Progressive Extractions & Exports Ltd

To the Members

PROGRESSIVE EXTRACTIONS & EXPORTS LIMITED

1. We have audited the attached Balance Sheet of Progressive Extractions & ExportsLimited as at March 31, 2011, the Profit and Loss Account for the Year ended on that dateannexed hereto and the Cash Flow Statement for the year ended on that date. 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 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 overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditors’ Report) Order, 2003 issued by theCentral Government of India in terms of sub-section (4A) of section 227 of the CompaniesAct, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4and 5 of the said order to the extent applicable.

4. Further to our comments, 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 account as required by law have been kept by thecompany so far as appears from our examination of those books;

(iii) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account;

(iv) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the accounting standards referred to in sub-section211 of the Companies Act, 1956:

(v) on the basis of written representations received from the directors, as on March31, 2011, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on March 31, 2011 from being appointed as a director in termsof clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; and

(vi) in our opinion and to the best of our information and according to theexplanations given to us, and read with other notes appearing in Schedule ‘M’give the information required by the Companies Act, 1956,in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India:

a) in the case of the Balance Sheet, of the state of affairs of the company as at March31, 2011;

b) in the case of the Profit and Loss Account, of the profit for the year ended on thatdate; and

c) in the case of the Cash Flow Statement, of the cash flows ended on that date.

ANNEXURE TO THE AUDITORS’ REPORT

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

(b) The management has physically verified the assets in a phased periodical manner,which in our opinion is reasonable, having regard to the size of the company and nature ofits assets. No material discrepancies were noticed on such physical verification. (c) Inour opinion, due to disposal of substantial assets during FY 2004-05, the going concernstatus of the company has been affected.

(ii) (a) As explained to us, no inventories are acquired or held during the year. Atthe end of the year there was no stock in trade.

(b) No stocks acquired or held during the year.

(c) No stocks acquired or held during the year.

(iii) (a) The company had taken unsecured loans from three companies covered in theregister maintained under section 301 of the companies Act, 1956. The maximum amountinvolved during the year was Rs.98.20 Lacs and the year-end balance of loans taken fromsuch companies was Rs.92.20 Lacs. The company has granted an inter-corporate deposit,unsecured to a company listed in the register maintained under section 301 of theCompanies Act, 1956. The year end balance of the same is Rs.541 Lacs.

(b) In our opinion and according to the information and explanations given to us, therate of interest and other terms and conditions on which loans have been takenfrom/granted to companies, firms or other parties listed in the register maintained undersection 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interestof the company.

(c) There is no overdue amount of loans taken from companies, firms or other partieslisted in the register maintained under section 301 of the Companies Act, 1956. However,in respect of inter-corporate deposit granted, the Borrower Company is a promoter-groupCompany and as such there is no evidence substantiating any specific action taken by theCompany for recovery of this deposit except that the promoters are putting in efforts toraise funds for all the group companies.

(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 for the purchase of fixed assets. During the course of ouraudit, we have not observed any major weaknesses in internal controls.

(v) (a) To the best of our knowledge and belief and according to the information andexplanations given to us, we are of the opinion that the transactions that need to beentered into the register maintained under section 301 of the Companies Act, 1956 havebeen so entered.

(b) In our opinion and according to the information and explanations given to us,transactions made in pursuance of contracts or arrangements entered in the registermaintained under Section 301 of the Companies Act, 1956 and exceeding the value of Rupeesfifty thousand 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 where suchmarket prices are available.

(vi) In our opinion and according to the information and explanations given to us, theCompany has not accepted deposits from the public during the period covered by our auditreport.

(vii) In our opinion, the Company has not maintain internal audit system commensuratewith the size and nature of its business.

(viii) The Central Government has not prescribed maintenance of Cost Records underSection 209(1)(d) of the Companies Act, 1956 in respect of the company as no manufacturingactivities are being carried by the Company.

(ix) According to the information and explanations given to us, Company is generallyregular in depositing with appropriate authorities undisputed statutory dues relating toprovident fund, investor education and protection fund, employees state insurance, wealthtax, customs duty, excise duty, cess and other statutory dues applicable to it except forcertain minor delays.

(x) In our opinion and according to the information and explanations given to us, theCompany has defaulted in repayment of dues to a financial institution as under :

The company has taken up the matter for settlement with financial institution. Interestaccrued but not paid has been separately shown as provided up to previous years. Howeverdue to pending settlement no interest has been provided for the year..

(xi) The Company has not granted any loans or advances on the basis of security by wayof pledge of shares, debentures and other securities.

(xii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefitfund/society, Therefore, the provisions of clause 4 (xiii) of the Companies(Auditor’s Report) Order, 2003 are not applicable to the Company.

(xiii) In our opinion and according to the information and explanations given to us,the Company is not dealing in or trading in shares, securities, debentures and otherinvestments. Accordingly, the provisions of clause 4 (xiv) of the Companies(Auditor’s Report) Order, 2003 are not applicable to the Company.

(xiv) In our opinion and according to the information and explanations given to us, theterm loans have been applied for the purpose for which they were raised.

(xv) In our opinion and according to the information and explanations given to us, andon an overall examination of the Balance sheet of the Company, we report that no fundsraised on short-term basis have been used for long-term investment and vice versa.

(xvi) 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.

(xvii) In our opinion and according to the information and explanations given to us,the Company has not issued any secured debentures during the period covered by our report.Accordingly, the provisions of clause 4 (xix) of the Companies (Auditor’s Report)Order, 2003 are not applicable to the Company.

(xviii) During the period covered by our audit report, the Company has not raised anymoney by public issues.

(xix) To the best of our knowledge and belief and according to the information andexplanations given to us, no fraud on or by the Company has been noticed or reportedduring the course of our audit.