1.  We have audited the attached Balance Sheet of PAE Limited as at
 March 31, 2012 and also the Statement of Profit and Loss 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 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 basis for
 our opinion.
 
 3.  As required by the Companies (Auditor''s Report) Order, 2003, as
 amended by the Companies (Auditor''s Report) (Amendment) Order, 2004,
 issued by the Central Government of India in terms of sub-section (4A)
 of section 227 of the Companies Act, 1956, 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 appears from our examination of
 those books;
 
 (iii) 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;
 
 (iv) In our opinion, 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.
 
 (v) On the basis of written representations received from the
 Directors, as on March 31, 2012 and taken on record by the Board of
 Directors, we report that none of the Directors of the Company are
 disqualified as on March 31,2012 from being appointed as a Director, in
 terms of clause (g) of sub-section (1) of Section 274 of the Companies
 Act, 1956;
 
 (vi) In our opinion and to the best of our information and according to
 the explanations given to us, the said Financial Statements together
 with the significant accounting policies and notes thereon, give the
 information required by the Companies Act, 1956, in the manner so
 required and present 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 31,2012;
 
 (b) in the case of the Statement of Profit and Loss, of the loss 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.
 
 Referred to in paragraph 3 of our report of even date on the Accounts
 for the year ended March 31,2012 of PAE Limited.
 
 (I) (a) The company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) A substantial portion of the fixed assets have been physically
 verified by the management during the year and the company has also
 instituted a program for periodic verification of assets which is
 reasonable having regard to the size of the company and the nature of
 its assets. According to the information and explanation given to us,
 no material discrepancies were noticed on such verification.
 
 (c) The fixed assets disposed off during the year were not substantial.
 According to the information and explanation given to us, we are of the
 opinion that the disposal of the fixed assets has not affected the going
 concern status of the company.
 
 (ii) (a) The inventory has been physically verified during the year by
 the management. In our opinion, the frequency of 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) In our opinion and according to the explanations given to us, the
 company is maintaining proper records of inventory. The discrepancies
 noticed on verification between the physical stocks and the book
 records were not material and properly dealt with in the books of
 account.
 
 (iii) (a) During the year the Company has taken unsecured loan in the
 form of inter-corporate deposit from a company covered in the register
 maintained under Section 301 of the Companies Act, 1956, wherein balance
 payable at the year end is Rs.518.38 lacs (Previous year Rs.200 lacs).
 Maximum balance during the year was Rs.518.38 lacs (Previous year 
 Rs.200.36 lacs.)
 
 (b) Based on the information and explanations given to us, we are of the
 opinion that the rate of interest and other terms and conditions of
 loan taken from such party covered in the Register maintained under
 Section 301 is not prima facie prejudicial to the interests of the
 company.
 
 (c) The company has given unsecured inter-corporate deposit to two
 companies covered in the register maintained under Section 301 of the
 Companies Act, 1956, wherein the balance receivable as at the year end
 is Rs.1,536.56 lacs (Previous year Rs.60.51 lacs). Maximum balance during
 the year was Rs.1,536.56 lacs (Previous year Rs.106.58 lacs.)
 
 (d) In our opinion and according to the explanations given to us, the
 rate of interest and other terms and conditions of the aforesaid loan
 given are not, prima facie, prejudicial to the interests of the company.
 
 (e) In our opinion and according to the explanations given to us, the
 company is regular in receiving the principal and interest as
 stipulated.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is adequate internal control system 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 and services. We have not observed any continuing failure to
 correct major weaknesses in internal control system. However, in the
 case of reconciliation of balances with debtors, further strengthening
 of internal control procedures at certain branches is recommended so as
 to be commensurate with the current size of the company.
 
 (v) (a) According to the information and explanations provided by
 management, we are of the opinion that the particulars of contracts or
 arrangements that are referred to in Section 301 have been entered in
 the register required to be maintained under that section.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements have been made at prices which are reasonable having
 regard to prevailing market prices at the relevant time.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the company has complied with the provisions of Sections
 58A and 58AA or any other relevant provisions of the Companies Act, 1956
 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to
 the deposits accepted from the public. No order has been passed by the
 Company Law Board, National Law Tribunal or Reserve Bank of India or
 any other court or any other tribunal.
 
 (vii) In our opinion, the company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) The Central Government has not prescribed maintenance of cost
 records under Section 209 (1) (d) of the Companies Act, 1956.
 
 (ix) (a) According to the records of the company, the company is
 regular in depositing with the appropriate authorities undisputed
 statutory dues including Provident Fund, Investor Education and
 Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax,
 Wealth Tax, Service Tax, Customs Duty, Cess and other statutory dues
 applicable to it.
 
 According to the information and explanations given to us, there are no
 undisputed statutory dues which are outstanding as at March 31, 2012
 for the period of more than six months from the date they become
 payable. Excise Duty is not applicable to the company.
 
 (b) According to the records of the company, there are no disputed
 Wealth Tax, Customs Duty, Service Tax or Cess. The details of dues in
 respect of Sales Tax, which have not been deposited on account of any
 dispute are given below:
 
                                                          (Rs. in lacs)
 
 Name of        Nature of       Period to    Forum where dispute 
 the            the dues        which the    is pending 
 Statute                        amount       Sales Tax    Sales Tax 
                                relates      Commi-       Appellate
                                             ssioner      Tribunal
 
 Central Sales 
 Tax            VAT, penalty    2007-08         0.23          -
 and Various 
 State          and interest 
 VAT Acts
 
 Central Sales 
 Tax            VAT, penalty    2006-07         2.05          -
 and Various 
 State          and interest
 VAT Acts
 
 VAT Acts       VAT, penalty    2007-08         6.25          -
                and interest
 
 VAT Acts       VAT, penalty    2008-09        12.42          -
                and interest
 
 Central Sales 
 Tax            Sales Tax,      1992-93            -       1.23
 and Various 
 State          penalty and 
 Sales Tax Acts interest
 
 Local Sales
 Tax            Sales Tax,      1992-93            -       1.18
                penalty and
                interest
 
 Local Sales 
 Tax            Sales Tax,      2001-02         0.25          -
                penalty and
                interest Total
 
                Total                          21.20       2.41
 
 (x) The company does not have any accumulated losses at the end of the
 financial year and has incurred cash losses of Rs. 492.23 lacs during the
 financial year covered by our audit and the company has not incurred
 cash losses during the immediately preceding financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to
 financial institutions or banks.  The company does not have any
 outstanding debentures.
 
 (xii) The company has not granted loans and advances on the basis of
 security by way of pledge of shares and other securities.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society. Therefore, the provisions of clause
 4(xiii) of the Order are not applicable to the company.
 
 (xiv) In our opinion and according to the information and explanations
 given to us, the Company is not dealing in or trading in shares,
 securities, debentures and other investments. Accordingly, the
 provisions of clause 4 (xiv) of the Order are not applicable to the
 company.
 
 (xv) The company has given guarantees for loans taken by subsidiaries
 from banks and prima facie the terms and conditions thereof are not
 prejudicial to the interests of the company.
 
 (xvi) The term loans have been applied for the purpose for which they
 were raised.
 
 (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.
 
 (xviii) The company has not made any preferential allotment of shares
 to parties and companies covered in the register maintained under
 Section 301 of the Companies Act, 1956 during the year.
 
 (xix) The company has not issued any secured debentures during the
 year.
 
 (xx) The company has not raised any money by way of public issues
 during the year.
 
 (xxi) 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 audit.
 
 
                                                 K. S. Aiyar & Co.
 
                                            Chartered Accountants 
 
                                         Registration No: 100186W
 
                                                 Satish K. Kelkar 
 
 Place: Mumbai                                            Partner
 
 Date: June 29,2012                           Membership No:38934