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Auditor Report of PNB Gilts Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of M/s.PNB Gilts Ltd. ("the Company") which comprise the Balance Sheet as at March 31,2015, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

The Company's Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in Section 133 of the Companies Act, 2013 ("the Act"). This responsibility includes the design, maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risk of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Management as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles accepted in India.

(a) In the case of the Balance Sheet of the state of affairs of the Company as at March 31,2015.

(b) In the case of the Statement of Profit & Loss of the profit of the Company for the year ended on that date and

(c) In the case of the Cash Flow Statement of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") in terms of sub-section (11) of Section 143 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act, we report that:

(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of accounts as required by law have been kept by the Company so far as it appears from our examination of those books.

(c) The Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of accounts and returns.

(d) In our opinion, the Financial Statements comply with the Accounting Standards referred to in Section 133 of the Act.

(e) On the basis of the written representation received from the Directors as on March 31,2015 and taken on record by the Board of Directors in meeting held on April 29, 2015, none of the Directors is disqualified as on March 31,2015 from being appointed as a director in terms of Sub-Section(2) of Section 164 of the Act.

(f) In our opinion, the Company has adequate internal financial controls system in place and also there is operating effectiveness of such controls.

(g) In accordance with Para 11 of Rule 11 of Companies (Audit and Auditors) Rules, 2014 relating to such matters as may be prescribed:

a. In our opinion, the Company has disclosed the impact of pending litigations in the financial statements.

b. In our opinion, no amount has been transferred by the company in the Investor Education & Protection Fund during the year and also there has been no default in transferring any amounts to the Investor Education and Protection Fund.

c. In our opinion, the Company does not have any material forseeable losses on long term contracts.

3. In accordance with provisions of Section 143(5) of Companies Act, 2013 and in terms of directions issued by the Comptroller and Auditor General of India during the course of audit of annual accounts of PNB Gilts Limited, we report that:

a. The Company has not been selected for disinvestment, thereby there is no status report on valuation of assets and liabilities which needs to be examined.

b. The Company has not waived/written off any debt/loan or interest during the year under consideration.

c. The Company does not have any inventories lying with the third parties excepting for the securities pledged with RBI/CCIL for availing secured loans for which proper records have been maintained by the company. Similarly, the Company has not received any asset as a gift from the Central Government or other authorities.

d. As informed to us, there are no pending legal cases or arbitrations pending against the company except the following Income Tax assessments which are given below:

(Rs. in lacs)

Assessment Amount Forum where dispute is pending Year involved

2006-2007 198.97 Income Tax Appellate Tribunal, New Delhi (ITAT)

2010-2011 46.39 Income Tax Appellate Tribunal, New Delhi (ITAT)

2012-2013 356.58 CIT Appeals

Assessment Reason for pendency Year

2006-2007 Pending for Fixation of hearing at the ITAT

2010-2011 Pending for Fixation of hearing at the ITAT

2012-2013 Pending for Fixation of hearing at the CIT-Appeals

Out of the above the Income Tax Department has retained and not given refunds of Rs. 118.60 lacs towards the above outstanding demands. As per the information and explanations given to us, the Company has engaged an income tax consultant for carrying out of the day to day tax compliances, appearances before the Income Tax authorities and arguing cases at various appellate levels. The Income tax consultant is being paid a retainership fees of Rs. 20,000 (plus service tax) per month towards carrying out all the above works.

Annexure to the Auditors' Report

(Referred to in Paragraph 1 of Report on Other Legal and Regulatory Requirements of our report of even date)

Based upon the information and explanations furnished to us and the books and records examined by us in the normal course of our audit, we report that to the best of our knowledge and belief:

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The Company has conducted physical verification of its fixed assets during the year. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the company and the nature of the assets. No material discrepancies were observed during the physical verification of assets.

(ii) (a) The Company's inventory comprising of Treasury Bills and Dated Government Securities are held in the form of Subsidiary General Ledger (SGL) account maintained with the Reserve Bank of India and the said stock is verified with the confirmation certificate received from Reserve Bank of India. The stock of other securities are held by the company in de-materialized form with NSDL/SHCIL, and the same is verified with the confirmation certificates received from them at the year end. In our opinion, the frequency of such verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of the business.

(c ) The Company is maintaining proper records of inventory. No discrepancy is noticed on physical verification of inventory as compared to book records.

(iii) In accordance with the legal opinion obtained by the company, the Directors of the Company who are nominees of Punjab National Bank are not to be regarded as concerned or interested. Hence the transactions with Punjab National Bank are not required to be listed in the register to be maintained under Section 189 of the Companies Act, 2013. The Company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained u/s 189 of the Act. The company has not taken any loans secured or unsecured from companies, firms or other parties covered in the register maintained u/s 189 of the Act.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of the business for the purchase of inventories and fixed assets and for the sale of goods and services. We have not observed any continuing failure to correct major weakness in internal control system during the course of the audit.

(v) To the best of our knowledge, the Company has not accepted any deposits from the public within the meaning of Section 73 to 76 of the Act and Rules framed thereunder.

(vi) To the best of our knowledge and according to the information/explanations given to us, maintenance of the cost records has not been prescribed by the Central Government under Section 148(1) of the Companies Act, 2013.

(vii) To the best of our knowledge and according to information/explanations given to us, the Company is regular in depositing undisputed statutory dues including Income Tax, Wealth Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities.

However, under the Income Tax Act, the following amounts are under dispute, the details of which are as under:

(Rs. in lacs)

Assessment Year Amount involved Forum where dispute is pending

2006-2007 198.97 ITAT

2010-2011 46.39 ITAT

2012-2013 356.58 CIT Appeals

Out of the above the Income Tax Department has retained and not given refunds of Rs 118.60 lacs towards the above outstanding demands.

All the amounts which are required to be transferred to Investor Education & Protection Fund have been transferred within time.

(viii) The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

(ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or bank or debenture holders as applicable.

(x) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xi) The Company has not raised any term loan during the year under audit.

(xii) According to the information and explanations given to us, we have neither come across any instance of fraud on or by the company noticed or reported during the year nor have we been informed of such case by the management during the course of our audit.

Dated : April 29, 2015 For Kapoor Tandon & Co. Place : New Delhi Chartered Accountants FRN: 000952C

(Himanshu Kapoor) Partner Membership No.078180


Mar 31, 2014

We have audited the accompanying financial statements of M/s. PNB Gilts Ltd ("the Company"), which comprise the Balance Sheet as at March 31, 2014 , the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

(b) in the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date, and

(c) in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003("the Order") as amended issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, we report that:

(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

(c) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act.

(e) On the basis of the written representations received from the directors as on March 31, 2014 and taken on record by the Board of Directors in meeting held on April 26, 2014, none of the directors is disqualified as on March 31, 2014 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

Annexure to the Auditors'' report

(Referred to in Paragraph 1 of Report on Other Legal and Regulatory Requirements of our report of even date) Based upon the information and explanations furnished to us and the books and records examined by us in the normal course of our audit, we report that to the best of our knowledge and belief:-

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has conducted physical verification of its fixed during the year. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

(ii) (a) The company''s inventory comprising of Treasury Bills & Dated Govt. Securities are held in the form of

Subsidiary General Ledger (SGL) account maintained with the Reserve Bank of India and the said stock is verified with the confirmation certificate received from Reserve Bank of India. The stock of other securities are held by the company in de-materialised form with NSDL/SHCIL and the same is verified with the confirmation certificates received from them at the year end. In our opinion, the frequency of such verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. No discrepancy is noticed on physical verification of inventory as compared to book records.

(iii) In accordance with the legal opinion obtained by the company, the Directors of the Company who are nominees of Punjab National Bank are not to be regarded as concerned or interested. Hence the transactions with Punjab National Bank are not required to be listed in the register to be maintained under Section 301 of the Companies Act, 1956. The company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained u/s 301 of the Act. The company has not taken any loans secured or unsecured from companies, firms or other parties covered in the register maintained u/s 301 of the Act.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventories and fixed assets and for the sale of goods and services. We have not observed any continuing failure to correct major weakness in internal control system during the course of the audit.

(v) In accordance with the legal opinion obtained by the company, the Directors of the Company who are nominees of Punjab National Bank are not to be regarded as concerned or interested. Hence the transactions with Punjab National Bank are not required to be listed in the register to be maintained under Section 301 of the Companies Act, 1956. Based on the audit procedures applied by us and according to the information and explanations given to us, we are of the opinion that there are no transactions which need to be entered into the register maintained under Section 301 of the Companies Act, 1956.

(vi) To the best of our knowledge, the Company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Act and rules framed there under.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

(viii) To the best of our knowledge and according to the information/explanations given to us, maintenance of the cost records has not been prescribed by the Central Government under S ection 209(1) (d) of the Companies Act, 1956.

(ix) To the best of our knowledge and according to information / explanations given to us the Company is regular in depositing undisputed statutory dues including Income Tax, Wealth Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities. There were no arrears of outstanding undisputed statutory dues as at the last day of the financial year for a period of more than six months from the date they become payable.

(x) The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

(xi) In our opinion & according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution or bank or debenture holders as applicable.

(xii) Based on our examination of documents and records, we are of the opinion that the company has maintained adequate records, where the company has granted loans and advances on the basis of security by way of pledge of securities.

(xiii) In our opinion and according to the information and explanations given to us, the provisions of special statute applicable to a chit fund or a nidhi/ mutual benefit fund/ societies are not applicable to the company.

(xiv) According to the information and explanations given to us, the company is dealing or trading in shares, securities, debentures and other investments and proper records have been maintained for the same. All the shares, securities, debentures and other investments are held in the name of the company.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xvi) The Company has not raised any term loan during the year under audit.

(xvii) To the best of knowledge and information and explanation given to us, funds raised on short term basis have not been used for long term investment.

(xviii)The Company has not made any preferential allotment of shares to companies/firms/parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) According to information and explanations given to us, the Company has not issued any debenture during the year.

(xx) According to information and explanations given to us the Company has not raised any money by public issues during the year.

(xxi) According to the information and explanations given to us, we have neither come across any instance of fraud on or by the company noticed or reported during the year nor have we been informed of such case by the management during the course of our audit.

For S. Mohan & Co. Chartered Accountants (R. K. Mittal) Place : New Delhi FCA Date : April 26, 2014 Partner Membership No. 088767


Mar 31, 2013

1. We have audited the attached Balance Sheet of PNB GILTS LTD. as at March 31, 2013 and also the Profit and Loss account and the Cash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Companyls management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004 (together tthe orderl) issued by the Central Government of India in terms of sub- section (4A) of Section 227 of the Companies Act, 1956 of India (the Act) we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the annexure referred to in paragraph 3 above, we report that :

i) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit

ii) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purpose of our audit have been received from liaison offices of the Company.

iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account.

iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred in sub-section (3C) of Section 211 of the Companies Act, 1956;

v) On the basis of written representation received from the Directors as on March 31, 2013 and taken on record by the Board of Directors in meeting held on April 27, 2013 we report that none of the Director is disqualified as on March 31, 2013 from being appointed as director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

5. In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read in conjunction with the significant accounting policies (Note-1) and notes on accounts (Note-2), give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a) In the case of Balance Sheet, of the State of affairs of the Company as at March 31, 2013.

b) In the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that date.

c) In the case of Cash Flow Statement, of the cash flow for the year ended on that date.

Annexure referred to in Paragraph 3 of our report of even date to the members of PNB Gilts Limited, New Delhi on the accounts of the Company for the year ended March 31, 2013.

Based upon the information and explanations furnished to us and the books and records examined by us in the normal course of our audit, we report that to the best of our knowledge and belief:-

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has conducted physical verification of its fixed assets during the year. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

(ii) (a) The Companyls inventory comprising of Treasury Bills & Dated Govt. Securities are held in the form of Subsidiary General Ledger (SGL) account maintained with the Reserve Bank of India and the said stock is verified with the confirmation certificate received from Reserve Bank of India. The stock of other securities are held by the Company in de-materialised form with NSDL/SHCIL and the same is verified with the confirmation certificates received from them at the year end. In our opinion, the frequency of such verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. No discrepancy is noticed on physical verification of inventory as compared to book records.

(iii) In accordance with the legal opinion obtained by the Company, the Directors of the Company, who are nominees of Punjab National Bank, are not to be regarded as concerned or interested. Hence the transactions with Punjab National Bank are not required to be listed in the register to be maintained under Section 301 of the Companies Act,1956. The Company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained u/s 301 of the Act. The Company has not taken any loans secured or unsecured from companies, firms or other parties covered in the register maintained u/s 301 of the Act.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventories and fixed assets and for the sale of goods and services. We have not observed any continuing failure to correct major weakness in internal control system during the course of the audit.

(v) In accordance with the legal opinion obtained by the Company, the Directors of the Company, who are nominee of Punjab National Bank are not to be regarded as concerned or interested. Hence the transactions with Punjab National Bank are not to be required to be listed in the register to be maintained under Section 301 of the Companies Act, 1956. Based on the audit procedures applied by us and according to the information and explanations given to us, we are of opinion that there are no transactions, which need to be entered into the register maintained under Section 301 of the Companies Act, 1956.

(vi) To the best of our knowledge, the Company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Act and rules framed there under.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

(viii) To the best of our knowledge and according to the information/explanations given to us, maintenance of the cost records has not been prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956.

(ix) To the best of our knowledge and according to the information / explanations given to us the Company is regular in depositing undisputed statutory dues including Income Tax, Wealth Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities. There were no arrears of outstanding undisputed statutory dues as at the last day of the financial year for a period of more than six months from the date they become payable.

(x) The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

(xi) In our opinion & according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or bank or debenture holders as applicable.

(xii) Based on our examination of documents and records, we are of the opinion that the Company has maintained adequate records, where the Company has granted loans and advances on the basis of security by way of pledge of securities.

(xiii) In our opinion and according to the information and explanations given to us, the provisions of special statute applicable to a chit fund or a nidhi/ mutual benefit fund/ societies are not applicable to the Company.

(xiv) According to the information and explanations given to us, the Company is dealing or trading in shares, securities, debentures and other investments and proper records have been maintained for the same. All the shares, securities, debentures and other investments are held in the name of the Company.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xvi) The Company has not raised any term loan during the year under audit.

(xvii) To the best of knowledge and information and explanation given to us, funds raised on short term basis have not been used for long term investment.

(xviii)The Company has not made any preferential allotment of shares to companies/firms/parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) According to information and explanations given to us, the Company has not issued any debenture during the year.

(xx) According to information and explanations given to us, the Company has not raised any money by public issues during the year.

(xxi) According to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company noticed or reported during the year nor have we been informed of such case by the management during the course of our audit.

For S. Mohan & Co.

Chartered Accountants

(R. K. Mittal)

Date : April 27, 2013 Partner

Place : New Delhi Membership No. 088767


Mar 31, 2012

1. We have audited the attached Balance Sheet of PNB GILTS LTD. as at March 31, 2012 and also the Profit and Loss account and the Cash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004 (together the order) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 of India (the 'Act'), we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the annexure referred to in paragraph 3 above, we report that :

i) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit

ii) In our opinion, proper books of account as required by law have been kept by the company so far as it appears from our examination of those books and proper returns adequate for the purpose of our audit have been received from liaison offices of the company.

iii) The Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account.

iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred in sub-section (3C) of Section 211 of the Companies Act, 1956;

v) On the basis of written representation received from the Directors as on March 31, 2012 and taken on record by the Board of Directors in meeting held on May 2, 2012 we report that none of the Director is disqualified as on March 31, 2012 from being appointed as director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

5. In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read in conjunction with the significant accounting policies (Note-1) and notes on accounts (Note-2), give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a) In the case of Balance Sheet, of the State of affairs of the company as at March 31, 2012.

b) In the case of the Profit & Loss Account, of the Profit of the company for the year ended on that date.

c) In the case of Cash Flow Statement, of the cash flow for the year ended on that date.

Annexure referred to in Paragraph 3 of our report of even date to the members of PNB Gilts Limited, New Delhi on the accounts of the company for the year ended March 31, 2012.

Based upon the information and explanations furnished to us and the books and records examined by us in the normal course of our audit, we report that to the best of our knowledge and belief:-

(i) (a) The company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The company has conducted physical verification of its fixed assets during the year. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption.

(ii) (a) The company's inventory comprising of Treasury Bills & Dated Govt. Securities are held in the form of Subsidiary General Ledger (SGL) account maintained with the Reserve Bank of India and the said stock is verified with the confirmation certificate received from Reserve Bank of India. The stock of other securities are held by the company in de-materialised form with NSDL/SHCIL and the same is verified with the confirmation certificates received from them at the year end. In our opinion, the frequency of such verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) The company is maintaining proper records of inventory. No discrepancy is noticed on physical verification of inventory as compared to book records.

(iii) In accordance with the legal opinion obtained by the company, the Directors of the company who are nominees of Punjab National Bank are not to be regarded as concerned or interested. Hence the transactions with Punjab National Bank are not required to be listed in the register to be maintained under Section 301 of the Companies Act,1956. The company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained u/s 301 of the Act. The company has taken unsecured loans (Call Money) from companies, firms or other parties covered in the register maintained u/s 301 of the Act. The number of parties involved is one and total amount involved in the transactions is Rs.1220 crores with closing balance of Rs. NIL. The rate of interest and other terms and conditions of loans taken are not prima facie prejudicial to the interest of the company and the company is regular in payment of the principal amount and interest.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business for the purchase of inventories and fixed assets and for the sale of goods and services. We have not observed any continuing failure to correct major weakness in internal control system during the course of the audit.

(v) In our opinion, and according to the information and explanations given to us, the transactions which need to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered and these transactions have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time as confirmed to us by the management.

(vi) To the best of our knowledge, the company has not accepted any deposits from the public within the meaning of Section 58A and 58AA of the Act and rules framed there under.

(vii) In our opinion, the company has an internal audit system commensurate with its size and nature of its business.

(viii) To the best of our knowledge and according to the information/explanations given to us, maintenance of the cost records has not been prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956.

(ix) To the best of our knowledge and according to the information / explanations given to us the Company is regular in depositing undisputed statutory dues including Income Tax, Wealth Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities. There were no arrears of outstanding undisputed statutory dues as at the last day of the financial year for a period of more than six months from the date they become payable.

(x) The company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceding financial year.

(xi) In our opinion & according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution or bank or debenture holders as applicable.

(xii) Based on our examination of documents and records, we are of the opinion that the company has maintained adequate records, where the company has granted loans and advances on the basis of security by way of pledge of securities.

(xiii) In our opinion and according to the information and explanations given to us, the provisions of special statute applicable to a chit fund or a nidhi/ mutual benefit fund/ societies are not applicable to the company.

(xiv) According to the information and explanations given to us, the company is dealing or trading in shares, securities, debentures and other investments and proper records have been maintained for the same. All the shares, securities, debentures and other investments are held in the name of the company.

(xv) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks or financial institutions.

(xvi) The company has not raised any term loan during the year under audit.

(xvii) To the best of knowledge and information and explanation given to us, funds raised on short term basis have not been used for long term investment.

(xviii) The company has not made any preferential allotment of shares to companies/firms/parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) According to information and explanations given to us, the company has not issued any debenture during the year.

(xx) According to information and explanations given to us, the company has not raised any money by public issues during the year.

(xxi) According to the information and explanations given to us, we have neither come across any instance of fraud on or by the company noticed or reported during the year nor have we been informed of such case by the management during the course of our audit.



For S. Mohan & Co.

Chartered Accountants

(R. K. Mittal)

Date : May 2, 2012 Partner

Place : New Delhi Membership No.088767


Mar 31, 2010

We have audited the attached Balance Sheet of PNB GILTS LTD., as at March 31, 2010 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Without qualifying our opinion we draw attention to Note No. 12 of Schedule 19 B pertaining to change in policy regarding transfer of a portion of Government Securities in the HTM category as permitted by the RBI vide circular dated August 31, 2009 (subject to certain conditions) and as a result thereof further diminution in market value of securities as on March 31, 2010 to the tune of Rs. 213.04 lacs not provided in the books.

As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraphs 4 & 5 of the said order to the extent applicable to the Company.

Further to our comments in the annexure we report that:

(i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit.

(ii) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books (and proper returns adequate for the purpose of our audit have been received from the branches not visited by us).

(iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account.

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the Directors, as on March 31, 2010 and taken on record by the Board of Directors in its meeting held on May 3, 2010, we report that none of the Director is disqualified as on March 31, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

(vi) The Govt. has not notified the rate of cess envisaged under Section 441A(i), of the Companies Act, 1956 hence, no provision/payment has been made for the same (refer Note no. 14 of schedule 19(B)).

(vii) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with the notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2010;

(b) in the case of the Profit and Loss Account, of the Profit for the year ended on that date; and (c ) in the case of Cash Flow Statement, of the cash flow for the year ended on that date.

Annexure referred to in our report of even date to the members of PNB Gilts Limited, New Delhi on the accounts of the company for the year ended March 31, 2010

1. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. The fixed assets have been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable. As informed to us, no material discrepancies were noticed on such verification. Further, no substantial part of fixed assets have been disposed off during the year.

2. (a) The companys stock comprising of Treasury Bills & Dated Govt. Securities is held in the form of Subsidiary

General Ledger Account, maintained with the Reserve Bank of India. The said stock in the SGL account was verified with the confirmation certificate received from the Reserve Bank of India. The stock of other securities held by the company in de-materialised form in NSDL / SHCIL was verified with the confirmation certificate received from them at the year end.

(b) The existing procedures of reconciliation of stock followed by the management at periodical interval is reasonable and adequate in relation to the size of the Company and nature of its business.

(c) The company is maintaining proper records of its inventory and no material discrepancies were noticed on the reconciliation as mentioned above, as compared with book records.

3. In our opinion and according to the information and explanations given to us, the internal control procedure for purchase of fixed assets, companys money market operations and trading in Government Securities, Corporate Bonds, Debentures and Equities are commensurate with the size of the company and nature of its business.

4. In accordance with the legal opinion obtained by the company the Directors of the company who are nominees of Punjab National Bank are not to be regarded as concerned or interested. Hence the transactions with Punjab National Bank are not required to be listed in the register to be maintained under section 301 of the Companies Act, 1956. Further, for other transactions as required to be entered into the register in pursuance to Section 301 to the Companies Act, 1956 have been entered. Further, these transactions have been made at prices which are reasonable having regard to the prevailing market price as observed from test check basis.

5. The Company has not accepted any deposits from the public, hence the provisions of Section 58A & 58AA of the Companies Act, 1956 are not applicable.

6. The Company has an Internal Audit System which in our opinion is commensurate with the size of the company and nature of its business.

7. (a) According to the records made available and information provided to us, the company is regular in depositing

undisputed statutory dues like Provident Fund, Investor Education and Protection Fund, Service Tax and other Statutory Dues with the appropriate authorities. Further, as explained to us, the provisions for Employee State Insurance, Sales Tax, Wealth Tax, Customs Duty, Excise Duty are not applicable to the company during the year. In the absence of notification/ guidelines for levy of Cess towards rehabilitation of Sick Industries, the dues remain unascertained and not deposited. However, in respect of undisputed Advance Income Tax there have been delays by the Company in depositing the same. The arrears of Advance Income Tax outstanding beyond six months as on March 31, 2010 are as follows:-

Name of the Statute Nature of Amount the dues (Rs. in lacs)

The Income Tax Act, 1961 Advance 54.49 Income Tax

The Income Tax Act, 1961 Advance 511.41 Income Tax

Name of the Statute Period to which Due date Date of the amount payment relates (with interest)

The Income Tax Act, 1961 1st Installment 15.06.09 28.04.10 of Advance Tax for 2009-10

The Income Tax Act, 1961 2nd Installment 15.09.09 28.04.10 of Advance Tax for 2009-10

(b) According to the information and explanation given to us there are no dues of Income Tax/ Service Tax and other Statutory Dues, which have not been deposited on account of any dispute.

8. According to information and explanation given to us, the Company has not defaulted in repayment of dues to the financial institution / bank / debenture holder during the year.

9. In respect of the Companys dealings in Treasury Bills, Certificate of Deposits, Commercial Paper, Dated Govt. Securities, Corporate Bonds, Debentures and Equities, proper records have been maintained and timely entries have been made thereof. Since the principal business of the company consists of buying and selling of securities, the provisions of Section 49(1) of the Companies Act, 1956, regarding holding of investments in its own name are not applicable to it.

10. According to the information and explanation given to us, no fraud has been committed to or by the Company during the year.

11. The provisions of para (iii), (viii), (x), (xii), (xiii), (xv), (xvi), (xvii), (xviii), (xix) and (xx) are not applicable during the year ended March 31, 2010.

For Bansal R. Kumar & Associates Chartered Accountants

(R. K. Gupta) Date : May 3, 2010 Partner Place : New Delhi Membership No. 86851

 
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