We have audited the attached Balance Sheet of Classic Biotech & Exports
 Limited, as at 31s1 March, 2009 , the Profit and Loss Account and also
 the Cash Flow Statement of the company for the year ended on that date
 annexed thereto. 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 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.
 
 As required by the Companies (Auditors Report) Order, 2003, as amended
 by the Companies (Auditors Report) (Amendment) Order, 2004 issued by
 the Central Government of India in terms of Section 227 (4A) 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 in paragraph (3)
 above: we report that:
 
 we have obtained all the information and explanations which to the best
 of our knowledge and belief were necessary for She purposes of our
 audit; 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 such
 books; the Balance Sheet, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account; in our opinion, the Balance Sheet, Profit and Loss Account and
 Cash Flow Statement, subject to note no. Il(e) & (!) in schedule 13
 regarding non provision lor retirement benefits and non ascertainment
 of Impairment loss, are in compliance with accounting standards
 referred to in Section 211 (3C) of the Companies Act, 1956, to the
 extent applicable; on the basis of written representations received
 from the directors, as on 31st March, 2009 and taken on record by the
 board of directors, we report that none of the directors is
 disqualified as on 31st March, 2009 from being appointed as a director
 in terms of clause (g) of sub-section (1) of section 274 of the
 Companies Act, 1956; in our opinion and to the best of our information
 and according to the explanations given to us, the said accounts read
 together with the notes thereon, subject to Note No. II (j) & (k) in
 schedule 13, regarding understatement of loss due to non-provision of
 interest on term loan & over draft and understatement of liability to
 the extent of Rs.  of Rs.5,75,96,457/- excluding the last two financial
 yesars interest and note no. 11(e) & (f) in schedule 13 regarding non
 provision for retirement benefits and non ascertainment of Impairment
 loss, give the information required by the Companies Act, 1956 in the
 manner so required arid give a true and fair view in conformity with
 the accounting principles generally accepted in India: in the case of
 the Balance Sheet, of the state of affairs of the company as at 31
 March, 2009; in the case of the Profit and Loss Account, of the loss of
 the company for the year ended on that date; and in the case of Cash
 Flow Statement, of the cash flows for the year ended on that date.  for
 Krishnam Raju & Associates Chartered Accountants
 
 ANNEXURE TO AUDITORS REPORT REFERRED TO IN PARAGRAPH 3 OF OUR REPORT
 OF EVEN DATE
 
 i a. The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets.
 
 b.  A major portion of fixed assets have been physically verified by
 the management during the year. In our opinion, the frequency of
 verification of the fixed assets by the management is reasonable having
 regard to the size of the Company and the nature of its assets and no
 material discrepancies were noticed on such physical verification.
 
 c.  In our opinion, the Company has not disposed off substantial part
 of fixed assets during the year and therefore do not affect going
 concern status of the company.
 
 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 and according to the information and explanations
 given to us, the procedures of physical verification of1 inventories
 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 inventories. The
 discrepancies noticed on physical verification of inventory as compared
 to book records were not material.
 
 iii. a. The company has not granted any loans, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under section 301 of the Companies Act, 1956. Accordingly, clause 4
 (iii) (a), (b), (c) and (d) of the Companies (Auditors Report) Order,
 2003 is not applicable.
 
 e.  The Company has taken unsecured loan in the previous years, from
 three parties covered in the register maintained under Section 301 of
 the Companies Act, 1956. The maximum amount involved was .  Rs.
 23,70,000 /- and the year end balance of loan taken from such parties
 was Rs. 23,70,000 /-.
 
 f.  In our opinion and according to the information and explanations
 given to us, the loans taken by the company are interest free and other
 terms and conditions are not prima facie prejudicial to the interest of
 the company.
 
 g.  In respect of interest free unsecured loans taken by the company
 from the above parties, the principal amount is repayable on demand.
 
 iv. In our opinion and according to the information and explanations
 given to us, there are adequate internal control system commensurate
 with the size of the company and the nature of its business with regard
 to purchases of inventory and fixed assets and for sale of goods.
 During the course of our audit, no major weakness has been noticed in
 internal control system.
 
 v. According to the information and explanations given to us, there are
 no contracts and arrangements the particulars of which need to be
 entered into the register maintained under section 301 of the Companies
 Act, 1956.
 
 vi. The Company has not accepted any deposits from the public within
 the meaning of Sections 58A and 5BAA of the Companies Act, 1956 and the
 rules framed there under.
 
 vii. The company has an internal audit system, which, is commensurate
 with the size of the company and nature of its business.
 
 viii. According to the information and explanations given to us, the
 Central Government has not prescribed the maintenance of cost records
 under clause (d) of sub-section (1) of Section 209 of the Companies
 Act, 1956, in respect of activities carried out by the company.
 
 ix. a. According to the information and explanations given to us and
 the records of the Company examined by us, the company has generally
 been 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,
 Excise Duty, Service Tax, Cess and other material statutory dues as
 applicable with the appropriate authorities. According to the
 information and explanations given to us, no undisputed amounts payable
 in respect of the aforesaid dues, except Income Tax ol Rs. 939/- and
 Tax Deducted at Source of Rs. 23,785/- were outstanding as at 31st
 March, 2009 for a period of more than six months from the date they
 becoming payable.
 
 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,
 income-tax, wealth tax, service tax, customs duty, excise duty and cess
 as at 31st March, 2009 which have not been deposited on account of a
 dispute.
 
 x. According to the records of the company, its accumulated losses at
 the end of the financial year are more than fifty percent of its net
 worth. The company has incurred cash losses in the financial year under
 report and in the immediately preceding financial year.
 
 xi. The company has defaulted in repayment of dues to Bank. The loans
 and interest including un provided interest amounting to Rs.
 9,67,65,257/-excluding the interest lor the last two years became due
 as on 31s March, 2009 and the default continuing over a period of
 Eight years.
 
 xii. In our opinion and according to the information and explanation
 given to us, no loans and advances have been granted by the Company on
 the basis of security by way of pledge.of shares, debentures and other
 securities. Accordingly, clause 4 (xii) of the Companies (Auditors
 Report) Order, 2003 is not applicable.
 
 xiii. In our opinion, the Company is not a chit fund or a nidhi/mutual
 benefit fund/society. Accordingly, clause 4(xiii) of the Companies
 (Auditors Report) Order 2003, is not applicable.
 
 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, clause 4
 (xiv) of the Companies (Auditors Report) Order, 2003 is not
 applicable.
 
 xv. According to the information and explanations given to us and
 records examined by us, the company has not given any guarantee for
 loans taken by others from banks or financial institutions.
 Accordingly, clause 4 (xv) of the Companies (Auditors Report) Order,
 2003 is not applicable.
 
 xvi. The company has not raised any new term loans during the year
 under report. The term loans outstanding at the beginning of the year
 were applied for the purposes for which they were obtained.
 
 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
 investments.
 
 xviii. During the year, 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. Accordingly,
 clause 4 (xviii) of the Companies (Auditors Report) Order, 2003 is not
 applicable.
 
 xix. The Company has not issued any secured debentures during the year.
 Accordingly, clause 4 (xix) of the Companies (Auditors Report) Order,
 2003 is not applicable.
 
 xx. The company has not raised any money by public issues during the
 year. Accordingly, clause 4 (xx) of the Companies (Auditors Report)
 Order, 2003 is not applicable.
 
 xxi.  According to the information and explanations given to us, no
 fraud on or by the company has been noticed or reported during the
 year.
 
                               for Krishnam Raju & Associates 
                                        Chartered Accountants 
                                                  (A.S.Naidu)
                                                      Partner 
                                        Membership No. 208582 
 Place: Hyderabad 
 Date : 02-09-2009