Financial Results 2012 R in Lakhs. Total Income 3, , Profit for the year 3, ,344.21

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1 DIRECTORS REPORT Your Directors have pleasure in presenting to you the Annual Report and Audited Accounts of Larsen & Toubro International FZE (LTIFZE) for the year ended December 31, FINANCIAL RESULTS Financial Results 2012 R in Lakhs 2011 R in Lakhs Total Income 3, , Profit for the year 3, , OVERVIEW OF THE YEAR During the year under review, activity in the field of construction and real estate was generally subdued in the Middle East due to various economic reasons. In spite of the general downward trend in the market, your posted a profit of V 3,044 lakhs for the year 2012, mainly by way of dividend from subsidiary companies. The has been making equity Investments in & Associate Companies in various countries after careful analysis. In 2012, an additional investment/ advance towards equity of V 2,035 lakhs was made and loan of V 4047 lakhs was to various JV companies/ subsidiaries in the Middle East and United Kingdom. During the year, reviewed the performance of two subsidiaries in China and took a decision to sell two Companies as the return on investment was very low. In the year under review one namely Larsen & Toubro (Wuxi) Electric Limited, was sold at V 3,679 Lakhs and made a profit of V 335 lakhs and 75% of the holding in Larsen & Toubro Jiangsu Valve Limited, was sold at V 2,986 lakhs and incurred loss of V 544 lakhs. CURRENT BUSINESS SCENARIO & FUTURE OUTLOOK It appears the general economic conditions in the world and in particular Gulf is appearing to be positive in the coming year. The various operational subsidiary & associate companies in which the has invested funds are working towards improved performance. CAPITAL EXPENDITURE During the year, the sold Plant & Machinery worth V 1,171 lakhs to parent company. PERSONNEL The Officers of the are working in ex-officio capacity and are employees of the parent company. AUDITORS REPORT The Auditors report to the shareholders does not contain any qualifications. AUDITORS The auditors M/s PKF continue to be the auditors of the for the year COMPLIANCE WITH VOLUNTARY CORPORATE GOVERNANCE GUIDELINES, 2009 The has familiarized itself with the requirement of the Corporate Governance Voluntary Guidelines 2009 issued by the Ministry of Corporate Affairs and it is in the process of implementing many of the suggestions. Our compliance with the said guidelines is given below - A) Separation of Offices of Chairman & Chief Executive The Chairman is elected during each Board Meeting by the Directors from amongst those present. All the Directors are Non-Executive and the role of Chairman is confined to the proper conduct of the Board Meeting. B) Remuneration Of Directors The Directors are not paid any remuneration by way of sitting fees, etc. C) Independent Directors All the members of the Board of the are independent in the sense that none of them are involved in the day-to-day management of the. The Directors are updated about their role, responsibilities and liabilities. D) Number of Companies in which an Individual may become a Director The has appraised its board members about the restriction on number of other directorships and the same is being complied with. E) Responsibilities of the Board Directors are regularly updated about their role, responsibilities and liabilities. The ensures necessary training to the Directors relating to its business through formal/ informal interactions. Systems, procedures and resources are available to ensure that every Director is supplied, in a timely manner, with precise and concise information in a form and of a quality appropriate to effectively enable/ discharge his duties. The system of risk assessment and compliance with statutory requirements are in place. S-2059

2 F) Statutory Auditors The does not advocate rotation of Auditors as envisaged in these guidelines in view of the domain knowledge acquired by the Auditors over a period of time. G) Internal Auditors The Corporate Audit Services department of Larsen & Toubro Limited provides internal audit services to all its group companies. H) Internal Control The Board ensures the effectiveness of the s system of internal controls including financial, operational and compliance controls and risk management systems. I) Secretarial Audit The Secretarial Audit, at regular intervals, is conducted by the Corporate Secretarial department of Larsen & Toubro Limited, which has competent professionals to carry out the said audit. PARTICULARS OF EMPLOYEES There are no employees covered by the provisions of the Section 217(2A) of the Companies Act, read with the Companies (Particulars of Employees) Rules, DISCLOSURE OF PARTICULARS The being registered outside India, the disclosures required to be made in accordance with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not relevant. Hence, the same has not been furnished. MATERIAL CHANGES, IF ANY, BETWEEN DATE OF THE BALANCE SHEET & DATE OF THE DIRECTORS REPORT There are no material changes that have taken place in the between the date of the Balance Sheet and the date of the Directors Report. DIVIDEND In view of the accumulated losses the Directors do not recommend any dividend for the year. DIRECTORS During the year Mr. J. S. Sudarsan had taken over as Head of PT&D IC in India and as a result he resigned from the and Mr. V. A. K. Shenoi was inducted as director. Mr. P. S. Banerjee resigned and Mr. N. Hariharan was inducted as director. Mr. Habibulla also resigned during the year. The management places on record their appreciation regarding the valuable guidance and suggestions given by Mr. P. S. Banerjee, Mr. J. S. Sudarsan and Mr. Habibulla to the during their tenure as Directors. DIRECTOR S RESPONSIBILITY STATEMENT 1. That in the preparation of the annual accounts, the applicable Accounting Standards have been followed and there has been no material departure. 2. That the selected Accounting policies were applied consistently and the Directors made Judgments and estimates that are responsible and prudent so as to give true and fair view of the states of affairs of the as at December 31, 2012 and the profits of the for the year ended on that date. 3. That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provision of the Companies Act, 1956 for safeguarding the assets of the and for preventing and detecting fraud and other regularities and 4. That the annual accounts have been prepared on a going concern basis; and 5. That proper systems are in place to ensure compliance of all laws applicable to the. ACKNOWLEDGEMENTS The Directors acknowledge the invaluable support extended by the customers, vendors, bankers, Auditors, L&T India and staff of the. For and on behalf of the Board Place : Mumbai S. N. SUBRAHMANYAN N. HARIHARAN V. A. K. SHENOI R. GOVINDAN Date : May 17, 2013 Director Director Director Director S-2060

3 AUDITORS REPORT TO THE MEMBERS OF LARSEN & TOUBRO INTERNATIONAL FZE The financial statements of LARSEN & TOUBRO INTERNATIONAL FZE for the year ended December 31, 2012, being a registered in the United Arab Emirates, are audited by PKF and we have been furnished with their audit report dated March 14, We are presented with the accounts in Indian Rupees prepared on the basis of the aforesaid accounts to comply with the requirements of Section 212 of the Companies Act, We give our report as under: We have audited the attached Balance Sheet of Larsen & Toubro International FZE as at December 31, 2012 and the Statement of Profit and Loss and the Cash Flow Statement of the for the year ended on that date, annexed thereto. These financial statements are the responsibility of the 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 about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In accordance with the provisions of Section 227 of the Companies Act, 1956, we report that: (1) As required by the Companies (Auditor s Report) Order, 2003, issued by the Central Government of India under sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. (2) 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 were necessary for the purposes of our audit; (b) in our opinion, proper books of account as required by law have been kept by the so far as appears from our examination of those books; (c) the Balance Sheet, Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account; (d) in our opinion, the Balance Sheet, Statement of Profit and Loss and the Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; and (e) as regards reporting on the disqualification of directors under Section 274(1)(g) of the Indian Companies Act, 1956, since the is registered in the United Arab Emirates, no reporting is required to be made under the said Section. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the significant accounting policies in Note N and other notes appearing thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: 1 in the case of the Balance Sheet, of the state of affairs of the as at December 31, 2012; 2 in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and 3 in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. SHARP & TANNAN Chartered Accountants Firm s Registration No W By the hand of FIRDOSH D. BUCHIA Place : Mumbai Partner Date : May 17, 2013 Membership No S-2061

4 ANNEXURE TO THE AUDITORS REPORT (Referred to paragraph (1) of our report of even date) 1 (a) The is maintaining proper records to show full particulars including quantitative details and situation of all fixed assets. (b) We are informed that the has physically verified the fixed assets during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of such verification is reasonable. (c) During year, the has disposed off substantial part of fixed assets. Based on the information and explanations given by the management, we are of the opinion that the sale of the said assets has not affected the going concern status of the. 2 The has no inventories and accordingly, paragraphs 4(ii) (a), (b) and (c) are not applicable. 3 The is incorporated in the United Arab Emirates and accordingly, maintenance of records under Section 301 of the Companies Act, 1956 is not required. Accordingly, paragraphs 4(iii) (b) to (g) of the Order are not applicable. 4 In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the and the nature of its business for the purchase of fixed assets and for the sale of services. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in the aforesaid internal control procedures. 5 The is incorporated in the United Arab Emirates and accordingly, maintenance of records under Section 301 of the Companies Act, 1956 is not required. Accordingly, paragraphs 4(v) (a) and (b) of the Order are not applicable. 6 The has not accepted deposits and the directives issued by the Reserve Bank of India and the provisions of Sections 58A, 58AA and other relevant provisions of the Companies Act, 1956 and the rules framed thereunder are not applicable. 7 In our opinion, the has an internal audit system commensurate with the size and nature of its business. 8 The is not required to maintain cost records under Section 209(1)(d) of the Companies Act, 1956 and accordingly paragraph 4 (viii) of the Order is not applicable to the. 9 (a) According to the information and explanations given to us, the is regular in depositing undisputed statutory dues with appropriate authorities and there are no undisputed statutory dues outstanding for a period exceeding six months as at December 31, (b) According to the information and explanations given to us, there are no dues towards income tax, sales tax, service tax, customs duty, excise duty and wealth tax that were under dispute as at December 31, The s accumulated losses are less than fifty percent of its net worth. The has not incurred cash losses in the current financial year. 11 According to the information and explanations given by management, the has neither borrowed from a bank nor a financial institution from India and neither has it issued any debentures. 12 According to the information and explanations given by management, the has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or other securities. 13 The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the. 14 In our opinion and according to the information and explanations given to us, the is not a dealer or trader in securities. 15 According to the information and explanations given to us, the has not given any guarantee for loans taken by others from banks or financial institutions. 16 The has not availed any term loans during the year. 17 According to the information and explanations given to us and on an overall examination of the Balance Sheet of the, we report that no funds raised on short term basis have been used for long term investments. 18 The has not made any preferential allotment of shares to any party during the year. 19 The has not issued debentures during the period and accordingly, no security is required to be provided. 20 The has not raised any money by public issues during the year. 21 During the course of our examination of the books and records of the, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on or by the, noticed or reported during the year, nor have we been informed of such case by management. SHARP & TANNAN Chartered Accountants Firm s Registration No W By the hand of FIRDOSH D. BUCHIA Place : Mumbai Partner Date : May 17, 2013 Membership No S-2062

5 BALANCE SHEET AS AT DECEMBER 31, 2012 As at December 31, 2012 As at December 31, 2011 Note No. R R R R EQUITY AND LIABILITIES Shareholders' Funds: Share capital A 11,473,973,500 11,473,973,500 Reserves and Surplus B (288,781,547) (976,582,296) 11,185,191,953 10,497,391,204 Non - Current Liabilities Long term provisions C 515, ,460 Current Liabilities Short term Borrowings D(i) 333,808, ,623,850 Trade payables D(ii) 823,715 Other Current liabilities D(iii) 1,588,586 33,990, ,221, ,614,395 TOTAL 11,521,928,757 10,861,376,059 ASSETS Non - Current Assets Fixed assets Tangible Assets E 85,129, ,890,437 Non - Current Investments F 6,727,018,098 6,965,698,044 Long-term Loans and Advances G 2,009,022,345 1,672,067,748 Current Assets Trade Receivables H(i) 16,272,415 14,143,029 Cash and bank balances H(ii) 2,176,043,425 1,997,738,088 Short term loans and advances H(iii) 508,443,129 20,838,713 2,700,758,969 2,032,719,830 TOTAL 11,521,928,757 10,861,376,059 CONTINGENT LIABILITIES COMMITMENTS OTHER NOTES FORMING PART OF ACCOUNTS SIGNIFICANT ACCOUNTING POLICIES O(9) & P(13) O(7) & P(14) O P As per our report attached SHARP & TANNAN Chartered Accountants Firm s Registration No W By the hand of For and on behalf of the Board FIRDOSH D. BUCHIA Partner Membership No Place : Mumbai Date : May 17, 2013 N. HARIHARAN R. GOVINDAN Director Director Place : Mumbai Date : May 17, 2013 S-2063

6 STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED DECEMBER 31, Note No. R R R R REVENUE Revenue from operations I 57,356,634 48,034,647 Other Income J 319,613, ,336,592 TOTAL REVENUE 376,970, ,371,239 EXPENSES Operating Expenses K 3,162,020 2,007,641 Employee benefit expenses L 14,258,956 11,928,445 Administration and other expenses M 14,741,530 5,299,041 Finance Costs N 6,804,964 9,100,562 Depreciation on tangible assets 27,389,452 22,889,844 TOTAL EXPENSES 66,356,922 51,225,533 Profit before tax 310,613, ,145,706 Tax expenses N Current tax Withholding tax paid [Note O(3)] 6,200,373 8,723,738 Profit after tax carried to Balance Sheet 304,413, ,421,968 Earnings per equity share : Basic and Diluted (v) O(10) 166, ,844 Face Value per Equity Share (US $) 150, ,000 OTHER NOTES FORMING PART OF ACCOUNTS O SIGNIFICANT ACCOUNTING POLICES p As per our report attached SHARP & TANNAN Chartered Accountants Firm s Registration No W By the hand of For and on behalf of the Board FIRDOSH D. BUCHIA Partner Membership No Place : Mumbai Date : May 17, 2013 N. HARIHARAN R. GOVINDAN Director Director Place : Mumbai Date : May 17, 2013 S-2064

7 CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2012 A. Cash Flow from Operating Activities Net profit/(loss) before tax 310,613, ,145,705 Adjustments for: Dividend Income (301,962,521) (285,107,932) Depreciation 27,389,452 22,889,844 (Profit) / Loss on sale of fixed assets (619,243) (1,039,923) Furniture, Fixtures and Office equipment written off 10,658 Interest expense 6,804,964 9,100,562 Interest Income (35,576,018) (17,027,226) Loss /(Gain) on sale of longterm of investments 18,740,185 (42,945,916) Foreign currency translation reserve 11,449,174 36,533,724 Operating profit before working capital changes 36,839,486 65,559,497 (Increase) / decrease in trade and other receivables (469,276,082) 53,369,410 Increase / (decrease) in trade payables (32,657,076) (78,743,773) Cash (used in) / generated from Operating Activities (465,093,672) 40,185,133 B. Cash Flow from Investing Activities Purchase of Fixed assets (87,002) (50,705,472) Sale of fixed assets 85,011,106 6,652,830 Loans & Advances to subsidiaries / associates / joint venture partners (296,658,649) (71,397,601) Investment in subsidiaries / associates (203,681,187) (369,353,559) Proceeds on disposal of investments 664,527, ,394,547 Proceeds on voluntary winding up subsidiary 448,897 Dividend received from subsidiaries 301,962, ,107,932 Interest received 35,576,018 17,027,226 Net Cash (used in) / from Investing Activities 586,649, ,174,800 C. Cash Flow from Financing Activities (Repayments) / Proceeds from other borrowings Interest paid (6,804,964) (9,100,562) Loans from and Associate Companies (net of repayment) (7,545,149) Net cash (used in) / from Financing Activities (14,350,113) (9,100,562) Net (decrease) / increase in cash and cash equivalents (A+B+C) 107,206, ,259,372 Cash and cash equivalents at beginning of the year 1,997,738,088 1,390,252,451 Foreign Exchange difference in cash and cash equivalents 71,099, ,226,265 Cash and cash equivalents at end of the year 2,176,043,425 1,997,738,088 Notes : 1. Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard (AS) 3; Cash Flow Statements, as specified in the Companies (Accounting Standards) Rules, Cash & Cash equivalent represent fixed deposits, cash and bank balances. 3. Previous year s figure have been regrouped / reclassified wherever necessary 2012 R 2011 R As per our report attached SHARP & TANNAN Chartered Accountants Firm s Registration No W By the hand of For and on behalf of the Board FIRDOSH D. BUCHIA Partner Membership No Place : Mumbai Date : May 17, 2013 N. HARIHARAN R. GOVINDAN Director Director Place : Mumbai Date : May 17, 2013 S-2065

8 NOTES FORMING PART OF ACCOUNTS As at December 31, 2012 As at December 31, 2011 R R NOTE - A SHARE CAPITAL A(i) Authorised, issued, subscribed and paid-up: Authorised: USD 380,000,000 in Equivalent Shares of USD 150,000 each (Previous year USD 380,000,000 in Equivalent shares of USD 150,000 each) Issued, Subscribed and Paid up 1829 Equity Shares of USD 150,000 each (Previous year 1829 Equity Shares of USD 150,000 each) Note : All the above equity shares are held by Larsen & Toubro Limited, the holding company. Note : All the above equity shares are held by Larsen & Toubro Limited, the holding company. A(ii) Reconciliation of the number of equity shares and share capital: 16,588,690,735 16,588,690,735 11,473,973,500 11,473,973,500 As at December 31, 2012 As at December 31, 2011 No. of Shares R No. of Shares R Issued, Subscribed and fully paid up equity shares outstanding at 1,829 11,473,973,500 1,829 11,473,973,500 Add : Shares issued during the year Issued, Subscribed and fully paid up equity shares outstanding at 1,829 11,473,973,500 1,829 11,473,973,500 A(iii) Terms / rights / restriction attached to equity shares The has only one class of equity shares having a par value of USD 1,50,000 per share. Each holder of equity shares is entitled to one vote per share. A(iv) The has not reserved any shares for issue under options and contracts/commitments for the sale of shares/disinvestments. A(v) The aggregate number of equity shares allotted as fully paid up by way of bonus shares in immediately preceding five years ended December 31, 2012: Nil (previous period of five years ended December 31, 2011 is Nil) A(vi) The aggregate number of equity shares issued pursuant to contract, without payment being received in cash in immediately preceding five years ended December 31, 2012: Nil (previous period of five years ended December 31, 2011 is Nil) A(vii) The Directors have not recommended payment of dividend during the year.no As at December 31, 2012 As at December 31, 2011 R R R R NOTE - B RESERVES AND SURPLUS Foreign Currency Translation Reserve As per last Balance Sheet 2,168,612, ,769,131 Addition/(deduction) during the year 383,387,630 1,645,843,031 2,551,999,792 2,168,612,162 Surplus / (deficit) in the Statement of Profit and Loss As per last Balance Sheet (3,145,194,459) (3,479,616,426) Profit / (Loss) for the year 304,413, ,421,968 (2,840,781,339) (3,145,194,458) TOTAL (288,781,547) (976,582,296) S-2066

9 As at December 31, 2012 As at December 31, 2011 R R R R NOTE - C LONG TERM PROVISIONS Provision for employee benefits Gratuity 515, ,460 TOTAL 515, ,460 NOTE - D(i) SHORT TERM BORROWINGS Loans from related parties: Inter-corporate borrowings from subsidiary company (unsecured) 333,808, ,622,788 TOTAL 333,808, ,623,850 NOTE - D(i)(a) SHORT TERM BORROWINGS Nature As at As at Rate of Interest Terms of Repayment of loan outstanding as at December 31, 2012 R R Inter-corporate Borrowings from subsidiary company (unsecured) 333,808, ,622,788 At pre-determined rates Repayable on Demand (The lender and Borrower reserve the right to call back or repay the same on demand) As at December 31, 2012 As at December 31, 2011 R R R R NOTE - D(ii) TRADE PAYABLES Due to Related Parties companies 5,163,399 Due to Others 823,715 28,827, ,715 33,990,545 TOTAL 823,715 33,990,545 NOTE - D(iii) OTHER CURRENT LIABILITIES Interest accrued and due on borrowings 1,062 Other payables 1,588,586 TOTAL 1,588,586 1,062 S-2067

10 NOTE - E FIXED ASSETS - TANGIBLE INTANGIBLE ASSETS As at Exchange difference included in the translation reserve COST / VALUATION DEPRECIATION BOOK VALUE Additions Deductions As at Up to Exchange difference included in the translation reserve For the Year Deductions As at As at As at R R R R R R R R R R R R Buildings 27,552, ,602 28,533,441 5,240, ,487 2,798,263 8,315,684 20,217,757 22,311,906 Plant & Equipment 249,354,528 8,874,605 (116,922,010) 141,307,123 83,363,752 3,701,410 22,843,059 (32,550,166) 77,358,055 63,949, ,990,776 Furniture & Fixtures 4,740, ,833 87,002 (260,456) 4,736,169 3,288, ,678 1,388,263 (260,346) 4,578, ,888 1,452,104 Vehicles 8,292, ,144 8,588,074 7,157, , ,867 7,783, ,632 1,135,651 TOTAL 289,941,087 10,319,184 87,002 (117,182,466) 183,164,807 99,050,651 4,405,871 27,389,452 (32,810,512) 98,035,462 85,129, ,890,437 previous year 181,077,380 34,024,106 97,654,094 (22,814,493) 196,489,050 75,626,241 17,323,498 22,889,844 (16,788,934) 75,626,241 Add: Capital work-in-progress 85,129, ,890,437 As at December 31, 2012 As at December 31, 2011 R R R R NOTE - F NON-CURRENT INVESTMENTS (at cost unless otherwise specified) Long Term Investments: 1. Trade Investments (i) Investments in Equity instruments fully paid (a) Companies: Larsen & Toubro Electromech LLC 37,338,030 36,054, ,000 shares of Omani Riyal 1 each Larsen & Toubro (Oman) LLC 96,493,347 93,177, ,144 shares of Omani Riyal 1 each Larsen & Toubro Saudi Arabia LLC 24,088 23, shares of Saudi Riyal 1 each Larsen & Toubro Qatar LLC 1,526,826 1,474, shares of Qatari Riyal 1000 each Larsen & Toubro (East Asia) Sdn.Bhd 123, , ,000 shares of Malaysian ringgit 1 each Larsen & Toubro Overseas Projects Nigeria Limited 3,849,650 3,717,350 9,999,998 shares of Naira 1 each L&T Modular Fabrication Yard LLC 268,986, ,742,025 1,875,000 shares of Omani Riyal 1 each Larsen & Toubro Readymix Concrete Industries LLC 7,337,653 7,085, shares of UAE Dirham 1000 each L&T Electricals Saudi Arabia Limited 198,087, ,280,015 13,500 shares of Saudi Riyal 1000 each Larsen & Toubro Kuwait Construction General Contracting 187,787, ,334,139 WLL 980 shares of Kuwaiti Dinar 1000 each Larsen & Toubro (Qingdao) Rubber Machinery Limited. 497,387, ,293,622 Equity shares aggregating to US Dollar 9,044,226 Offshore International FZC 2,169, shares of UAE Dirham 1000 each S-2068

11 As at December 31, 2012 As at December 31, 2011 R R R R Larsen & Toubro (Wuxi) Electric Limited 322,889,977 Equity shares aggregating to Chinese RMB 43,369,386 Larsen & Toubro ATCO Saudia LLC 7,240,367 6,991, shares of Saudi Riyal 1000 each Larsen & Toubro Heavy Engineering LLC 570,530, ,782,384 39,65,500 shares of Omani Riyal 1 each L&T Electrical & Automation FZE 14,974,809 14,460,173 1 Equity share of AED 1,000,000 PT Tamco Indonesia 115,354, ,390, ,500 shares of Indonesian Rupiah 2010 each Tamco Electrical Industries Australia Pty Limited 283,865, ,109,689 13,500,000 shares of Australian Dollar 1 each Tamco Switchgear (Malaysia) Sdn.Bhd 4,000,430,451 3,862,948, ,000,000 shares of Malaysian Ringgits 1 each Thalest Limited, U K 203,535, ,656 shares of GBP 1 each Larsen & Toubro T and D SA (PTY) Ltd 44,053,470 42,539, shares of South African Rand Larsen & Toubro Consultoria E Projeto Ltda 28,707,390 27,720, ,300 shares of Brazilian Real 1 each 6,567,634,778 6,470,304,015 (b) Associate Companies: L&T Camp Facilities LLC 36,690,684 35,429,744 Equity shares aggregating to US Dollar 667,164 Larsen & Toubro (Jiangsu) Valve Ltd 117,880, ,317,597 Equity shares aggregating to Chinese RMB 16,000,000 (previous year equity shares aggregating to RMB 64,000,000) 2. Other Investments Partly paid equity shares in incorporated Joint Ventures Indiran Engineering Projects And Systems Kish (LLC) 4,812,063 4,646, shares of Irani Riyal 1,000,000 each 159,383, ,394,029 TOTAL 6,727,018,098 6,965,698,044 Note: The above investments are unquoted. S-2069

12 As at December 31, 2012 As at December 31, 2011 R R R R NOTE - G LONG TERM LOANS AND ADVANCES Unsecured-Considered good Loans and advances to related Parties companies Loans 1,724,243,057 1,410,025,692 Inter-corporate deposits including interest accrued 32,997,000 57,318,935 Associate companies Loans 122,718,593 80,094,926 Joint Ventures Companies Loans 2,887,237 2,788,013 Considered Doubtful Loan to 244,249, ,855,714 2,127,095,675 1,786,083,280 Less: Provision for Doubtful Advances 244,249, ,855,714 1,882,845,887 1,550,227,566 Other Loans and Advances Loan to Joint Venture Partners 126,176, ,840,182 TOTAL 2,009,022,345 1,672,067,748 NOTE - H(i) TRADE RECEIVABLES Unsecured Debts outstanding for more than 6 months: Considered good Considered doubtful 98,089,962 94,718,928 98,089,962 94,718,928 Other Debts: Considered good 16,272,415 14,143, ,362, ,861,957 Less: Provision for Doubtful Debts 98,089,962 94,718,928 16,272,415 14,143,029 TOTAL 16,272,415 14,143,029 NOTE - H(ii) CASH AND BANK BALANCES Cash and Cash Equivalent Cash on hand 62,034 97,341 Cheques on hand 7,723,443 Balances with banks 11,936,829 41,129,078 Fixed deposits with banks including interest accrued thereon 1,095,881,021 1,020,576,722 1,115,603,327 1,061,803,141 Other Bank Balances Fixed deposits with banks including interest accrued thereon 1,060,440, ,934,947 TOTAL 2,176,043,425 1,997,738,088 S-2070

13 As at December 31, 2012 As at December 31, 2011 R R R R NOTE - H(iii) SHORT TERM LOANS AND ADVANCES Unsecured-Considered good companies Intercorporate Deposits Including Interest Accrued 41,010,046 18,439,755 Others Considered good Security Deposits 269, ,586 Advance recoverable in cash or in kind 467,163,223 2,138,372 TOTAL 508,443,129 20,838, R R NOTE - I REVENUE FROM OPERATIONS Revenue from hiring of plant and machinery 57,356,634 48,034,647 TOTAL 57,356,634 48,034,647 NOTE - J OTHER INCOME Interest Income Interest income on Banks Deposits 28,593,998 13,022,173 Interest income on Inter-corporate Deposits to Subsidiaries 6,479,464 4,005,053 Interest income Others 502,556 Dividend Income From long term Investments Companies 301,962, ,107,932 Net Gain/(Loss) on Sale of Investments Long term Investments (net) (18,740,185) 42,945,916 Net Gain/(Loss) on Sale of Fixed Assets 619,243 1,039,923 Miscellaneous Income Miscellaneous Receipts 196, ,595 TOTAL 319,613, ,336,592 NOTE - K OPERATING EXPENSES Repairs & Maintenances - Plant & Machinery 1,649, ,307 Insurance 1,492,642 1,133,762 Freight & Forwarding 19,821 65,572 TOTAL 3,162,020 2,007,641 NOTE - L EMPLOYEE BENEFIT EXPENSES Salaries 12,097,199 9,656,472 Welfare and other expenses 2,161,757 2,271,973 TOTAL 14,258,956 11,928,445 S-2071

14 R R R R NOTE - M ADMINISTRATION AND OTHER EXPENSES Power & fuel 593, ,627 Professional fees 16,648,973 4,113,365 Audit fees 464, ,872 Rent 1,006, ,672 Rates & taxes 3,019,118 1,050,955 Travelling & conveyance 1,689,413 1,716,485 General repairs and maintenance 440, ,115 Telephone, postage and telegram 727, ,700 Printing and stationery 98,465 94,802 Bank charges 174, ,369 Security charges 1,148,334 1,008,135 Exchange (gain)/loss (net) (11,990,742) (1,196,757) Miscellaneous expenses 721,385 1,321,056 Bad debts and advances written off 1,623,446,390 Less : Provision for doubtful debts and advances written back 1,623,446,390 Provision no longer required TOTAL 14,741,530 5,299,041 NOTE - N FINANCE COST Interest on bank overdraft 31,040 Interest on Inter-Corporate deposit from 6,804,964 9,069,522 TOTAL 6,804,964 9,100,562 NOTE - O O(1) Disclosure of related parties/related party transactions pursuant to Accounting Standard 18 Related Party Disclosures : I. List of parties who exercise control Sr No. Name of the related party Relationship 1. Larsen & Toubro Limited Holding II. List of parties over which control exists Sr No. Name of the related party Relationship 1 Larsen & Toubro Oman LLC * 2 Larsen & Toubro Saudi Arabia LLC * 3 Larsen & Toubro Electromech LLC * 4 L&T Modular Fabrication Yard LLC * 5 Larsen & Toubro ATCO Saudia LLC ** 6 Larsen & Toubro (Qingdao) Rubber Machinery Limited * 7 Larsen & Toubro Readymix Concrete Industries LLC ** S-2072

15 Sr No. Name of the related party Relationship 8 L&T Electrical & Automation Saudi Arabia Limited (LLC) * 9 Larsen & Toubro Qatar LLC ** 10 Larsen & Toubro (East Asia) Sdn.Bhd ** 11 L&T Overseas Projects Nigeria Limited Wholly owned 12 Larsen &Toubro Kuwait Construction General Contracting WLL ** 13 Thalest Limited Wholly owned 14 Bond Instrumentation and Process Control Limited of Thalest Limited 15 Servowatch Inc of Thalest Limited 16 Servowatch System Limited of Thalest Limited III. 17 Henikwon Corporation Sdn.Bhd of Tamco Switchgear (Malaysia) Sdn.Bhd 18 Qingdao Larsen & Toubro Trading Limited of Larsen & Toubro (Qingdao) Rubber Machinery Limited 19 Larsen & Toubro Heavy Engineering LLC * 20 Tamco Switchgear (Malaysia) Sdn.Bhd Wholly owned 21 PT Tamco Indonesia * 22 Tamco Electrical Industries Australia Pty Limited Wholly owned 23 L&T Electrical & Automation FZE Wholly owned 24 Larsen & Toubro T&D SA (PTY) Ltd * 25 Larsen & Toubro Consultoria E Projeto Ltda * * The holds more than one-half in nominal value of the share capital ** The controls the composition of the Board of Directors. Names of the related parties with whom transactions were carried out during the year, description of relationship and particulars of transactions. Sr No. Related party Nature of relationship 1. Larsen & Toubro Limited Holding 2 Larsen & Toubro Oman LLC 3 Larsen & Toubro Readymix Concrete Industries LLC 4 Larsen & Toubro Saudi Arabia LLC 5 Larsen & Toubro Electromech LLC 6 Larsen & Toubro Oman LLC 7 L&T Electrical & Automation FZE 8 Tamco Switchgear (Malaysia) SDN.BHD. 9 Larsen & Toubro Limited Holding 10 Larsen & Toubro Readymix Concrete Industries LLC 11 L&T Electrical & Automation Saudi Arabia Limited Nature of transaction 2012 Amount in R 2011 Amount in R Equipment Hire Income 35,036,805 31,508,684 Equipment Hire Income 11,087,984 12,945,181 Equipment Hire Income 575,446 3,580,782 Equipment Hire Income 10,656,400 Dividend Income 80,918,947 47,229,719 Dividend Income 45,865,945 40,240,108 Dividend Income 1,450,816 Dividend Income 173,726, ,638,078 Sale of plant & equipment Sale of Plant & Equipment 84,371,734 4,674,833 46,406,652 Interest Income 2,540,006 3,709,382 S-2073

16 Sr No. Related party 12 Larsen & Toubro Readymix Concrete Industries LLC Nature of relationship 13 L&T Electrical & Automation FZE 14 Tamco Switchgear (Malaysia) SDN.BHD. 15 Larsen & Toubro Limited Holding 16 Larsen & Toubro ATCO Saudia LLC 17 Tamco Switchgear (Malaysia) SDN.BHD. 18 L&T Realty FZE Fellow 19 Larsen & Toubro Heavy Engineering LLC 20 Larsen & Toubro (Qingdao) Rubber Machinery Co.Ltd 21 Larsen & Toubro T&D SA (Pty) Limited, South Africa 22 Larsen & Toubro Consultoria E Projeto Ltda, Brazil 23 Thalest Ltd, UK 24 L&T Camp Facilities LLC Associate 25 Larsen & Toubro Heavy Engineering LLC 26 Larsen & Toubro Readymix Concrete Industries LLC 27 Larsen & Toubro Qatar LLC 28 Larsen & Toubro Electrical & Automation Saudi Arabia Ltd 29 Larsen & Toubro ATCO Saudia LLC 30 Tamco Switchgear (Malaysia) SDN.BHD. Nature of transaction 2012 Amount in R 2011 Amount in R Interest Income 3,939, ,672 Interest Expenses 557,125 Interest Expenses 6,804,911 8,512,397 Cost of Services rendered by 9,627,684 8,967,856 Overhead expenses 391,356 1,083,101 Overhead Expenses 356,088 Cost of services 191, ,746 Subscription of Equity 145, ,778,202 Subscription of Equity 159,315,000 Subscription of Equity 42,539,548 Subscription of Equity 27,720,810 Subscription of Equity 203,535,725 Loan 39,773,099 48,007,764 Loan Advanced 364,970,578 Loan / Part Repayment of loan Part repayment of loan Part repayment of loan Loan advance net of repayment Repayment of loan 81,628, ,721,659 7,273,208 26,361, , ,897 (iv) Amount due to/from related parties: Sr No. Related party Nature of Transaction 1. Larsen & Toubro Limited Trade receivables 2 Larsen & Toubro Qatar LLC Trade receivables 3 Larsen & Toubro Readymix Concrete Industries LLC 4 Larsen & Toubro (Oman) LLC Trade receivables Trade receivables Nature of relationship Holding 2012 Amount in R Due from related parties Due to related parties 2011 Amount in R Due from related parties Due to related parties 98,108,880 7,204,118 98,089,962 94,718,904 6,938,912 2,535,270 S-2074

17 Sr No. Related party Nature of Transaction 5 L&T Camp Facilities LLC Loan 6 Tamco Switchgear (Malaysia) SDN.BHD. 7 Larsen & Toubro Saudi Arabia LLC Trade payables Trade payables 8 Larsen & Toubro Qatar LLC Loan 9 L&T Electrical & Automation Saudi Arabia Limited 10 L&T Modular Fabrication Yard LLC 11 Larsen & Toubro Readymix Concrete Industries LLC 12 IndIran Engineering Project & Systems Kish (LLC) 13 L&T Electricals & Automation FZE Intercorporate deposit Loan Loan Loan Loan Nature of relationship Associate 2012 Amount in R Due from related parties Due to related parties 2011 Amount in R Due from related parties Due to related parties 122,718,593 80,094, ,926 4,386,473 Jointly Controlled Entity 244,249, ,855,714 32,997,000 57,318, ,112, ,829, ,184, ,773,544 2,887,238 2,788,013 40,020,191 38,644, Larsen & Toubro ATCO Saudia LLC Loan 73,631,156 70,787, Larsen & Toubro Saudi Arabia LLC Loan 172,785, ,847, Larsen & Toubro Heavy Engineering LLC Loan 791,817, ,177, Tamco Switchgear (Malaysia) Sdn.Bhd. Loan 404, Tamco Switchgear (Malaysia) Sdn.Bhd. Loan availed 333,808, ,622,788 (v) Notes to Related Party Transactions: a) The has made a provision towards doubtful advances as at December 31, 2012 towards amounts due from Larsen & Toubro Qatar LLC which has accumulated losses as at December 31, V 244,249,788 (Previous year : V 235,855,714) b) The has also made a provision towards doubtful debt amounting to V 98,089,962 in earlier years. c) The long term loans which are interest-free, are for the term of those subsidiaries and associates, except for the loans given to L&T Electrical & Automation Saudi Arabia Co. Ltd and L&T Readymix Concrete Industries LLC which bear interest at the rate of 5% per annum and 4.42% p.a. respectively. O(2) Operating Lease (i) The has entered into non-cancellable operating lease for rent of plot of land situated at Hamriyah Free Zone. The future minimum lease payments are as follows: Amount in R Not later than one year 1,165,234 1,085,572 Between one and five year 4,113,406 4,283,821 Later than 5 years Not Established Not Established S-2075

18 (ii) Contingent rent recognized in Profit and Loss Account is V Nil (previous year Nil). (iii) Lease Rental expense in respect of operating leases: V 1,006,497 (previous year : V 596,672). O(3) Taxation There is no income tax payable in UAE where the is registered. However, the provision for current tax includes withholding tax of V 6,200,373 on sale of investment in subsidiaries (previous year V 8,723,738). O(4) There are no transactions with micro and small enterprises as defined in the Micro, Small & Medium Enterprises Development Act, 2006 during the year. O(5) Auditors remuneration and expenses charged to the accounts: R R Audit fees 464, ,872 O(6) Segment Reporting: As per Accounting Standard 17 on Segmental Reporting, the is engaged in the business of hiring of plant & equipment and forward trading. The has income only from equipment hiring in the current and previous year and there are no forward trading transactions. The entire operations of the are in United Arab Emirates. O(7) The estimated amount of contracts remaining to be executed on capital account (net of advances): V NIL (previous year V NIL) O(8) The has reviewed the future discounted cash flows based on value in use of fixed assets and satisfied that the recoverable amount is more than the amount carried in the books. Accordingly, no provision is required to be made for impairment in the accounts. O(9) Contingent Liabilities: R R Banker s Letters of guarantee issued as counter- 39,885, ,527,402 guarantee for the facilities granted to / Associate Companies Corporate Guarantees given to Banks with respect 14,156,427,935 8,846,602,635 to facilities availed by Companies O(10) Basic and diluted Earnings per share (EPS): Particulars Profit after tax as per accounts (V) 304,413, ,421,968 Weighted average number of equity shares 1,829 1,829 Basic & Diluted EPS (V) 166, ,844 O(11) Previous year s figures have been regrouped / reclassified wherever necessary to confirm to the presentation adopted in the current year. NOTE - P 1. SIGNIFICANT ACCOUNTING POLICIES: Brief Description of the Larsen & Toubro International FZE ( the entity ) was incorporated on September 25, 2001 in the Hamriyah Free Zone, Sharjah as a Free Zone Establishment with Limited Liability under Hamriyah Free Zone Implementing Rules and Regulations issued pursuant to SharjahEmiri Decree No. 6 of Basis of Accounting The maintains its accounts on accrual basis following the historical cost convention in accordance with the Generally Accepted Accounting Principles (GAAP) in compliance with the provisions of the Companies Act, 1956 and the Accounting Standards as specified in the Companies (Accounting Standards) Rules, 2006 prescribed by the Central Government. Further the guidance notes/announcements issued by ICAI are also considered, wherever applicable. The preparation of financial statements in conformity with GAAP requires the management of the to make estimates and assumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosures relating to contingent liabilities as on the date of the financial statements. Examples of such estimates include the useful lives of tangible and intangible fixed assets, allowance for doubtful debts / advances etc. Difference, if any, between the actual results and estimates is recognized in the period in which the results are known. S-2076

19 2. Presentation and disclosure of financial statements The Balance Sheet and the Statement of Profit and Loss are prepared and presented in the format prescribed in the Schedule VI to thecompanies Act, 1956 ( the Act ). The Cash Flow Statement has been prepared and presented as per the requirements of AccountingStandard (AS) 3 Cash flowstatements. The disclosure requirements with respect to items in the Balance Sheet and Statement ofprofit and Loss, as prescribed in the Schedule VI to the Act, are presented by way of notes forming part of accounts along with theother notes required to be disclosed under the notified Accounting Standards. 3. Revenue Recognition a) Interest income is accrued at applicable interest rate. b) Dividend Income is accounted when right to receive the same is established. c) Revenue from hire charges of equipment is accounted based on contract with customers. 4. Extraordinary and exceptional items Income or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the are classified as extraordinary items. Specific disclosure of such events/transactions is made in the financial statements. Similarly, any external event beyond the control of the, significantly impacting income or expense, is also treated as extraordinary item and disclosed as such. On certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities of the,is such that its disclosure improves an understanding of the performance of the. Such income or expense is classified as an exceptional item and accordingly disclosed in the notes to accounts. 5. Tangible Fixed Assets Tangible fixed assets are stated at original cost net of tax / duty credits availed, if any, less accumulated depreciation and accumulated impairment. Administrative and other general overhead expenses that are specifically attributable to construction or acquisition of fixed assets or bringing the fixed assets to working condition are allocated and capitalised as a part of the cost of the fixed assets. Tangible assets not ready for the intended use on the date of the Balance Sheet are disclosed as capital work-in-progress. (Also refer to policy on impairment of assets and borrowing costs). 6. Depreciation Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows: Category of Asset Rate of Depreciation (% p.a) Plant and equipment 10% to 50% Vehicles 20% Furniture & Fixtures 33.33% Office Equipment 33.33% Buildings 10% The above rates are higher than the rates specified under Schedule XIV of the Companies Act, 1956 for the respective categories. Depreciation for, additions to / deductions from, owned assets is calculated pro rata from / to the month of additions / deductions. Extra shift depreciation is provided on a location basis. Depreciation charge for impaired assets is adjusted in future periods in such a manner that the revised carrying amount of the assets is allocated over its remaining useful life. 7. Intangible assets and amortization Intangible assets are stated at original cost net of tax/duty credits availed, if any, less accumulated amortization and cumulative impairment. Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. Intangible assets are amortized over their useful life as follows: Specialized Software is amortized over a period of six years. Administrative and other general overhead expenses that are specifically attributable to acquisition of intangible assets are allocated and capitalized as a part of the cost of the intangible assets. Amortization on impaired assets is provided by adjusting the amortization charges in the remaining periods so as to allocate the assets revised carrying amount over its remaining useful life. 8. Impairment As at each Balance Sheet date, the carrying amount of assets is tested for impairment so as to determine: a) the provision of impairment loss, if any; and b) the reversal of impairment loss recognized in previous periods, if any. S-2077

20 Impairment loss recognized when the carrying amount of assets exceeds its recoverable amount. Recoverable amount is determined: a) in the case of an individual asset, at the higher of the net selling price and the value in use; b) in the case of a cash generating unit (a group of assets that generates identified, independent cash flows), at the higher of the cash generating unit s net selling price and the value in use. (Value in use is determined as present value of estimated future cash flows from the continuing use of an asset and from its disposal at the end of its useful life). 9. Investments Trade investments comprise investments in subsidiary companies and entities in which the has strategic business interest. Investments, which are readily realizable and are intended to be held for not more than one year from the date of acquisition, are classified as current investments. All other investments are classified as long term investments. Long term investments including trade investments are carried at cost, after providing for any diminution in value, if such diminution is other than temporary in nature. Current investments are carried at lower of cost and fair value. The determination of carrying amount of such investments is done on the basis of weighted average cost of each individual investment. Purchase and sale of investments are recognised based on the trade date of accounting. 10. Cash and bank balances Cash and bank balances also include fixed deposits, margin money deposits, earmarked balances with banks and other bank balances which have restrictions on repatriation. Short term and liquid investments being not free from more than insignificant risk of change in value, are not included as part of cash and cash equivalents. 11. Borrowing Costs Borrowing costs that are attributable to the acquisition, construction, or production of a qualifying asset are capitalized or inventorised as part of such asset till such time as the asset is ready for its intended use or sale. Qualifying asset is an asset that necessarily takes substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as an expense in the year in which they are incurred. 12. Foreign Currency Transactions a) The functional currency of the is United States Dollar (USD). Accounts are translated in Indian Rupees as follows:. b) Share capital is retained at the initial contribution amount. c) All other assets and liabilities are translated at year end rate. d) Revenue transactions are translated at the average rate. e) The resultant difference is accounted as translation reserve in the Balance Sheet. 13. Provisions, contingent liabilities and contingent assets Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if a) the has a present obligation as a result of a past event b) a probable outflow of resources is expected to settle the obligation and c) the amount of the obligation can be reliably estimated. Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received. Contingent Liability is disclosed in the case of a) a present obligation arising from a past events, when it is not probable that an outflow of resources will be required to settle the obligation. b) a present obligation arising from past events when no reliable estimate is possible. c) a possible obligation arising from past events where the probability of outflow of resources is not remote. Contingent Assets are neither recognized, nor disclosed. Provisions, contingent liabilities and contingent assets are reviewed at each Balance Sheet date. S-2078