Apex Frozen Foods Ltd Management Discussions.

Disclaimer

This section contains a discussion on the opinions and perceptions of the Management on the trends that impact the Company, it has been collated from information available publicly and reports by various nodal and governmental agencies that the management believes to be accurate at the time of publishing this report The Company does not undertake to update or revise any of the opinions or statements expressed in this report, consequent to, inter alia, revisions to the reports mentioned herein, new information, future events, or otherwise.

A. ECONOMIC ENVIRONMENT

The year 2019 ended on a mixed note with most global economies witnessing slowing economic growth, with some green shoots of recovery popping up in pockets around the world. The World Economic Outlook (WEO, a periodic report by the International Monetary Fund (IMF) dated January 2020) reported that the World GDP growth slowed to 2.9% in CY 2019 from 3.6% in CY 2018. Elowever, the WEO, Jan-2020, reported that market sentiment had been boosted by tentative signs that manufacturing activity and global trade are bottoming out, a broad-based shift toward accommodative monetary policy, intermittent favorable news on US-China trade negotiations, and diminished fears of a no-Brexit deal. This had set the stage for an improved GDP growth for CY 2020.

The World then faced an unprecedent global pandemic, Covid-19, that led to a unique combination of factors, i.e. voluntary social distancing, lockdowns being imposed to slow transmission and allow health care systems to handle critical patients. This led to a severe impact in the form of consumption and services output dropping markedly, depressed mobility, a severe hit to the labor market causing steep income losses and weaker consumer confidence and this has been playing out for the past 3-6 months across the world. Consequently, the WEO, Jun-2020, believes that in CY 2020, the global economy is expected to shrink by 4.9%. However, as countries begin easing lockdowns across the world, global growth is projected to recover to 5.4% in CY 2021.

In India, per the WEO, Jun-2020, the real GDP grew by 4.2% in CY 2019 as compared to 6.1 % in CY 2018. As mentioned above, the global pandemic has put the brakes on most well-laid plans and consequently, Indias GDP is expected to shrink by 4.5% in CY 2020 but is estimated to grow at 6.0% in CY 2021. The Government, on its part, has tried to step in to help. The reduction in corporate tax rate is a big boost to the industry; it makes India much more competitive globally. Further, to combat Covid-19, the slew of policy measures and announcements are welcome and signal the Governments strong commitment to arrest and reverse the slowdown.

B. INDUSTRY OVERVIEW Global Shrimp Industry

Shrimp trade plays an important role in international fish trade, representing about 18% of total world fish trade in value terms. As per the FAO, Jul-2020 report, the shrimp production in CY 2019 increased 17% to reach 4.45 million tonnes, led by increased production mainly in China, India, and Indonesia. The Asia-Pacific region continued to bethe largest producer of shrimp, followed by Ecuador, the top producer in Latin America.

In terms of the consuming markets for global farmed shrimp, the European Union, USA, and China continued to be in the top three, in CY 2019. In the EU, internal economic environs kept up the weak trend with a 3.9% y-o-y decline in Shrimp imports to ~ 800,000 MT. USA too, saw a very subdued 0.4% growth in CY 2019, but was on course for a strong revival following good consumer demand, reduced inventories, and lower import prices from the beginning of CY 2020 and registered a ~1 5% y-o-y growth in shrimp imports in Cl CY 2020. On the back of strong internal demand, China became the focus of global shrimp exporters and registered an increase of 179% y-o-y to ~722, 000 MT in CY 2019.

While shrimp prices remained weak in the initial period, the green shoots of recovery helped stabilized it over the second half of CY 2019.

India Shrimp Industry

Indias shrimp production saw a significant jump of ~30% from 615,692 MT in CY 2018 to 804,000 MT in CY 2019 (reports the Ministry of Commerce and Industry). Exports too saw an 8% increase with 667,879 MT being exported in CY 2019. While the countries that India has been exporting to has remained stable, the proportion has kept on changing. In CY 2019, while USA remained the largest market, China became the second driven by increased imports. The breakup of exports in CY 2019 were as follows:

Break-up of Shrimp Exports - CY19

Business Responsibility Report

Section A: General Information about the Company

1) Corporate Identity Number (CIN) of the Company: LI 5490AP2012PLC080067

2) Name of the Company: Apex Frozen Foods Limited

3) Registered Address: 3-160, Panasapadu, Kakinada, East Godavari 533005, Andhra Pradesh, India

4) Website: www.apexfrozenfoods.com

5) Email: info@apexfrozenfoods.com

6) Financial Year Reported: 2019-20

7) Sector(s) that the Company is engaged in (industrial activity code-wise NIC-2008):

a) 1020 - Processing and preserving of fish, crustaceans and molluscs and products thereof

8) List three key products/services that the Company manufactures/provides (as in balance sheet):

a) Flead On / Fleadless, Shell-on Shrimp

b) Easy Peel Shrimp

c) Peeled Shrimp

9) Total number of locations where business activity is undertaken by the Company

a) Number of International Locations: NIL

b) Number of National Locations: Two (2) Processing Plants; One (1) Pre-Processing Unit; Three (3) Flatcheries

10) Markets served by the Company: Local/State/ National/lnternational

a) National: The shrimp seed from the Companys Flatcheries is marketed to shrimp farmers in the state of Andhra Pradesh.

b) International: During the year under review, the Company exported processed shrimp to the USA, European Union, and China

Section B:Financial Details of the Company

1) Paid Up Capital: Rs. 3,125.00 lacs

2) Total Turnover: Rs. 82,710.54 lacs

3) Total Profit after Taxes: Rs. 6,064.17 lacs

4) Total Spending on Corporate Social Responsibility (CSR) as percentage of profit aftertax (%): 1.50%

5) The Company has spent Rs. 158.08 lakhs on CSR which formed 2.52% of the profit after tax for the financial year 2019-20.

6) List of activities in which expenditure in 4 above has been incurred:

a) Eradicating hunger, poverty and malnutrition

b) protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art.

c) Promoting Health care.

d) Promoting sports.

Section C: Other Details

1) Does the Company have any Subsidiary Company/Companies?

• No

2) Do the Subsidiary Company/Companies participate in the BR Initiatives of the parent company?

• Not Applicable

3) Do any other entity/entities (e.g. suppliers, distributors etc.) that the Company does business with, participate in the BR initiatives of the Company?

• The Company engages with many suppliers, distributors, farmers and third parties. None of these entities participate in the BR activities / initiatives of the Company.

Section D: BR Information

1) Details of Director/Directors responsible for BR

a) Details of the Director/Directors responsible for implementation of the BR policy/policies

Particulars Details
DIN Number 05107525
Name Mr. K Satyanarayana Murthy
Designation Chairman & Managing Director

b) Details of the BR head

Particulars Details
DIN Number 03619259
Name KARUTURI SUBRAHMANYA CHOWDARY
Designation Executive director
Telephone number 08842383902
E-mail ID cs@apexfrozenfoods.com

2) Principle-wise (as per NVGs) BR Policy/policies

The National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business

released by the Ministry of Corporate Affairs has adopted nine areas of Business Responsibility. These are as follows:

P1 Business should conduct and govern themselves with Ethics, Transparency and Accountability
P2 Business should provide goods and services that are safe and contribute to Sustainability
throughout their life cycle
P3 Business should promote the well- being of all employees
P4 Business should respect the interests of and be responsive towards all stakeholders, especially
those who are disadvantaged, vulnerable and marginalized.
P5 Business should respect and promote human rights
P6 Business should respect, protect and make efforts to restore the environment
P7 Business, when engaged in influencing public and regulatory policy, should do so in a responsible manner
P8 Business should support inclusive growth and equitable development
P9 Business should engage with and provide value to their Customers and consumers in a Responsible manner

2) Principle-wise (as per NVGs) BR Policy/policies

The National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business

released by the Ministry of Corporate Affairs has adopted nine areas of Business Responsibility. These are as follows:

SI. No. Name of the Member P1 P2 P3 P4 P5 P6 P7 P8 P9
1 Do you have a policy/policies for Yes Yes Yes Yes Yes Yes Yes Yes Yes
2 bias the policy being formulated in consultation with the relevant stakeholders? Yes Yes Yes Yes Yes Yes Yes Yes Yes
3 Does the policy conform to any national / international standards? If yes, specify? (50 words)

Yes, Policy conform to National Voluntary Guidelines on Social Environmental and Economic Responsibilities of Business issued by Ministry of Corporate Affairs

4 Has the policy been approved by the Board? Is yes, has it been signed by MD/ owner/ CEO/ appropriate Board Director?

Yes, The policies have been approved by the Board and signed by Managing director / executive director

5 Does the company have a specified committee of the Board/ Director/ Official to overseethe implementation of the policy? Yes Yes Yes Yes Yes Yes Yes Yes Yes
6 Indicate the link for the policy to be viewed online?

Policies are available on the website of the Company www.apexfrozenfoods.com and the policies which are internal to the Company are available on the intranet of the Company.

7 Has the policy been formally communicated to all relevant internal and external stakeholders? Yes Yes Yes Yes Yes Yes Yes Yes Yes
8 Does the company have in- house structure to implement the policy/policies? Yes Yes Yes Yes Yes Yes Yes Yes Yes
9 Does the Company have a grievance redressal mechanism related to the policy/ policies to address stakeholders grievances related to the policy/ policies? Yes Yes Yes Yes Yes Yes Yes Yes Yes
10 Has the company carried out independent audit/ evaluation of the working of this policy by an internal or external agency? No No No No No No No No No

b) If answer to the question at serial number 1 against any principle, is No, please explain why: (Tick up to 2 options)

Sl. No. Name of the Member P1 P2 P3 P4 P5 P6 P7 P8 P9
1 The company has not understood the Principles NA NA NA NA NA NA NA NA NA
2 The company is not at a stage where it finds itself in a position to formulate and implement the policies on specified principles NA NA NA NA NA NA NA NA NA
3 The company does not have financial or manpower resources available for the task NA NA NA NA NA NA NA NA NA
4 It is planned to be done within next months NA NA NA NA NA NA NA NA NA
5 It is planned to be done within the next 1 year NA NA NA NA NA NA NA NA NA
6 Any other reason (please specify) NA NA NA NA NA NA NA NA NA

3) Governance related to BR:

a) Indicate the frequency with which the Board of Directors, Committee of the Board or CEO assess the BR performance of the Company. Within 3 months, 3-6 months, Annually, More than 1 year:

Once a year

b) Does the Company publish a BR or a Sustainability Report? What is the hyperlink for viewing this report?

How frequently it is published?

This is the first year that the BR report is applicable to the Company and it forms a part of the Annual Report.

Section E: Principle-Wise Performance

Principle 1: Businesses should conduct and govern themselves with Ethics, Transparency and Accountability

Apex frozen Foods Limited lays a strong emphasis on ethical corporate citizenship and establishment

of good corporate culture. It has always believed in adhering to the best governance practices to ensure protection of interests of all stakeholders of the Company in tandem with healthy growth of the Company. The Company has always discouraged practices that are abusive, corrupt, or anticompetitive.

Our philosophy is to conduct the business with high ethical standards in our dealings with all the stakeholders that include employees, customers, suppliers, government and the community. The Company has a strong and effective Whistle Blower Policy which aims to deter and detect actual or

Suspected misconduct. It has been established to ensure that genuine concerns of misconduct/ unlawful conduct, which an individual believes may be taking place within the organisation, are raised at an early stage in a responsible and confidential manner. This mechanism also provides for adequate safeguards against victimisation of employees who avail of the mechanism. Any employee may report such incident without fear to the Chairman of the Audit Committee. The Policy on Vigil Mechanism may be accessed on the Companys website at http://apexfrozenfoods.in/wp-content/uploads/2017/11/Apex_Whistle-Blower-Policy.pdf

1) Does the policy relating to ethics, bribery and corruption cover only the company? Yes/ No. Does it extend to the Group/Joint Ventures/ Suppliers/Contractors/NGOs /Others?

The Companys Code of Conduct for Directors, Key Managerial Personnel and Senior Managers covers the fundamentals of the first principle.

2) How many stakeholder complaints have been received in the past financial year and what percentage was satisfactorily resolved

by the management? If so, provide details thereof, in about 50 words or so.

• As laid out the Corporate Governance Report, the Company received one Investor Complaints during the financial year 2019-20, which was addressed satisfactorily. Other than these, there were no complaints received by the Company.

Principle 2: Businesses should provide goods and servicesthat are safe and contribute to sustainability throughouttheir life cycle

1) List up to 3 of your products or services whose design has incorporated social or environmental concerns, risks and/or opportunities.

a) The Processing plants are designed to ensure that the practices followed consider the environment right from procurement, packing to discharge of waste materials

b) The Farming activity conducted on our farms ensures environmental sustainability and ecological balance

2) For each such product, provide the following details in respect of resource use (energy, water, raw material etc.) per unit of pro- duct(optional):

a) Reduction during sourcing/production/ distribution achieved since the previous year throughout the value chain?

• Reduction in sourcing / distribution is proportionate to our business. There has been no reduction in resource usage other than this

b) Reduction during usage by consumers (energy, water) has been achieved since the previous year?

• There has been no material change in the usage patterns of energy and water in comparison to the previous year.

3) Does the company have procedures in place for sustainable sourcing (including transportation)?^ yes, what percentage of your inputs was sourced sustainably? Also, provide details thereof, in about 50 words or so.

• Yes, the Company has procedures in place for sustainable sourcing throughout its supply chain. In our mission to reduce our environmental impact, the involvement of our supply chain partners is vital. We encourage our partners to adopt sustainable practices in their operations for improvement in their environmental performance.

4) Flas the company taken any steps to procure goods and services from local & small producers, including communities surrounding their place of work? If yes, what steps have been taken to improve their capacity and capability of local and small vendors?

• Yes, the Company sources raw shrimp from local and small producers. With the purpose of achieving sustainable procurement, local sourcing is an essential aspect in developing the supply chain and hence most of the shrimp that is processed comes from within almost 200 to 250 kms of the Companys operating base. The Company also supports local producers by providing technical inputs to upgrade and maintain the quality of their produce.

5) Does the company have a mechanism to recycle products and waste? If yes what is the percentage of recycling of products and waste (separately as <5%, 5-10%, >10%). Also, provide details thereof, in about 50 words or so.

• The Company has a mechanism of recycling products and waste which is less than 5%.

Principle 3: Businesses should promote the well-being of all employees

1) Please indicate the total number of employees: 2858

2) Please indicate the total number of employees hired on temporary/contractual/casual basis: 320

3) Please indicate the number of permanent women employees: 24

4) Please indicate the number of permanent employees with disabilities: 2

5) Do you have an employee association that is recognized by management: Nil

5) What percentage of your permanent employees is members of this recognized employee association? Not applicable

7) Please indicate the number of complaints relating to child labour, forced labour, involuntary labour, sexual harassment in the last financial year and pending, as on theend of the financial year.

SI.No. Category No.of complaints filed during the financial year No.ofcomplaints pending as on end of the financial year
1 Child labour/forced labour/ involuntary labour Nil Nil
2 Sexual harassment Nil Nil
3 Discriminatory employment Nil Nil

8) What percentage of your under mentioned employees were given safety & skill up-gradation training in the last year?

a) Permanent Employees: 100%

b) Permanent Women Employees: 100%

c) Casual/Temporary/Contractual Employees: 100%

d) Employees with Disabilities: 100%

Principle 4: Businesses should respect the interests of, andbe responsive to the needs of all stakeholders, especiallythose who are disadvantaged, vulnerable, and marginalized

1) Has the company mapped its internal and external stakeholders? Yes/No

Yes, the Company has mapped its internal and external stakeholders as follows:

i) Employees

ii) Customers

iii) Suppliers

iv) Shareholders

v) Bankers

vi) Regulatory Authorities

vii) Members of the Society

2) Outoftheabove,hasthecoimpanyidentifiedthedisadvantaged,vulnerable&imarginalized stakeholders?

The Company is engaged with its stakeholders and focusses on being responsive and proactive in communicating with them and is sensitive towards their needs and expectations. The Company is in the process of identifying the disadvantaged, vulnerable & marginalized stakeholders to be able to undertake special initiative based on the need of such stakeholders

3) Are there any special initiatives taken by the company to engage with the disadvantaged, vulnerable and marginalized stakeholders. If so, provide details thereof, in about 50 words or so.

The Company undertakes various social initiatives in and around the vicinity of the Companys facilities.

Principle 5: Businesses should respect and promotehuman rights

1) Does the policy of the company on human rights cover only the company or extend to theGroup/Joint Ventures/Suppliers/Contrac- tors/NGOs/Others?

The current policy of Human Rights currently covers the Company and its employees.

2) How many stakeholder complaints have been received in the past financial year and what percent was satisfactorily resolved by the management?

There were no complaints regarding human rights violation during the past financial year 2019-20 Principle 6: Business should respect, protect, and makeefforts to restore the environment

1) DoesthepolicyrelatedtoPrinciple6coveronlythecompanyorextendstotheGroup/Joint Ventures/Suppliers/Contractors/NGOs/others.

The Companys current policy pertaining to the Environment covers the Company and its employees

2) Does the company have strategies/ initiatives to address global environmental issues such as climate change, global warming, etc? Y/N. If yes, please give hyperlink for webpage etc.

The Company is conscious of its role in ensuring the protection of the environment and it has adhered to all laid down principles of water conservation, making the supply chain more sustainable by guiding our key suppliers to incorporate sustainability initiatives into their operations etc. Further, we have ensured that our plants are equipped with class leading equipment to reduce

wastage and effluents.

3) Does the company identify and assess potential environmental risks? Y/N

• Weather is an important aspect especially for the farming stage of the supply chain. Extreme events are floods can cause disruption in aquaculture ponds and thereby affect the value chain from material sourcing aspect. Apart from that, there are no potential environmental risks.

4) Does the company have any project related to Clean Development Mechanism? If so, provide detailsthereof, in about 50 words or so. Also, if Yes, whether any environmental compliance report is filed?

• No, the Company does not have any projects registered with the United Nations Framework Convention on Climate Change (UNFCCC) as a Clean Development Mechanism (CDM) project in the reporting year

5) bias the company undertaken any other initiatives on - clean technology, energy efficiency, renewableenergy, etc. Y/N. If yes, please give hyperlink for web page etc.

• Yes, the Companyconstantly explores means to reduce energy consumption through vigilant energy management and through the adoption of emerging efficient renewable technologies.

5) Are the Emissions/Waste generated by the company within the permissible limits given byCPCB/SPCB for the financial year being reported?

• Yes, all the facilities of the Company complywith the prescribed emission norms of StatePollution Control Boards and the emissions and wastegenerated during the financial year 2019-20 were within thepermissible limits given by SPCB

7) Number of show cause/ legal notices received from CPCB/SPCB which are pending (i.e. not resolved tosatisfaction) as on end of Financial Year

• Nil

Principle 7: Businesses, when engaged in influencing publicand regulatory policy, should do so in a responsible manner

1) Is your company a member of any trade and chamber or association? If Yes, name only those major ones that your business deals with.

• Company is member of Federation of Indian Chambers of Commerce and Industry, The Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry, the Andhra Pradesh Chambers of Commerce & Industry Federation, Indian Wind Power Association, Compound Livestock Feed Manufacturers Association of India and Federation of Indian Export Organization

2) Have you advocated/lobbied through above associations for the advancement or improvement of public good? Yes/No; if yes, specify the broad areas (drop box: Governance and Administration, Economic Reforms, Inclusive Development Policies, Energy security, Water, Food Security, Sustainable Business Principles, Others)

• The Company has lobbied with MPEDA for effective monitoring mechanismfor stopping usage of antibiotics in shrimpculture and to check the menace of illegalhatcheries.Company lobbying along with associations forcontinuous power supply to farmers at rates applicable to agricultural sector with State and Central Governments

Principle 8: Businesses should support inclusive growth andequitable development

1) Does the company have specified programmes /initiatives/projects in pursuit of the policy related to Principle 8? If yes details thereof.

• The Companys CSR policy is aimed at demonstrating care for the community through its focus on education & skill development, health & wellness and environmental sustainability including biodiversity, energy & water conservation.

2) Are the programmes /projects undertaken through in-house team/own foundation/external NGO/government structures/any other organization?

• The Company engages in the above activities independently or in such manner that it will complement the work being done by local authorities wherever necessary in such a manner, that the work executed by the Company will offer a multi fold benefit to the community.

3) Have you done any impact assessment of your initiative?

• The Companys CSR Committee does a periodic assessment of the various initiatives being undertaken and ensures that the impact of these initiatives is reaching the intended targets.

4) What is your companys direct contribution to community development projects- Amount in INR and the details of the projects undertaken?

Sl.No. Purpose for which CSR project undertaken Recipient of CSR contribution Cumulative expenditure upto to the reporting period
1 Midday Meal Scheme Akshayapatra Foundation Rs. 36.00 lacs
2 Construction of monument Nauyana Monastery Rs. 29.24 lacs
3 Promotion of Health Care Sankurathri Foundation Rs. 15.29 lacs
4 Promotion of Traditional Art Nataraj Music & Dance Academy Rs. 5.00 lacs
5 Promotion of Traditional Art The Youngmans Happy Club Rs. 4.15 lacs
6 Promotion of sports Kakinada Runners Trust Rs.1.50 lacs

5) Have you taken steps to ensure that this community development initiative is successfully adopted by the community? Please explain in 50 words, or so.

The CSR Committee undertakes relevant projects based on its assessment of the requirements of the residential communities and after discussion with the village committees. The Company believes that these programmes were well received by the community that they were intended for

Principle 9: Businesses should engage with and providevalue to their customers and consumers in a responsiblemanner

1) What percentage of customer complaints/consumer cases are pending as on the end of financial year:

zero

2) Does the company display product information on the product label, over and above what is mandated as per local laws? Yes/ No/N.A. /Remarks(additional information)?

The Company displays all the mandatoryinformation on the product labels as per thegoverning laws

3) Is there any case filed by any stakeholder against the company regarding unfair trade practices, irresponsible advertising and/or anti-competitive behaviour during the last five years and pending as on end of financial year? If so, provide details thereof, in about 50 words or so.

Nil

4) Did your company carry out any consumer survey/ consumer satisfaction trends?

Nil