Page 1

Padaeng Industry Public Company Limited

Annual Report 2005


Contents

Message from the Board of Directors

3

Highlights for the year 2005

4

Key figures and ratios

5

The year in review

6

• Industry conditions • Operations • Mineral resources and exploration Sustainable development

14

• Environment and safety • Overview of the environmental performance indicators • Environment in Mae Sot - update • Personnel • Community relations Management report, analysis of financial status and operating performance Risk factors

20 22

Board of Directors, Strategic Committee, Audit Committee and Nomination and Remuneration Committee 2005

25

Audit Committee’s statement

31

Financial statements

32

Corporate governance

67

Shareholders and management

70


Vision

PDI will be a low cost producer of high quality zinc, able to compete in its markets with world class producers, providing valued services to customers and giving great importance to the environment.

Background --->

Padaeng Industry was established on April 10, 1981 with the original registered capital of Bt20 million invested by the Thai public (Ministry of Finance) and private investors, and a private company from Belgium. The company has since engaged in mining and refining businesses with the objective to produce zinc metal and zinc alloys to serve the demand of our customers. The company’s mine is located in Mae Sot district, Tak province, the zinc smelter is located in Muang district of the same province and the roaster plant is located in Rayong. The company has also engaged in zinc ore exploration programs both in Thailand and in neighbouring countries. The company was listed on the Stock Exchange of Thailand on July 21, 1987 and was converted into a public company limited on February 4, 1994. In 1996, the company increased its registered capital to Bt 2,260 million, which was fully paid in 2000.


Annual Report 2005 Padaeng Industry 2 Public Company Limited


Annual Report 2005 Padaeng Industry 3 Public Company Limited

Message from the Board of Directors

--->

We are very pleased to announce the results of 2005

case around Mae Sot that proved to originate from natural

as the best of the last 11 years. Supported by the world zinc

sources as well as from human activities. In line with its

price, the company achieved a spectacular improvement that

commitment to the community, the company assumed an

translates now into a very healthy balance sheet.

active role in the process of defining the extent of the problem

The zinc price evolution surprised particularly in

and to stimulate the cooperation of the numerous concerned

the last quarter of the year and generated confusion and

parties in order to develop to a well understood and shared

perturbations both on the supply and demand sides. It pushed

action plan. The company has set up a Fund to support

the income of the company drastically upwards, even if the

community that will promote and assist projects to improve

locked-in forward price has somewhat limited the upside.

the living conditions of the population.

Nevertheless, the positive impact on the income obliterated

Throughout the year, the company also proceeded

several negative factors that would otherwise have impacted

with plans for continuous improvement in terms of safety and

on the profitability of the company, namely the reduction of the

the environment. After the Rayong plant was recertified in

import duty of zinc to 5.5% and the steady increase of

2004, Tak and Mae Sot have also entered the ISO 14001

electricity and diesel prices.

certification process.

Another reason for satisfaction is that after several

On behalf of the Board, we wish to express our

years of delay, exploration licences have been granted at last

appreciation to our employees commitment. We equally value

and the company has embarked on a substantial exploration

the continued support of our customers, shareholders and

program aimed at finding additional local resources. In the

financial institutions. We will continue to conduct our business

current supply conditions of imported concentrates, it is a

with good corporate governance to achieve the best possible

company priority to increase the share of local sources.

results to fully justify your trust and belief in us.

On the environmental side, many resources and intense efforts were devoted to help progress in the cadmium

Mr. Bernard Tonnon Managing Director

Mr. Pinit Vongmasa Chief Executive Officer

Mr. Arsa Sarasin Chairman


Annual Report 2005 Padaeng Industry 4 Public Company Limited

Highlights for the year 2005

--->

Average zinc price in 2005 rose significantly to US$1,382 per mt, a 32% increase compared to the previous year

--->

The company turnover amounted Bt6,151 million, an increase of Bt477 million or 8.4% despite lower sale volumes and reduction of import duty from 7.75 to 5.5%

--->

Net profit of Bt561 million compared with a 2004 net profit of Bt217 million

--->

Net earnings-per-share of Bt2.48 versus Bt0.96 in 2004

--->

Debt-to-equity ratio down to 0.47

--->

YTD ROCE of 16.4%

--->

Total sales of 102,034 mt

--->

Metal production of 101,186 mt

--->

Several exploration licences have been granted in year 2005

--->

Outstanding award for good performance metallurgical plant and mining from the Department of Primary Industries and Mines, Ministry of Industry

--->

Outstanding energy conservation award from Ministry of Energy

--->

Outstanding award for labour relations and welfare from the Ministry of Labour

--->

Outstanding award of Safety and Occupational Health at a national level from the Ministry of Labour

--->

Calcine plant succeeded in zero accidents for seven consecutive years


Annual Report 2005 Padaeng Industry 5 Public Company Limited

Key figures and ratios

Consolidated

End of year

2005

2004

2003

Total revenues

(Million Baht)

6,180

5,715

4,932

Gross profit

(Million Baht)

1,297

769

430

Net profit (loss)

(Million Baht)

561

217

0.0

(Baht)

2.48

0.96

0.00

%

9.1

3.8

0.0

Total assets

(Million Baht)

5,172

4,905

5,125

Total liabilities

(Million Baht)

1,655

1,903

2,290

Shareholders’ equity

(Million Baht)

3,517

3,002

2,835

Return on assets

%

11.1

4.3

0.0

Return on equity

%

16.0

7.1

0.0

Return on capital employed

%

16.4

6.7

1.0

(Times)

0.47

0.61

0.81

Book value per share

(Baht)

15.56

13.29

12.54

Dividend per share

(Baht)

1.10

0.40

-

Net profit (loss) per share Net profit (loss) per total revenue

Debt-to-equity ratio


Annual Report 2005 Padaeng Industry 6 Public Company Limited

The year in review

F igure 1

--->

Industry conditions

LME zinc prices and stock levels during the past 10 years

Zinc demand in the world market inc reas ed, especially in C hina, which reverted to being a net importer

Metric ton

US $

from its pos ition as a net exporter. Moreover, increas ing competition and s hortage of c onc entrates forc ed s ome

800, 000

refineries to reduce or end their production, increasing the gap

700, 000

between production and demand. Falling stocks and increased interest from investment funds drove an increase in the zinc

1, 500 1, 350

600, 000 1, 200

500, 000

price by US $334 per metric ton (pmt) up to US $1,382 in 2005. B y the end of fourth quarter in 2005, the price of zinc metal jumped to US $1,915 pmt, hitting a 16-year record high. It was

300, 000

foreseen that the world demand for zinc metal would reach

200, 000

10.69 million metric tons (mt), a slight increase of 2.3% from

100, 000

2004, mainly in C hina, India and S outh K orea. The demand is

0

expected to increase 4.0% to 11.12 million mt in 2006, based

1, 050

400, 000

900 750 0 1996 1997 1998 1999 2000

on sustained growth in demand from C hina.

2001 2002 2003 2004 2005

LME stock

On the local market, zinc-related industries slowed

Average LME price

down amid a gloomy domestic economy. Total zinc metal consumption was limited to 114,000 mt, an 9.4% decrease from 2004 due to the following factors: - C ontinuously rising oil price; - R ising production costs not translated immediately into selling prices; - Imports of finished products from C hina competing with our customersÕproducts; - C oncerns surrounding bird flu and violence in the south; and,

- R educ ed buying power of c ons umers after droughts and floods. T he negative fac tors mentioned led to higher production costs in various industries while shaking consumer confidence. However, zinc consumption in some sectors such as zinc oxide and auto parts rose significantly in spite of the sluggish economy.


Annual Report 2005 Padaeng Industry 7 Public Company Limited

F igure 2

F igure 3

Zinc consumption in Thailand from 2001-2005

Sales volume of zinc metal and alloys from 2001-2005 Metric ton 120, 000

Metric ton 130, 000

100, 000 80, 000

120, 000 60, 000 40, 000

90, 000

20, 000 60, 000

0 2001

2002

2003

2004

2005

2001

2002

2003

2004

2005

Zinc metal (S HG) Zinc alloy

Zinc sales volumes Domestic sales accounted for 87,137 mt, a 10% drop

Korea are sold in Thailand. This trend should intensify following Government-supported reduction of import duties.

from 2004. The export ratio was kept at about 15% of total

These reductions have severely hit the company

sales, although the total exports of 14,897 mt decreased 11.5%

income and will unfortunately outlast the historical peak of the

compared to 2004 as higher-margin sales were given priority.

zinc price. However, to cope effectively with these new threats,

C hina, Taiwan and Asean countries, such as Indonesia and

the company relies on:

Vietnam, were the main export markets.

- its product quality meeting world-class standards; - the speedy delivery that reduces customersテ不tock

Competition in the industry C ompeting imports originating in Australia, C hina and

burden; and, - its efficient technical services.


Annual Report 2005 Padaeng Industry 8 Public Company Limited

F igure 4

F igure 5

Sales value of zinc metal and alloys from 2001-2005

Sales volume of zinc metal from 2001-2005

Million B aht

Metric ton

7, 000

120, 000

6, 000

100, 000

5, 000 80, 000 4, 000 60, 000 3, 000 40, 000

2, 000

20, 000

1, 000

0

0 2001

Operations Flow chart

2002

2003

2004

2005

2001

2002

2003

2004

2005

Zinc metal (S HG)

Domestic sales

Zinc alloy

E xport sales


Annual Report 2005 Padaeng Industry 9 Public Company Limited

Mining During 2005, the Mae Sot mine produced a total of

mine closures and capacity reductions. Secondly, freight costs remained at very high levels.

175,000 dmt of zinc silicate ore at an average zinc content of

Some materials were also purchased locally.

27%, to feed the Smelter in Tak province. The production was

Despite the company’s policy to procure more of such

noticeably higher than in 2004, in particular in the first half of

“regional� materials, they represented in 2005 less than 10%

the year where advantage could be taken of a particularly

of the equivalent total zinc metal production, mainly because

optimal mine-front geology.

of the non-performance of a major contract with a third-party project in Vietnam. Imported sulphides could only partially

Raw materials

compensate for the lacking materials.

As primary source of raw material, the Smelter in Tak received ore and concentrate from the Mae Sot mine for

Calcine plant At the Calcine plant in Rayong province, zinc sulphide

197,276 dmt containing about 51,012 mt of zinc metal. In addition, 92,781 dmt of concentrates, mainly imported sulphides were purchased. Those concentrates are usually zinc sulphide concentrates from South America and Australia, which are

concentrate is converted into calcine prior to being sent to the refinery in Tak for further processing, together with zinc silicate ore to produce zinc metal. A by-product of the calcine process is 98.5% sulphuric acid.

delivered to the Roaster in Rayong. All sulphides delivered in 2005 were imported. In 2005, the cost of zinc sulphide concentrates raised rapidly because of 2 factors. Firstly, the availability of zinc concentrate declined globally due to the increasing number of

Production in mt

2005

2004

2003

Calcine

74,605

98,773

98,743

Acid

78,401

101,994

98,063


Annual Report 2005 Padaeng Industry 10 Public Company Limited

Calcine production was 24% lower than in 2004, in

on Zn and acidity at appropriate frequency so that the

line with the Tak refinery’s reduced consumption. While lower

cell-room operators can control the electrolysis process

demand was alleviated by the world’s increasing shortage of concentrates, the latter materialised in irregular supply and blending issues, which affected the running of the plant.

steadily and efficiently. - Installation of an additional cathode-stripping machine which allows for a faster stripping process. - Modification of the existing SO2 scrubber at the acid

Zinc smelter

plant to facilitate the recycling of SO2 from tail gases

In 2005, Tak zinc refinery produced 99,708 mt of

back into the acid-production process.

cathode zinc, 88.1% of total capacity (113,200 mt). A total of 7,044 mt of zinc ingot was imported for the production of

Value-added products

value-added zinc alloy products.

- Installation of a small copper cathode production facility

The production of zinc metal products could be split

for re-treating the copper cake generated in the Zn purification process. The line will be operational in 2006

as follows:

and will produce about 500 mt in Cu cathodes a year - SHG

60,866 mt

(60.1 % of total products)

- Zinc alloys

40,320 mt

(39.9 % of total products)

Production improvement & modification - Installation of an on-line analyzer at the main cell house. The equipment can provide real-time analysis results

until consumption of the stock falls to 180 mt per year.


Annual Report 2005 Padaeng Industry 11 Public Company Limited

Mineral resources and exploration

The mineral resources can be converted to reserves of about 3,237,000 dmt at 12.9% zinc. At the current pace of

Padaeng mineral resources

extraction at about 400,000 dmt of ore per year, Padaeng

1. Padaeng mine

Mine has sufficient reserves to sustain mining operations for

As of December 31, 2005, the total mineral resource of the Padaeng Mine at Mae Sot was 3,863,000 dmt at 12.3%

about 8 years. 2. Hualon deposit

or about 475,000 mt of zinc metal. The mineral resource

The company has reapplied for its lease on Hualon

was calculated using a cut-off grade of 3% zinc as shown in

(Mining lease application number 1/2547), an area separate

Table 1.

from but close to the Padaeng Mine. On December 31, 2005, total mineral resources at the Hualon Mine in Mae Sot were

Table 1: Mineral resources at Padaeng mine on December

295,000 dmt at 6.0% zinc (zinc-sulphide). A secondary

31, 2005

zinc resource of 44,000 dmt at 7.1% zinc has also been demarcated.

Category Low grade ore stockpile

Dry metric tons

Zinc grade

(dmt)

(%)

Exploration

440,000

7.1

•

Mae Sot area 1. Existing mining leases

Measured resource

1,446,000

13.1

Indicated resource

1,636,000

12.8

During 2005, no new exploration within the existing

341,000

13.0

pit has been carried out. The existing leases still

3,863,000

12.3

Inferred resource Total


Annual Report 2005 Padaeng Industry 12 Public Company Limited

represent excellent potential for additional zinc silicate

of the Copper deposits at PUT 1 and PUT 2. At

ore extraction, so additional exploratory drilling will be

PUT 1, current resources are 80 million dmt at 0.5%

conducted in 2006. Reserves will be reassessed after

Copper at a cut-off grade of 0.1% . At PUT 2, current

the drilling.

resources run at 32 million dmt at 0.4% Copper at

2. Special prospecting licences (SPL)

a 0.1% Copper cut-off.

Exploration within the SPL2-3/2548 during 2005 has

In June 2004, the Thai Cabinet approved to ease

progressed only technically. None of the targets

the 1A watershed for the feasibility study and issued

warrant the resource-definition stage.

“in-principle” approval for the mining application subject to Environmental Impact Assessment terms

Regional exploration

to be defined by the Ministry of Natural Resources

1. Zinc exploration projects outside Mae Sot

and Environment. However, the file has not

After more than two years of indecision, several SPL’s

progressed any further in 2005.

were finally approved during the last year. Exploration

2. Lao People’s Democratic Republic

within the SPL’s outside Mae Sot has progressed,

Mining activities have stopped at the Kaiso Zinc

though most projects remain at the target-testing

Mine concession and rehabilitation continues.

stage.

Padaeng (Laos) Company Limited has applied for

1. Loei copper project

a new exploration area covering 2,000 square

PDI’s affiliate, Puthep Company Limited, has joined Pan Australian Resources of Australia in development

kilometres for five years.


Annual Report 2005 Padaeng Industry 13 Public Company Limited

Table 2: Summary of mining and exploration tenements Licence number

Area (Ha)

Date granted

Expiry date

20780/13286

Type* ML

14

18/10/1982

17/10/2007

20781/13285

ML

11

18/10/1982

17/10/2007

20782/13287

ML

14

18/10/1982

17/10/2007

25697/14388

ML

1

30/04/1991

29//04/2008

30769/15525

ML

39

11/07/2002

10/07/2017

1/2547

MLA

48

Pending

1/2548

SPL

1,042

1/04/2005

2/2548

SPL

787

20/06/2005

19/06/2010

3/2548

SPL

1,328

20/06/2005

19/06/2010

4/2548

SPL

1,520

20/06/2005

19/06/2010

5/2548

SPL

1,485

20/06/2005

19/06/2010

6/2548

SPL

662

20/06/2005

19/06/2010

7/2548

SPL

1524

20/06/2005

19/06/2010

8/2548

SPL

1569

20/06/2005

19/06/2010

18/2548

SPL

162

31/10/2005

30/10/2010

1/2546

SPLA

1,474

Pending

4/2547

SPLA

1,600

Pending

5/2547

SPLA

1,600

Pending

6/2547

SPLA

1,600

Pending

7/2547

SPLA

1,600

Pending

8/2547

SPLA

1,600

Pending

9/2547

SPLA

1,523

Pending

10/2547

SPLA

1,492

Pending

1/2548

SPLA

480

Pending

2/2548

SPLA

1,576

Pending

3/2548

SPLA

1,548

Pending

* Note:

ML

30/03/2010

= Mining lease

MLA = Mining lease application at Hualon, applied since March 2004 SPL

= Special prospecting licence

SPLA = Special prospecting licence application


Annual Report 2005 Padaeng Industry 14 Public Company Limited

Sustainable development

--->

Environment and safety • The mining industry has been subjected to negative

• The smelter completed several small investments aimed at improving its environmental stewardship.

press in recent years, with even remote cases generating

• The Rayong Plant has upgraded its environment

bad perceptions in the public mind. Therefore, the

management system to the new version of ISO14001

company is following a strict policy of legal compliance

:2004 and managed a zero-accident result for the

and complete transparency towards the authorities and

seventh year in a row.

stakeholders. The company has invited government

• The mine developed its water management

agencies, financial institutions, media and local villagers

programme further (investing more than Bt12 million

to visit the facilities. Consequently, the overall impression

in 2005) and demonstrated its water systems were fully

of our activities in people’s minds has greatly improved.

compliant throughout the rainy season. Water monitoring

• The company also aims at developing best-practice

was performed on a shift basis, and pond levels were

management systems adapted to its specific situation

also under tight controls. Staff took regular samples

as a mining and smelting company. In 2005, management

from the creek, which consistently showed that water

has focused on consolidation of environmental

flowing upstream from the mine already contained Zn

management and has submitted all sites to an external

and Cd minerals, and that the rainwater released from

compliance audit. Conclusions and suggestions are

the mine area was of a better quality than the natural

now being considered and implemented in the more

flow. In order to further improve the system, the mine

general frame of the ongoing ISO14001 certification

will build another pond in 2006 at a budget of Bt15

process for both the Tak Smelter and the Mae Sot Mine

million.

(The Rayong Plant is already certified).


Annual Report 2005 Padaeng Industry 15 Public Company Limited

1

2

3

4

5

7

6

8

1. Villagers visit the company’s facilities and environmemtal measures • 2. The Mae Sot mine’s water management system • 3.-4. Staff regularly take water samples from a creek • 5.-6. Vetiver planting replenishes land after mining and prevents soil erosion • 7. Signs promote safety awareness at work • 8. A sound meter measures ambient noise in work areas


Annual Report 2005 Padaeng Industry 16 Public Company Limited

Overview of the environmental performance indicators (EPI) Indicator

Measurement

Zinc Smelter

Unit

2005

2004

Calcine Plant 2003

2005

2004

2003

INPUT INDICATORS Total materials used

metric tons / y

290,839

305,247

310,270

84,899

111,463

109,377

gigajoule

1,741,779

1,966,306

1,973,251

16,593

19,546

20,721

1,000 m / y

2,024

1,638

1,597

173

215

204

wet metric tons / y

572,598

600,779

635,688

370

571

464

%

99.72

100

99.997

95.3

91.8

83

1,000 m3/ y

503

180

786

39

54

41

Total energy consumption

3

Total water consumption OUTPUT INDICATORS Produced waste Total waste produced Disposal Emissions to water Total emitted process waters Total emitted metals Total metal toxic unit load

kg / y

76

43

117

57

84

83

toxic unit kg

4,071

1,566

6,620

1,149

1,493

1,493

kg / y

1,117

1,362

612

11

18

127 145

Emissions to air Total emitted metals Total metal toxic unit load

toxic unit kg

1,131

1,375

623

126

55

metric tons / y

390

344

280

105

181

165

103 acid equivalents

13,122

11,726

11,644

3,356

5,779

5,257

Total emitted SOx Total acid deposition emissions

ENVIRONMENTAL PERFORMANCE INDICATORS Compliance & incidents Violations

number

1

2

1

1

1

0

Reported incidents

number

0

0

0

1

0

0

Landfills Landfill covered / landscaped in reporting year %

100

100

100

0

0

0

Cumulative landfill covered / landscaped

%

44

38.25

32.42

0

0

0

Complaints about noise

number

0

0

0

0

0

0

Complaints about odour

number

0

0

1

1

0

0

Total nuisance complaints

number

0

0

1

1

0

0

SOCIETAL INDICATORS

FINANCIAL INDICATORS Environmental investment and operating costs Total environmental investment costs

(million baht)

29

52

29

7.6

0.9

0

Total environmental operating costs

(million baht)

108

92

80

11.1

8.9

12

Indicator

Measurement Unit

Zinc Smelter 2005

2004

Calcine Plant 2003

2005

2004

Mae Sot Mine 2003

2005

2004

2003

SAFETY INDICATORS Frequency rate

accidents / million working hours

0.83

3.36

2.54

0

0

0

1.62

3.36

2.36

Severity rate

lost days / million working hours

29.80

24.35

24.55

0

0

0

8.11

6.71

7.07

number

567

559

542

92

90

93

286

283

284

No of employees na : not available

0 : measured or calculated


Annual Report 2005 Padaeng Industry 17 Public Company Limited

1

2

1. Trial project of flowering plants 2.-3. Trial project of oil palm and rubber plants 3

Environment in Mae Sot-update

• The company has been supportive and active in all

• Studies performed in 2005 concluded that contamination

discussions. Padaeng has provided assistance to all

in the Mae Tao Basin had emanated from natural

bodies, has delivered to the task force any technical

sources and human activities of all kinds that aggravate

information required, such as geological and

the natural process, including industry, deforestation,

geographical mapping and resources for sampling and

forestry firing, farming and other settlement.

analysis. Also, the company has continued to help the

• In the meantime, the authorities have banned farmers

community through donations of medical equipment

from growing edible crops in the cadmium-contaminated

(bone-quality detector) and financial support for the

area.

non-edible-plant cultivation project.

• Due to widespread concerns voiced by many sections

• In the area of public health, the company has sponsored

of society, all parties (authorities, local villagers,

a joint project with King Chulalongkorn Memorial and

community leaders and the private sector) accepted a

Mae Sot Hospitals to study the amount of cadmium

proposal to regroup under the Tak Governor to hasten

uptake from food and water by the local risk group.

the decision process. This is a major achievement and

• Padaeng also established the Mae Tao Basin Community

a critical step in the mediation process.

Development fund, which is being used exclusively

The task force is now preparing a plan to:

to benefit the community around the mine. The fund

- Rehabilitate Cadmium contaminated areas

supports various development projects and assists the

- Control and prevent pollution

community wherever and whenever it is needed.

- Promote economic development that emphasises quality of life and health - Make the Mae Tao management more efficient


Annual Report 2005 Padaeng Industry 18 Public Company Limited

Outstanding award for labour relations and welfare from the Ministry of Labour

Personnel

Community relations

The company realises that human resources

To make a positive contribution to a better and a

development is a key factor determining business growth,

stronger Thai society, from the smallest hamlet to the country

particularly in an era of unsurpassed globalisation. Therefore,

as a whole, has been Padaeng’s unwavering commitment since

Padaeng provides full support for employees occupying

our business started. Every year, the company provides

positions at all levels to build on their work and management

children and youth with opportunities for higher education by

skill sets, and as a result, their performance and work quality,

granting more than 500 academic scholarships, and donating

by continually providing a wide range of training activities and

educational materials and funding for school lunch projects.

development programmes. These are crucial to aligning

Furthermore, the company embarks on activities that improve

goals between and among management and staff, and to

people’s quality of life in the community in areas such as

implementing good corporate governance.

professional, health and local traditions. The company

The company’s total workforce is built on 766

recognises that advancing the quality of life within our society

employees. The majority of employees live in Tak province and

is very important objective that needs co-operation from

the northern region of the country, where the smelter plant

everyone. As a member of the community, the company

and mine are located. The average age of employees is 39

assumes this responsibility as a vital part of its ongoing agenda.

years, while the average service tenure is 13 years. Employee

Here are some details of our efforts:

turnover rate equalled 3.13%.


Annual Report 2005 Padaeng Industry 19 Public Company Limited

1. Renovating school’s playground 2.-3. Donating medical equipments

1

2

3

Education

• As members of the “Padaeng Volunteer Group”, company

• Awarded annual academic scholarships, school

employees worked alongside local villagers to renovate

uniforms and learning materials to students in Tak

school buildings, playgrounds and public utilities at

province

many schools in Tak province

• Donated computer packages for learning and 1

The teams:

satellite television set to 6 impoverished schools in Tak

- Paved concrete roadways

province

- Built multi-purpose fields and reconditioned their

• Funded school lunch projects at 10 local schools in Tak province, the finance of which helped plant vegetable gardens and breed chickens safely

edges - Renovated a pavilion • Financed sporting events at local schools and within the community to encourage exercise and physical

Public health and welfare

fitness among young people and local villagers

• Donated electrocardiogram heart monitoring

• Supported programmes to train villagers in the

equipment to the King Taksin Maharaj Hospital in Tak

making of decorative items from local textiles at Pa

province

Dae village in Mae Sot

• Donated a pesticide fogging machine to the Primary

• Supported and promoted Buddhism by making

Public Health Centre at North Mae Ku village in Mae

charitable contributions and participating in merit-

Sot district, to prevent malaria in the area

making ceremonies with local villagers


Annual Report 2005 Padaeng Industry 20 Public Company Limited

Management report, analysis of financial status and operating performance

--->

Compared to the previous year, 2005 was marked by a limited and irregular supply of concentrates and a weak

electricity costs for the smelter could be lowered thanks to increased off-peak production.

and unsteady demand on the local market. Fortunately, those

Total costs of sales and services amounted to

negative impacts were more than compensated by continuously

Bt4,849 million (Bt4,853 million consolidated) or a decrease

rising Zinc prices, an effect positively sustained by the higher

of Bt51 million from 2004.

production from the fully owned and operated mine.

Sales and Administrative expenses increased mainly

The consolidated net profit for the year more than

due to the superior number of days offline-primarily at the

doubled to reach Bt561 million, compared to Bt217 million in

calcine plant-and higher transportation and delivery expenses.

2004. Equity grew 15% and the company’s borrowing position

Some additional charges were booked at that level:

improved drastically leading to a very healthy balance sheet.

Sales revenue

Downward adjustment in the accounting value of the prepayment made on a failed project in Vietnam

Despite lower sales volume, company turnover,

supported by increasing zinc prices, increased 8.5% to Bt6,138

Non-recoverable capitalised exploration expenses Allocation of a fund for the Mae Sot Community Development

million (Bt6,151 million consolidated). The rise was nevertheless

Employee termination and retirement benefits

restricted by strategic hedges and the reduction of duty from

Following above mentioned items, selling and

7.75% to 5.5%. The proportion of domestic sales (85%) and

administrative expenses increased by Bt143 million

of high-value alloys (40%) remained similar to the previous year.

to Bt502 million (Bt499 million consolidated)

Sulphuric acid sales generated revenue of Bt150 million, a 20% drop compared to last year, weighed down by

Pushed mostly by higher sales price, royalty expenses increased by Bt60 million to Bt226 million

less activity in calcine production. The company operating profit totalled Bt567 million

Profitability

from Bt247 million one year earlier. Following the reduction of

Despite the higher zinc prices, the cost of goods

financial charges, the net profit of the company for the year

decreased thanks to increased consumption of ore and

amounts to Bt554 million, or Bt332 million higher than 2004.

concentrate from our own mine and fewer metal imports. Also,

The consolidated profit after attribution to minorities was Bt561

the impact of the several increases of Ft charges on the

million or Bt2.48 per share.


Annual Report 2005 Padaeng Industry 21 Public Company Limited

parties decreased Bt120 million to Bt902 million. With long-term loans limited to Bt80 million, a major shift of Bt468 million from the long-term portion to the current portion was seen. During the final quarter, the company updated its accounting policy to recognise provisions for termination and retirement benefits in accordance with Thai Labour Laws. The effect of the update has been accounted for retroactively by restating the 2004 balance sheet with an additional opening provision of Bt51 million. Total closing provisions stated here, with provisions for restoration expenses, are up Bt22 million to Bt101 million. Shareholder’s equity The net equity of the company progressed Bt463 million to Bt3,471 million. After apportionment to the legal reserve of Bt28 million, retained earnings total Bt571 million. The Board of Directors will propose a dividend of Bt1.10 per share for a total of Bt248.6 million to the shareholders. Cash flow & capital expenditure Cash flow from operations before changes in operating assets and liabilities rose to Bt999 million (consolidated Bt999 million), from Bt626 million in 2004. On top of depreciation expenses (Bt336 million), main items reintegrated into the cash flow were the charges mentioned at the level of Selling & Administrative expenses. Total net cash provided by operating activities was Bt643 million (consolidated Bt649 million), from Bt672 million

Balance sheet Assets & liabilities

a year earlier. The company paid Bt187 million for fixed-asset

The company assets totalled Bt5,293 million; a 6%

investments, mining intangibles and capitalised exploration

or Bt302 million on-year increase. This reflects an improved

expenses, amounting to a Bt44 million decrease compared to

cash and deposits position (+Bt364 million) and value added

the figure for 2004. An additional Bt42 million was invested by

to inventories (+Bt221 million). Property, plant and equipment

a related company in exploration at the Puthep copper project,

show net depreciation of Bt178 million. Consolidated assets

pushing the total consolidated investments to Bt230 million.

include Bt42 million of additional capitalised exploration expenses for the Puthep copper project.

Subsidiaries

Liabilities dropped Bt161 million to Bt1,822 million,

PNA (Puthep) Proprietary Limited of Australia

Current trade liabilities fell Bt185 million to Bt229 million

obtained through a capital increase a 20.66% ownership

on-year. Total borrowings from financial institutions and related

interest in Puthep Company Limited.


Annual Report 2005 Padaeng Industry 22 Public Company Limited

Risk factors Protecting our competitiveness Until recently, the Thai government imposed an import duty of 10% on zinc, protecting the company to some degree from foreign competitors, who have a lower cost base than exists in Thailand. However, further government implementation of current market liberalisation measures in this sector reduced the import duty on zinc metal to 5.5% in 2005, and to 3.25% in 2006, which will lead to a significant reduction in the company’s revenue. This measure will decrease our protection against better-protected Asian producers. Nevertheless, the company holds the ambition to maintain its position as leader in the domestic market and to

--->

The company makes every effort to manage its

continue expanding its market share in the region. It will

businesses efficiently so as to protect itself from internal and

therefore take advantage of its own raw material sources, and

external exposure to risk, which may affect operations or

customer-driven marketing.

financial status. Some initiatives include reducing investment in activities of subsidiaries, which are non-core businesses,

Risk involving investments in subsidiaries The company has one significant investment in a

leading to greater financial stability for the company.

subsidiary under a Participation Agreement with an Australian

Changes in zinc prices and exchange rates

company. As in 2004, the project has been idle for the whole

Any fluctuations in zinc prices - as quoted daily on

year waiting for a breakthrough in the approval process

the London Metal Exchange - and exchange rates, would be

for land access to conduct further ore sampling prior to a

key areas of exposure for the company, having a real impact

feasibility study. The study must determine if the resources

on the company’s revenues, as both purchase and selling

are economically recoverable.

prices are linked to the LME price and are expressed in US currency. Such variations in the price of zinc on the LME and

Risk involving mining licences The company is applying for the extension of the

the US$/Baht exchange rate are considered the main structural risks for the company. In order to reduce the exposure to such factors, the company is hedging purchases and sales in US dollars. The company has also since the fourth quarter of

existing mining leases that will expire in October 2007. Considering the lengthy procedure, uncertainty around the timely approval of such leases forms the basis of risk in this area.

2004 implemented a policy of reducing its exposure to zinc-price fluctuations by strategic hedging. While these hedging

Environmental risks

transactions will prevent the company from taking advantage

In case of industrial pollution, clean up costs or

of any further upside on the tonnage hedged, the company

personal class action liability are potential risks. The company

will, in any case, lock-in an acceptable return for its shareholders

is monitoring its emissions very closely and has a system of

and be protected against future drops in the price of zinc

water management in place to ensure no contamination is

and/or a strengthening of the Thai Baht. This strategy is

generated by the mining operations.

non-speculative through forward sales of metal on the London

The company has also proceeded with an external

Metal Exchange. As the transactions are conducted in US

audit of compliance to H&S regulations and is actively

dollars, the underlying currency risk is covered by simultaneous

implementing improvements to reach best management

forward sales of US dollars.

practices.


Annual Report 2005 Padaeng Industry 23 Public Company Limited

Revenue structure

The company’s total revenue for the consolidated financial statement can be classified by types of product (2003 - 2005) 2005

% of

2004

% of

2003

% of

Revenue

Total

Revenue

Total

Revenue

Total

Million Baht

revenue

Million Baht

revenue

Million Baht

revenue

Zinc metal (SHG)

3,356.2

54.3

3,133.1

54.8

2,720.7

55.2

Zinc alloy

2,570.4

41.6

2,262.7

39.6

1,822.6

37.0

Sulphuric acid

149.8

2.4

187.9

3.3

100.7

2.0

Other revenue

103.3

1.7

131.3

2.3

288.2

5.9

6,179.7

100.0

5,715.0

100.0

4,932.1

100.0

Total revenue

Policy for investment in subsidiary companies To be consistent with the company’s business goals, our policy is to support only those subsidiaries related to core businesses, such as joint ventures in exploration and mining projects. Therefore, the company limits involvement in activities not directly related to our core businesses. Such subsidiaries will continue to operate their daily businesses independently from the group. The current proportion of total investment in subsidiaries represents 6.8% of the group’s total assets.


Annual Report 2005 Padaeng Industry 24 Public Company Limited

Overall business operations of its subsidiary companies and affiliated companies

The company holds shares in the following groups of companies: Subsidiary companies

Nature of business

Paid up

Shareholding

capital

%

(Baht) 1. Padaeng Properties Co., Ltd.

- Land development and real estate with the Industrial Estate Authority of Thailand

2. Puthep Co., Ltd.

100.00

183,575,800

79.34

5,000,000

100.00

- Prospecting and mining for copper and other base metals in EPL No. 3, Loei province

3. Padaeng Industry (Laos) Co., Ltd.

80,000,000

- Prospecting and mining for base metals in Laos

(US$ 200,000)

4. Padaeng International Mining Co., Ltd.

- Investing in exploration and mine development project in Vietnam

5. Sila Enterprise Co., Ltd.

- Marketing of aggregate limestone

6. Padaeng Poongsan Metals Co., Ltd.

- Manufacturing of copper and brass sheet/strip

100,000

100.00

9,000,000

55.00

250,000,000

61.98

200,000,000

100.00

coin blank and case cup N.B. Ceased operation since February 1999 and in process of liquidation and is not consolidated into the financial statement Other affiliated companies 1. South East Asia Metals Co., Ltd.

- Distributing base metals and other by-products

Future projects Striving for constant improvement, the company invests essentially in projects that reduce costs or increase efficiency. But, in the current context of raw materials shortages and the soaring costs of foreign concentrates, the firm will also be placing a high priority on developing the local potential for mining and diversification projects in the Asean region, such as joint ventures in mining and exploration.


Annual Report 2005 Padaeng Industry 25 Public Company Limited

Board of Directors, Strategic Committee, Audit Committee and Nomination and Remuneration Committee 2005

Mr. Arsa Sarasin Chairman Education • B.A. (Business Administration), Boston University, U.S.A. Training • Director Accreditation Program (DAP), Thai Institute of Directors Association Current position • Chairman, Padaeng Industry Public Company Limited • Chairman, Thai Asia Pacific Brewery Company Limited • Chairman, Siam Makro Public Company Limited • Chairman, Amata City Company Limited • Chairman of Advisors, Thai-Lao Association for Friendship • The Honorable Chairman of the TOA Group of Companies • Director Thai Pure Drinks Company Limited • Director Thai Tapioca Development Institute • Director and Member of the Governance and Nomination Committee, The Siam Cement Public Company Limited • Independent Director and Audit Committee Member of Charoen Pokphand Foods Public Company Limited • Advisor to the Board of Directors of Bangkok Bank Public Company Limited Working experience • Chief Executive Officer, Padaeng Industry Public Company Limited • Director-General, Department of Political Affairs, Ministry of Foreign Affairs • Director-General, Department of Economic Affairs, Ministry of Foreign Affairs • Thai Ambassador to Belgium & Chief of Mission to the European Community • Thai Ambassador to the U.S.A • The Permanent Secretary of the Ministry of Foreign Affairs • The Minister of Foreign Affairs • Chairman of the Asia-Europe Business Forum II • Vice Chairman of the Board of Directors, Bangkok Bank Public Company Limited • Member of the Board of Director, Vinythai Public Company Limited • Chairman of the Thai-Laos Association

Mr. Paron Israsena Independent Director, Audit Committee Member and The Nomination and Remuneration Committee Chairman Education • Master of Science (M.E.), Massachusetts Institute of Technology (MIT), U.S.A. Training • The Board’s Role in Setting Effective Compensation Policy, Thai Institute of Directors Association • The Audit Committee...The Expectation Increase and The Responsibility Expansion, Stock Exchange of Thailand • Director Accreditation Program (DAP), Class 4/2003, Stock Exchange of Thailand and Thai Institute of Directors Association Current position • Director, Member of the Audit Committee and Chairman, The Governance and Nomination Committee, Siam Cement Public Company Limited • Director and Chairman of the Audit Committee, Summakorn Public Company Limited • Chairman, Shin Satellite Public Company Limited • Member, Thailand Industrial Standard Institute, Ministry of Industry • Director, The National Competitiveness Development Board • Academic Director, The National Economic and Social Development Board Working experience • President, Siam Cement Public Company Limited • Chairman, The Federation of Thai Industries • Senator and Member of National Legislative Assembly • Chairman, Committee on Economics & Industry of the Senate Academic Director, Thailand Productivity Institute

Mr. Kosit Panpiemras Director Education • M.A. (Economics), University of Maryland, U.S.A. Current position • Director and Executive Chairman, Bangkok Bank Public Company Limited • Member of the National Economic and Social Development Board Working experience • The Minister of Finance • The Minister of Industry


Annual Report 2005 Padaeng Industry 26 Public Company Limited

Mr. Vinai Vamvanij Independent Director, Audit Committee Chairman and Strategic Committee Member Education • Professional Accountancy, CPA, Australia Training • Thai Institute of Directors Association - DCP Refresher Course, Directors Certification Program 2001, Chairman 2000, Creating a Strategic Direction Current position • Independent Director and Audit Committee, Christiani & Neilsen (Thai) Public Company Limited • Director, Continental Petrochemical (Thailand) Co. Ltd. Working experience • Executive Director, Thonburi Automotive Assembly Plant Company Limited • President, Continental Petrochemical (Thailand) Co. Ltd. • Chief Executive Officer, Aquastar Group

Mr. Aswin Kongsiri Independent Director, Audit Committee Member and The Nomination and Remuneration Member Education • B.A. (Hons.) in Philosophy, Politics and Economics, Oxford University, England Training • Banff School of Advanced Management, Alberta, Canada • The National Defend Course for the Joint StatePrivate Sectors, Class 6, National Defend College • Directors Certification Program, Class 11/2001, Thai Institute of Directors Association (IOD) and Australian Institute of Company Directors (AICO) • Chairman 2000, Class 5/2001, Thai Institute of Directors Association (IOD) and Australian Institute of Company Directors (AICO) Current position • Chairman of the Executive Committee, Electricity Generating Public Company Limited • Director, Chairman of Risk Management Committee and Chairman of Nominating Committee, Bangkok Aviation Fuel Services Public Company Limited • Director and Executive Director, Krung Thai Bank Public Company Limited • Director and Audit Committee Member, Tris Rating Company Limited • Director, Thai-German Ceramic Industry Public Company Limited • Director and Chairman of Audit Committee, The Oriental Hotel (Thailand) Public Company Limited • Director, Audit Committee Member and Chairman of Nominating and Remuneration Committee, Thai Reinsurance Public Company Limited • Director, Audit Committee Member, Risk Management Committee and Chairman of Nominating and Remuneration Committee, Muang Thai Life Assurance Company Limited • Director, Ch. Karnchang Public Company Limited Working experience • President, The Industrial Finance Corporation of Thailand

Mrs. Sirinuj Bisonyabut Director Education • M.B.A., Thammasart University • B. Sc., Chulalongkorn University • Certificate of Senior Executive of Office of the Civil Service Committee (Class 28) • Certificate of National Defense College (Class 44) • Certificate of King Prajadhipok’s Institute (Class 3) Training • Directors Certification Program, Class 56/2005 • Thai Institute of Directors Association Current position • Chief of Inspector, Ministry of Finance • Board of CAT Telecom Public Company Limited Working experience • Deputy Director-General, Excise Department

Mr. Karel Vinck Director Education • Master’s Degree in Electrical and Mechanical Engineering, Katholieke Universiteit Leuven (KUL), Belgium • Master of Business Administration, Cornell University, U.S.A. Current position • Chairman, Umicore, Belgium • Chairman, Cumerio, Belgium Working experience • Chief Executive Officer, Eternit, Belgium • Chief Executive Officer, Bekaert Group, Zwevegem • Chief Executive Officer, Union Miniere, Belgium • Chief Executive Officer, NMBS/SNCB (Belgian Railways), Belgium


Annual Report 2005 Padaeng Industry 27 Public Company Limited

Dr. Jean-Luc Deleersnyder Director, Strategic Committee Member and The Nomination and Remuneration Member Education • Master’s Degree in Electromechanical Engineering and Ph.D. in Operations Management, Rijksuniversiteit Gent. (RUG), Belgium Current position • Executive Vice President (Zinc), Umicore, Belgium Working experience • Corporate Vice-President HR & Strategy, Umicore, Belgium • Management Consultant, McKinsey & Company, Belgium

Mr. Pinit Vongmasa Director, Chief Executive Officer and Strategic Committee Member Education • B.Eng. (Electrical Engineering), Chulalongkorn University • M.S. (Ind. Mgt.), Oklahoma State University, U.S.A. • Advance Management Program, Harvard University, U.S.A. Training • Directors Certification Program 2001, Thai Institute of Directors Association Current position • Chief Executive Officer, Padaeng Industry Public Company Limited Working experience • President and Chief Executive Officer, Padaeng Industry Public Company Limited • President, The Siam Kubota Industry Co., Ltd. • Managing Director, The CPAC Concrete Products Company Limited

Mr. Bernard Tonnon Director, Managing Director and Strategic Committee Member Education • Master’s Degree in Mining Engineering, Universite Libre de Bruxelles, Belgium Training • Directors Certification Program, Class 57/2005 • Thai Institute of Directors Association Current position • Managing Director, Padaeng Industry Public Company Limited Working experience • Business Line Manager, Umicore, Angleur, Belgium • Head of Activity Zn Wire & Dust, Umicore, Angleur, Belgium

Board of Directors (Resigned during the year) 1. Mr. Michel Moser Director Education • Master’s Degree in Commercial Engineering, Ecole de Commerce Solvay (ULB), Belgium • Post graduat en commerce international, Ecole de Commerce Solvay (ULB), Belgium • Finance for Executives, INSEAD, Fontainebleau Current position • Member of the Umicore Executive Committee, Belgium • Vice President Corporate Development, Umicore, Belgium Working experience • Managing Director, Sogemin Metals Ltd., London, England • Chief Financial Officer, Sogem s.a., Brussels, Belgium • Managing Director, Sogem Far East Ltd., Hong Kong • Executive Vice-President, Sogem Afrimet Inc., New York, U.S.A.


Annual Report 2005 Padaeng Industry 28 Public Company Limited

Products and their uses --->

Padaeng Industry products comprise special high-grade (SHG) zinc and value-added zinc alloys. Their main applications are described as follows:

SHG Zinc: is used predominantly in the field of corrosion protection, whereby steel is galvanised with a zinc coating on its surface. Subsequently, the zinc layer protects the steel substrate in two ways. First, when the coating is intact, zinc forms a barrier covering steel to protect it from corrosive media and hence provides barrier protection for the steel surface. Second, having a lower electrochemical potential than steel, zinc becomes a “sacrificial anode”, while the steel assumes the role of a cathode. When the coating is damaged, the zinc is sacrificed as it corrodes preferentially to the steel. This interaction is called “cathodic protection”. Galvanising thereby offers a surface better protection than painting, which provides only barrier protection. Galvanised steel will offer long-term and maintenance-free corrosion resistance to structures.


Annual Report 2005 Padaeng Industry 29 Public Company Limited

Zinc alloys: Pressure die-casting zinc alloys are used to produce near-finished cast products for the construction, automotive, toy and audiovisual appliances industries. In zinc-aluminum-magnesium alloys, aluminum helps to increase tensile and creep strength as well as toughness and castability, while magnesium provides protection against inter-granular corrosion.

Zinc die-casting products: require a minimum of finishing steps and may be further subjected to painting and baking and electroplating.


Annual Report 2005 Padaeng Industry 30 Public Company Limited

Other applications of zinc

Zinc chemicals: While special grades of zinc powder are used in alkaline batteries and button cells, zinc oxide finds application in vulcanisation, ceramics, paints, animal feed and even in medical ointments and sun blocks.

Brasses: By combining zinc and copper in different concentrations, various grades of brass are obtained for varied applications, including bathroom accessories, valves, decorative statues and brass tubes.


Annual Report 2005 Padaeng Industry 31 Public Company Limited

Audit Committeeûs statement

Dear shareholders,

--->

The Audit Committee comprises three independent

continue striving for improvement of the internal control system

directors, Mr. Vinai Vamvanij as Chairman, Mr. Aswin Kongsiri,

with the aim to cut down redundant work procedures, to boost

and Mr. Paron Israsena.

efficiency & effectiveness and to identify weaknesses in the system and implementation of solutions to eliminate them.

In 2005, the Audit Committee has met quarterly with the external auditor, the internal auditor and the management

The Audit Committee has recommended to the Board

to review the consolidated and company financial statements

of Directors to propose to the shareholders to reappoint

to ensure conformity with the regulations of SEC, SET and

Certified Public Accountants of PricewaterhouseCoopers

with the generally accepted accounting principles of Thailand

ABAS Ltd. to conduct the audit of financial statements for the

before submission to the board. The Audit Committee has

company and its subsidiaries for the year 2006.

also held meetings with the internal auditor and management to assess the company’s internal control and risk management with emphasis on such issues as connected party transactions and proper disclosure of information in such areas, for transparency and good corporate governance. In this respect, the Audit Committee is of the opinion that the company’s operations have been appropriate and has found no significant weaknesses in its business conduct. The committee’s focus for 2006 will be on the overall

(Mr. Vinai Vamvanij)

risk management of the company and devising an early

Chairman of the Audit Committee

warning risk system. At the same time the company will

23 February 2006


Annual Report 2005 Padaeng Industry 32 Public Company Limited

Financial statements

Padaeng Industry Public Company Limited


Annual Report 2005 Padaeng Industry 33 Public Company Limited

AuditorĂťs report

To the shareholders and the Board of Directors of Padaeng Industry Public Company Limited

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 audit provide a

--->

reasonable basis for my opinion. I have audited the accompanying consolidated and company balance sheets of Padaeng Industry Public Company

In my opinion, the consolidated and company financial

Limited and its subsidiaries and of Padaeng Industry Public

statements referred to above present fairly, in all material

Company Limited as at 31 December 2005 and the related

respects, the consolidated and company financial position as

consolidated and company statements of income, changes in

at 31 December 2005 and the consolidated and company

shareholders’ equity and cash flows for the year ended 31

results of operations, and cash flows for the years then ended

December 2005. The company’s management is responsible

of Padaeng Industry Public Company Limited and its subsidiaries

for the correctness and completeness of information in these

and of Padaeng Industry Public Company Limited in accordance

financial statements. My responsibility is to issue a report on

with generally accepted accounting principles.

these financial statements based on my audit. The consolidated and company financial statements for the year ended 31 December 2004 of Padaeng Industry Public Company Limited and its subsidiaries and of Padaeng Industry Public Company Limited, were audited in accordance with generally accepted auditing standards by another auditor in the same firm as myself whose report dated 4 February 2005, expressed an unqualified opinion on those statements. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I

NATTAPORN PHAN-UDOM Certified Public Accountant (Thailand) No. 3430 PricewaterhouseCoopers ABAS Limited

plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,

Bangkok 23 February 2006


Annual Report 2005 Padaeng Industry 34 Public Company Limited Padaeng Industry Public Company Limited and Subsidiaries As at 31 December 2005 and 2004

Balance sheets Consolidated

Notes

Company

2005 Baht

Restated 2004 Baht

2005 Baht

Restated 2004 Baht

Assets Current assets Cash and cash equivalents

3

600,395,622

441,677,104

568,843,310

325,879,711

Deposit

4

121,314,837

-

121,314,837

-

5

241,744,163

235,095,679

235,211,850

228,096,854

27 (iv)

51,345,585

22,578,804

54,143,601

23,168,198

Trade accounts receivable-net - other parties - related parties Short-term loans and advances to related parties-net Inventories-net

27 (v) 6

Value added tax receivable Other current assets

7

Total current assets

-

-

1,848,263

10,934,667

1,528,612,615

1,307,118,547

1,528,612,615

1,307,060,824

49,265,663

95,302,256

46,152,125

95,271,095

18,373,230

86,148,573

17,860,532

85,873,927

2,611,051,715

2,187,920,963

2,573,987,133

2,076,285,276

-

-

361,933,979

358,934,364

Non-current assets Investment in subsidiaries-net

8, 27 (i)

Property, plant and equipment-net

9

2,248,200,005

2,427,094,495

2,251,245,733

2,429,905,770

Exploration and acquisition costs

10

306,219,748

277,032,327

100,130,543

113,114,836

Other non-current assets

11

6,057,527

12,983,853

6,002,527

12,928,853

Total non-current assets

2,560,477,280

2,717,110,675

2,719,312,782

2,914,883,823

Total assets

5,171,528,995

4,905,031,638

5,293,299,915

4,991,169,099

Director......................................... (Pinit Vongmasa)

The notes to the consolidated and company financial statements on pages 43 to 66 are integral part of these financial statements.


Annual Report 2005 Padaeng Industry 35 Public Company Limited Padaeng Industry Public Company Limited and Subsidiaries As at 31 December 2005 and 2004

Balance sheets (Continued) Consolidated

Notes

Company

2005 Baht

Restated 2004 Baht

2005 Baht

Restated 2004 Baht

175,719,606

283,819,241

175,719,606

283,819,241

223,154,352

412,997,555

222,610,236

412,984,821

5,964,825

813,981

6,028,377

923,691

Liabilities and shareholders’ equity Current liabilities Loans from financial institutions

12

Trade accounts payable - other parties - related parties

27 (iv)

Current portion of payable for land use compensation Current portion of long-term loans

14

-

11,061,405

-

11,061,405

15

467,500,000

102,500,000

467,500,000

102,500,000

Current portion of hire purchase payable

1,919,873

1,893,022

1,919,873

1,893,022

Advance from related party

27 (vi)

2,951,967

-

-

-

Short-term loans from related parties

27 (vii)

-

-

180,000,000

90,000,000

1,187,096

1,864,844

1,187,096

1,864,844

-

-

166,438

157,808

Accrued electricity expenses

160,437,037

186,941,582

160,437,037

186,941,582

Royalty payable

177,847,780

122,108,581

177,847,780

122,108,581

Accrued interest expenses - other parties - related parties

Other current liabilities

27 (vii)

13

Total current liabilities

252,014,186

145,142,433

244,099,250

135,879,514

1,468,696,722

1,269,142,644

1,637,515,693

1,350,134,509

Non-current liabilities Long-term loans

15

80,000,000

547,500,000

80,000,000

547,500,000

Provisions for restoration expense

16

42,257,061

21,543,364

40,748,738

21,543,364

17

60,804,526

57,814,474

60,804,526

57,814,474

Provision for employee termination/retiarement benefits Others non-current liabilities Total non-current liabilities Total liabilities

3,095,445

6,546,437

3,095,445

6,546,437

186,157,032

633,404,275

184,648,709

633,404,275

1,654,853,754

1,902,546,919

1,822,164,402

1,983,538,784

The notes to the consolidated and company financial statements on pages 43 to 66 are integral part of these financial statements.


Annual Report 2005 Padaeng Industry 36 Public Company Limited Padaeng Industry Public Company Limited and Subsidiaries As at 31 December 2005 and 2004

Balance sheets (Continued) Consolidated

Notes

Company

2005 Baht

Restated 2004 Baht

2005 Baht

Restated 2004 Baht

2,260,000,000

2,260,000,000

2,260,000,000

2,260,000,000

2,260,000,000

2,260,000,000

2,260,000,000

2,260,000,000

602,413,600

602,413,600

602,413,600

602,413,600

Shareholders’ equity Share capital Authorized share capital 226,000,000 ordinary shares of Baht 10 each

18

Issued and paid-up share capital 226,000,000 ordinary shares of Baht 10 each, fully paid Premium on share capital Retained earnings (deficit) Appropriated-legal reserve

37,486,820

9,791,560

37,486,820

9,791,560

569,685,839

126,436,817

571,235,093

135,425,155

3,469,586,259

2,998,641,977

3,471,135,513

3,007,630,315

47,088,982

3,842,742

-

-

Total shareholders’ equity

3,516,675,241

3,002,484,719

3,471,135,513

3,007,630,315

Total liabilities and shareholders’ equity

5,171,528,995

4,905,031,638

5,293,299,915

4,991,169,099

Unappropriated retained earnings (deficit) Total company shareholders’ equity Minority interest

19

The notes to the consolidated and company financial statements on pages 43 to 66 are integral part of these financial statements.


Annual Report 2005 Padaeng Industry 37 Public Company Limited Padaeng Industry Public Company Limited and Subsidiaries For the years ended 31 December 2005 and 2004

Statements of income Consolidated

Notes Revenues from sales and services

29

Cost of sales and services Gross profit Selling and administrative expenses

20

Royalty expenses Profit from sales and services Other revenues Gain (loss) on exchange rate Inventory revaluation gain Impairment expenses

6 9,20

Directors’ remuneration Other expenses Profit from operations

Company

2005 Baht

Restated 2004 Baht

2005 Baht

Restated 2004 Baht

6,150,696,571

5,673,841,586

6,138,518,881

5,663,727,552

(4,853,391,642)

(4,904,783,584)

(4,849,355,713)

(4,900,113,919)

1,297,304,929

769,058,002

1,289,163,168

763,613,633

(499,040,318)

(366,323,475)

(501,696,002)

(358,879,842)

(226,449,236)

(166,579,883)

(226,449,236)

(166,579,883)

571,815,375

236,154,644

561,017,930

238,153,908

17,401,202

18,854,234

15,682,629

15,808,313

1,525,217

18,252,913

1,443,449

18,296,547

-

207,492

-

207,492

(5,581,400)

(21,218,479)

(5,581,400)

(21,218,479)

(4,522,063)

(3,593,913)

(4,522,063)

(3,593,913)

(386,990)

(447,831)

(386,990)

(447,831)

580,251,341

248,209,060

567,653,555

247,206,037

-

-

2,926,173

1,840,717

580,251,341

248,209,060

570,579,728

249,046,754

(16,256,469)

(26,525,533)

(16,674,530)

(27,417,205)

Share of gain (loss) from subsidiaries on equity method

8

Profit before finance costs and income tax Finance costs-net

22

Income tax Profit before minorities (Profit) attributable to minorities Net profit for the year

(1,576,065)

(3,672,852)

-

-

562,418,807

218,010,675

553,905,198

221,629,549

(1,074,525)

(983,984)

-

-

561,344,282

217,026,691

553,905,198

221,629,549

2.48

0.96

2.45

0.98

Earnings per share Net profit for the year

23

The notes to the consolidated and company financial statements on pages 43 to 66 are integral part of these financial statements.


Annual Report 2005 Padaeng Industry 38 Public Company Limited Padaeng Industry Public Company Limited and Subsidiaries For the years ended 31 December 2005 and 2004

Statements of changes in shareholders没 equity

Consolidated Issued and

Premium

paid up

Retained earnings (deficit)

on share capital Appropriated

share capital Notes

Beginning balance 2005 Retrospective adjustments

Appropriated legal reserve Increase in share capital

interest

Baht

Baht

Total

legal reserve

Baht

Baht

Baht

Baht

2,260,000,000

602,413,600

9,791,560

177,051,291

3,842,742

3,053,099,193

-

-

-

(50,614,474)

-

(50,614,474)

17

Beginning balance after correction

Minority

Unappropriated

2,260,000,000

602,413,600

9,791,560

126,436,817

3,842,742

3,002,484,719

19

-

-

27,695,260

(27,695,260)

-

-

27 (i)

-

-

-

-

42,171,715

42,171,715

-

-

-

561,344,282

1,074,525

562,418,807

Net profit Dividends paid Ending balance 2005

-

-

-

(90,400,000)

-

(90,400,000)

2,260,000,000

602,413,600

37,486,820

569,685,839

47,088,982

3,516,675,241

Consolidated Issued and

Premium

paid up

Retained earnings (deficit)

on share capital Appropriated

share capital

Retrospective adjustments

17

Beginning balance after correction Appropriated legal reserve Net profit Ending balance 2004 (Restated)

19

interest

Baht

Baht

Total

legal reserve

Baht

Beginning balance 2004

Minority

Unappropriated

Baht

Baht

Baht

2,260,000,000

602,413,600

-

(30,183,840)

2,858,758

2,835,088,518

-

-

-

(50,614,474)

-

(50,614,474)

2,260,000,000

602,413,600

-

(80,798,314)

2,858,758

2,784,474,044

-

-

9,791,560

(9,791,560)

-

-

-

-

-

217,026,691

983,984

218,010,675

2,260,000,000

602,413,600

9,791,560

126,436,817

3,842,742

3,002,484,719

The notes to the consolidated and company financial statements on pages 43 to 66 are integral part of these financial statements.


Annual Report 2005 Padaeng Industry 39 Public Company Limited Padaeng Industry Public Company Limited and Subsidiaries For the years ended 31 December 2005 and 2004

Statements of changes in shareholders没 equity (Continued)

Company Issued and

Premium

paid up

Retained earnings (deficit)

on share capital Appropriated

share capital Notes

Beginning balance 2005 Retrospective adjustments

Appropriated legal reserve

Baht

Baht

Total

Baht

Baht

Baht

2,260,000,000

602,413,600

9,791,560

186,039,629

-

3,058,244,789

-

-

-

(50,614,474)

-

(50,614,474)

2,260,000,000

602,413,600

9,791,560

135,425,155

-

3,007,630,315

-

-

27,695,260

(27,695,260)

-

-

-

553,905,198

-

553,905,198

(90,400,000)

-

(90,400,000)

571,235,093

-

3,471,135,513

19

Net profit

-

-

Dividends paid

-

-

2,260,000,000

602,413,600

Ending balance 2005

interest

legal reserve

Baht

17

Beginning balance after correction

Minority

Unappropriated

37,486,820

Company Issued and

Premium

paid up

Retained earnings (deficit)

on share capital Appropriated

share capital

Beginning balance 2004 Retrospective adjustments

17

Beginning balance after correction Appropriated legal reserve Net profit Ending balance 2004 (Restated)

19

Unappropriated

Minority interest

Total

legal reserve

Baht

Baht

2,260,000,000

602,413,600

Baht

Baht Baht

-

Baht

(25,798,360)

-

2,836,615,240

-

-

-

(50,614,474)

-

(50,614,474)

2,260,000,000

602,413,600

-

(76,412,834)

-

2,786,000,766

-

-

9,791,560

(9,791,560)

-

-

-

-

-

221,629,549

-

221,629,549

2,260,000,000

602,413,600

9,791,560

135,425,155

-

3,007,630,315

The notes to the consolidated and company financial statements on pages 43 to 66 are integral part of these financial statements.


Annual Report 2005 Padaeng Industry 40 Public Company Limited Padaeng Industry Public Company Limited and Subsidiaries For the years ended 31 December 2005 and 2004

Statements of cash flows Consolidated

Company

2005 Baht

Restated 2004 Baht

2005 Baht

Restated 2004 Baht

561,344,282

217,026,691

553,905,198

221,629,549

-

-

(2,926,173)

(1,840,717)

(1,719,257)

(512,421)

-

-

-

-

11,390,294

-

6

(4,858,811)

5,500,088

(4,858,811)

5,500,088

7

39,635,411

-

39,635,411

-

17

2,990,052

7,200,000

2,990,052

7,200,000

2,403,690

600,000

2,403,690

600,000

-

(207,492)

-

(207,492)

(1,531,119)

(1,531,119)

(1,531,119)

(1,531,119)

-

440,540

-

224,485

336,267,102

337,724,334

336,017,392

337,453,734

(1,758,594)

929,243

(1,758,594)

929,243

5,581,400

21,218,479

5,581,400

21,218,479

Notes Cash flows from operating activities Net profit Items to reconcile net income to net cash: Share of (gain) loss from subsidiaries

8

Allowance for doubtful debts-other trade accounts receivable (reversal) - other parties - related parties

27 (v)

Allowance for shortage, slow-moving and obsolete stocks (reversal) Allowance for unrecoverable advances to supplier Provision for employee termination/ retirement benefits Provision for annual leave Inventory revaluation (gain) Amortization of deferred gain on hire purchase Withholding tax written-off Depreciation expenses

9

(Gain) loss on disposal of property, plant and equipment Impairment expenses

9

Property, plant and equipment written-off

9

Other assets written-off Other assets write-down (reversal) Other assets amortization expenses Provisions for restoration expense

16

248,029

1,941,652

248,029

1,941,652

6,213,470

38,512,731

6,213,470

38,512,731

6,000,000

(10,877,389)

6,000,000

(10,877,389)

12,901,884

12,619,575

12,901,884

12,619,575

34,657,914

10,702,136

33,149,591

10,702,136

Unrealized foreign currency exchange (gain) loss

(717,226)

(17,824,250)

(717,226)

(17,824,250)

Minority interest in net profit of subsidiaries

1,074,525

983,984

-

-

998,732,752

624,446,782

998,644,488

626,250,705

Cash flows from operations before changes in operating assets and liabilities

The notes to the consolidated and company financial statements on pages 43 to 66 are integral part of these financial statements.


Annual Report 2005 Padaeng Industry 41 Public Company Limited Padaeng Industry Public Company Limited and Subsidiaries For the years ended 31 December 2005 and 2004

Statements of cash flows (Continued) Consolidated

Notes

Company

2005 Baht

Restated 2004 Baht

2005 Baht

Restated 2004 Baht

(121,314,837)

-

(121,314,837)

-

(4,871,030)

3,045,100

(7,056,799)

5,344,239

(28,739,809)

4,754,465

(30,948,431)

4,861,629

Operating assets (increase) decrease Deposit Trade accounts receivable - other parties - related parties Short-term loans to related parties Inventories

-

-

(2,377,333)

(329,665)

(216,635,256)

220,372,282

(216,692,980)

220,350,559

Value added tax receivable

46,036,593

44,804,154

49,118,970

44,700,729

Other current assets

25,636,613

(64,582,724)

25,874,666

(64,481,862)

9,074,815

11,209,801

9,074,815

11,209,801

(189,227,154)

(88,312,034)

(189,758,538)

(87,982,662)

5,150,844

(10,049,562)

5,104,686

(93,913,767)

(677,748)

(224,140)

(677,748)

(224,140)

Other non-current assets

Operating liabilities increase (decrease) Trade accounts payable - other parties - related parties Accrued interest expenses - other parties - related parties

-

-

8,630

(78,904)

2,951,967

-

-

-

(26,504,545)

20,173,475

(26,504,545)

20,173,475

55,739,199

52,610,659

55,739,199

52,610,659

107,356,835

(38,054,115)

108,704,820

(37,479,588)

(13,944,217)

(29,306,937)

(13,944,217)

(29,306,937)

648,765,022

750,887,206

642,994,846

671,704,271

14

(11,061,405)

(11,061,405)

(11,061,405)

(11,061,405)

9

(164,284,068)

(189,653,571)

(164,268,811)

(189,554,011)

Advance from related party Accrued electricity expenses Royalty payable Other current liabilities Provision for restoration expenses (use of)

16

Net cash provided by operating activities Cash flows from investing activities Cash paid for land compensation Cash paid for purchase of property, plant and equipment Cash received from sales of property, plant and equipment Exploration and acquisition costs (increase) Net cash used in investing activities

2,840,622

3,256,776

2,840,622

3,256,776

(54,302,776)

(30,394,494)

(12,131,061)

(30,394,494)

(226,807,627)

(227,852,694)

(184,620,655)

(227,753,134)

The notes to the consolidated and company financial statements on pages 43 to 66 are integral part of these financial statements.


Annual Report 2005 Padaeng Industry 42 Public Company Limited Padaeng Industry Public Company Limited and Subsidiaries For the years ended 31 December 2005 and 2004

Statements of cash flows (Continued) Consolidated

Notes

Company

2005 Baht

Restated 2004 Baht

2005 Baht

Restated 2004 Baht

(108,099,635)

(517,961,223)

(108,099,635)

(517,961,223)

-

-

90,000,000

-

Cash flows from financing activities Loans from financial institution (decrease) Short-term loans from related parties increase

12 27 (vii)

Dividend payment

(90,239,264)

-

(90,239,264)

-

Proceeds from long-term borrowings

15

-

200,000,000

-

200,000,000

Payment on long-term borrowings

15

(102,500,000)

-

(102,500,000)

-

(4,572,481)

5,760,000

(4,572,481)

5,760,000

Account payable hire purchase (payment) Proceeds from issue of ordinary shares of subsidiary

42,171,715

-

-

-

(263,239,665)

(312,201,223)

(215,411,380)

(312,201,223)

788

(423,984)

788

(423,984)

Net increase (decrease) in cash and cash equivalents

158,718,518

210,409,305

242,963,599

131,325,930

Cash and cash equivalents at beginning of the year

441,677,104

231,267,799

325,879,711

194,553,781

Cash and cash equivalents at end of the year

600,395,622

441,677,104

568,843,310

325,879,711

21,220,045

21,042,539

21,668,810

26,091,805

1,066,130

2,889,038

199,283

78,682

-

5,760,000

-

5,760,000

Net cash (used in)/from financing activities Effects from changes in exchange rate for cash and cash equivalents

Supplementary information for statements of cash flows Cash paid during the year: Interest paid Tax paid Non-cash items Hire purchase payable

The notes to the consolidated and company financial statements on pages 43 to 66 are integral part of these financial statements.


Annual Report 2005 Padaeng Industry 43 Public Company Limited Padaeng Industry Public Company Limited and Subsidiaries For the years ended 31 December 2005 and 2004

Notes to the consolidated and company financial statements

1. General information Padaeng Industry Public Company Limited (the “Company”) was established on April 10, 1981 and has been listed on the Stock Exchange of Thailand since July 21, 1987. The company’s head office is at CTI Tower, 26th-27th floor, 191/18-25 Ratchadaphisek road, Khlong Toei district, Bangkok. The company operates a silicate mine and a zinc smelter located in Tak province and a calcine plant located in Rayong province. The principal business operations of the company and its subsidiaries are summarised as follows: Company Padaeng Industry Public Co., Ltd.

Principal activities Mining and refining of zinc, the main products are zinc ingot and zinc alloy

Subsidiaries

Principal activities

Padaeng Properties Co., Ltd.

Providing services

Puthep Co., Ltd.

Copper exploration

Padaeng Industry (Laos) Co., Ltd.

Zinc exploration and mining in Laos

Padaeng International Mining Co., Ltd.

Minerals exploration in Vietnam

Sila Enterprise Co., Ltd.

Distribution of limestones

South East Asia Metals Co., Ltd.

Distribution of various base metals and their by-products

During the year 2005 , the company employed 766 employees (2004: 746 employees). These consolidated and company financial statements have been approved for issue by the Board of Directors on 23 February 2006.

2. Significant accounting policies The principal accounting policies adopted in the preparation of these consolidated and company financial statements are set out below. 2.1

Basis of preparation The consolidated and company financial statements have been prepared in accordance with Thai Generally

Accepted Accounting Principles under the Accounting Act B.E. 2543 being those Thai Accounting Standards issued under the Accounting Profession Act B.E. 2547 and the financial reporting requirements of the Securities and Exchange Commission under the Securities and Exchange Act B.E. 2535. The accounting principles applied may differ from Generally Accepted Accounting Principles adopted in other countries and jurisdictions. The accompanying consolidated and company financial statements are therefore not intended to present the financial position and results of operations and cash flows in accordance with jurisdictions other than Thailand. The consolidated and company financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. As a result of the Federation of Accounting Profession (FAP) approval of three new accounting standards on 12 May 2005, the company has adopted TAS 52, ‘Events After Balance Sheet Date’, TAS 53, ‘Provisions, Contingent Liabilities, and Contingent Assets’ and TAS 54, ‘Discontinuing Operations’ since the second quarter of 2005. There is no significant impact to the financial statements from the adoption of these standards.


Annual Report 2005 Padaeng Industry 44 Public Company Limited

An English version of the consolidated and company financial statements has been prepared from the statutory financial statements that are in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language statutory financial statements shall prevail. 2.2

Changes in accounting policy In 2005, the company changed its accounting policy to start recognising provisions for employee termination/

retirement benefits in accordance with Thai Labor laws. The effect of this change in accounting policy has been accounted for retrospectively. Accordingly, the comparative statements for 2004 have been restated to reflect adoption of the new policy. The company has recognised Baht 8.2 and 7.2 million in employee termination/retirement benefits for 2005 and 2004 respectively. Additionally, Baht 50,614,474 has been recognised in the opening 2004 retained earnings balance representing the costs to be recognised for prior periods (see Note 2.19 and Note 17). There is no requirement under Thai Accounting Standards to record these costs. 2.3

Use of estimates The preparation of financial statements in conformity with Thai Generally Accepted Accounting Principles requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses in the reported periods. Actual results may differ from those estimates. 2.4

Revenue recognition Sales are recognised when title to the goods sold passes to the buyer, which is at the time when the goods are

delivered to the customer or as contractually agreed. 2.5

Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid

investments, and bank overdrafts. Cash and cash equivalents denominated in foreign currencies are translated at the exchange rate ruling at the end of the year. 2.6

Trade receivables Trade receivables are carried at anticipated realisable value. An estimate is made for doubtful receivables based

on a review of all outstanding amounts at the year-end. Bad debts are written off during the year in which they are identified. 2.7

Inventories Inventories are stated at the lower of cost or net realisable value. Cost is calculated on the weighted average cost

basis. The cost of work in progress and finished goods comprise raw materials costs (zinc sulphide concentrates and zinc silicates), direct conversion costs, and a proportion of manufacturing overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less estimated conversion costs and the estimated costs incurred to make the sale. Where net realisable value is less than cost, an allowance for the diminution in value of inventories has been provided. Spare parts and consumables are valued on the weighted average cost basis. Provisions are made, where necessary, for obsolete, slow moving and defective inventories based on a review of all outstanding amounts at the year-end. 2.8 Investments in subsidiaries Investments in subsidiaries are accounted for in the company (non-consolidated) financial statements by the equity method. Subsidiaries are those entities over which the company has over 50% of the voting rights, or over which the company exercises control. When necessary, provisions are recorded for any impairment in value of these investments. Equity accounting involves recognising in the income statement the company’s share of the subsidiary’s profit or loss for the year. The company’s interests in the subsidiaries are carried in the balance sheet at an amount that reflects its shares of the net assets of the subsidiaries and includes goodwill, if any, on acquisition. Additionally, all intercompany transactions, balances and unrealised gains are eliminated unless the loss cannot be recovered.


Annual Report 2005 Padaeng Industry 45 Public Company Limited

2.9

Consolidation Subsidiary undertakings, which are those companies in which the company, directly or indirectly, has over 50%

of the voting rights or otherwise has power to exercise control over the financial and operating policies, have been consolidated (see Note 27(i)). Subsidiaries are consolidated from the date on which effective control is transferred to the company and are no longer consolidated from the date control ceases. All intercompany transactions, balances and unrealised surpluses and deficits on transactions between companies have been eliminated. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the company. Separate disclosure is made for minority interests in the consolidated balance sheet and consolidated income statement. The SET guideliness dated 8 May 1998, specify that the equity method is to be used to account for investments in subsidiaries that have accumulated losses exceeding their share capital, and that the consolidated financial statements recognise the full amount of a subsidiary’s losses (excluding the minority interest to the extent that they do not exceed the minority shareholders’ equity), that exceed the company’s investment in such subsidiaries. In the company (non-consolidated) financial statements, the company’s share of losses in subsidiaries are generally recognised only to the extent of the amount of the investment in the subsidiaries except where the company has a commitment and/or guarantees on behalf of the subsidiaries. The resumption of recognition of the company’s equity in profit will begin when the profit in such subsidiaries exceeds the company’s shares of previously unrecognised losses in excess of investment. Accordingly, the consolidated and the company’s financial statements do not present the same net income (loss) and shareholders’ equity. 2.10 Related companies Related companies are holding companies, subsidiaries, fellow subsidiaries, associates and other companies that are in the same company, including companies that are related by way of common directors, key management or shareholders. Transactions with related companies have been disclosed in Note 27. 2.11 Property, plant and equipment Carrying value: Property, plant and equipment are recorded at cost. Cost is measured by the cash or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use. In the case of self-constructed assets, the cost of construction consists of the materials, direct labour and other expenses attributable to the construction which are allocated to the assets on a systematic basis. Property, plant and equipment, except land, are presented in the balance sheet at cost less accumulated depreciation. Land is not depreciated. Depreciation is calculated on a straight line method to write off the cost of each asset, or its revalued amount, to their residual values over their estimated useful life as follows: Years Land improvement Building Machinery and heavy equipment Equipment, furniture and fixtures and vehicles

5-20 20 - 25 8-20 5

Mining concession fees and expenses

5-16

Other structures

8-25

Residue ponds brought into operation after 1 January 2001 are amortised on units of production basis using the capacity volume of the residue ponds. Finance lease assets are recorded as assets and depreciated over their estimated useful life. When the company disposes of property, plant and equipment, the company will write-off both the asset and its related accumulated depreciation, and recognise any gain or loss from disposal of the assets through the statement of income.


Annual Report 2005 Padaeng Industry 46 Public Company Limited

Capital expenditures which result in the acquisition of assets, or results in an increase in capacity, useful life or improves the operating efficiency of existing assets and that are expected to provide future economic benefits, are capitalised. Where the carrying amount of an asset exceeds its estimated recoverable amount, it is written down immediately to its recoverable amount through recording an impairment charge. 2.12 Exploration costs Exploration is accumulated separately for each area of interest and accounted using the successful efforts basis of accounting for such costs. Under this basis, accumulated costs of exploration are capitalized and carried forward on the balance sheet where one or both of the following conditions are met: -

Costs are expected to be recouped through successful development and exploitation of each area of interest or by sale of the area of interest; and/or

-

Exploration activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence of economically recoverable reserves and exploration activities are continuing in the area of interest.

Upon commencement of development and production, these costs are amortised using the straight line basis over the period that it is expected to provide economic benefits. Expenditure which no longer satisfies the above policy is written-off or an allowance raised against such expenditure where management is of the opinion that the carried forward net cost may not be recoverable. 2.13 Environmental restoration costs Expenditures relating to ongoing environmental restoration programs are charged against earnings as incurred. Where future costs relating to environmental liabilities have arisen as a result of past events, the company establishes a provision over the period in which the obligation is incurred, which is over the useful life of the related asset. These provisions are made on an undiscounted basis. Hence, the estimated restoration costs of the Mae Sot mine are accrued over the life of the mine. The estimated restoration costs for the residue ponds located at the Tak zinc smelter facility are accrued over the useful life of the residue ponds. 2.14 Provisions Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. 2.15 Deferred income taxes The company does not recognise income taxes payable or receivable in future periods in respect of temporary differences arising from differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. The accounting standard for deferred income taxes is currently not in effect in Thailand. 2.16 Foreign currency transactions Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions. Such balances are translated at year-end exchange rates. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets, and liabilities denominated in foreign currencies, are recognised in the statement of income. 2.17 Financial instruments Financial assets and liabilities carried on the balance sheet include cash and cash equivalents, trade accounts receivable, related party receivables and payables, bank overdraft, trade accounts payable, accrued expenses and loans. The company enters into derivative financial instruments that reduce its exposure to fluctuations in foreign currency exchange rates with respect to recognised foreign currency assets or liabilities. The derivative instruments comprise forward foreign exchange contracts, protecting the company from movements of foreign currency exchange rates


Annual Report 2005 Padaeng Industry 47 Public Company Limited

by establishing the rate at which a foreign currency asset or liability will be realised or settled. Such forward contracts are recorded initially on the balance sheet at cost. Subsequently, they are measured at fair value and any related gains or losses (realized or unrealized) are recognised in current period income. The fair values of the contracts are based on closing exchange quotations. The company also enters into forward derivative contracts to protect the company from movements in zinc metal prices and foreign exchange rate changes related to forecasted production, purchases and sales of zinc. Those instruments comprise forward contracts for the sale and purchase of zinc metal and foreign currencies to enable the company to establish the prices of forecasted zinc metal sales and purchases. Such derivatives are not recognised on balance sheet at inception, since they relate to future transactions (or underlyings) which are not yet reflected in the financial statements. Gains and losses on those derivative contracts are recognised in the financial statements upon settlement of the transactions (see Note 30). 2.18 Leases-where a group company is the lessee Leases of property, plant or equipment which substantially transfer all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated to the principal and to the finance charges so as to achieve a constant rate on the finance balance outstanding. The outstanding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of income over the lease period so as to achieve a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant or equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset or the lease term. Leases not transferring a significant portion of the risks and rewards of ownership to the lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of income on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. 2.19 Provision for employee termination/retirement benefits In 2005 the company began recognising the costs of employee termination/retirement benefits payable in accordance with Thai Labor law. The amount of termination/retirement benefits are recorded based on an actuarial valuation completed based on employee wages, turnover, retirement ages, mortality, length of service and other factors in place at the end of the period. (The effect of adoption of this policy is shown in Note 2.2 and Note 17)

3. Cash and cash equivalents Cash and cash equivalents as at 31 December 2005 and 2004 comprise: Consolidated

Company Restated

2005 Cash on hands and deposits with banks Promissory note/bill of exchange Total

2004

Restated 2005

2004

Baht

Baht

Baht

Baht

600,395,622

336,677,104

568,843,310

220,879,711

-

105,000,000

-

105,000,000

600,395,622

441,677,104

568,843,310

325,879,711

The average interest rates on deposits and short-term investments are in the range of 0.25% - 3.55%.

4. Deposit The company has on deposit Baht 121,314,837 with commodity brokers to support the company’s hedging activities on the London Metal Exchange. The company earns the prevailing short-term market interest rate on these US dollar deposits (see Note 30).


Annual Report 2005 Padaeng Industry 48 Public Company Limited

5. Trade accounts receivable-net Consolidated

Company Restated

2005 Trade accounts receivable Less : Allowance for doubtful accounts Trade accounts receivable, net

2004

Restated 2005

2004

Baht

Baht

Baht

Baht

242,894,492

238,081,163

235,211,850

228,212,752

(1,150,329)

(2,985,484)

-

(115,898)

241,744,163

235,095,679

235,211,850

228,096,854

6. Inventories-net Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

Raw materials

853,331,805

253,334,062

853,331,805

253,334,062

Spare parts and consumables

243,007,464

232,605,769

243,007,464

232,605,769

Goods in transit

2,405,399

330,372,305

2,405,399

330,372,305

Work in process

234,447,785

286,353,641

234,447,785

286,353,641

Finished goods

227,206,282

241,097,701

227,206,282

241,039,978

1,560,398,735

1,343,763,478

1,560,398,735

1,343,705,755

(31,786,120)

(36,644,931)

(31,786,120)

(36,644,931)

1,528,612,615

1,307,118,547

1,528,612,615

1,307,060,824

Less : Allowance for obsolete and slow moving inventories Inventories, net

7. Other current assets Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

- principal

35,071,032

37,719,189

35,071,032

37,719,189

- interest

4,564,379

1,827,400

4,564,379

1,827,400

Advances to supplier

Import tax Others Allowance for doubful accounts Total

363,274

28,817,579

363,274

28,817,579

18,009,956

17,784,405

17,497,258

17,509,759

58,008,641

86,148,573

57,495,943

85,873,927

(39,635,411)

-

(39,635,411)

-

18,373,230

86,148,573

17,860,532

85,873,927


Annual Report 2005 Padaeng Industry 49 Public Company Limited

8. Investments in subsidiaries-net Subsidiaries

Consolidated

Company Restated

Opening net book amount

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

-

-

358,934,364

357,093,647

Share of results before tax

-

-

3,947,232

5,513,569

Share of tax

-

-

(1,021,059)

(3,672,852)

Net share of results

-

-

2,926,173

1,840,717

Increase in share capital (Note 27(i))

-

-

73,442

-

Closing net book amount

-

-

361,933,979

358,934,364

Net equity in principal subsidiary companies are shown in Note 27 (i).

9. Property, plant and equipment-net Consolidated Building and Land and

Machinery

Equipment,

land

and heavy

furniture,

machinery Other

under

improvement

Building

equipment

and fixtures

Vehicles

structures construction

Baht

Baht

Baht

Baht

Baht

Baht

Baht

Total Baht

447,288,523

626,603,845

1,226,066,188

32,549,376

35,455,686

9,699,847

49,431,030

2,427,094,495

At 31 December 2004 Net book amount Year ended 31 December 2005 Opening balance

447,288,523

626,603,845

1,226,066,188

32,549,376

35,455,686

9,699,847

49,431,030

2,427,094,495

Additions

-

-

-

1,892,705

-

-

162,391,363

164,284,068

Transfers

11,805,782

6,777,494

100,349,783

20,163,259

23,494,121

Disposals

-

-

(512,093)

(38,616)

(531,318)

Write-offs Closing book amount

18,000 (162,608,439) -

-

(1,082,027)

-

-

-

(42,753)

(205,276)

-

-

(248,029)

459,094,305

633,381,339

1,325,903,878

54,523,971

58,213,213

9,717,847

49,213,954

2,590,048,507

(19,613,069)

(71,267,184)

(208,818,545)

(20,860,871)

(10,671,706)

(5,035,727)

-

(336,267,102)

Less: Depreciation expense

Provision for impairment (formed) released

-

-

(5,373,052)

53,188

(261,536)

-

-

(5,581,400)

Closing net book amount 439,481,236

562,114,155

1,111,712,281

33,716,288

47,279,971

4,682,120

49,213,954

2,248,200,005

1,567,263,230

4,487,863,842

365,716,633

194,361,605

30,910,695

49,213,954

7,369,684,534

At 31 December 2005 Cost

674,354,575

Less: Accumulated depreciation

(231,564,595) (1,005,036,689) (3,211,508,282) (327,814,654)

(146,636,977) (26,228,575)

- (4,948,789,772)

Accumulated provision for impairment Net book amount

(3,308,744)

(112,386)

(164,643,279)

(4,185,691)

(444,657)

-

-

(172,694,757)

439,481,236

562,114,155

1,111,712,281

33,716,288

47,279,971

4,682,120

49,213,954

2,248,200,005


Annual Report 2005 Padaeng Industry 50 Public Company Limited

Company Building and Land and

Machinery

Equipment,

land

and heavy

furniture,

machinery Other

under

improvement

Building

equipment

and fixtures

Vehicles

Baht

Baht

Baht

Baht

Baht

structures construction Baht

Baht

Total Baht

450,798,461

626,603,845

1,226,066,188

32,274,232

35,032,167

9,699,847

49,431,030

2,429,905,770

At 31 December 2004 Net book amount Year ended 31 December 2005 Opening balance

450,798,461

626,603,845

1,226,066,188

32,274,232

35,032,167

9,699,847

49,431,030

2,429,905,770

Additions

-

-

-

1,877,448

-

-

162,391,363

164,268,811

Transfers

11,805,782

6,777,494

100,349,783

20,163,259

23,494,121

Disposals

-

-

(512,093)

(38,616)

(531,318)

Write-offs

18,000 (162,608,439) -

-

-

(1,082,027)

-

-

-

(42,753)

(205,276)

-

-

(248,029)

462,604,243

633,381,339

1,325,903,878

54,233,570

57,789,694

9,717,847

49,213,954

2,592,844,525

(19,613,069)

(71,267,184)

(208,818,545)

(20,783,984)

(10,498,883)

(5,035,727)

-

(336,017,392)

-

-

(5,373,052)

53,188

(261,536)

-

-

(5,581,400)

Closing net book amount 442,991,174

562,114,155

1,111,712,281

33,502,774

47,029,275

4,682,120

49,213,954

2,251,245,733

677,864,513 1,567,263,230

4,487,863,842

364,132,487

192,670,737

30,910,695

49,213,954

7,369,919,458

Closing book amount Less: Depreciation expense

Provision for impairment (formed) released

At 31 December 2005 Cost Less: Accumulated depreciation

(231,564,595) (1,005,036,689) (3,211,508,282) (326,444,023)

(145,196,804) (26,228,575)

- (4,945,978,968)

Accumulated provision for impairment Net book amount

(3,308,744)

(112,386)

(164,643,279)

(4,185,691)

(444,657)

-

-

(172,694,757)

442,991,174

562,114,155

1,111,712,281

33,502,773

47,029,276

4,682,120

49,213,954

2,251,245,733

Provision for asset impairment Asset impairment charges represent a write-down in the book value of assets which exceed their estimated recoverable amount based on a review of each asset’s respective value in use. Changes in impairment provision movement are shown as follows: Consolidated

Company Restated

Opening balances Provision for impairment Reversal from disposals/write-off’s Ending balances

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

167,113,357

145,894,878

167,113,357

145,894,878

5,634,588

21,846,336

5,634,588

21,846,336

(53,188)

(627,857)

(53,188)

(627,857)

172,694,757

167,113,357

172,694,757

167,113,357


Annual Report 2005 Padaeng Industry 51 Public Company Limited

10. Exploration and acquisition costs Exploration and acquisition costs balance comprise: Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

175,134,679

178,599,198

28,203,698

31,668,217

Exploration costs Opening balance for the year

66,407,670

30,551,531

24,235,956

30,551,531

Expenditure charged to the statement of income (12,104,895)

Expenditure incurred during the year

(21,136,981)

(12,104,895)

(21,136,981)

Expenditure transferred to mine properties Expenditure written-down Ending balance of the year (Note 10 (i))

-

-

-

-

(12,213,470)

(12,879,069)

(12,213,470)

(12,879,069)

217,223,984

175,134,679

28,121,289

28,203,698

60,000,000

100,900,000

60,000,000

100,900,000

-

(40,900,000)

-

(40,900,000)

(13,333,344)

(6,666,672)

(13,333,344)

(6,666,672)

46,666,656

53,333,328

46,666,656

53,333,328

16,986,510

16,986,510

-

-

9,730,567

11,434,795

9,730,567

11,434,795

Mining acquisition costs Capitalized deferred cost Opening balance for the year Acquisition cost write-off Accumulative depletion Ending balance for the year Special prospect licence fee Land use compensation Other capitalized expenditure

15,612,031

20,143,015

15,612,031

20,143,015

Ending balance for the year

88,995,764

101,897,648

72,009,254

84,911,138

306,219,748

277,032,327

100,130,543

113,114,836

Total i)

Exploration costs Exploration costs are mainly related to those incurred by a subsidiary, Puthep Co., Ltd. At the date of these

statements, exploration activities had not established whether economically recoverable resources existed in the area. In accordance with the company’s accounting policy for exploration, such costs will remain capitalized until final determination of whether economically recoverable resource exists. On 21 August 2000, the company and Puthep Co., Ltd. entered into a Participation Agreement (the “Agreement”) with Pan Australian Resources N.L. and PNA (Puthep) Pty Limited of Australia (“PNA”) to undertake exploration and mining of Puthep Copper Project. Under the Agreement, PNA has the right to a 51% working interest in the Puthep Project in north-east Thailand by completing a feasibility study to a bankable standard. The Agreement also includes further options for PNA to acquire a total interest of either 60% or 70%. PNA completed the expenditure requirements of the First Earning Period of the Participation Agreement (US$ 1 million or Baht 42 million) in April 2003 and has complied with all other requirements under the Participation Agreement. Accordingly, in June 2005, PNA obtained, through a capital increase, a 20.66% ownership interest in Puthep Co., Ltd. (Note 27 (i)) PNA must spend a further US$ 1 million to attain approximately a further 15% interest in Puthep Co., Ltd.


Annual Report 2005 Padaeng Industry 52 Public Company Limited

11. Other non-current assets Other non-current assets as at 31 December 2005 and 2004 comprise: Consolidated

Company Restated

Deposits Others

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

774,311

1,230,511

719,311

1,175,511

5,283,216

11,753,342

5,283,216

11,753,342

6,057,527

12,983,853

6,002,527

12,928,853

Deposits and installment payments for condominium units

74,932,723

74,932,723

-

-

Less: Allowance for doubtful accounts

(74,932,723)

(74,932,723)

-

-

6,057,527

12,983,853

6,002,527

12,928,853

Total

Deposits and installment payment for condominium units A subsidiary has provided an allowance of Baht 75 million with respect to deposit and installment payments for certain condominium units whose construction was suspended due to unfavorable economic conditions. Others The company has long-term investments in the amount of Baht 14,451,626 that have been fully written down in value.

12. Loans from financial institutions Loans from financial institutions as at 31 December 2005 and 2004 comprise: Consolidated

Company Restated

Promissory notes Trust receipts Total

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

175,719,606

-

175,719,606

-

-

283,819,241

-

283,819,241

175,719,606

283,819,241

175,719,606

283,819,241

The company has entered into short-term financing arrangements to fund its operations with various financial institutions. The interest rates, the company is paying on the promissory notes and trust receipts, are in the range of 5.22% - 5.25%

13. Other current liabilities Other current liabilities as of 31 December 2005 and 2004 comprise: Consolidated

Company Restated

2005 Accrued expenses Accrued inventory purchases Others Total

2004

Restated 2005

2004

Baht

Baht

Baht

Baht

24,515,881

26,934,993

24,515,881

26,934,993

164,582,245

65,942,840

164,582,245

65,942,840

62,916,060

52,264,600

55,001,124

43,001,681

252,014,186

145,142,433

244,099,250

135,879,514


Annual Report 2005 Padaeng Industry 53 Public Company Limited

Accrued inventory purchases represents changes in liability for unpriced raw material inventory shipments due to fluctuations in the quoted market price of the inventory.

14. Payable for land use compensation The company is required to compensate the Department of Forestry an amount of Baht 58 million as compensation for the use of forest areas. An amount of Baht 25 million was paid during the year 2002. The outstanding balance of Baht 33 million is being repaid annually since January 2003. The final payment was paid in May 2005. As at 31 December 2005 and 2004, outstanding amounts due for land use compensation comprise: Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

Due within one year

-

11,061,405

-

11,061,405

More than one year

-

-

-

-

Total

-

11,061,405

-

11,061,405

Consolidated

Company Restated

Payable for land use compensation Less: Payment during the year Total

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

11,061,405

22,122,810

11,061,405

22,122,810

(11,061,405)

(11,061,405)

(11,061,405)

(11,061,405)

-

11,061,405

-

11,061,405

15. Long-term loans Long-term loans as at 31 December 2005 and 2004 comprise: Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

Due within one year

467,500,000

102,500,000

467,500,000

102,500,000

More than one year

80,000,000

547,500,000

80,000,000

547,500,000

547,500,000

650,000,000

547,500,000

650,000,000

Total

The movements in the borrowings can be analyzed as follows: Consolidated

Company Restated

For the year ended 31 December Opening amount New loan agreements Repayment of loans Closing amount

2005

2004

Restated 2005

2004

Baht

Baht

Baht

Baht

650,000,000

450,000,000

650,000,000

450,000,000

-

200,000,000

-

200,000,000

(102,500,000)

-

(102,500,000)

-

547,500,000

650,000,000

547,500,000

650,000,000


Annual Report 2005 Padaeng Industry 54 Public Company Limited

In August 2003, the company entered into unsecured 3-years bill of exchange agreements for Baht 200 million through a local bank. In November 2003, the company entered into 2 unsecured loan agreements for the total amount of Baht 600 million with two local banks to refinance existing long-term loans. The repayment schedules are up to 3 years from the drawdown date of the loans. These facilities have been contracted at a market rate of interest which is in the range of 2.5% to 3%. i)

Financing arrangements available Consolidated

Company Restated

Bank overdraft Promissory notes/short-term loans Bank guarantee Packing credit Long-term loans Total ii)

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

60,000,000

60,000,000

60,000,000

60,000,000

1,882,619,000

1,888,240,000

1,882,619,000

1,888,240,000

568,873,000

523,810,000

568,873,000

523,810,000

-

60,000,000

-

60,000,000

650,000,000

650,000,000

650,000,000

650,000,000

3,161,492,000

3,182,050,000

3,161,492,000

3,182,050,000

At balance sheet date, the following had been drawn down under the above facilities: Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

175,719,606

-

175,719,606

-

-

283,819,241

-

283,819,241

Long-term loans

547,500,000

650,000,000

547,500,000

650,000,000

Total

723,219,606

933,819,241

723,219,606

933,819,241

Promissory notes Trust receipts

16. Provisions for restoration expense Consolidated

Company Restated

Balance at the beginning of the year

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

21,543,364

40,148,165

21,543,364

40,148,165

Additional provisions charged to the statement of income Amounts utilised Balance at the end of the year

34,657,914

10,702,136

33,149,591

10,702,136

(13,944,217)

(29,306,937)

(13,944,217)

(29,306,937)

42,257,061

21,543,364

40,748,738

21,543,364


Annual Report 2005 Padaeng Industry 55 Public Company Limited

The provision for restoration costs represent amounts provided for the estimated costs of restoration of residual ponds at Tak and the tailing dam and rehabilitation of the mined area in Mae Sot in accordance with government regulations and creation of a community fund as per decision of the Board. In line with its previously announced community service commitments, the company has set aside a fund for the Mae Sot community development in the amount of Baht 10 million. That fund will be used exclusively for the benefit of the community around the mine by supporting various development projects.

17. Provision for employee termination/retirement benefits Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

Balance at the beginning of the year

57,814,474

-

57,814,474

-

Retrospective provision adjustments

-

50,614,474

-

50,614,474

57,814,474

50,614,474

57,814,474

50,614,474

8,244,672

7,200,000

8,244,672

7,200,000

A current period provision Provision used

(5,254,620)

-

(5,254,620)

-

Severance provision at year end

60,804,526

57,814,474

60,804,526

57,814,474

In 2005, the company has begun recording the costs of employee termination/retirement benefits in accordance with Thai Labor laws. The amount of provision recognised is based on an actuarial valuation computed using factors based on employee wages, turnover, retirement ages, mortality, length of service and others. The company has applied this policy retrospectively and accordingly opening retained earnings of 2004 have been adjusted to reflect the restatement of previously issued financial statements.

18. Share capital and premium on share capital Number of As at 31 December 2004

Ordinary

Shares

shares

premium

Total

shares

Baht

Baht

Baht

226,000,000

2,260,000,000

602,413,600

2,862,413,600

Movement during the year

-

-

-

-

As at 31 December 2005

226,000,000

2,260,000,000

602,413,600

2,862,413,600

As at 31 December 2005, the total authorized number of ordinary shares is 226,000,000 shares (2004: 226,000,000 shares) with a par value of Baht 10 per share (2004: Baht 10 per share). All issued shares are fully paid.


Annual Report 2005 Padaeng Industry 56 Public Company Limited

19. Legal reserve Consolidated

Company Restated

As at 31 December 2004

2005

2004

Baht 9,791,560

Restated 2005

2004

Baht

Baht

Baht

-

9,791,560

-

Appropriation during the year

27,695,260

9,791,560

27,695,260

9,791,560

As at 31 December 2005

37,486,820

9,791,560

37,486,820

9,791,560

Under the Public Companies Act.,B.E.2535, the company is required to set aside as a legal reserve at least 5% of its net profit after accumulated deficit brought forward (if any) until the reserve reaches 10% of the registered capital.

20. Selling and administrative expenses The following expenditures, classified by nature, have been charged against the selling and administrative expenses: Consolidated

Company Restated

2005

2004

Restated 2005

2004

Baht

Baht

Baht

Baht

77,554,955

65,139,177

77,554,955

65,139,177

Impairment expenses (Note 9)

5,581,400

21,218,479

5,581,400

21,218,479

Bad debt expense (reversal)

(115,898)

-

(115,898)

-

-

-

11,390,295

-

39,635,411

-

39,635,411

-

(4,858,811)

5,500,089

(4,858,811)

5,500,089

8,244,672

7,200,000

8,244,672

7,200,000

Freight and transportation costs

Write off receivable from related companies Allowance for doubtful account expenses (advance to supplier) Allowance for obsolete and slow moving inventories (reversal) (Note 6) Provision for employee termination/retirement benefits (Note 17)

21. Dividend On 26 April 2005 the shareholders at the Annual General Meeting passed a resolution to declare a dividend for the year 2004 Baht 0.40 per share totalling Baht 90,400,000 for the shareholders as at the closing date on 9 May 2005. The dividend was paid on 25 May 2005.

22. Finance costs-net Finance costs relate to the following: Consolidated

Company Restated

For the year ended 31 December

2005

2004

Restated 2005

2004

Baht

Baht

Baht

Baht

9,992,961

4,088,462

10,032,297

4,078,691

Interest expense

(26,249,430)

(30,613,995)

(26,706,827)

(31,495,896)

Total finance costs-net

(16,256,469)

(26,525,533)

(16,674,530)

(27,417,205)

Interest income


Annual Report 2005 Padaeng Industry 57 Public Company Limited

23. Basic earnings per share Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year. Consolidated

Company Restated

For the year ended 31 December

Restated

2005

2004

2005

2004

561,344,282

217,026,691

553,905,198

221,629,549

226,000,000

226,000,000

226,000,000

226,000,000

2.48

0.96

2.45

0.98

Net profit attributable to common shareholders (Baht) Weighted average number of ordinary shares on issue (Shares) Basic earnings per share (Baht)

There are no potential dilutive ordinary shares in issue for the years presented and no diluted earning per share is presented.

24. Bank guarantee issued by banks As at 31 December 2005 the company and subsidiaries have given letters of guarantee in the ordinary course of business issued by banks of approximately Baht 375.83 million (2004: Baht 231.36 million).

25. Capital expenditure and commitments As at 31 December 2005 and 2004, the company has the following commitments for the acquisition of plant and equipment that have been contracted but not recorded as liabilities: Consolidated

Company Restated

Not later than 1 year Later than 1 year Total

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

5,767,384

52,375,405

5,767,384

52,375,405

-

-

-

-

5,767,384

52,375,405

5,767,384

52,375,405

As at 31 December 2005 and 2004, the company has the following commitments for the purchase of raw materials that have been contracted but not recorded as liabilities: Consolidated

Company Restated

Not later than 1 year Later than 1 year Total

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

2,630,146,241

1,578,974,225

2,630,146,241

1,578,974,225

-

573,220,954

-

573,220,954

2,630,146,241

2,152,195,179

2,630,146,241

2,152,195,179

26. Segment information The company produces a single product produced in Thailand for both domestic and export markets, utilizing the same assets. The company does not present segment information as it considers its business operations to be in one segment.


Annual Report 2005 Padaeng Industry 58 Public Company Limited

27. Related party transactions The company’s major shareholder is Umicore in Belgium which owns approximately 46.90% of the company’s outstanding shares. The remaining shares are widely held. i)

Investments in subsidiaries Details of investments in subsidiaries are as follows: Company

Company

31 December 2005

31 December 2004 (Restated)

Paid up

%

Carrying

Paid up

%

capital

Ownership

Cost

value

capital

Ownership

Cost

Carrying value

Baht

investment

Baht

Baht

Baht

investment

Baht

Baht

Co., Ltd.

80,000,000

100

80,000,000

33,865,582

80,000,000

100

80,000,000

33,050,737

Puthep Co., Ltd.

183,575,800

79.34

145,650,772

162,205,203

145,584,742

100

145,584,742

161,926,604

5,000,000

100

5,000,000

-

5,000,000

100

5,000,000

-

100,000

100

100,000

-

100,000

100

100,000

-

9,000,000

55

4,950,000

5,944,613

9,000,000

55

4,950,000

4,696,684

200,000,000

100

200,000,000

159,918,581

200,000,000

100

200,000,000

159,260,339

435,700,772

361,933,979

435,634,742

358,934,364

Subsidiaries Padaeng Properties

Padaeng Industry (Laos) Co., Ltd. Padaeng International Mining Co., Ltd. Sila Enterprise Co., Ltd. South East Asia Metals Co., Ltd.

All subsidiaries are incorporated in Thailand except Padaeng Industry (Laos) Co., Ltd. On 18 March 2005, the shareholders at the Extraordinary Shareholders’ Meeting passed a resolution to approve an increase in the authorised share capital of Puthep Co., Ltd. from 2,348,142 ordinary shares with a par value of Baht 62 per share to 2,960,900 ordinary shares with a par value of Baht 62 per share. On 28 June 2005, Puthep Co., Ltd. received subscriptions of 612,759 additional shares at Baht 62 par value at a price of Baht 68.82 per share. As a result, the paid-up share capital and premium on share capital totalled Baht 37,991,058 and Baht 4,254,099, respectively. Puthep Co., Ltd. registered the increased share capital with the Ministry of Commerce on 29 June 2005 see Note 10 (i). The impact of this transaction to minority shareholder was Baht 42,171,715. In August 2005, the Board of Directors passed a resolution to complete the liquidatation process of Padaeng International Mining Co., Ltd.


Annual Report 2005 Padaeng Industry 59 Public Company Limited

ii)

Sales of goods and services Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

Sales of goods and services: Sila Enterprise Co., Ltd. Umicore

-

-

10,066,304

8,536,508

518,461,054

402,547,355

518,461,054

402,547,355

-

31,876,530

-

31,876,530

140,330,849

68,267,322

140,330,849

68,267,322

-

1,283

-

1,283

Umicore Marketing Services (Far East) Ltd. Umicore Marketing Services (Thailand) Co.,Ltd. Umicore Precious Metal (Thailand) Co., Ltd.

Sales to related companies are based on industry market price. iii) Purchases of goods and services Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

-

-

1,386,714

1,524,141

Purchases of goods and services: Padaeng Properties Co., Ltd. Padaeng Industry (Laos) Co., Ltd. Umicore

-

-

3,595,455

2,956,839

12,096,723

677,921

12,096,723

677,921

38,597,361

22,441,907

38,597,361

22,441,907

-

1,154,474

-

1,154,474

1,673,003

-

1,673,003

-

Umicore Marketing Services (Thailand) Co.,Ltd. Umicore Marketing Services (Far East) Ltd. Umicore Enginerring S.A.

Purchases from the subsidiary company are based on industry market price.


Annual Report 2005 Padaeng Industry 60 Public Company Limited

iv) Outstanding balances arising from sales/purchases of goods and services Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

Receivables from related parties: Sila Enterprise Co., Ltd. Umicore

-

-

2,798,016

589,394

32,401,827

9,786,330

32,401,827

9,786,330

-

12,792,474

-

12,792,474

18,943,758

-

18,943,758

-

51,345,585

22,578,804

54,143,601

23,168,198

Umicore Marketing Services (Far East) Ltd. Umicore Marketing Services (Thailand) Co.,Ltd. Total

Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

-

-

63,552

109,710

981,037

418,682

981,037

418,682

Payables to related parties: Padaeng Properties Co., Ltd. Umicore Umicore Marketing Services (Thailand) Co.,Ltd. Total v)

4,983,788

395,299

4,983,788

395,299

5,964,825

813,981

6,028,377

923,691

Short-term loans and advances to related parties-net Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

Padaeng Industry (Laos) Co., Ltd.

-

-

11,390,294

9,012,962

Puthep Co., Ltd.

-

-

1,650,063

1,723,505

Padaeng International Mining Co., Ltd.

-

-

244,800

244,800

-

-

13,285,157

10,981,267

-

-

(11,436,894)

(46,600)

-

-

1,848,263

10,934,667

Less: Allowance for doubtful accounts Short-term loans and advances to related parties, net

The outstanding balance from Padaeng Industry (Laos) Co., Ltd. totalling Baht 11.3 million mainly comprises a Baht 7.0 million loan advance which bear an interest rate of MLR plus 5%. The remaining Baht 4.3 million comprises accrued interest.


Annual Report 2005 Padaeng Industry 61 Public Company Limited

vi) Advance from related party Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

PNA (Puthep) Pty Limited of Australia Begining balance

-

-

-

-

Advance increases during the year

2,951,967

-

-

-

Ending balance

2,951,967

-

-

-

vii) Loans from related parties Consolidated

Company Restated

Restated

2005

2004

2005

2004

Baht

Baht

Baht

Baht

South East Asia Metals Co., Ltd. Beginning balance

-

-

90,000,000

90,000,000

Loans increase during the year

-

-

90,000,000

-

Ending balance

-

-

180,000,000

90,000,000

Accrued interest expenses

-

-

166,438

157,808

As at 31 December 2005, the above mentioned loan from South East Asia Metals Co., Ltd. is an unsecured 1 month term promissory note at an interest rate of 2.8125 % .

28. Investment promotion certificates The company has been granted certain rights and privileges as a promoted industry under the Investment Promotion Act of B.E. 2520 (1977). Under these privileges, the company has received exemption from certain taxes and duties as detailed in the certificates including exemption from corporate income tax for a period of 8 years from the commencement of commercial operations or as specified in the certificate. The following certificates are in force: Zinc Ingot : Investment Promotion certificate No. 1575/2539 (1996) As a promoted industry, the company must comply with the terms and conditions as specified in the promotion certificates. Shareholders of the company will be exempt from tax on the dividends received during the period in which the company is granted exemption from corporate income tax.

29. Revenue reporting of a promoted industry Based on the Announcement of the Board of the Investment No. PO 14/2541 (1998) dated December 30, 1998 regarding revenue reporting of a promoted industry, the company is required to report revenue from local sales and export sales separately and to report separately promoted and non-promoted business. The required information is as follows:


Annual Report 2005 Padaeng Industry 62 Public Company Limited

Company For the year ended December 31, 2005

Promoted

Non-promoted

business

business

Total

Baht

Baht

Baht

-

842,914,315

842,914,315

3,272,968

5,292,331,598

5,295,604,566

3,272,968

6,135,245,913

6,138,518,881

Income Income from export sales Income from local sales Total income from sales Interest income

-

10,032,297

10,032,297

Other income

-

18,608,802

18,608,802

Total income

3,272,968

6,163,887,012

6,167,159,980

For the year ended December 31, 2004

Promoted

Non-promoted

business

business

Total

Baht

Baht

Baht

125,904,670

631,722,595

757,627,265

Company

Income Income from export sales Income from local sales Total income from sales

861,008,834

4,045,091,453

4,906,100,287

986,913,504

4,676,814,048

5,663,727,552

Interest income

-

4,078,691

4,078,691

Other income

-

17,649,030

17,649,030

986,913,504

4,698,541,769

5,685,455,273

Total income

30. Risk management policy for assets and liabilities in foreign currencies 30.1 Significant assets and liabilities in foreign currencies As at 31 December 2005: Term of

Consolidated

Company

Amount

Amount

receipt/ payment Cash at banks Accounts receivable-foreign

(days)

USD

Baht

USD

Baht

-

5,863

240,273

5,863

240,273

15

Deposit

1,174,119

48,118,449

1,174,119

48,118,449

2,960,155

121,314,837

2,960,155

121,314,837

Forward contract payable

30-120

3,228,556

132,528,934

3,228,556

132,528,934

Forward contract receivable

30-120

2,935,908

120,639,626

2,935,908

120,639,626

Trust receipts/promissory notes

30-130

4,246,549

174,849,956

4,246,549

174,849,956

30-90

3,080,127

126,822,997

3,080,127

126,822,997

30

6,071,450

236,729,822

6,071,450

236,729,822

30

6,071,450

249,812,954

6,071,450

249,812,954

Accounts payable Realized forward contract payable for zinc metal price Realized forward contract receivable for zinc metal price


Annual Report 2005 Padaeng Industry 63 Public Company Limited

Term of

Amount

receipt

EUR

Baht

EUR

Baht

Forward contract receivable

30-60

55,851

2,712,768

55,851

2,712,768

Accounts payable

30-90

46,978

2,299,577

46,978

2,299,577

Payment Accounts payable

Amount

SGD

Baht

SGD

Baht

30-90

594

14,747

594

14,747

Amount

Amount

(days)

AUD

Baht

AUD

Baht

30-90

22,849

693,624

22,849

693,624

Payment Accounts payable

Amount

(days)

Payment Accounts payable

Amount

Amount

Amount

(days)

GBP

Baht

GBP

Baht

30-90

7,280

517,991

7,280

517,991

As at 31 December 2004: Term of

Consolidated

Company

receipt/ payment (days) Cash at banks

Amount USD

Amount Baht

USD

Baht

-

5,765

224,920

5,765

224,920

Accounts receivable-foreign

15

926,633

36,152,309

926,633

36,152,309

Forward contract receivable

30-180

5,014,455

195,896,842

5,014,455

195,896,842

Forward contract payable

10-180

2,540,812

99,202,872

2,540,812

99,202,872

Trust receipts

30-130

7,239,825

283,819,240

7,239,825

283,819,240

30-90

8,330,752

326,586,305

8,330,752

326,586,305

Accounts payable

Term of Forward contract receivable

Amount

receipt

EUR

Baht

EUR

Baht

1-30

107,168

5,696,224

107,168

5,696,224

Payment Accounts payable

Amount

Amount

Amount

(days)

SEK

Baht

SEK

Baht

30-90

110,880

652,751

110,880

652,751

Foreign currency amounts are translated by using the reference rate quoted by the Bank of Thailand and Commercial Bank as at 31 December 2005 and 2004, respectively.


Annual Report 2005 Padaeng Industry 64 Public Company Limited

30.2 Risk management and hedging instruments The majority of the company’s price quotations of zinc related transactions are based in US dollars. In this respect, the company is exposed to foreign currency fluctuations relating to export sales and to the purchases of imported raw materials, spare parts and capital equipment. When needed, the company uses derivative financial instruments (mainly spot and forward contracts) to reduce the exposure to adverse fluctuations in foreign exchange rates. Also, the company uses derivative financial and commodity instruments (mainly spot and forward contracts) primarily to reduce the exposure to adverse fluctuations in foreign exchange rates and commodity prices on its expected future cash flows. Those risks derive mainly from our exposure to fluctuations in metals prices from our own mining production, on treatment charges and surplus of metals recovered from imported concentrates. Derivative financial and commodity instruments related to future cash flows are not recognized in the financial statements until the underlying cash flows is realized. Accordingly, on these transactions, no “mark to market� mechanism is applied at the time of the balance sheet date to unsettled financial and commodity. In 2004 and the first quarter of year 2005, a total of 50,000 metric tons of zinc forward contracts were entered into relating to cash flows to be realized in 2005 at an average price of Baht 49,892 per metric tons. In addition, in 2005, a total of 30,000 metric tons of zinc forward contracts have been entered into relating to cash flows to be realized in 2006 at an average price of Baht 58,511 per metric ton. Further, a total of 18,275 metric tons of zinc forward contracts have been entered into relating to cash flows to be realized in 2007 at an average price of Baht 68,579 per metric ton. At the end of the year, a balance of 48,275 metric tons of unsettled forward sales remained at a contractual average of USD 1,512 per metric ton which will be settled through purchases from the London Metals Exchange in 2006 and 2007. The total contract value of these unsettled forward contracts at 31 December 2005 is USD 73 million. Additionally, at 31 December 2005, 41,650 metric tons of unsettled metal forwards purchases remained at a closing average of USD 1,836 per metric ton. The contract value of these forward contracts which remain unpriced at period end are estimated at USD 76 million. Consolidated

Company

Amount Fair values

Amount

USD

Baht

USD

Baht

-

-

-

-

72,978,438

3,001,448,281

72,978,438

3,001,448,281

As at 31 December 2005: For off balance sheet contracts Forward contract receivable for the net of zinc and aluminium metal price Forward contract payable for zinc metal price


Annual Report 2005 Padaeng Industry 65 Public Company Limited

Fair values

Consolidated

Company

Amount

Amount

USD

Baht

USD

Baht

748,800

29,168,824

748,800

29,168,824

35,363,864

1,378,323,121

35,363,864

1,378,323,121

As at 31 December 2004: For off balance sheet contracts Forward contract receivable for the net of zinc and aluminium metal price Forward contract payable for zinc metal price

The contract values shown in above reflect the marked to market values of the contracts at year end. The marked to market values are determined on a comparison of the contract rate to the prevailing end of period market rate. (spot-tospot or forward-to-forward depending on the type of contract). The operations carried out on the future markets for reducing both transactional and structural risks as describe here above are not of speculative nature. 30.3 Fair values The carrying amounts at the balance sheet date of cash and cash equivalents, trade accounts receivable, shortterm loans and advances to related parties, value added tax receivable, other receivables, other current assets, investment and certain other assets, loans from financial institutions, trade accounts payable, short-term loans from related parties, payable for land use compensation, accrued interest expenses, accrued electricity expenses, royalty payable, other current liabilities, hire purchase payable, deferred gain on hire purchase and provision for restoration expense approximate their fair values. 30.4 Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the company. As a general rule, the company has a credit risk management policy to obtain collateral from the customers before commencing trade. The collateral may include bank guarantees or cash guarantees. The companyĂ­s credit risk is spread amongst several customers. 30.5 Interest rate risk Interest rate risk in the balance sheet arises from the potential for a change in interest rates to have an adverse effect on the net interest earnings of the company in the current reporting period and in future years. Management believes that these risks are acceptable. In 2003, the company obtained financing facilities in the amount of Baht 800 million at a fixed rate of interest for a period of 3 years. As of December 31, 2005, the company has drawndown a total of Baht 650 million from which Baht 547.5 million are still not matured (see Note 14).


Annual Report 2005 Padaeng Industry 66 Public Company Limited

31. Provident funds The company established a registered contributory provident fund in accordance with the Provident Fund Act B.E. 2530. Under the plan, the company and employees contribute to the fund at a certain percentage of the employees basic salary. Contributions to the provident fund are charged to the statement of income in the year to which they related.

32. Reclassification Certain items in the balance sheet as at 31 December 2004 and statements of income for the year then ended have been reclassified for comparative purpose to coincide with balance sheet as at 31 December 2005 and statements of income for the year then ended.

33. Restatement As disclosed in Note 2 and Note 17, the prior year financial statements have been restated to reflect the adoption of the recognition of employee termination/retirement benefits.

34. Post balance sheet event On 23 February 2006, the Board of Director decided to propose the payment of a dividend in respect of 2005 operating results of Baht 1.10 per share totalling Baht 248.6 million in the Annual Shareholder’s Meeting in April 2006.


Annual Report 2005 Padaeng Industry 67 Public Company Limited

Corporate governance

--->

1. Policy on corporate governance

proceeded with plans for continuous improvement in terms of

The Board of Directors recognizes the importance of Good

safety and the environment.

Corporate Governance and as such established a policy for

Furthermore, the company has complied with laws and

achieving it, with emphasis on internal controls and internal

regulations set by government agencies including the

auditing. The policy is based on principles of transparency,

Department of Industrial Works, Ministry of Industry. In this

disclosure, risk management, adhering to laws and government

respect, both the Calcine plant and Tak smelter were certified

regulations, minimizing problems of conflict of interest, taxation

with TIS/OHSAS 18001 standard. Moreover the Calcine plant

issues and ensuring efficient management of operations in the

has also received the ISO 14001 certification.

best interest of company shareholders and other stakeholders for the long run.

In addition, the company is concerned for and is responsible to our customers. We provide a standardized and quality product, maintain confidentiality of our customers and have a

2. Rights of shareholders

technical service department, which provides technical advice

In 2005 the company held one annual shareholder’s meeting

to customers. Furthermore, the company promotes a good

on 26 April 2005 at the Sukhothai Hotel. An invitation letter

working environment and encourages teamwork and offers

and agenda of the meeting and related documents were sent

training and skills enhancement for our employees in an effort

to shareholders 7 days prior to the meeting. Topics on the

to best take advantage of human resources.

agenda included the opinion of the Board of Directors and a complete report or minutes of the meeting were recorded in

4. Meeting of shareholders

order to allow shareholders ample time and opportunity to

In holding the shareholders meeting, the company considers

review and consider the topics. In addition, the company made

each shareholder as an equal and stipulates procedures for

every effort to accommodate shareholders by arranging the

the meeting according to the law and in compliance with

meeting in a convenient location with an appropriately sized

guidelines of the Stock Exchange of Thailand.

meeting space and permitted shareholder proxies in the event some shareholders were unable to attend.

During the 2005 annual shareholders’ meeting, a total of 7 directors attended, including the Chairman of the Audit

In addition to the annual shareholders’ meeting, the

Committee. The Chairman of the meeting allowed equal

company will call additional shareholders’ meeting, if necessary,

opportunity for all shareholders to question, comment or give

in the event that specific emergency agenda topics, which are

suggestions regarding conduct of company operations. Notable

vital to the shareholders’ interests or relate to by-laws or

inquiries and opinions were recorded in the minutes of the

regulations require shareholders’ approval.

meeting.

3. Rights of stakeholders

5. Leadership and vision

The company places much significance upon the rights

The Board of Directors has played a part in establishing

of every group of stakeholders, particularly the local community,

the vision, mission, strategy, objectives, business plans and

our customers and our employees. Unwavering commitment

budget of the company with effectiveness and efficiency. In

is given to environmental protection and conservation measures,

addition the Board ensures that the management team conducts

more specifically protecting and treating conditions in water,

operations in accordance with the company’s business plan,

air and soil to ensure maximum safety of nature and the local

to add value to our business and ensure maximum stability for

community. Throughout this past year the company also

our shareholders.


Annual Report 2005 Padaeng Industry 68 Public Company Limited

6. Conflict of interest

9. Aggregation or segregation of positions

To protect against conflict of interest, the Board of Directors

The position of the Chairman of the Board of Directors

investigates any instance which may lead to a dispute and

and the position of the CEO and of MD are kept separate as

has established a policy and guidelines to prevent executives

to ensure a clear distinction between authorities, that of policy

and related persons from using internal company information

making and day to day operations, respectively. The company

for personal gains. Further details are stipulated in section

has clearly defined the authorities and responsibilities of

Controlling the use of internal information.

management on every level.

7. Business ethics

10. Remunerations for directors and management

It is the company’s philosophy to conduct business with

Remuneration for Directors-Remuneration for company

honesty, righteousness, and ethics, with responsibility towards

directors has been determined in a clear manner and is

all stakeholders, namely, our customers, shareholders,

comparable to that of similar companies in the industry. The

employees, society and our country. The company has issued

amount of remuneration has been approved by shareholders.

a Code of ethics, which are guidelines for work conduct and

Directors who have been selected to sit on the Audit Committee,

employee conduct. All related persons are to use this manual

Strategic Committee and Nomination and Remuneration

as a reference for carrying out duties according to the mission

Committee receive additional remuneration reflective of the

of the company.

added work responsibility. Remuneration for Top Executives-Remuneration for top

8. Balance of power for non-executive directors

executives has been determined in accordance with the

The company’s Board of Directors consists of qualified

principles and policy set by the Board of Directors and

directors with a broad realm of experience, totaling 10 members

correspond with overall company performance and that of each

as follows:

individual executive. The management submits remuneration

Executive directors

2 members

of executives to the Board of Directors for consideration and

Directors representing major shareholders

5 members

final approval.

- Umicore of Belgium

holds 3 seats

- Ministry of Finance

holds 1 seat

- Bangkok Bank Public Co., Ltd.

holds 1 seat

Directors on the Audit Committee

3 members

Remuneration for Directors in 2005 is detailed in section Remuneration for executives. 11. Meetings of the Board of Directors

The company’s Board of Directors is responsible for acting

The Board of Directors has regular meetings held every 3

in compliance with by-laws, objectives and guidelines of the

months and may call additional special meetings as needed.

company and resolutions of the shareholders meeting, with

Clear agenda topics and agenda minutes of the meetings are

honesty and prudence in the best interests of the company.

prepared in advance of each meeting and the Board Secretary

Company directors have fixed terms according to company

sends out an invitation letter and relevant documents to board

guidelines, which state that at every annual meeting 1 in 3

members prior to the meeting, so as to allow sufficient time

director(s) will resign.

for review, During 2005, the Board of Directors met 4 times with records of attendance as follows:


Annual Report 2005 Padaeng Industry 69 Public Company Limited

Name

Term appointed

No.of

to office

Excused

meetings

Attendance (times)

1.

Mr. Arsa Sarasin

23 Apr.04-30 Apr.07

4

-

4

2.

Mr. Paron Israsena

26 Apr.06-30 Apr.09

4

1

3

3.

Mr. Kosit Panpiemras

26 Apr.05-30 Apr.08

4

2

2

4.

Mr. Vinai Vamvanij

23 Apr.04-30 Apr.07

4

-

4

5.

Mr. Aswin Kongsiri

23 Apr.04-30 Apr.07

4

1

3

6.

Mrs. Sirinuj Bisonyabut

26 Apr.05-30 Apr.08

4

-

4

7.

Mr. Karel Vinck

26 Apr.05-30 Apr.08

4

-

4

8.

Dr. Jean-Luc Deleersnyder

26 Apr.06-30 Apr.09

4

-

4

9.

Mr. Michel Moser

23 Apr.02-26 Apr.05

1

1

-

10. Mr. Pinit Vongmasa

23 Apr.04-30 Apr.07

4

-

4

11. Mr. Bernard Tonnon

26 Apr.06-30 Apr.09

4

-

4

12. Committees The Board of Directors has established the Audit

accounting principles in Thailand. Important information is

Committee, the Strategic Committee and the Nomination &

sufficiently disclosed in the notes to the financial statements.

Remuneration Committee to help in supervising company

The Board of Directors has set up the Audit Committee,

operations. Each committee has its own members, scope of

made up of independent directors, to supervise and be

work and responsibilities, which are detailed in section

responsible for the integrity of the financial statements and

Management structure.

internal control system. The opinions of the Audit Committee are written in the annual report.

13. Internal controls

The Board of Directors has the opinion that the company

The company recognizes the importance of internal control

maintains adequate internal controls and can reasonably show

systems on both management and operational levels and has

credibility towards its financial statements as of December 31,

created an authority manual as the definitive reference. An

2005.

independent internal audit department, reporting directly to the Audit Committee, works as an internal checks and balances

15. Investor relations

and conducts audits as needed.

The Board of Directors has called for the disclosure of

The company also pays a great deal of attention to the

company information in an accurate, complete, transparent

risk management of the company. The company has set up a

and widespread manner. Financial information as well as general

currency-hedging program to minimize risk arising from the

information about the company, which might impact the value

fluctuation of foreign exchange. The company also provides a

of company stock, is readily available. Shareholders and other

framework to ensure the compliance with laws & regulations

interested parties may locate any such information through

and taxation issue.

the various Stock Exchange of Thailand media outlets or from the company’s website. Although a specific investor relations

14. Report of the Board of Directors

division has not been established, potential investors may

The Board of Directors is responsible for the financial

obtain information by contacting the company directly

statements of the company and its subsidiaries and the financial

at Tel: 02-661-9900 or at www.padaeng.co.th and

information disclosed in the annual report. These financial

www.padaeng.com or e-mail inquiries to info@padaeng.co.th.

statements are prepared in accordance with generally accepted


Annual Report 2005 Padaeng Industry 70 Public Company Limited

Shareholders structure

--->

The company has Baht 2,260 million registered capital, which is fully paid up. It is divided into 226,000,000 ordinary shares at Baht 10 per share. a) List of the top 18 shareholders of Padaeng Industry Public Co., Ltd. As of 9 May 2005, which is the latest date of the close of the shareholders’ register, is as follows:

No. Name 1.

Umicore

2.

Ministry of Finance

No. of shares

% of Total shares

106,002,442

46.90

31,200,000

13.81

3.

Thai NVDR Co., Ltd.

9,037,617

4.00

4.

Mr. Anan Utharntharm

7,380,800

3.27

5.

Bangkok Bank Public Company Limited

7,301,070

3.23

6.

Dr. Pichit Lerttamrab

3,007,100

1.33

7.

Somers (U.K.) Limited

2,617,153

1.16

8.

Mr. Mitree Srinarawat

2,335,500

1.03

9.

Mr. Cheewin Chaicheewinlikit

2,297,450

1.02

1,600,800

0.71

11. Ms. Wararat Waewmaneewan

1,400,000

0.62

12. Kimeng Securities (Thailand) Public Company Limited

1,388,300

0.61

13. Mitsiam International Ltd.

1,220,000

0.54

14. Ms. Thanu Chindarat

1,200,000

0.53

15. Mr. Uttasin Waewmaneewan

1,200,000

0.53

16. Ms. Tuanjai Naree

1,200,000

0.53

17. Thailand Iron Works Public Company Limited

1,170,000

0.52

18. Ms. Ulai Kumteeraj

1,161,600

0.51

10. Gerlach & Co-Dimensional Emerging Markets Value Fund, Inc.

Remark: Investors can look up the present shareholders of the company at www.padaeng.co.th or www.padaeng.com before the 2006 shareholders’ meeting.


Annual Report 2005 Padaeng Industry 71 Public Company Limited

b) Major shareholders No. Name 1.

Umicore

2.

Ministry of Finance

No. of shares

% of Total shares

106,002,442

46.90

31,200,000

13.81

Policy for payment of dividends

shareholders’ meeting on 26 April 2005 for the dividend

Under normal circumstances an amount of at least

payment of 2004 at Baht 0.40 per share to be paid on 25 May

5% of profits after corporate taxes must be put in reserve,

2005 with the company’s share transfer book closing for the

until the total amount in reserve equals at least 10% of the

right to receive the dividend on 9 May 2005 at 12.00 hr.

company’s authorized share capital, the company will then

A subsidiary will pay dividends only from profits

pay dividends up to 50% of profits after corporate taxes. An

generated by the subsidiary company. Each time the

exception can be made if the Board deems necessary for the

subsidiary company pays a dividend; an amount of at least

company to reserve part of the profit to cover the cash needs

5% of profits after corporate taxes must be put in reserve,

in the near future.

until the total amount in reserve equals at least 10% of the

From the company’s total operating results and financial position, the Board proposed and got approval in the

À

subsidiary company’s authorized share capital. There is no fixed dividend payment policy for the subsidiary.


Annual Report 2005 Padaeng Industry 72 Public Company Limited

Organization chart of Padaeng Industry Public Company Limited in the year 2005

Board of Directors Audit Committee

Strategic Committee

Nomination & Remuneration Committee Chief Executive Officer

Managing Director

Internal Audit

Advisor

Board Secretary

Technical Services

Mining & Exploration (Mae Sot)

Calcine Plant (Rayong)

Zinc Plant (Tak)

Finance & Accounting (Bangkok)

Marketing (Bangkok)

Human Resources & Corporate Admin. (Bangkok)

Procurement (Bangkok)


Annual Report 2005 Padaeng Industry 73 Public Company Limited

Management

6.

Padaeng Industry Public Company Limited is made

Director

up of 4 committees. 7. 1)

8. 9.

Manage company operations according to the law,

Mr. Pinit Vongmasa Director and Chief Executive Officer

rules and regulations, mission of the company and 10.

resolutions of the company shareholders

Mr. Bernard Tonnon Director and Managing Director

Determine the amount of dividend to be paid to

and Dr. Surin Tanticharoenkiat

shareholders 3.

Dr. Jean-Luc Deleersnyder Director

Directors are as follows:

2.

Mr. Karel Vinck Director

The Board of Directors The duties and responsibilities of the company’s Board of 1.

Mrs. Sirinuj Bisonyabut

Secretary to the Board of Directors

Determine the amount of compensation or bonus to be awarded to officers or employees or other staff

Remark : During the year 2005, Mr. Michel Moser

working for the company (permanent or temporary employees), not including pension benefits or other

resigned as PDI’s director.

remuneration paid to directors 4.

Review the company’s strategic work plan and

The definition of Independent Director

assessment of operations as submitted by the

1.

company or related company, which shall be inclusive

In carrying out its duties and responsibilities, the Board of

of the shares held by related persons.

Directors may authorize Chief Executive Officer, Managing Director, any director or any other individual to take action on

Holding shares not more than 5% of paid-up capital of the company, affiliated company, associated

Strategic Committee

2.

Being a director who does not take part in the management of the company, affiliated company,

its behalf.

associated company, related company or majority

The company’s Board of Directors consists of 10 members

shareholder of the company. Not being a employee,

as follows:

staff member or advisor who receives a regular salary 1. 2 3.

Mr. Arsa Sarasin

from the company, affiliated company, associated

Chairman

company, related company or majority shareholder

Mr. Paron Israsena

of the company; for example, the Chief Executive

Independent Director

Officer of the company may not be a member of the

Mr. Kosit Panpiemras

Audit Committee because he is directly responsible for the management etc.

Director 4. 5.

Mr. Vinai Vamvanij

3.

Being a director who has no direct of indirect benefit

Independent Director

or interest in finance and management of the company,

Mr. Aswin Kongsiri

affiliated company, associated company or majority

Independent Director

shareholder of the company.


Annual Report 2005 Padaeng Industry 74 Public Company Limited

Being a director who has no benefit or interest of the said nature during the period of 1 year before his

In 2005 the committee met 4 times and reported to the Board of Directors.

appointment as a director except where the Board

The Audit Committee’s scope of authority is as follows:

of Directors has carefully considered that such

1.

previous benefit or interest does not affect the

any information it sees relevant to its activities from

performance of duties and the giving of independent

the director or any managers of the company.

opinions. 4.

2.

Being a director who is not a related person or close 3.

shareholder of the company.

The Audit Committee will have no executive powers with regard to its findings and recommendations.

Being a director whom is not appointed as a representative to safeguard interests of the company’s directors, majority shareholders of shareholders who are related to the company’s majority shareholders.

6.

The Audit Committee may seek independent professional advice as it considers necessary.

relative of any management member or majority 5.

The Audit Committee shall have the authority to request

3)

Strategic Committee The Strategic Committee has been established on 13 July

2000 and at present consists of 4 members as follows:

Being capable of performing duties, giving opinions or reporting the results of performance of work

1.

according to the duties delegated by the Board of Directors free and clear of the management or the

2.

majority shareholders of the company including related persons or close relatives of the said persons.

jointly sign with the company seal’s affixed.

Mr. Pinit Vongmasa Member

3.

The authorized directors consist of Mr. Arsa Sarasin, Mr. Pinit Vongmasa and Mr. Bernard Tonnon two of whom shall

Mr. Vinai Vamvanij Member

Dr. Jean-Luc Deleersnyder Member

4.

Mr. Bernard Tonnon Member

and Dr. Surin Tanticharoenkiat 2)

Audit Committee

Secretary to the Strategic Committee

The Audit Committee has been established on 22 December 1998 and at present consists of 3 directors as follows:

In 2005 the committee held 4 meetings and reported to the Board of Directors. The Strategic Committee is responsible for preparing and

1. 2. 3.

Mr. Vinai Vamvanij

providing the company’s strategic work plan and assessment

Chairman of the Audit Committee

for consideration by the Board of Directors, as well as giving

Mr. Paron Israsena

recommendations to the Board of Directors. All matters

Audit Committee Member

regarding strategy and planning should be channeled through

Mr. Aswin Kongsiri

the Strategic Committee for presentation and/or recommendation

Audit Committee Member

to the Board of Directors for consideration. Moreover, the

and Dr. Surin Tanticharoenkiat

Strategic Committee acts as an advisor to the Board of

Secretary to the Audit Committee

Directors, but does not have decision-making authority.


Annual Report 2005 Padaeng Industry 75 Public Company Limited

4)

The Nomination and Remuneration Committee

6.

The Nomination and Remuneration Committee has been

Senior Vice President-Marketing

established on 26 February 2005 and at present consists of 3

7.

members as follows: 1.

Mr. Paron Israsena

3.

Mr. Philippe Salmon Senior Vice President-Finance & Accounting

The Selection of company directors and executives

Chairman 2.

Mr. Somluck Toonkumtornchai

The company has set up the Nomination and

Mr. Aswin Kongsiri

Remuneration Committee who will recommend the nomination

Member

of the directors. Of all the company’s directors, five are

Dr. Jean-Luc Deleersnyder

representatives from the top shareholders. Umicore of

Member

Belgium holds a total of 3 seats, the Ministry of Finance holds

and Dr. Surin Tanticharoenkiat Secretary to the Nomination and

1 seat and the Bangkok Bank Public Co., Ltd. holds 1 seat on the Board of Directors.

Remuneration Committee

The appointment of a director requires a majority vote from the eligible voting shareholders present at the

The Nomination and Remuneration Committee is responsible for 1.

shareholder’s meeting. Voting shall be according to the following guidelines:

Recommending new nominees to the Board to

1.

Each shareholder shall have one vote for each share.

fill positions made vacant by directors who

2.

Each shareholder must exercise all the votes he has

complete their terms. The Committee then makes

under item (1) to elect one or several persons to be

recommendations to the Board for ultimate

directors but cannot divide his votes to any person

shareholder approval. 2.

Recommending to the Board of Directors guidelines

particularly. 3.

The candidates shall be ranked in order descending

and methods of payment of remuneration for the

from the highest number of votes received to the lowest,

directors, and committees appointed by the Board.

and shall be elected as directors equivalent to the number of directors who are to be elected.

The executives 1. 2.

4. 5.

If there is a tie in the last to be elected and this exceeds

Mr. Arsa Sarasin

the said number of directors, the presiding Chairman

Chairman

shall have an additional casting vote.

Mr. Pinit Vongmasa Chief Executive Officer

3.

4.

Remuneration for executives consists of:

Mr. Bernard Tonnon

1.

In the form of cash

Managing Director

a)

In the year 2005 the company paid a total of

Mr. Chaiyan Roojnawate

Baht 5,914,285.71 to 11 Directors (one director

Senior Vice President-Zinc Plant Operations

resigned during the year 2005), 4 Strategic Committee

Dr. Kitisil Kalayanakoul

Members and 3 Audit Committee Members as

Senior Vice President-Calcine Plant

directors’ fees and directors’ remunerations, detail as follows:


Annual Report 2005 Padaeng Industry 76 Public Company Limited

Directors

Position

1.

Mr. Arsa Sarasin

Chairman

2.

Mr. Paron Israsena

Remuneration

Director bonus *

(Baht)

For 2005 (Baht)

280,000.00

350,000.00 230,000.00

Independent Director

245,000.00

Member of Audit Committee

200,000.00

3.

Mr. Kosit Panpiemraj

Director

230,000.00

230,000.00

4.

Mr. Vinai Vamvanij

Independent Director

260,000.00

230,000.00

Audit Committee Chairman

200,000.00

Strategic Committee Member 5.

Mr. Aswin Kongsiri

80,000.00

Independent Director

245,000.00

Member of Audit Committee

200,000.00

230,000.00

6.

Mrs. Sirinuj Bisonyabut

Director

260,000.00

230,000.00

7.

Mr. Karel Vinck

Director

260,000.00

230,000.00

8.

Dr. Jean-Luc Deleersnyder

Director

260,000.00

230,000.00

9.

Mr. Michel Moser

Strategic Committee Member

80,000.00

Director

14,285.71

-

260,000.00

230,000.00

(Until 26 April 2005) 10. Mr. Pinit Vongmasa

Director and Chief Executive Officer Strategic Committee Member

11. Mr. Bernard Tonnon

Director and Managing Director

80,000.00 260,000.00

Strategic Committee Member Total

230,000.00

80,000.00 3,494,285.71

2,420,000.00

Remark: Director bonus will be proposed to the 2006 Shareholders’ Meeting for approval. b)

The company paid a total of Baht 36,373,400 to the

Corporate governance

7 executives in the year 2005, as salaries and

The company conducts business in conformity with

bonuses.

guidelines of the Code of Best Practices for Directors of Listed Companies, as set out by the Stock Exchange of Thailand.

2.

In other forms:

By doing so, the company demonstrates its commitment

The company contributed to employees’ provident

to standards and conduct in building confidence of the

fund savings, as a percentage of salary and period of time

shareholders, investors and other related entities or persons.

enrolled in the fund, ranging from 5 to 10%.

Moreover, the Audit Committee, through the internal audit department, supervises financial statements, internal control, and practices of good corporate governance to ensure compliance


Annual Report 2005 Padaeng Industry 77 Public Company Limited

to policies. The company has also enacted a Code of Ethics

Internal control

by which all executives and employees are expected to adhere

During the Board of Director’s meeting, No. 01-2006,

to in conducting business. In addition, to ensure efficient and

held on Thursday 23 February, 2006, the Board assessed the

productive business operations as planned, a Strategic Committee

system of internal control, the organization and external

has been established with the responsibility of forming the

conditions, risk management, method of disseminating,

company’s strategic plan for proposal to the Board of Directors.

communicating and monitoring information, it was determined

Along with the mechanisms described above, the

that the company employs an adequate system of internal

company has taken steps in other areas as well, in an effort to

control regarding transactions with major shareholders,

be accepted by our stakeholders and other related entities, as

directors, management and related persons, as well as internal

having good corporate governance as called for by the Stock

control in other areas.

Exchange of Thailand.

Following is an opinion of the auditor, Mrs. Nattaporn Phan-Udom, Certified Public Accountant, Registration No.

Controlling the use of internal information

3430, PricewaterhouseCoopers ABAS Ltd.

During each Board of Director’s meeting, a summary

In planning and performing our audit of the financial

of company holdings by executives is submitted for review, as

statements of Padaeng Industry Public Company Limited

a mean of monitoring any use of inside information for gains

for the year-ended 31 December 2005, we obtained an

by executives.

understanding of the internal control system in order to determine the nature, timing and extent or our audit procedures, for the

Personnel

purpose of expressing our opinion on the financial statements

At year end, the total number of company employees

and not to provide an opinion on the internal control system.

stood at 766, consisting of 90 employees at the Bangkok

The management of Padaeng Industry Public Company

office, 422 employees at the Smelter plant in Tak province,

Limited are responsible for establishing and maintaining an

162 employees at the Mae Sot mine and 92 employees at the

internal control system to assist in achieving management’s

Calcine plant in Rayong province. In year 2005, compensation

objective of ensuring, as far as practicable, the orderly and

paid to employees as salaries and bonuses. In addition, the

efficient conduct of its business, including adherence to

company contributed to employees’ provident fund savings,

management policies, the safeguarding of assets, the prevention

as a percentage of salary and period of time enrolled in the

and detection of fraud and error, the accuracy and completeness

fund, ranging from 5-10%.

of the accounting records, and the timely preparation of reliable

The company’s total workforce consists of 766

financial information.

employees. Approximately 23% of employees have earned

Because of inherent limitations in any internal control

at least a bachelor’s level degree, while 39% have earned

system, errors or irregularities may nevertheless occur and not

an Associate’s or Vocational level degree. The remaining

be detected. Also, projection of any evaluation of the internal

employees have studied at less than vocational level. The

control system to future periods is subject to the risk that

majority of company employees reside in Tak province and

procedures may become inadequate because of changes in

the northern region of the country, where the smelter plant

conditions or that the effectiveness of the design and operation

and mine is located. The average age of employees is 39 years,

of policies and procedures may deteriorate.

while average tenure of service with the company is 13 years. For the year, employee turnover rate equaled 3.13%.


Annual Report 2005 Padaeng Industry 78 Public Company Limited

Audit fee

However, after consideration of the internal control

Audit fee

system, we noted no matters involving the internal control

1.

system and its operation that we consider to be material

The company and its subsidiaries has paid audit fees

weaknesses under Thai Auditing Standard 400 “Risk

to audit companies, individual auditors or other businesses

assessments and internal control�. Material weaknesses as

relating to the auditors and auditing companies during the

defined in the Auditing Standard are the weaknesses in internal

previous fiscal year totaling Baht 3,500,000. 2.

control that could have a material effect on the financial

Non-audit fee

The company and its subsidiaries has paid non-audit

statements.

fees, which include services such as auditing of financial Related transactions

statements prepared under guidelines other than generally

Look for details of related transactions in notes to

accepted accounting principles and other legal and tax related

financial statement no. 27, Related party transactions.

services, to audit companies, individual auditors or other

The company’s policy on related transactions is

businesses relating to the auditors and auditing companies

based on the principles of free trade, using the world price as

during the previous fiscal year totaling Baht 75,000. An

a reference, and is conducted in the best interest of the company.

additional non-audit fee will be paid in the future for services

In this respect, the internal audit department has also carried

previously agreed upon but not yet provided totaling Baht

out an audit on the related party transaction in year 2004 and

675,000.

will continue doing so on a regular basis.


Annual Report 2005 Padaeng Industry 79 Public Company Limited

Structure of corporate shareholding

Number and

Name

Address

(A) Padaeng Industry Public 191/18-25 CTI Tower, 26th-27th Floor, Company Limited

Nature of business

Mining and smelting of zinc ore and

Number and

types

types

of all the shares

of all the shares

issued and

held by the

paid up

company

No. of

Par value

No. of

ordinary

each

ordinary

% of Total

shares

(Baht)

shares

shares

226,000,000

10

-

-

Land development and real estate

3,200,000

25

3,200,000

100

2,960,900

62

2,349,206

79.34

10,000,000

25

6,197,746

61.98

USD 200,000

-

-

100

1,000

100

1,000

100

100 90,000

55

55

100,100

0.78

Ratchadaphisek road, Khlong Toei district,

concentrate as well as marketing of zinc

Bangkok 10110 Tel. 0-2661-9900

metal and other by-products

Fax 0-2261-1108-10 (B) Affiliated companies 1. Padaeng Properties

191/18-25 CTI Tower, 26th-27th Floor,

Company Limited

Ratchadaphisek road, Khlong Toei district, Bangkok 10110 Tel. 0-2661-9900 Fax 0-2261-1108-10

2. Puthep Company

191/18-25 CTI Tower, 26th-27th Floor,

Prospecting and mining for copper and

Limited

Ratchadaphisek road, Khlong Toei district,

other base metals

Bangkok 10110 Tel. 0-2661-9900 Fax 0-2261-1108-10 3. Padaeng Poongsan

191/18-25 CTI Tower, 26th-27th Floor,

Manufacturing of copper and brass sheet/

Metals Company Limited

Ratchadaphisek road, Khlong Toei district,

strip coin blank and case cup

N.B. Ceased operation

Bangkok 10110 Tel. 0-2661-9900

since February 1999

Fax 0-2261-1108-10

and in process of liquidation and is not consolidated into the financial statement. 4. Padaeng Industry (Laos) 49 Ban Dongmieng, Khum 1, Unit 6,

Prospecting and mining for base metals

Company Limited

in Laos

Chanthabuli, Vientiane, Laos

5. Padaeng International

191/18-25 CTI Tower, 26th-27th Floor,

Investing in exploration and mine

Mining Company Limited

Ratchadaphisek road, Khlong Toei district,

development project in Vietnam

Bangkok 10110 Tel. 0-2661-9900 Fax 0-2261-1108-10 6. Sila Enterprise

68/5-68/6 Asia Highway,

Company Limited

Mae Sot district, Tak

Marketing of aggregate limestone

Tel. 0-5553-3777 Fax 0-5554-7285 (C) Other Companies 1. ASEAN Potash Mining

16th Floor, SG Tower, 161/1

Punblc Company Limited

Soi Mahadlekluang 3, Rajdamri road, Lumpini, Pathumwan, Bangkok 10330 Tel. 0-2650-2711 Fax. 0-2650-2715

Potash mining operation

12,870,000

100


Annual Report 2005 Padaeng Industry 80 Public Company Limited

Other references

Registrar

Thailand Securities Depository Company Limited The Stock Exchange of Thailand Building, 4 Floor, 62 Ratchadaphisek road, Klong Toei, Bangkok 10110, Thailand Tel. 0-2229-2800 Fax. 0-2359-1259

Auditor

Mrs. Nattaporn Phan-Udom and Ms. Somsri Dhanyacheevee and Ms. Wimon Chiamchittrong and Mrs. Anothai Leekitwattana Certified Public Accountant Registration Nos. 3430, 1905, 3365 and 3442 respectively, PricewaterhouseCoopers ABAS Ltd. 15th Floor Bangkok City Tower 179/74-80 South Sathorn road, Bangkok 10120 Tel. 0-2286-9999 Fax. 0-2286-5050

Legal adviser

Dr. Prajit & Suchinda International Law Office 1793/16 Sirinthon road, Bangplad, Bangkok 10700, Thailand Tel. 0-2424-5693 Fax. 0-2435-8644

Adviser or contractor under management agreement

- None -


Annual Report 2005 Padaeng Industry 81 Public Company Limited

SEC contents in accordance with form 56-2

1. General information 1.1

The company

1.2

Juristic persons in which the company holds more then 10% of shares

79

1.3

References

80

2. Statement by the Chairman of the Board or Board of Directors 3. Statement by the Audit Committee 4. Summary of the company’s financial data 4.1

Data from financial statements

4.2

Financial ratios

1

3 31 5

5. Nature of business 5.1

Business in brief

5.2

Structure of revenues

5.3

Changes during the past year

6. Factors of risk

24 23 6-19 22

7. Shareholders and management 7.1

Shareholders

7.2

Management structure

70

7.3

Selection of directors and executives

75

7.4

Remuneration for executives

75

7.5

Other terms of remuneration

7.6

Corporate governance

7.7

Controlling the use of internal information

77

7.8

Internal control

77

72-75

76 67-69

8. Connected persons and connected transactions

73

9. Management discussion and analysis

20

10. Financial statements

32-66


Annual Report 2005 Padaeng Industry 82 Public Company Limited

PADAENG INDUSTRY PUBLIC COMPANY LIMITED

BANGKOK OFFICE CTI Tower, 26th-27th Floor,191/18-25 Ratchadaphisek road, Khlong Toei district, Bangkok 10110, Thailand Telephone : +66 (0) 2661-9900 Fax.

: +66 (0) 2261-1108-10, (0) 2661-9490

E-mail: info@padaeng.co.th Website: www.padaeng.com, www.padaeng.co.th

TAK OFFICE 94 Moo 1, Ban Klonghuaysai Asian Highway 409-410, Nongbuatai subdistrict, Muang district, Tak 63000, Thailand Telephone : +66 (0) 5551-7444 , (0) 5555-8500 Fax. : +66 (0) 5551-7440 , (0) 5555-8511

MAE SOT OFFICE 13 Moo 4 Phratad Padaeng subdistrict, Mae Sot district, Tak 63110, Thailand (P.O.Box 29 Amphoe Mae Sot Tak 63110) Telephone : +66 (0) 5553-3016-7, (0) 5553-3019 Fax. : +66 (0) 5553-3018

RAYONG OFFICE Padaeng Industrial Estate, 15 Padaeng road, Maptaphut subdistrict, Muang district ,Rayong 21150, Thailand Telephone : +66 (0) 3868-3318-20 Fax. : +66 (0) 3868-3321, (0) 3868-3361


Created & Designed by Graphic Station Co., Ltd. 0-2930-3029


www.padaeng.com info@padaeng.co.th

Pdi 05  

PDI_2005 PADAENG INDUSTRY PCL Annual Report 2005

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