Auditor Report of Bafna Spinning Mill & Exports Ltd.

Mar 31, 2012

We have audited the attached Balance Sheet of BAFNA SPINNING MILLS & EXPORTS LIMITED, as at 31st 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 company's 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 (Auditor's 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 31st 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;.

(T) In the case of the Balance Sheet, of the state of affairs of the company as on 31st 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 31st March, 2012 except the following:

Name of the Nature of Amount (Rs.) Statute Dues

Income Tax Income Tax 1,81,010/- Act, 1961 with Interest

Income Tax Advance Tax 10,41,301.35 Act, 1961

Income Tax Advance Tax 9,88,864.82 Act, 1961

Name Period to which Due Date Date of the amount Payment relates

Income Tax A.Y. 2008-09 30/09/2008 Outstanding

Income Tax A.Y. 2009-10 30/09/2009 Outstanding

Income Tax A.Y. 2010-11 30/09/2010 Outstanding

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 (Auditor's 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 usage's 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.

PLACE: COIMBATORE FOR AND ON BEHALF OF THE BOARD

DATE : 01/09/2012

Sd/-

CHAIRMAN

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Mar 31, 2011

We have audited the attached Balance Sheet of Bafna Spinning Mills & Exports Limited, Coimbatore as at 31st March, 2011 together with the Profit & Loss Account for the year ended on that date annexed there to and report that:

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 sue free ol material misstatement. An audit includes examining, on a test check basis, evidence supporting the amounts and disclosures made by management, as well as evaluating the overall financial statement presentation. We believe that: our audit provides a reasonable? basis for our opinion.

1. As required by the Manufacturing and other Companies (Auditors Report) Order, 1988, issued by the Central Government in terms of the Section 227 (4A) of the Companies Act, 1956, we give in tin* annexure a statement on the matters specified in paragraph 4 & 5 of the said order.

2. further to our comments in the annexure referred to in paragraph I 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.

h. 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 hooks of accounts,

c. In our opinion the Balance Sheet and Profit & Loss Account are drawn up in accordance with the accounting standards referred to in Section 211 (3C) of the companies Act, 1956.

d. On the basis of written representations received from the directors 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 (1J of section 274 of the companies Act, 1956.

e. In our opinion and to the best of our information and according to the explanation given to us the said accounts subject to the notes thereon gives the information required and gives a true & fair view.

(i) In the ease of Balance Sheet of the state of affairs of the company as on 31 March, 2011.

AND

(ii] In the case of Profit & Loss Accounts of the Loss for the year ended on that dale.

ANNEXURE TO THE AUDITORS' REPORT

Annexure to the Auditors' Report referred to in paragraph 1 of our report of even date on the accounts for the year ended on 31M March, 2011 of Bafna Spinning Mills & Exports Limited

1. The Company has maintained proper records to show full particulars including quantitative details and situation of its Fixed Assets. Fixed Assets of the company have been physically verified by the management and no discrepancy was noticed.

2. None of the Fixed Assets has been revalued during the year.

3. In our opinion the terms and conditions on which loans have been taken from the firms & other parties listed in the register maintained under section 301 are not prima facie, prejudicial to the interest of the company.

4. The company has given loans to the companies under the same management which is prima facie prejudicial to the interest of the company.

5. The company has not given loan to its employees therefore tin: question of reporting it does not arise.

(). In our opinion & according lo the information to explanations given to us there are adequate internal control procedure lo commensurate with the size of the company & nature of its business with regard to purchase of stores, raw materials, items traded including components, plant & machinery, equipment & other assets with regard to the sales of goods.

7. In our opinion & according to the information & explanations given to us the transaction for purchase of raw material made in pursuance of contracts of agreements entered in the register & aggregating during the year to Us. 50,000/- or more in respect of each party have been made at a price which are reasonable in regard to the prevailing market price.

8. As explained to us, the company has regular procedure for determining of unserviceable & damaged stores, raw materials & finished goods & the same has been properly dealt with in the accounts.

9. Directives issued by the Reserve Bank of India and the provision of section 58-A of the Companies Act, 1956 and rules framed there under are not applicable as the company has not accepted any public deposits.

10. As the paid up Share Capital of the company and the average annual turnover of the company does not exceed the prescribed limit, the company did not require having Internal Audit.

11. According to the Central Government has not made order under Section 209(1)(d) of the Companies Act, 1956 for the industry in which the company is operating.

12.According to the information and explanations given to us no undisputed amount payable in respect of Income Tax, Sales Tax, Custom Duty and excise duty were outstanding as at 31s' March, 2011 except the following.

13. According to the information and explanations given to us and as per the records made available to us Provident Fund Scheme is introduced by the company and company has deposited both employers' contribution & employees' contribution within specified time.

14. According to the information and explanations given to us no personal expenses of the employees or directors have been charged to revenue accounts, oilier than those payable under contractual obligation or in accordance with business practice.

15. The company is not sick industrial company within the meaning of clause (o) of sub section (I) of section 3 of the Sick Industrial Companies {Special Provisions) Act, 1985.

16. In respect of the trading & manufacturing activity of the company we were informed that there were no damaged goods hence the question of providing for loss on in books does not arise.

Place : Ahmadabad For, K.R. Shah & Associates

Date : 29/08/2011 Chartered Accountants

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Mar 31, 2010

1. I have audited the attached Balance sheet of "BAFNA SPINNING MILLS & EXPORTS LIMITED" as on 31st March 2010 and the profit & loss account for the year ended on that date annexed thereto. These financial statements are the responsibility of the companys management. My responsibility is to express an opinion on these financial statements based on my audit.

2. I conducted my audit in accordance with auditing standards generally accepted in India. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.

3. As required by the Companies (Auditors Report) Order 2003, issued by the Central Government of India in terms of Sec. 227 (4A) of the companies Act, 1956,1 enclose in the annexure, a statement on matters specified in paragraphs 4 and 5 of the said Order.

4. Further to my comments in the Annexure referred to in paragraph 3 above, I report that:

a. I have obtained all the information and explanations, which to the best of my knowledge and belief were necessary for the purpose of my audit.

b. In my opinion, proper books of accounts as required by law have been kept by the company as far as appears from my examination of such books.

c. The Balance sheet, profit & loss account dealt with by this report are in agreement with the books of accounts.

d. In my opinion, the Balance sheet, Profit & Loss account dealt with by this report comply with the Accounting Standards referred to in sub-sec. (3C) of sec.211 of the Companies act, 1956.

e. On the basis of the written representation received from the directors as on 31st March 2010 and taken on record by the board of directors, I report that none of the directors are disqualified as on 31.03.2010 from being appointed as a director in terms of clause (g) of sub-sec. (1) of sec. 274 of the Companies Act, 1956.

f. In my opinion and to the best of my information and according to the explanations given to me, the said accounts read together with significant accounting policies and other notes thereon, 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 Balance sheet, of the state of affairs of the Company as at 31.03.2010.

ii. In the case of Profit & Loss account of the profit for the year ended on that date.

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

Annexure to Auditors Report:

In terms of the information and explanations given to me and the books and records examined by me in the normal course of audit and to the best of my knowledge and belief, I state as under:

i) a) The Company has maintained proper records to show full particulars including quantitative details and situation of fixed assets.

b) The Fixed Assets of the company have been physically verified by the management during the year. We have been informed by the company that no material discrepancies were noted on such physical verifications.

c) In my opinion and according to the information and explanations given to me, a substantial part of fixed assets has not been disposed of by the company during the year.

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

iii) a) The Company has taken loans from Mr. SR Bafna, the Managing Director of the Company. The Maximum amount involved during the year was Rs. 782162/- and the outstanding balance at the end of the year is Rs. 782162/-. The Company has not granted any loans to the parties covered in the register required to be maintained under section 301 oftheCompaniesAct, 1956.

b) No Interest is charged for the above loan taken.

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

iv) In my opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business for the purchase of fixed assets and other stock in trade. Further on the basis of the examination of books and records of the company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control procedures.

v) In my opinion there are no contracts or arrangements referred to in section 301 of the Act that need to be entered in the register required to be maintained under that section.

vi) The Company has not accepted any deposits from the public within the meaning of Sections 58A, 58AAor any other relevant provisions of the Companies Act, 1956 and the rules framed there under, where applicable. According to the information and explanations given to me, no order under the aforesaid sections has been passed by the Company Law Board or National Company Law Tribunal or the Reserve Bank of India or any court or any other Tribunal on the Company.

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

viii) Since the Company has not commenced its production activity during the year under audit, the question of maintenance of cost records does not arise.

ix) As the Company has not commenced its production activity, it has not implemented the Provident Fund & ESI schemes. Hence the question of undisputed statutory dues with respect to the Provident Fund & ESI Schemes does not arise. The company has not deposited any amount on account of any dispute under any statute. But the company has undisputed Income Tax Dues payable as given below

Statement of Arrears of Statutory Dues Outstanding for more than Six months

Name Nature Amount Period to which the of the Statute of Dues (Rs.) amount relates

Income Tax Act, Income Tax with 181010/- A.Y 2008-2009 1961 Interest

Income Tax Act, Income Tax 1041601.35 A.Y 2009-2010 1961

Income Tax Act, Income Tax 988864.80 A.Y 2010-2011 1961

Date of Name of the Statute Due Date Payment

Income Tax Act, 1961 30-09-2008 Outstanding

Income Tax Act, 1961 30-09-2009 Outstanding

Income Tax Act, 1961 30-09-2010 Outstanding

x) The Company has no accumulated losses as at 31st March, 2010 and it has not incurred cash tosses in the financial year ended on that date or in the immediately preceding financial year.

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

xii) The maintenance of documents and records does not arise as the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund, nidhi or mutual benefit fund/society. Therefore the provisions of clause 4 (xiii) of the Companies (Auditors Report) Order are not applicable to this company.

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

xv) The Company has not given any guarantee for loans taken by others from banks and other financial institutions.

xvi) The Company has not obtained any term loans from banks and financial institutions.

xvii) The Company has not raised any funds on short term basis.

xviii) 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.

xix) No debentures has been issued by the company, hence the question of creation of security or charges in respect of debentures issued does not arise.

xx) No money has been raised by the company through public issue of shares during the year under audit. Hence the question of verification of end use of money raised on public issue does not arise.

xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of audit.

PLACE : COIMBATORE

DATE : 29.08.2010 Sd/- Chartered Accountant