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GOF AUDIT MANUAL

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28 pages
6 AUDITORS‟ REPORT M/s AROCKIASAMY & RAJ No.13/7, South Boag Road, Chartered Accountants T „Nagar , Chennai - 600017 Phone: 044-65381661, 24340415 24340416, Mobile:9444035374 Email: anaga_in@yahoo.co.uk TO MEMBERS OF GROWING OPPORTUNITY FINANCE (INDIA) PRIVATE LIMITED. We have audited the attached Balance Sheet of Growing Opportunity Finance (India) Private Limited as at March 31, 2010 and also the Income and Expenditure Account and the 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 company‟s management. Our responsibility is to express an opinion on these financial statements based on our audit. 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 as to whether the financial statements are free of material misstatement. Audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. Audit also includes assessing the accounting principles used, accounting standards applied and significant estimates made by management, besides evaluating the overall financial statement presentation. We believe that our audit provides reasonable basis for our opinion and we report that: 1. As required by the Companies (Auditors‟ Report) Order, 2003 issued ...
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6 AUDITORS‟ REPORT M/s AROCKIASAMY & RAJ Chartered Accountants
No.13/7, South Boag Road, T „Nagar, Chennai - 600017 Phone: 044-65381661, 24340415 24340416, Mobile:9444035374 Email: anaga_in@yahoo.co.uk
 
TO MEMBERS OF GROWING OPPORTUNITY FINANCE (INDIA) PRIVATE LIMITED. We have audited the attached Balance Sheet of Growing Opportunity Finance (India) Private Limited as at March 31, 2010 and also the Income and Expenditure Account and the 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 cmanagement. Our responsibility is to expressompany‟s an opinion on these financial statements based on our audit. 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 as to whether the financial statements are free of material misstatement. Audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. Audit also includes assessing the accounting principles used, accounting standards applied and significant estimates made by management, besides evaluating the overall financial statement presentation. We believe that our audit provides reasonable basis for our opinion and we report that: 1. As required by the Companies (Auditors‟ Report) Order, 2003 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 considered appropriate and according to the information and explanation given to us, we state in our annexure, a statement of matters specified in paragraphs 4 & 5 of the said Order. 2. Further to our comments in the Annexure referred 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) by law have been kept by the Company, soIn our opinion, proper books of accounts as required far as it appears from our examination of the books maintained by the Company ; c) Expenditure Account and Cash Flow Statement dealt with by thisThe Balance Sheet, Income & report are in agreement with the books of account ; d) Expenditure Account and Cash Flow Statement,In our opinion, the Balance Sheet, Income & comply with the accounting standards referred to in sub -section 3 (C) of Section 211 of the Companies Act, 1956; e) On the basis of the written representations received from the directors ; as on March 31, 2010 and taken on record by the Board of Directors, we report that none of the directors are disqualified as at March 31, 2010 from being appointed as director in the company in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act,1956 ; f) Without qualifying our opinion, We draw attention to the fact that:
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During the year, the company has changed its accounting policy to amortize the proc essing fees paid on borrowed loans from lenders. As a result of this change, the income increase d by Rs.599,912. g) In our opinion and to the best of our information and according to the explanations given to us, the said Balance Sheet, Income & Expenditure Account and Cash Flow Statement read together with Notes on Accounts attached thereto, 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: I.  31In the case of the Balance Sheet, of the state of affairs of the Company as atst March 2010; II. Expenditure Account, of the profit of the Company for the yearIn the case of the Income & 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. For M/s AROCKIASAMY & RAJ Chartered Accountants  Sd/-(A. NAGARAJAN) Partner (M.No 20680)
Place: Chennai Date: 15 June 2010
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7 ANNEXURE TO THE AUDITORS‟ REPORT M/s AROCKIASAMY & RAJ Chartered Accountants
No.13/7, South Boag Road, T „Nagar , Chennai- 600017 Phone: 044-65381661, 24340415 24340416, Mobile:9444035374 Email: anaga_in@yahoo.co.uk
 
REFERRED TO IN OUR REPORT OF EVEN DATE TO THE MEMBERS OF GROWING OPPORTUNITY FINANCE (INDIA) PRIVATE LIMITED [Pursuant to the Companies (Auditor‟s Report) Order, 2003] In respect of items stated in Paragraph 4 of the Order: 1. proper records to show full particulars includingThe Company has maintained  details quantitative and situation of its fixed assets. 2. The Fixed Assets have been physically verified by the management and no discrepancies were noticed on such verification. 3. The Company has not disposed any fixed assets during the year. 4. loan secured or unsecured to companies, firms or other partiesThe Company has not granted any listed in the register required to be maintained under Section 301 of the Companies Act, 1956. 5. The Company has availed from Dia-Vikas Capital Pvt. Ltd, a company (majority owned & controlled by Opportunity International Austra lia (OIA), a subordinated loan of Rs.4 Crores at 9% per annum and repayable over a term period of 60 months. The maximum amount involved during the year and the year end balance of such loan is Rs. 4 Crores. 6. In our opinion and according to the information and explanation given to us, the terms and conditions of such loan are not prima facie prejudicial to the interest of the Company and there is no overdue amount in respect of the aforesaid loan . 7.  given to us, the Company has ationsIn our opinion and according to the information and explan adequate internal control systems commensurate with the size and nature of its business. 8.  hereAccording to the information and explanations given to us, t are no contracts or arrangements referred to in Section 301 of the Act that need to be entered in the register required to be maintained under that section. 9. The Company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Act and the rules framed there under . 10. The Company has an internal audit system which in our opinion is commensurate with the size and nature of its business. 11. has been regular in depositing statutory dues with appropriate authorities. As onThe Company the last date of the financial year there are no dues outstan ding for more than six months. 12. According to the information and explanations given to us, there were no disputed amounts payable in respect of Income Tax, Sales Tax, and Custom Duty which were outstanding as at March 31, 2010 for a period more than six months from the date they become payable.
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13. The Company has accumulated a loss of Rs.586,859/- (Previous year Rs.878,770/-) at the end of the fourth year of its operation. The Company has not incurred cash loss during the fourth financial year, covered by our audit. 14. The Company has availed loans from Standard Chartered Bank, HDFC Bank, AXIS Bank, ING-VYSYA Bank, MAANAVAYEEA Holdings & Investments Pvt. Ltd; and SIDBI against hypothecation of book debts and there has been no default in respect of repayment of prin cipal or interest. 15. The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities. 16. The Company does not deal or trade in shares, debentures, or other investments. 17. taken by others from bank or financialThe Company has not given any guarantee for loans institutions. 18. The Company has applied the term loans for the purpose for which it has been raised. 19. The Company is in the business  term ortof providing micro finance, which involves provision of sh loans up to a maximum period of 12 months. Most of the funds raised for these purposes are short and medium term and are rotated in the business until they become due for payment. The details of the payments in respect of the borrowings falling du e within the next one year are reported in the financial statements. 20. not made any preferential allotment of shares to companies covered in theThe Company has register maintained under Section 301 of the Act. 21. has not issued any debenture during the year.The Company 22. The Company, during the year has not raised any money through public issue of shares. 23. Other clauses of the order are not applicable to the Company. For M/s AROCKIASAMY & RAJ Chartered Accountants  Sd/-(A. NAGARAJAN) Partner (M.No 20680)
Place: Chennai Date: 15 June 2010
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 8  TOAUDITORS REPORTMEMBERS PURSUANT TO NBFC (RESERVE BANK OF INDIA) DIRECTIONS 1998 M/s AROCKIASAMY & RAJ No.13/7, South Boag Road, Chartered AccountantsT „Nagar , Chennai- 600017 Phone: 044-65381661, 24340415 24340416, Mobile:9444035374 Email: anaga_in@yahoo.co.uk
 
We have audited the attached Balance Sheet ofGROWING OPPORTUNITY FINANCE (India) PRIVATE LIMITEDas at March 31, 2010 and the Income & Expenditure Account for the year ended on that date annexed thereto and report that: Further to our audit report of even date issued under Section 227(2) of the Companies Act, 1956, and as required by the Non-Banking Financial Companies Auditor‟s Report (Reserve Bank Directions 1998), and based on the information and explanations given to us and the records produced, we state below a statement on matters specified in paragraph 3 of the said Directions. IN THE CASE OF ALL NON-BANKING FINANCIAL COMPANIES (PARAGRAPH 3(A) OF THE ORDER): The Company has obtained a Certificate of Registration as Non-Banking Financial Company vide Certificate No.N-07.00757 dated November 8, 2006, pursuant to Section 451A of the Reserve Bank of India Act, 1934(2 of 1934). IN THE CASE OF NON-BANKING FINANCIAL COMPANY NOT ACCEPTING PUBLIC DEPOSITS (PARAG RAPH 3(C) OF THE ORDER): The Board of Directors has passed a resolution in the meeting held on 6TH 2009 in respect of non- April acceptance of any public deposits. The Company has not accepted any Public Deposits during the period under review. The Company has complied with the Prudential Norms relating to income recognition, assets classification, accounting standards and adoption of a prudent policy on provisioning for bad and doubtful debts, during the period ended March 31, 20 10. The Company has also followed the Capital Adequacy Norms. The Accounting Policies followed by the Company in respect of the same are reported in the notes forming part of accounts.  
Place: Chennai Date: 15 June 2010  
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For M/s AROCKIASAMY & RAJ Chartered Accountants  Sd/-(A. NAGARAJAN) Partner (M.No 20680)
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9 BALANCE SHEET AS ON 31STMARCH 2010  1st March '10 BALANCE SHEET AS AT Ref 3(in Rupees) 31(isnt  RMuaprcehe s')0  9 LIABILITIES   SHAREHOLDERS FUNDS   Share Capital 1.1 166,190,240 89,661,240 RESERVES & SURPLUS   Capital Reserve 1.2.1 2,308,591 2,873,874 Statutory Reserve 1.2.2 1,590,824 874,184 LOAN FUNDS   Secured Loans 1.3 , ,927 146,399,898 246 031 Unsecured Loan 1.3.1 40,000,000 30,000,000 Deferred Tax Liability 346,237 513,052 TOTAL 456,467,819 270,322,248 ASSETS   FIXED ASSETS(At cost less depreciation) 1.4 12,184,911 9,146,538 _ INVESTMENTS 500,000 CU ANS & ADVANCES :  RRENT ASSETS, LO - LOANS & ADVANCES   Micro Loans 1.5 270,955,019 209,969,268   CURRENT ASSETS  Interest receivable on Loans 2,952,564 1,827,403 Cash and Bank Balances 1.6.1 169,197,393 46,409,809 Advances recoverable and other current assets 1.6.2 10,648,216 5,702,178  ,753,1 263,908,658  453 92 LESS: CURRENT LIABILITES AND PROVISIONS   a) Current Liabilities 1.7.1 5,354,394 2,872,155 b)  2,216,866 6,865,640Provisions 1.7.2 NET CURRENT ASSETS  441,533,158 258,819,637     Misc. Exp: to the extent not written off 1,662,891 1,477,303 Profit & Loss Account 586,859 878,770 TOTAL 456,467,819 270,322,248 Note: Contingent Liabilities - Nil Significant accounting policies & notes to accounts For Growing Opportunity Finance (India) Pvt.Ltd As per our report of even date forM/s. Arockiasamy & Raj Chartered Accountants Sd/-A. Nagarajan, Partner (M.No 20680)
 Chennai Sd/- Sd/-15 June 2010 Managing Director Director  
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 10 INCOME & EXPENDITURE ACCOUNT FOR THE PERIOD ENDING 31STMARCH 2010 INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR Ref 31st March '10 31st March '09 ENDED (in Rupees) (in Rupees) INCOME2.1  Income from operations 92,601,882 52,602,657   Bank Interest 1,162,924 460,770   Other Income 707,909 459,522   TOTAL 94,472,715 53,522,949  EXPENDITURE2.2  Salaries, Allowances and Benefits to Staff 2.2.1 35,755,974 22,343,145  Other Operating Expenses 2.2.3 14,526 879 9,387,361 , 31, 14,204,465  Interest on Bank/Other Loans 2.2.2 044,252  Bad Debts Written off 5,845,499 770,681   Non Cash Charges    Preliminary Expenses Written off 314,412 185,150   Provision for Doubtful Debts 1,489,164 1,291,824   Depreciation 1,913,334 1,088,407    49,271,033TOTAL 90,889,514   Profit ss Before Tax 3,583,201 4,251,916 /(Lo )  Less:Current Tax 345,226 1,108,945   Deferred Tax (166,815) 513,052  Fringe _ 23, Benefit tax 031    2,641,071 3,370,607Profit/(Loss) After Tax    2,641,071Net Operating Surplus / (Deficit) 3,370,607  APPROPRIATIONS    Transfer to Statutory Reserve (20%) 716,640 850,383   Preference Dividend 1,632,520 219,160    2,301,064 291,911Profit/(Loss) for the current year  Add : Balance brought forward from previous year (878,770) (3,179,834)  Loss Carried over to Balance Sheet(586,859) (878,770) Significant accounting policies & notes to accounts For Growing Opportunity Finance (India) Pvt.Ltd As per our report of even date forM/s. Arockiasamy & Raj Chartered Accountants Sd/-   Chennai Sd/- Sd/- A. Nagarajan, 15 June 2010 Managing Director Director Partner (M.No 20680) GOF-Annual Report - Mar 10 Page 30
    
 11 CASH FLOW STATEMENT 31st Mar 2010 31st Mar 2009 CASH FLOW STATEMENT Rupees in thousands Cash inflow from operating activities Interest & Fees 91,477 51,238 Bank Interest & Others 649 296 4 A 92,126 51,53 LESS: Cash outflow from operating activities Payments to Employees 34,245 21,351 Other Operating expenses(net) 10,164 20,630  Interest on Bank Loans 30,247 13,206 B 85,122 44,721 Net cash flow from operating activities A-B = C 7,004 6,813 Increase/Decrease in Operating Assets Net increase in Micro Loans 60,593 154,135 Short-term Advances 4,114 2,297 Net Cash outflow from Operating Assets D 64,707 156,432 Net Cash outflow from Operating Activity/Assets D-C = E 57,703 149,619 Cash flow from Investing Activities Purchase of Fixed Assets 4,952 3,731 Preliminary Expenses 500 915 Cash Outflow from Investing Activities F 5,452 4,646 Cash flows from financing activities(G) Share Capital 76,529 40,813 Dividend Paid (219) _ Bank Loansless 134,817Repayments 109,632  Net Cash from financing activities G 185,942 175,630 Net flows in Cash/Cash equivalents G 122,787 21,365(E+F) = H Cash & cash equivalents at the beginning of year 46,410 25,045 Cash & cash equivalents at the end of year 169,197 46,410   For Growing Opportunity Finance (India) Pvt.Ltd As per our report of even date forM/s. Arockiasamy & Raj Chartered Accountants   Sd/- Chennai Sd/- Sd/- A. Nagarajan, 15 June 2010 Managing Director Director Partner (M.No 20680) GOF-Annual Report - Mar 10 Page 31
 
 SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31STMARCH 2010  12 SIGNIFICANT ACCOUNTING POLICIES Basis of preparation of Financial Statements The financial statements have been prepared to comply in all material respects with the Notified Accounting Standards by Companies Accounting Standards Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements are prepared under the historical cost convention, on an accrual basis of accounting in accordance with the generally accepted accounting principles to the extent applicable and adopted in adherence to the accounting standards issued by the Institute of Chartered Accountants of India (ICAI), except otherwise stated and in compliance to the directions issued from time to time by the Reserve Bank of India for Non Banking Financial (Non-Deposit Accepting or Holding) Prudential Norms (Reserve Bank) Directions, 2009. Use of Estimates The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period like provision for employee benefits. Management believes that the estimates used in the preparation of financial statements are prudent and reasonable. Future results may vary from these estimates. Revenue Recognition Interest on loans is recognized on accrual basis. Interest charges on loans given to borrowers are recognized on reducing balance method Loan Processing fees charged to borrowers are amortised over the period of loans Documentation charges are due at the time of disbursement are recognized as income on upfront basis Income on Non-performing Assets is recognized only when realized and any interest accruing on such assets is de-recognized totally by reversing the unrealized interest income already recognized Interest income on deposits with banks is recognized on a time proportion basis taking into account the rate applicable and the amount outstanding The company follows the prudential norms for income recognition and asset classification as prescribed by the Reserve Bank of India (RBI) for Non-Deposit taking Non-Banking Finance Companies (NBFC-ND). Interest on loans which has been classified as Non Performing Assets (NPA) is accounted for on cash basis. Income on non-performing assets is recognized only when realized and no Interest which remains overdue for more than six months at the end of the accounting period is treated as income. All other income is recognized on an accrual basis, when there is no uncertainty in the ultimate realization/collection Grants and Donations Capital grants for asset acquisition are recognized as Capital Reserve, under the head „Reserves & Surplus‟. Depreciation on such assets is reduced from the Capital Reserve. 
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In respect of assets received in kind, the estimated market value as on the date of receipt is recognized as Capital Reserve, under the head „Reserves & Surplus‟.(Refer Notesinfra on such assets) Depreciation is reduced from the Capital Reserve. The company has not received any grant asset during the current year under review, however the depreciation on such type of assets acquired in the past continues to be provided at the applicable rates and stated appropriately in accordance with prudent accounting principles in the books of accounts of the company. Fixed Assets The Gross Block of Fixed Assets is stated at cost of acquisition including any cost attributable to bring the assets to their working condition for their intended use. The Fixed Assets are carried at cost less depreciation. Depreciation Depreciation is provided on straight line method at the rates as prescribed under Schedule XIV to Companies Act 1956. Category of Assets Rate (%) Furniture & Fixtures 6.33 Computer Hardware & Accessories 16.21 Plant & Machinery (Genset /Photocopier) 4.75 Office Equipment 4.75 Temporary Wooden Partitions 100.00  In respect of additions the depreciation is provided pro -rata from the date assets are put to use. Depreciation on assets received in kind is provided at the respective rates and recognized as other income in the Income and Expenditure Account and reduced from the Capital Reserve. Individual Fixed assets costing Rs.5,000/- or less are fully depreciated in the year of purchase. Investments Since the company has not made any current investments the need for valuing at lower of cost or net asset value (NAV) does not arise. Loans & Advances Loans are classified as standard assets, sub-standard assets and doubtful assets and loss assets in terms of the Non-Banking Financial Companies Norms (Reserve Bank) Directions- 2007 as follows: Description 31st 31March 2010stMarch 2009 Standard Assets 270,955,019/- 209,969,268/-Sub standard Assets Nil Nil Doubtful Assets Nil Nil Loss Assets Nil Nil Total 270,955,019/- 209,969,268/-  
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 Provision for Loan Losses Regarding provision for loan losses the management has adopt ed a definite policy with specific reference to the nature of company‟s operationsthe risk on all on all non-performing assets ownedwhich considers by the company, (principal becoming past due for payment when the first default happens and when the default continues) Period % of Past due (Current) <1 day 0.5 1 day up to 30 days 10 From 31 days up to 60 days 30 From 61 days up to 90 days 30 From 91 days up to 120 days 60 Above 120 days 100 The above provisioning is marginally higher than the norms stated by the Non-Banking Financial CompaniesDirections issued by Reserve Bank of India. Considering the nature of industry and the globally accepted CAMEL standards the provisioning for loan losses has been accordingly made. In addition to the above, a further provision at 0.5 percent on current portfolio has been provided based on the recovery performance. On the above basis, the company has made a total provision of Rs.3,311,720/-(Previous year Rs.1,822,556/-) Write-Off Policy Loans are written off when the management has exhausted all options for recovery of overdue principal and interest on such loans which are deemed bad and irrecoverable. The management after exercising all options to recover the chronically bad loans, for which provisions were already made during the previous years, has written-off of Rs. 5,833,713/-(previous year 770,681/-) as bad debts in thecurrent year‟s incomeand expenditure account of the company. Employee Benefit In respect of defined contribution schemes, contributions to Provident Fund and Family Pension Fund are accounted on actual liability basis when becoming due and would be paid to statutory authorities, within the prescribed time. The employees of the company have been covered under the LICDeath cum Retirement Gratuity Scheme which has been approved by the Commissioner of Income Tax . The actual contribution under the Scheme is accounted on actual liability basis as and when due and i s remitted within the prescribed time. The gratuity amounts received in respect of the employees transferred from the erstwhile firm is appropriated towards the commitment payable to LIC. In respect of other employee benefits, provision for such benefits is provided in terms of Accounting Standard 15 (Revised)–“Employee Benefits .   
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