Board of Directors Sukumar R. KirloskarChairman

Padmaja S. KirloskarDirector

M C JayasimhaDirector

M S SrinathDirector

Ajay S. KirloskarManaging Director

Banks & Financial Institutions Central Bank of India, Bangalore

Karnataka State Financial Corporation, Bangalore

State Bank of Mysore, Bangalore

Auditors Divakara & AssociatesBangalore

Solicitors P. V. BhatBangalore

Indus LawBangalore

B. S. ShankarnarayanBangalore

Registered Office Kempapura, HAF PostBangalore - 560 024

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NOTICE TO THE MEMBERS

NOTICE IS HEREBY GIVEN THAT THE EIGHTEENTH ANNUAL GENERAL MEETING of the Members of theCompany will be held on Thursday, September 30, 2010 at 2:00 PM at All India RMS & MMS Union Hall, 849/4,A Block, Sahakaranagar, Bangalore - 560 092, to transact the fol lowing business.

ORDINARY BUSINESS

1. To consider, approve and adopt the Audited Balance Sheet as on 31st March 2010, the Profit and LossAccount for the year ended 31st March 2010 and the Reports of the Directors and Auditors of the Company.

2. To appoint Mr. Ajay S. Kirloskar, who retires by rotation and is eligible for re-appointment.

3. To appoint M/s Divakara & Associates, Chartered Accountants, Bangalore, as Auditors of the Companyto hold office from the conclusion of this Annual General Meeting until the conclusion of the ensuing AnnualGeneral Meeting and to fix their remuneration.

By Order of the Board

Date : August 25, 2010Place : Bangalore Sukumar R. Kirloskar, Chairman

Notes

1. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE ON POLLINSTEAD OF HIMSELF AND SUCH PROXY NEED NOT BE A MEMBER.

2. The instrument appointing proxy should be deposited with the Company atleast 48 hours before the commencementof the Meeting.

3. Members are requested to notify any change in their address.

4. The Register of Members and Share Transfer Book will remain closed from 21.09.2010 to 30.09.2010 (both days inclusive)for the purpose of determining shareholders for sending AGM Notice.

5. Members are requested to bring their own copies of Annual accounts already dispatched to them.

6. For the convenience of members & proxies attending the meeting, the attendance slip and proxy forms to be used.

DIRECTOR’S REPORT

The Directors present the 18th Annual Report of your Company with Audited Financial Statements for theyear ended 31st March 2010 along with the Auditors’ Report.

REVIEW OF OPERATIONSThe Company had no commercial operations duing the year. There was no operational income from multimediapublishing during the year (previous year NIL), while expenditure before interest and depreciation was atRs. 0.35 million (previous year Rs. 0.23 million). Overall loss for the year was at Rs. 1.17 million (previousyear Rs. 1.05 million). There is no change in the outlook with regard to the Company’s prospects for revivalin the multimedia publishing industry.

REDUCTION OF CAPITALYour Company’s petition for reduction of capital is pending before the Honourable High Court of Karnataka.

ENERGY, TECHNOLOGY, FOREIGN EXCHANGEA statement giving details of conservation of energy, technology absorption, foreign exchange earnings andoutgo as per the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 isannexed to this Report.

PUBLIC DEPOSITSThe Company has not accepted any deposit from the public during the year under review.

PERSONNELThe Statement under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars ofEmployees) Rules, 1975, as amended is not given as there are no employees drawing remuneration as perprovisions of this Section.

DIRECTORSMr. Ajay S. Kirloskar retires by rotation at the ensuing Annual General Meeting and being eligible offershimself for re-appointment.

AUDITORSM/s Divakara & Associates, retiring Auditors, have furnished a certificate of their eligibility for re-appointmentas required under the provisions of Companies Act, 1956. The members of the Company are requested toappoint them as statutory Auditors of the Company.

REPLY TO AUDITOR’S OBSERVATIONSNo provision has been made till date in respect of interest on the loan balance claimed by Central Bank ofIndia as the same has been contested by the Company and is undeterminable pending a settlement. Noprovision has been made till date in respect of the claim made by Tata Finance Limited as the arbitrationaward has been challenged by the Company before the City Civil Judge, Bangalore. No provision has beenmade till date in respect of the claim by the Income Tax Department, as the Company has challenged theclaim. The Company does not have a formal internal audit system as the present level of operations do notjustify the cost of implementing one.

ACKNOWLEDGEMENTYour Directors wish to place on record their sincere appreciation for the support of shareholders, bankersand financial institutions.

For and on behalf of the Board

Date : May 31, 2010 Sukumar R. KirloskarPlace : Bangalore Chairman

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I. ANNEXURE TO THE DIRECTORS’ REPORT

A. CONSERVATION OF ENERGY

The Operations of your Company are not energy intensive. Adequate measures have been taken toreduce energy consumption. Efforts are being made on an on-going basis to conserve and optimize theuse of energy in regular operations by investments in latest techniques and equipments.

B. RESEARCH AND DEVELOPMENT

Specific areas where the company carries out R & DCompany carries out R & D in the field of multimedia content development although no R & D was carriedout during the Year.

Benefits derivedDevelopment of new mult imedia products and upgradation of exist ing products.

Future Plan on R & DIn view of the Company’s financial situation, no future plan on R&D is planned at present.

Expenditure on R & DR & D is undertaken by the projects department when there are financial resources allocated and noseparate records of the expenditure incurred on R & D as such is maintained.

Technology AbsorptionThe Company has not absorbed any technology from foreign companies / parties.

C. FOREIGN EXCHANGE EARNING & OUTGO

The information on Foreign Exchange earning and outgo are contained in the notes to the accounts inSchedule 11(B9&10).

II. ANNEXURE TO THE DIRECTORS’ REPORT

In compliance of Section 217(2AA) of the Companies Act, 1956 as amended by the Companies Act, 2000,the Directors of the Company confirm:

1. That the applicable accounting standards have been followed in the preparation of final accounts and thatthere are no material departures;

2. That such accounting policies have been selected and applied consistently and such judgements andestimates made are reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company as at March 31, 2010 and of the loss of the Company for the year ended on that date;

3. That proper and sufficient care has been taken for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Companyand for preventing and detecting fraud and other irregularities;

4. That the annual accounts have been prepared on a going concern basis.

For and on behalf of the Board

Date : May 31, 2010 Sukumar R. KirloskarPlace : Bangalore Chairman

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CORPORATE GOVERNANCE REPORT

1. THE COMPANY’S CORPORATE GOVERNANCE PHILOSOPHY

Kirloskar Multimedia Limited defines Corporate Governance as a systemic process by which companies aredirected and controlled to enhance their wealth generating capacity. It is a combination of voluntary practicesadopted by a Company interwoven with laws, regulations, procedures and disclosures.

It is aimed in the long run to maximize shareholder and employee value as well as to attract, retain andmotivate employees.

Corporate Governance is, in a larger context, to be experienced as a movement throughout the Companyand not merely as an exercise or as a means to an end in complying with statutory requirements, but asan end by itself, which transcends beyond mere disclosures and statutory compliances.

The Company has initiated the process of Corporate Governance in compliance with Clause 49 of the ListingAgreement with The Stock Exchange, Mumbai and Clause 51 of the Listing Agreement with the BangaloreStock Exchange Ltd. A sincere attempt has been made to comply with Corporate Governance code and inthis regard, hereby submit a report on the matters mentioned in the said clauses and practices which arefollowed by the Company.

2. BOARD OF DIRECTORS

During the year, the Board of Directors had an optimum combination of Executive and Non-Executive Directorswith not less than 50% of the Directors being Non-Executive Directors. The non-executive directors areeminent professionals, drawn from amongst persons with experience in business/finance/law/public enterprises.

The Company is not paying sitting fees or any remuneration to the non-executive directors.

The Board had met 5 times during the year under review on the following dates : July 31, 2009; October31, 2009; January 30, 2010; March 31, 2010 & May 31, 2010.

The following table gives details of designation, category of directors and their attendance, last AGM attendedand number of directorships held by them in other companies.

No. of Board Attendance Nos. of otherCategory meetings at last D i r e c t o r sh i p

Name of the Director of Directors attended AGM held

Mr. Sukumar R. Kirloskar Chairman & 5 Yes 0Non-Executive Director

Mrs. Padmaja S. Kirloskar Non-Executive Director 5 Yes 0

Mr. Ajay S. Kirloskar Managing Director& Executive Director 5 Yes 2

Mr. M. C. Jayasimha Non-Executive Director 5 No 0

Mr. M. S. Srinath Non-Executive Director 5 No 0

None of the Directors is a member in more than 10 committees or acts as a Chairman of more than 5committees across all companies in which he is a Director.

Disclosure regarding appointment or re-appointment of Directors -

Mr. Ajay S. Kirloskar, who retires by rotation at the ensuing Annual General Meeting and who is eligible forre-appointment, is one of the Promoters of the Company.

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Remuneration of Directors

Remuneration paid/payable to Directors for the year under review:

Director Sitting SalariesFees & Perquisites (Rs) Commission Total (Rs)

Mr. Sukumar R. Kirloskar NIL NIL NIL NILMrs. Padmaja S. Kirloskar NIL NIL NIL NILMr. Ajay S. Kirloskar NIL NIL NIL NILMr. M. C. Jayasimha NIL NIL NIL NILMr. M. S. Srinath NIL NIL NIL NIL

3. AUDIT COMMITTEE

The Audit Committee inter alia provides assurance to the Board on the adequacy of internal control systemand financial disclosures. According to the provisions of Clause 49 of Listing Agreement with The StockExchange, Mumbai and Clause 51 of Listing Agreement of the Bangalore Stock Exchange Ltd., and read withthe provisions of Section 292A of the Companies Act, 1956 as inserted by the Companies Amendment Act,2000, the Audit Committee of your Company comprised of Mr. M. S. Srinath, Independent Director asChairman of the Committee and with Mr. M. C. Jayasimha, Independent Director and Mr. Ajay S. Kirloskar,Managing Director as members.

The Audit Committee has met five times on July 31, 2009; October 31, 2009; January 30, 2010; March31, 2010 & May 31, 2010 during the year for finalization of accounts and such other additional matters. Allthe members of the Committee were present in these meetings.

4. REMUNERATION COMMITTEE

Since no remuneration is provided to any of the non-executive directors, no committee for regulating thepayment of remuneration has been formed.

5. SHARE HOLDERS COMMITTEE

Shareholders / Investors Grievance Committee

The Shareholders / Investors Grievance Commitee, consisting of Mr. M. C. Jayasimha - Independent Director,as Chairman, and Mr. M. S. Srinath - Independent Director and Mr. Sukumar R. Kirloskar, Non-ExecutiveDirector, as members, specifically looks into matters such as redressing of shareholder and investorscomplaints.

No. of Complaints received: 1No. of Complaints redressed: 1

No. of Pending Share Transfers: 0

Share Transfer CommitteeThe Company from the beginning has formed Share Transfer Committee to look into the issues like Transferof shares, Transmission of Shares, Splitting, Consolidation of Shares, Issue of Duplicate Share Certificatesetc., comprising of two Directors. Now that the Company is under the compulsory demat scheme, thequestion of issue of duplicate for lost/mutilated certificates does not arise.

6. GENERAL BODY MEETING

Particulars of AGM/EGM held for the previous financial year:

AGM/EGM Date Venue Time No of SpecialResolutions Passed

17th AGM Sep 18, 2009 All India RMS & MMS Union Hall 9.00 A.M. -

7. DISCLOSURE

• There are no material transaction with its promoters, the Directors or the Management, their subsidiariesor relatives, etc., which requires separate disclosure.

• Trading of the Company’s scrip was suspended on and by The Stock Exchange, Mumbai, as the Companywas not able to pay the listing fees due to its adverse financial position.

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8. MEANS OF COMMUNICATION

• Half yearly report sent to eachhousehold of shareholders : No

• Quarterly resultsWhich newspapers normally published in : Normally in Business Standard & Udayvani;

Could not be published due to adverse financialcondition.

• Any Web site, where displayed : http://www.bseindia.com/qresann/result.asp?scripcd=32352&scripname=KIRLOSKAR+ML

• Displays official news releases and presentations made to institutional investors

or to the analysts : No

• Whether Management Discussion andAnalysis report is a part of annual report or not: Yes

9. GENERAL SHAREHOLDERS INFORMATION

• AGM : Date, time and venue : 30 September 2010, 2.00 PMAll India RMS & MMS Union Hall, 849/4, A BlockSahakaranagar, Bangalore - 560092

• Financial Calendar : April to March

• Date of Book Closure : 21.09.2010 to 30.09.2010Both days inclusive

• Dividend Payment Date : NA

• Listing on Stock Exchange : Bangalore Stock Exchange Ltd.,Stock Exchange Towers, 51, 1st Cross,J. C. Road, Bangalore - 560 027

The Stock Exchange, MumbaiPhiroze Jeejeebhoy Towers,Dalal Street, Mumbai - 400 023

• Stock Code

Bangalore Stock Exchange Ltd., : KMMLThe Stock Exchange, Mumbai : 532352 (Demat segment)

32352 (Normal Segment)

International SecuritiesIdentification number (ISIN) : INE175B01010

• Market Price Date : Year 2009-10 High LowHigh, Low during each month in April No Trading No Tradinglast financial year (At BgSE) May No Trading No Trading

June No Trading No TradingJuly No Trading No TradingAugust No Trading No TradingSeptember No Trading No TradingOctober No Trading No TradingNovember No Trading No TradingDecember No Trading No TradingJanuary No Trading No TradingFebruary No Trading No TradingMarch No Trading No Trading

• Registrar and Share Transfer Agents : Karvy Computershare Pvt. Ltd.,No.51/2, T.K.N. ComplexVanivilas Road,Opp.National CollegeBasavangudi,Bangalore - 560 004.

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• Share Transfer System : Karvy Computershare are the share transfer agentsof the company. Transfer of shares are approved bythe share transfer committee formed by the Boardin its meeting held on 28.07.2000 which meets atfrequent intervals. After approval, the Memorandumof transfer is sent to Karvy, who will endorse thetransfer and despatch the certificates to the transfereeswithin 30 days from the date of receipt.

• Distribution of Share-holding : Category No of Shares % to Equity

Promoters 6,609,060 45.27Private Corporate Bodies 1,535,525 10.52Indian Public 6,441,815 44.12NRI’s/OCB’s 13,600 0.09

• Dematerialization of shares and liquidity : The shares are traded in demat form only.

• Outstanding GDRs/ADRs/Warrants orany Convertible instruments : NA

• Plant Locations : Kirloskar Multimedia LimitedKempapura, HAF PostBangalore - 560 024

• Address of Correspondence : Kirloskar Multimedia LimitedKempapura, HAF PostBangalore - 560 024

Auditors’ Certificate

To the Members:

As required by the Guidance Note issued by the Institute of Chartered Accountants of India, we have to statethat no investor grievance is pending for a period exceeding one month against the Company as per therecords maintained by the Investor’s Grievance Committee.

For Divakara & AssociatesChartered Accountants

Place : Bangalore POLALI DIVAKAR RAODate : 31.05.2010 (Proprietor)

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MANAGEMENT DISCUSSION & ANALYSIS

Industry StructureThe multimedia products industry that the Company operates in a subset of the consumer products industry.End consumers are reached through various channels including retail, direct marketing, affinity groups, theinternet, direct-order catalogs, etc. The Company’s products are additionally meant for the educationalmarket consisiting of educators, schools and learning institutions. Distribution structures are well definedand are mature, consisting of channel specific whole-salers, distributors and retailers. The market opportunityfor the Company’s products are world-wide, and each market territory has its own unique differences formarketing and distribution. Products to be sold to the European Union, for instance, require languageconversion and localisation for each different country. Product awareness is supported by public relationsactivities that result in reviews in consumer magazines and trade journals. Purchase is typically an impulsebuy determined by attractiveness of point-of-purchase display which in most instances is the packagingitself. Prominence in display in the retail environment is also a significant factor in product success.Competition is intense.

Opportunities and ThreatsA growing international consumer multimedia products market with new technology delivery platformsprovides opportunities for new and expanding models for the development and delivery of interactivemultimedia content. While this represents an ongoing, expanding opportunity with the possibility of significantup-sides, the publishing model is high risk as substantial investment and lead-time is necessary for newcontent development combined with brand development, marketing and distribution. Even so, productsuccess is dependent on consumer acceptance assuming adequate distribution exists. Established distributionchannels are extremely difficult to penetrate. Ongoing R&D, investment in product development, andconstant product technological upgradation is a necessity. Product development necessitates a large poolof creative and technical talent supported by adequate marketing and distribution. Being adequatelycapitalised in addition to having definitive and dependable product revenue streams is a prerequisite for ahealthy cash-flow that can support a publishing endeavour. The Company’s track record in building such apublishing business is indicative of the several challenges, difficulties and risks that exist in the market.

Segment Wise PerformanceThe Company had no operating income from its multimedia publishing business.

OutlookThe Company has not had any past success in its efforts to build a successful multimedia products publishingbusiness. It has been the experience of the Company that to take on the risks posed in this industry requiresa fundamental financial base that the Company has lacked, as product development costs lead revenuestreams which have been uncertain. The Company has not had any commercial operations during the yeardue to it’s financial situation. The Company’s products face technological obsolescence in the absence ofupgradation and no longer meet the latest standards for technology delivery. It is unlikely that the Companycan revive it’s multimedia products publishing business without making a completely new beginning withnew investment leading to existing product upgradation and new products, coupled with sizable investmentin marketing and distribution, which in view of the present financial condition is unlikely.

Risks and ConcernsThe Company is in a dire situation consequent to it’s poor financial position. It is unlikely that the Company’smultimedia product publishing business can be revived. The Company at present lacks the financial meansto pursue any new alternative opportunity within the multimedia industry. There are significant liabilitiesthat the Company still carries. Consequently, it is unlikely that the Company can be revived in its presentform.

Internal Control Systems and their AdequacyThere are reasonable internal procedures commensurate with the size of the Company and the nature ofits business with regard to purchase of plant and machinery, equipment and other assets, and sales.

Financial PerformanceThe Company’s financial performance has been severely affected by factors beyond its control.

Cautionary StatementManagement discussion and analysis about the Company’s objectives and expectations may be forwardlooking statements subject to applicable securities laws and regulations. Actual results could differ materiallyfrom those expressed or implied depending upon demand and supply conditions, changes in governmentregulations, economic developments within India and overseas.

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AUDITORS’ REPORT

To the Members of Kirloskar Multimedia Limited

We have audited the attached Balance Sheet of M/s. Kirloskar Multimedia Limited, Regd. Off: Kempapura,HAF Post, Bangalore - 560 024 as at 31st March 2010 and the Profit and Loss account for the year endedon that date together with the Schedules and Notes thereon annexed thereto. These financial statementsare the responsibility of the Management of the Company. Our responsibility is to express an opinion onthese financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in India. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are prepared, in all material respects, in accordance with an identified financial reporting frameworkand are free of material mis-statements. An audit includes, examining on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant statements presentation. We believe that our audit provides a reasonablebasis of our opinion, and report that:

1. As required by the Companies (Auditor’s Report) Order, 2003 (CARO - 2003) as amended by theCompanies (Auditor’s Report) Order (Amendment) 2004, issued by the Central Government of Indiain terms of Sub-section (4A) of Section 227 of the Companies Act 1956, and on the basis of suchchecks and verification of books and records as we considered appropriate and as per the informationand explanations given to us during the course of our audit, we report as follows on the mattersspecified in paragraphs 4 & 5 of the said Order:

i a. The Company has maintained proper records showing all particulars, including quantitative detailsand situation of fixed assets.

b. According to the information and explanations given to us, the fixed assets have been physicallyverified by the management at reasonable intervals which, in our opinion, is reasonable, havingregard to the size of the Company and nature of the assets. No material discrepancies werenoticed on such verification.

c. In our opinion, the Company has not disposed off a substantial part of its Fixed Assets duringthe year and the going concern status of the Company is not affected.

ii The Company is a Service Company, primarily rendering information technology services -multimedia. Further, as informed to us, the Company does not hold any physical inventories.Thus paragraph 4(ii) of the Order is not applicable.

iii We are informed that the Company has not taken / granted any loans, secured or unsecured,from/to Companies, Firms or other parties listed in the register maintained under Section 301of the Companies Act, 1956.

iv In our opinion, and according to the information and explanation given to us, there are adequateinternal control procedures commensurate with the size of the Company and the nature of itsbusiness with regard to purchase of fixed assets and the sale of services. During the year, therewere neither purchase of inventories and sale of services.

v According to the information and explanations given to us, there are no transactions andarrangements, the particulars of which need to be entered into the Register maintained underSection 301 of the Companies Act, 1956.

vi The Company has not accepted any deposits from the public within the meaning of Section 58A,58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed thereunder.

vii The Company does not have an Internal Audit System commensurate with its size and natureof business.

viii The Central Government has not prescribed maintenance of cost records under Section 209(1)(d)of the Companies Act, 1956, for the products of the Company.

xi a. The Company is generally regular in depositing undisputed statutory dues including ProvidentFund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, CustomsDuty, Excise Duty, Cess and any other Statutory dues with the appropriate authorities, exceptRs. 82,987 being fines and penalty payable to ESIC which are outstanding as at 31.03.2010 fora period of more than six months from the date they became payable.

b. According to the information and explanations given to us and on the basis of our examinationof the accounts, there are no disputed amounts of Income Tax / Sales Tax / Service Tax / CustomsDuty / Excise Duty / Cess as on 31 March 2010 except a claim against the Company by theIncome Tax Department towards Income Tax and Interest amounting to Rs. 3.93 Lakhs for whichthe Company has not made any provision in the Books of Accounts..

x The Company is registered for a period not less than 5 years and accumulated losses at the endof the financial year are not less than 50% of its net worth. However, the Company has incurredcash losses during the financial year and in the immediately preceding financial year.

xi The Company has defaulted in the repayment of working capital facilities extended by Central

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Bank of India and in redemption of non-convertible debentures issued to KSFC. As on 31.03.2010,these amounts are outstanding, as disclosed in the financial statements, to the bank and financialinstitution and are overdue.

xii As the Company has not granted loans and advances on the basis of security by way of pledgeof shares, debentures and other securities, the question of reporting on Clause No. 4(xii) of theOrder does not arise.

xiii The provisions of any special statute applicable to Chit Fund, Nidhi, Mutual Benefit Fund orSocieties are not applicable to the Company.

xiv The Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, Caluse 4(xiv) of the Order is not applicable.

xv According to the information and explanations given to us, the Company has not given anyguarantee for loans taken by others from banks and other financial institutions. Accordingly,Clause 4(xv) of the Order is not applicable.

xvi The Company has not raised any Term Loans during the year.

xvii According to the information and explanations given to us,and on overall examination of thebalance-sheet of the Company, we report that no funds raised on short-term basis have beenused for long-term investment of the Company.

xviii The Company has not made any preferential allotment of shares to parties and companies coveredin the register maintained under Section 301 of the Companies Act, 1956, during the year.

xix The Company has not issued any debentures during the year and hence the question of creatingsecurities for the debentures issued does not arise.

xx The Company has not made any public issue during the year and as such, reporting on ClauseNo 4(xx) of the Order does not arise.

xxi During the course of our examination of the books and records of the Company, carried out inaccordance with the generally accepted auditing practices in India, and according to the informationand explanations given to us, we have neither come across any instance of fraud on or by theCompany, noticed and reported during the year, nor have we been informed of such case by theManagement.

2. Further to our report in paragraphs (1) above subject to:(i) Serial number B 4 of Schedule 10, regarding non provision of interest in respect of facilities from

Central Bank of India till date and its consequential effects on the losses of the Company; and(ii) Serial number B 5 of Schedule 10, regarding non provision for the claim against the Company by Tata

Finance Limited till date and its consequential effects on the loses of the Company; and(iii) Serial number B 6 of Schedule 10, regarding non provision for the claim against the Company by the

Income Tax Department towards Income Tax and Interest amounting to Rs. 3.93 Lakhs and itsconsequential effects on the losses of the Company.

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 purpose of our audit;(b) 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;(c) the Balance Sheet and the Profit and Loss Account referred to in this report are in agreement with the

books of account;(d) In our opinion and subject to various observations made in the above paragraphs, the Balance Sheet

and Profit and Loss Account dealt with by this report have been prepared in compliance with theapplicable Accounting Standards referred to in sub-section (3C) of the Companies Act, 1956;

(e) On the basis of written representations received from the Directors of the Company as at 31st March2010 and taken on record by the Board of Directors, none of the Directors is disqualified as on 31stMarch 2010 from being appointed as Director of the Company under Clause (g), Sub-Section (i) ofSection 274 of the Companies Act, 1956.

(f) In our opinion and to the best of our information and according to the explanations given to us, theBalance Sheet and Profit and Loss Account read together with the Schedules and the Notes thereongive the information required by the Companies Act of 1956 in the manner so required and give a trueand fair view:(i) in so far as it relates to the Balance Sheet, of the State of Affairs of the Company as at 31st

March 2010 and(ii) in so far as it relates to the Profit and Loss Account, of the losses of the Company for the year

ended on that date.for DIVAKARA & ASSOCIATES.,

Chartered Accountants

PLACE : Bangalore POLALI DIVAKAR RAODATE : May 31, 2010 (Proprietor)

Membership No. 23377 Firm Regn No. 000763S

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BALANCE SHEETas at 31.03.2010

As at As atSchedule 31.03.2010 31.03.2009

(Rs.) (Rs.)

SOURCES OF FUNDS:

Shareholders' FundsShare Capital 1 146,000,000 146,000,000

Loan FundsSecured Loans 2 9,934,400 9,934,400

TOTAL 155,934,400 155,934,400

APPLICATION OF FUNDS:

Fixed Assets 3Gross Block 50,893,156 50,893,156Less: Depreciation 50,893,156 50,893,156Net Block 0 0

Investments 4 5,775,925 5,775,925

Current Assets,Loans & Advances 5 1,090,934 1,077,329Less: Current Liabilities& Provisions 6 15,259,227 14,086,124Net Current Assets -14,168,293 -13,008,795

Profit & Loss Account 164,326,768 163,167,270

TOTAL 155,934,400 155,934,400

Significant Accounting Policies 10(A)

Notes to Accounts 10(B)

Schedules referred to above form part of the accounts.

To be read with our report of even date

For Divakara & Associates For and on behalf of the BoardChartered Accountants

POLALI DIVAKAR RAO SUKUMAR R. KIRLOSKAR AJAY S. KIRLOSKAR(Proprietor) Chairman Managing DirectorMembership No. 23377

PLACE : BANGALORE DATE : May 31, 2010

PROFIT & LOSS ACCOUNTfor the Year Ended 31.03.2010

Schedule For the For theYear ended Year ended

31 March 2010 31 March 2009

Income

Other Income 7 14,067 16,910

TOTAL 14,067 16,910

Expenditure

Operating & Other Expenses 8 353,423 226,724Interest & Financial Charges 9 820,142 820,075Depreciation 3 0 0

TOTAL 1,173,565 1,046,799

Net Loss for the year 1,159,498 1,029,889

Add: Provision for Taxes - FBT 0 300

1,159,498 1,030,189

Add: Deficit brought down from lastBalance Sheet 163,167,270 162,137,081

Balance Carried To Balance Sheet 164,326,768 163,167,270

Earnings Per Share Basic (0.08) (0.07) Diluted (0.08) (0.07)

Significant Accounting Policies 10(A)Notes to Accounts 10(B)

Schedules referred to above form part of the AccountsTo be read with our report of even date

For Divakara & Associates For and on behalf of the BoardChartered Accountants

POLALI DIVAKAR RAO SUKUMAR R. KIRLOSKAR AJAY S. KIRLOSKAR(Proprietor) Chairman Managing DirectorMembership No. 23377

PLACE : BANGALOREDATE : May 31, 2010

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SCHEDULES ATTACHED TO AND FORMING A PART OF THE ACCOUNTSFOR THE YEAR ENDED 31ST MARCH 2010

As at 31.03.2010 As at 31.03.2009(Rs.) (Rs.)

SCHEDULE NO. 1 – SHARE CAPITAL

Authorised Capital15,000,000 Equity Shares of Rs. 10 / - each 150,000,000 150,000,000(Previous Year - 15,000,000 Equity Shares of Rs. 10/- each)

Issued, Subscribed & Paid Up Capital1,46,00,000 Equity Shares of Rs. 10 / - each fully paid 146,000,000 146,000,000(Previous Year: 1,46,00,000 Equity Shares)

146,000,000 146,000,000

SCHEDULE NO. 2 – SECURED LOANS

Debentures KSFC - NCD - secured by way of hypothecation of current 4,000,000 4,000,000assets, semi-finished, finished goods & book debts,machinery and equipments, both present and futureand also guaranteed by the Directors personally.

Loans & Advances from Banks :Central Bank of India, secured by way of hypothecation of multimedia titles and moveable property, stock-in-tradeand foreign bills to the extent of Rs. 45 Lakhs and securedby the Directors personally- Foreign Bills Purchased 4,334,400 4,334,400- Packing Credit 1,600,000 1,600,000

9,934,400 9,934,400

SCHEDULE NO. 3 FIXED ASSETS

SCHEDULE NO. 4 - INVESTMENTS

Non Trade - Unquoted, Long term - at Cost

In Wholly Owned Subsidiary : - 175,000 Equity Shares of US$ 1 each in M/s. Kirloskar Multimedia Inc., USA 5,775,925 5,775,925

5,775,925 5,775,925

GROSS BLOCK(at cost) DEPRECIATION NET BLOCK (Straight line method)

Sl. Additions/ Transfers/No Description As at Deletions/ As at Upto For the deletions Upto As at As at

of Asset 01-Apr-09 Transfers 31-Mar-10 31-Mar-09 year During the 31-Mar-10 31-Mar-10 31-Mar-09 during the year

year

1 Computers 50,893,156 0 50,893,156 50,893,156 0 0 50,893,156 0 0

Total 50,893,156 0 50,893,156 50,893,156 0 0 50,893,156 0 0

Previous Year 50,893,156 0 50,893,156 50,893,156 0 0 50,893,156 0 0

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SCHEDULES ATTACHED TO AND FORMING A PART OF THE ACCOUNTSFOR THE YEAR ENDED 31ST MARCH 2010

As at As at 31.03.2010 31.03.2009

(Rs.) (Rs.)SCHEDULE NO. 5 – CURRENT ASSETS, LOANS & ADVANCES

Cash & Bank BalancesCash on Hand 1,582 1,902Balance with Scheduled Banks : In Current Account 0 142 In Deposit Account 193,537 180,877 Margin Held on FBP 470,016 470,016

665,135 652,937

Loans & Advances(Unsecured - Considered Good unless otherwise stated)Advances recoverable in cash or kind or for value to be received 365,499 364,092

Other Deposits 60,300 60,300

425,799 424,392

1,090,934 1,077,329

SCHEDULE NO. 6 – CURRENT LIABILITIES & PROVISIONS

Current LiabilitiesOther liablilties 9,483,302 8,309,899Provision for FBT 0 300Provision for loss from subsidiary company 5,775,925 5,775,925

15,259,227 14,086,124

SCHEDULE NO. 7 – OTHER INCOME

Interest- Gross 14,067 16,910

14,067 16,910

SCHEDULE NO. 8 OPERATING & OTHER EXPENSES

Rates & Taxes 78,310 0Printing & Stationery 19,913 17,989Communication 2,400 2,400Travelling & Conveyance 3,889 2,000Legal & Professional Charges 77,866 57,182Annual Listing Fee 137,875 113,195Auditor’s Remuneration 11,030 11,030AGM Expenses 2,000 1,400Filing Fees 1,020 2,500Postage & Courier Charges 19,100 19,028Interest on FBT 20 0

353,423 226,724

SCHEDULE NO. 9 – BANK INTEREST & FINANCIAL CHARGES

Bank Interest & Charges 142 75KSFC Interest 820,000 820,000

820,142 820,075

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Notes to the Accounts for the Year Ended 31ST MARCH 2010

SCHEDULE 10 - NOTES ON ACCOUNTS

(A) SIGNIFICANT ACCOUNTING POLICIES

i. Accounting Conventions and Basis of Presentation for Accounting:The Financial Statements have been prepared under the historical cost convention in accordancewith the generally accepted accounting principles in India and the provisions of the CompaniesAct, 1956, and the Accounting Standards issued under the Companies (Accounting Standards)Rules, 2006.

All income and expenditure to the extent considered receivable / payable with reasonablecertainty are accounted for on accrual basis.

ii. Cash Flow StatementCash flow statement has been prepared in accordance with the indirect method prescribed inAccounting Standard - 3 issued under the Companies (Accounting Standards) Rules, 2006 andas required by the Securities and Exchange Board of India.

iii Fixed Assets:Fixed assets are stated at cost less depreciation.

iv. Investments:Investment in wholly-owned subsidiary is shown at cost. Provision is made for any diminution,other than temporary in the accounts.

v. Depreciation on Fixed Assets:Depreciation on Fixed Assets is provided on Straight Line Method at the rates specified inSchedule XIV to the Companies Act, 1956 as amended vide Notification No. GSR 757 (E) dated16.12.1993 issued by the Department of Company Affairs, Government of India, New Delhi.

vi. Revenue Recognition:Interest income is accounted on accrual basis.

vii. Preliminary Expenses:Preliminary expenses are written off over a period of 10 years in equal installments.

viii. Retirement Benefits:No provision for retirement benefits has been made as the Company does not have anyemployees.

ix. Taxes on Income:Current Tax is determined as the amount of tax payable in respect of taxable income for theperiod. Deferred tax is recognised subject to the consideration of prudence, on timing differences,being the difference between taxable income and accounting income that originate in oneperiod and is capable of reversal in one or more subsequent periods.

x. Earnings per Share (EPS):In determining Earnings Per Share, the Company considers the net profit after tax expense.The number of shares used in computing basic earnings per share is a weighted averagenumber of shares outstanding during the period. Number of shares used in computing dilutedearnings per share comprises the weighted average shares considered for deriving basicearnings per share, and also the weighted average number of equity shares that could havebeen issued on the conversion of all dilutive potential equity shares.

xi. Prior Period, Extraordinary Items & Changes in Accounting Policies:Prior period and extraordinary items are shown separately in the financial statements.

xii. Contingencies and Events Occuring after the Balance Sheet date:There are no contingencies and events occurring after the balance sheet date affecting thefinancial position of the Company.

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xiii. Provisions, Contingent Liabilities and Contingent Assets:In preparation of accounts, the Company has made required provisions for all the liabilities,which can be measured by using a substantial degree of estimation. The amount of ContingentLiabilities not provided in the accounts is disclosed in the notes forming part of the accounts.Assets in the nature of contingent assets are not recognised in the accounts.

(B) NOTES TO ACCOUNTS

1. Contingent Liability on account of Current Year Previous Year(Rs. in Lakhs) (Rs. in Lakhs)

Interest claimed by Central Bank of India 28.27 28.27not acknowledged as debt by the Company

Amount claimed by Tata Finance Limited 7.10 7.10not acknowledged as debt by the Company

Amount claimed by Income Tax Department 3.93 3.93towards Income Tax and Interest U/s 201(1A)and 220(2)

2. Balances under unsecured loans, other liabilities, in deposit account with banks, margin money heldon FBP with Central Bank of India and other loans and advances are subject to confirmation whereverapplicable.

3. The Company has made provision for interest in respect of Non-Convertible Debentures issued infavour of Karnataka State Financial Corporation as per the sanctioned terms. The Corporation hasfiled a suit against the Company for recover of the debenture redemption amount along with interest,which the Company has contested.

4. No provision has been made till date in respect of interest on the loan balance claimed by CentralBank of India as the same has been contested by the Company, which is pending for settlement.

5. No provision has been made till date in respect of the claim made by Tata Finance Limited as thearbitration award has been challenged by the Company before the City Civil Judge, Bangalore.

6. No provision has been made in respect of claim made by the Income Tax Department towards IncomeTax and Interest U/s 201(1A) and 220(2).

7. There are no Micro and Small enterprises, to whom the Company owes dues, which are outstandingfor more than 45 days as at 31st March 2010. This information is required to be disclosed under theMicro, Small and Medium Enterprises Development Act, 2006. Has been determined to the extentsuch parties have been identified on the basis of information available with the Company.

8. Managerial Remuneration: Paid/or payable during the year in respect of Directors of the Companyis Rs. NIL (Previous Year: Rs. NIL)

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9. Earnings / Expenditure In Foreign Currency during the year is Rs. NIL (Previous Year: Rs. NIL).

10. Related Party Transactions: Name of the related party - Kirloskar Multimedia, Inc., - No transactionsduring the year.

11. Quantitative Details: The Company is engaged in interactive multimedia title development andprovides professional services involving skilled manpower. The development and sales of such productscannot be expressed in any generic terms. Hence it is not possible to give quantitative details ofsales & certain information required under paragraph 3, 4C & 4D of Part II of Schedule VI of theCompanies Act, 1956.

12. No provision has been made for taxes on income as the Company has incured losses during the yearand Deferred Tax Asset is not created in the absence of certainty of sufficient future income againstwhich Deffered Tax Asset can be realised.

13. The Petition for reduction of share capital is pending before the Honourable High Court of Karnataka.

TO BE READ WITH OUR REPORT OF EVEN DATE

For and on behalf of the Boardfor Divakara & AssociatesChartered Accountants

POLALI DIVAKAR RAO SUKUMAR R. KIRLOSKAR AJAY S. KIRLOSKAR(Proprietor) Chairman Managing Director

PLACE : BangaloreDATE : May 31, 2010

Balance Sheet Abstract and Company’s General Business Profile

I Registration Details

Registration No. 13492 State Code 8 Balance Sheet Date 31.03.2010

II Capital Raised during the year (Amount in Rs.)

Public Issue Nil Rights Issue Nil Bonus Issue Nil Private Placement Nil

III Position of Mobilisation and Deployment of Funds (Amount in Rs.)

Source of Funds Paid-up-Capital 146,000,000 Unsecured Loan Nil Secured Loans 9,934,400

Application of Funds Net Fixed Assets 0 Investments 5,775,925 Net Current Assets -14,168,293 Miscellaneous Expenditure 0 Accumulated Losses 164,326,768

IV Performance of Company (Amount in Rs.)

Turnover 14,067 Total Expenditure 1,173,565 Net Loss 1,159,498 Dividend Rate Nil Earning Per Share -0.08

V Generic Names of the three principle products/services of company(as per monetary terms)

Item Code (ITC Code) 8524 Product Description Development of Software/Multimedia Titles

To be read with our report of even date

For Divakara & Associates For and on behalf of the BoardChartered Accountants

POLARI DIVAKAR RAO SUKUMAR R. KIRLOSKAR AJAY S. KIRLOSKAR(Proprietor) Chairman Managing Director

PLACE : BangaloreDATE : May 31, 2010

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19

CASH FLOW STATEMENT FOR THE YEAR ENDED 31.03.2010

As at As at31.03.2010 31.03.2009

(Rs. in Lakhs) (Rs. in Lakhs)

A. CASH FLOW FROM OPERATING ACTIVITIESNet Profit/(Loss) after extra ordinary items (11.59) (10.30)Adjusted for:Depreciation 0 0Miscellaneous Expenses 0 0Advances/Liabilities Written off 0 0

(11.59) (10.30)Adjusted ForTrade & Other receivables (0.02) (0.03)Trade payable 11.73 11.71 10.47 10.44

Net Flow from operating activites 0.12 0.14

B. CASH FLOW FROM INVESTING ACTIVITIESInvestment Realised 0.00 0.00

0.00 0.00

C. CASH FLOW FROM FINANCING ACTIVITIESIncrease/Decrease in Loan components 0.00 0.00 0.00 0.00

Net Increase/(Decrease in cash andcash equivalents) ( A+B+C) 0.12 0.14Cash and Cash equivalents (Op.Bal) 6.53 6.39Cash and Cash equivalents (Cl.Bal) 6.65 6.53

For Divakara & Associates For and on behalf of the BoardChartered Accountants

POLALI DIVAKAR RAO SUKUMAR R. KIRLOSKAR AJAY S. KIRLOSKAR(Proprietor) Chairman Managing Director

PLACE : BangaloreDATE : May 31, 2010

AUDITORS’ CERTIFICATE

We have examined the attached Cash Flow Statement of Kirloskar Multimedia Limited for the period ended31st March, 2010. The Statement has been prepared by the Company in accordance with the requirementsof listing agreements with Stock Exchanges and is based on and derived from the audited accounts of thecompany for the period ended 31st March 2010.

Place : Bangalore For Divakara & AssociatesDATE : May 31, 2010 Chartered Accountants

Divakar (Proprietor)

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Statement of Subsidiary Company

KIRLOSKAR MULTIMEDIA INC - Financial Statements for the year ended 31st December, 2009

DIRECTORS’ REPORT

The Directors submit their report together with the financial statements of the Company for the period ended31st December 2009.

BUSINESS OF THE COMPANY

During the period under review the Company has not conducted any business activity in the USA. TheCompany operated a branch in London until March 31, 1996.

COUNTRY OF INCORPORATION

The Company was incorporated in USA on 30th June, 1995.

BOARD OF DIRECTORS

Mr. Ajay S. Kirloskar is the sole director of the Company.

AUDITORS

Since the Company has not conducted any business in the US during the period, the financial statementsare not required to be audited under the US Law. Hence, the auditors have not been appointed.

By order of the Board

AJAY S KIRLOSKARDirector

Statement of Subsidiary Company (Continued)KIRLOSKAR MULTIMEDIA INC - Financial Statements for the year ended 31st December, 2009

BALANCE SHEET AS AT 31ST DECEMBER, 2009

As at 31.12.2009 As at 31.12.2008US$ US$

FIXED ASSETSCURRENT ASSETSLESS:CURRENT LIABILITIES

PROFIT & LOSS ACCOUNT (LOSS) $175,000 $175,000

TOTAL $175,000 $175,000FINANCED BYEQUITY $175,000 $175,000

TOTAL $175,000 $175,000

for KIRLOSKAR MULTIMEDIA, INC.

AJAY S. KIRLOSKARDirector

REGISTERED OFFICEC/o. 650 Page Mill RoadPalp Alto, CA 94304-1050, USA

KIRLOSKAR MULTIMEDIA LIMITED ATTENDANCE SLIPRegd. Off : Kempapura, HAF Post BANGALORE - 560 024

THIS ATTENDANCE SLIP DULY FILLED-IN IS TO BE HANDED OVER ATTHE ENTRANCE OF THE MEETING HALL

Name of the attending Member(In Block Letters)

Member’s Folio Number/ID No.

No. of shares held

Name of Proxy(in Block Letters, to be filled-in if the proxy attends instead of the member)

I hereby record my presence at the EIGHTEENTH ANNUAL GENERAL MEETING to be held at 2.00 P. M.on Thursday, the 30th September, 2010 at All India RMS & MMS Union Hall, 849/4, A Block, Sahakaranagar,Bangalore - 560 092.

Place : Bangalore .............................................DATE : September 30, 2010 Member’s/Proxy’s Signature

KIRLOSKAR MULTIMEDIA LIMITED PROXY FORMRegd. Off : Kempapura, HAF Post BANGALORE - 560 024

I/We of

in the district of

being a member/members of the above named Company, hereby appoint

of in the district of

or failing him/her of in the district of

as my/our Proxy in my/our absence to attend and vote for me/us on my/our behalf at the Fourteenth AnnualGeneral Meeting of the Company to be held at 2.00 P. M. on Friday, the 30th September, 2010 at All IndiaRMS & MMS Union Hall, 849/4, A Block, Sahakaranagar, Bangalore - 560 092.

Signed this day the .....................................................2010 Affix Stamp

Note

1. A member entitled to attend and vote is entitled to appoint a proxy to attend and vote on poll insteadof himself and such proxy need not be a member.

2. Stamp should be affixed at the place provided for the signature affixed by the member/members.

3. The proxy Form thus completed be deposited at the Registered Office of the Company, not less than 48hours before the time for holding the meeting.