Annual Report 2012 - Shun Thai Rubber Gloves Industry

Annual Report 2012

Shun Thai Rubber Gloves Industry Public Company Limited


Annual Report 2012

Contents

Page

Mission Statement & Corporate Value 3

Message from The Board of Directors 4

General Information 5

Executive Summary 7

Summary of Financial Statement of The Company 9

Characteristics of the Business Operations 18

Risk Factors 29

Shareholding and Management Structures 33

Internal Audit 65

Related Transactions 67

Financial Report 74

2

Shun Thai Rubber Gloves Industry Public Company Limited Annual Report 2012

Mission Statement & Corporate Value

Vision

"Producing quality gloves that are widely accepted whilst being environmental

friendly (Green Product), with emphasis on the optimization of production and innovation.

Focusing in the value added of the products".

Mission

"To have an efficient & advance manufacturing process, international standard

management system with emphasis on the effectiveness in marketing and development of the

value chain".

Objective

Cost Reduction

Market Development

Alleviate manufacturing process & management practice.

Maintain product quality to international standards

Emphasize on Green Product

Create Brand Loyalty

3


Message from The Board of Directors

In year 2012, Europe's economic problems along with the uncertainty of the U.S. economy

together with reduction in economic growth rate of China had greatly impacted on the overall economy

of the world. Leading to the overall operation performance of the company. As the main revenue of the

company is from exporting 80% rubber gloves to overseas. With focus in North America and Europe

market combined accounting for 50 percent of all sales. As a result, the global economic downturn has

driven the sales of latex gloves down from the previous year.

The company will still be committed to the quality policy and care for the environment.

We will also be committed to establishing partnerships both domestically and internationally for basis of

distribution of our products. We also are emphasizing on the research and development of new products

and increase the production effectiveness to increase yield per unit along with decreasing production cost.

We are also managing risks occurred from the variability of the raw material pricing and the currencies.

As a company, we are adhering to good business conduct by conducting business in the open with

transparency; all processes are audited by the auditing committee comprising of third party individuals to

inspect the company financial reports to ensure good governance, good internal control, and effective risk

management.

The Board of Directors would like to express our gratitudes to the shareholders, business

partnership, private and public sectors as well as the financial institutions in continual supports resulting

in the growth and development of our company; thus, enabling our continuing success in the business

world. The company pledges its management control so that all are equally and fairly benefited.

Board of Directors

Shun Thai Latex Gloves Industry Public Company Limited

4


General Information

Name of Company

Shun Thai Rubber Gloves Industry Public Co., Ltd.

Company registration

No. 0107544000086 (former No. PLC 669)

To do the Business

Doing the main business as a manufacturer, distributor and exporter of rubber

gloves for medical field, household, industry, etc.

Number and type of outstanding shares of the Company

Registered capital 499,453,373 baht, par value 1.00 baht, paid-up shares

499,453,373 baht. Securities Registrar

Address of head office and plant situated

No. 9, Village 4, Ka Ched Sub-district, Mueang District, Rayong Province 21100

Tel. (038) 634-072-3, 634-481-6

Fax (038) 634-001, 634-480.

www.shunthaiglove.com

Location of branch office

No. 14, Moo 4, Ka Ched Sub-district, Mueang District, Rayong Province 21100

No. 52/18, Moo 4, Ka Ched Sub-district, Mueang District,

Rayong Province 21100

No. 52/19, Moo 4, Ka Ched Sub-district, Mueang District,

Rayong Province 21100

Tel. (038) 634-072-3, 634-481-6 Fax (038) 634-001, 634-480.

No. 238/9, Ratchada Pisek Road, Huai Khwang District, Bangkok metropolis 10320

Tel. 0 – 2274-0951 Fax 0 – 2274-0950

5

http://www.shun/


Securities Registrar

Thailand Securities Depository Co., Ltd.

62 The Stock Exchange of Thailand Building, 4, 6-7 floors,

Ratchada Pisek Road, Khlong Toei, Bangkok 10110

Tel. 0 - 2359 - 1200 – 1 Fax 0 - 2359 - 1259

Auditor

Mr. Apichart Sayasit, C.P.A (Thailand) No. 4229

Baker Tilly Audit and Advisory Services (Thailand) Limited

Level 21/1 Sathorn City Tower,

175 South Sathorn Road, Sathorn,

Bangkok 10120

Tel. 0 – 2679 – 5400 Fax 0 – 2679 – 5008

Legal Counsel

Mr. Suphan Jirathiwattanakul

Suphan Jirathiwattanakul Law Office

49/6, Rim Nam Road, Tha Pra Du Sub-district,

Muang District, Rayong Province 21000

Tel. (01) 943-1915 Fax (038) 871-148

Secretary and Investor Relations

Miss Sureeporn Sandsang

238/9, Ratchada Pisek Road, Huai Khwang District, Bangkok metropolis 10320

Tel. 0 - 2274-0951 Fax. 0 - 2274-0950

Email : [email protected]

6

mailto:[email protected]


Executive Summary

Overall Performance and Important Events

In 2012 the company delayed in submitting the financial report of Quarter 3/2012 due to

changes in management at the highest levels. Managing Director, managers, and Accounting& Finance

staffs has all been changed. As a result, all works in the account & finance was disrupted and delayed.

However the Company later submitted Quarter 3/2012 financial report on January 15, 2013.

In December 2012, Mr. Ong Siew Bock, who has served as Director and President, sold

96,180,774 of stocks or shares equal to 19.257% of the total shares of the Company to Mr. Seah Lan

Seang to stake a significant change. This was recorded in the report the acquisition or disposal of

securities (Form 246-2).

The Company has a policy for the administration to focus on improving quality, expand sales

and reducing costs to generate greater profits to strengthen the financial position of the company to

generate returns for shareholders in the future.

Overview of year 2012 performance, the company's total revenue was Baht 831.26 million,

down Baht 194.98 million or 19.0 % decrease. Cost of sales and expenses Baht 972.18 million, down

Baht 72.19 million or a 6.91 % decrease. There by causing a net loss of Baht 140.92 million, an increase

from the previous year by Baht 122.79 million, total assets stood at Baht 638.37 million, down by Baht

114.38 million or by15.20%, total liabilities stood at Baht 686.71 million, down Baht 59.96 million or by

8.03% And shareholders' equity was at Baht -48.35 million, down Baht 54.43 million or by 895.23 %

In 2012 the total sales was Baht 817.80 million, a decrease from the year 2011 in the

amount of Baht 174.18 million or by 17.56%. The gross loss was Baht 57.87 million, representing a loss

of 7.08% from sales, the cost of goods sold was Baht 875.67 million, a decrease of 9.46% from the year

2011. It can be seen then, that the cost of sales decreased at a rate less than sales. This was due to the cost

of raw materials was higher than the previous year, and lower sales figure. As a result, the company

recorded a gross loss.

7


In 2012 accounts receivable - net Baht 46.47 million, down from the year 2011 in the

amount of Baht 43.58 million or 48.40% due to a decrease sales of Baht 174.18 million.

Inventories was at Baht 207.89 million in 2012 compared to 2011, decreased by Baht

125.15 million or down 37.58%

2012 total debt was Baht 686.71 million, a decrease from the year 2011 in the amount of

Baht 59.96 million or 8.03%, with current liabilities at Baht 560.51 million, down Baht 29.07 million or

4.93%, which was a decrease of accounts payable from commercial companies.

Liabilities valued at Baht 126.21 million, down Baht 30.89 million or 19.66% decrease due

to the reduction of debt under the debt restructuring and finance lease liabilities

Shareholder equity fell because in 2012 recorded a net loss increased of Baht 122.79

million. In 2011 the accumulated losses was Baht 597.06 million, the company had a deficit from this

year, and the accumulated losses come to Baht 737.98 million. As a result, the shareholders' equity

become of less than capital with Baht 48.35 million in deficit.

8


Summary of Financial Statement of the Company

Total Assets

Total Sales

กราฟแสดงส่วนของผูถื้อหุ้นของบริษัท

717 789

649 752

638

0

200

400

600

800

1,000

2008 2009 2010 2011 2012

TOTAL ASSETS Million Baht

796 724

1009 991 818

0

200

400

600

800

1000

1200

2008 2009 2010 2011 2012

SALES

Million Baht

9


Shareholders’ Equity

Summary of Financial Statement of the Company

122 94

25 6

-48 -100

-50

0

50

100

150

200

2008 2009 2010 2011 2012

SHAREHOLDERS' EQUITY

Million Baht

10


Financial summary

(Thousand : Baht)

Item 2012 2011 2010 2009 2008

Profit & loss a/c

Income

Domestic sales 161,713 157,328 127,885 86,952 174,935

Foreign sales 646,887 834,650 881,455 638,030 621,893

Sales 808,600 991,978 1,009,340 724,982 796,828

Other incomes 22,660 34,264 21,031 13,096 22,094

Total incomes 831,260 1,026,242 1,030,371 738,078 843,760

Expense

Cost of sales 875,672 967,166 1,015,043 645,425 782,410

Expense on sales & administration 52,257 51,152 55,208 59,095 47,352

Interest payment 34,226 26,044 24,754 25,166 33,790

Impariment loss on fixed assets 11,732 - - - -

Loss on impairment of assets - - 23,910 -

Reversal of allowance for doubtful accounts (1,712) - - - -

Provision for doubtful accounts - 4,029 4,849 33,068

Provision for loss on decline in value of inventories - - 7,744 9,666

Share of loss from investments recorded - - - -

Total expenses 972,175 1,044,362 1,099,034 766,189 906,286

Net profit (loss) before taxes -140,915 -18,120 -68,663 -28,111 -87,364

Corporate tax - - - -

Net profit (loss) -140,915 -18,120 -68,663 -28,111 -87,364

11


(Thousand : Baht)

Item 2012 2011 2010 2009 2008

Balance sheet

Trade account receivables (net) 46,465 90,047 84,359 102,084 116,069

Inventories (net) 207,885 333,038 196,937 303,518 155,299

Total Current Assets 269,610 430,895 291,498 425,536 286,321

Land, buildings & equipment (net) 353,506 306,912 340,656 355,160 410,728

Total assets 638,365 752,750 649,680 789,461 717,491

Bank overdrafts & short-term loans from financial

institutions 370,136 388,859 301,453 290,326 338,398

Trade account payables 125,188 178,658 193,154 219,304 92,449

Total current liabilities 560,505 589,575 622,280 650,314 561,149

Long-term loans 126,207 157,095 0 41,766 31,014

Total liabilities 686,712 746,670 623,722 694,840 594,879

Issued and paid-up share capital 499,453 499,453 499,453 499,453 499,393

Premium on common shares 103,688 103,688 103,688 103,688 103,628

Increment of revaluation surplus on fixed assets 86,488 - - - -

Deficit (737,977) -597,062 -577,183 -508,521 -480,410

Total equity (48,347) 6,079 25,958 94,621 122,611

Total liabilities and equity 638,365 752,750 649,680 789,461 717,491

Statement of cash flows

Cash flows from operating activities 82,015 -13,311 96,395 47,410 6,880

Cash flows from investing activities (18,648) -8,725 -33,605 -814 -7,446

Cash flows from financing activities (56,377) 18,876 -71,436 -39,849 2,621

Cash and cash equivalents at end of year 8,145 1,155 4,315 12,961 6,214

Share Information

Book value per share (baht) -0.09 0.012 0.16 0.50 0.17

Dividend per share (baht) - - - - -

profit (loss) per share (baht) Fully Diluted -0.282 -0.037 -0.137 -0.09 -0.19

12


(Thousand : Baht)

Analysis of Financial Ratio 2012 2011 2010 2009 2008

Liquidity Ratio

Current Ratio (time) 0.48 0.73 0.58 0.65 0.51

Quick Ratio (time) 0.11 0.17 0.18 0.19 0.23

Account Receivable Turnover (time) 11.98 11.38 10.89 7.10 6.87

Average Debt Collection Time (days) 30.46 32.09 33.52 51.41 53.13

Current Finished Goods Turnover (time) 3.24 3.65 4.06 2.90 4.62

Profitability Ratio

Gross profit ratio (%) -7.08% 2.50% -0.32% -0.41% -6.72%

Net profit ratio (%) -17.23% -1.83% -6.88% -3.88% -10.96%

Financial Policy Ratio

Debt to equity ratio (time) -14.20 122.82 24.03 7.34 4.85

Interest coverage ratio (time) -2.82 0.30 -1.77 -0.12 -1.59

Dividend payment ratio (%) 0.00% 0.00% 0.00% 0.00% 0.00%

With regard to the financial statements of the company during the year 2008 – 2012,

the auditing reports of the auditors and the auditor’s names are as follows.

• Auditor’s name : Financial Statements As of December 31 , 2008

Mr. Somchai Kurujitkosol

Authorized Auditor No. 3277

S.K. Accountant Services Co., Ltd.

• Auditor’s name : Financial Statements As of December 31 , 2009 and 2010

Miss Waleerat Akkarasrisawad


Baker Tilly Audit and Advisory Services (Thailand) Limited.

13



Mr. Sunthorn Sarakhwan




Mr. Apichart Sayasit



Audit Fee

In 2012, the company paid the audit fee to the auditors of Baker Tilly Audit and Advisory

Services (Thailand) Limited, and non-audit service fees such as accommodation, travel and allowance

fees for auditors working at the company’s head office, Rayong Province, as mentioned in the table

below.

Detail

Baker Tilly Audit and Advisory Services (Thailand) Ltd.

S.K. Accountant

Services

Co., Ltd.

Year 2012 Year 2011 Year 2010 Year 2009 Year 2008

1. Audit Fee 950,000.- 950,000.- 950,000.- 930,000.- 800,000.-

2. Non-audit Service Fee 97,650.- 68,175.- 68,700.- 55,270.- 171,600.-

Total 1,047,650.- 1,018,175.- 1,018,700.- 985,270.- 971,600.-

14


Explanation on Financial Statements and the Performance

Overall Performance

In year 2012 total sales decreased from the year 2011 with a gross loss of Baht 57.87

million, representing a 7.08% loss from sales. Due to the company has been focus on selling goods in

large quantities with some items which have a relatively high production costs.

In 2012 due to fuel costs, chemicals and other manufacturing costs together with minimum

wage increase, adjusted by the Cabinet, which came in to effect in January 2012, drove company's overall

cost up.

Performance

Total Revenue

Total revenues in year 2012 amounted to Baht 831.26 million, a decrease from the year

2011, with total revenues of Baht 1,026.24 million or equivalent to Baht 194.98 million decrease or down

by 19%

On other incomes, a decrease from Baht 20.80 million from year 2011 due to foreign

exchange gain and a fall in revenue from sale of by-products.

Cost of Sales and Expenses

Company's cost of sales in 2012 were Baht 875.67 million, a decrease from Baht 967.17

million 2011, decreased by 9.46% while sales declined by 17.56% it can be seen that cost of sales

decrease less than the sales due to raw material costs was higher than previous year.

Selling and administrative expenses in 2012 was Baht 52.26 million, an increase from the

2011 by Baht 51.15 million or by 2.16%

15


Net profit (loss)

The Company's results for the year 2012 recorded a net loss of Bath140.92 million, an

increase in loss from the year 2011 with a net loss of Baht 18.12 million baht or by 677.65% due to the

increase in gross loss of Baht 82.68. million, Baht 20.80 million decrease in other income, finance costs

increased by baht 8.18 million and a loss on impairment of fixed assets net 11.73 million baht.

Financial Status

Asset

In 2012 and 2011, the total assets were Baht 638.37 million and Baht 752.75 million

respectively. Mainly composed of account receivable, inventories and fixed assets

In 2012 accounts receivable - net Baht 46.47 million, down from the year 2011 – net Baht

90.04 million or 48.40% due to lower revenues from the sale by Baht 174.18 million.

Inventories - net worth Baht 207.89 million in 2012 compared to - net worth Baht 333.04

million in 2011 or down 37.58%

Fixed assets - net Baht 353.51 million in 2012 and Baht 306.91 million in 2011, increased

by Baht 46.59 million or 15.18% Due to the change accounting classification making total assets increase

by Baht 18.66 million in addition to land and buildings revaluation to increase by Baht 191.51 million

and depreciation down the lifespan

Liabilities

Total liabilities in 2012 and 2011 was Baht 686.71 million and Baht 746.67 million

respectively, down Baht 59.96 million or 8.03% which can be classify in current liabilities and long-term

debt as follows:

Current liabilities in 2012 and 2011 was Baht 560.51 million and Baht 589.58 million

respectively, down Baht 29.07 million or 4.93% due a reduction in trade accounts payable.

16


Non-current liabilities in 2012 and 2011 was Baht 126.21 million and Baht 157.09 million

respectively, down by Baht 30.89 million or 19.66% as liabilities under debt restructuring from related

companies and liabilities under finance leases decreased

Shareholder’s Equity

In 2012 the company has a registered capital of Baht 499,453,373 and paid-up capital

amounting to Baht 499,453,373 share premium of Baht 103.69 million and contributed surplus on

revaluation of fixed assets was Baht 86.49 million, with accumulated losses totaling to Baht 737.98

million, the shareholder equity to be below capital and a deficit amount of Baht 48.35 million.

17


Characteristics of the business operations

Shun Thai Rubber Gloves Industry Public Company Limited (“the company”) has started its

business since 1998 and has been registered as the public company on September 4, 2001.

Its core business is manufacturing, selling and exporting rubber gloves. Rubber gloves are classified by

use into 3 categories as follows:

(1) Medical glove which is divided into 2 types as follows:

• Surgical gloves for surgery purpose. This glove is thin, durable, long (covering

elbow), 100% antiseptic by Gamma ray, and 1-time use for germ protection. The

package is carefully done and for convenient use.

• Examination gloves for general examination purpose, comprising powdered gloves

and non-powdered gloves. The production of this glove concerns convenience of use

i.e. easy to put on - take off and easy unpacking. This ambidextrous glove fitting both

hands is thin, fit, short (covering wrist), not expensive, and 1- time use for avoiding

spread of germ.

(2) Household glove is in big size, strong and durable, proper use for water or detergent,

long-time use, beauty in design and soft touch. The package is carefully done to attract customers.

(3) Industrial glove is in big size, strong, highly durable and worthy of use. The package does

not emphasize on beauty. This glove is proper for use in industrial factories such as food processing

industry or instant food process, etc.

In addition, rubber gloves may be categorized by customer needs into 2 categories, namely,

powdered glove and non-powdered glove. For powered glove, the company may use protein content up

to 50 micrograms in compliance with the international standards. Non-powdered glove is favorite among

persons allergic to powder protein or persons hating powder dirty.

18


The gloves produced by the company are classified into medical devices according to the Thai

Food and Drug Administration, therefore, manufacturing and exportation must be approved according to

the standards of the FDA so that products produced comply with the quality and safety requirements. The

company products have already been approved and certified according to various international standards.

Product standard is settled to international standard. Our company used as a guide and reference in

glove manufacturing. Our company's products received standard :

No. Product Standards Meaning

1 TIS. 538-2548 Industrial Standard. Sterile gloves for surgery.

Thai Industrial Standards Institute

2 TIS. 1056-2548

Industrial Standard. Examination gloves for single use.

Thai Industrial Standards Institute : Standard Specification for

Rubber Surgical Gloves

3 Standards EN455 British Standard: Medical Gloves for Single use

4 ASTM D3577, ASTM D3578,

ASTM D 6319

ASTM: Standard Specification for Rubber Surgical Gloves, Rubber

Examination Gloves, Nitrile Examination Glove for Medical

Application.

5 ISO 11193, ISO 10282 International Standard: Single-Use Medical Examination Gloves,

Single-Use Sterile Rubber Surgical Gloves Specification,

19


In addition, the company is awarded the factory standard by several institutions and also the

Good Performance Exporter of Thailand Award by Thai Government. Therefore, the company has been

granted the Good Exporter Level from the Revenue Department. The followings are the details.

No. Receive Standards Meaning Year Certified Standards

1 ISO 9001 International Standard- Quality

Management System 2002 TUV Rheinland

2 ISO 13485 under CMDCAS

Control standard on medical device

production and permitted to export rubber

gloves to Canada.

2005 TUV Rheinland

3

GMP : Good Manufacturing

Practice Good Manufacturing Practice

2006

Ministry of Public

Health

4 MDD : Medical Device

Directive Medical Glove European Standards 2007 TUV Rheinland

5

510K

Standards USA FDA

-

FDA (U.S. Food and

Drug Administration)

6

Health Canada

Medical Canada Standards

2009

Therapeutic Products

Directorate Medical

Devices Bureau Canada

20


Quantity Rubber Gloves Order Shipment

Quantity Rubber Gloves Order Shipment for the year 2008 - 2012, for the year 2012

total 605,837,816 prices

Quantity Rubber Glove Order Shipment Year 2008 – 2012

Quantity Rubber Glove Order Shipment by Quarterly

0

200

400

600

800

1000

2008 2009 2010 2011 2012

692 734 835

708 606

Quantity Rubber Glove Order Shipment Year 2008 - 2012

Million

-

200

400

600

800

1,000

2008 2009 2010 2011 2012

225 138 242 168 132

219 209

185 164 145

111 178

178 159 170

136 209 230

218 158

Quantity Rubber Glove Order Shipment By Quartery Year 2008 - 2012

Q1 Q2 Q3 Q4

Million

21


Sales and Distribution Channel

The company has establish marketing strategies in defining customers or targeted group, a critical

variable in determining business status, to decrease pressure from cost of production and prices.

Therefore, In 2012 the company implements the policy of product distribution to foreign market with the

total of 80% of total sales volume and domestic market with the total of 20% of total sales volume.

Exports can be broken down to main groups as :

Distribution of rubber gloves Year 2013 and 2012

Strategies and Marketing Competition

Marketing Strategies

- Purchase orders will be received 1 to 3 months in advance in order to estimate production

costs more accurately. Selling prices will be set reasonably to gain profit and to compete with

competitors, resulting in accurate production plans.

5.40% 22.04%

26.88%

28.30%

47.72%

33.80%

20.00% 15.86%

0%

20%

40%

60%

80%

100%

2013 2012

Distribution of rubber gloves Year 2013 and 2012

Thailand Zone

Asia Zone

Europe Zone

North America Zone

22


- For price setting, the factors taking into consideration included costs of raw materials,

foreign exchange rates, order quantity, and glove sizes. In addition, the price must be profitable but

competitive price.

- The company’s distribution channels comprised of distributors and its direct sales. This

year, the company will focus on domestic clients neighboring country, specifically Asian consumers due

to the economy downturn in the EU. & US.

- Nevertheless the company try to keep good relationships with existing clients and also

finding new ones.

Competition

In the overall picture, the demand on rubber gloves in 2012 was higher. Demand for rubber

gloves was necessary for medical devices and also other industries, especially food and services

industries, including electronics industry, resulting in more sales for the company.

For international sales, competition for sales of rubber gloves was increased due to the

global economic slow down. But the demand for rubber gloves continue to grow. However the

appreciation of the baht in influence the competitiveness of the company, making customers both at

home and abroad to turns to imports from competing countries such as Malaysia, Indonesia and

even China.

Main competition came from manufacturer from Malaysia, China and Indonesia. With the

ability to produce a more standardized products and utilizing a more advanced machineries with greater

output, thereby lowering the cost per unit resulting in a cost advantages.

However the Company believes that our gloves qualities are widely accepted in the

international market due to the manufacturing process has been certified by many recognized

international standard institutes. Along with good customer relations, future planning & development

in the production line. The company will be able to have an advantage on par with competitors

in the market.

23


Product Supply

Production of Rubber Gloves

Presently, the company has 2 plants with 15 production lines for rubber gloves production,

which are divided as follows:

- First plant with 7 production lines (1st – 7th sets) for rubber gloves production, maximum

capacity of 32 million pieces / month

- Second plant with 8 production lines (8th – 15th sets) for rubber gloves production, maximum

capacity of 55 million pieces / month

Production of Latex and Steam

In 2008, the company started producing latex used for rubber glove production. The latex

produced was of good quality costing less than buying from other suppliers. But the company continues

to struggle with liquidity and had to purchase latex from other vendors on credit term also.

Location of Raw Material and Raw Material Supplier

The company purchases concentrated latex from producers in the Rayong, Chantaburi and

Songkla provinces; all concentrated latex used are from the domestic market. The company has defined

purchasing policy for latex to the lowest price offer, however, the company also insists on the individual

supplier latex quality.

The company has a policy on purchasing latex from a supplier offering the lowest price

with high quality. Latex prices depend on market prices in that period. The company will compare

quotations of suppliers in the same time period. The comparison is in accordance with its policy on best

price with best quality by comparing market prices with purchase prices of at least 3 suppliers and also

compared to the fair price quoted by Bangkok Rubber Research Institution.

24


Production Cost Year 2013 and 2012

Price of Concentrated Latex 60% (January - December ) Year 2008 – 2012

60.42 44.28

11.51

12.96

9.21

10.39

9.98

13.14

4.17 5.63

3.26 4.24

1.45 9.36

0%

20%

40%

60%

80%

100%

2011 2012

Production Cost (%)

Etc.

Electricity Charge

Depreciation

Wage

Chemical

Fuel

Latex 60%

75.0 61.8 64.0

72.0 75.0

65.7 65.8

71.5

57.9 57.8 57.0 54.0

64.8

0

20

40

60

80

100

120

Price of Concentrated Latex 60% (January - December ) Year 2008 - 2012

2008

2009

2010

2011

2012

Baht/kg.

25


Environmental Concern

The production process of making latex gloves is environment friendly, only in the cleaning

process for the used formers which clean by water and its solutions that may have some dirty particles

along with. In cleaning this used water, we have additional standard process for water treatment to meet

acceptable standard before releasing those treat water into the public area.

No. Quality of used water Standards The treatments

1 pH pH = 5.5-9.0 pH = 7.5-8.5

2 Total Dissolved Solid no more than 3,000 mg/liter 1,300-1,800 mg/liter

3 Suspended Solid no more than 50 mg/liter 18-25 mg/liter

4 Biochemical Oxygen Demand no more than 20 mg/liter 4-8 mg/liter

5 Chemical Oxygen Demand no more than 120 mg/liter 50-80 mg/liter

6 Temperature no more than 40 celsius 28-31 mg/liter

7 Colour non-detestable clear

8 Odor non-detestable no

The production process of making latex gloves is environment friendly, only in the cleaning

process for the used formers which clean by water and its solutions that may have some dirty particles

along with. In cleaning this used water, we have additional standard process for water treatment to meet

acceptable standard before releasing those treat water into the public area. The company’s production

process complied with standards of medical industry such as ISO 10282, ISO 11193, EN 455, ASTM

D3577, ASTM D3578, ASTM D6319, TIS. 538-2548, TIS. 1056-2548. The company has been granted

by the Food and Drug Adminstration to be the rubber glove producer for surgery, including other

standards such as ISO 9001, ISO 13485, and GMP.

26


Research and Development

The company has given great importance to our research and development project to increase the

company’s product values and to manufactures products that answer various customer requirements. Our

R&D team, cooperating with our customer in a partnership, is currently conducting researches for new

products and further exploring researches in terms of safety, decreasing risks of fatality due to allergic

reactions of proteins in the rubber glove. Currently our company has been able to produce rubber gloves

with low amount of proteins according to the international standards and have been certified by the

United States Food and Drug Administration agency.

27


Revenue Structure

Compare sales of rubber Glove Year 2003-2012

Percentage Sales of rubber Glove Year 2003 - 2012

40.5 36.8 52.0 33.8 33.0 81.2 87.0 121.1 157.3 161.7

499.7 562.3 601.2

517.3

751.4 621.9 637.9

881.5 834.7

646.9

0

200

400

600

800

1000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Compare ( Domestic VS International ) Sales of Rubber Glove Year 2003 - 2012

Domestic Sales of Rubber Glove International Sales of Rubber Glove

7.5% 6.2% 8.0% 6.1% 4.2% 11.6% 12.0% 12.1% 15.9% 20.0%

92.5% 93.9% 92.0% 93.9% 95.8% 88.5% 88.0% 87.9% 84.1% 80.0%

0%

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Percentage ( Domestic VS International ) Sales of Rubber Glove Year 2003 - 2012

International Sales of Rubber Glove Domestic Sales of Rubber Glove

Million Baht

28


Risk Factors

1. Production Risk

Risk on Price Fluctuation of Raw Materials and Fuel

Concentrated Latex 60%

Concentrated latex 60% as main raw material in the manufacture of rubber gloves. In 2012

prices were volatile and difficult to predict. In the first quarter of the year, with an average price of 66.92

baht / kg in the second quarter, the average price of 70.89 baht / kg in the third quarter at an average price

of 65.05 baht / kg and an average fourth quarter. at 56.28 baht / kg for the year 2012 at an average price of

64.78 baht/kg in 2011, a decrease of 28.44 percent.

Year 2012, the company manufacture some of it’s own latex used. Continuing with the

quality production process. But the lack of liquidity made it impossible to buy natural rubber latex

needed to produce concentrated latex 60%. As a result, the company had no choice but to remain exposed

to rubber latex price fluctuation.

However, the company has ordered latex from other suppliers by making forward contracts

and distributed its orders to several suppliers. With this strategy, the company was able to estimate its

production costs at a certain level and to reduce the risk on price fluctuation. The comparison is in

accordance with its policy on best price with best quality by comparing market prices with purchase

prices of at least 3 suppliers and also compared to the fair price quoted by Rubber Research Institution of

Thailand, Bangkok. In addition the company made consideration to the Credit Term.

Nitrile

Synthetic latex (Nitrile). In the first quarter of 2012 the average price of 55.30 baht / kg,

54.20 baht / kg in the second quarter, 47.46 baht / kg in the third quarter, 42.36 baht / kg in the fourth

quarter. For the year 2012 average price of synthetic rubber was at 49.83 baht / kg, down 6.53%

compared to 2011 with the average price of 53.31 baht / kg.

29


Although the price of synthetic rubber is lower than the previous year. However, in the long

run synthetic latex price will rise. Since the year 2012, chemicals are increased to 5% from the year 2011,

the Company hedged on this issue by providing many chemical suppliers. The buying agents and import

directly. Including production control procedures to minimize loss and wastage.

Palm Kernel Shell

Since the year 2008 the company has been using palm shells as fuel to produce steam to heat

the oil. By buying Palm Shells from Malaysia and Indonesia. Palm shells are even lower than the price is

oven oil. But the company continue to face issues with palm shell price upward trend. Due to a shortage

of palm shell during the rainy season. And policy support for renewable diesel fuel in Malaysia.

For the average price of palm shell in 2008 was 2.34 baht / kg in 2009 was 2.55 baht / kg in

2010 was 2.63 baht / kg for the year 2011 of 2.94 $ / kg for the average price of palm shell in the year

2012. 3.63 baht / kg, up 23.46% over 2011.

In the last quarter of 2012, the company has stock a lot of palm shell backing the

administration policy of the management for use in planning in event of severe short supply and prices

are likely to rise further. Currently, the company is looking in to the possibility of using other biomass

that provide similar heat calorific value and domestic replacement to prevent the risk of future events.

As such factors will make the company to have higher production costs. Uncertainties in the raw

material prices will affect sales planning and production of the company's cost control policy. Therefore

focuses on the manufacturing process to reduce the risk was implemented. Arising from the volatility of

raw materials such as chemicals, replace the latex, increasing the capacity, control, power and maximize

the benefits. And control of steam heat loss to a minimum and so on.

30


Inventory risk.

The company has plenty of inventory problems. These are is mostly finished goods and

work in process. But are likely to decline in the future.

To hedge risk in this regard. Management will strictly manage inventory. And to reduce

inventory by the age of the product. If any product is likely deterioration in the near future will continue

to accelerate the sale of such goods out. Planned marketing and distribution has been implemented to

enhance liquidity for the company.

Risk planning.

If the company made planning error, will result in increased inventory & increase costs.

Plan production at higher volume than the purchase order was to drive the cost per unit was down and the

remaining stock must be stored into the warehouse, resulting in the risk of production planning.

To hedge risk in this regard. Management will conduct a conference relevant to clarify the

cause of the production plan. And preparation of a new plan to comply with the order and the customer's

needs.

.

2. Financial Risk

Risks from foreign exchange

Since the company’s main revenue came from foreign sales, 80% of the revenue was in foreign

currencies. Therefore, significant currency fluctuation will affect its operation inevitably.

The company has managed the currency risk by making forward currency contracts with

domestic banks, on monthly basis. This is considered another money management strategy mitigating

risks related to foreign exchange fluctuations.

31


Risk on unsettled payment of customers

In the past the company experienced problems with the allowance for doubtful debt of

returned goods. The company has suffered the need to set aside for allowance for doubtful accounts each

year.

To hedge the Company's customers with overdue debt. Payment must be completed before

the company will ship the new order. In terms of new customers and the company has change the credit

terms to customers as L / C At sight, D / P At sight or payment for goods prior to shipment. Such policies

allows the Company to reduce overdue receivables decreased and resulted in the allowance for doubtful

debt in 2012, a decrease of 2011.

Each individual customer is selected by its reputation and financial status. In addition,

the company examines some customers via the EXIM Bank and grants 60-day credit terms.

The company sets allowance for doubtful debts if any customer has not made the payment within granted

credit terms. This rule will prevent any risk arising from customers unable to repay debts

In the allowance for doubtful accounts of the Company, is determined by the behavior of

the debtor. If exceeded the duration of the credit and a clear indication that it may not pay to the

Company the Company will proceed with the allowance for doubtful accounts balance. And executed

closely monitoring outstanding debt. To minimized losses.

32


Shareholding and Management Structures

Securities

The company has registered capital 499,453,373 Baht, paid-up shares 499,453,373 Baht,

par value 1.00 Baht,

Shareholders

First 10 major shareholders on March 18, 2013

No. List of Shareholders / ShareholderGroup Share ( % )

1 MR. SEAH LAN SEANG 96,180,774 19.26%

2 MISS DEONG CHEW MING,ESTHER 79,476,999 15.91%

3 THAI HUA HOLDING COMPANY LIMITED 78,387,003 15.69%

4 EVERGROW FERTILIZER COMPANY LIMITED 57,787,663 11.57%

5 MR. LIN FU LAI 38,273,179 7.66%

6 THAI N V D R COMPANY LIMITED 15,342,618 3.07%

7 MR. CHALIT JESADAVISUT 14,537,280 2.91%

8 MR. EKACHAI TANGSAJATAM 14,325,550 2.87%

9 MR. WINYOO JESADAVISUT 13,149,999 2.63%

10 MR. WITHOON JESADAVISUT 13,149,999 2.63%

11 OTHER SHAREHOLDERS 78,842,309 15.79%

TOTAL 499,453,373 100.00%

Source: Thailand Securities Depository Co., Ltd.

Dividend payment policy

The company has dividend payment policy on 50 percent of profit after tax each year.

33


Management

The company has set its organizational structure as the following chart.

34


Annual Report 2012

The Board of Directors

1. Mr.Yanyong Phuangrach

Position Chairman of the Board of Director

Shun Thai Rubber Gloves Industry PLC.

Age 60

Address 101/101 Preecha village Moo 9 Soi 10 Phutthamonthol

sai 4 Road, Kratoomlom , Sampran, Nakornpathom 73220

Education Master’s Degree in Laws, New York University

Governance Training Thai Institute of Directors Association (IOD)

DAP 2006 and DCP 2007

Attend of meeting in 2012 The Board of Directors Meeting 3 / 15 times

(Appointed on October 27, 2012)

% Shareholding - None -

Working until the present 2012-present Chairman of the Board of Director


2009-2012 Permanent Secretary

Ministry of Commerce

2007-2009 Director General

Department of Internal Trade


2003-2007 Deputy Permanent Secretary


2001-2003 Director General

Department of Intellectual Property


* The established Chairman of the Board of Director for The meeting of The Board of

Director No. 12/2012 at October 27, 2012 Effective October 27, 2012.

35


2. Mr. Lin Fu Lai

Position Director (Chairman of the Executive Committee)


Age 58

Address 9 Moo 4, Kached, Muang, Rayong 21100 Thailand

Education Diploma from Cheng Sing College Taiwan

Governance Training - None -


% Shareholding 7.663 % (38,273,179 shares)

Shareholder List issued by STHAI at March 18, 2013

Working until the present Oct 2012 - present Chairman of the Executive Commitee


Sep – Oct 2012 Chairman of the Board of Director


Aug – Sep 2012 Chief Executive Officer


2002-2009 Chairman of the Board of Director


* The authorized person on behalf of the company

36


3. Mr. Porkuan Kittisriswai

Position Director (Managing Director)


Age 50

Address 66/117 Soi Lardprao 80, Lardprao Road,

Wangthonglang, Bangkok 10310

Education Bachelor’s Degree in Engineering (Communication Engineering)

Rajamangala University of Technology

Governance Training Thai Institute of Directors Association (IOD) DAP 2012


% Shareholding 0.054 % (272,199 shares)


Working until the present 2012-present Director (Managing Director)


2010-2012 Director (Technical Director)


2010-Jan 2013 Director

Agrow Enterprise Co., Ltd.

2005-present Director

Fujian TaiSheng Petrochemical Co., Ltd. &

Fujian TaiHua Shi Hua Co., Ltd. .

2000-2005 Managing Director

Vision Access International Co., Ltd.

1991-2000 Assistant Managing Director

Data International Co., Ltd.

* The established Director for The meeting of The Board of Director No. 2/2012

at March 2, 2012 Effective March 2, 2012.

(authorize to sign to on behalf of the company to bind the company.)

** The established Managing Director for The meeting of The Board of Director No. 10/2012

at September 8, 2012 Effective September 8, 2012.

37


4. Mr.Winyoo Jesadavisut

Position Director


Age 33

Address 136 Soi Ladprao 80 (Janthima)

Wangthonglang, Bangkok 10310

Education Master’s Degree in Business Administration (Finance)

Oklahoma City University, USA



(Appointed on October 27, 2012)



Working until the present 2012-present Director


2009-present Assistant Managing Director

Debug Termite and Pest Control

(Thailand) CO., Ltd.

2007-2008 Marketing Executive

Thai Hua Rubber PLC.

2005-2006 Assistant Marketing Executive


* The established Director and Executive Director for The meeting of The Board of Director

No. 12/2012 at October 27, 2012 Effective October 27, 2012.

38


5. Asso. Prof. Krit Phurisinsit

Position Chairman of Audit Committee and

Independent Director


Age 63

Address 14 Sukhumvit 49 (Off 6) Soi Prompak, Khlong Toei Nua,

Wattana, Bangkok 10110

Education B.S.B.A (Michigan) U.S.A. MS. In Economic (Texas) U.S.A.

Honor society in Economics (Omicron Delta epsilon) (Texas) U.S.A.


DAP 36/2005, ACP 11/2006, SFE 3/2009


The Audit Committee Meeting 10 / 10 times


Shareholder List issued by STHAI at March 18, 2013 Working until the present 2012-present Chairman of Audit Committee and



2002-2012 Audit Committee and Independent Director


2005-2012 Chairman of Audit Committee and


Thanapat Property Development PLC.

2004-Jan 2013 Audit Committee


2003-present Vice president for Office of Regional Campus

Administration Amnatcharoen Province

Ramkamheng University

1973-present Asso. Prof. Industrial Economics Faculty


1997-1998 Consultant of Minister of University

* Present the position Chairman of Audit Committee and Independent Director

for The Meeting of The Board of Director No. 2/2012 at March 2, 2012 Effective March 2, 2012

39


6. Asso. Prof. Suphol Ingprasarn

Position Audit Committee and Independent Director


Age 75

Address 63/1 Moo 2, Toknong, Kalang, Chanthaburi 22110

Education Bachelor’s Degree Thammasart University





Working until the present 2008-present Audit Committee and Independent Director


2009-Jan 2013 Audit Committee


1968-1999 Asso. Prof. (Level 9)


40


7. Ms.Vilai Chattanrassamee



Age 59

Address 60/30 Moo 1 Thongsonghong, Laksi,

Bangkok 10210

Education Master’s Degree in Accounting Thammasat University

Bachelor’s Degree in Accounting, Chulalongkorn University


DCP 13/2001, DCP Refresher Course 2/2006

Attend of meeting in 2012 - None - (Appointed on February 28, 2013)


Working until the present 2013-present Audit Committee and Independent Director


2012-present Audit Committee

MK Restaurant Group PLC.

1998-present Director

Horton International Co.,Ltd.

2001-present Secretary-General,

Committee refine accounting standards.

Federation of Accounting Professions

1999-2009 Vice President, Finance and Accounting

Sahaviriya Steel Industries PLC.

* The established Audit Committee and Independent Director for The meeting of The Board

of Director No. 3/2013 at February 28, 2013 Effective February 28, 2013.

41


Management

Mr.Tana Uawithya

Position Chief Executive Officer


Age 43

Address 70 Vibhavadirangsit 20 Soi Song Sa-ard Chomphon,

Chatuchak Bangkok 10900

Education MBA in International Business Management

University of Exeter, United Kingdom

Mechanical Engineering BEng Hon’s

City University, London, United Kingdom



Working until the present 2012-present Chief Executive Officer


2000-2012 General Manager

Nico Resource Management Co.,Ltd.


Niji (Thailand) Limited.


U.M.P Communication Co.,Ltd.

* The established Chief Executive Officer for The meeting of The Board of Director

No. 1/2013 at January 11, 2013 Effective February 1, 2013.

** Established as a Director from The 2013 Annual General Meeting on April 26, 2013

Effective April 26, 2013 authorize to sign to on behalf of the company to bind the company.

42


Directors (who has resigned during 2012 – February 28, 2013)

1. Mr.Kitt Kraiwee



Age 53

Address 47/17 Suparom Village, Chaengwattana Rd.

Pakkred, Nonthaburi

Education Master of Business Administration, Sripatum University

Bachelor of Laws, Sukhothai Thammathirat University

Governance Training - None –




Working until the present 2012-Jan 2013 Audit Committee and Independent Director


2010-present Deputy Vice President

Business Relation Department 2

Islamic Bank of Thailand

2006-2010 Internal Audit Office Director

Yarnapund Public Co.,Ltd.

2004-2006 Finance Manager

Coca Foods International Co.,Ltd.

* The established Audit Committee and Independent Director for The meeting of The Board of

Director No. 6/2012 at July 16, 2012 Effective July 16, 2012.

** Present the resignation Audit Committee and Independent Director at February 1, 2013

43


2. Mr. Ong Siew Bok

Position Director (Managing Director)


Age 40


Education Bachelor’s Degree

Degree in Mechanical Engineering from the Queensland

University of Technology Brisbane, Australia



% Shareholding sold 96,180,774 shares (19.257 %) at December 28, 2012

Working until the present 2009-2012 Director (Managing Director)


2001-2009 Director of Sales and Operations

Aerosonics Pte Ltd.

1999-2001 Assistant Sales and Service Manager

JCS Automation Pte Ltd.

* Present the resignation Director (Managing Director) at August 8, 2012

44


3. Miss Wanida Kanjanasantisak



Age 47

Address 47/291 Moo 5 Soi Pracha u-thit 98,

Pracha u-thit Road, Thungkhu, Bangkok

คุณวุฒิการศึกษา Master’s Degree

Business Administration, Ramkhamhaeng University

Bachelor’s Degree

Accounting, Ramkhamhaeng University

Governance Training - CFO Federation of Accounting Professions Models 8

- The new Accounting Models 11 of Chulalongkorn University

- The change in accounting standard financial Reporting

Update 2009 of the FAP

- Planning for the Plan to use the accounting standards of the

Association Alumni Board of Administration University




Working until the present 2012 – 2012 Audit Committee and Independent Director

Shun Thai Rubber Gloves Industry PLC. 2010-2012 Accounting Manager

JR Business Advisory Co., Ltd.

2002-2010 Assistant Director of Accounting

LPN Planner Co., Ltd.

2002-2010 Assistant Director of Accounting

Thanapat Property Development PLC.

* The established Audit Committee and Independent Director for The meeting of The Board of

Director No. 2/2012 at March 2, 2012 Effective March 2, 2012

** Present the resignation Audit Committee and Independent Director at June 30, 2012

45


4. Dr. Sanit Samosorn

Position Chairman of Audit Committee and



Age 72

Address 5/39 Muang Thong Thani, Bang Phud, Pak Kred,

Nonthaburi 11120

Education Phd. Funded by SECRCA University of The Philippines

At Los Banos

Governance Training Thai Institute of Directors Association (IOD) DAP 29/2004

Attend of meeting in 2012 The Board of Directors Meeting 1 / 15 time

The Audit Committee Meeting 1 / 10 time


Working until the present 2001-2012 Chairman of Audit Committee and



1999-Present Managing Director

TRI Global Co., Ltd.

1996-1998 Dep. Dir-Gen of Agriculture

1987-1995 Director of Institute of Rubber Research

* Present the resignation Chairman of Audit Committee and Independent Director at March 2, 2012

46


5. Mr. Ong Siew Kwee

Position Chairman of the Board of Director


Age 43


Education Bachelor’s Degree

Majoring in Economics from the National University

of Singapore

Governance Training - International Professional Managers’ Association (IPMA)

- American Association of Financial Management (AAFM)

Attend of meeting in 2012 The Board of Directors Meeting 0 / 15 time


Working until the present 2009-2012 Chairman of the Board of Director


Present Chairman & CEO

ERC Holding Pte Ltd.

Griffin Capital Management Pte Ltd.

* Present the resignation Chairman of Executive Director at March 1, 2012

47


6. Mr. Anan Jesadavisut

Position Deputy Chairman


Age 58

Address 9 Moo 4, Kached, Muang, Rayong 21100

Education Master’s Degree

Economics, Ramkhamhaeng University

Bachelor’s Degree

Economics, Ramkhamhaeng University

Public Admin course from NIDA

Governance Training Thai Institute of Directors Association (IOD) DCP 23/2002


% Shareholding 0.038 % (187,500 shares)


Working until the present 2009-2012 Deputy Chariman


1997-2008 Managing Director


1985-2001 Deputy Managing Director

Thai Hua Rubber PLC.

* Present the resignation Deputy Chairman at March 1, 2012

48


Company structure consisted of 3 sets of the boards as follows :

• The Board of Directors

The board of directors on February 28, 2012 consisted of 7 directors as follows:

1. Mr.Yanyong Phuangrach Chairman of the Board of Director

2. Mr. Lin Fu Lai Director

3. Mr. Porkuan Kittisriswai Director

4. Mr.Winyoo Jesadavisut Director

5. Asso. Prof. Krit Purisinsit Independent Director

6. Asso. Prof. Suphol Ingprasarn Independent Director

7. Ms.Vilai Chattanrassamee Independent Director

Miss Sureeporn Sandsang (Manager of Investor Relation Department) acts as the secretary of the Board of Directors of the company

Note : Rotation of the members for year 2012 to February 28, 2013 are as follows

No. Names Position Commencing

date

Resignation

date

Approved

at the

meeting

1 Mr. Ong Siew Kwee Chairman of the BODs - 1-Mar-12 1/2012

2 Mr. Anan Jesadavisut Deputy Chairman - 1-Mar-12 1/2012

3 Dr. Sanit Samosorn Independent Director - 2-Mar-12 2/2012

4 Mr. Porkuan Kittisriswai Director 2-Mar-12 - 2/2012

5 Ms. Wanida Kanjanasantisak Independent Director 2-Mar-12 - 2/2012

- 30-Jun-12 6/2012

6 Mr.Kitt Kraiwee Independent Director 16-Jul-12 - 6/2012

1-Feb-13 2/2013

7 Mr. Ong Siew Bok Director - 8-Aug-12 6/2012

8 Mr.Yanyong Phuangrach Chairman of the BODs 27-Oct-12 - 12/2012

9 Mr.Winyoo Jesadavisut Director 27-Oct-12 - 12/2012

10 Ms.Vilai Chattanrassamee Independent Director 28-Feb-13 - 3/2013

49


Note :.During the year 2012 Mr. Lin Fu Lai was appointed by the Board of Directors Meeting No. 10/2012 on the September 8,

2012 to serve as the Chairman of the Board of Director and change to the position as Chairman of Executive Director by the Board

of Directors Meeting No.12/2555 on the October 27, 2012

Directors authorized to sign on behalf of the Company

Mr. Lin Fu Lai or Mr. Porkuan Kittisriswai with signature and affixed the authorized seal of the

Company.

Scope of authority of the Board of Directors

1. Duties of the Board of Directors

The Board of Directors has worked with knowledge, ability and experience to benefit the

business operations of the Company, and comply with the objective, regulations of the Company,

including the resolutions of the meetings of the shareholders. It is careful to protect the interests of the

Company and is responsible for the shareholders.

2. Providing review and approval for the appropriate policies.

The Board of Directors is responsible for review and approval on the policy and direction of the

operation proposed by the managing director. Except the following matters the Board of Directors has to

receive approval from the meeting of the shareholders before operation. e.g. the matters that the law

stipulates the meeting of the shareholders must approve them first.

3. Good Corporate Governance of The Board of Director

Our Board of Directors carefully look after the management team in order to efficiently comply

with the agreed policies and particularly in screening all important issues that may related to any people

that may or may not in compliance with the regulation of Thai Stock Exchange Market.

Anyhow if necessary for some important issues, our board agreed to contract/ employ professional

consultants to help in those needed business transactions especially for the areas that may have serious

impact to our business performance.

4. To meet the standards of audit system

In order to properly control and audit all the business transactions, our management with its clear

scope of internal audit, we have audit division in order to verify and audit all the internal business

transaction. This audit will strictly verify and work closely with the audit committees.

50


5. Business Ethics and Code of Conducts

The Board of Director shall provide the compliance manual of the Company on Business Ethics

and Code of Conduct for the management and the employees to be used as a guideline within the

organization.

• Executive Directors

The Executive Directors consists of 4 persons as follows:

1. Mr. Lin Fu Lai Chairman of Executive Director

2. Mr. Porkuan Kittisriswai Managing Director

3. Mr.Winyoo Jesadavisut Executive Director

4. Mr.Tana Uawithya Chief Executive Officer

Note : - Mr. Porkuan Kittisriswai was appointed by the Board of Directors Meeting No. 2/2012

on the March 2, 2012 to serve as a Director [previous position plant technical director]

- Mr. Tana Uawithya appointed by the Board of Directors' Meeting No. 1/2013 on the 11

January 2013 to serve as Chief Executive Officer with effect from 1 February 2013 onwards.

- Directors coming in/out of positions during the year 2012 to 28 February 2013.

No. Names Position Commencing

date

Resignati

on date

Approved at

the meeting

1 Mr. Ong Siew Bok Managing Director - 8-Aug-12 6/2012

2 Mr. Lin Fu Lai Chief Executive Officer 8-Aug-12 - 6/2012

Chief Executive Officer

8-Sep-12 10/2012

Chairman of

Executive Director 27-Oct-12 - 12/2012

3 Mr. Porkuan Kittisriswai Managing Director 8-Sep-12 - 10/2012

4 Mr.Winyoo Jesadavisut Executive Director 27-Oct-12 - 12/2012

5 Mr.Tana Uawithya Chief Executive Officer 1-Feb-13 - 1/2013

51


Scope of authority of the Board of Executives Director

1. It has the authority to order planning and operation of the Company to comply with the

policies prescribed by the Board of Directors.

2. It has the power to approve on investment projects value not exceeding 10 million baht.

3. It has the power to appoint and manage the department level and up for the benefit and

efficiency of the good management and transparency, e.g. consideration on quality control of the product,

etc.

4. It has the power to prescribe the fringe benefits of the employees to be suitable with the

situations, traditions and consistent with the applicable laws.

5. It has the power to approve provision for bad debts/doubtful debts and file a lawsuit in

transaction cases for the obligation from 500,000 baht but not exceeding 2 million baht.

Nevertheless, the approvals above shall not include the approvals on items that the executives or

conflicting person with vested interest or conflict of interest in any forms with the Company or its

affiliates. It includes the specified items that need prior approval from the shareholders to do the

interconnected and acquisition or disposal of key assets to be consistent with the requirements of SET

• Audit Committee

The Audit Committee consists of 3 persons (on February 28, 2013) as follows:

1. Asso. Prof. Krit Purisinsit Chairman of Audit Committee

2. Asso. Prof. Suphol Ingprasarn, Audit Committee

3. Ms.Vilai Chattanrassamee Audit Committee

52


Note : Rotation of the members of Audit Committee for year 2012 to present are as follows

No. Names Position Commencing date Resignation date Approved at

the meeting

1 Dr. Sanit Samosorn Chairman of

Audit Committee - 2-Mar-12 2/2012

2 Miss. Wanida Kanjanasantisak Audit Committee 2-Mar-12 - 2/2012

- 30-Jun-12 6/2012

3 Mr.Kitt Kraiwee Audit Committee 16-Jul-12 - 6/2012

- 1-Feb-13 2/2013

4 Ms.Vilai Chattanrassamee Audit Committee 28-Feb-13 - 3/2013

Scope of Authority of the Audit Committee

1. Make sure that the Company prepares the financial statement correctly and frankly

sufficiently, and coordinate with the external auditor and the executive, who has the duty to prepare the

financial statement on quarterly and annual basis.

2. Make sure that the Company has the internal audit and inspection sufficiently and effectively.

3. Consider, select and propose the auditor of the Company including his remuneration.

4. Review the operations of the Company to comply with the laws on securities and Stock

Exchange of Thailand (SET), regulations of the (SET) or laws involving the business of the Company.

5. Consider disclosing the information of the Company in case there is an interconnected item or

items that may have conflict of interest to be correct and complete.

53


6. Prepare the report on supervision activities of the Audit Committee by disclosing in the annual

report of the Company, which such report shall sign by the chairman of Audit Committee. Such items

shall consist of the following items:

a. A comment on preparation process and disclosure of information in the financial

report of the Company.

b. A comment on adequacy of the internal control system of the Company.

c. Reasons to believe that the auditor of the Company is suitable to be re-appointed

another term.

d. Other reports that it deems the general shareholders and investors should know

under the scope of duty and responsibility assigned by the Board of Directors.

• Managing Director

Scope of power and duty of the managing director

1. Indicating/determining Mission, Objective, and Policy of the company including regulating

performance, production, customer relation, project planning and be response to the Board of Directors.

2. Authorizing expenses in accordance with the Board of Directors resolutions, including actual

expenses or any actual payments.

3. Considering investment, including permanent assets of the company and proposing to the

Board of Directors.

4. Considering capital raising to propose to the Board of Directors.

5. Appointing, hiring, laying off and determining salaries, bonus for managers, or below

54


6. Authorizing allowances for doubtful accounts / debts, but no more than THB, 0.5 m.

7. Acting on behalf of the company.

8. Appointing advisors being, necessary to the operations of the company.

9. Operating for general management / administration of the company.

Nevertheless, approval of the managing director above does not include items that make the

managing director or persons with conflict of interest of having vested interest in other forms with the

Company or its affiliates need to seek approval from the shareholders. Including the specified items for

the interconnected items that derived or acquire of important assets of the Company or its affiliates to

seek approval to be consistent with the requirements of the SET on such matters.

55


Executives

Executive officers of the Company consist as follows:

No. Names Position Remark

1 Mr. Tana Uawithya Chief Executive Officer Effectively on February 1, 2013

2 Mr. Ong Siew Bok Managing Director Resign effective August 8, 2012

3 Mr. Lin Fu Lai Chief Executive Officer Effectively on

August 8 – September 8,2012

4 Mr. Porkuan Kittisriswai Managing Director The duty change, on September 8, 2012

5 Mrs. Srijai Laoritthikai Deputy Managing Director Resign effective December 31, 2012

6 Mr. Chan Gog Run Plant Director Resign effective July 31, 2012

7 Ms. Surassawadee Noiubon Human Resources

Department Manager The duty change, on October 1, 2012

8 Mr. Hew Seng Yep Marketing Director Resign effective December 31, 2012

9 Ms. Nathisara Sornlaksap Marketing Department Manager 10 Ms. Potchana Dongkosol

Account & Financial

Department Manager Resign effective February 29, 2012

11 Mr. Sarit Sriboonruang Account & Financial

Department Manager

Effectively on

March 20 – October 31, 2012

12 Ms. Daoprakai Srikeaw Account & Financial

Department Manager

Effectively on

October 1 - 16, 2012

13 Ms. Thidarat Pradprung Account & Financial

Department Manager

Effectively on

November 5 - 26, 2012

14 Mrs. Yuphin Noppakaow Account & Financial

Department Manager Effectively on December 20, 2012

15 Mrs. Kongtong Loadlaydee Logistics Department Manager Resign effective September 30, 2012

16 Ms. Sunisa Sunthonchaiyakit Logistics Department Manager Effectively on

September 24 – December 31, 2012

17 Ms. Kamonluck Kamolpiamsak Internal Audit Effectively on

March 19 – December 16, 2012

18 Ms. Kanika Kongsapjaroen Packing Department Manager

19 Ms. Chanpen Wattanapichitpong Quality Management Responsibility

Department Manager

20 Mr. Tong Malasit Product & Process Engineer

Department Manager Effectively on December 6, 2012

21 Ms. Sureeporn Sadsang Investor Relation

Department Manager

56


Recruitment of directors and executives

The Company has on recruitment committee, as the recruited persons to be appointed the

directors shall be considered from the qualifications, knowledge, experience and time to attend the

meetings with the board of directors regularly. Nevertheless, the meeting of the shareholders shall

appoint the directors using the majority votes according to the criteria and method as follows:

1. One shareholder shall have one vote equal to one share.

2. One shareholder can use the total votes s/he has according to (1) to elect one or several

persons to be the directors, but cannot divide the votes to one more or less than others.

3. The persons with the highest votes shall be appointed the directors equal to the number of

the directors should be elected for the time. In case the elected persons received equal votes

more than the number required in that election, the Chairman shall make the casting vote.

In each annual general meeting (AGM) one-third of the directors shall be rotated, If the

number of the directors cannot be divide into three parts the nearest number of one-third

directors shall be retired. In the first and second year after listing as a public company,

drawing lots shall be used to retire the directors. While the years after that the longest

serving directors shall be retired, although the rotated directors may be re-elected again.

Corporate Governance

1. Policies of control

The company’s directors realizes the significance of the effective business control in that it seeks

to ensure the transparency of the business, helps accelerate the company’s abilities to compete, and helps

increase the confidence of shareholders, investors and other relevant parties. The company, thus, drafted

and determined the policies and direction for its operation in which were crucial to the controlling and

internal auditing system to guarantee that the executives would effectively follow such policy. The

policies are made for the long-term benefits of the shareholders under the laws and business ethic.

57


2. Shareholders: rights and equivalence

All shareholders will have all the rights including the right to attend the shareholder meeting and

right to vote in accordance with the Public Company Limited act, the company’s regulations and other

relevant rules of the Stock Exchange of Thailand.

3. Right of stakeholder

The company realizes the right of all stakeholders including the internal stakeholder - such as

officers, the executives of the company and its minor companies-, and the external stakeholder -such as

competitors, creditors, government sectors, and other relevant departments. This is because the company

also realizes the importance of the endorsement of stakeholder, which helps expedite the company’s

competitiveness, and generates the profits as the long-term success of the company.

4. Meeting of the shareholders

For the respect of the shareholder meeting, the company has strictly followed the Public

Company Limited act, the company’s regulations and the rules of the Stock Exchange of Thailand.

In addition, the meeting is conducted in regard to the following principles:

• All directors pay close attentions to the participation of the shareholders;

• In the meeting, the shareholders have a full right to express their opinions, to raise questions,

and to suggest in the appropriate time. The significant opinions, questions, and suggestions

will be recorded and included in the minute of the meeting.

5. Leadership and vision

The broad of the directors is responsible for determining and approving of the company’s vision,

mission, strategies, objectives, business plans and budget, including controlling the operational

departments to follow the approved business plans and budget effectively to ultimately proliferate the

economic value to the business and to assure the utmost security to the shareholders.

The broad also provides the effective internal controlling system, internal auditing and risk

management system. The follow-up of such system operations is also the constant issue raised in the

directorial meeting.

58


6. Conflict of interests

The company’s broad of directors has followed the rules and regulations of the Stock Exchange

of Thailand for the matter of the inter transaction, the acquiring and purchasing of the registered asset

including the connected transaction by disclosing the complete and clear information every time when

making any transaction with whom may have conflict of interests. The company has, however,

prioritized the total benefits of the company. Every performed operation of the company was made

cautiously, honestly, rationally and independently in concert to the good ethic. The price and condition of

the transactions were also disclosed under the same conditions of transactions made with the outsiders

including the contracts values, the parties to the contracts, rationale and necessity of the contracts as

reported in the annual report and the 56-1 form.

In addition, the executives and relevant parties for their own sake have never misused the

company’s internal information. All the directors prioritize their career ethics and agree to show the

report of their existing asset including of the spouse’s and child who has not become sui juris in

accordance with the regulations set by the Stock Exchange of Thailand. No record shown that the

directors and executives of the company have sold or purchased the company’s asset during a month the

financial budget was publicized. Besides none of the company’s internal information sharing by the

executives and departments- has been given to the outsiders or irrelevant parties.

7. Business ethics

The company has set the code of conduct for the directors, managerial departments and officers

to be used as a guideline to accomplishing the company’s appointed goals honestly and straightforwardly

to both the company itself and all stakeholder, public and society. The company has constantly

communicated with its officers and followed up the result of the code. The punishment was also

specified.

59


8. Balance of authorization of the non-executive director

The company’s broad of the directors consists of 7 persons, categorized as follows:

Executive directors 3 person

Non-executive director 1 persons

Independent directors 3 persons

The company’s broad of the directors will appoint 3 Audit Committee, selected from the

independents directors, to remain for the 3-year term and when the term ends the same direct may remain

working. The scope of the inspection directors’ operation has clearly been specified in writing.

9. Merging and diverging of position

The presidential director is, according to the Stock Exchange of Thailand’s definition, an independent

director and has no relation to the management in order to distinctively separate the business control and the

usual management.

10. Executives’ salary

Director’s salary The Company has a clear and transparent criterion used in determining the directors’

salary in which is in the same level with the industrial section and is highly enough to maintain the qualified

directors. The salary was already approved in the shareholder meeting. In addition, the audit directors would be

given more salary as the responsibility soars

Manager’s salary the company’s broad of directors, which are based on the company’s operating

result and each manager’s operational performance, in accordance with the principles and policies makes the

manager’s salary.

60


In 2012 the salaries in number were as follows:

Remuneration for directors was the resolution of the Annual General Meeting 2012 by no more

than THB 2 million.

Remuneration for the Board of Directors and Audit Committees

No. Names Position

Board of Directors

Year 2012

Audit Committee

Year 2012

Meeting

15 times

Remuneration

Baht

Meeting

10 times

Remuneration

Baht

1 Mr.Yanyong Phuangrach Chairman of the BODs 3/15 42,000 - -

2 Mr. Lin Fu Lai Director 4/15 44,000 - -

3 Mr. Porkuan Kittisriswai Director 13/15 130,000 - -

4 Mr.Winyoo Jesadavisut Director 3/15 30,000

5 Asso. Prof. Krit Purisinsit Chairman of Audit Committee

Independent Director 15/15 150,000 10/10 136,000

6 Asso. Prof. Suphol Ingprasarn Audit Committee


7 Mr.Kitt Kraiwee Director 8/15 80,000 7/10 70,000

8 Mr. Ong Siew Bok Director 6/15 60,000 - -

9 Ms. Wanida Kanjanasantisak Audit Committee


10 Dr. Sanit Samosorn Chairman of Audit Committee


11 Mr. Ong Siew Kwee Chairman of the BODs 0/15 0 - -

12 Mr. Anan Jesadavisut Deputy Chairman 0/15 0 - -

TOTAL 686,000 320,000

61


Manager

The number of the company’s managers, according to the Securities and Exchange Commission

(SEC), consists of the managing director and the next 4 executives. By counting the next 4 executives in

the year 2012, had executives and paid the 11,863,966 baht executives’ salary.

11. Directorial meeting

In 2012 there were 15 directorial meetings and there were 10 audit committee meeting each was

held with the complete broad of the directors. The meeting details were recorded in writing and were

collected, after approved by the broad, to be later examined by the directors and other relevant parties

when requested.

12. Controlling and internal auditing system

The company’s broad of directors has evaluated the adequacy of the internal auditing system by

employing the Stock Exchange of Thailand’s appraisal form, and concluded that the internal auditing

system was adequate and appropriate to the company’s businesses. The system could be briefed as

follows:

(1) Organization and environment the company has improved its managerial structure to

make it fit best with the expansion of the business, and has clearly set the scope of its

responsibilities especially in production and purchasing including modifying the

regulations to accommodate the ongoing changing situation;

(2) Risk management the company has paid its attentions to the risks caused by both internal

and external factors namely production risk, financial risk including credit providing. The

company has arranged hearings on the issue on regular basis;

(3) Control of the operation of management the company has arranged the operational

authorization by separating the approval responsibility and asset maintenance

responsibility to ensure that no significant issues would be ignored;

62


(4) Information and communication the company had provided the way to report

managerial information to its executives constantly and in no time. The communicative

system will be updated frequently;

(5) Follow-up and evaluation the internal audit department has been assigned to made

constant evaluations of the company’s internal controlling system to appraise its efficiency

and effectiveness to check if it meets the operational objectives

13. Report of the broad of the directors

The broad of the directors is responsible for the company’s total financial budgets and financial

information exhibited in the annual report. Such financial budget was made in accordance with the

nationwide accepted and standardized auditing policy-by selecting the most appropriate and most used

policy- together with cautious judgment and evaluation including the disclosure of crucial information in

remark in the financial budget.

The directors has also sought to ensure that the effective internal controlling system would remain

to guarantee the accuracy, completeness and adequacy of auditing information to maintain the company’s

asset and prevent any plausible deceitfulness or misuse in the company’s operation.

In so doing, the board of the directors has, thus, assigned audit committees who were non-

executives to be in charge of the evaluation of the financial report and internal controlling system. The

opinions of the audit committees were already shown in the annual report.

The audit committees pointed out that the company’s internal controlling system were satisfactory

in overall. The committees verified the reliability of the company’s financial statement .

14. Investor relations

The company has realized the importance of its information –both financial and non financial- in

that the information would have impacts upon investor’s decision-making and stakeholder. The company

accordingly emphasized on the disclosure of true, reliable, constant and punctual company-related

information. For the matter of the relations of the investors, the company has not yet established

particular departments to be put in charge of the issue since the communicative activities

were still below. For more information, investors may contact the Investor Relation Department

Tel. 0 -2274 – 0951, Fax. 0 - 2274 – 0950, Website: www.shunthaiglove.com and E-mail address:

[email protected]

63

http://www.shunthaiglove.com/

mailto:[email protected]


• Human resources

A) As of December 31, 2012, the current numbers of the company’s officers are 728, male

341, and female 387, classified into Thai nationality 293 and others 435. The officers classified by main

functions are as the following:

1. Management 83 persons

2. Production 645 persons

B) Total salaries

The Company total salaries of the company’s officers in the year 2012 as:

- salaries + daily wages 118.94 million baht

The company provides other welfares such as uniform, accommodation, employee bus, food

allowance (complexity of job task), overtime payment, position allowance, and transportation and

accommodation allowance to employees as well.

C) Policy on Human Resource Development

The company has supported all levels of employees of each group on training and seminars,

offered both inside and outside the company, relating to government rules and regulations, production

safety and environment, skill development, laws, as well as rules and regulation of public act and

securities act, etc. This is to facilitate and benefit the company’s operation and the better development.

There is standard measure of the performance of employees after training with Workforce

Development Center, in Rayong. Fork lifts operator training, boiler control, electricians, welders etc. to

revise the wage rate for skill labor.

In year 2012 the company had one labor dispute, by transferring of the one employee's

position of housekeeper to staff fixing glove position. With the new position requiring good vision in

screening gloves. But this employee was an elderly hence had a poor eyesight thus requiring a longer

period of performance evaluation than employees in general result in a decline in revenue. Currently,

agreement & settlement has already been met and lawsuit has already been dropped. And during the past

of 3 years, the turnover of employees has not been at a significant rate.

64


Internal Audit

The Company has been confidence in our internal control as we adopted our working

process step by step for all staffs, starting from staffs through executive officers in order to have mutual

benefits for everyone. By having such process, we ensured that the performance of all department would

fulfil our mission effectively.

Board of Directors

The Board of Directors assigned the Audit Committee to evaluate the internal control of the

company. The responsible department is the Internal Audit Department. The Board of Directors enhances

all levels of employees to be aware of ethics and morality by recognizing importance of the internal

control and audit. The Board has set in place the efficient internal control and audit system through the

whole organization but, in the same time, maintained the flexibility of the operation. With this system,

employees are able to control, supervise, evaluate and verify their own operation, including preventing

any illegal action as well.

Audit Committee

The Audit Committee is responsible for considering the sufficiency of the company’s internal

control. Its duties cover reviewing performance of the Internal Audit Department, considering important

notes to the financial statements and verifying the accountability of the financial statements to ensure the

compliance with accounting standards, notifications of Office of Securities and Exchange Commission,

notifications of Stock Exchange of Thailand and related laws. If the Audit Committee has

recommendations or finds any significant faults, it will report to the Board of Directors for revision and

improvement.

65


Internal Audit Department

The Internal Audit Department has performed its duties on examining and evaluating the

efficiency of the internal control system independently, including providing recommendations for work

improvement. Department meetings on result notification are held every month. The Internal Audit

Department also coordinates with the management and proposes the company’s risk management

guidelines.

The Internal Audit Department proposes the Audit Committee the quarterly reports on sales

volume, production, latex purchase, asset purchase report, adjustment machine value more than one

million report and inter-transaction with related persons or companies, including significant events

affecting the company’s operation.

In addition, the Board of Directors believes that the internal control system is sufficient, proper

and efficient in terms of organization and environment, risk management, control of the management’s

operation, information technology and data communication, the company’s monitoring and evaluation.

66


Related Transactions

Necessity and reasonableness of transactions

Product trading or inter-company transactions of the company have been done under normal

business practices, aiming at the maximum benefit of the company. The company has the policy on

determining trading prices at market prices as trading with third parties, so that the company can operate

effectively in controlling the quality of raw materials or products for sales. This is to bring the highest

satisfaction of customers and obtaining or enhancing business relations in the future.

Approval Measure or Procedure of Inter-Company Transaction

The Meeting of the Board of Directors No. 7/2551 on 13th August 2008 had a resolution to prepare

the report on transactions exceeding 5 million baht. This report will be presented in the Meeting of the

Board of Director quarterly.

Accordingly, the company will comply with the Securities and Stock Exchange laws, and

regulations, orders, or schedules of the Stock Exchange of Thailand and the Office of the Securities and

Exchange Commission.

Policy or Tendency of Inter-Company Transaction in the Future

The policy on carrying out inter-company transactions in the future will be determined by the

Board of Directors. The Board assigned the management to approve transactions with normal trade

agreement, which a reasonable man makes with general parties in a same situation and with equal

bargaining power, and to ensure transactions in fair prices according to normal business practices. The

Audit Committee will participate in considering necessity and reasonability, including price policies and

inter-transaction procedures as well.

67


Related Transactions Year 2012

Thai Hua Rubber Public Company Limited

Person / Juristic Person : Latex supplier, rubber sheets and rubber blocks.

with Mutual Benefit

Relationship : Trade Payable and lender under debt restructuring agreement, including

related to the major shareholder of the company.

Detail of Inter-Company

Transaction

Value of Inter-Company

Transaction

(Thousand Baht)

Necessity and Reasonability of

Inter-Company Transaction

Year 2011 Year 2012

1. Purchase of

latex 60%

- Sales transaction

16,846

100,234

Its price proposed was in accordance with

a market price at that time. The company

compared price lists quoted by at least 3

suppliers at the same time with the

standard price quoted by Rubber Research

Institute of Thailand, Bangkok.

Thai Hua Pcl. provided loan in term of

60-day Credit Term to the company.

Hence, the Audit Committee would

propose the appropriate price, compared

to other suppliers of latex 60% at the same

time.

68


Thai Hua Rubber Public Company Limited (Continued)


Transaction


Transaction

(Thousand Baht)



Year 2011 Year 2012

2. Lending

- Loans

- Loan interest

157,232

4,472

153,640

4,472

In February 2011, the company entered into the second amendment of debt restructuring agreement comprising of default short term loan and trade account payable for latex purchasing at the amount of THB 150.0 million, bearing interest at the rate of 6.375% p.a. (average MLR quoted by local commercial banks at commencing date)

In May 2011, the company entered into the third amendment of debt restructuring agreement to extend the repayment period of THB 161.80 million. - Repayable in 25 monthly installments at

THB 1.0 million (principal and interest at the rate of 3.1875% p.a.) starting from May 2011 to April 2013.

- Repayable in 35 monthly installments at THB 4.55 million (principal and interest at the rate of 6.375% p.a.) starting from May 2013 to April 2016.

Hence, the Audit Committee recommended that the third amendment was sufficient for liquidity and to release debt burden of the company.

In September 2012, the Company has adjusted new rate in accordance with the Accounting Standards No. 104 regarding the Restructuring. Effective rate as restructure debt is now at IRR 4.492%.

69


D.S. Rubber & Latex Company Limited

Person / Juristic Person : Local latex supplier in Rayong Province

with Mutual Benefit

Relationship : Having related persons to Thai Hua Rubber Public Company Limited


Transaction


Transaction

(Thousand Baht)



Year 2011 Year 2012

Purchase of latex 60%

- Sales transaction

18,295

-

A local latex supplier in Rayong Province

as they can save for transportation costs.

Its price proposed was in accordance with

a market price at that time. The company

compared price lists quoted by at least 3

suppliers at the same time with the

standard price quoted by Rubber Research

Institute of Thailand, Bangkok.

The inter-company transactions were in

accordance with normal business practices

and the Audit Committee had considered

and proposed that the purchased price

were reasonable price compared to other

suppliers at the same time.

70


Tri Beca Enterprise Company Limited

Person / Juristic Person : Purchasing, selling, leasing, developing lands building

with Mutual Benefit Buildings and properties, local latex supplier in Rayong Province and

leasehold for office building

Relationship : Having related persons to Thai Hua Rubber Public Company Limited


Transaction


Transaction

(Thousand Baht)



Year 2011 Year 2012

1. Purchase of

latex 60%

- Sales transaction

. 2. Lease of Tripakee

Building (2nd floor)

located at 238/9

Ratchadapisek Road,

Huay Kwang District,

Bangkok

(Area of 184 sq.m.)

2,252

162

-

162

Being a local latex supplier in Rayong

Province and its price proposed was in

accordance with a market price at that time.

The company compared price lists quoted

by at least 3 suppliers at the same time with

the standard price quoted by Rubber

Research Institute of Thailand, Bangkok.

Hence, the Audit Committee would propose

the appropriate price, compared to other

suppliers of latex 60% at the same time.

For used such area as its Bangkok Office

because of good location, convenient

transportation.

The lease and service contract was made.

The Audit Committee examined and had

opinions that the leased price was

reasonable and close to general lease prices

of nearby areas.

71


Mr. Porkuan Kittisriswai

Person / Juristic Person : -

with Mutual Benefit

Relationship : Director of the company and also held the Managing Director position


Transaction


Transaction

(Thousand Baht)



Year 2011 Year 2012

Loan from Director

-

91

Due to lack of liquidity at the time therefore

the company took out a loan from Director

of the company to pay the rubber cess fee in

rubber product exports in December 2012

72


Report of the Audit Committee

The Audit Committee consists of 3 persons as follows

1. Asso. Prof. Krit Purisinsit Chairman of Audit Committee &


2. Asso. Prof. Suphol Ingprasarn Audit Committee & Independent Director

3. Ms.Vilai Chattanrassamee Audit Committee & Independent Director

The Audit Committee which comprises of non-executive directors has duties and responsibilities

on verifying the accuracy and sufficiency of the financial statements, proper and effective internal

control, the compliance with laws and relevant regulations stipulated by the Stock Exchange of Thailand

and/ or the Office of Securities and Exchange Commission. The Audit Committee also considers, selects

and proposes the auditor’s fee and discloses the company’s information in case of connected transactions

or transactions with conflict of interest to enhance accuracy, completeness and transparency.

The Audit Committee approved audit targets, plans and scopes, as well as recognized the audit

result report, provided recommendations to the Internal Audit Department. In addition, the Audit

Committee also collaborated with the management to ensure the efficient and accurate supervisory

system in compliance with related regulations.

The Audit Committee reviewed the company’s financial statements and discussed on the

financial statements and the sufficiency of the internal control system, including considering the auditor’s

notices. The Audit Committee also proposed recommendations and auditor names and auditing fees to

the Board of Directors in order to propose to the shareholders’ meeting.

The company has given great importance to and conducted its business under good corporate

governance. The company has complied with rules and regulations of government agencies, and

enhanced the operation in line with the good corporate governance in terms of transparency, equality

treatment of shareholders, priority to all stakeholders’ rights, and complete, verifiable and accurate

information disclosure, leading to the maximum benefit of shareholders and all stakeholders.

Chairman of Audit Committee & Independent Director

73


Financial Statements For the Year Ended December 31, 2012 And

Independent Auditor’s Report

74


INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Shun Thai Rubber Gloves Industry Public Company Limited

I was engaged to audit the accompanying financial statements of Shun Thai Rubber Gloves Industry

Public Company Limited, which comprise the statement of financial position as at December 31, 2012,

and the statements of comprehensive income, changes in equity and cash flows for the year then ended,

and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in

accordance with Thai Financial Reporting Standards, and for such internal control as management

determines is necessary to enable the preparation of financial statements that are free from material

misstatement, whether due to fraud or error.

Auditor’s Responsibility

My responsibility is to express an opinion on these financial statements based on conducting the audit in

accordance with Thai Standards on Auditing. Because of matters as described in the Basis for Disclaimer

of Opinion paragraph, however, I was not able to obtain sufficient appropriate audit evidence to provide a

basis for an audit opinion.

Basis for Disclaimer of Opinion

As explained in Notes 1, 6 and 7 to the financial statements,

a) I was unable to obtain sufficient appropriate audit evidence to satisfy myself on the quantities and

unit prices of inventories as at December 31, 2012 of Baht 207.9 million since books of accounts,

related accounting records and supporting documents are not in a proper manner resulting in

numerous errors in inventories. As of the date of my audit report, management has still been in the

process of correcting the errors. As a result of this matter, I was unable to determine whether any

adjustments might have been found necessary in respect of recorded or unrecorded inventories as at

December 31, 2012 and the elements making up the statement of comprehensive income for the year

ended December 31, 2012.

b) The Company recorded the allowance for decline in value of inventories of Baht 5.5 million in the

statement of comprehensive income for the year ended December 31, 2012 by using management’s

judgment and referencing to selling prices of inventories. Thai Accounting Standard No. 2

“Inventories” requires that the inventories shall be valued at the lower of cost and net realizable

value. Such net realizable value must be the selling price after December 31, 2012 less selling

expense of such inventories. I was unable to obtain sufficient appropriate audit evidence to satisfy

75


myself on such value. As a result of this matter, I was unable to determine whether any adjustments

might have been found necessary in respect of over-recorded or under-recorded on allowance in

decline in value of inventories as at December 31, 2012 and the elements making up the statement of

comprehensive income for the year ended December 31, 2012.

c) Since the Company has been recurring huge loss from operations for many years, there was an

indicator that the Company’s plant, machinery and construction in progress with the net carrying

amount as at December 31, 2012 totalling Baht 257.3 million would be impaired. Hence, the

Company engaged an independent financial advisor firm to perform the impairment test of these

assets by using the value in use method. Based on the report of such independent financial advisor

firm dated January 15, 2014, there was an impairment loss on these assets of Baht 24.1 million, which

the Company has not yet recorded in the accounts. However, I was unable to use the report of such

independent financial advisor firm as our sufficient appropriate audit evidence because:

1) It was mentioned in the report of such independent financial advisor firm that such report has

been prepared and summarized based on the information and assumption provided by the

management by assuming that such information is correct without performing any review on

such information.

2) I was unable to obtain sufficient appropriate audit evidence to satisfy myself on the matters as

follows:

2.1) The fair salvage value of machinery of Baht 125.2 million which was appraised by another

independent appraisal firm based on its report dated December 12, 2013. This fair salvage

value of these assets was a part of forecasted cash received from sale of machinery of Baht

125.2 in the calculation of value in use of this machinery.

2.2) The assumption on salary of factory’s staff which was estimated that salary of factory’s staff

for the years 2014 to 2017 would be the same amount as the year 2013 of Baht 42.7 million

by referring to the actual amount for the year ended December 31, 2013 (which was

unaudited and unreviewed). In addition, the management informed that the Company had no

policy to employ any additional staff in factory and had no policy to increase salary of staff

in factory if the operation of the Company was unflavored since the Company had increased

salary of staff in factory to match with the organization structure in the past 2-3 years.

However, if it was necessary to increase salary of factory in factory, the amount would not be

material. This assumption was not in line with the information in the past (which salary has

increased every year) and future operation plan of the Company.

76


2.3) The assumption on selling expense which was variable expense and would change in relation

to total revenues of the Company. The estimated selling expense for the years 2014 to 2017

was at the rate of 1.42% of total revenues which was referred to the average rate for the years

2008 to 2013 in order to maintain the same cost structure of the Company. However, actual

selling expense of the Company for the year ended December 31, 2013 was Baht 16.7

million which equaled to 2.18% of total revenues of 2013 (which was unaudited and

unreviewed). The management preliminary informed that the higher rate in the year 2013

resulting from commission expense on sales. However, the management is under analyzing

this information and the final conclusion could not be reached.

2.4) The assumption on sales of latex that the Company had sales of latex in the year 2013 of

Baht 67.7 million by referring to the actual amount for the year ended December 31, 2013

(which was unaudited and unreviewed) and had gross profit margin of 5% (by interviewing

from the Control department of Latex factory). In this regard, the Company forecasted the

total sales of latex for the years 2014 to 2017 would increase from the year 2013 at the rates

of 2% and 4% per year by having the same gross profit margin as the year 2013 of 5%. This

assumption was not in line with the information in the past since the Company did not have

sales of latex every year and the Company incurred gross loss from sales of latex in certain

years.

2.5) The assumption on electricity charge that the Company had electricity charge in the year

2013 of Baht 32.0 million by referring to the actual amount for the year ended December 31,

2013 (which was unaudited and unreviewed) and indicating that the increase in electricity

charge for the years 2014 to 2017 was at same rate as average inflation rate for the years

2008 to 2013 at 2.83% by not considering factors both in the past and in the future that had

effects to the Float time (Ft).

Disclaimer of Opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, I

have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Accordingly, I do not express an opinion on the financial statements of Shun Thai Rubber Gloves

Industry Public Company Limited for the year ended December 31, 2012.

77


Emphases of Matter

I draw attention to

a) Note 1 to the financial statements, based on the statement of financial position as at December 31, 2012,

the Company had total current liabilities higher than total current assets of Baht 290.9 million, and had

deficit of Baht 738.0 million. Moreover, the Company faced with the liquidity problem and could not

repay to a related company creditor and the Company entered into various amendments of restructuring

agreement as discussed in Note 4 to the financial statements. These matters indicate material

uncertainties which may cast substantial doubt about the Company’s ability to continue its operations as

a going concern. Thus, the Company’s ability to continue its operations as a going concern may

significantly depend on the Company’s success in future operations and can generate sufficient cash

flows from operations. The financial statements for the year ended December 31, 2012 have been

prepared on the accounting basis that the Company will continue its operations as a going concern.

Accordingly, such financial statements do not include any adjustments relating to the realization of the

carrying value and classification of the assets or the amount and classification of liabilities that might be

necessary should the Company be unable to continue its operations as a going concern.

b) Note 7 to the financial statements, in 2012, the Company changed its valuation method of land and

land improvements, buildings and building improvements from cost model to revaluation model

based on the appraisal reports of an independent appraisal firm.

However, my disclaimer of opinion did not relate to matters a) and b) emphasized above.

Other Matter

The financial statements of Shun Thai Rubber Gloves Industry Public Company Limited for the year

ended December 31, 2011 were audited by another auditor who was an auditor in my firm at that time

whose report dated February 27, 2012, expressed an unmodified opinion on those statements and having

an emphasis paragraph to draw attention about the uncertainty on the Company’s ability to continue its

operations as a going concern.

(Mr. Apichart Sayasit)

Certified Public Accountant, Registration No. 4229

Baker Tilly Audit and Advisory Services (Thailand) Ltd. Bangkok

June 17, 2013 (except as to Notes 7 and 23 to the financial statements, which are dated January 15, 2014

and February 19, 2014, respectively)

78


SHUN THAI RUBBER GLOVES INDUSTRY PUBLIC COMPANY LIMITED

STATEMENT OF FINANCIAL POSITION

AS AT DECEMBER 31, 2012

ASSETS

In Baht

Notes

2012

2011

CURRENT ASSETS

Cash and cash equivalents

8,145,350

1,154,759

Trade and other account receivables - net 5, 6, 10

46,465,466

90,047,374

Inventories - net 5, 6

207,885,476

333,038,336

Other current assets

7,113,425

6,654,714

Total Current Assets

269,609,717

430,895,183

NON-CURRENT ASSETS

Investments in restricted fixed deposits 10, 19

13,829,718

13,416,380

Property, plant and equipment - net 7, 10

353,506,057

306,912,222

Computer softwares - net 8

114,170

222,518

Assets not used in operations - net 9

-

-

Other non-current assets

1,305,361

1,303,361

Total Non-Current Assets

368,755,306

321,854,481

TOTAL ASSETS

638,365,023

752,749,664

79



STATEMENT OF FINANCIAL POSITION (Continued)


LIABILITIES AND EQUITY

In Baht

Notes

2012

2011

CURRENT LIABILITIES

Bank overdrafts and short-term loans from financial institutions 5, 7, 10

370,135,817

388,858,850

Trade and other account payables

- Related companies 4

44,154,493

8,441,000

- Other companies

81,033,951

170,216,932

Advances received from director 4

91,389

-

Current portion of liabilities under finance lease agreements 7

416,309

760,078

Current portion of restructured debts from related company 4

33,979,683

7,078,044

Advances received from customers

14,724,659

987,788

Accrued expenses

10,712,647

9,209,044

Other current liabilities

5,256,516

4,023,368

Total Current Liabilities

560,505,464

589,575,104

NON-CURRENT LIABILITIES

Liabilities under finance lease agreements - net 7

17,923

434,231

Accrued interest expense to related company 4

4,471,644

4,471,644

Restructured debts from related company - net 4

119,659,978

150,153,505

Provision for employee retirement benefit 11

2,057,112

2,035,557

Total Non-Current Liabilities

126,206,657

157,094,937

Total Liabilities

686,712,121

746,670,041

80



STATEMENT OF FINANCIAL POSITION (Continued)


EQUITY

In Baht

Notes

2012

2011

Share capital 21

- Authorized share capital, common share 499,453,373 shares

at Baht 1 par value

499,453,373

499,453,373

- Issued and paid-up share capital,

common share 499,453,373 shares at Baht 1 per share

499,453,373

499,453,373

Premium on common shares 12

103,688,297

103,688,297

Revaluation surplus on fixed assets 7

86,488,360

-

Deficit

(737,977,128)

(597,062,047)

Equity - Net (Capital Deficiency)

(48,347,098)

6,079,623

TOTAL LIABILITIES AND EQUITY

638,365,023

752,749,664

81



STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED DECEMBER 31, 2012

In Baht

Notes

2012

2011

Revenues from sales

817,799,042

991,977,782

Cost of sales 4, 14

(875,671,899)

(967,166,468)

Gross profit (Loss)

(57,872,857)

24,811,314

Other income 4

6,862,822

23,850,466

Gain on foreign exchange - net

6,598,249

10,414,239

Selling expenses 14

(11,786,001)

(11,021,154)

Administrative expenses 4, 14

(27,075,224)

(27,415,666)

Management benefit expenses 14, 15

(13,396,086)

(12,715,449)

Reversal of allowance for doubtful accounts 5

1,712,428

-

Impariment loss on fixed assets - net 7, 14

(11,731,896)

-

Finance costs 4

(34,226,516)

(26,044,390)

LOSS FOR THE YEAR

(140,915,081)

(18,120,640)

Other Comprehensive Income

Increment of revaluation surplus on fixed assets 7

86,488,360

-

TOTAL COMPREHENSIVE LOSS FOR THE YEAR

(54,426,721)

(18,120,640)

Basic Loss per Share

(0.2821)

(0.0363)

Weighted Average Number of Shares (In Shares)

499,453,373

499,453,373

82



STATEMENT OF CHANGES IN EQUITY


In Baht

Issued and

Premium on

Revaluation

Paid-up

Common

Surplus on

Net

Note

Share

Capital

Shares

Fixed

Assets

Deficit

(Capital Deficiency)

Balance as at January 1, 2011

499,453,373

103,688,297

-

(578,941,407)

24,200,263

Total comprehensive loss for the year

-

-

-

(18,120,640)

(18,120,640)

Balance as at December 31, 2011

499,453,373

103,688,297

-

(597,062,047)

6,079,623

Total comprehensive income (loss) for the year 7

-

-

86,488,360

(140,915,081)

(54,426,721)

Balance as at December 31, 2012

499,453,373

103,688,297

86,488,360

(737,977,128)

(48,347,098)

83


SHUN THAI RUBBER GLOVES INDUSTRY PUBLIC COMPANY LIMITED STATEMENT OF CASH FLOWS


In Baht

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Loss for the year

(140,915,081)

(18,120,640)

Adjustments to reconcile loss for the year to net cash provided by

(used in) operating activities

Depreciation and amortization

46,903,471

45,820,013

Reversal of allowance for doubtful accounts

(1,712,428)

-

Allowance for (reversal of) decline in value of inventories

5,491,972

(10,729,120)

Impariment loss on fixed assets - net

11,731,896

-

Write-off fixed assets

22,425

-

Gain on disposal of fixed assets

-

(98,676)

Reversal of allowance for impairment of long-term investment

-

(718,000)

Loss on disposal of long-term investment

-

96,398

Provision for employee retirement benefit

21,555

278,064

Unrealized (gain) loss on foreign exchange - net

1,289,631

(1,009,928)

Interest income

(420,461)

(23,590)

Interest expense

34,226,516

26,044,390

Profit (Loss) from Operations before Changes in Operating Assets

and Liabilities

(43,360,504)

41,538,911

Decrease (Increase) in Operating Assets:

Trade and other account receivables

43,993,742

641,540

Inventories

119,660,888

(129,807,811)

Other current assets

(458,711)

(767,424)

Other non-current assets

(2,000)

(24,000)

Increase (Decrease) in Operating Liabilities:

Trade and other account payables

(53,458,525)

75,169,272

Advances received from director

91,389

-

Advances received from customers

13,736,871

132,788

Accrued expenses

578,692

(2,893,373)

Other current liabilities

1,233,148

2,698,262

Net Cash Provided by (Used in) Operating Activities

82,014,990

(13,311,835)

84


SHUN THAI RUBBER GLOVES INDUSTRY PUBLIC COMPANY LIMITED STATEMENT OF CASH FLOWS (Continued)


In Baht

2012

2011

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from disposal of long-term investment

-

3,108,170

Purchases of fixed assets

(18,654,919)

(11,961,030)

Proceeds from disposal of fixed assets

-

127,829

Interest received

7,123

-

Net Cash Used in Investing Activities

(18,647,796)

(8,725,031)

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase (decrease) in bank overdrafts and short-term loans

from financial institutions

(18,723,033)

87,406,073

Repayments of defaulted short-term loan from related company

-

(10,000,000)

Repayments of long-term loan from related company

-

(10,000,000)

Repayments of liabilities under finance lease contracts

(760,077)

(1,566,156)

Repayments of long-term loans from financial institution

-

(4,268,197)

Repayments of restructured debts from related company

(3,591,888)

(20,260,208)

Interest paid

(33,301,605)

(22,435,091)

Net Cash Provided by (Used in) Financing Activities

(56,376,603)

18,876,421

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

6,990,591

(3,160,445)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

1,154,759

4,315,204

CASH AND CASH EQUIVALENTS AT END OF YEAR

8,145,350

1,154,759

85


SHUN THAI RUBBER GLOVES INDUSTRY PUBLIC COMPANY LIMITED STATEMENT OF CASH FLOWS (Continued)


In Baht

2012

2011

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash and cash equivalents consisted of:

Cash on hand

277,030

322,469

Cash in banks

- Savings deposits

168,239

166,103

- Current accounts

7,700,081

666,187

Total

8,145,350

1,154,759

86



Notes to Financial Statements

December 31, 2012

1. GENERAL

Shun Thai Rubber Gloves Industry Public Company Limited (“the Company”) was incorporated as a

limited company in Thailand on May 24, 1988 and was transformed to be the Public Company on

September 4, 2001, which was the date that the Company’s common shares have been approved to be a

listed security in the Stock Exchange of Thailand by having the objectives to engage in manufacturing of

rubber gloves for medical profession and industry and manufacturing of latex.

The registered address of the Company is located at 9 Moo 4, Tambon Kached, Amphur Muang, Rayong

Province, Thailand.

As at December 31, 2012 and 2011, the Company’s major shareholders are as follows:

Percentage

Shareholders 2012 2011

Mr. Seah Lan Seang 19.3 -

Mr. Ong Siew Bok - 19.3

Ever Glow Fertilizer Company Limited 11.0 11.0

Thai Hua Holding Company Limited 9.0 9.0

As at December 31, 2012 and 2011, the Company’s financial positions are as follows:

In Million Baht

2012 2011

Deficit 738.0 597.1

Total current liabilities higher than total current assets 290.9 158.7

87


Moreover, for each of the years ended December 31, 2012 and 2011, the Company’s results of operations

are as follows:

In Million Baht

2012 2011

Loss for the year 140.9 18.1

The Company faced with the liquidity problem and could not repay to a related company creditor and

defaulted the repayment on short-term loan from such related company, so the Company entered into

various amendments of restructuring agreement as discussed in Note 4. These matters indicate material

uncertainties about the Company’s ability to continue its operations as a going concern. Thus, the

Company’s ability to continue its operations as a going concern may significantly depends on the

Company’s success in future operations and can generate sufficient cash flows from operations. The

financial statements for each of the years ended December 31, 2012 and 2011 have been prepared on the

accounting basis that the Company will continue its operations as a going concern. Accordingly, such

financial statements do not include any adjustments relating to the realization of the carrying value and

classification of the assets or the amount and classification of liabilities that might be necessary should

the Company be unable to continue its operations as a going concern.

Presently, the Company has a plan to improve the production process and marketing strategy to resolve

the above problems and to be suitable for the Company’s financial liquidity and the world economic

situation. The ultimate outcome of these matters cannot presently be determined. In addition, the

Company engaged an independent appraisal firm to appraise major assets of the Company by using the

market approach as discussed in Note 7.

2. BASIS OF FINANCIAL STATEMENT PREPARATION

The statutory financial statements are prepared in Thai Baht and in the Thai language in conformity Thai

Financial Reporting Standards. Accordingly, the accompanying financial statements are intended solely

to present the financial position, financial performance and cash flows in accordance with Thai Financial

Reporting Standards.

The accompanying financial statements are prepared under the historical cost convention except for those

specified in the notes to the financial statements.

For convenience of the readers, an English translation of the financial statements has been prepared from the

Thai language statutory financial statements, which are issued solely for domestic financial reporting purposes.

88


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash on hand is kept for general use purpose within the Company. Cash equivalents are savings deposits

and current accounts, highly liquid investments that are readily convertible to known amount of cash that

are subject to an insignificant risk of change in value.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at invoice amount net of allowance for doubtful accounts.

The Company provides an allowance for doubtful accounts equal to the estimated collection losses that

may be incurred in the collection of all receivables. The estimated losses are based on historical

collection experience coupled with a review of the current status of existing receivables.

Inventory Valuation

The Company values its inventories at the lower of cost or net realizable value, by using the following

methods:

Finished goods and work in process - at first-in, first-out method

Raw materials and factory supplies - at average cost method

Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the

inventories to their present location and condition. In the case of manufactured inventories and work in

progress, cost includes an appropriate share of overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated

costs of completion and selling expenses.

Property, Plant and Equipment

In 2011, property, plant and equipment is stated at cost less accumulated depreciation and allowance for

impairment losses. When assets are sold or retired, their cost and accumulated depreciations are

eliminated from the accounts and any gain or loss resulting from their disposal is included in the

statement of comprehensive income.

89


In 2012:

- Equipment is stated at cost less accumulated depreciation and allowance for impairment losses.

When assets are sold or retired, their cost and accumulated depreciations are eliminated from the

accounts and any gain or loss resulting from their disposal is included in the statement of

comprehensive income.

- Land and land improvements, and buildings and building improvements are stated at revalued

amounts. Revaluations are performed by independent professional valuers with sufficient regularity

to ensure that the carrying amount of these assets does not differ materially from that which would

be determined using fair values at the statement of financial position date.

The Company records the differences incurred from revaluation as follows:

- When an asset’s carrying amount is increased as a result of a revaluation, the increase is recognized

in other comprehensive income and accumulated in equity under the heading “Revaluation surplus

of fixed assets”. However, the increase is recognized in profit or loss to the extent that it reverses a

revaluation decrease of the same asset previously recognized in profit or loss.

- When an asset’s carrying amount is decreased as a result of a revaluation, the decrease is

recognized in profit or loss. However, the decrease is recognized in other comprehensive income to

the extent of any credit balance existing in the revaluation surplus in respect of that asset. The

decrease recognized in other comprehensive income reduces the amount accumulated in equity

under the heading “Revaluation surplus of fixed assets”.

The revaluation surplus of fixed assets is not available for dividend distribution.

Upon the disposal of the revalued property, plant and equipment, the relevant portion of the revaluation

surplus realized in respect of the previous valuation is released from the property, plant and equipment

valuation surplus directly to retained earnings or deficit.

90


Depreciation

Depreciation of plant and equipment is calculated by a straight-line basis over the following estimated

useful lives:

Years

Land improvements 20

Buildings and building improvements 20

Machinery and equipment 2 to 15

Furniture, fixtures and office equipment 5

Vehicles 5

Computer Softwares and Amortization

Computer softwares that are acquired by the Company are stated at cost less accumulated amortization

and allowance for impairment losses (if any).

Amortization of computer softwares is calculated by reference to their costs on a straight-line basis for

the periods of 3 and 5 years.

Impairment of Assets

The Company reviews the impairment of assets whenever events or changes in circumstances indicate

that the recoverable amount (the higher of asset’s selling price or value in use) of assets is below the

carrying amount. The review is made for individual assets or for the cash-generating unit.

If the carrying value of an asset exceeds its recoverable amount, the Company recognizes the impairment

losses by reducing the carrying value of the asset to its recoverable amount and recording the devaluation

in statements of comprehensive income or reducing revaluation increment in assets in case that those

assets were previously revalued. The reversal of impairment losses recognized in prior years is recorded

as part of other income or as a revaluation increment in assets when there is an indication that the

impairment losses recognized for the assets no longer exist or are decreased. Such a reversal should not

exceed the carrying amount that would have been determined (net of the associated depreciation or

amortization).

91


Provision

A provision is recognized when the Company has a present legal or constructive obligation as a result of

a past event and it is probable that an outflow of resources will be required to settle the obligation, and a

reliable estimate of the amount can be made. A provision is reviewed at the statement of financial

position date and adjusted to reflect the current best estimate. Where the effect of the time value of

money is material, the amount of a provision is the present value of the expenditures expected to be

required to settle the obligation.

Provision for Employee Retirement Benefit

The Company’s employee retirement benefit obligation is calculated by estimating the amount of future

benefit that employees have earned in return for their service in the current and prior periods by the

projected unit credit method determined by a professionally qualified independent actuary. The projected

unit credit method considers each period of service as giving rise to an additional unit of benefit

entitlement and measures each unit separately to build up the final obligation. Past service costs are

recognized on a straight-line basis over the average period until the amended benefits become vested.

Gains or losses on the curtailment or settlement of pension benefits are recognized when the curtailment

or settlement occurs. Actuarial gains or losses are recognized immediately to the statement of income.

The defined benefit obligations are measured at the present value of estimated future cash flows using a

discount rate that is similar to the government bonds.

Use of Estimates

In order to prepare financial statements in conformity with Thai Financial Reporting Standards, the

management needs to make estimates and set assumptions that affect income, expenditure, assets and

liabilities in order to disclose information on the valuation of assets, liabilities and contingent liabilities.

Actual outcomes may, therefore, differ from the estimates used.

The estimates and underlying assumptions used in the preparation of these financial statements are

reviewed on an ongoing basis. Revisions 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.

92


Revenue Recognition

Revenue from the sale of goods is recognized in the statement of comprehensive income when the

significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognized

if there are significant uncertainties regarding recovery of the condition due, associated costs, the

probable return of goods or the continuing management involvement with the goods.

Interest income is recognized on a time proportion basis that reflects the effective yield on the asset.

Other income is recognized as income on an accrual basis.

Repair and Maintenance

Expenditures on repair and maintenance are charged to expense at the expenditures are incurred.

Expenditures of a capital nature are added to the related plant and equipment.

Finance Leases

Leases in terms of which the Company substantially assumes all the risk and rewards of ownership are

classified as finance leases. Property, plant and equipment acquired by way of finance leases are

capitalized at the lower of its fair value and the present value of the minimum lease payments at the

inception of the lease, less accumulated depreciation and impairment losses (if any). Lease payments are

apportioned between the finance charges and reduction of the lease liability so as to achieve a constant

rate of interest on the remaining balance of the liability. Finance charges are charged directly to the

statement of comprehensive income.

Operating Leases

Leases of assets under which all the risks and rewards of ownership are effectively retained by the lessor

are classified as operating leases. Lease payments under an operating lease are recognized as an expense

in the statement of comprehensive income on a straight-line basis over the lease term.

Finance Costs

Interest expense and similar costs are charged to the statement of comprehensive income for the period in

which they are incurred, except to the extent that they are capitalized as being directly attributable to the

acquisition, construction or production of an asset which necessarily takes a substantial period of time to

be prepared for its intended use or sale. The interest component of finance lease payments is recognized

in the statement of comprehensive income using the effective interest rate method.

93


Foreign Currency Transactions

Foreign currency transactions throughout the year are recorded in the accounts at the rates prevailing at

the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the end of

the years are translated into Baht at the prevailing rates at that date. Gains or losses from translations are

credited or charged to the statements of comprehensive income.

Income Tax

The provision for income tax is based on the amount currently payable according to the Revenue Code.

However, no income tax is payable for the years 2012 and 2011 since the Company has net loss from

operations.

Basic Loss per Share

Basic loss per share is determined by dividing the loss for the year by the weighted average number of

shares outstanding during the year.

4. TRANSACTIONS WITH RELATED PARTIES

A portion of the Company’s liabilities, revenue and expenses arose from transactions with related

companies. These companies are related through common shareholdings and/or directorships. The

accompanying financial statements reflect the effects of these transactions.

The significant transactions between the Company and its related companies, which included in the

statements of comprehensive income for each of the years ended December 31, 2012 and 2011, are as

follows:

Credit Term Policy of In Thousand Baht

(Days) Pricing 2012 2011

Revenues from sales of by products

Related company

- Thai Hua Rubber Public Company Limited 30 Market price - 1,350

Purchases of raw materials

Related companies

- Thai Hua Rubber Public Company Limited 60 Negotiated

Agreement 100,234 16,846

- D.S. Rubber & Latex Co., Ltd. 30 Market price - 18,295

- Tri Beca Enterprise Co., Ltd. Cash Market price - 2,252

Total 100,234 37,393

94


Credit Term Policy of In Thousand Baht

(Days) Pricing 2012 2011

Rental expense

Related company

- Tri Beca Enterprise Co., Ltd. - Negotiated

Agreement 162 162

Finance costs

Related company

- Thai Hua Rubber Public Company Limited - Negotiated

(from loan) Agreement 8,408 4,232

The outstanding balances with related companies as at December 31, 2012 and 2011 are as follows:

In Thousand Baht

Balance as at Balance as at

December 31, 2011 Increase Decrease December 31, 2012

Trade account payable

Related company

- Thai Hua Rubber Public Company Limited 8,441 100,234 64,521 44,154

Advances received from director

- Khun Porkuan Kittisriswai - 91 - 91

Accrued interest

Related company

- Thai Hua Rubber Public Company Limited 4,472 - - 4,472

Restructured debts

Related company

- Thai Hua Rubber Public Company Limited 157,232 - 3,592 153,640

Less: Portion due within one year (7,078) (26,902) - (33,980)

Net 150,154 (26,902) 3,592 119,660

95


On August 1, 2009, the Company entered into the first amendment of debt restructuring agreement with

Thai Hua Rubber Public Company Limited to extend the repayment period of trade account payable for

latex purchase, short-term loans and related accrued interest (up to June 30, 2009) to be repayable in 28

monthly installments at varying amounts starting August 2009. There restructured debts are non-interest

bearing.

On February 25, 2011, the Company entered into the second amendment of debt restructuring agreement

with Thai Hua Rubber Public Company Limited to extend the repayment period of defaulted short-term

loan of Baht 55.0 million and trade account payable for latex purchase of Baht 95.0 million (presented as

a portion of restructured debts from related company totalling Baht 150.0 million) starting March 2011

and last repayment period will be in February 2014. These restructured debts bear interest at the rate of

6.375% per annum.

On April 20, 2011, the Company entered into an acceptance letter for the accrued interest to Thai Hua

Rubber Public Company Limited as at December 31, 2010 of Baht 4.5 million to repay such accrued

interest within April 30, 2014. Hence, the Company reclassified such accrued interest as non-current

liabilities in the statements of financial position as at December 31, 2012 and 2011.

On May 20, 2011, the Company entered into the third amendment of debt restructuring agreement with

Thai Hua Rubber Public Company Limited to extend the repayment periods of the first and the second

amendments of debt restructuring agreements of Baht 17.9 million and Baht 143.9 million, respectively

(presented as restructured debts from related company totalling Baht 161.8 million), to be repayable in 60

monthly installments at Baht 1.0 million per month (principal and interest at the rate of 3.1875% per

annum) starting from May 2011 to April 2013 and at Baht 4.55 million per month (principal and interest

at the rate of 6.375% per annum) starting from May 2013 to April 2016.

96


5. TRADE AND OTHER ACCOUNT RECEIVABLES - Net

The aging analyses of trade and other account receivables as at December 31, 2012 and 2011 are as

follows:

In Thousand Baht

2012 2011

Trade account receivables:

Within credit term 25,876 80,057

Overdue

- Not over 3 months 21,348 10,811

- Over 3 months to 6 months 754 -

- Over 6 months to 12 months 14 4,092

- Over 12 months 47,583 45,439

Total trade account receivables 95,575 140,399

Other account receivables - 470

Total 95,575 140,869

Less: Allowance for doubtful accounts (49,110) (50,822)

Net 46,465 90,047

Transfer out allowance for doubtful accounts from returned

goods (Note 6)

- (4,436)

Reversal of allowance for doubtful accounts during the year (1,712) -

The Company has a credit term with trade account receivables ranging from 30 to 60 days.

As at December 31, 2012 and 2011, the Company had an allowance for doubtful accounts on trade and

other account receivables of Baht 49.1 million and Baht 50.8 million, respectively. The management

believes that such allowance is adequate to absorb possible losses on doubtful accounts.

97


6. INVENTORIES - Net

In Thousand Baht

2012 2011

Finished goods 36,183 51,582

Work in process 117,381 161,536

Raw materials and factory supplies 95,153 155,260

Total 248,717 368,378

Less: Allowance for decline in value of inventories (40,832) (35,340)

Net 207,885 333,038

Write-down of inventories recognized as a part of cost of sales

during the year

5,492

-

Transfer in allowance for decline in value of inventories

from returned goods (Note 5) - 4,436

Reversal of write-down inventories recognized as a part of cost

of sales in previous years

-

(10,729)

During the year 2011, the Company sold certain returned goods and obsolescence goods. Hence, the

Company reversed related allowance for decline in value of inventories of Baht 10.7 million and

presented net of cost of sales in the statements of comprehensive income for the year ended December

31, 2011.

98


7. PROPERTY, PLANT AND EQUIPMENT - Net

In Thousand Baht

Land Buildings Furniture,

and land and building Machinery fixtures

improvements improvements and and office Construction

(Cost/ (Cost/ equipment equipment Vehicles in progress

Appraisal) Appraisal) (Cost) (Cost) (Cost) (Cost) Total

Cost / Appraisal

As at January 1, 2011 74,007 154,926 565,046 6,868 6,001 5,607 812,455

Additions - 47 7,486 3 631 4,011 12,178

Disposals - - (8,968) (18) (565) (8) (9,559)

Transfers - 135 5,814 - - (5,949) -

As at December 31, 2011 74,007 155,108 569,378 6,853 6,067 3,661 815,074

Additions - 779 12,892 100 - 4,884 18,655

Revaluation 27,349 164,156 - - - - 191,505

Disposals - - (35,359) (11) - - (35,370)

Transfers - 130 3,531 - - (3,661) -

As at December 31, 2012 101,356 320,173 550,442 6,942 6,067 4,884 989,864

Accumulated Depreciation

As at January 1, 2011 3,532 64,097 370,731 6,403 3,126 - 447,889

Depreciation charge for the year 740 6,789 36,865 191 1,090 - 45,675

Disposals - - (8,954) (10) (348) - (9,312)

As at December 31, 2011 4,272 70,886 398,642 6,584 3,868 - 484,252

Depreciation charge for the year 740 6,885 38,194 164 812 - 46,795

Revaluation - 105,017 - - - - 105,017

Disposals - - (35,337) (11) - - (35,348)

As at December 31, 2012 5,012 182,788 401,499 6,737 4,680 - 600,716

Allowance for Impairment

As at January 1, 2011 2,520 8,120 13,270 - - - 23,910

Additions - - - - - - -

As at December 31, 2011 2,520 8,120 13,270 - - - 23,910

Additions (reversal) (780) 12,512 - - - - 11,732

As at December 31, 2012 1,740 20,632 13,270 - - - 35,642

Net Book Value

As at December 31, 2011 67,215 76,102 157,466 269 2,199 3,661 306,912

As at December 31, 2012 94,604 116,753 135,673 205 1,387 4,884 353,506

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Based on the Company’s financial position and result of its operations in the past and up to 2009, there

was an indicator that its property, plant and equipment might be impaired. Hence the Company engaged

an independent appraiser firm, Century 21 Fast and Fair Co., Ltd., to revalue the Company’s assets.

According to its appraisal reports dated October 2, 2009 and October 5, 2009, which appraised by using

the Market Approach, the details as follows:

In Thousand Baht

Appraised Values

Deficit Carrying value Appraised values Surplus (Impairment loss)

Land and land improvements 71,467 68,947 - (2,520)

Buildings and building improvements 92,958 149,485 64,647 (8,120)

Machinery and equipment 185,802 194,508 21,976 (13,270)

Other equipment 30,589 45,850 15,261 -

Total 380,816 458,790 101,884 (23,910)

As a result, the Company recorded allowance for impairment of property, plant and equipment totalling

Baht 23.9 million in the financial statements for the year ended December 31, 2009.

In 2012, the Company appraised its land and land improvements and buildings and building

improvements by following Accounting Standard No. 16 of which allows the valuation of property, plant

and equipment at appraisal amounts for financial statements reporting purposes. As at December 31,

2012, the Company’s land and land improvements and buildings and building improvements are stated at

the appraised values (based on reports of Chartered Valuation and Consultant Co., Ltd., an independent

appraisal firm, dated December 25, 2012). The appraisal report was using the Cost Approach which is

Market Approach for land and Replacement Cost Approach for land improvements, buildings and

building improvements. The revaluation increment of land and land improvements and buildings and

building improvements increased amounting to Baht 28.1 million and Baht 59.1 million, respectively,

totaling increase Baht 87.2 million and the devaluation of buildings and building improvements

amounting to Baht 12.5 million. The Company recorded the revaluation increment of assets amounting to

Baht 86.4 million as part of “Revaluation surplus on fixed assets” under “Equity” in the statement of

financial position as at December 31, 2012 and amounting to Baht 0.8 million as reversal of impairment

100


loss in the statement of comprehensive income for the year ended December 31, 2012 and recorded the

loss on devaluation of assets amounting to Baht 12.5 million as impairment loss in the statement of

comprehensive income for the year ended December 31, 2012. The details are as follows:

In Thousand Baht

Appraised Values

Reversal

Carrying value Appraised values Surplus (Impairment loss)

Land and land improvements 66,475 94,604 27,349 780

Buildings and building

improvements

70,126 116,753 59,139 (12,512)

Total 136,601 211,357 86,488 (11,732)

The revaluation surplus on fixed assets is not available for dividend distribution.

The carrying amounts of land and land improvements and building and building improvements carried

under the cost model are as follows:-

In Thousand Baht

Buildings and

Land and building

land improvements improvements Total

As at December 31, 2012

Revaluation model 94,604 116,753 211,357

Less revaluation surplus (27,349) (59,139) (86,488)

Cost model 67,255 57,614 124,869

Vehicles with net book value as at December 31, 2012 and 2011 amounting to Baht 0.4 million and Baht

1.6 million, respectively, are assets under various finance lease agreements with a leasing company.

The gross carrying amounts of the Company’s certain fixed assets totalling approximately Baht 193.7

million and Baht 153.3 million were fully depreciated as at December 31, 2012 and 2011, respectively,

but these items are still in active use.

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All of the Company’s land, buildings and improvements that are existing or to be constructed thereon and

a portion of machinery and equipment with net book value as at December 31, 2012 and 2011 totalling

Baht 336.0 million and Baht 288.5 million, respectively, are mortgaged/pledged as collateral for credit

facilities from several local banks as discussed in Note 10.

Since the Company has been recurring loss from operations for many years, there was an indicator that

the Company’s plant, machinery and construction in progress with the net carrying amount as at

December 31, 2012 totalling Baht 257.3 million would be impaired. Hence, the Company engaged an

independent financial advisor firm to perform the impairment test of these assets by using the value in

use method. Based on the report of such independent financial advisor firm dated January 15, 2014, there

was an impairment loss on these assets of Baht 24.1 million

8. COMPUTER SOFTWARES - Net

In Thousand Baht

Cost

As at January 1, 2011 548

Additions -

As at December 31, 2011 548

Additions -


Accumulated Amortization

As at January 1, 2011 181

Amortization charge for the year 144


Amortization charge for the year 109


Net Book Value



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9. ASSETS NOT USED IN OPERATIONS - Net

In Thousand Baht

Cost

As at January 1, 2011, December 31, 2011 and 2012 15,587

Accumulated Depreciation


Allowance for Impairment


Net Book Value

As at December 31, 2011 -

As at December 31, 2012 -

As at December 31, 2012 and 2011, all assets not used in operations are bunker oil boilers which used

bunker oil as fuel. Presently, they are not used in operations. The Company recorded allowance for

impairment in full.

10. BANK OVERDRAFTS AND SHORT-TERM LOANS FROM FINANCIAL

INSTITUTIONS

Interest rate per annum (%) In Thousand Baht

2012 2011 2012 2011

Bank overdrafts 7.425 4.00 – 7.55 3,446 9,659

Short-term loans from financial institutions 7.00 6.25 26,700 49,200

Liabilities under packing credits 7.00 - 7.425 5.75 - 7.25 339,990 330,000

Total 370,136 388,859

As at December 31, 2012, the Company obtained the credit facilities (bank overdrafts, short-term loans

and liabilities under packing credit) from two local banks totalling Baht 455 million. These credit

facilities are collateralized by pledging the Company’s fixed deposit amounting to Baht 10.0 million and

mortgaging/pledging the Company’s land, buildings and improvements that are existing or to be

constructed thereafter and portion of machinery and equipment as discussed in Note 7, in addition to the

guarantee by a director of the related company and certain related companies. Moreover, the loan

agreements contain conditions and restrictions, such as not to create additional pledge on assets, etc.

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Under the term of the agreements covering the Company’s liabilities under packing credits, the Company

will receive from the bank the value of the merchandise before shipping the merchandise to customers

provided that the Company has a commitment to pay back to the bank upon collection from sales.

11. PROVISION FOR EMPLOYEE RETIREMENT BENEFIT

In Thousand Baht

2012 2011

Provision for employee retirement benefit as at January 1 2,036 1,757

Current service costs for the year 15 192

Interest expense for the year 6 87

Provision for employee retirement benefit as at December 31 2,057 2,036

Actuarial assumptions

Daily Employee Monthly Employee

Discount rate 4.48% p.a. 4.44% p.a.

Future salary and wage increase rates 5.32% per year 5.47% per year

Employee turnover rates 48% per year 32% per year

Mortality rates (from Thai Mortality Table year 1997) 100% of Thai Mortality Table 50% of Thai Mortality Table

Disability rates (from Thai Mortality Table year 1997) 15% of Thai Mortality Table 10% of Thai Mortality Table

12. PREMIUM ON SHARE CAPITAL

Premium on share capital represents share subscription monies received in excess of the par value of the

shares issued. Premium on share capital is not available for dividend distribution.

13. REGISTERED PROVIDENT FUND

The Company has established a contributory registered provident fund in accordance with the Provident

Fund Act B.E. 2530 based on the approval from the Ministry of Finance on April 23, 2004. Under the

plan, members and the Company contribute to the fund at 3% of the employees’ basic salaries. The

Company appointed a fund manager to manage the fund in accordance with the terms and conditions

prescribed in the Ministerial Regulation No. 2 (B.E. 2532) issued under the Provident Fund Act B.E.

2530.

The Company’s contribution for the years 2012 and 2011, which was charged to the statements of

comprehensive income amounted to Baht 0.2 million each.

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14. EXPENSES BY NATURE

Significant expenses by nature for each of the years ended December 31, 2012 and 2011 are as follows:

In Thousand Baht

2012 2011

Raw materials and consumable used 360,886 588,681

Change in inventories of finished goods and work in progress 59,554 (63,192)

Other production expenses 335,316 331,120

Employee benefit expenses 82,219 73,932

Depreciation and amortization 46,904 45,820

Management benefit expenses 13,396 12,715

Impairment loss on fixed assets - net 11,732 -

Other expenses 29,654 29,243

Total expenses 939,661 1,018,319

15. MANAGEMENT BENEFIT EXPENSES

The monetary management benefit expenses for each of the years ended December 31, 2012 and 2011

are as follows:

In Thousand Baht

2012 2011

Salary 11,819 11,488

Meeting allowances 868 374

Others 709 853

Total 13,396 12,715

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16. SEGMENT INFORMATION

The Company operates in two business segments, which are production and distribution of gloves and

latex. Revenues and expenses will relate to business segment and geographical segments as follows:

For each of the years ended December 31, 2012 and 2011, the Company’s sale portions are as follows:

For each of the years ended December 31,

(Unit: % per Total Net Sales)

2012 2011

Net foreign sales 80.23 84.14

Net domestic sales 19.77 15.86

Total 100.00 100.00

For each of the years ended December 31, (In Thousand Baht)

Manufacturing and Distributing Manufacturing and Distributing

Rubber Gloves Latex Total

2012 2011 2012 2011 2012 2011

Revenue from sales 808,600 991,977 9,199 - 817,799 991,977

Cost of sales (865,768) (967,166) (9,904) - (875,672) (967,166)

Gross profit (loss) margin (57,168) 24,811 (705) - (57,873) 24,811

Gain on foreign exchange

- net 6,598 10,414

Reversal allowance for

doubtful accounts 1,712 -

Other income 6,863 23,850

Impairment loss - net (11,732) -

Share expenses (52,256) (51,152)

Finance costs (34,227) (26,044)

Loss for the year (140,915) (18,121)

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17. DISCLOSURE OF FINANCIAL INSTRUMENTS

Financial assets and financial liabilities carried on the statement of financial position include cash and

cash equivalents, trade and other account receivables, investments in restricted fixed deposits, bank

overdrafts and short-term loans from financial institutions, trade and other account payables, advances

received from director, restructured debts from and accrued interest expense to related company and

liabilities under finance lease agreements. The accounting policies on recognition and measurement of

these items are disclosed in the respective accounting policies in Note 3.

Liquidity Risk

Liquidity risk arises from the problem in raising funds adequately and in time to meet commitments as

indicated in the financial statements. Based on the assessment of the Company’s current financial

position and financial performance, the Company has liquidity risk. Hence, the Company entered into the

amendment of debt restructuring agreement with a related company to extend the period of repayments.

Foreign Currency Risk

The Company has commercial transactions in foreign currency, giving rise to exposure risk from changes

in foreign exchange rates. Hence, the management considers using forward exchange contracts to

mitigate this risk from time to time as appropriate.

Credit Risk

Credit risk is the risk that a counterparty is unable or unwilling to meet a commitment that it entered into

with the Company. The risk is controlled by the application of credit approvals from time to time and

monitoring procedures.

The carrying amount of accounts receivable recorded in the statements of financial position net of

allowance for doubtful accounts represents the maximum exposure to credit risk.

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Interest Rate Risk

Interest rate risk arises from the fluctuation of market interest rates, which may have an impact to current

and future operations of the Company. The Company exposure to interest rate risk relates primarily to

their deposits at financial institutions, investment in restricted fixed deposits, bank overdrafts and short-

term loans from financial institutions, restructured debts from related company and liabilities under

finance lease agreements. However, since most of the Company’s financial assets and liabilities bear

floating interest rates or fixed interest rates which are close to the market rates. The management

considers that the interest rate risk is minimal, hence, the Company has no hedging agreement to protect

against such risk.

Significant financial assets and liabilities as at December 31, 2012 and 2011, classified by type of interest

rates are summarized in the table below:

2012 (In Thousand Baht)

Fixed interest rates _______ Effective

Within Over Floating Non-interest interest rate

1 year 1- 5 years 5 years interest rate bearing Total (% p.a.)

Financial assets

Cash and cash equivalents - - - 168 7,977 8,145 0.625

Trade and other account

receivables - net - - - - 46,465 46,465 -

Investments in restricted fixed

deposits - 13,830 - - - 13,830 2.25 - 2.625

Total - 13,830 - 168 54,442 68,440

Financial liabilities

Bank overdraft and short-term

loans from financial institutions - - - 370,136 - 370,136 7.00 - 7.425

Trade and other account payables - - - - 125,188 125,188 -

Advances received from director - - - - 91 91 -

Liabilities under finance lease

agreements 416 18 - - - 434 7.07

Accrued interest expense from

related company - - - - 4,472 4,472 -

Restructured debts from

related company 33,980 119,660 - - - 153,640 4.49

Total 34,396 119,678 - 370,136 129,751 653,961

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2011 (In Thousand Baht)

Fixed interest rates Effective

Within Over Floating Non-interest interest rate

1 year 1- 5 years 5 years interest rate bearing Total (% p.a.)

Financial assets

Cash and cash equivalents - - - 166 989 1,155 0.75

Trade and other account

receivables – net - - - - 90,047 90,047 -

Investments in restricted fixed

deposits - 13,416 - - - 13,416 2.35 - 3.00

Total - 13,416 - 166 91,036 104,618

Financial liabilities

Bank overdraft and short-term

loans from financial institutions 8,104 - - 380,755 - 388,859 4.00 - 7.55

Trade and other account payables - - - - 178,658 178,658 -

Liabilities under finance lease

agreements 760 434 - - - 1,194 7.07

Accrued interest expense from

related company - - - - 4,472 4,472 -

Restructured debts from

related company 7,078 150,154 - - - 157,232 4.49

Total 15,942 150,588 - 380,755 183,130 730,415

Fair Value of Financial Instruments

Fair value is defined as the amount at which the instrument could be exchanged in a current transaction

between knowledgeable willing parties in an arm’s length transaction. The following methods and

assumptions are used to estimate the fair value of each class of financial instruments.

Cash and cash equivalents, trade and other account receivables - the carrying values approximate their

fair values due to the relatively short-term maturity of these financial instruments.

Investments in restricted fixed deposits carrying at market floating rate - the carrying values approximate

their fair values.

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Bank overdrafts, short-term loans from financial institutions, trade and other account payables and

advances received from director - the carrying amounts of these financial liabilities approximate their fair

values due to the relatively short-term maturity of these financial instruments.

Restructured debts from and accrued interest expense to related company and liabilities under finance

lease agreements carrying interest at fixed rate - the fair value could not be calculated appropriately

because the market floating rate could not be determined.

18. FOREIGN EXCHANGE FORWARD CONTRACTS

As at December 31, 2012 and 2011, the Company had policy to mitigate a foreign exchange rate risk,

which occurred from sales of goods in foreign currencies by entering into foreign exchange forward

contracts from two local financial institutions as follows:

2012 2011

Forward contract value U.S. Dollars 0.97 million U.S. Dollars 3.0 million

and Euro 0.4 million and Euro 0.7 million

Equivalent to Thai Baht Baht 46.1 million Baht 123.7 million

19. OTHERS

As at December 31, 2012 and 2011, the Company had:

a. letters of credit opened but not utilized amounting to U.S. Dollars 0.2 million (equivalent to Baht

7.4 million) and U.S. Dollars 0.1 million (equivalent to Baht 3.4 million), respectively.

b. letters of guarantee issued by a local financial institution in favor of a state enterprise amounting to

Baht 2.8 million, which are guaranteed by pledging of the investment in fixed deposit amounting

to Baht 2.8 million.

20. CAPITAL MANAGEMENT

The primary objective of the Company’s capital management is to ensure that it has sustained good cash

flows management and preserves the ability to continue its business as a going concern.

No changes were made in the Company’s objectives, policies or processes during the years ended

December 31, 2012 and 2011.

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21. EVENT AFTER THE REPORTING PERIOD

At the annual general meeting of the shareholders of the Company held on April 26, 2013, the

shareholders pass the resolution to increase authorized share capital from Baht 499,453,373 (499,453,373

ordinary shares at Baht 1 par value) to Baht 998,906,746 (998,906,746 ordinary shares at Baht 1 par

value). The Company registered the capital increase with the Ministry of Commerce on May 10, 2013.

The offering and allocation of 499,453,373 new ordinary shares to the existing shareholders in

proportion with their shareholdings (Right Offering). The subscription ratio is 1 existing shares for 1 new

ordinary share at Baht 0.25 per share. If the shares are not sold out, it is appropriate offer to the

interested parties or new investors (Private Placement).

22. NEW THAI ACCOUNTING STANDARDS NOT YET APPLIED

The Company has not adopted new/revised Thai Financial Reporting Standards (TFRS) that have been

issued but are not yet effective at the reporting date as follows:

TFRS Topic Effective date

TAS 12 Income Taxes January 1, 2013

TAS 21 (Revised 2009) The Effects of Changes in Foreign Exchange Rates January 1, 2013

TFRS 8 Reporting Segments January 1, 2013

Management has presently determined the effects from application of the new/revised TFRS on the

financial statements of the Company, which are as follows:

TAS 12 – Income Taxes

The principal change introduced by TAS 12 is the requirement to account for deferred tax liabilities and

assets in the financial statements. Deferred tax liabilities and assets are the amounts of income taxes

payable and recoverable, respectively, in future periods in respect of temporary differences between the

carrying amount of the liability or asset in the statement of financial position and the amount attributed to

that liability or asset for tax purposes; and the carry forward of unused tax losses. Currently, the

Company does not recognize deferred tax in the financial statements.

The Company will adopt TAS 12 with effect from January 1, 2013. The effects of the change will be

recognized retrospectively in the financial statements. Management estimates that the effects on the

statement of financial position as at December 31, 2012 would be resulted in increase in total liabilities

and decrease in equity by Baht 17.3 million.

111


TAS 21 (Revised 2009) – The Effects of Changes in Foreign Exchange Rates

The principal change introduced by TAS 21 (revised 2009) is the introduction of the concept of

functional currency, which is defined as the currency of the primary economic environment in which the

entity operates. TAS 21 (revised 2009) requires the entity to determine its functional currency and

translate foreign currency items into its functional currency, reporting the effects of such translation in

accordance with the provisions of TAS 21 (revised 2009). Foreign currencies are defined by TAS 21

(revised 2009) as all currencies other than the entity’s functional currency.

Management has determined that the functional currency of the Company is Thai Baht. Accordingly, the

adoption of TAS 21 (revised 2009) from January 1, 2013 is not expected to have a significant impact on

the Company’s reported assets, liabilities or deficit.

TFRS 8 – Reporting Segments

Management is of the opinion that the adoption of TFRS 8 from January 1, 2013 will not have a

significant impact on the Company’s financial statements.

23. APPROVAL OF FINANCIAL STATEMENTS

The Company’s Board of Directors have authorized these financial statements for issue on February

19, 2014.

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Documents

Annual Report 2012 - Shun Thai Rubber Gloves Industry