KCP Sugar - Limited Review For The Quarter Ended June 30, 2007

KCP Sugar & Industries Corporation Ltd has informed that in the limited review report of the Company for the quarter ended June 30, 2007, the Auditors of the Company have made the following observations:

1. In respect of the Companys Sugar units, the incidental Co-generation units attached to the Sugar units, Research and Development unit and Registered Office, part of the expenses incurred towards staff costs and manufacturing expenses (included in other expenses) and depreciation have been recognized as such during the quarter ending June 30, 2007 only to the extent they are relatable to the production of sugar manufactured and electric energy generated during the said quarter. In the opinion of the Companys Management, the remaining expenses are relatable to the sugar to be produced and electric energy to be generated in the coming season, which commences and predominantly extends thorough the last two quarters of the year. The expenses so deferred are as follows.

(i) Other Expenditure - Rs 590.67 lakhs

(ii) Depreciation - Rs 150.88 lakhs

2. It has been explained to the Auditors by the Companys Management that, the Sugar Industry and the incidental co-generation activity being a seasonal in nature and since the sugar season does not match with the Companys financial year, recognition of expenses strictly in the period in which they have been incurred would result in substantial distortion of the financial results in different quarters of the financial year. It is therefore, the consistent practice followed by the Company, to identify such expenses incurred during the off-season that are relatable to the coming season, and to defer them and recognize them only in the season period.