AVON CORPORATION LIMITED ANNUAL REPORT 2011-2012 AUDITORS' REPORT To, The Members. AVON CORPORATION LTD. We have audited the attached Balance Sheet of AVON CORPORATION LTD as on 31st March, 2012 together with Profit & Loss Account and the Cash Flow Statement for the year ended that date annexed thereto. 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. We have 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 misstatements. 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. As required by the Companies (Auditor's Report) Order, 2003 ('the Order') issued by the Central Government of India in terms of sub-section (4A) of section 227 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 set out in the Annexure a statement on the matters specified in the paragraphs 4 and 5 of the said order. Further to our comments in the Annexure referred to in paragraph 3 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 purposes of our audit; b. In our opinion, the Company has kept proper books of accounts as required by Law, 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 account; d. 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, to the extent applicable. e. On the basis of the written representations received from Directors of the Companies, as on 31st March, 2012 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2012 from being appointed as a director in the terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; and f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the notes thereon given 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: 1. In the case of Balance Sheet, of the State of Affairs of the Company as on 31st March, 2012; 2. In the case of Profit And Loss Account, of the Profit of the Company for the year ended on that date; and 3. In the case of Cash Flow Statement, of the cash flows for the year ended on that date. For ATUL. B.SHAH & CO. (Chartered Accountants) Registration No. 130818W Sd/- Atul Shah (Proprietor) Membership No. 033137 Place: Mumbai. Date : 14/8/2012 ANNEXURE TO AUDITOR'S REPORT Referred to in paragraph 3 of our report of even date on the accounts for the year ended 31st March, 2012 of Avon Corporation Limited. 1.(a) The Company has maintained proper records showing full particulars including quantitative details and location of fixed assets. (b) The Company has a program for phased physical verification of all its fixed assets which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were noticed on such verification. (c) The company has not disposed off any substantial part of fixed assets during the year. 2.(a) As explained to us, the physical verification of the inventory has been conducted by the management at reasonable intervals during the year. (b) In our opinion and according to the information and explanations given to us, the procedures for physical verification of inventories followed by the management are reasonable and adequate in relation to size of the Company and the nature of its business. (c) The Company is maintaining proper records of inventory. The discrepancies noticed during physical verification of inventories as compared to book records were not material having regard to the size of the operations of the Company and have been dealt with in the books of account. 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) Based on the information received and the explanation given, the rate of interest and the terms and condition of loan taken is prima facie not prejudicial to the interest of the Company. (b) Based on the information received and the explanation given to us, the repayment of principal amount is generally regular. (c) Based on the information received and the explanation given to us, there is no overdue repayment of principal amount. 4. In our opinion, and according to the information and explanations given to us, there exists adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of trading goods, raw materials Including components, packing materials, plant and machinery, equipment and other assets and with regard to sale of goods and service. During the course of audit, we have not observed any continuing failure to correct major weakness in the internal controls. 5.(a) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements that need to be entered in to the register maintained under Section 301 of the Companies Act, 1956, for the year have been so entered, (b) There is no transaction of loan given to the party covered in the Register Maintained Under Section 301 of the Companies Act, 1956. 6. The company has accepted Fixed Deposits of Twenty Crores from the public, the directives issued by Reserve Bank of India and the provisions of Section 58A and 58AA of the Companies Act, 1956 and rules framed thereunder are applicable. We are informed that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal. 7. In our opinion, the company has an internal audit system commensurate with the size & nature of it's business. 8. To the best of our knowledge and as explained, the Central Government has not Prescribed the maintenance of cost records under Clause (d) of sub- section (1) of section 209 of the Companies Act, 1956. 9. In our opinion and according to the information and explanations given to us the company is regular in depositing undisputed statutory dues including Provident Fund, Employees' State Insurance, Service tax, Custom Duty, Excise Duty, cess and any other statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March 2011 for a period of more than six months from the date they became payable. (Annexure Enclosed) 10. The Company does not have any accumulated losses at the end of the financial year. The Company has not k incurred cash losses during the financial year covered by our audit and in the immediately preceding financial f year. 11. As per the information and explanations given to us by the management as at the balance sheet date, the Company has defaulted in repayment of dues to banks and financial institutions. 12. In our opinion and according to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. The Company is not a Chit Fund or a nidhi / mutual benefit fund /society. Therefore, the provisions of clause 4 (xiii) of the Companies Order are not applicable to the Company. 14. As the Company is not dealing or trading in shares, securities, debentures, and other investments, the provision of clause 4 (xiv)ofthe Companies (Auditor's Report) Order, 2003 is not applicable to the company. 15. As per the information and explanation given to us, the Company has not given any guarantee for loans taken from financial institutions and/or banks by others. 16. Based on information and explanation by the management. Term Loans were applied for the purpose for which the loans were obtained. 17. In our opinion and according to the information and explanations given to us, and on overall examination of the balance Sheet and the Cash flow of the Company, we report that no funds raised on short-term basis have been used for long-term investments 18. According to the information and explanations given to us, 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. Accordingly clause 4 (xix) of the Companies (Auditor's Report) Order, 2003 is not applicable to the Company. 20. The Company did not raised any funds through a public issue during the year. 21. On the basis of our examination and according to the information and explanations given to us, no fraud on or by the Company, has been noticed or reported during the course of our audit. For ATUL. B.SHAH & CO. (Chartered Accountants) Registration No. 130818W Sd/- Atul Shah (Proprietor) Membership No. 033137 Place: Mumbai. Date : 14/8/2012 Appendix-I Details of Statutory dues which have not been deposited on account. Name of the Statue Amount Period to which in Rs. the amount relates ESIC 52,002 F.Y 2011-12 PF 349,797 F.Y 2011-12 PT 54,635 F.Y 2011-12 TPS 3,249,995 F.Y 2011-12 * Sales Tax 71,278,108 From F.Y 2007-08 to 10-11 Note: a) * Sales Tax Dept has demanded the above mentioned amount for the Financial Years Company has not disputed the liability. b) Income tax Dept. has sent demands for F.Y 2005-06 to 2009-10. The Company has not agreed for the same. c) Some Debtors, Loans, Advances are outstanding since long period according to management the same as good & no provision is required to the made in accounts. d) Confirmation of balance for debtors & creditors are to be received.