KINETIC ENGINEERING LIMITED ANNUAL REPORT 2002-2003 CHAIRMAN'S REPORT Dear Shareholder, As the financial year 2002-03 draws to a close, I write to you with mixed feelings. While the balance sheet has not yet reflected growth, we have been taking steps and getting closer to fulfilling our goal of transformation from a moped company to a motorcycle manufacturing one. Several key initiatives that we undertook last year were carried out successfully. These initiatives which include brand building in motorcycles, strengthening of distribution network, cost reduction, work on improving product portfolio, improving the company's policies and systems, increasing exports, reducing debt etc., are aimed at paving the way for the company to emerge stronger in the coming year. The underlying strategy is to make a strong foray into motorcycles, while maintaining mopeds at the current levels. To quickly recap, last year we signed on legendary cricketer Kapil Dev to be our brand ambassador for our motorcycle Kinetic Boss. Kapil's association with the Boss was built right to the grassroots level by organizing a series of his visits across the country from Aurangabad to Gorakhpur. We also launched a special 250cc cruiser with breakthrough V- twin technology Kinetic Aquila. The Aquila has been appreciated as the most premium and overall superior motorcycle available in India. These two initiatives, combined with a total motorcycle sales growth of 45.97% have gone a long way into establishing Kinetic as a motorcycles manufacturer. In addition, this year, we expanded our distribution network by 430 numbers, largely by adding sales points in the rural areas, an important factor for motorcycle sales in the country. Cost reduction was achieved through a series of cost cutting measures including vendor base rationalization and renegotiation of our debt. We have also been working on expanding our product portfolio and have three important products lined up for the next year, exciting performance bike GF 170 (in two variants City and Sport), an executive bike and also a mini-bike designed for load carrying. We also achieved a significant growth in our export volumes (129.36%) and opened new overseas markets. Special highlights include our growing presence in US market, where we reached a milestone of over 25,000 units exported since we began. US being a very tough market in its expectations of quality, this is a significant achievement. New markets of Mexico, Sri Lanka, Bangladesh and African countries have also responded very enthusiastically to us. I believe that with this groundwork laid out, our company is now ready to capture a significant market share in the motorcycles market. As we know, India is the second largest two wheeler market in the world anti motorcycles have emerged as a passion and a must-have in the country, resulting in a growth of 25.350%. Last year, a total of 32.95 lakh motorcycles were sold. I believe that this is a very good industry to be present in today. And I am confident that next year, we will see ample growth and success in this segment. Thank you, Arun Firodia, Chairman