Project Marlin: Second Draft

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Project Marlin Financial due diligence report 8 November 2007

SECOND DRAFT

Audit experience

Audit for May FY07 Financial statement for May FY07 are still in a draft format and the draft audit report is qualified in respect of start up costs amortization and fire and life raft stations depreciation The financial statements for May FY06 had a qualified audit opinion in respect of unaudited opening balances We were not allowed to read the auditors’ working papers for May FY07 audit

Audit experience

Provisions and accruals

 The financial statements for May FY05 have not been

 Provisions and accruals are made at the financial year

audited. The auditors for May FY06 and May FY07 have been AGN Mak-Chartered Certified Accountants from Sharjah, the UAE

 We understand that management letter for May FY07 has

not been provided to TF Dubai’s management

 Financial statement for May FY06 have a qualified audit

opinion in respect of unaudited opening balances

 Financial statement for May FY07 are still in a draft format

and the draft audit report is qualified in respect of start up cost amortization and fire and life raft stations depreciation. In order to sign audit opinion, the auditors need to obtain representation letter signed by management and final balance sheet and income statement. We understand that one of the main reasons that the financial statements for May FY07 are still in draft format is that management need to make decision on profit distribution. Expected date for signing of financials has not been determined

 During the year accounting records are maintained as

combination of cash based accounting and accrual based accounting. IFRS based financial statements are prepared only at the year end with support from the auditors

Audit for May FY07  We were not allowed to read the auditor’s working papers

for May FY07 audit. Our comments below are based on limited information provided by TF Dubai’s auditors during the telephone conference attended also by TF Dubai’s Managing Director. The summary of comments provided by Marin’s auditors are disclosed below

Quality of accounting records  According to the auditors the quality of accounting records

improved in May FY07 compared to May FY06 though many aspects still need to be improved (e.g. manual accounting records to be integrated into accounting software, consistent application of IFRS based accounting policies)

end only and with support from the auditors. The auditors claim that they are satisfied with the procedures carried out at May FY07 year end in respect of provisions and accruals Receivables  At May FY07 year end the auditors asked for

confirmation from 5 largest debtors. None of them responded. However according to the auditors it was stated in the confirmation letters that response should be sent only if the customer does not agree with the amounts stated in confirmation letters Payables  At May FY07 the auditors asked for confirmation from 5

largest creditors. None of them responded. However according to the auditors it was stated in the confirmation letters that response should be sent only if the creditor does not agree with the amounts stated in confirmation letters Commitments and contingencies  Auditors claim that during the annual audit for May

FY07 they have not identified any unrecorded commitments and contingencies. Also the auditors have not identified any outstanding litigation Revenue  The auditors confirmed that they did not find any

medium / long term contracts outstanding at the May FY06 and May FY07 year end that would require recognition of work in progress

Inventory and fixed assets counts  Inventory and fixed assets are counted only at the financial

year end. At the May FY07 year end the auditors did not attend physical counts but they reviewed inventory and fixed assets and count sheets prepared by management. The This document is CONFIDENTIAL its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, United Arab Emiratesany memberadjustments firm of the KPMG network independentof member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. auditors havethenot required in of respect Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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Audit experience Audit experience; How can we benefit from auditor work

Audit experience  Audit report Components of audit report (ISA 700 Par 65) Kinds of audit report (ISA 700 & 701)

Financial Statements Notes to the financial statements

Audit Work

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Audit experience Audit experience

Audit experience  Audit report −

Components of audit report (ISA 700 par 65)  Independent Auditor’s Report  Introduction  Management's Responsibility for the Financial Statements  Auditor's Responsibility  Opinion  Report on Other Legal and Regulatory Requirements  Auditor's signature  Date of the auditor's report  Auditor's address

−

Kinds of audit report (ISA 700/701)  Unqualified audit report  Emphasis of matter  Qualified audit report  Adverse report  Disclaimer of opinion

 Financial statements −

Balance sheet

−

Income statement

−

Change in owner equity

−

Cash flows

−

Notes to the financial statements −

Foot notes in every note.

−

Last couples of notes

 Auditor work −

Working paper

−

Unadjusted audit difference

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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Audit experience Audit experience Audit report, a good starting point

Audit experience  Audit report −

Components of audit report (ISA 700 par 65)  Independent Auditor’s Report  Introduction  Management's Responsibility for the Financial Statements  Auditor's Responsibility  Opinion  Report on Other Legal and Regulatory Requirements  Auditor's signature  Date of the auditor's report  Auditor's address

−

Kinds of audit report (ISA 700/701)  Unqualified audit report  Emphasis of matter  Qualified audit report  Adverse report  Disclaimer of opinion

 Financial statements  Auditor work

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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Audit experience Audit report,

Independent Auditor’s Report To The Board of Directors of ABC Co.

Standard format (ISA 700)

We have audited the accompanying consolidated financial statements of ABC Co., which comprise the consolidated balance sheet as at 31 December, 20X7, and the consolidated income statement, consolidated statement of changes in shareholders’ equity and consolidated cash flows statement for the period then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Reasonability Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Opinion We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of ABC Co. as of 31 December, 20X7, and of its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards. City, Date Sign Address

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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To the Board of Directors Independent

Audit experience Audit report,

Independent Auditor’s Report

Components of audit report (ISA 700 par 65)

To The Board of Directors of ABC Co.

 Independent

Auditor’s Report

 Introduction  Management's

Responsibility for the Financial Statements

 Auditor's

Responsibility

 Opinion  Report on Other

Legal and Regulatory Requirements

 Auditor's

signature  Date of the

auditor's report  Auditor's address

ABC Co. 31 December 20X7

We have audited the accompanying consolidated financial statements of ABC Co., which comprise the consolidated balance sheet as at 31 December, 20X7, and the consolidated income statement, consolidated statement of changes in shareholders’ International Financial Reporting Standards equity and consolidated cash flows statement for the period then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Balance sheet, income statement, statement of change in owner equity, cash flows statement and Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance notes with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,International whether dueStandards to fraud oron error; selecting and applying appropriate accounting policies; and making accounting Auditing estimates that are reasonable in the circumstances. Auditor’s Reasonability Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Present fairly, in all material respects (or give a true and fair view of) Opinion We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of ABC Co. as of 31 December, 20X7, and of its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards. City, Date

International Financial Reporting Standards

Sign Address

31 December, 20X7 Board of directors report Place and date Signature of the auditor

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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Audit experience Audit report, (ISA 700/701)  Unqualified audit

report

 Emphasis of

matter

 Qualified audit

report

 Adverse report  Disclaimer of

opinion

 Unqualified audit report

present fairly, in all material In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of ABC respects, Co. as of 31 December, 20X7, and of its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards.

It is also referred to as clean audit report.  Emphasis of matter Without Without qualifying our opinion we draw attention to Note X to the financial statements. qualifying It is not a qualification but a point that the auditor need to draw the attention of the reader to. Qualified audit report A qualified opinion should be expressed when the auditor concludes that an unqualified opinion cannot be expressed but that the effect of any disagreement with management, or limitation on scope is not so material and pervasive as to require ‘except as for’ an adverse opinion or a disclaimer of opinion. A qualified opinion should be expressed being 'except for' the effects of the matter to which the qualification relates. Adverse opinion An adverse opinion should be expressed when the effect of a disagreement is so material and pervasive to the financial statements that the auditor concludes that a qualification of the report is not adequate to disclose the misleading or does not incomplete nature of the financial statements. It should clearly state that the financial statement does not present fairly, in all material respects. Disclaimer of opinion A disclaimer of opinion should be expressed when the possible effect of a limitation on scope is so material and pervasive that the auditor has not been able to obtain sufficient appropriate audit evidence and accordingly is unable to express an do not express an opinion on the financial statements. The report should state that the auditor do not express an opinion on the financial opinion statements”.

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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Audit experience Financial Statements Balance Sheet Income statement Change in owner equity Cash flows Notes to the financial statement - Foot notes in every note - Last couples of notes

Audit experience Audit report Financial statements −

Balance sheet

−

Income statement

−

Change in owner equity

−

Cash flows

−

Notes to the financial statements −

Foot notes in every note.

−

Last couples of notes

Auditor work

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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Audit experience Financial Statements Balance Sheet Income statement Change in owner equity Cash flows Notes to the financial statement - Foot notes in every note - Last couples of notes

Components of financial statements Balance Sheet Income statement Change in owner equity Cash flows statements Notes to the financial statements

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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Audit experience Notes to the financial statement

Notes to the financial statements Foot notes in every note - Like pledge on tangible assets - Restricted cash at banks - Special terms of transactions

Last couples of notes - Comparative figures - Going concerns - Events after balance sheet date - Notes stated in the audit report - Narrative notes

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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Audit experience Audit report, a good starting point

Audit experience Audit report Financial statements Auditor work −

Auditor working papers

−

Unadjusted audit difference

−

Adjusted audit differences

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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Audit experience Auditor work

Auditor work −

Auditor working papers;  In most cases will not be given to us.

−

Unadjusted audit difference;  Immaterial audit difference amounts not adjusted last year may become material this year.

−

Adjusted audit differences;  Mistakes tend to repeat from one year to another, and since we do not audit the target then

this mistakes may not get noticed.

−

Physical count (including inventory, tangible assets, cash on hand);  Timing, process, palces

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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Audit experience Audit report, a good

Audit experience

starting point

This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2007 KPMG Lower Gulf Limited, the United Arab Emirates member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Arab Emirates. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative

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