STAR!
STARS MICROELECTRONICS (THAILAND) PUBLIC COMPANY LIMITED
Stars Microelectronics (Thailand) Public Company Limited
ขอมูลทั่วไปของบริษัทฯ Corporate Information ชื่อ / Name ทะเบียนเลขที่ / Registration No. ประเภทธุรกิจ / Type of Business ที่ตั้งสำนักงานใหญ / Headquarter ที่อยูปจจุบัน / Current Address โทรศัพท / Telephone โทรสาร / Facsimile Website
: บริษัท สตารส ไมโครอิเล็กทรอนิกส (ประเทศไทย) จำกัด (มหาชน) Stars Microelectronics (Thailand) Public Company Limited : 0107545000098 : ประกอบธุรกิจรับจางผลิตและประกอบชิ้นสวนอิเล็กทรอนิกส Electronics Manufacturing Services : เลขที่ 586 หมูที่ 2 ตำบลคลองจิก อำเภอบางปะอิน จังหวัดพระนครศรีอยุธยา 13160 586 Moo 2 Klongjig, Bang Pa-In, Ayutthaya 13160, Thailand. : เลขที่ 605 - 606 หมูที่ 2 ตำบลคลองจิก อำเภอบางปะอิน จังหวัดพระนครศรีอยุธยา 13160 605 - 606 Moo 2 Klongjig, Bang Pa-In, Ayutthaya 13160, Thailand. : +66(0) 3522 1777 : +66(0) 3522 1778 : www.starsmicroelectronics.com 002
Content 100 Financial Highlights 101 Vision, Mission, Strategy, Policy and Direction of Operation 101 Organization Chart 102 Message from Chairman 104 Message from CEO 106 Board of Directors 108 Management Team 110 Nature of Business 116 Corporate Social Responsibility 117 Global and Thailand Industry and Competition in 2009 118 Production Capacity 118 Future Projects 119 Shareholding Structure 119 Shareholding Structure in Subsidiary Company 120 Revenue Structure
121 Investment Policy and Capital Structure 121 Dividend Policy 121 Research and Development 122 Human Resource Development and Management 123 Good Corporate Governance 128 Related Party Transactions 130 Risk Management 132 Management Structure 145 Details of Biography of Board of Directors 149 Report of the Audit Committee 150 Report of the Board of Directors’ Responsibilities for the Financial Statements 151 Management Discussion and Analysis 156 Report of Independent Auditor and Financial Statement 195 Remuneration for the Auditor 196 Other Reference Persons
Stars Microelectronics (Thailand) Public Company Limited
FINANCIAL HIGHLIGHTS (Million Baht)
FINANCIAL HIGHLIGHTS 2007
Total Revenues
11,116
12,146
11,685
Sales and Service Income
11,051
12,127
11,653
Gross Profit
403
440
352
Operating Profit
266
323
258
EBITDA
545
583
447
Net Profit before Exceptional Items
267
201
198
Net Profit (Loss) for the year
267
201
198
Total Assets
4,378
4,005
3,460
Net Fixed Assets
2,242
2,263
2,288
Total Liabilities
2,679
2,963
2,619
Shareholders’ Equity
1,699
1,042
841
Debt / Equity
1.58
2.84
3.11
Net Profit (after tax) per Sales
2.42%
1.66%
1.70%
EBITDA Margin
4.94%
4.81%
3.83%
Return on Equity
19.49%
21.34%
26.89%
Dividend per Share
0.29
-
Payout Ratio (excl. exceptional items)
40%
-
-
EPS before Exceptional Items
0.73
0.73
0.72
EPS after Exceptional Items
0.73
0.73
0.72
Book Value per Share (Baht)
4.62
3.78
3.05
Number of Shares Outstanding (year end) (Millions Share)
368
276
276
4,378
2008
4,005
2007
3,460
11,116
2009
2008
2008
Total Revenues
100
-
267
2009
2007 2009
Total Assets
11,685
2008
12,146
2009
201
198
2007
Net Profit (Loss) for the year
Stars Microelectronics (Thailand) Public Company Limited
• Vision The Company has established the Company’s vision as follows.
/
“Stars to lead the industry in advanced manufacturing technology”
• Mission
/
The Company has established the Company’s mission as:
• Strategy, Policy and Direction / of Operation
“Stars to be committed to its customers and business partners for long-term growth and win-win relationships”
And in order, to clearly express the direction of the Company, it is the policy of the Company to have a joint innovation with the customers from the beginning until the products are in the process of mass production. The Company also attaches great importance to its high strategies to achieve high technologies, high growth and high margins.
Organization Chart Board of Directors
Audit Committee Executive Committee
Internal Audit Department
Chief Executive Officer
Sales & Marketing
Operations & Development
Procurement & Supply Chain
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Finance & Administration
Stars Microelectronics (Thailand) Public Company Limited
MESSAGE FROM CHAIRMAN Message from the Chairman Dear Shareholders, On behalf of Stars Microelectronics (Thailand) Public Company Limited (SMT), I am pleased to present the Company’s successful developments in 2009, focusing particularly on its business and results for your acknowledgement in this annual report. This is the first public report on its performance and good corporate governance from SMT as a member of the Stock Exchange of Thailand with its IPO shares traded on 24th September 2009. SMT is a leading contract manufacturer (CM) providing advanced Electronics Manufacturing Services (EMS) and its products comprise Microelectronics Module Assembly (MMA) and Integrated Circuit Packaging or IC Packaging. SMT is very proud to be recognized as a company of “Thai people” and a prominent CM, highly accepted by well known major companies. The products of SMT have been the components of a large number of the end products in numerous industries such as computers, mobile phones, MP3 players, automobiles and electrical appliances used in daily life. As the world of electronics is colossal; our lives depend on numerous electronics products; therefore, the electronics industry has become “enormous and of towering significance” for the affluence of the country and the world’s economy. The year 2009 began with the world economic recession and it was inevitable for SMT to avoid this condition; however, the SMT Management had effectively implemented the ‘right’ operational strategy and together with the determination and devotion to the work of
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Stars Microelectronics (Thailand) Public Company Limited
its Management and Staff, SMT managed to “conquer the crisis.” Furthermore, the Company took pride in being registered on the Stock Exchange of Thailand, truly a historical achievement of SMT. In the year 2010, SMT has set a goal for a higher growth in the net sales and profits as the world economy is currently in a stage of recovery, especially the electronics industry which is expanding rapidly to meet soaring demand. SMT has considerably raised its production capacity of both MMA and IC Packaging and increased its employment to accommodate customers’ rising requirements which the Company believes will bring extensive growth to SMT from this year onward. In my capacity as Chairman of the Company’s Board of Directors, I wish to pledge that “The Board of Directors shall efficiently oversee the operations of the Company in accordance with its established policy and with good corporate governance as well as prevent all aspects of a business risk for the maximum benefits of all the shareholders”.
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In conclusion, I wish to thank all SMT shareholders for continually supporting SMT and the Board of Directors, the Management and Staff for their devoted efforts for the common prosperity of SMT
Mr. Somnuk Chaikul Chairman Stars Microelectronics (Thailand) Public Company Limited
Stars Microelectronics (Thailand) Public Company Limited
MESSAGE FROM CEO Message from the CEO Dear Shareholders, 2009 was a testing year that we managed to surmount. The economic crisis caused by the financial meltdown in the USA impacted the global economy. The effect started to be felt in the fourth quarter of 2008 and carried over to the first or even the second quarter of 2009. Many companies here and elsewhere suffered from the economic slowdown. Yet, I as CEO of Stars Microelectronics (Thailand) Public Company Limited (SMT) announced that SMT must remain profitable for the whole year of 2009. This surprised the Company’s management as several other companies foresaw gloomy results. Even though I expected the revenue in 2009 to be flat, I would focus on the bottom line performance or the net profit. I also made it unequivocally clear to everyone in the entire organization that SMT would be listed on the Stock Exchange of Thailand (SET) in 2009 despite the looming economic uncertainty. To cope with the world economic recession, I introduced my 3R strategy. Relief To ease the impact, the Company reduced expenses to support lean management, ensured its operators worked with maximum efficiency without redundancy, managed raw materials based on the just-in-time basis (JIT) and exercised tightened financial control including bringing down the interest paid on loans. Reform SMT implemented a company-wide policy to bring changes to every area of the whole organization to realign it to better suit the changing situations and future challenges and attain high customer satisfaction. Recover The Company concentrated on developing new potential customers in niche markets who require advanced and integrated manufacturing
104
Stars Microelectronics (Thailand) Public Company Limited
technology made possible by state-of-the-art facilities and strong R&D capability as well as existing world-class customers the Company has been working with to jointly develop cost-effective innovative products. Moreover, the Company continued to energize all of our sales channels in Europe, USA and Asia. In addition, SMT implemented the “paperless” system to enable us to do away with paper and apply new technology to improve the general operations and management leading to reduced process time, task redundancy, non-productive activities, paper usage and last but not least improved data accuracy. In the first half of 2009, SMT generated 115 million baht in profits and the Company has markedly improved our financial structure. Exiting 2009, SMT achieved a record net profit of 267 million baht on the total revenue of 11,116 representing 33% growth over the net profit of 201 million baht on the total revenue of 12,146 million baht in 2008. SMT saw our shares first traded on the SET on 24 September 2009. In 2010, I feel the global electronics demand will continue to grow. Additional orders from new customers will boost our income. The penetration into the European market will significantly contribute to our growth. SMT will benefit from Thailand’s becoming the ‘Global Hub’ for the electronics industry and BOI support. SMT will continue to expand our production capacity for both Microelectronics Module Assembly (MMA) and IC Packaging. Once again,
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I set another challenging target of achieving sales growth of approximately 40% year on year for 2010. I wish to thank the shareholders, Mr. Somnuk Chaikul as SMT Chairman, our Management and Staff, partners and suppliers for the support and trust given to me and the Company. We will work hard to overcome all the challenges in 2010 to realize our goal and bring sustainable wealth to all our stakeholders and the Company.
Mr. Polsak Lertputipinyo Chief Executive Officer Stars Microelectronics (Thailand) Public Company Limited
Stars Microelectronics (Thailand) Public Company Limited
Board of Directors 5
2
1. Mr. Somnuk Chaikul Chairman
2. Mr. Polsak Lertputipinyo
4. Mr. Dheerasak Suwannayos
3. Mr. Pitak Sirivanasandha
5. Associate Professor Dr. Preecha Jarungidanan
Director & Chief Executive Officer
Vice Chairman
Independent Director and Chairman of the Audit Committee
Independent Director and Audit Committee Member
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1
3
4
Stars Microelectronics (Thailand) Public Company Limited
6
6. Mr. Tetsuo Tsujimoto
8. Mr. Prasart Yunibhand
7. Mr. Chong Kwen Sam
9. Ms. Suthiluck Chaikul
Director
Director, Executive Director & Chief Procurement Officer
Independent Director and Audit Committee Member
Director
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7
8
9
Stars Microelectronics (Thailand) Public Company Limited
Nature of Business
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Stars Microelectronics (Thailand) Public Company Limited
Nature of Business and Product Samples 1. Microelectronics Module Assembly The following are examples of the Company’s Microelectronics Module Assembly:
• The Printed Circuit Board Assembly (PCBA) which controls the operation of the Hard Disk Drive (Hard Disk Drive Control Board) • The Printed Circuit Board Assembly (PCBA) consists of an electronics circuit for Touch Pad of Notebook and Click Wheel Interface part in the MP3 Player
The Company offers Electronics Manufacturing Services (EMS) to Original Equipment Manufacturer (OEM) or Subcontractor and an electronics product designer or Fabless Company. It distributes products to local and international customers. The Company boasts modern and high-tech facilities. Its products range from normal standard found in the market to high level standard involving several types of technology. More important, the Company’s ability to design and develop products with customers
as a joint innovation utilizing high technology machines enables the Company to produce Microelectronics Module Assembly with utmost precision and complex and innovative Microelectronics Modules to serve the needs of the global leading customers.
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• Clear Pad Assembly consists of Touch Pad for Smart Phone and MP 4 Player with high technology connecting circuit board on PET (Polyethylene Terephthalate) which provides lower cost and more flexibility when compared with the glass screen, and can be used with other equipment within almost every industry. •
The manufacture of PCBA with the use of PTH, SMT, and COB technology for several types of electronics equipment such as telephones, dryers, electronics toothbrush, flat LCD television from Panasonic and other brands.
• The manufactures for LCD Module for office telephone to NEC.
Stars Microelectronics (Thailand) Public Company Limited
• The manufacture of the Radio Frequency Identification (RFID) tag which is developed from the Bar Code tag. The strength of RFID is to read the information from the label without touching. It also has a resistance qualification of moisture, vibration, and shock with high speed data reading. The RFID is applied to several products such as pass, parking ticket, and product label, etc.
The Board of Investment (“BOI”) Privileges The Company has received two privileges from the Board of Investment pursuant to the Investment Promotion Act B.E. 2520. The approval of the BOI is under stipulated conditions. The tax incentives the Company received can be summarized as follows:
• The manufacture and assembly of smartcard to circuit board be a data recorded card. The smartcard contains memory chips to electronically record data and programs to provide safe protection for the data in the card when the smartcard is used with other card readers. The examples of the smartcard are credit card, ATM card, Identification card.
Received BOI Privilege Date
September 29, 2004
BOI Privilege
No. 2057(4)/2547 dated December 16, 2004
Additional Amendment
No. Aor Kor 0906/005845 dated March 29, 2005 No. Aor Kor 0906/015080 dated July 5, 2006 No. Aor Kor 0906/015444 dated June 28, 2007 No. Aor Kor 0906/016064 dated July 4, 2007
2. Integrated Circuit Packaging (IC Packaging) At present, the Company provides different packages of IC Packaging
No. Aor Kor 0906/020700 dated August 24, 2007 No. Aor Kor 0906/030677 dated December 24, 2009
Eligible Business • The Standard Packaging is a product which has common form in the market and has long been produced until it has the standard size and a larger form and thickness such as SOIC, TSSOP, SCTO, SOT23, SOT143, etc. The Advanced Packaging is a circuit board which has just been developed in a smaller and thinner size when compared with the Standard Packaging such as TDFN (Thin Dual Flat Non-Lead) and UDFN (Ultra-Thin Dual Flat Non-Lead). The examples of the IC Packaging product are Infrared Data Association (IrDA) which provides wireless connection to connect mobile telephone, Notebook, PDA, Printer, and Digital Camera, etc. • In addition, the Company is one of the leading manufacturers of Micro-Electro-Mechanic Systems (MEMS) a faster growing technology in the present day. The Company has more than 10 years of experience to co-develop the MEMS with global leading companies to apply to the Tire Pressure Monitoring System (TPMS). The Company also uses this technology to produce other products such as pressure measurement for medical instruments as well as for other industrial and consumers applications.
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Summary of important information, benefits, and conditions
Manufacturing Integrated Circuit and LCD Module as well as the PCBA type 5.5 Manufacture of electronic parts and/or equipment or parts and/or equipment used for electronic apparatus • Exemption of import duty on machinery according to investment promotion policy forelectronics and electrical appliances industry. Granted corporate income tax exemption for 7 years for the net profit of the promoted business starting from the first day of revenue received from the business (the privilege of corporate income tax exemption will end on December 8, 2012). If the business experiences a loss during the exemption period, the loss within the period can be deducted from the net profit of one or several years within 5 years from the date following the completion of the period. The deduction can be performed on one or more years. • Granted exemption of corporate income tax on business operation’s dividend,which received the privilege, throughout the period of the exemption
Stars Microelectronics (Thailand) Public Company Limited
Summary of important information, benefits, and conditions
• The registered capital is no less than Baht 463.50 million
In addition, the Company also received the investment promotion grant after being listed on the SET as announced by the Board of Investment No. 7/ 2009 on the Investment Promotion to the Company Listed on the SET or MAI. The Company has received the exemption of corporate tax with no limit of Investment Promotion grant No. Aor Kor 2020(1) /2009, Date December 30,2009.
• Production capacity IC
656,000,000
pieces / year
LCD Module
17,000,000
pieces / year
PCBA
80,000,000
pieces / year
(21 working hours per day, 300 days per year)
• The plant is located in the Bang Pa-In Industrial Estate in Ayudhaya Province and shall not move to other locations within 15 years starting from the opening day. BOI Promotion Granted Date
March 1, 2006
BOI Privilege
No. 1386(4)/2549 dated April 11, 2006
Additional Amendment
No. Aor Kor 0906/013806 dated June 8, 2007 No. Aor Kor 0906/016064 dated July 4, 2007 No. Aor Kor 0907/007603 dated March 27, 2009 No. Aor Kor 0907/030676 dated December 24, 2009
Eligible Business
Summary of important information, benefits, and conditions
Manufacturing electronic parts such as PCBA, Touch Pad Module and Optical Mouse Sensor, and IC • Granted corporate income tax exemption for 7 years for the net profit of the promoted business starting from the first day of revenue received from the business (the privilege of corporate income tax exemption will be ended on April 30, 2014). If the business experiences a loss during the exemption period, the loss within the period can be deducted from the net profit of one or several years within 5 years from the date following the completion of the period. The deduction can be performed on one or more years. • Granted exemption of corporate income tax on business operation’s dividend, which received the privilege, throughout the period of the exemption • The Thai personnel training expense ratio when compared with the salary and payroll of Thais and foreigners shall be no less than 1% within the first 3 years
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Marketing and Distribution The Company produces Microelectronics Module Assembly to OEM around the world for a variety within different types of businesses such as computer, electronics, automobile, telecommunication, safety equipment, and entertainment businesses, etc. The Company’s revenue classified by markets can be summarized as follows:
• The registered capital is no less than Baht 463.50 million • Production capacity IC
Microelectronics Module
24,000,000 pieces / year 45,000,000 pieces / year
( 21 working hours per day, 300 days per year )
• The plant is located in the Bang Pa-In Industrial Estate in Ayudhaya Province and shall not move to other locations within 15 years starting from the opening day unless receiving an approval from the Board
Stars Microelectronics (Thailand) Public Company Limited
Microelectronics Module Assembly Distribution Categorized by Regions 1,562,736
2009
14.19
1,650,644
2008
1,244,509
9,333,583 84.72
10,178,905 84.77
10,258,601
2007
1.48
97,586 0.84
Markets in Europe
Markets in USA
2008
178,251
2007
10.73
2009
1.09
2008
13.75
2007
120,124
2009
88.43
11,016,443
2009
100% 12,007,800
2008
100% 11,600,696 100%
2007 Total sales revenue
Domestic markets (for export)
The Company performs marketing activity, contacts customers, provides Electronics Manufacturing Services (EMS) to customers via associated companies including subsidiaries, alliances, and distributors of the Company.
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Stars Microelectronics (Thailand) Public Company Limited
Revenue Categorized by Distribution Channels
Sales revenue Direct Sales
2007
2009
%
Thousand Baht
%
T housand Baht
%
11,192,705
96.48
11,548,837
96.18
10,375,730
94.53
273,633
2.36
329,274
2.74
490,011
4.46
96,892
0.84
106,557
0.89
91,406
0.83
37,465
0.32
23,132
0.19
19,487
0.18
11,600,696
100.00
12,007,799
100.00
10,976,637
100.00
Stars USA Smart Electronics SIIX Corporation Total
2008
Thousand Baht
The Company’s sales offices consist of: •
Stars Microelectronics USA, Inc. is an American company located in Silicon Valley, San Jose, CA, USA. The management team has experience and expertise in distribution and product co-development with customers, including providing Electronics Manufacturing Services (EMS). It is a subsidiary of the Company. The Company holds 59% of the paid-up capital.
• Smart Electronics is a German company. It is the Company’s sales representative in Europe. With more than 10 years of experience, the executives of the company have expertise in distribution of equipment and Microelectronics Modules in Europe. •
SIIX Corporation is a Japanese company which offers an Electronics Manufacturing Services (EMS) with expertise in the electronics industry services covering design, parts procurement, manufacturing through sales offices across the World. SIIX Corporation has become the business alliance and the shareholder of the Company since 1998.
Production Technology
the IC into one piece, resulting in a very small size of the Micro-electronics Module. The manufacturing process and technology of each type can be applied to different types of Microelectronics Module Assembly. Despite frequent changes of electronic products to replace the obsolete products, the manufacturing process, technology, and machinery for the manufacturing of Microelectronics Module Assembly can be adjusted for a new product assembly.
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Future technology
FCOF, FCOG
FOB,FOG
COB,COF
SMT
PTH
Technology of the Company
The Company’s investment in machinery and modern technology helps the Company to integrate various and complete production technologies, together with the Company’s expertise and experience to design and develop with the customers to serve the needs of potential world-class customers. In addition, the Company’s services of Microelectronics Module Assembly and IC Packaging within the same plant help the Company’s production technology to produce System in Package (SiP) which bring together the Microelectronics Module Assembly and
Stars Microelectronics (Thailand) Public Company Limited
Corporate Social Responsibility Stars Microelectronics (Thailand) Public Company Limited has realized that the operation of business requires a responsibility toward the society, community, environment including all beneficiaries in every sector, to achieve a strong society and lasting growth of the organization. In 2009 the Company supported and organized various project activities to assist the community. Its employees cooperate in carrying on the activities for the community in different aspects e.g. supporting education, religion and culture, and social work in the community and remote villages.
Education The activity called “Warmth of Love” was organized on the occasion of the Royal Birthday of Her Majesty the Queen on 12 August 2009 to encourage the employees and their children to participate in activities to promote love and good relationships within the family. The Company also provided scholarships to students in various communities. On the occasion of the Royal Birthday of His Majesty the King on 5 December, the Company organized the activity called “Good Deeds for the Father, a project for youngsters in remote areas” to promote a “unity” of good deeds within the Company and realize the duty in helping the underprivileged children in the society, in rural areas. For example, the Company gave scholarships and study materials to the students in the Salawa Village School in Sangklaburi District, Kanchanaburi Province.
Religion and Culture
Social Work in Community Blood donation event are held regularly, to help the patients and contribute to the blood bank, promoting “social sacrifice and contribution to the society” among its employees.
The Company encourages its employees to make merit on important religious occasions e.g. Visakabucha Day, Makabucha Day, Arsalahabucha Day. It presents Buddhist Lent at Kampang Buddhist Temple, Bang Pa-In District, Ayutthaya Province.
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Stars Microelectronics (Thailand) Public Company Limited
Global and Thailand Industry and Competition in 2009 Though in the first half of 2009, the Company received an affect from the global economic slowdown, there was an improvement of the Company’s performance in the second half of the year. It is expected to continue its improvement in 2010, particularly with the HDD of which Thailand is the largest manufacturer in the World. The popularity smart phone 3G system has led to an increased demand of the Smart Phone within mobile telephone industry. Meanwhile, the Semiconductors situation (Integrated Circuit Packaging) has recovered from its lowest point which usually occurs after 4-5 years. In addition, the automobile industry has increasingly replaced mechanical parts with electronic parts, particularly the sensors such as the technology of the Micro-Electro-Mechanic Systems (MEMS). The electronics industry in Thailand has significantly improved in terms of Electronics and Computers due to Thailand’s being the global hub of HDD and IC Packaging. Thailand’s rapid advancement in the Research and Development areas will increase its long-term competitiveness within the region and, also, worldwide.
01ต9 117
Stars Microelectronics (Thailand) Public Company Limited
Production Capacity At present, the Company has two factories situated in the Bang Pa In Industrial Estate (Free Zone), Ayutthaya Province on and area of 17 rai with a total utility space of 25,500 square meters. First Factory The construction was completed in 1997 on the land area of 4 rai and the space of 3,500 square meters. Currently the Company uses the space in the first factory as a warehouse for raw materials and products which is in the condition ready for future production increase. Second Factory The building completed construction in 2005 on a land area of 13 rai and space of 22,000 square meters with a production capacity of approximately 780 pieces per year to provide services in microelectronics module assembly, IC Packaging Assembly & Test and Captive Line Assembly.
Products
IC Packaging and Testing Production and Assembly of Microelectronics Modules Total
Production Capacity (Million Pieces) 1,200.0
100.0
1,300.0
Future Projects The Company will continue to maintain their focus and vision in order to increase and expand their production capacity and Gross Profit Margins, such as the Microelectronics Module Assembly of Smart Phone (Clear Pad) and the IC Packaging.
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Stars Microelectronics (Thailand) Public Company Limited
Shareholding Structure
Shareholding Structure in Subsidiary Company
The Company shareholders structure as of 31st December 2009 of the first 10 maximum holders is summarized as the following.
Name List of Shareholders
Number of Share
Percentage
1. WINKEY HOLDINGS LIMITED
31,347,218
8.518
2. Mr. Somnuk Chaikul
24,999,629
6.793
3. Miss Suthilak Chaikul
23,100,790
6.277
4. ITOCHU Corporation
19,260,595
5.234
5. SIIX SINGAPORE PTE.LTD.
18,442,650
5.012
6. Miss Oranuj Chaikul
18,000,000
4.891
7. Mr. Petch Wailikit
12,368,344
3.361
8. MR.CHONG HENG KANG
11,920,368
3.239
9. Mr. Saran Chaikul
10,125,133
2.751
10. Mr. Polsak Lertputipinyo
6,621,248
1.799
Stars Microelectronics USA, Inc. is an American national company, founded in 2005, with the head office, in Silicon Valley, San Jose, California State, U.S.A. The Company has invested in the proportion of 19%. The management team of Stars Microelectronics USA, Inc. is a veteran in sales and development of products with the customers, providing service, production and assembly of electronics parts to the majority of customers in diversified electronics assembly and automobile industries. On 20 January 2009, the Company acquired additional shares in Stars Microelectronics USA, Inc. as approved in the Board of Directors’
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Meeting No 4/2551 on 12 September 2008 and Extraordinary shareholders meeting No.1/2551 on 16 January 2009 to allow the Company to acquire 8 million shares of Stars Microelectronics USA, Inc. for US 0.001$ per share which was equivalent to the par value of the shares, an increase in shareholding to 59 %. The shares bought from former shareholders of Stars Microelectronics USA, Inc. made Stars Microelectronics USA, Inc. a subsidiary of the Company as the Company holds 59% shares of the paid-up capital.
Stars Microelectronics (Thailand) Public Company Limited
Revenue Structure Product
2007 Revenue
MMA – Hard Disk 10,254.53 MMA - Others
995.96
IC Packaging Totals
2007 2008 2009
(Unit : Millions Baht)
2008
2009
%
Revenue
%
88.00
10,175.17
83.91
9,263.92
83.82
8.55
1,475.05
12.16
1,273.84
11.53
402.47
3.45
477.05
11,652.96
100.00
12,127.27
Revenue
3.93 100.00
%
513.70
4.65
11,051.46
100.00
10,254.53
995.96
402.47
11,652.96/100%
10,175.17
1,475.05
477.05
12,127.27/100%
9,263.92
1,273.84
513.70
11,051.46/100%
Totals
MMA-Hard Disk
MMA-Others
IC Packaging
Value Added Structure (Unit : Millions Baht)
2007 Revenue
2008 %
Revenue
2009
%
Revenue
%
Value Added MMA – Hard Disk
215.59
29.07
223.97
24.51
284.46
29.24
MMA - Others
261.63
35.28
399.60
43.73
430.41
44.25
IC Packaging
264.44
35.65
290.19
31.76
257.84
26.51
Totals
741.66
100.00
913.76
100.00
972.71
100.00
2007 2008 2009
215.59
261.63
264.44
741.66 /100%
223.97
399.60
290.19
913.76/100%
284.46
430.41
257.84
972.71/100%
MMA-Hard Disk
MMA-Others
120
IC Packaging
Totals
Investment Policy and Capital Structure Investment Policy The Company’s investment policy is to invest in its subsidiaries and/ or affiliated companies with maximum consideration of investment to the business which supports and benefits the business operation of the Company, or the business which is in the industry with potential growth, or the business which the Company excels in or has expertise in, with realization of rate of return received from the investment for the benefit of the shareholders as the main priority. The Company’s vision is to assign Directors or Top Executives to become representatives of the Company following the shareholding proportion, and the Company has the Veto Right in important matters which will be performed by the subsidiaries and/or the affiliated companies. The investment in the companies shall receive an approval from the Board of Directors and the shareholders when the relevant investment is directed to the appropriate transaction. It, shall, then receive the approval from the Audit Committee, including any, other relevant rules and regulations.
Capital Structure Authorized Capital and Issued and Paid-up Capital as of December 31, 2009 Authorized Capital: 736,000,000 Baht consisting of 368,000,000 common shares with par value at 2 Baht per share Issued and Paid-up Capital: 736,000,000 Baht consisting of 368,000,000 common shares with par value at 2 Baht per share
Dividend Policy The company and its subsidiary have a dividend policy of paying dividends at the approximate rate of 40% of the net profit after a deduction of tax and reserves by law. In this regard the Company’s Board of Directors is authorized to consider an exemption not to comply with this policy or occasionally modify the policy, provided the discretion is under the conditions that yield maximum benefit to the shareholders, for instance as a reserved capital to pay debts, to invest in expanding the production capacity or to prepare for the market conditions which could affect the cash flow of the Company in the future.
Research and Development The Company focuses on continuous product development by co-researching with customers from the process of product design at the initial stage to the mass production of the ultimate finished products, achieving both the economy of scale and production efficiency Examples of continuous product development with the customers in the previous years consist of: - Touch Screen Module in Smart Phone - Green Laser Portable Micro-Projector - Tyre Air Pressure Sensor for Automobile Industry - Pressure Sensor for Medical Equipment - Optical Mouse Module - Intelligent Credit Card In addition, the Company has the advantage of combining PCB assembly and IC Chip assembly as it has both the machines and skillful personnel to create alternative new smaller products called System In Package (SIP). In doing so, the Company’s engineering teams focus on research and development with customers and business partners who are the manufacturers of machines and raw materials to enhance the effectiveness of the new products that the customers can easily and quickly offer to the market. Meanwhile, the Company will keep the technical data of each customer, confidential. In 2010, the Company continues to place the emphasis on research and development, and innovation with the customers to continue to provide the highest value products for the niche market with advanced technology and manufacturing equipment together with the ability of its engineering teams to best serve the needs of the customers who have the strategy for joint innovation with the Company.
Stars Microelectronics (Thailand) Public Company Limited
Human Resource Development and Management The Company’s Human Resource Development and Management follows and supports the Company’s policies, business objectives, and strategies with the establishment of a clear, modern, transparent, and fair Human Resource Management process and system in the same direction of the Company. The employees of the Company shall perform their duties with skill, responsibility, determination, and devotion, pursuant to the Code of Business Ethics, the Code of Conduct of Directors and Employees, Organization Culture and the rules and regulations of the Company. The Company shall hire and appoint an employee as necessary and appropriate. The suitable applicant to become an employee of the Company shall possess suitable qualifications, experience, and proven ability in the position. When there is a vacant position, the Company will always provide an opportunity and consider selection of the Company’s employees for the relevant position as a priority. The Company shall consider the salary and compensation to the employees based on duties and responsibility of the position as a priority, together with the economic situation, the living conditions, the remuneration rate in the market at the particular time when compared with other companies which operate similar business to the Company. The Company supports the Human Resource Development to have employees with professional knowledge, ability, and work efficiency, as well as to promote occupational health and safety in the workplace for its employees. In addition, the Company maintains an excellent and supportive working relationship between the employees and the Management of the Company.
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Stars Microelectronics (Thailand) Public Company Limited
Good Corporate Governance The Board of Directors continues to ensure that the company practices good corporate governance and seek to develop the company to be among the most highly respected companies, with regards to good corporate practices, so that, they are able to provide shareholders and stakeholder’s value-added benefits and confidence to the business. The Company has adopted The Principle of Good Corporate Governance for Listed Companies by The Stock Exchange of Thailand and applied significant guidelines to appropriately complement rules, regulations, and the company’s culture.
1. Rights of Shareholders and Shareholders Meeting The Company acknowledges all rights of shareholders which covers all selling, sharing, and transferring rights. With regards to attendance and voting rights in Shareholders’ Meeting, the Company allows Shareholders’ Meeting to take place in a venue where participants find convenient and will prepare sufficient meeting information within relevant time period prior to the meeting. The Company allows the option for a shareholder to assign other individuals to represent themselves and their voting rights in a shareholders meeting as to provide convenience, especially for those who are minor shareholders. The Company will schedule the shareholder’s meeting and conduct the meeting in such a manner that all shareholders have equal rights and opportunities in auditing the company’s operating results, have the rights to question, comment, and make suggestions as necessary. In the past, the Company ensured that the Minutes of the Meeting were published no later than 7 days after the meeting had taken place and that the report was made available for shareholder’s viewing at all times.
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2. Equitable Treatment of Shareholders The Board of Directors regard every shareholder of equal importance and ensures equitable treatment to each one, regardless of the nature of their shareholding (i.e. major shareholder, minor shareholder, or foreign shareholder). The Company continuously reports to the Shareholders about the Company’s progress and operations through public announcements made available by the Stock Exchange of Thailand. Furthermore, the Company will schedule Shareholders’ meeting and announce the upcoming agenda no less than 7 days prior to the meeting schedule and publish the meeting invitation in Thailand’s daily newspapers for 3 consecutive days and not less than 3 days before the meeting. The Board of Directors ensures all practices are in accordance with the laws and regulatory framework imposed by the Securities and Exchange Commission and the Stock Exchange of Thailand and complies with all rules, and appointment of new requirements as announced by the Stock Exchange of Thailand. The Company shall accurately conduct disclosure of all relevant information regarding buying or selling of major shares of the Company and its subsidiary while adhering to the standards of accounting practices by the Federation of Accounting Professions. On this regard, the Board of Directors wil give importance to all relevant transactions between the Company and its subsidiary with other entities which may post potential conflict of interest that is not regarded as part of the regular business practice. In such a case, the Audit Committee will comment on the necessity of the transaction, the appropriateness, and the reasonability to follow through on such a transaction. Terms and conditions will be considered by the market situation and a gauged comparison of the current market price will
Stars Microelectronics (Thailand) Public Company Limited
be conducted. In the case where the Audit Committee does not possess the expertise in considering such a nature of a transaction, the company will acquire other Independent Auditors with expert knowledge (such as Auditor, Independent Asset Appraiser, or Lawyers) and stand independent from the company and those related to the transaction and therefore, having no possible conflict of interest. Comments from the appropriate expert will be a part of the information essential for the decision-making process and be reviewed by the Audit Committee and/or the Board of Directors and/or the shareholders as necessary in each case. The Company will disclose the transaction in the Notes of the Financial Statements which will be audited by the Company’s Audit Committee.
3. Rights of Stakeholders
financial figures will also be disclosed in an orderly fashion along with other relevant reports. The Company discloses information on duties and authority of the Board of Directors and Sub-Committees, numbers of meetings held, and remuneration package granted to the Board of Directors. The company also established an Investor Relations Unit whose responsibility is to ensure all significant information is available to investors and stakeholders. The unit will also serve to report all necessary information to the Stock Exchange of Thailand and The Company’s website so that the information on financial standing and operating results are made available to investors and stakeholders at all times.
5. Roles, Duties and Responsibilities of Board of Directors
The Board of Directors outlines the terms of Stakeholders’ rights as follow: 1. Shareholders: The Company promotes equal treatment to every shareholder and refrains from any act that may violate or curtail the rights of the shareholders, etc. 2. Employees: The Company promotes equal treatment to every employee and ensures fair remuneration. 3. Business Partners and Creditors: The Company and its business partners carry out businesses with justifiability and impartiality in accordance with the ethical framework, ensuring optimum mutual interests. 4. Customers: The Company aims to provide quality service and meet and exceed the needs of customers as well as maintaining and prioritizing safety standards. 5. Competitors: The Company supports the ethical way of business competition. It seeks to be more successful than its competitors within a good competitive framework, on the basis of fairness and honesty, and will refrain from acting in bad faith to the detriment of the competitors. The Company ensures that the lawful rights of stakeholders are properly protected and cooperation among these groups is promoted with benefits generated to all Stakeholders in a fair and just manner.
4. Disclosure and Transparency The Board will seek to make sure that all relevant information of the business is disclosed in a timely manner. This includes the Company’s operating results, financial information, and financial statements which are provided in both Thai and English for all investors, shareholders, and stakeholders to review with equal availability and transparency. In addition, the Auditor’s report on all
The Board of Directors is accountable for roles and responsibilities indicated by relevant laws as well as the Company’s goals, directions, policies, annual operational plans, annual profit and loss statements and budget estimation. The Board also controls management and governs the management team or any entity authorized to have any required responsibility, so that all practices are in line with the goals, policy and directions of the operational plan as approved by the Board of directors.
Structure of Boards of Directors The Company comprises 4 Committees which are Board of Directors, Executive Committee, Audit Committee, and Remuneration Committee. The roles and responsibilities of each Committee are divided clearly for maximum efficiency in the operation. The Board of Directors will determine the company’s direction and determine duties and assign responsibilities to the Audit Committee, the Executive Committee and the Chief Executive Officer. According to the rules and regulations of the Company, the Board of Directors must comprise at least 5 directors. As of December 31, 2009, the Board of Directors consist of 9 directors, 7 of whom are not the employees of the company, whom is more than half of the board, and 2 of whom are the employees of the Company. Sub-Committees The Company comprises 2 Sub-Committees, namely, the Audit Committee - which comprises 3 Independent Directors - and Remuneration Committee comprising 3 directors. The Company has not appointed a Nomination Committee because the Company’s structure is not complex.
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Stars Microelectronics (Thailand) Public Company Limited
Internal Control The Company prioritizes establishment of an internal control system which adheres to acceptable standards and credible criteria understood by Shareholders, Investors, and all Stakeholders. The Company has established the Audit Committee - which is independent from the Company - to monitor the Company’s operations and report all financial dealings with full accuracy complete with all relevant information, ensuring credibility as well as maintaining the efficiency and the effectiveness of the Company’s operations in a transparent manner. In a case where there is a potential for conflict of interest, the Audit Committee will hold a meeting with auditors and the management of the Company to consider and provide recommendations in improving the Internal Control system of the Company. Furthermore, the Company also establishes an Internal Audit deparment that is independent from the Company and reports directly to the Audit Committee, tasked with auditing operations of each system while conducting all practices in accordance with all rules, regulations, and relevant legal requirements. Results of the audit will be reported to the Audit Committee in accordance with the system pre-determined in the yearly operational plan. Inside Information Control The Company has established measures to protect the Company’s inside trading information and seeks to prevent abuse of such or any other misusage by the management and the Company’s employees. Confidentiality and acceptable uses of inside information are outlined as follow: 1. Directors, Executives, Employees, and staff of the Company must secure all confidential information and/or all inside information that belongs to the Company. 2. Directors, Executives, Employees, and staff of the Company must not disclose confidential information and/or inside information of the company for personal gain or other individual’s benefits whether directly or indirectly and with or without any form of reward. 3. Directors, Executives, Employees, and staff of the Company must not buy, sell, transfer, or accept transfers of the Company’s shares by applying confidential and/or/ inside trading information of the Company and/or engage in any transaction that could potentially cause direct and indirect harm to the Company. This rule is to be applied to the spouse and/or all family members and/or relatives of Directors, Executives, Employees, and staffs of the Company. Any violation of this policy will be met with legal actions.
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4. Directors and Executives that have acknowledged the latest financial information must not seek to benefit from such knowledge one month prior to the information being disclosed, to the public. The Company prohibits buying and selling of shares before public disclosure of the abovementioned information. Code of Business Ethics and Code of Conduct The Board of Directors recognize the importance and the necessity of good business ethics and established policies to ensure implementation of the code of conduct as follows: 1. Promote fair and equitable treatment to Shareholders. 2. Consider all rights of Stakeholders and prevent potential cases of conflict of interests. 3. Determine duties and responsibility of Board of Directors. Roles and responsibilities of each Committee are clearly defined. 4. Operate all areas of business with transparency and provide full disclosure of all information in a sufficient and timely manner. 5. Operate all areas of business with caution. The Company has established a risk management scheme and strategies for correcting and monitoring risks in an appropriate and consistent manner. 6. Promotes the sense of team-work and corporate culture to executives and all employees of the Company.
The Company impose that all Directors conduct all activities under the Code of Best Practices as marked by The Stock Exchange of Thailand where the Board assumes full roles and responsibility in applying knowledge, skills, abilities, and experiences increating collective benefits for the business as a whole. Practices with ethics and lawful conduct must be maintained in reaching regulatory objectives, the company’s Articles of Association and the resolution of the shareholders’ meeting with honesty integrity and seeks to generate overall benefits for the company as its highest priority. The Board of Directors assume responsibilities in financial budgeting and consolidated financial statements of the Company and its Subsidiary whereby such statements will be reported in accordance with the general accounting standards stipulated by Thai laws. Most appropriate accounting polices will be applied accordingly and continuously whereby impartial estimation and discretion is incorporated with sufficient disclosure of information, clearly displayed in the report and Notes of all financial statements.
Stars Microelectronics (Thailand) Public Company Limited
Unit: Baht
Board of Directors’ Meeting The Board has established the meeting policy whereby the Board of Directors’ Meeting will take place at least once every 3 months. In the year 2009, the Board of Directors’ meeting was held 6 times, all of which most Directors attended. In scheduling Board of Directors Meetings, the Chairman of the Meeting is assigned to call for the meeting and must make sure to inform relevant attendees by providing 7-days notice about the meeting unless an urgent meeting is called upon to discuss rights and benefits of the Company when immediate decisionmaking is required. The Board of Directors will hold meetings within an area of close proximity to the Company’s headquarters or inside any other venue as appropriate. More than 2 directors can request to hold a meeting. In a case where more than 2 directors have requested to hold the meeting, Chairman of the Board or an appointed director may adjourn the meeting within 14 days of the request. Board of Directors’ Remuneration The Annual Shareholder’s Meeting of the Year 2009 held on March 18th, 2009, passed the resolution to approve 2009 Remuneration Package to the Directors as follow: 1. Directors who attend a Board of Directors meeting receive attendance fee of Baht 4,000. 2. The Company’s Directors receive a monthly remuneration of Baht 12,000.
Name List
1. Remuneration of Board of Directors For the fiscal year ending December 31st, 2008 and December 31st, 2009, the total remuneration fee to the directors totaled up to Baht 1,415,000 and Baht 1,520,000 respectively. Remuneration is issued in the form of a monthly fee and per attendance as follows:
Fiscal Year 2009 Ending December 31st, ‘09
140,000 144,000 144,000 110,000 133,000 144,000 160,000 153,000 161,000 126,000
164,000 168,000 168,000 0 156,000 168,000 184,000 160,000 184,000 168,000
1,415,000
1,520,000
1. Mr. Somnuk Chaikul 2. Mr. Pitak Sirivanasandha 3. Mr. Polsak Lertputipinyo 4. Mr. Toru Uchino1 5. Mr. Tetsuo Tsujimoto 6. Mr. Chong Kwen Sam 7. Mr. Prasart Yunibhand 8. Mr. Dheerasak Suwannayos 9. Assoc. Prof. Dr. Preecha Jarungidanan 10. Ms. Suthiluck Chaikul Total
1
Mr. Toru Uchino resigned from the Director position, effective May 15th, 2009.
2. Remuneration of the Executives Unit: Baht Remuneration
The stated remuneration plan has been in effect since April 2009 onwards.
Remuneration as Cash Payment
Fiscal Year 2008 Ending December 31st, ‘08
Fiscal Year 2008 Ending December 31st, ‘08 of Recipients Of Recipients Total payment
Total Salary Total Bonus Provident Fund Total
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6 6 6
Fiscal Year 2009 Ending December 31st, ‘09 of Recipients Of Recipients Total payment
14,722,802 613,561 845,048
16,181,411
5 5 5
14,560,351 1,114,000 918,481
16,592,832
Stars Microelectronics (Thailand) Public Company Limited
Human Resources As of December 31st, 2008 and December 31st, 2009, List of employees (not including higher-level executives) of the Company
Analyze Demands
are categorized as follows: Unit: Person As of December 31st, 2008
As of December 31st, 2009
1. Sales and Marketing 2. Operations & Development 3. Procurement & Supply chain 4. Finance & Administration
13 2,205 120 97
17 1,765 104 92
Total
2,435
1,978
Major Department
Since the Year 2002, the numbers of the Company’s employees have increased significantly due to the revival of the business which has since showed continuous growth. The Company has expanded human resources in each department and in the operations and Development Department in particular. This is to support the increase in production capacity and is part of the preparation for future growth anticipated by the Company’s positive outlook. Policies in Developing Human Resources The Company has a systematic approach to developing talent and human resources to acquire skills and knowledge while nurturing a positive attitude towards the Company. Such attention to human resources will fuel the efficiency and increase the effectiveness in their present and future performance. The Company aims to promote the development of the following qualities of their employees: 1. 2. 3. 4.
Learn well-rounded knowledge. Develop the ability to engage in multi-tasking. Acquire multi-skilling in all areas of operations. Possess the ability to adapt and substitute for team members.
As the Company believes in the potential of their employees and aims to promote career enrichment for all, the Training Scheme is developed with respect to a development path as outlined in the following diagram.
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Design Training Program Study, Train, & Develop Evaluation & Feedback
Because the Company prioritizes the development of human resources, the following policies are outlined to help the Company reach the goal of developing its employees’ skill sets: 1. Provide budget for training the organization’s human assets. 2. Promote and develop the employee in every level with internal and external training. 3. Establish joint-innovation and joint-training schemes with clients for developing the products with joint-innovation. 4. Send employees on overseas training.
Stars Microelectronics (Thailand) Public Company Limited
Related Party Transactions In the past years, the company had adequate business related party transactions with the subsidiary companies and related companies as these companies are large operators in the business of buying and selling electronic accessories which have been partly beneficial and supportive to the operation of business of the Company for instance sales of products, procurement of raw materials and machine. However, the related transaction with individuals who could have a conflict of interest is a business transaction produced to achieve maximum benefit to the company and in accordance with the regular business conditions as a general business partner, which require reciprocal procurement of products or delivery of services in which the company management has established the procedures of approval of these businesses as a regular business operation with regular customers in general and without discrimination. The Company has a policy to enable the business transaction between each other to be coincided with the mechanism of market prices. In addition, the company has a procurement policy in accordance with the standard of the ISO9001 in which there is a comparison of vendors in the Approved Vendor List: AVL of approximately 2-3 vendors and the consideration of selection bases on quality, prices, duration of payment as the criteria adopted by every company.
Comment of the Audit Committee about the Related Party Transactions
The related party transactions have been considered and commented by the Audit Committee of the Company as a regular business operation by the Company without any special conditions and no transition of the benefit between the Companies, subsidiary companies, associated companies, related companies and shareholders. In addition, the policy to establish the common prices between the Company and related business are on the basis of regular prices of business as had been established for other unrelated individuals/business and undertaken for the benefit of the Company. Measures or Procedures for Authorization of Connected Transactions The related party transactions between the companies are divided into 2 categories (1) Regular and continuous transaction; and (2) Special transaction through measures or procedures of authorization. There are details for each category of transaction as the following. 1. Regular and Continuous Transactions The Company has established guidelines on the organization of regular and continuous transaction that in the future it will be required to be audited by the Audit Committee and/or the Board of Directors concerning justification, comparison of prices and various conditions whether or not they were in compliance with the regular business conditions and in which the management and beneficiaries cannot be involved in the consideration of authorization of the related party transaction. Once the company has been registered in the Stock Exchange Thailand, the Board of Directors has to ensure that the Company complies with the Securities and Exchange Act and regulation, announcement, memorandum or guideline of the Stock Exchange of Thailand and Securities and Exchange Commission including the compliance with guidelines concerning the disclosure of related information, acquisition or sale of principal properties of the Company or subsidiary companies including the compliance with accounting standards as regulated by the Federation of Accounting Professions.
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Stars Microelectronics (Thailand) Public Company Limited
2. Special Transaction The Company has authorized the Audit Committee to confirm a justification for the Production of transactions. In case the Audit Committee was not proficient in considering the required related party transaction, the company shall make arrangements to have individuals with special expertise such as an accountant or an independent assessor or a legal office, which are independent from the company and individuals, who could have a conflict of interest to give comments concerning the related party transaction. The expert’s comments will be used in decision making, by the Audit Committee and/or the Board of Directors and/or shareholders dependent on each case. The Company shall disclose a “common transaction” in an Notes of the financial report, audited by the auditor of the Company.
Trend for future Connected Transactions
The production of the “future connected transactions” shall be audited as required by the Audit Committee and/or the Board of Directors, concerning the justification of the production of the transactions, comparison of prices and different conditions of the transactions whether or not in compliance with the conditions of “regular business”. The management and beneficiary will not become involved with the endorsement of the connected transaction. Once the company is registered with the Stock Exchange of Thailand, the Board of Directors is to ensure that the Company complies with the Securities and Exchange Act and those regulations, announcements, memorandums or guidelines of the Stock Exchange of Thailand, including its compliance with guidelines concerning the disclosure of “related information and acquisition or sale of principal properties” of the Company or subsidiary companies including as well their compliance with the accounting standards, as regulated by the Federation of Accounting Professions. In case there were related party transactions between the Company and subsidiary Companies, produced with individuals, who could have a “conflict of interest, advantage and disadvantage” or would have in the future, which are not under regular business conditions, the Audit Committee, shall give comments concerning the “necessity of the production of transactions, justification and suitability in the aspect of prices, through consideration of the different conditions and if they are in compliance with the regular manner of operation of trade in the market and
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can show a “comparison of prices” as applied to the external individuals. In a case, where the Audit Committee was not proficient in its consideration of the related party transaction which may be required, the Company would allocate an individual with the expertise; e.g. an auditor or independent assessor or legal office etc, which are independent from the Company and an individuals who could have a “conflict of interest” to comment concerning the related party transaction. The comments by individual with the expertise would be used as part of the decision making of the Audit Committee and/or the Board of Directors and/or shareholders depending on the case. In this regard, the Company must disclose the common-related party transaction, between each other in an Notes of the financial report confirmed by the Company’s auditor.
Stars Microelectronics (Thailand) Public Company Limited
Risk Management 1. Change in Technology Because the electronics industry relies on heavy machinery and advanced technology, which requires a high cost and investment while the rapid changes in technology causes the product and machinery life cycles to be short, a small error in investment calculations can result in a big difference to the profitability of investments. Therefore, the company follows technology advancements closely and selectively invests in advanced equipment by integrating machine usage with operations of other product lines as part of the risk management process.
2. Risk from Relying on a Small Number of Major End-Clients The Company acquires a major part of its revenue from producing for its biggest client, a Hard Disk manufacturer, which represented approximately 85% of total revenue in the year 2009. In addition, the company must buy all raw materials from the client, which results in a high cost of production and low margins. However, when calculating our value-added ratios, we deduct these raw material costs, which are effectively passed through. The Company’s revenue generation relies primarily on contract electronics assembly for end-clients. There are more than 5 other major customers in products that do not incorporate Hard Disks, representing 70 percent of the Company’s value added in the year 2009. The Company’s operating results could be impacted if one of these customers cancels or reduces their orders. The Company sought to find new clients and lessen its reliance on major end-clients as mentioned by consistently engaging in new B2B marketing campaigns. Furthermore, the company also established STARS Microelectronics USA, Inc. to act as the sales distributor and penetrate new markets in the United States and established SMART Electronics Company Limited to be a distributor and find new clients in European markets and SIIX Corporation for the Asia region. With this subsidiary and marketing arms, the Company was able to lessen its dependence on major end-clients as our client base increased and smaller clients increase their demand for the Company’s service at the same time.
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3. Labor Risk Currently, Thailand lacks skilled workers, especially in the electronics industry, where only the local Thai labor force is allowed to participate. Furthermore, the economic situation during the end of 2008 until the middle of 2009 caused a lot of electronics factories to lay off significant numbers of workers. This caused a lot of workers to relocate back to their home provinces in accordance with the domestic “sufficiency economy� philosophy and a program to promote grassroots career development. Therefore, when confidence in the electronics industry is restored and order volumes rise, the sudden increase in demand for skilled workers can cause a shortage, as their supply returns at a slower rate than demand. The Company has developed a remuneration package and benefits it believes to be as attractive as other businesses in the same industry. Furthermore, the Company supports employee training, allowing workers to acquire additional skills as an incentive for their loyalty to the company.
4. Financial Risks Risks the Company faces in the area of financial are exchange rate risk, interest rate risk and liquidity risk. The Company accounts cost and revenue both in local and foreign currency, requiring the company to manage foreign exchange rate risk through financial instruments such as FX options, FX forwards and a natural hedge between incomes and expenses in the same currency. The Company also manages interest rate risk by monitoring interest rates in the market and evaluating other suitable financial instruments. Liquidity is also managed through the form of working capital acquired in sufficient amounts to fund the growth of the company. Furthermore, the company also implement a cash flow management ahead of time to efficiently utilize cash, minimize financial expenses and mitigate risks.
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Stars Microelectronics (Thailand) Public Company Limited
Management Structure Board of Directors During January – April, 2009, the Board of Directors consisted of 10 members and during May – December, 2009, the Board of Directors consisted of 9 members (due to the resignation of one of the Directors, effective May 15th, 2009). Position
Name List of Directors 1 Mr. Somnuk Chaikul
Chairman
2 Mr. Pitak Sirivanasandha
Vice Chairman
3 Ms. Suthiluck Chaikul
Director
4 Mr. Polsak Lertputipinyo
Director
5 Mr. Chong Kwen Sam
Director
6 Mr. Tetsuo Tsujimoto
Director
7 Mr. Toru Uchino
Director (Resigned Effective on May 15th, 2009)
8 Mr. Dheerasak Suwannayos
Independent Director and Chairman of the Audit Committee
9 Mr. Prasart Yunibhand
Independent Director and Audit Committee Member
10 Assoc. Prof., Dr. Preecha Jarungidanan Independent Director and Audit Committee Member
Scope of Authorities and Duties of the Board of Directors 1. Manage and oversee that the execution of the Company’s operations are conducted in accordance with the objectives, law, and regulatory framework of the Company as approved by the Board of Director’s meeting while honesty and integrity are adhered to in line with the priority to achieve benefits for the Company as a whole. 2. Has the authority to appoint a number of directors and/or executives of the Company to become part of the Executive Committee to conduct duties as assigned by the Board of Directors. The Board of Directors also has the authority to appoint a Chief Executive Officer and other committees as appropriate (such as Remuneration Committee) as well as delegate authorities to other individuals
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to act on behalf of or represent the Board of Directors’ decision in certain operations under the supervision of the Board of Directors, and subject to cancelation and changes where appropriate. 3. Determine the Company’s goal, direction, policies, and yearly operational/business plan, financial budget, and yearly profit and loss estimation and statement as well as governing the management or any individual that has been authorized to the abovementioned role so that all practices are in accordance with objectives and overall operational policy established by the Board of Directors. 4. Consider, evaluate, monitor and approve the Company’s policies, directions, strategies, operational plan or framework, and major investments of the Company as proposed to the Board of Directors. 5. Consistently evaluate the result of the operations whether they follow the operational/business plan, established framework, and yearly budget forecast. 6. Consider approving investments relating to business extensions and joint-venture decisions with other business partners or investment in other businesses or other external activities. 7. Determine corporate governance and control policies of the Company and its subsidiaries. 8. Has the authority to consider proposing shareholders to approve cancellation and buying or selling of assets and leasing back assets in accordance with the rules and regulations where net value of such an asset exceeds 30 million Baht.
Stars Microelectronics (Thailand) Public Company Limited
9. Consider approval of other significant matters relating to the Company and gauge whether the proposal is appropriate to follow through with and benefits the company. With the exception of the following cases, outlined below, decisions can only be made if the Shareholder’s meeting passes the approval. In a case where any of the directors or authorized individuals, or individual with conflict of interest (according to the announcement made by the Securities Exchange Commissions and/or The Stock Exchange of Thailand) is involved with and stands to lose or gain from the outcome relating to the Company and/or its subsidiaries and/or related companies such director or such authorized individuals will not have the authority to approve the execution of the matter in question. (A) All matters where resolutions from the Shareholder’s meeting are required by law. (B) All matters where any of the directors stands to gain or lose with relevance to any law, rules, or regulations which stipulate requirements of resolution from the Shareholders’ Meeting such as execution of a transaction, acquisition or distribution of the Company’s significant asset and comply to any relevant legal framework.
The following must be given a majority vote from the Board of Directors’ and Shareholders’ Meeting with a ratio of at least 3:4 from all votes casted by members with voting rights. (A) Selling or transferring a significant part of or the whole of the Company’s business. (B) Acquisition or accepting transfers from other companies or other private companies for inclusion in the Company’s asset. (C) Establishment, amendment, or annulations of any contract relating to the Company’s business rental (partial and wholesome) as well as assigning other individuals to manage the Company’s joint-venture and partnerships with other entities for the purpose of profit-sharing. (D) Amendment of Company’s Memorandum of Association or regulations (E) Capital Increase or Capital Reduction and Issuance of Debentures (F) Merger and Acquisition or Close Company Registration (G) All other matters stipulated by the Securities and Exchange Act and/or rules and regulations imposed by the Stock
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Exchange of Thailand that require consent from the Board of Directors’ and Shareholders’ Meeting to pass on the resolution Directors with a conflict of interest or stands to personally benefit from the matter relating to the Company and its subsidiaries will not be entitled to the right to vote for such a subject matter. In addition to the Company’s Board of Directors, the Company has also established 2 Sub-Committees to facilitate management, consider relevancy of matters that is necessary for corporate decision making, and ensure transparency and practices of good corporate governance. The 2 SubCommittees are: - Audit Committee - Remuneration Committee To ensure all practices are conducted impartially and transparently, and that all directional policies are established with full effectiveness, the Board of Directors determine the objectives of the Company and determine the roles and authority of the Sub-Committees as follows:
Stars Microelectronics (Thailand) Public Company Limited
Executive Committee Executive Committee comprises 5 Directors
Name of Director 1. Mr. Somnuk Chaikul
Position Chairman of the
Executive Director
2. Mr. Polsak Lertputipinyo
Executive Director
3. Mr. Chong Kwen Sam
Executive Director
4. Mr. Yunyong Sawasdi
Executive Director
5. Dr. Kavee Techapichetvanich
Executive Director
Role and Authority of Executive Directors Executive Committee has the authority to conduct the following: 1. Monitors and makes sure the management acknowledge the Company’s policy, objective, directions, and operational plan as well as annual financial profit and loss forecast and business strategies. 2. Control and monitor operations of the Company to be in accordance with the legal framework and regulations of the Company as well as the Company’s overall policy, yearly operational plan, and annual profit and loss statement as well as business strategy as approved by the Board of Directors while executing all that is required by the resolutions derived by each Board of Director’s meeting. 3. Evaluate overall operating results of the Company and operational departments on a quarterly basis. 4. Oversee implementation of policies derived by the Board of Directors to determine directions, approaches, and mission for further execution by executives and management team while determining core operational plans and business objectives so that they coincide with approved policy, business policy and profit and loss statement.
5. Monitor, evaluate and track operational results of the management and recommend solutions to any obstacles for executives and leaders in managerial positions to follow through with recommended approaches strategically and in accordance with core values and policies imposed by the Board of Directors. 6. Issue orders, rules, regulations, and announcements to ensure all operational practices of the Company are in line with the Company’s policies and effectively achieve benefits for the Company while organizational discipline is well-maintained. 7. Consider employing, promoting, or retiring employees of executive level. Establish remuneration policy for the Company’s employees, including salary, wage, employee benefits, and social welfare benefits. 8. Monitor and propose balance sheets, book-keeping, and profit and loss, and cash flow estimation for investment plans for the Board of Directors’ consideration and approval before proposal in Shareholders’ meeting for Shareholders’ further approval, if necessary. 9. Provide recommendations and advice to directors to ensure a good decision making process for the operational businesses of the Company. 10. Monitor and delegate executive and the management to produce reports on the Company’s Operating results as well as financial statements, profit and loss statements, incurred problems, or risk management approaches to propose to the Board of Directors for their acknowledgement and/or approval. 11. Determine sales and marketing strategies which support yearly operational work plans and profit and loss as budgeted and approved by the Board of Directors. 12. Consider participating in bidding of projects with no more than 100 million Baht in value. 13. Consider approving purchasing equipment not part of the procurement plan approved by the Board of Directors and/nor does not appear in the yearly profit and loss budget statement or the company’s financial annual statement but not more than 30 million Baht in value (per time or overall value) and no more than 100 million Baht in cash or value. 14. Possess the authority to annul and purchase assets or sell and buy-back assets in accordance with regulations on a such matter in the case where the net accountable asset is more than 1 million Baht but not more than 30 million Baht. 15. Consider lending or borrowing capital, capital outsourcing, or applying or issuing mortgages, invest in Treasury bonds or private banks’ bonds, or other investment instruments as deemed appropriate and propose to the Board of Directors for approval. 16. Propose any matters deemed relevant by the Executive Committee to seek approval from the Executive Directors meeting as necessary. 17. Conduct other rules and responsibilities assigned by the committee and assume necessary authority in order to execute such assignments.
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Executive Directors’ Meeting (A) In conducting Executive Directors’ meetings, the meeting must comprise more than half of the directors of all the directors in the Executive Committee. (B) In a casting vote, each Executive Director is entitled to 1 voting right. (C) In arriving at resolutions, the result of the vote must be no less than the majority of all votes casted by Executive Directors attending the meeting unless the meeting agenda falls in the category of either number 1, 8, 10, 12, and 13, the result of the vote must display the ratio of no less than 4:5 of all the votes casted by the attending members of the Executive Committee. (D) The Executive Committee may appoint Sub-Committee and/or sub-operational committee and/or an entity or an individual to assume responsibility in considering the necessity to propose a certain agenda to the Executive Committee or to ensure beneficial operation for the practices of the Executive Directors or represent executive of required conduct as assigned by the Executive Committee within the authority that the Executive Committee is entitled to. Approval of any of the abovementioned agendas must not lead to any potential conflict of interest with the Company, its subsidiaries, or any related company (as announced by the Securities and Exchange Commission and/or The Stock Exchange of Thailand) or conducted by the authorized director which stands to personally gain from the approval of the agenda. The Executive Committee must propose such matters to the Board of Directors and/or Shareholders’ meeting for consideration and approval of the matter instead, in accordance with relevant regulations and legal framework, unless the matter is part of a regular operational procedure which the scope of conduct had already been clearly defined.
Remuneration Committee In order to comply with the code of conduct as indicated in “The Principle of Good Corporate Governance for Listed Companies 2006”, the Board of Directors has established Remuneration Committee since December 18th, 2009 as part of the resolution arrived in the Company’s Board of Directors Meeting No. 6/2009 to oversee format and criteria in remunerating Directors and Chief Executive Officers and propose suggestions to the Board of Directors as follow: - The Board of Directors has the authority to approve a remuneration package to the Chief Executive Officer - Remuneration of directors and Board of Directors must be approved by the Shareholders’ meeting. The Board of Directors Meeting No. 6/2009 passed the resolution to nominate Remuneration Committee with 3 members as follow:
Name of Remuneration Director
Position
1 Assoc. Prof., Dr. Preecha Jarungidanan
Chairman of Remuneration
Committee
2 Mr. Pitak Sirivanasandha
Remuneration Committee
Member
3 Mr. Prasart Yunibhand
Remuneration Committee
Member
Roles and responsibilities of Remuneration Committee had been defined in the rules and regulations of code of conduct for the Remuneration Committee. Remuneration Committee is a Sub-Committee established to make suggestions and provide advice, when, considering a remuneration package for the directors, sub-committee members, and Chief Executive Office, Advisory Board and Company Secretary of the Company as to ensure transparent, ethical, and impartial terms and conditions whereby the Remuneration Director is entirely independent from the company in conducting their responsibilities as follows:
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Stars Microelectronics (Thailand) Public Company Limited
1. Structure and Nomination - The Board of Directors has the authority to consider and nominate Remuneration Directors - The Remuneration Committee must comprise at least 3 directors, the majority of whom are independent directors. - The Remuneration Committee must be appointed from the Independent Directors. - The Corporate Secretary shall serve as the secretary of the Remuneration Committee with the responsibility to promote smooth operation by the Remuneration directors.
2. Period of Active Responsibility Responsibility of Remuneration directors is valid for 3 years after the day of the appointment by the Board. The Remuneration committee can continue their term consecutively provided they are met with a majority vote from the Board of Directors. In case, a substitution is needed in the absence of a director, the Board will consider and nominate other directors to fulfill the replacement.
3. Roles and Responsibilities The Remuneration Committee assumes significant roles and responsibilities as follow: 1. Advise all matters related to remuneration planning to the Board of Directors and SubCommittees, Chief Executive Officer, and Advisory Board during the Board of Directors Meeting and/or Shareholders’ meeting for consideration and approval. 2. Determine annual retainer fee and attendance fee as well as other fees as appropriate by considering standardized
industrial practices, operating results of the Company, as well as responsibility, knowledge, ability and experience or other qualifications of each Director, Chief Executive Officer, and Advisors the Company requires. 3. Remuneration Committee has the authority to call on the Management, Department Heads and/or individuals to attend the meeting in order to be questioned and/or facilitate in handling of documentations as part of considering terms and conditions of a remuneration package. The Remuneration Directors also has the authority to appoint an independent expert from outside or within the Company under the Company’s expenses in accordance with the approved yearly profit and loss statements by the Board of Directors in order to acquire advisory and professional suggestions relating to planning remuneration packages for the directors. 4. Determine the regulatory framework and evaluation report on performances of Board of Directors, Sub-Committee, and Chief Executive Officer and Board of Advisory to the Board of Directors. 5. Report performance results to the board of Directors after each Remuneration Committee meeting and report name list, scope of authority of the remuneration committee to the shareholders in the Annual Form (56-1) and Annual Report (56-2), for example. 6. Review and make suggestions on any necessary changes to the rules and regulatory framework of the Remuneration planning to the Board of Directors for approval in order to improve and comply to the rules and regulations imposed by relevant authority. 7. Consider and assume every other responsibility that the Board assigns to the Remuneration Committee in an ad hoc basis.
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4. Conducting Meetings 1. The Remuneration Committee must conduct at least 1 meeting per year as appropriate. 2. Chairman of the Remuneration Committee will determine the agenda of each meeting and chair the meeting which is transparently recorded with systematic book-keeping and minutes of meeting consistently entailed. 3. Meeting agenda and meeting documents must be delivered to Remuneration Committee for consideration prior to the meeting. 4. In conducting a Remuneration Committee meeting, the majority of the directors must attend the meeting in order for the meeting to commence. 5. Resolution of the meeting is derived by the majority of the votes by the Remuneration directors that attended the meeting. The Remuneration director with a conflict of interest and who, stands to personally gain from the voting outcome must not engage in the discussion of the matter.
5. Remuneration Report Remuneration Committee must report performance results to the Board of Directors and report on the annual performance of the roles and responsibilities to the Shareholders through the Annual Report by disclosing the following details: 1. Name list of Remuneration Directors 2. Number of meetings held 3. Number of times Remuneration Director considers the remuneration package of the meeting attendee. 4. Performance results according to the rules and regulatory framework
Stars Microelectronics (Thailand) Public Company Limited
Audit Committee The Audit Committee which has been nominated by the Board of Directors comprises 3 independent directors with expertise in various fields such as accountancy, finance, and economics. The Company’s Audit Committee comprises the following members:
Name
1. Mr. Dheerasak Suwannayos1 2. Mr. Prasart Yunibhand 3. Assoc. Prof. Dr. Preecha Jarungidanan
Position
Chairman of the Audit Committee Audit Committee Member Audit Committee Member
Mr. Dheerasak Suwannayos possesses the expertise and professional experience in auditing financial statements. /1
Scope of Authorities and Duties 1. Duties of the Audit Committee The Audit Committee is assigned the following responsibility by the Board of Directors:1. Audit the Company’s financial reports to ensure information accuracy. 2. Audit the Company’s internal control system and establishment of an appropriate internal audit that is effective and evaluate the equivocation of the internal audit as well as consider supplying agreement to the transfer or retiring internal control Department Head or any other Department Heads relating to Internal Audit. 3. Audit the Company’s practice to be in accordance with the legal framework required by the Securities and Exchange Commission and the Stock Exchange of Thailand, and all legalities related to the business of the Company. 4. Consider, select, and propose a nomination of an independent individual to perform account auditing of the Company and remunerate the individual as well as attend Audit Committee Meetings without the presence of the management at least once per year. 5. Consider any related matters and use discretion on any issues that may cause possible conflict of interest as to ensure compliance with the legal framework and regulations stipulated by the Stock Exchange of Thailand and to ensure that the transactions are reasonable and maximize benefits for the company.
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6.
Provide Audit Committee report in the Company’s Annual Report whereby the report must be signed by the Chairman of the Audit Committee and comprise at least the following information:
(4) Audit Committee Meeting 1. The Meeting The Audit Committee must hold at least 1 meeting per quarter. In case of emergency, one of the Audit Directors or any of the Company’s Directors may request for Audit Committee Meeting.
• Comments on accuracy and credibility of the financial report of the Company.
2. Voting The Audit Director who stands to gain or lose from a certain voting outcome must refrain from commenting and is not entitled to a vote in such a case. The Audit Committee secretary is not entitled to a right to vote, either.
• Comment on the quality and sufficiency of the internal control of the Company. • Comment on compliance with the legal framework stipulated by the Securities and Exchange Commission and the Stock Exchange of Thailand, regulations by the Stock Exchange of Thailand and all legalities related to the Company’s business.
3. Minutes of Meeting Secretary of the Audit Committee or the authorized individual who has been assigned by the authority to record the minutes of the meeting and produce the Audit Committee meeting report must report the meeting to the Audit Committee for approval for further presentation to the Board of Directors.
• Comment on the appropriateness of the Auditor. • Comment on potential conflict of interest issues. • Number of meetings held by the Audit Committee and attendance of each directors.
(5) Audit Committee Report
• Comment on overall observations of the Audit Committee when, conducting responsibilities in accordance with the charter.
Any of the following issues that may significantly affect the financial standing and operating results of the Company must be addressed and reported to the Board of Directors Meeting for prompt investigative action under the appropriate timeframe.
• Other items where Shareholders, and general investors must be informed, under the duties and responsibilities assigned by the Board of Directors.
1. Issues that may cause conflict of interest 2. Dishonesty, irregularity, or significant error in the internal control system
7. Conduct and execute other operations as assigned by the Board of Directors where Audit Committee deem appropriate.
3. Violation of any law stipulated by the Securities and Exchange Commission and regulations by the Stock Exchange of Thailand or any legality related to the Company’s business.
(2) Responsibilities of the Audit Committee The Audit Committee assumes direct responsibility to the Board of Directors as the Board of Directors acknowledges responsibilities in the Company’s operations for the external public.
(3) Authority of the Audit Committee 1. The Audit Committee has the authority to ask for independent and impartial advice from an Advisory of a certain expertise and professionalism during times of necessity under the expense of the Company.
If the Audit Committee has informed the Board of Directors of the abovementioned but is not met with an active response from the Board of Directors or in the case where the Board of Directors fail to follow through on a required actions to comply and improve the irregularities over the agreed period of time, any of the Directors from the Audit Committee may report directly to the Securities and Exchange Commission or the Stock exchange of Thailand of the misconduct.
2. The Audit Committee has the authority to request information from all departments of the Company for further reference in the consideration and decision making process.
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Scope of Authorities and duties of Chief Executive Officer 1. Monitor, manage, execute, and perform regular operational duty for the benefit of the Company in accordance with the policy, objective, yearly operational work plan, and annual profit and loss statement approved by the Board of Directors and/or carry out assigned duties by the Board of Directors. 2. Manage operations of the Company to follow through the Company’s mission determined by the Executive Committee and apply business strategies determined by the Board of Directors and/or the Executive Committee. 3. Conduct and oversea financial operations, marketing planning, human resources management and implementation and execution of all departments so that their overall performances meet with the Company’s policy and operational work plan as approved by the Board of Directors and/or the Executive Committee. 4. Has the authority to employ, promote, and retire Company’s employees and determine salary and remuneration package for the Company’s employees with roles minor to the Executive Directors. The Chief Executive Officer may assign other individuals to represent authority in conducting necessary tasks.
5. Determine reward scheme, salary increase, and remuneration, special bonuses as separate from normal annual bonuses to outstanding employees as approved by the Company’s Directors or Executive Directors. 6. Approve procurement of internal machinery or equipment worth not more than 4 millions Baht (per time or collectively) and not more than 20 millions Baht per year unless approved by the company’s Board of Directors and/or the purchasing item is appeared in the yearly operational work plan or profit and loss forecast. 7. Has the authority to cancel, buy, sell or leasing back assets in accordance with related regulatory framework and relevant legality in the case where net accounting value of the asset is not more than 1 million Baht. 8. Committee in contractual agreement for plans that will benefit the Company provided such is proposed to the Executive Directors for consideration and further approval of the Board of Directors to successfully follow through. 9. Possess the authority to approve purchase of raw materials in the Western Digital (WD) project of not more than 150 million Baht in value per transaction. 10. Conduct other duties as assigned by the Board of Directors and/or Executive Directors while assuming necessary authorization in order to follow through with the assignment.
In issues where the Chief Executive Officer or an acting member authorized by the Chief Executive Officer or individual with a conflict of interest (as announced by the Securities and Exchange Commission and/or The Stock Exchange of Thailand) stands to personally benefit from the outcome through their relationship with the Company and/or its subsidiaries and/or related companies, the Chief Executive Officer is not authorized to approve such operations and must propose such an issue to the Audit Committee Meeting, and Board of Directors’ meeting except in a case where such is clearly noted and pre-approved as part of the regular business practice.
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Stars Microelectronics (Thailand) Public Company Limited
Attendance of the Company’s Board of Directors and Audit Committee
Name
Meetings Attended /
Attendance in Audit
Total Meetings
Committee Meeting
2009
1.1 The Company will decide an appropriate compensation package to attract and retain the most highly-qualified directors for the Company. Factors in determining this compensation include:
2009
1. Mr. Somnuk Chaikul
5/6
2. Mr. Pitak Sirivanasandha
6/6
n/a
3. Mr. Polsak Lertputipinyo
6/6
n/a
4. Mr. Toru Uchino
1/2*
n/a
5. Mr. Tetsuo Tsujimoto
3/6
n/a
6. Mr. Chong Kwen Sam
6/6
n/a
7. Ms. Suthiluck Chaikul
6/6
n/a
8. Mr. Dheerasak Suwannayos
0/6
4/4
9. Mr. Prasart Yunibhand
6/6
4/4
10 Assoc. Prof. Dr. Preecha
6/6
4/4
1. Compensation Criteria for Directors
n/a
• The Company’s performance • Duties and responsibilities assigned to the Director • Industrial average of compensation paid to Directors 1.2 Compensation structure includes Retainer fee which is paid yearly and Attendance Fee which is paid per time.
2. Compensation Criteria for Executives
Jarungidanan
* Mr. Toru Uchino resigned from the Board of Directors on May 15th, 2009
Management Compensation Remuneration Committee consider the compensation of the Directors and the Chief Executive Officer and will propose the plan for approval by the Board of Directors. In the case of determining compensation, the Board of Directors must also gain approval from the Shareholders’ meeting. Remuneration scheme for director and managerial positions is outlined as follows:
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Chairman of the Executive Directors and Chief Executive Officer will decide an appropriate compensation package in the more junior positions such as of all chiefs and Directors in various departments, Senior Directors, and Department Head in various departments. In deciding fair compensation, the Company aims to attract and retain talented managerial people to become a part of the Company. Other factors influencing compensation decisions are as follows: • The Company’s performance • Salary-raise consideration or yearly salary adjustment will be determined from results of Key Performance Indicator (KPI) of each individual. • Industrial average of compensation paid to Executives Furthermore, the Company many seek professional advice from Human Resources Management under the expense of the Company in considering compensation scheme for Executives.
Stars Microelectronics (Thailand) Public Company Limited
Qualification of Board of Directors
Qualification of Remuneration Committee
1. Possess all prerequisites required by law (Public Company Act, and Securities and Exchange Commission and other Act or criteria required by the Stock Exchange of Thailand).
1. Holds the position of Company’s Director and not Chairman of the Board of Directors.
2. Possess knowledge, expertise, skills, and experience essential for directing the Company’s business and overseeing business goals. Possess determination in good ethics in operating businesses. 3. Able to apply impartial discretion and independce from other managerial biases or groups that may stand to gain or benefit from the Company’s operations. 4. Able to dedicate sufficient time to the Company and extend effort in performing duties and take care of all assumed responsibilities without exception.
2. The majority of the committee consists of independent directors. 3. Possess knowledge and experience, understanding and sensitive to work ethics and human resources qualities to take the role and determine remuneration packages in an equivocal manner. 4. Able to dedicate sufficient time to the Company and extend effort in performing duties and take care of all assumed responsibilities without exception.
Qualification of Independent Directors
1. Possess vision, initiatives, creativity, and honesty
1. Holds no more than 1% of shares of the total shares with voting rights of the Company, its subsidiaries, joint-venture or other entities with a conflict of interest with the Company, including shares held by other individuals related to the director.
2. Possess knowledge, ability, and past experiences that are beneficial to the Company’s operations with determination and ethics in conducting business practices.
2. Does not take part in management or involved with other employees, company hires, or regular advisors with authority to control
3. Able to dedicate sufficient time for the Company and extends effort in performing duties and take care of all assumed responsibilities without exception.
3. Does not possess business relations with professional services provider and account auditor
Qualification of Executive Committee
Qualification of Audit Committee 1. The Audit Committee must consist of at least 3 independent directors 2. Nominated by the Board of Directors or passed approval of Shareholders’ meeting 3. Not a Director of any other company, headquarters, subsidiary, joint-venture partner, or any other entities with a conflict of interest. 4. Possess knowledge and experience in conducting auditing tasks as an Audit Director. At least one director of the committee must have sufficient ability to audit the credibility of the financial statements.
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4. Has no involvement with the executives or major shareholders
Selection of Directors and Independent Directors and Directors of Remuneration Committee Even though the company did not establish a Nomination Committee but the Company has the policy to search and select individuals to assume a Director position by considering many factors such as knowledge, ability, and relevant experience, for example, and have outlined criteria for appointing and retiring Directors as follow: 1. Board of Directors must consist of at least 5 directors and no more than 15. The majority of the directors must be a resident of Thailand and possess all qualities required by law and are prohibited to engage in shareholding activities or take part in as a director in other entities or businesses of similar business interests unless reported and accepted by the Shareholders’ meeting before an appointment in the Company. 2. Shareholder’s meeting will appoint directors according to the majority vote and the following regulations and methods: 2.1 One shareholder is entitled the same voting rights as one voting right per one share held 2.2 Shareholders cast vote one-by-one in the election of directors 2.3 Individuals who receive the highest votes are entitled to the Directors position, in such order and numbers that is required to fill the desired number
of Directors positions. In case where there is a tie between 2 individuals for the last position of the Director, Chairman of the Board of Director has the authority to determine the ultimate outcome.
Selection of Independent Directors
3. In every General Shareholder Meeting held annually, approximately 1 in 3 directors must step off. The Director that must step off after the first year and 2nd year of enlisting in the company, a draw can be conducted to determine which Director must step off. As for other years, directors who held the position with the longest time must step off from the meeting. The directors that step off in this manner can be re-elected to take up a Director position again.
at least 1 out of 3 directors must be
4. In case where the Directors’ position is available due to other reasons than term expiry, the Board of Directors must select individuals with professional qualities and do not possess any conditions unacceptable by law can serve as the Acting Director in the next Board of Directors’ Meeting. However, if the term of the Director is less than 2 months, the Acting Director can only serve in the Directors’ position for only as long as the term remains for the Director the Acting Director is being replaced. 5. The Shareholders’ meeting can pass a resolution to ask a Director to step down before their term expires when no less than 3:4 votes have been casted by the eligible votes who are present at the meeting and hold the total shares of not less than half of the shares held by the shareholders who attend the meeting and have the voting right.
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In selecting Independent Directors, independent with the total number of no less than 3. The company’s criteria in selecting Independent Directors is similar to the criteria in selecting directors and executives. Individuals qualified for further selection must possess the following qualities: 1. Hold no more than 1 percent of shares with the total of shares with voting rights of the Company, its subsidiary, joint-venture that may cause a conflict of interest. 2. Does not take part in management and is not an employee, staff, or advisor with a regular salary or has the authority to control the Company or its subsidiaries, its joint venture, or other entities that may post potential conflict of interest and must possess no relationship with any of the stated businesses for more than 2 years. 3. Has not possessed a business relationship, standed to gain, directly or indirectly, financially and/possessed managerial responsibility with the Company, its subsidiary, joint-venture, or any other entities that may post potential conflict of interest and loss independent no less than 2 years before the appointment.
4. Is not the direct relative or a relative by law with the executives, major shareholders of the company, those with authority, or nominee of a managerial position, or an individual with authority to control the Company or its subsidiary and is the appointed to represent the interest of directors and major shareholders. 5. Is not the Director that has been appointed to represent the Company’s director, major shareholders, or regular shareholders that are related to the major shareholders. 6. Does not possess any conditions that disqualify the individual from assuming Independent Directors position by law.
Holding a Director Position in Other Companies The Company’s Directors are limited to holding Director position in no more than 5 other companies so that they are ensured sufficient time to perform duties for the Company with quality and acknowledge full responsibility in their commitment to the company during their presence in the position. The Director must report to the Company, any changes in their position and commitment with other companies.
Evaluation of Board of Directors The Board of Directors seek to evaluate the performance of the Board more than once a year in order to review previous results, address strengths and weaknesses for the purpose of improving efficiency in future practices and create mutual understanding among all directors.
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Evaluation of Chief Executive Officer The Company will seek to evaluate the performance of the Chief Executive Officer on a yearly basis to decide fair and just compensation packages for the Company and the Chief Executive Officers as a whole. The criteria will be based on common practices by listed companies and pre-agreed with the Chief Executive Officer in an objective manner. Such evaluation criteria will incorporate financial performances, long-term strategic plan effectiveness and implementation, for example. Factors influencing the evaluation include evaluation by financial metrics, and non-financial metrics as follows: - Financial Metrics Revenue, net profit, and earning per share, return on fixed asset, return on equity, and Economic Value Added – EVA, for example. - Non-Financial Metrics Visions, leadership skills, effectiveness in strategic implementation, risk management, relationship skills with the Board of Directors, efficiency in responding to the needs and directions of the Board of Directors, communication skills, and human resources management, and business and market development, business expansion, for example.
Stars Microelectronics (Thailand) Public Company Limited
Training and Development of Directors and Executives The Company has established a policy to develop human resources by supporting personal training of directors and executives in conducting good corporate governance and continuously acquiring management skills. The Company’s Directors and Executives are encouraged to attend seminars and training organized by the Stock Exchange of Thailand (SET), the Securities Exchange Commission (SEC) or Thai Institute of Directors Association (IOD). To date, all directors have passed either the Director Certification Program (DCP) or Director Accreditation Program (DAP) organized by the IOD. In the year 2009, the Company Secretary participated in the Training for Corporate Secretary program and Remuneration Committee Program which were organized by IOD during October 5th-6th, 2009 and during November 3rd-4th, 2009 respectively. The Senior Directors of the Accounting and Finance Department took part in the CFO training organized by the Federation of Accounting Professions during August 8th – October 17th, 2009. Chief Financial Officer (Finance and Administration) and Chief Operating Officer (Operations and Development) participated in Risk management and Enterprise Risk Management training organized by Management and Psychology Institute on November 25th-26th, 2009. Furthermore, respected professors from well-known institutions such as National Institute of Development Administration are regularly invited to perform training for the executives whenever appropriate.
Management Succession Plan The Company’s succession plan will be implemented as necessary to select internal and external individuals wherein the Company must engage in effective selection criteria of qualified candidates in filling in for the significant director or managerial positions. The Management Succession Plan requires that the selection process is conducted ethically with impartiality.
Company Secretary The Board of Directors appointed the company secretary on August 7th, 2009 where the company secretary was given significant duties and responsibilities such as, ensure smooth inception of Board of Directors’ and Shareholders’ meetings that comply with all the legal and regularity framework, produce Meeting Reports, systematically record and conduct well-organized book-keeping for each report for future reference and easy browsing, prepare and distribute invitation to meetings and annual report to shareholder and regulatory commissions as well as distributing information online on the Company’s Website, ensures that the Company, its subsidiaries, Directors, and Executives comply with the code of conduct and regulatory framework stipulated by the Stock Exchange of Thailand and the Securities and Exchange Commission, liaise with the Stock Exchange of Thailand and the Securities and Exchange Commission in disclosing information about the Board of directors and executives, provide comments and suggestions to new directors of the Company, engage in Investor Relations Activities, serve as the broker between the shareholders and the Company’s Board of Directors and executives, promote understanding of Corporate Governance and provide information to promote cooperation of the directors in practicing an ethical code of conduct as well as ensuring a feedback mechanism to track the performance and evaluate the effectiveness of such conduct, provide information and suggestions to the directors and executives in preparing reports as required by law and regulatory framework whereby public disclosure of information and transparency is prioritized such as acknowledgement of responsibilities in reporting shareholding structure, and monitor the operational procedures of the Company to comply with the Company’s rules, regulations by the Stock Exchange of Thailand and other related organizations, for example.
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Details of Biography of Board of Directors Mr. Somnuk Chaikul Position Chairman Age 57 Percentage of Shareholding as of December 31st, 2009 6.79% Educational Background - Bachelor of Engineering, Major in Mechanical Engineering, Faculty of Engineering, Chulalongkorn University
Work Experience Present: - Chairman of Stars Microelectronics (Thailand) Public Company Limited - Chairman of Thai Maparn Trading Company Limited - Chairman of Cheeva Rice Company Limited - Chairman of TMP Rice Mill Company Limited - Chairman of Sri Sukho Thai Real Estate Company Limited - Chairman of Sri Sukho Thai Resort Company Limited Training History - Director Accreditation Program (DAP) Class of 26/2004 Thai Institute of Directors
Mr. Pitak Sirivanasandha Position Age Percentage of Shareholding as of December 31, 2009 Educational Background
Vice Chairman 59
Work Experience Present: - Director of Stars Microelectronics (Thailand) Public Company Limited
1.13% - Bachelor of Engineering, Major in Electricity, Faculty of Engineering, Chulalongkorn University - Master of Engineering, Major in Electricity, University of Detroit, USA
Past:
- Senior Engineer Forrest Coile Associates, P.C., Virginia, U.S.A. - Senior Engineer GTE Products Corp., Virginia, U.S.A - Engineer, Planning Research Corp., NASA, Kennedy Space Center, Florida, U.S.A. - Chief Executive Officer of Stars Microelectronics (Thailand) Public Company Limited - Director of Electronic & Computer Employers’ Association - Engineer, Electricity Generation Authority of Thailand - Vice President of Thai Factory Development Public Company Limited Training History - Director Accreditation Program (DAP) Class of 29/2004 Thai Institute of Directors
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Stars Microelectronics (Thailand) Public Company Limited
Ms. Suthiluck Chaikul Position Age Percentage of Shareholding as of December 31, 2009 Educational Background
Director 37 6.28 % - Bachelor Degree in Accounting, Payap University
Work Experience Present: - Director of Stars Microelectronics (Thailand) Public Company Limited - Director of Kullapassorn Company Limited - Director of Royal Siam Holdings Company Limited Training History - Director Accreditation Program (DAP) Class of 80/2009 Thai Institute of Directors - Financial Statements for Directors (FSD) Class of 7/2010 Thai Institute of Director
Mr. Polsak Lertputipinyo Position Age Percentage of Shareholding as of December 31, 2009 Educational Background
Work Experience Present: - Director and Chief Executive Officer of Stars Microelectronics (Thailand) Public Company Limited
Director & Chief Executive Officer 53 1.80% - Bachelor of Engineering in Electricity (Electronics), King Mongkut's Institute of Technology Ladkrabang - Master of Business Administration in General Management, Kasetsart University
Past: - Senior Marketing and Sales Manager of Hana Microelectronics Public Company Limited - Senior Operations Manager of Hana Microelectronics Public Company Limited - Test Department Manager, Intergrated Circuit of Philips Semiconductors (Thailand) Company Limited Training History - Director Accreditation Program (DAP) Class of 26/2004 Thai Institute of Directors
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Stars Microelectronics (Thailand) Public Company Limited
Mr. Chong Kwen Sam Position Age Percentage of Shareholding as of December 31, 2009 Educational Background
Director, Executive Director & Chief Procurement Officer 57
Work Experience Present: - Director, Executive Director & Chief Procurement Officer, Stars Microelectronics (Thailand) Public Company Limited - Director of Thai Maparn Trading Company Limited Training History - Director Accreditation Program (DAP) Class of 74/2008 Thai Institute of Directors
- None - Diploma in Business Management, Singapore Institute of Management, Singapore - Postgraduate Diploma in Business Administration T.E.D. Management Studies School (Singapore).
Mr. Tetsuo Tsujimoto Position Age Percentage of Shareholding as of December 31, 2009 Educational Background
Work Experience Present: - Director of Stars Microelectronics (Thailand) Public Company Limited - Managing Director, SIIX Bangkok Company Limited Training History - Director Accreditation Program (DAP) Class of 74/2008 Thai Institute of Directors
Director 47 - None - Bachelor Degree, Major Law, Kwansei-Gakuin University, Japan
Mr. Dheerasak Suwannayos Position Age Percentage of Shareholding as of December 31, 2009 Educational Background
Independent Director and Chairman of the Audit Committee 57 - None - B.A. (hons.) in Economics, University of Karachi, Karachi, Pakistan - M.A. in Economics, University of Karachi, Karachi, Pakistan
147
Work Experience Present: - Independent Director and Chairman of the Audit Committee of Stars Microelectronics (Thailand) Public Company Limited - Director of MCOT Public Company Limited - Managing Director of Islamic Bank of Thailand Training History - Director Accreditation Program (DAP) Class of 27/2004 Thai Institute of Directors
Stars Microelectronics (Thailand) Public Company Limited
Mr. Prasart Yunibhand Position Age Percentage of Shareholding as of December 31, 2009 Educational Background
Independent Director and Audit Committee Member 62 1.01% - Bachelor of Law, Faculty of Law, Chulalongkorn University - Master Degree in International Relations and Law, University of Detroit, USA
Work Experience Present: - Independent Director and Audit Committee Member of Stars Microelectronics (Thailand) Public Company Limited - Director of ISC (Thailand) Limited - Director of Thai Cardif Life Assurance Company Limited - Managing Director of Noppong & Prasart Law Office Limited - Director of Siam Capital Multi-Services Company Limited - Director of Siam-Charoen Capital Services Company Limited Training History - Director Accreditation Program (DAP) Class of 26/2004 Thai Institute of Directors
Associate Professor Dr. Preecha Jarungidanan Position Age Percentage of Shareholding as of December 31, 2009 Educational Background
Independent Director and Audit Committee Member 63 - None - Bachelor of Economics, Major in Finance and Banking, Thammasat University - Master of Economics, Major in Public Finance, California State University, Long Beach, USA. - Doctor of Philosophy (Ph.D.) in Economics, Major in Monetary Theory, University of Missouri – Columbia, USA.
Work Experience Present: - Independent Director and Audit Committee Member of Stars Microelectronics (Thailand) Public Company Limited - Academic Specialist, MBA Program, The National Institute of Development Administration - Director and Audit Committee Member of Kim Eng Securities (Thailand) Public Company Limited - Director and Audit Committee Member of Lam Soon (Thailand) Public Company Limited - Director and Audit Committee Member of Thai-German Products Public Company Limited - Honorary Director of Public Debt Management Control and Policy Committee, The Public Debt - Director of Office of the National Research Council of Thailand, Economics Department - Director of Office of the Public Sector Development Commission Thailand - Honorable Sub-Committee Member of Office of the Higher Education Commission Training History - Director Accreditation Program (DAP) Class of 9/2004 Thai Institute of Directors - Director Certification Program (DCP) Class of 89/2007 Thai Institute of Directors - Audit Committee Program (ACP) Class of 24/2008 Thai Institute of Directors
148
Stars Microelectronics (Thailand) Public Company Limited
Report of the Audit Committee
Dear Shareholders,
The Audit Committee, appointed by the Board of Directors of Stars Microelectronics (Thailand) Public Company Limited, consists of 3 Independent Directors who have expertise in several fields such as accounting, finance, law, and economics. The Audit Committee has performed its duties in accordance with the scope and responsibility as assigned by the Board of Directors of the Company and approved by the shareholder’s meeting. The Committee has held at least one meeting per quarter. During 2009, the Committee held 4 meetings altogether, which were co-attended by the Management, the Auditor, and the Internal Audit officer, to consider and revise the accuracy of the quarterly and annual financial statements and reports of the auditor. The Committee invited the auditor to attend every meeting and to consider several matters to revise the efficiency and the appropriateness of the internal control system, and the risk management system such as examination plans and the result of the internal auditing. The Audit Committee also consistently reports the result of the meetings to the Board. The Audit Committee re-examined the financial statement of Stars Microelectronics (Thailand) Public Company Limited for the year ended December 31, 2009, and decided that the financial statement followed the general acceptance of accounting standard and appropriately disclosed the information in the financial statement, of which the Auditor expressed his opinion within the report to the auditor. The Committee co-examined the internal control system with the Auditor, the Management, and the Internal Audit Officer to ensure the sufficient appropriateness of the internal control system and re-examined the management and control of the risk of Stars Microelectronics (Thailand) Public Company Limited by expressing opinions and suggestions to manage important risks and to continuously follow the amendments, leading the Company’s business operation to meet the target. The Audit Committee considered selection for the Auditor from Ernst and Young Office Ltd. as the Company’s Auditor for 2010, and consider Auditor Fee to propose to the shareholder’s meeting for further approval. The Audit Committee performed its duties with independency, carefulness, and a straightforward expression of opinion to monitor the operations of the Company’s internal control to comply with the laws and regulations concerning business operation to ensure that the performance of the Audit Committee in 2009 achieved the objectives assigned by the Board of Directors of the Company.
149
Mr. Dheerasak Suwannayos Chairman of the Audit Committee 22 March 2010
Stars Microelectronics (Thailand) Public Company Limited
Report of the Board of Directors’ Responsibilities for the Financial Statements The Board of Directors acknowledges full responsibility in reporting financial standings of Stars Microelectronics (Thailand) Public Company Limited and its subsidiaries, in particular, the financial statements which make up the significant part of the annual report. Stars Microelectronics (Thailand) Public Company Limited adheres to the regulatory framework and standards of account practices required by Thai laws and the Stock Exchange of Thailand as stipulated by The Securities and Exchange Act B.E. 2535 as appropriate accounting policy is adopted and applied to provide sufficient disclosure of information in the Notes of financial statements. The Board of Directors has assigned the Audit Committee which consists of Independent Directors to ensure the quality of financial reports, evaluate the Internal Control and Internal Audit systems to calibrate efficiency and effectiveness as the result of accurate and complete accounting records, reported promptly as to prevent misconduct or unethical practices as monitored by the Audit Committee whose list is included in this Annual Report. The Board of Directors is confident that internal regulatory system and auditing practices within the company provide credible financial reports of Stars Microelectronics (Thailand) Public Company Limited and its subsidiaries, ensuring accurate financial statements, balance sheets, and significant cash flows. Comments of the Company’s and its subsidiary’s profit and loss estimation as well as annual budgeting have also been added in the Auditor Report as part of the Annual Report provided herein.
150
Mr. Somnuk Chaikul Chairman
Stars Microelectronics (Thailand) Public Company Limited
Management Discussion and Analysis (MD&A) Income In 2009, the Company’s net income was THB11,116 million, slightly lower than those in 2008 and 2007, when the Company had a net income of THB12,146 million and THB11,685 million consecutively, due to the sluggish global economic conditions. The principal income of the Company (in 2009) was comprised of the net sales of products in the Hard Disk group of THB 9,264 million; MMA group of THB1,228 million and IC Packaging group of THB 484 million. In addition, the Company also had a service income of THB 75 million. If considered as net sales, it can be seen that the net sales of Hard Disk group was as high as 84% as, the Company had to rely completely on the income from the Hard Disk and could run the risk, but if considered the Value Added (VA) (It is a net sale after deduction of the cost of raw material) it would be seen that all three groups have a relative “Value Added” as the following:
Product Group
Hard Disk MMA IC Packaging
VA (%) 2552
2551
29.2 44.3 26.5
24.5 43.7 31.8
In relation to the VA from above information it is evident that the Company did not overly rely on the income from Hard Disk group and the Company had efficiently regulated the risk as far as income was concerned.
151
Stars Microelectronics (Thailand) Public Company Limited
Cost of goods sold The ratio of cost of goods sold per net sales in 2009, 2008 and 2007 showed a percentage value of 96.35, 96.36 and 96.98 consecutively. With reference to the above ratio of cost of goods sold, in 2009 the Company had the cost of goods sold per net sales slightly lower than those in 2008 because the beginning period of the 3rd quarter until the present, the products in the electronics group particularly the Hard Disk Drive had rapidly and highly expanded and the Company had received extensive orders for these products, while the order for the IC Packaging products was also proportionally high and caused the Product Mix of the sales in 2009 different from that in 2008 but slightly affected the rate of cost of goods sold per net sales.
Selling & Administrative Expenses The sale and administrative expenses of the years, 2009, 2008 and 2007 were THB 137, 117 and 93 million consecutively and compared to a percentage of the net income from the sale and service, the selling and administrative expenses of the years, 2009, 2008 and 2007 were equal to 1.24, 0.96 and 0.80 percent consecutively. This was because in 2009 the Company had acquired shares from the original shareholders of the STARS MICROELECTRONICS USA, INC. and made the proportion of shareholding in this company to be increased from 19 % to 59% and had the Company report its financial report as a “consolidated financial statements� of the Company and subsidiary companies which was different from the previous year that the Company reported the financial report only as the Equity Method. As a result the financial report in 2009, the income and expenses was also included income and expenses of the financial statements of the subsidiary companies, consequently the number had been increased.
Net Profit The net profit in the years, 2009, 2008 and 2007 were THB 267, 201 and THB197 million consecutively. The net profit for the year 2009 was higher than for the year 2008, at the percentage of 33.00 % despite the lower net sales of products than the previous year. This could be due to a higher expansion of the net sales of IC Packaging Product which has a primary profit rate higher than the products in other groups and coincided with the continuous weakness of the US dollar in 2009 and in which the profit from the rate of exchange to the Company was higher than the previous year. In addition, within the same year the interest rates had a tendency to decline, and due to the registration of the Company in the Stock Exchange, where the funds could be solicited to be allocated to repay part of the loan debts and considerably reduced the expenses on the interest of the Company and yielded a considerably higher profit in 2009 than those in the year 2008.
Financial Status With reference to the financial report of the Company as of 31st December 2009, it could be seen that the Company had a sound financial status and has a solid financial structure which was much higher than those at the end of 2008, due to the increase of capital by the Company, resulting from its registration in the Stock Exchange of Thailand and when it acquired the solicited capital of approximately THB 441 million. In addition, the Company had restructured its financial structure with the financial institutions for a short-term loan, to be extended as a long-term loan, to improve the Company’s financial ratio and which met the requirements of the covenant of all financial institutions.
152
Stars Microelectronics (Thailand) Public Company Limited
2009
2008
2007
4,378
4,005
3,460
Total Debts
2,679
2,963
2,619
Sums Belong to Shareholders
1,699
1,042
841
Total Asset
In 2009, the Company’s total asset was higher than in the years 2008 and 2007; it had total debts lower than in the years 2008 and 2009; and the shareholders’s equity, was higher than in the years 2008 and 2007, as follows:
(Million Baht)
Million Baht
Million Baht
Million Baht
5,000
5,000
3,000
4,000
4,000
2,500
3,000
3,000
2,000
2,000
2,000
1,500
1,000
1,000
1,000 0
0
0
2007
2008
2009
2007
Total Asset
2008
2009
2007
Total Debts
2008
2009
Shareholders’ Equity
• Asset Quality • Current Asset With reference to the financial report, as of 31st December 2009, the Company had current asset of THB 2,115 million, an increase from the years 2008 and 2007, which were then THB 1,716 million and THB 1,152 million consecutively. The majority of current assets were accounts receivable and inventories; regarding the accounts receivable, in 2009 the Company had total remaining accounts receivable of THB 808 million compared with those in 2008 which were equal to THB 836 million. In 2009 it was lower than those in 2008 at THB 28 million. Regarding the inventories, due to the recovery of the economy in 2009, the Company had continually received increased orders since the end of 2009, through the middle of 2010. Consequently, it was necessary for the Company to increase by a larger amount of the raw materials and finished goods to be prepared for such a demand. On the contrary, the number of days in which to repay accounts payable in 2009, was equal to 44.89 days and 28.80 days in 2008; resulting from the registration of the Company in the Stock Exchange, the Company was accepted by many of venders and its financial strength , until it was possible to negotiate the venders to extend of the credit term.
153
Stars Microelectronics (Thailand) Public Company Limited
• Fixed Asset With reference to the financial report ended on 31st December 2009, the Company had fixed assets of THB 2,264 million in comparison with those in 2008 and 2007 of THB 2,289 million and THB 2,308 million consecutively. The important list of fixed assets were the land, buildings and equipment which had the net accounting value of THB 2,242 million compared with the year 2008 and 2007 with the net accounting value equal to THB 2,263 million and THB 2,288 million consecutively.
• Liabilities With reference to the financial report, as of 31st December 2009, the Company had a total debt of THB 2,679 million compared with that in 2008 and 2007 of THB 2,963 million and THB 2,619 million consecutively.
• Current Liabilities The result of the financial structure with the financial institutions the Company, as having current liabilities of approximately THB 2,091 million compared with those in 2008 and 2007 when the Company had current liabilities of THB 2,885 million and THB 2,109 million consecutively. In 2009, when the Company had lower current liabilities than those in 2008, up to THB 794 million and calculated as 28% lower than last year the important current liabilities such as the Bank overdraft, a short-term loan from the financial institutions and accounts payable.
• Non-current Liabilities The Company had non-current liabilities in 2009 of THB 588 million, as compared to those in 2008 of THB 77 million, higher than the previous year of THB 511 million. The important list of non-current liabilities was the long-term debt, when in 2009 the Company had the increased total long-term debts of THB 750 million as the Company had a policy to opimised the appropriate financial structure and had decreased the debt to equity to be only 1.58 times in 2009, while it was as high as 2.84 times in 2008.
• Shareholders’s equity and financial structure Shareholders’s equity as of 31st December 2009, was THB 1,700 million, higher than the years 2008 and 2007 which had THB 1,042 million and THB 841 million consecutively. As a result of, the profit of the Company had increased and the increase of capital solicited in the Stock Exchange of Thailand. The ratio of return on equity in 2009 was calculated as 19.49% lower that in 2008 and 2007 calculated as 21.34% and 26.89% consecutively, although the Company was able to show an increase of a higher profit every year, the increase of capital through the acquisition and sale aditional 92 million of shares in the Stock Exchange Market, had resulted the ration of return on equity to be lower than in the previous year.
• Dividend Payout Analysis The Company paid interim dividends on 4 December 2009 at the rate THB 0.14 per share as a result of the operation in the first half of the year in 2009, which was calculated as the ratio of dividend payout per net profit before deduction of the exceptional items equal to 53.81 % of the net profit. The Company would regularly announce the dividend payout of the result of operation in the previous year in the meeting of the Committee in February of the following year, to propose the endorsement in the annual meeting of the common shareholders in April, and would pay the dividend payout in May.
• Capital Expenditure In 2009, the Company had invested in the new machine to expand the production capacity in the sums of THB 102 million, the majority of which were for the machines to rectify a bottleneck problem of the production system to strengthen the capacity of production to be increased to THB 65 million, for which another investment of THB 37 million, was to expand the capacity of production to facilitate the increase of the extensive order for the IC Packaging product, which had increased extensively in the fourth quarter of 2009 including the new products and customers in 2010. In comparison, with the year 2008, the Company had invested highly in the machine up to THB 130 million, as it was the business regarding the Contact Manufacturer, which required the availability of machines to facilitate the customers’ orders and build up a long term confidence of the customer in the efficiency of the production of the Company.
154
Stars Microelectronics (Thailand) Public Company Limited
• Source of Fund
2009
2008
2007
380
457
168
- Investing activities
(165)
(190)
(269)
- Financing activities
(209)
(275)
110
Net cash flow from - Operating activities
Million Baht
Despite the Company having an extensive increase in profits from the operation every year, the information from the above tables is evidence that the net cash flow of the operational activities in 2009 was slightly lower than those in 2008, due to the increase of efficiency of management by the Company, resulting in the variation of the operational asset and debt, to be extensively lower than the previous year, while the cash flow for investment activities began to decrease since 2007, due to the advance a investment by the Company in the machine to facilitate the expansion of the net sales in the future. With regard to the investment activities in 2007, the Company had taken an extensive loan from financial institutions but began to increase the repayment extensively, since 2008, as evidence of the development of a solid capital structure of the Company.
155
Stars Microelectronics (Thailand) Public Company Limited
Report of Independent Auditor
To the Shareholders of Stars Microelectronics (Thailand) Public Company Limited I have audited the accompanying consolidated balance sheet of Stars Microelectronics (Thailand) Public Company Limited and its subsidiary as at 31 December 2009, the related consolidated statements of income, changes in shareholders’ equity and cash flows for the year then ended, and the separate financial statements of Stars Microelectronics (Thailand) Public Company Limited for the same year. These financial statements are the responsibility of the management of the Company and its subsidiary as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audit. I did not audit the financial statements as of 31 December 2009 of the subsidiary of which statements reflected total assets as at 31 December 2009 of Baht 106,430 thousand, total revenues and net income for the year ended 31 December 2009 of Baht 399,675 thousand and Baht 8 thousand, respectively. The financial statements of the subsidiary were audited by other auditor, whose report has been furnished to me, and my opinion, insofar as it relates to that subsidiary in the Company’s consolidated financial statements, is based solely on the report of that other auditor. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, based on my audit and the report of the other auditor, the financial statements referred to above present fairly, in all material respects, the financial position of Stars Microelectronics (Thailand) Public Company Limited and its subsidiary and of Stars Microelectronics (Thailand) Public Company Limited as at 31 December 2009, and the results of their operations and cash flows for the year then ended, in accordance with generally accepted accounting principles. I have previously audited the financial statements, in which the equity method is applied, and the separate financial statements of Stars Microelectronics (Thailand) Public Company Limited for the year ended 31 December 2008, in accordance with generally accepted auditing standards, and expressed an unqualified opinion on those financial statements, under my report dated 25 February 2009.
Supachai Phanyawattano Certified Public Accountant (Thailand) No. 3930
Ernst & Young Office Limited Bangkok: 26 February 2010
156
Stars Microelectronics (Thailand) Public Company Limited
Financial Statement Stars Microelectronics (Thailand) Public Company Limited and its subsidiary Balance sheets As at 31 December 2009 and 2008
(Unit: Baht)
Financial statements Consolidated in which the financial equity method is statements applied
Note
2009
2008
Separate financial statements 2009
2008
Assets Current assets Cash and cash equivalents
6,630,080
843,128
5,193,243
843,128
Trade accounts receivable Related parties
2,187,449
6
Unrelated parties
806,746,735
Less: Allowance for doubtful accounts
40,885,940
103,826,816
40,885,940
795,530,613
704,442,490
795,530,613
(480,215)
(578,483)
Trade accounts receivable - net
7
808,453,969
835,838,070
Unbilled receivables
212,412,840
-
Inventories - net
8
1,075,783,946
869,466,112
(480,215)
(578,483)
807,789,091
835,838,070
212,412,840
-
1,073,754,708
869,466,112
Other current assets Input tax refundable Forward contract receivable
2,479,778
3,735,955
2,479,778
3,735,955
-
844,952
-
844,952
31.1
Others
8,923,955 2,114,684,568
Total current assets
5,501,033 1,716,229,250
6,102,886 2,107,732,546
5,501,033 1,716,229,250
Non-current assets Restricted bank deposits
9
9,150,741
9,093,280
9,150,741
9,093,280
Loan to other company
10
2,480,000
2,480,000
2,480,000
2,480,000
Investment in subsidiary
11
- -
-
Investment in associated company
12 13
2,241,633,195
Intangible asset - net
14
9,850,763
6,713,108
9,850,763
6,713,108
537,710
7,753,926
537,710
7,753,926
Total non-current assets Total assets
2,262,887,276
-
-
Property, plant and equipment - net Other non-current assets
21,316
429,279 2,241,633,195
149,396 2,262,887,276
2,263,652,409
2,288,948,906
2,264,081,688
2,289,076,986
4,378,336,977
4,005,178,156
4,371,814,234
4,005,306,236
The accompanying notes are an integral part of the financial statements.
157
Stars Microelectronics (Thailand) Public Company Limited
Stars Microelectronics (Thailand) Public Company Limited and its subsidiary Balance sheets (continued) As at 31 December 2009 and 2008 (Unit: Baht)
Consolidated financial statements 2009
Note
Financial statements in which the equity method is applied
Separate financial statements 2009
2008
2008
Liabilities and shareholders’ equity Current liabilities
Bank overdrafts and short-term loans
from financial institutions
15
205,676,916
997,215,277
205,676,916
997,215,277
Trade accounts payable
1,443,490,347
Accounts payable - machinery
171,622,725
86,437,033
171,622,725
86,437,033
59,701,827
57,054,677
59,701,827
57,054,677
-
46,777,511
-
46,777,511
Accounts payable - others Factoring payable Current portion of liabilities under finance
7, 16
1,212,409,429 1,438,460,653 1,212,409,429
lease agreements Current portion of long-term loans Other current liabilities
Accrued expenses
Forward contract payable
18
8,635,332
10,234,070
8,635,332
10,234,070
17
176,520,000
446,596,125
176,520,000
446,596,125
13,348,238
18,818,722
12,013,488
18,818,722
2,119,391
-
2,119,391
-
9,387,605
9,670,274
8,581,049
9,670,274
Total current liabilities
2,090,502,381
Non-current liabilities
Liabilities under finance lease agreements, net
Others
31.1
of current portion Long-term loans, net of current portion
2,885,213,118 2,083,331,381 2,885,213,118
18
8,644,152
17,279,484
8,644,152
17,279,484
17
579,960,000
60,391,875
579,960,000
60,391,875
Total non-current liabilities
588,604,152
77,671,359
588,604,152
77,671,359
Total liabilities
2,679,106,533
The accompanying notes are an integral part of the financial statements.
158
2,962,884,477 2,671,935,533 2,962,884,477
Stars Microelectronics (Thailand) Public Company Limited
Stars Microelectronics (Thailand) Public Company Limited and its subsidiary Balance sheets (continued) As at 31 December 2009 and 2008 (Unit: Baht)
Consolidated financial statements Note
2009
Financial statements in which the equity method is applied 2008
Separate financial statements 2009
2008
Shareholders’ equity 19
Share capital Registered 368,000,000 ordinary shares of Baht 2 each
736,000,000
736,000,000
736,000,000
736,000,000
736,000,000
552,000,000
736,000,000
552,000,000
Issued and fully paid 368,000,000 ordinary shares of Baht 2 each (2008: 276,000,000 ordinary shares of Baht 2 each) Share premium
19
266,944,068
9,719,148
266,944,068
9,719,148
Unrealised gain - revaluation surplus on land
20
14,712,166
14,712,166
14,712,166
14,712,166
20,005
23,121
-
-
Translation adjustment Retained earnings 21
Appropriated - statutory reserve Unappropriated Equity attributable to the company’s shareholders
54,683,931
41,291,330
54,683,931
41,291,330
626,823,156
424,547,914
627,538,536
424,699,115
1,042,293,679 1,699,878,701
1,042,421,759
1,699,183,326
Minority interest - equity attributable to minority shareholders of subsidiary
47,118
-
-
Total shareholders’ equity
1,699,230,444
1,042,293,679 1,699,878,701
1,042,421,759
4,378,336,977
4,005,178,156 4,371,814,234
4,005,306,236
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of the financial statements.
159
-
Stars Microelectronics (Thailand) Public Company Limited
Stars Microelectronics (Thailand) Public Company Limited and its subsidiary Income statements For the years ended 31 December 2009 and 2008
(Unit: Baht)
Consolidated financial statements Note
2009
Financial statements in which the equity method is applied
Separate financial statements
2008
2009
2008
Revenues 22
Sales and service income
11,051,462,404 12,127,274,412 11,016,652,759 12,127,274,412
Other income Gains on exchange
42,259,168
-
42,259,168
-
Revenue from scrap sales
13,054,175
11,229,165
13,054,175
11,229,165
8,743,729
7,052,885
8,743,729
7,052,885
Others
11,115,519,476 12,145,556,462 11,080,709,831 12,145,556,462
Total revenues Expenses
10,648,478,334 11,686,780,444 10,634,464,508 11,686,780,444
Cost of sales and services Selling expenses
26,709,636
13,417,484
11,596,908
13,417,484
Administrative expenses
93,350,314
87,227,205
87,963,716
87,227,205
17,194,351
16,823,363
17,194,351
16,823,363
-
40,695,771
-
40,695,771
6
Management benefit expenses Other expenses - losses on exchange
10,785,732,635 11,844,944,267 10,751,219,483 11,844,944,267
Total expenses Income before share of income from investment in associated company, finance
329,786,841
cost and corporate income tax 12
Share of income from investment in associated company Income before finance cost and corporate income tax
300,612,195
329,490,348
300,612,195
-
190,790
-
-
329,786,841
300,802,985
329,490,348
300,612,195
Finance cost
(61,738,326)
(99,859,307)
(61,738,326)
(99,859,307)
Income before corporate income tax
268,048,515
200,943,678
267,752,022
200,752,888
Corporate income tax
24, 25
Net income for the year
(857,378)
-
-
-
267,191,137
200,943,678
267,752,022
200,752,888
267,187,843
200,943,678
267,752,022
200,752,888
Net income attributable to: Equity holders of the parent
3,294
Minority interests of the subsidiary
267,191,137 Basic earnings per share Net income attributable to equity holders of the parent Weighted average number of ordinary shares (shares)
26
0.89
0.73
0.89
0.73
301,457,534
276,000,000
301,457,534
276,000,000
The accompanying notes are an integral part of the financial statements.
160
-
Total income for the year
161
Balance as at 31 December 2008
transferred to statutory reserve 552,000,000
-
-
Net income for the year
21
-
Net income recognised directly in equity
Unappropriated retained earnings
-
552,000,000
capital
9,719,148
-
-
-
-
-
9,719,148
14,712,166
-
-
-
-
-
14,712,166
on land
23,121
-
3,280
-
3,280
3,280
19,841
adjustment
surplus
premium
paid-up share
Translation adjustment
Income recognised directly in equity:
Balance as at 31 December 2007
Note
Translation
Revaluation
Share
Issued and
3,280 200,943,678 200,946,958
200,943,678 200,943,678
-
(10,047,184)
424,547,914 1,042,293,679
10,047,184 41,291,330
-
3,280
841,346,721
-
233,651,420
Total
(Unit: Baht)
-
31,244,146
statutory reserve Unappropriated
Appropriated -
Retained earnings
Financial statements in which the equity method is applied
Stars Microelectronics (Thailand) Public Company Limited and its subsidiary Statements of changes in shareholders’ equity For the years ended 31 December 2009 and 2008
Stars Microelectronics (Thailand) Public Company Limited
Balance as at 31 December 2008
162 -
-
736,000,000 266,944,068
-
-
184,000,000 257,224,920
-
-
-
-
-
9,719,148
The accompanying notes are an integral part of the financial statements.
Balance as at 31 December 2009
transferred to statutory reserve 21
29
Payment of interim dividend
Unappropriated retained earnings
19
-
Total income for the year
Share capital increase
-
-
-
-
552,000,000
premium
capital
Net income for the year
in equity
Net income recognised directly
Translation adjustment
Income recognised directly in equity:
acquisition of subsidiary
shareholders of subsidiary from
Equity attributable to minority
Note
Share
paid-up share
Issued and
Consolidated financial statements
Appropriated -
Retained earnings
14,712,166
-
-
-
-
-
-
-
-
14,712,166
20,005
-
-
-
(3,116)
-
(3,116)
(3,116)
-
23,121
54,683,931
13,392,601
-
-
-
-
-
-
-
41,291,330
626,823,156
(13,392,601)
(51,520,000)
-
267,187,843
267,187,843
-
-
-
424,547,914
on land adjustment statutory reserve Unappropriated
surplus Translation
Revaluation
Equity attributable to the parent’s shareholders
Stars Microelectronics (Thailand) Public Company Limited and its subsidiary Statements of changes in shareholders’ equity (continued) For the years ended 31 December 2009 and 2008
equity attribut-
1,699,183,326
-
(51,520,000)
441,224,920
267,184,727
267,187,843
(3,116)
(3,116)
-
1,042,293,679
shareholders
Total
-
(51,520,000)
441,224,920
267,185,856
267,191,137
(5,281)
(5,281)
45,989
47,118 1,699,230,444
-
-
-
1,129
3,294
(2,165)
(2,165)
45,989
- 1,042,293,679
subsidiary
the parent’s shareholders of
attributable to able to minority
Total equity
Minority Interest
Stars Microelectronics (Thailand) Public Company Limited
21
-
-
163
to statutory reserve
266,944,068
-
-
-
736,000,000
257,224,920
184,000,000
The accompanying notes are an integral part of the financial statements.
Balance as at 31 December 2009
21
29
Payment of interim dividend
Unappropiated retained earnings transferred
19
Total income for the year
Share capital increase
-
9,719,148
552,000,000
Balance as at 31 December 2008 -
9,719,148
552,000,000
Balance as at 31 December 2008
Net income for the year
-
-
to statutory reserve
Unappropiated retained earnings transferred
-
-
9,719,148
Total income and the year
552,000,000
14,712,166
-
-
-
-
-
14,712,166
14,712,166
-
-
-
14,712,166
54,683,931
13,392,601
-
-
-
-
41,291,330
41,291,330
10,047,184
-
-
31,244,146
Appropriatedstatutory reserve
Revaluation
-
200,752,888
200,752,888
841,668,871
Total
(Unit: Baht)
-
(51,520,000)
441,224,920
267,752,022
267,752,022
627,538,536 1,699,878,701
(13,392,601)
(51,520,000)
-
267,752,022
267,752,022
424,699,115 1,042,421,759
424,699,115 1,042,421,759
(10,047,184)
200,752,888
200,752,888
233,993,411
Unappropriated
Retained earnings
Separate financial statements
share capital Share premium surplus on land
Issued and paid-up
Net income for the year
Balance as at 31 December 2007
Note
Stars Microelectronics (Thailand) Public Company Limited and its subsidiary Statements of changes in shareholders’ equity (continued) For the years ended 31 December 2009 and 2008
Stars Microelectronics (Thailand) Public Company Limited
Stars Microelectronics (Thailand) Public Company Limited
Stars Microelectronics (Thailand) Public Company Limited and its subsidiary Cash flow statements For the years ended 31 December 2009 and 2008
(Unit: Baht)
Financial statements Consolidated in which the financial equity method statements is applied 2009
2008
Separate financial statements
2009
2008
Cash flows from operating activities Income before tax
268,048,515
200,943,678
267,752,022
200,752,888
Adjustments to reconcile income before tax to net cash provided by (paid from) operating activities: Interest expenses Depreciation and amortisation
61,738,326
99,859,306
61,738,326
99,859,306
279,734,854
260,306,026
279,734,854
260,306,026
Allowance for doubtful accounts (reversal) Unrealised (gains) losses on exchange
(98,268)
578,483
(98,268)
578,483
(11,425,644)
43,520,095
(11,425,644)
43,520,095
(267,116)
(280,373)
(267,116)
(280,373)
Gains on sales of equipment Difference between amount of acquisition of subsidiary amd the Company’s interest in subsidiary (Note 11)
235,018
-
-
-
(7,408,741)
20,352,565
(7,408,741)
20,352,565
-
(190,790)
-
-
590,556,944
625,088,990
590,025,433
625,088,990
Allowance for diminution in value of inventories Share of income from investment in associated company Income from operating activities before changes in operating assets and liabilities Operating assets (increase) decrease Trade accounts receivable
66,632,896
(477,257,310)
28,988,362
(477,257,310)
Unbilled receivables
(212,412,840)
-
(212,412,840)
-
Inventories
(198,909,092)
(116,446,101)
(196,879,855)
(116,446,101)
(1,321,793)
737,824
1,499,276
737,824
(160,771)
(744,848)
(160,771)
(744,848)
201,637,693
511,710,724
237,524,044
511,710,724
2,641,029
4,972,465
2,641,029
4,972,465
Other current assets Other non-current assets Operating liabilities increase (decrease) Trade accounts payable Accounts payable - others Other current liabilities Cash from operating activities Cash paid for interest expenses
(5,031,928)
9,097,072
(6,366,679)
9,097,072
443,632,138
557,158,816
444,857,999
557,158,816
(63,164,521)
(100,109,992)
(63,164,521)
(100,109,992)
(50,823)
-
-
-
380,416,794
457,048,824
381,693,478
457,048,824
Cash paid for corporate income tax Net cash from operating activities Cash flows from investing activities Increase in restricted bank deposits Payment of accounts payable - machinery Acquisition of equipment and intangible assets
(57,461)
(80,547)
(57,461)
(80,547)
(84,081,820)
(60,562,548)
(84,081,820)
(60,562,548)
(102,464,366)
(129,714,440)
(102,464,366)
(129,714,440)
18,893,241
280,374
18,893,241
280,374
Proceeds from sales of equipment Net cash received from (paid for) acquisition of subsidiary(Note11) Net cash used in investing activities
2,438,920
-
(279,882)
-
(165,271,486)
(190,077,161)
(167,990,288)
(190,077,161)
The accompanying notes are an integral part of the financial statements.
164
Stars Microelectronics (Thailand) Public Company Limited
Stars Microelectronics (Thailand) Public Company Limited and its subsidiary Cash flow statements (continued) For the years ended 31 December 2009 and 2008
(Unit: Baht)
Consolidated financial statements
Financial statements in which the equity method is applied
2008
2009
2008
2009
Separate financial statements
Cash flows from financing activities Increase (decrease) in bank overdrafts and short-term loans from financial institutions
(791,538,361)
121,696,166
(791,538,361)
121,696,166
Decrease in factoring payable
(46,777,511)
(29,028,651)
(46,777,511)
(29,028,651)
Repayment of liabilities under finance lease agreements
(10,234,123)
(39,647,138)
(10,234,123)
(39,647,138)
Cash receipts from long-term loans
750,000,000
-
750,000,000
-
Repayments of long-term loans
(500,508,000)
(328,934,400)
(500,508,000)
(328,934,400)
Proceeds from increasing in share capital
441,224,920
-
441,224,920
-
Payment of interim dividend
(51,520,000)
-
(51,520,000)
-
(209,353,075)
(275,914,023)
(209,353,075)
(275,914,023)
(5,281)
-
-
-
5,786,952
(8,942,360)
4,350,115
(8,942,360)
843,128
9,785,488
843,128
9,785,488
6,630,080
843,128
5,193,243
843,128
171,622,725
82,308,220
171,622,725
82,308,220
-
28,351,196
-
28,351,196
Net cash used in financing activities Decrease in translation adjustment Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
Supplemental cash flows information Non-cash items Purchases of machinery on credit Machihery and equipment acquired under finance lease agreements
The accompanying notes are an integral part of the financial statements.
165
Stars Microelectronics (Thailand) Public Company Limited
Notes to Financial Statements Stars Microelectronics (Thailand) Public Company Limited and its subsidiary Notes to financial statements For the years ended 31 December 2009 and 2008
1. Corporate information Stars Microelectronics (Thailand) Public Company Limited (“the Company”) is a public company incorporated and domiciled in Thailand. The major shareholder of the Company is a group of individual persons. The Company is principally engaged in the manufacture and distribution of integrated circuit boards and its registered address is 586 Moo 2, Klong Jig, Bang Pa-In, Ayutthaya. The Stock Exchange of Thailand set ordinary shares of the Company of 368 million shares with a par value of Baht 2 per share, totaling of Baht 736 million, be traded on the Stock Exchange of Thailand from 24 September 2009 onwards.
2. Basis of preparation 2.1 The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Professions Act B.E. 2547 and their presentation has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 30 January 2009, issued under the Accounting Act B.E. 2543. The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from the Thai language financial statements.The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policies.
2.2 Basis of consolidation In January 2009, the Company additionally purchased shares of Stars Microelectronics USA, Inc. as discussed in Note 11. As a result, that company’s status is changed from an associated company to a subsidiary of the Company. a) The consolidated financial statements include the financial statements of Stars Microelectronics (Thailand) Public Company Limited (“the Company”) and the following subsidiary (“the subsidiary”):
Nature of business
Company’s name Stars Microelectronics
Country of incorporation
Trading company
USA, Inc.
United States of America
166
Percentage of shareholding as at 31 December 2009 % 59
Assets as a percentage to the consolidated total assets as at 31 December 2009
%
2.43
Revenues as a percentage to the consolidated total revenues for the year ended 31 December 2009
%
3.62
Stars Microelectronics (Thailand) Public Company Limited
b) Subsidiary is fully consolidated as from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. c) The financial statements of the subsidiary are prepared for the same reporting period as the parent company, using consistent significant accounting policies. d) The financial statements of overseas subsidiary are translated into Thai Baht at the closing exchange rate as to assets and liabilities, and at monthly average exchange rates as to revenues and expenses. The resultant differences are shown under the caption of “Translation adjustment� in shareholders’ equity in consolidated balance sheet. e) Material balances and transactions between the Company and its subsidiary have been eliminated from the consolidated financial statements. f) Minority interests represent the portion of net income or loss and net assets of the subsidiary that are not held by the Company and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet. 2.3 The separate financial statements, which present investments in subsidiary and associated companies under the cost method, have been prepared solely for the benefit of the public.
3. Adoption of new accounting standards In June 2009, the Federation of Accounting Professions issued Notification No. 12/2552, assigning new numbers to Thai Accounting Standards that match the corresponding International Accounting Standards. The numbers of Thai Accounting Standards as referred to in these financial statements reflect such change. The Federation of Accounting Professions has issued Notification No. 86/2551 and 16/2552, mandating the use of new accounting standards, financial reporting standard and accounting treatment guidance as follows. 3.1
Accounting standards, financial reporting standard and accounting treatment guidance which are effective for the current year
Framework for the Preparation and Presentation of Financial Statements (revised 2007 ) TAS 36 (revised 2007)
Impairment of Assets
TFRS 5 (revised 2007)
Non-current Assets Held for Sale and Discontinued Operations
Accounting Treatment Guidance for Leasehold Right Accounting Treatment Guidance for Business Combination under Common Control
These accounting standards, financial reporting standard and accounting treatment guidance became effective for the financial statements for fiscal years beginning on or after 1 January 2009. The management of the Company and its subsidiary has assessed the effect of these standards and believes that TFRS 5 (revised 2007), Accounting Treatment Guidance for Leasehold Right and Accounting Treatment Guidance for Business Combination under Common Control are not relevant to the business of the Company and its subsidiary, while Framework for Preparation and Presentation of Financial Statements (revised 2007), TAS 36 (revised 2007) do not have any significant impact on the financial statements for the current year.
167
Stars Microelectronics (Thailand) Public Company Limited
3.2
Accounting standards which are not effective for the current year Effective date TAS 20
Accounting for Government Grants and
1 January 2012
Disclosure of Government Assistance
TAS 24 (revised 2007)
Related Party Disclosures
1 January 2011
TAS 40
Investment Property
1 January 2011
However, TAS 24 (revised 2007) and TAS 40 allow early adoption by the entity before the effective date. The management of the Company and its subsidiary has assessed the effect of these standards and believes that TAS 20 and TAS 40 are not relevant to the business of the Company and its subsidiary, while TAS 24 (revised 2007) will not have any significant impact on the financial statements for the year in which it is initially applied.
4. Significant accounting policies 4.1 Revenue recognition Sales of goods Sales of goods are recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are the invoiced value, excluding value added tax, of goods supplied after deducting discounts and allowances. Rendering of services Service revenue is recognised when services have been rendered taking into account the stage of completion and accepted by customers. 4.2 Cash and cash equivalents Cash and cash equivalents consist of cash in hand and at banks, and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions. 4.3 Trade accounts receivable Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in collection of receivables. The allowance is generally based on collection experience and analysis of debt aging. 4.4 Inventories Finished goods and work in process are valued at the lower of standard cost (which approximates actual cost) and net realisable value. Standard cost includes all production costs and attributable factory overheads. Raw materials, spare parts and supplies are valued at the lower of average cost and net realisable value and are charged to production costs whenever consumed. 4.5 Investments a) Investment in associated company is accounted for in the financial statements in which the equity method is applied using the equity method. b) Investments in subsidiary and associated companies are accounted for in the separate financial statements using the cost method.
168
Stars Microelectronics (Thailand) Public Company Limited
4.6 Property, plant and equipment/Depreciation Land is stated at revalued amount. Buildings and equipment are stated at cost less accumulated depreciation and allowance for loss on impairment of assets (if any). Land is initially recorded at cost on the acquisition date, and subsequently revalued by an independent professional appraiser to its fair value. Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from fair value at the balance sheet date. Differences arising from the revaluation are dealt with in the financial statements as follows: - When a land’s carrying amount is increased as a result of a revaluation of the Company’s land, the increase is credited directly to equity under the heading of “Revaluation surplus on land”. However, a revaluation increase will be recognised as income to the extent that it reverses a revaluation decrease of the same land previously recognised as an expense.
- When a land’s carrying amount is decreased as a result of a revaluation of the Company’s land, the decrease is recognised as an expense in the income statement. However, a revaluation decrease is to be charged directly against the related “Revaluation surplus on land” to the extent that the decrease does not exceed the amount held in the “Revaluation surplus on land” in respect of that same land. Any excess amount is to be recognised as an expense in the income statement.
Depreciation of plant and equipment is calculated by reference to their costs on the straight-line basis over the following estimated useful lives:
Buildings
20 years
Building improvement
10 years
Machinery and equipment Motor vehicles
4.7
5 and 10 years 5 years
Depreciation is included in determining income. No depreciation is provided on land and machinery under installation.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. 4.8
Intangible assets
Intangible assets are measured at cost on the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses (if any). Intangible assets with finite lives are amortised on a systematic basis over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method of such intangible assets are reviewed at least at each financial year end. The amortisation expense is charged to the income statement. Intangible assets with finite useful lives of the Company are computer software which has the useful life of 10 years.
169
Stars Microelectronics (Thailand) Public Company Limited
4.9
Related party transactions
Related parties comprise enterprises and individuals that control, or are controlled by, the Company, whether directly or indirectly, or which are under common control with the Company. They also include associated companies and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, key management personnel, directors and officers with authority in the planning and direction of the Company’s operations. 4.10 Long-term leases Leases of equipment which transfer substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included in other long-term payables, while the interest element is charged to the income statements over the lease period. The equipment acquired under finance leases is depreciated over the useful life of the asset. 4.11 Foreign currencies Transactions in foreign currencies are translated into Baht at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Baht at the exchange rate ruling at the balance sheet date.Gains and losses on exchange are included in determining income. 4.12 Impairment of assets At each reporting date, the Company performs impairment reviews in respect of the property, plant and equipment and other intangible assets whenever events or changes in circumstances indicate that an asset may be impaired. An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the asset’s fair value less costs to sell and its value in use, is less than the carrying amount. In determining value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by a valuation model that, based on information available, reflects the amount that the Company could obtain from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. An impairment loss is recognised in the income statement. However in case where land was previously revalued and the revaluation was taken to equity, a part of such impairment is recognised in equity up to the amount of the previous revaluation. 4.13 Employee benefits Salaries, wages, bonuses and contributions to the social security fund and provident fund are recognised as expenses when incurred. 4.14 Provisions Provisions are recognised when the Company has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 4.15 Income tax Income tax is provided in the accounts based on taxable profits determined in accordance with tax legislation. Income tax of overseas subsidiary is calculated in accordance with the tax rates applicable under the tax legislation of that country.
170
Stars Microelectronics (Thailand) Public Company Limited
4.16 Derivatives Forward exchange contracts Receivables and payables arising from forward exchange contracts are translated into Baht at the rates of exchange ruling on the balance sheet date. Gains and losses from the translation are included in determining income. Premiums or discounts on forward exchange contracts are amortised on a straight-line basis over the contract periods.
5. Significant accounting judgments and estimates The preparation of financial statements in conformity with generally accepted accounting principles at times requires management to make subjective judgments and estimates regarding matters that are inherently uncertain. These judgements and estimates affect reported amounts and disclosures and actual results could differ. Significant judgments and estimates are as follows: Leases In determining whether a lease is to be classified as an operating lease or finance lease, the management is required to use judgement regarding whether significant risk and rewards of ownership of the leased asset has been transferred, taking into consideration terms and conditions of the arrangement. Allowance for doubtful accounts In determining an allowance for doubtful accounts, the management needs to make judgement and estimates based upon, among other things, past collection history, aging profile of outstanding debts and the prevailing economic condition. Allowance of diminution in value of inventories In determining an allowance of diminution in value of inventories, the management makes judgment and estimates net realisable value of inventories based on the amount the inventories are expected to realise. These estimates take into consideration fluctuations of price or cost directly related to events occurring after the end of the period. The management also makes judgments and estimates expected loss from stock obsolescence based upon movements of inventories and the prevailing economic condition. Property plant and equipment/Depreciation In determining depreciation of plant and equipment, the management is required to make estimates of the useful lives and salvage values of the Company’s plant and equipment and to review estimate useful lives and salvage values when there are any changes. The Company measures land at revalued amounts. Such amount is determined by the independent valuer using the market approach. The valuation involves certain assumptions and estimates. In addition, the management is required to review property, plant and equipment for impairment on a periodical basis and record impairment losses in the period when it is determined that their recoverable amount is lower than the carrying amount. This requires judgements regarding forecast of future revenues and expenses relating to the assets subject to the review. Litigation The Company has contingent liabilities as a result of litigation. The Company’s management has used judgement to assess of the results of the litigation and believes that no loss will result. Therefore no contingent liabilities are recorded as at the balance sheet date.
171
Stars Microelectronics (Thailand) Public Company Limited
6. Related party transactions During the years, the Company and its subsidiary had significant business transactions with related parties. Such transactions, which are summarised below, arose in the ordinary course of business and were concluded on commercial terms and bases agreed upon between the Company, its subsidiary and those related parties. (Unit: Million Baht) Financial Consolidated
statements in
financial
which the equity
statements
method is applied
2009
2008
Separate financial statements
Pricing policy
2009
2008
Transactions with subsidiary (eliminated from the consolidated financial statements) Sales and service income
-
-
364.9
-
Cost plus margin
-
208.9
-
208.9
Cost plus margin
Sales and service income
19.8
21.5
19.8
21.5
Purchase of raw material
0.3
0.7
0.3
0.7
Market price
-
0.6
-
0.6
Cost plus margin
Transactions with associated company Sales and service income Transactions with related companies
Purchases of machinery and equipment
Cost plus margin
As at 31 December 2009 and 2008, the balances of the accounts between the Company, its subsidiary and those related parties are as follows: (Unit: Baht) Consolidated
Financial statements
financial
in which the equity
statements
method is applied
2009
2008
Separate financial statements 2009
2008
Trade accounts receivable - related parties Subsidiary (eliminated from the consolidated financial statements) Stars Microelectronics USA, Inc.
-
-
101,639,367
-
-
38,389,515
-
38,389,515
2,170,839
2,376,028
2,170,839
2,376,028
16,610
120,397
16,610
120,397
2,187,449
40,885,940
103,826,816
40,885,940
Associated company Stars Microelectronics USA, Inc. Related companies SIIX Bangkok Company Limited Others Total trade accounts receivable - related parties
Directors and management’s benefits In 2009 the Company paid salaries, bonus, meeting allowances and gratuities to its directors and management totaling Baht 17.2 million (2008: Baht 16.8 million).
172
Stars Microelectronics (Thailand) Public Company Limited
7. Trade accounts receivable 7.1 The balances of trade accounts receivable as at 31 December 2009 and 2008, aged on the basis of due dates, are summarised below. (Unit: Baht) Consolidated financial statements
2009
Financial statements in which the equity method is applied 2008
Separate financial statements
2009
2008
Related parties Age of receivables Not yet due
2,170,839
28,660,440
91,332,289
28,660,440
Up to 3 months
-
12,166,543
11,535,453
12,166,543
3 - 6 months
-
8,385
5,864
8,385
Past due
6 - 12 months Over 12 months Total trade accounts receivable - related parties
-
17,403
909,231
17,403
16,610
33,169
43,979
33,169
2,187,449
40,885,940
103,826,816
40,885,940
671,919,805
755,091,476
617,944,837
755,091,476
120,530,696
27,332,212
82,501,126
27,332,212
Unrelated parties Age of receivables Not yet due Past due Up to 3 months 3 - 6 months
12,321,154
1,972,473
2,021,447
1,972,473
6 - 12 months
1,335,618
11,033,116
1,335,618
11,033,116
639,462
101,336
639,462
101,336
806,746,735
795,530,613
704,442,490
795,530,613
(480,215)
(578,483)
(480,215)
(578,483)
Total trade accounts receivable - unrelated parties, net
806,266,520
794,952,130
703,962,275
794,952,130
Trade accounts receivable, net
808,453,969
835,838,070
807,789,091
835,838,070
Over 12 months Total trade accounts receivable - unrelated parties Less: Allowance for doubtful accounts
7.2 The Company agreed with a lenders that it would not sell, transfer, make commitment on, or use invoices which are evidence of collecting from trade accounts receivable of approximately Baht 466.9 million as at 31 December 2009 (2008: nil), to get finance from other lenders. 7.3 Approximately Baht 58.5 million of the trade accounts receivable as at 31 December 2008 (2009: nil) has been sold at a discount to a financial institution, with recourse. The Company has recorded the amount received from factoring its rights of claim in accounts receivable as a secured liability under the caption of “Factoring payable� in the balance sheets.
173
Stars Microelectronics (Thailand) Public Company Limited
8. Inventories (Unit: Baht) Allowance for diminution in value of inventories Reduction cost to net realisable value
Cost Financial statements in which the equity method is applied
Consolidated financial statements 2009
Consolidated financial statements
2008
2009
Stock obsolescence
Financial statements in which the equity method is applied 2008
Inventories - net
Consolidated financial statements
Financial statements in which the equity method is applied
2009
2008
Consolidated financial statements 2009
Financial statements in which the equity method is applied 2008
Finished goods
153,482,178
302,368,538
(2,507,888)
(7,355,887)
(2,127,777)
(153,796)
148,846,513
294,858,855
Work in process
173,204,583
121,568,880
(6,819,752)
(12,482,469)
(129,165)
(129,165)
166,255,666
108,957,246
Raw materials
739,281,889
445,800,963
-
-
(1,965,663)
(837,669)
737,316,226
444,963,294
21,927,151
20,754,092
-
-
(67,375)
(67,375)
21,859,776
20,686,717
Spare parts and supplies Material in Transit Total
1,505,765
-
-
-
-
-
1,505,765
-
1,089,401,566
890,492,473
(9,327,640)
(19,838,356)
(4,289,980)
(1,188,005)
1,075,783,946
869,466,112
(Unit: Baht) Separate financial statements Allowance for diminution in value of inventories Reduction cost to net realisable value
Cost 2009
2008
2009
Stock obsolescence
2008
2009
Inventories - net
2008
2009
2008
Finished goods
151,452,940
302,368,538
(2,507,888)
(7,355,887)
(2,127,777)
(153,796)
146,817,275
294,858,855
Work in process
173,204,583
121,568,880
(6,819,752)
(12,482,469)
(129,165)
(129,165)
166,255,666
108,957,246
Raw materials
739,281,889
445,800,963
-
-
(1,965,663)
(837,669)
737,316,226
444,963,294
Spare parts and supplies
21,927,151
20,754,092
-
-
(67,375)
(67,375)
21,859,776
20,686,717
Material in transit
1,505,765
-
-
-
-
-
1,505,765
-
1,087,372,328
890,492,473
(9,327,640)
(19,838,356)
(4,289,980)
(1,188,005)
1,073,754,708
869,466,112
Total
174
Stars Microelectronics (Thailand) Public Company Limited
9. Restricted bank deposits These represent saving and fixed deposits pledged with the banks to secure credit facilities.
10. Loan to other company The Company provided a loan of EUR 50,000 to an overseas company in accordance with the Shareholders’ Investment Agreement. The loan will be converted to share capital when that company registers the change of its name to “Stars Microelectronics Europe GMBH”, which is in the process.
11. Investment in subsidiary Separate financial statements Company’s name
Stars Microelectronics USA, Inc.
Paid-up capital
Percentage of shareholding
Carrying amounts based on cost method
Dividend received during the year
2009
2008
2009
2008
2009
2008
2009
2008
US Dollar
US Dollar
%
%
Baht
Baht
Baht
Baht
20,000
-
59
-
429,279
-
-
-
On 16 January 2009, the Company entered into an agreement to purchase a total of 8,000,000 common shares (40% of registered share capital) of Stars Microelectronics USA, Inc. (the associated company) from other shareholders of that company at USD 0.001 per share, for a total of USD 8,000 or approximately Baht 280,000. As a result, the Company’s shareholding percentage in Stars Microelectronics USA, Inc. has increased from 19% to 59% and that company’s status is changed to a subsidiary of the Company. The interest of those shares has been transferred from the other shareholders to the Company on 20 January 2009. Since Stars Microelectronics USA, Inc. did not prepare its financial statements as at 20 January 2009 (shares transferring date) and the Company’s management assessed that the assets and liabilities of Stars Microelectronics USA, Inc. as at that shares transferring date and 31 December 2008 were not materially different, the Company calculated its interest in net asset value of Stars Microelectronics USA, Inc. from the financial statements as at 31 December 2008 and recorded the difference of approximately Baht 0.2 million between amount of acquisition and its interest amount in the income statement of the current year.
175
Stars Microelectronics (Thailand) Public Company Limited
The valuation of the assets and liabilities of the subsidiary at the purchase date was as follow:
(Unit: Baht) Cash and cash equivalent
2,718,802
Trade accounts receivable - net
38,309,412
Trade accounts payable
(40,916,045)
Net assets
112,169
Amount paid for purchase of subsidiary
279,882
Less: Subsidiary’s cash and cash equivalent
2,718,802
Net cash received from purchase of subsidiary
2,438,920
12. Investment in associated company 12.1 Details of associated company :
(Unit: Baht)
Company’s name
Stars Microelectronics USA, Inc.
Nature of business
rading T company
Country of incorporation
USA
Shareholding percentage 2009
2008
%
%
-
19
Total The associated company did not announce any dividends during 2008.
176
Cost 2009
2008
Carrying amounts based on equity method
Share of income from investment in associated company during the year
2009
2009
2008
2008
-
149,396
-
21,316
-
190,790
-
149,396
-
21,316
-
190,790
Stars Microelectronics (Thailand) Public Company Limited
12.2
Summarised financial information of associated company:
Financial information of the associated company is summarised below.
(Unit: US dollar)
Company’s name
Stars Microelectronics USA, Inc.
Paid-up capital as at 31 December
Total assets as at 31 December
Total liabilities as at 31 December
Total revenues for the year ended 31 December
Net income for the year ended 31 December
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
-
20,000
-
1,174,120
-
1,170,910
-
10,229,543
-
30,136
The Company classified this investment as an investment in associated company, even though it holds less than 20% of its share capital. This was because the Company has significant influence over trading transaction with that company. Share of income from investment in this associated company of Baht 190,790 as included in the income statements in which the equity method is applied for the year ended 31 December 2008 was calculated from the U.S. Corporation Income Tax Return, which was audited by that associated company’s auditor.
177
-
Transfers between accounts
178
92,968,857
39,549,824
-
-
-
-
-
39,549,824
-
-
39,549,824
-
2,241,633,195
2,262,887,276
992,685,629
(52,459,039)
279,254,563
765,890,105
3,234,318,824
-
(71,085,164)
276,626,607
3,028,777,381
Total
279,254,563
7,485,375
22,165,218
-
-
-
-
92,968,857
(63,348,994)
-
134,152,633
22,165,218
Machinery in transit
2009 (Baht 272.9 million included in manufacturing cost, and the balance in administrative expenses)
1,522,397,563
8,068,547
7,684,598
-
2,288,453
5,396,145
15,169,973
-
-
1,705,281
13,464,692
Motor vehicles
Machinery under installation
259,837,371
509,221,576
1,606,808,303
754,027,888
(52,459,039)
222,029,661
584,457,266
64,141,729
64,141,729
(71,085,164)
92,103,317
2,191,265,569
Machinery and equipment
Cost basis
(Unit: Baht)
2008 (Baht 254.1 million included in manufacturing cost, and the balance in administrative expenses)
Depreciation for the year
31 December 2009
31 December 2008
230,973,143
70,010,000
-
31 December 2009
-
54,936,449
555,835,208
-
Depreciation on disposals
176,036,694
740,194,719
1,892,881
-
6,429,936
731,871,902
Buildings and building improvement
70,010,000
-
Depreciation for the year
Net book value
-
31 December 2008
Accumulated depreciation
70,010,000
-
31 December 2009
-
Disposals
70,010,000
Additions
31 December 2008
Cost / Revalued amount
Land
Revaluation basis
13. Property, plant and equipment
Stars Microelectronics (Thailand) Public Company Limited
Stars Microelectronics (Thailand) Public Company Limited
The Company arranged for an independent professional valuer to appraise its land in 2007 using the market approach. The appraisal had the effect of increasing the Company’s revaluation surplus on land by Baht 14.7 million which had been recorded in shareholder’s equity in the balance sheets. Had the land been carried in the financial statements based on historical cost, its net book value as of 31 December 2009 and 2008 would have been Baht 55,297,834. As at 31 December 2009, the Company had machinery, motor vehicles and equipment under finance lease agreements with net book value amounting to Baht 26.3 million (2008: Baht 103.4 million). As at 31 December 2009, certain equipment items have been fully depreciated but are still in use. The original cost, before deducting accumulated depreciation, of those assets amounted to approximately Baht 182.9 million (2008: Baht 173.3 million). The Company has pledged its assets as at 31 December 2009 amounting to approximately Baht 1,233.0 million (2008: Baht 1,169.7 million) as collateral against credit facilities received from banks.
14. Intangible asset Detail of intangible asset which is computer software are as follows:
(Unit: Baht)
2009
2008
Cost
7,181,763
5,768,789
Additions
3,617,947
1,412,974
(948,947)
(468,655)
Net book value
9,850,763
6,713,108
480,292
468,655
Accumulated amortisation
Amortisation expenses included in the income statements for the years
179
Stars Microelectronics (Thailand) Public Company Limited
15. Bank overdrafts and short-term loans from financial institutions
(Unit: Baht) Interest rate (percent per annum) 2009 Bank overdrafts
MOR to MOR - 0.50
2008 MOR to MOR - 0.5
2009
2008
676,916
21,614,872
-
567,000,000
-
298,600,405
80,000,000
110,000,000
125,000,000
-
205,676,916
997,215,277
and Prime rate + 0.75 Packing credits
-
Market rate, MLR - 1 and Prime rate - 1
Trust receipts
-
Market rate, Sibor + 2
Promissory notes
2.10
Market rate, MLR - 1
Bill of exchange
1.85
and Prime rate - 1 and Prime rate - 1 -
Total
Promissory notes as at 31 December 2009 amounting to Baht 80 million comprised a credit facility under an agreement made with a lender as discussed in Note 7.2. These credit facilities are secured by majority of the Company’s assets as mentioned in Note 13.
16. Factoring payable This represents the amount received from a financial institution for factoring its rights of claim in domestic accounts receivable with recourse (Note 7.3), in accordance with the conditions specified in the factoring agreement. Factoring payable has the right to pursue the Company in the event that it is unable to make full collection of the account receivable.
180
Stars Microelectronics (Thailand) Public Company Limited
17. Long-term loans
(Unit: Baht) Loan
Interest rate
Repayment schedule
Balance as at 31 December 2009
1
3.75% per annum for the first to third
Quarterly installments from December
years and prime rate minus 0.5 per
2007 to March 2009 and monthly
annum for the fourth to seventh years
installments from April 2009 to
excluded prime rate in April 2007 to
December 2010
2008 -
171,785,500
-
249,102,500
November 2007 of the fourth year 2
3.75% per annum for the first to third
Quarterly installments from February
years and prime rate minus 0.5 per
2007 to March 2009 and monthly
annum for the fourth to seventh years
installments from April 2009 to February
excluded prime rate in April 2007 to
2011
January 2008 of the fourth year 3
MLR - 0.5 per annum
Monthly installments as from July 2007
-
53,340,000
4
MLR - 1 per annum
Monthly installments as from April 2007
6,480,000
32,760,000
5
MLR - 1.75 per annum for the first and
Monthly installments as from January
200,000,000
-
second years and MLR - 1.5 per
2010
550,000,000
-
annum for the third and fourth years 6
MLR - 1.5 per annum
Monthly installments as from March 2010
Total
756,480,000
506,988,000
Less: Portion due within one year
(176,520,000)
(446,596,125)
Long-term loans - net of current portion
579,960,000
60,391,875
181
Stars Microelectronics (Thailand) Public Company Limited
According to the letter dated 10 February 2009 received from the bank that lent loans per 1 and 2, the Company received an extension of repayment terms of such loans as from six years to seven years and the repayment amount in 2009 will be decreased from Baht 367 million to Baht 180 million. The Company has to comply with additional conditions such as dividend payment. During the third quarter of 2009, the Company repaid all of the remaining balances of loans per 1 and 2 by using cash received from the Company’s share capital increase. In November and December 2009, the Company entered into long-term loan agreements (loans per 5 and 6) with two commercial banks to acquire cash for repayment of short-term loans. In January and February 2010, the Company repaid the portion of the loan per 6 due in 2010 (installments of March to December 2010) amounting to Baht 120 million. The long-term loans are secured by the Company’s fixed deposits and major of the Company’s assets as mentioned in Note 13. Under the loan agreements, the Company has to comply with certain covenants, pertaining to matters such as maintenance of debt to equity ratio and debt service coverage ratio, restrictions on disposals of assets, limits on the creation of additional liabilities and changes of the Company’s major shareholders and management structures.
18. Liabilities under finance lease agreements (Unit: Baht) Liabilities under finance lease agreements
2009
Less : Deferred interest expenses Total Less: Portion due within one year
2008
18,707,740
30,461,525
(1,428,256)
(2,947,971)
17,279,484
27,513,554
(8,635,332)
(10,234,070)
8,644,152
17,279,484
Liabilities under finance lease agreements - net of current portion
The Company has entered into the finance lease agreements with financial institutions for rental of machinery, motor vehicles and equipment for use in its operation, whereby it is committed to pay rental on a monthly basis. The terms of the agreements are generally between 3 and 4 years.
182
Stars Microelectronics (Thailand) Public Company Limited
As at 31 December 2009, Future minimum lease payments required under the finance lease agreements were as follows:
(Unit: Baht)
19.
Less than
1 year
1-5 years
Total
Future minimum lease payments
9,665,733
9,042,007
18,707,740
Deferred interest expenses
(1,030,401)
(397,855)
(1,428,256)
Present value of future minimum lease payments
8,635,332
8,644,152
17,279,484
Share capital
At the Extraordinary General Meeting of the Company’s Shareholders No. 1/2008 held on 15 January 2008, it was resolved that: a) Change the par value of the Company’s ordinary shares from Baht 5 (a total of 147,200,000 shares) to Baht 2 (a total of 368,000,000 shares). The Company registered the par value change with the Ministry of Commerce on 31 January 2008. b) Cancel the resolution of the Extraordinary General Meeting of the Company’s Shareholders held on 10 September 2007 concerning the allocation of those new ordinary shares which had not yet been sold through changing the number of shares to be offered to the public from 36,800,000 shares to 92,000,000 shares. During 16-18 September 2009, the Company sold its ordinary shares of 92 million shares with a par value of Baht 2 per share, by public offering, at a price of Baht 4.95 per share totaling Baht 441.2 million, after deducting expenses of issuing those shares. As a result, share premium of Baht 257.2 million increased in this year. The Company registered the increase in paid up share capital from Baht 552 million (276 million ordinary shares at a par value of Baht 2 per share) to Baht 736 million (368 million ordinary shares at a par value of Baht 2 per share) with the Ministry of Commerce on 22 September 2009.
20. Revaluation surplus on land The revaluation surplus on land can neither be offset against deficit nor used for dividend payment
183
Stars Microelectronics (Thailand) Public Company Limited
21. Statutory reserve Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside to a statutory reserve at least 5% of its net income after deducting accumulated deficit brought forward (if any), until the reserve reaches 10% of the registered capital. The statutory reserve is not available for dividend distribution.
22. Sales and service income Income derived from one customer accounted for more than 75% of total sales and services income of the Company.
23. Expenses by nature Significant expenses by nature are as follows: (Unit: Baht)
Consolidated financial statements
2009
Financial statements in which the equity method is applied 2008
Separate financial statements 2009
2008
Salary and wages and other employee benefits
417,352,296
451,515,882
403,792,242
451,515,882
Depreciation
279,254,563
259,837,371
279,254,563
259,837,371
Losses (gains) on exchange
(42,259,168)
40,965,771
(42,259,168)
40,965,771
Raw materials and consumables used
9,744,641,099
10,971,820,394
9,744,641,099
10,971,820,394
Changes in inventories of finished goods and work in progress
97,250,657
(117,772,689)
99,279,896
(117,772,689)
24. Corporate income tax The Company is not liable to corporate income tax for the year 2009 and 2008 due to tax loss brought forward from previous years in excess of its taxable income of the non-promoted operations after adding back expenses and deducting income which are disallowable for income tax computation purpose.
184
Optical Mouse Sensor and Integrated Circuit
sembly (PCBA)
185
4. Date of first earning promoted operation income
import date. 9 December 2005
Granted (Expired)
3.3 Exemption of import duty on raw materials and necessary supplies imported
for use in the production of export sales for a period of one year from the first
Granted
3.2 Exemption of import duty on machinery as approved by the Board.
period.
income of promoted operations during the corporate income tax exemption
exemption of income tax on dividends paid to the shareholders from the
operations, in accordance with conditions stipulated in the certificate, and
3.1 Exemption of corporate income tax on net income derived from the promoted
1 May 2007
Not granted
Granted
7 years
Assembly (PCBA), Touch Pad Module,
Module and Printed Circuit Board As-
7 years
Manufacture of Printed Circuit Board
Manufacture of Integrated Circuit, LCD
2. Promotional privileges for
3. The significant privileges are
1386(4)/2549
2057(4)/2547
1. Certificate No.
Details
The Company has received promotional privileges from the Board of Investment. Subject to certain imposed conditions, significant privileges of the Company are as follows:
25. Promotional privileges
Stars Microelectronics (Thailand) Public Company Limited
Stars Microelectronics (Thailand) Public Company Limited
The Company’s operating revenues for the years are below shown divided according to promoted and non-promoted operations.
(Unit: Thousand Baht)
Promoted operations
2009
2008
Non-promoted operations
Total
2009
2008
2009
(3,364)
3,364
9,280,910
2008
Sales Domestic sales
Direct export sales Total sales
9,284,274
10,196,780
10,200,144
1,735,743
1,833,803
-
93,327
1,735,743
1,927,130
11,020,017
12,030,583
(3,364)
96,691
11,016,653
12,127,274
26. Earnings per share Basic earnings per share is calculated by dividing net income for the year by the weighted average number of ordinary shares in issue during the year and after adjusting the number of ordinary shares in proportion to the change in the number of shares as a result of the change in par value from Baht 5 each to Baht 2 each as discuss in Note 19. The number of ordinary shares is adjusted as if the share split had occurred at the beginning of the earliest period reported.
27. Financial information by segment The Company and its subsidiary’s business operations involve two principal segments: manufacture of integrated circuit boards business and trading business. These operations are mainly carried on in Thailand and in United States of America. Below is the consolidated financial information of the Company and its subsidiary for the year ended 31 December 2009 by segment.
186
Stars Microelectronics (Thailand) Public Company Limited
(Unit: Million Baht) For the year ended 31 December 2009 Manufacture of integrated circuit boards business (Thailand) Revenue from external customers
10,651
Trading business (United States of America)
Elimination of inter-segment revenues
400
-
Consolidated financial statements 11,051
Inter-segment revenues
365
-
(365)
-
Total revenues
11,016
400
(365)
11,051
Segment income
382
21
-
403
Other income Gains on exchange
42
-
-
42
Others
22
-
-
22
Selling expenses
(12)
(15)
-
(27)
Administrative expenses
(105)
(6)
-
(111)
Finance cost
(62)
-
-
(62)
Net income
267
(Unit: Million Baht) As at 31 December 2009 Manufacture of integrated circuit boards business (Thailand) Property, plant and equipment - net
Trading business (United States of America)
Elimination of inter-segment revenues
Consolidated financial statements
2,242
-
-
2,242
Trade accounts receivable - net
808
102
(102)
808
Inventories - net
1,074
2
-
1,076
Others
252
4,378
187
Stars Microelectronics (Thailand) Public Company Limited
In 2008, the operations of the Company principally involve the manufacture of integrated circuit boards and are carried on in the single geographic area of Thailand. As a result, all of the revenues, operating income and assets as reflected in the financial statements for the year ended 31 December 2008 pertain to the aforementioned industry segment and geographic area. All of the Company’s sales and service income for the year 2009 and 2008 are direct and indirect export revenues.
28. Provident fund The Company and its employees have jointly established a provident fund in accordance with the Provident Fund Act B.E. 2530. Both employees and the Company contributed to the fund monthly at the rate of 3 and 5% of basic salary. The fund, which is managed by Kasikorn Asset Management Company Limited, will be paid to employees upon termination in accordance with the fund rules. During the year 2009, the Company contributed Baht 6.7 million (2008: Baht 7.0 million) to the fund.
29. Dividend
(Unit: Baht) Dividend
Approved by
Interim dividend on 2009
A Meeting of the Com-
income
pany’s Board of Directors No.
Total dividend
Dividend per share
51,520,000
0.14
51,520,000
0.14
5/2009 on 6 November 2009 Total dividend for 2009
30. Commitments and contingent liabilities 30.1 Litigation During the third quarter of 2007, legal action was taken against the Company by one of its former directors on the charge of contempt/ libel as a result of his employment being terminated. On 30 September 2008, the Court of First Instance ruled that the Company had violated the Penal Code and ordered it to pay a fine of Baht 100,000. The Company already paid the fine on 30 September 2008. However, the Company also filed an appeal against this ruling to the Court of Appeals. At present, the case is being considered and,
188
Stars Microelectronics (Thailand) Public Company Limited
in the opinion of the Company’s legal counsel, there are legal points which can be applied by the Court of Appeals to overrule the ruling of the Court of First Instance. In this connection, the director also claimed to have sustained damage to his reputation as a result of the termination and sued the Company in a civil case, demanding the following compensation: a) For damage to reputation, a total of Baht 30,000,000 b) For loss of income of Baht 60,606,000 in view of ability to work until the age of 70 years. The loss of income less severance payment of Baht 3,174,600 was already received from the Company; and the outstanding balance of the loss of income is Baht 57,431,400. c) For loss of business opportunity and benefits if the Company is listed on the Stock Exchange of Thailand, in view of his rights and entitlements to purchase shares at below market price, to a special bonus and other rights, a total of Baht 120,000,000. The Company has filed a statement of defense and the Court has suspended consideration of the case and temporarily taken the case off its case file in order to await the result of the criminal case, since it is linked to the civil case, as mentioned. The civil case consideration will not start, pending a final judgment in the criminal case. The Court of First Instance reached its decision on the basis of one issue; that “the Court believed that all witnesses testified truthfully and according to facts. It could be admitted that Plaintiff had acted and performed his duties as stated in Exhibit Jor. 2, which could be deemed to be a violation of Clauses 1.12, 2.5, 2.6, 3.4, 5.3.13 of Chapter 7 of the Employees’ Working Rules and RegulationsDiscipline & Disciplinary Action, which first defendant used as the reason to terminate the employment, per Exhibit Jor. 2.” This Criminal Court decision will be beneficial to the Company in the civil suit brought by the same director in which he claimed compensatory damages for a tort causing damage to his reputation, because the civil case is linked to the criminal case, and according to the law on delivering judgment in a civil case, the Civil Court is bound by the facts as found in the judgment of the criminal case. Judgment in the civil case will be made in accordance with the provisions of civil liabilities law, without regard to the conviction or non-conviction of the accused. Since the Company’s wording of the notice of termination of employment was true, its action was therefore not an intentional wrongful civil act against the said director involving an untrue statement. In the opinion of the Company’s legal counsel, the Company is in possession of defense arguments capable of disproving the allegations on both factual and legal grounds, since it acted in accordance with the Labor Protection Laws and the action taken was necessary to reveal the truth in good faith, and was for the sake of fairness and to protect Company’s interests. Accordingly such act was not an act of making or revealing an untrue statement and thus not an intentional tort against the former director. Hence the Company should not be liable for the payment of compensation for damages as claimed. Furthermore, some of the claims were groundless and without any legal pretext. The Criminal Court’s verdict also gives the Company an advantage. Despite all this, if some damages were to be sustained at the Court’s discretion, the amount should not be significant. 30.2 Capital commitments As at 31 December 2009, the Company had capital commitments of approximately Baht 6.7 million and USD 0.7 million, and commitments to banks under outstanding letters of credit amounting to approximately USD 1.5 million relating to the acquisition of machinery. 30.3 Operating lease commitments As at 31 December 2009, the Company had commitments of approximately Baht 1.1 million in respect of leases of motor vehicles which are payable within one year. 30.4 Long-term service commitments The Company has entered into an agreement with a financial advisor for a period as from February 2009 to February 2010. Under the conditions of the agreement, the Company is to pay a financial advisory fee on a monthly basis at a rate as stipulated in the agreement and to pay the financing fee for loan underwriting and/or capital increase in accordance with the timeframe and conditions stipulated in the agreement.
189
Stars Microelectronics (Thailand) Public Company Limited
30.5 Guarantees As at 31 December 2009, there were outstanding bank guarantee of Baht 8.9 million (2008: Baht 7.6 million) issued by a bank on behalf of the Company to guarantee electricity use.
31. Financial instruments 31.1 Financial risk management Financial instruments of the Company and its subsidiary as defined under Thai Accounting Standard No. 32 “Financial Instruments: Disclosure and Presentations�, principally comprise cash and cash equivalents, trade accounts receivable, loan, investment, and short-term and long-term loans. The financial risks associated with these financial instruments and how they are managed is described below. Credit risk The Company and its subsidiary are exposed to credit risk primarily with respect to trade accounts receivable and loan. The management manages the risk by adopting appropriate credit control policies and procedures and therefore does not expect to incur material financial losses. However, the Company and its subsidiary are exposed to concentrations of credit risk with respect to trade receivables because they have a few major customers who are in the same industry. The maximum exposure to credit risk is limited to the carrying amount of trade accounts receivable and loan as stated in the balance sheet. Interest rate risk Exposure of the Company and its subsidiary to interest rate risk relates primarily to its cash at banks, bank overdrafts, short-term loans, liabilities under finance lease agreements and long-term borrowings. However, since most of the financial assets and liabilities do not bear interest or bear floating interest rates or fixed interest rates which are close to the market rate, the interest rate risk is expected to be minimal. Significant financial assets and liabilities as at 31 December 2009 classified by type of interest rate are summarised in the table below, with those financial assets and liabilities that carry fixed interest rates further classified based on the maturity date, or the repricing date if this occurs before the maturity date.
190
Stars Microelectronics (Thailand) Public Company Limited
(Unit: Million Baht) Consolidated financial statements Fixed interest rates Within 1 year
1-5 years
Over 5 years
Floating Interest rate
Noninterest bearing
Total
-
-
7
-
7
Financial Assets Cash and cash equivalent
-
Trade accounts receivable
-
-
-
-
808
808
Unbilled receivables
-
-
-
-
212
212
Restricted bank deposits
-
-
-
9
-
9
Loan to other company
-
-
-
-
2
2
-
-
-
16
1,022
1,038
205
-
-
1
-
206
Financial liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable
-
-
-
-
1,443
1,443
Accounts payable - purchase of machinery
-
-
-
-
171
171
Other accounts payable
-
-
-
-
60
60
Liabilities under finance lease agreements
9
9
-
-
-
18
Long-term loans
-
-
-
756
-
756
214
9
191
-
757
1,674
2,654
Stars Microelectronics (Thailand) Public Company Limited
(Unit: Million Baht) Separate financial statements Fixed interest rates Within 1 year
1-5 years
Over 5 years
Floating Interest rate
Noninterest bearing
Total
Financial Assets Cash and cash equivalent
-
-
-
5
-
5
Trade accounts receivable
-
-
-
-
808
808
Unbilled receivables
-
-
-
-
212
212
Restricted bank deposits
-
-
-
9
-
9
Loan to other company
-
-
-
-
2
2
-
-
-
14
1,022
1,036
Financial liabilities Bank overdrafts and short-term loans from financial institutions
205
-
-
1
-
206
Trade accounts payable
-
-
-
-
1,438
1,438
Accounts payable - purchase of machinery
-
-
-
-
171
171
Other accounts payable
-
-
-
-
60
60
Liabilities under finance lease agreements
9
9
-
-
-
18
Long-term loans
-
-
-
756
-
756
214
9
-
757
1,669
2,649
192
Stars Microelectronics (Thailand) Public Company Limited
Foreign Currency Risk The Company’s exposure to foreign currency risk arises mainly from trading transactions and purchases of machinery that are denominated in foreign currencies. The Company seeks to reduce this risk by entering into forward exchange contracts when it considers appropriate. Generally, the forward contracts mature within one year. The balances of financial assets and liabilities denominated in foreign currencies as at 31 December 2009 are summarised below.
Foreign currency
Financial
Financial
assets
liabilities
(Million)
(Million)
US dollar
Average exchange rate as at 31 December 2009 (Baht per 1 foreign currency unit)
16.3
45.6
-
1.5
36.2287(per Yen 100)
-
0.1
23.7287
0.1
-
47.7934
Japanese yen Singapore dollar Euro
33.3688
Foreign exchange contracts outstanding as at 31 December 2009 are summarised below.
Foreign currency US dollar
Bought amount
Contractual exchange rate (Bought)
(Million)
(Baht per 1 foreign currency unit)
5.0
33.1665 – 33.8520
The Company has entered into agreements with a local bank to purchase US dollars per the amounts (USD 6 million or USD 12 million) and rates stipulated in the agreements. The exchange rates stipulated in the agreements are those in the range of between Baht 32.80 and 33.00 per USD 1, or those on the contract expiry dates less Baht 0.4 – 0.5 per USD 1. The agreements are to expire in May 2010. The Company has entered into an agreement with a financial institution to purchase US dollars at the amounts (USD 1.3 million or USD 2.6 million) and rate (Baht 32.85 per USD 1) as stipulated in the agreement. The agreement is to expire in May 2010.
193
Stars Microelectronics (Thailand) Public Company Limited
31.2 Fair values of financial instruments Since the majority of the financial instruments of the Company and its subsidiary are short-term in nature and loans bear floating interest rates, their fair value is not expected to be materially different from the amounts presented in the balance sheets. A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument.
32. Capital management The primary objective of the Company’s capital management is to ensure that it has an appropriate financial structure and preserves the ability to continue its business as a going concern. According to the balance sheet as at 31 December 2009, the Group’s debt-to-equity ratio was 1.58:1 and the Company’s was 1.57:1. According to the balance sheet in which the equity method is applied as at 31 December 2008, the Company’s debt-to-equity ratio was 2.84:1 and according to the separate balance sheet as at 31 December 2008, the Company’s debt-to-equity ratio was 2.84:1.
33. Approval of financial statements These financial statements were authorised for issue by the Company’s Board of Directors on 26 February 2010.
194
Stars Microelectronics (Thailand) Public Company Limited
Remuneration for the Auditor The Company and its subsidiaries have paid the remuneration for the auditor of Ernst and Young Office Ltd. as Audit Fee as follows:
Audit Fee
2007
870,000
195
2008 1,050,000
2009 1,370,000
Stars Microelectronics (Thailand) Public Company Limited
Other Reference Persons The Stock Registrar Thailand Securities Depository Co., Ltd 62 Stock Exchange of Thailand Building Ratchadapisake Road, Klongtoey, Bangkok 10110 Tel: 02-229-2800 Call center: 02-229-2888
The Auditor Mr. Supachai Panyawattano and/or Miss Siraporn Ueanankul and/or Miss Thipwan Nananuwat Ernst & Young Co., Ltd. 33rd Floor, Lake Ratchada Building 193/136-137 New Ratchadapisake Road Klongtoey, Bangkok 10110 Tel: 02-264-0777 Fax: 02-264-0789-90
Investor Relations Contact Stars Microelectronics (Thailand) Public Company Limited 605 - 606 Moo 2 Bang Pa-In Industrial Estate, Klongjig, Bang Pa-In, Ayutthaya 13160, Thailand. Email: ir@starsmicroelectronics.com Tel: +66 (0)35-221-777 ext. 313 Fax: +66 (0)35-221-778
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