ANNUAL REPORT

ANNUAL REPORT 2005-2006

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6 Mill view PM2

7 Farm forestry Captive plantation at Bharathidasan University

8 TEWLIS irrigated land - sugarcane TEWLIS irrigated land - coconut trees

9 Medical camp Support to flood relief measures

NOTICE NOTICE is hereby given that the Twentysixth Annual General Meeting of the Members of Tamil Nadu Newsprint and Papers Limited will be held on Friday the 25 th August 2006 at 10.25 AM at the Music Academy Main Hall, 168 T T K Road, Alwarpet, Chennai 600 014 to transact the following business : ORDINARY BUSINESS 1. To receive, consider and adopt the Profit and Loss Account for the year ended 31 st March 2006, Balance Sheet as at 31 st March 2006 and the Directors Report and Auditors Report thereon. 2. To declare dividend. 3. To appoint a Director in the place of Thiru V. Narayanan, who retires by rotation and being eligible offers himself for reappointment. 4. To appoint a Director in the place of Thiru V. R. Mehta, who retires by rotation and being eligible offers himself for reappointment. 5. To consider and if thought fit, to pass with or without modifications, the following resolution as an ORDINARY resolution: RESOLVED THAT consent of the Company be and is hereby accorded for the payment of remuneration of Rs.2,25,000/- to M/s.Maharaj N. R. Suresh & Co., Statutory Auditors, besides reimbursement of travelling and out of pocket expenses at actuals subject to other terms and conditions laid down by the Office of the Comptroller and Auditor General of India in their letter No. CA V/COY/Tamil Nadu,TNEWSP(1)/46 dt.17.8.2005. SPECIAL BUSINESS 6. To consider and if thought fit, to pass with or without modifications, the following resolution as an ORDINARY Resolution : RESOLVED THAT pursuant to the provisions of Sec.269 and other applicable provisions, if any, of the Companies Act, 1956 and Article 140 of the Articles of Association of the Company and subject to such other approvals, as may be necessary, consent of the members of the Company be and is hereby accorded to the appointment of Thiru S Ramasundaram, IAS as Chairman and Managing Director of the company w.e.f. 8.8.05 on such terms and conditions and such remuneration as may be prescribed by the Government of Tamil Nadu from time to time. 7. To consider and if thought fit, to pass with or without modifications, the following resolution as an ORDINARY Resolution : RESOLVED THAT pursuant to the provisions of Sec.269 and other applicable provisions, if any, of the Companies Act, 1956 and Article 140 of the Articles of Association of the Company and subject to such other approvals, as may be necessary, consent of the members of the Company be and is hereby accorded to the appointment of Thiru V. Murthy, IAS as Managing Director of the company w.e.f. 17.5.06 AN on such terms and conditions and such remuneration as may be prescribed by the Government of Tamil Nadu from time to time. 8. To consider and if thought fit, to pass with or without modifications, the following resolution as an ORDINARY Resolution : RESOLVED THAT Thiru Shaktikanta Das, IAS be and is hereby appointed as Director of the Company. 9. To consider and if thought fit, to pass with or without modifications, the following resolution as an ORDINARY Resolution : RESOLVED THAT Thiru Sandeep Saxena, IAS be and is hereby appointed as Director of the Company. BY ORDER OF THE BOARD Place : Chennai A. VELLIANGIRI Date : 20.6.06 DIRECTOR (FINANCE) NOTES 1) A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE ON A POLL INSTEAD OF HIMSELF AND SUCH PROXY NEED NOT BE A MEMBER OF THE COMPANY. 2) Proxies in order to be effective, must be lodged with the Company not later than 48 hours before the meeting. 3) The relative Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956 in respect of the Special Business set out under Items 6 to 9 is annexed hereto. 4) The Register of Members and Share Transfer Books of the Company will be closed from 18.8.06 to 25.8.06 (both days inclusive). 5) The dividend for the year ended 31 st March 2006 as recommended by the Board, if sanctioned at the meeting, will be paid to those members whose names appear in the Company s Register of Members on 25 th August 2006. In respect of shares held in electronic form, the dividend will be paid on the basis of beneficial ownership as per details furnished by National Securities Depository Limited and Central Depository Services (India) Limited for this purpose. 6) In accordance with the amended provisions of Sec.205A(5) of the Companies Act, 1956, the unclaimed dividend pertaining to the years 1999-2000, 2000-01, 2001-02, 2002-03, 2003-04 and 2004-05 would remain with the company for a period of 7 years, upon expiry of which they will be transferred to The Investor Education and Protection Fund. 7) Members who have not encashed their dividend warrant(s) so far for the financial year ended 31 st March 1999 or any subsequent financial year(s) are requested to make their claim to the company or to the Company s Registrar and Share Transfer Agents. 11

TAMIL NADU NEWSPRINT AND PAPERS LTD 8) Members are requested to quote their Registered Folio No. or Depository Participant Id. No. and Client Id. No. in all their correspondences and notify promptly change, if any, in their Address/bank mandate to the Company s Share Transfer Agent viz.cameo Corporate Services Limited Unit: Tamil Nadu Newsprint and Papers Limited, Subramanian Building, 1 Club House Road, Chennai 600 002. 9) Members/Proxies are requested to bring the attendance slip sent with Annual Report duly filled in for attending the meeting. 10) Members are requested to bring their copies of Annual Report for the meeting. Copies of the Annual Report will not be distributed at the Annual General Meeting. 11) Equity shares of the Company have been placed under Compulsory Demat Trading w.e.f. 8.5.2000. Members who have not dematerialised their physical holding in the Company are advised to avail the facility of dematerialisation of equity shares of the Company. 12) Members holding shares under different folios in the same names are requested to apply for consolidation of folios and send relevant share certificates to the Company s Registrar and Transfer Agents. 12 ANNEXURE TO THE NOTICE Notes on directors seeking appointment/re-appointment as required under Clause 49 of the Listing Agreement entered into with Stock Exchanges: PROFILE OF DIRECTORS BEING APPOINTED/ REAPPOINTED ITEM NO. 3 Name Age Qualification Experience : Thiru V. Narayanan : 68 years : M.Sc. (Chemistry) : Thiru V. Narayanan has more than 45 years of experience in Management. He has held several positions in Hindustan Lever Ltd., both in India and in the U.K. Subsequently he had joined Pond s (India) Ltd. and was its Chairman and Managing Director for over 15 years. He is currently on the Board of several reputed companies. Presently, he is the Honorary Chairman of Academy for Management Excellence. His Directorships and Committee Memberships of other Companies are as follows: Company Position Committee Membership Ponds Exports Limited Chairman M M Forgings Limited Chairman Audit Committee-Chairman UCAL Fuel Systems Limited Director Audit Committee-Chairman Bata India Limited Director Audit Committee-Chairman Samtel Color Limited -do- Glaxo Smithkline -do- Audit Committee-Member Pharmaceuticals Ltd. Remuneration Committee- Member Samcor Glass Limited -do- Hindustan Lever Limited -do- Remuneration Committee- Chairman Rane (Madras) Limited -do- Audit Committee-Member Lafarge India Pvt. Ltd. -do- Sundaram Fasteners Limited -do- Audit Committee-Member FAL Industries Limited -do- Audit Committee-Member Foster s India Limited -do- Rane Holdings Limited -do- ITEM NO. 4 Name : Thiru V. R. Mehta Age : 72 years Qualification : An Honours degree in Engineering from BITS, Pilani Experience : Thiru Mehta worked as a Senior Expert in the Asian Development Bank, Manila for over 14 years. Since his return from the Asian Development Bank in 1994, Thiru Mehta continues to undertake short-term assignments as a Senior Consultant for the World Bank in Washington D.C. and the African Development Bank, Tunis. Prior to joining the ADB, Thiru Mehta served in the Government of India in the Ministry of Shipping & Transport for almost 6 years as Director and Joint Secretary, with the charge of all the major ports in the country. He is the founder Managing Director of the Dredging Corporation of India. Thiru Mehta had earlier served for about 17 years in various senior positions in the Railway Board and the zonal railways. Thiru Mehta has been closely associated with the charitable work of Jaipur Foot (artificial limbs) and Mother Teresa and has also co-authored a book on Mother Teresa. His Directorships and Committee Memberships of other Companies are as follows: Company Position Committee Membership Sical Logistics Limited, Chennai Director Southern Petrochemical Industries Corpn.Ltd., Chennai Director Tata Motors Ltd., Mumbai Director Audit Committee- Chairman Remuneration Committee-Member Telco Construction Equipment Director Audit Committee- Company Ltd., Bangalore Chairman Remuneration Committee-Member T T Ltd., New Delhi Director Audit Committee- Member

ITEM NO. 6 Name : Thiru S. Ramasundaram, IAS His Directorships and Committee Memberships of other Companies are as follows: Age Qualification : 52 years : M.Sc. (Chem.), MS (Applied Demography), USC Los Angeles, USA Experience : Thiru S. Ramasundaram, IAS belongs to 1979 batch of Indian Administrative Service. He has 27 years of experience in various Departments of Govt. of Tamil Nadu and Govt. of India. His Directorships and Committee Memberships of other Companies are as follows: Company Position Committee Membership Tamil Nadu Sugar Director Corporation Ltd. ITEM NO. 7 Name Age Qualification Experience : Thiru V. Murthy, IAS : 58 years : M.A.B.L., H.D.C. : Thiru V. Murthy, IAS belongs to 1991 batch of Indian Administrative Service. He has 36 years of experience in various Departments of Govt. of Tamil Nadu. His Directorships and Committee Memberships of other Companies are Nil. ITEM NO. 8 Name : Thiru Shaktikanta Das, IAS Age : 49 years Qualification : M.A. Experience : Thiru Shaktikanta Das, IAS belongs to 1980 batch of Indian Administrative Service. He has 26 years of experience in various departments of Government of Tamil Nadu. Thiru Shaktikanta Das, IAS was the Managing Director of TNPL for three years from 1993 to 1996. Currently, he is holding the office of the Secretary to Government, Industries Department, Govt. of Tamil Nadu. Company Position Committee Membership Titan Industries Tamil Nadu Petro Products Limited Tamil Nadu Industrial Guidance & Export Promotion Bureau TASCO Tidel Park Limited Tamil Nadu Industrial Development Corporation Limited Chennai Petroleum Corporation Limited Southern Petrochemical Industries Corpn. Ltd. Neyveli Lignite Corporation Limited Small Industries Promotion Corporation of Tamil Nadu Ltd. P.S.G.STEP Governing Body ITEM NO. 9 Name Age Qualification : Thiru Sandeep Saxena, IAS : 40 years Chairman Chairman Chairman Chairman Director Director Director Director Director Director Member : B.E. (Civil), M.Tech, (Water Resources Engg.IITD), MBA(International Fin.) M.A.(Eco.) Experience : Thiru Sandeep Saxena, IAS belongs to 1989 batch of Indian Administrative Service. He has 17 years of service in various departments of Government of Tamil Nadu. His Directorships and Committee Memberships of other Companies are as follows: Company Position Committee Membership Tamil Nadu Sugar Managing Audit Committee Corporation Ltd. Director Chairman Perambalur Sugar Mills Chairman and Audit Committee- Limited Managing Chairman Director 13

TAMIL NADU NEWSPRINT AND PAPERS LTD EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956 ITEM NO. 6 Pursuant to G.O.Rt.No.3264 Public (Special A) Department dt.8.8.2005 issued by the Govt. of Tamil Nadu and in terms of Article 139 of the Articles of Association of the Company, the Board of Directors have passed a resolution appointing Thiru S. Ramasundaram, IAS as Chairman and Managing Director of the Company with effect from 8.8.05. Under Sec.269 read with Schedule XIII of the Companies Act, appointment of Managing Director has to be approved by the Members of the Company in general meeting. The terms and conditions of his appointment including remuneration payable to him are governed by the orders of the Govt. of Tamil Nadu. Your Directors recommend this resolution for approval of the members of the Company. None of the Directors of the Company other than Thiru S Ramasundaram, IAS is interested or concerned in the resolution. ITEM NO. 7 Pursuant to G.O.Rt.No.1900 Public (Special A) Department dt.16.5.2006 issued by the Govt. of Tamil Nadu and in terms of Article 139 of the Articles of Association of the Company, the Board of Directors have passed a resolution appointing Thiru V. Murthy, IAS as Managing Director of the Company with effect from 17.5.06 AN. Under Sec.269 read with Schedule XIII of the Companies Act, appointment of Managing Director has to be approved by the Members of the Company in general meeting. The terms and conditions of his appointment including remuneration payable to him are governed by the orders of the Govt. of Tamil Nadu vide G.O.Ms.No.167 Public (Special A) Department dt.21.2.94 read with G.O.Ms.No.495 Finance(BPE) Department dt.18.7.88. Copies of the abovesaid orders are available for inspection by any of the shareholders at the Registered Office of the Company. Your Directors recommend this resolution for approval of the members of the Company. None of the Directors of the Company other than Thiru V. Murthy, IAS is interested or concerned in the resolution. ITEM NO. 8 The Board of Directors of your Company have appointed Thiru Shaktikanta Das, IAS as an additional Director with effect from 24.5.06. As an additional Director Thiru Shaktikanta Das, IAS will hold the office of Director upto the date of AGM. Notice has been received under Section 257 of the Companies Act, 1956 from a member of his intention to propose the candidature for directorship of Thiru Shaktikanta Das, IAS. This may also be treated as individual notice under Sec.257(1A) of the Companies Act, 1956. Your Directors recommend this resolution for approval of the members of the Company. None of the Directors of the Company other than Thiru Shaktikanta Das, IAS is interested or concerned in the resolution. ITEM NO. 9 The Board of Directors of your Company have appointed Thiru Sandeep Saxena, IAS as an additional Director with effect from 20.6.06. As an additional Director Thiru Sandeep Saxena, IAS will hold the office of Director upto the date of AGM. Notice has been received under Section 257 of the Companies Act, 1956 from a member of his intention to propose the candidature for directorship of Thiru Sandeep Saxena, IAS. This may also be treated as individual notice under Sec.257(1A) of the Companies Act, 1956. Your Directors recommend this resolution for approval of the members of the Company. None of the Directors of the Company other than Thiru Sandeep Saxena, IAS is interested or concerned in the resolution. Registered Office : 67 Mount Road, Guindy, Chennai 600 032. BY ORDER OF THE BOARD A. VELLIANGIRI DIRECTOR (FINANCE) 14

DIRECTORS REPORT TO THE MEMBERS The Directors have pleasure in presenting the Twentysixth Annual Report and the Audited Accounts of your Company for the financial year ended 31.3.2006. 1. FINANCIAL RESULTS (Rs. in crores) Particulars 2005-06 2004-05 Sales 775.67 641.06 Other income 25.73 27.17 Operating Profit (PBIDT) 189.33 117.27 Interest and Finance charges 20.29 16.22 Gross Profit (PBDT) 169.04 101.05 Depreciation 62.50 61.88 Profit before Prior Period/ Exceptional items 106.54 39.17 Prior Period/Exceptional items 5.07 Profit before tax 101.47 39.17 Provision for taxation Current tax 36.51 8.68 Deferred Tax (13.81) (7.46) Fringe Benefit Tax 0.95 Excess provision of Income Tax written back (2.73) Profit after tax 80.55 37.95 Balance brought forward 20.20 20.06 Profit Available for appropriation 100.75 58.01 APPROPRIATIONS Transfer to General Reserve 57.00 16.00 Dividend Adjustments 0.01 Interim dividend 10.41 Proposed Dividend 10.38 19.08 Tax on Dividend 2.91 2.72 Balance carried forward 20.05 20.20 100.75 58.01 2. DIVIDEND Your company has paid Interim Dividend of 15% during November 2005. Your Directors are pleased to recommend final dividend of 15% for the financial year ended 31.3.2006. The final dividend, if approved by the shareholders, will be paid to all the equity shareholders whose names appear in the Register of Members as on 25.08.06. Total dividend of 30% for the year 2005-06 would absorb Rs. 2078.60 lakhs. 3. OVERALL PERFORMANCE The production and capacity utilization are given hereunder: (Figures in MTs) Particulars 2005-06 2004-05 PM I PM II Total PM I PM II Total Newsprint 5468 5468 7708 7708 PWP 108923 115688 224611 94920 93613 188533 Total 108923 121156 230079 94920 101321 196241 Capacity Utilisation 100% 85.47% (%) Your company has achieved an overall capacity utilization of 100% against 85.47% in the previous year. The production was higher by 33,838 MT over the previous year. The production mix of newsprint and printing & writing paper was 2:98 against 4:96 in the previous year. Your company s strategy of keeping the production mix flexible between newsprint and printing & writing paper has improved the sales revenue and the profit. During the year, your company has exported 38,645 MT of printing & writing paper against 41,264 MT in the previous year. Your company has sold the entire production and achieved zero stock of finished goods as on 31.3.2006. This is the 15 th year in which your company has achieved zero stock of finished goods at the end of the financial year. This is a unique record in the Paper Industry. In-house hardwood pulp production reached a new peak of 41,907 MT registering an improvement of 3644 MT over the previous year. This is the sixth year in which your company has increased the hardwood pulp production in a row. Your company has produced 4280.18 lakh units of power during the year against 3810.56 lakh units in the previous year. Of this, 831.38 lakh units were exported to the State grid. During the year, your company has drawn only 14.76 lakh units of power from the State grid, equivalent to 0.43% of the total consumption. This has enabled your company to control the cost on the energy front. Consequent on the good monsoon and increased sugar cane production, bagasse supplies have increased and the bagasse stock as on 31.03.2006 swelled to 315000 MT. With the abundant availability of bagasse, your company has stopped procuring bagasse from distant sources to keep the cost low. There was no water shortage during the year. Your company has maintained water conservation measures and kept the water consumption at 104 KL per MT of finished production. Your company set up a novel bio-methanation plant for generating methane gas (bio-gas) around 15000M 3 per day from bagasse wash water. The bio-gas is used as fuel in the lime-kiln replacing usage of furnace oil around 10 KL per day. Your company has registered the project under Clean 15

TAMIL NADU NEWSPRINT AND PAPERS LTD 16 Development Mechanism (CDM) with UNFCCC and has obtained 82955 CERs (Certified Emission Reduction) for the period from 1.8.2003 to 31.12.2005. In addition, your company will be generating about 37000 CERs per annum upto 31 st July 2013. Your company s bio-methanation plant is the country s first ever CDM Project in the waste management sector, to be registered with the UNFCCC and the first CDM Project from the Indian Paper Industry. 4. MARKET TRENDS Newsprint is in an uptrend right from March 2003. The imported newsprint price has increased from USD 590 per MT during January - March 2005 to USD 670 per MT during January-March 2006 and to USD 700 per MT for supplies during April-June 2006. Correspondingly, the newsprint price in the domestic market has also increased from Rs. 26,250 per MT during January-March 2005 to Rs. 30,250 per MT during January-March 2006 and to Rs. 31,500 per MT for supplies during April-June 2006. Printing & Writing Paper market was stable throughout the year. To neutralise partly the cumulative adverse impact of the cost increase, printing & writing paper prices were increased in the domestic as well as export sales. Pulp price in the International market was stable during the year, price ranging from USD 486 to USD 540 per MT in the case of soft wood pulp and USD 482 to USD 513 in the case of hardwood pulp. However, imported softwood pulp price has increased to USD 650 per MT and hardwood pulp USD 570 per MT since April 2006. To overcome the competition from B Grade Mills, and to improve the sales realization, your company has increased the production of value added products viz. TNPL Copier, Ultrawhite Maplitho, Hi-tech Maplitho, Offset Printing and TNPL Elegant Printing from 78368 Mts. in 2004-05 to 105259 Mts. in 2005-06. During the year, the Government of India has reduced the export incentive for printing & writing paper from 9% to 7% for Sheets & Cut size papers with effect from 26.05.2005 and from 4% to 3% for Reels with effect from 14.9.2004. During the year, your company has exported 38,645 MT of PWP to 22 countries. 5. OUTLOOK The domestic consumption of Newsprint is expected to grow by 5% per annum and printing & writing paper by 6% per annum. The pulp price in the international market has firmed up from April 2006. However, paper price in the international market has increased only marginally. With the steep increase in the pulp prices, the paper prices in the international market may rise in the near term. The market for surface sized paper is expected to grow by 8% and Copier paper by 15% per annum. With the installation of the state of the art Size Press in PM-I, Copier production has been increased from 19311 MT in 2003-04 to 28,141 MT in 2004-05 and 37,645 MT in 2005-06 registering a growth of 46% in 2004-05 and 34% in 2005-06. The company has set a target of 42,000 MT of Copier production for the year 2006-07. The newsprint market is also showing a positive trend. The newsprint price in the international market has increased to USD 700 per MT during April June 2006. The price is expected to remain firm during the current year. In the Union Budget 2006-07, the Government has reduced the excise duty on printing & writing paper from 16% to 12% effective from 1.3.2006. Import duty on printing & writing paper has been reduced from 15% to 12.5% with effect from 1.3.2006. Import duty on newsprint is retained at 5%. Cenvatable countervailing duty of 4% introduced in the Union Budget 2006-07 is applicable for printing & writing paper. Newsprint is exempted from the levy of countervailing duty. 6. HIGHLIGHTS OF THE YEAR Achieved highest production of 2,30,079 MT and highest sales of 230079 MT. Production during the year was higher by 33,838 MT over the previous year. Sales during the year was higher by 28792 MT compared to the previous year. Achieved highest production of 37,645 MT of TNPL Copier Paper against 28,141 MT in the previous year registering a growth of 34%. Achieved highest Hardwood Pulp production of 41,907 MT against 38,263 MT in the previous year. This is the sixth consecutive year in which the company has increased the Hardwood Pulp production. Exported 38,645 MT of Printing & Writing Paper during the year valuing Rs. 117.55 crores on FOB basis. This is the highest export of wood free uncoated printing & writing paper from India during 2005-06. Introduced a new product, namely, TNPL Copy Crown for Inkjet and laser printers. Implemented Farm Forestry Scheme in 6054 acres benefiting 1466 farmers in nine districts and Captive Plantation in 188 acres. Total area covered under Farm Forestry Scheme and Captive Plantation during the year is 6242 acres against 3076 acres in the previous year. It is proposed to implement the Farm Forestry Scheme and Captive Plantation in about 10000 acres during 2006-07. Achieved Zero Stock of finished goods (NP & PWP) at the end of the financial year. This is the 15 th year in which your company has achieved Zero Stock (NP & PWP) at the end of the financial year. Received the Special Export Award from CAPEXIL for the seventh consecutive year in recognition of the outstanding export performance.

The Mill Development Plan has been taken up for implementation at a capital outlay of Rs.565 Crores. The project will be implemented before 31.3.2007. Processed 16,70,636 M 3 of Black liquor in energy efficient falling film evaporator, against 14,62,850 M 3 in the previous year. Registered the Bio-Methanation project with United Nations Framework Convention Climate Change (UNFCCC) as the country s first CDM Project in the waste management sector. The project generates about 37,000 CERs per annum. 82955 CERs have been received from UNFCCC for the period from 1.8.2003 to 31.12.2005. 7. WIND FARM Your company has increased the wind farm capacity from 21.75 MW to 28 MW by installing 5 Nos. of 1250 KW wind energy generators at Devarkulam during February 2006. During the year under review, your company has generated 309.31 lakh units of wind power against 348.86 lakh units in the previous year. The wind farm, has earned a profit of Rs.17.71 lakhs during the year. 8. EXPORTS Your company has exported 38,645 MT of woodfree uncoated printing & writing paper valuing Rs. 128.44 Crores (C & F) during the year 2005-06. Your company has set a target of 42000 MT for exports during 2006-07. 9. FORFEITURE OF SHARES A sum of Rs. 18.76 lakhs has been received during the year towards allotment and call money arrears. During the year, TNPL has forfeited 427400 shares for which Rs. 293.68 lakhs were overdue. The above shares were forfeited after ten years of IPO and after giving several notices and reminders to the defaulting shareholders. 10. FIXED DEPOSITS Your company has stopped accepting fresh deposits from 1.6.2002 and renewals from 1.8.2005. The outstanding deposits as on 31.3.2006 was Rs. 10.72 Crores against Rs. 17.40 Crores in the previous year. Number of depositors as on 31.3.2006 was 3929 against 6627 depositors in the previous year. 11. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars required under Sec. 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are furnished in the Annexures to this Report (Annexure I and II). 12. STATEMENT OF EMPLOYEES PARTICULARS None of the employees drew remuneration of Rs. 24,00,000 or more per annum/ Rs. 2,00,000 or more per month during the year. This information is furnished as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975. 13. DIRECTORS Pursuant to the orders of Government of Tamil Nadu, Thiru D. Rajendran, IAS has been co-opted as an Additional Director in place of Thiru Rameshram Mishra, IAS w.e.f. 17.10.05. Thiru D. Rajendran, IAS will hold office upto the date of forthcoming Annual General Meeting and is eligible for appointment as Director in the Annual General Meeting. Tvl. R. S. Kanna, IAS, V. R. Mehta and V. Narayanan, Directors retire by rotation in the forthcoming Annual General Meeting. They are eligible for re-appointment as Directors in the Annual General Meeting. 14. COST AUDITORS Pursuant to orders of the Department of Company Affairs, M/s S T R & Associates, Cost Accountants, Chennai have been appointed as Cost Auditors of your Company for the year 2005-2006. 15. AUDITORS In terms of Section 619(2) of the Companies Act, 1956 the Department of Company Affairs has appointed M/s. Maharaj N. R. Suresh & Co., Chartered Accountants, Chennai as the Auditors of your Company for the year 2005-2006. 16. INDUSTRIAL RELATIONS Overall industrial relations during the year were cordial. The Directors place on record their appreciation of the valuable contribution made by the employees of your Company towards the performance and growth of your Company. 17. SOCIAL DEVELOPMENT Your company is now well perceived as an environment caring company. It has taken up the all round development of the Kagithapuram area. Besides building up community assets, your company has promoted health camps and poverty alleviation efforts in the area. 18. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors Responsibility Statement, it is hereby confirmed: a) That the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; 17

TAMIL NADU NEWSPRINT AND PAPERS LTD b) That the selected accounting policies were applied consistently and judgements and estimates that are reasonable and prudent were made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the company for that period; c) That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) That the annual accounts were prepared for the financial year ended 31 st March 2006 on a going concern basis. stipulated by Clause 49 of the Listing Agreement is attached to this report. 20. CEO/CFO CERTIFICATION Thiru S. Ramasundaram, IAS, Chairman and Managing Director and Thiru A. Velliangiri, Director (Finance) & Secretary have furnished the certificate as per the requirement of Clause 49(V) of the Listing Agreement. 21. ACKNOWLEDGEMENT The Directors have pleasure in recording their appreciation of the assistance, co-operation and support extended to your company by the shareholders, Govt. of Tamil Nadu, the participating Indian Financial Institutions, Commercial banks, Depositors, Managements of Sugar Mills, the indentors and customers. 19. CORPORATE GOVERNANCE Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report and Corporate Governance Report are made a part of this Annual Report. A Certificate from the auditors of the company regarding compliance of the conditions of Corporate Governance as Place : Chennai 600 032 Date : 9.5.2006 For and on behalf of the Board S. RAMASUNDARAM, IAS CHAIRMAN AND MANAGING DIRECTOR 18

ANNEXURE I PARTICULARS UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 I. (A) REPORT ON ENERGY CONSERVATION 1. 1 No. 132 KW clarified water pump was provided with Variable Frequency Drives with an investment of Rs. 6 lakhs. This has resulted in annual savings of 1.6 lakh units of electricity. 2. 10 Nos. of running motors were downsized with a total installed KW reduction of 125 KW. There is no investment in the above project. The annual savings works out to 1 lakh units. 3. Process modification in Pulp Mill towards energy conservation through motors removed from service with a combined load of 59 KW. The annual savings works out to 4.8 lakh units. 4. Flash steam vented out to the atmosphere in Paper Machine I was recovered and utilised in Power Boilers 1 to 4 deaerator. This has resulted in reduction in LP steam consumption to the extent of 10,000 MTs per annum, with no investment. 5. The total energy savings works out to Rs. 63 lakhs per annum. The investment towards Energy Conservation is Rs. 6 lakhs. 6. During the year, energy audit was carried out through Confederation of Indian Industry, Hyderabad. The recommended Energy Conservation measures will be implemented during 2006-07. I. (B) RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION (AS PER FORM B SEE RULE 2) I. SPECIFIC AREAS IN WHICH R&D CARRIED OUT BY THE COMPANY ALTERNATIVE RAW MATERIALS FOR PULPING Pulping of wood varieties such as Acacia, Pinewood, Wattle and Blue gum as an alternative to Eucalyptus Hybrid, was carried out on laboratory scale to assess their suitability and chemicals requirement and pulp yield. Suitability of other wood varieties such as Dlabergia Sisoo, Samania Saman, Hilanthus Execise, Casto Siamea Wood, Gmelina Arborea, Grenia Tillitolia, Melia Dubia forest wood species were evaluated for their pulping performance. In addition, imported mixed hardwood chips from Australia were also evaluated for their suitability as alternative. As an alternative to bagasse fiber source, the suitability of Sabai Grass, Sorghum Vulgaris were studied for pulping properties. Suitability of 14 clones of Eucalyptus species was carried out in comparison to Euca hybrid. PULPING Pulping of bagasse received from different offsites was carried out to comparatively evaluate the differences. Also the effect of different fiber fractions on pulping of bagasse was studied. BLEACHING Bleaching of Acacia, Blue gum, Pinewood and Wattle pulps were carried out with conventional CE (P) HH bleaching to a brightness of 85% ISO and compared with Euca hybrid pulp. Comparison was made with regard to bleach chemical consumption, viscosity and strength properties. Elemental chlorine free OO-DHT-E(OP)-D bleaching involving Oxygen delignification and Chlorine di-oxide was carried out for Hardwood pulp and compared with conventional CE(P)HH bleaching with regard to brightness development, yield, pulp properties and pollutant generation. ENZYME PREBLEACHING Use of Xylanase prebleaching stage as step towards Chlorine reduction and AOX reduction in bleaching was studied in laboratory. For same ultimate brightness target of 85% ISO, 20% Chlorine reduction could be achieved with enzyme pretreatment in addition to proportionate reduction in AOX. Plant scale trials are being planned. WILD SUGARCANE Studies on wild sugarcane developed on trial plantation was carried out to assess the yield per hectare, pulping and bleaching properties in comparison to conventional sugarcane. Potential for using High Fibre Cane varieties with relatively less sugar will be tried as a fibrous raw material as well as to generate renewable energy. NEW PRODUCT DEVELOPMENT COPY CROWN a multipurpose office stationery with improved properties over regular copier paper which include brightness, ink jet printability, reduced two sidedness, whiteness and stiffness was developed and has been marketed on trial basis. The field trials on the product performance have been satisfactory. The new A4 80 gsm premium product is meant to cater the hitech segment of A4 cut size market. PRODUCT IMPROVEMENT Use of alternative Oxidised starch products from different sources was tried on plant scale and new products could be identified for surface sizing of paper at lower cost. Two indigenous products and two imported products were tried. With a view to reduce dusting and linting during printing, use of additives such as antilinting agents, starch products etc., were tried on lab scale and on plant scale. The role of additives in improving surface strength in terms of IGT Viscosity Velocity Product (VVP) was studied. Recommendations for plant scale continuous addition have been made. 19

TAMIL NADU NEWSPRINT AND PAPERS LTD 20 The role of different wood varieties on pulp properties such as stiffness, curl needed for Copier was studied. Improving existing Copier grade to meet International Paper Products standard was carried out by trial scale in plant with modifications in pulp combination and additives. Improvement in Copier quality meeting International Paper Products recommendations could be achieved. Use of alternative fillers such as calcined clays, high bright clays, and Synthetic silicates for high bright products were analysed for their suitability in laboratory. Some have been recommended for plant trials. Improving bulk of products by using BCTMP and through additives was studied in laboratory. Use of BCTMP to about 10% was tried in plant scale and bulk improvement could be observed. Further trials have been planned. Improving shade stability of products through usage of Direct dyes and Pigment dyes in place of basic dyes were studied. Pigmenting of paper for improved printability and surface characteristics was carried out on trial basis. PROCESS IMPROVEMENTS Pulping of Wattle, Blue gum and Hybrid separately instead of mixed cooking was implemented so as to have better control over pulping and bleaching. Usage of Polyelectrolyte for dewatering of lime sludge was studied. Chloride removal from ESP ash through fractional crystallisation of sulfate has been implemented in the plant to remove Chloride and Potassium from system. Liquid OBA addition without dilution so as to prevent unwanted quenching of OBA activity by poor water quality has been implemented. Addition of Synthetic fillers at the fan pump after centricleaning system to prevent loss of costly filler and better brightness realisation with reduced specific consumption in hightech grades. Installation and stabilisation of conical refiner with specific energy control for hardwood pulp refining in PM2. ENVIRONMENT RELATED R&D Use of Ferric Chloride for colour removal in anaerobic stream was implemented in plant in place of alum, based on laboratory scale studies. Biomethanation process improvements and augmentation of the system with additional reactor to take care of excess bagasse washing effluent load. Constant monitoring of environmental parameters, both water and air and maintaining them within stipulated levels set by Pollution Control Board. Installation of Centrifugal Decanter, to take care of excess secondary sludge generated, in combination with polyelectrolyte addition. Trials on sludge dewatering of mixed waste sludge in effluent treatment plant using belt filters and polyelectrolyte. Installation of online dust monitoring in limekiln and in one of the power boilers. CDM AND CARBON TRADING The Kyoto Protocol under the United Nations Framework Convention on Climate Change introduced a market-based approach to combat climate change through emissions trading and generation of tradeable green house gas emission reduction credits through projects. TNPL participated in the CDM process and developed two projects viz,, GHG reduction from biomethanation plant and GHG reduction through generation of renewable energy using windmills. The Biomethanation project got registered with UNFCCC with a potential CER (Certified Emission Reduction) generation of around 37000 CERs for a period of 10 years. II. BENEFITS DERIVED AS A RESULT OF ABOVE R&D Usage of Bluegum and Wattle has resulted in better pulp yield in comparison to Euca hybrid. Separate pulping of wood species instead of mixed pulping has paved way for active alkali reduction. Wild cane gives improved pulp yield and better tear factor in comparison to conventional bagasse. New product developed meets modern hitech copier segment requirements. Alternatives for additives and process improvements have reduced chemical requirements. Studies on improving surface strength through additives have improved the paper quality. Use of OBA without dilution and continuous monitoring has reduced OBA overall requirement. Pigmenting of paper has paved way for improving bagasse based paper. Use of Ferric Chloride in place of Alum has resulted in cost savings with reduced sludge and TDS. Maximising Biogas production has resulted in furnace oil savings in Limekiln. Installation of centrifugal decanter for secondary sludge has resulted in reduction in MLSS in the system within controllable limits. III. FUTURE PLAN OF ACTION Alkaline sizing of bagasse based papers. Use of Direct/Pigment dyes for shading and improved colour stability. Studies on ECF bleaching of different wood species and bagasse. Enzyme prebleaching and its effectiveness in ECF. Biorefining of pulps for energy reduction and better strength development. Pigmenting of bagasse based papers.

Studies on high fibre cane varieties with low sugar content as fibre source and for renewable energy generation. Development of seedlings for captive wood plantation. Alternative raw material evaluation. Product and process improvement studies. IV. EXPENDITURE ON R&D Rs. in lakhs a) Capital : 23.69 b) Recurring : 65.34 c) Total : 89.03 d) Total R&D expenditure as a : 0.11% percentage of total turnover I. (C) FOREIGN EXCHANGE EARNINGS a. Activities relating to Exports During the year, the company exported 38645 Mts. of Printing and Writing Paper valued at Rs. 128.44 crores. Continuous efforts are taken to increase exports by exploring new markets. b. Foreign Exchange Earnings Rs. in lakhs Export of PWP (CIF value) 12843.84 I. (D) FOREIGN EXCHANGE OUTGO a. Imports (on CIF basis) Raw materials 7451.17 Components, spare parts & chemicals 1931.35 Imported coal 9709.29 Capital goods 1119.53 Total 20211.34 b. Other than imports Engineering & Supervision charges 6.22 Interest & Commitment charges 993.10 Repayment of foreign currency loan 3369.81 Others 40.51 Total 4409.64 21

TAMIL NADU NEWSPRINT AND PAPERS LTD Form A (See Rule 2) ANNEXURE II A. POWER AND FUEL CONSUMPTION 1. Power S.No. PARTICULARS UOM 2005-2006 2004-2005 Current year Previous year a) Purchased Unit Lakh KWH 14.76 14.52 Energy Charges Rs. in lakhs 54.23 53.35 MD & Other Charges 362.07 346.57 Total Charges 416.30 399.91 Rate/Unit (Excluding MD & Other Charges) Rupees 3.68 3.68 b) Own Generation (i) Through Steam Turbine/ Generator Units generated Lakh KWH 4280.18 3810.56 Cost / Unit (Variable Cost) Rupees 1.64 1.58 Units Consumed Lakh KWH 3448.80 3047.04 Cost / Unit (Variable Cost) Rupees 1.57 1.50 Units Exported to TNEB Lakh KWH 831.38 763.52 Cost / Unit (Variable Cost) Rupees 1.93 1.89 (ii) Through Wind Turbine/ Generator * Lakh KWH 309.31 348.86 Cost / Unit (Total Cost) Rupees 2.64 2.14 * Power sold to TNEB (Generation net of imports) 2. Fuel Consumed # S. No. PARTICULARS 2005-2006 2004-2005 Qty. Total Cost Avg. Rate Qty. Total Cost Avg. Rate (MT) Rs. lakhs Rs. (MT) Rs. lakhs Rs. Fuel Purchased A Indigenous Coal 4136 98.81 2389 44528 903.36 2029 B Imported Coal 360803 8666.28 2402 272746 6565.30 2407 C Raw Lignite 6006 78.62 1309 D Furnace Oil (Kilo Litre) 8092 1179.52 14576 7723 949.60 12295 E Agro Fuel 2037 25.21 1238 7167 82.34 1149 Fuel Internal Generation F Pith 88950 104643 G MLSS Pith 13211 16545 H Black Liquor Solids 228991 199071 J Bio Methane Gas - 000 M 3 4831 3257 22 # Includes Fuel consumed for the Inhouse Power exported to TNEB B. CONSUMPTION PER UNIT OF PRODUCTION OF PAPER S.No. PARTICULARS UOM Current Year Previous Year (1) (2) NP P&WP NP P&WP a) Electricity KWH 1571 1474 1485 1527 b) Ind.Coal Kg 15 18 187 228 c) Imp.Coal Kg 1130 1323 887 1083 d) Raw Lignite Kg 0 0 25 31 e) Furnace Oil Ltr 19 36 23 40 f ) Agro Fuel Kg 8 9 30 37 g) Pith Kg 333 390 439 536 h) MLSS Pith Kg 49 58 69 85 i) Black Liquor Solids Kg 802 1005 797 1021 j) Bio-Methane Gas 000 M 3 10 21 9 17

ADDENDUM TO DIRECTORS REPORT Pursuant to the orders of Government of Tamil Nadu, Thiru V. Murthy, IAS was appointed as Managing Director. Thiru V Murthy, IAS assumed charge on 17.5.06 AN. Pursuant to the orders of Government of Tamil Nadu, Thiru Shaktikanta Das, IAS and Thiru Sandeep Saxena, IAS have been appointed as Additional Directors in place of Thiru D. Rajendran, IAS and Thiru R. S. Kanna, IAS, respectively. The above directors will hold office upto the date of forthcoming Annual General Meeting and are eligible for appointment as Directors in the General Meeting. Government of Tamil Nadu have also directed that the Secretary to Government, Industries Department shall function as Chairman of the Company. Accordingly, Thiru Shaktikanta Das, IAS, has become the Chairman of the Company. For and on behalf of the Board Place: Chennai Date : 20.6.2006 V. MURTHY, IAS MANAGING DIRECTOR 23

TAMIL NADU NEWSPRINT AND PAPERS LTD AUDITORS REPORT TO THE MEMBERS OF TAMIL NADU NEWSPRINT AND PAPERS LIMITED 1. We have audited the attached Balance Sheet of TAMIL NADU NEWSPRINT AND PAPERS LIMITED as at 31 st March 2006, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we 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. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor s Report) Order, 2003, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said order. 4. Further to our comments in this Annexure referred to above, we report that: i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of the audit. ii) In our opinion, proper books of accounts as required by law have been kept by the company so far as appears from our examination of those books. iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account. iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in subsection (3C) of Section 211 of the Companies Act, 1956. v) On the basis of written representations received from the directors as on 31 st March, 2006 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31 st March 2006 from being appointed as a director in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. vi) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: a. in the case of the Balance Sheet, of the state of affairs of the Company as at 31 st March 2006; b. in the case of the Profit & Loss Account of the PROFIT for the year ended on that date; and c. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Place: Chennai Date : 09 th May 2006 For MAHARAJ N. R. SURESH & CO. Chartered Accountants N. R. SURESH Partner Membership No.200/21661 24

ANNEXURE REFERRED TO IN PARA 3 OF OUR REPORT OF EVEN DATE i) a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. ii) a) iii) a) b) All the assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its business and assets. No material discrepancies were noticed on verification. c) No Substantial part of the fixed assets has been disposed of during the year. Inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. c) The Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of stocks as compared to book records have been properly dealt with in the books of accounts and were not material. The company has neither granted nor taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. iv) In our opinion and according to the information and explanations given to us, there exists an adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchases of inventory and fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls. v) In our opinion and according to the information and explanations given to us, there are no contracts or arrangements referred to in Section 301 of the Companies Act, 1956 that need to be entered into the register maintained under that section. vi) The company has complied with the provisions of Sections 58A, 58AA or other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal. vii) In our opinion, the company has an internal audit system commensurate with its size and nature of its business. viii) On the basis of records produced to us, we have broadly reviewed the cost records maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that, prima facie, the cost records prescribed have been made and maintained. ix) a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it. According to the information and explanations given to us, no undisputed amounts payable were in arrears, as at 31 st March 2006 for a period of more than six months from the date they became payable. The provisions of Employees State Insurance Act are not applicable to the company. b) According to the information and explanation given to us, there are no dues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty and cess, which have not been deposited on account of any dispute other than the following: Sl. Nature of Amount Forum where Dispute No. Dues Rs. Lacs is pending 1. Income Tax 231.57 Income Tax Appellate Authorities 2. Wealth Tax 10.22 Wealth Tax Assessing Authorities 3. Customs Duty 8.68 Madras High Court 4. Customs Duty 217.21 Customs Assessment Authorities Total 467.68 x) The Company has no accumulated losses, as at 31 st March 2006. The company has not incurred cash losses in the financial year under report and in the immediately preceding financial year. xi) The company has not defaulted in repayment of dues to a financial institution, bank or debenture holders. xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. xiii) The company is not a chit fund or a nidhi/mutual benefit fund/society. 25

TAMIL NADU NEWSPRINT AND PAPERS LTD xiv) The company was dealing in Mutual Fund investments during the year. Proper records have been maintained of the transactions and contracts and timely entries have been made. The said investments have been held by the company in its own name. However no such investments are held as at 31 st March 2006. xv) The company has not given any guarantee for loans taken by others from bank or financial institutions. xvi) The term loans have been applied for the purpose for which they were raised. xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company as at 31.03.2006, we report that no funds raised on short term basis have been used for long term investment. xviii) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year. xix) The company has not issued any debentures during the year. xx) The Company has not raised money by public issue during the year. However the company has received calls in arrears in respect of Public Issue made in November 1995 for which Project has already been completed. xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit. Place : Chennai Date : 09 th May 2006 For MAHARAJ N. R. SURESH & CO. Chartered Accountants N. R. SURESH Partner Membership No.200/21661 26

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619 (4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF TAMIL NADU NEWSPRINT AND PAPERS LIMITED FOR THE YEAR ENDED 31st MARCH 2006 I have to state that the Comptroller and Auditor General of India has no comments upon or supplement to the Auditors Report under Section 619(4) of the Companies Act, 1956 on the accounts of Tamilnadu Newsprint and Papers Limited, Chennai for the year ended 31st March 2006. Place : Chennai 18 Date : 13-07-2006 S. MURUGIAH, I.A. & A.S. ACCOUNTANT GENERAL 27

TAMIL NADU NEWSPRINT AND PAPERS LTD REVIEW OF ACCOUNTS OF TAMIL NADU NEWSPRINT AND PAPERS LTD, CHENNAI FOR THE YEAR ENDED 31ST MARCH 2006 BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA 1. FINANCIAL POSITION The table below summarises the financial position of the Company under broad headings for three years upto 2005-06 (Rs. in lakhs) 2003-04 2004-05 2005-06 LIABILITIES a) Paid-up Capital (including advances for shares) 6935.86 6935.99 6937.78 b) Reserves and Surplus 37987.69 39607.34 45314.03 c) Borrowings: i) Short Term & Long Term 25317.43 24677.80 30508.60 ii) Cash Credit 81.77 325.45 304.78 d) Deferred Tax Liability 17603.00 16857.00 15476.00 e) Trade dues and other liabilities (including provisions) 19547.82 23349.85 22972.39 Total 107473.57 111753.43 121513.58 ASSETS a) Gross Block 136463.58 138344.40 143235.13 b) Less : Depreciation 61368.67 66563.96 72995.94 c) Net Fixed Assets 75094.91 71780.44 70239.19 d) Capital Works-in-progress 968.71 1104.72 11513.28 e) Other Assets / Investments 814.76 114.05 114.05 f ) Current Assets, Loans and Advances 30568.81 38734.43 39633.87 g) Intangible Assets: i) Miscellaneous Expenditure 26.38 19.79 13.19 ii) Accumulated Losses Total 107473.57 111753.43 121513.58 CAPITAL EMPLOYED 87084.61 88239.21 98413.95 NET WORTH 44897.17 46523.54 52238.62 Note: 1. Capital Employed represents Net Fixed Assets PLUS Working Capital. 2. Net Worth represents Paid-up Capital PLUS Reserves LESS Intangible Assets. 28 2. CAPITAL STRUCTURE a) Debt-Equity Ratio The Debt-Equity Ratio for the Company was 0.35:1 in 2003-04, 0.23:1 in 2004-05 and 0.35:1 in 2005-06. b) The amount of loans taken from Government of Tamil Nadu outstanding as on 31 st March 2006 was Rs. NIL lakhs. 3. RESERVES AND SURPLUS Reserves and Surplus accumulated upto 31.3.2006 amounted to Rs.45314.03 lakhs as against Rs.39,607.34 lakhs as on 31.3.2005 and Rs.37,987.69 lakhs as on 31.3.2004. The Reserves and Surplus (Rs.45,314.03 lakhs), amounted to 37.29 percent of the total liabilities in 2005-06 as against 35.51 percent in 2004-05 and 35.35 percent in 2003-04, and 653.14 percent of the equity capital (Rs. 6,937.78 lakhs) in 2005-06 as against 571.04 percent in 2004-05 and 547.70 percent in 2003-04.

4. LIQUIDITY AND SOLVENCY a) The percentage of current assets to total net assets varied from 28.44 in 2003-04 to 34.55 in 2004-05 and to 32.62 in 2005-06. b) The percentage of current assets to current liabilities (including provisions) varied from 156.38 in 2003-04 to 172.53 in 2004-05 and to 172.52 in 2005-06. c) The percentage of quick assets (Sundry debtors, advances, Cash and Bank balances) to current liabilities varied from 112.08 in 2003-04 to 123.72 in 2004-05 and to 153.01 in 2005-06. 5. WORKING CAPITAL The working capital (Current assets, Loans and advances LESS trade dues and current liabilities) of the Company at the close of three years ending with 31.3.2006 amounted to Rs.11,020.99 lakhs, Rs.15,377.51 lakhs and Rs.16,661.48 lakhs respectively and represented 2.59 months value of production in 2005-06; 2.94 months value of production in 2004-05; and 2.17 months value of production in 2003-04. 6. SOURCES AND USE OF FUNDS Funds amounting to Rs. 14,252.96 lakhs from internal sources (Reserves, Depreciation, Provision & Surplus) and Rs. 5811.92 lakhs from external sources were utilised during 2005-06 as follows: (Rupees in lakhs) a) Gross fixed assets including capital works in progress 15299.29 b) Increase in net current assets 3384.59 c) Decrease in Deferred Tax Liability 1381.00 20064.88 7. WORKING RESULTS The Working Results of the Company for the three years upto 31 st March 2006 are tabulated below: (Rs. in lakhs) Sl.No. Particulars 2003-04 2004-05 2005-06 a) Profit (+)/Loss (-) as per accounts 5280.08 3794.60 8054.57 Add/Deduct: Investment Allowance Reserve Add/Deduct: Adjustment for prior period 331.13 507.49 b) Profit(+)/Loss(-) for the year 5611.21 3794.60 8562.06 c) Profit(+)/Loss(-) before Tax and Investment Allowance 6857.58 3916.95 10147.36 Tax provision 1577.50 122.35 2092.79 d) Profit(+)/Loss(-) after Tax and before Investment Allowance 5280.08 3794.60 8054.57 e) Percentage of Profit before Tax and Investment Allowance to: i) Sales 11.75 6.11 13.08 ii) Gross Fixed Assets 5.03 2.83 7.08 iii) Capital Employed 7.87 4.44 10.31 f ) Percentage of Profit after Tax and before Investment Allowance to: i) Net Worth 19.76 8.16 15.42 ii) Equity Capital 76.13 54.71 116.09 iii) Capital Employed 6.06 4.30 8.18 29 The reasons for increase in profit during the year is directly attributed to increase in Sales and Carbon credit sales.

TAMIL NADU NEWSPRINT AND PAPERS LTD 8. COST TRENDS The table below indicates the percentage of cost of sales to sales during three years upto 2005-06 (Rs. in lakhs) 2003-04 2004-05 2005-06 Sales 58359.62 67128.52 77567.10 Less: Profit for the year 6857.58 3916.95 10147.36 Add: Loss for the year Cost of Sales 51502.04 63211.57 67419.74 Percentage of Cost of Sales to Sales 88.25 94.17 86.92 9. PRODUCTION PERFORMANCE The value of production during the three years upto 2005-06 worked out below: (Rs. in lakhs) 2003-04 2004-05 2005-06 1. Sales 58359.62 67128.52 77567.10 2. Closing stock of finished goods and works-in-progress (at cost) 2522.96 1112.58 706.60 3. Opening stock of finished goods and works-in-progress (at cost) 161.12 2522.96 1112.58 4. Value of production (1+2-3) 60721.46 65718.14 77161.12 The percentage of value of production to net worth increased / decreased from 135.24 in 2003-04 to 141.26 in 2004-05 and to 147.71 in 2005-06. The percentage of value of production to total net assets of the Company fluctuated from 56.49 in 2003-04 to 58.81 in 2004-05 and to 63.5 in 2005-06. 10. INVENTORY AND PRODUCTION The following table indicates the comparative position of the inventory and its distribution at the close of three years upto 2005-06. (Rs. in lakhs) 2003-04 2004-05 2005-06 30 i) Raw materials and components 5104.78 5889.00 6045.60 ii) Stores and Spare parts 1846.36 2452.13 1812.94 iii) Opening Stock of finished goods and works-in-progress (at cost) 1018.31 1099.71 706.60 iv) Finished goods 1504.65 12.87 v) Loose tools 4.01 vi) Other items 901.11 3015.20 3585.71 The stock of raw materials and components, stores, spares was equivalent to 3.61 months consumption in 2003-04 compared with 3.29 months in 2004-05 and 3.8 months in 2005-06. The works-in-progress at the end of 2003-04 represented about 0.20 months value of production at cost as against 0.21 months during the year 2004-05 and 0.10 months during the year 2005-06.

11. SUNDRY DEBTORS AND TURNOVER The following table indicates the value of book-debts and sales for three years upto 2005-06. (Rs. in lakhs) As on 31 st March Book-debts considered Sales during Percentage of Good Doubtful Total the year debtors to sales 2004 8930.72 1091.97 10022.69 58359.62 17.17 2005 11838.26 648.95 12487.21 67128.52 18.60 2006 12776.68 356.99 13133.67 77567.10 16.93 12. The following table indicates details of debts outstanding for more than one year as on 31.03.2006. Government Government Private Total Departments Companies Parties (Rs. in lakhs) Debts Outstanding For 1-2 years 38.70 38.70 For 2-3 years 8.85 8.85 For over 3 years 55.68 319.99 375.67 Total 94.38 328.84 423.22 ACCOUNTANT GENERAL 31

TAMIL NADU NEWSPRINT AND PAPERS LTD REPORT ON CORPORATE GOVERNANCE As required by Clause 49 of the Listing Agreement with the Stock Exchanges, a report on Corporate Governance in accordance with the SEBI prescribed format is given below: A. MANDATORY REQUIREMENTS 1. Company s Philosophy TNPL s philosophy on Corporate Governance endeavours to achieve highest levels of transparency, integrity and equity, in all its operations and in its dealings with all its stakeholders, including shareholders, employees, the Government and lenders. 2. Board of Directors a. Composition and Category of Directors The composition of Board of Directors is in conformity with the Corporate Governance code. The Board comprises of a Chairman (Executive Director, nominated by Government of Tamil Nadu), one Executive Director, three non-executive Directors nominated by the Government of Tamil Nadu, one independent non-executive Director nominated by Industrial Development Bank of India Limited (equity investor) and five independent non-executive Directors as on 31.03.2006. The Independent Directors on the Board are experienced, competent and highly respected persons from their respective fields. They take active part in the Board and Committee meetings. None of the Directors on the Board is a Member on more than 10 Committees. Necessary disclosures have been made by the Directors in this regard. Board s functioning and Procedure The Board plays a pivotal role in ensuring good governance. The Board s role, functions, responsibility and accountability are clearly defined. In addition to its primary role of setting corporate goals and monitoring corporate performance, it directs and guides the activities of the Management towards the set goals and sets accountability with a view to ensure that the corporate philosophy and mission viz. to create long term sustainable growth that translates itself into progress, prosperity and the fulfilment of stakeholders aspirations is accomplished. It also sets standards of corporate behaviour and ensures ethical behaviour at all times and strict compliance with laws and regulations. b. Attendance of each Director at the Board of Directors Meetings held during 2005-2006 and the last AGM is as follows: Director Board of Directors Meetings Last AGM No. of Meetings Held Attended (held on 22.8.05) Attended EXECUTIVE DIRECTORS Tvl. Rameshram Mishra, IAS 3 3 Attended Chairman and Managing Director I/c(ceased w.e.f. 8.8.05) 32 S. Ramasundaram, IAS 5 5 Attended Chairman and Managing Director (w.e.f. 8.8.05 ) A. Velliangiri 8 8 Attended Director (Finance)

Director Board of Directors Meetings Last AGM No. of Meetings Held Attended (held on 22.8.05) Attended NON-EXECUTIVE DIRECTORS FROM GOTN Rameshram Mishra, IAS (As non-executive director from 9.8.05 till 17.10.05) N. Narayanan, IAS 1 1 (Ceased w.e.f. 26.5.05) R. S. Kanna, IAS 8 Not Attended D. Rajendran, IAS 4 4 (Appointed w.e.f. 17.10.05) K. Gnanadesikan, IAS 7 3 Not Attended (Appointed w.e.f. 26.5.05) INDEPENDENT NON-EXECUTIVE NOMINEE DIRECTORS FROM IDBI(EQUITY INVESTOR) R. S. Agarwal 8 8 Attended INDEPENDENT NON- EXECUTIVE DIRECTORS V. R. Mehta 8 7 Attended V. Narayanan 8 8 Attended Dr. S. Janakarajan 2 1 (ceased w.e.f. 27.6.05) R. R. Bhandari 8 8 Attended G. Prabhakara 7 5 Attended (appointed w.e.f. 21.4.05) N. Kumaravelu (appointed w.e.f. 27.6.05) 6 6 Attended c. Number of other Company Boards or Board Committees in which each of the Directors of the Company is a Member or Chairperson: Directorships held in other Committee Memberships Name of Director Category Companies Held in other Companies As Director As Chairman As Member As Chairman Tvl. S. Ramasundaram, IAS Executive 1 D. Rajendran, IAS Non-Executive 6 9 K. Gnanadesikan, IAS Non-Executive 5 R. S. Kanna, IAS Non-Executive 1 1 2 R. S. Agarwal Non-Executive 6 7 V. R. Mehta Non-Executive 5 3 2 V. Narayanan Non-Executive 10 2 4 4 G. Prabhakara Non-Executive R. R. Bhandari Non-Executive N. Kumaravelu Non-Executive 2 A. Velliangiri Executive 33

TAMIL NADU NEWSPRINT AND PAPERS LTD d. Number of Board Meetings held and the dates on which held: Eight Board Meetings were held during the year 2005-2006 as against the minimum requirement of four meetings. The dates on which the meetings were held are given below: 21.4.05, 26.5.05, 22.7.05, 22.8.05, 17.10.05, 5.12.05, 20.1.06, 21.3.06 Information placed before the Board of Directors In addition to matters statutorily requiring approval of the Board, all major items relating to mobilisation of resources, capital expenditure, investments, acquisitions, technology and risk management are discussed in the Board. All the information laid down in the Corporate Governance code are placed before the Board of Directors. All the items on the Agenda are accompanied by notes giving comprehensive information on the related subject and in certain matters such as financial/business plans, financial results, detailed presentations are made. The agenda and the relevant notes are sent in advance separately to each Director to enable the Board to take informed decisions. The minutes of the meetings of the Board are individually given to all Directors and confirmed at the subsequent Board Meeting. The minutes of the various Committees of the Board are given to the Members of the Committees and thereafter tabled before the Board for discussion at the subsequent Meeting. Particulars of Directors being appointed at the Annual General Meeting and Directors retiring by rotation and seeking reappointment have been given in the Notice convening the 26 th Annual General Meeting along with the Explanatory Statement. 3. Audit Committee a. Terms of reference The terms of reference of this Committee are wide enough to cover the matters specified for Audit Committee under Clause 49 of the Listing Agreements as well as in Sec.292(A) of Companies Act and are as follows: 1. Oversight of the company s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. 2. Recommending to the Board the appointment, reappointment and if required, the replacement or removal of the statutory auditors and fixation of audit fees. 3. Approval of payment to statutory auditors for any other services rendered by the statutory auditors. 4. Reviewing with the management, the annual financial statements before submission to the Board for approval, with particular reference to : a. Matters required to be included in the Directors Responsibility Statement to be included in the Board s report in terms of Clause (2AA) of Section 217 of the Companies Act, 1956. b. Changes, if any, in accounting policies and practices and reasons for the same. c. Major accounting entries involving estimates based on the exercise of judgment by management. d. Significant adjustments made in the financial statements arising out of audit findings. e. Companies with listing and other legal requirements relating to financial statements. f. Disclosure of any related party transactions. g. Qualifications in the draft audit report. 5. Reviewing, with the management, the quarterly financial statements before submission to the Board for approval. 34 6. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems. 7. Reviewing the adequacy of internal audit functions, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. 8. Discussions with internal auditors any significant finding and follow-up thereon. 9. Reviewing the findings of any internal investigations by the internal auditors into matter where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. 10. Discussions with statutory auditors before the audit commences, nature and scope of audit as well as have post-audit discussion to ascertain any area of concern.

11. To look into the reasons for substantial default in the payment to depositors, debentureholders, shareholders (in case of non-payment of declared dividend) and creditors. 12. Reviewing the company s financial and risk management policies. 13. The audit committee should have discussions with the auditors periodically about the internal control systems, the scope of audit including the observations of the auditors and review the half yearly and annual financial statements before submission to the Board and also ensure compliance of internal control systems. 14. The Audit Committee shall have authority to investigate into any matter in relation to the items specified in this section or referred to it by the Board and for this purpose, shall have full access to information contained in the records of the company and external professional advice, if necessary. 15. To review internal audit programme, to ensure coordination between the internal and statutory auditors, to ensure the internal audit function is adequately resourced and has appropriate standing within the company and to request internal audit to undertake specific audit projects, having informed management of their intentions. 16. Review of Cost Audit Report. 17. Reviewing any other areas which may be specified as role of the audit committee under amendments, if any, from time to time, to the Listing Agreement, Companies Act and other statutes. 18. Considering such other matters as may be required by the Board. The Audit Committee mandatorily reviews the following information : 1. Management discussion and analysis of financial condition and results of operations; 2. Statement of significant related party transactions (as defined by the audit committee), submitted by management; 3. Management letters / letters of internal control weaknesses issued by the statutory auditors; 4. Internal audit reports relating to internal control weaknesses; and 5. The appointment, removal and terms of remuneration of the Chief internal auditor shall be subject to review by the Audit Committee. The recommendations of the Audit Committee on any matter relating to financial management, including the audit report, shall be binding on the Board. b. Composition, name of members and Chairperson In TNPL, the Audit Committee was established even before the introduction of the Corporate Governance code. Currently, the following five non-executive Directors are the members in the Audit Committee: Thiru V. Narayanan, Chairman of the Committee Thiru V. R. Mehta, Member Thiru R. S. Agarwal, Member Thiru R. R. Bhandari, Member Thiru N. Kumaravelu, Member Thiru V. R. Mehta was the Chairman of the Audit Committee till 21 st April 2005. Thiru V. Narayanan became the Chairman of the Audit Committee from 26 th May 2005. The CMD, Director (Finance), Senior Management Executives, Statutory Auditors, External Internal Auditors and Cost Auditors are invited to the Audit Committee meetings. c. Meetings and attendance during the year Director No. of Meetings Held Attended Tvl. V. Narayanan 6 6 V. R. Mehta 7 6 R. S. Agarwal 7 7 R. R. Bhandari 7 7 S. Janakarajan 1 1 (ceased w.e.f. 8.6.05) N. Kumaravelu 4 4 35 The Audit Committee met 7 times during 2005-06 as against the minimum requirement of 3 meetings.

TAMIL NADU NEWSPRINT AND PAPERS LTD 4. Remuneration Committee a. Remuneration Policy Thiru Rameshram Mishra, IAS was holding additional charge as Chairman and Managing Director till 8.8.05 and was being paid remuneration by the Govt. in accordance with the Govt. Rules as applicable to his cadre. Thiru S. Ramasundaram, IAS is holding additional charge as Chairman and Managing Director with effect from 8.8.05 and is being paid remuneration by the Govt. in accordance with the Govt. Rules as applicable to his cadre. Thiru A. Velliangiri, Director (Finance) is drawing remuneration as per TNPL Rules applicable to officers of his category. No remuneration except sitting fees for attending the Board/Committee Meetings is paid to other Directors. As such, there has been no need to constitute a Remuneration Committee. b. Details of remuneration for the year ended 31.3.2006 Executive Directors (Rs. in lakhs) Name & Position Pay & Allowances Reimbursement of medical expenses Perquisites Total Retirement Benefits Tvl. A. Velliangiri 7.89 0.49 1.97 10.35 Gratuity and Director (Finance) Superannuation as per rules of the company Rameshram Mishra, IAS 0.37 0.37 As per Govt. rules applicable to his cadre S. Ramasundaram, IAS 0.17 0.17 As per Govt. rules applicable to his cadre Non-Executive Directors Remuneration by way of sitting fees for attending Board/ Board Committee Meetings are paid only to non-executive Directors. Sitting fees paid to non-executive Directors during the financial year are given below: 36 Name of the Director Sitting Fees Paid (Rs.) Tvl. Rameshram Mishra, IAS 18000 * N. Narayanan, IAS 6000 * S. Ramasundaram, IAS 24000 * D. Rajendran, IAS 28000 * K. Gnanadesikan, IAS 22000 * R. S. Agarwal 93500 V. R. Mehta 69000 V. Narayanan 84500 Dr. S. Janakarajan 15000 R. R. Bhandari 89000 G. Prabhakara 34000 ** N. Kumaravelu 63500 Total 546500 * remitted to Govt. of Tamil Nadu ** remitted to LIC Independent Directors were paid sitting fees of Rs. 6,000/- per meeting of the Board and Rs. 4,500/- per meeting of the Committee of the Board. This has been increased to Rs.10,000/- per meeting uniformly for Board meetings and Committee meetings with effect from 1.2.2006.

5. Shareholders Committee a. Shareholders /Investors Grievances Committee Shareholders complaints/grievances are redressed by the Registrar and Transfer Agent, namely M/s.Cameo Corporate Services Limited. The Board also constituted the Shareholders /Investors Grievances Committee in August 2001. The following two non-executive directors are the members in the Shareholders / Investors Grievances Committee as on 31.3.2006. 1. Thiru R. S. Agarwal Chairman of the Committee 2. R. R. Bhandari Member 3. N. Kumaravelu Member Thiru R. S. Agarwal became the Chairman of the Investors Grievances Committee from 26.5.05. The Investors Grievances Committee review and redress the grievances/complaints received from Shareholders/Investors. The Shareholders /Investors Grievances Committee met on 26 th May 2005 and reviewed the grievances/complaints received and the action taken on the grievances / complaints. Complaints Status: 1.4.2005 to 31.3.2006 Number of shareholders complaints received so far : 159 Number not solved to the satisfaction of shareholders : Nil Number of pending complaints : Nil b. Share Transfer Committee To expedite the process of share transfers, the Board has delegated the powers of share transfers to a Committee comprising of CMD, Director (Finance) and Chief General Manager (Finance). The Share Transfer Committee attends to the share transfer formalities thrice a month. The business transacted at the Share Transfer Committee meetings is placed before the Board regularly. All valid share transfers during the year ended 31.3.06 have been acted upon. No share transfer was pending as on 31.3.06. 6. General Body Meetings a. Last three Annual General Meetings were held as below: Year Location Date Time 2002-03 Music Academy 13.8.2003 10.00 AM Chennai 14 2003-04 -do- 20.8.2004 10.00 AM 2004-05 -do- 22.8.2005 10.25 AM b. No special resolution was put through postal ballet last year nor is any proposed for this year. 7. Disclosures a. Disclosures on materially significant related party transactions i.e. transactions of the company of material nature, with its promoters, the directors or the management, their subsidiaries or relatives etc. that may have potential conflict with the interests of the company at large. There were no such transactions during the year except the remuneration paid to Wholetime Directors of the company. b. Details of non-compliance by the company, penalties, strictures imposed on the company by stock exchanges or SEBI or any statutory authority on any matter related to capital markets during the last three years. 37 None Code of Conduct The Board of Directors has framed the Code of Conduct for Board Members and Senior Management. The code of conduct has been communicated to the Directors and the Members of the Senior Management. The code of conduct has also been posted on the Company s website www.tnpl.co.in

TAMIL NADU NEWSPRINT AND PAPERS LTD 8. Means of Communication a. Half-yearly report sent to each household of shareholders : No b. Quarterly results : Newspapers published in : Financial Express Economic Times Daily Thanthi Namadhu M G R Website where displayed www.tnpl.co.in c. Whether the website also displays official : Yes news releases and presentations to the media, analysts, institutional investor s etc.? d. Audited financial results : Economic Times (Newspapers published in) Financial Express Daily Thanthi e. Whether MD&A (Management : Yes Discussion & Analysis) is a part of Annual Report? The company also informs by way of intimation to the Stock Exchanges all price sensitive matters and such other matters which in its opinion are material and of relevance to the shareholders and subsequently issues a Press Release on the said matters. All data required to be filed electronically as EDIFAR document pursuant to Clause 51 of the Listing Agreement with the Stock Exchanges such as quarterly financial results, shareholding pattern, are being regularly filed on the EDIFAR website, in addition to the filing of the same with the Stock Exchanges. 9. SHAREHOLDERS INFORMATION i) Annual General Meeting - Date and Time : August 25, 2006 at 10.25 a.m. - Venue : The Music Academy, 168, T.T.K.Road, Chennai 600 014. ii) Financial Year Calendar : Results for quarter ending June 30, 2006 Fourth week of July 2006. (2006-2007) (Tentative) Results for quarter ending September 30, 2006 Fourth week of October 2006. Results for quarter ending December 31, 2006 Fourth week of January 2007. Results for quarter ending March 31, 2007 Second week of May 2007. iii) Book closure date : 18.08.2006 to 25.08.2006 (both days inclusive) on account of AGM and Dividend. iv) Dividend payment date : 26.08.2006 onwards. v) Listing of Equity Shares on a) Stock Exchanges at : 1) National Stock Exchange of 2) Mumbai Stock Exchange, India Limited Listing Department Plot No.C/1, G Block Phiroze Jeejeebhoy Towers Bandra-Kurla Complex 25th Floor Bandra (E) Dalal Street Mumbai 400 051 Mumbai 400 001 38 b) Depositories : 1) National Securities Depository Ltd. Trade World, 4th Floor Kamala Mills Compound Senapati Bapat Marg Lower Parel Mumbai 400 013. 2) Central Depository Services (India) Limited 28th Floor, Phiroze Jeejeebhoy Towers Dalal Street Fort, Mumbai 400 023. Listing fee for the year 2006-2007 has been paid to the above Stock Exchanges.

vi) Stock Code : Trading Symbol Bombay Stock Exchange : TNPL 31426 Trading Symbol National Stock Exchange : TNPL EQ Trading Symbol National Stock Exchange : TNPL AE / (Demat Segment) TNPL BE vii) Market Price Data (In Rs.) Bombay Stock Exchange (BSE) National Stock Exchange (NSE) High Price Low Price Volume High Price Low Price Volume April 2005 65.00 57.50 827771 63.50 57.30 3178625 May 2005 80.95 60.50 2872112 81.20 60.00 7365041 June 2005 88.45 74.50 3666837 88.80 74.50 7855880 July 2005 90.90 78.75 1715844 99.40 78.50 5090572 August 2005 97.00 80.00 5909917 96.10 80.30 10515083 September 2005 103.80 81.60 5077848 103.75 78.60 11078347 October 2005 100.00 79.25 2033416 97.40 79.00 4548883 November 2005 91.95 80.05 1007024 91.80 79.00 2789009 December 2005 92.25 76.25 2109502 91.90 82.50 5341459 January 2006 102.70 85.00 3828745 102.40 88.00 8638114 February 2006 109.00 91.00 4685538 108.80 90.55 8612391 March 2006 120.40 104.50 6036440 120.65 104.20 9833390 viii) Share price performance in comparison to broad based indices BSE Sensex and NSE Nifty : Year BSE Sensex NSE Nifty 1-4-2005 % change in % change in TNPL % change in % change in TNPL to TNPL Share Sensex reactive TNPL Share Nifty reactive 31-3-2006 Price to Sensex Price to Nifty Financial Year 98.72% 73.73% (+)24.99% 98.72% 67.15% (+)31.57% 2005-2006 39 SENSEX and TNPL share prices are based on month end closing rates.

TAMIL NADU NEWSPRINT AND PAPERS LTD NIFTY and TNPL share prices are based on month end closing rates. 40 ix) Registrar and Transfer Agent : Securities Exchange Board of India (SEBI) has mandated, vide Circular No. D&CC/ FITTC/CIR-15/2002 dated December 27, 2002 that all Share Registry work relating to both physical shares and shares held in electronic mode must be maintained at a single point, either in-house or by a SEBI registered Registrar and Transfer Agent. The Company has already enlisted the services of M/s Cameo Corporate Services Ltd., Chennai to act as Registrar and Transfer Agents to handle all investor services relating to shares held in physical form as well as in electronic mode. Their address is given below : M/s Cameo Corporate Services Ltd. V Floor, Subramanian Building No.1 Club House Road Chennai 600 002 Tel.No.044-28460390 - 28460394 Fax No.044-28460129 E-mail ID : cameo@cameoindia.com x) Share Transfer System : i) Share Transfers : The shares of the Company, being in the compulsory demat list, are transferable through the depository system. Shares in physical form are processed and the share certificates are generally returned within a period of 7 days from the date of receipt. As per the Guidelines of SEBI/Stock Exchanges, a Demat Option Letter is sent to the transferees, seeking their option, as to whether the shares transferred in their name, would be demated by them or they would like to hold the shares, in physical form. After 30 days time, if the Demat Request Form is not received alongwith the Demat Option Letter, duly accepted, physical share certificates are despatched to the transferees. All transfers received are processed and approved by the Share Transfer Committee which normally meets thrice in a month. Shares under objection are returned within two weeks. ii) Nomination facility for shareholding : As per the provisions of the amended Companies Act 1956, facility for making nomination is available for shareholders in respect of shares held by them. Nomination forms can be obtained from the share transfer agent. iii) Payment of dividend through Electronic Clearing Services : The Securities and Exchange Board of India (SEBI) has made it mandatory for all companies to use the bank account details furnished by the depositories for depositing dividends through Electronic Clearing Service (ECS) to the Investors wherever ECS and Bank details are available. In the absence of ECS facility the Company is required to print the Bank account details if available on payment instruments for distribution of dividend etc. to the shareholders. iv) Unclaimed dividends : The company is required to transfer dividends which have remained unpaid/ unclaimed for a period of seven years to the Investor Education & Protection Fund established by the Government. The Company will accordingly be required to

transfer in the year 2006, the dividend for the year ended March 31, 1999 which have remained unclaimed/unpaid. v) Correspondence regarding Change of Address etc. : Shareholders are requested to ensure that any correspondence for change of address, change in Bank Mandates etc. should be signed by the first named shareholder. Shareholders who hold shares in dematerialised form should correspond with the Depository participant with whom they have opened Demat Account/s. vi) Pending Investors Grievances : Any Shareholder whose grievance has not been resolved to his/her satisfaction may kindly write to the Asst. Company Secretary at the Registered Office with a copy of the earlier correspondence. xi) Distribution of Shareholding as on 31st March, 2006. DISTRIBUTION SCHEDULE AS ON 31ST MARCH 2006 Shareholding of Shareholders Nominal value of Shares Rs. Number % to Total In Rupees % to Total (1) (2) (3) (4) (5) Upto - 5000 20315 87.57 30297290 4.38 5001-10000 1345 5.80 11602190 1.68 10001-20000 635 2.74 10170400 1.47 20001-30000 259 1.12 6752370 0.98 30001-40000 110 0.47 4075070 0.59 40001-50000 139 0.60 6734280 0.97 50001-100000 185 0.80 13755380 1.98 100001 And Above 209 0.90 608719020 87.95 TOTAL 23197 100.00 692106000 100.00 Distribution of Shareholding as on 31.03.2006 CATEGORY NO. OF % OF SHARE SHARES HOLDING A PROMOTERS HOLDING 1. Promoters Indian Promoters 24444900 35.32 Foreign Promoters Nil Nil 2. Persons acting in Concert # SUB-TOTAL 24444900 35.32 B. NON-PROMOTERS HOLDING 3. Institutional Investors a. Mutual Funds 13335596 19.27 b. Banks, Financial Institutions, Insurance 14205562 20.53 Companies, Central/State Govt. Institutions/Non-Government Institutions) c. Foreign Institutional Investors 2884533 4.16 SUB-TOTAL 30425691 43.96 4 OTHERS a. Private Corporate Bodies 3574254 5.16 b. Indian Public 9979031 14.42 c. NRIs/OCBs 558291 0.81 d. Others 228433 0.33 SUB-TOTAL 14340009 20.72 GRAND TOTAL 69210600 100.00 41

TAMIL NADU NEWSPRINT AND PAPERS LTD Share Holding Pattern As on 31.03.2006 As on 31.03.2005 No. of Shares % to shares No. of Shares % to shares Governor of Tamil Nadu 2,44,44,900 35.32% 2,44,44,900 35.10% Foreign Institutional Investors 28,84,533 4.17% 29,57,828 4.25% Indian Mutual Funds 1,33,35,596 19.27% 51,89,236 7.45% Banks 7,55,108 1.09% 90,52,054 13.00% Indian Financial Institutions 2,94,726 0.43% 3,04,826 0.44% Insurance Companies 1,01,94,368 14.73% 1,12,08,877 16.09% Non-Resident Companies 35,000 0.05% 54,600 0.08% Employees 45,100 0.07% 55,800 0.08% Limited Companies 65,35,614 9.44% 67,64,467 9.71% NRIs 5,23,291 0.75% 2,28,995 0.33% Public & Trust 99,37,832 14.36% 91,13,190 13.09% Shares Dematerialised/Shares in transit 2,24,532 0.32% 2,63,227 0.38% Total 6,92,10,600 100.00% 6,96,38,000 100.00% 42 xii) Dematerialisation of Shares and liquidity : For Dematerialisation of Equity shares, the Company has entered into a tripartite agreement with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The Company s Equity shares have been included in the list in which trading is compulsory for all investors in dematerialised form, along with other scrips, from 8.5.2000. Details of Demat shares as at 31st March 2006 : No. of Shareholders No. of Shares % to Capital NSDL 15599 37961106 54.85 CDSL 2366 27964838 40.40 Physical Form 5230 3284656 4.75 Total 23195 69210600 100.00

As on March 31, 2006, 17965 shareholders are holding shares in demat form and 6,59,25,944 shares have been dematerialized, representing 95.25% of the total Equity Share capital. xiii) Outstanding GDRs/ADRs/Warrants or any Convertible Instruments, conversion date and likely impact on equity xiv) Plant locations : Nil : Kagithapuram Karur District Tamil Nadu Pin : 639 136 Tel.No.04324-277001 to 277017 Fax : 04324-277025/277026/277027 xv) Address for correspondence : a) Investor correspondence for transfer/ : M/s Cameo Corporate Services Ltd. dematerialisation of shares, payment of V Floor, Subramanian Building dividend on shares, and any other query No.1 Club House Road relating to the shares of the Company Chennai 600 002 Tel.No.044-28460390 - 28460394 Fax No.044-28460129 E-mail ID : cameo@cameoindia.com Contact Person : Thiru D. Narasimhan Executive b) Any query on Annual Report : Shares Department Tamil Nadu Newsprint and Papers Ltd. 67, Mount Road, Guindy, Chennai 600 032. Tel.No.22354417 Fax No. 22350834 & 22354614 e-mail address : response@tnpl.co.in, sivakumar.v@tnpl.co.in Contact Person : Thiru V. Sivakumar Asst. Company Secretary 43

TAMIL NADU NEWSPRINT AND PAPERS LTD B. NON-MANDATORY REQUIREMENTS 1. The Board a. Whether Chairman of the Board is entitled to maintain a Chairman s Office at the Company s expenses and also allowed reimbursement of expenses incurred in performance of his duties. Chairman is an executive Director in the company. b. Independent directors may have a time not exceeding in the aggregate a period of nine years on the Board of the Company. Presently the company has not adopted the above non-mandatory requirement. 2. Remuneration Committee The Company has not formed Remuneration Committee. 3. Shareholders Rights The half-yearly results of the company are published in more than one English newspaper having a wide circulation and in one Tamil Newspaper. (vide para 8(d) of this Report). The results are not sent to the shareholders individually. 4. Audit Qualification There is no qualification of Accounts during the year. 5. Training of Board Members Presently the company does not have training programme for Board Members. 6. Mechanism for evaluating non-executive Board Members Presently the company does not have any mechanism for evaluating the performance of Non-executive Board Members. 7. Whistle Blower Policy Presently the company does not have a Whistle Blower Policy. This is the report on Corporate Governance referred to in our Certificate of even date. For MAHARAJ N. R. SURESH & CO. CHARTERED ACCOUNTANTS Place: Chennai Date : 9.5.2006 (N. R. SURESH) Partner CERTIFICATE OF COMPLIANCE WITH THE CODE OF CONDUCT POLICY As provided under Clause 49 of the Listing Agreement with the Stock Exchanges, the Board Members and the Senior Management Personnel have confirmed compliance with the Code of Conduct for the period ended 31 st March 2006. 44 For TAMIL NADU NEWSPRINT AND PAPERS LIMITED Place: Chennai S. RAMASUNDARAM, IAS Date : 9.5.2006 Chairman and Managing Director

REPORT ON CORPORATE GOVERNANCE As required by Clause 49 of the Listing Agreement with the Stock Exchanges, a report on Corporate Governance in accordance with the SEBI prescribed format is given below: A. MANDATORY REQUIREMENTS 1. Company s Philosophy TNPL s philosophy on Corporate Governance endeavours to achieve highest levels of transparency, integrity and equity, in all its operations and in its dealings with all its stakeholders, including shareholders, employees, the Government and lenders. 2. Board of Directors a. Composition and Category of Directors The composition of Board of Directors is in conformity with the Corporate Governance code. The Board comprises of a Chairman (Executive Director, nominated by Government of Tamil Nadu), one Executive Director, three non-executive Directors nominated by the Government of Tamil Nadu, one independent non-executive Director nominated by Industrial Development Bank of India Limited (equity investor) and five independent non-executive Directors as on 31.03.2006. The Independent Directors on the Board are experienced, competent and highly respected persons from their respective fields. They take active part in the Board and Committee meetings. None of the Directors on the Board is a Member on more than 10 Committees. Necessary disclosures have been made by the Directors in this regard. Board s functioning and Procedure The Board plays a pivotal role in ensuring good governance. The Board s role, functions, responsibility and accountability are clearly defined. In addition to its primary role of setting corporate goals and monitoring corporate performance, it directs and guides the activities of the Management towards the set goals and sets accountability with a view to ensure that the corporate philosophy and mission viz. to create long term sustainable growth that translates itself into progress, prosperity and the fulfilment of stakeholders aspirations is accomplished. It also sets standards of corporate behaviour and ensures ethical behaviour at all times and strict compliance with laws and regulations. b. Attendance of each Director at the Board of Directors Meetings held during 2005-2006 and the last AGM is as follows: Director Board of Directors Meetings Last AGM No. of Meetings Held Attended (held on 22.8.05) Attended EXECUTIVE DIRECTORS Tvl. Rameshram Mishra, IAS 3 3 Attended Chairman and Managing Director I/c(ceased w.e.f. 8.8.05) S. Ramasundaram, IAS 5 5 Attended Chairman and Managing Director (w.e.f. 8.8.05 ) 45 A. Velliangiri 8 8 Attended Director (Finance)

TAMIL NADU NEWSPRINT AND PAPERS LTD MANAGEMENT DISCUSSION AND ANALYSIS 46 I. INDUSTRY SCENARIO II. The Indian Paper Industry ranks 15 th among the global producers. The industry is fragmented with over 600 units. Capacity is ranging from 3 tpd to 700 tpd. Total production capacity is 7.82 million tonnes. Actual production is 5.94 million tonnes. Consumption 6.378 million tonnes. 12 top players with a capacity of over 1 lakh tonnes per annum account for a production of 2 million tonnes equivalent to 1/3 rd of the total production. Indian average per capita paper consumption is 6 kg. against the Asian average of 45 kg. and world average of 54 kg. The economic growth and the increase in the literacy rate are expected to increase the per capita consumption to 8-9 kg. by 2010 and 11-12 kg. by 2015. The compounded average growth rate in the last three years is 5.47%. The current growth rate is estimated at 5% for NP and 6% for PWP. Within PWP, non-surface sized papers are expected to grow at 3-4%, Surface sized paper at 6-8% and copier at 15%. Raw material shortage, high capital outlay, strict environmental regulations are the major entry barriers for the industry. Because of the entry barriers, only very few greenfield projects are at sight. Many A grade mills are upgrading their facilities with cleaner technology for improving their competitiveness. Some B grade mills are also expanding their capacity. Small mills not complying with environmental regulations may be forced to close down their operation in course of time. The demand for quality products is on the rise. The industry is open to competition from the global players. Imports are freely allowed. In the Union Budget 2006-07, the import duty on paper has been reduced from 15% to 12.5% with effect from 1.3.2006. Countervailing duty of 4% introduced with effect from 1.3.2006 is levied on PWP. Import duty on newsprint is retained at 5%. Countervailing duty is not levied on newsprint imports. IPMA member mills have exported around 2 lakh mts. during 2005-06. Imports during 2005-06 was 9 lakh mts. This includes newsprint imports of 7 lakh mts. STRATEGY With the increasing competition the manufacturing units are compelled to upgrade the technology and the scale of operation to supply quality products at competitive rates. TNPL s strategy in this regard has been to restructure the company thoroughly to impart to it the ability to meet the adverse conditions and evolve as a globally competitive low cost producer. The strategy adopted in this regard are discussed hereunder: Technology upgradation Work continuously on cost reduction Redesign the financial structure to bring down the interest costs Get customer centric Be an innovative company Development of Human Resources The strategy has worked well and facilitated the company to post a healthy profit during 2005-06. Technology Upgradation TNPL expanded the capacity from 90000 tpa to 180000 tpa during 1993-96 by installing a new Paper Machine. Then enhanced the capacity to 230000 tpa during 2002-03 through upgradation of Paper Machines. Under the Mill Development Plan being implemented, the existing hardwood line of 120 tpd will be replaced with a new 300 tpd hardwood line with ECF bleaching. The existing two Chemical bagasse bleach lines with a total capacity of 400 tpd will be replaced with a single line of 500 tpd with ECF bleaching. The paper capacity will be increased from 230000 tpa to 245000 tpa. The cut pack line capacity will be expanded from 150 tpd to 350 tpd by December 2006 through adding a new Cut Pack line of 200 tpd. The emphasis on the economies of scale and technology upgradation has transformed the company into an efficient producer in the global arena. Work Continuously on Cost Reduction Companies capable of keeping the cost of production low alone can survive the increasing competition. Having this in view, TNPL has been working continuously on cost reduction measures. The focus has been on pulp and energy cost. Hardwood pulp production was increased from 38263 mts. in 2004-05 to 41907 mts. in 2005-06. This is the sixth year in a row in which the hardwood pulp production has been increased with the existing facilities. Pulp furnish is optimised through usage of purchased pulp of different varieties. Captive power capacity was increased from 36.5 MW to 61.12 MW during 2001-02. The capacity will be increased to 81.12 MW during 2006-07 by adding a new 20 MW TG under Mill Development Plan. TNPL will be self-sufficient in power even after enhancing the pulp & paper capacity under MDP. Surplus power will continue to be exported to the State grid.

Redesign the Financial Structure to bring down Interest Costs TNPL has pre-paid high cost loans and swapped the high cost multi-currency world bank loan of USD 45 million with USD denominated FCNR(B) loan. The swap has benefited TNPL a sum of Rs. 34 crores between December 2002 and March 2006 in the form of reduction in loan liability: USD 3.74 million (Rs 16.68 crores) and reduction in financial charges: USD 3.88 million (Rs.17.32 crores). The average cost of loans outstanding as on 31.3.06 is 6.30 %. Getting Customer Centric TNPL adopts the production mix in line with the market requirement. The Newsprint and Printing & Writing Paper production ratio was 33:67 in 2000-01. Newsprint production has been gradually reduced from 33% in 2000-01 to 4% during 2004-05 and to 2% during 2005-06. The manufacturing flexibility has helped the company to earn profits even during hard times. TNPL has increased the Copier production from 19,311 MT in 2003-04 to 28,141 MT in 2004-05 and to 37645 MT in 2005-06, registering a growth of 46% and 34% respectively. The target production for 2006-07 is 42,000 MT. During the year, TNPL has launched a new product, namely TNPL Copy Crown, for Inkjet and Laser printers. Two new products, namely, TNPL Offset Printing and Elegant Printing introduced during 2004-05 to meet the requirements of ever increasing publishing segment have been received well in the market. TNPL has exported 38645 MT uncoated wood free printing & writing paper during 2005-06. An optimum mix of market sales, direct sales and exports has enabled the company to obtain the best value for its products. Be an Innovative Company TNPL has installed shoe press in both the paper machines and a state of art pre-metered size press in paper machine-i. TNPL has installed a bio-methanation plant generating about 15,000 M 3 of methane gas per day. The methane gas is used in limekiln replacing 10-12 KL of furnace oil per day and part quantity of coal in the boilers. TNPL is the first paper mill in the country which has registered a project with UNFCCC for availing carbon credit. Thus there has always been a comprehensive focus on products and processes to bring them into the best practices. Development of Human Resources Human Resources Policies and Practices play a major role in every organization. TNPL has evolved a periodical Performance Appraisal System, through which the performance of the individual employees is measured with reference to the targets and wherever necessary, III. training is imparted to improve the knowledge and skill of the employees. The employees are encouraged to handle greater responsibilities. M/s Price Waterhouse Coopers (P) Ltd (PWC) have developed the Key Performance Indicators (KPI) and Competency Mapping for all the executives upto the level of Managers. TNPL employees have carried out a number of projects under TQM for improving the operation, performance and reducing the cost of production. THE SUCCESS DRIVERS Bagasse Management TNPL requires around one million tonnes of wet whole bagasse per annum for a production of 2,30,000 MT per annum. As of date, TNPL has firm tie-up arrangements with seven sugar mills in Tamil Nadu for procuring bagasse on steam substitution basis. TNPL can procure more than one million tonnes of bagasse from the above tied-up sources. TNPL is not likely to face bagasse shortage in the years to come. As on 31.3.2006, TNPL has stocked 315000 MT of depithed bagasse. Equivalent wet whole bagasse is: 420000 Mts. Pulpwood Management Hardwood pulp production capacity is 120 tpd. Under the Mill Development Plan, the hardwood line will be replaced with a new state-of-art 300 tpd hardwood line with ECF bleaching, recovery boiler and other facilities. Pulpwood requirement thereafter will be increased from 1.50 lakh MT to 3.50 lakh MT per annum. To meet the additional requirement, TNPL has entered into a long term agreement with Tamil Nadu Forest Plantation Corporation Ltd. In addition, TNPL has started implementing Farm Forestry and Captive Plantation schemes from 2004-05. So far, TNPL has raised pulpwood plantation in 7945 acres under farm forestry scheme and in 1373 acres under captive plantation scheme. It is proposed to raise pulpwood plantation in 7000 acres under Farm Forestry Scheme and 3000 acres under Captive Plantation Scheme during 2006-07. The farm forestry and captive plantation will be continued in the ensuing years also as a regular feature for sourcing additional quantity of pulp wood. Fuel Management TNPL uses solid fuel in the main factory for generation of steam and power. TNPL procures bagasse from the sugar mills in substitution of steam generated through solid fuel. Both in the main factory and sugar mills, TNPL uses all available agro fuels such as saw dust, paddy husk, coir pith and coconut shells. TNPL uses a judicious mix of imported coal, indigenous coal, lignite and agro fuel depending on the availability and economics. Adequate stock of imported coal is kept in the factory to ensure that the solid fuel is available all the time and the overall cost is low. 47

TAMIL NADU NEWSPRINT AND PAPERS LTD 48 Water Management TNPL sources water from river Cauvery. Due to failure of monsoon during 2002-03, 2003-04 and 2004-05, there was no supply of water into the river during 2003-04 and 2004-05 summer months. Consequently, due to water shortage, TNPL lost production on 37 machine days during 2003-04 and 58 machine days during 2004-05. TNPL has taken steps to optimize the water consumption. Water consumption during 2005-06 was 104 KL per tonne of paper which is one of the lowest in Indian Paper Industry. TNPL has gone in for a series of rain water harvesting structures in the factory and colony areas. Wherever possible, the used water is recycled to reduce the fresh water consumption. TNPL has also developed storage facilities to take care of contingencies during summer months. The Mill Development Plan being implemented, will reduce fresh water consumption in the Pulp Mill. Consequently, despite expanding the pulping capacity from 520 tpd to 800 tpd and increasing the paper production from 2,30,000 tonnes to 2,45,000 tonnes per annum, the post-expansion water consumption will remain only at the current level. Energy Management The power generation capacity is 61.12 MW. TNPL is self-sufficient in its energy requirement. Surplus power is exported to the State Grid. During 2005-06, TNPL has exported 831.38 lakh units of power to the State Grid. TNPL has been continuously expanding the wind farm capacity. During the year, the wind farm capacity was increased from 21.75 MW to 28 MW by adding 5 Nos. of 1250 KVA each wind energy generators. During the year, TNPL has exported 309.31 lakh units of wind farm power to the State Grid. Under the Mill Development Plan, a turbo generator of 20 MW capacity will be installed. The turbo generator will be operated with the steam generated in the new recovery boiler by firing black liquor. This will increase the power generation and reduce the cost. The Bio-Methanation plant installed during June 2003 has been functioning well. The methane gas generated from bagasse wash water through the bio-methanation plant is used as fuel in limekiln replacing 10-12 KL furnace oil per day and power boilers replacing part quantity of coal. During 2005-06, 45.77 lakh M 3 of methane gas were used in limekiln valuing Rs. 400.33 lakhs. TNPL is taking steps to expand the bio-methanation capacity by 50%. The expansion will be completed during the current year. Marketing Management The market for newsprint and printing & writing paper is highly competitive. Newsprint price is less economical compared to printing & writing paper. TNPL has therefore reduced newsprint production to 2% of the total production. The production mix can be changed any time depending on the market requirements and economics. TNPL has been introducing one or two new products every year to cope up with market requirements. During the year, TNPL has introduced a high bright high opacity Copier paper, namely, TNPL Copy Crown for Inkjet and Laser printers. TNPL has also increased the production of other value added products, namely, Elegant Printing, Ultra Maplitho, Hi-Tech Maplitho. TNPL is a consistent exporter receiving special export award for seven consecutive years. During 2005-06, TNPL has exported 38645 MT of printing & writing paper representing 16.8% of the total production. Customers Service Cell has been formed for each region. The Customers Service Cell visits the customers regularly and gets the feedback for making improvements in the products. With the above measures, TNPL is keeping its market risks low. Research and Development & Quality Management Product development and product improvement are the priority areas under the R&D activities. R&D efforts are also made to reduce the cost of production through usage of alternative pulps and chemicals. The feedback from the customers on performance of various products is taken as an important input in the R&D activities. TNPL enjoys the second position in the market in copier sales. The increased production of Copier paper and Surface sized papers and exports bear testimony to the R&D efforts on product development. The State-of-art facilities enables the company to maintain the consistency in quality. Being an ISO 9001 and ISO 14001 certified organisation, systematic procedures have been laid down for maintaining uniform quality of end products. Continuous thrust is given for developing alternative raw material for paper making. The commercial, economic and technical suitability of wild sugarcane as an alternative to bagasse is being studied as a CESS funded project. Excellence in Corporate Governance The Institute of Company Secretaries of India (ICSI), New Delhi, has conferred on TNPL, the ICSI National Award for Excellence in Corporate Governance for the year 2004 in the category of public sector recognising the company s application of best management practices, compliance of law in true letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders. IV. REVIEW OF OPERATIONS During the year the company has produced 2,30,079 Mts of paper, equivalent to 100% capacity utilization. The newsprint production was restricted to 5468 Mts against

7708 Mts in the previous year. The printing and writing paper production was increased to 2,24,611 Mts against 1,88,533 Mts in the previous year. The change in the product mix of NP & PWP from 4:96 in 2004-05 to 2:98 in 2005-06, was based on the market dynamics. The manufacturing flexibility has helped the company to improve the profitability. The wind farm capacity was enhanced from 21.75 MW to 28 MW in February 2006 by installing 5 Nos. of 1250 KW capacity each wind energy generators. During the year the wind farm generated 309.31 lakh units of power against 348.86 lakh units in the previous year. The generation was less compared to the previous year due to low wind velocity. The entire wind power was exported to the State Grid. In-house captive power plant of 61.12 MW capacity has generated, 4280.18 lakh units of power during the year against 3810.56 lakh units in the previous year. TG power exports to the State grid was at 831.38 lakh units against 763.52 lakh units in the previous year (higher by 67.86 lakh units). Total power export during the year was 1140.69 lakh units against 1112.38 lakh units in the previous year. V. FINANCIAL REVIEW During the year the company has recorded an all time high turnover of Rs. 801.41 crores against Rs. 668.23 crores in the previous year, registering a growth of 19%. The sales include Rs. 31.05 crores relating to the sale of power. TNPL has posted an all time high net profit during the year. The Gross profit before interest and depreciation is Rs. 189.33 crores against Rs. 117.27 crores in the previous year. Rs. 20.29 crores has been provided for interest and financial charges and Rs. 62.50 crores has been provided for depreciation. Net Profit before tax is Rs. 101.47 crores against Rs. 39.17 crores in the previous year. Net profit after tax is Rs. 80.55 crores, against Rs. 37.95 crores in the previous year. Rs. 36.51 Crores has been provided for current tax, Rs. (13.81) crores for deferred tax and Rs. 0.95 crores for fringe benefit tax. Debtors outstanding as on 31.03.2006 is Rs. 127.77 crores against Rs. 118.14 crores as on 31.3.2005. The outstanding has increased mainly due to the increase in sales. The inventory as on 31.3.2006 is Rs. 121.55 crores against Rs. 123.00 crores in the previous year. The loans (secured and un-secured) outstanding as on 31.3.2006 is Rs. 308.13 crores against Rs. 249.73 crores in the previous year. During the year the company has drawn new loan of Rs. 75.48 crores for Mill Development Plan and Rs. 26.50 Crores for wind farm expansion. The term loan instalments were paid on due dates. Addition to the Fixed Assets is Rs. 49.75 crores. There is no change in the investments. A sum of Rs. 18.76 lakhs has been received during the year towards allotment and call money arrears. During the year, TNPL has forfeited 427400 shares for which Rs. 293.68 Lakhs were overdue. The above shares were forfeited after ten years of IPO and after giving several notices and reminders to the defaulted shareholders. The financial statement has been prepared in accordance with the requirement of the Companies Act, 1956 and the prescribed Accounting Standards. The estimates and judgement to the financial statements has been made on a reasonable basis, in order that the financial statements reflect in a true and fair manner. The forms and substances of transactions are reasonably representing the company s state of affair and the profit for the year. VI. RESOURCES & LIQUIDITY TNPL believes in prudent financial management for continuous success. The expansion project for doubling the capacity from 90,000 tpa to 1,80,000 tpa implemented during 1993-96 was funded through an optimum mix of internal generation, issue of equity shares and term loans. The second capacity expansion from 1,80,000 tpa to 2,30,000 tpa, implemented during 2002-03, was funded entirely through internal generation. The Mill Development Plan being implemented at a capital outlay of Rs. 565 Crores will be funded through internal generation of Rs. 150 Crores and term loan of Rs. 415 Crores. TNPL has pre-paid the high cost loans. TNPL also swapped the high cost World Bank loan into Dollar denominated FCNRB loan and reduced the interest charges considerably. Even after borrowing the entire amount of Rs. 415 Crores for the Mill Development Plan, the Debt Equity ratio at the peak level during 2006-07 will be around 0.93:1. The weighted average cost of loan outstanding as on 31.03.2006 is 6.30%. CRISIL has rated TNPL s Fixed Deposits at FAA+ which indicates the degree of safety regarding timely repayment of principal and interest is strong. VII. OUTLOOK, OPPORTUNITIES AND CHALLENGES Newsprint The newsprint segment was restricted to the public sector till 1991. Thereafter, the Government has allowed the private players to set up small units to manufacture newsprint. In 1992 the Government decanalised the import of newsprint and imposed a quantity restriction for imports. As per the quantity restriction, the end-users should purchase 2 tonnes of NP from domestic sources for every tonne of newsprint imported. In 1995, when the newsprint prices in the global market reached the peak, the newsprint was placed under OGL and the quantity restriction for import was withdrawn. In 1996, the newsprint prices in the global market declined. There was large scale import of newsprint in the domestic market. The domestic manufacturers rolled back the prices 49

TAMIL NADU NEWSPRINT AND PAPERS LTD 50 by around 30%. The levy of 10% import duty did not deter large scale dumping of newsprint into India. In January 1997, the Govt. of India brought back the enduser criteria for newsprint imports. During 1997, the import duty of newsprint was reduced to 5% and the same rate is continued till date, though the WTO bound rate for newsprint import is 25%. The domestic newsprint industry is completely open to the competition and has to move in tandem with international trends. Due to consolidation taken place during 1999-2000 and closing down of excess capacity, the newsprint prices in the international market stabilised during September 1999 December 2000. During this period (2000-01), the newsprint prices in the domestic market also showed uptrend. Thereafter, due to global economic slow down, the newsprint consumption reduced considerably. Consequently, the newsprint prices started declining fast from January 2001 in the international market and from April 2001 in the domestic market. The newsprint prices ruling at USD 720 pmt during January-March 2001 dropped to USD 400 pmt during January-March 2002. Consequently, the newsprint prices in the domestic market also went down by 30% during 2001-02 compared to the previous year. Except a short spell during July-September 2002, the imported newsprint prices were ranging between USD 400-420 per MT till January-March 2003. Since then, the imported newsprint price is in an uptrend and reached a level of USD 670 per MT during January- March 2006 and USD 700 per MT for supplies during April- June 2006. The newsprint price in the domestic market has increased from Rs. 26,250 per MT during January - March 2005 to Rs. 30,250 per MT during January-March 2006 and Rs. 31,500 per MT for supplies during April - June 2006. Outlook for newsprint is good. Printing & Writing Paper The Indian Paper industry is fragmented. The per capita consumption is 6 Kg. The paper industry was under protection with high level of import duty. The duty was reduced to 35% in 2001-02. Thereafter, the import duty was reduced by 5% every year till it reached 15% in 2005-06. In the Union Budget 2006-07, the import duty was reduced to 12.5%. With effect from 1.3.2003, excise duty is levied at 8% on the first 3500 Mts. of PWP made primarily out of non-conventional raw material. For the balance, excise duty is levied at 12%. Till 1994-95, Indian Paper Industry was not active in the export market. Over the years, the Indian paper manufacturers have increased the export sales. During 2005-06, the IPMA mills have exported a total quantity of around 2 lakh tonnes against 2.30 lakh tonnes in the previous year. During 2005-06, TNPL has exported 38645 mts. of PWP. The overall demand for cut size paper has been increasing at an average of 15% per annum. TNPL s copier sales during 2005-06 was 35977 mts. against 28141 mts. in the previous year. TNPL enjoys the second place in the domestic market for branded copier with the market share of around 17%. Pulp prices of all varieties have increased by around USD 70-100 per MT from April 2006. The pulp prices are likely to remain firm during the current year. The outlook for PWP in the domestic market and export is good. Opportunities and Challenges The Indian economy is growing @ 6-8% per annum on a consistent basis. The demand growth in paper and the demand growth in GDP are positively correlated and move together. The consistent growth in the GDP and the increasing literacy rates are likely to increase the per capita consumption. India, with 16% of the world population, consumes only 1.2% of global paper and board production. The per capita consumption of 6 Kg. is far below the global average of 54 Kg. The growth in GDP and the increasing literacy rates are likely to move up the per capita consumption to 8-9 Kg. by 2010 and to 11-12 Kg. by 2015. Increase in per capita consumption by 1 Kg. would mean an increase in demand by 1 million tonnes. The capacity additions during 2006-07 is estimated to be less than 1.5 lakh tonnes. With the increase in exports and increase in consumption in the domestic market, the additional production can be absorbed. The outlook for PWP is good. The NP consumption is also growing @ 5% per annum. The imported NP price is likely to remain in the range of USD 700 725 per MT during the year. The Indian Paper Industry faces challenges like in-adequate availability of raw material, low economies of scale, environmental concerns, intensive competition and so on. The Indian paper industry, in the last few years, has learnt to manage the above constraints through upgrading the technology, increasing the capacity through brown field expansion and new capacity additions, implementing farm forestry and captive plantation schemes, focussing on cost control measures and so on. Now, the Indian paper industry is able to market its products in the international market in competition with other global manufacturers. TNPL will be able to meet the above challenges and make use of the opportunities for achieving growth in terms of capacity additions, turnover and profit. TNPL will continue its focus on PWP. VIII. FUTURE PLANS TNPL is currently implementing the Mill Development Plan at a capital outlay of Rs. 565 Crores with the following goals: To become environmentally benign by implementing Elemental Chlorine Free (ECF) bleaching sequence in the in-house pulping lines.

To increase in-house pulp production capacity from 520 tpd to 800 tpd and thereby reduce the dependence on purchased pulp and market the surplus pulp around 120 tpd. Orders have been placed for all the major equipments. The project will be completed by March 2007. With the implementation of the Mill Development Plan, the entire pulp requirement will be met internally. Surplus pulp around 120 tpd will be sold in the market generating revenue. The mill operations will be fully environmental compliant. The water consumption will be minimized. The paper production capacity will be increased from 230000 tpa to 245000 tpa effective from April 2007. A new 200 tpd Cut Pack line will be installed by December 2006 and thereby the total conversion capacity will be increased from 150 tpd to 350 tpd. This will enable the company to increase Copier production and improve the market share in the Copier segment. TNPL has installed 5 Nos. of 1250 KVA wind energy generators during February 2006. The wind farm capacity will be further augmented during 2006-07. TNPL is also examining the possibility of increasing the production capacity from 2,45,000 tpa to 3,50,000 tpa through adding a new paper machine in the existing site to make use of the surplus pulp and other infrastructure facilities. Decision on expansion of capacity will be taken soon. TNPL has implemented Farm Forestry and Captive Plantation schemes in 7945 acres and 1373 acres respectively upto 31.3.2006. The scheme will be implemented in additional 10,000 acres during the current year to augment the pulpwood supplies. IX. INTERNAL CONTROLS TNPL has instituted adequate internal control procedures commensurate with the nature of business and size of its operations. TNPL has also prepared an Internal Control Procedure Manual for all the departments to ensure that the control procedures are followed by all departments. Internal controls are supported by internal audit and management reviews. The Board of Directors has an Audit Committee chaired by an Independent Director. The Audit Committee meets periodically the management, externalinternal auditors, internal-internal auditors, statutory auditors and reviews the audit plans, internal controls, audit reports and the management response to the observations and recommendations emanated from the audit. All significant observations and follow-up actions are reported to the Audit Committee. The Audit Committee has met seven times during the financial year. X. ENVIRONMENT TNPL is totally committed to save the Environment, uphold Human Safety and Health. With this view, the corporate Management of TNPL has declared policies of Environment, Safety, Quality and Energy. The main excerpts of the above policies are: Compliance with all relevant legislative requirements. Reducing Pollution Load in terms of Liquid Discharge, Air Emission, and Land conservation. Saving Energy & Preserving natural resources like Water, Raw material, Fuels. Generating Human Awareness in Environment, Safety and Health. Minimizing the Unsafe Acts & Unsafe working conditions. Promoting comprehensive programs to propagate Health and Environmental Safety. Around 1600 acres of land is irrigated with TNPL s treated effluent water under TNPL s Treated Effluent Water Lift Irrigation Scheme (TEWLIS). XI. HUMAN RESOURCES DEVELOPMENT Training TNPL s HR strategies focus on providing need based training to its employees to develop their knowledge, skills and attitude in compliance with ISO 9001/2000 Standards. During the year, 49 in-house trainings were organized covering operation, maintenance, instrumentation, electrical, finance, Information Technology, human resources and other areas. On-the-job training was provided to 180 employees in key areas of operation. 106 Executives were nominated for 60 external training programmes on various topics. Awareness programme on Internal Quality Auditor Training on ISO 9001 (Quality Management System), ISO 14001 (Environmental Management System) and OHSAS 18001 (Occupational Health and Safety Management System) were conducted to train 38 Executives in the above standards. M/s Pricewater House Coopers (P) Ltd. have prepared the balance scorecard for the organisation, departments and individuals upto the level of Managers. The Consultants have also prepared Key Performance Indicators and Competency Mapping for 47 Key personnel in the Organisation. This will be put into practice to improve further the managerial efficiency. Total Quality Management (TQM) Creativity and lateral thinking improve productivity. Considering this, TQM was introduced in TNPL in the year 2000. TQM projects implemented has resulted in cost 51

TAMIL NADU NEWSPRINT AND PAPERS LTD 52 savings, quality improvement and simplification of work methods. Optimisation of bio-methanation operation carried out through TQM has increased the methane gas production. Similarly, reduction of chlorides from the Electro Static Precipitator ash has been achieved through a TQM project. Projects, namely, Wealth from Waste for converting organic garbage in TNPL factory and residential colony into manure and maintaining an ecofriendly environment and cultivation of Jatropha in the vacant land in the windfarms have been undertaken during the year. Harmonious Industrial Relations The company has created a participative and congenial atmosphere for redressing the grievances of the employees which has yielded a propitious working environment. There are three recognized trade unions representing Workmen and one Association representing the Staff. The matters concerning the Workmen and Staff are discussed with the recognized trade unions and Association and resolved amicably. An amicable bipartite settlement was entered into with the trade unions for payment of bonus and ex-gratia for the financial year 2004-05. The Settlement entered into with the Trade Unions under Section 12(3)/18 of the Industrial Disputes Act, is valid upto 15.5.2006. A new Wage Settlement effective from 16.5.2006 will be entered into with the recognized Trade Unions during the course of the year. Health TNPL takes care of its employees and their dependents in the health front. Various schemes, which are in vogue, stands as testimony of the care and concern shown by the Company on its employees and their dependents. A well equipped First Aid Medical Centre is maintained at factory with three Doctors. Employees are sent for Master Medical Check-up in the renowned hospitals in Chennai and Madurai after completion of 40 years and again, after completion of 50 years. Awareness Programmes and Medical Camps are conducted in the factory with the help of specialists invited from reputed hospitals. Immediate action is taken on accidents and serious ailments cases by referring to the renowned hospitals in Chennai, Madurai and Coimbatore. Safety TNPL has a clearly defined Occupational Health and Safety Policy. The Safety Policy specifies in detail the responsibility for implementation of safety measures, prevention of personal injury, accident reporting system and statutory reporting system. Personal protective equipment as required are provided to all employees to avoid personal injury. Periodical medical checkups are organized to identify occupational health hazards. TNPL s Safety Committee is represented by the Management Members and Workmen Members nominated by the Unions. Periodical Committee meetings are conducted and suggestions of the Members are implemented. Accidents and incidents within the factory are documented and preventive/corrective actions are taken to minimize accidents/incidents. An Onsite Emergency Management Plan has been developed. Periodic Mock Drills on major chemical hazards like Chlorine gas leakage and incidents of fire are conducted. Periodic training programmes on safety measures and safety method of chlorine handling and fire are organized. Periodic testing of all unfired pressure vessels are carried out in collaboration with Deputy Chief Inspector of Factories to ensure safety under operating conditions. As part of statutory requirement under Factories Act, Internal Safety Audit, building stability testing, testing of lifting, tackles etc., are carried out and the report submitted to the Chief Inspector of Factories, Tamil Nadu. Two mobile fire-tenders are available. The entire Mill is covered with fire hydrant points with pressurized water mains. All safety reporting systems, testing procedures, inspection procedures have been brought under ISO 9001-2000 documentation as well as ISO 14001. Periodic audits are conducted. Safety slogans are displayed in different areas. Safety suggestion boxes are placed in different departments inviting suggestions from employees. Area-wise Safety Committee has been formed for involvement of more employees in ensuring safety in their respective areas. Personal protective equipment are kept at various sections of the Mill for ready use of the employees when required. Community Development TNPL, committed to social responsibilities, has been taking steps on a continuous basis for promoting the overall betterment of the villages in the neighbourhood. TNPL has extended financial assistance in the neighbourhood for laying and improving roads, providing drinking water supply, providing lighting facilities, providing laboratory facilities to schools, construction of sports complex, etc. TNPL extended help to the District Administration by providing food, drinking water and lighting arrangements during flood in river Cauvery during October November 2005. TNPL and its employees contributed a sum of Rs.63,78,910 for Tsunami relief activities during December 2004 and Rs.One crore for flood relief measures during 2005. TNPL has conducted free medical camps in the neighbouring villages. Through implementation of various social and community development activities, TNPL has received appreciation and recognition from the society and among the local residents.

Awards, Accolades and Achievements Achieved highest production of 2,30,079 MT and highest sales of 230079 MT. Production during the year was higher by 33,838 MT over the previous year. Sales during the year was higher by 28839 MT compared to the previous year. Achieved highest production of 37,645 MT of TNPL Copier Paper against 28,141 MT in the previous year registering a growth of 34%. Achieved highest Hardwood Pulp production of 41,907 MT against 38,263 MT in the previous year. This is the sixth consecutive year in which the company has increased the Hardwood Pulp production. Exported 38,645 MT of Printing & Writing Paper during the year valuing Rs. 117.55 crores on FOB basis. This is the highest export of wood free uncoated printing & writing paper from India during 2005-06. Introduced a new product, namely, TNPL Copy Crown for Inkjet and Laser Printers. Implemented Farm Forestry Scheme in 6054 acres benefiting 1466 farmers in nine districts and Captive Plantation in 188 acres. Total area covered under Farm Forestry Scheme and Captive Plantation during the year is 6242 acres against 3076 acres in the previous year. It is proposed to implement the Farm Forestry Scheme and Captive Plantation in about 10,000 acres during 2006-07. Achieved Zero Stock of finished goods (NP & PWP) at the end of the financial year. This is the 15 th year in which your company has achieved Zero Stock (NP & PWP) at the end of the financial year. Received the Special Export Award from CAPEXIL for the seventh consecutive year in recognition of the outstanding export performance. The Mill Development Plan has been taken up for implementation at a capital outlay of Rs. 565 Crores. The project will be implemented before 31.3.2007. Processed 16,70,636 M 3 of Black liquor in energy efficient falling film evaporator, against 14,62,850 M 3 in the previous year. Registered the Bio-Methanation project with United Nations Framework Convention Climate Change (UNFCCC) as the country s first CDM Project in the waste management sector. The project generates about 37,000 CERs per annum. 82955 CERs have been received from UNFCCC for the period from 1.8.2003 to 31.12.2005. XII. CAUTIONARY STATEMENT The Management Discussion and Analysis Report contains forward looking statements based upon the data available with the Company, assumptions with regard to global economic conditions, the government polices etc. The Company cannot guarantee the accuracy of assumptions and perceived performance of the Company in future. Therefore, it is cautioned that the actual results may materially differ from those expressed or implied in the report. 53

TAMIL NADU NEWSPRINT AND PAPERS LTD TAMIL NADU NEWSPRINT AND PAPERS LIMITED BALANCE SHEET AS AT 31ST MARCH 2006 (Rs. in Lakhs) As at As at Schedule 31/03/06 31/03/05 I. SOURCES OF FUNDS SHARE HOLDERS FUNDS Share Capital 1 6937.78 6935.99 Reserves and Surplus 2 45314.03 39607.34 52251.81 46543.33 LOAN FUNDS Secured Loans 3 22428.92 15794.97 Unsecured Loans 4 8384.46 9177.75 30813.38 24972.72 DEFERRED TAX 5 15476.00 16857.00 98541.19 88373.05 II. APPLICATION OF FUNDS FIXED ASSETS Gross block 143235.13 138344.40 Less: Depreciation 72995.94 66563.96 Net Block 6 70239.19 71780.44 Capital work-in-progress 11513.28 1081.26 81752.47 72861.70 INVESTMENTS 7 114.05 114.05 CURRENT ASSETS, LOANS AND ADVANCES Inventories 8 12154.86 12299.50 Sundry Debtors 9 12776.68 11814.20 Cash and Bank balances 10 2021.49 1360.38 Loans and Advances 11 12680.84 13066.88 A 39633.87 38540.96 Less: CURRENT LIABILITIES AND PROVISIONS Current Liabilities 12 16513.62 18812.37 Provisions 13 6458.77 4351.08 B 22972.39 23163.45 NET CURRENT ASSETS A B 16661.48 15377.51 MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted) Voluntary Retirement Scheme 13.19 19.79 98541.19 88373.05 54 Schedules 1 to 13, 21 and 22 form an integral part of this Balance Sheet. S. RAMASUNDARAM, IAS D. RAJENDRAN, IAS vide our report of even date CHAIRMAN & MANAGING DIRECTOR DIRECTOR MAHARAJ N. R. SURESH & CO. CHARTERED ACCOUNTANTS (A. VELLIANGIRI) (N. R. SURESH) Place : Chennai 32 DIRECTOR (FINANCE) PARTNER Date : 09th May 2006 & SECRETARY Membership No. 200/21661

TAMIL NADU NEWSPRINT AND PAPERS LIMITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2006 (Rs. in Lakhs) For the For the Schedule Year ended Year ended 31/03/06 31/03/05 I. INCOME Sales 14 77567.10 64106.02 Other Income 15 2573.61 2716.52 II. A 80140.71 66822.54 EXPENDITURE Manufacturing expenses 16 49517.42 44448.05 Personnel expenses 17 5166.68 5358.00 Administration, selling & other expenses 18 6523.27 5289.76 Interest and finance charges 19 2028.85 1621.48 Depreciation/amortisation 6 6249.64 6188.30 B 69485.86 62905.59 III. PROFIT BEFORE PRIOR PERIOD/EXCEPTIONAL ITEMS A B 10654.85 3916.95 Prior Period / Exceptional Items 20 507.49 0.00 IV. PROFIT BEFORE TAX 10147.36 3916.95 PROVISION FOR TAXATION Current Tax 3650.96 868.35 Excess provision of Income Tax written back (272.52) 0.00 Deferred Tax (1381.00) (746.00) Fringe Benefit Tax 95.35 0.00 2092.79 122.35 V. PROFIT AFTER TAX 8054.57 3794.60 Balance brought forward 2020.15 2006.78 VI. PROFIT AVAILABLE FOR APPROPRIATIONS 10074.72 5801.38 VII. APPROPRIATIONS Transfer to General Reserve 5700.00 1600.00 Dividend Adjustments 0.00 1.41 Interim Dividend 1040.44 0.00 Proposed Dividend 1038.16 1907.42 Tax on Dividend 291.53 272.40 VIII. BALANCE CARRIED FORWARD 2004.59 2020.15 10074.72 5801.38 IX. BASIC & DILUTED EARNINGS PER SHARE (Refer Para No.III-D of Sch., 22) Basic Earnings Per Share before Prior Period / Exceptional Items Rs. 12.39 5.47 Diluted Earnings Per Share before Prior Period / Exceptional Items Rs. 12.37 5.45 Basic Earnings Per Share after Prior Period / Exceptional Items Rs. 11.66 5.47 Diluted Earnings Per Share after Prior Period / Exceptional Items Rs. 11.64 5.45 Schedules 14 to 22 form an integral part of this profit and loss account. 55 S. RAMASUNDARAM, IAS Vide our report of even date CHAIRMAN & MANAGING DIRECTOR D. RAJENDRAN, IAS MAHARAJ N.R.SURESH & CO. DIRECTOR CHARTERED ACCOUNTANTS (A.VELLIANGIRI) (N. R. SURESH) Place : Chennai 32 DIRECTOR (FINANCE) PARTNER Date : 09th May 2006 & SECRETARY Membership No.200/21661

TAMIL NADU NEWSPRINT AND PAPERS LTD SCHEDULES TO BALANCE SHEET (Rs.in Lakhs) As at As at 31/03/06 31/03/05 1. SHARE CAPITAL Authorized: 13,50,00,000 Equity Shares of Rs.10/- each 13500.00 13500.00 Issued: 7,00,00,000 Equity Shares of Rs.10/- each 7000.00 7000.00 Subscribed and Paid up: 6,92,10,600 Equity Shares of Rs.10/- each fully paid up 6921.06 6963.80 Less: Calls in arrears (from persons other than directors) 0.00 27.81 Add: Shares Forfeited 16.72 0.00 Equity Shares Paid up Amount Nos. Rs. Rs. 27600 7 193200 93000 6 558000 306800 3 920400 427400 1671600 6937.78 6935.99 2. RESERVES AND SURPLUS (a) Capital Reserve : Project Investment subsidy 125.00 125.00 (b) (c) Share Premium: Opening Balance 17950.86 17944.58 Add: Calls-in-arrears received/adjusted 22.25 6.28 17973.11 17950.86 General Reserve: Opening Balance 19511.33 17911.33 Add : Transferred from Profit & Loss Appropriation A/c 5700.00 1600.00 25211.33 19511.33 (d) Balance in Profit and Loss Account 2004.59 2020.15 TOTAL (a)+(b)+(c)+(d) 45314.03 39607.34 56

SCHEDULES TO BALANCE SHEET (Rs. in Lakhs) As at As at 31/03/06 31/03/05 3. SECURED LOANS (a) Term Loans: From Banks FCNR(B) 7747.40 8750.00 Rupee Term Loans 5877.22 0.00 (Secured by pari passu first charge on fixed assets (land, buildings, Plant and Machinery and other immovable properties-except movable fixed assets given as first charge for ECB Loan) of the company including an equitable mortgage by deposit of title deeds in respect of 566.26 acres of land situated at Kagithapuram, Karur district, Tamil Nadu as primary security on a pari passu basis with other lenders and a pari passu second charge on the current assets of the company viz., stock of raw materials, finished goods, stores and other movables.) - ECB LOAN 1784.40 1750.00 (External Commercial Borrowing (ECB) Loan is secured by the first charge on the company s movable fixed assets pertaining to the 18.75 MW Wind Farm facilities.) - Rupee Term Loans 2650.00 0.00 (Secured by first charge on Wind Mills created out of the respective loans) 18059.02 10500.00 (b) Working Capital from Banks Cash Credit 304.78 325.45 Buyer s Credit 1063.91 2006.67 Short Term Loan 1000.00 0.00 Post Shipment Credit 239.86 1024.72 Pre-Shipment Credit - Foreign Currency 1561.35 1938.13 Pre-Shipment Credit 200.00 0.00 (Working Capital facilities obtained from banks are secured by hypothecation of stock of raw materials, semi-finished and finished goods, consumables, stores and book debts and a second charge by way of extension of equitable Mortgage on immovable properties of the company in Kagithapuram, Karur District, Tamil Nadu.) 4369.90 5294.97 Total of (a)+(b) 22428.92 15794.97 4. UNSECURED LOANS Fixed Deposits # 1051.49 1709.62 Short Term Loans from Banks FCNR(B) 3301.14 4112.50 Pre-Shipment Credit - Foreign Currency 0.00 2187.50 Pre-Shipment Credit 2000.00 0.00 Buyer s Credit 1131.83 1168.13 Rupee Loan 900.00 0.00 8384.46 9177.75 # Due for repayment within one year 552.70 788.61 5. DEFERRED TAX A. DEFERRED TAX LIABILITY Depreciation 16113.00 17496.00 16113.00 17496.00 B. DEFERRED TAX ASSETS Provision for Doubtful Debts 130.00 229.00 Provisions for Gratuity and Leave Encashment 507.00 410.00 637.00 639.00 DEFERRED TAX (NET) (A) (B) 15476.00 16857.00 57

TAMIL NADU NEWSPRINT AND PAPERS LTD 58 SCHEDULES TO BALANCE SHEET 6. FIXED ASSETS (Rs. in Lakhs) NET BLOCK DEPRECIATION /AMORTISATION GROSS BLOCK As at Additions/ Adj. As at Upto for the period Adj. Upto As at As at 01/04/05 (Deletions) 31/03/06 31/03/05 (Deletions) 31/03/06 31/03/06 31/03/05 DESCRIPTION A. TANGIBLE ASSETS LAND 765.55 11.71 777.26 0.00 0.00 0.00 777.26 765.55 BUILDINGS ON FREE HOLD LAND 9632.16 312.27 (958.79) 8942.19 2932.02 242.77 (360.27) 2789.30 6152.89 6700.14 (43.45) (25.22) ON LEASE HOLD LAND 1078.33 15.77 1094.10 218.84 37.72 256.56 837.54 859.49 0.00 0.00 RAILWAY SIDINGS 201.32 0.00 201.32 201.32 0.00 201.32 0.00 0.00 PLANT & MACHINERY ON FREE HOLD LAND 116477.94 4575.53 958.79 121980.43 59344.13 5724.32 360.27 65399.46 56580.97 57133.81 (31.83) (29.26) ON LEASE HOLD LAND 9160.78 15.86 9176.64 3269.34 420.24 3689.58 5487.06 5891.44 0.00 0.00 FURNITURE, FIXTURES & 630.58 31.27 661.57 317.01 35.40 352.35 309.22 313.57 OTHER EQUIPMENTS (0.28) (0.06) VEHICLES 161.04 11.75 172.79 93.79 11.21 105.00 67.79 67.25 0.00 0.00 B. INTANGIBLE ASSETS COMPUTER SOFTWARE 236.70 0.69 228.83 187.51 23.42 202.37 26.46 49.19 (8.56) (8.56) TOTAL 138344.40 4974.85 0.00 143235.13 66563.96 6495.08 0.00 72995.94 70239.19 71780.44 (84.12) (63.10) PREVIOUS YEAR 136463.58 3011.81 138344.40 61368.67 6188.30 66563.96 (1130.99) (993.01) CAPITAL WORK-IN-PROGRESS (Refer Para I (A) (d) of Sch., 22) 11513.28 1081.26 81752.47 72861.70

SCHEDULES TO BALANCE SHEET (Rs. in Lakhs) As at As at 31/03/06 31/03/05 7. INVESTMENTS LONG TERM Non-Trade: Quoted Investment stated at cost : Industrial Development Bank of India Ltd. 142720 fully paid equity shares of Rs.10 each 114.05 114.05 [(Market value Rs.111.75 lakhs (Previous Year Rs.130.09 lakhs)] 114.05 114.05 8. INVENTORIES Stores and Spare parts 1812.94 1672.75 Loose Tools 4.01 4.93 Consumables 3158.46 3688.15 Raw materials 5547.92 5528.84 Materials in Transit 727.09 145.04 Work in process 706.60 1099.71 Finished Goods 0.00 12.87 Standing crops 197.84 147.21 12154.86 12299.50 9. SUNDRY DEBTORS - UNSECURED Debts outstanding for a period exceeding six months: Considered good 363.32 758.59 Considered doubtful 356.99 673.01 720.31 1431.60 Other debts Considered good 12413.36 11055.61 13133.67 12487.21 Less: Provision for doubtful debts 356.99 673.01 12776.68 11814.20 10. CASH AND BANK BALANCES Cash balance on hand 4.42 4.37 Bank balances with Scheduled Banks: a) in current accounts 1893.44 1186.19 b) in savings account (Employees Security Deposit) 0.87 0.84 c) in unpaid Dividend accounts 43.76 31.98 d) in deposit accounts 79.00 137.00 59 2021.49 1360.38

TAMIL NADU NEWSPRINT AND PAPERS LTD SCHEDULES TO BALANCE SHEET 11. LOANS AND ADVANCES (Rs. in Lakhs) As at As at 31/03/06 31/03/05 Unsecured - considered good: Prepaid Expenses # 160.17 70.13 Advances recoverable in cash or in kind or for value to be received 7227.05 10495.31 Advances & Deposits with Government and public bodies 4772.08 2069.00 Balance with: Port Trust/Airport Authority 0.59 0.22 Central Excise 520.95 432.22 12680.84 13066.88 Unsecured - considered doubtful 28.26 30.66 Less: Provision for doubtful advances (28.26) (30.66) # Includes Rs.11.47 lakhs Deferred Premium on Forward Contracts 12680.84 13066.88 12. CURRENT LIABILITIES Acceptances 1344.22 4984.87 Sundry Creditors a) Small Scale Industrial Undertakings 217.93 (Previous Year Rs.217.62 lakhs) b) Others (Previous Year Rs.587.78 lakhs) 818.40 1036.33 805.40 Security Deposits from customers/contractors 1552.50 1365.06 Investor Education and Protection Fund a) Unclaimed Dividend 43.76 31.98 b) Unclaimed Matured Deposits 20.72 30.53 (Amount payable during the year Rs.Nil (Previous Year Rs.Nil)) Other Liabilities 12269.84 11354.23 Interest accrued but not due 246.25 240.30 16513.62 18812.37 60 13. PROVISIONS For Income-Tax 3698.85 888.54 Proposed Dividend 1038.11 1907.42 Tax on Dividend 145.60 267.52 For Leave Encashment 157.14 127.31 For Gratuity 1419.07 1160.29 6458.77 4351.08

SCHEDULES TO PROFIT AND LOSS ACCOUNT 14. SALES (Net of Sales Tax & Sales Returns) (Rs. in Lakhs) For the For the Year ended Year ended 31/03/06 31/03/05 Printing & Writing Paper: Domestic Sales 69805.52 54798.95 Less: Excise Duty & Cess 7355.36 5443.49 62450.16 49355.46 Export Sales 12843.84 12768.32 75294.00 62123.78 Newsprint Domestic Sales 1500.17 1960.83 76794.17 64084.61 Less: Discounts 2614.41 3022.50 74179.76 61062.11 Note Books 144.45 86.11 Chemical Bagasse Pulp 138.07 30.69 Sale of Energy 3104.82 2927.11 77567.10 64106.02 15. OTHER INCOME Interest - Deposits/Advances/OD bills 367.27 188.55 [TDS Rs. 27.05 lakhs (Previous Year Rs. 26.06 lakhs)] Sale of scrap, wastes etc. 556.10 598.94 Rental Building 97.47 99.36 [TDS Rs. 19.92 lakhs (Previous Year Rs. 20.78 lakhs)] Income from Investments 8.01 42.26 Interest Short Term Deposits 190.84 184.35 [TDS Rs. 7.78 lakhs (Previous Year Rs. 39.32 lakhs)] Incentive under CDM 495.53 0.00 Export Incentive 604.50 917.42 Profit on Sale of Assets 0.00 247.45 Other receipts 253.89 438.19 2573.61 2716.52 16. MANUFACTURING EXPENSES Raw materials consumed * 15697.53 14712.78 Purchase of Note Books 132.12 99.06 Chemicals consumed 8146.91 6587.91 Stores consumed 995.13 831.11 (Increase)/Decrease in Stock of Bagasse (723.53) (1166.28) (Increase)/Decrease in Stock-WIP 393.11 (81.40) (Increase)/Decrease in Stock-Finished Goods 12.87 1491.78 Freight & Handling charges 1645.81 1937.94 Packing Expenses 1991.55 1535.62 Power, Fuel & Water charges 16792.13 14331.05 Repairs and maintenance: Building 300.35 107.66 Plant and machinery 4133.44 4060.82 61 * Excluding cost of Bagasse procured in lieu of steam/fuel supplied 49517.42 44448.05

TAMIL NADU NEWSPRINT AND PAPERS LTD SCHEDULES TO PROFIT AND LOSS ACCOUNT (Rs. in Lakhs) For the For the Year ended Year ended 31/03/06 31/03/05 17. PERSONNEL EXPENSES Salaries,Wages and Bonus 3384.54 3640.38 Contribution to Provident and Other funds 462.57 486.23 Employees Gratuity and Leave Encashment 443.61 350.57 Staff Welfare Expenses * 875.96 880.82 5166.68 5358.00 18. ADMINISTRATION, SELLING & OTHER EXPENSES Rent 55.34 40.55 Rates and Taxes 1058.55 586.49 Insurance 204.17 217.99 Transportation Charges 1464.65 1391.58 Commission & Discount on Sales 2088.61 1672.83 Repairs and Maintenance Other than Building and Plant & Machinery 112.47 72.11 Travelling Expenses 194.97 157.90 Auditors Remuneration # 3.66 3.35 Printing and Stationery 61.18 46.95 Communication Expenses 95.13 80.58 Loss on write off/sale of Fixed Assets 20.07 0.00 Advertisement 127.39 119.09 Provision for Doubtful Debts and Advances 322.27 323.03 Miscellaneous Expenses 714.81 577.31 6523.27 5289.76 # Details of Auditors Remuneration Statutory Audit 2.48 2.25 Tax Audit 0.35 0.35 Limited Review 0.80 0.75 Certification Fee 0.03 0.00 19. INTEREST AND FINANCE CHARGES Interest on Term Loans 447.77 415.33 Interest on Short Term Loans 247.57 142.10 Interest on Working Capital 459.51 266.25 Interest on Fixed Deposits 115.30 195.40 Lease Rental Charges 240.16 240.16 Other Interest & Finance Charges 518.54 362.24 2028.85 1621.48 62 20. PRIOR PERIOD/EXCEPTIONAL ITEMS Depreciation on reclassification of assets 252.25 0.00 Depreciation pertaining to earlier years (6.81) 0.00 Compensation for Bagasse supply relating to earlier periods 695.98 0.00 Interest Receipts (408.93) 0.00 Other receipts (25.00) 0.00 507.49 0.00 * Includes amortisation of Voluntary Retirement compensation of Rs. 6.59 lakhs (Previous Year Rs. 6.59 lakhs)

SCHEDULES TO BALANCE SHEET AND PROFIT AND LOSS ACCOUNT 21. SIGNIFICANT ACCOUNTING POLICIES AS 1 AS 2 AS 3 AS 4 AS 5 AS 6 Disclosure of Accounting Policies The accounts have been prepared using historical cost convention and on the basis of going concern, with revenues recognised and expenses accounted on accrual basis, unless otherwise stated. Valuation of Inventories Inventories are valued at cost or net realisable value, whichever is lower. Cost for the purpose of valuation of stocks purchased is determined by using the moving weighted average cost, net of MODVAT/CENVAT credit (wherever applicable) except in the following cases:- a) Raw Materials Bagasse is valued at the average cost of production of steam/average cost of fuel (excluding interest) supplied to the sugar mills inclusive of freight, handling and other charges. In accordance with AS-2, from this year depreciation has been included for ascertaining the cost of bagasse procured which has resulted in increase in the value of closing stock of bagasse to the extent of Rs.195.70 lakhs. b) Work-in-Process Work-in-process is valued at cost, which includes the cost of raw materials and overheads on FIFO basis upto the stage of the completion. c) Finished Goods Finished Goods are valued at the lower of the cost or net realisable value and are inclusive of excise duty. d) Captive Plantation / Standing Crops The Crops are valued at the total amount of expenditure incurred (including land development expenditure) less any incidental revenue realised. Cash Flow Statements Cash Flow Statement has been prepared under Indirect Method. Cash and Cash Equivalents comprise Cash in Hand, Current and Other Accounts (including Fixed Deposits) held with Banks. Events occurring after the Balance Sheet Date a) Assets and Liabilities are adjusted for events occurring after the balance sheet date that provide additional evidence to assist the estimation of amounts relating to conditions existing at the balance sheet date. b) Dividends, which are proposed/declared by the Company after the Balance Sheet date but before the approval of the Financial Statements, are adjusted. Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies Significant items of Extra-ordinary Items, and Prior Period Income and Expenditure, are accounted in accordance with Accounting Standard 5. Depreciation Accounting a) Depreciation on fixed assets is provided on straight-line basis at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. b) Depreciation on addition to assets (which are to supplement the usage of the parent asset) is provided as detailed below: i) In respect of additions to existing Buildings, Depreciation has been provided from the beginning of the year in which such addition is made. ii) In respect of additions to existing Plant and Machinery, Depreciation has been provided prospectively over the residual useful life of the parent asset from the beginning of the year in which such addition is made. iii) However, in respect of rebuild / upgrade of machinery leading to substantial capacity expansion, depreciation is provided on straight line basis at the rates and in the manner provided in Schedule XIV of the Companies Act, 1956. iv) Depreciation on account of change in the value of fixed assets acquired out of foreign currency loans is provided prospectively over the residual useful life of the respective assets from the beginning of the year in which the change has occurred. c) Pending renewal of agreements with sugar mills, depreciation on fixed assets at such Offsites is provided on straightline basis at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 considering the continued arrangement for procurement of bagasse from sugar mills. 63

TAMIL NADU NEWSPRINT AND PAPERS LTD AS 9 Revenue Recognition a) Sales are accounted net of excise duty, sales tax and sales returns. b) Other items of revenue are recognised in accordance with the Accounting Standard (AS-9) issued by the Institute of Chartered Accountants of India. Accordingly, where there are uncertainties in the ascertainment /realisation of income such as interest from customers (upon factors such as financial condition of the person from whom the same is to be realised)/liquidated damages recovered from suppliers/contractors, the same is not accounted for. AS 10 Accounting for Fixed Assets Fixed Assets a) Fixed Assets are stated at cost of construction or acquisition less depreciation. All costs attributable to bring the fixed assets to a working condition are capitalised. MODVAT / CENVAT Credit availed due to purchase of fixed assets is deducted from the cost. b) Exchange differences due to changes in foreign exchange liabilities in relation to the acquisition of Fixed Assets are adjusted in the carrying cost of the respective Fixed Assets. c) Additional compensation for lands acquired from farmers under Land Acquisition Act, 1894 is capitalised with the cost of the land in the year of payment based on final award of compensation by appropriate authority. Capital Work-in-Progress Advances paid for acquisition of fixed assets and cost of assets not put to use before the year-end are disclosed under Capital Work-in-Progress. AS 11 Accounting for Effects in Foreign Exchange Rates Fixed Assets a) Fixed Assets acquired out of foreign currency loans are recorded at the actual transaction rate. b) The gains or losses due to exchange fluctuations on repayment of such loans during the year are recorded at the actual repayment rates and consequent adjustments are made in the cost of Fixed Assets. c) The gains or losses on translation of such loan liabilities at the year-end (at the closing rate) are adjusted against the cost of Fixed Assets. Current Assets and Current Liabilities a) Foreign Currency Current Assets and Current Liabilities are recorded at the actual transaction rate. b) The gain or loss arising out of settlement are recognised as income / expenditure in the profit and loss account. c) The gain or loss arising out of translation of the assets and liabilities at the closing rates at the year-end are recognised as income / expenditure in the profit and loss account. Forward Contracts: Forward Contracts are entered into to hedge foreign currency risk of the underlying assets/liabilities as at the Balance Sheet date and also to hedge foreign currency risk of firm commitments or highly probable forecast transaction. The premium or discount on all such contracts arising at the inception of each contract is amortised as income or expense over the life of the contract. Any profit or loss arising on cancellation of forward contracts is recognised as income or expense for the period. AS 12 Accounting for Government Grants Capital Grants relating to specific fixed assets are reduced from the gross value of the respective fixed assets and other Capital Grants are treated as Capital Reserve. 64 AS 13 Accounting for Investments a) Long-term investments are valued at cost. Provision, if any, is made to recognise a decline other than a temporary decline, in the value of long-term investments. Permanent decline in the value of long-term investments is determined initially ten years from the date of its purchase and thereafter once in a period of five years. b) Current investments are valued at lower of cost and fair market value. AS 15 Accounting for Retirement Benefits Provident Fund / Employees Pension Scheme Contribution to Provident Fund/Employee Pension Scheme is made monthly, at a pre-determined rate to the Provident Fund Trust and debited to the Profit and Loss Account on accrual basis.

Superannuation Fund The Company has arrangements with the Life Insurance Corporation of India to administer the Superannuation Schemes. The premium paid/payable is debited to the Profit and Loss Account on accrual basis. Gratuity & Leave Encashment Liabilities in respect of Gratuity and Leave Encashment are provided for on the basis of Actuarial Valuations as at the yearend. VRS Compensation Payment of compensation to employees who have retired under Voluntary Retirement Scheme (VRS) is amortised over a period of 5 years. The balance amount is carried forward as Miscellaneous Expenditure (to the extent not written off or adjusted). AS 16 Borrowing cost Borrowing costs, attributable to qualifying assets, are capitalised up to the date the asset is ready to put to use. All other borrowing costs are charged to revenue. AS 17 Segment Reporting The company s products namely Newsprint and Printing & Writing Paper are classified under one segment. Revenue/value of fixed assets/net profit of energy division being less than 10% of the total revenue/value of fixed assets/net profit of the company, segment reporting for energy division is considered as not applicable. AS 18 Related Party Transactions a) In pursuance of the opinion of the Institute of Chartered Accountants of India, the transactions with IDBI are not regarded as Related Party Transactions. b) Remuneration to Key Managerial Personnel, other than Independent Non-executive Directors, is disclosed as Related Party Transactions in the Notes to Accounts, as per the Standard and its interpretations. AS 19 Leases Rentals are expensed with reference to lease terms and other considerations. AS 20 Earnings per Share a) Basic Earnings per Share has been computed with reference to the Weighted Average number of Shares, based on monthly rests. b) Diluted Earnings per Share has been computed based on the fully paid-up value of the Shares issued, as if Calls-in- Arrears has been received. AS 22 Accounting for Taxes on Income Income-tax expense is accounted in accordance with AS 22 - Accounting for taxes on Income which includes current taxes and deferred taxes. Deferred taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available. AS 26 Intangible Assets General: a) Intangible assets are stated at cost less accumulated amortisation. b) Computer software being intangible asset is amortised over a period of four years. Research and Development: a) Expenditure relating to capital items are treated as fixed assets and depreciated at applicable rates. b) Expenditure on Research is recognised as an expense under respective natural heads, as and when incurred. AS 28 Impairment of Assets The Company determines the Impairment of Assets based on Cash Generating Units. For this purpose, the Cash Generating Units have been based on segments of operations, viz., Paper & Pulp and Energy. 65 AS 29 Provisions, Contingent Liabilities and Contingent Assets a) A present obligation, which could be reliably estimated, is provided for in the accounts, if it is probable that an outflow of resources embodying economic benefits will be required for its settlement. b) Contingent Liabilities are disclosed by way of notes in the Balance Sheet. c) Contingent Assets are neither recognised nor disclosed.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ D.P. Id* Client Id* TAMIL NADU NEWSPRINT AND PAPERS LIMITED Registered Office: 67, Mount Road, Guindy, Chennai 600 032 NAME AND ADDRESS OF THE SHAREHOLDER ATTENDANCE SLIP Master Folio No. No. of Share(s) I hereby record my presence at the 26th Annual General Meeting of the Company held on Friday, the 25th August 2006 at 10.25 a.m. at The Music Academy, 168, T.T.K. Road, Chennai 600 014. Signature of the shareholder or proxy * Applicable for investors holding shares in electronic form. Note: Please fill attendance slip and hand it over at the Entrance of the Meeting Hall. --------------------------------------------------------------------------------------------------------------------- TEAR HERE D.P. Id* Client Id* TAMIL NADU NEWSPRINT AND PAPERS LIMITED Registered Office: 67, Mount Road, Guindy, Chennai 600 032 PROXY FORM Master Folio No. I / We... of... being a member / members of Tamil Nadu Newsprint and Papers Limited hereby appoint... of... or failing him vote for me / us and on my / our behalf at the 26th Annual General Meeting to be held on Friday, the 25th August 2006 at 10.25 a.m. or at any adjournment thereof. Signed this... day of... 2006. * Applicable for investors holding shares in electronic form. Note Affix One Re. Revenue Stamp : The Proxy in order to be effective should be duly stamped, completed and signed and must be deposited at the Registered Office of the Company not less than 48 hours before the time for holding the aforesaid meeting. The Proxy need not be a member of the Company. 75