Hubergroup India Pvt Ltd Auditor Reports

MICRO INKS LIMITED ANNUAL REPORT 2011 AUDITORS REPORT To, The Members of Micro Inks Limited on the accounts for the year ended December 31, 2011 1. We have audited the attached Balance Sheet of MICRO INKS LIMITED (the Company), as at December 31, 2011, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, both 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. 2. We conducted our audit in accordance with the 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 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. Without qualifying our opinion, we draw attention to Note No. 26 on Schedule-17. The Company has investments in Hostmann-Steinberg Inc., a wholly owned subsidiary incorporated in USA (the Subsidiary), at a carrying value of Rs. 965.81 million (as at December 31,2010 of Rs. 965.81 million). [These figures are after writing off Rs. 1,587.86 million, in an earlier year, by utilisation of reserves in accordance with requisite approvals]. The accumulated losses of the Subsidiary are Rs. 3,742.93 million (as at December 31, 2010 are Rs. 3,629.97 million) and the net worth is Rs. 885.84 million (as at December 31, 2010 is Rs. 848.98 million). The Company has net outstanding of Rs. 485.81 million (as at December 31, 2010 346.88 million) due from the Subsidiary on account of debtors and has given corporate guarantees of Rs. 679.81 million (as at December 31, 2010 Rs. 447.10 million) for loans given by banks to the : Subsidiary. As represented by the Management, notwithstanding the subsidiary being dependent on the Company j for financial support and for the reasons stated in the said note, no provision has been made. 4. As required by the Companies (Auditors Report) Order, 2003, (CARO) issued by the Central Government of India : in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on : the matters specified in paragraphs 4 and 5 of the said Order. 5. Further to our comments in the Annexure referred to in paragraph 4 above and read with paragraph 3 above, we report that: (i) 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; (ii) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; (iii) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account; (iv) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; (v) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity 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 December 31, 2011; (b) in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. 6. On the basis of the written representations received from the Directors and taken on record by the Board of Directors, none of the Directors is disqualified as on December 31, 2011, from being appointed as a Director in terms of Section 274(1 )(g) of the Companies Act, 1956. For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W) Rajesh K. Hiranandani Place: Mumbai Partner Date : February 25, 2012 Membership No. 36920 ANNEXURE TO THE AUDITORS REPORT ON THE ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Referred to in paragraph 4 of our report of even date) (i) Having regard to the nature of the Companys business/activities/result clauses (vi), (xiii), (xrv), (xviii), (xix) and (xx) of CARO are not applicable. (ii) In respect of its Fixed Assets: (a) The Company has generally maintained proper records showing full particulars, including quantitative details and situation of fixed assets. (b) According to the information and explanations given to us, the fixed assets are being physically verified by the management according to a phased programme designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, some of the fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification. (c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company. (iii) In respect of its Inventories: (a) As explained to us, inventories (other than stocks lying with third parties, in respect of which confirmations have been obtained) have been physically verified during the year by the Management at reasonable intervals. In our opinion, the frequency of verification is reasonable. (b) In our opinion and according to information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of the inventories and no material discrepancies were noticed on physical verification. (iv) The Company has not granted or taken loans, secured or unsecured, to or from any companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. (v) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system. (vi) In respect of contracts or arrangements entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of knowledge and belief and according to the information and explanations given to us: (a) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered in the register maintained under the said Section have so been entered. (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year, except for transactions where the items involved were of a specialised nature and in the absence of any comparable prices available, have been made at prices which are reasonable having regard to prevailing market prices at the relevant time. (vii) In our opinion, the internal audit functions carried out during the year by a firm of Chartered Accountants appointed by the management have been commensurate with the size of the Company and the nature of its business. (viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company relating to the manufacture of resins, pursuant to the order made by the Central Government for the maintenance of cost records under Section 209(1 )(d) of the Companies Act, 1956, and we are of the opinion that prima-facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of such records with a view to determining whether they are accurate and complete. To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records for any other products of the Company. (ix) According to the information and explanations given to us in respect of statutory dues: (a) The Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees State insurance, Income-tax, Sales Tax / Value Added Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other material statutory dues applicable to it with the appropriate authorities though there have been slight delays in few cases in respect of Employees State Insurance. (b) There are no undisputed amounts payable in respect of Provident Fund, investor Education and Protection Fund, Employees State Insurance, Income- tax, Sales Tax / Value Added Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty. Cess and any other material statutory dues which were in arrears, as at December 31, 2011, for a period of more than six months from the date they became payable. (c) There are no disputed Wealth Tax, Custom Duty, and Cess which have not been deposited as on December 31,2011. Details of dues of Income-tax, Sales Tax, Service Tax, Excise Duty which have not been deposited as on December 31, 2011 on account of disputes are given below: Disputed Income-tax liability (The Income Tax Act, 1961): i. Rs.0.12 million for the Financial Year 1993-1994 pending with the Assessing Officer. ii. Rs.0.64 million for the Financial Year 1998-1999 pending with the High Court. iii. Rs.5.73 million for the Financial Year 2003-2004 pending with the Commissioner of Income Tax (Appeals). iv. Rs.222.60 million for the Financial Year 2006-2007 pending with the Income Tax Appellate Tribunal. Disputed Sales Tax/Value Added Tax liability (Central Sales Tax Act, 1956 and Value Added Tax Act of various states): i. Rs.0.34 million for the Financial Year 2004-2005 pending with the Appellate and Revisional Board. ii. Rs.0.37 million for the Financial Year 2006-2007 pending with the Deputy Commissioner. iii. Rs.0.54 million for the Financial Year 2008-2009 pending with the Joint Commissioner (Appeals). Disputed Central Excise (The Central Excise Act, 1944) / Service tax liability (The Finance Act, 1994): i. Rs. 2.11 million for the period 1999 to 2000 pending with the Custom Excise and Service Tax Appellate Tribunal. ii. Rs. 805.16 million for the period 2006 to 2010 pending with the Custom Excise and Service Tax Appellate Tribunal. iii. Rs. 0.83 million for the period 1994 to 2009 pending with the Commissioner of Central Excise (Appeals). (x) The Company does not have accumulated losses as at the end of the financial year covered by our audit. The Company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year. (xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to banks. The Company has not obtained any borrowings from financial institutions and also has not issued any debentures. (xii) In our opinion and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) In our opinion and according to the information and explanations given to us, the Company has given guarantees for loans taken by one of its subsidiaries from banks. Having regard to the explanation that the subsidiary is wholly owned, in our opinion, the terms and conditions of the guarantees are not prima-facie prejudicial to the interests of the Company. (xiv) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company have been applied for the purposes for which the loans were obtained. (xv) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that funds raised on short-term basis have, prima-facie, not been used during the year for long-term investment. (xvi) According to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year. For Deloitte Haskins & Sells Chartered Accountants (Registration No. 117366W) Rajesh K. Hiranandani Place: Mumbai Partner Date : February 25, 2012 Membership No. 36920