Meritor (MTOR) 10-K/A 2007 FY Annual report (amended)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A (Amendment no. 2)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 2007
Commission file number 1-15983

ARVINMERITOR, INC.
(Exact name of registrant as specified in its charter)

Indiana	38-3354643
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2135 West Maple Road Troy, Michigan	48084-7186
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (248) 435-1000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class	Name of each exchange on which registered
Common Stock, $1 Par Value (including the associated Preferred Share Purchase Rights)	New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

          Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

          Yes x No o

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
          Yes o No x

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
          Yes x No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,  a non-accelerated filer, or a smaller reporting company. See the definitions of  “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
          Yes o No x

          The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant on March 30, 2007 (the last business day of the most recently completed second fiscal quarter) was approximately $1,290.5 million.

73,680,018 shares of the registrant’s Common Stock, par value $1 per share, were outstanding on February 29, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

          Certain information contained in the Proxy Statement for the Annual Meeting of Shareowners of the registrant held on January 25, 2008 is incorporated by reference into Part III of the Annual Report on Form 10-K for the fiscal year ended September 30, 2007.

EXPLANATORY NOTE - AMENDMENT

          ArvinMeritor, Inc. (the “company” or “ArvinMeritor) is filing this Form 10-K/A to include in its Annual Report on Form 10-K for the fiscal year ended September 30, 2007 (the “Annual Report”), pursuant to Rule 3-09 of Regulation S-X under the Securities Exchange Act of 1934, financial statements and related notes of Automotive Axles Limited (“AAL”), an unconsolidated joint venture in which the company owns a 35.52% interest.

          Rule 3-09 of Regulation S-X provides that if a 50% or less owned person accounted for by the equity method meets the first or third condition of the significant subsidiary tests set forth in Rule 1-02(w), substituting 20% for 10%, separate financial statements for such 50% or less owned person shall be filed. AAL did meet such test as of and for the year ended October 2, 2005 and the company has included in this Form 10-K/A the required audited financial statements for those periods. However, as AAL did not meet the significance test as of and for the years ended September 30, 2007 and October 1, 2006, ArvinMeritor is only required to file unaudited financial statements for that period. ArvinMeritor has included in this Form 10-K/A AAL’s unaudited financial statements for the years ended September 30, 2007 and October 1, 2006. Item 15 is the only portion of the Annual Report being supplemented or amended by this Form 10-K/A.

AAL’s financial statements are prepared in accordance with accounting principles generally accepted in India, a basis of accounting other than U.S. GAAP. Since AAL did not meet a 30% significance test set forth in Rule 3-09, the financial statements include a narrative description of differences between these two bases of accounting.

          Additionally, in connection with the filing of this Form 10-K/A and pursuant to Securities and Exchange Commission (“SEC”) rules, ArvinMeritor is including currently dated certifications. This Form 10-K/A does not otherwise update any exhibits as originally filed and does not otherwise reflect events occurring after the original filing date of the Annual Report. Accordingly, this Form 10-K/A should be read in conjunction with ArvinMeritor’s filings with the SEC subsequent to the filing of the Annual Report.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

          (a) Financial Statements, Financial Statement Schedules and Exhibits.

          (1) Financial Statements.

ArvinMeritor

The following financial statements and related notes were filed as part of the Annual Report filed with the SEC on November 19, 2007 (all financial statements listed below are those of the company and its consolidated subsidiaries):

          Consolidated Statement of Operations, years ended September 30, 2007, 2006 and 2005.

          Consolidated Balance Sheet, September 30, 2007 and 2006.

          Consolidated Statement of Cash Flows, years ended September 30, 2007, 2006 and 2005.

          Consolidated Statement of Shareowners’ Equity, years ended September 30, 2007, 2006 and 2005.

          Notes to Consolidated Financial Statements.

          Report of Independent Registered Public Accounting Firm.

Meritor WABCO

The following financial statements and related notes of Meritor WABCO Vehicle Control Systems were filed as part of Amendment No. 1 on Form 10-K/A filed with the SEC on December 20, 2007:

          Financial Statements as of and for the Year Ended September 30, 2007 (Unaudited).

          Financial Statements as of and for the Year Ended September 30, 2006 and 2005, and Independent Auditors’ Report.

Automotive Axles Limited

The following financial statements and related notes of Automotive Axles Limited are included in this Form 10-K/A pursuant to Rule 3-09 of Regulation S-X:

Financial Statements as of and for the Years Ended September 30, 2007 and 2006 (Unaudited)

Financial Statements as of and for the Year Ended September 30, 2005 and Independent

Auditors’Report

Automotive Axles Limited

Financial Statements as of and for the
Years Ended September 30, 2007 and 2006
(Unaudited)

AUTOMOTIVE AXLES LIMITED

BALANCE SHEETS AS AT 30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

		Schedule No.	2007		2006
	SOURCES OF FUNDS
	1. Shareholders’ Funds
	a) Share capital	1		151,119,750		151,119,750
	b) Reserves & surplus	2		1,104,850,371		800,324,824
				1,255,970,121		951,444,574
	2. Loan Funds
	a) Secured loans	3		841,808,890		371,671,482
	b) Unsecured loans	4		177,345,781		174,654,274
				1,019,154,671		546,325,756
	3. Deferred tax liability (net)			129,600,000		99,619,000
	TOTAL			2,404,724,792		1,597,389,330
	APPLICATION OF FUNDS
	1. Fixed Assets	5
	a) Gross block			2,331,610,966		1,947,553,469
	b) Less: Depreciation			959,871,355		797,221,438
	c) Net block			1,371,739,611		1,150,332,031
	d) Capital work-in-progress - at cost			143,806,048		91,749,688
				1,515,545,659		1,242,081,719
	2. Current Assets, Loans & Advances
	a) Current assets:
	Inventories	6		760,251,829		580,747,616
	Sundry debtors	7		912,582,196		368,201,481
	Cash and bank	8		114,902,515		25,313,956
	b) Loans & advances	9		215,718,000		121,635,895
				2,003,454,540		1,095,898,948
	Less: Current Liabilities & Provisions
	a) Current liabilities	10		969,420,125		600,233,636
	b) Provisions	11		144,855,282		140,357,701
				1,114,275,407		740,591,337
	Net Current Assets			889,179,133		355,307,611
	TOTAL			2,404,724,792		1,597,389,330
Significant Accounting Policies and Notes to ‘Balance Sheet & Profit & Loss Account		18

AUTOMOTIVE AXLES LIMITED

PROFIT AND LOSS ACCOUNTS FOR THE YEARS ENDED 30TH SEPTEMBER

2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

	Schedule No.	2007			2006
INCOME
Sales - Gross			6,944,474,039			5,242,043,571
Less: Excise duty			872,525,355			661,685,805
			6,071,948,684			4,580,357,766
Other income:
- Operational	12		44,667,209			37,187,229
- Others	13		57,901,221			5,060,639
			6,174,517,114			4,622,605,634
EXPENDITURE
Raw materials consumed	14		4,232,175,644			3,109,270,833
Increase in stock of finished goods and work-in-process	15		(54,530,677	)		(49,147,760	)
Manufacturing, administration & selling expenses	16		931,756,664			720,906,876
Interest	17		75,206,409			56,322,214
Depreciation			170,903,724			136,906,784
			5,355,511,764			3,974,258,947
Profit before tax			819,005,350			648,346,687
Provision for taxation:
- Current tax
for current year			245,700,000			194,855,000
for earlier years			—			(5,699,164	)
- Deferred tax			35,432,440			23,399,000
- Fringe benefit tax			1,600,000			2,300,000
Profit after tax			536,272,910			433,491,851
Add: Balance brought forward from previous year			518,417,398			352,334,134
Profit available for appropriation			1,054,690,308			785,825,985
APPROPRIATIONS
Proposed dividend			98,227,838			113,339,813
Interim dividend			90,671,850			83,115,863
Tax on dividend			32,103,510			27,552,910
Transfer to general reserve			53,700,000			43,400,000
Surplus carried to Balance Sheet			779,987,110			518,417,399
No. of equity shares			15,111,975			15,111,975
Basic and diluted earnings per equity share (face value of Rs. 10 per share) (Rs.)			35.49			28.69
Significant Accounting Policies and Notes to Balance Sheet & Profit & Loss Account	18

AUTOMOTIVE AXLES LIMITED
CASH FLOW STATEMENTS FOR THE YEARS ENDED 30TH SEPTEMBER
2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

					2007			2006
I) Cash Flow From Operating Activities
	A)	Net Profit before Tax and Extraordinary Items				819,005,350			648,346,687
	B)	Adjustments
		Add:
		Depreciation	170,903,724
		Interest expense	75,206,409			246,110,133			193,228,998
						1,065,115,483			841,575,685
		Less:
		Unrealized exchange gain	42,780,129						(8,761,828	)
		Profit on sale of asset (net)	86,761						974,181
		Interest Income	7,934,419			50,801,309			1,387,138
		Operating Profit Before Working Capital Changes				1,014,314,174			847,976,194
	C)	Adjustments for
		Inventory	(179,504,213	)
		Sundry debtors	(544,380,715	)
		Loans & advances	(60,446,982	)
		Current liabilities & provisions	371,048,273			(413,283,637	)		233,781,257
	D)	Cash Generated From Operations				601,030,537			1,081,757,451
		Advance tax (net of refunds)				(281,640,133	)		(223,831,284	)
	E)	Net Cash From Operating Activities				319,390,404			857,926,167
II) Cash Flow From Investing Activities
		Purchase of fixed assets (net of exchange fluctuation capitalized & assets acquired on finance lease & including capital work-in-progress)				(444,608,335	)		(540,980,634	)
		Sale of assets				327,432			3,938,361
		Interest income				7,934,419			1,387,138
		Net Cash Used in Investing Activities				(436,346,484	)		(535,655,135	)
III) Cash Flow From Financing Activities
	A)	Inflows:
		Proceeds from long term borrowings				489,590,597			240,396,679
		Proceeds from short term borrowings				650,378,812			443,773,459
						1,139,969,409			684,170,138
	B)	Outflows
		Repayment of long term borrowings				(235,713,196	)		(118,452,000	)
		Repayment of short term borrowings				(389,705,132	)		(639,932,854	)
		Dividend & tax on dividend				(234,870,437	)		(223,379,340	)
		Interest paid				(73,136,005	)		(50,923,238	)
						(933,424,770	)		(1,032,687,432	)
		Net Cash Used in Financing activities				206,544,639			(348,517,294	)
		NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				89,588,559			(26,246,262	)
		CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				25,313,956			51,560,218
		CASH AND CASH EQUIVALENTS AT END OF PERIOD				114,902,515			25,313,956

Notes:
1.	The above cash flow statement has been prepared under the “Indirect Method” as set out in the Accounting Standard 3 Cash Flow Statement issued by the Institute of Chartered Accountants of India.
2.	Cash and cash equivalents at the end of the year include balances with scheduled banks in unpaid dividend accounts of Rs.3,404,070 (previous year Rs.2,957,444).

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

			2007			2006
SCHEDULE - 1
SHARE CAPITAL
Authorized:
23,000,000 Equity shares of Rs.10 each				230,000,000			230,000,000
2,000,000 Preference shares of Rs.10 each				20,000,000			20,000,000
				250,000,000			250,000,000
Issued, Subscribed & Paid up:
15,111,975 Equity shares of Rs.10 each fully paid up				151,119,750			151,119,750
SCHEDULE - 2
RESERVES & SURPLUS
Share premium as per last Balance Sheet				115,588,500			115,588,500
General reserve:
As per last Balance Sheet	166,318,925						122,918,925
Add: Transfer from P&L Account	53,700,000			220,018,925			43,400,000
Less: Transitional liability in gratuity	(16,195,604	)
Deferred tax asset on the above	5,451,440			(10,744,164	)		—
Balance as on 30th September, 2007				209,274,761			166,318,925
Surplus in Profit & Loss Account				779,987,110			518,417,399
TOTAL				1,104,850,371			800,324,824

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

	2007		2006
SCHEDULE - 3
SECURED LOANS
From Financial Institutions:
- Finance lease obligations (include amounts due within one year  Rs. 1,200,053, previous year Rs. 901,533)		2,085,580		2,137,950
From Banks:
- Foreign currency term loans (include amounts due within one year  Rs.73,652,500, previous year Rs. 46,020,000)		159,040,000		230,100,000
- Rupee term loans (include amounts due within one year Rs. 99,375,000, previous year Rs. 27,043,475)		388,750,000		108,173,902
- Working capital borrowings		291,933,310		31,259,630
		839,723,310		369,533,532
TOTAL		841,808,890		371,671,482

Notes:
	1.	Foreign currency term loan of Rs. 159,040,000 (previous year Rs. 230,100,000) is secured by first charge on the entire plant & machinery of the Company.
	2.	Rupee term loan of Rs. 388,750,000 (previous year Rs.108,173,902) is secured by a first pari-passu charge by hypothecation of the plant and machinery of the Company.
	3.	Working capital borrowings include: Working capital facilities from banks and financial institutions of Rs.291,933,310 (previous year Rs. 31,25,960) secured by a first charge ranking pari-passu inter-se, by way of hypothecation of current assets.
	4.	Finance lease obligations are secured by assets purchased under the respective agreements.

SCHEDULE - 4
UNSECURED LOANS
From Bank:
Foreign currency term loans (include amounts due within one year Rs. 33,369,661, previous year Rs. 24,036,314)	157,613,486	132,212,946
From the Govt. of Karnataka:
- Development loan - interest free (includes amount due within one year of Rs. 37,033 in 2006)	—	37,033
- Sales tax loan - interest free (includes amounts due within one year Rs. 19,472,000, previous year Rs. 22,672,000	19,732,295	42,404,295
TOTAL	177,345,781	174,654,274

AUTOMOTIVE AXLES LIMITED 
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE - 5

FIXED ASSETS

	GROSS BLOCK AT COST				DEPRECIATION				NET BLOCK
DESCRIPTION	Balance at 1st October 2006	Additions/ adjustments during the year	Disposals/ adjustments during the year	Balance at 30th September 2007	Up to 30th September 2006	For the year	Adjustments during the year	Balance at 30th September 2007	At 30th September 2007	At 30th September 2006
Land - Freehold	3,832,366	—	—	3,832,366	—	—	—	—	3,832,366	3,832,366
Building	136,013,378	54,629,394	—	190,642,772	33,702,592	6,054,141	—	39,756,733	150,886,039	102,310,786
Plant & machinery	1,766,461,599	328,494,676	6,705,931	2,088,250,344	738,514,657	159,369,335	6,664,565	891,219,427	1,197,030,917	1,027,946,942
Furniture & office equipment	36,049,246	8,418,872	1,519,111	42,949,007	22,636,207	4,679,961	1,392,284	25,923,884	17,025,123	13,413,039
Vehicles (b)	5,168,384	1,009,034	269,437	5,907,981	2,339,487	800,287	196,958	2,942,816	2,965,165	2,828,897
Assets held for disposal	28,496	—	—	28,496	28,495	—	—	28,495	1	1
Total	1,947,553,469	392,551,976	8,494,479	2,331,610,966	797,221,438	170,903,724	8,253,807	959,871,355	1,371,739,611	1,150,332,031
Capital work in progress (a)									143,806,048	91,749,688
Total									1,515,545,659	1,242,081,719
Previous Year	1,482,359,137	567,951,878	102,757,546	1,947,553,469	760,108,020	136,906,784	99,793,366	797,221,438	1,242,081,719

(a)	Capital work in progress includes capital advances Rs. 54,682,938 (previous year Rs. 56,961,264).
(b)	Vehicles include Rs. 5,204,231 (previous year Rs. 4,459,711) purchased under finance lease arrangements.

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

	2007		2006
SCHEDULE - 6
CURRENT ASSETS
Inventories (at the lower of cost and net realisable value)
Raw materials & components		453,435,105		349,727,928
Work-in-process		206,505,966		155,078,434
Finished goods		23,576,756		20,643,242
Stores & spares		76,734,002		55,298,012
		760,251,829		580,747,616
SCHEDULE - 7
SUNDRY DEBTORS
(Unsecured, considered good)
Over Six months		1,162,706		316,621
Others		911,419,490		367,884,860
		912,582,196		368,201,481
Include amounts due from Meritor HVS (India) Ltd., a company under the same management.		728,846,284		286,160,896
SCHEDULE - 8
CASH AND BANK BALANCES
Cash on hand		73,613		44,720
Checks on hand		—		6,757,978
Bank balances with scheduled banks in current accounts		114,828,902		18,511,258
		114,902,515		25,313,956

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

			2007				2006
SCHEDULE - 9
LOANS & ADVANCES (considered good)
Advances recoverable in cash or in kind or for value to be received				165,801,642				106,019,939
Advance income tax	719,612,639				440,277,516
Less: Provision for income tax	(678,047,369	)		41,565,270	(432,347,369	)		7,930,147
Deposits with Govt. authorities				7,896,090				7,107,612
Balances with Customs & Central Excise Department				53,323				17,323
Deposits - others				401,675				560,875
TOTAL				215,718,000				121,635,895
Note:
1. Of the above:
- Secured				—				1,550,000
- Unsecured				215,718,000				120,085,895
				215,718,000				121,635,895
2. Advances recoverable includes amounts due from Meritor HVS (India) Ltd., a company under the same management				27,885				195,111
Maximum amount outstanding during the year				195,111				195,111
SCHEDULE - 10
CURRENT LIABILITIES
Sundry creditors
- Small scale undertakings				23,682,309				15,648,983
- Others				551,306,377				416,854,645
Other liabilities				120,670,872				46,706,604
Interest accrued but not due on loans				9,614,571				7,544,167
Unpaid dividend #				3,404,070				2,957,244
Bills payable				255,794,305				106,582,070
Advances From suppliers				4,947,621				3,939,923
TOTAL				969,420,125				600,233,636
# There is no amount due and outstanding as at the Balance Sheet date to be credited to the Investor Education and Protection Fund

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

			2007				2006
SCHEDULE - 11
PROVISIONS
Provision for employee benefits				19,166,965				6,251,008
Warranty				10,705,997				4,105,298
Provision for fringe benefit tax	4,568,141				2,968,141
Less: Advance fringe benefit tax	(4,507,479	)		60,662	(2,202,469	)		765,672
Proposed dividend				98,227,838				113,339,813
Tax on proposed dividend				16,693,820				15,895,910
TOTAL				144,855,282				140,357,701
SCHEDULE - 12
OPERATIONAL INCOME
Jobbing charges				9,304,531				16,677,313
Scrap sales				2,877,576				2,072,042
Others				32,485,102				18,437,874
TOTAL				44,667,209				37,187,229
SCHEDULE - 13
OTHER INCOME
Profit on sale of assets (net)				86,761				974,181
Interest (tax deducted at source Rs. 1,221,846, previous year Rs. 228,303)				7,934,419				1,387,138
Exchange gain				49,318,539				—
Miscellaneous income				561,502				2,699,320
TOTAL				57,901,221				5,060,639
SCHEDULE - 14
RAW MATERIALS CONSUMED
Opening stock				349,727,928				294,979,296
Add: Purchases	4,556,020,841
Less: Cash discount & scrap sales	220,138,020			4,335,882,821				3,164,019,465
				4,685,610,749				3,458,998,761
Less: Closing stock				453,435,105				349,727,928
TOTAL				4,232,175,644				3,109,270,833

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

	2007			2006
SCHEDULE - 15
INCREASE IN STOCK OF FINISHED GOODS & WORK-IN- PROCESS
Closing stock
- Finished goods		23,576,756			20,643,242
- Excise duty on finished goods		(2,918,158	)		(3,087,789	)
- Work-in-process		206,505,966			155,078,434
		227,164,564			172,633,887
Opening stock
- Finished goods		20,643,242			22,058,581
- Excise duty on finished goods		(3,087,789	)		(2,876,528	)
- Work-in-process		155,078,434			104,304,074
		172,633,887			123,486,127
TOTAL		(54,530,677	)		(49,147,760	)
SCHEDULE - 16
MANUFACTURING, ADMINISTRATION AND SELLING EXPENSES
Payments to and provision for employees:
-Salaries & wages		222,211,165			183,063,593
-Contribution to Provident Fund and other funds		19,388,572			21,728,627
-Welfare expenses		25,235,402			20,239,378
		266,835,139			225,031,598
Stores & spares consumed		159,792,701			124,342,119
Power & fuel		151,111,193			145,231,867
Rates & taxes		908,359			1,140,007
Travelling expenses		5,278,819			6,209,293
Repairs & maintenance
- Buildings		19,000			110,596
- Plant & machinery		57,639,651			33,949,261
- Others		4,230,806			3,423,964
Insurance charges		4,421,682			3,017,457
Postage, telephone & telegrams		1,766,882			1,449,753
Vehicle running expenses		1,230,746			1,182,252
Directors’ sitting fees		440,000			420,000
Legal and professional fees		11,562,917			11,182,272
Technical fees		10,626,919			—
Bank charges / commission		1,663,287			1,924,036
Outside processing charges		179,578,378			119,650,566
Lease rent		494,160			429,685
Exchange loss		—			14,726,742
Warranty		22,015,521			6,913,881
Export expenses		32,677,037			294,133
Miscellaneous expenses		19,463,467			20,277,394
TOTAL		931,756,664			720,906,876
SCHEDULE - 17
INTEREST
Interest on term loans		45,319,175			27,106,024
Interest on working capital borrowings		29,887,234			29,216,190
TOTAL		75,206,409			56,322,214

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS

1.	Significant Accounting Policies
	a)	Accounting Convention
		The financial statements are prepared under the historical cost convention, on the accrual basis of accounting, to comply in all material respects with the mandatory accounting standards issued by the Institute of Chartered Accountants of India and requirements in the Indian Companies Act, 1956.
	b)	Use of Estimates
		The preparation of financial statements in conformity with Indian GAAP requires that the management makes estimates & assumptions that affect the reported amount of assets & liabilities, disclosure of contingent liabilities as at the date of financial statements & reported amounts of revenue & expenses during the reported period. Actual results could differ from those estimates.
	c)	Fixed Assets and Depreciation
		(i)	Fixed Assets
			Fixed assets are stated at cost (net of CENVAT) less accumulated depreciation. Cost includes all costs relating to the acquisition and installation of fixed assets including interest on borrowings for the project / fixed asset till the date of commercial production or the assets are put in use.
			Expenditure on reconditioning of machinery is capitalised where such expenditure results in increase in the future benefits from the asset and / or results in an extension of the useful life of the asset based on technical assessment.
		(ii)	Depreciation
			Depreciation on buildings and plant & machinery is provided under the “straight line method” and on other assets under the “reducing balance method” at the rates specified in Schedule XIV to the Companies Act, 1956 (the “Schedule”), based on technical estimates that indicate the useful lives would be comparable with or higher than those arrived at using these rates
			In cases where the useful lives are estimated to be lower than those considered in determining the rates specified in the Schedule, depreciation is provided under the straight line method over the useful lives of the assets as follows:

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

Reconditioned machinery and related expenditure	As specifically estimated and currently ranging between 3 and 10 years
Tools, jig and fixtures and measuring gauges	2 to 5 years
Certain imported machinery	As per technical evaluation of their useful life and currently ranging between 4 to 15 years

In case of diminution in value of the asset due to technological reasons, the difference between written down value and estimated net realisable value of assets is provided as depreciation in the year in which it is ascertained.

d)	Inventories
	Raw material, stores & spares, work-in process and finished goods are valued at the lower of cost and estimated realisable value. Cost of materials is determined on weighted average basis. In the case of work-in-process and finished goods, cost includes the cost of conversion. Closing stock of finished goods includes liability towards excise duty payable on clearance of goods. Imported materials in transit at the year-end are valued inclusive of customs duty.
e)	Foreign Currency Transactions
	Monetary assets & liabilities denominated in foreign currency at the balance sheet date are translated into rupees at the exchange rate prevailing on that date. Gains or losses arising on settlement / restatement are charged to the Profit & Loss Account.
	Premium in respect of forward contract is accounted over the period of the contract.
f)	Revenue Recognition
	Sales: - Sales are recognised on dispatch and transfer of underlying risk & rewards as per contracted terms and are recorded at invoice value, net of sales taxes, but including excise duties.
	Export incentives: Export incentives are accounted for on accrual basis at the time of export of goods if the entitlements can be estimated with reasonable accuracy and conditions precedent to claim are fulfilled.

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

g)	Research and Development
	Revenue expenditure on research and development is charged to the Profit and Loss Account in the year of incurrence. However capital expenditure on research and development is treated in the same way as other fixed assets.
h)	Employee Benefits
	a)	Defined Contribution Plan
		Company’s contributions paid / payable during the year to Provident Fund and Superannuation Fund are recognised in the Profit and Loss Account.
	b)	Defined Benefit Plan
		Liabilities for gratuity funded in terms of a scheme administered by a fund manager are determined by an independent actuarial valuation made at the end of each financial year. Provision for liabilities pending remittance to the fund is carried in the Balance Sheet.
		Actuarial gain and losses are recognized immediately in the Profit and Loss Account as income or expense. Obligation is measured at the present value of estimated future cash flows using a discount rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation.
	c)	Liability for leave encashment is provided based on accumulated leave credit outstanding to the employees as on the date of Balance Sheet.
i)	Events Subsequent to the Balance Sheet Date
	Events occurring after the balance sheet date, which have a material impact on the financial affairs of the Company, are taken into cognisance.
j)	Prior Period and Extraordinary Items
	Prior period and extraordinary items, and changes in accounting policies, having a material impact on the financial affairs of the Company are disclosed.
k)	Income Tax
	Income tax comprises the current tax provision, net change in the deferred tax asset or liability in the year and fringe benefit tax.

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

	Provision for current tax is made taking into account the admissible deductions / allowances and is subject to revision based on the taxable income for the fiscal year ending 31 March each year.
	Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between carrying values of the assets and liabilities and their respective tax bases and are measured using enacted tax rates applicable on the Balance Sheet date. Deferred tax assets are recognized subject to management’s judgment that realization is virtually certain.
	The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement in the period of enactment of the change.
	Fringe benefit tax has been provided as per provisions of Indian Income Tax Act, 1961.
l)	Cash flow Statement
	Cash Flow Statement has been prepared in accordance with the indirect method prescribed in Accounting Standard 3 issued by the Institute of Chartered Accountants of India.
m)	Impairment of Assets
	The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal / external factors. An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to Profit and Loss Account in the year in which an asset is identified as impaired. The recoverable amount is greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to the present value. A previously recognized impairment loss is further provided or reversed depending on changes in circumstances.
n)	Earning Per Share
	In determining the earning per share, the Company considers the net profit after tax. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period. The number of shares used in computing diluted earning per share comprises the weighted average shares considered for deriving basic earning per share and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period unless issued at a later date.
o)	Provision & Contingencies
	A Provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their present values and are determined based on best estimate required to settle the obligation at the balance sheet date. These

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Warranty expenses are provided for in the year of sale based on technical estimates. In addition, specific provision is also made against customer claims for manufacturing defects, where necessary.

2 (a)	Installed Capacity
			30th September
			2007	2006
	Axle housing (a component of axle)	(Nos.)	162,500	150,000
	Complete axles	(Nos.)	130,000	108,000
	Brake assemblies **	(Nos.)	1,248,000	510,000
	Gear sets	(MT)	7,163	6,765
	(as certified by management and relied upon by the auditors, being a technical matter)

(b)		Actual Production
				Year ended 30th September
				2007	2006
		Axle housings* (a component of axle)	(Nos.)	137,947	114,041
		Complete axles	(Nos.)	104,633	92,034
		Gear sets@	(MT)	4561.84	4099.89
	@	Includes jobbing11.06 MT ( previous year 65.62 MT )
	*	Actual production of axle housings includes 104,633 Nos. used for production of complete axles (previous year 92,034 Nos.).
	**	Brake assemblies include sub assemblies.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

3. Details of Gross Sales: (Excluding Warranty Replacements & Samples)

		Year ended 30th September 2007				Year ended 30th September 2006
		Quantity (Nos.)		Amount		Quantity (Nos.)		Amount
•	Axle housing		33,373		388,741,592		22,391		207,515,418
•	Axles		104,740		5,400,522,679		91,945		4,403,510,241
•	Spares				1,155,209,768				631,017,911
					6,944,474,039				5,242,043,570

4. Opening and Closing Stock of Finished Goods

		2007				2006
		Quantity (Nos.)		Amount		Quantity (Nos.)		Amount
Opening Stock:
•	Axle housing		208		1,795,880		592		5,435,122
•	Axles		383		15,254,369		294		10,223,710
•	Others				3,592,993				6,399,749
					20,643,242				22,058,581
Closing Stock:
•	Axle housing		42		451,129		208		1,795,880
•	Axles		276		16,118,008		383		15,254,369
•	Others				7,007,619				3,592,993
					23,576,756				20,643,242

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

5. Raw Materials and Components Consumed

		Year ended 30th September 2007				Year ended 30th September 2006
		Quantity		Amount		Quantity		Amount
•	Steel (MT)		27,546		883,669,877		22,556		642,829,188
•	Castings (Nos.)		849,432		553,805,697		538,847		357,196,817
•	Forgings (Nos.)		1,331,391		951,556,990		1,351,576		746,971,902
•	Bought out finished components				1,617,017,812				1,144,571,713
•	Others				226,125,268				217,701,213
					4,232,175,644				3,109,270,833

6. Value of Raw Materials, Stores & Spares Consumed During the Year

		Year ended 30th September 2007				Year ended 30th September 2006
		Consumption %		Amount		Consumption %		Amount
a) Raw Materials
•	Imported		2		85,917,610		2		48,546,270
•	Indigenous		98		4,146,258,034		98		3,060,724,564
			100		4,232,175,644		100		3,109,270,834
b) Stores & Spares
•	Imported		1		2,028,579		1		943,907
•	Indigenous		99		157,764,122		99		123,398,212
			100		159,792,701		100		124,342,119

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

7. Value of Imports on C.I.F. Basis

	Year ended 30th September 2007		Year ended 30th September 2006
i. Raw material		76,322,509		82,298,650
ii. Consumables & spares		9,712,886		2,337,851
iii. Capital goods		149,956,995		275,143,194
		235,992,390		359,779,695

8. Expenditure in Foreign Currency

	Year ended 30th September 2007		Year ended 30th September 2006
a)   Foreign travel		2,439,481		3,039,857
b)   Bank charges		153,657		812,191
c)   Others		5,415,399		3,758,641
d)   Interest		20,311,462		13,728,133

9. Remittances in Foreign Currency on Account of Dividends to Non-resident Shareholders

		Year ended 30th September 2007		Year ended 30th September 2006
a. No. of non-resident shareholders			1		1
b. No. of equity shares held			5,367,275		5,367,275
c. Amount of dividend paid			72,458,212		69,774,575
d. Year to which dividend relates
	Final dividend		2005-2006		2004-2005
	Interim dividend		2006-2007		2005-2006

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

10. Managerial Remuneration

	Year ended 30th September 2007		Year ended 30th September 2006
Salary & allowances		7,501,641		5,325,188
Contribution to Provident and other funds		1,271,417		959,312
Perquisites		326,062		604,089
		9,099,120		6,888,589

11. Payment to Auditors

	Year ended 30th September 2007		Year ended 30th September 2006
As Auditors		1,548,000		1,290,000
In other capacity		650,102		575,000
Service tax (including education cess as applicable)		265,493		228,276
Reimbursement of expenses		169,885		92,936
		2,633,480		2,186,212

12. Employee Benefits:

The Company has adopted the revised Accounting Standard (AS) 15 on Employee Benefits with effect from 1^st October 2006, the details of which are given below:

I Defined Contribution Plans

During the year, the Company has recognized the following amount in the Profit and Loss Account -

Particulars	Year ended 30th September 2007
Employers’ contribution to Provident Fund including Family Pension Fund*		12,516,414
Superannuation Fund*		4,448,700

* Included in contribution to provident and other funds (Refer Schedule - 16)

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

II Defined Benefit Plan

a) Defined Benefit Plan (Leave Encashment)

Leave encashment benefit expensed in the Profit & Loss Account for the year is Rs.5,668,645.

b) Contribution to Gratuity Fund

In accordance with Accounting Standard 15 (Revised 2005) actuarial valuation as on September 30, 2007 was done in respect of the aforesaid defined benefit plan of Gratuity based on the following assumptions:

	Percentage
Discount rate		8.00%
Expected rate of return on plan assets		8.00%
Salary escalation rate		6.50%

Change in Present Value of Obligation

	Year ended 30th September 2007
Present value of obligation as at 1st October, 2006		40,423,702
Current service cost		2,345,786
Interest on defined benefit obligation		1,616,948
Benefits paid		(1,568,328	)
Net actuarial gains recognized in year		(1,512,252	)
Closing present value of obligations 30th September 2006		41,305,856

Change in the Fair Value of Assets

	Year ended 30th September 2007
Opening fair value of plan assets		24,228,098
Expected return on plan assets		969,124
Actuarial gains		392,696
Contributions by employer		5,389,420
Benefits paid		(1,568,328	)
Closing fair value of plan assets		29,411,010

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

Reconciliation of Present Value of Defined Benefit Obligation and the Fair Value of Plan Assets

	30th September 2007
Closing present value of funded obligations		41,305,856
Closing fair value of plan assets		29,411,010
Closing funded status		(11,894,846	)
Unrecognized actuarial (gains) / losses		—
Unfunded net liability recognised in Balance Sheet		(11,894,846	)

Amount Recognized in the Balance Sheet

	30th September 2007
Closing present value of obligations		41,305,856
Closing fair value of plan assets		29,411,010
Liability recognised in the Balance Sheet		(11,894,846	)

Expenses recognized in the Profit & Loss Account

	Year ended 30th September 2007
Current service cost		2,345,786
Past service cost		—
Interest cost		1,616,948
Expected return on plan assets		(969,124	)
Actuarial losses		(1,904,948	)
Total expenses to be recognized in the Profit & Loss Account		1,088,662

In accordance with revised Accounting Standard 15 “Employee Benefit”, issued by the Institute of Chartered Accountants of India, the transitional liability of Rs. 16,195,604 in respect of Gratuity existing as on 1^st October 2006 is adjusted against opening balance of General Reserve, net of deferred tax adjustment of Rs. 5,451,440. The impact of the change in the method of calculating such liability on the current year’s Profit and Loss Account is estimated not to be material.

The above disclosures have been consequent to early adoption of revised AS 15. Therefore, figures for the previous year have not been disclosed.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

13. Segment Reporting

	Domestic			Sale for Exports (Note 2 Below)			Consolidated
I. Revenue
Sales to external customers		6,014,705,872 (4,824,092,403	)		971,506,735 (453,120,963	)		6,986,212,607 (5,277,213,366	)
Segment result		709,710,924 (654,640,149	)		202,118,728 (124,777,667	)		911,829,652 (779,417,816	)
Unallocated expenses, net of unallocated income								17,617,893 (74,748,917	)
Operating profit								894,211,759 (704,668,900	)
Interest expense								75,206,409 (56,322,214	)
Income taxes								282,732,440 (214,854,836	)
Net profit								536,272,910 (433,491,850	)
II. Other Information
Segment assets		1,441,122,112 (835,213,988	)		231,711,903 (113,735,109	)		1,672,834,015 (948,949,097	)
Unallocated assets								2,524,213,543 (1,388,265,899	)
Total assets								4,197,047,558 (2,337,214,996	)
Liabilities: Unallocated liabilities								2,941,077,447 (1,286,151,421	)
Total liabilities								2,941,077,447 (1,286,151,421	)
Depreciation		129,761,815 (118,362,805	)		35,521,945 (14,330,797	)		165,283,760 (132,693,602	)
Depreciation -Unallocable								5,619,964 (4,213,182	)

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

13. Segment Reporting (Cont…)

1.	The Company has identified its primary segment as geographical, i.e., domestic and exports. Export markets have been considered together as the products sold to these markets have comparable risks and rewards.
2.	Sales for exports represent export sales channelised through Meritor HVS (India) Limited and includes DEPB.
3.	There are no inter-segment transactions during the year.
4.	Fixed Assets of the Company have not been identified to the segments as they are common to the segments. Depreciation has been allocated to segments based on standard rates determined by the Company.
5.	Secondary segment disclosures have not been furnished as there is only a single business segment.
6.	Figures in brackets relate to the previous year.

14. Related Party Transactions

a. List of Related Parties and Relationships

Relationship	Related Parties
(i) Controlling Enterprises	Meritor Heavy Vehicle System LLC, USA Arvin Meritor Inc.
(ii) Other related parties with whom the Company had transactions:
Enterprises under common control	Bharat Forge Limited Kalyani Forge Limited Meritor HVS Cameri, SPA Italy Meritor HVS India Ltd. Meritor HVS, Florence Meritor Automotive Inc., Fletcher, USA Meritor Automotive Inc., Ohio, USA Meritor HVS, Sweden
Key Management Personnel	Mr. B.N. Kalyani, Chairman (Non-retiring) Mr. Ashok Rao, President and Wholetime Director Mr. C. K. Sabareeshan, Executive Director    (Finance) & Company Secretary

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

b. Transactions with Related Parties

	Transactions	Controlling Enterprises		Enterprises under Common Control		Key Management Personnel and their Relatives	Total
1)	Purchase of Goods
	Bharat Forge Limited	—		178,456,753		—	178,456,753
		—		(121,425,794	)	—	(121,425,794	)
	Others	19,649,976		4,095,070		—	23,745,046
		(26,794,480	)	(4,633,316	)	—	(31,427,796	)
		19,649,976		182,551,823		—	202,201,799
		(26,794,480	)	(126,059,110	)	—	(152,853,590	)
2)	Sale of goods
	Meritor HVS (India) Limited	—		6,673,191,772		—	6,673,191,772
		—		(5,167,022,975	)	—	(5,167,022,975	)
	Bharat Forge Limited	—		23,336,536		—	23,336,536
		—		(29,425,327	)	—	(29,425,327	)
		—		6,696,528,308		—	6,696,528,308
		—		(5,196,448,302	)	—	(5,196,448,302	)
3)	Purchase of Fixed Assets
	Bharat Forge Limited	—		5,954,744		—	5,954,744
				—			—
	Other	—		—		—	—
		(715,061	)	—		—	(715,061	)
4)	Services Received
	Bharat Forge Limited	—		117,232,353		—	117,232,353
		—		(101,124,781	)	—	(101,124,781	)
	Others	—		16,497,086		—	16,497,086
		—		(6,785,635	)	—	(6,785,635	)
		—		133,729,439		—	133,729,439
		—		(107,910,416	)	—	(107,910,416	)

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

b. Transactions with Related Parties (Cont…)

	Transactions	Controlling Enterprises	Enterprises under Common Control		Key Management Personnel and their Relatives		Total
5)	Services Rendered
	Bharat Forge Limited	—	657,017		—		657,017
		—	(2,926,102	)	—		(2,926,102	)
	Others	—	159,000		—		159,000
		—	(159,000	)	—		(159,000	)
		—	816,017		—		816,017
		—	(3,085,102	)	—		(3,085,102	)
6)	Other Recoveries
	Bharat Forge Limited	—	2,144,979		—		2,144,979
		—	—		—		—
	Meritor HVS (India) Limited	—	533,503		—		533,503
		—	(501,615	)	—		(501,615	)
		—	2,678,482		—		2,678,482
		—	(501,615	)	—		(501,615	)
7)	Trade Advances Paid
	Bharat Forge Limited	—	8,970,420		—		8,970,420
		—	(23,455,000	)	—		(23,455,000	)
8)	Managerial Remuneration and Sitting Fees
	Mr. Ashok Rao	—	—		5,173,403		5,173,403
		—	—		(3,969,211	)	(3,969,211	)
	Mr. C.K. Sabareeshan	—	—		3,925,717		3,925,717
		—	—		(2,919,378	)	(2,919,378	)
	Others	—	—		60,000		60,000
		—	—		(60,000	)	(60,000	)
		—	—		9,159,120		9,159,120
		—	—		(6,948,589	)	(6,948,589	)

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

b. Transactions with Related Parties (Cont…)

		Transactions	Controlling Enterprises	Enterprises under Common Control		Key Management Personnel and their Relatives		Total
Amounts Outstanding at the Balance Sheet Date
	9)	Amounts Receivable
		Meritor HVS (India) Limited	—	728,874,169		—		728,874,169
			—	(286,160,896	)	—		(286,160,896	)
		Others	—	4,319,746		—		4,319,746
			—	(2,782,627	)	—		(2,782,627	)
			—	733,193,915		—		733,193,915
			—	(288,943,523	)	—		(288,943,523	)
	10)	Amounts Payable
		Bharat Forge Limited	—	66,682,839		—		66,682,839
			—	(43,191,659	)	—		(43,191,659	)
		Others	—	610,245		—		610,245
			—	(1,764,607	)	(1,541,235	)	(3,305,842	)
				67,293,084		—		67,293,084
				(44,956,266	)	(1,541,235	)	(46,497,501	)

1.	Related party relationships are as identified by the Company on the basis of information available with them and accepted by the auditors.
2.	No amount is/has been written off or written back during the year in respect of debts due from or to related parties.
3.	Figures in brackets relate to the previous year.

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

15. Deferred Tax

The net deferred tax liability comprises the tax impact arising from timing differences on account of the following:

	2007		2006
Depreciation & amortisation	409,447,267		343,825,840
Provision for employee benefits & others	(28,895,030	)	(48,444,534	)
	380,552,237		295,376,306
Net deferred tax liability relating to the above	129,600,000		99,619,000

16.	Leases
(a)	Finance Lease: The lease transactions of the Company represent lease of vehicles on a non-cancelable basis. The minimum lease payments under the various agreements are given below:

	2007	2006
Amount repayable not later than one year	1,200,053	901,533
Amount repayable later than one year and not later than five years	1,250,857	1,529,822
Total	2,450,910	2,431,355
Less: Interest	365,330	293,405
Present value of minimum lease payments	2,085,580	2,137,950

(b) Operating Lease: The Company has taken vehicles for certain employees under operating leases, which expire in the year 2010. Gross rental expenses for the year ended September 30, 2007 aggregated to Rs. 494,160 (2006: Rs. 429,685). The committed lease rental in the future are:

	2007	2006
Not later than one year	494,160	494,160
Later than one year and not later than five years	1,052,795	1,546,955

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS

30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)

All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

17. Earnings Per Share:

	2007		2006
Profit after tax attributable to ordinary share holders (Rs.)		536,272,910		433,491,850
Weighted average number of shares outstanding during the year		15,111,975		15,111,975
Nominal value of ordinary shares (Rs.)		10		10
Basic and diluted earnings per ordinary share (Rs.)		35.49		28.69

18. Details of Provisions Under AS - 29 (Provisions, Contingent Liabilities and Contingent Assets)

	2007			2006
Nature of Expense Probable outflow estimated within		Warranty One Year			Warranty One Year
Liability as at beginning of the year		4,105,298			9,088,094
Amount provided during the year		22,201,233			8,907,861
Amount utilized during the year		(15,414,822	)		(11,896,678	)
Amount reversed during the year		(185,712	)		(1,993,979	)
Liability as on end of the year		10,705,997			4,105,298

19.	Estimated amount of contracts remaining to be executed on capital account, net of advances and not provided for are Rs.198,815,217 (previous year: Rs. 137,667,111).
20.	Claims against the company not acknowledged as debt are Rs.  4,522,148 (previous year Rs. 574,022).
21.	Contingent Liability: Company has certain labour disputes which are pending adjudication. The liability that may arise on account of these disputes cannot be reasonably estimated but is not expected to be material.
22.	There are no overdue amounts outstanding for over 30 days at the year end to small scale industrial undertakings.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

23.	In the absence of necessary information with the Company relating to registration status of suppliers under the Micro, Small, and Medium Enterprises Development Act, 2006, the information required under the said Act could not be compiled and disclosed.
24.	Derivative Instruments:

(a) The company has entered into the following derivative instruments:
(i)	Forward Exchange Contracts, which are not intended for trading or speculative purposes, but for hedge purposes, to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.
(ii)	The following are the outstanding forward exchange contracts (three contracts) entered into by the Company as on 30th September, 2007:

Currency	Amount	Buy/Sell	Cross Currency
US Dollar	1,511,151	Buy	Rupees
	(Previous year Nil)

(b) The following currency exposures as on 30th September 2007 have not been hedged by a derivative       instrument or otherwise:

	2007				2006
	Amounts in Rupees		Amounts in foreign currency		Amounts in Rupees		Amounts in foreign currency
Import of goods and services		1,544,882		38,507 USD		467,702		10,110 USD
		610,245		10,712 Euro		1,755,030		29,812 Euro
		1,583,098		4,450,000 Yen		681,177		1,730,195 Yen
		—		—		9,577		276 AUD
Capital imports (including intangibles)		9,958,810		248,226 USD		1,170,810		25,500 USD
Interest payable		6,643,030		167,078 USD		7,315,945		158,973 USD
Loans payable		256,570,131		6,452,971 USD		362,312,946		7,872,945 USD

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

25.	Previous year’s figures have been regrouped/reclassified wherever necessary.
26.	Differences between Indian and United States Generally Accepted Accounting Principles

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in India (“Indian GAAP”) which differ from those generally accepted in United States (“US GAAP”). The significant differences, as they apply to the Company, are summarized below:

Employee costs

Leave encashment/compensated absences

The Company records liabilities towards leave encashment on the basis of contributions towards schemes with fund managers. Such contributions are determined by periodical actuarial valuation by the fund managers, which is expected to be paid in cash.

Under US GAAP, the determination of the liability would also take into consideration vacation that may be availed or utilized.

Gratuity

As discussed in note 12 above, the Company has adopted revised accounting standard (AS) 15 on employee benefits effective 1^st October 2006. The revised AS 15 requires employee benefit liabilities to be determined based on actuarial valuation using projected unit credit method. In accordance with the revised AS 15, the transitional liability arising out of change in the method of actuarial valuation is adjusted against actual balance of reserve and surplus, net of deferred taxes thereon.

Under US GAAP, such transitional liability arising from the change in the method of actuarial valuation would require restatement of such liability in the respective years to which it pertains to.

Depreciation charge

The Company charges depreciation on buildings and plant and machinery under the straight line method and on other assets under the reducing balance method at the rates prescribed under Schedule XIV to the Indian Companies Act, or based on technical estimates that indicate the useful lives would be comparable with, or higher than, those arrived at using these rates. In case where the useful lives are estimated to be lower when compared using rates in the Schedule XIV, depreciation is charged under straight line method over the useful lives.

Under US GAAP, depreciation is charged on a systematic basis to each accounting period over its useful life, reflecting the pattern in which the entity consumes the asset’s benefits.

Fixed Assets

Foreign exchange transaction losses and gains relating to the acquisition of fixed assets are adjusted to the cost of fixed assets.

Under US GAAP, foreign exchange transaction gains and losses related to the acquisition of fixed assets would be recorded as an expense and included in manufacturing, administration and selling expenses.

Forward Contracts

Forward contracts are entered into for mitigating the risk of price fluctuations and not for trading purposes. Premium / discounts on such contracts are amortised over the contract period. The underlying assets / liabilities have been restated at exchange rates prevailing at the year-end and exchange gain / loss thereon have been recognised in the profit and loss account.

Under US GAAP, forward contracts are measured at fair value; changes in fair value are recognised in income statement except for effective portion of cash flow hedges, where the changes are deferred in equity until effect of underlying transaction is recognised in income statement.

Dividend

Dividends are accounted for in the year to which they pertain. Dividends on ordinary equity shares are presented as an appropriation to the income statement.

Under US GAAP, dividends are accounted for in the year they are declared. Dividends on ordinary equity shares are presented as a deduction in the statement of changes in shareholders’ equity in the period when authorised by shareholders.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS
30TH SEPTEMBER 2007 AND 2006 (UNAUDITED)
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 18

NOTES FORMING PART OF ACCOUNTS (Cont…)

Profit & Loss Account / Income Statement

The profit and loss account is presented with total income including from sales, operational and other income; expenditure including raw material consumed, increase / decrease in stock of finished goods and work in progress, manufacturing, administration and selling expenses, interest and depreciation to arrive at a measure of profit before tax. Such a measure is not appropriate under US GAAP, wherein the presentation is either in a single-step where all expenses are classified by function and are deducted from total income to give income before tax; or multiple step where cost of sales is deducted from sales to show gross profit, and other income and expense are then presented to give income before tax. Also, under US GAAP the expenditures are presented by function.

Fringe benefit tax is disclosed as a separate item after ‘profit before tax’ on the face of the income statement as a component of income tax expense under Indian GAAP. Under US GAAP it is included as a part of related salary and benefits expense arriving at a measure of profit before tax.

Also under US GAAP, total comprehensive income and accumulated other comprehensive income are disclosed, presented either as a separate primary statement or combined with the income statement or with the statement of changes in stockholders’ equity, while there are no such measures under Indian GAAP.

Cash Flow Statement

Interest received and interest paid has been disclosed under cash from investing and cash from financing activities, respectively. Under US GAAP, interest received and paid are disclosed under cash from operating activities.

Balance sheet

The presentation of certain items in the balance sheet under Indian GAAP is not consistent with financial statement presentation under US GAAP. These items are as follows:

(i)	Items on the face of the balance sheet are presented in decreasing order of liquidity under US GAAP.
(ii)	The company has presented changes in shareholders’ equity in separate schedules of ‘Share Capital’ and ‘Reserves and Surplus’. Under US GAAP, a separate statement of changes in shareholders’ equity is presented showing capital transactions with owners, the movement in accumulated profit and a reconciliation of all other components of equity.
(iii)	Secured and unsecured loans repayable within twelve months from the balance sheet date are shown separately under Indian GAAP whereas these would be included in current liabilities under US GAAP.
(iv)	Deferred tax liability net of deferred tax assets is disclosed separately in the balance sheet after the secured loans. Under US GAAP, deferred tax assets and liabilities are either classified as current or non-current, based on the classification of the related tax asset or liability for financial reporting.
(v)	Loans and advances not receivable within twelve months from the balance sheet date would be disclosed separately under Indian GAAP, whereas these are reclassified as non-current assets under US GAAP.
(vi)	Advance income tax included under loans and advances would be offset against provision for tax included under provisions, where as under the Indian GAAP these are separately disclosed.
(vii)	Provisions for warranty included in provisions not payable within twelve months from the balance sheet date would be reclassified as a non-current liability under US GAAP, whereas under Indian GAAP such reclassification is not made.

Automotive Axles Limited

Financial Statements as of and for the
Year Ended September 30, 2005,
and Independent Auditors’ Report

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
Automotive Axles Limited

We have audited the accompanying balance sheet of Automotive Axles Limited (“Company”), a company incorporated in India as of September 30, 2005 and the related profit and loss account and the cash flow statement for the year then ended (all expressed in Indian Rupees). 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 audits.

We conducted our audits in accordance with the auditing standards generally accepted in India and those in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to and nor were we engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2005 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in India (Refer note no. 1a of Schedule 16).

Accounting principles generally accepted in India vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of the net profit for the year ended September 30, 2005 and the determination of stockholder’s equity and the cash flows as of September 30, 2005, to the extent summarized in note no. 22 of Schedule 16.

/s/ Deloitte Haskins & Sells (Chennai)

Deloitte Haskins & Sells (Chennai)

Place: Bangalore

Date: March 14, 2008

AUTOMOTIVE AXLES LIMITED
BALANCE SHEET AS AT 30TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

		Schedule No.	Rupees
SOURCES OF FUNDS
1.	Shareholders’ Funds
	a) Share capital	1		151,119,750
	b) Reserves & surplus	2		590,841,559
				741,961,309
2.	Loan Funds
	a) Secured loans	3		467,987,975
	b) Unsecured loans	4		143,812,328
				611,800,303
3.	Deferred tax liability (net)			76,220,000
	TOTAL			1,429,981,612
APPLICATION OF FUNDS
1.	Fixed Assets	5
	a) Gross block			1,482,359,137
	b) Less: Depreciation			760,108,020
	c) Net block			722,251,117
	d) Capital work-in-progress - at cost			118,720,932
				840,972,049
2.	Current Assets, Loans & Advances
	a) Current assets	6		1,158,011,344
	b) Loans & advances	7		546,007,968
				1,704,019,312
	Less: Current Liabilities & Provisions
	a) Current liabilities	8		510,559,678
	b) Provisions	9		604,450,071
				1,115,009,749
	Net Current Assets			589,009,563
	TOTAL			1,429,981,612
Significant Accounting Policies and Notes to Balance Sheet & Profit & Loss Account		16

AUTOMOTIVE AXLES LIMITED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

	Schedule No.		Rupees
INCOME:
Sales – gross				4,024,168,596
Less: Excise duty				530,919,772
				3,493,248,824
Other income:
- Operational		10		54,156,557
- Others		11		11,034,550
				3,558,439,931
EXPENDITURE:
Raw materials consumed		12		2,303,150,060
Decrease in stock of finished goods & work-in-process		13		38,898,454
Manufacturing, administration & selling expenses		14		536,345,851
Interest		15		21,435,612
Depreciation				108,514,437
				3,008,344,414
Profit before tax				550,095,517
Provision for taxation:
- Current tax				172,020,000
- Deferred tax				8,220,000
- Fringe benefit tax				1,220,217
Profit after tax				368,635,300
Add: Balance brought forward from previous year				235,991,705
Profit available for appropriation				604,627,005
APPROPRIATIONS:
Proposed dividend				113,339,813
Interim dividend				75,559,875
Tax on dividend				26,493,183
Transfer to general reserve				36,900,000
Surplus carried to balance sheet				352,334,134
No. of equity shares				15,111,975
Basic and diluted earnings per equity share (Face value of Rs. 10 per share)  (Rs.)				24.39
Significant Accounting Policies and Notes to Balance Sheet & Profit & Loss Account		16

AUTOMOTIVE AXLES LIMITED
CASH FLOW STATEMENT FOR THE YEAR ENDED 30TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

				Rupees			Rupees
I)	Cash flow from operating activities:
		A)	Net profit before tax and extraordinary items					550,095,517
		B)	Adjustments
			Add:
			Depreciation		108,514,437
			Loss on sale of asset		29,882
			Interest expense		21,435,612
								129,979,931
			Less:
			Profit on sale of asset					1,762,249
			Interest income					972,552
			Operating profit before working capital changes					677,340,647
		C)	Adjustments for:
			Inventory		(7,334,326	)
			Sundry debtors		(256,317,587	)
			Loans & advances		(17,954,963	)
			Current liabilities & provisions		100,579,012
								(181,027,864	)
		D)	Cash generated from operations					496,312,783
			Advance tax (net of refunds)					(157,592,106	)
		E)	Net cash from operating activities					338,720,677
II)	Cash flow from investing activities:
			Purchase of fixed assets (net of exchange fluctuations capitalised & assets acquired on finance lease & including capital work-in-progress)					(281,334,115	)
			Sale of assets					2,270,401
			Interest income					972,552
			Net cash used in investing activities					(278,091,162	)
III)	Cash flow from financing activities
		A)	Inflow:
			Proceeds from long term borrowings					170,510,000
			Proceeds from short term borrowings					593,830,500
								764,340,500
		B)	Outflow:
			Repayment of long term borrowings					(41,988,918	)
			Repayment of short term borrowings					(560,849,463	)
			Dividend & tax on dividend					(196,708,124	)
			Interest paid					(20,452,572	)
								(819,999,077	)
			Net cash used in financing activities					(55,658,577	)
	NET INCREASE IN CASH AND CASH EQUIVALENTS							4,970,938
	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD							46,589,280
	CASH AND CASH EQUIVALENTS AT END OF PERIOD							51,560,218

Note: 1. The above cash flow statement has been prepared under the “Indirect Method” as set out in the Accounting Standard 3 “Cash Flow Statement” issued by the Institute of Chartered Accountants of India.

2. Cash and cash equivalents at the end of the year include balances with scheduled banks in unpaid dividend accounts Rs.2,327,998.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

	Rupees
SCHEDULE - 1
SHARE CAPITAL
Authorized:
23,000,000 Equity shares of Rs.10 each		230,000,000
2,000,000 Preference shares of Rs.10 each		20,000,000
		250,000,000
Issued, subscribed & paid up:
15,111,975 Equity shares of Rs.10 each fully paid up		151,119,750
SCHEDULE - 2
RESERVES & SURPLUS
Share premium		115,588,500
General reserve:
As per last balance sheet		86,018,925
Add: transfer from Profit & Loss Account		36,900,000
		122,918,925
Surplus in Profit & Loss Account		352,334,134
TOTAL		590,841,559
SCHEDULE - 3
SECURED LOANS
From financial institutions:
-Foreign currency working capital loans		70,832,000
-Finance lease obligations		2,810,581
		73,642,581
From banks:
-Foreign currency term loans
(include amounts due within one year Rs. 55,337,500)		309,890,000
-Foreign currency working capital loans		70,832,000
-Rupee term loans
(include amounts due within one year Rs.3,800,000)		3,800,000
-Working capital borrowings		9,823,394
		394,345,394
TOTAL		467,987,975

1.	Foreign currency term loan of Rs. 309,890,000 is secured by first charge on the entire plant & machinery of the Company.
2.	Rupee term loan of Rs.3,800,000 secured by a first pari-passu charge by hypothecation of the plant and machinery of the Company.
3.	Working capital borrowings include working capital facilities from banks and financial institutions of Rs.151,487,394 including foreign currency loan of Rs.141,664,000 secured by a first charge ranking pari-passu inter-se, by way of hypothecation of current assets.
4.	Finance lease obligations are secured by assets purchased under the respective agreements.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

	Rupees
SCHEDULE - 4
UNSECURED LOANS
From the Govt. of Karnataka
-Development loan - interest free (Includes amounts due
within one year Rs. 240,000)		277,033
-Sales tax loan - Interest free (Includes amounts due
within one year Rs. 25,872,000)		68,276,295
		68,553,328
Short term loans & advances from banks:
- Foreign currency short term borrowings		75,259,000
TOTAL		143,812,328

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE - 5
FIXED ASSETS

		GROSS BLOCK AT COST			DEPRECIATION				NET BLOCK
Description	Balance at 1st October 2004	Additions / adjustments during the year	Disposals / adjustments during the year	Balance at 30th September 2005	Up to 30th September 2004	For the year	Adjustments during the year	Balance at 30th September 2005	As at 30th September 2005
Land - freehold	3,832,366	—	—	3,832,366	—	—	—	—	3,832,366
Building	92,510,882	35,701,007	—	128,211,889	26,269,018	3,018,058	—	29,287,076	98,924,813
Plant & machinery	1,103,361,674	226,107,864	15,610,226	1,313,859,312	624,352,507	101,087,383	15,531,662	709,908,228	603,951,084
Furniture & office equipment	28,568,420	6,733,875	4,867,914	30,434,381	19,821,961	3,465,508	4,703,832	18,583,637	11,850,744
Vehicles (b)	4,910,709	2,115,906	1,033,922	5,992,693	2,095,630	943,488	738,534	2,300,584	3,692,109
Assets held for disposal	28,496	—	—	28,496	28,495	—	—	28,495	1
Total	1,233,212,547	270,658,652	21,512,062	1,482,359,137	672,567,611	108,514,437	20,974,028	760,108,020	722,251,117
Capital work in progress (a)									118,720,932
Total									840,972,049

(a)	Capital work in progress includes capital advances Rs.70,054,049.
(b)	Vehicles include Rs.4,459,711 purchased under finance lease arrangements.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

	Rupees
SCHEDULE - 6
CURRENT ASSETS
Inventories (at the lower of cost and net realisable value)
Raw materials & components		294,979,296
Work-in-process		104,304,074
Finished goods		22,058,581
Stores & Spares		46,090,882
		467,432,833
Sundry debtors (unsecured, considered good)
Over Six months		66,277
Others		638,952,016
		639,018,293
Includes amounts due from:
Meritor HVS (India) Ltd., a company under the same management.		562,165,139
Cash and Bank Balances
Cash on hand		54,241
Checks on hand		12,637,229
Bank balances - in current accounts		38,868,748
		51,560,218
TOTAL		1,158,011,344
SCHEDULE - 7
LOANS & ADVANCES (considered good)
Advances recoverable in cash or in kind or for value to be received		97,630,678
Advance income tax		440,915,280
Deposits with Govt. authorities		7,120,112
Balances with Customs & Central Excise Dept.		17,323
Deposits - others		324,575
TOTAL		546,007,968
Note:
1. Of the above:
-Secured		5,149,999
-Unsecured		540,857,969
		546,007,968
2. Advances recoverable includes amounts due from
Meritor HVS (India) Ltd., a Company under the same management.		—
Maximum amount outstanding during the year		483,654

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

	Rupees
SCHEDULE - 8
CURRENT LIABILITIES
Sundry creditors
- Small scale undertakings		7,931,034
- Others		329,628,772
Other liabilities		21,660,561
Interest accrued but not due on loans		2,145,191
Unpaid dividend #		2,327,998
Bills payable		146,866,122
TOTAL		510,559,678
# There is no amount due and outstanding as at the balance sheet date to be credited to the Investor Education and Protection Fund
SCHEDULE - 9
PROVISIONS
Taxation		466,126,254
Warranty		9,088,094
Proposed dividend		113,339,813
Tax on proposed dividend		15,895,910
TOTAL		604,450,071
SCHEDULE - 10
OPERATIONAL INCOME
Jobbing charges		41,594,077
Scrap sales		2,334,247
Others		10,228,233
TOTAL		54,156,557
SCHEDULE - 11
OTHER INCOME
Profit on sale of assets		1,762,249
Interest (tax deducted at source Rs. 190,804)		972,552
Exchange gain		5,738,208
Miscellaneous income		2,561,541
TOTAL		11,034,550

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

		Rupees
SCHEDULE - 12
Raw Material Consumed
Opening Stock			258,320,073
Add: Purchases	2,473,558,227
Less: Cash discount & scrap sales	133,748,944
			2,339,809,283
			2,598,129,356
Less: Closing stock			294,979,296
TOTAL			2,303,150,060
SCHEDULE - 13
DECREASE IN STOCK OF FINISHED GOODS & WORK-IN-PROCESS
Closing stock
- Finished goods			22,058,581
- Work-in-process			104,304,074
			126,362,655
Opening stock
- Finished goods			48,090,298
- Work-in-process			117,170,811
			165,261,109
Decrease in stock			38,898,454
SCHEDULE - 14
MANUFACTURING, ADMINISTRATION AND SELLING EXPENSES
Payments to and provision for employees:
- Salaries & wages			141,277,187
- Contribution to Provident Fund and other funds			15,942,567
- Welfare expenses			11,939,639
			169,159,393
Stores & spares consumed			91,427,869
Power & fuel			124,140,706
Rates & taxes			833,018
Travelling expenses			4,807,671
Repairs & maintenance:
- Buildings			159,978
- Plant & machinery			38,087,847
- Others			1,794,129
Insurance charges			4,494,727
Postage, telephone & telegrams			1,335,250
Vehicle running expenses			952,650
Directors’ sitting fees			360,000
Bank charges/commission			2,310,970
Outside processing charges			74,258,740
Warranty			8,198,642
Excise duty on finished goods in stock			2,876,529
Miscellaneous expenses			11,147,732
TOTAL			536,345,851
SCHEDULE - 15
INTEREST
Interest on term loans			10,220,504
Interest on working capital borrowings			11,215,108
TOTAL			21,435,612

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS

1. Significant Accounting Policies:

a)		Accounting convention
		The financial statements are prepared under the historical cost convention, on the accrual basis of accounting, to comply in all material respects with the mandatory accounting standards issued by the Institute of Chartered Accountants of India and requirements in the Indian Companies Act, 1956.
b)		Fixed Assets and Depreciation
	(i)	Fixed Assets
		Fixed assets are stated at cost (net of CENVAT) less accumulated depreciation. Cost includes all costs relating to the acquisition and installation of fixed assets including interest on borrowings for the project / fixed asset till the date of commercial production / the assets are put in use.
		Expenditure on reconditioning of machinery is capitalised where such expenditure results in increase in the future benefits from the asset and /or results in an extension of the useful life of the asset based on technical assessment.
	(ii)	Depreciation
		Depreciation on buildings and plant & machinery is provided under the “straight line method” and on other assets under the “reducing balance method” at the rates specified in Schedule XIV to the Companies Act, 1956 (the ‘Schedule”), based on technical estimates that indicate the useful lives would be comparable with or higher than those arrived at using these rates.
		In cases where the useful lives are estimated to be lower than those considered in determining the rates specified in that Schedule, depreciation is provided under the straight line method over the useful lives of the assets as follows:

•	Reconditioned machinery and related expenditure	-	as specifically estimated and currently ranging between 3 to 10 years
•	Tools, jig and fixtures and measuring gauges	-	2 to 5 years
•	Certain imported machinery	-	as per technical evaluation, of their useful life and currently ranging between 4 to 15 years.
In case of diminution in value of the asset due to technological reasons, the difference between written down value and estimated net realizable value of assets is provided as depreciation in the year in which it is ascertained.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

c)	Inventories
	Raw material, stores & spares, work-in process and finished goods are valued at the lower of cost and estimated realizable value. Cost of materials is determined on weighted average basis. In the case of work-in-process and finished goods, cost includes the cost of conversion. Closing stock of finished goods includes liability towards excise duty payable on clearance of goods. Imported materials in transit at the year-end are valued inclusive of customs duty.
d)	Foreign Currency Transactions
	Foreign currency assets and liabilities covered by forward contracts are stated at the forward contract rates whilst those not covered by forward contract are restated at rates ruling at the year end. Premium in respect of forward contract is accounted over the period of the contract.
	Gains or losses arising on settlement / restatement are adjusted to Profit & Loss Account as appropriate.
e)	Revenue Recognition
	Sales: Sales are recognised on dispatch and transfer of underlying risk & rewards as per contracted terms and are recorded at invoice value, net of sales taxes, but including excise duties.
	Export incentives: Export incentives are accounted for on accrual basis at the time of export of goods if the entitlements can be estimated with reasonable accuracy and conditions precedent to claim are fulfilled.
f)	Warranty
	Warranty expenses are provided for in the year of sale based on technical estimates. In addition, specific provision is also made against customer claims for manufacturing defects, where necessary.
g)	Research and Development
	Revenue expenditure on research and development is charged to the Profit and Loss Account in the year of incurrence. However capital expenditure on research and development is treated in the same way as other fixed assets.
h)	Retirement Benefits
	Liabilities towards superannuation, gratuity and leave encashment benefits are charged to the Profit and Loss Account as contributions towards schemes with the Life Insurance Corporation of India. The adequacy of the contributions is determined by periodical actuarial valuation by the Life Insurance Corporation of India.
	Fixed contribution to Provident Fund and the cost of other benefits are determined as per the Schemes at the actual cost to the Company.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

i)	Events Subsequent to the Balance Sheet Date
	Events occurring after the balance sheet date, which have a material impact on the financial affairs of the Company, are taken into cognisance.
j)	Prior Period and Extraordinary items
	Prior period and extraordinary items, and changes in accounting policies, having a material impact on the financial affairs of the Company are disclosed.
k)	Income Tax
	Income tax comprises the current tax provision and the net change in the deferred tax asset or liability in the year.
	Provision for current tax is made taking into account the admissible deductions / allowances and is subject to revision based on the taxable income for the fiscal year ending 31 March each year.
	Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between carrying values of the assets and liabilities and their respective tax bases and are measured using enacted tax rates applicable on the Balance Sheet date. Deferred tax assets are recognized subject to management’s judgment that realization is virtually certain.
	The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement in the period of enactment of the change.
l)	Provision
	A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

2 (a) Installed Capacity

		At 30th September 2005
Axle housing (a component of axle)	(Nos.)		109,200
Complete axles	(Nos.)		83,000
Brake assemblies **	(Nos.)		270,000
Gear sets	(MT)		4,775
(as certified by management and relied upon by the auditors, being a technical matter)

(b) Actual Production
		Year ended 30th September 2005
Axle housings* (a component of axle)	(Nos.)	90,464
Complete axles	(Nos.)	70,012
Brake assemblies	(Nos.)	Nil
Gear sets	(MT)	3,147.04	@

@ Includes jobbing 81.7 MT
*	Actual production of axle housings includes 70,012 (Nos.) used for production of complete axles.
**	Brake assemblies include sub-assemblies.

3 Details of Gross Sales: (Excluding Warranty Replacements & Samples)

		Year ended 30th September 2005
		Quantity (Nos.)		Amount in Rupees
•	Axle Housing		20,348		190,836,528
•	Axles		70,876		3,333,030,550
•	Spares		—		500,301,518
					4,024,168,596

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

4 Opening and Closing Stock of Finished Goods

		1st October 2004
		Quantity (Nos.)		Amount in Rupees
Opening Stock:
•	Axle housing		488		4,040,376
•	Axles		1,158		40,207,992
•	Others		—		3,841,930
					48,090,298

		30th September 2005
		Quantity (Nos.)		Amount in Rupees
Closing Stock:
•	Axle housing		592		5,435,122
•	Axles		294		10,223,710
•	Others		—		6,399,749
					22,058,581

5 Raw Materials and Components Consumed

			Year ended 30th September 2005
			Quantity (Nos.)		Amount in Rupees
•	Steel	(MT)		19,009		514,673,655
•	Castings	(Nos.)		484,653		280,754,286
•	Forgings	(Nos.)		1,024,615		589,965,230
•	Bought out finished components			—		778,252,296
•	Others			—		139,504,593
				��
						2,303,150,060

6 Value of Raw Materials, Stores & Spares Consumed During the Year

		Year ended 30th September 2005
		Consumption %		Amount in Rupees
a) Raw materials
•	Imported		3		68,667,784
•	Indigenous		97		2,234,482,276
			100		2,303,150,060
b) Stores & spares
•	Imported		1		1,140,698
•	Indigenous		99		90,287,171
			100		91,427,869

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

7 Value of Imports on C.I.F. Basis

	Year ended 30th September 2005
	(Rupees)
i.  Raw material		51,576,542
ii.  Consumables & spares		3,152,113
iii.  Capital goods		7,855,257
		62,583,912

8 Expenditure in Foreign Currency

	Year ended 30th September 2005
	(Rupees)
a)     Foreign travel		2,028,995
b)     Bank charges		322,129
c)     Others		3,675,619
d)     Interest		9,175,067

9 Remittances in Foreign Currency on Account of Dividends to Non-resident Shareholders

	Year ended 30th September 2005
	(Rupees)
a.     No. of non-resident shareholders		1
b.     No. of equity shares held		5,367,275
c.     Amount of dividend paid		61,723,663
d.     Year to which dividend relates
- Final dividend		2003-2004
- Interim dividend		2004-2005

10 Managerial Remuneration

	Year ended 30th September 2005
	(Rupees)
Salary & allowances		4,592,713
Contribution to Provident and other funds		804,055
Perquisites		482,453
		5,879,221

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

11 Payment to Auditors

	Year ended 30th September 2005
	(Rupees)
As auditors		840,000
In other capacity		450,000
Reimbursement of expenses		90,308
		1,380,308

12	Related party transactions:
	a. List of Related Parties and Relationships:

Relationship	Related Parties
(i) Controlling Enterprises	Meritor Heavy Vehicle System LLC, USA
	ArvinMeritor Inc.
(ii) Other related parties with whom the Company had transactions:
Enterprises under Common       Control	Bharat Forge Limited
	Kalyani Forge Limited
	Meritor HVS Cameri, SPA
	Meritor HVS India Ltd.
	Arvin Meritor CVA, Australia
	Meritor Automotive Inc., Fletcher USA
	Meritor Automotive Inc., Ohio USA
Key Management Personnel	Mr. B.N. Kalyani, Chairman (Non-retiring)
	Mr. Ashok Rao, President and Wholetime Director
	Mr. C. K. Sabareeshan, Executive Director
	(Finance) & Company Secretary

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005

All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16

NOTES FORMING PART OF ACCOUNTS (Contd…)

b. Transactions with Related Parties:

	Related Party and Transactions	Controlling Enterprises	Enterprises under Common Control	Key Management Personnel and their Relatives	Total
1)	Purchase of Goods
	Bharat Forge Limited	—	130,889,757	—	130,889,757
	Others	15,732,117	10,424,565	—	26,156,682
		15,732,117	141,314,322	—	157,046,439
2)	Sale of Goods
	Meritor HVS (India) Limited	—	3,966,567,433	—	3,966,567,433
	Bharat Forge Limited	—	3,841,963	—	3,841,963
			3,970,409,396	—	3,970,409,396
3)	Purchase of Fixed Assets
	Bharat Forge Limited	—	13,605,684	—	13,605,684
4)	Services Received
	Bharat Forge Limited	—	76,960,220	—	76,960,220
	Others	—	4,343,080	—	4,343,080
		—	81,303,300	—	81,303,300
5)	Services Rendered
	Bharat Forge Limited	—	3,414,800	—	3,414,800
	Others	—	153,000	—	153,000
		—	3,567,800	—	3,567,800
6)	Other Recoveries
	Meritor HVS (India) Limited	—	24,213	—	24,213
		—	24,213	—	24,213

AUTOMOTIVE AXLES LIMITED

SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005

All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16

NOTES FORMING PART OF ACCOUNTS (Contd…)

b. Transactions with Related Parties: (Contd…)

	Related Party and Transactions	Controlling Enterprises	Enterprises under Common Control	Key Management Personnel and their Relatives	Total
7)	Managerial Remuneration
	and Sitting Fees
	Mr. Ashok Rao	—	—	3,400,523	3,400,523
	Mr. C.K. Sabareeshan	—	—	2,478,698	2,478,698
	Others	—	—	60,000	60,000
		—	—	5,939,221	5,939,221
Amounts Outstanding at the Balance Sheet Date
8)	Amounts Receivable
	Meritor HVS (India) Limited	—	562,165,139	—	562,165,139
	Others	—	4,970,848	—	4,970,848
		—	567,135,987	—	567,135,987
9)	Amounts Payable
	Bharat Forge Limited	—	43,971,693	—	43,971,693
	Others	202,015	1,844,309	1,647,248	3,693,572
		202,015	45,816,002	1,647,248	47,665,265

1.	Related Party relationships are as identified by the Company on the basis of information available with them and accepted by the auditors.
2.	No amount is/has been written off or written back during the year in respect of debts due from or to related party.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

13. Segment Reporting

	Domestic		Sale for exports		Consolidated
			(Note 2 Below)
	(Rupees)		(Rupees)		(Rupees)
I. Revenue
Sales to external customers		3,888,928,482		186,620,956		4,075,549,438
Segment Result		563,598,270		45,430,154		609,028,424
Unallocated expenses net of unallocated income						37,497,295
Operating profit						571,531,129
Interest expenses						21,435,612
Income taxes						181,460,217
Net profit						368,635,300
II. Other Information
Segment Assets		1,012,950,853		93,500,273		1,106,451,126
Unallocated assets						1,438,540,235
Total assets						2,544,991,361
Segment Liabilities
Unallocated liabilities						1,726,810,052
Total liabilities						1,726,810,052
Depreciation		97,493,278		6,357,091

1.	The Company has identified its primary segments as geographical, i.e., domestic and exports. Export markets have been considered together as the products sold to these markets have comparable risks and rewards.
2.	Sales for exports represent export sales channelised through Meritor HVS (India) Limited and includes DEPB.
3.	There are no inter-segment transactions during the year.
4.	Fixed assets of the Company have not been identified to the segments as they are common to the segments. Depreciation has been allocated to segments based on standard rates determined by the Company.
5.	Secondary segment disclosures have not been furnished as there is only a single business segment.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

14.	Deferred Tax
	The net deferred tax liability comprises the tax impact arising from timing differences on account of:

	Rupees
Depreciation & amortisation		252,586,876
Provision for warranty & other provisions		(26,722,534	)
		225,864,342
Net deferred tax liability relating to the above		76,220,000

15.	During the year, the Company has changed the method of valuation of materials from FIFO basis to weighted average basis. Consequent to this change the profit for the year is higher by Rs. 3,026,351.
16.	Finance Lease
	The lease transactions of the Company represent lease of vehicles on a non-cancelable basis. The minimum lease payments under the various agreements are given below:

	Rupees
For the next one year		901,835
One year to five years		2,431,656
Total		3,333,491
Less: Interest		522,910
Present value of minimum lease payments		2,810,581

17. Details of Provisions Under AS - 29 (Provisions, Contingent Liabilities and Contingent Assets)

	Rupees
Nature of Expense	Warranty
Probable outflow estimated within	One Year
Liability at beginning of the year		8,733,073
Amount provided during the year		12,079,945
Amount utilized during the year		(7,843,622	)
Amount reversed during the year		(3,881,302	)
Liability at on end of the year		9,088,094

18.	Estimated amount of contracts remaining to be executed on capital account, net of advances and not provided for is Rs. 275,379,677.
19.	Claims against the company not acknowledged as debt are Rs. 473,922.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

20.	Contingent Liability: Company has certain labor disputes which are pending adjudication. The liability that may arise on account of these disputes cannot be reasonably estimated.
21.	There are no overdue amounts outstanding for over 30 days at the year end to small scale industrial undertakings.
22.	Differences between Indian and United States Generally Accepted Accounting Principles
	The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the India (‘Indian GAAP’) which differ from those generally accepted in the United States (“US GAAP”). The significant differences, as they apply to the Company, are summarized below.
	Employee costs
	Leave encashment / compensated absences
	The Company records liabilities for leave encashment / compensated absences on the basis of contributions towards plans with third-party fund managers. Such contributions are determined by periodical actuarial valuation by the third-party fund managers, which are expected to be paid in cash.
	Under US GAAP, the determination of the liability would also take into consideration unused vacation based on expected cash payments on an undiscounted basis.
	Gratuity
	The Company records liabilities for gratuity benefits on the basis of contributions towards schemes with fund managers. Such contributions are determined by periodical actuarial valuation by the fund managers. Under Indian GAAP, the actuary can choose a method for (i) expense determination, (ii) determining the discount rate and (iii) valuing plan assets.
	Under US GAAP, the liability for gratuity benefits requires the use of the projected unit credit method. The discount rate (reflecting the rate of interest which would provide the necessary future cash flows to pay the accumulated benefits when due) reflects current market rates for high quality debt instruments.
	Depreciation charge
	The Company records depreciation expense on buildings and plant and machinery under the ‘straight line method’ and on other assets under the ‘reducing balance method’ at the rates prescribed in Schedule XIV to the Indian Companies Act, or based on technical estimates that indicate the useful lives would be comparable with or higher than those arrived at using these rates. In case where the useful lives are estimated to be lower when compared using rates in the Schedule XIV, depreciation is charged under ‘straight line method’ over the useful lives.
	Under US GAAP, depreciation is charged on a systematic basis to each accounting period over its

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

estimated economic useful life, reflecting the pattern in which the entity consumes the asset’s benefits.

Fixed assets

Foreign exchange transaction losses and gains relating to the acquisition of fixed assets are adjusted to the cost of the fixed asset.

Under US GAAP, foreign exchange transaction gains and losses related to the acquisition of fixed assets would be recorded as an expense and included in manufacturing, administration and selling expenses.

Dividends

Dividends are accounted for in the year to which they pertain to. Dividends on ordinary equity shares are presented as an appropriation to the income statement.

Under US GAAP, dividends are accounted in the year when declared. Dividends on ordinary equity shares are presented as a deduction in the statement of changes in shareholders’ equity in the period when authorised by shareholders.

Reclassification

Profit & Loss Account / Income Statement

The profit and loss account is presented with total income including from sales, operational and other income; expenditure including raw material consumed, (increase)/decrease in stock of finished goods and work in progress, manufacturing, administration and selling expenses, interest and depreciation to arrive at a measure of profit before tax. Such a measure is not appropriate under US GAAP, wherein the presentation is either in a single-step where all expenses are classified by function and are deducted from total income to give income before tax; or multiple step where cost of sales is deducted from sales to show gross profit, and other income and expense are then presented to give income before tax.

Fringe benefit tax is disclosed as a separate item after ‘profit before tax’ on the face of the income statement as a component of income tax expense under Indian GAAP. Under US GAAP fringe benefit taxes are included as a part of related salary and benefit expense arriving at a measure of profit before tax.

Also under US GAAP, total comprehensive income and accumulated other comprehensive income are disclosed, presented either as a separate primary statement or combined with the income statement or with the statement of changes in stockholders’ equity while there are no such measures under Indian GAAP.

Cash Flow Statement

Interest received and interest paid has been disclosed under cash from investing and cash from financing activities, respectively. Under US GAAP interest received and paid are disclosed under cash from operating activities.

AUTOMOTIVE AXLES LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 30^TH SEPTEMBER 2005
All amounts in Indian Rupees (Rs.), unless otherwise stated

SCHEDULE 16
NOTES FORMING PART OF ACCOUNTS (Contd…)

Balance Sheet
The presentation of certain items in the balance sheet under Indian GAAP is not consistent with financial statement presentation under US GAAP. The following differences pertaining to the Company are identified:
(i)	Items on the face of the balance sheet are presented in decreasing order of liquidity under US GAAP.
(ii)	The Company has presented changes in shareholders’ equity in separate schedules of ‘Share capital’ and ‘Reserves and Surplus’. Under US GAAP, a separate statement of changes in shareholders’ equity is presented showing capital transactions with owners, the movement in accumulated profit and a reconciliation of all other components of equity.
(iii)	Secured and unsecured loans repayable within twelve months from the balance sheet date would be included in current liabilities under US GAAP.
(iv)	Deferred tax liability net of deferred tax assets is disclosed in the balance sheet under loans. Under US GAAP, deferred tax assets and liabilities are either classified as current or non-current, based on the classification of the related non-tax asset or liability for financial reporting.
(v)	Loans and advances not receivable within twelve months from the balance sheet date would be classified as non-current assets under US GAAP.
(vi)	Advance income tax included under loans and advances under Indian GAAP  would be offset against provision for tax included under provisions under US GAAP.
(vii)	Provisions for warranty included in provisions not payable within twelve months from the balance sheet date would be reclassified as a non-current liability under US GAAP, whereas under Indian GAAP, such reclassification is not made.

          (2) Financial Statement Schedule for the years ended September 30, 2007, 2006 and 2005. The following schedule was filed as part of the Annual Report filed with the SEC on November 19, 2007:

                    Schedule II - Valuation and Qualifying Accounts

          Schedules not filed with this Annual Report on Form 10-K are omitted because of the absence of conditions under which they are required or because the information called for is shown in the financial statements or related notes.

          (3) Exhibits

3-a	Restated Articles of Incorporation of ArvinMeritor, filed as Exhibit 4.01 to ArvinMeritor’s Registration Statement on Form S-4, as amended (Registration Statement No. 333-36448) (“Form S-4”), is incorporated by reference.
3-b	By-laws of ArvinMeritor, filed as Exhibit 3 to ArvinMeritor’s Quarterly Report on Form 10-Q for the quarterly period ended June 29, 2003 (File No. 1-15983), is incorporated by reference.
4-a	Rights Agreement, dated as of July 3, 2000, between ArvinMeritor and The Bank of New York (successor to EquiServeTrust Company, N.A.), as rights agent, filed as Exhibit 4.03 to the Form S-4, is incorporated by reference.
4-b	Indenture, dated as of April 1, 1998, between ArvinMeritor and BNY Midwest Trust Company (successor to The Chase Manhattan Bank), as trustee, filed as Exhibit 4 to Meritor’s Registration Statement on Form S-3 (Registration No. 333-49777), is incorporated by reference.
4-b-1	First Supplemental Indenture, dated as of July 7, 2000, to the Indenture, dated as of April 1, 1998, between ArvinMeritor and BNY Midwest Trust Company (successor to The Chase Manhattan Bank), as trustee, filed as Exhibit 4-b-1 to ArvinMeritor’s Annual Report on Form 10-K for the fiscal year ended September 30, 2000 (File No. 1-15983) (“2000 Form 10-K”), is incorporated by reference.
4-b-2	Third Supplemental Indenture, dated as of June 23, 2006, to the Indenture, dated as of April 1, 1998, between ArvinMeritor and BNY Midwest Trust Company (successor to The Chase Manhattan Bank), as trustee (including Subsidiary Guaranty dated as of June 23, 2006), filed as Exhibit 4.2 to ArvinMeritor’s Current Report on Form 8-K, dated June 23, 2006 and filed on June 27, 2006 (File No. 1-15983)(“June 23, 2006 Form 8-K”), is incorporated by reference.
4-c	Indenture dated as of July 3, 1990, as supplemented by a First Supplemental Indenture dated as of March 31, 1994, between ArvinMeritor and BNY Midwest Trust Company (successor to Harris Trust and Savings Bank), as trustee, filed as Exhibit 4-4 to Arvin’s Registration Statement on Form S-3 (Registration No. 33-53087), is incorporated by reference.
4-c-1	Second Supplemental Indenture, dated as of July 7, 2000, to the Indenture dated as of July 3, 1990, between ArvinMeritor and BNY Midwest Trust Company (successor to Harris Trust and Savings Bank), as trustee, filed as Exhibit 4-c-1 to the 2000 Form 10-K, is incorporated by reference.
4-c-2	Fourth Supplemental Indenture, dated as of June 23, 2006, to the Indenture, dated as of July 3, 1990, between ArvinMeritor and BNY Midwest Trust Company (successor to Harris Trust and Savings Bank), as trustee (including Subsidiary Guaranty dated as of June 23, 2006), filed as Exhibit 4.3 to the June 23, 2006 Form 8-K, is incorporated by reference.
4-d	Indenture, dated as of March 7, 2006, between ArvinMeritor and BNY Midwest Trust Company, as trustee, filed as Exhibit 4.1 to ArvinMeritor’s Current Report on Form 8-K, dated March 7, 2006 and filed on March 9, 2006 (File No. 1-15983), is incorporated by reference.
4-d-1	First Supplemental Indenture, dated as of June 23, 2006, to the Indenture, dated as of March 7, 2006, between ArvinMeritor and BNY Midwest Trust Company, as trustee (including Subsidiary Guaranty dated as of June 23, 2006), filed as Exhibit 4.1 to the June 23, 2006 Form 8-K, is incorporated by reference.

4-e	Indenture, dated as of February 8, 2007, between ArvinMeritor and The Bank of New York Trust Company, N.A., as trustee (including form of Subsidiary Guaranty dated as of February 8, 2007), filed as Exhibit 4-a to ArvinMeritor’s Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2007 (File No. 1-15983), is incorporated by reference.
10-a	Credit Agreement, dated as of June 23, 2006, by and among ArvinMeritor, ArvinMeritor Finance Ireland, the institutions from time to time parties thereto as lenders, JP Morgan Chase Bank, National Association, as Administrative Agent, Citicorp North America, Inc. and UBS Securities LLC, as Syndication Agents, ABN AMRO Bank N.V., BNP Paribas and Lehman Commercial Paper Inc., as Documentation Agents, and J.P. Morgan Securities Inc. and Citigroup Global Markets, as Joint Lead Arrangers and Joint Book Runners, filed as Exhibit 10.1 to the June 23, 2006 Form 8-K, is incorporated by reference.
10-a-1	Subsidiary Guaranty, dated as of June 23, 2006, by and among the subsidiary guarantors and JPMorgan Chase Bank, National Association, as Administrative Agent, for the benefit of itself, the lenders and other holders of guaranteed obligations, filed as Exhibit 10.2 to the June 23, 2006 Form 8-K, is incorporated by reference.
10-a-2	Pledge and Security Agreement, dated as of June 23, 2006, by and among ArvinMeritor, the subsidiaries named therein and JPMorgan Chase Bank, National Association, as Administrative Agent, filed as Exhibit 10.3 to the June 23, 2006 Form 8-K, is incorporated by reference.
10-a-3	Amendment No. 1 to Credit Agreement, dated as of February 23, 2007, among ArvinMeritor, the financial institutions party thereto and JPMorgan Chase Bank, National Association, as Administrative Agent, filed as Exhibit 10 to the Current Report on Form 8-K dated and filed on February 23, 2007 (File No. 1-15983), is incorporated by reference.
10-a-4	Amendment No. 2 to Credit Agreement, dated as of October 2, 2007, among ArvinMeritor, the financial institutions party thereto and JPMorgan Chase Bank, National Association, as Administrative Agent, filed as Exhibit 10 to the Current Report on Form 8-K dated October 2, 2007 and filed on October 3, 2007 (File No. 1-15983), is incorporated by reference.
10-a-5	Amendment No. 3 to Credit Agreement, dated as of October 26, 2007, among ArvinMeritor, the financial institutions party thereto and JPMorgan Chase Bank, National Association, as Administrative Agent, filed as Exhibit 10 to the Current Report on Form 8-K dated October 26, 2007 and filed on October 30, 2007 (File No. 1-15983), is incorporated by reference.
*10-b-1	1997 Long-Term Incentives Plan, as amended and restated, filed as Exhibit 10 to ArvinMeritor’s Current Report on Form 8-K dated and filed on April 20, 2005 (File No. 1-15983), is incorporated by reference.
*10-b-2	Form of Restricted Stock Agreement under the 1997 Long-Term Incentives Plan, filed as Exhibit 10-a-2 to Meritor’s Annual Report on Form 10-K for the fiscal year ended September 30, 1997 (File No. 1-13093), is incorporated by reference.
*10-b-3	Form of Option Agreement under the 1997 Long-Term Incentives Plan, filed as Exhibit 10(a) to Meritor’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998 (File No. 1-13093), is incorporated by reference.
*10-b-4	Form of Performance Share Agreement under the 1997 Long-Term Incentives Plan, filed as Exhibit 10-b to ArvinMeritor’s Current Report on Form 8-K, dated December 7, 2004 and filed on December 9, 2004 (File No. 1-15983), is incorporated by reference.
*10-b-5	Description of Performance Goals Established in connection with 2006-2008 Cash Performance Plan under the 1997 Long- Term Incentives Plan, filed as Exhibit 10-b-6 to ArvinMeritor’s Form 10-K for the fiscal year ended October 2, 2005 (File No. 1-15983), is incorporated by reference.
*10-b-6	Description of Performance Goals Established in connection with 2007-2009 Cash Performance Plan under the 1997 Long- Term Incentives Plan, filed as Exhibit 10-b-7 to ArvinMeritor’s Annual Report on Form 10-K for the fiscal year ended October 1, 2006 (File No. 1-15983), is incorporated by reference.
*10-c	2007 Long-Term Incentive Plan, as amended, filed as Exhibit 10-a to ArvinMeritor’s Quarterly Report on

	Form 10-Q for the quarterly period ended April 1, 2007 (File No. 1-15983), is incorporated by reference.
*10-c-1	Form of Restricted Stock Agreement under the 2007 Long-Term Incentive Plan.**
*10-d	Description of Compensation of Non-Employee Directors.**
*10-e	2004 Directors Stock Plan, filed as Exhibit 10-a to ArvinMeritor’s Quarterly Report on Form 10-Q for the quarterly period ended March 28, 2004 (File No. 1-15983), is incorporated by reference.
*10-e-1	Form of Restricted Share Unit Agreement under the 2004 Directors Stock Plan, filed as Exhibit 10-c-3 to ArvinMeritor’s Annual Report on Form 10-K for the fiscal year ended October 3, 2004 (File No. 1-15983), is incorporated by reference.
*10-e-2	Form of Restricted Stock Agreement under the 2004 Directors Stock Plan, filed as Exhibit 10-c-4 to ArvinMeritor’s Annual Report on Form 10-K for the fiscal year ended October 2, 2005 (Filed No. 1-15983), is incorporated by reference.
*10-f	Incentive Compensation Plan, as amended and restated, filed as Exhibit 10-b to ArvinMeritor’s Current Report on Form 8-K, dated February 16, 2005 and filed on February 17, 2005 (File No. 1-15983), is incorporated by reference.
*10-f-1	Form of Deferred Share Agreement, filed as Exhibit 10-a to ArvinMeritor’s Quarterly Report on Form 10-Q for the quarterly period ended January 2, 2005 (File No. 1-15983), is incorporated by reference.
*10-g	Copy of resolution of the Board of Directors of ArvinMeritor, adopted on July 6, 2000, providing for its Deferred Compensation Policy for Non-Employee Directors, filed as Exhibit 10-f to the 2000 Form 10-K, is incorporated by reference.
*10-h	Deferred Compensation Plan, filed as Exhibit 10-e-1 to Meritor’s Annual Report on Form 10-K for the fiscal year ended September 30, 1998 (File No. 1-13093), is incorporated by reference.
*10-i	1998 Stock Benefit Plan, as amended, filed as Exhibit (d)(2) to ArvinMeritor’s Schedule TO, Amendment No. 3 (File No. 5-61023), is incorporated by reference.
*10-j	Employee Stock Benefit Plan, as amended, filed as Exhibit (d)(3) to ArvinMeritor’s Schedule TO, Amendment No. 3 (File No. 5-61023), is incorporated by reference.
*10-k	1988 Stock Benefit Plan, as amended, filed as Exhibit 10 to Arvin’s Quarterly Report on Form 10-Q for the quarterly period ended July 3, 1988, and as Exhibit 10(E) to Arvin’s Quarterly Report on Form 10-Q for the quarterly period ended July 4, 1993 (File No. 1-302), is incorporated by reference.
10-l	Loan Agreement, dated as of September 19, 2005, among ArvinMeritor, Inc., ArvinMeritor Receivables Corporation, the lenders from time to time party thereto and SunTrust Capital Markets, Inc., filed as Exhibit 10a to ArvinMeritor’s Current Report on Form 8-K, dated September 16, 2005 and filed on September 19, 2005 (File No. 1-15983), is incorporated by reference.
10-l-1	Amendment No. 1, dated as of May 8, 2006, to Loan Agreement, dated as of September 19, 2005, among ArvinMeritor, ArvinMeritor Receivables Corporation, the lenders from time to time party thereto and SunTrust Capital Markets, Inc., filed as Exhibit 10a to ArvinMeritor’s Current Report on Form 8-K, dated May 8, 2006 and filed on May 10, 2006 (File No. 1-15983), is incorporated by reference.
10-l-2	Amendment No. 2, dated as of September 18, 2006, to Loan Agreement, dated as of September 19, 2005, among ArvinMeritor, ArvinMeritor Receivables Corporation, the lenders from time to time party thereto and SunTrust Capital Markets, Inc., filed as Exhibit 10 to ArvinMeritor’s Current Report on Form 8-K, dated September 18, 2006 and filed on September 20, 2006 (File No. 1-15983), is incorporated by reference.
10-l-3	Amendment No. 3, dated as of November 6, 2006, to Loan Agreement, dated as of September 19, 2005,

	among ArvinMeritor, ArvinMeritor Receivables Corporation, the lenders from time to time party thereto and SunTrust Capital Markets, Inc., filed as Exhibit 10-k-3 to ArvinMeritor’s Annual Report on Form 10-K for the fiscal year ended October 1, 2006 (File No. 1-15983), is incorporated by reference.
10-l-4	Amendment No. 4, dated as of September 17, 2007, to Loan Agreement, dated as of September 19, 2005, among ArvinMeritor, ArvinMeritor Receivables Corporation, the lenders from time to time party thereto and SunTrust Robinson Humphrey, Inc., filed as Exhibit 10 to ArvinMeritor’s Current Report on Form 8-K, dated and filed on September 17, 2007 (File No. 1-15983), is incorporated by reference.
10-m	Second Amended and Restated Purchase and Sale Agreement, dated as of September 19, 2005, among ArvinMeritor OE, LLC and various affiliates, as Originators, and ArvinMeritor Receivables Corporation, filed as Exhibit 10b to ArvinMeritor’s Current Report on Form 8-K, dated September 16, 2005 and filed on September 19, 2005 (File No. 1-15983), is incorporated by reference.
10-m-1	First Amendment, dated as of May 8, 2006, to Second Amended and Restated Purchase and Sale Agreement, dated as of September 19, 2005, among ArvinMeritor Receivables Corporation and the Originators named therein, filed as Exhibit 10b to ArvinMeritor’s Current Report on Form 8-K, dated May 8, 2006 and filed on May 10, 2006, is incorporated by reference.
10-m-2	Third Amendment, dated as of November 6, 2006, to Second Amended and Restated Purchase and Sale Agreement, dated as of September 19, 2005, among ArvinMeritor Receivables Corporation and the Originators named therein, filed as Exhibit 10-l-2 to ArvinMeritor’s Annual Report on Form 10-K for the fiscal year ended October 1, 2006 (File No. 1-15983), is incorporated by reference.
*10-n	Employment agreement between the company and Charles G. McClure, Jr., filed as Exhibit 10-s to ArvinMeritor’s Annual Report on Form 10-K for the fiscal year ended October 3, 2004 (File No. 1-15983), is incorporated by reference.
*10-o	Employment agreement between the company and James D. Donlon, III, filed as Exhibit 10 to ArvinMeritor’s Current Report on Form 8-K, dated April 12, 2005 and filed on April 13, 2005 (File No. 1-15983), is incorporated by reference.
*10-p	Employment agreement, dated August 23, 2006, between ArvinMeritor and Philip R. Martens, filed as Exhibit 10.3 to ArvinMeritor’s Current Report on Form 8-K, dated August 24, 2006 and filed on August 28, 2006 (File No. 1-15983), is incorporated by reference.
*10-q	Employment agreement, dated August 23, 2006, between ArvinMeritor and Carsten J. Reinhardt, filed as Exhibit 10.4 to ArvinMeritor’s Current Report on Form 8-K, dated August 24, 2006 and filed on August 28, 2006 (File No. 1-15983), is incorporated by reference.
*10-r	Form of employment letter between ArvinMeritor and its executives, filed as Exhibit 10-a to ArvinMeritor’s Current Report on Form 8-K, dated October 27, 2004 and filed on December 21, 2004 (File No. 1-15983), is incorporated by reference.
12	Computation of ratio of earnings to fixed charges. **
21	List of subsidiaries of ArvinMeritor. **
23-a	Consent of Vernon G. Baker, II, Esq., Senior Vice President and General Counsel of ArvinMeritor. **
23-b	Consent of Deloitte & Touche LLP. **
23-c	Consent of Bates White LLC. **
23-d	Consent of Deloitte Haskins & Sells (Chennai). ***
24	Power of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf of certain directors and officers of ArvinMeritor. **
31-a	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act. ***

31-b	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act. ***
32-a	Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.***
32-b	Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.***

* Management contract or compensatory plan or arrangement.

** Previously filed with the Registrant’s Form 10-K for the year ended September 30, 2007 filed with the SEC on November 19, 2007.

*** Filed herewith.

SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ARVINMERITOR, INC.
By:	/s/ Jeffrey A. Craig
	Jeffrey A. Craig Senior Vice President and Controller

Date: March 28, 2008