Mangalam Timber Products Ltd

Your Directors present herewith the 27th Annual Report on the business and operationsof the company and the audited statement of accounts for the financial year ended 31March, 2011.

FINANCIAL RESULTS

SOCIO ECONOMIC ENVIRONMENT

After growing at 8.0% in 2009/10, the Indian economy picked up further steam in 2010/11recording a real GDP growth of 8.6% during the year. While the Agricultural sector postedan above-trend growth of 5.4% aided in part by a low base effect, Industry and Servicesgrew by 8.1% and 9.6% respectively. After clocking an impressive growth of 8.9% in thefirst half of the year, the economy showed signs of moderate growth in the secondhalf.With the Indian economy on a positive growth path, the number of constructionprojects has also risen substantially over the past few years.

As per the estimates of European Panel Federation (EPF), the worldwide market of MDFand particle board is increasing at a fast rate of 13 % per year. Wood-based panels have abroad diversity of uses in every economy around the world. These are widely used forpartitions, kitchen and office cabinets, panels, drawers, tables, and furniture, and aregradually replacing ply wood. With reducing wood supply and the need to use eco-friendlyproducts, the demand for MDF products is expected to remain robust.

OPERATIONAL PERFORMANCE

During the year under review, your company incurred a Net after tax loss of Rs. 367Lakhs. The turnover of the Company came down to Rs. 5584.61 lacs (Previous Year Rs.7199.60lacs) and the production was also lower at 18157 Mt. (Previous Year 29286 Mt).

A major reason for the decline was the outbreak of a fire in the Hydraulic Room of thefactory in the month of April 2010 in which major plant equipments were damaged.Fortunately no harm was caused to any of our workers and personnel in the factory.However, the MDF production came to a complete halt for nearly three and a half months; asa result of which the company suffered a loss of Rs. 437 lacs in the first quarter alone.

Immediate steps were taken to restore the damaged equipment and for installation of astandby system which was commissioned by the end of July 2010 after which production couldbe gradually restored. In March 2011, the original German hydraulic machine that wasdamaged in the fire was reinstalled. A planned shutdown was taken for the same.

Your company improved its operational efficiency by commissioning the installation of ahigher efficiency boiler resulting in reduction of our coal consumption. Proactive stepshave also been taken to ensure preventive maintenance of the machinery.

Your Company is certified for an integrated system for :

• ISO 9001:2008 ensuring stringent process quality control

• ISO 14001:2004 ensuring superior environmental management system

• OHSAS 18001:2007 ensuring advanced occupational health and safety managementsystem

MARKETING & SALES

Your Company has benefited further from leveraging its brand "Duratuff" tocommand a premium position in the market. Duratuff is widely recognized as an industrypioneer because of its strong brand recall & implicit trust among customers.

The Sales network was consolidated by appointment of new channel partners, along withstrategic rationalisation of distribution channels.

HUMAN RESOURCES

The agreements with the Permanent Workers Union and the Casual Workers Union haveexpired. Negotiations for fresh agreements are at an advanced stage. The Managementrecognizes the positive role played by the Unions in improving quality and increasingproductivity of the factory.

For the safety of our workers, additional medical benefits have been provided byestablishing an in-plant clinic & a regular doctor on premises. Your Companycontributes a part of its income to social, charitable and cultural organizations.

Your company has inducted new personnel with significant management expertise at seniorpositions. The HR Department has taken various initiatives for implementing specifictraining programs across multiple disciplines & functional groups. We are confidentthat these steps will strongly reflect in our performance indicators over the comingfinancial years.

PLANTATION :

Your company is currently in the process of restoring its farm forestry operations byengaging in clonal plantation of high yielding gall resistant seedlings, which were badlyaffected by the Gall Disease in 2009. The company has 850 acres of land on lease forvarious periods where uprooting of old tree stumps and fresh plantation is beingundertaken in phases. This is a capital intensive and time consuming project.

Your company has also applied for Clean Development Mechanism (CDM) which will earncarbon credits for plantation activity. Till date 28 forestry projects across the globehave been registered of which three are from India. The project has reached the validationstage and is likely to be considered for registration at UNFCCC shortly. This is a win-winsituation for the company and the local farmers as the revenue earned from the carboncredits would be shared among the parties.

RAW MATERIAL

Price and avalibility of other major raw materials such as methanol, TG Urea , Melamineremained fairly stable.

AMALGAMATION WITH MANGALAM CEMENT LTD

The merger of your Company with M/s Mangalam Cement Ltd, is in process and theHon’ble High Court of Orissa, Cuttack, vide its order dt. 22nd April 2011, hasdirected to convene a meeting of the Equity Shareholders of the Company on Saturday, the29th May, 2011 at the Registered Office of the Company.

The merger on approval by the Hon’ble High Court of Rajasthan and the Hon’blehigh Court of Orrisa will be effective from 1st of April 2010.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate Internal Control Systems in all its areas of operation, whichis commensurate with its size. A reputed outside Firm of Chartered Accountants has beenappointed as the Internal Auditors to carry out thorough audit of the Company’sfunctions. The adequacy of the system has also been deemed satisfactory by the Auditors.

a) Conservation of Energy & Technology Absorption

Energy conservation measures, to the extent feasible received top priority from theManagement of your Company. Power Consumption for the year was marginally higher due tolower production and longer downtime. Greater emphasis is now being placed towards theResearch & Development facility. FORM ‘A’ of the Companies (Disclosure ofparticulars in the Report of Board of Directors) Rules, 1988 is not required to be filledas our industry is not included in the Schedule to the Rules.

b) Foreign Exchange Earnings and Outgo

During the year under review, the foreign exchange earnings from export sales amountedto Rs 16.35 Lacs & the total outgo of foreign exchange (including cost of imports, rawmaterials, stores & spares) was equivalent to Rs 101.76 Lacs.

Burgeoning urban India: Urban India accounts for 30 percent of its population and52 percent of GDP. According to consultancy firm McKinsey's estimates, urban India willaccount for two-thirds of incremental consumption demand. The increased urban expenditurewill be driven by an increase in population growth and increase in urbanisation from 30percent to 37 percent (318 mn to 523 mn).

Middle-class: India’s middle-class is expected to account for 85 percent ofurban households and 70 percent of consumption by 2015; the upper-class will account for 7percent of households and 28 percent of consumption.

Young population: India’s working population is among the world’syoungest working populations. Around two-thirds of the Indian population is under 35 yearsand more than 60 percent of the population will be in the working age group (15 – 60years) by 2050. The median age of the population is estimated at 23 years against theworld median age of 33 years.

Rising per capita income: India’s per capita income grew from Rs 38,695 perannum in 2008-09 to Rs 40,745 per annum in 2009-10. Overall per capita consumptionincreased 2.7 percent from Rs 23,012 per annum to Rs 23,626 per annum.

Real estate growth : The Indian real estate sector accounts for 4.5 percent ofgross domestic product with urban housing accounting for 3.13 percent. Over the next fiveyears, this contribution is expected to rise to 6 percent. India's property sector mayattract up to USD 12.11 billion in investment over a five-year period. Investments incommercial real estate are likely to increase three-fold in five years.

RISKS

• Cheap imports

• Competition from both unorganised and other organised players, leading todifficulties in improving market share.

• Shortage of primary raw material (wood fibre)

• Stringent regulatory norms regarding concerns over the environment.

DIVIDEND

The Board of Directors has not recommended dividend for the financial year 2010-2011,in view of losses.

FINANCE

Your Company thanks its consortium bankers for their continued support.

LISTING WITH THE STOCK EXCHANGES

The Company is listed with The National Stock Exchange of India Ltd and Bombay StockExchange Limited. The annual Listing Fee to both the stock exchanges has been paid ontime.

PUBLIC DEPOSITS

The Company has neither invited nor accepted any deposits from the public within themeaning of Section 58(A) of the Companies Act, 1956 during the year under review. As such,no amount of principal or interest was outstanding on the date of the Balance Sheet.

CORPORATE GOVERNANCE

In terms of clause 49 of the Listing Agreement, the Company has implemented the Code ofCorporate Governance and a separate section has been included in this report. The reporton Corporate Governance and the declaration by the Manager in respect of Code of Conductfor all Board Members and Senior Management personnel and the certificate issued by M/s. SM Daga & Co., Chartered Accountants ((Firm Registration No. 303119E), statutoryauditors of the company in confirmation of the compliance as per requirement of clause 49of the Listing Agreement with the stock exchanges have been set out in Annexure I.

CASH FLOW ANALYSIS

In conformity with the provisions of Clause 32 of the Listing Agreement(s), cash flowstatement for the financial year ended 31st March 2011 is annexed hereto.

DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956 with respect to Directors’responsibility, it is hereby confirmed –

That in the preparation of the annual accounts, the applicable accounting standards hadbeen followed along with proper explanations relating to material departures;

That the Directors had selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at 31st March, 2011 and of the profitor loss of the Company for that period;

That the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

That the Directors had prepared the annual accounts on a going concern basis.

DIRECTORS

Shri S K Parik retires by rotation in the forthcoming Annual General Meeting and beingeligible, offers himself for re-election.

Shri Anand Daga has been appointed as Additional Director and holds office upto thedate of the ensuing Annual General Meeting. Notice has been received from a Shareholder ofthe Company proposing his candidature for the Office of the Director.

AUDITORS’ REPORT

Auditors’ Report to the Shareholders does not contain any qualification,reservation, or adverse remarks.

STATUTORY AUDITORS

M/S. S M Daga & Co., Chartered Accountants ((Firm Registration No. 303119E),Auditors of the Company will retire at the ensuing Annual General Meeting and are eligiblefor re-appointment and they have confirmed that their re-appointment, if made, shall bewithin the limits of Section 224 (1B) of the Companies Act, 1956. The Board recommendstheir re-appointment.

DEMATERIALIZATION OF THE SHARES OF THE COMPANY

Trading in shares of the Company has been compulsorily in Dematerialized mode by allinvestors as per directives given by SEBI. Accordingly, the Equity Shares of the Companyare available for Dematerialization under ISIN INE 805B01012 with CDSL and NSDL.

PERSONNEL

The Company has no employee in respect of whom information under Section 217 (2A) ofthe Companies Act, 1956 is required to be annexed.

ACKNOWLEDGEMENT

Your Directors take this opportunity to place on record their deep appreciation for thewhole-hearted and sincere co-operation the Company has received from the StatutoryAuthorities, Banks, Shareholders and Customers.

Your Directors also wish to thank all the Employees for their dedicated and committedservice to the Company.