ఆడిటర్ నివేదిక Fortune Foods Ltd.

Mar 31, 2011

I. We have audited the attached balance sheet of M/s. Fortune Foods Limited as at 31 March 2011 and the annexed Profit & loss account of the company for the year ended on that date. 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.

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 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 (Auditor's Report) Order, 2003 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.

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

a) We have obtained all the information and explanation 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 as required by law have been kept by the company so far as appears from our examination of books subject to our remarks under notes to the audit report;

c) The profit and loss account and balance sheet dealt with by this report are in agreement with the books of account;

d) In our opinion the profit and loss account and balance sheet comply with the accounting standards referred to in sub section (3C) of section 211 of the Companies Act, 1956. The Company has complied with the Accounting Standards as notified under the Companies Act, 1956 except that,

- accounting standard (AS) 15-' Employee Benefits for Retirement benefits of the employees by way of Leave encashment, Gratuity etc. which are not provided for and the quantum of the same have not been determined by the management.

- the Company has not provided deferred tax liability/asset as per for AS 22- Accounting for Taxes on Income

e) On the basis of the written presentations received from the directors of the company as at 31st March, 2011 and taken on record by the board of directors, we report that, no director is disqualified from being appointed as a director of the company under clause (g) of the 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 accounts read with the notes thereon gives us, the information required by the companies act, 1956 in the manner so required and give true and fair view.

i. In the given case of the balance sheet of state of affairs of the company as at 31 March 2011.

ii. In the case of the profit and loss account of the loss for the year ended on that date. Notes to the Audit Report for the year ended March 31, 2010

1. Cash balance as on 31 March 2011 is verified and certified by the management and not physically verified by us.

2. Confirmation of Creditors, Advances, Deposits have not been obtained and hence are subject to confirmation and reconciliation if any.

3. Stocks are verified, certified and valued by the management and not physically verified by us.

4. This report is based on the information and explanations given to us, and subject to the notes attached to the Balance Sheet and the Schedules thereto, are based on our interpretations among other things, inter-alia of judicial / semi judicial pronouncements, Circulars of the Central Board of Direct Taxes and guidance note of the Institute of Chartered Accountants of India.

5. We have applied the test check method for auditing. Most of the transactions are supported by external/third party documents viz. Invoice, receipts, contract notes, vouchers, etc. However, wherever supporting are not available we have relied on the vouchers prepared and approved by director of the company, and confirmed that, all these expenses are legitimate expenses incurred for the business.

Annexure to the Audit Report

Fortune Foods Limited

For the year ended March 31, 2011

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

i. (a) The company has not maintained proper records showing full particulars, including Quantitative details and situation of fixed assets.

(b) All the assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets However, discrepancies, if any, with book records can't be ascertained, as the records are not properly maintained.

(c) As per information and explanation given to us on our enquiries the company has not I disposed off any assets during year so as to have an impact on the operations of the company, or affect its going concern status of the company

ii. (a) The inventory has been physically verified during the year by the management. In respect of inventory lying with third parties, these have substantially been confirmed by them. In our opinion, the frequency of verification is reasonable.

(b) According to the information and explanations given to us, in our opinion, 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) In our opinion and according to the information and explanations given to us, we feel that the company needs to further improve maintenance of records of inventories. Periodically review the quality, marketability of the old inventory laying in cold storage. Material discrepancies noticed on physical verification have been properly dealt with in the books of account.

iii. (a) The company has made the advance by way of payment of expenses for the parties covered in the register maintained under section 301 of Companies Act 1956, in contravention of provision of section 295 of the Companies Act, 1956. The maximum amount involved during the year was Rs.373,641/- and the year end balance was Rs. 1,388,098/-

iv. In our opinion and according to the information and explanations given to us, there exists an adequate internal control system commensurate with the size of the company and the nature of its business, with regard to purchase of inventory, fixed assets and with regard to the sale

- of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system of the company.

v. (a) According to the information and explanations given to us, we are of the opinion that the particulars of all contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(d) In respect of the transactions entered in register maintained in pursuance of Section 301 of the Companies Act. 1956, according to the information and explanation given to us and excluding certain transactions of purchase of goods and material being tailor made as per drawings and designs of the customers etc and being of special nature for which alternate quotations are not available, the transactions in pursuance of such contracts or arrangements have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time

vi. As the Company has not accepted any deposit from the public, the directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA of the Company Act, 1956 and the Rules framed there under are not applicable.

vii. The Company has no formal internal audit department as such, and though, its control procedures ensure reasonable internal checking of its financial and other records, we recommend that, the Company should have a formal internal audit department comprising qualified persons capable for it or get the internal audit done by external professionals).

viii. In our opinion and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under clause (d) of sub- section (1) of section 209 of the Company Act, 1956.

ix. (a) According to the records of the Company, the Company is not regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Profession Tax and other statutory dues applicable to the Company with the appropriate authorities.

- The company has not paid deferral Sales Tax since the year 2007-08 as per Sales Tax NPV discounted payable scheme. Hence Rs.33.94 lacs for the year FY 2009-10 & Rs.1 16.04 lacs till the date has been reversal in the Balance Sheet and expenses out on account of interest/discounted value, which has been recognized as an income in the year 2006-07.

- There are undisputed liabilities of Rs.3.96 lacs for Profession tax, 0.12 lacs for Service Tax, Rs 19.02 lacs for Income Tax TDS Rs.27.34 lacs for VAT, Rs.0.72 lacs for FBT & Income tax which are due for more than a year.

- The Company has continuing default in filling of Registrar of Companies returns and submitting reports to Stock Exchanges Further, since the Central Government has till date not prescribed the amount of cess payable under section 441A of the Companies Act, 1956 we are not in a position to comment upon the regularity or otherwise of the company in depositing the same.

x. The company has accumulated depreciation losses. In our opinion, the accumulated losses of the company are not more than fifty percent of its net worth. Further, the company has incurred cash loss of Rs. 41.85 lacs during the financial year covered by our audit.

xv. In our opinion, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of

xx. The Company has not raised any money through a public issue during the year.

For Ratan Chandak & Co.

Chartered Accountms Niranjan R. Laddha

Partner

Place :Nashik Membership No, 111756

Date : 22nd September, 2011 Firm Reg. No, 108696W