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Auditor Report of Advance Lifestyles Ltd.

Mar 31, 2014

Report on the Financial Statements:

We have audited the accompanying financial statements of Advance Lifestyles Limited (Formerly Known as The Ahmedabad Advance Mills Limited) ("the Company"), which comprise the Balance Sheet as at March 31, 2014 the Statement of Profit and Loss and 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 (which for the time being, are deemed to be the Accounting Standards prescribed under Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs). 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.

Auditors'' 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 misstatements.

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 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 audit opinion.

Opinion:

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the 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 March 31, 2014;

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

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 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 (which for the time being, are deemed to be the Accounting Standards prescribed under Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs).

e) on the basis of written representations received from the 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 (g) of sub-section (1) of section 274 of the Act.

The Annexure referred to in paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements" of our Report of even date

1. In respect of its Fixed Assets:

(a) The company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

(b) As explained to us, fixed assets have been physically verified by the management at reasonable intervals; no material discrepancies were noticed on such verification.

(c) In our opinion and according to the information and explanations given to us, no fixed asset has been disposed during the year and therefore does not affect the going concern assumption.

2. In respect of its inventories:

(a) As explained to us, inventories have been physically verified during the year by the management at reasonable intervals.

(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) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. No material discrepancy was noticed on physical verification of stocks by the management as compared to book records.

3. In respect of loans, secured or unsecured, granted or taken by the Company to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956:

(a) The Company has given unsecured loans to its subsidiary company. In respect of the said loans, the maximum amount outstanding at any time during the year was Rs. 55,76,12,719/- and the year end balance is Rs. 55,66,35,658/-.

(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of the loans given by the Company are, prima facie, not prejudicial to the interest of the Company.

(c) As per the information and explanations give to us, there are no stipulation for receipt of principal amount of loans or interest. However, the Company is charging the interest at the year end.

(d) Since, there are no stipulations in respect of receipt of principal amount of loans, we are not in a position to comment whether any amount is over due or not.

(e) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has taken unsecured loans from 3 companies listed in the register maintained under Section 301 of the Companies Act, 1956. In respect of the said loans, the maximum amount outstanding at any time during the year and the yearend balance is as follows:

Sr. Particulars Maximum Amt. No. O/s at any Closing balance time during the Year

1. Prateek Spintex Ltd. 31,51,36,357 30,12,89,458

2. Advance Spacelink Pvt. Ltd. 3,53,66,242 NIL

3. Phulchand Exports Pvt. Ltd. 9,46,23,524 NIL

(f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of the loans taken by the Company are, prima facie, not prejudicial to the interest of the Company.

(g) As per the information and explanations give to us, there are no stipulation for repayment of principal amount of loans or interest.

(h) Since, there are no stipulations in respect of repayment of principal amount of loans, we are not in a position to comment whether any amount is over due or not.

4. In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the Company and the nature of its business, for the purchase of inventories and fixed assets and payment for expenses and for sale of goods. During the course of our audit, no major instance of continuing failure to correct any weaknesses in the internal controls has been noticed.

5. In our opinion and according to the information and explanations given to us, the Company has not carried out any contract or arrangements referred to in Section 301 of the Companies Act, 1956. Hence, Clause 4(v) of the Order is not applicable to the Company.

6. According to the information and explanations given to us, the Company has not accepted any deposit from the public. Therefore the provisions of Clause (vi) of paragraph 4 of the Order are not applicable to the Company.

7. Company''s internal audit is carried out by a Chartered Accountant. In our opinion and according to the information & explanations given to us, the Company has an internal audit system commensurate with its size and the nature of its business.

8. In our opinion and according to the information and explanations given to us, the cost records as prescribed under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956 have not been maintained by the Company during the year, as there was no manufacturing activity except trading of cloth and property development activities.

9. In respect of statutory dues:

(a) According to the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess other statutory dues to the extent applicable have been generally regularly deposited with the appropriate authorities. According to the information and explanations given to us, there were no outstanding statutory dues as on 31st of March, 2014 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there is no amounts payable in respect of income tax, wealth tax, service tax, sales tax, customs duty and excise duty.

10. In our opinion, the company has accumulated losses at the end of the financial year, which are not more than its net worth and has incurred cash losses during the financial year covered by our audit and has not incurred any cash losses during the immediately preceding financial year.

11. The Company has not taken loan from bank or financial institutions and has also not issued debenture. Hence, clause 4(xi) of the Order is not applicable to the Company.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The Company is not a chit fund or a nidhi /mutual benefit fund/society. Therefore, the provision of this clause of the Order is not applicable to the Company.

14. According to information and explanations given to us, the Company is not dealing in or trading in Shares, securities, debentures and other Investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

15. According to the information and explanations given to us, the Company has not given any guarantees for loan taken by others from a bank or financial institution.

16. The Company has not taken any term loan during the year under audit. Accordingly, the provisions of clause 4(xvi) of the Order are not applicable to the Company.

17. Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31st March, 2014, we are of the opinion that there are no funds raised on short-term basis that have been used for long-term investment.

18. According to the information and explanations given to us, the Company has not made any preferential allotment of shares to the parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

19. The Company has not issued any debenture. Accordingly, the provisions of clause 4(xix) of the Order are not applicable to the Company.

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

21. In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year, nor have we been informed of such case by the management.

Sd/- For, Dhiren Shah & Co. Chartered Accountants FRN: 114633W

Sd/- Dhiren Shah Place: Ahmedabad (Partner) Date: 11-08-2014 Membership No. : 035824


Mar 31, 2010

1. We have audited the attached Balance Sheet of The Ahmedabad Advance Mills Limited as at March 31, 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.

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 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 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 to the extent applicable to the Company.

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

(a) The company has made the provision ofRs. 4, 73, 83,235- for retrenchment compensation and salary for the closure period of employees during the year.

The provisions ofRs. 4, 73, 83,235/- relate to previous year and thcx•fore, the profit for the year under report has been understated by that amount.

(b) During the year, the Company has given Inter Corporate Deposits (ICD.f) to one Company (in which a director of the Company is interested) aggregating to Rs. 3,07,50,000/-. Approval of the Central Government in respect of the ICD given has not been obtained as required by Section 295 of the Companies Act 1)56. Out of the aforesaid ICD whole amount is repaid during the year, (as indicated in Note 2 of Schedule 18). Do application has been made by the Company to the Central Government under Section 295.

(c) The management has represented that the market value of its freehold land is adequate to meet its contingent and ascertained liabilities. The Company has also received an undertaking from its promoters to support the Company to meet its obligations. However in view of suspension of operations as described in note 1-B on Schedule 18, " provision for retrenchment compensation as described in 4(a) above and in the absence of any formal business plan (as during the year the Company has carried out activity of trading of cloths only), we are unable to state whether the Company will be able to continue in operation as a going concern in the foreseeable future.

5. Subject to the matters referred to in paragraph (4) above:

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;

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 those books;

c. the Balance Sheet Profit and Loss Account and Cash Flow statement dealt with by this report are in agreement with the books of account;

d. in our opinion, and to the best of our information and according to the explanations given to us, the Balance Sheet, Profit and Loss Account and Cash Flow Statement, except for prior years provision of retrenchment compensation in paragraph 4(a) above and for our comments on the appropriateness of the going concern assumption under Accounting Standard 1 in paragraph 4(c) above, dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e. in our opinion and to the best of our information and according to the explanations given to us, the said accounts give tire information required by the Companies Act, 1956, in the manner so required except for prior years provision of retrenchment compensation in paragraph 4(a) above and our inability to assess if the going concern assumption has been followed appropriately as stated in paragraph 4(c) above, and its impact on these accounts, if any, not ascertainable and read togeti/cr with other notes, the financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2010;

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

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

6. We further report that, on the basis of the written representations received from the directors, as on March 31, 2010, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2010 from being . appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

ANNEXURE TO THE AUDITORS REPORT

Annexure referred to in paragraph 3 of our report of even date to the members of The Ahmedabad Advance Mills Limited on the financial statements for the year ended March 31, 2010.

(i) (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(b) Fixed assets have been physically verified by the management during the year and in our opinion the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such physical verification.

(c) During the year, the Company has disposed off 7931.69 sq. mtrs. of land which has the approval of B1FR under the revival scheme. According to the information and explanations given to us, we are of the opinion that the sale of said part of land has affected the going concern status of the Company.

(ii) (a) The inventories have been physically verified during the year by the management. In our opinion, the fiequency of verification is reasonable.

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

(c) In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventories and there were no discrepancies noticed on physical verification.

(iii) (a) As per information and explanations given to us, the Company has granted unsecured loans aggregating Rs. 3,07,50,000/- to one party covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the period was Rs. 2.43,00,000 and the year end balance of such loans was Rs. 21,08,75 1/- (Cr.).

(b) As per the information and explanations given to us, the rate of interest and other terms and conditions at which the loans have been given to the Company covered in the register maintained under section 301 of the Companies Act, 1956 are not prima facie prejudicial to the interest of the Company having regard to the market yields.

(c) As per information and explanations given to us. the Company is regular in receipt of the principal amount and interest thereon.

(d) As per the information and explanations given to us, the Company has taken reasonable steps for the recovery of the principal amount and interest thereon.

(e) The Company has taken unsecured loans aggregating to Rs. 12,43,62,491/- from two companies covered in the register maintained under section 301 of the Companies Act, 1956, which were repaid in full and only interest portion is outstanding at the year end. The maximum amount involved during the year was Rs. 13, 21, 60,220 and the year end credit balance is Rs. 40,92,492/-.

(f) As per the information and explanation given to us, the rate of interest and other terms and conditions on which loans have been taken from companies, covered in the register maintained under section 301 of the Companies Act, 1956 are prima facie not prejudicial to the interest of the Company having regard to the market yields.

(g) As per the information and explanation given to us, the Company is regular in payment of the principal amount and interest thereon.

(iv) In our opinion and according to the information and explanations given to us, there are generally adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchases 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 weakness in internal control systems.

(v) According to the information and explanation given to us. company has not carried out any contract or arrangements referred to in Section 301 of the Act, hence Clause 4(v) of the Order is not applicable to the company.

(vi) The Company has not accepted any deposits from the public to which the provisions of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 apply.

(vii) Companys internal audit is carried out by a Chartered Accountant. In our opinion and according to the information and explanations given to us, the Company has an internal audit system commensurate with its size and nature of its business.

(viii) In our opinion and according to the information and explanations given to us. the cost records as prescribed under clause (d) of sub- section (I) of section 209 of the Act. have not been maintained by the Company during the period, as there was no manufacturing activity except trading of cloth.

(ix) (a) According to the records of the Company and information and explanations given to us, statutory dues including provident fund, employees state insurance (E.S.l.C), income tax, sales tax. service tax, cess and other material statutory dues as applicable to it have generally been regularly deposited during the year under audit with the appropriate authorities. As explained to us. the Company did not have any dues on account of investor education and protection fund, customs duty, excise duty and wealth tax.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees state insurance (E.S.l.C), income tax, sales tax, service tax, cess and other material statutory dues as applicable were in arrears, as at March 31, 2010 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of Income Tax/ Sales Tax/ Service Tax/ Customs Duty/ Wealth Tax/ Excise Duty or Cess that have not been deposited on account of any dispute, except the amount & details shown as per chart given below:

Details of Tax demand raised Amount Rs. Remarks

For the A.Y.2007-08 demand for 4,08,07,057 Appeal preferred" income tax has been raised by the before CIT Assessing Office while passing order (Appeals) u/s. 143(3) of the Act

(x) In our opinion, there are no accumulated losses at the end of the financial year. The Company has not incurred cash losses during the financial year covered by our audit. The Company had incurred cash losses during the immediately preceding financial year.

(xi) The company has not taken loan from bank or financial institution and has also not issued debentures. Hence, clause 4(xi) of the order is not applicable to the company.

(xii) Based on the examination of our records and the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Order are not applicable to the Company.

(xv) According to information and explanations given to us. the Company has not given guarantee for loans taken by others from banks or financial institutions. According!); the provisions of clause 4 (xv) of the Order are not applicable to the Company.

(xvi) The Company has not taken any term loans during the year under audit. Accordingly. the provisions of clause 4 (xvi) of the Order are not applicable to the Company.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company has not issued any debentures. Accordingly, the provisions of clause 4 (xix) of the Order are not applicable to the Company.

(xx) The Company has not raised any money by way of public issues. Accordingly, the provisions of clause 4 (xx) of the Order are not applicable to the Company.

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

For, DHIREN SHAH & CO., Chartered Accountants


Membership No. 35824 Firm Reg. No. 114633W

Place: Ahmedabad Date : 31-05-2010


Mar 31, 2009

1. We have audited the attached Balance Sheet of The Ahmedabad Advance Mills Limited as at March 31, 2009 and also the Profit and Loss Account and Cash Flow Statement for the year ended on that date both annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with 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 misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 (the Order), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order to the extent applicable to the Company.

4. Further to our comments in the annexure referred to in paragraph 3 above, we report that:

a) Provision for retrenchment compensation and compensation for closure period aggregating to Rs. 47,383,235/ in respect of employees who have yet to tender their resignation, has not been made in view of the obligating event having taken place by way of the order of Honorable High Court of Gujarat which held that closure declared by the management is legal and valid. Had the provision been made for this amount, loss for the year and adverse balance carried forward in the profit and loss account would have been higher by Rs. 47,383,235 (see Note 6 of Schedule 18).

b) The Company had given Inter Corporate Deposits (ICD) up to March 31, 2008 to two Companies and a partnership firm ( in which a director of the Company is interested) aggregating Rs. 36,250,000 and fresh ICD of Rs.5,500,000 during the current year. Approval of the central government in respect of the aggregating ICD amounting to Rs.41,750,000 has not been obtained as required by Section 295 of the Companies Act 1956. Out of the aforesaid, ICDs aggregating to Rs.40,800,000 has been repaid upto 31.3.09. The amount of ICDs outstanding as at March 31, 2009 is Rs. 950,000. (as indicated in Note 2(a) of Schedule 18). No- application has been made by Company to the Central Government under section 295.

c) There are no approval given by the Board of Directors authorizing the ICD given aggregating to Rs.80,528,050 during the year ended March 31, 2009 as required under section 292(1 )(e) of the Companies Act, 1956 (see Note 2(b) of Schedule 18).

d) The management has represented that the market value of its freehold land is adequate to meet its contingent and ascertained liabilities. The Company has also received an undertaking from its promoters to support the Company to meet its obligations. However in view of suspension of operations as described in note 1-B on Schedule 18, the significant loss made by the Company during the year, negative net worth (after considering the non-provisioning of retrenchment and closure compensation as described in 4(a) above) and the absence of any formal business plan, we are unable to state whether the Company will be able to continue in operation as a going concern in the foreseeable future.

5. a) Subject to the matters referred to in paragraph (4) above:

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;

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 the books;

c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

d) in our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, Profit and Loss Account and Cash Flow Statement, except for our comments on the appropriateness of the going concern assumption under Accounting Standard 1 in paragraph 4(d) above and for non-provisioning of retrenchment and closure compensation under Accounting Standard 29 in paragraph 4(a) above, comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

e) 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 except for our inability to assess if the going concern assumption has been followed appropriately as stated in paragraph 4(d) above, and its impact on these accounts, if any, not ascertainable, give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2009;

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

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

6. We further report that, on the basis of the written representations received from the directors as on March 31 2009, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2009 from being appointed as director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

Annexure to the Auditors report

Annexure referred to in paragraph 3 of our report of even date to the members of The Ahmedabad Advance Mills Limited on the financial statements for the year ended March 31, 2009

(i) (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(b) Fixed assets have been physically verified by the management during the year and in our opinion the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such physical verification.

(c) There was no disposal of fixed assets during the year. Therefore, the provisions of clause 4(i)(c) of the Order are not applicable to the Company.

(ii) (a) The inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

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

(c) In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventories and there were no discrepancies noticed on physical verification.

(iii) (a) As per information and explanations given to us, the Company has granted unsecured loans aggregating Rs. 5,500,000 to three parties covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the period was Rs. 52,337,033 and the period end balance of such loans was Rs. 950,000.

(b) As per the information and explanations given to us, the rate of interest and other terms and conditions at which the loans have been given to Companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are not prima facie prejudicial to the interest of the Company having regard to the market yields.

(c) As per the information and explanations given to us, the Company is regular in receipt of the principal amount and interest thereon.

(d) As per the information and explanations given to us, the Company has taken reasonable steps for the recovery of the overdue principal amount and interest thereon.

(e) The Company has taken unsecured loans aggregating to Rs. 156,868,625 from four parties covered in the register maintained under section 301 of the Act, 1956. The maximum amount involved during the year was Rs. 223,092,120 and the yearend balance is Rs. 61,474,719.

(f) As per the information and explanations given to us, the rate of interest and other terms and conditions on which loans have been taken from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956 are prima facie not prejudicial to the interest of the Company having regard to the market yields.

(g) As per the information and explanations given to us, the Company is regular in payment of the principal amount and interest thereon.

(iv) In our opinion and according to the information and explanations given to us, there are generally adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchases 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 weakness in internal control systems.

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

(b) In our opinion an according to the information and explanations given to us, the transactions in excess of Rs. 5 lakhs made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 have been made at the 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 to which the provisions of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 apply. Accordingly, the provisions of clause 4 (vi) of the Order are not applicable to the Company. As informed to us, no Order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal.

(vii) In our opinion and according to the information and explanations given to us, whilst the Company has an internal audit system, the scope of which needs to be extended to make it commensurate with the size and nature its business.

(viii) In our opinion and according to the information and explanations given to us, the cost records as prescribed under clause (d) of sub- section (1) of section 209 of the Act have not been maintained by the Company during the period, as there was no manufacturing activity except on job work basis.

(ix) (a) According to the records of the Company and information and explanations given to us, provident fond, employees state insurance, income tax, sales tax, service tax, cess and other material statutory dues as applicable to it have generally been regularly deposited during the year under audit with the appropriate authorities. As explained to us, the Company did not have any dues on account of investor education and protection fund, customs duty, excise duty and wealth tax.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees state insurance (E.S.I.C), income tax, sales tax, service tax, cess and other material statutory dues as applicable were in arrears, as at March 31, 2009 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of Income Tax/ Sales Tax/ Service Tax/ Customs Duty/ Wealth Tax/ Excise Duty or Cess that have not been deposited on account of any dispute.

(x) In our opinion, the accumulated losses at the end of the financial year are more than fifty per cent of its net worth. The Company has incurred cash losses during the financial year covered by our audit.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

(xii) Based on the examination of our records and the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Order are not applicable to the Company.

(xv) According to information and explanations given to us, the Company has not given guarantee for loans taken by others from banks or financial institutions. Accordingly, the provisions of clause 4 (xv) of the Order are not applicable to the Company.

(xvi) The Company has not taken any term loans during the year under audit. Accordingly, the provisions of clause 4 (xvi) of the Order are not applicable to the Company.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company has not issued any debentures. Accordingly, the provisions of clause 4 (xix) of the Order are not applicable to the Company.

(xx) The Company has not raised any money by way of public issues. Accordingly, the provisions of clause 4 (xx) of the Order are not applicable to the Company.

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

For DELOITTE HASKINS & SELLS Chartered Accountants A. S. Varma Partner Membership No. 15458

MUMBAI: 25 SEP 2009

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