Auditor Report of United Breweries (Holdings) Ltd.

Mar 31, 2016

To

The members of

UNITED BREWERIES (HOLDINGS) LIMITED.

1. Report on the Financial Statements

We have audited the accompanying stand-alone financial statements of UNITED BREWERIES (HOLDINGS) LIMITED (''the Company'') which comprise the Balance Sheet as at 31st March 2016, the Statement of Profit and Loss and the Cash Flow Statement, and a summary of the significant accounting policies and other explanatory information for the year then ended.

2. Management''s Responsibility for the Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation and presentation of these stand-alone 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 principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting frauds and irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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.

3. Auditor''s Responsibility

Our responsibility is to express an opinion on these stand-alone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the 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 financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the stand-alone financial statements.

4. Basis for qualified opinion

a. The company had extended corporate guarantees of Rs. 87,072 million in favour of lenders/lessors/creditors of Kingfisher Airlines Limited (KFA) an erstwhile subsidiary of the company (Refer note no. 31 to financial statements). The beneficiaries of such guarantees have invoked the guarantees and are pursuing recovery actions against the company. This may result in loss to the company (Refer note no. 31 to financial statements). No provision has been made in the accounts for such possible loss.

b. The company carries investments in certain subsidiaries. The carrying value of such investments is Rs. 1,472 million. There are significant declines in the carrying value of these investments. The company has not provided for such declines. (Refer note 33(h) to financial statements).

c. Certain subsidiaries owe to the company Rs. 754 million. Net-worths of these companies are eroded, impairing the recovery of such loans and advances. Company has not provided for the possible loss on this count. (Refer note 39 to financial statements).

d. The company has shown Rs. 358 million as due from a banker who has unilaterally encashed company’s deposits lying with it and appropriated the amount towards its claims against a group company. The possible loss on account of this development has not been recognized in the financial statements (Refer note 42 to financial statements).

e. An amount of Rs. 8,074 million is shown as dues from a contributory trust ("Trust") managed by a financial company which had sold the company’s investments that were pledged with it and had appropriated part of the sale proceeds against dues from KFA (Ref note no. 43 & 33(e)). Further, the said Trust still holds custody of 59,150,000 shares in KFA, belonging to the company (Ref note no. 33(c)). The company has petitioned the City Civil Court of Calcutta and High Court of Karnataka challenging the validity of the pledge and for rendering full accounts. Pending outcome of the petitions, the company has shown the above amounts as good and recoverable. Should the company fail to get the reliefs as sought, there would be losses. The company has not provided for any possible losses in this regard. According to the management, it is not possible to estimate the losses if any and consequently quantify the amount of provisions required in the above cases.

Had the company estimated and provided for the losses as mentioned in paragraphs 4(a) to 4(e) above, the loss stated in the Statement of Profit and Loss would have been higher by such amount; the liabilities in the Balance Sheet would have been higher by the amount of provision with respect to item mentioned in paragraph 4(a) above; the carrying value of investments in the Balance Sheet would have been lower by the amount of provision with respect to item mentioned in paragraph 4(b) above; the amount of loans and advances in the Balance Sheet would have been lower by the amount of provision with respect to item mentioned in paragraph 4(c) above and the amount of other current assets in the Balance Sheet would have been lower by the amount of provisions with respect to items mentioned in paragraphs 4(d) and 4(e) above.

f. Winding up petitions filed against the Company have been admitted by the Honourable High Court of Karnataka and are being heard [Ref. note no. 44]; the Honourable High Court of Karnataka has restrained the Company from disposing of any of its assets [Ref. note no. 50.]; the Company is a defendant in recovery suits instituted by certain creditors/lenders for recovery of their dues of Rs. 62,033 million [Ref. note no. 37] (which is part of the amount mentioned at Sl No. 4(a) above); some of the lenders have recovered their dues by disposing of the securities pledged by the company.[Ref. note no. 37], On the consideration that it shall defend legal cases successfully, the company has prepared its financial statements on going concern basis for the reasons stated in note no. 50. The appropriateness of preparation of financial statements on going concern basis is subject to the Company being able to successfully defend itself in the petitions/suits filed against it and obtaining substantial reliefs in the suits filed by it as mentioned in note no. 44.

g. The Company has not recognized in its financial statements, disputed liabilities amounting to Rs. 77,309 million (which is part of the amount mentioned at Sl No. 4(a) above) arising out of invocation of its corporate guarantees [Ref. note no. 31], Had the company recognized the above, current liabilities in the Balance Sheet would have been higher, guarantees under contingent liabilities would have been lower and amounts recoverable under other current assets would have been higher, by Rs. 77,309 million.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the "Basis for Qualified Opinion" paragraphs above, the aforesaid stand-alone 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, of the state of affairs of the Company as at 31st March 2016, and its loss and its cash flows for the year ended on that date.

6. Emphasis of Matter

Attention is invited to the following:

a. A term deposit for Rs. 609 million with a banker, representing part of the sale proceeds of shares in United Spirits Limited in favour of Diageo group which had been kept deposited to comply with the direction of the Honourable High Court of Karnataka to the effect that the sale proceeds shall be kept invested in term deposits with banks, has been pre-closed by the bank by exercising its general lien and it has adjusted an amount of Rs. 494 million (a part of which is referred in paragraph 4(d)) and encumbered an amount of Rs. 115 million against the borrowings from one of the group companies which had been guaranteed by the Company [Ref note no. 42];

b. The ''status quo'' with respect to the transaction of sale of 10,141,437 no. of shares in United Spirits Limited in favour of Diageo group, as ordered by the Honourable Supreme Court of India, continues;

c. The Company has written off an amount of Rs. 579 million due from an associate. [Ref. note no. 39];

d. The lenders of Kingfisher Airlines Limited have taken possession of the Company''s property in Goa to recover its dues [Ref. note no. 32(d)];

e. Note no. 48 regarding non-accrual of interest payable to the extent of Rs. 1904 million (out of that Rs. 634 million pertaining to earlier year) on account of the lender company''s shareholders not approving the agreement granting the loan.

7. Report on Other Legal and Regulatory Requirements

i. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order"), issued by the Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

ii. As required by section 143(3) of the Act, we report that:

a. We have sought and 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 it 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. Except for the effects of the matters described in the Basis for Qualified Opinion paragraphs above, in our opinion, the aforesaid stand-alone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e. The matters described in the Basis for Qualified opinion paragraphs above, in our opinion, may have an adverse effect on the functioning of the company;

f. On the basis of the written representations received from the directors as on 31st March 2016, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2016, from being appointed as a director in terms of Section 164(2) of the Act;

g. We have issued a separate report on the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls. The said report can be found in "Annexure B" to this report.

h. With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The company has disclosed the impact of pending litigations on its financial position in its financial statements

- Refer Note 44 to the financial statements;

ii. The company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses except for the matters specified in the Basis for Qualified Opinion paragraphs;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

Referred to in paragraph 7(i) of our report of even date;

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

(b) Most of the assets have been physically verified by the management during the year. Some of the assets have not been verified. However, there is a regular programme of physical verification where under, every asset gets verified at least once every three years. In our opinion, such verification is reasonable having regard to the size of the company and the nature of its assets. Discrepancies noticed on verification during the year have been properly dealt with in the books of account.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

(ii) The physical verification of inventory has been conducted at reasonable intervals by the management. The discrepancies noticed on verification between the physical stocks and the book records have been properly dealt with in the books of account.

(iii) As explained to us, the company has not granted any loans, secured or unsecured during the year to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Therefore, the provisions of clause 3(iii)(a) to 3(iii)(c) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the company.

(iv) According to the information and explanation given to us and based on our examination of the records of the company, the company has not given any loans, made any investments, provided any guarantee/security to any persons during the year. Therefore, the provisions of clause 3(iv) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the company.

(v) 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 sections 73 to 76 and other relevant provisions of the Companies Act and the rules framed there under. 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 in relation to the deposits accepted by the company.

(vi) In our opinion and according to the information and explanations given to us the provisions with regard to maintenance of cost records under section 148(1) of the Companies Act, 2013 are not applicable to the company.

(vii) (a) In our opinion and according to the information and explanations given to us, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including dues in respect of provident fund, employees state insurance, income tax, sales tax, duty of customs, duty of excise, value added tax and other material statutory dues. However, there have been delays in depositing dues of service tax and tax deducted at source with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees state insurance, income tax, sales tax, duty of customs, duty of excise, service tax, value added tax and other material statutory dues etc., were in arrears as at 31-3-2016 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, following is the list of dues on account of taxes, which have not been deposited on account of disputes.

Name of the Statute	Nature of dues	Disputed amount ( Rs. in million)	Forum where dispute is pending
Income Tax Act, 1961	Income tax for the A.Y. 2007-08.	69.535	CIT (Appeals)
Income Tax Act, 1961	Income tax for the A.Y. 2008-09.	171.040	CIT (Appeals)
Income Tax Act, 1961	Income tax for the A.Y. 2010-11.	99.710	CIT (Appeals)
Income Tax Act, 1961	Income tax for the A.Y. 2011-12.	1,144.949	Income Tax Appellate Tribunal
Foreign Trade (Development & Regulation) Act, 1992	Penalty	5.000	High Court of Judicature, Madras

(viii) As per the information and explanations given to us, the company has defaulted in repayment of dues to a bank and a Non Banking Financial Company. The unpaid dues to the bank as at March 31, 2016 were Rs. 1,519 million and unpaid dues to the Non Banking Financial Company were Rs. 695.686 million. Out of this Rs. 17 million has been repaid to bank in April 2016. The company is in negotiation with the banker. The company has not issued any debentures.

(ix) The company has not raised any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Therefore, the provisions of clause 3(ix) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the company.

(x) According to the information and explanations given to us, no fraud by the company or on the company by its officers or employees has been noticed or reported during the course of our audit.

(xi) The company has not paid/provided any managerial remuneration during the year. Therefore, the provisions of clause 3(xi) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the company.

(xii) In our opinion and according to the information and explanations given to us, the company is not a nidhi company. Therefore, the provisions of clause 3(xii) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the company.

(xiii) According to the information and explanations given to us and based on our examination of the records of the company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanation given to us and based on our examination of the records of the company, the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanation given to us and based on our examination of the records of the company, the company has not entered into non-cash transactions with directors or persons connected with him. Therefore, the provisions of clause 3(xv) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the company.

(xvi) According to the information and explanation given to us and based on our examination of the records of the company, the company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For Vishnu Ram & Co.,

Chartered Accountants

S.Vishnumurthy

Proprietor

Place : Bangalore Membership No. 22715

Date : 31-08-2016 Firm Registration No.004742S

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Mar 31, 2015

We have audited the accompanying stand-alone financial statements of UNITED BREWERIES (HOLDINGS) LIMITED ('the Company') which comprise the Balance Sheet as at 31st March 2015, the Statement of Profit and Loss and the Cash Flow Statement, and a summary of the significant accounting policies and other explanatory information for the year then ended

2. Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these stand-alone 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 principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the company and for preventing and detecting frauds and irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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

3. Auditor's Responsibility

Our responsibility is to express an opinion on these stand-alone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the 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 financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on whether the company has in place an adequate internal financial control system over financial reporting and the effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the stand-alone financial statements.

4. Basis for qualified opinion

a. The company has extended corporate guarantees of Rs. 87,072 million in favor of lenders / lessors / creditors of Kingfisher Airlines Limited (KFA) (Refer note no. 31 to financial statements). The beneficiaries of such guarantees have invoked the guarantees and are pursuing recovery actions against the company. This may result in loss to the company (Refer note no. 31 to financial statements). No provision has been made in the accounts for such possible loss.

b. The company carries investments in certain subsidiaries and an associate company. The carrying value of such investments is Rs. 2,558 million. There are significant declines in the carrying value of these investments. The company has not provided for such declines. (Refer note 33(e) to financial statements).

c. Certain subsidiaries owe to the company 754 million. Net-worth's of these companies are eroded, impairing the recovery of such loans and advances. Company has not provided for the possible loss on this count. (Refer note 39 to financial statements).

d. The company has shown Rs. 317 million as due from a banker who has unilaterally encashed company's deposits lying with it and appropriated the amount towards its claims against a group company. The possible loss on account of this development has not been recognised in the financial statements (Refer note 43 to financial statements).

e. An amount of 8,475 million is shown as dues from a financial company which has sold the company's investments that were pledged with it and appropriated part of the sale proceeds against dues from KFA (Ref note no. 44). Further, the said finance company still holds custody of 59,150,000 shares in KFA, belonging to the company (Ref note no. 33(b). The company has petitioned the High Court of Calcutta and High Court of Karnataka challenging the validity of the pledge and for rendering full accounts. Pending outcome of the petitions, the company has shown the above amounts as good and recoverable. Should the company fail to get the reliefs as sought, there would be losses. The company has not provided for any possible losses in this regard.

According to the management, it is not possible to estimate the losses and consequently quantify the amount of provision required in the above cases.

Had the company estimated and provided for the losses as mentioned in paragraphs 4(a) to 4(e) above, the Profit stated in the Statement of Profit and Loss would have been lower by such amount; the liabilities in the Balance Sheet would have been higher by the amount of provisions with respect to item mentioned in paragraph 4(a) above; the carrying value of investments in the Balance Sheet would have been lower by the amount of provision with respect to item mentioned in paragraph 4(b) above; the amount of loans and advances in the Balance Sheet would have been higher by the amount of provision with respect to item mentioned in paragraph 4(c) above and the amount of other current assets in the Balance Sheet would have been lower by the amount of provisions with respect to items mentioned in paragraphs 4(d) and 4(e) above.

f. Winding up petitions filed against the Company have been admitted by the Honourable High Court of Karnataka and are being heard [Ref. note no. 45]; the Honourable High Court of Karnataka has restrained the Company from disposing of any of its assets [Ref. note no. 52(e)]; the Company is a defendant in recovery suits instituted by certain creditors / lenders for recovery of their dues of 62,033 million [Ref. note no. 45]; some of the lenders have recovered their dues by disposing of the securities pledged by the company.[Ref note no. 37]. Yet, the company has prepared its financial statements on going concern basis for the reasons stated in note no. 52. The appropriateness of preparation of financial statements on going concern basis is subject to the Company being able to successfully defend itself in the petitions / suits filed against it and obtaining substantial reliefs in the suits filed by it as mentioned in note no. 45.

g. The Company has not recognised in its financial statements, disputed liabilities amounting to Rs. 77,309 million arising out of invocation of its corporate guarantees [Ref. note no. 31] and claims oft 1,463 million made against it under agreements entered into with a banker [Ref. note no. 31] Had the company recognised the above, current liabilities in the Balance Sheet would have been higher by that amounts and guarantees under contingent liabilities and claims not acknowledged as debt would have been lower by Rs. 77,309 million and Rs. 1,463 million, respectively.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the "Basis for Qualified Opinion" paragraphs above, the aforesaid stand-alone 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, of the state of affairs of the Company as at 31st March 2015, and its Profit and its cash flows for the year ended on that date

6. Emphasis of Matter

Attention is invited to the following:

a. A term deposit for Rs. 609 million with a banker, representing part of the sale proceeds of shares in United Spirits Limited in favor of Diageo group which had been kept deposited to comply with the direction of the Honourable High Court of Karnataka to the effect that the sale proceeds shall be kept invested in term deposits with banks, has been pre-closed by the bank by exercising its general lien and it has adjusted an amount of Rs. 453 million and encumbered an amount of Rs. 156 million against the borrowings from one of the group companies which had been guaranteed by the Company [Ref note no. 43];

b. The 'status quo' with respect to the transaction of sale of 10,141,437 no. of shares in United Spirits Limited in favor of Diageo group, as ordered by the Honourable Supreme Court of India, continues;

c. The Company has provided for an amount of Rs. 579 million towards the probable loss that may arise in respect of dues from an associate. [Ref. note no. 39];

d. The Company has written off an amount of Rs. 13,883 million dues from Kingfisher Airlines Limited;

e. The Company has provided for an amount of Rs. 2,779 million towards decline, other than temporary, in the carrying value of its investments in Kingfisher Airlines Limited;

f. A lender of Kingfisher Airlines Limited has initiated action to attach and dispose of the Company's property in Goa to recover its dues [Ref. note no. 32(d)];

g. The Company has considered the write-off of amounts due from its subsidiaries as tax deductible having regard to an opinion obtained by it [Ref. note no. 35];

h. Note no. 53 regarding efforts being made to recover a sum of Rs. 200 million advanced to a vendor which is presently being shown as an advance which is good and recoverable;

Note no. 51 regarding non-accrual of interest payable to the extent of Rs. 634 million on account of the lender company's shareholders not approving the agreement granting the loan

7. Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor's Report) Order, 2015 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

i. As required by section 143(3) of the Act, we report that:

a. We have sought and 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 it 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. Except for the effects of the matters described in the Basis for Qualified Opinion paragraphs above, in our opinion, the aforesaid stand-alone financial statements comply with the Accounting Standards specifed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e. The matters described in the Basis for Qualified opinion paragraphs above, in our opinion, may have an adverse effect on the functioning of the company;

f. On the basis of the written representations received from the directors as on 31st March 2015, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2015, from being appointed as a director in terms of Section 164(2) of the Act;

g. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

The company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 45 to the financial statements;

i. The company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses except for the matters specified in the Basis for Qualified Opinion paragraphs;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

Referred to in paragraph 7(i) of our report of even date;

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

(b) Most of the assets have been physically verified by the management during the year. Some of the assets have not been verified. However, there is a regular programme of physical verification where under, every asset gets verified atleast once every three years. In our opinion, such verification is reasonable having regard to the size of the company and the nature of its assets. Discrepancies noticed on verification during the year have been properly dealt with in the books of account.

(ii) (a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of such verification is reasonable

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and 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 its inventory. The discrepancies noticed on physical verification of inventory have been properly dealt with in the books of account.

(iii) As explained to us, the company has not granted any loans, secured or unsecured during the year to companies, frms or other parties covered in the register maintained under section 189 of the Companies Act, 2013. However, in respect of Kingfisher Airlines Limited (KFA), which is a company listed in the register maintained under section 189 of the Companies Act, 2013, there has been a transaction wherein a lender of KFA has sold the shares pledged by the company to secure KFAs borrowings Out of such sale proceeds the lender has appropriated an amount of Rs. 1,286.195 million towards dues from KFA. This has been written off by the company.

(iv) In our opinion and according to the information and explanations given to us, there exists in the company an adequate internal control system 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 sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system of the company.

(v) 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 sections 73 to 76 and other relevant provisions of the Companies Act and the rules framed there under. 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 in relation to the deposits accepted by the company.

(vi) In our opinion and according to the information and explanations given to us the provisions with regard to maintenance of cost records under section 148(1) of the Companies Act, 2013 are not applicable to the company.

(vii) (a) In our opinion and according to the information and explanations given to us, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including dues in respect of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax and other material statutory dues. However, there have been delays in depositing dues of service tax and tax deducted at source with the appropriate authorities.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, service tax, sales tax, excise duty etc., were in arrears as at 31-3-2015 for a period of more than six months from the date they became payable

(c) According to the information and explanations given to us, following is the list of dues on account of taxes, which have not been deposited on account of disputes

Disputed amount Forum where dispute is Name of the Statute Nature of dues (Rs. in million) pending

Income Tax Act, 1961 Income tax for the A.Y. 1997-98 31.998 Supreme Court

Income Tax Act, 1961 Income tax for the A.Y. 2001-02 0.482 High Court of Karnataka

Income Tax Act, 1961 Income tax for the A.Y 2007-08 69.535 CIT (Appeals)

Income Tax Act, 1961 Income tax for the A.Y 2008-09 171.040 CIT (Appeals)

Income Tax Act, 1961 Income tax for the A.Y 2009-10 68.987 CIT (Appeals)

Income Tax Act, 1961 Income tax for the A.Y 2010-11 200.661 CIT (Appeals)

Foreign Trade Penalty 5.000 High Court of Judicature, Madras (Development & Regulation) Act, 1992

(d) According to the information and explanations given to us the amounts which were required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under have been transferred to such funds within time.

(viii) Accumulated losses of the company are more than fifty percent of its net worth. The company has not incurred cash losses during the financial year covered by our audit. The company has incurred cash losses during the immediately preceding financial year.

(ix) As per the information and explanations given to us, the company has defaulted in repayment of dues to a bank. The unpaid dues to the bank as at March 31, 2015 were Rs. 2,363 million. Out of this Rs. 27 million has been repaid in April 2015. The company is in negotiation with the banker. The company has not issued any debentures.

(x) According to the information and explanations given to us, during the year, the company has not given any guarantees in favor of banks or financial institutions for loans taken by others. Therefore, the provisions of clause 3(x) of the Companies (Auditor's Report) Order, 2015 are not applicable to the company.

(xi) The company has not raised any term loans during the year. Therefore, the provisions of clause 3(xi) of the Companies (Auditor's Report) Order, 2015 are not applicable to the company.

(xii) 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 Vishnu Ram & Co.,

Chartered Accountants

S.Vishnumurthy

Proprietor Place : Mumbai Membership No. 22715

Date : 29-05-2015 Firm Registration No.004742S

---

Mar 31, 2014

1. Report on the Financial Statements

We have audited the accompanying financial statements of UNITED BREWERIES (HOLDINGS) LIMITED (''the Company'') which comprise the Balance Sheet as at 31st March 2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

2. Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act") read with General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. 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.

3. Auditor''s Responsibility

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

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

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

4. Basis for qualified opinion

a. The company has investments of Rs. 8,424 million in Kingfisher Airlines Limited (KFA). Due to financial difficulties, KFA has stopped its operations. Its net worth is fully eroded and some of its lenders/lessors have filed winding up petitions against it. These factors, along with others, have caused diminution in the carrying value of company''s investments in KFA (Refer note no. 34(f) to financial statements). No provision has been made in the accounts for such diminution in the carrying value of investments. Had the company made such provisions, the loss disclosed in the Statement of Profit and Loss would have been higher by such amount and carrying amount of investments would have been lower by that amount.

Further, the company has extended corporate guarantees of Rs. 87,072 million in favour of lenders/lessors/ creditors of KFA (Refer note no. 32 to financial statements). The beneficiaries of such guarantees have invoked the guarantees and pursuing recovery actions against the company. This may result in loss to the company (Refer note no. 32 to financial statements). No provision has been made in the accounts for such probable loss. Had the company made such provisions, the loss disclosed in the Statement of Profit and Loss would have been higher by such amount and liabilities in the Balance Sheet would have been higher by such amount.

b. The company carries investments in certain subsidiaries and an associate company. The carrying value of such investments is Rs. 2,588 million. There are significant declines in the carrying value of these investments but the company has not quantified and provided for such declines. Had the company provided for such decline, the loss stated in Statement of Profit and Loss would have been higher by such amount and the carrying value of those investments would have been lower by an equal amount (refer note 34(e) to financial statements).

c. Certain subsidiaries and an associate company owe to the company Rs. 1,556 million. Net worth of these companies are eroded, impairing the recovery of such loans and advances. Company has not quantified and provided for the probable loss on this count. Had the company provided for such loss, the loss stated in the Statement of Profit and Loss would have been higher by such amount and the loans and advances stated in the Balance Sheet would have been lower by that amount (refer note 42 to financial statements).

d. Winding up petitions filed against the Company have been admitted by the Honourable High Court of Karnataka and is allowed to be proceeded with by the Honourable Supreme Court of India [Ref. note no. 47(c)]; the Honourable High Court of Karnataka has restrained the Company from disposing of any of its assets [Ref note no. 49(d)];, the Company is a defendant in recovery suits instituted by certain creditors/lenders for recovery of their dues of Rs. 64,933 million; [Ref. note no. 47], some of the lenders have recovered their dues by disposing of the company''s pledged securities.[Ref. note no. 40], Yet, the company has prepared its financial statements on going concern basis for the reasons stated in note no. 49. The appropriateness of preparation of financial statements on going concern basis is subject to the Company being able to successfully defend itself in the petitions/suits filed against it and obtaining substantial reliefs in the suits filed by it as mentioned in note no. 47.

e. The Company has not recognised in its financial statements, liabilities amounting to Rs. 80,208 million arising out of invocation of its corporate guarantees [Ref. note no. 32] and claims of Rs. 1,463 million made against it under an agreement entered into with a banker [Ref. note no. 32], Had the company recognised the above, current liabilities in the Balance Sheet would have been higher by that amounts and guarantees under contingent liabilities and claims not acknowledged as debt would have been lower by Rs. 80,208 million and Rs. 1,463 million, respectively.

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the "Basis for Qualified Opinion" paragraph, 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 31st March 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.

6. Emphasis of Matter

Attention is invited to the following:

a. A term deposit for Rs. 609 million with Lakshmi Vilas Bank Limited, representing part of the sale proceeds of shares in United Spirits Limited in favour of Diageo group which had been kept deposited to comply with the direction of the Honourable High Court of Karnataka to the effect that the sale proceeds shall be kept invested in term deposits with banks, has been pre-closed by the bank by exercising its general lien and it has adjusted an amount of Rs. 219 million and encumbered an amount of Rs. 390 million against the borrowings from one of the group companies which had been guaranteed by the Company [Ref. note no. 46(c)].

b. Loans and advances include an amount of Rs. 200 million advanced to a vendor which is pending confirmation [Ref. note no. 50].

c. The Company has recognised the transaction of sale of 10,141,437 shares in United Spirits Limited in favour of Diageo group having regard to the direction of the Honourable Supreme Court of India to maintain status quo with regard to the said transaction [Ref. note no. 37].

d. Certain lenders have sold the Company''s securities that have been pledged with them and have appropriated the sale proceeds against their dues [Ref. note no. 40].

e. The Company has written off a total amount of Rs. 24,506 million due from its subsidiaries [Ref. note no. 35].

f. The Company has provided for an amount of Rs. 12,717 million towards the probable loss that may arise in respect of dues from Kingfisher Airlines Limited and another subsidiary [Ref. note no. 36].

g. A lender of Kingfisher Airlines Limited has initiated action to attach and dispose of the Company''s property in Goa to recover its dues [Ref. note no. 33(d)].

h. Based on a valuer''s report, the Company has revised and restated the carrying amounts of its land and buildings in UB city and upcoming Kingfisher Towers at their respective fair market values as on 31-3-2014 [Ref. note no. 33(a)].

i. The Company has considered the write-off of amounts due from its subsidiaries as tax deductible having regard to an opinion obtained by it [Ref. note no. 38].

7. Report on Other Legal and Regulatory Requirements

i. 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.

ii. 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, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 read with General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013; and

e. on the basis of written representations received from the directors as on 31 March 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2014, 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 Independent Auditors'' Report

Referred to in paragraph 7(i) of our report of even date Re: United Breweries (Holdings) Limited

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

(b) Most of the assets have been physically verified by the management during the year. Some of the assets have not been verified. However, there is a regular programme of physical verification whereunder, every asset gets verified atleast once every three years. In our opinion, such verification is reasonable having regard to the size of the company and the nature of its assets. Discrepancies noticed on verification during the year have been properly dealt with in the books of account.

(c) During the year, the company has not disposed off any substantial part of its fixed assets..

(ii) (a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of such verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and 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 its inventory. The discrepancies noticed on physical verification of inventory have been properly dealt with in the books of account.

(iii) (a) According to the information and explanations given to us, the company has granted unsecured loans to parties covered in the register maintained under section 301 of the Companies Act, 1956. Maximum amount involved during the year is Rs. 7,477 million. The amount of such loans outstanding as at 31-3-2014 is Rs. 11,052 million. The company has discontinued charging interest on such loans. The terms and conditions of advances made during the year are yet to be finalized.

(b) According to the information and explanations given to us, the company has taken unsecured loans from parties covered in the register maintained under section 301 of the Companies Act, 1956. Maximum amount involved during the year is Rs. 15,497 million. The amount of loans outstanding as at 31-3-2014 is Rs. 15,381 million. In our opinion, the rate of interest and other terms and conditions of loans taken by the company are prima facie not prejudicial to the interest of the company. The repayments of the dues are in accordance with terms and conditions stipulated.

(iv) In our opinion and according to the information and explanations given to us, there exists in the company an adequate internal control system 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 sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system of the company.

(v) (a) In our opinion and according to the information and explanations given to us, 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.

(b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) I n our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 58A and 58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or Reserve Bank of India or any Court or any other Tribunal in relation to the deposits accepted by the company.

(vii) In our opinion and according to the information and explanations given to us, the company has an internal audit system commensurate with the size and nature of its business.

(viii) In our opinion and according to the information and explanations given to us the provisions of section 209(1)

(d) of the Companies Act, 1956 with regard to maintenance of cost records are not applicable to the company.

(ix) (a) In our opinion and according to the information and explanations given to us, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including dues in respect of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax and other material statutory dues. However, there have been several cases of delays in depositing dues of service tax and tax deducted at source with the appropriate authorities.

(b) to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, service tax, sales tax, excise duty etc., were in arrears as at 31-3-2014 for a period of more than six months from the date they became payable.

(c) to the information and explanations given to us, following is the list of dues on account of taxes, which have not been deposited on account of disputes

Name of the Statute Nature of due Disputed amount Forum where (Rs.in million) dispute is pending. Income Tax Act,1961 income tax for the A.Y 1997-98. 31.998 Supreme Court Income Tax Act,1961 Income tax for the A.Y.2001-02 0.482 High Court of Karnataka Income Tax Act,1961 Income tax for the A.Y.2007-08 69.535 CIT (Appeals)

Income Tax Act,1961 Income tax for the A.Y. 2008-09. 171.040 CIT (Appeals)

Income Tax Act,1961 Income tax for the A.Y. 2009-10. 68.987 CIT (Appeals)

Income tax Act,1961 Income Tax for the A.Y. 2010-11. 200.661 CIT (Appeals)

Foreign Trade Penalty 5.000 High Court of (Development & Judicature, Regulation) Act, Madras 1992

(x) Accumulated losses of the company are more than fifty percent of its net worth. The company has incurred cash losses during the financial year covered by our audit and during the immediately preceding financial year.

(xi) As per the information and explanations given to us, the company has defaulted in repayment of dues to a bank. The unpaid dues to the bank as at March 31, 2014 were Rs. 2,292 million. Out of this Rs. 29 million has been paid in May 2014 and Rs. 17 million has been paid in June 2014. The company is in negotiation with the banker. The company has not issued any debentures.

(xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4(xii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xiii) In our opinion and according to the information and explanations given to us, the company is not a chit fund or a nidhi/ mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xiv) In our opinion and according to the information and explanations given to us, the company is not dealing in or trading in shares, securities, debentures or other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xv) According to the information and explanations given to us, during the year, the company has not given any guarantees in favour of banks and financial institutions for loans taken by others.

(xvi) In our opinion and according to the information and explanations given to us, the term loans raised during the year have been applied for the purposes for which they were raised.

(xvii) In our opinion and according to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that amount of Rs. 307.500 million raised on short-term basis have been used for granting long-term loans and advances.

(xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to any parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(xviii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xix) According to the information and explanations given to us, the company has not issued any debentures during the year. Therefore, the provisions of clause 4(xix) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xx) According to the information and explanations given to us, the company has not raised any money during the year by public issue. Therefore, the provisions of clause 4(xx) of the Companies (Auditor''s Report) Order, 2003 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 Vishnu Ram & Co.,

Chartered Accountants Firm Registration No.004742S



S.Vishnumurthy Proprietor Membership No. 22715

London August 13, 2014

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Mar 31, 2013

1. Report on the Financial Statements

We have audited the accompanying financial statements of UNITED BREWERIES (HOLDINGS) LIMITED (‘the Company'') which comprise the Balance Sheet as at 31st March 2013, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

2. Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). 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.

3. Auditor''s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes J 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.

4. Basis for qualified opinion

a. The company has significant financial exposure to Kingfisher Airlines Limited (KFA). These exposures are in ) the form of investments in equity of Rs. 20,953.043 million, loans and advances of Rs. 23,592.484 million, other receivables of Rs. 3,104.505 million and corporate guarantee of Rs. 89,643.800 million. KFA''s licence to operate the airline business stands suspended (refer note 43 to financial statements). Its net worth is completely eroded.

It is under severe financial stress and has defaulted in honouring its financial obligations on several counts. Having regard to the financial condition of KFA, the company has discontinued charging it interest, guarantee/ security commission and logo fee. Consortium of lenders of KFA led by State Bank of India have recalled their loans. They have invoked the corporate guarantee of Rs. 64,932.900 million and demanded the company to honour its obligation under its guarantee agreements (refer note 40 to financial statements). Certain aircraft lessors of KFA have invoked the corporate guarantee given by the company and have also instituted proceedings under section 433/434 of the Companies Act, 1956 before the Honourable High Court of Karnataka (refer note 42 to financial statements). Above factors have resulted in substantial erosion in carrying value of company''s investments in KFA and significantly impaired the recovery of loans and advances made to them. Similar losses may also arise on account of invocation of corporate guarantee given by the company. The management has not quantified and provided for erosion in the value of investments and the probable losses. Had the company made such provisions, the loss disclosed in the Statement of Profit and Loss would have been higher by such amount and the carrying amount of investments and loans and advances would have been lower by that amount.

b. Company carries investments in certain subsidiaries. The carrying value of such investments is Rs. 700.610 million. There are significant declines in the carrying value of these investments but the company has not quantified and provided for such declines. Had the company provided for such decline, the loss stated in Statement of Profit and Loss would have been higher by such amount and the carrying value of those investments would have been lower by an equal amount (refer note 32(e) to financial statements).

c. Certain subsidiaries owe to the company Rs. 1,709.556 millions. Net worth of these companies are eroded, significantly impairing the recovery of such loans and advances. Company has not quantified and provided for the probable loss. Had the company provided for such loss, the loss stated in the Statement of Profit and Loss would have been higher by such amount and the loans and advances stated in the Balance Sheet would have been lower by that amount (refer note 36 to financial statements).

5. Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the "Basis for Qualified Opinion" paragraph, 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 31 March 2013;

(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.

6. Emphasis of Matter

Attention is invited to the following;

a. note 40 (a) to financial statements dealing with sale of pledged investments by lenders of Kingfisher Airlines Limited.

b. note 40 (b) to financial statements dealing with invocation of corporate guarantee by lenders of Kingfisher Airlines Limited.

7. Report on Other Legal and Regulatory Requirements

i. 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.

ii. 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, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

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

e. on the basis of written representations received from the directors as on 31 March 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Referred to in paragraph 7(i) of our report of even date

Re: United Breweries (Holdings) Limited

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

(b) Most of the assets have been physically verified by the management during the year. Some of the assets have not been verified. However, there is a regular programme of physical verification whereunder, every asset gets verified atleast once every three years. In our opinion, such verification is reasonable having regard to the size of the company and the nature of its assets. Discrepancies noticed on verification during the year have been properly dealt with in the books of account.

(c) During the year, the company has not disposed off any substantial part of its fixed assets.

(ii) (a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of such verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and 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 its inventory. The discrepancies noticed on physical verification of inventory have been properly dealt with in the books of account.

(iii) (a) According to the information and explanations given to us, the company has granted unsecured loans to parties covered in the register maintained under section 301 of the Companies Act, 1956. Maximum amount involved during the year is Rs. 2,258.938 million. The amount of such loans outstanding as at 31-3-2013 is Rs. 3,575.680 million. The company has discontinued charging interest on such loans. Repayment schedules are yet to be fixed for the loans granted during the year.

(b) According to the information and explanations given to us, the company has taken unsecured loans from parties covered in the register maintained under section 301 of the Companies Act, 1956. Maximum amount involved during the year is Rs. 4,966.133 million. The amount of loans outstanding as at 31-3-2013 is Rs. 6,967.412 million. In our opinion, the rate of interest and other terms and conditions of loans taken by the company are prima facie not prejudicial to the interest of the company. The repayments of the dues are in accordance with terms and conditions stipulated.

(iv) In our opinion and according to the information and explanations given to us, there exists in the company an adequate internal control system 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 sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system of the company.

(v) (a) In our opinion and according to the information and explanations given to us, 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.

(b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 58A and 58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or Reserve Bank of India or any Court or any other Tribunal in relation to the deposits accepted by the company.

(vii) In our opinion and according to the information and explanations given to us, the company has an internal audit system commensurate with the size and nature of its business.

(viii) In our opinion and according to the information and explanations given to us the provisions of section 209(1) (d) of the Companies Act, 1956 with regard to maintenance of cost records are not applicable to the company.

(ix) (a) In our opinion and according to the information and explanations given to us, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including dues in respect of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax and other material statutory dues except service tax amounting to Rs. 21.388 million and custom duty of Rs. 0.700 million both of which are outstanding for more than six months.

(b) According to the information and explanations given to us, following is the list of dues on account of taxes, which have not been deposited on account of disputes.

Name of the Statute Nature of dues Disputed amount Forum where dispute is (Rs. in million) pending.

Income Tax Act, 1961 Income tax for the A.Y. 1997-98. 31.998 Supreme Court

Income Tax Act, 1961 Interest for A.Y 2001-02 1.929 High Court of Karnataka

Income Tax Act, 1961 Income tax for the A.Y 2007-08. 111.790 CIT (Appeals)

Income Tax Act, 1961 Income tax for the A.Y. 2008-09. 171.040 CIT (Appeals)

Income Tax Act, 1961 Income tax for the A.Y. 2009-10. 68.990 CIT (Appeals)

Income Tax Act, 1961 Income tax for the A.Y. 2010-11. 723.480 CIT (Appeals)

Foreign Trade Penalty 5.000 High Court of Judicature, (Development & Madras Regulation) Act, 1992

(x) The company does not have any accumulated losses. The company has incurred cash losses during the financial year covered by our audit. The company has not incurred cash losses during the immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given to us, the company has defaulted in repayment of dues to a fnancial institution and banks. The unpaid overdue interest to banks and financial institutions as at March 31, 2013 were Rs. 75.470 million. Out of that Rs. 27.036 million has been paid in April 2013. The company has not issued any debentures.

(xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4(xii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xiii) In our opinion and according to the information and explanations given to us, the company is not a chit fund or a nidhi/ mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xiv) In our opinion and according to the information and explanations given to us, the company is not dealing in or trading in shares, securities, debentures or other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xv) According to the information and explanations given to us, during the year, the company has not given any guarantees in favour of banks and financial institutions for loans taken by others.

(xvi) In our opinion and according to the information and explanations given to us, the term loans raised during the year have been applied for the purposes for which they were raised.

(xvii) In our opinion and according to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that amount of Rs. 13,227.606 million raised on short-term basis have been used for granting long-term loans and advances.

(xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to any parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(xviii) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xix) According to the information and explanations given to us, the company has not issued any debentures during the year. Therefore, the provisions of clause 4(xix) of the Companies (Auditor''s Report) Order, 2003 are not applicable to the company.

(xx) According to the information and explanations given to us, the company has not raised any money during the year by public issue. Therefore, the provisions of clause 4(xx) of the Companies (Auditor''s Report) Order, 2003 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 Vishnu Ram & Co.,

Chartered Accountants,

Firm Registration No. 004742S

(S. Vishnumurthy)

Proprietor.

Place: Mumbai Membership No.22715

Date: 30-05-2013

---

Mar 31, 2012

1. We have audited the attached Balance Sheet of United Breweries (Holdings) Limited, Bangalore ("the Company"), as at 31st March 2012, the Statement of Profit and Loss and also 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.

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 the 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 Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 (1 of 1956), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

4. Attention is invited to the following:

(i) Note no 39 regarding inclusion in the income for the year, an amount of Rs. 521.143 million of guarantee/security commission charged to Kingfisher Airlines Limited (KFA). KFA has not accrued the charge in view of the restrictions imposed by its lenders for the period commencing from 1.1.2011. The total of such charge, accrued by the company for the period from 1.1.2011 to 31.3.2012 is Rs. 646.770 million.

(ii) Note no 35 regarding inclusion in the income for the year, interest of Rs. 1,285.272 million charged to certain subsidiaries and associates, the ultimate realization of which may take protracted period of time.

(iii) Note no 40 regarding significant financial exposure to KFA in the form of investments in equity, loans and advances and guarantees. KFA has considerably scaled down its operations and it is under severe financial stress. No provision has been made in the accounts for the probable loss that may arise due to non recovery of loans and advances and other receivables, decline in the value of investments and invocation of guarantees

(iv) Note no 32(f) and Note no 34 regarding non provision for significant decline in the value of investments aggregating Rs. 700.610 million in certain subsidiaries whose networth is eroded/partially eroded besides non provision for probable loss that may arise due to non-recovery of outstanding Loans and advances of Rs. 1,627.300 million due from such subsidiaries.

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

i we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit;

ii in our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

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

iv In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v on the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31-03-2012 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and

vi in our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the notes thereon and except for the effects of paragraph 4 above, which according to the management, is presently not quantifiable, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with accounting principles generally accepted in India;

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31-03-2012;

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

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

(Referred to in paragraph 3 of our report of even date) Re: United Breweries (Holdings) Limited

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

(b) Most of the assets have been physically verified by the management during the year. Some of the assets have not been verified. However, there is a regular programme of physical verification where under, every asset gets verified atleast once every three years. In our opinion, such verification is reasonable having regard to the size of the company and the nature of its assets. Discrepancies noticed on verification during the year have been properly dealt with in the books of account.

(c) During the year, the company has disposed off a portion of its land and building. In our opinion, this transaction has not affected the "going concern" status of the company.

(ii) (a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of such verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and 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 its inventory. The discrepancies noticed on physical verification of inventory have been properly dealt with in the books of account. (iii) (a) According to the information and explanations given to us, the company has granted unsecured loans to parties covered in the register maintained under section 301 of the Companies Act, 1956. Maximum amount involved during the year is Rs. 944.188 million. The amount of such loans outstanding as at 31-3-2012 is Rs. 1,396.742 million. In our opinion, the rate of interest and other terms and conditions of loans given by the company are prima facie not prejudicial to the interest of the company. The repayments of the dues are in accordance with terms and conditions stipulated.

(b) According to the information and explanations given to us, the company has taken unsecured loans from parties covered in the register maintained under section 301 of the Companies Act, 1956. Maximum amount involved during the year is Rs. 2,510.389 million. The amount of loans outstanding as at 31-3-2012 is Rs. 2,401.279 million. In our opinion, the rate of interest and other terms and conditions of loans taken by the company are prima facie not prejudicial to the interest of the company. The repayments of the dues are in accordance with terms and conditions stipulated.

(iv) In our opinion and according to the information and explanations given to us, there exists in the company an adequate internal control system 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 sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system of the company.

(v) (a) In our opinion and according to the information and explanations given to us, 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.

(b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 58A and 58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or Reserve Bank of India or any Court or any other Tribunal in relation to the deposits accepted by the company.

(vii) In our opinion and according to the information and explanations given to us, the company has an internal audit system commensurate with the size and nature of its business.

(viii) In our opinion and according to the information and explanations given to us the provisions of section 209(1)(d) of the Companies Act, 1956 with regard to maintenance of cost records are not applicable to the company.

(ix) (a) In our opinion and according to the information and explanations given to us, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including dues in respect of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax and other material statutory dues except service tax amounting to Rs. 24.254 million and custom duty of Rs. 0.700 million both of which are outstanding for more than six months.

(b) According to the information and explanations given to us, following is the list of dues on account of taxes, which have not been deposited on account of disputes.

Name of the Statute Nature of dues Disputed amount Forum where dispute is (Rs. in million) pending.

Income Tax Act, 1961 Income tax for the A.Y. 1997-98. 31.998 Supreme Court

Income Tax Act, 1961 Interest for A.Y 2001-02 1.929 High Court of Karnataka

Income Tax Act, 1961 Income tax for the A.Y. 2007-08. 130.340 CIT (Appeals)

Income Tax Act, 1961 Income tax for the A.Y. 2008-09. 171.040 CIT (Appeals)

Income Tax Act, 1961 Income tax for the A.Y. 2009-10. 106.510 CIT (Appeals)

Foreign Trade Penalty 5.000 High Court of Judicature, (Development & Madras Regulation) Act, 1992

(x) The company does not have any accumulated losses. The company has not incurred cash losses during the financial year covered by our audit and during the immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given to us, the company has defaulted in repayment of dues to a financial institution and banks. The unpaid overdue installments and interest to banks and financial institutions as at March 31, 2012 were Rs. 91.740 million. The same has been paid in April 2012. The company has not issued any debentures.

(xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans on the basis of security byway of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4(xii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xiii) In our opinion and according to the information and explanations given to us, the company is not a chit fund or a nidhi/ mutual benefit fund/society Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xiv) In our opinion and according to the information and explanations given to us, the company is not dealing in or trading in shares, securities, debentures or other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xv) In our opinion and according to the information and explanations given to us, 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 the company.

(xvi) In our opinion and according to the information and explanations given to us, the term loans raised during the year have been applied for the purposes for which they were raised.

(xvii) In our opinion and according to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that amount of Rs. 2,580.389 million raised on short-term basis have been used for granting long-term loans and advances.

(xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to any parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(xviii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xix) According to the information and explanations given to us, the company has not issued any debentures during the year.

Therefore, the provisions of clause 4(xix) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xx) According to the information and explanations given to us, the company has not raised any money during the year by public issue. Therefore, the provisions of clause 4(xx) of the Companies (Auditor's Report) Order, 2003 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 Vishnu Ram & Co.,

Chartered Accountants,

Firm Registration No. 004742S

(S. Vishnumurthy)

Proprietor.

Mumbai Membership No.22715

August 24, 2012

---

Mar 31, 2011

1. We have audited the attached Balance Sheet of United Breweries (Holdings) Limited, Bangalore, as at 31st March 2011, the Profit and Loss Account and also 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.

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 the 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 Government of India in terms of sub- section (4A) of Section 227 of the Companies Act, 1956 (1 of 1956), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

4. We draw attention, without qualifying our report, to Note No 8(d) in Schedule 12 regarding diminution in the carrying value of certain long term investments, Note No. 11 in Schedule 12 regarding possible protracted delay in recovery of unsecured advances to subsidiaries amounting to Rs. 19,236.010 million and Note No. 15 in Schedule 12 regarding company's exposure to guarantees given on behalf of a major subsidiary.

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

i we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit;

ii in our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

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

iv in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v on the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31-03-2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and

vi in our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with accounting principles generally accepted in India;

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31-03-2011;

(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 to the Auditor's Report (Referred to in paragraph 3 of our report of even date) Re: United Breweries (Holdings) Limited

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

(b) Most of the assets have been physically verified by the management during the year. Some of the assets have not been verified. However, there is a regular programme of physical verification whereunder, every asset gets verified atleast once every three years. In our opinion, such verification is reasonable having regard to the size of the company and the nature of its assets. Discrepancies noticed on verification during the year have been properly dealt with in the books of account.

(c) During the year, the company has disposed off a portion of its land and building. In our opinion, this transaction has not affected the "going concern" status of the company.

(ii) (a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of such verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and 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 its inventory. The discrepancies noticed on physical verification of inventory have been properly dealt with in the books of account. '

(iii) (a) According to the information and explanations given to us, the company has granted unsecured loans to parties covered in the register maintained under section 301 of the Companies Act, 1956. Maximum amount involved during the year is Rs. 5,766.800 million. The amount of such loans outstanding as at 31-3-2011 is Rs. 452.554 million. In our opinion, the rate of interest and other terms and conditions of loans given by the company are prima facie not prejudicial to the interest of the company. The repayments of the dues are in accordance with terms and conditions stipulated.

(b) According to the information and explanations given to us, the company has taken unsecured loans from parties covered in the register maintained under section 301 of the Companies Act, 1956. Maximum amount involved during the year is Rs. 6,747.055 million. The amount of loans outstanding as at 31-3-2011 is Rs. 3,950.970 million. In our opinion, the rate of interest and other terms and conditions of loans taken by the company are prima facie not prejudicial to the interest of the company. The repayments of the dues are in accordance with terms and conditions stipulated.

(iv) In our opinion and according to the information and explanations given to us, there exists in the company an adequate internal control system 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 sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system of the company.

(v) (a) In our opinion and according to the information and explanations given to us, 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.

(b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 58A and 58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or Reserve Bank of India or any Court or any other Tribunal in relation to the deposits accepted by the company.

(vii) In our opinion and according to the information and explanations given to us, the company has an internal audit system commensurate with the size and nature of its business.

(viii) In our opinion and according to the information and explanations given to us the provisions of section 209(1)(d) of the Companies Act, 1956 with regard to maintenance of cost records are not applicable to the company.

(ix) (a) In our opinion and according to the information and explanations given to us, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including dues in respect of provident fund, investor education protection fund, employees state insurance, income tax, sales tax, wealth tax and other material statutory dues except service tax amounting to Rs. 22.153 million (including an amount of Rs. 11.591

For Vishnu Ram & Co.,

Chartered Accountants,

(S. Vishnumurthy)

Proprietor. Mumbai Membership No.22715

August 25, 2011 Firm Registration No. 004742S

---

Mar 31, 2010

1. We have audited the attached Balance Sheet of United Breweries (Holdings) Limited, Bangalore, as at 31st March 2010, the Profit and Loss Account and also 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 the 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 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 (1 of 1956), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

4. We draw attention, without qualifying our report, to Note No 9(iii) in Schedule 12 regarding diminution in the carrying value of investment, Note No. 11 in Schedule 12 regarding the delay in recovery of unsecured advances to subsidiaries amounting to Rs. 13,151.541 million and Note No. 13 in Schedule 12 regarding companys exposure to guarantees given on behalf of subsidiaries.

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

i we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit;

ii in our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

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

iv in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v on the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31-03-2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and

vi in our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with accounting principles generally accepted in India;

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31-03-2010;

(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 to the Auditors Report (Referred to in paragraph 3 of our report of even date) Re: United Breweries (Holdings) Limited

(i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of its 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. Discrepancies noticed on verification during the year have been properly dealt with in the books of account.

(c) During the year, the company has disposed off a portion of its land and building. This transaction has not affected the "going concern" status of the company.

(ii) (a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of such verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the company is maintaining proper records of its inventory. The discrepancies noticed on physical verification of inventory have been properly dealt with in the books of account.

(iii) (a) In our opinion and according to the information and explanations given to us, the company has granted unsecured loans to a party covered in the register maintained under section 301 of the Companies Act, 1956. The amount of such loans outstanding as at 31-3-2010 is Rs. 3,212.275 million. The rate of interest and other terms and conditions of loans given by the company are prima facie not prejudicial to the interest of the company. The repayments of the dues are in accordance with terms and conditions stipulated.

(b) The company has not taken any loans from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(iii)(e) to 4(iii)(g) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(iv) In our opinion and according to the information and explanations given to us, there exists in the company an adequate internal control system 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 sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system of the company.

(v) (a) In our opinion and according to the information and explanations given to us, 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.

(b) In our opinion and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 58A and 58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or Reserve Bank of India or any Court or any other Tribunal in relation to the deposits accepted by the company.

(vii) In our opinion and according to the information and explanations given to us, the company has an internal audit system commensurate with the size and nature of its business.

(viii) In our opinion and according to the information and explanations given to us the provisions of section 209(1)(d) of the Companies Act, 1956 with regard to maintenance of cost records are not applicable to the company.

(ix) (a) In our opinion and according to the information and explanations given to us, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including dues in respect of provident fund, investor education protection fund, employees state insurance, income tax, sales tax, wealth tax and other material statutory dues applicable to it. (b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, service tax, sales tax, excise duty etc., were in arrears as at 31-3-2010 for a period of more than six months from the date they became payable except an amount of rupees 0.700 million in respect of customs duty.

(c) According to the information and explanations given to us, following is the list of dues on account of taxes, which have not been deposited on account of disputes.

Name of the Statute Nature of dues Disputed amount Forum where dispute is (Rs. in million) pending.

Income Tax Act, 1961 Income tax for the A.Y. 1993-94. 25.105 Supreme Court

Income Tax Act, 1961 Income tax for the A.Y. 1997-98. 40.000 Supreme Court

Income Tax Act, 1961 Income tax for the A.Y. 1990-91. 2.737 Supreme Court

Income Tax Act, 1961 Income tax for the A.Y. 1991-92. 3.575 Supreme Court

Income Tax Act, 1961 Interest for A.Y 1990-91 & 1991-92 5.094 Supreme Court

Income Tax Act, 1961 Interest for A.Y 2001-02 1.929 CCIT, Bangalore

Income Tax Act, 1961 Income tax for the A.Y. 2007-08. 347.473 CIT (Appeals)

Foreign Trade Penalty 5.000 High Court of Judicature, (Develop ment & Madras Regulation) Act, 1992

(x) The company does not have any accumulated losses. The company has not incurred cash losses during the financial year covered by our audit and during the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to financial institution or banks. The company has not issued any debentures.

(xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4(xii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xiii) In our opinion and according to the information and explanations given to us, the company is not a chit fund or a nidhi/mutual benefit fund/society Therefore, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xiv) In our opinion and according to the information and explanations given to us, the company is not dealing in or trading in shares, securities, debentures or other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xv) In our opinion and according to the information and explanations given to us, 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 the company.

(xvi) In our opinion and according to the information and explanations given to us, the term loans raised during the year have been applied for the purposes for which they were raised.

(xvii) In our opinion and 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 any parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clause 4(xviii) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xix) According to the information and explanations given to us, the company has not issued any debentures during the year. Therefore, the provisions of clause 4(xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

(xx) According to the information and explanations given to us, the company has not raised any money during the year by public issue. Therefore, the provisions of clause 4(xx) of the Companies (Auditors Report) Order, 2003 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 Vishnu Ram & Co.,

Chartered Accountants,

(S.Vishnumurthy)

Proprietor.

Membership No. 22715

Firm Registration No. 004742S



Bangalore

20.08.2010