Arex Industries Ltd

To

The Members,

Your Directors are pleased to present their 21^st Annual Report together withthe Audited Statement of Accounts of the Company for the year ended on 31st March, 2010.

OPERATIONS

The Company has made a turnaround in its performance during the year under review. TheCompany has secured sales of Rs. 2142.59 lacs, i.e. an increase of 29.56% over theperivous year's sales of Rs. 1653.74 lacs. Export of the Company has seen a boost up. TheCompany has made major capital expenditure for installation of WTG for captive consumptionand plant and machineries for expansion on hand. The manufacturing and other overheadswere also increased. The Company has earned profit of Rs. 602.24 lacs, i.e. an increase of49.53% over the previous year's profits before providing depreciation and taxes.

DIVIDEND

Your Directors are pleased to recommend dividend at 9% (i.e. Re. 0.90 per share)subject to approval of the members in their ensuing Annual General Meeting. The finaldividend, if declared will absorb an outflow of Rs.35,62,830/- towards dividend and Rs.6,05,510/- towards dividend tax. The requisite provision for dividend has been made in theaccounts for the year ended 31^st March, 2010.

FINANCE

The Company's expansion project has been financed partly out of borrowings from theCompany's bankers, namely the State Bank of India.

PARTICULARS OF EMPLOYEES

There was no employee covered under the purview of Section 217(2A) of the CompaniesAct, 1956 read with the Companies (Particulars of Employees) Rules, 1975. Hence,particulars are not given.

INSURANCE

All the assets of the Company including buildings, plant & machineries and stocksare adequately insured.

DIRECTORATE

Shri Laxman C Tilani and Shri Vasant R Shah are liable to retire by rotation asDirector at the ensuing Annual General Meeting and are eligible for re-appointment. Theyhave also offered themselves for re-appointments.

Shri Pragnesh K Shah was as an Executive Director of the Company for a period of fiveyears from 1^st November, 2009 and Shri Neel D Bilgi, relative of Directors wasre-appointed as an Executive Director of the Company for a further period of five yearsfrom 1^st August, 2010 by the Board of Directors on recommendation of the AuditCommittee. You are requested to consider both the appointments.

Shri Dinesh H Pande was appointed as an Additional Director of the Company with effectfrom 1^st August, 2010 to strengthen the present Board of Directors. He has avast experience in Marketing for over three decades. He is a Independent Director. Heholds office upto the date of this ensuing Annual General Meeting. The Board recommendshis appointment.

Shri Chirag D Bilgi, an Executive Officer of the Company was promoted and appointed asan Additional and Executive Director of the Company with effect from 1^stAugust, 2010. He has provided valuable services to the Company and the Audit Committeealso recommended his appointment. He holds office upto the date of this ensuing AnnualGeneral Meeting. The Board recommends his appointment.

RESOLUTIONS BY POSTAL BALLOT

Your Directors are pleased to inform that the Company has passed resolutions throughPostal Ballots on 11.12.2009 for (1) Alteration of the Main Objects Clause III of theMemorandum of Association by insertion of new Sub Clauses A(6) and A(7), (2) increasingborrowing powers of the Company upto Rs. 200 crores in view of the proposed expansionprojects and (3) authorising the Company to sell, lease, mortgage or create charge overthe assets of the Company for securing the borrowings.

WTG PROJECT

Your Directors have pleasure to inform you that the Company has installed 1.6MW WindTurbine Generators at Samana, Jamnagar District with total outlay of Rs. 880 lacs. TheWTG's are also operative from 31^st December, 2009. These WTG's are installedfor captive consumption and would result in the reduction of the power cost which in turnwould be beneficial to the Company.

COMPLIANCE CERTIFICATE

As required under the provisions of Section 383A of the Companies Act, 1956 and therules made there under, a certificate is attached herewith and the same forms part of thisReport.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, theDirectors hereby confirm that:

i) in the preparation of annual accounts for the financial year ended March 31, 2010,the applicable accounting standards have been followed along with proper explanationrelating to material departures;

ii) the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year as at 31^stMarch, 2010 and the profits of the Company for the year under review;

iii) the directors have taken proper and sufficient care to the best of their knowledgeand ability for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act, 1956 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities;

iv) the directors have prepared the accounts for the financial year ended 31^stMarch, 2010 on a "going concern" basis.

PUBLIC DEPOSITS

The Company has not accepted any deposit from the public during the year within themeaning of Section 58A of the Companies Act, 1956 read with the Companies (Acceptance ofDeposit) Rules, 1975.

AUDITORS

M/s C R Sharedalal & Co., Chartered Accountants, Ahmedabad retires as the StatutoryAuditors at the conclusion of the ensuing Annual General Meeting and are eligible forre-appointment and have indicated their willingness to act as Auditors, if appointed. Youare requested to consider their re-appointment. The Auditors observations read with thenotes to the Accounts are self - explanatory.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

The Company has been taking steps for optimirm utilisation of power and fuel.Information as required under Section 217(1) (e) of the Companies Act, 1956 read with theCompanies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988,is given by way of Annexure- "A" forming part of this Report.

CORPORATE GOVERNANCE

The Company has been proactive in adhering to. the principles and practices of goodCorporate Governance. As required by Clause 49 of the Listing Agreement with the BombayStock Exchange Ltd, Mumbai, a detailed note on Corporate Governance is annexed to thisReport. The Auditor's Certificate confirming compliance of the Corporate Governancerequirements by the Company is attached to the Report on Corporate Governance.

ACKNOWLEDGEMENTS

The Board of Directors of the Company hereby express their sincere appreciation for theexcellent support and co-operation extended by the State Bank of India, the Company'sbankers, shareholders, customers, suppliers and other business associates. Your Directorsplace on record their deep appreciation for contribution of the Employees at all levels.

INFORMATION AS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OFTHE BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS' REPORT FOR THE YEARENDED ON 31^st MARCH, 2010.

A. Conservation of Energy:

(a) Energy conservation measures taken

(b) Additional investments & proposals, if any, being implemented for reduction ofconsumption of energy.

(c) Impact of the measures at (a) & (b) for reduction of energy consumption &consequent impact on the cost of production of goods.

(d) Total energy consumption and energy consumption per unit of production

The Company is conscious about the conservation of energy and reduction of consumptionof energy. The Company has installed wind turbine generators in order to generate greenenergy. Addtional Investment Rs. 880 lacs.

D. G Sets of 400 KVA have been installed as standby for continuous power supply.

FORM FOR DISCLOUSRE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

FORM FOR DISCLOUSRE OF PARTICULARS WITH RESPECT TO ABSORPTION

Technology absorption, adaptation and innovation

C. Foreign Exchange Earnings and Outgo