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| Policy and Business Operations Overview                               |
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Thai Carbon Black Public Company Limited (TCB) was incorporated in 1978
to produce Carbon Black (CB). The commercial operation began with a
capacity of 16,000 TPA of CB. With regular expansions and
debottlenecking, TCB had achieved the capacity of 275,000 TPA which
remain limited to 240,000 TPA with mothballing of Line#1 last year.
Present capacity stands at 15 times of its initial capacity. TCB also
has capacity to produce 370 MT / hour of Steam and 49.70 MW / hour of
Electricity. TCB is listed at Stock Exchange of Thailand since 1992 with
market capitalization of Baht 6,540 million as of 31^(st) March 2016.

TCB factory is located in Angthong province. The company is accredited
with ISO 9001:2000, OHSAS 18001:1999, ISO/TS 16949:2002. TCB has also
been awarded the prestigious TPM Excellence award by JIPM, Japan and
Deming prize for total quality management.

Our product under brand of “Birla Carbon” offers wide range of Carbon
Black for Rubber and specialty applications.

Almost half of TCB’s production is exported to more than 20 countries
worldwide. TCB’s product meets the stringent quality expectations of
customers in Japan, Australia, South Korea, Philippines, Singapore,
Malaysia, Indonesia, Vietnam, Taiwan etc

The company has been making continuous efforts to improve productivity
and quality of its products to cater high-end markets. Being a prominent
exporter, a significant contributor to exchequer and a major employer in
Angthong Province, the company is contributing to economy of Thailand.

1.1 Vision, Mission

Vision : To be the most respected, dynamic and sustainable global Carbon
Black Business

Mission : To be a premium global conglomerate with a clear focus on each
business

1.2 Development and Significant changes in 2015-16

25^(th) June 2015:

The Board of Directors’ passed the resolution to recommended to Annual
General Meeting of shareholders to pay dividend of Baht 0.60 per share
amounting to Baht 180 million.

16^(th) November 2015:

The Board approved availing of long term facilities for an amount not
exceeding US$ 110 million from any one or more of the banks, financial
institutions, foreign institutional investors, bodies corporate and / or
any other entities (located locally or globally) by way of term loan,
external commercial borrowings, debentures, bonds, financial papers or
such other credit facilities or its equivalent in any other currency on
such terms and conditions, as may be necessary for meeting its various
financial obligations and needs.

14^(th) December 2015:

The Board of Directors’ meeting passed the resolution to approve are
follow :

-   The Board approved availing of revolving credit facilities for an
    amount not exceeding US$ 100 million (or its equivalent in any other
    currency) from any one or more of the banks or any other entities
    (located locally or globally) (the “Revolving Facilities”).

-   The Board approved to release and discharge of the security securing
    existing facility.

-   The Board approved to register the release of mortgages of land and
    buildings.

-   The Board approved to register the release of mortgages of
    machinery.

8^(th) March 2016:

The Company would like to inform that SKI Carbon Black (Mauritius)
Limited has filed with the Office of the Securities and Exchange
Commission on 8^(th) March 2016, an announcement of its intention to
make a tender offfer for all ordinary shares of the Company. (Form
247-3)

16^(th) March 2016:

The Company would like to inform that the Company has received the
Tender Offer to purchase Securities of the Company (Form 247-4) under
which SKI Carbon Black (Mauritius) Limited is making a tener office for
all the remainder of ordinary shares of the Company amounting to
213,760,520 ordinary shares, at the tender offer price of THB22/share
and during the tender offer period from 17^(th) March – 26^(th) April
2016 (banking business day only). The tender offer period is 25 business
days in total.

17^(th) March 2016:

The Company would like to inform that the Company has appointed Discover
Management Co., Ltd. as an independent financial adviser (IFA) to
provide an opinion to the shareholders of the Company on the tender
offer under which SKI Carbon Black (Mauritius) Limited is making an
offer for all the ordinary shares of the Company. In this regard, the
Company will provide the recommendation of the Company on the tender
offer (Form 250-2) with the opinion of the IFA on the tender offer to
shareholders in due course of time.

30^(th) March 2016:

The company has changed the date for submission of annual audited
financial Statement from within 3 months from the end of accounting year
to within 2 months from the end of accounting year.

5^(th) April 2016:

The company received a copy of the tender offer to purchase securities
of the Company on 16 March 2016 from SKI Carbon Black (Mauritius)
Limited, the Company has prepared a recommendation of the tender offer
(Form 250-2) and appointed Discover Management Co., Ltd. as an
independent financial adviser (IFA) to provide an opinion to the
shareholders of the Company on the tender offer.

20^(th) April 2016:

The company has received a copy of Form of Report on the Preliminary
Result of the Tender Offer to Purchase Securities (Form 247-6 Khor),
which SKI Carbon Black (Mauritius) Limited is the tender offeror.

3^(rd) May 2016:

The company has notifies that as SKI Carbon Black (Mauritius) Limited
(the “Offeror”) made the tender offer for the securities of the Company
during the tender offer period of 25 business days from 17 March 2016 to
26 April 2016, the tender offer period was already completed and the
Company has received copy of Form of Report on the Result of the Tender
Offer to Purchase Securities (Form 256-2) from the Offeror.

1.3 INVESTMENT STRUCTURE OF THAI CARBON BLACK PUBLIC COMPANY LIMITED (as on 31 March 2016)

1.4 SHAREHOLDING STRUCTURE

+--------------+-------------+---+-------+------+------+----------------+
| Company Name | Activity    |   | Pa    | %    | Cost | Other Major    |
|              |             |   | id-up | S    | of   | Shareholders   |
|              |             |   | Ca    | hare | In   |                |
|              |             |   | pital | Hold | vest | (>10%)         |
|              |             |   |       | ings | ment |                |
|              |             |   |       |      | (MB) |                |
+--------------+-------------+---+-------+------+------+----------------+
| Subsidiary   |             |   |       |      |      |                |
| Companies    |             |   |       |      |      |                |
+--------------+-------------+---+-------+------+------+----------------+
| Birla Carbon | Manufacture | 4 |       | 9    |   1  |                |
| Mexico,      | of carbon   | . |       | 8.00 | 2.85 |                |
| S.A.DE       | black       | 5 |       |      |      |                |
|              |             | m |       |      |      |                |
| C.V.         | (under      | i |       |      |      |                |
| (Registered  | planning    | l |       |      |      |                |
| in Mexico)   | stage)      | l |       |      |      |                |
|              |             | i |       |      |      |                |
|              |             | o |       |      |      |                |
|              |             | n |       |      |      |                |
|              |             | M |       |      |      |                |
|              |             | e |       |      |      |                |
|              |             | x |       |      |      |                |
|              |             | i |       |      |      |                |
|              |             | c |       |      |      |                |
|              |             | a |       |      |      |                |
|              |             | n |       |      |      |                |
|              |             | P |       |      |      |                |
|              |             | e |       |      |      |                |
|              |             | s |       |      |      |                |
|              |             | o |       |      |      |                |
+--------------+-------------+---+-------+------+------+----------------+
| Associated   |             |   |       |      |      |                |
| Companies    |             |   |       |      |      |                |
+--------------+-------------+---+-------+------+------+----------------+
| Aditya Birla | Manufacture | B |       | 2    | 50   | 1.Thai Rayon   |
| Chemicals    | of Caustic  | a |       | 9.99 | 9.82 | Pcl (29.98%)   |
| (Thailand)   | Soda &      | h |       |      |      |                |
| Co., Ltd     | Epic        | t |       |      |      |                |
|              | hlorohydrin | 1 |       |      |      |                |
|              |             | , |       |      |      |                |
|              |             | 7 |       |      |      |                |
|              |             | 0 |       |      |      |                |
|              |             | 0 |       |      |      |                |
|              |             | M |       |      |      |                |
|              |             | i |       |      |      |                |
|              |             | l |       |      |      |                |
|              |             | l |       |      |      |                |
|              |             | i |       |      |      |                |
|              |             | o |       |      |      |                |
|              |             | n |       |      |      |                |
+--------------+-------------+---+-------+------+------+----------------+
| P.T. Indo    | Manufacture | U |       | 4    | 19   | 1.Thai Rayon   |
| Liberty      | of          | S |       | 0.00 | 6.95 | Plc. (40%)     |
| Textiles     | Synthetic   | D |       |      |      |                |
| (Registered  | Yarn        | 1 |       |      |      | 2.Cheddington  |
| in           |             | 9 |       |      |      | Trading        |
| Indonesia)   |             | , |       |      |      | Company Inc.   |
|              |             | 5 |       |      |      | (16%)          |
|              |             | 0 |       |      |      |                |
|              |             | 0 |       |      |      |                |
|              |             | , |       |      |      |                |
|              |             | 0 |       |      |      |                |
|              |             | 0 |       |      |      |                |
|              |             | 0 |       |      |      |                |
+--------------+-------------+---+-------+------+------+----------------+
| Indigold     | Manufacture | U |       | 2    | 6    | 1. SKI         |
| carbon       | of Carbon   | S |       | 0.59 | 3.60 | Investments    |
| (Mauritius)  | Black       | D |       |      |      | Pte Ltd –      |
|              |             | 1 |       |      |      | 58.82%         |
|              |             | 0 |       |      |      |                |
|              |             | m |       |      |      | 2. Alexandria  |
|              |             | i |       |      |      | Carbon Black – |
|              |             | l |       |      |      | 20.59%         |
|              |             | l |       |      |      |                |
|              |             | i |       |      |      |                |
|              |             | o |       |      |      |                |
|              |             | n |       |      |      |                |
+--------------+-------------+---+-------+------+------+----------------+

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| Nature of Business                                                    |
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Revenue Structure

(Unit : Million Baht)

+-----------------------+--------+--------+--------+--------+--------+
| Product/Service       | For    |        |        | For    | For    |
|                       | the    |        |        | the    | the    |
|                       | year   |        |        | three  | year   |
|                       | ended  |        |        | -month | ended  |
|                       |        |        |        | period | 31     |
|                       | 31     |        |        | ended  | De     |
|                       | March  |        |        | 31     | cember |
|                       |        |        |        | March  |        |
+-----------------------+--------+--------+--------+--------+--------+
|                       | 2016   | 2015   | 2014   | 2013   | 2012   |
+-----------------------+--------+--------+--------+--------+--------+
| Domestic              | 2,941  | 3,521  | 4,423  | 1,289  | 4,968  |
+-----------------------+--------+--------+--------+--------+--------+
| Export                | 1,895  | 3,087  | 3,366  | 834    | 4,278  |
+-----------------------+--------+--------+--------+--------+--------+
| Other income          | 441    | 410    | 334    | 143    | 288    |
+-----------------------+--------+--------+--------+--------+--------+
| Total revenue         | 5,277  | 7,018  | 8,123  | 2,266  | 9,534  |
+-----------------------+--------+--------+--------+--------+--------+

Company produces carbon black as a main product

2.1 Products Features

Carbon Black

Carbon Black is elemental carbon in the form of extremely fine particles
having an amorphous molecular structure. It’s derived from the
incomplete combustion through controlled process. In the older times,
Chinese used Carbon Black produced from resins and vegetable oils in
inks and water colors. The Greeks and Romans used Carbon Black to paint
the walls of their buildings. Today, Carbon Black's biggest application
is as reinforcing filler in rubber products. Manipulation of Carbon
Black surface can enhance the physical properties of rubber. Almost all
rubber products, especially those that need to have abrasion wear
properties, use Carbon Black; hence, they are black in color. It also
helps conduct heat away from the tread and belt area of the tire,
reducing thermal damage and increasing tire life. Carbon black particles
are also employed in some radar absorbent materials and in photocopier
and laser printer toner, and other inks and paints. The high tinting
strength and stability of carbon black has also provided use in coloring
of resins and films. Additionally, carbon black has been used in various
applications for electronics. As a good conductor of electricity, carbon
black is used as filler mixed in plastics, elastomer, paints, films,
adhesives, and paints. Application of carbon black as an antistatic
agent has provided uses as an additive for fuel caps and pipes for
automobiles.

Manufacturing process

Carbon Black is produced by partial combustion of oils and pyrolysis in
the reactor. Carbon Black feed stock is suitably blended before charging
into the reactors. Predetermined quantities of process air from a
process air header system, fuel natural gas and Carbon Black feedstock
are introduced into the reactor, which has been brought up to the
desired temperature level.

At the initial stage, carbon nuclei or precursors formed from the oil
combine to form aggregates. The reaction is stopped at suitable points
by direct quenching with water, at predetermined locations with
predetermined quantities. The entire operation of flow, including the
temperature measurements is controlled by computer-supervised electronic
instrumentation.

Effluents from the reactors are essentially carbon-laden flue gases
containing some combustibles. These gases are at a temperature between
700oC and 900oC. This heat is first utilized in preheating incoming
process air in an air pre-heater and then reused to heat incoming Carbon
Black feed stock in an oil pre-heater. This process maximizes heat
recovery and process efficiency. The effluents from the reactors pass
into an inline boiler and then into a common header called smoke header.

The smoke header leads the carbon-laden flue into the main bag filter.
Inlet of the flue is controlled at about 280 degree Centigrade. The main
bag filter is a filter house consisting of multi-cylinders, where Carbon
Black is filtered. Clean gases containing combustibles pass out of the
filter to the Carbon Black pellet dryer. Carbon black is recovered from
the bag filters by reverse flow of the flue gases into the cylinders,
performed in rotation one at a time. Carbon Black thus released from the
bags accumulates in the hopper and is dropped into a pneumatic conveying
line through air lock valves. Two pneumatic conveying fans draw carbon
black from underneath the hopper.

[]

Loose Carbon Black and the conveying gases are drawn through two micro
pulverisers and transferred to the accumulator tank through a conveying
cyclone separator. The purpose of this cyclone is to separate Carbon
Black from the conveying gas. Loose Carbon Black from the cyclone
separator falls into the accumulator tank and the conveying gas is drawn
by a return fan and returned to the smoke header at the bag filter
inlet.

Carbon Black collected in the accumulator tank is in a fluffy, powdery
form, and being difficult to handle as such, has to be pelletized.
Pelletization is achieved in a proprietary machine called wet pelletizer
where the loose Carbon Black is mixed with a near equal quantity of
water and small quantities of pellet binders. An indirectly fired rotary
drum dryer is used to dry the wet pellets. Drying is achieved by burning
the part of the waste gases from the main bag filter in a specially
designed combustor. Water vapors from the dryer are drawn by an exhaust
blower and the exhaust or purge gas exits to the atmosphere.

The entire operation is completely automatic, achieved by sophisticated
electronic distributed control system of instrumentation. The dried
Carbon Black is lifted by a bucket elevator and passed through a scalper
screen to separate lumps from the product and a magnetic separator to
separate accidental contamination of Carbon Black by magnetic particles
before discharging into product storage tanks by product screw
conveyors. Lumps separated from the product are returned for
reprocessing.

The black is then packed into multi-wall paper bags, polyethylene bags
or super-sacks for dispatch to customers. The packing of paper bags/
polyethylene bags are achieved by fluidizing of Carbon Black and
super-sacks by gravity fill.

2.2 Market and Competition

Thailand GDP advanced 2.8 percent in 2015, accelerating from a
three-year-low of 0.8 percent in 2014, aided by strengthening
investments. The economy gained momentum but at a moderate pace with
growth significantly below its potential (+5.0% p.a. over (2000-2007) as
per analysts. Domestic consumption is recovering, supported by lower
fuel prices and further public spending. However, Private investment is
still lacking momentum and the Private sector confidence is still low,
according to the experts. Also economic headwinds are strong stemming
from lower demand growth from China.

[]

This is reflected in the fact that the, Bank of Thailand (BOT) has
revised the 2016 growth projection to 3.1 percent, down from 3.5 percent
estimated in December 2015 on account of slower economic recovery and
shrinking exports.

As per the data Published by Thai Automotive Industry Association,
Thailand Automobile production grew by 0.5% in FY2016 vs. FY2015
supported by increase in commercial vehicle production by 1.2%. However,
passenger car production reduced by 0.5% as compared to production in
FY2015.

Based on published data by “The Office of Industrial Economics,
Thailand”, overall, Tire production registered a growth of 3% in FY2016
supported by increase in production of Bus & Truck Tire by 3%, Passenger
tire by 6% and Pick Up tire by 4%.

[]

[]

China’s carbon black industry has started to face some challenging
conditions. The primary headwind is the Chinese tire industry, which
faces stiff tariffs in key markets such as the US, while the new
European tire regulations are imposing a technological barrier to
imports of cheap Chinese tires. Internally, the Chinese tire industry
faces excess capacity and intense price competition, and pricing for raw
materials including carbon black remains under intense pressure. As a
result of these pressures, China’s carbon black production declined by
1.9% to 5.01 million tons in 2015 vs. 2014, its first decline in 20
years based on Notch figures.

  -----------------------------------------------------------------------
  []

  Source: Report from Notch Consulting Inc.
  -----------------------------------------------------------------------

The domestic demand for Carbon Black in China is only 87% of its total
production and the country has an oversupply of 13%. This oversupply has
lead to a severe competition in the other Asian markets and leading to
pricing moving downwards.

  ----------------------------------- -----------------------------------
  []                                  []

  ----------------------------------- -----------------------------------

As per Notch estimates, China’s Carbon black exports were down sharply
in 2015 (exports totaled 733 KMT in 2015, down 13% from 842 KMT in
2014). This decline was driven by increased price competitiveness in
export countries as decant oil prices remain low against coal tar.
Weaker demand in some export markets is also hindering Chinese exports.

The major destinations of Chinese Carbon Black are nearby Asian
countries like Thailand, India, Malaysia, Indonesia, Japan, Philippines,
etc. Thailand remained the largest export destination in 2015.

During current year, carbon black market conditions continued to remain
challenging. In spite of the continuing recessionary conditions in key
economies and high level of import of Chinese Carbon Black in Thailand
and Asian markets, Company sold 175,783 MT of Carbon Black as against
164,451 MT sold in immediately preceding 12 months, an increase of 7% in
volume terms. This is mainly driven from increase in domestic volumes by
24%.

We saw a lot of volatility in crude and feedstock prices during current
year. The decline in feedstock prices with Platts 3% which began in 4Q
2014 due to expanding energy supply and slowing demand continued
throughout FY 2016. Feedstock prices with Platts 3% moved from $52/bbl
at the end of June to $ 34/bbl in September and touched its lowest in
January at $19/bbl.

[]

Prices of China CBO remained relatively higher than the GC 3% prices
throughout FY 2016. Due to this during the current financial year, some
feedstock demand of Asian CB Manufacturers moved back from Coal tar to
USGC to benefit from low oil prices. The availability of high quality
feedstock from US Gulf Coast is shrinking. Because the supply side of
high quality feedstock is not so elastic, the changes in USGC feedstock
demand are immediately seen in premium/discounts of heavier slurries.
After being in discounts for almost all of FY 2015, the premium started
soaring in beginning of FY 2016 as the USGC feedstock became cheaper
than Chinese Coal Tar, and premium peaked in second quarter of current
fiscal year as high as $ 9/BBl.

This impacted margins which remained under severe pressure.
Profitability of the Company was affected because the premiums or
discounts are not part of pass- through formula pricing of Carbon Black.
The Company put every effort to neutralise the downside effects of such
premium.

Strategic Initiatives:

Operational Excellence

An unwavering commitment at every level of the organization to
operational excellence and effective risk management led to strong
environment and safety results. The company employees executed their
responsibilities supported by well-established processes and tools that
aid in the management of financial and operational risks. As recognition
of these efforts, The Company was awarded Outstanding Safety Practice
recognition from the Angthong Province. This activity was organized by
Angthong Labor Deparment to honor Her Royal Highness Princess Sirindhorn
on her 60th Year Anniversary. The Company is operating without accident
for 850 days as on 31^(st) March’16. Implementation of Flue Gas
Desulfurization plant is in progress & the commissioning of the same is
going on as a commitment to our environmental initiative

Customer Engagement

The Company has made efforts to engage in continuous dialogue with its
customers. This has been effectively managed not only with the sales and
procurement teams but at many levels with the customer organization.

Communities

The Company maintains a very close engagement with communities, and has
active involvement in many community development programs e.g.
assistance to victims of natural calamities, drinking water for
communities, sponsoring meals for students, scholarships, health check
camps, donation to Red Cross, etc.

Energy Conservation

The Company has focused on the aspect of energy conservation through
training and creating awareness programs. TCB hosted the East Asian
Regional Energy Seminar in early 2016 to bring out ideas towards
building an energy efficient plant. One of the key developments has been
the process air blowers optimization project which resulted in reduction
of two blowers.

Sustainability

The Company is committed to addressing the challenges faced by industry
and the future of the environment through the adaptation of
Sustainability Operational Excellence. This initiative is in line with
the Aditya Birla Group’s commitment to have Sustainability business
practices across its global operations.

Market Structure

There are more than 100 carbon black producers worldwide. These are
categorized into Global, Regional and local players. The global players
have plants spread all over the world and operate regionally to keep the
freight cost low. Three big players – Birla Carbon, Cabot and Orion, who
together hold about 40% of the market share, dominate the market. The
global players compete on value propositions of global presence, R&D
capabilities, superior product quality and strong customer engagement.

Regional Players are medium size players operating in particular
continents or a group of two to three countries. OCI Company Ltd, Sid
Richardson Carbon & Energy, Bridgestone Carbon, CSRC and Tokai Carbon
Co. Ltd are important regional players. Some players like Black Cat
though operate from single country production facilities can be termed
as regional players because of their higher production capacities. The
regional players compete on varied propositions of price, optimum
quality and proximity to point of consumption.

Local players are manufacturers who have single country production
facilities and operate in smaller markets with very low percentage of
exports. These players are small in size and primarily compete in the
local markets on prices.

Carbon black, particularly the tire and rubber grade which accounts for
almost 93% of total carbon black consumption, is essentially a regional
market, because freight economics play a large role in price
competitiveness. Asia Pacific region, due to concentration of tire
manufacturers, is one of the largest consumer markets of carbon black
accounting for 61% of world’s consumption. China is the dominating
player in the market followed by India, Japan, South Korea and Thailand.

While the region was largely balanced till 2010 with Chinese consumption
very near to domestic production, thereafter rapid capacity expansion in
China, primarily led by cheap availability of coal-tar, has created a
demand supply mismatch in the region. This is leading to low capacity
utilizations, severe competition and pressures on margins. The situation
aggravated in 2012, and with production in other Asian countries
shrinking at expense of increase in production and exports from China.
The situation continued in 2014-15 also.

Thailand Market

Due to abundant availability of rubber, Thailand is one of the major
tire manufacturing countries. It has presence of all five global tire
producers, three major regional tire producers apart from fragmented two
wheeler tire and tube producers. Thailand mainly produces PCR tires and
is a major exporter of these tires to North America and EU. The tire
segment accounts for about 79% of the Carbon Black demand in Thailand
and the balance is consumed by manufactured rubber goods and specialty
products like inks and coatings manufacturers.

Carbon black consumption in Thailand is expected to grow at a CAGR of
5.8% during 2014-2020 in tandem with tire production primarily driven by
new investments in country from Chinese tire producers, barring the dip
in 2009. The market demand for carbon black is being driven by an
increase in passenger car tire output, largely driven by an increase in
export shipments, and strong growth in automotive production.

Thailand has three Carbon Black producers

1.  Thai Carbon Black Public Company Limited - capacity of approx
    240,000 MT/ year.

2.  Thai Tokai Carbon Product Co. Ltd. - capacity of approx 180,000 MT/
    year.

3.  Bridgestone Carbon Black (Thailand) Co. Ltd - capacity of approx
    50,000 MT/ year. (Mostly produces for captive consumption for their
    Thailand and overseas tire plants)

Thai Carbon Black is the largest producers of Carbon Black in Thailand.
Being part of Birla Carbon gives a distinctive advantage of having
global foot prints and access to customers in various export markets
compared to other players in the region. The products are well accepted
and established in the international market including the Japanese
customers which form a major portion of the South East Asia region. The
company exports approx 45-50% of its production and is able to meet
stringent customer quality requirements through advanced TQM and Quality
Circle processes.

Key Success Factors

-   Robust customer engagement and regular technical collaborations with
    Key customers.

-   Excellent and consistent product quality, approved by all tire
    manufacturers worldwide enables a strong brand image in Asia Pacific
    region.

-   Major quality accreditations : ISO/TS 16949, ISO 14001, IQRS Level
    7, TPM Special award, TPM Consistency award, TPM Excellence award
    and Deming Prize

-   Low cost of production through efficient utilization of production
    facility, and continuous improvements in technology and process.
    Columbian acquisition has proved invaluable for TCB by providing it
    access to latest technology developments in Carbon black process.

-   Excellent customer services including just In Time delivery to major
    customers

-   Experienced, Qualified and motivated workforce and management team

-   Sound financial position for making required investments in process,
    technology and environment

-   Focus on sustainable development, excellent relations with all
    stakeholders, high business ethics and good corporate governance

Opportunities

-   With access to technology from Columbian acquisition, move into high
    value added products and specialty grades for various tire and
    non-tire applications.

-   Offer packaged solutions to customers with a mix of Thailand,
    Chinese and Korean products to cater to complete spectrum of
    requirements

-   Increase share with existing global customers leveraging the global
    engagements and excellent service history

-   Become a cost leader in Domestic market through technology and
    process improvements

-   Recent change in raw material landscape is expected to give Thai
    Carbon Black PCL competitive advantage over Chinese carbon black
    producers

-   Heavy tariffs against imports of Chinese tires into the USA may
    leverage tire production in other countries in Asia, like Thailand
    and Vietnam

-   New investments in South East Asian economies by various tire
    manufacturers will give Thai Carbon Black PCL an opportunity to
    further straighten its presence as a market leader

Threats

-   Partial product substitute may be developed in long term period.
    Trends in tire labeling may prompt tire companies to switch to
    costlier, less effective but greener products like silica however no
    significant impact expected in near future

External Factors

-   Slowdown in global economies and regional imbalance in demand supply
    situation in Asia

-   Exchange Rate Fluctuation - Thai Baht with USD, and other major
    currencies

-   Volatility in feedstock prices driven by global oil market dynamics

-   Calamities in Thailand or any of major markets of Thai Carbon Black
    PCL

-   Trade barriers by importing countries to protect domestic industry

Work-in-process

-No-

+-----------------------------------------------------------------------+
| Risk Factors                                                          |
+-----------------------------------------------------------------------+

Risk factors

The company has a systematic method of risk identification, impact assessment, and mitigation. A committee of senior executives supervises risk management. Also the audit committee of Board reviews various risks associated with the business and advices management from time to time about the appropriateness of the company’s risk management policies and measures. Company has identified following major risks related to its business:

1. External risks

Business cycles

The business of the company is affected by upturn and downturn in economic conditions. The cycles affect sales volumes, competitive situation, prices of finished goods and raw material, operating costs, and also raw material availability. Present conditions in European economies have forced company’s key customers to operate at 70-80% capacity utilization affecting demand of carbon black. 

Regional demand supply mismatches

Rapid expansion of Chinese capacities in last few years, have created demand supply mismatch in the region leading to fierce competition and driving the prices and margins southwards. 

Company has taken various initiatives to keep ahead in competition and
mitigate to a large extent the impact of downturn in business cycles and
also regional demand supply mismatches. The initiatives include:

-   Maintaining differentiation with competitors through superb quality,
    and on-time deliveries

-   Strengthening customer relationship through an active engagement and
    personalized solutions

-   Annual contract negotiations with key customers

-   Identifying and developing new markets

-   Introduction of new product lines

-   Strengthening sales and marketing team for rubber goods and
    specialty blacks

-   Continuous investment in technology and process to improve costs and
    operating efficiencies

-   Offering packaged solutions to customers through combined sales and
    marketing efforts and high level of synergy with other Birla Carbon
    units in the regions.

Fluctuations in Raw material prices

Prices of raw material, i.e. Carbon black feedstock oil, have shown high volatility in tandem with crude and fuel oil prices. This creates risks in developing suitable pricing methods, business forecasting, inventory management, and maintaining constant operating margins period to period. 

The company is employing suitable pricing models, within the flexibility allowed by market conditions, to hedge against the raw material prices. Also a very lean manufacturing model protects against risks from changes in inventory valuations. In case of abrupt changes in demand, Company suitably hedges the inventory through commodity hedging instruments. 

Changes in Government policies

World economic situation has brought high level of uncertainty in Government policies, and timing of policy actions is not always predictable. Government decisions like preferential treatment, anti-dumping duties, tax rates, wage rates, inflation measures, etc. directly impact Company’s business. Company proactively engages with the Government to represent the management view points, influence the policies in right direction, and be prepared in advance for policy actions. 

High degree of volatility in foreign exchange rates

Volatility in key currencies which affect company’s business results like THB, USD, Yen have increased with economic uncertainty. To some extent company’s operations create a natural hedge in short term. Also an appropriate use of available hedging instruments like currency swaps, forward contracts, etc. also protect against impact of currency volatility on profits. Several cost improvements undertaken by the Company help against erosion of competitiveness through directional changes in exchange rates. 

Volatility in interest rates

Company’s borrowing arrangements are linked to LIBOR and volatility in
interest rates affects interest and financing costs. Company is using
interest rate swaps to protect from interest rate fluctuations.

Natural Disasters like floods, earthquake, tsunami, hurricane, etc. in
any of the operating regions, supplier locations, and markets served,
affect company’s business. Though company has insurance programs to
cover financial impact of natural disasters, the impact of any large
scale natural disaster cannot be totally avoided.

2. Internal risks

High concentration of sales in tire customers 

Majority of the Company’s sales come from Tire customers, so Company’s sales are sensitive to developments in tire, rubber, and automobile markets. Company has chalked out a focused program to increase the sales to non-tire customers, e.g. rubber goods, inks, coatings. The program includes strengthening sales and marketing team, introducing new product lines, synergies with other Birla Carbon units in the region, etc. 

Dependence on Key business partners for port infrastructure, transportation, steam and electricity sales

Company depends heavily on a few key business partners for port
infrastructure to unload bulk raw material imports, transportation of
oil and carbon black, and sale of steam. Company has entered into long
term agreements with key business partners to ensure uninterrupted
operations and most beneficial prices.

Equipment failure

Failure of critical production and utility equipment can cause long
stoppage of plant. Company has a well experienced plant maintenance
team, employs best practices of plant operations and maintenance, has an
exhaustive preventive and predictive maintenance system to ensure good
health of all its manufacturing equipments, uses standard operating
procedures in all areas, and also maintains adequate inventory of
critical spares.

Availability of technically trained manpower

As there are very few carbon black manufacturers in Thailand,
availability of skilled manpower in carbon black manufacturing process
and technology is very limited.

Company has many internal and external training programs for its
employees. A development plan is prepared and monitored for every
employee. Also there are frequent knowledge sharing and information
exchange programs with other Birla carbon units across the world for
prompt and effective horizontal deployment of any technology
advancement. Time-to-time Company draws on technical resources of other
Birla Carbon units and technology centers too.

Risk from storage and handling

Feedstock oil or carbon black, in event of any damage to the container
during transportation or storage, could release and pollute a very
limited area. To prevent this, the company follows all international
standards stipulated for their safe transportation and storage. Though
there has never been any accident relating to these products,
theoretically the risk exists. Company has appropriate insurance covers
to safeguard financial losses from such release.

Environment, health and safety risks

The Company assigns highest priority to health, safety and environment.
This is directly looked after by senior management of the Company. In
fact the Company is the first Asian Carbon Black manufacturer to receive
ISO 14001 certificate for ensuring the highest standards of environment
cleanliness.

The production process of Carbon black does not generate any solid
wastes. The liquid waste which is process water is fully recycled in the
process and no discharge. For this initiative, the Company received
River Conservation & Restoration Outstanding Award from Ministry of
Industry in 2009. Flue gas samples are collected and tested regularly
which are well within the standard limits set by the government. The
company also has the cogeneration system of using the waste heat gases
in generation of steam and electricity thereby reducing the carbon
foot-print.

The company also have plan of further investment in phase manner in
equipments to have improved environmental control systems. Also for any
of expansion projects, company carries out environment impact assessment
(EIA) study from an independent consultant and obtains the necessary
approval from Ministry of Industry (MOI).

Besides a very high level of safety consciousness amongst all employees,
inculcated through rigorous training and investment in all necessary
safety equipment, the company conducts mock drills, emergency plan
simulation etc. to ensure high alertness on health and safety aspects.
The company has the robust system of ‘near-miss’ identification and
rectification as part of its preventive system to reduce the
possibilities of any health or safety incident. The company also has
emergency plans in place.

The company is certified for ISO/TS 16949, OHSAS 18001 & ISO 14001 from
BV Certification (Thailand) for its quality system as well as
Occupational Health, Safety & Environment and ISO/IEC 17025; Lab
Accreditation from Thai Industrial Standards Institute and these
certifications demonstrates company's commitment to Quality, Safety &
Environment.

+-----------------------------------------------------------------------+
| 1.  Operating Assets                                                  |
+-----------------------------------------------------------------------+

Land, Buildings, and Machines

The details of various locations and land area are as follows:

Location Land Area (Company only) Ownership Rai Ngan Wah

1. Factory at Angthong 186 1 305.4 Owned by the company

2. Worker Colony at Angthong 3 0 0 Owned by the company

3. Storage tanks at Sriracha 12 0 76 Owned by the company

4. New Colony at Angthong 17 3 87 Owned by the company

Total 218 4 468

Hence Total will be 219 1 68

Total Book Value of Land = Baht 138,533,412 Baht

The company does not have any machines and equipment which is having the
Book Value of more than 10% of the total assets. All the assets are
shown at Net Book Value in the financial statement.

Details of Property, Plant, and Equipment (Unit : Thousand Baht)

  ------- --------------------------------------- ------------- --------------
  Sr.     Items                                   The Company   Consolidated

  1       Land                                    138,533       138,533

  2       Building, Roads & Lease Rights          759,260       759,260

  3       Plant & Machinery                       4,708,659     4,708,659

  4       Furniture, Office Equipments, Hardware  75,341        75,341
          & Software                                            

  5       Motor Vehicle                           17,326        17,326

  6       Construction in Progress                302,856       302,856

          Total Cost                              6,001,975     6,001,975

  Less:   Accumulated Depreciation                4,466,217     4,466,217

          Total Net Book Value                    1,535,758     1,535,758
  ------- --------------------------------------- ------------- --------------

Property, Plant and Equipment

  ----------------- ---------- -- --------------- -- ----------- -- ------------ -- ---------- -- -------------- -- -----------
                                                                    Furniture,                    Assets            

                                                     Machinery      fixtures                      under             

                                  Buildings and      and            and office                    installation      
                                                                                                  and               

                    Land          constructions      equipment      equipment       Vehicles      construction      Total

                    (in                                                                                             
                    thousand                                                                                        
                    Baht)                                                                                           

  Cost                                                                                                              

  At 1 April 2014   138,533       759,260            4,565,631      73,556          16,751        308,551           5,862,282

  Additions         -             -                  -              69              1,545         169,811           171,425

  Disposals/write   -             -                  -              -               (1,801)       -                 (1,801)
  off                                                                                                               

  As at 31 March                                                                                                    
  2015 and                                                                                                          

  1 April 2015      138,533       759,260            4,565,631      73,625          16,495        478,362           6,031,906

  Additions         -             -                  25,768         25              831           147,664           174,288

  Write off         -             -                  (204,207)      (12)            -             -                 (204,219)

  Transfers         -             -                  321,467        1,703           -             (323,170)         -

  As at 31 March    138,533       759,260            4,708,659      75,341          17,326        302,856           6,001,975
  2016                                                                                                              

                                                                                                                    

  Depreciation                                                                                                      

  At 1 April 2014   -             439,627            3,605,109      69,716          8,967         -                 4,123,419

  Depreciation                                                                                                      
  charge for                                                                                                        

  the year          -             15,208             277,768        945             2,260         -                 296,181

  Disposals/write   -             -                  -              -               (1,801)       -                 (1,801)
  off                                                                                                               

  As at 31 March                                                                                                    
  2015 and                                                                                                          

  1 April 2015      -             454,835            3,882,877      70,661          9,426         -                 4,417,799

  Depreciation                                                                                                      
  charge for                                                                                                        

  the year          -             22,366             225,675        2,007           2,589         -                 252,637

  Write off         -             -                  (204,207)      (12)            -             -                 (204,219)

  As at 31 March    -             477,201            3,904,345      72,656          12,015        -                 4,466,217
  2016                                                                                                              

                                                                                                                    

  Net book value                                                                                                    

  At 31 March 2015  138,533       304,425            682,754        2,964           7,069         478,362           1,614,107

  At 31 March 2016  138,533       282,059            804,314        2,685           5,311         302,856           1,535,758
  ----------------- ---------- -- --------------- -- ----------- -- ------------ -- ---------- -- -------------- -- -----------

Investment in associates

[TABLE]

Investment policy 

The manufacturing of carbon black is Company’s core business and Company
always looks for the opportunities to expand and grow and emphasize on
future growth of the business. Due to Company’s growth policy, the
company grew from the initial capacity of 16,000 MT to 275,000 MT/ year
by way of 6 expansions and debottlenecking and continuous improvement in
the production process. With the mothballing of Line#1 the current
capacity remains limited to 240,000 MT/year.

The decision of Company’s investment mainly depends on growth
opportunities, return on investment and sustainable growth of Company
business and its investment in other companies.

Company’s investment is focused on its core business carbon black where
the company and Aditya Birla Group have major growth plans for carbon
black business and at present company is exploring possibilities for
putting up carbon black projects in emerging markets.

The company will continue to explore possibilities to invest and expand
in carbon black and other business to maximize return on shareholders’
funds.

+-----------------------------------------------------------------------+
| 2.  Legal Dispute                                                     |
+-----------------------------------------------------------------------+

-None-

+-----------------------------------------------------------------------+
| 3.  General and Other Significant Information                         |
+-----------------------------------------------------------------------+

General Information

Company Name : Thai Carbon Black Public Company Limited

Company Registration No. : 0107537001251

Type of business : Manufacturer of carbon black

Location of Head Office : 888/122, 888/128, Mahatun Plaza Building,
12^(th) Floor, Ploenchit Road, Lumpini, Patumwan, Bangkok 10330

Tel. 0-2253-6745-54

Fax 0-2254-9031, 0-2253-2812

E-mail : rajesh.kedia@adityabirla.com

rajesh.k.jha@adityabirla.com

Website: http://www.birlacarbon.com

http://www.adityabirla.com

Location of Factory : 44 Moo1, Ayuthaya-Angthong Highway, Tumbol Posa,

Amphur Muang, Angthong 14000

Tel. (035) 672-150-4

Fax (035) 672-148-9

E-mail : rajesh.kedia@adityabirla.com

rajesh.k.jha@adityabirla.com

Investor Relations

Corporate Finance Department : 1. Mr. Rajesh Kedia

(Investor Relation) Tel 035-617104, 035-672150-4 (Ext 104)

Fax - 035-617-124

Email : rajesh.kedia@adityabirla.com

2. Mr. Rajesh K Jha

Tel - 02-617 120

Fax - 0-2254-9031

Email : rajesh.k.jha@adityabirla.com

References

Share Registrar : Thailand Securities Depository Co.,Ltd.

No.62 Ratchadapisek Road,

Klongtoey, Bangkok 10110.

Tel : 0-2229-2800

  Fax : 0-2359-1259

Trustee : - None -

Auditors : 1. Ms. Orawan Chunhakitpaisan Registered License no. 6105

  2. Mr. Waiyawat Kosamarnchaiyakij Registered License no. 6333

  3. Ms. Wilai Buranakittisopon Registered License no. 3920

  KPMG Phoomchai Audit Ltd.

  48^(th) Floor, Empire Tower

  195 South Sathorn Road, Bangkok

Tel : 0-2677-2000

Fax : 0-2677-2222

Bankers : 1. Bangkok Bank Public Co.,Ltd.

2. The Siam Commercial Bank Public Co.,Ltd.

3. Kasikorn Bank Public Co.,Ltd.

4. Citibank N.A.

5. Hongkong & Shanghai Banking Corp.Ltd.

6. Standard Chartered Bank (Thai) Public Co.,Ltd

7. Indian Overseas Bank

8. Krung Thai Bank