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ONTRACK SYSTEMS LIMITED

C O N T E N T S

1 Financial Highlights

2 MD’s Message

3 Review by Operating Groups & Subsidiaries

13 Board of Directors & Management Team

14 Organisational Structure

15 Directors’ Report

17 Management Discussion & Analysis

18 Report on Corporate Governance

21 Auditors’ Report

24 Balance Sheet

25 Profit & Loss Account

26 Schedules to Accounts

37 Cash Flow Statement

40 Consolidated Financial Statement

51 Subsidiaries Annual Accounts

62 Shareholders Information

65 Notice

68 Proxy Form

A Cautionary Note on Forward–looking

Statements

The Annual Report contains statements regarding

Ontrack’s corporate strategies, objectives and views of

future developments that are forward–looking in nature

and are not simply reiterations of historical facts. These

statements are presented to inform shareholders of the

views of Ontrack’s management but should not be relied

on solely in making investment and other decisions. A

number of important risk factors could lead to outcomes

that differ materially from those presented in the forward–

looking statements. These include, but are not limited,

(i) changes in economic conditions that may lead to

unforeseen developments in markets for products and

services rendered by Ontrack, (ii) ability of the company

to mobilize financial and human resources to execute the

business plan, (iii) adverse political developments that

may create unavoidable delays or postponement of

transactions and projects, (iv) changes in laws,

regulations, or policies in any of the countries where

Ontrack conducts its operations that may affect Ontrack’s

ability to fulfill its commitments, and (v) significant

changes in the competitive environment. In the course of

its operations, Ontrack adopts measures to control these

and other types of risks, but this does not constitute a

guarantee that such measures will be effective. All

trademarks and copyrights belong to their respective

owners.

ONTRACK SYSTEMS LIMITED 1

FINANCIAL HIGHLIGHTSONTRACK SYSTEMS LIMITED

(Rs. In Lacs)

(Rs. in Lacs)

Particulars 2001–2002 2002–2003 2003-2004

Export Sales 471.27 1239.24 1748.45

Domestic Sales 598.74 388.59 477.57

Other Income 13.98 16.57 14.88

Total Revenue 1083.99 1644.40 2240.90

Operating Profit (PBDIT) 228.47 352.41 267.75

Finance Expenses 31.50 38.51 38.55

Loss on sale of UTI Investment 22.59 — —

Loss on sale of Assets 1.38 — 0.24

Preliminary & Deferred Rev. Exp. W/O 35.13 55.85 37.92

Depreciation 73.31 137.26 139.26

Extraordinary item (Loss) — 36.19 —

Income Tax (Net) 8.00 25.51 4.74

Net Income after tax 56.56 110.11 47.04

EPS before extraordinary item (after tax) 1.13 2.05 —

EPS after extraordinary item (after tax) 1.13 1.33 0.89

Dividend 5% 6% 7%

Operating Income as % to Total Revenue 21.08 21.43 11.95

Share Capital 500.02 500.02 500.02

Reserves & Surplus 550.38 626.65 634.20

Fixed Assets (Gross Block) 534.33 711.18 744.95

0

100

200

300

400

500

600

700

800

2001-2002 2002-2003 2003-2004

534.33

325.97

711.18

461.93

744.95

356.49

(Rs. in Lacs)

0

500

1000

1500

2000

2500

2001-2002 2002-2003 2003-2004

1083.99

228.47

1644.40

352.41

2240.90

267.75

Turnover

Operating Profit

Gross Block

Net Block


TO OUR SHAREHOLDERS

The global market for services has seen a significant interest

in BPO and ITES services from offshore destinations like India.

There has been considerable resistance and bad press about

the job losses in Western countries due to the significant

outsourcing initiatives taken by large corporations worldwide.

Your company believes that this trend of outsourcing core

processes is irreversible and wil l continue to grow

exponentially in the next couple of years. Though the

opportunities are enormous, your company recognizes that

there are significant challenges being faced by the Indian software and services companies. Your company has taken

initiatives in ensuring that Information Security, compliance requirements and HR are the key challenges for your

company during the current financial year. The company has initiated a series of activities to address these with

state of art practices.

Though we are optimistic that the overall business of the company would grow, we do expect newer challenges that

would require more innovation and hard work to live up to the expectations of our customers and stakeholders. The

BPO activities initiated by the company will play a significant role in contributing revenues in the near future. Your

company has started pilot projects in the areas of technical services and HR services for overseas companies which

are expected to scale up based on our performance.

This year we have proposed a modest increase in our dividend and we will strive towards increasing our returns to

our shareholders in the next year as well. The company’s management is confident that your company is well poised

to take the challenges of the marketplace and continue to deliver value to our customers.

Thank You.

B HariManaging Director

Dated : 28th June, 2004

ONTRACK SYSTEMS LIMITED22


Implementat ion of state-of -ar toperational processes for the center.

Release of SMS Xprez in the UAE market

Star t ing of the Ontrack Hol landOperations

Initiation of Internet Chat based HelpDesk

Partnership and Alliances in the SAARCnations

Successful development andimplementation of online tenderingsolution: Secure-T for Indian Railways

Specialization in ecommerce, media/enter tainment and banking domains

100% successful closure of all projectsin the financial year

Minimal attrition rate with retention ofits core team members

New business stands for about 50 % ofits revenues

Average offshore and Onsite rates standat USD 10.00 and USD 50.00respectively

Ontrack’s “India Development Centre(IDC)” consists of a dedicated pool ofsoftware professionals who form a virtualextension of the client’s team. IndiaDevelopment Centre has the benefits ofoffshore software outsourcing in India; beit application development andmaintenance, product development,mobile and wireless solutions, ManagedServices or help desk operations, clientsare assured of the best among Indiansoftware developers. Opportunities to itscustomers are:

Provides enormous cost benefitsWorks according to Internet timeProvides an extended resource poolAllows focus on core competencies

IDC today has built a reputation for doingsolid, disciplined work that is deliveredon time, and on cost. Our project leadersand developers have experience withEuropean, American, and Asian clientsand are trained in the most currentdevelopment methods and technologies.IDC helps firms capture the full costsavings promised by offshore outsourcing,and delivers enterprise-class results. IDCoffers to its customers a huge valueproposition through the followingadvantages -

Extended state-of-art facilityState-of-art project managementprocesses and toolsOptimal development timeTotal Cost of Ownership (TCO)Minimal Attrition rateRetention of Domain and Skill

India Development Centre continued

with its practice of continual

improvement program as per the ISO

certification requirements and realized

the formulation of state-of-art

operational processes. These processes

led the center towards an excellence

whereby 100% of its projects were

completed and delivered successfully

on time for its global customer base. The

venture in the United Sates was

moderate wherein we executed projects

for some of the SME’s and established

concrete relationships in the region.

Retention of its core team members and

increase in its capacity has been a

remarkable achievement for the center.

We were able to retain about 80% of

our technical resources.

The last fiscal year saw the market

release of SMS Xprez – an SMS based

framework in UAE. With almost a dozen

implementations in the UAE market, the

plan is to launch the enterprise product

in the India and UK market. IDC also

designed, developed and implemented

online tendering solution – Secure-T for

the Indian Tendering industry and the

solution was implemented by India

Railways.

IDC has been engaged in a number of

application development projects with

4

Highlights Strategy and Direction Review of Activities

India Development Centre


its main working areas in ecommerce

applications, banking and media/

entertainment industry. The center also

initiated the setup of Internet chat

based help desk for its global customer

base and has formed alliance with

premiere Internet chat based solution

providers.

With the setup of the Ontrack Holland

and partnerships in the SAARC

countries, the center now has some

additional market to focus for its

services. IDC, with its participation in

the IT fairs like COMPASS, GITEX,

NASSCOM and IndiaSoft looks ahead

towards a very prospective growth of

its customer base in the coming days.

The current f iscal year wil l see

consolidation and expansion of the India

Development Center as a ‘Global

Delivery Centre’ engaged in Application

Development, ERP, Product

Development, Resourcing and BPO

activities.

The primary market areas will remain

to be UK, UAE and USA with addition of

Holland. With the opportunities coming

its way, Ontrack plans to set up its

maiden International VOIP based IS

Delivery center for BPO/Call center/

Helpdesk operations in India. The value

proposition will be to service overseas

customers from offshore locations.

On the development activities, IDC will

focus on Microsoft .NET, Java and

Opensource, Oracle, Core C++/Python

and Multimedia tools. On ERP, the focus

will remain on Navision and SAP

support services through its SAP

Helpdesk. The development center

expects large deals to be executed from

its location at Kolkata in areas of

software development, migration, SAP

support and BPO operations.

There are plans to participate in other

important summits during the coming

year, to utilize for demonstration of its

products and capabilities. As a part of

continuous improvement the center

aims at BS7799 complaint and

assessment of the center at CMM level 4.

The center aims to be a center of

excellence and plans to expand its

capacity and infrastructure in the

current fiscal year by shifting its

operations to the IT hub of Kolkata. The

Bangalore center is intended for the

setup of an International IS delivery

center and Sales office.

On the products, IDC plans foray into

the national markets like Mumbai and

Chennai. It is also looking forward

towards strategic partnerships for the

SMS Xprez product in South East Asian

markets like Malaysia and Singapore.


Outlook for Fiscal 2004-05Review of Activities

India Development Centre


Reaches 2.05 million – visitor trafficmonthly from over 70 countries

More breakthrough in overseasorders

Face2Face – Interview with GlobalPersonalities

Japan, Saudi Arabia and Switzerlandadded to Trade Par tners section

IndiaOneStop.com (IOS) continued tofurther consolidate its position as anexpanded and effective interactive webplatform for exchange of businessinformation besides enabling more andmore users to conclude business dealsbetween Indian and overseas buyers,sellers and investors. Encouraged by theinitial response to the Interview Section -Face2Face now features prominentpolitical, business leaders and opinionmakers from across the globe. From Chinato Middle East from USA to SAARCcountries, investors and business peopleare increasingly using the website.Extensive industry coverage and country-specific focus proved to be the major sourceof information for researchers in thecountry’s leading management institutesand for international users interested inestablishing business relationship withIndia. The Project Report section continuesto be an effective choice for the prospectiveinvestors both in India and abroad.

The monthly user statistics reaches the2.0 million mark, a growth of 25% overthe user-base of 1.6 million in 2002–03.The increasing credibility and reliabilityof the website is reflected in the increasingnumber of users from more than 70countries. With a view to strengtheningthe bilateral trade relations between Indiaand its major trade partners -Tradepartners section (launched in2001-02) featured three more countries,

namely, Japan, Saudi Arabia andSwitzerland raising the number to sevenincluding the existing four - UK, USA,Germany and European Union.

The Merchant Export activity gave theboost to the revenue and overshot its targetestablishing the potential for this activity.The service on Project Reports doubledits revenue and the number of overseasclients. The Interview Section - Face2Facecarried Interviews with prominentpersonalities from the World of Business,Economics and Politics. Regular update inpages Trade Partners, Economy, Face2Faceetc., addition of new pages, offeringprompt reply to queries on a variety ofsubjects related to India contributed to thesteady growth in user-traffic. InsuranceBroking activity in its first year, thoughdid not contribute much to the revenue,enabled improving Public Relations andalso provided opportunity to promote IOSin the domestic market.

In the current year, Merchant Exportactivity to focus on countries – UAE, UK,Malaysia, Iran etc. ‘India’ being the Brand,the year throws up immense possibilityfor increased traffic in IOS – Target to reach3.0 Million hits by the year–end. WithInternet already dominating as thepreferred medium for BusinessTransactions, the Insurance Broking andProject Reports services are poised for abig leap.

6

Outlook for fiscal 2004-05Review of Activities

Highlights Review of ActivitiesStrategy and Direction


Face2Face with IndiaOneStop.com

Ms Benazir Bhutto, former Prime

Minister of Pakistan & Chairperson,

Pakistan Peoples Party

I would like to convey to the Indian people that

a new generation of Pakistanis to whom the

torch of independence has passed, wish to renew the faith of its

Founding Father in the importance of friendship between two great

South Asian neighbours to the everlasting benefit of all the people

of South Asia.

Mr. Osamu Watanabe, Chairman, Japan

External Trade Organization (JETRO)

We think that through technology developments

and joint research projects for the Japanese

market, there are possibilities for increased

investments by Indian IT companies in Japan.

Mr. Sanjay Puri, Executive Director, US

India Political Action Committee.

This relationship will continue to expand

especially as the economy expands and also since

India is now not only considered a destination

for cheap labor but for quality IT solutions.

Mr. Riaz Ahmed Tata, President, The

Federation of Pakistan Chambers of

Commerce & Industry

India having wider software Industry can

extend help to Pakistan to promote IT through

the establishment of Joint Ventures. I see huge scope for Indian

Companies in this sector.

L E A D E R S S P E A K

His Highness Prince Abdullah bin Faisal

bin Turki Al-Saud, Chairman, Saudi

Arabian General Investment Authority

(SAGIA).

We look forward to India’s participation in the

IT market. The IT sector is rapidly expanding in the Kingdom to

service other growing sectors, and there has been a definite surge of

investor interest in new IT-related businesses. We welcome the Indian

IT businesses to come and look at the rapidly emerging opportunities

in the Kingdom.

Mr. Y. Sato, President, Japan Informa-

tion Service Industry Association (JISA)

To reduce costs, Japanese IT companies are very

interested in offshore outsourcing including to

India, but we need to solve this problem of these

barriers first. It might be easier and quicker that Indian companies

get communication ability in Japanese and flexibility with Japanese

business culture. Fields would be mainly business application software

development and maintenance.

Dr. Jacques Derron, Economic Counsel-

lor, Embassy of Switzerland in India

The strength of Indian IT professionals is well

appreciated in Switzerland by the both

government and private companies.

Mr. Kiran Karnik, President, NASSCOM

If both these two giants (India and China) in

hardware and software join hands to build up a

strong marketing base, it simply can outshine

the performance of many a leading countries.

7


tendertimes.com made a dent in thedomestic market, in the governmentorganizations and public sector inparticular. It has established itself as anonline secured and robust tendering &reverse auctioning platform.Commensurating with the growingdemand for e-tendering facility, thetechnical bandwidth has beenexpanded further. In view of the Indiangovernment’s increasing emphasis onthe transparency in tendering process,sales strategy is being restructured andtailored to customer’s requirements. Inthe domain of consultancy as well,tendertimes.com now is well positionedtoday to offer consultancy services toother corporates on how to maintainand automate their own tenderingwebsites and their allied activities.

tendertimes.com has registered 62%growth this year over the previousyear’s revenue. The client base alsoexpanded by 50% compared with theprevious year’s. This year has witnessedthe division strengthening itsrelationship with all its existing Clientsand reaping the benefits of last years’breakthroughs in spreading its wingsacross the Divisional Offices of variousRailways and other clients such asBSNL. The greater customer confidenceis reflected in the number of visitorswhich now stands at over 10,000 perday.

Review of ActivitiesStrategy and Direction

In the current fiscal year the Division islooking forward to speed up and multiplyits Marketing activities. It aims atreshaping its Operational team as a crispand high performance team byoutsourcing various activities at reducedcost and aiming at better service. Througha network of business associates andfranchisees, market promotional activitieswill be strengthened further. It is aimingto launch paid tender subscriptionservices in attractive packages to give moreuniform and meticulous services to its

Registered Users. With the growingCompetition and the Customers gainingmore and more insight & knowledge intothe domain of e-tendering a competitivepricing strategy for the various offeringsto be introduced shortly to expand thecustomer base. It would be affordable toeven small units with limited budget.tendertimes.com will continue to addmore value to its Brand equity and enjoyits premium and leadership position in thee-tendering domain.

Outlook for fiscal 2004-05

Successfu l launching of thee-tendering solution (Secure-T)

Emerged as preferred choice of the EastCentral Division of Indian Railways tohost tenders online

Registered 60 percent growth in revenue

The customer base expanded by 50percent

Created record by host ing 117Commercial Tenders in a single month.

Highlights


Target achievement more than 100

percent

Business tie-up with Hewlet & Packard

Awarded Best SMB par tner of HP

Added 45 new clients

Spearheading this operation towardsstrategic business al l iances, thisdivision provides IT infrastructuresolutions to its wide range of customers.Hallmark of this operational wing is toprovide quality service touching theminutest details to major calamities.Ultimate customer satisfaction is theonly direction towards which theoperation is continuously striding.

In the year under review the Division hasgone ahead and consolidated its operationin the eastern region. It had new businesstie-up with Hewlet and & Packard. It hasbagged the Best SMB Partner and BestSales Person awards from HP. The Divisionhas roped in 45 new clients, retained100% of its customers and achieved 85%growth in revenue. The Call centeroperation has been centralized. The entireinventory control process has beencomputerized. The Division’s Marketingteam has been strengthened further.Training and gearing up the humanresource to optimize the potential, theDivision has been able to upgradetechnological expertise. The Division hasalso been successful in exporting technicalservices overseas adding one more steadyrevenue stream to its present model.


The Division that has started gettingresults of its business tie-up with Hewlet& Packard, expects for tie-ups with HP,IBM Global Services and Dell for serviceand support business. It may startoperation in Bhutan and Bangladesh forvarious services.

Enterprise Networking for industry is agrowing market and involves high-valueproposition. It has been identified as amajor thrust area for the Division sincethis would contribute substantially to the

revenue besides enhancing the technologystatus in the marketplace.

The Division is planning to go in a big waywith global Networking giant, CISCO. Itplans to have tie-ups in Enterprise rangeof Products and services with IBM and HP.Apart from AMC, the Division will giveincreased emphasis on FacilityManagement and InfrastructureManagement business in Governmentorganizations, PSUs, banks andcorporates.

9

Highlights Strategy and Direction Review of Activities

Service & Support Division


Onsite Development Work

Offshore Project Contracts

Marketing expansion into Oman and Qatar

Ontrack Systems (UAE) Limited is awholly owned subsidiary of OntrackSystems Limited. A DevelopmentCentre in Fujairah to cater to softwaredevelopment requirements from Europewas the first offering. The DevelopmentCentre is positioned as an extension tothe India Development Centre, with allrequisite infrastructure. With on–goingmarketing efforts in the UAE and GCCregion, the Fujairah Development Centreis taking on regional software projects,with support from IDC.

The company focuses on product sales tothe UAE market, with customisation to suitlocal needs. Customised software sales isanother area of focus, with developmentcontracts being undertaken at theFujairah Development Centre or IDC.

The company offers product solutions for

SMS, Document Management,

Collaborative Tools, and Office

Management.

Successfully completed an OnsiteSoftware Development Contract for aleading Bank

Onsite Network and PC Support for aleading Bank

Customized Software Developmentprojects completed

SMS Xprez product sales

Customized Software Marketingefforts in the GCC Region

ERP offerings


10

Highlights Review of ActivitiesStrategy and Direction

ONTRAONTRAONTRAONTRAONTRACKCKCKCKCKSYSTEMS (UAE) LIMITEDSYSTEMS (UAE) LIMITEDSYSTEMS (UAE) LIMITEDSYSTEMS (UAE) LIMITEDSYSTEMS (UAE) LIMITED

Fiscal 2004 – 05 would see Ontrack(UAE) focus efforts on developingcustomized software solutions forGovernment Department and Agencies.Marketing efforts in 2003 – 04 have laidthe foundation for software requirementsfrom the Government departments andneighboring countries to be awarded.

The fiscal would be used to consolidateOntrack’s presence as a SoftwareDevelopment company offering Arabicand English software. Additionalmarketing efforts would be made to targetother countries, mainly Saudi Arabia andKuwait – through partnerships and directmarketing efforts.


47% growth in revenue

Managed Service contract for £ 1M plus

win for Ontrack UK.

Ontrack UK moves to a State of Ar t office

with cutting edge technology capability.

Managed Service Center setup to facilitate

24*7 global delivery facility.

BS 7799 compliance as an internal

ongoing project.

Ontrack Systems (UK) Limited is a

wholly owned subsidiary of Ontrack

Systems Limited. The operations in UK

started three years back and engaged in

IT services focusing in the areas of

Bespoke Development through their

offshore unit at Kolkata and Fujairah,

consultancy on SAP and Managed

Services. Currently a pool of highly skilled,

motivated and dedicated employees is

part of the organization including Senior

local Mangement employees.

The company is presently concentrating

on relationship building with various

multinational organizations to its offering

of IT services.

A dedicated Sales Team has been set up

for consciously and aggressively market

the offshore development model, BPO and

products in the UK and European market.

Despite adverse market conditions,

Ontrack UK has been steadily increasing

its business by servicing its existing

customers to their satisfaction. Having

grown from a very small team to a mid–

sized team, in the year under review

Ontrack UK has worked towards putting

all other processes in place such that the

organisation is prepared for more growth

in the coming years.

Ontrack (UK) aggressively plans to market

its successful Managed Service offering

and SAP Basis Remote management to the

UK market and also establish 7 x 24

operations with the non core UK time to

be outsourced to IDC in India.

Ontrack UK is keen to establish a SMS

Service center in UK, specialising in

offering the service to the Education sector.

Ontrack is keen to establish BPO center

India and presently in discussion with a

major US organisation for a pilot project.

Ontrack UK plans to grow its UK operation

by 50% in revenue for this period.

Ontrack UK plans to increase it European

presence with possible partnerships in

Netherlands and Germany.

Ontrack UK to be a strategic location for

Ontrack’s global delivery capability.

11

Highlights Strategy and Direction

ONTRAONTRAONTRAONTRAONTRACKCKCKCKCKSYSTEMS (UKSYSTEMS (UKSYSTEMS (UKSYSTEMS (UKSYSTEMS (UK) LIMITED) LIMITED) LIMITED) LIMITED) LIMITED



ONTRACK ACCOLADES

12

Anirban Basu receiving special award for his contribution Sudipto Chakrabor ty and Debarshi Roy receiving awards for BestEmployee from the Managing Director, Mr. B. Hari

Rupankar Rakshit receiving award for Best Accounts Manager Joyraj Chakraborty receiving award for Best Performer

OSL Team and Telecommunication Minister Mr. Arun Shourieat Infocom India IT Exhibition (OSL Pavilion)

OSL Team and IT MinisterMr. Manab Mukherjee at Infocom India IT Exhibition

INFOCOM INDIA IT EXHIBITION, KOLKATA 2003


MANAGEMENT TEAM

BOARD OF DIRECTORS

BOARD OF DIRECTORS

B. HariManaging Director

Rajat RakkhitIndependent Director

Simi HariAlternate Director to Rajat Rakkhit

Lakshmi PraturyIndependent Director

Vijay Kumar ChhinkwaniIndependent Director

Mayank KhemkaIndependent Director

S. V. RamaniWhole-time Director & Secretary

AUDITORS

M/s. N. C. Ganguli & Co.

LEGAL ADVISOR

Bidyut Kumar Banerjee

BANKERS

Indian Bank, India

UTI Bank, India

HSBC Bank, UK

HSBC Bank, UAE

ASAHI Bank, Japan

Bank of America, USA

Abhijit KashyapAnirban BasuAtul AgarwalB. HariBijit BoseC. V. AiyarChandranath BanerjeeDavid MountfordDebasis RoyDonnovan DickG. AnandManik DeyPreetam BanerjeeRick van der SchaftS. V. RamaniSimi HariSuparna Dasgupta RoySushil PrasadWilliam Swar tz


ORGANISATIONAL STRUCTUREAs of June 28, 2004

ONTRACK GROUP

MANAGING DIRECTOR OVERSEAS SUBSIDIARIES

Ontrack Systems (UK) Ltd.Ontrack Systems Inc.(USA)Ontrack Systems (UAE) Ltd.

MANAGEMENT TEAM

OPERATING GROUPS OFFICES IN INDIA OVERSEAS BRANCHES

India Development Centre IndiaOneStop.com Service and Support Division tendertimes.com

CHENNAI Registered Office

KOLKATA Corporate Office India Development Centre

NEW DELHIBranch Office

JAPAN

Wholly owned Subsidiary of Ontrack Systems (UK) Ltd.

14

SHAREHOLDERS

BOARD OF DIRECTORS AUDITORS

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ORGANISATIONAL STRUCTURE


DIRECTORS’ REPORT

RESULTS OF OPERATIONSThe total revenue of the Company registered a growth of36.75% from Rs. 1627.83 lacs to Rs. 2226.02 lacs.

The operating profit for the year stood at Rs. 267.51 lacsagainst Rs. 352.41 lacs in the previous year.

Profit after tax was Rs. 47.04 lacs against Rs. 110.11 lacsin the previous year.

Your Directors have proposed a dividend pay out @ 7% on theequity shares.

INTERNATIONAL OPERATIONSThe Company has increased its international presence andstepped up sales and business development activities in UK,UAE, USA and Japan. Our team is constantly looking foropportunities with customers. These initiatives have alreadygiven positive results to the Company and we expect thistrend to continue in the coming years. The Company has setup a step-down subsidiary, Ontrack Systems Inc., USA tostrengthen its market base globally, which will contributesubstantially towards the revenue growth of the Company.

DOMESTIC OPERATIONSThe Service and Support Division has gone ahead andconsolidated its operation in the Eastern region. The Divisionhas bagged the best SMB partner and best sales person awardsfrom HP in addition to new a business tie-up with HP duringthe year under review. The Division has been able to retain100% of its existing customers in addition to 45 new clientsand achieved 35% growth in revenue in comparison to last

year. The Division has also been successful in exportingtechnical services overseas adding one more steady revenuestream to its present model.

http://www.tendertimes.com made a dent in thedomestic market, in the government organizations and publicsector in particular, and established itself as an online securedand robust tendering platform and has registered 58% growthover the revenue of previous year. Commensurating with thegrowing demand for e-tendering facility, the technicalbandwidth has been expanded further. In view of the Indiangovernment’s increasing emphasis on the transparency intendering process, sales strategy is being restructured andtailored to customer’s requirements. In the domain ofconsultancy as well, tendertimes.com is well positioned todayto offer consultancy services to other corporates on how tomaintain and automate their own tendering websites and itsallied activities.

IndiaOneStop.com continued to further consolidate itsposition as an expanded and effective interactive web platformfor exchange of business information besides enabling moreand more users to conclude business deals between Indianand overseas buyers, sellers and investors. Encouraged bythe initial response to the Interview Section - Face 2 Facenow features prominent political, business leaders and opinionmakers from across the globe. From China to Middle East,from USA to SAARC countries, investors and business peopleare increasingly using the website. Extensive industrycoverage and country-specific focus proved to be the majorsource of information for researchers in the country’s leadingmanagement institutes and for international users interested

15

To

The Members of Ontrack Systems Limited

Your Directors are pleased to present the Sixteenth Annual Report together with the Audited Statement of Accounts and theAuditor’s Report of your Company for the Financial year ended 31.03.2004. The financial highlights for the year under revieware given below :–

(Rs. in Lacs)

Amount AmountSl. No. Description for the year ended for the year ended

31.03.2004 31.03.2003

1. Total Income 2226.02 1,627.832. Total Expenditure 2011.07 1,347.853. Profit before interest, depreciation & tax 214.95 279.984. Interest 38.55 38.515. Depreciation 139.26 137.256. Other income 14.88 16.577. Extraordinary items (Loss) – 36.198. Loss on sale of Assets 0.24 –9. Profit before tax 51.78 84.6010. Provision for tax 10.00 18.0011. Provision for tax for earlier year written back 2.8012. Deferred Tax - Asset 2.46 43.5113. Profit after tax 47.04 110.1114. Distributable Profit

Appropriation: –Proposed Dividend 35.00 30.00Transfer to General Reserve 4.70 15.00

DIRECTORS’ REPORT


in establishing business relationship with India. The ProjectReport section continues to be an effective choice for theprospective investors both in India and abroad.

SUBSIDIARY COMPANIESThe overviews of our subsidiaries are mentioned in a separatesection.

INVESTMENTThe Company has not invested in the capital markets. TheCompany has invested a sum of Rs. 61.30 lacs in its whollyowned subsidiary in UK and Rs. 3.27 lacs in its wholly ownedsubsidiary in UAE during the year under review. The UK wholly-owned subsidiary of the Company has set up Ontrack SystemsInc. in USA as its subsidiary by making a strategic investmentof £ 12,478.94 (INR 9,93,448/-).

SEGMENT REPORTINGThe Company has followed Accounting Standard - 17stipulated by the Institute of Chartered Accountants of India.Geographical segment has been identified on the basis oflocation of major clients of the company. The geographicalsegments presently identified are Domestic, Europe, USA &others.

HUMAN RESOURCE DEVELOPMENTYour Company constantly strives on improvement in theproject management competency of its associates andpersonnel by continuous upgradation of their skills by trainingand development. The Company employees attend variousseminar and technical sessions conducted by differentprofessional bodies.

The Company’s expansion globally has resulted in globalcultural integration since the Company now employs peoplefrom various foreign countries like Japan, UK, Germany andUAE. An employee–friendly work environment combined witha balanced compensation package ensures that the attritionrate in the Company during the last year under review waswell below 20% of the total associate strength.

QUALITY

The Company which was awarded the ISO 9001:2000certification for Quality standards for business processes in2002-03, aspires to reach the SEI – CMM level 5 during nextcouple of years. The Company is committed towards achievingBS 7799, the standard for Information Security ManagementSystem (ISMS) compliance at IDC, its offshore development.

CORPORATE GOVERNANCEA report on Corporate Governance as per listing agreement

of clause 49 is provided elsewhere in the report.

TECHNOLOGY, R & D AND FOREIGN EXCHANGEThe operations of your company are not energy-intensive.However your company has taken significant measures tominimize energy consumption by using energy-efficientcomputers.

Research and development of new softwares, systems, designs,frameworks, processes and methodologies continue to be ofprime importance at your company. This permits yourcompany to upkeep quality, productivity and customersatisfaction through continuous innovation.

16

DIRECTORS’ REPORT

The foreign exchange earned and outgoes for the year endedMarch 31,2004

Amount in Rs.

2004 2003

Earnings 16,18,27,142.36 11,29,71,728.15Outgoes 13,10,05,564.77 9,00,71,680.67

Net 3,08,21,577.59 2,29,00,047.48

DIRECTOR’S RESPONSIBILITYPursuant to Section 217 (2AA) of the Companies(Amendment) Act, 2000, the Directors confirm that inpreparation of the annual accounts, the applicable accountingstandards have been followed. Appropriate accountingpolicies have been selected and applied consistently, andjudgements and estimates made are reasonable and prudentso as to give a true and fair view of the state of affairs of theCompany as on March 31, 2004, and of the profit of theCompany for the period April 1,2003 to March 31,2004.Proper and sufficient care has been taken for the maintenanceof adequate accounting records in accordance with theprovisions of the Companies Act, 1956, for safeguarding theassets of the Company and for preventing and detecting fraudand other irregularities and the annual accounts have beenprepared on a going concern basis.

FIXED DEPOSITSThe Company has accepted fixed deposit amounting Rs. 35.00lacs during the year under review pursuant to Rule – 4A ofthe Companies (Acceptance of Deposits) Rules, 1975. Theamount of fixed deposits as at 31.03.2004 is Rs. 35.00 lacsand the amount of deposits maturing during the year is NIL.

DIRECTORSThere is no change in the directorship on the Board of theCompany. In accordance with the Articles of the Companyand the provisions of the Companies Act, 1956, Mr. VijayKumar Chhinkwani, Director retires by rotation at the ensuingAnnual General Meeting and being eligible offers himself.

AUDITORSM/s. N. C. Ganguli & Co., Chartered Accountants, the Auditorsof the Company retires at the ensuing AGM and haveexpressed their willingness to continue till the conclusion ofnext AGM of the Company, if re-appointed.

ACKNOWLEDGEMENTYour Directors take this opportunity to thank its customersboth in India and abroad, investors, business partners, bankers,financial institutions, business associates and advisors for theirconsistent support to the Company. Your Directors place onrecord their appreciation of the contribution made byemployees at all level through hard work, cooperation anddedication, which has enabled the Company to move forward.Your Directors once again take this opportunity to thank theGovernments of India, UK, UAE, JAPAN & USA for theircooperation and assistance in enabling your company to enterthe global marketplace.

For and on behalf of the Board of Directors

Sd/- Sd/-

Place : Kolkata, India S. V. Ramani B. HariDate : 28th June, 2004 Whole-time Director Managing Director

and Secretary


MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW

The Indian IT Sector has recovered significantly from thedownturn that the entire world had to withstand during lasttwo years.

The country witnessed growth in almost all segments of theIT sector during fiscal 2003-04. Software and servicesexports were up by 30.5 percent; IT products and technologyservices grew 25 percent and the ITES and BPO segmentregistered 46 percent growth during this period. Traditionalmarkets like UK and US besides Japan, Germany and Francehave witnessed a strong recovery. The management has triedto exploit the changed market scenario, which is reflected in53.8 percent growth in the Company’s export sales.Company’s business in the European region grew 57 percentduring 2003-04.

Several US and European mid-sized companies are stillevaluating on how best they could perfect their offshoredelivery model by looking at partnering with Indiancompanies. Ontrack today has a proven track record and aglobal presence giving us the advantage to look at severalopportunities that come our way for such partnerships.

OPPORTUNITIES & THREATS

Opportunities :

The Company is well positioned globally by establishing itspresence in UK, UAE and USA and through this initiative, itprovides a world-class consulting with excellence and costcompetitiveness of global delivery.

The cost pressure on account of the slowdown in US &European markets have resulted in more and more customersexploring the offshore option in outsourcing IT Service. Thishas contributed to immense opportunities for companies ofour size to penetrate new accounts at competitive rates.

Numerous developments in the domestic market are alsolikely to result in higher demand for IT services particularlyin e-governance, banking and customer service supportsystem.

Threats :

Risk of losing large accounts

Risk of losing key manpower

FINANCIAL PERFORMANCE

The Company’s major international revenue comes from itsUK operations. However, during the year, the operations inthe UAE picked up which has given a turnover of Rs. 1.96crores (Rs. 1.47 crores, previous year).

NET WORTH

The Company’s total net worth stood at Rs. 1103.61 lacsagainst Rs. 1058.15 lacs in the previous year.

GROSS BLOCK

The Gross Block of the Company increased by Rs. 33.77 lacsand registered an increase of 4.75% over the Gross Block inthe previous year.

INVESTMENT

The Company has not invested in the Capital Markets. TheCompany has invested a sum of Rs. 61.30 lacs in its whollyowned subsidiary in the UK and Rs. 3.27 lacs in the whollyowned subsidiary in the UAE. A sum of £ 12478.94 has beeninvested in Ontrack Systems Inc., USA as a strategicinvestment by WOS-UK.

SEGMENT–WISE PERFORMANCE

Separately given

RISK & CONCERNS

The Company which is mainly concentrating on InternationalMarket, is exposed to the risk of the highly volatile technologicalbusiness environment. It is not in a position to perceive whatkind of risks it may have to confront in future which is amajor cause of concern.

RISK MANAGEMENT

The Company has started a process of risk assessment forevery project it executes and that gets constantly monitoredby the management team.

OUTLOOK

Mentioned in details for every operating group in the section“Review by Operating Groups”

DISASTER PREVENTION & RECOVERY

Your Company has developed a well laid-out disaster recoveryand prevention plan. The Company can replicate any projectwithin shortest possible time.

QUALITY

The Company which was awarded the ISO 9001:2000certification for Quality standards for business processes in2002-03, aspires to reach the SEI – CMM level 5 during nextcouple of years. The Company is committed towardsachieving BS 7799, the standard for Information SecurityManagement System (ISMS) compliance at IDC, its offshoredevelopment.

MANPOWER & HRD

The total employee strength as on 31st March 2004 is 146.HR initiatives, policies and strategies were undertaken in theareas of recruitment, training and motivation to help theCompany emerge as an employer of choice.

17

MANAGEMENT DISCUSSION AND ANALYSIS


REPORT ON CORPORATE GOVERNANCE

COMPANY’S PHILOSOPHY

The Company believes in enhancing stakeholder’s value by providing quality and innovative service at competitive price whilefulfilling the role as a responsible corporate entity.

BOARD OF DIRECTORS

A. CompositionThe details of the Board of your Company for the year 2003–2004 are given below :-

CONSTITUTION OF THE AUDIT COMMITTEE

The terms of reference of the Audit Committee were :

(i) Design the Company’s financial reporting & its financial statements.

(ii) Constitute an internal control & internal audit system.

(iii) Review of accounting and financial practice.

(iv) Advice on risk management policies.


Name of Directors No. of meetings No. of meetings No. of memberships Whether attendedheld during the attended on Board of last AGM

Year during the year other companies

Mr. B. Hari 5 5 6 Yes

Ms. Lakshmi Pratury 5 – – No

Mr. Rajat Rakkhit 5 5 1 No(Alternate Director, Ms. Simi Hari)

Mr. Mayank Khemka 5 2 6 No

Mr. Vijay Kumar Chhinkwani 5 5 – Yes

Mr. S. V. Ramani 5 5 1 Yes

Sl. No. Name of Director Category of Directorship Designation

1 Mr. B. Hari Promoter Managing Director

2 Mr. S. V. Ramani Executive Director Whole-time Director & Secretary

3 Mr. Vijay Kumar Chhinkwani Independent Non-executive Director Director

4 Mr. Mayank Khemka Independent Non-executive Director Director

5 Mr. Rajat Rakkhit Independent Non-executive Director Director(Alternate Director, Mrs. Simi Hari)

6 Mrs. Lakshmi Pratury Independent Non-executive Director Director

B. Attendance at each meeting of the Board

The attendance of the Directors at the Board Meetings held during the year are given below :-

C. Directors’ membership in Board Committees

As per Clause 49 of the Listing Agreement with Stock Exchanges, no Director shall be a member in more than 10 Committees orshall act as Chairman of more than 5 Committees across all companies in which he is a Director.

None of the directors of our Company were members in more than 10 Committees or acted as a chairman of more than 5Committees across all companies in which they were directors.

18



Composition :

The Audit Committee comprises of two Independent Non-executive Directors and one executive Director. All the members including theChairman have adequate financial and accounting knowledge. The details of the Audit Committee of your Company for the year 2003 –2004 are given below :-

Sl. No. Name of Member Position No. of Meetings held No. of Meetings attendedduring the year during the year

1 Mr. V. K. Chhinkwani Chairman 4 4

2. Mr. Mayank Khemka Member 4 3

3 Mr. S. V. Ramani Member 4 4

4. Mr. S. Prasad Convenor 4 4

5. Mr. A. K. Ganguli (Statutory Auditor) Invitee 4 3

SHARE TRANSFER & SHAREHOLDER GRIEVANCE COMMITTEE

This Committee oversees the shareholders’ grievance in close co-ordination with Registrar & Share Transfer Agent and also acts as aShare Transfer Committee.

The Share Transfer Committee met on 14.05.2003, 30.07.2003, 07.10.2003 and 04.02.2004 respectively.

Composition :

Mr. Mayank Khemka : Independent & Non-executive Director

Mr. Vijay Kumar Chhinkwani : Independent & Non-executive Director

Mr. S. V. Ramani* : Whole-time Director & Secretary

Mr. T. K. Parida : Asst. Company Secy. – Convenor

* Compliance Officer

There is no valid request pending for share transfer as on date of the Directors’ Report.

The remaining part of the Corporate Governance Report has been given on page no. 62 under the heading “Shareholders’ information”.

19


AUDITORS’ CERTIFICATE

To the Members of Ontrack Systems Limited.

We have examined the compliance of conditions of corporategovernance by Ontrack Systems Limited for the year ended March31, 2004, as stipulated in Clause 49 of the Listing Agreement ofthe Company with stock exchanges.

The compliance of conditions of corporate governance is theresponsibility of the management. Our examination was limitedto procedures and implementation thereof, adopted by theCompany for ensuring the compliance of the conditions of theCorporate Governance. It is neither an audit nor an expression ofopinion on the financial statements of the Company.

In our opinion and to the best of our information and according tothe explanations given to us, we certify that the Company hascomplied with the conditions of Corporate Governance asstipulated in the above mentioned Listing Agreement.

We state that generally no investor grievance(s) is/are pendingfor a period exceeding one month against the Company as perthe records maintained by the Investors Grievance Committee.

We further state that such compliance is neither an assurance asto the future viability of the Company nor the efficiency oreffectiveness with which the management has conducted theaffairs of the Company.

For N. C. Ganguli & Co.Chartered Accountants

Sd/-Kolkata, India (A. K. Ganguli)28th June, 2004 Proprietor

Membership No. 51862

20

AUDITORS’ CERTIFICATE


AUDITORS’ REPORT

N. C. Ganguli & Co.Chartered Accountants

A. K. Ganguli, F.C.A. 71A, Netaji Subhas Road, Top Floor, Room # E/2,Chartered Accountant Kolkata 700 001, Tel : 2243 4874 (O), 2654 4463 (R)

Mobile: 98302 19295, E-mail : [email protected]

AUDITORS’ REPORT TO THE MEMBERS

1. We have audited the attached Balance Sheet of OntrackSystems Limited, as at 31st March 2004 and also the Profit &Loss Account and the Cash Flow Statement for the year endedon that date annexed thereto. These financial statements arethe responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financialstatements based on our audit.

2. We conducted our audit in accordance with the auditingstandards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financial statementsare free of material misstatement. An audit also includesexamining , on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit alsoincludes asessing the accounting principles used andsignificant estimates made by management, as well asevaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for ouropinion.

3. As required by the Companies (Auditor’s Report) Order, 2003issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, weenclose in the annexure a statement of the matters specifiedin paragraphs 4 and 5 of the said order.

4. Further to our comments in the Annexure referred to above,we report that.

(a) We have obtained all the information and explanations,which to the best of our knowledge and belief werenecessary for the purposes of our audit;

(b) In our opinion, proper books of account as required bylaw have been kept by the company so far as appearsfrom our examination of such books and proper returnsadequate for the purposes of our audit has been receivedfrom Delhi Branch not visited by us. The Branch Auditorreport of Japan Branch has not been forwarded towardsand the said Account have been incorporated subject toAudit.

(c) The Balance Sheet, Profit & Loss Account and Cash FlowStatement dealt with by this report are in agreement

with the books of account except un-audited returns fromJapan Branch i.e. Foreign Branch.

(d) In our opinion, the Balance Sheet, Profit & Loss Accountand Cash Flow Statement dealt with by this reportcomply with the Accounting Standards referred to insub-section 3C of Section 211 of the Companies Act,1956.

(e) On the basis of written representations received fromthe Directors, as on 31st March 2004 and taken on recordby the Board of Directors, we report that none of theDirectors are disqualified as on 31st March 2004 frombeing appointed as a director in terms of clause (g) ofsub-section (1) of Section 274 of the Companies Act,1956.

(f) In our opinion and to the best of our information andaccording to the explanations given to us, the saidaccounts give the information required by the CompaniesAct, 1956, in the manner so required and give a trueand fair view in conformity with the accounting principlesgenerally accepted in India.

(a) in the case of the Balance Sheet, of the state of affairsof the Company as at 31st March 2004.

(b) in the case of the Profit & Loss Account, of the Profitfor the year ended on that date; and

(c) in the case of Cash Flow Statement, of the Cashflows for the year ended on that date.

4.1 The Company has made an Advance for purchase of Propertyamounting to Rs. 80,00,000/- as per Agreement dated23.09.2000. The said property is not yet registered till thedate of Audit.


Sd/-Kolkata, India (A. K. Ganguli)28th June, 2004 Proprietor


21

AUDITORS’ REPORT


ANNEXURE TO AUDITORS’ REPORT

Referred to in paragraph 3 of our Report of even date

1. (a) The Company has maintained proper records showingfull particulars including quantitative details andsituation of its fixed assets.

(b) The Company has a system of verification of all FixedAssets once in every three years which in our opinion,is reasonable having regard to the size of the Companyand the nature of its business. Management hasphysically verified major Fixed Assets during the year.No material discrepancies were noticed on suchverification as compared with the book of records.

(c) The Company has not disposed off substantial part ofFixed Assets during the year.

2. (a) The management carried out physical verification ofinventory at reasonable intervals during the year. Theinventory of Trading Stock (excluding items lying incustomers for providing stand by support formaintenance service) of the Company have beenphysically verified by the Management during the year.In respect of inventory of Trading Stock, lying withthird parties, these have been substantially confirmedby company’s own documents but not by the partiesthemselves. The value of Work in Progress andConsumable Stores and Spares have been consideredat the end of each quarter by the management onreasonable estimated basis.

(b) In our opinion, the procedure of physical verificationof inventory followed by the management arereasonable and adequate in relation to the size of theCompany and the nature of its business;

(c) The Company has maintained reasonable records ofTrading Stock and no material discrepancies in TradingStock were noticed on physical verification with bookrecords and the said discrepancies have been properlydealt with in the books of accounts.

3. (a) The Company has not taken or granted any loans,secured or unsecured, during the year from or tocompanies, firms and other parties listed in the registermaintained under Section 301 of the Companies Act,1956; Though the Advances given to three parties(unsecured) which are not listed in the registermaintained under Section 301 of the Companies Act,1956 the opening and closing balances of the saidparties were Rs. 65,84,440/- and Rs. 71,25,372/-respectively. Other Advances were interest free. Thesaid three unsecured advances were bearing interest@ 10% p.a.

(b) The rate of interest and other terms and conditions ofAdvances given by the Company (other than listed u/s.301 of The Companies Act, 1956) unsecured are primafacie prejudicial to the interest of the Company.

(c) The payment of interest and principal in respect ofthe said Advances given by the Company (other thanlisted u/s. 301 of the Companies Act, 1956) areirregular.

(d) In respect of said Advances, the terms and conditionsis not known as such, we are unable to comment thetime frame of repayment schedule along with interestpayment and reasonable steps taken by the Companycould not be identified by us.

4. In our opinion, there are adequate internal controlprocedures commensurate with the size of the Companyand the nature of its business with regard to purchase ofInventory, Fixed Assets and for the Sale of goods. Duringthe course of our audit, no major weakness has been noticedin the internal controls.

5. In our opinion and according to the information andexplanation given to us, there are transaction of sale ofgoods made in pursuance of contract or arrangementsentered in the registers maintained under Section 301 ofthe Companies Act, 1956 and aggregating during the yearRs. 5,00,000/- or more but the transaction were made atprevailing market price.

6. The Company has accepted deposit from the Public towhich the directives issued by the Reserve Bank of Indiaand the provisions of Section 58A and 58AA of theCompanies Act and the rules framed there under are dulycomplied with.

7. In our opinion, the company has an internal audit systemcommensurating with the size and nature of its business.

8. According to the information and explanation given to us,maintenance of cost records have not been prescribed bythe Central Government under section 209 (1)(d) of theCompanies Act.

9. (a) According to the records of the company, the companyis generally regular in depositing with appropriateauthority undisputed statutory dues includingProvident Fund, Investor Education and ProtectionFund, Employees’ State Insurance, Income Tax, SalesTax, Wealth Tax, Custom Duty, Excise Duty and anyother statutory dues applicable to it.

(b) The dues of Sales Tax that have not been deposited onaccount of any dispute, the amounts involved and theforum where the dispute is pending are detailed inthe statement given below;

Sl. Name of the Nature of Dues Amount Forum whereNo. statute (in Rs.) dispute is pending

1. Bengal Sales Tax Sales Tax Demand 154,209/- A.C.C.T.Act 1994 for 1996-97 South circle (Kol)

2. Bengal Sales Tax Sales Tax Demand 295,115/- A.C.C.TAct 1994 for 2000-01 South circle (Kol)

10. The Company does not have any accumulated losses at

22

ANNEXURE TO AUDITORS’ REPORT


the end of the financial year and has not incurred cashlosses in the financial year and in the financial yearimmediately preceeding such financial year.

11. The Company has not defaulted in repayment of dues tobanks/financial institutions with respect to its borrowings.

12. According to the information and explanations given tous, the Company has not granted any loans and advanceson the basis of way of pledge of shares, debentures andother securities.

13. The Company is not a chit/nidhi/mutual benefit funds/society.

14. According to the information and explanations given tous, the Company is not dealing or trading in Shares,Securities, Debentures and other investments.

15. On the basis of the information and explanations given tous, the Company has not given any guarantee for loanstaken by others from banks or financial institutions.

16. The Company has taken a fresh term loan of Rs. 70.00lacs which was sanctioned on 01.3.2004 but the said termloan was not disbursed during the year under audit. Theopening balance of term loan at the beginning of the yearwas duly repaid during the year under audit. So thepurpose of taking term loan and its proper disbursementwas not related during the year.

17. On the basis of our examination and according to theinformation and explanations given to us, the companyhas not used the funds borrowed on short term basis forlong term investment and vice-versa.

18. The Company has not made any preferential allotment ofshares to parties and companies covered in the registermaintained under Section 301 of the Companies Act,1956.

19. During the year the Company has not issued anyDebenture.

20. The Company has not raised any money by public issuesduring the year.

21. According to the information and explanations given tous by the management, we report that company has fileda suit for recovery of sum of Rs. 18.60 lacs paid as advancein respect to two separate deals and no fraud by theCompany has been noticed or reported during the courseof our audit.


Sd/-

Kolkata, India (A. K. Ganguli)28th June, 2004 Proprietor


23


As on As on31.03.2004 31.03.2003

SCHEDULE NO. (Amount in Rs.) (Amount in Rs.)I SOURCES OF FUNDS

Shareholders’ Funds

Capital 1 5,00,02,000.00 5,00,02,000.00

Reserves and Surplus 2 6,34,19,822.76 6,26,64,742.9711,34,21,822.76 11,26,66,742.97

Loan Funds

Secured loans 3 2,37,92,525.71 2,48,63,325.51

Unsecured loans 4 35,00,000.00 2,72,92,525.71 —

Deferred Tax Liabilities 5 9,07,301.00 11,53,595.00

14,16,21,649.47 13,86,83,663.48

II APPLICATION OF FUNDSFixed Assets

Gross block 6 7,44,95,297.87 7,11,18,356.57

Less: Depreciation 3,88,46,282.52 2,49,25,417.42

Net block 3,56,49,015.35 4,61,92,939.15

INVESTMENTS 7 1,51,57,344.23 87,00,259.71

A. Current assets, loans and advances

Stock-in-trade 8 1,29,44,317.60 1,25,11,599.76

Sundry Debtors 9 6,16,40,108.79 4,76,58,098.49

Cash & Bank balances 10 3,41,816.99 22,54,442.93

Loans & advances 11 3,01,41,027.83 2,69,92,231.15

10,50,67,271.21 8,94,16,372.33B. Less : Current liabilities & provisions

Current liabilities 12 87,64,276.32 45,93,892.71

Provisions 13 85,48,596.00 78,84,510.00

1,73,12,872.32 1,24,78,402.71

Net current assets (A-B) 8,77,54,398.89 7,69,37,969.62

Miscellaneous Expenditure 14 30,60,891.00 68,52,495.00

TOTAL 14,16,21,649.47 13,86,83,663.48

Accounting Policies & Notes on accounts 23

Business profile 24

Related party disclosure 25

Segment Reporting 26

In accordance with our report of even date attached herewith.


Sd/- Sd/- Sd/-

Kolkata, India (B. Hari) (S. V. Ramani) (A. K. Ganguli)28th June, 2004 Managing Director Whole-time Director and Secretary Proprietor

BALANCE SHEETAS ON 31ST MARCH, 2004

BALANCE SHEET

24


Year ended Year ended31.03.2004 31.03.2003

SCHEDULE NO. (Amount in Rs.) (Amount in Rs.)INCOME

Sales 15 22,26,01,838.83 16,27,83,230.56Other Income 16 14,88,472.68 16,56,556.50

TOTAL 22,40,90,311.51 16,44,39,787.06

EXPENDITURE

(Increase)/decrease of stock–(WIP) 17 (17,71,540.00) (15,26,910.00)

Cost of purchases 18 3,76,64,777.94 2,28,63,900.06

Consumption of Con. Stores 19 14,72,618.25 10,72,280.78

Operating expenses 20 11,34,42,783.16 7,82,77,307.40

Administrative expenses 21 4,65,30,506.74 2,85,13,384.63

Finance charges 22 38,55,247.94 38,51,444.93

Preliminary & preoperative exp. w/o 14 9,88,922.00 9,88,922.00

Deferred revenue exp. w/o 14 28,02,682.00 45,95,698.88

Depreciation 6 1,39,26,500.69 1,37,25,197.57

TOTAL 21,89,12,498.72 15,23,61,226.25

Profit before tax & extraordinary items 51,77,812.79 1,20,78,560.81

Less : extraordinary items — 36,19,000.00

Profit Before Tax 51,77,812,.79 84,59,560.81

Less: Provision for Tax 10,00,000.00 18,00,000.00

Provision for Tax for earlier year (written back) (2,79,569.00) —

Add: Deferred Tax Assets/(Liabilities) 2,46,294.00 43,51,352.00

Profit After Tax 47,03,675.79 1,10,10,912.81

Add: Surplus of Profit & Loss A/c 85,45,442.97 24,19,040.16

1,32,49,118.76 1,34,29,952.97

Appropriations:

Transfer to General Reserve 4,70,000.00 15,00,000.00Proposed Dividend 35,00,140.00 30,00,120.00

Corporate Dividend Tax 4,48,456.00 3,84,390.00

Balance C/F to Balance Sheet 88,30,522.76 85,45,442.97

1,32,49,118.76 1,34,29,952.97

Accounting Policies & Notes on accounts 23Business profile 24Related party disclosure 25Segment Reporting 26EPS after tax 0.89 1.33(Basic & Diluted) (Refer Note No. 2 (xv) of Sch–23)

In accordance with our report of even date attached herewith.


Sd/- Sd/- Sd/-Kolkata, India (B. Hari) (S. V. Ramani) (A. K. Ganguli)28th June, 2004 Managing Director Whole-time Director and Secretary Proprietor

PROFIT & LOSS ACCOUNTFOR THE YEAR ENDED 31ST MARCH, 2004

25

PROFIT & LOSS ACCOUNT


As at As at31st March 2004 31st March 2003(Amount in Rs.) (Amount in Rs.)

SCHEDULE NO. 1

SHARE CAPITAL

Authorised:10000000 Equity Shares of Rs.10/– each 10,00,00,000.00 10,00,00,000.00

Issued, subscribed & paid up :5000200 Equity Shares of Rs.10/– each 5,00,02,000.00 5,00,02,000.00fully paid up.

5,00,02,000.00 5,00,02,000.00SCHEDULE NO. 2

RESERVES & SURPLUSShare Premium 4,91,19,300.00 4,91,19,300.00General ReservesAs per last Balance Sheet 50,00,000.00 35,00,000.00Add: Transferred from Profit and Loss A/c 4,70,000.00 15,00,000.00

54,70,000.00 50,00,000.00

Surplus in Profit & Loss A/c 88,30,522.76 85,45,442.97

6,34,19,822.76 6,26,64,742.97SCHEDULE NO. 3

SECURED LOANOCC limit with Indian Bank, Strand Road Branch 2,09,28,606.71 2,10,70,848.51(On hypothecation of Stocks and Book Debts)

Term Loan with HDFC 28,63,919.00 37,92,477.00

(On hypothecation of Building) 2,37,92,525.71 2,48,63,325.51

SCHEDULE NO. 4

UNSECURED LOANSFixed Deposits 35,00,000.00 —

35,00,000.00 —SCHEDULE NO. 5

DEFERRED TAX LIABILITIESDeferred Tax Liabilities 11,53,595.00 55,04,947.00Less : Deferred Tax Assets 2,46,294.00 43,51,352.00

9,07,301.00 11,53,595.00

SCHEDULES FORMING PART OF THE BALANCE SHEET ANDPROFIT & LOSS ACCOUNT

26

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SCHEDULE NO. 7INVESTMENT (AT COST)LONG TERM, TRADE (UNQUOTED):IN FOREIGN HOLDINGSInvestment in Equity withOntrack Systems (UK) Ltd. 1,31,99,722.93 70,70,223.17(100% Wholly Owned Subsidiary).(17,50,000 Ordinary Shares of 10 Pence each fully paid up)Investment in Equity withOntrack Systems (UAE) Ltd. 19,57,413.19 16,29,828.43(100% Wholly Owned Subsidiary)(2,52,159 Ordinary shares of AED 1/- each fully paid up)Investment in Equity withPersonalMedic Limited 208.11 208.11(3 Ordinary shares of £ 1/- each fully paid up)

1,51,57,344.23 87,00,259.71SCHEDULE NO. 8STOCK –IN–TRADE AT COSTWork–in–progress 82,98,450.00 65,26,910.00Consumable and spares 10,67,747.60 9,45,213.00Trading Stock 35,78,120.00 50,39,476.76

1,29,44,317.60 1,25,11,599.76SCHEDULE NO 9SUNDRY DEBTORS(Unsecured considered good)

A. Debts outstanding for period ofMore than Six months 91,15,857.20 1,68,85,283.00

B. Others – Subsidiaries 2,34,20,407.77 76,24,644.33 – Others 2,91,03,843.82 2,31,48,171.16

6,16,40,108.79 4,76,58,098.49SCHEDULE NO. 10CASH AND BANK BALANCECash in hand 52,361.67 7,60,004.95Bank Balance with Scheduled banks ini) Current A/C 70,466.13 64,020.32ii) Dividend A/C 1,070.00 1,070.00iii) Gratuity A/C 3,010.00 3,010.00iv) Fixed Deposit A/C 54,697.00 54,697.00v) EEFC A/C – £ 14,376.55 12,57,150.60vi) EEFC A/C – $ 54,324.28 31,112.50vii) Dividend Unpaid A/C 56,978.00 11,128.00Interest Accrued on fixed deposit 13,092.00 13,092.00Bank balance with other bank in current A/c.ASAHI BANK, KANDA, JAPAN 21,441.36 59,157.56(Maximum balance held during the year Rs. 2,55,958.43and previous year Rs. 3,10,485.05)

3,41,816.99 22,54,442.93

28





SCHEDULE NO. 11LOANS AND ADVANCES(Unsecured considered good)Advance Rent 65,000.00 81,380.00Advance Income Tax and TDS 30,60,332.24 34,75,055.40Advance to Staff 35,46,997.43 26,44,846.36Other Advances 1,09,12,492.22 1,19,86,362.00Advance to subsidiary 5,04,365.24 —Prepaid Insurance 88,281.83 56,890.52Deposit 21,03,558.87 7,47,696.87Advance for Property 80,00,000.00 80,00,000.00UNSECURED DOUBTFUL ADVANCESAdvance 18,60,000.00 —

3,01,41,027.83 2,69,92,231.15SCHEDULE NO. 12CURRENT LIABILITIESSUNDRY CREDITORSFor Goods Supplied 31,15,516.50 10,60,943.07For Expenses 41,53,524.91 23,52,272.87Unexpired service income 5,39,299.71 6,69,826.36Dividend Unpaid a/c. 56,978.00 11,128.00Overdrawn – UTI Bank — 1,41,222.41Advance from Customers 3,39,000.00 3,58,500.00Standard Chartered Bank - Car Loan 5,59,957.20 —

87,64,276.32 45,93,892.71

SCHEDULE NO. 13PROVISIONSProvision for Tax 46,00,000.00 45,00,000.00Proposed Dividend 35,00,140.00 30,00,120.00Corporate Dividend Tax 4,48,456.00 3,84,390.00

85,48,596.00 78,84,510.00

SCHEDULE NO. 14MISCELLANEOUS EXPENDITUREPreliminary & Preoperative Exp. 19,77,845.00 29,66,767.00Less : Written Off 1/5th 9,88,922.00 9,88,922.00

9,88,923.00 19,77,845.00DEFERRED REVENUE EXPENDITUREtendertimes.com Exp. — 14,54,147.00India Development Centre 21,92,149.00 36,53,581.88STP Subscription — 15,000.00Brand Building — 3,23,871.00indiaonestop.com 18,66,569.00 27,99,853.00P. C. Ustaad.com 8,15,932.00 12,23,896.00

48,74,650.00 94,70,348.88Less: Written off 1/3rd 28,02,682.00 45,95,698.88

20,71,968.00 48,74,650.0030,60,891.00 68,52,495.00


29




SCHEDULE NO. 15SALESDomestic 4,77,57,336.67 3,88,58,923.25Export Sales 17,48,44,502.16 12,39,24,307.31

22,26,01,838.83 16,27,83,230.56SCHEDULE NO. 16OTHER INCOMEIncome from Currency Fluctuation 3,20,123.90 10,44,479.17Interest received 6,80,658.98 6,06,084.00Miscellaneous Receipts 37,691.00 5,993.33Dividend received from WOS (UK) 4,49,998.80 —

14,88,472.68 16,56,556.50SCHEDULE NO. 17(INCREASE)/DECREASE IN STOCK (W.I.P.)Opening Stock : 65,26,910.00 50,00,000.00Closing Stock : 82,98,450.00 65,26,910.00Increase in stock (17,71,540.00) (15,26,910.00)

SCHEDULE NO. 18COST OF PURCHASEOpening Stock 50,39,476.76 56,91,936.59Add: Purchases 3,62,03,421.18 2,22,11,440.23

4,12,42,897.94 2,79,03,376.82Less: Closing Stock 35,78,120.00 50,39,476.76

3,76,64,777.94 2,28,63,900.06SCHEDULE NO. 19CONSUMPTION OF CONSUMABLE STORESOpening Stock 9,45,213.00 4,61,679.71Add: Purchases 15,95,152.85 15,55,814.07

25,40,365.85 20,17,493.78Less: Closing Stock 10,67,747.60 9,45,213.00

14,72,618.25 10,72,280.78SCHEDULE NO. 20OPERATING EXPENSESSalaries, Incentives And Bonus 1,48,37,027.47 94,85,822.29Contribution to Provident Fund 9,87,386.50 6,29,414.00Contribution to E. S. I. 1,78,440.00 1,25,133.00Contribution to Group Gratuity 1,03,901.00 1,13,660.00Electricity Expenses 10,64,250.50 6,73,222.00Professional and Consultancy Charges 40,44,330.64 42,78,447.35Repairs to machinery 8,40,411.25 8,87,312.50Insurance Premium 1,10,828.69 1,27,043.48Hire Charges 84,243.00 2,34,245.00Expenses for UAE Office 2,63,555.70 1,92,088.17Operative Expenses for WOS-UK 9,09,28,408.41 6,15,30,919.61

11,34,42,783.16 7,82,77,307.40

30




As at As at

31st March 2004 31st March 2003

(Amount in Rs.) (Amount in Rs.)

SCHEDULE NO. 21

ADMINISTRATIVE EXPENSES

Administrative expenses for WOS-UK 3,15,98,438.60 1,93,99,906.18

Directors Remuneration 16,20,000.00 7,20,000.00

Rent 4,46,477.46 3,79,060.00

Rates and Taxes 3,63,911.14 2,27,482.00

Discount Allowed 5,100.00 6,500.00

Travelling and Conveyance 47,28,357.40 32,46,275.97

Postage, Telephone and Telegram 20,59,702.52 18,08,081.37

Printing & Stationery 6,04,088.75 3,33,491.19

Business promotion 6,46,151.08 7,13,484.04

Books and Periodicals 47,087.00 1,17,916.47

Advertisement and Publicity 2,52,753.00 1,91,679.00

Sundry subscription 19,582.00 16,520.00

Office Expenses 2,73,728.48 2,09,154.51

Remuneration to Auditors 1,29,600.00 1,29,600.00

Commission Paid 20,47,375.00 —

Staff Recruitment expenses 86,520.00 14,212.00

Staff Training Expenses 2,45,878.00 —

Sundry balances w/o — 1,73,711.00

Staff welfare expenses 7,61,632.69 4,80,422.51

Other Charges 5,70,597.98 3,45,888.39

Loss on sale of Assets 23,525.64 —

4,65,30,506.74 2,85,13,384.63

SCHEDULE NO. 22

FINANCE CHARGES

Interest 35,68,329.20 30,90,846.00

Bank Charges 2,86,918.74 7,60,598.93

38,55,247.94 38,51,444.93

31



SCHEDULE NO. 23

ACCOUNTING POLICIES AND NOTES ANNEXED TO AND FORMINGPART OF ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2004.

1. Statement of significant accounting policies

i) The financial statement have been prepared under thehistorical cost convention in accordance with the generallyaccepted accounting principles and as adopted consistentlyby the Company.

ii) The Company generally follows mercantile system ofaccounting and recognises significant items of Income &Expenditure on accrual basis.

iii) Inventories of Trading Goods, spare parts and consumablestores are valued at lower of cost or market value. Outdatedand damaged stocks are written off on technical evaluation.Cost of W.I.P. is the cost of personnel expenses for partialcompletion of Software at the end of each quarter andcompetent authority has made the said valuation.

iv) The Company has a group gratuity policy with the LifeInsurance Corporation of India and the premium paid to LICis accounted for. The actuarial valuation of gratuity liabilityhas not been accounted for.

Company’s contributions to Provident Fund and E.S.I. havebeen paid to appropriate authority. The benefits to employeeslike Provident Fund, E.S.I. and Gratuity have been accountedfor all employees employed in India.

v) All Fixed Assets are accounted for at cost less depreciation,depreciation on Fixed Assets have been provided on StraightLine Method and written off over a period of :

Computer and its Accessories 3 Years

Land and Building 20 Years

Other Fixed Assets 5 Years

vi) The sales are recognized at the point of despatch of materialsto the customers and bills are raised to them. Income frommaintenance contract is accounted for in the relevant periodof the accounting year upon entering into the contract. Revenuefrom Software Development are recognized on the basis ofachievement of prescribed milestone as relevant to eachcontract as proportionate completion method as applicable.

vii) Preliminary and share issue expenses are amortised over aperiod of five years. Deferred revenue expenditure is amortisedover a period of three years.

viii) Foreign currency transactions denominated in foreigncurrencies are normally recorded at the exchange rate prevailingat the time of the transaction.

Monetary items denominated in foreign currencies at the year-end and not covered by forward exchange contracts aretranslated at year end rates. Those transactions covered byforward exchange contracts are translated at year end ratesruling at the date of transaction as increased or decreased bythe proportionate difference between the forward rate andexchange rate on the date of transaction, such difference havingbeen recognized over the life of the contract. Non-monetaryitem including Fixed Assets which are carried in terms ofhistorical cost denominated in a foreign currency should be

32


reported using the exchange rate at the date of thetransaction.

ix) Long term investments are stated at cost. Provision fordiminution in the value of long-term investments are madeonly if such a decline is other than temporary in nature and inthe opinion of the Management.

x) Provision for Tax is based on Current Tax rates in force.Deferred Tax is recognized, subject to the consideration ofprudence, on timing differences, being the difference betweentaxable income and accounting income that originate in oneperiod and may be reversed in one or more subsequent periods.The rate of Deferred Tax is based on the tax rate and laws thathave been enacted or substantively enacted as on the BalanceSheet date. The Deferred Tax asset is recognized and carriedforward only to the extent that there is reasonable certaintythat the asset will be realised in future.

2. Notes on Accounts

(i) Figures of the previous year have been reworked,regrouped, rearranged and reclassified wherevernecessary.

(ii) The details of operating and administrative expenses forforeign operation of WOS-UK has been shown separately.

(iii) Other income includes interest on bank deposit of Rs.84/-for current year and Rs. 1,573/- for the last year. No TDShas been deducted. Interest other than bank interest of Rs.6,80,659/- for current year and Rs. 6,06,084/ for last yearand corresponding TDS on interest other than bank interestis Rs. 1,33,039/- and Rs. 1,26,948/- respectively. Currencyfluctuation of Rs. 3,20,124/- is in the current year and Rs.10,44,479/- is for last year.

(iv) Provision for Deferred Tax

The Company has accounted for deferred tax assets valuedat Rs. 2,46,294/- against previous year amount valued atRs. 43,51,352/- which has been shown in profit & lossaccount. The carrying amount of deferred tax liabilities afteradjustment of assets comes to Rs. 9,07,301/- andRs. 11,53,595/- for current year and previous yearrespectively which is due to difference in depreciation as perCompanies Act and Income Tax Act.

(v) The Company has preferred two appeals before Sales TaxAuthority against demand to amounting to Rs. 4,49,324/-and as such the said liabilities have not been provided inaccounts and have been treated as contingent liability.

(vi) During the year the company has given advances to twoparties amounting to Rs. 10.00 lacs and Rs. 8.60 lacsrespectively against two contracts, the terms of whichhave still not been fullfilled so far. The management ishopefull to recover the said advances, as such noprovision has been created.

(vii) Balances of Debtors, Creditors, Loans and Advances paidor received are subject to confirmation by the parties.

(viii)The Company has overseas branch at Japan and hasincurred a net loss of Rs. 14,65,885.01 and Company’sdomestic branch at New Delhi has made a Net Profit of



from Foreign source. Current year Export turnover wasabout 78.55% of Gross Turnover and Management’sperception is that this percentage will increase to morethan 80% next year. The geographical segments havebeen identified on the basis of location of the majorcustomers of the Company. The geographical segmentsare Europe, USA & Other Countries and Domestic. Thesegeographical places represent a strategic business unitthat offers different places as unit having different riskand returns.

xiii) Inter-segment sales and transfers, if any, are accountedfor as if the sales or transfers were to third parties atcurrent market prices.

xiv) General Income and Expense items, which are notallocable to any specific geographical segment, areclassified as unallocated revenue and expenditurerespectively. This Expense includes Depreciation,Deferred Revenue Expenditure W/o, Finance Charges,Expenses in extraordinary nature and Other unallocatedExpenses of Administrative and Operating Expenses andIncome includes Other Income which is shown as Net ofFinance Charges.

xv) The segment-wise apportionment of Capital is notdisclosed since Capital is used as a whole for theCompany.

Rs. 77,584.08 during this year’s operation.

(ix) The Company has set up a joint venture withPersonalMedic Limited, U.K. with a token investment ofthree ordinary shares. The said joint venture has not yetcommence operations as stated by management.

(x) Domestic Sales include income from service of Rs.98,37,171/- for current year against Rs. 72,78,881/- inthe previous year.

(xi) Earnings Per Share is calculated by dividing the profitafter tax but before deferred tax assets (Numerator)attributable to the equity shareholders by the number ofequity shares (Denominator) as under:

Current Year Previous Year

Profit after tax beforedeferred tax (in Rs.) 44,57,382 66,59,561No. of Equity Share 5000200 5000200Basic and diluted earningper share (in Rs.) 0.89 1.33Nominal value per share (in Rs.) 10/- 10/-

As a prudent accounting policy deferred tax asset has notbeen considered.

xii) The Company is providing services globally. TheCompany’s operating businesses are originated mainly

3. Remuneration to Auditors

(Amount in Rs.) (Amount in Rs.)Year ended 31.03.2004 Year ended 31.03.2003

For Audit fee 1,08,000.00 1,08,000.00

For Tax Audit fee 21,600.00 21,600.00

1,29,600.00 1,29,600.00

4. Remuneration to Managing Director & Wholetime Director

(Amount in Rs.) (Amount in Rs.)Year ended 31.03.2004 Year ended 31.03.2003

Salary 16,20,000.00 7,20,000.00

P. F. Contribution 97,200.00 43,200.00

17,17,200.00 7,63,200.00

Note: Remuneration paid to Managing Director and Whole-time Director is within the limit as per provision of Schedule XIIIof the Companies Act 1956, as such computation of net profit in accordance with sec.- 309 (5) of the Companies Act 1956 isnot given separately.


ANNEXURE – 1 Referred to in Schedule – 23

Additional information pursuant to the Provisions of Clauses 3, 4C and 4D of part II of Schedule VI of the Companies Act, 1956.

Year ended 31.3.2004 Year ended 31.3.2003(Amount in Rs.) (Amount in Rs.)

1. A. Employed throughout the year and wherein receipt ofRemuneration the aggregate ofWhich was not less than Rs. 24,00,000/–Number of Employees None NoneRemuneration Nil Nil

B. Employed for a part of the year on remuneration ofRs. 2,00,000/– per monthNumber of Employees None NoneRemuneration Nil Nil

2. Licensed Capacity 40 crores 40 crores

As per SIA Registration with Govt. of India

3. Installed Capacity 40 crores 40 crores

4. PRODUCTION CAPACITY Not applicable Not applicable

5. PRODUCTION Not applicable Not applicable

6. A. IMPORTS Nil Nil

B. EXPORTS 17,48,44,502.16 12,39,24,307.31

7. TURNOVER

Sales 22,26,01,838.83 16,27,83,230.56Other income 14,88,472.68 16,56,556.50

8. COST OF PURCHASE

a. Imported Nil Nil

b. Indigenous (100%) 3,91,37,396.19 2,39,36,180.84

9. EXPENDITURE IN FOREIGN CURRENCY

Foreign Travel 1,64,295.00 1,44,575.00

Foreign Subsidiary Expenses (Reimbursed) 12,25,26,847.01 8,14,88,385.96

Foreign Branch Expenses 13,90,689.20 4,08,460.00

Investment in Foreign Subsidiary 64,57,084.52 80,30,051.60Investment in Foreign Joint Venture — 208.11

Advance to Subsidiary 5,04,365.24 —

10. EARNINGS IN FOREIGN EXCHANGE

a. Fees received from Foreign Enterprise 3,93,00,295.35 3,14,83,342.19

11. SSI Creditors and amount owed over 30 days Nil Nil

12. No specific license is required for manufacture of products, in term of the New Industrial Policy of the Govt. of India except thosewhich are in the restricted list. As per SIA approval received from Govt. of India, the annual capacity of the Company works out toRs. 40 crores.

Further software development, system integration and networking cannot be expressed in any generic unit terms and hence is notpracticable to give these details in quantitative figures.

13. CONTINGENT LIABILITIES

Sales Tax 4,49,324/- 1,54,209/-

34



SCHEDULE NO : 24

BUSINESS PROFILE

I. Registration details

Registration no. : 18—15370Registration date : 15.02.1988Balance Sheet date : 31.03.2004

II. Capital raised during the year (Amount in Rs. thousand)

Public issue Rights issueNil Nil

Private placement Bonus issueNil Nil

III. Position of mobilisation and deployment of funds (Amount in Rs thousand)

Total Liabilities Total Assets141621 141621

Source of funds (Amount in Rs. thousand)Paid-up Capital Reserves & Surplus

50002 63419Secured loans Unsecured loans

23793 3500Deferred Tax Liabilities

907

Application of funds (Amount in Rs. thousand)

Net Fixed Assets Investment35649 15157

Net Current Assets Miscellaneous Expenses87754 3061

Accumulated LossesNil

IV. Performance of Company (Amount in Rs. thousand)

Turnover Total Expenditure224090 218912

Profit/Loss before tax Profit/Loss after tax5178 4703

Dividend rate in %7

V. Generic names of principal product/services of Company

Item code no. Product description847190 Computer Hardware

Not applicable IT ServicesNot applicable Software development.

In accordance with our report ofeven date attached herewith.


Sd/- Sd/- Sd/-Kolkata, India (B. Hari) (S. V. Ramani) (A. K. Ganguli)28th June 2004 Managing Director Whole-time Director and Secretary Proprietor

35




SCHEDULE NO. 25

RELATED PARTY TRANSACTIONS

During the year the Company had transactions mainly with its subsidiary Ontrack Systems (UK) Ltd., UK, and Ontrack Systems(UAE) Ltd., UAE. The other companies having some transactions were Cosmat Investments Pvt. Ltd., Venus Barter Pvt. Ltd. andGinvani Merchants Pvt. Ltd.

B. Hari is Director in its Subsidiary Ontrack Systems (UK) Ltd., Ontrack Systems (UAE) Ltd., and Manik Dey is a Director ofOntrack Systems (UK) Ltd.

Key Managerial Personnel : G. Anand and Sushil Prasad

Summary of the transaction with the above related party

Total sales, debtors, investment, dividend received and advance paid to subsidiary and group company under same Managementare Rs. 16,71,61,681/– (Rs. 11,22,04,379/-), Rs. 2,39,33,321/- (76,24,644/-), Rs. 64,57,084/- (Rs. 80,30,051/-), Rs. 4,49,999/- (Nil) and Rs. 5,04,365/- (Nil) respectively. The figures of the previous year have been given in brackets.

Closing Balance of Loan given and Interest received Rs. 72,58,411/- (Rs. 61,06,877/-), Rs. 6,48,971/- (Rs. 4,77,563/-) andremuneration to Key Management Personnel and Directors are Rs. 78,97,596/- (Rs. 43,81,277/-). The figures of the previousyear have been given in brackets.

SCHEDULE NO. 26

SEGMENT INFORMATION FOR THE YEAR ENDED 31ST MARCH, 2004

Primary Segment Reporting — Geographical Segment

Segment–wise Revenue Results(Amount in Rs.)

Particulars Domestic Europe USA & Others Total

Revenue 4,77,57,337 16,31,47,695 1,16,96,807 22,26,01,839(3,88,58,923) (10,89,74,093) (1,49,50,215) (16,27,83,231)

Direct & Allocated Cost 4,50,91,396 13,66,50,474 25,84,500 18,43,26,370(3,29,26,817) (7,86,33,088) (1,10,38,302) (12,25,98,207)

Profit before interest & depreciation 26,65,941 2,64,97,221 91,12,307 3,82,75,469(59,32,106) (3,03,41,005) (39,11,913) (4,01,85,024)

Finance Charges (Net) 23,66,775(21,94,888)

Depreciation 1,39,26,501(1,37,25,198)

Unallocated Expenses 1,68,04,380(1,58,05,377)

Profit before tax 51,77,813(84,59,561)

Provision for tax (Net) 4,74,137(25,51,352)

Profit after tax 47,03,676(1,10,10,913)

Capital employed 11,03,60,932(10,58,14,248)

Notes : The figures of the previous year are shown in brackets


CASH FLOW STATEMENTFOR THE YEAR ENDED 31ST MARCH, 2004

31.03.2004 31.03.2003Rs. Rs. Rs. Rs.

A. Cash flow from operating activitiesNet profit before tax and extraordinary items 51,77,813.00 1,20,78,561.00Adjustment for– depreciation 1,39,26,501.00 1,37,25,197.00– amortisation of deferred revenue expenditure 3,79,1,604.00 55,84,621.00– interest Paid 38,55,248.00 38,51,445.00– other income (10,98,974.00) (6,06,084.00)– (profit)/loss on sale of assets 23,526.00 2,04,97,905.00 — 2,25,55,179.00

– operating profit before working capital changes 2,56,75,718.00 3,46,33,740.00Adjustment for :– sundry debtors (increase) / decrease (1,39,82,011.00) (2,97,241.00)– stock in trade (increase) / decrease (4,32,718.00) (13,57,984.00)– loans & advances (increase) / decrease (35,63,520.00) (9,39,406.00)– current liabilities increase / (decrease) 43,11,606.00 (1,36,66,643.00) (27,99,431.00) (53,94,062.00)– cash generated from operations 1,20,09,075.00 2,92,39,678.00– interest paid 38,55,248.00 38,51,445.00– direct tax paid (net of refund) 2,05,707.00 40,60,955.00 11,40,535.00 49,91,980.00– Net cash from operating activities 79,48,120.00 2,42,47,698.00

B. Cash flow from investing activitiesPurchase of fixed assets (34,08,203.00) (1,76,85,644.00)Sale of fixed assets 2,100.00 —Sale of Capital WIP — —Purchase of investments (64,57,085.00) (80,30,260.00)Sale of investment (UTI) —Dividend on shares (Subsidiary) 4,49,999.00 —Interest received 6,48,975.00 6,06,084.00

Net cash used in investing activities (87,64,214.00) (2,51,09,820.00)C. Cash flow from financing activities

– Proceeds from borrowingsLong term (10,70,800.00) 49,92,643.00Short term 35,00,000.00 (11,75,000.00)Dividend paid (33,84,510.00) (24,88,972.00)

Net cash used in financing activities (9,55,310.00) 13,28,671.00

Net increase/decrease in cash &cash equivalents (A+B+C) (17,71,404.00) 4,66,549.00Cash & cash equivalents – opening balance 21,13,221.00 16,46,672.00Cash & cash equivalents – closing balance 3,41,817.00 21,13,221.00

Note : Cash and cash equivalents consist of cash in hand and balance and short term deposits with Banks.

As per our report of even date attachedFor N. C. Ganguli & Co.

Chartered Accountants

Sd/- Sd/- Sd/-Kolkata, India (B. Hari) (S. V. Ramani) (A. K. Ganguli)28th June 2004 Managing Director Director and Secretary Proprietor

37



STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956RELATING TO SUBSIDIARY COMPANIES

1. Name of the Subsidiary : Ontrack Systems (UK) Limited Ontrack Systems (UAE) Limited

2. Financial year ended : 31st March, 2004 31st March, 2004

3. Holding Company’s interest : 100% in Equity Share 100% in Equity Share

Capital Capital

4. Shares held by the holding company : 17,50,000 shares of 1,50,000 shares of

in the Subsidiary Ten Pence each AED One each

5. The net aggregate of profits or losses

for the above financial year of the

subsidiary so far as it concerns the

members of the holding company

a. dealt or provided for in the

accounts of the holding company : Nil Nil

b. not dealt with or provided for in

the accounts of the holding company : Profit : Profit :

GBP 50716 AED 21945

6. The net aggregate of profits or losses

for the previous financial year of the

subsidiary so far as it concerns the

members of the holding company

a. not dealt with or provided for in the

accounts of the holding company : Nil Nil

b. not dealt with or provided for in the

accounts of the holding company : GBP 71663 AED 11767

38

STATEMENT OF SUBSIDIARY COMPANIES


AUDITORS’ REPORT TO THE BOARD OF DIRECTORS ON THE CONSOLIDATED FINANCIALSTATEMENTS OF ONTRACK SYSTEMS LIMITED AND ITS SUBSIDIARIES

We have audited the attached consolidated Balance Sheet of

Ontrack Systems Limited and its subsidiaries as at 31st March,

2004 and also the consolidated Profit and Loss Account for

the year ended on that date annexed thereto and the

consolidated cash flow statement for the year ended on that

date.

These financial statements are the responsibility of the

Company’s management. Our responsibility is to express an

opinion on these financial statements based on our audit. We

conducted our audit in accordance with auditing standards

generally accepted in India. Those Standards require that

we plan and perform the audit to obtain reasonable assurance

whether the financial statements are prepared, in all material

respects, in accordance with an identical financial reporting

framework and are free of material misstatements. An audit

includes examining, on a test basis, evidence supporting the

amounts and disclosures in the financial statements. An Audit

also includes assessing the accounting principles used and

significant estimates made by management, as well as

evaluating the overall financial statement presentation. We

believe that our audit provides a reasonable basis for our

opinion.

We did not audit the financial statements of certain

subsidiaries, whose financial statements reflect total assets

of UK GBP 2,92,307 and UAE AED 13,64,978/- as at 31st

March, 2004 and total revenues of UK GBP 22,13,119 and

UAE AED 16,35,477/- for the year ended. These financial

statements have been audited by other auditors whose reports

have been furnished to us, and our opinion, in so far as it

relates to the amounts included in respect of the subsidiaries,

is based solely on the report of the other auditors.

We report that the Consolidated Financial Statements have

been prepared by the Company in accordance with the

requirements of Accounting Standards (AS) 21, Consolidated

Financial Statements, issued by the Institute of Chartered

Accountants of India and on the basis of the separate audited

financial statements of Ontrack Systems Limited and its

subsidiaries included in the Consolidated Financial

Statements.

On the basis of the information and explanation given to us

and on the consideration of the separate audit reports on

individual audited financial statements of Ontrack Systems

Limited and its aforesaid subsidiaries, we are of the opinion

that :

a. the Consolidated Balance Sheet gives a true and fair

view of the consolidated state of affairs of Ontrack

Systems Limited and its subsidiaries as at 31st March,

2004,

b. the Consolidated Profit and Loss account gives a true

and fair view of the consolidated results of operations of

Ontrack Systems Limited and its subsidiaries for the year

ended and

c. the Consolidated Cash Flow Statement gives a true and

fair view of the Consolidated Cash Flow of Ontrack

Systems Limited and its subsidiaries for the year ended

on that date.

For N. C. Ganguli & Co.


Sd/-

Kolkata, India (A. K. Ganguli)

28th June, 2004 Proprietor


39

AUDITORS’S REPORT


CONSOLIDATED BALANCE SHEETAS ON 31ST MARCH 2004

As on As on31.03.2004 31.03.2003

SCHEDULE NO. (Amount in Rs.) (Amount in Rs.)I SOURCES OF FUNDS

Shareholder’s Funds

Capital 1 5,00,02,000.00 5,00,02,000.00

Reserves and Surplus 2 7,36,41,863.02 6,81,89,452.63

12,36,43,863.02 11,81,91,452.63Loan Funds

Secured Loans 3 2,37,92,525.71 2,48,63,325.51

Unsecured Loans 4 35,00,000.00 1,05,829.10

Deferred Tax Liabilities 5 11,17,122.30 11,80,790.96

15,20,53,511.03 14,43,41,398.20II APPLICATION OF FUNDS

Fixed AssetsGross Block 6 7,80,95,906.16 7,20,42,237.83

Less: Depreciation 3,95,62,238.53 2,50,93,330.28

Net Block 3,85,33,667.63 4,69,48,907.55

INVESTMENTS 7 9,93,661.30 208.11

A. Current Assets, Loans and Advances

Stock–In–Trade 8 1,29,44,317.60 1,25,11,599.76

Sundry Debtors 9 7,50,37,912.86 6,82,23,458.51

Cash & Bank Balances 10 81,04,871.09 43,55,992.57

Loans & Advances 11 4,22,84,462.51 2,72,79,174.75

13,83,71,564.06 11,23,70,225.59B. Less : Current Liabilities & Provisions

Current Liabilities 12 1,90,48,570.12 1,21,77,657.21

Provisions 13 98,57,702.84 96,52,780.84

2,89,06,272.96 2,18,30,438.05

Net Current Assets (A-B) 10,94,65,291.10 9,05,39,787.54

Miscellaneous Expenditure 14 30,60,891.00 68,52,495.00

TOTAL 15,20,53,511.03 14,43,41,398.20

Notes on accounts 23

Segment Reporting 24



Sd/- Sd/- Sd/-Kolkata, India (B. Hari) (S.V. Ramani) (A.K. Ganguli)28th June, 2004 Managing Director Director and Secretary Proprietor

40

CONSOLIDATED FINANCIAL STATEMENT


CONSOLIDATED PROFIT & LOSS ACCOUNTFOR THE YEAR ENDED 31ST MARCH, 2004

As on As on31.03.2004 31.03.2003

SCHEDULE NO. (Amount in Rs.) (Amount in Rs.)INCOME

Sales 15 24,40,36,698.34 16,63,63,589.93Other Income 16 17,73,230.12 18,43,963.00TOTAL 24,58,09,928.46 16,82,07,552.93

EXPENDITURE

(Increase)/decrease of stock (WIP) 17 (17,71,540.00) (15,26,910.00)Cost of purchases 18 3,76,64,777.94 2,28,63,900.06Consumption of Con.Stores 19 14,72,618.25 10,72,280.78Operating expenses 20 12,65,17,940.16 7,59,59,394.25Administrative expenses 21 4,88,77,842.17 2,86,66,094.63Finance charge 22 49,07,965.80 38,61,109.63Preliminary & Preoperative exp. w/o 14 9,88,922.00 9,88,922.00Deferred revenue exp. w/o 14 28,02,682.00 45,95,698.88Depreciation 6 1,44,74,543.84 1,38,93,110.43

TOTAL 23,59,35,752.16 15,03,73,600.66

Profit Before Tax & Extraordinary items 98,74,176.30 1,78,33,952.27Less : Extraordinary items (loss) — 36,19,000.00Profit Before Tax 98,74,176.30 1,42,14,952.27Less: Provision for Tax

- Current Tax 19,05,338.45 28,77,874.04- Provision for Tax for earlier year (written back) (2,79,569.00) —

Add: Deferred Tax Assets/(Liabilities) 63,668.66 43,24,156.04Profit after tax 83,12,075.51 1,56,61,234.27Add: Surplus Profit & Loss A/c 1,40,70,152.63 37,27,215.16

2,23,82,228.14 1,93,88,449.43AppropriationsTransfer to General Reserve 4,70,000.00 15,00,000.00Proposed Dividend 39,03,921.92 34,33,906.80Corporate Dividend Tax 4,48,456.00 3,84,390.00Balance C/F to Balance Sheet 1,75,59,850.22 1,40,70,152.63

2,23,82,228.14 1,93,88,449.43

Notes on accounts 23Segment Reporting 24EPS after tax 1.95 2.27(Basic & Diluted) (Refer to Sch. – 23)



Sd/- Sd/- Sd/-Kolkata, India (B. Hari) (S.V. Ramani) (A.K. Ganguli)28th June, 2004 Managing Director Whole-time Director and Secretary Proprietor

41



SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET ANDPROFIT & LOSS ACCOUNT (...CONTD.)

As at As at



SCHEDULE NO. 1

SHARE CAPITAL

Authorised:10000000 Equity Shares of Rs.10/- each 10,00,00,000.00 10,00,00,000.00

Issued, subscribed & paid up:5000200 Equity Shares of Rs.10/- each fully paid up. 5,00,02,000.00 5,00,02,000.00

5,00,02,000.00 5,00,02,000.00

SCHEDULE NO. 2

RESERVES & SURPLUS

Share Premium 4,91,19,300.00 4,91,19,300.00General Reserves

As per last Balance Sheet 50,00,000.00 35,00,000.00Add: Transferred from Profit and Loss A/c 4,70,000.00 15,00,000.00

54,70,000.00 50,00,000.00Currency fluctuation reserve 14,92,712.80 —

Surplus in Profit & Loss A/c 1,75,59,850.22 1,40,70,152.63

7,36,41,863.02 6,81,89,452.63

SCHEDULE NO. 3

SECURED LOAN

OCC limit with Indian Bank, Strand Road Branch 2,09,28,606.71 2,10,70,848.51(On hypothecation of Stocks and Book Debts)

Term Loan with HDFC 28,63,919.00 37,92,477.00(On hypothecation of Building)

2,37,92,525.71 2,48,63,325.51

SCHEDULE NO. 4

UNSECURED LOANS

Auto Loan — 1,05,829.10

Fixed Deposit 35,00,000.00 —

35,00,000.00 1,05,829.10

SCHEDULE NO. 5

Deferred Tax Liabilities 11,80,790.96 55,04,947.00Less : Deferred Tax Assets 63,668.66 43,24,156.04

11,17,122.30 11,80,790.96

42



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SCHEDULE NO. 7

INVESTMENT (AT COST)LONG TERM, TRADE (UNQUOTED)IN FOREIGN HOLDINGSInvestment in Equity with Ontrack Systems Inc., USAmade by Ontrack Systems (UK) Ltd. 9,93,453.19 —Investment in Equity withPersonalMedic Limited 208.11 208.11(3 Ordinary shares of £ 1 each fully paid up)

9,93,661.30 208.11SCHEDULE NO. 8

STOCK-IN-TRADE AT COSTWork in progress (at cost) 82,98,450.00 65,26,910.00Consumable and Spares (at cost) 10,67,747.60 9,45,213.00Trading Stock (at cost) 35,78,120.00 50,39,476.76

1,29,44,317.60 1,25,11,599.76SCHEDULE NO. 9

SUNDRY DEBTORS(Unsecured considered good)A. Debts outstanding for period of more than six months 91,15,857.20 1,98,85,283.00B. Others 6,59,22,055.66 4,83,38,175.51

7,50,37,912.86 6,82,23,458.51SCHEDULE NO. 10

CASH AND BANK BALANCECash in hand 52,361.67 7,60,004.95Balance with scheduled banks in(i) Current A/c 70,466.13 64,020.32(ii) Dividend A/c 1,070.00 1,070.00(iii) Gratuity A/c 3,010.00 3,010.00(iv) Fixed Deposit A/c 54,697.00 54,697.00(v) EEFC A/c (£) 14,376.55 12,57,150.60(vi) EEFC A/c ($) 54,324.28 31,112.50(vii) Dividend Unpaid A/c 56,978.00 11,128.00Interest accrued on fixed deposit 13,092.00 13,092.00Balance with other bank in Current A/cASAHI BANK, KANDA, JAPAN 21,441.36 59,157.56(Maximum Balance held during the year Rs. 2,55,958.43 andprevious year Rs. 3,10,485.05)HSBC - Harrow, UK 62,46,280.21 7,56,467.24HSBC - Fujairah, UAE 3,00,250.00 3,17,500.00Balance with other banks in Deposit A/c.HSBC - Call Deposit 12,16,523.89 10,27,582.40

81,04,871.09 43,55,992.57

44





SCHEDULE NO. 11LOANS AND ADVANCES(Unsecured considered good)Advance Rent 65,000.00 81,380.00Advance Income Tax and TDS 30,60,332.24 37,61,999.00Advance to Staff 35,46,997.43 26,44,846.36Other Advances 1,09,12,492.22 1,19,86,362.00Prepaid Insurance 88,281.83 56,890.52Prepaid Expenses 1,26,47,799.92 —Deposit 21,03,558.87 7,47,696.87Advance for Property 80,00,000.00 80,00,000.00UNSECURED DOUBTFUL ADVANCESAdvance 18,60,000.00

4,22,84,462.51 2,72,79,174.75SCHEDULE NO. 12CURRENT LIABILITIESSUNDRY CREDITORSFor Goods supplied 31,15,516.50 86,44,707.57For Expenses 1,44,34,765.74 23,52,272.87Unexpired service income 5,39,299.71 6,69,826.36Dividend Un-paid A/c 56,978.00 11,128.00Overdrawn - Bank balance 1,081.38 1,41,222.41Advance from customers 3,40,971.59 3,58,500.00Motor Car Payment 5,59,957.20 —

1,90,48,570.12 1,21,77,657.21

SCHEDULE NO. 13PROVISIONSProvisions for Tax 55,05,324.92 58,34,484.04Proposed Dividend 39,03,921.92 34,33,906.80Corporate Dividend Tax 4,48,456.00 3,84,390.00

98,57,702.84 96,52,780.84

SCHEDULE NO. 14MISCELLANEOUS EXPENDITUREPreliminary & Preoperative Exp. 19,77,845.00 29,66,767.00Less : Written Off 1/5th 9,88,922.00 9,88,922.00

9,88,923.00 19,77,845.00DEFERRED REVENUE EXPENDITUREtendertimes.com Exp. — 14,54,147.00India Development Centre 21,92,149.00 36,53,581.88STP Subscription — 15,000.00Brand Building — 3,23,871.00IndiaOneStop.com 18,66,569.00 27,99,853.00P.C. Ustaad.com 8,15,932.00 12,23,896.00

48,74,650.00 94,70,348.88Less : Written off 1/3rd 28,02,682.00 45,95,698.88

20,71,968.00 48,74,650.0030,60,891.00 68,52,495.00

45





SCHEDULE NO. 15SALESDomestic 4,77,57,336.67 3,88,58,923.25Export Sales 19,62,79,361.67 12,75,04,666.68

24,40,36,698.34 16,63,63,589.93SCHEDULE NO. 16OTHER INCOMEIncome from Currency Fluctuation 4,41,571.34 12,06,346.41Miscellaneous Receipts 37,607.00 5,993.33Interest Received 8,44,052.98 6,31,623.26Dividend from WOS (UK) 4,49,998.80 —

17,73,230.12 18,43,963.00SCHEDULE NO. 17(INCREASE)/DECREASE IN STOCK (W.I.P.)Opening Stock : 65,26,910.00 50,00,000.00Closing Stock : 82,98,450.00 65,26,910.00

(Increase)/Decrease in stock (17,71,540.00) (15,26,910.00)

SCHEDULE NO. 18COST OF PURCHASEOpening Stock 50,39,476.76 56,91,936.59Add : Purchases 3,62,03,421.18 2,22,11,440.23

4,12,42,897.94 2,79,03,376.82Less : Closing Stock 35,78,120.00 50,39,476.76

3,76,64,777.94 2,28,63,900.06SCHEDULE NO. 19CONSUMPTION OF CONSUMABLE STORESOpening Stock 9,45,213.00 4,61,679.71Add : Purchases 15,95,152.85 15,55,814.07

25,40,365.85 20,17,493.78Less : Closing Stock 10,67,747.60 9,45,213.00

14,72,618.25 10,72,280.78SCHEDULE NO. 20OPERATING EXPENSESSalaries, Incentives and Bonus 1,71,44,103.19 94,85,822.29Contribution to Provident Fund 9,87,386.50 6,29,414.00Contribution to E.S.I 1,78,440.00 1,25,133.00Contribution to Group Gratuity 1,03,901.00 1,13,660.00Electricity Expenses 10,64,250.50 6,73,222.00Professional and Consultancy Charges 78,97,537.80 42,78,447.35Repairs to Machinery 8,89,772.35 8,87,312.50Insurance Premium 1,10,828.69 1,27,043.48Hire Charges 84,243.00 2,34,245.00Expenses for UAE office 71,29,068.72 1,92,088.17Operative Expenses for WOS-UK 9,09,28,408.41 5,92,13,006.46

12,65,17,940.16 7,59,59,394.25

46




As at As at



SCHEDULE NO. 21

ADMINISTRATIVE EXPENSES

Administrative Expenses for WOS–UK 2,76,99,518.94 1,60,90,068.90

Directors’ Remuneration 72,87,356.29 39,62,837.28

Rent 5,47,361.46 3,79,060.00

Rates and Taxes 3,63,911.14 2,27,482.00

Discount Allowed 5,100.00 6,500.00

Travelling and Conveyance Expenses 49,22,304.97 32,46,275.97

Postage, Telephone and Telegram 20,94,130.75 18,61,421.37

Printing & Stationary 6,04,088.75 3,33,491.19

Business Promotion 6,46,151.08 7,13,484.04

Books and Periodicals 47,087.00 1,17,916.47

Advertisement and Publicity 2,52,753.00 1,91,679.00

Sundry Subscription 19,582.00 16,520.00

Office Expenses 2,73,728.48 2,09,154.51

Remuneration to Auditors 3,68,430.00 1,29,600.00

Commission Paid 20,47,375.00 —

Staff Recruitment Expenses 86,520.00 14,212.00

Staff Training Expenses 2,45,878.00 —

Sundry Balance w/o — 1,73,711.00

Staff Welfare Expenses 7,61,632.69 4,80,422.51

Other Charges 5,81,406.98 5,12,258.39

Loss on Sale of Assets 23,525.64 —

4,88,77,842.17 2,86,66,094.63

SCHEDULE NO. 22

FINANCE CHARGES

Interest 35,73,877.82 30,90,846.00

Bank Charges 13,34,087.98 7,70,263.63

49,07,965.80 38,61,109.63

47



CONSOLIDATED CASH FLOW STATEMENTSFOR THE YEAR ENDED 31ST MARCH, 2004

31.03.2004 31.03.2003(Amount in Rs.) (Amount in Rs.)

A. Cash flow from operating activitiesNet profit before tax and extraordinary items 98,74,176.00 1,78,33,952.00Adjustment for:– depreciation 1,44,74,544.00 1,38,93,110.00– amortisation of deferred revenue expenditure 37,91,604.00 55,84,621.00– interest paid 49,07,966.00 38,61,110.00– other income (12,62,368.00) (7,93,490.00)– Share fluctuation Profit (Unrealised Gain) 14,92,713.00 1,61,867.00– Profit/Loss on sale of assets 23,526.00 —Operating profit before working capital changes 3,33,02,161.00 4,05,41,170.00Adjustment for:– sundry debtors (increase)/decrease (68,14,454.00) (1,66,19,759.00)– stock in trade (increase)/decrease (4,32,718.00) (13,57,984.00)– loans & advances (increase)/decrease (1,57,06,956.00) (9,39,406.00)– current liabilities (decrease)/increase 69,65,204.00 5,53,888.00

1,73,13,237.00 2,21,77,909.00

Cash generated from operationsInterest paid 49,07,966.00 38,61,110.00Direct tax paid (net of refund) 12,53,261.00 14,27,479.00Net cash from operating activities 1,11,52,010.00 1,68,89,320.00

B. Cash flow from investing activitiesPurchase of Fixed Assets (60,84,930.00) (1,86,09,526.00)Sale of Fixed Assets 2,100.00 —Purchase of Investment (9,93,453.00) (208.00)Dividend on Share (Subsidiary) 4,49,999.00 —Interest Received 8,12,369.00 6,31,623.00Net cash used in investing activities (58,13,915.00) (1,79,78,111.00)

C. Cash flow from financing activitiesProceeds from borrowingsLong term (10,70,800.00) 49,92,643.00Short term 33,94,171.00 (10,69,171.00)Dividend paid (37,72,447.00) (24,88,972.00)Net cash used in financing activities (14,49,076.00) 14,34,500.00Net increase/(decrease) in cash & cash equivalents (A+B+C) 38,89,019.00 3,45,709.00Cash & cash equivalents - opening balance 42,14,771.00 38,69,062.00Cash & cash equivalents - closing balance 81,03,790.00 42,14,771.00

Notes: Cash and cash equivalents consists of cash in hand and balance and short term deposits with Bank including overdrawn balanceof bank, which are freely encashable.

Cash and cash equivalents included in the cash flow statement comprise of the following balance sheet Amount

Year ended Year ended31.03.2004 31.03.2003

Cash & Cash Equivalents 66,11,077.00 40,52,904

Profit on Exchange fluctuation (unrealised gain) 14,92,713.00 1,61,867.00

Cash and Cash Equivalent as restated 81,03,790.00 42,14,771.00

As per our report of even date attached herewithFor N. C. Ganguli & Co.

Chartered Accountant

Sd/- Sd/- Sd/-Kolkata, India (B. Hari) (S. V. Ramani) (A. K. Ganguli)28th June 2004 Managing Director Whole-time Director and Secretary Proprietor

48



SCHEDULE NO. 23

Notes to Consolidated Financial Statement

OVERVIEWOntrack Systems Limited (OSL), together with its subsidiariesOntrack Systems (UK) Ltd. and Ontrack Systems (UAE) Ltd.is a provider of IT services globally. The Company has anestablished line of business in UK and UAE which mainly dealswith computer software development both onsite and offshore.The Company is headquartered in India.

OSL is founded to provide Information Technology (IT)solutions, IT consulting, Development services globally,enhancing competitive advantage of its customers. TheCompany also provides both onsite as well as offshore servicesin the area of Internet, migration projects, data warehousing,e-commerce and web-based solutions amongst others.

The company has started a Joint Venture withPersonalMedic Limited at UK but due to non-availability ofthe accounts, Accounting Standard 27 of ICAI could not befurnished in consolidated accounts, except investment insaid JV.

Ontrack Systems Inc., USA is step down subsidiary ofOntrack Systems (UK) Limited which has not beencompleted one year full operations and such consolidatedfinancial results figures will be considered for the periodending on 31.03.2005 as stated by management.

BASIS OF PREPARING THE FINANCIAL STATEMENTSThe accompanying financial statement for the fiscal periodwhich begins on 1st April 2003 and ends on 31st March,2004 have been prepared incorporating Accounting Policiesof the parent company under the historical cost convention,in compliance with Indian Generally Accepted AccountingPractices (“GAAP”) comprises with mandatory and relevantAccounting Standards (AS) issued by the Institute ofChartered Accountants of India (“ICAI”) and in compliancewith the provisions of Companies Act, 1956.

Consolidated Financial Statements does not include intercompanies sales (service charges) and payment of servicecharges, inter company debtors, creditors, advance andinvestment in paid-up capital. During the year under audit,Ontrack Systems (UK) Ltd. has invested in its step downsubsidiary at USA a sum of £ 12,479 i.e. INR 9,93,453 as peraudited Balance Sheet of OSL (UK).

At the time of consolidation of Profit & Loss account theCompany has clubbed each group of expenses of subsidiariesunder the same group of expenses of Holding Company(OSL), except salaries, professional service charges,remuneration to Directors and Auditors. Mr. B. Hari isManaging Director of parent company and also Director ofOSL (UK) and has drawn remuneration from both theCompanies.

At the time of consolidation of Balance Sheet the Companyhas followed strictly line by line consolidation. The dividendof subsidiary which has been received by the parent companyduring this period but the said subsidiary has shown the sameunder Sundry Creditor in the year 2002-03. In case ofprovision for taxation of previous year, OSL (UK) has takenprovisions for taxation net of advance tax.

USE OF ESTIMATES

The Consolidated Financial Statements include the accounts

49

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

of the Company and its Subsidiary Company. The preparationof Consolidated Financial Statements requires Managementto make estimate and assumptions that affect the reportedamounts of assets and liabilities, revenues and expenditureand disclosure of contingent liabilities. Although theseestimates are based on the Management’s best knowledge ofcurrent events and the actions the Company may undertakein future, actual result ultimately may differ from the estimates.

FOREIGN CURRENCY TRANSACTIONSForeign currency transactions denominated in foreigncurrencies are normally recorded at the exchange rateprevailing at the time of the transaction.

Monetary items denominated in foreign currencies at the year-end and not covered by forward exchange contracts aretranslated at year end rates. Non monetary foreign currencyitems are carried at historical cost, except new investmentand addition to fixed asset in subsidiary have been made atyear end rate. The entire effect has been transferred tounrealised gain on Currency Fluctuation, to the extent ofRs. 14,92,713/- corresponding to Rs. 1,61,867/- for theprevious year. The said unrealised gain of currency fluctuationis transferred to currency fluctuation reserve under the group“Reserve & Surplus” in Balance Sheet as per ManagementAccounting policy adopted during the year.

TAXES ON INCOME

Provision for the year ended 31.3.2004

Current Taxes: Amount in Rs.

Domestic 10,00,000Foreign 9,05,338

Deferred Taxes (DTA/DTL) Amount (Rs.)

Domestic (DTA) 2,46,294Foreign (DTL) 1,82,625


Deferred Tax Liabilities (DTL)Domestic 9,07,301 11,53,595Foreign 2,09,821 27,196

SEGMENT REPORTING POLICIES

The Company is providing services globally. The Company’soperating businesses are originated mainly from Foreignsource. The Management’s perception is that this percentagewill be increased to more than 60% in next year and it will begradually increased. The services within a particular economicenvironment has typical risks and returns that are differentfrom those components operating in other economicenvironments. The geographical segments have been identifiedon the basis of location of the major customers of the Company.The geographical segments are Europe, USA & OtherCountries and Domestic. These geographical places representa strategic business unit that offers different places as unithaving different risk and returns.


INTER-SEGMENT TRANSFERSInter-segment sales and transfers, if any, are accounted for asif the sales or transfers were to third parties at current marketprices.

CONSOLIDATED RELATED PARTY TRANSACTIONSDuring the year the Company has transactions with its subsidiaryOntrack Systems (UK) Ltd., UK and Ontrack Systems (UAE)Ltd. at UAE. The other companies having some transactionswere Cosmat Investments Pvt. Ltd., Venus Barter Pvt. Ltd.,Ginvani Merchants Pvt. Ltd.

B. Hari is Director in its Subsidiary Ontrack Systems (UK)Ltd., Ontrack Systems (UAE) Ltd. and Manik Dey is a Directorof Ontrack Systems (UK) Ltd.

Key Managerial Personnel : G. Anand and Sushil Prasad.

SUMMARY OF THE TRANSACTIONS WITH THE ABOVERELATED PARTYTotal sales, debtors, investment, dividend received andadvance paid to subsidiary and group company under sameManagement are Rs. 16,71,61,681/- (Rs. 11,22,04,379/-),Rs. 2,39,33,321/- (Rs. 76,24,644/-), Rs. 64,57,084/-(Rs. 80,30,051/-), Rs. 4,49,999/- (Nil) and Rs. 5,04,365/-(Nil) respectively. The figures of the previous year have beengiven in brackets.

Closing Balance of Loan given and Interest receivedRs. 72,58,411/- (Rs. 61,06,877/-), Rs. 6,48,971/-(Rs. 4,77,563/-) and remuneration to Key Management Per-sonnel and Directors are Rs. 78,97,596/- (Rs. 43,81,277/-).The figures of the previous year have been given in brackets.

SEGMENT INFORMATION FOR THE YEAR ENDED 31ST MARCH 2004

Primary Segment Reporting Geographical Segment

CONSOLIDATED SEGMENT-WISE REVENUE RESULTS (Amount in Rs.)

PARTICULARS DOMESTIC EUROPE USA & OTHERS TOTAL

Revenue (Excluding Intersegment) 4,77,57,337 17,88,89,030 1,73,90,331 24,40,36,698(3,88,58,923) (11,44,19,343) (1,30,85,324) (16,63,63,590)

Direct & Allocated Cost 4,50,92,337 14,38,30,030 1,48,71,846 20,37,94,213(3,29,26,817) (7,86,33,089) (87,20,388) (12,02,80,294)

Profit before interest & depreciation 26,65,013 3,50,59,114 25,18,358 4,02,42,485(59,32,106) (3,57,86,254) (43,64,936) (4,60,83,296)

Finance Charges (Net) 31,34,735(20,17,147)

Depreciation 1,44,74,543(1,38,93,110)

Unallocated Expenses 1,27,59,031(1,59,58,087)

Profit before tax 98,74,176(1,42,14,952)

Provision for tax (NET) 15,62,100(14,46,282)

Profit after tax 83,12,076(1,56,61,234)

Capital Employed 11,90,90,261(11,13,38,958)

Notes : The figures of the previous year are shown in brackets

50

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

UNALLOCATED ITEMSGeneral Income and Expenses items, which are not allocableto any specific geographical segment, are classified asunallocated revenue and expenditure respectively. ThisExpense includes Depreciation, Deferred RevenueExpenditure W/o, Finance Charges, expenses in extraordinarynature and other unallocated expenses of Administrative andOperating Expenses and Income includes Other Income whichis shown as Net of Finance Charges.

CAPITAL EMPLOYEDThe Segment-wise apportionment of Capital is not disclosedsince Capital is used as a whole for the Company, but excludingcurrency fluctuation results which is unrealised gain.

EARNINGS PER SHAREEarnings Per Share is calculated by dividing the profit(Numerator) attributable to the equity shareholders by thenumber of equity shares (Denominator) as under:


Profit after tax beforedeferred tax assets 97,41,120 1,13,37,078No. of Equity Share 50,00,200 50,00,200Basic and diluted earningper share (in Rs.) 1.95 2.27Nominal value per share (in Rs.) 10/- 10/-

Net profit has been increased by currency fluctuation reserveof Rs. 14,92,713/- for comparison of EPS.

The Company has mentioned same accounting policy as madein previous year as also its parent company.


ONTRAONTRAONTRAONTRAONTRACK SYSTEMS (UKCK SYSTEMS (UKCK SYSTEMS (UKCK SYSTEMS (UKCK SYSTEMS (UK) L) L) L) L) LTDTDTDTDTD.....

DIRECTORS’ REPORTFOR THE YEAR ENDED 31ST MARCH 2004

51

SUBSIDIARIES ANNUAL ACCOUNTS

The Directors present their report and the financial statements for the year ended 31st March 2004.

PRINCIPAL ACTIVITY

The principal activity of the Company during the period under review was that of sales & marketing of software consultancy services.

DIRECTORS AND THEIR INTERESTS

The Directors who served during the year and their interests in the Company are as stated below:

Ordinary shares

31.03.04 01.04.03

Mr. B. Hari – –

Mr. M. Dey – –

DIRECTORS’ RESPONSIBILITIES

Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of thestate of the affairs of the Company and of the Profit or Loss of the Company for that year. In preparing these the Directors arerequired to:

select suitable accounting policies and apply them consistently;

make judgements and estimates that are reasonable and prudent;

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company willcontinue in business.

The Director’s are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time thefinancial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for theprevention and detection of fraud and other irregularities.

AUDITORS

In accordance with Section 385 of the Companies Act 1985, a resolution proposing that Macilvin Moore Reveres LLP be reappointedas Auditors of the Company will be put to the Annual General Meeting.

This report is prepared in accordance with the special provisions of Part VII of the Companies Act 1985 relating to smallcompanies.

This report was approved by the Board on 21st June 2004 and signed on its behalf by

Sd/-M. DeyDirector


INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OFONTRACK SYSTEMS (UK) LTD.

Macilvin Moore Reveres LLPRegistered Auditors

Regd. Office :7, St. John’s Road, HarrowMiddlesex, HA1 2EYPhone : 020 8863 1234Fax : 020 8863 1123To

The Shareholders

We have audited the financial statements of Ontrack Systems (UK) Ltd. for the year ended 31st March 2004 which comprise the profit andloss account, the balance sheet and the related notes. These financial statements have been prepared in accordance with the FinancialReporting Standard for Smaller Entities (effective June 2002), under the historical cost convention and the accounting policies set outtherein.

This report is made solely to the Company’s shareholders, as a body, in accordance with Section 235 of the Companies Act 1985. Our auditwork has been undertaken so that we might state to the Company’s shareholders those matters we are required to state to them in anauditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone otherthan the Company and the Company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditors

As described in the statement of Directors’ responsibilities the Company’s Directors are responsible for the preparation of the financialstatements in accordance with applicable law and United Kingdom Accounting Standards.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United KingdomAuditing Standards.

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance withthe Companies Act, 1985. We also report to you if, in our opinion, the Directors’ report is not consistent with the financial statements, ifthe company has not kept proper accounting records, if we have not received all the information and explanations we require for ouraudit, or if information specified by law regarding Directors’ remuneration and transactions with the Company is not disclosed.

We read the Directors’ report and consider the implications for our report if we become aware of any apparent misstatements within it.

Basis of audit opinion

We conducted our audit in accordance with United Kingdom Auditing Standards by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessmentof the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether theaccounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order toprovide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement,whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentationof information in the financial statements.

Qualified opinion arising from disagreement about accounting treatment

Included in the debtors shown on the Balance Sheet is an amount of £ 95,800 for deferred expenses. These expenses are the start up costsof a new structure and customer technical support unit which have been capitalised by the Company and will be written over a period of2-3 years. This policy is adopted by the parent company. In our opinion, start up costs that do not meet the criteria for recognition as assetsunder a relevant accounting standard should be recognised as expenses in the period in which they are incurred. Such treatment wouldhave no effect in the profit and loss account since all expenses are re-charged to the parent Company. However, the amount due to parentcompany shown under creditors will be reduced by the same amount.

With the exception of the above, in our opinion the financial statements give a true and fair view of the state of the Company’saffairs as at 31st March 2004 and of its profit for the year that ended and have been properly prepared in accordance with theCompanies Act 1985.

Macilvin Moore Reveres LLPChartered Accountants &Registered Auditors

–Sd/–Shailesh Patel

52



PROFIT & LOSS ACCOUNTFOR THE YEAR ENDED 31ST MARCH 2004

BALANCE SHEETAS AT 31ST MARCH 2004

53


2004 2003Notes £ £

Turnover 2,213,119 1,453,617Cost of sales 2 (21,09,693) (1,381,236)

Gross profit 1,03,426 72,381Administrative expenses (4,08,281) (275,100)Other operating income 3,68,154 275,099

Operating profit 3 63,299 72,380Other interest receivable and similar income 1,191 298Interest payable and similar charges (108) —

Profit on ordinary activities before taxation 64,382 72,678Tax on profit on ordinary activities 5 (13,666) (14,750)

Profit on ordinary activities after taxation 50,716 57,928Dividends 6 (5,072) (5,790)

Retained profit for the year 45,644 52,138Retained profit brought forward 71,663 19,525

Retained profit carried forward 1,17,307 71,663

2004 2003Notes £ £ £ £

Fixed AssetsTangible Assets 6 30,535 1,815Investment 7 12,479 —

43,014 1,815Current AssetsDebtors 8 4,81,312 3,71,236Cash at bank and in hand 78,461 10,097

5,59,773 3,81,333

Creditors : amounts fallingdue within one year 9 (3,07,823) (2,16,122)

Net Current Assets 2,51,950 1,65,211

Total Assets less Current Liabilities 2,94,964 1,67,026Provisions for Liabilities and Charges 10 (2,657) (363)

Net assets 2,92,307 1,66,663Capital and ReservesCalled up Share Capital 12 1,75,000 95,000Profit and Loss Account 1,17,307 71,663

Shareholders’ Funds 2,92,307 1,66,663

The financial statements are prepared in accordance with the special provisions of Part VII of the Companies Act 1985 relating tosmall companies and in accordance with the Financial Reporting Standard for Smaller Entities (effective June 2002).

The financial statements were approved by the Board on 21st June 2004 and signed on its behalf by

–Sd/–Mr. M. DeyDirector


NOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31.03.2004


1. ACCOUNTING POLICIES

1.1 Accounting conventionThe financial statements are prepared under the historicalcost convention and in accordance with the FinancialReporting Standard for Smaller Entities (effective June2002)

1.2 TurnoverTurnover represents the total invoice value, excluding valueadded tax, of services provided during the year.

1.3 Tangible Fixed Assets and Depreciation

Depreciation is provided at rates calculated to write off thecost less residual value of each asset over its expected usefullife, as follows:Fixtures, Fittingsand Equipment – 15% on costEquipment – 33% on cost

1.4 InvestmentsFixed asset investments are stated at cost less provision fordiminution in value.

1.5 Deferred TaxationThe Company adopted Financial Reporting Standard 19“Deferred Taxation” (FRS 19) during the financial year.

Full provision is made for Deferred Taxation on all timingdifferences which have arisen but have not reversed at theBalance Sheet date.

Prior to the adoption of FRS 19, the Company provided forDeferred Taxation only to the extent that timing differenceswere expected to materialise in the foreseeable future.

Deferred tax is provided in respect of the tax effect of alltiming differences, to the extent that it is probable that aliability or asset will crystallise in the foreseeable future, atthe rates of tax expected to apply when the timingdifferences reverse.

1.6 Foreign CurrenciesMonetary assets and liabilities denominated in foreigncurrencies are translated into sterling at the rates of exchangeprevailing at the accounting date. Transactions in foreigncurrencies are recorded at the date of the transactions. Alldifferences are taken to the Profit and Loss account.

1.7 Start up CostsStart up costs of enduring nature are capitalised andamortised over the periods from which the company isexpected to benefit.

This is a departure from UK accounting standards whichrequired start up costs to written off in the period in whichthey are incurred. This departure is to bring the Company’saccounting policies in line with the group policy.

1.8 Group accountsThe Company is entitled to the exemption under Section248 of the Companies Act 1985 from the obligation toprepare group accounts.

2. TURNOVERThe total turnover of the Company for the year has beenderived from its principal activity wholly undertaken inthe UK.

3. OPERATING PROFIT

2004 2003£ £

Operating profit is stated after charging:Depreciation and other amountsWritten off Tangible Assets 4,903 908Auditors’ Remuneration 3,000 2,900and after crediting Profiton foreign currencies — (37)

4. DIRECTORS’ EMOLUMENTS

2004 2003£ £

Remuneration and other benefits 71,189 43,284

5. TAX ON PROFIT ON ORDINARY ACTIVITIES

2004 2003£ £

Analysis of charge in periodCurrent TaxUK Corporation Tax 11,372 14,387Total Current Tax 11,372 14,387Deferred TaxTiming differences, origination and reversal 2,294 363Total Deferred Tax 2,294 363Tax on profit on ordinary activities 13,666 14,750

6. TANGIBLE FIXED ASSETS

Fixture,fittings and Computerequipment equipment Total

£ £ £

CostAt 1st April, 2003 — 2,723 2,723Additions 27,586 6,037 33,623

At 31st March, 2004 27,586 8,760 36,346DepreciationAt 1st April, 2003 — 908 908Charge for the year 2,013 2,890 4,903

At 31st March 2004 2,013 3,798 5,811Net book valuesAt 31st March 2004 25,573 4,962 30,535

At 31st March 2003 — 1,815 1,815

7. FIXED ASSETS INVESTMENTS

2004 2003Subsidiary Subsidiary

undertakings undertakingsshares shares

£ £

CostAddition 12,479 —At 31st March 2004 12,479 —Net Book valuesAt 31st March 2004 12,479 —

54


12. SHARE CAPITAL

2004 2003£ £

Authorised

10,000,000 Ordinary shares of10 pence each 10,00,000 10,00,000

Allotted, called up and fully paid

17,50,000 Ordinary shares of10 pence each 1,75,000 95,000

During the year 8,00,000 fully paid up shares were issued at parto strengthen the Company’s Capital base.

13. RELATED PARTY TRANSACTIONS

The Company is a wholly owned subsidiary and acts as agentof Ontrack Systems Limited, a Company incorporated in India.Under an agreement between the two Companies, OntrackSystems (UK) Limited will keep 5% of the net sales as theircommission and will recharge all the fixed and variable coststo Ontrack Systems Limited.

During the year Ontrack Systems (UK) Limited paid netconsultancy charges of £ 9,35,810 (£ 5,74,289) to OntrackSystems Limited and made a reimbursement charge of £3,68,154 (£ 2,75,099) to Ontrack Systems Limited. Thebalance owed to Ontrack Systems Limited as at 31st March2004 was £ 1,86,055 (£ 80,458) and is shown under amountsdue to parent undertaking. Figures of the previous year havebeen shown in the brackets.

The Company also paid consultancy fees of £ 26,021(£ 30,000) to Ontrack Systems (UAE) Limited, a Companyincorporated in the United Arab Emirates. The balanceoutstanding at 31st March 2004 was £35,000(£ 25,500) and is shown under amounts owned by othergroup undertakings.

Mr. B. Hari, a Director of the company, is a Director andshareholder in the parent company, Ontrack Systems Limited.

Mr. M. Dey, a Director of the company, is a shareholder in theparent company.

14. ULTIMATE PARENT UNDERTAKING

The Company is a wholly owned subsidiary of OntrackSystems Limited, a Public Limited Company incorporated inIndia.

55


8. DEBTORS

2004 2003£ £

Trade Debtors 1,23,104 3,63,386

Amounts owed by group undertaking 35,000 —

Other debtors 1,64,336 7,850

Prepayments and accrued income 1,58,872 —

4,81,312 3,71,236

9. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2004 2003£ £

Trade Creditors 34,123 24,677Amounts owed to other group undertaking — 25,500Amounts owed toconnected companies 1,86,055 80,458Corporation tax 11,372 14,387Other Taxes and socialsecurity costs 70,967 67,264Other Creditors 2,306 936Accruals and Deferred Income 3,000 2,900

3,07,823 2,16,122

10. PROVISIONS FOR LIABILITIES AND CHARGES

2004 2003Deferred Deferredtaxation taxation

£ £

At 1st April 2003

Movements in the year 363 —

At 31st March 2004 2,294 363

2,657 363

11. PROVISION FOR DEFERRED TAXATION

2004 2003£ £

Accelerated Capital Allowances 2,657 363

Provision at 1st April 2003 363 —Deferred Tax charge inProfit and Loss account 2,294 363

Provision at 31st March 2004 2,657 363


CASH FLOW STATEMENTFOR THE YEAR ENDED 31ST MARCH 2004

56


2004 2003Reconciliation of operating profit to net £ £

Cash inflow from operating activities

Operating profit before tax 64,382 72,678

Depreciation 4,903 908

(Increase) in Debtors (1,10,076) (2,58,251)

Increase in Creditors 89,644 83,145

Payment of Corporation Tax (14,387) (3,830)

Net cash inflow from operating activities 34,466 (1,05,350)

CASH FLOW STATEMENT

Net cash inflow from operating activities 34,466 (1,05,350)

Financing 80,000 85,000

Purchase of Tangible Assets (33,623) (2,723)

Investment (12,479) —

Increase/ (Decrease) in cash in the period 68,364 (23,073)

Reconciliation of net cash flow to movement in net funds

Opening Cash & Bank Balances 10,097 33,170

Increase / (Decrease) in cash in the year 68,364 (23,073)

Closing Cash & Bank Balances 78,461 10,097


ONTRAONTRAONTRAONTRAONTRACK SYSTEMS (UAE) LCK SYSTEMS (UAE) LCK SYSTEMS (UAE) LCK SYSTEMS (UAE) LCK SYSTEMS (UAE) LTDTDTDTDTD.....

57


INDEPENDENT AUDITORS’ REPORT

To

The Shareholder,Ontrack Systems (UAE) Limited FZEP.O. Box 3153Fujairah – United Arab Emirates

We have audited the accompanying Balance Sheet of Ontrack Systems (UAE) Limited FZE (the Establishment) as at March 31, 2004and the related statements of income, changes in shareholder’s equity and cash flows for the year that ended. These financial statementsare the responsibility of the Establishment’s management. Our responsibility is to express an opinion on these financial statements basedon our audit.

We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessingthe accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

In the above paragraph, in our opinion, the financial statements present fairly, in all material respects, the financial position of OntrackSystems (UAE) Limited FZE as at March 31, 2004, and the result of its operations and its cash flows for the year that ended, inconformity with International Accounting Standards.

Place : Dubai –Sd/–Date : 15th June, 2004 HAMT & ASSOCIATES


BALANCE SHEETAS AT 31ST MARCH, 2004

(In Arab Emirates Dirhams)

Year ended Year endedNotes March 31, 2004 March 31, 2003

AssetsCurrent AssetsBank Balances 1,26,292 1,05,912Trade and Other Receivables 3 12,03,000 6,100Due from related party 4 — 1,74,007Total Current Assets 13,29,292 2,86,019Non-current AssetsProperty and Equipment 5 35,686 48,818Total Non-current Assets 35,686 48,818Total Assets 13,64,978 3,34,837Liabilities and Shareholder’s EquityCurrent LiabilitiesTrade Payables — 1,78,581Other Payable 6 53,676 13,432Due to related parties 4 11,27,590 —Obligation under finance Leases-current portion 7 — 8,333Total Current Liabilities 11,81,266 2,00,346Total Liabilities 11,81,266 2,00,346Shareholder’s EquityShare Capital 8 1,50,000 1,22,724Retained Earnings 33,712 11,767Total Shareholder’s Equity 1,83,712 1,34,491Total Liabilities and Shareholder’s Equity 13,64,978 3,34,837

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

Place : Dubai –Sd/–Date : 15th June, 2004 B Hari

Director




Notes Year ended Year endedMarch 31,2004 to March 31,2003

Revenue 16,35,477 1,160,442

Cost of sales 9 (12,19,338) (9,03,265)

Gross Profit 4,16,139 2,57,177

Other Income 169 253

General and Administrative Expenses 10 (3,94,363) (2,45,663)

Net Profit for the year / period 21,945 11,767



Share capital Retained Totalearnings

Capital introduced 1,22,724 — 1,22,724

Net profit for the period — 11,767 11,767

Balance at 31st March, 2003 1,22,724 11,767 1,34,491

Additional capital introduced 27,276 — 27,276

Net profit for the year — 21,945 21,945

Balance at 31st March, 2004 1,50,000 33,712 1,83,712


Place : Dubai –Sd/– –Sd/–Date : 15th June, 2004 HAMT & ASSOCIATES B Hari

Chartered Accountants Director

STATEMENT OF INCOMEFOR THE YEAR ENDED 31ST MARCH , 2004

STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITYFOR THE YEAR ENDED 31ST MARCH , 2004


1. ESTABLISHMENT AND OPERATIONS

Ontrack Systems (UAE) Limited FZE was registered with the Fujairah Free Zone Authority, Fujairah – UAE on August 12, 2002 as aFree Zone Establishment. The authorised share capital of the Establishment is:

Sl. No. Shareholders Nation Shares Amount %AED

1 Ontrack Systems Limited India 1,50,000 1,50,000 100

Total 1,50,000 1,50,000 100

The address of the registered office of the Establishment is P.O.Box 3153, Fujairah, United Arab Emirates.The principal activity of the Establishment is Communication & information technology.At March 31, 2004 the Establishment employed 3 staff (3 staff at March 31, 2003).

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTSThe financial statements have been prepared in accordance with International Accounting Standard (IAS). These financial statementsare presented in Arab Emirates Dirhams (AED) since that is the currency in which majority of the transactions are denominated. Thefinancial statements have been prepared on the historical cost basis. Following is a summary of the significant accounting policiesadopted.

Revenue recognitionIncome from sales is recognized when goods are delivered and title is passed.

Provision for employees’ end of service indemnity

Provision for employees’ end of service indemnity is accounted on cash basis.

Property and EquipmentProperty and equipment are carried at cost, less accumulated depreciation and any identified impairment loss.Property and equipment are depreciated using straight line method over the expected useful lives of the assets concerned. The ratesof depreciation adopted are:

Furniture 20%Vehicles 25%Equipment 20%

59



Year ended Year endedMarch 31,2004 March 31,2003

Cash flows from operating activitiesNet Profit for the period 21,945 11,767Adjustment for:Depreciation 13,132 7,865Operating cash flows before movements in Working Capital 35,077 19,632Increase in trade and other receivables (11,96,900) (6,100)Decrease /(increase) in due from related parties 1,74,007 (1,74,007)(Decrease)/increase in trade payables (1,78,581) 178,581Increase in other payables 40,244 13,432Increase in due to related parties 11,27,590 —Net cash (used in)/generated from operating activities 1,437 31,538Cash flow from investing activitiesPurchase of Property and Equipment — (56,683)Net cash used in investing activities — (56,683)Cash flows from financing activitiesReceipts under finance lease — 20,000Repayment under finance lease (8,333) (11,667)Additional Capital introduced 27,276 1,22,724Net cash generated from financing activities 18,943 1,31,057Net increase in cash and cash equivalents 20,380 1,05,912Cash and cash equivalents at the beginning of year/period 1,05,912 —Cash and cash equivalents at the end of period 1,26,292 1,05,912


NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31ST MARCH , 2004

STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31ST MARCH, 2004


NOTES TO THE FINANCIAL STATEMENTS (...CONTD.)Impairment

At each Balance Sheet date, the Establishment reviews the carrying amounts of its assets to determine whether there is any indicationthat those assets have suffered any impairment loss. The loss, if any, is recognized on the date of impairment.

Financial InstrumentsTrade Receivables

Trade Receivables are stated at their nominal value as reduced by appropriate allowance for estimated doubtful amounts.

Trade Payables

Trade payables are stated at their nominal value.

Provisions

Provisions are recognized when the Establishment has a present obligation as a result of a past event which is probable and will resultin an outflow of economic benefits that can be reasonably estimated.

Foreign Currencies

Transactions denominated in Foreign Currencies are initially recorded at the rates of exchange prevailing on the dates of transactions.Monetary Assets and Liabilities arising in Foreign Currencies are converted into Arab Emirates Dirham at the rates of exchangeprevailing on Balance Sheet date and profit or loss arising thereon is charged to statement of income.

Cash and Cash Equivalents

For the purpose of cash flow statement, cash and cash equivalents consist of cash on hand, current account, demand and time depositwith the banks, with an original maturity of three months or less at the date of placement, free of encumbrances.

3. Trade and other receivables

March 31,2004 March 31, 2003AED AED

Trade receivables 12,03,000 —Prepayments — 6,100

12,03,000 6,100

4. Related party transactions

The Establishment enters into transactions with Establishment that fall within the definition of a related party as contained inInternational Accounting Standard 24. Related parties comprise Establishment under common ownership and /or commonmanagement and control and key management personnel.During the year the Establishment entered into the following transactions with related parties.

Year ended Year endedMarch 31,2004 March 31, 2003

AED AED

Advance received 3,34,326 —Net financial transaction 7,93,264 —Sales 1,72,487 11,09,700Purchases 7,46,787 7,44,600

The above transactions were in the normal course of the business.

5. Property and Equipment

Furniture Vehicles Office Equipment TotalAED AED AED AED

Cost as at April 1,2003 3,909 35,900 16,874 56,683Additions — — — —As at March 31,2004 3,909 35,900 16,874 56,683Depreciation as at April 1, 2003 521 5,235 2,109 7,865For the year 782 8,975 3,375 13,132

As at March 31, 2004 1,303 14,210 5,484 20,997

Net book value as at March 31,2004 2,606 21,690 11,390 35,686

As at March 31, 2003 3,388 30,665 14,765 48,818

60



NOTES TO THE FINANCIAL STATEMENTS (...CONTD.)

61


10. GENERAL AND ADMINISTRATIVE EXPENSES

Year ended Year endedMarch 31, 2004 March 31, 2003

AED AED

Salaries and allowances 1,92,096 30,000Rent 48,450 —Depreciation 13,132 7,865Operating expenses 29,861 1,35,737Maintenance expenses 4,110 54,000Telecommunications 2,867 4,200Finance charges 860 761Others 1,02,987 13,100

3,94,363 2,45,663

11. CONTINGENT LIABILITIES

Except the ongoing business commitments, which are in the normal course of business there has been no known Contingent Liabilityor capital commitments on the Establishment as at the Balance Sheet date.

12. FINANCIAL INSTRUMENTS

Financial instruments of the Establishment comprise bank balance, trade and other receivables, due from related parties, tradepayables, other payables, due to related parties.

Credit Risk Exposure

The Establishment’s exposure to credit risk at year end is indicated by the carrying amounts of its financial assets, net of any applicableallowance for losses.

Currency Risk Exposure

The Establishment’s currency risk exposure relates to the exposure to the fluctuations in the foreign currency rates.

Fair Values

The fair value of the Financial Assets and Liabilities at Balance Sheet date approximate their carrying amounts in the Balance Sheet.

13. Certain amounts for the prior period were reclassified to conform to current year presentation.

6. OTHER PAYABLESMarch 31,2004 March 31, 2003

AED AED

Fujairah Free Zone Authority 4,660 7,432Accrued Expenses 49,016 6,000

53,676 13,432

7. OBLIGATION UNDER FINANCE LEASES

Year ended Year endedMarch 31,2004 March 31,2003

AED AED

Total amounts due — 8,795Less : Future Interest — (462)Due within 1 year — 8,333

8. SHARE CAPITALThe Authorized capital of the Establishment is AED - 1,50,000 divided into 1,50,000 Shares of AED 1 each, held by the Shareholdersas mentioned in note 1.

9. COST OF SALESYear ended Year ended

March 31, 2004 March 31, 2003AED AED

Software Purchases 12,19,338 9,03,26512,19,338 9,03,265


SHAREHOLDERS’ INFORMATION

62

GENERAL INFORMATION FOR SHAREHOLDERS

(a) As indicated in the Notice to our Shareholders, the 16th Annual General Meeting of the Company will be held on Saturday,the 28th day of August, 2004 at Hotel GRT Grand, 120, Sir Thyagaraya Road, Chennai – 600 017, India.

(b) The Financial Year of the Company is April to March

(c) Date of book closure : From 21st to 28th August (both days inclusive) for the purpose of the Annual General Meeting andpayment of final dividend, if approved by the members.

(d) The Shares of the Company are listed on

(1) Madras Stock Exchange Stock Code No. : OTL

(2) Calcutta Stock Exchange Script Code No. : 10025152

(e) Demat Depository : NSDL/CSDL : ISIN No. INE 426B01017

(f) Dematerialization of Shares : Over 82% of the outstanding shares of the Company have been dematerialized.

(g) Address for correspondence :

(i) Registered Office : 5 Club Road, Chetpet, Chennai – 600 031Phone : 2827 3450/556, Fax : 2827 1391

(ii) Compliance Office and : 19, Ekdalia Road, Kolkata – 700 019Secretarial Department Phone : 2460 1293/1304/1980/1981, Fax : 2460 1281

Email : [email protected]

(iii) Share Registrar andTransfer Agents : Cameo Corporate Services Ltd.

Subramanian Building, 1, Club House RoadChennai – 600 002Phone : 2846 0390–95, Fax : 2846 0129Email : [email protected]

DISCLOSURE

Disclosure regarding materially significant related party transactions :

No transaction of material nature has been entered into by the Company with its Promoters, Directors or the Management, theirsubsidiaries or relatives etc. that may have potential conflict with the interest of the Company.

DISCLOSURE OF NON–COMPLIANCE BY THE COMPANY

There were no instances of non-compliance or penalty, strictures imposed on the Company by Stock Exchanges or SEBI or anystatutory authority on any matter related to capital markets, during the last three years.

MEANS OF COMMUNICATION

The Quarterly Results of the Company were published during the financial year under review in leading national newspapernamely, The Economic Times, (Kolkata Edition), The Hindu Business Line (Chennai Edition) and The Malaichudar (ChennaiEdition) and posted in the website of the Company www.ontrackindia.com.

Management Discussion and Analysis Report forms part of this Annual Report.

SHAREHOLDERS INFORMATION


PATTERN OF HOLDINGSAS ON 31ST MARCH, 2004

PHYSICAL & ELECTRONIC

DISTRIBUTION OF SHAREHOLDINGSAS ON 31ST MARCH, 2004

PHYSICAL & ELECTRONIC

Shareholding of Share Percentage Share PercentageNominal Value of Holders to Amount of

Rs. No. Total Rs. Total Shares

(1) (2) (3) (4) (5)

Upto – 5,000 979 74.84 20,36,030 4.07

5,001 – 10,000 111 8.49 10,12,500 2.02

10,001 – 20,000 68 5.20 11,34,290 2.27

20,001 – 30,000 4 0 3.06 9,86,600 1.97

30,001 – 40,000 12 0.92 4,34,940 0.87

40,001 – 50,000 2 9 2.22 13,82,500 2.76

50,001 – 1,00,000 24 1.83 21,54,900 4.31

1,00,001 and above 4 5 3.44 4,08,60,240 81.73

Total 1,308 100.00 5,00,02,000 100.00

Client Type No.of No.of % ofShareholders Shares Holding

Resident 1,216 20,22,344 40.45

NRI 7 1,65,200 3.30

Body Corporate 39 12,74,736 25.49

Financial Institution 1 36,450 0.73

OCB 1 1,00,000 2.00

Promoters’ Friends & Relatives 34 99,340 1.99

Core Promoters 9 13,01,930 26.04

Clearing Members 1 200 0.00

Total 1,308 50,00,200 100.00

63



STOCK MARKET PRICE MOVEMENT

The monthly high and low quotations and volume of Shares traded at Calcutta Stock Exchange (“CSE”) during the financial 2003 – 2004(12 months) are given in Table :

CSE

Period High Low Closing Price(Rs.) (Rs.) (Rs.)

April, 2003 6.80 6.80 6.80

May, 2003 6.25 5.00 5.00

June, 2003 5.50 5.50 5.50

July, 2003 6.50 5.50 6.40

August, 2003 6.50 6.00 6.50

September, 2003 7.00 5.50 6.50

October, 2003 5.90 5.90 5.90

November, 2003 — — —

December, 2003 7.10 6.00 7.10

January, 2004 10.00 8.00 8.10

February, 2004 8.10 8.00 8.10

March, 2004 8.10 6.50 7.55

Note : There were no trade during the year in MSE, Chennai as reported by Madras Stock Exchange. This is due to the concentration ofmajority of investors in Calcutta.

GENERAL BODY MEETING

YEAR LOCATION DATE TIME

2001-2002 Hotel Kanchi, Glass Room, 14th August, 2002 11.30Ground Floor, 28 Ethiraj Salai,Chennai 600 003

2002-2003 Hotel Kanchi, Glass Room, 22nd August, 2003 11.30Ground Floor, 28 Ethiraj Salai,Chennai 600 003

2003-2004 Hotel GRT Grand, 28th August, 2004 11.30120, Sir Thyagaraya Road,Chennai 600 017

NOMINATION FACILITY

Individual Shareholders can now avail of the facility of nomination. The nominee shall be the person in whom all rights of transfer and/or amount payable in respect of the shares shall vest-in the event of the death of shareholders(s). A minor also can be a nomineeprovided the name of the guardian is given in the Nomination Form. The facility of nomination is not available to non-individualshareholders such as bodies corporate, financial institutions, Kartas of Hindu Undivided Families and holders of Power of Attorney. Incase of any assistance, please contact Cameo Corporate Services Ltd. Subramanian Building, 1, Club House Road, Chennai - 600 001at the R & TA of the Company.

64



NOTICENotice is hereby given that the 16th Annual General Meetingof the Shareholders of the Company will be held at 11.30a.m. on Saturday, the 28th day of August, 2004 at Hotel GRTGrand, 120, Sir Thyagaraya Road, Chennai – 600 017, Indiato transact the following business :

ORDINARY BUSINESS

1. To receive, consider and adopt

a) The Audited Balance Sheet as at March 31, 2004;

b) The Audited Profit and Loss account for the yearended as on that date;

c) Directors’ report for the year 2003–04; and

d) The Auditors’ report, thereon.

2. To declare the dividend on equity shares for the financialyear ended 31.03.2004.

3. To appoint a Director in place of Mr. Vijay KumarChhinkwani, who retires by rotation, being eligible offers,himself for reappointment.

4. To appoint M/s. N. C. Ganguli & Co., CharteredAccountants as the Auditors of the Company who retiresat the conclusion of this Annual General Meeting andwho has consented to continue as Auditors, if re–appointed, to hold office for the period commencing fromthe conclusion of this meeting till the conclusion of nextannual general meeting and to fix their remuneration.

SPECIAL BUSINESS

5. To consider and, if thought fit, to pass, with or withoutmodification, the following resolution which will be pro-posed as a Special Resolution:–

“Resolved that pursuant to the provisions of Section372A and other applicable provisions if any, of the Com-panies Act, 1956, the consent of the Company be and ishereby accorded to the Board of Directors to make thefollowing transactions directly or indirectly on behalf ofthe Company :-

(a) make any loan to any other body corporate,

(b) give any guarantee, or provide security in connectionwith a loan made by any other person to, or to anyother person by, any body corporate, and

(c) acquire, by way of subscription, purchase or otherwisethe securities of any other body corporate,

notwithstanding that the aggregate of the loans andinvestments so far made, the amounts for whichguarantee or security so far provided to or in all otherbodies corporate, along with the investment, loan,

guarantee or security proposed to be made exceedssixty percent of its paid-up share capital and freereserves or hundred percent of its free reserves,whichever is higher, provided that the aggregateamount of the aforesaid transaction shall not exceedRs. 3.00 Crores at any one time”.

By Order of the Board of Directors

Sd/-Place : Kolkata (S. V. Ramani)Dated : 28th June, 2004 Whole-time Director

and Secretary

NOTES

1. The relevant Explanatory Statement pursuant to Section173(2) of the Companies Act, 1956 is annexed hereto.

2. A member entitled to attend and vote at the meeting isentitled to appoint a proxy to attend and vote on his behalfand a proxy need not be a member. The instrumentappointing a proxy should be deposited at the RegisteredOffice of the Company, not later than 48 hours before themeeting.

3. The Register of Members and share transfer books willremain closed from 21st August to 28th August, 2004 (bothdays inclusive).

4. Members are requested to bring their copies of the Reportand Accounts to the meeting. Please bring the attendanceslip with you duly filled in and hand over the same at theentrance of the meeting hall.

5. Members are requested to notify any change in theiraddress immediately.

6. Members desirous of getting any information about theaccounts and operations of the Company are requestedto address their queries to the Company Secretary atleast seven days in advance of the meeting so thatinformation required can be made readily available at themeeting. Members may also login to the Company’sWebsite: http://www.ontrackindia.com for detailinformation on the financial performance of the Company.

7. Members holding shares in physical form are requestedto dematerialise the shares into electronic form tofacilitate faster transfer and avoid rejections for baddeliveries. The share certificates may be sent directly toour Share Transfer Agent: Cameo Corporate Services Ltd.,No. 1, Club House Road, Chetpet, Chennai – 600 002.

8. Subject to provisions of Section 206A of Companies Act,1956, dividend as recommended by the Board ofDirectors, if declared at the meeting will be payable on or

65

NOTICE


after 28th August, 2004 to those members whose namesappear in the Register of Member as on 21st August, 2004.

9. Members wishing to claim their dividend, which remainunclaimed, are requested to correspond with CompanySecretary at the Corporate Office in Kolkata with a copyto the R & TA, Cameo Corporate Services Ltd., Chennai.Members are requested to note that dividends notencashed or claimed within 7 years from the date oftransfer to the Company’s unpaid dividend account, willas per 205A of the Companies Act, 1956, be transferred tothe Investors Education and Protection Fund.

10. Members are requested to address all communicationsincluding dividend mandates to the Registrar and ShareTransfer Agents – Cameo Corporate Service Ltd.,Subramanian Building, 1, Club House Road, Chennai – 600002, India, E-mail: [email protected].

Explanatory statement pursuant to Section 173(2) of theCompanies Act, 1956 and Clause 23(a) of the Articles ofAssociation of the Company.

ITEM NO. 5

In the interest of business in the long run, it is expected thatthe Company may be required to make investments as andwhen necessary or to advance loan /guarantee/security inexceeding of 60% of the paid-up Capital and Free reserves or

66

NOTICE

100% of its Free reserves (whichever is more) and in thatcase the Company will have to convene a General Meeting toaccord approval of the Company for making investments orfor advancing loan / give corporate guarantee to securefinancial facilities etc. in excess of the limits specified above,every time.

The purpose of the proposed resolution is to provide to theDirectors a maximum ceiling exceeding 60% of the paid-upCapital and Free reserves or 100% of its Free reserves,whichever is more provided that the aggregate amount of theaforesaid transaction shall not exceed Rs. 3.00 Crores at anyone time.

In the event of your acceptance of the aforesaid Specialresolution, no further special resolution or resolutions shallbe deemed to be necessary for making the aforesaidtransactions within the limit specified above.

None of the Directors are personally interested in theproposed Special Resolution and recommends youracceptance thereof in the interest of the eff icientadministration of the Company.

By order of the Board of Directors

Sd/-Place : Kolkata, India (S. V. Ramani)Dated : 28th June, 2004 Whole-time Director

and Secretary

From : Date :

To :

Cameo Corporate Services LimitedUNIT : Ontrack Systems Limited‘Subramanian Building’, V Floor,No. 1, Club House RoadChennai – 600 002

PAYMENT OF DIVIDEND THROUGH ELECTRONIC CLEARING SERVICE (ECS)

1. Name of the First Shareholder(In Block Letters)

2. Folio No.

3. No. of Shares

4. Name of the Bank

5. Branch

6. Bank Account Number(as appearing on cheque book)

7. Account type (Please tick) [ ] Savings Current Cash Credit

8. 9 Digit Code Number of the Bank &Branch appearing on the MICRCheque issued by the Bank (Pleaseattach Photocopy of a cheque or ablank cancelled cheque issued by yourBank relating to your above accountfor verifying the accuracy of thecode).

I agree to avail of the Electronic Clearing Service, as and when implemented by Ontrack Systems Limited for payment of dividend to me.

I hereby declare that the particulars given above are correct and complete. If the transaction is delayed or not effected at all for reasonsof incomplete or incorrect information, I would not hold Ontrack Systems Limited/Registrar responsible.

I further undertake to inform the Registrar/OSL any change in my Bank, Branch and Account No.

Signature of the First / Sole Shareholder

Affix1 Rupees

Revenue Stamp

SIXTEENTH ANNUAL GENERAL MEETING

ONTRACK SYSTEMS LIMITEDRegistered Office: 5, Club Road, Chetpet, Chennai - 600 031, India

P R O X Y F O R M

I/We.................................................................................................................................................................................................................................

of ................................................................................................................................... being a Member/Members of Ontrack Systems Limited,

hereby appoint.......................................................................................................................... of...............................................................................

or failing him.............................................................................................................................. of................................................................................

or failing him............................................................................................................................... of.................................................................................

as my/our proxy to attend and vote for me/us on my/our behalf at the Sixteenth Annual General Meeting of the Company to be held onSaturday, the 28th day of August, 2004 and at any adjournment thereof.

As witness my/our hand (s) this day of ......................................................... 2004........................

Signed by the said

A/c. No

Note : (i) The proxy must be returned so as to reach the Investor Service Centre, Ontrack Systems Limited, 5, Club Road, Chetpet,Chennai - 600 031 not less than FORTY-EIGHT HOURS before the commencement of the aforesaid meeting.

(ii) Please mark the envelope ‘ONTRACK SYSTEMS-PROXY’.

ONTRACK SYSTEMS LIMITEDRegistered Office : 5, Club Road, Chetpet, Chennai - 600 031, India

ADMISSION SLIP

DATE : VENUE : TIME :28th August, 2004 Hotel GRT Grand 11.30 A.M.

120, Sir Thyagaraya Road, Chennai 600 017

I certify that I am a Member of the Company and hold .............................................................................................................................. shares

Please tick in the appropriate box

Member Proxy

Member’s Signature

Name of the Proxy in Block Letter Proxy’s Signature

NOTE : Member/Proxyholder wishing to attend the meeting must bring the Admission Slip to the meeting and hand over at theentrance duly signed.


NUMBER OF OFFICES

Offices:

India : 4Overseas : 4

OVERSEAS SUBSIDIARY

Ontrack Systems (UK) LimitedMoorbridge Court29-41 Moorbridge RoadMaidenhead, SL6 8LTE–mail: [email protected]: www.ontrackuk.comPhone: +44 (0) 1628 703 300Fax: +44 (0) 1628 703 301

Ontrack Systems (UAE) LimitedP. O. Box 3153, Fujairah, UAEPhone: +971 (9) 228 1464Fax: +971 (9) 228 1465E–mail: [email protected]: www.ontrackuae.com

OVERSEAS BRANCH OFFICE

Ontrack Systems Limited (Japan Branch)1195-63 Kitazuka, Mobara-shiChiba -2970009, JapanTelephone: +81 3 5295 1110Fascimile: +81 475 22 5627

For additional copies of this Annual Report andother information contact :

S. V. RamaniOntrack Systems LimitedOntrack House, 19, Ekdalia RoadKolkata – 700 019, IndiaPhone: +91 (33) 24601293/1304/1980–2Fax: +91 (33) 2460 1281E–mail: [email protected]

Editorial supervision :

C. V. AiyarHead – Corporate Communications

Designed and Composed by :

India Development CenterOntrack Systems Limited276B, Lake GardensKolkata – 700 045, IndiaPhone: +91(33) 2417 8434/35Fax: +91(33) 2422 1264


Ontrack House19, Ekdalia Road, Kolkata – 700 019, IndiaPhone: +91(33) 2460 1293/1304/1980/

1981/1982/1997Fax: +91(33) 2460 1281E-mail: [email protected]: www.ontrackindia.com

YEAR OF ESTABLISHMENT

15th February, 1988

STOCK EXCHANGE LISTINGS

Madras Stock ExchangeCalcutta Stock Exchange

SHARE TRANSFER AGENT

Cameo Corporate Services Ltd.Subramanian Building,1, Club House RoadChennai – 600 002, IndiaPhone: +91 (44) 2846 0390-95Fax: +91 (44) 2846 0129E–mail: [email protected]

COMPANY DATAAs of March 31, 2004

NEW OFFICE

Ontrack Systems BVBusiness Park ArenaOlympia 1a/b1213 NS HilversumThe NetherlandsTel: +31 (0) 35 64627 54Fax: +31 (0) 35 64626 66Email: [email protected]: www.ontracknl.com

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