FRESHTROP FRUITS LIMITED ANNUAL REPORT 2005-2006 CHAIRMAN'S REPORT Dear Shareholders, Agro-industry's structure in our country has undergone a very significant change during the year 2005-06. Retail, trade in India is moving from unorganized road side outlets to well organized Malls and Supermarkets. Many Indian Corporates have committed large investments to development of this sector. Groceries and food products are a very important part of these new and upcoming retail outlets. Large wastage of agricultural produce is well known to all of us. It occurs both in terms of loss of freshness and weight. It is also known that use of cold chain for movement of agricultural produce from farm to consumers would considerably reduce this wastage. As this is a chain operation, all links have to be in place for it to be effective. One of the main links in this cold chain is appropriate retail outlets. Organized retailing would be this link; the other links are then expected to fall in place. We can expect to get more nutritional and fresh agricultural produce available in our markets in the near future. Your Company has been in the business of supplies of fresh Indian fruits to the world's largest and fastest growing Supermarkets like Walmart and Tesco. We expect to use our knowledge and experience of this business for supplies to the domestic retailers as well. Exports continue to grow at a steady pace. Availability of fresh produce in required quality has been the limiting factor for the growth of this business. 2005-06 was the first year where we saw increased availability and consequent reduction in procurement price of grapes. This is a healthy sign as we can be more competitive in the international market while our farmers continue to get good returns more out of larger production and better yield than higher price. Food safety continues to play a very important role in international trade of fresh produce and traceability of the produce is the first requirement of food safety. Your Company is the first in India and amongst the few in the world to offer 100% traceability of its products through an on-line internet based front-end to its ERP and SCM system which allows every entity of the fresh produce supply chain to track and know the complete history of the product and its origin. Your Company is also perhaps the only one in India to deploy such advanced tools for business growth as of today. During the year your Company commissioned its third state-of-the-art post harvest handling facility at Kaledhone in Satara district, in the state of Maharashtra. This facility was set up in just 4 months and has a capacity to pack and precool 15 Metric Tons of grapes per day. While it did contribute to an increase in exports of grapes which grew by overall 59.11%, its full impact is expected to be observed in the year 2006-07. Your Company is committed to the growth of its farmers. We organize field excursions and interaction between the farmers and national and international agriculture scientists to help them improve quality and yield of their produce. Higher realizations for their produce results in their increasing area under cultivation of export quality products which in turn helps us increase sales. This also helps them improve their living standards along with contributing to the literacy levels in the area. For example, an English medium school has been set up in a remote village of Savlej, 50 kilometers from Sangli, with a population of no more than 20000 people and is now attended by children from adjoining villages as well Savlej is home to your Company's second unit which was established in 2002-2003. In the fresh produce business dedication and hard work of all the employees, especially during the season has contributed significantly to your Company becoming the most preferred supplier of Indian fresh produce to the most demanding customers in the world. Every employee of your Company is committed to this endeavor and contributes effectively to its growth in this sector which is now throwing up opportunities earlier thought to be a distant dream in the Indian landscape. The management on its part is exploring how these opportunities can be harnessed to take your Company into its next round of growth. We look forward to your support in taking your Company forward in these very exciting times. Ashok Motiani Chairman & Managing Director