Galore Prints Industries Ltd

To

The Members of

M/s. Galore Prints Industries Limited

1. We have audited the attached Balance Sheet of M/s. Galore Prints Industries Ltd.as at 31^st March, 2011 and also the Profit & Loss Account and the Cash FlowStatement for the year ended March 31, 2011 annexed thereto all of which we have signedunder reference to this report. These financial Statements are the responsibilities of theCompany’s management. Our responsibility is to express our 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 misstatements. Anaudit includes examining on a test basis, evidence supporting the amount and disclosuresin the financial statement. 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. In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts together with the notes thereon/attached thereto and theStatement on Significant Accounting Policies give in the prescribed manner the informationrequired by the Companies Act, 1956 of India (the act) and also give respectively a trueand fair view in conformity with the accounting principles generally accepted in India,subject to para (A) below:

a) In the case of Balance Sheet, of the affairs of the Company as at March 31, 2011

b) In case of Profit & Loss account of the Loss for the year ended on that date;and

c) In the case of the Cash Flow Statement, of the cash flow for the year ended on thatdate.

No interest has been charged/paid on these advances and loans .

4. We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purpose of our audit. In our opinion, properbooks of accounts have been kept by the Company, as required by law so far as appears fromour examination of these books and the aforementioned Balance Sheet, Profit and LossAccount and the Cash Flow Statement are in agreement therewith.

5. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementhave been prepared in compliance with the applicable accounting standards referred to insub-section (3C) of section 211 of the Act, except the provision for Leave Encashmentand Gratuity payment has not been made as per AS 15 (Accounting for Retirement Benefits inFinancial Statements of Employers).

6. On the basis of written representations received from the Directors, as on March 31,2011 and taken on record by the Board of Directors of the Company, we report that none ofthe directors are disqualified as on March 31, 2011 from being appointed as a directors interms of clause (g) of sub-section (1) of section 274 of the Act.

7. As required by the Companies (Auditors’ Report) Order, 2003 issued by theCentral Government of India in terms of sub-section (4a) of Section 227 of the Act and onbasis of such checks as we considered appropriate and according to the information andexplanations given to us, we further report that :

(b) The fixed assets of the Company have been physically verified during the period bythe management as per certificate given to us. The frequency of the same is notreasonable. Discrepancies if any, between book records and physical inventory is notascertainable due to absence of fixed assets register.

(c) Substantial parts of the fixed assets have not been disposed off during the yearand the same has not affected the going concern.The company has shifted its plant &machinery from 191-Nangli Sakrawati, Najafgarh, Delhi-43 to HP 1293(H-2) Phase-2, RIICOIndustrial Area, Bhiwadi, Distt,. Alwar( Rajasthan) which shows a very negligiblerealisiable value . The company has received against Sale of Plant & Machinery ofRs.1551883.00 Where there is no proper records.

The stock of work in progress is based on the consolidated stock lying in the processwithout any reference to the parties for whom these are being manufactured. This isfeasible as the specification, size and design for each customers is different. Hence thevaluation and quantity of stock is not fair in our opinion.

(c) There is no discrepancy between physical stocks and book stocks as reported by themanagement.

(iii) (a) The Company has granted unsecured loan of Rs 27, 10,000/-, to the companieswhere one of the director was earlier interested to the companies, firms or other partiescovered in the register maintained under section 301 and/or to the companies under thesame management as defined under sub-section (1-B) of section 370 of the companies Act,1956., paragraphs (iii)(b), (c) and (d) of the order. The repayment of principal are inaccordance with the stipulated terms.

(b) The Company has taken unsecured loan from companies, firms, or other parties listedin the register maintained under section 301 of the companies Act 1956, and or from thecompanies under the same management as defined under the sub section (1B) of section 370of the companies Act 1956.

(c) The comments regarding terms and conditions, repayment of the principal amount& interest thereon and overdue amount are without any stipulated terms.

(iii) 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 companyand nature of its business for the purchase of inventory and fixed assets and for the saleof goods as the company is owner managed with greater degree of personal supervision andthere is no continuing failure to correct major weaknesses in internal control.

(iv) In our opinion and according to the information and explanations given to us thereare no transactions made in pursuance of contacts and arrangements entered in the registermaintained under section 301 of the Act, aggregating during the year to Rs.500000/= ormore in respect of any party.

(vi) The Company has no internal audit system commensurate with the nature and size ofits business.

(vii) We have been informed that the Central Government has not prescribed themaintenance of costs records by the Company under section 209(1)(d) of the Act.

(viii) As per records produced before us the company was not regular in depositingundisputed Statutory dues with appropriate authorities and the extent of arrears ofoutstanding Statutory dues as at 31^st March , 2011 for a period of more than 6months from the date they become payable are given as under:-

(ix) According to the information and explanations given to us, the outstanding of U.P. Financial Corporation, Indian Overseas Bank and National Small Industries CorporationLtd has been settled under one time settlement and repaid fully in the last year, no duescertificate has been obtained from the above financial institutions..

(x) According to the information and explanations given to us, the Company has notgranted any loans and advances on the basis of security by way of pledge of Shares,Debentures and other Securities.

(xi) According to the information and explanations given to us, provisions of anyspecial Statute like Chit Fund, Nidhi, Mutual Benefit Fund/Societies are not applicable tothe Company.

(xii) According to the information and explanations given to us &as per thecorrigendum issued by the company, the Company has reduced its share capital by Rs1,65,26,570/- by transferring to capital reduction account in the last year. The capitalreduction is part of sanctioned scheme by B.I.F.R and special resolution was also passedin share holders meeting.

(xiii) According to the information and explanations given to us, no term loans wereapplied during the year.

(xiv) According to the information and explanations given to us, the funds raised onshort term basis have not been used for long term investment and vis versa by Company.

(xv) According to the information and explanations given to us, the Company have notmade any preferential allotment of shares to companies, firms and other parties listed inthe register maintained under Section 301 of the Companies Act, 1956.

(xvi) According to the information and explanations given to us, the Company have notissued debentures and hence requirement of reporting regarding creation of securities inrespect of debentures issued does not arise.

(xvii) According to the information and explanations given to us, the Company has notraised any money by public issue during the year ending 31^st March, 2011.

(xviii) According to the information and explanations given to us, no fraud on/or bythe Company has been noticed or reported during the year.