We have audited the accompanying fnancial statements of ASIAN ELECTRONICS LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2013, the Statement of Proft and Loss and the Cash Flow Statement for the year then ended, and a summary of the signifcant accounting policies and other explanatory information, in which are incorporated the unaudited Returns for the year ended on that date of PAL Technology Division, LMD Division and SMR Division.

Management's Responsibility for the Financial Statements

The Management is responsible for the preparation of these fnancial statements that give a true and fair view of the fnancial position, fnancial performance and cash fows of the Company in accordance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 ("the Act") 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 fnancial 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 fnancial 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 ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fnancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the fnancial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the fnancial 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 fnancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the fnancial statements.

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

Basis for Qualifed Opinion

Attention is invited to the following:

i. Note No. 30 regarding transfer of related loans and debentures of ESCO and Project Division aggregating to Rs. 14,279.61 Lacs to two wholly owned subsidiaries. The Lenders have refused to give their approval and have informed the company not to proceed with hiving off of the Assets and not to transfer the Loans / Debentures to the two subsidiaries. Although the Loans / Debentures aggregating to Rs. 14,279.61 Lacs granted by Banks/Financial Institutions to the Company are not refected in the Books of Account, the Company continues to be liable to the lenders for the Loans / Debentures transferred to the subsidiary companies. Also, the Company has not provided interest on the above Loans / Debentures for the year under review. On the basis of information available to us, we are unable to form an opinion in this matter and unable to opine on the fall in the value of Investments in the subsidiary companies amounting to Rs 6303.49 Lacs shown under Investment Supense in Note No. 10.

ii. Note Nos. 31 to 33 regarding Stock Options granted to Directors and Employees. Since the Company has not ascertained the fair value of the Options granted, impact of the same on the Proforma Loss, Proforma basic earnings per share and Proforma diluted earnings per share is not ascertainable. Also the Company has not complied with the Securities and Exchange Board Of India (Employee Stock Option Scheme And Employee Stock Purchase Scheme) Guidelines, 1999.

iii. Note No. 35, wherein as explained, LIC NOMURA Mutual Fund and SBI Factors Limited had fled petitions in The Bombay High Court for winding up of the company for nonpayment of their dues. In case of the dues to SBI Factors Limited, the dues were supposed to be paid in the fnancial year 2012-13, where there is a delay and the company is likely to pay in the coming months. The other lenders are being addressed under One Time Settlement. Upon settlement of the matters amicably with the lenders including LIC Nomura Mutual Fund, the consent terms will be fled. Also Bank of India has served upon the Company a Notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Act, 2002 for repayment of dues. The said notice has been set aside by DRT and is now being challenged in appeal by the Bank. Other Banks have also asked the Company for repayment of their dues and also issued SARFAESI notices.

iv. Note No. 37, wherein consequent to review made by the management the following are the observations:

a. Diminution in the value of Investments in certain companies of Rs. 4,507.47 Lacs not refected in theFinancial Statements which is not in accordance with Accounting Standard - 13 Accounting for Investments" referred to in Section 211(3C) of the Act .

b. Loans aggregating to Rs 22,399.68 Lacs have been recalled by the banks, due to default in repayment of the principal and interest amounts. Interest aggregating to Rs. 2,835.95 Lacs approx, has not been provided on these loans for the year ended 31.03.2013 and consequently loss for the year has been understated to the same extent. Also no interest has been provided on account of delays in payment of various statutory dues like Tax Deducted at Source, Service Tax, ESIC, Customs Duty, Sales Tax, Provident Fund etc. amount whereof is not ascertainable. Of the above, balances aggregating to Rs. 7,657.83 Lacs have not been confrmed / reconciled. The Company has approached the Banks for One Time Settlement of the Dues. Consequently the aggregate liability due to these Banks is not ascertainable.

c. Trade Receivables considered good includes Rs. 9,979.50 Lacs of old Outstanding's which may be doubful of recovery.

d. Old Debit Balances of Rs. 5,901.13 Lacs included in Loans and Advances and old unreconciled debits in certain Bank Accounts which may not be recoverable / realizable.

e. Interest amounting to Rs. 63.55 Lacs approx, has not been provided on Public Deposits for the year including on Deposits which have matured and are claimed but have not been paid as on 31 st March 2013 amounting to Rs. 258.62 Lacs and consequently loss for the year has been understated to the same extent Consequently, although the above related items of assets have been shown as Considered Good, no provision has been made for the same.

v. Managerial remuneration of Rs 17.99 Lacs paid during the year to the Executive Director is subject to the approval of the Central Government

vi. Note No. 40 wherein Management has stated that Impairment of the Company's assets and impact thereof on the loss for the year has not been ascertained. Also certain Fixed Assets are no longer under the control of the Company for the reasons stated in Note No. 35. Hence we are unable to ascertain as to whether there is any impairment in line with Accounting Standard - 28 "Impairment of Assets" referred to in Section 211(3C) of the Act

In view of the above, we are unable to express an opinion on the recoverability / realizability of the above mentioned items, the impact of the same on the Loss for the year as well as the future viability of the Company as a `going concern'.

Qualifed Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualifed Opinion paragraph, the aforesaid fnancial 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 31st March, 2013;

(b) in the case of the Statement of Proft and Loss, of the loss of the Company for the year ended on that date; and

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

Emphasis of Matter:

We draw attention to Note Numbers 38 and 41 regarding Unsecured Interest Free Loans received from certain parties aggregating to Rs. 131.50 Lacs and Balances of Trade Receivables, Loans and Advances and Trade Payables which are subject to confrmations and reconciliations, the effects of which are at present unascertainable.

Attention is also drawn to Note No. 39 regarding non availability of Sales Invoices along with relevant corresponding documents for a part of the year as the same are in the custody of the Government Authorities.

Our opinion is not qualifed in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227(4A) of the Act, we give in the Annexure a statement on the matters specifed 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) Except for the effects of the matter described in the Basis for Qualifed Opinion paragraph, 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 purposes of our audit have been received from the branches not visited by us, except for the fnancial statements of PAL Technology Division, LMD Division and SMR Division which have not been audited by branch auditors. Therefore, we are unable to express an opinion on the same.

(c) The Balance Sheet, the Statement of Proft and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from the branches not visited by us.

(d) Except for the effects of the matter described in the Basis for Qualifed Opinion paragraph, in our opinion, the Balance Sheet, the Statement of Proft and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act.

(e) As the Company has failed to repay its Public Deposits and interest thereon on the due dates, and such failure has continued for a period of over one year, all the directors are disqualifed as on March 31, 2013 from being appointed as directors in any other public company, under clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. Refer Note No. 37(ii)(a).

                                 For SORAB S. ENGINEER & CO.

                                 Chartered Accountants

                                 Firm Registration No. 110417W

                                 CA N.D. Anklesaria

                                (Partner)

                                (Membership No. 10250)

Date : 30th May, 2013