Karnataka Silk Marketing Board Ltd 2005

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K ARNAT AK A SILK MARKETING BOARDLtd

th26in A N N U A L ACCOUNTSFOR THE YEAR 2004-05

2nd Floor, Mysugar Building,J.C.Road,Bangalore-560 002.

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DIRECTORS REPORTT o ;The Shareholders ,Karna t aka Silk M arket ing Board Ltd. ,M y s u g a r Bui ld ing ,J.C. Road,Banglalorc-560 002.

Your Directors hereby present the 26th Annual Report of theCompany together with the Audited Balance Sheet as a t 31st March2005 and Prof i t and Loss Account for the year ended on tha t d u toalong wi th th e Review and Comments of the Comptroller and AuditorGeneral of India as required under Sect ion 619(4) of the Companies

- Act.1.0 OPERATIONS:As in the recent past years the unprecedented fluctuat ions, cont inuedto daunt the indus t ry in general arid Company in par t icular and ourpurchases and sales activities dwindled considerably due to thefollowing impor tan t reasons.

(a ) Poor demand for our silk(b ) Stiff competition from other fibre fabrics.(c)Un-abel ted availability of foreign silk, has not a l lowed the market

prices to improve even during seasons. However, th e prices inthe market dur ing the year 2004-05 w as stable of course on thelower side both in the cocoons and yarn stages. A table is givenbelow showing the comparat ive average purchases prices for silkyam d u r i n g 2003-2004 and 2004-05 which reflects th e stability inprices.

(d ) Continued less arr ivals of s i lk yarn a t Silk Exchange and iIruu.sactions preven t ing KSMI3 to compete inprice a n d v o l u m e .

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: 2:(Average purchase price/kg of silk yarn)Month

Apri lM a yJ u n eJ u lyA u g u s tS e p t e m b e rOctobe rN o v e m b e rD e c e m b e rJ a n u a r yF e b r u a r yM a r c h

Filal2003-04

Rs.99110441140116711791205

119511971135113311531123

ture2004-05R s.114111471096103810741045104010441084110511121089

Chai2003-04R s.9209591150118911551163

1 1 1 411431047107711021068

aka2004-05R s.110610889779389989749769551028103510801040S ou rce: Silk exchange Month ly report

D u e to s table pr ices of s i lk yarn f rom June 2004 t i l l F e b r u a r y2005 , th e p u r c ha s e w as m a in t a i n e d a t a low-key an d moreconcentrat ion w as given for the l iquidat ion of stock. This w as intact agood achievem ent as the com pany l iqu ida ted a l l the o ld s tocks andm ain ta ined very l im i ted inven tory com pr is ing recent purch ases andnew s tock. However , the C o m p a n y w as p l a n n i n g to m a k e m o r epurch ase s in the n o r m a l p u r c h a s e season m a i n l y in Feb. & M a r .m o n t h s b u t contra r i ly th is year the prices did not come down a sn or ma l ly expec ted . In fact th e pr ice s p rev a i l ed a lm os t t he sam e a n dw e could not m a k e m u c h purchases. As a result , the total purchase sfor the. yea r 2004-05 was 71 tons , which w as 2 0 tons less than th epu rchases of 2003-04.

Likewise , the sales achieved in th e y e a r 2004-05 w a s 10 3tons . As the Company was ho ld ing s tock o f 77 tons in th e b e g i n n i n gof !he year eilbrls w e re m a d e lo l i qu ida te , l l ic old slock and reduce , ihe.

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level of I nven to ry o f ' 45 tons v a l u e d a t Rs. 4.79 crores a t the end oft h e c u r r e n t f inanc ia l yea r . The stock is v a lue d b y a d o p t io n ofA c c o u n t i n g s t a n d a r d s (AS) 2 by the C o m p a n y s ince 2 002 -03 , a s perthe am endm en t m ade to the Company ' s Act .

O u r approach a nd percept ion tak ing i n to accoun t th eLibera l i za t ion , Globalizat ion an d Pr iva t i za t ion for a free t r adeeconomy and WTO agreement are chal lenges before the C om panyfor su rv iva l and i ts cont inua t ion. For tiiis, the C o m pan y has to beprepared to face the chal lenges in the co in ing yea rs b y c h a n g i n g i tspolicy and perception and s t ra teg ics . The Com pany has a l read ys tar ted t h i n k i n g in those lines to m eet these cha l l enges a nd w e hopeto i n t roduce new strategies and ideas in the com ing per iod .

Severa l representa t ions have been made to the Go v e r n m e n t ofInd i a to ban/ res t r ic t the impor t of s i lk so t h a t ou r Ser icu l t u r e Indus t r yi n th e State is not aHected . However the avai lab i l i ty of im ported si lkin bu lk quan t i t i e s con tinued unaba ted , du r ing th e year u n d e r reportt h u s affect ing the total t ransact ions of si lk in general and Companyin par t i cu la r . The comparat ive tab le g iv ing the state product ion of si lky a rn and the import of si lk yarn for the past f ive years wills u b s t an t i a t e adve rse im pa c t of the impor t ed si lk to domes t ic s i lk .

rea r

1999-20002000-20012001-20022002 - 20032003 - 20042004 - 2005*( up lo Feb)

Karna t aka Si lkProduc t ion(i n tons)

812181218200872867607301*

Impor t ofSilk Y a r ninto the country(in tons)458 147136808905492586953

: Central Silk Monnl

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:: 4 ::2 . 0 : F IN A N C IA L RESULTSThe f inanc ia l re s u l t s o f the com pany a rc a s u nd e r : ( Rs . i n L a k h s )PAR TICULA RS 2004-2005 2003-2004Turnover i nc lud ing other Iiicome 1219.84 2152.54Prof i t (+) Loss(-) (- ) 186.96 (+ ) 11.65APPROPRIATIONLoss t ransfe rred to Balance Shee t (-) 902.26 (- ) 715.312 .1 R E I M B U R S E M E N T OF LOSS B YG O V E R N M E N T O F K A R N A T A K AC om pany i s pr im ari ly d ischarg ing th e func t ion of PriceStabi l i sa t ion of si lk yarn activi ty which is general ly a non-prof i tableproposi t ion. C om pany is expected to protect the intere st of rcclcrsand f a r m e r s by cont inuous ly pu rch as in g s i l k in a l l the SilkExchanges in K a r n a t a k a . C o mp a ny be i ng th e bigges t Govt .

. l icensed b u y e r of s i lk a t S i l k Exc ha nge s of K a r n a t a k a Slate has tostrive to maintain price stabi l i ty and to prevent formation of g roupsand car te l s among t raders an d merchants , thereby to protect theinterests of cocoon producers (farmers), reelers and weavers .C o mp a ny has to mainta in suff ic ient buffer stock to me e t the da i lyr e q u i r e m e n t of consum ers spread in Karna t aka , T u m i l n a d u & A n d h r aPradesh w i th 19 sales outlets. It sells silk to poor rural Artisans (i.e.weavers) . A t t imes when th e prices are cont inuous ly stablein te rvent ion by K S M B m ay not be necessary. This wil l resu l t in veiylow pur ch a se and sales. This is in fact the role of any PrieeStab i l i s a t ion I n s t i t u t io n a nd K S M B i s o ne a m o ng the m. Therefore,m ain t enanc e of procurement and dis t r ibut ion points involvesconsiderable overhead expenses such as ren t for Office and godowninsurance Etc . Any loss incurred in the process of price stabi l isationis n o t h i n g bu t the loss incurre d in the process of pro tec t ing th e i n te re s tof the reelers .This mat te r i s be i ng t a ke n u p w i t h G o v e r n m e n tsepara te ly .

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:: 7 : - .i v )Tha t th e Di re c t o r s had prepared th e A nnu a l a c c o u n t son a go ing concern b as i s .v ) C O NS E RV AT I O N O F E N E R G Y :T h er e is no s ign i f i can t scope for conse rva t ion ofenergy since th e C o m p a n y i s not car ry ing on a nym a n u f a c t u r i n g a c t iv i t y . .v i) TECHNOLOGY ABSORPTION:

The C o m p a n y i s d i s c h a rg ing ' t he func t ion of prices tab i l i s a t ion of si lk y a r n and r e l a ted marke t ing ac t iv i t y .Hence there is no r e p o r t i ng involved in regard totechnology ab so r p t ion a s requi red u n d e r Rules .v ii )F OR EIG N EX CH A N G E EA R N IN G S A N DOUTGO:There i s no expor t ac t iv i ty involved, hence t h e re is nor e p o r t i ng in re spec t of expor t m a r k e t and fore igne xchange ou tg o etc., a s r equ i r ed under th e Ru le s .

10.0: ACKNOWLEDGEMENT:Your Directors wish to place on record their sincereappreciation for the whole hearted support, co-operation oftimely assistance extended by va r ious depa r tmen t s ofG o v e r n m e n t of Karna t aka , in par t icu la r Commerce andIndus t r ies Dept, Directorate of Sericulture, Finance Dcpt,DDPER, Cent ra l Silk Board, Price Stabilisation FundAuthor i ty and Bankers . Y our Direc tors are also t h ank fu l to theStatutory Audi tors , Comptrol ler and Auditor General of India ,Accountan t General , K a m a t a k a for their active and valuable co-operat ion. Your Directors a lso wish to thank the Company'sva lued cus tomers a l l over I n d i a , Reclers, Twisters and Weavers .The Direc tors wish to place on record their appreciat ion for theva l uab l e services rendered by the Executives and otheremployees of the Company at all levels.

For and on beha l f of tbe Board of Directorsf

C.H. G t y V l N D A 131JATC&URMAN

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Karnataka Silk Marketing Board Ltd 2005

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