AFFLUENCE

REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 MARCH 2013 Your Directors are pleased to present their Report and Audited Statement of Accounts for the year ended 31 March 2013. FINANCIAL RESULTS (` in Lakh) Particulars Current Year ended 31.03.2013 Previous Year ended 31.03.2012 Income Revenue 8590.60 4194.93 Other Income 30.06 24.40 TOTAL 8620.66 4219.33 Expenditure (Increase) / Decrease in finished goods 0.03 2.61 Operating and Other Expenses 8749.82 4852.07 Finance Cost 2.84 477.73 Depreciation / Write Offs 851.27 846.75 TOTAL 9603.96 6179.17 Loss before Tax (983.30) (1959.84) Tax expenses - - Loss after Tax (983.30) (1959.84) Loss carried forward from previous year (2960.41) (1000.57) Profit / (Loss) carried to Balance sheet (3943.71) (2960.41) Paid-up equity shares (FV `10 per equity share) 9,26,15,000 9,26,15,000 Weighted average number of equity shares outstanding 9,26,15,000 41,325,342 Earning Per Share (`) - Basic & Diluted (1.06) (2.88) The Company incurred a loss of `983 lakh for the year after charging `851 lakh towards depreciation on fixed assets. Together with the loss of `2960 lakh brought forward from the previous year in the Profit and Loss Account, the loss carried to the Balance Sheet is `3944 lakh. OPERATIONS During the year, the Company generated 162.19 mu of power including 20.14 consumed for Auxiliaries. Of this, 72.53 mu have been sold through Energy Exchange and 24.28 mu to ESCOMs in compliance with the order no. EN 2PPC 2012 dated 27 January 2012 issued by the Government of Karnataka in exercise of its powers under Section 11 of the Electricity Act,2003 apart from 6.37 mu energy banked with KPTCL, aggregating 103.19 mu. The captive consumption at the Ferroalloys Plant was 36.56 mu. The transmission loss including unscheduled export was 2.31 mu. The Company has also produced 10192 (PY- 5787) tonnes of Silico Manganese for its holding company on job work basis and earned conversion fee of ` 2683 lakh ( ` 1509 lakh). FUTURE PROSPECTS The contract manufacturing arrangement for the holding company is expected to continue. The Company expects improved operation of the Power Plant and better price for electricity in coming years. SUBSIDIARY The Company has no subsidiary. DIVIDEND In the absence of profits, no dividend has been proposed for the year. DIRECTORS Pursuant to the provisions of Sections 255 and 256 of the Companies Act,1956, Mr. Nazim Sheikh, Director and Mr. S H Mohan, Whole time Director retire by rotation and, being eligible offer themselves for re-election. Their reappointment is included in the Notice for the ensuing Annual General Meeting. AUDITORS M/s. Deloitte Haskins & Sells, Chartered Accountants, retire and being eligible, offer themselves for re-appointment. Their reappointment is included in the Notice for the ensuing Annual General Meeting. DIRECTORS’ RESPONSIBILITY STATEMENT In accordance with the provisions of section 217(2AA) of the Companies Act, 1956, your Directors state that: i. In the preparation of accounts, the applicable accounting standards have been followed ii. Accounting policies selected were applied consistently. iii. Reasonable and prudent judgments and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of 31 March 2013. iv. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities. v. The accounts of the Company have been prepared on a ‘going concern’ basis. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Particulars relating to conservation of energy and technology absorption for the Ferroalloys Plant as stipulated in the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 are set out in an annexure to this report. COST RECORDS The central government has, vide its Cost Audit Order No. 52/26/CAB-2010 dated 2nd May 2011 made maintenance of cost accounting records ,as prescribed, and their audit by a practising cost accountant compulsory for companies, inter alia, engaged in generation of power. It has subsequently been clarified by the government, vide General Circular 67/2011 dated 30 November 2011 that captive generating plants are exempted from the requirement of regular audit of the cost records. However, as a matter of additional compliance, the Company has decided to get cost audit conducted for the FY 2012-13 and has accordingly, appointed M/s K.S.Kamalakara &Co, practising cost accountants as Cost Auditors. The Report of the Cost Audit will be filed with Central Government by the Cost Auditors before the due date i.e 30 September 2013. PARTICULARS OF EMPLOYEES During the period, there were no employees whose particulars are required to be disclosed under Section 217(2A) of the Companies Act,1956. ACKNOWLEDGEMENTS The Directors wish to thank the Board of SMIORE, the holding company, Government Authorities and Banks for their support. The Directors also wish to place on record their appreciation of the good work put in by the employees of the Company.

CONSERVATION OF ENERGY: (a) Energy conservation measures taken : a). Electricity from our captive power plant ensures continuous availability of power to furnace even during the grid failure which avoids energy loss due to grid failure. b). The output steam from the turbine is utilized in HP, LP heaters and deaerator to heat the boiler feed water. c). The high temperature exhaust gas of the combustion in boiler is utilized to heat air for combustion through air pre heater and water through economizer. d). Application of fluid coupling for ID fans and SA fans restricts usage of energy to the requirement of combustion and thus conserves energy. e). Capacitor banks installed to attain power factor much above the statutory norm fixed by GESCOM. f). Computerized data acquisition system for reduction in specific energy consumption. g). Furnaces are now equipped with Data Supervisory Control (DSC) for efficient operation and also for optimum working of auxiliaries. The DSC also provides the energy measurement at each point of consumption which enables us to audit and control. (b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy. : - (c) Impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods. : Not possible to identify specifically. (d) Total energy consumption and energy consumption per unit of production : As per Form ‘A’ annexed.

FOREIGN EXCHANGE EARNINGS & OUTGO: Activities relating to exports, initiatives taken to increase exports, development of new export markets for products and services; export plans. : The Company has been exporting Silicomanganese produced under the conversion agreement with third party and the same is expected to continue in coming years. Total foreign exchange used and earned (`) 1. Foreign Exchange Earnings: - Export Sales (including exchange difference) : Please refer to Note No.28 in the Notes to Accounts 2. Foreign Exchange Outgo: - Stores and spares (including coal, water and consumables) - Capital Equipment (including repairs0 -Travelling & Conveyance and Membership & Subscription : : Please refer to Note No.25 in the Notes to Accounts. Please refer to Note No.25 in the Notes to Accounts Please refer to Note No.26 in the Notes to Accounts

PARTICULARS OF EMPLOYEES During the period, there were no employees whose particulars are required to be disclosed under Section 217(2A) of the Companies Act,1956

DIRECTORS’ RESPONSIBILITY STATEMENT In accordance with the provisions of section 217(2AA) of the Companies Act, 1956, your Directors state that: i. In the preparation of accounts, the applicable accounting standards have been followed ii. Accounting policies selected were applied consistently. iii. Reasonable and prudent judgments and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of 31 March 2013. iv. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities. v. The accounts of the Company have been prepared on a ‘going concern’ basis.