LGB Forge Ltd

TO THE SHAREHOLDERS

We have audited the attached Balance Sheet of LGB Forge Limited, Coimbatore, asat 31^st March, 2010 and also the Profit and Loss Account for the year ended onthat date annexed thereto and the cash flow statement for the period ended on that date.These financial statements are the responsibility of the Company's Management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

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 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 the management, as well as evaluating the over allfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

As required by the Companies' (Auditor's Report) Order, 2003, and according to theinformation and explanations given to us during the course of the audit and on the basisof such checks as were considered appropriate, we enclose in the Annexure a statement onthe matters specified in paragraph 4 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

1) We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purpose of our audit.

2) In our opinion, proper books of accounts as required by law have been kept by theCompany so far as appears from our examination of those books.

3) The Balance Sheet and the Profit and Loss Account dealt with by this report are inagreement with the books of account.

4) In our opinion the Balance Sheet and Profit and Loss Account dealt with by thisreport comply with the Accounting Standards referred to in sub-section (3C) of Section 211of the Companies Act, 1956.

5) On the basis of the written representation received from the Directors, as on 31^stMarch, 2010 and taken on record by the Board of Directors, we report that none of theDirectors is disqualified as on 31^st March, 2010 from being appointed as aDirector in terms of Clause (g) of Sub-section (1) of Section 274 of the Companies Act,1956.

6) In our opinion and to the best of our information, and according to the explanationsgiven to us, the said financial statements, read together with the attached schedules andnotes forming part of accounts give the information required by the Companies Act, 1956,in the manner so required and present a true and fair view in conformity with theaccounting principles generally accepted in India:

a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31^stMarch 2010; and

b) In the case of the Profit and Loss Account, of the Loss for the year ended on thatdate, and

c) In the case of cash flow statement, of the cash flow for the year ended on thatdate.

(Referred to in our report of even date)

1. a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

b) The assets have been physically verified by the management in accordance with aphased programme of verification, which in our opinion, is reasonable, considering thesize and the nature of business. The frequency of verification is reasonable anddiscrepancies noticed on such physical verification were not material and have beenproperly dealt with in books of accounts.

c) There is no disposal of substantial part of Fixed Assets during the year.

2) a) The inventories have been physically verified by the management during the yearat reasonable intervals.

b) The procedures of physical verification of the inventories followed by themanagement are reasonable and adequate in relation to the size of the company and natureof its business.

c) The company has maintained proper records of inventories and discrepancies noticedon physical verification of inventories as compared to book records were not material andhave been appropriately dealt with.

3) a) During the year the company has not granted loans, secured or unsecured tocompanies, firms or other parties covered in the Register maintained under section 301 ofthe Companies Act, 1956.

b) The terms and conditions in respect of loans already granted by the company, are inour opinion, prima-facie not prejudicial to the interest of the company.

c) During the year the company has taken unsecured loans from various person covered inthe Register maintained under section 301 of the Companies Act, 1956. Details are givenbelow:

d) The terms and conditions in respect of loans taken by the company, are in ouropinion, prima facie not prejudicial to the interest of the company.

4. There are adequate internal control systems commensurate with the size of theCompany and the nature of its business, for the purchase of inventory, fixed assets andfor the sale of goods and services. There is no major weakness in the internal controlsystem. The company continues its process of strengthening its internal control systems.

5. a) The particulars of contracts or arrangements referred to in section 301 of theCompanies Act, 1956 have been entered in the register required to be maintained under thatsection.

b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of such contracts or arrangements exceeding rupees fivelakh each have been made at prices, which are reasonable having regard to prevailingmarket prices at the relevant time.

6. During the year the company has accepted deposits from public. The company hascomplied with the directives issued by Reserve Bank of India and the provisions of Section58A, 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,1975 or any other relevant provisions of the act.

7. The Company has an adequate Internal Audit system commensurate with its size andnature of its business. The company continues its process of strengthening its internalaudit system.

8. We have broadly reviewed the books of accounts maintained by the company relating towindmill division, pursuant to the order made by the Central Government for themaintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and are ofthe opinion that prima facie, the prescribed records have been maintained. However, wehave not made a detailed examination of the records with a view to determine whether theyare accurate.

9. a) According to the information and explanations given to us and the recordsexamined by us, the company is regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund, investor education and protectionfund, employees' state insurance, income-tax, sales tax, wealth tax, service tax, customduty, excise duty, cess and other statutory dues. According to the information andexplanations given to us, no undisputed arrears of statutory dues were outstanding as at31^st March, 2010 for a period of more than six months from the date they becamepayable.

b) There are no disputed statutory dues.

10. The Company has not defaulted in repayment of its dues to financial institutionsand banks.

11. During the year, the company has not granted any loans and advances on the basis ofsecurity by way of pledge of shares, debentures or other securities.

12. The provisions of Special Statutes applicable to Chit Fund, Nidhi or Mutual BenefitFund/Societies are not applicable to the Company.

13. The Company is not dealing or trading in shares, securities, debentures or otherinvestments.

14. According to the information and explanations given to us, the Company has notgiven guarantee during the year for loans taken by others.

15. The Company has applied term loan for the purposes for which they were obtained.

16. According to the information and explanations given to us and on an overallexamination of the Source and Application of the Funds of the company, we report that nofunds raised on short-term basis have been used for long-term investments by the company.

17. 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.

18. During the year, the Company has not raised money by Public issue.

19. According to the information and explanation given to us, and the books and recordsexamined by us, there are no frauds on or by the Company that has been noticed or reportedduring the year.

20. The other clauses of the order are not applicable to the company.