We have audited the attached Balance Sheet of KGN Industries Limited as
 at 31st March, 2011 and the Profit and Loss account of the Company for
 the year ended on that date annexed thereto. These financial statements
 are the responsibility of the Company''s management. Our responsibility
 is to express an opinion on these financial statements based on our
 audit.
 
 We conducted our audit in accordance with 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 also includes
 examining, on a test basis, evidence supporting the amounts and
 disclosure in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 As required by the Companies (Auditors'' Report) Order, 2003 issued by
 the Central Government of India in terms of Section 227(4A) of the
 Companies Act. 1956, and on the basis of the books and records of the
 company as we considered appropriate and according to the information
 and explanations given to us , we enclose in the Annexure a statement
 on the matters specified in paragraphs 4 and 5 of the said order.
 
 Further to our comments on 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 purpose of our
 audit;
 
 b) In our opinion , proper books of accounts as required by law have
 been kept by the Company, so far as appears from our examination of the
 those books;
 
 c) The Balance Sheet and the Profit & Loss Account dealt by this report
 are in agreement with the books of accounts;
 
 d) In our opinion, the Balance Sheet and the Profit & Loss Account
 dealt by this report comply with the accounting standards referred to
 in sub-section (3C) of section 211 of the Companies Act,1956;
 
 e) On the basis of written representation received from the directors,
 as on 31st March, 2011 and taken on record by the Board of Directors,
 we report that none of the Directors is disqualified as on 31st March,
 2011 from being appointed as a Director in terms of clause (g) of sub
 section (1) of section 274 of the Companies Act, 1956.
 
 f) In our opinion and to the best of our information and according to
 the explanation given to us, the said accounts, give the information
 required by the companies Act, 1956 in the manner so required and give
 a true and fair view in conformity with the accounting principles
 generally accepted in India:
 
 i) In the case of the Balance Sheet, of the state of affairs of the
 company as at 31st March, 2011; and
 
 ii) In the case of the Profit and Loss Account, of the Profit for the
 year ended on that date.
 
 iii) In the case of the Cash Flow Statement, of the Cash Flows for the
 year ended on that date.
 
 KGN INDUSTRIES LIMITED ANNEXURE TO THE AUDITORS'' REPORT (Referred to in
 paragraph 3 of our report of even date)
 
 1.  (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 at
 reasonable intervals; No material discrepancies were noticed on such
 verification by the management.
 
 (c) In our opinion, the Company has not disposed off any substantial
 part of fixed assets during the year and the going concern status of
 the company is not affected.
 
 2.  (a) The Inventory has been physically verified by the management
 during the year. In our opinion, the frequency of verification is
 reasonable.
 
 (b) In our opinion, 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) On the basis of our examination of the inventory records, in our
 opinion, the company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification of inventory as compared
 to book records were not material.
 
 3.  (a) The Company has granted unsecured loan to companies, firms or
 other parties in the register maintained under Section 301 of the
 Companies Act, 1956. The maximum amount granted during the year and
 yearend balance of loan to such parties was as per details given
 bellow. The terms and conditions and rate of interest of the aforesaid
 loans granted are prima-facie not prejudicial to the interest of the
 company.
 
                                        Maximum      Closing Balance As
 Sr.                 Relation With The
       Name of The
        Party                           Outstanding    on 31/03/2011
 No.                   Company
                                         ( In Rs. )      ( In Rs. )
 
 1.  KGN Projects 
     Limited          Subsidiary        61,50,000/-      61,50,000/-
 
 (b) The Company has not taken loans, secured or unsecured from
 companies, firms or other parties covered in the register maintained
 under section 301 of the Companies Act, 1956.
 
 4.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures
 commensurate with a size of a company and the nature of its business,
 for purchase of inventory and fixed assets and for the sale of goods
 and services. During the course of our audit, no major weakness has
 been noticed in the internal control system.
 
 5.  (a) According to the information and explanations given to us, we
 are of the opinion that the particulars of all contracts or
 arrangements that need to be entered in to 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 explanations
 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 lacs 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.
 
 6.  The Company has not accepted deposits from the public, within the
 meaning of sections 58A and 58AA of the Act and the rules framed there
 under.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with the size and nature of business.
 
 8.  We are informed that the company is not required to maintain cost
 records as prescribed by the Central Government under section 209(1)
 (d) of the Companies Act, 1956 having regard to the nature of the
 business of the Company.
 
 9.  (a) According to the information and explanations given to us and
 the records of the company examined by us, in our opinion, the Company
 is regular in depositing with appropriate authorities undisputed
 statutory dues including provident fund, investor education fund,
 employees'' state income tax, sales tax, wealth tax, service tax, custom
 duty, excise duty and other material statutory dues applicable to it.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payables in respect of income tax, sales tax, wealth
 tax, service tax, customs duty and excise duty were in arrears, as at
 31st March, 2011 for a period of more than six months from the date of
 they became payable.
 
 (c) According to the information and explanation given to us, there are
 no dues of income tax, sales tax, service tax, customs duty and excise
 duty which have not been deposited on account of any dispute.
 
 10. In our opinion, the company has no accumulated losses at the end of
 the financial year and it has not incurred any cash losses during the
 financial year covered by our audit and the immediately preceding
 financial year.
 
 11. In our opinion and according to the information and explanations
 given to us, the company has not defaulted in repayment of dues to a
 financial institution, bank or debenture holders.
 
 12. The company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities
 during the year.
 
 13. The company is not a chit fund, nidhi, mutual benefit fund or
 society. Therefore, the provisions of clause 4(xiii) are not applicable
 to the company.
 
 14. In our opinion, the company is not a dealer or trader in shares,
 securities, debentures and other investments. Therefore the provision
 of clause 4(xiv) is not applicable to the company.
 
 15. In our opinion and according to the information and explanations
 given to us, the company has not given any guarantee for loans taken by
 others from banks or financial institutions during the year.
 
 16. As per the records of the company and as per the information and
 explanations given to us, the company has not taken any term loan
 during the year.
 
 17. On the basis of overall examination of the balance sheet of the
 company, the funds raised on short-term basis have not been used for
 long-term investment and vise-a-versa, during the year.
 
 18. The company has not made preferential allotment of shares to
 parties and companies covered in the register maintained under section
 301 of the Companies Act, 1956, during the year.
 
 19. The company has not issued any debentures during the year.
 
 20. The company has not raised any money by public issue during the
 year.
 
 21. During the year, no fraud on or by the company has been notice or
 reported during the course of our audit.
  
                                             For, Kirit & Company
                                                F. R. No. 132282W
                                            Chartered Accountants
                                                             Sd/-
 Date    : 2nd September, 2011                         Proprietor
 Place   : Mumbai                                   M. No. 038047