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Notes to Accounts of Karuturi Global Ltd.

Mar 31, 2014

GENERAL INFORMATION OF THE COMPANY

kicorporated in 1994, Karuturi Global is today the largest producer of cut roses in the world, with are area of over 292 hectares under Greenhouse cultivation and an annual production capacity of around 555 million stems.

From a modest beginning in 1994, as an export-oriented unit for floriculture, we have expanded our presence into agriculture and food processing verticals with operations spread across Ethiopia, Kenya and India.

Tire Mission of the company is "To emerge as an integrated agri-products company servicing the world market through unmatched product, cost and quality advantages."

b. Terms/riehts attached to equity shares

The company has only one class of equity shares having par value of Rs 1 per Share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General s Meeting. In the event of liquidation of the company, the holders of equity shares wiU be entitled to receive remaining assets of the company, after distribution of aU preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders

c. Details of shares issued for consideration other than cash & shares bought back.

"The company has not issued any shares for consideration other than cash & no shares have been bought back by the company.

D. Unpaid calls by directors/officer.

There is no unpaid call due from the directors and officers of the company.

*On maturity of FCCB on 19*'''' Oct 2012, the company had applied to the bonds holders for restructuring the bonds. The bonds holders vide resolution dated 05*'''' March 2013 approved the restructuring of FCCB on the following terms subject to RBI approval, and hence is in default.

The proposed redemption plan would be as:

The bonds of an accreted principal amount of US$ 49,42,885.75 on 08 May 2013;

The bonds of an accreted principal amount of US$ 9,885,711.50 on 29 April 2014;

The bonds of an accreted principal amount of US$ 9,885,711.50 on 29 April 2015;

On or before 8 May 2013, Exchange on a cashless basis, the bonds of accreted principal value of USD 30,363,256.75 Plus the additional exchange amount for the new

Additional exchange amount will be interest on US $ 55,077,535.50 at the rate of 7% Per aimuam from and including 19 October 2012 to, but excluding, new bond issue date.

The new bonds of the company shall be issued by the company on the new bond issue date in two tranches being tranche A(Tranche A Bonds") and tranche B("Tfanche B Bonds"). Bonds of an accreted principal value of US$ 15,000,000 shall be exchanged with Tranche A Bonds issued by the company on the new bond issue date and bunds of an accreted principle value of US$ 15,363,256.75 plus the additional exchange amount shall be exchanged with Tranche B Bonds issued by the Company on the New Bond Issue Date.

On 31 January 2014, RBI has approved the restructured repayment proposal of the Company, conditionally, and the Company in turn is not meeting certain conditions relating to the all-in-cost as per ECB guidelines as stated in the conditional approval of the RBI. However, the Company is under the process of re- approaching the RBI/ Bond holders for the above matter.

The management hereby states that, the money received through FCCB has been invested in its subsidiary companies and it has adequate amount in the form of investment in subsidiaries for repayment of the same.

In the opinion of management, there will not be any penal consequences in the event of non approval of FCCB restructuring from RBI and hence contingent liability is not disclosed.

2.1 C) Details of Term Liabilities from Related Parties:

Treatment of Foreign Currency Monetary Translation Reserve (FCMTR)

During the year Company converted part of loans and advances made to Karuturi Overseas Ltd (KOL), Dubai a wholly owned subsidiary to Equity investment total amounting to Rs.6,798.66 lakhs (USD 125.00 lakhs). Consequently, the company has transferred an amount of Rs.2,037.79 lakhs from FCMTR to Profit and loss account and disclosed as exceptional item. This treatment is given as per Accounting Standards-11 "The effects of changes in foreign exchange rates", considering the fact that this amount is no longer remains as monetary item and is also in hne with matching principles.

3. Other Disclosures:

3.1: The Company is operating primarily in a single segment of floriculture. As there is no diversified business activity there is no business segment. Hence the requirements of disclosure under Accounting Standard for segment reporting (AS17) would not apply.

3.2 Contigent liabilitios and commitments (to the extend not provide for)

Particulars 31-Mar-14 31-Mar-13

Contingent Liabilities

Disputed Income Tax dues (as detailed below) 17,805.61 16,043.75

Disputed Service tax dues 172.62 172.62

* Disputed Cases 57.50 -

Disputed Entry Tax 6.41 11.86

Coporated Guarantee Given to the Bank against Borrowing by the Subsidiaries 68,324.63 49,625.07

86,309.27 65,85330

a) The Company has received a demand for Rs. 863.44 Lakh for AY 2005-06, Rs. 1850.91 Lakh for AY 2007-08, Rs. 6902.34 Lakhs (outstanding Rs. 5979.80 Lakhs) for Assessment year 2008-2009 and Rs. 3254.27 for Assessment order for 2009-10 due to certain additions and disallowances made by the Assessing Authorities.

The same has been disputed by the Company before the Appellate Authorities and is confident of obtaining a favorable response in the appeal.

b) The Commissioner of Appeals Bangalore upheld the contention of the Company relating to a demand of Rs 792.71 Lakhs for the Assessment Year 2006-2007 made by the Assessing Authorities and deleted the additions and hence demand. The department has filed an appeal contesting the decision of the Commissioner of Appeals Bangalore before the Income Tax Tribunal Bangalore.

c) The Income Tax Department has seized 17 bank accounts of the company during the year.

d) The Company has entered into a sale agreement with Convergent Technologies Pvt Ltd., for sale of one of its wholly owned subsidiary Karuturi Telecom Pvt. Ltd., where as the Company is suppose to receive Rs.330 lakhs out of which the company has reveived a sum of Rs.57.50 Lakhs only and have failed to settle the balance amount of Rs.272.50 lakhs. In this regard the Company has filed a case against Convergent Technologies Pvt Ltd. and case is pending before the High Court of Karnataka

3.6 Leasing Arrangements Operatine Lease:

Where the Company is the lessee

The significant leasing arrangement entered into by the company include the following:

Building taken on operating lease with lease term from 01-10-2013 to 30-09-2014 for office premises and which are renewable on a periodic basis by mutual consent of both parties for further period of 12 months

All the operating leases are cancellable by the lessee for any reason by giving notice of 2 months There is no restriction imposed by the arrangement such as those concerning dividends, additional debts.

3.4 Disclosure on Foreign currency exposures:

a) The Company has entered not into any Forward contracts during the year 2013-14. Forward contract outstanding as on 31st March 2014 is Nil (Previous Year: $464,600 and in Rs. 252.69 Lakh).

Considering the Fluctuations occurred subsequent to the year ending in Foreign Currency, notional Income arising on account of computation of mark to market liability of Forward Contract as on 31®'' March 2014 is not recognized

b) The year end foreign currency exposure that have not been hedged by a derivative instrument or otherwise are given below

3.5 Lease Particulars:

Operating lease: Where the company is a lessor Assets given on operating lease to subsidiary is as under:

i) Gross carrying amount of fixed assets given on operating lease to its subsidiary is Rs. -Nil- (PY-Rs. 208.87), accumulated depreciation Rs. Nil (PY-Nil) and net block of Rs. Nil (Rs. 208.87)

ii) Depreciation recognized during the year against assets given on lease is. Nil (Rs. Nil), iii) The lease rental income for the year is Rs. 3.00 (Rs. 3.00).

3.6 The Banker of Karuturi Limited, one of the subsidiaries in Kenya has appointed Receivers for recovery of the dues to the Bank. However, the Subsidiary Company has appealed the in Kenyan High Court, asking for terminating the appoinment of receivers. The case is pending for decision in the Kenyan High Court, and the Company is confident of getting positive response.

3.7 Previous Year''s figures have not been audited by the current year auditors

3.8 Previous year''s figures have been reworked, regrouped,rearranged and re-classified wherever necessary. Figures in bracket relates to previous years


Mar 31, 2013

GENERAL INFORMATION OF THE COMPANY

Incorporated in 1994, Karuturi Global is today the largest producer of cut roses in the world, with are area of over 292 hectares under Greenhouse cultivation and an annual production capacity of around 555 million stems.

From a modest beginning in 1994, as an export-oriented unit for floriculture, we have expanded our presence into agriculture and food processing verticals with operations spread across Ethiopia, Kenya and India. The Mission of the company is ''''To emerge as an integrated agri-products company servicing the world market through unmatched product, cost and quality advantages.''''

1.1: The Company is operating primarily in a single segment of floriculture. As there is no diversified business activity there is no business segment. Hence the requirements of disclosure under Accounting Standard for segment reporting (AS17) would not apply.

1.2: Contingent liabilities and commitments (to the extent not provided for)

Particulars 31.03.2013 31.03.2012 Contingent Liabilities

Disputed Income Tax Dues (as detailed below) 16,043.75 8,349.66

Disputed Service Tax Dues 172.62 172.62

Disputed Entry Tax 11.86 2.50 Corporate Guarantees Given to the Bank against Borrowing by the Subsidiaries 49,625.07 49,621.80

Total 65,853.30 58,146.58

a)The Company has received a demand for Rs. 863.44 Lakh for AY 2005-06, Rs. 1850.90 Lakh for AY 2007-08, Rs 8349.66 Lakhs (outstanding Rs. 7772.38 Lakhs) for Assessment year 2008-2009 and Rs. 4764.29 for Draft Assessment order for 2009-10 due to certain additions and disallowances made by the Assessing Authorities. The same has been disputed by the Company before the Appellate Authorities and is confident of obtaining a favorable response in the appeal.

b) The Commissioner of Appeals Bangalore upheld the contention of the Company relating to a demand of Rs 792.71 Lakhs for the Assessment Year 2006-2007 made by the Assessing Authorities and deleted the additions and hence demand. The department has filed an appeal contesting the decision of the Commissioner of Appeals Bangalore before the Income Tax Tribunal Bangalore.

c) The Income Tax Department has seized 17 bank accounts of the company during the year.

1.3: Leasing Arrangements

Operating Lease:

Where the Company is the lessee

The significant leasing arrangements entered into by the company include the following: ''''Building taken on operating lease with lease term from 01-10-2012 to 30-09-2013 for office premises and which are renewable on a periodic basis by mutual consent of both parties for further period of 12 months.All the operating leases are cancellable by the Lessee for any reason by giving notice of 2 months.There is no restriction imposed by lease arrangements, such as those concerning dividends, additional debts.''''

1.4 Employee Benefits:

a) Defined Contribution Plan:-

During the year the Company has recognized the following amounts in the Statement of Profit And Loss:-

b) Defined Benefits Plan:-

Short term employee benefits such as salary, allowances and bonus are accounted on accrual basis of accounting and based upon the laws applicable. Termination benefits (Gratuity) is provided on the basis of actuarial valuation. The actuarial gain or loss is considered in the Profit and Loss Account of the period in which it accrues.

1.5 Employee Stock Option:

Under the Employee Stock Options Scheme 2008 (ESOS-2008), the Company has granted 60, 00,000 Options to its eligible employees, the details of which are as follows:

1.6 Disclosure on Foreign currency exposures:

a) Forward contracts entered into by the Company and outstanding as at 31st March, 2013 amount to

$464,600 and in Rs 252.69 Lakh (Previous Year: $1,999,980 and in Rs. 1,023.12 Lakh).

Considering the Fluctuations occurred subsequent to the year ending in Foreign Currency, notional Income arising on account of computation of mark to market liability of Forward Contract as on 31st March 2013 is not recognized.

b) The year end foreign currency exposure that have not been hedged by a derivative instrument or otherwise are given below

1.7 Lease Particulars:

Operating lease: Where the company is a lessor

Assets given on operating lease to subsidiary is as under:

i) Gross carrying amount of fixed assets given on operating lease to its subsidiary is Rs. 208.87 (PY- Rs. 208.87), accumulated depreciation Rs. Nil (PY-Nil) and net block of Rs. 208.87 (Rs. 208.87) ii) Depreciation recognized during the year against assets given on lease is. Nil (Rs. 15.64). iii) The lease rental income for the year is Rs. 3.00 (Rs. 13.00).

1.8 Previous ear''s figures have not been audited by the current year auditor.

1.9 Previous year''s figures have been reworked, regrouped, rearranged and re-classified wherever necessary. Figures in bracket relates to previous year.


Mar 31, 2012

Contingent Assets are not recognized in the Financial Statements

1. Other Disclosures:

1.1 Contingent liabilities and Commitments (to the extent not provided for)

Particulars 31-Mar-2012 31-Mar-2011

Contingent Liabilities

Disputed Income Tax Dues (as detailed below) 8,349.66 719.00

Disputed Service Tax Dues 172.62 172.62

Disputed Entry Tax 2.50 2.50

Corporate Guarantees given to Bank against borrowing by the Subsidiaries 49,621.80 19,294.00

Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (Capital commitments) - 405.00

a) The Company has received a demand for Rs 8349.66 Lakhs for Assessment year 2008-2009 due to certain additions and disallowances made by the Assessing Authorities. The same has been disputed by the Company before the Appellate Authorities and is confident of obtaining a favorable response in the appeal.

b) The Commissioner of Appeals Bangalore upheld the contention of the Company relating to a demand of Rs 719.00 Lakhs for the Assessment Year 2006-2007 made by the Assessing Authorities and deleted the additions and hence demand. The department has filed an appeal contesting the decision of the Commissioner of Appeals Bangalore before the Income Tax Tribunal Bangalore

1.2 Employee Benefits:

Short term employee benefits such as salary, allowances and bonus are accounted on accrual basis of accounting and based upon the laws applicable. Termination benefits (Gratuity) is provided on the basis of actuarial valuation. The actuarial gain or loss is considered in the Profit and Loss Account of the period in which it accrues.

Change in the fair value of plan assets:

The Company does not have any Gratuity Fund and in view of this and other external and internal factors, estimates of the amount of funding for the ensuing year are not determinable.

1.3 Forward contracts entered into by the Company and outstanding as at 31st March, 2012 amount to 1023.12 (Previous year; Nil ).

Considering the Fluctuation occurred subsequent to the year ending in Foreign Currency, notional Income arising on account of computation of mark to market liability of Forward Contract as on 31st March, 2012 is not recognized.

1.4 Lease Particulars:

Assets given on lease to Subsidiaries are as under;.

i) Written down value of fixed assets given on operating lease to its subsidiaries ( net of depreciation) is 208.87 (286.35 )

ii) Depreciation recognized against assets given on lease is 15.64 (61.14)

iii) The lease rental income for the year is 13(63)

1.5 Previous Years' Figures haven been reworked, regrouped, re-arranged and re-classified wherever necessary.

 
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