ఆడిటర్ నివేదిక Integrated Finance Company Ltd.

Mar 31, 2012

We have audited the attached Balance Sheet of M/s. Integrated Finance Company Limited, as at 31st March 2012 and the Profit and Loss Account 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 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.

As required by the Companies (Auditor''s Report) Order, 2003, as amended by the Companies (Auditor''s Report) (Amendment) Order, 2004 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.

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 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 and Profit and Loss Account dealt with by this report are in agreement with the books of account

(iv) In our opinion, the Balance Sheet and Profit and Loss Account 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 written representations received from the directors, as on 31st March, 2011, and taken on record by the Board of Directors, we report that none of the directors is 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;

(vi) a) The net worth of the company is completely eroded and restrictions are placed by RBI on accepting further deposits which seriously hampers the ability of the company to carry on its designated business activities as NBFC. In the meanwhile the company filed a scheme of restructuring U/s 391 to 394 of Companies Act, 1956 on 1.06.2005 which was approved by the Hon''ble High Court, Madras on 19.08.2006 vide order of Single Judge Bench, which on an appeal the division bench of Madras High court has decided the proposed restructuring against the company, in respect of which the company the approached Supreme Court through a Special Leave Petition (SLP) and the same has been admitted by the Hon''ble Supreme Court pending the outcome of the same (despite huge accumulated losses accumulated by the company) the financial statements have been prepared as that on a going concern basis. In the event, the outcome of the ongoing proceedings are going to be against the company the same will impair the very going concern assumption of the company, and would place serious limitations on the company''s eventual liability to meet its obligation to secured/ unsecured lenders/ depositors. On view of the above we are unable to express our view whether the company is a going concern or not, consequently we are unable to express our opinion whether the financial statements give a true and fair view of the affairs of the company.

b) 1) Interest to banks has been provided at the contracted rates on the sanctioned limits, which is different from the actual out standings to the respective banks. The claims of the bank towards all penal levies not quantified.

2) The company has not provided interest on fixed deposits and non-convertible secured bonds after 19th May 2005 (effective date under scheme U/s 391 of Companies Act, 1956) for the financial year amounting to Rs. 158.52 lakhs on the un-matured bonds cumulative 5076.25 lakhs, consequently the loss for the year has been understated by Rs. 158.52 lakhs consequently the carried forward profit and loss account balance is also understated by Rs. 5076.25 lakhs. The interests on matured bonds and matured fixed deposits have not been provided for and the amount is not quantified.

3) During the previous year ending March 31, 2011 the government of Pondicherry had acquired a property of company under compulsory acquisition of land for a compensation of Rs. 2.18 Crores, for which the company had filed the writ petition before the High Court of Madras seeking the quashing of the acquisition. Pending the outcome the Company had not recorded and taken cognizance of the transaction in the books of accounts, and consequently in the financial statements also. Had the company accounted for the transaction, the loss for the financial year would have been lower by Rs 1.96 crores and the accumulated Profit and loss account debit balance would be lower by 1.96 Crores with a reduction in carrying value of assets to the extent of Rs. 32 Lakhs.

4) The company ceased to be a deposit accepting NBFC and further also discounted its primary objective as NBFC (other than collecting dues from its debtors or payment of dues to lenders/ depositors) many of the provisions pertaining to NBFC have not been complied with.

5) An amount of Rs. 67.5 lakhs being the balance in the current account of a scheduled bank has been adjusted by the bank as a preference dividend due by the company (notwithstanding that no dividend is declared by the company), in respect of which we are unable to express our opinion on recoverability of said amount from the bank.

6) Cash and bank balances include an amount of Rs.7,88,967 being the balance with a bank which has not been reconciled due to non availability of statements and confirmation. We are unable to form an opinion to that extent.

7) In our view the investments of the company in the form of long term investments including investments in subsidiaries have been affected by permanent diminution in carrying value held by the company thus such diminution warrants a provision to the extent of Rs. 828.11 lakhs. Had this amount being provided the loss for the year would have been higher by Rs. 828.11 lakhs and the debit balance in profit and loss account would have been higher by Rs. 828.11 lakhs.

8) In view various qualifications and disclaimers in our report as mentioned above, our report cannot be taken as any assurance for future performance of the company in meeting any of its obligations towards secured/ unsecured lenders or depositors.

(vii) Subject to the above, in our opinion and to the best of our information and according to the explanations given to us, and especially in view of our comments in Para (iv)(a) above, the said accounts does not give the information required by the Companies Act, 1956, in the manner so required and does not 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, 2012; and

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

ANNEXURE REFERRED IN OUR REPORT OF EVEN DATE

1. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. Fixed Assets including assets under lease, have not been physically verified by the management during the year. The company has no programme of verification for the fixed assets other than the assets under lease which, in our opinion, is not reasonable having regard to the size of the company and the nature of its assets, and the Company has not verified the fixed assets during year. The company does not have any programme of verification in respect of assets on lease. During the year, there was no substantial disposal of fixed assets affecting the status of the company as a going concern, however this should be read along with our comments in Para (iv)(a) of the main audit report.

2. a) In our opinion and according to the information and explanations given to us, the Company has not granted any loans secured or unsecured to companies, firms and other parties entered in the Register maintained under Section 301 of the Companies Act, 1956.

b) In our opinion and according to the information and explanations given to us, during the year the company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register mentioned under Sec 301 of the Act.

3. 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 purchases of fixed assets. During the course of our audit, no major weakness has been noticed in the internal controls.

4. Based on the audit procedures applied by us and according to the information and explanations provided by the Management, we are of the opinion that the no transactions need to be entered into the Register maintained under Section 301.

5. In our opinion and according to the information and explanations given to us, the company has not complied with the directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA of the Companies Act, 1956 and the rules framed thereunder with regard to deposits accepted from the public and the company has not submitted the required returns/ statements to Reserve Bank of India with in the stipulated time. The Reserve Bank of India passed an order, prohibiting the company from accepting any deposits from public from 18th January 2005. The company has filed a restructuring proposal for meeting the liability towards deposits under section 391 of the Companies Act, 1956 on 21.06.2005 which was approved by the Hon''ble High Court, Madras on 19.08.2006 vide order of Single Judge Bench, which on an appeal the Division Bench of Madras High Court decided the proposal for restructuring against the company, in respect of which the company appealed to Supreme Court through a Special Leave Petition (SLP) and the same been admitted by the Hon''ble Supreme Court pending the outcome of the same the interest amounting to Rs. 418.97 lakhs for the year on deposits has not been provided after 19.05.2005. 6. In our opinion the Company has no internal audit system commensurate with the size and nature of its business.

7. According to the records of the Company, the Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, , employees'' state insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty, cess, except for the tax deducted but remitted amounting to Rs. 93,450 including interest for delayed remittance of Rs. 22,798 for the year ended. There are no undisputed amounts payable in respect of statutory dues, which are outstanding as at 31st March, 2012 for a period of more than six months from the date they become payable except as aforesaid. The company has not deposited the amounts stipulated under Section 205C (2) to the credit of "Investor Education and Protection Fund" amounting to 13.90 Lakhs.

8. Based on our audit procedures and on the information and explanations given by the Management, there are no dues outstanding in respect of excise duty, customs duty, wealth tax, service tax and cess on account of any dispute. Disputed income tax and sales tax which have not been deposited on account of disputes and the forum where the dispute is pending are as under:

Name of the statute Assessment year Tax Amount Amount deposited (In lakhs)

1. Income Tax Act, 1961 1997-1998 39.37 39.37

1999-2000 182.35 0

2000-2001 664.64 40.82

2001-2002 250.31 0

2002-2003 227.37 7.40

2003-2004 133.03 0

2004-2005 411.97 0

2005-2006 319.26 0 2. Tamilnadu General Sales Tax Act, 1959 1992-1993 1.23 0.20

1995-1996 4.38 0

1996-1997 11.88 0

2004-2005 1.30 1.30

3. Kerala General Sales Tax Act, 1963 1993-1994 5.02 0

1994-1995 0.80 0

1995-1996 15.26 5.09

4. Bombay Sales Tax Act, 1959 1992-1993 8.97 3.11

5. Delhi Sales Tax Act, 1975 1989-1990 1.50 0.15

Name of the Statute Forum where dispute is pending with

Income Tax Act, 1961 The High Court of Judicature at Madras

The High Court of Judicature at Madras

The High Court of Judicature at Madras

The High Court of Judicature at Madras

The High Court of Judicature at Madras

The High Court of Judicature at Madras

The Income tax Appellate Tribunal

The Income tax Appellate Tribunal

Tamilnadu General Sales Tax Act, 1959 The Appellate Assistant Commissioner (CT) III Chennai

The Sale Tax Appellate Tribunal, Chennai

The Appellate Assistant Commissioner (CT) III Chennai

The Appellate Assistant Commissioner (CT) III Chennai

Kerala General Sales Tax Act, 1963 The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam

The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam

The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam

Bombay Sales Tax Act,1959 Remanded back to Assistant commissioner Mumbai

Delhi Sales Tax Act,1975 Deputy commissioner of sales tax, Appeal -1, New Delhi

9. The Company''s accumulated losses as at the end of financial year is more than its net worth. The company has incurred cash losses during the financial year, as well as in the preceding financial year.

10. The Company has defaulting in payment of interest and installments to banks towards working capital borrowings of Rs. 11581.26 lakhs. The company has filed a restructuring proposal for meeting the liability towards Bonds under section 391 of the Companies Act. 1956 on 21.06.2005 which was approved by the Hon''ble High Court, Madras on 19.08.2005 vide order of Single Judge Bench, which on an appeal the Division Bench of Madras High Court decided the proposal for restructuring against the company, in respect of which the company appealed to Supreme Court through a Special Leave Petition (SLP) and the same been admitted by the Hon''ble Supreme Court pending the outcome of the same the interest amounting to Rs.162.16 lakhs for the financial year and Rs. 4657.28 lakhs cumulatively on bond has not been provided after 19.05.2005, the company has not repaid the matured bonds on due dates, amounting to Rs. 8407.81 lakhs. Had the company provided for the interest on Bonds for the year the loss for the year would have been higher by Rs.162.16 lakhs and consequently balance in Profit and loss account would have been higher by similar amount.

11. According to the information and explanations given to us, the company has granted loans and advances on the basis of security by way of pledge of shares.

12. The company has given guarantee for loans taken by the associate company from banks, the terms and conditions of which are prima facie not prejudicial to the interest of the company.

13. According to the information and explanations given to us and records examined by us, the company has not availed any term loan during the year.

14. In our opinion and according to the explanations given to us, on an overall examination of balance sheet of the company, funds raised on short-term basis, prima-facie, have not been used during the year for long term investment.

15. Based upon the audit procedures performed and information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

16. The provisions of Clauses of Paragraph 4 of the Companies (Auditor''s Report) Order, 2003 listed below are not applicable to the Company for the year:

a) Clause (ii) regarding physical verification and maintenance proper records, of investory;

b) Clause (viii) regarding maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956;

c) Clause (xiii) regarding special statute applicable to Chit Funds and Nidhis/Mutual Benefit Fund and Societies;

d) Clause (xiv) regarding dealing or trading in shares, securities, etc;

e) Clause (xviii) regarding preferential allotment of shares to specified parties and

f) Clause (xx) regarding money raised by public issue and its end use.

For BRAHMAYYA & Co.

Chartered Accountants

(Firm Regn. No.000511S)

N. SRI KRISHNA

Place :Chennai Partner

Date : 28.09.2012 Membership No.26575

---

Mar 31, 2011

We have audited the attached Balance Sheet of M/s. Integrated Finance Company limited, as at 31st March 2011 and also the Profit and 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 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.

As required by the Companies (Auditor''s Report) Order, 2003, as amended by the Companies (Auditor''s Report) (Amendment) Order, 2004 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.

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 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 cash flow statement dealt with by this report are in agreement with the books of account

(iv) On the basis of written representations received from the directors, as on 31st March, 2011 and taken on record by the Board of Directors, we report that none of the director is disqualified as on 31st March, 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

(v) 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, except as for non accrual of interest on fixed deposits and non-convertible bonds after 19th May 2005.

(vi) a) The net worth of the company is completely eroded and restrictions are placed by RBI on accepting further deposits which seriously hampers the ability of the company to carry on its designated business activities as NBFC. In the meanwhile the Company has filed a restructuring proposal for meeting the liability towards deposits and Bonds under section 391 of the Companies Act 1956 on 21.06.2005 which was approved by the Hon''ble High Court, Madras on 19.08.2006 vide order of Single Judge Bench, which on an appeal the division bench of Madras High Court decided the proposal for restructuring against the company, in respect of which the company appealed to supreme court through a Special Leave Petition (SLP) and the same has been admitted by the Honorable Supreme Court pending the outcome of the same (despite huge accumulated losses incurred by the company) the financial statements have been prepared as that on a going concern basis. In the event, the out come of the on going proceedings are going to be against the company the same will impair the very going concern assumption of the company, and would place serious limitations on the company''s eventual ability to meet its obligation to secured / unsecured lenders/depositors. In view of the above we are unable to express our view whether the company is a going concern or not.

b) 1) Interest to banks has been provided at the contracted rates on the sanctioned limits, which is different from the actual out standings to the respective banks. The claims of the banks towards all penal levies and other claims have not been provided amount not quantified.

2) The Company has not provided interest on fixed deposits and non-convertible secured bonds after 19th May 2005 (effective date under scheme U/s 391 of Companies Act 1956) for the year amounting to Rs. 373.61 Lakhs cumulative Rs.4917.73 lakhs, consequently the loss for the year is understated by Rs.373.61 Lakhs and hence the carried forward profit and loss account is also understated byRs.4917.73 lakhs.

3) During the year, the government of Puducherry had acquired the property of company under compulsory acquisition of land for a compensation of Rs.2.18 Crores, for which the company had filed the writ petition before the High Court of Madras seeking the quashing of the acquisition. Pending the outcome the Company had not taken cognizance of the transaction in the books of accounts, and consequently in the financial statements also. Had the company accounted for the transaction, profit for the year could be higher by Rs.1.96 Crores and the Profit and Loss account debit balance would be lower by the same amount.

4) The company seized to be a deposit accepting NBFC and further also discontinued its primary objective as NBFC (other than collecting dues from its debtors or payment of dues to lenders/depositors) many of the provisions pertaining to NBFC have not been compliedwith in relation to filing of periodical returns and other compliances required under the RBI Act, consequently having regard to our audit qualification mentioned above, our report cannot be taken as any assurance for future performance of the company in meeting any of its obligation towards secured / unsecured lenders or depositors.

5) As referred to in 14(a), an amount of Rs.67.50 Lakhs being the balance in the current account of a bank has been adjusted by the bank as a preference dividend due by the company (notwithstanding that no dividend is declared by the company), which we are not able to express an opinion on recoverability of said amount from the bank.

(vii) Subject to above and based on the matters mentioned Note No. 10 (D) regarding the security for secured loans, 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 having specific regard to VI (a) and VI (b)(g) above, on the ability of the company to be treated as going concern, 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, 2011;

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

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

ANNEXURE REFERRED IN OUR REPORT OF EVEN DATE

1. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. Fixed Assets including the assets under lease, have not been physically verified by the management during the year. The Company has a programme of verification for the fixed Assets other than the assets under lease which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets, however the Company has not verified the fixed assets as per the said programme. The Company does not have any programme of verification in respect of assets on lease. During the year, there was no substantial disposal of fixed assets affecting the status of the company as a going concern.

2. In our opinion and according to the information and explanations given to us, the Company has neither granted nor taken any loans secured or unsecured to / from companies, firms and other parties entered in the Register maintained under Section 301 of the Companies Act, 1956 during the year.

3. 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 of fixed assets. During the course of our audit, no major weakness has been noticed in the internal controls.

4. Based on the audit procedures applied by us and according to the information and explanations provided by the Management, we are of the opinion that the transactions that need to be entered into the Register maintained under Section 301 have been so entered.

5. In our opinion and according to the information and explanations given to us, the company has complied with the directives issued by the Reserve Bank of India and the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed there under with regard to deposits accepted from the public, except that the Company has not submitted the required returns/statements to Reserve Bank of India with in the stipulated time. The Reserve Bank of India passed an order, prohibiting the company from accepting any deposits from public from 18th January 2005. The Company has filed a restructuring proposal for meeting the liability towards deposits under section 391 of the Companies Act 1956 on 21.06.2005 which was approved by the Hon''ble High Court, Madras on 19.08.2006 vide order of Single Judge Bench, which on an appeal the division bench of Madras High Court decided the proposal for restructuring against the company, in respect of which the company appealed to supreme court through a Special Leave Petition (SLP) and the same has been admitted by the Hon''ble Supreme Court , pending the outcome of the same the interest amounting to Rs. 422.61 lakhs on deposits has not been provided after 19.05.2005.

6. Company does not have an internal audit adequate and commensurate to the size and nature of the business of Company.

7. According to the records of the Company, the Company is in general irregular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty, cess. There are no undisputed amounts payable in respect of statutory dues which are outstanding as at 31st March, 2011 for a period of more than six months from the date they become payable. The company has not deposited the amounts stipulated under Section 205 C (2) to the credit of "Investor Education and Protection Fund" amounting to Rs.13.90 Lakhs.

8. Based on our audit procedures and on the information and explanations given by the Management, there are no dues outstanding in respect of excise duty, customs duty, wealth tax, service tax and cess on account of any dispute. Disputed income tax and sales tax which have not been deposited on account of disputes and the forum where the dispute is pending are as under:

Name of the statute Assessment year Tax Amount Amount deposited (In lakhs)

1. Income Tax Act, 1961 1997-1998 39.37 39.37

1999-2000 182.35 0

2000-2001 664.64 40.82

2001-2002 250.31 0

2002-2003 227.37 7.40

2003-2004 133.03 0

2004-2005 411.97 0

2005-2006 319.26 0

2. Tamilnadu General Sales Tax Act, 1959 1992-1993 1.23 0.20

1995-1996 4.38 0

1996-1997 11.88 0

2004-2005 1.30 1.30

3. Kerala General Sales Tax Act, 1963 1993-1994 5.02 0

1994-1995 0.80 0

1995-1996 15.26 5.09

4. Bombay Sales Tax Act, 1959 1992-1993 8.97 3.11

5. Delhi Sales Tax Act, 1975 1989-1990 1.50 0.15

Name of the Statute Forum where dispute is pending with

Income Tax Act, 1961 The High Court of Judicature at Madras

The High Court of Judicature at Madras

The High Court of Judicature at Madras

The High Court of Judicature at Madras

The High Court of Judicature at Madras

The High Court of Judicature at Madras

The Income tax Appellate Tribunal

The Income tax Appellate Tribunal

Tamilnadu General Sales Tax Act, 1959 The Appellate Assistant Commissioner (CT) III Chennai

The Sale Tax Appellate Tribunal, Chennai

The Appellate Assistant Commissioner (CT) III Chennai

The Appellate Assistant Commissioner (CT) III Chennai

Kerala General Sales Tax Act, 1963 The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam

The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam

The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam

Bombay Sales Tax Act, 1959 Remanded back to Assistant commissioner Mumbai

Delhi Sales Tax Act, 1975 Deputy commissioner of sales tax, Appeal -1, New Delhi

9. The Company''s accumulated losses at the end of financial year are more than its net worth. The company has incurred cash losses during the financial year as well as incurred cash loss during the immediately preceding previous year.

10. The company has defaulted in payment of interest and installments to banks towards working capital borrowings of Rs.10816 Lakhs. The Company has filed a restructuring proposal for meeting the liability towards Bonds under section 391 of the Companies Act 1956 on 21.06.2005 which was approved by the Hon''ble High Court, Madras on 19.08.2006 vide order of Single Judge Bench, which on an appeal the division bench of Madras High Court decided the proposal for restructuring against the company, in respect of which the company appealed to supreme court through a Special Leave Petition (SLP) and the same has been admitted by the Hon''ble Supreme Court , pending the outcome of the same the interest amounting to Rs. 4495.12 lakhs on bond has not been provided after 19.05.2005, the company has not repaid the matured bonds on due dates, amounting to Rs.7027.74 Lakhs .

11. According to information and explanations given to us and records of the company examined by us the Company has granted loans and advances on the basis of security by way of pledge of shares. The company has since obtained adequate documents, such as the valid transferred deeds in respect of such shares taken as security.

12. The Company has given guarantee for loans taken by the associate company from banks, the terms and conditions of which are prima facie not prejudicial to the interest of the company. The company also given the guarantee to loans taken by others, the terms and conditions of which are not prejudicial to the interest of the company.

13. According to information and explanations given to us and records of the company examined by us the company has not availed any term loan during the year.

14. According to the cash flow statement and other records examined by us and the information and explanations given to us on an overall basis, funds raised on short term basis, prima facie, have not been used during the year for long term investment and vice versa.

15. According to information and explanations given to us and records of the company examined by us, securities have been created in respect of bonds issued, except for certain modification of charges in respect "Bond A".

16. Based upon the audit procedures performed and information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

17. The provisions of Clauses of Paragraph 4 of the Companies (Auditor''s Report) Order, 2003, as amended by the Companies (Auditor''s Report) (Amendment) Order, 2004 listed below are not applicable to the Company for the year:

a) Clause (ii) regarding Physical verification and maintenance proper records, of inventory;

b) Clause (viii) regarding maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956;

c) Clause (xiii) regarding special statute applicable to Chit Funds and Nidhis/Mutual Benefit Fund and Societies;

d) Clause (xiv) regarding dealing or trading in shares, securities etc.;

e) Clause (xviii) regarding preferential allotment of shares to specified parties and;

f) Clause (xx) regarding money raised by public issue and its end use

For BRAHMAYYA & Co.

Chartered Accountants

(Firm Regn. No.000511S)

N. SRI KRISHNA

Place:Chennai Partner

Date : 01.10.2011 Membership No.26575

---

Mar 31, 2010

We have audited the attached Balance Sheet of M/s. Integrated Finance Company limited, as at 31st March 2010 and also the Profit and 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 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.

As required by the Companies (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004 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.

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 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 cash flow statement dealt with by this report are in agreement with the books of account

(iv) On the basis of 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 is 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; (v) 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, except as for the accrual of interest on fixed deposits and non-convertible bonds after 19th May 2005. (vi) a) The net worth of the company is completely eroded and restrictions are placed by RBI on accepting further deposits which seriously hampers the ability of the company to carry on its designated business activities as NBFC. In the meanwhile the Company has filed a restructuring proposal for meeting the liability towards deposits and Bonds under section 391 of the Companies Act 1956 on 21.06.2005 which was approved by the Honble High Court, Madras on 19.08.2006 vide order of Single Judge Bench, which on an appeal the division bench of Madras High Court decided the proposal for restructuring against the company, in respect of which the company appealed to supreme court through a Special Leave Petition (SLP) and the same has been admitted by the Honorable Supreme Court pending the outcome of the same (despite huge accumulated losses incurred by the company) the financial statements have been prepared as that on a going concern basis. In the event, the out come of the on going proceedings are going to be against the company the same will impair the going concern assumption of the company, and would place serious limitations on the companys eventual ability to meet its obligation to secured / unsecured lenders / depositors. In view of the above we are unable to express our view whether the company is a going concern or not.

b) 1) Interest to banks has been provided at the contracted rates on the sanctioned limits, which is different from the actual out standings to the respective banks. The claims of the banks towards all penal levies and other claims have not been provided amount not quantified.

2) The Company has not provided interest on fixed deposits and non-convertible secured bonds after 19th May 2005 (effective date under scheme U/s 391 of Companies Act 1956) for the year amounting to Rs. 655.65 Lakhs cumulative Rs. 4544.11 Lakhs, consequently the loss for the year is understated by Rs.655.65 Lakhs and hence the carried forward profit and loss account is also understated by Rs. 4544.11 Lakhs.

c) Cash and bank balances, which includes, amount set aside is meet the SLR requirements of the Company, have been appropriated by the Bank, towards their dues, however, the Company contested the matter and pending before RBI, for direction, pending to out come from RBI, the balance with the banks were retained as per books of the Company, without taking cognizance of the appropriation by banks of stated above, consequently the assets are overvalued by Rs. 359.50 Lakhs.

(vii) Subject to above and based on the matters mentioned Note No. 10 (D) regarding the security for secured loans, 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 31st March, 2009;

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

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

ANNEXURE REFERRED IN OUR REPORT OF EVEN DATE 1. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. Fixed Assets including the assets under lease, have not been physically verified by the management during the year. The Company has a programme of verification for the fixed Assets other than the assets under lease which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets, however the Company has not verified the fixed assets as per the said programme. The Company does not have any programme of verification in respect of assets on lease. During the year, there was no substantial disposal of fixed assets affecting the status of the company as a going concern.

2. In our opinion and according to the information and explanations given to us, the Company has neither granted nor taken any loans secured or unsecured to / from companies, firms and other parties entered in the Register maintained under Section 301 of the Companies Act, 1956 during the year.

3. 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 of fixed assets. During the course of our audit, no major weakness has been noticed in the internal controls.

4. Based on the audit procedures applied by us and according to the information and explanations provided by the Management, we are of the opinion that the transactions that need to be entered into the Register maintained under Section 301 have been so entered.

5. In our opinion and according to the information and explanations given to us, the company has complied with the directives issued by the Reserve Bank of India and the provisions of Section 58A and Section 58A A of the Companies Act, 1956 and the rules framed there under with regard to deposits accepted from the public, except that the Company has not submitted the required returns/statements to Reserve Bank of India within the stipulated time. The Reserve Bank of India passed an order, prohibiting the company from accepting any deposits from public from 18th January 2005. The Company has filed a restructuring proposal for meeting the liability towards deposits under section 391 of the Companies Act 1956 on 21.06.2005 which was approved by the Honble High Court, Madras on 19.08.2006 vide order of Single Judge Bench, which on an appeal the division bench of Madras High Court decided the proposal for restructuring against the company, in respect of which the company appealed to supreme court through a Special Leave Petition (SLP) and the same has been admitted by the Honble Supreme Court, pending the outcome of the same the interest amounting to Rs. 426.35 lakhs on deposits has not been provided after 19.05.2005.

6. Company does not have an internal audit adequate and commensurate to the size and nature of the business of Company.

7. According to the records of the Company, the Company is general irregular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty, cess. There are no undisputed amounts payable in respect of statutory dues which are outstanding as at 31st March, 2010 for a period of more than six months from the date they become payable. The company has not deposited the amounts stipulated under Section 205 C (2) to the credit of "Investor Education and Protection Fund" amounting to Rs.13.90 Lakhs.

8. Based on our audit procedures and on the information and explanations given by the Management, there are no dues outstanding in respect of excise duty, customs duty, wealth tax, service tax and cess on account of any dispute. Disputed income tax and sales tax which have not been deposited on account of disputes and the forum where the dispute is pending are as under: Name of the Assessment year Tax Amount Amount statute deposited Forum where dispute is pending with

(In lakhs)

1.Income Tax Act, 1961 1997-1998 19.27 19.07 The High Court of Judicature Madras

1999-2000 182.35 0 The High Court of Judicature Madras

2000-2001 664.64 40.82 The High Court of Judicature Madras

2001-2002 250.31 0 The High Court of Judicature Madras

2002-2003 227.37 7.40 The High Court of Judicature Madras

2003-2004 100.02 0 The High Court of Judicature at Madras

2004-2005 360.66 0 The Income tax AppellateTribunal

2. Tamilnadu General Sales Tax Act, 1959 1992-1993 1.23 0.20 The Appellate Assistant Commissioner (CT) III Chennai.

1995-1996 4.38 0 The Sale Tax Appellate Tribunal, Chennai. 1996-1997 11.88 0 The Appellate Assistant Commissioner (CT) III Chennai

2004-2005 1.30 1.30 The Appellate Assistant Commissioner (CT) III Chennai

3. Kerala General Sales Tax Act, 1963 1993-1994 5.02 0 The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam.

1994-1995 0.80 0 The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam.

1995-1996 15.26 5.09 The Sale Tax Appellate Tribunal, Additional Bench, Ernakulam.

4. Bombay Sales Tax Act, 1959 1992-1993 8.97 3.11 Remanded back to Assistant commissioner Mumbai

5.Delhi Sales Tax Act, 1975 1989-1990 1.50 0.15 Deputy commissioner of sales tax, Appeal -1, New Delhi

9. The Companys accumulated losses at the end of financial year are more than its net worth. The company has incurred cash losses during the financial year as well as incurred cash loss during the immediately preceding previous year.

10. The company has defaulted in payment of interest and installments to banks towards working capital borrowings of Rs.l 1061 Lakhs. The Company has filed a restructuring proposal for meeting the liability towards Bonds under section 391 of the Companies Act 1956 on 21.06.2005 which was approved by the Honble High Court, Madras on 19.08.2006 vide order of Single Judge Bench, which on an appeal the division bench of Madras High Court decided the proposal for restructuring against the company, in respect of which the company appealed to supreme court through a Special Leave Petition (SIP) and the same has been admitted by the Honble Supreme Court, pending the outcome of the same the interest amounting to Rs. 4117.76 lakhs on bond has not been provided after 19.05.2005, the company has not repaid the matured bonds on due dates, amounting to Rs. 5528.10Lakhs.

11. According to information and explanations given to us and records of the company examined by us the Company has granted loans and advances on the basis of security by way of pledge of shares. The company has since obtained adequate documents, such as the valid transferred deeds in respect of such shares taken as security.

12. The Company has given guarantee for loans taken by the associate company from banks, the terms and conditions of which are prima facie not prejudicial to the interest of the company. The company also given the guarantee to Joans taken by others, the terms and conditions of which are not prejudicial to the interest of the company.

13. According to information and explanations given to us and records of the company examined by us the company has not availed any term loan during the year.

14. According to the cash flow statement and other records examined by us and the information and explanations given to us on an overall basis, funds raised on short term basis, prima facie, have not been used during the year for long term investment and vice versa.

15. According to information and explanations given to us and records of the company examined by us, securities have been created in respect of bonds issued, except for certain modification of charges in respect "Bond A".

16. Based upon the audit procedures performed and information and explanations given by the Management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

17. The provisions of Clauses of Paragraph 4 of the Companies {Auditors Report) Order, 2003, as amended by the Companies {Auditors Report) (Amendment) Order, 2004 listed below are not applicable to the Company for the year:

a) Clause (ii) regarding Physical verification and maintenance proper records, of inventory;

b) Clause (viii) regarding maintenance of cost records under Section 209(l)(d) of the Companies Act, 1956;

c) Clause (xiii) regarding special statute applicable to Chit Funds and Nidhis/Mutual Benefit Fund and Societies;

d) Clause (xiv) regarding dealing or trading in shares, securities etc.;

e) Clause (xviii) regarding preferential allotment of shares to specified parties and;

f) Clause (xx) regarding money raised by public issue and its end use

For BRAHMAYYA & Co.,

Chartered Accountants

(FirmRegn. No.000511S)

N. SR1KRISHNA

Place: Chennai Partner

Date: 12.08.2010 Membership No. 26575