We have audited the attached Balance Sheet of CDR MEDICAL INDUSTRIES
 LIMITED as at 31st March, 2005 and also the Profit & Loss Account for
 the period ended on the date annexed thereto and the cash flow
 statement for the period ended on that date. 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.
 
 We 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 statement. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall statement
 presentation. We believe that our audit provides a reasonable basis of
 our opinion.
 
 As required by the Companies (Auditors Report) and as amended by the
 Comapnies (Auditors Report) (Amendment) Order 2004, issued by the
 Central Government of India in terms of the 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.
 
 Further to our comments in the Annexure referred to 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 & Profit & Loss Account dealt with by this
 report are in agreement with the books of account;.
 
 (iv) In our opinion, the Balance Sheet & Profit & Loss Account dealt
 with by this report comply with the Accounting standards referred to in
 sub-section (3C) of Section 211 of Companies Act, 1956 ;
 
 (v) On the basis of written representations received from the
 Directors, as on 31st March, 2005 and taken on record by the Board of
 Directors,we report that none of the Directors is disqualified as on
 31st March, 2005 from being appointed Director in terms of clause(g)
 of sub-section(I) 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 accounts 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 accepted in India ;
 
 (a) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2005;
 
 (b) In the case of the Profit & Loss Account, of the Loss for the
 period ended on that date;
 
 And
 
 (c) In the case of the Cash Flow, of the cash flows for the period
 ended on that date;
 
                                                     For P.MURALI & CO.,
                                                   CHARTERED ACCOUNTANTS
 PLACE : HYDERABAD                                   P.MURALI MOHANA RAO
 DATE : 05-09-2005                                               PARTNER
 
 ANNEXURE TO THE AUDITORS REPORT
 
 1. (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of Fixed
 Assets.
 
 (b) As explained to us, the fixed assets have been physically verified
 by the management at reasonable intervals and no material discrepancies
 between the book records and the physical inventory have been noticed
 on such verification.
 
 (c) The Company has not disposed off substantial part of the Fixed
 Assets during the year.
 
 2. (a) The Inventory has been physically verified during the year and
 in our opinion, the frequency of verification is reasonable.
 
 (b) In our opinion, the procedures of the 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.
 
 The Company is maintaining proper records of inventory and as explained
 to us, no material discrepancies were noticed on physical verification
 of stocks as compared to book records.
 
 3. (a) The Company has not either granted or taken any loans, secured
 or unsecured to/from Companies, Firms or other Parties covered in the
 register maintained U/s.301 of the Companies Act, 1956.
 
 (b) As the Company has not granted any loans, the clause of whether the
 rate of interest & other terms and conditions on which loans have been
 granted to parties listed in the register maintained under section 301
 is prejudicial to the interest of company, is not applicable.
 
 (c) As no loans are granted by company, the clause of receipt of
 interest & principal amount from parties, is not applicable to the
 company.
 
 (d) No loans have been granted to Companies. Firms & other parties
 listed in the register U/s.301 of the Companies Act, 1956, hence
 overdue amount of more than rupees one lac does not arise and the
 clause is not applicable.
 
 (e) The company has not taken any loans, secured or unsecured from
 Companies, Firms or other Parties covered in the register maintained
 U/s. 301 of the Companies Act. 1956.
 
 (f) As the Company has not taken any loans, the clause of whether the
 rate of interest & Other terms and conditions on which loans have been
 taken from parties listed in the register maintained under section 301
 is prejudicial to the interest of company, is not applicable.
 
 (g) As no loans are taken by the company, the clause of repayment of
 interest & principal amount to parties, is not applicable to the
 company
 
 4. in our opinion and according to the information and explanations
 given to us, there are generally adequate internal control systems
 commensurate with the size of the company and the nature of its
 business with regard to purchase of inventory and fixed assets and for
 sale of goods. There is no continuing failure by the company to correct
 any major weaknesses in infernal control.
 
 5. (a) In our opinion and according to the information and explanation
 given to us, since no contracts or arrangements referred to in section
 301 of the Companies Act, 1956 have been made by the company in respect
 of any party in the financial year, the entry in the register U/s. 301
 of the Companies Act, 1956 does not arise.
 
 (b) According to the information and explanations given to us, as no
 such contracts or arrangements made by the company, the applicability
 of the clause of charging the reasonable price having regard to the
 prevailing market prices at the relevant time does not arise.
 
 6. The Company has not accepted any deposits from the public and hence
 the applicability of the clause of directives issued by the Reserve
 Bank of India and provisions of section 58A and 58AA or any other
 relevant provisions of the Act, and the rules framed there under does
 not arise. As per information and explanations given to us the order
 from the Company Law Board or National Company Law Tribunal or Reserve
 Bank of India or any Court or any other Tribunal has not been received
 by the Company.
 
 7. In our opinion, the company is having internal audit system,
 commensurate with its size and nature of its business
 
 8. In respect of the Company, the Central Government has not prescribed
 maintenance of cost records under clause (d) of sub-section(l) of
 section 209 of the Companies Act, 1956.
 
 9. a) The Company is not regular in depositing statuatory dues
 including PF, Income Tax, with the appropriate authorities which were
 due for more than 6 months from the date they became payable.
 
 b) According to the information and explanations given to us, no
 undisputed amounts are payable in respect of PF, Income Tax as at the
 end of the period, for a period more than six months from the date they
 became payable.
 
 10. The Company has been registered for a period of not less than 5
 years, and its accummulated losses at the end of the financial year is
 more than fifty percent of its net worth and the company has incurred
 cash losses in this financial year and has incurred losses in the
 immediately preceding financial year.
 
 11. According to information and explanations given to us, the Company
 has taken loans from Banks or Financial Institutions. Hence this clause
 of repayment of dues of financial Institutions or banks or debenture
 holders and the defaulted payment there in is not applicable to the
 company.
 
 12. According to the information and explanations given to us, the
 Company has not granted any loans or advances on the basis of security
 by way of pledge of shares, debentures and other securities and hence
 the applicability of the clause regarding maintenance of adequate
 documents in respect of loans does not arise.
 
 13 This clause is not applicable to this Company as the Company is not
 covered by the provisions of special statute applicable to Chit Fund in
 respect of Nidni/Mutual Benefit Fund/Societies.
 
 14. According to the information and explanations given to us, the
 company is not dealing or trading in shares, securities,Debentures and
 other investments and hence the provisions of clause 4(xiv) of the
 Companies (Auditors Report) Order 2003, are not applicable to the
 Company.
 
 15. 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, and hence the applicability of this
 clause regarding terms and conditions which are prejudicial to the
 interest of the company does not rise.
 
 16. According to the information and explanations given to us, the
 Company as not obtained any Term Loans, hence this clause is not
 applicable.
 
 17. According to the information and explanations given to us, no funds
 are raised by the Company on short-term basis Hence the clause of short
 term funds being used for long-term investment does not arise.
 
 18. According to the information and explanations given to us, 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 and hence the applicability of the clause
 regarding the price at which shares have been issued and whether the
 same is prejudicial to the interest of the Company does not arise.
 
 19. According to the information and explanations given to us, the
 company does not have any debentures and hence the applicability of the
 clause regarding the creation of security or charge in respect of
 debentures issued does not arise.
 
 20. According to information and explanations given to us,the company
 has not raised money by way of public issues during the year hence the
 clause regarding the disclosure by the management on the end use of
 money raised by Public Issue is not applicable.
 
 21. According to the information and explanations given to us, no fraud
 on or by the Company has been noticed or reported during the year under
 audit.
 
                                                     For P.MURALI & CO.,
                                                   CHARTERED ACCOUNTANTS
 PLACE : HYDERABAD                                   P.MURALI MOHANA RAO
 DATE : 05-09-2005                                               PARTNER