Union Quality Plastics Ltd

To,

The Members of

UNION QUALITY PLASTICS LIMTED

We report that we have audited the attached Balance Sheet of UNION QUALITY PLASTICSLIMITED, as at 31st March 2011 and profit and loss account and the cash flow statement forthe year ended on that date annexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

1. We conducted our audit in accordance with the auditing standards generally acceptedin India. These Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from any material misstatement.An audit includes, examining on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes, assessing the accountingprinciples used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audit provides areasonable basis for our opinion.

2. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issuedby the Central Government in terms of section 227(4A) of the Companies Act, 1956 and onthe basis of such checks as we considered appropriate and according to the information andexplanations given to us, we give in the Annexure, a statement on the matters specified inparagraphs 4 and 5 of the said order.

3. Further to our comments in the Annexure referred in the paragraph 2 above, we reportthat:

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

b) In our opinion, proper books of accounts as required by the Companies Act, 1956 havebeen kept by the company so far as appears from our examination of such books.

c) The Balance Sheet and the Profit and Loss account referred to in this report are inagreement with the books of account.

d) In our opinion, the Balance Sheet and the Profit and Loss Account dealt with by thisreport are in compliance with the Accounting Standards referred to in Section 211(3C) ofthe Companies Act, 1956 subject to the non compliance by the company of the AccountingStandard 15 relating to non provision of retirement and other benefit which is beingaccounted by the company on cash basis instead of accrual basis (liability quantum notascertained) and provision for gratuity is not made on actuarial basis.

e) In our opinion and based on information and according to explanations given to us,none of the directors are disqualified as on 31st March 2011 from being appointed asdirectors in terms of clause (g) of subsection (1) of Section 274 of the Companies Act1956.

4. In our opinion and to the best of our information and according to the explanationsgiven to us, the said Balance Sheet and Profit and Loss Account read together with theSignificant Accounting Policies and the other notes thereon give the information requiredby the Companies Act, 1956 in the manner so required and also give a true and fair view,

I) in the case of the Balance Sheet, of the state of affairs of the Company as at 31stMarch, 2011.

ii) in the case of Profit and Loss Account, of the Profit for the year ended on thatdate.

iii) in the case of cash flow statement, of the cash flows for the year ended on thatdate.

ANNEXURE TO AUDITORS' REPORT

Referred to in paragraph 3 of our report of even date on the accounts of Union QualityPlastics Ltd. for the year ended 31st March 2011.

1. In respect of its fixed assets:

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

b) We were given to understand that the management has physically verified the fixedassets in phased manner and this revealed no material discrepancies during suchverification between book records and physical balance. In our opinion the frequency ofthe verification is reasonable, having regard to the size of the Company and the nature ofits business.

c) In our opinion the Company has not disposed off any major asset/ substantial part ofits business during the year and the ‘Going Concern’ status of the Company isnot affected.

2. In respect of its inventories:

a) The inventories have been physically verified by management at reasonable intervalsduring the financial year.

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

c) The company has maintained proper records of inventory. As explained to us, therewas no material discrepancies noticed on physical verification of inventory as compared tothe book records.

3. In respect of loans, secured or unsecured, granted or taken by the Company to/fromcompanies, firms or other parties covered in the register maintained under section 301 ofthe Companies Act, 1956:

a] During the year the Company has taken interest free unsecured loans from five listedparties aggregating to Rs. 111.70 lacs and balance outstanding, as on 31-03-2011 is Rs.4,14.78 lacs,(P.Y. Outstanding of Rs.331.67 Lacs). The Company has not granted any loanssecured or unsecured to any parties listed in aforesaid register.

b] In our opinion and according to the information and explanation given to us, theterms and conditions on which the abovementioned loan has been taken are not prima facieprejudicial to the interest of the Company.

c] In respect of loans taken by the Company, the principal amount is repayable ondemand.

d] In respect of loans taken by the Company, these are repayable on demand andtherefore the question of interest overdue amounts does not arise.

4. In our opinion and according to the explanations given to us there is an adequateinternal control procedure commensurate with the size of Company and nature of itsbusiness, for the purchase of fixed assets, inventory and for the sale of goods. Duringthe course of our audit no major weakness has been observed in internal controls.

5. In respect of transactions covered under section 301 of the Companies Act, 1956.

a) Based on the audit procedures applied by us and according to the explanationsprovided by the management, we are of the opinion that all transactions that need to beentered into the register in pursuance of Section 301 of the Companies Act, 1956 and whichhave so been 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 register inpursuance of Section 301 of the Companies Act, 1956 and exceeding the value of Rs. 5 lacsin respect of any party during the year, have been made at prices which are reasonablehaving regard to the prevailing market prices at the relevant time.

6. Sections 58A and 58AA of the Companies Act, 1956 is not applicable to the Company asit has not accepted any deposits from the public. Hence, the clause (vi) of the Order isnot applicable.

7. In our opinion the companies do not have any internal audit system commensurate withthe size of Company and nature of its business.

8. In our opinion and to the best of our knowledge and according to the informationgiven to us, The Central Government has not prescribed the maintenance of cost recordsunder Section 209 (1) (d) of the Companies Act, 1956 for any of the products of theCompany.

9. In respect of statutory dues:

a) The Company is generally regular in depositing undisputed statutory dues includingProvident Fund, Investor Education and Protection Fund, Income Tax, Wealth Tax, Sales Tax,Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriateauthorities. According to the information made available to us, no undisputed arrears ofstatutory dues are outstanding as at 31st March 2011 for more than six months from thedate when they became except few payments towards employees and sales tax.

b) According to the information and explanations given to us there are no amounts inrespect of Sales Tax, Custom duty, Wealth tax, Excise duty and Cess that have not beendeposited with the appropriate authorities on account of any dispute.

10. The Company has accumulated losses of Rs. 18,82,43,276/- as on 31st March 2011(P.Y. Rs. 21,62,11,506/-). The company has not incurred any cash losses during thefinancial year and in the immediately preceding financial year.

11. Based on our audit procedures and as per the information and explanations given bythe management, we are of the opinion that the company has not defaulted in repayment ofdues to a financial institution, bank at balance sheet date.

12. Based on our audit procedures and as per the information and explanations given bythe management, the Company has not granted any loans and advances on the basis ofsecurity by way of pledge of shares, debentures and other securities during the financialyear 2010-2011.

13. The provision of any special statutes applicable to the Chit Funds, Nidhi or MutualBenefit Society are not applicable to the Company.

14. In our opinion, the Company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly the provisions of this clause are notapplicable on the Company.

15. According to the information and the explanations given to us, the Company has notgiven any guarantee for loans taken by others from bank or financial institutions.

16. According to the information and the explanations given to us, the company has notraised any term loans during the year.

17. According to the information and explanations given to us and on an overallexamination of the Balance Sheet of the company, we are of the opinion that the companyhas not utilized funds raised from short term sources towards long term applications andvice versa.

18. During the current financial year, the Company has not made any preferentialallotment of shares to parties and companies covered in the Register maintained underSection 301 of the Companies Act, 1956.

19. No debentures have been issued during the current financial year.

20. No money has been raised by public issues during the current financial year.

21. On the basis of our examination and according to the information and explanationsgiven to us, no fraud on or by the Company has been noticed or reported during the currentfinancial year.

AUDITORS CERTIFICATE OF CORPORATE GOVENANCE

To the members of

UNION QUALITY PLASTICS LIMITED

We have examined the compliance of conditions of corporate governance by Union QualityPlastics Ltd. for the year ended 31st March, 201, as stipulated in clause 49 of theListing Agreement of the said company with the Stock Exchange(s) of India.

The compliance of conditions of corporate governance is the responsibility of themanagement. Our examination was limited to review of procedures and implementationsthereof, adopted by the Company for ensuring the compliance of conditions of corporategovernance. It is neither an audit nor an expression of opinion on the financialstatements of the Company.

In our opinion and to the best of our information and explanations given to us and therepresentations made by the Directors and the management, we certify that the Company hascomplied with the conditions of corporate governance as stipulated in clause 49 of theListing Agreement.

We further state that such compliance is neither an assurance as to the futureviability of the Company nor the efficiency or effectiveness with which the management hasconducted the affairs of the Company.