Dear Shareholders,
It is my pleasure to present to you, your company's annual report for 2010-11.

I am happy to report that the investments that we made during the last four years in our new direct-to-consumer business model began to bear fruit in 2010-11. Until 2006-07, your company was in b-to-b business, selling fine jewelry to major retailers such as Zales, Wal-Mart, QVC, Macy's in the US and Argos, QVC, and more in the UK. We began investing in consumer retailing through TV and the Internet in 2007, first in the UK and later in Germany and the US. The economic recession of 2008-09 delayed the maturity of this business model for some time, but helped us identify the discount segment within electronic retail, which we found was underserved. While there are 8-10 major players in electronic jewelry retail in both the US and UK markets, almost none of them addresses the discount market segment. Your company has direct sourcing capabilities, allowing us to competitively price products. This is both congruent to a discount model and is difficult to match by our competitors.

This new discount model requires that we run your company frugally. To this end, we have been able to lower the expense to sales ratio from 51% in 2009-10 to 46.5% in 2010-11. We will strive to reduce this ratio further in the coming years.

You may be aware that the US and UK economies continue to be stressed and that precious metals' prices continue to rise. To address these issues, your company has launched many new, inexpensive product lines such as natural gemstone-studded gold & platinum- bonded silver, copper, brass, Murano-style glass, gemstone-studded stainless steel, gemstone beads, glass beads and more. Customers have responded very well to these offerings, leading to a 19% increment in gross margin in 2010-11 over last year.

Your company has also invested in capacity expansion at it's Jaipur plant by constructing a new factory building at E-69, which adjoins the current premises at E-68, Sitapura. This capacity will support the larger requirement of our US and UK operations in the 2011 season and beyond. Your company has also initiated investments in retail units for a better customer experience and at it's Jaipur manufacturing unit for further improved quality and productivity. These initiatives will come on stream during 2011-12.

Our success in 2010-11 gives me immense confidence in our direct-to-consumer, discount business model. With a combined jewelry retail market of over $60 billion in the US and UK available to us, at least 10%, or $6 billion, of which is electronic commerce. I am confident that we have a long runway ahead of us and will see substantial growth in years to come. The success in 2010-11 could not have been achieved without the tireless efforts, dedication and commitment of our employees. I sincerely thank each and every one of the VGL Group employees for their support leading to this success. I also want to express sincerest thanks to my colleagues on the board for their support and guidance during the year, and would like to thank our bankers for their continued support to the company. Lastly, my sincere thanks to you, the valued shareholders, for your continued support for me and my colleagues on the board.
Thank You,
Sunil Agrawal
Chairman