GITANJALI VENTURES DMCC

Financial Statements

31 March 2011

Registered Office

Unit No.33D, Almas Tower

Plot No.LT2, Jumeirah Lakes Towers
Dubai-UAE
GITANJALI VENTURES DMCC

Financial Statements
31 March 2011

CONTENTS PAGE

Director’s Report 1

Auditors’ Report 2

Balance Sheet 3

Income Statement 4

Statement of Changes in Equity 5

Statement of Cash Flow 6

Notes to the Financial Statements 7 - 14

 PAGE 1

GITANJALI VENTURES DMCC

Director’s Report
The director submits his report and financial statements for the financial year ended 31 March
2011.
Results
The net profit for the year amounted to USD.14, 378,244/-

Review of the business

The activities of the company during the year were trading in diamonds and precious stones,
diamonds jewellery & pearls.
Sales, gross profit, net profit, gross profit ratio, net profit ratio for the year ended 31st March
2011 were as follows:
SR NO. Particulars Year ended 31-03-11 Year ended 31-03-10
USD USD
1. Revenue 90,665,783 64,856,014
2. Gross profit 16,008,030 14,228,459
3. Net profit 14,378,244 13,453,551
4. Gross profit ratio 17.65% 21.93%
5. Net profit ratio 15.85% 20.74%

Events since the end of the year

There were no important events, which have occurred since the year-end that materially affect the
company.

Shareholder and its interest

The shareholder at 31 March 2011 and its interest as at that date in the share capital of the
company was as follow:

No. of shares % of shares USD

Gitanjali Gems Limited, India 200 100 54,500

Auditor
A resolution to re-appoint M/s. Abdulhusain & Associates as auditors and fix their remuneration
will be put to the board at the annual general meeting.

___________
DIRECTOR
 PAGE 2
Independent Auditors’ Report to the Shareholder of
GITANJALI VENTURES DMCC
Report on the Financial Statements
We have audited the accompanying financial statements of GITANJALI VENTURES DMCC , which
comprises the balance sheet as of 31 March 2011, and the income statement, statement of changes in equity
and cash flow statement for the year then ended, and a summary of significant accounting policies and
explanatory notes.

Management’s Responsibilities for the Financial Statements

Management is responsible for the preparation and fair presentations of these financial statements in
accordance with International Financial Reporting Standards. 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 circumstance.

Auditor’s responsibility:
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with International Standards on Auditing. Those standards require that we comply
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 risk 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 in 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 the
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.

Opinion:
In our opinion, the financial statements present fairly, in all material respects the financial position of
GITANJALI VENTURES DMCC as of 31 March 2011 and its financial performance and its cash flow
for the year then ended in accordance with International Financial Reporting Standards.

CHARTERED ACCOUNTANTS
Dubai
24th May 2011
 PAGE 3

GITANJALI VENTURES DMCC

Balance Sheet
31 March 2011
2011 2010
Notes USD USD
ASSETS
Non-current assets
Fixed assets 3 3,153 -
Investments 4&15 21,015,000
Intangible assets 5 1,068,177 1,237,177
Loan to related party 15 - 6,000,000
Total non- current assets 22,086,330 7,237,177

Current assets
Inventories 6 2,796,160 4,983,934
Trade and other receivables 7 & 15 62,361,815 70,967,448
Cash and bank balances 8 289,454 174,409
Total current assets 65,447,429 76,125,791

Total assets 87,533,759 83,362,968

EQUITY AND LIABILITIES

Capital and reserves
Shareholders’ funds
Share capital 9 54,500 54,500
Accumulated profits 52,098,345 37,720,101
Equity funds 52,152,845 37,774,601
Shareholder’s current account 10 9,500,000 8,500,000
Total shareholders’ funds 61,652,845 46,274,601

Non-current liability
Long term loan from a related party 15 17,333,334 26,000,000

Current liabilities
Trade and other payables 11 & 15 8,547,580 11,088,367
Total current liabilities 8,547,580 11,088,367

Total equity and liabilities 87,533,759 83,362,968

The accompanying notes form an integral part of these financial statements.

The report of auditors is set forth on page 2.
We confirm that we are responsible for these financial statements, including selecting the accounting policies and
making the judgments underlying them. We confirm that we have made available all relevant accounting records
and information for their compilation.
Approved by the director on 24th May 2011.

DIRECTOR
 PAGE 4

GITANJALI VENTURES DMCC

Income Statement
For the year ended 31 March 2011

Year ended Year ended

31 March 31 March
2011 2010
Notes USD USD

Sales 15 90,665,783 64,856,014

Cost of sales 12&15 (74,657,753) (50,627,555)

Gross profit 16,008,030 14,228,459

Other income 130,112 118,574

Commission and consultation charges 13 (905,649) (475,488)

Expenses 14 (854,249) (417,994)

Net profit for the year 14,378,244 13,453,551

The accompanying notes form an integral part of these financial statements.

 PAGE 5

GITANJALI VENTURES DMCC

Statement of Changes in Equity

For the year ended 31 March 2011

Share Accumulated
Capital Profits Total
USD USD USD

As at 31 March 2009 54,500 24,266,550 24,321,050

Net profit for the year - 13,453,551 13,453,551

As at 31 March 2010 54,500 37,720,101 37,774,601

Net profit for the year - 14,378,244 14,378,244

As at 31 March 2011 54,500 52,098,345 52,152,845

The accompanying notes form an integral part of these financial statements.

 PAGE 6

GITANJALI VENTURES DMCC

Cash Flow Statement

For the year ended 31 March 2011

Year ended Year ended

31 March 31 March
2011 2010
Notes USD USD
Cash flow from operating activities
Net profit for the year 14,378,244 13,453,551
Adjustment for:
Amortization of intangible assets 169,000 169,000
Operating profit before working capital 14,547,244 13,622,551
(Increase)/decrease in inventories 2,187,774 1,309,456
(Increase)/decrease in trade and other receivables 8,605,633 (22,570,058)
Increase/(decrease) in trade and other payables (2,540,787) 7,564,107
Net cash generated from/(used in) operating 22,799,864 (73,944)

Cash flows from investing activities

Purchase of fixed assets (3,153) -
Payment for investments (21,015,000) -
(21,018,153) -
Cash flow from financing activities
Share capital introduced
Loan to a related party 6,000,000 -
Loan from a related party (8,666,666) -
Funds introduced/(withdrawn) by the director (net) 1,000,000 -
Net cash from/(used in) financing activities (1,666,666) -

Net increase/(decrease) in cash and cash equivalents 115,045 (73,944)

Cash and cash equivalents at beginning of the year 174,409 248,353
Cash and cash equivalents at end of the year 8 289,454 174,409

The accompanying notes form an integral part of these financial statements.

 PAGE 7

GITANJALI VENTURES DMCC

Notes to the Financial Statements

For the year ended 31 March 2011

1. Legal status and business activity

a) GITANJALI VENTURES DMCC is a limited liability company incorporated in the

Dubai Multi Commodities Centre under trade license No 30669 on 26 March 2007.

b) The company is mainly engaged in trading in diamonds and precious stones, diamonds
jewellery & pearls.

c) The pricing policies, terms of sales and purchase transactions and credit terms are as
approved by the management.

d) These financial statements do not include transactions and balances of a branch company,
for which separate financial statements are prepared.

2. Significant accounting policies

Basis of Preparation

These financial statements have been prepared in accordance with the International
Financial Reporting Standards (IFRS) issued by the International Accounting Standards
Board (IASB), Interpretations issued by the International Financial Reporting
Interpretation Committee (IFRIC) and applicable rules and regulations of the UAE Law.
The significant accounting policies, which have been applied, are set out below:

a) Accounting Convention
These financial statements have been prepared under the historical cost convention. The
accounting policies have been consistently applied by the company.

b) Depreciation of fixed assets:

The cost of fixed assets is their purchase cost together with any incidental expenses of
acquisition. Minor purchases of fixed assets are depreciated fully in the year of purchase.
The cost of fixed assets is depreciated by equal annual installments over their estimated
useful lives.
Depreciation on addition is calculated on a pro-rata basis from the month of addition and
on deletion up to and including the month of deletion of the asset.
 PAGE 8

GITANJALI VENTURES DMCC

Notes to the Financial Statements

For the year ended 31 March 2011

c) Investments
Investments, which have fixed or determinable payments and which are intended to be
held to maturity, are classified as “held to maturity” and measured at amortized cost less
provision for impairment in value. Amortized cost is calculated by taking into account any
discount or premium on acquisition.

All other investments are classified as “available for sale”. Subsequent to initial
recognition, they are measured at fair value as required by IAS 39 and changes therein are
recognized in statement of changes in equity. Unquoted shares are valued at cost less
impairment.
Income from investments with fixed interest rates is accounted as and when due.
Dividend income is accounted when shareholders’ right to receive payment is established.

Distributions received in excess of such profits are considered as a recovery of investment

and are recorded as a reduction of the cost of investment.

d) Intangible Assets

Intangible assets acquired, are stated at cost less accumulated amortization and any
accumulated impairment losses. Amortization is charged to the income statement on a
straight line basis, over the estimated useful lives of intangible assets, unless such lives are
indefinite. Subsequent expenditure on capitalized intangible assets is capitalized only when
it increases the future benefit embodied in the specific asset to which it relates.

e) Inventories

Inventories are valued at cost or net realizable value whichever is lower. Cost comprises
of direct purchase price and the overheads that have been incurred in bringing the
inventories to their present location and condition.Net realizable value represents the
estimated selling price less all estimated costs to completion and cost to disposal.

f) Trade receivables:

Invoices made on credit are included in trade receivables at the balance sheet date, and
reduced by appropriate allowances for estimated doubtful amounts. Bad debts are written
off as they arise.

g) Trade and other payables:

Liabilities are recognized for amounts to be paid for goods or services received, whether
invoiced by the supplier or not.
 PAGE 9
GITANJALI VENTURES DMCC

Notes to the Financial Statements

For the year ended 31 March 2011

h) Impairment:

The carrying amount of the company’s assets is reviewed at each Balance Sheet date or
whenever there is any indication of impairment. If any such indication exists, the
recoverable value of the assets is estimated. An impairment loss is recognized where the
carrying amount of an asset exceeds its recoverable value. Impairment losses are
recognized in the income statement when it arises.

i) Provisions:

Provisions are recognized when the Company has present obligation as a result of past
events, which it is probable, will result in an outflow of economic benefits that can be
reasonably estimated.

Provisions for employee entitlements to leave salary, gratuity and their passage to their
home town as a result of service rendered by employees are not provided and these are
recognized as and when it is paid by the company.

j) Sales:
Sales represents net amount invoiced for goods delivered during the year. Sales are
recognized when the significant risks and rewards of ownership of the goods have passed
to the buyer.
Other income is accounted on accrual basis.

k) Foreign currency transactions:

Transactions in foreign currencies are converted into US Dollars at the rate of exchange
ruling on the date of the transaction. Assets and liabilities expressed in foreign currencies
are translated into US Dollars at the rate of exchange ruling at the balance sheet date.
Resulting gain or loss is taken to the income statement.

l) Cash and cash equivalents:

Cash and cash equivalents for the purpose of the cash flow statement comprise cash and
cheques on hand, bank balances in current accounts, deposits free of encumbrance with a
maturity date of three months or less from the date of deposit and highly liquid
investments with a maturity date of three months or less from the date of investment.
 PAGE 10
GITANJALI VENTURES DMCC
Notes to the Financial Statements
For the year ended 31 March 2011

m) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose
existence will only be confirmed by the occurrence or non occurrence of one or more
uncertain future events not wholly within the control of the company. It can also be a
present obligation arising from the past events that is not recognized because it is not
probable that outflow of economic resources will be required or the amount of obligation
cannot be measured reliably.
Contingent liabilities are not recognized but are disclosed in the notes to the accounts.
When a change in the probability of an outflow occurs so that outflow is probable, it will
then recognized as provision.
A contingent asset is a possible asset that arises from past events and whose existence will
be confirmed only by the occurrence or non occurrence of one or more uncertain future
events not wholly within the control of the company. Contingent assets are not recognized
but are disclosed in the notes to the accounts when an inflow of economic benefits is
probable. When an inflow is virtually certain, an asset is recognized.

n) Dividend:

Dividend is paid out of accumulated profits, when declared.

Furniture &
Fixtures
3. Fixed assets USD

Cost
As at 01.04.2010 -
Purchase during the year 3,153
As at 31.03.2011 3,153

Depreciation
As at 01.04.2010 -
Charge for the year -
As at 31.03.2011 -

Net book value

As at 31.03.2011 3,153
In the opinion of the management, there is no impairment in the value of assets as of the reporting date.
As the asset has been capitalized at the end of the year no depreciation has been provided.
 PAGE 11
GITANJALI VENTURES DMCC

Notes to the Financial Statements

For the year ended 31 March 2011

2011 2010
USD USD

4. Investments

Investment in shares* 21,015,000 -

*Represents amount invested as additional capital in the associate company, Samuels Jewelers Inc. USA, as per the
tri-party agreement between Gitanjali Ventures DMCC, Gitanjali Gems Ltd and Samuels Jewelers Inc. Refer note 15.

5. Intangible asset

Amounts paid for acquiring patents

Cost* 1,617,427 1,617,427

Amortization for the year

Opening balance 380,250 211,250
Additions during the year 169,000 169,000
Closing balance 549,250 380,250
Net book value 1,068,177 1,237,177
* Includes patent rights amounting to USD 350,000/- registered in the name of the holding company M/s
Gitanjali Gems Ltd, India. The management of the holding company has transferred all the rights of usage to the
company.

6. Inventories*

Polished diamonds and other items 285,650 82,705

Diamond jewellery 2,465,016 3,636,159
Gold, gold jewellery and others 45,494 1,265,070
2,796,160 4,983,934
*As physically verified, valued and certified by the management.

7. Trade and other receivables

Trade receivables# 48,429,680 68,357,065

Deposits (Refer note 18) 40,356 23,851
Advances for acquisition@ 11,400,996 -
Loans and advances 1,022,254 1,118,003
Other receivables* 1,468,529 1,468,529
62,361,815 70,967,448
# Refer note 15
@ Represents amount advanced for acquisition of company in Italy.

* Includes USD. 518,529/- paid Al Haseena LLC, a company registered and operating in Dubai-UAE for overheads,
marketing and interior work expenses for showrooms and shops of Al Haseena LLC in UAE at Al Fahidi Street,
Meena Bazar, Dubai Festival City and Abu Dhabi.
 PAGE 12
GITANJALI VENTURES DMCC

Notes to the Financial Statements

For the year ended 31 March 2011

8. Cash and bank balances

Cash on hand 45,701 8,922

Bank balances in:

Current accounts 243,753 165,487
289,454 174,409

9. Share capital

200 shares of AED 1,000/- each (converted @ 3.67) 54,500 54,500

10. Shareholder’s current account 9,500,000 8,500,000

This represents current account of the shareholder of the company.

11. Trade and other payables

Trade payables* 5,990,619 9,005,510

Advance from customers 535,623 -
Deposit payable 1,983,276 1,983,276
Other payables* 27,889 -
Accrued expenses 10,173 99,581
8,547,580 11,088,367
*Refer note 15

Year ended Year ended

31 March 31 March
2011 2010
USD USD
12. Cost of sales

Opening inventory 4,983,934 6,293,390

Purchases 72,469,979 49,318,099
Closing inventory (2,796,160) (4,983,934)
74,657,753 50,627,555
 PAGE 13
GITANJALI VENTURES DMCC

Notes to the Financial Statements

For the year ended 31 March 2011

13. Commission and consultation charges

Represents commission and consultation charges paid for business development and
marketing strategies as agreed by the management from time to time.

14. Expenses

Staff salaries and benefits 449,200 36,128

Rent 57,275 18,801
Amortization of intangible asset 169,000 169,000
Other administrative and selling expenses 178,774 194,065
854,249 417,994

15. Related party transactions

The company in the normal course of business enters into transactions with other business
entities that fall within the definition of a related party as contained in the International
Accounting Standard - 24. Related parties are the entities under common ownership
and/or common management control and associates.

2011 2010
USD USD

Sales 2,257,651 826,069

Purchases - 19,498

At the balance sheet date, balances with related parties were as follows:

2011 2010
USD USD

Included in trade and other receivables 507,068 5,265,878

Investment 21,015,000 -
Loan to related party - 6,000,000
Included in trade and other payables 294,919 -
Long term loan from related party 17,333,334 26,000,000
 PAGE 14
GITANJALI VENTURES DMCC

Notes to the Financial Statements

For the year ended 31 March 2011

16. Financial instruments: Credit, interest rate and exchange rate risk
exposures
Credit risk

Financial assets, which potentially expose the company to concentrations of credit risk,
comprise principally of bank balances and trade and other receivables.
The company’s bank balances in current accounts are placed with high credit quality
financial institutions.

As at 31 March 2011, the significant concentration from trade receivables outside UAE is
nil and within UAE is amounted to USD. 48,004,077/-
There is no significant concentration of credit risk outside the industry in which the
company operates.

Interest rate risk

In the absence of any borrowings or deposits there is no interest rate risk.

Exchange rate risk

There are no significant exchange rate risks as substantially all financial assets and financial
liabilities are denominated in US Dollars.

17. Financial instruments: Fair value

Financial instruments comprise of financial assets and financial liabilities. Financial assets
consist of inventories, trade and other receivables, loan to a related party and cash and
bank balances. Financial liabilities consist of long term loan from a business associate and
trade and other payables. The fair values of financial instruments are not materially
different from their carrying value.

18. Contingent liabilities

2011 2010
USD USD

Margin money deposit 20,476 4,509

19. Comparative figures

Previous year’s figures have been regrouped /reclassified to conform to those of the
current year.