ANNUAL REPORT 2013 - listed companyqtc.listedcompany.com/misc/AR/20140401-QTC-AR2013-EN-01.pdf · • The company was accredited by Thai Industrial Standards TIS 384-2543 for power

ANNUAL REPORT 2013QTC Energy Public Company Limited

www.qtc-energy.com

Contents

1 Message from the Chairman of the Board 2 Message from the CEO and Managing Director3 Financial Highlights4 Policy and Overview of Business Operations10 Board of Directors and Management Team13 Corporate Social and Environmental Responsibilities35 General and Other Relevant Information36 Business Characteristics51 Revenue Structure52 Industry and Competition Situational Analysis 54 Risk Factors56 Capital Structure57 Management Infrastructure65 Corporate Governance78 Internal Control and Risk Management80 Related Party Transactions84 Board of Audit Report85 Board of Directors’ Reports & Responsibility for Financial Reports 86 Certified Auditor’s Report88 Performance and Financial Status21. Financial Statements and Accompanying Remarks

IwouldliketoaddressallshareholdersonbehalfoftheboardofdirectorsregardingQTC’slistingontheStockExchangeofThailand.Everycompanydirectorhasbeenresolvedfromthestartthat,althoughthecompanyisamedium-sizedbusinessfocusedonthedevelopmentandproductionofengineeringproductsandservicesintransformingenergyasitsmainobjectives.Apartfromproductsandservicesmeetinginternationalstandards,weneedtohelponeanothercreateatransparentandprofessionalmanagementsystemwithgoodgovernanceintheconsiderationoftheinterestsofshareholdersand,moreimportantly,tomakedividendpaymentstoshareholdersatareasonablepershareratioinawaythatdoesnotaffectthestabilityofthecompany.

Inlinewiththeaforementionedresolution,thecompanywouldliketoaddressallshareholdersthattheCorporateGovernanceReportofThaiListedCompanysurveybytheThaiInstituteofDirectors(IOD)inwhichmorethan500companiesweresurveyedthatQTCreceived“Excellent”ratingsin4categories.ThefifthcategoryistheresponsibilityoftheBoardofDirectorswhichreceiveda“Good”rating.Iamconfidentthatalldirectorswillsucceedinstrivingforahigherratingnexttime.

However,thecompany’smanagementindicatorinthepreviouslymentioned5categoriesareonlybasicindicatorsofthecompany’sworkefficiency,whichwillgivecomforttoyou,ourshareholders,thatyourinvestmentsarewell-handledatminimalrisk.

Amoreimportantcompanyobjectiveistheeffectivenessofthecompany’sbusinessintermsofsecuregrowthwithabilitytocontinuouslypaylargedividendstoshareholders,whichhastobeourmaingoal.However,becausethecompany’sproductsareengineeringproductsandnotdailyconsumerproductsforthepublicatlarge,theextentofthecompany’sgrowthdependsonthegrowthanddevelopmentoftheeconomicinfrastructurewithinthecountryandcountriesinthecompany’sprimarymarket,Asia.Countriesinparticularhavetobefreefrompoliticalconfusionandinterruptionstomanypublicandprivateprojects.However,thiskindofproblemwillnotdiscouragethecompany’spersonnel.Rather,wewillaccelerateourproductioncapacity,cutcostsandfindmoreworkinnewmarketslateron.

WiththehopethatpeacewillsoonreturntoThailand,thedifferentdimensionsofthecompany’sbusinessplansin2014presentedfortheconsiderationofourshareholdersduringthismeetingwillbecarriedoutandconstantlymonitored.

OnbehalfoftheBoardofDirectors

AssociateProfessor,DoctorSomchobChaiyavej

Chairman,BoardofDirectors

Message from the Chairman of the Board


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Message from the CEO and the Managing Director In2013,theThaieconomygrew2.9%,adecreasefromlastyearduetotheslowingdownofexpensesoftheprivatesector.Inthefirsthalfoftheyear,privateconsumptionstillplayedanimportantroleineconomicgrowth.Itsgrowthcouldbeattributedtothegovernment’sstimulatingmeasuressuchtheraisingofminimumwage,interventionmeasuresinagriculturalproducts,aswellasotherfactorsthatpushedforthegrowthofhouseholdconsumption.Asaresult,businessoperatorsstillmadetheirinvestmentsinordertoimprovetheefficiencytomeettheneedintheindustrialsector.

Nevertheless,inthesecondhalfoftheyear,thegovernmentbegantorunoutofmeasurestostimulateeconomicgrowth.This,togetherwithpoliticaluncertaintypulleddownconsumption.Atthesametime,businessoperatorsslowedandpostponedtheirinvestmentstowaitforclarityinpoliticalsituation.

In2013,theCompanyreceivedatotalincomeof811.69millionbaht,andnetprofitof74.51millionbaht;a16%and37%decreaserespectively.Adecreaseinincomewasaneffectofslowingeconomyanduncertainpoliticalsituation,whichresultedinthepostponementofinvestmentsbybusinessoperators.

Nevertheless,theCompanystillcommitstosettingthepolicyandstrategiestosuitbothdomesticandinternationaleconomicsituation,toimprovetheefficientandproductionprocess,toreducecosts,toimprovethecapacityofitsemployeesatalllevels,aswellastoplannewstrategiestoenternewmarketstocarveoutmoremarketshares.Thevalueofelectricaltransformersmarketisapproximately9,000millionbaht.

Withthedeterminationandcommitmentofthemanagementteaminconductingthebusinesseswithintegrityandethics,withtheaimtodevelopboththeorganisationandqualityproducts,aswellastoparticipateseriouslyinhelpingandimprovingthesocietycontinuouslyforsustainablegrowth,theCompanyorganisedasocialprojectandsocialresponsibleactivitiesthroughout2013.ItreceivedtheCSRIRecognitionRisingStarAwardfromtheCorporateSocialResponsibilityInstitute(CSRI),theStockExchangeofThailand.Itisanawardforalistedcompanywhohasjustenteredthecompetitionandshowedaremarkablesuccessincorporatesocialresponsibility.

For2014,theThaieconomyhasbeenforecasttoimproveifthepoliticalsituationbecameclearer,whichwouldcreatedemandfromthestateandprivatesectors.Thiswillgiverisetothegrowthindemandofelectricaltransformersfollowingtheincreaseinelectricalusage.Nevertheless,theCompanyhasplanstoexpandtonewmarketsabroad,whichisconsistentwithitsgrowingproductioncapacityof30%.

Itakethisopportunity,onbehalfoftheBoardofDirectors,tothankallshareholders,customers,tradepartners,businessfriendsaswellasallrelatedpartiesfortrustinginouroperations.Wearestillcommittedtodevelopingourorganisationtomeetthegoals.

OnbehalfoftheBoardofDirectors

(Mr.PoolpipatTantanasin)ChairmanandManagingDirector


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Financial Highlights

Total revenueTotal assets, Total liabilities

and Shareholders’ equity

(Unit:millionbaht)

Performance 2011 2012 2013

Revenuefromsalesandservices 714.46 959.51 803.95

Totalrevenue 717.79 969.70 811.69

Grossprofit 208.29 264.25 211.53

Profitbeforeinterestandincometaxes 124.56 163.17 100.48

Netprofit 84.06 118.40 74.51

Netprofitpershare 0.49 0.59 0.37

Dividendpershare 0.19(200,000,000)

0.31(200,000,000)

0.21(200,000,000)

Totalassets 570.44 788.97 735.84

Totalliabilities 190.41 326.06 260.42

Shareholders’equity 380.03 460.92 475.42

Gross profit

2554 2554

2555 2555

2556 2556

Gross profitNet profit

Total assetsTotal liabilitiesShareholders’ equity

(Unit : Million Baht) (Unit : Million Baht) (Unit : Million Baht)

2554 2555 2556

717.79

969.70

811.69

357.42

208.29

84.06

118.40

74.51

264.25

211.53

570.44190.41

380.03

788.97326.06

460.92

735.84260.42

475.42


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Policy and Overview of Business Operations

1.1 Background

FormerlyknownasQualityTransformerCo.,Ltd.,QTCEnergyPublicCo.,Ltd.,wasregisteredon19July1996withastartingregisteredcapitalof10millionbahttoconductthebusinessesofmanufacturinganddistributingelectricitydistributiontransformers.On4July2003,thecompanychangeditsnametoQTCTransformersCo.,Ltd.,andon19August2010,thecompanybecameapubliccompanylimitedunderthenameofQTCEnergyPublicCo.,Ltd.,withMr.PoonphiphatTantanasinasthefounder.Mr.PoonphiphatTantanasinhasoverthirty-sevenyearsofexperienceworkinginthetransformermanufacturingindustry.Hehasworkedwithmajorandleadingcompaniesmanufacturingtransformersdomesticallyandheldresponsibilitiesinvariousaspects,includingdesign,assemblyandproductionaswellassalesandmarketing,sohehasknowledgeandexpertisecoveringallaspectsinthefieldoftransformers.Furthermore,thecompany’sadministrativeteam,engineersandmostcompanyemployeeshavehadknowledge,experienceandexpertiseintheelectricitytransformerbusinessformorethan20years.Moreover,theyhavereceivedtrainingfromleadingtransformermanufacturingcountriesinforeigncountries,suchasGermanyandJapan.Theaforementionedexperiencehashelpedthecompanydevelophighqualitytransformerswhichhavebecomewidelyacceptedamongthegovernmententerprisecustomergroupinvolvedwithelectricity,namely,theMetropolitanElectricityAuthority,theProvincialElectricityAuthority,andinprivatesectorcustomergroupsbothdomesticallyandabroad.

Throughoutthepast,thecompanyhascontinuallydevelopedtransformerproductsandreceivedaccreditationaccordingtovariousstandards,suchasThaiIndustrialStandardsTIS384-2543fromtheThaiIndustrialStandardsInstitute,MinistryofIndustry,ISO9001:2000standardsfordesigns,production,andmaintenanceofdistributiontransformers.Furthermore,thecompanyisabletoproducequalitytransformersmeetingvariousinternationalstandards,whichisproofoftheinternationalqualityofthetransformersmanufacturedbyQTC.

1.2 Overview of Business Operations & Key Developments

QTCEnergyPublicCo.,Ltd.,conductsthebusinessesofmanufacturinganddistributingcustommadetransformerstodomesticandforeigncustomersunderthe“QTC”trademarkandcustomertrademarks.Atpresent,thecompany’stransformerprojectscanbecategorizedasfollows:

1. DistributionTransformers:

1.1 HermeticallySealedOilTypeDistributionTransformers.

1.2 OpenTypeTransformerswithConservators.

2. PowerTransformers

Furthermore,thecompanyalsoprovidesvarioustypesofservicesforcustomers,suchasscheduledchecksandmaintenance,transformerrepairsandmaintenance,transformeroilfillservices,transformerrentalservices,etc.,inordertosupportcustomerneedsandfacilitatebothcustomerswhohavepurchasedQTCtransformersandothercustomersingeneral.


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Quality of DETAILS AttentiontoDETAILSisattheheartofourprinciplesandencompasseseveryareaofQTCwithcomprehensivecoveragefromstaff,thoughtprocesses,workmethods,technologicaladvancement,factoryoperation,productsandconsiderationforsocietyandenvironment.

Vision QTCisaworld-classmanufacturerprovidingworld-classqualityinelectrictransformationequipmentandservices.

Management PrinciplesQTCisfirmlycommittedtothreegoodcorporategovernanceprinciples.• Ethical,justandtransparentmanagement.• Productandserviceprovisionmeetinginternationalqualitystandards.• Focusoncorporatesocialandenvironmentalresponsibilityinstrictcompliancewithhuman

rightsprinciples.

Mission Wearefirmlycommittedtomeetingourcustomers’electricalsystemperformancechallengeswithproductsandservicesmeetinginternationalstandards.

Progress with Purpose & Vision


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Thedetailsofsignificantcompanydevelopmentsinthepastareasfollows:

2004 • Thecompanyincreasedregisteredcapitalby40millionbahtfromtheoriginalregisteredcapitalof10millionbahtbyissuing400,000newcommonsharesvaluedat100bahtpershareinordertoproposesalestoexistingshareholders,whichputthecompany’sregisteredcapitalat50millionbaht.

• ThecompanywasaccreditedbyThaiIndustrialStandardsTIS384-2543forpowertransformersfromtheThaiIndustrialStandardsInstitute,MinistryofIndustry.

• Thecompany’s250kVAand1000kVAtransformerspassedshortcircuittestingfromCESI,Italy.

2005 • Thecompanyincreaseditsregisteredcapitalby50millionbahtfromtheoriginalregisteredcapitalof50millionbahtbyissuing500,000newcommonsharesvaluedat100bahtpershareinordertoproposesalestoexistingshareholders,whichputthecompany’sregisteredcapitalat100millionbaht.

2007 • Thecompany’s167kVAtransformerspassedshortcircuittestingfromKEMA,theNetherlands.• ThecompanyreceivedISO14001:1996standardsaccreditationfromRWTÜV,Germany(2001).

2008 • ThecompanyreceivedOHSAS18001:2007accreditationforoccupationalhealthandsafetymanagementsystemsfromUKAS,England.SGSCompany(Thailand)providedaccreditation.

• Thecompany’s500kVAand2000kVAtransformerspassedshortcircuittestingfromCESI,Italy.• ThecompanywasgrantedtherighttousetheQ-MARKfromtheJoint-StandingCommitteeonCommerce,Industries

andBanking(JSCCIB)consistingoftheThaiChamberofCommerce,theFederationofThaiIndustries,andtheThaiBankers’Associationasamarkforcertificationofproductquality,businessethics,responsibilitytocustomers,consumersandsocietyincludingthemanufacturing,tradeandservicesectorsasfollows:1. Singlephaseoiltypedistributiontransformerswithsized1-167kVAwithmaximumvoltageof36kvand

three-phaseoiltypedistributiontransformerssizedat1-2500kVAwithmaximumvoltageof36kVwithqualitymeetingthestandardsoftradepartnercountriesandthestandardqualityofThailand,whichwasissuedon27May2008andeffectiveuntil26May2010.

2. [Standardsfor]thedistribution,services,repairs,andinstallationsoftransformers,includingcorporations,issued21March2008andeffectiveuntil20March2010.

• ThecompanywasgrantedISO14001:2004accreditationforenvironmentalmanagementsystemsfromUKAS,England,andNAC,Thailand.SGSCompany(Thailand)providedcertification.

• ThecompanyreceivedtheThaiChamberofCommerceBusinessEthicsStandardTestAwardof2008fromtheThaiChamberofCommerceasanorganizationwithethicalmanagementaccordingtotheethicsoftheThaiChamberofCommercecomprisingthefollowingsixkeyissues:

• Fairtreatmentofallpartiesconcerned.• Disclosureofinformationandtransparency.• Riskmanagement.• Promotionofexcellentcorporatepractice.• Corporatesocialandnationalresponsibility.• Yieldingsustainabletangiblereturnsforthenation.• Thecompanyincreasedregisteredcapitalby50millionbahtfromtheoriginalregisteredcapitalof100millionbaht

byissuing500,000newcommonsharesvalued100bahtpershareforproposedsalestoexistingshareholdersattheproposedsalespriceof100bahtpershare.

• ThecompanywasawardedtheInternationalEuropeAwardforQualityfromexportingtransformersfordistributioninSpain.

2009 • ThecompanywasgrantedISO9001:2008accreditationforqualitymanagementsystemsfromUKAS,England,andNAC,Thailand.SGSCompany(Thailand)providedaccreditation.

• Thecompanywasawardedthe“D”ClassCertificateofCleanFoodGoodTastestandardsfromtheDepartmentofHealth,MinistryofPublicHealth.


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2010 • Thecompanyreceivedthe2ndAnnualSMENationalAwardof2009inmachineryandequipmentcategoryfromtheOfficeofSmallandMediumEnterprisePromotion(OSMEP),MinistryofIndustry.

• ThecompanyreceivedthePrimeMinister’sIndustryAward2010forSMEIndustrialManagementfromtheMinistryofIndustry.

• InSeptemberof2010,thecompanyreceivedextensionofrightstousetheQ-MARKfromtheJoint-StandingCommitteeonCommerce,IndustriesandBanking(JSCCIB)intheproductionsectorandthetradeandservicessectorasfollows:1. Singlephaseoiltypedistributiontransformerssizedat1-167kVAwithmaximumvoltageof36kvand

three-phaseoiltypedistributiontransformerssizedat1-2500kVAwithmaximumvoltageof36kVandqualitytomeetthestandardsoftradingpartnercountriesaswellasthequalitystandardsofThailand,whichwereissuedon10September2010andeffectiveuntil9September2012.

2. Distribution,sales,installation,andmaintenanceoftransformers,whichwereissuedon10September2010andeffectiveuntil9September2012.

• Thecompanyreceiveda“D”ClassCertificateforCleanFoodGoodTastestandardsfromtheDepartmentofHealth,MinistryofPublicHealth.

• InAugustof2010,thecompanybecameapubliccompanylimitedandchangeditsnametoQTCEnergyPublicCo.,Ltd.

2011 • InMarch,thecompanyregisteredchangesinsharevaluefromtheoriginalvalueof100bahtpershareto1bahtpershare,includinganincreaseinregisteredcapitalby50millionbahtfromtheoriginalamountof150millionbaht,whichputtheregisteredcapitalat200millionbaht.Sharesweredividedasfollows:-Forty-fivemillionnewcommonshareswhichwereofferedforpublicsalesand-Fivemillionnewcommonshareswhichwereofferedforsaletocompanydirectorsandemployees.

• InApril,thecompanyconstructednewofficesat2/2SoiKrungthepKritha8(5),KrungthepKrithaRd.,Huamark,Bangkapi,Bangkok10240

• InJuly,thecompanyproposedaninitialpublicoffering(IPO)ofsharesandStockExchangeofThailandlistedthecompany’sordinarysharesasregisteredsharesandbeganbuyingandsellingon28July2011underthecompany’sabbreviatednameforbuyingandsellingshares,QTC.

• InAugust,thecompanywasatoprecipientofaZeroAccidentAward(nooccupationalaccidentscausingongoingworktostopoverthepastyearfornolessthan1,000,000workinghours)fromtheZeroAccidentCampaignof2011fromtheDepartmentofWelfareandLaborProtection,MinistryofLabor.

• InOctober,thecompanyreceivedtheTopCorporateGovernanceAward(EasternRegion)fromtheThaiChamberofCommerceGoodCorporateGovernanceCommissionincooperationwiththeOfficeoftheNCCCandtheThaiChamberofCommerceUniversity.

• InNovember,thecompanywasconsideredbytheThaiLaboratoryAccreditationScheme,Electronics-Telecommunications,whichdecidedtoapproveaccreditationofthecompany’slaboratoryaccordingtoTIS17025-2548standardswiththeThaiIndustrialStandardsInstitute

• InDecember,thecompanywasawardedforfoodhygienewitha“D”Classcertificatefor“CleanFood,GoodTaste”fromtheHealthDepartment,MinistryofPublicHealthforthesecondconsecutiveyear.

2012 • InFebruary,thecompanywasofficiallyawardedlaboratoryaccreditationforlaboratorytestingabilityincompliancewithTISStandardNo.17025-2548(ISO/IEC17025:2005),CertificateNo.12007/T309fromtheThaiIndustrialStandardsInstitute,MinistryofIndustry.

• InFebruary,thecompanymovedtoworkatitsnewheadquarterslocatedat2/2KrungthepKritha8(5),KrungthepKrithaRd.Huamark,Bangkapi,Bangkok10240.

• InMarch,thecompanycommencedtheconstructionofaplantinordertoexpandproductioncapacitybyaddingsiliconsteelslittingmachinesandsiliconsteelcuttingmachines.TheconstructionwascompleteandtheplantwasopenforoperationsinDecemberinPluakDaeng,Rayong.

• InApril-September,thecompanyparticipatedinanindustriallogisticsefficiencybuildingprojectbytheDepartmentofPrimaryIndustriesandMinesincooperationwiththeTechnologyPromotionAssociation(Thailand–Japan).

• InJune,thecompanywasawardedacertificateforbeingahealth-promotingworkplacebyHonoraryProfessor,Dr.KasemWattanachai,PrivyCouncilor.

• InJuly,thecompanyparticipatedinacooperativeprojectfortheproductionofAmorphousDistributionTransformers(AMDT)withHitachiMetalsJapan.

• InOctober,100KVA3Ph50Hz22000-400/230V,100,500KVA3Ph50Hz33000-400/230V.and150,300,750KVA3Ph50Hz24000-416/240VelectricitytransformerspassedshortcircuittestingbytheCESIinItalywithTypeTestCertificateNo.B2030322-27.

• InSeptember,thecompanywasawardedacertificateformeetingcleantechnologycriteriaforentrepreneurialdevelopmentfromtheGovernorofRayong.


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2013 • InJuly,thecompanywasgrantedaccreditationforlaboratorytestingincompliancewithTIS17025-2548(ISO/IEC17025:2005)Standards,CertificateNo.12007/T309fromtheThaiIndustrialStandardsInstituteforthesecondconsecutiveyearinwhichthecompanyappliedforaccreditation.

• InMay,thecompanyproductedAmorphousDistributionTransformers(AMDT)incooperationwithHitachiMetalsJapanwith1000kVAsizedtransformersforcommercialdistributionwiththefirsttransformerinOctober.

• InJune,thecompanyparticipatedinanin-depthconsultingprojectforSMEswiththeleanstandardsoftheDepartmentofIndustrialPromotion.

• InJune,thecompanyparticipatedinaconsultationprojectfor5-SactivitiesbytheTechnologyPromotionAssociation(Thailand–Japan)forcorporaterestorationanddevelopmentinincreaseproductioncapacitywiththe5-Ssystem.

• InJune,thecompanywasawardedaClass3GreenIndustrycertificatebytheMinistryofIndustry.• InJune,thecompanysignedajointventureprojectcontractfortheconstructionofelectricitytransformersin

Vientiane,Laos.• InJuly,thecompanypurchasedaDistributionTransformerTestSystemDTTS3-2500fromHAEFELYSwitzerlandin

ordertoenhancetheefficiencyoftestingandcertificationforincreasingworkvolumeinthefuture.TheinstallationandusebeganinFebruaryof2014.

• InJuly,thecompanycommencedtheconstructionofaplantformanufacturingtanksforelectricitytransformers.• InNovember,thecompanywasgrantedCSRIRecognitionintheRisingStarcategorybytheCorporateSocial

ResponsibilityInstitute,StockExchangeofThailand.

1.3 PolicyandBusinessPerformanceGoals

Thecompanyhassetagoaltobecomeamanufacturerofworldclasstransformerswithemphasisonthedevelopmentofqualityandstandardsforthecompany’stransformersinordertobuildconfidenceinmaximumefficiencywithcontinuedwideacceptanceofcustomersathomeandabroad.Thecompanyintendstomaintainandexpanditscustomerbase,especiallyinthemembercountriesoftheASEANEconomicCommunity(AEC).ThecompanyhasconsideredthestateofcompetitionexpectedtooccurfollowingthelaunchingoftheAEC.Therefore,thecompanyhasclearguidelinesforinvestinginimprovedproductionefficiencyoverthenextthreeyearsfrom2012to2015.Thecompany’spersonnelinvestmentsemphasizedevelopmentbasedontheprinciplesofhumancapital,whichdevelopspersonnelinlinewithcorporatestrategiesandtacticstoincreasecompetitivecapacityduringtheneweconomicerawhichwillbeginin2015.Inaddition,weintendtoacceleratethedevelopmentofsupplychainmanagement.After2015,movementsofrawmaterialsbetweenAECcountrieswillbeexemptedfromcustomstaxes,whichwillbereducedtozeropercent.Furthermore,eachcountrywillhavepoliciestoreducelogisticscosts,sothecompanywillhavetopreparetohandlethemovementsofproductsamongAECcountries,whichwillbeconvenient,rapidandfreefromcustomstaxes,sothecompanycanincreaseitscompetitivecapacityinotherways.Moreover,thecompanyplacesimportanceintheimprovementofthequalityandefficiencyofserviceprovisionaimedatmaximumcustomersatisfactionforcustomerswhouseQTCtransformersandcustomerswhousethetransformersofotherproducers,whichwillbeamarketingchannelthatwillincreasethecompany’stransformerdistributioninthefuture.

Inmanagingthecorporationtoachievetheaforementionedgoals,thecompanyadherestomanagementprinciplesundertheprocessof“QualityofDetails”andgoodgovernanceprinciples,includingconductingitsbusinessundercorporategovernanceprinciplesforsustainablegrowth.

1.4FutureProjects

Thecompanyhastakenactiontowardprojectsforfutureinvestment.Thesedetailsoftheseprojectscanbesummarizedasfollows:

1. MegawattBiomassFuelPowerPlantProject

Asaresultofthecompressedbiogas(CBG)investmentproject,afterthecompanyhadalreadyconductedfeasibilitystudiesfortheproject,theresultsobtainedfromstudyingthemethodsforproducinggasfromwastewaterweresummarized.Theresultsdidnotachievethesetgoals.Therefore,the


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boardhasdeemeditfittingtocancelthegasproductionproject.Atthistime,afeasibilitystudyisbeingconductedonusingthegasyieldtomixwithpalmkernelshellsandwoodfragmentstoproducefuelfortheproductionof9.9MWforsaletotheElectricityGenerationAuthorityofThailand.Fourcompaniesareparticipatinginthejointventure,namely,QTCEnergyPCL,UniversalAdsorbentandChemicalPCL,AsiaGreenEnergyPCLandSamroiyotPowerCo.,Ltd.Atpresent,afeasibilitystudyisbeingconductedfortheproject.Theresultsareexpectedtobereadyforsummarizationbytheendof2014.

2. LightningArresterProductionProject

Whereasthecompanyhasplanstoinvestintheproductionofpolymerlightningarresterequipment,thecompanyhasenlistedthecooperationofABBintermofmainrawmaterialsupportfortheproductionofthelightningarresterequipment.Thecompanyiscurrentlyintheprocessofconductingatechnologicalstudyonlowcostmanufacturingabilityataproductionoutputofnomorethan50,000setsperyear.Thecurrentmarketdemandisintheearlystages,sothemarketisnotlargebutwillincreaseoverthenextthreetofiveyears.Atpresent,thecompanyisintheprocessofstudyingthedata.

3. ElectricityTransformerProductionInvestmentProjectinLaos

ThecompanyhasplanstoinvestintheproductionofelectricitytransformerproductioninLaos.InconsiderationofthefeasibilitystudyandthesigningofajointventurecontractwithPancoGroupCo.,Ltd.on20June2013,thecompanyinvested85%andPancoGroupCo.,Ltd.invested15%.Thecompanyiscurrentlyintheprocessofdraftingaleaseagreementforthelandandexpectstheplanttobecompletelyconstructedbytheendof2014.


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1. Prof. Dr. Somchob Chaiyavej Chairman of the BoardAge 78 YearsEducation• PhD,MechanicalEngineering,PurdueUniversity• Course:DirectorAccreditationProgram(DAP),Classof62/2007

Other Positions• ExpertDirector, RajamangalaUniversityofTechnologyThanyaburi• ChairmanoftheBoard,PATKOLPublicCo.,Ltd.• CouncilPresident,NorthBangkokCollege• ExpertDirector,Thai-GermanInstitute

2. Mr.Padetpai Meekun-iam DirectorAge 69 Years Education• M.S.(MechanicalEngineering), GeorgiaInstituteofTechnology,U.S.A.• Course:DirectorCertificationProgram(DCP), Classof22/2002• AuditCommitteeProgram(ACP),Classof42/2013• MonitoringtheQualityofFinancialReporting(MFR),Classof17/2013

• MonitoringtheSystemofInternalControlandRiskManagement(MIR),Classof14/2013

• MonitoringFraudRiskManagement(MFM),Classof10/2013• MonitoringtheInternalAuditFunction(MIA),Classof14/2013

Other Positions• Director,TateVehicleCo.,Ltd.• Director,ThaiAgroEnergyPublicCo.,Ltd.• Director,MBKResortPublicCo.,Ltd.

3. Mr. Polrachot Piyathanom DirectorAge 61 YearsEducation• Master’sDegree,Management,SasinGraduateInstituteofBusinessAdministrationofChulalongkornUniversity

• Master’sDegree,BusinessAdministration,NationalInstituteofDevelopmentAdministration

• Course:DirectorCertificationProgram(DCP),Classof118/2009• Course:DirectorAccreditationProgram(DAP),Classof62/2007• Course:AuditCommitteeProgram(ACP),Classof31/2010

Other Positions• Director,SangKonKengCo.,Ltd.• M-DICIntertradeCo.,Ltd.• Director,M-DICHoldingCo.,Ltd.

4. Mr. Nattapol Lilawattananan DirectorAge 56 YearsEducation• MBA,ChulalongkornUniversity• Course:DirectorAccreditationProgram(DAP),Classof10/2004• Course:AuditCommitteeProgram(ACP),Classof3/2004

Other Positions• Director,UnimitEngineeringPublicCo.,Ltd.• Director,UniqueMiningServicesPublicCompanyLimited• Director&ManagingDirector, ExcellentBusinessManagementCo.,Ltd.• Director&ManagingDirector,NBSResearchConsultingCo.,Ltd.

Board of Directors

12 3 4


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6. Mr.Poonphiphat Tantanasin DirectorAge 61 YearsEducation• B.S.(ElectricalEngineering) KingMongkut’sInstituteofTechnologyNorthBangkok• Course:DirectorCertificationProgram(DCP),Classof117/2009• Course:DirectorAccreditationProgram(DAP),Classof77/2009• Course:FinanceStatementsforDirectors(FSD),Classof4/2009

Other Positions• Director,M-DICHoldingCo.,Ltd.• Director,JarinApartmentLimitedPartnership

7. Mr.Siripong Boontam DirectorAge 53 YearsEducation• B.S.(ElectricalEngineering), KingMongkut’sInstituteofTechnologyNorthBangkok• Course:DirectorAccreditationProgram(DAP),Classof78/2009

Other Positions• -None-

5. Mr. Nakorn Phraprasert Director

Age 62 YearsEducation• MBA,SasinGraduateInstituteofBusinessAdministrationofChulalongkornUniversity

• Course:DirectorAccreditationProgram(DAP),ClassBJC/2004Other Positions• -None-

5 6 7


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Management Team

1. Mr.Poonphiphat TantanasinChief Executive Officer

2. Mr.Siripong BoontamDeputy Managing Director

4. Miss Boonpa RuddistManager, General Management

Department

5. Miss Chotika ChumpoonManager, Finance &

Accounting Department

3. Mr. Panu SinivesManager, Supply Chain and

Logistic


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Corporate Social Responsibility

QTCEnergyPCLisfirmlycommittedtoconductingitsbusinesswithgoodpracticeadherenttotheprinciplesofgoodgovernanceincombinationwithattentiontoenvironmentalconservationandtruesocialconscienceandresponsibilitybyawarenessofstakeholdersinvolvedbothinsideandoutsidetheorganizationfromshareholders,employees,customersandcommunitiestosocietyatlargeinordertoachievesustainablebusinessdevelopment.

Inordertosuccessfullyconducttheorganization’sbusinesstomeetstandardswithconscientiousperformanceandconfidenceinvariousactionsinlinewiththeCompany’ssetvisionandmissiontoinstilltrueconfidenceintheorganization’sstakeholdersandexpresscorporatesocialresponsibilityinvariousandtangibleways.Hence,wehavesetcorporatesocialresponsibility(CSR)policyandappointedaboardofdirectorsandaCSRcommitteeinordertooverseetheworkinthisareawithcompliancetopolicyandstandardpracticeguidelinesmeetingISO26000standardswithaChairmanoftheBoard,Mr.PoonphiphatTantanasin.Themanagementstructureisshowninthefollowinglink:http://www.qtc-energy.com/index.php/csr-policy-qtc.

Vision :QTCisaworld-classmanufacturerprovidingworld-classQualityinElectricTransformation EquipmentandServices. Mission :Wearedeterminedtomeetourcustomers’performancechallengesinvolvingtheirelectricalsystems withproductsandservicesmeetinginternationalstandards. Philosophy :1.Managementwithethics,moralsandtransparency. 2.Qualityproductandserviceprovisionmeetinginternationalstandards. 3.Determinedcorporatesocialandenvironmentalresponsibilitywithconsiderationforpersonal rightsandfreedoms. Values :ThequalityofDETAILSisattheheartofourprinciplesandencompasseseveryareaofQTC,covering everythingfromstaff,towaysofthinking,waysofworking,technologicaladvancement,factory operations,productsandconsiderationforsocietyandtheenvironment. D➞Dynamics = Ourorganizationisperpetuallyactiveinthecreationofacorporatecultureinresponseto changesforsustainableadvancement. E➞Environment = Wefocusondesignanddevelopmentforproductsandproductionprocesseswithreduced energyrequirementsaswellassocialandenvironmentalimpact. T➞Teamwork = Wegiveattentiontohumanresourceswithdeterminationtomakeimprovementsateverylevel leadingtoteamworkexcellence. A➞Achievement = Qualitycorporatemanagementwithdeterminationtoachieveworld-classgoals. I➞Innovation = Processandsoftwaredevelopmentundercopyrightlawsinresponsetocustomers’challenging needswithspeedandaccuracymeetinginternationalstandards. L➞Leadership = Widespreaddomesticandinternationalacceptanceasahighqualityelectricaltransformer manufacturer. E➞Service = Ourexpertengineeringteamiswaitingtoofferadviceaboutelectricalsystems. Ourprofessionalsalesteamhasin-depthknowledgeandunderstandingaboutourproducts. Ourcompetentpost-salesserviceteamisreadytohandleandtroubleshoot24hoursaday. Ourdeliveryteamisfastandpunctual.

Thecompanyhasanalyzedandlinkedstakeholdersinthecompany’sbusinessprocessestobeusedasaCSRpracticeguidelineinlinewiththeorganization’svisionandmissionwhichcanbesummarizedasfollows:

รายงานประจ�าปี 2556บริษัท คิวทีซี เอนเนอร์ยี่ จ�ำกัด (มหำชน)

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CSR Framework for QTC

By2015,QTCwillbeawidelyacceptedorganizationasaworld-classmanufacturerofhighqualityelectricaltransformers2558QTCwithatotalqualitymanagement(TQM),ahappyplacetoworkbuildingvalueforcustomers,employeesandstakeholders,includingsocietyandtheenvironment,undertheprinciplesofcorporategovernancewhichwillhelpupgradethecompany’scompetitivecapacityinbusinesswithsustainabledevelopmentbymeansoftwokeystrategies,namely,buildingcompetitivecapacitywithhighqualityproductsandtotalqualitymanagement(TQM),andthroughouthumanresourcedevelopmentinordertogeneratehappinesswithintheorganization.

In2013,thecompanyparticipatedintheCSRIRecognitioncontestof2013inwhichthecompanyreceivedanawardintheRisingStarcategory,whichshowsthecompany’sdeterminationtopromoteanddevelopitsbusinessprocesseswithCSRonacontinualbasis.Theawardencourageallofouremployeesintheorganizationandhaspushedthecompanytowardachievingitsgoalofsustainableworld-classstatus.

Nevertheless,thecompanystillneedstodevelopandimproveinmanyareastodemonstrateourconcurrenceandlinkagewiththecompany’svision,mission,goals,stakeholders,economy,societyandtheenvironmentleadingtocorporatesustainability.Thecompany’sexecutiveswillsupportintegrationtocovereverypartwithadherencetothepracticeguidelinesofISO26000standards.


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1 Fair Business Operations • Fair Competition

Thecompanygivesimportancetotheframeworkoffaircompetitioninitsbusinesspracticeswithhonestyandjusticewithinthescopeofthelawandthecompany’sbusinessethics.Furthermore,weadheretoequalopportunitycompetitionwithethics,honesty,transparencyandtraceability.Thus,thecompanyhasofferedopportunitiestostakeholdersineverygroupateverylevelwithchannelsforfilingcomplaintsonviolationsofbusinessethicsoranyeventsconsideredtopotentiallyimpactthecompany’sbusinessorreputationwithsafetybyreportingorinforminginlettersofferinganonymitywhichcanbesentdirectlytothecompany’sboardofauditors.Personswhofilereportsorinformationwillbesafelyprotected.Ifanyeffortismadetothreateninformants,sucheffortswillbeconsideredviolationsofethicalconduct.Therefore,thecompanyhassetpolicyinvolvingtheprinciplesoffaircompetitionasfollows:

1.1PolicyonConflictsofInterest Thecompanyhaspolicyfordirectors,executivesandemployeestoexerciseopportunitiesasthecompany’sdirectors,executivesoremployeesseekingpersonalgain.Thus,wehavesetthefollowingregulations:

• Thecompany’sboardofdirectors,boardofauditandexecutivesneedtoconsiderconflictsofinterestconcerningrelatedtransactionsincompliancewiththeregulationssetforthbytheStockExchangeofThailandthoroughlyhonestly,frankly,reasonablyandfreelywithconsiderationofthecompany’sinterestsasthemainfocustoensurethattheaforementionedtransactionsarereasonable,inthecompany’sprimaryinterestsandthatinterestgroupswillnotbepartoftheaforementionedapproval.

• Noactionswithpotentialconflictsofinterestwiththecompanycanbeperformed,e.g.causingthecompanytoloseinterestoryieldlessgainthanitshouldordividegainfromthecompany.

• Noactionscanbeperformedthatwouldcompetewiththecompany’sbusinesses.• Personalrelatedtransactionspotentiallyconflictingwiththecompany’sinterestsmustbeavoided.• Incasedwhereatransactionmustbeconductedinthecompany’sinterests,thetransactionmustbecarried

outinthesamewayasitwouldwithoutsidepersonnelwhohavetradeagreementsinthesamewayasareasonablepersonwouldconductthetransactionswithageneralpartnerwhoholdstradingpowerfromtheauthorityofdirectors,managersorrelatedpersonsanddoesnotrequireconsiderationofapprovalwithadutytoactincompliancewiththeregulationssetforthbytheStockExchangeofThailandandtheOfficeoftheSecuritiesandExchangeCommissionindisclosingrelatedinformation.

• Companydirectors,managersandemployees,includingthespousesoftheaforementionedpersons,arestrictlyforbiddenfromseekinggainintheirpersonalbusinessesfromthecompanysuchasanyactsinvolvingthesalesofproductsandservicestothecompany.Ifsuchactsoccur,documentsmustbemadeexplaininganddisclosingtheinformationtothecompanyoneveryoccasion.

1.2PolicyonContactingTradePartners• Engageinconductwithintherulesandframeworkoffaircompetition.• Neverdefametradecompetitorsbymakingfalseaccusations.• Neverviolateintellectualproperty/rights.• Neverseekthesecretsoftradecompetitorsbyusinginappropriateordishonestmeans.

1.3.PoliciesonTradePartnersandTradeDebtors• Neverdemand,receiveorpayanybenefitsthataredishonesttotradepartnersordebtors,andact

appropriatelyandfairlyaccordingtothecircustances.• Anyprocurements,purchasesoremploymentinvolvingthecompanyand/orrelatedcompaniesor

relativesofdirectors,managers,oremployeesatalllevelswillhavetoremainwithintheprinciplesofequality,transparency,fairnessforthecompany’smaximumbenefitandincompliancewiththecompany’sregulationsanddisclosureofverifiableinformation.

• Avoidprocurements,purchases,andemploymentscausingpotentialconflictsofinterestwiththecompany.• Personsinvolvedintheaforementionedprocurement,purchase,oremploymentmustnotreceiveanydirect

orindirectbenefitsthetradepartnerandmustremainneutralwithoutintimaterelationshipswithpotentialimpactondecision-making.


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• Iftherearereasonspreventingperformanceinlinewiththeagreementorcontract,theresponsiblepartyhastoreporttotheperson’ssuperiorsimmediately.

• Remainfirmlycommittedtomaintaininglastingrelationshipswithtradepartnersandcontractpartnerswithclearobjectivesregardingthequalityofproductsandmutualrespect.

• Treattradedebtorsequallyandfairlyandonthebasisoffairgainforbothparties.1.4PoliciesonReceiving/GivingGifts

• Thedirectors,managers,andemployeeswillneitherdemand,grant,orconsenttotheacceptanceofmoneyofotherbenefitsfromthecompany’sbusinesspartners.

• Ifemployeesreceiveexpensivegiftsontraditionaloccasionsfromthecompany’sbusinesspartners,reporttosupervisorsbythechainofcommand

• Conductbusinessandcompetitionwithlegitimatestrategiesandrefuseobjectsorfundsfromcustomersortradepartnersbecauseconflictswillariseintheperformanceofduty.

• Neverdirectlyorindirectlyoffervaluablegiftstopublicofficialsforthebenefitofbusinessdealings,exceptwhengiftsaregivenontraditionaloccasions,inwhichcasethesamerulesapplyaswhengivinggiftstothecompany.

1.5ReportingComplaintsandMakingRecommendations

Thecompany’sboardofdirectorshasgrantedopportunitiesforemployeesandinterestedpartieswithchannelsforfilingcomplaints,expressingopinions,andreportingillegalactivitiesbymakingitpossibletoreportbyposttothecompany’sBoardofAuditatQTCEnergyPublicCompanyLimited,2/2SoiKrungthepKritha8(5),KrungthepKrithaRd.,HuaMark,Bangkapi,Bangkok10240.

Proceduresforprocessingcomplaints:1. Personsreceivingcomplaintsarerequiredtocollectfactsregardingviolationsofunethicalconduct.2. Personsreceivingcomplaintsarerequiredtoreportfactstotheauditcommitteefortheinvestigationoffacts

andsetmeasuresforputtinganendtotheviolationofillegalconducts.3. Peoplewhoreceivecomplaintshaveadutytoreporttheresultstothecomplainantiftheidentityofthe

complainantisrevealed.Incasesofimportance,thepersonreceivingthecomplaintistoreporttothechairmanoftheboardandtheboardofdirectors.

ProtectiveMeasuresforComplainantsThecompanyhassetmeasuresinplacetoprotectcomplainantsinlinewiththefollowingregulations:

1. Thecomplainantcanchoosenottorevealhis/heridentityifhe/shedeemsitunsafetodoso.If,however,thecomplainant’sidentityisrevealed,thecompanywillbeabletoreportprogressandexplainfactstothecomplainant.

2. Personsreceivingcomplaintswillmaintaintheconfidentialityofsecrets,consideringsafetybysettingupmeasurestoprotectemployeesfilingcomplaintsand/orinformantsand/orcooperationinauditingwithaguaranteefromthecompanythattheaforementionedactionswillnotcauseorbeseenasacausetoterminate,punish,orperformanyactionthatwouldbepotentiallyharmfultotheaforementionedemployee(s).

• Respecting the property rights of others. Thecompanyisfirmlycommittedtocompliancewiththelawsinvolvingintellectualpropertyorotherrightsbynotusingwork,information,inventions,orsoftwarebelongingtootherpersonsinsidethecompanybeforereceivingpermissionfromtheownersandmaintainingrulesinrelationtorespectingthepropertyrightsofothersasfollows:1, PoliciesonTreatmentofTradeCompetitors:

Actwithinscopeoffaircompetition.Neverdefametradecompetitionbymakingfalseaccusations.Neverviolateintellectualproperty/rights.Neverseekthetradesecretsofcompetitorsbyusinginappropriateordishonestmeans.

2. OrdersRegardingComputerSoftwareInstallation ToensurethatthesoftwarethecompanyusesiscompliantwiththeCopyrightActof1994,thecompanyhasassignedtheMISDepartmentthetaskofhandlingtheinstallationofallcompanysoftwareasfollows:


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• Theinformationtechnologysystemisresponsibleforprocurementsandtheinstallationofbasicinfrastructuresoftware.

• TheERPsystemisresponsibleforprocurementsandtheinstallationoftheERPsystemwiththesupportoftheinformationtechnologysystem.

• Neverallowemployeestoinstallsoftwarewithoutpermission.• Incaseswhereanemployeeactsinviolation,theemployeewillbeheldresponsibleforallofthewrongdoing

incompliancewiththeCopyrightActof1994andthecompanywillproceedinlinewiththecompany’sregulations.

• Promoting corporate social responsibility in the business chain. Thecompanystillhasnoofficialpolicyregardingthepromotionofcorporatesocialresponsibilityininterestgroupswithinthebusinesschain.

2 Anti-Corruption • Anti corruption policies and announcing intentions with other organizations

Atpresent,thecompanyhasannouncedanti-corruptionpolicywithcommunicationsandpublicationstoraiseawarenessamongpeopleinvolvedwiththecompanytoneitherdemandnoracceptmoney,objects,oranygainfromthecompany’sbusinesspartners.Moreover,theaforementionedmustnotengageinorperformanyoftheaforementionedordemand,engagein,oracceptbribesforthegainofthecompany,personalgainorthegainofsubordinates.Hence,thecompanyhasannounceditsanti-corruptionpoliciestointerestedpartiesthroughthecompany’swebsiteathttp://www.qtc-energy.com/index.php/qtc56040. Forannouncementsofintentiontoparticipateintheproject,thePrivateSectorCollectiveActionCoalitionAgainstCorruption(“CAC”)isintheprocessofcheckingthecompany’sreadinessineveryaspectfortheentireauditingandfollow-upsystem,fairness,attitudesofpeopleintheorganizationinordertoassurethatthecompanyisstrongineveryaspectbeforeproposalfortheconsiderationofthemeetingofthecompany’sboardofdirectors.

• Department Guidelines According to Policy

ArrangingforemployeesontheCSRteamtoparticipateinthe2013“ACTNOW:LearningTogether,SavingtheFuture”anti-corruptioneventon6September2013.

Setriskmanagementpolicieshttp://www.qtc-energy.com/index.php/qtc56041andestablishaBoardofRiskManagement.In2013,weprovidedlessonsandguidelinesformanagersinlinewithstandardsandwillexpandtoincludeoperatingemployeesin2014.

Establishemployeeimprovementplansbychangingemployeeattitudesinthecompanyintermsoffightingcorruptiontostrengthenthemindsandconsciencesofemployees.Theplanswillbecarriedoutin2014.

• Work Performance and Progress Disclosure

In2013,theNationalAntiCorruptionCommission(NACC)sentaninvitationlettertotheelectricitytransformermanufacturersthatwonthepricebiddingtoexplaintheissueofcomplaintsinordertolookintothefactssurroundingthepricebiddingfortheprocurementofelectricitytransformersforthe2012fiscalyearbytheMetropolitanElectricalAuthority.Asoneofthewinnersofthebidding,thecompanyhascompliedbyassigningthemanagersandemployeesinvolvedtotestifytothefactsbeforethecommission.Atpresent,noconclusionshavebeendrawnbytheaforementionedcommission.


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3 Respecting Human Rights • Applying principles and guidelines as international standards for the company

Thecompanyisawareandattentivetocompanyactivitieswithpotentialimpactonhumanrightsineveryaspectbyactingincompliancewithrelatedregulationsandpolicytoneveremploychildorforcedlaborandtoneversupportactivitiesviolatinghumanrightsorcorruption.Atpresent,thecompanyisconcentratingonapplyinginternationalguidelinesandmakingofficialannouncementstocoverallinterestgroups.

• Corporate policies and regulations (and agreements with other organizations)

Atpresent,thecompanyhasnohumanrightspoliciesandnoofficialagreementsabouthumanrightswork,exceptfortheinternalmanagementoftheorganizationinwhichthecompanyhasestablishedregulationsinlinewiththesecondclauseofthecompany’ssocialresponsibilitypolicytorespectandgiveimportancetohumanrightsatalllevelsofemployees.Theregulationsareasfollows:

• Respectthehumanrightsofalllevelsofemployeesandguaranteerightstopersonalsafety,acleanandsafeworkplacethatishygienicandfreefromviolationsorabuseineveryform.

• ManagethesafetywithintheorganizationaccordingtotheOHSAS18001standards.• Considerandsupportrightsandfreedomsintheunionizingofemployeesforpolitical,economicand

socio-culturalrights.• Takeactiontowardresolvingconflictsaccordingtotheprincipleoflaw.

• Important measures regarding labor rights

Thecompanyisstrictabouttreatingemployeesincompliancewiththehumanrightsprinciplesspecifiedabove.Thus,thecompanyhassetupandenforcedrulesinmanuals,rules,directives,andregulationsinrelationtotheworkbyteachingnewemployeesaboutrulesandworkregulations,worksafetyrulesandbusinessethics.Moreover,thecompanyhasgatheredandpublishedportablemanualsforalllevelsofemployeestobuildunderstandingandproperconduct.

Eachmonth,thecompanyconducts“ManagerMeetstheEmployees”asameansofcommunicatingwithemployeesaboutthecompany’ssituationandalsoasawaytoacceptrecommendationsfromtheemployeesforimprovementtopromoteemployeeparticipation.


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Sample Photos of Happy Work Place in 2013

QTCLEAGUECUP2013

4 Fair Labor Treatment • Employment and work relations

Thecompanyhassetfairemploymentwageshigherthanthewagesrequiredbylawbecausethecompanyislocatedinanareasurroundedbyindustrialestateswhichhaverelativelyhighlaborcompetition.Apartfromouremploymentwagesthatarehigherthanthewagesrequiredthelaw,thecompanyisdeterminedtocreatehappinesswithintheorganizationwiththeHappy8principlecharacteristicof“QTC”resultinginfeweremployeeresignations.Accordingtoasurveyofthefeelingsandopinionsoftheemployees;theworkatmosphereandattitudetowardstheorganizationisbetterandtherehavebeennogatheringsofemployeestoorganizeunions.

Over80%PositiveEmployeeAttitudestowardtheOrganizationisacorporateobjectivetowhichmanagersofalllevelshavegivenimportanceandrealizethatthemostimportantfactorintheorganization’ssuccessistohaveastrongworkforcewithwillingdedicationinbodyandspiritandgoodworkattitudewithdeterminationtowintogether.Thisiswhyactivitiesarearrangedtopromoteandimprovevariousprocessesincombinationwitharrangingoutsideorganizationstosurveythefeelingsandopinionsemployeeshaveaboutthework,workatmosphereandtheorganizationbyusingtheStatisticalPackagefortheSocialSciences=SPSS,conductedbytheHRTeamworkCompany.Andthesurveyresultsfor2013are3.10percenthigherthanin2012.

Year Score(MaximumScore:5points)

CalculatedinPercentage

2012 3.686 73.72%

2013 3.841 76.82%

Theresultsoftheaforementionedsurveyhavenotyetachievedthegoalssetbytheorganizationinwhichthecompanyplanstoimprovetheresultsin2014accordingtotheHappyWorkPlaceandaccordingtothesurveyor’s’recommendationsasfollows:

• Managersandemployeeswerefoundtohavegoodrelationsandhappinessinworkingtogetheratanaverageof3.90whichcanbeconsideredasaverygoodopportunityforthemanagerstochangetheattitudesoftheemployeesandformattachmentstotheorganizationinvariouspartstoreducetherateofresignations.

• Themajorityofemployeeswerefoundtobeconfidentintheirworkabilitiesfromtheworkdedicationevaluationaveragescoreof4.25whichisthehighestscore.Thecompanywouldliketosupportanemployeecoachingsystemtobuildindedicationtoworkfortheoptimalinterestsoftheorganization.

• ThemajorityoftheemployeeswerefoundtobeproudtosaytoanyonethattheyareQTCemployeeswithanaveragescoreof4.16,whichisagoodopportunityforthecompanytoexpandthiscircleofpridetootherpeoplebothinsideandoutsidetheorganization.

• Ofall16ofthe“negative”surveyquestions,asmanyas11questionswerefoundtohaveamoderateaverage,or86.75percentofthenegativequestions.Thus,thesequestionsareareaswheretheorganizationneedstotakeaction,i.e.thecomplacencyoruncertaintyofemployees,byimprovingattitudesandmotivatingemployeesattheoperationallevelbyusingemployeerelationshipsinsupervisorygroups.


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“AsaPaPuanSuk”Activityisaminiconcertperformanceinthegardenoftheemployees’musicclubonceamonth

Spreadinghappinesstoemployeesandsinginghappybirthdayforemployeesbornthatmonth.

HolidayactivitiesandAnnualVacation2013

atImPooHill,WangNamKhiao

SongkranActivities–OfferingTraditionalWaterBlessings-SermonbyPraMahasompongTalputo

PhotographContest“LovingMotherBecauseShe’stheMostLoved”“LovingDadBecauseHe’stheMostLoved”


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• Occupational Health and Safety

Thecompanyisfirmlydeterminedtopromotingthesafetyoftheemployeesandinterestgroupsinadditiontopreventingaccidents,injuriesandsicknesswhileworking.Andweconstantlyseektolocateandremoveorcontrolhazardsrelatedtothecompany’sbusinessperformancebysettingupoccupationalhealthandsafetyandworkenvironmentpoliciesasguidelinesforemployeestogetherwithdisseminationtointerestgroupsviahttp://www.qtc-energy.com/index.php/qtc53055.

Themaingoalofoccupationalhealth,safetyandworkenvironmentiszeroaccidents.Alllevelsofemployeesintheorganizationgiveimportancetothisgoalandhavecooperatedinseekingandremovingoccupationalhazards.Theresultsoftheoperationsoverthepastthreeyearshavenotyetbeenabletoachievethisgoal,butaccidentsareclearlyinadownwardtrend.In2013,accidentsreducedfrom43.33percentin2012andthenumberofemployees’accident-relatedleavedaysreducedfrom95.74percentin2011.Andthecompanyremainsfirmlycommittedtocontinuallyreducingaccidentstozeroinlinewiththesafetygoalsandconductingongoingsafety-promotingactivities.

Tablecomparingwork-relatedaccidentsforthepastthreeyears.

Severity/Damage

NumberofTimes/Year

2011 2012 2013

Jan-Dec Jan-Dec Jan-Dec

Propertydamage 7 13 8

Injurieswithoutleave 9 14 8

Injurieswithleave 3 3 1

TotalNumber(times) 19 30 17

TotalNumberofLeaveDays(days) 92 47 2

Graphcomparingworkrelatedaccidentinthepast3years.

Thecompanyhasimpartedknowledgeandawarenesstotheemployeesregardingoccupationalsafetyasameansofremovingandpreventingdangerspotentiallyoccurringthroughtrainingandvariousactivitiessuchasthefollowing:


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KYTactivityaboutrecognizingthedangersbeforeperformingwork.

Tobuildsafetyawarenessandreducework-relatedaccidents.

Safetyandhealth-promotingnewsasasourceoflearningandinformationforintra-organization

communications

Arrangingtrainingcoursesonoccupationalsafety

Byanout-sourcedresourcepersontoreduceaccidents

Safetyandhealth-promotingactivities16-17July2013


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• Diversity and opportunities for quality Thecompanytreatsalllevelsofemployeeswithfairnessandequalityanddiscriminationagainstanyoneduetosimilaritiesordifferences,whethertheaforementionedarephysical,emotional,racial,religious,gender-related,age-related,educationalorforanyotherreason.Hence,thecompanyhassetguidelinesfortreatingemployeesinbusinessethicsregardingthetreatmentofemployees.Whencomplaintsarefiled,thecompanywillquicklytrytoresolvethemfairlyandwithoutdiscriminationbyclearlystatingtheaforementionedinworkmanuals,rulesandregulations.

Asameansofimprovingworkknowledgeandabilitiesforalllevelsofemployees,thecompanyrecognizestheimportanceofdrivingtheorganizationtowardachievingitsgoals.Therefore,thecompanyhassetuptwoissuesasgoalsfortheorganizationasfollows:

1. Forimprovingemployeeworkperformancebyhavingemployeesattendtrainingcoursestoreduceatleast50%ofthegapperyear.In2013,thegapwasreducedfrom2011by59.42percent.

2. Forimprovinghumanresourcesinlinewithcareerfields,employeesrequireatleast50%trainingindifferentfieldsperyear.

Course Method 2013Performance

On-the-JobTraining Settingtheskillsandknowledgeforeachpositionandhavingamanagertotakeresponsibilityforthetraining.Employeetrainingcanbeconductedaccordingtothelevelofskillsandknowledgeneededwithcloseandregularevaluationtoconcentrateondevelopingcapableemployeeswhoperformworksothetraininggapcandecreaseatleast50%peryear.

If69peoplewithgapsdecreaseto41people,thepercentageis59.42%

In-houseTraining CoreCompetencyCourseManagerialCompetencyCourseFunctionCompetencyCourseOtherSpecialCourses

47Courses190Employees

AverageTrainingHours37/people/year

PublicTraining Sendingemployeestoparticipateinpublictrainingcourses. 96Courses71Employees

AverageTrainingHours16/people/year


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ContemporaryMusicRehearsalRoomandPerformanceStage

ContainerLibraryforanOutdoor

LearningEnvironment

OurGoldClassCleanFoodGoodTasteCertifiedFood

Courtservestoalllevelsofemployeeswithmenus

regulatedincompliancewithnutritionalstandardsand

price-controlledricewithtwoentreesat20baht.

5 Responsibility to Consumers: • Customer Health and Safety

Thecompany’s“electrictransformers”aretheproductscertifiedbytheIndustrialStandardsInstitute(ISI.384-2543).Beforetransformersaredeliveredtocustomers,theyarerequiredtopassevaluationinanISO/IEC17025certifiedtestinglabtoensurethatthetransformersmeetIEC60076,ANSIstandardsorAS60076standards,aswellasmeetingcustomerneedswithmanagementmeetingrelatedmanagementstandardssuchasISO9001qualitymanagement,ISO14001environmentalsafetymanagementandOHSAS18001occupationalhealthandworkenvironmentstandards.

TheCompanyhaspreparedvariousfacilitiesandservicessoalllevelsofemployeeshaveequalaccesstoamenities,suchasthecontemporarymusicrehearsalroom,thepetanquecourt,thecontainerlibrary,anair-conditionedlounge,employeeshopsanddormitoriesforupcountryemployees,etc.


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VoltageTransformerSize

TISStandards GroundSiteNameplate

“Electrictransformers”arecategorizedastoolsorequipmentusedwithhighvoltageworkthatispotentiallyhazardousorfatal.Thatisthereasonwhypeoplewhoneedtouseelectricaltransformersarecontractors,designers,orpeoplewhoarewell-versedinelectricity.Furthermorethecompanydeliverselectricitytransformerusermanualstocustomersforproperoperations.However,“customers”maynotbeinthegrouppurchasingelectrictransformers,e.g.ordinarypeoplelivingnearanelectricitytransformerinstallationsite,orrealbusinessownerswhoarenotthecompany’sdirectcustomers.Therefore,theinstallationsofelectrictransformersareregulatedbytheElectricityGenerationAuthorityofThailandtoensuretheymeetengineeringandsafetystandards.Andlocalelectricalauthoritieshavetocheckeverytimebeforetransmittingelectricalcurrent.However,allQTCelectrictransformersareequippedwithphonenumbertagssothegeneralpubliccanseeandcontactthecompany24hoursadayincaseofemergency,complaintsorconcerns.

Thecompanyoffers24-hour“MaintenanceandRepairsServices”withateamofmechanics.WeoperateincompliancewithISO9001,ISO14001andOHSAS18001standards.Operationsinvolvingcustomersareconfirmedfromthecustomereverytimeandserviceproceduresareexplainedindetail.Moreover,weworkincompliancesafetyregulations,payattentiontoenvironmentalawarenesswithpreparationsandplanneddrillsforemergenciessuchasoilspills,fires,etc.

• Display of Product Label and Service Displays

Thecompanyrecognizestheimportanceofproperlydisplayedproductinformationandhasspecifiedthatnameplatesdisplayinginformationabouttheelectrictransformersbeplacedontheelectrictransformers.Andbecauseelectrictransformersarespecificproductswithausagelifeofmorethan20years,thedesignsofdifferentelectrictransformersmaydifferaccordingtocustomerneeds.Therefore,theinformationdisplayedonthenameplatesisveryimportantandmustbepossibletomanufacturingtraceabilityandpastdesigninformation.Thatiswhyitisnecessarytousestainlesssteelwhichisadurablematerialthatdoesnotfade.

Furthermore,UVresistantstickerscomewithausagelifeofthreeyearsareattachedtodisplayphonenumbersandcontactinformationsothegeneralpubliccancallandreportemergenciesorreportvariouscomplaintsandconcerns.Ifanystickerisfoundtobefadedduringaserviceround,itwillbeimmediatelybereplacedwithanewsticker.


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• Marketing Communications and Customer Privacy

Thecompanyhaspolicyregardingthetreatmentofpeoplewhoareinterestedinthebusinesschainsuchascustomers,shareholders,competitors,tradepartners,employees,societyandtheenvironment.Thepolicyisannouncedinourbusinessethicsaspracticeguidelinesforthecompany’soperations.Theguidelinesforresponsibilitytocustomersareasfollows:

• Payattentionandtreateverycustomerfairlybyemphasizingthemanufactureofqualityproductsmeetingstandardsandcompletelyabletomeetcustomerneedsatcommensurateandfairpricestoallcustomersequally.

• Presentqualityproductsmeetingcustomerspecifications.Discloseinformationregardingproductsandservicescompletely,correctlyandwithopportunitiesforcustomertofilecomplaintsandcriticizeservices.Andworktothebestofourabilityforquickresponsesfromcustomers.

• Provideexcellentservicewithqualityandeffectivenesstogeneratecustomersatisfaction.• Handleandprotecttheinterestsofcustomersproperlyandfairly.• Actinstrictcompliancewithcustomerspecifications.Incaseswherespecficationscannotbemet,notifythe

customerstoseeksolutions.• Treatcustomerspolitelyandservethereliably.• Deliverqualityproductsontimeasspecified.• Supportcustomers’CSRtasks.• GuaranteeproductswithinsuitabletermsandincompliancewiththeConsumerProtectionAct.http://qtc-th.listedcompany.com/code_of_conduct.html

Becauseelectrictransformersarespecificproducts,theinstallationprocesshastobecontrolledbyengineeringknowledgeandoperationhastobecontrolledbytheElectricalGenerationAuthorityofThailand.Theyarenotproductsordinarypeoplecanpurchaseandusefreely.Inmarketing,thecompanychoosestomakeacatalogforcustomerstodisplaythecompany’sproductioncapacityandtechnicalinformationontheelectrictransformers.Thecatalogprovidesinformation,detailsandadvicetocustomersclearly,quicklyandfactuallycorrect.Thedetailsofthecatalogandtechnicalinformationcanbeviewedathttp://www.qtc-energy.com/index.php/technical-data?lang=th

Formarketinginpublicrelationsadvertisement,thecompanysetsupexhibitionboothsintradeshowsassociatedwiththecompany’sproductandservicetypesfordirectaccesstocustomersandopportunitiestogiveproductinformationtocustomersvisitingtradeshowssuchastheThaiElectrical&MechanicalContractorsAssociationExhibition(TEMCA2013)from16-17August2013atRoyalCliffHotelsGroup,Pattaya.


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6 Environmental Care: • Sustainable Energy Use

EnergyManagement

Electricityisthemainenergyusedduringthecompany’sproductionprocess.In2012,thecompanypassedassessmentforentrepreneurialdevelopmentintheuseofcleanenergyinRayong.Andin2013,thecompanycontinueddevelopmentbyimprovingthemachineryusedinproduction,e.g.byremovingoldmachineswithhighenergyconsumptionratesfromtheproductionprocessandreplacingthemwithnewmachinesthataremoreeffectiveanduselessenergyinresponsetogrowingproductionandtohelpconserveenergy.Theresultscannotbesummarizedinnumbersatthistime.

Thecompanycontinuestomoveforwardregardingenergyconservation,eventhoughtheproductionfacilityisnotpartofanetworkrequiringenergyconservationpolicies.BysigningupforaconsultationprogramonhowtomeettheISO50001standardsandTLCISO50001standardsbytheThaiIndustrialStandardsInstitute,thecompanyhasalreadybeenselectedtoentertheprogramandwillbeginin2014byplanningtoreceiveISO5001accreditationbythebeginningof2015forthepurposeofintroducingknowledgetomanageadministration,informationandanalysisofinformationrelatedtoenergyforgreatereffectivenessandtangibility.

ResourceManagementintheProductionProcess

QTCpurchasesitsmainrawmaterialsforproduction,e.g.copperwire,coppersheets,silicon,andtransformeroil,frommanufacturerslocatedbothdomesticallyandabroad.Thequalityoftherawmaterialsiscontrolledtomeetcustomerneedsbyvariousmeans,includingregulations.In2013,thecompanyinitiatedthe5-Sprogramtoincreaseoutput.AconsultantfromtheTechnologyPromotionAssociation(Thailand-Japan)enteredtheprogramtoofferconsultationandin-depthadvicewiththeLeanStandardSystembytheDepartmentofIndustrialPromotionforthepurposeofimprovingtheproductionprocessforgreatereffectivenessandtoreducewastedrawmaterialsduringproduction.Bothprogramsarecontinuallymovingforwardasanimportantbaseforthecompany’semployeesinjoiningtheprogramtoimprovetotalqualitymanagement(TQM)in2014withtheconsultationteamofTQM-BESTCO.,LTD.ledbyDr.WeerapojLueprasitsakul.

GreenIndustryProgram

QTCrealizestheimportanceofoperatingabusinesswithcorporatesocialandenvironmentalresponsibility.Therefore,thecompanyhasjoinedtheGreenIndustryProgramwiththeMinistryofIndustry.Accordingtotheevaluationresults,QTChasbeenaccreditedas“GreenIndustry,Class3”No.3-2730/2556.Thecompanyisaccreditedfrom19June2013to18June2016whichshowsthatenvironmentalmanagementissystematicwithfollow-upassessmentandreviewsforcontinuousimprovements.ThecompanyhassetagoaltoreachGreenIndustry,Class4accreditationby2015.

• Reducing and Preventing Pollution Thecompanyisdeterminedtotakeactionstowardreducingthesocialandenvironmentalimpactofthecompany’sproductionprocessandservices,whichiswhytheISO14001environmentalmanagementsystemhasbeenintroducedtothecompanywithenvironmentalpolicynotificationathttp://www.qtc-energy.com/index.php/qtc56015asaguidelineforalllevelsofemployeestopracticestrictadherencewiththeSafetyandEnvironmentDepartmentasthesupervisortoevaluatetheactionsandperformanceinaccordancewiththelawandstandards.

PollutionControl

WastewaterQuality:TheQTCfactoryisnotlocatednearanaturalwatersourceandtheproductionprocessofQTCelectrictransformersdoesnotusewaterduringthemainproductionprocess.Waterisonlyusedforthecoolingcirculationofthevacuumovenandforcoolingduringtheweldingprocesswhichisareservoirsystem.Andwaterissentfordisposalonceeveryyearincompliancewiththelaw.Furthermore,waterisalsousedandconsumedbythecompany’semployees.Thewaterqualitytestresultsareasfollows:


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Thefactory’swastewatertestingresultsatthefinaldestinationin2013

ParametersMeasuredTestResults

Standard Unit1/56 2/5619/2/56 16/9/56

BOD5 8.3 4.8 ≤20 mg/lOilandGrease 0 0 ≤5 mg/lPH 8 6.3 5.5-9.0 -Sulfides 0.53 0.6 ≤1 mg/lasH2SSuspendedSolids 38 11 ≤50 mg/lTemperature 33 29 ≤40 °CTotalDissolvedSolids 42 64 ≤3000 mg/lTotalKjeldahlNitrogen <5 <5 ≤100 mg/lasH2S

Thefoodcourt’swastewatertestingresultsatthefinaldestinationin2013.

ParametersMeasured

TestResultsStandard Unit1/56 2/56 3/56 4/56

19/2/56 16/9/56 3/12/56 14/1/57BOD5 266 155 92.5 84 ≤20 mg/lOilandGrease 22.2 16 6 4 ≤5 mg/lPH 7.8 6 5.98 6.54 5.5-9.0 -Sulfides 0.53 2.17 0 0.84 ≤1 mg/lasH2SSuspendedSolids 76 128 6 77.5 ≤50 mg/lTemperature 28 28 26 25.4 ≤40 °CTotalDissolvedSolids 409 306 346 124 ≤3000 mg/lTotalKjeldahlNitrogen 30 15 16 11 ≤100 mg/lasH2S Accordingtothetestresultsofthefoodcourtwastewateratthefinaldestination,someparameterswerefoundtoremainsub-standard.Therefore,thecompanyhasestablishedmeasuresbypumpingoutthewastewaterinthetanksforremovalonceamonthbyauthorizedpersonnelfromtheMabyangpornTambonAdministrativeOrganization.Andin2014,developmentplanswillbesetupandconstantlymonitoredwiththegoalforthewastewaterqualityofthefoodcourttomeetthevaluessetbythelaw. Qualityoftheairventilatedfromthechimneys:DuringtheproductionofQTCelectrictransformersthereisastagewherethetransformersareputthroughavacuumandhotairovensinwhichaventilationsystemisputinplacetoreleasehotairoutsidepossiblycontaminatedbyoilvaporfromthetransformers.Furthermore,wealsouseadryspraysystemtopaintasthelaststepinwhichsomepaintvapormightbemixedwiththeair.Andforthestepofpreparingplywoodinsulation,wehaveselectedacuttingmachinewithhighsafetyandwithastandardizeddustremovalsystemwithachimneytoreleasetheairoutsidewhichmightalsocontaindustfromthewoodcutting.Therefore,thecompanyhasscheduledmeasurementoftheairqualityventilatedfromonallfourchimneystwiceayear.

Airqualitytestresultsfromthechimneysin2013

Parameter Area

Standard Unit1/56 2/56

21-3-56 16-9-56

Particulate Woodcuttingroomchimney 1.3 1.2 400 mg/m3

Oilmist Vacuumovenchimney 3.22 10.05 - -

Oilmist Ovenchimney(transformerrepairs) 1.62 2.85 - -

ToluenePaintingroomchimney

1.88 1.88 - -

Xylene 2.17 2.17 870 mg/m3


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“ForestintheFactory”activitiesonSaturday,27July2013,inanemptyfieldareaof3raiand2nganatthefactory.

WasteManagement

QTCintendstoreducewastebyestablishingvariousprojectsandcampaignstoreducewastefromofficesandwastefromtheproductionprocesssuchastheprojecttosortoutplasticbottles,glassbottlesandmetalcansforsalebytheemployeesparticipatingintheproject. Fortrashorscrapmaterialsfromtheproductionprocess,thecompanyhassortedsellablegarbageandcontaminatedwastethatcannotbesold,sellinganddeliveringwithinthelimitationsofthelaw.

Graphshowingthesummaryoftheamountofscrapmaterialsnolongerusedintheproductionprocessfrom2011-2013.

• Protection and restoration of the environment and biodiversity

ForestsintheFactoryProject:Theenvironmentsurroundingthefactoryishighgroundandseparatedfromnaturalwatersourcesandforests.Furthermore,thesurroundingareabelongstoacommunityofcassavaandpineapplegrowersforindustrialfactoriesinadditiontosomeemptyspace.Themonsoonseasonismarkedbyheavyrainandfloods.Andthesummerismarkedbyhightemperaturesanddrought.Thus,thecompanydecidedtorestoreaboutfourraiofemptylandaroundthefactorybyestablishingthe“ForestintheFactoryProject”toincreasesomegreenspaceandcreateanaturalboundary,planting751treesfrom14specieswithemployeesparticipatingintheprojecttoinstillasenseofcorporatesocialandenvironmentalresponsibilityamongtheemployees.


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“VolunteersPlantCoraltoRestoreBalancetoThaiSeas”:Isoneoftheactivitiesinthe“QTCVolunteersDoGoodDeeds”projectconsideringcoralreefsasanimportantmarineecosystemprovidinghomesandfoodforvariousmarineanimals.Coralreefsare,therefore,asourceofmarinebiodiversity,afoodsource,asourceoffishingrevenue,tourismandprotectionagainstcoastalerosionbythewaves.Atpresent,Thailand’scoralreefsareincreasinglydeterioratingasaresultofbothdirectandindirecthumanactivitiesandnature.

Therefore,thecompanyinitiatedthe“VolunteersPlantCoraltoRestoreBalancetoThaiSeas”activityon22June2013atKohSamaesarnBeach,aconservationareafor“Marinebiologyandconservationcamps”with80volunteerparticipantsand80branchesofcoralbyDr.PrasanSangpaibul,ViceDeanofScienceandTechnologyatRambhaiBarniRajabhatUniversityandthePresidentoftheorganizationasspeakersimpartingknowledgeaboutcoastalandcoralreefecosystems,includingtheimportanceofconservationandtherestorationofcoralreefsprovidinghabitatsforlargeandsmallmarinelife.QTCarrangedthisactivitywiththeobjectiveofinstillingawarenessaboutconservationandconscientiousnessaboutusingnaturalresourcesamongallQTCvolunteers,includingthedisseminationofknowledgeforthelocalresidentsinsurroundingcommunitiestorealizetheaforementionedimportance.

7 Cooperation in the Improvement of Communities and Society • Market and Job Creating Roles

Forover17years,thecompanyhasbeenproducingelectricitytransformersinMabyangporn,PluakDaeng,Rayong.Originally,themajorityofthepeopleintheaforementionedareawerefarmers.Atpresent,however,trendsareshiftingtowardanindustrialsocietywithmanyindustrialestatesappearingintheregion.Therefore,farmershavechangedtheirprofessionsfromfarmingtobecomingfactoryworkerswiththeconstructionoflodgingsorapartmentstosupportworkersfromoutsidethearea.

QTCisapartofthecommunitythatcreatesopportunitiesandincomeforlocalresidentswithapolicyofacceptingemployeesmeetingtheconditionsofthecompany,extendingopportunitiestolocalvenderstosellfoodwithnorequirementtopayrentorotherexpenses.Allthevendorsneedtodoisinvestinmaterialsforcooking.Thecompanywillcontrolthepricesandqualityoffoodsalongwithhelpingvendorswithlivingexpensesforthedifferencesinprices.

QTChasheldthe“CommunityAssociatesMeetQTC”activityfortwoconsecutiveyearsbyinvitingcommunityleaders,monks,teachersandstudentrepresentativeswithcommunityhospitalstodiscussandobservethecompany’sproductionprocesswiththemainpurposeoflisteningtocommunitycommentsinrequiringthecompanytojoinintheimprovementofthecommunityinlinewiththecompany’sneedsandabilities.Itisalsoanopportunityforthecompanytocommunicatewiththecommunityregardingenvironmentalmanagementbythecompany,atthesametimegivingscholarshipstoall


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levelsofstudentsateveryschoolwithonescholarshipperlevelforatotalof33scholarships.Theresultsoftheseconddiscussionin2013includedpointsthecompanywillconsiderandbeabletocarryoutasfollows:

• Theschoolwantssupportfromthecompanyingrantingopportunitiestostudentstolearninindustrialfactoriestoinspiredreamsinchildren.

• Theschoolwouldlikethecompanytousethespecialabilitiesofemployeestohelpimprovevariousabilitiesofteachersandstudents.

• Temples,schoolsandhospitalsinthecommunitywouldlikethecompanytosupportthecommunitywiththecompany’selectricitytransformerstogeneratedirectbenefitsforthecommunitywithabilitytousetheservicesintemple,schoolandhospitalareas.

• ThecommunitywouldlikethecompanytotakepartinvarioustraditionalactivitiespracticedbylocalresidentssuchasElderlyDay,candleprocessionsatBuddhistLent,ordinationceremoniesandfuneralsinthecommunity,etc.

• Community Participation QTChasalwaysgivenimportancetocooperationbetweenthecompanyandthecommunity,societyandtheenvironment,eveniftheworkofthefactorydoesnotaffectthepeopleinthecommunity,societyortheenvironmentinanysignificantway.Allcooperationoccursthroughactivitiesconcentratingontheparticipationandabilitiesofthecompany,andisaguidelinecapableofrespondingtotheneedsofpeopleinthecommunity.

QTCLovesKidsisavoluntaryactivityQTCholdsannuallyincooperationwiththeMabyangpornTambonAdministrativeOrganizationonNationalChildren’sDay.TheQTCLovesKidsteamsetsupaboothforentertainmentandgift-givingtochildrenwhereeachgameoffersablendofsafetyandhealth-promotinginformation.Andin2013,QTCorganizedtheChildren’sDayFairatMabyangpornSchool,PluakDaengDistrict,RayongProvincewithover1500studentsandyouthsfromtheschoolsinthecommunityandotherparticipantsinthesurroundingareas.

QTCmeetstheCommunity

Thursday,15August2013


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SappapayaActivity,WatDan,Rama3Rd.

SappapayaActivity,

WatSuthiWararam,CharoenKrung

SafetyandHealthPromotionWeekisanactivityheldinsidetheorganizationwiththeaimofpromotingawarenessofsafetyandhealthpromotionforemployees.However,becausetheneedsofschoolsinMabyangpornincludeprovidingopportunitiestolearn,thecompanyinvitedstudentrepresentativesfromallfourschoolsinthecommunityparticipatingintheprojectinordertobuildawarenessandrecognitionofvariouspotentialhazardsintheworkplaceon17July2013.Theprojectenjoyedcooperationandearnedtheadmirationofteachersandstudentsalike.

The“HappyTemple”ProjectisanactivitysupportedbytheThaiHealthPromotionFoundation(HPF)andtheTechnologyPromotingAssociationThailand-Japan(TPA)withcooperationfromprivatesectorcorporatealliesalsoparticipatingbysuccessfullyutilizingthe5-Sconceptintheworkplacewiththemanagementofthetemplegroundsforneat,clean,pleasantsurroundingsundertheslogan“BuildingaHappySocietywithTemple-CenteredDisseminationof5-Sdiscipline”.FromtheperspectiveofQTC,ourobjectiveistofostergoodsocialawarenessandparticipationbycompanyemployees.In2013,QTCcontinuedtosetupteamsofvolunteerstoparticipateinthe”HappyTemple”projectasaresultoftheabilitiesoftheteamsthatlearnedvariousmethodsandtechniques.In2014,thecompanyassignedtheteamstoparticipateintheOneTemple,OneFactoryprojectbyselectingtemplesfromtheareassurroundingthefactories.

“EnglishCamp2013”withice-breakingactivitiesforkids–BecausethelanguageandteamworkabilitiesoftheQTCteamareacceptedbytheschooldirectorinthecommunity,BanHuayPrabSchool,Mabyangporn,PluakDaeng,Rayong,requestedsupportfromthecompanytohelpcreateice-breakingactivitiesfor200fourth-sixgraderstobuildingspiritandunitybeforejoining“EnglishCamp2013”heldbytheschoolon4September2013.


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EnglishProficiencyImprovement–AsaresultoftheEnglishproficiencyimprovementplanforemployeestopreparefortheupcomingAECin2015byusingnativespeakersasteachersfromtheECClanguageinstitutetoteachemployeesingroupsrequiringimprovementtwiceweeklyintwo-hourafterworksession.Theprojecthasattractedtheinterestofcommunityleadersandtheschooldirectorswho

haveaskedtojoininbyrequestingaquotaoftwoEnglishteachersperschoolforatotalofeightteacherstoimprovethelanguageabilitiesofteachersforapplicationinteachingtheirstudents.Thecompanycanseethelong-lastingbenefitsforteachersandstudents;thereforethecompanysupportsteachersinparticipatingwiththecompany’semployeesatnocost.Theprojectisongoing.

QTCWorkstogetherinAiding“Haiyan”VictimsinthePhilippinesbygatheringthemusicclubtoperformagardenconcerton28November2013toraiseatotalof20,749bahtindonatedfundsfromemployeesandmanagerstobesenttothevictimsthroughtheStockExchangeofThailand.

Activitiesinthe“JoiningLocalBrothersandSisters”Project-Thisprojectoffersopportunitiesforemployeestopresentprojectstoimprovetheirhometownswithonecontestheldannually.Theprojecthasbeenrunningforthreeconsecutiveyearswiththecompanyprovidingsupportintheprojectswithnomorethan30,000baht.In2013,theprojectselectedwasthe“DharmaHeartsTakingDistantBrothersandSistersBackHome”projectbyMr.

SuratPanomai’steam.Thecompanythenprovidedsupportwith12,600kilogramsofcementvaluedatapproximately30,000bahtforuseintheconstructiononthe1December2013forthetempletouseincompliancewiththeobjectivesoftheprojectowner.Thisprojectmadetheemployeesproudtobepartofthecompany.Parentsandrelativesoftheemployeesarealsoproudoftheemployeesforbringinggoodthingstotheirhometowns.

The“RobotCamp,ScienceCampandInformationTechnology”projectistoshowcooperationandsupportbygivingscientificequipmenttotheFacultyofEngineeringatKingMonkut’sInstituteofTechnology.Thecompanysupportswithcontinuedparticipationintheproject.Thecompanyrealizesthattheprojectbenefitssocietyandcaninspireunderprivilegedstudentsinremoteareas.Itisalsoachannelforcommunicatingthecompany’scapacityforbecomingknowntoengineeringstudentswhomayreturnasimportantcustomersornewmembersofthecompanyinthefuture.


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Asaresultofthesuccessoftheaforementionedactivities,thecompanyplanstoorganizesimilaractivitiesin2014intheMabyangcommunityarea,offeringopportunitiestostudentsandyouthsintheareasotheycanexperienceavarietyofexcitingexperimentsandcreatenewlearningexperiences.Theuniversityandthefacultiesarehappytoconducttheaforementionedactivitiesattimeswhenthecompanyandschoolsintheareaareready.

• Social Investment and Assessing Social Impact

EnergySavingElectricityTransformerResearchandDevelopmentProject:Asaresultofthecompany’sfirmcommitmenttoimprovingitselectrictransformersforhighquality,reducedenergylossinthetransformerandhelpforcustomersinsavingenergy.Thecompanycooperatedwithanamorphoussteelproducerintheresearchanddesignofamorphoustransformersasasuccessfulachievementin2012.Andin2013,wecommencedproductiononthreedifferentsizesofprototypeamorphoustransformerswhichhavepassedtesting.TheMetropolitanElectricityAuthorityisalsointerestedintheproject,sotheyrequestedtheresearchteamofQTCtoprovideconsultationandtaketheprototypetransformerstotestandcollectinformationforsubsequentimprovements.Intheoryandifsuccessful,thisundertakingwilldramaticallyreducepowerconsumptioninThailand.Atpresent,however,theaforementionedprojecthassloweddownduetopoliticalfactorsandinternalchangesintheMetropolitanElectricalAuthority.

However,QTC’sresearchteamhascontinuedtomoveforwardinthedevelopmentofotherprototypesforproposaltointerestedcustomers.Wealsorealizethelong-termbenefits,especiallyintheGreenIndustrycustomergroupbothdomesticallyandabroad.

8 CSR Innovations and their Dissemination• CreativeCSR

• Co-CreationwithStakeholders

• SocialInnovation

In 2013,weheld the“SearchingforInformation@Andaman”activityatBanSalaDanSchool,SalaDan,KohLanta,Krabi,inwhichQTCsupportedthetestingofstaticelectricitygeneratormodelVDG5K500KVADEGRAAFFGENKITvaluedatover62,489baht,andsentaCSRteamtotakepartintheactivitieswithgroupsofteachersandstudentsaswellaslocalresidentsin4-6December2013.


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General & Other Relevant Information1 General Information

Company InformationCompanyName : QTCEnergyPublicCompanyLimitedTypeofBusiness : Operatingthebusinessofmanufacturinganddistributingelectricity distributiontransformers,includingthoseforcompaniesinvolvedwith electricitydistributiontransformers.MainOfficeAddress : 2/2SoiKrungthepKritha8(5),KrungthepKrithaRd.,Huamark, Bangkapi,Bangkok10240FactoryAddress : 149M.2TambolMabyangporn,AmpurPluakdaeng,Rayong21140CompanyRegistrationNo. : 0107553000158RegisteredCapital : 200millionsharesPaid-upCapital(ordinaryshares) : 200millionsharesWebsite : www.qtc-energy.comInvestorRelations : 0-2379-3089,ext.241Telephone : 0-2379-3089-92Facsimile : 02-379-3097

Stock RegistrarCompanyName : ThaiSecuritiesDepositoryCo.,Ltd.OfficeAddress : 62StockExchangeofThailandBuilding,RatchadapisekRoad, Klongtoey,Bangkok10110Telephone : 02-229-2800,02-654-5999Facsimile : 02-359-1262-3

AuditorsAuditors : Mr.SomkidTiatrakul,AccountingAuditor’sLicenseNo.2785or Mrs.SumaleeChotdianan,AccountingAuditor’sLicenseNo.3322or Mr.KosolYaemleemul,AccountingAuditor’sLicenseNo.4575CompanyName : GrantThorntonCo.,Ltd.OfficeAddress : 87/1AllSeasonsPlace,18thFloor,WirelessRd.,Lumpini, Pathumwan,Bangkok10330Telephone : 0-2205-8222Facsimile : 0-2654-3339

Legal ConsultantsCompanyName : 3PProfessionalCo.,Ltd.OfficeAddress : 10/186TheTrendyOfficeBuilding,25thSukhumvit13SukhumvitRd., Wattana,KlongToeiNua,Bangkok,10110Telephone : 021687688-92Facsimile : 021687693

2 Other Relevant Information InvestorscanstudyadditionalinformationabouttheCompanyintheCompany’sAnnualDisclosureForm(Form56-1)postedatwww.sec.or.thorwww.set.co.thandthecompany’swebsiteatwww.qtc-energy.com.


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Characteristics of Business Operations

BusinessOperationsofEachProductLine

1 Characteristics of products and service 1.1 Electricity Transformers

Theelectricitytransformersmanufacturedanddistributedbythecompanyarecustom-madeormadetomeetthespecificationsofcustomerorders.Customersprovideproductspecificationssuchashighandlowvoltage,loss,impedance,vectorgroupandtemperaturerisesothecompanycandesignhighqualityelectricitytransformerstomeetcustomerneeds.Alloftheelectricitytransformerssolddomesticallybythecompanyareunderthe“QTC”trademark.Forforeignsupply,productsaredistributedunderboth“QTC”andcustomertrademarks.Inaddition,themaincomponentsoftheelectricitytransformerareasfollows:

1. SteelCorewhichactsasamagneticcircuitforthetransmissionofmagneticlineofforcetoproducepressureonbothlowandhighvoltagecoils.Thesteelcoreismadefromcuttingsiliconsteelandlayeringittoformacore.

2. HighVoltage(Primary)Coilsreceiveelectricenergyfromhighelectrictransmissionlinesandtransformtheelectricenergyintomagneticenergyfortransmissiontoalowvoltagecoil.Highvoltagecoilsarenormallymadefromroundcoppercoilsoakedinchemicalsandwrappedorputontolowvoltagecoils.

3. LowVoltage(Secondary)Coilsactasdistributorsofelectricityfromtransformersontoaloadoraccompanyingequipment.Lowvoltagecoilsaremadefromflatcoppercoilcoveredbyinsulationorcopperfoilwithrelativelylargesizedwrappingontheinsulatorcovertobeinsertedontothesteelcore

4. TanksandTankLidsarecomponentsthatpreservetransformeroilandreleaseheatinsidethetransformer.Thecompanyusesthetechniqueofproducingelectricitytransformershermeticallysealedwithprototypeinacorrugatedformwithheatreleasefinsattachedtoallthesidesofthetanksotheheatcanbeswiftlyreleasedfromtheinsidetotheoutside.Thefinsarefoldedfromlongsteelsheetmakingtheconnectingmarklessvisiblewhilereducingthechanceoftankleakageincomparisontopreviousspecificationsusingradiatorfinforheatventilation.Thetanklidisusuallyusedtoinstallthebussingandothertankprotectionequipment.

5. Bushingsarepartofthereceiverordistributorofthetransformerelectricalcurrent.Theingoingandoutgoingwiresareconnectedtothebushingandtheinsideofthebushingholdsanelectricconductorleadingtheelectricalcurrenttothecoil.Thebushingactsasaninsulatortopreventtheleakageofelectricityintothetank.

6. Transformeroilactsasagoodinsulatorthatishighinpurityandusedasanelectricinsulatorinsidethetransformerasinadditiontohelpingventilateheatfromthecoilinsidethetransformertooutsideair.

7. Tapsareequipmentthatchangestheratioofthecoils,allowingthepressureproportionofthetransformertobeatathedesiredrate.

8. Otherequipmentusedforprotectionsuchastoolsforoillevelmeasurement,thermometersandpressurereleasevalvesareusedtomeasurevariouslevelsofthetransformer.Onceanerrorisdetected,awarningsignalissenttocontrolthecorrectiveequipmentandpreventseveredamagetothetransformer.


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Theelectricitytransformersproducedanddistributedbythecompanyaredividedintothefollowingtwotypes:

1.1.1 DistributionTransformer

DistributiontransformersareequipmentperformingthetaskoftransforminghighvoltageelectricityfromtheMetropolitanElectricityAuthorityandtheProvincialElectricityAuthoritydistributionsystemsthroughdistributionlinesat11-33Kilovolts,orKV,sotheelectromotiveforcewillbereducedtothesamelevelrequiredbytheneedsofcustomerssuchasindustrialfactories,householdsandhigh-risebuildings.

Thedistributiontransformersmanufacturedanddistributedbythecompanyhaveelectricpowerfrom10-5,000kilovoltamperes(KVA)andelectromotiveforcelessthan36KVinboththefirstandthirdphases.Distributiontransformerscanbedividedintothefollowingtwotypes:

1. HermeticallySealedOilTypeDistributionTransformers:Thistypeoftransformerusestransformeroilasaninsulatortopreventshortcircuitsinsidethetransformerandreleaseheatfrominsidethecoiltotheoutsidearea.Thetankitselfiscarefullysealedtopreventexternalairfromleakinginsideandmixingwiththeoil.Thistypeoftransformer,therefore,ishighlycapableofwithstandingmoistureanddeterioratesataslowerrate.Itwillalsohelppreservethequalityoftheinsulatoroftransformeroilaswellasextendthedurabilityandreducemaintenancecosts.Thistypeoftransformerismainlyinstalledoutdoors.

2. OpenTypewithConservator:Apreviouselectricitytransformerdesignthathasbeenpopularforalongtime.Itrequirestransformeroilasaninsulatorandheatreleaseinthesamemannerasthehermeticallysealedoiltypedistributiontransformer.Thedifferenceisthatithasaconservatorinstalledtoreservetheexpansionoftheoilduringoperationsandatubetolettheairflow.Ontheendofthetubeisabulbfilledwithsilicagelthatabsorbsmoisturefromtheairbeforeitentersthetransformer.Thistyperequirestransformerinspectionoilevery6-12months.


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EarthingTransformer Dry-TypeClassF&H

UnitSubstation PadMounted

TheelectricitytransformersdistributedbythecompanyarequalitytransformerscertifiedbystandardssuchasThaiIndustrialStandards384-2543bytheIndustrialStandardsInstitute,MinistryofIndustry,ISP9001:2000forthedesign,productionandmaintenanceofthedistributiontransformer.Inaddition,thecompanyhasbeingmanufacturingelectricitytransformersrequiringcompliancewithinternationalstandardssuchasIEC60076,IEEEStdC57.12.00,VDE0532,JEC204,AS2374orotherstandardstosatisfycustomers.

Furthermore,inordertoensurethatthedevelopmentoftheelectricitytransformersarefullycompliantwiththestandardsofourcustomersinadditiontobuildinggreatertrustfromourcustomers,thecompanyhassentourelectricitytransformersforshortcircuittestingbyawell-renownedglobalinstitution.The250KVA,500KVA,1000KVA,and2000KVAhaveallpassedthetestandreceivedcertificationforshortcircuitresistancebyCESI,Italy.Powerplantswith167KVAhavepassedtheshortcircuittestingandreceivedcertificationforshortcircuitresistancebyKEMA,Netherlands.Thecompanyhasbeenplanningtohaveotherelectricitytransformerssubmittedtoshortcircuittestingtoincreasethechanceofwinningpricebiddingfromelectricitytransformermanufacturersanddistributors,includingthegovernment,inadditiontoexpandingthedomesticmarket.In2012,100KVA3Ph50Hz22000-400/230V,100,500KVA3Ph50Hz33000-400/230V.and150,300,750KVA3Ph50Hz24000-416/240V.haveallpassedtheshortcircuittestingbyCESIinItaly.

8.1.1.2PowerTransformers

Powertransformersaretransformersusedtoadjustelectromotiveforcestransmittedfrompowergenerationsourcesalongthetransmissionlinetoreduceforcebeforeenteringthedistributionlineandthenlatertotheenduser.Thepowertransformersthecompanyismanufacturinganddistributingaresizedat5,000-30,000KVAwithamaximumelectromotiveforceof72KV.

In2012,thecompanyinvestedinrestorationandextensionofbuildingandmachinesforelectricitytransformerproduction,suchas2-coilwiringmachinescapableofcoilingatthetimeandsiliconsteelslittingmachines.AllthemachinesarefullyassembledandhavebeenreadytousesinceNovemberof2012.

In2013,thecompanyexpandeditsproductioncapacitybybuildingfactoriestomanufactureelectricitytransformertanks.Productionisexpectedtoexpandbyanadditional30%thanitsbaseproductionvolume.

Inaddition,thecompanymanufacturesspecialtypesofelectricitytransformersthatarecustom-designedandproducedtomeetcustomerneedssuchasEarthingTransformers,Dry-TypeClassF&H,UnitSub-stationsandpadmountedtransformers.


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1.2 Services Allservicesprovidedbythecompanyarerelatedto24-hourtransformerusage.OurhighlyexperiencedengineersandtechnicalexpertsarereadytosupportandassistcustomerswhohavepurchasedQTCelectricitytransformers,aswellasgeneralcustomers.IncaseswhereanelectricitytransformerbelongstotheQTCbrand,thedetailsregardingemergencycontactinformationareplacedonthesidesofalltransformers.Theelectricitytransformer-relatedservicesprovidedbythecompanyincludethefollowing:

- Electricitytransformerinstallation - Inspectionandmaintenanceaccordingtotheproductcycle - Restorationandmaintenanceoftheelectricitytransformer - Fillingoilintotheelectricitytransformer - Electricitytransformerrental - Electricitytransformertesting - Adviceonelectricitytransformersandelectricalsystems - Serviceonsteelcuttingandcoilwiring

2 Marketing and Competition 2.1 Competitive Strategy

1. ProductQuality

Thecompanyisfirmlycommittedtopolicyforconstantdevelopmentinthequalityoftheelectricitytransformerstocomplywithinternationalstandardsfromdesigntotheselectionofrawmaterialsforproduction.Qualityinspectionsarefrequentlyconductedfortherawmaterialsfrequentlypurchased.Thecompany’selectricitytransformershavebeendesignedbyacomputersystemthatincreasesandpreciselycontrolslossunderthesupervisionofexperiencedengineersinthedesignfield.Furthermore,thetechnologyemployedbythecompanyinpowerplantsisup-to-dateandhighlydeveloped.ThemainmachinesusedareimportedfromGermanyandalloftheproductionprocess,uptotheproductsdeliveredtoourcustomers,havebeentestedandcontrolled.Allthecompany’soperationsdescribedabovehavebeenadoptedtoensurethatproductsarestandardizedandcustomizedforcustomersatisfaction.Thecompany’sproductsareclearlycertifiedbyISO9001:2008,andalloftheelectricalsizesandtypesofelectricitytransformersavailableinthemarketarecertifiedwithThaiIndustrialStandards384-2543.Moreover,the100KVA,150KVA,250KVA,300KVA,500KVA,750KVA,1000KVA,2000KVA,andEarthingTransformer1600AhaveallpassedshortcircuitresistancetestingbyCESI,Italy.The167KVAhasalsopassedshortcircuitresistancetestingfromKEMA,intheNetherlands.Bothinstitutionsareworldfamoustestinginstitutescapableofensuringthequalityanddurabilityofthecoilandinternalstructureofelectricitytransformers.

2. SpeedandReliabilityinProductDelivery Deliveringproductsonscheduleisanotherimportantfactorconsideredbycustomerswhendecidingto

purchaseproductsfromvarioussuppliers.Mostofthecustomershaveatimeframethatisexact,especiallythoseinthestateenterprisesectorthatproduceanddistributeelectricityorcustomerswhohavewonpricebiddingforentireprojects.IfQTCisunabletodeliverproductsontime,itmaycausedelaysforthecustomer’sprojectsandourcompanymayberequiredtopayfinesaccordingtopurchase/salesagreements.Therefore,ourmainpolicyistodeliverproductsontimetomaintaincustomersatisfactionandultimatelybuildtrustandloyalty,aswellasbrandpromotionforourcompany.


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3. EffectiveCapitalManagement

Thecompanygivesimportancetotheefficiencyofcapitalmanagement,whichisamaincostwithimpactonthecompany’sprofitandcompetitivecapacity,beginningwiththeselectionofrawmaterials.Ateamofexpertsselectsthemanufacturersand/orsupplierswhoarerequiredtopassinspectiontestingontheirproductionprocessestoensurethequalityoftherawmaterialsandreducelossfromproductioncausedbylowqualityrawmaterials.Inaddition,thecompanyhasadoptedtheERPsystemtoplanthepurchasingofrawmaterialstohelpcontroltheamountofrawmaterialproductionatacceptableandsufficientlevels.SincetheERPsystemhaslinkedinformationfromalldepartmentssinceordersbegantobeacceptedfromthecustomers,thesystemtakestheordersandplansforproductionandrawmaterialpurchases.

Inaddition,thecompanyhasplannedaproductionandtechnologicalproductionsystemtohelpsaveproductioncostsaswellasmaintainproductquality.ApplyingtheWoundCoretechnologyforsteelcoreproduction,thistechnologywillreducesteelinput.

• Siliconandlossofsiliconsteelcouldreduceoverallproductioncosts

• Findingalternativerawmaterialsforwideroptionsandhelpingmanagecapitalwouldbeveryefficient,e.g.copperfoilorpaper-wrappedflatwireisanimportantcomponentforwrappinglowvoltagecoils.

However,theselectionofeachrawmaterialdependsonthespecificationsoftheelectricitytransformersrequestedbythecustomers.

4. AcquiringExperiencedStaffandExpertsintheElectricityTransformerIndustry

Withthecompany’steamofdirectors,architects,andmostofthestaffwithexperienceandexpertiseintheelectricitytransformerindustryforover23yearsandhavingpassedthetrainingofworld-renownedelectricitytransformermanufacturersfrombothGermanyandJapan,thecompanyisabletohelpdeveloptechnologybothintermsofdesignandimprovetheproductionprocessforhigherefficiency.Themachinesarethereforehightechandabletoreduceproductionprocess,causingcosttobelowerandabletocompetewellwithcompetitorsinthebusiness.Also,thesalesdepartmenthasexperienceinthesalesandmarketingfieldforover23years,makingthemunderstandcustomer’sdemandandin-depthelectricitytransformermarketcondition.Theyarethereforeabletocommandstrategieswhicharesuitableforeachsituationperfectly.

5. TradeAlliancesandGoodRelationshipwithDistributingAgents

In2013,19-25%ofincomefromnetsalesofelectricitytransformercomesfromdistributingagents,bothdomesticandabroad.AsofJanuary,31,2013,thecompanyhasatotalof3agentsdomesticallyand6agentsabroad;coveringMalaysia,Australia,SouthAfrica,andItaly.Also,thecompanyisfocusedonmaintaininganddevelopingrelationshipwiththeagentscontinuously.Also,tomaintaingoodrelationshipamongothercompaniesinthemarketanddistributingagentstoshareinformationforproductandqualitydevelopment,aswellasservice.Thisallowsthecompanytoimproveproductqualitytodirectlyserveneedsofthecustomersatahighstandard.

6. Post-SaleServices

Thecompanyoffersaftersaleservicebyexpertsinelectricitytransformertogiveadviceandsuggestionsonproblemsolving24hourstocustomers.Thisservicewillnotonlyimpressthecustomersbutallowthecompanytobeawareoftheexistingproblemscausedbytheproductdirectlyfromthecustomer.Thecompanywillbeabletotakethecomplaintstodevelopandfixtheproductaccordingly.Theproductwillthereforehavehighqualityandfullyrespondtocustomer’sdemand.Sincetheelectricitytransformerhashighquality,wecanensurethisbyoffering2yearproductwarranty.


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2.2. Characteristics of Customers Customersofourcompanycanbedividedinto2maingroupsasfollow;1. Domesticcustomers Domesticcustomersofthecompanycouldbedividedinto4categoriesasfollow;

1.1 Stateandstateenterprise

Stateandstateenterpriseisagroupcombinedofthemaincustomerwhoistheelectricitystateenterpriseproduceranddistributor.ThisincludesTheProvincialElectricityAuthority(PEA),TheMetropolitanElectricityAuthority(MEA),ElectricityGeneratingAuthorityofThailand(EGAT),andotherstateandstateenterprisecustomerssuchasotherstateandstateenterprisecustomerse.g.SattahipElectricWelfare,MinistryofPublicHealth,PublicWorksDepartment,andRoyalIrrigationDepartment.

1.2 ProjectContractors

Thiscustomergrouprangesfromsmalltolargeprojectcontractorswherebythemarketingofficerwillberesponsibleforcontactingthecustomerstopresentelectricaltransformertotheproject'sowner,architecture,andprojectadvisor,includingtakingthecustomersonatourtovisitthefactoriestogaintheirtrustofthecompany'sproducts.After,themarketingofficercontactsthecontractortostartthesaleprocess.Theprocessbeginswiththespecsanddetailsoftheelectricitytransformerwhichthecustomerwantstogatherinformationasdatafordesigningandpriceoffering.ThistypeofcustomerincludesPowerlineengineeringpubliccompanylimited.Italthaidevelopmentpubliccompanylimited,RittaCompanyLimited,Sino-thaiengineering&constructionpubliccompanylimited,Demcopubliccompanylimited,andFirstTechnologyCompanyLimited.

1.3 Distributingagents

Customerswhoaredistributingagentsandthenonwardstoendusers.Onthe31stjanuary2013,thecompanyhasatotalof3distributingagents.Eachagentidresponsiblefordistributingtheelectricitytransformerandofferingserviceintheirareaofresponsibility.Thiswillhelpwithmarketingandserviceprovidedbythecompanytofullycoverallthearea.Thesalesdepartmentwillberesponsibleofsellingthroughdistributingagentsandinspecttheseagentsregularlytogiveinformationandstrategyduringeachperiod,aswellasconductquestionnaireoncustomer’ssatisfactionregardingtheproductandserviceprovidedbythecompany.Theyarealsoobligedtohearproblemsandtakethattofurtherimproveandresolvelateron.

1.4 Projectorfactoryowners

ThisgroupofcustomerwillpurchaseelectricitytransformertouseintheirownfactoriesorbuildingssuchasCP-MeijiCompanyLimited,AdvancePepperMillCompanyLimited,TrueUniversalConvergenceCompanyLimited,andBetagroCompanyLimited.Themarketingofficerand/orsalesofficerwilldirectlycontacttheprocurementdepartment,aswellastoadviseandpresentthecompany’sproductsforthecustomertoseetheimportanceofusinghighqualityelectricitytransformerwhichwillgreatlyhelpsaveenergy.

2. Foreigncustomers

2.1 Distributingagents

Currently,thecompanyhas6agentscoveringelectricitytransformerdistributioninAustralia,MalaysiaItaly,andSouthAfricawheretheincomefromexport(92%)mainlycomesfromsellingthroughdistributingagents.

2.2 Othercustomergroups

Othercustomergroupsincludecontractorandtradingfirmwhichwillpurchaseelectricitytransformerfromthecompanyanddeliverittoendusersinvariousindustriessuchaspaperindustry,petrochemicalindustry,palmoilindustry,textileindustry,andelectronicindustry.


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Chartshowingrevenuefromeachdistributingchannelbycustomertype

CustomerType

2011 2012 2013

MMillionBaht

%MMillionBaht

%MMillionBaht

%

Revenuefromdomesticsales

(1)Stateandstateenterprises 327.48 46.73 330.59 35.16 270.46 34.50

(2)Distributor 23.00 3.28 15.77 1.68 21.20 2.70

(3)Private 238.68 34.06 366.08 38.92 330.50 42.16

Totalincomefromdomesticsales 589.16 84.06 712.44 75.76 622.16 79.37

Revenuefromforeignsales

(1)Distributor 95.00 13.55 192.17 20.44 148.18 18.90

(2)Private 16.70 2.38 35.74 3.80 13.54 1.73

TotalRevenuefromForeignSales 111.70 15.94 227.91 24.24 161.72 20.63

TotalRevenuefromSales 700.86 100.00 940.35 100.00 783.88 100.00

2.3 Pricing policy Thecompanyhasapolicytowardspricingthatfollowsthecostplusmarginrulewhichwillbedifferent

accordingtoeachcustomertypeandconsiderthecompetitiveconditionineachmarket-bothdomesticandforeign,respondtotheproductofeachcustomergroupwhichtakesinconsiderationoftheproductqualityandeffectiveafter-saleservice.SincerawmaterialpricessuchassiliconsteelandcopperfoilareconsiderablyhighandfluctuatesaccordingtotheWorldpricewithasmallgroupofsupplier,thecompanycarefullytracksthepricetrendandamountofsupplyofeachrawmaterial.

2.4 Distribution and distribution channel Distributionofelectricitytransformerwillbyproceededbythesalesdepartment.Theresponsibilityis

dividedinto2fields-1)domesticsalesfield,servicingstateandstateenterprise,distributingagents,andprivatecompanies,bothcontractors,industrialcustomers,andcustomersindifferentnationsand2)foreignsalefield.

Apartfromdistributionthroughthecompany’ssalesdepartment,thecompanyalsohaspolicytoexpandmarkettocoverawidercustomerbasewhereitentersvariousproductfairssuchaselectronicproductandmachineryfairorganizedbytheThaiElectricalandMechanicalContractorsAssociation(TEMCA)andotherindustrialproductfairwhichisthetargetfairsofthecompany.Duringeachyear,thecompanywilljoinabout2-3oftheseeventsandjoinproductfairsalongwiththedistributingagentssuchasELINEX,IIEEConference&Exhibition.

Detailsofthecompany’sdistributionchannelcouldbecategorisedasfollow;

1. Distributionthroughauctioning

Auctioningthroughpricebiddingisoneofthemaindistributingchannelsforcustomerswhoarestateenterpriseproduceranddistributorofelectricity.Theprocessofbiddingwillbeginwithpriceoffering.Afterthecompanystudiesinformationandanalyzedetailsoftheelectricitytransformertoarrangedocumentsandcalculatepricewhichwillbeoffered.Documentsusedforpriceofferingaredividedto-documentpresentingthequalificationofthebidderandtechnicaldocuments.Companiesentitledtoparticipatein


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pricebiddingmustpassthebasicqualificationsinpriceoffering.Oncethecompanywinsthebidding,tradingcontractofthemodelandtimeperiodwillbewritten,alongwiththesecurityguarantee-mostvalueoftheguaranteeis10%ofthebiddingprice.

TheProcessofSubmittingPriceBidsCanBeSummarizedasFollows:

2. Distributionthroughdistributingagents

Inconsiderationtoestablishthedistributingagents,bothdomesticandabroad,thecompanyfocusesonexperienceinbusiness,proficiencyinmarketing,experienceinthearea,financialcondition,andreadinessoftheagents.Acontractwillbewrittenforeachagent,incasetherearemorethanoneagentineachcountry,thecompanywilldeterminetheareaofresponsibilityofeachagent.Distributingagentswillactasachannelfordistributionofthecompany'sproducts.Theywillberesponsibleinmarketingoftheelectricitytransformerineacharea,includinggivingserviceandmaintenanceofthepurchasedproduct.Thecompanywillinadditiongivetechnicalsupporttotheagentsandtheseagentsarealsoresponsibleforseekingtrendoftheproductintheirrespectivecountryofdutysothattheexistingproductwillbedevelopedtoresponddirectlytothemarketdemand.Distributingviadistributingagentswillhelpthecompanysavemanagementcostsinceproductsaresoldtodistributingagentsareoutrightandagentsdistributethemdirectlytocustomers.

OnJanuary,31,2013,thecompanyhasatotalof3agentsdomesticallyand6abroad-coveringAustralia,Malaysia,Italy,andSouthAfrica.

3. Distributingdirectlytocustomers

Marketingofficerand/orsalesofficerwilldirectlycontactthecustomersandtakeadvantageofdirector'srelationshipwiththecustomerstofindchannelstocontinuouslyreachthecustomers.Theywillpresentandgiveinformationregardingtheproductandtakethemtovisitthecompany'sfactories.Thisgroupofcustomersinclude;contractor,architecture,andcustomerswhousetheproductsdirectlysuchasindustrialfactory.

BuyPriceBiddingForms

SubmitPriceBiddingEnvelop

PriceProposalDate

AnnouncePriceBiddingResults

SignContract

Approximately2Months

2-3Weeks

Within15Days


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Tableshowingrevenuecategorizedbydistributingthrougheachdistributionchannel

CustomerType

2011 2012 2013

MMillionBaht

%MMillionBaht

%MMillionBaht

%

Directsalesfromthecompany’sSalesDepartment 255.38 36.44 458.08 49.34 344.04 43.89

Salethroughproductdistributor 118.00 16.84 206.66 22.26 169.38 21.61

Salesthroughproductauctioning 327.48 46.73 263.33 28.42 270.46 34.50

Total 700.86 100.00 928.57 100.00 783.88 100.00

3 Product provision 3.1 Production

Thecompany’sfactoryislocatedat149Moo2Pluakdaeng-huaiprapRoad,TambonMabyangporn,PluakdaengDistrict,Rayongona32Railand.Allelectricitytransformerisamadetoorderproductwhichthecompanyhasapolicyofproducingtheexactmatchofproductthathasbeenrequestedbythecustomersandfocusmainlyontheproduct’squality.Thetechnologytowardsthedesignandproduction,machineryusedinproductionsuchassteelcuttingmachine,coilwrappingmachine,andstoveareimportedfromGermany.Thetestingprocessofeachelectricitytransformercomplieswithinternationalstandardandcontrolledbyacomputersystem.Therefore,thetestsareaccurateanduptospeed.In2012,thecompanyhadinvestedinbuildingfactoriesandpurchasingnewmachinessuchassteelsiltingmachineandcoilwrappingmachinetorespondtothebusinessexpansion.In2013,thecompany’sproductionhasbeengrowingsteadilywithinvestmentinfactoryexpansiontoproduceelectricitytransformertanktoreduceproductioncostandrespondtoshortdurationofdeliverydemand.Thiswillhelpimprovethecompany’scompetitiveadvantageandsupportnetsalesgrowthforecastedwithinthenext5years.

3.2 Production Capacity

2009 2010 2011 2012 2013

ProductionCapacity(KVA) 952,000 952,000 976,000 1,215,000 1,482,000

ProductionAmount(KVA) 562,930 638,238 952,380 1,379,748 1,236,562

ProductionCapacityRate(%) 59.13 67.04 97.58 113.56 83.44

In2013,theproductioncapacityandtheproductionamountincreasedbyapproximately21%from2012,partiallyduetoplansforincreasingproductioncapacitytosupportbusinessgrowthoverthenextfiveyears.Thatiswhythecompanyhasgearedproductioncapacitytomeetcustomerneeds.Hence,thecompanyhasdevelopedemployeeskillsforacceleratedworkflow,improvedmachineefficiencyandorderednewmachinerytogreatlyincreaseproductioncapacityatthesametime,e.g.the4-coilcoilwindingmachine.Furthermore,thecompanyhasalsoimprovedtheproductionprocesstoshortenproductiontime.


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3.3 Manufacturing & Production Processes

Design

Production Planning

High VoltageCoiling

Low VoltageCoiling

Silicon SteelCutting

Arrange the Steel Cores

Assembly

Tank Lid

Tank

Prepare Materials

EquipmentAssembly

Quality Inspection

Box Packing

DeliverTransformers to Customers

Pre-Test

Final Routine Test

Drying & Oiling

Clamps & Equipment

TheProductionProcessforCompany’sDistributionTransformersisasfollows:

1. Design

Thecompany’selectrictransformersarecustom-madetomeetcustomerorders.Thetransformersarecompletelydesignedbyusingamoderncomputerprogramwithhighaccuracyandcapableengineerswithextensivedesignexperiencetoensuretheresultsmeetthecustomers’specificationsandpurpose.Thecomputerdesigncanshowimmediatelyresultsasoutlinedrawings.

2. Productionplanningandequipmentpreparations

Theelectrictransformer’sorderinformationfromcustomersisenteredintotheERPsystemandusedforthepurchaseplansofrawmaterialsandequipment,includingtheproductionplan.TheplanningwillincludeupdatestotheproductionplansforpunctualdeliveryaspercustomerorderswhichwillrequireclosecooperationbetweentheSales,Production,andProcurementDepartments.


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3. Siliconsteelcuttingandsteelcorearrangement

ThecompanyusessiliconsteelcuttingmachinesfromGermanycontrolledbyacomputersystem,therebymakingitpossibletocutsiliconsharply,quicklyandpreciselyinwhichthecomputerwillcalculatethedrillinglocationsofthesteelcoreandcutsiliconsteelatthesametime,fullypreservingtheelectricalpropertiesofthesiliconsteelcore.Thesiliconsheetwillthenbecuttoshapeandsenttothesteelarrangingsection.Forsteelarrangement,thesteelpieceswillbeplacedinoverlappinglevels(Step-Lap)usingastackingtable.Theaforementionedstep-lapmethodresultsinno-loadloss,excitingcurrentofthesteelcoresandwillreducethetransformers,thusreducingnoisedisturbanceandcostsforthelossvalues.

4. Primary(HighVoltage)andSecondary(LowVoltage)Coiling

Thecompanyusescopperfoilastherawmaterialusedforprimarycoilinginsteadofusingpaper-insulatedflatwiresasinthepast,therebygivingthetransformermaximumresistancetopowersurgesandshortcircuitsbecausethecopperfoilhasbettercurrentdistributionpropertiescombinedwiththesecondarycoilingusingthelonglayermethodwithahighvoltagewindingmachinetocontrolthetensionandarrangingthewireswithacomputersystemtomakethequalityofeachcoillayermeetuniformtensionstandardwhichwillincreasetheeffectivenessandqualityofthecoils.

5. AssemblyofWireCoilsandSteelCores

Thissteptakesplacewhenthewirecoilsareassembledwiththesteelcoresinwhichtheprimarycoilisassemblednearthesteelcoreandthesecondarycoilisplacedontopoftheouterpartoftheprimarycoil.Next,theseareassembledwiththeupperyokeincombinationwiththeinstallationofthetanklid,bushingandtapchanger,andtheinternalwiringasinthedesign.

6. Pre-Testing

Oncethesteelcoreandtheprimaryandsecondarycoilshavebeenassembled,theTestingDepartmentwillthenperformpreliminarytestingoftheelectrictransformersasfollows:

- MeasurementofWindingResistance

- MeasurementofTurnRatio

- CheckingofPolarityorVectorGroup

- MeggerTesting

7. DryingandOiling

Inthedryingofelectrictransformers,thecompanyusesamodernvacuumovencontrolledbyacomputersystemfromGermany.Furthermore,thecompanyistheonlycompanyinSouthEastAsiatouseElectricLow-FrequencyHeatingtechnologytoremovemoisturefromtheelectrictransformerbydirectlydeliveringlowfrequencyelectricalcurrentstothecoilsoftheelectricaltransformerinavacuumenvironmentwhichisawaytotransmitheatfromtheinsidetotheoutside.Thismethodwillremovemoisturefromtheinnermostpartofthecoilsinashorttimecomparedtotheheaterwhichisamethodusedtoheatthecoilsfromtheoutside,butunabletoremoveallmoisture.Furthermore,thecompanyalsousestechnologyforoilingthetransformerinavacuumoveninawayfortheoiltofullyinfiltratetheinsulationsystemandcanprevent100%ofmoisturefromcomingintocontactwiththeinsideofthetransformer,whicheffectivelyextendsthetransformer’susagelife.

8. FinalRoutineTesting

Afterthetransformershavegonethroughalloftheprocedures,alltransformerswillberequiredtogothroughafinalroutinetest.Thecompany’stestingequipmentiscontrolledbycomputerandcalibratedregularly,therebyyieldingtestresultsthatareaccurateandprecisewithabilitytoreporttestresultsimmediately.Thetestinglistiscomposedofthefollowing: - Measurementofwindingresistance - Measurementofvoltageratioandcheckofphasedisplacement - Measurementofshortcircuitimpedanceandloadloss - Measurementofno-loadlossandcurrent


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- SeparatesourceACwithstandvoltagetest - Short-durationinducedACwithstandvoltagetest - Measurementofinsulationresistance - Oildielectrictest

3.4 Raw Material Procurement Thetopfivemainrawmaterialsusedfortheproductionofthecompany’selectrictransformersaresiliconsteel,enameledroundwires,electrictransformertanksets,copperfoilandtransformeroil.Thecompanyorderstherawmaterialsfrombothdomesticandforeignmanufacturersand/orsuppliers.Therefore,thecompanyhaspolicyforthepurchaseofrawmaterialsbyconsideringvariousfactorsasfollows:

1. RawMaterialQuality

Duetothefactthatcompanypolicygiveimportancetoproductquality,thecompanyemphasizesorderingqualityrawmaterialsfrommanufacturers/supplierswithpotentialandcapabilitytodeliverqualityrawmaterialsmeetingspecificationscompletelyandasscheduled.Thecompanyhaspreparedanapprovedvendorlistforuseinscreeningforqualitymanufacturersandsuppliers.Inanycase,thecompanyhasprocessesforevaluatingthequalityofrawmaterials,includingvisitsandinspectionsofnewmanufacturersbeforegrantingapprovaltobecomethecompany’smanufacturer/supplier.Thecompanywillreviewtheevaluationresultseverysixmonthsbymainlyconsideringthequalityanddeliveryhistoryoftherawmaterials.Furthermore,theQualityAssuranceDepartmentwillconductrandomtestingofrawmaterialseverytimethevendordeliverstherawmaterialstoensurethequalityoftherawmaterialsusedmeettherequirementsforthecompany’sproductionprocess.

2. RawMaterialDeliveryTimes

Whenorderingrawmaterialsfromdomesticsources,thedeliverytimeisapproximately15-30days,dependingontheproducttype.Whenorderingfromforeignsources,however,thedeliverytimeisapproximately1.5-3monthsbecausethedeliverytimeneedstobeconsideredintermsofthecountryfromwhichitwasordered.Therefore,ifthematerialscanbeorderedfromdomesticmanufacturers/supplierswithqualitysimilartoforeignmanufacturers/suppliersorwithqualitymeetingthecompany’sspecifications,e.g.theenameledroundwire,paperinsulatedflatwire,enameledflatwireandvarioustransformerparts,etc.,thecompanyusuallyordersfromdomesticsourcesbecauseoftheshorterdeliverytime,therebymakingitmoreconvenientandefficienttomanagetheproductbalance.

3. RawMaterialPricesandPriceTrends

Thepriceofsiliconsteelandcopper,inparticular,whichareconsideredacommoditywithdynamicpricingaccordingtotheworldmarketprices,thecompanyconsiderseachrawmaterialorderintermsoftheorderamountandanappropriatepurchasetime.Thecompanyfollowsthemovementsandtrendsoftherawmaterialpricescloselyinordertoeffectivelymanagerawmaterialcosts.

4. ExchangeRates

Becausethecompanyhaspurchasedrawmaterialsfromforeigncountriesinproportionsof37%,37%and31%from2011-2013,respectively,thecompanywillcloselytrackthemovementswiththeexchangeratesofvariousimportantcurrenciesandmakeproperpurchase/salesagreementsinforeigncurrenciesbeforehandasameansofpreventingrisksfrompotentialfluctuationsincurrency.

5. NoExclusiveRelianceonOnlyOneoraFewManufacturers/Suppliers

Thecompanyhasapolicyofprocuringrawmaterialsfrommanymanufacturers/suppliersforeachtypeofrawmaterial,especiallyforsiliconsteel,enameledroundwire,electrictransformertankset,copperfoilandtransformeroil.Thecompanyhasonlyoneortwomainmanufacturers/suppliersbecauseeachmanufacturer/supplierhasaminimumorderamountanddoingsoincreasesthecompany’sbargainingpowerwiththeaforementionedmanufacturers/suppliersbothforthepriceandthedeliverytimeofrawmaterials.However,otherthantheaforementionedmanufacturers/suppliersofrawmaterials,thecompanyalsoordersrawmaterialsfromothermanufacturers/supplierstomaintaingoodrelationsandminimizetheriskofrelyingtooheavilyononeorafewmanufacturers/suppliers.


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Tableshowingtheproportionsofrawmaterialpurchasesfromdomesticandforeignsources.

2011 2012 2013

MillionBaht

%MillionBaht

%MillionBaht

%

Rawmaterialspurchaseddomestically. 304.45 63.00 398.06 63.36 324.22 68.82

Rawmaterialspurchasedabroad. 178.85 37.00 230.23 36.64 146.92 31.18

Totalrawmaterialspurchased 483.30 100.00 628.29 100.00 471.14 100.00

Thecompany’smainrawmaterialsaredescribedasfollows:

1.SiliconSteel

Siliconsteelisconsideredanessentialmaterialintheproductionofelectrictransformersandiscalculatedinproportionsofapproximately22.40percentand16.97percentofthetotalvalueofrawmaterialpurchasesin2012and2013,respectively.ThecompanymostlyimportssiliconsteelfromdistributorsinSouthKoreaandsomefromJapanbypre-orderingthematerialsonaquarterlybasis.However,becausethehighqualitysiliconsteelusedintheproductionofelectricitytransformersisacommoditywithfewmanufacturers,siliconsteelismanufacturedinlimitedquantities.Therefore,incasetheamountofsiliconsteelorderedfromforeigncountriesisinsufficienttomeetthecompany’srequirements,thecompanyordersmoresiliconsteelfromothercountries,sothecompanywillbeabletomanufactureelectrictransformersontimeasscheduledbythecustomers.

Tableshowingtheproportionofsiliconsteelpurchasesfromdomesticandforeignsources.

2011 2012 2013

MillionBaht

%MillionBaht

%MillionBaht

%

Domestic 7.64 7.23 9.42 6.70 8.45 10.57

Foreign 98.04 92.77 131.37 93.30 71.50 89.43

Total 105.68 100.00 140.79 100.00 79.95 100.00 2. EnameledRoundWire

Theenameledroundwireisamaterialusedforthecoilingofthesecondarycoilwhichperformsthetaskofreceivingelectricityfromahighvoltagepowerlineandconvertingtheelectricityintoamagneticenergycirclingthesteelcorefortransmissiontotheprimarycoil.Thecompanyhascalculatedthetotalamountoftheenameledroundwireinproportionsat14.72percentand15.39percentofthetotalmaterialcostfor2012and2013,respectively.Domesticmanufacturersmakeup100percentofthesuppliersbecausetheenameledroundwiremanufactureddomesticallyhasqualitiessimilarorequaltothewireimportedfromabroadbuttakeslesstimetopurchasewhichenablesthecompanytomanagetheproduct’sbalancemoreeffectively.

3. ElectricityTransformerTankSet In2012and2013,thecompanypurchasedanelectrictransformertanksetcalculatedinproportionsat

12.10percentand13.62percentofthetotalmaterialcostrespectively.In2014,thecompanywillproducesomeelectrictransformertanksetstohelpcutproductioncostsandmeettransformerneedswithshorterdeliverytimestoincreasecompetitivecapacity.However,thecompanycontinuestobuyfrom1-2domesticmanufacturersinlinewiththesuitabilityofspecificationsandthenumberoforders,priceandtheproductdeliverytime.Thetanksthecompanymanufacturestakeabout5-10daysandthedeliverytimefortanksorderedfromforeignmanufacturersisapproximately15-30days.

Foreignmanufacturerssetaperkilogrampriceforelectrictransformertanks.Forthemostpart,thispricewillnotchange.Incaseswheremanufacturerschangetheprices,thecompanyneedstobenotifiedatleastonemonthinadvance.


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4. TransformerOil In2012and2013thecompanypurchasedtransformeroilinproportionscalculatedat8.84percent

and7.72percentofthetotalmaterialcost,respectively.Thetransformeroilismanufacturedspecificallyforelectricitytransformersandhasgoodinsulatingproperties.Theoilperformsthetaskoftransportingtheheatfrominsidethetransformertotheoutsideofthetanktobeemittedtotheexternalair.Inorderingthetransformeroil,theproductionplanwillbeconsideredbyorderingfromdomesticdistributorsapproximatelythreemonthsinadvancebecausedistributershaveaminimumamountrequirementfororders.Furthermore,thedeliverytimeofthetransformeroilisreconfirmedwiththedistributorbyrelyingoninformationfromclosecoordinationbetweentheProcurementDepartmentandtheProductionDepartmenttopreventmaterialshortages.Consequently,theProcurementDepartmentmonitorsthemovementofoilpricesbyregularlyrequestinginformationfromthedistributorstoeffectivelymanagethepurchasingoftransformeroil.

5. CopperFoil Copperfoilisamaterialusedforprimarycoilcoilingwhichperformsthetaskoftransmittingelectricity

fromthetransformertotheloadorconnectedequipment.In2012and2013,thecompanypurchasedcopperfoilcalculatedinproportionsof9.55percentand10.95percentofthetotalmaterialcost,respectively.Allofthecopperfoilboughtbythecompanycomesfromforeignmanufacturingsources.Atpresent,thecompanyordersfrommanufacturersinGermanyandSouthKoreaandhasbeentryingtohelpdevelopcapabledomesticmanufacturersabletomeetinternationalstandardsasanoptionandtosupportthecompany’ssupplysystem.Fortheorderingofcopperfoil,thespecifiedminimumpurchaseamountisconsidered(MinimumStock).Ifthecompany’samountisdowntotheminimumrequiredamount,thentheERPsystemwillnotifytheemployeesinvolvedtoordermorematerials.Theaforementionedsystemwillhelpthecompanymanagethematerialbalanceeffectivelyinproperamounts.

3.5 Environmental Impact Inthepast,thecompanyhashadnodisputesorprosecutionsregardingtheenvironment.Thecompanyhasconcentratedonthedesignanddevelopmentofelectrictransformersusinglessenergythatareenvironmentallyfriendlytogetherwiththetechnologyselectedbythecompanyfortheproductionprocesstoconserveenergyandeffectivelyminimizeenvironmentalpollution,includingsafetytooperatorswhetherincopperfoilpressingbyusingthecoldpressmethodwhichissmoke-andhotsteam-free,theuseofpaintinganddecoratingprocessesofthetransformersinthesprayboothwhichhaveequipmentsetuptoremovepaintfumessopaintdoesnotspreadintonearbyareasanddamagetheenvironment.Moreover,thepaintusedforthetransformersisalsowater-based,soitisnotharmfultopeopleandtheenvironment,includingtheuseofamoistureremovalsystemsandanoilingsystemthatuseslessenergyandreduceshotsteamreleasedintotheenvironment. Furthermore,in2008thecompanywasgrantedISO14001:2004environmentalmanagementaccreditation,whichisconsideredproofthatthecompanyhasaneffectiveenvironmentalmanagementsystemwithcontrolandimprovementsystemsintheproductionprocess,includingclearplansformanagingtheenvironmenttoreduceoreliminateenvironmentalimpactincompliancewithregulations.

3.6 Research and Development

Thecompanyhasalwaysrecognizedtheimportanceofresearchanddevelopmentbecauseourproductqualitymustbecapableofmeetingallcustomers’needsinordertobeimportant.Moreover,researchanddevelopmentwillincreasethecompany’scompetitivecapacitywhileprotectingandincreasingmarketsharesfortheelectricitytransformerindustryonacontinualandsteadybasis.Thecompany’sresearchanddevelopmentinthepastcanbesummarizedasfollows:

• Researchanddevelopmentforproductdesignsabletobetterrespondtothedemandsofcustomersbycooperatingwithcustomersdomesticallyandabroad.

• Theresearchanddevelopmentofproductswithqualitymeetingtheproductstandardssetforthbyvariousrelatedinstitutesandorganizationsbothdomesticallyandabroad.Obviously,thecompany’selectricitytransformershavebeengrantedISI384-2543certificationbytheIndustrialStandardsInstitute,MinistryofIndustry,andISO9001:2000bytheSGSinstituteoftheUnitedKingdomandThailand.Furthermore,thecompanyisalsocapableofproducingelectrictransformersmeetingvariousinternationalstandards.


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• Toincreaseconsumerconfidenceinthecompany’sproducts,thecompanyhassubmittedelectricitytransformerstoshortcircuittesting.Atpresent,theelectrictransformerspassingtheaforementionedtestaretransformersizes100KVA,150KVA,250KVA,300KVA,500KVA,750KVA,1000KVA,2000KVAandEarthingTransformer1600AwhichhasbeencertifiedforshortcircuitendurancebytheCESIInstitute,Italy,aworldfamouselectricaltestinginstitute.Moreover,thecompanyispreparingtosenda315KVAtransformerforadditionaltestingin2014.

• Thecompanyhascontinuouslydevelopedmachineryforworkbyusingthecompany’sownresearchanddevelopmentteamtocreatehighlyefficientmachinesmeetinguserneeds,increaseproductioncapacityusingthesameamountofspaceandsavecostsusedinthepurchaseofnewmachineryfromabroad.

• Theresearchanddevelopmentofenergysavingelectrictransformersbyusingamorphouscores,whichmakesitpossibletoproducehighlyefficient,environmentallyfriendlyelectrictransformers.Asaresult,thecompanyhassuccessfullyproducedamorphouselectrictransformersize1000KVAasthefirsttofunctioninThailandwhichshowsthecompany’scapabilitiesanddeterminationinresearchanddevelopment.

• Thedevelopmentofanelectrictransformerusingaluminumforthetransformerbodyasanalternativeforcustomerswhowanttosaveenergybutcontinuetoretaintheeffectivenessandqualityoforiginalelectrictransformers.

• ResearchanddevelopmentregardingthevariousinfrastructuresofelectrictransformersincooperationwithThailand’sleadinguniversitiestoimproveproductqualityandbuildcustomerconfidencebothdomesticallyandabroad.

Theresearchanddevelopmentexpenditurewithinthecompany’spastfouryearscanbesummarizedasfollows:

Year ResearchandDevelopmentExpenditures(Baht)

2009 -

2010 203,423.61

2011 1,372,932.00

2012 2,011,800.00

2013 993,861.00


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Revenue Structure

RevenueType2011 2012 2013

MillionBaht Percent MillionBaht Percent MillionBaht Percent

RevenuefromElectricityDistributionTransformerSales 688.42 95.91 928.57 95.76 774.47 95.41

-RevenuefromDomesticTransformerSales 580.32 80.85 703.33 72.53 614.51 75.71

-RevenuefromOverseasTransformerSales 108.10 15.06 225.24 23.23 159.96 19.71

RevenuefromRawMaterialSales1) 12.44 1.73 11.78 1.22 9.41 1.16

ConsolidatedRevenuefromSales 700.86 97.64 940.35 96.98 783.88 96.57

RevenuefromServiceProvision 13.60 1.89 19.16 1.98 20.07 2.48

OtherRevenue2) 3.33 0.46 10.19 1.06 7.73 0.95

TotalRevenue 717.79 100.00 969.70 100.00 811.68 100.00Remarks:1)Revenuefromrawmaterialsalesisrevenueoccurringasaresultofthesalesofrawmaterialsusedasa

componentforthemanufactureofelectricitytransformerstocustomers,suchastransformeroil,lowvoltageterminallugs,bushinggasketsets,etc.

2)Otherrevenuecomprisingrevenuefromscrapsales,profitfromexchangerates,interestreceivable,etc.


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Industry and Competition Situational Analysis

Domestic Market Theelectricitytransformermanufacturingindustryinvolveselectricalpower,whichisconsideredanessentialfactorplayingasignificantroleindailylivingaswellasnationaleconomicdevelopment.Thus,thegrowthoftheelectricitytransformermanufacturingindustrycorrespondstoannualpowerrequirementsdependingonkeyfactorssuchaspopulationgrowth,industrygrowthandeconomicalgrowth.Inthepast,powerproduction,powerdemandandGDPallfluctuatedinthesamedirection.Nevertheless,thegrowthofthepowerdemandisconsiderablyhigherthandomesticGDPgrowth.Thus,evenduringeconomicrecessions,thepowerdemanddeclinesonlyslightlyinconjunctionwiththedeclineofthedomesticGDP,asevidentin1998duringaperiodofnationaleconomiccrisiswhentheThaibahtvaluewasfloatedwiththeinevitableconsequenceofaneconomicrecession.DomesticGDPdecreasedfrom3,072.6billionbahtin1997to2,749.6billionbaht,adecreaseof10.51%,whilepowerdemanddecreasedfrom81,998.02GWHin1997to79,899.63GWHin1997,adecreaseofonly2.56%.

Inadditiontoeconomicgrowth,populationgrowthisalsoanotherfactorinfluencingthenationalpowerdemand.TheThaipopulationisconstantlyincreasing,whichhasresultedinexpandingcommunities.ThePEAandMEA,whoareresponsibleforsupplyingpowertodomesticpowerusers,needtoinvestmoreinthepowerdistributionsystem.Asaresult,thedemandfortransformers,whicharepartofthepowerdistributionsystem,hasalsoincreased.

Aspreviouslymentioned,electricalpowerisanecessaryfundamentalpower.Furthermore,ifsupplyisinsufficienttomeetdemands,thepeople’slivingconditionsandbusinessesaswellasthenationaleconomywillbeaffected.Thus,theMinistryofEnergy,incooperationwiththeElectricityGen-erationAuthorityofThailand,hasdevisedanationalpowerproductiondevelopmentplanforThailand.ThemostrecentvolumeistheNationalPowerDevelopmentPlanof2010-2030(PDP2010).Thisplanprojectsincreasesinthemaximum

powerdemandfrom23,249megawattsin2010to52,890megawattsin2030,oranaverageof4.42%peryear.Powerproductioncapacitywillincreasefrom31,349megawattsin2010to65,547megawattsin2030,anaverageincreaseof3.96peryear.Thus,EGAT,MEAandPEAneedtocomeupwithaplantoinvestinpowercapacityexpansionandplanstoimproveandexpandpowerdistributionsystemsconcurrentwiththeaforementioneddevelopmentplaninordertobeabletoproduceanddistributesufficientelectricalpowerforthenation’sfuturepowerdemands.Theaforementionedinvestmentwillcausedomesticelectricitytransformermanufacturingandsalestoexpandaswell.


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International Markets The factorsaffectingpowerdemand in foreigncountriesareeconomicgrowthandworldpopulationgrowth.TheEnergyInformationAdministration(EIA)intheUSestimatesthegrowthofpowerproductionofcountriesoutsidetheOrganizationofEconomicCooperationandDevelopment(OECD)tobeconsiderablyhigherthanthatofOECDcountriesat3.3%versus1.1%,respectively.AsiancountriesoutsideOECDaretheplaceswherepowerproductiongrowthisthehighestat4.1%peryear.Thus,currenttrendsindicategrowthforthedemandfortransformerstobehigherthaninotherregions.Furthermore,whenthecompany’s2012foreigncustomerbaseisconsidered,itappearsthat22.10%offoreigntransformersalescamefromMalaysiancustomers,whichisthecountryintheregionwithhighestpowerproductiongrowth.Ourcompanyhasthecapacitytomanufacturetransformersmeetinginternationalstandards,thuswebelievethecompany’stransformerproductscancompeteintheworldmarket.Thus,thereisachanceforconsistentgrowthforthecompany’stransformerexportsinthefuture.

Australiaisanotherimportantmarketforthecompanyintermsofforeigntransformersales.In2013,theaveragegrowthofpowerproductioncontinuedtogrowat1%.Australiaisalargemarketwithastrongindustrialsector.However,Australia’seconomicgrowthhasfacedaconstantdownturnwiththepowerdemandoftheindustrialsectorandpowerdistributionsysteminastableorslightlydecliningphase.ThecompanyhasexpandedthemarketintoLaos,thePhilippinesandSingaporeinordertodiversifyrisksandexpanditscustomerbase.

Competitive Conditions Thetransformermarketcanbedividedintotheelectricitytransformermarketforpowersystemsandtheelectricitytransformermarketfordistributionsystems.Previously,allofthecompany’ssaleswerefromdistributiontransformer.Thereareabout24manufacturersinthepowerdistributiontransformercomprisingofsmallmanufacturersthatemphasizepricestrategyratherthanquality,andmediumandlargemanufacturersthatfocusonproductquality.Therefore,eachgroupofmanufacturershasdifferentcustomergroups.Thecompanyisamedium-sizedmanufacturerproducinghighqualitytransformerstosupporttheworkoperationsofbothpublicandprivatesectorcompanies.Thecompany’sproductsareTIS384-2543accreditedandhavepassedshortcircuittestingbytheCESIinItalyandtheKEMAInstituteoftheNetherlands.Thus,thecompany’sproductqualityisacceptedbydomesticandforeigncustomers;furthermore,ourqualityisconstantlyimproving.Theseimprovementsareconstantlyenhancingthecompany’scompetitivecapacitytoequaltoexceedthatoflargermanufacturers.Smallmanufacturersfocusingonsmallgroupsofcustomersandputtingemphasisonpricestrategywithoutgivingconsiderationtoproductqualityarenotinthesamemarketwiththecompany.

Newmanufacturersenteringtheindustryanddevelopingelectricitytransformermanufacturingprocessesinordertoachievequalitymeetinginternationalstandardsaredifficultbecausetheyrequirecostlyinvestmentsformachinery.Moreimportantly,know-howandadvancedtechnologywithskilledpersonnelandproductionexpertisearealsoessential.Thus,domesticcompetitioncomesfromaboutsevenmanufacturerswithtechnologyandabilitytomanufacturehighqualitytransformers.Thesemanufacturersallrequiremanufacturingtechnologytoenabletheirproductstoproducehighqualitytransformersacceptedbycustomers.Thecompanymanagesproductioncostsinordertoachievemaximumefficiencywiththegoalofbuildingcapacityforconsistentandsustainablecompetition.


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Risk Factors

1 Risks of Revenue Fluctuations and Dependence on Large Customers Thecompany’srevenueisderivedfrombiddingfortransformersalestocustomergroupswhoaremanufacturersanddistributorsofgovernmentelectricityenterprisesprimarilyconsistingoftheMetropolitanElectricityAuthority(MEA)andtheProvincialElectricityAuthority(PEA),whichaccountsforapproximately33-47%ofallsalesrevenue.HighrevenueratiosfromthesalesoftransformerstoMEAandPEAmayhaveimpactonthecompany’srevenueifthecompanylosestheaforementionedcustomers.Furthermore,revenuefromthesalesoftransformerstothisgroupofcustomersdependsuponthecompany’sabilitytowinvariousbidswhilealsodependingoneconomicconditionsandthebudgetsofeachagency.Therefore,ifthecompanydoesnotwinbiddingsorifbiddingsarerescheduledoragencieshavereducedbudgetsforinvestingintransformerpurchases,therewillbeimpactsreducingthecompany’srevenueandbusinessperformance.Therefore,thecompanyemphasizesexpandingtheprivatesectorcustomerbase.Thecompanyalsoconsidersincreasingproductvarietyinresponsetotheneedsofeverycustomergroup.Atpresent,thecompanyisalsoabletoproducepowertransformers.

2 Risks from Fluctuations in Raw Material Prices Themainrawmaterialsusedintransformerproductioncomprisesiliconmetal,coatedroundwiresandcopperfoils.Thepricesoftheaforementionedrawmaterialswillfluctuateaccordingtothepricesontheworldmarket,whichdependonsupplyanddemandintheglobalmarket.Inthepast,thepricesofsiliconandcopperunderwentgreatfluctuations.Therefore,ifthecostsofrawmaterialsincreaserapidly,theremaybeimpactsonthecompany’ssalescostsandgrossprofitmarginsbecausethecompanyisunabletoadjustproductpricesatanequalorhigherratethantheaforementionedincreaseinrawmaterialcosts,whichwillhaveeventuallyhaveimpactonthecompany’sbusinessperformance.However,becausethecompanyhaspoliciesforsettingproductpricesinlinewithcostsaddedtothecompany’sgrossprofit,thecompanyisconstantlycheckingthepricesofrawmaterials,especiallyrawmaterialswithhighlyfluctuatingpricesinordertobeabletoestimateproductioncostsaccuratelyandasneartorealcostsaspossiblesoproductpricescanbesetproperly.Moreover,thefactthatthecompany’sexecutiveshaveover30yearsofexperienceintheindustryandgoodrelationshipswithrawmaterialsuppliersenablesthecompanytohavereliableestimatesforforrawmaterialpricetrends.

3 Risks from Foreign Exchange Rates Thecompanyimportsrawmaterialsfromforeigncountriesandexportsproductsfordistributiontoforeigncountries.In2013,thecompanyhadrevenuefromthesalesinforeigncurrencyequalto161.71millionbaht,whichwas20.63%ofallsalesrevenue.Atthesametime,thecompanyhasalsoorderedthepurchasesofrawmaterialsfromforeigncountries,whichmustbepaidinforeigncurrencies,therebyenablingthecompanytopartiallyreducerisksfromexchangeratefluctuationswithnaturalhedges.However,thecompanyrealizestheimportanceofpreventingtheaforementionedrisks.Thecompany’sFinance&AccountingDepartmentwillcloselymonitorthenewsandmovementsofexchangeratesandthecompanywillconsiderpreventingrisksbyusingforwardcontractsaccordingtosituationsandnecessity.Moreover,inthesalesoftransformerstoforeigncustomers,theSalesDepartmentwillcalculatetransformerpricesbyusingmark-upsforforeignexchangeratestocoverthecostsofrisksandfluctuations,whichwillhelpminimizerisksfromfluctuationsofexchangeratestoacertaindegree.


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4 Risks from Delayed Product Deliveries Becausemostofthecompany’srevenueisderivedfromthesalesoftransformerstoMEAandPEA,thesalesofproductstotheaforementionedagenciesgenerallyhavestandardpurchaseagreementswithclearschedulesfordeliveringproducts.Ifthecompanyisunabletodelivertransformersaccordingtothetimeperiodsetintheagreement,thecompanymustcompensatefordamagesorpayfinesattherateof0.15-0.20%ofthevalueofundeliveredwork.Theaforementioneddelayedproductdeliveriesalsocoverscasesoftransformerrepairsduringtheguaranteeperiodinwhichthecompanymustbeheldliableforrepairingtransformerstonormalfunctionalconditionsanddeliveringtransformerswithinspecifiedtimes.Thecalculationsoffineswillbemadedailybeginningfromthedateofdelayedproductdeliveries.Thecompanymaintainsthekeypolicyofmanufacturinganddeliveringproductstocustomersontime.TheSalesDepartmentandtheProductionDepartmentwillcontactcustomerstoupdatedata,coordinate,andcloselymonitortheworkinordertopreventerrorswhichmaypreventthecompanyfromdeliveringtransformerstocustomersontime.Withregardtotransformerrepairs,thecompanyhascurrentlyimprovedtransformerrepairsforgreatereffectivenessbyseparatingtransformerrepairlinesfromtransformerproductionlines,whichhashelpedthecompanymanagetimemoreefficiently.Furthermore,theimplementationoftheEnterpriseResourcesPlanning(ERP)bythecompanyhashelpedincreasetheefficiencyofproductionplanning.

5 Risks from Dependence on Main Executives in Conducting Business Themainexecutivesintermsofthecompany’sproductionandsalesarepersonswithover20years’experienceinthetransformerindustrywhohaveopportunitiestoworkwithleadingdomestictransformermanufacturingcompaniesandreceivedtrainingfromleadingforeigntransformercompaniesforalongperiodoftime.Hence,theexecutiveshaveknowledgeandexpertiseinthetransformerindustryalongwithgoodrelationshipswithcustomersandsuppliersbothdomesticallyandabroad.Theaforementionedexperiencehasmadethecompany’stransformersquicklyreceivereliabilityandacceptancefrombothdomesticandforeigncustomers.Therefore,thecompanymaybeatriskduetodependenceonthemainexecutivesintermsofmanagingoperations.Iftherearechangesintheaforementionedmainexecutives,thecompany’smanagementmaybesubjecttoimpact.However,thecompanyhascleargoalsformotivatingexecutivesandemployeestoworkwiththecompanyforthelongrun.Themainexecutivesandmostofthecompany’spersonnelhaveworkedwiththecompanyfromitsfounding.Thecompanyalsohaspoliciesfortrainingemployeesatalllevelsandarrangingforthedisseminationofexperiencesalongwithadditionaleducationforemployeeswithobjectivesforthecompany’semployeestohavecompleteskills,knowledge,capabilitiesandunderstandingintheirresponsibilities.Moreover,thecompanyhaspoliciestopromoteeachlevelofemployeestoadvancewithabilitytoprogresscontinuallyinthecompany,therebycausingthecompanytobeconfidentthattheaforementionedpolicieswillmaintainthecompany’spersonnelsustainably.

6 Risks from Having a Group of Major Shareholders with Total Shares Over 50% Asof31December2013,theholdingsofMr.PoonphiphatTantanasin’sgroupaccountedfor125,014,600shares,whichis62.51%ofalldistributedcompanyshares,therebycausingtheaforementionedgroupofshareholderstohavepowertocontrolthecompanywithinfluenceinnearlyeverycompanydecisionwhetherconcerningappointmentsofdirectors,requestsfordecisionsonothertopicsrequiringamajorityvoteoftheshareholders’meeting,exceptforissuesstipulatingbylawsorcompanyregulationsarequirementofvotesamountingtonolessthanthreeoutoffourfromtheshareholders’meeting.Therefore,othercompanyshareholdersareatriskfromtheirinabilitytocollectvotestocheckandbalanceissuesproposedbymajorshareholdersfortheconsiderationoftheshareholders’meeting.Nevertheless,thecompanyhasappointedtheAuditCommitteetocheck,considerandscreenpreventagendaitemsposingpotentialconflictsofinterestinthefutureandtogeneratetransparencyinthecompany’soperations.Thestructureofthecompany’sboardofdirectorsconsistsoftwoexecutivedirectorsandfivenon-executivedirectors,includingtheChairmenofthecompany’sboardofdirectorsandthreeauditdirectors.Theaforementioneddirectorstructurewillhelpcreatebalanceinvotesconsideringvariousissuesandhelpwiththesupervisionandmanagementofworkforsuitabilityandmaximumefficiency.


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Capital Structure

1 Company Stocks

Asof31December2013,thecompanyhadlisted200millionbahtwith200millionbahtinpaid-upcapitaldividedinto200millionordinaryshareswithaparvalueof1bahtpershare.

2 Shareholder Structure

TheCompany’sTopTenMajorShareholders,asof28December2013,whichisthebookclosingdate,isdescribedbelow:

TopTenMajorShareholdersasof27December2013

No. Shareholder NumberofShares(Shares)

ShareholderRatio(%)

1 Mr.PoonphiphatTantanasin’sGroup

1.1Mrs.AlisaraCharoenvanich 37,696,000 18.85

1.2MissSisakarnTantanasin 45,000,000 22.50

1.3Mr.PatcharapongTantanasin 41,720,000 20.86

1.4Mr.PoonphiphatTantanasin 598,600 0.30

TotalSharesheldbyMr.PoonphiphatTantanasin’sGroup 125,014,600 62.51

2 ThaiNVDRCo.,Ltd. 23,642,100 11.82

3 Mr.WorapojHirunpiwong 3,008,300 1.50

4 Mr.PrasertLohawiboonsap 1,539,200 0.77

5 Mr.SupakornEmasuda 1,500,000 0.75

6 Mr.SuebpongTangtrongmitr 1,300,000 0.65

7 Mrs.WandeeEkudomsin 1,150,000 0.58

8 Mr.PanomKuansataporn 1,140,000 0.57

9 Mr.VirojTangsurakit 1,080,000 0.54

10 MissPanisaraPranchaleesakun 1,079,300 0.54

OtherShareholders 39,546,500 19.77

Total 200,000,000 100.00

3 Dividend Payment Policy

Thecompanyhaspolicyforpaymentofannualdividendsatnolessthanfiftypercentofthenetprofitafterdeductionofjuristicpersonincometaxesandallocationofreservefundsincompliancewiththelaw.However,thecompanymayconsiderdividendpaymentsdifferingfromthesetpolicy,dependinguponbusinessperformance,financialliquidity,economicconditionsandnecessitytousecurrentcapitalinordertomanageoperationsandexpandthecompany’sbusiness.


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Management 1 Board of Directors

Thecompany’sboardofdirectorsconsistsofthefollowingsevendirectors:

First-LastName Position

1.Prof.Dr.SomchobChaiyavej ChairmanandIndependentDirector

2.Mr.PoonphiphatTantanasin Director

3.Mr.SiripongBoontam Director

4.Mr.NakornPhraprasert DirectorandIndependentDirector

5.Mr.PadetpaiMeekun-iam DirectorandChairmanoftheAuditCommittee

6.Mr.PolrachotPiyathanom IndependentDirectorandAuditDirector

7.Mr.NattapolLilawattananan IndependentDirectorandAuditDirector

MissBoonpaRuddististhecorporatesecretaryappointedbythe1/2554meetingoftheboardofdirectorson24February2011.

SignatoryDirectorsAuthorizedtoSignandObligatetheCompany

Mr.PoonphiphatTantanasinhassignatoryauthoritywithMr.SiripongBoontamandaffixesthecompanyseal.

BoardofDirectorsScopeofAuthorityandDuties1. Theboardofdirectorshastheauthority,dutyandresponsibilityofmanagingthecompanyaccordingtothe

company’sbylaws,objectivesandregulations,includinglegalresolutionsbythemeetingofshareholderswithintegrityandmustmaintainthecompany’sinterests.

2. Theboardofdirectorsmustarrangeageneralshareholder’smeetingwithinfourmonthsfromtheendofthecompany’saccountingcycle.

3. Theboardofdirectorsmustarrangeameetingofthecompany’sboardofdirectorsatleasteverythreemonths.

4. Theboardofdirectorsmustarrangecrediblesystemsforaccounting,financialreportsandauditing,includingefficientandeffectivesystemsforinternalcontrol,internalauditingandriskmanagement.

5. Theboardofdirectorsmustarrangethecompany’sbalancesheetsandprofit-lossstatementsattheendofthecompany’saccountingcycle,whichmustbeauditedbyanauditorandpresentedtothemeetingofshareholdersforconsiderationandapproval.

6. Theboardofdirectorsmustsetthecompany’sgoals,guidelines,policies,businessplansandbudgetsalongwithmonitoringandsupervision,sotheadministrationandmanagementofexecutivesconcurswithworkplanningpoliciesandsettingbudgetswithefficiencyandeffectiveness.

Furthermore,thescopeoftheboardofdirectors’dutiesincludesdirectionforthecompanytocomplywithlawsonsecuritiesandsecuritiesexchanges,announcementsoftheCapitalMarketSupervisoryBoard,specificationsoftheStockExchangeofThailandsuchasengaginginconnectedtransactions,acquisitionsorsalesofsignificantproperties,orlawsassociatedwiththecompany’sbusinesses.


57

7. Theboardofdirectorsmustconsiderreviews,auditsandapprovalsofplansbytheexecutivesforbusinessexpansion,largeinvestmentprojects,includingparticipationininvestmentswithotherbusinessoperatorsproposedbytheexecutives.

8. Theboardofdirectorsmustcontinuallymonitorperformanceforconcurrencewithplansandbudgets.9. Theboardofdirectorsmustconsiderdesignatingexecutivestructureswithauthoritytoappointthe

ExecutiveBoardofDirectors,ManagingDirectorsandothersub-committeesasdeemedfitting,suchastheAuditCommittee,theRecruitmentCommittee,theRemunerationCommittee,etc.,includingthesettingofthescopesofauthorityanddutiesoftheExecutiveBoardofDirectors,ManagingDirectorsandvariousappointedsub-committees.

AuthorizationsaccordingtodesignatedscopesofauthorityanddutywithnocharacteristicsofallowingtheaforementionedExecutiveBoardofDirectors,ManagingDirectorsandvarioussub-committeestobeabletoconsiderandapprovetransactionswithpotentialconflictsofinterestorconflictsofanyotherinterestswiththecompanyoritssubsidiaries(ifany),exceptforapprovaloftransactionsinlinewithpoliciesandcriteriaconsideredandapprovedbytheboardofdirectors.

10. Theboardofdirectorsmayauthorizeadirector,severaldirectors,oranyotherpersonstoperformanyactionsonbehalfoftheboardofdirectorsunderthecontroloftheboardofdirectors,ortheboardofdirectorsmayauthorizetheaforementionedpersonstohaveauthorityasdeemednecessarybytheboardofdirectorswithintheperiodoftimetheboardofdirectorsdeemsfitting.Theboardofdirectorsmaycancel,withdraw,changeorreviseauthorizationsasdeemednecessary.

Authorizationsmustnothavecharacteristicsofallowingtheaforementionedpersonstoconsiderandapproveoftransactionsinwhichtheyorotherpersonswithpotentialconflictsofinterestsasstakeholdersorotherpotentialconflictsofinterestwiththecompanyoritssubsidiaries(ifany),exceptforapprovalofroutinebusinesstransactionaccordingtonormaltradeconditionsoraccordingtopoliciesandcriteriaconsideredandapprovedbytheboardofdirectorsundercriteria,conditionsanddesignatedmethodsconcernedwithconnected/relatedtransactionsandacquisitionordistributiontransactionofkeypropertiesofregisteredcompaniesaccordingtoannouncementsbytheCapitalMarketSupervisoryBoardand/ortheStockExchangeofThailandand/oranyotherannouncementsbyrelatedagencies.

Asameansofpromotingandsupportingthedirectorsinattendingeverymeetingheldbythecompany’sboardofdirectors,thecompanyhassetascheduleforthemeetingsinadvanceonanannualbasisasadvancenotificationfortheboardofdirectors.

In2012,thecompanyheldfiveboardofdirectors’meetingsandin2013anotherfiveboardofdirectors’meetingswereheldwiththefollowingdetailsontheattendanceofeachdirector:

ShareholderName No.ofMeetingAttendances/No.ofMeetingsfor

2012

No.ofMeetingAttendances/No.ofMeetingsfor

2013

Remarks

1.Prof.Dr.SomchobChaiyavej* 4/4 4/5

2.Mr.PoonphiphatTantanasin 4/4 5/5

3.Mr.NiponJaisin 2/4 - Resignedasadirectoreffectiveasof1June2012.

4.Mr.SiripongBoontam 4/4 5/5

5.Mr.PadetpaiMeekun-iam 4/4 5/5

6.Mr.PolrachotPiyathanom 4/4 5/5

7.Mr.NattapolLilawattananan 4/4 5/5

8.Mr.NakornPhraprasert 4/4 5/5

Remark*Unabletoattendthemeetingduetoacoldandfever.


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2 Executive Board of Directors

Thecompany’sExecutiveBoardofDirectorscomprisesthefollowingfivedirectors:

First-LastName ต�ำแหน่ง

1.Mr.PoonphiphatTantanasin ChiefExecutiveOfficer

2.Mr.SiripongBoontam ExecutiveDirector

3.Mr.PanuSinives ExecutiveDirector

4.MissBoonpaRuddist ExecutiveDirector

5.MissChotikaChumpoon ExecutiveDirector MissBoonpaRuddististhesecretaryoftheExecutiveBoardofDirectorsappointedbythe1/2554meetingof

theboardofdirectorson24February2011.

ScopeofAuthorityandDutiesoftheExecutiveBoardofDirectors1. Proposalofgoals,policies,businessplans,includingthecompany’sbusinessstrategiesandannual

budgetsforconsiderationofapprovalbythecompany’sboardofdirectors.2. Theexecutiveboardofdirectorsmustsupervisecomplianceofthecompany’sbusinesseswithpolicies,

workplansandbudgetsapprovedbythecompany’sboardofdirectors.3. Considerationofapprovalofthecompany’sregularbusinesstransactions,suchasinvestmentsto

purchasemachineryandotherpropertiesinlinewithinvestmentsorbudgetsapprovedbythecompany’sboardofdirectors,purchasesofrawmaterialsintowarehouses,salesofgoods,etc.Thebalancesforeachtransactionmustbemadeunderauthoritywiththeapprovalofthecompany’sboardofdirectors.

4. Establishcorporatestructure,authoritytoadministratethecorporationandconsideradjustingthesalariesandbonusesofemployeesatlevelslowerthandepartmentalmanagers,includingconsiderationofapprovaloflaborratesnotincludedinannualbudgets.

5. Theexecutiveboardofdirectorshastheauthoritytoappointoremployconsultantsassociatedwithcorporateadministrationformaximumefficiency.

6. Theexecutiveboardofdirectorsmustconsiderthecompany’sprofitsandlossesandproposeinterimdividendpaymentsorannualdividendsforapprovalfromthecompany’sboardofdirectors.

7. Theexecutiveboardofdirectorshastheauthoritytoauthorizeanypersonorpersonstooperateunderthecontroloftheexecutiveboardofdirectorsorauthorizetheaforementionedpersonorpersonstohaveauthorityasdeemedfittingbytheexecutiveboardofdirectorswithinaperiodoftimedeemedfittingbytheexecutiveboardofdirectors.Theexecutiveboardofdirectorsmaycancel,withdraw,change,orreviseauthorizedpersonsorauthorizationsasdeemednecessary.

8. Performotherdutiesassignedbythecompany’sboardofdirectors. Authorizationsofauthority,dutiesandresponsibilitiesbytheexecutiveboardofdirectorsmustnotbe

characteristicofauthorizationsortemporaryauthorizationsenablingthepersonorpersonsauthorizedbytheexecutiveboardofdirectorstoapproveoftransactionsinwhichthatpersonorotherpersonshavepotentialconflictsofinterest(accordingtothedefinitionssetforthintheannouncementsoftheCapitalMarketSupervisoryBoardand/ortheStockExchangeofThailandand/orrelatedagencies)asstakeholdersorwithanyotherconflictsofinterestwiththecompanyoritssubsidiariesand/orrelatedcompanies.Theexecutiveboardofdirectorsdoesnothavetheauthoritytoapproveofactionsregardingtheaforementionedissues.Theaforementionedissuesmustbepresentedtothemeetingoftheboardofdirectorsand/orthemeetingofshareholders(dependinguponthecase)forapproval,exceptforapprovaloftransactionsundernormalbusinessandtradeconditionsaccordingtotheannouncementsoftheCapitalMarketSupervisoryBoardand/ortheStockExchangeofThailandand/orrelatedagencies.


59

Corporate Management Structure

Asof31December2013,thecompanyhadthefollowingcorporatemanagementstructure:

Executives

Thecompanyhasatotalofelevenexecutivesasfollows:

First-LastName ต�ำแหน่ง

1.Mr.PoonphiphatTantanasin ChiefExecutiveOfficer&ManagingDirector

2.Mr.SiripongBoontam DeputyManagingDirector

3.Mr.PanuSinives Manager,SupplyChainandLogisticsDepartment

4.MissBoonpaRuddist Manager,GeneralManagementDepartment

5.MissChotikaChumpoon Manager,Finance&AccountingDepartment

6.Mr.CharoensakSarawong Manager,ProductionDepartment1

7.Mr.SiripongBoontam Manager,ProductionDepartment2

8.Mr.ChanvutMeeploi Manager,EngineeringDepartment

9.Mr.RuangchaiKrissanakriangkrai Manager,InternationalSalesDepartment

10.MissSuanyaPhumomanularp Manager,DomesticSalesDepartment

11.Mr.NippatJingjamikorn Manager,CustomerCare&ServiceCenterDepartment

12.Mr.SasikanjanaTantanasin Manager,BusinessDevelopmentDepartment

ScopeofAuthorityandDutiesoftheManagingDirector1. Supervisebusinessoperationsand/oradministratethecompany’sdailywork.2. Carryoutoradministrateworkinlinewithpolicies,workplansandbudgetsapprovedbytheboardofdirectors

and/ortheexecutiveboardofdirectors.3. Setthecompany’spolicies,businessplans,businessstrategiesandannualbudgetsforpresentationtothe

executiveboardofdirectorsandrequestapprovalfromthecompany’sboardofdirectors.4. Considerapprovalofthecompany’sregularbusinesstransactions,suchasinvestmentstopurchasemachinery

andotherassetsinlinewithinvestmentbudgetsorbudgetsapprovedbythecompany’sboardofdirectors,purchasesofrawmaterialsintowarehousesanddistributionofproducts,etc.Thebalanceforeachitemmustbeapprovedbytheauthorityofthecompany’sboardofdirectors.

Board of Directors

Executive Boardof Directors

Board of Risk Management Board of Audit

Deputy Managing Director

Managing Director

แผนก MIS

Business Development Department

Supply Chain and Logistic

Department

Customer Care & Ser-vice CenterDepartment

International Sales

DepartmentManagement Department

DomesticSales

Department

Accounting & Finance

Department

Production Department

1

Production Department

2

Engineering Department

Research &Development Department


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5. TheManagingDirectorhastheauthoritytoapproveratesforlabor,employmentandfillingemployeepositions,appointmentandtransfersofemployeesatlevelslowerthandepartmentalmanagersasapprovedbythecompany’sboardofdirectors,includingtheconsiderationofdutiesandresponsibilitiesofeachunitandposition.

6. Continuallymonitorandevaluatethecompany’sperformance.TheManagingDirectoralsohasthedutyofreportingonperformanceandmanagement,includingworkprogress,totheExecutiveBoardofDirectors,theAuditCommitteeandthecompany’sboardofdirectors.

7. Considerapprovalofentryintoagreementsregardingthecompany’sregularbusiness.Thebalanceforeachtransactionmustbeinlinewithauthorizationalreadyapprovedbythecompany’sboardofdirectors.

8. Issueorders,regulations,announcementsandvariousrecordsforthecompany’sperformanceinlinewithpoliciesintheinterestsofthecompany,includingthemaintenanceofdisciplineinthecorporation.

9. TheManagingDirectorhastheauthoritytoappointcommitteesorvariousworkinggroupsforbenefits,efficiencyandtransparencyinmanagement.TheManagingDirectorhastheauthoritytoauthorizeanypersonorpersonstooperateunderthecontroloftheManagingDirectorandtheManagingdirectormayauthorizetheaforementionedpersonorpersonstohaveauthorityasdeemedfittingbytheManagingDirector.TheManagingDirectormaycancel,terminate,change,oramendpersonswhohavebeengrantedauthority,orthegrantingofsaidauthority,astheManagingDirectordeemsitfittingtodoso.

10. Performotherdutiesasassignedbytheexecutiveboardofdirectorsortheboardofdirectors.

OnanyissueswheretheManagingDirector,personsauthorizedbytheManagingDirector,orpersonswithpotentialconflictsofinterest(accordingtothedefinitionssetforthintheannouncementsoftheCapitalMarketSupervisoryBoardand/ortheStockExchangeofThailandand/orrelatedagencies)asstakeholdersorotherconflictsofinterestwiththecompanyand/oritssubsidiariesand/oraffiliatedcompanies,theManagingDirectorhasnoauthoritytoapproveoftheaforementionedissues.Theaforementionedissuesmustbepresentedtothemeetingofthecompany’sboardofdirectorsand/orthemeetingofshareholders(dependinguponthecase)inordertorequestapproval,exceptforapprovalsoftransactionsinaccordancewiththecompany’sregularbusinessandtradeconditionsassetforthintheannouncementsoftheCapitalMarketSupervisoryBoardand/ortheStockExchangeofThailandand/orrelatedagencies.

SettingAuthoritytoApproveofFinancialAmounts Thecompanyhassetauthorityfortheapprovaloffinancialamountsforthecompany’sregularbusiness

transactions,whichcanbesummarizedasfollows:DepartmentManagers

DeputyManagingDirector

ManagingDirector ExecutiveBoardofDirectors

(1) Investmentsfrominvestmentbudgets(perproject).

- Nomorethan2millionbaht

Nomorethan3millionbaht


(2) Investmentsoutsideofbudgetplans. - - - Nomorethan5millionbaht

(3) Expensesassociatedwithassets:- Purchasesofmachineryaccordingtoinvestmentbudgets.

- Purchasesofotherassets.




(4) Saleofproductsbysettingpricesaccordingtopricepolicies(PriceList).




(5) Saleofproductsbysettingpriceslowerthanpricepolicies(PriceList)1.

Nomorethan10%

- Nomorethan15% >15%

(6) Requeststopurchaserawmaterialsintowarehousesforproduction2.




>10millionbaht

(7) Requests topurchasemachinery/instruments/buildingsandfacilities3.

Nomorethan200,000baht



>3millionbaht

Remarks:1. Considerationsforapprovalofproductsalesatpriceslowerthanpricelistsmustalsoincludeconsiderationofsalesvaluesapartfromproceeding

asauthorizedin(5)byrequestingapprovalfromauthorizedpersonsinlinewiththesalesvaluessetforthin(4).2. Thecompanyhasconsideredgrantingtheexecutiveboardofdirectorstheauthoritytoapproveofrequeststopurchaserawmaterialsfor

productionintowarehouseswithoutfinanciallimitations,becausethemainrawmaterialswhichneedtobeordered,e.g.siliconandcopperfoil,arerawmaterialswithfewproducersandsalespricesreferencedtopricesontheglobalmarketwhichisconstantlychanging.Therefore,considerationsofeachpurchaseorderwillbemadeintermsofneedforrawmaterials,includingtrendsinthefluctuatingpricesofmainrawmaterials,whichrelyonflexibilityandspeedintheprocess.Inpractice,however,thecompanyreportstheaforementionedissuetothecompany’sboardofdirectorsinboardofdirectorsmeetings.

3. Investmentstopurchasemachinerymustconcurwithinvestmentstructuresapprovedbythecompany’sboardofdirectors.Intermsofprocedures,thepartytopurchasetheassetsmustrequestapprovaltopurchaseassetsasauthorizedin(3).Theauthorityin(7)involvessigningforapprovalofpurchaserequests.


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13.3 Corporate Secretary

Inthe1/2554meetingofthecompany’sboardofdirectorson24February2011,theboardofdirectorspassedaresolutiontoappointMissBoonpaRuddisttothepositionofCorporateSecretary.ThequalificationsofthepersonholdingthepositionofCorporateSecretaryappearinAttachment1incompliancewithSection89/15oftheSecuritiesandExchangeActof1992revisedbytheSecuritiesandExchangeAct(Volume4)of2008.DutiesandresponsibilitiesoftheCorporateSecretaryareasfollows:

1. Arrangeandmaintainthefollowingdocuments:

(a) Director’sCharter

(b) Lettersofnotificationofdirectors’meetings,minutestothemeetingsofthecompany’sboardof directorsandthecompany’sannualreports.

(c) Lettersofnotificationofshareholders’meetingsandminutestothemeetingsofshareholders.

2. Maintenanceofreportsonstakeholdersreportedbydirectorsandexecutives.

3. AnyotheractionsannouncedandstipulatedbytheCapitalMarketSupervisoryBoard.

AsameansofbuildingknowledgeabouttheworkoftheCorporateSecretaryandtoenabletheCorporateSecretarytoefficientlyperformtheworkoftheCorporateSecretary,thecompanyhasstipulatedthattheCorporateSecretaryreceivingtraininginvariouscoursessuchasacourseonthebasicsofthelawandregulationsrelatedtolistedcompaniesandcorporatesecretarycourseswithparticipationinvariousseminarsheldbytheStockExchangeofThailand.

13.4 Remuneration for Directors and Executives

13.4.1MonetaryRemuneration

RemunerationfortheBoardofDirectors

Attheshareholdersgeneralmeetingin2013whichwasheldon23April2013,aresolutionwaspassedonthesettingofdirectorremunerationfor2013intheformofmeetinggratuitiesandannualremunerationforatotalamountnottoexceed4,200,000baht(fourmillionandtwohundredthousandbahtonly),whichthecompanypaidasfollows:

(Unit:Baht)

Name PositionMeetingGratuity

AnnualRemuneration

TotalCompanyDirector

BoardofAuditDirector

1.Prof.Dr.SomchobChaiyavej Chairman 60,000 - 630,000 690,000

2.Mr.PadetpaiMeekun-iam Chairmanof theAuditCommittee/Director

50,000 75,000 350,000 475,000

3.Mr.PolrachotPiyathanom Director/AuditDirector 50,000 50,000 350,000 450,000

4.Mr.NattapolLilawattananan Director/AuditDirector 50,000 50,000 350,000 450,000

5.Mr.NakornPhraprasert Director 50,000 - 350,000 400,000

6.Mr.PoonphiphatTantanasin Director 50,000 - 350,000 400,000

7.Mr.SiripongBoontam Director 50,000 - 350,000 400,000

Total 360,000 175,000 2,730,000 3,265,000

Nootherformofremuneration.


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ExecutiveRemuneration

In2012and2013,thecompanypaidremunerationtoexecutivesamountingto16.70millionbahtand18.82millionbaht,respectively.Theaforementionedremunerationincludessalaries,bonusesandprovidencefundcontributions.Theonlyotherformofremunerationwouldbeacompanycar.

5 Personnel

5.1 NumberofEmployees

Asof31December2013,thecompanyhadatotalof181employees(notincludingelevenexecutives)with176asregularemployeesand5asdailyemployeesaccordingtothefollowingdetails:

Department RegularStaff(persons)

DailyStaff(persons)

Total(persons)

CustomerCare&ServiceCenter - 14

SupplyChainandLogistics 23 - 23

InternationalSalesDepartment 12 - 12

DomesticSalesDepartment 2 - 2

Administration 10 - 10

BusinessDevelopment - - -

AccountingandFinance 10 - 10

Production 77 5 82

Engineering 21 - 21

Security 3 - 3

ResearchandDevelopment 1 - 1

MIS 3 - 3

Total 176 5 181

Remarks:Underthecompany’sorganizationalstructure,theCustomerCareandServiceCenterDepartment,theSupplyChainandLogisticsDepartment,theInternationalSalesDepartment,theDomesticSalesDepartment,theManagementDepartment,theAccountingandFinanceDepartment,theBusinessDevelopmentDepartmentandtheMISDepartmentreportdirectlytotheManagingDirector,whiletheProductionandEngineeringDepartments,theSecurityDepartmentandResearchandDevelopmentDepartmentreporttotheDeputyManagingDirector.

5.2 LaborDisputes

-None-

5.3 EmployeeRemuneration

MonetaryRemuneration

In2013,thecompanypaidremunerationtoitsemployees(notincludingexecutives)amountingto59.19millionbahtintheformofsalaries,bonuses,overtimepay,providentfundcontributionsandotherbenefits.

OtherRemuneration

-None-


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5.4 PersonnelDevelopmentPolicy

Itisthecompany’svisiontobeaworldclasstransformermanufacturerwithamissiontorespondtochallengesindevelopingthecustomers’electricalsystemstomeetworldclassqualitystandardsleadingtothesettingofallpersonneldevelopmentpolicysopersonnelhavecapabilitytoachievetheorganization’smissionandvisionbasedonthefollowingkeytenets:

ConstructiveEngagement:Havingemployeesatalllevelsparticipateinsettingworkpolicyatdifferinglevels.However,theextentofparticipationvariesandisfocusedonjointsolutionsinvolvingdevelopmentwithemphasisonseekingsolutionsforresolvingissues(ratherthanpinpointingtheguiltyparty)byprovidingopportunitiestohearandrespectdifferingopinions.

SharingSuccess:Buildaworkingatmospherewhereeveryoneparticipatesincorporatesuccess,whichwillbereflectedintheformofremunerationfocusedmoreonoverallcorporatesuccessthanindividualachievements,andpromotingemployeestolearnfrompracticebyusingtheknowledgeobtainedfrompreviouspracticetogeneratereplication,improvementanddevelopmentofknowledgeforfuturepracticebyencouraginglearningexchangeswithinthecorporationsandremainingupdatedonchangingbusinessconditionsandrespondingtothosechanges.Sinceeveryonemustachievetogether,valuemustbegiventothesuccessofeachemployee,agencyandbusinessunitwhichwillleadtothesuccessoftheentirecorporation.

BetterAttitude:Havinganattitudethateverythingmust“bebetterthanbefore”inordertopromotecontinualimprovementtomeettheexpectationsofcustomers,society,organizationsandshareholders.


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Corporate Governance

1 Corporate Governance Policy

Thecompanyplacesimportanceingoodcorporategovernance,becausethecompanyviewsgoodgovernanceasanimportantmechanisminleadingtoeffective,transparentandtraceablesystemsofmanagement,whichwillhelpbuildconfidenceinshareholders,investors,stakeholdersandallpartiesconcerned.Goodcorporategovernanceisaninstrumentthatwillenhancevalue,buildcompetitivecapacity,includingthepromotionofsustainablegrowthofthecompanyinthelongrun.Therefore,thecompanyhassetpoliciesforgoodcorporategovernanceassetforthbytheStockExchangeofThailandinthe3rd/2556meetingoftheboardofdirectorson8August2013,whichcoveredfivesectionsofprinciplesdetailedasfollows:

Section 1: The Rights of Shareholders Thecompanyisawareofandgivesimportancetothebasicrightsofshareholderssuchasrightstopurchase,sell,ortransfershares,rightstoreceivesharesinthebusiness,rightstoreceivesufficientnewsandinformationaboutthebusiness,rightstoparticipateinmeetingstoexerciserightstovoteinshareholders’meetingstoappointorremovedirectors,appointmentsofauditorsandissueswithimpactonthecompany,suchasdistributionofdividends,specificationsorreviewsofregulations,memorandumsofassociation,regulations,reductionsorincreasesincapital,etc. Apartfromtheabovementionedbasicrights,thecompanyhasalsoactedonvariousissuestopromoteandfacilitatetheexercisingofshareholders’rightsasfollows:

• Thecompanysendslettersofnotificationtoattendshareholders’meetingstoshareholdersnolessthanfourteendaysbeforethemeetingdate.Letterscontainschedulesfordates,times,placesandagendasofthemeetings,includingdataregardingtopicsrequiringresolutionsatthemeeting.Theinformationisalsopostedatthecompany’swebsiteinThaiandEnglishforatleastonemonth,soshareholdersaregivenasufficientamountoftimetostudytheinformationaccompanyingthemeetingbeforereceivinginformationintheformofdocumentsfromthecompany.

• Thecompanyhassetagendasfortheannualshareholder’smeetingforcompliancewiththeprinciplesofcorporategoodgovernanceasfollows:1. Agenda1Considerationtoapprovetheminutestotheshareholder’sgeneralmeeting.2. Agenda2Considerationtoacknowledgethecompany’sperformanceforthepreviousyear.3. Agenda3Considerationtoapprovethecompany’sfinancialbudgetfortheaccountingcyclefortheyear

ending31Decemberofthepreviousyear.4. Agenda4Considerationtoapprovetheallocationofprofitsfromoperationsforthepreviousyear.5. Agenda5Considerationofthenominationofreplacementdirectorsfordirectorswhosetermsofofficehave

expired.6. Agenda6Considerationtoapprovedirector’scompensation.7. Agenda7Considerationoftheappointmentofauditorsandsetcompensationfortheannualaudit.8. Agenda8Considerationofothermattersbygivingtheshareholdersopportunitiestoinquireaboutkeyissues.

• Intheeventthatashareholderisunabletoattendameeting,theshareholdermayauthorizeanindependentdirectororanindividualtoattendthemeetingonhis/herbehalfbyusinganyoneofthelettersofproxysentbythecompanywiththemeetinginvitation.

• Shareholdersaregivenopportunitiestosendquestionsonmeetingagendastotheboardofdirectorsnolessthan20daysbeforethemeetingdateviathecompany’swebsiteorinvestorrelationse-mailnotifiedthroughtheSETnewssystem.


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• Shareholdersarefullyandindependentlygivenopportunitiestoaskquestions,expressopinionsandsuggestions.• Thecompanyfullyfacilitatesshareholdersinexercisingtheirrightstoattendmeetingsandcastvotes.Themeetings

areheldonworkingdaysathotelsinBangkokandBangkoksuburbareaswheretransportationisconvenientfortheshareholderstravellingtoattendthemeetings.

• Alldirectorsandhigh-rankingexecutivesattendthemeetingandaddressquestionsraisedintheshareholder’smeetingstogether.

• Afterthemeetings,thecompanypoststhevotingresultsforeachagendafromtheshareholder’sgeneralandspecialmeetingsonthenextdayatthecompany’swebsite,andpreparesminutestothemeetingswithaccurateandcompletedatadisclosedviathecompany’swebsitewithin14daysfromthemeetingdate,soshareholdersareabletoverifytheresults.

• Thecompanyemploystechnologyintheshareholder’smeetingsintermsofshareholderregistration,votecountinganddisplaysothemeetingcanproceedquickly,accuratelyandprecisely.

Section 2: The Equitable Treatment of Shareholders

Thecompanyhaspoliciesforpracticingandprotectingtherightsofeveryshareholderequallyandfairly,includingshareholderswhoareexecutives,shareholderswhoarenotexecutives,Thaishareholdersorforeignshareholders,majorshareholdersorminorshareholders.Shareholdersareentitledtoequalfundamentalrights.

• Thecompanyallowsshareholderswhoareunabletoattendmeetingstoauthorizeanindependentdirectororanindividualasaproxytoattendthemeetingontheshareholder’sbehalf.

• Thecompanyallowsshareholderstoproposeissuestobelistedasmeetingagendasandnominatepersonsasdirectorcandidatesintheshareholder’smeetinginadvanceinlinewithcriteriasetbythecompanyaspostedatthewebsitehttp://www.qtc-energy.com.Theproposalmustbemadethreemonthsbeforetheshareholder’smeeting.

• Unlessnecessary,thecompanywillnotaddmeetingagendaswithoutsendingnotificationtoshareholders,particularlyagendasthatareimportantandrequiretimetostudyinformationbeforemakingdecisions.

• Theboardofdirectorsgrantsshareholdersopportunitiestoexercisetherighttoappointindividualdirectorsandencouragestheuseofvotingcardstoensurevotingtransparency.

• Theboardofdirectorssetsupmeasurestopreventinsidertradingbyrelatedindividuals,includingdirectors,executives,employees,employeesaswellasthespousesandunderagechildrenoftheaforementionedindividuals.Theboardofdirectorshasalsosetupuppunitiveregulationsonthecompany’sdisclosureofinformation,ortheuseofthecompany’sinformationforpersonalgaininlinewiththepolicytopreventinsidertrading.

• Thecompanyeducatesdirectorsanditsexecutivesontheburdenanddutytoreportshareholdingsofthedirectorsaswellasthedirector’sspousesandunderagechildren,andtoreportchangesinshareholdingstotheSecuritiesandExchangepursuanttoArticle59andthepunitiveclausesoftheSecuritiesandExchangeActof1992.

Section 3: The Role of Stakeholders

Thecompanygivesimportancetotherightsofstakeholdersandtreatsallrelatedpartieswithfairness,asfollows:• Employees:Thecompanyisawareoftheimportanceofeverycompanyemployeewhowilltakepartinpushingthe

companytowarddevelopingitsbusinesstothefuture.Therefore,thecompanyisfocusedoncontinuallydevelopingthecapabilities,knowledgeandskillsofemployees,includingconsiderationsofsuitableremunerationaccordingtotheknowledgeandcapacityofeachemployeeinadditiontothemaintenanceofworkenvironmentsbyconsideringqualityoflifeandoccupationalsafety.Thecompanytreatseveryemployeeequallyandfairly.

• TradingPartnersandTradeAccountsReceivable:Thecompanytreatstradingpartnerswhoaresuppliersandfinancialdebtorsfairly,equallyandwithouttakingadvantagebystrictadherencetotradingconditionsand/oragreementsmadewithoneanotherinordertoimprovebusinessrelationsintheinterestsofbothparties.

• Customers:Thecompanypaysattentiontocustomersandtakesresponsibilitybyfocusingonproductionofhighqualitystandardizedproductsandrespondingtotheneedsofcustomerswhilemaintainingcustomerconfidentiality.Thecompanyalsogivesimportancetosettingproperequalpricesforproductssoldtocustomers.


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• Competitors:Thecompanybehavesincompliancewiththerulesofgoodcompetitionandsetlaws,maintainingthenormsofcodesofconductforcompetitionwithavoidanceoffraudulentmethodswhichwoulddestroycompetitors.

• CommunityandSociety:Thecompanyconductsitsbusinesswithconsiderationofenvironmentalimpact.Thecompanyemphasizescontinuallybuildingconscience,socialandcommunityresponsibilityinthecompanyandsupportofactivitiesintheinterestsofthepublicwithoutviolatinglaws.

• Thecompanyhasacompensationmeasurespublishedinthecompany’scodeofconductincasewherestakeholdersaredamagedbythecompany’sviolationofthestakeholder’slegitimaterights.

• Thecompanydeclaresthatdirectors,executivesandemployeeswholearnofimportantinsideinformationpotentiallyaffectingsecuritiestradingpricesmuststoptradingthecompany’ssecuritieswithinonemonthbeforethecompanyannouncesitsperformanceorbeforetheinsideinformationisdisclosedtothepublic.

• Thecompanyhasclearproceduresforcaseswherepersonsdisclosemattersoflegalviolation,sfinancialreportingaccuracy,internalcontrolerrorsormisconduct.Thesepersonscanreportsuchmattersbylettertotheboardofaudit.Furthermore,thecompanyhassetupmeasurestoprotecttheinformants’rights.

Section 4: Disclosure and Transparency

Theboardofdirectorsplacesimportanceoncorrect,completeandtransparentinformationdisclosure,fromreportsonfinancialdataandgeneraldataaccordingtothecriteriaoftheSECandtheStockExchangeofThailandtothekeyinformationwhichmayaffectthecompany’ssecurity’spricesandpotentiallyaffectthedecision-makingprocessofthecompany’sinvestorsandstakeholders,sothecompany’srelatedindividualsreceiveequaltheinformation.Followingthisproposedsaleofstockandfollowingthecompany’slistingontheStockExchangeofThailand,thecompanywilldiscloseinformationtotheshareholdersandthepublicviaStockExchangeofThailanddatadisseminationchannelsandthecompany’swebsite.

Theboardofdirectorsisawareofitsresponsibilitiesandfirmlycommittedtostrictlyoverseeingcompliancewiththelawsandregulationsrelatedtoinformationdisclosureandtransparencyasfollows:

• ThecompanypublishesinformationinlinewiththesetcriteriathroughchannelsoftheSET,AnnualDisclosureForm(Form56-1)andtheAnnualReport(Form56-2)andviathecompany’swebsiteinbothThaiandEnglishwithregularinformationupdates.

• TheboardofdirectorsreportscorporategovernancecomplianceresultsthroughtheAnnualDisclosureForm(Form56-1)andtheAnnualReport(Form56-2)andcompany’swebsite.

• Theboardofdirectorscompilesreportsontheboardofdirectors’responsibilitiesforfinancialtransactionsdisplayedtogetherwiththeauditor’sreportandarrangesforreportsoncorporategovernancebytheBoardofAuditintheAnnualReport(Form56-2).

• AnnualDisclosureForm(Form56-1)andtheAnnualReport(Form56-2)theboardofdirectorspublishesnamelist,rolesandresponsibilitiesofmembersoftheboardofdirectorsandsub-committees,numberofmeetingandnumberofmeetingsattendedbyeachdirectorineachyearthroughtheAnnualDisclosureForm(Form56-1)andtheAnnualReport(Form56-2).

• ThecompanyhassetpolicyforinformationdisclosurethroughtheAnnualDisclosureForm(Form56-1)toassurecompliancewiththeCapitalMarketSupervisoryBoard’snotificationonthecriteria,termsandmethodsforinformationdisclosureregardingacompany’sfinancialstatusandbusinessperformanceinthefollowingareas:1)generalinformation;2)riskfactors;3)characteristicsofbusinessoperations;4)businessoperationsofeachproductline;5)assetsutilizedinbusinessoperation;6)legaldisputes;7)capitalstructure;8)management;9)internalcontrol;10)relatedtransactions;11)financialstatusandbusinessperformance;and12)otherrelatedinformation.

• TheboardofdirectorsandexecutivesreportshareholdingsandthechangesinshareholdingsinlinewithregulationssetbytheSecuritiesandExchangeCommission.


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• ThefirstfourdirectorsandexecutivescountedfromtheManagingDirectorareunderobligationtosubmitareportontheirownstakeholdingsandthestakeholdingsofrelatedindividualstothechairmanoftheboardandthechairmanoftheBoardofAuditwithdisclosureofinformationforalldirectors’awarenessinlinewiththeSecuritiesandExchangeActof2008.TheboardofdirectorshassetpolicytodesignateexecutivelevelemployeeswiththetitleofdivisionmanagertosubmittotheBoardofAudittheirpersonalstakeholdingsandthestakeholdingsofrelatedindividualsinordertoassuretransparencyandfairnessinbusinessconduct.

• Theboardofdirectorsarrangesforthemaintenanceofeffectiveinternalcontrolsinorderprovidereasonableassurancethataccountingrecordsarerecordedaccurately,completelyandsufficientlytomaintainthecompany’sassets,andinordertobeawareoftheweaknessessomisconductorsignificantirregularoperationscanbeprevented.TheboardofdirectorshasestablishedtheBoardofAuditcomposedofnon-executivedirectorsservingtoauditfinancialtransactions,relatedpartytransactionsandinternalcontrolsystems.TheBoardofAuditdirectlyreportstotheboardofdirectors.

• Thecompanyhasestablishedaninvestorrelationunitforthepurposeofcommunicationswithoutsideindividuals,namely,shareholders,institutioninvestors,generalinvestorsandrelatedpublicanalystsasfollows:1. Todiscloseimportantinformationforpublicawareness.2. Tothoroughlypublishinformationtothepeople.3. Toclarifyrumorsornews.4. Topreventthepromotionaldisclosureofunreasonableinformation.5. Touseinsideinformationinthetradingoflistedcompanieswithaccuracy,sufficiency,modernity,equity,

transparencyandfairness.6. Tocarryoutprocedureswhenthesecuritiestradingoflistedcompaniesdeviatesfromthemarket’snormal

conditions.Theunitcanbecontactedthroughthefollowingchannels: Telephone :(66)23793089,extension241 Fax :(66)23793099 Email :[email protected] Website :http://www.qtc-energy.com/irs/investor_th.html

Inaddition,thecompanyhasappointedtheChiefExecutiveOfficerortheManagingDirectorasthepartywiththeauthorizationtoprovidetheaforementionedinformation.

• ThecompanyhasappointedcontactpersonswhoareauthorizedtocoordinatewiththeSETindisclosinginformation.1. Mattersonthedisclosureofinformationinlinewitheventsoccurring,namely,assetacquisition/discharge

(sales)transactions,relatedtransactions,shareholders’meetingschedules,changesindirectorsandauditors,relocatingheadquarters,minutestotheshareholders’meetingsandinvestmentprojects,dividendpayments/dividendpaymentsuspensionsaretobemadebytheManagingDirector.

2. Thedisclosureofinformationaccordingtoaccountingcycle,namely,annualfinancialstatements,andquarterlyfinancialstatement,AnnualDisclosureForm(Form56-1)andtheAnnualReport(Form56-2)aretobemadebytheManagingDirector.

• TheChairmanoftheBoardortheManagingDirectorarethepartiesauthorizedtoprovidegeneralnewsandinformationoncorporatemanagementtothemedia.

• Appointingcontactpersonswithotherrelatedagencies:1. ThecorporatesecretaryisthepartytocoordinatewithThailandSecuritiesDepositoryCompanyLimited2. ThecorporatesecretaryisthepartytocoordinatewiththeSecuritiesandExchangeCommission.


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Section 5: Responsibilities of the Board of Directors

5.1 BoardofDirectors’Structure

5.1.1ElementsoftheBoardofDirectors

Theboardofdirectorsiscomposedoffivedirectorsandindependentdirectorsforatleastonethirdofthenumberofdirectorsontheentireboard,butmustbenolessthanthree.Thedirectorsareappointedbytheshareholder’smeeting,withofficetermbeingthreeyearsandnolimittothenumberofofficeterms.Atpresent,thecompanyhasthreeauditingdirectors.Theaforementionedstructurewillcreateacheck-and-balancesystemforthevotingwhenissuesareunderconsideration.Accordingtocompanypolicy,theChairmanoftheBoardmustonlybeanindependentdirector.

5.1.2 DirectorQualifications Theboardofdirectorsismadeupofqualifiedexpertswithknowledge,abilityandexperienceatthe

executivelevelfromvariouscorporations.Theboardofdirectorsisabletouseitsexperience,knowledgeandabilitytoeffectivelydevelopandsetthecompany’spoliciesandgovernancetomaximizebenefitstothecompanyandshareholders.Theboardofdirectorsplaysasignificantroleinsettingcorporatepoliciesandoverallbusinessinadditiontosupervising,auditingandmonitoringmanagementperformanceandevaluatingthecompany’sperformanceaccordingtoplans.Eachdirectorisallowedtoholdtheofficeofdirectorfornomorethanthreelistedcompanies.

5.1.3 IndependentDirectorQualifications(1) Independentdirectorsmustholdnomorethan1%ofallcompany,parentcompany,subsidiary,

affiliatedcompanyorjuristicpersonsharesentitledtovotewithpotentialconflictsofinterest.Sharesheldbyrelatedpersonsarealsocounted.

(2) Independentdirectorsmustbepersonswhoarenotandneverhavebeendirectorswhohaveparticipatedasmanagers,subordinate,employees,consultantswithregularsalaries,orpersonswithpowertocontrolthecompany,parentcompany,subsidiaries,affiliatedcompanies,equallevelsubsidiaries,orjuristicpersonswithpotentialconflictsofinterest,unlessthepersonhasnothadmettheaforementionedcriteriafornolessthantwoyearspriortothedateofsubmittingapplicationstotheSEC.

(3) Independentdirectorsmustnotbepersonsrelatedbybloodorlegalregistrationasaparent,spouse,siblingorchild,includingspousesofchildren,tomajorexecutives,shareholders,personswithauthoritytocontrol,orexecutivecandidates,orpersonswithauthoritytocontrolthecompanyoritssubsidiaries.

(4) Independentdirectorsmustnothaveoreverhavehadbusinessrelationshipswiththecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterestincharacteristicswhichmayobstructindependentjudgment.Moreover,independentdirectorsmustnotbeoreverhavebeenamajorshareholder,director,orexecutiveofpersonswithbusinessrelationshipswiththecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterest,unlessindependentdirectorshavebeenfreefromtheaforementionedcharacteristicsfornolessthantwoyearsbeforethedateoftheapplicationforSECpermission.

(5) Independentdirectorsmustnotbeoreverhavebeenauditorstothecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterest.Moreover,independentdirectorsmustnotbeoreverhavebeenamajorshareholder,director,executiveormanager-shareholderofauditingofficesemployingauditorsforthecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterest,unlesstheindependentdirectorhasbeenfreefromtheaforementionedcharacteristicsfornolessthantwoyearspriortothedateofapplicationforSECpermission.

(6) Independentdirectorsmustnotbeoreverhavebeenserviceprovidersinanyprofession,includinglegalconsultantservicesorfinancialconsultantservices,whichhavereceivedservicefeesofmorethantwomillionbahtperyearfromthecompany,parentcompany,subsidiaries,affili-


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atedcompanies,orjuristicpersonswithpotentialconflictsofinterest.Moreover,incaseswhereprofessionalserviceproviderswerejuristicpersons,thisincludesbeingamajorshareholder,adirector,anexecutiveormanagingpartnerofauditingofficesemployingauditorstothecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterest,unlesstheindependentdirectorhasfreefromtheaforementionedcharacteristicsfornolessthantwoyearspriortothedateofapplicationforSECpermission.

(7) Independentdirectorsmustnotbedirectorsappointedtorepresentcompanydirectors,majorshareholders,orshareholdersassociatedwithmajorshareholdersofthecompany.

(8) Independentdirectorsmustnothaveanyothercharacteristicspreventingindependentopinionsconcerningthecompany’soperations.

5.1.4 ThecompanyhassetpolicyfortheChairmanoftheBoardandtheManagingDirectorareheldbydifferentpersonsinordertopreventanyonepersonfromholdingabsolutepowerinanyspecificmatter.Theboardofdirectorswillsetthescopeofthepowerandresponsibilitiesinadditiontoselectingthepersonstoholdtheaforementionedoffices.

5.1.5 Thenumberofcompaniesinwhicheachdirectorholdsofficemustbecompliantwithgoodcorporategovernanceandeachdirectormustbeadirectorinnomorethanthreelistedcompanies.

5.1.6 TheManagingDirectorandhigh-rankingexecutivescanholdtheofficeofdirectorinnomorethanthreecompanies,andmustbeapprovedbytheboardofdirectorsinadvance.

5.1.7 Eachindependentdirectormaybeanindependentdirectorfornomorethannineconsecutiveyears.5.1.8 Theboardofdirectorswillappointanewdirectortoservefortheremainingtermofofficefortheprevious

directorwithapprovalfromtheboardofdirectors.5.1.9 Theboardofdirectorsdisclosesinformationonofficeholdinginothercompaniestotheshareholder’s

awarenessintheAnnualDisclosureForm(Form56-1)andtheAnnualReport(Form56-2).5.1.10TheboardofdirectorsappointsaCorporateSecretarywithdutiesandresponsibilitiesconcurrentwiththe

SecuritiesandExchangeActasfollows:1. Arrangeandmaintainthefollowingdocuments: (a) Director’sCharter (b) Lettersofnotificationofdirectors’meetings,minutestothemeetingsofthecompany’s

boardofdirectorsandthecompany’sannualreports. (c) Lettersofnotificationofshareholders’meetingsandminutestothemeetingsofshareholders.2. Maintenanceofreportsonstakeholdersreportedbydirectorsandexecutives.3. AnyotheractionsannouncedandstipulatedbytheCapitalMarketSupervisoryBoard.

5.2 Sub-CommitteesundertheCompany’sBoardofDirectors

Theboardofdirectorsalsosetsupsub-committeestohelpwithcorporategovernanceasfollows:1. ThecompanyhasaManagingDirectorasthepartytosetbusinessguidelinesandstrategyinlinewith

thetargetssetbytheboardofdirectorsandtofacilitatemanagement.2. TheBoardofAudit–thecompanyhasatotalofthreeauditdirectorstoperformdutiesconcerningspecific

mattersandtoproposeissuestotheboardofdirectorsforconsiderationandawareness.TheBoardofAudit’srightsanddutieshavebeensetwithinthescopeofthepowerandresponsibilitiesoftheBoardofAudit.Atleastoneauditdirectormustpossessadequateknowledgeandexperienceinaccountinginordertoexecutethedutyofauditingthecredibilityofthecompany’sfinancialstatements.

3. TheNominationandRemunerationCommittee–Thiscommitteeiscomposedof2/3independentdirectors.Thechairmanisanindependentdirectorholdingthedutyofrecruitingandselectingcandidatesfortheofficeofdirectorintheboardofdirectorstomonitorthesuccessionofoffice,toevaluatetheworkperformanceoftheManagingDirector,toproposeremunerationpolicyandotherbenefitsfortheboardofdirectors,sub-committees,managingdirectors,anddeputymanagingdirectors,toreviewthedirectorremunerationstructure,directorandexecutiveremunerationtosuitthedutiesandresponsibilitiesaswellasthecompanybusinessperformance.


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4. Theboardofriskmanagement–Theboardofriskmanagementperformsdutiesinoverseeingthecompany’sriskmanagementprocedurestoensureexecutionofdutyinlinewiththebusinessplan,policyandstrategysetbytheboardofdirectors.

5.3 TheRoles,DutiesandResponsibilitiesofDirectors ThecompanystipulatesthatdirectorscomplywiththecodeofbestpracticeinlinewithSETguidelines.

Directorsmustunderstandandbeawareoftheirroles,duties,andresponsibilities,performingthosedutiesincompliancewiththelaw,companyobjectivesandregulationsaswellasshareholders’resolutionswithintegrity,honestyandmaximumconsiderationoftheinterestsofthecompanyanditsshareholders.Director’sroles,dutiesandresponsibilitiesareasfollows:1. Theboardofdirectorsmustarrangeageneralshareholder’smeetingwithinfourmonthsfromtheendof

thecompany’saccountingcycle.2. Theboardofdirectorsmustarrangeameetingofthecompany’sboardofdirectorsatleasteverythreemonths.3. Arrangesacredibleaccountingsystem,financialstatementreportsandfinancialauditsforthecompany.4. Theboardofdirectorsmustarrangecrediblesystemsforaccounting,financialreportsandauditing,

includingefficientandeffectivesystemsforinternalcontrol,internalauditingandriskmanagement.5. Theboardofdirectorsmustarrangethecompany’sbalancesheetsandprofit-lossstatementsattheend

ofthecompany’saccountingcycle,whichmustbeauditedbyanauditorandpresentedtothemeetingofshareholdersforconsiderationandapproval.

6. Theboardofdirectorsmustsetthecompany’sgoals,guidelines,policies,businessplansandbudgetsalongwithmonitoringandsupervision,sotheadministrationandmanagementofexecutivesconcurswithworkplanningpoliciesandsettingbudgetswithefficiencyandeffectiveness.

Furthermore,thescopeoftheboardofdirectors’dutiesincludesdirectionforthecompanytocomplywithlawsonsecuritiesandsecuritiesexchanges,announcementsoftheCapitalMarketSupervisoryBoard,specificationsoftheStockExchangeofThailandsuchasengaginginconnectedtransactions,acquisitionsorsalesofsignificantproperties,orlawsassociatedwiththecompany’sbusinesses.

7. Theboardofdirectorsmustconsiderreviews,auditsandapprovalsofplansbytheexecutivesforbusinessexpansion,largeinvestmentprojects,includingparticipationininvestmentswithotherbusinessoperatorsproposedbytheexecutives.

8. Theboardofdirectorsmustcontinuallymonitorperformanceforconcurrencewithplansandbudgets.9. Theboardofdirectorsmustconsiderdesignatingexecutivestructureswithauthoritytoappointthe

ExecutiveBoardofDirectors,ManagingDirectorsandothersub-committeesasdeemedfitting,suchastheAuditCommittee,theRecruitmentCommittee,theRemunerationCommittee,etc.,includingthesettingofthescopesofauthorityanddutiesoftheExecutiveBoardofDirectors,ManagingDirectorsandvariousappointedsub-committees.

10. Theboardofdirectorsmayauthorizeadirector,severaldirectors,oranyotherpersonstoperformanyactionsonbehalfoftheboardofdirectorsunderthecontroloftheboardofdirectors,ortheboardofdirectorsmayauthorizetheaforementionedpersonstohaveauthorityasdeemednecessarybytheboardofdirectorswithintheperiodoftimetheboardofdirectorsdeemsfitting.Theboardofdirectorsmaycancel,withdraw,changeorreviseauthorizationsasdeemednecessary.Thepowertoauthorizedmustnotbeinamannerthatwouldenabletheaforementionedindividualtoconsiderorapprovetransactionsorpersonswithpotentialconflictsofinterest,stakeholdersoranyothertypesofconflictsofinterestoccurringwiththecompanyoritssubsidiaries(ifany),unlesstheapprovalinvolvesnormalbusinesstransactionsinlinewithgeneraltradeconditionsorcompliancewithpolicyandcriteriaalreadyconsideredandapprovedbytheboardofdirectorsunderthecriteria,termsandmethodssetforthregardingrelatedtransactionsandacquisitionsordischargesoflistedcompanymainassetspursuanttoSECand/orSETnotificationsand/oranyothernotificationsbyrelatedagencies.

11. Theboardhaspreparedcorporategovernancepolicyinwritingwithperformanceevaluationandpolicyreviewatleastonceayear,promotingthepreparationofwrittencodeofconductsoalldirectors,executivesandemployeesunderstandtheethicalcodebywhichthecompanyconductsitsbusiness,monitorscompliancewiththeaforementionedethicalcodes,andsetsupriskmanagementpolicywithevaluationofriskmanagementeffectivenessatleastonceayear.


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5.4 BoardofDirectors’Meetings Theboardofdirectorsmustexecuteitsdutiesthroughtheboardmeetingsasfollows:

1. Theboardmeetingscheduleispreparedinadvancefortheentireyearandreportedtoeachdirectortoensureawareness.

2. Theboardofdirectorsholdsboardmeetingsatleastonceeverythreemonths,andmayholdspecialmeetingsasnecessary.Ineachmeeting,agendasareclearlysetandmeetinginvitationsaresentwithdetailssevendaysaheadoftime,sotheboardofdirectorshasasufficientamountoftimetostudythedata.Minutestothemeetingsarerecordedinwritingandtheboard-approvedminutestothemeetingarekeptavailableforverificationbytheboardofdirectorsandrelatedindividuals.

3. TheChairmanoftheBoardortheManagingDirectoristhepartytoconsiderandselectmatterstobeplacedonthemeetingagenda.Eachdirectorproposesmeetingagendasindependently.

4. Thechairmanoftheboardallotsasufficientamountoftimefortheexecutivestoproposemattersandthedirectorstodiscusskeyissueswithprudence.Minutestothemeetingareinwritingandkeptfordirectorsandrelatedpersonstoverify.

5. Theboardofdirectorsencouragesthecompany’shigh-rankingexecutivestoattendmeetingswiththeboardtoprovideadditionaldetailsasdirectlyrelatedtoproblemsandtoensuretheboardissufficientlyfamiliarwiththehigh-rankingexecutivesforthebenefitofconsiderationsinvolvingtheworksuccession.

6. Thecompanyhassetpolicyfornon-executivedirectorstoholdmeetingstodiscussmanagementproblemswithoutthemanagement’spresenceandreportmeetingresultstotheManagingDirector.

7. TheboardofdirectorshasappointedtheCorporateSecretarytotheboardofdirectorstoperformsthedutyofsupportingthepreparationofmeetingagendasandthepreparationofmeetinginvitationsinadditiontooverseeingandholdingmeetings,maintainingmeetingdocumentsandpreparingminutestothemeetingtobesubmittedtotheChairmanoftheBoardbeforepresentingtothemeetingforapprovalconsiderationoftheminutestothemeeting.

5.5 BoardofDirector’sSelfEvaluation

Theboardofdirectorshasstipulatedthatitsperformancewillbeevaluatedatleastonceayearforthepurposeofawarenessaboutproblemsandbarriersoccurringduringthepreviousyearinordertoassurethattheboard’soperationsaremoreeffectivebecausetheboardlearnsitsownresponsibilitiesandhelpsimproverelationshipsbetweentheboardofdirectorsandthemanagement.Thus,correctiveguidelinesareconcurrentwiththeprinciplesofcorporategoodgovernance.

5.6 Remuneration Thecompanysetsremunerationfordirectorsandexecutivesatasuitableandsufficientlevelto

maintaindirectorsandqualityteamexecutiveswithouthavingtopayoverlyhighremuneration.Furthermore,theleveliscomparabletothatofcompaniesinthesameindustry.Thefactorstobeconsideredincludeexperience,duties,rolesandresponsibilities.Director’sremunerationpaymentsmustbeapprovedbytheshareholder’smeeting.Executiveremunerationpaymentsareconcurrentwiththeprinciplesandpolicysetforthbytheboardofdirectorsinconsiderationofdutiesandresponsibilities,individualexecutiveperformanceandcompanyperformance.Forthedirectorsofsub-committees,theremunerationiscommensuratewithrolesandresponsibilities.

5.7 DirectorandExecutiveDevelopment5.7.1 Theboardofdirectionshassetpolicytopromoteandfacilitatethearrangementoftrainingand

resourcepersonsrelatedtothecompany’scorporategovernancesystem,includingdirectors,auditingdirectors,executivesandsecretaries,sooperationsarecontinuallyimproved,i.e.thecoursesoftheThaiInstituteofDirectorsAssociation(IOD).

5.7.2 Thecompanypreparesdocumentsandinformationfortheuseofnewdirector’sintheexecutionofduty.Manualsonbusinesscharacteristicsandthecompany’sbusinessoperationsarealsoprovidedfornewdirectors.


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5.7.3 Thecompanyhassuitableandtransparentplansforrecruitingemployeestobeunderobligationforallkeymanagementpositionstoensurethatthecompanyacquiresexecutiveswithprofessionalismandabilitytomanageindependentlyfromtheinfluenceofmajorshareholdersoranyindividuals.Theplanisreviewedbytheboardofdirectorsonanannualbasis.Theexecutivesappointedassuccessorswillbedevelopedinlinewiththeindividualdevelopmentplaninordertobereadyforfuturepromotion.

5.8StakeHoldingReports Thecompanyassignsdirectorsandmanagingdirectorstoreportpersonalstakeholdingsand

thestakeholdingsofrelatedpartiesatthetimetheytakeofficeorwhentherearechangesininformation.Furthermore,informationistobereviewedannuallyinlinewiththecriteriaandmethodsforreportingstakeholdingsofcompanydirectorsandexecutivessetforthbytheboardofdirectors.

In2013,inordertoconcurwithgoodcorporategovernanceprinciplesandforthepurposeoftransparency,thecompanyarrangedfortheevaluationoftheCEO’sworkperformancefor2013toinform,considerandreviewanyproblemsandbarriersinthepast.

2 Sub-Committees

ThecompanyhasthreesubcommitteescomposedoftheBoardofAudit,theBoardofManagementandtheBoardofRiskManagement.Thedirectorsoftheboardofdirectors,directoroftheBoardofAudit,directoroftheBoardofRiskManagementanddirectoroftheBoardofManagementandcompany’sexecutivesarefullyqualifiedpursuanttoArticle68ofthePublicCompanyActof1992andrelatednotificationsoftheCapitalMarketSupervisoryBoard.Thecompany’smanagementstructurecanbedescribedasfollows:

2.1 BoardofAudit

TheentireBoardofAuditiscomposedofthreeindependentdirectorswhopossesknowledge,ability,experienceandqualificationsinlinewiththeSET’sregulations.TheBoardiscomposedofnon-executivedirectorswithofficetermsofthreeyearseach.

First-LastName Position

1. Mr.PadetpaiMeekun-iam ChairmanoftheBoardofAudit

2. Mr.PolrachotPiyathanom* AuditDirector

3. Mr.NattapolLilawattananan* AuditDirector Remarks:*Adirectorwithsufficientknowledgeandexperienceforreviewingthecredibilityfinancial

statements’. MissWandeeSibunruangistheInternalAuditorandSecretaryoftheBoardofAudit.

ScopeofDutiesandResponsibilitiesfortheBoardofAudit1. Toreviewtheaccuracyandsufficiencyofthecompany’sfinancialreports.2. Toreviewthesuitabilityandeffectivenessofthecompany’sinternalcontrolsystemsandinternal

audits,andtoconsidertheindependencyoftheinternalauditagency,andtoapproveconsiderationoftheappointment,transfer,terminationoftheheadofinternalauditoranyotheragenciesresponsibleforinternalaudits.

3. Toauditthecompany’scompliancewiththelawsgoverningsecuritiesandexchangemarkets,thespecificationssetforthbytheStockExchangeofThailandandthelawsrelatedtothecompanybusiness.

4. Toconsider,selectandproposetheappointmentofindependentindividualsinordertoserveasthecompany’sauditors,toproposeremunerationfortheaforementionedpersons,andtoattendmeetingswiththeauditorswithoutthemanagementatleastonceayear.


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5. Toconsiderrelatedtransactionsortransactionswithpotentialconflictsofinterestforcompliancewiththelawsandregulationsofthestockmarketinordertoensurethattheaforementionedtransactionsarereasonableandinthecompany’soptimalinterests.

6. ToprepareBoardofAuditreportsfordisseminationinthecompany’sannualreport.TheaforementionedreportsmustbesignedbythechairmanoftheBoardofAuditandmustcontainthefollowingminimuminformation:(a) Opinionsontheaccuracy,completenessandcredibilityofthecompany’sfinancialreport.(b) Opinionsonsufficiencyofthecompany’sinternalcontrolsystem.(c) Opinionsonlegalcomplianceonsecuritiesandexchange,andsecuritiesmarketregulations

orlawsrelatedtothecompany’sbusiness.(d) Opinionsonauditor’ssuitability.(e) Opiniononpotentialconflictofinteresttransactions.(f) NumberofBoardofAudit’smeetingsandmeetingattendancebyeachauditdirector.(g) OverallopinionorobservationrenderedbyBoardofAuditreceivesonexecutionofdutyin

linewithcharter.(h) Othertransactionsthatshouldbeknownbyshareholdersandgeneralinvestorswiththe

scopeofthedutiesandresponsibilitiessetforthbytheboardofdirectors.7. AnyotheroperationsassignedbytheboardofdirectorswiththeBoardofAudit’sapproval.

2.2 TheBoardofRiskManagement

Inordertoensuretheefficiencyofcorporateriskmanagement,theboardofriskisunderobligationtomonitorthecompany’sriskmanagementprocessforproperconcurrencewiththebusinessplan,policyandstrategywithinthescopesetbytheboardofdirectorsinwritingintheframeworkofthecriteriafortheBoardofRiskManagement.TheBoardofRiskManagementiscomposedofthefollowingindividuals:

1.Mr.PoonphiphatTantanasin ChairmanofTheBoardofRiskManagement2.Mr.SiripongBoontam Director3.Mr.PanuSinives Director4.Mr.RuangchaiKrissanakriangkrai Director5.MissBoonpaRuddist Director6.Mr.CharoensakSarawong Director7.Mr.ChanvutMeeploi Director8.MissSuanyaPhummanulap Director9.MissChotikaChumpoon Director

ScopeandResponsibilitiesoftheBoardofRiskManagement1. Tosetoverallriskmanagementpolicyandguidelinescoveringvarioustypesofimportantriskssuchas

financialrisks,exchangeraterisks,marketingrisksandotherriskspotentiallyaffectingthecompany’soperationsandreputationforpresentationtotheboardofdirectorsforapproval.

2. Toperformassessmentandanalysisonpotentialriskfactorsincludingthesettingofriskmeasuringcriteriaandacceptableriskceiling.

3. Toestablishprocessesformanaging,assessing,controllingandmonitoringrisks;todevelopprocessesintoachieveoptimumefficiencyandsuitabilityinmanagingalltypesofpotentialrisks.

4. Toregularlyreporttotheboardofdirectorsonthemanagement,operationsandcorporateriskstatusandchangesaswellasareasforimprovementorcorrectionandnotifytheBoardofAudittoreviewthesufficiencyandsuitabilityofriskmanagement.

5. Managesandcontrolsoverallcorporateriskmanagementforconcurrencewithgoodgovernanceprinciples.

6. Reviewsthesufficiencyofpolicyandriskmanagementsystemsaswellaseffectivenessofthesystemandcompliancewithsetpolicy.


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7. Arrangesforariskmanagementteamasnecessary.8. Executesdutiesasassignedbytheboardofdirectors. Theboardofriskmanagementholdsmeetingsatleastonceeverythreemonths,andreportstotheBoard

ofAuditandtheboardofdirectorsforawarenesseveryquarter.

3 Director Recruitment

Directorrecruitmentiscarriedoutintheshareholder’smeeting.Theboardofdirectorsisthepartytoconsiderexperience,knowledge,abilityandlegalqualificationsbecausethecompanyhasnocommitteetorecruitpeoplefortheaforementionedofficeatthistime.Next,theshareholder’sselectdirectorsinlinewiththecriteriaandmethodssetforthinthecompany’sregulations.

3.1 ElementsandAppointmentoftheBoardofDirectors Thedescriptionsoftheelements,recruitment,appointment,removalorterminationofdirectorsare

setforthinthecompany’sregulations,whichcanbesummarizedasfollows:1. Thecompany’sboardofdirectorscomprisesnolessthanfivedirectorsandnolessthanhalfofall

directorsmustresideintheKingdomwithqualificationsassetforthbylaw.2. Shareholders’meetingsmustselectdirectorsaccordingtothefollowingcriteriaandmethods:

(1) Eachshareholderhastherighttocastvotesequaltothenumberofsharesheldbythatshareholder.

(2) Eachshareholdermayusetheirvotestoelectoneorseveralpersonsasdirectors.Incaseswhereashareholderelectsseveralpersonsasdirectors,theshareholdermaynotgiveunequalvotestoanyperson.

(3) Thepersonswhoreceivethehighestnumberofvoteswillbethepersonsappointedasdirectorsinorderaccordingtothenumberofdirectorsallowedorthenumberofdirectorsbeingelectedatthetimeofthemeeting.Incaseswherethenextpersoninlineexceedsthequotaofdirectorsallowedorthenumberofdirectorsbeingelectedatthattimewithequalvotes,theChairmanwillcastthedecidingvote.

3. Ineveryannualshareholder’smeeting,one-thirdoftheexistingdirectorsmustbereleasedfromoffice.Ifthenumberofdirectorscannotbedividedequallyintothreeparts,thenumberofdirectorsnearestone-thirdoftheexistingdirectorsmustbereleasedfromoffice.Directorswhowillbeoutofofficeinthefirstandsecondyearsfollowingtheregistrationofthecompanymustdrawlots.Insubsequentyears,thedirectorswhohavebeeninofficelongestmustbereleased.Directorswhosetermswillexpiremaybereelected.

4. Anydirectorwishingtoresignmustsubmitaresignationformtothecompany.Resignationsshallbeeffectivefromthedatetheresignationformreachesthecompany.

5. Incaseswheredirector’sseatsbecomevacantduetocausesotherthanexpirationofterm,thecompany’sboardofdirectorsmayselectpersonswithqualificationswhohavenoprohibitedcharacteristicsaccordingtothelawsgoverningpubliclimitedcompaniesand/orlawsonsecuritiesandsecuritiesexchangesasdirectorsinthenextmeeting.Unlesstheremainingtermofthedirectorsislessthantwomonths,newreplacementdirectorsmayremaininofficeonlyfortheremainingtermofthedirectorwhowasreplaced.

Thedecisionsoftheboardofdirectorsmustbemadewithvotesofnolessthanthree-fourthsoftheremainingdirectors.

6. Shareholder’smeetingsmaypassaresolutionforanydirectortobereleasedfromofficeprematurelywithvotesofnolessthanthree-fourthsofshareholdersentitledtovoteandinattendanceatthemeeting.


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13.3.2ElementsandAppointmentsofIndependentDirectors

Thecompany’sboardofdirectorswilljointlyconsiderthebasicqualificationsofindependentdirectorcandidatesbyconsideringqualificationsandprohibitedcharacteristicsofdirectorsaccordingtothePublicLimitedCompanyAct,lawsonsecuritiesandsecuritiesexchanges,announcementsoftheCapitalMarketSupervisoryBoard,includingannouncements,rulesand/orrelatedregulations.Furthermore,thecompany’sboardofdirectorswillconsiderselectingindependentdirectorsfromqualifiedpersonswithworkexperienceandsuitabilityinotheraspectsbeforeproposaltothemeetingofshareholdersforconsiderationofappointmentasacompanydirector.Thecompanyhassetpolicyforappointingindependentdirectorsatoneoutofthreedirectorsandthenumberofindependentdirectorsmustbenolessthanthreeindependentdirectors.

QualificationsofIndependentDirectors1. Independentdirectorsmustholdnomorethan1%ofallcompany,parentcompany,subsidiary,affiliated

companyorjuristicpersonsharesentitledtovotewithpotentialconflictsofinterest.Sharesheldbyrelatedpersonsarealsocounted.

2. Independentdirectorsmustbepersonswhoarenotandneverhavebeendirectorswhohaveparticipatedasmanagers,subordinate,employees,consultantswithregularsalaries,orpersonswithpowertocontrolthecompany,parentcompany,subsidiaries,affiliatedcompanies,equallevelsubsidiaries,orjuristicpersonswithpotentialconflictsofinterest,unlessthepersonhasnothadmettheaforementionedcriteriafornolessthantwoyearspriortothedateofsubmittingapplicationstotheSEC.

3. Independentdirectorsmustnotbepersonsrelatedbybloodorlegalregistrationasaparent,spouse,siblingorchild,includingspousesofchildren,tomajorexecutives,shareholders,personswithauthoritytocontrol,orexecutivecandidates,orpersonswithauthoritytocontrolthecompanyoritssubsidiaries.

4. Independentdirectorsmustnothaveoreverhavehadbusinessrelationshipswiththecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterestincharacteristicswhichmayobstructindependentjudgment.Moreover,independentdirectorsmustnotbeoreverhavebeenamajorshareholder,director,orexecutiveofpersonswithbusinessrelationshipswiththecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterest,unlessindependentdirectorshavebeenfreefromtheaforementionedcharacteristicsfornolessthantwoyearsbeforethedateoftheapplicationforSECpermission.

5. Independentdirectorsmustnotbeoreverhavebeenauditorstothecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterest.Moreover,independentdirectorsmustnotbeoreverhavebeenamajorshareholder,director,executiveormanager-shareholderofauditingofficesemployingauditorsforthecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterest,unlesstheindependentdirectorhasbeenfreefromtheaforementionedcharacteristicsfornolessthantwoyearspriortothedateofapplicationforSECpermission.

6. Independentdirectorsmustnotbeoreverhavebeenserviceprovidersinanyprofession,includinglegalconsultantservicesorfinancialconsultantservices,whichhavereceivedservicefeesofmorethantwomillionbahtperyearfromthecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterest.Moreover,incaseswhereprofessionalserviceproviderswerejuristicpersons,thisincludesbeingamajorshareholder,adirector,anexecutiveormanagingpartnerofauditingofficesemployingauditorstothecompany,parentcompany,subsidiaries,affiliatedcompanies,orjuristicpersonswithpotentialconflictsofinterest,unlesstheindependentdirectorhasfreefromtheaforementionedcharacteristicsfornolessthantwoyearspriortothedateofapplicationforSECpermission.

7. Independentdirectorsmustnotbedirectorsappointedtorepresentcompanydirectors,majorshareholders,orshareholdersassociatedwithmajorshareholdersofthecompany.

8. Independentdirectorsmustnothaveanyothercharacteristicspreventingindependentopinionsconcerningthecompany’soperations.


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13.3.3ElementsandAppointmentsoftheAuditCommittee Thecompany’sboardofdirectorswillappointtheAuditCommitteecomprisingofaminimumof

threeAuditDirectorsbyappointingindependentdirectorswithqualificationsmeetingthespecificationssetforthbylawsgoverningsecuritiesandsecuritiesexchanges,includingtheannouncements,regulationsand/orrulesoftheStockExchangeofThailand.Furthermore,independentdirectorsholdingthepositionofAuditDirectorsmustmeetthefollowingadditionalqualifications:1. Independentdirectorsmustnotbedirectorsassignedbytheboardofdirectorsinthebusiness

operationsofthecompany,parentcompany,subsidiaries,affiliatedcompanies,subsidiariesofthesamelevel,orjuristicpersonswithpotentialconflicts.

2. AnAuditdirectormustnotbeadirectoroftheparentcompany,subsidiaries,orregisteredsubsidiariesofthesamelevel.

3. AuditDirectorsmusthavesufficientknowledgeandexperiencetoperformdutiesasAuditDirectors.AminimumofoneAuditDirectormusthavesufficientknowledgeandexperiencetoperformdutiesincheckingthevalidityoffinancialbudgets.

EachAuditDirectorshallhaveathree-yearterminoffice.

4 Supervision of Subsidiaries’ and Affiliates’ Operations Atpresent,thecompanyhasneithersubsidiariesnoraffiliates.Thus,thereisnosupervisionovertheoperationsofsubsidiariesandaffiliates.However,ifinthefuturethecompanyhassubsidiariesoraffiliates,theboardofdirectorswillsetpolicyforthesupervisionofthesubsidiariesandaffiliates.

5 Securities Trading Policy and Using the Company’s Inside Information and Trade Secrets 1. Thecompanystrictlyforbidsitsdirectors,executives,employeesandstaff,includingthespousesand

under-agechildrenoftheaforementioned,fromtradingthecompany’ssharesduringaperiodofonemonthbeforethefinancialstatementsaredisclosedtothepublic.

2. Thecompanyforbidsitsdirectors,executives,employeesandemployees,includingspousesandunder-agechildrenoftheaforementioned,fromusingthecompany’sinternaldataavailableorinawaywhichmightaffectthecompany’ssecuritypricechangeswhichhavenotyetbeendisclosedtothepublicforthepurposeofpurchasing,selling,purchase/saleproposalsorpersuadingotherindividualstopurchase,sell,proposetopurchase/sellthecompany’ssecurities,whetherdirectlyorindirectly,beforethedataisdisclosedtothepublic,whethertheaforementionedactionsareforpersonalgainorthegainofothers,oraimedathavingtheotherpersonstaketheaforementionedactionswiththebenefitofpersonalgain/remuneration.Anypersonfoundinviolationwillbesubjecttopenaltiesaccordingtothedisciplinarymeasuressetforthbythecompany.

3. Thecompany’sdirectors,executives,staffandemployeesareforbiddenfromdisclosingcompanysecretsand/orinternaldatatootherindividualsforpersonalgainorforthegainofotherindividuals,whetherdirectlyorindirectly,withorwithoutremuneration.

4. Theinterestsandtradesecretsofthecompanyorthecompany’scustomersmustbemaintained.Disclosureofcompany’stradesecretstooutsideindividuals,especiallytothecompany’srivals,evenwhenadirector,manageroremployeetermofofficehasexpiredisstrictlyforbidden.

Thecompany’spolicyonsecuritiestrading,theuseofinsideinformationandtradesecretsisrecordedinthecodeofconductwhichthecompanyhasmadeintoamanualbookgiventoalldirectors,executivesandemployees,allofwhomarerequiredtosigntoassurecompletecompliance.Moreover,compliancewiththecodeofconductissupervised.Thefullversionofcodeofconductcanbeviewedatwww.qtc-energy.com.

6 Auditor Remuneration AuditFees

Thecompanywillpayauditfeestothefollowing:• Thecompany’sauditor.Forthepreviousaccountingcycle,anamountof750,000bahtwaspaidto

theauditor.• Thecompanypaidnoauditfeestotheauditor’soffice,personsorbusinessesassociatedwiththe

auditorandtheauditor’sauditofficeduringthepreviousaccountingcycle. Non-AuditFees Thecompanydoesnothaveothernon-auditfees.


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Internal Control and Risk Management

InBoardofDirectorsMeetingNo.1/2557on20February2014whereallthreeauditdirectorswereinattendance,theboardofdirectorsassessedtheadequacyofthecompany’sinternalcontrolsystemrisksbysubmittinginquiriestotheManagementDepartmentandwasabletodrawconclusionsbasedontheassessmentofthecompany’sinternalcontrolsystemintermsofthefollowingaspects:

1. InternalControl 2. RiskManagement 3. ControlActivities 4. InformationandCommunicationMeasures 5. Monitoring

Theboardofdirectorshasrenderedtheopinionthatthecompanyalreadyhasadequateinternalcontrolactivitiesconcerningbusinessconductedwithmajorshareholders,directors,executivesorpersonsrelatedtotheaforementioned(inPart3,Clause12oftheassessmentform).Asforinternalcontrolactivitiesunderothercategories,theboardofdirectorshasrenderedtheopinionthatthecompanyalsohasadequateandappropriatecontrols.

1 Internal Control-Related Performance ThecompanyhasaBoardofAudittoperformthedutyofcheckingtoensurethatthecompanyhasproperandeffectiveinternalcontrolsystemsandinternalaudits.TheBoardofAudithasalsocheckedthecompany’sperformancetoensurecompliancewiththelawsgoverningsecuritiesandstockexchanges,thespecificationssetforthbytheStockExchangeofThailandandlawsrelatedtothecompany’sbusinesses.TheBoardofAuditwillholdmeetingsatleastonceeveryquarterinordertoconsiderandtakestepstowardensuringthecompilationofaccuratefinancialreportswithcompleteandsufficientdisclosure,includingtheconsiderationofrelatedtransactionsortransactionswithpotentialconflictsofinteresttoensurecompliancewiththelawandthespecificationssetforthbytheSecuritiesandExchangeCommissionandtheStockExchangeofThailand.Auditorsarepresentatthemeetingsinordertoobservebasedonthecompany’saudits. Atpresent,thecompanyhasnointernalauditdepartment.However,thecompanyhashiredP&LInternalAuditCo.,Ltd.toperformthedutyofauditingthecompany’sinternalcontrolsystemssince2006untiltheendof2012.Andin2013,thecompanyhiredIVLAuditCo.,Ltd.toperformthetaskofconductinginternalauditsforthecompanyfromthenuntilthepresent.TheaforementionedinternalauditorshavecompiledreportsontheresultsofassessmentandinternalauditingandthesereportshavebeensubmittedfortheacknowledgementoftheBoardofAuditonaregularquarterlybasis.Thecompanyhasrevisedandadjustedthepracticeofvariousdepartmentsaccordingtotherecommendationsoftheinternalauditors.

2 Board of Audit Report TheBoardofAuditofQTCEnergyPublicCo.,Ltd.wasappointedbytheboardofdirectorsandiscomposedofMr.PadetpaiMeekun-iamastheChairmanoftheBoardofAudit,Mr.NattapolLilawattanananandMr.PolrachotPiyathanomasAuditDirectors.ThescopeforthekeydutiesandresponsibilitiesaccordingtotheBoardofAuditCharteristocareforthecompany’sfinancialreportsincompliancewithgenerallyacceptedaccountingstandardsandprinciplesforcheckingthecompany’soperationstoensurecompliancewithgoodgovernanceprincipleswithanefficientinternalcontrolsystemincompliancewithrelatedspecificationsandlaws,andsupervisionofcasesinvolvingpotentialconflictsofinterestbetweenthecompanyandassociatedindividuals.In2013,theBoardofAuditheldatotaloffivemeetingswiththefollowingkeytopics:


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1. TheBoardofAudithasexaminedthequarterlyfinancialstatementsandthefinancialstatementfor2012withthemanagementandaccountingauditorsinordertoassurethatthecompany’sfinancialreportshavebeenpreparedaccuratelyaccordingthegenerallyacceptedaccountingstandardsandwithsufficientlycompletedisclosureofinformationandtheremarksaccompanyingthefinancialstatementarecredibleaswellastheobservationsandacknowledgementoftheproblem-solvingguidelinesintheinterestsofthecompany.

2. Considerationofthedisclosureofinformationonconnectedandrelatedtransactionsaccurately,absolutelyandsufficiently.Moreover,thecompanyhasperformedaccordingtothebusinesstermsandcriteriasetforthbytheStockExchangeofThailand.

3. Supportandimportanceforcorporategovernance,inordertoensuregoodgovernanceconcurrentwiththeprinciplesoftheStockExchangeofThailandinordertoassuretransparencyandethicstobuildconfidenceamongshareholders,investors,customers,tradingpartnersandallrelatedparties.

4. SuperviseinternalauditworksotheworkisperformedindependentlybyarrangingtohireIVLAuditingCo,ltd.,toperformthecompany’sinternalauditswiththeBoardofAuditasthepartyconsideringtheannualauditplans,reportingoninternalaudits,continuallyfollowinguponinternalauditfindingswiththemanagementinordertoinstillconfidencethatoperationsassociatedwiththeannualinternalauditplansarecarriedoutefficientlyandeffectivelywherebythefindingsoftheannualinternalauditdiscovernoerrorsintermsofkeyinternalcontrols.

5. EvaluatetheinternalcontrolsystemaccordingtotheguidelinessetforthbytheCapitalMarketSupervisoryBoardandtheStockExchangeofThailandwhichcoverwork,finance,workingincompliancewiththelaw.TheBoardofAuditviewsthecompanyashavingsufficientandeffectiveinternalcontrol.

6. ConsiderselectionofappointmentsandnominateGrantThorntonCo.,Ltd.asthecompany’saccountingauditorstobeproposedtofortheapprovaloftheshareholders’generalmeeting.

Hence,theBoardofAudithasmeticulouslyperformeditsdutywithindependenceandexpressedthesameopinionwithnotlimitationsinreceivinginformationwithgoodcooperationfromthecompany.Ithasalsoreportedtheresultsinthemeetingtothecompany’sboardofdirectorseverytime.

3 Internal Audit & Governance SupervisorsIntheBoardofAuditMeetingHeldon19February2013,No.1/2556,IVLAuditCo.,Ltd.wasappointedasthecompany’sinternalauditorfor2013.IVLAuditCo.,Ltd.appointedMs.SuwaldeeSeeboonruangasmainpersonresponsibleforperformingthetaskofconductingthecompany’sinternalaudits.

TheBoardofAudithasconsideredthequalificationsofIVLAuditCo.,Ltd.andMs.SuwaldeeSeeboonruanganddeemedtheaforementionedtobesuitableandsufficientforperformingtheaforementionedtaskbecausetheaforementionedareindependentandhavesixteenyearsofexperienceinconductinginternalauditsinbusinessesorindustrieswiththesamecharacteristicsasthecompany.Furthermore,theyhavebeentrainedincoursesinvolvingtheperformanceofinternalauditssuchastheDirectorAccreditationProgrambytheThaiInstituteofDirectors(IOD)andtheBoardofAuditProgrambytheThaiInstituteofDirectors(IOD).ThecompanyhasalsoappointedtheAccountingandFinanceDepartmentthetaskofcoordinatingwiththeoutsourcedauditor.

Hence,theconsiderationandapprovaloftheappointment,removal,transferofthecompany’sinternalauditsupervisormustbegrantedoragreeduponbytheBoardofAudit.ThequalificationsoftheinternalauditsupervisorappearinAttachment2.


79

Related Transactions

1 Type of Relationship

QTCEnergyPublicCompanyLimited(“theCompany”)hasrelatedtransactionswithindividualsposingpotentialconflictsofinterestcomprisingshareholdersand/orcompanyexecutives.Relatedcompaniesmeancompanieswithindividualswhomighthaveconflictsofinterestwiththecompany,whohaverelationshipswiththeaforementionedcompanyexecutivesorshareholders.Thetypesofrelationshipscanbesummarizedasfollows:

PersonsWithPotentialConflictsofInterest TypeofRelationship

QTCServiceChiangmaiCo.,Ltd. Mrs.SisapimWongkhamisthesignatorydirectorauthorizedtosignonbehalfofthecompanyandholds99.94percentofthesharesinQTCChiangmai.SheisrelatedastheyoungersisterofMr.PoonphiphatTantanasin,whoholdsthepositionofChiefExecutiveOfficerandManagingDirectorofthecompany.Inaddition,theformerwifeandchildrenofMr.Mr.Poonphiphatjointlyholdsharesinthecompanyforatotalholdingof62.51percent.

SMIMetalWorkCo.,Ltd. Mr.ThitipatTechapiboonchaiisthesignatorydirectorauthorizedtosignonbehalfof thecompanyandholdsa100percentshareholdinginSMIMetalWorkCo.,Ltd.HeisrelatedastherelativeofMissBoonpaRuddistwhoholdsthepositionofManagingDirector.

Mr.PoonphiphatTantanasin HoldsthepositionofChiefExecutiveOfficerandManagingDirectorandtheformerwifeandchildrenofMr.Poonphiphatjointlyowna62.51percentshareholding.

QTCPANCOCo.,Ltd. Mr.PoonphiphatTantanasinisthesignatorydirectorauthorizedtosignonbehalfofthecompanyandholds85percentofthesharesintheregisteredcapitalofQTCPANCOCo.,Ltd.Mr.PoonphiphatTantanasinholdsthepositionofChiefExecutiveOfficerandManagingDirector.Inaddition,theformerwifeandchildrenofMr.Mr.Poonphiphatjointlyholdsharesinthecompanyforatotalholdingof62.51percent.


80

2 Related Transaction Details In2013and2012,thecompanycarriedouttransactionswithindividualswhomighthavepotentialconflicts

ofinterestwiththefollowingtransactiondetails:

1 GoodsandServiceSalesTransactions

PersonsWithPotentialConflictsofInterest

TransactionType

RelatedTransactionValue

(millionbaht)

NecessityandValidityofRelatedTransactions

2013 2012

QTCServiceChiangmaiCo.,Ltd.(QTCChiangmai)Conductsthebusinessofserviceprovisionrelatedtoelectricalsys-tems.

Goods&ServiceSalesTradeAccountsReceivable

8.890.62

5.280.23

Thecompanysellselectricitytransformersandrawmaterialswhicharecomponentsofelectricitytransformers,i.e.gassealedtransformers,lowvoltageterminallugs,gasketsetsandinsulators,etc.,includingtheprovisionofrepairservicesforelectricitytransformerstoQTCServiceChiangmai,whichisoneofthecompany’sdistributors.ThesalespricesforgoodstoQTCServiceChiangmaiisadiscountedrateequaltothediscountrateofferedtothecompany’sotherdistributors.Moreover,thetradingtermsaresimilartothetradingtermssetforthecompany’sotherdistributors.TheAuditCommitteehasconsideredtheissueandholdstheviewthattheaforementionedsaleofgoodsandservicestransactionisoneofthecompany’snormalandvalidtradingtypes.

SMIMetalWorkCo.,Ltd.Conductsthebusinessoftransform-ercasingandcovermanufacturing.

GoodsandServiceSalesTradeAccountsReceivable

0.60

-

0.17

0.02

Thecompanyhasrawmaterialswhicharecomponentsforelectricitytransformers,suchasRALpaintandprimer,etc.TheAuditCommitteehasconsideredtheissueholdstheviewthattheaforementionedsaleofgoodsandservicestransactionisoneofthecompany’snormalandvalidtradingtypes.

QTCPANCOCo.,LtdConductsthebusinessofmanufacturingandsellingelectricitytransformers.

GoodsandServiceSalesTradeAccountsReceivable

2.43

2.46

-

-

Thecompanysellselectricaltransformersandrawmaterialswhicharecomponentsofelectricitytransformers.TheAuditCommitteehasconsideredtheissueandrenderedtheviewthattheaforementionedsaleofgoodsandservicestransactionisoneofthecompany’snormalandvalidtradingtypes.


81

2 SalesandAdministrativeExpenseTransactions

PersonsWithPoten-tial

ConflictsofInterest

TransactionType

RelatedTransactionValue(millionbaht)

NecessityandValidityofRelatedTransactions

2013 2012

QTCServiceChiangmaiCo.,Ltd.(QTCChiangmai)Conductsthebusinessofserviceprovisionrelatedtoelectricalsystems.

GoodsandServicePurchasesTradeAccountsPayable

0.001-

0.004 Thisisanexpenseincurredbythecompany’shiringofQTCServiceChiangmaitoprovidethefollowingservicesforthecompany’scustomersinareaslocatedinareas/provincesneartheofficesofQTCServiceChiangmai:transformercargo,inspection,repairandcraneliftfees,etc.,becausethecompany’scargotrucksand/ormechanicshavefullqueuespreventingthemfromprovidingservicestocustomers.Furthermore,QTCServiceChiangmaiisabletoprovideservicesforcustomersrapidlyandreliably.TheservicefeesQTCServiceChiangmaicollectedfromthecompanycanbecomparedtoexpensesincurredinthecompany’sserviceprovisionand/orcanbecomparedtoservicefeesincurredinoutsourcingthewoktoathirdparty.TheAuditCommitteehasconsideredtheissueandholdstheviewthattheaforementionedsaleofgoodsandservicestransactionisoneofthecompany’snormalandvalidtradingtypes.Therelatedservicefeesareappropriate.

SMIMetalWorkCo.,Ltd.Conductsthebusinessoftransformercasingandcovermanufacturing.

GoodsAndServicePurchasesTradeAccountsPayable

0.50-

2.56-

Thecompanypurchasedtransformercasingandcovers.ThepurchasepriceobtainedfromSMIMetalWorkiscomparabletopurchasepricesincurredwithothercompanies.TheAuditCommitteehasconsideredtheissueandholdstheviewthattheaforementionedsaleofgoodsandservicestransactionisoneofthecompany’snormalandvalidtradingtypes.Therelatedservicefeesareappropriate.

MeasuresorProceduresforApprovingRelatedTransactions

ThecompanyhassetforthmeasuresforenteringintorelatedtransactionsbetweenthecompanyandpersonswithpotentialconflictsofinterestbyarrangingfortheAuditCommitteetoofferopinionsregardingthenecessityofentryintorelatedtransactions,thereasonsfortherelatedtransactionsandthesuitabilityoffeesforrelatedtransactionsbyconsideringvariousconditionsforconcurrencewithcharacteristicsofnormalmarkettrading,i.e.prices/feescomparabletothirdparties.IncaseswheretheAuditCommitteelacksexpertiseinconsideringpotentialrelatedtransactions,thecompanywillprovidepersonswithparticularknowledgeandexpertise,suchasauditors,propertyappraisers,lawoffices,etc.,whoareindependentfromthecompanyandpersonswithpotentialconflictsofinterest,toprovideopinionsregardingtheaforementionedrelatedtransactionstoaccompanythedecisionsoftheAuditCommitteeforpresentationtothemeetingoftheboardofdirectorsorthemeetingofshareholders,dependinguponthecase.


82

Furthermore,thecompanyhassetforthmeasurestopreventexecutivesorstakeholdersfromparticipatingintheapprovaloftransactionsinwhichexecutivesorstakeholdersmayobtaindirectorindirectgainsorlosses.Furthermore,thecompany’sboardofdirectorsmustensurethecompany’scompliancewithlawsonassetsandstockexchanges,regulations,announcements,orders,orspecificationsoftheCapitalMarketSupervisoryBoardandtheStockExchangeofThailand,includingcompliancewithspecificationsregardingthedisclosureofinformationonrelatedtransactionsandacquisitionsorsalesofsignificantassetsbelongingtothecompanyoritssubsidiaries,accountingstandardssetforthbytheFederationofAccountingProfessionsandtheAccountantsandLicensedAuditorsAssociationofThailand.Thecompany’sboardofdirectorsmustdiscloserelatedtransactionsinremarksaccompanyingbudgetswhichhavebeenauditedorreviewedbythecompany’sauditors.

FutureTrendsforRelatedTransactions

Thecompanymayhavecontinualrelatedtransactionsinthefuture,whichwillbeaccordingtocharacteristicsofnormalbusinesstransactionswithcleardesignationofpoliciesforenteringintorelatedtransactionsatnormalpricesandundertradeconditionsofbusinessessimilarlysetforthforpersonsand/orunrelatedcompanies,e.g.salesofproducts,provisionorreceiptofservices,etc.Therelatedtransactionsthatwilloccurwillbeconcurrentwiththecompany’sbusinessneedsandinthecompany’sinterests.TheAuditCommitteewillconsiderauditingpracticesaccordingtosetcriteriaandprovideopinionsregardingthevalidityoftransactionsoccurringeveryquarter.

TransactionsforproductssoldtoQTCServiceChiangmaiCo.,Ltd.andQTCPANCOCo.,Ltd.(Laos),whichisapersonwithpotentialconflictofinterest,willcontinueinthefuture.Thecompanyhassetpoliciesforsettingpricesanddiscountsforthesaleoftransformersandrawmaterialsorequipmentwhicharecomponentsoftransformersprovidedforeachtypeofcustomer,includingsalesrepresentativeseffectiveasof15May2011andwiththeobjectiveofincreasingclarityandenablingcomparisonsofpricesanddiscountsinthesaleofproductstoQTCServiceChiangmaiCo.,Ltd.,whichmustbeconcurrentwithpricesanddiscountsprovidedforothersalesrepresentatives,inordertoaidtheAuditCommitteeinitsconsiderationofopinionsregardingthejusticeandvalidityofthesalesofproductstobothcompanies.HencetheAuditCommitteewillbeabletoproceedsystematically,especiallyduringperiodswhenthecompanyhasnosalesofproductstoothersalesrepresentatives.

Forpotentialrelatedtransactionsnotconcurringwiththecompany’snormalbusinessoperationsinthefuture,thecompanywillarrangefortheAuditCommitteetocheckwhetherornotpracticeiscompliantwithcriteriaandassurethatthereasonsfortheaforementionedtransactionsaredisclosedbeforethecompanyproceedswiththetransactionsbyactingincompliancewiththemeasuresandproceduresforapprovalassetforthabove.Nevertheless,withregardtorelatedtransactionswithpotentialconflictsofinterestregardingpotentialfuturebenefits,theAuditCommitteewillhavetopracticeaccordingtothelawsgoverningsecuritiesandsecuritiesexchange,aswellastherule,announcements,ordersorspecificationsoftheCapitalMarketSupervisoryBoardandtheStockExchangeofThailand,andfurtherincludingpracticeaccordingtospecificationsregardingdisclosureofrelatedtransactionsandtheacquirementorsalesofassetsbelongingtothecompanyoritssubsidiariesaswellaspracticeincompliancewiththeaccountingprinciplessetforthbytheFederationofAccountingProfessionsandtheAccountantsandLicensedAuditorsAssociationofThailand.


83

Board of Audit Report

QTCEnergyPCL’sBoardofAuditiscomposedofMr.PadetpaiMeekun-iamastheChairmanoftheBoardwithMr.NattapolLilawattanananandMr.PolrachotPiyathanomasdirectors.Theboardofaudit’sscope,dutiesandresponsibilitiesarespecifiedintheBoardofAuditCharter.Keydutieswithinthatscooparetoensurethatthecompany’sfinancialreportsarecompliantwithstandardsandgenerallyacceptedaccountingprinciples,toauditthecompany’sbusinessoperationsinlinewithgoodcorporategovernanceprinciplesandtoensurethatthecompanyhasefficientinternalcontrolsystemscompliantwithrelatedregulationsandlegalstipulationsinadditiontoreviewingcaseswithpotentialconflictsofinterestbetweenthecompanyandrelatedparties.In2013,theboardofauditheldatotaloffivemeetingscoveringthefollowingrelevantagendas:

1 TheBoardofAudithasreviewedthequarterlyfinancialstatementsandannualfinancialstatementsfor2013inconjunctionwiththeadministrationandtheauditorstoensurethatthecompany’sfinancialreportshavebeenproperlypreparedinlinewithstandardandgenerallyacceptedaccountingprincipleswithsufficient,accurateandcredibledisclosureintheremarksaccompanyingthefinancialstatementsTheBoardofAuditalsopointsoutissuesofinterestandacknowledgesproblem-solvingguidelinesintheinterestsofthecompany.

2. TheBoardofAudithasconsideredthecompany’sdisclosureofinformationonrelatedpartytransactionsandconnectedtransactions.TheBoardofAuditdeemsthecompany’sdisclosureofinformationonrelatedpartytransactionsandconnectedtransactionstohavebeencarriedoutaccurately,completelyandsufficientlyandinlinewiththebusinessrequirementsandcriteriasetbytheStockExchangeofThailand.

3. TheBoardofAuditsupportsandgivesimportancetocorporategoodgovernanceinlinewiththeprinciplessetbytheStockExchangeofThailandtoensuretransparencyandmoralethicsresultinginassurancetotheshareholders,investors,customers,tradepartnersandallrelatedparties.

4. TheBoardofAudithasreviewedtheinternalauditworktoensureithasbeenconductedindependently.Anout-sourcedcompany,IVLAuditCo.,Ltd.,washiredastheauditor.TheBoardofAuditwillbethepartyconsideringannualinternalauditplans,internalauditreportsandconsistentfollow-uponinternalauditresultswiththeadministrationinadditiontoofferingadvicetotheinternalauditorinordertoensurethattheannualinternalauditoperationiscarriedoutefficientlyandeffectively.Forthe2013internalauditresults,nosignificantinternalcontrolflawswerediscovered.

5.TheBoardofAuditevaluatedtheinternalcontrolsysteminlinewiththeguidelinessetbytheOSEC,whichcoverthecontrolofoperations,financeandlegalcompliance.TheBoardofAudithasdeemedthecompany’sinternalcontroltobeadequateandeffective.

6. TheBoardofAuditconsideredthenominationandremunerationplansfor2014madebytheauditorandproposedthattheboardofdirectorsappointMr.SomkidTiatrakul,AuditorLicenseNo.2785,orMrs.SumaleeChokdeeanan,AuditorLicense3322,orMr.TheerasakChuasisakul,AuditorLicenseNo.6624orMissSansaneePoonsawat,AuditorLicenseNo.6977,fromGrantThorntonCo.,Ltdasthecompany’sauditorwithremunerationsetat860,000bahtforsubsequentproposaltothestockholder’sgeneralmeeting.

TheBoardofAuditperformeditsdutywithprudenceandindependence,renderingopinionscandidlywithoutlimitationsonthedatareceived.TheBoardofAudithashadthecompany’scooperationandsubmittedminutestomeetingstotheboardofdirectorsoneveryoccasion. OnbehalfoftheBoardofAudit, (Mr.PadetpaiMeekun-iam) Chairman,BoardofAudit 18February2014


84

DearShareholders,

TheboardofdirectorsisresponsibleforthefinancialstatementsofQTCEnergyPCL,includingthefinancialinformationappearinginthecompany’sannualreportandfinancialstatements.Theboardofdirectorsholdstheviewthatthecompany’sfinancialstatementsfortheyearending31December2013havebeencompiledincompliancewithgenerallyacceptedaccountingprinciplesbyusingproperaccountingpolicyinlinewiththeprinciplesofcautionandconsistentpractice.Moreover,thecompanyhascarefullyexerciseddiscretionwithreasonableestimationsinthecompilation.Moreover,sufficientinformationhasbeendisclosedintheremarksaccompanyingthecompany’sfinancialstatements.Hence,theaforementionedfinancialstatementshavepassedtheauditandunconditionalopinionshavebeenrenderedbytheindependentlicensedauditor.

Theboardofdirectorssupportsthecompanyingoodcorporategovernancewithstructuraldevelopmentfortheboardofdirectorsinordertopromotecontinuedgoodcorporategovernanceandefficientworkperformancewithtransparencyandreliability.Theboardofdirectorshasappointedaboardofauditcomposedofthreeindependentdirectorsasthepartiesresponsibleforcheckingthefinancialreportingsystem,theinternalcontrolsystemsandinternalaudits.Theboardofaudithasrenderedopinionsconcerningtheaforementionedmattersasappearingintheboardofaudit’sreportasalreadyshownintheannualreport.

Theboardofdirectorshasrenderedtheopinionthatthecompany’sinternalcontrolsystemsaresufficientandappropriate.Moreover,theaforementionedhavetheabilitytobuildreasonableconfidenceinthereliabilityofthecompany’sfinancialstatementsfortheyearending31December2013.

(Prof.Dr.SomchobChaiyavej) ChairmanoftheBoard

Board of Directors’ Reports&Responsibility for Financial Reports


85

Report of Independent Auditor


86


87

Performance and Financial Status1 Financial Statement 1.1 Summary of Auditing Reports

(a) FinancialStatement2011wasauditedbyMr.SomkitTiatrakul,Auditor’sLicenseNo.2785,ofGrantThorntonCo.,Ltd.

Theauditorauditedthecompany’sfinancialstatementsandrenderedtheopinionthatthefinancialstatementdisplayedthecompany’sfinancialstatusasof31December2011andthecompany’sperformancefortheyearendingonthesamedatetobeaccurateintermsofrelevantcontentsincompliancewithgenerallyacceptedaccountingprinciples.

(b) FinancialStatement202wasauditedbyMr.SomkitTiatrakul,Auditor’sLicenseNo.2785,ofGrantThorntonCo.,Ltd.

Theauditorexaminedthecompany’sfinancialstatementandrenderedtheopinionthatthefinancialstatementdisplayedfinancialstatusasof31December2012andthecompany’sperformancefortheyearendingonthesamedatetobeaccurateintermsofsignificantcontentsincompliancewithThaistandardsforfinancialreports.

(c) FinancialStatement2013wasauditedbyMr.SomkitTiatrakul,Auditor’sLicenseNo.2785,ofGrantThorntonCo.,Ltd.

Theauditorauditedthecompany’sfinancialstatementandrenderedtheopinionthatthefinancialstatementaccuratelydisplayedfinancialstatuson31December2013andthecompany’sperformancefortheyearendingonthesamedayintermsofsignificantcontentsincompliancewithThaistandardsforfinancialreports.

1.2 Table Summarizing Financial Status and Performance

Balance Sheet

2011 2012 2013

THBMillion % THBMillion % THBMillion %

AssetsCurrent AssetsCashandCashEquivalentTransactionsTemporaryInvestmentsTradeDebtors-OrdinaryDebtors-Net-RelatedCompaniesInventory–NetValueAddedTaxPendingRefundOtherCurrentAssets

46.8952.10

115.271.90

147.82-

3.46

8.229.13

20.210.3325.91

-0.61

43.5435.29

258.010.25

176.243.427.94

5.524.47

32.700.0322.340.431.01

117.3610.84

126.073.09

151.350.387.77

15.951.47

17.130.4220.570.051.06

Total Current Assets 367.44 64.41 524.69 66.50 416.86 56.65


88

2011 2012 2013


Non-Current AssetsLimitedBankDepositsOtherInvestmentsLand,Buildings&Equipment-NetComputerProgramsDepositsDeferredAssetsTax

0.540.05

197.514.730.17

-

0.090.0134.620.830.05

-

-0.05

259.372.86

-1.99

-0.0132.880.36

-0.25

0.580.05

314.171.64ป-

2.55

0.080.0142.700.22

-0.34

Total Non-Current Assets 203.00 35.59 262.28 33.50 318.99 43.35

Total Assets 570.44 100.00 786.97 100.00 735.85 100.00

Liabilities&ShareholderEquityCurrentLiabilitiesOverdraftWithdrawals&Short-TermLoansfromFinancialInstitutions.TradeCreditorsLong-TermLoanswithPaymentDuewithin1Year.Rent-to-BuyContractsCreditorsDuewithin1Year.OutstandingIncomeTaxOutstandingExpensesProductDepositReceivablesOtherCurrentLiabilities

64.46

60.969.90

1.74

19.5318.135.646.50

11.30

10.691.74

0.31

3.423.180.991.14

137.24

77.4414.07

3.08

30.5616.433.428.87

17.44

9.841.79

0.39

3.882.090.431.13

74.05

75.9922.93

3.08

11.1016.847.6510.11

10.06

10.333.12

0.42

1.512.291.041.37

Total Current Liabilities 186.86 32.76 291.11 36.99 221.75 30.14

Non-CurrentLiabilitiesLong-TermLoans-NetRent-to-BuyContractCreditorsLiabilitiesforEmployeeBenefitObligations

0.261.341.95

0.050.240.34

26.706.112.13

3.390.780.27

31.085.162.43

4.220.700.34

Total Non-Current Liabilities 3.55 0.62 34.94 4.44 38.67 5.26

Total Liabilities 190.41 33.38 326.05 41.43 260.42 35.40

2011 2012 2013


ShareholderEquityCapitalStockAuthorizedShareCapitalIssuedandPaidupShareCapitalPremiumonCommonStocksAccumulatedProfitAllocated–ReservedinCompliancewiththeLawNotAllocated

200.00200.0045.94

20.00114.09

35.0635.068.05

3.5120.00

200.00200.0045.94

20.00196.98

25.4125.415.84

2.5424.78

200.00200.0045.94

20.00209.48

27.1827.186.24

2.7128.47

Total Shareholder Equity 380.03 66.62 462.92 58.57 475.42 64.60

Total Liabilities and Shareholder Equity 570.44 100.00 788.97 100.00 735.84 100.00


89

Profit-Loss Statement

2011 2012 2013


RevenueRevenuefromSalesRevenuefromServicesOtherRevenue

700.8613.603.33

97.641.900.46

940.3519.1510.20

96.971.981.05

783.8820.077.73

96.572.470.96

Total Revenue 717.79 100.00 969.70 100.00 811.69 100.00

Capital&ExpensesSalesCapitalServiceCapitalSales&ServiceExpenses

500.176.0087.06

69.680.8412.13

687.407.86

111.28

70.890.8111.48

582.699.73

118.79

71.791.2014.63

Total Expenses 593.23 82.65 806.54 83.17 711.21 87.62

Profit(Loss)beforeDeductionofInterestandIncomeTaxInterestPayableJuristicPersonIncomeTax

124.567.2133.29

17.351.004.64

163.167.7337.04

16.830.803.77

100.486.9419.03

12.380.862.34

Profit (Loss) - Net 84.06 11.71 118.40 12.26 74.51 15.58

Net Profit (Loss) Per Share (Fully Diluted) (THB) 0.41 0.59 0.37

NetProfit(Loss)PerShare(WeightedAverage)(THB)

0.49 0.59 0.37

Par Value (THB) 1.00 1.00 1.00 1.00


90

Cash Flow Statement

(Unit:THBMillion) 2011 2012 2013

CashFlowfromOperationalActivitiesNetProfitbeforeIncomeTaxesAdjustmenttoReconcileNetProfittoCashFlowfromOperatingActivitiesPriceDepreciationandAmortizationCostsAllowanceforDoubtfulDebtsAllowance(ReverseAllowanceEntry)Out-DatedProductsLossesfromAssetSalesUnrealizedLoss(Profit)fromExchangeRatesAllowanceforEmployeeBenefitObligationsInterestPayable

117.36

24.282.211.53

(0.60)0.340.207.21

155.44

27.432.650.51

(2.33)(1.59)0.067.73

93.53

35.951.350.40

(1.00)(1.75)0.216.94

ProfitfromOperationsbeforeChangesinAssetsandOperatingLiabilitiesOperatingAssetTurnoverDecrease(Increase)TradePartnersInventoryPendingValueAddedTaxRefundOtherCurrentAssetsOperatingLiabilitiesIncrease(Decrease)TradeCreditorsProductDepositsReceivableOtherCurrentLiabilities

152.53

(63.58)(63.47)

-2.08

-33.703.68

(3.31)

189.90

(143.74)(28.94)(3.42)(4.31)

16.48(2.22)0.68

135.62

128.1124.503.040.17

-(1.47)4.231.61

CashfromOperatingActivitiesTaxesPayableInterestPayable

61.63(24.14)(7.12)

24.43(25.52)(7.64)

295.81(39.03)(6.85)

NetCash(Spent)fromOperatingActivities 30.37 (8.73) 249.93

CashFlowfromInvestmentActivitiesBankDepositswithLimitations–Decrease(Increase)TemporaryInvestmentIncreaseCashfromEquipmentSalesFundsPaidtoPurchaseOtherFixedAssets

(0.54)(52.10)0.66

(61.42)

0.5416.842.34

(78.39)

(0.58)24.451.19

(82.30)

NetCashFlow(Spent)fromInvestmentActivities (113.40) (58.67) (57.24)

CashFlowfromFinancingActivitiesBankoverdraftsandShort-TermLoansfromFinancialInstitutions–Increase(Decrease)Long-TermBankLoanPaymentsDebtPaymentsunderRent-to-BuyContractsCashReceivedfromCapitalIncreaseCashDividendPayments

5.664.30

(2.22)95.94

(21.00)

74.3730.61(2.94)

-(37.99)

(66.72)13.25(3.45)

-(61.95)

NetCash(Spent)fromFinancingActivities 82.68 64.05 (118.87)

Cash&CashEquivalentTransactions–Increase(Decrease)-Net (0.35) (3.35) 73.82

Cash&CashEquivalentTransactionsasof1January 47.23 46.89 43.54

Cash&CashEquivalentTransactionsasof31December 46.89 43.54 117.36


91

1.3 Table Summarizing Relevant Financial Ratios

Description 2011 2012 2013

LiquidityRatioLiquidityRatio (times)QuickLiquidityRatio (times)CashFlowLiquidityRatio (times)TradeDebtorCurrentRatio (times)AverageCollectionPeriod (days)InventoryTurnoverRatio (times)AverageSalePeriod (days)CurrentCreditorRatio (times)DebtPaymentPeriod (days)CashCycle (days)

1.971.160.197.5648.2612.1130.1311.4931.3447.05

1.801.19

(0.04)4.9973.0912.5729.049.5038.43

63.70

1.881.180.974.0590.129.6437.887.3549.6878.32

ProfitabilityRatiosGrossProfitMargin (%)OperatingProfitMargin (%)OtherProfitMargins (%)Cash-ProfitRatio (%)NetProfitMargin (%)ReturnonEquityRatio (%)

29.1516.970.4625.0511.7127.89

27.5415.941.06

(5.69)12.3428.01

26.3111.542.37

269.489.2715.88

EfficiencyRatiosReturnonAssetRatio (%)ReturnorFixedAssetRatio (%)AssetTurnoverRatio (times)

18.1259.171.55

17.3962.791.41

9.7738.221.05

FinancialPolicyRatios(LeverageRatios)DebttoShareholderEquityRatio (times)InterestCoverageRatio (times)DebtServiceCoverage (times)DividendPayoutRatio (%)

0.508.660.3445.20

0.712.71

(0.06)52.37

0.5538.291.4656.37

2. Explanation and Analysis of Financial Status and Performance Overall Past Performance

Thecompanyoperatesinthebusinessofmanufacturinganddistributingtransformers,whichisinvolvedwithandrelatedtoelectricitygenerationandrequirements,becausetransformersaredevicesusedtoadjustelectricityvoltagefromthesourcetolevelsmeetingtheneedsofusers,suchasindustrialfactories,residentialhomesandtallbuildings,etc.Therefore,thecompany’sgrowthtrendsaremovinginthesamedirectionaselectricitydemand.Furthermore,accordingtoprojectionsforelectricitydemandbytheElectricityGeneratingAuthorityofThailand(EGAT),thenation’smaximumrequirementforelectricityinthenexttwentyyearsduring2010-2030isexpectedtoincreaseatanaveragerateof3.91%peryear.ThisincreaseinthedemandforelectricityhasresultedinEGAT,whichhasdutiesandresponsibilitiesinvolvingelectricitygenerationandtransmissionsystemsofThailand,includingtheMetropolitanElectricityAuthority(MEA)andtheProvincialElectricityAuthority(PEA)whichareresponsiblefordistributingelectricitytousers,hashadtomakemodificationsandexpandelectricitydistributionsystemsinlinewithThailand’splansfordevelopingelectricityproductioncapacity,therebyresultinginanincreaseddemandfortransformers.

Followingtheeconomiccrisisof1997,thedomesticeconomyhasgraduallyexpanded.Theindustrialsectorshaveexpandedproductioncapacitytosupportincreasingdomesticandinternationalcustomerdemands,whichhascausedthedomesticdemandforelectricitytograduallyescalate.Forthisreason,revenuefromthecompany’ssalesandserviceshavegrowncontinuallyfrom512.20millionbahtin2010to700.86millionbahtin2011and940.35million


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bahtin2012inlinewiththeexpansionoftheeconomyandmanufacturingindustrialsectors.Inthepast,thepricesofkeyrawmaterialswhetherintheformofsiliconwireandcopperfoilsusedtoinsulatelowvoltagewireshavehadhighdegreesoffluctuation.However,theexperienceofthemanagementteammemberswhohavebeeninthetransformerindustryformorethanthirty-fiveyearsandtheuseofmodernandefficientmachineryandproductiontechnologieshaveenabledthecompanytoprofitthroughoutthisperiodoftime.Furthermore,thecompanyhasrealizedtheimportanceofimplementingtheEnterpriseResourcesPlanningorERPsysteminmanagingallofthecompany’ssections,whetherinproduction,procurement,sales,accountingorfinanceandincludingwarehousemanagementinacoordinatedsystemcapableoflinkingdataquicklywithreal-timesystemstoenhancethecompany’soverallperformancewithgreaterefficiency.

Thefactthatthecompanyplacesimportanceonthequalityoftransformersproducedbythecompanyisevidentinthefactthatthecompany’stransformerproductshavebeencertifiedformeetingthestandardsofvariousaccreditationinstitutes,suchasTISI384-2543fromtheThaiIndustrialStandardsInstitute,MinistryofIndustry,ISO9001:2000fordesigns,productionandmaintenanceofdistributiontransformers,includingthefactthatthecompanyhasbeencertifiedfortestinglaboratorycapacityincompliancewithTISI17025-2548(ISO/IEC17025:2005)standards.Moreover,thecompanyisabletomanufacturetransformerswithqualitymeetinginternationalstandards,whichisproofofinternationalqualityandcustomeracceptance.

(1) Revenue

Thecompanyhadthetotalrevenueof717.79millionbahtin2011,969.70millionbahtin2012and811.69millionbahtin2012.Thedetailsonrevenuefromsalesandservices,includingotherrevenuecanbesummarizedasfollows:

RevenuefromSales

CustomerType 2011 2012 2013

THBMillion

Ratio(%)

GrowthRate(%)

THBMillion

Ratio(%)

GrowthRate(%)

THBMillion

Ratio(%)

GrowthRate(%)

GovernmentAgenciesandEnterprises 327.48 46.73 41.42 330.59 35.16 0.95 270.46 34.50 (18.19)

SalesRepresentatives 118.00 16.84 20.08 207.94 22.11 75.07 169.38 21.61 (19.63)

PrivateSector 255.38 36.44 40.03 401.82 42.73 57.82 344.04 43.89 (13.78)

TotalRevenuefromSales 700.86 100.00 36.83 940.35 100.00 34.17 783.88 100.00 (16.64)

In2011,thecompanyearnedrevenuefromsalesat700.86millionbaht,whichwasanincreaseof36.83%from2010.Revenuefromthesaleoftransformerstogovernmentagencyandgovernmententerprisecustomersincreasedfrom231.56millionbahtand182.37millionbaht,respectively,in2010to327.48millionbahtand255.38millionbaht,respectively,in2011forgrowthratiosof41.42%and40.03,respectively,asaresultofinvestmentstoexpandtheelectricitydistributionsystemsoftheelectricityauthoritiesinlinewithdomesticeconomicrecovery.Revenuefromthesaleoftransformerstosalesrepresentativecustomerswas18.01millionbaht,anincreaseof20.08%from2010.

In2012,thecompanyearnedrevenuefromsalesat940.35millionbaht,anincreaseof34.17%from2011.Revenuefromthesaleoftransformerstodomesticprivatesectorcustomersandsalesrepresentativesincreasedfrom255.38millionbahtand118.00millionbaht,respectively,in2011to401.82millionbahtand207.94millionbaht,respectively,in2012,forgrowthratiosof57.35%and76.22duetodomesticeconomicexpansionandeconomicexpansionintheAsianregionwithinvestmentsandexpansionsintheenergybusinessgroup.Revenuefromthesalesoftransformerstogovernmentagencyandgovernmententerprisecustomerswasat330.59millionbaht,whichwascloseto2011.


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In2013,thecompanyearnedrevenuefromsaleat738.88millionbaht,adecreaseof16.64%from2012.Revenuefromsaleoftransformerstodomesticprivatesectorcustomersandcustomersabroaddecreasedfrom356.06and225.24millionbahtin2012to319.77and159.96millionbahtrespectivelyin2013,fordipratiosof10.19and28.98%respectivelyduetodomesticpoliticalinstabilityduringtheyearandfiercercompetition.

RevenuefromServices

Revenuefromthecompany’sservicesduring2011-2013amountedto13.60,19.16,and20.07millionbaht,respectively.Revenuefromservicescanbedividedinto(1)revenuefromtransformerrepairs,(2)revenuefromprovidingtransformerinspectionandmaintenanceservicesand(3)revenuefromtransformerrentals.Whenrevenuefromservicesin2013wasconsidered,therevenuewasfoundtocompriserevenuefromtransformerrepairsat15.21millionbaht,whichwasaratioof75.78%ofrevenuefromservices,revenuefromprovidingtransformerinspectionsandmaintenanceservicesat3.15millionbahtforaratioof15.71%ofrevenuefromservicesandrevenuefromtransformerrentalsat0.81millionbahtforaratioof4.08%ofrevenuefromservices.

OtherRevenue

Otherrevenueofthecompanycomprisedrevenuefromsellingscraps,profitsfromexchangeratesandinterestreceivables,etc.In2011-2013,thecompanyearnedotherrevenueat3.33,10.20and7.73millionbaht,respectively.In2011,thecompanyearnedotherrevenueamountingto3.33millionbaht.Otherrevenueintheformofmaintransactionscomprisedrevenuefromsellingscrapmaterialsat1.35millionbaht,revenuefromthesalesoffixedassetsamountingto0.60millionbahtanddoubtfuldebtreturnsamountingto0.73millionbaht.In2012,thecompanyearnedotherrevenueamountingto10.20millionbaht.Otherrevenueintheformofmaintransactionscomprisedrevenuefromsellingscrapmaterialsamountingto2.95millionbaht,revenuefromsalesoffixedassetsat2.33millionbaht,profitsfromexchangeratesat2.36millionbahtanddoubtfuldebtreturnsamountingto1.11millionbaht.In2013,thecompanyearnedotherrevenueamountingto7.73millionbaht.Otherrevenueintheformofmaintransactionscomprisedrevenuefromsellingscrapmaterialsamountingto2.45millionbaht,doubtfuldebtreturnsamountingto1.00millionbaht,andotherrevenueamountingto2.92millionbaht.

(2) Costs and Expenses Thecompany’srelevantexpensesconsistedofthecostsofsalesandservices,salesexpenses,

administrativeexpensesandinterestpayables.In2011-2013,thecompanyincurredtotalexpensesamountingto600.43,814.26and718.15millionbaht,respectively,asshowninthefollowingdetails:

SalesandServicesCostsandGrossProfit

Salesandservicecostsareconsideredasakeycompanyexpense.Thecompanyincurredsalesandservicecostsamountingto506.17millionbahtin2011,695.26millionbahtin2012and814.26millionbahtin2013,forratiosof84.30%,85.39%and82.49%,oftotalexpenses,respectively.

Whencostsofsalesandserviceswerecomparedtorevenuefromsalesandservices,thecompanyearnedtheaforementionedratiosat70.85%,72.46%and73.69%ofrevenuefromsalesandservices,respectively,oratgrossprofitmarginsof29.15%,27.54%and26.31%respectively.Thefactorswithimpactonthecompany’sgrossprofitmarginsareasfollows:

1. TheproductsalesratiogoestoacustomermixeachyearfromtheCompany’spreviouscustomermixwhichcouldbedividedintothefollowingthreemaintypes:(1)GovernmentandGovernmentEnterpriseCustomers;(2)SalesRepresentativeCustomersand(3)PrivateSectorCustomers.Transformersaresoldtoallthreetypesofcustomersatdifferentgrossprofitrateswherebygovernmentandgovernmententerprisecustomershadthehighestgrossprofitratebecausethesalesinvolvelargepurchaseorderseachtimewhichmakesthecostperunitlowerthanmanufacturingtransformersforothertypesofcustomers.Thesearefollowedbyinternationalsalesrepresentatives.In2011,whichwasayearwhenthecompanyhadahighgrossprofitasevidentinthetransformer


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salesratetogovernmentandgovernmententerprisecustomersthatamountedto46.73percentoftherevenuefromtotalsales.In2012and2013,thecompanyearnedrevenuefromtransformersalestothiscustomergroupatonly35.16and34.50%respectively.Furthermore,ifconsideredintermsofrevenuefromtransformersalestosalesrepresentativecustomers,theratiowas16.84percentin2011,22.12percentin2012and21.61percentin2013.

2. Rawmaterialscosts,particularlymainrawmaterialscomprisingsiliconsteel(electricalsteel),roundenameledwireandcopperfoilwhicharerawmaterialswithfewmanufacturersandwherepricesareadjustedbysupplyanddemandintheglobalmarket,sothereisahighdegreeoffluctuation.Aftertheglobaleconomiccrisis,thepriceofsiliconsteelhascontinuallydeclinedfrom2010to2012byapproximately43%whilethepricesofroundenameledwireandcopperfoilhavecontinuallyescalateduntil2012whenthepriceofbothoftheserawmaterialsescalatehigherthanpricesin2011byapproximately10-13%,anddecreasedin2013by7-9%.

SalesandManagementExpenses

Thecompany’ssalesandmanagementexpensesamountto87.06millionbahtin2011,111.28millionbahtin2012and118.79millionbahtin2013,forratiosof12.13percent,11.48percentand14.78percentofthetotalprofit,respectively.

In2011,thecompanyincurredexpensesinsalesandservicesamountingto87.06millionbaht,anincreaseof13.50percentfrom2010.Themainexpensesincurredinsalesandservicescompriseexpensesassociatedwithexecutivesandemployeesataratioof29.65percent;depreciationataratioof10.35percentandtravelingexpensesatarateof7.09percentoftheexpensesincurredinsalesandservices.Ifthesalesandservicesexpenseratioisconsideredpertotalrevenue,theratioamountsto12.13percent,whichisdownfrom14.64percentin2010.Thereasonstemmedfromtheincreasedtotalrevenuewhichwashigherthantheincreaseratioforexpensesincurredinsalesandservices.

In2012,thecompanyincurredexpensesinsalesandmanagementamountingto111.28millionbaht,whichwasanincreaseof27.81percentfrom2011becausethecompanyincurredincreasedexpensesassociatedwithexecutivesandemployeesfrom25.81millionbahtin2011to29.39millionbahtduetothecompany’srevenuerestructuring,whichincreasedthenumberofexecutives,andraisesinmonthlysalaries.Inaddition,thecompanyhascontinuallyinvestedinfixedassets,whetherintermsofanewofficebuildingorinvestmentsinfactorymachineryandequipmenttoimproveproductionefficiency.Theresulthasbeenincreaseddevaluationfrom9.01millionbahtin201to12.38millionbahtin2012.Consequently,relevantexpensesincurredinsalesandadministrationin2012compriseexpensesassoci-atedwithexecutivesandemployeesamountingto26.41percentwithdevaluationamountingtoarateof11.13percentandtravelingexpensesamountingto6.81percentoftheexpensesincurredinsalesandmanagement.

In2013,thecompanyincurredexpensesinsalesandmanagementamountingto118.79millionbaht,whichwasanincreaseof6.75percentfrom2012becausethecompanyincurredincreasedexpensesassociatedwithexecutivesandemployeesandraisesinmonthlysalaries.Inaddition,thecompanyhascontinuallyinvestedinfixedassets,whetherintermsofanewofficebuildingorinvestmentsinfactorymachineryandequipmenttoimproveproductionefficiency.Theresulthasbeenincreaseddevaluationfrom12.38millionbahtin2012to15.84millionbahtin2013.Relevantexpensesincurredinsalesandadministrationin2013compriseexpensesassociatedwithexecutivesandemployeesamountingto25.32percentwithdevaluationamountingtoarateof13.33percentandtravelingexpensesamountingto6.74percentoftheexpensesincurredinsalesandmanagement.


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InterestPayableObligations

During2011-2013,thecompanyhadinterestpayableobligationsof7.20,7.72and6.94millionbaht,respectively.Mostofthecompany’sinterestpayableobligationsoccurredasaresultofusingP/NandLC/TRfunds,whichwerecurrentloanlimitsinvolvingbothdomesticandinternationalpurchasesofrawmaterials.Moreover,thecompanyhadlong-termloanswithacommercialbanktobeusedforinvestmentintheconstructionofanewofficebuildingandinvestmentsinadditionalmachinerytoincreaseproductionefficiency,therebyresultinginthecompany’sinterestpayablesfromtheaforementionedlong-termloans.

(3) Net Profit Accordingtotheabovementionedperformanceduring2011-2013,thecompanyearnednetprofitsof84.06,

118.88and74.51millionbaht,respectively,fornetprofitratiosof11.71,12.26and9.27percent,respectively.

Ifthenetprofitratioisconsideredforthepastyear,itisevidentthatthecompany’snetprofitratiohasincreased.Ifthecompany’srevenuehasincreased,includingtheincomeratiofromproductsales,namely,thegroupofcustomerswithhighgrossprofitmarginsatincreasingratiosbecausethecompany’sexpensesincurredinsalesandservicesamounttoapproximately37-40percent,whichareexpensesthatdonotfluctuatewithincome,suchasexpensesassociatedwithexecutivesandemployees,devaluation,etc.In2012,thecompany’srevenuefromsalesincreasedatarateof34.17percentfrom2011,butthenetprofitratioincreasedonlyslightlyasaresultofthehigherratiosinsalestocustomersintheprivatesectorgroupandthesalesrepresentativegroup.In2013,thecompany’snetprofitdecreasedduetorevenuefromsaleswhichdecreasedatarateof16.64%from2012,andthecompanyalsoincurredtheafore-mentionedexpensesthatdonotfluctuatewithincome.

ReturnonEquity

Whenthereturnonequityisconsidered,itbecomesevidentthatthereturnonequityadjustedinthesamedirectionastheincreasednetprofitratiowherebythecompanyhadareturnonequityequalto27.89percentin2011,25.79percentin2012and15.88percentin2013.For2013,thereturnonequityratioreducedincomparisonwith2012becausethecompanyhadlowernetprofitin2013comparedto2012,andhighershareholderequityaccordingtothecompany’sperformanceat15.88percent.Furthermore,in2011-2013,thecompanyhadcontinualdividendpaymentstoshareholdersatdividendpayoutratiosof45.20,52.15and56.37percent,respectively.

Financial Status (a) Assets

Intheyearsending2011-2013,thecompanyhadtotalassetsamountingto570.44,786.97and735.84millionbaht,respectively.Thecompany’smainassetscompriseland,buildingsandequipment,tradedebtorsandinventory.In2013,theaforementionedrelevantassetratiosamountedto44.60,17.51and20.52percent,respectively.Thedescriptionsofthecompany’srelevantassetsaresummarizedasfollows:

TradeDebtors

Thecompanyhadtradedebtorsbeforedeductingallowancesfordoubtfuldebtsamountingto120.00millionbahtattheendof2011,262.11millionbahtattheendof2012,and134.61millionbahtattheendof2013,forratiosof21.04,33.31and18.25percentoftotalassets,respectively.Attheendof2013,tradedebtortotalbeforedeductionofallowancesfordoubtfuldebtsdecreasedby48.64percentcomparedto2012becausein2012therewasalargenumbersaleattheendoftheyearandconsequentlythereweremanydebtorswhohadnotreachedthecollectionperiod.

Thecompanyhaspolicytograntcustomersacredittermofapproximately30-60days.Fornewcustomers,however,thecompanymaystipulatethatcustomerspayincashbeforeproductdeliveriesorproducts.Orinthecaseofinternationalcustomers,thecompanymaystipulatedthatcustomerstransfer


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moneyintoaccountsorpayasL/CatSight,dependinguponthecustomeranalysisbytheSalesDepartmentwhichgivesprimaryconsiderationtocustomerrepaymentcapacity.Inthepast,thecompanyhadameandebtcollectionperiodof48.26daysin2011,73.09daysfor2012,and90.12daysin2013.

DaysPayableOutstanding 31December2011 31December2012 31December2013THBMillion

% THBMillion

% THBMillion

%

NotDue 91.48 76.24 160.73 61.33 67.56 51.37Overdue

NoMorethan3Months 14.30 11.91 92.25 35.20 53.46 40.643-6Months 4.11 3.43 1.80 0.69 4.60 3.496-12Months 4.60 3.83 0.69 0.27 0.46 0.35Over12Months 5.50 4.58 6.64 2.54 5.46 4.15

TradeDebtorsbeforeDebitAllowanceforDoubtfulDebts

119.99 100.00 262.11 100 131.53 100

Debit–AllowanceforDoubtfulDebts (4.72) (4.11) (5.46)TradeDebtors-Net 115.27 258.00 126.07

Accordingtotheaforementionedtable,itisevidentthatdebtorsnotdueforpaymenttothecompanyattheendof2011-2013hadratiosof76.24%,61.33%and51.37%oftradepartnersbeforedeductionofallowancefordoubtfuldebts,respectively,whilethecompany’soutstandingdebtorshadratiosof23.76%,38.67%and48.63%oftradepartnersbeforedeductionofallowancefordoubtfuldebts,respectively.Mostofthedebtorsweredebtorswithoutstandingpaymentsfornomorethanthreemonthsbecausethecompanywasunabletocollectpendingbillplacementandcustomerpaymentsbecausemostofthecompany’sprivatecustomerscompriseelectricalsystemscontractorspurchasingthecompany’stransformersforinstallationatvariousprojects.Therefore,thepaymentofproductpricestothecompanywasdependentonwhetherornotcustomerswereabletocollectfromprojectowners,whichmaytakealongtime.Nevertheless,thecompanywasabletocollectalldebtsfromtheaforementioneddebtors.

Attheendof2011-2013,thecompanyhadratiosfordebtorswhohadnotpaidforoverayearamountingto4.58%,2.53%and4.15%ofthefigurefortradepartnersbeforedeductionofallowancefordoubtfuldebts,respectively.In2013,thetotalfordebtorswhohadnotpaidformorethanoneyeardecreasedfrom2012by17.77%.Nevertheless,thecompanyconsideredtakingactiontowardfollow-upontheaforementioneddebts,includinglegalactionsornegotiationsfordebtorswhocouldstillbecontactedtograduallyrepaythecompanybyconsideringintermsofthesuitabilityandnecessityofeachdebtor.Themanagementgivesimportanceandcloselymonitorstheprogressandoperationsofrelateddepartmentsinmonthlymeetings,therebyresultinginthecompanyreceivingrepaymentfromdebtorsforwhomallowancefordoubtfuldebtshadbeensetat0.20millionbahtin2011,1.18millionbahtin2012and1.36millionbahtin2013.

Concerningpoliciesforsettingallowancesfordoubtfuldebtsfor2011and2012,thecompanyhasconsideredsettingallowancesfordoubtfuldebtsfromtheamountsanticipatedtobeuncollectiblefromdebtcollectionexperienceandthecurrentstatusofeachdebtor.In2013,thecompanyconsideredsettingallowancesfordoubtfuldebtsfromdebtorswhohadnotpaidformorethan1year,andattheendof2013,thecompanysetallowancesfordoubtfuldebtsamountingto5.46millionbaht.

Inventory

Attheendof2011-2013,thecompanyhadinventorybeforedeductingproductqualitydepreciationandallowancesforproductvalueamountingto150.44,179.37and154.87millionbaht,respectively.Thelargestcomponentforinventorywasrawmaterialsattheratiostototalinventoryof48.03%,55.86%and40.49%respectively,duetothefollowing:


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• Rawmaterialsusedintheproductionoftransformers,suchassiliconwireandcooperfoilareproductswithfewmanufacturers,andthecompanyhadtoreserveproductsfromproducersorsuppliersinadvanceinordertohavesufficientamountsofrawmaterialsneededforproductionandminimizerisksduetorawmaterialpricefluctuations.

• Ingeneral,multiplesizesofrawmaterialsarerequiredfortheproductionofasetoftransformers.Theuseofdifferentamountsofeachrawmaterialsizewithrawmaterialpurchaseordershaveminimumordersresultinginarawmaterialsinventory.

• Becausecertaintypesofrawmaterials,suchascopperfoilandroundenameledwire,etc.,havecharacteristicsofbeingrolls,therewillbescrapsofcopperorwireleftoverfromtherequisitionofrawmaterials.Thecompanyhasconsideredsalesoftheaforementionedscrapsofrawmaterialsasfittingandrecordedtheaforementionedscrapsofcopperorwireasremainingrawmaterialswhenthescrapshavenotbeensold.

31December2011 31December2012 31December2013THBMillion

% THBMillion

% THBMillion

%

RawMaterials 72.26 48.03 100.19 55.86 62.72 40.49OngoingWork 13.99 9.30 11.45 6.39 21.17 13.67FinishedProducts 53.40 35.50 57.22 31.90 65.75 42.46ProductsEn-Route 10.79 7.17 10.51 5.86 5.23 3.38TotalInventory 150.44 100.00 179.37 100.00 154.87 100Debit–ReserveforDepreciation&Devaluation (2.62) (3.13) (3.52)Inventory-Net 147.82 176.24 151.35

Whentheratiosoffinishedproducttoinventoryareconsideredat35.50%attheendof2011,31.90%attheendof2012,and42.46%attheendof2013,changeshaveclearlymovedinthesamedirectionasproductsaleperiodsequalto30.13days,29.04daysand37.88days,respectively.Finishedproductscomprise(1)finishedtransformerspendingdeliverytocustomersbecausethecompanywilldeliverproductstocustomersinmosttransformersalesattheplacesspecifiedbythecustomers,socustomershavetopreparefacilitiestoaccepttransformerdeliveriesfromthecompanywhicharesometimesrescheduled.Hence,thecompanyneedstorecordtheaforementionedtransformersasfinishedproductsbecausethecompanymayrecordasrevenueincompliancewiththecompany’saccountingpoliciesonlywhentransformershavebeendeliveredtocustomersand(2)transformershavebeenmanufacturedasreservesforsale.Thefactthatthecompany’stotalsalesrosesharplyin2011and2012causedthecompanytogivegreaterimportancetotheproductionoffinishedtransformersasreservesforsalein2013,whichwerestandardtransformerswithregularpurchaseordersthathelpedthecompanyplanproductionmoreefficientlyandhavemorefinishedtransformersininventory.

In2013, thecompanyhad inventorybeforedebitingallowances fordepreciationandallowancesforproductvalueat154.87millionbahtwhichwasadecreasefromtheendof2012by13.66%.Totalinventorybeforetheaforementionedreservedebitcomprisedrawmaterialsat62.72millionbaht,ongoingworkat21.17millionbahtandfinishedproductsat65.75millionbaht,whichweredecreaseof37.40%,anincreaseof84.89%andanincreaseof14.91%fromthetotalattheendof2012respectively.Consequently,thecompanyhadtoorderthepurchaseofrawmaterialsinadvanceandproducetransformersfordeliverytocustomersasscheduledinthebeginningof2014.

Attheendof2012and2013,thecompanysetreservesforproductdevaluationat2.31millionbahtand2.11millionbaht,respectively,foralltypesofinventory.TheProductionDepartmentconsideredintermsoftheuseofeachinventoryitem.Ifanyitemwasnotusable,thecompanywouldconsidersellingtheaforementionedinventoryitemasrawmaterialscrapandreservesforproductdevaluationequaltothedifferencebetweencostsandexpectedsalesprices.Furthermore,thecompanyreducedreservesforproductdevaluationby0.82attheendof2012and1.41millionbahtattheendof2013andforfinishedproductsbyconsideringthedifferencebetweenthecostsoffinishedtransformersandexpectednetvaluefromsales.


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Land,BuildingsandEquipment

Thecompanyhadnetland,buildingsandequipmentamountingto197.51millionbahtattheendof2011,259.37millionbahtattheendof2012,and314.17millionattheendof2013,whichwereratiostototalassetsof34.62%,32.96%and42.60%respectively.

In2011,thecompanyconstructednewofficebuildingsat28.98millionbaht(underconstruction)andinvested25.10millionbahtinthepurchaseofadditionalmachineryandequipmentsuchascoilwindingmachines,metalcuttingmachinesandcurrenttransformers,etc.

In2012,thecompanyhadnetland,buildingsandequipmentwhichwereincreasedfrom2011by61.86millionbahtbecausethecompanyanewconstructedofficebuilding(completedin2012)andfactorybuildingsamountingto30.03millionbahtwithaninvestmentof22.10millionbahtinthepurchaseofadditionalmachineryandequipment,suchasmetalslittingmachines,metalcuttingmachinesandcoilwindingmachines,etc.

In2013,thecompanyhadnetland,buildingsandequipmentwhichwereincreasedfrom2012by54.80millionbahtbecausethecompanyconstructedadditionalfactoriesamountingto15.87millionbahtandinvested74.00millionbahtinthepurchaseofadditionalmachineryandequipment,suchasmetalslittingmachines,metalcuttingmachinesandcoilwindingmachines,etc.

(b) Liquidity

CashFlow

In2011,thecompanyhadnetcashflowfromoperatingactivitiesamountingto30.37millionbahtbecausethecompanyhadprofitsbeforetaxdeductionsamountingto117.36millionbahtandusedtheprofitsascurrentcapitalforincreasedinventoryby63.47millionbahtandincreasedtradedebtorsby63.58millionbahtandthecompanyhadincreasedtradecreditorsat33.70millionbaht.Thecompanyinvestednetcashflowof113.40millionbahtininvestmentactivitiesbytemporarilyinvesting52.10millionbahtintheKrungThaiSa-Som-SubFundandinvested61.42millionbahtinthepurchaseofpurchasefixedassets.Significantassetsinwhichthecompanyinvestedcomprisedmachineryandequipmentamountingto25.10millionbahtandnewofficebuildingsamountingto28.97millionbaht.Furthermore,thecompanyhadnetcashflowfromprocurementamountingto82.68millionbahtbyreceiving95.94millionbahtfromtheissuanceofsharestoincreasecapitalwhilepayingdividendstoshareholdersamountingto21.00millionbaht.Fortheaforementionedreasons,thecompanyhadareductionof0.35millionbahtincashandcashequivalenttransactionsin2011.

In2012,thecompanyhadnetcashflowspentinoperatingactivitiesamountingto8.70millionbaht.Althoughthecompanyhadprofitsbeforetaxdeductionsamountingto155.44millionbaht,thecompanyusedtheprofitsascurrentcapitalinincreasedtradedebtorsby145.39millionbaht,productincreasesby28.94millionbahtandthecompany’sinvestmentof78.39millionbahtinfixedassets.Themainassetsinwhichthecompanyinvestedconsistedofthenewofficebuildingandfactorybuildingsamountingto30.03millionbaht,machineryandequipmentat22.10millionbahtandpurchasesofmoreutilities,officedecorationsandvehicleswhilethecompanyhadnetcashflowfromprocurementamountingto64.05millionbaht.Thecompanyhadmoreshorttermloansfromfinancialinstitutionsat74.37millionbaht,morelongtermloansat46.27millionbahtandpaiddividendstoshareholdersat37.99millionbaht.Fortheaforementionedreasons,thecompanyhadareductionof3.35millionbahtincashandcashequivalenttransactionsin2012.

In2013,thecompanyhadnetcashflowfromoperatingactivitiesamountingto249.93millionbahtbecausethecompanyhadprofitsbeforetaxdeductionsamountingto93.53millionbahtandusedtheprofitsascurrentcapitalforincreasedinventoryby24.50millionbahtandincreasedtradedebtorsby130.92millionbaht.Thecompanyinvestednetcashflowof82.30millionbaht.Themainassetsinwhichthecompanyinvestedconsistedofthenewfactorybuildingsamountingto15.87millionbaht,machineryandequipmentat74.00millionbaht,whilethecompanyhadnetcashflowfromprocurementamountingto118.87millionbaht.Thecompanyhadmoreshorttermloansfromfinancialinstitutionsat66.72millionbaht,morelongtermloansat29.92millionbahtandpaiddividendstoshareholdersat61.95millionbaht.Fortheaforementionedreasons,thecompanyhadareductionof73.82millionbahtincashandcashequivalenttransactionsin2013.


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(Unit:THBMillion) 2011 2012 2013

Cash(Spent)fromOperatingActivities 30.37 (8.70) 249.93

NetCash(Spent)fromInvestmentActivities (113.40) (58.70) (57.23)

NetCash(Spent)fromFinancingActivities 82.68 64.05 (118.87)

Cash&CashEquivalentTransactions–Increase(Decrease) (0.35) (3.35) 73.82

LiquidityRatios

Attheendof2011-2013,thecompanyhadliquidityratiosof1.97,1.80and1.88times,respectively,withquickliquidityratiosof1.16,1.19and1.18times,respectively.Thereasonquickliquidityratioswerevastlydifferentfromliquidityratioswasduetothecompany’sratiosofinventorytocurrentassetsathighratesof40.23%,33.59%and36.17%respectively.

Whenthecompany’scashcyclewasconsidered,itbecomesevidentthatthecompany’scashcycleswere47.05daysin2011,63.70daysin2012and78.32daysin2013.Thecompany’smeandebtcollectionperiodsduring2011-2013were48.26days,73.09daysand90.12daysrespectively.In2012and2013,thecompany’sdebtcollectionperiodincreasedbecausethecompanysoldlargequantitiesofproductstoprojectswhichweredeliveredattheendoftheyear,therebyincreasingthenumberofoutstandingdebtors.Debtpaymentperiodswere31.34days,38.43daysand49.68daysrespectively.

2011 2012 2013

LiquidityRatio 1.97 1.80 1.88

QuickLiquidityRatio 1.16 1.19 1.18

AverageCollectionPeriod 48.26 73.09 90.12

AverageSalePeriod 30.13 29.04 37.88

DebtPaymentPeriod 31.34 38.43 49.68

CashCycle 47.05 63.70 78.32

(c) Capital Sources

Liabilities

Attheendof2011-2013,thecompanyhadtotalliabilitiesamountingto190.41,326.06and260.42millionbaht,respectively.Itcanbeseenthattotalliabilitiesincreaseordecreaseduetoincreaseordecreaseinsalesasthecompanyhadtopurchaseenoughrawmaterialsforproducinggoods.However,whenthecompany’sliabilitystructurewasconsidered,mostliabilitieswerefoundtobecurrentliabilitiesinthecompany’sroutineoperatingactivitiesfortotalliabilitiesratiosof98.13%attheendof2011,89.28%attheendof2012,and85.15%attheendof2013.Significantcurrentliabilitiescomprisedshort-termloansfromfinancialinstitutionsat28.43%oftotalliabilitiesattheendof2013,mostofwhichcomprisedpromissorynotesandLC/TRusedtoorderpurchasesofrawmaterialsdomesticallyandabroad.Furthermore,currentliabilitiesalsoincludetradeaccountspayablewiththeratioof29.18%oftotalliabilitiesattheendof2013.

Shareholders’Equity

Attheendof2011,thecompanyhadshareholders’equityof382.51millionbaht,anincreaseof159.74millionbahtfrom2010becausethecompanyincreasedcapitalwiththeresolutionoftheannualmeetingof2011on18March2011whichapprovedthecompanytoincreaseregisteredcapitalby50millionbaht,therebyresultinginthecompanyhavingregisteredcapitalof200millionbahtandapremiumonsharesof45.94millionbahtattheendof2011.Furthermore,thecompanypaid21millionbahtindividendsandrecordedestimatesofliabilities


100

forpreviouscostsinlinewithobligationsforemployeebenefitson1January2011at1.74millionbaht.TheaforementionedrecordingwasanimpactfromThaiAccountingStandards19onEmployeeBenefitsenforcedsince1January2011whilethecompanyhadincreasedaccumulatedprofitsby84.06millionbahtfromperformancein2011.Attheendof2012,thecompanyhadshareholders’equityof460.92millionbaht,anincreasefromtheendof2011by80.89millionbaht,whichwasanincreaseinprofitsfromperformanceamountingto118.88millionbahtwhilethecompanypaiddividendstoshareholdersat37.99millionbaht.

Attheendof2013,thecompanyhadshareholders’equityof475.42millionbaht,anincreasefromtheendof2012by12.51millionbaht,whichwasanincreaseinprofitsfromperformanceamountingto74.51millionbahtwhilethecompanypaiddividendstoshareholdersat62.00millionbaht.

SuitabilityofCapitalStructure

Thecompanyhadaratioofliabilitytoshareholders’equityof0.50timesattheendof2011,0.71timesattheendof2012,and0.55timesattheendof2013.In2012,thecompanyhadahigherliabilitytoshareholders’equityratiocomparedtootheryearsduetotheissuanceofpurchaseordersforlargequantitiesofrawmaterialsbythecompanyduringthelastquarterinamountsadequateforproductionduringthefourthquarterof2012andthefirstquarterof2013,therebyresultinginincreasedshort-termloansusedinoperationsto214.68millionbahtin2012from125.42millionbahtin2011.Inaddition,thecompanyhadincreasedlongtermloansto26.69millionbahtin2012from0.26millionbahtin2011duetoinvestmentsinthenewofficebuilding,factorybuildingsandmachinerytoenhanceproductionefficiency.

3. Main Factors and Influences with Potential Impacts on Future Performance and Financial Status Impactsfromuncertaintyofbiddingresultsbecausegovernmentandgovernmententerprisecustomersgeneratinganddistributingelectricity,suchastheMetropolitanElectricityAuthorityandtheProvincialElectricityAuthority,usetheprocessofpurchasingtransformersbybidding,therebyincreasinguncertaintyintermsofrevenuefromthecompany’ssalesbecauserevenuefromthecompany’ssalesisdependentonbiddingcapabilities.Furthermore,revenuefromsalesisalsodependentoneconomicconditionsandthebudgetsofeachagency,whichwillhaveimpactsontheperiodoftimewhentheaforementionedagencieswillopenbiddings.Inthepast,thecompanyearnedrevenuefromtransformersalestothisgroupofcustomersatapproximately32-45%oftotalincomefromsales,whichwasahighratio.Nevertheless,thecompanyandthecompany’sexecutiveshavebeenoperatinginthebusinessforalongperiodoftime,resultinginthecompanyhavinggoodrelationshipswiththeMEAandthePEAoveralongperiodoftimewithconfidenceintransformerquality.Inaddition,thecompanyisoneofthemanufacturerscapableofproducinghighqualitytransformersmeetingtheneedsofbothagencies.Hence,theexecutivesbelievethecompanyhassufficientcapacitytoselltransformerstoboththeMEAandthePEAonacontinuebasisinthelongrun.

4. Auditor Remuneration Inthefiscalyearending31December2013,thecompanypaidauditfeestothecompany’sauditor,GrantThorntonCo.,Ltd.,intheamountof750,000baht.Otherthantheaforementionedfees,thecompanyhasnootherfeestopaytotheauditor,auditingofficeswhereauditorsareoriginallyaffiliatedandpersonsorbusinessrelatedtotheauditororauditingofficeswhereauditorsareoriginallyaffiliated.


101

The accompanying notes form an integral part of these financial statements.

Statements of Financial PositionASAT31DECEMBER2013

QTCENERGYPUBLICCOMPANYLIMITED

QTC ENERGY PUBLIC COMPANY LIMITED

STATEMENTS OF FINANCIAL POSITION

ASSETS

31 December 2013 31 December 2012 31 December 2011

Notes (Restated) (Restated)

CURRENT ASSETS

Cash and cash equivalents 6 117,360,228 43,537,796 46,886,072

Temporary investment 7 10,842,674 35,291,304 52,101,041

Trade accounts receivable - general customers - net 8 126,072,694 258,007,101 115,269,873

- related companies 9 3,085,449 251,397 1,904,814

Inventories - net 10 151,350,355 176,245,505 147,820,054

Refundable value added tax 375,716 3,416,824 -

Other current assets 7,771,228 7,942,745 3,626,934

Total Current Assets 416,858,344 524,692,672 367,608,788

NON - CURRENT ASSETS

Restricted deposits with bank 11 579,588 - 539,963

Other investment - at cost 12 50,000 50,000 50,000

Property, plant and equipment - net 13 314,170,253 259,367,966 197,510,174

Computer software - net 14 1,640,317 2,862,771 4,730,908

Deferred income tax asset 18 2,545,110 1,994,203 2,478,005

Total Non - Current Assets 318,985,268 264,274,940 205,309,050

TOTAL ASSETS 735,843,612 788,967,612 572,917,838


Baht


102


Statements of Financial Position (Continued)ASAT31DECEMBER2013




LIABILITIES AND SHAREHOLDERS' EQUITY


Notes (Restated) (Restated)

CURRENT LIABILITIES

Short - term loans from banks 15 74,048,052 137,237,545 64,459,541

Trade accounts payable 75,985,382 77,442,700 60,958,299

Other payables 4,532,156 3,307,809 4,683,370

Current portion of :

- Long - term loans 16 22,932,000 14,072,000 9,895,349

- Liabilities under financial lease agreements 17 3,075,568 3,078,827 1,742,609

Accrued income tax 18 11,103,293 30,561,299 19,526,408

Accrued expenses 19 12,314,347 13,126,125 13,445,892

Deposits from customers 7,651,213 3,421,633 5,642,975

Other current liabilities 20 10,111,066 8,871,685 6,500,521

Total Current Liabilities 221,753,077 291,119,623 186,854,964

NON - CURRENT LIABILITIES

Long - term loans - net 16 31,084,859 26,696,859 260,000

Liabilities under financial lease agreements - net 17 5,156,614 6,113,993 1,346,459

Liabilities under employee benefits obligation 21 2,428,554 2,126,227 1,948,044

Total Non - Current Liabilities 38,670,027 34,937,079 3,554,503

TOTAL LIABILITIES 260,423,104 326,056,702 190,409,467


Baht


103

Statements of Financial Position (Continued)ASAT31DECEMBER2013





LIABILITIES AND SHAREHOLDERS' EQUITY (Continue)


(Restated) (Restated)

SHAREHOLDERS' EQUITY

Share capital : common share, Baht 1 par value

Registered 200,000,000 shares 200,000,000 200,000,000 200,000,000

Issued and fully paid - up 200,000,000 shares 200,000,000 200,000,000 200,000,000

Premium on common shares 45,939,064 45,939,064 45,939,064

Retained earnings

- Appropriated for legal reserve 20,000,000 20,000,000 20,000,000

- Unappropriated 209,481,444 196,971,846 116,569,307

TOTAL SHAREHOLDERS' EQUITY 475,420,508 462,910,910 382,508,371

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 735,843,612 788,967,612 572,917,838


Baht


104

Statements of Comprehensive IncomeFORTHEYEARSENDED31DECEMBER2013





LIABILITIES AND SHAREHOLDERS' EQUITY (Continue)


(Restated) (Restated)

SHAREHOLDERS' EQUITY

Share capital : common share, Baht 1 par value

Registered 200,000,000 shares 200,000,000 200,000,000 200,000,000

Issued and fully paid - up 200,000,000 shares 200,000,000 200,000,000 200,000,000

Premium on common shares 45,939,064 45,939,064 45,939,064

Retained earnings

- Appropriated for legal reserve 20,000,000 20,000,000 20,000,000

- Unappropriated 209,481,444 196,971,846 116,569,307

TOTAL SHAREHOLDERS' EQUITY 475,420,508 462,910,910 382,508,371

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 735,843,612 788,967,612 572,917,838


Baht


STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED 31 DECEMBER

Baht

2013 2012

Notes (Restated)

Income from sales and services

Sales 9 783,879,695 940,352,086

Service income 20,074,959 19,156,003

Total income from sales and services 803,954,654 959,508,089

Cost of sales and services

Cost of sales 9 , 24 (582,686,601) (687,400,281)

Cost of services 24 (9,733,061) (7,861,055)

Total cost of sales and services (592,419,662) (695,261,336)

Gross profit 211,534,992 264,246,753

Other income 7,734,965 10,196,035

Income before expenses 219,269,957 274,442,788

Selling expenses 24 (36,691,338) (37,444,002)

Administrative expenses 24 (82,101,269) (73,833,093)

Total expenses (118,792,607) (111,277,095)

Income before financial cost and income tax 100,477,350 163,165,693

Financial cost (6,942,414) (7,725,934)

Income before income tax 93,534,936 155,439,759

Income tax 18 (19,025,338) (37,043,224)

INCOME FOR THE YEAR 74,509,598 118,396,535

Other comprehensive income (loss) for the year - -

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 74,509,598 118,396,535

Basic earnings per share

Income (Baht per share) 0.37 0.59

Weighted average number of common shares (share) 200,000,000.00 200,000,000.00



105

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STATEMENTS OF CASH FLOWS


2013 2012

Cash flows from operating activities :


Adjustments to reconcile income before income tax to net cash provided from

(used in) operating activities :

Depreciation and amortization 35,950,042 27,432,260

Allowance for doubtful account 1,350,920 2,651,800

Allowance for obsolete and decline value of inventories - net 396,433 512,419

Gain from disposal of fixed assets (1,003,060) (2,330,090)

Unrealized gain from exchange rate (1,754,980) (1,593,884)

Unrealized gain on revaluation of investment (2,970) (26,128)

Provision for employee benefits obligation 208,613 90,710

Interest expense 6,942,414 7,725,934

Cash provided from operations before changes in operating assets and

liabilities : 135,622,348 189,902,780

Decrease (Increase) in operating assets :

Trade accounts receivable - general customers 130,922,537 (145,389,028)

Trade accounts receivable (2,811,874) 1,653,417

Inventories 24,498,717 (28,937,870)

Refundable value added tex 3,041,108 (3,416,824)

Other current assets 171,517 (4,315,811)

Increase (Decrease) in operating liabilities :

Trade accounts payable (1,472,334) 16,484,401

Other payable 1,224,347 (1,375,561)

Accrued expenses (811,778) (319,767)

Deposits from customers 4,229,580 (2,221,342)

Other current liabilities 1,191,455 2,371,164

Cash provided from operations 295,805,623 24,435,559

Interest payment (6,844,700) (7,638,461)

Income tax payment (39,034,251) (25,524,531)

Net cash provided from (used in) operating activities 249,926,672 (8,727,433)


Baht


106

Statements of Cash FlowsFORTHEYEARSENDED31DECEMBER2013




STATEMENTS OF CASH FLOWS


2013 2012

Cash flows from operating activities :


Adjustments to reconcile income before income tax to net cash provided from

(used in) operating activities :


Allowance for doubtful account 1,350,920 2,651,800

Allowance for obsolete and decline value of inventories - net 396,433 512,419

Gain from disposal of fixed assets (1,003,060) (2,330,090)

Unrealized gain from exchange rate (1,754,980) (1,593,884)

Unrealized gain on revaluation of investment (2,970) (26,128)

Provision for employee benefits obligation 208,613 90,710

Interest expense 6,942,414 7,725,934

Cash provided from operations before changes in operating assets and

liabilities : 135,622,348 189,902,780

Decrease (Increase) in operating assets :

Trade accounts receivable - general customers 130,922,537 (145,389,028)

Trade accounts receivable (2,811,874) 1,653,417

Inventories 24,498,717 (28,937,870)

Refundable value added tex 3,041,108 (3,416,824)

Other current assets 171,517 (4,315,811)

Increase (Decrease) in operating liabilities :

Trade accounts payable (1,472,334) 16,484,401

Other payable 1,224,347 (1,375,561)

Accrued expenses (811,778) (319,767)

Deposits from customers 4,229,580 (2,221,342)

Other current liabilities 1,191,455 2,371,164

Cash provided from operations 295,805,623 24,435,559

Interest payment (6,844,700) (7,638,461)

Income tax payment (39,034,251) (25,524,531)

Net cash provided from (used in) operating activities 249,926,672 (8,727,433)


Baht


107

Statements of Cash Flows (Continued)FORTHEYEARSENDED31DECEMBER2013




STATEMENTS OF CASH FLOWS (CONTINUE)


2013 2012

Cash flows from investing activities:

Decrease (increase) in restricted cash deposits (579,588) 539,963

Decrease in temporary investment 24,451,600 16,835,865

Proceeds from sales of fixed assets 1,196,263 2,339,958

Payment for purchasing assets and down payment (82,303,546) (78,386,634)

Net cash used in investing activities (57,235,271) (58,670,848)

Cash flows from financing activities:

Increase (decrease) in short - term loan from banks (66,717,249) 74,371,888

Increase in long - term loans 29,920,000 46,270,859

Repayment of long - term loans (16,672,000) (15,657,349)

Payment of liabilities under financial lease (3,447,646) (2,941,397)

Paid for dividend (61,952,074) (37,993,996)

Net cash provided from (used in) financing activities (118,868,969) 64,050,005

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 73,822,432 (3,348,276)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 43,537,796 46,886,072

CASH AND CASH EQUIVALENTS AT END OF YEAR 117,360,228 43,537,796

Supplemental disclosures for cash flows information

Non - cash item

Purchase assets under financial lease 2,487,008 9,045,149


Baht


108

หมำยเหตุประกอบงบกำรเงินASAT31DECEMBER2013



NOTES TO FINANCIAL STATEMENTS

AS AT 31 DECEMBER 2013 AND 2012

1. GENERAL INFORMATION

QTC Energy Public Company Limited was incorporated as a limited company under The Civil and Commercial

Code of Thailand on 9 June 2003. The Company registered the change of its status to a Public Company Limited

and the change of its name to “QTC Energy Public Company Limited” on 19 August 2010. The Company’s shares

had been listed for trading in “MAI” of the Stock Exchange of Thailand (SET) on 28 July 2011. The Company is

engaged in the manufacture, distribution and maintenances of electrical transformers. The Company’s registered

head office is located at 2/2 Krungthep Kritha Soi 8 Yak 5, Krungthep Kritha Road, Huamark, Bangkapi, Bangkok,

with a branch at 149 Moo 2 Mapyangporn Sub District, Ploukdaeng District, Rayong.

2. BASIS OF FINANCIAL STATEMENT PREPARATION

The accompanying financial statements have been officially prepared in Thai in accordance with the Accounting Act

B.E. 2543 and Thai Accounting Standards issued under the Accounting Professions Act B.E. 2547 and the financial

reporting requirements promulgated by the Securities and Exchange Commission under the Securities and

Exchange Act B.E. 2535. The translation of these financial statements to other language must be in compliance

with the official report in Thai.

The financial statements have been prepared on a historical cost basis, except as otherwise disclosed specifically.

During the year 2013, the Federation of Accounting Professions has announced the application of accounting

standards, the financial reporting standards that were amended in 2012, and the interpretation of accounting

standards and reporting standards, effective for fiscal years beginning on or after 1 January 2014. The Company’s

management has considered the effects from the implementation of these financial reporting standards in the

preparation of to the Company’s fiancial statements.

The financial statements have been prepared with the same manner as prior year, except for the adoption of TAS 12

Income taxes as follow:


109

TAS 12 Income tax

This accounting standard requires the Company to identify temporary differences arising between the carrying

amount of an asset or liability in the statement of financial position and related tax bases in order to recognize the

income tax effects as deferred income tax asset or liability subjecting to certain recognition criteria. Effective 1

January 2013, the Company has changed this accounting policy and restated the prior year financial statements,

presented as comparative information, as if the Company had recognized the income tax effects as deferred income

tax assets or liabilities in the previous years.

The income tax expense for the year comprises current and deferred income taxes. Current and deferred income

taxes are recognized in profit or loss, except to the extent that it relates to items recognized directly in equity or

other comprehensive income.

Current income tax

Current income tax is the expected tax payable or claimable, under the income tax prevailing, on the taxable income

or loss for the year, using tax rates enacted or substantially enacted at the end of the reporting period, and any

adjustment to tax payable in respect of previous years.

Deferred income tax

Deferred income tax is recognized in respect of temporary differences between the carrying amounts of assets and

liabilities for financial reporting purpose and the amounts used for taxation purpose. Deferred income tax is

measured at the tax rates that are expected to be applied to the temporary differences when they reverse, using tax

rates enacted or substantively enacted at the end of the reporting period.

Deferred income tax assets and liabilities are offset if there is a legally enforceable right to offset current income tax

liabilities and assets, and if they relate to income taxes levied by the same tax authority on the same taxable entity, or

on different tax entities, but they are intended to be settled on a net basis or when income tax assets and liabilities

will be realized simultaneously.

A deferred income tax asset is recognized to the extent that it is probable that future taxable profits will be available

against which the temporary differences can be utilized. Deferred income tax assets are reviewed at the end of each

reporting period and reduced to the extent that it is no longer probable that the related tax benefit will be realized.


110

3. CUMULATIVE EFFECT OF THE CHANGE IN ACCOUNTING POLICY FROM THE ADOPTION OF

NEW ACCOUNTING STANDARD

Effective 1 January 2103, the Company initially adopted TAS 12 “Income Taxes”. The cumulative effect of the

change in the accounting policy is separately presented in the statements of changes in shareholders’ equity.

The amounts of adjustments affecting the statements of financial position and the statements of comprehensive

income are summarized below.

Baht

31 December 2013 31 December 2012 1 January 2012

Statements of financial position

Increase in deferred income tax assets 3,404,673 3,084,235 2,950,235

Increase in deferred income tax liabilities 859,563 1,090,032 472,230

Increase in unappropriated retained earnings – net 2,545,110 1,994,203 2,478,005

Baht

For the years ended 31 December

2013 2012

Statements of comprehensive income

Increase (Decrease) in income tax expense (550,907) 483,802

Increase (Decrease) in basic earnings per share (Baht per share) 0.0028 (0.0024)

The movement in cumulative effect of change in accounting policy for deferred income tax are as follows :

Baht

Retroactive adjustment of retained earnings as at 31 December 2011 2,478,005

Effect to the operations for the year 2012 - net (483,802)

Retroactive adjustment of retained earnings as at 31 December 2012 - net 1,994,203


111

4. SIGNIFICANT ACCOUNTING POLICIES

Revenue and expense recognition

Sales are recognized when delivery has taken place and the transfer of risks and rewards has been completed,

excluding value added tax and discounted.

Service income, excluding value added tax and discounted, is recognized when the services has been rendered.

Other income and expenses are recognized on an accrual basis.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and highly liquid cash in banks (which do not have restriction of

usage) that are readily convertible to cash on maturity date with insignificant risk of change in value.

Related parties

Related parties comprise enterprises and individuals that control, or are controlled by the Company, whether directly

or indirectly, or which are under common control with the Company.

They also include associated companies and individuals which directly or indirectly own a voting interest in the

Company that gives them significant influence over the Company, key management personnel, directors and officers

with authority in the planning and directing the Company’s operations.

Trade accounts receivable and allowance for doubtful accounts

Trade accounts receivable are stated at invoice amount net of allowance for doubtful accounts (if any). The

Company provides allowance for doubtful accounts equal to the estimated collection losses that may incur in the

collection process. The estimated losses are based on historical collection experiences coupled with a review of the

current status of receivables.

Inventories

Inventories are valued at the lower of cost (specific method) and net realizable value. Net realizable value is the

estimated selling price in the ordinary course of the business less the marginal cost to complete (for work in

process) and other estimated costs necessary to make the sale.

Cost of purchases consist of purchasing prices and other related direct cost, excluding discounts and allowances

(if any).


112

Cost of finish goods and work in process consist of raw materials, direct labor, other direct expenses and overhead,

allocated based on the production process.

The Company sets up allowance for decline value of inventories (if any), based on their current status, slow –

moving and defective inventories.

Property, plant and equipment

Property, plant and equipment are recorded at cost. Cost is measured by the cash or cash equivalent price of

obtaining the asset that bring it to the location and condition necessary for its intended use. Plant and equipment

are presented in the statements of financial position at costs less accumulated depreciation. When assets are sold or

retired, their costs and accumulated depreciation are eliminated from the accounts and any gain/loss resulting from

their disposals is included in the statements of comprehensive income.

The Company depreciates its plant and equipment by the straight - line method over the estimated useful lives of

the assets based on the segregation of components of assets, if each part is significant with different useful lives.

Estimated useful lives of the assets are as follows:

Building 20 years

Furniture, fixtures and office equipment 5 years

Machine and factory equipment 10 and 5 years

Vehicles 5 years

No depreciation is made for land, building in progress, and machine and equipment under installation.

Expenditure for additions, renewals and betterment are capitalized. Repair and maintenance costs are recognized as

expenses when incurred.

Computer software

Computer software is presented at cost less accumulated amortization. Amortization is calculated by reference to

cost on a straight-line basis over the estimated period of 5 years. The computer software will be adjusted when there

is an indication of impairment.

Income tax

Income tax is provided for in the accounts based on the taxable profits determined in accordance with the Revenue

Code.

Employee benefits

Salaries, wages, bonuses, and contributions to the social security fund and provident fund, are recognized as

expenses on an accrual basis.


113

Post-employment benefits (Defined contribution plans)

The Company and its employees have jointly established a contributory provident fund plan whereby monthly

contributions are made by employees and by the Company. The fund’s assets are held in a separate trust fund. The

Company’s contributions are recognised as expenses when incurred.

Post-employment benefits (Defined benefit plans)

The Company has obligations in respect of the severance payments for employees upon retirement under the Labor

Law. The Company treats these severance payment obligations as a defined benefit plan.

The obligation under the defined benefit plan is determined by actuary, using the projected unit credit method.

Segment of financial information

Segment of information is presented in respect of the Company’s businesses. The primary format, geographical

segments, is based on the Company management and internal reporting structure.

Basic earnings per share

Basic earnings per share are determined by dividing the net income for the year by the weighted average number of

paid up common shares outstanding during the year.

Dividend payment

Dividend payment is recorded in the financial statements in the period in which they are approved by the

Shareholders or Board of Directors of the Company.

Leases

Leases of equipment where the Company assumes substantially all the benefits and risks of ownership are classified

as finance leases. Finance leases are capitalized at the estimated present value of the underlying lease payments or

the present value of the lease payments, whichever is lower. Each lease payment is allocated between the liability

and finance charges so as to achieve a constant rate on the outstanding balance. The lease payment obligation under

the lease agreement, net of financial interest payment, is recorded as liability under finance lease. The interest

element of the finance charge is charged to operations over the lease period. The equipment acquired under finance

leasing contract is depreciated over the useful life of the asset. Leases of assets under which all the risks and benefits

of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating

leases are charged to statements of comprehensive income on a straight – line basis over the period of the lease.

When an operating lease is terminated before expiry date of the lease period, any payment required to be made to

the lessor by way of penalty is recognized as an expense in the period in which termination takes place.


114

Foreign currency transactions

Foreign currency transactions during the year are translated into Baht at the exchange rate on transaction dates. The

balance of foreign currency monetary assets and liabilities at the date of the statements of financial position are

translated into Baht at the rate prevailing at that date. Exchange gains or losses are included in the statement of

comprehensive income.

Use of accounting estimates

The preparation of financial statements in conformity with TAS requires management to make judgments, estimates

and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and

expenses. The estimates and associated assumptions are based on historical experience and various other factors

that are believed to be reasonable under the circumstances, the results of which form the basis of making the

judgments about carrying amounts of assets and liabilities that are not readily apparent from other sources.

Accordingly, actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed by management on an ongoing basis. Revision to

accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that

period, or in the period of the revision and future periods, if the revision affects both current and future periods.

Provisions for liabilities and expenses, and contingent assets

Provisions are recognized when the Company has present legal or constructive obligations as a result of past events

with probable outflow of resources to settle the obligation, and where a reliable estimated of the amount can be

made. The contingent assets will be recognized as separate assets only when the realization is virtually received.

5. CRITICAL ACCOUNTING ESTIMATES, ASSUMPTION AND JUDGMENT AND CAPITAL RISK

MANAGEMENT

5.1 Critical accounting estimates, assumption and judgments

5.1.1 Impairment of trade accounts receivables

The Company sets an allowance for doubtful accounts to reflect impairment of trade accounts

receivable relating to estimated losses resulting from the inability of customers to make required

payments. The allowance is based on consideration of historical collection experience couple with a

review of outstanding receivables at the closing date.

5.1.2 Allowance for decline value and defective inventories

The Company maintains an allowance for decline value and defective inventories (if any) to reflect

impairment of inventories. The allowance is based on the consideration of inventory turnovers and

the comparison with market value.


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5.1.3 Plant, equipment and computer software

Management determines the estimated useful lives and residual values of the Company’s plant,

equipment and computer software and will revise the depreciation charge where useful lives and

residual values previously estimated have changed or subject to be written down for their technical

obsolescence or if they are no longer in used.

5.1.4 Impairment of assets

The Company considers allowances for impairment of assets when there is an indication that an asset

may be impaired. When there has been a significant decline in the fair value of asset, the management

will determine the estimated recoverable amount.

5.2 Capital risk management

The Company’s objectives in the management of capital is to safeguard its ability to continue as a going

concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an

optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends payment

for shareholders, return capital, issue new shares, or sell assets to reduce debts.

6. CASH AND CASH EQUIVALENTS

Baht

2013 2012

Cash on hand 160,000 160,000

Cash at banks

- Current account 22,276,219 14,013,476

- Savings account 94,924,009 29,364,320

Total 117,360,228 43,537,796


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7. TEMPORARY INVESTMENT

Baht

Balance as at 1 January 2013 35,291,304

Add Additional investment during the year 145,000,000

Less Disposal of investment during the year (169,451,600)

Adjustment for unrealized gain from changes in value of investment 2,970

Balance as at 31 December 2013 10,842,674

The Company has temporarily investment in The Krung Thai Sa-Som-Sub Fund K51 (KTSS: K51) which yields

more return than general savings deposits. The said investment does not have any restriction for redemption.

8. TRADE ACCOUNTS RECEIVABLE – NET

The outstanding trade accounts receivable balances as at 31 December 2013 and 2012 are classified by ages as

follows:

Baht

2013 2012

Trade accounts receivable – general customers

Not yet due 67,564,034 160,733,608

Past due :

Less than 3 months 53,457,225 92,251,791

3 - 6 months 4,591,335 1,798,145

6 - 12 months 460,100 693,999

Over 12 months 5,458,533 6,637,171

Total 131,531,227 262,114,714

Less Allowance for doubtful accounts (5,458,533) (4,107,613)

Net 126,072,694 258,007,101

Trade accounts receivable – related companies

Not yet due 3,085,449 233,527

Past due :

Less than 3 months - 17,870

3 - 6 months - -

6 - 12 months - -

Over 12 months - -

Total 3,085,449 251,397


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9. RELATED PARTY TRANSACTIONS

The Company has certain business transactions with its related companies which are related through common

shareholding and/or management. Such transactions are made under the conditions and terms of general trade

practice with prices approximate the market.

The significant business transactions with related companies for the years ended 31 December 2013 and 2012 are as

follow :

Baht


Pricing Policy 2013 2012

Revenue from sales Market prices 11,934,231 5,444,696

Purchase of raw materials Market prices 506,387 2,561,954

Selling and administrative expenses Agreed prices 4,500 4,000

Key management personnel compensation

Short - term employment benefits 15,122,761 17,965,018

Post - employment benefits 148,043 170,349

Total 15,270,804 18,135,367

As at 31 December 2013 and 2012, the significant outstanding balances of the above transactions are as follows:

Baht

Relationship 2013 2012

Trade accounts receivable – related companies

QTC - PANCO Co., Ltd. (incorporated in Lao

People’s Democratic Republic)

Co – director and

Co – shareholder

2,456,717

-

Q.T.C. Services Chiang Mai Co., Ltd. Family member of

the director

628,732

233,528

SMI Metal Work Co., Ltd. Family member of

the director

-

17,869

Total 3,085,449 251,397

Key management personnel compensation

Liabilities under employee retirement benefits

obligation

1,497,873 1,482,019


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10. INVENTORIES – NET

Baht

2013 2012

Raw materials 62,716,254 100,193,467

Work in process 21,175,430 11,452,243

Finished goods 65,752,767 57,215,471

Goods in transit 5,230,657 10,512,644

Total 154,875,108 179,373,825

Less Allowance for decline value (3,524,753) (3,128,320)

Inventories – net 151,350,355 176,245,505

The Company has movements in allowance for decline value of inventories for the year ended 31 December 2013

as follows :

Baht


Add Allowance for decline value of inventories 396,433


11. RESTRICTED DEPOSITS WITH BANK

As at 31 December 2013, the Company’s savings deposit of Baht 0.58 million is restricted for usage from the

pledge as collaterals for letters of guarantee issued by a local bank for performance bond.

12. OTHER INVESTMENT

(Unit : Baht)

Percentage of shareholding Investment (at cost)

Company’s name Nature of business 2013 2012 2013 2012

MDICP HOLDING

CO., LTD.

Providing commercial and

industrial training services 0.86 0.86 50,000 50,000


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13. PROPERTY, PLANT AND EQUIPMENT – NET

Baht

2012 Increase Decrease

Transfer In

(Out) 2013

Cost

Land 31,089,980 - - - 31,089,980

Land improvement 2,803,391 - - - 2,803,391

Buildings 138,695,611 5,067,744 (26,362) 10,819,423 154,556,416

Machine and factory equipment 143,237,772 30,535,752 (1,958,098) 22,079,592 193,895,018

Furniture, fixtures and offices equipment 32,528,546 2,826,037 (858,455) 284,496 34,780,624

Vehicles 27,122,184 3,194,551 (2,391,713) - 27,925,022

Building in progress 22,000 11,251,838 - (10,819,423) 454,415

Machine and equipment under installation 15,039,086 36,421,670 - (22,364,088) 29,096,668

Total 390,538,570 89,297,592 (5,234,628) - 474,601,534

Accumulated depreciation

Buildings 22,004,595 8,036,814 (4,758) - 30,036,651

Machinery and factory equipment 81,455,266 15,962,781 (1,742,292) - 95,675,755

Furniture, fixtures and offices equipment 14,593,069 5,658,861 (787,240) - 19,464,690

Vehicles 13,117,674 4,528,222 (2,391,711) - 15,254,185

Total 131,170,604 34,186,678 (4,926,001) - 160,431,281

Net book value 259,367,966 314,170,253

Allocation of depreciation for the year :

Cost of sales and services 15,049,063 20,111,281

Selling and administrative expenses 10,475,260 14,075,397

Total 25,524,323 34,186,678

Land and buildings and a partial of machinery are mortgaged as collaterals for credit facilities with a financial

institution as mentioned in Notes 15 and 16.

As at 31 December 2013 and 2012, the costs of fully depreciated assets which are remained in use amounted to

Baht 85.30 million and Baht 15.28 million, respectively.


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14. COMPUTER SOFTWARE – NET

Baht

2012 Increase Decrease 2013

Computer software 9,546,687 540,910 - 10,087,597

Less Accumulated amortization (6,683,916) (1,763,364) - (8,447,280)

Computer software – net 2,862,771 1,640,317

Amortization for the year 1,907,937 1,763,364

15. SHORT – TERM LOANS FROM BANKS

Baht

2013 2012

Liabilities under trust receipt agreements 59,048,052 88,598,757

Promissory notes 15,000,000 48,638,788

Total 74,048,052 137,237,545

As at 31 December 2013 and 2012, the Company has outstanding credit facilities in form of bank overdrafts,

promissory note, liabilities under trust receipt agreements, letter of credit, forward exchange contracts, the

assignment of collection under customer letters of credit, and others totaling Baht 2,485 million and Baht 1,573

million, respectively, with interest rates ranging from 4.50% - 5.88% per annum and 5.88% - 7.48% per annum,

respectively. These credit facilities are collateralized by the mortgages of the Company’s land and construction and

part of machinery as mentioned in Note 13.

16. LONG – TERM LOANS

Baht

2013 2012

Long - term loans from bank 54,016,859 40,768,859

Less Current portion (22,932,000) (14,072,000)

Long - term loans from bank - net 31,084,859 26,696,859


121

Movements in the long – term loans during the year ended 31 December 2013 are summarized below:

Baht


Add Additional borrowings 29,920,000

Less Repayments (16,672,000)


These loans are repayable approximately Baht 1.91 million per month. These loans are collateralized by the

mortgages of Company’s land and construction thereon, and part of machinery as mentioned in Note 13.

17. LIABILITIES UNDER FINANCIAL LEASE AGREEMENTS

Baht

2013 2012

Liabilities under financial lease agreements

Due within one year 3,430,853 3,488,361

Due later than one year but not over five years 5,374,283 6,495,024

Total 8,805,136 9,983,385

Less Deferred interest (572,954) (790,565)

8,232,182 9,192,820

Less Current portion (3,075,568) (3,078,827)

Liabilities under financial lease – net 5,156,614 6,113,993

The Company has financial leases with local leasing companies covering its motor vehicles and equipment for

periods of 3 - 4 years.


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18. INCOME TAX

Baht


2013 2012


Add Transactions added back under the provision of the Revenue Code 9,818,747 8,432,941

Less Additional expense deductions (5,472,457) (4,918,690)

Taxable income 97,881,225 158,954,010

Income tax in compliance with the Revenue Code

- at the rate of 20% (2012 : rate of 23%) 19,576,245 36,559,422

Current income tax expense under the Revenue Code 19,576,245 36,559,422

The amount of deferred income tax expense relating to

the initial and reversal of temporary differences

(550,907)

483,802

Income tax 19,025,338 37,043,224

Accrued income tax – beginning of year 30,561,299 19,526,408

Add Income tax for the year under the Revenue Code 19,576,245 36,559,422

Less Income tax paid during the year (39,034,251) (25,524,531)

Accrued income tax – end of year 11,103,293 30,561,299

Deferred income tax asset/liability as at 31 December 2013 and 2012, which were resulted from temporary

differences between those assets/liabiliies for income tax purpose and assets/liabilities for accounting purpose are

summarized as follow:

Baht

2013 2012

Deferred income tax assets

From allowance for doubtful accounts 1,091,707 821,523

From allowance for obsolete and decline value of inventories 704,951 625,664

From accumulated depreciation for plant and equipment 243,495 255,242

From provision for warranty expenses 878,809 956,561

From provision for employee benefits obligation 485,711 425,245

Total 3,404,673 3,084,235

Deferred income tax liability

From carrying value of asset exceeding liability under finance lease 859,563 1,090,032

Net 2,545,110 1,994,203


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19. ACCRUED EXPENSES

Baht

2013 2012

Accrued director and management remuneration 6,830,000 7,940,000

Accrued transportation 2,096,068 2,074,643

Others 3,388,279 3,111,482

Total 12,314,347 13,126,125

20. OTHER CURRENT LIABILITIES

Baht

2013 2012

Provision for warranty claim 4,394,043 4,782,804

Construction deposits 2,058,117 919,716

Withholding tax payable 520,752 1,442,040

Others 3,138,154 1,727,125

Total 10,111,066 8,871,685

21. LIABILITIES UNDER EMPLOYEE BENEFITS OBLIGATION

During the years ended 31 December 2013 and 2012, the Company has following movements in employee

benefits obligation:

Baht

2013 2012

Beginning balance as at 1 January 2,126,227 1,948,044

Recognized in statement of comprehensive income 302,327 178,183

Employee benefits paid during the year - -

Balance as at 31 December 2,428,554 2,126,227


124

The employee benefits expense were recorded in the statement of comprehensive income for the years ended 31

December 2013 and 2012 as follow:

Baht

2013 2012

Service cost 204,613

203,128

Interest cost 97,714 94,684

Reversal of service cost - (112,418)

Reversal of interest cost - (7,211)

Principal actuarial assumptions are as follows :

Discount rate 4.44 percent per annum

Future salary average increment rate 6.71 percent per annum

Normal retirement age 60 years

Number of employees 135 persons

22. LEGAL RESERVE

Pursuant to the Public Limited Companies Act. B.E. 2535, the Company is required to set aside as a statutory

reserve at least 5 percent of its net profit for the year net of deficit (if any), until the reserve reaches 10 percent of

the registered capital. This reserve shall not be distributable for dividends.

23. DIVIDEND PAYMENT

At the Annual General Meeting of Shareholders for the year 2012 held on 24 April 2012, the Company declared

the payment of dividend from the net profit for the year ended 31 December 2011 to shareholders at Baht 0.19

per share for 200 million common shares, totaling Baht 37.99 million. The dividend was paid on 11 May 2012.

At the Annual General Meeting of Shareholders for the year 2013 held on 23 April 2013, the Company declared

the payment of dividend from the net profit for the year ended 31 December 2012 to shareholders at Baht 0.31

per share for 200 million common shares, totaling Baht 62.00 million. The dividend was paid on 15 May 2013.


125

24. EXPENSES BY NATURE

Significant expenses by nature for the years ended 31 December 2013 and 2012 are as follows :

Baht

2013 2012

Raw materials and supplies used 522,666,230 620,533,321

Changes in finished goods and work in process (18,260,483) (1,286,563)

Purchasing of finished goods 440,617 354,797

Salaries, wages and other employee benefits 85,968,679 80,880,908


Warranty expenses 5,536,283 3,956,797

Repair and maintenance expenses 10,301,619 9,334,587

Commission and sales promotion 9,148,016 7,043,924

Transportation expense 7,441,599 10,032,876

25. FORWARD FOREIGN EXCHANGE CONTRACTS

The Company does not have any policy to use derivative financial instrument for speculation or commercial use.

Forward foreign exchange contracts are made to manage exposure for fluctuation in foreign currency exchange

rates on specific transactions.

As at 31 December 2013, the Company has open forward contracts which settlement dates are ranged between

1 month and 6 months as follows :

Foreign currencies Contracts rates

USD 1,727,472 31.38 – 32.62

EUR 246,972 45.57 – 42.60


126

26. FINANCIAL INFORMATION BY SEGMENT

The Company business operations categorized by geophysical nature for years ended 31 December 2013 and 2012

are presented as follows :

(Unit : Thousand Baht)


2013 2012

Sales

Service

Sales

Service

Domestic Export Total Domestic Export Total

Revenue 623,922 159,958 20,075 803,955 712,462 227,890 19,156 959,508

Costs (453,632) (129,055) (9,733) (592,420) 503,656 183,744 7,861 695,261

Gross profit 170,290 30,903 10,342 211,535 208,806 44,146 11,295 264,247

Interest income 267 167

Interest expense (6,942) (7,726)

Depreciation and amortization (35,950) (27,432)

Income before income tax 93,535 155,440

Total assets 735,844 788,968

Major Customer

For the years ended 31 December 2013 and 2012, the Company’s revenue came from Government enterprises and

a private company amounted to Baht 386 million and Baht 492 million, respectively.

27. COMMITMENTS AND CONTINGENT LIABILITIES

As at 31 December 2013, the Company has obligations under a domestic bank guarantees for performance bonds

required in the normal course of businesses approximately Baht 94.60 million. Such letters of guarantee are

covered by the mortgages of the Company’s land and construction and part of machines as disclosed in Note 13.

28. DISCLOSURE OF FINANCIAL INSTRUMENTS

Financial assets and liabilities carried in the statements of financial position included cash and cash equivalent,

accounts receivable, loan from financial institutions, accounts payable, and liabilities financial lease - purchase

agreements. The particular recognition methods adopted are disclosed in the individual policy statements

associated with each.


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Foreign Currency Risk

The Company exposure for foreign currency risk relates primarily to its trade accounts receivable and accounts

payable and loans from bank which are denominated in foreign currencies. The Company entered into the

forward exchange contracts when it considers necessary to reduce exposure on foreign currency risk.

As at 31 December 2013 and 2012, the Company has assets and liabilities in foreign currency as follows :

(Unit : Baht)

2013

Foreign currencies Exchange rate Baht equivalent

Trade accounts receivable in foreign currency

AUD 588,540 28.9078 17,013,397

USD 508,852 32.6778 16,628,164

Trade accounts payable in foreign currency

USD 114,361 32.9494 3,768,198

EUR 3,855 45.3223 174,717

Short – term loans from bank in foreign currency

USD 1,727,472 32.9494 56,919,173

EUR 46,972 45.3223 2,128,879

(Unit : Baht)

2012

Foreign currencies Exchange rate Baht equivalent

Trade accounts receivable in foreign currency

USD 123,333 30.4857 3,759,908

AUD 635,420 31.4849 20,006,135

Trade accounts payable in foreign currency

USD 2,401 30.7775 73,903

EUR 8,023 40.8603 327,820

Short – term loans from bank in foreign currency

USD 2,773,344 30.7775 85,356,583

EUR 79,348 40.8603 3,242,173


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Credit Risk

The Company provides credit term on its trade transactions. The Company manages its exposure to credit risk by

closely monitoring collection of accounts receivable and focuses on overdue accounts. In the case of doubt about

the collectability on accounts receivable, the Company provides allowance in the accounts as deemed necessary.

Interest Rate Risk

The interest rate risk is that future movements in market interest rates that will affect the results of the Company

operation and its cash flows. The Company’s exposure to interest rate risk relates primarily to their deposits with

bank, loans from bank and liabilities under hire - purchase agreements as follows :

(Unit : Baht)

31 December 2013

Floated rate Fixed rate No interest Total Interest rate (%)

Financial assets/ liabilities

Cash and cash equivalents 94,924,010 - 22,436,218 117,360,228 0.75% - 0.875%

Temporary investment 10,842,674 - - 10,842,674 Approx. 2.68%

Trade accounts receivable - - 129,158,143 129,158,143 -

Short - term loans from bank 74,048,052 - - 74,048,052 2.63% - 7.48%

Trade accounts payable and other payable - - 80,517,538 80,517,538 -

Long - term loans from bank 54,016,859 - - 54,016,859 5.50% - 7.00%

Liabilities under hire - purchase agreements - 8,232,182 - 8,232,182 2.40% - 3.55%

(Unit : Baht)

31 December 2012

Floated rate Fixed rate No interest Total Interest rate (%)


Cash and cash equivalents 29,364,320 - 14,173,476 43,537,796 0.75% - 0.875%

Temporary investment 35,291,304 - - 35,291,304 Approx. 2.66%

Trade accounts receivable - - 258,258,498 258,258,498 -

Short - term loans from bank 137,237,545 - - 137,237,545 6.00% - 7.60%

Trade accounts payable and other payable - - 80,750,509 80,750,509 -

Long - term loans from bank 40,768,859 - - 40,768,859 7.125% - 6.50%

Liabilities under hire - purchase agreements - 9,192,820 - 9,192,820 2.40% - 3.55%


129

As of 31 December 2013 and 2012, the financial instrument classified by the periods of time of the statements of

financial position date to their maturity date are as follows :

(Unit : Baht)

31 December 2013

At call Within 1 year Over 1 year Total


Cash and cash equivalents 117,360,228 - - 117,360,228

Temporary investment 10,842,674 - - 10,842,674

Trade accounts receivable 129,158,143 - - 127,234,664

Short - term loans from bank 74,048,052 - - 74,048,052

Trade accounts payable and other payable 80,517,538 - - 80,517,538

Long - term loans from bank - 22,932,000 31,084,859 54,016,859

Liabilities under hire - purchase agreements - 3,075,568 5,156,614 8,232,182

(Unit : Baht)

31 December 2012

At call Within 1 year Over 1 year Total


Cash and cash equivalents 43,537,796 - - 43,537,796

Temporary investment 35,291,304 - - 35,291,304

Trade accounts receivable 258,258,498 - - 258,258,498

Short - term loans from bank - 137,237,545 - 137,237,545

Trade accounts payable and other payable 80,750,509 - - 80,750,509

Long - term loans from bank - 14,072,000 26,696,859 40,768,859

Liabilities under hire - purchase agreements - 3,078,827 6,113,993 9,192,820

Fair value of financial instruments

The following methods and assumptions are used to estimate the fair value of each class of the Company’s

financial instruments.

- Financial assets are shown at estimated fair value.

- Financial liabilities are shown at the book value which is considered fair value because such liabilities will be

matured in short term.

29. EVENTS AFTER THE REPORTING PERIOD

At the meeting on 20 February 2014, the Company’s Board of Directors passed a resolution to propose the

payment of a dividend of Baht 0.21 per share to the common shareholders, from operating result for the year

ended 31 December 2013. The dividend payments must be approved at the Annual General Meeting of the

Company’s shareholders.

30. APPROVAL OF THE FINANCIAL STATEMENTS

These financial statements have been approved by the Company’s Board of Directors on 20 February 2014.


130