1.  We have audited the attached Balance Sheet of MICRO INKS LIMITED
 (the Company), as at December 31, 2010, and also the Profit and Loss
 Account and the Cash Flow Statement for the year ended on that date
 both 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 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 (CARO),
 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.  Without qualifying our opinion, we continue to draw attention to
 Note No. 27 on Schedule-17. The Company has investments in
 Hostmann-Steinberg Inc., a wholly owned subsidiary incorporated in the
 USA (the Subsidiary), at a carrying value of Rs. 965.81 million (as
 at December 31, 2009 of Rs. 965.81 million). [These figures are after
 writing off Rs. 1,587.86 million in an earlier year by utilisation of
 reserves in accordance with the requisite approvals]. The accumulated
 losses of the Subsidiary are Rs. 3,629.97 million (as at December 31,
 2009 are Rs. 3,659.38 million) and the net worth is Rs. 848.98 million
 (as at December 31, 2009 is Rs. 853.82 million). The Company has net
 outstanding of Rs. 346.88 million (as at December 31, 2009 Rs. 564.07
 million) due from the Subsidiary on account of debtors and has given a
 corporate guarantee of Rs. 447.10 million (as at December 31, 2009 Rs.
 595.84 million) for loan given by a bank to the Subsidiary. As
 represented by the management, notwithstanding the Subsidiary being
 dependent on the Company for financial support and for the reasons
 stated in the said note, no losses on these accounts are presently
 expected to occur and, accordingly, no provision has been made.
 
 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 Profit and Loss Account 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 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 211 of
 the Companies Act, 1956;
 
 (v) 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 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:
 
 (a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at December 31, 2010;
 
 (b) in the case of the Profit and Loss Account, of the profit of the
 Company for the year ended on that date; and
 
 (c) in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 6.  On the basis of written representations received from the Directors
 and taken on record by the Board of Directors, none of the Directors is
 disqualified as on December 31, 2010, 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 3 of our report of even date)
 
 (i) In respect of its Fixed Assets:
 
 (a) The Company has generally maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) According to the information and explanations given to us, the
 fixed assets are being physically verified by the management according
 to a phased programme designed to cover all the items over a period of
 three years, which, in our opinion, is reasonable having regard to the
 size of the Company and the nature of its assets. Pursuant to this
 programme, some of the fixed assets have been physically verified by
 the management during the year, and no material discrepancies were
 noticed on such verification.
 
 (c) The fixed assets disposed off during the year, in our opinion, do
 not constitute a substantial part of the fixed assets of the Company,
 and such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 (ii) In respect of its Inventories:
 
 (a) As explained to us, inventories (other than stocks lying with third
 parties, in respect of which confirmations have been obtained) have
 been physically verified during the year by the management at
 reasonable intervals. In our opinion, the frequency of 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 has maintained proper records of the
 inventories and no material discrepancies were noticed on physical
 verification.
 
 (iii) The Company has not granted or taken loans, secured or unsecured,
 to or from any companies, firms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956.
 Therefore, paragraphs (a) to (g) of Clause 4(iii) are not applicable to
 the Company.
 
 (iv) In our opinion and according to the information and explanations
 given to us, having regard to the explanations that some of the items
 purchased are of special nature and suitable alternative sources are
 not readily available for obtaining comparable quotations, there is an
 adequate internal control system commensurate with the size of the
 Company and the nature of its business with regard to purchases of
 inventory and fixed assets, and the sale of goods and services. During
 the course of our audit, we have not observed any major weakness in
 such internal control system.
 
 (v) 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 explanations given to us:
 
 (a) The particulars of contracts or arrangements referred to in Section
 301 that needed to be entered in the register maintained under the said
 Section have so been 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 lakhs
 in respect of any party during the year, except for transactions where
 the items involved were of a special nature and in the absence of any
 comparable prices available, have been made at prices which are
 reasonable having regard to prevailing market prices at the relevant
 time.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has not accepted deposits from public within
 the meaning of Sections 58A and 58AA or any other relevant provisions
 of the Companies Act, 1956, and the Companies (Acceptance of Deposits)
 Rules, 1975. Accordingly, to the information and explanation given to
 us, no order has been passed by the Company Law Board, National Company
 Law Tribunal, Reserve Bank of India or any Court or any other Tribunal.
 
 (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) We have broadly reviewed the books of account relating to
 materials, labour and other items of cost maintained by the Company
 relating to the manufacture of resins, pursuant to the order made by
 the Central Government for the maintenance of cost records under
 Section 209(1 )(d) of the Companies Act, 1956, and we are of the
 opinion that prima-facie the prescribed accounts and records have been
 made and maintained. We have, however, not made a detailed examination
 of such records with a view to determining whether they are accurate
 and complete. To the best of our knowledge and according to the
 information and explanations given to us, the Central Government has
 not prescribed the maintenance of cost records for any other products
 of the Company.
 
 (ix) According to the information and explanations given to us in
 respect of statutory and other dues:
 
 (a) The Company has been generally regular in depositing undisputed
 statutory dues, including Provident Fund, Investor Education and
 Protection Fund, Employees State Insurance, Income-tax, Sales Tax /
 Value Added Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty,
 Cess and any other material statutory dues applicable to it with the
 appropriate authorities though there have been slight delays in few
 cases in respect of Service Tax and Works Contract Tax.
 
 There are no undisputed amounts payable in respect of Provident Fund,
 Investor Education and Protection Fund, Employees State Insurance,
 Income-tax, Sales Tax / Value Added Tax, Wealth Tax, Service Tax,
 Customs Duty, Excise Duty, Cess and any other material statutory dues
 which were in arrears, as at December 31, 2010, for a period of more
 than six months from the date they became payable.
 
 (b) There are no disputed Wealth Tax, Customs Duty, Service Tax and
 Cess which have not been deposited as on December 31, 2010.
 
 Disputed Income-tax liability of Rs. 0.76 million for the Financial
 Years 1993-94 and 1998-99 pending with the Assessing Officer have not
 been deposited as on December 31, 2010.
 
 Disputed Sales Tax / Value Added Tax liability of Rs. 0.58 million for
 the Financial Years 2003-04 to 2005-06 pending with the Appellate and
 Revisional Board and liability of Rs. 0.54 million for the Financial
 Year 2008-09 pending with the JC (Appellate) VAT have not been
 deposited as on December 31, 2010.
 
 Disputed Central Excise liability of Rs.1.64 million for the period
 1994 to 2010 pending with the Commissioner (Appeals) and liability of
 Rs. 2.11 million for the period 1999 to 2000 pending with the Appellate
 Tribunal have not been deposited as on December 31, 2010.
 
 (x) The Company does not have accumulated losses as at the end of the
 financial year covered by our audit. The Company has not incurred cash
 losses during the financial year covered by our audit and in 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
 banks. The Company has not obtained any borrowings from financial
 institutions and also has not issued any debentures.
 
 (xii) In our opinion and according to the information and explanations
 given to us, the Company has not granted loans and advances on the
 basis of security by way of pledge of shares, debentures and other
 securities.
 
 (xiii) The Company is not a chit fund or a nidhi / mutual benefit fund
 / society. Therefore, the provisions of Clause 4(xiii) of the said
 Order are not applicable to the Company.
 
 (xiv) The Company is not dealing in or trading in shares, securities,
 debentures and other investments. Therefore, the provisions of Clause
 4(xiv) of the said Order are not applicable to the Company.
 
 (xv) In our opinion and according to the information and explanations
 given to us, the Company has given guarantee for a loan taken by its
 subsidiary from a bank. Having regard to the explanation that the
 subsidiary is wholly owned, in our opinion, the terms and conditions of
 the guarantee are not prima-facie prejudicial to the interests of the
 Company.
 
 (xvi) To the best of our knowledge and belief and according to the
 information and explanations given to us, in our opinion, the term
 loans availed by the Company have been applied for the purposes for
 which the loans were obtained.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we report
 that funds raised on short-term basis have, prima-facie, not been used
 during the year for long-term investment.
 
 (xviii) According to the information and explanations given to us,
 during the year, 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.
 
 (xix) According to the information and explanations given to us and the
 records examined by us, no debentures were outstanding during the year.
 
 (xx) According to the information and explanations given to us, there
 has no money been raised by public issues during the year.
 
 (xxi) According to the information and explanations given to us, no
 fraud on or by the Company was noticed or reported during the year.
 
                                         For Deloitte Haskins & Sells
 
                                             Chartered Accountants 
                                          (Registration No. 117366W)
 
                                              Rajesh K. Hiranandani
 Place  :  Mumbai                                   Partner
 Date   :  February 19, 2011                  Membership No. 36920