MIC Electronics Ltd

M/S. MIC ELECTRONICS LIMITED

We have audited the attached Balance Sheet of M/s.MIC Electronics Limited, as at30th September 2012 and also the Statement of Profit and Loss and the Cash Flow Statementof the Company for the year ended on that date annexed hereto. These financial statementsare the responsibility of the Company's management. Our responsibility is to express anopinion 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 management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

1. As required by the Company's (Auditors Report) Order, 2003 issued by the Departmentof Company Affairs, in terms of Section 227{4A) of the Companies Act, 1956, we give in theannexure a statement on the matters specified in Paragraphs 4 and 5 of the said order.

2. Further to above, we report that:

I. We have obtained all the information and explanations, which to the best of ourknowledge and belief, were necessary for the purposes of our audit;

ii. In our opinion, proper books of accounts as required by law have been kept by thecompany so far, as appears from our examination of books.

iii. The Balance sheet, Statement of Profit and Loss and Cash Flow statement dealt withby this report are in agreement with the books of account.

iv. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash FlowStatement comply with the accounting standards referred to in subsection (3C) of section211 of the Companies Act, 1956.

v. Based on information and explanations given to us and representations received fromthe directors of the Company, as on 30th September 2012 and taken on record by the Boardof Directors, we report that none of the directors is disqualified as on 30th September2012 from being appointed as a director in terms of clause (g) of sub section (1) ofsection 274 of the Companies Act, 1956.

vi. 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 the accountingprinciples generally accepted in India:

(a) In the case of the Balance Sheet, of the state of affairs of the Company as at 30thSeptember, 2012 and

(b) In the case of the Statement of Profit and Loss, of the Loss for the period endedon that date.

And

(c) In the case of the cash flow statement, of the cash flows for the period ended onthat date.

for PAVULURI & CO.,

Chartered Accountants

(CA.P.A RAMAIAH)

PARTNER M.No. : 203300

Place : Hyderabad

Dated: 29-11-2012

REFERREDTOIN PARAGRAPH (1) IN OUR REPORT OF EVEN DATE FOR THE PERIOD ENDED 30.09.2012.

1. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets. As informed to us, most of the fixedassets have been physically verified by the management. There is annual verification offixed assets, which in our opinion is reasonable having regard to the size of the companyand the nature of its assets. No material discrepancies have been noticed on suchverification.

(b) During the year, the company has not disposed off substantial part of the assets.According to the information and explanations given to us, we are of the opinion that notransactions are made involving disposal of assets so as to affect going concern status ofthe company.

2. (a) The inventory has been physically verified during the year by the management. Inour opinion, the frequency of the verification is reasonable.

(b) The procedures of physical verification of stocks 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. The discrepancies noted onphysical verification between the physical stocks and book records were not material.

3. (a) The Company has granted unsecured loan to one of its subsidiary covered in theregister maintained under section 301 of the companies Act, 1956. The maximum amountoutstanding during the year was Rs.157.98 lakhs and the year-end balance of loan grantedto such party was Rs. 157.98 lakhs.

(b) In our opinion and according to the information and explanations given to us, theterms and conditions of such loans are not prima facie prejudicial to the interest of theCompany.

(c) As the terms of repayment have not been stipulated in respect of loans given asabove, we are not in a position to make any specific comment regarding the repayment ofprincipal and also interest.

(d) In respect of the said loan, there are no overdue amounts.

(e) As informed, the Company has taken unsecured loan from the party covered in theregister maintained under section 301 of the companies Act, 1956. In our opinion andaccording to the information and explanations given to us, the terms and conditions ofsuch loans are not prima facie prejudicial to the interest of the Company,

4. In our opinion and according to the information and explanations given to us, thereare adequate internal control procedures commensurate with the size of the Company and thenature of its business with regard to purchases of the stores, raw materials includingcomponents, plants and machinery, equipment and other assets and with regard to the saleof goods.

5. In our opinion and according to the information and explanations given to us, thetransactions of purchase of goods and materials and sale of goods, materials and services,made in pursuance of contracts or arrangements entered in the registers maintained underSection 301 of the Companies Act, 1956 and aggregating during the year to Rs.500,000/- ormore in respect of each party, have been made at prices which are reasonable having regardto prevailing market prices for such goods, materials or services or the prices at whichtransactions for similar goods, materials or services have been made with other parties.

6. According to the information and explanations given to us, the provisions of Section58-A of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975, donot apply to this Company, as it has not accepted deposits from the public other thancorporate bodies and directors of the company.

7. The Company has an adequate internal Audit system commensurate with the size andnature of the business.

8. As per the information given to us the Central Government has not prescribedmaintenance of Cost records under Section 209(1 )(d) of the Companies Act, 1956.

9. (a) According to the information and explanations given to us, the company is notregular in depositing with appropriate authorities undisputed statutory dues includingProvident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, CustomDuty, Excise Duty, Cess and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, the following are theundisputed amounts of Income Tax, Service Tax, Provident Fund, Employees State Insuranceand Professional tax outstanding as at 30th September, 2012 for a period of more than 6months from the date they became payable.

(c) According to the information and explanations given to us following are thedisputed dues relating to Customs Duty, Sales Tax and Excise Duty as on 30th September,2012.

10. The Company has no accumulated losses as at the end of the financial year. TheCompany has not incurred any cash losses during the period covered by our audit and theimmediately preceding financial year.

11. As per the records of the Company and according to the information and explanationsgiven to us, the company has defaulted in repayment of dues to M/s.L&T FinanceLimited. The total overdue as on 30th September 2012 is Rs.36,400,318/-.

12. The company has not given any loans and advances on the basis of security by way ofpledge of shares, debentures and other securities.

13. The company is not a chit fund or a nidhi /mutual benefit fund/ society.Accordingly the provisions of clause 4 (xiii) of the Compan ies (Auditor's Report) Order,2003 are not applicable to the company.

14. The company is not dealing in or trading in shares, securities, and debentures andother investments. Accordingly, the provisions of clause 4 (xiv) of the Companies(Auditor's Report) Order, 2003 are not applicable to the company.

15. In our opinion, the terms and conditions on which the company has given guaranteesfor loans taken by the subsidiaries/associates from banks orf inancial institutions arenot prejudicial to the interest of the company.

16. In our opinion, the term loans taken by the company were applied forthe purpose forwhich they were taken.

17. According to the information and explanations given to us and on an overallexamination of statements and records of the company, that the funds raised on short-termbasis have, prima facie, not been used during the year for long-term investment. No longterm funds have been used to fi nance short term assets except permanent working capital.

18. The company has not made preferential allotment of shares/warrants during the yearto parties covered in the register maintained under section 301 of the Companies Act,1956.

19. During the year, the Company has not issued any debentures, therefore the questionof creating security or charge in respect thereof does not arise.

20. During the year, the Company has not made any public issue and therefore thequestion of disclosing the end use of money raised by public issue does not arise.

21. Based upon the audit procedures performed and accord ing to the information andexplanations given to us, we report that no fraud on or by the Company has been noticed orreported during the year.

for PAVULURI & CO., Chartered Accountants