Damas International Limited and its Subsidiaries FINANCIAL STATEMENTS

Transcription

1 Damas International Limited and its Subsidiaries FINANCIAL STATEMENTS 31 MARCH 2009

2 Board of Directors H.E. Mr. Mohamed Alabbar (Director) Tawfique Abdulla (Chairman) Aamer Abdul Jalil Mohd Al Fahim (Director) Tawhid Abdulla (Managing Director) Dr Gaetano Cavalieri (Non-Executive Independent Director) Tamjid Abdulla (Deputy Managing Director) John Harper (Non-Executive Independent Director) Dr Maryam Matar (Non-Executive Independent Director) Essam Abdulkadir Al Muhaidib (Non-Executive Independent Director) Ammar A. Alkhudairy (Non-Executive Independent Director) Auditors Ernst & Young Bankers ABN Amro Bank N.V, Dubai Branch Abu Dhabi Commercial Bank, Dubai Barclays Bank, Dubai BNP Paribas, Dubai Calyon Corporate & Investment Bank, Dubai Diamond Bank Switzerland Ltd, Switzerland Dubai Bank, Dubai Emirates Bank International, Dubai First Gulf Bank, Abu Dhabi Gulf International Bank, Bahrain HSBC Bank Middle East, Dubai Mashreq Bank, Dubai National Bank of Ras Al Khaimah, Dubai National Bank of Dubai, Dubai Standard Chartered Bank, Dubai United Arab Bank, Dubai Union National Bank, Dubai Bullion Banks Bank of Nova Scotia, London Hollandsche Bank, Rotterdam HSBC Bank Middle East, Dubai National Bank of Dubai National Bank of Fujairah Standard Bank London, London Standard Chartered Bank, Dubai Syndicated Banks ABN Amro Bank N.V., Dubai Branch Bank Muscat International B.S.C Bank Of Bahrain & Kuwait Bahrain Bank Of Taiwan, London Branch Barclays Bank Plc BNP Paribas Commercial Bank of Dubai PSC Doha Bank State bank of India - Bahrain Efibanca SPA - Rome First Gulf Bank First Commercial Bank LTD., London Branch Gulf International Bank B.S.C International Bank Of Qatar (Q.S.C) National Bank of Abu Dhabi National Bank of Dubai P.J.S.C The Arab Investment Company S.A.A (OBU) Union National Bank Registered Office Damas International Limited P.O. Box 1522, 3 rd Floor, New Gold Center, Suite No 57/58, Deira, Dubai UAE

3 Consolidated financial statements 31 March 2009 Contents Director s report Management discussion and analysis Corporate governance Page 3 (i)-(iv) 3 (v)-(vii) 3 (viii)-(xiv) Independent auditors report 4-5 Consolidated income statement 6 Consolidated balance sheet 7-8 Consolidated cash flow statement 9-10 Consolidated statement of changes in equity Notes to the consolidated financial statements 13-76

4 DIRECTORS REPORT Your Directors have pleasure in presenting the Report and Accounts for the year ended 31 st March, Your Company is the hundred percent holding Company of Damas LLC and in turn holds controlling power directly or indirectly in the other Companies in Damas Group ( the Group or Damas ). Financial highlights of the Group 1 January 2008 to 31 March 2009 (15 Months) (AED 000) 1 January 2007 to 31 December 2007 (12 Months) Revenue 6,032,876 3,553,269 Gross profit 1,116, ,096 Profit for the period/year 226, ,126 Earnings per share in AED Dividend During the Financial Year your Directors have paid an Interim 2.5% on the paid up capital of the Company amounting to AED million. The Directors recommend approval of the same by the Members of the Company at the ensuing Annual General Meeting. Industry Structure and Development The retail jewellery market in the regions in which the Group operates is highly fragmented and presents significant challenges to new entrants. The Group structured itself to effectively tap the market by positioning itself as a leading retailer in gold, diamond and pearl jewellery and watches retailer through its vast retail network across the regions in which it operates. The retail operation is supported with its own wholesale business and designing and manufacturing facilities. The Group s stores offer its own branded products as well as products sold under leading global and regional luxury brands. The Group sells jewellery and watches through three main distinctive store formats, each of which is tailored to a specific type of customers. The Group also sells loose diamonds and gold and diamond jewellery on a wholesale basis to other jewellery retailers, including those in other Middle Eastern countries and India, as well as individual business owners and small family-owned local jewelers. The Group s manufacturing capabilities encompass the entire manufacturing cycle from design to manufacturing and branding. The Group manufactures a portion of the branded and unbranded jewellery sold in its stores, either directly through its own facilities or indirectly through shared facilities. Review of operations The core market for the Company in UAE and GCC countries are expected to remain the same for the next year. With the recent approval obtained from the Government of India, the Company expects to focus in that market from Initial Public Offer In the month of July2008, the Company issued shares to public and got its shares listed in the Stock Exchange. Presently % of Company s shares are held by public as free float. The details of listing are given under the section Corporate Governance 3 (i)

5 Future outlook The current global economic recession cast a degree of uncertainty in the future outlook. However dominant markets like UAE and other GCC Countries are expected to behave well albeit at a lower level of activities. India however has an exciting proposition in future. Accordingly, Damas has initiated its new venture in India which is given in more detail in the following paragraph. Joint Venture in India Damas LLC, the Wholly Owned Subsidiary of the Company, is in the process of establishing a joint venture Company in India with its Indian Partner, M/s Gitanjali Group. The investment by Damas in the new venture will be in the tune of INR 1,800 Million (approx AED Million) which will be introduced in the next three to five years. Damas will hold 51% equity in the new entity. Damas has already obtained the necessary approval in this regard from the Government of India. Corporate Social Responsibility Damas is committed and actively engaged in providing various voluntary social services to different segments of the society and thus fulfilling its duty as a good Corporate Citizen. In this regard Damas is committed to making a positive contribution to the society in a number of ways. As a policy, Damas promotes and encourages economic, social and educational development while also giving active support to other local initiatives including sports, employment generation and social and health care. Human Resource Development Keeping in view the Global downturn and cut throat competition in the market the main focus of your Company was the optimal utilisation of available talent pool by providing intensive and better training and institutionalising communication. The objective is to develop a performance-driven dynamic organizational culture through job enrichment. Continuous employee training programmes are in place across the Group s locations to upgrade competence and skills. Employee relations continued to be healthy. Financial Year Change The Board of Directors of the Company vide their resolution dated 22 December, 2008 has changed its Financial Year End from 31 December, 2008 to 31 March, 2009 due to the following reasons. i) Since the market conditions were very much volatile, the first part of 2009 would give the Company, some time to see how expansions could be made effectively in the later part of the calendar year. ii) All the Auditors were extremely busy at the end of the calendar year and feel pressurised to deliver and that it would be a better option to choose a lean period for audit reviews and for consolidation of more than 75 Group companies. Accordingly all the subsequent Financial Years will be from 1 April to 31 March. Buy back of shares The Members of the Company vide special resolution dated 08 February, 2009 authorised the Board of Directors/ Committee of Directors of the Company to purchase back the ordinary shares of the Company. The Share Buy Back Committee of the Board of Directors of the Company vide its resolution dated 11 March, 2009 authorized purchase up to 120,000,000 ordinary shares of the Company. The Company is in the process of getting necessary approval from NASDAQ Dubai only after which the actual purchase can be made. Auditors The Auditors, M/s Ernst & Young Middle East (Dubai Branch), will retire at the ensuing Annual General Meeting and are eligible for re appointment. 3 (ii)

6 Directors H.E. Mohamed Alabbar, H.E. Aamer Abdul Jalil Mohammed Al Fahim, Dr. Gaetano Cavalieri, Mr. John Harper, H.E. Dr. Mariam Matar (Mrs.), Mr. Abdulla Nasser H Al Mansouri, Mr. Essam Abdulkadir Al Muhaidib and Mr. Ammar A Alkhudairy were appointed as Directors with effect from 08 July, Mr. Abdulla Nasser H Al Mansouri resigned from the Directorship of the Company and the Board accepted his resignation at its meeting held on 25 March, The resignation is effective from 05 March, During the Financial Year Mr. Tawfique Abdullah, Mr. Tawhid Abdullah and Mr. Tamjid Abdullah resigned from the Board of Directors. The Board of Directors accepted their resignation with effect from 28 May, 2009 and immediately re appointed them as Directors to fill up the vacancy caused by their resignation and to continue up to the date of the next General Meeting. The Board further appointed Mr. Tawfique Abdullah as its Chairman, Mr. Tawhid Abdullah as the Managing Director and Mr. Tamjid Abdullah as the Deputy Managing Director of the Company. All the three Directors being eligible offered themselves for re appointment by the Shareholders of the Company. The Board has also recommended their re appointment by the Shareholders in the Annual General Meeting. All the other Directors viz. H.E. Mohamed Alabbar, H.E. Aamer Abdul Jalil Mohammed Al Fahim, Dr. Gaetano Cavalieri, Mr. John Harper, H.E. Dr. Mariam Matar (Mrs.), Mr. Essam Abdulkadir Al Muhaidib and Mr. Ammar A Alkhudairy have submitted themselves and consented to reappointment by the shareholders in the Annual General Meeting. Corporate Governance As per the Requirements of Markets Law ( DIFC Law 12 of 2004), the Offered Securities Rules of Dubai Financial Services Authority and the Listing Rules of the NASDAQ Dubai, a section on Corporate Governance is set out forming part of this Annual Report. Internal Control System and Adequacy There are adequate internal control systems in all areas of operation of the Group by it s in house expertise and resources. Moreover, the Company continuously upgrades these systems in line with the best available practices. Operational Reports are tabled at Board Meetings. An independent Audit Committee of the Board reviews the adequacy of Internal Control. Insurance All the Properties, Assets and Insurable interest of the Company including Plant & Machinery, Building, Inventory, wherever necessary and to the extent required have been adequately insured. Directors Responsibilities in Respect of the Preparation of the Accounts The following statement, which should be read in conjunction with the statement of Auditors responsibilities included in the report of the independent Auditors, is made with a view to distinguishing the respective responsibilities of the Directors and of the Auditors in relation to the accounts. The Directors are required to prepare accounts for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit and loss for the financial year. In preparing the accounts, the Directors are required to select appropriate accounting policies and then apply them consistently, make judgments and estimates that are reasonable and prudent and state whether all accounting standards which they consider to be applicable have been followed, subject to any material departures disclosed and explained in the financial statements. The Directors also use a going concern basis in preparing the accounts unless this is inappropriate. Forward- Looking Statements This Report contains forward looking statements that involve risks and uncertainties. Actual results, performance or achievements could differ materially from those expressed or implied in such forward looking statements. Significant factors that could make a difference to Damas s operations include domestic and international economic conditions affecting demand, supply and price conditions, foreign exchange fluctuations, changes in government regulations, tax regimes and other statutes. 3 (iii)

7 Acknowledgement Your Directors record their sincere appreciation of the encouragement, assistance and co-operation received from Shareholders, Government authorities, Banks and Customers. They thank them for the trust reposed in the Management and wish to thank all employees for their commitment and service. For and on behalf of the Board Dubai (Tawhid Abdullah) 27 July, 2009 Managing Director 3 (iv)

8 MANAGEMENT DISCUSSION AND ANALYSIS Economy The global economic crisis has not spared the Middle East. The extremely large fall in the price of oil is hitting the region hard. The deterioration in external financing conditions and reversal of capital inflows are also taking a toll: local property and equity markets have come under intense pressure across the region, domestic liquidity conditions have deteriorated, credit spreads have soared for some firms, financial system strains have emerged in a number of countries, and sovereign wealth funds have suffered losses from investments in global markets. The International Monetary Fund in its World Economic Outlook 2009 expects a contraction in the GDP, the second-largest in the Arab World after the Saudi economy. In the United Arab Emirates (UAE), where the exit of external funds (which had entered the country on speculation of a currency revaluation) has contributed to a large contraction in liquidity, a sizable fall in property and equity prices, and substantial pressure in the banking system. A major financial center, UAE will also suffer from the contraction in global finance and merger and acquisition activity. Extracts from Statement by His Excellency Sultan N. Al-Suwaidi Governor of the Central Bank of the United Arab Emirates at International Monetary and Financial Committee Meeting on Saturday, April 25, 2009 is given below: Growth in the region is projected to slow sharply to 2.5 percent before picking up in 2010, although growth outcomes will be different across countries. For oil exporting GCC countries, the decline in oil GDP resulting from OPEC cuts is likely to be offset by robust growth in non oil GDP. Financial buffers accumulated during the boom years as well as much strengthened policy and macroeconomic frameworks in many Arab countries allow the scope for supportive policies to cushion the impact of the crisis. In several countries, high government spending is deployed to support domestic demand and mitigate the impact of retrenchment in private sector activity. Where liquidity pressures emerged, central banks across the region have acted swiftly by providing liquidity and lowering reserve requirements. Countries with pegged exchange rates have additionally benefited from the continued monetary easing in the U.S., further reinforcing the stabilizing role of the exchange rate peg in oil producing economies. Policy responses in the financial sector have also been swift with measures aimed to shore up confidence and prevent systemic banking crises. Looking ahead, governments stand ready to provide additional support as needed to shield the financial sector and domestic activity from further deterioration in global conditions. But in a study last month, the National Bank of Kuwait (NBK) ruled out a contraction in the UAE's real GDP on the grounds the drop in oil production and prices would be offset by modest growth in the non-oil sector. The UAE economy is expected to grow by four per cent in real terms in 2009 despite the downward pressure of the global credit crunch and a steep cut in its oil production, as per the forecast by the Arab Monetary Fund (AMF) which is the latest in a series of projections about the UAE economy. It also expects inflation in the UAE to decline to between six and eight per cent this year from a record 14 per cent in According to estimates by the UAE Ministry of Economy, the nominal GDP jumped by at least 27 per cent to a record Dh929.4 billion in 2008 from Dh729.bn in The non-oil sector shot up by 23.5 per cent. The figures showed the high growth was also a result of a surge in capital investments, which climbed to a record Dh251.4bn from Dh155.9bn How ever it might be understood that the economy has to go through a phase of consolidation, both domestically and internationally. Cautious optimism for the remaining quarters for the year is advocated by experts. Source: World Economic Outlook (WEO) 2009 from IMF and UAE Interact the official website of UAE Industry The World Gold Council (WGC) confirms that the market remains healthy compared to global markets. WGC's latest reports announced that the UAE gold jewellery sales increased by 17% in 2008 to cross Dh13.7 billion compared to Dh11.4 in While jewellery accounts for 90% of total consumer demand, net retail investment witnessed strong growth of 38% in the last quarter of 2008 compared to the same period of the previous year. Tonnage gold demand in the first quarter of 2009 was up a strong 38% on the levels of a year earlier. In $US value terms, this represented a 36% rise to $29.7bn. Global economic conditions continued to take their toll on jewellery and industrial demand while underpinning safe haven demand from investors. 3 (v)

9 The gold price averaged $US during Q1, down 2% on the Q average. However, this relatively flat result in $US terms masks significant gains in local currency terms for consumers in several key countries, including India and Turkey. The biggest source of growth in demand for gold was investment. Identifiable investment demand reached tonnes in Q1, up 248% from tonnes in Q Taking into account inferred investment, which in the first quarter largely reflected investor flows into bullion accounts, total investment off-take reached tonnes, up 173% on the levels of a year earlier. Global jewellery sales will grow at 4.6 per cent on year-to-year basis to touch $185 billion in 2010 and $230 billion in Palladium is expected to establish itself as an alternative metal for jewellery fabrication while gold and jewellery will continue to dominate the market together, accounting for about 82 per cent of overall market share. Diamond jewellery will be the slowest growing segment at a compound growth rate of 3.3 per cent and will attain a size of $95 billion by However, demand for polished diamonds will be higher at 4.2 per cent. The Middle East will be a large market with close to 9 per cent of global jewellery sales by The crisis in the diamond industry has hit bottom, and the industry can now look forward to growth, according to DeBeers. Global diamond markets continue to stabilize with prices slowly solidifying against a shortage of supplies in the market. Buyers are resisting the new, higher prices as they are still unwilling to pay them. There is particular strength in medium to high quality rounds in the 1.00 ct range. The new diamond supply is estimated to be down 15% by volume, 45% by value, Global diamond production in 2009 will run at about 85 percent of production in Sources: WGC; Business Intelligence - Tacy Ltd. forecast: 2009; The KPMG Report on The Global Gems and Jewellery Business Overview The Group is operating in18 countries with 514 stores as at 31 March 2009, and the leading jewellery and watch retailer in the Middle East, based on number of stores. As at 31 March 2009, the Group s network of retail outlets included 277 operated through subsidiaries predominantly in the GCC countries and Italy; 65 operated through subsidiaries in the other Middle East countries, North Africa, Europe and other regions. The Group s stores offer its own branded products as well as products sold under leading global and regional luxury brands. The Group sells jewellery and watches through three main distinctive store formats, each of which is tailored to a specific type of customer. As at March 2009, these included: Les Exclusive stores, 68 in total, which cater to high net worth consumers through products that include some of the world s most exclusive luxury brands, for jewellery and watches, and some of the Group s own brands; Semi- Exclusive stores, 227 in total, which cater principally to upper-middle income consumers such as tourists and expatriate professionals and office workers, through products that include well known international jewellery brands of wider appeal, in addition to regional brands and the Group s own labels; and Damas 22K stores, 133 in total, which cater mostly to middle income and working class immigrant populations, primarily of South Asian origin, and primarily offer jewellery under the Group s own brands and regional brands. In addition to the three principal store formats, the Group has other stores, 86 in total, such as watch stores and mono-brand stores, as well as Damas Kids for children and duty- free shops. The Group also sells loose diamonds and gold and diamond jewellery on a wholesale basis to other jewellery retailers, including those in other Middle Eastern countries, as well as individual business owners and small familyowned local jewelers. The Group sources gold bullion primarily from bullion banks, finished unbranded jewellery mainly from suppliers in the UAE and direct overseas suppliers in Italy, India, Singapore, Saudi Arabia and Bahrain etc, and international brands from large international jewellery businesses. The Group also makes corporate sales to business clients throughout the Middle East. 3 (vi)

10 The Group s manufacturing capabilities encompass the entire manufacturing cycle from design to manufacturing and branding. The Group manufactures a portion of the branded and unbranded jewellery sold in its stores, either directly through its own facilities or indirectly through shared facilities. Realizing the impact of current economic scenario in Group s business, your Company has initiated a lot of cost saving measures, including controlled expensing in general administration and selling and distribution by maximum utilization of resources with commendable co-operation from employees. Our Strength Management believes that the primary competitive factors beneficial to the Group s operations are brand strength (reputation for reliability and trust), marketing, pricing, product variety, quality of sales personnel, service and convenience and visibility of store locations. Risks and Uncertainties The retail jewellery market in the regions in which the Group operates is highly fragmented and presents significant challenges to new entrants. Among the most important of these barriers to entry are the difficulties of securing retail store locations and competition from the numerous other retailers. The Group analyses its competitors according to the number of stores they operate, as well as their customer base, estimated sales, product types, marketing activities and estimated foot fall. The Group s primary competition is presented by regional retail and wholesale jewellery chains that sell to customers targeted by each of the Group s store formats. To a lesser extent, the Group also faces competition from a number of small, local family owned businesses. Risks are also present in the form of certain investments in subsidiaries or JCEs in different geographical areas coming under the influence of economic conditions prevalent in those geographic areas. Risk Management Your company has developed a risk management system for the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to monitor, control and minimize the probability and/or impact of unfortunate events. Risks can come from uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents, natural causes and disasters. Statements in the Management Discussion and Analysis describing the Company s objectives, projections, estimates and expectations may be forward-looking. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company s operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors. For and on behalf of the Board Dubai (Tawhid Abdullah) 27 July, 2009 Managing Director 3 (vii)

11 CORPORATE GOVERNANCE Damas Group is committed to the adoption of best governance practices and its adherence in both letter and spirit, at all times. Our governance practices stem from an inherent ethical practice and transparency in transactions coupled with high morale and Corporate Social Responsibility. Your Company also complies with the Corporate Governance requirements provided under legal and regulatory mechanism. The details of Compliances are as follows. Governing body The Company has an effective Board of Directors to lead and Control the Company headed by a Chairman who is responsible for the leadership of the Board. At present the Board is comprised of ten Directors out of which five Directors are Non Executive Independent Directors, two Directors are Non Executive Non Independent Directors and three Executive Directors. The Office of Chairman of the Board is different from the Office of the Managing Director of the Company. The Chairman of the Board is a Non Executive Director. The Board of Directors is properly balanced and the Board Members are adequately qualified and experienced to ensure that no individual or small group of individuals can dominate the Board s decision making. Moreover the division of responsibilities of the Directors are clearly established and recorded by the Board. The Board focuses on the overall objectives, strategy and policy issues of the Group and is responsible for approving acquisitions and divestments, major capital expenditure projects, considering Group budgets, dividend policy etc. The Management is responsible for implementation of the decisions taken by the Board and various other Committees of the Board and also for the day-to-day affairs of the Business. Meetings of the Board of Directors The Board of Directors of the Company duly met seven times during the Financial Year on 14 February 2008, 28 May 2008, 8 June 2008, 18 September 2008, 22 December 2008, 12 March 2009 and 25 March 2009 to effectively discharge its duties. The Company strives as far as practicable to provide the Directors, detailed agenda well in advance of the Board Meetings so that the Board can take well informed decision in the best interest of the Company. The following table sets out the number of meetings of the Board during the Financial Year together with the details of attendance: Director 14 Feb, May, 2008 Date of the Board Meeting Jun, Sep, Dec, Mar, 2009 Mr. Tawfique Abdullah P P P P P P P Mr. Tawhid Abdullah P P P P P P P Mr. Tamjid Abdullah P P P P P P P H.E. Mohamed Alabbar # NA NA NA A P A A H.E. Aamer Abdul Jalil Mohammed Al Fahim # NA NA NA P A A P Dr. Gaetano Cavalieri # NA NA NA P P P P Mr. John Harper # NA NA NA P P P P Dr. Maryam Matar # NA NA NA P P A P Mr. Abdulla Nasser H Al Mansouri * # NA NA NA P A A A Mr. Essam Abdulkadir Al Muhaidib # NA NA NA A P P A Mr. Ammar A. Alkhudairy # NA NA NA P P A P P = Present, A= Absent, NA = Not Applicable, # = Appointed as Director with effect from 08 July, 2008 * = Resigned effective 05 March, Mar, (viii)

12 Directors Remuneration Director Sitting Fees Fixed Remuneration (AED) (AED) Mr. Tawfique Abdullah 40, ,667 Mr. Tawhid Abdullah Nil Nil Mr. Tamjid Abdullah Nil Nil H.E. Mohamed Alabbar 10,000 Nil H.E. Aamer Abdul Jalil Mohammed Al Fahim 20,000 Nil Dr. Gaetano Cavalieri 40, ,333 Mr. John Harper 40, Dr. Maryam Matar 30,000 Nil Mr. Essam Abdulkadir Al Muhaidib 20,000 Nil Mr. Ammar A. Alkhudairy 30,000 Nil The remuneration of Mr. Tawhid Abdullah (Managing Director) and Mr. Tamjid Abdullah (Deputy Managing Director) has not yet been decided by the Board. Audit Committee The Board of Directors has constituted the Audit Committee with the following members: 1. Dr Gaetano Cavalieri- Independent Director 2. Mr John Harper- Independent Director 3. H.E. Aamer Abdul Jalil Mohammed Al Fahim Director Dr Gaetano Cavalieri is the Chairman of the Committee and the Company Secretary acts as the Secretary to the Committee. The Committee monitors and reviews the effectiveness of the Company s internal audit function, financial reporting and internal control policies and procedures for the identification, assessment and reporting of risks, reviews the management of financial matters and focuses upon the freedom allowed to the internal auditors; monitors the integrity of the financial statements of the Company and any formal announcements relating to the Company s financial performance, considers and makes recommendations to the Board as regards the appointment, removal and terms of engagement of the Company s external auditors; keeps under review the consistency of accounting policies both on a year to year basis and across the group companies; reviews on a regular basis its own performance, constitution, and terms of reference to ensure it is operating at maximum effectiveness, give due consideration to the requirements of the Offered Securities Rules of the DFSA Rulebook etc. Details of the terms of reference of the Audit Committee are available at the website of the Company Since the Committee was formally constituted only in the Month of September2008 and the Committee Members took some time to cope up with the terms of reference, their duties and responsibilities, the Committee could not hold a formal meeting in the Financial Year but informally met with the External Auditors to review the scope of Audit and related matters. Moreover the Committee formally met on 26 July, 2009 to consider the Financial Results for the Financial Year and all the Committee Members except H.E. Aamer Abdul Jalil Mohammed Al Fahim were present therein. Remuneration Committee The Board of Directors has constituted the Remuneration Committee with the following members: 1. Dr Gaetano Cavalieri- Independent Director 2. Mr John Harper- Independent Director 3. Mr. Ammar A Alkhudairy- Independent Director Dr Gaetano Cavalieri is the Chairman of the Committee and the Company Secretary acts as the Secretary to the Committee. As per the terms of reference of the Committee the Chief Executive and Human Resources Manager of the Company have right to attend and speak at meetings of the Committee. 3 (ix)

13 The Committee determines and agrees with the Board the framework for Board policy for the remuneration of the Directors, the Company's Chief Executive, the Chairman of the Company. The Committee also within the terms of the agreed policy determines the total individual remuneration package of each director and also makes recommendations for the remuneration of the executive directors of the Company in consultation with the Chief Executive and the Chairman of the Board. Details of the terms of reference of the Remuneration Committee are available at the website of the Company The Committee held its first meeting on 25 March, 2009 and all the Committee Members were present therein. Nomination Committee The Board of Directors has constituted the Nomination Committee with the following members: 1. Dr Gaetano Cavalieri- Independent Director 2. Mr John Harper- Independent Director 3. Mr. Ammar A Alkhudairy- Independent Director 4. Mr. Tawfique Abdullah Director and Chairman of the Board 5. Mr. Tawhid Abdullah Managing Director Dr Gaetano Cavalieri is the Chairman of the Committee and the Company Secretary acts as the Secretary to the Committee. As per the terms reference of the Committee the Chief Executive and Human Resources Manager of the Company have right to attend and speak at meetings of the Committee. The Committee reviews the structure, size and composition of the Board and makes recommendations to the Board with regard to any adjustments that are deemed necessary, makes recommendations to the Board as regards plans for succession, in particular, of the Chairman and Chief Executive of the Company, as regards the re-appointment of any non-executive director at the conclusion of his or her specified term of office, concerning the re-election by shareholders of any director under the retirement by rotation provisions in the Company's Articles of Association, concerning any matters relating to the continuation in office of any directors at any time and related issues. Details of the terms of reference of the Nomination Committee are available at the website of the Company The Committee held its first meeting on 25 March, All the Committee Members except Mr. Tawhid Abdullah were present at the Meeting. Other Committees In addition to the above committees, the Company has formed the following Committees of Directors and/ or Executives for smooth functioning of the Group Committee for Development of Corporate Strategic Plan Present Committee Members i. Mr Tawfique Abdulla - Chairman of the Committee ii. Dr Mariam Matar The Committee was formed to frame corporate strategic plan including Corporate Social Responsibilities. Risk Management Committee Present Committee Members i. Mr Tawhid Abdulla - Chairman of the Committee ii. Mr Ammar A. Alkhudairy iii. Mr PK Dutta, CFO The Committee was formed to assess from time to time the impact of gold price volatility, changing conditions of financial markets etc on the Group s Business. The Committee held one meeting during the Financial Year on 08 February, 2009 where all the Members of the Committee were present. The details of risk management process for the group are given under Management Discussion and Analysis. 3 (x)

14 Committee for making Damas Shares more Liquid Present Committee Members i. Mr Tawhid Abdulla, ii. H.E. Aamer Abdul Jalil Mohammed Al Fahim The Committee was formed to explore the possibility of dual listing to make the shares of the Company more liquid. Executive Committee Present Committee Members i. Mr Tawhid Abdulla, ii. Mr Tamjid Abdulla iii. Mr Ammar A. Alkhudairy iv. Mr Essam Abdulkadir Al Muhaidib The Committee was formed to approve and authorize new investments or projects in excess of AED 15,000,000/- but not exceeding AED 50,000,000/- involving one transaction or a series of transactions. Shares buy back Committee Present Committee Members 1. Mr. Tawhid Abdullah Chairman of the Committee 2. Mr. Tawfique Abdullah 3. Mr. Tamjid Abdullah 4. Mr. Ammar A. Alkhudairy This Ad hoc Committee was formed by the Board to consider and whenever possible to implement the decision of the Directors and Shareholders to buy back the shares of the Company. The Committee held its meeting on 11 th March, 2009 where all the Members of the Committee were present. General Meetings During the Financial Year the Company held six Extra Ordinary General Meetings on 12 May, 2008, 28 May, 2008, 1 June, 2008, 8 June, 2008 (two meetings) and 8 February, The Board has decided to hold the Annual General Meeting on 9 September, 2009 wherein all the Directors will submit themselves for re appointment by the Shareholders of the Company. Financial Reporting and disclosure The Board of Directors strives to ensure a sound system of internal control to safeguard the Company s assets and shareholders interest. The Company has a separate internal audit department with qualified personnel and the department is headed by a Senior Manager who directly reports to the Managing Director/ Chief Executive Officer of the Company. The Audit Committee and Board of Directors reviews the functions of the internal audit department. The Board further strives to present an understandable assessment when carrying any financial reporting or disclosures to different stake holders. Insider Trading The Company takes all reasonable steps to avoid the risk of insider trading. The Company s Directors and staffs are well aware about the Company s policy in handling of insider information. 3 (xi)

15 Listing information Date of Listing 8 July, 2008 Stock Exchange where Company s shares are listed NASDAQ Dubai (Formerly Dubai International Financial Exchange) Trade symbol DAMAS ISIN AEDFXAOQ3724 Registrar NASDAQ Dubai Limited (formerly Dubai International Financial Exchange Limited) Status of Listing fees Paid up to date Share holding pattern as on 31 March, 2009 Category of Shareholders Number of Shares held % of shares held Principal Shareholders 698,018, NASDAQ Dubai Guardian Ltd. As bare nominee of CSD Account Holders 291,209, Communications/ Relations with Shareholders The Company regularly disseminate relevant information, both financial and non financial, to the shareholders through appropriate means including market announcement through CANDI System of the Stock Exchange. It published its Un-audited Interim Condensed Consolidated Financial Statement for the period of six months ended on 30 June, The report was reviewed by the Auditors of the Company and published in the month of August, Your Directors encourage Shareholders participation in the General Meetings of the Company wherein they can directly interact with the Directors of the Company. More over the Company has established a separate Legal and Secretarial Department. The investors may contact the following official for information and/ or grievances. Mr. Prodyut Banerjee Investors Relations Officer Damas Corporate Finance Building 1 st, Floor, Post Box Dubai- UAE Ph Fax prodyutb@damasjewellery.com Brief profile of the Directors: Mr. Tawfique Abdullah, Chairman, has been serving as Director of the Company since 14 April He has also been serving as Chairman of the Board of Damas LLC, the Wholly Owned Subsidiary of the Company, since 1980 and is responsible for monitoring Group strategies and mentoring the Executive Committee. Mr Abdullah is also a qualified gemologist and goldsmith. Mr Abdullah currently holds professional and active memberships with various reputable organisations such as the Dubai Gold & Jewellery Group, the World Diamond Council and the World Federation of Jewellery. Mr Abdullah has also served as Chief Executive Officer of the Dubai Metals and Commodities Centre and has been bestowed with the title of Knighthood of Belgium. In addition to his directorships of the Company, Damas LLC and Damas Jewellery LLC, Mr Abdullah is currently a member of the boards of several of the Group s subsidiaries, associates and jointly controlled entities. He also serves as Vice Chairman of the Dubai Multi Commodities Centre. Mr. Abdullah, a Non Executive Director, is presently serving as the Chairman of the Board of Directors of the Company. He is holding 168,500,820 Ordinary Shares and 1 Deferred Share in the Company. 3 (xii)

16 Mr. Tawhid Abdullah, Managing Director, has been serving as Director of the Company since 14 April He has also been serving as Managing Director of Damas LLC, the Wholly Owned Subsidiary of the Company for over 10 years and is responsible for finance and corporate functions as well as marketing and the gold wholesale business. Mr Abdullah, who has been instrumental in expanding Damas s retail network and enhancing the Damas brand for over 25 years, is also a qualified gemologist. He has held various senior positions at jewellery companies, including Managing Director of Dubai Gold & Jewellery Group. Mr Abdullah was awarded Best Entrepreneurial Mentor by the Mohammad Bin Rashid Awards for young business leaders in June In addition to his directorships of the Company, Damas LLC and Damas Jewellery LLC, Mr Abdullah is currently a member of the boards of several of the Group s subsidiaries, associates and jointly controlled entities. He is Currently Serving as the Managing Director and Chief Executive Officer of the Company. He is holding 177,685,023 Ordinary Shares and 1 Deferred Share in the Company. Mr.Tamjid Abdullah, Deputy Managing Director, has been serving as Director of the Company since 14 April He has also been serving as Deputy Managing Director of Damas LLC, the Wholly Owned Subsidiary of the Company for over 10 years and is responsible for the diamond division as well as the retail network. He has been instrumental in establishing the quality control and customer service departments of Damas Jewellery LLC. Mr Abdullah is also a qualified gemologist. For over three decades, Mr Abdullah has been recognised with numerous awards for jewellery design and craftsmanship including the De Beers Millennium Award for the Best Jewellery piece in 2000 and in He is also responsible for the Damas private jewellery brands such as Boudoor, Romance, Hayati and Jawaher. In addition to his directorships of the Company, Damas LLC and Damas Jewellery LLC, Mr Tamjid Abdullah is currently a member of the boards of several of the Group s subsidiaries, associates and jointly controlled entities. He is currently serving as the Deputy Managing Director of the Company. He is holding 168,500,820 Ordinary Shares and 1 Deferred Share in the Company. H.E Mohamed Alabbar has been serving as Director of the Company since July He has also been serving as Director of Damas LLC, wholly owned subsidiary of the company since July Mr Alabbar is a graduate in Finance and Business Administration from Seattle University in the U.S. and was awarded an honorary doctoral degree in humanities from Seattle University in recognition of his notable achievements in business, economic development and public service in Dubai and throughout the Middle East region. Also in recognition of his achievements, FDI magazine, published by the Financial Times Group, recently named Mr Alabbar Middle East Personality of the Year. Mr Alabbar was ranked second in Arabian Business March 2007 list of the 100 Most Influential Arabs in the World, and Fortune magazine named Mr Alabbar among the top 30 in power positions globally in their December 2007 issue. In addition to his directorship of the Company, Mr Alabbar is the founding member and Chairman of Emaar Properties PJSC. He is also the Director General of the Dubai Department of Economic Development and a member of the Dubai Executive Council. Mr Alabbar serves on the board of directors of the Investment Corporation of Dubai, the investment arm of the Government of Dubai, and is a board member of Noor Investment Group, an affiliate of Dubai Group, the leading diversified financial company of Dubai Holding. Mr. Alabbar is a Non Executive Director. H.E. Aamer Abdul Jalil Mohammed Al Fahim has been serving as Director of the Company since July H.E. Al Fahim is a member of the executive committee of Damas LLC. H.E. Al Fahim is also the executive director of the Al Fahim Group and serves as a member of the UAE Federal National Council. H.E. Al Fahim is the chairman of Aradi Properties P.J.S.C. and serves as a director on the following boards: the Abu Dhabi Chamber of Commerce & Industry; Abu Dhabi Commercial Bank; Al Wathba Insurance Company; Al Qudra Holdings; Al Safwa Islamic Financial Services; and International Investment Bank (Bahrain). H.E. Al Fahim obtained a Master of Business Administration (Banking and Finance) from the University of Hull. Dr Gaetano Cavalieri has been serving as Director of the Company since July Dr Cavalieri has over 37 years of experience in the jewellery business, having served as President of his family jewellery company since 1972 and as President of the Italian Gold and Jewellery Wholesaler Federation since He also currently serves as Chief Financial Officer of the World Diamond Council. He has also served as a consultant to the Huadu Authority District People s Government of Guangzhou and the China Chamber of Commerce for Precious Metals and Gemstones, and has served as a member of the Advisory Board of the Italian Institute of Foreign Trade and Commerce since Dr Cavalieri received his Ph.D. in Economics and Economic Policy from Catania University in 1979, and his master s degree in Multi-criteria Decision Theory from Catania University and in Business Administration, Finance and International Marketing from Rotterdam University in Dr Cavalieri has received several industry awards, including the Most Advanced Jewellery Marketing Project from the Japanese Ministry of Industry, The Best Programme to Penetrate the German Jewellery Market award from the German Ministry of Commerce, and the Youngest Foreign Managing Director award from the Australian Ministry of Foreign Trade. Dr Cavalieri also serves on the board of the Italian General Trade Confederation and Mondimpresa S.c.r.l. Mr. Cavalieri is an Independent Director. 3 (xiii)

17 John Harper has been serving as Director of the Company since July Mr Harper has over 41 years of experience in the banking industry, having worked for HSBC Bank plc ( HSBC ) in various positions. When Mr Harper retired from HSBC at the end of 2006, he was Global Co-Head of the Retail Sector, Corporate, Investment Banking and Markets. He worked in the retail banking sector at HSBC for eight years, prior to which he served as Head of Property and Construction, Corporate Finance Director of the Oil and Energy Group, Manager of the Crocker Integration Project, Manager of Syndicated Loans in Hong Kong, and various other positions with HSBC in Bermuda, Beirut and Bahrain. Mr Harper became an Associate of the Chartered Institute of Bankers in He also currently serves as Trustee and Treasurer of HSBC Bank (UK) Pensioners Association Benevolent Fund and as Governor and Chairman of the Premises and Finance Committee of Eastbury Farm JMI School in Northwood, England. Mr. Harper is an Independent Director. Dr Maryam Matar has been serving as Director since July Dr Matar has over 10 years experience in the field of Health and Social Development. She is the founder and Executive Director of the UAE Genetic Disease Association (since 2005), and the founder and Executive Director of the UAE Down Syndrome Association (since 2006). Dr Matar also served as Executive Director of the Dubai Social Development Strategic Plan 2015, and was the Executive Team Leader for the Ministry of Health Strategy From 2006 to 2008, Dr Matar served as Undersecretary to the Minister of Health for Public Health and Primary Health Care. Dr Matar obtained a bachelor s degree in Medicine and Surgery from the Dubai Medical College in In recognition of her achievements, Dr Matar received the Sheikh Rashid Award for Education Excellence from the Dubai Faculty of Medicine in 1999, the Dubai Quality Award for Best Employee from the Dubai Department of Health in 2003, the Best Community Project Award from the Sheikh Mohammed Bin Rashid Leadership Programme in 2004 and the Emirate Business Women Award for Professional Excellence from the Dubai Quality Group in 2005.Mrs. Matar is an Independent Director. Mr Essam Abdulkadir Al Muhaidib has been serving as Director of the Company since July Mr Al Muhaidib is the Group Managing Director of A.K. Al Muhaidib and Sons Group, one of the major conglomerates in Saudi Arabia. Mr Al Muhaidib, who holds a bachelor s degree in Statistics from King Saud University in Saudi Arabia, is also on the board of directors of several companies in the areas of banking and insurance, retail, construction and real estate, including Emmar Middle East, United Sugar Company (THIMAR), Amwal Al Khaleej and Middle East Paper Company. Mr Al Muhaidib is also on the board of several educational and charitable organisations. Mr. Al Muhaidib in an Independent Director Mr Ammar A. Alkhudairy has been serving as Director of the Company since July Mr Alkhudairy has over 20 years of management experience, principally in the fields of merchant, investment and corporate banking and venture capital. Mr Alkhudairy is a founding partner of Amwal Al Khaleej Commercial Investment Company in Saudi Arabia, and currently serves as its Managing Director. Prior to his position with Amwal Al Khaleej, Mr Alkhudairy served as Regional Manager of Banque Saudi Fransi from October 2001 to September Before his position with Banque Saudi Fransi, Mr Alkhudairy served as Manager of the Riyadh Corporate Bank for United Saudi Bank from April 1995 to May 1999, and Vice President and Chief Operating Officer of Tawteen Trading Company, a venture capital firm in Saudi Arabia, from January 1992 to March Before working with Tawteen Trading Company, Mr. Alkhudairy held the position of Assistant Manager in the Equity Investment Department of the Riyad Bank and High Commission for Development of Riyadh. Mr Alkhudairy received his master s degree in Engineering Administration from George Washington University in Washington, D.C. in 1984, and his B.Sc. in Civil Engineering from George Washington University in 1983.Mr. Alkhudairy is an Independent Director. For and on behalf of the Board Dubai (Tawhid Abdullah) 27 July, 2009 Managing Director 3 (xiv)

18 INDEPENDENT AUDITOR S REPORT TO THE SHAREHOLDERS OF DAMAS INTERNATIONAL LIMITED Report on the Financial Statements We have audited the accompanying consolidated financial statements of Damas International Limited ( the Company ) and its subsidiaries, associates and joint ventures (collectively referred to as the Group ), which comprise the consolidated balance sheet as at 31 March 2009, and the consolidated income statement, consolidated cash flow statement and consolidated statement of changes in equity for the period then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the applicable provisions of the Companies Law pursuant to DIFC Law No. 3 of This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the shareholders of the company as a body, for our audit work, for this report, or for the opinions we have formed. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

19 Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 March 2009, and its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards. Report on Other Legal and Regulatory Requirements We also confirm that, in our opinion, the consolidated financial statements include, in all material respects, the applicable requirements of the Companies Law pursuant to DIFC Law No. 3 of We have obtained all the information and explanations which we required for the purpose of our audit and, to the best of our knowledge and belief, no violations of the Companies Law pursuant to DIFC Law No. 3 of 2006 have occurred during the period which would have had a material effect on the business of the Company or on its financial position. Ernst & Young 27 July, 2009 Dubai

20 CONSOLIDATED INCOME STATEMENT For the period ended 31 March January 1 January 2008 to to 31 March 31 December (15 months) (12 months) Notes AED 000 AED 000 (restated) Revenue 6,032,876 3,553,269 Cost of sales (4,916,386) (2,910,173) GROSS PROFIT FOR THE PERIOD / YEAR 1,116, ,096 General administration, selling and distribution expenses 6 (759,925) (431,984) Finance costs 7 (175,953) (107,620) Finance income 55,888 33,830 Share of results of equity accounted investments 8 46,326 42,261 (Loss) / gain on fair value of investments carried at fair value through profit or loss 13(b) (102,315) 12,459 Impairment loss on goodwill 11 (2,294) - Other income 9 48,696 17,084 PROFIT FOR THE PERIOD / YEAR 226, ,126 Attributable to: Shareholders of the Company 217, ,051 Minority interests 9,567 5, , ,126 Basic and diluted earnings per share (EPS) in AED The attached notes 1 to 34 form part of these consolidated financial statements. 6