Prime Focus

1.  We have audited the attached balance sheet of Prime Focus Limited
 (the Company) as at March 31, 2009 and also the profit and loss
 account and the cash flow statement for the year ended March 31, 2009
 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 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 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 (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 a statement on the matters specified in paragraphs 4
 and 5 of the said Order.
 
 4.  Without qualifying our opinion, we draw attention to Note 18(e) on
 Schedule 17. The Company had in the previous year issued Foreign
 Currency Convertible Bonds (FCCB) aggregating to USD 55 million.
 Subsequent to year-end, the Company has received a letter from the
 Reserve Bank of India CRBI) stating that it is not an eligible
 borrower to issue the Foreign Currency Convertible Bonds under External
 Commercial Borrowings (ECB) guidelines. The Company has obtained legal
 opinion confirming its eligibility and is in process of filing for
 compounding application with the RBI for the above mentioned matter and
 resultant compliances. The ultimate outcome of the matter cannot
 presently be determined, and no provision for any liability that may
 result has been made in the financial statements.
 
 5.  As more fully described in Note 18 to Schedule 17 to the financial
 statements, the Company has not revalued the FCCB of USD 55 million at
 the exchange rate prevailing as at March 31, 2009 and March 31, 2008,
 which in our opinion is not in accordance with Accounting Standard 11
 The Effects of Changes in Foreign Exchange Rates and not provided for
 the premium payable on redemption of these FCCB. Had the Company
 revalued the bonds as at March 31, 2009, the profit for the year ended
 March 31, 2009 and the reserves as at that date would have been lower
 by Rs. 208.3 million and Rs. 219.0 million respectively and Foreign
 Currency Monetary Item Translation Difference account would have been
 Rs. 416.7 million. Further, had the Company provided for the premium on
 redemption, the securities premium as at March 31, 2009 would have been
 lower by Rs. 269.1 million. Consequent to the above, the FCCB balance
 at March 31, 2009 would have been higher by Rs. 904.8 million.
 
 6.  Further to our comments in the Annexure referred to 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 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 appears 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 agreement with the books of account;
 
 iv. Subject to our comment in paragraph 5 above, 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 211 of the Companies Act, 1956;
 
 v. 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 on
 March 31, 2009 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956;
 
 vi. In our opinion and to the best of our information and according to
 the explanations given to us, subject to our comments in paragraph 5
 above, 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 March 31, 2009;
 
 b) in the case of the profit and loss account, of the profit for the
 year ended March 31, 2009; and
 
 c) in the case of cash flow statement, of the cash flows for the year
 ended March 31, 2009.
 
 Annexure referred to in paragraph [3] of our report of even date
 
 Re: Prime Focus Limited
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) All fixed assets have not been physically verified by the
 management during the year but there is a regular programme of
 verification. Accordingly, certain fixed assets have been physically
 verified by the management during the year. As informed, no material
 discrepancies were noticed on such verification.
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) The Company does not have any inventory. Accordingly, the
 provisions of clause 4(ii) (b) and (c) of the Companies (Auditors
 Report) Order, 2003 (as amended) OCARO) are not applicable to the
 Company.
 
 (iii) As informed, the Company has neither granted nor taken any loans,
 secured or unsecured to/from companies, firms or other parties covered
 in the register maintained under section 301 of the Companies Act, 1956
 (the Act). Accordingly clauses 4(iii) (b), (c), (d), (f) and (g) of
 CARO are not applicable to the Company.
 
 (iv) In our opinion and according to the information and explanations
 given to us, having regard to the fact that major purchase of fixed
 assets is of specialized equipments, there is an adequate internal
 control system commensurate with the size of the Company and the nature
 of its business, for the purchase of fixed assets.  During the course
 of our audit, no major weakness has been noticed in the internal
 control system in respect of these areas. However, the internal control
 system for the sale of film related services is inadequate since the
 Company does not have formal documentation with customers in few cases,
 which is an industry issue per management.
 
 (v) According to the information and explanations provided by the
 management, there are no contracts or arrangements referred to in
 Section 301 of the Act that need to be entered into the register
 maintained under Section 301 of the Act.
 
 (vi) The Company has not accepted any deposits from the public.
 
 (vii) The Company has an internal audit system, the scope and coverage
 of which, in our opinion requires to be enlarged to be commensurate
 with the size and nature of its business.
 
 (viii) To the best of our knowledge and as explained, the Central
 Government has not prescribed maintenance of cost records under clause
 (d) of sub-section (1) of section 209 of the Act for the services of
 the Company.
 
 (ix) (a) Undisputed statutory dues including provident fund, investor
 education and protection fund, or employees state insurance,
 income-tax, sales-tax, wealth-tax, service tax customs duty, cess have
 generally been regularly deposited with the appropriate authorities
 though there has been slight delay in a few cases. The provisions
 relating to excise duty are not applicable to the Company.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of provident fund, investor
 education and protection fund, employees state insurance, income-tax,
 wealth-tax, service tax, sales-tax, customs duty, cess and other
 undisputed statutory dues were outstanding, at the year end, for a
 period of more than six months from the date they became payable.  The
 provisions relating to excise duty are not applicable to the Company.
 
 (c) According to the records of the Company, there are no dues
 outstanding of income-tax, sales-tax, wealth-tax, service tax, customs
 duty and cess on account of any dispute. The provisions relating to
 excise duty are not applicable to the Company.
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in the current and immediately
 preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to a financial
 institution, bank or debenture holders.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced 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) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society. Therefore, the provisions of clause
 4(xiii) of CARO are not applicable to the Company.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly, the
 provisions of clause 4(xiv) of the CARO are not applicable to the
 Company.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from bank
 or financial institutions.
 
 (xvi) Based on information and explanations given to us by the
 management, term loans were applied for the purpose 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 no funds raised on short-term basis have been used for long-term
 investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties or companies covered in the register maintained under
 section 301 of the Act.
 
 (xix) The Company has unsecured debentures outstanding during the year
 on which no security or charge is required to be created.
 
 (xx) The Company has not raised money by public issues during the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the course of our audit.
 
 For S. R. BATLIBOI & ASSOCIATES
 
 Chartered Accountants
 
 per Govind Ahuja
 
 Partner
 
 Membership No.: 48966
 
 Place : Mumbai
 
 Date : June 30, 2009