Cosmo Films Ltd

To the Members of Cosmo Films Limited

1. We have audited the attached Balance Sheet of Cosmo Films Limited ('theCompany'), as at 31st March, 2012, and also the Statement of Profit and Loss and the CashFlow Statement for the year ended on that date annexed thereto (collectively referred asthe 'financial statements'). These financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinion on these financialstatements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally acceptedin India. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 ('the Order') (asamended) issued by the Central Government of India in terms of sub-section (4A) of Section227 of the Companies Act, 1956 ('the Act'), we enclose in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the Order.

4. 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 ourknowledge 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 theCompany so far as appears from our examination of those books and proper returns adequatefor the purposes of our audit have been received from the branches not visited by us ;

(c) The financial statements dealt with by this report are in agreement with the booksof account.

(d) On the basis of written representations received from the directors as on 31stMarch 2012 and taken on record by the Board of Directors, none of the directors isdisqualified as on 31 March 2012 from being appointed as a director in terms of clause (g)of sub-section (1) of Section 274 of the Act;

(e) In our opinion and to the best of our information and according to the explanationsgiven to us, the financial statements dealt with by this report comply with the accountingstandards referred to in subsection (3C) of Section 211 of the Act and give theinformation required by the Act, in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India, in the case of:

(i) the Balance Sheet, of the state of affairs of the Company as at 31st March 2012;

(ii) the Statement of Profit and Loss, of the profit for the year ended on that date;and

(iii) the Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure to the Independent Auditors' Report of even date to the members of Cosmo FilmsLimited, on the financial statements for the year ended 31 March 2012

Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit, we report that:

(i) (a) The Company has maintained proper records showing full particulars, includingquantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management during the yearand no material discrepancies were noticed on such verification. In our opinion, thefrequency of verification of the fixed assets is reasonable having regard to the size ofthe Company and the nature of its assets.

(c) In our opinion, a substantial part of fixed assets has not been disposed off duringthe year.

(ii) (a) The management has conducted physical verification of inventory at reasonableintervals during the year, except goods-in-transit.

(b) The procedures of physical verification of inventory followed by the management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) The Company is maintaining proper records of inventory and no materialdiscrepancies were noticed on physical verification.

(iii) (a) The Company has not granted any loan, secured or unsecured to companies,firms or other parties covered in the register maintained under Section 301 of the Act.Accordingly, the provisions of clauses 4(iii)(b) to 4(iii)(d) of the Order are notapplicable.

(b) The Company has not taken any loans, secured or unsecured from companies, firms orother parties covered in the register maintained under Section 301 of the Act.Accordingly, the provisions of clauses 4(iii)(f) and 4(iii)(g) of the Order are notapplicable.

(iv) In our opinion, there is an adequate internal control system commensurate with thesize of the Company and the nature of its business for the purchase of inventory and fixedassets and for the sale of goods.During the course of our audit, no major weakness hasbeen noticed in the internal control system in respect of these areas.

(v) (a) In our opinion, the particulars of all contracts or arrangements that need tobe entered into the register maintained under Section 301 of the Act have been so entered.

(b) In our opinion, the transactions made in pursuance of such contracts orarrangements and exceeding the value of rupees five lakhs in respect of any party duringthe year have been made at prices which are reasonable having regard to prevailing marketprices at the relevant time.

(vi) The Company has not accepted any deposits from the public within the meaning ofSections 58A and 58AA of the Act and the Companies (Acceptance of Deposits) Rules, 1975.Accordingly, the provisions of clause 4(vi) of the Order are not applicable.

(vii) In our opinion, the Company has an internal audit system commensurate with itssize and the nature of its business.

(viii) To the best of our knowledge and belief, the Central Government has notprescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209of the Act, in respect of Company's products. Accordingly, the provisions of clause4(viii) of the Order are not applicable.

(ix) (a) Undisputed statutory dues including provident fund, investor education andprotection fund, employees' state insurance, income-tax, sales-tax, wealth-tax,service-tax, custom duty, excise duty, cess and other material statutory dues, asapplicable, have generally been regularly deposited with the appropriate authorities,though there has been a slight delay in a few cases. No undisputed amounts payable inrespect thereof were outstanding at the year-end for a period of more than six months fromthe date they became payable.

(b) The dues outstanding in respect of sales-tax, income-tax, custom duty, wealth-tax,excise duty, cess on account of any dispute, are as follows:

(x) In our opinion, the Company has no accumulated losses at the end of the financialyear and it has not incurred cash losses in the current and the immediately precedingfinancial year.

(xi) The Company has not defaulted in repayment of dues to any bank or financialinstitution during the year. The Company did not have any outstanding debentures duringthe year.

(xii) The Company has not granted any loans and advances on the basis of security byway of pledge of shares, debentures and other securities. Accordingly, the provisions ofclause 4(xii) of the Order are not applicable.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/society. Accordingly, the provisions of clause 4(xiii) of the Order are not applicable.

(xiv) In our opinion, the Company is not dealing or trading in shares, securities,debentures and other investments. Accordingly, the provisions of clause 4(xiv) of theOrder are not applicable.

(xv) The Company has given a guarantee in respect of loans taken by subsidiaries frombanks, in respect of which no commission is charged from the subsidiaries. In our opinion,having regard to the long term involvement with the subsidiary companies and consideringthe explanations given to us in this regard, the terms and conditions of the above arenot, prima facie, prejudicial to the interests of the Company.

(xvi) In our opinion, the term loans were applied for the purpose for which the loanswere obtained, though idle/surplus funds which were not required for immediate utilizationhave been invested in liquid investments, payable on demand.

(xvii) In our opinion, no funds raised on short-term basis have been used for long-terminvestment.

(xviii) During the year, the Company has not made any preferential allotment of sharesto parties or companies covered in the register maintained under Section 301 of the Act.Accordingly, the provisions of clause 4(xviii) of the Order are not applicable.

(xix) The Company has neither issued nor had any outstanding debentures during theyear. Accordingly, the provisions of clause 4(xix) of the Order are not applicable.

(xx) The Company has not raised any money by public issues during the year.Accordingly, the provisions of clause 4(xx) of the Order are not applicable.

(xxi) No fraud on or by the Company has been noticed or reported during the periodcovered by our audit.