13.1. Report of Independent Auditor

To The Board of Directors and Shareholders of

Thai Carbon Black Public Company Limited

I have audited the accompanying consolidated balance sheet of Thai
Carbon Black Public Company Limited and its subsidiaries as at 31
December 2006, the related consolidated statements of income, changes in
shareholders’ equity and cash flows for the year then ended, and the
separate financial statements of Thai Carbon Black Public Company
Limited for the same period. These financial statements are the
responsibility of the Company’s management as to their correctness and
completeness of the presentation. My responsibility is to express an
opinion on these financial statements based on my audits. The financial
statements as at 31 December 2006 and for the year then ended of the
overseas subsidiary were audited by other auditor, whose report has been
furnished to me. My opinion on the consolidated and the Company’s
financial statements, insofar as they relate to the amounts included for
this subsidiary, is based solely on the report of that other auditor.
The subsidiary’s financial statements reflect total assets as at 31
December 2006 of Baht 1,185 million, total revenues for the year then
ended of Baht 492 million, and net loss for the year then ended of Baht
166 million. In addition, the Company’s financial statements include the
investment in this subsidiary accounted for under the equity method,
amounting to Baht 258 million as at 31 December 2006, and its share of
loss for the year then ended amounting to Baht 128 million. The
financial statements as at 31 December 2005 and for the year then ended,
as presented herein for comparative purposes, were audited by another
auditor of our firm who, under his report dated 23 February 2006,
expressed an unqualified opinion on those statements.

I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. I believe that my audits
and the report of the other auditor referred to in the second paragraph
provide a reasonable basis for my opinion.

In my opinion, based on my audits and the report of other auditor, the
financial statements referred to above present fairly, in all material
respects, the financial position of Thai Carbon Black Public Company
Limited and its subsidiaries and of Thai Carbon Black Public Company
Limited as at 31 December 2006, the results of their operations, and
cash flows for the year then ended in accordance with generally accepted
accounting principles.

Narong Puntawong

Certified Public Accountant (Thailand) No. 3315

Ernst & Young Office Limited

Bangkok : 21 February 2007

  .

 

13.2 Financial statement

Balance sheets

Unit : Baht

  ------------------------- --------------- --------------- --------------- -- --
                            CONSOLIDATED                                       

                            2006            2005            2004               

  ASSETS                                                                       

  CURRENT ASSETS                                                               

  Cash and cash equivalents 875,667,603     948,317,659     473,184,080        

                                                                               

  Trade accounts receivable                                                    

  Unrelated parties         1,173,180,368   869,433,009     729,618,565        

  Related parties           32,856,996      23,777,322      34,735,344         

                                                                               

  Inventories - net         1,060,660.254   750,921,339     900,576,910        

  Other current assets                                                         

  Advance for purchases of  12,511,936      52,590,327      63,028,757         
  raw materials                                                                

  Input tax refundable      118,998,477     81,213,605      67,054,216         

  Duty drawback and export  -               -               -                  
  incentive receivable                                                         

  Others                    22,360,844      61,179,609      41,425,385         

  TOTAL CURRENT ASSETS      3,296,236,478   2,787,432,870   2,309,623,257      

  NON-CURRENT ASSETS                                                           

  Investments accounted for 1,551,737,770   1,351,001,287   918,782,281        
  under equity method                                                          

  Other long-term                                                              
  investments                                                                  

  Investments in related    255,166,578     322,741,663     322,741,663        
  parties                                                                      

  Investments in preference -               -               600,000,000        
  shares                                                                       

  Advance for purchases of  34,161,892      5,501,657       41,767,709         
  property, plant and                                                          
  equipment                                                                    

  Property, plant and       2,081,580,305   2,137,563,685   1,295,695,343      
  equipment - net                                                              

                                                                               

  Other non-current assets  10,592,350      11,145,708      13,432,431         

  TOTAL NON-CURRENT ASSETS  3,933,238,895   3,827,954,000   3,192419,427       

  TOTAL ASSETS              7,229,475,373   6,615,386,870   5,502,042,684      
  ------------------------- --------------- --------------- --------------- -- --

Balance sheets

Unit : Baht

  ------------------------------------- --------------- --------------- -------------
                                        CONSOLIDATED                    

                                        2006            2005            2004

  LIABILITIES AND SHAREHOLDERS' EQUITY                                  

  CURRENT LIABILITIES                                                   

  Bank overdrafts and short-term loans  531,424,585     453,378,895     273,869,798
  from financial institutions                                           

  Trade accounts payable                                                

  Unrelated parties                     180,897,691     237,675,198     121,842,962

  Related parties                       1,618,874       1,084,090       10,348,037

  Short-term loans from related parties -               -               -

  Current portion of long-term loans    71,184,692      80,740,913      -

  Other current liabilities                                             

  Corporate income tax payable          113,618,748     101,177,099     100,970,419

  Accrued expenses                      45,363,926      30,272,978      27,060,233

  Others                                63,526,220      66,831,471      31,224,940

  TOTAL CURRENT LIABILITIES             1,007,634,736   971,160,644     565,316,389

  NON-CURRENT LIABILITIES                                               

  Long-term loans –net of current       182,882,199     288,173,437     164,777,990
  portion                                                               

  Provision for employee retirement     69,584,663      57,131,693      21,398,845
  benefit                                                               

  TOTAL NON-CURRENT LIABILITIES         252,466,832     345,305,130     186,176,835

  TOTAL LIABILITIES                     1,260,101,568   1,316,465,774   751,493,224
  ------------------------------------- --------------- --------------- -------------

Balance sheets

Unit : Baht

  --------------------------------- --------------- --------------- ---------------
                                    CONSOLIDATED                    

                                    2006            2005            2004

  SHAREHOLDERS' EQUITY                                              

  Share capital                                                     

  Registered, issued and fully paid                                 

  300,000,000 ordinary shares of    300,000,000     300,000,000     300,000,000
  Baht 1 each                                                       

  Paid-in capital                                                   

  Share premium                     930,000,000     930,000,000     930,000,000

  Share of revaluation surplus of   -               -               102,441,142
  subsidiary company                                                

  Translation adjustments                                           

  Subsidiary company                (13,068,082)    4,068,470       (13,272,356)

  Associated company                (192,957,927)   (171,600,765)   (198,704,413)

  Retained earnings                                                 

  Appropriated - statutory reserve  30,000,000      30,000,000      30,000,000

  Unappropriated                    4,893,437,524   4,141,647,271   3,432,309,467

  EQUITY ATTRIBUTABLE TO THE        5,947,411,515   5,234,114,976   4,582,773,840
  COMPANY'S SHAREHOLDERS                                            

  MINORITY INTEREST - equity                                        
  attributable to                                                   

  minority shareholders of          21,962,290      64,806,120      167,775,620
  subsidiary companies                                              

  TOTAL SHAREHOLDERS' EQUITY        5,969,373,805   5,298,921,096   4,750,549,460

  TOTAL LIABILITIES AND             7,229,475,373   6,615,386,870   5,502,042,684
  SHAREHOLDERS' EQUITY                                              
  --------------------------------- --------------- --------------- ---------------

Balance sheets

Unit : Baht

  -------------------------------- --------------- --------------- ---------------
                                   THE COMPANY                     
                                   ONLY                            

                                   2006            2005            2004

  ASSETS                                                           

  CURRENT ASSETS                                                   

  Cash and cash equivalents        824,442,204     886,146,690     410,491,667

                                                                   

  Trade accounts receivable                                        

  Unrelated parties                1,114,812,306   820,883,055     628,586,692

  Related parties                  37,595,907      23,777,322      24,062,270

                                                                   

  Inventories - net                841,126,192     624,307,692     792,863,414

  Other current assets                                             

  Advance for purchases of raw     -               -               -
  materials                                                        

  Input tax refundable             45,643,989      22,563,028      37,388,282

                                                                   

  Others                           20,729,119      29,006,534      32,171,638

  TOTAL CURRENT ASSETS             2,884,349,717   2,406,684,321   1,925,563,963

  NON-CURRENT ASSETS                                               

  Investments accounted for under  1,809,739,605   1,567,960,904   1,300,667,164
  equity method                                                    

  Other long-term investments                                      

  Investments in related parties   255,166,578     322,741,663     322,741,663

  Investments in preference shares -               -               600,000,000

  Advances for purchases of        34,161,892      5,501,657       41,767,709
  property, plant and equipment                                    

  Property, plant and equipment -  1,322,118,735   1,228,946,449   598,905,109
  net                                                              

                                                                   

  Other non-current assets         1,650,301       1,023,342       1,043,342

  TOTAL NON-CURRENT ASSETS         3,422,837,111   3,126,174,015   2,865,124,987

  TOTAL ASSETS                     6,307,186,828   5,532,858,336   4,790,688,950
  -------------------------------- --------------- --------------- ---------------

Balance sheets

Unit : Baht

  -------------------------------------- ------------- ------------- -------------
                                         THE COMPANY                 
                                         ONLY                        

                                         2006          2005          2004

  LIABILITIES AND SHAREHOLDERS' EQUITY                               

  CURRENT LIABILITIES                                                

  Bank overdrafts and short-term loans   6,690,078     6,613,830     2,987
  from financial institutions                                        

  Trade accounts payable                                             

  Unrelated parties                      81,845,777    55,486,435    54,084,200

  Related parties                        1,672,255     1,084,090     1,486,747

  Current portion of long-term loans     -             -             -

  Other current liabilities                                          

  Corporate income tax payable           113,497,141   101,128,521   100,330,192

  Accrued expenses                       31,585,060    23,123,976    18,835,962

  Others                                 54,900,369    54,174,815    20,381,581

  TOTAL CURRENT LIABILITIES              290,190,680   241,611,667   195,121,669

  NON-CURRENT LIABILITIES                                            

  Long-term loans –net of current        -             -             -
  portion                                                            

  Provision for employee retirement      69,584,633    57,131,693    12,793,441
  benefit                                                            

  TOTAL NON-CURRENT LIABILITIES          69,584,633    57,131,693    12,793,441

  TOTAL LIABILITIES                      359,775,313   298,743,360   207,915,110
  -------------------------------------- ------------- ------------- -------------

Balance sheets

Unit : Baht

  --------------------------------- --------------- --------------- ---------------
                                    THE COMPANY                     
                                    ONLY                            

                                    2006            2005            2004

  SHAREHOLDERS' EQUITY                                              

  Share capital                                                     

  Registered, issued and fully paid                                 

  300,000,000 ordinary shares of    300,000,000     300,000,000     300,000,000
  Baht 1 each                                                       

  Paid-in capital                                                   

  Share premium                     930,000,000     930,000,000     930,000,000

  Share of revaluation surplus of   -               -               102,441,142
  subsidiary company                                                

  Translation adjustments           -               -               -

  Subsidiary company                (13,068,082)    4,068,470       (13,272,356)

  Associated company                (192,957,927)   (171,600,765)   (198,704,413)

  Retained earnings                                                 

  Appropriated - statutory reserve  30,000,000      30,000,000      30,000,000

  Unappropriated                    4,893,437,524   4,141,647,271   3,432,309,467

  EQUITY ATTRIBUTABLE TO THE        5,947,411,515   5,234,114,976   4,582,773,840
  COMPANY'S SHAREHOLDERS                                            

  MINORITY INTEREST - equity                                        
  attributable to                                                   

  minority shareholders of          -               -               -
  subsidiary companies                                              

  TOTAL SHAREHOLDERS' EQUITY        5,947,411,515   5,234,114,976   4,582,773,840

  TOTAL LIABILITIES AND             6,307,186,828   5,532,858,336   4,790,688,950
  SHAREHOLDERS' EQUITY                                              
  --------------------------------- --------------- --------------- ---------------

Earnings statements

Unit : Baht

  -------------------------------- --------------- --------------- ---------------
                                                   CONSOLIDATED     

                                   2006            2005            2004

  REVENUES                                                         

  Sales                            6,845,778,970   4,934,805,317   4,236,551,316

  Share of profit (loss) from                                      
  investments accounted for under                                  
  equity method                                                    

  Associated companies             263,904,378     286,153,994     79,773,020

  Other income                                                     

  Dividend income                  46,238,403      12,557,713      87,479,365

  Interest income                  21,641,440      12,754,177      11,869,073

  Tax refund from the Revenue      -               -               -
  Department                                                       

  Gain on exchange                 -               17,377,071      -

  Gain on sale of investment in    -               32,411,394      -
  subsidiary                                                       

  Others                           35,665,806      8,907,060       12,181,394

  TOTAL REVENUES                   7,213,228,997   5,304,966,726   4,427,854,168

  EXPENSES                                                         

  Cost of sales                    5,439,453,847   3,730,684,345   3,144,515,830

  Selling and administrative                                       
  expenses                                                         

  Selling expenses                 293,526,794     244,339,197     286,151,648

  Administrative expenses          292,064,555     197,616,439     163,503,312

                                                                   

                                                                   

  Loss on Exchange                 56,249,542      -               1,245,086

  TOTAL EXPENSES                   6,081,294,738   4,172,639,981   3,595,415,876

  EARNINGS BEFORE INTEREST         1,131,934,259   1,132,326,745   832,438,292
  EXPENSES AND INCOME TAX                                          

  INTEREST EXPENSES                (57,618,375)    (16,134,287)    (7,571,554)

  CORPORATE INCOME TAX                                             

  Corporate income tax of current  (180,699,178)   (239,776,538)   (178,502,259)
  year                                                             

  Adjustment of prior year's       -               -               1,104,513
  corporate income tax                                             

  EARNINGS BEFORE MINORITY         893,616,706     876,415,920     647,468,992
  INTEREST                                                         

  MINORITY INTEREST IN SUBSIDIARY  38,173,547      10,846,392      (13,706,357)
  COMPANIES                                                        

  NET EARNINGS FOR THE YEAR        931,790,253     887,262,312     633,762,635
  -------------------------------- --------------- --------------- ---------------

Earnings statements Unit : Baht

  --------------------------------- --------------- --------------- ---------------
                                    THE COMPANY                     
                                    ONLY                            

                                    2006            2005            2004

  REVENUES                                                          

  Sales                             6,594,595,535   4,617,671,977   3,500,488,566

  Share of profit (loss)from                                        
  investments accounted for under                                   
  equity method                                                     

  Subsidiary companies              (129,209,895)   (36,311,836)    2,304,273

  Associated companies              263,904,378     286,153,994     79,773,020

  Other income                                                      

  Dividend income                   46,238,403      12,557,713      87,479,365

  Interest income                   21,568,560      12,358,753      11,869,073

  Tax refund from the Revenue       -               -               -
  Department                                                        

  Gain on exchange                  -               12,383,795      -

  Gain on sale of investment in     -               32,411,394      -
  subsidiary                                                        

  Others                            14,602,641      8,907,060       7,147,715

  TOTAL REVENUES                    6,811,699,622   4,946,132,850   3,689,062,012

  EXPENSES                                                          

  Cost of sales                     5,202,921,834   3,454,274,228   2,583,289,152

  Selling and administrative                                        
  expenses                                                          

  Selling expenses                  278,229,929     229,823,151     186,821,753

  Administrative expenses           141,477,050     134,439,926     108,191,059

  Loss on Exchange                  74,884,800      -               240,007

  TOTAL EXPENSES                    5,697,513,613   3,818,537,305   2,879,281,971

  EARNINGS BEFORE INTEREST EXPENSES 1,114,186,009   1,127,595,545   809,780,041
  AND INCOME TAX                                                    

  INTEREST EXPENSES                 (1,696,578)     (556,695)       (698,086)

  CORPORATE INCOME TAX                                              

  Corporate income tax of current   (180,699,178)   (239,776,538)   (176,423,833)
  year                                                              

  Adjustment of prior year's        -               -               1,104,513
  corporate income tax                                              

  EARNINGS BEFORE MINORITY INTEREST 931,790,253     887,262,312     633,762,635

  NET EARNINGS FOR THE YEAR         931,790,253     887,262,312     633,762,635
  --------------------------------- --------------- --------------- ---------------

Statements of changes in shareholders’ equity

Unit : Baht

  -------------- -------------- ------------- --------------- -------------- -- --------------- -------------- -- ---------------- ----------------- ---------------
                 CONSOLIDATED                                                                                                                        

                                                                                                                                   Minority          

                                                                                                                                   interest-equity   

                                              Share of        Translation                       Retained                           attributable to   Total
                                              revaluation     adjustments                       earnings                           minority          

                 Issued and     Premium on    surplus from    Subsidiary        Associated      Appropriated                       shareholders of   
                 paid-up                                                                                                                             

                 share capital  share capital subsidiary      Company           Company         Statutory         Unappropriated   subsidiary         
                                              company                                           reserve                            companies         

  Balance as at  300,000,000    930,000,000   102,441,142     (13,272,356)      (198,704,356)   30,000,000        3,432,309,467    167,775,620       4,750,549,460
  31 December                                                                                                                                        
  2004                                                                                                                                               

  Share of                                                                                                                                           
  amortisation                                                                                                                                       
  of revaluation                                                                                                                                     
  surplus of                                                                                                                                         

  subsidiary     -              -             (2,075,492)     -                 -               -                 2,075,492        -                 -
  company                                                                                                                                            

  Reversal of    -              -             (100,365,650)   -                 -               -                 -                -                 (100,365,650)
  revaluation                                                                                                                                        
  surplus of                                                                                                                                         
  subsidiary                                                                                                                                         
  company                                                                                                                                            

  Payment of     -              -             -               -                 -               -                 (180,000,000)    -                 (180,000,000)
  dividend                                                                                                                                           
  (Note21)                                                                                                                                           

  Translation    -              -             -               17,340,826        27,103,648      -                 -                5,179,728         49,624,202
  adjustments                                                                                                                                        

  Decrease in    -              -             -               -                 -               -                 -                (97,302,836)      (97,302,836)
  minority                                                                                                                                           
  interest in                                                                                                                                        
  subsidiary                                                                                                                                         
  company                                                                                                                                            

  Net income     -              -             -               -                 -               -                 887,262,312      (10,846,392)      876,415,920
  (Loss)                                                                                                                                             

  Balance as at  300,000,000    930,000,000   -               4,068,470         (171,600,765)   30,000,000        4,141,647,271    64,806,120        5,298,921,096
  31December                                                                                                                                         
  2005                                                                                                                                               

                                                                                                                                                     

                                                                                                                                                     

                                                                                                                                                     

  Payment of     -              -             -               -                 -               -                 (180,000,000)    -                 (180,000,000)
  dividend (Note                                                                                                                                     
  21)                                                                                                                                                

  Translation    -              -             -               (17,136,552)      (21,357,162)    -                 -                -                 (38,493,714)
  adjustments                                                                                                                                        

                                                                                                                                                     

  Net income     -              -             -               -                 -               -                 931,790,253      (42,843,830)      888,946,423
  (loss)                                                                                                                                             

  Balance as at  300,000,000    930,000,000   -               (13,068,082)      (192,657,927)   30,000,000        4,893,437,524    21,962,290        5,969,373,805
  31 December                                                                                                                                        
  2006                                                                                                                                               
  -------------- -------------- ------------- --------------- -------------- -- --------------- -------------- -- ---------------- ----------------- ---------------

Unit:Baht

[TABLE]

Unit : Baht

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

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

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

Statements of changes in shareholders’ equity

Unit : Baht

  -------------------- -------------- ------------- --------------- -------------- --------------- -------------- ---------------- ----- ---------------
                       THE COMPANY                                                                                                       
                       ONLY                                                                                                              

                                                    Share of        Translation                                                          
                                                    revaluation     adjustments                                                          

                       Issued and     Premium on    surplus from    Subsidiary     Accociated      Retained                              
                       paid-up                                                                     earnings                              

                       share capital  share capital subsidiary      Companies      Companies       Appropriated   Unappropriated         Total
                                                    company                                                                              

  Balance as at 31     3000,000,000   930,000,000   102,441,142     (13,272,356)   198,704,413     30,000,000     3,432,309,467          4,582,773,840
  December 2004                                                                                                                          

  Share of                                                                                                                               
  amortisation of                                                                                                                        
  revaluation surplus                                                                                                                    
  from                                                                                                                                   

  subsidiary company   -              -             (2,075,492)     -              -               -              2,075,492              -

  Reversal of          -              -             (100,365,650)   -              -               -              -                      (100,365,650)
  revaluation surplus                                                                                                                    
  of subsidiary                                                                                                                          
  company                                                                                                                                

  Payment of dividend  -              -             -               -              -               -              (180,000,000)          (180,000,000)

  Translation          -              -             -               17,340,826     27,103,648      -              -                      44,444,474
  adjustments                                                                                                                            

  Net earnings         -              -             -               -              -               -              887,262,312            887,262,312

  Balance as at 31     300,000,000    930,000,000   -               4,068,470      (171,600,765)   30,000,000     4,141,647,271          5,234,114,976
  December 2005                                                                                                                          

                                                                                                                                         

                                                                                                                                         

  Payment of dividend  -              -             -               -              -               -              (180,000,000)          (180,000,000)
  (Note21)                                                                                                                               

  Translation          -              -             -               (17,136,552)   (21,357,162)    -              -                      (38,493,714)
  adjustments                                                                                                                            

  Net earnings         -              -             -               -              -               -              931,790,253            931,790,253

  Balance as at 31     300,000,000    930,000,000   -               (13,068,082)   (192,957,927)   30,000,000     4,893,437,524          5,947,411,515
  December 2006                                                                                                                          
  -------------------- -------------- ------------- --------------- -------------- --------------- -------------- ---------------- ----- ---------------

Statements of Cash Flows Unit : Baht

  -------------------------------------- --------------- --------------- ---------------
                                                         CONSOLIDATED     

                                         2006            2005            2004

  Cash flows from (used in) operating                                    
  activities                                                             

  Net earnings                           931,790,253     887,262,312     633,762,635

  Adjustments to reconcile earnings to                                   
  net cash Provided by (used in)                                         
  operating activities:-                                                 

  Dividend income                        (46,238,403)    (12,557,713)    (87,479,365)

  Unrealized loss (gain) on exchange     (5,531,321)     (6,340,200)     1,897,229

  Allowance for doubtful accounts        345,829         -               

  Allowance for stock obsolescence       12,194,515      10,775,717      -

  Depreciation and amortization          258,496,349     156,192,377     223,356,161

  Net income (loss) of attributable to   (42,843,830)    (10,846,392)    13,706,357
  minority interest                                                      

  Gain on sales of investment in         -               (32,411,394)    -
  subsidiary company                                                     

  Loss (gain) on sales of property,      126,512         1,272,849       (265,206)
  plant and equipment                                                    

  Provision for employee retirement      15,544,558      47,721,038      6,093,043
  benefit                                                                

  Share of loss (profit) from                                            
  investments accounted for under equity                                 
  method                                                                 

  Associated companies                   (263,904,378)   (286,153,994)   (79,773,020)

  Earnings from operating activities                                     
  before changes in operating assets                                     

  and liabilities                        859,980,084     754,914,600     711,297,834

  Decrease (increase) in operating                                       155,376, 895
  assets :-                                                              

  Trade accounts receivable              (321,177,665)   (221,267,893)   (159,246,584)

  Inventories                            (321,933,430)   77,602,688      (297,973,376)

  Other current assets                   41,112,284      (36,054,018)    13,813,703

  Other long-term assets                 262,628         (966,875)       (4,398,234)

  Increase (decrease) in operating                                       
  liabilities :-                                                         

  Trade accounts payable                 (56,242,723)    170,624,204     16,938,938

  Other current liabilities              24,227,346      47,154,784      (30,212,041)

  Payment of employee retirement benefit (3,091,618)     (3,382,786)     (2,857,416)

  Net cash from operating activities     232,136,906     788,624,704     247,362,824
  -------------------------------------- --------------- --------------- ---------------

Statements of Cash Flows Unit : Baht

  ---------------------------------- --------------- ----------------- ---------------
                                     CONSOLIDATED                      

                                     2006            2005              2004

  Cash flows from (used in)                                            
  investing activities                                                 

  Dividend income                    46,238,403      12,557,713        87,479,365

  Dividend received from associated  603,413         1,038,636         1,135,500
  company                                                              

  Decrease in deposit with maturity  -               -                 545,000,000
  more than 3 months                                                   

  Decrease in short-term loan to     -               -                 12,000,000
  related company                                                      

  Proceeds from sales of investment  41,207,320      78,000,000        -
  in subsidiary and associated                                         
  company                                                              

  Proceeds from capital reduction of 67,575,085      600,000,000       -
  shares of related company                                            

  Payment of additional investments  -               (120,000,000)     (363,452,220)
  in subsidiary and associated                                         
  companies                                                            

  Proceed from disposals of          238,310         771,855           502,523
  property, plant and equipment                                        

  Advances for purchases of          (28,660,235)    36,266,052        (41,767,709)
  property, plant and equipment                                        

  Acquisition of property, plant and (281,184,175)   (1,324,025,205)   (333,322,386)
  equipment                                                            

  Net cash from used in investing    (153,981,879)   (715,390,949)     (92,424,927)
  activities                                                           

  Cash flows from financing                                            
  activities                                                           

  Increase in bank overdrafts and                                      
  short-term loans                                                     

  from financial institutions        78,045,690      379,414,869       111,130,918

  Increase (decrease) in short- term -               -                 (170,000,000)
  loan from related parties                                            

  Repayment of long-term loans       (84,512,727)    -                 -

  Cash receipt from long-term loans  -               210,686,841       164,777,990

  Payment of Dividend                (180,000,000)   (180,000,000)     (180,000,000)

  Net cash flow from (used in)       (186,467,037)   410,101,710       (74,091,092)
  financing activities                                                 

                                     (108,312,010)   483,335,465       80,846,805

  Increase (decrease) in translation 35,661,954      (4,048,029)       
  adjustments                                                          

  Net increase (decrease) in cash    (72,650,056)    479,287,436       78,075,558
  and cash equivalents                                                 

  Cash and cash equivalents at       948,317,659     473,184,080       395,108,522
  beginning of year                                                    

  Less: Cash and Cash equivalents at                                   
  beginning of the year subsidiary                                     
  company                                                              

  excluded from the consolidated     -               (4,153,857)       -
  financial statements in the                                          
  current year                                                         

  Cash and cash equivalents at end   875,667,603     948,317,659       473,184,080
  of year                                                              

  Supplemental cash flow information                                   

  Cash paid during the year for :-                                     

  Interest                           59,064,541      9,454,602         34,956,627

  Corporate income tax               168,517,274     238,978,209       192,868,447
  ---------------------------------- --------------- ----------------- ---------------

Statements of Cash Flows

Unit : Baht

  ----------------------------- --------------- --------- --------------- ---------- ---------------
                                THE COMPANY                                          
                                ONLY                                                 

                                2006                      2005                       2004

  Cash flows from operating                                                          
  activities                                                                         

  Net earnings                  931,790,253               887,262,312                633,762,635

  Adjustments to reconcile                                                           
  earnings to net cash provided                                                      
  by (used in) operating                                                             
  activities :-                                                                      

  Dividend income               (46,238,403)              (12,557,713)               (87,479,365)

  Unrealized loss (gain) on     (995,197)                 210,281                    1,897,229
  exchange                                                                           

                                                                                     

  Depreciation and amortization 186,526,392               140,045,207                180,305,131

  Gain on sales of investment   -                         (32,411,394)               -
  in subsidiary company                                                              

  Loss (gain) on sale of        (545)                     (181,710)                  (265,206)
  property, plant andequipment                                                       

  Provision for employee        15,544,558                47,721,038                 -
  retirement benefit                                                                 

  Share of (profit) loss from                                                        
  investments accounted for                                                          
  under equity method                                                                

  Subsidiary companies          129,209,895               36,311,836                 (2,304,273)

  Associated companies          (263,904,378)             (286,153,994)              (79,773,020)

  Earnings from operating       951,932,575               780,245,863                646,143,131
  activities before changes in                                                       
  operating assets and                                                               
  liabilities                                                                        

  Decrease (increase) in                                                             
  operating assets :-                                                                

  Trade accounts receivable     (306,752,639)             (192,221,696)              (155,156,647)

                                                                                     

  Inventories                   (216,818,500)             168,555,722                (298,100,642)

  Other current assets          (14,803,546)              17,990,358                 (414,937)

  Other assets                  (626,958)                 20,000                     (280,000)

  Increase (decrease) in                                                             
  operating liabilities :-                                                           

  Trade accounts payable        26,947,507                999,578                    (17,297,899)

                                                                                     

  Other current liabilities     21,555,258                38,879,577                 (33,427,079)

  Payment of employee           (3,091,618)               (3,382,786)                (2,857,416)
  retirement benefit                                                                 

  Net cash from operating       458,342,079               811,086,616                138,608,511
  activities                                                                         
  ----------------------------- --------------- --------- --------------- ---------- ---------------

Statements of Cash Flows

Unit : Baht

  ---------------------------------------- --------------- --------------- ---------------
                                           THE COMPANY                     
                                           ONLY                            

                                           2006            2005            2004

  Cash flows from investing activities                                     

  Dividend income                          46,238,403      12,557,713      87,479,365

  Dividend received from associated        603,413         1,038,636       1,135,500
  company                                                                  

  Decrease (increase) in deposit with      -               -               545,000,000
  maturity more than 3 months                                              

  Decrease in short-term loan to related   -               -               12,000,000
  company                                                                  

  Proceeds from sales of investment in     41,207,320      78,000,000      -
  subsidiary and associated company                                        

  Proceeds from capital reduction of       67,575,085      600,000,000     -
  preference shares of related company                                     

  Payment of additional investments in     (187,388,665)   (120,000,000)   (443,010,647)
  subsidiary and associated companies                                      

  Proceeds from disposals of property,     545             532,711         502,523
  plant and equipment                                                      

  Advances for purchases of property,      (28,660,235)    36,266,052      (41,767,709)
  plant and equipment                                                      

  Acquisition of property, plant and       (279,698,679)   (770,437,548)   (64,552,441)
  equipment                                                                

  Net cash from used in investing          (340,122,813)   (162,042,436)   96,786,591
  activities                                                               

  Cash flows from financing activities                                     

  Increase (decrease) in bank overdrafts   76,248          6,610,843       (11,253,966)
  and short-term loans from financial                                      
  institutions                                                             

  Increase (decrease) in short- term loan  -               -               -
  from related parties                                                     

                                                                           

  Payment of Dividend                      (180,000,000)   (180,000,000)   (180,000,000)

  Net cash used in financing activities    (179,923,752)   (173,389,157)   (191,253,966)

  Net increase (decrease) in cash and cash (61,704,486)    475,655,023     44,141,136
  equivalents                                                              

  Cash and cash equivalents at beginning   886,146,690     410,491,667     366,350,531
  of year                                                                  

  Cash and cash equivalents at end of year 824,442,204     886,146,690     410,491,667

  Supplemental cash flow information                                       

  Cash paid during the year for :-                                         

  Interest express                         1,696,578       556,695         548,086

  Corporate income tax                     168,517,274     238,978,209     187,528,757
  ---------------------------------------- --------------- --------------- ---------------

13.3 Ratio Analysis

(The company only)

  ---------------------------------- ------------- ----------- -----------
                                     2006          2005        2004

  LIQUIDITY RATIOS :                                           

  Current Ratio (Times)              9.91          9.96        9.87

  Quick Ratio (Times)                6.79          7.16        5.45

  Liquidity of Cashflow (Times)      1.72          3.71        0.61

  Accounts Receivable Turnover       6.60          6.17        6.08
  (Times)                                                      

  Collection Period (Days)           54.51         58.37       59.24

  Inventory Turnover (Times)         7.10          4.87        4.01

  Average Sales Time (Days)          50.70         73.85       89.72

  Accounts Payable Turnover (Times)  74.28         61.61       40.23

  Payment Period (Days)              4.85          5.84        8.95

  Cash Cycle (Days)                  100.36        126.37      140.01

  PROFITABILITY RATIOS :                                       

  Gross Profit Margin (%)            21.10         25.19       26.20

  Net Profit Margin (%)              13.66         17.94       17.18

  Return on Net worth (%)            16.65         18.08       14.48

  EFFICIENCY RATIOS :                                          

  Return on Total Assets (%)         15.72         17.19       13.72

  Return on Fixed Assets (%)         87.60         112.41      123.93

  Total Assets Turnover (Time)       115.06        95.82       79.88

  FINANCIAL POLICY RATIO:                                      

  Debt/Equity Ratio (Times)          0.06          0.06        0.05

  Interest Payment Coverage (Times)  656.73        2,025.52    1,160.00

  Pay-out Ratio (%)                  22.56         20.29       28.40

  PER SHARE VALUES :                                           

  Par Value (Baht)                   1.00          1.00        1.00

  Book Value (Baht)                  19.82         17.45       15.28

  Earning Per Share (Baht)           3.10          2.96        2.11

  Dividend Per Share (Baht)          0.70          0.60        0.60

  (Proposed for year 2006)                                     
  ---------------------------------- ------------- ----------- -----------

Consolidated

  ---------------------------------- ------------- ----------- -----------
                                     2006          2005        2004

  LIQUIDITY RATIOS :                                           

  Current Ratio (Times)              3.27          2.87        4.09

  Quick Ratio (Times)                2.06          1.90        2.19

  Liquidity of Cashflow (Times)      0.23          1.03        0.41

  Accounts Receivable Turnover       6.52          5.95        6.18
  (Times)                                                      

  Collection Period (Days)           55.20         60.46       58.27

  Inventory Turnover (Times)         6.01          4.52        4.18

  Average Sales Time (Days)          59.95         79.68       86.05

  Accounts Payable Turnover (Times)  25.82         20.11       25.42

  Payment Period (Days)              13.94         17.90       14.16

  Cash Cycle (Days)                  101.20        122.25      130.15

  PROFITABILITY RATIOS :                                       

  Gross Profit Margin (%)            20.54         24.40       25.78

  Net Profit Margin (%)              12.90         16.73       14.31

  Return on Networth (%)             16.52         17.66       13.96

  EFFICIENCY RATIOS :                                          

  Return on Total Assets (%)         13.45         14.64       12.09

  Return on Fixed Assets (%)         56.36         60.77       68.95

  Total Assets Turnover (Time)       104.20        87.56       84.47

  FINANCIAL POLICY RATIO:                                      

  Debt/Equity Ratio (Times)          0.21          0.25        0.16

  Interest Payment Coverage (Times)  19.65         70.18       109.94

  Pay-out Ratio                      22.56         20.29       28.40

  PER SHARE VALUES :                                           

  Par Value (Baht)                   1.00          1.00        1.00

  Book Value (Baht)                  19.89         17.66       15.28

  Earning Per Share (Baht)           3.10          2.96        2.11

  Dividend Per Share (Baht)          0.70          0.6         0.60

  (Proposed for year 2006)                                     
  ---------------------------------- ------------- ----------- -----------

13.4 Management Discussions & Analysis

Production

The plant continued to operate at full production capacity during the
year. During the 4^(th) quarter of 2005 the company has commissioned its
expansion project with approximate production capacity of 45,000 to
50,000 Mt/year. The expansion project has been commissioned in scheduled
time frame and within budget.

The production of various grades of Carbon Black during the year was
higher by 19% compared to last year. This has been possible partly due
to start of new production line and also due to optimization of
production process by way of debottlenecking and improvement in the
production process. The production level has reached to 213,000 Mt
against 178,000 Mt last year.

Sales Revenue

The Sales volume registered an increase of 19% whereas sales revenue
registered impressive growth of 43% from Baht 4618 million to Baht 6595
million despite stronger Thai Baht which was mainly possible due to
additional volume of expansion project, better productivity, cost push
increase in selling prices due to continued very high raw material
prices, better product mix and higher domestic sales.

The ratio of export to local sales for the year 2006 has changed from
45:55 to 49:51. It is Company’s strategy to strive the optimum product
and customer mix to enhance the contribution margin and sales volume.

Equity Income

The equity income from subsidiary and associated companies decreased
from Baht 250 million to Baht 135 million mainly due to initial
operating losses of subsidiary company in China.

Other Income

The dividend income of Baht 46 million from related and associated
companies is higher against Baht 13 million last year mainly due to one
time dividend payment of Baht 41 million received from one related
company namely Thai Epoxy & Allied Products Co., Ltd due to its plan to
sale its entire business to another Associated company namely Aditya
Birla Chemicals (Thailand) Ltd. (ABCT).

Our Interest income of Baht 21 million is higher compared to 2005 of
Baht 12 million. Similarly our Export Incentive income of Baht 12
million is higher compared to 2005 of Baht 8 million due to higher
Export sales.

Cost and Expenses

The cost of sales have gone up by 51% to Baht 5,203 million in 2006
against 3,454 million last year due to continuous increase in raw
material prices . The price of raw material which is carbon black feed
stock oil were all time high due to highest annual average crude oil
prices in the world market. . Going forward the average oil prices are
expected to decline gradually. Your company would continue to strive for
better energy efficiency; cost outs, improved productivity and optimum
product mix to mitigate the effect of high oil prices.

The selling expense were higher by 21% at Baht 278 million compared to
Baht 230 million in 2005 mainly due to higher sales volume coupled with
higher logistics cost due to high oil prices.

There is a Loss on exchange of Baht 75 million against loss of Baht 12
million last year mainly due to stronger Thai Baht which has impacted
export sales realization in Thai Baht.

Profits

The company has been able to record impressive net profits of Baht 932
million for the year 2006 compared to Baht 887 million in the previous
year thereby registered a growth of 5% despite continued very high raw
material prices. The increase in profit was mainly due to cost push
increase in selling prices, higher sales volume from expansion project,
better productivity, dividend from investee company and lower corporate
tax due to tax exemptions on expansion project etc.

The equity income from subsidiary and associated companies decreased
from Baht 250 million to Baht 135 million mainly due to initial
operating losses of subsidiary company in China.

Financial Position (Company only)

Assets

The total assets as at 31^(st) Dec 2006 amounted to Baht 6,307 million
compared to Baht 5,533 million for the previous year, an increase of
14%. Details of major assets are as follow

-   Cash

  The cash and cash equivalents and funds placed with financial
  institutions were marginally lower at Baht 824 million compared to
  Baht 886 million for 2005.

-   Trade Accounts Receivable

  At the year end Trade Accounts Receivable was higher at Baht 1152
  million compared to Baht 845 million for 2005. This is mainly due to
  increased sales.

-   Inventory

  At the year end the inventory was higher at Baht 841 million compared
  to Baht 624 million for the previous year. This is mainly due to
  higher raw material inventory at year end since we received one large
  shipment during Dec’06. Our Finished stock inventory levels have also
  gone marginally high.

-   Investment

  Investments accounted for under equity method increased from 1,568
  million Baht to 1,810 million Baht in 2006 mainly due to the following
  reasons:

  - Increase in capital by RMB 78.5 Million in LBCC for better
  operational flexibility and efficiency, loan repayments, working
  capital requirements and to meet operational expenses etc. The company
  will subscribe the 100% of the equity capital of RMB 78.5 million and
  after this company’s shareholding will be increased to 88.5%.During
  the year the investment at cost has been increased by Baht 186 million
  and the current shareholding stood at 84.80 %.

  - Better performance and improved share of profit in Aditya Birla
  Chemical (Thailand) Ltd due to an overall business restructure plan of
  ABCT by rationalizing their capital structure entire business purchase
  of other chemical companies and better operational performance.

Liabilities and Shareholders Equity

The total liabilities for the year ended amounted to Baht 360 million,
an increase of Baht 61 million. Like last year the company has made
provision of severance pay amounting Baht 13 million for Local staff.
The provision will be paid to eligible employees upon their retirement
and was determined in accordance with length of service of employees at
certain specified rates by reference to labour laws and based upon the
probability that employees will work until reaching their retirement
age.

Trade Accounts payable have increased mainly from Baht 57 million to
Baht 84 million in the normal course of business.

The shareholders equity at the year-end was higher by Baht 713 million,
an increase of 14% mainly on account of profit for the year

Earning per share

The earning per share was Baht 3.11 in 2006 compared to Baht 2.96 in
2005 due to higher profit for 2006.

Book value per share

The book value per share increased to Baht 19.82 in 2006 against Baht
17.45 due to profit during the year.

Analysis of Financial Ratios (Company only)

Liquidity

The company’s current ratio was higher at 9.91 times up which reflect
company’s very strong and comfortable liquidity and cash flow position.
The current assets increased by 20% mainly due to increase in trade
accounts receivable which increased by 36% due to increase in sales. Our
inventories also increased by 35% mainly due to higher raw material &
finished goods.inventory. Raw material inventory increased due to
receipt of one large shipment during Dec’06.

Equity

The company has historically maintained very low debt to equity ratio.
At the year end, company did not have any long term and short term
borrowings except very minor overdrawn balance. The debt to equity ratio
is 0.06:1

Profitability

The gross profit margin of the company decreased to 21% as compared to
25% in 2005 mainly due to continued higher raw material price. The net
profit margin is decreased to 13.7% compared to 17.9% in 2005. The
return on average shareholders equity based on total profit after tax is
16.6% compared to 18% last year.

Efficiency

The fixed assets turnover ratio has increased to 5 in 2006 against 3.7
in 2005. The return on fixed assets has reduced from 112% to 87% in
2006. The inventory turnover ratio has improved from 4.9 to 7.1 in 2006.

Remuneration to Auditors

1.  Audit fee

  Company and subsidiary paid audit fee for year 2006 as per details
  given below

+-----------------------+------------------------+--------------------+
| Company name          | Audit firm             | Audit fee          |
+-----------------------+------------------------+--------------------+
| Thai Carbon Black Pcl | Ernst & Young Office   | Baht 730,000-      |
|                       | Limited                |                    |
+-----------------------+------------------------+--------------------+
| Liaoning Birla Carbon | Beijing Jingdu         | RMB 120,000-       |
| Co.,ltd               | Certified Accountants  |                    |
|                       | Co.,Ltd                | (Approx. = Baht    |
|                       |                        | 570,636)           |
+-----------------------+------------------------+--------------------+

Other fee - Nil