Assam Company

1.  [a] All assets except Furniture as at 31 st December, 1994 were
 revalued by an approved valuer at the then net replacement
 cost resulting in increase in value of these assets by
 Rs.427,664,732/-. All assets except Furniture as at 31st December, 1996
 have been revalued again by an approved valuer at net replacement cost
 resulting in a further increase in value of these assets by
 Rs.113,567,000/-.
 
 [b] Taking into account the total intrinsic value of the Companys land
 in Assam, no adjustment in the opinion of the management is required
 for the loss on land lost due to flood and consequent erosion in past
 years. Claim for compensation in this regard has been made to Assam
 Government.
 
 2.  Estimated amount of contracts remaining to be executed on capital
 account and not provided for Rs.7,638,834/- (net of advance
 Rs.15,368,371/-), [31.12.2007-Rs.3,095,396/- (net of advance
 Rs.15,337,804/-)]
 
 3.  Contingent Liabilities not provided for:
 
 [a] [i] Income Tax assessments disputed in appeals Rs.11,208,122/-
 (31.12.2007-Rs.31,970,535/-). If the appeals for disputed amounts are
 upheld In favour of tax authorities, there will be a concomitant
 liability in respect of Agricultural Income Tax.
 
 [a] [ii] Agricultural Income Tax matter Rs.64,209,208 /- (31.12.2007 -
 Rs. 62,415,149/-)
 
 [b] Sales Tax assessments disputed in appeals Rs.143,482,782/-
 (31.12.2007-Rs.64,092,146/-)
 
 [c] In view of the stay on payment of Fringe Benefit Tax (FBT),
 liability which may arise is yet to be determined. Refer Note 32 of
 Schedule 11,
 
 [d] Premium on redemption of Foreign Currency Convertible Bonds (FCCBs)
 not ascertainable at this stage. Refer Note 19 of Schedule 11.
 
 [e] Guarantees given on behalf of third parties Rs.151,100,000/-
 (31.12.2007 - Rs.151,100,000/-)
 
 [f] Uncalled liability on partly paid shares - Rs. 69,99,510/-
 (31.12.2007 - Rs.69,99,510/-).
 
 The future cash flows on account of above cannot be determined unless
 the judgement / decisions / demand are received from the appropriate
 forums/parties.
 
 4.  Provision for taxation for the Companys financial year ended 31 st
 December, 2008 has been determined based on results for the three
 months ended 31st March 2008 (Assessment Year 2008-09) and for nine
 months ended 31st December, 2008 (Assessment Year 2009-10). The
 ultimate liability for the Assessment Year 2009-10, however, will be
 determined on the total Income for the company for the period from 1 st
 April, 2008 to 31 st March, 2009.
 
 5.  Employee Benefit Obligation
 
 The Company has two post retirement pension plans, one of them being a
 defined contribution plan and the other a defined benefit. Apart from
 them the Company also has a defined contribution provident fund and a
 defined benefit gratuity scheme.
 
 Gratuity
 
 The Company operates gratuity plan wherein every employee is entitled
 to the benefit equivalent to 15 days salary last drawn for each
 completed year of service. The same is payable on retirement or
 termination of service, whichever is earlier. Annual contributions
 based on actuarial valuation carried out at the year end are made to a
 private insurance company under group gratuity scheme.
 
 Pension
 
 The Company operates two pension schemes for eligible employees, one of
 them being a defined benefit scheme and the other a defined
 contribution. These are funded with Life Insurance Corporation of India
 (LICI) and a private insurance company respectively. Annual
 contributions to the defined benefit scheme are made by the Company
 based on actuarial valuation carried out by them at year end.
 Contributions for the defined contribution plan are funded by the
 Company and such contributions along with interest accumulate during
 the service period of such employee and are utilised to buy pension
 annuity from the insurance company.
 
 Provident Fund
 
 Provident Fund is a defined contribution scheme whereby the Company
 deposits an amount determined as a fixed percentage of basic salary to
 the trust/government authorities every month.
 
 Leave Benefit
 
 Leave benefit comprises of leave balances accumulated by the employees.
 These balances can be accumulated upto a maximum of 120 days and can be
 encashed only at the time of retirement.
 
 A.  Defined Contribution Plans
 
 Contributions for Defined Contribution Plans amounting to Rs.56,928,082
 /- (31.12.2007 - Rs.53,286,761/-) has been recognised in the Profit &
 Loss Account under the head Contribution to Provident, Superannuation &
 Gratuity Funds in Schedule 9.
 
 6.  Directors remuneration in aggregate
 
 [B] Approval from Central Government for remuneration paid in the year
 2007 to the managing director of the Company amounting to
 Rs.1,732,416/- has been received subsequent to the year. This amount
 was included under Loans and Advance as advance recoverable from
 directors in the financial statements of 2007. Charge for managerial
 remuneration for the current year includes the aforesaid amount.
 
 [C] Remuneration to the managing director in excess of what already has
 been approved by Central Government paid in earlier years amounting to
 Rs.374,979/- and remaining outstanding as at the year-end have been
 subsequently recovered from him.
 
 [D] One of the wholetime Directors has resigned from the Company with
 effect from 18 August, 2008. His remuneration alongwith other
 applicable perquisites and retirement benefits have been settled in
 full on the same date.
 
 [E] Commission payable to one of the wholetime Directors have been
 waived.
 
 7. [a] Assets acquired under Hire Purchase (HP) comprise of vehicles.
 These agreements are of a period of 36 months and more and in certain
 cases provide for revision of hire charges for variation in prime
 lending rates of the bank. There are no restrictive covenants in the HP
 agreements.
 
 [b] The Company has taken various premises under operating lease having
 tenures upto 36 months which are not non- cancellable. These are
 usually renewed periodically by mutual consent. The rental payable
 against these lease amounting to Rs.424,495/- (31.12.2007 -
 Rs.7,81,918/-) have been debited to the Profit & Loss Account.
 
 8.  Related Party Disclosure
 
 I.  Names of related parties and description of relationship
 
 a.  Subsidiaries of the Company
 
 Namburnadi Tea Company Ltd.
 
 Camellia Cha Bar Ltd.
 
 North East Hydrocarbon Ltd.
 
 Assam Oil and Gas Ltd.
 
 Duncan Macneill Natural Resources Ltd.
 
 Assam Estates Ltd.
 
 Gujarat Hydrocarbons and Power SEZ Ltd.
 
 b.  Key Management Personnel
 
 Mr A. K. Jajodia, Managing Director
 
 Mr Abhay Chawdhry, Director Finance & CFO (upto 18.08.2008)
 
 c.  Relatives of Key Management Personnel
 
 Ms. Ruchika Jajodia Ms. Rashmi Chawdhry
 
 d.  Enterprises over which the key management personnel are able to
 exercise a significant influence
 
 Abhay Chawdhry HUF
 
 9.  The Term Loan from IDBI was restructured vide their letter dated
 21st November, 2003 subject to certain conditions which have been
 waived by IDBI upon pre-payment of a part of Term Loan by the Company
 subsequent to the year-end.
 
 10.  The Company is pursuing E&P activities in Amguri Development Block
 and AA-ON/7 Exploration Block located in North East India under a Joint
 Operating Agreement (JOA) with M/s. Canoro Resources Ltd, a Canadian
 E&P Company based in Calgary, Canada, having participation interest of
 40% and 35% respectively. In addition, the Company during the year has
 added one more E&P asset - AA-ONN-2005/1 in Assam and Assam-Arakan
 Basin under consortium with ONGC and OIL, having participation interest
 of 10% through bidding process under NELP-VII. The Company also
 operates three Marginal Discovered Fields at Laxmijan, Barsilla and
 Bihubar under Service Contracts from ONGC.
 
 Amguri Development Block has been producing oil and gas from 1 st of
 April, 2006. The oil and gas pool from where currently the production
 of oil and gas is generated has been found to be of retrograde gas
 reservoir. With installation of Gas Compression project, which is in
 progress, the production volume of oil and oil condensate will increase
 substantially. The drilling campaign in Amguri Development Block as
 part of Full scale Development plan will continue to make further
 discovery of oil and gas pools.
 
 In respect of AA-ON/7 Exploration Block comprising of 787 sq km (Assam
 -468 sq km and Nagaland -319 sq km), the Company has made further
 investments in drilling Exploratory wells during the current year and
 it has plans to drill more Exploratory wells in this Block during the
 Exploration phase. Since this Block is still in exploratory phase,
 exploratory activities will continue to be undertaken till a major
 discovery of oil and gas is made which is normal in any E&P operations.
 
 With regard to operations in Marginal Discovered Fields, having made
 investments in work over operations in Laxmijan and Barsilla and having
 established oil and gas reserve, the Company has made strong
 representation before ONGC seeking amendment of commercial terms to
 make the operation economically viable due to increased cost of
 operation. Since currently the operation is not economically viable,
 the Management has decided to treat these Marginal fields as abandoned
 and accordingly the investment cost capitalised earlier has been
 transferred to Fixed Assets.
 
 11.  The Company had issued Zero Per Cent Foreign Currency Convertible
 Bonds (FCCB) in 2006 aggregating to USD 48 Million (INR 2,109,120,000
 as at the year end) to finance capital expenditure for modernisation,
 expansion and acquisitions. The Bond holders have an option of
 converting these Bonds into Equity Shares at a conversion price of Rs.
 28.75 per share, at any time on or after 28th November, 2006, subject
 to compliance with certain conditions stated in the offer circular
 dated 23rd November, 2006. The Bonds are redeemable on 30th November,
 2011 at 150.019 per cent of their principal amount, unless previously
 converted or redeemed.
 
 Bond holders have excercised their option of converting their Bond
 amounting USD3.3 Million into Equity Shares on 18th January, 2008.
 Accordingly, 5,145,703 shares have been issued during the year with
 resultant increase in issued share capital and security premium
 account.
 
 12. During the year, the Company received the balance amount
 outstanding against 81,000,000 share warrants of Re.1 each Issued in
 2006 at a premium of Rs.22.25/- per warrant. Equivalent number of
 Equity Shares of Re. 1 each has been issued on conversion of these
 warrants resulting in increase of issued and paid up share capital of
 the Company by Rs.81,000,000 /- and the securities premium by
 Rs.1,802,250,000 /-.
 
 13.  Loans & Advances to Subsidiaries include an amount of Rs
 684,418,474/- (31.12.2007 - Rs 731,445,800/-) paid to its wholly owned
 subsidiary, Duncan Macneill Natural Resources Limited,UK (DMNRL) as
 loan for investments in prospective oil and gas properties overseas.
 DMNRL has agreed to repay rupee equivalent of the total amount
 outstanding to the Company in the Companys books.
 
 14.  Loans and Advances to subsidiaries include an amount of Rs.
 1,107,849,116/-(including Interest Rs. 133,991,914/-) due from Gujarat
 Hydrocarbons and Power SEZ Limited (GHPSL), a wholly owned subsidiary
 of the company. GHPSL was incorporated for developing a Special
 Economic Zone (SEZ) for Hydrocarbon Park for Energy in the state of
 Gujarat. GHPSL has acquired 315 hectares of land for its SEZ project
 from Gujarat Industrial Development Corporation (GIDC) out of which 276
 hectares of land has been taken possession of and the balance 39
 Hectares is in the process of acquisition.
 
 15.  The Eviction Suit filed before the Honble High Court at Kolkata
 by the Landlord of the Kolkata office premises of the Company has since
 been rejected on the ground of jurisdiction and against which the
 appeal filed by the Landlord before the Division Bench of the Honble
 High Court at Kolkata has been admitted. The Company is preferring a
 Special Leave Petition before the Honble Supreme Court. The Management
 expects a favourable verdict on the matter.
 
 16.  Loans & Advance include Rs. 13,391,804/- recoverable from M/s
 iSmart Business Solutions Pvt. Ltd., a Company engaged for development
 and implementation of an ERP software. The contract with this party was
 terminated by the Company on the ground of non-performance and
 continued breach of contract. The Company in addition to the above
 amount has made a claim of Rs. 36,608,196/- for damages on account of
 delay in providing the services by the said party. The Company had
 filed a suit before the Honble High Court of Calcutta for recovery of
 such amount. However, as a matter of abundant precaution the aforesaid
 advance lying in the books has been provided for in the current year.
 
 17. In line with the notification dated 31 st March, 2009 issued by the
 Ministry of Corporate Affairs, amending Accounting Standard (AS) 11 -
 Effects of Changes in Foreign Exchange Rate, the Company with
 retrospective effect from 1 st January, 2007 has :
 
 (i) charged to the opening General Reserve Rs. 144,975,665/- ( Net of
 Tax of Rs.36,712,493/-) which was recognised in the Profit & Loss
 Account in previous financial year ended 31 st December 2007.
 
 (ii) added to fixed assets Rs.3,323,409/- and to Capital
 Work-in-progress Rs. 123,225,627 being the exchange difference on long
 term monetary items relatable to the acquisition of depreciable assets.
 
 (iii) charged to the Profit & Loss Account Rs.29,492,555/-, being the
 amortisation charge of Foreign Currency Monetary Item Translation
 Difference Account (FCMITDA) for the year.
 
 (iv) carried forward Rs.66,358,250/- in the FCMITDA amortisable by 31
 st March, 2011.
 
 Asa result of the above change in Accounting Policy the net profit
 before tax for the year is higher by Rs.373,815,015/-.
 
 18.  The Company has obtained a stay from the Honble Guwahati High
 Court restraining the taxation authorities from imposing and collecting
 Fringe Benefit Tax (FBT) under section 115WA of the Income Tax Act,
 1961. In view of this, the Company has not ascertained and provided the
 liability for FBT till the year-end.
 
 19.  Previous years figures have been regrouped / rearranged wherever
 necessary.