1.  We have audited the attached Balance Sheet of ASSOCIATED CERAMICS
 LIMITED as at March 31,2005, Profit & Loss Account and also the Cash
 Row Statement of the Company 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.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 (Auditors Report) Order, 2003 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) 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
 explanations given to us, we further report that:
 
 0) a) The company is maintaining proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 b) The fixed assets of the company have been physically verified by the
 management during the year and no material discrepancies between the
 book records and the physical inventory have been noticed. In our
 opinion, the frequency of verification is reasonable.
 
 c) In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 of by the company during the year.
 
 (ii) a) The inventory has been physically verified by the management
 during the year. In our opinion, the frequency of verification is
 reasonable.
 
 b) In our opinion, the procedures of physical verification of inventory
 followed by the management are reasonable and adequate in relation to
 the size of the company and the nature of its business.
 
 c) On the basis of our examination of the inventory records, in our
 opinion, the company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification of inventory as compared
 to book records were not material and the same has been properly dealt
 with in the books of account.
 
 (iii) a) The company has taken unsecured loans from two companies
 covered in the register maintained under Section 301 of the Companies
 Act, 1956. As per arrangement with those companies the amount has been
 drawn as per requirement.The maximum amount drawn during the year was
 Rs. 69.15 Lacs and the year end balance was Rs. 3.76 Lacs.  The company
 has granted loans to two companies covered in the register maintained
 under Section 301 of the Companies Act, 1956.The maximum amount
 outstanding during the year was Rs. 1.89 Lacs and year end Balance was
 Nil.
 
 b) In our opinion and according to information and explanations given
 to us the rate of interest and other terms and conditions on which said
 loans have been taken or granted are prima facie not prejudicial to the
 interest of the company.
 
 c) The Company has repaid the principal amount as stipulated and has
 been regular in the payment of interest for the loan taken by it. In
 case of loan granted by the company neither principal amount or
 interest is due as per terms of the loan.
 
 d) There are no overdue amounts of principal and interest in respect of
 the said loans,
 
 (iv) In our opinion, there are adequate internal control procedures
 commensurate with the size of the company and the nature of its
 business for the purchase of inventory, fixed assets and for the sale
 of goods. Further, on the basis of our examination of the books and
 records of the company, and according to the information and
 explanations given to us, we have neither come across not have been
 informed of any major weaknesses in the aforesaid internal control
 procedures.
 
 (v) a) In our opinion and according to the information and explanations
 given to us, the transactions that need to be entered into the register
 in pursuance to Section 301 of the Act, have been so entered.
 
 b) In our opinion and according to the information and explanations
 given to us, there are no transactions made pursuance of contracts or
 arrangements entered into the register in pursuance of Section 301 of
 the Act exceeding the value of Rupees Five Lacs in respect of any party
 during the year.
 
 (vi) The company has not accepted any deposits from the public within
 the meaning of Sections 58A and 54AA of the Act and the rules framed
 thereunder,
 
 (vii) In our opinion, the company has an internal audit system
 commensurate with its size and nature of its business.
 
 (viii) The Central Government of India 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 products of the company.
 
 (ix) a) According to the information and explanations given to us and
 the records of the company examination by us, in our opinion, the
 company is generally regular in depositing the undisputed statutory
 dues including provident fund, investor education and protection fund,
 employees state insurance, income-tax, sales tax, wealth tax, customs
 duty, cess and other material statutory dues, as applicable, with the
 appropriate authorities and no undisputed amount payable in respect of
 the aforesaid dues were outstanding as at 31 st March, 2005 for a
 period of more than six month.
 
 b) According to the information and explanations given to us and the
 records of the company examined by us, there are no dues of Sales Tax,
 Ihcome Tax, Customs Duty, Wealth Tax, Excise Duty and Cess which have
 not been deposited on account of any dispute (without considering cases
 wherein the disputed dues have been paid under protest and net of
 demands raised which have been adjusted by the appropriate authorities
 against the fund of some other year(s) due to the company).
 
 (x) The company has no accumulated losses as at March 31,2005 and it
 has not incurred any cash losses in the financial year ended on that
 date or in the immediately preceding financial year.
 
 (xi) According to the records of the company examined by us and the
 information and explanations given to us, the company has not defaulted
 in repayment of dues to any financial institutions as at the balance
 sheet date, (xii) The company has not granted any loans and advances on
 the basis of security by way of pledge of shares, debentures and other
 securities.
 
 (xiii) The provisions of any special statutes applicable to chit fund /
 nidhi / mutual benefit fund / societies are not applicable to the
 company.
 
 (xiv) In our opinion the Company is not a dealer in shares, securities,
 debentures and other instruments.
 
 (xv) In our opinion, and 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 during the year.
 
 (xvi) The company has not taken any term loans during the year.
 
 (xvii) On the basis of an overall examination of the Balance Sheet of
 the company, in our opinion and according to the information and
 explanation given to us, there are no funds raised on a short term
 basis which have been used for long term and vice-versa,
 
 (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 Act during the year.
 
 (xix) The company has not raised any money by public issue during the
 year.
 
 (xx) During the course of our examination of the books and records of
 the company, carried out in accordance with the generally accept
 auditing practices in India, and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the company, notice or reported during the year, nor
 have we been informed of such case by the management.
 
 4.  Further to our comments 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 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 appears from our examination of those
 books;
 
 c) The Balance Sheet and Profit and Loss Account and Cash Row Statement
 dealt with by this report are in agreement with the books of account;
 
 d) In our opinion, the Balance Sheet and Profit and Loss and Cash Row
 Statement dealt with by this report comply with the accounting
 standards referred to in sub-section (3C) of Section 211 of the Act;
 
 e) On the basis of written representations received from the directors,
 as on March 31,2005 and taken on record by the Board of Directors, none
 of the directors is disqualified as on March 31, 2005 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 financial statements together
 with the notes thereon and attached thereto give in the prescribed
 manner the information required by the Act 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 March 31, 2005;
 
 (ii) in the case of Profit and Loss Account, of the profit for the year
 ended on that date.  (iii) in the case of the Cash Row Statement of the
 Cash Flows for the year ended on that date.
 
 
                                             For A. PANDEY & ASSOCIATES
                                                  Chartered Accountants
 
                                                                   Sd/-
 Date : 25.07.2005                            ICAI Membership No. 52873