Mysore Paper Mills Ltd

To,

The Members

The Mysore Paper Mills Limited

Bangalore, Karnataka.

We have audited the attached Balance Sheet of The Mysore Paper Mills Limited,Bangalore as at March 31, 2011 and the Profit and Loss Account and the Cash FlowStatement of the company for the year ended on that date annexed thereto, together withthe notes thereon. These financial statements are the responsibility of the company’smanagement. Our responsibility is to express an opinion on these financial statementsbased on our audit.

We have conducted our audit in accordance with the auditing standards generallyaccepted in India. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of materialmis-statements. An audit includes examining on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by the management as well asevaluating the overall financial statements presentation. We believe that our auditprovides a reasonable basis for our opinion.

1) As required by the Companies (Auditor’s Report) Order, 2003 as amended, issuedby the Central Government of India in terms of subsection (4A) of section 227 of theCompanies Act, 1956, we enclose in the Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.

2) Further to our comments in the Annexure referred 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 purpose 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 these books.

iii) The Balance Sheet, the Profit and Loss account and the Cash Flow statement dealtwith by this report are in agreement with the books of accounts.

iv) In our opinion, the Balance Sheet and the Profit and Loss account dealt with bythis report, comply with the accounting standards referred to in subsection (3C) ofsection 211 of the Companies Act, 1956 to the extent they are applicable to the Company.

v) As per Department notification GSR 829(E) dated 17.07.2003, the provisions of clause(g) of sub section (1) of section 274 is not applicable to a Government company. Being agovernment company, the company is exempt from, the provisions of clause (g) of subsection (1) of section 274.

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 inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

(a) In the case of Balance Sheet, of the State of Affairs of the Company as at March31, 2011, (b) In the case of Profit and Loss account, of the Loss for the yearended on that date, and (c) In the case of the Cash Flow statement, of the Cash Flows forthe year ended on that date.

FOR THE YEAR ENDED MARCH 31, 2011:

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) As per the information provided, the company has a programme of physicalverification of the fixed assets at reasonable intervals. During the year no suchverification was conducted and so no material discrepancy was noticed.

(c) The Company has not disposed of any substantial part of its fixed assets during theyear so as to affect its going concern status.

(ii) (a) According to the information and explanations given to us, the management ofthe Company has conducted physical verification of Inventory during the year except forstanding crops which is estimated on yield-based formula, as in earlier years.

(b) In our opinion, the procedures of physical verification of inventory followed bythe management are reasonable and adequate having regard to the size of the Company andnature of its business.

(c) In our opinion, the Company is maintaining proper records of inventory andaccording to the information and explanations given to us, the discrepancies noticedduring physical verification are not material in nature. The discrepancies noticed havebeen properly dealt with in the books of accounts of the Company.

(iii) (a) According to the information given to us, the Company has not granted anyloan, secured or unsecured, to companies, firms or other parties covered in the registermaintained under section 301 of the Companies Act, 1956.

As the company has not granted any loan secured or unsecured to companies, firms orother parties covered in the register maintained under section 301 of the Companies Act,1956. the provisions of paragraphs 4 (iii) (b) to 4 (iii) (d) of the Order are notapplicable.

(b) According to the information given to us, the Company has not taken any loan,secured or unsecured, from companies, firms or other parties covered in the registermaintained under section 301 of the Companies Act, 1956.

As the company has not taken any loan secured or unsecured from companies, firms orother parties covered in the register maintained under section 301 of the Companies Act1956, the provisions of paragraphs 4 (iii) (f) and 4 (iii) (g) of the Order are notapplicable.

(iv) In our opinion, and according to the information given to us, there is adequateinternal control system commensurate with the size of the company and the nature of itsbusiness for the purchase of inventory and fixed assets and for the sale of goods andservice. We have not observed any continuing failure to correct major weaknesses ininternal control system during the course of our audit.

(v) (a) According to the information and explanations given to us, we are of theopinion that the particulars of all contracts or arrangements that need to be entered intothe register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of contracts or arrangements entered in the registermaintained under section 301 of the Companies Act, 1956 and exceeding the value of rupeesfive lakhs in respect of any party during the year have been made at prices which arereasonable having regard to prevailing market prices at the relevant time.

(vi) According to the information and explanations given to us, the Company hascomplied with the directives issued by the Reserve Bank of India, the provisions ofsection 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and theCompanies (Acceptance of Deposit) Rules, 1975, where applicable. According to theinformation and explanations given to us, no order has been passed by the Company LawBoard or National Company Law Tribunal or Reserve Bank of India or any Court or any otherTribunal.

(vii) In our opinion, the Company has an internal audit system commensurate with itssize and nature of its business.

(viii) According to the information and explanations given to us the Central Governmenthas prescribed the maintenance of cost records by the company under section 209 (1)(d) ofthe Companies Act, 1956 and such accounts and records have been made and maintained by theCompany.

(ix) (a) According to the information and explanations given to us, and on the basis ofour examination of the books of accounts, the Company has been generally regular indepositing with appropriate authorities undisputed statutory dues wherever applicableincluding Provident fund, Investor Education and Protection Fund, Employees’ StateInsurance, Income tax, Sales tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cessand any other material statutory dues applicable to it, though delay was noted in somecases.

According to the information and explanations given to us no undisputed amounts payablein respect of Provident Fund, Income tax, Wealth tax, Sales tax, Service tax, Customsduty, Excise duty and Cess were in arrears as at 31.03.11 for a period of more than sixmonths from the date they became payable, except Provident Fund dues for Rs. 1652412/-.

(b) According to the information and explanation given to us, there are no dues ofsales tax, income tax, customs duty, wealth tax, excise duty and cess, which have not beendeposited on account of any dispute.

(x) In our opinion, the accumulated losses of the Company at the end of the financialyear are more than fifty percent of its net-worth and the Company has incurred cash lossduring the current financial year and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, theCompany has not defaulted in repayment of dues to financial institutions or bank ordebenture holders.

(xii) The Company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities. Accordingly, the provisions ofparagraph 4(xii) of the Order are not applicable.

(xiii) The Company is not a chit fund, nidhi, mutual benefit fund or a society.Accordingly, the provisions of paragraphs 4(xiii) (a) to 4(xiii)(d) of the Order are notapplicable.

(xiv) The Company is not dealing in or trading in shares, securities, debentures andother investments.

Hence the provisions of paragraph 4(xiv) of the Order are not applicable.

(xv) According to the information and explanations given to us, the Company has notgiven any guarantees for loans taken by others from banks or financial institutions. Soprovisions of paragraph 4(xv) of the Order are not applicable.

(xvi) According to the information and explanations given to us and the recordsexamined by us the Company has not applied the term loans in full for the purpose forwhich they were raised.

(xvii) According to the information and explanations given to us, the Company has notutilised the funds raised on short-term basis for long term investments.

(xviii) 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.

(xix) According to the information and explanations given to us and the recordsexamined by us, security or charge has been created in respect of the debentures issued.

(xx) The Company has not raised any money by public issues during the year.

(xxi) In our opinion and according to the information and explanations given to us, nofraud on or by the Company has been noticed or reported during the course of our audit.