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SRITHAI SUPERWARE PUBLIC COMPANY LIMITED 355 Suksawat Rd., Soi 36, Bangpakok, Rasburana, Bangkok 10140 Thailand. Tel. 66 2427 0088 Fax. 66 2428 9675 www.srithaisuperware.com

รายงานประจำป 2549 บริษัท ศรีไทยซุปเปอรแวร จำกัด (มหาชน) Annual Report 2006 SRITHAI SUPERWARE PUBLIC COMPANY LIMITED

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รายงานประจำป 2549

ANNUAL REPORT 2006

บริษัท ศรีไทยซุปเปอรแวร จำกัด (มหาชน) SRITHAI SUPERWARE PUBLIC COMPANY LIMITED


CONTENTS

Highlight of Consolidated Financial Statements 2 Message from the Chairman 4 1. General Information 9 2. Nature of Business 15 3. Structure of Shareholders and Management 32 • Report by Nominating and Remuneration Committee 44 4. Risk Factors 58 • Report by Risk Management Sub-Committee 61 5. Related Party Transaction 62 6. Management’s Discussion and Analysis of Business Performance 64 7. Policies and Operations of the Company 74 8. Other Relevant Information 77 Report by the Board of Directors on Its Accountability to Financial Statements 81 Audit Committee’s Report 82 Auditor’s Report and Financial Statements Attached Sheets

Annual Report 2006 - As of December 31, 2006 


HIGHLIGHT OF CONSOLIDATED FINANCIAL STATEMENTS

Unit : Thousand Baht

2006

2005

2004

CONSOLIDATED BALANCE SHEETS Assets Liabilities

6,702,399 1,741,923

6,119,661 1,508,768

6,287,896 1,717,524

4,960,476

4,610,893

4,570,372

Shareholders’ equity

CONSOLIDATED PROFITS

Total revenues

5,365,455

4,728,394

4,542,663

Total expenses

5,042,638

4,421,405

4,199,140

Profit from operating activities

322,817

306,989

343,523

Net profit for year

396,419

263,904

314,387

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities

592,978

731,071

651,523

Cash flows from investing activities

(314,977)

(209,252)

(290,899)

Cash flows from financing activities

(350,119)

(505,072)

(334,673)

Cash and Cash equivalence at year end

275,802

347,920

331,172

1.6

1.8

1.8

KEY FINANCIAL RATIOS

Current Ratio (times)

Account Receivable Turnover (days)

62.5

65.4

65.7

Inventory Turnover (days)

30.2

28.7

24.6

Account Payable Turnover (days)

60.8

57.9

54.4

Gross Profit Ratio to Sales (%)

21.0

20.5

21.0

Net Profit Ratio to Total Revenues (%)

7.4

5.6

6.9

Return on Total Assets (%)

6.2

4.3

5.0

Debt to Equity Ratio (times)

0.4

0.3

0.4

 Annual Report 2006 - As of December 31, 2006


Operation Result

Million Baht

8,000 6,000 4,000 2,000

945

0

963

314

2004 Sales and Hire of Work

Million Baht

8,000 6,000

5,314

4,691

4,500

1,117

264

396

2005

2006

Year

Gross Margin

Net Profit

Total Assets and Shareholders’ Equity 6,288

6,702

6,120 4,570

4,960

4,611

4,000 2,000 0

2004

2005

Total Assets

Baht

1

Year

Shareholders’ Equity

Earnings per Share

2

1.5

2006

1.46 1.10

0.94

0.5 0

2004

2005

2006

Year

Earnings per Share

Book Value per Share

Baht 30 20

16.00

16.37

2004

2005

18.30

10 0

2006

Year

Book Value per Share

Annual Report 2006 - As of December 31, 2006 


Message from the Chairman

We are pleased to inform you that our sales for the year 2006 amounted to THB 4,543 million which was higher than that of previous year by 12.6%. Net profit of THB 396 million was higher than that of the year 2005 by THB 133 million or 50.2%. Dividend per share is expected to be THB 0.75. Interim dividend at THB 0.30 per share was paid in September 2006. Additional dividend will be proposed to be paid to shareholders in May 2007 at THB 0.45 per share. The Company has set sales target for the year 2007 at THB 4,880 million which is higher than that of the year 2006 by 7.4%. In the year 2006, the Company had restructured its lines of businesses so as to be in line with applications of our products. The new structure comprised Plastic Business line, i.e. industrial products and household products, and Trading Business Line which is outsourcing of finished products for distribution purpose (trading). Industrial Products In the year 2007, the Company has a policy to defend its market leadership in industrial products, especially manufacture of auto-parts, manufacture of pails for paint and chemical, manufacture of plastic pallets, plastic packaging of various kinds and sizes, etc. The Company will keep on focussing on manufacture of large garbage bins for export.  Annual Report 2006 - As of December 31, 2006


Household Products In the year 2007, the Company has a policy to defend its share in domestic market for melamine tablewares for which we are market leader. In addition, the Company has set a target to expand export markets worldwide for melamine products, especially new markets in Africa, South America and Eastern Europe Block, in an aim to cover export markets in 100 countries by the year 2008 which is the 45th anniversary of the Company. Besides, Srithai (Vietnam) Company in which the Company has about 96% interest, located in the Socialist Republic of Vietnam, is preparing to start production of melamine products in early 3rd quarter of the year 2007. Its products will serve both domestic market in Vietnam and export markets worldwide. Trading Business Line The Company has set up a unit to screen and select quality products from outside sources for distributing to consumers through our two main channels, i.e. direct sales force deploying more than 100,000 independent business owners nationwide. It has been a main channel of distribution of the Company over the last 30 years. Another main channel of distribution is our customers in HoReCa group (Hotel, Restaurant, Catering). The Company together with our distributors have targetted at distributing complete range of products for serving HoReCa group, such as high-quality plastic furniture made in France for use in catering hall and around swimming pool, gadgets imported from Italy for use in catering halls and kitchens of HoReCa businesses, and other high-quality products under selection, not mentioning Lock&Lock Food Preservation Boxes which are presently very popular in the market. Above all, the Company has given most priority to human resource development to get prepared for our corporate growth. The Company has been continually developing human resource, focussing on training of executives of new generation to assure that they are knowledgeable, innovative, and able to keep abreast of global changes. The Company has been trying to enhance its potential on value adding of new product development, and creating new innovation for a better competitive edge in the world market. The Management of Srithai Superware Public Company Limited wishes to express our sincere thanks to all shareholders for having confidence in us and for your support. Please be assured that our Company will grow continually and sustainably. Mr. Sanan Angubolkul Chairman

Annual Report 2006 - As of December 31, 2006 


Board of Directors

Standing from left to right Seated from left to right

: Mr.Enghug Nontikarn, Mr. Suchat Boonbanjerdsri, Mr. Manit Ativanichayaphong, Mr. Naphol Lertsumitkul, Mr. Thawee Kongyungyuen : Mr. Prin Bholnivas, Mr. Sanan Angubolkul, Prof. Viroj Lowhaphandu, Mrs. Srisuda Lertsumitkul

 Annual Report 2006 - As of December 31, 2006


SHAREHOLDING STRUCTURE OF SRITHAI SUPERWARE GROUP - BUSINESS LINE

Srithai Superware Public Company Limited Plastic

Trading

Mould & Others

Srithai (Vietnam) 95.3%

Srithai-Otto 50.0%

Srithai Moulds 71.0%

Thai MFC 45.0%

Srithai Sanko 48.0%

Srithai Miyagawa 51.0%

Beijing Huatai 40.0%

Srithai WBG 47.0%

S.K.I. Ceramics 41.2%

PT. Srithai Maspion 32.5%

Srithai Shin-Osaka 40.0%

Srithai Nanoplast 30.0%

Srithai Packaging 39.2%

Thai Takahashi Plastics 25.0%

THAIVAN Service 35.0%

Soko Srithai 24.0%

LN Srithai Comm 20.0%

Takahashi Korat 19.0% Takahashi Plastics 16.5%

Remark : (1) Srithai Sanko Co., Ltd. was registered with the Ministry of Commerce on January 20, 2006. (2) THAIVAN Service Co., Ltd. was registered with the Ministry of Commerce on October 4, 2006. (3) LN Srithai Comm Co., Ltd. was formerly known as LG Srithai Infocomm (Thailand) Co., Ltd.

Annual Report 2006 - As of December 31, 2006 


SHAREHOLDING STRUCTURE OF SRITHAI SUPERWARE GROUP

Srithai Superware Public Company Limited

Subsidiary

Affiliates

Joint Venture

Srithai (Vietnam) 95.3%

Srithai Sanko 48.0%

PT. Srithai Maspion 32.5%

Srithai Moulds 71.0%

Srithai WBG 47.0%

Srithai Nanoplast 30.0%

Srithai Miyagawa 51.0%

Thai MFC 45.0%

Thai Takahashi Plastics 25.0%

Srithai Shin-Osaka 40.0%

S.K.I. Ceramics 41.2%

Soko Srithai 24.0%

Beijing Huatai 40.0%

LN Srithai Comm 20.0%

Srithai Packaging 39.2%

Takahashi Korat 19.0%

THAIVAN Service 35.0%

Takahashi Plastics 16.5%

Srithai-Otto 50.0%

Remark : (1) Srithai Sanko Co., Ltd. was registered with the Ministry of Commerce on January 20, 2006. (2) THAIVAN Service Co., Ltd. was registered with the Ministry of Commerce on October 4, 2006. (3) LN Srithai Comm Co., Ltd. was formerly known as LG Srithai Infocomm (Thailand) Co., Ltd.

 Annual Report 2006 - As of December 31, 2006


1. GENERAL INFORMATION

Srithai Superware Public Company Limited Head Office : 355 Suksawat Rd., Soi 36, Bangpakok, Rasburana, Bangkok 10140 Tel. : 66 2427 0088 Fax : 66 2428 9675 URL : www.srithaisuperware.com Registration Number : 0107536001516 Share Registrar : Thailand Securities Depository Co., Ltd. Location : 62 The Stock Exchange of Thailand Bldg., Rachadapisek Road, Khwaeng Klongtoey, Khet Klongtoey, Bangkok 10110 Tel. : 66 2359 1200-1 Fax : 66 2359 1259 Auditor : Mr. Prasan Chuaphanich Certified Public Accountant (Thailand) No. 3051 PricewaterhouseCoopers ABAS Limited 15th Floor, Bangkok City Tower, 179/74-80 South Sathorn Road, Bangkok 10120 Tel. : 66 2286 9999, 66 2344 1000 Fax : 66 2286 5050 Accounting Period January 1 – December 31 Legal Advisor : Niti-Pricha Office 69/33 Soi Athens Theater, Phayathai, Bangkok 10400 Tel. : 66 2252 9494, 66 2251 3225 Fax : 66 2251 3226, 66 2255 5201 Security Agent : Siam City Bank Public Company Limited Head Office 1101 New Petchburi Road, Rajthevi, Bangkok 10400 Tel : 66 2208 5000 Fax : 66 2253 6227 Managerial Contract : No

Annual Report 2006 - As of December 31, 2006 


JURISTIC PERSON’S SHARES OF WHICH THE COMPANY HOLDS MORE THAN 10% Subsidiary Companies 1. Company Name : Srithai Rungruengsaap (1999) Co., Ltd.(1) Location : 376 Moo 4, Soi Suksawat 36, Suksawat Rd., Bangpakok, Rasburana, Bangkok Type of Business : Assets Holding Telephone : 0 2427 0088 Fax : 0 2428 4418 Number of shares : Common Shares 3,900 shares, paid-up per share : Baht 10 issued and paid up Preferred Shares 6,100 shares, paid-up per share : Baht 10 Paid-up Capital : Common Shares Baht 39,000 Preferred Shares Baht 61,000

(1)

Srithai Rungruengsaap (1999) Co., Ltd. had registered its dissolution with the Ministry of Commerce on July 14, 2006.

2. Company Name : Srithai (Vietnam) Co., Ltd. Location : 9 Street 2, Song Than 1 Industrial Park, Di An District, Binh Duong Province, Socialist Republic of Vietnam Type of Business : Manufacture of Plastic Products Telephone : 84 650 790023-4 Fax : 84 650 790025 Paid-up Capital : Dong 93,307,234,503 3. Company Name : Srithai Moulds Co., Ltd. Location : 55/1, 55/6 Moo 1, Nong-Samsak, Amphoe Ban Bueng, Chon Buri Type of Business : Manufacture of Moulds Telephone : 0 3837 9280-2 Fax : 0 3847 6352 Number of shares issued and paid up : 1,000,000 shares, paid-up per share : Baht 100 Paid-up Capital : Baht 100,000,000 4. Company Name : Srithai Miyagawa Co., Ltd. Location : 539 Moo 4, Tambon Prak-Sa, Amphoe Mueang, Samut Prakan Type of Business : Manufacture of Moulds and Plastic Products Telephone : 0 2324 0911 Fax : 0 2324 0427 Number of shares issued and paid up : 1,200,000 shares, paid-up per share : Baht 100 Paid-up Capital : Baht 120,000,000

10 Annual Report 2006 - As of December 31, 2006


5. Company Name : Srithai Shin-Osaka Co., Ltd. Location : 1/132 Moo 2, Tambon Ta-sai, Amphoe Mueang, Samut Sakorn Type of Business : Mould Laminating Telephone : 0 3449 0130-1 Fax : 0 3449 0132 Number of shares issued and paid up : 600,000 shares, paid-up per share : Baht 83 Paid-up Capital : Baht 49,800,000 Affiliated Companies 1. Company Name : Srithai Sanko Co., Ltd.(2) Location : 355 Moo 4, Soi Suksawat 36, Suksawat Rd., Bangpakok, Rasburana, Bangkok Type of Business : Trading Company Telephone : 0 2427 0088 Fax : 0 2428 4418 Number of shares issued and paid up : 200,000 shares, paid-up per share : Baht 100 Paid-up Capital : Baht 20,000,000 (2) Srithai Sanko Co., Ltd. was registered with the Ministry of Commerce on January 20, 2006. 2. Company Name : Srithai WBG Co., Ltd. Location : 252/240 Ratchadaphisek Rd., Huai Khwang, Bangkok Type of Business : Distribution of Food Supplement and Health Care Products under Network Marketing System Telephone : 0 2275 7798 Fax : 0 2275 7797 Number of shares issued and paid up : 800,000 shares, paid-up per share : Baht 10 Paid-up Capital : Baht 8,000,000 3. Company Name : Srithai Plaschem (Thailand) Co., Ltd.(3) Location : 355 Soi Suksawat 36, Suksawat Rd., Bangpakok, Rasburana, Bangkok Type of Business : Trading Company Telephone : 0 2428 1000 Fax : 0 2428 1020 Number of shares issued and paid up : 75,000 shares, paid-up per share : Baht 100 Paid-up Capital : Baht 7,500,000 (3)Srithai Plaschem (Thailand) Co., Ltd. had registered its dissolution with the Ministry of Commerce on October 31, 2006.

Annual Report 2006 - As of December 31, 2006 11


4. 5. 6. 7. 8.

Company Name : Thai MFC Co., Ltd. Location : 1 Siam Cement Road, Bang Sue, Bangkok Type of Business : Manufacture of Melamine Powder Telephone : 0 2586 3895 Fax : 0 2586 4878 Number of shares issued and paid up : 2,000,000 shares, paid-up per share : Baht 100 Paid-up Capital : Baht 200,000,000 Company Name : S.K.I. Ceramics Co., Ltd. Location : 7/101 Moo 4, Tambon Mab Yang Porn, Amphoe Pluak Daeng, Rayong Type of Business : Manufacture of Ceramics Tableware Telephone : 0 3895 6025 Fax : 0 3895 6030 Number of shares issued and paid up : 12,000,000 shares, paid-up per share : Baht 10 Paid-up Capital : Baht 120,000,000 Company Name Location Type of Business Telephone Fax Paid-up Capital

: Beijing Huatai Replica of Porcelain Products Co., Ltd. : Xi Guan Street No. 104, Tongxian, Beijing, P.R.C. : Manufacture of Melamine Products : 86 10 6954 7477 : 86 10 6954 1924 : Yuan 8,947,925

Company Name : Srithai Packaging Co., Ltd. Location : 30/27 Moo 2, Tambon Khok Kham, Amphoe Mueang Samut Sakhon, Samut Sakhon Type of Business : Manufacture of Packaging Telephone : 0 3445 2100-7 Fax : 0 3445 2108-9 Number of shares issued and paid up : 600,000 shares, paid-up per share : Baht 100 Paid-up Capital : Baht 60,000,000

Company Name : THAIVAN Service Co., Ltd.(4) Location : 126/222 Moo 8, Soi Wachrapol, Ramindra Rd., Ta Rang, Bangken, Bangkok Type of Business : Local Hub Switching services Telephone : 0 2347 0099 Fax : 0 2347 0120 Number of shares issued and paid up : 100,000 shares, paid-up per share : Baht 10 Paid-up Capital : Baht 1,000,000

(4)

THAIVAN Service Co., Ltd. was registered with the Ministry of Commerce on October 4, 2006.

12 Annual Report 2006 - As of December 31, 2006


9. Company Name : PT. Srithai Maspion Indonesia Location : Ji Kembang Jepun 38, 40 Surabaya, Indonesia Type of Business : Manufacture of Melamine Products Telephone : 62 31 891 3004 Fax : 62 31 891 3630 Number of shares issued and paid up : 9,320 shares, paid-up per share : Rupiah 1,115,250 Paid-up Capital : Rupiah 10,394,130,000 10. Company Name : Srithai Nanoplast Co., Ltd. Location : 42 Moo 4, Tambon Bualoy, Amphoe Nhong Kae, Saraburi Type of Business : Manufacture of Plastic Products Telephone : 0 3637 3251-5 Fax : 0 3637 3256 Number of shares issued and paid up : 4,000,000 shares, paid-up per share : Baht 10 Paid-up Capital : Baht 40,000,000 11. Company Name : Thai Takahashi Plastics Co., Ltd. Location : 479 Moo 4, Tambon Prak-Sa, Amphoe Mueang, Samut Prakan Type of Business : Manufacture of Plastic Products Telephone : 0 2324 0730 Fax : 0 2324 0698-9 Number of shares issued and paid up : 200,000 shares, paid-up per share : Baht 100 Paid-up Capital : Baht 20,000,000 12. Company Name : Soko Srithai Co., Ltd. Location : 94 Moo 5, Tambon Bang-Samak, Amphoe Bang Pakong, Chachengsao 24130 Type of Business : Manufacture of Plastic Products (for kitchen) Telephone : 0 3857 0265-8 Fax : 0 3857 0271 Number of shares issued and paid up : 250,000 shares, paid-up per share : Baht 1,000 Paid-up Capital : Baht 250,000,000

Annual Report 2006 - As of December 31, 2006 13


13. Company Name : LN Srithai Comm Co., Ltd.(5) Location : 71/12 Moo 5, Tambon Tha-Kam, Amphoe Bang Pakong, Chachengsao Type of Business : Manufacture of Telephone Sets Telephone : 0 3857 3061-3 Fax : 0 3857 3064 Number of shares issued and paid up : 76,000 shares, paid-up per share : Baht 1,000 Paid-up Capital : Baht 76,000,000

was formerly known as LG Srithai Infocomm (Thailand) Co., Ltd.

(5)

14. Company Name : Takahashi Korat (1995) Co., Ltd. Location : 479 Moo 4, Tambon Prak-Sa, Amphoe Mueang, Samut Prakan Type of Business : Manufacture of Plastic Products (for electronics) Telephone : 0 2324 0730 Fax : 0 2324 0698-9 Number of shares issued and paid up : 1,500,000 shares, paid-up per share : Baht 100 Paid-up Capital : Baht 150,000,000 15. Company Name : Takahashi Plastics Co., Ltd. Location : 479 Moo 4, Tambon Prak-Sa, Amphoe Mueang, Samut Prakan Type of Business : Manufacture of Plastic Products Telephone : 0 2324 0730 Fax : 0 2324 0698-9 Number of shares issued and paid up : 400,000 shares, paid-up per share : Baht 100 Paid-up Capital : Baht 40,000,000 Joint Venture Company 1. Company Name : Srithai-Otto (Thailand) Co., Ltd. Location : 355 Moo 4, Soi Suksawat 36, Suksawat Rd., Bangpakok, Rasburana, Bangkok Type of Business : Trading Company Telephone : 0 2427 0088 Fax : 0 2874 5015 Number of shares issued and paid up : 200,000 shares, paid-up per share : Baht 50 Paid-up Capital : Baht 10,000,000

14 Annual Report 2006 - As of December 31, 2006


2. NATURE OF BUSINESS

2.1 COMPANY BACKGROUND Srithai Superware Public Company Limited, “the Company”, initially operated under the name “Srithai Plastic Industry Limited Partnership”. It was found by Mr. Sumit Lertsumitkul on August 1, 1963, to operate as a manufacturer and distributor of household plasticware. In 1972, the business was renamed “Srithai Superware Limited Partnership” and the management team was reorganized. Mr. Sanan Angubolkul was appointed as Factory Manager at that time. A new product line, melamine tableware, was added. In 1979, the limited partnership was transformed into a company limited under the name “Srithai Superware Company Limited”, after which time the Company kept on expanding. The Company was listed with The Stock Exchange of Thailand on October 2, 1991, with an increase of registered capital from Baht 170 million to Baht 200 million. The Company was transformed into a public company on December 13, 1993. The Company increased its registered capital again to Baht 470 million on January 14, 1994, and subsequently to Baht 500 million on March 19, 1996, with fully paid-up share capital of Baht 400 million. In July 1997, under the pressure of economic crisis in the Asia-Pacific region, the Company announced debt restructuring. The Company later agreed with a creditor to file a petition to Court for business reorganization under the bankruptcy law. The Court approved the petition on May 28, 1999, and the reorganization plan on December 30, 1999, by appointing SGV-Na Thalang & Co., Ltd. as plan administrator. In the first quarter of 2000, Srithai Rungruengsaap (1999) Co., Ltd., a subsidiary, was established to hold parts of assets of the company in line with the structure as indicated in the approved reorganization

plan, to whom parts of land and shares in related companies of the company were sold. On April 28, 2000, the Company converted a portion of debt to equity according to the reorganization plan. It resulted in an increase in paid-up capital from Baht 400 million to Baht 2,857 million. The remainder portion of the affected debts was converted to Secured Floating Rate Notes (FRN) amounting to USD 84.2 million, redeemable in 5 years. The Company repaid and prepaid the FRN from time to time. Implementation of the business reorganization plan of the Company had been completed. On July 15, 2002, the Southern Bangkok Civil Court passed an order to release the company from the reorganization plan by virtue of Section 90/70 of the Bankruptcy Act B.E. 2483. As a result, the Management team of the Company resumed managerial power again. On July 19, 2002, the Company signed a Syndicated Long-term Loan Agreement with the Siam City Bank Pcl. and the Bangkok Bank Pcl. amounted THB 2,100 million. The loan was used to repay all the Secured Floating Rate Notes, and freed the Company from all offshore loans. After borrowing the syndicated long-term loan, the Company has repaid and prepaid many installments. As a result, the outstanding balance of the syndicated long-term loan as of December 31, 2006 was brought down to THB 125 million. On August 12, 2005 Mr. Sumit Lertsumitkul, late Chairman of the Board of Directors of the Company passed away. Her Royal Highness Princess Maha Chakri Sirindhorn graciously presided over the cremation ceremony of Mr. Sumit Lertsumitkul on Friday 10th March 2006. Meanwhile, the Board of Directors in the meeting no. 5/2548, held on September 7, 2005, unanimously appointed Mr. Sanan Angubolkul, President, to be Chairman and President of the Annual Report 2006 - As of December 31, 2006 15


Company. The Board did not appoint a new director to replace Mr. Sumit Lertsumitkul. On June 21, 2006, an entire business transfer agreement was signed between the Company and Srithai Rungruengsaap (1999) Co., Ltd., the subsidiary. At the 25th Annual General Meeting of Shareholders (for the year 2005) on April 28, 2006, a resolution was passed to accept the transfer of the entire business of the subsidiary in order to simplify the structure of investments within the Group. Besides, Srithai Rungruengsaap (1999) Co., Ltd. registered its dissolution with the Ministry of Commerce on July 14, 2006. It is liquidating its assets. The Company has restructured its lines of businesses according to the resolution of Board Meeting no. 6/2549, held on September 29, 2006. The new structure comprises a plastic business line, which main products are industrial products and household products, a trading business line, and a supporting business line. The new structure has been in effect since October 1, 2006. 2.2 BUSINESS OUTLOOK OF SRITHAI

SUPERWARE GROUP The Company has restructured its business. The previous business structure comprised a plastics business line and a melamine business line. The new structure comprises a plastic business line and a trading business line, effective since 1 October 2006,

16 Annual Report 2006 - As of December 31, 2006

according to the resolution of Board Meeting no.6/ 2549, held on 29 September 2006. The business restructuring was aimed at restructuring of the organization chart, management operations, business direction, strategies, and plans; so that it would be more suitable and in line with the growth and expansion of businesses, and to enhance competitive edge of the Company in both domestic and export markets. The plastic business line encompasses products categorized by its applications which are industrial products and household products. As a result, this allows clearer determination of business direction, mapping of strategies and plan, and grouping of products. The introduction of the trading business line will enable to focus on trading transactions and preparation for its increasing future role. The business restructuring of the Company resulted in the change of business structure classified by business lines of Srithai Superware Group. However, since the Group has a strategy to do vertical business integration in order to reduce dependency on business outside the Group, most of its subsidiaries, affiliated companies and joint venture are still engaged in the said two businesses under the new structure. Our subsidiaries that operate mold-making business and other affiliated companies that cannot be classified under the two main business lines are grouped under “other businesses�.


STRUCTURE OF REVENUE The structure of revenue of the Group can be classified by business lines : Plastic Business Line comprises Industrial Products and Household Products, Trading Business Line, and Mould-Making Business Line as described below :- CONSOLIDATED For the year ended December 31, 2006 (Unit : Thousand Baht) Plastics Business Household Industrial Products Products Trading and Domestic Domestic Overseas Moulds Productions Productions Productions Businesses Total Sales and hire of work 1,629,896 3,126,934 150,259 511,989 5,419,078 Revenues from subsidiaries - (6,206) (1,474) (97,257) (104,937) Total Sales and hire of work 1,629,896 3,120,728 148,785 414,732 5,314,141 Remark : Additional information classified by business line and geographic segments was disclosed in notes to financial statements for the year ended 31 December 2006, page 18-19 STRUCTURE OF TOTAL SALES OF SRITHAI SUPERWARE GROUP Unit of Total Sales : Million Baht, % 2006 Sales (%) 2006 2005 2004 Plastic Business Srithai Superware Pcl. Srithai (Vietnam) Co., Ltd. (Sales in Vietnam) Srithai Miyagawa Co., Ltd. Thai MFC Co., Ltd. Beijing Huatai Replica of Porcelain Products Co., Ltd. (Sales in China) PT. Srithai Maspion Indonesia (Sales in Indonesia) Srithai Nanoplast Co., Ltd. Soko Srithai Co., Ltd. Takahashi Korat (1995) Co., Ltd. Takahashi Plastics Co., Ltd. Total Plastic Business

Domestic Export Sales

%

Sales

Sales

%

81 81

19 19

66 40 100

34 60 0

366 643 84

2.6 4.6 0.6

254 506 82

2.2 4.3 0.7

254 2.2 571 5.0 85 0.7

99

1

64

0.4

62

0.5

51 0.4

100 96 100 73

0 4 0 27

4,366 30.9 3,826 138 1.0 132

%

32.6 3,815 33.1 1.1 101 0.9

16 0.1 12 0.1 0 0.0 141 1.0 137 1.2 236 2.0 4,920 34.9 3,481 29.6 3,047 26.4 606 4.3 630 5.4 1,349 11.7 11,344 80.4 9,122 77.7 9,509 82.4

Annual Report 2006 - As of December 31, 2006 17


STRUCTURE OF TOTAL SALES OF SRITHAI SUPERWARE GROUP (CONT.) Unit of Total Sales : Million Baht, % 2006 Sales (%) 2006 2005 2004 Domestic Export Sales % Sales % Sales % Trading Business 97 3 103 0.7 70 0.6 24 0.2 Srithai Superware Pcl. 100 0 73 0.5 42 0.4 35 0.3 Srithai-Otto (Thailand) Co., Ltd. (1) 100 0 19 0.2 0 0.0 0 0.0 Srithai Sanko Co., Ltd. 100 0 0 0.0 0 0.0 0 0.0 Srithai WBG Co., Ltd. (2) Srithai Plaschem (Thailand) Co., Ltd. 100 0 15 0.1 25 0.2 30 0.3 210 1.5 137 1.2 89 0.8 Total Trading Business Other Businesses - Mould-Making 92 8 75 0.5 137 1.2 42 0.4 Srithai Superware Pcl. 100 0 127 0.9 151 1.3 151 1.3 Srithai Moulds Co., Ltd. 100 0 173 1.2 169 1.4 141 1.2 Srithai Miyagawa Co., Ltd. 100 0 33 0.3 19 0.2 17 0.1 Srithai Shin-Osaka Co., Ltd. (3) 0 0 0 0.0 0 0.0 21 0.2 High Tech Moulds Co., Ltd. Total Mould-Making 408 2.9 476 4.1 372 3.2 - Others 100 0 27 0.2 57 0.5 56 0.5 Srithai Rungruengsaap (1999) (4) Co., Ltd. (Rental Income) 5 95 341 2.4 345 2.9 252 2.2 S.K.I. Ceramics Co., Ltd. 100 0 128 0.9 130 1.1 130 1.1 Srithai Packaging Co., Ltd. (5) 1 99 1,653 11.7 1,468 12.5 1,134 9.8 LN Srithai Comm Co., Ltd. 2,149 15.2 2,000 17.0 1,572 13.6 Total Others 14,111 100.0 11,735 100.0 11,542 100.0 Grand Total (1) Srithai Sanko Co., Ltd. was registered on January 20, 2006. (2) Srithai Plaschem (Thailand) Co., Ltd. had registered its dissolution on October 31, 2006 (3) High Tech Moulds Co., Ltd. had registered its dissolution on April 26, 2004 (4) Srithai Rungruengsaap (1999) Co., Ltd. had registered its dissolution on July 14, 2006 (5) was formerly known as LG Srithai Infocomm (Thailand) Co., Ltd.

Remarks : 1. Structure of Sales information of the Company and group companies, shown comparatively for 3 years 2004-2006, were from financial statements of each company without eliminating inter-company transactions. 2. Exchange rates used in the calculation of sales of foreign associates were as shown below:- 2006 2005 2004 Beijing Huatai Replica of Porcelain Products Co., Ltd. Baht 1 = 0.218 RMB Baht 1 = 0.199 RMB Baht 1 = 0.213 RMB Srithai (Vietnam) Co., Ltd. Baht 1 = 454.545 VND Baht 1 = 384.615 VND Baht 1 = 400.000 VND PT. Srithai Maspion Indonesia Baht 1 = 266.830 RP Baht 1 = 255.951 RP Baht 1 = 253.209 RP 18 Annual Report 2006 - As of December 31, 2006


2.3 Business Direction of the Company The Company has set and announced business direction for the years 2007-2009 (revised version) on 30 September 2006, so that management and staffs of all levels in the organization could share a common understanding and co-ordinate among them to push forward the Company to the desired direction. Details of business direction are as following:- Business Direction of Srithai Superware Pcl. for period 2007- 2009 (Revision) 1. During 2007- 2009 we shall focus on quality growth as described below:- Plastic Business : • Export Markets Focus on sustainably aggressive growth by covering markets in 100 countries. • Domestic Markets Focus on continual growth. Maintain our market shares and secured profitability. Attach importance on product lines of high market growth. Focus on profitable products. • Product Lines Focus on development of production Expansion technology for industrial goods and household goods so as to expand new product lines in an aim to cover as many market targets as possible. • Production Base Target at countries of high Expansion potential in production work such as Vietnam and India. Trading Business : • Expand business for widening product varieties by doing trading business. 2. We shall expand our production capacity and invest in moulds and machines of high efficiency, so that worthwhile return on investment could be expected. 3. We are committed to build up corporate culture under which our staffs will work as a team with very high team spirit, so as to assure that our customers are well serviced inside and outside our organization. Focus will be given to the success

of teams. Our organization will reward the persons participating in the success of their teams. 4. We shall focus on quality improvement of our goods, reduction of production costs, and punctual delivery of goods to customers. These factors will boost up our competitiveness and maintain our leadership in the markets for our main products forever. 5. We are committed to fully utilize our modern information technology to provide useful and timely information to our Management teams, so that decision-making process will be made effective. 6. We shall emphasize on innovations and human resource development to fulfill need of our organizational growth. The Company has carried out the following business activities following the revised version of our business direction as summarized below:- Plastic Business Line 1. In the year 2006, export market coverage of the Company was 60 countries worldwide, as compared with the target of 100 countries within the year 2008. 2. The Company has been manufacturing and distributing goods of high market growth and profitable products as following:- 2.1 Production capacities of Suksawat factory and Amata Nakorn Chonburi factory were increased so that the Company could accept more orders for automotive parts. Amata Nakorn Chaonburi factory has submitted an application to the Board of Investment for promotional privileges in the production of automotive parts. 2.2 The Company has collaborated with its business alliance on technology transfer on designing, manufacturing and distributing toilet seats. Toilet seats are produced at Korat factory and Amata Narkorn Chonburi factory, which have received promotional privileges from the B.O.I. It was expected that sales revenue from distributing toilet seats will be generated in the year 2007.

Annual Report 2006 - As of December 31, 2006 19


2.3 The Company has focussed on manufacturing and selling material handling products such as packaging products, crates, pallets, and paint pails. These products are produced at Amata Nakorn Chonburi factory. The Company has invested in expansion of production facility to support sales of material handling products. The company has received additional promotion from the B.O.I. for manufacturing and distributing a few items of goods. 3. The Company has been expanding production base of household products to Vietnam by increasing capital of Srithai (Vietnam) Company Limited so as to add another production line. Srithai (Vietnam) is a subsidiary company in which the Company has 95.32% interest. It has long been operating in Vietnam. The expansion of production base in Vietnam will enhance price competitiveness of the Company because there are abundant cheap labour in Vietnam. It was expected that the additional investment will generate revenues to the group in the year 2007. 4. Regarding our plan to set up a production base in India which is another country of high production potential, the Company is negotiating with a business alliance. It will consume time to do legal and marketing feasibility studies. The Company will take due care in evaluation of this project to assure good return on investment.

Trading Business line After launching Lock&Lock food preservation boxes to the market, and it becomes popular and gains recognition among consumers, the Company has been restlessly screening other quality products for distributing to its customers. Attention was focused on products of complete ranges or a group of products that could be offered to the same target customer in a package. The Company has been marketing its products to HoReCa group of customers, comprising hotels, restaurants and catering businesses. It was expected that HoReCa businesses will generate more revenue to our trading business line. 20 Annual Report 2006 - As of December 31, 2006

2.4 BUSINESS OPERATION BY BUSINESS LINE 2.4.1 Plastic Business

Regarding new business structure, the Company’s plastic business unit has been categorized by its main products i.e. industrial products and household products. The categorization was made according to the function of the products and has been detailed as following:-

(1) Industrial Products (a) Description of Product or Service Engineering Parts - parts that are used in the assembly of industrial products such as microwave oven, air-conditioner, refrigerator, washing machine, parts for automobiles and motorcycle etc. in which the Company can provide both manufacturing and assembling parts for the above mentioned products. Battery Cases - Exterior plastic case, lid and anode & cathode of batteries for cars and motorcycles. Pallet - Low-rise rectangular plastic pedestal used for putting on with goods in warehouse. There are openings inside the pallet for forks of forklift trucks to insert for lifting. Bottle Crate - Plastic crates with inside divided into small sockets for keeping upright bottles such as soft drink and beer. Container - Pail for paint, chemical, lubricant and grease Garbage Bin - Large garbage bin for sidewalk or public places Crate - Fish crate, spare part box, milk crate and crate for fruits & vegetables Premium Products - Made-to-order products for free gift promotional campaign of brand-owners and department stores. Mostly products are designed by brand owners and printed with customers’ brands. Other Products - Accessories, decorations, and appliances etc.

(b) Marketing and Competition Description of Customer Customers who buy automotive and motorcycle parts and battery cases use the products for further assembly in their production process.


Customers who buy pallets, bottle crates, pails, garbage bins, and container crates are end-users such as manufacturing plants. Premium products are directly sold to brand-owners and retailers for their promotional campaign. Accessories, decorations, and appliances are sold through sale agents or retailers who distributed the products to the consumers. Credit term Usually credit term of 30-90 days is granted to customers of plastic products. Sales in grand sales event are made in cash. Competitive Strategy Emphasis is put on high quality products, wide variety of products and complete integration of services, owing to the fact that certain related companies can produce moulds for customers. Distribution Channel Plastic products are distributed through the following distribution channels. Export Sales: 8.5% Bottle Crates 32.3% Garbage Bins 32.1% Accessories and Decorations 18.3% Battery Cases 8.9% Other 8.4% Domestic Sales: 91.5% Engineering Parts 26.8% Battery Cases 22.6% Vehicle Parts 13.6% Packaging 10.4% Accessories and Decorations 10.4% Bottle Crates 5.5% Pallets 4.9% Others 5.8%

only in their niche markets. For instance, producers of household plastic products will only produce household products and not other. There are about 4,000 plastic factories in the country. Mostly they are shop-house factories or household factories with low investment and low technology. Large plastic factories that are able to produce plastic products for supply to businesses and consumers are only handful as it requires large investment, high quality control, and advanced technology. Additionally, brand name is also important in creating creditability among customers, especially for manufacturing of engineering parts which requires high quality and timeliness of delivery. However, plastic resin market had driven up resin prices sharply and continually, resulting in closure of many small plasticware factories. Srithai Superware Group is the leader in plastic industry because our production capacity is as high as 40,000 tons per annum. Srithai operates 3 plastic factories. We have expertise in producing plastic precision parts such as engineering and vehicle parts. Plastic business has high potential to grow in line with economic growth of Thailand.

Distributors are Srithai Marketing Co., Ltd., Siam Melamine Marketing Co., Ltd., Srithai-Otto (Thailand) Co., Ltd., Tanasiri Industries Co., Ltd. and S. Sirithai Trading Co., Ltd. No distribution agreement is needed to be signed with them, because they have been our trade partners for a very long time. (c) Competitive Environment Most plastic product producers focus on any one particular area of specialization, and compete

Size of the Company as Compared to Competitors’ The company cannot compare its size with its competitors because there are thousands of plastic injection factories, medium and small. Therefore, size can be estimated from market shares as follow:-

industrial parts battery cases bottles crates pallets

market share

60% 60% 60% 50%

(d) Sourcing of Products or Services (Plastic Business) The Company operates 3 plastic product factories at Suksawat, Amatanakorn Chonburi and Bangpoo. The 3 factories are differentiated according to specialized production skills as follows: Suksawat Factory Producing small engineering parts i.e. parts of electricity products and vehicle parts etc., household products, and accessories.

Annual Report 2006 - As of December 31, 2006 21


Amatanakorn Chonburi Factory Producing pallets, bottle crates, container, garbage bin, decorations and industrial parts of big size - i.e. parts of electricity products and vehicle parts etc. Bangpoo Factory Producing battery cases. Important raw materials are various types of plastic resin, which are purchased domestically from distributors of many producers. There are no problems about raw material quality or shortage. However, when crude oil price rose, the price of plastic resin also increased. The Company could also increase sales price of products because there was an arrangement for such increase, and orders will not be taken from customers longer than 1 month in advance. The production process does not cause any environmental impacts.

Distribution Channel Household products have the following distribution channels: Export Sales 37.9% Domestic Sales 62.1% Direct Sales 50.6% Sale Agents and selling direct to Institutions 36.2% Grand Sales and Others 13.2% Distributors are Siam Melamine Marketing Co., Ltd. and Srithai Marketing Co., Ltd. No distribution agreement is needed to be signed with them, because they have been our trade partners for a very long time.

(c) Competitive Environment (e) Pending Orders Household products made of melamine powder, Customer-base of the Company is extensive; a kind of plastic substance that can endure high therefore, the Company did not rely on big customers temperature up to 100 degree celsius, is suitable for whose pending orders valued more than 10% of total food packaging owing to its high degree of consumer revenue. safety. There are only a handful of manufacturers. Since melamine product is enduring, colorful, and safe (2) Household Products for consumer health, it has become generally popular in (a) Description of Product or Service the domestic market and export market. Export market Household Products comprise tableware still has some potential for expansion, both in the and kitchenware made of melamine powder and neighboring countries and developed countries. In beautifully decorated with printed patterns or cartoons addition, the Company is a leader in the business as it characters. They include dish, bowl, rice bowl, ladle, is the largest producer in the country. It is estimated spoon, cup etc. The manufacturing plant received that total market size for melamine tableware for the promotional privileges from The Board of Investment. year 2006 in Thailand stands at approximately Baht 2,300 million or 15,700 tons per year. Presently the Company is the market leader for (b) Marketing and Competition Description of Customers distributed by the household plastic product made of melamine distributed under our 6 brands, i.e. Superware, Vanda, sale agents and direct sales. Credit term Usually credit term of 30 - 150 Flowerware, Melamineware, UNICA and Ektra. In days is granted to wholesalers. Sales in grand sales Thailand, the Company is the only distributor who event are made in cash and direct sales are also deploys a team force of direct sales. mostly made in cash. Competitive Strategy Emphasis is made on Size of the Company as Compared to Competitors’ The Company is biggest in term of market high quality product with beautiful decoration and colorful design along with product shapes which are share and production capacity. Our production capacity is 11,000 tons per annum, the second suitable for multi-purpose functions.

22 Annual Report 2006 - As of December 31, 2006


runner-up is Melamine Thai Co., Ltd. with capacity of 1,000 tons per annum, and the third is Malaplast Co., Ltd. with capacity of 700 tons per annum. (d) Sourcing of Product or Service The Company produces its household plastic products made of melamine at the factory in Nakorn Rachasrima province, in Suranaree Industrial Estate. Total production capacity is 11,000 tons per year, the largest melamine product producer in Thailand. Production is mainly made to purchase orders from overseas, and to satisfy demand for certain popular designs in the domestic market. Major raw material is melamine powder, almost all purchased from domestic producers, i.e. Thai MFC Co., Ltd., Thai K.K. Co., Ltd. and Matsushita Electric Works (Ayuthaya) Ltd. These companies have maintained good relationship with the Company. There are no problems on quality or shortage of raw material, and the production process causes no environmental impacts. The Company buys melamine powder from Thai MFC Co., Ltd. more than 50% of total purchase. Despite the standard quality, purchase price is reasonable due to Thai MFC Co., Ltd. being an affiliate. (e) Pending Orders The Company sells to tens of thousands of customers in domestic and export markets, both consumers and distributors. There is no pending order amounted more than 10% of total revenue. Besides, the Company also manufactures products under new brand “ektra”. These products are made of plastic and melamine and are designed for Metro Living people in corresponding to trendy design and right function which is personal characteristics so as to help expand business to new groups especially the upper level of consumers. The products are sold through direct sales system, leading department stores and shops as well as exported to other countries.

2.4.2 Trading Business Line Trading business is a new business line resulting from the restructuring of the Company’s businesses. The purpose of trading business line is to be another source of revenue of the Company in addition to the main source of revenue from plastic business and to support the increasing role of the Company’s trading business so that business planning and management could be clarified. Details of trading business and products are as follow:- (a) Description of Product or Service Products categorized under trading business line comprise:- Domestic Products : Bedding and cooking utensils. Imported Products : Lock & Lock food preservation box imported from Korea, Gadgets used in kitchen and catering under brand names “Albert”, “Broggi”, and “Ghidini” from Italy, tables, sun loungers, and artificial rattan chairs under brand name “Evolutif” and “Kettal” from France and Spain respectively.

(b) Marketing and Competition Description of Customer End users and HoReCa business which consists of Hotel, Restaurant, and Catering. Credit term Usually credit term of 30 - 150 days is granted to wholesalers. Sales in grand sales event are made in cash and direct sales are also mostly made in cash. Competitive Strategy Focussing on distributing complete range of products and services or a group of products that could be offered to the same target customer in a package. Focussing on Company’s direct sales distribution channel in order to access more consumers and target groups. Distribution Channel Partly distributed through sale agents and distributed through direct sales to consumers. In 2006, Sales breakdown by distribution channel was shown as follow:-

Annual Report 2006 - As of December 31, 2006 23


Export Sales 2.6% Domestic Sales 97.4% c) Competitive Environment The Company committed itself to pick up products of high quality and popularity to be distributed to customers. We also do the market survey in order to pick up the right product that could satisfy the customer. We continually launch marketing and sales activities. Moreover, distribution channels of the Company - sales agents, direct sales, and department stores allow recognition and make easy access to our product for consumers. As a result, our products become well-known and accepted among customers, and have high potential to be the products of common use and to gain more sales in the future. Anyway, the Company carefully studied products and market in order to avoid unnecessary risk and competition. Besides, trading business does not require large investment. If any product is not lucrative or not welcome by consumers, the Company could give up distribution of that product with very little impact. It is a good point of this type of business.

Size of the Company as Compared to Competitors’ The Company cannot compare size of trading business with its competitors’ because there are many types of products and of different applications. Therefore, there are many competitors of many sizes. Besides, trading business of the Company is at its early stage so that the Company could not evaluate market condition of each product and determine market share. (d) Sourcing of Products or Services The Company procures products from both local and international sources. The Company does not face product shortage problem since most products are popular among customers and the Company has had good relationship with the manufacturers.

24 Annual Report 2006 - As of December 31, 2006

(e) Pending Orders The Company distributed products to various types of customers – i.e. end users, retailers, sales agents and HoReCa (Hotel, Restaurant, and Catering). In addition, revenue proportion of trading business in the year 2006 is still small as compared to total revenue of the Company. Therefore, there is no pending order amounted more than 10% of total revenue.

2.4.3 Other Business According to the Company’s new business structure, other business comprises mould-making business which is supporting plastic business, and other businesses other than plastic business and trading business as following:- (1) Mould-Making Business The Company does not itself make moulds for sale to outsiders. Mould-making business has been operated by our subsidiaries, namely Srithai Miyagawa Co., Ltd. and Srithai Moulds Co., Ltd. Both companies are leaders in this business. Their products are supplied to automobile industry and electrical appliance industry which require very high precision of injected parts. Srithai Shin-Osaka Co., Ltd., another company in Srithai group, has been providing mould laminating business. (a) Description of Product or Service It is a hire-of-work to make moulds for plastic injection or melamine compression as per designs and sizes described by clients, including mould repair services. (b) Market and Competition Automobile industry and electrical appliance industry have been expanding. Demand for moulds for plastic injection is higher than production capacity of mould-makers in Thailand. Import of moulds by the two industries is still high, approximately THB 5,000 million per annum. Mould-makers have to


compete with themselves in increasing their production capacities to produce moulds of high precision and complication, in order to satisfy domestic demand. Injection mould-makers in Thailand have been improving quality and production capacities to substitute imports. Presently, there are strong competitions in mould-making industry. Buyers have more bargaining power due to mould makers from China, Korea and Taiwan cutting their prices. They can trade-off low quality of mould with cheap prices. Furthermore, new joint ventures among by Thai makers and Japanese, Korean, Taiwanese and Chinese makers can supply standard moulds of big size to automotive and other industries increasingly. The Company’s subsidiaries face more competition from domestic and foreign competitors, therefore, they have to improve their quality and competitive edge. Also, price and cost reduction strategies are key factors to compete with other makers. (c) Competitive Environment in Mould-Making Industry Making of injection moulds for supply to automobile industry and electrical appliance industry needs very high precision and complication. Competition in term of quality and production capacity is unavoidable in order to satisfy demand for ever-developing designs of parts for the two industries. Srithai Miyagawa Co., Ltd. and Srithai Moulds Co., Ltd. have been developing its personnel and procuring modern equipments and tools with an aim to increase capabilities of its personnel and to improve quality of its moulds. They have also considered cost reduction for sake of price competitiveness. Size of the Company as Compared to Competitors’ Srithai Miyagawa Co., Ltd. has invested in tools, machinery and man-power to be able to make moulds of weight 200 kgs. up to 5,000 kgs., whereas Srithai Moulds Co., Ltd. can make large mould

of weight up to 10,000 kgs. There are about 50 competitors of the same size with us. However, those competitors have special skill in different areas of products. As a result, competition is not so high. (d) Sourcing of Product or Service

(Mould-Making Business) Iron ingot is the raw material of mouldmaking. There are many import agents for iron ingots in Thailand. Hence, competition among those import agents is high, and mould-making companies of ours can procure iron ingots easily. There is no shortage of supply. (e) Pending Orders As of December 31, 2006, Srithai Miyagawa Co., Ltd., Srithai Moulds Co., Ltd. and Srithai Shin-Osaka Co., Ltd. had no pending orders in hand more than 10% of their respective total revenue. (2) Other Businesses (a) Description of Product or Service S.K.I. Ceramics Co., Ltd. Manufacturing ceramic tablewares. Srithai Packaging Co., Ltd. Manufacturing paper box for industrial users. THAIVAN Service Co., Ltd. Providing local hub switching service for credit card, debit card, cash card, and smart card etc. business. LN Srithai Comm Co., Ltd. Manufacturing telephone equipments, both with cord and cordless, and switching board. (b) Marketing, Competition, and Competitive Environment S.K.I. Ceramics Co., Ltd. Very high competition in business. Products of the company are exported to U.S.A. and Japan under brand names of customers. By the end of year 2006, its new brand “Miyako” was launched to domestic customers in order to expand distribution channel and sale of the Company.

Annual Report 2006 - As of December 31, 2006 25


Srithai Packaging Co., Ltd. Facing strong competition. However, it can retain a group of loyal customers with its quality and service, so there is no problem. THAIVAN Service Co., Ltd. Not yet in operation. LN Srithai Comm Co., Ltd. Most of its products are for export. Major customer is the parent company in Korea. The company acts as a production base for the parent company. (c) Sourcing of Product or Service S.K.I. Ceramics Co., Ltd. Major raw materials are clay which are purchased from both local trader and abroad; stickers and coating solution which are purchased from a shareholder, Iwatani International Corporation (Osaka). There is no raw material shortage problem. Srithai Packaging Co., Ltd. Major raw materials are card board and craft paper, which are all purchased from domestic suppliers. Sometimes price of paper pulp rises, causing price of paper to increase to some extent. There is no problem of raw material shortage. THAIVAN Service Co., Ltd. Not yet in operation. LN Srithai Comm Co., Ltd. Major raw materials are IC and electronics parts imported from overseas distributors. There is no raw material shortage problem as these products are generally available. Plastic components are outsourced from local plastic injection factories. Since there are so many plastic injection factories, there is no problem of shortage of supplier. (d) Pending Orders S.K.I. Ceramics Co., Ltd., Srithai Packaging Co., Ltd., and LN Srithai Comm Co., Ltd. had no pending order valued more than 10% of total revenue.

26 Annual Report 2006 - As of December 31, 2006

2.5 IMPORTANT CHANGE AND SIGNIFICANT EVENTS OVER THE PAST YEAR In the year 2006, the Company faced important change and significant events. Some events had been reported to the shareholders after the Board of Directors passed the resolution in accordance with the regulation of Security Exchange of Thailand through ELCID and Company’s website. The important change and significant events are:- 1) Investment in new companies and expansion of investment 1.1) Establishment of a new company - Srithai Sanko Co., Ltd. Sanko Co., Ltd., “Sanko”, is a major plastic injection operator in Japan. Its main products are pallets, crates, and packaging for industries and auto-parts. Sanko owns very efficient plastic injection technology. It has good relationship with auto assemblers such as Nissan and Toyota. ITOCHU Management (Thailand) Co., Ltd., “ITOCHU”, is an international trading company. ITOCHU has very wide market bases both in Thailand and Japan. It has maintained good relationship with many Japanese manufacturers of auto-parts and auto-assemblers in Thailand. Both Sanko and ITOCHU have maintained good relationship with the Company, and they have good faith in our reputation as a leader in manufacturing and distributing plastic products in Thailand. They are interested in jointly setting up a new company with us for purpose of expanding market and customer-base. Our cooperation with Sanko and ITOCHU will provide an opportunity for Srithai group of companies to learn and develop plastic injection technique to serve logistics business that demands for plastic pallets and crates, etc. In addition, we shall have an opportunity to learn plastic injection technology for auto-parts from Sanko who is well recognized by Japanese auto-assemblers. The Board of Directors in the meeting no. 7/2548, held on November 11, 2005, unanimously approved the establishment of a new company to do business of distributing plastic products such as pallets and crates.


On January 20, 2006, Srithai Sanko Co., Ltd., an associate, was registered with the Ministry of Commerce with a registered capital of THB 20 million, comprising 200,000 ordinary shares of par value THB 100 each, and the capital has been fully paid up. The Company holds 95,994 shares or 48.0% of its shares amounting to THB 9,599,400. 1.2) Establishment of a new company THAIVAN Service Co., Ltd. The Board of Directors in the meeting no. 4/2549, held on July 6, 2006, unanimously approved the establishment of a new company, THAIVAN Service Co., Ltd., an associate, to do business of the service of on-line connection to database for authorization of credit card utilization in settlement of costs of goods and services. On October 4, 2006, THAIVAN Service Co., Ltd. was registered with the Ministry of Commerce with a registered capital of Baht 1 million, comprising 100,000 ordinary shares of Baht 10 each. The share capital has been paid up in the whole amount. The Company entered into an agreement to hold 34,997 shares, a 35% holding, amounting to Baht 349,970. 1.3) Investment in Plastic Houseware in Vietnam Srithai (Vietnam) Co., Ltd., “Srithai Vietnam�, is a subsidiary in which the Company holds 95.32% of shares. It was incorporated to do business in the Socialist Republic of Vietnam with paid-up capital equivalent to USD 7.9 million. Core businesses are producing and distributing of plastic products and serving as production base of plastic products for the Company. The Company has full control in management and business direction of Srithai Vietnam. The Company increased its stake of shareholding in Srithai Vietnam according to the resolution passed in the Board Meeting no. 1/2546, held on January 6, 2003, took control of its management, and supported its working capital requirement. Hence, Srithai Vietnam showed an improvement with satisfaction rate of sales growth. Gross margin was also increased.

As a result, operation of Srithai Vietnam showed an improving result. Since Srithai Vietnam showed an improvement of sales growth, it needed an additional working capital to invest in machines, to purchase raw materials and to support its business operation. In addition, it needed to repay long-term loan and interest to the Bangkok Bank Pcl., Ho Chi Minh City Branch. As a result, it needed the Bank to extend credit facilities. The Board of Directors of the Company in the meeting no. 3/2549, held on May 10, 2006, unanimously approved providing a corporate guarantee in favour of Srithai Vietnam for the additional credit limit from an equivalent to USD 1.9 million to new credit limit amounted USD 2.1 million so that Srithai Vietnam will have sufficient working capital to run the business. Srithai Vietnam then signed a new agreement on credit facilities increase with the Bangkok Bank Pcl., Ho Chi Minh City Branch, and the Company signed a corporate guarantee agreement in July 2006. After the expansion of market and production base in Vietnam, the Company has foreseen a business opportunity to expand its market and production base of household products made of melamine in Vietnam. That was due to availability of ample labour force and low production cost. The business expansion is aimed at increasing sales volume of Srithai Group, and increasing price competitiveness. Srithai Vietnam has sufficient space in its factory to set up a new production line of plastic products of melamine category. It will have to invest only in warehouse and machines. No investment in land is required. Capital expenditure is therefore limited, and expected to be USD 1.5 million for the first three years. Srithai Vietnam has been suffering losses from operation. Its sources of cash from operation and limited credit lines from the Bangkok Bank Pcl., Ho Chi Minh City Branch, have been used to finance purchase of raw materials and working capital requirement. Srithai Vietnam could not invest to add a Annual Report 2006 - As of December 31, 2006 27


new production line of plastic products of melamine category by itself. It was deemed appropriate to increase capital of Srithai Vietnam for the amount equivalent to USD 1.0 million. Another source of fund for such investment of Srithai Vietnam comes from additional credit from the bank and cash generated from operation of Srithai Vietnam. The Board of Directors in the meeting no. 7/2549, held on November 14, 2006, unanimously approved investment in plastic businesss of melamine category in Vietnam and approved investment in the capital increase of Srithai Vietnam for the amount equivalent to USD 1,000,000. The stake of holding of the Company of such investment will increase from 95.32% to 95.84%. On February 12, 2007, the Company has partially paid for such capital increase of Srithai Vietnam for the amount of USD 550,000 to Srithai Vietnam. Srithai Vietnam has applied for additional credit line from the Bangkok Bank Pcl., Ho Chi Minh City Branch, for the amount equivalent to USD 1,000,000 for investment, purchasing raw materials and working capital for business operation regarding sales and marketing activities in plastic business of melamine category. The Board of Directors in the meeting no. 8/2549, held on December 22, 2006, unanimously approved providing a corporate guarantee in favour of Srithai Vietnam for the additional credit limit from USD 2.061 million to USD 3.061 million. This was aimed at supporting Srithai Vietnam in running its business. The corporate guarantee in favour of Srithai Vietnam for the additional credit limit caused the Company to sign the corporate guarantee agreement with the Bangkok Bank Pcl. after the additional credit line of USD 1.0 million that Srithai Vietnam applied to the bank has been approved. It is expected that the corporate guarantee agreement will be signed within the second quarter of 2007. 2) Loans Raising 2.1) Entering into an amended syndicated loans agreement no.3, no.4 and no.5 28 Annual Report 2006 - As of December 31, 2006

Siam City Bank Pcl. and Bangkok Bank Pcl. gave their consent on August 3, 2005 to reduce the interest rate of syndicated long-term loan amounted THB 2,100 million according to a condition in syndicated loans agreement between the Company and the two banks from the floating rate of MLR less 1.25% per annum to fixed rate at 4% per annum, starting from August 2005 till July 2006. The banks also agreed not to make an appraisal on machines mortgaged to the bank which the Company has to review the appraisal value of the mortgaged collateral every three years in compliance with a condition in the syndicated loans agreement. As a consequence, the Company had to sign an amended syndicated loans agreement no.3 with the Siam City Bank Pcl. and the Bangkok Bank Pcl. In this regard, the Board of Directors in the meeting no.7/2548, held on November 11, 2005, unanimously approved the Company to sign the agreement and the Company signed the amended syndicated loans agreement no.3 on March 20, 2006. The Board of Directors in the meeting no.3/2549, held on May 10, 2006, unanimously approved in principle the increase in credit line under project “working capital for energy conservation” for purpose of purchasing additional machines and equipments for Suksawat Plant and Amata Nakorn Plant in Chonburi, using credit line from the Siam City Bank Pcl. and the Bangkok Bank Pcl. On December 27, 2006, the Company signed an amended syndicated loans agreement no.4 with the Siam City Bank Pcl. and the Bangkok Bank Pcl. to cover the additional credit line amounted THB 261.53 million. The credit line was approved by the two banks while former conditions and collateral in the loan agreement and the three amended syndicated loans agreement are the same. The Company received consent from the Siam City Bank Pcl. and the Bangkok Bank Pcl. on May 26, 2006 and June 21, 2006 respectively to transfer of the entire business of Srithai Rungruengsaap (1999) Co., Ltd., “SRS”, and consent to replace all land mortgagers from SRS, who is the guarantor, to the Company. The Board of Directors in the meeting no.


7/2549, held on November 14, 2006, unanimously approved the increase in credit line of project “working capital for energy conservation” amounted THB 68.54 million for investment in additional machines and equipments of Bangpoo Plant and Amata Nakorn Plant in Chonburi, using credit line approved by the Siam City Bank Pcl. As a consequence, the Company had to sign an amended syndicated loans agreement no.5 with the Siam City Bank Pcl. and the Bangkok Bank Pcl. and the Company is expected to sign the amended syndicated loans agreement in second quarter of 2007. 2.2) Release mortgage of land and buildings of warehouse on the bank of the river On February 14, 2006 and March 27, 2006 respectively, the Company received consent from the Siam City Bank Pcl. and the Bangkok Bank Pcl. to release mortgage, in compliance with the syndicated long-term loan agreement, of land and buildings of warehouse on the bank of the river. The Company requested for the consent to release such mortgage in order to allow mortgaged collateral be compatible with the Company’s debt since the liabilities from various loans have been decreasing due to the Company paying back the long-term loan many times, thus the amount of debt is lower than the value of mortgage collateral. The Company has released such assets completely in 2006. 2.3) Guarantee on Credit Facilities and Providing Short-term Loan to Srithai WBG Co., Ltd. Srithai WBG Co., Ltd., “SWBG”, is waiting for a licence from the Food & Drug Administration Office (FDA) to import food supplement for distributing in the country. Presently, SWBG could not yet distribute food supplement which is its major products. As a result, SWBG could not generate enough income to cover its operating expenses. In addition, cash flow from operation is not sufficient for its use, and financial liquidity becomes less. SWBG needs a sum of working capital for use to carry on

trading transaction of goods with sales and marketing activities after getting a license from the FDA. The extraordinary meeting of shareholders of SWBG, held on November 1, 2006, resolved an approval on SWBG applying for short-term credit facilities to support its working capital for the amount not exceeding THB 10 million from the Bangkok Bank Pcl. and passed a resolution approving borrowing short-term loan from shareholders pro-rata to the ratio of shareholding for the amount not exceeding THB 2.0 million. Borrowing period will not exceed 3 months. This aimed at supporting its working capital while waiting for approval for credit facilities from the bank. The Board of Directors in the meeting no. 7/2549, held on November 14, 2006, unanimously approved the Company to guarantee credit facilities of SWBG for limit of not exceeding THB 4.7 million and provided a short-term loan to SWBG for the amount not exceeding THB 0.94 million for the period of 3 months. The Company, holding 47% of shares in SWBG, has to guarantee credit facilities and provide a short-term loan to SWBG pro-rata to shareholding ratio in order to support the working capital of SWBG. Later, SWBG signed a short-term loan agreement with the Company on November 15, 2006 amounted THB 940,000 for a period of 3 months and SWBG had fully drawn-down the said short-term loan on November 21, 2006. The due date of repayment of the said short-term loan will be on February 20, 2007. Since the Bangkok Bank Pcl. had not yet approved credit facilities to SWBG and SWBG needs support on its working capital, it could not repay loan to the Company on the due date which was on February 20, 2007. The Board of Directors in the meeting no.1/2550, held on February 24, 2007, unanimously approved the extension of period of the short-term loan agreement amounted THB 940,000 to SWBG for 6 months. The new due date of repayment of the short-term loan will be on August 20, 2007. Annual Report 2006 - As of December 31, 2006 29


3) Dissolution of a subsidiary and an associate 3.1) Transfer of the entire business of Srithai Rungruengsaap (1999) Co., Ltd. In year 2000 Srithai Rungruengsaap (1999) Co., Ltd., “SRS”, a subsidiary, was established to be an asset holder of the Company to be in accordance with structure stated in the Business Reorganization Plan. Since the status of the Company at that time was alien company due to debtors who became shareholders of the Company being foreigners holding more than 50% of the Company’s shares, it could not possess land. At present, it is not necessary for SRS to run its business due to the Company being released from the Business Reorganization Plan since year 2002 and more than 70% of shareholders of the Company Srithai Miyagawa Co., Ltd. Thai Takahashi Plastic Co., Ltd. Takahashi Korat (1995) Co., Ltd. Takahashi Plastics Co., Ltd.

No. of shares (Shares) 611,994 12,000 224,980 35,997

At the Annual General Meeting of Shareholders of the Company held on April 28, 2006, the Company was approved to accept the transfer of the entire business of SRS. The Company signed the transfer of the entire business agreement with SRS on June 21, 2006. Since SRS no longer necessary to operate its business, at the Extraordinary Shareholders’ Meeting of SRS, held on June 21, 2006, subsequently confirmed by the special resolution at the Shareholders’ Meeting of SRS, held on July 14, 2006, it was resolved that the subsidiary be dissolved and the dissolution be registered with the Ministry of Commerce on July 14, 2006. In addition, the subsidiary will complete the liquidation in 2007 after the dissolution.

30 Annual Report 2006 - As of December 31, 2006

Company are Thai nationality, thus causing the status of the Company no longer being an alien company. The Board of Directors in the meeting no. 2/2549, held on March 30, 2006, unanimously approved the transfer of the entire business of SRS and passed a resolution approving the registration of dissolution of SRS with the Ministry of Commerce, in order to simplify the shareholding structure for investments of the Company in subsidiary and associate, reduce expenses occurred by doing business transaction between SRS and the Company and save tax of SRS that may incur in the future. The changes in the ratio of stake of the Company in subsidiary and associate from the transfer of the entire business of SRS are as follows: Percentage of shareholding Previous After - 51.0 9.0 25.0 4.0 19.0 7.5 16.5

3.2) Dissolution of an associate - Srithai Plaschem (Thailand) Co., Ltd. At present business of Srithai Plaschem (Thailand) Co., Ltd., “Srithai Plaschem”, is facing high competition, eventhough Srithai Plaschem can earn profit each year but only small amount comparing to management cost that will occur in the future. In addition, the trading business of Srithai Plaschem is not directly related to the core business of the Company. At the Extraordinary Shareholders’ Meeting of Srithai Plaschem, held on October 13, 2006, subsequently confirmed by the Extraordinary Shareholders’ Meeting held on October 31, 2006, it was resolved that the associate be dissolved. The dissolution was registered with the Ministry of Commerce on October 31, 2006 and is in the process of clearing the liquidation.


4) Others 4.1) Sales of Treasury Stocks The Board of Directors in the meeting no. 3/2548, held on May 12, 2005, unanimously approved the purchase of treasury stocks of SITHAI ordinary shares for purpose of financial management. Detail of the treasury stocks purchase program is described hereunder:- 1) Number of shares to purchase : not exceeding 28 million shares at par value THB 10 per share, which is 9.8% of total issued shares. 2) Budget for this program : THB 280 million 3) Method of purchase : purchase via the Stock Exchange of Thailand. 4) Period of purchase : June 1, 2005 November 30, 2005. 5) Disposition of shares and shares written-off : 5.1) Sell the shares via the Stock Exchange of Thailand. 5.2) Period of share disposition is 3 years, starting on June 1, 2006, till November 30, 2008 (after 6 months from the completion date of share repurchase and resell the share within 3 years from the completion date of share repurchase) Starting on June 1, 2005 till November 30, 2005 which was the closing date of the purchase program, the Company purchased treasury stocks of 14,723,806 shares, or 5.15% of total issued ordinary shares, at the average price of THB 8.65 per share for total amount of THB 127,309,640. The remaining shares held by shareholders were 270,990,480 shares.

Due to the Company being eligible to sell treasury stocks during June 1, 2006 till November 30, 2008 according to the Share Repurchase Program, the Company will dispose of treasury stocks via trading in the Stock Exchange of Thailand at appropriate price, so as to comply with our purpose of financial management. Selling price will also not be lower than 85% of average close price of the last 5 trading days according to criteria laid down by the Stock Exchange of Thailand. The Board of Directors in the meeting no. 5/2549, held on August 11, 2006, unanimously approved selling of treasury stock of 14,723,806 shares, or 5.15% of total issued ordinary shares. Period of selling treasury stocks is September 1, 2006 till November 30, 2008. Appropriate selling price will be determined so as to comply with our purpose of financial management and the lower limit of selling price at not less than 85% of average close price of the last 5 trading days. 4.2) Payment of Interim Dividend The Board of Directors in the meeting no. 5/2549, held on August 11, 2006, unanimously approved on an appropriation of net profit as a legal reserve for the sum of THB 10,000,000, and payment of an interim dividend from profit of the period January - June 2006 to shareholders whose names appeared in the Share Registrar’s Book on the date of suspension of share transfer on August 25, 2006 at 12.00 hours for sake of determining the right to get dividend at the rate of THB 0.30 per share. Total payment of an interim dividend was THB 81,297,144. Interim dividend was paid out on September 8, 2006.

Annual Report 2006 - As of December 31, 2006 31


3. STRUCTURE OF SHAREHOLDERS AND MANAGEMENT

3.1 LIST OF 10 MAJOR SHAREHOLDERS As of December 29, 2006 3.1.1 SHAREHOLDERS WHO COULD PARTICIPATE IN FORMULATION OF POLICIES Name MR. SANAN ANGUBOLKUL

Rank 1

MRS. SRISUDA LERTSUMITKUL 2

Shares 37,082,351

Major Business 12.98 Chairman and President of Srithai Superware Pcl.

15,206,400

5.32 Director of Srithai Superware Pcl.

%

3.1.2 SHAREHOLDERS WHO COULD NOT PARTICIPATE IN FORMULATION OF POLICIES % Name Rank Shares MR. PRASONG & MS. MAYUREE SIRIVAJANANGKUL 3 14,818,849 5.19 MR. SOMBAT & MS. NALINEE LERTSUMITKUL 4 10,988,700 3.85 HSBC BANK PLC-CLIENTS GENERAL A/C 5 10,680,000 3.74 6 10,048,244 3.52 MR. SOMYOD LERTSUMITKUL MS. BUNNAPA LERTSUMITKUL 7 7,320,000 2.56 MR. KAMONPLUST MEKWORAWUT 8 6,652,500 2.33 MR. SOMKIEAT LERTSUMITKUL 9 6,220,700 2.18 MR. SOMSAK LERTSUMITKUL 10 6,155,570 2.15 Total shares of 10 major shareholders Total common shares

125,173,314 285,714,286

43.81 100.00

Remark : 1. The Company purchased the treasury stocks of 14,723,806 shares or 5.15% of total ordinary shares. 2. Investors can see the recent of 10 major shareholders at the Company’s website before the Annual General Meeting of Shareholders. 3.2 MANAGEMENT The Board of Directors is responsible for overall management of the Company. According to the Articles of Association, the Board consists of at least 5 directors but not more than 12 directors, and at least 3 of them must be independent directors. At least half a number of Directors representing in the

32 Annual Report 2006 - As of December 31, 2006

Meeting of the Board of Directors constitutes a quorum. The Meeting of Shareholders nominates Directors. The term of Directorship is 3 years. Any director whose term is expired can be re-elected by the Meeting of Shareholders. Executive Committee conducts business on behalf of the Board of Directors.


Annual Report 2006 - As of December 31, 2006 33

Mr. Pawat Chalermpong Mr. Apisit Tangsatit Marketing Director Factory Director (Industrial Products) (Bangpoo & Amatanakorn Chonburi)

Mr. Naphol Lertsumitkul Assistant to the President

Audit Committee

Ms. Bunnapa Lertsumitkul Mr. Thawee Kongyungyuen Mr. Manit Ativanichayaphong Direct Sales Director Factory Director Trading Business (Korat) Director

Mr. Prayoon Kajitte Personnel Administration Director

Mr. Prin Bholnivas (Acting) Finance Director

Mr. Prin Bholnivas Chief Financial Officer

Internal Audit Department

คณะอนุ กรรมการบริหSub-Committee ารความเสี่ยง Risk Management

Mr. Sanan Angubolkul President

Executive Committee

Board of Directors

Mr. Manit Ativanichayaphong (Acting) Chief Operating Officer

Ms. Nitaya Prasertnukulphol Marketing Director (Household Products)

Nomination and Remuneration Committee

3.2.1 STRUCTURE OF ORGANIZATION


3.2.2 BOARD OF DIRECTORS : AUTHORITY AND RESPONSIBILITIES

BOARD OF DIRECTORS 1. Mr. Sanan

2. Prof. Viroj 3. Mr. Enghug 4. Mr. Suchat 5. Mrs. Srisuda 6. Mr. Manit 7. Mr. Thawee 8. Mr. Naphol 9. Mr. Prin

Angubolkul Lowhaphandu Nontikarn Boonbanjerdsri Lertsumitkul Ativanichayaphong Kongyungyuen Lertsumitkul Bholnivas

Chairman and President Independent Director and Chairman of the Audit Committee Independent Director and Audit Committee Member Independent Director and Audit Committee Member Director Director Director Director Director

AUTHORITY AND RESPONSIBILITIES OF THE BOARD OF DIRECTORS The Board of Directors has the following authorities and responsibilities : 1. Performing duties in accordance with the law, the Objects and Articles of Association of the Company as well as the resolution of the Meeting of Shareholders; 2. Prescribing business policies and targets for the Management to follow; 3. Monitoring and controlling Management to conduct business efficiently and in good faith, and to follow shareholders’ resolution; 4. Calling for the Meeting of the Shareholders at least once a year to report business performance and to request for the resolutions on matters beyond the power of the Board of Directors e.g. declaration of dividend; 5. Calling for the Meeting of the Board of Directors at least once every three month; 6. Entering into any transaction or any act which may have material effect on financial position, obligation on liabilities, and reputation of the Company, e.g. borrowing money from financial institution; 7. Entering into any connected transaction that requires no approval of Shareholders’ Meeting between the Company, its subsidiaries, or affiliated companies and connected persons;

34 Annual Report 2006 - As of December 31, 2006

8. Setting up internal control system and efficient internal auditing procedure; 9. Directing and monitoring the accuracy, completeness, and transparency of financial reporting and reporting of other information to shareholders and other concerned parties; 10. Nominating and defining scope of duties and responsibilities of ad-hoc committee in any particular issue; 11. Nominating and changing authorized signatories who can bind the Company; 12. Setting up policies, business strategies, business plan, and annual budget for the Company; 13. Following up results of work and business results quarterly and annually of the Company, and comparing it to budget; 14. Entering into any contract that is not normal business of the Company, or any material contract of normal business nature; 15. Directing and monitoring the compliance to principles of good corporate governance; and 16. Amending or changing the scope of authorities and responsibilities of the Board as mentioned above.


3.2.3 EXECUTIVE COMMITTEE : AUTHORITY AND RESPONSIBILITIES EXECUTIVE COMMITTEE 1. Mr. Sanan Angubolkul Chairman and President 2. Mr. Prin Bholnivas Chief Financial Officer 3. Mr. Manit Ativanichayaphong Acting Chief Operating Officer and Trading Business Director 4. Mr. Naphol Lertsumitkul Assistant to the President 5. Mr. Thawee Kongyungyuen Factory Director (Korat) 6. Mr. Prayoon Kajitte Personnel and Administration Director 7. Ms. Bunnapa Lertsumitkul Direct Sales Director 8. Mr. Apisit Tangsatit Factory Director (Bangpoo & Amatanakorn Chonburi) 9. Mr. Pawat Chalermpong Marketing Director (Industrial Products) 10. Ms. Nitaya Prasertnukulphol Marketing Director (Household Products) AUTHORITY AND RESPONSIBILITIES OF THE EXECUTIVE COMMITTEE The Executive Committee will manage the Company so as to assure that work plan being implemented and policies of the Board being followed. The Executive Committee will carry out any assignment from the Board as follows: 1. Managing, directing and monitoring the performance of the Company in order to be efficient, comply with the direction and objectives of the Company and keep up the strength of business as stated by policies of the Board of Directors; 2. Screening any agenda to be proposed to the Board of Directors and carrying out any assignment from the Board;

3. Reporting to the Board; 4. Planning and screening all short-term and long-term plans so as to achieve purpose and objectives of the Company; 5. Planning financial management so as to diminish financial burdens and to solidify the financing structure of the Company; and 6. Performing duties in compliance with the laws, the objectives and Articles of Association of the Company. COMPANY SECRETARY Mr. Prin Bholnivas

Annual Report 2006 - As of December 31, 2006 35


3.2.4 BACKGROUND INFORMATION ABOUNT DIRECTORS AND EXECUTIVES 1) Mr. Sanan Angubolkul Position : Chairman, President and Nominating and Remuneration Committee Member Age 61 Years Has authority to sign for the Company as per Certification Document Education : Bachelor Degree in Business Administration University of Oglethorpe, Atlanta, Georgia, U.S.A. Honorary Doctorate Degree in Business Administration From Chiang-Mai University Honorary Doctorate Degree in Marketing from Sripatum University Certificate of Achievement, 3rd Class The National Defence College of Thailand Training : Chairman 2000 Program, class no. 4/2001 Thai Institute of Directors Association Experience : 1972 – Present Srithai Superware Pcl. No. of Share : 37,082,351 Shares or 12.98 percent (December 29, 2006) Relationship among Directors : None Illegal acts in the past 10 years : None Position in competing : None companies / company related to business of the Company 2) Prof. Viroj Lowhaphandu Position : Independent Director and Chairman of the Audit Committee Age 77 Years Has no authority to sign for the Company Education : Bachelor of Commerce and Bachelor of Law Thammasat University Higher Diploma in Accountancy, Thammasat University Master of Business Administration The American University, Washington D.C., U.S.A. Honorary Doctorate Degree in Accounting Thammasat University Certificate of Achievement, 22nd Class The National Defence College of Thailand Honorary Doctorate Degree (Business Administration-Banking) Sripatum University Training : Director Certification Program (DCP) Thai Institute of Directors Association Certified Professional Internal Auditors Certified Public Accountant (Thailand) Experience : 1980 - 1985 Director General of Treasury Department 1985 - 1986 Director General of Revenue Department 1986 - 1990 Director General of Customs Department 1990 - 1991 Director General of Excise Department 1976 - Present Director and Treasurer, Ajinomoto Foundation 1987 - Present Chairman Bangpra Golf International Co., Ltd. 1991 - Present Executive Director, Central Plaza Hotel Pcl. 1991 - Present Member of the Board of Trustee and Chairman of the Audit Committee The University of the Thai Chamber of Commerce 36 Annual Report 2006 - As of December 31, 2006


3) Mr. Enghug Nontikarn Age 51 Years

1999 - Present Director and Chairman of the Audit Committee, Don Muang Tollway Pcl. 1999 - Present Director and Chairman of the Audit Committee, Siam Food Products Pcl. 2004 - Present Chairman of the CPA Examination Sub- Committee, Federation of Accounting Professions 2002 - Present Independent Director and Chairman of the Audit Committee, Srithai Superware Pcl. No. of Share : 0 Share or 0.00 percent (December 29, 2006) Relationship among Directors : None Illegal acts in the past 10 years : None Position in competing : None companies / company related to business of the Company Position : Independent Director, Audit Committee Member and Chairman of the Nominating and Remuneration Committee Has no authority to sign for the Company Education : M.B.A. - Faculty of Commerce & Accountancy, Thammasat University Training : Director Accreditation Program (DAP) Thai Institute of Directors Association Experience : 1979 - 1991 Krung Thai Bank Pcl. 1991 - 1995 Bangkok Metropolitan Bank Pcl. 1995 - 1998 Senior Vice President Siam City Bank Pcl. 1998 - 2001 Executive Vice President Siam City Bank Pcl. 2002 - 2006 First Executive Vice President Siam City Bank Pcl. 2006 - Present Vice President, Siam City Bank Pcl. 2002 - Present Independent Director, Audit Committee Member and Chairman of the Nominating and Remuneration Committee Srithai Superware Pcl. No. of Share : 5,900 Share or 0.00 percent (December 29, 2006) (included shares held by spouse) Relationship among Directors : None Illegal acts in the past 10 years : None Position in competing : None companies / company related to business of the Company

Annual Report 2006 - As of December 31, 2006 37


4) Mr. Suchat Boonbanjerdsri Position : Independent Director and Audit Committee Member Age 48 Years Has no authority to sign for the Company Education : M.B.A. – Finance & Marketing Wharton School, University of Pennsylvania, U.S.A. Bachelor of Quantitative Economics, 2nd class honor Chulalongkorn University Training : Director Certification Program (DCP) Thai Institute of Directors Association Experience : 1985 - 1986 Dealer - Treasury Department Kasikornbank Pcl. 1986 - 1994 Manager, Los Angeles Branch Kasikornbank Pcl. 1987 Guest Lecturer, M.B.A. Program Thammasat University Kasetsart University 1994 - 1996 Senior Vice President Asset Plus Securities Co., Ltd. 1996 - 1997 Managing Director, Dynamic Eastern Pcl. 1997 - 1998 Non core Sale Department Financial Restructuring Authority of Thailand 1999 - 2000 Advisor Sub-Committee on Fiscal, Banking and Financial Institution House of Representatives 2000 Guest Lecturer, M.B.A. Program Siam University 2001 - 2002 Director Aeronautical Radio of Thailand Co., Ltd. A state enterprise under the Ministry of Transport and Communication 2001 - 2002 Director, Siam Syntech Construction Pcl. 2001 - 2005 Advisor, Sub-Committee on Economics Development, House of Representatives 2002 - 2006 Advisor, Risk Management Committee Aeronautical Radio of Thailand Co., Ltd. 2002 - Present Independent Director and Audit Committee Member, Srithai Superware Pcl. No. of Share : 0 Shares or 0.00 percent (December 29, 2006) Relationship among Directors : None Illegal acts in the past 10 years : None Position in competing : None companies / company related to business of the Company

38 Annual Report 2006 - As of December 31, 2006


5) Mrs. Srisuda Lertsumitkul Position : Director Age 67 Years Has no authority to sign for the Company Education : Elementary school Experience : Co-Founder of Srithai Superware Pcl. Training : Never take any training course of Thai Institute of Directors Association No. of Share : 15,206,400 Shares or 5.32 percent (December 29, 2006) Relationship among Directors : Mother of Mr. Naphol and Ms. Bunnapa Lertsumitkul Illegal acts in the past 10 years : None Position in competing : None companies / company related to business of the Company 6) Mr. Manit Ativanichayaphong Position : Director, Risk Management Sub-Committee Member and Age 62 Years Acting Chief Operating Officer and Trading Business Director Has authority to sign for the Company as per Certification Document Education : Bachelor Degree in Marketing, Ramkamhaeng University Training : Director Certification Program (DCP) Thai Institute of Directors Association Experience : 1967 - 1974 Account Executive Grant Advertising International Inc. 1974 - Present Srithai Superware Pcl. No. of Share : 1,148,720 Shares or 0.40 percent (December 29, 2006) (included shares held by spouse) Relationship among Directors : None Illegal acts in the past 10 years : None Position in competing : None companies / company related to business of the Company 7) Mr. Thawee Kongyungyuen Position : Director and Factory Director (Korat) Age 60 Years Has authority to sign for the Company as per Certification Document Education : Associate Degree, Thai-German Technical Institute Training : Director Accreditation Program (DAP) Thai Institute of Directors Association Experience : 1972 - Present Srithai Superware Pcl. No. of Share : 1,268,000 Shares or 0.44 percent (December 29, 2006) Relationship among Directors : None Illegal acts in the past 10 years : None Position in competing : None companies / company related to business of the Company

Annual Report 2006 - As of December 31, 2006 39


8) Mr. Naphol Lertsumitkul Age 46 Years 9) Mr. Prin Bholnivas Age 51 Years 10) Mr. Prayoon Kajitte Age 56 Years

Position : Director and Assistant to the President Has authority to sign for the Company as per Certification Document Education : Associate of Applied Science in Business Management University of Houston, Texas, U.S.A. Training : Director Certification Program (DCP) Thai Institute of Directors Association Experience : 1986 – Present Srithai Superware Pcl. No. of Share : 3,916,300 Shares or 1.37 percent (December 29, 2006) (included shares held by spouse) Relationship among Directors : a son of Mrs. Srisuda Lertsumitkul Illegal acts in the past 10 years : None Position in competing : None companies / company related to business of the Company Position : Director, Nominating and Remuneration Committee Member, Chairman of the Risk Management Sub - Committee and Chief Financial Officer Has authority to sign for the Company as per Certification Document Education : B.B.A. (Accounting), Thammasat University M.B.A. (Accounting), University of Wisconsin - Madison, Wisconsin, U.S.A. Training : Director Certification Program (DCP) Thai Institute of Directors Association Experience : 1982 - 1989 Chief of Financial Analysis & Planning Division Accounting and Finance Department State Railways of Thailand 1989 - 1992 Financial Controller Sunny’s Supermarket Co., Ltd. 1992 - 1993 Senior Manager – Management Information System Division, Accounting Department TelecomAsia Corporation Pcl. 1993 - 2000 Assistant Vice President – Finance & Accounting, Marketing and Distribution Business Group, Charoen Pokphand Group 2000 – Present Srithai Superware Pcl. No. of Share : 200,000 Shares or 0.07 percent (December 29, 2006) Relationship among Directors : None Illegal acts in the past 10 years : None Position in competing : None companies / company related to business of the Company Position : Personnel and Administration Director Has no authority to sign for the Company Education : Associate Degree, Rajamangala Institute Bangkok Technical Campus Experience : 1972 - 1974 Technician, Anglo - Thai Industrial Co., Ltd. 1975 - Present Srithai Superware Pcl. No. of Share : 90,000 Shares or 0.03 percent (December 29, 2006) Relationship among Directors : None Illegal acts in the past 10 years : None

40 Annual Report 2006 - As of December 31, 2006


11) Ms. Bunnapa Lertsumitkul Position : Direct Sales Director Age 45 Years Has no authority to sign for the Company Education : City of London Polytechnic Experience : 1984 - Present Srithai Superware Pcl. No. of Share : 7,320,000 Shares or 2.56 percent (December 29, 2006) Relationship among Directors : a daughter of Mrs. Srisuda Lertsumitkul Illegal acts in the past 10 years : None 12) Mr. Apisit Tangsatit Position : Risk Management Sub-Committee Member and Age 49 Years Factory Director (Bangpoo & Amatanakorn Chonburi) Has no authority to sign for the Company Education : Bachelor Degree in Mechanics King Mongkut’s University of Technology Thonburi Experience : 1983 – Present Srithai Superware Pcl. No. of Share : 30,142 Shares or 0.01 percent (December 29, 2006) (included shares held by spouse) Relationship among Directors : None Illegal acts in the past 10 years : None 13) Mr. Pawat Chalermpong Position : Risk Management Sub-Committee Member and Age 46 Years Marketing Director (Industrial Products) Has no authority to sign for the Company Education : Bachelor Degree in Business Administration (Marketing) Ramkamhaeng University M.B.A., Webster University, St. Louis, U.S.A. Experience : 1987 - 1988 Account Executive Fareast Advertising Pcl. 1988 - 1990 Import & Export Department Siam Commercial Bank Pcl. 1990 - 1993 Manager of Finance, Shinawatra Computer and Communication Pcl. 1993 - Present Srithai Superware Pcl. No. of Share : 50,000 Shares or 0.02 percent (December 29, 2006) Relationship among Directors : None Illegal acts in the past 10 years : None 14) Ms. Nitaya Prasertnukulphol Position : Marketing Director (Household Products) Age 47 Years Has no authority to sign for the Company Education : M.B.A. (Marketing), Thammasat University Experience : 1986 - 1994 Marketing Manager Berli Jucker (Public) Co., Ltd. 1994 - 2000 Director of Marketing & Sales International Beauty Products Co., Ltd. Thailand (a subsidiary company of The Tempo Group, Indonesia) 2000 - 2006 Senior Technical Advisor in Marketing & Sales, PT. Barclay Ltd. Indonesia (a subsidiary company of The Tempo Group, Indonesia) 2006 - Present Srithai Superware Pcl. No. of Share : 0 Shares or 0.00 percent (December 29, 2006) Relationship among Directors : None Illegal acts in the past 10 years : None

Annual Report 2006 - As of December 31, 2006 41


3.2.5 Attendance of Directors at meetings In the year 2006, there were 8 Board Meetings and 4 Audit Committee Meetings. Attendance report of Directors and Audit Committee Members is shown hereunder:- Number of Meetings Attended Board of Directors’ Name Board of Directors’ Meetings Audit Committee’s Meetings Mr. Sanan Angubolkul 8 - Prof. Viroj Lowhaphandu 7 4 Mr. Enghug Nontikarn 8 4 Mr. Suchat Boonbanjerdsri 8 4 Mrs. Srisuda Lertsumitkul 7 - Mr. Manit Ativanichayaphong 8 - Mr. Thawee Kongyungyuen 5 - Mr. Naphol Lertsumitkul 8 - Mr. Prin Bholnivas 8 4 3.2.6 Details of Directors and Management who have control over companies in Srithai Superware

Group Abbreviation : CM = Chairman DR = Director ED = Executive Director Company

Mr. Sanan Angubolkul

Subsidiaries CM Srithai (Vietnam) Co., Ltd. CM Srithai Moulds Co., Ltd. ED Srithai Miyagawa Co., Ltd. ED Srithai Shin-Osaka Co., Ltd. Affiliated Companies   ED Srithai Sanko Co., Ltd. ED Srithai WBG Co., Ltd. ED Thai MFC Co., Ltd. ED S.K.I. Ceramics Co., Ltd. Beijing Huatai Replica of Porcelain DR Products Co., Ltd. Srithai Packaging Co., Ltd. ED ED THAIVAN Service Co., Ltd. DR PT. Srithai Maspion Indonesia ED Srithai Nanoplast Co., Ltd. DR Thai Takahashi Plastics Co., Ltd. - Soko Srithai Co., Ltd. CM LN Srithai Comm Co., Ltd.* Takahashi Korat (1995) Co., Ltd. DR DR Takahashi Plastics Co., Ltd. 42 Annual Report 2006 - As of December 31, 2006

Mr. Manit Ativanichaya phong

- - - - - ED ED DR - - - - - - - - - -

Mr. Prin Mr. Naphol Mr. Thawee Mr. Apisit Mr. Pawat Bholnivas Lertsumitkul Kongyungyuen Tangsatit Chalermpong

ED ED ED ED   ED DR ED DR -

- - ED -   - - - - -

- - - -   - - - - -

- - DR -   DR - - - -

- - - -   - - - - -

DR ED - DR DR ED DR DR DR

- - - - - - - - -

- - - - - - - - -

- - - - - - - DR -

- - - - - - - - -


Company

Mr. Sanan Angubolkul

Mr. Manit Ativanichaya phong

Mr. Prin Mr. Naphol Mr. Thawee Mr. Apisit Mr. Pawat Bholnivas Lertsumitkul Kongyungyuen Tangsatit Chalermpong

  Joint venture Company - Srithai-Otto (Thailand) Co., Ltd. ED ED     Related Companies - - Siam Melamine Marketing Co., Ltd. - - - - Srithai Marketing Co., Ltd. - - - Srithai Stainless Co., Ltd. - - - Firstpoint Translogistics Co., Ltd. - - P.E.T (Thailand) Co., Ltd. ED *Previous name : LG Srithai Infocomm (Thailand) Co., Ltd.

-   - - -

ED -

-   - - - - -

-   - - - - -

ED - - - - -

3.2.7 Director of Subsidiaries Abbreviation : CM = Chairman, DR = Director, ED = Executive Director Srithai (Vietnam) Srithai Moulds Srithai Miyagawa Srithai Shin-Osaka Name Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Mr. Sanan Angubolkul CM CM ED ED ED ED ED ED Mr. Prin Bholnivas - - ED - Mr. Naphol Lertsumitkul DR - Mr. Apisit Tangsatit - - ED - - - Mr. Nobuo Hagihara ED - - - Mr. Santi Sakgumjorn - - Mr. Prapon Siripanich - ED Mr. Michio Nakai - DR - - ED - Mr. Seishiro Miyagawa - - - - DR - Mr. Shingo Miyagawa Mr. Akio Mano - - DR - ED Mr. Kinichi Hashimoto - - - Mr. Masashi Sonoda - - - ED 3.2.8 NOMINATION OF DIRECTORS In the year 2005, the Company has appointed a Nominating and Remuneration Committee, of which an Independent Director is Chairman, to perform the duty of nominating new directors, and propose to the Board for approval and/or propose to the meeting of shareholders for approval. The procedure of nominating directors was described in Article no. 13 and 14 of the Articles of Association as following:- “ (1) One shareholder has one voting right for one share held; (2) Each shareholder will cast all his votes in (1) to elect one candidate or more as Director, but he cannot split his votes, more or less, to elect any candidate;

(3) The candidates shall be ranked in order descending from the highest number of votes to the lowest, and shall be appointed as directors in that order until all of the director positions are filled. Where the votes cast for candidates in descending order are tied, which would otherwise cause the number of directors to be exceeded, the chairman shall have a casting vote.” Nomination of Executives When any Executive resigns or retires, the Nominating and Remuneration Committee will nominate a new executive and propose to the Board for approval. Annual Report 2006 - As of December 31, 2006 43


Report by Nominating and Remuneration Committee

Dear Shareholders, A Nominating and Remuneration Committee, referred to as “the Nominating Committee”, was appointed by Board of Directors as per its resolution of the Board meeting No. 4/2548 held on 10 August 2005. The Nominating Committee was set up so as to be in line with policy on the Good Corporate Governance of the Company and the principle of Good Corporate Governance of the Stock Exchange of Thailand in order to assist the Company in nominating and remunerating directors and executives transparently and fairly to all stakeholders and efficiently to the Company. At present, the Nominating Committee comprises 3 directors. The independent director chairs the Nominating Committee and has a term in office not longer than 3 years. The current Nominating Committee’s term in office lasts until year 2007 accounting period. Tasks of Nominating and Remuneration Committee The Nominating Committee concluded and classified criteria of selecting and recruiting directors/ executives and determined remuneration rate to be proposed to the Board of Directors for approval or to be submitted to the meeting of shareholders again. Year 2006 The Nominating Committee held 5 meetings. Attendance of each member of the Nominating Committee is presented in the table below:- No. of attendances / Names Position No. of meetings (times) Mr. Enghug Nontikarn Mr. Sanan Angubolkul Mr. Prin Bholnivas

Chairman of the Nominating Committee Member of the Nominating Committee Member and secretary of the Nominating Committee

5/5 5/5 5/5

Tasks of Nominating and Remuneration Committee in year 2006 could be summarized as follow:- 1. Considering electing new director to substitute for retired director and determining remuneration for submission to the meeting of shareholders for year 2005. 2. Considering executives’ salary revision for year 2006. 3. Nominating 1 executive to be in a position of marketing director for household products. 4. Considering renewing term in office of the Audit Committee. 5. Considering determining remuneration for directors to be submitted to the meeting of shareholders for year 2006. 6. Considering remuneration (annual bonus) for executives for year 2006. On Behalf of the Nominating and Remuneration Committee Mr. Enghug Nontikarn Chairman of the Nominating and Remuneration Committee

44 Annual Report 2006 - As of December 31, 2006


3.2.9 REMUNERATION FOR DIRECTORS, EXECUTIVES AND MANAGEMENT (Definitions as set by the Office of the Securities and Exchange Commission) (1) Financial Remuneration - Directors 2006 2005 Name – Position Amount (million baht) Amount (million baht)

Meeting Allowance Mr. Sumit Lertsumitkul : Late Chairman Mr. Sanan Angubolkul : Chairman and President Prof. Viroj Lowhaphandu : Chairman of the Audit Committee Mr. Enghug Nontikarn : Audit Committee Member Mr. Suchat Boonbanjerdsri : Audit Committee Member Mrs. Srisuda Lertsumitkul : Director Mr. Manit Ativanichayaphong : Director Mr. Thawee Kongyungyuen : Director Mr. Naphol Lertsumitkul : Director Mr. Prin Bholnivas : Director Total Remark : Mr. Sumit Lertsumitkul, the late Chairman, passed away in 2005

- 0.15 0.36 0.18 0.18 0.08 0.08 0.08 0.08 0.08 1.27

0.11 0.10 0.36 0.18 0.18 0.08 0.08 0.08 0.08 0.08 1.33

- Executives Committee and Management (1) 2006 2005 Number Amount (million baht) Number Amount (million baht) Salary 10 27.57 10 31.68 (2) Bonus 10 9.48 10 6.78 Total 10 37.05 10 38.46 (2) Other Remuneration No Note : 1. Executives Committee and Management comprise: 1.1 Mr. Sanan Angubolkul 1.2 Mr. Prin Bholnivas 1.3 Mr. Manit Ativanichayaphong 1.4 Mr. Naphol Lertsumitkul 1.5 Mr. Thawee Kongyungyuen 1.6 Mr. Prayoon Kajitte 1.7 Ms. Bunnapa Lertsumitkul 1.8 Mr. Apisit Tangsatit 1.9 Mr. Pawat Chalermpong 1.10 Ms. Nitaya Prasertnukulphol (Appointed in July 2006) * Executive Committee and Management in 2005 included Mr. Sumit Lertsumitkul, the late Chairman, who passed away in 2005. 2. Included accrued bonus of the year.

Annual Report 2006 - As of December 31, 2006 45


3.2.10 GOOD CORPORATE GOVERNANCE The Board has realized the importance of corporate governance in view of its role to increase transparency, competitiveness of the Company, and confidence among shareholders and other persons concerned. Compliance to good corporate governance could be summarized as following:- 1. Policies on good corporate governance In order to achieve objectives of the Company, to realize commitment to our duties, to be transparent on basis of integrity, to build-up sustainable competitive edge of our businesses, and to boost-up confidence of stakeholders, the Board of Directors therefore laid down policies on good corporate governance as following:- 1) To make sure that the Board will always carry out its role and assigned responsibilities efficiently; 2) To set up a system to control and manage risk efficiently; 3) To lay down policies and review strategic plan / business plan with Management; 4) To make sure that there will be no case of conflict of interest; 5) To treat all shareholders and stakeholders equally and fairly; 6) To conduct businesses in virtue transparently and examinably; 7) To disclose information to stakeholders sufficiently, especially on business affairs, operation results, and financial statements.

2. Shareholders: Right and Equality The Company realizes the right and equality of shareholders to get accurate, adequate and timely information. The Company sent letters calling for a meeting to all shareholders, along with accompanying information relevant to each agenda and blank proxy form, at least 7 days before date of meeting. The Company sets time and place of meeting appropriately so that it would be most convenient to shareholders. On date of meeting, shareholders were allowed to register their attendance before time not less than 2 46 Annual Report 2006 - As of December 31, 2006

hours. Voting forms describing number of votes of particular shareholders were given to shareholders after registration. During the course of meeting, shareholders could express opinions and raise questions freely. Votings of Shareholders were cast following each agenda of meeting. In the year 2006 the Company called for one annual general meeting of shareholders. In each agenda of that meeting the Company did not describe its rationale or effect. However, opinions of the Board were described in every agenda, and minutes of the meeting properly and completely taken, so that shareholders could examine it. In addition, the Company provided an option to shareholders who could not attend the meeting by themselves. They could appoint an Independent Director of the Company as their proxy. Shareholders were notified of this in the letter of invitation to the Annual General Meeting. For purpose of being transparent to all stakeholders, the Company discloses names of persons or major group of shareholders in the top ten ranks or the group of major shareholders who could participate on policy formulation or operations of the Company. Such disclosure is based on the most recent date of closure of Share Registrar’s book, and the information has been posted in the Company’s website since 2006 as well. In the shareholders’ meeting, all directors intended to attend every meeting. However, two out of nine directors could not attend the last Annual General Meeting due to prior engagements. Attending directors were Chairman and President of the Board, Chairman of the Audit Committee, 3 executive directors and 2 independent directors. The Company has described more details in the minutes of shareholders’ meeting since the year 2006, especially in the following areas:- 1. names of attending directors. 2. explanations made by Chairman of the Board, Chairman of the Audit Committee, President, and concerned directors.


3. questions or opinions of shareholders. 4. method of voting and vote counting, number of votes falling under three categories, i.e. approve, disapprove, or abstain. After the shareholders’ meeting in year 2007, the Company will submit minutes of the shareholders’ meeting to the Stock Exchange of Thailand (Stock Exchange) within 14 days. The minutes will be broadcast via the Company’s website as well, so that shareholders could check the accuracy of the minutes-taking and matters being discussed in the meeting, including any recommendation on any addendum or amendment of the minutes before submitting it to the next shareholders’ meeting for adoption. Anyhow, the Company would file voting cards and other relevant documents for 2 years for future examination or reference. Previously, those documents were not filed. Regarding the right to get dividend, the shareholders can be assured of getting their dividend in full because shareholding structure of the Company is clear. Besides, the Audit Committee has been assigned to consider every connected transaction, and submit it to the Board for getting an approval. In such a Board-meeting, any director who has a vested interest in that agenda could not attend. If it is deemed necessary that any agenda should be disclosed to investors, the Company will submit a report to the Stock Exchange. 3. Right of Stakeholders The Company realizes right of stakeholders within and outside the organization. The employees, as one of the stakeholders, were given hand-books so that they could learn about their right. The Company has put more emphasis on human resource development since the year 2005. Development plan has been drawn up for this purpose. In collaboration with a leading public university, the Company conducted a survey on attitude and satisfaction of employees towards the

Company in various aspects. Results of the survey will be used for further improvements. Other stockholders include shareholders, customers, trade partners, creditors, competitors, society & environment. Even though right of those stakeholders were not written, the Company always observes their right equally in good faith. 4. Shareholders’ Meeting In the last general meeting, the Company observed procedure of calling for a shareholders’ meeting as required by law. The procedure was counted from the first step of sending out invitation letter along with relevant documents and agendas, furnishing shareholders with adequate information in a timely manner, and providing option to shareholders who could not attend the meeting by themselves to appoint an Independent Director as a proxy. The Company has informed shareholders to propose additional agendas of meeting or names of candidates who possessed qualifications fitting for directorship for the Board’s consideration. Proposal could be submitted to the Company via ELCID and website of the Company in order for the directors to consider adding the said agendas. In the meeting, the Company assured that all shareholders were allowed equally to raise questions and express opinions in every agenda of the meeting. Details of the meeting were taken in a minutes. 5. Leadership and Vision The Board has possessed leadership, good vision and independence in decision-making. For maximum benefit of the Company and shareholders, the Board has participated in the formulation of corporate vision, strategies, targets, business plans, and budgets of the Company. The Board also monitors the implementation of business plans and budgets by the Management, so as to assure efficiency and effectiveness. The Board and the Management are accountable to shareholders. Roles of the Board and the Management are clearly discriminated.

Annual Report 2006 - As of December 31, 2006 47


The Board comprises knowledgeable and capable persons. Most directors took some training courses provided by the Thai Institute of Directors (IOD), such as Chairman 2000 by the Chairman, Director Certification Program (DCP) by 5 directors, and Director Accreditation Program (DAP) by 5 directors. 6. Conflict of Interest The Board has a policy to scrutinize carefully and honestly any transaction that may have a conflict of interest with any party, such as directors, executives, major shareholders, or personnel, etc., so as to assure justice and transparency. Relevant information will be disclosed in full. In order to comply with the regulations of the Stock Exchange on connected transaction, the Company and its subsidiaries added one more clause in their Articles of Association so as to save guard the interest of minority shareholders. The new clause was approved by the 23rd annual general meeting of shareholders (for the year 2003), held on 28 April 2004, as following:- “Article 26/1 In case the Company or its subsidiary enters into any connected transaction as defined in the Announcement of the Stock Exchange of Thailand governing the transaction of any connected transaction by listed companies, the Company will comply with those regulations and procedures as described in the said Announcement” In case of a connected transaction, the Company always complies with the regulations and procedures on entries of connected transaction with regard to types and sizes of the transaction described in the said Announcement. 7. Business Ethics In the year 2006, the Company declared Business Ethics with the objective to serve as a guideline to all employees and management staffs while performing their duties with quality and righteousness. The Business Ethics comprise: 1. Conflict of Interest Policy 2. Corporate Assets Policy 48 Annual Report 2006 - As of December 31, 2006

3. Gift and Entertainment Policy 4. Securities Trading and Insiders’ Information Policy 5. Internal Controls and Audits, and Financial Reporting 6. Responsible for Shareholders Policy 7. Customer Relations and Product Policy 8. Suppliers/Creditors Policy 9. Employees Policy 10. Rivals Policy 11. Employee Practice Policy 12. Environment and Community Policy The information about Business Ethics of the Company has already been disclosed in the Company’s website.

8. Balancing by non-executive directors The Board comprises well experienced directors who are knowledgeable, efficient, and fit to business. Presently, there are 9 directors, i.e. 1. Mr. Sanan Angubolkul Chairman / President / Member of the Nominating and Remuneration Committee 2. Prof. Viroj Lowhaphandu Chairman of the Audit Committee / Independent Director 3. Mr. Enghug Nontikarn Chairman of the Nominating and Remuneration Committee / Audit Committee Member Independent Director 4. Mr. Suchat Boonbanjerdsri Audit Committee Member / Independent Director 5. Mrs. Srisuda Lertsumitkul Director 6. Mr. Manit Ativanichayaphong Director / Executive Director 7. Mr. Thawee Kongyungyuen Director / Executive Director 8. Mr. Naphol Lertsumitkul Director / Executive Director 9. Mr. Prin Bholnivas Director / Executive Director / Member of the Nominating and Remuneration Committee / Company Secretary


There are 3 non-executive directors who are also Independent Directors under the current structure of the Board. All of the three directors have been nominated Audit Committee. The Board believes that all the 9 directors are well-experienced, knowledgeable and capable of efficient governing of the Company. Definition of Independent Director Independent Director means any person who possesses all the requisite qualifications and is independent as described by the Stock Exchange as following:- 1. Holding shares not more than 5% of paid-up capital of the Company, associated company, affiliated company and connected company; 2. Being non-executive director. Not being employed or personnel or salary-earning advisor of the Company, associated company, affiliated company, connected company, or major shareholder; 3. Having no vested interest or any benefit, directly or indirectly, in term of financial area and business administration of the Company, associated company, affiliated company, and connected company; 4. Not being a connected person or a close relative of the Management or any major shareholder; 5. Not representing any body in the Board to safe-guard their interest e.g. director, major shareholder, or any shareholder connected with any major shareholder. In addition, an Independent Director is able to express opinion and making report freely in carrying out his assignment without any worry to any benefit on any asset or position. He will not be influenced by any person or any group of persons. Under no circumstance, he would be forced to refrain from expressing opinion as it should be. Nominating of Directors In the year 2005, the Company appointed a Nominating and Remuneration Committee to perform the duty of nominating new directors who not only

possess qualifications and experiences as required by the Company, but should also be able to devote time and efforts to carry out their duties for the benefits of the Company, and to propose to the Board for approval and/or to propose to the meeting of shareholders for approval, as per the procedure described in Article no.13 and 14 of the Articles of Association as following:- “Article 13 The shareholders’ meeting shall elect the directors in accordance with the conditions and procedures as follows: (1) One shareholder has one voting right for one share held; (2) Each shareholder will cast all his votes in (1) to elect one candidate or more as Director, but he can not split his votes, more or less, to elect any candidate; (3) The candidates shall be ranked in order descending from the highest number of votes to the lowest, and shall be appointed as directors in that order until all of the director positions are filled. Where the votes cast for candidates in descending order are tied, which would otherwise cause the number of directors to be exceeded, the chairman shall have a casting vote. Article 14 At every annual general meeting, one-third of the directors shall retire. If the number of directors cannot be divided into three, the number of directors closet to one-third shall retire. In the first and second years after the registration of the Company, the directors shall retire by drawing lots. In subsequent years, the director who has held office for the longest shall retire.” According to Article 14 of the Company’s Articles of Association, the Company did not describe maximum times of being nominated as director and qualification on limit of age for directorship. 9. Doubling of Positions The two positions, Chairman and President, are held by the same person who represents a group of major shareholders. The Company deems the doubling of positions appropriate under this Annual Report 2006 - As of December 31, 2006 49


circumstance due to the fact that this person has gained much experiences in this business for a very long time, and he is widely recognized among business community. Besides, number of Independent Directors is one-third of total directors. Those Independent Directors can express opinions freely, and they could review business operations of the Management efficiently. 10. Remuneration for Directors and Executives In the year 2005, the Company had appointed a Nominating and Remuneration Committee to formulate a policy on remuneration for directors transparently and properly compared to those of other businesses in the same industry. The Nominating and Remuneration Committee determined the rate of remuneration based on the results of the survey made by the Thai Institute of Directors. Rate of remuneration for directors was approved by the shareholders’ meeting. Directors who are member of the Audit Committee have got additional pay commensurate with their work-load and increased responsibility. Directors who are executives get remuneration according to the results of their performances. The Company disclosed details of remuneration for directors and executives under the section Remuneration for Directors in the Annual Report 2006 and Annual Filing of Information Form 2006 (Form 56-1).

11. Board Meeting Schedule of Board Meeting has been set for 4 times of ordinary meetings per annum. Extraordinary meeting of the Board may be called for. Agendas of the meeting usually comprise acknowledgement of financial report approved by the Audit Committee, monitoring business operation results, risk management report of the Risk Management Sub-committee, etc. To call for each meeting, the Office of Company Secretary will issue letter of invitation along with agenda and relevant information for the directors at least 7 days in advance, so that the Board could have enough time to consider the information. Each meeting consumes approximately 2 - 3 hours. Chairman of the Board makes sure that adequate time being allocated for the meeting so that the Board Members could express opinion on significant issues for the benefits of the shareholders and concerned parties fairly. Regarding agenda which may have a conflict of interest with any director, the concerned director has to wait outside the meeting room during consideration of the said agenda. Company Secretary takes minutes of meeting, and issues written minutes with adequate details. He files the adopted minutes of Board Meeting and accompanying documents for further examination by the Board and concerned parties. In the year 2006 there were 5 ordinary meetings of the Board, and 3 extraordinary meetings, totalling 8 meetings. Meeting attendance of each director was shown in table below:-

Attendance/total meetings (times) ordinary meeting 1. Mr. Sanan Angubolkul 5/5 2. Prof. Viroj Lowhaphandu 4/5 5/5 3. Mr. Enghug Nontikarn 5/5 4. Mr. Suchat Boonbanjerdsri 4/5 5. Mrs. Srisuda Lertsumitkul Ativanichayaphong 5/5 6. Mr. Manit 2/5 7. Mr. Thawee Kongyungyuen 5/5 8. Mr. Naphol Lertsumitkul Bholnivas 5/5 9. Mr. Prin Name

50 Annual Report 2006 - As of December 31, 2006

Attendance/total Attendance/total meetings (times) meetings (times) total extraordinary meeting 3/3 8/8 3/3 7/8 3/3 8/8 3/3 8/8 3/3 7/8 3/3 8/8 3/3 5/8 3/3 8/8 3/3 8/8


Performance Evaluation of the Board In the Board Meeting no. 1/2550, held on 24 February 2007, the Board evaluated its own performance by using an evaluation form provided by the Stock Exchange of Thailand. Such evaluation covered the following matters:- 1) Satisfaction of the Board on its own performance/ Company’s performance and problem-solving of management. 2) Understanding of the Board on its roles/businesses and strategies of the Company. 3) Good relationship between the Board and management. 4) Description of roles and duties of the President, and appropriate evaluation of his performance. 5) Efficiency in business operation of subsidiaries. 6) Efficient performance of all committees. 7) Devotion of time to carry out works of directors. 8) Preparation of directors before attending Board Meeting. 9) Expressing opinion independently by Board Members. 10) Expressing opinion without bias by Board Members. 11) Chairing Board Meetings by the Chairman. 12) Confidence of investors in the Board. 13) Compliance to good corporate governance. The Board has evaluated its own performance, and found that the result was very satisfactory. Its performance rating was 95%

12. Committees and Sub-committee The Board had appointed 3 groups of committee and sub-committee who were assigned to study in details and review various assignments, i.e. Audit Committee, Nominating and Remuneration Committee, and Risk Management Sub-committee. Policies and frame-work of the 3 groups were clearly laid down on its duties, responsibilities, meeting procedure, and reporting to the Board.

Audit Committee Audit Committee was set up on 17 July 2002. It comprises 3 Independent Directors who possess all requisite qualifications determined by the Stock Exchange of Thailand. They are:- 1. Prof. Viroj Lowhaphandu Chairman of the Audit Committee 2. Mr. Enghug Nontikarn Audit Committee Member 3. Mr. Suchat Boonbanjerdsri Audit Committee Member Professor Viroj Lowhaphandu is knowledgeable and well-experienced in the areas of accounting, auditing, finance and taxation. Mr. Enghug Nontikarn and Mr. Suchat Boonbanjerdsri are knowledgeable and well-experienced in finance & banking, investment, and accounting. The Audit Committee has been assigned by the Board the following duties and responsibilities:- 1. Assuring that financial reporting of the Company is accurately and sufficiently disclosed by coordinating with external auditor and the executive who is responsible for preparation of financial reports quarterly and annually. The Audit Committee may recommend external auditor to review or audit any particular transaction deemed necessary and significant during audit session; 2. Reviewing internal control and internal audit systems of the Company with external auditor and internal auditor to assure their appropriateness and effectiveness; 3. Selecting and proposing for nomination the external auditor. Proposing remuneration of external auditor for approval by taking into consideration trustworthiness, resourcefulness, and volume of works in hand of the candidates for nomination; 4. Reviewing the disclosure by the Company of any information on connected transactions or transactions with conflict of interest, so as to assure accuracy and sufficiency of such disclosure;

Annual Report 2006 - As of December 31, 2006 51


5. Reviewing policies on financial management, risk management, adherence to business codes of ethics by Management, and reviewing jointly with Management any significant report to be made public as required by law; 6. Preparing report on activities of the Audit Committee, and disclosing it in the Company’s annual report. The report will be signed by Chairman of the Audit Committee. The report will comprise the following information:- 6.1 Opinion on process of preparing financial reports and disclosure of information in the reports as to its accuracy, sufficiency, and reliability; 6.2 Opinion on sufficiency of internal control system of the Company; 6.3 Reasons to convince that the term of the present external auditor should be extended by another one year; 6.4 Opinion on compliance of the Company with the Securities and Exchange Act, Rules and Regulations of the Stock Exchange of Thailand, and any laws regulating the businesses of the Company; 6.5 Any report deemed necessary to be disclosed to the public and investors within the framework of duties and responsibilities assigned by the Board. 7. Holding the audit committee’s meeting on topics being assigned as follows: 7.1 To review financial statements and other relevant financial reports, accounting principles and practice, compliance to accounting standards, viability of the Company, change of significant accounting policies and the rationale of Management on formulating such accounting policies and present it to the Board for further publicizing; 7.2 To review internal control system and internal audit procedures; 7.3 To review annual internal audit plan, coordination in each step of the audit plan, and evaluation of the auditing jointly with internal auditor and external auditor. Audit Committee will inquire the extent of the 52 Annual Report 2006 - As of December 31, 2006

audit plan so as to assure that any irregularity or weak point of internal control system be detected; 7.4 To review together with internal auditor the problems and limitation arising during the internal audit courses, and to review the internal audit procedure; 7.5 To review together with external auditor the problems and limitation arising during the external audit courses; 7.6 To review together with internal auditor and external auditor the audit plan on procedure and control of electronic data processing. To review safety measures so as to prevent irregularity or malpractice on computer system by staffs or outsiders; 7.7 To be compliant with the Securities and Exchange Act, regulations of the Stock Exchange of Thailand, and other laws regulating the businesses of the Company; 7.8 To carry out any work assigned by the Board; 7.9 To do self evaluation on performance and achievement of assignments; 7.10 To review and assure the accuracy and adequacy of financial reporting; 7.11 To consider jointly with the Management the evaluation on performance and merit or punishment of the head of internal audit; 7.12 To review jointly with the Management on policy and adequacy of risk management on sensitive issues of the Company; 7.13 To review financial management policy of the Company; 7.14 To report to the Board the tasks of Audit Committee; 7.15 To perform any other duties as assigned by the Board under mutual consent; 7.16 To review Charter of Audit Committee. Remark Term in office of the Audit Committee is 3 accounting years. The present Audit Committee will complete their term in the accounting year ended 2009 (renewed for the third term in office).


In the year 2006, there were 4 Audit Committee meetings. Attendance report of Audit Committee is shown hereunder:- Name Attendance/total meetings (times) total 1. Prof. Viroj Lowhaphandu 4/4 2. Mr. Enghug Nontikarn 4/4 3. Mr. Suchat Boonbanjerdsri 4/4 Nominating and Remuneration Committee The Company set up a Nominating and Remuneration Committee by resolution of the Board Meeting no. 4/2548, held on 10 August 2005. The committee comprises at least 3 directors, of which at least 1 director must be an Independent Director. The committee comprises:- 1. Mr. Enghug Nontikarn Chairman of the Nominating and Remuneration Committee 2. Mr. Sanan Angubolkul Member 3. Mr. Prin Bholnivas Member and Secretary Authority and Responsibility of the Nominating and Remuneration Committee: 1. Consider organization chart, qualification and composition of directors and executives of the Company; 2. Select capable persons and propose their names to the meeting of shareholders for nomination as directors, or to the Board for nomination as Name 1. Mr. Enghug 2. Mr. Sanan 3. Mr. Prin

Nontikarn Angubolkul Bholnivas

Sub-committee on Risk Management The Company appointed a Sub-committee on Risk Management on 10 August 2004. The Subcommittee comprises executives of the Company and 1 secretary as following:- 1. Mr. Prin Bholnivas Chairman of the Risk Management Sub-Committee 2. Mr. Manit Ativanichayaphong Member

executives if there is a vacant position, as the case may be; 3. Consider and propose structure of remuneration for directors and executives, such as salary, severance pay, bonus, welfare, meeting allowance, and other financial or non-financial remuneration; 4. Evaluate performance of the Nominating and Remuneration Committee, and report to the Board; 5. Other assignments relevant to nominating personnel and remunerating as deemed fit by the Board. Remark Term in office of the Nominating and Remuneration Committee is 3 accounting years. The committee will complete its term in the accounting year ended 2007. In the year 2006, there were 5 Nominating and Remuneration Committee meetings. Attendance report of Nominating and Remuneration Committee is shown hereunder:- Attendance/total meetings (times) total 5/5 5/5 5/5 3. Mr. Apisit Tangsatit Member 4. Mr. Pawat Chalermpong Member 5. Mr. Pramual Pinyo* Member 6. Ms. Nitaya Prasertnukulphol * Member 7. Mr. Tanatch Sripan Member and secretary (* No. 5 and 6 were appointed in August 2006)

Annual Report 2006 - As of December 31, 2006 53


Authorities and Responsibilities of the Risk Management Sub-committee: 1. Study, review and evaluate any possible risk, including trend of probable impact on the organization, for both internal and external risks covering at least 4 areas as described below:- - Financial risk - Operational risk - Business risk - External factors risk 2. Formulate policies on risk management, and propose it to the Board for the Board’s overview; 3. Formulate strategies, organizational structure, and resources used in the management of risks, in compliance to risk management policies and business directions of the Company; Name 1. Mr. Prin Bholnivas 2. Mr. Manit Ativanichayaphong 3. Mr. Apisit Tangsatit 4. Mr. Pawat Chalermpong 5. Mr. Pramual Pinyo 6. Ms. Nitaya Prasertnukulphol 7. Mr. Tanatch Sripan 13. Control System and Internal Audit The Company has a policy to set up an efficient and effective internal control system, including evaluation of sufficiency in internal control system. Additional details were shown under section 3.2.12 Internal Control. 14. Report by the Board Apart from report made by the Audit Committee, the Board also made a report on its accountability to the accuracy of financial reports additional to the Auditor’s Report as published in the Annual Report 2006 and Annual Filing of Information Form 2006 (Form 56-1).

54 Annual Report 2006 - As of December 31, 2006

4. Set up risk-taking criteria of operation in term of financial limit and nature of transactions; 5. Monitor and review policies, strategies and implementation to assure that risk management strategies are implemented appropriately; 6. Be authorized to appoint working group to evaluate and keep track of risk throughout the organization; 7. Other matters as assigned by the Board. Remark Term in office of the Sub-Committee on Risk Management is 2 accounting years. The SubCommittee will complete its term in accounting year 2007. In the year 2006, there were 17 Risk Management Sub-Committee meetings. Attendance report of Risk Management Sub-Committee is shown hereunder:- Attendance/total meetings (times) total 17/17 17/17 15/17 16/17 5/5 5/5 17/17 15. Investor Relation The Board attaches much importance to disclosure of information such as financial reports, operation results, and general information. The disclosure of information must be accurate, transparent, well distributed and timely, so that investors and concerned persons are equally furnished with sufficient information necessary for their decision-making. Office of Chief Financial Officer has been assigned to keep in contact with investors. Interested investors can call 0-2427-0088, including channel of contact via URL : www.srithaisuperware.com


16. Monitor on Insiders’ Trading The Board has reiterated to Management that insiders’ trading must be monitored so as to observe the rules of the Stock Exchange of Thailand. More details appeared under section 3.2.11 Monitor on Insiders’ Trading. 3.2.11 Monitor on Insiders’ Trading The Company had issued Regulation on Suppression of Insiders’ Trading in order to prevent manipulation of inside information for personal benefits of executives, especially the trading of shares issued by the Company within 15 days before disclosure of financial statements to the general public. Any person who violates this regulation will be subject to disciplinary punishment and personal infringement of Section 241 and 242 of Securities and Exchange Act B.E. 2535. 3.2.12 Internal Control The Company has a policy to set up an efficient and effective internal control system. It is the duties and responsibilities of the Board and the Management to set up and maintain an internal control system, including review of its efficiency from time to time, to safeguard investments of shareholders and assets of the Company. Scope of an internal control system covers financial control, business operations and monitoring to assure compliance to laws and relevant regulations, and risk management. An efficient internal control system will reasonably boost up confidence that the Company will achieve its objectives and targets as following:- - Information system and financial reports are accurate and respectable. - Compliance to regulations, policies and work procedures of the Company and relevant laws. - Assets of the Company exist and are kept in good order. - Business operations are efficient, and resources are used efficiently. - Objectives of the Company are achieved effectively.

A good internal control system will be a tool to intercept irregularity, and it serves as an alarm signal. It helps to reduce risk to an acceptable level. The internal control system set up by the Company is in line with that of the Committee of Sponsoring Organization of the Treadway Commission (COSO), which could be summarized according to areas of control as following:- 1. Organization & Control Environment. The Company has a business plan that outlines the targets, strategies, vision and budget with clear performance indice. Organizational structure was adjusted to stay in line with the business plan. There was improvement on the monitoring methods of business. Qualified personnels are recruited and developed continually. There are policies and work procedures on financial transactions, purchasing, risk management, personnel management, and other. 2. Risk Management. The Company had introduced risk management in corporate level since the year 2004. The Risk Management Sub-Committee and the Audit Committee played the role of monitoring. 3. Operational Control. The Company introduced segregation of duties for purpose of internal controlling, written authorization on approval of transactions variable to financial limits, procedure of works for connected transactions and intra-company transactions so as to observe the laws. 4. Information & Communication. The Company has made available information system to support decision-making. A department was set up to collect, analyze and store data in the datawarehouse system. Information system within the organization is of two-way nature. Sufficient information and documents have been furnished to the Board before its decision-making. Directors could ask for additional information from the Company freely.

Annual Report 2006 - As of December 31, 2006 55


5. Monitoring. The Company introduced monitoring system for its executives and directors so that business plan could be achieved. Internal Audit Department monitored and evaluated internal control system freely, and it could report the results and suggestions to the Management for further action. In the Board Meeting no.1/2550, attended by members of the Audit Committee and held on 24 February 2007, the Board evaluated internal control system by using the evaluation form of the Securities and Exchange Commission. Evaluation was made on 5 areas, i.e. organization and environment, risk management, operational control, information system and communication and monitoring. The Board formed an opinion that the Company had applied internal control sufficiently in each area. In addition, the external auditor, Pricewaterhouse Coopers ABAS Limited, issued a report of its observation on internal control system, and proposed it to the Audit Committee and the Board of Directors. The Company has assigned concerned departments to make improvements based on the report. Internal Audit An Internal Audit Department was set up. It reported directly to the Audit Committee and President. It played the roles of counseling, auditing, evaluating internal control system, monitoring risk management system, and corporate governing, so as to assure that risk management system, internal control system, and corporate governing were sufficient, efficient, and serving its desired objectives. Internal Audit Department was independent. It was allocated with sufficient resource and budget appropriate for carrying out its tasks on operational audits, compliance to legal requirements and financial audit. In order to map out an audit plan, risk factors were taken into consideration. Every Audit results and performance of this department were reported to the Audit Committee and the President together with quarterly summarized audit results. 56 Annual Report 2006 - As of December 31, 2006

Risk Management The Company formulated policies on risk management system for the whole organization since the year 2004. A Risk Management Sub-Committee was set up to do the functions of policy formulating, systemizing risk evaluations for both external risks and internal risk on managing and operating within the organization. The ways to manage risks so that it was at acceptable level were communicated to our personnel, and they realized the significance of risk management. The Company had allocated sources of risks to all its employees, executives, and all units within the organization, so that all of them had been held accountable to do the evaluating and managing of their own risks; and as a result, the degree of risk exposure would be at acceptable level. Process of Risk Management could be described as following:- 1. Formulation of Policy and Criteria on Risk Management Policy, objectives, frame-work, responsibilities, criteria and ways of risk management were set up in line with strategies, targets, plan and business directions of the Company. It would be reviewed annually, and issued along with the issuance of business plan to assure synchronization. 2. Risk Identification Risks that may impact achievement of objectives and targets were identified by taking into consideration external factors and internal factors such as environment, laws, finance, information system, managerial data-support system, satisfaction of investors, investment management, human resources, reputation and image, security system, etc. The Company manages risks by ranking inherent risk level before considering risk control system. If inherent risk level is high or highest, it would be given priority on analysis and management.


3. Risk Analysis This is an analysis of residual risk after controlling measures are evaluated and risks are ranked according to its degree of impact. If the residual risk remains high or highest, the Management will set up risk management measures promptly. If the residual risk is at its moderate or low level, risk management measures at departmental level would be set up or mitigating operational measures being applied. 4. Risk Management This is to determine method and draw up plan on management of significant risks which are ranked according to level of impact. Risk management lies behind the control, transfer, avoid, make use of risks or the acceptance of risk. 5. Monitoring and Review This is the monitoring step of the implementation of risk management plan, including evaluation of risk management. Internal Audit Department will do the monitoring step, and report to the Management and the Audit Committee.

In addition, the Company has put ‘Risk Management’ as a subject for study in its executive training program. 3.2.13 DIVIDEND POLICY (1) DIVIDEND POLICY OF THE COMPANY The Company has a policy to pay out dividend from profit at the rate not less than 50% of net profit each year, and on a condition that the Company has no retained loss. (2) DIVIDEND POLICY OF SUBSIDIARIES Due to the fact that each subsidiary has its own management team who is free on formulating dividend policy, the Company could not set up dividend policy for any subsidiary. However, subsidiaries will usually pay out dividend at reasonable ratio, subject to their financial standing at that time, if they have profit and there is no opposing concern. There is no pre-determined dividend pay-out ratio.

Annual Report 2006 - As of December 31, 2006 57


4. RISK FACTORS

4.1 MARKETING RISK Fierce competition prevails in export market for melamine type of plastic tableware, especially competition from China. China enjoys low production cost due to her labor cost being at low level. China can therefore price her products more attractive than ours. However, product quality of China is much lower than ours and her product delivery is not punctual as well. Risk Counter-Measures: a. Sourcing for cheaper raw materials at sustainable level of quality; b. Improving production efficiency so as to bring down unit cost of production; c. Expanding customer bases by extending markets to countries in Eastern Europe, Africa and South America. Target is set for exporting to be totalled 100 countries within the year 2008, increasing from existing 60 countries worldwide; d. Increasing variety of products; e. Developing product shapes so as to be suitable for various applications and designing new decorations to make the products look modern. f. Expanding production bases to Vietnam where is full of labours and low production cost. For domestic market where there are a handful number of competitors, the Company set up risk counter-measures by increasing its distribution channels, i.e. direct sales system, selling agents, and direct approach to customers.

fluctuation of the exchange rate of THB against USD has direct effect on prices of plastic resin. In addition, demand for and supply of plastic resin in domestic and international markets are prime factors effecting prices of plastic resin. In case price of plastic resin in the world market rises up, price of plastic resin in domestic market will also rise. During the past year cost of plastic resin constitutes about 75 percent of cost of production of plastic products. Risk Counter-Measures: a. Enquiry is made to many suppliers, before order being placed, to ensure that the best term is obtained; b. Trend of plastic resin price from local and overseas dealers and trend of crude oil price will be closely monitored; c. If price of plastic resin is likely to rise, the Company will place orders for future deliveries at the volume enough for use for a period of time; d. In case of price of plastic resin abroad is lower than those of local dealers, the Company will import it; e. In doing hire-of-work business for industrial parts for OEM customers, the Company takes very low risk of change of raw material price. The hirer will take that risk, and price of goods will be adjusted subject to change of raw material price. 4.3 PRODUCTION RISK 4.2 RISK OF CHANGES IN RAW MATERIAL PRICE The Company buys nearly all melamine Prices of plastic resin in world market have powder from Thai MFC Co., Ltd. and Thai K.K. Co., strong effects on cost of goods. Plastic resin is Ltd. The Company has therefore faced with risk of by-product of oil refinery. If price of crude oil in the buying from a limited number of suppliers. world market rises up, price of plastic resin will also increase. During the past year, prices of plastic resin Risk Counter-Measures: rose up continually in the same direction with prices a. The Company invested in 45 percent of shares in of benzene. Eventhough the Company has been Thai MFC Co., Ltd., who is a major supplier and buying plastic resin mostly from local suppliers, price manufacturer of melamine powder, to ensure that of plastic resin in domestic market has direct the Company will always have an access to reference with prices of plastic resin denominated in source of melamine powder; US currency in the world market. Therefore, 58 Annual Report 2006 - As of December 31, 2006


b. The Company can buy melamine powder from other sources such as :- local source - Matsushita Electric Works, (Ayuthaya) Ltd. overseas sources - China, Italy, Japan, Taiwan 4.4 FINANCIAL RISK 4.4.1 RISK OF BREACHING FINANCIAL COVENANTS The Company has to comply with financial covenants, as required by the Syndicated Loans Agreement signed between the Company and the Siam City Bank Pcl. and the Bangkok Bank Pcl. In case of breaching of any financial covenant, an event of default may be declared. Risk Counter-Measures: The Company has prepared a financial projection for internal use. It can be used as a tool by Management to predict financial ratios of the future. Real figures in subsequent interim periods are closely monitored to lessen the chance of breaching any financial covenant.

Risk Counter-Measures: After borrowing the syndicated long-term loan amounted THB 2,100 million, the Company has repaid and prepaid many installments. As a result, the outstanding balance of the syndicated long-term loan as of December 31, 2006 was brought down to THB 125 million. The Company could fully repay the outstanding balance amounted THB 125 million within June 2007. For long-term loan and credit facilities of the Company with interest rates floating on MLR and MOR respectively, the size of loan is not significantly high as compared to long-term credit under energy conservation with fixed interest rate. However, the Company has set up method to reduce the interest rate risk by additional prepaying installments whenever the Company has excess financial liquidity and find additional sources of working captital.

4.4.3 RISK OF FOREIGN EXCHANGE RATES Exports of products and imports of raw materials, finished goods and machines expose the Company to risk of foreign exchange fluctuation. In 4.4.2 INTEREST RATE RISK such case, the Company cannot forecast income and After the period that the Company could enjoy cost accurately. a fixed interest rate for the Company’s syndicated long-term loan with the Siam City Bank Pcl. and the Risk Counter-Measures: Bangkok Bank Pcl. amounted THB 2,100 million The Company has been signing forward expired in July 2006, the Company has had to bear contracts with banks to prevent risk of foreign interest rate at the averaged MLR of the Siam City exchange in observation of situation of foreign Bank Pcl. and the Bangkok Bank Pcl. less 1.25 per exchange market at that time. Entering into forward annum since August 2006. On December 27, 2006, contracts enables the Company to know precisely our the Company signed an additional Loan Agreement income and cost, and facilitates our mapping of with the Siam City Bank Pcl. and the Bangkok appropriate business strategies. Bank Pcl. in order to get a long-term loan under Energy Conservation revolving fund project. For the 4.4.4 CREDIT RISK additional loan, it bears interest rates at MLR less 1 Due to the majority of the Company’s sales to to MLR per annum throughout 7 years of loan period. the customers – both domestic and export customers Moreover, our working capital facilities bear interest being on credit, sales increase from old customers rate at MOR per annum. As a result, the Company dealing with the Company for a long time and new has been facing the risk of changes in interest rates customers being derived from increasing customer which are floating on MLR and MOR. bases as well as different credit terms granting to the Annual Report 2006 - As of December 31, 2006 59


customers cause credit risk to the Company in the way that it cannot receive payment from the customers who are accounts receivable. Risk Counter-Measures: The Company has set guidelines for customer credit evaluation. By trying to find additional information about the customer and analyzing fundamental data before granting credit to the customer, credit risk of the Company deems appropriate. Besides, the Company has large number of customers so as not to bunch up trade receivables. Taking the above reasons and the past experience of collection of accounts receivable into consideration, Management believes that no additional credit risk beyond the amounts provided for collection losses as being recorded. Furthermore, payment terms for most export customers require them to open letter of credit or partial or in full amount of advanced payment in case of new customers or those whose financial standing is still in doubt. 4.4.5 LIQUIDITY RISK The Company needs to maintain sufficient cash and financial liquidity in order to support working capital requirement for running the business as well as to support additional investments and business expansion in the future. Failure of having sufficient financial liquidity causes the risk of losing business opportunity to compete in the market and leads to difficulty in running the business. Risk Counter-Measures: The Company has been provided sources of working capital from the Siam City Bank Pcl. and the Bangkok Bank Pcl. amounted THB 400 million, comprising bank overdraft, promissory notes, L/C,

T/R, L/G etc., being deemed appropriate and sufficient for running the business. Besides, the Company keeps on trying to find additional sources of working capital in order to make sure that it will have sufficient credit facilities with reasonable conditions and cost. The Company has projected its cash flows and monitors it closely so as to assure that the Company will not face the liquidity problems. 4.5 RISK OF INABILITY TO DECLARE DIVIDEND The company has adopted a dividend-payment policy that dividend will be paid out from profit at the rate not less than 50% of net profit each year, and on a condition that the company has no retained loss. Therefore, declaration of dividend is subject to operation results and financial circumstance in each year. Risk Counter-Measures: The Company has prepared a business plan and financial projections. By so doing, the Company can predict the operation results and financial circumstance in the future, and ways of doing business can be adjusted according to the economic condition, industrial situation, and other outside factors. This is an effort to reduce risk of inability to declare dividend. For year 2006, the Company paid an interim dividend from profit of the period January - June 2006 to shareholders at the rate of THB 0.30 per share. Total payment of an interim dividend was THB 81,297,144 which was paid out on September 8, 2006. The Company will pay additional dividend from profit of the period July - December 2006 after getting approval from shareholders’ meeting.

60 Annual Report 2006 - As of December 31, 2006


Report by Risk Management Sub-Committee

A Risk Management Sub-Committee, referred to as “the Sub-Committee”, was appointed by Board of Directors in order to assist the Board in supervising risk management process so as to assure that the risk exposure is at its appropriate level. The Sub-Committee comprises involved managerial officers not more than 7 persons. Term in office is not longer than 2 years. The current Sub-Committee’s term in office lasts until year 2007 accounting period. Tasks of Risk Management Sub-Committee The Sub-Committee concluded and classified criteria and methodology of risk management by degree of likelihood and impact according to framework laid down by Arthur Andersen Business Advisory Company Limited. The framework covered 4 components of risk (financial risk, operational risk, business risk and external factors risk) for a total of 31 factors. Those factors were ranked by degree of seriousness. The Sub-Committee located sources of those risk factors, risk management measures, and key performance index on the results of risk management. Year 2006 The Sub-Committee held 17 meetings. Attendance of each member of the Sub-Committee could be summarized in the table below:- No. of attendances/ Names No. of Meeting (times) 1. Mr. Prin Bholnivas 17/17 2. Mr. Manit Ativanichayaphong 17/17 3. Mr. Apisit Tangsatit 15/17 4. Mr. Pawat Chalermpong 16/17 5. Mr. Pramual Pinyo 5/5 6. Ms. Nitaya Prasertnukulphol 5/5 7. Mr. Tanatch Sripan 17/17 (No. 5 and 6 were appointed in August 2006) In year 2006, the Sub-Committee set up criteria and procedure on management of risk factors in accordance with degree of seriousness of each factor considered for altogether 7 risk factors being undertaken continuously from the previous year. By so doing, the Company was, to a certain extent, efficiently equipped with data base along with criteria and procedure on controlling the chances of risk-taking. Concurrently, the Sub-Committee followed risk management result of some factors being varied according to business changes and external factors such as changes in oil prices or raw material prices which directly effect major operating cost and business performance - i.e. Product Pricing risk. The follow-up also included management of Efficiency Risk which involved the Company’s production efficiency. The Sub-Committee executed self-assessment for all members of the Sub-Committee in order to indicate problems and causes of those problems including solutions to improve performance of the Sub-Committee to be more efficient. Furthermore, the Sub-Committee attached much important on strict and continuous implementation of criteria and procedure of risk management, as described in a plan at the beginning. For this purpose, the Company established a specific unit in internal audit department so as to achieve effective results of risk management as being assigned to the Sub-Committee.

Mr. Prin Bholnivas Chairman of the Risk Management Sub-Committee Annual Report 2006 - As of December 31, 2006 61


5. RELATED PARTY TRANSACTIONS

5.1 RELATED PARTY TRANSACTIONS In the year 2006, the Company entered many related party transactions with subsidiaries, affiliated companies, and associated companies for trading of merchandises, servicing, management fees, etc. In some cases, the Management or some major shareholders or authorized persons of the Company hold shares in aggregate exceeding 10% of those counter-parties, or become authorized persons of those counter-parties, resulting in the transactions being made with them to becoming connected transactions Name Srithai Moulds Co., Ltd.

according to criteria laid down by the Stock Exchange of Thailand. However, those transactions were of normal trade nature and charged at market prices then prevailing in businesses. That was a common policy of each company to charge the others at market prices for inter-company transactions. Details of related party transactions were disclosed in the notes to financial statements for the year ended 31 December 2006 at page 54 – 60. Details of nature of business and relationship of connected companies with the Company were as follows:- Relationship with the Company

Nature of business Manufacture of 1. A subsidiary whose 71.0% of shares held by the Company. moulds 2. 29.0% of shares held by executives of the Company and relatives of some executives. Srithai Shin-Osaka Co., Ltd. Mould laminating 1. A subsidiary whose 40.0% of shares held by the Company. 2. 15.0% of shares held by executives of the Company and relatives of some executives. Srithai Packaging Co., Ltd. Manufacture of 1. An associate whose 39.2% of shares held by the Company. Packaging 2. A relative of some executives of the Company serves as a director in Srithai Packaging Co., Ltd. Srithai Nanoplast Co., Ltd. Manufacture of plastic 1. An associate whose 30.0% of shares held by the Company. products 2. 15.0% of shares held by an executive of the Company and relatives of some executives. 3. A relative of some executives of the Company serves as a director in Srithai Nanoplast Co., Ltd. Firstpoint Translogistics Co., Ltd. Â

Domestic cargo transportation

Siam Melamine Marketing Co., Distributor of plastic Ltd. products and melamine products Srithai Marketing Co., Ltd. Distributor of houseware Srithai Stainless Co., Ltd.

Distributor of kitchenware and furniture

P.E.T. (Thailand) Co., Ltd.

Manufacture of PET packaging

1. A related company. 2. 100.0% of shares held by an executive of the Company and his relatives. 3. An executive of the Company serves as a director in Firstpoint Translogistics Co., Ltd. 1. A related company. 2. 45.0% of shares held by relatives of some executives of the Company. 1. A related company. 2. 52.0% of shares held by relatives of some executives of the Company. Some of them serve as directors of Srithai Marketing Co., Ltd. 1. A related company. 2. 60.0% of shares held by relatives of some executives of the Company. They also serve as directors of Srithai Stainless Co., Ltd. 1. A related company. 2. 25.0% of shares held by an executive of the Company and relatives of some executives. Some of them serve as directors of P.E.T. (Thailand) Co., Ltd.

Remark : Executive and relative of executive mean person or persons as defined in the relevant criteria on connected transaction as laid down by the Stock Exchange of Thailand. 62 Annual Report 2006 - As of December 31, 2006


5.2 THE NEEDS FOR RELATED PARTY TRANSACTIONS The Group concerns the importance of vertical integration of business, so as to minimize any dependence on outsider, and increase competitive edge of the Group. As a result, related party transactions occur from time to time. However, the Group applies normal terms and conditions to related party transactions the same as doing normal business transactions with outsiders.

5.3 PROCEDURE OF APPROVAL Each company in the Group has its own Management team. Management of each company in the Group attempts to maximize profit of their company. As a result, purchase and sale among these companies arise from the need to carry out those transactions. The Company has always observed the

relevant regulations of the Stock Exchange of Thailand on determining prices and terms of trade as if those transactions being made with outsiders. Negotiations on prices and terms of trade are carried out comparable to those of outsiders. To prevent conflict of interest, the Board has always been very careful when any transaction of this nature arising. 5.4 POLICY AND FUTURE TREND OF RELATED PARTY TRANSACTIONS The Group has the policy to allow each company in the Group to trade freely with any party. Price and term of trade will be major factors influencing the decision of each company’s Management. The number of related party transactions next year is not expected to fluctuate much in each year.

Annual Report 2006 - As of December 31, 2006 63


6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF BUSINESS PERFORMANCE

6.1 SIGNIFICANT FINANCIAL RATIOS OF CONSOLIDATED FINANCIAL STATEMENTS Ratio Unit 2006 2005 Liquidity Ratio     Times 1.55 1.75 Current Ratio Times 0.95 1.12 Quick Ratio Times 0.49 0.69 Operating Cash Flows Ratio Times 5.76 5.51 Account Receivable Turnover Days 62.51 65.39 Average Collection Period Times 11.94 12.53 Inventory Turnover* Days 30.16 28.72 Inventory Turnover Days Times 5.93 6.22 Account Payable Turnover Days 60.75 57.91 Average Payment Period Days 31.93 36.21 Cash Cycle** Profitability Ratio       % 21.03 20.52 Gross Profit Ratio to Sales % 5.13 5.78 Operating Margin to Sales % 0.96 0.79 Non-operating Margin to Total Revenues % 217.39 269.74 Operating Cash Flows Margin % 7.39 5.58 Net Profit Ratio to Total Revenues % 8.28 5.75 Return on Equity       Efficiency Ratio % 6.18 4.25 Return on Total Assets % 20.69 17.95 Return on Net Fixed Assets Times 0.84 0.76 Total Assets Turnover Financial Policy Ratio       Times 0.35 0.33 Debt to Equity Ratio Times 30.28 30.86 Interest Coverage Ratio Times 0.74 1.03 Operating Cash Flows Coverage % 58.24 59.36 Dividend Payout Ratio

2004 1.80 1.10 0.67 5.48 65.69 14.64 24.59 6.61 54.43 35.85   20.99 6.72 0.93 215.29 6.92 7.09   5.01 19.97 0.72   0.38 19.15 0.76 30.81

* Only finished goods inventory (before allowance for net realisable value and allowance for obsolescence) is used for calculation. ** Average Collection Period + Inventory Turnover Days - Average Payment Period Remark : The Company has reclassified some accounting items used to calculate financial ratios of the year 2004 and 2005 in order to be in line with the classification of accounting items in financial statements for the year 2006. The reclassification had no effect to net profit or shareholders’ equity as reported. Therefore, financial ratios of the year 2004 and 2005 presented above might be different from those disclosed in the Annual Report 2005.

64 Annual Report 2006 - As of December 31, 2006


6.2 Management’s Discussion and Analysis Financial Ratios Analysis on Consolidated Financial Statements Liquidity Liquidity Current Ratio was 1.55 times. Quick Ratio was 0.95 times. Operating Cash Flows Ratio was 0.49 times. The three ratios were decrease slightly from those of the year 2005 due to higher capital expenditure as compared to that of previous year in line with business expansion of the group. Another reason was due to payment of interim dividend in the year 2006. However, financial liquidity of the group was relatively high as compared to that of previous year. Cash Cycle decreased slightly from 36.21 days in 2005 to 31.93 days in 2006 due to improvement in collection of accounts receivable. Average Collection Period was 65.39 days in 2005, and it was decreased to 62.51 days in 2006. In addition, Average Payment Period of the group was increased from 57.91 days in the year 2005 to 60.75 days in the year 2006. In conclusion, the group had high financial liquidity. Profitability Gross Profit Ratio to Sales increased marginally from 20.52% in the year 2005 to 21.03% in the year 2006 due to adjustment of selling prices and soaring of sales of profitable products. Higher volume of production in line with increased sales brought down cost of sales per unit. However, Operating Margin to Sales decreased slightly due to the increase of selling and administrative expenses in line with the increase of sales, and increase of expenses on launching new products. Net Profit Ratio to Total Revenues increased from 5.58% in the year 2005 to 7.39% in the year 2006, and Return on Equity increased from 5.75% in the year 2005 to 8.28% in the year 2006, which were due to improvement of operating results and recognition of deferred income tax against recognized tax loss carry forwards. In conclusion, the group had an improved profitability.

Efficiency Return on Total Assets increased from 4.25% in the year 2005 to 6.18% in the year 2006 as a result of sharp increase of net profit from THB 263.90 million in the year 2005 to THB 396.42 million in the year 2006. In conclusion, the group had a higher efficiency in its business operation. Financial Policy Debt to Equity Ratio increased marginally from 0.33 time in the year 2005 to 0.35 time in the year 2006 as a result of the increase in total liabilities which were caused by higher volume of purchase of raw materials and production supplies and capital expenditure. The increase of these items was relatively higher than the increase of equity. However, the group could maintain Interest Coverage Ratio and Dividend Payout Ratio approximated to those of the year 2005. Analysis of Consolidated Financial Statements 6.2.1 Overview of Business Performance A. Revenues Srithai Superware Group has set up a strategy to do businesses in a complete loop to reduce dependency on outside businesses. Main source of income was generated by Plastic Business Line. Income generated by Trading Business Line was not much as compared to total sales of the group because it was a new business line started in the year 2006. The Company wanted to focus on trading business, and it was expected to be another main source of income in the future. Plastic Business Line comprised industrial products and household products. Income generated by industrial products was higher than that of household products, and its growth trend shared the same situation because industrial products had wider applications that could satisfy needs of many industries. For example, industrial parts and automotive parts could fulfill growing demands in property and auto industries, plastic crates in beer and

Annual Report 2006 - As of December 31, 2006 65


soft drink industries, pallets in many industries with own warehouses or material handling works. Household products could fulfill demands of consumers directly, including restaurants, food shops, etc. In conclusion, customers of industrial products were much diversified than those of household products. Sales Breakdown for the Year 2006: Plastics Business Line 92.20% Comprised of - industrial products 66.73% - household products 33.27% Trading Business Line 7.80% Total 100.00% All kinds of businesses that the group was doing has faced high competition. However, Srithai Superware Group was still the leader in plastic industry in all business lines, i.e. industrial products, household products, and mould-making. B. Marketing and Trend 1) Plastic Business Line Domestic Market for Industrial Products Amidst the economic slowdown and political unrest of the country in the year 2006, our industrial product showed a growth in line with growth of many industries, e.g. auto assembly industry for domestic distribution and export. Real estate industry chased after high demand of consumers. Logistics business showed a good sign of growth because entrepreneurs turned their attention to reduction of the rising transportation costs following rising oil prices, and efficient inventory management for purpose of slashing storage cost and warehousing costs. The company was the manufacturer and distributor of industrial products to those industries. We produced and supplied industrial parts to automobile and motorcycle assemblers, battery cases to battery manufacturers, pails to paint manufacturers, electrical parts to electrical appliance manufacturers, pallets and crates to business with own warehouses or for used in material handling work. Sales of industrial 66 Annual Report 2006 - As of December 31, 2006

products for domestic market of the Company showed a growth of 15% in the year 2006 as compared to that of the year 2005. It was expected to grow almost the same rate as in the year 2007. Export Market for Industrial Products Despite the fact that baht currency had been strengthening against the US dollars, our export value of industrial products soared up 56% in the year 2006 as compared to that of previous year. That was due to the success of export drive of plastic crates and battery cases for cars to Indo-Chinese countries and Myanmar. Our export value of plastic garbage bins through our sales agent abroad was higher than that of the year 2005. It was expected that our export markets for industrial parts in Indo-Chinese countries and Myanmar could be maintained in the year 2007. Purchase orders for garbage bins from our sales agent abroad was expected to be not less than that of the year 2006. Export drive was focussed on Korea, China, Singapore, Australia and Middle-East countries. Domestic Market for Household Products Eventhough being-affected by decrease of consumer spending due to economic slowdown and political unstability, our household products could maintain its domestic sales. Domestic sales of household products was slightly higher than that of the year 2005, owing to the fact that the Company had many channels of distribution and an efficient direct sales force. As a result, the Company could have access to new groups of customers. Domestic market for household products was growing continually, because our household products could replace tableware made of other materials such as porcelain which was breakable. Our products gained approximately 10% market share, relatively low as compared to total market value of tablewares of all kinds. It was expected that domestic sales of our household products for the year 2007 would continue to grow.


Export Market for Household Products Export value of our household products increased by 27% in the year 2006 as compared to that of the year 2005. That was due to sharp growth of exports to South Asia and Middle-East. Exports to East Asia countries and Europe showed a continual growth. Export to the U.S. market showed a marginal growth as a result of price-cutting competition from Chinese products. It was expected that the strengthening of baht currency against the US dollar would have an adverse effect on the Company in the year 2007. It would decrease competitiveness of our household products as compared to our competitors’, especially from China. Export value of our household products for the year 2007 was expected to be approximately the same with that of 2006. The company had strong commitment to export household products made of melamine powder and launch new designs of shape and decoration to fulfill diversified needs. The Company was also commited

to capture new export markets in Eastern Europe, Africa and South America. Our target was to have market coverage of 100 countries by the year 2008. In the year 2006, the Company exported to 60 countries worldwide. 2) Trading Business Line In the initial stage of operation of trading business line, most activities were focussed on marketing and distributing mostly in domestic market. Sourcing of modern products or products popular in foreign and domestic markets was done for distributing via many channels of the Company, i.e. selling by the Company, direct sales force, sales agency, or selling through department stores. Products imported and distributed by the Company comprised Lock&Lock food container boxes, gadgets for kitchens, beach tables and sun-loungers. The Company had been focussing on direct selling to consumers, hotels, food shops.

C. Operation Results (highlight from consolidated statements) 2005 2004 % % Amount Amount Sales and hire of work 5,314 100.00 4,691 100.00 Cost of sales and services (4,197) (78.97) (3,728) (79.48) Gross profit 1,117 21.03 963 20.52 Selling & administrative expenses (845) (15.90) (692) (14.74) Other income 51 0.97 37 0.79 Share of profit from associates 63 1.19 43 0.91 Interest expense (22) (0.41) (26) (0.55) Income tax 58 1.08 (23) (0.50) Net income 396 7.46 264 5.63

Net profit for the year 2006 was THB 396.42 million, an increase of THB 132.51 million. Comparative consolidated operation results and financial position for the year 2006 and 2005 was described as following :-

Unit : Million Baht 2003 % Amount 4,500 100.00 (3,556) (79.01) 945 20.99 (642) (14.27) 42 0.94 58 1.28 (38) (0.85) (20) (0.45) 314 6.99

• Consolidated Statements of Income for the

year ended 31 December 2006 as compared with that of the same period of previous year ended 31 December 2005 (Details as appeared on page 4 of the Consolidated and Company Financial Statements for the year 2006). Annual Report 2006 - As of December 31, 2006 67


1. Sales and hire of work amounted THB 5,314.14 million was higher than that of the previous year by THB 623.04 million, or 13.28% due to:- - Sales of household products under Plastics Business Line amounted THB 1,629.90 million, or 30.67% of total sales, was increased by THB 130.24 million over that of previous year, or 8.68%. That was due to an increase in purchasing power by the introduction of SML project of public sector, which resulted in soaring of wholesaling, and exporting over those of previous year. - Sales of industrial products of domestic production and overseas production under Plastics Business Line amounted THB 3,269.51 million, or 61.53% of total sales, was increased by THB 542.82 million over that of previous year, or 19.91%. That was due to an increase in purchasing power by the introduction of SML project of public sector, new orders on new plastic products in certain categories, adjustments on sales prices and structure of sales, and soaring of exports. - Sales of Trading Business Line and moulds amounted THB 414.73 million, or 7.80% of total sales, was decreased by THB 50.02 million from that of previous year, or 10.76%. That was due to a decrease of purchase orders for moulds from customers under Industrial Products because their investments were on the decreasing trend resulting from economic life of moulds being longer than 1 year. Presently, their moulds invested in the previous year are still in use. 2. Gross profit was THB 1,117.49 million, an increase of THB 154.79 million. Gross profit on sales ratio was 21.03% for the year 2006, higher than that of the previous year at 20.53%, due to price adjustment, an increase in sales of profitable products, and an increase in production capacity in line with an increase in sales. 3. Selling and administrative expenses amounted THB 844.72 million was increased by THB 68 Annual Report 2006 - As of December 31, 2006

153.04 million over that of the previous year. Selling and administrative expenses on sales ratio was 15.90% for the year 2006, higher than that of the previous year at 14.75%. The increase was due to increase of salary and wages expenses and recruitment of additional personnel in line with business expansion. In addition, other expenses also increased, such as advertising and sales promotion expenses, domestic and export transportation expenses, as a consequence of soaring of sales revenue and transportation costs due to rising oil prices. 4. Share of profit from associates and interest in joint venture amounted THB 63.02 million was increased by THB 20.10 million from that of previous year. That was due to associates having significant increase in gross profit ratio, resulting from their acceptance of more purchase orders of good margin products. In addition, an associate company engaged in paper box packaging business had gained a profit on sales on land and a factory. 5. Interest expense amounted THB 21.54 million was decreased by THB 4.32 million from that of previous year due to repayments of principal amounts during the past year. 6. Income tax (credit) amounted THB 57.51 million was due to recognition of deferred tax asset from the balanced tax losses carried forward, netted with corporate income taxes of subsidiaries. 7. Others Basic earning per share was THB 1.46, an increase of 55.32% as compared to THB 0.94 per share of previous year. That was due to substantial increase of net profit and decreased number of shares as a result of treasury stock program in the year 2005. • Consolidated Balance Sheets as of 31 December 2006 comparing to that of 31 December 2005 (Details as appeared on page 2 to 3 of the Consolidated and Company Financial Statements for the year 2006).


1. Total assets amounted THB 6,702.40 million was increased by THB 582.74 million over that as of 31 December 2005, or 9.52%, due to the following significant changes :- - Net trade accounts and notes receivable amounted THB 964.90 million was increased by THB 114.77 million over that of previous year due to soaring of sales. - Inventories amounted THB 732.98 million was increased by THB 98.14 million over that of previous year due to increased prices of raw materials which were major factors of production. The increase was in line with rising oil prices and sales expansion. - Investment in associates and interest in joint venture amounted THB 487.35 million was increased by THB 50.18 million due to new investment of THB 9.95 million in associates, pay-up of an unpaid called capital of another associate for an amount of THB 1.9 million, and operation results of associates and joint venture company for the year 2006. - Property, plant and equipment amounted THB 3,949.47 million was increased by THB 270.74 million due mainly to acquisitions of new assets netted with depreciation expenses and increase of appraised values of assets during the period. - Deferred income tax assets amounted THB 80.59 was derived from projection of taxable profit on tax shield from unutilized accumulative loss which would be expired in the year 2010. 2. Total liabilities amounted THB 1,741.92 million was increased by THB 233.15 million over that of previous year, or 15.45% due to the following significant changes :- - Bank overdrafts and short-term loans from banks amounted THB 89.25 million was increased by THB 61.12 million due to increase of Promissory notes to support working capital. - Trade accounts payable amounted THB 786.20 million was increased by THB 156.11 million over that of previous year due to purchase of

raw-materials and production supplies to get prepared for more production activities in line with soaring of sales. - Payable of long-term assets amounted THB 130.59 million was increased by THB 119.51 million over that of previous year due to an increase in fixed assets in line with business expansion. - Long-term loans and its current portion amounted THB 291.67 million was decreased by THB 186.81 million due to repayments of principal amounted THB 235.13 during the past year, and additional borrowing by subsidiaries under energy conservation project amounted THB 51.52. - Deferred income tax liabilities amounted THB 291.53 million was increased by THB 105.20 million over that of previous year due to an increase in appraisal value of assets during the period, netted with depreciation expense of appraised assets. 3. Total shareholders’ equity amounted THB 4,960.48 million was increased by THB 349.58 million over that of previous year, or 7.58%, due to the following significant changes :- - Retained earnings were increased by net profit amounted THB 396.42 million for the year 2006, netted with dividend payment paid-out from operation results of the year 2005 and interim dividend payment paid out in the 3rd quarter of the year 2006 altogether amounted THB 216.79 million. - Fair Value Reserves on Assets was increased by THB 73.70 million due to higher appraisal value of assets netted with amortization of the fair value reserve on assets. That was in line with an increase in depreciation expense on the increased value of appraisal assets, and it resulted in an increase of retained earning. • Consolidated Statements of Cash Flows for the year ended 31 December 2006 comparing to that of previous year ended 31 December 2005 showed a net decrease of cash flow THB 72.12 million (Details Annual Report 2006 - As of December 31, 2006 69


as appeared on pages 7, 52 and 53 of the Consolidated and Company Financial Statements for the year 2006). 1. Net cash receipt from operating activities amounted THB 592.98 million was decreased from that of previous year by THB 731.07 million, due to the increases of trade accounts receivable, inventories, and trade accounts payable as a result of expansion of production and sales. 2. Net Cash payments for investing activities amounted THB 314.98 million were due to acquisition of assets to get prepared for business expansion for the amount THB 323.15 million, and cash payments for investments in associates and other long–term investments amounted THB 17.33 million netted with dividends received THB 16.20 million. 3. Net cash payments for financing activities amounted THB 350.12 million was mostly due to

repayments of long–term loan amounted THB 235.13 million, cash dividend payments paid out from net profits of the group for the year 2005, interim dividend payments in the 3 rd quarter of the year 2006 amounted THB 230.87, netted with receipt from long–term loans of a subsidiary under energy conservation project amounted THB 51.52 million, and an increase in bank overdrafts and short–term loan from banks amounted THB 64.37 million.

6.2.2 QUALITY OF ASSETS Consolidated financial statements as of December 31, 2006 showed accounts receivable and notes receivable of THB 978.83 million (before allowance for doubtful accounts). This amount included debtors who had overdue debts more than 3 months amounted to THB 14.92 million. Aging of overdue accounts receivable was shown below:

Accounts Receivable Overdue More Than 3 months As of December 31 Aging Report Consolidated Financial Statements Year 2006 Year 2005 Million Baht Million Baht Overdue 3 to 6 months 3.78 1.92 0.83 0.56 Overdue 6 to 12 months 10.31 15.30 Overdue 12 months Total 14.92 17.78 Trade accounts receivable are carried at original invoice amount and subsequent by measured at the remaining amount less allowance for doubtful accounts. The Group estimates the allowance for doubtful accounts based on a review of all outstanding amounts at the year end. The estimate encompasses consideration of past collection experiences and other factors such as changes in the composition and volume of the receivable, the relationship of the allowance to the receivable and local economic conditions. The amount of the allowance is the difference between the carrying 70 Annual Report 2006 - As of December 31, 2006

amount of the receivable and the amount expected to be collectible. Bad debts are written off during the year in which they are identified and recognized in the income statement within selling and administrative expenses. The Company tries to safeguard quality of assets by applying some measures, such as setting up criteria on how to define credit limits for new customers. Financial positions of new customers, volume of purchase order, and terms of payment are taken into account. Power to approve credit limit and term of payments are authorized by officers according


to echelons. Credit rating has been assigned to each customer, based on their past records of purchase volume and punctuality of making payments. Credit rating will be reviewed from time to time. Follow-up of payments from overdue accounts has been carried out closely. Steps of demanding payment are set up. Cases will be brought up to Court for accounts that are overdue beyond our criteria.

The Company realizes the significance of sufficiency in making provisions for other kinds of assets, so as to reflect the real financial circumstances of Srithai Superware Group. In the year 2006, provisions of other kinds of assets were shown below:

Consolidated Financial Statements Year 2006 Year 2005 Million Baht Million Baht 13.93 16.56

Allowance for doubtful accounts – Trade accounts receivable Allowance for net realizable value and allowance for 15.42 18.91 obsolescence Provision for impairment loss of investments 32.12 27.02 5.53 2.57 Allowance for impairment of machinery and equipment Remark : Due to account reclassification for certain items of the year 2005 for sake of comparison with those of the year 2006, the Allowance and Provision on certain assets has been changed and became different from what being disclosed in Annual Report 2005. 6.2.3 BORROWING 1) Srithai Superware Pcl. The Company has two non-trade financing facilities:- 1. A long-term loan amounted to THB 2,100 million granted by the Siam City Bank Pcl. and the Bangkok Bank Pcl. The loan is repayable every 3 month, and scheduled to be fully repaid in the year 2009. Outstanding balance as of 31 December 2006 was THB 125 million. 2. A long-term loan under energy conservation project granted by the Siam City Bank Pcl. and the Bangkok Bank Pcl. amounted to THB 383.89 million. The loan is repayable every 3 month. First repayment was made in March 2005. The loan will be fully repaid in the year 2013. Outstanding balance as of 31 December 2006 was THB 79.93 million. Long-term loan facility for investment on energy conservation project was higher than that of the year 2005 because the Company asked for an

additional credit facility from a bank for use in the energy conservation project at its Suksawat factory and Amata Nakorn Chonburi factory in the year 2006. The new loan was partially drawn down by THB 9.10 million on 29 January 2007. The Company has no difficulty to repay principal or to service interest charge. Syndication Loan Agreement that the Company signed with the two banks had no covenant which may materially effect the operation or business expansion of the Company, except certain financial covenants e.g. restriction on new borrowing, debt service coverage ratio, and debt to equity ratio 2) Subsidiaries • Srithai Moulds Co., Ltd., our subsidiary has borrowed two long-term loans under an energy conservation project from two local banks for total credit limit of THB 24.40 million. The loans were repayable monthly and quarterly. The first installment Annual Report 2006 - As of December 31, 2006 71


repayment would be made in July 2006, and the last one in July 2013. Outstanding balance of the long-term loan as of 31 December 2006 was THB 22.31 million. • Srithai Miyagawa Co., Ltd., a subsidiary, was granted a credit facility by a local bank for investment in an energy conservation project for the credit limit of THB 57.72 million. Principal repayments would be made on monthly installments. The first installment repayment would be made in July 2006, and the last one in July 2013. Outstanding balance of the long-term loan as of 31 December 2006 was THB 40.23 million. • Srithai (Vietnam) Co., Ltd., our subsidiary, has borrowed a long-term loan from a commercial bank in the Socialist Republic of Vietnam. As of December 31, 2006 the outstanding balance of the loan was equivalent to THB 24.19 million. 6.2.4 EVENTS DURING THE PAST YEAR A. Restructuring of Companies in Srithai Superware Group The Company has restructured its business by classifying it into 2 business lines, i.e. Plastic Business Line comprising industrial products and household products, and Trading Business Line. The restructuring was aimed at restructuring of organization structure, management, business direction, strategies and work plans, so that it would fit in and be in line with the changing and expanding business. It also focussed on enhancing competitive edge of the organization in both domestic and export markets. In addition, the Company tried to restructure its investment in subsidiaries and associates so as to strengthen the whole group, e.g. closing down of a non-profit making subsidiary, investing more in certain companies with high potential of business, and investment for expansion of business and production base. Establishing new companies to boost up production capabilities and marketing strength of Srithai Superware Group to cover wider range of products and markets. Details are as described below:-

72 Annual Report 2006 - As of December 31, 2006

1. Establishment of new associated companies i.e. Srithai Sanko Co., Ltd. and THAIVAN Service Co., Ltd. 2. Acceptance of business transfer from Srithai Rungruengsaap (1999) Co., Ltd. 3. Close down of Srithai Rungruengsaap (1999) Co., Ltd. and Srithai Plaschem (Thailand) Co., Ltd. 4. Investment in plastic business to produce household products in Vietnam For more details of No. 1-4, please look at item 2.5 Important Change and Significant Events Over the Past Year. B. Financial Restructuring The Company signed a Syndicated Loan Agreement with the Siam City Bank Pcl. and the Bangkok Bank Pcl. for the amount of THB 2,100 million on July 19, 2002. The loan was used to refinance all the USD-denominated floating rate notes. As a result, the Company was free from foreign currency loan. Subsequently, the Company had joined the Working Capital for Energy Conservation Project and borrowed a long-term loan from the Siam City Bank Pcl. and the Bangkok Bank Pcl. for the total amount of THB 383.89 million. The Company had made several repayments and prepayments. The outstanding balance as of December 31, 2006 was THB 204.93 million. C. Assets Restructuring The Company accepted transfer of business from Srithai Rungruengsaap (1999) Co., Ltd., our subsidiary, in 2006. It resulted in change of asset structure of the Company. The Company’s assets were increased by acceptance of land and investments in group companies previously held by Srithai Rungruengsaap (1999) Co., Ltd. on behalf of the Company as described in Business Restructuring Plan. Besides, the Company terminated land rental agreement with Srithai Rungruengsaap (1999) Co., Ltd. on 21 June 2006 because the


Company accepted transfer of all land parcels from Srithai Rungruengsaap (1999) Co., Ltd. The Company had disclosed details of accepting transfer of business in notes to financial statements for the year ended 31 December 2006, Page 62, and in Annual Report 2006 under item 2.5 Important Change and Significant Events Over the Past Year. CONCLUSION The Company has strong financial position continually and fairly high financial liquidity. Subsidiaries and affiliated companies showed good performances. The Company accumulated more retained earning and legal reserve, and it could pay interim dividend out of its half-year operation result in 2006. In 2006 the Company still had suffered a problem on high prices of plastic resin which was a major raw material for injection of plastic products. Another problem was the high conversion cost as effected by rising oil prices. The Company could alleviate the problems by focussing on hire-of-work business in which the Company did not have to take risks on fluctuation of raw material prices. Other strategies were the upward adjustment of sales prices of our goods, and the short limit of lead time of order-taking from customers, slashing production cost by planning a shift of production base to another country of high potential in production i.e. Vietnam and India which are abundant of labour forces of low cost. These will enhance price competitiveness and more coverage of market expansion.

Eventhough the Company has many customer bases in domestic and export markets, and its products could fulfill needs of customers in many industries, the Company has strong commitment to expand markets aggressively and to have access to new groups of customers. To do so, the Company has been focussing on launching new product designs and product development, value-adding of products, including searches for new products for distribution to markets. By the way, business customers and industries have welcomed our product. Our customers have confidence in the quality and brands of our products, therefore the Company has good potential on sales growth and competitive edge over its competitors. Srithai Superware Group has structural strength because the group operates business in a complete loop, so that the group is least dependent on outsiders’ businesses. As a result, the Company could well control quality of goods and services of the whole group to meet the same standard. Besides, procurements could be made at appropriate prices, and sizable income could be circulated among companies within the group. The group has been looking for new markets and customers to increase sales of the group. In addition, the Company had restructured its business to fit in with our business expansion, operations, and management. Human resource development and support on learning of new know-how, including the introduction of modern information technology to business, would be a good preparation for growth of business. The organization would be able to keep abreast with the changing world at present time and in the future. It will result in sustainable growth and prosperity of the group continually, and adding of value to the shareholders’ interest.

Annual Report 2006 - As of December 31, 2006 73


7. POLICIES AND OPERATIONS OF THE COMPANY

1. Policy and Measures on Energy Conservation The Company emphasizes on value of energy and performs many measures in order that all staffs perceive value of energy which shall bring energy saving to the Company. The benefits of energy conservation are not only cost reduction for the Company but also benefits for the country. The Company is now applying the following measures: 1. Machines were run continuously for 3 shifts a day to avoid warm up process which consumes electricity without producing anything. If the factory cannot secure production order sufficient enough to run all machines, some machines will be closed down in order for the production rate to be more appropriate. 2. Working days of Production Department of a factory were switched by making Sunday as a working day replacing one weekday. By so doing, electricity tariff rate would be reduced. 3. Insulators were installed at Plastic Injection Machines to reduce melting time of plastic resin in the machines and save energy. 4. Closed-loop cooling system had been introduced. Chilled water will cool down the moulds, and harden quickly the injected plastic liquid in the moulds. Cycle time of injection is reduced. 5. Light bulbs were removed from the ceiling, and installed just over the machines, so that light can be focused at the machines. Watt consumption was reduced, but brightness of the light can be maintained. Electricity consumption can be reduced at night. 6. Switch for each fluorescent lamp in the office was installed so that each lamp could be turned on and turned off independently, and consumption of electricity could be reduced. 7. Brightness of light in plant was checked to ensure that it was at appropriate level. 8. Melamine compressing machines were insulated so that consumption of electricity by its heater can be reduced. Consequently, heat in front of the machine will also decrease.

74 Annual Report 2006 - As of December 31, 2006

9. Operating time of melamine compressors’ motors was reduced during feeding of raw material, so that waste of energy could be decreased. Circuits of motors and heaters were separated to save electricity consumption. 10. Machines and moulds were fitted so that they are in good condition by improving weak points such as reduction of its crepe, improving cooling loop and injection flow. The improvement will reduce, for example, cycle time of the machine. 11. New machines were acquired to replace old ones. 12. Installation of electric meter was made to trace behavior on electricity consumption and saving of electricity by each work unit. 13. Energy Conservation Committee was set up. The Committee will look after all the activities on energy conservation. Seminars on this topic were given to all employees. PR activities emphasized energy conservation among employees so as to promote cautiousness in energy conservation. 14. Suggestions from all levels of personnel were welcome on energy conservation and improvement of work procedure to boost up efficiency so that consumption of energy in office and factory could be reduced. It was under the participating energy conservation campaign of all personnel. Besides, in the year 2006, the Company held a best energy management plant competition campaign between 4 plants of the Company. This campaign was held from September 2006 to May 2007. Specialists from many organizations were invited to be the Committee of the campaign. The purpose of the competition is to encourage each plant to realize the importance of efficient energy management, to reduce the cost, and to comply with energy saving policy of the government. In order to continuously develop and improve the energy management, the Company declared energy policy on November 16, 2006 to serve as a guideline to all employees as follows:- 1. Performing energy conservation activities to be consistent with law and regulations in Thailand which related to international regulations and regulations of customers.


2. Monitoring, controlling energy usage index and evaluating energy loss so as to continuously improve the method of energy usage to be more suitable. 3. Supporting and encouraging energy conservation activities of the Company. Emphasis is put on participation of all employees. 4. Emphasizing that energy conservation is duty and responsibility of all employees to be abided. 2. Policy on Safety, Hygiene at Work, and Workplace

Environment The Company has set up a policy on safety, hygiene at work, and workplace environment so that efficient implementation could be assured and suitable to business environment and safety in workplace for all employees could be increased. The following measures were implemented to actualize the policy. 1. Committing to comply with the laws and international standard of safety. 2. Affairs about safety, hygiene at work, and workplace environment are under the responsibilities of all employees. Superiors of all levels have to enforce this policy by closely taking care of their subordinates. 3. Setting up a Committee on Safety, Hygiene at Work and Workplace Environment in each factory. Those committee members would check safety condition, making improvement and evaluation. They will hold monthly meetings to report the results. 4. Providing training and development to its personnel so that they could gain better understanding and positive attitude on safety, hygiene and workplace environment. 5. Providing an orientation meeting on safety at work for different kinds of work to new personnel. Personal safety kit along with operation and maintenance manuals are distributed to them as well. 6. Manufacturing, transporting, and storing goods properly by taking into consideration our commitment on safety and good health of

personnels and concerned persons. The Company tries to prevent possible incidents that may cause injuries or sickness or loss of life and property. These efforts are well supported by all levels of superiors and staffs. 7. Checking fire preventive & distinguishing systems, and improving it every month. Fire preventive rehearsal is provided to personnel every year. 8. Providing training and advice on how to use personal safety kit and maintenance of machines and equipments so that it could be operated safely. 9. Providing health check up to its personnel every year. Checking comprises general check up and specific check up as required by different nature of works. 10. Launching related projects, e.g. Reduction of Injuries at Work Project under which risks at work were searched, identified and evaluated; White Factory Project which aims to make our factory free from narcotics; and Garbage Management Project. Safety measures at work are publicized to all personnel for their information and compliance. 3. Policy on Environment The Company realizes its social responsibilities and its friendliness to the environment. The Company believes that it is direct responsibility of each employee to follow this policy. The Company commits itself to improvement of environmental protection continually. Therefore, a policy on environment was drawn up for being guideline as follows:- 1. To comply with laws, standard, and other regulations concerning environmental protection that are relevant to the Company’s activities. Relevant information could be disclosed to the public any time. 2. To determine development and improvement on environmental management system, ISO 14001:2004, so as to achieve objectives and desired targets. Annual Report 2006 - As of December 31, 2006 75


3. To prevent, control, lessen risks and/or possible impact on the environment. 4. To provide training to and arouse cautiousness of all personnels of all levels, including any person in contact, suppliers, service providers on environmental protection. 5. To focus on conservation of energy and resources to attain maximum benefits. The Company is at the stage of preparation and carrying out the certification on standard of environmental management, ISO 14001:2004. The Company realizes the importance and benefits of this certification as follows:- 1. It enables systematic management of the environment because international requirements must be complied with. 2. It creates good working environment, and it lessens damage in case of disruption by an accident. 3. It brings down cost in the long term because there is a focus on economic use of resources. As a result, impact on the environment will be minimized, and cost lowered. 4. It increases business opportunities. Business negotiation will be conducted more conveniently. As a result, market share could be defended, and market expansion in the future will have more potential. 5. It builds up good image for the Company because it is a good chance to participate in the creation and maintenance of good environment to the society. As a result, the Company will gain good image in the society.

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6. The Company will be awarded a certificate on environmental management after getting approval from a certifying agent. Upon being certified, the Company could use the certification in its public relation effort to support the image of the Company. The Company expects to carry out the certification on standard of environmental management, ISO 14001:2004, within the year 2007. 4. Policy on Labour Other than the policies mentioned above, the Company has been trying to bring the organization to the international standard so that the organization could develop and grow lastingly. The Company announced Thai Labour Standard Policy on August 1, 2006 in order for the Company to comply with Thai labour standard efficiently. Details of the policy are as follow:- 1. Complying with Thai labour standard is duty and responsibility of all employees which superiors should pay close attention. 2. Operating with appropriate method and realizing social responsibility by preventing injury, illness, or loss in life or asset. For this purpose, superiors of all levels and all employees should pay serious and continuous attention. 3. Training, developing and supporting employees to gain knowledge, understanding and good attitude about Thai labour standard. 4. Aiming to comply with Thai law and labour standard. 5. Inspecting and evaluating the result of operation to be in line with the policy.


8. OTHER RELEVANT INFORMATION

8.1 Innovation and Human Resource Development The Company still continuously focuses on innovation and human resource development so as to be in line with organization growth as mentioned in new business direction of the Company during 2007 2009 declared on September 30, 2006. Innovation and human resource development was used as a guideline to determine product development plan and to enhance knowledge and capability of the staffs. In the year 2006, the Company has proceeded according to the corporate business direction with the following courses:- 1. Innovation The Company supported creation of new innovation according to our corporate policy by setting up work plan of Research & Development Department as following:- 1) Boosting-up Efficiency on Product Development R&D Department collaborates closely with Sales Departments and Marketing Department, and share information with them. R&D Department will coordinate with other Departments in designing new products by focussing on reduction of time consumption and production cost. 2) Adding Value by Product Development and Creation of Products for Niche Market Adding value is carried out by adding new products such as home decorative products or non-tableware products to earn higher margin and to fulfill demands of consumers. In addition, good image of products and brand name will be built up. 3) Improvement of Work System to Enhance Two Ways Communication with Customers Improvement of softwares such as CAD-CAM is to enable better communication with customers more speedily and efficiently. E-Drawing software was introduced to enhance exchange of information with customers. 4) Introduction of new technology in our products to add more value, e.g. introduction of RFID which is an auto identification system of high calibre. The system uses electromagnetic induction

technology with radio frequency as its carrier in the data interchange. Reading of data does not require physical touch. The system is fit for use in most environments or contamination. Reading and writing of data could be easily made in either short or long distance or during moving. Saving of data could be repeated more than 100,000 times. It is expected that this system will replace the existing bar-coding in the near future. 2. Human Resource Development The Company attached much importance to human resource development so that our personnel would be more knowledgeable and capable. Branches of knowledge and new know-how were included in training courses for our personnel, both inside and outside the Company. The Company has been trying to promote the culture of “Learning Organization” to its executives and staffs. Group activities were also promoted among our personnel to build up the culture of team-work effort and consciousness in shared responsibilities. Training courses were focused in the following 4 areas, i.e. • Skill: Drilling skill at work. • MIS: Introduction of management information system to enhance speed and accuracy at work, and to support analysis and decision-making. • Management: Increasing speed at work and reducing time consumption. • Work Procedure: Introduction of information technology so that work procedure could attain international standard. 8.2 Information Technology In the year 2006, IT work had been focused on its efficiency by installation of the following management information system:- 1) Security Network System - a development on safety system of the network to lessen risk on loss of data, e.g. Firewall preventing virus inside and outside the Company and Back-up Site used as storage of data in a different place with an aim of protection of our data base from any accident. Annual Report 2006 - As of December 31, 2006 77


2) Development of Oracle Application - ERP that 8.3 Remuneration to Auditors 1) Audit Fee helps work procedures to be more efficient. The Company and subsidiaries paid audit fee to:- 3) Development of computer system for more - the external auditor in the past accounting efficiency in direct sales business which has been partly operated and expected that the development year the sum of THB 2.20 million. - audit firm for whom the auditor work and will be completed and the system will start in persons related to the auditor and such audit firm the fourth quarter of the year 2007. in the past accounting year the sum of THB 1.27 4) Control on client policy and log on management. 5) Technology selecting for Customer Relation million and US dollars 11,500. 2) Non-audit Fee Management. The Company and subsidiaries paid non-audit 6) Capacity of hardware for future expansion of fee for System Computer Environment Control business volume. In the year 2007, the Company has many Review, giving advice on preparation of consolidated development plans on stream, so as to increase financial statements and on entire business transfer of subsidiary to:- efficiency and speed at work, i.e. - the Company’s auditors in the past accounting 1) Increasing direct sales business system to support year the sum of THB 1.85 million, and the Company the growth of the business. 2) Studying and developing Barcode system or RFID is obligated to pay to them in the future the sum of to apply with containers and pallets in order to THB 0.25 million. - audit firm for whom the auditor work and reduce loss and increase efficiency of working persons related to the auditor and such audit firm in process. 3) Setting up Service Level Agreement plan to help the past accounting year the sum of THB 0.42 million, and the Company is obligated to pay to them IT service be more efficient. 4) Developing IT service in organization such as in the future the sum of THB -None- million. report and follow up the problem via internal web. 8.4 Social activities 5) Managing useless data in ERP system to increase •Support of receiving students from speed in working process. Department of Vocational Studies for training in

6) Studying applying e-commerce system with the Company according to the change of learning reservation of product for member. This will help and teaching and appraisal increase distribution channels to direct sales. The Korat branch of Srithai Superware 7) Bringing technology to quote the price for plastic Pcl. supported institutions under the Department product as a tooling for sales department. of Vocational Studies in Northeastern Provinces 8) Studying and analyzing changes in business about in receiving students from Phon Industrial and production. Community Education College in Khonkaen Province, 9) Network security plan. Dej-udom Technical College in Ubonrachathani 10) Security and Disaster Recovery Plan (DRP) used Province and Prasart Industrial and Community to reduce loss to business due to any disaster. Education College in Surin Province totaled 317 11) Determining fundamental program for user for the students to attend training course in Korat factory. sake of safety for data and copyright. The students would receive payment rate same as normal workers. The training period would be 6 - 8 months. The Company has started the training

78 Annual Report 2006 - As of December 31, 2006


program from August 1, 2006 till March 31, 2007. The training program would add work experience to students and prepare them for joining labour force in industrial sector. In addition, Mr. Sanan Angubolkul, Chairman and President of the Company has participated in social activities. Some of them are as follows:-

8.5 Achieved Award in year 2006 (1) Awarded a Plate of Honour On 13 August 2006, Child and Youth Development Counsil under Royal Patronage of Her Royal Highness Princess Maha Chakri Sirindhorn awarded a Plate of Honour to the Company who gave support to the program “This Hour for Children” provided by the Counsil to promote its activities. (1) AFS Foundation (Thailand) The event took place at Amarin Plaza Shopping AFS Foundation (Thailand) operates its Complex. business for 45 years this year. Chairman of the (2) Awarded Certificate of Achievement on Foundation is Mr. Sanan Angubolkul. Each year the Foundation selects over 700 students to join the AIDS Management On 27 March 2006, Korat factory of program to further their study in foreign countries of more that 45 countries around the world. Past Srithai Superware Pcl. was awarded a Certificate performance of success is being selected by 53 of Achievement on AIDS management in the factory member countries to be number one in the world and by Director-General Department of Labour Protection received award from AFS International for 2 and Welfare. The factory’s performance on AIDS management met the standard of AIDS-response consecutive years in 2004 and 2005. Standard Organization (ASO Thailand). It showed that (2) Rogatien Foundation the Company was responsible to and being the leader Mr. Sanan Angubolkul is appointed chairman in social development of this matter in order to of the Rogatien Foundation. The Foundation offers decrease the spread of AIDS virus and help those who scholarships to students who want to further their have got HIV to live their normal lives. study in education, major in English or Mathematics. (3) Certificate of Admiration on Safety, When they finish their study, they have to become teachers in these 2 subjects. At present, there were Hygiene and Workplace Environment On 10 May 2006, Korat factory of Srithai students finished their study for 3 classes and 2 Superware Pcl. was awarded a certificate of admiration classes are receiving their scholarships. on Safety, Hygiene and Workplace Environment by (3) Committee on Energy of the Thai Nakorn Rachasima Provincial Administration, based Chamber of Commerce on its performance in 2004 and 2005 according to Mr. Sanan Angubolkul is appointed Chairman criteria of Department of Labour Protection and on energy committee of the Thai Chamber of Welfare. Commerce. The activities of the committee are to (4) Certificate of Admiration on Workplace look after activities concerning the conservation and saving of energy especially for members of the Thai Environment On 9 June 2006, Korat factory of Srithai Chamber of Commerce and outsiders. It has established Energy Saving Consultation Center, Superware Pcl. was awarded a certificate of admiration on the Thai Chamber of Commerce by joining hands improvement of workplace environment for a better with the Ministry of Energy in order to provide living and clean environment by Permanent Secretary consultation regarding energy saving and procedures of Ministry of Industry based on its improvement of to borrow money from financial institutions to finance scenery and friendly environment according to criteria the energy-saving activities. of the Ministry of Industry. The factory joined the Annual Report 2006 - As of December 31, 2006 79


improvement program to celebrate the Sixtieth Anniversary of His Majesty’s Accession to the Throne. (5) Certificate of Thai Labour Standard 8001-2003 of Complete Level-Initial Stage On 30 June 2006, Minister of Labour presented a certificate of Thai Labour Standard 8001-2003 of Complete Level-Initial Stage to Korat factory of Srithai Superware Pcl. The factory has been applying Thai Labour standard in order to develop its labour management so that its employees are protected and treated fairly and have better quality of lives, which will result in better quality productivity. In addition, the Company has committed to social responsibility to assure that the Company will always meet the standard of social responsibility of Thai businesses as well as achieve its objectives. All of its personnel will perform their duties in accordance with managerial system and policies laid down by the Company. (6) Certificate of Admiration on Campaign on Prevention of Narcotic Addiction On 26 June 2006, Korat factory of Srithai Superware Pcl. was awarded a Certificate of Admiration on Campaign on Prevention of Narcotic Addiction by Governor of Nakhon Ratchasima Province. The factory has cooperated with the Provincial authorities on campaign on prevention of narcotic addiction in the factory continually. (7) Certificate of White Business Enterprise On 7 September 2006, Korat factory of Srithai Superware Pcl. was awarded a Certificate of White Business Enterprise by Governor of Nakhon Ratchasima Province. The factory has taken measures in prevention and solving of narcotic addiction, based on the criteria laid down by the authorities.

80 Annual Report 2006 - As of December 31, 2006

(8) Awarded a Plate of Honour On 8 September 2006, Korat factory of Srithai Superware Pcl. was awarded a Plate of Honour for giving support on education-outside-school by Minister of Education. Korat factory gave support on education-outside-school program at the factory with the cooperation of the Center for Education Outside School of Nakhon Ratchasima Province. The Company’s employees as well as other company’s employees whose factory located in Suranaree Industrial Estate are welcomed to join the education program at a community educational center supported by the Company on Sunday. The Company has been providing classrooms, equipments and other facilities in order to promote education for its employees and the community so that the community will be developed finally. (9) Presented the Distinguished Enterprise on Labour Relations Award On 18 September 2006, Minister of Labour presented the Distinguished Enterprise on Labour Relations Award to Korat factory of Srithai Superware Pcl. at United Nations Office Building. The Company has performed Labour Relations Management for its employees continually in order to prevent labour dispute in the organization. (10) Presented The Distinguished Enterprise on Labour Welfare On 18 September 2006, Minister of Labour presented the Distinguished Enterprise on Labour Welfare Award to Korat factory of Srithai Superware Pcl. at United Nations Office Building. The Company has performed distinguished Labour Welfare Management for its employees and their families.


Report by the Board of Directors on its Responsibility to Financial Statements

Financial Statements of Srithai Superware Public Company Limited and its subsidiaries were prepared in conformity with Public Company Act B.E. 2538, Accounting Act B.E. 2543, Securities and Exchanges Act B.E. 2535, and Notification of the Board of Governors of the Security and Exchange Commission on criteria, conditions, and methods of information disclosure on financial condition and operation results of security-issuing companies, which required the Board of Directors to prepare financial statements showing financial circumstance and operation results of the past year correctly and reasonably. The Company had prepared consolidated financial statements and company’s financial statements for the year ended 31 December 2006 in conformity with generally accepted accounting standards, and appropriate accounting policies on conservative principles were consistently applied correctly. Information was sufficiently disclosed in notes to financial statements. The Board of Directors had assured that effective internal control systems existed and well maintained, so that business operations were efficient, transparent, and reliable. The Board of Directors had appointed an Audit Committee comprising 3 Independent Directors who were not Executive Directors to be responsible for the review of financial reports, internal control system and internal audit work. This was to assure reasonably of the correctness, completeness, and sufficiency of accounting records that the Company’s assets were maintained and safeguarded, and dishonest conducts or material abnormal operations were prevented. The Audit Committee had expressed their opinion in Audit Committee’s Report as shown in the Annual Report. The external auditor has expressed his unqualified opinion that the consolidated and company financial statements present fairly in all material respects the consolidated and company financial position as at 31 December 2006, and the consolidated and company results of operations and cash flows for the year then ended, in accordance with generally accepted accounting principles. On Behalf of the Board of Directors Mr. Sanan Angubolkul Chairman of the Board

Annual Report 2006 - As of December 31, 2006 81


Audit Committee’s Report

To: Shareholders Srithai Superware Public Company Limited The Audit Committee of Srithai Superware Public Company Limited comprising of Chairman of the Audit Committee, Mr. Viroj Lowhaphandu, and Audit Committee Members, Mr. Enghug Nontikarn and Mr. Suchat Boonbanjerdsri, held 4 meetings during the last accounting year ended 31 December 2006. Company executives, external auditor, and head of Internal Audit Department had attended all such meetings to clarify issues on agenda of their concern and to jointly consider it with their professionalism and independency. All resolutions of meetings, were presented to the Board of Directors for acknowledgement, which could be summarized as following:- 1. Preparation of Financial Statements for the Year 2006 Financial statements of the Company and its subsidiaries were prepared in conformity with accounting standards as specified by Federation of Accounting Profession Under the Royal Patronage of His Majesty the King, and adopted by concerned authorities e.g. Department of Business Development, Ministry of Commerce, the Stock Exchange of Thailand, and the Securities and Exchange Commission. Relevant informations were sufficiently disclosed. Suggestions recommended by the external auditor were adopted as to improve accounting records more appropriately. 2. Internal Control System Evaluation of internal control system of the Company in the year 2006 revealed that inventory control system, direct sales system, and manufacturing system were efficient and in good control, except trading business which was a new business line, in which the Company had not much experience. Existing internal control system to trading business was not so clear enough to control the operation efficiently. Therefore, it should be improved and made concise. The Audit Committee had reviewed internal auditing reports every quarter according to audit plan, and made suggestions to Internal Audit Department every quarter so as to boost up its efficiency. 3. Corporate Governance Good corporate governance policies were set up in the Company since the year 2004, and it was revised in the year 2005 as to gain wider coverage and harmony with principles of good corporate governance as compared to those of other listed companies in the Stock Exchange of Thailand. In the year 2006, the Company was rated a ‘good’ level in corporate governance practice. In addition, the Board of Directors had approved the ‘codes of ethic’ on business practice as part of good corporate governance policies for purpose of serving as a guideline of quality and fair business practice. 4. Risk Management Audit Committee in collaboration with Risk Management Sub-Committee had been trying to scale down risks to acceptable level, including risk components on finance, operations, business, and external factors. Audit Committee had suggested risk prevention plan for each risk component, especially risk caused by external factors such as changes of oil prices and prices of raw materials, which may have direct impact on production cost of our main products. 5. Appointment of External Auditor for the year 2007 Audit Committee had invited 4 auditing firms of high standard to submit bidding for auditing works of the Company for the accounting year 2007. After careful consideration, Audit Committee decided to propose to the shareholders meeting to appoint Mr. Prasan Chuaphanich, CPA (Thailand) No. 3051, or Ms. Nangnoi Charoenthaveesub, CPA (Thailand) No. 3044, or Mrs. Nattaporn Phan-Udom, CPA (Thailand) No. 3430, from PricewaterhouseCoopers ABAS Limited, as auditor of the Company for the accounting year 2007 with the remuneration amount of THB 2,200,000. (Two Million and Two Hundred Thousand Bahts Only). On Behalf of the Audit Committee Mr. Viroj Lowhaphandu Chairman of the Audit Committee Bangkok 15 February 2007 82 Annual Report 2006 - As of December 31, 2006


SRITHAI SUPERWARE PUBLIC COMPANY LIMITED CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS 31 DECEMBER 2006


AUDITOR’S REPORT

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ALANCE SHEETS B

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BALANCE SHEETS

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STATEMENTS OF INCOME

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STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

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STATEMENTS OF CASH FLOWS

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