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Auditor Report of Transgene Biotek Ltd.

Mar 31, 2015

We have audited the accompanying financial statements of TRANSGENE BIOTEK LIMITED("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 ended , and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements :

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 principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities, selection and application of accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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.

Auditor's Responsibility :

Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with 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 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 internal financial control relevant to the Company's preparation and fair presentation of the financial statements that give true and fair view 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 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 on the financial statements.

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 31,2015; and

b) in the case of the Profit and Loss Account, of the Loss for the period ended March 31,2015.

c) in the case of the cash flow statement, of the Cash Flows, for the period ended March 31,2015.

Emphasis of Matter

1. Attention is brought to Note No.10 to the Notes on Accounts under the heading "Non-Current Investments" amounting to Rs.9220.10 Lakhs made in the wholly owned subsidiary company (1,69,52,001 shares of US $ 1 each). Keeping in view the comments of the Auditor of the Subsidiary Company, in the Independent Auditor's Report wherein they commented that they are unable to express an opinion on the financial statements of the said Subsidiary Company and also in the absence of alternative methodologies to independently evaluate the same, we are unable to express an opinion whether the said sum as reflected under the above head is recoverable at the value at which it is stated. Management, as a prudent measure, made full provision in the books of accounts considering the above development.

2. Attention is also brought to the fact that Securities and Exchange Board of India (SEBI) had conducted Preliminary Inquiry on receiving certain complaints on the matter of GDRs issued by the Company and its utilization thereof, basically on the angle of protection of Investors' interest.

SEBI prima facie concluded that the GDR proceeds have been transferred by the Company, directly or indirectly, through foreign subsidiary for undisclosed purposes under the garb of consideration for technology transfer and consequently passed an interim Order inter alia, refraining the Company from issuing any securities. The Company has appealed against the said Order. We are unable to comment, at this stage, on the impact this Order will have on the Company as a going concern. We are also unable to quantify, at the stage, the financial impact of this Order on the Company, as the Management has informed us that the Company is in the process of taking steps for recovery of amounts raised in the GDR.

3. The findings of the SEBI as per their Order on the utilization/transfer of GDR proceeds for undisclosed purposes point out towards violations of the provisions of the Foreign Exchange Management Act as well as GDR approval conditions, the impact of which we are unable to quantify at this stage.

4. Attention is brought to the fact that there is an outstanding balance of Rs. 2302.00 lakhs which pertains to advance given to a Party out of the proceeds of GDR. Consequent to the order of the SEBI as aforesaid and the contention of the management that the payments were made without Company's authorization or knowledge, we are unable to opine whether this amount is recoverable or not as we are unable to obtain confirmation from the concerned Party. However, the Management as a prudent measure, made full provision for the amount, in the Books of Account considering the above facts.

Report on Other Legal and Regulatory Requirements :

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanation given to us, we give in the Annexure a statement on the matters specified in the paragraphs 3 and 4 of the Order to the extent applicable to the company.

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

a. We sought and have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. In our opinion proper Books of Account as required by law have been kept by the Company so far as it appears from our examination of those books;

c. The Balance Sheet, Statement of Profit and Loss and the 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 the Cash Flow Statement comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013 read with rule 7 of the Companies (Accounts) Rules, 2014.

e. On the basis of written representations received from the directors as on March 31,2015, and taken on record by the Board of Directors, none of the directors are disqualified as on March 31,2015, from being appointed as a director in terms of section 164(2) of the Act.

f. With respect to the other matters to be included in Auditor's Report in accordance with Rule 11 of Companies (Audit and Auditors),Rules 2014, in our opinion and to the best of our information and according to the explanation given to us;

i. The Company has disclosed the impact of pending litigation on its financial position in its financial statements.

ii. In our opinion and as per the information and explanations provided to us, the Company has not entered into any long term contracts including derivate contracts, requiring provision under applicable laws or accounting standards for material foreseeable losses, and

iii. There has been no delay in transferring the amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

ANNEXURETO THE INDEPENDENT AUDITOR'S REPORT

Re: TRANSGENE BIOTEK LIMITED

Referred to in Paragraph 1 under section (Report on other Legal and Regulatory Requirements of our Report of even date)

(i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.In case of Technology item, we have been informed that certain balancing components are yet to be received without which the technology is incomplete for the full effective intended usage. Subject to this, the other fixed assets have been physically verified by the management and this revealed no material discrepancies.

(b) All the assets have been physically verified by the management during the year and there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(ii) (a) The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, 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) In our opinion and according to the information and explanations given to us, the company is maintaining proper records of inventory. No material discrepancies were noticed on verification of the physical stocks with the records.

(iii) The company has not granted any loan to the parties covered in the register maintained under section 189 of the Companies Act, 2013.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

(v) According to the information and explanations given to us, the Company has accepted deposits against the terms of directives issued by Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under. During the year deposits accepted to the tune of Rs. 34.00 lakhs.

(vi) The maintenance of cost records has not been prescribed by the Central Government under sub section (1) of section 148 of the Companies Act, 2013 for the activities of the Company.

(a) The company is not regular in depositing undisputed statutory dues . The amount of arrears, as at 31st March, 2015 outstanding for a period of more than six months from the date they became payable are as mentioned below:

Nature of Dues Amount(Rs) Period Forum where dispute is pending

Customs Duty demand raised 59.37 lakhs 2002 CESTAT, Chennai for Non-fulfillment of Export Obligation

(c) In our opinion and according to the information and explanations given to us, there are no amounts required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and Rules made there under.

(vii) In our opinion, the company has accumulated losses as on 31st March, 2015 to the tune of Rs.13862.25 lakhs. The Company has incurred cash losses during the financial year covered by our audit and also in the immediately preceding financial year.

(viii) In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of dues to financial institutions and banks.

The Company is not regular in repayment of Term loans within due date and the loan accounts with Union bank of India and SIBRI are classified as Non-Performing Asset by the banks due to non-payment as per payment schedule of Term loan and non-application of interest on the loan account after the account becoming NPA. In the absence of confirmation of the loan balance, we are not in a position to quantify the exact arrears at the year end.

(b) According to the information and explanations given to us, there are no dues of sales tax, income tax an excise duty which have not bee deposited on account of any dispute except the following :

(ix) 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, the terms and conditions whereof are prejudicial to the interest of the Company.

(x) According to the information and explanations given to us, the company has not obtained any Term Loans during the period under audit.

(xix) Based upon the audit procedures performed and according to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

As per our report attached For GOPAL & RAJAN Chartered Accountants Firm Regd. No. 000953S

Sd/- K.Goutham Subbaiah Partner (M. No. 203237)


Mar 31, 2014

We have audited the accompanying financial statements of M/S. TRANSGENE BIOTEK LIMITED ("the Company") which comprises the Balance sheet as at 31st March 2014, the Statement of Profit and Loss for the year ended on that date and the Cash fFlow Statement for the year and a summary of 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 position, financial performance and cash flows of the company in accordance with the accounting standards notified under the Companies Act, 1956 ("the Act") (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs) and in accordance with the accounting principles generally accepted in India. 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.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conduct 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 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 disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers 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, subject to our comments under the heading "Emphasis of Matter" and in para (a) and para (b) (4) of ''Report on other Legal and Regulatory requirements'' mentioned hereunder:

a) In the case of Balance sheet, of the State of affairs of the Company as at 31 st March 2014;

b) In the case of Statement of Profit and Loss, of the Loss 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.

Emphasis of Matter

1. Attention is bought to Note No. 10 to the Notes on Accounts under the heading "Non-Current Investments" amounting to Rs.9220.10 Lakhs made in the wholly owned subsidiary company (1,69,52,001 shares of US $ 1 each). Keeping in view the comments of the Auditor of the Subsidiary Company, in the Independent Auditor''s Report wherein they commented that they are unable to express an opinion on the financial statements of the said Subsidiary Company and also in the absence of alternative methodologies to independently evaluate the same, we are unable to express an opinion whether the said sum as reflected under the above head is recoverable at the value at which it is stated or not. Management, as a prudent measure, made full provision in the books of accounts considering the above development.

2. Attention is also bought to the fact that the regulator, Securities and Exchange Board of India had conducted Preliminary Inquiry on receiving certain complaints on the matter of GDR''s issued by the Company in the past and its utilization thereof, basically on the angle of protection of Investors'' interest, . and SEBI prima facie concluded that the GDR proceeds have been transferred by the Company, directly or indirectly, through foreign subsidiary for undisclosed purposes under the garb of consideration for technology transfer and consequently passed an interim Order, after the end of the financial year but before this reporting date, inter alia, refraining the Company from issuing any securities. Management has informed us that the Company is in the process of conducting its own inquiry into the matters mentioned in the Order and taking steps for protection of amounts raised in the GDR. We are unable to quantify, at the moment, the financial impact of this Order on the Company, as the Company is yet to quantify and make any provision towards this purported loss. We are also unable to comment, at this stage, on the impact this Order will have on the Company as a going concern.

3. The findings of the SEBI as per their Order on the utilization/transfer of GDR proceeds for undisclosed purposes point out towards violations as per the provisions of the Foreign Exchange Management Act as well as GDR approval conditions, the impact of which we are unable to quantify at the moment.

4. Attention is bought to the fact that there is an outstanding balance of Rs.2684.08 Lakhs which pertains to advance given out of the proceeds of GDR. Consequent to the order of the SEBI as aforesaid and of the counter contention of the CMD as to transfer of payments were made unauthorizedly without his knowledge and also considering the fact that confirmation from the party could not be obtained, we are unable to opine whether this amount is recoverable or not. However, the Management as a prudent measure, made full provision in the books of accounts considering the above development.

Report on Other Legal and Regulatory

Requirements

a. As required by the Companies'' (Auditor''s Report) Order, 2003, ("the Order") as amended issued by the Central Government of India in terms of Section 227 (4A) of ''The Companies'' Act, 1956, (the ''Act'') and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we set out in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

1. 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, except loan balance confirmations and others stated elsewhere in our report.

2. 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.

3. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of accounts.

4. In our opinion, the Balance Sheet, Statement of Profit and Loss 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, except the compliance of Accounting Standard 15 & 22, the effect of which we are unable to determine.

5. On the basis of written representations received from the Directors as on March 31st 2014, and taken on record by the Board of Directors, none of the Directors are disqualified as on March 31st 2014 from being appointed as Director in terms of clause (g) of sub section (1) of Section 274 of the Companies Act, 1956.

6. The Company had neither provided nor paid for cess payable u/s 441A of the Companies Act, 1956 since the aforesaid section is not yet be made effective by the Central Government.

ANNEXURE REFERREDTO IN ''REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS'' OF AUDIT REPORT OF EVEN DATE ON THE ACCOUNTS OF TRANSGENE BIOTEK LIMITED (''THE COMPANY'') FOR THE YEAR ENDED 31 ST MARCH 2014

1. (a) As per the information and explanations given to us, the Company is in the process of updating its records showing full particulars including quantitative details and situation of Fixed Assets.

(b) As per the information and explanations given to us, the fixed assets have been physically verified by the management during the year. In case of Technology item, we have been informed that certain balancing components are yet to be received without which the technology is incomplete for the full effective intended usage. Subject to this, the other fixed assets have been physically verified by the management and this revealed no material discrepancies. the Company had carried out the physical verification of the Fixed Assets during the year under review and we have been informed that such verification did not reveal any material discrepancies.

(c) As per the information & explanations given to us, the Company has not disposed off any fixed assets during the year, which will affect the going concern status of the company.

2 (a) As per the information & explanations given to us, the inventory has been physically verified during the year by the management at periodical intervals. In our opinion the frequency of verification appears to be reasonable.

(b) Based on the information & explanations to given to us, 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 present business.

(c) As per the information & explanations given to us, the Company is maintaining records of inventory and no material discrepancies have been noticed by the management on the physical verification done by them.

3. (a) As per the information and explanations given to us, as the company has not granted any loans, secured or unsecured to Companies, Firms or other parties covered in the register maintained under Section 301 of the Act, and accordingly, the provisions of Clause 4(iii) (a) to 4 (iii)

(d) are not applicable to the Company for the current year.

(b) According to the information and explanations given to us, the Company had taken interest free unsecured loan from three parties listed in the register maintained under Section 301 of the Act. The amount involved is Rs. 306.28 1249.52 Lakhs and the maximum outstanding balance during the year was Rs. 1259.59 Lakhs.

(c) In our opinion, terms and conditions of unsecured loan taken from the parties listed in the register maintained under Section 301 of the Act, being interest free, are not prima facie prejudicial to the interest of the Company.

(d) According to the information and explanations given to us, no specific terms have been stipulated for payment of the principal amount and interest thereon. Hence we are not in a position to make any specific comment as to whether the company is regular in payment of the principal amount and interest thereon.

4. Based on the information & explanations given to us, we are of the opinion that the matters as to adequacy of the internal control procedures regarding purchase of inventory and fixed assets and sale of goods and services as compared to the size of the Company and nature of its business needs to be strengthened. However, we have not come across instances of continuing major weaknesses, apart from strengthening the existing internal controls during the year under review.

5. According to the information and explanation given to us and as confirmed by the Management, there are no transactions with the parties which need to be entered into the register maintained under Section 301 of the Act. Accordingly, the provisions of clause 4 (v) (a) & (b) are not applicable for the year under review.

6. As the Company has not accepted any deposits from public covered by the directives issued by the Reserve Bank of India and the provisions of section 58A and 58AAA or any other relevant provisions of the Act, the provisions of clause 4(vi) of the Order are not applicable to the Company for the current year.

7. As per information and explanation given to us, the Company does not have Internal Audit system commensurate with the size and nature of the business.

8. According to information and explanation given to us, the Central Government has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Act, for any of the activities of the company, and accordingly the provisions of clause 4(viii) of the order is not applicable to the Company for the current year.

9. (a) According to the information and explanations given to us, the Company is not regular in depositing undisputed statutory Statutory dues of Income Tax, Service Tax and other statutory dues. The amount of arrears of outstanding dues as on 31st March 2014, outstanding for a period of more than six months from the date they became payable are Income Tax Rs. 554.11 Lakhs, Fringe Benefit Tax Rs.0.58 Lakhs, Income tax in the nature of Tax deducted at source Rs.24.16 Lakhs, Service Tax Rs.8.37 Lakhs.

(b) As per the records and according to the information and explanation given to us, there are no dues of Sales tax, Income Tax, Wealth Tax, Excise duty and Cess which have not been deposited on account of any dispute as on 31.03.2014, except a disputed claim of Customs Duty net of amount paid under protest, as per the details given below

Nature of Dues Amount (Rs) Period Forum where Dispute is pending

Customs Duty demand raised for Non-fulfilment of Export obligation 59.37 Lakhs 2002 CESTAT, Chennai

10. According to the information and explanation given to us and overall examination of the financial statements of the Company, we report that the Company does not have any accumulated losses at the end of the current financial year. The Company had incurred cash losses during the year as well as in the immediately preceding financial year.

11. The Company is not regular in repayment of Term loans within due date and the account is classified as Non Performing Asset by the bank during the year under review. Due to non- repayment as per payment schedule of Term loan and non- application of interest on the loan account after the account becoming NPA, and In the absence of confirmation of the loan balance, we are not in a position to quantify the exact arrears at the end of the year.

12. According to the information and explanation given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities, the provisions of clause 4 (xii) of the Order are not applicable to the Company for the current year.

13. In our opinion, The Company is not a Chit Fund/Nidhi/Mutual Benefit Fund/Society. Therefore the provisions of clause 4(xiii) of the Order are not applicable to the Company for the current year.

14. In our opinion, as the Company is not dealing or trading in shares, securities, debentures and other investments, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

15. According to information and explanations given to us the Company has not given any Guarantee to any banks / financial institutions during the year under review for the loan taken by any third party, the provisions of Clause 4 (xv) of the Order are not applicable to the Company

16. As per information and explanations given to us, no fresh term loans have been raised by the Company and the as per the past records of the Company, the earlier term loans have been applied for the purpose for which they were raised.

17. According to the Information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short term basis have been used for long term investment purposes.

18. According to the Information and explanations given to us, the Company had made preferential allotment of shares to one party covered under the register maintained under Section 301 of the Act during the year under review, which has been made at price which is not prejudicial to the interest of the Company.

19. As the Company has not issued any debentures during the year, which requires creation of security or charge, the provisions of clause 4 (xix) of the Order, are not applicable to the Company for the current year.

20. According to the Information and explanations given to us and on overall examination of the books of accounts of the company, the Company has not raised any money by public issue during the year under review. However, the Company had, in the preceeding year(s), have issued Global Depository Receipts outside India and the majority proceeds of GDRs have been utilized through wholly owned subsidiary abroad, which is not audited by us and accordingly, we are unable to express any opinion on the end use of moneys raised through GDRs. Further, during the current year, the auditor who conducted the audit in respect of overseas subsidiary also could not express his opinion regarding the existence, valuation of the deposits and prepayments/advances and technical know how, as stated in his audit report.

21. During the course of examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, and as per the representation given by the Company and relied on by us, we have neither come across any instance material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such cases by the management. Attention is bought to the fact that after the end of the financial year and before the issue of our Audit Report, SEBI had passed an order against the Company as well as promoters/directors wherein it has alleged that there is a prima facie case of acts, omissions and concealment by the Company and its promoters/Directors which amount to ''Fraud'' within the meaning of regulation 2(1 )(c ) of the SEBI (Prohibition of Fraudulent and UnfairTrade Practices relating to Securities Market) Regulations 2003. SEBI further stated that the Company and the promoters/directors have violated the provisions of Regulations 3(a), (c) and (d), read with regulation 4(1) and 4 (2)(f) of the above regulations as well as Section 12A(b) and (c ) of SEBI Act, 1992. Accordingly, we are unable to quantify the impact of the above Order in financial terms and further unable to state whether this affects the going concern of the Company.

For Sarath & Associates

Chartered Accountants Firm Regd. No. 005120S

Sd/-

PLACE: HYDERABAD P. Sarath Kumar

DATE: 06.12.2014 Partner (M. No. 021755)


Mar 31, 2011

1. We have audited the attached Balance Sheet of TRANSGENE BIOTEK LIMITED ("the Company") as at 31 st March 2011, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report.

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 bur audit in accordance with the 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 basts for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of India in terms of Sub- section (4A) of Section 227 of the Companies Act, 1956("Act") and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we set out 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 above, 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 appears from our examination of those books;

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

d. 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, to the extent applicable;

e. The Company has neither paid nor provided for the Cess payable under section 441A of the Companies Act,1956 since the aforesaid section is not yet been made effective by the Central Government of India;

f. On the basis of written representations received from the directors as on 31st March, 2011 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31 st March 2011 from being appointed as a director in terms of Clause (g) of Sub-section (1) of Section 274 of the Companies Act,1956;

g. In our opinion and to the best of our information and according to the explanations given to us, the said accounts together 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 acxepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31 st March, 2011;

ii. in the case of the Profit and Loss Account, of the Profit for the year ended on that date; and

iii. 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 AUDIT REPORT OF EVEN DATE ON THE ACCOUNTS OF TRANSGENE BIOTEK LIMITED FOR THE YEAR ENDED 31 ST March, 2011.

I a The Company is in the process of updating its records showing full particulars including quantitative details and situation of Fixed Assets.

b As informed to us, the Company had carried out the physical verification of Fixed Assets during the year under review and such verification did not reveal any material discrepancies.

c The Company has not disposed off any fixed assets during the year, which will affect the going concern status of the Company.

II a As explained to us, inventories have been physically verified at reasonable intervals during the year by the management.

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

c As informed to us, no material discrepancies were noticed on such verification of inventories as compared to book records.

III a As per the information and explanations given to us, as the Company has not granted any loans, secured or unsecured, to Companies, Firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956, the Provisions of Clause 4(iii) (a) to 4 (iii) (d) are not applicable to the Company for the current year.

b The Company has taken interest free unsecured loan from one party listed in the register maintained under Section 301 of the Act, amounting to Rs. 10,05,41,788/- and the maximum amount involved during the year Rs. 10,92,10,470/-.

c In our opinion, the rate of interest and other terms and conditions of unsecured loan taken from the party listed in the register maintained under Section 301 of the Act, are not prima facie prejudicial to the interest of the Company.

d The Company is regular in repayment, where applicable, of principal amount of loan taken from the party listed in the register maintained under Section 301 of the Companies Act, 1956.

IV In our opinion, the adequacy of internal control systems for the purchase of inventory and fixed assets and for the sale of goods and services as compared to the size of the Company and the nature of its business needs to be strengthened. However, we have not come across any continuing major weakness in the overall internal control system existed in the Company during the current year.

V a According to the information and explanations given to us and as confirmed by the Managing Director of the Company, the transactions of the Company which need to be entered into the register maintained under Section 301 of the Act, have been entered.

b In our opinion and according to the information and explanations given to us, there are no transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Act and exceeding the value of Rs.5,00,000/- in respect of each party during the year.

VI As the Company has not accepted any deposits from public covered by the directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA or any other relevant provisions of the Act and rules framed there under, the provisions of Clause 4(vi) of the Order are not applicable to the Company for the current year.

VII In our opinion, the Company does not have an internal audit system commensurate with its size and nature of its business.

VIII According to information and -explanation given to us, the maintenance of cost records has not been prescribed by the Central Government under Clause (d) of Sub- section (1) of Section 209 of the Act.

IX a As per the information and explanations give to us, the Company is generally regular in depositing undisputed statutory dues of Provident fund, Investor Education Fund, Employee State Insurance, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities and in respect of these dues there are no dues outstanding for a period of more than six months from the date they became payable;

The Company is not regular in depositing the undisputed statutory dues of Income Tax and Service Tax and the arrears of outstanding dues as on 31st March,2011 outstanding for a period of more than six months from the date they became payable are Income Tax is Rs. 7,37,373/-, Income Tax in the nature of Tax Deducted at Source is Rs. 12,50,285/'- and Service Tax is Rs. 9,08,750/-;

b As per the records and according to the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Wealth Tax, Excise Duty and Cess which have not been deposited on account of any dispute as on 31.03.2011, except a disputed claim of Custom Duty net of amount paid under protest, as per the details given below:

NATURE OF DUES AMOUNT PERIOD FORUM WHERE RS DISPUTE IS PENDING

Customs Duty Demand raised by the CESTAT, Chennai for non- 59.37 Lakhs 2002 CESTAT, Chennai fulfillment of export obligation

X As per the information and explanation given to us and on overall examination of the financial statements of the Company, we report that the Company does not have any accumulated losses at the end of the Current financial year nor incurred cash losses in the current and immediately preceding financial year.

XI The Company is not regular in repayment of term loans with in the

- due date, however there are no outstanding arrears at the end of the year.

XII As the Company had not granted any loans and advances on the basis of security by way of pledge of shares, debentures or other securities to anybody during the year, the provisions of Clause 4(xii) of the Order are not applicable to the Company for the current year.

XIII As the Company is not a Chit Fund or a Nidhi or Mutual Fund or Society, the provisions of Clause 4(xiii) of the Order are not applicable to the Company for the current year.

XIV As the Company is not dealing or trading in shares, securities, debentures and other investments, the provisions of Clause 4(xiv) of the order are not applicable to the Company for the current year.

XV As the Company has not given any guarantee for loans taken by others from banks or financial institutions, the provision of Clause 4(xv) of the Order are not applicable to the Company for the current year.

XVI As per records of the Company, the term loans have been applied for the purposes for which they were obtained.

XVII According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short term basis have been used for long-term investment purposes.

XVIII According to the information and explanations given to us and on overall examination of the balance sheet of the Company, as the Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under Section 301 of the Act during the year, the provisions of Clause 4(xviii) of the Order are not applicable to the Company for the current year.

XIX As the Company has not issued any debentures during the year, which requires creation of security or charge, the provisions of Clause 4(xix) of the Order, are not applicable to the Company for the current year.

XX According to the information and explanations given to us and on overall examination of the books of accounts of the Company, the Company has disclosed the end use of money raised by issue of Global Depositary Receipts in the Note No: 3 of Schedule XX - Notes to Accounts.

XXI During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, and as per the representation given by the Company and relied on by us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we informed of such cases

For SARATH & ASSOCIATES,

Firm Regn.No.005120S

Chartered Accountants

P. Sarath Kumar

Place : Hyderabad Partner

Date : 05.09.2011 Membership No: 021755


Mar 31, 2010

1. We have audited the attached Balance Sheet of TRANSGENE BIOTEK LIMITED (the Company") as at 31st March, 2010, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. 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.

2. We have 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 whether the financial statements are free of material misstatements. 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 statements. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003, (the Order) issued by the Central Government of India in terms of section 227 (4A) of The Companies Act, 1956, (the Act) and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we set out in the Annexure a statement on the matters specified in paragraph 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, 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 appears from our examination of those books.

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

(d) 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 Section 211 (3C) of the Act, to the extent applicable.

(e) On the basis of written representations received from the directors as on 31st March, 2010, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31 st March, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

(f) 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 notes thereon 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:

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

(ii) in the case of the Profit and Loss Account, of the PROFIT for the year ended on that date; and

(iii) in the case of the cash flow statement, of the cash flow for the year ended on that date.

Annexure to the Auditors Report

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF AUDIT REPORT OF EVEN DATE ON THE ACCOUNTS OF TRANSGENE BIOTEK LIMITED (THE COMPANY) FOR THE YEAR ENDED 31ST MARCH, 2010

1.(a) The Company is in the process of updating its records showing full particulars including quantitative details and situation of Fixed Assets.

(b) As informed to us, the Company had carried out the physical verification of Fixed Assets during the year under review and such verification did not reveal any material discrepancies.

(c) The Company has not disposed off any fixed assets during the year, which will affect the going concern status of the Company.

2.(a) As per the information and explanations given to us, the inventory has been physically verified during the year by the management at periodical intervals. In our opinion the frequency of verification appears to be reasonable.

(b) As per the information and explanations given to us, 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 present business.

(c) As informed to us, no material discrepancies were noticed on such verification of inventories as compared to book records.

3.(a) As per the information and explanations given to us, as the company has not granted any loans, secured or unsecured, to Companies, Firms or other parties covered in the register maintained-under section 301 of the Act, the provisions of Clause 4(iii)(a) to 4(iii)(d) are not applicable to the Company for the current year.

(b) The Company, during the year, has taken unsecured loan from one party listed in the register maintained under Section 301 of the Act, amounting to Rs. Rs. 3,46,71,553/- and the maximum amount outstanding at the end of the year is Rs,10,58,44,469/-

(c) In our opinion, the rate of interest and other terms and conditions of unsecured loan taken from the party listed in the register maintained under Section 301 of the Act, are not prima facie prejudicial to the interest of the Company.

(d) The Company is regular in repayment, where applicable, of principal amount and interest on unsecured loan taken from the party listed in the register maintained under Section 301 of the Act.

4. In our opinion, the adequacy of internal control systems for the purchase of inventory and fixed assets and for the sale of goods and services as compared to the size of the Company and the nature of its business needs to be strengthened. However, we have not come across any continuing major weaknesses in the overall internal control system existed in the Company during the current year.

5.(a) According to the information and explanations given to us and as confirmed by the Managing Director of the Company, the transactions of the company which need to be entered into the register maintained under Section 301 of the Act, have been entered in the register maintained Under Section 301 of the Ac.

(b) According to the information and explanations given to us, there were no transactions made in pursuance of such contracts or arrangement during the year.

6. As the Company has not accepted any deposits from public covered by the directives issued by the Reserve Bank of India and the provisions of Section 58A,58AA or any other relevant provisions Act, the provisions of clause 4(vi) of the Order are not applicable to the Company for the current year.

7.In our opinion, the Company does not have an internal audit system commensurate with its size and nature of its business.

8.According to information and explanation given to us, the maintenance of cost records has not been prescribed by the Central Government under clause (d) of sub-section (1) of section 209 of the Act.

9. (a) According to the information and explanations given to us, the Company is not regular in depositing undisputed statutory dues including provident fund, Employees State Insurance, Income Tax, Cess, Excise Duty and other appropriate statutory dues with the appropriate authorities. The amount of the arrears of outstanding statutory dues as at the last day of the financial year concerned for more than six months from the date they became payable pertaining to Income Tax Deducted At Source is Rs. 12.96 lakhs and Income Tax is Rs.16.87 lakhs.

(b) As per the records and according to the information and explanations given to us, there are no dues of Sales Tax / Income Tax / Wealth Tax / Excise Duty / Cess which have not been deposited on account of any dispute as on 31.03.2010, except a disputed claim of Custom Duty as per the details given below:

Name of the Statue Nature of Dues Amount Rs. Period Forum where pending

Customs Act, 1962 Customs Duty Demand raised by the CESTAT, Chennai for non-fulfillment of export obligation 59.37 Lakhs 2002 CESTAT, Chennai



10. As per the information and explanation given to us and on overall examination of the financial statements of the Company, we report that the Company does not have any accumulated losses at the end of the current financial year nor incurred cash losses in the current and immediately preceding financial yea .

11. As the Company has neither availed any loan from any financial institution or from any bank, nor issued any debentures, the provisions of Clause 4(xi) of the Order are not applicable to the Company for the current year.

12. As the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities, the provisions of Clause 4(xii) of the Order are not applicable to the Company for the current year.

13. In our opinion, as the company is not a chit fund, nidhi or a mutual benefit fund/ society, the provisions of Clause 4(xiii) of the Order are not applicable to the company for the current year.

14. In our opinion, as the company is not dealing in or trading in shares, securities, debentures and other investments, the provisions of Clause 4 (xiv) of the Order are not applicable to the company.

15. As per the information and explanations given to us, as the company has not given any guarantees for loans taken by others from bank or financial institution, the provisions of Clause 4(xv) of the Order are not applicable to the Company for the current year.

16. As the company has not raised any term loans during the current year, the provisions of Clause 4 (xvi) of the Order are not applicable to the company for the current year.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that no funds raised on short-term basis have been used for long- term investment purposes*.

18. According to the information and explanations given to us and on overall examination of the balance sheet of the company, as the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act during the year, the provisions of Clause 4(xviii) of the Order are not applicable to the Company for the current year..

19. As the Company has not issued any debentures during the year, which requires creation of security or charge, the provisions of Clause 4(xix) of the Order, are not applicable to the Company for the current year.

20. According to the information and explanations given us and on an overall examination of the books of accounts of the Company, the Company has not raised any money by public issue during the year under review.

21. During the course of examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, and as per the representation given by the Company and relied on by us, we have neither come across any instance material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such cases by the management.



For/Sarath & Associates

Firm Registration NO.005120S

Chartered Accountants

Sd/-

P.Sarath Kumar

Place : Hyderabad Partner

Date : 04.09.2010 (M.No.21 755)

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