PACIFIC COTSPIN LIMITED ANNUAL REPORT 2006-2007 AUDITORS' REPORT To The Members of Pacific Cotspin Limited 1. We have audited the attached balance sheet of Pacific Cotspin Limited as at 31st March 2007, the profit & loss account and also the cash flow statement for the year ended on 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. 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 lest 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 (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 statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. 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 & loss account and cash flow statement dealt with by this report are in agreement with the books of account; (iv) In our opinion, the balance sheet, profit & loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 2t I of the Companies Act, 1956; (v) On the basis of written representation received from the directors, as on 31st March 2007 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2007 from being appointed as a director in terms of clause (g) of sub-section (I) 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, the said accounts together with Holes 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 principles generally accepted in India: (a) In the case of the balance sheet, of the state of affairs of the company as at 31st March 2007; (b) In the case of the profit and loss account, of the profit for the year ended on that date; and (c) In the case of the cash flow statement, of the cash flows for the year ended on that date. For AGARWAL & MODI Chartered Accountants (Shankar BajaJ) Place: Kolkata Partner Date : 1st September, 2007 Membership No.: 60223 ANNEXURE TO AUDITORS' REPORT (Referred to in Paragraph 3 of our report of even date) (i)(a)The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b)All of the fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its fixed assets. No material discrepancies were noticed on such verification, (c) During the year, there is no substantial disposal of fixed assets which would affect the going status of the company. (ii) (a) The inventory has been physically verified during the year by the management, in our opinion, the frequency of verification is reasonable. (b) The procedures of physical verification of inventories followed by the management arc reasonable and adequate in relation to the size of the company and the nature of its business. (c) The company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stock and the book records were not material. (iii) (a) The company has not granted any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 30 i of the Companies Act, 1956. (b) In view of clause (iii) (a), clause (iii) (b) is not applicable. (c) In view of clause (iii) (a), clause (iii)