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HOUSE OF PEARL FASHIONS LIMITEDDIRECTORS’ REPORTDIVIDENDTo the Shareholders,The Directors do not recommend any dividend for the year under review.The Directors of your Company have pleasure in presenting the 22nd Annual Report and AuditedAccounts for the year ended 31st March 2011, together with the Auditors’ Report thereon.DIRECTORSIn accordance with the provisions of the Companies Act, 1956 and the Articles of Association ofyour Company, Dr. Ashutosh P Bhupatkar and Mr. S.B. Mohapatra, would retire by Rotation at theensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Necessaryresolutions for their appointment are included in the notice convening Annual General Meeting.CONSOLIDATED WORKING RESULTSDuring the year under review, the consolidated Income of your Company is Rs.226,445.79 Lacsagainst previous year Rs.187,737,07 Lacs.DIRECTORS IDENTIFICATION NUMBER (DIN)2010-20112009-2010223,206.77183,204.86Other Income3,239.024,532.21Mr. Deepak Seth-00003021Dr. Ashutosh Prabhudas Bhupatkar-00479727Profit before Tax & Adjustments2,825.951,624.25Mr. Pallak Seth-00003040Mr. Chittranjan Dua-00036080119.28199.87Mr. Pulkit Seth-00003044Mr. Samar Ballav Mohapatra-00327410--2,287.531,413.75Mr. Sanjay Pershad-00003054Mr. Rajendra Kumar Aneja-0073195610.034.53--IncomeProvision for TaxProvision for Bad debtProfit After TaxEPS (in Rs.)Transfer to General ReservesWORKING RESULTS OF THE COMPANY 25Other Income1,204.791,117.45Profit before Tax(30.63)(421.39)Provision for Tax575.995.87(2,380.73)(404.67)--Profit After TaxTransfer to General ReservesThe following are the Directors Identification Number (DIN) of your Directors:SUBSIDIARY COMPANIESIn line with the requirements of Accounting Standards AS – 21 issued by the Institute of CharteredAccountants of India, consolidated financial statements presented by the Company include thefinancial information of its Subsidiaries. As required under Section 212 of the Companies Act, 1956,the statement in respect of the Subsidiary companies is annexed herewith and forms an integralpart of this Annual Report.During the year four companies changed their names from Magic Global Fashions Limited to NorDelhi Manufacturing Limited, Poetic Hong Kong Limited to Nor Lanka Manufacturing Limited, PearlGES Group Ltd. to PG Group Ltd. and Pearl GES Home Group Ltd. to PG Home Group Ltd.AUDITORSThe Auditors, M/s S. R. Dinodia & Co., Chartered Accountants, (Regn. No. 001478N), NewDelhi, retires at the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.BUSINESS AND OPERATIONSFIXED DEPOSITSWith US and European countries coming out of recession, India’s garment exports have steadilyincreased since over a year. Across the globe, the demand for garments has been steadily increasing.With the recent trends, the future of the garment business look quite promising.Your Company has not accepted any Fixed Deposits from Public or Shareholders.Indian share in global textile and apparel trade has potential to increase from its current level of 4.5%to 8% by 2020. However rising cost of cotton and labour cost is a cause of concern. Overall rawmaterial is getting expensive and it is likely to impact consumption pattern also.The company has extended its Sourcing and Development activities to new countries in Asia.Wherever possible, we have focused on cost competitiveness and open new horizons towardsSourcing and Product Development across the globe. The company has leveraged its experienceand expertise in cost competitiveness in channelising the business through its manufacturing oroutsourcing activities based on buyers requirements.Over the last five years, your company through its subsidiaries has been able to add more capacities,acquires strategic companies, set up new divisions, expand into new geographies, strengthen itsdesign infrastructure, implement SAP and has now reached an enviable position of “One StopShop” destination for its customers. Today, your company offers almost all categories of garments,manufactured either in its own or outsourced from the most cost effective locations.Consolidated turnover of the company is Rs.2264.46 Crore, up by more than 20%. in financial year2010-11. The consolidated profit of the company is Rs.22.87 Crore compared to profit of Rs.14.14Crore for last year. With no expected increase in fixed overheads, your company expects that thenew business initiatives will be start yielding increase in sales and improved consolidated profit.Considering the growing demand, the company has enhanced manufacturing capacities at Gurgaon,Chennai and Bangladesh during the financial year 2010-11.CORPORATE SOCIAL RESPONSIBILITYThe company has been taking up and fulfilling its fundamental responsibility towards society. LittlePeople Educational Society, set up by the group has been imparting employment oriented highereducation and retail sector education through Indian Retail School (IRS). IRS has taken initiativeto impart career oriented training in retail sector. ARPAN and SOHAM are helping underprivilegedchildren, studying in 1st to 5th level financially and also supporting the school system.The company is formulating a formal Corporate Social Responsibilities (CSR) Policy keeping in tunewith its overall business policy and goals.Annual Report 2010-11 6DIRECTORS’ RESPONSIBILITY STATEMENTPursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956, with respect toDirectors Responsibility Statement, it is hereby confirmed:i)That in the preparation of the accounts for the financial year ended 31st March 2011, theapplicable accounting standards issued by the Institute of Chartered Accountants of Indiahave been followed. There are no material departures from prescribed accounting standardsin the adoption of the accounting standards.ii)That the Directors have adopted such accounting policies and applied them consistently andmade judgments and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and of the profitor loss of the Company for the year under review.iii)That the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.iv)That the Directors have prepared the accounts for the financial year ended 31st March 2011as a ‘going concern’ and on accrual basis.LISTINGThe shares of your Company are listed at Bombay Stock Exchange Limited, Mumbai and NationalStock Exchange of India Limited, Mumbai. The listing fees to the Stock Exchanges for the year2011-12 have been paid.REGISTRAR AND SHARE TRANSFER AGENTLink Intime India Pvt. Ltd (formerly known as Intime Spectrum Registry Limited) has been appointedas Registrars and Share Transfer Agent (RTA) as common agency both for physical and dematshares, as required under Securities Contract (Regulation) Act, 1956. The detail of RTA forms partof the Corporate Governance Report.

CORPORATE GOVERNANCEReport on Corporate Governance along with the certificate of the Auditors, confirming compliance ofconditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement, formspart of the Annual report.CORPORATE GOVERNANCE VOLUNTARY GUIDELINES 2009The company is in the process of considering adoption of Corporate Governance VoluntaryGuidelines, 2009 (the Guidelines) and formulating relevant policies/codes.MANAGEMENT DISCUSSION AND ANALYSISA detailed review of operations, performance and future outlook of the Company is given separatelyunder the head “Management Discussion and Analysis”.NOTES TO ACCOUNTSThe observations of the Auditors, if any, have been adequately explained in Notes to Accounts andneed no further clarification.PARTICULARS OF EMPLOYEESParticulars of employees required under Section 217 (2A) of the Companies Act, 1956 read withCompanies (Particulars of Employees) Rules, 1975 is nil.Foreign Exchange Earnings ParticularsParticularsExport of Goods- FOB basisInterest IncomeSAP/Mgmt ign Exchange OutgoParticularsImportForeign TravellingAdvertisement ExpensesCommissionSampling ExpensesAirfreight ChargesOthersTotalPARTICULARS W.R.T. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ANDFOREIGN EXCHANGE EARNINGS AND OUTGOACKNOWLEDGEMENTInformation pursuant to Section 217(1)(e) of the Companies Act, 1956, read with Rule 2 of theCompanies (Disclosures of Particulars in the Report of the Board of Directors) Rules, 1988 relatingto ‘Energy Conservation’ and ‘Technology Absorption’ are not applicable.The Directors of your Company are thankful to Bankers, Business Associates, Customers, Members,Government Bodies & Regulators for the continuous support received from them and place onrecord their appreciation for the sincere services rendered by the employees at all level.Foreign Exchange Earnings and OutgoInformation pertaining to activities relating to exports, initiative taken to increase exports, developmentof new export markets and exports plans is as follows:The Company through subsidiaries is into export of garments to various countries and has takenvarious initiatives for increasing exports like strengthening design & development, outsourcinggarments from cost effective locations and increasing manufacturing capacities. The Company andsubsidiaries have explored new markets in South America, Africa and sourcing partners in Sri Lanka.The Company has valued buyers across the globe and plans to cater to new markets and also tocater to ‘A category of International buyers especially through Chennai unit of its subsidiary.For and on behalf of the Boardfor HOUSE OF PEARL FASHIONS LIMITEDPlace: GurgaonDate: 30th May, 2011(DEEPAK SETH)Chairman(DIN - 00003021)Total Foreign Exchange used and earned (in Rs.):7 Annual Report 2010-11

HOUSE OF PEARL FASHIONS LIMITEDCORPORATE GOVERNANCE1.COMPANY’S PHILOSOPHYCorporate Governance is a mirror of an organization in real sense. It’s involve vast areas of integrity, fairness, equity, transparency, accountability and commitment to values. Good CorporateGovernance is a boat by which an organization swim to overcome in difficult times.Undoubtly, it’s a mind set of an organization which create trust with stakeholders based on the principles of corporate governance.Your Company is committed to best Corporate Governance and has fully complied with the requirements of Clause 49 of the Listing Agreement with the Stock Exchanges. The Company in its endeavortowards the best Corporate Governance and to provide transparency initiated various measures.House of Pearl Fashions strives not only to foster a corporate culture, ethical behavior but individual accountability and transparency. Over the years, governance process and systems have beenstrengthened at House of Pearl Fashions. In addition to complying with the statutory requirements, effective governance system and practices towards improving transparency, disclosures, internalcontrols and promotion of ethics at work-place.House of Pearl Fashions committed towards their buyers, institutions/bankers, employees/workers and other government agencies which are directly or indirectly concerned with the company.Your Company is committed to best Corporate Governance and has fully complied with the requirements of Clause 49 of the Listing Agreement with the Stock Exchanges. The Company in its endeavortowards the best Corporate Governance and to provide transparency initiated various measures.2.BOARD OF DIRECTORSAs on 31st March 2011, the company’s Board of Directors consists of 8 (Eight) members. The Chairman of the Board is non-executive Promoter Director. The Board comprises of one executive Directorand seven non-executive Directors, of whom four are Independent Directors. The composition of the Board is in conformity with the requirements of Clause 49 of the listing agreement. All non-executiveindependent Directors are persons of eminence and bring a wide range of expertise and experience to the Board.4 (Four) Board Meetings were held during the year. The dates on which the meetings were held are as follows:29th May 2010, 14th August 2010, 13th November 2010 and 14th February 2011.Composition and Category of the Board as on 31.03.2011 and their attendance in the Board and Annual General Meetings are as hereunder:S.Name of DirectorCategoryNo. of outsidedirectorshipsMr. Deepak SethMr. Pallak SethMr. Pulkit SethMr. Sanjay PershadDr. Ashutosh P. BhupatkarMr. Samar Ballav MohapatraMr. Chittranjan DuaMr. Rajendra K AnejaNon-Executive ChairmanNon Executive Vice-ChairmanManaging DirectorNon-Executive DirectorIndependent DirectorIndependent DirectorIndependent DirectorIndependent Director1121216-No.12345678No. of CommitteeAttendanceMemberChairmanBoard MeetingsAnnual General Meetings1122122-332333-YesNoYesYesYesNoYesYesMr. Deepak Seth, Chairman, being father, is related to Mr. Pulkit Seth, Managing Director and Mr. Pallak Seth, Vice Chairman.Notes:1.The committees considered for the purpose are those prescribed under clause 49 (IV) (B) of the Listing Agreement.2.Foreign Companies, Bodies corporate, Private companies and Companies under section 25 of the Companies are excluded for the above purpose.As stipulated by Clause 49, none of the Directors was a member of more than 10 committees, or a Chairman of more than 5 committees across all companies in which he was a director.There is no Nominee or Institutional Directors on the Board of the Company.Information supplied to the BoardThe Board has complete access to all information with the company. Inter alia, the following information are provided to the board and the agenda papers for the meetings are circulated in advance ofeach meeting or are tabled. Annual Operating plans and budgets, Capital budgets, updates; Quarterly results for the company and its operating divisions or business segments; Minutes of meetings of Audit Committee and other committees of the board; Information on recruitment and remuneration of senior officers just below the board level including appointment or removal of Chief Financial Officer and

degree from Delhi University and a Master in Arts degree from Delhi University. He joined the Indian Administrative Services in 1967 and retired in 2004. He served as Secretary, Ministry of Textiles; Special Secretary, Ministry of Home Affairs; Additional Secretary and Finance Advisor, Ministry of Commerce and Director General of Foreign Trade.