UFLEX LIMITED (FORMERLY KNOWN AS FLEX INDUSTRIES LIMITED) ANNUAL REPORT 2006-2007 CHAIRMAN'S REPORT The Indian economy embarked on a high growth path in 2003-2004 with a GDP growth of 8.5%. The year 2006-2007 witnessed a growth of 9.2% and marked the fourth consecutive year of excellent economic performance taking the compounded annual growth rate during this fourth year period to over 8.5%. India is one of the few markets that has enormous potential for growth and earnings in all sectors. There is no let up from the Government on the reform process, which has spurred the economy. These developments at the macro level will have a positive impact on your Company. Last year I spoke to you about the merger of erstwhile Flex Engineering Limited, FCL Technologies & Products Limited and Flex Securities Limited with your Company. I am happy to inform you that the said companies were merged with the Company in terms of the Order of the High Court of Delhi with effect from December 4, 2006 and the appointed date being April 1, 2006. The Audited results for the year ended March, 2007 was the first consolidated results of the Company after merger Your Company has posted a commendable performance during the financial year 2006-07. The Company on a consolidated basis along with its subsidiaries achieved total revenues of Rs.1995 Crores and Net Profit of Rs.77 Crores. Our employees are our pride. Their hard work and dedication ensured outstanding results for the company in the year 2006-2007. I am also pleased to inform you that the wholly owned subsidiary of the Company, M/s Flex Middle East FZE, Dubai has successfully commissioned its second line of PET film at Jebel Ali, Dubai and production from the said line has already commenced ahead of its schedule. Coupled with additional capacity to produce 26400 tpa of Polyester film from second line aggregating to a total capacity of 44400 tpa at Dubai, FME shall be able to enhance its revenues to US$ 120 million (approx.) as against existing revenues of about US$ 45 Million and earn profit of US$ 20 million (approx) as against existing profit of about US $ 8 million. Businesses, globally are getting increasingly competitive. The increased competition invites greater efficiency. Your company is addressing this challenge by taking steps that will ensure growth through setting of new plants and expansions in India and abroad. The expansion will help the Company to achieve new levels of revenues & profitability on a long-term basis. Your company has presently the following expansion plans: * setting up facilities to produce flexible packaging materials with an installed capacity of 12000 MT per annum and Holography materials with an installed capacity of 1600 MT per annum at Jammu, India. The project is expected to commence production by December, 2007. * setting up manufacturing facilities for Ethyl Alcohol & other allied products with an installed capacity of 90KL per day at Aligarh (U.P), India. The project is expected to commence production by March, 2008. * setting up manufacturing facilities for production of woven poly propylene (WPP) bags. The project is expected to commence commercial production during financial year 2008-09. * your company's plastic film business continues to grow from strength to strength. To sustain its leadership and to garner a larger pie of the growing market demand, particularly in the American Continent, your company is heading to set up a green field project at Mexico for manufacturing of Polyester film with an estimated capital outlay of about US$ 91 million in phases to built up capacity of 52800 tpa. To part finance the above and other expenses, your Company has successfully raised USD 85.00 Millions by way of issue of Foreign Currency Convertible Bonds (FCCBs) in the International market and has also issued 103 Lacs warrants convertible into equity shares on preferential basis to promoters and others. I would like to offer my sincere thanks to our employees for their outstanding commitment and hard work, which was instrumental for your Company's performance. Also of importance was the support of my colleagues, our customers, business associates, shareholders, GDR & FCCB holders, Members of the Board, Central Government, State Governments, Financial Institutions and Banks. Your Company aims to become one of the largest packaging companies in the world and add values in every repect to it's business and stakeholders. The future holds more excitement and many opportunities for us. I am sure, UFLEX has great future for all of us to share. With warm regards, ASHOK CHATURVEDI Chairman & Managing Director