We have audited the attached Balance Sheet of PARAMOUNT COSMETICS
 (INDIA) LIMITED as at 31st March 2011 and the Profit and Loss Account
 for the year ended on that date annexed there to and Cash Flow
 Statement of the Company for the year ended on that date. 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.
 
 1.  We conducted our audit in accordance with Auditing Standards
 generally accepted in India. These Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material mis-statement. 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
 presentation. We believe that our audit provides reasonable basis for
 our opinion.
 
 2.  As required by the Companies (Auditor’s Report) Order 2003 ( as
 amended ) 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 hereto a statement on the matters specified in
 paragraphs 4 & 5 of the said Order.
 
 3.  Further to our comments in the Annexure referred to in paragraph 2
 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
 those books;
 
 c) The Balance Sheet ,Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the Books of Accounts;
 
 d) In our opinion, the Balance Sheet, the Profit and Loss Account and
 Cash Flow Statement dealt with by this report comply with the mandatory
 Accounting Standards referred in sub section (3C) of Section 211 of the
 Companies Act, 1956;
 
 e) In our opinion, and based on information and expectations given to
 us, none of the Director are disqualified as on 31st March 2011 from
 being appointed as directors 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 explanations given to us, the said accounts read together with the
 Significant Accounting Policies and other notes thereon 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 principle generally accepted in India, subject to :
 
 a) Provision for gratuity for Rs. 4,75,473/- is made for those
 employees who have completed five years of their service (Note 4
 Schedule 20B).
 
 b) Balance of Debtors and Creditors are subject to confirmation &
 reconciliation, any loss on account of these are undeterminable.
 
 c) No provision is made for doubtful debts for Rs.3,69,092/- (Schedule
 8)
 
 d) Non compliance of Accounting Standard 22 for Deferred Tax, deferred
 tax assets are under stated by Rs.9,93,090/- (Note 14 Schedule 20B)
 
 i) In so far as related to the Balance Sheet, of the statement of
 affairs of the company as at 31st March 2011;
 
 ii) In so far as it relates to the Profit & Loss Account, of the Profit
 of Company for the period ended on that date; and
 
 iii) In so far as it relates to the Cash Flow Statement, of the cash
 flows of the Company for the year ended on that 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 on the
 basis of available information.
 
 b.  As explained to us, the fixed assets have been physically verified
 by the management during the year in a phased periodical manner, which
 in our opinion is reasonable, having regard to the size of the Company
 and nature of its assets. No material discrepancies were noticed on
 such physical verification.
 
 c.  In our opinion, the Company has not disposed of substantial part of
 fixed assets during the year and the going concern status of the
 Company is not affected.
 
 2.  In respect of its inventories:
 
 a.  As explained to us, inventories have been physically verified by
 the management at regular intervals during the year, 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.  The Company has maintained proper records of inventories. As
 explained to us, there were no material discrepancies noticed on
 physical verification of inventory as compared to the book records.
 
 3.  In respect of the loans, Secured or Unsecured, granted or taken by
 the Company to/from Companies, firms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956 :
 
 a.  The Company has granted unsecured loans to one company covered in
 the register maintained under section 301 of the Companies Act 1956. In
 respect of the said loan, the maximum amount outstanding at any time
 during the year was Rs. 6,05,602 and the year end balance of such loan
 aggregate to Rs. Nil
 
 b.  In our opinion and according to the information and explanations
 given to us, no interest is charged on the loan and other terms and
 conditions are not prima facie prejudicial to the interest of the
 Company.
 
 c.  In respect of the aforesaid loan, there is no stipulation about the
 repayment hence the clause iii (d) is not applicable. The said Loan
 is repayable on demand and there is no repayment Schedule.
 
 d.  In respect of the Loan given by the Company, the same is repayable
 on demand and therefore the question of overdue amount does not arise.
 
 e.  The Company has taken unsecured loans from three parties covered in
 the register maintained under section 301 of the Act. The maximum
 amount outstanding at any time during the year and the year-end balance
 of such loan aggregate to Rs.2,45,00,000/- and Rs. 2,45,00,000/-
 respectively.
 
 f.  In our opinion and according to the information and explanations
 given to us, the rate of interest, wherever applicable and other
 terms and conditions are not prima facie prejudicial to the interest of
 the Company, there is no stipulation about the repayment of two of
 these loan hence clause (iii) (g) is not applicable.
 
 4.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business for the purchase of inventory, fixed assets and also for the
 sale of goods and services. During the course of our audit, we have not
 observed any major weaknesses in internal controls.
 
 5.  In respect of transactions covered under Section 301 of the
 Companies Act, 1956.
 
 (a) To the best of our knowledge and belief and according to the
 information and explanations given to us, we are of the opinion that
 the particulars of contracts or arrangements that needed to be entered
 into in the register maintained under Section 301 of the Companies
 Act, 1956 have been so entered.
 
 (b) According to the information and explanations given to us, the
 transactions of purchase of goods and materials and sales of goods,
 material and services, made in pursuance to contracts or arrangement
 entered in the registers maintained under Section 301 of the Companies
 Act, 1956 and aggregating during the year to Rs.5,00,000/- (Rupees Five
 lacs only) or more in respect of each party, have been made at prices
 which in our opinion are reasonable having regard to prevailing market
 prices for such goods, materials or services or prices at which similar
 transactions have been made with other parties as the case may be,
 since the purchases/sales are for branded goods, comparative prices are
 not available.
 
 6.  According to the information and explanations given to us, the
 Company has not accepted any deposits from the public.  Therefore, the
 provisions of clause (vi) of paragraph 4 of the Order are not
 applicable to the Company.
 
 7.  In our opinion, the company has an internal audit system
 commensurate with the size and nature of its business.
 
 8.  The Central Government has not prescribed maintenance of Cost
 Records under Section 209(1) (d) of the Companies Act, 1956 in respect
 of certain manufacturing activities of the Company.
 
 9.  In respect of statutory dues:
 
 a. According to the records of the Company, undisputed statutory dues
 including Provident Fund, Investor Education and Protection Fund,
 Employees’ State Insurance dues, Income-Tax, Sales-tax, Wealth Tax,
 Service Tax , Customs Duty, Excise Duty, Cess, FBT and other material
 statutory dues have not been regularly deposited with the appropriate
 authorities. According to the information and explanations given to us,
 Rs. 32,98,673/- undisputed amounts payable in respect of the aforesaid
 dues were outstanding as at 31st March 2011 for a period of more than
 six months from the date of becoming payable, as per Annexure 1.
 
 b.  As at 31st March, 2011 there have been disputed Sales Tax dues
 aggregating to Rs.9,45,277/-, that have not been deposited on account
 of matters pending before appropriate appellate are as under:
 
 Sr. Name of    Nature of the   Amount   Forum where     Period to which
 No. statute    Dues            (Rs.)    dispute is 
                                         pending         the amount
                Sales Tax-                               relates
 
 1   Daman      Sales Tax       95,580   Commissioner 
                                         (Appeals)            92-95
 
 2   Guwahati   - do -        1,23,192   Board of revenue     99-00
 
 3   Guwahati   - do -        1,75,708     - do -             98-99
 
 4   Guwahati   - do -        2,50,797     - do -             97-98
 
 5   Guwahati   - do -        3,00,000     - do -             96-97
 
                              9,45,277
 
 10.  The Company does not have accumulated losses at the end of the
 financial year. The Company has not incurred cash loss during the
 financial year covered by our audit and the immediately preceding
 financial year.
 
 11.  Based on our audit procedures and according to the information and
 explanations given to us, we are of the opinion that the Company has
 not defaulted in repayment of dues to a financial institution or bank
 
 12.  In our opinion and according to the explanations given to us and
 based on the information available, no loans and advances have been
 granted by the Company on the basis of security by way of pledge of
 shares, debentures and other securities.
 
 13.  In our opinion, the Company is not a chit fund or a niche/mutual
 benefit fund/ society. Therefore, clause 4(xiii) of the Companies
 (Auditors’ Report) Order 2003 as amended is not applicable to the
 Company.
 
 14.  The Company has not dealt in or of trading in shares, securities,
 debentures and other investments. Accordingly, the provisions of Clause
 v(xiv) of the Companies (Auditors Report) order, 2003 are not
 applicable to the Company.
 
 15.  The Company has not given guarantees for loans taken by others
 from bank.
 
 16.  As explained to us, the Company has not raised any further
 business loan.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we are of
 the opinion that there are no funds raised on short term basis which
 have been used for long term investment.
 
 18.  During the year, 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.
 
 19.  The Company has not issued any debentures during the year.
 
 20.  The Company has not raised any money by way of public issue during
 the year.
 
 21.  In our opinion and according to the information and explanations
 given to us, no fraud on or by the Company has been noticed or reported
 during the year that causes the financial statements to be materially
 misstated.
 
                                               For R. U. JAIN & CO.
 
                                              Chartered Accountants
 
                                                    R. U. JAIN
 
 Place: Bangalore,                                  Proprietor
 
 Dated: 31st August, 2011                     Membership No. 031037