Mirza International Ltd

Dear Shareholders,

The Directors of your company have pleasure in presenting the Thirty-first AnnualReport together with Audited Accounts of the company for the year ended 31^stMarch, 2010.

FINANCIAL RESULTS

PERFORMANCE OF THE COMPANY

During the year under review, the Company recorded a Gross Income of Rs. 380.03 Croresagainst Rs 361.38 Crores in the previous year. The operating profit before depreciationand interest has been Rs. 52.98 Crores as against Rs 33.66 Crores in the previous year.After charging Interest of Rs. 13.97 Crores (Rs 14.44 Crores), depreciation of Rs. 11.40Crores (Rs 10.11 Crores) and providing for tax Rs. 9.43 Crores (Rs 3.76 Crores), theprofit after tax for the year remained at Rs.18.18 Crores compared to Rs 5.36 Crore in theprevious year, thus showing a healthy growth of 239%.

During the year, your Company achieved significant improvement in its operations. TheCompany once again managed double digit growth in domestic operations and an overallgrowth of around 5%. The cost-cutting measures implemented by the Management have helpedCompany to counter inflationary trend. The same is reflected in the increasedprofitability during the year. Further, the increased focus on domestic market has startedgiving results.

Over the years, the Company has graduated from being a small exporter of finishedleather to branded shoes. The main reason behind the phenomenal success of the company ishigh quality standards set by the promoters, its abilities to venture into newer areas andre-invent ourselves with the time. The company focussed on supplying high quality leatherand leather products to the overseas markets and gradually became one of the largestexporters of finished leather in the country.

In addition to direct sales to global footwear retailers, the company also has a strongpresence in branded segment through three brands namely, Redtape, Oaktrak, Redtape Gal.With a presence in the top European countries and developments in the domestic markets,the company expects its revenues to increase considerably in the future. Our committedteam, leadership position, financial strength and our values are the four wheels on whichwe will move ahead.

DIVIDEND

Considering the improved profitability, your Directors are pleased to recommend ahigher dividend of Re. 0.40 (20%) per Equity Share of Rs. 2/- each for the year ended 31^stMarch 2010 as against Re. 0.20 (10%) per Equity Share in the previous year. If approved,the dividend will absorb Rs. 4.33 Crores (including Rs. 0.62 Crores towards dividend tax).

EXPANSION PROGRAMME

In order to cater to the exponential growth emanating simultaneously from the newmarkets the ambitious expansion programme chalked out by the Company for building largeshoe manufacturing capacities at Unnao and Greater Noida in planned phases, will take thepresent capacity of 4.0 million pairs/annum to 10.0 million pairs/ annum over the nextthree years. In this direction, the First phase of expansion programme at Unnao has beensuccessfully commissioned in a record time and Company is planning to add production ofadditional 12 Lakhs pairs of Footwear for Gents and 5 Lakhs pairs for Ladies by the end ofensuing financial year through ongoing expansion of capacities at Unnao and Noida. Thecompany has moved to the next phase by acquiring mass piece of land at Greater Noida. Theconstruction activity has already begun. This ambitious expansion plan is being financedthrough a mix of internal accruals and borrowings.

Industry Structure and Developments

Leather Industry occupies a prominent place in the Indian Economy due to its massivepotential for employment and exports. The leather sector has been identified as a thrustsector for exports promotion in India. There has been increasing emphasis on its planneddevelopment aimed at optimum utilization of available raw-materials for maximizing thereturns specially exports. During the past four decades, from the status of exporter ofraw hides and semi finished leather, the country has now turned into a major importer ofthese goods. It is now the major supplier of value added goods like footwear, bags andtravel accessories like belts and wallets. Recognizing the importance of leather sector,the government has initiated a number of measures including subsidy schemes aiming ataccelerating growth over the coming years and competing with low price economies.

On account of a difficult economic environment and a continued slowdown in thedeveloped world, the export of leather and leather products for the first nine months of2009-10 i.e. April-December 2009 dipped to US$ 2763.11 million against the performance ofUS$ 3139.32 million in the corresponding period of last year, registering a decline of11.98% in Dollar terms. In rupee terms, the export touched Rs 131937.19 million againstthe previous year performance of Rs 141718.34 million registering a decline of 6.90%. Theexports of leather footwear and footwear components shown a marginal decline of 2.04 % byposting an aggregate turnover of Rs. 56706.10 Million compared to Rs. 57889.21 Million inthe previous year period due to sluggish export recovery. India's local currency ratingoutlook has been raised to positive from stable global crises and is expected that it willresume its high growth path.

Opportunities, Threats, Risks & Concerns

The Cost advantage enjoyed by our Chinese counterpart are no more shackles to theCompany's performance thanks to various developments taking place in Chinese economy likeincreasing wage levels due to shortages of labor, stringent labor and environment laws,acute shortage of power, strengthening of Chinese Yuan which have impacted their costs bynearly 18-20% and have turned out to be positive signs for the Company. The variousIncentive Schemes announced by the Govt, is also going to be a backup for the Company inthe times to come. However, there are challenges on account of higher commodity prices,high food inflation and rising interest rates, coupled with the lack of infrastructurefacilities and the rise of low price economies like Vietnam, Sudan have posed a threat tothe Indian players.

Outlook

India's GDP growth has bounced back and is estimated to average 9% in the next decade.Fundamental factors like a young population, a growing middle-class section, rising incomelevel with growing household savings make India's medium to long term growth secure. OurGovernment has been deligent in its attempts to curb the effects of global slowdownthrough some well thought out policy reforms and stimulus packages, including additionalspending and excise duty cuts. All these have contributed to higher spends andconsumptions. Speedy implementation of GST will replace multiple indirect taxes levied onproducts and would lead to a uniform, simplified and single point taxation. It would helpto reduce prices, improve supply chain efficiencies and is expected to increase taxcollection.

Segment-wise Performance

The Company's business segment is primarily Shoe Division and Tannery Division. Duringthe year under review, the Shoe Division revenue was Rs. 346.72 Crores and TanneryDivision revenue was Rs. 92.70 Crores.

Internal Control System and their Adequacy

The Company has a well established framework of internal control systems, theconformity of which is periodically assessed by Internal Audit and regularly reviewed bythe Statutory Auditors and the Audit Committee of the Board. Recommendations, if any, areassessed and implemented, if found necessary.

Risk Management

The Company's Risk Management framework ensures compliance with the provisions ofClause 49 of the Listing Agreement. Senior

Management has ownership of key risks, their management and mitigation plans. TheBoard, through the Audit Committee, headed by a Non-Executive Independent Director,reviews the key risks, the internal control framework and the audit findings.

Human Resources

The company recognizes human resources as its strength and hence welfare activitiesform an integral part of your Company's strategy for growth. On Industrial Relationsfront, your company continued to enjoy a cordial and harmonious relations with itsemployees and Unions. Your company had a staff strength of 1955 employees as on 31^stMarch, 2010.

Corporate Social Responsibility

Corporate Social Responsibility has always been at the heart of the activities of yourCompany. The Company has been making humble contributions and taking meaningful measuresto enrich the socio-economic environment and living standard of the people aroundespecially the backwards and economically weaker sections of the society. As a part of itsCorporate Social Responsibility, the Company undertakes a range of initiatives byextending infrastructure support to schools, free medical/ Eye camps etc.

Fixed Deposits

During the year, the Company has not accepted any fixed deposits. No amount on accountof principal or interest on deposits was outstanding on the date of the Balance Sheet.

Exports

On the exports front, your Company maintained growth momentum during the year. Thetotal revenues from the exports were Rs. 295.55 Crores as compared to 289.27 Crores duringthe previous year.

DOMESTIC SALES

Mirza has penetrated into the best of international fashion markets and is today arespected quality statement in its sphere of operations. Company's flagship brand'REDTAPE' enjoys customer's admiration and confidence and is one of the highest sellingbrand in Men's footwear market. Opportunities in Ladies footwear markets are also beingexplored successfully. Mirza now aims to provide lifestyle fashion solutions for theentire family across the world by foraying into apparels, leather accessories etc. underbrand 'REDTAPE'. The company plans to have 200 exclusive REDTAPE stores in India itself by2011 and will also launch it in France, Poland and Eastern European countries. The companyhas also launched REDTAPE online stores which is getting huge response.

DIRECTORS

As per statute, Mr Tauseef Ahmad Mirza, Mr. Shahid Ahmad Mirza and Dr. Yashveer Singhretire by rotation at the ensuing Annual General Meeting and being eligible, offerthemselves for re-appointment.

AUDITORS

M/s Khamesra Bhatia & Mehrotra, Chartered Accountants, Auditors of the Company willretire at the conclusion of the forthcoming Annual General Meeting and being eligibleoffer themselves for the re-appointment.

AUDITORS' REPORT

The notes to the accounts referred in the Auditor's Report are self-explanatory and,therefore, do not call for any further comments on the Auditors' Report under Section217(3) of the Companies Act, 1956. In respect of observations made by the Auditors intheir report, the notes to accounts referred in the Auditors' Report, adequately explainthe auditor's observation.

COST AUDIT

As per the Government directives, the Company's Cost records in respect of Footwear forthe year ended 31^st March, 2010 are being audited by Cost Auditor, Mr. A KSrivastava, Cost Accountant who was appointed by the Board with the approval of CentralGovernment.

PARTICULARS OF EMPLOYEES

A Statement of Particular of employees as specified under Section 217(2A) of theCompanies Act, 1956 read with Companies [Particulars of Employees] Rules, 1975 as amended,is set out in the Annexure forming part of the Directors' Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

The particulars as prescribed under section 217(1)(e) of the Companies Act, 1956 readwith Companies [Disclosure of Particulars in the report of Board of Directors] Rules,1988, are set out in Annexure forming part of the Directors' Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956 withrespect to Directors' Responsibility Statement, it is hereby confirmed:

i) That in the preparation of the annual accounts for the financial year ended 31^stMarch, 2010, applicable accounting standards had been followed along with properexplanation relating to material departures;

ii) That the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair picture of the state of affairs of the Company at the end of thefinancial year and of the profit of the Company for that period;

iii) That the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the company and for preventing and detecting fraud and other irregularities;

iv) That the Directors had prepared the annual accounts for the financial year ended 31^stMarch, 2010 on a 'going concern basis.

ACKNOWLEDGEMENTS

Your directors take this opportunity to express their gratitude to the bankers,employees, suppliers and the shareholders and various government departments for theirunstinted support and the confidence they have placed in our ability to make MIL a greatsuccess.

Energy Conservation measures taken during the year:

Energy conservation is an ongoing process and it is constant endeavour of the Companyto create awareness and motivate employees to conserve energy at every stage. Cost ofenergy was considerably reduced by supplies of power from UP Power Corp. Ltd. in place ofpower generated by own D.G. Sets. The Company has upgraded the power generation anddistribution system for long-term energy saving. Old Generators have been replaced bybetter fuel efficient Generators. Similarly, Coal fired boilers have been installed toreplace Diesel fired boilers to save energy cost.

Research and Development (R&D)

The Company has put R&D as an integral part of its production activities. Researchand Development Department has been set up in each of the Units of the company to exercisecontrol over Quality and for technical upgradation and innovation. The Company hasimported latest technology in Semi Auto Moulding System, to add on quality enhancment ofits products and to maintain its consistency. Company aims to cater to the demands of themarket place and growing consumer expectations, the continous focus is on creating newdesigns for Shoe Uppers and Shoes and are consumer centric and backs it with a strongquality assurance process. The Company is accredited with ISO-9001:2000(Quality ManagementSystem) and SA-8000:2001 (Social Accountability Management System) and equipped with Labsaccredited by SATRA Technology Centre (UK) and has been accorded Associate Membership byFootwear Design & Development Institute (Ministry of Commerce & Industry,Government of India).

Technology Absorption, Adaptation and Innovation

The Company develops in-house Technology and is not dependent on any outside Technology/source.

Foreign Exchange Earnings and Outgo

During the year, the foreign exchange earned was Rs. 262.45 Crores mainly on account ofexports. The foreign exchange outgo was Rs. 43.52 Crores.

STATEMENT OF PARTICULARS UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 READ WITHCOMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975 FORMING PART OF THE DIRECTORS' REPORT FORTHE YEAR ENDED 31^st MARCH, 2010.

Notes:

1. All appointments are on contractual basis except of Mr. Shuja Mirza.

2. Mr. Rashid Ahmed Mirza, Mr. Shahid Ahmad Mirza, Mr. Tauseef Ahmad Mirza, Mr. TasneefAhmad Mirza being brothers and Mr. Shuja Mirza being the son of Mr. Rashid Ahmed Mirza arerelated to each other within the meaning of Companies Act, 1956.

3. Remuneration includes salary and perquisites as per rules of the Company andrecorded under Income Tax Act, 1961.