3. NATURE OF BUSINESS

STA was established by our founders, Mr. Somwang Sincharoenkul and Dr.
Viyavood Sincharoenkul in Thailand in 23 April 1987, as a private
limited company with an initial registered capital of Baht 31 million to
produce RSS in Hat Yai, Thailand. STA is a producer and exporter of
natural rubber, which is one of the most important agricultural products
in the southern part of Thailand. STA has continuously expanded its
business to support the growth of the domestic and international rubber
industries.

In 1991, we undertook an initial public offering exercise in Thailand
and were listed on the SET on 22 August 1991. STA was converted as a
public limited company in 27 December 1993. In January 2011, STA made an
offering of its newly issued shares to the public (Public Offering) in
Singapore, including institutional investors and listed its shares on
the SGX-ST. At present, STA shares are listed securities on both the SET
and SGX-ST (Dual Listing).

Since our inception as a natural rubber processor in Thailand, we have
expanded our product mix, our production capacity and our geographical
operations to become a dominant natural rubber supply chain operator
with integrated end-to-end capabilities on a multi-national platform.

Significant Changes and Developments

Our significant changes and developments are as follows:

  ---------------- ------------------------------------------------------
  October 1987     Established Anvar Parawood for the production of
                   rubber wood for the furniture industry.

  March 1988       Established Rubberland Products for the production of
                   Concentrated Latex, our Group’s first processing
                   facility producing Concentrated Latex.

  January 1989     Jointly established SSC to produce latex examination
                   gloves.

  March 1990       Thai Tech Rubber was jointly established with
                   Southland Rubber Co., Ltd and Itochu Corporation
                   Limited to expand our product mix to cover TSR block
                   rubber.

  January 1994     Starlight Express Transport was established to provide
                   logistical support to our Group’s business.

  March 1994       Premier System Engineering was established to support
                   our Group’s research and development and provide
                   engineering services.

  May 1995         Jointly established Shanghai Semperit to produce
                   escalator handrails.

  September 1995   Established Startex Rubber to invest in upstream
                   business into the ownership of rubber plantations in
                   the southern region of Thailand.

  April 1998       Our Company started TSR production at our Thungsong
                   facility.

  April 2002       Sri Trang International was established in Singapore,
                   a purchasing hub for key users of natural rubber, for
                   the distribution of the Natural Rubber Products to
                   global market.

  March 2004       Established Sri Trang USA to focus on the distribution
                   of the Natural Rubber Products that we sell in the
                   United States.

  July 2004        We expanded substantially in the PRC by establishing
                   our sales teams in Qingdao and Shanghai to conduct
                   direct sales of the Natural Rubber Products that we
                   sell and to provide after sales services to our
                   customers within the PRC.

  January 2005     We established PT Sri Trang Lingga, our first natural
                   rubber procurement and processing facility outside of
                   Thailand.

  December 2007    Sri Trang Rubber & Plantation was established to
                   invest in large scale of rubber plantations.

  May 2008         Established Sempermed Singapore with Semperit
                   Technische for the acquisition of Sempermed Brazil,
                   our examination glove distributor in Brazil.

  August 2009      Acquired PT Star Rubber as our second Indonesian TSR
                   processing facility.

  August 2010      We established our first PRC subsidiary, Shi Dong
                   Shanghai, in Shanghai, to expand our operation into
                   the PRC.

  January 2011     STA made an offering of its newly issued shares to the
                   public (Public Offering) in Singapore, including
                   institutional investors and listed its shares on the
                   SGX-ST. STA is the first Thai listed company dually
                   listing in Singapore.
  ---------------- ------------------------------------------------------

Other significant events in the operational history of our Group are as
follows:

  ---------------- ------------------------------------------------------
  April 1987       Commenced operations producing ribbed smoked sheets in
                   Hat Yai, Thailand with an initial registered capital
                   of Baht 31.0 million.

  December 1994    Our subsidiary, Nam Hua Rubber, commenced production
                   of Concentrated Latex.

  March 1996       Jointly founded Semperflex Asia which commenced the
                   production of highpressure hydraulic hoses.

  March 1996       Jointly established Semperform Pacific which produces
                   rubber and plastic parts.

  April 1998       Sempermed USA was jointly established to manage the
                   sales and marketing of examination gloves which are
                   used for medical and industrial purposes in the United
                   States.

  July 2005        Semperflex Shanghai was jointly established to produce
                   high-pressure hydraulic hoses in the PRC.

  February 2007    Our subsidiary, Sri Trang International, was awarded
                   the first prize in the top trading volume award by the
                   Singapore Commodity Exchange Limited.

  December 2007    Our subsidiary, Sri Trang International, received the
                   Supplier Partnership and Appreciation Day award from
                   Goodyear Orient (Private) Company Limited.

  February 2008    Our subsidiary, Sri Trang International, was awarded
                   the second prize in the top trading volume award by
                   the Singapore Commodity Exchange Limited.

  October 2008     Acquired Sempermed Brasil, the distributor of
                   examination and industrial gloves in Brazil

  November 2009    Semperform Pacific ceased its business operation.
                   Liquidation process will be performed after the
                   approval of shareholders’meeting.

  December 2009    Our Company received the Prime Minister’s Export Award
                   2009 (Best Exporter) for being the top Thai exporter
                   into the PRC market by export volume under the Natural
                   Rubber category.

  September 2011   SSC received Quality Award form Food and Drug
                   Administration for three consecutive years.

  December 2011    STA issued two tranches of debentures, the first
                   debenture for rubber processor in Thailand, to the
                   institutional and high net-worth investors totaling
                   Baht 2,150,000,000.

  August 2012      STA won Prime Minister’s Export Award 2012 for being a
                   best exporter with the export value exceeding Baht
                   5,000 million.

  February 2013    STA issued two tranches of debentures to the
                   institutional and high net-worth investors totaling
                   Baht 900,000,000 for working capital and capacity
                   expansion of our group.
  ---------------- ------------------------------------------------------

3.2 Business Overview

The Company’s principal business is the production of natural rubber,
which are RSS, TSR and Concentrated Latex as well as other businesses
through its subsidiaries, associates and joint ventures, such as the
production of Finished Products, the distribution of products and other
services business, which are logistic business, engineering services
business, production and sale of rubber wood. The product segments of
the Company can be divided as follows:

(1) Natural Rubber Products

+-------------------+-------+----------------+------------+-----------+
| Company           | Co    | Type of        | Direct     | Paid-up   |
|                   | untry | Businesses     | Sh         | Capital   |
|                   |       |                | areholding | as of 31  |
|                   |       |                | as of 31   | December  |
|                   |       |                | December   | 2012      |
|                   |       |                | 2012 (%)   |           |
+===================+=======+================+============+===========+
| STA               | Thai  | Production of  | -          | Baht      |
|                   |       | RSS, TSR and   |            | 1,28      |
|                   |       | Concentrated   |            | 0,000,000 |
|                   |       | Latex          |            |           |
+-------------------+-------+----------------+------------+-----------+
| Rubberland        | Thai  | Production of  | 99.99      | Baht      |
| Products          |       | TSR and        |            | 1,10      |
|                   |       | Concentrated   |            | 0,000,000 |
|                   |       | Latex          |            |           |
+-------------------+-------+----------------+------------+-----------+
| Nam Hua Rubber    | Thai  | Production of  | 99.99      | Baht      |
|                   |       |                |            | 50        |
|                   |       | Concentrated   |            | 0,000,000 |
|                   |       | Latex, RSS,    |            |           |
|                   |       | and TSR        |            |           |
+-------------------+-------+----------------+------------+-----------+
| Sadao P.S. Rubber | Thai  | Production of  | 99.99      | Baht      |
|                   |       | RSS            |            | 4         |
|                   |       |                |            | 0,000,000 |
+-------------------+-------+----------------+------------+-----------+
| PT Sri Trang      | Indo  | Production of  | 90.00[1]   | IDR       |
| Lingga            | nesia | SIR- block     |            | 91,05     |
|                   |       | rubber         |            | 0,000,000 |
+-------------------+-------+----------------+------------+-----------+
| PT Star Rubber    | Indo  | Production of  | 99.00[2]   | USD       |
|                   | nesia | SIR- block     |            | 3         |
|                   |       | rubber         |            | 2,000,000 |
+-------------------+-------+----------------+------------+-----------+
| Thai Tech Rubber  | Thai  | Production of  | 33.50[3]   | Baht      |
|                   |       | TSR            |            | 6         |
|                   |       |                |            | 0,000,000 |
+-------------------+-------+----------------+------------+-----------+

(2) Finished Products

+------------------+-------+----------------+------------+-----------+
| Company          | Co    | Type of        | Direct     | Paid-up   |
|                  | untry | Businesses     | Sh         | Capital   |
|                  |       |                | areholding | as of 31  |
|                  |       |                | as of 31   | December  |
|                  |       |                | December   | 2012      |
|                  |       |                | 2012 (%)   |           |
+==================+=======+================+============+===========+
| SSC              | Thai  | Production of  | 31.50[4]   | Baht      |
|                  |       | examination    |            | 20        |
|                  |       | gloves         |            | 0,000,000 |
+------------------+-------+----------------+------------+-----------+
| Semperflex Asia  | Thai  | Production of  | 37.50[5]   | Baht      |
|                  |       | high-pressure  |            | 38        |
|                  |       | hydraulic      |            | 0,000,000 |
|                  |       | hoses          |            |           |
+------------------+-------+----------------+------------+-----------+
| Semperform       | Thai  | Production of  | 37.50[7]   | Baht      |
| Pacific [6]      |       | injection      |            | 1         |
|                  |       | moulded-rubber |            | 5,000,000 |
|                  |       | and plastic    |            |           |
|                  |       | parts          |            |           |
+------------------+-------+----------------+------------+-----------+
| Shanghai         | PRC   | Agent import   | 100.00[8]  | USD       |
| Sempermed        |       | and export of  |            | 6,000,000 |
|                  |       | rubber gloves  |            |           |
+------------------+-------+----------------+------------+-----------+
| Semperflex       | PRC   | Production of  | 50.00[9]   | USD       |
| Shanghai Ltd.    |       | high-pressure  |            | 1         |
|                  |       | hydraulic      |            | 5,000,000 |
|                  |       | hoses          |            |           |
+------------------+-------+----------------+------------+-----------+
| Shanghai         | PRC   | Manufacture    | 10.00[10]  | Euro      |
| Semperit         |       |                |            | 2,471,000 |
|                  |       | of handrails   |            |           |
|                  |       | and related    |            |           |
|                  |       |                |            |           |
|                  |       | parts for      |            |           |
|                  |       | escalators and |            |           |
|                  |       | travelators    |            |           |
+------------------+-------+----------------+------------+-----------+

Mr. Viyavood Sincharoenkul who is a major shareholder, Chairman, and
Managing Director of STA holds directly and indirectly in excess of 10%
of the shares with voting rights in SSC, Semperflex Asia and Semperform
Pacific (collectively, the “Associated Companies”) in the proportion of
11.83%, 12.86% and 12.86% respectively as of 31 December 2012. The
reason for holding such shares is due to the condition specified by
Semperit Technische that for Semperit Technische to invest in the
Associated Companies, Mr. Viyavood Sincharoenkul has to own at least 10%
of shares in the Associated Companies in order to show his commitment to
Semperit Technische and the Associated Companies. If Mr. Viyavood
Sincharoenkul does not own shares pursuant to the condition of Semperit
Technische, Semperit Technische will not invest with the Company in the
Associated Companies.

In this regard, STA has considered and was of the opinion that the joint
investment with Semperit Technische and the shareholding structure of
STA and connected persons of STA in the Associated Companies were for
the best benefit of STA and its shareholders, with the following
reasons:

1. The Company will create its customer base in the long term from this
joint investment;

2. The Company will be able to expand its production capacity by
reducing risks associated with the limitation of production capacity as
well as the risks from finding customers, in order to create the revenue
base of the Company.

3. The Company will be able to sell its products without having to face
risks associated with the payment and allowance for bad debts as
Semperit Technische is a globally recognized company which has potential
and strength in its capital.

4. The Company will not suffer any loss of revenue, profits or lose any
opportunity to make a higher profit as the price at which the Company
sells Concentrated Latex to such Associated Companies is on an arm’s
length basis.

5. The Company will gain and learn technology to produce finished goods
from natural rubber from this joint investment with Semperit Technische.

6. The Company will build up a worldwide profile from this joint
investment with Semperit Technische.

7. The Company will utilize all resources of the Company in order to
gain benefits and create the highest return to the Company from this
investment.

(3) Products Distribution

  ----------------------------------------------------------------------------
  Company             Country     Type of          Direct         Paid-up
                                  Businesses       Shareholding   Capital as
                                                   as of 31       of 31
                                                   December 2012  December
                                                   (%)            2012
  ------------------- ----------- ---------------- -------------- ------------
  Sempermed USA, Inc. United      Distribution of  25.00[11]      USD 4,000
                      States      examination                     
                                  gloves in the                   
                                  United States                   

  Sri Trang           Singapore   Natural rubber   100.00         USD
  International                   wholesaler in                   47,000,000
                                  Singapore                       

  Sri Trang USA, Inc. United      Natural rubber   100.00         USD 100
                      States      wholesaler in                   
                                  the United                      
                                  States                          

  Sempermed Brasil    Brazil      Distribution and 100.00[12]     Brazilian
                                  marketing of                    Real
                                  natural rubber                  12,546,638
                                  gloves and                      
                                  synthetic rubber                
                                  in Brazil                       

  Shi Dong Shanghai   PRC         Distribution of  100.00[13]     USD
                                  Natural Rubber                  5,000,000
                                  Products in PRC                 
  ----------------------------------------------------------------------------

(4) Other businesses

  -----------------------------------------------------------------------------
  Company            Country     Type of         Direct         Paid-up Capital
                                 Businesses      Shareholding   as of 31
                                                 as of 31       December 2012
                                                 December 2012  
                                                 (%)            
  ------------------ ----------- --------------- -------------- ---------------
  Anvar Parawood     Thai        Lumber          99.94          Baht 10,000,000
                                 production and                 
                                 manufacture of                 
                                 wooden                         
                                 furniture                      

  Startex Rubber     Thai        Ownership and   83.99[14]      Baht 50,000,000
                                 management of                  
                                 rubber and oil                 
                                 palm                           
                                 plantations                    

  Premier System     Thai        Engineering     81.99[15]      Baht 50,000,000
  Engineering                    services,                      
                                 design,                        
                                 installation                   
                                 and maintenance                
                                 machinery                      

  Starlight Express  Thai        Provision of    76.66[16]      Baht 15,000,000
  Transport                      logistics                      
                                 services                       

  Pattana Agro       Thai        Brokerage       40.00[17]      Baht
  Futures                        activities                     100,000,000

  Sri Trang Rubber & Thai        Ownership and   99.99          Baht
  Plantation                     management of                  2,050,000,000
                                 rubber                         
                                 plantations                    

  Shi Dong           Singapore   Investment      100.00[18]     USD 34,000,000
  Investments                    holding in PT                  
                                 Star Rubber                    

  Sempermed          Singapore   Investment      50.00          USD 8,000,000
  Singapore                      holding in                     
                                 Sempermed                      
                                 Brasil                         

  Formtech           Malaysia    Production and  82.86[19]      MYR 7,000,000
  Engineering (M)                distribution                   
  Sdn. Bhd.                      mold for glove                 
                                 production line                
  -----------------------------------------------------------------------------

3.3 Group Structure

The group structure of the Company as of 31 December 2012 is shown in
the diagram below.

Notes:

(1) Our Company is interested in an aggregate of approximately 40.2% of
the total voting rights in SSC, comprising a direct interest of
approximately 31.5% and an indirect interest of approximately 8.7%
through our subsidiary Rubberland Products. Semperit Technische (50.0%),
STH (6.0%) and five individuals, namely,
Ms. Poonsuk Cherdkiatgumchai (3.7%), Mr. Veerasith Sinchareonkul (2
shares), Mr. Somwang Sincharoenkul (2 shares), Dr. Viyavood
Sincharoenkul (2 shares) and Mr. Kitichai Sincharoenkul (2 shares), hold
the remaining interest in SSC.

(2) Our Company is interested in an aggregate of approximately 42.5% of
the total voting rights in Semperflex Asia, comprising a direct interest
of approximately 37.5% and an indirect interest of approximately 5.0%
through our subsidiary Rubberland Products. Semperit Technische (50.0%),
STH (5.0%), Paktai Rubber Industries Limited Partnership (2.5%) and
seven individuals, namely, Ms. Poonsuk Cherdkiatgumchai (2 shares), Mrs.
Promsuk Sincharoenkul (2 shares), Mr Somwang Sincharoenkul (2 shares),
Dr. Viyavood Sincharoenkul (2 shares), Mr. Chaiyos Sincharoenkul (2
shares), Mr. Anan Pruksanusak (2 shares) and Mr. Prasit Panidkul (2
shares), hold the remaining interest in Semperflex Asia.

(3) Our Company is interested in an aggregate of approximately 42.5% of
the total voting rights in Semperform Pacific, comprising a direct
interest of approximately 37.5% and an indirect interest of
approximately 5.0% through our subsidiary Rubberland Products. Semperit
Technische (50.0%), STH (5.0%), Paktai Rubber Industries Limited
Partnership (2.5%) and seven individuals, namely, Ms. Poonsuk
Cherdkiatgumchai (1 share), Mrs. Promsuk Sincharoenkul (1 share), Mr
Somwang Sincharoenkul (1 share), Dr. Viyavood Sincharoenkul (1 share),
Mr. Chaiyos Sincharoenkul (1 share), Mr. Anan Pruksanusak (1 share) and
Mr. Prasit Panidkul (1 share), hold the remaining interest in Semperform
Pacific. Semperform Pacific ceased its business operations at the end of
2009. Liquidation process will be performed after the approval of
shareholders’ meeting.

(4) Our Company and Semperit Technische directly own 50.0% each of the
total paid-up capital in Semperflex Shanghai. Semperflex Shanghai is
licensed to operate for a term of 50 years from 14 July 2005. 180 days
prior to the expiry of such term, an application may be submitted to the
relevant authorities for an extension. If the term is not extended,
Semperflex Shanghai will be liquidated upon expiry and proceeds from the
sale of its assets will be returned to its shareholders after its
creditors are paid.

(5) Our Company directly owns 33.5% of the total number of issued shares
in Thai Tech Rubber. Southland Rubber Co., Ltd. and Itochu Corporation
Limited own 33.5% and 33.0% of the total number of issued shares in Thai
Tech Rubber respectively. The remaining shares in Thai Tech Rubber are
held by Mr. Perm Theerasarnwong (1 share), Mr. Thanasak Charnsanti (1
share), Dr. Viyavood Sincharoenkul (1 share) and Mr. Chaiyos
Sincharoenkul (1 share).

(6) Our Company holds 10.0% of the total paid-up capital in Shanghai
Semperit, and Semperit Technische holds the remaining 90.0% of the total
paid-up capital. Shanghai Semperit is licensed to operate for a term of
50 years from 10 May 1995. 180 days prior to the expiry of such term, an
application may be submitted to the relevant authorities for an
extension. If the term is not extended, Shanghai Semperit will be
liquidated upon expiry and proceeds from the sale of its assets will be
returned to its shareholders after its creditors are paid.

(7) SSC holds the entire paid-up capital in Shanghai Sempermed. Shanghai
Sempermed ceased its business operations on November 2011 . Currently,
it is in the process of asset disposal.

(8) Shi Dong Shanghai is licensed to operate for a term of 30 years from
2 August 2010. 180 days prior to the expiry of such term, an application
may be submitted to the relevant authorities for an extension. If the
term is not extended, Shi Dong Shanghai will be liquidated upon expiry
and proceeds from the sale of its assets will be returned to its
shareholders after its creditors are paid.

(9) Our Company directly owns 25.0% of the total number of issued shares
in Sempermed USA. SSC owns 50.0% of the total number of issued shares in
Sempermed USA. The remaining 25.0% of the total number of issued shares
in Sempermed USA are held by Semperit Technische.

(10) Our Company and Semperit Technische directly own 50.0% each of the
total number of issued shares in Sempermed Singapore.

(11) Sempermed Singapore directly owns approximately 100.0% of the total
paid-up capital in Sempermed Brasil, and Semperit Industrial Products
Singapore Private Limited holds the remaining 1 quota in Sempermed
Brazil.

(12) Our Company is interested in an aggregate of approximately 99.9% of
the total voting rights in Premier System Engineering, comprising a
direct interest of approximately 81.9% and indirect interests of
approximately 16.0% and 2.0% through our subsidiaries, Rubberland
Products and Sadao P.S. Rubber respectively. The remaining shares are
held by Mr. Viyavood Sincharoenkul (1 share), Mr. Kitichai Sincharoenkul
(1 share), Phrueksa Mansion Ltd (1 share), and Mr. Aram Sirisuwat (1
share).

(13) Our Company is interested in an aggregate of approximately 99.9% of
the total voting rights in Startex Rubber, comprising a direct interest
of approximately 83.9% and an indirect interest of approximately 16.0%
through our subsidiary, Rubberland Products. The remaining shares are
held by Mr. Somporn Punnarai (1 share), Mr. Boonyachon Sincharoenkul (1
share), Ms. Wanna Thanabhumkul (1 share), Ms. Promsuk Sinchareonkul (1
share), and Prukesa Mansion Ltd. (1 share).

(14) Our Company is interested in an aggregate of approximately 99.9% of
the total voting rights in Starlight Express Transport, comprising a
direct interest of approximately 76.6% and indirect interests of
approximately 13.3%, 3.3%, 3.3% and 3.3% through our subsidiaries
Rubberland Products, Nam Hua Rubber, Sadao P.S. Rubber and Startex
Rubber respectively. The remaining shares are held by Prukesa Mansion
Ltd (1 share) and Mr. Boonyachon Sincharoenkul (1 share).

(15) Our Company directly owns 40.0% of the total number of issued
shares in Pattana Agro Futures. Lee Feed Mill Public Company Limited
owns 44.5% of the total number of issued shares in Pattana Agro Futures,
and the remaining shares in Pattana Agro Futures are held by Wallstreet
Tower Company Limited (6.3%), Mr. Preecha Leelasithorn (8.8%), and Mr.
Nipon Leelasithorn (0.5%).

(16) Formtech Engineering (M) Sdn. Bhd is owned by Sempermed Singapore
directly 82.9%, Dietmar Trumm 11.4%, and Valluvan A. Peramuthu 5.7%.

4.  Revenue Structure

The revenue from sales and services according to the consolidated
financial statements ended
31 December 2010, 2011 and 2012 are shown below:

  ---------------- ------------ ------- ----------- ------- ---------- -------
  Revenue          Year ended                                          
  breakdown by     31 December                                         
  product segment                                                      

                   2010                 2011                2012       

                   Baht million %       Baht        %       Baht       %
                                        million             million    

  TSR              58,909.1     70.3    96,138.6    71.9    77,499.7   77.8

  RSS              15,046.4     17.9    24,942.8    18.7    13,591.0   13.6

  Concentrated     8,168.8      9.7     10,236.6    7.6     6,436.4    6.5
  Latex                                                                

  Others ⁽¹⁾       1,721.0      2.1     2,385.8     1.8     2,112.0    2.1

  Total revenue    83,845.3     100.0   133,703.8   100.0   99,639.1   100.0
  from sales and                                                       
  services                                                             
  ---------------- ------------ ------- ----------- ------- ---------- -------

Note: (1) Comprises revenue from (i) the sale of dried rubber wood and
wood packing products, (ii) the provision of certain services (such as
logistics, research and development and information technology services)
to our associates and a joint venture entity as well as other external
third parties, and (iii) RSS processing fee for Thai Government
recognized from Q3 2012 onwards.

3.5 Strategy

Our vision is to be a global leader in the natural rubber industry.

To achieve this vision, we have established our business model as an
integrated natural rubber supply chain operator and our principal
strategy is to make long-term investments in establishing and expanding
our capabilities and capacity at each stage of the natural rubber supply
chain, namely planting, procurement, processing, and sales and
distribution and tap into our expertise in the emerging market economies
to grow our business.

[]

Further vertical integration of business model

Our business model of operating an integrated natural rubber supply
chain is instrumental in enabling us to strengthen our market position
as a dominant natural rubber player, as we are able to maximize our cost
efficiency, competitive edge and ultimately, our profit potential. In
establishing our business model, we have developed all-round
capabilities throughout the natural rubber supply chain. Over the years,
we have integrated and synergised the operations, domain knowledge and
management expertise of the inter-linked processes of the entire natural
rubber supply chain, as well as reduced the need to transact with
third-party intermediaries. As a result, we are able to achieve greater
operational efficiency and capture value across the entire natural
rubber supply chain. By operating an integrated natural rubber supply
chain, we are also able to gain direct access to supply and customer
demand information, which in turn enables us to respond to changes in
market conditions and adjust our procurement, production and inventory
levels accordingly.

As a result, we have evolved since our inception as a natural rubber
processor in Thailand to become a dominant natural rubber supply chain
operator with integrated end-to-end capabilities on a multi-national
platform.

We adopt a balanced approach in our pursuit of investments by focusing
on investments which allow us to establish competitive advantages for
our integrated supply chain on a long-term basis. Taking this approach,
we identify potential investment and expansion opportunities (such as
plantations, establishment of processing plants and establishment of
capabilities in new geographical markets) on the basis of their
potential long-term benefits to our business model. In this regard, we
plan to further develop our upstream capabilities which we believe could
enable us to better control our costs and provide greater supply chain
co-ordination, for instance, strategy of raw material procurement in the
new plantation area such as Northern Thailand. In line with this
strategy, we intend to acquire additional land to achieve 50,000 rai (or
approximately 8,000 hectares) over the next two years for the
cultivation of rubber trees in Thailand or other suitable areas.

Our Vertical integration business strategy

Increase scale and processing capacity

In line with our principal strategy of making long-term investments in
establishing and expanding our capabilities and capacity at each stage
of the natural rubber supply chain, we constantly invest in both organic
and inorganic growth initiatives, as we believe such growth momentum is
critical in creating a scalable integrated natural rubber supply chain.
We will also continue to expand our processing capacity in order to
enhance our market position as a dominant natural rubber processor. In
line with this strategy, we will build new and/or acquire existing
rubber processing facilities as well as expand our existing rubber
processing facilities, to expand our raw material procurement network
and increase our total estimated effective production capacity for
Natural Rubber Products to approximately 1,500,000 tons annually by the
end of 2015.

We believe that the enlarged processing capacity will enable us to
benefit from the growth opportunities in the natural rubber market.

Capitalise on our emerging market expertise

We believe our management team’s insights have enabled us in identifying
suitable opportunities in emerging market economies even during periods
of economic downturn. As an example, during the economic downturns such
as the 1997 financial crisis, the burst of the dotcom bubble in 2000 and
the recent credit crisis in 2008, we undertook the following strategic
investments and corporate developments:

• Starting from 2000, we enhanced our competitiveness by consolidating
our position as a key Natural Rubber supply chain operator through the
expansion of our network of raw material procurement centres and the
increase of our production capacities in Thailand. We have also made
investments in Indonesia, world’s second largest Natural Rubber producer
after Thailand, to strengthen our group’s market position.

• In 2004, we made a strategic decision to substantially expand into the
PRC market, as we believed that the PRC would become the largest
consuming country of Natural Rubber. In 2009, the PRC was the largest
consumer of Natural Rubber globally with more than one-third of world
demand.

• In 2007, we started expanding our operations upstream by investing in
large-scale rubber plantations in Thailand.

Specifically, we believe that our decision to continue growing our
business operations in the PRC has further strengthened our market
position in the PRC market and places us in a better position to benefit
from the expected growth in demand for natural rubber in the PRC. We
plan to continue to use our market insights and expertise to expand and
grow in other key emerging market economies like India and Brazil, to
position ourselves to ride on the structural growth of rubber demand in
these countries.

Through the successful implementation of the above three-fold strategy,
we have been able to grow our business, expand our geographical
footprint and enlarge our customer base in an environment characterised
by competition and price volatilities. We are now one of the largest
processors of natural rubber globally. Our sales volume in 2012
represented approximately 8.9%[20] of global demand while the volume
that we produced in Thailand and that was sold, accounted for
approximately 17.6%[21] of Thailand’s production volume. Thailand was
the world’s largest natural rubber producer in 2012, accounting for
approximately 30.9%[22] of the global natural rubber production. Our
sales volume to the PRC in 2012 represented approximately 12.5%[23] of
the PRC’s total natural rubber import in 2012.

Leveraging on our dominant market position, in-depth industry knowledge
and proven track record of successfully implementing our strategy, we
believe that we will be able to continue to realise future growth
opportunities for our business. Through our multi-national platform, we
have acquired on-the-ground knowledge and insights that will enable us
to undertake our investments in the geographical locations and business
environments that we identify as being most strategically favourable and
beneficial to our business.

3.6 Our Future Plans

Going forward, in line with our principal strategy, we intend to pursue
the following initiatives to grow our business and further strengthen
our dominant market position:

The Company also enhances our Group’s financial capacity to cater for an
increase in business volume and financial ability to pursue strategic
acquisition or expansion opportunities as and when they arise.

[1] Held by STA and the remaining shares are held by PT Nusantara Agro
Industri (which is not a person who may have conflicts of interest)
10.00%.

[2] Held by Shi Dong Investments

[3] Held by STA 33.50% and the remaining shares are held by Southland
Rubber Co.,Ltd. (which is not a person who may have conflicts of
interest) 33.49%, Itochu Corporation Limited (which is not a person who
may have conflicts of interest) 33.00%, Mr. Perm Theerasarnwong (1
share), Mr. Thanasak Charnsanti (1 share), Mr. Viyavood Sincharoenkul (1
share), and Mr. Chaiyos Sincharoenkul (1 share).

[4] Held by STA 31.50% and the remaining shares are held by Semperit
Technische (50.00%); Rubberland Products (8.73%), STH (6.00%), Miss
Poonsuk Cherdkiatgumchai (3.73%), Mr. Veerasith Sinchareonkul (2
shares), Mr. Somwang Sincharoenkul (2 shares), Mr. Viyavood
Sincharoenkul (2 shares), and Mr. Kitichai Sincharoenkul (2 shares).

[5] Held by STA37.50% and the remaining shares are held by Semperit
Technische (50.00%), Rubberland Products (5.00%), STH (5.00%), Paktai
Rubber Industries Limited Partnership (2.50%) Miss Poonsuk
Cherdkiatgumchai (2 shares), Mrs. Promsuk Sinchareonkul (2 shares), Mr.
Somwang Sincharoenkul (2 shares), Mr. Viyavood Sincharoenkul (2 shares),
Mr. Chaiyos Sincharoenkul (2 shares), Mr. Anan Pruksanusak (2 shares),
and Mr. Prasit Panidkul (2 shares).

[6] Semperform Pacific ceased its business operations at the end of 2009
. Liquidation process will be performed after the approval of
shareholders’ meeting.

[7] Held by STA 37.50% and the remaining shares are held by Semperit
Technische (50.00%), Rubberland Products (5.00%), STH (5.00%), Paktai
Rubber Industries Limited Partnership (2.50%), Miss Poonsuk
Cherdkiatgumchai (1 share), Mrs. Promsuk Sincharoenkul (1 share), Mr.
Somwang Sincharoenkul (1 share), Mr. Viyavood Sincharoenkul (1 share),
Mr. Chaiyos Sincharoenkul (1 share), Mr. Anan Pruksanusak (1 share), and
Mr. Prasit Panidkul (1 share).

[8] Held by SSC.

[9] Held by STA 50.00% and the remaining shares are held by Semperit
Technische 50.00%.

[10] Held by STA 10.00% and the remaining shares are held by Semperit
Technische 90.00%.

[11] Held by STA 25.00% and the remaining shares are held by SSC 50.00%
and Semperit Technische 25.00%.

[12] Held by Sempermed Singapore approximately 100.0% and Semperit
Industrial Products Singapore Private Limited holds 1 share.

[13] Held by STA. Shi Dong Shanghai is licensed to operate for a term of
30 years from 2 August 2010

[14] Held by STA 83.99% and the remaining shares are held by Rubberland
Products 16.00%, Mr. Somporn Punnarai (1 share), Mr. Boonyachon
Sincharoenkul (1 share), Miss Wanna Tanapoomkul (1 share), Mrs. Promsuk
Sinchareonkul (1 share), and Prukesa Mansion Ltd (1 Share).

[15] Held by STA 81.99% and the remaining shares are held by Rubberland
Products 16.00%, Sadao P.S. Rubber 2.00%,
Mr. Viyavood Sincharoenkul (1 share), Mr. Kitichai Sincharoenkul (1
share), Phrueksa Mansion Ltd (1 share), and Mr. Aram Sirisuwat (1
share).

[16] Held by STA 76.66% band the remaining shares are held by Rubberland
Products 13.33%, Nam Hua 3.33%, Sadao P.S. Rubber 3.33%, Startex Rubber
3.33%, Phrueksa Mansion Ltd (1 share), and Mr. Boonyachon Sincharoenkul
(1 share).

[17] Held by STA 40.00% and the remaining shares are held by Lee Feed
Mill Public Company Limited (which is not a person who may have
conflicts of interest) 44.50%, Mr. Preecha Leelasithorn 8.75%,
Wallstreet Tower Company Limited (which is not person who may have
conflicts of interest) 6.25%, and Mr. Nipon Leelasithorn 0.5%.

[18] Held by Sri Trang International.

[19] ถือหุ้นโดย Sempermed Singapore ร้อยละ 82.86 Dietmar Trumm ร้อยละ 11.43
และ Valluvan A. Peramuthu ร้อยละ 5.71

[20] Based on our sales volume of Nutural Rubber Products of
approximately 975,604 tons for the financial year ended 31 December 2012
and the total global demand for Natural Rubber Products of approximately
10,947,000 tons in 2012.

[21] Based on our production volume in Thailand of 618,373 tons for the
financial year ended 31 December 2012 and production volume of Thailand
of approximately 3,522,000 tons in 2012.

[22] Based on our production volume of Natural Rubber Products in
Thailand of approximately 3,522,000 tons for the financial year ended 31
December 2012 and world’s production volume of approximately 11,406,000
tons in 2012.

[23] Based on our sale volume to the PRC of 422,548 tons for the
financial year ended 31 December 2012 and gross import of Natural Rubber
of the PRC of approximately 3,368,200 tons in 2012.

  (Source of note 20-23 : International Rubber Study Group (IRSG), The
  World Rubber Industry Outlook, Review and Prospects to 2022, December
  2012 and Association of Natural Rubber Producing Countries (ANRPC),
  Natural Rubber Trend & Statistics, January 2013)