ILandFS Investment Managers

1.  We have audited the attached Balance Sheet of IL&FS INVESTMENT
 MANAGERS LIMITED (the “Company”) as at March 31, 2009, the Profit and
 Loss Account and the Cash Flow Statement of the Company 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 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 misstatements. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by 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 (the
 Order) issued by the Central Government of India in terms of sub
 section (4A) of Section 227 of the Companies Act, 1956, we enclose in
 the Annexure a statement on the matters specified in paragraphs 4 and 5
 of the said Order.
 
 4.  Further to our comments in the Annexure referred to above, we
 report that:
 
 (a) We have obtained all the information and 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 Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (d) In our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement dealt with by this report comply with the
 Accounting Standards referred to in sub section (3C) of Section 211of
 the Companies Act, 1956.
 
 (e) Attention is invited Note 8(ii) of Schedule 13 regarding
 remuneration to Whole Time Directors aggregating to Rs. 17,129,730/-
 which is in excess of the limits specified in Section 198 of the
 Companies Act, 1956 for which the Company is in the process of
 obtaining necessary approval from the Central Government.
 
 (f) On the basis of the written representations received from the
 directors as on March 31, 2009, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as at
 March 31, 2009 from being appointed as a director in term of clause (g)
 of sub section 1 of Section 274 of the Companies Act, 1956.
 
 (g) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read alongwith our
 observation in paragraph 4(e) above and other notes to accounts, give
 the information required by the Companies Act, 1956 in the manner so
 required and give a true and fair view in conformity with the
 accounting principles generally accepted in India:
 
 (i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at March 31, 2009;
 
 (ii) in the case of the Profit and Loss Account, of the profit for the
 year ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 Annexure to the Auditors Report
 
 Re: IL&FS INVESTMENT MANAGERS LIMITED (Referred to in paragraph 3 of
 our report of even date)
 
 (i) The nature of the Companys activities is such that clauses (ii),
 (viii), (x), (xii), (xiii), (xiv), (xv), (xvii), (xix) and (xx) of
 Companies (Auditors Report) Order, 2003 (the order) are not applicable
 to the Company for the year.
 
 (ii) In respect of its fixed assets:
 
 (a) The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 (b) The fixed assets were physically verified during the year by the
 Management in accordance with a programme of verification, the
 frequency of which is reasonable. According to the information and
 explanations given to us, no material discrepancies were noticed on
 such verification.
 
 (c) The Company has not disposed off a substantial part of fixed assets
 during the year.
 
 (iii) According to the information and explanations given to us, the
 Company has not granted or taken loan to/ from companies, firms or
 other parties covered in the Register maintained under Section 301 of
 the Companies Act, 1956. Accordingly paragraph 4 (iii) (a) to (g) of
 the Order are not applicable.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there exists an adequate internal control system
 commensurate with the size of the Company and the nature of its
 business with regard to purchase of fixed assets and for the sale of
 services. During the course of our audit, we have not observed any
 continuing failure to correct major weaknesses in internal control
 system of the Company.
 
 (v) To the best of our knowledge and belief and according to the
 information and explanations given to us, there were no contracts or
 arrangements referred to in Section 301 of the Companies Act, 1956 that
 needed to be entered into the register maintained under the said
 section. Accordingly sub clause (b) of clause (v) of the Order is not
 applicable.
 
 (vi) The Company has not accepted any deposits from the public.
 
 (vii) In our opinion, the internal audit functions carried out during
 the year by a firm of Chartered Accountants appointed by the Management
 have been commensurate with the size of the Company and the nature of
 its business.
 
 (viii) In respect of statutory dues:
 
 (a) In our opinion and according to the information given to us, the
 Company has generally been regular in depositing undisputed statutory
 dues, including Provident Fund, Investor Education and Protection Fund,
 Employees State Insurance, Income tax, Sales tax, Wealth Tax, Service
 Tax, Cess and other material statutory dues with the appropriate
 authorities during the year. According to the information and
 explanations given to us, there were no undisputed amounts payable on
 account of the above dues, outstanding as at March 31, 2009 for a
 period of more than six months from the date they became payable.
 
 (b) According to the information and explanations given to us, details
 of disputed Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service
 Tax and Cess which have not been deposited as on March 31, 2009 on
 account of dispute is given below:
 
 Name of statute              Nature of the dues     Amount
 
 Income Tax Act, 1961         Income Tax             200.92
 
 Period of which            Forum where
 the amount relates         dispute is pending
 
 2002 - 2007                CIT (Appeals)
 
 (ix) According to the information and explanations given to us, the
 Company has not borrowed from financial institutions and banks.
 
 (x) To the best of our knowledge and belief and according to the
 information and explanations given to us there are no term loans
 availed by the Company during the year.
 
 (xi) According to the information and explanations given to us, the
 Company has not made any preferential allotment of shares to parties
 and companies covered in the Register maintained under Section 301 of
 the Companies Act, 1956.
 
 (xii) To the best of our knowledge and belief and according to the
 information and explanations given to us, no fraud by the Company and
 no material fraud on the Company was noticed or reported during the
 year.
 
                                        For Deloitte Haskins & Sells
                                               Chartered Accountants
 
                                                          A. B. JANI
                                                             Partner
 Mumbai, April 22, 2009                        (Membership No. 46488)