Thomas Cook (India)

1.  We have audited the attached Balance Sheet of Thomas Cook (India)
 Limited, as at 31st December, 2008, and the related Profit and Loss
 Account and Cash Flow Statement for the year ended on that date annexed
 thereto, which we have signed under reference to this report.  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 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 by the Companies (Auditors Report) (Amendment) Order, 2004
 (together the Order) issued by the Central Government of India in
 terms of sub-section (4A) of Section 227 of The Companies Act, 1956
 of India (the Act) and on the basis of such checks of the books and
 records of the Company as we considered appropriate and according to
 the information and explanations given to us, we give in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the Order.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report that:
 
 (a) The Company has considered Non Compete Fees paid during the
 financial year ended 31st December, 2007 as an allowable expenditure
 for the purpose of computing the provision for tax for the year ended
 31st December, 2007 based on legal opinion (refer note 2(n) on Schedule
 Q);
 
 (b) Subsequent to the Annual General Meeting of the Company held on
 27th June, 2008, the Company has appointed an Executive Director for a
 period of two years with effect from 25th November, 2008 and the
 Company has paid remuneration of Rs. 24.73 lakhs for the period. The
 appointment and remuneration of the ¦ said Executive Director is
 subject to the approval of the members in the general meeting and the
 Central Government of India for which an application has been made
 (refer note 2(o) on Schedule Q);
 
 (c) 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;
 
 (d) 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, and proper returns adequate for the purposes of our audit
 have been received from the Sri Lanka branch not visited by us;
 
 (e) The report on the accounts of the Sri Lanka branch audited by the
 branch auditors has been forwarded to us and the same has been
 appropriately dealt with by us in preparing our report;
 
 (f) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 (g) 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 Act;
 
 (h) On the basis of written representations received from the
 directors, as on 31st December, 2008 and taken on record by the Board
 of Directors none of the directors is disqualified as on 31st December,
 2008 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of the Act;
 
 (i) In our opinion and to the best of our information and according to
 the explanations given to us, read with our comment in paragraph 4 (a)
 and subject to paragraph 4 (b) above, the said financial statements
 together with the notes thereon and attached thereto give in the
 prescribed manner the information required by the Act 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 December, 2008;
 
 (ii) in the case of the Profit and Loss Account, of the profit for the
 year ended on that date; and
 
 (iii) in the case of the 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 the Auditors Report of even date to the
 members of Thomas Cook (India) Limited on the financial statements for
 the year ended 31st December, 2008]
 
 1.  (a) The Company is maintaining proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) Fixed assets have been physically verified by the management during
 the year and no material discrepancies between the book records and the
 physical inventory have been noticed. In our opinion, the frequency of
 verification is reasonable.
 
 (c) In our opinion, a substantial part of fixed assets has not been
 disposed of by the Company during the year.
 
 2.  (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 Act. Accordingly, Clauses (iii)(b) to (iii)(d)
 of paragraph 4 of the Order are not applicable to the Company for the
 current year.
 
 (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 Act. Accordingly, Clauses (iii)(f) and
 (iii)(g) of paragraph 4 of the Order are not applicable to the Company
 for the current year.
 
 3.  In our opinion and according to the information and explanations
 given to us, 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 and for the sale of services. There are no
 purchases of inventory and sale of goods. Further, on the basis of our
 examination of the books and records of the Company, carried out in
 accordance with the auditing standards generally accepted in India and
 according to the information and explanations given to us, we have
 neither come across nor have we been informed of any continuing failure
 to correct major weaknesses in the aforesaid internal control system.
 
 4.  In our opinion and according to the information and explanations
 given to us, there are no contracts or arrangements referred to in
 Section 301 of the Act during the year that need to be entered in the
 register maintained under that section.  Accordingly, clause (v)(b) of
 paragraph 4 of the Order is not applicable to the Company for the
 current year.
 
 5.  The Company has not accepted any deposits from the public within
 the meaning of Sections 58A & 58AA of the Act and the rules framed
 there under.
 
 6.  In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 7.  (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 undisputed statutory dues including provident
 fund, investor education and protection fund, employees state
 insurance, income-tax, wealth tax, service tax, customs duty, cess and
 other material statutory dues as applicable with the appropriate
 authorities in India.
 
 (b) According to the information and explanations given to us and the
 records of the Company examined by us, there are no dues of wealth tax,
 customs duty and cess which have not been deposited on account of any
 dispute.  The particulars of dues of income-tax and service tax as at
 31st December, 2008 which have not been deposited on account of a
 dispute, are as follows 
 
 Name of the statute        Nature of dues               Amount
                                                         Rupees
 
 Income-tax Act, 1961       Income-tax on certain        46,922,228
                            disallowances
 
 Income-tax Act, 1961       Income-tax on certain        11,907,676
                            disallowances
 
 Income-tax Act, 1961       Income-tax on certain        930,793
                            disallowances
 
 Service Tax Rules, 1994    Service Tax                  98,200,280
 
 Year to which the                Forum where the
 amount relates                   dispute is pending
 
 Assessment year 1994-95 and      Income Tax Appellate
 1996-1997                        Tribunal
 
 Assessment year 2005-06          Assistant Commissioner of
                                  Income Tax
 
 Assessment year 2005-06          Commissioner of Income
                                  Tax Appeal
 
 Financial Year 2003 to 2008      Various Levels from
                                  Commissioner to  Deputy
                                  Commissioner Service Tax
 
 8.  The Company has no accumulated losses as at 31st December, 2008 and
 has not incurred any cash losses in the financial year ended on that
 date or in the immediately preceding financial year.
 
 9.  According to the records of the Company examined by us and the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to any financial institution or bank or debenture
 holder.
 
 10.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 11.  The provisions of any special statute applicable to chit fund/
 nidhi/ mutual benefit fund/ societies are not applicable to the
 Company.
 
 12.  In our opinion and according to the information and explanations
 given to us, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 13.  In our opinion and according to the information and explanations
 given to us, the terms and conditions of a guarantee given by the
 Company, for the credit facilities extended by a bank to a wholly owned
 foreign subsidiary company during the year, are not prejudicial to the
 interest of the Company.
 
 14.  In our opinion, the Company has not obtained any term loans that
 were not applied for the purposes for which these were raised.
 
 15.  According to the information and explanations given to us and on
 overall examination of the balance sheet of the Company, we report that
 the Company has used funds aggregating to Rs. 519,213,848 raised on
 short-term basis for long-term investment.
 
 16.  The Company has not made any preferential allotment of shares to
 parties and companies covered in the register maintained under Section
 301 of the Act during the year.
 
 17.  The Company has not issued any debentures.
 
 18.  During the year, the Company opened the rights issue of equity
 shares which opened on 31st December, 2008 and closed on 14th January,
 2009. Since the issue was open as on 31st December, 2008, no disclosure
 regarding utilisation of the proceeds has been made.
 
 19.  During the course of our examination of the books and records of
 the Company, carried out in accordance with the auditing standards
 generally accepted in India, we have neither come across any instance
 of fraud by the Company, noticed or reported during the period, nor
 have we been informed of such case by the management. Frauds on the
 Company through misappropriation of assets aggregating to Rs. 7,251,682
 by employees of the Company and other parties, were noticed and
 reported. The management has since recovered Rs. 4,047,146 of the total
 amount (refer note 2(t) on Schedule Q).
 
 20. According to the information and explanations given to us and
 taking into consideration the nature of business of the Company, the
 matters specified in Clauses (ii) and (viii) of paragraph 4 of the
 Order are not applicable to the Company.
 
                                                    SHARMILA A. KARVE
                                                              Partner
                                                 Membership No. 43229
 
                                                 For and on behalf of
                                                     LOVELOCK & LEWES
                                                Chartered Accountants
 
 Mumbai, 27th February, 2009