Macmillan India

We have audited the attached balance sheet of Macmillan India Limited
 (the Company), as at 31st December 2008, the profit and loss account
 and the cash flow statement for the year ended on that date annexed
 thereto. These fi- nancial statements are the responsibility of the
 Companys management. Our responsibility is to express an opinion on
 these financial statements based on our audit.
 
 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 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.
 
 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, 1 956, we enclose in the Annexure a statement
 or the matters specified in pargaraphs 4 and 5 of the said Order.
 Order.
 
 Further to our comments in the Annexure referred to above, we report
 that:
 
 i. We have obtained all the information and explana- tions, which to
 the best of our knowledge and belief were necessary for the purposes of
 our audit;
 
 ii.  In our opinion, proper books of account as required by law have
 been kept by the Company, so far as ap- pears 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 agree- ment 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 21 1 of the
 Companies Act, 1 956;
 
 v.  On the basis of the 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 31st December 2008
 from be- ing appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of the Companies Act, 1956 on the said
 date;
 
 vi. Without qualifying our opinion, we draw attention to:
 
 a.  Note No. II (8) of Schedule 1 8 regarding the invest- ments made
 and advances given to the subsidiary, ICC Macmillan Inc, USA. No
 provision is consid- ered necessary by the management, as they have
 committed to extend continued financial support.
 
 b.  Note No. II (6b) of Schedule 1 8 regarding non- provision of
 service tax, which is being disputed by the Company.
 
 vii In our opinion and to the best of Our information and according to
 the explanations given to us, the said accounts give the information
 required by the Compa- nies Act, 1956, 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 December 2008;
 
 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 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)
 
 1.  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.  Most of the fixed assets were physically verified during the year
 by the management in accordance with 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.  According to the
 information and explanations given to us no material discrepancies were
 noticed on such verification.
 
 c.  Although a major part of the fixed assets have been disposed off
 during the year, in our opinion and according to the information and
 explanations giv- en to us, the ability of the company to continue as a
 going concern is not affected.
 
 2.  In respect of its inventories:
 
 a.  As explained to us, inventories were physically verified during the
 year by the management at reasonable intervals.
 
 b.  In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 relating to publishing business followed by the management were
 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 explanation
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verification.
 
 3.  a. The Company has not granted any loans, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Companies Act, 1956.
 
 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 Companies Act, 1956.
 
 4.  In our opinion and according to the information and explanations
 given to us, there is adequate internal control system commensurate
 with the size of the Com- pany and the nature of its business for the
 purchase of inventory and fixed assets and for the sale of goods and
 services and we have not observed any continu- ing failure to correct
 major weaknesses in such internal control systems.
 
 5.  In respect of contracts or arrangements entered in the register
 maintained in pursuance of section 301 of the Companies Act 1956, to
 the best of our knowledge and belief and according to the information
 and expla- nations given to us:
 
 a.  The particulars of contracts or arrangements referred to Section
 301 that needed to be entered into the register, maintained under the
 said section have been so entered.
 
 b.  There are no transactions, in aggregate, in excess of Rs.5 lacs in
 respect of any party.
 
 6.  The Company has not accepted any fixed deposits from the public
 during the year.
 
 7.  The internal audit was carried out by the internal audit department
 of the Company up to June 2008.  A consulting Company, which is an
 associate of the statutory auditors of the Holding Company, were
 appointed on 24th November 2008 to carry out the internal audit from
 1st December 2008. Therefore, no internal audit was conducted during
 the period July to November 2008.
 
 8.  The Central Government has not prescribed mainte- nance of Cost
 Accounting Records under Section 209(1) (d) of the Companies Act, 1 956
 for the Company.
 
 9.  In respect of Statutory dues:
 
 a. According to the information and explanations given to us, the
 Company has been generally regular in depositing undisputed statutory
 dues including Investor Education and Protection Fund, Provident Fund,
 Employees State Insurance, Income-tax, Sales-tax, VAT, Wealth tax,
 Service Tax, Custom duty, Cess and any other material statutory dues
 with the appropriate authorities during the year, though there has been
 a slight delay in a few cases.
 
 b.  There were no undisputed amounts payable in respect of Investor
 Education and Protection Fund, Provident Fund, Employees State
 Insurance, Income-tax, Sales-tax, VAT, Wealth tax, Service Tax, Custom
 duty, Cess and any other material statutory dues as at 31st December
 2008 for a period of more than six months from the date they became
 payable.
 
 c.  According to the information and explanations given to us, the
 details of Sales Tax, VAT, Income tax, Customs Duty, Wealth Tax,
 Service Tax, and Cess, which has not been deposited with the
 appropriate authorities as on 31st December 2008 on account of any
 dispute are given below:
 
 Name of the          Nature or the dues
 Statute
                      Service Tax on
 Section 66A of the   Commission paid to
 Finance Act, 1994    Macmillan UK
 
                      Demand for Income
 Income lax Act,      tax upon completion or
 1961                 assessment
 
                      Demand for Income
 Income lax Act,      tax upon completion or
 1961                 assessment
 
 Amount          Period to which the     Forum where the
 (Rs. In lacs)   amount relates          dispute is pending
 
 227.77          July 2003 - Dec 2006    CESTAT, Bengaluru
 
                                         Commissioner of
 24.36           AY 2005-06              Income Tax-Appeals,
                                         Chennai
 
                                         Commissioner of
 1.80            AY 2005-06              Income Tax-Appeals,
                                         Chennai
 
 10. As at the end of the financial year, the Company does not have
 accumulated losses. The Company has not in- curred cash losses during
 the financial year covered by our audit and the immediately preceding
 financial year.
 
 11. The Company has not taken any loans from financial institutions,
 banks and debenture holders.
 
 12. Based on our examination of documents and records, we are of the
 opinion that the Company has not grant- ed loans and advances on the
 basis of security by way of pledge of shares, debentures and other
 securities.
 
 13. The Company is not a chit fund or nidhi mutual benefit fund /
 society.
 
 14.  In our opinion and according to the information and explanations
 given to us, the Company is not dealing in or trading in shares,
 securities and debentures and other investments.
 
 15.  According to the information and explanations given to us, the
 Company has given a guarantee for loans taken by Frank Brothers & Co.
 (Publishers) Limited from banks during the year.
 
 16.  The Company has not raised any Term Loan during the year.
 
 17.  According to the information and explanations given to us, and on
 an overall examination of the balance sheet of the Company, funds
 raised on short-term basis, have, prima facie, not been used during the
 year for long term investment.
 
 18.  The Company has not made any preferential allot- ment of shares to
 parties and companies covered in the register maintained under Section
 301 of the Compa- nies Act, 1956.
 
 19. The Company has not issued any debentures.
 
 20.  The Company has not raised money through public issues during the
 year.
 
 21.  To the best of our knowledge and belief and accord- ing to the
 information and explanations given to us, no material fraud on or by
 the Company was noticed or reported during the year.
 
 Place: Bengaluru
 Date : 25th February 2009              For Deloitte Haskins & Sells
                                               Chartered Accountants
 
                                             Bhavani Balasubramanian
                                                             Partner
                                                Membership No. 22156