annual registration statement (form 56-1) for the year ... · nam hua rubber : nam hua rubber ......

- Unofficial Translation -

Annual Registration Statement (Form 56-1)

For the Year Ended 31 December 2012

Sri Trang Agro-Industry Public Company Limited

TABLE OF CONTENTS

Page

Part 1 Issuing Company 1

1. General Information 1

2. Risk Factors 10

3. Nature of Business 16

4. Business Operation of Each Product Line 30

5. Operating Assets 56

6. Legal Disputes 58

7. Capital Structure 59

8. Management 63

9. Internal Control 96

10. Related Party Transactions 98

11. Management Discussion and Analysis 122

12. Relevant Information 136

Part 2 Certification of Accuracy of Information

Enclosure 1 Details of the Executives and Controlling Persons of STA

Enclosure 2 Details of the Directors of the Subsidiaries

Enclosure 3 The Audit Committee Report

DEFINED TERMS AND ABBREVIATIONS

In this document, unless the context otherwise requires, references to “our Company”, “the Company”

or “STA” refer to Sri Trang Agro-Industry Public Company Limited; references to “we”, “us”, “our”,

“ourselves”, and “Group” refer to the Company and its consolidated subsidiaries taken as a whole.

Our Group Companies and other Entities

Anvar Parawood : Anvar Parawood Company Limited

Company or STA : Sri Trang Agro-Industry Public Company Limited

Nam Hua Rubber : Nam Hua Rubber Company Limited

Pattana Agro Futures : Pattana Agro Futures Company Limited

Premier System Engineering : Premier System Engineering Company Limited

PT Sri Trang Lingga : PT Sri Trang Lingga Indonesia

Rubberland Products : Rubberland Products Company Limited

Sadao P.S. Rubber : Sadao P.S. Rubber Company Limited

Semperflex Asia : Semperflex Asia Corporation Limited

Semperflex Shanghai : Semperflex Shanghai Ltd.

Semperform Pacific : Semperform Pacific Corporation Limited

Semperit Technische : Semperit Technische Produkte Gesellschaft m.b.H., a

subsidiary of Semperit AG Holding

Sempermed Brasil : Sempermed Brasil Comé´ rcio Exterior Ltda.

Sempermed Singapore : Sempermed Singapore Pte. Ltd.

Sempermed USA : Sempermed USA, Inc.

Shanghai Semperit : Shanghai Semperit Rubber & Plastic Products Co., Ltd.

Shanghai Sempermed : Shanghai Sempermed Gloves Co., Ltd.

Shi Dong Investments : Shi Dong Investments Pte. Ltd.

Shi Dong Shanghai : Shi Dong Shanghai Rubber Co., Ltd.

Sri Trang International : Sri Trang International Pte. Ltd.

Sri Trang Rubber & Plantation : Sri Trang Rubber & Plantation Company Limited

Sri Trang USA : Sri Trang USA, Inc.

SSC : Siam Sempermed Corporation Limited

Starlight Express Transport : Starlight Express Transport Company Limited

Startex Rubber : Startex Rubber Corporation Limited

STH : Sri Trang Holdings Company Limited

Thai Tech Rubber : Thaitech Rubber Corporation Limited

General

CDP : The Central Depository (Pte) Limited

Code of Corporate Governance : Singapore Code of Corporate Governance 2012

Concentrated Latex : Liquid latex with a dry rubber content of approximately

60.0%

Listing Manual : The listing manual of the SGX-ST

Natural Rubber Products : RSS, TSR and Concentrated Latex

Office of the SEC : The Office of the SEC

Other Finished Products : Finished products, including high-pressure hydraulic

hoses, escalator handrails and various rubber and plastic

parts which are mainly used in electrical appliances

PLCA : The Public Limited Companies Act B.E. 2535 (1992) of

Thailand, as amended from time to time

RSS : Ribbed smoked sheet

SEC : The Securities and Exchange Commission of Thailand

SEC Act : The Securities and Exchange Act. B.E. 2535 (1992) of

Thailand, as amended from time to time

SET : The Stock Exchange of Thailand

SFRS : Singapore Financial Reporting Standards

SGX-ST : Singapore Exchange Securities Trading Limited

SICOM : Singapore Commodity Exchange Limited

STR : Standard Thai rubber

Thai GAAP : Generally accepted accounting principles in Thailand

TSD : The Thailand Securities Depository Co., Ltd.

TSR : Technically specified rubber, which includes STR and

SIR

Currencies and Measurements

Baht : The lawful currency of Thailand

IDR or Indonesian Rupiah : The lawful currency of Indonesia

MYR or Malaysian Ringgit : The lawful currency of Malaysia

R$ : The lawful currency of the Federative Republic of Brazil

SGD or Singapore dollar : The lawful currency of the Republic of Singapore

US$ or US Dollar : The lawful currency of the U.S.

Sri Trang Agro-Industry Public Company Limited Annual Registration Statement (Form 56-1)

Part 1 Page 1

PART 1

Issuing Company

1. General Information

1.1 Information of the Company

Name of the Company

(Thai) : บริษัท ศรีตรังแอโกรอินดัสทรี จ ำกัด (มหำชน)

Name of the Company

(English)

: Sri Trang Agro-Industry Public Company Limited

Head Office : 10 Soi 10, Phetkasem Road, Hatyai, Songkhla 90110, Thailand

Telephone +66-7434-4663 (Automatic 14 Lines)

Fax +66-7434-4676, +66-7434-4677, +66-7423-7423

Type of Business : Production and export of RSS, TSR and Concentrated Latex

Registration No. : 0107536001656

Website : http://www.sritranggroup.com

Type of Shares : Ordinary shares

Registered Capital : Baht 1,280,000,000

Paid-up Capital : Baht 1,280,000,000

Issued Shares : Baht 1,280,000,000 with a par value of Baht 1 each

Branch Offices

1. 13/1-5 Jingjit Road, Thupthiang Subdistrict, Muang Trang District, Trang Province, 92000,

Thailand

Telephone 0-7550-2900-2

Fax 0-7550-2903

2. 99/3 Moo 7, Karnchanawanich Road, Phangla Subdistrict, Sadao District,

Songkhla Province, 90170, Thailand

Telephone 0-7445-2623-6

Fax 0-7445-2622

3. 17th Floor, Park Venture Ecoplex Unit 1701, 1707-1712

57 Wireless Road, Lumpini Subdistrict, Pathumwan District,

Bangkok, 10330, Thailand

Telephone 662-207-4500

Fax 662-108-2241-44

4. 1 Moo 2, Thumyai Subdistrict, Thungsong District, Nakhonsrithammarat Province,

80110, Thailand

Telephone 0-7532-9830-3

Fax 0-7577-3223

5. 399 Moo 7, Huay Nang Subdistrict, Huay Yod District, Trang Province, 92130,

Thailand

http://www.sritranggroup.com/


Part 1 Page 2

Telephone 0-7529-4313-5

Fax 0-7529-4316-7

6. 101/1-4 Moo 7, Praiwas Subdistrict, Karnchanadit District, Surat Thani Province,

84160, Thailand

Telephone 0-7728-0580-1, 089-873-1486

Fax 0-7728-0582, 081-956-0559

7. 68/2 Moo 4, Surat Thani-Punpin Road, Watpradoo Subdistrict, Muang Surat Thani

District, Surat Thani Province, 84000, Thailand

Telephone 0-7720-0521-3

Fax 0-7720-0524

8. 41/1 Moo 13, Dongyang Subdistrict, Pratew District, Chumporn Province, 86210,

Thailand

Telephone 0-7757-8410-2

Fax 0-7757-8414

9. 139 Moo 2, Trang-Sikao Road, Na Muangphet Subdistrict, Sikao District, Trang

Province, 92000, Thailand

Telephone 0-7557-0042-3

Fax 0-7557-0041, 0-7557-0046

10. 136/1 Moo 1, Siroros Road, Khaotoom Subdistrict, Yarang District, Pattani Province,

94160, Thailand


Fax 0-7326-2785

11. 328 Moo 7, Baan Jumpa, Nhongnakum Subdistrict, Mueng Udon Thani District,

Udon Thani Province 41000

Telephone 0-4221-9991-4

Fax 0-4221-9995

12. 218 Moo 7, Muengsrikai Subdistrict, Varinchumrab District, Ubon Ratchathani

Province 34190


Fax 0-4525-2967

1.2 Information of juristic persons in which the Company holds more than 10% of the

issued shares of such juristic persons

1. Nam Hua Rubber

Head Office: 10 Soi 10 Phetkasem Road, Hatyai Subdistrict

Hatyai District, Songkhla, 90110 Thailand

Branch Office: 1. 99 Moo 3 Samnuk Kham Subdistrict, Sadao District, Songkhla Province,

90120

2. 41 Moo 3 Samnuk Kham Subdistrict, Sadao District, Songkhla Province,

90120

Type of Business: Production and export of RSS, TSR and Concentrated Latex

Telephone: 66-7441-2268, 66-7441-1982-5

Fax: 66-7441-2255

Type of Shares: Ordinary shares

Total number of shares directly held by STA: 4,999,994 shares or 99.99%


Part 1 Page 3

2. Anvar Parawood

Head Office: 101 Moo 3, Padangbezar Road, Samnuk Kham Subdistrict

Sadao District, Songkhla Province, 90120 Thailand

Branch office: 369 Moo 7, Huay Nang Subdistrict, Huay Yod District, Trang Province

Type of Business: Lumber production and manufacture of wooden furniture

Telephone: 66-7441-2756-7

Fax: 66-7441-2853

Type of shares: Ordinary shares

Total number of shares directly held by STA: 9,994 shares or 99.94%

3. Premier System Engineering

Head Office: 123 Moo 8, Karnchanawanich Road, Banpru Subdistrict

Hatyai District, Songkhla, 90250, Thailand

Branch Office: 133 Rakpru Road, Banpru Subdistrict, Hatyai District, Songkhla Province,

90250

Type of Business: Engineering services, design, installation and

maintenance machinery

Telephone: 66-7447-1480-3, 66-7447-1368

Fax: 66-7447-1290, 66-7447-1430



4. Rubberland Products

Head Office: 109 Karnchanawanich Road, Pahtong Subdistrict

Hatyai District, Songkhla Province, 90230, Thailand

Branch Office: 1. 10 Soi 10 Phetkasem Road, Hatyai Subdistrict

Hatyai District, Songkhla, 90110




3. 338 Moo 2 Nonsomboon Subdistrict, Mueang Bungkarn District,

Bungkarn, 38000

4. 338 Moo 1 Kokma Subdistrict, Prakonchai District, Burirum, 31140

5. 188 Moo 10 Bangsaiyai Subdistrict, Mueang Mukdahan Subdistrict,

Mukdahan, 49000

Type of Business: Production of Concentrated Latex/ Block rubber

Telephone: 66-7429-1223-4, 66-7429-1755, 66-7429-1476

Fax: 66-7429-1477



5. SSC

Head Office: 110 Karnchanawanich Road, Pahtong Subdistrict

Hatyai District, Songkhla , 90230, Thailand

Branch Office: 1. 10 Soi 10 Phetkasem Road, Hatyai Subdistrict

Hatyai District, Songkhla Province, 90110



Part 1 Page 4



3. 109/2 Karnchanawanich Road, Pahtong Subdistrict


4. 352 Karnchanawanich Road, Pahtong Subdistrict


5. 189 Moo 7 Plaiwat Subdistrict, Karnchanadit district, Surat Thani Province,

84160

6. 39/1 Moo 9 Tungkai Subdistrict, Yantakao District, Trang Province, 92140

Type of Business: Production of examination gloves

Telephone: 66-7447-1471, 66-7429-1648-9, 66-7429-1471-5

Fax: 66-7429-1650



6. Semperflex Asia

Head Office: 110/1 Karnchanawanich Road, Pahtong Subdistrict


Branch Office: 10 Soi 10 Phetkasem Road, Hatyai Subdistrict

Hatyai District, Songkhla, Province 90110

Type of Business: Production of high-pressure Hydraulic hoses

Telephone: 66-7447-1231-5

Fax: 66-7447-1230



7. Semperform Pacific1

Head Office: 110/2 Karnchanawanich Road, Pahtong Subdistrict


Branch Office: 10 Soi 10 Phetkasem Road, Hatyai Subdistrict

Hatyai District, Songkhla, Province 90110

Type of Business: Production of injection moulded-rubber and plastic parts

Telephone: 66-7447-1231-5

Fax: 66-7447-1230



1 Semperform Pacific ceased its business operations since 2009. Liquidation process will be performed after the

approval from shareholders’meeting.


Part 1 Page 5

8. Sadao P.S. Rubber

Head Office: 207/1 Padang Besar Road, Sadao Subdistrict

Sadao District, Songkhla Province, 90120, Thailand

Type of Business: Production of RSS

Telephone: 66-7441-1838, 66-7446-0483, 66-7446-0485

Fax: 66-7446-0484


Total number of shares held by STA: 399,994 shares or 99.99%

9. Starlight Express Transport

Head Office: 13/1 Jingjit Road, Thupthiang Subdistrict

Muang District, Trang Province, 92000, Thailand

Type of Business: Provision of logistics services

Telephone: 66-7521-0900-2

Fax: 66-7521-0903



10. Startex Rubber

Head Office: 10 Soi 10 Phetkasem Road, Hatyai Subdistrict


Type of Business: Ownership and management of rubber and oil palm plantations

Telephone: 66-7550-2900-2

Fax: 66-7550-2903



11. Thai Tech Rubber

Head Office: 2 Juti Utit 3 Road, Hatyai Subdistrict


Type of Business: Production of TSR

Telephone: 66-7423-0768, 66-7423-0406-7, 66-7423-9063-4

Fax: 66-7423-8650



12. Pattana Agro Futures

Head Office: Wallstreet Tower, G Floor, 33/19 Surawongse Road

Surawongse Subdistrict, Bangrak District, Bangkok, 10500, Thailand

Type of Business: Brokerage activities

Telephone: 66-2632-8826

Fax: 66-2632-8825




Part 1 Page 6

13. Sri Trang Rubber & Plantation

Head Office: 13/1 Jingjit Road, Thupthiang Subdistrict

Muang District, Trang Province, 92000, Thailand

Branch Office: 55 Moo 7 Suthep Subdistrict, Mueng Chiang Mai District, Chiang Mai

Province 52000

Type of Business: Ownership and management of rubber plantation

Telephone: 66-7521-0900-2

Fax: 66-7521-0903


Total number of shares directly held by STA: : 21,999,993 shares or 99.99%

14. Sri Trang International

Head Office: 1 Raffles Place No. 38-02, One Raffles Place, Singapore 048616

Type of Business: Natural rubber wholesaler in Singapore

Telephone: 65-6532-5210 , 65-6532-5321

Fax: 65-6532-7501



15. Sri Trang USA, Inc.

Head Office: 300 Preston Ave., Suite 400 Charlottesville

Virginia 22902 United States

Type of Business: Natural rubber wholesaler in the United States

Telephone: 1-434-296-0080 , 1-434-244-0089

Fax: 1-434-296-0098

Type of Shares: Common stock


16. Sempermed USA, Inc.

Head Office: 13900, 49th Street North, Clearwater, Florida 33762 United States

Type of Business: Distribution of examination gloves in the United States

Telephone: 1-800-366-9545

Fax: 1-800-763-5491



17. Shanghai Sempermed

Head Office: No.8, Xinja Road, Che Dun Town

Songjiang District, Shanghai 201611 P.R.C

Type of Business: Production of examination gloves

Telephone: 86-21-5760-9389

Fax: 86-21-5760-9296

Type of capital: Registered capital

Total amount of capital directly held by SSC: USD 6,000,000 or 100.00%


Part 1 Page 7

18. Shanghai Semperit

Head Office: Bei SongSt2, Minhang, Shanghai 20111 P.R.C. North of Bridge No.2

Type of Business: Manufacture of handrails and related parts for escalators and travelators

Telephone: 86-21-6409 0850 , 86-21-6409 0300

Fax: 86-21-6409 0850

Type of Interest: Equity

Total interest directly held by STA: 10.00%

19. PT Sri Trang Lingga

Head Office: Jalan TPA2, RT.26 & 29 Keramasan, Palembang, South Sumatera, Indonesia

30259 PO BOX 1230 Palembang

Type of Business: Production of block rubber

Telephone: 62-711-445 666

Fax: 62-711-445 222



20. Semperflex Shanghai

Head Office: Shanghai Chemical Industry Park, Fengxian Subzone

Canggong Road 1255, 201424, Shanghai, P.R.C.

Type of Business: Production of high-pressure Hydraulic hoses

Telephone: 86-21-5744-8386

Fax: 86-21-5744-8386


Total interest directly held by STA: 50.00%

21. Sempermed Singapore

Head Office: 10 Anson Road, #09-24, International Plaza, Singapore 079903

Type of Business: Investment holding in Sempermed Brasil

Telephone: N/A

Fax: N/A



22. Sempermed Brasil

Head Office: Rua João Franco de Oliveira

750 – Unileste, Piracicaba – São Paulo

Brazil Zip Code: 13.422-160

Type of Business: Distribution and marketing of natural rubber gloves

and synthetic rubber in Brazil

Telephone: N/A

Fax: N/A

Type of capital: Quotas

Total number of quotas held by Sempermed Singapore: 12,546,638 shares or approximately

100.00%


Part 1 Page 8

23. Shi Dong Investments

Head Office: 1 Raffles Place No.38-02, One Raffles Place, Singapore 048616

Type of Business: Investment holding in PT Star Rubber

Telephone: 65-6532-5210 , 65-6532-5321

Fax: 65-6532-7501


Total number of shares directly held by Sri Trang International: 100.00%

24. PT Star Rubber

Head Office: Jalan Trans Kalimantan KM. 16, Desa Jawa Tengah Kec. Sungai Ambawang,

Kab Kubu Raya-Kalbar, Pontianak, Kalimantan Barat, Indonesia. PO Box 7864

Type of Business: Production of block rubber

Telephone: 62-561-724888

Fax: 62-561-724593


Total number of shares directly held by Shi Dong Investment Pte Ltd. 99.00%

25. Shi Dong Shanghai

Head Office: Unit 2701, Wheelock square, No.1717 West Nanjing Road, Jing’ an District,

Shanghai 200040

Type of Business: Distribution of Natural Rubber Products in PRC

Telephone: 86 21-64137860

Fax: 86 21-64137315


Total interest held by STA: USD 5,000,000 or 100.00%

26. Formtech Engineering (M) Sdn. Bhd.

Head Office: Lot 135, Jalan Permata 1/4, Arab-Malaysian Industrial Park 71800 Nilai, Negeri

Sembilan, Malaysia

Type of Business: Production and distribution mold for glove production line

Telephone: 060-6799-5952

Fax: 060-6799-5951


Total number of shares directly held by Sempermed Singapore: 82.86%


Part 1 Page 9

References

1. Share Registrar Thailand Securities Depository Co., Ltd.

62 The Stock Exchange of Thailand Building,

Ratchadaphisek Road, Klongtoey, Bangkok 10110, Thailand

Telephone: 66-2229 2800

Fax: 66-2654 5427

TSD Call Center: 66-2229 2888

2. Singapore Transfer Agent Boardroom Corporate & Advisory Services Pte. Ltd.

50 Raffles Place #32-01

Singapore Land Tower

Singapore 048623

Telephone: 65-6536 5355

Fax: 65-6536 1360

3. Auditor (Appointed on 28 June 2010 and has been in charge of the auditor of the

Company during FY 2010-2012)

Mrs. Unakorn Phruithithada, Certified Public Accountant (Thailand) No. 3257; or

Mrs. Nattaporn Phan-Udom, Certified Public Accountant (Thailand) No. 3430; or

Mr. Boonlert Kamolchanokkul, Certified Public Accountant (Thailand) No. 5339

PricewaterhouseCoopers ABAS Limited

15th Floor, Bangkok City Tower

179/74-80 South Sathorn Road,

Bangkok, 10120 Thailand

Telephone: 66-2344-1000, 66-2286-9999

Fax: 66-2286-5050

4. Debenture Registrar for STA No. 1/2554 and STA No. 1/2556

Siam Commercial Public Company Limited

9 Ratchadapisek Rd., Chatuchak,

Bangkok 10900 Thailand

Telephone: 66-2256-2323

Fax: 66-2256-2414

5. Debenture Holder’s Representative for STA No. 1/2554

Kasikornbank Public Company Limited

1 Soi Ratburana 27/1 Ratburana Rd.,

Ratburana, Ratburana,

Bangkok 10140 Thailand

Telephone: 66-2222-0000

Fax: 66-2470-1144-5


Part 1 Page 10

2. RISK FACTORS

Our Company is exposed to a number of risks that may affect its business and the value of its shares.

The following sets out some of the significant risks that may affect the Company. However, there are

some risks that may be unknown to the Company and other risks that the Company currently

considers to be immaterial. These risks could have an impact upon the operation of the Company in

the future.

2.1 Risks Relating to Our Industry and Our Business

Prices of commodities in general, including natural rubber, are susceptible to price

fluctuations.

Prices of commodities in general, including natural rubber, have been volatile and we, like

other participants in the natural rubber industry, have limited influence over the timing and

extent of the price changes for natural rubber. The price of natural rubber and the Natural

Rubber Products that we sell, like most commodities, are affected by a number of factors

including but not limited to the following:

Supply and demand for natural rubber — An increase in the supply of natural rubber

or a decrease in world consumption levels of natural rubber could result in an

oversupply which could in turn result in a decrease in average selling prices of the

Natural Rubber Products that we sell;

Prices of crude oil, energy and oil-based chemicals — Crude oil prices may affect the

prices of natural rubber and other input materials such as oil-based chemicals used in

rubber processing. In addition, the prices of synthetic rubber usually move along with

crude oil prices, and the price fluctuations of synthetic rubber affects the pricing and

demand for natural rubber;

Currency movements — As natural rubber is traded mainly in US Dollars, any

fluctuations in the natural rubber exporting currencies against US Dollars may result

in corresponding fluctuations in natural rubber prices in the relevant exporting

countries;

Speculation — As natural rubber and certain of the Natural Rubber Products that we

sell are traded at various commodity future exchanges, they are susceptible to price

speculation in addition to local and global economic factors; and

Government intervention — The governments of natural rubber producing countries

such as Thailand, Indonesia and Malaysia may from time to time introduce policies to

support the natural rubber industry in their respective countries. For example, the

Indonesian government had imposed export quotas in relation to natural rubber in

2009, in response to the drop in the price of natural rubber, which restricted our

ability to operate our factories in Indonesia at full capacity. In addition, in 2012, price

intervention of the Thai government to provide loans with total amount of THB 45.0

billion to the state-run Rubber Estate Organization and cooperatives through the Bank

for Agriculture and Agricultural Cooperatives to buy rubber from farmers at prices

above market prices directly impacted our raw material costs. Moreover, the

cooperative agreement among Thailand, Indonesia, and Malaysia in August 2012 to


Part 1 Page 11

withdraw Natural Rubber exports of 300,000 tons during October 2012 to March

2013 also affected the export volume of Natural Rubber producer during such period.

Other unpredictable factors which affect the price of natural rubber and the Natural Rubber

Products that we sell include economic growth rates, foreign and domestic interest rates and

trade policies.

If we are unable to pass on any increase in raw material costs to our customers and/or

suppliers, our profitability may be adversely affected. If the market prices of the Natural

Rubber Products that we sell are volatile, our business, financial condition and results of

operations could be materially and adversely affected.

A significant portion of the sales of the Natural Rubber Products that we sell are for use in

the tyre manufacturing industry which exposes us to downturns in this industry.

The Natural Rubber Products that we sell include RSS, TSR and Concentrated Latex. Global

demand for such products, in particular TSR, is dependent significantly upon the tyre

manufacturing industry. Our customers include tyre manufacturers in the emerging markets

such as the PRC and India and leading global tyre manufacturers. The majority of our sales of

Natural Rubber Products are made to tyre manufacturers. If the level of activity in the tyre

manufacturing industry declines, the demand for the Natural Rubber Products that we sell

may decrease and our business, financial condition and results of operations may be adversely

affected.

Our business, financial condition and results of operations may be adversely affected by

fluctuations in exchange rates and foreign exchange controls.

While our financial reporting currency is Baht and our raw material purchases for the Natural

Rubber Products that we produce are transacted in Baht and Indonesian Rupiah,

approximately 83.0% of our total revenues is denominated in US Dollars. In addition, the

Company’s Shares will also be quoted in Singapore dollars on the SGX-ST while dividends,

if any, will be paid in Baht. Fluctuations in the exchange rates between the Baht, Indonesian

Rupiah, US Dollars, Singapore dollar or other currencies, could adversely affect our business,

financial condition and operating results as well as the foreign currency value of any dividend

distributions. Any fluctuations in the exchange rates between the Baht, Indonesian Rupiah

and Malaysian Ringgit could adversely affect our price competitiveness in relation to other

natural rubber processors from Indonesia and Malaysia.

We attempt to mitigate foreign exchange risks using forward foreign exchange contracts and

foreign exchange options to hedge our foreign exchange exposures arising from purchase and

sale of products in currencies other than Baht. Should we be unable to successfully hedge our

foreign exchange exposures, we may have a greater exposure to foreign exchange fluctuations

and our financial condition and results of operations may be adversely affected.


Part 1 Page 12

Our Group is dependent upon the services of key management staff.

One of the key reasons for the growth of our Group has been our ability to attract and retain a

team of experienced professional managers. Our continued success will depend on our ability

to retain key management staff, such as Dr. Viyavood Sincharoenkul, Mr. Kitichai

Sincharoenkul and Mr. Paul Sumade Lee, and to attract and train new managers. If members

of our senior management team are unable or unwilling to continue in their present positions,

we may not be able to hire satisfactory replacements and our business may be adversely

affected. In addition, the process of hiring new managers with the required combination of

skills and attributes may be time-consuming and competitive. We may not be able to attract

additional qualified persons to complement our expansion plans. As a result, our business and

results of operations may be adversely affected.

We are a capital intensive business and our operations could be adversely affected if we fail

to maintain sufficient levels of working capital.

We expend a significant amount of cash in our operations, principally on the purchase of raw

materials such as unsmoked rubber sheets, cup lumps and field latex, the Natural Rubber

Products which we purchase from third party producers and our joint venture entity, Thai

Tech Rubber, from time to time, to meet demand from customers, and the storage of the

Natural Rubber Products to facilitate our sales in overseas markets. The working capital cycle

for the Natural Rubber Products that we produce, from the purchase of raw materials to the

receipt of payment from our customers, is approximately two to four months. We may also

require substantial capital expenditures to maintain, upgrade and expand our processing and

storage facilities, logistics services and other facilities to keep pace with competitive

developments, technological advances and changing safety and environmental standards in

our industry. We fund our operations principally through cash flow from our operations and

short and long-term bank loans.

As at 31 December 2012, we had cash and cash equivalents of approximately Baht 1,534.0

million and the majority of our total borrowings comprised short-term borrowings. We can

provide no assurance that we will not experience negative cash and cash equivalents in the

future. In the event that we are unable to obtain or secure sufficient borrowings or generate

sufficient revenue from our operations, or if we fail to maintain sufficient cash, we may not

have sufficient cash flow to fund our operations and our business and operating results will be

adversely affected.

Difficult conditions in the global credit markets could adversely impact the cost or other

terms of our existing financing.

As at 31 December 2012, we have an aggregate of Baht 14,837.9 million in short and long

term bank loans, accounting for approximately 82.0% and 18.0% of the aggregate amount of

bank loans respectively, with interest rates ranging from 1.1% to 11.5% per annum depending

on the currency on which the loans are denominated. Difficult conditions in the global credit

markets could adversely impact the cost or other terms of our existing financing as well as our

ability to obtain new credit facilities or access the capital markets on favourable terms. A


Part 1 Page 13

significant increase in our borrowing costs could impair our ability to compete effectively in

our business relative to competitors with lower amounts of indebtedness.

We may be affected by adverse weather conditions and/or diseases which could lead to

price fluctuations and an increase in our operating costs.

Unsmoked rubber sheets, cup lumps and field latex are the primary raw materials for Natural

Rubber Products. The availability of these raw materials from suppliers, as well as our ability

to harvest field latex from our own rubber plantations in the future, may be adversely affected

by unfavourable weather conditions such as drought, floods, prolonged periods of rainfall,

storms etc. and/or diseases which has infected the rubber plantations from which suppliers

purchase the raw materials or our own rubber plantations in the future. Such events,

especially if continued for a prolonged period, could affect the overall yield of such raw

materials and consequently lead to price fluctuations. Any substantial decrease in the supply

of, and increase in the cost of, raw materials could increase our operating costs, affect our

production capacity and consequently have a material adverse effect on our business,

financial condition and results of operations.

There may be disruptions at our processing facilities as well as the processing facilities of

our associates and joint venture entity which would have an adverse effect on our

operations and those of our associates and joint venture entity.

Our production processes and those of our associates and joint venture entity require

significant use of resources such as water and electricity to power our processing facilities

and those of our associates and joint venture entity. Natural disasters, acts of God, a shortage

of labour, major or sustained disruptions in the supply of utilities such as water or electricity

and other calamities or events beyond our control. For example, the torrential floods occurred

in southern Thailand in November 2010 and January 2012 may lead to significant disruption

or a cessation in processing at our processing facilities and those of our associates and joint

venture entity. Such disruptions would have an adverse effect on our operations and those of

our associates and joint venture entity and would result in longer lead-time for processing and

delayed delivery to customers.

Our Company depends on distributions from our principal operating subsidiaries,

associates and joint venture entity which may in turn affect our Company’s cashflow

Our Company is dependent on distributions from our principal operating subsidiaries,

associates and joint venture entity to meet our financial obligations, including the payment of

principal and interest of our indebtedness.

Our Company will receive distributions made by our subsidiaries, associates and joint venture

entity based on our ownership interest. However, should revenues or operating performance

of our principal operating subsidiaries, associates and joint venture entity be decreased, the

amount of distributions in terms of both rate and value made by such principal operating

subsidiaries, associates and joint venture entity will decline. Accordingly, our Company’s

cashflow might be adversely affected.


Part 1 Page 14

Our Group may be adversely affected by the imposition and enforcement of more stringent

environmental regulations.

Our Group is subject to a variety of laws and regulations that promote environmentally and

socially sound operating practices. Our Group’s principal environmental concerns relate

primarily to the discharge of effluent resulting from the processing of natural rubber. Any

environmental claims or the failure to comply with any present or future regulations could

result in the assessment of damages or the imposition of fines, the suspension or a cessation of

our Group’s operations.

Environmental regulations and social practices in the countries in which our Group operates

tend to be less stringent than those in developed countries. It is possible that these regulations

and/or social practices could become more stringent in the future and consequently have an

adverse effect on our operations and financial condition. Any failure to comply with the laws

and regulations could subject our Group to liabilities which may affect our business, financial

condition, results of operations and prospects.

The demand for Natural Rubber Products could be affected by the emergence of synthetic

rubber substitutes.

Our sales of Natural Rubber Products, which are produced from natural rubber, accounted for

97.9% of our Group’s revenue for the financial year ended 31 December 2012. There are a

variety of synthetic rubber substitutes available in the market which can be used as substitutes

for natural rubber in the manufacture of rubber products. Factors such as increased global

demand for rubber, volatile pricing of natural rubber, increased natural rubber price compared

to synthetic rubber, long transport distances, risks of supply disruption driven by political

events, regional constraints and seasonal supply patterns may lead to an increase in demand

for such synthetic rubber substitutes. Any resulting decrease in demand for Natural Rubber

Products may have a material adverse effect on our business, financial condition and results

of operations.

Expiry of concessionary tax rates and/or exempt tax status for certain of our subsidiaries

and associates will have an adverse impact on our profitability.

Our subsidiary, Sri Trang International, enjoys certain tax benefits under the Global Trader

Programme launched by International Enterprise Singapore, pursuant to which Sri Trang

International is only taxed on 10.0% of its qualifying income (i.e. income which is derived

from offshore sales or sales to companies under the Global Trader Programme).

In addition, our Company and certain of our subsidiaries and associates which are

incorporated in Thailand have been granted certain privileges, including exemption from

certain taxes, at various times by the Board of Investment of Thailand, in relation to our

respective operations

In the event of any expiry of such tax benefits, Sri Trang International, our Company and our

relevant subsidiaries and associates which are incorporated in Thailand will be liable to the


Part 1 Page 15

applicable taxes at the prevailing rates and accordingly, there will be an adverse impact on

our profitability.

2.2 Risks Relating to the Countries in Which We Operate

Economic, political, legal and regulatory conditions in the countries in which we operate

may materially and adversely affect our business, financial condition, results of operations,

prospects and the market price of our Shares.

We have operations in and investments in countries such as Thailand, Singapore, USA,

Indonesia, and the PRC, each of which contributed 59.5%, 29.2%, 7.0%, 3.1%, and 1.2% of

total revenues, respectively. Accordingly, we are subject to the risks associated with our

business activities in these countries. Our business, financial condition, results of operations

and prospects may be materially and adversely affected by a variety of conditions and

developments in these countries including:

inflation, interest rates and general economic conditions;

civil unrest, military conflict, terrorism, change in political climate and general

security concerns;

changes in legal and regulatory conditions;

changes in duties payable and taxation rates;

natural disasters;

imposition of restrictions on foreign currency conversion or the transfer of funds; or

expropriation or nationalisation of private enterprise or confiscation of private

property or assets.

Should any of the aforesaid risks materialise and we are unable to adapt our business

strategies or operations accordingly, our business, financial condition, results of operations

and prospects may be materially and adversely affected.


Part 1 Page 16

3. NATURE OF BUSINESS

STA was established by our founders, Mr. Somwang Sincharoenkul and Dr. Viyavood Sincharoenkul

in Thailand in 23 April 1987, as a private limited company with an initial registered capital of Baht 31

million to produce RSS in Hat Yai, Thailand. STA is a producer and exporter of natural rubber, which

is one of the most important agricultural products in the southern part of Thailand. STA has

continuously expanded its business to support the growth of the domestic and international rubber

industries.

In 1991, we undertook an initial public offering exercise in Thailand and were listed on the SET on 22

August 1991. STA was converted as a public limited company in 27 December 1993. In January

2011, STA made an offering of its newly issued shares to the public (Public Offering) in Singapore,

including institutional investors and listed its shares on the SGX-ST. At present, STA shares are listed

securities on both the SET and SGX-ST (Dual Listing).

Since our inception as a natural rubber processor in Thailand, we have expanded our product mix, our

production capacity and our geographical operations to become a dominant natural rubber supply

chain operator with integrated end-to-end capabilities on a multi-national platform.

Significant Changes and Developments

Our significant changes and developments are as follows:

October 1987 Established Anvar Parawood for the production of rubber wood for the

furniture industry.

March 1988 Established Rubberland Products for the production of Concentrated Latex,

our Group’s first processing facility producing Concentrated Latex.

January 1989 Jointly established SSC to produce latex examination gloves.

March 1990 Thai Tech Rubber was jointly established with Southland Rubber Co., Ltd and

Itochu Corporation Limited to expand our product mix to cover TSR block

rubber.

January 1994 Starlight Express Transport was established to provide logistical support to

our Group’s business.

March 1994 Premier System Engineering was established to support our Group’s research

and development and provide engineering services.

May 1995 Jointly established Shanghai Semperit to produce escalator handrails.

September 1995 Established Startex Rubber to invest in upstream business into the ownership

of rubber plantations in the southern region of Thailand.

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

April 2002 Sri Trang International was established in Singapore, a purchasing hub for key

users of natural rubber, for the distribution of the Natural Rubber Products to

global market.

March 2004 Established Sri Trang USA to focus on the distribution of the Natural Rubber

Products that we sell in the United States.


Part 1 Page 17

July 2004 We expanded substantially in the PRC by establishing our sales teams in Qingdao

and Shanghai to conduct direct sales of the Natural Rubber Products that we sell

and to provide after sales services to our customers within the PRC.

January 2005 We established PT Sri Trang Lingga, our first natural rubber procurement and

processing facility outside of Thailand.

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

rubber plantations.

May 2008 Established Sempermed Singapore with Semperit Technische for the

acquisition of Sempermed Brazil, our examination glove distributor in Brazil.

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

August 2010 We established our first PRC subsidiary, Shi Dong Shanghai, in Shanghai, to

expand our operation into the PRC.

January 2011 STA made an offering of its newly issued shares to the public (Public Offering) in

Singapore, including institutional investors and listed its shares on the SGX-ST.

STA is the first Thai listed company dually listing in Singapore.

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

April 1987 Commenced operations producing ribbed smoked sheets in Hat Yai, Thailand

with an initial registered capital of Baht 31.0 million.

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

March 1996 Jointly founded Semperflex Asia which commenced the production of

highpressure hydraulic hoses.

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

April 1998 Sempermed USA was jointly established to manage the sales and marketing of

examination gloves which are used for medical and industrial purposes in the

United States.

July 2005 Semperflex Shanghai was jointly established to produce high-pressure hydraulic

hoses in the PRC.

February 2007 Our subsidiary, Sri Trang International, was awarded the first prize in the top

trading volume award by the Singapore Commodity Exchange Limited.

December 2007 Our subsidiary, Sri Trang International, received the Supplier Partnership and

Appreciation Day award from Goodyear Orient (Private) Company Limited.

February 2008 Our subsidiary, Sri Trang International, was awarded the second prize in the top

trading volume award by the Singapore Commodity Exchange Limited.

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

in Brazil

November 2009 Semperform Pacific ceased its business operation. Liquidation process will be

performed after the approval of shareholders’meeting.


Part 1 Page 18

December 2009 Our Company received the Prime Minister’s Export Award 2009 (Best

Exporter) for being the top Thai exporter into the PRC market by export volume

under the Natural Rubber category.

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

consecutive years.

December 2011 STA issued two tranches of debentures, the first debenture for rubber processor

in Thailand, to the institutional and high net-worth investors totaling Baht

2,150,000,000.

August 2012 STA won Prime Minister’s Export Award 2012 for being a best exporter with

the export value exceeding Baht 5,000 million.

February 2013 STA issued two tranches of debentures to the institutional and high net-worth

investors totaling Baht 900,000,000 for working capital and capacity expansion

of our group.

3.2 Business Overview

The Company’s principal business is the production of natural rubber, which are RSS, TSR and

Concentrated Latex as well as other businesses through its subsidiaries, associates and joint ventures,

such as the production of Finished Products, the distribution of products and other services business,

which are logistic business, engineering services business, production and sale of rubber wood. The

product segments of the Company can be divided as follows:

(1) Natural Rubber Products

Company Country Type of Businesses

Direct

Shareholding

as of 31

December 2012

(%)

Paid-up

Capital as of

31 December

2012

STA Thai Production of RSS, TSR

and Concentrated Latex

- Baht

1,280,000,000

Rubberland Products Thai Production of TSR and

Concentrated Latex

99.99 Baht

1,100,000,000

Nam Hua Rubber Thai Production of

Concentrated Latex,

RSS, and TSR

99.99 Baht

500,000,000

Sadao P.S. Rubber Thai Production of RSS 99.99 Baht

40,000,000

PT Sri Trang Lingga Indonesia Production of SIR-

block rubber

90.001 IDR

91,050,000,000

PT Star Rubber Indonesia Production of SIR-

block rubber

99.002 USD

32,000,000

Thai Tech Rubber Thai Production of TSR 33.503 Baht

60,000,000

1 Held by STA and the remaining shares are held by PT Nusantara Agro Industri (which is not a person who may have

conflicts of interest) 10.00%. 2 Held by Shi Dong Investments 3 Held by STA 33.50% and the remaining shares are held by Southland Rubber Co.,Ltd. (which is not a person who may

have conflicts of interest) 33.49%, Itochu Corporation Limited (which is not a person who may have conflicts of

interest) 33.00%, Mr. Perm Theerasarnwong (1 share), Mr. Thanasak Charnsanti (1 share), Mr. Viyavood

Sincharoenkul (1 share), and Mr. Chaiyos Sincharoenkul (1 share).


Part 1 Page 19

(2) Finished Products


Direct

Shareholding as

of 31 December

2012 (%)

Paid-up

Capital as of

31 December

2012

SSC Thai Production of

examination gloves 31.50

4 Baht

200,000,000

Semperflex Asia Thai Production of high-

pressure hydraulic

hoses

37.505 Baht

380,000,000

Semperform Pacific 6 Thai

Production of injection

moulded-rubber and

plastic parts

37.507 Baht

15,000,000

Shanghai Sempermed PRC Agent import and

export of rubber gloves

100.008 USD

6,000,000

Semperflex Shanghai Ltd. PRC Production of high-

pressure hydraulic

hoses

50.009 USD

15,000,000

Shanghai Semperit PRC Manufacture

of handrails and

related

parts for escalators and

travelators

10.0010

Euro 2,471,000

4 Held by STA 31.50% and the remaining shares are held by Semperit Technische (50.00%); Rubberland Products

(8.73%), STH (6.00%), Miss Poonsuk Cherdkiatgumchai (3.73%), Mr. Veerasith Sinchareonkul (2 shares), Mr.

Somwang Sincharoenkul (2 shares), Mr. Viyavood Sincharoenkul (2 shares), and Mr. Kitichai Sincharoenkul (2 shares).

5 Held by STA37.50% and the remaining shares are held by Semperit Technische (50.00%), Rubberland Products

(5.00%), STH (5.00%), Paktai Rubber Industries Limited Partnership (2.50%) Miss Poonsuk Cherdkiatgumchai

(2 shares), Mrs. Promsuk Sinchareonkul (2 shares), Mr. Somwang Sincharoenkul (2 shares), Mr. Viyavood

Sincharoenkul (2 shares), Mr. Chaiyos Sincharoenkul (2 shares), Mr. Anan Pruksanusak (2 shares), and Mr. Prasit

Panidkul (2 shares). 6 Semperform Pacific ceased its business operations at the end of 2009 . Liquidation process will be performed after the

approval of shareholders’ meeting. 7 Held by STA 37.50% and the remaining shares are held by Semperit Technische (50.00%), Rubberland Products

(5.00%), STH (5.00%), Paktai Rubber Industries Limited Partnership (2.50%), Miss Poonsuk Cherdkiatgumchai (1 share), Mrs. Promsuk Sincharoenkul (1 share), Mr. Somwang Sincharoenkul (1 share), Mr. Viyavood Sincharoenkul

(1 share), Mr. Chaiyos Sincharoenkul (1 share), Mr. Anan Pruksanusak (1 share), and Mr. Prasit Panidkul (1 share). 8 Held by SSC. 9 Held by STA 50.00% and the remaining shares are held by Semperit Technische 50.00%. 10 Held by STA 10.00% and the remaining shares are held by Semperit Technische 90.00%.


Part 1 Page 20

Mr. Viyavood Sincharoenkul who is a major shareholder, Chairman, and Managing Director of STA

holds directly and indirectly in excess of 10% of the shares with voting rights in SSC, Semperflex

Asia and Semperform Pacific (collectively, the “Associated Companies”) in the proportion of

11.83%, 12.86% and 12.86% respectively as of 31 December 2012. The reason for holding such

shares is due to the condition specified by Semperit Technische that for Semperit Technische to invest

in the Associated Companies, Mr. Viyavood Sincharoenkul has to own at least 10% of shares in the

Associated Companies in order to show his commitment to Semperit Technische and the Associated

Companies. If Mr. Viyavood Sincharoenkul does not own shares pursuant to the condition of

Semperit Technische, Semperit Technische will not invest with the Company in the Associated

Companies.

In this regard, STA has considered and was of the opinion that the joint investment with Semperit

Technische and the shareholding structure of STA and connected persons of STA in the Associated

Companies were for the best benefit of STA and its shareholders, with the following reasons:

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

2. The Company will be able to expand its production capacity by reducing risks associated with

the limitation of production capacity as well as the risks from finding customers, in order to

create the revenue base of the Company.

3. The Company will be able to sell its products without having to face risks associated with the

payment and allowance for bad debts as Semperit Technische is a globally recognized

company which has potential and strength in its capital.

4. The Company will not suffer any loss of revenue, profits or lose any opportunity to make a

higher profit as the price at which the Company sells Concentrated Latex to such Associated

Companies is on an arm’s length basis.

5. The Company will gain and learn technology to produce finished goods from natural rubber

from this joint investment with Semperit Technische.

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

Technische.

7. The Company will utilize all resources of the Company in order to gain benefits and create

the highest return to the Company from this investment.


Part 1 Page 21

(3) Products Distribution


Direct

Shareholding as

of 31 December

2012 (%)

Paid-up

Capital as of

31 December

2012

Sempermed USA, Inc. United

States

Distribution of

examination gloves

in the United States

25.0011

USD 4,000

Sri Trang International Singapore Natural rubber

wholesaler in

Singapore

100.00 USD

47,000,000

Sri Trang USA, Inc. United

States

Natural rubber

wholesaler in the

United States

100.00 USD 100

Sempermed Brasil Brazil Distribution and

marketing of natural

rubber gloves and

synthetic rubber in

Brazil

100.0012

Brazilian Real

12,546,638

Shi Dong Shanghai PRC Distribution of

Natural Rubber

Products in PRC

100.0013

USD

5,000,000

(4) Other businesses


Direct

Shareholding

as of 31

December 2012

(%)

Paid-up Capital

as of 31

December 2012

Anvar Parawood Thai Lumber production

and manufacture of

wooden furniture

99.94 Baht 10,000,000

Startex Rubber Thai Ownership and

management of

rubber and oil palm

83.9914

Baht 50,000,000

11 Held by STA 25.00% and the remaining shares are held by SSC 50.00% and Semperit Technische 25.00%. 12 Held by Sempermed Singapore approximately 100.0% and Semperit Industrial Products Singapore Private Limited

holds 1 share. 13 Held by STA. Shi Dong Shanghai is licensed to operate for a term of 30 years from 2 August 2010 14 Held by STA 83.99% and the remaining shares are held by Rubberland Products 16.00%, Mr. Somporn Punnarai

(1 share), Mr. Boonyachon Sincharoenkul (1 share), Miss Wanna Tanapoomkul (1 share), Mrs. Promsuk Sinchareonkul

(1 share), and Prukesa Mansion Ltd (1 Share).


Part 1 Page 22


Direct

Shareholding

as of 31

December 2012

(%)

Paid-up Capital

as of 31

December 2012

plantations

Premier System

Engineering

Thai Engineering

services, design,

installation and

maintenance

machinery

81.9915

Baht 50,000,000

Starlight Express

Transport

Thai Provision of

logistics services

76.6616

Baht 15,000,000

Pattana Agro Futures Thai Brokerage activities 40.0017

Baht 100,000,000

Sri Trang Rubber &

Plantation

Thai Ownership and

management of

rubber plantations

99.99 Baht

2,050,000,000

Shi Dong Investments Singapore Investment holding

in PT Star Rubber

100.0018

USD 34,000,000

Sempermed Singapore Singapore Investment holding

in Sempermed

Brasil

50.00 USD 8,000,000

Formtech Engineering

(M) Sdn. Bhd.

Malaysia Production and

distribution mold for

glove production

line

82.8619

MYR 7,000,000

15 Held by STA 81.99% and the remaining shares are held by Rubberland Products 16.00%, Sadao P.S. Rubber 2.00%,

Mr. Viyavood Sincharoenkul (1 share), Mr. Kitichai Sincharoenkul (1 share), Phrueksa Mansion Ltd (1 share), and

Mr. Aram Sirisuwat (1 share).

16 Held by STA 76.66% band the remaining shares are held by Rubberland Products 13.33%, Nam Hua 3.33%, Sadao P.S.

Rubber 3.33%, Startex Rubber 3.33%, Phrueksa Mansion Ltd (1 share), and Mr. Boonyachon Sincharoenkul (1 share). 17 Held by STA 40.00% and the remaining shares are held by Lee Feed Mill Public Company Limited (which is not a

person who may have conflicts of interest) 44.50%, Mr. Preecha Leelasithorn 8.75%, Wallstreet Tower Company

Limited (which is not person who may have conflicts of interest) 6.25%, and Mr. Nipon Leelasithorn 0.5%. 18 Held by Sri Trang International.

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


Part 1 Page 23

3.3 Group Structure

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

99.9%

40.0%(15)

99.9%(14)

99.9%(13)

100.0%(7)

99.9%(12)

99.9%

100.0%(11)

99.0%

50.0%(10)

100.0%

45.1%(9)

100.0%

100.0%

42.5%(2)

42.5%(3)

50.0%(4)

10.0%(6)

40.2%(1)

33.5%(5)

90.0%

99.9%

99.9%

99.9%

STA

Shanghai Sempermed

Sempermed Brasil

Shi Dong Investments

PT Star Rubber

PT Sri Trang Lingga

Thai Tech Rubber

Sadao P.S. Rubber

Nam Hua Rubber

Rubberland Products SSC

Semperform Pacific

Semperflex Asia

Semperflex Shanghai

Shanghai Semperit

Sri Trang International

Sri Trang USA

Sempermed USA

Sempermed Singapore

Anvar Parawood

Startex Rubber

Pattana Agro Futures

Starlight Express

Transport

Sri Trang Rubber & Plantation

Premier System

Engineering

100.0%(8) Shi Dong Shanghai

Natural Rubber Product Finished Goods Distribution Other Products & Services

Formtech Engineering

(M) Sdn. Bhd.

82.9%(16)


Part 1 Page 24

Notes:

(1) Our Company is interested in an aggregate of approximately 40.2% of the total voting rights in SSC, comprising a direct interest of approximately 31.5% and an

indirect interest of approximately 8.7% through our subsidiary Rubberland Products. Semperit Technische (50.0%), STH (6.0%) and five individuals, namely,

Ms. Poonsuk Cherdkiatgumchai (3.7%), Mr. Veerasith Sinchareonkul (2 shares), Mr. Somwang Sincharoenkul (2 shares), Dr. Viyavood Sincharoenkul (2 shares)

and Mr. Kitichai Sincharoenkul (2 shares), hold the remaining interest in SSC.

(2) Our Company is interested in an aggregate of approximately 42.5% of the total voting rights in Semperflex Asia, comprising a direct interest of approximately

37.5% and an indirect interest of approximately 5.0% through our subsidiary Rubberland Products. Semperit Technische (50.0%), STH (5.0%), Paktai Rubber

Industries Limited Partnership (2.5%) and seven individuals, namely, Ms. Poonsuk Cherdkiatgumchai (2 shares), Mrs. Promsuk Sincharoenkul (2 shares), Mr

Somwang Sincharoenkul (2 shares), Dr. Viyavood Sincharoenkul (2 shares), Mr. Chaiyos Sincharoenkul (2 shares), Mr. Anan Pruksanusak (2 shares) and Mr. Prasit

Panidkul (2 shares), hold the remaining interest in Semperflex Asia.

(3) Our Company is interested in an aggregate of approximately 42.5% of the total voting rights in Semperform Pacific, comprising a direct interest of approximately

37.5% and an indirect interest of approximately 5.0% through our subsidiary Rubberland Products. Semperit Technische (50.0%), STH (5.0%), Paktai Rubber

Industries Limited Partnership (2.5%) and seven individuals, namely, Ms. Poonsuk Cherdkiatgumchai (1 share), Mrs. Promsuk Sincharoenkul (1 share), Mr

Somwang Sincharoenkul (1 share), Dr. Viyavood Sincharoenkul (1 share), Mr. Chaiyos Sincharoenkul (1 share), Mr. Anan Pruksanusak (1 share) and Mr. Prasit

Panidkul (1 share), hold the remaining interest in Semperform Pacific. Semperform Pacific ceased its business operations at the end of 2009. Liquidation process

will be performed after the approval of shareholders’ meeting.

(4) Our Company and Semperit Technische directly own 50.0% each of the total paid-up capital in Semperflex Shanghai. Semperflex Shanghai is licensed to operate for

a term of 50 years from 14 July 2005. 180 days prior to the expiry of such term, an application may be submitted to the relevant authorities for an extension. If the

term is not extended, Semperflex Shanghai will be liquidated upon expiry and proceeds from the sale of its assets will be returned to its shareholders after its

creditors are paid.

(5) Our Company directly owns 33.5% of the total number of issued shares in Thai Tech Rubber. Southland Rubber Co., Ltd. and Itochu Corporation Limited own

33.5% and 33.0% of the total number of issued shares in Thai Tech Rubber respectively. The remaining shares in Thai Tech Rubber are held by Mr. Perm

Theerasarnwong (1 share), Mr. Thanasak Charnsanti (1 share), Dr. Viyavood Sincharoenkul (1 share) and Mr. Chaiyos Sincharoenkul (1 share).

(6) Our Company holds 10.0% of the total paid-up capital in Shanghai Semperit, and Semperit Technische holds the remaining 90.0% of the total paid-up capital.

Shanghai Semperit is licensed to operate for a term of 50 years from 10 May 1995. 180 days prior to the expiry of such term, an application may be submitted to the

relevant authorities for an extension. If the term is not extended, Shanghai Semperit will be liquidated upon expiry and proceeds from the sale of its assets will be

returned to its shareholders after its creditors are paid.

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

of asset disposal.

(8) Shi Dong Shanghai is licensed to operate for a term of 30 years from 2 August 2010. 180 days prior to the expiry of such term, an application may be submitted to

the relevant authorities for an extension. If the term is not extended, Shi Dong Shanghai will be liquidated upon expiry and proceeds from the sale of its assets will

be returned to its shareholders after its creditors are paid.

(9) Our Company directly owns 25.0% of the total number of issued shares in Sempermed USA. SSC owns 50.0% of the total number of issued shares in Sempermed

USA. The remaining 25.0% of the total number of issued shares in Sempermed USA are held by Semperit Technische.

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

(11) Sempermed Singapore directly owns approximately 100.0% of the total paid-up capital in Sempermed Brasil, and Semperit Industrial Products Singapore Private

Limited holds the remaining 1 quota in Sempermed Brazil.

(12) Our Company is interested in an aggregate of approximately 99.9% of the total voting rights in Premier System Engineering, comprising a direct interest of

approximately 81.9% and indirect interests of approximately 16.0% and 2.0% through our subsidiaries, Rubberland Products and Sadao P.S. Rubber respectively.


Part 1 Page 25

The remaining shares are held by Mr. Viyavood Sincharoenkul (1 share), Mr. Kitichai Sincharoenkul (1 share), Phrueksa Mansion Ltd (1 share), and Mr. Aram

Sirisuwat (1 share).

(13) Our Company is interested in an aggregate of approximately 99.9% of the total voting rights in Startex Rubber, comprising a direct interest of approximately 83.9%

and an indirect interest of approximately 16.0% through our subsidiary, Rubberland Products. The remaining shares are held by Mr. Somporn Punnarai (1 share),

Mr. Boonyachon Sincharoenkul (1 share), Ms. Wanna Thanabhumkul (1 share), Ms. Promsuk Sinchareonkul (1 share), and Prukesa Mansion Ltd. (1 share). (14) Our Company is interested in an aggregate of approximately 99.9% of the total voting rights in Starlight Express Transport, comprising a direct interest of

approximately 76.6% and indirect interests of approximately 13.3%, 3.3%, 3.3% and 3.3% through our subsidiaries Rubberland Products, Nam Hua Rubber, Sadao

P.S. Rubber and Startex Rubber respectively. The remaining shares are held by Prukesa Mansion Ltd (1 share) and Mr. Boonyachon Sincharoenkul (1 share).

(15) Our Company directly owns 40.0% of the total number of issued shares in Pattana Agro Futures. Lee Feed Mill Public Company Limited owns 44.5% of the total

number of issued shares in Pattana Agro Futures, and the remaining shares in Pattana Agro Futures are held by Wallstreet Tower Company Limited (6.3%), Mr.

Preecha Leelasithorn (8.8%), and Mr. Nipon Leelasithorn (0.5%). (16) Formtech Engineering (M) Sdn. Bhd is owned by Sempermed Singapore directly 82.9%, Dietmar Trumm 11.4%, and Valluvan A. Peramuthu 5.7%.


Part 1 Page 26

3.4 Revenue Structure

The revenue from sales and services according to the consolidated financial statements ended

31 December 2010, 2011 and 2012 are shown below:

Revenue

breakdown by

product segment

Year ended 31 December

2010 2011 2012

Baht million % Baht million % Baht million %

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

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

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

Others (1)

1,721.0 2.1 2,385.8 1.8 2,112.0 2.1

Total revenue from

sales and services 83,845.3 100.0 133,703.8 100.0 99,639.1 100.0

Note: (1) Comprises revenue from (i) the sale of dried rubber wood and wood packing products, (ii) the

provision of certain services (such as logistics, research and development and information

technology services) to our associates and a joint venture entity as well as other external third

parties, and (iii) RSS processing fee for Thai Government recognized from Q3 2012 onwards.

3.5 Strategy

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

To achieve this vision, we have established our business model as an integrated natural rubber supply

chain operator and our principal strategy is to make long-term investments in establishing and

expanding our capabilities and capacity at each stage of the natural rubber supply chain, namely

planting, procurement, processing, and sales and distribution and tap into our expertise in the

emerging market economies to grow our business.


Part 1 Page 27

Further vertical integration of business model

Our business model of operating an integrated natural rubber supply chain is instrumental in enabling

us to strengthen our market position as a dominant natural rubber player, as we are able to maximize

our cost efficiency, competitive edge and ultimately, our profit potential. In establishing our business

model, we have developed all-round capabilities throughout the natural rubber supply chain. Over the

years, we have integrated and synergised the operations, domain knowledge and management

expertise of the inter-linked processes of the entire natural rubber supply chain, as well as reduced the

need to transact with third-party intermediaries. As a result, we are able to achieve greater operational

efficiency and capture value across the entire natural rubber supply chain. By operating an integrated

natural rubber supply chain, we are also able to gain direct access to supply and customer demand

information, which in turn enables us to respond to changes in market conditions and adjust our

procurement, production and inventory levels accordingly.

As a result, we have evolved since our inception as a natural rubber processor in Thailand to become a

dominant natural rubber supply chain operator with integrated end-to-end capabilities on a multi-

national platform.

We adopt a balanced approach in our pursuit of investments by focusing on investments which allow

us to establish competitive advantages for our integrated supply chain on a long-term basis. Taking

this approach, we identify potential investment and expansion opportunities (such as plantations,

establishment of processing plants and establishment of capabilities in new geographical markets) on

the basis of their potential long-term benefits to our business model. In this regard, we plan to further

develop our upstream capabilities which we believe could enable us to better control our costs and

provide greater supply chain co-ordination, for instance, strategy of raw material procurement in the

new plantation area such as Northern Thailand. In line with this strategy, we intend to acquire

additional land to achieve 50,000 rai (or approximately 8,000 hectares) over the next two years for the

cultivation of rubber trees in Thailand or other suitable areas.

Our Vertical integration business strategy

Diversify customer base for all

range of market segments

worldwide as well as maintain the

well-balance of portfolio

Increase upstream rubber plantation

in arable areas suitable for high

yield output under acceptable

investment cost

Expand procurement coverage in

order to support capacity growth

and reduce cost of production

Continually pursue expansion

opportunities to gain higher market

share by ways of stretching into

new business territories and get

access to new source of raw

materials Develop all-

round

capabilities

throughout the

Natural Rubber

supply chain


Part 1 Page 28

Increase scale and processing capacity

In line with our principal strategy of making long-term investments in establishing and expanding our

capabilities and capacity at each stage of the natural rubber supply chain, we constantly invest in both

organic and inorganic growth initiatives, as we believe such growth momentum is critical in creating a

scalable integrated natural rubber supply chain. We will also continue to expand our processing

capacity in order to enhance our market position as a dominant natural rubber processor. In line with

this strategy, we will build new and/or acquire existing rubber processing facilities as well as expand

our existing rubber processing facilities, to expand our raw material procurement network and

increase our total estimated effective production capacity for Natural Rubber Products to

approximately 1,500,000 tons annually by the end of 2015.

We believe that the enlarged processing capacity will enable us to benefit from the growth

opportunities in the natural rubber market.

Capitalise on our emerging market expertise

We believe our management team’s insights have enabled us in identifying suitable opportunities in

emerging market economies even during periods of economic downturn. As an example, during the

economic downturns such as the 1997 financial crisis, the burst of the dotcom bubble in 2000 and the

recent credit crisis in 2008, we undertook the following strategic investments and corporate

developments:

• Starting from 2000, we enhanced our competitiveness by consolidating our position as a key

Natural Rubber supply chain operator through the expansion of our network of raw material

procurement centres and the increase of our production capacities in Thailand. We have also

made investments in Indonesia, world’s second largest Natural Rubber producer after

Thailand, to strengthen our group’s market position.

• In 2004, we made a strategic decision to substantially expand into the PRC market, as we

believed that the PRC would become the largest consuming country of Natural Rubber. In

2009, the PRC was the largest consumer of Natural Rubber globally with more than one-third

of world demand.

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

plantations in Thailand.

Specifically, we believe that our decision to continue growing our business operations in the PRC has

further strengthened our market position in the PRC market and places us in a better position to

benefit from the expected growth in demand for natural rubber in the PRC. We plan to continue to use

our market insights and expertise to expand and grow in other key emerging market economies like

India and Brazil, to position ourselves to ride on the structural growth of rubber demand in these

countries.

Through the successful implementation of the above three-fold strategy, we have been able to grow

our business, expand our geographical footprint and enlarge our customer base in an environment

characterised by competition and price volatilities. We are now one of the largest processors of

natural rubber globally. Our sales volume in 2012 represented approximately 8.9%20

of global

demand while the volume that we produced in Thailand and that was sold, accounted for

approximately 17.6%21

of Thailand’s production volume. Thailand was the world’s largest natural

20 Based on our sales volume of Nutural Rubber Products of approximately 975,604 tons for the financial year ended 31

December 2012 and the total global demand for Natural Rubber Products of approximately 10,947,000 tons in 2012. 21 Based on our production volume in Thailand of 618,373 tons for the financial year ended 31 December 2012 and

production volume of Thailand of approximately 3,522,000 tons in 2012.


Part 1 Page 29

rubber producer in 2012, accounting for approximately 30.9%22

of the global natural rubber

production. Our sales volume to the PRC in 2012 represented approximately 12.5%23

of the PRC’s

total natural rubber import in 2012.

Leveraging on our dominant market position, in-depth industry knowledge and proven track record of

successfully implementing our strategy, we believe that we will be able to continue to realise future

growth opportunities for our business. Through our multi-national platform, we have acquired on-the-

ground knowledge and insights that will enable us to undertake our investments in the geographical

locations and business environments that we identify as being most strategically favourable and

beneficial to our business.

3.6 Our Future Plans

Going forward, in line with our principal strategy, we intend to pursue the following initiatives to

grow our business and further strengthen our dominant market position:

The Company also enhances our Group’s financial capacity to cater for an increase in business

volume and financial ability to pursue strategic acquisition or expansion opportunities as and when

they arise.

22 Based on our production volume of Natural Rubber Products in Thailand of approximately 3,522,000 tons for the

financial year ended 31 December 2012 and world’s production volume of approximately 11,406,000 tons in 2012. 23 Based on our sale volume to the PRC of 422,548 tons for the financial year ended 31 December 2012 and gross import of

Natural Rubber of the PRC of approximately 3,368,200 tons in 2012.

(Source of note 20-23 : International Rubber Study Group (IRSG), The World Rubber Industry Outlook, Review and

Prospects to 2022, December 2012 and Association of Natural Rubber Producing Countries (ANRPC), Natural Rubber

Trend & Statistics, January 2013)

Upstream Business Midstream Business Downstream Business

Acquire land to achieve

50,000 rai (approx.

8,000 hectares) within

2014.

Build/ acquire/ expand

rubber processing

facilities to increase our

production capacity to

1.5 million tons per year

within 2015.

Continue to develop

technology for

examination gloves.

Expand procurement

networks so we can

procure raw material

at the appropriate

price

Emphasize cost

leading position

Pinpoint strategic

location for

midstream factories

in the future

Maintain world largest

fully-integrated

Natural Rubber

processor position

Enjoy more on

Economies of Scale

Influence on both

procurement and

selling side which will

increase profitability

Maintain world’s

leading position of

examination glove

producer

Increase revenue and

good income

diversification for our

Group

Reduce cost as well as

increase

competitiveness and

profitability


Part 1 Page 30

4. BUSINESS OPERATION OF EACH PRODUCT LINE

4.1 Businesses

The key products we sell consist of Natural Rubber Products. In 2010, 2011 and 2012, Revenues from

sales of Natural Rubber Products accounted for approximately 98% of our Group’s total revenue.

More than 70% of total revenue comes from TSR followed by RSS, Concentrated latex, and other

products.

Revenue breakdown by product segment (%)

4.1.1 Natural Rubber Products

We carry out our natural rubber supply chain operations on a multi-national platform in Thailand,

Indonesia, the PRC, the United States and Singapore and we sell Natural Rubber Products to

customers globally. We believe that we are one of the largest processors of natural rubber globally,

with a global market share of approximately 8.9%1. We produce three main types of Natural Rubber

Products — RSS, TSR and Concentrated Latex. We also purchase Natural Rubber Products from third

party producers and our joint venture entity, Thai Tech Rubber, from time to time, to meet demand

from customers. We sell these Natural Rubber Products to customers in various countries and

territories in Asia such as, the PRC, India, Singapore, Japan, Korea, Vietnam, Malaysia, as well as to

the United States and Europe.

Raw materials procurement and management

The raw materials which our rubber processing facilities utilise to produce Natural Rubber Products

include unsmoked rubber sheets, cup lumps and field latex, which respectively accounted for 18.3%,

72.0% and 9.7% of raw materials purchased in the financial year ended 31 December 2012,

respectively.

We have established a network of raw material procurement centres, which as at 31 December 2012

comprise 61 procurement centres, 42 in Thailand, mainly in the southern region of Thailand, and 19

procurement centres in Indonesia. Our procurement centres consist of our 38 collecting centres and

1 Based on our sales volume of Natural Rubber Products of approximately 975,604 tons for the financial year ended 31

December 2012 and the total global demand for Natural Rubber Products of approximately 10,947,000 tons in 2012.

(Source : International Rubber Study Group (IRSG), The World Rubber Industry Outlook, Review and Prospects to 2022,

December 2012)

2010

Technically specified rubber (TSR) Ribbed smoked sheet (RSS) Concentrated latex (LTX) Others

2012 2011

RSS

TSR

LTX RSS

TSR

LTX RSS

TSR

LTX


Part 1 Page 31

our 23 natural rubber production facilities, which are located strategically, close to sources of raw

materials supply. The proportion of purchasing raw material from Thailand to Indodonesia was

86.3 : 13.7.

While we purchase raw materials primarily from dealers, raw materials are also sourced either directly

from farmers or from farmer unions and cooperatives and rubber centre markets at which farmers sell

the raw materials. As we obtain our raw materials through our procurement network from diverse

sources of raw materials, we do not have any supplier of raw materials or Natural Rubber Products

who accounts for 5% or more of our raw material purchases for the three most recent completed

financial years ended 31 December 2012 apart from our purchases of Natural Rubber Products from

our joint venture entity, Thai Tech Rubber, which accounted for approximately 5.1% of our raw

material purchases for the financial year ended 31 December 2012.

While we have well-established relationships with existing dealers and suppliers, our procurement

team seeks to maintain and improve our relationship with such dealers and suppliers. This is done

primarily through the conduct of supplier surveys and regular visits to the local villages. In addition,

our procurement team will identify new dealers and suppliers, based on our assessment of their

business operations (if evaluating dealers), quality and price of raw materials.

Our procurement team is also responsible for in-coming quality assurance. The raw materials used in

our production process have to meet our specifications and are subject to our strict internal quality

assurance and testing. Prior to accepting delivery of raw materials, sample testing is conducted on the

raw materials. The raw materials are tested for, amongst other things, its purity and dry rubber content

to ensure that it meets our requirements. The results of the sample testing are recorded and considered

prior to accepting delivery of a particular batch of raw material.

The other responsibilities of our procurement team include (i) monitoring the pricing and supply trend

of the raw materials that we require, (ii) inventory management and (iii) allocating raw materials to

our various production facilities.

Processing and production of Natural Rubber Products

We produce three main types of Natural Rubber Products:

(1) Ribbed Smoked Sheet (RSS)

RSSs are unsmoked rubber sheets which have undergone processing and can be classified into

five categories, namely, RSS1, RSS2, RSS3, RSS4 and RSS5. The classification is based on

the quality of each sheet, which takes into account factors like purity, elasticity and colour.

RSS is used as a raw material in the production of products such as tyres, pipes, shoes and

automobile parts. As it is a form of processed natural rubber, RSS is of a higher quality and

can be subjected to dyeing treatments.


Part 1 Page 32

The following is an illustration of our RSS production process:

Unsmoked rubber sheets are produced by processing field latex which is collected and

allowed to coagulate. The coagulated field latex is subsequently passed through a mill to

extract water to produce unsmoked rubber sheets. The unsmoked rubber sheets are then

washed, cleaned and cut to size before they are allowed to hang on racks to dry. The dried

unsmoked rubber sheets are then transferred into a smoke house where they are smoked for

several days at controlled temperatures before being manually sorted and visually classified

based on quality. These are then packed into bales for shipment or storage.

(2) Technically Specified Rubber (TSR)

TSR or block rubber is produced from raw materials such as cup lump and unsmoked rubber

sheets. Cup lump is produced when field latex is allowed or made to coagulate in the cup in

which it is collected. Unlike RSS, the quality of TSR is determined through chemical testing

to ascertain its technical specifications. We produce two main types of TSRs — the Standard

Thai Rubber (STR) and the Standard Indonesian Rubber (SIR). TSR is a raw material used

mainly in the production of tyres for automobiles and airplanes.

We utilise two processes in our production of TSRs — the “STR” process and the “compound

rubber” process. Both processes are mainly automated.

The following is an illustration of our TSR production processes:

“STR” process

Sourcing of

unsmoked

rubber sheets

Washing and

cleaning Hanging Smoking

Sorting and

classifying Packing Shipping /

storage

Cutting,

washing and

cleaning

Sourcing of

raw materials Cutting Washing and

cleaning Flattening

Hanging High

temperature

drying

Compressing

Packing Shipping /

storage


Part 1 Page 33

In the “STR” process, the raw materials are cut into smaller pieces, washed and cleaned

before being passed through rollers and flattened to form rubber crepes. The rubber crepes are

then placed on racks to dry for approximately 10 to 15 days. Once dried, the rubber crepes are

cut into smaller pieces before being washed to remove the remaining dirt and impurities. It is

then passed through a dryer at high temperatures to remove excess water before being

compressed into rubber blocks and packed for shipment or storage.

“Compound rubber” process

In the “compound rubber” process, the raw materials are cut into smaller pieces, washed and

cleaned before being passed through rollers and flattened to form rubber crepes. The rubber

crepes are then placed on racks to dry for approximately 10 to 15 days. Once dried, the rubber

crepes are cut into smaller pieces before being washed to remove the remaining dirt and

impurities and then passed through a dryer at high temperatures to remove excess water and

mixed with chemicals. The resultant rubber mixture is then allowed to cool before it is

compressed into rubber blocks and packed for shipment or storage. The “compound rubber”

process produces a special type of compound rubber, which we sell into the PRC market.

(3) Concentrated Latex

Concentrated Latex is derived from field latex and is liquid latex with a dry rubber content of

approximately 60.0%. It is one of the cleanest forms of rubber and is used primarily in the

production of various products such as, latex examination gloves, surgical gloves, condoms,

elastic threads and adhesives.

The following is an illustration of our Concentrated Latex production process:

Sourcing of

raw materials Cutting Washing and

cleaning Flattening

Hanging

Cutting,

washing and

cleaning

High

temperature

drying

Chemical

mixing

Pre-breaker

drying

Cooling and

compressing Packing Shipping /

storage

Sourcing of

field latex Centrifuging Adding of

ammonia Packing

Shipping /

storage


Part 1 Page 34

Field latex is tapped by farmers from the rubber tree and collected. To prevent the field latex

from coagulating during transportation to the processing facility, ammonia, among other

chemicals, is added to the field latex by the collectors. At the processing facility, the mixture

is centrifuged to separate impurities and to obtain a latex concentration containing

approximately 60.0% dry rubber content. Ammonia is then added back to the extract to

prevent it from coagulating before it is packed and prepared for shipment or storage. The

quality of the Concentrated Latex is dependent on the level of ammonia in it. There are

generally three grades of Concentrated Latex — high ammonia latex, medium ammonia latex

and low ammonia latex.


Part 1 Page 35

Production facilities and rates of utilisation

As at 31 December 2012, we have a total of 22 processing facilities, 20 processing facilities2 located in Thailand and 2 processing facilities located in

Indonesia with an estimated total effective production capacity of approximately 1.1 million tons of Natural Rubber Products per annum.

Our production capacity is limited by available space, production lines, number of machines and manpower. Our estimated annual effective production

capacity and the annual utilisation rates of our natural rubber processing facilities which were in operation during the last three years based on our three

categories of Natural Rubber Products for each of the three most recent completed financial years are as follows:

Natural Rubber Product Estimated Effective Production Capecity(1)

(tons)

Engineering Specified Capecity (2)

(tons)

Effective Utilisation Rate(3)

(%)

As at 31 December As at 31 December For the Year Ended 31

december

2010 2011 2012 2010 2011 2012 2010 2011 2012

RSS 224,392 215,993 206,393 224,392 215,992 206,393 54.1 71.8 61.0

TSR 465,906 691,684 714,801 602,980 845,340 917,736 88.7 78.5 75.9

Concentrated Latex 169,960 191,488 191,488 252,872 284,700 285,480 61.3 53.5 48.5

Total 860,258 1,099,165 1,112,682 1,080,244 1,346,032 1,409,609 73.5 72.4 68.1

Notes:

(1) Calculated based on the annual engineering capacity of the relevant processing facility at the end of the relevant period which takes into consideration the estimated total number of

working days, the down time for the maintenance of machinery and equipment and the amount of time needed to complete one cycle of production for each of our Natural Rubber Products

at the relevant processing facility.

(2) The engineering specified capacities of our natural rubber processing facilities are derived from the specifications certified or provided by the supplier of the relevant processing machinery.

(3) Calculated based on actual production volume of the relevant processing facility for the relevant period divided by the weighted average effective capacity for that period, and in the case of

production facilities that commenced operations during the relevant period, also taking into consideration the actual processing capacity for the relevant period.

2 Comprises 19 processing facilities which produce Natural Rubber Products and one processing facility which processes cup lump for the production of TSR.


Part 1 Page 36

The machinery and equipment used in our production of Natural Rubber Products are maintained

weekly by the maintenance teams located at each of our rubber processing facilities to ensure that

they operate under optimum conditions to produce quality products and minimise disruptions to our

production activities. Generally, all maintenance of our machinery and equipment is carried out by

Premier System Engineering, with certain exceptions when we will call upon third party vendors to

service the machinery and equipment. Our maintenance team comprises qualified engineers and

technicians who have been appropriately trained.

Quality assurance

We have implemented comprehensive quality assurance and monitoring procedures to ensure that our

products meet our stringent quality control standards and the expectations and requirements of our

customers. Our quality assurance system encompasses stringent quality control checks at each stage

of our production processes, from procurement and processing of raw materials, to the inspection of

the end product.

As at 31 December 2012, we have received the following quality assurance certifications and awards

in respect of our Natural Rubber Products production processes and/or the Natural Rubber Products

that we produce:

For the

operation of

Name of

certification/

award

Awarding body/

authority

Validity period of

certificate/award

Process/Natural

Rubber Product

awarded

STA (Trang) ISO9001:2008

TÜV Rheinland

Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

RSS and

Concentrated

Latex

ISO14001:2004 TÜV Rheinland

Cert GmbH

13 November 2012

to 15 October 2015

Manufacture of

Concentrated

Latex

STA (Chumporn) ISO9001:2008 TÜV Rheinland

Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

Concentrated

Latex

STA (Surat Thani) ISO9001:2008 TÜV Rheinland

Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

Concentrated

Latex

STA (Kanchanadit) ISO9001:2008 TÜV Rheinland

Cert GmbH

17 September 2012

to 20 July 2015 Manufacture of

Concentrated

Latex

STA (Hat Yai) ISO9001:2008 TÜV Rheinland

Cert GmbH

17 September 2012

to 20 July 2015 Manufacture of

RSS


Cert GmbH

13 November 2012

to 15 October 2015

Manufacture of

RSS

BS

OHSAS18001:2007

TÜV Rheinland

Cert GmbH

10 December 2012

to 14 July 2015

Manufacture of

RSS

STA (Thungsong) ISO9001:2008 TÜV Rheinland

Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

TSR and

compound rubber


Part 1 Page 37

For the

operation of

Name of

certification/

award

Awarding body/

authority

Validity period of

certificate/award

Process/Natural

Rubber Product

awarded


Cert GmbH

13 November 2012

to 15 October 2015

Manufacture of

TSR and

compound rubber

STA (Sikao) ISO9001:2008 TÜV Rheinland

Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

TSR and

compound rubber


Cert GmbH

13 November 2012

to 15 October 2015

Manufacture of

TSR and

compound rubber

STA (Huay Nang) ISO9001:2008

TÜV Rheinland

Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

TSR and

compound rubber

STA Group ISO9001:2008 TÜV Rheinland

Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

RSS,

Concentrated

Latex, and

compounded

rubber

Rubberland Product

(Hat Yai)


Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

Concentrated

Latex

Rubberland Product

(Bueng Karn)


Cert GmbH

25 August 2011 to

20 July 2012

Manufacture of

TSR and

compound rubber

ISO 14001:2004 TÜV Rheinland

Cert GmbH

13 November 2012

to 15 October 2015

Manufacture of

TSR and

compound rubber

Rubberland Product

(Buriram)


Cert GmbH

16 May 2012 to

15 May 2015

Manufacture of

TSR and

Rubberland Product

(Mukdahan)


Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

TSR and

Nam Hua Rubber

(Sadao)


Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

Concentrated

Latex


Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

TSR and

compound rubber

Sadao P.S. Rubber

(Sadao)


Cert GmbH

17 September 2012

to 20 July 2015

Manufacture of

RSS

PT Sri Trang Lingga ISO 9001:2008 TÜV Rheinland

Cert GmbH

27 May 2010 to 6 August 2013

Manufacture of

TSR


Part 1 Page 38

For the

operation of

Name of

certification/

award

Awarding body/

authority

Validity period of

certificate/award

Process/Natural

Rubber Product

awarded

Premier System

Engineering (Hat Yai)

ISO9001:2008

Management

System

Certification

Institute

(Thailand)

27 May 2010 to

26 May 2013

Design and

development,

manufacture,

installation and

maintenance

services for

machinery and

electrical devices.

BSOHSAS18001:2007 TÜV Rheinland

Cert GmbH

29 October 2012 to

28 October 2015

Design,

production,

installation and

maintenance

service for

machinery and

electrical devices,

service for

calibration and

information

technology

ISO/IEC 17025:2005 Thai Industrial

Standards

Institute (TISI)

9 June 2011 to 8 June 2014

Standard

calibration

laboratory

Starlight Express

Transport (Trang)

ISO9001: 2008 Management

System

Certification

Institute

(Thailand)

25 June 2010 to

24 June 2013

Services of land

transport, import-

export, forklift

rental and forklift

maintenance

In-processing quality assurance

We conduct random in-process sampling at every stage of our production process to ensure that the

Natural Rubber Products that we produce meet our stringent quality standards and that our production

capacity is effectively utilised. For example, prior to the packing and storage of our TSRs at our

rubber processing facilities, samples of our TSR will be sent to our quality assurance department for

testing to ensure that the TSR meets industry specifications.

Out-going quality assurance

All of the finished Natural Rubber Products that we produce are subject to a further round of quality

inspection after packaging and labelling to ensure that they meet the quality criteria established by our

quality inspection department. Finished Natural Rubber Products that do not meet our quality

standards will be removed, recorded and analysed by our quality assurance department to identify the

issues and to refine our production processes to reduce such occurrences. Our quality assurance

department also monitors and ensures that the finished Natural Rubber Products are properly handled

and stored in accordance with our ISO9001 requirements.

Pre-delivery quality assurance

Prior to delivery, we would conduct a final round of inspection of the finished Natural Rubber Product

to ensure that it is delivered to our customers in good condition and that they meet our customers’

specifications.


Part 1 Page 39

Sales and marketing and customers

Our global sales and distribution function is located in and managed out of Singapore, a global

purchasing hub for Natural Rubber Products. We have established three trading and distribution

networks based in Singapore, the United States and the PRC for the Natural Rubber Products that we

sell, through our subsidiaries Sri Trang International, Sri Trang USA and Shi Dong Shanghai

respectively. Together with the various sales teams established in Thailand and in our major

geographical markets, such as the PRC, we are able to ensure that the Natural Rubber Products that

we sell are distributed efficiently.

The responsibilities of our sales and marketing department include the following:

• developing sales strategies in connection with our penetration into domestic and international

markets;

• recommending products to existing customers through the distribution of our product

samples;

• procuring new customers;

• monitoring and analysing our competitors’ product development and pricing;

• coordinating the delivery of our products to our customers; and

• purchasing Natural Rubber Products from third party producers.

In addition, our sales and marketing department is also responsible for maintaining our Group’s

customer records, attending to customer complaints and maintaining and improving customer

relations and inviting our existing customers to visit our processing facilities, enabling them to gain a

better understanding of our operations and products.

We have an extensive and diversified customer network of leading players globally and we sell

Natural Rubber Products to customers in various countries and territories in Asia such as the PRC,

India, Singapore, Japan, Vietnam, Malaysia, and Korea, as well as to the United States and Europe.

Shipping, logistics and maintenance

In Thailand, services for shipping and logistics activities in relation to the sale of Natural Rubber

Products are provided by our subsidiary, Starlight Express Transport. Such services include the

arrangement of product shipping and the preparation of the related import and export documentation.

In addition, Starlight Express Transport also undertakes the business of forklift rental and repair

services to companies within our Group.

We typically engage third party transportation and freight forwarding companies to provide services

in relation to shipping and logistics activities relating to the export of the Natural Rubber Products

that we sell.

Our subsidiary, Premier System Engineering, is responsible for carrying out general maintenance on

all of our Group’s machinery and equipment as well as the machinery and equipment of certain of our

associates. The maintenance team of Premier System Engineering comprises qualified engineers and

technicians who have been appropriately trained.


Part 1 Page 40

4.1.2 Examination Gloves

In addition and complementary to our Natural Rubber Products business, we have diversified our

income stream through our interest in SSC, our associate, in which we have an aggregate interest

(direct and indirect) of approximately 40.2%. We are closely involved in the day-to-day operations of

SSC which primarily produces latex examination gloves and nitrile examination gloves. These

examination gloves are used for medical and industrial purposes. As at 31 December 2012, SSC has 4

processing plants in southern Thailand with a total production capacity of approximately 12.5 million

glove pieces annually. We believe that SSC is Thailand’s largest examination gloves producer and

one of the leading producers of latex and nitrile examination gloves globally.

Raw materials procurement and management

The base raw material SSC requires for its production of its latex examination gloves is Concentrated

Latex which is supplied by our Group.

Production of examination gloves

Latex and nitrile examination gloves

The following is an illustration of SSC’s production process of latex and nitrile examination gloves:

The base raw material used is compounded with chemicals, which varies with our customers’

specifications. After compounding, the mixture is transferred into a dipping tank where hand formers,

which are first cleaned, are dipped into the mixture, coated with a thin layer of latex and then dried in

controlled temperatures. The hand formers are then immersed in a leaching tank to wash away water-

soluble materials, to ensure cleanliness. This is followed by curing in ovens. Thereafter, the

examination gloves are stripped from the hand formers prior to packing and export. For the powder

free glove, a chlorine substance will be added to make it easier to wear prior to putting it into drying

process. Finally, all the gloves are tested according to certain examination glove standards such as

ASTM and EN Std before they are packed and prepared for shipment or storage.

Raw material

preparation

Former

Cleaning

Dipping into

concentrated

latex

Oven

Washing Pre-cuffing

Packing

Chlorination

Shipping /

Storage

Washing /

Drying

QC test

Strip from

hand formers

Powder free glove

Powder glove


Part 1 Page 41

Sales and marketing

SSC’s sales and marketing department is responsible in their markets for:

• developing the sales strategies for its examination gloves;

• recommending products to existing customers through the distribution of product samples;

• procuring new customers;

• monitoring and analysing competitors’ product development and pricing; and

• coordinating the delivery of products to customers.

SSC regularly markets and showcase its products and canvass for customers by participating in

regional and international trade exhibitions in various markets. Participation in such trade fairs and

exhibitions allow SSC to promote its products, obtain up-to-date information on industry

developments and market trends, and secure new customers. Moreover, SSC also hold meetings

abroad with its overseas core customers to look into customers’ needs and maintain good relationship.

We have, together with our business partner Semperit Technische, also established two companies,

Sempermed USA and Sempermed Brasil, which focus on the sales and distribution of the examination

gloves produced by SSC in North America and Brazil respectively.

4.1.3 Other Businesses

Rubber wood processing business

Through our subsidiary, Anvar Parawood, we are also involved in the production and

distribution of rubber wood for the furniture industry in both local and global market.

Production and sale of finished products business

We have expanded our business operation to manufacture and distribute finished

products through investments in our associates that we have jointly established with

Semperit Technische, namely Semperflex Asia, Semperflex Shanghai, and Shanghai

Semperit. We have participated in the production and sale of high-pressure hydraulic

hoses for industrial, mining, and other specific applications through Semperflex Asia

and Semperflex Shanghai and participated in the production and sale of escalator

handrails through Shanghai Semperit.

Future broker

Through our associate, Pattana Agro Futures, we are also a commodity futures broker

in the Agricultural Futures Exchange of Thailand.


Part 1 Page 42

4.2 Industry and Competition

Natural Rubber Industry

Demand and Supply of Natural Rubber in 2012

According to International Rubber Study Group (IRSG), The world Rubber Industry Outlook, Review

and Prospects to 2022, December 2012, world demand of Natural Rubber in 2012 was 10,947,000

tons, 0.02% increase from 2011, whereas world production of natural rubber was 11,406,000 tons,

3.6% growth from 2011. China is a world’s major natural rubber consumer accounting for 34.4% of

total global consumption followed by North America and European Union who consumed about

10.0% and 9.7% of total global consumption, respectively. Thailand, world’s topmost natural rubber

producing country, produced 3,522,000 tons or 30.9% of world’s natural rubber production followed

by Indonesia and Vietnam whose production contributed 26.4% and 8.4% of world’s natural rubber

production, respectively.

Diagram exhibits Demand and Supply of Natural Rubber during 2002-2013

Trend of Demand and Supply of Natural Rubber in 2013

Global’s Natural Rubber consumption in 2013 is expected to be 11,592,000 tons, up 5.9% from the

year 2012 which grew at only 0.02% (Source: IRSG - The World Rubber Industry Outlook, Review

and Prospect to 2020, December 2012). The increase in demand coincides with growth of tyre

industry which accounted for more than 70% of global Natural Rubber demand. Most growing

demand comes primarily from emerging countries such as China and India whose relatively high GDP

growth would benefit automotive industry which is directly related to tyre industry, as part of

component. Meanwhile, IRSG forecasted that total global Natural Rubber production will be

increased by 3.2% YoY to 11,771,000 tons. Such increase is mainly contributed by Thailand and

Indonesia, world’s major Natural Rubber producing countries. It is anticipated that Natural Rubber

supply will surpass Natural Rubber demand by 179,000 tons in 2013.

Unit : Million Tons


Part 1 Page 43

Diagram exhibits Supply Surplus (Deficit) of Natural Rubber during 2002-2013

Diagram Exhibits World’s Major Natural Rubber Producing Countries during 2002-2013

Diagram Exhibits World’s Major Natural Rubber Consuming Countries during 2002-2013

Unit : Thousand Tons




Part 1 Page 44

Diagram Exhibits Growth of World’s Natural Rubber Consumption and GDP Growth during

2003-2013

Key factors affecting the Natural Rubber price

The price of natural rubber are affected by a number of factors including 1) world economic

conditions which directly affected automobile industry and tyre industry, 2) exchange rate fluctuation

especially US dollar, Japanese Yen, and natural rubber exporting currencies such as Thai Baht and

Indonesian Rupiah as natural rubber is mainly traded in US Dollars, and 3) oil price since natural

rubber and synthetic rubber which is by product from crude oil, are the main raw materials of

automobile tire, the rubber price tends to fluctuate and move same direction as oil price.

In 2012, price of Natural Rubber was relatively volatile and continued to move in downward direction

from 2011. This was due to the economic slowdown in various countries. However, such concerns on

economic problems are expected to ease up from money injection to stimulate the economy of China,

Japan, and the US. The revised up world GDP compared to the prior year could rebuild consumer

confidence which will increase overall demand of Natural Rubber.

Diagram Exhibits Price of STR20 in 2011- 2012

US Cent : Kilogram

High inflation

in China

Tsunami in Japan

Sovereign

debt in EU

World economic slowdown

Stimulas

package by the

US, Japan, and

China

Concerns

on Greece

to exit EU


Part 1 Page 45

Competition

The main Natural Rubber producing and exporting countries are Thailand, Indonesia, Vietnam, and

Malaysia. There are only a few large Natural Rubber producers in the world. To operate a sustainable

growth and success business, Natural Rubber producer needs an extensive experience, an insight in

rubber industry, and continuous support from financial institutions for large working capital

requirement. We believe that our main competitors are primarily larger Natural Rubber processors

and exporters such as Von Bundit Company Limited, Southland Group, and Thai Hua Rubber Public

Company Limited based in Thailand, The Tat Lee Group and The Kirana Group based in Indonesia,

and Lee Rubber Group based in Malaysia and Indonesia.

We believe we are the world’s largest fully integrated Natural Rubber processing company. In 2012

our sales volume accounted for 8.9%3 of world’s Natural Rubber consumption. The benefits that large

firm have over the small to medium firms include to create the economies of scale, balance the

bargaining power with both suppliers and customers, and enhance accessibility to different sources of

fund for using as a working capital and funding business expansion, all of which are the key success

of Natural Rubber business.

We realise that the potential to sufficiently procure raw material is as important as effective

distribution channels that allow us to penetrate into strategic markets. We, therefore, strategically set

up production base in Thailand and Indonesia, the world’s two largest Natural Rubber producing

countries collectively contributed more than 60% of world production. For sales & distribution, we

have established subsidiaries in China, Singapore, and the US to carry out sales & distribution

activities. With the high international quality standard of products, the Company is able to sell Natural

Rubber products to world’s leading tyremakers as well as other tyre manufacturers in every corner of

the world.

3 Based on our sales volume of Nutural Rubber Products of approximately 975,604 tons for the financial year ended 31

December 2012 and the total global demand for Natural Rubber Products of approximately 10,947,000 tons in 2012.


Part 1 Page 46

Majority of our products are globally sold to conventional tyre manufacturers. Diagram below

exhibits the proportion of geographic sale during the past three years.

Continental 2010 2011 2012

Ton (%) Ton (%) Ton (%)

Overseas markets

Asia 551,855.5 65.6 589,781.6 62.0 652,746.7 66.9

- The PRC 307,705.7 36.6 317,513.0 33.4 422,547.9 43.3

- India 41,813.9 5.0 37,048.6 3.9 30,976.7 3.2

- Japan 26,335.2 3.1 28,865.3 3.0 17,580.9 1.8

- Korea 25,436.1 3.0 28,290.6 3.0 26,717.4 2.7

- Malaysia 21,914.9 2.6 11,969.4 1.3 13,055.0 1.3

- Singapore 97,501.9 11.6 127,446.7 13.4 110,225.8 11.3

- Others 31,148.3 3.7 38,648.1 4.1 31,642.9 3.2

America 84,680.2 10.1 107,518.9 11.3 92,443.1 9.5

Europe 55,406.7 6.6 77,631.5 8.2 67,833.8 7.0

Others 3,456.2 0.4 7,283.5 0.8 4,005.0 0.4

Total overseas markets 695,398.6 82.7 782,215.5 82.2 817,028.6 83.7

Domestic market 145,063.4 17.3 169,719.1 17.8 158,575.5 16.3

Grand Total 840,462.0 100.0 951,934.6 100.0 975,604.1 100.0

We believe that the major competitive factors in the Natural Rubber processing industry include

product quality, production capability and capacity, economies of scale, customer service, product

pricing, geographical presence and management capability.

Key Strengths of our Group

1. Being the world’s largest natural rubber processing company with a market share of

8.9%

- Capture all possible market segments with full range of Natural Rubber products.

- Benefit from economies of scale.

- Balance the bargaining power with suppliers and customers.

- Enhance accessibility to different sources of fund to support our operation and expansion.

-

2. Fully integrated Natural Rubber supply chain business model

- Gain direct access to supply and demand information

- Enables us to respond to changes in market conditions and manage our production and

position efficiently.

- Maximise competitive edge and cost efficiency.

- Create potential for business expansion in the future.

3. Well-balanced portfolio with a good coverage of sales and distribution

- Have more than 250 diversified customer network across the globe, no single customer

accounts more than 6% of our total sales.


Part 1 Page 47

- Cover all class of customers to serve all demand from every corner of the word.

- Get direct access to end-users to gain demand flow and market sentiment.

4. Having production base in major Natural Rubber producing countries

- Advantage in secure raw material as Thailand and Indonesia are world major Natural

Rubber producing countries collectively contributed more than 60% of global production.

- Flexible production management from different seasonal period throughout the year.

- Having a rich number of raw material procurement centers to reduce the reliance on

dealers.

5. Expand upstream to rubber plantation business

- Emphasize on cost leading position

- Enhance profitability and reduce volatility in earning

- Create procurement networks for potential raw material from neighboring area.

- Pinpoint strategic locations for midstream factories in the future

6. Captained by highly experienced managements

- Led by a group of seasoned managements with over 20-year experience in Natural

Rubber industry

4.3 Insurance

As at 31 December 2012, we have taken insurance against damage (inclusive of fire and natural

disaster such as lightening, bombing, storm, and etc.) for all our fixed assets (including our offices,

production facilities and machinery) as well as our inventory for an aggregate of approximately Baht

37,938.92 million.

Our Directors believe that the insurance policies taken up by our Group are adequate for our business

needs and operations, and will periodically conduct a review of our Group’s insurance coverage.

4.4 Environment, Health and Safety

Environmental Regulation

Our operations are subject to significant environmental laws and regulations, including the

Enhancement and Conservation of National Environmental Quality Act B.E. 2535 (A.D. 1992) (the

“Environmental Act”). In 1992, Thailand strengthened its environmental laws and regulations in order

to promote sustainable development and to better protect the natural environment. The 2007 Thai

Constitution also contains definitions and provisions relating to the government’s responsibility and

the citizen’s rights in the management and development of natural resources and the environment.

Environmental laws and regulations that primarily relate to air emissions and water discharged from

our facilities affect all aspects of our business, including rubber manufacturing and the construction

and maintenance of our facilities. We are required by environmental law to maintain the emissions of

our various facilities within certain limits.

According to the Environmental Act, operators of pollution-generating facilities are required to install

pollution control equipment and must collect data and compile statistics on the daily operations of

their facilities and pollution control equipment, and keep and compile records on pollution sources. In

addition, they must submit monthly summary reports that provide information on the functioning of

their facilities and equipment to the local authorities. Pollution control officials are authorised to enter

buildings and premises where business facilities or sources of pollution are located in order to inspect

the functioning of the facilities and equipment. They have the authority to issue written orders to

require the owners, persons in possession, or person(s) monitoring or controlling the operation to


Part 1 Page 48

correct, modify, improve, or repair the facilities or equipment. Moreover, the officials have the

statutory power to impose a fine on the owners or persons in possession of the sources of pollution for

breach of their obligations under the Environmental Act. The officials may recommend the closure of

the plants or premises, the suspension or revocation of licenses, or the suspension of the operation of

facilities that illegally discharge sewage or other pollutants into the environment. If leakage or

contamination from any point source of pollution is the cause of death or injury of any person, or has

caused damage in any manner to the property of any private person or of the state, then the owner or

the possessor of such a point source is liable to pay compensation, regardless of whether the leakage

or contamination is the result of a willful or negligent act on the part of the owner or the possessor of

the facility. Compensation for which a business enterprise may be liable includes all costs incurred by

the government in cleaning up the pollution. Violation of the provisions of the Environmental Act

may also lead to criminal sanctions consisting of a fine or imprisonment, or both.

In addition to the Environmental Act, the Factory Act B.E. 2535 empowers the Minister of Industry to

issue ministerial regulations to impose obligations on business facilities to observe requirements

concerning protection of the environment including the standards and methods to control the

discharge of waste, pollutants, or anything that affects the environment in the normal course of

business. Under this law, any operator acting in contravention of the regulations imposed by the

ministry may be subject to a shutdown order and a fine not exceeding Baht 200,000.

In accordance with the Public Health Act B.E. 2535, the Pollution Control Department is involved in

a wide range of waste disposal issues, from overseeing the process of waste transportation and

disposal to establishing criteria aimed at controlling public nuisance caused by odor, light, radiation,

sound, heat, vibration, dust, toxic tar and ash, and other hazardous substances. Under this law, any

operator acting in contravention of an order to eliminate any public nuisance may be subject to a

shutdown order or such contravention may lead to criminal sanctions consisting of a fine or

imprisonment, or both.

The primary governmental bodies which supervise our operations are the Office of Natural Resources

and Environmental Policy and Planning, the Pollution Control Department and the Department of

Industrial Works.

Group’s environmental policy and practice

Management of the Group has been focusing on the environment and has announced the

environmental policy since 2005 to implement environmental management systems. The Group is

committed and ready to work with its sense of responsibility towards the environment. Environmental

Management Systems (EMS/ISO14001) is implemented in our organization with the objectives,

goals, plans, and activities on the environment as well as plan follow-up under the slogan

"Environmental conservation with care and treatment, Sri Trang will develop and add value for

society”. The Group’s environmental performances in accordance with laws and regulations were as

follows;

• to comply with laws, regulations, and legislations of government agencies or related

environmental unit;

• to prevent and reduce waste as well as implement policies to minimise the adverse effects to

the environment;

• to continually develop and improve on our environmental management systems by checking

and follow-up;

• to conserve resources and energy and ensure that they are utilised efficiently;


Part 1 Page 49

• to educate and increase the awareness of environmental issues among our employees as well

as to know how to prevent significant impact on the environment; and

• to disclose our environmental policy to the public

The Group has 5 branches that are certified to ISO14001 environmental management system, each of

which has their own internal inspector and certified external assessor. Moreover, each branch also sets

environmental goals and objectives such as reducing the use of chemicals and energy, recycle the

waste, as well as monitoring and measuring environment such as waste water and air emitted, etc. on

annual basis to comply with laws.

The Group has complied with the law associated with wastewater treatment system. Currently, there

are two plants that have to be connected to the remote pollution measure machine (BOD online), our

plant in Trang province and SSC in Songkhla province. In this regard, the Group has already installed

and connected the signal with Department of Industrial Works to control and monitor. In addition, the

Group has also developed a wastewater treatment system at the new plant in the Northeast of Thailand

to provide effective water treatment that can be 100% recycled to reduce the use of water resource and

environmental impacts.

In terms of air pollution, we install Multi-cyclone system for the plants with boiler. The quality of our

air emitted is in accordance with the law.

We also hold a licence for the storage of hazardous and waste disposal and comply with the

Environmental Monitoring Efforts Report and Management Efforts Report for our operations in

Indonesia.

Participation in Environmental Project

Our environmental projects that we have attended during 2012 were as follows;

1. Rubberland Products, Buriram branch received the certification for environmental governance

project, co-hosted by provincial industry and Department of Industrial Works

2. Nam Hua (block rubber), Rubberland Products (Concentrated latex HA), and STA Sikao

branch received Carbon Footprint Labeling co-certified by Thai Environment Institute

Foundation and the Federation of Thai Industries

3. Rubberland Products, Bueng Kan branch was awarded “Love Mom…Preserve the River

2012” for their collaboration in conserving and restoring the river.

4. STA, Huay Nang branch was certified with Step 1 of environmental management system

5. Rubberland Products, Buriram branch received the certification for environmental governance

project, co-hosted by provincial industry and Department of Industrial Works

6. STA Kanchanadit branch co-hosted with Mangrove Forest Resources Development Station

14 to hold mangrove forest planting project to rebalance the land and release aquatic animals

at Baan Gadae, Karnchanadid district, in Surat Thani province

7. Supporting reforestation project to honor H.M. the King and H.M. Queen and granted

scholarship to the students of Baan Kuan Samed School in Songkhla province

8. Fishing for lunch project and library construction for Baan Kok Petch School in Buriram

province


Part 1 Page 50

9. Green industrial wok project: This project was organized by the Ministry of Industry.

Following is list of our plants that were certified;

Level 1 : “Green Commitment” is a commitment to reduce environmental impact where the

commitment has been communicated throughout the organization. The company that has been

certified at this level includes Rubberland Products, Mukdahan branch.

Level 2 : “Green Activity” is an activity to minimize the impact on the environment according

to predetermined plan. The company that has been certified at this level includes Rubberland

Products, Buriram branch and STA, Surat Thani branch.

Health and Safety

We place significant emphasis on the health and safety of our employees and contractors. Moreover,

we are required to comply with a range of health and safety laws and regulations such as inspection,

equipment for an emergency event, annually emergency training plan, working environment

measurement including light, noise, heat, dust, vapour, and building inspection.

We review our health and safety standards on an ongoing basis and our operations are subject to

government authority inspections throughout the year.

Our employees undergo periodic health check-ups. For safety at work, we provide training on health

and safety, safety equipment, knowledge about chemical, and how to control the contractor to our

employees.

4.5 Sales Commitment

As at 31 December 2012, the Group was committed to certain sales of Baht 16,948.38 million of

which comprised 2 types of contracts; fixed contractual prices which the price will be settled at future

dates and undertrained contractual prices which the price is the market prices at the end of period.

4.6 Tax Incentives

Tax Incentives from The Board of Investment of Thailand

Under the Industrial Investment Promotion Act B.E. 2520 (as amended), the Company and certain

subsidiaries incorporated in Thailand have been granted privileges by the Board of Investment at

various times relating to, among others, manufacture of latex and skim crepe and/or skim block,

concentrated latex, block rubber and mixed rubber, rubber smoked sheets and providing service of

calibration laboratory (the “promoted operations”).

The privileges granted, subject to compliance with the terms and conditions prescribed in the relevant

promotional certificates, include:

(a) exemption from payment of import duty on machinery approved by the Board of Investment;

(b) exemption from payment of corporate income tax on net profit from promoted operations for

a period of eight years from the date on which income is deemed to be first derived from such

operations;


Part 1 Page 51

(c) a 50% reduction in the normal corporate income tax rate on the net profit derived from

promoted operations for a period of five years, commencing from the expiry date in (b) above

(if applicable);

(d) a five-year carry forward period for losses for tax purposes from promoted operations during

the period in (b) above;

(e) income exclusions and additional deductions in computing the taxable income for promoted

operations during the period in (b) above;

(f) exemption from income tax on dividend paid to the shareholders from the profit of the

promoted operations during the corporate income tax exemption period; and

(g) double deduction of the cost of transportation, electricity and water supply for corporate

income tax purposes for a period of 10 years from the date on which income is deemed to be

first derived from the promoted operations.

The following table summarises the expiry dates of the Board of Investment tax incentives granted to

our Company and certain of our subsidiaries incorporated in Thailand.

Company Certificated

no.

Expiry for Full

Exemption from

Tax

Expiry for 50%

Reduction in Tax

STA 1165/2542 3 January 2008 3 January 2013

(Trang - Concentrated Latex)

STA 1046/2543 1 January 2008 1 January 2013

(Thung Song - TSR)

STA 1803(2)/2547 30 April 2013 Not applicable

(Surat Thani - Concentrated Latex)

STA 1802(2)/2550 17 September 2016 Not applicable

(Khanjanadit - Concentrated Latex)

STA 1803(2)/2550 9 March 2016 Not applicable

(Sikao - TSR)

STA 2213(2)/2550 3 October 2016 Not applicable

(Huay Nang - TSR)


(Trang - Concentrated Latex)


(Surat Thani - Concentrated Latex)

Nam Hua Rubber 1167/2542 7 January 2008 7 January 2013

(Sadao - Concentrated Latex)


Part 1 Page 52

Company Certificated

no.

Expiry for Full

Exemption from

Tax

Expiry for 50%

Reduction in Tax

Nam Hua Rubber 1264/2543 28 September 2008 28 September 2013

(Sadao - TSR)

Nam Hua Rubber 2379(2)/2553 2 December 2010 2 December 2018

(Sadao - TSR)

Sadao P.S. Rubber 1028/2543 31 August 2008 31 August 2013

(Sadao - RSS)

Rubberland Products 1402(2)/2552 30 March 2018 30 March 2023

(Bueng Karn - TSR)

Rubberland Products 1887(2)/2553 30 November 2010 30 November 2018

(Buriram - TSR)

Rubberland Products 2387(2)/2553 1 April 2011 1 April 2019

(Hat yai - Concentrated Latex)

Rubberland Products 1016(2)/2555 22 December 2011 Not applicable

(Mukdahan – TSR)

Global Trader Programme

Sri Trang International enjoys certain tax benefits under the Global Trader Programme launched by

International Enterprise Singapore, pursuant to which Sri Trang International is only taxed on 10% of

its qualifying income (i.e. income which is derived from offshore sales or sales to companies under

the Global Trader Programme). Sri Trang International renewed its status under the Global Trader

Programme in January 2010 for the period from 1 January 2010 to 31 December 2014.

4.7 Present Applicable Regulations

We have all necessary permits and licences required for our business. Some of the laws and

regulations which are material to our business and operations are set out below.

4.7.1 General Rules

The laws governing domestic activities in respect of rubber in Thailand have been reformed in

accordance with the commitments to which Thailand is bound as a member of the International

Natural Rubber Organisation, the commitments under the Treaty on Maintenance of Stability of

Natural Rubber Price, the Project on Establishment of Common Market of Natural Rubber of the

Natural Rubber Producer Association, the Project on Control and Cooperation of Rubber Standard

and Trade of the International Natural Rubber Organisation and the United Nations Treaty on

Cooperation on Natural Rubber. Currently, the activities in respect of rubber are governed by the

Rubber Control Act B.E. 2542 (A.D. 1999) (the “Rubber Control Act”), which is the law controlling

all the processes in rubber industry, including rubber plantation, rubber-tree propagation, import and

export of rubber trees, transportation of natural rubber, rubber processing plants, rubber trade, rubber


Part 1 Page 53

import and export, and rubber quality analysis or assessment etc. According to the Rubber Control

Act, a Rubber Control Board has been established to provide opinions or advice to the Minister or the

authorities approving notifications or ministerial regulations on rubber control under the said law.

Under the Rubber Control Act, the approving authority is the Department of Agriculture, while the

co-ordination authority is the Rubber Research Institute. Both authorities are under the supervision of

the Agriculture and Cooperatives Minister.

Policy on Rubber Plantation

Pursuant to the Rubber Control Act, the Minister is empowered to set up policies on rubber plantation,

by scheduling the dates and time at which rubber planters give information regarding rubber

plantation to the authorities. Such information includes, amongst others, amount of area, number of

rubber trees, rubber breeds and quantity of rubber sheets produced per annum. The Minister is also

empowered, under the law, to declare the rubber plantation zones: (1) Restricted zones: these zones

will be designated at the breakout of rubber plagues and will be prohibited for rubber plantation, in

addition, the Minister, under the law, may instruct the rubber planters to destroy the rubber trees

which may cause plagues, and (2) Rubber plantation zones: the rubber planters shall grow the good

breeds of rubber which are identified by the Minister of Agriculture and Cooperatives which has been

determined to be planted in the rubber plantation zones and shall undertake the plantation under the

procedures as prescribed in the law.

Licenses

Pursuant to the Rubber Control Act, several activities in respect of rubber require licenses to be

obtained from the authorities which can be summarised as follows:

1. License for importers or exporters of rubber trees, buds, seeds or knots or any part of rubber

trees which may grow;

2. License for commercial propagation of rubber trees: the person wishing to propagate rubber

trees for commerce shall file an application to the authority in charge of its area and thereafter

such authorities shall inform the Rubber Research Center to send officers to conduct a survey

at the rubber plantation and prepare a report to the Rubber Research Institute for further

approval by the Department of Agriculture;

3. License for rubber trade: the rubber trade shall include sales and purchases of rubber or

rubber exchange, which include the sales and purchases of instruments on rubber issued by a

person or otherwise, but excludes sales of fresh latex, cup lumps, rubber scraps or raw sheet

rubber which are produced by rubber planters from their rubber plantation;

4. License for establishment of rubber plants, operated by rubber traders, using fresh latex, cup

lumps, rubber scraps or raw sheet rubber to be processed to concentrated latex, dried rubber,

smoked sheet rubber, rubber blocks, crepe rubber, other raw rubbers compounded with

another kind or other kinds of raw rubber, including the plants producing mixed rubber but

excluding the plants producing raw sheet rubber;

5. License for importers or exporters of rubber: the rubber traders wishing to import or export

rubber shall obtain permits, except for the import or export of rubber samples of which the

weight does not exceed 5 kilograms. A permit for rubber import or export must be obtained

for each customs checkpoint;

6. Custom checkpoint clearance: the export of rubber requires a custom checkpoint clearance

granted by the authorities. The fees for custom checkpoint clearance is at the rate of Baht

0.002 per kilogram; and


Part 1 Page 54

7. License for arrangement of analysis or assessment of rubber quality: the rubber traders

wishing to arrange an analysis or assessment of rubber quality shall file an application under

the Rubber Control Act and the Regulation of the Department of Agriculture governing Rules

for License on TSR Block Rubber Laboratory B.E. 2542 (A.D. 1999).

Generally, the licenses issued under the Rubber Control Act are valid for one year from the issuance

date. The operator shall file an application for renewal of license prior to the expiration date. After

having filed an application for renewal of license, the business can be operated until the Department

of Agriculture disapproves the renewal of license.

Law Governing Rubber Plantation Aid Fund

The Rubber Plantation Aid Fund was established under the Rubber Plantation Aid Fund Act B.E.

2503 (A.D. 1960) (as amended) (the “Aid Fund Act”) in order to maximise the volume of rubber

crops. The aid to plantation was implemented by replacing the original rubber trees or perennial trees

with better rubber breeds or other economic perennial plants.

The sources of the Rubber Plantation Aid Fund under the Aid Fund Act consist of (1) contributions

collected from the rubber exporters, and (2) contributions from government budget.

The current contribution (cess rate) which was effective on 1 October 2010 is as follows:

1. Smoked rubber sheet

(a) 90 satang per kilogram (in case the rubber price does not exceed Baht 40);

(b) Baht 1.40 per kilogram (in case the rubber price exceeds Baht 40 but does not exceed

Baht 60);

(c) Baht 2.00 per kilogram (in case the rubber price exceeds Baht 60 but does not exceed

Baht 80);

(d) Baht 3.00 per kilogram (in case the rubber price exceeds Baht 80 but does not exceed

Baht 100); and

(e) Baht 5.00 per kilogram (in case the rubber price exceeds Baht 100).

2. Latex — the cess rate is the same as smoked rubber sheet, but shall be calculated at the rate of

35% of the total latex weight.

3. Concentrated latex or concentrated latex masterbatch — the cess rate is the same as smoked

rubber sheet, but shall be calculated at the rate of 60% of the total concentrated latex weight

or concentrated latex masterbatch weight.

4. Compound rubber or rubber masterbatch — the cess rate is the same as smoked rubber sheet,

but shall be calculated from the proportion of natural rubber thereof, as indicated in the

certificate issued by the Rubber Research Institution of Thailand, Department of Agriculture.

5. Other rubber e.g. block rubber, crepe rubber, lump rubber, rubber scraps, etc, the cess rate is

the same rate as smoked rubber sheet.

The annually collected contributions shall be allocated to the Rubber Research Institute, Department

of Agriculture, as follows: up to 5% for research on rubber, up to 10% for administration expenses of

the Fund and the remaining, which is no less than 85% for the funds granted to the planters requesting

for technical and production assistance. These funds cannot be spent for other purposes.


Part 1 Page 55

4.7.2 Regulations by Other Laws

License and Rules under the Medical Device Act

The Medical Device Act B.E. 2551 (A.D. 2008) (the “Medical Device Act”) provides the rules on the

control of medical devices and the protection of consumers’ safety. It is required that the production

or import of medical devices shall be approved by the Food and Drug Administration. According to

the application procedure for production of medical devices, the producers shall register the

establishment and comply with the requirements on the production plants, including amongst others

building scales, room division and waste water treatment. The producers must obtain the license on

establishment prior to the application for license on production of medical devices. A license on

production of medical devices shall be valid until 31 December of the fifth year from the date of

issuance. The licensee of establishment license shall file an application for renewal of license prior to

the expiration date of such license. Upon the filing of application for renewal of the license, the

business can be operated until the renewal of license is disapproved.

Currently, under the Notification of the Ministry of Public Health, surgical rubber gloves, latex

medical gloves and condoms are medical devices for which the producers and importers shall be

licensed. As a result, the production of such products which are made of rubber latex shall be licensed

under the Medical Device Act. In addition, the production of latex gloves and condoms shall meet the

standard as prescribed in the law.

License and Rules under the Factory Act

According to the Factory Act B.E. 2535 (A.D. 1992) (as amended) (the “Factory Act”), prior to the

commencement of production of a rubber factory, the production of concentrated rubber latex, rubber

blocks, rubber sheets or rubber crepes which use the machinery with over 50 horse power shall be

licensed by the Ministry of Industry. In addition, the producers shall comply with the requirements

under the Factory Act covering (1) location, environment, building structure and internal components

of factories; (2) specification or type of machinery and equipment used in production; (3) rules on

employees; (4) pollution control (including waste water treatment and noise control); and (5) rules on

safety measures. A license to operate a factory is generally valid for five years from the date of the

commencement of operations. The licensed producers shall file an application for renewal of license

within 60 days prior to the expiration date. Such license may be renewed for a period of five years and

the producers shall comply with all relevant conditions. Each licensed factory shall annually prepare

and file a report on environment assessment to the Ministry of Industry.

License under the Public Health Act

According to the Public Health Act B.E. 2535 (A.D. 1992) (as amended), the activities of washing,

smoking, baking and collection of raw rubber are considered as health threatening activities and the

producers shall be licensed by the local authorities prior to the operations. A license shall be valid for

one year from the date of issuance. The licensee shall file an application for renewal of license and

have paid the relevant fees prior to the expiration date. In the case of revocation of license, the

producers may re-apply for a new license upon the lapse of one year from the date of such revocation.

4.7.3 Indonesia

We hold various licences issued by, among others, the Capital Investment Coordinating Board, the

Department of Trade and the Department of Manpower, including an industrial business licence from

the Capital Investment Coordinating Board and a licence for the storage of hazardous and waste

disposal as set out in Decree No. 104/2009. We are required to comply with the Environmental

Monitoring Efforts Report and Management Efforts Report.


Part 1 Page 56

5. OPERATING ASSETS

5.1 Fixed Assets of the Company

As of 31 December 2012, the book value of the Company’s total fixed assets, less accumulated

depreciation and reserves for impairment, used in business operations as shown in the consolidated

financial statements of the Company is Baht 10,034.3 million or 27.3% of the total assets. The details

are as follows:

Unit : Baht million

Descriptions

Book Value Less

Accumulated

Depreciation as of

Contingent

Liabilities

31 December 2012 31 December 2012

Land and land improvement 4,011.8 211.3

Buildings and structures 2,539.7 822.4

Machinery and equipment 1,811.7 667.4

Vehicles 158.5 -

Fixtures and office equipment 106.7 -

Assets under construction and installation 1,405.9 -

Total net book amount 10,034.3 1,701.1

Note: As of 31 December 2012, certain plots of land, land improvement, buildings and structures, and machinery and

equipment of certain subsidiaries with net book value amounting of Baht 1,701.1 million have been mortgaged as collateral

for overdrafts and short-term loans and long-term loans from the financial institutions.

Certain land, factories and buildings and structures of the Company were mortgaged as collateral

for the repayment of debt to the financial institutions pursuant to the loan agreements.

5.2 Intangible Assets The Company used intangible assets in its business operations. As of 31 December 2012, the net

book value of the intangible assets is Baht 21.4 million or 0.1% of the total assets, consists of

computer software.

5.3 Long-term Lease

We lease various properties on which certain of offices and processing facilities are located. The

following table sets forth information relating to the material lease agreements of the properties leased

by us and the long-term lease agreements:


Part 1 Page 57

Location

Gross Area

(approximate)

(sq m) Lease Term Annual Rent Landlord Principal Use

STA

Park Ventures

Ecoplex, Lumpini,

Pathumwan, Bangkok

1,345 1 February 2012 to

31 January 2015

Baht

1,452,524.4

Lertrattakarn

Co., Ltd.

Office space

Sri Trang

International

No. 38-02, One Raffles

Place, Singapore

474 First period

8 Janurary 2012 to

30 April 2014

Second period

1 May 2012 to

7 January 2015

S$39,668.56

per month

S$56,122.0

per month

OUB Centre

Limited

Office space

5.4 Intellectual Property

Our Group does not own any intellectual property, patents or trademarks

5.5 Policies on Investment in Subsidiaries and Associates

STA has an investment policy to be the leader in the natural rubber industry. STA makes investments

so that it can be in the entire supply chain, increase the product value, or obtain the services which

support its businesses and which benefit the Company as a whole. The investments will be made

pursuant to the economic conditions at such time.

In respect of the polices on investment in subsidiaries and associates, STA Directors will serve as

directors of its subsidiaries and associates and STA may, if it is deemed appropriate, nominate its

representatives to serve as directors of its subsidiaries and associates. The Directors of STA will be

involved in the decision making in relation to the business management as a whole in order to enable

such entities to be in line with the Group’s direction.


Part 1 Page 58

6. LEGAL DISPUTES

As of 31 December 2012, STA and its subsidiaries had no pending legal disputes in the amount of

more than 5% of shareholders’ equity, or that may have an adverse affect on its assets or those of its

subsidiaries, or that may materially affect the business operations of the Group.


Part 1 Page 59

7. CAPITAL STRUCTURE

7.1 Shares in STA

As of 1 March 2013, STA has a registered capital of Baht 1,280,000,000 (One thousand two

hundred and eighty million) and paid-up capital of Baht 1,280,000,000 (One thousand two

hundred and eighty million), divided into 1,280,000,000 (One thousand two hundred and

eighty million) shares with a par value of Baht 1 each. The aforementioned shares are listed

securities on both the SET and SGX-ST.

7.2 Non-Voting Depository Receipt (NVDR)

As of 1 March 2013, the Thai NVDR Co., Ltd. held 50,969,894 shares in STA or 3.98% of

the total issued shares of STA. The investors who hold NVDRs will receive the same

financial benefits (i.e. dividends, rights issue, and warrants) as those who invest directly in the

shares in STA. The NVDR holders, however, do not have the right to vote in the meeting of

shareholders. The Thai NVDR Co., Ltd. will not exercise the right to vote in the

shareholders’ meeting, except in the case of considering the delisting of securities from the

SET.

7.3 Debentures

On 1 December 2011, STA successfully issued the debentures in two tranches to the

institutional and high net-worth investors with total amount of Baht 2,150,000,000.

On 1 November 2011, Tris Rating Co., Ltd. assigned A- / Stable rating for the newly issued

debentures. Net proceeds from the issuance of debentures in an aggregate amount of

approximately Baht 2,145,000,000 million will be used for long-term loan refinancing and/or

business expansion. Details of each tranche of debenture are as follows;

Tranche 1 Tranche 2

Debenture Name Debenture of Sri Trang - Agro

Industry Public Company

Limited no. 1/2554 due in

2014.

Debenture of Sri Trang -

Agro Industry Public

Company Limited no. 1/2554

due in 2016.

Type of Debentures Unsubordinated and

unsecured debentures with a

debenture holders’

representative

Unsubordinated and



representative

Principal amount of

Debentures

Baht 1,600,000,000

Baht 550,000,000

Interest rate

Fixed interest rate at 4.4% per

annum

Fixed interest rate at 4.7%

per annum

Interest Payable Semi-annually

Semi-annually

Term 3 Years 5 Years

Maturity Date 1 December 2014 1 December 2016


Part 1 Page 60

On 13 February 2013, STA successfully issued the debentures in two tranches to the

institutional and high net-worth investors with total amount of Baht 900,000,000. STA

intends to use the net proceeds for working capital and/or business expansion of the group.

Details of each tranche of debenture are as follows;

Tranche 1 Tranche 2

Type of Debentures Unsubordinated and



representative

Unsubordinated and



representative

Principal amount of

Debentures

Baht 300,000,000 Baht 600,000,000

Interest rate

Fixed interest rate at 4.1%

per annum

Fixed interest rate at 4.5% per

annum

Interest Payable Semi-annually Semi-annually

Term 3 years 5 years

Maturity Date 13 February 2016 13 February 2018

7.4 Shareholders

Top twenty largest shareholders of STA according to the book closure date as of 1 March

2013, are as follows:

Name / Company No. of Shares (%)

1 STH 246,852,060 19.29

2 Dr. Viyavood Sincharoenkul 168,523,970 13.17

3 Mr. Aram Sirisuwat 54,787,505 4.28

4 Thai NVDR Co., Ltd 50,969,894 3.98

5 CITIBANK NOMS S'PORE PTE LTD 34,024,250 2.66

6 Mr. Veerasith Sinchareonkul 22,441,000 1.75

7 Mr. Somwang Sincharoenkul 18,913,305 1.48

8 Mr. Kitichai Sincharoenkul 14,250,000 1.11

9 Mr. Tsai Wu-Ying 13,153,420 1.03

10 Southland Rubber Co., Ltd. 11,605,920 0.91

11 CITIGROUP GLOBAL MARKETS LIMITED.-

PROP.CUSTODY ACCOUNT

11,452,750 0.89

12 STATE STREET BANK EUROPE LIMITED 11,132,600 0.87

13 SOMERS (U.K.) LIMITED 10,313,700 0.81

14 Mr.Puthirat Pathratrathip 10,043,295 0.78

15 UOB Kay Hian Private Limited 10,000,000 0.78

16 RAFFLES NOMINEES (PTE) LTD 9,731,000 0.76

17 Mr. Paul Sumade Lee 8,906,955 0.70

18 KGI (Thailand) Co., Ltd. 8,597,400 0.67

19 Mrs. Promsuk Sinchareonkul 8,450,000 0.66

20 Mrs. Sungai Cherdkiatgamchai 8,357,875 0.65

Total 732,506,899 57.23 Note: Information obtained from TSD and CDP


Part 1 Page 61

The top 10 major shareholders of STH are as follows;

Name As at 1 March 2013

No. of Shares

(Par value of Baht 10

each)

Direct Shareholing

(%)

1. Mr. Viyavood Sincharoenkul 2,787,700 31.68

2. Ms. Susan Su 1,206,000 13.70

3. Ms. Somsri Sirisuwat 672,000 7.64

4. Mr. Somwang Sincharoenkul 570,860 6.49

5. Mr. Chaiyos Sincharoenkul 542,860 6.17

6. Paktai Rubber(1)

528,000 6.00

7. Nguan Chiang Food Industry Co., Ltd. 448,000 5.09

8. Mr. Paul Sumade Lee 397,000 4.51

9. Mr. Kitichai Sincharoenkul 348,880 3.96

10. Mrs. Voradi Sincharoenkul 226,860 2.58

11. Others 1,071,840 12.18

Total 8,800,000 100

Notes: (1) Mr. Viyavood Sincharoenkul, Mrs. Duangjai Sincharoenkul and Mr. Chaiyos

Sincharoenkul are limited partners

The shareholding of Sincharoenkul family who are the top 10 major shareholders of STA

holding shares in STH as at the book closure date as at 1 March 2013 combined with holdings

of related persons as defined in Section 258 of the SEC Act are as follows:

Name Shareholding in STA (%)

1. Mr. Viyavood Sincharoenkul 33.11

2. Mr. Veerasith Sinchareonkul 1.75

3. Mr. Somwang Sincharoenkul 1.48

4. Mr. Kitichai Sincharoenkul 1.11


Part 1 Page 62

7.5 Dividend Policy

7.5.1 Dividend Policy of STA

Our policy is to pay a dividend of approximately 30.0% of our net profit for each financial

year as contained in our Company’s stand-alone financial statements, but not in excess of our

retained earnings. In considering the level of dividend payments, we intend to take into

account various factors, including STA’s financial position, results of operations and cash

flow; the ability of our subsidiaries, associates and joint venture entity to make dividend

payment to STA; STA’s expected working capital requirements to support STA’s future

growth; and general economic conditions and such other external factors that STA believes to

have an impact on the business operations of STA.

7.5.2 Dividend Policy of Our Subsidiaries

The dividend payment of our subsidiaries shall be approved by the Board of Directors of each

subsidiary and shall be presented to the shareholders’ meeting for approval. The Company

does not fix the percentage of dividend payment. The dividend payment made by our subsidiaries

will depend on the business profits, financial position and the future investment plans of each

subsidiary and shall be according to its Articles of Association and the relevant laws.


Part 1 Page 63

8. MANAGEMENT

8.1 Corporate Structure as of 31 December 2012

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Part 1 Page 64

8.2 Management Structure

Committees of STA

As of 31 December 2012, the corporate structure of STA consists of five committees which are the

Board of Directors of STA, the Audit Committee, the Executive Committee, the Nominating

Committee and the Remuneration Committee.

8.2.1 The Board of Directors of STA

As of 31 December 2012, the Board of Directors of STA consists of 11 directors as follows:

Name Position Remarks

1. Mr. Viyavood

Sincharoenkul

Chairman /Managing Director/

Executive Committee

Executive Director

2. Mr. Prasit Panidkul Vice-chairman/

Executive Committee

Executive Director

3. Mr. Chaiyos Sincharoenkul Director/ Executive Committee Executive Director

4. Mr. Anan Pruksanusak Director/ Executive Committee Executive Director

5. Mr. Kitichai Sincharoenkul Director/ Executive Committee/

Nominating Committee member

Executive Director

6. Mr. Paul Sumade Lee Director/ Executive Committee Executive Director

7. Mr. Veerasith

Sinchareonkul

Director Non-Executive Director

8. Mr. Prakob Visitkitjakarn Lead Independent Director/ Chairman

of the Audit Committee/ Chairman of

the Remuneration Committee

Non-Executive Director

9. Mr. Kriang Yanyongdilok Independent Director/

Audit Committee member/ Chairman

of the Nominating Committee/

Remuneration Committee member


10. Mr. Samacha Potavorn Independent Director/

Audit Committee member/

Nominating Committee member/

Remuneration Committee member


11. Mr. Neo Ah Chap Independent Director Non-Executive Director

Mrs. Pacharin Anuwongwattanachai is a secretary to the Board of Directors of the Company.

Authorized Directors of STA

Any two of the following seven directors, Mr. Viyavood Sincharoenkul, Mr. Chaiyos Sincharoenkul,

Mr. Prasit Panidkul, Mr. Anan Pruksanusak, Mr. Kitichai Sincharoenkul, Mr. Veerasith

Sinchareonkul and Mr. Lee Paul Sumade, may jointly sign with STA’s seal affixed.

Engagement of Mr. Somwang Sincharoenkul as Honorary Adviser

The Board of Directors Meeting No. 4/2010 held on 6 May 2010 resolved to approve the engagement

of Mr. Somwang Sincharoenkul as the Honorary Adviser of STA. Such advisory services are as

follows:


Part 1 Page 65

1. Advise on the formulation of the Company’s goals and vision.

2. Advise on the Company’s investment and business plans and the business operation policy of

the Company, both domestically and internationally.

3. Advise on strategies in relation to the use of raw materials, procurement, price and quantity in

each period pursuant to the local conditions.

4. Advise on dealings with communities, local authorities and government agencies in the

southern part of Thailand.

Mr. Somwang Sincharoenkul does not have any participation in the Company’s operation. His

remuneration during 2 years starting from 6 May 2010 to 6 May 2012 is Baht 400,000 per month or

Baht 4,800,000 per year. This transaction is considered as a connected transaction which continues to

be carried out in the future.

As the Honorary Advisor period of Mr. Somwang Sincharoenkul was ending on 6 May 2012, the

Board of Directors Meeting No. 2/2012 held on 9 March 2012 approved the extension period of his

services for two years which will end on 6 May 2014. The remuneration rate remains the same at Baht

400,000 per month or Baht 4,800,000 per year.

Scope of Duties and Responsibilities of the Board of Directors of STA

STA has determined the scope of duties and responsibilities of the Board of Directors of STA as

follows:

1. Duties of the Board of Directors

The Board of Directors of STA shall perform its duties with knowledge, ability, and

experience to benefit the business operation of the Company. The Board of Directors shall

also perform its duties in accordance with STA’s objectives, its Articles of Association and

shareholders' resolutions with due care in order to protect the interests of STA and be

responsible to STA shareholders. According to the Articles of Association of STA, a meeting

of the Board of Directors shall be held at least once every three months.

2. Review and Approve the Appropriate Policies

The Board of Directors of STA is responsible for proposing, reviewing and approving STA’s

policies and business direction.

3. Supervision of the Executive Committee

The Board of Directors of STA shall supervise the Executive Committee to ensure that the

policies set out are followed efficiently and that they notify the Board of Directors to propose

material matters in relation to the significant business operations of STA and connected

transactions to be in accordance with the regulations of the SEC, the SET and the SGX-ST.

If necessary, the Board of Directors of STA may appoint advisor(s) to advise or provide

professional opinions to support the significant business decisions of STA.

4. Arrange the Efficient Internal Control and Internal Audit Systems

The Board of Directors of STA shall arrange efficient internal control and internal audit

systems, in particular in respect of transactions in which the director(s) have an interest and

are required to be approved by the shareholders’ meeting pursuant to the law as well as the

SET and SGX-ST regulations.

In any case, the assignment of the duties and responsibilities of the Board of Directors of STA shall

not constitute an authorization or sub-authorization which may cause the Board of Directors of STA

or its assignee to be able to approve any transaction in which such person or other related party (as

defined in the Notification of the SEC or the notification of the Capital Market Supervisory Board)

may have a conflict of interest or may benefit in any manner, or any other conflict of interest with


Part 1 Page 66

STA or its subsidiaries, except when the approvals of such transactions are consistent with the policy

and criteria approved by the shareholders meeting or the Board of Directors meeting of STA.

Composition and Appointment of the Board of Directors of STA

The following is a summary of the composition, appointment, removal or retirement from the Board

of Directors of STA set forth in the Articles of Association of STA:

1. The number of members of the Board of Directors of STA shall be determined by a

shareholders meeting but shall be not less than five persons and not less than one-half of the

total number of Directors must reside in the Kingdom of Thailand.

2. Directors shall be elected at a shareholders meeting in accordance with the following criteria

and procedures:

(1) Each shareholder shall have one vote for one share.

(2) A shareholder must use all of his/her votes in (1) to elect one or several persons as

Director or Directors, however, he or she may not split his/her votes unequally

between any person in any number.

(3) The persons who receive the most votes shall be elected as Directors, in the number

of Directors required or to be elected on the relevant occasion. In the event that votes

of two or more nominees are equal in number, causing the number of Directors

required or to be elected on such relevant occasion to be exceeded, the chairman of

the meeting shall have a casting vote.

3. At every annual general meeting, one-third of the Directors, or, if the number of Directors is

not a multiple of three, then the number nearest to one-third, shall retire from office.

The Directors who are to retire from office in the first and the second years after registration

of the Company shall be drawn by lots. In subsequent years, the Directors who have been

holding office for the longest time shall retire.

4. Any Director wishing to resign from office shall submit his or her resignation letter to STA.

The resignation shall be effective from the date on which STA receives the resignation letter.

5. The shareholders meeting may pass a resolution to remove any Director from office prior to

rotation, by a vote of not less than three-fourths of the number of the shareholders attending

the meeting and having the right to vote, and whose shares represent a total of not less than

one half of the number of shares held by the shareholders attending the meeting and having

the right to vote.

The Board currently comprises eleven Directors, four of whom are Independent Directors. The

Company has six Executive Directors and five Non-executive Directors.

The composition of the Board takes into consideration the nature and scope of the Group’s operations

to allow constructive discussion, a diversity and balance of judgment for effective decision making.

The Directors have invaluable experience in accounting, finance, business management, strategic

planning, marketing, law and the rubber industry.

Selection of Independent Director

Qualifications of Independent Director

1. Holding shares not exceeding one percent of the total number of shares with voting rights of

STA, its parent company, subsidiary company, associate company, major shareholder or

controlling person of STA, including shares held by related persons of such independent

director.

2. Not having any relationship with (a) STA; (b) STA's holding company, subsidiary or fellow

subsidiary; (c) any person who has an interest or interests in one or more voting shares in STA

and the total votes attached to that share, or those shares, is not less than ten percent of the


Part 1 Page 67

total votes attached to all the voting shares in STA ("10% Shareholder"); and/or (d) STA's

officers, that could interfere or be reasonably perceived to interfere with the exercise of the

Director's independent business judgment with a view to the best interests of STA.

3. Neither being nor having an immediate family member who is or was, in the current or

immediate past financial year, a 10% shareholder of, or a partner in (with 10% or more stake),

or an executive officer of, or a director of, any organisation to which STA or any of its

subsidiaries made, or from which STA or any of its subsidiaries received, significant

payments or material services (which may include auditing, banking, consulting and legal

services), in the current or immediate past financial year.

4. Not being nor having been directly associated with a ten percent shareholder of STA in the

current or immediate past financial year.

5. Neither being nor having been an executive director, employee, staff, advisor who receives

salary, or a controlling person of STA, its parent company, subsidiary company, associate

company, same-level subsidiary company, major shareholder or controlling person of STA,

unless the foregoing status ended not less than three financial years prior to the appointment

as an independent director. Such prohibited characteristic shall not include the case where the

independent director used to be a government official or advisor of a government unit which

is a major shareholder or controlling person of STA.

6. Not being a person related by blood or legal registration as father, mother, spouse, sibling, and

child, including spouse of child, of a director, executive, major shareholder, controlling

person, or person to be nominated as director, executive or controlling person of STA or its

subsidiary company.

7. Not have an immediate family member including spouse, child, adopted child, stepchild,

brother, sister and parent, who is, or has been in any of the past three financial years,

employed by the Company or any of its related companies and whose remuneration is

determined by the remuneration committee.

8. Not being a director or having an immediate family member including spouse, child, adopted

child, stepchild, brother, sister, and parent, accepting any compensation from STA or any of

its related corporations for the provision of services, other than compensation for board

service, for the current or immediate past financial year.

9. Neither having nor having had a business relationship with STA, its parent company,

subsidiary company, associate company, major shareholder or controlling person, in the

manner which may interfere with his independent judgement, and neither being nor having

been a significant shareholder or controlling person of any person having a business

relationship with STA, its parent company, subsidiary company, associate company, major

shareholder or controlling person, unless the foregoing relationship ended not less than two

years prior to the appointment as an independent director .

10. Neither being nor having been an auditor of STA, its parent company, subsidiary company,

associate company, major shareholder or controlling person of STA, and not being a

significant shareholder, controlling person, or partner of an audit firm which employs auditors

of STA, its parent company, subsidiary company, associate company, major shareholder or

controlling person of STA, unless the foregoing relationship ended not less than two years

prior to the appointment as an independent director .

11. Neither being nor having been a provider of any professional services including those as legal

advisor or financial advisor who receives service fees exceeding two million baht per year

from STA, its parent company, subsidiary company, associate company, major shareholder or

controlling person of STA, and not being a significant shareholder, controlling person or

partner of the provider of professional services, unless the foregoing relationship ended not

less than two years prior to the appointment as an independent director .


Part 1 Page 68

12. Not being a director appointed as representative of directors of STA, major shareholder or

shareholder who is related to a major shareholder, or a director who is or has been directly

associated with a 10% Shareholder, in the current or immediate past financial year. A director

will be considered "directly associated" with a 10% Shareholder when the director is

accustomed or under obligation, whether formal or informal, to act in accordance with the

directions, instructions or wishes of the 10% Shareholder in relation to the corporate affairs of

STA.

13. Not undertaking any business in the same nature and in competition to the business of STA or

its subsidiary company or not being a significant partner in a partnership or being an

executive director, employee, staff, advisor who receives salary or holds shares exceeding one

percent of the total number of shares with voting rights of other company which undertakes

business in the same nature and in competition to the business of STA or its subsidiary

company.

14. Not having any other characteristics which would cause the inability to express independent

opinions with regard to STA’s business operations.

The qualifications of the Independent Director of STA are more stringent than the definitions as

specified in the notification of the Capital Market Supervisory Board.

The Nominating Committee is also guided by the Code of Corporate Governance 2012 in determining

independence.

The Board of Directors is of the opinion that both Mr. Prakob Visitkitjakarn and Mr. Kriang

Yanyongdilok, who have served as Independent Directors for STA beyond nine years, should

continue to serve as Independent Directors of STA as they have the qualifications required by the

Capital Market Supervisory Board and Code of Corporate Governance 2012 and do not have any

characteristics which would cause them to be unable to express their independent opinions with

regard to STA’s business operations. During their respective terms of appointment, both Mr. Prakob

Visitkitjakarn and Mr. Kriang Yanyongdilok have performed their duty as Audit Committee and

Remuneration Directors for the benefit and the good governance of the Company.

8.2.2 Executive Committee

As of 31 December 2012, the Executive Committee consisted of 6 Directors as shown below.

Name Position

1. Mr. Viyavood Sincharoenkul Chairman of Executive Director

2. Mr. Prasit Panidkul Executive Director

3. Mr. Chaiyos Sincharoenkul Executive Director

4. Mr. Anan Pruksanusak Executive Director

5. Mr. Kitichai Sincharoenkul Executive Director

6. Mr. Paul Sumade Lee Executive Director

Scope of Duties and Responsibilities of the Executive Committee

1. To order, plan, and operate the business of STA to be in accordance with the policies set out

by the Board of Directors of STA.

2. To appoint STA’s management to efficiently and transparently manage STA’s businesses.

3. Any two of the Executive Committee members jointly signing and affixing the company

seal are eligible to grant proxies to any person to perform on behalf of STA in respect of

any business that will benefit STA.

4. To determine the appropriate employees’ benefits and welfare in compliance with corporate

culture and applicable laws.


Part 1 Page 69

5. To approve the credit limits of the normal business transactions or other transactions that

bind STA.

In any case, the assignment of duties and responsibilities of the Executive Committee shall not

constitute an authorization or sub-authorization which may cause the Executive Committee or its

assignee to be able to approve any transaction in which such person or other related party (as defined

in the Notification of the SEC or the Capital Market Supervisory Board) may have a conflict of

interest or may benefit in any manner or any other conflict of interest with STA or its subsidiaries.

Such approval must be proposed at a meeting of the Board of Directors and/or the meeting of

shareholders, as the case may be, for approval, as stipulated in the Articles of Association of STA or

subsidiaries, or any applicable laws.

8.2.3 Audit Committee

Audit Committee

The Audit Committee consists of 3 independent directors and all have the qualifications required by

the Capital Market Supervisory Board and the SET. As of 31 December 2012, the Audit Committee

consists of the following directors:

Name Position

1. Mr. Prakob Visitkitjakarn Chairman of the Audit Committee

2. Mr. Kriang Yanyongdilok Audit Committee Member

3. Mr. Samacha Potavorn Audit Committee Member

Mr. Prakob Visitkitjakarn and Mr. Kriang Yanyongdilok are the Audit Committee members who have

sufficient knowledge and experience to review the reliability of financial statements of STA.

Mr. Wittawas Grungtanmuang is a secretary to the Audit Committee.

Scope of Duties and Responsibilities of the Audit Committee

1. To assist the Board of Directors in the discharge of its responsibilities on financial and

accounting matters (including reviewing STA’s financial reporting process and our

Company’s consolidated financial statements to ensure accuracy and adequacy).

2. To review our Company’s internal control system and internal audit system to ensure that

they are suitable and efficient, to determine an internal audit unit’s independence, as well as

to approve the appointment, transfer and dismissal of the chief of an internal audit unit or any

other unit in charge of an internal audit.

3. To review our Company’s compliance with the law on securities and exchange, the

regulations of the SET, the rules of SGX-ST, and the laws relating to business of STA.

4. To consider, select and nominate an independent person to be STA’s auditor, and to propose

such person’s remuneration, as well as to attend a non-management meeting with an auditor

at least once a year.

5. To review the connected transactions, interested person transactions or the transactions that

may lead to conflicts of interest, to ensure that they are in compliance with the laws and the

regulations of the SGX-ST and the SET, and are reasonable and in the best interests of STA.

6. To prepare, and to disclose in our Company’s annual report, an Audit Committee’s report

which must be signed by the Chairman of the Audit Committee and consist of at least the

following information:

(1) an opinion on the accuracy, completeness and credibility of the company’s financial

report;

(2) an opinion on the adequacy of the company’s internal control system;


Part 1 Page 70

(3) an opinion on the compliance with the law on securities and exchange, the regulations

of the SET, the rules of SGX-ST, or the laws relating to the STA’s business;

(4) an opinion on the suitability of the auditor of STA;

(5) an opinion on the transactions that may lead to conflicts of interests;

(6) the number of the Audit Committee meetings, and the attendance at such meetings by

each committee member;

(7) an opinion or overview of comments received by the Audit Committee from its

performance of duties in accordance with the charter; and

(8) other transactions which, according to the Audit Committee’s opinion, should be

known to the shareholders and general investors, within the scope of duties and

responsibilities assigned by the company’s board of directors.

7. To commission and review the findings of significant internal investigations and/or consult

with the auditor in relation to such findings and report the findings to the Board of Directors

of STA in the event that there is any suspected fraud or irregularity or infringement of any

law or regulations of Thailand and Singapore, the rules of the SET and SGX-ST, or other

relevant regulations which has or is likely to have a material impact on the results of

operations and/or financial position of STA.

8. To review the audit plans, scope of work and results of our audits compiled by our internal

and external auditors.

9. To review the co-operation given by our officers to the external auditors.

10. To review our risk management structure (including all hedging policies) and any oversight of

our risk management processes and activities to mitigate and manage risk at acceptable levels

determined by our Directors.

11. To perform any other act as delegated by the Board of Directors and approved by the Audit

Committee.

Apart from the duties listed above, the Audit Committee is required to commission and review the

findings of internal investigations into matters where there is any suspected fraud or irregularity, or

failure of internal controls or infringement of any law, rule or regulation which has or is likely to have

a material impact on the results of operations and/or financial position of STA.

8.2.4 Nominating Committee

As of 31 December 2012, the Nominating Committee of STA consists of 3 Directors as follows:

Name Position

1. Mr. Kriang Yanyongdilok Chairman of the Nominating Committee

2. Mr. Samacha Potavorn Nominating Committee Member

3. Mr. Kitichai Sincharoenkul Nominating Committee Member

Scope of Duties and Responsibilities of the Nominating Committee

1. Reviewing and assessing candidates for directorships (including executive directorships)

before making recommendations to the Board of Directors of STA for the appointment of

Directors.

2. Reviewing and recommending nominations for appointment, re-appointment or re-election or

renewal of appointment of the Directors having regard to the Director’s contribution and

performance.

3. Determining annually whether or not a Director is independent.


Part 1 Page 71

4. Deciding whether or not a Director is able to and has been adequately carrying out his duties

as a director.

Certain factors considered by the Nominating Committee in order to carry out their responsibilities

above include:

independence of mind;

capability of the individual and how it meets the needs of the Company and simultaneously

complements the skill set of the other Board members;

experience and track record as directors in other companies; and

ability to commit time and effort toward discharging his responsibilities as a Director.

Nomination of Directors

The Nominating Committee will nominate candidates who have appropriate qualifications to be a

Director of STA. At the end of the office term of any Director or when it is necessary to appoint more

Directors, the Nominating Committee will jointly discuss and consider determining the person(s) with

appropriate experience, knowledge and ability to benefit STA to be a Director of STA. The

nomination of the aforementioned person(s) will be proposed to the meeting of the Board of Directors

of STA and the meeting of shareholders, respectively, for further approval.

The resolution of the meeting of shareholders for the appointment of directors will be the majority of

votes of the shareholders attending the meeting and having the right to vote.

8.2.5 Remuneration Committee

As of 31 December 2012, the Remuneration Committee consists of 3 Directors as follows:

Name Position

1. Mr. Prakob Visitkitjakarn Chairman of the Remuneration Committee

2. Mr. Kriang Yanyongdilok Remuneration Committee Member

3. Mr. Samacha Potavorn Remuneration Committee Member

Scope of Duties and Responsibilities of the Remuneration Committee

Our Remuneration Committee is responsible, among other things, for recommending to the Board of

Directors a framework and criteria of remuneration for the Directors and executive officers, and for

recommending specific remuneration packages for each Director and the Managing Director and to

perform any other acts as delegated by the Board of Directors.

8.2.6 Details of Attendance for the Meetings of the Board of Directors and Board Committees

Details of the meeting attendance for the meetings of the Board of Directors, Executive Committee

and Audit Committee in 2011 and 2012 are as follows:

Name

No. of Attendances No. of Attendances No. of Attendances No. of Attendances No. of Attendances

Board of Directors of STA Executive Committee Audit Committee Nominating Committee Remuneration Committee

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

1. Mr. Viyavood

Sincharoenkul 7/7 6/6 8/8 8/8 - - - - - -

2. Mr. Prasit Panidkul 7/7 6/6 8/8 8/8 - - - - - - 3. Mr. Chaiyos

Sincharoenkul 7/7 6/6 8/8 8/8 - - - - - -

4. Mr. Anan Pruksanusak 6/7 6/6 8/8 8/8 - - - - - - 5. Mr. Kitichai

Sincharoenkul 7/7 6/6 8/8 8/8 - - 1/1 1/1 - -

6. Mr. Paul Sumade Lee 7/7 5/6 8/8 8/8 - - - - - - 7. Mr. Veerasith

Sinchareonkul 7/7 5/6 - - - - - - - -

8. Mr. Prakob

Visitkitjakarn 7/7 6/6 - - 7/7 12/12 - - 1/1 1/1


Part 1 Page 72

Name

No. of Attendances No. of Attendances No. of Attendances No. of Attendances No. of Attendances

Board of Directors of STA Executive Committee Audit Committee Nominating Committee Remuneration Committee

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

9. Mr. Kriang

Yanyongdilok 7/7 5/6 - - 7/7 11/12 1/1 1/1 1/1 1/1

10. Mr. Samacha Potavorn 7/7 6/6 - - 7/7 12/12 1/1 1/1 1/1 1/1

11. Mr. Neo Ah Chap 6/7 5/6 - - - - - - - -

8.2.7 Executives (pursuant to the definition of “Executive” in the SEC’s notification no.

GorJor. 17/2551 re: Determination of Definitions under Notifications relating to

Issuance and Offering of Securities)

As of 31 December 2012, the list of Executives of STA is as follows:

Name Position

1. Mr. Viyavood Sincharoenkul Chairman and Managing Director

2. Mr. Prasit Panidkul Vice Chairman

3. Mr. Chaiyos Sincharoenkul Director

4. Mr. Anan Pruksanusak Director

5. Mr. Kitichai Sincharoenkul Director and Manager of Legal and Administration

6. Mr. Paul Sumade Lee Director and Manager of Sales and Marketing

7. Mr. Veerasith Sinchareonkul Director

8. Mr. Prakob Visitkitjakarn Independent Director and Chairman of the Audit

Committee

9. Mr. Kriang Yanyongdilok Independent Director and Member of the Audit

Committee

10. Mr. Samacha Potavorn Independent Director and Member of the Audit

Committee

11. Mr. Neo Ah Chap Independent Director

12. Mrs. Prapai Srisuttiphong Group Procurement Manager

13. Mr. Chalermpop Khanjan Co-Group Production Manager

14. Mr. Arsom Aksornnam Co-Group Production Manager

15. Mr. Chaidet Pruksanusak Group Quality Assurance Manager

16. Mr. Rattapong Laparojkit Co-Group Engineering Manager

17. Mr. Phanlert Wangsuphadilok Co-Group Engineering Manager

18. Mr. Udom Pruksanusak Co-Group Human Resource Manager

19. Ms. Nuchanart Chaiyarat Co-Group Human Resource Manager

20. Ms. Lim Li Ping Controller

21. Mr. Patrawut Panitkul Chief Financial Officer

Note: “Executive” means a director, manager or the next four executives succeeding the manager, a person

holding an equivalent position to the fourth executive, including a person holding the position of

manager or equivalent in the accounting or finance departments


Part 1 Page 73

Scope of Authorities and Responsibilities of the Managing Director

1. Approve any juristic act binding the company for the normal business operation of STA in an

amount not exceeding Baht 200,000,000.

2. Issue and amend the rules, orders, and work rules of STA, for example, the acceptance,

appointment, removal and disciplining of staff and employees, and the determination of salary

and other monies, including compensation and other welfare.

3. Determine the salary rate and other remuneration, including expenses rate and facilities of the

manager or equivalent for proposing to the Executive Committee for further approval.

4. Administer STA pursuant to the resolutions and policies of the Board of Directors of STA.

5. Propose significant matters to the Board of Directors of STA or the meeting of shareholders

for further approval or other appropriate action.

6. Study the feasibility of new projects and consider and approve the projects as delegated by the

Board of Directors of STA and the Executive Committee.

7. Perform other matters as delegated by the Board of Directors of STA and/or the Executive

Committee from time to time.

However, the abovementioned approvals shall not be given in a way that may cause the Managing

Director or his authorized representative to be able to approve any transaction in which he himself or

any related person has or may have a conflict of interest with STA or its subsidiaries as defined in the

Notification of the SEC or the Capital Market Supervisory Board.

8.2.8 Company Secretary

The Board of Directors of STA resolved to approve the appointment of Mrs. Pacharin

Anuwongwattanachai as the Company Secretary (the “Company Secretary”) having the duties and

responsibilities as provided in the Securities and Exchange Act, including providing advice on and

ensuring compliance with relevant laws and regulations which the Board is required to know and

follow. The Company Secretary attends and documents all Board meetings and ensures Board

procedures are followed. The appointment and removal of the Company Secretary is subject to the

approval of the Board.in the Securities and Exchange Act.

8.3 Remuneration of Directors and Executive Officers

8.3.1 Financial Remuneration

(1) Directors’ Fees

For the fiscal year ended 31 December 2012, STA paid the directors’ fees to the Directors in the

amount of Baht 5,472,000 for services rendered by them in forms of monetary remuneration. The

details are as follows:

Name Amount of Directors’ Fees (Baht)

Fiscal year ended 31 December 2012

1. Mr. Viyavood Sincharoenkul 576,000

2. Mr. Prasit Panidkul 432,000

3. Mr. Chaiyos Sincharoenkul 432,000

4. Mr. Anan Pruksanusak 432,000

5. Mr. Kitichai Sincharoenkul 432,000


Part 1 Page 74

Name Amount of Directors’ Fees (Baht)

Fiscal year ended 31 December 2012

6. Mr. Paul Sumade Lee 432,000

7. Mr. Veerasith Sinchareonkul 432,000

8. Mr. Prakob Visitkitjakarn 720,000

9. Mr. Kriang Yanyongdilok 576,000

10. Mr. Samacha Potavorn 576,000

11. Mr. Neo Ah Chap 432,000

(2) Remuneration of the Directors and Executive Officers

For the fiscal year ended 31 December 2012, STA paid remuneration to the Executive Directors and

Executive Officers, totaling 19 persons, in the amount of Baht 103,920,840 of which Baht 16,562,215

was paid to the top five key management personnel who are not directors or the CEO. Such

remuneration was in the form of salary, bonus and other compensation.

Fees and compensation paid by our Company to each of our Directors and each of the top five

Executive Officers of STA (for services rendered by them in all capacities to STA and our

subsidiaries), in remuneration bands(1) for year ended 31 December 2012, are as follows:

Name

Amount of

Remuneration

Paid by STA

Director’s

Fees (%) Salary (%)

Performance

based

bonuses (%)

Total

(%)

1. Mr. Viyavood

Sincharoenkul Band F 1.84 66.95 31.21 100

2. Mr. Prasit Panidkul Band B 4.23 53.52 42.25 100

3. Mr. Chaiyos

Sincharoenkul Band B 5.16 52.69 42.15 100

4. Mr. Anan

Pruksanusak Band A 25.29 50.37 24.34 100

5. Mr. Kitichai

Sincharoenkul Band B 3.60 55.69 40.71 100

6. Mr. Paul Sumade Lee Band B 4.02 78.90 17.08 100

7. Mr. Veerasith

Sinchareonkul Band A 100 - - 100

8. Mr. Prakob

Visitkitjakarn Band A 100 - - 100

9. Mr. Kriang

Yanyongdilok Band A 100 - - 100

10. Mr. Samacha

Potavorn Band A 100 - - 100

11. Mr. Neo Ah Chap Band A 100 - - 100

Top five Executive

Officers

1. Mrs. Prapai

Srisuttiphong Band A - 48.83 51.17 100

2. Ms. Lim Li Ping Band A - 79.90 20.10 100

3. Mr. Rattapong Band A - 61.77 38.23 100


Part 1 Page 75

Name

Amount of

Remuneration

Paid by STA

Director’s

Fees (%) Salary (%)

Performance

based

bonuses (%)

Total

(%)

Laparojkit

4. Mr. Chalermpop

Khanjan Band A - 67.16 32.84 100

5. Mr. Chaidet

Pruksanusak Band A - 75.19 24.81 100

Notes:

(1) Remuneration bands:

Band A means between SGD 1 and SGD 250,000.

Band B means between SGD 250,001 and SGD 500,000.

Band C means between SGD 500,001 and SGD 750,000.

Band D means between SGD 750,001 and SGD 1,000,000.

Band E means between SGD 1,000,001 and SGD 1,250,000.

Band F means between SGD 1,250,001 and SGD 1,500,000.

Remuneration bands are based on the average (Baht: SGD) foreign exchange rates for the stipulated

year, being SGD 1 to Baht 24.8812.

Compensation includes benefit-in-kinds and compensation that has already been paid includes any

deferred compensation accrued for the financial year in question and payable at a later date. The

estimated amount of compensation payable in the current financial year includes bonus or profit-

sharing plan or any other profit-linked agreement or arrangement.

Sri Trang International Pte. Ltd. have entered into employment agreements with each of our Directors,

Dr. Viyavood Sincharoenkul and Mr. Paul Sumade Lee. Each of these employment agreements does

not have a fixed term of employment.

Pursuant to their respective employment agreements, each of Dr. Viyavood Sincharoenkul and

Mr. Paul Sumade Lee will be entitled to the following:

a monthly salary and a variable bonus, as determined by the Profit Incentive Scheme (as

defined below); and

coverage of all reasonable business expenses incurred or paid for during the term of

employment, in connection with the discharge of their duties to Group.

Profit Incentive Scheme

Each of our Directors, Dr. Viyavood Sincharoenkul and Mr. Paul Sumade Lee are entitled to

participate in a profit incentive scheme (the "Profit Incentive Scheme") in respect of each financial

year of our subsidiary, Sri Trang International.

Under the Profit Incentive Scheme, in respect of each financial year, if the board of directors of Sri

Trang International determines that there is a surplus ("Surplus") after deducting (i) 10% of Sri Trang

International’s issued and paid-up capital, or such other amount as may be determined by the board of

directors of Sri Trang International, at their sole discretion, from time to time, (ii) 5% of any retained

profits as at the beginning of the relevant financial year and (iii) accumulated losses as at the

beginning of the relevant financial year, from Sri Trang International’s profit after tax (as reflected in

its audited accounts), 20% of such Surplus will be payable under the Profit Incentive Scheme ("Profit

Incentive").


Part 1 Page 76

The Company has retirement benefits scheme for all directors and employees for their retirement or post-

employment.

8.3.2 Other Remunerations

None

8.4 Retirement and Re-election of Directors

A retiring Director shall be eligible for re-election. The Directors to retire in every year shall be those,

subject to retirement by rotation, who have been longest in office since their last re-election or

appointment. The details of the retirement and re-election of the Directors are set out as follows:

Name of Director Position Date of first

appointment to

the Board

Date of last

re-election as

Director

1. Dr. Viyavood

Sincharoenkul

Chairman and Managing

Director

27 December 1993 27 April 2012

2. Mr. Prasit Panidkul Vice-chairman 27 December 1993 28 April 2011

3. Mr. Chaiyos

Sincharoenkul

Director 27 December 1993 28 April 2011

4. Mr. Anan

Pruksanusak

Director 5 November 1993 28 April 2011

5. Mr. Kitichai

Sincharoenkul

Director and Manager of

Legal and Administration

10 April 1995 27 April 2012

6. Mr. Paul Sumade Lee Director and Manager of

Sales and Marketing

28 June 2010 -

7. Mr. Veerasith

Sinchareonkul

Director 28 April 2010 -

8. Mr. Prakob

Visitkitjakarn

Independent Director and

Chairman of the Audit

Committee

27 December 1993 27 April 2012

9. Mr. Kriang

Yanyongdilok


Member of the Audit

Committee

25 January 2000 28 April 2011

10. Mr. Samacha

Potavorn


Member of the Audit

Committee

1 February 2008 27 April 2012

11. Mr. Neo Ah Chap Independent Director 28 June 2010 -

8.5 Employees

8.5.1 Number of Employees and Significant Changes to the Number of Employees

As of 31 December 2010, 31 December 2011 and 31 December 2012, the Company had 5,414

employees, 6,214 employees, and 6,205 employees, respectively, which can be divided into the

following activities:


Part 1 Page 77

Activity

As of 31 December

0210 0211 0210

Procurement 553 685 639

Production 3,516 3,975 4,044

Quality assurance 545 541 514

Finance and accounting 149 164 177

Engineering 362 424 406

Sales and marketing 53 56 66

Human resource 224 356 335

Company secretarial, legal and

administrative

12 13 24

Total 5,414 6,214 6,205

The breakdown of our employees by geographical location as of 31 December 2010, 31 December

2011 and 31 December 2012 is as follows:

Geographical location

As of 31 December

0210 0211 0210

Thailand 4,502 5,225 5,237

Indonesia 866 940 916

Singapore 21 24 22

USA 13 13 13

PRC 12 12 17

Total 5,414 6,214 6,205

The increase in number of our employees in 2011 compared to 2010 was in line with the increase in

number of processing plants to support business expansion of our Group.

Our employees are not unionised in Thailand. Certain of our employees in Indonesia have established

labour unions that have been registered with the Indonesia Manpower Authority and have entered into

collective labour agreements with our subsidiaries.

8.5.2 Major labour disputes during the last three years

The cooperative agreement among Thailand, Indonesia, and Malaysia in August 2012 for the export

quota of 300,000 tons within 6 months (October 2012 – March 2013) has adversely affected the

utilisation rate of PT Sri Trang Lingga, our subsidiary in Indonesia. This led to the decrease in

working hour and income of daily staffs. Although PT Sri Trang Lingga has a minimum wage


Part 1 Page 78

guarantee policy, there was a strike of some staffs who concerned about their long-term income in

October 2012. Representative from various parties also participated the negotiation between PT Sri

Trang Lingga and the representative of staffs. The proposal to terminate and pay compensation

required by the laws to those staffs was acceptable to all parties. Afterwards, PT Sri Trang Lingga has

set up employee relations to resolve the grievance, coordinate with employee union, and support the

staffs in order to avoid the recurrence of such problem.

Apart from the above incident, the Company has not experienced any material labour disputes or

related work stoppages in the three most recent completed financial years. We believe that our

relationship with our employees is good.

8.6 Personnel Remuneration

8.6.1 Total remuneration of employees

STA

The employees of STA receive the remunerations in forms of salary, overtime payment, bonus, and

other welfares such as life and health insurance. For the fiscal year end as of 31 December 2012, the

Company had expenses for salary and bonus and others employee benefit in an amount of

Baht 514.69 million.

8.6.2 Employee Development Policy

Staff Training and Development

The rubber processing industry is a labour and capital-intensive industry. Accordingly, we place

emphasis on staff training to improve and upgrade our employees’ technical knowledge and skills in

their respective fields. We believe that focusing on the training of our employees not only helps us to

increase the efficiency of our operations and optimise our production capabilities but also build

cohesion within our Group’s workforce.

Our staff training programmes are formulated by our human resource department and are designed

according to our employees’ job requirements and responsibilities. Our staff training programmes are

divided into four main categories — administration, manufacturing, service and engineering. This

ensures that our employees receive the appropriate training for them to carry out their assigned roles

within our Group.

We also send our employees for training and exchanges in local, Asian countries, and EU countries

for skills development.

8.7 Corporate Governance

The Board of Directors of STA has conducted the business operation appropriately and effectively in

accordance with its objectives by utilizing expertise, diligence, and due care to protect the interests of

the Company and to comply with the laws, objectives, and the Articles of Association of STA. The

Board of Directors of STA has also followed the Principles of Good Corporate Governance for

Directors of Listed Companies and the Principles of Good Corporate Governance for Listed

Companies of 2006 as well as the Code of Corporate Governance 2012. The roles and responsibilities

of the Board of Directors of STA are all managed with due care, in particular in the process of

decision making. Careful consideration is given using reasonable judgment based on honesty,

transparency, ethics, and the concern of stakeholders as well as all aspects of the best interests of

shareholders.


Part 1 Page 79

8.7.1 Principles of Good Corporate Governance under the Principles of Good Corporate

Governance for Listed Companies of 2006

STA has established principles for good corporate governance in accordance with the Principle of

Good Corporate Governance for Listed Companies of 2006 as prescribed by the SET. The details of 5

principles of good corporate governance areas are as follows:

1. Rights of Shareholders

STA always realizes that the main factors for building shareholders’ trust and confidence for investing

in the businesses of STA are the application of policies and operations that protect the fundamental

rights of the shareholders as well as the equality of all shareholders as prescribed by the laws, and

encouraging the shareholders to exercise their fundamental rights. For example:

(1) Right to Receive Profit Sharing in the Form of Dividend: STA has a policy on dividend

payment which is based on careful consideration of the financial position, results of operation

and cash flow of STA, the ability of our subsidiaries, associates and joint venture entity to

make dividend payment, STA’s expected working capital requirements to support the future

growth of STA, the economic situation, and other external factors that STA expects will have

an impact on its operations. In order to manage the business operation efficiently, the

dividend payment policy is at approximately 30 percent of the net profit.

(2) Right to Attend the Shareholders’ meeting: STA pays great attention to the sufficiency of

information so that the shareholders are able to make a well-informed decision at the

shareholders’ meeting, including casting their votes and expressing their opinions on

significant changes and the election of the Board of Directors of STA, based on information

which is accurate, complete, transparent, and equally shared.

Where the STA's shares are held through CDP, CDP will be the only holder on record of such

shares. Accordingly, as a matter of Thai law, CDP will be the only person or entity recognised

as a shareholder and legally entitled to vote on any matter to be submitted to the vote of the

Company's shareholders at a general meeting of shareholders.

CDP has appointed a Thai custodian to safekeep all the shares held by CDP. Such Thai

custodian will act as CDP’s proxy during a general meeting of shareholders and CDP will

instruct such Thai custodian to split its votes in accordance with the instructions that CDP

receives from investors holding shares through CDP. However, shareholders who desire to

attend shareholders’ meetings and exercise their voting rights under their names with regard

to the shares beneficially owned by them will be required to transfer their shares out of the

CDP system and have the share transfer registered in the share register book. In addition, a

shareholder who transfers the Company's shares out of the CDP system will not be able to

trade such shares on the SGX-ST unless he first transfers such shares back into the CDP

system.

In order to provide the equivalent of the annual general meeting to shareholders in Singapore

holding shares through the CDP, STA will hold an annual investor forum in Singapore soon

after the annual general meeting is held in Thailand, to enable as even a level of access to

information as possible at the time of such forum. Shareholders in Singapore holding shares

through the CDP will be given the opportunity to air their views and ask Directors any

questions they may have. The representation of the Board at the forum will include at the

minimum, the Managing Director, two other Executive Directors and two Independent

Directors, one of whom will be the Lead Independent Director.

(3) Right to Vote on Agenda Items in the Shareholders’ meeting: The completed invitation to

shareholders’ meeting and attachments will be forwarded to shareholders in advance. The


Part 1 Page 80

invitation to shareholders’ meeting includes details on agenda items, attachments to agenda

items, opinions of the Board of Directors of STA, proxy forms as prescribed by the Ministry

of Commerce, a name list of all independent directors to whom the shareholders are able to

give their proxy, and a map of the meeting venue. The invitation to the shareholders’ meeting

also includes the information regarding the required documents that shareholders have to

present to the meeting in order to protect their right to attend the meeting, the Articles of

Association of STA pertaining to the shareholders’ meeting, and voting instructions.

Furthermore, so that the investors can obtain information thoroughly, the shareholders can

access all information with respect to the agenda of the shareholders’ meeting at

www.sritranggroup.com and the website of the SGX-ST at www.sgx.com ("SGXNET").

(4) Equal Right to Express Opinions and Make Inquiries in the Shareholders’ meeting:

With respect to agenda items and proposed agenda items, the Chairman of the shareholders’

meeting should allocate sufficient time and encourage the shareholders to express their

opinions and make inquiries in the meeting. STA's Lead Independent Director, Mr Prakob

Visitkitjakarn, also the Chairman of the Audit Committee and Remuneration Committee, will

be present at the annual general meeting to address questions that shareholders’ may have.

External auditors will also be present to address queries in relation to the audit of the Group

and the auditors’ report.

2. Fair Treatment of Shareholders

(1) The shareholders’ meeting shall be held in accordance with the agenda mentioned in the

invitation to shareholders’ meeting. The policy is that no additional agenda item is included in

the meeting without prior notice to the shareholders. STA sends a complete invitation to

shareholders’ meeting, including attachments, with all sufficient information relevant to the

meeting to the shareholders. Moreover, STA posts all information which is relevant to the

meeting at its website (www.sritranggroup.com) and on SGXNET so that the shareholders

will have sufficient time to carefully study this information. In addition, the invitation to

shareholders’ meeting shall be advertised no less than three days prior to the shareholders’

meeting in a daily newspaper for at least three consecutive days in order to allow shareholders

to have sufficient time to prepare for attending the shareholders’ meeting. Chairman of the

Board, the respective Chairman of the Audit, Remuneration, and Nominating Committees,

and each director usually are present and are available to address shareholders' queries at

these meetings. The external auditors are also present to address shareholders' queries about

the conduct of audit and the preparation and content of the auditor's report. Before the

commencement of each meeting, the Chairman will give instructions on the voting and the

counting methods as clearly prescribed. During the meeting, the Chairman allows the

shareholders, equally, to make inquiries and express their opinions as well as to make

recommendations. The Chairman also answers questions and provides complete information

as requested by the shareholders. After the meeting, STA will send the minutes of the

shareholders’ meeting to the SET and the SGX-ST within the prescribed period.

(2) STA has encouraged the shareholders to use ballots for voting on each agenda item. The

ballots shall be kept in the meeting room for vote counting prior to the announcement of the

resolutions. For the purpose of transparency, STA makes an announcement of the detailed

results showing the number of votes cast for and against each resolution and the respective

percentages and keeps all ballots having signatures of the shareholders or their proxy for

future reference.

(3) Minutes of the shareholders’ meeting must be accurately and completely recorded and

submitted to the SET within 14 days after the shareholders’ meeting. The resolutions of the

shareholders’ meeting will be posted on the website of STA at www.sritranggroup.com and

on SGXNET.


http://www.sgx.com/




Part 1 Page 81

(4) The policy regarding the monitoring of the use of insider information has been established for

strict compliance by personnel at all levels.

(5) A full and clear disclosure of shareholding structure in the subsidiaries and associates is made

to assure shareholders that the operational structure of STA is transparent and accountable.

(6) STA places importance on the accurate, full, timely, and transparent disclosure of information

on various issues to shareholders. As such, significant information is disclosed on a regular

basis.

(7) STA has established a channel of communication for minority shareholders to directly access

information on various issues e.g. the activities of the Board of Directors, supervision and

monitoring of the operation, and auditing through the email address of the independent

directors. Furthermore, minority shareholders may directly seek information from the

Company Secretary of STA or the Investor Relations Office.

3. Role of Stakeholders

STA fully realizes that the growth and development of STA has resulted from the full support given

by all interested parties. STA places importance on the rights of all stakeholders, both internal

stakeholders such as personnel, staff members, and the executives of STA and the subsidiaries and

external stakeholders such as commercial partners ranging from the suppliers of raw materials to

various groups of customers of finished products, financial institutions, government agencies that

provide close co-operation, and finally, the shareholders of STA. In this regard, STA realizes its

responsibilities towards the above-mentioned stakeholders. The details of such responsibilities are as

follows:

Shareholders:

STA is committed to be the representative of its shareholders in conducting its business operation in a

transparent manner, and having a reliable accounting and finance system that brings the highest

satisfaction to shareholders by continuous considering the long-term, sustainable growth of STA and

an adequate return.

Employees:

STA treats its employees equally and fairly by providing a good and safe working environment and

adequate remuneration. Moreover, STA supports its employees in terms of providing the opportunity

to develop knowledge, skills and experiences for career improvement. STA has established a Health

and Working Environment Committee. A training program is specially designed for relevant

personnel responsible for overseeing, providing advice, and giving accurate information on safety,

occupational heath, and the working environment, and the prevention of accidents resulting from

work as well as providing other interesting health information to the employees. Considering the

employee’s welfare with respect to the safe and maximum working efficiency, STA has introduced

various activities that promote the quality of life of employees, such as establishing a library and

creating entertainment programs as well as various activities which are designed to promote

employees’ good physical and mental health. Moreover, a handbook for employees has been

published and is publicized through STA Intranet.

Customers:

STA is committed to create customer satisfaction by producing quality products and delivering the

products on a timely basis and maintaining a good sustainable relationship. A guideline for customer

relations practice is included in the Employees’ Handbook.

Business Partners:

STA purchases goods and services from its business partners pursuant to commercial conditions and

always complies with the agreements entered into with its business partners and strictly follows the

laws and regulations and possesses good business ethics in regard to business competition.


Part 1 Page 82

Government Agencies and Related Organizations:

STA strictly complies with various laws and regulations e.g. laws pertaining to the environment,

safety, labour, tax management and accounting, as well as the government notifications relating to the

business operations of STA.

Society and Environment:

STA is aware of and concerned about the safety, environment, and the quality of life of the people,

and the importance of natural resources conservation, the promotion of energy sufficiency, the

alternative use of natural resources to minimize the impact on society, the environment and people’s

quality of life to the greatest possible extent. As such, STA supports activities in the neighborhood

community of the factories by providing the most efficient management of safety and environment.

In addition, STA has supervised and monitored its management system to ensure full compliance with

laws and regulations of regulatory agencies and the fair and strict equitable treatment of all

stakeholders.

4. Information Disclosure and Transparency

(1) The Board of Directors of STA is responsible for the accurate, complete, timely, and

transparent disclosure of both significant financial and non-financial information of STA

through easy-to-access channels, which reflects fairness and reliability so that the

stakeholders are all equally able to receive information in compliance with the requirements

of various regulators.

(2) STA has set up a public relations department in order to communicate with investors and

related third parties. The Investor Relations Office is the center for communication between

shareholders, stakeholders, investors, and analysts.

(3) The Board of Directors of STA supports the preparation of information in an accurate,

reliable, timely, and regular manner in both Thai and English through communication

channels at SET and the website of STA.

(4) The Board of Directors of STA has a duty to report its corporate governance policy through

the Annual Report and website of STA.

(5) The Board of Directors of STA has a duty to disclose meeting attendance of Directors and the

Audit Committee members.

(6) The Board of Directors of STA is responsible for the preparation of the balance sheet, profit

and loss statement, auditor’s report, annual report, and other relevant reports for shareholders

approval.

(7) The Board of Directors of STA has a duty to report risk factors, types of risk, and the cause

and impact of risk upon the business operation of STA through the Annual Report.

The Board of Directors of STA ensures that the disclosure of significant information is conducted in

an accurate, precise, reliable, and timely manner in accordance with the regulations of the SEC and

SET, and that such information is disclosed in the Annual Registration Statement (Form 56-1) and the

Annual Report (Form 56-2) so that the shareholders are equally informed. Furthermore, the Investor

Relations Office has been established to act as a contact person for communication with investors,

shareholders, securities analysts, and other related agencies.

The STA website is updated regularly. Information which should be disclosed is posted on the STA

website. The Investor Relations Office at Bangkok Branch can be contacted at: Tel: 0-2207-4500,

Fax 0-2108-2244, or at www.sritranggroup.com



Part 1 Page 83

5. Responsibility of the Board of Directors

(1) The Structure of the Board of Directors

The Board of Directors of STA, consisting of directors who have knowledge, competence and

experience in business, has the duty to determine policies, visions, strategies, goals, missions,

business plans and budgets of STA, as well as to monitor the management team to effectively

and efficiently manage the business of STA in accordance with the policies under the legal

framework, objectives, the Articles of Association of STA and the resolutions of the

shareholders meeting and the Board of Directors Meeting. Such duties must be performed

with responsibility, due care and loyalty under the principles of good corporate governance in

order to increase the best economic value for the business and the highest stability for the

shareholders.

The Board of Directors of STA consists of 11 directors, including four independent directors

who are fully qualified under the notifications of the Capital Market Supervisory Board and

the SET.

No director of STA shall hold the office of director in more than five listed companies. In the

case that any director holds the office of director in more than five listed companies, the

Board of Directors will further review the efficiency of such director’s performance.

According to the Articles of Association of STA, at every annual general meeting, one-third

of the Directors, or, if the number of Directors is not a multiple of three, then the number

nearest to one-third, shall retire from office. The Directors who are to retire from office in the

first and the second years after registration of the company shall be drawn by lots. In the

subsequent years, the Directors who have been holding office for the longest time shall retire

STA has appointed a Company Secretary to provide advice on compliance with relevant laws

and regulations which the Board of Directors is required to know. The Company Secretary

shall also supervise the activities of the Board of Directors and ensure that the resolutions of

the Board of Directors meeting have been complied with.

(2) Sub-committees

The Board of Directors has a duty to carefully and effectively consider and give approval on

significant operational matters; therefore, sub-committees are formed to assist the Board of

Directors in various aspects. An Audit Committee is appointed consisting of at least three

independent directors and at least one of them must have knowledge of accounting and

finance and must have a qualification on independence as prescribed by the notifications of

the Capital Market Supervisory Board and by the definition of an independent director. The

Audit Committee was established for the purpose of monitoring the internal control system,

financial report system, corporate governance, risk management, as well as the selection and

the appointment of the auditor. Moreover, STA has formed other sub-committees such as the

Remuneration Committee and the Nominating Committee in order to manage the businesses

of STA. The majority of members of the sub-committees are independent committee

members in order to ensure a transparent and independent business operation.

(3) Roles, Duties, and Responsibilities of the Board of Directors

The Board of Directors of STA oversees the business operation and the mission of STA to be

in accordance with the approval given by shareholders, applicable laws, objectives, the

Articles of Association of STA, and resolutions of the Board of Directors meeting and the

shareholders meeting. The Board of Directors of STA must exercise good business judgment

in making business decisions and perform its duty with responsibility, due care, and loyalty in

the best interests of STA.

Conflict of Interests

The Board of Directors of STA has established a policy for preventing conflicts of interests

on the basis that any decision-making on business transactions must be made only for the best


Part 1 Page 84

interest of STA, and that any act which may cause a conflict of interest should be avoided. It

is required that a person involved in or having a conflict of interest in any agenda item to be

discussed in a meeting shall report the relationship or conflict of interest in such agenda item

to STA, as well as abstain from voting and shall have no authority to grant approval for such

transaction.

(4) The Board of Directors Meeting

According to the Articles of Association of STA, the Board of Directors shall hold a meeting

at least once every three months and any additional meetings as necessary. A meeting notice

will be delivered to directors at least seven days prior to the date of the meeting, except in the

case where it is necessary or urgent to preserve the rights and benefits of STA. At each

meeting, the agenda items of the meeting must be clearly specified and supported by complete

and sufficient documents, and must be delivered to the directors in advance so that the

directors will have sufficient time to study such information prior to the meeting. At the

meeting, each director is allowed to openly discuss and express his/her opinion. In addition, at

the meeting of the Board of Directors, the senior executives will be invited to participate in

order to present additional details of information on such matters in which they are directly

involved.

STA is committed to providing the Board of Directors with adequate, complete, continuous

information in a timely manner prior to a Board of Directors meeting. The Directors can

directly and independently contact the Company Secretary. The Company Secretary is

responsible for advising the Board of Directors on compliance with legal and regulatory

requirements.

(5) Remuneration

The remuneration for directors must be made on a practical industry level based on working

experience, role, responsibilities, and must be in line with the average market practice of the

same industry.

(6) Training for Directors and Executives

The Board of Directors has a policy to enhance and accommodate the provision of training on

good corporate governance. Regular and continuous training programs are provided to

directors so that they can improve their knowledge.

Dealings in Securities

STA has a policy and procedure to monitor its executives in relation to their use of inside information

of STA and its subsidiaries for personal interest as follows:

1. Educate the Directors and executives of each department regarding their duties to prepare and

disclose the report of securities holding and the report of changes in securities holding of STA

to the Office of the SEC, the SET and SGX-ST, as the case may be, including the applicable

penalty in the case of breach according to the SEC Act, the regulations of the SET and the

SGX-ST Listing Manual.

2. Arrange for the Directors and executives of STA and their spouses and minor-children to

prepare and disclose the report of securities holding and the report of changes in securities

holding of STA to the Office of the SEC pursuant to Section 59 of the SEC Act and deliver

copies of such documents to STA on the same day, and to report to SGX-ST as stipulated in

the Listing Manual of SGX-ST.

3. The Directors and executives of STA and its subsidiaries who know material inside

information affecting changes in securities price, must be cautious in the trading of securities

of STA within one month prior to the time when the financial statement or such inside


Part 1 Page 85

information is disclosed to the public. Moreover, within 24 hours after such inside

information has been disclosed to the public, no person involved with such inside information

shall disclose any inside information to any person before such inside information has been

notified to the SET and/or SGX-ST. Regarding penalty measures in the case of a violation of

the above-mentioned regulations, STA deems such violation as warranting a disciplinary

penalty according the working rules of STA.

4. The directors, executives, staff members and employees of STA shall not, whether directly or

indirectly, purchase or sell, offer to purchase or sell or invite any other person to purchase,

sell or offer to purchase or sell shares or other securities (if any) of STA by using inside

information which has or may have an impact on the change of the price of STA securities

and has not been disclosed to the public, in a manner that may directly or indirectly cause

damage to STA and whether or not such act is done for their own or another person’s benefit,

or to disclose such information so that they will receive consideration from the person who

engages in the aforementioned acts.

Directors and employees are also expected to observe applicable insider trading laws at all times even

when dealing in securities within permitted trading periods. In addition, the Directors and employees

are expected not to deal in the Company’s securities for short-term considerations.

8.7.2 Principles of Good Corporate Governance under the Code of Corporate Governance

2012

THE BOARD'S CONDUCT OF AFFAIRS

Principle 1: Effective Board to lead and control the Company

The Board's principal roles are set out under "Scope of Duties and Responsibilities of the Board of

Directors of STA". The membership and attendance of the members of the Board and Board

Committees at Board and Board Committee meetings held in FY2011 and FY2012, are disclosed in

the table set out under "Details of Attendance for the Meetings of the Board of Directors and Board

Committees".

Certain material corporate actions such as quarterly results announcements, annual results and

financial statements, declaration of dividends, convening of shareholders’ meetings, authorization of

merger and acquisition transactions, and other material transactions that exceed the authority of the

Executive Board and MD will require the Board’s approval. The Board of Directors also consider and

approve any transactions, including but not limited to related party transaction and the

acquisition/disposal of assets of the Company, that are required by the SET and the SGX-ST.

STA has made available resources for Directors to receive training in any relevant specific area to

enable them to discharge their duties with due care and diligence.

BOARD COMPOSITION AND GUIDANCE

Principle 2: Strong and independent element on the Board

The Board composition of the Company is set out under "Scope of Duties and Responsibilities of the

Board of Directors of STA – Composition and Appointment of the Board of Directors of STA". In

determining the independence of the Directors of STA, the Nominating Committee is guided by the

factors set out under "Selection of Independent Director". The Nominating Committee reviews

nominations for re-appointment as set out under "Scope of Duties and Responsibilities of the

Nominating Committee".

Brief profiles of the Company's Directors are provided under the section "Board of Directors".


Part 1 Page 86

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Principle 3: Clear division of responsibilities between the leadership of the Board and the

executives responsible for managing the Company's business

Dr Viyavood Sincharoenkul is the Chairman and Managing Director (the equivalent of the Chief

Executive Officer) ("MD") of the Company.

Notwithstanding the above, the Board believes that Dr Sincharoenkul should continue to lead the

Group as Chairman and MD. Dr Sincharoenkul manages the day-to-day operations of the Group as its

MD and is responsible for the strategic direction and growth of the Group. As Chairman, he ensures

that Board meetings are held when necessary and sets agendas in consultation with other Directors.

He ensures that Board members are provided with complete, accurate and timely information on a

regular basis.

Furthermore, there is accountability and independent decision making by the Board by virtue of the

following factors:

The Board is of the view that there are sufficient safeguards and checks in place to ensure that

management is accountable to the Board as a whole. The Nominating Committee, Remuneration

Committee and Audit Committee are all chaired by Independent Directors.

Active participation by Independent Directors during Board meetings, who challenge the

assumptions and proposals of the management on all issues affecting the affairs and businesses of

the Group.

The appointment of Mr Prakob Visitkitjakarn as Lead Independent Director, to address

shareholder concerns which could not have been resolved through the normal channels of the

Chairman or MD, or for which such contact is inappropriate. The Lead Independent Director also

acts as the principal liaison between the Independent Directors and the Chairman on sensitive

issues.

BOARD MEMBERSHIP

Principle 4: Formal and transparent process for the appointment and re-appointment of

directors to the Board

The Nominating Committee comprises a majority of Independent Directors, including the Chairman.

The members of the Nominating Committee are Mr. Kriang Yanyongdilok, Mr. Samacha Potavorn

and Mr. Kitichai Sincharoenkul. The Chairman of the Nominating Committee is Mr. Kriang

Yanyongdilok. The duties and responsibilities of the Nominating Committee are set out in the section

titled "Nominating Committee – Scope of Duties and Responsibilities of the Nominating Committee".

The selection, nomination, appointment and re-election processes of the Company's Directors

according to the Articles of Association of STA are set out under the section titled "Composition and

Appointment of the Board of Directors of STA" and "Nomination of Directors". For details of the

factors taken into consideration for the selection of independent Directors, please refer to the section

"Selection of Independent Director – Qualifications of Independent Director". The Independent

Directors shall not be under anyone’s influence and controlled by any situation.

A retiring Director shall be eligible for re-election. The Directors to retire in every year shall be those,

subject to retirement by rotation, who have been longest in office since their last re-election or

appointment. The details of the retirement and re-election of the Directors are set out under the section

titled "Retirement and re-election of Directors".

The directorships or chairmanships both present and those held over the preceding three years in other

listed companies and other major appointments by the Directors are set out below:


Part 1 Page 87

Name of Director Present Three preceding years (2010 – 2012)

Name of

Company

Position Name of

Company

Position

1. Mr. Prakob Visitkitjakarn

ARIP PLC Independent Director and Chairman of the Audit Committee

ARIP PLC Independent Director and Chairman of the Audit Committee

Siam City Cement PLC

Director and Chairman of the Audit Committee

2. Mr. Neo Ah Chap

NAC Consultancy Services

Sole-Proprietor - -

BOARD PERFORMANCE

Principle 5: Formal annual assessment of the effectiveness of the Board as a whole and its board

committees and the contribution by each Director to the effectiveness of the Board

The Board has, through the Nominating Committee, implemented an annual evaluation process to

assess the overall performance and effectiveness of the Board as a whole and the contribution by

individual directors to the effectiveness of the Board.

The evaluation process is undertaken as an internal exercise and involves Board members completing

a questionnaire designed to seek their views on the various aspects of the Board performance so as to assess the overall effectiveness of the Board such as the appropriateness of Board structure and

competency mix, the degree of independence of the Board, the accessibility to management,

participation in strategic planning, self-development process of the Board and development plan for

management, Board process and procedure, and the effectiveness of the Board’s oversight of the

Company’s performance. The criteria taken into account in assessing each individual Director include

the value of contribution to the development of strategy, the degree of preparedness, industry and

business knowledge, and experience which are crucial to the Group’s business.

The responses are reviewed by the Nominating Committee before submitting to the Board for

discussing and determining areas for improvement and enhancement of the Board effectiveness.

Following the review, the Board is of the view that the Board and its Board Committees operate

effectively and each Director is contributing to the overall effectiveness of the Board.

ACCESS TO INFORMATION

Principle 6: Board members should be provided with complete, adequate and timely

information

The Board has separate and independent access to senior management and the Company Secretary at

all times. The management provides information requested by the Board promptly and keeps the

Board informed of all material events and transactions as they occur. Meeting agendas and board

materials are provided to all Directors with sufficient time prior to meetings, so that there is sufficient


Part 1 Page 88

time to seek clarification if required. The management consults Board members as necessary and

appropriate.

The role of the Company Secretary is set out under "Company Secretary".

The Directors may, in fulfilling their duties, as a group or individually, when necessary, direct the

Company to appoint external professionals to render advice.

REMUNERATION MATTERS

Principle 7: Formal and transparent procedure for developing policy on executive remuneration

Principle 8: Remuneration of directors should be adequate but not excessive

Principle 9: Disclosure on remuneration policies, level and mix of remuneration, and procedure

for setting remuneration

The Remuneration Committee comprises entirely of Non-executive and Independent Directors. The

Remuneration Committee comprises Mr. Prakob Visitkitjakarn, Mr. Kriang Yanyongdilok, and Mr.

Samacha Potavorn. The Chairman of the Remuneration Committee is Mr. Visitkitjakarn.

The roles and functions of the Remuneration Committee is set out in the section "Scope of Duties and

Responsibilities of the Remuneration Committee". The recommendations of the Remuneration

Committee are submitted for endorsement by the entire Board. All aspects of remuneration, including

but not limited to Directors’ fees, salaries, allowances, bonuses, options and benefits-in-kind shall be

covered by the Remuneration Committee.

Please refer to the section titled "Remuneration of Directors and Executive Officers" for information

on the remuneration of the Company's Directors and Executive Officers.

The remuneration of employees who are immediate family members of Directors for the year ended

31 December 2012 are as follows: Name Relationship Remuneration Band*

1. Mrs. Promsuk Sincharoenkul Spouse of Dr. Viyavood

Sincharoenkul, Managing

Director of the Company

Band V

2. Mr. Anek Pruksanusak Brother of Mr. Anan

Pruksanusak

Band II

3. Mr. Somboon Pruksanusak Brother of Mr. Anan

Pruksanusak

Band II

Note*:

Band I means remuneration between SGD 1 and SGD 50,000

Band II means remuneration between SGD 50,001 and SGD 100,000

Band III means remuneration between SGD 100,001 and SGD 150,000

Band IV means remuneration between SGD 150,001 and SGD 200,000

Band V means remuneration between SGD 200,001 and SGD 250,000

ACCOUNTABILITY AND AUDIT

Principle 10: The Board should present a balanced and understandable assessment of the

Company’s performance, position and prospects

The Board has adopted a policy of openness and transparency in the conduct of the Company’s affairs

while preserving the commercial interests of the Company. The Company reports its financial results

quarterly and presents such financial results in a balanced and understandable manner.


Part 1 Page 89

Financial results and other price sensitive information are disseminated to shareholders via SGXNET

and on the website of the SET, to the SGX-ST and SET as required, press releases, the Company’s

website and through media and analyst briefings. Any information disseminated on the website of one

stock exchange is simultaneously released on the other as well, in order to preserve parity of

information between shareholders on both exchanges.

The Company will also hold annual investor forums in Singapore where CDP depositors can meet the

Directors. At the minimum, the Managing Director, two other Executive Directors and two

Independent Directors, one of whom will be the Lead Independent Director, will be present at the

investor forum. Shareholders will have the opportunity to be briefed on the Company's performance

and may raise any queries directly with the Directors present.

RISK MANAGEMENT AND INTERNAL CONTROLS

Principle 11: Sound system of risk management and internal controls

Risk Management

Risks

As a result of the Company's multi-national platform, it is exposed to various types of financial risks,

such as foreign exchange risk, interest rate risk, credit and counterparty risks and liquidity risk. The

Company uses forward and simple option contracts and interest rate swaps to hedge certain risk

exposures.

The Company actively monitors and manages these risks associated with its business activities

through an experienced risk management group which is responsible for identifying, evaluating,

managing and controlling such risks.

Foreign exchange risks

The Company is exposed to foreign exchange risks arising from its exposure to currencies such as

Indonesian Rupiah and US Dollars. These foreign exchange risks arise primarily from the difference

of currencies dominated in the Company's sales and costs. As the Company presents its income

statement in Baht, it generally benefits in the event the US Dollar appreciates against the Baht. The

Company generally manages its foreign exchange risk through the use of forward and simple option

contracts.

The Company is also exposed to foreign currency translation risks in respect of its investments in

foreign operations. The Company does not hedge its exposure to such risks as the management

believes that the exposure to such risks is not significant due to the long-term nature of the Company's

investments in foreign operations.

Price risks

Prices of commodities in general, including natural rubber, have been volatile and the Company, like

other participants in the natural rubber industry, is exposed to the risk of fluctuations in the price of

natural rubber. To mitigate such risks, the Company monitors the demand and supply of natural

rubber as well as prices of Natural Rubber Products. Through its long-established relationships,

diversified customer base and negotiation power with buyers, the Company is able to transact sales of

Natural Rubber Products either on a spot basis or long-term contracts, depending on various factors,

including the price of natural rubber. In the event the Company is unable to transact its sales of

Natural Rubber Products, it may enter into hedging arrangements through the use of rubber futures

contracts.

Interest rate risks

The Company has fixed and floating interest rate borrowings. Interest rate risks refer to the

Company's exposure to interest rate fluctuations on the Group’s borrowings. The Company manages

its exposure to interest rate risks by ensuring that the majority of the borrowings have a suitable

repayment term as necessary for the use in such period and considering the trend of the interest rate in


Part 1 Page 90

such period.

Credit and counterparty risks

A large portion of the Company's sales are to customers in various countries and territories in Asia

such as, the PRC, India, Singapore, Japan and Korea and to the United States and Europe, for which

the Company will require letters of credit from customers or cash against the presentation of

documents of title. As such, the Company is exposed to credit and counterparty risks arising from

normal business activities if its customers or counterparties fail to meet their contractual obligations.

To mitigate such risks, the Company only transacts with counterparties after taking steps to assess

their creditworthiness while also taking into account past transactional experience with such

counterparties and their financial position. The Company also regularly monitors its counterparties’

use of the credit limits which have been granted, with a specific focus on the counterparties identified

as being of higher risk of default. Additionally, for sales into the PRC, the Company generally

requires payment of cash on delivery and may grant substantial customers credit terms from the date

of issuance of the invoice.

The Company is also exposed to credit risks with respect to the cash deposits which it places with and

derivative financial instruments which it enters into with banks and financial institutions. The

Company assesses the creditworthiness of the banks and financial institutions with which it transacts

and mitigates its exposure by increasing the number of banks and financial institutions with which

such cash deposits are placed.

Liquidity risks

The working capital cycle for the Natural Rubber Products produced, from the purchase of raw

materials to the receipt of payment from customers, is approximately two to four months. As such, the

Company regularly monitors its liquidity requirements to ensure it has sufficient cash to meet its

operational needs while also maintaining sufficient headroom on unutilised committed borrowing

facilities at all times so that the borrowing limits or covenants on its credit facilities are not breached.

Additionally, the Company believes that due to the global demand for Natural Rubber Products, there

is a ready market for its inventory and should be able to sell them quickly in the event that the

Company is in need of funds.

Internal control systems

The following sets out a summary of the Company's internal control system and functions

implemented to handle the risks related to the business:

Management Activity Control System – The Board of Directors sets the operating goals of the

Company by determining the clear mission, detailed operating plan of each department, and

Key Performance Indicators (KPIs) in financial outcome, operating output, and customer

satisfaction. Such control is closely monitored every month. The Board of Directors also

annually reviews the adequacy and effectiveness of the Company's internal control systems.

Risk Assessment – Changing environments may cause business at risk and negative impacts,

therefore continuous risk assessment and monitoring are required. Each department shall assess

its risk and prepare the solution plan. In addition, there is a management meeting every month

to evaluate the current situation and select strategy to cope with the possible risks.

Control System – The Company clearly determines measures and implementation plans by

issuing orders, rules, approval authority, and working procedures for the management and all

employees.

Information and Communication – STA has moved towards “IT governance” to manage and

control its IT system efficiently with IT risk management system based on international

standard level. The goal and plan of the IT system are set based on the nature of STA's business

and conforms with related laws and regulations. To minimize the incidences of errors or

misleading information, users can only access the IT system through the channel provided by

STA. In addition, STA provides backup and IT continuity plan in preparation for an emergency


Part 1 Page 91

event. Nowadays, the Company has various communication networks, via both the Internet and

its Intranet. The Internet is a communications channel between the Company and stakeholders

such as shareholders, investors, and other external parties. For internal communication within

the Group, the Intranet is the key method for correspondence. This ensures efficiency and

accuracy of information, and that information is delivered in time to all related parties.

Monitoring and Evaluation Systems – To monitor the operating performance of all business

units, each business unit reports its operating performance to the management every month.

The internal audit team also frequently audits all operating units and reports to the Audit

Committee quarterly.

Risk Reporting – Daily reports setting out the aggregate amount and cost of raw materials

purchased are generated by the managers of each of the Company's rubber processing facilities.

In addition, the Company's sales and marketing department also generates a daily sales and

inventory report. The senior management team utilises these reports to determine the net

position of the Company's sales and cost of goods sold, and hence, the exposure to the various

risks.

Reviews – The managers of the Company's rubber processing facilities meet with the

procurement and sales and marketing teams on a monthly basis, to prepare the budget

(including the targeted monthly production capacities for each of the Company's rubber

processing facilities as well as the sales targets for the month). These targets are set after taking

into account several factors such as the estimated effective production capacity at each of the

rubber processing facilities, the supply of raw materials that the Company is able to acquire, the

demand for Natural Rubber Products, the price of natural rubber in the commodities markets

and other general economic conditions. Such budgets are then reviewed by the senior

management team before they are implemented. Through these monthly budget meetings and

the setting of targets, the Company has established procedures which it believes allows it to

achieve maximum return on investments within the appropriate risk parameters that are set by

the senior management team from time to time.

The Board of Directors with the concurrence of the Audit Committee is of the opinion that the

Company’s internal controls in the past year are adequate and effective. The details are set out under

“Audit Committee Report”.

The Board of Directors have received assurance from the MD and the CFO that the financial records

have been properly maintained and the financial statements give a true and fair view of the Company's

operations and finances; and the effectiveness of the Company's risk management and internal control

systems.

Principle 12: Establishment of Audit Committee with written terms of reference

The Audit Committee comprises entirely of Non-executive Directors, namely, Mr. Prakob

Visitkitjakarn, Mr. Kriang Yanyongdilok and Mr. Samacha Potavorn. The Chairman of the Audit

Committee is Mr. Visitkitjakarn.

The Audit Committee have meeting quarterly and privately meet with the internal audit team and

external auditors at least once a year without the presence of management to review the adequacy of

audit arrangement, with particular emphasis on the scope and quality of their audits, and the

independence and objectivity of the internal and external auditors. The Audit Committee has the

duties and responsibilities as set out under "Scope of Duties and Responsibilities of the Audit

Committee".


Part 1 Page 92

The Company's auditors have not provided any non-audit services and as such, the Company has not

paid non-audit fees to the auditors.

INTERNAL AUDIT

Principle 13: Establishment of an effective internal audit function that is adequately resourced

and independent of the activities it audits.

The Company recognises the importance of an internal control system, risk management system, and

operational control, to ensure that all employees and the Executive Board share their duties and

responsibilities so that all share the same goals.

Independent internal audit function

The Company's Internal Audit Department is an independent unit, which reports directly to the Audit

Committee. Under the Company's yearly internal audit plan, the Internal Control Department will

perform an audit of the internal controls system, implement the risk management system, and provide

general advice under the "Standard for the Professional Practice of Internal Auditing". This standard

is an operating guideline and framework of internal audit that focuses on independent, just, and

international standard operations with high quality auditing work. Guidelines for the development and

training of internal audit staff are also included in the standard.

The Internal Audit Department provides adequate staffing with relevant experience to conduct the

internal audits and has full, free and unrestricted access to all data of the Company that it requires to

carry out its function. The Internal Audit Department is responsible for the internal auditing of all

business unit operations of the Group under its annual internal auditing plan and provides advice to

improve the internal audit system. The main considerations are primarily business and operational

risks.

The Audit Committee continuously reviews the performance and the adequacy of the internal audit

function. In addition, the Audit Committee may recommend improvements to the internal audit and

internal control systems to the Board of Directors.

SHAREHOLDER RIGHTS AND RESPONSIBILITIES

Principle 14: Fair and equitable treatment of all shareholders

Principle 15: Regular, effective and fair communication with shareholders

Principle 16: Greater shareholder participation at general meetings of shareholders

The Company aims to provide timely information to shareholders, and such information should be

substantial and clear in relation to the matters at hand. The Company ensures that all shareholders

should be equally informed of all major developments impacting the Group, and is accessible and

responsive to the public at all times.

For more information on communication with shareholders, please refer to the section titled

"Corporate Governance – Principles of Good Corporate Governance under the Principles of Good

Corporate Governance for Listed Companies of 2006 – Rights of Shareholders" and "Corporate

Governance – Principles of Good Corporate Governance under the Principles of Good Corporate

Governance for Listed Companies of 2006 – Fair Treatment for Shareholders".


Part 1 Page 93

8.8 Corporate Social Responsibility (CSR)

Over the past 25 years that Sri Trang Group has committed to process and export Natural Rubber

products, we have dedicated to conduct business with good practices of corporate governance and

Corporate Social Responsibility (CSR). Therefore, in 2012, the Company has announced CSR policy.

Our philosophy is to grow along with the community and society and to be an effective mechanism to

constantly strengthen the stability of rubber industry. We value our way to conduct business in

parallel with creating activities for communities and societies, maintain our environmentally-friendly

production, create a fair trade standard to gain trust and acceptance from rubber farmers and

customers, consider the impact on every aspect from business operations to all stakeholders including

shareholders, employees, customers, suppliers, communities, and government agencies, as well as

create the attitude and organisational culture to make employee participate more in CSR activities.

Policy and guideline practices for CSR of Sri Trang Group, our core mission, lays on the five meaning

of “GREEN” Natural Rubber as follows;

1. Good Corporate Governance

The company is dedicated to good practices of corporate governance focusing on the structure of the

Board of Directors, management, and shareholders to create a competitive advantage which will build

growth and increase value of shareholders in the long run. In addition, other stakeholders are also

taken into consideration.

2. Responsibility to Supply Chain

Sri Trang Group's core business is to produce primary natural rubber products (Midstream

processing). Yet, the Company has extended business line to cover the whole supply chain right start

from rubber plantations to the production of finished products. This allows the Company to strictly

control the quality of products to respond downstream business who focus on the quality of the

product at most. Another main concern of downstream businesses, whether latex examination glove

producers or tyre makers, is to ensure the safety for users. Thus, our responsibilities through supply

chain management cover;

2.1 Rubber farmers and rubber dealers: Our Group is strived for fair, transparent,

clear principles, and accountability procurement of natural rubber which is the main

raw materials for our production. We also encourage rubber farmers to produce high

quality of rubber without contamination and to properly store the rubber so that the

quality of raw materials will meet our factory’s standard. Moreover, we support

rubber farmers with knowledge to properly operate rubber plantations in order to

increase yield which will in turn increase their revenues as well as sustainable quality

of life.

2.2 Customer: Our Group is committed to produce high quality products and provide

good services to create the highest satisfaction for the customers. We sincerely handle

complaints from customers and promptly improve and correct flaws that might be

caused from productions and/or services to create the highest effective and efficient

production.

3. Environmental Friendly and Safe Operation

As our Group's nature of business is directly related to the natural and environment, we strictly adhere

to environmental practices by implementing the effective environmental management systems. We

also set up measures to prevent and minimize the environmental impacts caused by different activities

from our Group to comply with laws and regulations. Furthermore, we aim to develop and promote

more green areas within the factories to retain moisture, increase fresh air, and reduce unfavorable


Part 1 Page 94

odors from production process. In addition, we reduce the use of chemicals in rubber plantation and

production of natural rubber products as well as finished products since it might affect the

environment and communities in the long run.

Aside from environmental-friendly production and being aware that we are part of community, we

stick to practice guidelines to preserve and maintain the ecological and social environment of the

surrounding communities which will not only create the livable community but also support

companies to smoothly and steadily run the business in the long term.

In terms of health & safety, our Group fully complies with laws, regulations and other related

requirements. We provide training, set up adequate and effective health & safety rules and plans in

workplace, and create a safe working environment for employees, contractors, and the other related

parties.

4. Engagement with Transparency

Our Group is committed to operate business with fairness, transparency, and accountability in all

process. We believe that to operate business with fairness and ethic, comply with laws, and respect the

rules of society could build confidence of stakeholders and reduce conflict of interest. This will

benefit business operation of the company in the long run. We also encourage every level of our

employees to work with integrity and adhere to ethic of business. Employees should not exploit

benefits that may cause conflict of interest to the Company and its stakeholders and should not

improperly indulge on business operation. We also have a policy against all forms of corruptions to

establish standards of transparent business operation which will benefit the organisation and rubber

industry in the long run.

5. Nurture Sustainability Attitudes Towards Organisation

The Company believes that effective and sustainable CSR practices is rooted from the awareness of

employees in every level from all departments. They need to have a positive attitude to follow the

policies and have responsibility to society and other related parties. Our people also volunteer to

participate in the community development and of business partners’ quality of life improvement.

Moreover, they cooperate to change their working behavior and daily lifestyle in accordance with

environmental conservation guidelines, to reduce energy consumption costs, and to enhance the

effectiveness of organisation.

The Company promotes and supports staffs to devote to social activity, for example, to volunteer and

participate activities of community, alleviate natural disaster victims, appropriately and continuously

support any kinds of shortages in the community, and create a benevolent society and social care for

each other to remain forever. Besides, we place great emphasis in manufacturing quality products for

our customers and at the same time giving back to our community and conserving our planet’s

resources.

The activities employed in 2012 can be summarized as follow:

Supported Baht 300,000 to develop “Tapping Skill Development Training Programme”

with cooperation of Rubber Replanting Aid Fund Association for northeastern rubber

farmers. There have been 4 programs conducted in Mukdahan, Sakon Nakhon, Udon

Thani, and Loei province. More than 150 rubber farmers learn how to properly operate

rubber plantations in order to safe and extend life of rubber tree.

Contributed Baht 2,000,000 to support University Sports No. 39 of Prince of Songkla

University.

Contributed Baht 200,000 to Rubber Replanting Aid Fund Association to support annual

honorable retirement event.


Part 1 Page 95

Granted scholarship to the students of Wad Jang School in Trang province and Baan

Koksamed School in Songkhla province

Fishing for lunch project and library construction for Baan Kok Petch School in Buriram

province.

Contributed sport equipment, sport shirts, and prize for sport competition of Baan Jumpa

Prachanuchror School and Baan Koi School in Udon Thani province.

Donate Baht 400,000 to build the arch at Mae Gaew Tai Temple in Chiang Rai Province

Supported local traditional activities such as long boat racing in Bueng Kan and

Mukdahan province.

Provide blood donation to Red Cross every year across our factories nationwide.

In addition, we aim to have our products associated with not only being of quality, but being

environmentally friendly and natural resources saving as well. In our normal operational and strategic

policies, we also have focused on the following initiatives.

Plantation

We have been only developing plantations on land which are approved by the government for the

cultivation of rubber trees. We have documented and will strive to purchasing land with lawful right

for planting. We adhere strictly to environment-friendly and community-friendly policies.

Processing Efficiency

We continually improve the efficiency of our processing methods through the modification of our

production machinery. This will enable us to minimise the production costs of Natural Rubber

Products through material savings and optimise existing production processes through the

development of innovative processing systems. For example, we have developed various processes

and systems which reduce the loss of raw materials through in-process recycling of raw materials.

Energy Savings

We adhere to the Energy Conservation Promotion Act by creating energy saving measures and cost

saving. For example, we use energy saving materials, decrease downtime operation, reduce electricity

consumption in production process, and replace LPG gas with bio-energy and boiler to oven the

rubber.

Waste Management

We have a standardized waste water treatment system. The quality of treated water and emitted air

from our processing facilities are monthly inspected. Moreover, we also set up waste management

system to separate and reduce waste from our factory.

Behavioral Change

We also regularly promote behavioral change of our staffs towards environmental friendly habits. For

example, we have instituted campaigns to reduce global warming by encouraging the use of cloth

bags in place of plastic bags and the use of bicycle instead of fuel-consuming vehicles at our

production facilities, and promote waste separating for recycle and reduce waste for disposing.


Part 1 Page 96

9. INTERNAL CONTROL

STA recognizes the importance of its internal control system, risk management, and the monitoring of

the business operation, which is a continuous process; and the role and shared responsibilities of all

STA staff members ranking from the Executive Committee to each employee. STA has set up a

sufficient and adequate internal control system to provide a reasonable assurance that all functions

within the Group are operated consistently and are able to meet the goals laid down by Executive

Committee. STA has established an Internal Audit Department which is an independent unit and

reports directly to the Audit Committee. The Internal Audit Department performs an internal control

assessment pursuant to the annual plan by considering related risk factors as approved by the Audit

Committee as well as supporting the creation of a risk management system and providing various

recommendations to ensure that all operations of the Company meet the objectives as planned. The

Internal Audit Department has followed the Standard for the Professional Practice of Internal

Auditing as a guideline for its work, which focuses on independent, just, and international standard

operations with high quality auditing work. Therefore, an adequate training program specially

designed for each individual internal audit personnel is provided continuously. In addition, according

to an independent auditor who certified the Company’s financial statements for the year 2011, there

was no weakness in the internal control system which will materially affect the financial statements of

the Company.

The following is a summary of the internal control system and internal audit of the Company:

Audit Committee: The Audit Committee responsibility is to consider the sufficiency of the

Company’s internal control system by continuously reviewing the performance of the Internal Audit

Department and the independent auditor. The Audit Committee emphasizes the sufficiency and

adequacy of the internal control system and ensures that all operations have complied with the laws,

rules, regulations and other relevant policies. If the Audit Committee has any recommendations or has

found any significant error, the Audit Committee will report these matters to the Board of Directors of

STA for further improvement.

Internal Audit Department: The Internal Audit Department monitors the operation of various units

within the Group in accordance with the annual plan and as assigned by the Executive Committee or

the Audit Committee by using the principle of risk management to make an assessment on the

businesses or the working processes, and also gives advices and makes recommendations regarding

the improvement of internal control to the management of each unit and also provides operation

guidelines to improve effectiveness and efficiency.

Management Activity Control System: The Board of Directors sets the operating goals of the

Company by determining the clear mission, detailed operating plan of each department, and Key

Performance Indicators (KPIs) in financial outcome, operating output, and customer satisfaction. Such

control is continuously closely monitored.

Risk Assessment: Changing environments may cause business at risk and negative impacts, therefore

continuous risk assessment and monitoring are required. Each department shall assess its risk and

prepare the solution plan. In addition, there is a management meeting every month to evaluate the

current situation and select strategy to cope with the possible risks.


Part 1 Page 97

Control: The Company clearly determines measures and implementation plans by issuing orders,

rules, approval authority, and working procedures for the management and all employees.

Information and Communication: The Company has various communication networks, via both the

Internet and its Intranet. The Internet is a communications channel between the Company and

stakeholders such as shareholders, investors, and other external parties. For internal communication

within the Group, the Intranet is the key method for correspondence. This ensures efficiency and

accuracy of information, and that information is delivered in time to all related parties.

Monitoring and Evaluation Systems: The management continuously monitors economic situations

to strategically plan business operation under current and future circumstances that may impact

organisation’s goal. Key Performance Indicator (KPI) report will be conducted in order to closely and

timely monitor and evaluate operating performance of organisation.

Risk Reporting: Daily reports setting out the aggregate amount and cost of raw materials purchased

are generated by the managers of each of the Company's rubber processing facilities. In addition, the

Company's sales and marketing department also generates a daily sales and inventory report. The

senior management team utilises these reports to determine the net position of the Company's sales

and cost of goods sold, and hence, the exposure to the various risks.

Reviews: The managers of the Company's rubber processing facilities meet with the procurement and

sales and marketing teams on a monthly basis, to prepare the budget (including the targeted monthly

production capacities for each of the Company's rubber processing facilities as well as the sales

targets for the month). These targets are set after taking into account several factors such as the

estimated effective production capacity at each of the rubber processing facilities, the supply of raw

materials that the Company is able to acquire, the demand of Natural Rubber Products, the price of

natural rubber in the commodities markets and other general economic conditions. Such budgets are

then reviewed by the senior management team before they are implemented. Through these monthly

budget meetings and the setting of targets, the Company has established procedures which it believes

to achieve maximum return on investments within the appropriate risk parameters that are set by the

senior management team from time to time.

Following the meeting of the STA Board of Directors no. 1/2013, on 28 February 2013, which was

attended by three members of the Audit Committee, the STA Board of Directors, having received

information from the management and relevant staff members, assessed the internal control system

and concluded that by assessing the internal control system of the Company in five areas, which are

organization and the environment, risk management, control of the operation of the management,

information and communication, and monitoring system using the assessment model of the Office of

the SEC, was of the opinion that STA has a sufficient internal control system and has applied a

precise audit standard. Neither the opinion of the independent directors nor the Audit Committee

differs from the opinion of the STA Board of Directors with regard to internal control. However, the

Audit Committee has emphasized the strict implementation of Good Corporate Practice of the

Company in order to comply with the regulations of the Capital Markets Supervisory Board, the SET,

SGX-ST, and the Office of the SEC to ensure that the operation of the Company is conducted in the

most transparent and effective manner possible.

In addition, the meeting of the Audit Committee of STA no. 1/2013, on 27 February 2013, made an

assessment of the internal control system of the Company and was of the opinion that the internal

control of the Company was adequate and appropriate.

Regarding the monitoring and supervision of the subsidiaries of STA, the Directors of STA will serve

as directors of the subsidiaries and associates and may from time to time nominate the Company’s

representatives to serve as directors of the subsidiaries. The Internal Audit Department of the

Company is assigned to audit the sufficiency of the internal control of the subsidiaries and reports its

findings to the Audit Committee in order for the Company to be able to effectively control and

monitor the internal control operation of the subsidiaries.


Part 1 Page 98

10. RELATED PARTY TRANSACTIONS

10.1 The related party transactions

The related party transactions that are material with value of transaction exceeding THB 5.0 million that were disclosed in the notes to the financial

statements of STA and the interested persons transactions that were not disclosed in the notes to the financial statements of STA for the financial year

ended 31 December 2011 and 31 December 2012 are as follows:

Related

Parties

Relationship Type of

Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012

Necessity / Reasonableness of

the Transaction

Opinion(s) of the

Audit Committee

1. SSC An associate

company.

A compa

ny in which STH,

the majority

shareholder of

STA, holds 6% of

the shares.

A company in

which Mr.

Viyavood

Sincharoenkul, the

majority

shareholder and the

Chairman of STA,

1.1 STA

Revenue from

the sale of

Concentrated

Latex

2,684.48

1,683.32 STA sold Concentrated Latex to

SSC based on the market price.

STA and Rubberland Products

were responsible for procuring

Concentrated Latex for SSC in

accordance with the terms of the

Joint Venture Agreement.

The price of the

Concentrated Latex

that STA sold to SSC

was based on the

market price that was

quoted by SICOM

(Singapore

Commodity

Exchange).

Revenue from

the provision of

office related

services

5.47 5.47 STA entered into an agreement

with SSC in relation to the

provision of computer

equipment and office supplies,

legal services, accounting and

financial services, including

export and import services. The

The rate of service fee

charged to SSC was

comparable to the

market price rate for

services of a similar

nature.


Part 1 Page 99

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

holds, directly and

indirectly, in an

aggregate of

11.83% of the

shares.

Two directors of

STA, who are Mr.

Viyavood

Sincharoenkul and

Mr. Kitichai

Sincharoenkul are

the directors of

SSC.

service fee that was charged by

STA to SSC for the Bangkok

branch office was Baht 50,000

per month and for the Hat Yai

branch office Baht 434,000 per

month, same rate with year

2011, which were comparable to

the market price.

Accounts

receivable

8.53 35.50 Outstanding accounts receivable

from the sale of field latex and

advance payments at the end of

the period.

Outstanding balance

according to the

payment terms under

normal trade

conditions and normal

accounts receivable.

Expense in

relation to the

purchase of

latex

examination

gloves

559.10 563.30 STA purchased latex

examination gloves from SSC

for selling to its domestic

customers as STA has its own

sales office for the domestic

market while SSC does not. The

purchase price of the latex

examination gloves was

comparable to the wholesale

price of other latex examination

glove producers in the country.

SSC has neither sales

nor marketing unit for

latex examination

gloves in Thailand as

most of the SSC sales

came from overseas

customers. For this

reason, in order to

penetrate into

Thailand market and

to maximize the

utilization of STA

resources, STA


Part 1 Page 100

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

purchased latex

examination gloves

from SSC for

domestic sale at a

price comparable to

the market price.

STA received

adequate profit from

entering into such

transaction.

Accounts

payable

103.11 93.49 Most of the accounts payable

came from the purchase of latex

examination gloves for domestic

sale.

Outstanding balance

according to the

payment terms under

normal trade

conditions and the

accounts payable

were normal.

1.2 Nam Hua

Rubber

Revenue from

the sale of

Concentrated

Latex

875.65

547.85

Nam Hua Rubber sold

Concentrated Latex to SSC at a

price comparable to the market

price, which was the same price

as sold by STA and Rubberland

Products pursuant to the Joint

Venture Agreement.

The price of the

Concentrated Latex

that was sold by Nam

Hua Rubber to SSC

was based on the

market price that was

quoted by SICOM


Part 1 Page 101

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

(Singapore

Commodity

Exchange).

Accounts

receivable

31.34 3.06 Outstanding accounts receivable

from the sale of field latex and

advance payments at the end of

the period.

Outstanding balance

according to the

payment terms under

normal trade

conditions and the

accounts receivable

were normal.

1.3 Rubberland

Products

Revenue from

the sale of

Concentrated

Latex

1,192.49

1,090.71

Rubberland Products sold

Concentrated Latex to SSC at

the market price. The Group

was responsible for procuring

Concentrated Latex to SSC

pursuant to the Joint Venture

Agreement.

The price of the

Concentrated Latex

sold by Rubberland

Products to SSC was

based on the market

price that was quoted

by SICOM

(Singapore

Commodity

Exchange).

Revenue from

the sale of

ground water

44.14 43.21 Rubberland Products sold

ground water to SSC as its

factories were located in the

same area. The sale price was at

SSC factory was

located near the factory

of Rubberland

Products and SSC did


Part 1 Page 102

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

Baht 16 per cubic meter, which

was comparable to the price of

tap water sold by the Provincial

Waterworks Authority.

not possess its own

ground water well. The

price of ground water

sold to SSC was

comparable to the price

of tap water sold by the

Provincial Waterworks

Authority to the

business sector.

Revenue from

the provision of

field latex tank

15.99 13.12 Rubberland Products entered

into the leasing of field latex

tank agreement with SSC as

SSC did not have its own tank to

store the field latex. The service

fee for 100 ton was Baht 40,000

per month per tank, for 250 ton

was Baht 100,000 per month per

tank which reflected the relevant

cost and an adequate profit of

Rubberland Products.

The service fee for the

provision of field

lalex tank did not

have a comparable

market price.

However, the service

fee charged by

Rubberland Products

covered and reflected

the relevant cost and

an adequate profit

margin.

1.4 Starlight

Express

Transport

Revenue from

import-export

6.83

7.37

Starlight Express Transport

provided export and import

Starlight Express

Transport has


Part 1 Page 103

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

freight

forwarding fees

services to SSC as Starlight

Express Transport has expertise

and personnel suitable for the

provision of services.

The fees for the preparation of

the related export and import

documentation for the year 2011

and 2012 were Baht 280 per

container and Baht 500 per set

respectively and the fee for the

trailer service was USD 60 per

container.

These rates were comparable to

the market price of other service

providers in the same industry.

expertise in the

logistics services and

the documentation

work concerning

logistics. The rate of

service fee reflected

the reasonable cost of

its business operation

and was comparable

to other service

providers in the same

industry.

Revenue from

logistic services

46.97 52.21 Starlight Express Transport

provided logistics services to

SSC as Starlight Express

Transport conducted logistics

services and has equipment and

personnel ready to support such

service. The service fee was at

the market price according to the

transportation route and was

adjusted according to the change

of the oil price in each period.

Starlight Express

Transport has

expertise in the

logistics services and

the documentation

work concerning

logistics. The rate of

service fee reflected

the reasonable cost of

its business operation

and was comparable

to other service


Part 1 Page 104

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee


industry.

1.5 Premier

System

Engineering

Revenue from

the

manufacturing

of machinery

and equipment

411.96

198.30

Premier System Engineering

produced and sold machinery

and equipment to SSC as the

machinery used in the

manufacturing process of SSC

required special specification

and SSC needed to keep its

production technology and

equipment as its business secret.

Premier System Engineering has

equipment and personnel

suitable for the manufacturing of

machinery and equipment. The

price of the machinery and

equipment sold by Premier

System Engineering were

comparable to the market price

which reasonably reflected the

cost of production, operation,

and an adequate profit margin.

Premier System

Engineering has

expertise in the

development,

production, and

maintenance of

machinery and

equipment in relation

to the production of

natural rubber and

finished products

from natural rubber.

The price of the

machinery and

equipment sold to

SSC reflected the

reasonable cost of its

production and an

adequate profit

margin of Premier


Part 1 Page 105

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

System Engineering

and was comparable

to the market price.

Revenue from

cleaning

service

48.86 60.95 Premier System Engineering

provided cleaning service for the

machinery and equipment to

SSC as Premier System

Engineering has expertise in

machinery and equipment and

was the seller of machinery and

equipment to SSC.

The rate of service fee was


and reflected an adequate profit

margin of Premier System

Engineering.

Premier System

Engineering has

expertise in the

development,

production, and

maintenance of

machinery and



natural rubber and

finished products



for cleaning the

machinery and

equipment of Premier

System Engineering

reflected the


business operation

and an adequate profit

margin of Premier

System Engineering


Part 1 Page 106

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

and was comparable

to other service


industry.

Revenue from information technology services

14.71 17.19 Premier System Engineering provided IT and information system service to SSC as Premier System Engineering has equipment and personnel ready for provision of such service.

The service fee was comparable to the market price.

Revenue from purchasing-maintenance the machines

27.06 19.10 Premier System Engineering provided maintenance services of machinery to SSC. The service fee was based on actual works which was comparable with market rates.

Service fee was comparable with market rates.

Revenues from sales of equipment and machinery spare part

139.98 138.72 Premier System Engineering provided stock management services and procured equipment and machinery spare part to SSC since it has expertise and specializes in machinery and equipment.


Accounts receivable

37.08 46.15 Outstanding accounts receivable from the aforementioned services.

Outstanding balance according to the payment terms under normal trade


Part 1 Page 107

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

conditions and the accounts receivable were normal.

Expense from purchasing supplies

5.43 6.16 Premier System Engineering purchased supplies from SSC in order to save purchasing cost and efficiently manage supplies of the Group. The purchasing price of supplies was weighted average cost of SSC excluding any other related processing expenses.

Large purchasing quantity of supplies enables the Group to receive discounts and increase bargaining power. The purchasing price of supplies that Premier System Engineering purchased from SSC was comparable to market price without any other related processing expenses.

1.6 Anvar

Parawood

Revenue from the sale of firewood

579.73

833.04

Anvar Parawood sold firewood to SSC as Anvar Parawood operates the business of the sale of rubber wood and has personnel suitable to provide such service. The price of the firewood was the price on the date the transaction was entered into plus the operation cost and

The selling price of the firewood was comparable to the price offered by other sellers.


Part 1 Page 108

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

an adequate profit margin which was comparable to the market price.

Accounts receivable

2.19 13.34 Account receivable from the sale of parawood

Outstanding balance according to the payment terms under normal trade conditions and the accounts receivable were normal.

1.7 Shi Dong

Shanghai

Purchase of

glove

1.75

36.97

Shi Dong Shanghai purchases

glove from SSC to distribute to

Chinese market since Shi Dong

Shanghai possess sale &

distribution unit in China while

SSC does not.

The selling price of

the glove was

comparable to the

wholesale price

offered by other

sellers.

2. Semperflex

Asia An associate

company.

A company in

which STH, the

majority

shareholder of

STA, holds 5.0%

of the shares.

2.1 STA

Revenue from

dividends

37.50 56.25 STA received dividends from

Semperflex Asia paid from the

operation results of Semperflex

Asia.

The payment of

dividend was made in

accordance with the

resolution of the

shareholders’ meeting

of Semperflex Asia.

STA received

dividend in proportion

to its shareholding in


Part 1 Page 109

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

A company in

which Mr.

Viyavood

Sincharoenkul, the

majority

shareholder and the

Chairman of STA,

holds directly and

indirectly, in an

aggregate of

12.38% of the

shares.

Three directors of

STA, who are Mr.

Viyavood

Sincharoenkul,

Mr. Kitichai

Sincharoenkul and

Mr. Veerasith

Sinchareonkul, are

the directors of

Semperflex Asia.

Semperflex Asia.

2.2 Rubberland

Products

Revenue from

dividends

5.00 7.50 Rubberland Products received

dividends paid from Semperflex

Asia based on its operating

results.

The payment of


accordance with the

resolution of the


of Semperflex Asia.

Rubberland Products

received dividend in

proportion to its

shareholding in

Semperflex Asia.

2.3 Starlight

Express

Transport

Revenue from

transportation

7.02 6.45 Starlight Express Transport

provided logistics services to

Semperflex Asia as Starlight

Express Transport conducted

logistics services and has

equipment and personnel ready

for the provision of such service.

The service fee was comparable

to the market and changed

according to the oil price level.

Starlight Express

Transport has

expertise in logistics

services and

documentation work

concerning logistics.


reflected the


business operation

and was comparable

to other service


industry.


Part 1 Page 110

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

2.4 Premier

System

Engineering

Revenue from

the

manufacturing

of machinery

and equipment

15.17

27.54

Premier System Engineering

sold machinery and equipment

to Semperflex Asia as the

machinery used in the

manufacturing process of

Semperflex Asia required

special specification and

Semperflex Asia needed to keep

its production technology and

equipment as its business secret.

Premier System Engineering has

equipment and personnel

suitable for the manufacturing of

machinery and equipment. The

price of the machinery and

equipment sold by Premier

System Engineering were

comparable to the market price.

Premier System

Engineering has

expertise in the

development,

production, and

maintenance of

machinery and



natural rubber and

finished products


The price of the

machinery and

equipment sold to

Semperflex Asia

reflected the


production and an

adequate profit

margin of Premier

System Engineering

and was comparable


Part 1 Page 111

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee


Revenue from

cleaning

service

6.22 2.35 Premier System Engineering,

who is a specialist in machinery

and equipment and a seller of

machinery and equipment to

Semperflex Asia, provided

cleaning services to Semperflex

Asia with service fee

comparable to market rate.

Premier System

Engineering has

expertise in the

development,

production, and

maintenance of

machinery and



natural rubber and

finished products


The service fee for

cleaning of machinery

reflected the


production and an

adequate profit

margin of Premier

System Engineering

and was comparable


Revenue from

selling and

11.93 22.27 Premier System Engineering provided maintenance services of machinery to SSC. The

Service fee was

comparable with


Part 1 Page 112

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

maintenance

machine

service fee was based on actual works which was comparable with market rates.

market rates.

Revenues from

sales of

equipment and

machinery

spare part

40.08 33.59 Premier System Engineering provided stock management services and procured equipment and machinery spare part to Semperflex Asia since it has expertise and specializes in machinery and equipment.


Accounts

receivable

14.57 5.57 Account receivable from the

above services.

Outstanding balance

according to the

payment terms under

normal trade

conditions and the

accounts receivable

were normal.

2.5 Anvar

Parawood

Revenue from

the sale of

pallets

8.99

7.92

Anvar Parawood sold pallets to

Semperflex Asia as Anvar

Parawood conducted the

business of selling rubber wood

and has personnel suitable for

providing such service. The

price of pallets sold to

Semperflex Asia was

The price of the

pallets was

comparable to the

price of other sellers.


Part 1 Page 113

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

comparable to the market price.

3. Thai Tech

Rubber An associate

company.

Two directors of

STA, who are Mr.

Viyavood

Sincharoenkul and

Mr. Paul Sumade

Lee, are the

directors of Thai

Tech Rubber.

3.1 STA

Revenue from

dividends

30.15

71.69

STA received dividends from

Thai Tech Rubber paid from the

operation results of Thai Tech

Rubber.

The payment of


accordance with the

resolution of the


of Thai Tech Rubber.

STA received

dividend in proportion

to its shareholding in

Thai Tech Rubber.

3.2 Sri Trang

International

Cost of the

purchase of

TSR

6,045.30

4,551.97


purchased TSR from Thai Tech

Rubber for selling to

international market. The

purchase price was based on

SICOM

The natural rubber

that the Group

produced to

international

customers was

distributed by Sri

Trang International as

Thai Tech Rubber did

not do marketing or

sale of natural rubber

to international

customers.


Part 1 Page 114

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

The natural rubber

price that Thai Tech

sold to Sri Trang

International was

comparable to the

market price that third

party sold to Sri

Trang international.

Accounts

payable

155.99 229.31 Accounts payable from the

provision of the aforementioned

services.

Outstanding balance

according to the

payment terms under

normal trade

conditions and the

accounts payable

were normal.

4. Pattana

Agro

Futures

An associate

company.

Two directors of

STA, who are Mr.

Viyavood

Sincharoenkul and

Mr. Kitichai

Sincharoenkul, are

the directors of

Pattana Agro

Futures.

4.1 STA

Accounts

receivable

(payable) for

the future

trading of

natural rubber

71.42

57.89

Accounts receivable from the

trading of natural rubber future

contracts

Normal business

transaction for future

trading

Amount due

from futures

brokers

44.06 70.45 Deposit made for trading in

futures market in accordance

with AFET criteria.

Normal business

transaction for future

trading


Part 1 Page 115

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

5. Pruksa

Rubber

Co., Ltd.

The Executives

Officer of STA,

Mr. Udom

Pruksanusak and

siblings, hold more

than 50% of the

shares in Pruksa

Rubber Co., Ltd.

Mr. Udom

Pruksanusak is the

authorized

signatory of Pruksa

Rubber Co., Ltd.

5.1 STA

Revenue from

the sale of field

latex

7.95

4.68

STA sold field latex to Pruksa

Rubber Co., Ltd. The sale was

made at the STA rubber

plantation because STA did not

have any department to handle

the transportation of field latex

on its own and in order to save

cost on the management, sales,

and related personnel. The price

at which field latex was sold to

Pruksa Rubber Co., Ltd. was at

the price determined daily by the

procurement department of

STA.

Due to the fact that STA

only had a few rubber

plantation areas ready

for tapping. In order to

save cost, STA decided

to minimize its

obligations on

transportation and

management by selling

field latex to Pruksa

Rubber Co., Ltd. at the

price determined by the

procurement department

of the Group.

5.2 Nam Hua

Rubber

The purchase

of field latex

191.59

131.45

Nam Hua Rubber purchased

field latex from Pruksa Rubber

Co., Ltd. because the rubber

plantations of Pruksa Rubber

Co., Ltd. were located close to

the factory and the purchasing

center for purchasing field latex

of Nam Hua Rubber. Moreover,

Pruksa Rubber Co., Ltd. was

Nam Hua Rubber

required field latex as

a raw material for the

production of

Concentrated Latex.

The purchase price

was at the market

price determined daily

by the procurement


Part 1 Page 116

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

capable of supplying rubber of

the quality and quantity as

required by Nam Hua Rubber.

The purchasing price of the field

latex was at the price that the

Group made an announcement

to general customers in front of

its factory.

department of the

Group for the purpose

of purchasing raw

materials from

general suppliers.

5.3 Sadao P.S.

Rubber

Cost of the

purchase of

unsmoked sheet

rubber

16.38

9.38

Sadao P.S. Rubber purchased

unsmoked sheet rubber from

Pruksa Rubber Co., Ltd., a

dealer who buys unsmoked sheet

rubber from the farmers and

sells it to factories located in the

Sadao District where is close to

the Sadao P.S. factory.

Moreover, Pruksa Rubber was

capable to supply unsmoked

sheet rubber at the quality and

quantity as required by Sadao

P.S. Rubber. The purchase price

of unsmoked sheet rubber was

the price that the Group made an

announcement to general

customers in front of its factory.

Sadao P.S. Rubber

required unsmoked

sheet rubber as the

raw material for the

production of RSS.

The purchase price

was at the market


by the procurement

department of the


of purchasing raw

materials from

general suppliers.


Part 1 Page 117

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

6. Worldwide

Shipping

Logistic

Service Pte.

A company with

100% of its shares

owned by a spouse

of a child of a

Director of STA –

Mr. Prasit Panidkul

6.1 STA

Transportation

expense

4.42

8.14

Worldwide Shipping Logistic

Service Pte., provided freight

forwarding service for

transportation of goods from

STA factories to overseas

customers. The service fee paid

by STA to Worldwide Shipping

Logistic Service Pte., was

comparable with the service fee

of other service providers having

no connection with the Group.

STA will conduct a price

comparison each time it enters

into an agreement for receiving

such services.

The fee was

reasonable and

comparable to the

market price.

6.2 Sri Trang

International

• Transportation

Cost

89.68

31.28

Worldwide Shipping Logistic

Service Pte., provided freight

forwarding service for

transportation of goods to

overseas customers. The service

fee paid by Sri Trang

International to Worldwide

Shipping Logistic Service Pte.,

The fee was

reasonable and

comparable to the

market price.


Part 1 Page 118

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

was comparable with the service

fee of other service providers

who are not related party of the

Group. Sri Trang International

will conduct a price comparison

each time it enters into an

agreement for receiving such

services.

6.3 P.T. Star

Rubber

Document fee

(Bill of

Lodging)

13.19 - Worldwide Shipping Logistic

Service Pte was hired by P.T.

Star Rubber to provide export

document at the rate of RPH

2,400,000 per set of Bill of

Lodging. The fee was comparable

to other independent companies.

The fee was

reasonable and

comparable to the

market price.

7. Tham

Phannara

Rubber

Fund

Cooperative

Wife (Mrs. Jiraporn

Aksornnam) of Co-

Group Production

Manager (Mr. Arsom

Aksornnam) is an

authorized person on

behalf of the

cooperative.

Purchasing

field latex

89.68 31.28 STA purchased filed latex from

Thum Phannara Rubber Fund

Cooperative as it situates nearby

STA’s procurement unit.

Moreover, it was capable of

supplying rubber of the quality

and quantity as required by

STA. The purchasing price of

the field latex was at the price

that the Group made an

announcement to general

customers in front of its factory.

STA required field

latex as a raw material

for the production of

Concentrated Latex.

The purchase price

was at the market


by the procurement

department of the


of purchasing raw

materials from


Part 1 Page 119

Related

Parties


Transaction

Value of

(THB

Consolidated

FY 2011

Transaction

Million)

Consolidated

FY 2012


the Transaction

Opinion(s) of the

Audit Committee

general suppliers.

8. The Board

of Director

of STA and

subsidiaries

consists of:

Mr.

Somwang

Sincharoenkul

Mr.

Viyavood

Sincharoenkul

Mr. Kitichai

Sincharoenkul

Mr. Prasit

Panidkul

Mr. Chaiyos

Sincharoenkul

Mrs.

Promsook

Sincharoenkul

Mr. Anan

Pruksanusak

Directors of STA and

the subsidiaries

Personal

guarantees have

been provided on

the loans that have

been extended to

STA and

subsidiaries by

financial

institutions

1,185.00 1,185.00 Directors of STA and the

subsidiaries provided personal

guarantees on the loans that have

been extended to STA and

subsidiaries by financial

institutions as a requirement of

borrowing specified by certain

financial institutions.

Such support

complied with the

requirements of

sponsor support

agreement and was

made for the benefit

of STA and the

subsidiaries. The

directors acting as

guarantors did not

charge any fee for

providing the personal

guarantee.


Part 1 Page 120

10.2 Audit Committee’s Opinion on Related Party Transactions

The Audit Committee of STA evaluated and expressed its opinion on the above related party

transactions that such transactions were carried out reasonably and were necessary to the

business operation of STA.

10.3 Measures or Procedures for Approving the Related Party Transactions

In the event that STA or its subsidiaries carries out its business with a party who may have a

conflict of interest, whether at present or in the future, or have an interest with STA, the Audit

Committee will express its opinion regarding the necessity and the reasonableness of the price

of such transaction. The Audit Committee will ensure that the terms and conditions of these

transactions are consistent with market practice and the prices charged for these transactions

compared with third party or market prices. If the Audit Committee is unable to evaluate

related party transactions due to lack of expertise in certain areas, STA will arrange an

independent expert or the auditor of STA to give an opinion on such transactions. The Board

of Directors or Audit Committee or the STA shareholders, as the case may be, will use this

opinion from the independent expert as a supplement to form their own conclusion. Those

directors who may have an interest in the transaction are prohibited from voting on such

transactions. In addition, related party transactions will be disclosed in the notes to the STA’s

audited or reviewed financial statements.

At present, STA has a pricing policy for it subsidiaries, associates, joint venture entities and

related companies as follows:

Pricing Policy

Sales of products and raw materials At arm’s length as if it was transacted with a third

party

Revenues from services – logistic

services

At arm’s length as if it was transacted with a third

party

Revenues from services – management

services

At fixed rate pursuant to the contract which is


Interest income from trade credit At arm’s length as if it was transacted with a third

party

Rental income At a contract price which had been agreed upon

and is comparable to the market price

Product purchase At arm’s length as if it was transacted with a third

party

Rental and Service Expenses At arm’s length as if it was transacted with a third

party

Guarantee No fee charged

Fixed assets acquisition At arm’s length as if it was transacted with a third

party

Furthermore, the Board of Directors Meeting resolved to approve in principle business

transactions with general trading conditions or supporting normal business transactions with

general trading conditions between STA or its subsidiaries and the Directors, Executive

Officers or any related parties.

STA and its subsidiaries may purchase raw materials, sell products, provide transportation

services or enter into any other transactions between the Directors, Executive Officers or

related parties, whether at present or in the future. In this regard, STA authorizes the

management to approve such transactions if the purchase price, selling price, transportation

fees or other related transactions is not different from the price offered to other customers

(market price) and the conditions and commercial terms are the same as those an ordinary

person would agree with any party under similar circumstances. The transportation fee shall

be the same as the rate of transportation used by the general public. In respect of the

transportation fee, the fee will be according to the normal market rate, but shall not be more


Part 1 Page 121

than 10% compared with the fee paid by other trade partners. In addition, STA shall prepare a

report on the summary of the transactions every quarter to present to the Board of Directors

Meeting or upon the request of the Board of Directors.

10.4 Policy on Future Related Party Transactions

In the event that STA engages in related party transactions in the future, STA will ensure that

such transactions are carried out in compliance with the SEC Act, the Securities Law of

Singapore, regulations, notifications, orders or rules of the SET and SGX-ST. In addition,

STA must also comply with the Thai GAAP on disclosure rules related to related party

transactions and other requirements as specified by the Institute of Certified Accountants of

Thailand and the Company’s policy or other relevant laws.

In addition, when STA enters into related party transactions, STA will seek the Audit

Committee’s opinion on the reasonableness of such transactions. In the event that the Audit

Committee is unable to evaluate related party transactions due to lack of expertise in certain

areas, the Committee may for arrange an independent expert, such as auditor or independent

appraiser, to give opinion on the transactions. The opinion of the Audit Committee or the

independent expert will be used by the Company’s Board of Directors or shareholders, as the

case may be, for making a decision to ensure that these related party transactions are carried

out without any conflict of interest and for the best interest of all shareholders.


Part 1 Page 122

11. MANAGEMENT DISCUSSION AND ANALYSIS

11.1 Summary of auditor report

Mrs. Unakorn Phruithithada, Certified Public Accountant (Thailand) No. 3257, the audit partner of

PricewaterhouseCoopers ABAS Limited, has been in charge of the auditing of consolidated and company

financial statements during 2010 – 2012. She was of an opinion that the consolidated and company

financial position as at 31 December 2012, 2011, and 2010, and the consolidated and company results of

operations and cash flows for the year then ended of Sri Trang Agro-Industry Public Company Limited

and its subsidiaries presented fairly in accordance with generally accepted accounting principles.

11.2 Financial Statement

11.2.1 Statements of Financial Position

(Unit : Baht million)

Statements of Financial Position 31 Dec 2012 31 Dec 2011 31 Dec 2010

Assets

Current assets

Cash and cash equivalents 1,534.0 2,273.0 1,774.0

Derivative financial instruments 100.1 329.3 459.6

Trade accounts receivable and other receivables, net 6,511.3 7,787.4 6,239.8

Amounts due from futures brokers 384.5 406.4 135.1

Inventories - net 13,151.6 17,336.6 20,282.4

Other current assets 289.4 198.9 60.2

Total current assets 21,970.9 28,331.7 28,951.0

Non-current assets

Long-term loan to an associate 60.8 62.9 -

Fixed deposits pledged as collateral 99.5 143.5 125.4

Investments in associates 3,456.1 3,122.6 2,615.4

Investment in a joint venture 489.3 456.5 325.3

Available-for-sale investments 59.1 43.7 46.3

Property, plant and equipment, net 10,034.3 7,475.6 5,213.4

Intangible assets, net 21.4 24.2 21.7

Investment properties 160.4 102.3 48.0

Witholding tax deducted at source 169.7 76.6 143.3

Deferred income tax assets 144.7 228.7 130.3

Other non-current assets 29.8 35.0 35.6

Total non-current assets 14,725.2 11,771.5 8,704.7

Total assets 36,696.2 40,103.2 37,655.8

Liabilities and shareholders’ equity

Current liabilities

Trade accounts payable and other payables 2,428.5 2,543.7 3,042.1

Short-term loans from financial institutions 12,173.0 15,425.6 20,452.6

Current portion of long-term loans from financial

institutions

114.0 120.0 597.6

Current portion of finance lease liabilities 9.8 11.5 17.2

Derivative financial instruments 164.2 1,112.2 493.5

Current income tax liabilities 8.2 192.4 119.7

Other current liabilities 45.3 65.2 64.9

Total current liabilities 14,943.1 19,470.6 24,787.6

Non-current liabilities

Long-term loans from financial institutions 400.9 314.9 2,226.1

Debentures 2,150.0 2,150.0 -

Finance lease liabilities 5.6 12.3 22.9


Part 1 Page 123

11.2.2 Statements of Comprehensive Income


Statements of Financial Position 31 Dec 2012 31 Dec 2011 31 Dec 2010

Deferred income tax liabilities 171.3 19.8 138.4

Provision for post employment benefit obligations 88.5 104.8 89.3

Total non-current liabilities 2,816.2 2,601.7 2,476.7

Total liabilities 17,759.4 22,072.3 27,264.3

Shareholders’ equity

Issued and paid-up share capital 1,280.0 1,280.0 1,000.0

Premium on share capital 8,551.0 8,551.0 1,123.8

Deduction arising from acquisition of additional

interest in subsidiaries from non-controlling

interests

(173.1) (173.1) (173.1)

Revaluation surplus, net of accumulated

depreciation

1,176.4 833.2 850.0

Unrealised gain on available-for-sale investments 13.5 0.6 3.0

Actuarial gains on defined employee benefit plan 23.1 - -

Cumulative currency differences on translating

financial information

(347.9) (120.5) (283.8)

Retained earnings

Appropriated - legal reserve 128.0 128.0 100.0

Unappropriated 8,201.0 7,437.3 7,729.4

Total parent’s shareholders’ equity 18,851.9 17,936.4 10,349.3

Non-controlling interests 84.9 94.4 42.2

Total shareholders’ equity 18,936.8 18,030.9 10,391.5

Total liabilities and shareholders’ equity 36,696.2 40,103.2 37,655.8

Statements of Comprehensive Income 2012 2011 2010

Revenues from sales of goods and services 99,639.1 133,703.8 83,845.3

Cost of sales and services (94,864.0) (127,941.3) (78,678.5)

Gross profit 4,775.1 5,762.5 5,166.8

Other income 363.9 165.2 77.2

Selling expenses (2,888.0) (3,199.9) (1,780.7)

Administrative expenses (1,033.4) (1,032.4) (576.5)

Gains (loss) on exchange rates 815.1 (22.7) 925.5

Other gain (loss) - net (340.7) 505.7 (10.4)

Operating profit 1,691.9 2,178.4 3,801.8

Share of profit of investments in associates and a

joint venture

526.8 648.9 702.8

Profit before net financial costs and income tax 2,218.7 2,827.3 4,504.7

Finance income 15.2 16.2 6.2

Finance costs (709.7) (885.0) (397.7)

Finance costs - net (694.5) (868.8) (391.5)

Profit before income tax 1,524.2 1,958.5 4,113.2

Income tax expenses (145.7) (629.2) (272.7)

Profit for the year 1,378.5 1,329.3 3,840.5

Owners of the parent 1,378.9 1,306.2 3,819.6

Non-controlling interests (0.3) 23.0 20.9


Part 1 Page 124

11.2.3 Statements of Cash Flows


Statements of cash flows 2012 2011 2010

Cash flows from operating activities

Profit before income tax 1,524.2 1,958.5 4,113.2

Adjustments for:

Unrealised (gain) loss on foreign currency

translations

(57.2) 139.8 (462.7)

Unrealised (Gain) loss from revaluation of

derivative financial instruments

(718.8) 749.0 79.7

Allowance for (reversal of) impairment of

trade accounts receivable

41.2 31.2 (36.4)

Allowance for (reversal of) inventory cost in

excess of net realisable value

(753.0) 869.6 (1.0)

Allowance for impairment of other receivables

- non-controlling interests

- 18.4 -

Provision for post-employment benefit

obligations

14.1 17.5 15.8

Depreciation 612.3 476.1 366.0

Amortisation 8.8 7.1 6.0

Loss on asset revaluation 15.6 5.2 -

Finance costs 709.7 885.0 397.7

Dividend income (1.3) (1.2) (17.6)

Share of profit of investments in associates

and a joint venture

(526.8) (648.9) (702.8)

Gain from revaluation of investment

properties

(33.5) (15.4) -

(Gain) loss on disposal and write-off of

property, plant and equipment and intangible

assets

(11.5) (8.0) 6.7

Changes in operating assets and liabilities:

(Increase)/decrease in operating assets

Trade accounts receivable and other

receivables

1,234.9 (1,605.7) (1,946.3)

Amounts due from futures brokers 22.0 (271.4) 177.5

Inventories 4,938.1 2,076.2 (10,108.2)

Other current assets 37.3 (98.7) (18.2)

Other non-current assets (7.6) 0.7 (25.8)

Increase/(decrease) in operating liabilities

Trade accounts payable and other payables (111.9) (488.5) 1,068.0

Other current liabilities (19.9) (1.6) 234.8

Cash (used in)/provided by operating

activities

6,916.7 4,095.1 (6,853.9)

Interest paid (714.5) (878.2) (390.2)

Income tax paid (414.8) (628.2) (284.9)

Employee benefits paid (2.2) (2.0) -

Net cash (used in)/provided by operating

activities

5,785.2 2,586.7 (7,528.9)

Cash flows from investing activities

Cash paid for long-term loans to an associate - (62.9) -

(Increase) Decrease in fixed deposits at

financial institutions

- - 0.3


Part 1 Page 125

Statements of cash flows 2012 2011 2010

(Increase) decrease in fixed deposits pledged

as collateral

44.0 (18.0) (42.0)

Cash paid for purchases of available-for-sale

investments

(0.2) (0.1) (0.0)

Dividends received 136.7 75.8 749.0

Cash paid for investments in subsidiaries and

associates (8.0) (30.3)

-

Proceeds from disposal of property, plant and

equiment and intangible assets

62.0 162.5 37.5

Cash paid for purchases of property, plant and

equipment and intangible assets

(2,927.6) (2,853.5) (1,397.3)

Cash paid for purchases of investment

property

(27.3) (6.8) -

Proceeds from a decrease in share capital of an

associate

- - 19.1

Net cash used in investing activities (2,720.3) (2,733.4) (633.4)

Cash flows from financing activities

Increase/(decrease) in short-term loans from

financial institutions

(3,235.5)

(4,854.1) 8,163.5

Proceeds from long-term loans 200.0 62.3 1,609.6

Repayments of long-term loans (120.0) (2,695.9) (192.4)

Proceeds from issuance of debentures - 2,150.0 -

Payments on finance lease liabilities (8.3) (21.9) (16.8)

Dividends paid to minority interests - - (8.0)

Dividend payment (640.0) (1,600.0) (600.0)

Proceeds from capital increase from non-

controlling interest

- 7.2 -

Proceeds from issuance of new ordinary

shares

- 8,034.9 -

Costs directly attributable to the issue of new

shares

- (436.7) -

Net cash (used in)/provided by financing

activities

(3,803.9) 645.7 8,955.9

Net increase in cash and cash equivalents (739.0) 499.1 793.6

Cash and cash equivalents at beginning of the

year

2,273.0 1,774.0 980.4

Cash and cash equivalents at end of the year 1,534.0 2,273.0 1,774.0

11.2.4 Financial ratios

Financial Ratios 2012 2011 2010

Liquidity Ratios

Current ratio Times 1.47 1.46 1.17

Quick ratio Times 0.54 0.52 0.32

Cash flow liquidity ratio Times 0.34 0.12 (0.39)

Account receivable turnover1 Times 14.67 20.38 17.05

Average collection period Days 24.55 17.67 21.11

Inventory turnover2 Times 6.22 6.80 5.17

Inventory period Days 57.85 52.93 69.68

Account payable turnover3 Times 50.17 55.75 38.54

Average payment period Days 7.18 6.46 9.34

Cash Cycle Days 75.22 64.14 81.45

Profitability Ratios


Part 1 Page 126

Financial Ratios 2012 2011 2010

Gross profit margin (%) 4.79 4.31 6.16

Operating profit margin (%) 1.70 1.63 4.53

Operating cashflow to operating profit

ratio

(%)

3.42 1.19 (1.98)

Net profit margin (%) 1.38 0.98 4.56

Return on equity (ROE)4 (%) 7.46 9.19 43.01

Efficiency Ratios

Return on assets (ROA)5 (%) 3.59 3.36 12.57

Return on fixed assets6 (%) 22.74 28.09 88.50

Fixed assets turnover ratio7 Times 11.38 21.07 17.73

Total assets turnover ratio8 Times 2.60 3.44 2.76

Financial Leverage Ratios

Net debt to equity ratio Times 0.86 1.10 2.45

Debt to equity ratio Times 0.94 1.22 2.62

Interest coverage ratio Times 9.36 4.63 (17.25)

Debt service coverage ratio Times 0.83 0.21 (3.43)

Dividend payout ratio (%) 46.41 49.00 41.89

Notes:

1. Computed by dividing sales of goods and services by average trade accounts receivable 2. Computed by dividing cost of sales and services by average inventories 3. Computed by dividing cost of sales and services by trade accounts payable 4. Computed by dividing net profit for the year (attributable to owners of the parent) by average shareholders’ equity 5. Computed by dividing net profit for the year (attributable to owners of the parent) by average total assets 6. Computed by dividing summation of net profit for the year (attributable to owners of the parent) and depreciation by average fixed assets 7. Computed by dividing sales of goods and services by average fixed assets 8. Computed by dividing total revenues by average total assets

11.2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial Result Overview

Year 2012 has been another challenging year. Amidst lacklustre demand environment, Natural Rubber

supply reduction from ITRC, and rubber price intervention of Thai Government, the Group delivered an

industry record sales volume, which was the highest volume since our inception. Our revenues from sales

of goods and services, however, declined from lower average selling price due to the slowdown in

economy of many countries. Since Q3 2012, a variety of easing measures for economic stimulus of giant

countries has been favourable to rubber market sentiment. Our increase of net profit margin compared

with the previous year was primarily attributable to 1) unrealised gain from financial derivative

instruments for foreign currency exchange as a result of an appreciation of Thai Baht against US dollar at

the end of the year, 2) the reversal of inventory allowance from upward trend of NR price in the final

quarter of the year, 3) the decrease in selling expenses which mainly came from lowered cess rate from

Baht 5 to 3 per kg. as F.O.B price of Natural Rubber during the second half of 2012 was less than Baht

100 per kg., 4) the decrease in finance costs as a result of less amount of short-term loan due to lower NR

price, 5) a decrease in income tax expenses from lower corporate income tax rate and BOI benefit, and 6)

the increase in other income from cess refund which was our one time revenue.


Part 1 Page 127

Income Statement Overview

Unit: Baht million

FY 2012 FY 2011 % YoY Q4 2012 Q4 2011 % YoY

Revenue from sale of goods and services 99,639.1 133,703.8 -25.5% 22,794.2 28,135.8 -19.0%

Cost of sales and services (net) (94,864.0) (127,941.3) -25.9% (21,404.9) (27,635.5) -22.5%

Gross profit 4,775.1 5,762.5 -17.1% 1,389.2 500.3 177.7%

SG&A (3,921.4) (4,232.3) -7.3% (952.6) (1,162.1) -18.0% Other income 363.9 165.2 120.2% 42.1 49.2 -14.5%

Gains/(Losses) on exchange rate 815.1 (22.7) 3692.1% 164.9 98.3 67.8%

Other gains/(losses) (net) (340.7) 505.7 -167.4% 40.1 235.1 -83.0%

Operating profit 1,691.9 2,178.4 22.3% 683.7 (279.2) 344.9%

Share of profit from investments in associates and a

joint venture 526.8 648.9 -18.8% 102.0 62.1 64.3%

EBITDA 2,839.8 3,310.6 -14.2% 950.3 (80.5) 1280.0%

EBIT 2,218.7 2,827.3 -21.5% 785.6 (217.2) 461.8%

Finance costs (net) (694.5) (868.8) -20.1% (143.1) (274.9) -47.9% Income tax (145.7) (629.2) -76.8% (7.7) (160.3) -95.2%

Net Profit for the period 1,378.5 1,329.3 3.7% 634.8 (652.3) 197.3%

Attributed to owners of the parent 1,378.9 1,306.2 5.6% 635.5 (647.6) 198.1% Attributed to non-controlling interests

(0.3) 23.0 -101.5% (0.7)

(4.7) -85.7%

In 2012, total sales of goods and services was Baht 99,639.1 million, decreased by 25.5% YoY. The

decline of sales was due mainly to the decrease in average selling price of 27.5%, despite being offset by

the increase in sale volume of 2.5%. The uncertainties of global economy from prolonged sovereign debt

in Europe, the slow recovery of US economy, and the slower down of economic in the PRC have affected

overall market sentiment and pressured NR prices to move in downward trend during the first eight

months of 2012. This resulted to a decrease in average selling price in comparison with the previous year.

Thanks to our extensive and strong sales and distribution networks, our 2012 sale volume growth rate was

higher than the growth rate of 2012 world tyres production.

In terms of sale volume, the Group sold 975,604 tons of Natural Rubber in 2012, the highest record since

our inception amidst the uncertainty of world economic conditions, or increased by 2.5% YoY which was

higher than a stagnancy of world NR consumption in 2012. Sale volume to China, our main market

contributed 43.3% of our total sale volume, continued a robust growth of 33.1% YoY to reach 422,548

tons in 2012. This resulted from the expansion of its demand which was in line with the moderate

economy improvement and a switch from tightening policy to easing policy to cope with the slower down

economy. However, a fall in NR consumption of the rest of the world was due to the deteriorating level of

the world economic activities while most customers deferred their purchase order during negative market

sentiment.

Gross profit in 2012 was recorded at Baht 4,775.1 million, down 17.1%. Our gross profit margin of 2012

was 4.8%, increased from last year at 4.3 %. The improvement of gross profit margin was partly due to the

reversal of inventory allowance amounted Baht 753.0 million, thanks to price improvement and positive

momentum at the final quarter of 2012 led by stimulus packages of major countries. Assuming the

reversal of inventory allowance was not made, our gross profit would have been Baht 4,022.1 million and

gross profit margin would have been at 4.0% which was lower than the adjusted gross profit margin of

2011 at 5.0%. The decline in adjusted gross profit margin compared to the previous year was mainly

attributable to global economic turbulence from EU, the US, Japan, and the PRC which have adversely

affected market sentiment and consumer confidence during the year. Moreover, a volatile price of Natural

Rubber in downward direction throughout the first eight months of 2012 coupled with global sluggish

demand also directly impacted our adjusted gross profit margin.

Operating profit in 2012 amounted to Baht 1,691.9 million, down from operating profit of Baht 2,178.4

million in 2011, or 22.3% YoY. Operating profit margin was 1.7%, increased from 1.6% in 2011. An

improvement in operating profit margin was due principally to 1) an increase in gross profit margin, 2)

the increase in other income largely contributed by cess refund* of Baht 238.4 million, 3) the decrease in

selling expenses which mainly came from lowered cess rate from Baht 5 per kg. to Baht 3 per kg. as F.O.B

price of NR during second half of 2012 was less than Baht 100 per kg., and 4) unrealised gain on foreign

exchange as a result of an appreciation of Thai Baht against US Dollar throughout second half of 2012,


Part 1 Page 128

although partially offset by loss from financial derivative instruments for rubber trading.

Note: *Cess refund from NR inventories that ORPAF has examined during 20 - 30 September 2010,

which is the period before the new cess rate (5 Baht per Kg.) come into effect, will be allowed to pay cess

at the former rate (1.4 Baht per Kg.).

Net profit in 2012 was Baht 1,378.9 million rose by 5.6% YoY. Net profit margin was 1.4%, increased

from 1.0% in 2011. This was due to the decrease in finance costs as a result of less amount of short-term

loan since an average NR price of 2012 declined by 30.0% YoY and a decrease in income tax expenses

from the lower corporate income tax rate and BOI benefit, even though partially offset by a decrease in

share of profit of investments in associates and a joint venture due mainly to the decrease in net profit of

our examination gloves business.

Key Factors Affecting the Company’s Operation

1. Price and Volatility of Natural Rubber

Daily Price Movement of TSR20 and RSS3 at SICOM

Price and volatility of Natural Rubber directly affect our revenues and profitability. In 2012, NR price was

relatively volatile and continued to move in downward direction from Q2 2011 to hit the bottom of 240

US cent per kilogram in mid-August 2012. However, easing policies to stimulate the economy of major

countries and global NR supply reduction agreed by International Tripartite Rubber Council (ITRC) have

positively improved rubber market sentiment and NR price from mid-Q3 2012 onwards. Such

improvement of NR price at the final quarter of 2012 enabled us to reverse the inventory allowance

amounted Baht 753.0 million which consequently improved our gross profit in 2012.

The NR price are affected by a number of factors including 1) world economic conditions which directly

affected automobile and tyre industry, 2) demand & supply of Natural Rubber, 3) exchange rate between

exporting countries such as Thai Baht, Indonesian Rupiah, and Malaysia Ringgit against US dollar and

Japanese Yen 4) government intervention, and 5) oil and synthetic rubber price.

US Cent : Kilogram

RSS TSR


Part 1 Page 129

Price Movement of TSR20 and RSS3 at Singapore Commodity Exchange Limited (SICOM) during 2011-

2012

(Unit : US dollar per ton)

RSS3 TSR20

2011 2012 %Change 2011 2012 %Change

Q1 Average 5,688 3,861 -32.1% 5,216 3,695 -29.1%

Q2 Average 5,290 3,589 -32.2% 4,668 3,297 -29.4%

Q3 Average 4,652 2,971 -36.1% 4,564 2,752 -39.7%

Q4 Average 3,598 3,097 -13.9% 3,579 2,884 -19.4%

Year Average 4,802 3,378 -29.7% 4,504 3,155 -30.0%

Closing price as at

31 December 3,275 3,240 3,270 2,988

2. Foreign Exchange rate

Historical Exchange Rate of Thai Baht against US dollar

The fluctuations between Thai baht and US Dollars could directly affect our revenues since approximately

83.0% of our total revenues is denominated in US Dollars while our financial reporting currency is in Thai

Baht. In order to mitigate this risk, the Group, therefore, use forward and options of foreign exchange

contracts to hedge our foreign exchange exposures. The mark-to-market of financial derivatives will be

recognised as unrealised gain/loss on foreign exchanges.

Overall, Thai Baht has weakened against US Dollar from an average of 30.2490 Baht/US dollar in 2011 to

30.8445 Baht/US dollar in 2012, representing a depreciation of 2.0%. However, due to the capital inflow

to Asian countries led by stimulus packages of the US and Japan since September 2012 that created a

strong appreciation of Thai Baht towards the end of 2012. When marking-to-market at the end of the year,

the Company posted gains on foreign exchange of Baht 815.1 million in 2012 compared with losses on

foreign exchange of Baht 22.7 million in 2011.

Thai Baht : USD


Part 1 Page 130

3. Finance costs

The key factors that affect our finance costs are interest rate, NR price, sale volume, and capacity

expansion plan. In 2012, finance costs decreased 19.8% YoY to Baht 709.7 million due mainly to less

amount of short-term loan since average NR price of 2012 declined by 30.0% YoY. Also, being a leader

in rubber industry allows us to better access to cheaper source of fund.

Graph below exhibited our average interest rates during 2011-2012, which were lower than the average

Minimum Loan Rate (MLR) of three large commercial banks; Bangkok Bank, Kasikorn Bank, and Siam

Commercial Bank and closed to Bank of Thailand’s policy rate.

4. Shares of Profit from Investment in Affiliates

In 2012, the Company received share of profit from investments in affiliates and joint venture

companies in total of Baht 526.8 million of which 52.5% contributed by glove business, 19.8% by

Natural Rubber processing business, and 17.5% by high pressure hydraulic hoses business. Share

of profit from investment in affiliates decreased by 18.8% compared to the previous year due

mainly to the decrease in net profit of our examination gloves business as a result of the switching

from NR gloves to NBR, the decrease in net profit of Natural Rubber processing business, and the

decrease in net profit of high pressure hydraulic hose business from sluggish demand during a

slowdown of industrial sector in China.

Business Segmentation Analysis

Revenue breakdown by product segment (Baht million)

FY 2012 FY 2011 % YoY Q4 2012 Q4 2011 % YoY

RSS 13,591.0 24,942.8 -45.5% 2,750.2 5,144.1 46.5%

% 13.6% 18.7% 12.1% 18.3%

TSR 77,499.7 96,138.6 -19.4% 18,070.2 20,380.1 11.3%

% 77.8% 71.9% 79.3% 72.4%

Concentrated Latex 6,436.4 10,236.6 -37.1% 1,462.1 2,058.6 29.0%

% 6.5% 7.7% 6.4% 7.3%

Others(1)

2,112.0 2,385.8 -11.5% 511.7 553.0 -7.5%

% 2.1% 1.8% 2.2% 2.0%

Total revenue 99,639.1 133,703.8 -25.5% 22,794.2 28,135.8 19.0%

Note: (1) Comprises revenue from (i) the sale of dried rubber wood and wood packing products and (ii) the provision of certain services (such as

logistics, research and development and information technology services) to our associates and a joint venture entity as well as other external

third parties. (iii) RSS processing fee for Thai Government recognized from Q3 2012 onwards.

Total sales and services income was Baht 99,639.1 million of which 97.9% or Baht 97,527.1 million

contributed by Natural Rubber Products. Total sales and services income comprised TSR of Baht 77,499.7

million or 77.8%, RSS of Baht 13,591.0 million or 13.6%, concentrated latex of Baht 6,436.4 million or

6.5%, and other products and services including RSS processing fee for Thai Government recognized

MLR 2011

MLR 2012

STA 2011

RP rate 2011

STA 2012

RP rate 2012


Part 1 Page 131

from Q3 2012 onwards, sales of parawood, transportation and engineering services of Baht 2,112.0

million or 2.1%.

Ribbed Smoked Sheet (RSS)

Revenue from the sale of RSS decreased by 45.5% YoY. Such decline was driven by a decrease of both

average selling price by 29.4% and sale volume by 22.8%. The decrease in average selling price was in

line with SICOM price that tilted downward throughout the first eight month of 2012, down 29.7% YoY,

pressured by concerns over global economic slowdown. The decrease in sale volume was partly due to the

switching trend from the use of RSS to TSR by tyre makers and cooperative agreement among Thailand,

Indonesia, and Malaysia (International Tripartite Rubber Council : ITRC) to withdraw Natural Rubber

exports of 300,000 tons during October 2012 to March 2013.

In 2012, our gross profit from the sale of RSS decreased by 65.9% YoY. Gross profit margin lowered

from 2011 as a result of downward movement in price and sluggish demand. Moreover, price intervention

scheme of the Thai government to buy rubber from farmers at prices above market prices also affected our

raw materials cost to some extent.

Technically Specified Rubber (TSR)

Revenue from the sale of TSR decreased by 19.4% YoY due mainly to a decrease in average selling price

of 27.6%, despite offset by the increase in sale volume of 11.3% YoY. The decrease in average selling

price of TSR products was in tandem SICOM price. However, our strategy to expand our market share in

China, the world largest NR consuming country, made our sale volume grew at much faster rate compared

to the growth rate of global tyre production in 2012 at 1%*. The expiration of import tariff of the US on

Chinese car and light-truck tires in September 2012 also benefited automobile and tyre industry in China

which resulted in the rising in demand of TSR.

Source*: The World Rubber Industry Outlook, Review and Prospects to 2022 by International Rubber

Study Group (IRSG), December 2012

In 2012, gross profit margin of TSR grew 9.5% YoY. Gross profit margin also improved from 2011 as

tyre makers have restocked after the recovery of NR prices from mid-Q3 2012 as a result of more positive

market sentiment. Furthermore, the improvement of gross profit margin was due to a reversal of inventory

allowance for TSR of Baht 650.5 million in 2012 as compared to an inventory allowance of Baht 732.3

million in 2011.

Concentrated Latex

Revenue from the sale of Concentrated Latex was down 37.1% YoY. The decrease was attributable to a

decline in average selling price of 27.4% and a decline in sale volume of 13.4%. The decrease in sale

volume was due mainly to a switching trend of glove makers from using Natural Rubber as raw material

for their production to NBR (synthetic rubber) since the price of concentrated latex has been generally

higher than Butadiene Nitrile in the past few years.

Our gross profit from the sale of Concentrated Latex in 2012 contracted by 58.5% YoY. Gross profit

margin also lowered from the previous year due to sluggish demand from glove industry.

Consolidated Balance Sheet

Current assets

Current assets decreased by Baht 6,360.8 million, or 22.5%, from Baht 28,331.7 million for the year end

2011 to Baht 21,970.9 million for the year end 2012 which due primarily to a decrease in inventories of

Baht 4,185.0 million from lower NR price and inventory level at the end of 2012, a decrease in trade

accounts receivables and other receivables of Baht 1,276.1 million due mainly to the decrease in average

selling price of NR products, a decrease in cash and cash equivalent of Baht 739.0 million, and a decrease

in derivative financial instruments of Baht 229.2 million from lowered unrealised gain from mark-to-

market of physical forward derivatives as well as rubber futures, which were partially offset by an increase

in other current assets of Baht 90.5 million.


Part 1 Page 132

At the end of 2012, 98.9% of our accounts receivable were not yet due or overdue less than 1 month while

0.4% was overdue by more than 1 year. The allowance for doubtful debts was 1.7% of total accounts

receivable.

Non-current assets

Non-current assets increased by Baht 2,953.7 million, or 25.1%, from Baht 11,771.5 million for the year

end 2011 to Baht 14,725.2 million for the year end 2012 which primarily consists of an increase in

property, plants and equipments of Baht 2,558.8 million (net of depreciation and write-off) for the

construction of our new factories in Udorn Thani, Ubonratcha Thani, Phitsanulok and for the expansion of

existing factories in Palembang (Indonesia) as well as for acquisition of landbank for rubber plantation, an

increase in investment in associates of Baht 333.5 million from increase of their operating results, an

increase in withholding tax deducted at source of Baht 93.1 million, and an increase in investment

properties of Baht 58.1 million, which partially offset by a decrease in deferred income tax assets of Baht

84.0 million and a decrease in fixed deposits pledged as collateral of Baht 44.0 million.

Net book value of the Group's land and buildings as at 31 December 2012 (THB million):

Freehold land including land improvements

3,793.1

Leasehold land 218.7

Buildings and structures 2,539.7

Total 6,551.5

Current liabilities

Current liabilities decreased by Baht 4,527.5 million, or 23.3%, from Baht 19,470.6 million for the year

end 2011 to Baht 14,943.1 million for the year end 2012 which was mainly on account of a decrease in

short-term loans of Baht 3,252.6 million due to lower average selling prices of NR products, a decrease in

derivative financial instruments of Baht 948.0 million, a decrease in trade accounts payable and other

payables of Baht 115.2 million due to lower price of raw materials, and a decrease in current income tax

liabilities of Baht 184.2 million.

Non-current liabilities

Non-current liabilities increased by Baht 214.5 million, or 8.2%, from Baht 2,601.7 million for the year

ended 2011 to Baht 2,816.2 million for the year ended 2012 which was primarily due to an increase in

deferred income tax liabilities of Baht 151.5 million and an increase in long-term loans of Baht 86.0

million (net of current portion).

Shareholders’ equity

Equity increased by Baht 905.9 million, or 5.0%, from Baht 18,030.9 million for the year end 2011 to

Baht 18,936.8 million for the year end 2012 due mainly to net profit during the year, despite offset by

dividend payment of Baht 640.0 million.

Consolidated Cash Flow

As at 31 December 2012, the Group had cash and cash equivalents of Baht 1,534.0 million, a decrease of

Baht 739.0 million, or 32.5% from the balance of Baht 2,273.0 million as at 31 December 2011.

The Group generated cash flows from operations before net change in operating assets and liabilities of

Baht 823.8 million. The Company generated cash amounted Baht 6,092.9 million arising from change in

our operating assets and liabilities which was due primarily to the decrease in inventories of Baht 4,938.1

million and the decrease in trade accounts receivable and other receivables of 1,234.9 million, which were

partially offset by the decrease in trade accounts payable and other payables of 111.9 million.

The Company paid benefit, interest, and income tax of Baht 1,131.5 million. Overall, the Company had

net cash flows of Baht 5,785.2 million provided by operating activities.


Part 1 Page 133

Investing activities utilised net cash flows of Baht 2,720.3 million, principally from investment in

property, plants and equipments of Baht 2,927.6 million for the construction of our new factories in Udorn

Thani, Ubonratcha Thani, Phitsanulok and for the expansion of existing factories in Palembang

(Indonesia) as well as for acquisition of landbank for rubber plantation. This was partially offset by

dividend received of Baht 136.7 million from associate and joint venture companies and proceeds from

disposal of fixed assets and intangible assets of Baht 62.0 million.

Net cash flow used in financing activities amounted to Baht 3,803.9 million consisted of the decrease of

short-term loans from financial institutions of Baht 3,235.5 million, repayment of long-term loans of Baht

120.0 million, and dividend payment of Baht 640.0 million, which was partially offset by proceeds from

long-term loans of Baht 200.0 million.

Source of Fund

In 2012, our capital expenditure was Baht 2,922.8 million, principally comprised Baht 1,616.5 million for

construction and expansion of TSR block rubber facilities and Baht 1,161.0 for the expansion of rubber

plantation business. Our 4 mains source of fund consisted of cash flows from operations, short-term and

long-term facilities from financial institutions, debentures, and proceeds from IPO in Singapore of SGD

336.0 million. As at 31 December 2012, proceeds from IPO of SGD 101.8 million has not yet been

utilised while only 30% of total loan facilities were utilised. Consequently, our debt to equity ratio was

less than one time, a very conservative level compared with our competitors in the industry.

Financial Ratios

Current ratios

Current ratio is calculated by dividing total current assets by total current liabilities. As at 31 December

2012 and 31 December 2011 our current ratios were 1.47 and 1.46 times, respectively. The marginal

increase in our current ratio was due primarily to a decrease in total current liabilities at a faster rate than a

decrease in total current assets.

Fixed asset turnover ratio

Fixed asset turnover ratio is calculated by dividing sales of goods and services by average property, plant

and equipment (net). As at 31 December 2012 and 31 December 2011, our fixed asset turnovers were

11.38 and 21.07 times, respectively. A decrease in fixed asset turnover ratio was due mainly to an increase

in property, plant and equipment and a decrease in revenues from NR products as a result of lower average

selling prices.

Return on assets ("ROA")

ROA is calculated by dividing net profit (parent company) for the year by average total assets. As at 31

December 2012 and 31 December 2011, our ROA were 3.59% and 3.36%, respectively. An improvement of

ROA was due to a decrease in total assets and an increase in net profit.

Return on equity ("ROE")

ROE is calculated by dividing net profit (parent company) for the year by average total equity. As at 31

December 2012 and 31 December 2011, our ROE were 7.46% and 9.19%, respectively. The decrease in ROE

was due mainly to an increase in average total equity resulted from the equity offering in Singapore in

2011.

Debt to equity ratio ("D/E")

D/E is calculated by dividing total debt by total equity. As at 31 December 2012 and 31 December 2011,

our D/E were 0.94 and 1.22 times, respectively. The decrease in D/E was due mainly to the decrease in

short-term loans from financial institutions as the Group required less working capital during a downward

movement of Natural Rubber price during 2012.


Part 1 Page 134

11.3 Business Outlook

Industry in general

2011 2012f 2013f

%Global Growth (GDP) 3.9% 3.2% 3.5%

Advance economies 1.6% 1.3% 1.4%

Emerging market and developing economies 6.3% 5.1% 5.5%

China (major NR consumer) 9.3% 7.8% 8.2%

Vehicle production (mil. Unit) 80 85 90

% change 3.1% 6.4% 5.7%

Tyre production (mil. Unit) 1,584 1,600 1,686

% change 7.2% 1.0% 5.4%

NR consumption (‘000 tons) 10,944 10,947 11,592

% change 1.3% 0.0% 5.9% Source : IMF and The World Rubber Industry Outlook forecasted by International Rubber Study Group (IRSG), December 2012

The world economy is the primary determinant of the world rubber outlook. According to International

Monetary Fund (IMF) forecast as of January 2013, global economy is expected to marginally improve in

2013 at the rate of 3.5%, a moderate uptick from 2012 at 3.2%. Emerging markets was projected to grow

at 5.5% whereas economy of China, the world largest NR consumer, was forecasted to grow at 8.2% in

2013.

After a synchronised slowdown of global economy during the past year, global economic prospects and

financial conditions have shown the signs of stabilization in the recent months. Easing policies of major

countries in advanced and emerging markets have rebuilt consumer confidence and created more positive

market sentiment for NR consumption. Overall NR consumption in 2013 is expected to pick up from a

stagnant growth in the previous year to grow at 5.9%, in line with tyre production and new vehicle

production. Healthier economic outlook of China, the world largest consuming country of Natural Rubber

with one-third of global demand, in 2013 would also support growth of global NR consumption.

High volatility and downward movement of NR price during Q2 2011 to mid-Q3 2012 have eliminated a

number of speculative investors. An approximately 25% jump of NR price as compared to the bottom

price in mid-August 2012 so far has brought the NR price back to its equilibrium level. Better growth

prospect of main consuming countries will support the balance of global NR demand and supply as well as

create more price stability. In the short to medium term under this economic climate, there should be less

volatility in NR price and NR price should be dictated by fundamental demand & supply.

The expiration in March 2013 of both supply reduction through the Agreed Export Tonnage Scheme

(AETS) of ITRC and market intervention of Thai Government to buy rubber at the above market price

should not largely affect NR price as the wintering period in Thailand will start from February to May

where the low season of supply is. Moreover, NR price should benefit from the movement of Thai baht

and Japanese Yen against US dollar as recent stimulus policies of key markets have spurred capital flows

into emerging markets.

Demand & Supply Balance

World Natural Rubber production and consumption during 2011 - 2013

Unit : 000’tons 2011 2012 2013

NR production 11,004 11,406 11,771

% change 5.5% 3.6% 3.2%

NR consumption 10,944 10,947 11,592

% change 1.3% 0.0% 5.9%

NR Balance 60 459 179 Source: The World Rubber Industry Outlook forecasted by International Rubber Study Group (IRSG), December 2012


Part 1 Page 135

According to The World Rubber Industry Outlook forecasted by International Rubber Study Group

(IRSG) in December 2012, overall global’s Natural Rubber consumption in 2013 is expected to be

11,592,000 tons, up 5.9% YoY. The increase in demand coincides with growth of tyre industry which

accounted for 70% of global Natural Rubber demand. Most of growing demand will primarily come from

emerging countries, namely China and India. Demand from the US and EU countries are also projected to

pick up in 2013 after a negative growth in the previous year. Meanwhile, IRSG forecasted that total global

Natural Rubber production will be increased by 3.2% YoY to 11,771,000 tons. Thailand and Indonesia

continue to be major NR suppliers of the world. The additional NR supply is partly contributed by new

planting and replanting of rubber trees during the boom-cycle of NR price in mid-2000s. Besides, more

remunerative average NR price in comparison with the previous year would improve tapping frequency of

rubber farmers.

Under gradual economic recovery prospect, NR demand and supply should shift to more equilibrium

level. IRSG anticipated that in 2013 Natural Rubber supply will be slightly outstrip NR demand by

179,000 tons, or 1.5% of global NR consumption, improved from that of 459,000 tons in the previous

year.

Progress of our businesses in value chain

Our upstream integration through rubber plantation that the Group has earmarked for future entry remains

on track. As at 31 December 2012, the Group has acquired land approximately 27,400 rai (4,384

hectares), most of them are in the North of Thailand. Approximately 460 rai (74 hectares) are under

tapping, 12,675 rai (2,028 hectars) have been planted and will be mature for tapping from 2016 onwards.

The vacant land of 14,265 rai (2,282 hectars) will be planted during raining season of the next year. The

achievement of our plan to have 50,000 rai (8,000 hectars) of rubber plantation in 2014 will depend on the

reasonability of land price and advantages of location as well as sufficiency of saplings. Although the

Group has yet to achieve mature plantation at the necessary scale, the Group believes that the upstream

integration shall further enhance our Natural Rubber supply chain that the Group has capitalized on with

sustainable profitability.

As at 31 December 2012, our optimum annual capacity was registered at industry record at 1.1 million

tons per annum, the highest capacity in the industry. By the end of this year, our production capacity

should be arrived at 1.2 million tons per annum with additional capacity from new TSR plants in the in

Ubon Ratchathani and the expansion capacity of Palembang (Indonesia). The Group aims to reach

capacity of 1.5 million tons per annum in the next couple of years. The achievement of capacity ramp-up

would depend on several factors such as global demand-supply situations and the earning of necessary

permits/licenses of operation. Thailand remains to be our primary production base with additional 3 plants

to be completed in different timeline. The Group is also in the process of building new plants in Indonesia

and exploring the opportunity to expand our business in new territories.

11.4 Auditor’s Compensation

Audit Fee

STA paid audit fee to the auditors of STA for the preparation of the 2012 consolidated financial

statements and stand-alone financial statements in amount of Baht 5,315,000. STA paid audit fee for its

subsidiaries in amount of Baht 1,585,000.

Non-Audit Fee

None


Part 1 Page 136

12. RELEVANT INFORMATION

None.


Part 2 Page 1

PART 2

Certification of Accuracy of Information

The Company having carefully reviewed the information contained in this Annual Registration

Statement, hereby certifies that the said information is accurate, complete and true, is not misleading

and does not omit any material information which is required to be disclosed. In addition, the

Company certifies that:

(1) The financial statements and financial information forming a part hereof contain accurate and

complete material information in respect of the financial condition, results of operations and

cash flow of the Company and its subsidiaries;

(2) The Company has arranged an effective disclosure system to ensure that the Company

properly and completely discloses the material information of the Company and its

subsidiaries, and shall be responsible for monitoring to ensure compliance with such system;

(3) The Company has arranged effective internal controls and monitors them to ensure

compliance with such system, and the Company has reported the assessment of internal

control systems as at 23 February 2012, including the deficiency and material change of the

internal control system as well as any wrongful act that may affect the preparation of financial

reports of the Company and its subsidiaries, to the auditor and the Audit Committee.

As evidence that all documents are the same set of documents that the Company certified, the

Company assigned Mr. Kitichai Sincharoenkul to initial all the pages hereof. If any pages do not have

the initial of Mr. Kitichai Sincharoenkul indicated, it shall be deemed that such information has not

been certified by the Company.

Name Position Signature

1. Mr. Prasit Panidkul Vice Chairman - Mr. Prasit Panidkul -

2. Mr. Chaiyos Sincharoenkul Executive Director - Mr. Chaiyos Sincharoenkul -

Name Position Signature

Attorney-in-

fact

Mr. Kitichai Sincharoenkul Executive Director - Mr. Kitichai Sincharoenkul -

.

Sri Trang Agro–Industry Public Company Limited

Enclosure 1

Details of the Executives and Controlling Persons of STA


Page 1

Details of the Executives and Controlling Persons of STA as of 31 December 2012

Name/Position

Age

(Year)

Educational Qualifications Numbers of

shares held

and

Percentage of

Shareholding

Stake in STA

(%) (1)

Family

Relationship

Among

Executives(2)

Work Experiences (Past 5 Years)

Period Position Name of Department/ Company

1 Mr. Viyavood Sincharoenkul

– Chairman and Managing

Director (the authorized director pursuant

to the Company’s Articles of

Association )

57 – Bachelor’s Degree in Chemistry (First Class), Queen

Elizabeth’s College, University of London

– Ph.D. in Chemistry, Queen Elizabeth’s College,

University of London

13.83 – Brother of Mr.

Kitichai

Sincharoenkul

– Brother of Mr.

Paul Sumade Lee

– Father of Mr.

Veerasith

Sinchareonkul

2010 – Present – Chairman – STA

1993 – Present – Managing Director – STA

Present – Director – Rubberland Products

Present – Director – Nam Hua Rubber

Present – Director – Sadao P.S. Rubber

Present – Director – Thai Tech Rubber

Present – Director – SSC

Present – Director – Semperflex Asia

Present – Director – Semperform Pacific

Present – Director – Anvar Parawood

Present – Director – Premier System Engineering

Present – Director – Startex Rubber

Present – Director – Starlight Express Transport

Present – Director – Sri Trang Rubber & Plantation

Present – Director – PT Sri Trang Lingga

2002 – Present – Director – Shanghai Sempermed

2005– Present – Director – Semperflex Shanghai

Present – Chairman – Sri Trang International

Present – Director – Shi Dong Investments

Present

Present

–

–

Director

Director

–

–

Sri Trang USA

Shi Dong Shanghai

Present – Director – Sempermed Singapore

2002 – Present – Director – Sempermed USA

Present – Director – Pattana Agro Futures

2003 – Present

Present

–

–

Director

Director

–

–

Shanghai Semperit

P.T.Star Rubber


Page 2

Name/Position

Age

(Year)


shares held

and

Percentage of

Shareholding

Stake in STA

(%) (1)

Family

Relationship

Among

Executives(2)



1987 – 1993

1985-1987

–

-

Managing Director

General Manager

–

-

Sri Trang Agro-Industry Co., Ltd.

Paktai Rubber Co., Ltd.

2 Mr. Prasit Panidkul

– Vice Chairman

(the authorized director pursuant


Association)

65 – Executive Micro MBA, Thammasat University

– DAP 75/2008 by Thai Institute of Directors Association

0.54 – Cousin of Mr.

Patrawut Panitkul

1993 – Present – Vice–chairman – STA







1987 – 1993 – Vice–chairman – Sri Trang Agro-Industry Co., Ltd. 1986 - 1991 – Member of Trang Provincial

Council,

– Trang Province

1975 - 1997 – Managing Partner – Trang Sahakarn Khonsong Ltd.

3 Mr. Chaiyos Sincharoenkul

– Director



Association )



0.91 None 1993 – Present – Director – STA




Present – Director – Anwar Parawood.






Present – Director – Shanghai Sempermed

Present – Director – Semperflex Shanghai


Present

Present

–

–

Director

Director

–

–

Shi Dong Shanghai

Shanghai Semperit

Present – President – The Thai Rubber Association

2008 - Present – Director – The Federations of Thai Industries


Page 3

Name/Position

Age

(Year)


shares held

and

Percentage of

Shareholding

Stake in STA

(%) (1)

Family

Relationship

Among

Executives(2)



2008 - 2011 – Chairman – The Federal of Thai Industries,

Songkhla Province

1987 – 1993 – Director – Sri Trang Agro-Industry Co., Ltd.

4 Mr. Anan Pruksanusak

– Director



Association )




Chaidet

Pruksanusak and

Mr. Udom

Pruksanusak

1995 – Present – Director – STA




Present – Director – Anwar Parawood




Present

Present

–

–

Director

Director

–

–

Semperflex Shanghai

Sempermed Singapore

5 Mr. Kitichai Sincharoenkul

– Director



Association )

53 – Bachelor in Economics, Thammasart University

– Master of Business Administration, Indiana State

University, United States of America


– SGX Listed Companies Development Programme:

Understanding the Regulatory Environment in

Singapore: What Every Director Ought to Know


Viyavood

Sincharoenkul

and Mr. Paul

Sumade Lee

– Uncle of Mr.

Veerasith

Sinchareonkul

2010 – Present

2002 – Present

–

–

Director and Manager of legal

and administration

Executive Director, STA

Bangkok Branch

–

–

STA

STA

1995 – Present – Director – STA


Present – Director – SSC

Present – Director – Semperflex Asia

Present – Director – Semperform Pacific


2002 – Present – Director – Shanghai Sempermed

2005 – Present – Director – Semperflex Shanghai

Present – Director – Sri Trang International


Present – Director – Sri Trang USA


Page 4

Name/Position

Age

(Year)


shares held

and

Percentage of

Shareholding

Stake in STA

(%) (1)

Family

Relationship

Among

Executives(2)




1998 – Present – Director – Sempermed USA

Present – Director – Pattana Agro Futures

1988 – 2006 – Branch Manager – STA

1984 - 1987 – Credit Department – Citibank

6 Mr. Veerasith Sinchareonkul

– Director

(the authorized director

pursuant to the Company’s

Articles of Association )

28 – Bachelor of Computer Science and Cybernetics, The

University of Reading, United Kingdom


– TLCA Executive Development Program class 10 (EDP

10)

1.75 – Son of Mr.

Viyavood

Sincharoenkul

– Nephew of Mr.

Kitichai

Sincharoenkul and Mr. Paul

Sumade Lee

2010 – Present

Present

Present

Present

Present

–

–

–

–

–

Director

Director

Director

Director

Director

–

–

–

–

–

STA

SSC

Semperflex Asia

Semperform Pacific

Shanghai Sempermed

2008 – Present – Corporate Credit analyst – KASIKORNBANK Public

Company Limited

7 Mr. Paul Sumade Lee

– Director



Association )

58 – Bachelor of Commerce, University of New South

Wales, Sydney, Australia

– Master of Business Administration, International

Institute for Management Development, Lausanne,

Switzerland





Viyavood

Sincharoenkul and

Mr. Kitichai

Sincharoenkul

– Uncle of Mr.

Veerasith

Sinchareonkul

2010 – Present – Director and Marketing

Manager

– STA

2009 – Present – Director – PT Star Rubber

Present – Director – Thai Tech Rubber


2006 – Present – Director – PT Sri Trang Lingga

Present

Present

–

–

Director

Director

–

–

Sri Trang USA

Shi Dong Shanghai

Present – Director and Vice Chairman – Sri Trang International


Page 5

Name/Position

Age

(Year)


shares held

and

Percentage of

Shareholding

Stake in STA

(%) (1)

Family

Relationship

Among

Executives(2)



8 Mr. Prakob Visitkitjakarn

– Independent Director/

Chairman of Audit

Committee/ Chairman of

Remuneration Committee

72 – Bachelor of Science in Business (Honors), Indiana

University, United States of America

– Master of Business Administration, Indiana University,

United States of America

– Audit Committee Program (ACP) 27/2009 by Thai

Institute of Directors Association

Monitoring the Quality of Financial Reporting (MFR)

8/2009 by Thai Institute of Directors Association

– Monitoring Fraud Risk Management (MFM) 1/2009 by

Thai Institute of Directors Association

Chartered Director Class (CDC) 3/2008 by Thai


– Director Certification Program (DCP) 33/2003 by Thai


– Role of the Chairman Program (RCP) 5/2001 by Thai


- SGX Listed Companies Development Programme:



0.04 None 2008 – Present – Chairman of the Audit

Committee, Chairman of

Remuneration Committee,

Independent Director

– STA

2010 – Present – Independent Director and


Committee

– ARIP Public Company Limited

2005 – Present – Director – Lease It Co., Ltd.

1999 – 2011 – Independent Director and


Committee

– Siam City Cement Public Company

Limited

1993 – Present – Independent Director – STA

1999 – 2008 – Audit Committee – STA

2006 – 2008 – Independent Director/Audit

Committee

– Ayudhya Auto Lease Public

Company Limited

1997 – 2002

– Executive Vice President – Bank of Ayudhya Public Company

Limited

9 Mr. Kriang Yanyongdilok

– Independent Director/ Audit

Committee member/

Chairman of the Nomination

Committee/ Remuneration

Committee member

74 – Bachelor of Science in Business Administration (Major

in Accounting), Thammasat University


None None 1999 – Present

Present

–

–


Audit Committee

Certified Public Accountant

(Thailand) No. 3257

– STA

2004 – 2005 – Audit Committee – Oishi Group Public Company

Limited

1985 – 1998 – Provincial Revenue, Area

Revenue Office, Regional

Revenue Office 3

– Revenue Office

1968 – Ombudsman, third class – Revenue Office, Phuket Province

1965 – Class–three government

official

– Office of the Auditor– General of

Thailand


Page 6

Name/Position

Age

(Year)


shares held

and

Percentage of

Shareholding

Stake in STA

(%) (1)

Family

Relationship

Among

Executives(2)



10 Mr. Samacha Potavorn

– Independent Director/ Audit

Committee member/

Nomination Committee

member/ Remuneration

Committee member

69 – Master Degree in Governmental Administration,

Thammasat University

– Thai barrister–at–law





None None 2008 – Present – Independent Director,

Remuneration Committee

member, and Audit

Committee

– STA

2006 – 2008 – Assistant Secretary of

Ministry of Interior

– Ministry of Interior

2003 – 2004 – Governor – Phang–nga province

2002 – 2003 – Legal Counsel – Ministry of Interior

2000 - 2002 – Assistant Permanent

Secretary, Vice–Director of

Southern Border Provinces

Administration Center

– Ministry of Interior

1997 – 2000 – Vice–Governor – Pattalung Province, Trang Province

1996 – 1997 – Permanent Secretary

1984 – 1996 – Sheriff

1969 – 1983 – Assistant District Officer

11 Mr. Neo Ah Chap

– Independent Director

68 – Diploma in Accountancy, Perth Technical College

– Certified Public Accountant (Australia)

– Certified Public Accountant (Singapore)




0.09 None 2010 – Present

Present

1998 – 2009

1971 – 2009

–

–

–

–

Independent Director

Sole proprietor

Executive Director

Marketing Director

–

–

–

–

STA

NAC Consultancy Services

Tan Chong International Ltd.

Tan Chong & Sons Motor

Company (Singapore) Private

Limited

12 Mrs. Prapai Srisuttiphong

– Procurement Manager

60 – Vocational Certificate in Accountancy from the

Polytechnic Bangkok College

0.004 None 2005 – Present – Procurement Manager – STA

1997 – 2004 – Head of Accounting, Raw

Materials Verification

Division

– STA

1993 – 1996 – Accountant – STA

13 Mr. Chalermpop Khanjan

– Production Manager

42 – Diploma in General Management from Industrial and

Community Education College None None 2006 – Present – Production Manager – Rubberland Products

1998 – 2005 – Factory Manager – Rubberland Products


Page 7

Name/Position

Age

(Year)


shares held

and

Percentage of

Shareholding

Stake in STA

(%) (1)

Family

Relationship

Among

Executives(2)



1994 – 1997 – Assistant to concentrated

latex Factory Manager

– STA

14 Mr. Arsom Aksornnam

– Production Manager

46 – Bachelor of Science (General Science), Prince of

Songkhla University

0.0003 None 2009 – Present – Factory Manager – SSC

2004 – 2008

1998 - 2003

–

–

Factory Manager

Factory Manager

–

–

Shanghai Sempermed

SSC

1995 – 1997

1989 - 1994

–

–

Production Manager

Line Chemist

–

–

SSC

SSC

15 Mr. Chaidet Pruksanusak

– Quality Assurance Manager

44 – Diploma in Finance and Banking, Bangkok

Commercial College

None – Brother of Mr.

Anan

Pruksanusak, and

Mr. Udom

Pruksanusak

2009 – Present – Quality Assurance Manager – STA

2000 - Present – Director – Prueksa Rubber

2007 – 2008 – Coordinated Officer – STA

1999 – 2006 – Factory Manager – STA

16 Mr. Patrawut Panitkul

– Chief Financial Officer (CFO)

44 – Bachelor of Accounting , Prince of Songkhla University None – Cousin of Mr.

Prasit Panidkul

2010 – Present – Accounting and Financing

Manager

– STA

2001 – 2009 – Accounting Manager – STA

1989 – 2000 – Accounting Manager – SSC


Page 8

Name/Position

Age

(Year)


shares held

and

Percentage of

Shareholding

Stake in STA

(%) (1)

Family

Relationship

Among

Executives(2)



17 Miss Lim Li Ping

– Controller

40 – Certified Public Accountant (Australia)

– Diploma in Accountancy, Ngee Ann Polytechnic,

Singapore

– Bachelor of Business (Accountancy), Royal Melbourne

Institute of Technology




0.002 None 2005 - Present

2002–Present

–

–

Controller

Accounting Manager and

General Manager

–

–

STA


2001 – Assistant Accounting

Manager

– Clarent Singapore Pte Ltd.

1993 – 2000 – Senior Accountant – Glenayre Electronics (S) Pte Ltd.

18 Mr. Rattapong Laparojkit

– Engineering Manager

39 – Bachelor of Civil Engineering Technology, University

of Southern Colorado at Pueblo, United States 0.004 None 2009 – Present – Engineering Manager – STA

2003 – 2009 – System Engineering Manager – Premier System Engineering

2001 – 2003 – Factory Manager – Premier System Engineering

2000 – 2001 – Assistant to Factory Manager – Premier System Engineering

19 Mr. Phanlert Wangsuphadilok

– Engineering Manager

40 – Bachelor of Engineering, Kasem Bundit University

– Master of Engineering, King Mongkut's University of

Technology Thonburi

None None 2009 – Present – System Engineering Manager – Premier System Engineering

2006 – 2009 – Factory Manager – Semperflex Asia

1998 – 2006 – Production Manager – Semperflex Asia

20 Mr. Udom Pruksanusak

– Human Resources Manager

51 – Bachelor of Agriculture, Prince of Songkhla University

– Master of Agriculture, Kasetsart Unitversity


Anan

Pruksanusak

– Brother of Mr.

Chaidej

Pruksanusak

2000 – Present – Human Resources Manager – SSC

Present – Director – Prueksa Rubber

1998 – 1999 – Factory Manager – Semperflex Asia

1988 – 1997 – Production Manager – SSC

21 Miss Nuchanart Chaiyarat

– Human Resource Manager

45 – Bachelor of Marketing Science, Prince of Songkhla

University None None 2008 – Present – Human Resources Manager – STA

2000 – 2007 – Purchasing Manager – SSC

Remarks (1) Including the shares holding of spouses and minor child. (2) Family relationship means relationship by blood, relationship by marriage and relationship by law.


Page 9

Details of the Executives and Controlling Persons of STA as of 31 December 2012

Company

Names of the Executives

and Controlling Persons

Mr. Viyavood

Sincharoenkul

Mr. Prasit

Panidkul

Mr. Chaiyos

Sincharoenkul

Mr. Anan

Pruksanusak

Mr. Kitichai

Sincharoenkul

Mr. Veerasith

Sinchareonkul

Mr. Paul Sumade

Lee

Mr. Prakob

Visitkitjakarn Mr. Kriang

Yanyongdilok

Mr. Samacha

Potavorn

Mr. Neo Ah

Chap

Mr. Udom

Pruksanusak

Mr. Chaidet

Pruksanusak

1. STA X // // // // / // / / / /

2. Subsidiaries

– Rubberland Products / / /

– Nam Hua Rubber / / / /

– Sadao P.S. Rubber / / / / /

– Anwar Parawood / / /

– Premier System Engineering / / / /

– Startex Rubber / / /

– Starlight Express Transport / / / /

– Sri Trang Rubber & Plantation / / / /

– PT Sri Trang Lingga / / / /

– Sri Trang International X / //

– Shi Dong Investments / / /

– PT Star Rubber / //

– Sri Trang USA / / /

– Shi Dong Shanghai / / / //

3. Related Companies

– Thai Tech Rubber / /

– SSC // // /

– Semperflex Asia // // /

– Semperform Pacific // // /

– Shanghai Sempermed / / / / /

– Semperflex Shanghai / / / /

– Sempermed Singapore / / / /

– Pattana Agro Futures / /

– Sempermed USA / /

– Shanghai Semperit / /

– Prueksa Rubber / /

Remarks: X = Chairman / = Director // = Executive Director/ Executive Officer


Enclosure 2

Details of the Directors of the Subsidiaries


Page 1

Details of the Directors of the Subsidiaries

Subsidiary*

Director

Sri Trang

International

Rubberland

Products

Thai Tech

Rubber

1. Mr. Viyavood Sincharoenkul X / /

2. Mr. Kitichai Sincharoenkul /

3. Mr. Paul Sumade Lee // /

4. Mr. Chaiyos Sincharoenkul /

5. Mr. Anan Pruksanusak /

Remarks: X = Chairman / = Director // = Executive Director

* Subsidiary means any material subsidiary having revenue of more than 10% of the total revenue

according to the latest consolidated profit and loss statement of STA


Enclosure 3

The Audit Committee Report


Page 1

The Audit Committee Report

The Audit Committee, appointed by the Board of Directors of Sri Trang Agro-Industry Public

Company Limited (the “Company”), consists of 3 independent directors, two-thirds of whom have

finance and accounting knowledge, as follows:

1. Mr. Prakob Visitkitjakarn Chairman of Audit Committee

2. Mr. Kriang Yanyongdilok Audit Committee

3. Mr. Samacha Potavorn Audit Committee

The Audit Committee performs its duties and responsibilities as assigned by the Board of Directors of

the Company. In year 2012, the Audit Committee members attended a total of 12 meetings. Mr.

Prakob Visitkitjakarn and Mr. Samacha Potavorn attended all the meetings while Mr. Kriang

Yanyongdilok attended 11 meetings, and, where the agendas were related, meetings were also

attended by the senior management, manager of the internal audit department and auditor. The

responsibilities of the Audit Committee can be summarized as follows:

The Audit Committee reviewed quarterly and year end financial statements of 2012 together

with the auditor and the management to ensure that they are accurate and comply with

generally accepted accounting principles. Through the meetings there were discussions,

opinion exchanges, and assessment on the reporting prior to seeking the approval from the

Executive Committee of such financial statements.

Considered internal audit plan and reviewed the results of the audit conducted by the internal

audit department, as well as the sufficiency and appropriateness of the internal control

system, to ensure that they are suitable and efficient.

Reviewed the Company’s compliance with the regulations, relevant laws and the principles of

good corporate governance and ensured that the Company has complied with its Articles of

Association, regulations of the Securities and Exchange Commission and the Stock Exchange

of Thailand, relevant laws and the principles of good corporate governance and has disclosed

information sufficiently and transparently.

Reviewed the entering into and disclosure of connected transactions and interested person

transactions which may lead to conflicts of interest between the interested party and the

Company. The review concluded that such transactions have complied with the laws and the

regulations of the Stock Exchange of Thailand and Singapore Exchange Securities Trading

Limited.

Reviewed the risk management policy and any oversight of risk management processes and

activities to mitigate and manage risk at acceptable levels determined by the Board of

Directors.

Selected and nominated auditors of the Company and auditing fees for 2012 to be proposed to

the Board of Directors to obtain an approval from the 2012 Annual General Meeting of

Shareholders. The Audit Committee has considered the performance, the independence, and

the appropriate of the remuneration of the auditors.

In conclusion, it is the opinion of the Audit Committee that the Company’s operations in the past year

have sufficient and appropriate internal control system, financial statements were prepared under the

generally accepted accounting principles, and complied with relevant laws of the Securities and

Exchange, the regulations of the Stock Exchange of Thailand, the regulations of the Singapore

Exchange Securities Trading Limited, and the law relating to the business of the Company. In the

performance of its duties the Audit Committee has had full discretion to give all relevant matters its

independent consideration, and there has been no limitation on its access to information.


Page 2

Yours sincerely,

(Mr. Prakob Visitkitjakarn)

Chairman of Audit Committee

27 February 2013

annual registration statement (form 56-1) for the year ... · nam hua rubber : nam hua rubber ......

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