Transgene Biotek Ltd

To

The Members of

MIS. Transgene Biotek Limited

Hyderabad.

1. We have audited the attached Balance Sheet of TRANSGENE BIOTEK LIMITED ('theCompany") as at 31st March, 2010, the Profit and Loss Account and also the Cash FlowStatement for the year ended on that date annexed thereto, which we have signed underreference to this report. These financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinion on these financialstatements based on our audit.

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

3. As required by the Companies (Auditor's Report) Order, 2003, ('the Order') issued bythe 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 tothe information and explanations given to us, we set out in the Annexure a statement onthe 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 reportthat:

(a) We have obtained all the information and explanations, which to the best of ourknowledge 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 theCompany, so far as appears from our examination of those books.

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

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt 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 31stMarch, 2010, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 31st March, 2010 from being appointed as a director interms of clause (g)of sub-section (1) of section 274 of the Act.

(f) In our opinion, and to the best of our information an d according to theexplanations given to us, the said accounts read in conjunction with the notes thereongive the information required by the Act, in the manner so required and give a true andfair view in conformity wit h 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 31stMarch, 2010;

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

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

For, Sarath & Associates

Firm Registration No. 005120S

Chartered Accountants

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF AUDIT REPORT OF EVEN DATE ON THE ACCOUNTS OFTRANSGENE 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 particularsincluding quantitative details and situation of Fixed Assets.

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

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

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

(b) As per the information and explanations given to us, the procedures of physicalverification of inventories followed by the management are reasonable and adequate inrelation 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 ofinventories as compared o t book records.

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

(b) The Company, during the year, has taken unsecured loan from one party listed in theregister maintained under Section 301 of the Act, amounting to Rs. Rs. 3,46,71,5537 - andthe maximum amount outstanding at the end of the year is Rs,10,58,44,4697-

(c) In our opinion, the rate of interest and other term s and conditions of unsecuredloan 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 andinterest on unsecured loan taken from the party listed in the register maintained underSection 301 of the Act.

4. In our opinion, the adequacy of internal control systems for the purchase ofinventory and fixed assets and for the sale of goods and services as compared to the sizeof the Company and the nature of its business needs to be strengthened.

However, we have not come across any continuing major weaknesses in the overallinternal control system existed in the Company during the current year.

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

(b) According to the information and explanations given to us, there were notransactions 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 directivesissued by the Reserve Bank of India and the provision s of Section 58A,58AA or any otherrelevant provisions Act, the provisions of clause 4(vi) of the Order are not applicable tothe Company for the current year.

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

8. According to information and explanation given to us, the maintenance of costrecords 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 notregular in depositing undisputed statutory dues including provident fund, Employees StateInsurance, Income Tax, Cess, Excise Duty and other appropriate statutory dues with theappropriate authorities. The amount of the arrears of outstanding statutory dues as at thelast day of the financial year concerned for more than six months from the date theybecame payable pertaining to Income Tax Deducted At Source is Rs.12.96 lakhs and IncomeTax 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 notbeen deposited on account of any dispute as on 31.03.2010, except a disputed claim ofCustom Duty as per the details given below:

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

11. As the Company has neither availed any loan from any financial institution or fromany bank, nor issued any debentures, the provisions of Clause 4(xi) of the Order are notapplicable to the Company for the current year.

12. As the Company has not granted any loans and advances on the basis of security byway 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 companyfor 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 notapplicable to the company.

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

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

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

18. According to the information and explanations given to us and on overallexamination of the balance sheet of the company, as the Company has not made anypreferential allotment of shares to parties and companies covered in the registermaintained 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 requirescreation of security or charge, the provisions of Clause 4(xix) of the Order, are notapplicable to the Company for the current year.

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

21. During the course of examination of the books and records of the Company carriedout in accordance with the generally accepted auditing practices in India, and as per therepresentation give n by the Company and relied on by us, we have neither come across anyinstance material fraud on or by the Company, noticed or reported during the year, norhave we been informed of such cases by the management

For Sarath & Associates

Firm Registration No.005120S

Chartered Accountants