MMTC Ltd

To the Members of MMTC Limited

We have audited the attached Balance Sheet of MMTC Limited as at 31st March, 2010,Profit & Loss Account and the Cash Flow Statement of the Company for the year ended onthat date, annexed thereto in which are incorporated the accounts of Corporate Office,Mica Division and Jhandewalan Regional Office audited by us and the other Regional Officesand Sub-Regional Offices audited by the other Auditors; and

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 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 Companies (Auditor's Report) Order, 2003 (as amended) issued bythe Central Government of India in terms of sub section (4A) of Section 227 of theCompanies Act, 1956 and on the basis of such checks of the records of the Company as weconsidered appropriate and according to the information and explanations given to us, wegive in the Annexure 'A' a statement on the matters specified in paragraphs (4)and (5) ofthe said Order.

2. Further to our comments in the Annexure referred to in paragraph (1) above, wereport as follows: -

(i) Non-provision of liability, if any, in case of extension of time / waiver / writeoff of GR-1 forms. (Refer Note No. 5)

(ii) Balances under Sundry Debtors / Claims Recoverable / Loans & Advances I SundryCreditors / Other Liabilities have not been confirmed in some cases by the parties.Adjustments, if any, required upon such confirmation are not ascertainable. (Refer NotesNo. 33)

(iii) Certain observations in respect of the internal control procedures, as stated inpara (iv) of annexure 'A' to main audit report, which may have consequential effect on theaccounts for the year, (effect not ascertainable).

We further report that: -

(a) We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit except as otherwisestated in report.

(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 the books.

(c) Proper returns, adequate for the purpose of our audit have been received fromRegional Offices, Sub Regional Offices and Branches not audited by us. Reports of RegionalAuditors have been considered while preparing ourreport.

(d) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of accounts and with the audited returns fromthe Regional Offices.

(e) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with Accounting Standards referred to in Section 211 (3C)of the Companies Act, 1956.

(f) Being a Government Company, pursuanttothe gazette notification No.GSR 829 (F) dated21-10-2003 issued by Government of India, provisions of clause (g) of section 274 of thecompanies Act 1956 are not applicable to the company.

We further report that, the impact of paragraphs 2(i) to 2(iii) above on the profit ofthe year and the assets and liabilities appearing in the Balance Sheet, could not beascertained. In our opinion and to the best of our information and according to theexplanations given to us the said accounts read together with the Significant AccountingPolicies and notes thereon, give the information required by the Companies Act, 1956 inthe manner so required, other than as stated above, and give a true and fair view inconformity with the accounting principles generally accepted in India:

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

(B) In the case of the Profit and Loss Account, of the Profit of the Company for theyear ended on that date; and

(C) In the case of the Cash Flow Statement, of the cash flows of the Company for theyear ended on that date.

ANNEXURE 'A' TO AUDITOR'S REPORT

Referred to in paragraph 1 of the Auditor's Report of even date to the members of MMTCLimited on the financial statements for the year ended 31st March 2010.

(i) (a) The Company has generally maintained proper records showing full particularsincluding quantitative details and situation of fixed assets.

(b) As explained to us, all the assets have been physically verified by the managementduring the year which, in our opinion is reasonable having regard to the size of thecompany and the nature of its assets. No material discrepancies were noticed on suchverification.

(c) In our opinion and according to the information and explanations given to us, nosubstantial part of the fixed assets have been disposed off by the Company during the yearand therefore the going concern assumption is not affected.

(ii) (a) The inventory has been physically verified by the management during the year,except in case of goods in transit, stocks lying in Central / State Warehouses whereconfirmation were obtained from the parties and relied upon.

In our opinion, the frequency of verification is reasonable.

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

(c) On the basis of our examination of the inventory records, in our opinion, theCompany is maintaining proper records of inventory. The discrepancies noticed onverification between the physical stock and the books of account were not material.

(iii) (a) As informed to us, the Company has not granted any loans, secured orunsecured to Companies, firms or other parties covered in the register maintained undersection 301 of the Companies Act, 1956.

(b) Not applicable in view of para (iii) (a) above.

(c) Not applicable in view of para (iii) (a) above.

(d) Not applicable in view of para (iii) (a) above.

(e) As informed to us, the Company has not taken any loans, secured or unsecured fromCompanies, firms or other parties covered in the register maintained under Section 301 ofthe Companies Act, 1956.

(f) Not applicable in view of para (iii) (e) above.

(g) Not applicable in view of para (iii) (e) above.

(iv) 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 the nature of its business with regard to the purchase of inventory, fixed assets andwith regard to the sale of goods and services. During the course of our audit, no majorweakness has been noticed in the internal control system

However, the internal control mechanism needs to be strengthened in the followingareas:

(a) Active and prompt follow-up of old debts, advances (including staff advances) andclaims by respective Commodity Division.

(b) Confirmation of outstanding balances and its periodic reconciliations.

(c) Follow-up of court cases and recoveries arising out of execution of decrees/awardsannounced in favour of the company.

(d) Rotation of jobs on the operations being carried out where the magnitude of thetransactions is very high. However such rotations are not affected in any structuredmanner or under any laid down policy.

(e) Expeditious follow up of old Safes Tax cases / Appeals pending withCourts/Appellate Authorities of CO, ROs and SROs including closed SROs to save on legalcosts and interest payable on disputed additional demands.

(v) (a) In our opinion and according to the information and explanations given to us,there are no contracts and arrangements referred to in Section 301 of the Companies Act1956, particulars of which need to be entered into a register maintained under Section 301of the Act.

(b) Not applicable in view of para (v) (a) above.

(vi) The directives issued by the Reserve Bank of India and the provisions of Section58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the rulesframed there-under have been complied with, in respect of deposits accepted from thePublic. We have been informed that, no order has been passed by Company Law Board orNational Company Law Tribunal or Reserve Bank of India or any other Court or Tribunal inthis regard.

(vii) The Company has an internal audit system, which in our opinion is commensuratewith the size of the Company and nature of its business however, in our opinion internalaudit needs to be further strengthened.

(viii) As informed to us, the maintenance of cost records under Section 209(1) (d) ofthe Companies Act, 1956 has not been prescribed by the Central Government.

(ix) (a) According to the information and explanations given to us and the records ofthe Company examined by us, in our opinion, the Company is regular in depositing withappropriate authorities undisputed statutory dues including Provident Fund, InvestorEducation and Protection Fund, Employees State Insurance, Income-Tax, Sales-tax, WealthTax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues asapplicable with the appropriate authorities and that no undisputed amounts payable inrespect of the same were in arrears as at 31-03-2010 for a period of more than six monthsfrom the date they became payable.

(b) According to the information and explanation given to us and the records of theCompany examined by us, the particulars of dues of Income Tax / Sales Tax / Wealth Tax /Service Tax / Custom Duty / Excise Duty / Cess (as applicable) as at March 31, 2010 whichhave not been deposited on account of any dispute, are referred to in Annexure-'B"

(x) The Company does not have any accumulated losses and has not incurred cash lossesin the current financial year and in the immediately preceding financial year.

(xi) According to the records of the Company examined by us and as per the informationand explanations given to us, the Company has not defaulted in repayment of dues to anyfinancial institution or bank or debenture holders.

(xii) 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; except certain loans to employees which have been grantedon the basis of security of house and vehicles and in this regard proper documents &records are maintained. In respect of loans to its employees other than those as statedalready, are granted without any security.

(xiii) In our opinion, the company is not chit fund or a Nidhi / Mutual benefit fund /society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report)Order, 2003 (as amended) are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly, the provisions of clause 4(xiv) of theCompanies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us theterms & conditions of the guarantee given by the company for loans taken by NINL frombanks or financial institutions during the year are not prima-facie prejudicial to theinterest of the Company.

(xvi) According to the information and explanation given to us, the Company has nottaken any term loans during the year. Hence, the provisions of clause 4(xvi)of theCompanies (Auditor's Report) Order 2003 (as amended) are not applicable to the Company.

(xvii) According to the information and explanations given to us and overallexamination of the Balance Sheet of the company, we report that no funds raised onshort-term basis have been used for long-term investment.

(xviii) According to the information and explanations given to us, the Company has notmade any preferential allotment of shares to parties and companies covered in the registermaintained under Section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, during the yearcovered by our audit report, the Company has not issued any debentures during the year andhence, the provision of clause No. 4(xix) of the Companies (Auditor's Report) Order 2003(as amended) is not applicable to the Company.

(xx) The Company has not raised any money by way of Public Issue during the year,therefore the provision of clause 4(xx) of the Companies (Auditor's Report) Order 2003 (asamended) is not applicable to the Company.

(xxi) During the course of our examination of the books and records of the Company,carried out in accordance with the generally accepted auditing practices in India, andaccording to the information and explanations given to us, we have neither come across anyinstance of material fraud on/or by the Company, noticed or reported during the year, norwe have been informed for such case by the management.

ANNEXURE 'B' TO AUDITORS' REPORT

Referred to in paragraph 9(b) of Annexure 'A' a statement on the matters specified inthe Companies (Auditors Report) Order, 2003 (as amended) of MMTC Limited for the yearended on 31st March 2010

According to the records of the company dues of Income Tax, Sales Tax, Custom Duty,Excise Duty and Cess which have not been deposited on account of disputes are statedbelow:

CORPORATE OFFICE

CHENNAI REGIONAL OFFICE

MUMBAI REGIONAL OFFICE

DELHI REGIONAL OFFICE

HYDERABAD REGIONAL OFFICE

BHUBANESHWAR REGIONAL OFFICE

JAIPUR REGIONAL OFFICE

VIZAG REGIONAL OFFICE

KOLKATA REGIONAL OFFICE

JHANDEWALAN REGIONAL OFFICE

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THECOMPANIES ACT, 1956 ON THE ACCOUNTS OF MMTC LIMITED FOR THE YEAR ENDED 31 MARCH 2010

The preparation of financial statements of MMTC Limited for the year ended 31 March2010 in accordance with the financial reporting framework prescribed under the CompaniesAct, 1956 is the responsibility of the management of the Company. The Statutory Auditorsappointed by the Comptroller and Auditor General of India under Section 619(2) of theCompanies Act, 1956 are responsible for expressing opinion on these financial statementsunder Section 227 of the Companies Act, 1956 based on independent audit in accordance withthe Auditing and Assurance Standards prescribed by their professional body the Instituteof Chartered Accountants of India. This is stated to have been done by them vide theirAudit Report dated 29 June 2010.

I on behalf of the Comptroller and Auditor General of India have conducted asupplementary audit under Section 619(3) (b) of the Companies Act, 1956 of the financialstatements of MMTC Limited for the year ended 31 March 2010. This supplementary audit hasbeen carried out independently without access to the working papers of the StatutoryAuditors and is limited primarily to inquiries of the Statutory Auditors and Companypersonnel and a selective examination of some of the accounting records. On the basis ofmy audit nothing significant has come to my knowledge which would give rise to any commentupon or supplement to Statutory Auditors' report under Section 619 (4) of the CompaniesAct, 1956.