KSL and Industries Ltd

To,

The Members of KSL AND INDUSTRIES LIMITED

1. We have audited the attached Balance Sheet of KSL AND INDUSTRIES LIMITED asat 31^st March, 2011, the Profit and Loss Account and also the Cash FlowStatement of the company for the year ended on that date, both annexed Thereto.Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted inIndia. 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 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 basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003(CARO)and theCompanies (Auditor’s Report)(Amendment) order 2004 issued by the Central Governmentin terms of section 227(4A) of the Companies Act, 1956, we give in the Annexure astatement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we reportthat : -

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.

c) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealtwith by this report are in agreement with the books of account.

d) In our opinion, the Balance Sheet, the Profit & Loss Account and the Cash FlowStatement dealt with by this report are in compliance with the Accounting Standardsreferred to in Section 211(3C) of the Companies Act, 1956.

e) On the basis of the written representations received from the directors as on 31^stMarch, 2011 and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 31^st March, 2011 from being appointed as adirector of the Company in terms of Section 274(1)(g) of the Companies Act, 1956.

f) In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts give the information required by the Companies Act,1956 in the manner so required and give a true and fair view in conformity with accountingprinciples generally accepted in India except for the retirement benefit are accounted foron cash basis

i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31^stMarch, 2011;

ii) in the case of the Profit and Loss Account, of the Loss of the Company for the yearended on that date and

iii) in the case of the Cash Flow Statement, of the cash flows of the Company for theyear ended on that date.

REFERRED TO IN PARAGRAPH 2 OF AUDITORS’ REPORT OF EVEN DATE

On the basis of such checks/ audit procedures as we considered appropriate andaccording to the information and explanation given to us during the course of audit, westate that:

1. In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, includingquantitative details and situation of the Fixed Assets.

(b) The management has at reasonable intervals carried out the physical verification ofthe fixed assets. No material discrepancies have been noticed on such verification.

2. In respect of its inventories:

(a) The inventories have been verified during the year by the management. In ouropinion, having regard to the nature and location of the stocks, the frequency of thephysical verification is reasonable.

(b) In our opinion, the procedures of physical verification of stocks followed by themanagement are reasonable and adequate in relation to the size of the Company and natureof its business.

(c) In our opinion, and according to the information and explanations given to us, theCompany has maintained proper records of its inventories and discrepancies noticed onphysical verification of the above referred inventories as compared to the book recordswere not material and have been properly dealt with in the books of account.

3. The company has neither granted nor taken secured or unsecured loans from Companies,firms or other parties covered in the register maintained under Section 301 of theCompanies Act, 1956. Accordingly Sub-clause (b), (c) & (d) are not applicable.

4. In our opinion, and according to the information and explanations given to us, in afew cases as the items are of special nature and no alternative quotation are available,there are adequate internal control system commensurate with the size of the Company andthe nature of its business with regard to the purchase of stores, raw materials includingcomponents, plant & machinery, equipment and similar assets & purchase of goodsand for the sale of goods We have not observed any major weakness in such internal controlsystem.

5. In respect of transactions covered under Section 301 of the Companies Act, 1956:

a. According to the information and explanations given to us, we are of the opinionthat the transactions that need to be entered into the register under section 301 havebeen so entered.

b. According to the information and explanations given to us, purchase of goods andmaterials and sale of goods, materials and services made in pursuance of contracts orarrangements entered in the register maintained under Section 301 of the Act andaggregating during the year to  Rs.500000 or more in respect of each party have beenmade at prices which are reasonable having regards to the prevailing market price for suchgoods, materials or services or the prices at which the transactions for similar goods areservices have been made with other parties, where applicable.

6. The Company has not accepted any deposits from the public during the year&consequently the provision of Section 58A and 58AA or any other relevant provision ofthe Companies Act, 1956 and the Rules made there under are not applicable.

7. In our opinion, the company has an adequate internal audit system commensurate withthe size of the company and nature of its business.

8. We are of the opinion that, prima facie, the cost records and accounts prescribed bythe Central Government of India under Section 209 (1) (d) of the Act have been maintained.We have, however, not made a detailed examination of such accounts and records.

9. In respect of statutory dues:

(a) According to the information and explanations given to us, the Company hasgenerally been regular in depositing undisputed statutory dues including Provident Fundand Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Cess and other materialstatutory dues with the appropriate authorities though there is delay in some cases.

(b) There are no disputed statutory dues. Therefore reporting under this clause doesnot arise.

10. According to the information and explanations given to us, the company does nothave an overdue outstanding to any financial institution or Banks.

11. In our opinion and according to records and the information and explanations givento us, the Company has not granted any loans and/or advances on the basis of security byway of pledge of shares, debentures and other securities.

12. In our opinion and according to the information and explanations provided to us thenature of activities of the company does not attract special statute applicable to Chitfund & Nidhi /Mutual benefit / society 13. All shares, debentures and other securitiesheld as investments by the company have been held by the Company in its own name.

14. According to the information and explanations given to us, the Company has given onbehalf of Actif Corporation Ltd (Formerly known as Deccan Mills & infrastructure Ltd(Subsidiary company)guarantee for loans taken by others from banks or financialinstitutions.

15. According to the information and explanations given to us, the working capital andterm loans raised during the year were used for the purpose for which they were raised.

16. The company has not made any preferential allotment of shares to parties andcompanies covered in the register maintained under section 301 of the Companies Act, 1956.

17. According to the information and explanations given to us and on an overallexamination of the Balance Sheet of the Company, we report that no funds raised onShort-term basis have been used for long term investment.

18. During the year the Company has not made any payment to parties or companiescovered in the register maintained u/s 301 of the companies Act, 1956.

19. The Company has not issued debenture during the year.

20. The Company has not raised money by public issue during the year.

21. Based upon the Audit procedure preformed for the purpose of reporting the true andfair view of financial statement as per the information and explanations given to us, nofrauds on or by the company has been noticed or reported during the year.