AUDITORS REPORT To the Members of: 20th Century Finance Corporation Limited We have audited the attached Balance Sheet of 20th Century Finance Corporation Limited as at 31st December, 1997 and also the annexed Profit and Loss Accounts of the Company for the year ended on that date and report that: 1. 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; 2. 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 the books; 3. The Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books of account; 4. In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to Note No. 15(i) regarding amount utilised from the Contingency Reserve amounting to Rs.791.97 lacs, Note No. 15(i) regarding excess provision for depreciation of Rs. 1881.78 lacs and Note No. 5(iii) regarding non provision of depreciation. Rs.873.90 lacs on Non Performing (NPA) on the grounds of non accrual of income and the consequent impact on the profits of the year and the other notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view: (a) in the case of the Balance Sheet of the state of affairs of the Company as at 31st December, 1997; and (b) in the case of Profit and Loss Account of the profit of the Company for the year ended 31st December, 1997. 5. As required by the Manufacturing and Other Companies (Auditor's Report) Order, 1988 issued by the Company Law Board in terms of Section 227 (4A) of the Companies Act, 1956 and on the basis of such checks as we considered appropriate and according to the information and explanations given to us we further report on the matters specified in paragraphs 4 and 5 of the said Order that: (i) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. The fixed assets other than the assets given on lease have been physically verified by the management during the year and no material discrepancies have been noticed on such verification as compared with the records of fixed assets maintained by the Company. In respect of assets given on lease, confirmations are being obtained from the Lessees. (ii) None of the fixed assets have been revalued during the year. (iii) The Company has taken loans from companies listed in the register maintained under Section 301 and/or from companies under the same management as defined under sub-section (1B) of Section 370 of the Companies Act, 1956. The rate of interest and the other terms and conditions of such loans are prima facie not prejudicial to the interest of the Company. (iv) The Company has granted unsecured loans to companies listed in the register maintained under Section 301 of the Companies Act 1956, and/or companies under the same management as defined under sub-section (1B) of Section 370 of the Companies Act, 1956. The rate of interest and the other terms and conditions of such loans are prima facie not prejudicial to the interest of the Company. (v) Loans and advances have been given to employees and other parties who are repaying the principal amount as stipulated and are also regular in payment of interest where applicable. In other cases, where the repayment has not been stipulated reasonable steps are being taken by the Company for recovery of the amounts. (vi) 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 with regard to purchases of plant and machinery, equipment and other assets. (vii) There are no transactions for providing consultancy services made by the Company in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956, aggregating during the year to Rs.50,000/- or more in respect of each party. (viii) In our opinion and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and the provisions of Section 58A of the Companies Act, 1956 with regard to the deposits accepted from the public. (ix) In our opinion, the Company has internal system commensurate with the size and nature its business. (x) According to the records of the Company, the Provident Fund and Employees Insurance dues have bean regularly deposited, during the year with the appropriate authorities. (xii) On the basis of our examination of (i) the books of account, (ii) other records and (iii) the explanations gives to us on our enquiries, no personal expenses other than expenses under service contract obligation with the Company's employees and/or accepted business practices have been charged to revenue account. xiii) In respect of consultancy services rendered, the Company has a reasonable system of allocating manhours utilised to the relative jobs, commensurate with the size and nature of its business. (xiv) In our opinion, adequate documents and records are maintained by the Company for loans and advances granted on the basis of security by way of pledge of shares, debentures and other securities. (xv) We are informed that the provisions of any special statute applicable to Chit Funds, Nidhi or Mutual Benefit Society do not apply to the Company. (xvi) The Company has maintained proper records of transactions and contracts in respect of trading in shares, debentures and other securities and that timely entries have been made therein. All shares, debentures and other securities have been held by the Company in its own name except to the extent of the exemption granted under Section 49 of the Companies Act, 1956, and save for certain other shares as detailed in schedule of investments. As per the information and explanations given to us and taking into consideration the nature of business of the Company Clauses (iii), (iv), (v), (vi), (xii), (xiv) and (xx) of the Paragraph 4 (B) and Clauses (ii) and (iv) of Paragraph 4(B) of the Manufacturing and other Companies (Auditor's Report) 1988 are not applicable. For Lakhani & Co. Chartered Accountants D. V. Lakhani Partner Place : Mumbai Date : April 29, 1998