Bafna Spinning Mills & Exports Ltd Auditor Reports

To

The Members of

BAFNA SPINNING MILLS & EXPORTS LIMITED

Coimbatore

We have audited the attached Balance Sheet of BAFNA SPINNING MILLS & EXPORTS LIMITED, as at 31^st March, 2012 together with the Profit & Loss Account and the Cash Flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted out audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test check basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government of India in terms of the Section 227 (4A) of the Companies Act, 1956, we give in the annexure a statement on the matters specified in paragraph 4 & 5 of the said order.

Further to our comments in the annexure referred to above, we report that:

a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our Audit;

b. In our opinion proper books of accounts as required by law have been kept by the company so far as it appears from our examination of books of accounts.

c. The Balance Sheet, Statement of Profit and Loss and Cash flow statement dealt with by this report are in agreement with the books of account;

d. In our opinion the Balance Sheet, Profit & Loss Account and Cash Flow statement dealt with this report are in compliance with the accounting standards referred to in Section 211 (3C) of the companies Act, 1956.

e. On the basis of written representations received from the directors as on 31^st March, 2012 and taken on records by the Board of Directors, we report that none of the directors of the company are disqualified from being appointed as directors of the company under clause (g) of sub-section (1) of section 274 of the companies Act, 1956.

f. In our opinion and to the best of our information and according to the explanation given to us, the said accounts read together with the Significant Accounting Policy and Notes thereto give the information required by the Companies Act, 1956, in the manner so required and give a true & fair view in conformity with the accounting principles generally accepted in India;.

(i) In the case of the Balance Sheet, of the state of affairs of the company as on 31^st March, 2012;

(ii) In the case of the statement of Profit & Loss, Accounts of the Loss for the year ended on that date; and

(iii) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR AUDITORS REPORT OF EVEN DATE OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st MARCH. 2012

On the basis of such checks as we considered appropriate and the terms of the information and explanations given to us, we state that:

1. (a) The Company has maintained proper records showing full particulars including quantitative and situation of fixed assets.

(b) As explained to us fixed assets are physically verified by the management at reasonable intervals in a phased verification program, which in our opinion is reasonable looking to the size of the company and the nature of its business.

(c) In our opinion, the company has not disposed off any substantial part of its fixed assets so as to effect in it going concern.

2. The Company does not hold any stocks of finished goods, stores, spare parts, work-in-progress or raw materials. Hence the question of physical verification, reconciliation, maintenance or records, discrepancies or valuation does not arise.

3. In respect of loans, secured or unsecured, granted or taken by the company to from companies, firms, or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(a) The Company has taken loans from Mr. SR Bafna, the Managing Director of the Company in the year 2009-10. The Maximum amount involved was Rs. 7,82,162/- and the outstanding balance at the end of the year is Rs. 7,82,162/-. The Company has not granted any loans to the parties covered In the register required to be maintained u/s 301 of the Companies Act, 1956.

(b) No interest is charged for the above loan taken.

(c) There is no stipulated repayment schedule for the above loan.

4. In our opinion and according to the information and given to us, there are adequate internal control procedures commensurate with the size of company and the nature of its business with regard to purchase of fixed assets and other stock in trade. During the course of audit, no major weakness in internal control had come to notice.

5. (a) On the basis of the audit procedure performed by us, and according to the

information and explanations given and representations given to us, we are of the opinion that, there were no transactions in which directors were interested as contemplated under Section 297 and sub- section (6) of Section 299 of the Companies Act, 1956 and so question of making entries in the register maintained under Section 301 of the said Act, does not arise.

(b) In our opinion and according to the information and explanations given to us, there were no transactions made in pursuance of contracts or arrangements exceeding the value of rupees five lacs during the year, so the question of making entries in the Register maintained u/s 301, do not arise.

6. The company has not accepted any deposit from public cover u/s 58A, 58AA or any other relevant provisions of the Companies Act 1956 read along with companies (Acceptance of deposits) rules 1973 and the directive issued by the Reserve Bank of India.

7. The Company has no separate Internal audit system during the year under audit.

8. The Central Government has not prescribed maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 for any of the products of the company.

9. According to the information and explanations given to us no disputed amounts payable in respect of Income Tax, Sales tax. Custom duty and Excise duty were outstanding as at 31^st March, 2012 except the following:

10. The Company has neither accumulated losses nor incurred cash losses at the end of the financial year and in the immediately preceding year.

11. As the Company has not obtained any loans from financial institutions, the question of default in repayment of dues does not arise.

12. As examined to us, the Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures, or any other securities.

13. In our opinion, the company is not a chit fund or a nidhi fund / mutual benefit fund / society. Therefore, clause 4(xiii) of the Companies (Auditors Report order 2003 is not applicable.

14. In our opinion and according to the information and explanation given to us, the Company is not dealing in or trading is respect of shares, securities debentures and other investments. According to the provision of clause 4 (xiv) of the companies (Auditor Report) order 2003 are not applicable to the company.

15. According to the information and explanation given to us, and the representations made by the management, the Company has not given any guarantee for loans taken by others from any bank or financial institution.

16. The company has not raised any term loan during the year under review.

17. According to the information and explanation given to us and on overall examination of the financial statements of the company and after placing reliance on the reasonable assumption made by the company for classification of long term and short term usages of funds, we are of the opinion that, prima-facie, long term funds have not been utilized for short term purposes.

18. The company has not made any issue of shares during the year under audit. Hence the question of preferential allotment of shares to parties and companies covered in the register mentioned under section 301 does not arise.

19. The Company has not issued any debentures.

20. The Company has not issued any money by way of public issue, during the year.

21. According to the information and explanation given to us, and to the best of our knowledge and benefit, no fraud on or by the Company, has been noticed or by the company, during the year that clauses the financial statements to be materially misstated.