Auditor Report of Morgan Industries Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of MORGAN INDUSTRIES LIMITED, which comprise of the Balance Sheet as at March 31,2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act") read with General Circular No. 15/2013 dated 13th September 2013 of Ministry of Corporate Affairs(MCA) in respect of Section 133 of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Basis for Qualified Opinion

Attention is invited to the following:

1) Note No:6 Regarding non-receipt of confirmation of the closing balances/ not reconciling balances as on 31.03.2014 In respect of Trade Payables, Trade Receivables, Loans & Advances, Unsecured Loans, creditors, other liabilities and group company accounts. The adjustment if any which may be required consequent to receipt of confirmation/ completion of reconciliation is unascertainable at this stage and not provided for.

2) Regarding non capitalization / non adjustment of amount of Rs.17.91 Crores kept under capital work in progress (CWIP) suitably for more than 3 years and consequently non provision of depreciation on the assets which would have otherwise suffered depreciation in the normal course. Also no impairment test has been done in respect of this capital wont in progress and in respect of other fixed assets. The impact on account of depreciation/impairment loss is unascertainable and has not been provided for.

The impact on account of the above qualification on the Statement of Profit and Loss and Balance Sheet is not ascertainable and hence not quantified.

QUALIFIED OPINION

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph, the financial statements give the information required by the Companies Act 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 31st March 2014.

b) in the case of the Statement of Profit and Loss, of the Profit 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.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, 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 account with records as required by law have been kept by the Company so far as appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books ofaccount.

d) In our opinion, the Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956, read with General Circular No. 15/2013 dated 13th September 2013 of the Companies Act, 2013, except AS-28 "Impairment of Assets".

e) On the basis of written representations received from directors as on March 31 2014, and taken on record by the board of directors, none of the directors is disqualified as on March 31 2014, from being appointed as a director in terms of Clause (i)(g) sec 274 of Companies Act 1956.

1) (a) The Company has not maintained adequate records showing full Particulars including quantitative details and situation of fixed assets.

(b) According to information and explanations furnished to us, fixed assets have been physically verified by the management during the year. We were informed that no material discrepancies were noticed on such physical verification. However, in the absence of updated fixed assets records, we are unable to comment on the discrepancies that may arise consequent to updation and reconciliation of Fixed Assets records.

(c) There was no disposal of substantial part of the fixed assets during the year.

2) (a) According to information and explanation furnished to us, the inventory, has been physically verified by the management.

(b) The procedures for the physical verification of inventories followed by the management appear to be reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) As per information furnished to us, the company has maintained records of inventory and the discrepancies noticed on verification between the physical stocks and the Books stocks were not material

3) a) The company has taken loans from Companies and Parties covered in the register maintained under section 301 of the Companies Act, 1956. No interest is applicable to these loans. In our opinion, the terms and conditions on which the loans have been taken are prima-facie not prejudicial to the interest of the company. No terms of repayment have been stipulated by the parties.

No. of Parties 5

Amount Outstanding at the close of the year Rs. 13,17,33,380

Maximum amount outstanding during the year Rs. 13,17,33,380

b) The Company has not granted any loans, secured or unsecured to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

4) 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 company and the nature of its business with regard to purchase and sale of goods, purchase of inventory and fixed assets. During the course of audit, we have not observed any continuing failure to correct major weakness in the internal control system in respect of these areas.

5) Based on our review and according to the information and explanations given to us, the transactions that need to be entered in the register maintained in pursuance of section 301 of the companies Act 1956 have been so entered. In our opinion these transactions made in pursuance of contracts or agreements entered in the register maintained under section 301 of the Companies Act, 1956, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6) The company has not accepted any deposits from the public requiring compliance of Provisions of Sections 58A and 58AA and any other relevant provisions of the Companies Act, 1956 and the rules made there under.

7) The company does not have an internal audit system commensurate with the size and nature of its business.

8) To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956.

9) (a) The company is not regular in depositing undisputed statutory dues with appropriate authorities. According to the information and explanations given to us the undisputed amounts payable in respect of ESI, Income tax, FBT, TDS and Sales tax wherever applicable were in arrears as at 31st march 2014 for a period of more than six months from the date they became payable as given below:

Nature of Dues Amount (Rs. In lakhs)

ESI 4.64

PF 1.97

TDS 15.06

Service Tax 6.79

Sales Tax (CST/VAT) 21.54

Income Tax - 6.25

Fringe Benefit Tax 12.64

(b) According to information and explanations given to us, there are no amounts payable in respect of Income Tax, Sales Tax, Service Tax, Excise duty and cess which have not been deposited with the appropriate authorities on account of any dispute.

10) The company has accumulated losses at the end of the current financial year and has not incurred cash losses during the current and the immediately preceding financial years.

11) As per information and explanations made available to us, the company has not defaulted in repayment of dues to financial institutions and banks during the year.

12) Based on our examination of documents and records, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13) The provisions of special statute applicable to Chit Fund, Nidhi, Mutual Benefit Fund and Societies are not applicable to the company.

14) In our opinion and according to the information and explanations given to us, the company has not given any guarantee for any loans taken by others from Banks and Financial Institutions.

15) The company had not availed any term loans from Banks in the current financial year.

16) According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report the fund raised on short term basis have not been used to finance long term investment.

17) The Company has not made preferential allotment of shares during the year to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

18) The company has not raised any money by way of public issue of shares during the year.

19) The Company has not raised any money by way of Public issue of debentures during the year.

20) To the best of our Knowledge and belief and according to information and explanations given to us, no fraud on or by the company was noticed or reported during the year.

21) Clause (xiv) of the Companies Auditors Report Order 2003 is not applicable to the company.

R.SUBRAMANIAN & COMPANY Chartered Accountants (Regn.No.004137-S)

CA.KJAYASANKAR Partner M.No. 014156

Date: 04.10.2014 Place: Chennai.

---

Mar 31, 2013

Report on Financial Statements

We have audited the accompanying financial statements of MORGAN INDUSTRIES LIMITED, which comprise of the Balance Sheet as at March 31,2013, the Statement of Profit and Lossand the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statementsthat give a true and fair view of the financial position, financial performance andcash flows of the Company in accordance with the Accounting Standardsreferred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("theAct"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards onAuditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies* used and the reasonableness of the accounting estimates made by management, aswell as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Basis for Qualified Opinion

Attention is invited to the following:

1) Note No: 6 Regarding non-receipt of confirmation of the closing balances reflected in the books of accounts in respect of Group Company balances, unsecured loans, Sundry creditors, Sundry debtors (Trade receivables), Loans and Advances, Deposits and other liabilities.

The impact on account of the above qualification on the Statement of Profit and Loss and Balance Sheet is not ascertainable and hence not quantified.

Qualified Opinion

|n our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph, the financial statements give the information required by the Companies Act 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 for the year ended on that date;

b) in the case of the Statement of Profit and Loss, of the Profit for the year ended on that date; and

c) In the case of the Cash Flow Statement, of trie Cash Flows for the year ended on that date.

Report on Other. Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("theOrder") issued by the Central Government of India in terms of sub-section (4A)of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, we report that:

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

b) In our opinion proper books of account with records as required by law have been kept by the Company so far as appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss and the Cash, Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in subsection(3C) of section 211 of the Companies Act, 1956.

e) On the basis of written representations received from directors as on March 31 2013, and taken on record by the board of directors, none of the directors is disqualified as on March 31 2013, from being appointed as a director in terms of Clause (i)(g) sec 274 of Companies Act 1956.

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT EVEN DATE

1) (a) The Company has maintained proper records which are being updated showing full Particulars including quantitative details and situation of fixed assets.

(b) According to information and explanations furnished, the Company has a regular- programme of physical verification of the fixed assets which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. However the reconciliation of Physical assets with the Books of accounts is in progress. Hence no comment could be offered on the Material discrepancies if any arising on- account of such Physical verification.

(c) There was no disposal of substantial part of the fixed assets during the year.

2) (a) According to information furnished to us, the inventory has been physically verified by the management at reasonable intervals of time during the period. In our opinion, the frequency of verification is reasonable.

(b) The procedures for the 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) The company has maintained proper records of inventory. The discrepancies noticed on verification between the physical stocks and the stocks as per records were not material and the same have been property dealt with in the books of accounts.

3) a) The company has taken loans from Companies and Parties Covered in the register maintained under section 301 of the Companies Act, 1956. No interest is applicable to these loans. In our opinion, the other terms and conditions on which the loans have been taken are prima-facie not prejudicial to the interest of the company.

b) The Company has not granted any loans, secured or unsecured to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

4) 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 company and the nature of its business with regard to purchase and sale of goods, purchase of inventory and fixed assets. During the course of audit, we have rjot observed any continuing failure to correct major weakness in the internal control system in respect of these areas.

5) Based on our review and according to the information and explanations given to us, the transactions that need to be entered in the register maintained in pursuance of section 301 of the companies Act 1956 have been so entered. In our opinion these transactions made in pursuance of contracts or agreements entered in the register maintained under section 301 of the Companies Act, 1956, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6) The company has not accepted any deposits from the public requiring compliance of Provisions of Sections 58A and 58AA and any other relevant provisions of the Companies Act, 1956 and the * rules made there under.

7) The company''does not have an internal audit system commensurate with the size and nature of its business.

8) To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under section 209 (1) (d) of me Companies Act, 1956.

9) The company is not regular in depositing undisputed statutory dues with appropriate authorities. According to the information and explanations given to us the undisputed amounts payable in respect of ESI, Income tax, FBT, TDS and Sales tax wherever applicable were in arrears as at 31st march 2013.

According to information and explanations given to us, there are no undisputed amounts payable in respect of Income Tax, Sales Tax, Service Tax, Excise duty and cess which have been deposited with the appropriate authorities on account of dispute.

10) The company has accumulated losses at the end of the current financial year and has not incurred cash losses during the current and the immediately preceding financial year.

11) As per information and explanations made available to us, the company has not defaulted in repayment of dues to financial institutions and banks during the year.

12) Based on our examination of documents and records, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13) The provisions of special statute applicable to Chit Fund, Nidhi, Mutual Benefit Fund and Societies are not applicable to the company.

14) In our opinion and according to the information and explanations given to us, the company has not given aRy guarantee for any loans taken by others from Banks and Financial Institutions.

15) The company has availed term loans from bank and the proceeds of the loans have been applied for the purposes for which they were sanctioned.

16) According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report the fund raised on short term basis have not been used to finance long term investment.

17) The Company has not made preferential allotment of shares during the year to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

18) The company has not raised any money by way of public issue of shares during the year.

19) The Company has not raised any money by way of Public issue of debentures during the year.

20) To the best of our Knowledge and belief and according to information and explanations given to us, no fraud on or by the company was noticed or reported during the year.

21) Clause (xiv) of the Companies Auditors Report Order 2003 is not applicable to the company.

R.SUBRAMANIAN & COMPANY Chartered Accountants

(Regn. No. 004137-S)

CA. AS. RAMANATHAN

Partner

M.No. 11072

Date: 06,12.2013

Place: Chennai.

---

Mar 31, 2012

1. We have audited the attached Balance Sheet of M/s. Morgan Industries Limited (the Company) as at March 31, 2012 and also the Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of uic Company''s Management. Our responsibility 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 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 the 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.

3. As required by the Companies (Auditors'' Report) Order, 2003 (as amended) issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said Order to the extent they are applicable to the Company.

4. 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 purposes 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, 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, 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; except the non- compliance of AS 15 in so far as it relates to making provision for Leave Encashment benefit to employees.

v) On the basis of the written representations received from the Directors as on 31st March 2012, and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 31st March 2012 from being appointed as a Director in terms of Clause (g) of Sub- Section (1) of Section 274 of the Companies Act, 1956.

5. Attention is invited to the following:

a) Note No:6 Regarding non-receipt of confirmation of the closing balances reflected in the books of accounts in respect of term Loans of bank unsecured loans, Sundry Creditors, Sundry Debtors, Loans and Advances, Deposits and other liabilities.

b) Note No. 7 - Regarding not providing for interest liability on certain loans availed from a Bank.

c) Note No: 12 regarding non-provision of liability towards Leaves Encashment benefits to employees as required under AS 15.

While the impact on account of (a) ,(b)and (c) above on the Profit and Loss account and Balance Sheet is not ascertainable and hence not quantified.

6. Subject to observations under Sl.No.4 (iv) and Sl.No.5 above, in our opinion, and to the best of our information and according to the explanations given to us, the said accounts read together with the notes thereon and schedules attached thereto, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view, inconformity 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 31st March 2012;

b) in the case of Profit and Loss Account, of the loss for the year ended on that date;

c) in the case of Cash Flow statement, of the cash flows for the year ended on that date;

ANNEXURE TO AUDITORS'' REPORT

Re: MORGAN INDUSTRIES LIMITED

Referred to in paragraph 3 of our report of even date,

i. (a) In our opinion and according to the information and explanations given to us, the company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of the fixed assets which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were notice on such verification.

(c) There was no disposal of substantial part of the fixed assets during the year.

ii. (a) According to information and explanations furnished to us, inventories have been physically verified by the Management during the year. 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 inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the stocks as per records were not material and the same have been properly dealt with in the books of accounts.

iii. (a) The company has taken loans from Companies or parties covered in the register maintained under section 301 of the Companies Act, 1956. No interest is applicable to these loans. In our opinion, the other terms and conditions on which the loans have been taken are prima-facie not prejudicial to the interest of the Company.

(b)The Company has not granted loans, secured or unsecured to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

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 company and the nature of its business for the purchase and sale of goods, purchase of inventory and fixed assets. During the course of audit, we have not observed any continuing failure to correct major weakness in the internal control system in respect of these areas.

v. Based on our review, the transactions that need to be entered into the register maintained in pursuance of Section 301 of the Companies Act, 1956 have been so entered. In our opinion, the transactions made in pursuance of contracts or agreements entered in the register maintained under Section 301 of the Companies Act, 1956, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi. The Company has not accepted any deposits from the public requiring compliance of provisions of Sections 58A and 58AA and any other relevant provisions of the Companies Act, 1956, and the rules made there under.

vii. The company does not have an internal audit system commensurate with the size and nature of its business.

viii. To the best of our knowledge and according to information and explanations given to us, the Central Government has not prescribed maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956 for the Company''s products,

ix. (a) The Company is not regular in depositing undisputed statutory dues with appropriate authorities. According to the information and explanations given to us the undisputed amounts payable in respect of PF, ESI, Income Tax, FBT, TDS and Sales tax wherever applicable were in arrears as at 31st March 2012 for a period of more than six months from the date they became payable as given below;

Nature of dues Amount (Rs. in lacs)

Provident Fund : 35.44

ESI : 12.31

TDS : 21.30

Sales Tax (CST/VAT) : 20.52

Income Tax : 22.17

Fringe Benefit Tax : 16.44

Service Tax : 1.31

(b)According to information and explanations given to us, there are no dues of Sales Tax, Income Tax, Service Tax, Excise Duty and Cess which have not been deposited with the appropriate authorities on account of dispute.Provident Fund of Rs.21.64 lacs is paid as on date. The amount of PF outstanding as on date is Rs.29.69 lacs.

x. The Company has accumulated losses at the end of the current financial year. The Company has not incurred cash loss in the current financial year but it has incurred cash loss in the immediately preceding financial year.

xi. The Company has availed certain loans from a Bank. The Company has defaulted in repayment of principal and interest dues to the Bank to the extent of Rs.835.96 together with interest thereon in respect of the said loans.

xii. Based on our examination of documents and records, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. The provisions of special statue applicable to Chit Funds, Nidhi, Mutual Benefit Fund and Societies are not applicable to the Company.

xiv. In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for any loans taken by other from Banks and Financial Institutions.

xv. The Company has availed Term Loans from Banks and the proceeds of the loans have been applied for the purposes for which they were sanctioned.

xvi. 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 not been used to finance long term investment.

xvii. The Company has not made preferential allotment of shares during the year to parties covered in the register maintained under section 301 of the Companies Act, 1956.

xviii. The Company has not raised any money by way of public issue of shares during the year.

xix. The Company has not raised any money by issue of debentures during the year.

xx. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

xxi. Clause (xiv) of the Companies Auditors Report Order 2003, is not applicable to the Company.

For R.Subramanian and Company

Chartered Accountants

A. S. Ramanathan

Place: Chennai Partner

Date : 18.01.2013 Membership No.11072

---

Mar 31, 2009

1. We have audited the attached Balance Sheet of M/s. Morgan Industries Limited (the Company) as at 31.03.20.09- and also the Profit and Loss Account and 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.

2. We conducted our 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 examihing, 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. We believe that our audit provides a reasonable basis for our opinion. .. .

3. As required by the Companies (Auditors Report) order, 2003 (as amended) issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said order to the extent they are applicable to the Company.

4. Further to our comments in the Annexure referred to 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, 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, Profit and Loss Account and 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). On the basis of 1he written representations received from the Directors as on 31st March 2009 and taken on record by the Board of Directors, we report that none of the Directors are disqualified as on 31st March 2009 from being; appointed as a Director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956..

5. Attention is invited to the following

Note No.6, Regarding non-receipt of confirmation of balances in respect of Creditors / Debtors / Unsecured Loans / loans and advances.

6. Subject to observations under SI.No.5 above, in our opinion, and to the best of our information and according to the explanations given to us,- thesaid accounts read together with the notes thereon and schedules attached thereto, 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 on 31 st March 2009;

b) in the case of Profit and Loss Account, of the Profit for the year ended on that date.

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

ANNEXURE TO AUDITORS REPORT MORGAN INDUSTRIES LIMITED

Referred to in paragraph 3 of our report of even date,

i) a) In pur opinion and according to the information and explanations given to us, the company has maintained proper records, showing full particulars including quantitative details and situation of fixed assets.

b) The company has a regular programme of physical verficiation of the fixed assets which in our opinion is reasonable having regard to the size of the Company and. the nature of its assets. As informed, no material discrepancies were noticed on such verification.

c) There was no disposal of substantial part of the fixed assets during the year.

ii) a) According to the information and explanations furnished to us, inventories have been physically verified by the management during the year: In our opinion, the frequency of " verification is reasonable.

b) In our opinion and according to the 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) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the stocks as per records were not material and the same have been properly dealt with in the books of accounts.

iii) a) The Company has taken loans from companies or firms covered in the register maintained under-section 301 of the Companies Act, 1956 -No interest is applicable to these loans. In our opinion, the other terms and conditions on which the loans. have been taken are prirna-facie not prejudicial to the interest of the Company.

b) The Company has not granted loans, secured or unsecured to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

• 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 Company and the nature of its business for, the purchase and sale of goods, purchase of inventory and fixed assets. During the course of audit we have not observed any continuing failure to correct major weakness in the internal control system in respect of these areas.

v) Based on our review, the transactions that need to be entered into the register maintained in pursuance of Section 301 of the Companies Act, 1956 have been so entered. In our opinion the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956, have been made at prices which are reasonable having regard tot he prevailing market prices at the relevant time.

vi) The Company has not accepted any deposits from the public requiring compliance of provisions of section 58A and 58AA of the Companies Act, 1956 and the rules, made there under.

vii)The Company has an internal audit system commensurate with the size and nature of its business,

viii)To the best of our knowledge and according to information and explanations given to us, the Central Government has not prescribed maintenance of cost records under section 209(1) (d) of the Companies Act, 1956 for the Companys products.

ix) a) The Company is remitting with appropriate authorities the undisputed statutory dues though there are delays on certain occasions. According to the information and explanations given to us the undisputed amounts payable 7 in respect of PF, ESI, Income Tax, FBT, TDS and Sales Tax wherever applicable, were in arrears as at 31 st March 2009 for a period of more than six months from the date they became payable as given below:

Nature of Dues Amount (in Rs.)

Provident Fund 11,05,944

ESI 5,07,281

TDS 9,00,920

CST 38,903

Income Tax & FBI 21,91,253

b) According to information and explanations given to us there are no dues of Sales Tax, Income Tax, Service Tax, Excise Duty and ¦ Cess which have not been deposited with the appropriate authorities onaccount of any dispute.

x) The company has no accumulated losses at the end of the current financial year and has not made cash loss in either the current financial year or the immediate 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 financial institutions...

xii) Based on our examination of documents and records, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The provisions of special statue applicable to Chit Fund, Nidhi, Mutual Benefit Fund and Societies are not applicable to the Company.

xiv) In our opinion and according to the information and explanations given to us the Company has not given any guarantee for loans taken by other. from banks and financial institutions.

xv) The Company has availed term loans from banks and the proceeds of the loans have been applied for the purpose for which they were sanctioned,

xvi) According to the information and explanation given to us and on an overall examination of the Balance Sheet 6f the company, we report that long-term funds have not been used to finance short-term assets except permanent working , capital.

xvii) The Company has made preferential allotment of preference shares during the year to parties covered in the register maintained under section 301 of the Companies Act 1956 and the terms and conditions of issue are not prima-facie prejudicial to the interest of the company.

xviii)The Company has not raised any money by way of public issue of shares during the year.

xix) The Company has not raised money by issuing debentures during the year.

xx) To the best of our knowledge and belief and according to the information and explanation given to us, no fraud on or by the company was noticed or reported during the year.

xxi) Clause (xii) and (xiv) of the Companies Auditors Report Order 2003, are not applicable to the Company.

For R.Subramanian And Company Chartered Accountants A. S. Ramanathan

Place : Chennai Partner Date : 02.09.2009 Membership No. 11072