1.  We have audited the attached Balance Sheet of Cosmo Films Limited
 (''the Company''), as at 31st March, 2012, and also the Statement of
 Profit and Loss and the Cash Flow Statement for the year ended on that
 date annexed thereto (collectively referred as the ''financial
 statements''). These financial statements are the responsibility of the
 Company''s management. Our responsibility is to express an opinion on
 these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with the auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  As required by the Companies (Auditor''s Report) Order, 2003 (''the
 Order'') (as amended) issued by the Central Government of India in terms
 of sub-section (4A) of Section 227 of the Companies Act, 1956 (''the
 Act''), we enclose in the Annexure a statement on the matters specified
 in paragraphs 4 and 5 of the Order.
 
 4.  Further to our comments in the Annexure referred to above, we
 report that:
 
 (a) We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 (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 and proper returns adequate for the purposes of our audit
 have been received from the branches not visited by us ;
 
 (c) The financial statements dealt with by this report are in agreement
 with the books of account.
 
 (d) On the basis of written representations received from the directors
 as on 31st March 2012 and taken on record by the Board of Directors,
 none of the directors is disqualified as on 31 March 2012 from being
 appointed as a director in terms of clause (g) of sub-section (1) of
 Section 274 of the Act;
 
 (e) In our opinion and to the best of our information and according to
 the explanations given to us, the financial statements dealt with by
 this report comply with the accounting standards referred to in sub-
 section (3C) of Section 211 of the Act and 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, in the case of:
 
 (i) the Balance Sheet, of the state of affairs of the Company as at
 31st March 2012;
 
 (ii) the Statement of Profit and Loss, of the profit for the year ended
 on that date; and
 
 (iii) the Cash Flow Statement, of the cash flows for the year ended on
 that date.
 
 Annexure to the Independent Auditors'' Report of even date to the
 members of Cosmo Films Limited, on the financial statements for the
 year ended 31 March 2012 Based on the audit procedures performed for
 the purpose of reporting a true and fair view on the financial
 statements of the Company and taking into consideration the information
 and explanations given to us and the books of account and other records
 examined by us in the normal course of audit, we report that:
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets have been physically verified by the management
 during the year and no material discrepancies were noticed on such
 verification. In our opinion, the frequency of verification of the
 fixed assets is reasonable having regard to the size of the Company and
 the nature of its assets.
 
 (c) In our opinion, a substantial part of fixed assets has not been
 disposed off during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year, except
 goods-in-transit.
 
 (b) The procedures of physical verification of inventory followed by
 the management are reasonable and adequate in relation to the size of
 the Company and the nature of its business.
 
 (c) The Company is maintaining proper records of inventory and no
 material discrepancies were noticed on physical verification.
 
 (iii) (a) The Company has not granted any loan, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act. Accordingly, the provisions of clauses
 4(iii)(b) to 4(iii)(d) of the Order are not applicable.
 
 (b) The Company has not taken any loans, secured or unsecured from
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act. Accordingly, the provisions of clauses
 4(iii)(f) and 4(iii)(g) of the Order are not applicable.
 
 (iv) In our opinion, there is an adequate internal control system
 commensurate with the size of the Company and the nature of its
 business for the purchase of inventory and fixed assets and for the
 sale of goods.During the course of our audit, no major weakness has
 been noticed in the internal control system in respect of these areas.
 
 (v) (a) In our opinion, the particulars of all contracts or
 arrangements that need to be entered into the register maintained under
 Section 301 of the Act have been so entered.
 
 (b) In our opinion, the transactions made in pursuance of such
 contracts or arrangements 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 prevailing market prices at the
 relevant time.
 
 (vi) The Company has not accepted any deposits from the public within
 the meaning of Sections 58A and 58AA of the Act and the Companies
 (Acceptance of Deposits) Rules, 1975. Accordingly, the provisions of
 clause 4(vi) of the Order are not applicable.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 (viii) To the best of our knowledge and belief, the Central Government
 has not prescribed maintenance of cost records under clause (d) of
 sub-section (1) of Section 209 of the Act, in respect of Company''s
 products.  Accordingly, the provisions of clause 4(viii) of the Order
 are not applicable.
 
 (ix) (a) Undisputed statutory dues including provident fund, investor
 education and protection fund, employees'' state insurance, income-tax,
 sales-tax, wealth-tax, service-tax, custom duty, excise duty, cess and
 other material statutory dues, as applicable, have generally been
 regularly deposited with the appropriate authorities, though there has
 been a slight delay in a few cases. No undisputed amounts payable in
 respect thereof were outstanding at the year-end for a period of more
 than six months from the date they became payable.
 
 (b) The dues outstanding in respect of sales-tax, income-tax, custom
 duty, wealth-tax, excise duty, cess on account of any dispute, are as
 follows:
 
 Name of the    Nature of 
                dues         Amount      Period to which   Forum where
 statute                     Rs in
                             crores      the amount 
                                         relates           dispute is
                                                           pending
                                        (Financial year)
 
                Excise duty     2.57     1996-97, 
                                         2005-06,          Appellate 
                                                           Tribunal
                                         2008-09 and
                                         2009-10
 
                Service tax     0.07     2007-08           Appellate
                                                           Tribunal
 
 Central 
 Excise         Excise duty     5.20     2002-03 and 
                                         2004-05           Assistant
                                                           Commissioner
 & Custom 
 Act                                     to 2011-12
 
                Service Tax     0.73     2007-08 and 
                                         2009-10           Assistant 
                                                           Commissioner
                                         to 2011-12
 
                Excise duty     1.15     2008-09 to
                                         2010-11           Commissioner
                                                           Appeals
 
                Service Tax     0.12     2009-10 to 
                                         2011-12           Commissioner 
                                                           Appeals
 
 Maharashra     Sales tax       0.07     1998-99 and 
                                         1999-00           Sales Tax 
                                                           Tribunal
 Sales Tax 
 Act                           12.70     2003-04 and 
                                         2004-05           Commissioner
                                                           Appeals
 
                Income Tax &
                Penalty         1.40     1997-98           Appellate 
                                                           Tribunal
 
                Income Tax & 
                Penalty         4.83
                             (paid       2002-03           Supreme Court
 Income Tax                   under 
                              dispute
 Act                          Rs 4.83)
 
                Income Tax & 
                Penalty       6.60 (paid 2007-08           CIT (Appeals)
                              under 
                              dispute
                              Rs 6.60)
 
 (x) In our opinion, the Company has no accumulated losses at the end of
 the financial year and it has not incurred cash losses in the current
 and the immediately preceding financial year.
 
 (xi) The Company has not defaulted in repayment of dues to any bank or
 financial institution during the year.  The Company did not have any
 outstanding debentures during the year.
 
 (xii) The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other
 securities.  Accordingly, the provisions of clause 4(xii) of the Order
 are not applicable.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi/
 mutual benefit fund/ society. Accordingly, the provisions of clause
 4(xiii) of the Order are not applicable.
 
 (xiv) In our opinion, the Company is not dealing or trading in shares,
 securities, debentures and other investments. Accordingly, the
 provisions of clause 4(xiv) of the Order are not applicable.
 
 (xv) The Company has given a guarantee in respect of loans taken by
 subsidiaries from banks, in respect of which no commission is charged
 from the subsidiaries. In our opinion, having regard to the long term
 involvement with the subsidiary companies and considering the
 explanations given to us in this regard, the terms and conditions of
 the above are not, prima facie, prejudicial to the interests of the
 Company.
 
 (xvi) In our opinion, the term loans were applied for the purpose for
 which the loans were obtained, though idle/surplus funds which were not
 required for immediate utilization have been invested in liquid
 investments, payable on demand.
 
 (xvii) In our opinion, no funds raised on short-term basis have been
 used for long-term investment.
 
 (xviii) During the year, the Company has not made any preferential
 allotment of shares to parties or companies covered in the register
 maintained under Section 301 of the Act. Accordingly, the provisions of
 clause 4(xviii) of the Order are not applicable.
 
 (xix) The Company has neither issued nor had any outstanding debentures
 during the year. Accordingly, the provisions of clause 4(xix) of the
 Order are not applicable.
 
 (xx) The Company has not raised any money by public issues during the
 year. Accordingly, the provisions of clause 4(xx) of the Order are not
 applicable.
 
 (xxi) No fraud on or by the Company has been noticed or reported during
 the period covered by our audit.
 
 
 
                                        For Walker, Chandiok & Co., 
 
                                            Chartered Accountants 
 
                                    Firm Registration No: 001076N
 
 New Delhi                                        per David Jones
 
 May 23, 2012                                Membership No. 98113