INDEX GENERAL INFORMATION FINANCIAL SUMMARY MESSAGE FROM THE CHAIRMAN BUSINESS CHARACTERS REVENUE STRUCTURE COMPANY BACKGROUND INDUSTRY OVERVIEWS RISK FACTORS SHAREHOLDER STRUCTURE MANAGEMENT STRUCTURE AND DIRECTORS RELATED TRANSACTIONS DISCUSSION AND ANALYSIS OF OPERATING RESULTS AND FINANCIAL POSITION AUDIT COMMITTEE’S REPORT AUDITOR’S REPORT AND FINANCIAL STATEMENT
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Company Name Symbol Business Head office Homepage Telephone Facsimile Registration Number Establishment date Date of registration Public Company Stock Listed Date Registered and Paid Capital Number of Ordinary Shares
31 December 2005
Global Connections Public Company Limited (“The company” or “GC”) GC Distributing agent of plastic, petrochemical and additive, which are used in petrochemical and plastic transformation process. 13/1 Moo 2 Kingkaew Rd., Rachateva, Bangplee, Samuthprakarn 10540 , Thailand http://www.gc.co.th +66 (0)2463-7921, +66 (0)2763-7999, +66 (0)2763-7923-42 +66 (0)2763-7950, +66(0)2312-4880-1 0107574800153 27 September 1994 17 March 2005 6 December 2005 200,000,000 Baht 200,000,000 Shares
Thailand Securities Depository Co.,LTD. Capital Market Academy Building, 2nd FL 2/7 Moo 4, (North Park Project) Vibhavadi-Rangsit Rd., Tung Song Hong, Laksi, Bangkok, 10210, Thailand Tel. + 66 (0) 2596-9000 Fax. +66 (0) 2832-4994
Kim Eng Securities (Thailand) PLC. 999/9 The Offices at Central World, 20th-21st FL. Rama 1 Road, Pathumwan, Bangkok 10330, Thailand Tel. +66(0)2658-6300 Fax. +66(0)2658-6862
Ernst & Young Office Limited 193/136-137 Rajadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel. +66(0)2264-0777 Fax. +66(0)2661-9192
FINANCIAL SUMMARY 2005 FINANCIAL POSITION (MILLION BAHT) Current Asset 644 Total Asset 893 Current Liabilities 505 Total Liabilities 596 Shareholderâ€™s Equity 297 OPERATING RESULT (MILLION BAHT) Sale Revenue 3,258 Gross Profit 163 Operating Profit 76 Net Profit 37 FINANCIAL RATIOS Return on Asset (%) 4.18 Return on Equity (%) 15.99 Net Profit Margin (%) 1.12 Current Ratio (Times) 1.28 Debt to Equity Ratio (Times) 2.00 Book Value per Share (Baht) 1.49 Net Profit Per share (Baht) 0.23
MESSAGE FROM THE CHAIRMAN
549 854 586 694 160
445 697 485 549 148
2,617 133 65 35
1,864 81 37 13
4.47 22.54 1.32 0.94 4.35 1.03 0.34
2.19 10.13 0.71 0.92 3.71 1.48 0.16
n behalf of the Board of Directors of the company, I would like to express our gratitude to all customers, suppliers, financial institutions for the trust bestowed to us. And also thank all staffs for their capability and the devotion to work which bring growth and profit to the company for 10 consecutive years with an average growth rate of 25 - 30 percent annually. The year 2005 was the 11th year of operation in which the company represented as distributing of raw materials related to plastics and petrochemicals for 24 leading companies both domestic and international including CCC Chemical Commerce Company Limited, the affiliated company of Cementhai Chemicals Group. In addition, the company has been listed in the Stock Exchange of Thailand (SET) and the shares have been trading under the main board of the SET since December 6, 2005. Our vision is to be "The Best Solution and Service Provider" and to be more than just a raw material supplier. To be the center for knowledge and the most up-to-date technology from the world leading manufacturers capable of providing technical consultant including market development which is useful for the customers and suppliers of the company. Apart from this, the company recognizes the importance of good Corporate Governance (CG). Hence the accounting system has been established in accordance with General Accepted Accounting Principles (GAAP) ensuring the correctness and transparency prior to the company listing. The company independent directors are qualified professionals from various fields, namely accountant, finance and industry. It is important for the company to set up an internal audit system to create confidence and render consultancy which will lead to the sustainable development in term of the quality of management and reduction of risk factors. For the operating result of the year 2005, the company successfully generated all time high profit by having net profit of Baht 37 Million, an increase of 5.4 percent from the revenue of Baht 3.272 billion. The growth was partly the effect of the world oil price increase which had direct effect on petrochemical products price and the other part was from an increase in the new customers and higher purchase volume from the existing big customers following the growth of petrochemical industry and the company policy to increase the sale portion of specialty grades. In the year 2006 the world economy still faces the on going changes all the time and may affect to the economic growth of the country. However from the past records the growth rate of plastics and petrochemicals industry has been growing in the range of 1.5 to 2.0 times of GDP all the time. It is expected that plastics and petrochemicals industry will continue to grow at such high rate. The demand for plastics has been increasing rapidly and in the future plastics will still be the products which are replacing other materials rather being replaced, especially Thailand is currently the number one production hub for petrochemicals in ASEAN. ASEAN FREE TRADE AREA (AFTA) enhances the opportunity to increase the business transactions. The reduction of import duty on petrochemical products in accordance with the announcement of the Ministry of Finance provides an advantage for the company which is the most ready in all aspects to import special grades petrochemical and plastics
products at the lower costs due to lower import duty enabling the company to be in the better position to compete. From the above mentioned situation, the company will operate on the basis of strategic partnership with customers, producers, inclusive of financial institutions for the sake of long term mutual benefits aiming at expanding specialty products, complete range of products and focus on development and efficiency improvement in various areas such as --- providing advice on production techniques and collaboration in new product development for customers --- providing good corporate governance management together with the policy to render regular dividend yield for the shareholders --- enhance the company staffs with management knowledge and new technology --- build good relationship and develop the quality of staffs to create cooperation and coordination among all parties in various aspects such as marketing, technology development and logistic for the sake of higher efficiency thus reducing the costs for the whole system Lastly, all the successes of the enterprise is the result of the collaboration and devotion of all staffs, the vision and special care in management from all committee plus the support and trust from the shareholders, customers, suppliers and financial institutions. The Board of Directors of the company is confident that the success which the company has achieved this year will be the strong fundamental and foundation paving the way for the company to be the leader in the business of distribution of raw materials related to plastic and petrochemical in the country.
( Dr. Pisit Leeahtham ) Chairman
BUSINESS CHARACTER The Global Connections Public Company Limited (“the Company” or “GC”) is the distributing agent of plastic, petrochemical and additive, which are used in petrochemical and plastic transformation process. The company is the distributing agent for 24 companies, which are both domestic and foreign companies leading in petrochemical and plastic in terms of production capacity and technology such as CCC Chemical Commerce Co., ltd.(a subsidiary owned 100 percent by Siam Cement Plc), Thai Plastic and Chemical Plc, Exxon Mobile Chemical, DuPont Engineering Polymers, Siam Polystyrene, Ciba Special Chemical, ChiMei Corporation, and etc. By this reason, the Company is considered to be the Thai distributor who provides the most variety petrochemical and plastic related products for Thailand. The Company was established on September 27, 1994 by five experienced founders who each has been working in petrochemical industry for more than 15 years with the company initial registered capital of baht 2 million and began fully commercial on April 1, 1995. The knowledge and experience of founders coincided with the rapid emerging petrochemical industry in Thailand created the rapid growth for the Company. The Company’s sale growth rate was 44 percent annually rising from 45,536 metric tons in the year 2002 to 62,415 metric tons in the year 2005 with the effect from increment in sale volume 12 percent and increment in pricing 31 percent annually. On December 31, 2005 the registered capital of the company was raised to baht 200 million. The objective of the Company is to be the best total solutions provider for petrochemical and plastic industry not only for supplying the variety products but also for advising production technology and knowledge to customers/end users in order to form long term strategic partnership with the customers as well as the suppliers.
REVENUE STRUCTURE The Company’s main business can be categorized into three business-units. 1. Business Unit 1: Commodity Polymer Business Unit 2. Business Unit 2: Specialty and Engineering Polymer Business Unit 3. Business Unit 3: Specialty Chemical Business Unit The Company’s product selections ranging from commodity polymer to special additive chemical which contribute high profit margin. Global Connections PLC is one of the only two Thai distributors offering product selections from common commodity grade polymers to special grade polymers. The Company’s revenue baht 3,271 million in 2005 derived from Commodity Polymer (B.U.1) 74.1% (or baht 2,424 million), Specialty & Engineering Polymer (B.U.2) 20.4% (or baht 666 million), Specialty Chemical (B.U.3) 5.1% (or baht 167 million) and from other income 0.4% (or baht 14 million). During the past couple years, the Company business strategy was to expand market in Specialty Product Units which contributed better profit margin and depended largely on technical support, obviously the growth was significant from baht 391 million in the year 2002 to baht 833 million in the year 2005. COMPANY REVENUES STRUCTURE 2003 - 2005: BREAK DOWN BY BUSINESS UNITS 2003 REVENUE STRUCTURE
Specialty and engineering polymer Specialty chemical Sale Revenue
Remark: Other income included commission income from oversea suppliers and interest income.
THE COMPANY REVENUE BREAKS DOWN: YEAR 2003 - 2005 Other Income Specialty chemical Specialty and engineering polymer Commodity polymer
THE COMPANY SALE GROWTH FROM 1995 TO 2005 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1995
COMPANY BACKGROUND 1994 GC was established with initial registered capital of Baht 2 million on 27th September 1994. 1995 GC was appointed to be HDPE distributing agent of Bangkok Polyethylene Plc. and increased its registered and paid-up capital to Baht 5 million. 1996 GC was appointed to be distributing agent of CCC Chemical Commerce Co., Ltd. and Eastman Chemical appointed GC to be distributing agent, which was the start of specialty product trading. GC increased its registered and paid-up capital to Baht 10 million. 1997 GC increased its paid-up capital to Baht 20 million to support the company expansion. GC was appointed to be distributing agent of Dupont Engineering Polymers and Chi Mei Corporation. 1998 GC was appointed to be distributing agent of Ciba Specialty Chemical and increased its paid-up capital to Baht 30 million. 1999 GC was appointed to be distributing agent of Dow Chemical Thailand and increased its paid up capital to Baht 50 million. 2000 GC was appointed to be distributing agent of Advance Elastomer Systems (AES). 2001 GC increased its paid-up capital to Baht 80 million to support the company expansion. 2003 GC increased its paid up capital to Baht 100 million and moved its warehouse to Kingkaew road. GC was appointed to be distributing agent of Thai Plastic and Chemical Plc. 2004 GC was appointed to be distributing agent of Exxon Mobil, the company moved the headquarters to Kingkaew road to facilitate the operation. The company paid dividends Baht 78 million and increased its paid-up capital to Baht 155 million. 2005 In March, GC transformed into public company limited, increased its paid-up capital to Baht 200 million and changed its par value to Baht 1 per share with the intention to implement an IPO of 45 million shares. (1.1 million shares for ESOP at baht 1.03 per share and the remain 43.9 million shares for IPO) â€œGCâ€? common stock was IPO and listed in The Stock Exchange of Thailand since 6 December 2005
INDUSTRY OVERVIEWS According to the GCâ€™s business characteristic, the company is a distributing agent of plastic and petrochemical product which the companyâ€™s performance will relate to petrochemical industry. The information of Thailand Petrochemical industry from The Office of Industrial Economics illustrates summary as the following. Plastic Product Industry Plastic Product The plastic products produced in Thailand including plastic bag and sack, film sheet, foil, etc., seventy percent of total production sold domestically while the rest was for export. Majority of manufacture are small size of business only 10 percent are large manufacturers. Type of raw plastic material can be described into 2 categories 1.Thermoplastic which can be reprocessed such as Polyethylene (PE), Polypropylene (PP), and Polyvinylchloride (PVC) 2.Thermosetting plastic which can not reprocessed such as Phenolics , Polyesters , Urea , and Melamine Industries which use plastic as raw material comprise of packaging, textile, shoes, construction materials, electrical appliances, and automotive parts industry. Cost structure of these industries consist of plastic 70 percent, labor 10-15 percent, energy 8 percent and 7-12 percent as administration cost. Marketing Export In the year 2005, the export value of finished plastic goods was approximately USD 1,857.1 million, an increase of 19.98 percent from the year 2004 as a result of growing demand from Hong Kong, China, USA, and Japan. The export value in the year 2005 were from plastic film, foil and strip with the value of USD 534.1 million, plastic bag with the value of USD 517.9 million, and plastic tableware with the value of USD 37.6 million, an increase of 14.60%, 38.88% and 22.88%, respectively, from the previous year. Last year, the export volume of finished plastic goods from Thailand had increase noticeably due to the growing demand from USA since the disaster of hurricane causing shortage in production capacity of plastic and petrochemical in USA. Export Value ( Million USD)
2004 372.9 466.1 25.8
Q3/2005 159.3 146.5 6.2
Q4*/2005 129.5 133.5 5.9
2005* 517.9 534.1 23.5
Q4/Q3 2005(%) -18.73 -8.85 -5.38
2005 Compare 2004 (%) 38.88 14.6 -9.04
Plastic Boxes and Caskets
Straw and Pipe
Plastic floor tile and wall
Product Type Plastic Bags and Sacks Film Foil and strip Accessories and outfits
Data taken from: Ministry of Commerce Thailand. *Remark: Estimated number
Import In 2005, Thailand had imported finished plastic goods approximately USD 2,030 Million, 5.54% higher than the last year, mostly from Japan, China, South Korea, and South East Asian. The increase of import value come from Film Foil & Strip with 10.49 percent increment and from Straw and Pipe 0.75 percent increment, compare to the previous year. Finished plastic goods have been import into Thailand increasingly because product price from China and Malaysia are very competitive. Type Import value ( Million USD ) Percent Change 2005* Q4*/Q3 compare 2005 Q3 / Q4* / 2004 (%) (%) Product 2005 2005 2005 2005* 80.5 18.7 20.1 Straw and Pipe Film Foil and strip 668.9 190.2 184.8 Others 1,174.0 294.8 302.6 Total 1,923.4 503.7 507.5 Data taken from: Ministry of Commerce Thailand. *Remark: Estimated number
81.1 739.1 1,210.4 2,030.0
7.66 -2.86 2.65 0.75
0.75 10.49 3.10 5.54
Petrochemical Industry The tendency of Petrochemical Industry in Thailand in the year 2005 still rising noticeably as a result of the growth of petrochemical industry from the increment of both sale quantity and sale price of most petrochemical products. Demand linkage from plastic related industries such as packaging, textile, automotive part, electric appliance, construction material, and fertilizer, which sale are increase in both domestic and international market. Besides the increase of demand size, rising in oil price also enhance and promote Petrochemical industry upward trend for the next 2-3 years.
Marketing Expected Import value of upstream, intermediate, and downstream petrochemical industry in 2005 are baht 6,928, 48,470, and 65,195 million, correspondingly. Import value of upstream decrease 14.7%, value of intermediate increase 2.82% and the value of downstream increase 3.67%, compare to the previous year. On the other hand, export value in year 2005 for upstream was baht 39,104 million or 32.55% increase, intermediate baht 19,133 million or 17.29% increase, and downstream baht 148, 247 million or 24.54% increase compare to the same period.
Petrochemical Import table Import value (Million Baht) Product 2005*/2004 2004 2005* (%) Upstream 8,123 6,928 -14.17 Intermediate 47,139 48,470 2.82 Downstream 62,888 65,195 3.67 Source : Thai customs department. *Remark : Estimated
Export value (Million Baht)) 2005*/2004 2004 2005* (%) 29,501 39,104 32.55 16,312 19,133 17.29 119,034 148,247 24.54
Taxation on Petrochemical industry The objective of Asian Free Trade Area (AFTA) agreement is to relieve Import duty and Tariff among member nations to be 0-5 percent within 10 years since being as a member nation. In the year 2003 Import duty and Tariff for all phase of petrochemical product would be lower to 5 percent. Consequently, degree of competition in this region would be higher, trade value among member nations would be raised while non-member would be less impacted due to MFN (Most Favorit Nation) Tariff rates are applied. Currently, Tariff rates of MFN are higher than that of AFTA, however MFN rate, in the next five years, will be reduce to 5 percent, hence the trend of import in Petrochemical product of Thailand potentially increase. The Company can gain benefit from the lower tariff rate as the cost of import goods lower and enable the company to expand the market due to the price difference between domestic and import narrower, furthermore the properties of import products generally superior. Therefore, the companyâ€™s sale would be increase easier as a result of change in Import duty and tariff rate. Import duty and Tariff rate for Petrochemical in Thailand 2000 2001 2002 2003 2004 2005 2006 2007 MFN Upstream 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Intermediate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Downstream 20.0% 20.0% 20.0% 20.0% 20.0% 12.5% 8.8% 5.0% AFTA Upstream 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Intermediate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Downstream 15.0% 15.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Role of Distributing Agent In general, large producers such as Exxon Mobil, Ciba, and Chi Mei and others in Petrochemical industry do not distribute their products by themselves because of the scatter location of end-users, high cost of each trade transaction. Furthermore, end-users of plastic mostly use the assortment of plastic raw material in the production process. As end-users perspective, it is too complicated to buy raw materials at a time from many producers. The picture below well illustrates transaction without role of distributing agent. Trade transaction without distributing agent
The essential of distributing agents for petrochemical industry is to connect the entire product ranges from the number of large producers to serve the various needs of end-users/ customers, and to lower logistic cost of each transaction. The company can delivers value added to both suppliers and customers by satisfy economy of scope to the number of customers/ end-users and satisfy economy of scale to large producers simultaneously. Role and benefit of distributing agent
The above picture demonstrates role and benefit of distributing agent in petrochemical industry similar to role of distribution channel for consumer products which regularly generate trade transaction at the supermarket or hyperstore such as TescoLotus, Makro, and BigC. In addition, the barrier for new entry in petrochemical distributing agent is that the petrochemical producers usually appoint only one or two distributing agents for each country as general practice.
Industrial Tendency Petrochemical industry has been growing in accordance with the growth trend of the economy. Forecast for year 2006 for plastic industry is expected to grow continually as a result of increase in oil price and the expectation of the development in many industrial sectors such as automotive, packaging, electrics, and electrical appliance, etc., Several producers deploy profit from this upward trend to reinvest and to improve efficiency in both upstream and downstream petrochemical production to prepare for their competitiveness for the year 2008 - 2010, which expected to be down cycle of the industry.
According to forecast of petrochemical and growth of economy, The Company believed that our business will be expanding to the target successfully. Besides, constructive factors such as reduction in import duty tariff rate will enhance companyâ€™s competitiveness in terms of imported product pricing.
RISK FACTORS 1.Risk associated with the reliability on major suppliers or manufacturers. The highest supplier proportion is CCC Chemical Commerce (a subsidiary of Siam Cement Plc.), which is 55 percent of total purchase in 2005. However, this purchasing proportion declines continuously. In 2003, this proportion was 66.01 percent of total purchase; in 2004 it was 63.02 percent of total purchase and declined to 55 in 2005. Moreover, GC focuses to increase the market and sale the special grade products. These products are the goods of Specialty and engineering polymer and Specialty chemical business unit. This proportion is 25.6 of total selling now. This will decrease the proportion of purchasing from CCC Chemical Commerce and will reduce the risk associated with the reliability on major suppliers. 2.Risk associated with the reliability on the officers. Because GC sells the goods by sell officers mostly. Hence, GC has the risk associated with the reliability on the officers. If the selling officers leave GC, the clients may move their selling. Moreover, selling specialty products needs special knowledge of selling officers. If these selling officers leave GC, GC may face the officer replacement problem. However, few officers quitted and the management has sold the product to the clients for a long time. Thus, it reduces this risk. Moreover, the management has the knowledge of every product and GC has the policy to train the officer continuously. Hence, GC should replace the officer shortly. Moreover, for specialty products, when the buyers of clients assure the quality of the products, the clients will not change the products without really necessary reasons. 3.Risk associated with the Accounts Receivable. Now GC sells the goods in credit term mostly. Thus, if account receivable turns to be bad debt significantly, GC may encounter a delinquency risk and affect the companyâ€™s profitability. However, GC had the policy to verify the clientsâ€™ credit before provide credit to customers. GC provides the credit to some of A, B and C customers. If the new clients, who is not A or B group or cannot be examined the financial status, they have to buy the goods in cash for 2-3 times to show the ability to pay before GC provides credit to them. Now GC sets the team to consider the credit of the clients, both new and old one and also set the credit approval system, which separate from sale department to control the unsafe sale. Moreover, GC has insurance, which covers the damage from account receivable. The first insurance issue effected from 1st May 2005 and will end on 30th April 2006. It insures against the bad debt of customers, which the outstanding is more than Baht 1 million and covers 80 percent of total bad debt value. The minimum insurance premium is Baht 4.16 million and the maximum protection is 30 time of paid insurance premium. The insurance company set insurance coverage of each client. GC sets the doubtful debt allowance according to the risk of accounts receivable, the past experience and the present status of the clients. Then GC compares with the allowance for doubtful debt and insurance to verify if GC needs to reserve more doubtful debt allowance. 4.Risk associated with exchange rate. Nearly all of the goods bought from foreign suppliers are in US Dollar term. In 2005, GC imports the goods in US Dollar accounts for 20.87 percent of total purchase and expects that it will increase to 25-30 percent of total purchase in 2005. The petrochemical import duty of non-AFTA reduces from 12.50 percent to 8.75 percent. This increases the demand of imported specialty goods. If the exchange rate of Thai Baht against US Dollar fluctuates, it may affect the GCâ€™s profitability. However, to protect the exchange rate risk, GC follows the movement of the exchange rate of Thai Baht against US Dollar closely by asking the advice of the bank to determine whether GC should buy the forward contacts. GC has the policy that there is not speculate. GC must not buy the forward contacts without the trading obligations. Moreover, GC uses the cost plus policy to set the price for imported goods and GC will not sell the goods in advance without agree the exchange rate with the clients or buy the forward contacts. This can provide some hedge of exchange rate risk.
5.Risk associate with working capital Because GC has to reserve the inventory for deliver to the clients in a short time and credit term of clients is about 44 days, which is longer than the credit term of suppliers, which is about 20 days. This causes GC have to maintain the working capital for operation. Cash cycle is about 46 days. If sale of the company increases significantly, GC may need to find more capital source, which is more costly than the financial cost in the present. However, GC has the credit line with many financial institutions and obtains the capital from this initial public offering. This makes GC the stronger working capital status and improves the debt to equity ratio. Moreover, GC is likely to get the better conditions from bank due to GC’s good performance. 6.Risk associated with the fluctuations in the price of goods in the world market Although GC sells the goods to the domestic customers mostly, product price fluctuates with the world market because the petrochemical goods is commodity produce, which depends on uncertain demand and supply in the world market. GC’s profitability changes according to the world market price as the cycle. There is the risk in the case that GC buys the goods in the high price and the price declines. This may lead GC to sell inventory to the clients cheaper or lower than buying price, which cause GC’s profitability’s lower or loss in some cases. However, GC tries lower this risk by keeping inventory in the low level especially the goods, which has high fluctuation price, and follows the changing price from the global supplier data all the time. Moreover, for the customers, who order the big amount in advance, GC is supported about the quantity and price directly from manufacturers and/or suppliers. This can lower the risk. Furthermore, specialty products are affected by this risk only little because GC sets the price according to the cost. 7.Risk associated with low profit margin Profit margin of GC is low, which is according to the nature of business. Thus, factors i.e. the fluctuation of interest rate, foreign exchange, quality of account receivable and inventory management could affect net profit margin. However, GC has the stronger working capital situation from this initial public offering and good firm performance. Thus, GC trends to get the better conditions of debt from bank. Furthermore, GC follows the exchange rate policy, customer credit policy and inventory management policy closely, which should lower the affect to the profit margin. Moreover, GC has the advantage about the accepted quality of the products from the first to the third of the world manufacturers, which leads GC to expand the specialty products in high rate every year. This leads profit margin of GC better and higher than common competitors, who focus on commodity products, lower profit margin. 8.Risk associated with terminates the distributing agent contact. The distributing agent contacts are both in long term and one-year contact. Thus, GC will face the risk not to continue the distributing agent contact from the manufacturers. if GC cannot follows the agreements of each manufacturer i.e. cannot achieve the sale target of manufacturers or cannot maintain the basic structure, which is set by the manufacturers. However, GC has good performance continuously and also has many repeat clients, which impress the manufacturers. Moreover, GC contacts with the manufacturers closely to explain the domestic sale progression. Thus, the manufacturers remain renew the contacts even GC cannot achieve the sale target because they understand the reasons. In the past GC has never been terminated the contact with any manufacturers.
SHAREHOLDER STRUCTURE Shareholdersâ€™ Structure As of 25th November 2005 No. of shareholders No. of shares 1. Strategic shareholders 1.1 Government, state-owned enterprises or public sector agencies 1.2 Directors, manager, and executive management 27 158,099,900 including related persons and associated persons) 1.3 Shareholders who have a holding of above 5% including related persons 1.4 Controlling Shareholders 1.5 Shareholders who enter into agreement not to sell their stocks within a specified period 1,062 41,900,100 2. Non-Strategic shareholders hold > 1 trading unit . 3. Non-Strategic shareholders hold < 1 trading unit - . Total Shareholders 1,089 200,000,000
Major Shareholders As of 25th November 2005 Name No. of shares 1. Mr. Somchai Kulimakin 46,499,800 2. Mr. Siri Thirawattanawong 27,125,000 3. Mr. Bhiya Jriyasetapong 27,125,000 4. Mr. Sumruay Tichachol 27,125,000 5. Mr. Aikachai Sirijantanan 27,125,000 6. Ms. Pranee Piriyamasakul 1,000,000 7. Mr. Somkiat Terdtultaveedey 600,000 8. Mr. Ronnachai Jinwattanaporn 600,000 9. Mrs. Saowanee Dolrudej 500,000 10. Mr. Wattana Tangkitwej 500,000 11. Ms. Kamolpon Nontananonchai 500,000 12. Mr. Chaiporn Panchavongroj 500,000 13. Ms. Noradee Vongsirikul 500,000 14. Mr. Vinai Srisuvan 500,000 15. Mr. Sumit Sumitratchatanon 500,000 16. Mrs. Siripa Sumitratchatanon 500,000 Total 161,199,800
% of paid-up capital 79.07 20.93 - . 100.00
% of paid-up capital 23.25 13.56 13.56 13.56 13.56 0.50 0.30 0.30 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 80.59
As of 25th November 2005 There are 15 foreign shareholders which held 993,800 shares or 0.50% of paid-up capital Note : The company has a limitation on the percentage of equity shares held by foreign shareholders stated in the article of association no. 7 that The company equity shares are fully transfer except the transferring will cause share of the company held by the foreign shareholders exceed the 49% of the company total shares.
MANAGEMENT STRUCTURE AND DIRECTORS Dr. Pisit Leeahtam
Mr. Virah Mavichak
Chairman of The board Age 54 holding (%) 0.08 2004 Present Chairman 2001 Present Vice Chairman CEO 2001 2003 Deputy Minister of Finance 1997 2001 1995 -- 1997 Executive Vice President 1991 -- 1994 Director, Office of the 1987 -- 1990 Governor Economist Ph.D, Economics, Erasmus University, Netherlands M.S., Economics, Erasmus University, Netherlands B.S., Economics, Erasmus University, Netherlands Directors Certification Program (DCP) class 18/2002
Chairman of Audit Committee Age 62
Percent of Share Global Connections PLC KGI Securities (Thailand) PLC TT&T PLC Ministry of Finance Bangkok Bank Plc Bank of Thailand International Monetary Fund (IMF)
Thai Institute of Directors (Thai-IOD)
Percent of Share
holding (%)0.05 2004 Present Chairman of Audit Committee Global Connections PLC Refine Tech Co.,Ltd. 2005 Present Director and Environment Advisor Department of Industrial works 2001 2003 Director general The permanent secretary Office of 1999 2000 Deputy undersecretary Ministry of Industry General inspector The permanent secretary Office of 1997 - 1998 Ministry of Industry Deputy director general Department of Industrial works 1996 1997 Engineer Department of Industrial works 1973 1996 Plant Manager Sri-Thai Co.,Ltd. 1972 1973 Production Manager Union Carbide (Thailand) Co.,ltd. 1972 1973 1971 - 1972 Graduate Instructor Faculty of Engineering, Chulalongkorn University M.S. Chemical Engineering, University of Texas, USA B.S. Engineering, Chulalongkorn University Directors Certification Program (DCP) class 26/2003 Thai Institute of Directors (Thai-IOD)
Assoc.Prof. Chawalee Pongpatirochna
Audit Committee Age 70 2004 Present 1999 -- Present 1997 -- Present 1995 -- Present
Percent of Share holding (%) 0.05 Audit Committee Global Connections PLC Chairman of Audit Committee Phatra Leasing PCL Director Phatra Leasing PCL Director Chula Unisearch, Chulalongkorn University 2004 -- Present Executive Director The Continuing Education Center, Chulalongkorn University Managing Director 1996 -- 2003 Intellectual Property Institute , Chulalongkorn University Assoc. Professor 1962 -- 1995 Faculty of Commerce and Accountancy, Chulalongkorn University Financial management 2519 - 2530 Chulalongkorn University secretary Equivalence to Master degree, Business Administration, The School of Economics and Business Administration in Gothenburg , Sweden Bachelor Degree in Accounting, Chulalongkorn University Director Accreditation Program (DAP) class1/2546 Thai Institute of Directors (Thai-IOD)
Mr. Chanitr Charnchainarong
Audit Committee Age 41 (%)0.05 2006 Present 2005 Feb 2006 2004 2005 1998 Jan 2006 1998 Jan 2006
Percent of Share holding President Audit Committee Advisor Vice President Director
Market for Alternative Investment (mai) Global Connections PLC Market for Alternative Investment (mai) VNET Capital Company Limited VNET Venture Capital Management Securities Co. Ltd Master of Science in Electrical Engineering, Purdue University, Indiana, USA Bachelor of Science in Electrical Engineering, Purdue University, Indiana, USA Chartered Financial Analyst Directors Certification Program (DCP) 2004 Thai Institute of Directors (Thai-IOD)
Remarks: Mr. Chanitr Charnchainarong had resigned from The Companyâ€™s Audit Committee on February 14, 2006
Audit Committee Age 48 Percent of Share holding (%) 0.00 Global Connections PLC 2006 Present Audit Committee Total Green Group Co., ltd.. 2004 Present Advisor ADDA (Thailand) PCL 2004 Present Audit Committee Repax Construction Co., ltd. 2004 Present Audit Committee Sammitr Motor Group ltd. 2003 - 2004 CFO Vice President Kad Suan Kaew Co., ltd 1998 2003 1996 1997 Vice President Rattana Real Estate Plc. 1994 1996 Vice President Thanapol Finance Securities PLC Master Degree in Business Administration, Chulalongkorn University Bachelor Degree in Accounting , Assumption University Director Accreditation Program (DAP) class 30/2004 Thai Institute of Directors (Thai-IOD)
Remarks : The Board of Directorsâ€™ resolution 1/2006 held on February 22, 2006 appointed Mr. Suchart Suphayak to be a member of the Audit Committee.
Mr. Somchai Kulimakin
President Age 48 1995 - Present 1988 1995 1985 1988 1979 - 1985
Percent of Share holding (%)23.25 President Executive Vice President Assistant Manager Sale Dept. Manager
Global Connections PLC Liack Seng Trading Co., Ltd. Central Pacific (EX-IM) GmbH, Germany Metro Co., Ltd.
Bachelor Degree in Business Administration, Assumption University Directors Certification Program (DCP) Class 62/2005 Thai Institute of Directors (Thai-IOD)
Mr. Sumruay Tichachol
Senior Executive Vice President : Department of Marketing 1 Age 48 Percent of Share holding (%)13.56 1996 Present Senior Executive Vice Global Connections PLC President : Department of 1994 1996 Marketing 1 Siam brother Import-Export Co.,Ltd., Thai 1989 1994 Sale Dept. Manager Polyethylene Co., ltd. 1986 1988 Direct Sale Manager Siam Cement Trading Co.,Ltd. 1981 1986 Sale Representative Metro Co., Ltd. 1980 - 1981 Sale Dept. Manager Bangkok Steel Industry PLC Technical officer Bachelor Degree in Economics, Thammasat University Director Accreditation Program (DAP) 2004 Thai Institute of Directors (Thai-IOD)
Mr. Aikachai Sirijuntanan
Senior Executive Vice President : Department of Marketing 2 Age 41 Percent of Share holding (%)13.56 1995 Present
Senior Executive Vice Global Connections PLC President Department of 1986 1995 Marketing 1 Liack Seng Trading Co., Ltd. 1986 - 1988 Sale Dept. Manager Rajamangala Institute of Technology Instructor of Polymer Engineering Faculty Master Degree in Business Administration, Chulalongkorn University Bachelor of Science in Industrial Chemistry, King Mongkut s Institute of Technology North Bangkok. Bachelor Degree in Polymer Engineering, Rajamangala Institute of Technology Certificate Chemical Engineering, Rajamangala Institute of Technology Director Accreditation Program (DAP) 2004 Thai Institute of Directors (Thai-IOD)
Mr. Siri Thirawattanawong
Senior Executive Vice President: Department of Administration Age 42 Percent of Share holding (%)13.56 1995 Present
Senior Executive Vice Global Connections PLC President Department of 1992 --1994 Administration Liack Seng Trading Co., Ltd. 1990 - 1992 Sale Dept. Manager Talomsin Plastic Co.,Ltd. 1987 - 1990 Sale Dept. Manager MC Plastic Co.,Ltd Sale Representative Bachelor Degree in Business Administration, Assumption University Director Accreditation Program (DAP) 2004 Thai Institute of Directors (Thai-IOD)
Mr. Bhija Jriyasetapong
Senior Executive Vice President : Department of Operation Age 45 Percent of Share holding (%)13.56 1995 -- Present 1989 -- 1995 1983 -- 1989
Senior Executive Vice President Global Connections PLC Department of Operation Sale Dept. Manager Liack Seng Trading Co., Ltd. Sale Dept. Manager Metro Co., Ltd.
Bachelor Degree in Business Administration, Assumption University Director Accreditation Program (DAP) 2004 Thai Institute of Directors (Thai-IOD)
The Board of Directors Members of the Board of Directors as of 31 December 2005 1. Dr. Pisit Leeahtam 2. Mr. Somchai Kulimakin 3. Mr. Siri Thirawattanawong 4. Mr. Bhija Jriyasetapong 5. Mr. Sumruay Tichachol 6. Mr. Aikachai Sirijuntanan 7. Mr. Virah Mavichak 8. Assoc. Prof. Chawalee Pongpatirochna 9. Mr. Chanitr Charnchainarong
Chairman of the Board Director Director Director Director Director Director and Chairman of Audit Committee Director and Member of Audit Committee Director and Member of Audit Committee
Remark : Mr. Chanitr Charnchainarong had resigned from The Companyâ€™s Audit Committee on February 14, 2006, The Board of Directorsâ€™ resolution held on February 22, 2006 had appointed Mr. Suchart Suphayak to be a member of the Audit Committee.
Management Structure Bo a rd o f Dire cto rs
Audit C om m ittee
E xecutive C om m ittee
T he President Office
Marketing Departm ent 1
Marketing Departm ent2
Scope, Authorities and Duties of the Board of Directors
F inance & Account
The Board of Directors has authority in management and operation of the Company's business in accordance with the laws, objectives, the Articles of Association, and the resolution of shareholdersâ€™ meetings, has authority to formulate the policies and directions, the financial management, the risk management, to supervise and control the Management to compliance with the assigned policies efficiency and effectively, to be responsible to the shareholders, has to preserve the shareholders' interest, and disclose the information accurately and completely with the standard and the transparency. In addition, the Board of Directors is authorized to appoint the directors, and/or the executives to act under the scope of authority and duties of the Board of Directors, unless the acts of the following matters which shall be approved in advance by the shareholdersâ€™ meeting:(a) Any issues stipulated by law that resolutions of shareholders must be sought. (b) Any transaction in which the directors have the interest and there is a law or provision of the Stock Exchange of Thailand prescribes that there must be the approval of the shareholders' meeting for such transaction. In this connection, the director who has the interest or has the conflict of interest in any matter is not entitled to cast the vote for such matter.
The Executive Committee Members of the Executive Committee as of December 31, 2005 1. Mr. Somchai Kulimakin Chairman of Executive Committee 2. Mr. Siri Thirawattanawong Executive Committee 3. Mr. Bhija Jriyasetapong Executive Committee 4. Mr. Sumruay Tichachol Executive Committee Executive Committee 5. Mr. Aikachai Sirijuntanan Scope, Authorities and Duties of the Executive Committee 1. To plan and formulate the Company’s policies, directions, strategies, work plans, organization structure, management structure, and business discipline to proper with the circumstances of the economy and the market’s competition for proposing to the Board of Directors’ approval. 2. To plan and formulate the Company’s business plan, annual budget, line of authority for proposing to the Board of Directors’ approval. 3. To audit and follow the implementation of the Company’s assigned policies and management directions efficiently and support the Company’s business performance. 4. To take consideration for approval of auctions or hire of works with company or person with the budget scope not exceed 150 million Baht. 5. To recruit or dismiss the Company’s staff in management level excluding Managing Director and the Company’s directors positions. 6. To supervise and checks the outcome of the Company’s daily operation in accordance with the Company’s business plan approved by the Board of Directors. 7. To sign on any documents which related to withdrawal document from the Company’s bank account under the conditions and limitations which approved by the Board of Directors. 8. To permit the Company’s expenditures on the approved annual budget without any limitation. 9. To sign on contract which binding the Company for the period from 1-3 years and not exceed 150 million Baht. 10. To invest or invest in capital expenditure (not exceed 150 million Baht) or the transaction fixed on the annual budget approved by the Board of Directors. 11. To finds out the financing for investment or invest in capital expenditure which was approved by the Board of Directors, or refinance the outstanding liabilities under the better terms and conditions. 12. To approve extra compensation for staff (Bonus) in accordance with the approved budget by the Board of Directors. 13. To approve the rising of staff’s compensation in accordance with the approved budget by the Board of Directors. 14. To act as appropriates for any duties which shall be assigned from the Board of Directors. However, the Executive Committee shall delegate its powers to the Management of the Company as appropriates for approving of one or more financial issues under the authorized scope of power. Nevertheless, the above delegation of authority shall be in accordance with Thailand legislations and the Company’s the articles of association. Moreover, where the conflicts of interest of the Executive Director(s) occurred of the prohibited person under the provision of SEC, the Executive Committee shall present that issue to the Board of Directors for taking the consideration, and the Executive Director(s) who has the conflict of interest is not entitled to cast the vote for such matter. Nonetheless, any transactions which were in relation or related with the receiving or selling the Company or affiliate Company’s assets under provision of SET, shall be approved by the shareholder’s meeting and/or acted as stated in that provision.
The Management Committee Members of the Management Committee as of December 31, 2005 1. Mr. Somchai Kulimakin 2. Mr. Sumruay Tichachol 3. Mr. Aikachai Sirijuntanan 4. Mr. Siri Thirawattanawong 5. Mr. Bhija Jriyasetapong 6. Mrs. Pravishya Hansakul
President Senior Executive Vice President Department of Marketing 1 (Commodity Products) Senior Executive Vice President Department of Marketing 2 (Specialty Products) Senior Executive Vice President Department of Administration Senior Executive Vice President Department of Operation Executive Vice President Department of Accounting and Finance GC
2. Specialty & Engineering Polymer
1. Commodity Polymer
- CCC - SABIC - Borealis - The Polyolefin - Cabot Plastics - Asia Polymer - Nova Chemical - Others
--Thai Thai PET PET resin - TPC - Others
1.Engineer &Synthetic Rubber SBU
Dupont Chisso G.E.Plastic Exxon Mobil Others
2.Themo. Rubber& Transparency SBU
- AES - Eastman - - Exxon Mobil - Dow (UCC Prod.) - TPE Compound - Cabot Plastics - Others
3.Styrenic Plastic SBU
- DOW Chemical - Chi Mei - Denka - Nova Chemical - Others
3. Specialty Chemical
4.IT Solution SBU
- Chi Mei - Others
1.Additive &Adhesive SBU
2.Petrochem. &Intermediate SBU
Ciba Specialty Crompton Exxon Mobil Others
- Chevron - Owen Corning -- Luzinac Rio Tinto - Others Mineral
Scope, Authorities and Duties of the Managing Director 1. To manages and operates Company’s normal business in accordance with business policies, plans and strategies approved by the board of Directors. 2. To permits any normal transaction of the Company including offering, contracting, purchasing, and hiring within the amount of Baht 30 Million or in accordance with the authority assigned by the Board of Directors. 3. To assigns any responsibilities of the Company’s management and operation to the Management or to the staff according to organization structure approved by the Board of Directors in line with the Laws and the Company’s articles of association. 4. To recruits, appoints, transfers, dismiss, lay-off, assigns wages of all Company’s staffs below the management level including appointing employer’s representative for the Company’s provident fund committee. 5. To issues any orders, practices, declarations, and memorandums involving operation in accordance with the policies and for preserve interest of the Company and for keeping the Company’s discipline. 6. To acts as appropriates for any duties which shall be assigned by the Board of Directors.
The Managing Director shall be under direct supervising of the Board of Directors and shall directly report to the Board of Directors. Thus, the Management Director shall perform in the directions and policies assigned by the Board of Directors. Nevertheless, the above delegation of power shall be in accordance with Thailand legislations and the Company’s articles of association. Moreover, where the conflicts of interests of the Managing Director occurred or the prohibited person under the SEC’s provision appeared, the Managing Director do not have power for approval that matter and shall present that issue to the Board of Directors for taking the consideration. Nonetheless, any transactions, which were in relation or related with the receiving or selling the Company of affiliated Company’s assets under the SET provision, shall be approved by the shareholder’s meeting and/or acts as stated in that provision.
The Audit Committee Members of the Audit Committee as of 31 December 2005 1. Mr. Virah Mavichak Chairman of Audit Committee 2. Assoc. Prof. Chawalee Pongpatirochna Audit Committee 3. Mr. Chanitr Charnchainarong Audit Committee Secretary to the Audit Committee Ms. Pornpimol Torpaiboon The Audit Committee of the Company has the scope of duties and responsibilities to the Companyâ€™s board of directors as follows: 1. To review the sufficiency, credibility and objectivity of the financial reporting by coordinating with the external auditors and management responsible for preparing the quarterly and yearly financial reports. The audit committee may suggest issues or matters to be included for review or audit by the external auditors during its audit of the company. 2. To review the adequacy and effectiveness of the internal control systems and internal audit functions by coordinating with the external auditors and internal auditors. 3. To review compliance with the Securities and Exchange Acts, Regulations of the SET, and any other relevant laws. 4. To consider and advise the appointment of the external auditors including the audit fee by considering the creditability, the adequacy of its resources, the firm's audit engagements, and the experience of its supervisory and professional staff. 5. To consider compliance with all connected transaction disclosures or the conflict-of-interests disclosures. 6. To take care of any other matters assigned to it by the board of directors, such as reviewing the company's financial and risk management policies, reviewing compliance with the Code of Corporate Conduct of the management, and reviewing with the company's management, all important reports which must be disclosed to the public according to the law (e.g. Management Discussion and Analysis (MD&A), etc.). 7. To report the activities of the audit committee in the company's annual report, which must be signed by the chairman of the audit committee. The following information should be included in the report. 7.1 Comments on the company's financial reporting process and the disclosure of its financial information, which must be correct, sufficient, and credible. 7.2 Comments on the adequacy of the company's internal control systems. 7.3 Statements on whether the company's auditor is suitable for re-appointment. 7.4 Comments on compliance with the Securities and Exchange Acts, Regulations of the SET, and any other relevant laws. 7.5 Other statements that shareholders and general investors deem to be considered under the scope of the functions and responsibilities assigned to them by the board.
The finding for the Board of Directors According to the Company’s regulations, the Company does not have a pre-finding committee. The Board of Directors consists of at least 5 Directors who appointed by the Shareholder Meeting with Majority decision in respect to the rules and measures as follows: 1. Individual election by the Shareholders 2. Under 1., there is an one vote per one share 3. The sequence of persons who being appointed started from the highest votes shall be appointed respectively as the Director(s) as equal as the total number of the Directors which will be appointed or elected in that period. However, when there are two or more persons getting the same amount of votes which caused to exceed the sum of appointing or electing of the Directors in that period, the decision of the Chairman of election shall prevail. There is a number of one-third of the Board of Directors shall retire in each annual Meeting. Where the number of the Board of Directors cannot exactly divide by three, the total number of retiring Director(s) shall be the closet number of one-third. The retiring Director(s) in the first and second years after Company’s transforming shall be selected by the lucky draw. Otherwise, the longer Directors shall be retired. However, the retiring Director(s) under this clause may be re-elected. Except for the number of the Board of Directors is not enough for the completion of its meeting, Where there is the unoccupied Director(s) caused by any reasons other than from the duration expired, the Board of Directors shall appoint the person(s), who qualified, and not prohibited by laws, to be the replaced Director(s) in the next Board of Directors’ meeting. In case of the duration of the replaced Director(s) is less than 2 months left, the replacing Director(s) shall be on that position as long as the left duration of the replaced Director(s). Where the number of the Board of Directors is not enough of the completion of its meeting, the rests of the Board of Directors shall manage, on behalf of the Board of Directors, merely for setting up the Shareholder’s meeting for election of the entire unoccupied Director(s). The rules of designating the independent Directors The proceeding of finding the independent Directors Firstly, the Board of Directors shall consider the persons who have the qualifications as defined by the regulation of SEC, and intently support the Company’s businesses with their appropriate potentials. Then, the Shareholder’s Meeting shall consider for approval on the final step. 1.
Holding shares not more than 5 percent of voting rights shares of the Company, affiliated company, related company, or person who may has conflict with the company’s interest.
Being a director who is not an employee, staff member or does not take part in the management of any company, affiliated company, associated company or related company which may has conflict of interest with the Company.
Being a director who is not a related person or close relative of any person whom may has conflict.
Being a director who has no business relate with any company, affiliated company, associated company or related company which may has conflict or not being person who has conflict with the company’s interest that may obstruct his/her independent consideration for the Company.
Remuneration Monetary Remuneration (1) Remuneration for the Board of Directors From Fiscal year end December 31, 2004 and December 31, 2005, the number of meeting and the amount of annual gratuity for the Board of Directors as the followings Meeting Name
Attendance/Number Attendance/Number of Meeting for of Meeting for Board of Direct Audit Committee
Dr. Pisit Leeahtam*
Chairman of the Board
Mr. Virah Mavichak *
Chairman of Audit Committee
Assoc. Prof. Chawalee Pongpatirochna* Dr. Teeron Pongmakapat**
Mr.Chanitr Charnchainarong **
Mr. Somchai Kulimakin
Mr. Siri Thirawattanawong
Mr. Bhija Jriyasetapong
Mr. Sumruay Tichachol
Mr. Aikachai Sirijuntanan
Remark: * Director who had appointed on 22nd December 2005, which held only one meeting for the year 2005 ** Dr. Teeron Pongmakapat had resigned on 31st January 2005 and the Company had appointed Mr.Chanitr Charnchainarong to be the audit committee on 21st February 2005
Meeting Fee ( 2004
Dr. Pisit Leeahtam*
Chairman of the Board
Mr. Virah Mavichak *
Assoc. Prof. Chawalee Pongpatirochna* Dr. Teeron Pongmakapat **
Chairman of the Audit Committee Audit Committee Audit Committee
Mr. Somchai Kulimakin
Mr. Siri Thirawattanawong
Mr. Bhija Jriyasetapong
Mr. Sumruay Tichachol
10 Mr. Aikachai Sirijuntanan Total
Remarks: The Company has contribute only one meeting fee for the meeting 17/2004
The Shareholderâ€™s resolution held on 2005 general meeting has assign remuneration for the Board of Directors and audit committee including meeting fee and bonus for the year 2005 for the amount within 2,000,000 Baht
Remuneration for executive directors and management committee For the Fiscal year ended 31 December 2005, remuneration for executive directors and management committee total of six was Baht 23.6 million in form of salary and bonus.
Other forms of remuneration The company has established provident fund since 2000, the companyâ€™s contribution to the provident fund for the management executives (The Management committee) totaled Baht 1.93 million in 2004 and Baht 2.88 million in 2005. The Company cars have been provided for the management committee. The companyâ€™s contribute common share for four independent directors and one management committee with the total of 550,000 shares as the followings; 1. Dr. Pisit Leeahtam 150,000 Shares 2. Mr. Virah Mavichak 100,000 Shares 3. Assoc. Prof. Chawalee Pongpatirochna 100,000 Shares 4. Mr.Chanitr Charnchainarong 100,000 Shares 5. Mrs. Pravishya Hansakul 100,000 Shares
RELATED TRANSACTIONS Related transactions
Related Company/person Integrity Plastics Co.,Ltd
Vector Solution Co.,Ltd
Description of Relations Mr.Aikachai Sirichantanunt, the major shareholder and director of the GC company, was the major shareholder and director of the Integrity Plastics Company. However, he had transferred his shares of the Integrity Plastics Company and resigned from the director of that company on the 31st December 2004 Ms.Patchamon Thirawattanawong, elder sister of Mr. Siri Thirawattanawong (major shareholder and director of GC Company), is the major shareholder and director of Vector Solution Company
(UNIT: MILLION BAHT)
Description of Size of 2004 Size of 2005 Transactions transactions transactions 5.91 3.89 Trade the instant petrochemical products, on the date of 31st December 2004 and 2005 has the sum of the debts at 1.19 and 0.53 million Baht respectively.
Necessaries and reasons of transactions There were normal businesses and transactions of the GC Company with its customers. Therefore, the Auditor Committee found that they were normal businesses and transactions of GC company and they were in relation with the market prices.
Trade the instant computer products, on the date of 31st December 2004 and 2005 has the sum of the debts at 0.58 and 0.13 million Baht respectively.
There were normal businesses and transactions of the Integrity Plastics Company with its customers. Therefore, the Auditor Committee found that they were normal businesses and transactions of that company and they were in relation with the market prices.
New Modern Superpack Co.,Ltd.
Mr. Wichan Nanthananonchai, a 1 share holder, is an elder brother of Ms. Boonsri Kuleemakin (1 share holder) which is a wife of Mr.Somchai Kuleemakin s (major shareholder and director of the GC Company) and the major shareholder and director of New Modern Company
Pay the commission of the selling of monitors to the Vector Solution Company
Purchase the instant Computer products Trade the instant petrochemical products, on the date of 31st December 2004 and 2005 has the sum of the debts at 0.00 and (0.17) million Baht respectively.
There were normal businesses and transactions of the GC Company with its customers. Therefore, the Auditor Committee found that they were normal businesses and transactions of GC company and they were in relation with the market prices.
According to the shortage of some GC s products which created high demand for GC s customers, GC Company had to purchase those products from New
Purchase the instant petrochemical products
Her customers were introduced by the Vector Solution company. Therefore, the Audit Committee considered and found that those transactions were in relation with the contracts and reasonable.
21 Construction Co.,Ltd
Mr. Hook Tichachol, the elder brother of Mr. Sumruay Tichachol which is the major shareholder and director of the GC Company, is the major and director of 21 Construction Company.
Payment for the building and warehouse s construction
Modern Superpack Company, then delivered to GC s customers. Consequently, the Auditor Committee found that they were normal businesses and transactions of GC company and they were in relation with the market prices. Due to the expansion of the GC company, the company had to expand the area of the warehouse and office. Then, when the GC company got the land for building the warehouse and office, the company had to find the contractor which was in charge of the construction sites and selected from auction. Therefore, the Audit Committee considered and found that those transactions were in relation with the
Mr.Pichai Sirichantanunt, elder brother of Mr.Aikachai Sirichantanunt which is the major and director of the GC Company, is a major shareholder and director of the Brandage Company.
Mr.Pichai Sirichantanunt, elder brother of Mr.Aikachai Sirichantanunt which is the major and director of the GC Company, is a major
Trade the instant computer products.
Seminar s fee
contracts and reasonable. There were normal businesses and transactions of the GC Company with its customers. Therefore, the Auditor Committee found that they were normal businesses and transactions of GC company and they were in relation with the market prices. The GC Company advertised its computer products on the Brandage magazine which the readers are GC company s target groups. Therefore, the Auditor Committee found that they were in relation with the market prices. The GC s employees were sent in the marketing skills improvement of training. Therefore, the Auditor Committee found that
shareholder and director of the Brandmaker Company.
Taicoon-Brandage Holding Co.,Ltd.
Mr.Pichai Sirichantanunt, elder brother of Mr.Aikachai Sirichantanunt which is the major and director of the GC Company, is a major shareholder and director of the Taicoon-Brandage Holding Company.
Trade the instant computer products.
Seminar s fee
they were normal businesses and transactions of GC company and they were in relation with the market prices. There were normal businesses and transactions of the GC Company with its customers. Therefore, the Auditor Committee found that they were normal businesses and transactions of GC company and they were in relation with the market prices. The GC s employees were sent in the marketing skills improvement of training. Therefore, the Auditor Committee found that they were normal businesses and transactions of GC company and they were in relation with the market prices.
GC company s directors which are: 1. Mr. Somchai Kuleemakin 2. Mr. Sumruay Tichachol 3. Mr.Aikachai Sirichantanunt 4. Mr.Siri Thirawattanawong 5. Mr. Bhiya Jariyasethapong
Company s directors
On the date of 31st December 2004 and 2005, all 5 directors were together being the guarantors of the loans from the Banks and financial institutes which were 949 and 1,341 million Baht respectively. The Guaranteed loans were such as an O/D account, promissory notes, and long term loan.
The GC Company advertised its computer products on the Brandage magazine which the readers are GC company s target groups. Therefore, the Auditor Committee found that they were in relation with the market prices. Practically, the Company s director which requested for the loans must guaranteed those loans for the debtors in respect to the Banks and financial institutes regulation. Even though the Company had been transformed to the Public company, however, all 5 GC company s director had to still be the company s guarantors for running the company s business without any charges to the company.
DISCUSSION AND ANALYSIS OF OPERATING RESULTS AND FINANCIAL POSITION Analysis of Overall Performance The distribution business of the plastic resins, plastic, and petrochemical related products need relatively high working capital. The key success factors of this business depend on the inventory management, the logistic systems that meet the clients’ needs in time, cost of capital, receivables management and sales revenue. Due to this business has low gross profit margin, to build up more sales revenue will result in good net profit. Sales revenue The Company had total sales revenue of Baht 3,258 million in 2005, increase Baht 641 million from last year or equivalent to 24%. The increase of sales revenue came from both sales volume and sales price. The main reason was the growth of the relevant industries such as packaging and automotive sectors, etc. Another reason was the efficient inventory management policy and the logistic system to quickly deliver the goods to the clients and the skilled team that has the capability to provide the good advices to the clients, resulting in the increase of both clients’ satisfaction and sales revenue. Moreover, the Company has also focused on the specialty products, which have high growth, better profit margin and less price sensitivity compared to the commodity products. Financial Operating Results In 2005, total cost of sales and operating expenses were Baht 3,196 million, or 25% increase from last year which was in line with the growth of sales revenue. Costs of goods sold increased from 94.93% to 94.99% was mainly due to the increase in product cost resulting from the rise in oil prices of which directly affected to petrochemical products as well as plastic resins. GC incurred Baht 101 million in selling and administrative expenses, an increase of 23% from last year. Key factors contributing to this rise were the loss from exchange rate, the increase in personnel expenses due to both annual salary adjustments and the additional number of staff as per business expansion. Interest expenses were Baht 25 million, or 25% higher than last year’s as the more increase in sales revenue, the more working capital required. Besides the higher average loan balance, short-term interest rates also rose significantly starting from the second half of the year. As a result of the discussed factors, our net income rose to Baht 37 million in 2005 versus Baht 35 million in 2004 or equivalent to 6% increased. Analysis of Financial Position (FY2005/2004) Assets: As of 31 December 2005, GC recorded total assets of Baht 893 million, a year-on-year increase of Baht 39 million, due to the increase in accounts receivable reflected from sales revenue increased. Liabilities : As of 31 December 2005, GC recorded total liabilities of Baht 596 million, a decrease of Baht 99 million from the previous year. This is caused by the decline of short-term loan in December due to the incoming fund from IPO proceed.
Shareholdersâ€™ Equity: As of 31 December 2005, the portion of shareholdersâ€™ equity amounted to Baht 297 million, an increase of Baht 137 million, or 86%, due to the good fund from IPO and a rise in net profit from operations in fiscal year 2005.
AUDIT COMMITTEE’S REPORT
To: The Shareholders The Audit Committee of Global Connections Public Company, which was appointed by the resolution of the Board of Directors’ meeting, consists of three independent Directors as follows: 1. Mr. Virah Mavichak
Chairman of Audit Committee
2. Assoc. Prof. Chawalee Pongpatirochna
3. Mr. Chanitr Charnchainarong
For the year of 2005, the Audit Committee had independently accomplished their assigned tasks with no limitations in gathering the Company’s information in any aspects. The Audit Committee had organized totally 6 meetings together with concerned management, of which three of them were joined by The External Auditor. The Main important issues can be summarized as follows:1.
The Audit Committee had audited the quarterly financial statement and the financial statement for the year 2005 to confirm that The Company’s financial report was made in accordance with Generally Accepted Accounting Principles and the disclosure of information was sufficient, complete and reliable. Moreover, the Committee had intensively considered and discussed the audited report with the external auditor and internal auditors and provided The Company with valuable notices and suggestions.
The Audit Committee had considered the internal control system and the internal control forms which were prepared by Dharmniti Auditing Company to ensure with sound reasoning that the system is sufficient, suitable and effective. Due to the fact that at the early stage, The Company has not set up Internal Audit Unit, so Dharmniti Auditing Company was contracted as an outsource to set up The Company’s internal control system, develop internal audit manual which can monitor the occurrence of risk and The Company’s businesses operation and also provide the recommendations which may improve the internal audit efficiency including act as internal audit outsource for 4 months.
The Audit Committee had considered internal audit plan for the year 2005 which prepared by Dharmniti Auditing Company.
The Audit Committee has examined the company’s internal audit reports to ensure that all were in line with the audit plan. For more effective internal audit control and to avoid any possible risk that might happen, The Committee has suggested that follow up schemes should be set up to ensure all the significant issues recommended in the internal audit reports had been rectified.
The Audit Committee had considered the progression on follow up of the overdue Account Receivables.
The Audit Committee suggested the management to systematically document all the rules, regulations and guideline with respect to The Company’s businesses operation.
The Audit Committee had overseen to ensure that all rules and regulations are strictly enforced, and no significant abuse was founded.
The Audit Committee had reviewed The Company’s compliance to all legal aspects and regulations to SET, as well as other business laws in order to ensure the shareholders and all concerned parties of Company’s good corporate governance and transparency. The Committee are in the view that The Company had conducted its business consistently with all related laws and find no significant mistake. The Audit Committee also commented on the disclosure of related transactions between the Company and other related companies that those transactions were executed as normal business practice with reasonable market prices. These all are in the line with regulation set up by SET.
The Committee has selected the authorized Auditors with fixed remunerations and proposed to the Board of Directors for further requesting the Shareholdersâ€™ approval for appointing Ernst & Young Office Limited, also recognized either of Khun Siraporn Ouaanunkun or Khun Suppachai Panyawattano, to be the Companyâ€™s Auditor for another period of the fiscal year end on 31 December 2006.
(Mr.Vira Mavichak) Chairman of Audit Committee
AUDITORâ€™S REPORT AND FINANCIAL STATEMENT
GLOBAL CONNECTIONS PUBLIC COMPANY LIMITED (FORMERLY KNOWN AS GLOBAL CONNECTIONS COMPANY LIMITED ) REPORT AND FINANCIAL STATEMENTS 31 DECEMBER 2005 AND 2004 Report of Independent Auditor To The Board of Directors and Shareholders of Global Connections Public Company Limited (Formerly known as Global Connections Company Limited ) I have audited the balance sheets of Global Connections Pubic Company Limited as at 31 December 2005 and 2004, and the related statements of earnings, changes in shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company s management as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Global Connections Public Company Limited as at 31 December 2005 and 2004, and the results of its operations and cash flows for the years then ended in accordance with generally accepted accounting principles.
Siraporn Ouaanunkun Certified Public Accountant (Thailand) No. 3844 Ernst & Young Office Limited Bangkok : 22 February 2006
GLOBALC ONNE CT IONS PUBLIC C OMPANY LIMIT E D (F ORME RLY KNOW N AS "GLOBALC ONNE CT IONSC OMPANY LIMIT E D") BALANC ESHE E T S AS AT3 1DE CE MBE R 20 0 5AND20 0 4 Note ASSE T S C URRE NTASSE T S C ash and cash equivalents T rade accountsreceivable net Inventoriesnet Othercurrent assets T OT ALC URRE NTASSE T S NONC URRE NTASSE T S Depositswith banksplaced ascollateral Property, plant and equipm ent net Assetsawaiting sale net Othernoncurrent assets T OT ALNONC URRE NTASSE T S T OT ALASSE T S LIABILIT IE SANDSHARE HOLDE RS' E QUIT Y C URRE NTLIABILIT IE S Bank overdraftsand shortterm loansfrom financialinstitutions T rade accountspayable C urrent portion ofliabilitiesunderfinance lease and hire purchase agreem ents C urrentportion oflongterm loans Othercurrent liabilities Accrued expenses C orporate incom e tax payable Value added tax payable W ithholding tax payable Others T OT ALC URRE NTLIABILIT IE S NONC URRE NTLIABILIT IE S Liabilitiesunderfinance lease and hire purchase agreem entsnet ofcurrentportion Longterm loansnetofcurrent portion T OT ALNONC URRE NTLIABILIT IE S T OT ALLIABILIT IE S SHARE HOLDE RS' E QUIT Y Share capital Registered, issued and fully paid 20 0 , 0 0 0 , 0 0 0ordinary sharesofBaht1each (3 1Decem ber20 0 4: 1 , 550 , 0 0 0ordinary sharesofBaht 1 0 0each) Share prem ium Retained earnings Appropriated statutory reserve Unappropriated T OT ALSHARE HOLDE RS' E QUIT Y T OT ALLIABILIT IE SANDSHARE HOLDE RS'E QUIT Y T he accom panying notesare an integralpartofthe financialstatem ents.
20 0 5
(Unit: Baht) 20 0 4
1 0 , 548, 284 466, 7 0 9, 1 42 1 63 , 829, 665 3 , 1 65, 51 2 644, 252, 60 3
7 , 3 0 8, 524 3 3 1 , 586, 7 3 7 20 6, 1 20 , 41 7 4, 0 0 7 , 21 7 549, 0 22, 895
80 , 20 0 , 0 0 0 1 60 , 628, 654 7 , 660 , 0 0 0 241 , 93 3 248, 7 3 0 , 587 892, 983 , 1 90
1 29, 20 0 , 0 0 0 1 7 4, 996, 958 87 5, 7 7 0 3 0 5, 0 7 2, 7 28 854, 0 95, 623
27 2, 1 80 , 7 1 9 1 95, 53 2, 0 67
3 91 , 882, 3 3 1 1 51 , 224, 0 64
4, 20 5, 60 5 1 7 , 1 60 , 0 0 0
5, 1 0 8, 548 1 5, 7 3 0 , 0 0 0
3 , 1 45, 53 8 7 , 7 3 9, 890 3 , 266, 592 1 , 3 3 8, 0 43 1 27 , 3 50 50 4, 695, 80 4
2, 93 9, 222 6, 61 3 , 296 3 2, 1 96 1 0 , 580 , 1 28 499, 448 584, 60 9, 23 3
3 , 97 9, 1 56 87 , 1 1 0 , 0 0 0 91 , 0 89, 1 56 595, 7 84, 960
5, 57 4, 1 22 1 0 4, 27 0 , 0 0 0 1 0 9, 844, 1 22 694, 453 , 3 55
20 0 , 0 0 0 , 0 0 0 56, 0 3 4, 0 3 5
1 55, 0 0 0 , 0 0 0 -
6, 250 , 0 0 0 3 4, 91 4, 1 95 297 , 1 98, 23 0 892, 983 , 1 90
4, 41 0 , 0 0 0 23 2, 268 1 59, 642, 268 854, 0 95, 623
GLOBALC ONNE C TIONS PUBLIC C OMPANY LIMITE D (F ORME RLY KNOW N AS "GLOBALC ONNE C TIONS C OMPANY LIMITE D") STAT E ME NT S OFE ARNINGS F OR THEYE ARS E NDE D3 1DE CE MBE R 20 0 5AND20 0 4 (Unit : Baht) Note 20 0 5 20 0 4 RE VE NUE S Sales 3 , 257 , 581 , 1 7 6 2, 61 6, 67 1 , 0 1 9 Otherincom e 1 4, 23 3 , 567 1 4, 1 89, 0 1 1 T OT ALRE VE NUE S 3 , 27 1 , 81 4, 7 43 2, 63 0 , 860 , 0 3 0 E XPE NSE S C ost ofsales 3 , 0 94, 50 2, 0 43 2, 484, 0 93 , 63 0 Selling and adm inistrative expenses 99, 3 0 8, 51 8 82, 0 1 2, 81 3 Directors' rem uneration 2, 0 0 0 , 0 0 0 1 80 , 0 0 0 T OT ALE XPE NSE S 3 , 1 95, 81 0 , 561 2, 566, 286, 443 E ARNINGS BE F OREINT E RE STE XPE NSE S AND C ORPORATEINC OMET AX 7 6, 0 0 4, 1 82 64, 57 3 , 587 INT E RE STE XPE NSE S (24, 985, 262) (1 7 , 0 64, 27 3 ) C ORPORAT EINC OMETAX (1 4, 496, 993 ) (1 2, 847 , 43 1 ) NE TE ARNINGS F OR T HEYE AR 3 6, 521 , 927 3 4, 661 , 883 BASIC E ARNINGS PE R SHARE Net earnings W eighted average num berofordinary shares(shares)
0 .3 4
1 59, 652, 87 7
1 0 0 , 7 51 , 3 66
T he accom panying notesare an integralpart ofthe financialstatem ents.
GLOBALC ONNE CT IONS PUBLIC C OMPANY LIMITE D (F ORME RLY KNOW N AS "GLOBALC ONNE CT IONS C OMPANY LIMITE D") STAT E ME NTS OFC ASH F LOW S F OR T HEYE ARS E NDE D31DE CE MBE R 20 0 5AND20 0 4 20 0 5 C ash flowsfrom (used in) operating activities Net earnings Adjustm entsto reconcile net earningsto net cash provided by (paid for) operating activities: Depreciation Unrealised exchange gain Bad debtsand allowance fordoubtfulaccounts(Reversal) Provision fordim inution in value ofinventories(Reversal) Provision forobsolete inventories(Reversal) Losson disposaland writeoffofvehiclesand equipm ent Provision forim pairm ent losson assetsawaiting sale Deferred interest from liabilitiesunderfinance lease and hire purchase agreem entsam ortisation E arningsfrom operating activitiesbefore changesin operatring assets and liabilities Decrease (increase) in operating assets: Trade accountsreceivable Inventories Othercurrent assets Othernoncurrent assets Increase (decrease) in operating liabilities: Trade accountspayable Accrued expenses C orporate incom e tax payable Othercurrent liabilities Net cash used in operating activities C ash flowsfrom (used in) investing activities Decrease (increase) in depositswith banksplaced ascollateral Decrease in otherlongterm investm ent C ash paid forbuilding and equipm ent Proceedsfrom disposalofvehiclesand equipm ent Net cash from (used in) investing activities C ash flowsfrom (used in) financing activities Increase (decrease) in bank overdrafts and shortterm loansfrom financialinstitutions C ash paid forliabilitiesunderfinance lease and hire purchase agreem ents Increase (decrease) in longterm loan Proceedsfrom share capitalincrease Interim dividend paid net ofproceedsfrom share capitalincrease Net cash from (used in) financing activities Net increase (decrease) in cash and cash equivalents C ash and cash equivalentsat beginning ofyear C ash and cash equivalentsat end ofyear Supplem entalcash flowsinform ation C ash paid during the yearfor: Interest expenses C orporate incom e tax Noncash transactions: Vehiclespurchased underfinance lease/hire purchase agreem ents Interim dividend paid returned to share capitalincrease The accom panying notesare an integralpart ofthe financialstatem ents.
(Unit :Baht) 20 0 4
36, 521, 927
34, 661 , 883
10 , 63 7 , 153 (1 1, 856) 483, 540 2, (1, 189, 0 0 0 ) 627 , 0 0 0 145, 60 7 1 , 23 7 , 20 3
9, 988, 638 (1 , 234, 381 ) (56, 57 8) 3, 0 0 0 , 0 0 0 (1 5, 0 0 0 , 0 0 0 ) 3 3 7 1, 97 -
520 , 864
50 , 97 2, 43 8
32, 366, 0 58
(137 , 60 5, 945) 42, 852, 7 52 841, 7 0 5 21 5, 11 7
(41, 290 , 440 ) (7 1 , 339, 90 2) (7 0 1, 97 2) (95, 7 50 )
44, 31 9, 859 20 6, 31 6 1 , 126, 594 (6, 37 9, 7 87 ) (3 , 450 , 951)
21 , 0 98, 862 (122, 0 87 ) (1 , 60 0 , 233 ) 6, 7 55, 460 (54, 930 , 0 0 4)
49, 0 0 0 , 0 0 0 (2, 345, 655) 281 , 127 46, 93 5, 47 2
45, 63 3, 91 5 10 , 0 0 0 , 0 0 0 (24, 7 44, 443) 820 , 3 7 4 (59, 557 , 984)
(119, 7 0 1, 61 2)
68, 322, 325
(5, 847 , 184) (15, 7 30 , 0 0 0 ) 10 1 , 0 34, 0 3 5 (40 , 244, 7 61) 3 , 23 9, 7 60 7 , 30 8, 524 10 , 548, 284 -
(5, 632, 648) 53 , 326, 0 90 (23 , 0 0 0 , 0 0 0 ) 93 , 0 15, 7 67 (21 , 47 2, 221 ) 28, 7 80 , 7 45 7 , 30 8, 524 -
25, 627 , 981 13 , 37 0 , 399
16, 461 , 344 14, 447 , 664
2, 828, 41 1 -
3 , 653 , 0 69 55, 0 0 0 , 0 0 0
GLOBALC ONNEC TIONS PUBLIC C OMPANY LIMITED (F ORMERLY KNOW N AS "GLOBALC ONNEC TIONS C OMPANY LIMITED") STATEMENTS OFC HANGES IN SHAREHOLDERS'EQUITY F OR THEYEARS ENDED31DEC EMBER 2005 AND2004 (Unit :Baht)
Note Balance asat 1J anuary 2004 Share capitalincrease Transferred retained earnings to statutory reserve Interim dividend paid Net earningsforthe year Balance asat 31Decem ber2004 Share capitalincrease Transferred retained earnings to statutory reserve Net earningsforthe year Balance asat 31Decem ber2005
Issued and fully paid up ordinary shares 100, 000, 000 55, 000, 000 155, 000, 000 45, 000, 000 200, 000, 000
The accom panying notesare an integralpart ofthe financialstatem ents.
Share prem ium 56, 034, 035 56, 034, 035
Retained earnings Appropriated statutory reserve Unappropriated 4, 410, 000 4, 410, 000 1, 840, 000 6, 250, 000
47 , 980, 385 (4, 410, 000) (7 8, 000, 000) 34, 661, 883 232, 268 (1, 840, 000) 36, 521, 927 34, 914, 195
Total 147 , 980, 385 55, 000, 000 (7 8, 000, 000) 34, 661, 883 159, 642, 268 101, 034, 035 36, 521, 927 297 , 198, 230 -
GLOBAL CONNECTIONS PUBLIC COMPANY LIMITED (FORMERLY KNOWN AS GLOBAL CONNECTIONS COMPANY LIMITED ) NOTES TO FINANCIAL STATEMENTS 1. GENERAL INFORMATION Global Connections Public Company Limited (hereinafter referred to as the Company ) was established as a limited company under Thai laws on 27 September 1994. On 1 March 2005, the Annual General Meeting of the Company s shareholders approved the change of the status of the Company to a public company under the Public Limited Companies Act and also approved the change of the Company s name from Global Connections Company Limited to Global Connections Public Company Limited . The Company registered the change of its status with the Ministry of Commerce on 17 March 2005.The Company operates its business in Thailand and its principal activity is the wholesale of plastic and plastic-related products. The Company s registered office is located at No. 13/1 Moo 2 King-Kaew Road, Rachateva, Bangplee, Samutprakarn. 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Profession Act B.E. 2547. Significant accounting policies adopted by the Company are summarised below :2.1
Revenue recognition Sales of goods are recognised when products are delivered and title passes to customers.
Cash and cash equivalents Cash and cash equivalents include cash on hand, all bank accounts and negotiable certificates of deposit with no more than 3 months remaining to maturity, including call notes receivable and term notes receivable maturing within 3 months or less and without commitments.
Trade accounts receivable and allowance for doubtful accounts Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is provided for, based on an estimate of collection losses that may be incurred in collection of receivables. The estimate is based on collection experience and the current status of receivables outstanding at the balance sheet date.
Inventories Inventories are valued at the lower of cost (weighted average method) or net realisable value.
Property, plant and equipment and depreciation Property, plant and equipment are stated at cost less depreciation and provision for impairment. Depreciation is calculated by reference to their costs on the straight-line basis over their estimated useful lives as follows :Buildings Office equipment Furniture and fixture Tools and equipment Vehicles
20, 30 years 3, 5 years 5, 10 years 5 years 5 years
No depreciation is provided for land, land improvements and construction in progress. Depreciation is included in determining earnings. The Company recognise impairment loss if events or changes in circumstances indicate the carrying value may not be recoverable. 2.6
Assets awaiting sale Assets awaiting sale represent idle property, plant and equipment and are stated at the lower of net book value or net realisable value. Loss on impairment is included in determining earnings.
Borrowing costs Interest costs on borrowings incurred during the construction periods are capitlised as part of the cost of buildings. Capitalisation ceases when the buildings are ready for their intended use.
Assets under finance lease and hire purchase agreements The Company records vehicles under finance lease/hire purchase agreements as assets and liabilities in an amount equal to the fair value of the leased/hire purchase assets at the inception of the agreements. The present value of the minimum payments under the agreement is calculated using the interest rates stipulated in the agreement. Interest expenses are recorded to each period over the term of the agreements based on the outstanding balance of the liabilities under finance lease/hire purchase agreements during each period.
Foreign currencies Foreign currency transactions incurred during the year are translated into Baht at the exchange rates ruling on the transaction dates. Assets and liabilities dominated in foreign currency outstanding on the balance sheets date are translated into Baht at the exchange rates ruling on the balance sheets date, with the exception of those covered by forward exchange contracts, which are translated at the contracted rates. Exchange gain and loss are included in determining earnings.
Provident fund The Company and its employees have jointly registered a provident fund scheme under the Provident Fund Act B.E. 2530. The Fund is contributed to by both the employees and the Company at the rate of 4 to 15 percent of the employee s basic salary based on their year of service. The fund will be paid to the employees upon termination in accordance with the rules of the Fund. The fund is a part of AIA Permpoon Registered Provident Fund which is managed by American International Assurance Company Limited.
Basic earnings per share Basic earnings per share is determined by dividing net earnings for the year by the weighted average number of ordinary shares in issue during the year, after adjusting the number of ordinary shares in proportion to the change in the par value of the ordinary shares from Baht 100 each to Baht 1 each as discussed in Note 11 to the financial statements as if the change in the number of shares had occurred since the beginning of the year. The previous year s reported earnings per share is also restated for comparative purposes.
Use of accounting estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates of certain accounting transactions, affecting amounts reported in the financial statements and notes thereto. Subsequent actual results may differ from these estimates.
3. DEPOSITS WITH BANKS PLACED AS COLLATERAL As at 31 December 2005, the Company has pledged fixed deposits with banks totaling Baht 80.2 million (2004 : Baht 129.2 million) as collateral to secure bank guarantees issued on behalf of the Company and credit facilities obtained from financial institutions.
4. TRADE ACCOUNTS RECEIVABLE An aging analysis of the trade accounts receivable as at 31 December 2005 and 2004 were as follows:-
Current receivables Past due receivables Not exceeding 1 month Over 1 month to 3 months Over 3 months to 6 months Over 6 months to 12 months Over 12 months Total trade accounts receivable
Less : Allowance for doubtful accounts Trade accounts receivable - net
(Unit : Baht) 2004 180,207,877
106,062,621 21,655,034 17,496,149 5,220,361 2,477,279 469,709,142
119,351,781 27,304,798 5,156,932 24,539 540,810 332,586,737
2005 163,456,953 2,810,712 166,267,665 (1,811,000) (627,000) 163,829,665
(Unit : Baht) 2004 200,701,397 8,419,020 209,120,417 (3,000,000) 206,120,417
Finished goods Goods in transit Less : Provision for diminution in value of inventories Provision for obsolete inventories Inventories - net
6. PROPERTY, PLANT AND EQUIPMENT (Unit : Baht)
Land and land improvements
Office equipment, furniture and fixture
Tools and equipment
Construction in progress
At cost : 31 December 2004 Purchases / Transfers in Disposals / Transfers out
103,617,739 346,585 (10,389,740)
12,279,993 1,078,391 (3,382,117)
2,987,294 2,750 (295,454)
23,829,463 4,179,631 (202,800)
31 December 2005
7,800 388,785 (396,585)
197,187,569 5,996,142 (16,416,929)
Accumulated depreciation : 31 December 2004 Depreciation for the year Transfers in/(out) Disposals
7,749,786 3,556,992 (3,299,676) -
6,199,619 1,602,580 (1,779,642) (1,307,651)
938,389 480,935 (139,482) (155,633)
7,302,817 4,996,646 (7,552)
22,190,611 10,637,153 (5,218,800) (1,470,836)
31 December 2005
Net book value : 31 December 2005
31 December 2004
Depreciation charge included in earnings statements for the year ended 31 December 2005 2004
174,996,958 10,637,153 9,988,638
As at 31 December 2005, the Company has vehicles acquired under finance lease and hire purchase agreements, with net book values amounting to approximately Baht 14.9 million. The ownership of these vehicles is to be transferred to the Company upon completion of payment. Moreover, certain assets of the Company with the gross carrying amount of Baht 1.5 million are the fully depreciated assets but are still in use. The Company has mortgaged its land and the construction thereon, to secure credit facilities obtained from banks.
ASSETS AWAITING SALE 2005 Idle property, plant and equipment (cost less accumulated depreciation up to the last day of usage) Less : Provision for impairment Assets awaiting sale - net
8,897,203 (1,237,203) 7,660,000
(Unit : Baht) 2004 -
During the current year, the Company ceased using certain property, plant and equipment located at its former office in its operations. As a result, the Company has presented these assets separately under the caption of assets awaiting sale in the balance sheet. They are stated at net value, after deducting provision for diminution in value set aside on the basis of the assets appraisal value, as appraised by an independent appraiser on 30 December 2005. 8.
BANK OVERDRAFTS AND SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONS
Bank overdrafts Trust receipts Promissory notes Total bank overdrafts and short-term loans from financial institutions
2005 10,862,202 261,318,517
(Unit : Baht) 2004 34,610,334 62,572,475 294,699,522
As at 31 December 2005, the Company has bank overdrafts and short-term loans facilities with 7 financial institutions (2004 : 5 financial institutions) of totaling Baht 1,107.6 million (2004 : Baht 690.6 million). Such credit facilities have been secured by the pledge/mortgage of the Company s fixed deposits with banks, land and the construction thereon, and joint guarantees from the Company s directors. The short-term loan facilities agreement with one bank contains normal covenants such as that the debt (total liability less deposits under lien with banks) to equity ratio is not to exceed 4:1 at all times.
LIABILITIES UNDER FINANCE LEASE AND HIRE PURCHASE AGREEMENTS Liabilities under finance lease and hire purchase agreements as at 31 December 2005 and 2004 of the Company are comprised of :-
Liabilities under finance lease and hire purchase agreements Less : Deferred interest Less : Current portion Liabilities under finance lease and hire purchase agreements net of current portion
(Unit : Baht) 2004
(627,956) 8,184,761 (4,205,605)
(707,231) 10,682,670 (5,108,548)
10. LONG-TERM LOAN Long-term loan as at 31 December 2005 and 2004 consist of the following :2005
(Unit : Baht) 2004
Baht loan from a bank, carrying interest at a certain percentage per annum in 2004, MLR less a certain percentage per annum in 2005 and 2006, and MLR per annum in 2007 onwards, repayable in monthly installment of Baht 1.43 million as from February 2005 to January 2012
Less : Current portion (17,160,000) (15,730,000) Long-term loan - net of current portion 87,110,000 104,270,000 As at 31 December 2005, the bank loan has been secured by the pledge/mortgage of the Company s fixed deposits with the bank, land and the construction thereon, and joint guarantees from the Company s directors.
11. SHARE CAPITAL On 30 November 2004 and 17 December 2004, the Extraordinary General Meeting of the Company s shareholders approved the increase of the Company s registered capital by Baht 100 million (1 million ordinary shares of Baht 100 each) to a total of Baht 155 million (1.55 million ordinary shares of Baht 100 each), through the issue of 550,000 additional shares for offer to the existing shareholders at a price of Baht 100 per share. On 21 December 2004, the Company received the payment of all share capital increment from the shareholders and registered the increase of its registered capital with the Ministry of Commerce on 27 December 2004. On 1 March 2005, the Annual General Meeting of the Company s shareholders approved the change in the status of the Company to a public company and also approved the reduction of the par value of the ordinary shares from Baht 100 each to Baht 1 each. As a result, the Company s registered and paid-up share capital is Baht 155 million, comprising 155 million ordinary shares of Baht 1 each. The Annual General Meeting of the Company s shareholders also approved an increase in the Company s registered share capital from Baht 155 million (155 million ordinary shares of Baht 1 each) to Baht 200 million (200 million ordinary shares of Baht 1 each), through the issuance of 45 million additional ordinary shares of Baht 1 each. The Company registered the increase in its registered share capital and the change in the par value of its shares with the Ministry of Commerce on 17 March 2005. On 7 June 2005, the Extraordinary General Meeting of the Company s shareholders approved the 45 million new additional ordinary shares to be allotted as follows :- 1.1 million ordinary shares are to be offered to employees, directors and managements at a price of Baht 1.03 each - 43.9 million ordinary shares are to be offered to the public On 14 June 2005, the Company received the payment of the additional shares offered to the employees, directors and managements, and registered the increase in its paid-up capital with the Ministry of Commerce on 28 June 2005. On 11 November 2005, the Board of Directors approved the sale of the additional shares offered to the public, at a price of Baht 2.34 per share. On 24 November 2005, the Company received the payment of this share capital increment. All expenses related to this share offering are presented as a deduction from the share premium. The Company registered the increase in its paid-up capital with the Ministry of Commerce on 28 November 2005.
12. STATUTORY RESERVE According to the Public Limited Companies Act B.E.2535, the Company is required to set aside a statutory reserve at least five percent of its net profit for the year, after deducting accumulated deficit brought forward (if any), until such reserve reaches ten percent of the registered share capital. The statutory reserve could not be used for dividend payment. 13. DIVIDEND On 30 November 2004, the Extraordinary General Meeting of the Company s shareholders approved the payment of an interim dividend of Baht 78 per share, a total of Baht 78 million. This dividend was paid in December 2004. 14. NUMBER OF EMPLOYEES AND RELATED EXPENSES Number of employees at the end of year (Persons) Personnel expenses for the year (Thousand Baht)
2005 85 45,386
2004 75 41,856
15. DIRECTORS REMUNERATION Directors remuneration represents the benefits paid to directors, exclusive of salaries, bonus and related benefit payable to directors who hold executive positions. 16. CORPORATE INCOME TAX Corporate income tax for the year was calculated based on net earnings for the year after adding back nondeductible expenses and provisions and deducting the provisions which are regarded as tax-deductible expenses for tax computation purpose. 17. PROVIDENT FUND During the year 2005, approximately Baht 3.4 million has been contributed to the fund by the Company (2004 : Baht 2.4 million). 18. RELATED PARTY TRANSACTIONS During the years ended 31 December 2005 and 2004, the Company had significant business transactions with its related companies (related by way of having shareholders and authorised directors being members of the same family as that of the Company s directors). Such transactions, which were concluded on the terms and basis stated in the relevant agreements, or as agreed by the Company and those companies in the ordinary course of business of the Company, are summarised below:-
(Unit : Million Baht) Transactions between the Company and related companies Sales of finished goods Purchase of finished goods Construction of building and purchase of equipment Service expenses
29.9 0.1 0.6
109.5 7.6 1.9
Market price Market price Contract price Market price
As at 31 December 2005 and 2004, the outstanding balances of the transactions are shown under the caption of trade accounts receivable and accrued expenses in the balance sheet. Details are as follows:2005
(Unit : Baht) 2004
T rade accountsreceivable related com panies
Integrity Plastics Company Limited Vector Tech Solution Company Limited New Modern Super Pack Company Limited Total trade accounts receivable related companies
532,809 133,750 (168,525) 498,034
1,185,079 576,730 1,761,809
Accrued expensesrelated com panies
Vector Tech Solution Company Limited Total accrued expenses - related companies 19. FINANCIAL INSTRUMENTS
A financial instrument is any contract that gives rise to both a financial assets of one entity and a financial liabilities or equity instrument of another entity. Financial risk management and policies The Company does not hold or issue derivative instruments for speculative or trading purposes.
Interest rate risk The interest rate risk is the risk that future movements in market interest rates will affect the results of the Company s operations and its cash flows. The Company s exposure to interest rate risk relates primarily to its deposits with banks and loans from financial institution. The Company does not use derivative financial instruments to hedge such risk. (The details of loans are set out in Note 8 and 10 to the financial statements). Foreign currency risk The Company s exposure to foreign currency risk relates primarily to its trade accounts payable which is denominated in foreign currencies. The Company primarily utilise forward exchange contracts to hedge such financial liabilities, when they consider it appropriate. Forward exchange contracts outstanding on 31 December 2005 are summarised below:Foreign currency
Forward exchange contract
Forward rate (Baht per unit of foreign currency) USD 1,211,980 40.825 - 41.410 As at 31 December 2005, the Company s foreign currency-denominated trade accounts payable amounting to approximately USD 0.2 million was unhedged. Credit risk The Company is exposed to credit risk primarily with respect to trade accounts receivable. However, since the Company has a prudent credit policy and grants credit only to creditworthy customers which have a stable position and have had a long relationship with the Company, the Company does not anticipate material losses from its debt collection. Fair value Since the majority of financial assets and liabilities are short-term, and the interest rate of long-term loan vary in line with market rates, the management believes that the fair value of the Company s financial assets and liabilities does not materially differ from their carrying value. 20. FINANCIAL INFORMATION BY SEGMENT The operations of the Company involve two industry segments, the wholesale of plastic and plastic-related products and the wholesale of computer monitors to both domestic and export markets, but the main activity is the wholesale of plastic and plastic-related products to domestic markets (more than 98 percent of total sales). For this reason, financial information has not been presented by either industry segment or geographic area.
21. BANK GUARANTEES As at 31 December 2005, there were outstanding bank guarantees issued on behalf of the Company of approximately Baht 92 million (2004 : Baht 102 million) in respect of certain performance bonds as required in the normal course of business of the Company. 22. COMMITMENTS As at 31 December 2005, the Company has the following commitments :22.1 A commitment under building rental agreement which the Company is to pay the rental fee amounting to approximately Baht 2.2 million in 2006. 22.2 Commitments under lease agreements for vehicles which the Company is to pay the rental fee amounting to approximately Baht 1.4 million from 2006 to 2008. 22.3 A commitment under trade credit insurance policy with an insurance company in which the Company is to pay the minimum insurance premium amounting to approximately Baht 2.8 million from 2006 to 2007. 22.4 Commitments under lease agreements for office equipment which the Company is to pay the rental fee amounting to approximately Baht 1.0 million from 2006 to 2008. 23. CORRECTION OF ERROR In September 2004, the Company performed stocktaking and found that some inventories were missing. This was because of error and incompleteness in the previous accounting systems. Although such difference should be classified as error in prior periods and the Company should retroactively adjust this transaction, in actual practice, such adjustment would take a certain period of time and the cost incurred would be very expensive. Therefore, the Company classified the difference as error found in the year 2004, adjusted the error and included this transaction as cost of sales amounting to approximately Baht 41.8 million in the statements of earnings for the third quarter of 2004 (the amount was calculated using the unit cost of September 2004 multiplied by the volumes of missing inventories). However, during the third quarter of 2004, the Company reversed the provision for obsolete inventories amounting to Baht 15 million, which was recorded in 2003, as cost of sales. Consequently, the net effect of the above transactions, which was included in cost of sales for the third quarter of 2004, totaled approximately Baht 26.8 million. In this regard, there was a significant increase in cost price in September 2004. If the Company used the unit cost during the early 2004 in the adjustment calculation, the net effect would decrease by approximately Baht 8.4 million. Therefore, without the cost price effect, the net effect of the above adjustment would be Baht 18.4 million.
24. SUBSEQUENT EVENT On 22 February 2006, the Board of Directors passed a resolution to propose the payment of a dividend in respect of the 2005 earnings of Baht 0.14 per share, or a total of Baht 28 million. Such dividend will be paid and recorded after being approved by the Annual General Meeting of the Company s shareholders. 25. PRESENTATION The presentation of the financial statements has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 14 September 2001, issued under the Accounting Act B.E. 2543. Certain amounts in the financial statements for year ended 31 December 2004 have been reclassified to conform to the current year classifications, with no effect on previously net earnings or shareholders' equity. 26. APPROVAL OF FINANCIAL STATEMENTS These financial statements were authorised for issue by the Board of Directors on 22 February 2006.