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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Message from the Chairman What a year 2009 has turned out to be! From the extreme bearishness witnessed in the first quarter of the year due to the concern of deteriorated world economy, the rubber market has steadily improved over the course of the year. Indeed from July 2009 onwards, the rubber market has been on a positive uptrend, recording the highest close on the very last working day of the year in December. Rubber price has effectively rallied from the low of US$ 1,350 per metric ton to US$ 2,900 per metric ton by the end of the year. The strong recovery in the rubber market has mirrored many of the other markets including equity, foreign exchange and all other commodities markets. As indicated in last year report, our company has encountered many potential defaults and problems on many outstanding open contracts as a consequence of nearly 60 per cent collapse in the rubber price. However, along with the hard negotiation effort coupled with a steady recovery of the rubber prices, we have managed to convince many counterparties to work out a compromise solution and resolve all contracts amicably. We are pleased to say that despite the late 2008 to early 2009 hiccup, our trust and confidence in the rubber industry remains intact. We have continued to improve our position in the Chinese market who has now commanded nearly 30 per cent of the global tire industry. On Christmas day 2009, the Company has been awarded the number one exporter of natural rubber into China by the Ministry of Agriculture in Thailand. We are proud and thankful for this award and will certainly work to continue to expand our market shares both in China as well as the rest of the world. The year of 2009 has also created an opportunity for our company as competitions have shied away from the rubber industry. We have not only expanded our capacity in our Palembang factory in South Sumatra Island - Indonesia, we have also acquired an almost brand new SIR20 factory in Pontianak city Kalimantan Island, Indonesia. In Thailand, we had made decision to go ahead of constructing STR block rubber factory in Nongkhai province. It is the 1st factory in our group located in North Eastern area of which becomes another big part of rubber plantation area in Thailand. In respect of down stream industry – latex examination gloves which was accomplished tremendously over the year, the affiliated company has proceed with capacity expansions at both existing facility in Hat Yai, Songkhla province and new factory construction in another province of down south Thailand. With the new expansion, our glove manufacturing and exporting business will add on a significant out put in 3 years time frame maintaining status quo world leader. We believe our company is in the right track for a great future. Our current and future expansion plans will certainly reap a good reward for all shareholders in time. We have achieved a record profit of 2,142 million Baht in 2009 and believed the bulk of the earning is sustainable. All operations within the group are performing well and our marketing team has continued to break into new territories. Our sales in 2009 also mirrored that of the previous couple of years’ hard work, recording a sale volume of 759,021 metric tons of rubber. It is our best operation since the establishment of the company. This performance is commendable when we take into account the very difficult situation prevailing in the first half of 2009. Again, we would like to thank all stakeholders for their support and understanding. We look forward to an even better future in 2010.

( Mr.Somwang Sincharoenkul ) Chairman Sri Trang Agro-Industry Public Company Limited March 5, 2010 -1-


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Board of Directors Mr. Mr. Mr. Mr. Mr. Mrs. Mr. Mr. Mr.

Somwang Prasit Viyavood Chaiyos Puang Promsuk Anan Kitichai Prakob

Sincharoenkul Panidkul Sincharoenkul Sincharoenkul Cherdkiatgumchai Sinchareonkul Pruksanusak Sincharoenkul Visitkitjakarn

Mr.

Kriang

Yanyongdilok

Mr.

Samacha

Potavorn

Chairman Vice Chairman Managing Director Director Director Director Director Director Independent Director / Chairman of Audit Committee Independent Director / Audit Committee Independent Director / Audit Committee

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

General Information Company name (Thai) Company name (English) Stock abbreviation Business registration No. Authorize capital Paid-up capital Type of shares Main business

: : : : : : : :

Head office address

:

Website Branch address

: :

Factory addresses

:

No. 1.

2.

3.

4.

5.

   ภ  ภ () Sri Trang Agro-Industry Public Company Limited STA 0107536001656 1,000 Million Baht 1,000 Million Baht 200 million common shares Producer and Exporter Rubber Smoked Sheets, Block Rubber, and Concentrated Latex 10 Soi 10 Phetkasem Road, Hatyai, Songkhla 90110 Tel 0-7434-4663 (Automatic 14 Lines) Fax 0-7434-4676, 0-7434-4677, 0-7423-7423 http://www.sritranggroup.com 36/82 23rd Floor, P.S. Tower, Sukhumvit 21 Road (Asoke) Klongtoey Nua, Wattana, Bangkok 10110 Tel 0-2259-2964-71 Fax 0-2259-2958 Address

13/1-5 Jingjit Road, Thupthiang, Muang, Trang 92000 Tel

0-7521-0500-2

Fax

0-7521-0503

99/3 Moo 7 Karnchanawanich Road, Phangla, Sadao, Songkhla 90170 Tel

0-7445-2623-6

Fax

0-7445-2622

1 Moo 2 Thumyai, Thungsong, Nakhonsrithammarat 80110 Tel

0-7532-9830-3

Fax

0-7577-3223

399 Moo 7 Huay Nang, Huay Yod, Trang 92130 Tel

0-7529-4313-5

Fax

0-7529-4316-7

101/1-4 Moo 7 Surat Thani-Nakornsrithammarat Road, Praiwas, Karnchanadit, Surat Thani 84160

6.

Tel

0-7728-0580, 089-873-1486

Fax

0-7728-0582, 081-956-0559

68/2 Moo 4 Surat Thani-Punpin Road, Watpradoo, Muang, Surat Thani 84000 Tel

0-7720-0521-3

Fax

0-7720-0524

-3-


Sri Trang Agro-Industry Public Company Limited

No. 7.

8.

9.

Annual Report 2009

Address 41/1 Moo 13 Donyang, Pratew, Chumphorn 86210 Tel

0-7757-8410-2

Fax

0-7757-8414

139 Moo 2 Trang-Sikao Road, Na Muangphet, Sikao, Muang, Trang 92000 Tel

0-7557-0042-3

Fax

0-7557-0041, 0-7757-0046

136/1 Moo 1 Siroros Road, Khaotoom, Yarang, Pattani 94160 Tel

0-7326-2784

Fax

0-7326-2785

Names of subsidiaries in which the Company holds more than 10% of the shares No. Address 1.

Num Hua Rubber Company Limited 99 Moo 3 Samnakkham, Sadao, Songkhla 90120 41 Moo 3 Samnakkham, Sadao, Songkhla 90120

2.

Tel

0-7441-2268, 0-7441-1982-3

Fax

0-7441-2255

Anvar Parawood Company Limited 101 Moo 3 Samnakkham, Sadao, Songkhla 90120

3.

Tel

0-7441-2756-7

Fax

0-7441-2853

Premier System Engineering Company Limited 123 Moo 8 Karnchanawanich Road, Banpru, Hatyai, Songkhla 90250

4.

Tel

0-7447-1480-3, 0-7447-1368

Fax

0-7447-1290, 0-7447-1430

Rubberland Products Company Limited 109 Karnchanawanich Road, Pahtong, Hatyai, Songkhla 90230 Tel

0-7429-1223-4, 0-7429-1755, 0-7429-1476

Fax

0-7429-1477

338 Moo 2, Noansomboon, Bungkan, Nongkai 43140 Tel / Fax 5.

N/A

Siam Sempermed Corporation Limited 110 Karnchanawanich Road, Pahtong, Hatyai, Songkhla 90230 Tel

0-7447-1471, 0-7429-1648-9, 0-7429-1471-5

Fax

0-7429-1650

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

No. 6.

Address Semperflex Asia Corporation Limited 110/1 Karnchanawanich Road, Pahtong, Hatyai, Songkhla 90230

7.

Tel

0-7447-1231-5

Fax

0-7447-1230

Semperform Pacific Corporation Limited 110/2 Karnchanawanich Road, Pahtong, Hatyai, Songkhla 90230

8.

Tel

0-7447-1231-5

Fax

0-7447-1230

Sadao P.S. Rubber Company Limited 207/1 Padang Besar Road, Sadao, Songkhla 90120

9.

Tel

0-7446-0483-5, 0-7441-1838

Fax

0-7441-1837

Starlight Express Transport Company Limited 13/1 Jingjit Road, Thupthiang, Muang, Trang 92000

10.

Tel

0-7521-0500-2

Fax

0-7521-0503

Startex Rubber Corporation Limited 10 Soi 10 Phetkasem Road, Hatyai, Songkhla 90110

11.

Tel

0-7521-0500-2

Fax

0-7521-0503

Thai Tech Rubber Corporation Limited 2 Chuti Uthit 3 Road, Hatyai, Songkhla 90110

12.

Tel

0-7423-0768, 0-7423-0406-7, 0-7423-9063-4

Fax

0-7423-8650

Pattana Agro Futures Company Limited 33/84 Wallstreet Tower, 17th floor, Surawongse Road, Bangrak, Bangkok 10500

13.

Tel

0-2632-8826

Fax

0-2632-8825

Sri Trang Rubber and Plantation Company Limited 13/1-5 Jingjit Road, Thupthiang, Muang, Trang 92000 Tel

0-7521-0500-2

Fax

0-7521-0503

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Sri Trang Agro-Industry Public Company Limited

No. 14.

Annual Report 2009

Address Sri Trang International Pte. Ltd. 1 Raffles Place, No.28-03, OUB Centre, Singapore 048616

15.

Tel

001-65-6532-5210, 001-65-6532-5321

Fax

001-65-6532-7501

Sri Trang USA Inc. 300 Preston Ave., Suite 400, Charlottesville, Virginia 22902, U.S.A.

16.

Tel

001-1-434-296-0080, 001-1-434-244-0089

Fax

001-1-434-296-0098

Sempermed USA Inc. 13900 49th Street North, Clearwater, Florida 33762, U.S.A.

17.

Tel

001-1-800-366-9545

Fax

001-1-800-763-5491

Shanghai Foremost Plastic Industrial Co., Ltd.* 159 Lane 356, Chexin Highway, Chedun Town, Songjiang District, Shanghai 201611, People Republic of China (P.R.C.)

18.

Tel

001-86-21-5760-9389

Fax

001-86-21-5760-9296

Shanghai Semperit Rubber & Plastic Products Co., Ltd. 2 Bridge, Beisong Road, Minhang, Shanghai 20111, People Republic of China

19.

Tel

001-86-21-6409 0850 , 001-86-21-6409 0300

Fax

001-86-21-6409 0850

PT Sri Trang Lingga Indonesia TPA. 2, RT. 26 & 29, Keramasan, Palembang, Indonesia

20.

Tel

001-62-711-445 666

Fax

001-62-711-445 222

Semperflex Shanghai Co., Ltd. Shanghai Chemical Industry Park, Fengxian Subzone, Canggong Road 1255, Shanghai 201424, People Republic of China (P.R.C.) Tel

001-86-21-5744-8386

Fax 001-86-21-5744-8385 Note: * 100% held by a subsidiary company, Siam Sempermed Corp., Ltd.

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Sri Trang Agro-Industry Public Company Limited

No. 21.

Annual Report 2009

Address Sempermed Singapore Pte. Ltd. 10 Anson Road, #09-24, International Plaza, Singapore 079903

22.

Tel

N/A

Fax

N/A

Sempermed Brazil Comercio Exterior LTDA** Rua João Franco de Oliveira, 750 – Unileste, Piracicaba – São Paulo, Brasil Zip Code:13.422-160

23.

Tel

N/A

Fax

N/A

Shi Dong Investment Pte Ltd.*** 1 Raffles Place, No. 28-03, OUB Centre, Singapore 048616

24.

Tel

001-65-6532-5210, 001-65-6532-5321

Fax

001-65-6532-7501

PT Star Rubber**** Jl. Trans Kalimantan, Km. 16, Kampung Jawa Tengah, Sei Ambawang Kab, Kubu Raya Kalbar, Indonesia Tel

001-62-85-750244759

Fax N/A Note: ** 100% held by a subsidiary company, Sempermed Singapore Pte. Ltd. *** 100% held by a subsidiary company, Sri Trang International Pte. Ltd. **** 99% held by a subsidiary company, Shi Dong Investment Pte Ltd. Securities Registrar Thailand Securities Depository Co., Ltd. 62 Thailand Securities Exchange Building, 4th, 7th Floors, Ratchadaphisek Road, Khlong Toey, Bangkok 10110 Tel 0-2229-2800, 0-2654-5999, Fax 0-2359-1259 Auditors Miss. Nongram Laohaareedilok, Certified Public Accountant, Registration No. 4334, and/or Mr. Pradit Rodloytuk, Certified Public Accountant, Registration No. 218 AST Master Co., Ltd. 790/12 Thonglor Tower, Soi Thonglor 18, Sukhumvit 55 Road, Khlongton, Khlongtoey, Bangkok 10110 Tel 0-2714-8842-3, 0-2381-8016-7, Fax 0-2381-5716

-7-


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Legal Advisor Mr. Wasin Uchuwasin, Wasin Law Office 234 Niphat Uthit 1 Road, Hatyai, Songkhla 90110 Tel 0-7424-5789, 0-7424-6081, Fax 0-7424-6081

Kamthorn, Suchet & Somsak Co., Ltd. Suite 31A, Sin Sathorn Tower 77/132 Krungthonburi Road, Klongtonsai, Klongsarn, Bangkok 10600 Tel 0-2440-0288-97, Fax 0-2440-0298-99

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Summary of Financial Results Operating performance of the Company and subsidiaries in 2007-2009 Unit : Thousand Baht 2008 2009

2007 Sales income

50,017,125

60,134,198

45,585,079

Total revenue

50,102,941

60,199,167

46,234,981

2,154,129

2,917,656

3,209,771

108,375

617,927

2,141,986

5.00

5.00

5.00

200,000

200,000

200,000

Earning per share – Baht/share

0.54

3.09

10.71

Dividend per share – Baht/share

1.00

1.00

3.00

Total assets

17,973,383

15,180,575

23,105,359

Total liabilities

14,067,826

9,772,775

15,736,588

Paid–up capital

1,000,000

1,000,000

1,000,000

Shareholders' equity

3,905,558

5,407,800

7,368,771

Minority interest

9,103

(5,666)

36,270

Book value per share – Baht/share

19.53

27.04

36.84

Net profit margin

0.22%

1.03%

4.63%

Return on equity

2.69%

13.27%

33.53%

Return on assets

0.66%

3.73%

11.19%

Gross profit Net profit (loss) Par value – Baht/share The weighted average number of common shares – thousand shares

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Background and Type of Business Sri Trang Agro-Industry Public Company Limited was established in 1987 with a registered capital of 31 Million Baht. The Company is a producer and exporter of natural rubber, which is one of the most important agricultural products in the southern part of Thailand. Directed by Mr. Somwang Sincharoenkul, the management has continuously expanded its operations to support the growth of the domestic and international rubber industries.

The

Company went public and listed on the Stock Exchange of Thailand in 1993. The company started with rubber smoked sheets which is the main raw material for the automobile tire industry. Founded in 1988, Rubber Land Products Co., Ltd. began to produce concentrated latex to support the demand of the medical latex glove and elastic thread industries. In 1989, the Company created a partnership with an Austrian company to found Siam Sempermed Corporation Limited which produces the medical latex gloves. In 1993 the Company invested in a joint venture with Thai Tech Rubber Corporation Limited to start the STR block rubber project in response to the increasing demand for STR block rubber as raw material in the automobile tire industry.

To become a leader in the natural rubber industry, the

management realized the Company needed to develop its businesses to become a universal producer in order to add value to its products. In addition, the Company has continuously expanded into finished products by creating partnerships with both domestic and international partners.

It has founded new companies to support the production in the area that each

company can supplement one another in terms of raw materials, transfer of technical know-how, and services. Moreover the Company’s policy, in line with the government’s and BOI’s, to focus on export-driven production which has assisted the Company to attain much higher purchasing power than domestic market alone. This policy has benefited the country by bringing enormous amounts of foreign currencies into the Kingdom each year. Besides that, the use of domestic products as raw materials has a significant and positive effect on the local employment and economy. As one of the large producers and exporters, the Company focuses strategically on improving the efficiency and competitiveness in the international market.

The Company

established Trading and Distribution Units in important regions to support marketing activities and to expand distribution channels to penetrate new markets. This strategy has strengthened the image of Thai companies in the global market as well. Currently, there are 24 companies in Sri Trang Group with total assets of more than 23,100 Million Baht. The Company is well known as one of the largest groups in the Thai rubber industry, covering full-scale as rubber exporter, rubber distributor, and rubber products manufacturer.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Description of Sri Trang Group Primary Rubber Product Company Sri Trang Agro-Industry PLC. (Trang Branch)

Business rubber smoked sheets concentrated latex

Sri Trang Agro-Industry PLC. (Hat Yai Branch)

rubber smoked sheets

Sri Trang Agro-Industry PLC. (Thung Song Branch)

STR block rubber

Sri Trang Agro-Industry PLC. (Sikao Branch)

STR block rubber

Sri Trang Agro-Industry PLC. (Chumporn Branch) Sri Trang Agro-Industry PLC. (Surat Thani Branch) Sri Trang Agro-Industry PLC. (Kanjanadit Branch) Sri Trang Agro-Industry PLC. (Huay Nang Branch) Rubberland Product Company Limited

concentrated latex

concentrated latex

Thai Tech Rubber Corporation Limited

STR block rubber

Num Hua Rubber Company Limited

concentrated latex

concentrated latex concentrated latex STR block rubber

STR block rubber Sadao P.S. Rubber Company Limited

rubber smoked sheets

PT Sri Trang Lingga Indonesia

STR block rubber

PT Star Rubber

STR block rubber

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Quality System - ISO 9001:2008 by TUV Rheinland in 2009 - ISO 9001:2008 by TUV Rheinland in 2009 - ISO 14001:2004 by TUV Rheinland in 2009 - ISO 9001:2008 by TUV Rheinland in 2009 - ISO 14001:2004 by TUV Rheinland in 2009 - OHSAS 18001:1999 by TUV Rheinland in 2003 - ISO 9001:2000 by TUV Rheinland in 2003 - ISO 14001:2004 by TUV Rheinland in 2009 - ISO 9001:2000 by TUV Rheinland in 2005 - ISO 14001:2004 by TUV Rheinland in 2009 - ISO 9001:2008 by TUV Rheinland in 2009 - ISO 9001: 2008 by TUV Rheinland in 2009 - ISO 9001:2008 by TUV Rheinland in 2009 - ISO 9001:2008 by TUV Rheinland in 2010 - ISO 9001:2008 by TUV Rheinland in 2009 - ISO 9000:2008 by TUV Rheinland Industry Service in 2010 - ISO 14000:2004 by TUV Rheinland Industry Service in 2005 - ISO 9001:2008 by TUV Rheinland in 2009 - ISO 9001:2000 by TUV Rheinland in 2006 - ISO 9001:2008 by TUV Rheinland in 2009 - ISO 9001:2008 by TUV Rheinland in 2009 - ISO 9001:2008 by SNI in 2010


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Finished/Value Added Products Company Business Quality System Siam Sempermed Corporation Limited powdered and - ISO 9001:2000 by TUV SUD powder-free latex Management Service GmbH in 2008 - ISO 13485:2003 by TUV SUD examination gloves Product Service GmbH in 2008 - ISO 13485:2003 (CMDCAS) by TUV SUD America Inc. in 2008 - ISO/IEC 17025:2005 by Department of Medical Sciences, Ministry of Public Health, in 2007. - Good Manufacturing Certificate (GMC) Certificate by Foods and Drugs Administration, Ministry of Public Health, in 2008 Shanghai Foremost Plastic Industrial latex examination - ISO 9001:2000 by TUV NORD CERT Co., Ltd. gloves GmbH in 2009 - ISO 13485:2003 by TUV NORD Semperform Pacific Corporation Limited Semperflex Asia Corporation Limited Semperflex Shanghai Company Limited Shanghai Semperit Rubber & Plastic Products Co., Ltd.

CERT GmbH in 2009 - ISO 9001:2000 by TUV SUD Management Service GmbH in 2008 High-pressure - ISO 9001:2000 by TUV SUD hydraulic hose Management Service GmbH in 2008 High-pressure hydraulic hose escalator handrails injection-molded rubber and plastic part

Trading / Distributor Company Sempermed USA Inc. Sri Trang International Pte. Ltd. Sri Trang USA Inc. Sempermed Brazil Comercio Exterior

Business Distributes latex examination gloves in U.S. market Trading / distributing natural rubber in Singapore market Trading / distributing natural rubber in U.S. market Trading / distributing latex and synthetic gloves in Brazil Market.

LTDA Other businesses Company Anvar Parawood Company Limited Startex Rubber Company Limited Premier System Engineering Company Limited

Business produces parawood for the furniture/pallets rubber and oil palm plantation

Quality System - ISO 9001:2008 by TUV Rheinland in 2009

research/development in machinery/ production process and IT services

- ISO 9001:2000 by Thailand Institute of Scientific and Technological Research (TISTR) in 2004 - OHSAS 18001:1999 by TUV Rheinland in 2006 - ISO/IEC17025:2005 by Thai Industrial Standard Institute(TISI) in 2006

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Sri Trang Agro-Industry Public Company Limited

Company Starlight Express Transport Company Limited Pattana Agro Futures Company Limited (Broker No. 2012)

Annual Report 2009

Business logistic services for Sri Trang Group

Quality System ISO 9001:2008 by Thailand Institute of Scientific and Technological Research (TISTR) in 2009 Brokerage activities in Agro Future Exchange of Thailand

Sri Trang Rubber and Plantation Company Limited

Rubber plantation

Shi Dong Investment Pte Ltd. Sempermed Singapore Pte Ltd.

Invest in PT Star Rubber Invest in Sempermed Brasil Comercio Exterior LTDA.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Group Shareholding Structure

Sri Trang Agro-Industry PLC.

Primary Rubber Produce

Finish / Value added Product

Trading / Distribution

Service / Other Business 99.94%

99.99%

40.23%

Rubberland Products 99.99%

100%

Siam Sempermed 42.5%

Num Hua Rubber

100%

Shanghai Foremost Plastic

100%

Sri Trang International

99%

Shi Dong Investment

Anvar Parawood

PT Star Rubber 99.99%

100%

Semperflex Asia

Premier System Engineering

Sri Trang USA Inc. 99.99%

99.99%

42.5%

Sadao P.S. Rubber 90%

40.75%

Semperform Pacific 50%

Sri Trang Lingga Indonesia 33.5%

99.99%

100%

50%

Semperflex Shanghai

Startex Rubber

Sempermed USA

Sempermed Singapore

Starlight Express Transport

Sempermed Brazil 40%

10%

Thai Tech Rubber

Pattana Agro Future

Shanghai Semperit Rubber and Plastic

99.99%

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Sri Trang Rubber and Plantation


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Group Operating Results in 2009 Company Name

Unit

Total

Profit

Total

Total

Shareholders’

Revenues

(Loss)

Assets

Liabilities

Equity

Thousand 3,703,226 315,559 1,623,299 1,076,409 Baht Thousand Rubberland Products Company Limited 741,815 163,972 884,487 278,940 Baht Thousand Sadao P.S. Rubber Company Limited 795,444 1,761 359,582 303,797 Baht Premier System Engineering Company Thousand 409,323 44,281 325,907 83,101 Limited Baht Thousand Anvar Parawood Company Limited 601,687 10,552 58,721 8,179 Baht Starlight Express Transport Company Thousand 286,529 18,414 129,359 56,475 Limited Baht Thousand Startex Rubber Company Limited 3,153 (2,932) 66,337 665 Baht Thousand Sri Trang International Pte. Ltd. 519,228 2,251 139,794 107,882 US Dollar Thousand Sempermed USA Inc. 83,758 (553) 37,873 35,088 US Dollar Million PT Sri Trang Lingga Indonesia 958,750 115,626 358,946 227,808 Rupiah Thousand Siam Sempermed Corporation Limited 8,160,262 1,444,097 6,432,186 2,572,200 Baht Thousand Semperflex Asia Corporation Limited 599,727 12,642 942,213 104,670 Baht Thousand Semperform Pacific Corporation Limited 48,726 (2,072) 67,931 1,133 Baht Thousand Sempermed USA, Inc. 121,717 776 30,032 22,795 US Dollar Thousand 7,991,904 36,078 3,418,988 2,638,130 Thai Tech Rubber Corporation Limited Baht Thousand Pattana Agro Futures Company Limited 31,332 6,089 175,566 78,604 Baht Shanghai Semperit Rubber & Plastic Thousand 100,612 21,843 136,815 14,230 Products Company Limited Yuan Thousand Semperflex Shanghai Company Limited 41,171 (3,952) 129,180 27,140 Yuan Sri Trang Rubber and Plantation Thousand 26 (1,377) 118,511 1,028 Company Limited Baht Thousand Sempermed Singapore Pte. Ltd. (266) 7,343 563 US Dollar Shanghai Foremost Plastic Industrial Thousand 86,946 8,057 55,751 10,830 Co., Ltd.* Yuan Thousand Shi Dong Investment Pte. Ltd.** (16) 8,987 3 US Dollar Million PT Star Rubber *** (2,807) 154,214 79,573 Rupiah Sempermed Brazil Comercio Exterior Thousand 38,311 10,761 22,060 5,466 Ltda.**** Reais Note : * 100% held by Siam Sempermed Corporation Limited ** 100% held by Sri Trang International Pte Ltd. *** 99% held by Shi Dong Investment Ptd Ltd. **** 100% held by Sempermed Singapore Pte. Ltd.

1. Nam Hua Rubber Company Limited

546,890

2.

605,547

3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24.

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55,785 242,806 50,541 72,884 65,672 31,911 2,785 131,138 3,859,986 837,543 66,798 7,237 780,858 96,962 122,585 102,040 117,483 6,779 44,921 8,984 74,641 16,594


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Financial Information by Business Segment

Revenue structure 2007

Unit : Thousand Baht

2008

2009

Income

%

Income

%

Income

%

Block rubber

29,428,997

59%

38,523,749

64%

30,399,975

66%

Ribbed smoked sheet

12,274,813

25%

14,034,932

23%

8,536,986

19%

Concentrated latex

7,203,835

14%

6,363,893

11%

5,314,088

12%

Other products

1,109,480

2%

1,211,624

2%

1,334,030

3%

50,017,125

100%

60,134,198

100%

45,585,079

100%

Total

Type of Products Major Product Types

Applications

Ribbed Smoked Sheet • 5 grades of Ribbed Smoked Sheets (RSS) 1, 2, 3, 4 and 5

• Raw material in the automobile tire industry, parts of automobile, belt, pipe, and shoes etc.

• ADS (Air Dried Sheet) Block Rubber

• 4 types of products; STR 10, STR 20, STR5L and STR CV • SIR (Production in Indonesia)

• Raw material in the automobile tire industry, and used as substitute to grade-3 rubber smoked sheet

Concentrated Latex

• 60%concentrated latex

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• Raw material in the productions of latex examination gloves, condoms, and elastic rubber


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Finished Products

Service & Other Business

Medical Examination Glove

Rubber and Oil Palm Plantation

Rubber and Plastic Parts

Transportation Services

High-Pressure Hydraulic Hoses

Engineering Services

Escalator Handrails

Rubber Wood Production

The Company’s products consist of:

Rubber Smoked Sheet (RSS), which can be classified into four categories; Rubber smoked sheets grade 2, 3, 4, and 5. Rubber Smoked Sheets are classified by the quality of each sheet. Rubber Smoked Sheets are used as a raw material in the production of other products including automobile tires, pipes, shoes and parts of automobiles, etc.

Block Rubber is classified into three main categories; STR 10, STR 20, and SIR 20. Like Rubber Smoked Sheets, Block Rubber is used as a raw material in the production of other products. The largest consumption of the products comes from the automobile tire industry. In general, the qualifications of STR 20 can be used to substitute grade-3 RSS.

Concentrated Latex with 60% concentration can be used as a raw material in the production of other products such as latex examination gloves, condoms, and elastic rubber thread.

Primary products of the Company are intermediate materials used as inputs in the production of finished products. Most of the demand for the Company’s primary products comes from the automobile tire industry, depending on the global economic conditions. Good economic conditions will increase the purchasing power, especially on the motor vehicle products and commercial vehicles. For Concentrated Latex, the main consumption

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

of concentrated latex is latex examination gloves, condoms, and elastic threads. Since the consumption of those products tends to increase, the demand for concentrated latex has a positive growth rate as well. However, the production of natural rubber depends on the seasonal climate.

Rubber output normally decreases between March and May and

increases between December and February each year. To cope with such seasonal supply constraint, the marketing department manages to acquire orders to match the Company’s capacity, while the company can still gain margins from appropriate pricing.

Revenue Structure by Customer Group Unit: Tons 2009 Tire Producers Trading Companies and Importers Domestic Users

Sales Volume Tons 492,801 147,635

% 65.00 19.00

118,585

16.00

Type of Customers The Company’s customers can be categorized into three major groups:

1) Automobile tire manufacturers are consisting of leading global tire manufacturers such as Bridgestone, Michelin, Yokohama, Hankook, Continental, Goodyear, Pirelli, and tire manufacturers in China. Using large amount of natural rubber as a raw material in their production, these customer groups have stable and high purchasing power.

2) Trading companies in Japan and other importers in Asia, China, Taiwan, Korea, America and Europe. These importers have customer bases with long established relationships and purchasing preference via agents since they offer various exclusive deals, such as longterm contracts which reduce delivery and price risks.

3) Domestic customers, including automobile tire, motorcycle tire, rubber parts, latex examination glove and elastic rubber thread manufacturers. These manufacturers are also export oriented, of which their demands are growing at a satisfactory rate.

- 18 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Management Plan of 2009 The overall outlook of the natural rubber industry has been continuously growing for the past few years which is in line with the growing global economy at average of 3-5% rate in the past 10 years. In addition, the economies of emerging countries such as Brazil, Russia, India, and China (or called “BRIC”) have been substantially growing. The increasing income and purchasing power in BRIC countries reflect the higher occupancy rate of automobiles. The US financial crisis and global economic downturn from the second half of 2008 to 2009 were only the temporally set back, the overall global economy resumed its growth shortly after.

In

particular automobile tire industry was less impacted from such events, due to tire replacement market remains strong due to a large number of existing automobiles are in use.

The Company as a leader in the rubber industry has adhered to the established various plans to strengthen the Company’s fundamental and to cope with the rapid changing environments. The Company maintains its plan to become the regional leader in the rubber industry both natural rubber products and value added products. This will yield the improving operating performance and increasing assets and share value of the company.

The Company has various products which are able to cover customers’ demand.

Sale

management, marketing, raw materials management and planning, inventory management and procurement are efficiently managed and aligned in the same direction.

In 2009, Chinese

import of natural rubber increased by 22% over the previous year or 2.73 million tons. With the efficient focused marketing plan, rubber products that meet the customers’ needs, on-time delivery, and effective resource allocation, the Company sales are account for 12 per cent of Chinese rubber imported figure. The Company is awarded “No. 1 Rubber Exporter to China” in 2009 by Ministry of Agriculture of Thailand.

Beginning from the business plan in year 2007, the management continues to expand market share in the global market as well as its production capacity, especially Block Rubber. Global demand of Block Rubber which is the main raw material of automobile tire industry is increasing every year. In 2009, the management activities are as follows:

1.

Continuous expansion of Block Rubber capacity by having done the 8 Million US Dollar acquisition of the second Block Rubber factory in Indonesia. The factory with capacity of 2,000 – 2,500 tons per month is located in Pontinak Town on Kalimantan Island. The new subsidiary company, PT Star Rubber, is 99 per cent held by our Investment Singapore-

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

based Shi Dong Investment Ltd. Subsequently, Shi Dong is 100 per cent owned by Sri Trang International Pte. Ltd. After acquisition, the group’s production base expanded to cover two main islands of Indonesia which is soon to become the largest natural rubber producing country in the world.

2. Initiating the construction of the Group’s first Block Rubber factory in north-eastern of Thailand. The factory is located at Amphur Bungkarn, Nongkhai Province and operated under the subsidiary, Rubberland Products Co., Ltd. The factory has capacity of 4,000 tons per month both Standard Block Rubber (STR) and Composed Rubber. The investment cost for factory and machinery is 320 Million Baht. Both project financing and working capital credit are supported by a local financial institution. The expansion/or penetration to the north-eastern region are in line with the government natural rubber promotion policy. It is to encourage the north easterner to switch from other crops to rubber trees of which provides greater return to them.

3. Long term plan on the up stream business, rubber plantation. Under long-term plan to become a leading regional rubber player, the business shall cover from the entire supply chain model ranging from raw latex to the value added products.

The management

continues the search for the appropriate plots of land for rubber plantation which shall provide the economic value for long-term investment. The subsidiary, Sri Trang Rubber and Plantation Co., Ltd., has completed the first 1,500 Rais rubber plantation in Northern region, Thailand and has recently acquired 1,600 Rais in the same proximity area in December 2009. New Rubber trees is expected be planted in time for rainy season of 2010 on the new acquired land.

As a result of expansion, Sri Trang Rubber and Plantation Co., Ltd. has

increased its registered capital from 100 Million Baht to 300 Million Baht. The paid-up capital will be later interval called upon the business necessity.

4. Expansion of latex examination gloves business. 2009 was turned out to be one of the best years for examination gloves industry due to the substantial increase in demand.

The

causes are ranging from the global spread of 2009 flu epidemics and increased health budget of several governments, especially emerging countries. The affiliated company, Siam Sempermed Corporation Ltd., as one of the world largest glove producer has a great success operation over the year. Due to the strong demand of orders over the capacity, this important affiliate has to expedite plan of capacity increase at both the existing facility and potential new factory in other area in southern Thailand.

The expected capacity of

Examination and Industrial Latex and Synthetic Gloves will increase from 10,000 million pieces to 15,000 million pieces within 3 years time span. It is expected in year 2010, Siam - 20 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Sempermed Corporation Ltd. will continue to maintain the status of top five world glove manufacturer. 5. The company used the opportunity of abundant and stable financial environment offered by Thai banking community to adjust the group financial structure in order to achieve higher efficiency model. The Company obtained a long term loan of 2,500 Million Baht for 5-years term from financial institutions with competitive low interest rate. This long-term loans will strengthen the Company’s financial structure and reduce risks from any volatility might be happened from short-term working capital. In addition, the management continues to explore other financing alternative such as Corporate bond issuance when the opportunity arise.

Currently the Company is rated BBB+, which is investment grade, by TRIS

Corporation Limited.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Market and Competition Environment Overall Industry Situation and Competition Originated from US financial crisis in 3rd quarter of 2008 that spread out to the whole global economy, there were the trade disruptions in almost every business sector thru out the region. Suspension of trade credit, confident crisis of financial institutions, and negative impact on almost all industries occurred.

All levels of rubber industry supply chain were impacted

negatively by dropped sales as well, beginning from automobile industry to automobile parts and automobile tire. To response to the crisis, all manufacturers reduced their inventory and production levels. Usage of natural rubber in 2009 reduced by 6 per cent from 2008 to 9.35 million tons. During October 2008 to January 2009, Chinese tire manufacturers tried every measures to reduce their inventory level such as price renegotiation, shipment postponement, and default in contracts. As a consequence, the business of rubber producers and exporters was stalled for a while.

The movement and pattern of rubber business in 2009 could be divided into two parts. Firstly, 1st half of the year, and followed by a clear and strong recovery momentum in the 2nd half of 2009. The reviving of global economy caused mainly by economic stimulus packages initiated by almost every government in every country, especially the success Chinese “Cash for Clunker� new car purchasing supporting plan. Chinese government issued a supporting plan on purchasing of under 1,600 cc car in February 2009.

Since then, car sales increased

dramatically, resulting of recovery of automobile tire sales.

In fact, Chinese automobile

ownership rate is still low and has a high growth potential due to the strong domestic economy. Chinese tire producers and exporters are very competitive in the world market in terms of cost, quality, and price. Conclusively, China will be the most important importer of natural rubber in the next 10-15 years. In 2nd half of 2009, the economies of the developed countries were staring to recover from the government economic stimulus plans and low interest rate policies. Consumer confident index increased as well as a substantial increase in automobile sales from tax privileges or subsidized funds in purchasing new cars. All big conventional buyers were able to resume production capacity close or equal to the pre-crisis level. To that effect, there was continuously increased demand and price of natural rubber.

Natural rubber price dropped to the lowest level at 40 Baht per kilogram (FOB price) in December 2008. At such low price, rubber farmers were reluctant to produce rubber to the

- 22 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

market due to low profit or loss operation. With limited supply, the world rubber price was gradually increased to 50 Baht per kilogram in January 2009 and continuously increased to 90 Baht per kilogram by the end of 2009.

Due to different structures local economy of each country, competition and market accessibility are different among each player in those countries. Those who are more efficient with market information for decision making, as well as good customer base coverage will certain have advantage over their competitors. The customer satisfaction and order is the resulted of full effort in every aspect ranging from good marketing teams to suitable products and quality plus sufficient production flexibility to meet customer needs. In 2009, the Company’s sale amount increased by 12 per cent to 759,021 tons, a satisfactory performance considering there was the decline of 5 per cent in world rubber usage. Government Policy Judging of natural rubber business, it is involved with a large number of farmers. Unavoidable, the government always tries to insert influence over the market. Particularly on any situation when there is the substantial drop of rubber price. The public sector will intervenes domestically and internationally with cooperation among large natural rubber producer countries such as Thailand, Indonesia, Malaysia, and Vietnam.

The government policies such as export tax,

export quota, or expanding or reducing rubber plantation areas may directly affect the performance of natural rubber private sector in long term.

At the beginning of 2009, there was the expectation of decrease in demand of world natural rubber. The leading natural rubber producer countries have agreed to cooperatively reduce their productions and exporting volume in 1st half of 2009. Additionally, the private sector via The International Rubber Conference Organization: IRCO reached the agreement of not to export natural rubber at the price lower than 1,350 US Dollar per ton as well as to reduce natural rubber exporting volume from Indonesia, Malaysia, and Thailand.

However, after

continuous recovery of world rubber price during 2009, such actions from public and private sectors have suspended except the long-term plan on increasing plantation area as to ensure the sufficient natural rubber supply in the future.

Competitive Situation

Domestic Competition The domestic competition has rarely changed from the previous year. Only large natural rubber producers have good operating performance due to relatively low profit margin structure in - 23 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

comparison of other industries. Large working capital is also required to support daily operation especially when the rubber price is on the uptrend. The domestic competition remains limited to long-established producers due to large working capital requirement, caused by very short account payable period, and continuous support from financial institutions for large investment in Block Rubber factories. The key success factors are still product quality, delivery period, and competitive price.

Major customers are global tire manufacturers including Chinese ones,

rubber glove manufacturers, and elastic thread manufacturers.

To supply to the major

consuming customer group, tire manufacturers, who has continuously increasing demand, quality products and sufficient large production capacity, on-time delivery, and company reputation are important factors that all large Thai rubber producers have to maintain. The Company is one of top five Thai rubber producers who covering all 3 main rubber products, rib smoked sheet (RSS), block rubber (STR), and concentrate latex. The Company is the only one in Thailand who has factories in Indonesia, enabling the Company to offer wider range of products.

Not only still maintaining relationship with the leading tire manufacturers, the

company also increases focus on emerging markets, especially China and India. With the substantial growth of natural rubber, large rubber producers with expanding capacities increased their attention to raw material procurement. To ensure the sufficient and continuous supply of natural rubber for production lines, local rubber purchase price offering and extensive coverage procurement area are important factors. While under rubber industry downturn since 4th quarter of 2008, large rubber producers have higher competitive advantage over smaller producers in term of preservation of market share and support from local and international financial institutions.

Regional Competition Thailand and Indonesia are the most influential in rubber industry due to the first and second rubber output in the world, respectively, totaling over 50 per cent of world rubber output. Indonesia is exporting rubber for 2.5 million tons per year, mainly from SIR. While Thailand is producing rib smoked sheet (RSS), block rubber (STR), and concentrate latex at total of 2.88 million tons per year.

Due to a large number of small rubber farmers, part of Thailand

production is still in rib smoked sheet while Malaysia and Indonesia mainly produce block rubber due to their large plantations characteristic.

Chinese economic stimulus plan has positively affected Thai rubber producers due to dramatically growth of Chinese automobile and tire sales. Thai rubber export figures to China are in the satisfactory level. Malaysia and Indonesia rubber producers who focus to only large global tire manufacturers were more affected negatively from global economic downturn since 4th quarter of 2008. Major world economies such as U.S.A, EU, and Japan were still struggling - 24 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

in weak purchasing power, high unemployment rate, and consumers confidence. To counter such global economic downturn, Indonesia rubber producers reduced their production and export volume in the first half of 2009 which in turn created positive effect to Thai rubber industry.

As the leading producer of concentrated latex, Thailand, continued to enjoy the

positive effect from latex glove and elastic rubber thread industries which immune from global economic downturn.

In addition, the latex examination glove demand has significantly

increased until there are order-backlog situations in Malaysia and Thailand due to the improvement of health standard of various governments and the global concern of 2009 flu epidemic. The Factors to Price Fluctuation Rubber, considered as a commodity, is attracted and actively traded on several Commodities Exchanges by rubber producers, traders, and investors. Beside the fundamental of supply and demand, rubber price fluctuation is influenced by arbitrage and trading of rubber in the Commodities Exchanges, oil prices, and exchange rates. Hedge funds have also caused the higher fluctuation of rubber price in the past 5 years. Second factor is the fluctuation of oil prices. Since natural rubber and synthetic rubber which is by product from crude oil, are the main raw materials of automobile tire, the rubber price tends to fluctuate and move same direction as oil price. The last factor is the exchange rate fluctuation of major rubber producers’ local currencies.

Since the general trading currency of natural rubber is US Dollar, the

fluctuation of Baht and Rupiah could also affect rubber price. Consumption Demand Due to double-digit GDP growth of Chinese economy in the past several years, China becomes the world largest importer consumer of natural rubber with rapid growth in the past 5 years. Chinese government automobile promotion plan includes a supporting plan to automobile tire manufacturers to upgrade production lines and adapt higher production technology, enable them to improve tire quality and reduce costs to compete in the world market. As a result, Chinese automobile tire industry dramatically expanded and has excellent operating performance last year. In 2009, the new car registration reached 13.6 million units or increased 46 per cent from 2008. Expected automobile sales in 2010 are very promising, especially under 1,600 cc cars which are promoted by the government. With the current 75 million cars in China, the future automobile tire markets both OEM and replacement markets look very promising and covering the demand of natural rubber as well.

- 25 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Table Showing Exported Rubber Prices, FOB Bangkok Unit: Baht

Month January February March April May June July August September October November December Average Price

RSS3 2008 87.17 90.46 88.50 89.37 97.30 107.38 107.75 100.23 99.40 70.68 61.62 44.35 87.02

STR20 2009 53.27 52.81 52.25 57.23 60.30 58.56 59.90 69.85 73.77 78.55 84.93 93.75 66.27

2008 84.93 87.97 85.00 85.66 93.58 104.69 107.17 99.76 98.75 70.01 60.86 42.56 85.08

2009 50.57 49.21 49.48 55.16 57.03 59.15 57.14 65.53 71.30 76.37 83.06 93.07 63.67

Latex 2008 57.87 61.34 58.52 58.03 62.64 70.95 72.77 63.13 63.30 47.25 46.22 34.14 58.01

2009 39.71 40.76 43.77 44.38 43.07 40.11 39.68 45.55 47.05 48.99 52.36 58.71 45.35

Source: Rubber Research Institute, Department of Agriculture

Graph showing the price of RSS 3 and TSR 20 at Singapore Commodities Exchange

SICOM 2009

RSS 3

STR 20

350 300 250 200 150 100 50 0 9 9 9 9 9 9 9 9 9 9 9 9 /20 0 /20 0 /20 0 /20 0 /20 0 /20 0 /20 0 /20 0 /03/200 /200 /200 /200 2 0 1 8 1 9 7 2 5 6 4 1 1 1 0 0 0 0 0 0 0 0 / / / / / / / / / / / 02 02 02 02 02 02 02 02 02 02 02 02 The table shows the FOB Bangkok exported rubber price and the graph demonstrates the prices of rib smoked sheet (RSS3) and block rubber (STR) in SICOM market, Singapore. The price level had continuously ascended all year. The highest RSS3 price and STR price are at 2,885 US Dollar per ton and 2,895 US Dollar per ton, respectively, in the end of 2009. The 2009 average prices of rib smoked sheet and block rubber are 1,917 US Dollar per ton and 1,796 US Dollar per ton, respectively. - 26 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Risk Factors Risk Factors of Business/Industry As aforementioned in the previous years, risk factors remain the same. However, some risks may be more influential over the world rubber price in some years. Global financial crisis, continued its effects in 2009, caused the slowdown in automobile industry as well as automobile tire industry and natural rubber industry. 1. Price volatility The management strategy is affected by short-term rubber price fluctuation and arbitrage of product prices in every level of rubber supply chain. The Group’s rubber price management in 2009 is much more manageable than 2008’s due to one way direction of rising rubber price until reached 90 Baht per kilogram by the end of 2009. Even though there is a concern about the actual recovery of global economy after the withdrawal of government stimulus plans, the management constantly encounters such situation and has well planned the production and distribution to cope with such situation. 2. World economy and global demand of natural rubber World economy has direct impacts to natural rubber demand and price due to over 70 per cent of natural rubber demand is from automobile tire industry both OEM and replacement markets. Economies of developed countries and emerging countries such as China, India, and ASEAN countries have a big influence of natural rubber consumption. With the clear trend of recovery, the demand of rubber consumption was in balance with the supply output that resulted in more stabilization or market price. As a consequence, the world automobile and tire productions were back to normal level. Every business unit in supply chain gains more confident in the whole industry. Therefore, sales, production, and raw material procurement could be more effectively planned under the normal circumstances. 3. Domestic competition Please see “Market and Competition Environment” on page 22

4. Climates and Raw Material Supply As an agricultural product, natural rubber supply highly depends on climates and seasonal. Under unusual climates such as drought or heavy rain/flood, the rubber output will be certainly affected.

With the Group continuously increased production capacity and sales and full

- 27 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

capacity operating policy, any unexpected events that causes the decline of rubber output will have significantly impact the Company’s operation. Financial Risk and Risk Management

1. Financial Liquidity, Interest Rate, and Currency Exchange Rate Risks Due to the accommodative policy of financial system by the central banks in many countries and the limited effects of global financial crisis to Thai financial institutions, there was sufficient liquidity in Thai financial system and continuous low interest rate environment. The Company has less liquidity pressure than last year due to lower rubber price level in 2009.

The

requirement of working capital was much lower amount than year2008. Coupling with the leading status in exporting sector, the Group was in the better position than 2008.

The exchange rate is a crucial factor to the Company’s operation due to export sales are largely in US Dollar and the Company’s foreign investment in various countries. However, Baht is relatively stable under closer/careful supervision of the Bank of Thailand in 2009. Therefore, the competitiveness of Thai rubber producers has not much changed over the year.

Currently, the group of companies is well supported from local and foreign financial institutions in additional to the company’s capital. The Company is alternatively exploring other funding channel such as Company bond issuance if opportunity arises. In doing so the rating agency in Thailand, TRIS Rating, has put the company under BBB+ rating status.

2. Management Policy Risk As a commodity product, natural rubber price has been highly volatile in the past few years due to heavily arbitrage of hedge funds. The rubber producers are now required not only to manage raw material availability risk, but also rubber price volatility risk.

Otherwise, the

Company may significantly operate at substantial losses. Due to the difficulty in forecast the rubber price, the management of rubber business becomes more complex than ever before.

Long-established relationships between suppliers and customers are an important factor to the business expansion. The success of large rubber producers is from long experience and focus in rubber business.

The barrier of entry of rubber business is very high because

customers are strictly consider past operating record, product reliability, and management reputation, especially during high price volatile period.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

To cope with rapid changing environment, globalization, unexpected events, and trend forecasting difficulty, the management must be flexible and agile and employees must have direct expertise and experience as well as high efficiency. All departments must be well cooperate to assist the direction of marketing and pricing which are crucial strategies.

The management of Sri Trang Agro-Industry Plc. has a long track record and vast experience in the natural rubber industry.

The management is well respected by the business

communities, both domestically and internationally. However, this has made the company more difficult in any changes in the management team who also happened to be the major shareholder. On contrary the Company may also encounter on-going-concern risk if there is a change in the management and major shareholders.

The new management or major

shareholders may have insufficient capabilities and experience to operate the business efficiently.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Shareholding Structure and Management List of 10 major shareholders as at 30th December 2009 No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Shareholders’ name Sri Trang Holdings Co., Ltd. Mr. Viyavood Sincharoenkul Mr. Aram Sirisuwat Mr. Somwang Sincharoenkul Mr. Kitichai Sincharoenkul Mr. Veerasith Sincharoenkul Mr. Prasit Panidkul Mr. Puttirat Pattratip Mr. Sumade Sincharoenkul Mr. Puang Cherdkiatgumchai

Shares 49,370,412 35,391,555* 6,846,872 3,841,485* 3,499,300* 3,200,000 2,408,395* 1,969,611 1,843,381 1,781,391

% Holding 24.69 % 17.70 % 3.42 % 1.92 % 1.75 % 1.60 % 1.20 % 0.98 % 0.92 % 0.89 %

Note: * The number of shares according to the report of securities holding (59-2 Form) in Company as at 30th December 2009 Groups which holds more than 10% of the Company as at 30th December 2009 are as follows: - Sri Trang Holding Co., Ltd.

49,370,412 shares

24.69%

- Sincharoenkul family

51,362,054 shares

25.68%

Note: Sri Trang Holdings Co., Ltd. has a registered capital of 88 Million Baht. Its 5 directors are Mr. Somwang Sincharoenkul, Mr. Viyavood Sincharoenkul, Mr. Chaiyos Sincharoenkul, Mr. Kitichai Sincharoenkul, Mr. Puang Cherdkiatgumchai. The largest group of shareholder is the Sincharoenkul family who hold 4,637,280 shares, representing 52.70% of the total paid-up shares.

Changes in the number of shares and shareholders’ equity over the past five years There have been no significant changes in the shareholder structure over the past five years.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Management Structure Board of Directors Audit Committees Executive Board

Managing Directors

Executive Director Production 1

Executive Director Production 2

Executive Director Financial and Accounting

Executive Director Production 3

Primary Rubber Product Group

Block Rubber Product Group

Concentrated Latex Product Group

Executive Director Bangkok Branch

Other Businesses

Board of Directors Company’s directors consist of Management, Independent Directors, and Audit Committee as follows;

No.

Name

Last name

Position

1.

Mr. Somwang

Sincharoenkul

Chairman

2.

Mr. Prasit

Panidkul

Vice Chairman

3.

Mr. Viyavood

Sincharoenkul

Managing Director

4.

Mr. Anan

Pruksanusak

Director

5.

Mrs. Promsuk

Sincharoenkul

Director

6.

Mr. Puang

Cherdkiatgumchai Director

7.

Mr. Chaiyos

Sincharoenkul

Director

8.

Mr. Kitichai

Sincharoenkul

Director

9.

Mr. Prakob

Visitkitjakan

Independent Director / Chairman of Audit committee

10.

Mr. Kriang

Yanyongdilok

Independent Director / Audit committee

11.

Mr. Samacha

Potavorn

Independent Director / Audit committee

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Authorized directors to sign on behalf of the company To sign on behalf of the Company, any two directors from eight authorized directors, excludes independent directors and audit committee members, jointly sign and affix the company seal.

The scope of responsibilities and duties of the Board of Directors According to the Company policy, the scope of responsibilities and duties of the Board of Directors are as follows:

1. Duties of the Board of Directors The Board of Directors shall use the best knowledge, abilities, and experiences to benefit to the Company. Also, the Board of Directors shall perform duties in compliance with the Company’s objectives and regulations and shareholder’s resolutions with high carefulness in order to protect interests of the Company and shareholders. As stated in the Company’s regulations, the Board of Directors’ meeting shall be arranged once every three months.

2. Review and approve the appropriate policies The Board of Directors is responsible to review and approve the Company’s policies and business direction.

3. Control the Executive Board The Board of Directors shall control the Executive Board to efficiently perform according to the policies and notify the Executive Board to propose the significant business agenda and connected transactions as compliance with the regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand. If necessary, the Board of Directors may appoint advisor(s) to advise or provide professional opinions to support the significant business decisions.

4. Arrange the efficient Internal Control and Internal Audit Systems The Board of Directors shall arrange the efficient internal control and internal audit systems, especially the conflict of interest transactions. As compliance with the relevant laws and regulation of the Stock Exchange of Thailand, such transactions shall be approved by the shareholders’ meeting.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Executive Board No.

Name

Last name

Position

1.

Mr. Viyavood

Sincharoenkul

Chairman of Executive Board

2.

Mr. Prasit

Panidkul

Executive Board

3.

Mr. Chaiyos

Sincharoenkul

Executive Board

4.

Mrs. Promsuk

Sinchareonkul

Executive Board

5.

Mr. Anan

Pruksanusak

Executive Board

6.

Mr. Kitichai

Sincharoenkul

Executive Board

The scope of responsibilities and duties of the Executive Board The Executive Board has the scope of responsibilities and duties as follows: 1) To order, plan, and operate the business in compliance with the policies set out by the Board of Directors. 2) To appoint the Company’s management to efficiently and transparently manage the Company’s businesses. 3) Any two of the Executive Board members jointly sign and affix the company seal is eligible to grant proxies to any person to perform the businesses that benefit to the Company. 4) To determine the appropriate employee’s benefits and welfare in compliance with corporate culture and relevant laws. 5) To approve credit limits of the normal business transactions or any agreements. Audit Committee The Audit Committee was established in 1999 in accordance to the regulations of the Stock Exchange of Thailand. The present committee, composed of 3 independent directors, was appointed on 16th December 2009, period 2 years, as follows: No.

Name

Last Name

Position

1.

Mr. Prakob

Visitkitjakarn

Independent Director / Chairman of audit committee

2.

Mr. Kriang

Yanyongdilok

IndependentDirector Director/ Audit committee Independent

3.

Mr. Samacha

Potavorn

Independent Director / Audit committee

2 of 3 persons, Mr. Prakob Visitkitjakarn and Mr. Kriang Yanyongdilok, were well experience in accounting knowledge and audit work.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

The scope of responsibilities and duties of the Audit Committee On 9th April 2009, the Audit Committee has revised the scope of responsibilities and duties which are required to report to the Board of Director as follows: 1. To ensure that the financial statements of the Company are correct and disclose sufficient information. 2. To ensure that the Company has the appropriate and efficient internal control and internal audit systems. To review the independence of internal audit department. To approve appointment, dismissal, and reposition of head of internal audit department. 3. To ensure the Company complies with the Securities and Exchange Act, regulations of the Stock Exchange of Thailand, and relevant laws. 4. To consider an appointment of the Company’s auditor with no conflict of interest and auditing fee. To arrange meeting with auditor at least once a year with no present of the Company’s management. 5. To ensure the connected transactions and conflict of interest transactions complied with the relevant laws and regulations of the Stock Exchange of Thailand. Such transactions shall be reasonable and yield the Company the most benefit. 6. To prepare the Audit Committee report, signed by the Chairman of the Audit Committee and disclosed in the Annual Report. The report shall contain the following topics: a. Opinion on correctness, completeness, and reliability of financial statements b. Opinion on sufficiency of internal control system c. Opinion on compliance with the Securities and Exchange Act, regulations of the Stock Exchange of Thailand, and relevant laws d. Opinion on appropriateness of auditor e. Opinion on the transactions with potential conflict of interest f.

Number of Audit Committee meeting in the previous year as well as attendance of each Audit Committee member

g. Opinion or suspicious during duties under charter. h. Other matters under responsibilities and duties which shareholders and investors should know

7. To perform any business as assigned by the Board of Directors with the approval of the Audit Committee.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

In 2009, there were 7 Board of Directors’ meeting, 8 Executive Board meetings, and 7 Audit Committee meetings. Meeting attendances in 2009 were as follows: No.

Name

Last Name

Meetings Attended

Meetings Attended

Meetings Attended

Board of Directors

Executive Board

Audit Committee

1.

Mr. Somwang

Sincharoenkul

7/7

-

-

2.

Mr. Prasit

Panidkul

7/7

8/8

-

3.

Mr. Viyavood

Sincharoenkul

7/7

8/8

-

4.

Mr. Puang

Cherdkiatgumchai

7/7

-

-

5.

Mrs. Promsuk

Sinchareonkul

7/7

8/8

-

6.

Mr. Chaiyos

Sincharoenkul

7/7

8/8

-

7.

Mr. Anan

Pruksanusak

7/7

8/8

-

8.

Mr. Kitichai

Sincharoenkul

7/7

8/8

7/7

9.

Mr. Prakob

Visitkitjakarn

7/7

-

7/7

10.

Mr. Kriang

Yanyongdilok

7/7

-

7/7

11.

Mr. Samacha

Potavorn

7/7

-

7/7

The Company Secretary The Company Secretary was appointed as compliance with the Securities and Exchange Act (Amendment No. 4) B.E. 2551. Scope of responsibilities and duties of the Company Secretary The Company Secretary shall have following responsibilities and duties on the behalf of the Company or the Board of Directors: 1. Prepare and keep the following documents: a. Director Registration b. Invitations to the Board of Directors’ meeting, minutes of the Board of Directors’ meeting, and annual reports 2. Keep the reports of the conflict of interest, submitted by directors and management 3. Other duties as further announced by Capital Market Commission

- 35 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Selection of Board Members and the Management The selection of directors shall be approved by the shareholders’ meeting.

Director

candidates shall have the qualifications under the Public Company Act B.E. 2535. The Board of Directors shall consider the persons who are suitable, qualified, and cable to make a significant contribution to the Company. The Board of Directors can delegate a person to recommend such persons for nomination to the shareholders’ meeting for approval. Selection Process through the Shareholders’ Meeting (under the Company’s Article of Association) Article 15. The number of members of the Board of Directors of the Company shall be determined at a meeting of shareholders, but shall be not less than five persons. Not less than one-half of the total number of Directors must be residents in the kingdom. The Board of Directors may authorize any one or several persons to carry out any act on behalf of the Board, but may not authorize the Board of Directors or any other persons to act for them in the capacity of Directors. The Directors of the Company are entitled to remuneration for the performance of their duties, which their remuneration is salary, meeting attendance payment, allowance, and bonus. Article 16.

Directors shall be elected at a meeting of shareholders in accordance with

the following rules and procedures: (1) Each shareholder shall have one vote for each holding share. (2) Each shareholder must use all of his votes in (1) to elect one or several persons as Directors and may not allocate the votes in favor of any one person at any great or small number. (3) The persons who win the highest votes, in descending order (high to low), shall be the elected Directors at equal to the number of Directors to be elected at that time. In case there are persons who are elected at a succeeding level with an equal number of votes at a number exceeding the number of Directors to be elected at that time, the chairman of the meeting shall decide. Article 17.

At each annual general meeting of shareholders, one-third of the Directors

shall be retired from their positions. If the number of Directors cannot be aliquantly divided by 3, the number nearest to one-third shall be applied. The Directors shall draw lots to retire from their positions in the first and the second year after registration of the Company. In the subsequent years, the Directors who are the longest in the position shall retire.

- 36 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Article 18. Other than retirement from the position by rotation, a Director shall vacate upon: (1) death; (2) resignation; (3) lacking qualifications or possessing prohibited descriptions according to Section 68 of the Public Limited Companies Act B.E.2535; (4) dismissal by resolution of a meeting of shareholders under Article 21; (5) dismissal by a court order. Article 19.

Any Director wishing to resign from the position shall tender his resignation

to the Company. The resignation shall be effective on the day that the letter of resignation reaches the Company. A Director who resigns under paragraph one may as well notify the Registrar of his resignation. Article 20. Where a vacancy occurs in the Board of Directors other than by rotation, the Board of Directors shall elect a person who is qualified and does not possess any prohibited descriptions according to Section 68 of the Public Limited Companies Act B.E.2535 as the replacement Director at the following meeting of Directors, except where the remaining Director term is less than two months. The replacement Director may retain his position only for the remaining term of the Director whom he replaced. The resolution of the Board of Directors under paragraph one must be supported by a vote of not less than three-fourths of the number of the remaining Directors. Article 21. Shareholders’ meeting may resolve to remove any Director from the position prior to the rotation by a vote of not less than three-fourths of the number of shareholders who are present at the meeting and are eligible to vote and representing an aggregate number of not less than one-half of the number of shares held by the shareholders who are attend the meeting and are eligible to vote. Article 22. A Director needs not be a shareholder of the Company. Article 23. The Board of Directors shall elect one Director as the Chairman of the Board of Directors. Where considering as appropriate, the Board of Directors may elect one or several Directors as Vice-Chairman of the Board of Directors. The Vice-Chairman shall have duties according to the Articles of Association in respect of the missions delegated to them by the Chairman of the Board of Directors.

- 37 -


Sri Trang Agro-Industry Public Company Limited

Article 24.

Annual Report 2009

The quorum necessary for a meeting of the Board of Directors shall be not

less than one-half of the total number of Directors. In case that the Chairman of the Board of Directors does not attend the meeting or is incapable of acting; the Vice-Chairman shall take the chair or the attending Directors shall elect one Director as the chairman of the meeting in case that no Vice-Chairman or the Vice-Chairman is incapable of acting. All decisions of a meeting shall be passed by a majority of votes. Each Director shall have one vote. Any Director who has the conflict of interest is not eligible to vote in such agenda. In case of an equality of votes, the chairman of the meeting shall have an additional vote as the casting vote. Article 25.

In summoning a meeting of the Board of Directors, the Chairman of the

Board of Directors or his assignee shall send the notice of the meeting to the Directors at not less than seven days in prior to the meeting date. Except in case of emergency in order to protect the rights or benefits of the Company, the meeting summons by other method and less than seven days in advance can be applied. Selection of Independent Directors An Independent Director is a qualified and independent person according to the definitions established by the Stock Exchange of Thailand. The Company established rules for selecting Independent Directors as follows: (1) Holding not more than 1% of paid-up capital of the Company, affiliated companies, associated companies, or related companies. (2) Not a director who involves in the Company’s management, an employee, a worker, or an advisor who receives a regular salary or fee of the Company, affiliated companies, associated companies, related companies, or major shareholders of the Company except retire from such position for not less than 2 years prior to appointment of independent director. (3) Has no direct or indirect benefit or interest in finance and management of the Company, affiliated companies, associated companies, related companies, or major shareholders or the Company. (4) Not a related person or close relative of any member of management or major shareholders of the Company. (5) Director with no business relationship, professional service provider, or auditor except has not been in such positions for not less than 2 years prior to the appointment to be an independent director (6) Not appointed as a representative to protect the interests of the Company’s directors, major shareholders, or shareholders who are related to the Company’s major shareholders. In addition, the Independent Directors shall provide opinion or report the duties independently without consideration of any benefit from properties or director position. The Independent Directors shall not be under anyone’s influence and controlled by any situation.

- 38 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Executives As of 31st December 2009, the following 11 persons were Directors of the Company. Relationship Mr. Somwang

Sincharoenkul

Chairman

Yes

Mr. Prasit

Panidkul

Vice Chairman

No

Mr. Viyavood

Sincharoenkul

Managing Director

Yes

Mr. Chaiyos

Sincharoenkul

Director

No

Mr. Puang

Cherdkiatgumchai

Director

Yes

Mrs. Promsuk

Sinchareonkul

Director

Yes

Mr. Anan

Pruksanusak

Director

No

Mr. Kitichai

Sincharoenkul

Director

Yes

Mr. Prakob

Visitkitjakan

Independence Director/

No

Chairman of Audit Committee Mr. Kriang

Yanyongdilok

Independence Director / Audit Committee

No

Mr. Samacha

Potavorn

Independence Director / Audit Committee

No

Executive Profiles 1. Mr. Somwang Sincharoenkul

84 years old

Relationship

Father of Mr. Viyavood Sincharoenkul and Mr. Kitichai Sincharoenkul

Education

Chung Ling High School, Panang, Malaysia

Current Position 1993 – Present

Chairman, Sri Trang Agro-Industry PLC.

Experience 1987 – 1993

Chairman, Sri Trang Agro-Industry Co., Ltd.

1946 – 1986

Director, Yang Thai Pak Tai Co., Ltd.

No. of Shares held

3,841,485 Shares

2. Mr. Prasit Panidkul

63 years old

Relationship

No

Education

Executive Micro MBA, Thammasart University

Current Position 1993 – Present

Vice Chairman, Sri Trang Agro-Industry PLC.

- 39 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Experience 1987 – 1993

Vice Chairman, Sri Trang Agro-Industry Co., Ltd.

1986 – 1991

Member of Trang Provincial Council

1975 – 1997

Managing Partner, Trang Sahakarn Khonsong Ltd.

No. of Shares Held

2,408,395 Shares

3. Mr. Viyavood Sincharoenkul

55 years old

Relationship

Mr. Somwang Sincharoenkul’s son

Education

Ph.D. in Chemistry Queen Elizabeth’s College, University of London Bachelor’s Degree in Chemistry Queen Elizabeth’s College, University of London

Current Position 1993 – Present

Managing Director, Sri Trang Agro-Industry PLC.

Experience 1987 – 1993

Managing Director, Sri Trang Agro-Industry Co., Ltd.

1985 – 1987

General Manager, Yang Thai Pak Tai Co.,Ltd.

No. of Shares Held

35,391,555 Shares

4. Mr. Chaiyos Sincharoenkul

59 years old

Relationship

No

Education

Executive Micro MBA, Thammasart University

Current Position 1993 – Present

Director, Sri Trang Agro-Industry PLC.

Experience 1987 – 1993

Director, Sri Trang Agro-Industry Co., Ltd.

1990 – 1992

Member of Chamber of Commerce, Trang Province

1970 – 1986

Assistant Manager, TTR Production Division, Yang Thai Pak Tai Co., Ltd.

No. of Shares Held

2,342,165 Shares

5. Mr. Puang Cherdkiatgumchai

82 years old

Relationship

Mrs. Promsuk Sincharoenkul’s father

Education

Assumption Commerce College (ACC)

Current Position 1993 – Present

Director, Sri Trang Agro-Industry PLC.

Experience 1987 – 1993

Director, Sri Trang Agro-Industry Co., Ltd.

No. of Shares Held

1,843,381 Shares - 40 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

6. Mrs. Promsuk Sincharoenkul

56 years old

Relationship

Mr. Somwang Sincharoenkul’s daughter in law

Education

Master’s Degree in Business Administration, The Institute of Chartered Secretary and Administrator, U.K.

Current Position 1995 – Present

Director, Sri Trang Agro-Industry PLC.

Experience 1985 – 1995

Director, Sri Trang Agro-Industry Co., Ltd.

1982 – 1985

Export Management, Yang Thai Pak Tai Co., Ltd.

No. of Shares Held

35,391,555 Shares

7. Mr. Anan Pruksanusak

56 years old

Relationship

No

Education

Executive Micro MBA, Thammasart University

Current Position 1995 – Present

Director, Sri Trang Agro-Industry PLC.

Experience 1990

Founder of Sadao P.S. Rubber Co., Ltd.

1984

Founder of Nam Hua Rubber Co., Ltd.

No. of Shares Held

412,437 Shares

8. Mr. Kitichai Sincharoenkul

51 years old

Relationship

Mr. Somwang Sincharoenkul’s son

Education

Master’s Degree in Business Administration, Indiana State University, U.S.A. Bachelor Degree in Economic, Thammasart University

Current Position 1995 – Present

Director, Sri Trang Agro-Industry PLC.

2002 – Present

Executive Director of Bangkok branch, Sri Trang AgroIndustry PLC.

Experience 1988 – 2006

Manager of Bangkok branch, Sri Trang Agro-Industry PLC.

1984 – 1987

Credit Department, Citibank

No. of Shares Held

3,499,300 Shares

9. Mr. Prakob Visitkitjakarn

70 years old

Relationship

No

Education

Master’s Degree in Finance, Indiana State University, USA B.A. (Hon.) in Finance, Indiana State University, USA - 41 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Current Position 2008 – Present

Chairman of Audit Committee, Sri Trang Agro-Industry PLC.

2004 – Present

Director, Lease It Co., Ltd.

1993 – Present

Independent Director, Sri Trang Agro-Industry PLC.

1999 – Present

Chairman of the Audit Committee, Siam City Cement PLC.

Experience 1999 – 2008

Audit Committee, Sri Trang Agro-Industry PLC.

1997 – 2002

Executive Vice President, Bank of Ayudhaya PLC.

1995 – 1997

President, Sahathanakit Thai Finance & Securities Company

1975 – 1995

Executive Vice President, Bank of Ayudhaya PLC.

No. of Shares Held

93,600 Shares

10. Mr. Kriang Yanyoungdilok

72 years old

Relationship

No

Education

B.A. Accounting, Thammasart University

Current Position 1999 – Present

Independent Director and Audit Committee, Sri Trang Agro-Industry PLC.

Present

Certified Public Accountant

Experience 2004 – Present

Audit Committee, Oishi Group PLC.

1985 – 1998

Revenue Officer, Revenue Department

1968

Transferred to Revenue Office, Phuket Province, as Classthree Inspector

1965

Class-three government official, Office of the AuditorGeneral of Thailand

No. of Shares Held

- Shares

11. Mr. Samacha Potavorn

67-year-old

Relationship

No

Education

Thai barrister–at–law Master of Public Administration, Thammasart University

Current Position February 2008 – Present

Independent Director and Audit Committee, Sri Trang Agro-Industry PLC.

Experience 2006 – February 2008

Assistant Secretary of Ministry of Interior

2003– 2004

Governor, Phang-nga province

- 42 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

2002 - 2003

Law advisor, Ministry of Interior

2000 - 2002

Assistant Permanent Secretary of Ministry of Interior /Vice-Director of southern boarder province control center

1997 - 2000

Vice-Governor, Pattalung Province, Trang Province

1996 - 1997

Assistant Province Officer

1984 - 1996

District Chief Officer

1969 - 1983

Assistant District Officer

No. of Shares Held

- Shares

Management Team As of 31st December 2009, the following persons comprised the Management team. 1. Mr. Viyavood

Sincharoenkul

Managing Director

2. Mr. Prasit

Panidkul

Executive Director – Production

3. Mr. Chaiyos

Sincharoenkul

Executive Director – Production

4. Mr. Anan

Pruksanusak

Executive Director – Production

5. Mrs. Promsuk

Sincharoenkul

Executive Director - Finance and Administration

6. Mr. Kitichai

Sincharoenkul

Executive Director – Bangkok Branch

7. Mrs. Pacharin

Anuwongwattanachai Company Secretary

8. Mr. Choosit

Sae – Lee

Marketing Manager

9. Mr. Piti

Chenvanij

Marketing Manager

10. Mr. Chaidej

Pruksanusak

Manager of Quality Control

11. Mr. Chalermpop

Khanjan

General Manager – Block Rubber, Concentrated Latex

12. Mr. Chalermchai Norsakul

Block Rubber Factory Manager–Thung Song Branch

13. Mr. Sarawood

Arunkit

Block Rubber Factory Manager–Si Kao Branch

14. Mr. Atipat

Malisuwan

Rubber Smoked Sheet Factory Manager–Hatyai Branch

15. Ms. Suwat

Suwanarat

Rubber Smoked Sheet Factory Manager–Trang Branch

16. Mr. Kriangsak

Paetai

Concentrated Latex Factory Manager–Trang Branch

17. Mr. Manas

Uthairat

Block Rubber Factory Manager–Huaynang Branch

18. Mr. Paithoon

Kulasuwan

Concentrated Latex Factory Manager–Karnjanadit Branch

19. Mr. Chetta

Naktai

Concentrated Latex Factory Manager–Surat Thani Branch

20. Mr. Wutthichai

Jeanphud

Concentrated Latex Factory Manager–Chumporn Branch

21. Mr. Ekkachai

Chalothornsudithi

General and Administration Manager

22. Mrs. Natpat

Soyphuraya

Accounting Manager

23. Ms. Narisara

Sincharoenkul

Finance Manager

Total staff of 998 persons and 4,013 daily workers

- 43 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Management’s Remuneration 1. Monetary remuneration  The financial compensation for eight directors includes Director Honorariums totaling 3,000,000 Baht Name

Position

Compensation 2009

1. Mr. Somwang Sincharoenkul

Chairman

480,000 Baht

Vice Chairman

360,000 Baht

3. Mr. Viyavood Sincharoenkul

Managing Director

360,000 Baht

4. Mr. Chaiyos Sincharoenkul

Director

360,000 Baht

5. Mr. Puang Cherdkiatgumchai

Director

360,000 Baht

6. Mrs. Promsuk Sincharoenkul

Director

360,000 Baht

7. Mr. Anan Pruksanusak

Director

360,000 Baht

8. Mr. Kitichai Sincharoenkul

Director

360,000 Baht

2. Mr. Prasit Panidkul

 The financial compensation for three audit committee members include Audit Committee Honorariums totaling 1,520,000 Baht Name 1. Mr. Prakob Visitkitjakan 2. Mr. Kriang Yanyongdilok 3. Mr. Samacha Potavorn 

Position Independence Director / Chairman of Audit Committee Independence Director / Audit Committee Independence Director / Audit Committee

Compensation 2009 600,000 480,000 480,000

Executive directors – salary and bonus (7 persons) 44,968,878 Baht Unit : Baht

Total

Year 2009

Salary

7

36,217,958

Bonus

7

8,750,920

Total

44,968,878

2. Other remunerations -NoneAuditing fee 1. Auditing fee Auditing fee in fiscal year 2009 2. Other fee (non auditing fee)

2,080,000 Baht -None- 44 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

The Use of Inside Information and Principles of Internal Control Inside Information As a public company listed on the Stock Exchange of Thailand, the Company is strictly conducted in the correct manner with equitable treatments of all participants according to the Inside Information Control policy applied on 28th September 2007 as follows: 1. The use of inside information for purchasing and selling securities. The Board of Directors, Management team, their spouses, and their children under legal age must report their holding securities in accordance with the regulations of the Stock Exchange of Thailand and the Office of the Securities and Exchange Commission (SEC). The Board of Directors, Management team, employees, and staffs of the Company who exposed to the Company’s inside information which may affect the securities price and has not yet disclosed to the public are prohibited to directly and indirectly purchase, sell, or tender offer of securities that resulting the damages to the Company. It is regardless that such actions or disclosure of inside information to others may or may not benefit to such person or not. The Board of Directors and Management team must report their holding securities in accordance with the regulations of the SEC. 2. The information disclosure. The Company has public information disclosure policies as follows: a. It is a responsibility of the Board of Directors and all employees to maintain the Company’s

confidential

information

by

carefully

handling

confidential

documents/information, preventing information leakage which may causes damages to the Company, and prohibited disclosure to outside parties except prior consent from the Company. The information exchanges with customers and suppliers under the normal course of business are not considered confidential information. Where the nature of the information is doubtful, consultation with management should be carried out. b. The Company shall disclose information to the public in a clear, timely, and equal manner. c. The disclosure of any information or news to the public shall be approved by the Managing Director or authorized persons.

Former executives or staffs shall not

disclose inside information to outside parties nor take advantage from inside information.

- 45 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

The Principles of Good Corporate Governance The Company set corporate governance guidelines based on five good corporate governance principles as follows: 1. Shareholders’ Rights. The Company realizes that shareholders will be trust and confident in the investment of the Company’s securities by having policies to preserve shareholders’ rights, render equitable treatment to all shareholders in accordance with the relevant laws, and encourage shareholders to exercise their rights such as: (1) Rights to Receive Dividend Payments. The Company, subsidiaries, and affiliated companies adopted a conservative dividend payment policy to ensure the operation stability by carefully considering the financial status, cash flow, expected dividend payments from subsidiaries and affiliated companies, the expected fund to finance future growth, external factors, and economic impacts. The dividend payout policy is 30% of total net profit.

For instance, the dividend payment in 2009 is 3 Baht

per share, which is 28 percent of total consolidated net profit. (2) Rights to Attend Shareholders’ Meetings. The Company pays high attention to disclose sufficiently accurate, completed, transparent, and equal information to its shareholders for making decisions in the shareholders’ meetings as well as voting, providing opinion, and appointment of directors. (3) Rights to Vote at the Shareholders Meeting. The completed invitation to shareholders’ meeting and attachments will be forwarded to shareholders in advance.

The invitation to shareholders’ meeting shall contain meeting

agendas, attachment to each agenda, board opinion, all proxy forms as indicated by the Ministry of Commerce, list of all independent directors for proxy of shareholders, map of meeting venue, list of documents required to present at the meeting, and Articles of Association regarding shareholders’ meeting and voting. The meeting agendas and attachments can be downloaded from the Company’s website, www.sritranggroup.com. (4) Rights to Expressing Opinion and Asking Questions in the Meeting. All shareholders shall have equal rights in expressing opinion and asking questions in the meeting under the meeting regulations. Chairman of the meeting shall allocate time for shareholders appropriately and encourage shareholders in expressing opinion and asking questions in the meeting.

- 46 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

2. Equitable Treatment to Shareholders. (1) The meeting shall be convened in sequence of agendas as indicated in the meeting invitation. No extra agenda should be added in the meeting without prior notification to the shareholders.

The invitation to shareholders’ meeting and attachments shall contain the

completed information and be delivered to shareholders in advance with sufficient time for shareholders to carefully study in information details. Such invitation shall also disclosed in the Company’s website, www.sritranggroup.com, and published in daily newspapers for at least 3 consecutive days and not less than 3 days prior to the meeting date. Before beginning of the meeting, the chairman of the meeting shall clearly explain the voting method and counting. During the meeting, the chairman of the meeting shall provide the equal opportunities for shareholders to ask questions, express opinion and recommendations, and receive clear answers and necessary information. After the meeting date, the minutes of the shareholders’ meeting shall be submitted to the Stock Exchange of Thailand (SET) within the required time frame. (2) Encourage shareholders to use voting cards on every agenda.

Voting cards

collection, vote counting, and announcement of voting resolutions shall be transparently conducted in the meeting room. The signed voting cards of shareholders shall be kept for future inspection. (3) Resolutions of the meeting shall be recorded accurately and completely, then submitted to the SET and SEC within 14 days after the meeting date and disclosed on the Company’s website, www.sritranggroup.com. (4) The policy regarding the use of inside information shall be strictly enforced to all level in the Company as described on page 45 (5) Disclosure of the shareholding structure of subsidiaries and affiliated companies clearly to ensure shareholders’ confident on the transparency and accountability operating structure. The group shareholding structure is in page 14 (6) The Company also focuses on disclosure of important information accurately, completely, on time, transparently, and frequently. (7) Shareholders shall have accesses for information request via independent directors’ emails (regarding director activities, corporate governance, and internal audit), the Company’s secretary, or investor relation department.

- 47 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

3. Stakeholders’ Rights. The continuous growth of the Company is from the good support of all stakeholders. The Company realized and pay attentions to all stake holders such as internal stakeholders (employees, workers, and management of the Company and subsidiaries), external stakeholders (suppliers, customers, financial institutions, government agencies), and the most important – shareholders. The responsibilities to stakeholders are as follows: −

Shareholders. The Company shall operate its business with transparency, reliable finance and accounting systems, long-term growth, and high return on investment which will create the highest satisfaction to shareholders.

Employees. The Company treats all employees equally, creates a good working environment and safety, and provides appropriate levels of remuneration. The Company also supports the development of employees’ skills, capabilities, and experience. The Health and Working Environment Committee is established to take care, advise, notify news, and training of safety, health, and working environment as well as prevent workplace accidents.

Additionally, the events for employees’ living standard

improvement are arranged such as library, recreation, employee manual, and activities to improve physical and mental health. All information and events are promoted via the Company’s website. −

Customers.

The Company is dedicated to create customer satisfaction and long-term

relationship by paying good attention, producing quality products, and delivering on time. The guidelines are in the employees’ manual. −

Vendors/Suppliers. The Company always purchases products and services from suppliers/vendors strictly under trade conditions, purchasing agreements, and relevant rules and laws with high business ethic and moral.

Government agencies. The Company strictly complies with relevant laws and regulations such as environmental, safety, labor, accounting, tax, the SEC, and the SET.

Environment and social responsibility. The Company highly concerns about safety, environment, neighborhood communities, and society.

Therefore, the Company

implements CSR policy in natural resource preservation, efficient use of energy, improvement of social living standard, and reduction of environmental impacts. In addition, the Board of Directors has established the management system to ensure the Company does not violate laws and regulations and provides fair treatment to all stakeholders.

- 48 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

4. Information Disclosure and Transparency. a. The Board of Directors has duties and responsibilities in disclosure of important information, including financial and non-financial information, in an accurate, complete and timely manner through accessible channels that stakeholders can equally receive information in accordance with the relevant regulations. b. The Board of Directors established a Public Relations Department to communicate with investors, outside parties, and involved parties.

Investors Relations Department will

communicate with shareholders, stakeholders, investors, and analysts. c. The Board of Directors will ensure that all published information is clear, complete, accurate, and accountable in both Thai and English languages. Information is released through the channel provided by the Stock Exchange of Thailand and the Company’s website. d. The Board of Directors has a responsibility to report the corporate governance policy through the annual report and website. e. The Board of Directors has a responsibility to disclose meeting attendance of directors and the Audit Committee members. f.

The Board of Directors has responsibility to prepare balance sheets, income statements, auditing reports, annual reports, and other related reports, and present these reports to the shareholders’ meeting.

g. The Board of Directors has a responsibility to report risk factors, risk characteristics, and causes and effects to Company’s operations through the annual report. The Board of Directors will ensure the Company discloses accurate, clear, reliable, and on-time information in accordance with the regulations of the Office of the Securities and Exchange Commission and the Stock Exchange of Thailand. The published information is prepared in the form of annual filing (56-1) and annual report (56-2).

In addition, the Investors Relations

Department is delegated to communicate with investors, shareholders, securities analysts, and related government agencies. The disclosed information will be updated on to the Company’s website frequently. Please contact the Investor Relations Department, (02) 259-2964-71 ext. 25-26 or Fax (02) 259-2958, or www.sritranggroup.com

- 49 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

5. The Responsibility of the Board of Directors. Roles and Responsibility of the Board of Directors •

The Board of Directors has responsibilities to consider and approve important operating issues and the formulation of financial policies, strategies, and goals.

The Board of Directors has responsibilities to ensure that the Company has reliable accounting reconciliation, accounting reports, financial reports, and accounting audits.

The Board of Directors has responsibilities to maintain the evaluation of internal control procedures and internal audits.

The Board of Directors has responsibilities to consider the possible risk factors and establish a risk management policy.

The Board of Directors has the responsibilities to consider and solve conflicts of interest, including related transactions, for benefits of the Company and all stakeholders.

Under section 89/12 (1) of the Securities and Exchange Act (4th amendment) B.E 2551, the Company shall determine the principles of normal business agreements or normal business supporting transactions with general business conditions for transactions among the Company, subsidiaries, directors, management, and related persons. Therefore, the Board of Directors has set the principles of such matter as follows:

The Company and subsidiaries may have transactions relating to raw materials purchase, sales, transportation services, or other connected transactions with directors, management, or related persons now and in the future. The management is capable to approve such transactions as long as the transaction prices and conditions are indifferent from prices and conditions quoted to other counter parties (or market price). Price of transportation service shall be according to general transportation rate and must not higher than 110% of price quoted to other counter parties.

The management shall prepare a transaction summary to report in the Board of

Directors’ Meeting every quarter or as per request.

Appointment of Committees The Board of Directors has responsibilities to carefully consider and approve the important operating issues. The Board of Directors, therefore, appointed special committees to consider each specific issue.

- 50 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

The Audit Committee appointed from Independent directors has to be one-third of Company’s directors and not least than three persons, at least one person should have accounting knowledge. All Audit Committee members shall maintain independency in accordance with the requirements of the Stock Exchange of Thailand and the internal definition of Independent Directors. The Audit Committee has responsibility to audit the internal control system, financial report system, corporate governance, risk management, and the selection of auditing firm. Independence of the Board of Directors The Board of Directors established the independence qualifications in accordance with the Notifications of the Office of the Securities and Exchange Commission and the Stock Exchange of Thailand. Director Remuneration The director remuneration o has been established in accordance with the industry standard, experiences, responsibilities, and authorities which are comparable to others in the same industry. Appointment of Directors in Other Listed Companies The Board of Directors has established the director policy to limit the Company’s directors to become not over 5 directors of listed companies. The Skill Development of Directors and Management The Board of Directors will encourage and support director’s training on the good governance practices continuously. Internal Control The Company recognizes the importance of internal control system, risk management, and operation control. The operating procedures involved with all employees and the Executive Board to share duties and responsibilities to ensure that every departments move in the same direction toward the same goals. Internal Control Department is an independent unit, reporting directly to the Audit Committee and the Executive Board. Under yearly internal audit plan, Internal Control Department will perform auditing of internal control system, implementation of risk management system, and general advice under “Standard for the Professional Practice of Internal Auditing”. Such standard is an operating guideline and framework of internal audit which focus on independent, justice, and international standard operation with high quality auditing work.

Development and training of internal audit staffs are also included in the

standard.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Based on audited financial statements for the year 2009, there is a note that “No significant deficiency in finance and accounting internal control systems”. The internal control system and functions can be summarized as follows: •

The Audit Committee – The Audit Committee is responsible for assessing the adequacy and effectiveness of internal control system by continuously reviewing the performance of the Company’s Internal Audit Department and accounting auditor. In addition, the Audit Committee may provide recommendations to the Board of Directors regarding improvement of internal audit and internal control systems.

Internal Audit Department – Responsible to internal auditing of all business unit operations of the Company and its subsidiaries under the yearly internal auditing plan and advice to improve internal audit system.

The consideration will be mainly on

business and operation risks. •

Management Activity Control System – The Board of Directors sets the operating goals of the Company by determining the clear mission, detailed operating plan of each department, and Key Performance Indicators (KPIs) in financial outcome, operating output, and customer satisfaction. Such control is closely monitored every month.

Risk Assessment – Changing environments may cause business at risk and negative impacts, therefore continuous risk assessment and monitoring are required.

Each

department shall assess its risk and prepare the solution plan. In addition, there is a management meeting every month to evaluate the current situation and select strategy to cope with the possible risks. •

Control System – The Company clearly determined measures and implementation plans by issuing orders, rules, approval authority, and working procedures for the management and all employees.

Information and Communication – The Company has various communication networks, both Internet website and Intranet website. The Internet website is a communications channel between the Company and stakeholders such as shareholders, investors, and other outside parties. For internal communication among the group, the Intranet website is the key instrument for correspondence. This is to ensure the efficiency and accurate of information, and delivered in time to all related parties.

Monitoring and Evaluation Systems – To monitor operating performance of all business units, each business unit shall report its operating performance to the management every month. The internal audit team also frequently audits all operating units and report to the Audit Committee every 45 days beginning from February each year.

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Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Connected Transactions The Company has connected transactions with subsidiaries and affiliated companies as disclosed in section 6 of the notes to the financial statements. Subsidiaries and affiliated companies are related through common shareholding and/or directorships as indicated in the “Background and Type of Business” and “Group Shareholding Structure”. Reason and Necessity of Connected Transactions The connected transaction relating to sales and services were executed under normal business practice at the best interest of involved business units. The pricing policy of the connected transactions is the same as pricing policy with other outside parties. Each company in different location has efficiently operation in controlling of raw materials and finished products. Marketing and production departments of each company are usually able to make raw material plan, sales plan, production plan, and delivery of finished products independently on its own. However, some production lines are sometimes unable to meet the clients’ need, therefore the connected transactions occurred to alleviate the production and delivery problems in order to maintain customer satisfactory and good business relationship.

Approval Process of Connected Transactions The approval of connected transactions is conducted under the same practice as transactions of outside parties, which are based on normal business conditions and market prices.

Responsible employees, namely purchasing staff or marketing officers, will follow the

Company’s established rules and procedures. The Company reports these transactions to the Audit Committee during consideration to approve the year-end financial statements.

- 53 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Policy or the Potential of Future Connected Transaction It is expected that the Company will engage in connected transactions under normal business operations in the future, and in a similar manner to transactions in preceding years.

Pricing Policies for Subsidiaries, Associated and Related Companies : Pricing Policies Sales of products and raw

At normal business prices, as same as other

materials

entities.

Service income - transportation

At normal business prices, as same as other entities.

Service income - management

At fixed rate on agreement.

Interest income from trade credit

At normal business prices, as same as other entities.

Rental income

At contract price which had been agreed upon.

Purchase

At normal business prices, as same as other entities.

Rental and Service Expenses

At normal business prices, as same as other entities.

Guarantee

No fee charged.

Fixed assets acquisition

At normal business prices, as same as other entities.

- 54 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Explanation, Financial Analysis and Performance The following explanation and analysis should be considered with the financial statement and financial notes of the company, as well as the operational information that appears in this document. The consolidated and separate 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 company’s performance In 2009, the Company’s sales ware the highest since the establishment at 759,021 tons or 12 per cent increase which was considerably good in comparison to the overall economy.

With the clear indication sign of recovery in Emerging and Asian economies,

coupling with more stabilized situation on those developed countries – USA EU and Japan, the world economy was in much improved level compared to the situation during Quarter 3-4, 2008. The various stimulus packages initiated by various governments had effectively turned around the economy, particularly the “Cash for Clunker program” starting by Chinese government encouraging people to swap the old car with new car. This policy has been followed by many western governments. As such the unit sold of automobile has grown significantly especially Chinese market. The registration of new car in China for year 2009 was at 13.6 million units, the highest record ever. The Company’s total sales and services in 2009 was at 45,585 Million Baht which reduced by 24 per cent from 2008. Rubber price sharply dropped 53 per cent from 3rd quarter of 2008 to 1st quarter of 2009, and then recovered to move up 59 per cent by 4th quarter of 2009. Average rubber price in 2009 was 30 per cent lower than 2008. Avg. Price

Q2/09

Q3/09

Q4/09

Period 2 Increase

(55%)

1,524

1,835

2,516

65%

1,461

(51%)

1,664

1,995

2,565

54%

1,394

(53%)

1,594

1,915

2,541

59%

Q1/08

Q2/08

Q3/08

Q4/08

Q1/09

TSR

2,651

2,945

2,972

1,554

1,328

RSS

2,736

3,035

2,984

1,591

Average

2,693

2,990

2,978

1,573

Period 1 Decrease

Quarterly Rubber Price in Singapore Commodities Exchange (SICOM) in 2008-2009 (Average price: US Dollar per ton)

Average selling price was around 1,800 – 2,200 US Dollar per ton. Based on average rubber price on SICOM in 2009, STR Block rubber and rib smoked sheet RSS average prices were 1,801 and 1,921 US Dollar per ton, respectively. Average prices of STR and rib smoked

- 55 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

sheet RSS in 2008 were 2,531 and 2,587 US Dollar per ton respectively. SICOM rubber price reduced 26-29 per cent from 2008 as per the following table. Avg. Price

Q3/09

Q4/09

Increase

% Increase

2008

2009

Decrease

% Decrease

TSR

1,835

2,516

681

37%

2,531

1,801

-730

-29%

RSS

1,995

2,565

570

29%

2,587

1,921

-666

-26%

Increasing production efficiency and effective raw material price management, especially STR production, were key points that attributed to wider gross profit margin from 4.9 per cent to 7 per cent with gross profit amount of 3,210 Million Baht. The Company also enjoyed the record performance by one of the affiliated companies – latex examination glove manufacturer. Due to very high demand of latex examination gloves business from the global concern of 2009 flu epidemics and increased heath care budget of several governments. At the consolidation level, the company’s shared of profits from affiliated companies increased from 383 million Baht to 745 million Baht. The company was able to lower financial cost by certain level due to overall positive environment in Thai financial system. There was the foreign exchange gain of 538 million Baht of which the Indonesian subsidiary had contributed to major portion of the said amount.

In 2009, 73 Million Baht future employee retirement benefit was recorded on

Balance sheet. It has affected the beginning retained earning 2008 for 64 Million Baht and 2009 income statement by 9 Million Baht. The Company’s net profit in 2009 was 2,142 Million Baht or 10.71 Baht per share, compared to 618 Million Baht or 3.09 Baht per share in 2008. Other Factors Affecting the Company’s Operation

Exchange Rate

The Company recorded 538 Million Baht exchange rate gain of which major portion derived from positive impact of Indonesian subsidiary.

This was due to this subsidiary‘s large

outstanding US dollar loan exposure. Any effect on the strengthening of Rupiah currency would have a positive affect to the operation.

In year 2009, Indonesia exchange rate

strengthened from US Dollar/Rupiah 11,325 to US Dollar/Rupiah 9,458.

Unit: Million Baht Consolidated Statement Exchange Rate Gain (Loss)

2008

2009

Increase

% Increase

(12)

538

550

4,630%

- 56 -


Sri Trang Agro-Industry Public Company Limited

IDR/USD

Annual Report 2009

FOREX ( Rupiah / usd )

End of year, Forex strengthen 16% 2008 Rp11,325 --> 2009 Rp 9,458/usd.

13,000 12,500

11,325

12,000

11,853

11,500 11,000 10,500 10,000

10,048

9,394

9,500

9,149

9,000

9,458

8,500 0801 0802 0803 0804 0805 0806 0807 0808 0809 0810 0811 0812 0901 0902 0903 0904 0905 0906 0907 0908 0909 0910 0911 0912

Graph showing US Dollar / Indonesian Rupiah Exchange Rate

US Dollar/Baht exchange rate was weakening from US Dollar/Baht 34.98 by the end of 2008 to US Dollar/Baht 35.73 by the end of March 2009. Then Thai exchange rate reversed to strengthen to US Dollar/Baht 33.18 at the end of December 2009. The average exchange rate was weakening from US Dollar/Baht 33.31 in 2008 to US Dollar/Baht 34.29 in 2009 or 2.9 per cent.

baht / USD. 40 39 38 37 36 35 34 33 32 31 30 29 28

FOREX ( baht / usd. )

Forex weaken 2.9% or 0.97 Baht/usd.

35.73

'08 ฿ 33.31  '09 ฿ 34.29 34.98

33.18

0801 0802 0803 0804 0805 0806 0807 0808 0809 0810 0811 0812 0901 0902 0903 0904 0905 0906 0907 0908 0909 0910 0911 0912

Graph showing US Dollar / Thai Baht Exchange Rate

The Company has the policy to hedge foreign exchange risk by using financial derivatives as the instrument tool to alleviate impact currency volatility.

The Company’s exchange rate

hedging exposure at the end of 2009 was 242.5 Million US Dollar (equivalent to 8,045.5 Million Baht) in forward and option contracts with 7 commercial banks.

For Indonesian

operations, US Dollar loans are naturally hedged by US Dollar sales/receivables.

- 57 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Financing Costs Unit: Million Baht Consolidated Financial Statement Sales revenue

% of Sales

2008 60,134

Interest paid

% of Sales

2009

Decrease

45,585

651

1.08%

330

14,549 0.72%

321

% 24% 49%

In 2009, financing costs reduced by 321 Million Baht or 49 per cent from the previous year. Financing costs as of percentage of sales also reduced from 1.08 per cent in 2008 to 0.72 per cent in 2009, mainly due to 30 per cent drop in rubber price, high liquidity in financial system, and low interest rate environment. With the advantage in accessing financing sources as the leading company in rubber industry, the management commanded higher leverage in term of financing cost control. The following graph showed the comparison of the Company’s interest rate versus banks’ MLR in year 2008-2009.

2008 MLR 2008

Interest rate (%)

2009 MLR 2009

8% 7%

Yr. 2551 4.44% 6%

Yr. 2552 2.86%

5% 4% 3% 2% JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Graph showing the Company’s Interest Rate and Banks’ MLR

Shares of Profit from Investment in Affiliates Shares of profit from affiliated companies increased from 385 Million Baht in 2008 to 745 Million Baht 2009 or 94 per cent increase, major contribution was from the leading global examination rubber glove producer – Siam Sempermed Corporation Ltd. Additionally, the operation of a new affiliated rubber glove distribution company, Sempermed Brazil Comercio Exterior LTDA, was considerably good due to increased Brazil’s health care budget and strengthen Brazilian exchange rate. Shares of profit and loss from 10 investments in the affiliated companies were as follows;

- 58 -


Sri Trang Agro-Industry Public Company Limited

Shares of profit and loss in the affiliated companies (Million Baht)

Annual Report 2009

Activities

Increase (decrease)

%

591

364

160%

(6)

7

13

214%

High-pressure hydraulic hose

68

10

(58)

(85%)

STR block rubber

95

12

(83)

(88%)

10

27

18

183%

1.6

1.8

0.2

13%

(5)

(1)

4

82%

(6)

(10)

(4)

(68%)

-

13

13

-

94

94

385

745

360

2008

2009

powdered and powder -free latex examination gloves

227

2. Shanghai Foremost Plastic Industrial (Subsidiary of Siam Sempermed Corporation Limited)

latex examination gloves

3. Semperflex Asia Corporation Limited

1. Siam Sempermed Corporation Limited

4. Thaitech Rubber Corporation Ltd. 5. Sempermed USA. Inc.

6. Pattana Agro Futures Co., Ltd. 7. Semperform Pacific Corporation Limited 8. Semperflex Shanghai Co., Ltd. 9. Sempermed Singapore Pte. Ltd. 10. Sempermed Brazil Comercio Exterior LTDA (Subsidiary of Sempermed Singapore Pte. Ltd.)

Distributes latex examination gloves in U.S. market Brokerage activities in Agro Future Exchange of Thailand injection-molded rubber and plastic part High-pressure hydraulic hose Invest in Sempermed Brasil Comercio Exterior LTDA. Trading / distributing latex and synthetic gloves in Brazil Market.

Total

- 59 -

94%


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Operating Results of Each Product Line ( million baht)

RSS, 8,537 , 19%

STR, 30,400 , 66%

LATEX, 5,314 , 12%

Others, 1,334 , 3%

STR

RSS

LATEX

Others

Structure of Sales and Services Income in 2009

Total sales and services income was 45,585 Million Baht, of which 97 per cent or 44,251 Million Baht were from natural rubber products, including: −

30,400 Million Baht block rubber, or 66 percent of total sales and services;

8,537 Million Baht rib smoked sheet, or 19 per cent of total sales and services;

5,314 Million Baht concentrated latex and by-product, or 12 per cent of total sales and services.

-

Other revenues from rubber wood, latex examination gloves, rubber and palm plantation, transportation services, and engineering services were worth 1,344 Million Baht, representing 3 per cent of total sales and services.

Block Rubber In 2009, the Company generated 30,400 Million Baht revenues from block rubber sold, 21 per cent or 8,124 Million Baht decreased from the previous year, due to sales price in US Dollar term lowered by 35 per cent. Total sales volumes were 493,562 tons, 19 per cent or 77,644 tons increase from 2008. The great success in acquiring higher market share from other competitors strong was the effort of marketing team and the offering various/suitable products to meet clients’ demand, especially Chinese customers. The average selling price was 1,500 – 2,200 US Dollar per ton, 33 per cent decline. Thai baht currency has weakened by 2.9 per cent from US Dollar/Baht 33.31 in 2008 to US Dollar/Baht 34.29 in 2009. The average selling

- 60 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

price in Thai baht term lower by 33 per cent,. However, the cost of sales decreased 36 per cent from efficient raw material cost management, resulting in higher gross profit margin from 4.5 per cent to 8 per cent.

The 2009 gross profit amount was 2,419 Million Baht, up from

1,731 Million Baht in 2008.

Ribbed Smoked Sheet The Company generated 8,537 Million Baht revenues from Ribbed Smoked Sheets, 39 per cent or 5,497 Million Baht declined from the previous year. The average selling price was lower by 35 per cent with averaging selling price of 1,500 – 2,200 US Dollar per ton. The total sales volumes were 139,253 tons, 9 per cent or 12,995 tons reduction from 2008 due to more switching to block rubber product. The cost of sales decreased 33 per cent resulted in lower gross profit margin from 5.5 per cent to 3 per cent. The 2009 gross profit amount was 260 Million Baht, dropped from 768 Million Baht in 2008.

Concentrated Latex and By-Products The Company generated 5,314 Million Baht revenues from concentrated latex, 16 per cent or 1,050 Million Baht decreased from the previous year. The sales volume increased 18 per cent or 18,544 tons due to the enormous growth of rubber glove industry and the successful of market penetration in China. The average selling price was 1,200 – 1,400 US Dollar per ton, 30 per cent reduction from 2008. The cost of sales decreased 31 per cent resulting in increase gross profit margin from 4.8 per cent to 6.9 per cent. The 2009 gross profit amount was 369 Million Baht, in comparison to 303 Million Baht in 2008.

Financial Status

Assets As of December 31, 2009, the group had total assets of 23,105 Million Baht, 52 per cent or 7,924 Million Baht increased from the end of 2008. Current assets are 69 per cent of total assets. Current assets mostly were in trade receivables and inventory, increased 85 per cent to 15,946 Million Baht.

- 61 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Unit: Million Baht Consolidate Financial Statement

31/12/2008

%

31/12/2009

%

Increase (decrease)

%

Cash and saving

1,087

7%

980

4%

(107)

(10%)

Market securities investment

13

0%

27

0%

13

98%

Traded receivables

2,740

18%

4,132

18%

1,392

51%

Inventory

4,433

29%

10,173

44%

5,741

130%

330

2%

634

3%

304

92%

8,603

57%

15,946

69%

7,343

85%

2,263

15%

2,372

10%

108

5%

291

2%

255

1%

(36)

(12%)

12

0%

10

0%

(2)

(13%)

3,808

25%

4,282

19%

475

12%

204

1%

240

1%

36

18%

15,181

100%

23,105 100%

7,924

52%

Other current assets Current assets Investment in affiliated companies Investment in Jointly control entity Investment in other companies Land, building, equipment – net Non-current assets Total assets Trade Receivables

Traded receivables were 4,132 Million Baht or 18 per cent of total assets, an increase of 1,392 Million Baht or 51 per cent from the end of 2008. It was due to much higher sales volume at the end of 2009 of which was far different situation from industry downturn in late of 2008. Higher price level was another factor that benefit from economic recovery stimulated by many governments. This was clearly illustrated in the growth number of automobile sales in many countries. The collection period was in range of 20-30 days. Inventory The value of inventory was 10,173 Million Baht, accounted for 44 per cent of total asset. The increase of 5,741 Million Baht or 130 per cent from the end of 2008 was due to the increasing rubber price and sale volume. Inventory amount increased 62,000 tons or 82 per cent from the end of 2008. This was in line with the trend of world economy recovery. Inventory turnover period was around 30-40 days. Investments in affiliated companies Total investments in affiliated companies increased 108 Million Baht to 2,372 Million Baht. There was the record of 733 Million Baht from share of profits from affiliated companies and 97 per cent or 712 Million Baht was from share of profits from those affiliates related to the

- 62 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

glove industry. In 2009, two affiliated companies had paid out the dividend for 625 Million Baht. Investments in jointly control entity Total investment in joint-venture companies decreased 36 Million Baht to 255 Million Baht. In year 2009, there was the share of profit for 11 Million Baht and 47 Million Baht dividend paid. Assets Quality

Assets The value of investment in marketable securities Investments in marketable securities were shown in fair values. Changes of investment value were reconciled as a separate item in shareholders’ equity until recording in income statement after disposition of such investments. The investments in marketable securities as at December 31, 2009 were as follows; Unit: Million Baht Consolidate Financial Statement Market securities - cost Deduct – the book value adjustments Fair price

31/12/2008 31/12/2009

Increase (decrease)

%

32.5

32.5

(0.0)

(0%)

(19.3)

(6.2)

13.1

68%

13.1

26.3

13.1

100%

The value of investments in marketable securities as shown in the fair price had increased by 13 Million Baht, resulting from recovery of stock market. Marketable securities increased 10 Million Baht from banking industry and 3 Million Baht from securities and telecommunication industries.

Account Receivables The Company‘s outstanding account receivables 4,132 Million Baht was recorded at the end of 2009. The average aging trade receivables shown per following details;

- 63 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Unit: Million Baht Consolidate Financial Statement

31/12/2008

%

31/12/2009

%

1,832

66%

3,834

91%

Overdue

949

34%

365

9%

Overdue 1 – 30 days

510

18%

282

7%

Overdue 31 – 60 days

315

11%

3

0%

Overdue 61 – 90 days

64

2%

5

0%

Overdue 91 – 120 days

4

0%

7

0%

Overdue 121 – 365 days

43

2%

35

1%

Overdue over 365 days

14

1%

33

1%

2,781

100%

With in credit terms

Total traded receivable – net Provision for doubtful debts Net Percentage of doubtful debt

4,200 100%

(41)

(68)

2,740

4,132

(1.5%)

(1.6%)

Overdue account receivables reduced from 34 per cent in 2008 to only 9 per cent in 2009. The Company recorded sufficient 68 Million Baht provision for doubtful account.

The

provision amount was accounted for 1.6 per cent of total trade receivable in 2009, compared to 1.5 per cent in 2008.

Inventory Total inventory value was 10,173 Million Baht, increased from 5,741 Million Baht in 2008. It was a significant increase which was influenced from substantial higher rubber price and sale volume. 63 per cent of inventory was finished goods and work in process which could turn into cash quickly while the other 37 per cent were mainly raw materials and disposable production items. The higher of inventory was a strategy in according to the management plan. Due to continued higher rubber price movement, there was no provision from possible marked down inventory value.

- 64 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Unit: Million Baht Value at Cost

2008

2009

Provision from reduced inventory value

2008

2009

Increase (Decrease)

Inventory - Net

2008

%

2009

%

%

Finished Goods

4,036

5,322

(511)

3,525

80%

5,322

52%

1,797

51%

Work in Process

482

1,103

(105)

377

9%

1,103

11%

725

192%

538

3,689

(73)

465

10%

3,684

36%

3,219

692%

65

64

65

1%

64

1%

(1)

(1%)

5,121

10,178

4,433

100%

10,173

100%

5,741

130%

Raw Materials, Packaging, and Chemicals Spare parts and disposable items Net

(688)

(4)

(4)

Efficiency Ratio Assets Turnover Unit: Million Baht Consolidate Financial Statement

2008

2009

Increase (Decrease)

%

3.63

2.42

Total revenues

60,199

46,235

Total assets

15,181

23,105

7,925

52%

Current asset

8,603

15,946

7,343

85%

Non-current assets

6,577

7,159

582

9%

Assets turnover

(1.21 ) (13,964) (23%)

Asset turnover was 2.42 times, reduced from 3.63 times in 2008 due to dropping rubber price. However, sale volume in tons increased for 12 per cent which considered satisfactory in comparison with the negative-growth of overall rubber industry. It was the successful effort by the marketing unit in penetrating emerging countries particularly China and Asia regions.

Total company assets increased by 7,925 Million Baht or 52 per cent.

Current assets

increased 85 per cent, mostly comprised of account receivables, inventory, and dividend receivable which was expected to be made in January 2010. Non-current assets increased 9 per cent from additional investments in land, buildings, machines, and equipments of new STR factories in Thailand and other countries which shall begin to generate revenues and profit in 2010.

- 65 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Financial Liquidity and Capital Expenditures

Cash Flow Statement The Company carried 980 Million Baht of cash at the end of 2009 as per the following details:

Consolidated Financial Statement

31/12/2009

Cash Flow Statement Net cash flow (use in) from operating activities

(4,378)

Net cash flow (use in) from investing activities

(534)

Net cash flow (use in) from financing activities

4,805

Cash and cash equivalents increase (decrease)

(107)

Beginning cash and cash equivalents

1,087

Ending cash and cash equivalents

980

The company had used 4,378 Million Baht net cash flow from operating activities. It was derived from net profit of 1,278 Million Baht from operation activities. The company had need of cash for working capital for 5,656 Million Baht. This was mainly from increased inventory for 5,057 Million Baht and trade receivables for 1,448 Million Baht. Traded payable increased by 982 Million Baht. The other items were 328 Million Baht interest paid and 110 Million Baht corporate income tax.

Net cash flow for investing activities was 534 Million Baht of which mainly for capital expenditures in lands, buildings, machinery, and equipments for 789 Million Baht. From total capital expenditures, 80 per cent or 650 Million Baht were investments in new block rubber factories in north-eastern Thailand and Indonesia. The other 20 per cent were investments in concentrated latex facilities to increase production efficiency and rubber plantation management. Other items were increase of fixed deposit under contingent liabilities for 27 Million Baht, disposition of equipments for 17 Million Baht, and dividend received from three local affiliated companies for 270 Million Baht.

Net cash flow from financing activities of 4,805 Million Baht was consisting of short term loan 3,933 Million Baht and 1,520 Million Baht of long-term loans. In addition to mainly use the fund for daily operation, the company utilized the said financing for 437 Million Baht repayment of long-term loans, 13 Million Baht repayment of liabilities under financial leases, and 200 Million

- 66 -


Sri Trang Agro-Industry Public Company Limited

Baht dividend payment.

Annual Report 2009

The loans were also used to purchase lands, buildings, and

equipments of new factories and increase production efficiency of existing factories. As a result, cash and cash equivalents reduced by 107 Million to 980 Million Baht by the end of 2009. Key Liquidity Ratios Current Ratio Unit: Million Baht Consolidate Financial Statement Current ratio (times)

2008

%

0.92

2009

%

1.13

Increase (decrease)

%

0.21

Trade receivables

2,740

18%

4,132

18%

1,392

51%

Inventory – net

4,433

29%

10,173

44%

5,741

130%

Total current assets

8,603

57%

15,946

69%

7,343

85%

Total current liabilities

9,363

62%

14,070

61%

4,707

50%

15,181

100%

23,105

100%

7,925

52%

Total assets

Current ratio was 1.13 times, increased from 0.92 times in 2008. The company was able to increase the current asset at the greater pace than current liabilities. Current assets increased by 85 per cent while only 50 per cent increase of current liabilities. Over the year the company gradually changed the borrowing structure by shifted partially toward long-term loans. The company was fully confident in term of receivable quality and sufficient liquidity due to strong accredited name of customers. With the higher rubber price, current liabilities increase by 50 per cent as well. However as mentioned earlier the company was well support by various financial institutions for working capital to support daily operation. Quick Ratio Unit: Million Baht Consolidate Financial Statement Quick ratio (times)

2008

%

0.45

2009

%

0.41

Increase (decrease)

%

(0.04)

Inventory – Net

4,433

29%

10,173

44%

5,741

130%

Current assets (excluded inventory)

4,171

27%

5,773

25%

1,602

38%

Total current liabilities

9,363

62%

14,070

61%

4,707

50%

- 67 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Quick ratio was 0.41 times, slightly decreased from 0.45 times in 2008, due to management policy in 2009 to increase inventory level. Inventory level reached 44 per cent of current assets. Liabilities Unit: Million Baht Consolidate Financial Statement Short term loans from financial institutions

31/12/2008

%

31/12/2009

Increase (decrease)

%

%

8,620

88%

12,195

77%

3,575

41%

Traded payables

565

6%

1,545

10%

980

174%

Other current liabilities

178

2%

330

2%

152

85%

9,363

96%

14,070

89%

4,707

50%

319

3%

1,578

10%

1,259

394%

Leasing contracts

25

0%

15

0%

Provision for retirement benefits

66

1%

74

1%

8

12%

Total current liabilities

410

4%

1,667

11%

1,257

307%

15,737 100%

5,964

61%

Total current liabilities Long term loans

(10) (38%)

Total liabilities

9,773 100%

Cash and deposits

1,087

Liabilities – net of cash and deposits

8,686

14,756

6,071

70%

Shareholders’ equity

5,408

7,369

1,961

36%

980

7%

4%

(107) (10%)

The total liabilities were 15,737 Million Baht, of which 89 per cent were current liabilities, 11 per cent were non-current liabilities. Current liabilities increased by 50 per cent or 4,707 Million Baht due to increased trade payable and short-term loans as business recovered and continued higher rubber price. Long term liabilities increased 307 per cent or 1,257 Million Baht due to additional 2,500 Million Baht long-term credit lines provided from financial institutions, of which 1,300 Million Baht was drawn down by the end of 2009. The purpose was to use in capacity expansion, improvement of production efficiency and more suitable alignment of company financial structure. Net liabilities (total liabilities less cash and deposits) were 14,756 Million Baht, an increase of 70 per cent or 6,071 Million Baht from 2008. Unit: times Consolidated Financial Statement

2008

2009

Increase (decrease)

%

Net Debt to Equity Ratio

1.61

2.00

0.40

25%

Debt to Equity Ratio

1.81

2.14

0.33

18%

- 68 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Net Debt to Equity Ratio was 2.00 times while Debt to Equity Ratio was 2.14 times by the end of 2009. Increased ratios from 2008 was resulted from increased loan amount to finance both capacity expansion and higher closing price at the end of the year

Even though the Company is financially well supported by several financial institutions, the management continues to explore/study other financial alternatives to support company’s operation. At this juncture, with long-term relationships with financial institutions, the Company is confident to continuously obtain good support from the Banks and have sufficient credit lines. The management foresees no trend of negative changes from financial institutions’ relationship in the near future. Shareholders’ Equity Unit: Million Baht Consolidate Financial Statement Shareholder’s equity

31/12/2008

%

31/12/2009

%

Increase (decrease)

%

Share capital - issued and paid-up 200,000,000 common shares

1,000

1,000

-

-

Premium on share capital

1,124

1,124

-

-

(173)

(173)

-

-

1,052

1,011

(41)

(4%)

(19)

(6)

13

68%

(10)

(46)

100

100

Difference between book values of acquires subsidiaries lower than cost Surplus on assets revaluation net Unrealized loss on marketable securities Cumulative adjustments of financial statements

(36) (364%)

Retained earnings Appropriated for legal reserve Unappropriated Total major shareholders’ equity Minority interest Total shareholders’ equity Total liabilities and shareholders’ equity

-

-

2,340

15%

4,323

19%

1,983

85%

5,414

36%

7,333

32%

1,919

35%

(6)

0%

36

0%

42

740%

5,408

36%

7,369

32%

1,961

36%

23,105 100%

7,925

52%

15,180 100%

As of 31st December 2009, the Company’s equity was 7,369 Million Baht, rising by 1,961 Million Baht or 36 per cent from the previous year. The minority interest portion increased by 42 Million Baht whiles the major shareholders’ equity portion increased by 1,919 Million Baht.

- 69 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

The contribution was from 1,983 Million Baht increase in unappropriated retained earnings, 41 Million Baht decrease in the surplus on assets revaluation-net, 13 Million Baht decrease in unrealized loss on marketable securities from higher stock prices, and 36 Million Baht loss increase in translation adjustments of foreign subsidiaries due to the strengthening of Thai baht currency against US Dollar.

- 70 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

Audit Committee Report The Audit Committee, appointed by the Board of Directors, consists of 3 independent directors who are Mr. Prakorb Visitkitjakarn as Chairman of Audit Committee, Mr. Kriang Yanyongdilok and Mr. Samacha Potavorn as Audit Committee member. Two-third of the Audit Committee members has finance and accounting knowledge.

The Audit Committee performs its duties and responsibilities as assigned by the Board of Directors, in compliance with the Audit Committee Charter, and in accordance with the requirements of the Stock Exchange of Thailand.

During the fiscal year 2009, the Audit

Committee arranged a total of 7 meetings with full collaboration from senior management, external auditors, and internal audit team fulfilling the assigned scope of responsibilities. This can be summarized as follows:

The Audit Committee reviewed quarterly and year-end financial statements together with the auditor and the management to ensure that it is accurate and complies with generally accepted accounting principles. Through the meetings, there were discussions, opinion exchanges, and assessment on the reporting before granting the approval.

Reviewed and ensured that the Company complied with relevant laws, regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand, and good corporate governance and internal control principles. The important information shall be sufficiently and transparently disclosed.

Reviewed the disclosure and engagements of related party transactions which may possible have the conflicts of interest. The review concluded that such transactions have complied with the regulations of the Stock Exchange of Thailand.

Reviewed and considered internal audit plan and auditing results of internal audit department as well as sufficiency and appropriateness of internal control system.

Conclusively, the Audit Committee has opinions that the Company’s operations in the past year have sufficient and appropriate internal control system; financial statements was prepared under the generally accepted accounting principles; and effectively complied with relevant laws and regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand.

The Audit Committee confirmed that their considerations are

independent and no limitation on information assessment.

- 71 -


Sri Trang Agro-Industry Public Company Limited

Annual Report 2009

In addition, the Audit Committee considered auditors and auditing fee and agreed to propose to the Board of Directors the appointment of Ms. Nongram Laohaareedilok, Certified Public Accountant Registration No. 4334, and/or Mr. Pradit Rodloytuk, Certified Public Accountant Registration No. 218, of AST Master Co., Ltd. to be the auditor of the Company.

Yours sincerely,

(Mr. Prakob Visitkitjakan) Chairman of Audit Committee 8 March 2010

- 72 -

:: Annual Report 2009 EN ::  

:: Annual Report 2009 EN ::

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