Flex Foods Ltd

To the Members,

Your Directors are pleased to present the 22^nd Annual Report together withthe Audited Accounts of the Company for the year ended 31^st March, 2012.

FINANCIAL RESULTS

The financial results for the year ended 31^st March, 2012 and for theprevious year ended 31^st March, 2011 are as follows:

(Rs. in lacs)

Your Company achieved total revenue of Rs.5324 lacs including other income of Rs.277lacs in comparison to total revenue of Rs.4841 lacs including other income of Rs.235 lacsin the previous year ended 31^st March, 2011. During the year the Company madeexport of manufactured/traded goods on FOB basis to the tune of Rs 3210 lacs, which isapproximately 63.60% of the total income from operations. Your Company ended the year witha net profit of Rs.418 lacs compared to profit of Rs.344 lacs for the previous year ended31^st March, 2011. The earning per share is Rs.3.36 in comparison to Rs.2.76 pershare in the previous year.

The operational aspects of the Company’s working have been covered in detail inthe Management Discussion and Analysis Report and the same is deemed to be part of thisDirectors’ Report.

Dividend

Your Directors are pleased to recommend a dividend @Rs.2/- (20%) per share for thefinancial year ended March, 2012. the dividend if approved at the forthcoming AnnualGeneral Meeting will be paid to Members whose name appear in the Register of Members as on20.08.2012. In respect of shares held in dematerialized form, it will be paid to thosemembers whose name are furnished by National Securities Depository Limited and CentralDepository Service (India) Limited as beneficial owner as on 20^th August, 2012.

Directors

In accordance with the provisions of the Companies Act, 1956 and the Articles ofAssociation of the Company, Shri S.K. Kaushik and Shri G.N. Gupta, Directors of theCompany retire by rotation and being eligible offer themselves for re-appointment.

Brief resume of the Directors seeking re-appointment, nature of their expertise inspecific functional areas and the name of the Public Companies in which they holdDirectorship and Chairman/Membership of the Committees of the Board, are given asAnnexure to the Notice convening the Annual General Meeting.

None of the Directors of the Company is disqualified as per provisions of Section274(1)(g) of the Companies Act, 1956. The Directors have made necessary disclosures asrequired under various provisions of the Companies Act, 1956 and Clause 49 of the ListingAgreement.

Fixed Deposits

During the year under review, your Company did not accept any Fixed Deposits from thePublic

Auditors

The Auditors of the Company, M/s Jain Singhal & Associates, Chartered Accountants,New Delhi retire at the forthcoming Annual General Meeting and being eligible offerthemselves for re-appointment. The Company has received a letter from them to the effectthat their appointment, if made, would be within the prescribed limit under Section224(1B) of the Companies Act, 1956.

The observations of the Auditors and the relevant notes on the accounts areself-explanatory and therefore do not call for any further comments.

Corporate Governance

The Securities and Exchange Board of India (SEBI) stipulate Corporate Governancestandards for listed companies through Clause 49 of the Listing Agreement of the StockExchanges. Accordingly, a separate report on Corporate Governance along with theAuditors’ Certificate on its compliance by the Company is included as a part of theAnnual Report.

Directors’ Responsibility Statement

On the basis of compliance certificates received from the Internal Auditors andExecutives of the Company, subject to the disclosures in the Annual Accounts and also onthe basis of the discussion with the Statutory Auditors of the Company from time to time,we state as under:

1) that in the preparation of the Annual Account for the financial year ended 31^stMarch, 2012, the applicable accounting standards have been followed and there has been nomaterial departure.

2) that the Directors have selected such Accounting Policies and applied themconsistently and made judgment and estimates that were reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profits of the Company for the year under review.

3) that the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act, 1956for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities.

4) that the Directors have prepared the Annual Accounts on a going concern basis.

The Company’s Internal Auditors have conducted periodic audit to providereasonable assurance that the Company’s established policies and procedures have beenfollowed. The Audit Committee constituted by the Board reviews the internal control andfinancial reporting issues with the Internal Auditors.

Particulars of Employees

There has been no employee during the year whose particulars are required to be givenunder section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars ofEmployees) Rules 1975.

Conservation of Energy, Technology Absorption, Foreign Exchange Earning and Outgo

Information under Section 217(1)(e) of the Companies Act, 1956 read with the Companies(Disclosure of the particulars in the Report of Board of Directors) Rules, 1988 is givenin Annexure ‘A’ forming part of this Report.

Personnel

Relations with the Employees remain cordial and harmonious throughout the year, therebystrengthening the commitment of the Employees at all level to the growth of the Company.

Acknowledgement

The Directors acknowledge with gratitude the co-operation extended by various agenciesof the Central Government, Government of Uttarakhand, Banks and all Business Associatesduring the year under review. The Board also takes this opportunity to express its deepgratitude for the continuous support received from the Shareholders and wholeheartedcooperation given by the employees of the Company working at various levels.

ANNEXURE ‘A’ TO DIRECTORS REPORT

Information regarding Conservation of Energy, Technology Absorption and ForeignExchange Earnings & Outgo pursuant to Companies (Disclosures of Particulars in theReport of Board of Directors) Rules, 1988, forming part of Directors Report.

Keeping in mind social accountability, efforts were undertaken to reduce energyconsumption & emission of pollutants. Steam generation & consumption, electricity& water consumption patterns were studied & optimized for various processes.

Efficient generation of steam was achieved by proper selection of fuel, improved boilerefficiency by proper heat distribution & technology up gradation.

System Modification in each production line has resulted in reduction of steam/unit/water consumption and increase in the plant efficiency.

Knowledge of energy consumption for each product & process, measuring &analyzing data on steam generation, distribution & consumption, measuring &analyzing data on electricity / water distribution & consumption, process analysis& improvement, proper selection of motors, identifying & eliminating distributionsystem losses, condition monitoring, frequent inspection & cleaning programmes, VFDinstallation & maintaining unity power factor have resulted in significant costsavings & increased level of awareness amongst the employees.

Additional investments and proposals being implemented for reduction of energyconsumption

New cold storage of capacity 1200 MT is in operation which will give advantage toprocess the herbs, fruits & vegetables in the season when the raw material cost is lowand sell the products over the year.

Freeze Drying Unit: Dehumidification system has been modified to improve thehumidity of process room.

Air Drying Unit: Cold store has been made for storage of finished goods to enhancethe shelf life of the products. Spiral sorter was installed for further improvement in thequality of product.

Impact of the above measures

System modification in each product line has resulted in increased raw materialhandling capacity & process efficiency thereby resulting in significant cost savings.Modification in dehumidification system in Freeze Drying Unit has resulted in significantfuel savings.

Finished goods cold storage for air dried products will enhance the shelf life and willretain the color of the products.

i) Specific areas in which R&D carried out by the Company

The company prioritized and carried out R&D work in process and product developmentof vegetables and organic herbs and other conventional herbs like Pimpernelle, GardenCress and Lemon Balm.

ii) Benefits derived as a result of above R&D

a. Process certification of facility for organic production has been obtained fromUttarakhand Organic Board, Dehradun.

b. IQF Pimpernelle, Garden Cress and Lemon Balm were developed and manufactured inaddition to other herbs.

c. IQF Organic Thyme, Parsley, Basil, Pimpernelle and Dill was manufactured in additionto other conventional IQF herbs.

iii) Future Plan of Action

a) Steps are continuously being taken for innovation and renovation of productsincluding new product development like Air dried Stevia, Sugar beat and Potato, IQF Steviaand Canned products like Fruit cocktails, Spinach and Pineapple.

b) Automation and process line modifications are being planned to substantially reducelabour costs and to improve productivity and quality

. iv) Expenditure on R&D

During the year, company spent Rs.0.18 Lacs. This is very negligible to the percentageof the turnover of the company.

C) FOREIGN EXCHANGE EARNING AND OUTGO

a) Activities related to Exports: Initiatives were taken to increase exports,development of new export markets for products and services. The company is at presentexporting its products to North America and Europe.

The company is continuously exploring possibilities of exporting new and enhancedquantities of existing product mix to existing and new prospective markets.

b) During the year company has exported manufactured goods of on FOB basis amounting toRs.3210.32 lacs. The expenditure incurred in Foreign Exchange (including value of imports)during the year amounted to Rs.214.37 lacs.