TFD: Annual Report 2014 by orapan kokong

ANNUAL

REPORT

YOUR SATISFACTION I S O U R B U S I N E S S.

2014

TFD Factory Location Map Mahadlek Residence Located : Soi Mahadlek Luang 2, Rajdamri Road. The project’s total value is appx. Baht 4,000 billion. โครงการ มหาดเล็ก เรสซิเดนซ ตั้งอยูในซอย มหาดเล็กหลวง 2 ถนนราชดําริ มูลคาโครงการรวม 4,000.-ลานบาท

Habour Residence Located : Rama 4 – NaRanong Road. The project’s total value is appx. Baht 1,800 billion. โครงการ ฮารเบอร เรสซิเดนซ ตั้งอยูที่ ถนนพระราม 4 - ถนน ณ ระนอง มูลคาโครงการรวม 1,800.-ลานบาท

Green Park

Colonial Khao Tao-Huahin Located : Kao Tao, Tambon Paknam Pran, Prachuab Kiri Khan Province. The project’s total value is appx. Baht 3,500 billion. โครงการ เดอะโคโลเนียล เขาเตา หัวหิน ตั้งอยูที่ บริเวณเขาเตา ตําบลปากนํ้าปราณ จังหวัดประจวบศิรีขันธ มูลคาโครงการรวม 3,500.-ลานบาท

Contents Financial Highlights Message from the Chairman Board of Directors Organization Chart Managements Social Development in the 2014 year Principles on the Good Corporate Governance Report Policy on Internal Control Report of the Audit Committee Independent Auditorâ&#x20AC;&#x2122;s Report Statements of Financial position and Notes Business Overview Status of Industry and Competition Policy on the Conflict of Interest and Connected Transactions with Subsidiaries Risk Factors Management Discussion and Analysis Report of the Board of Directorsâ&#x20AC;&#x2122; Accountability to the Financial Statements Shareholders and Management Major Shareholders as at December 30, 2014 General Information

02 03 04 09 10 12 15 35 38 39 41 114 124 132 143 149 162 163 165 166

Annual Report 2014

Financial Highlights Unit : Baht Million

Lists

2014

2013

2012

(Restated) Financial Data: 1. Income from Sales and Service 2. Total income 3. Net profit (loss) 4. Total assets 5. Total liabilities 6. Shareholderâ&#x20AC;&#x2122;s equity Financial Ratio: 1. Net profit to total income 2. Return on equity 3. Return on total assets 4. Net profit (loss) per share (Baht) 5. Dividend per share (Baht) 6. Book value per share (Baht) 7. Current ratio (time) 8. Debt: Equity ratio (time)

1,384.95 1,465.14 (157.82) 7,409.30 5,240.27 2,169.03

882.82 945.42 153.86 7,683.00 6,054.91 1,628.10

1,323.75 1,360.58 503.00 5,977.45 3,967.85 2,009.60

1,323.75 1,350.29 525.16 3,664.35 2,032.65 1,631.69

-10.77% -8.31% 1.20% (0.12) 1.68 2.45 2.41

16.27% 9.45% 2.00% 0.14 0.30 1.50 1.19 3.71

36.97% 25.03% 8.41% 0.64 0.09 2.54 1.63 1.97

38.89% 32.18% 14.33% 0.68 0.00 2.07 1.59 1.25

Remark : The Financial Statements of 2012 were restated because of the Company invested in subsidiary. The acquisition was thus considered to be a business combination under common control.

Annual Report 2014

Thai Factory Development Public Company Limited

Message from the Chairman

Dear Shareholders, It is well aware by now that 2014 was a year of political unrest for Thailand which inevitably led to various economic impacts. Although every party wished to see peace and reconciliation in the country, still, that wish wasn’t realized. As the political conflict was escalated, Thailand had to confront with yet another coup d’état believed to at least bring peace and détente to the situation. Although the political upheaval had tremendous economic and political effects to the country, Thai Factory Development Plc., tried to run its business as best as possible but was eventually forced to extend the term of some of its projects which further delayed its ability to make profits to the Company itself and shareholders. The Board of Directors commits to perform its duties in a way that will ultimately benefit the Company. TFD still has a few projects in the pipeline which in the following year should generate tremendous profits to the firm. This includes the TFD Industrial Estate Project, the Colonial Kao Tao Hua Hin, and the Mahadlek Residence Project. Once completed, these projects should be profitable to the firm. Meanwhile, TFD’s subsidiaries have expanded their business in a material sense. To name a few, VSSL Enterprise Co., Ltd. is looking for a new project to replace the 15 Sukhumvit Residence Project which is to be completed soon while Total Industrial Services Co Ltd are currently build three warehouse and ready-made factory projects aside from the fact that the firm has a plan to invest overseas such as in the UK to increase its revenues. On this occasion, Thai Factory Development Plc., wishes to express our appreciation to shareholders, customers, financial institutions and our business alliance who have given us solid support. Our appreciation is also extended to the Board of Directors, the management and all employees who have excellently performed your duties to ensure that we remain a property development company with stability and sustainability. Yours sincerely,

Dr. Sunthorn Sathirathai Chairman of the Board

Annual Report 2014

Board of Directors

Dr. Sunthorn Sathirathai Chairman/Independent Director

Mr. Prasong Vara-ratanakul

Audit Committee Chairman Corporate Governance Nomination and Remuneration Committee Chairman/Independent Director

Dr. Apichai Taechaubol

Director/Executive Chairman

Mr. Gumpol Tiyarat

Mr. Nan Kitjalaksana

Director/Executive Director/ Managing Director

Mr. Anukul Ubonnuch

Director

Independent Director/ Audit Committee Member Corporate Governance Nomination and Remuneration Committee

Mr. Sommart Sangkhasap

Independent Director/ Audit Committee Member Corporate Governance Nomination and Remuneration Committee

Mr. Bunyong Visatemongkolchai

Mr. Krittawat Taechaubol

Mr.Pisuth Viriyamattakul

*Mr. Bunyong Visatemongkolchai has been appointed in the position of Director on April 11, 2014

*Mr. Krittawat Taechaubol has been appointed in the position of Director on April 11, 2014

*Mr. Pisuth Viriyamattakul resigned in the position Director on January 22, 2014 and has been appointed as the 2014 Annual General Meeting of Shareholdersâ&#x20AC;&#x2122; resolution on April 30, 2014

Director

Annual Report 2014

Thai Factory Development Public Company Limited

Board of Directors Dr. Sunthorn Sathirathai Chairman, Independent Director Appointed on February 1, 2002

Education :

• Ph.D.(Hons), Economics Sorbonne, France 1956 • Master’s Degree in Economics Sorbonne, France 1954 • Bachelor’s Degree in Political Science Thammasart University

Working Experience :

Holding prominent positions at the Ministry of Finance from 1957 - 1988 • Deputy Permanent Secretary • Director General-Comptroller General’s Department • Director General-Treasury Department • Counsellor-Fiscal Policy Office • Head of Banking Supervision and Savings Division

• Chancellor at Eastern Asia University • Professor Emeritus in Law at Chulalongkorn University • Chairman of the Committee on Industrial Estate

Dr. Apichai Taechaubol

Director, Executive Chairman Appointed on February 20, 2012

Education :

• Honorary Degree of Master of Business Administration in Department of General Management Ramkhamhaeng University • Master’s Degree in Political Science Ramkhamhaeng University • Bachelor’s Degree in Business Administration North Central University • Bachelor’s Degree in Political Science Ramkhamhaeng University

Directors Program Training from IOD • DAP, Class 39/2005 • Chairman 2000 Program • CGI, Class 3/2015

Working Experience :

• Director and Executive Chairman J.C. Kevin Development Co., Ltd. • Director Executive Chairman VSSL Enterprise Co., Ltd. • Vice Minister for Office Of Prime Minister • Director to the DASTA • Director and Executive Chairman - SG Land Co., Ltd. • Deputy Advisor for the Internal Affairs Ministry • Consultant to the Thai/Chinese Chamber of Commerce • Chairman Princeton Park Suites Co., Ltd. • Vice Chairman Total Industrial Services Co., Ltd.

Annual Report 2014

06 Mr. Prasong Vara-ratanakul

Audit Committee Chairman, Corporate Governance, Nominating and Remuneration Committee Chairman, Independent Director Appointed on April 30, 1999

Education :

• Master of Public Administration Chulalongkorn University • Bachelor of Commerce Chulalongkorn University • Bachelor of Law Ramkamhaeng University

Directors Program Training from IOD • DCP, Class 72/2006 • DAP, Class 51/2006 • ACP, Class 12/2006 • AACP, Class 16/2014

Working Experience :

• Director and Audit Committee Chairman Krungthep Land PLC.

Mr. Nan Kitjalaksana

Audit Committee Member, Corporate Governance, Nominating and Remuneration Committee, Independent Director Appointed on February 1, 2002

Education :

• MBA, University of Michigan, U.S.A. • Higher Diploma in Accountancy, Thammasart University

Directors Program Training from IOD • DAP, Class 58/2006

Working Experience :

• Director of The Far East Law Office (Thailand) Co., Ltd.

Mr. Sommart Sangkhasap

Audit Committee Member, Corporate Governance, Nominating and Remuneration Committee, Independent Director Appointed on April 2, 2003

Education :

• Bachelor’s Degree in Law Thammasart University • Bachelor’s Degree in Accounting Thammasart University • Bachelor’s Degree in Commercial Thammasart University

Directors Program Training from IOD • DAP, Class 58/2006

Working Experience :

• Consultant in Taxation of Sapsataporn Co., Ltd.

Annual Report 2014

Thai Factory Development Public Company Limited

Mr. Gumpol Tiyarat Director, Executive Director, Managing Director Appointed on February 1, 2002

Education :

• Master’s Degree of Business Administration Kasetsart University • Bachelor’s Degree of Economics Thammasart University • Bachelor’s Degree of Accounting Dhurakijbundit University • Bachelor’s Degree of Law Chulalongkorn University

Directors Program Training from IOD • Role of the Chairman, Class 22/2009 • DCP Refresher, Class 2/2006 • DCP, Class 30/2003

Other Institute

• Business and Economic Analysis Program, Class 22/2009 Faculty of Economics, Chulalongkorn University

Working Experience :

• Tax Economist Officer of Revenue Department Ex-Police Sub-commission on Laws & Regulations Royal Thai Police • Executive Director Total Industrial Services Co., Ltd. • Executive Director SG Land Co., Ltd. • Executive Director VSSL Enterprise Co., Ltd. • Managing Director Princeton Park Suite Co., Ltd.

Mr. Anukul Ubonnuch Director Appointed on February 1, 2002

Education :

• Master’s Degree in Business Administration Kasetsart University • Barrister at Law Institute Legal Education Thai Bar Association • Bachelor’s Degree in Law Ramkhamhaeng University

Directors Program Training from IOD • DCP, Class 7/2001 • Director Diploma Examination • Chartered Director, Class 5/2009

Training from other Institute

• Graduate Diploma in Public Law and Management King Prajadhipok’s Institute • Certificate of Applied Psychology for National Security The Institute of Applied Psychology, National Defence Studies Institute

Working Experience :

• Director SG Land Co., Ltd. • Managing Director, Director Total Industrial Services Co., Ltd. • Managing Director, Director VSSL Enterprise Co., Ltd. • Managing Director (1995 - 2005) Credit Foncier Unico Housing Limited • Chief Legal Department (1992 - 1995)

Annual Report 2014

08 Mr. Bunyong Visatemongkolchai Director Appointed on April 11, 2014

Education :

• Master of Law Temple University, USA • Mini MBA Chulalongkorn University • Bachelor of Law Thammasart University

Training from other Institute

• Certificate in Administration Development, Institute of Administration Development ( Class of 48th ) • Certificate in Leadership Program, Capital Market Academy by The Stock Exchange of Thailand (Class of 5th)

Working Experience :

• Director Total Industrial Services Co., Ltd. • Chairman of the Executive Committee Asset Management Specialist Managing Director & Director Bangkok Commercial Asset Management (BAM) • Independent Director OSK Securities (Thailand) PCL. • Board of Directors Thai Asset Management Corporation (TAMC)

Mr. Krittawat Taechaubol Director Appointed on April 11, 2014

Education :

• Bachelor’s Degree in Management Sciences London School of Economics and Political Science (LSE) Houghton St., London WC2A 2AE

Directors Program Training from IOD • DCP, Class 196/2014

Working Experience :

• Marketing Analysis Manager J.C. Kevin Development Co., Ltd.

Mr. Pisuth Viriyamattakul Director Appointed on April 30, 2014

Education :

• Master of Business Administration Finance, California State University • Bachelor’s Degree International Business Management Assumption University (ABAC)

Directors Program Training from IOD • Role of the Chairman, Class 22/2009 • DCP Refresher, Class 2/2006

Working Experience :

• Managing Director Taparak Development Co., Ltd. CMT Network Sulutions Co., Ltd. • Deputy Managing Director Ratchada Office Building Co., Ltd.

Annual Report 2014

Thai Factory Development Public Company Limited

Organization Chart as of December 31, 2014

Board of Directors

Corporate Governance, Nomination and Remuneration Committee

Assistant Managing Director Industrial Business Development

Executive Chairman

Audit Committee

Managing Director

Internal Audit

Assistant Managing Director Business Development Residential and Office Building

Assistant Managing Director Administration Information Technology

Assistant Managing Director Finance

Remark : The Companyâ&#x20AC;&#x2122;s internal auditor has assigned to the Non-Juristic Body of Person, responsible an all function of work and the other related to the assignment from the Audit Committee.

Annual Report 2014

Managements

Dr. Apichai Taechaubol

Executive Chairman

Mr. Gumpol Tiyarat

Managing Director

Mrs. Siriporn Pinprayong

Assistant Managing Director/ Administration InformationTechnology/ Company Secretary

Mrs. Rachanee Siwawej

Assistant Managing Director Finance

Mrs. Vilai S. Ngow

Assistant Managing Director, Industrial Business Development

Annual Report 2014

Thai Factory Development Public Company Limited

Managements Dr. Apichai Taechaubol Executive Chairman Joined TFD in 2012

Education :

Mr. Gumpol Tiyarat Managing Director Joined TFD in 2002

Education :

Mrs. Rachanee Siwawej

Assistant Managing Director, Finance Joined TFD in 1981

Education :

• Bachelor’s Degree in Commerce Thammasart University

Mrs. Siriporn Pinprayong

Assistant Managing Director, Administration Information Technology, Company Secretary Joined TFD in 1994

Education :

• Master of Arts in English Naresuan University • Bachelor of Science in Business Administration (Finance) Roosevelt University, Chicago, U.S.A.

Mrs. Vilai S. Ngow

Assistant Managing Director, Business Development – Industrial Joined TFD in 1997

Education :

• Bachelor’s Degree in Computer Science West Coast University, U.S.A.

Annual Report 2014

Social Development in the 2014 year Thai Factory Development Public Company Limited (“TFD”) and associated companies realize the importance of social responsibility at locations where we have our operation especially with regard to environmental care and community relations. In 2014, we continued to organize not only activities that brought assistance and development in education as well as life quality enhancement to remote communities and our neighbors but also donations to charitable foundations. We underline the importance of staff and community participation when undertaking these activities. • Children’s Day 2014 In 2014, TFD together with Tambon Tha Sa-an Administration Organization and Tambon Nong Chok Administration Organization which are two local governments took school materials, sports equipment and consumables to schools located around the TFD Industrial Estate. The event involved participation of several stakeholders including government agencies and children living in communities adjacent to the industrial estate.

• Giving Books, Giving Future to 1,000 Schools TFD has become a partner of the “Giving Books, Giving Future to 1,000 Schools” Project initiated by Nanmee Books and the Thongkasem for Education Foundation to celebrate the 58th Birthday Anniversary of HRH Princess Maha Chakri Sirindhorn. The project gives a way a cabinet full of books and learning materials to underprivileged schools. In our case, the book cabinet went to Rak Chat Pracha Bamrung School in Nakhon Ratchasima School to stimulate reading habits of school children depriving an access to books.

Annual Report 2014

Thai Factory Development Public Company Limited

â&#x20AC;˘ Planting Tree, Reducing Air Pollution, Improving Life Being aware of the worsening situation of air pollution, TFD in collaboration with the Industrial Estate Authority of Thailand (IEAT) and other industries located in the TFD Industry Estate took the matter into our hands by planting trees in a green zone within the TFD Industrial Estate hopefully to add more shade and greens to communities within our vicinity.

â&#x20AC;˘ Used computers donated to Association of Persons with Physical Disability International (APDI) TFD donated used but functioning computers and accessories such as screen, CPUs, keyboard and printer to the Association of Persons with Physical Disability International (APDI) who would recycle them by selling them later of which the proceeds will be used to buy equipment required by the disabled nationwide.

Annual Report 2014

14 • Donations to the Border Patrol Police School TFD was joining hands with the “Compassion for Smile” group to organize the annual “Compassion for Smile” event which brings education support to remote areas in Thailand. In 2014, we took school materials and sports equipment as well as provided lunch to students at the Ban Thai Ngarm Border Patrol Police School located at Poo Chi Fa District, Chiangrai Province between December 5-7, 2014 with a purpose to reach out to kids in areas difficult to access in order enhance their life quality and learning opportunities.

• Industrial Estate Extending Happiness to Neighbors Together with the Industrial Estate Authority of Thailand (IEAT), other businesses in the TFD Industrial Estate, local governments and neighboring communities, TFD was organizing an event of happiness during the New Year’s festive season to reflect the Thai government’s desire to make people happy. The “Industrial Estate Extending Happiness to our Neighbors” event offered a chance for people to give alms to monks in the morning before joining entertaining activities organized by TFD staff, other business within the TFD Industrial Estate, public agencies and local governments and neighboring communities during the rest of the day. Children in the communities staged a show there while lunch was served and money stipends were also given to underprivileged students with outstanding school performance.

Annual Report 2014

Thai Factory Development Public Company Limited

Principles on the Good Corporate Governance Realizing that corporate governance helps strengthen trust and confidence among investors, financial institutions, business partners and other stakeholders in the business, the Board of Directors of Thai Factory Development Public Company Limited has adopted the principles of corporate governance (CG) as a guideline for directors, executives and employees to comply with. The Board of Directors has periodically updated the CG principles as well as disseminated this and other information through the Companyâ&#x20AC;&#x2122;s website at http://www.tfd-factory.com. The principles on good corporate governance can be divided to eleven important chapters are as follows: Chapter 1 Business philosophy Chapter 2 The Board of directors Chapter 3 Ethics of the Board of directors, the management and the employees Chapter 4 Reports on the finance, the management and the internal control Chapter 5 Risk management Chapter 6 Rights of the shareholders Chapter 7 Equitable treatment of shareholders Chapter 8 Role of the stakeholders Chapter 9 Disclosure of the information and transparency Chapter 10 Responsibility for the society and the environment Chapter 11 The anti-corruption

Chapter 1 Business philosophy The Company has the intention to be the best on the organization that does business on real estate development with good management, focusing on increasing the operation to be flexible with the capability in competition and can operate with optimization to the involved persons, including the stakeholders. Moreover, the Company is determined to be an organization with good ethics, transparency and accountability to increase the value to the business and acceptability by everyone involved. From the said intention the Company has prescribed the philosophy in the business for the Board of directors, the management and the employees to use as guidelines for the operations. It emphasizes the personnel to have good attitude with the learning behavior and development creatively and consciously on the overall society. The said philosophy consists of the following essence: 1. Main principles in the business operations and good corporate governance 1.1 Accountability is the responsibility on decision-making and self-action and can explain the decisions. 1.2 Responsibility is the responsibility toward the duty with adequate capability and effectiveness. 1.3 Equitable treatment is treating the stakeholders and all parties equally, justifiably and explicably. 1.4 Transparency is transparent operations that can be verified and the information disclosed to all involved parties. 1.5 Vision to create long-term value is having the vision to build added value to the business in the long run. 1.6 Ethics is maintaining the ethical value while doing the business.

Annual Report 2014

16 2. Corporate Values 2.1 To the shareholders - It shall do business with sustainable growth and profitability, considering the good return on investment. 2.2 To the customers - It shall build satisfaction to the customers by presenting the products and services with high quality at the international-standard level at the fair prices. 2.3 To the employees - It shall support the development on capability of working at the professional level continuously with confidence for the life quality of the employees to be equal to the leading companies. 2.4 To the community - It shall be responsible for and has participated in development of the environment with good quality life for the community. 2.5 To the trade partner - It shall build good relations for mutual interest. 3. Corporate culture 3.1 Attitude - Having the ownership feeling. - Focusing the business interest as priority. - It is customer-centered. - Focusing the organization to have continuous development. - Having the conscience on team spirit with the mutual goal that is clear. 3.2 Thinking method - Thinking in analytical method with the strategic system and in-line issue. 3.3 Working behavior - Having the clear framework and working plan. - The working method can be adjusted according to the situation. - Working in teamwork. - Recording and collecting information for analysis and building as knowledge. - Having the system to transfer the working method systematically. - Knowing how to manage the time.

Chapter 2 The Board of Directors 1. Criteria and procedure for nominating director and the high-level management 1.1 State of leadership and independence of the board of directors - The Board of directors under the leadership of the chairman shall have the state of leadership and can control the operations of the management efficiently and effectively to achieve the targets that are the heart of the business of the Company by building and increasing the investment value to the shareholders, the government sector, the people and the stakeholders. - The Board of directors should consist of independent directors with knowledge and capability, and should convene at least four times per month. The independent directors must access to the financial data and other business sufficiently to express opinions independently, keeping interest of those involved by attending the meeting regularly.

Annual Report 2014

Thai Factory Development Public Company Limited

- The Company requires that Chairman and Managing Director be elected from members of the Board of Directors and that they are two different persons where roles and responsibilities relating to policy, performance evaluation and management are separated from each other. Chairman of the Board shall have leadership skills. His major responsibilities are to ensure that the Board is independent from the management, to adopt meeting agendas based on the Boardâ&#x20AC;&#x2122;s responsibility and to effectively chair the meeting of the Board of Directors and Shareholders by encouraging all directors to participate at the meeting. 1.2 Elements of the Board of directors and the appointments - The Board of directors be comprised of: Executive director, Non-executive director, Independent Director - The Company aims to have the independent directors to be the most professional possible, but no less than 3 persons. - The directors should come from the authorities in various fields to integrate the necessary ability, consisted of the persons knowledgeable in real estate development at least 3 persons, at least one legal-knowledgeable person, and one person in accounting and finance. - Appointments of the directors should comply with the specific agenda, transparency and clarity by disclosed the number of years each director has been with the company in the annual report and the companyâ&#x20AC;&#x2122;s website. 1.3 Appointments of other committees - The Independent Committee: The Board of directors must appoint the independent committee as part of it; from the directors at least 3 persons with 1 person must have knowledge on accounting/finance. The audit committee must have the qualification on independence, according to the notice of the SET on the qualification and scope of operations of the audit committee to inspect/supervise the operations of the Company. It shall report on finance, internal control, selection of the auditor, and consideration on the interest, including reporting on governance of the business of the audit committee. At present, the Company has three members of the Audit Committee with acknowledge for reviewing the Company financial report as follows: 1. Mr. Prasong Vara-ratanakul Audit Committee Chairman 2. Mr. Nan Kitjalaksana Audit Committee Member 3. Mr. Sommart Sangkhasap Audit Committee Member - The Corporate Governance, Nomination and Remuneration Committee: The Board of Directors on 11 November 2010 appointed three independent directors as members of the Corporate Governance, Nomination and Remuneration Committee whose term of office is three years or until they are no longer the Companyâ&#x20AC;&#x2122;s directors. The three are fully qualified according to the criteria of the Stock Exchange of Thailand (SET) and the Securities and Exchange Commission (SEC) Re: Qualifications of independent directors. They are: 1. Mr. Prasong Vara-ratanakul Corporate Governance, Nomination and Remuneration Chairman 2. Mr. Nan Kitjalaksana Corporate Governance, Nomination and Remuneration Committee 3. Mr. Sommart Sangkhasap Corporate Governance, Nomination and Remuneration Committee

Annual Report 2014

18 The Corporate Governance, Nomination and Remuneration Committee should meets at least twice during the year for consideration of any matters to achieve their responsibilities assigned by the Board. In addition, the Board of directors clearly state a policy that independent directors who have served on the Board beyond nine years from the date of their first appointment should be subject to particularly rigorous review of their continued independence. 2. Characteristics and qualifications of the Board of directors - Having the qualification and disqualification meeting the Public Company Act. - The Board of Directors will thoroughly review performance of directors sitting in the board of various companies. In other words, each director should not hold directorship in more than five listed companies and non-listed subsidiaries. - The independent directors must have the qualifications concerning independency, according to the notices of the Stock Exchange of Thailand (SET) and the Securities and Exchange Commission (SEC) Re: Qualification and scope of work of the audit committee, and can oversee the interests of all the shareholders equally, and no conflict of interest between the Company and the management, the major shareholders of other companies, which the management / major shareholders in the same group. Moreover, it can attend the Board meetings and express opinions independently. - According to the rule and regulation of the Stock Exchange of Thailand (SET) and the Securities and Exchange Commission (SEC) Re: Qualifications of an independent director, determine the structure of Listed Companyâ&#x20AC;&#x2122;s Board of Directors that shall be at least one-third of the Board membership is made up of independent directors and the sub directors should be an independent director. The Company is able to determine the qualifications of an independent director over the standard of SET and SEC. - The independent directors must have the qualifications concerning independency from major shareholders, executives, and related person or director not being as executive of the Company, subsidiary, and associated companies. Those qualifications are comply with the rules and regulations regarding clause 16: qualifications of an independent director of Notification of the Capital Market Supervisory Board No. TorChor. 28/2008 Re: Application for and Approval of Offer for Sale of Newly Issued Shares as follows. Qualifications of TFDâ&#x20AC;&#x2122;s independent director 1. Holds shares not exceeding 1% of the total shares with voting right of the applicant, its parent company, subsidiaries, associates, major shareholders, and controlling parties of the applicant, provided that the shares held by the related parties of such independent director shall be included. 2. Is not or has never been an executive director, employee, staff, advisor who receives salary, nor controlling parties of the applicant, its parent company, subsidiaries, associates, same-level subsidiaries, major shareholders, or controlling parties of the applicant unless the foregoing status ended at least 2 years prior to the date of submitting the application to the Securities and Exchange Commission (SEC), provided that such prohibition shall not include the case that such independent director has ever been official or advisor of the government sector that is the major shareholder or controlling party of the applicant. 3. Is not the person who has relationship by means of descent or legal registration under the status of father, mother, spouse, brothers and sisters, and children. The prohibitive persons also include spouses of daughters and sons of management, major shareholders, controlling party or the person who is in the process of nomination to be the management or controlling party of the applicant or its subsidiary.

Annual Report 2014

Thai Factory Development Public Company Limited

4. Have no or never had business relationship with the applicant, its parent company, subsidiaries, associates, major shareholders, or controlling parties of the applicant in respect of holding the power which may cause the obstacle of the independent decision, including not being or never been the significant shareholder, or controlling parties of any person having business relationship with the applicant, its parent company, subsidiaries, associates, major shareholders, or controlling parties of the applicant unless the foregoing status ended at least 2 years prior to the date of submitting the application to the SEC. The business relationship mentioned under the first paragraph shall include business transaction in ordinary business manner of rent, or lease the immovable property, transaction related to assets or services, or the financial support regardless of being lent or borrowed, guaranteed, secured, by assets, debt, and any otherwise similar performance which causes liability or obligation to the applicant or counter party, have provided that such liability is equal to or exceed 3% of the net tangible assets of the applicant or equal or above 20 million baht, whichever is lower. In this regard, the calculation of such liability shall be in accordance with the calculation method of the value of connected transaction under the Notification of Capital Market Supervisory Board governing the conditions of connected transaction mutatis mutandis. The liabilities incurred during a period of 1 year prior to the date of having business relationship with the above party shall be included on calculation of such liabilities. 5. Is not or has never been the auditor of the applicant, its parent company, subsidiaries, associates, major shareholders, or controlling parties of applicant, and is not the significant shareholder, controlling parties, or partner of the auditing firm which employs such auditor of the applicant, its parent company, subsidiaries, associates, major shareholders, or controlling parties of the applicant unless the foregoing status ended at least 2 years prior to the date of submitting the application to the SEC. 6. Is not or has never been the professional service provider, including but not limited to legal service or financial advisor with received service fee more than 2 million baht per year from the applicant, its parent company, subsidiaries, associates, major shareholders, or controlling parties, and is not the significant shareholder, controlling parties, or partner of the above mentioned service firms unless the foregoing status ended at least 2 years prior to the date of submitting the application to the SEC. 7. Is not the director who is nominated to be the representative of directors of the applicant, major shareholders, or any other shareholder related to the major shareholders. 8. Do not operate the same and competitive business with the business of the applicant, or its subsidiaries, or is not a significant partner of the partnership, or is not an executive director, employee, staff, advisor who receives salary, nor holds shares for more than 1% of the total shares with voting right of any other company which operates same and competitive business with the business of the applicant, or its subsidiaries. 9. Is not any otherwise which is unable to have the independent opinion regarding the business operation of the applicant Such independent director may be assigned by the Board of directors to make decision in respect of collective decision on business operation of the applicant, its parent company, subsidiaries, associates, same-level subsidiaries, major shareholders, or controlling parties of applicant.

Annual Report 2014

20 3. Main duties and responsibilities of the Board of directors and sub-Committees 3.1 Scopes of work of the Board of Directors 1. To review and approve actions as required by the laws 2. To regularly review managing director’s performance; to set managing director’s remunerations 3. To determine the business’s vision and be responsible for the business’s operation results and performances of the management by promoting attentiveness and prudence 4. To review and approve major strategies and policies, objectives, financial goals, work plans and to regularly monitor the management for their compliance 5. To set up a reliable accounting system, financial reporting and auditing as well as a process that evaluates the soundness of an internal control system and an internal auditing system to ensure their efficiency and the effectiveness of the Company’s risk management, financial reporting and monitoring practices, at least annually as well as disclose the review results in the annual report. 6. To supervise and resolve problems of conflict of interest among stakeholders 7. To oversee the Board of Director’s practices to be in line with corporate governance and ethical work practices 8. To be authorized to approve investment items and expenses in projects exceeding Baht 500 million in value which however shall be aligned with relevant regulations of the SEC, the Capital Market Supervisory Board and the SET. The Executive Board of Directors shall be empowered to approve investment items and expenses in projects for a value not exceeding Baht 500 million. Chief Executive Officer (CEO) will have the authority to do so for projects of which the value does not exceed Baht 300 million; while Managing Director is authorized to approve investment items and expenses not exceeding Baht 100 million in value. 3.2 Major responsibilities of the Sub-Committees The Board of Directors has set up two committees; namely, the Audit Committee and the Corporate Governance, Nomination and Remuneration Committee, whose responsibilities are as follows. 3.2.1 Scopes of work of the Audit Committee 1. To review the Company’s financial statements to ensure that it reflects the Company’s actual financial status. 2. To review that the Company has put in place an appropriate and effective internal control and internal audit; to approve an appointment, transfer, termination and performance evaluation of head of the Internal Audit Department and to review the Internal Audit Department’s independence in its performance and reporting tasks as well as its line of command. 3. To review the Company’s compliance with the laws on securities and exchange, the SET’s requirements or other laws relating to the Company’s business. 4. To review, select, nominate, appoint and propose the auditor’s fee and to review the auditor’s independence in case the Company’s auditor provides other non-audit services which could lead to its lack of independence; to organize a meeting with the auditor without the presence of the management at least once a year in order to seek opinions in various matters from the auditor. 5. To review compliance and information disclosure in the case of connected transactions or any transaction with a potential conflict of interest for the purpose of accuracy and comprehensiveness.

Annual Report 2014

Thai Factory Development Public Company Limited

6. To prepare the Audit Committee’s annual corporate governance report to be signed by Chairman of the Audit Committee. This report will be published in the Annual Report and sent to every shareholder. The report will feature the number of the Audit Committee’s meetings being held during the year, meeting attendance of each of the Committee’s members and their opinions in the following issues: - Accuracy, comprehensiveness and reliability of the Company’s financial statements - Adequacy of the Company’s internal control - Legal compliance with the laws on securities and exchange, the SET’s requirements or other legislations relating to the Company’s business - The auditor’s suitability - Transactions with a potential conflict of interest - Overall opinion or observation that the Audit Committee has received from performing its duty based on the Charter - Other information that shareholders and investors should learn based on the roles and responsibilities entrusted by the Board 7. To perform other duties as designated by the Board upon the Audit Committee’s approval. 3.2.2 Scopes of work of the Corporate Governance, Nomination and Remuneration Committee The Corporate Governance, Nomination and Remuneration Committee has a duty to recommend, supervise and review corporate governance practices of the Company as well as nominate those qualified as the Company’s directors to replace directors resigning on rotation or in other cases. The Committee also reviews an evaluation system of performance of the Board and other committees. It is responsible for a succession plan of the Company’s managing director, which will then be reported to the Board for approval or for proposing to the Shareholders’ Meeting, as the case may be. The Committee also studies changes and trends of director’s remunerations and recommend it as a policy to keep quality people with the Company while acting as an incentive to help expanding the Company. Its jobs are as follows. 1. To review corporate governance policies and practices and business ethics to see if they are sound and adequate; to improve and update such policies 2. To monitor the compliance of a corporate governance policy and business ethics by the Board, the management and staff according to the Company’s practices and policies 3. To promote compliance with corporate governance policies and practices and business ethics for continued effect and to ensure that it fits the Company’s business 4. To recommend the Company, the Board, the management and workgroups on corporate governance 5. To determine how to nominate director or managing director systematically and transparently 6. To nominate those appropriate as a director or a managing director in case of vacancy for further recommendation to the Board or the Shareholders’ Meeting, as the case may be. 7. To recruit future directors to replace those whose term is expired for further recommendation to the Board or the Shareholders’ Meeting 8. To nominate director qualified as a member of the Committee for recommendation to the Board in case of vacancy 9. To recommend how to evaluate performances of directors, the Board and the Committee and to follow up with the evaluation

Annual Report 2014

10. To review and propose amendments to the scopes of work and responsibilities of Corporate Governance, Nomination and Remuneration Committee and to determine its remunerations that suit each situation 11. To recommend remunerations of and how to pay remunerations or other benefits to the Board, the Committees and managing director with fair and reasonable criteria and to propose it to the Board for consideration 12. To perform other jobs as entrusted by the Board.

4. Qualifications and responsibilities of Company Secretary The Board of Directors shall appoint a Company Secretary to oversee activities of the Board and to ensure that both the Board and the Company comply with relevant laws, rules and regulations. Company Secretary is to oversee the meeting of the Board and Shareholders as well. Qualifications of Company Secretary - Understand the Company’s business and related roles and responsibilities of Company Secretary’s work including having fundamental knowledge in principles of laws and regulations of supervising agencies, the laws on public company and the laws on securities and exchange. Company Secretary is to seek knowledge from experts or legal advisors to strengthen his/her understanding. - Being knowledgeable; understand and support the Company’s operation to achieve the purposes under the principle of corporate governance and best practices on CG - Refrain from seeking personal interest from the Company’s business opportunities; able to keep the Company’s secrets; having integrity and taking into consideration all stakeholders; refrain from action that could defame the Company’s reputation and harm its image. - Have excellent interpersonal skills; able to coordinate with both internal departments and external agencies. Roles and Responsibilities of Company Secretary - Give basic advice to Directors in respect of laws, orders and regulations of the Company of which the Borad of Directors needs to know, as well as to ensure proper and consistent compliance. Report any significant change in matter of laws to directors. - Organize the shareholders’ meeting and Board meeting in accordance with the laws, articles of association and proper practice. - Prepare and keep documents of the Board of Directors and shareholders; namely registration of directors, invitation letter to attend the meeting of the Board and Shareholders, minutes of the meeting of the Board and Shareholders, annual report and quarterly financial statements - Keep the reports of interests filed reported by directors or executives and make submission as required by laws. - Have information and IT reports under his/her responsibility disclosed to supervising agencies in compliance with the laws and the Company’s rules and regulations on information disclosure. - Contact and communicate with general shareholders to keep them informed of various shareholders’ rights and Company’s news. - Do any other actions as entrusted

Annual Report 2014

Thai Factory Development Public Company Limited

The Company has appointed Mrs. Siriporn Pinprayong, who has proper qualifications as the Company Secretary on 14 November, 2007. Name Mrs. Siriporn Pinprayong Title Assistant Managing Director, Administration Information Technology, Company Secretary Education - Master of Arts in English Naresuan University - Bachelor of Science in Business Administration (Financce) Roosevelt University, Chicago, U.S.A. IOD Training course - Effective Minute Taking 8/2007 - Company Secretary Program 22/2007 - Role of The Compensation Committee 1/2006 - Role of the Chairman Program 34/2014 - Director Accreditation Program SEC/2014 - Advanced Audit Committee Program 16/2014 5. Holding the Board meetings and the receipts of documents and data - Have the office of the managing director to be the secretary of the Company to hold board meetings, shareholdersâ&#x20AC;&#x2122; meetings, and advice on the various laws that the directors should know. - The Board set its meeting schedule and agenda in advance and notify each director of the schedule so that each member of the Board can manage time to attend meetings. - The Board of directors should dedicate and pay attention to the Company fully, and are ready to attend the meetings regularly at least once every three months, and as necessary. If there is a special agenda, it requires at least one half of the total directors to attend to achieve the quorum. Absence of the Board meetings more than three consecutive times without a reasonable cause shall be regarded as not wanting to be a director anymore. If the meetings are not monthly, the Board should receive, for the month of not meeting, a monthly report on the companyâ&#x20AC;&#x2122;s performance so that it can monitor management performance continuously and promptly. - No less than two-thirds of all directors shall be present at the meeting of the Board of Directors when a resolution is adopted, - The chairman should encourage all directors to attend at least 75% of all the Board meetings held during the year. - The chairman of the Board should give approval on the meeting agenda by consulting with the managing director; however, the managing director should consider a request by some directors to put other important matters in the agenda in the next meeting. - The chairman of the Board should give confidence that the Board of directors to allocate the time sufficiently for the management to present documents and information for discussion and adequacy for the directors to discuss the important issues. - The chairman of the board should have the clear measure for the directors to receive the information involved in advance with sufficient time to study and decide correctly on the matters at each board meeting. Meeting documents will be sent to each director at least five business days in advance of the meeting.

Annual Report 2014

24 - The Board of directors can access to additional information,under prearranged by seek documents, data, consulting words, and various services concerning the operations from the high-level management or company secretary and may seek independent opinions from outside consultants as necessary to supplement each meeting, at the company’s expense. - It should prepare the minutes of the Board meetings for clarity and reference. The Board of directors’ Meeting attendance in 2014 Time (s) / Total meeting

Name

1. Dr. Suthorn Sathirathai 2. Dr. Apichai Taechaubol 3. Mr. Prasong Vara-ratanakul 4. Mr. Nan Kitjalaksana 5. Mr. Sommart Sangkhasap 6. Mr. Gumpol Tiyarat 7. Mr. Anukul Ubonnuch 8. Mr. Bunyong Visatemongkolchai 1 9. Mr. Krittawat Taechaubol 1 10. Mr. Pisuth Viriyamettakul 2

Board of Directors

21/21 20/21 21/21 21/21 20/21 21/21 21/21 11/12 8/12 12/12

Executive Committee

7/7

7/7 7/7

Audit Committee

Corporate Governance, Nomination and Remuneration Committee

16/16 16/16 16/16

7/7 7/7 7/7

Remark : 1. Mr. Bunyong Visatemongkolchai and Mr. Krittawat Taechaubol has been appointed in the position of Director on April 11, 2014 2. Mr. Pisuth Viriyamettakul resigned in the position of Director on January 22, 2014 and has been appointed as the 2014 Annual General Meeting of Shareholders’ resolution on April 30, 2014

Company Secretary: Mrs.Siriporn Pinprayong (Assistant Managing Director, Administration Information Technology) 6. Evaluation of the Board of directors Criteria for the evaluation of the Board of directors - The Board of directors should prepare the self-evaluation form for use as the framework for examination of the operation of the directors constantly. - The Board of directors should set its working standards with criteria and evaluation on its operations to compare with the criteria periodically. - The managing director should participate in explaining the expectations from the board of directors. - The Board should appoint an external consultant to facilitate a board assessment at least once every three years, and assessment results should be disclosed in the annual report. The process and the evaluation of the borad of directors - To comply with the principles of corporate governance, the Board and sub-Committees have come up with an evaluation form where they will be subject to it once a year. The Board and sub-Committees conducted a self-evaluation on a group basis by using an evaluation form of the SET and the Institute of Directors as a framework to check and improve the performances of its directors. The evaluation form of the entire Board consists of four topics as follows

Annual Report 2014

Thai Factory Development Public Company Limited

1. Structure of the Board 2. Strategy and directions of the Company 3. Monitoring and evaluation of the management 4. Responsibilities of the Board - To evaluate performances of the Board of Directors, self-evaluation surveys of each individual director will be gathered. Results of the evaluations in “appropriate” and “to be improved” columns will be added up and divided by the total number of directors conducting the self evaluation to come up with a percentage of directors who consider relevant practices appropriate or otherwise. 7. Board and management training - The Board of Directors encourages and facilitates directors, executives, Company Secretary and related parties to attend coursework organized by the Thai Institute of Directors (Thai IOD), the Stock Exchange of Thailand (SET), or other independent agencies to improve their performances. Whenever a new director is appointed, the management will provide documents and information proven beneficial to his/her performance including organizing a session to introduce the Company’s nature of business and direction to the new director. - The Board requires Managing Director to regularly report a succession plan as well as to appoint a successor to replace executives at various levels in case they cannot perform their duty. All the information has already been stated in the Company’s HR policy and HR development plan annually.

Chapter 3 Ethics of the Board of directors, the management and the employees So as to show the intention of doing the business by the Company transparently with merits and responsibility toward the stakeholders, considering the society and the environment, so it should set the Company ethics for the Board of directors, the management, and all the employees to use as guidelines in practice in parallel with the Company rules/ regulations as follows: 3.1 Ethics of the Board of directors and the management For compliance with the above principle the Board of directors and the management to have duty on the ethics as follows: 3.1.1 The Board of directors and the management shall perform the duty according to the laws, objectives and regulations of the Company and the resolutions of the shareholder’s meeting. 3.1.2 The Board of directors and the management must manage for the benefit of the Company, the shareholders, and the employees at present and future, also to maintain the image of the Company. 3.1.3 The Board of directors and the management must manage the job with integrity for the benefit of the Company, the shareholders and the employees at present and future. 3.1.4 The Board of directors must have the important role in control and decision-making on the policy, including appointing the management to manage daily affairs with each side has the responsibility on the duty toward each other to comply with the objectives and rules of the Company. The Board of directors should give power to the management to do the daily jobs fully without interfering on the operations and no justifiable cause. 3.1.5 The Board of directors and the management must not have conflict of interest or competition with the Company directly or indirectly.

Annual Report 2014

26 3.1.6 The Board of directors and the management must shall manage the operations avoiding conflict of interest with the Company, so the management is effective and beneficial to the Company, including - Not seeking personal interest from the directorship. - Not abuse the confidential information of the Company. - Not a director in a competing company. - Not having interest in signing a contract for the Company. 3.1.7 The Board of directors and the management must manage the job carefully, and not bind the Company that may have conflict with their duty later. 3.1.8 The Board of directors and the management must not seek personal interest from working directly or indirectly. 3.1.9 The Board of directors and the management must work on their duty in full capacity for the maximum interest to the Company. 3.1.10 The Board of directors and the management must not be an important operator or shareholder or having a family member as a director or shareholder in the business or any business in the same condition and being competition or doing business with the Company regardless of for self-interest or for others. 3.1.11 The Board of directors and the management team must not do any kind of management that would conflict with the Company interest or grant advantage to the other person or company for self or other profit. 3.1.12 The Board of directors and the management must determine to protect and eliminate corruption of all kinds based on speediness, clarity and definiteness. 3.1.13 The Board of directors and the management must be independence in decision-making and performance, including creating satisfaction from the correctness of the decision-making by the board of directors and the management. 3.2 Implementations by the employees The Companyâ&#x20AC;&#x2122;s business is the real estate development both in the industrial and residential sectors. The Company optimize to the shareholders that it is necessary to maintain professionalism, flexibility and independence to maintain those characteristics further. So the Company has guidelines for the employees as follows: 3.2.1 S/he does the duty with responsibility, integrity, determination, dedication and observation of the rules and policies with interest of the Company as priority. 3.2.2 S/he strictly maintains the secrets of the customers, trade partners, and caring not to allow the secret of the Company to the outsiders that may cause damage to the Company. 3.2.3 S/he respects in personal rights of other employees, avoiding bringing data or information of other employees concerning the operations and personal matters to disclose or comment in the form to cause damage to employees or overall image of the Company. 3.2.4 S/he does not defame or do anything to lead into the internal division which damage the Company or persons involved. 3.2.5 S/he maintains and creates unity and team spirit among the employees, and helps to support each other for benefit to the Company on the overall. 3.2.6 S/he treats the colleagues with politeness, spirit and good human relations, not concealing necessary data on the operation of the colleagues, and be good cooperate with other people, including giving honor to others, not claiming the work products of others as his own.

Annual Report 2014

Thai Factory Development Public Company Limited

3.2.7 S/he shall behave and develop himself/herself for benefit themselves and the company by always seeking knowledge and experience to build working ability, adhere to the merits, abstaining from all the vices, not to behave that may cause bad reputation to self and the Company. 3.2.8 S/he shall notify the superior or the audit committee if finding the Company or its management or employee to do something in bad faith or corruption. 3.2.9 S/he shall pay attention and help in anything to conserve the environment and atmosphere on working, including development of the organization to excellence. 3.2.10 S/he should avoid to give / receive things, giving / accepting a party or any benefits from the trade partners or stakeholders of the Company, except for the benefit in doing business in the righteous way of the Company, or in festival or tradition at the suitable value. The recipient shall consider if the gift received in the monetary form or things with high value shall notify the superior or return it.

Chapter 4 Reports on the finance, the management and the internal control - The committee should report on the status evaluation and trend of the Company, summarizing in the terms that is easy to understand in the annual report of the Company. - The Board of directors must prepare the balance sheet, profit and loss statement and report of the auditor together with the annual report of the Board of directors presented to the shareholders in the annual general meeting (AGM) for approval. - It shall prepare the administrative report on analysis in various forms as the Board of directors required, other than the financial and audit reports. The audit committee and the auditor - The Board of directors should provide the system that is official and transparent in maintaining relation with the internal and external auditors with the audit committee as the coordinator. - The external auditor should confirm independency of himself each year to the audit committee, and the various methods used in the auditing office for confidence of independency of the external auditor. - The auditor is entitled to verify the reports or other financial reports that the Board of directors issues together with the financial report that it has audited, and can report the abnormality in the report that is inconsistent with the audited financial statement. - The audit committee has the duty to be responsible for the review and the financial report. - The remuneration on the audit and other fees paid to the auditor should be disclosed separately in the financial statement for transparency and independency of the auditor. Internal Control Realizing the significance of internal control and regular supervision, the Board has designated the Audit Committee to review and assess the internal control process. The Internal Audit Department which is independent from the management shall directly report the Audit Committee to ensure efficient and effective performance. The efficiency of the internal control system is regularly assessed. The audit should cover everything including the financial control, operations, governance and compliance control, risk management, and priority to the unusual items.

Annual Report 2014

28 Chapter 5 Risk management The Company assesses both internal and external risks that could affect its operation. It analyzes and ranks major risks based on impacts and potentials of the risks to strike each business process as a means to adopt a risk management plan. In addition, risk factors and circumstances are closely monitored. Set up teamwork or clearly authorize to the unit within the Company for verifying and governing of the risk management such as financial risks, operation risks, business risks or event risk, etc. and Preparing the risk management report to be presented to the Board of directors. In addition, the Board of Directors also discloses risk management practices and risk factors in the Company’s Annual Report and every time the level of risk exposure changes. This includes giving priority to advanced warning signals and unusual transactions. The Board of Directors also reviews the adequacy of the risk management process and risk management efficiency at least once a year or as deemed necessary.

Chapter 6 Rights of the shareholders The Company recognize shareholders rights and avoid any action that violates those rights as well as encourage shareholders to exercise their right for controlling the Company by appointing the Board of directors to act as their representatives. Shareholders are eligible to make decisions on any significant corporate changes. - The Board of directors publicly disclose policies to encourage all shareholders, especially institutional ones, to attend the company’s shareholders meeting. - The Company provides shareholders, in advance of meetings, with the date, time, venue, and all agenda items with the rationale or explanation for each agenda item or resolution in the notice of the annual general meeting or extraordinary general meeting or circulars and/or the accompanying statement. - The chairman of the meeting should allocate the time appropriately and promote expression of opinions and inquiries at the meeting, including allow shareholders to send their questions to the company prior to the meeting date. Investors can be clearly informed in advance of the determined criteria for accepting advance questions and the process for submitting them on company’s website. - The Board of directors encourage shareholders are specify their votes by allow shareholders to appoint an independent director as their proxy. - The Board of directors encourage the company to use secure, fast, precise, and accurate technology in the shareholders meeting, including in recording attendee registration, printing ballots and processing voting results. - Each director, especially the chairman of the Board/chairman of the committees should attend the meetings of the shareholders to answer the questions by the meeting attendants. - The shareholders should have the right to vote for each item proposed, and the Board of directors should not bundle many unrelated businesses for approval in one resolution.In addition, there are no bundling of several items into the same vote; for example, election of directors. - The Company appoints an independent party of scrutineers/inspectors to count and/or validate votes the annual general meeting or extraordinary meeting. This scrutineer shall be disclosed at the meeting and recorded in the minutes. - For the sake of transparency, the Board encourage the use of voting cards for important agenda items such as related party transactions or disposal of significant assets. - The Board make publicy available on company’s website by the next working day the result of voting during the annual general meeting or extraordinary general meetings for all resolutions.

Annual Report 2014

Thai Factory Development Public Company Limited

Chapter 7 Equitable treatment of shareholders The Board of directors provides convenience at the shareholders meetings with equal treatment for all, nothing to limit the information of the Company, and attend the meetings of the shareholders. - The Company releases its annual general meeting notice, with detailed agenda and explanatory circulars, at least 30 (thirty) days before the date of the meeting. Morover, the company’s notice of shareholders meeting will be fully translated into English and published at the same time as the local language version. The Company will deliver an invitation letter to attend the meeting to shareholders at least seven days before the meeting date or as required by the Office of the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET). - The Company informs shareholders of meeting procedures and voting criteria, including the voting rights attached to each class of shares. If a shareholders in a management position wishes to add any agenda item, he/she should notify other shareholders in advance, especially if it is an issue that will require shareholders to spend a good deal of time to study before deciding. - The Board, in advance of the meeting date, have pre-determined criteria on allowing minority shareholders to propose any agenda item and on screening those propose by them. The Board establish procedures for the nomination of candidates by minority shareholders. One alternative is to nominate via the company’s nomination committee three to four months prior to the meeting date. Supporting information, candidates’ qualifications and their consent, should be provided by the minority shareholders nominating the candidates. - The process used in election of directors allow shareholders to vote on individual nominees. - The Board has adopted a policy that requires any director having an interest in any agenda to refrain from attending the meeting in that agenda. Directors are to report their interests at least before the agenda starts which shall be recorded in the minutes of the Board of Directors’ Meeting. - The Company has a policy to continue executing connected transactions carried out at the moment in the future subject to the corporate governance principle where conditions of the transactions will be aligned with what is done during ordinary course of business and at a market price which can be comparable to a price offered to the third party. In addition, the Audit Committee will take part in the process to review the soundness of the connected transaction’s price and its rationality. - The Board of Directors will comply with the laws on securities and exchange as well as regulations, announcements, orders or requirements of the Office of the Securities and Exchange (SEC), the Capital Market Supervisory Board and the Stock Exchange of Thailand (SET) when executing a connected transaction possible taking place in the future. The Board will also comply with requirements to disclose information of connected transactions as well as the acquisition or disposal of major assets of the Company and subsidiaries. It is anticipated that a volume of the Company’s connected transactions to be executed in the future will remain relatively the same as what’s happening now. However, this volume is subject to change based on what’s necessary and proper to the business of the Group. - If the Company or subsidiaries execute a connected transaction with a person with potential conflict of interest, a stakeholder, or a person who could have a conflict of interest in the future, the Company will have the Audit Committee express its opinion regarding the transaction’s necessity and soundness. If the Audit Committee doesn’t have any expertise to review such connected transaction, an independent expert or an auditor of the Company will provide an opinion instead for the Board or shareholders, as the case may be, to use in their decision-making process. The Company will disclose connected transactions in notes to the financial statements audited or reviewed by the Company’s auditor.

Annual Report 2014

30 - There are written procedure concerning the use and protection of inside information. The Board establish these procedures and communicate them to everyone in the company. Every director and executives regularly submit to the Board a report on their ownership of the companyâ&#x20AC;&#x2122;s shares and this information will be disclosed in the firmâ&#x20AC;&#x2122;s annual report.

Chapter 8 Role of the stakeholders - The Board of directors should be aware and gives confidence that the stakeholder of the Company shall be taken care fully. - The Board of directors should report the non-financial data that shows the stakeholder are taken care and considered very well in making a decision for the Company. - The Board of directors should specify fully who are the stakeholders, and rank their priority for consideration without any mistake or failure in business operation at the end. The role of the stakeholders of the Company is as follows 8.1 Responsibility for the shareholders The Company is determined to be the good representative of the shareholders to do business to build highest satisfaction for the shareholders, considering the value growth of the Company in the long run and good return on investment continuously at the suitable level. It shall do transparently; build confidence of the accounting system to comply with the said principle, so it embraces these guidelines: 8.1.1 The Companyâ&#x20AC;&#x2122;s growth of value in the long run - It performs the duty with integrity and fairness to the major and ultimate shareholders for overall maximization. - It manages by using the knowledge, ability and skill fully, including carefulness and prudence in the decision to do in any cases. - It does not do anything to cause conflict of interest to the Company. 8.1.2 Disclosure of information - It reports the status and the future trend of the Company to the shareholders equally, regularly and fully as it actually happens. - It shall not seek self-interest and from the involved persons, using any value of the Company not disclosed to the public. - It does not disclose confidential data to the outsiders, which may cause adverse effects to the Company. 8.2 Relationship with the customers The Company is determined to create satisfaction and confidence with the customers to receive the good products and service with the quality at the suitable price, including maintaining good and sustainable relations, so it has set the guidelines as follows: 8.2.1 Produces quality goods and service with determination to develop the standard of the goods to have higher quality continuously, and reveal the information on the goods and service correctly and completely, no distortion of facts and keeps up with the event. 8.2.2 Gives warranty on the goods and service under the suitable conditions. 8.2.3 Produces the system for the customers can complain on the goods, service and operations the best for the goods to receive quick response.

Annual Report 2014

Thai Factory Development Public Company Limited

8.2.4 Do not make excessive profit compared with the quality of the goods or service in the same type or kind, and do not specify the trade conditions that are unfair to the customers. 8.2.5 Complies with the terms and conditions with the customers strictly, if it cannot do it, it must notify the customers in advance to consider jointly finding guidelines on correction. 8.2.6 Keeps the secret of the customers seriously and constantly, including not using for self-interest and for the involved persons illegally. 8.3 Relations with its trade partners, competitors and creditors The Company shall consider the equality and integrity in the business operations and the interests jointly with its trade partners, as they shall comply with the laws and rules strictly and good ethics in the business operations. While the business that is in competition, the Company shall adhere to the rules on good competition and guidelines and fairness in borrowing from the creditor and repayment. So as to comply with the said principle the Company has specified practical guidelines as follows: 8.3.1 Relations with the trade partners - It shall not demand or receive or pay for the benefit of any in bad faith from its trade partners. - It shall comply with the existing conditions strictly with partners. - In case of cannot comply with the conditions, it shall notify the trade partners in advance to jointly find the guidelines on solving the problems with justification. 8.3.2 Relations with the trade competitors - It shall comply with the rules on good competition. - It shall not try to destroy the reputation of the competitor by slandering and baseless allegation. 8.3.3 Relations with the trade creditors - It shall maintain and comply with the conditions with the creditors strictly on repayment and care of securities, guarantees and other conditions, including not using the funds received from loans to be contrary to the objective in the agreement made with the lenders. - Report the financial status to the creditors with honesty. - Report to the creditors in advance if it cannot comply with the obligations in the contract, and try to find guidelines on a joint solution. 8.4 Responsibility for the employees The Company shall regard the employees are a factor to its success, so it determines to develop, build culture and good atmosphere, including promoting teamwork for confidence of the employees. So they can do sustainable work with the Company, so it specifies the guidelines as follows: 8.4.1 The employees receive fair remuneration in the form of salaries and/or annual compensation, including the various fringe benefits. 8.4.2 Cares for the working condition with safety for the life and property of the employees. 8.4.3 Appoints and transfers, including gives rewards and makes disciplinary action with equality, honesty and justification based on the knowledge, ability and suitability, including making or performing for the employees. 8.4.4 Gives priority on development and transfer of knowledge and ability of the employees by giving opportunity to the employees widely and regularly. 8.4.5 Listens to the ideas and propositions from the employees at all levels equally and equitably. 8.4.6 Complies with the laws and regulations concerning the employees strictly.

Annual Report 2014

32 8.4.7 Manages by avoiding anything unfair, which may have effects on the duty stability of the employees. 8.4.8 Treats the employees with politeness and respect equally for everyone. 8.4.9 The employees have an opportunity to notify on illegality of the Company by reporting to the superior or the audit committee.

Chapter 9 Disclosure of the information and transparency

The role of the Board of directors concerning the disclosure of information and transparency - The Board of directors has the duty to disclose information on financial and non-financial report sufficiently, reliably, and in time for the shareholders and the stakeholders to receive the information equally as prescribed by the law, regulation and the public sector involved. - The Company should be prepared the corporate information carefully, clearly, and compactly, using simplified language with transparency. Regularly disclose of important information on both positive and negative sides which carefully not to cause users misunderstanding and confuse of factual information. - Providing an investor relations unit to publicizes/communicates data that is beneficial to the shareholders, the investors, the securities analysts, and the involved persons to know the information of the Company. - The Board of directors should provide sufficient resources to help develop capability of the management in presenting information and communications. - In addition to disclosing information as specified in regulations the SET, annual statements (Form 56-1), and annual reports, the Board disclose information, both in Thai and English, via companyâ&#x20AC;&#x2122;s website. All disclosed information will be up-to-date, the minimum information as follows: - Objectives of the Company. - Financial status and operation results of the Company (current and at least one prior year) - Direct and indirect shareholding structure and the right to vote. - List of the directors, committees, the senior management and their remuneration. - Factors and policies on risk management that is visible, concerning the operations and finance. - Issues with essence concerning the employees and the stakeholders. - The Board encourage the company to make a Management Discussion and Analysis (MD&A) for each quarterly financial statement, to help investors better understand changes in the companyâ&#x20AC;&#x2122;s financial status and performance each quarter, not just be presented with the figures by themselves. - It should unveil in the annual report on the number of times that each of the directors and/or the subcommittees attends the meetings, compared with the number of times of the Board meetings and/or subcommittees each year, including ongoing professional education or training of its directors, are disclosed in the annual report. - The Board should ensure that audit and non-audit fees are disclosed.

Chapter 10 Responsibility for the society and the environment Having a vision to be a business with social and environmental responsibility, the Company has set up a working committee to oversee environmental management issues when conducting business. A social responsibility strategy has been concretely adopted to maximize the management of various projects by improving environmental protection processes and practices and by conducting an environmental impact assessment before a project starts. The Operation Department may directly report the Corporate Governance, Recruitment and Remunerations Committee when necessary but a performance

Annual Report 2014

Thai Factory Development Public Company Limited

report must be made at least once a year. In addition, a business review will be conducted from the perspectives of social responsibility, risk assessment and effects to sustainable growth where plan and practices to respond to the issue of social responsibility will be strategically adopted. The Company and its subsidiaries are responsible for pursuing business on the basis of policies and plans adopted within the framework of social responsibility. We are also responsible for strengthening our knowledge and understanding within our responsible context through the monitoring and the reporting. As a result, we have come up with the following practices with a view to pursue a sustainable business development: 10.1 To consider the option with minimum impact on the society, environment and life quality of the people by using the benefits from natural resources. 10.2 To support the creative activities for the society and environment regularly from the Companyâ&#x20AC;&#x2122;s profit. 10.3 To inculcate the conscience of social responsibility and the environment among the employees at all levels continuously and earnestly. 10.4 To give priority of all transaction deal with the trade partners who has the same goal in society and environment. 10.5 To treat and cooperate or control for strict treatment, according to the intention of the law and regulations, issued by the corporate governance section. 10.6 To regard it as a main duty and policy to give priority to the activities of the community and society, aiming for development of society, the environment, creativity and conservation of the good natural resources. Including supporting education to the youth, support public activities that benefit the deprived communities to be stronger, self-reliant, under the self-sufficient economy with creativity to skill and development of occupation to the general communities.

Chapter 11 The anti-corruption To assure that we have put in place appropriate policy, practice and requirements to prevent corruption possibly incurred from our business activities and to encourage thorough decisions and actions that could potentially be exposed to corruption risk, the Company has adopted an anti-corruption policy in writing as a clear practice for our operation and for sustainable corporate development. Roles and Responsibilities 1) The Board of Directors has roles and responsibilities to adopt a policy and to supervise a system that will effectively support anti-corruption practices. This is to create awareness among the management of the importance of this practice and thereby promote it as a corporate culture. 2) The Audit Committee has roles and responsibilities to audit financial statements and the systems of financial and account reporting, internal control, internal audit and risk management for compliance with international standards while making sure that they remain precise, sound, sophisticated and effective. 3) Managing Director, the management and executives have roles and responsibilities to set up a system that will help supporting and communicating an anti-corruption policy to employees and related parties. They are also to review the soundness of the measures to reflect business, legal and regulatory changes. 4) An internal auditor has roles and responsibilities to audit and review compliance with policy, practice, authority and regulatory rules and laws to ensure that the Company has indeed an adequate and appropriate system against potential corruption risk. The internal auditor directly reports to the Audit Committee.

Annual Report 2014

34 Practices 1) Directors, executives and employees at all levels are to comply with the Company’s anti-corruption policy where they shall neither directly nor indirectly be involved in corruption. 2) Employees must not remain ignorant if witnessing action potentially qualified as corruption in relation to the Company. They shall report the incident to supervisors or responsible persons and cooperate with the examination process. In case of doubt or question, employees should consult with supervisors or persons designated to be responsible for such policy compliance through available channels. 3) The Company will protect and fairly treat employees who report or refuse to be involved in corruption in relation to the Company through measures designed to protect whistleblowers of corruption. 4) Corrupting is an offense and is subject to disciplinary actions based on the Company’s regulations. Besides, corrupted persons may be subject to legal punishment if the action is found illegal. 5) The Company underlines the importance of disseminating anti-corruption information and knowledge and making the third party collaborating with the Company or whose action could affect to the Company comply with this anti-corruption policy. 6) The Company commits to promote and nurture the corporate culture that corruption is inacceptable when conducting transactions with either the public or private sectors. Reporting of grievances and whistle-blowing The Board of Directors has adopted whistle-blowing or grievance measures which allow employees or stakeholders to file complaints against legal violation, corrupted malpractice or improper behavior of the Company’s personnel. In addition, measures to protect them are also adopted to enable stakeholders to effectively help protecting the Company’s interests. Issues to be reported - Legal violation, corruption against the Company’s regulations, wrongdoings committed by directors, executives and employees - Unusual items in financial statements; defected internal control system - Matters that could jeopardize the Company’s interests or reputation Channels of Grievance Company’s website : www.tfd-factory.com Email : cs@tfd-factory.com Address : Thai Factory Development Public Company Limited 18, Soi Sathorn 11, Yaek 9 TFD Building, Kwaeng Yannawa, Sathorn District, Bangkok 10120 Tel. 0-2676-4031-6 All grievances will go through independent directors or members of the Audit Committee for investigation of the matter based on a process already adopted by the Company before reporting the result to the Board. Whistleblower Protection Mechanisms - A database of confidential information received from whistleblowers will be established. Only executives from Deputy Managing Director and over will be authorized to access the database. - It’s the duty and responsibility of supervisor and head of the person whose action is reported to protect whistleblowers, witnesses and collaborators from being exposed to danger, threat or injustice resulted from such reporting, from being the witness or from confiding the information.

Annual Report 2014

Thai Factory Development Public Company Limited

Policy on internal control 1. Objective of the internal control â&#x20AC;&#x153;Internal Controlâ&#x20AC;? is the process of working or implementing the job that the board of directors and personnel of all levels of the Company provided for confidence with justification on the operations of the Company to achieve the following objectives: - The operations shall have efficiency and effectiveness by achieving the goal of the Company, including caring not to lose or misuse the assets. - The financial reporting must be accurate and in-time presentation. - The compliance with policies, rules, and regulations shall be performed the duties strictly to the rules and regulations of the Stock of Exchange of Thailand, or laws relating to business of the company.

2. Importance of the internal control system

The internal control system is the important mechanism that gives confidence with justification to the management for: - Helps to reduce the business risk. - Helps to do business effectively with suitable allocation of the resources and achieve the established goal. - Help to prevent corruption, protect misusing, and safeguard and care of property. - Helps to assure the reliability of the financial statement. - Helps the personnel to comply with the laws and rules involved. - Helps to give protection on the investment of the shareholders. The internal control is the main factor behinds the success of all business either in government or private sectors. The management as the leader, must perform their duties in responsible to various elements and environment of their units. In additional they should: - Encourage team work mind-set to the subordinates of all levels to be aware of the importance to coordinate and comply with constantly and continuously. So the measures and mechanisms of the internal control system set up by the management to accomplish the established objective. - Regularly monitoring and evaluating of internal control in order to obtain suitable strategies and mechanism under the variation in difference circumstance of risks. The internal control, regardless of design or implementation, shall give only confidence at the reasonable level, as it can protect from loss, waste or accomplishment and effectiveness. However, it can not assure or give confidence of the business success, because the internal control has several limitations, which mostly involving with the human behavior.

Annual Report 2014

36 3. Policy on internal control of the Company 3.1 The Company commit that its management must aware with the important of internal control is sufficiently efficient to acceptable risk level and suitable with the circumstances of the job or activity of that units. It divides the duties and responsibilities concerning the internal control of the Company as follows: 3.1.1 The board of directors as well as the audit committee must perform their duties and responsibilities to provide the effective internal control system, to manage and control of risks in the suitable level. Specifying the policy concerning to the internal control system, risk management, and monitoring of the evaluation constantly that whether or not the established system goes as planned. However, the audit committee has the duty to review that the elements of the internal control system of the five aspects are comply with effectiveness as follows: - The business has good control environment. - The business has proper procedure of risk assessment. - The business has good control on activities - The business has good system on information and communications. - The business has good system on monitoring and evaluation. 3.1.2 The management has duty and responsibility to fulfill the policy which the board of directors has delegated, so the Company determining the management must be treated as it important of the internal control. The management has direct duty and responsibility to provide the internal control system in the company, including works or various activities of all levels or latent in the business methods of the management function by: - The senior management shall provide the internal control that covers all elements in the Company, encouraging the subordinates discipline and good conscience on the internal control. - The middle management shall provide the internal control with the responsibility to evaluate the efficiency of the internal control, adjust the system to be complete and review on its compliance. 3.1.3 The employees of all levels must perform their duties by complying with all laws, regulations, rules, announcement, policies, plans, measures, and the internal control system, the management has established. Conduct their duties honestly with care in the performance, and regularly provide the implementation that ensures the efficiency of internal control system. As a result, the operations shall comply with the goal effectively and economically. All the employees must have the conscience to be aware of the importance of the internal control. 3.1.4 Internal control, the internal auditor has duties and responsibilities of evaluation the internal control, and examination the operating system, periodically and regularly. Updating and assuring that the various control measures are suitable with all significant situation, circumstance, and incidence of risk, with the objective to assist and recommend the senior and middle managements to provide the efficient internal control in the companyâ&#x20AC;&#x2122;s business units as the policies: - The internal auditor is independent and perform their duties in a more effective manner as it deems appropriate according to the profession standard of the internal control - The internal auditor has the right to request for checking the assets and activities, including the books, accounting, supplementary documents on the records, bookkeeping, correspondences and reports involved. - The internal auditor can ask the audited units to give data, explanations and delivery of the documents on the audited matters. However, the personnel of all levels must provide full cooperation to give the availability of information,

Annual Report 2014

Thai Factory Development Public Company Limited

resource, and material needed by the internal and external auditors which their duties is examination and evaluation to ensure that the internal control sufficient and effective as intended to respond with the company goal, and give recommendation for improvement , as it deems appropriate.

Risk management When doing business, the Company had to confront several risks and uncertainties which can materially affect its incomes, profits, assets, liquidity and share price. Since today’s connection between financial and economic activities has been very sophisticated, the Company therefore had to adjust itself to face with economic dynamism that could affect the Company’s business direction, strategy, decision and operation. As a result, to minimize business volatility, Thai Factory Development Public Company Limited has adopted a risk management process in writing covering product risk, income risk as well as risk from natural disasters, competitions, finance and lending both at the management and operational levels for use as a direction to achieve its goal. Aside from these risks, there could be other risks that the Company is not aware of or cannot yet identify at the moment. Besides, certain risks that it believes having no material effect at the moment may become significant in the future. As a result, stakeholders should consider both the impacts and possibilities and other possible risk factors that the Company may confront aside from those stated here. 1. Employees at all levels shall be responsible for risk management. They must be aware of operation risk both in their functions and within the organization where risk management shall be carried out in a way that there is enough management and that risk is kept at an appropriate level. 2. Risk management shall be an important tool to manage the Company where the risk management system shall be part of a decision-making process, strategic planning as well as the Company’s action plan and operation. The risk management system shall also be highlighted for the Company to achieve its objectives, goals, visions, mission and strategies. Personnel of all levels must understand and collaborate in the implementation of risk management for a good corporate image, to strengthen its corporate governance (CG) practice and operation excellence and to boost confidence of shareholders or stakeholders. 3. Financial and non-financial causes of risk that could affect the Company shall be identified and risk shall be reviewed whenever there is change of risk factors affecting the Company’s investment funds. 4. Types of risk and acceptable levels of risk shall be identified for use as criteria to respond to the Company’s risks. 5. Risk prevention and mitigation guidelines shall be adopted to avoid possible damage or loss. In addition, the Company shall regularly monitor and evaluate risk management results quantitatively and qualitatively for better accuracy. 6. The Company shall introduce a sophisticated information technology (IT) system to manage the Company’s risks and it should enable personnel at all levels to extensively access risk management information. Besides, the Company should put in place a risk management report mechanism to allow the Board to efficiently manage the Company’s risks. In addition, the Company has determined roles and responsibilities and approval authority regarding risk management. It has already posted the risk management policy and procedures on its website for everyone’s compliance. Besides, a risk management report has been prepared and submitted to the Board for refinement of the Company’s risk management plan.

Annual Report 2014

Report from the Audit Committee In 2014, Thai Factory Development Public Company Limited complied with the following requirements set by the Stock Exchange of Thailand and as entrusted by the Board of Directors. Details are : 1. The Audit Committee convened Sixteen times in 2014. The meeting was attended by all members of the Audit Committee. The auditor meanwhile attended the Audit Committee meeting at least once a year. 2. The Audit Committee reviewed and approved the 2014 auditing plan of the Internal Audit Department where it focused at strengthening the internal control system, reinforcing adequate auditing in required areas and reporting results of such internal control to the Audit Committee on a regular basis. Having reviewed and assessed the Audit Committee’s operation in 2014, the Board of Directors had an opinion that the internal control system was efficient enough to control and supervise the operation of both Thai Factory Development Plc and its subsidiaries and no material defect was found. 3. Both quarterly and annual financial statements of the Company were reviewed to provide full and accurate financial information based on the generally-accepted accounting principles in a timely fashion as well as a true reflection of the company’s financial status before they were submitted to the Board of Directors. 4. The Audit Committee reviewed an evaluation form of the adequacy of the Company’s internal control system to ensure that it had an appropriate and adequate internal control system to supervise operation based on its business objectives. 5. The Audit Committee reviewed risk management procedures by taking into consideration a risk management policy and a risk management plan and guideline based on prevailing corporate risks. It also regularly reviewed the efficiency and suitability of the Company’s risk management system. 6. The Company was requested to be compliant with corporate governance on the basis of the Stock Exchange of Thailand’s guideline and to develop its CG practice to match the international standards. 7. The Audit Committee reviewed the Company’s compliance with the laws and the authorities’ rules and regulations. 8. The Audit Committee reviewed connected transactions and items that could cause conflict of interest as well as ensured that the information was accurately and completely disclosed. 9. The Audit Committee appointed an auditor and set his remuneration before submitting the information to the Board of Directors for proposing to the Shareholders’ Meeting for its approval.

(Mr. Prasong Wararatanakul) Chairman of the Audit Committee February 20, 2015

Annual Report 2014

Thai Factory Development Public Company Limited

Independent Auditorâ&#x20AC;&#x2122;s Report Independent Auditorâ&#x20AC;&#x2122;s Report To the Shareholders of Thai Factory Development Public Company Limited I have audited the accompanying consolidated financial statements of Thai Factory Development Public Company Limited and its subsidiaries, which comprise the consolidated statement of financial position as at 31 December 2014, and the related consolidated statements of comprehensive income, changes in shareholdersâ&#x20AC;&#x2122; equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, and have also audited the separate financial statements of Thai Factory Development Public Company Limited for the same period. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Thai Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Thai Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Annual Report 2014

40 I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Thai Factory Development Public Company Limited and its subsidiaries and of Thai Factory Development Public Company Limited as at 31 December 2014, and their financial performance and cash flows for the year then ended, in accordance with Thai Financial Reporting Standards.

Siraporn Ouaanunkun Certified Public Accountant (Thailand) No. 3844

EY Office Limited Bangkok: 23 February 2015

Annual Report 2014

Thai Factory Development Public Company Limited

Statements of financial position Thai Factory Development Public Company Limited and its subsidiaries For the year ended 31 December 2014

Thai Factory Development Public Company Limited and its subsidiaries Statements of financial position

For the year ended 31 December 2014

(Unit: Baht) Consolidated financial statements Note

2014

Separate financial statements

2013

2014

2013

Assets Current assets Cash and cash equivalents

Short-term investment open-end fixed income fund

157,878,693

1,268,664,102

31,932,015

1,192,374,575

27,371,895

Investment in trading securities

84,050,000

Trade and other receivables

30,511,649

20,439,696

10,570,985

6,914,524

320,151,233

2,003,233,877

1,288,334,502

Project development costs

5,202,862,739

4,824,249,144

2,429,109,800

2,029,814,086

Deposit for purchase of land from related party

300,000,000

46,503,500

54,642,250

38,553,000

54,642,250

Short-term loan to and interest receivable from related parties

Deposit for purchase of land

9,969,237

79,000,000

Income tax receivable

Deposit for construction

25,453,073

15,084,556

1,097,540

Other current assets

38,620,496

43,746,392

23,894,633

38,943,965

5,943,372,515

6,605,826,140

4,649,813,745

4,690,023,902

64,045,392

13,214,711

61,183,487

10,957,129

Total current assets Non-current assets Restricted bank deposits Long-term loan to and 6

230,489,571

234,137,075

Investments in subsidiaries

interest receivable from subsidiaries

898,477,107

598,477,317

Investments in avaliable-for-sales securities

225,000,000

243,000,000

225,000,000

243,000,000

Leasehold rights

401,107,497

440,983,090

45,254,259

46,668,454

Investment properties

535,947,832

232,189,070

Equipment

90,678,588

60,703,981

87,658,605

59,495,225

Deferred tax asset

131,522,718

60,628,988

62,268,660

3,202,532

17,627,708

26,459,019

11,830,406

6,725,173

Total non-current assets

1,465,929,735

1,077,178,859

1,622,162,095

1,202,662,905

Total assets

7,409,302,250

7,683,004,999

6,271,975,840

5,892,686,807

Other non-current assets

The accompanying notes are an integral part of the financial statements.

Annual Report 2014

Statements of financial position (continued) Thai Factory Development Public Company Limited and its subsidiaries

Thai Factory Development Public Company Limited and its subsidiaries Forthe theyear yearended ended 31 December For 31 December 2014 2014 Statements of financial position (continued)

(Unit: Baht) Consolidated financial statements Note

2014

Separate financial statements

2013

2014

2013

Liabilities and shareholders' equity Current liabilities Short-term loans from financial institutions

1,548,000,000

2,560,200,000

1,190,000,000

2,030,200,000

Trade and other payables

331,772,781

585,495,097

48,615,175

85,279,839

Debentures

1,344,547,659

6,958,176

3,449,803

6,714,426

3,431,908

521,036,862

894,223,409

503,549,975

335,506,915

47,180,074

13,333,707

Current portion of liabilities under finance lease agreements Current portion of long-term loans from financial institutions Current portion of debt restructuring payable Current portion of long-term loans from related party Short-term loans and interest payable to subsidiaries

8,685,112

56,333,495

1,581,446

50,352,808

37,355,576

13,114,893

7,498,667

1,830,438

2,244,636

2,422,464,158

5,506,281,224

1,759,395,126

3,894,900,028

1,687,453,370

11,505,248

3,741,960

10,956,810

3,741,960

739,399,260

155,002,284

472,048,320

155,002,284

19,530,806

312,722,001

300,035,798

48,528,070

53,055,271

129,500,000

Income tax payable Other current liabilities Total current liabilities Non-current liabilities Debenture, net of current portion Liabilities under finance lease agreements, net of current portion Long-term loans from financial institutions, net of current portion Debt restructuring payable, net of current portion Long-term loans from related party and interest payable, net of current portion Rental deposit received Deposit from sale of project

Deferred tax liabilities

2,226,766

3,911,577

2,109,658

3,911,577

Provisions for long-term employee benefits

11,908,720

8,941,877

10,029,732

7,244,158

Long-term provisions

2,372,500

Other non-current liabilities

1,692,500

2,032,500

1,692,500

2,032,500

Total non-current liabilities

2,817,808,435

548,624,573

2,316,162,890

303,804,979

Total liabilities

5,240,272,593

6,054,905,797

4,075,558,016

4,198,705,007

The accompanying notes are an integral part of the financial statements.

Annual Report 2014

Thai Factory Development Public Company Limited

Statements of financial position (continued) Thai Factory Development Public Company Limited and its subsidiaries

Thai Factory Development Public Company Limited and its subsidiaries Forthetheyearyear ended 31 December For ended 31 December 2014 2014 Statements of financial position (continued)

(Unit: Baht) Consolidated financial statements Note

2014

Separate financial statements

2013

2014

2013

Shareholders' equity Share capital

Registered 1,914,911,170 ordinary shares of Baht 1 each (31 December 2013: 1,264,029,396 shares of Baht 1 each)

1,914,911,170

1,264,029,396

1,914,911,170

1,264,029,396

1,283,501,405

1,083,500,205

1,283,501,405

1,083,500,205

955,101,210

147,783,522

955,101,210

147,783,522

50,655,721

(40,850,818)

421,117,042

(92,840,512)

397,642,352

(188,156,725)

(172,338,733)

Issued and fully paid up 1,283,501,405 ordinary shares of Baht 1 each (31 December 2013: 1,083,500,205 ordinary shares of Baht 1 each) Share premium Retained earnings Appropriated - statutory reserve Unappropriated Other components of shareholders' equity Equity attributable to owners of the Company Non-controlling interests of the subsidiary

2,060,250,793

1,530,717,757

14,400,000

2,196,417,824

1,693,981,800

108,778,864

97,381,445

Total shareholders' equity

2,169,029,657

1,628,099,202

2,196,417,824

1,693,981,800

Total liabilities and shareholders' equity

7,409,302,250

7,683,004,999

6,271,975,840

5,892,686,807

The accompanying notes are an integral part of the financial statements.

Directors

The accompanying notes are an integral part of the financial statements.

Annual Report 2014

Statements of comprehensive income Thai Factory Development Public Company Limited and its subsidiaries For the year ended 31 December 2014

Thai Factory Development Public Company Limited and its subsidiaries Statements of comprehensive income For the year ended 31 December 2014

(Unit: Baht) Consolidated financial statements Note

2014

2013

Separate financial statements 2014

2013

Profit or loss: Revenues Revenue from sale of land and building

460,000,000

Revenue from sale of land to a subsidiary

207,937,800

Revenue from sale of condominium units

1,151,345,972

40,357,974

233,601,759

248,134,700

14,897,339

9,241,397

134,330,943

Dividend income

16,063,810

7,815,000

16,063,810

204,535,923

Proceeds from the transfer of land-purchasing rights

Revenue from rental and services Gain from sale of investment properties Other income

16,032,000

Interest income

30,969,963

13,490,315

124,060,132

32,825,847

Others

33,154,542

41,293,830

24,074,603

45,592,987

1,465,136,046

945,422,762

179,095,884

976,165,954

244,229,218

Total revenues Expenses Cost of land and building sold

73,344,746

Cost of condominium units sold

Cost of land sold to a subsidiary

878,144,018

32,204,320

Cost of rental and services

152,142,672

148,913,284

11,630,917

8,962,740

65,260,393

52,761,515

1,961,318

31,577,779

252,249,431

158,150,153

178,195,236

128,508,512

Selling expenses Administrative expenses Loss on exchange rate

26,244,708

1,374,041,222

636,258,490

191,787,471

486,622,995

91,094,824

309,164,272

(12,691,587)

489,542,959

Finance cost

(305,058,175)

(113,136,172)

(241,666,220)

(74,855,681)

Profit (loss) before income tax expenses

(213,963,351)

196,028,100

(254,357,807)

414,687,278

Total expenses Profit (loss) before finance cost and income tax expenses

Income tax expenses (revenues)

Profit (loss) for the year

56,147,983

(42,168,780)

57,098,450

(44,026,774)

(157,815,368)

153,859,320

(197,259,357)

370,660,504

(18,000,000)

7,500,000

(18,000,000)

18,000,000

(262,448)

(847,989)

(1,417,992)

Other comprehensive income for the year: Gain (loss) on changes in value of available-for-sale securities Actuarial losses Exchange differences on translation of financial statements in foreign currency Income tax effect

3,652,490

(1,500,000)

3,769,597

(3,600,000)

Other comprehensive income for the year

(16,027,950)

6,000,000

(15,078,392)

14,400,000

Total comprehensive income for the year

(173,843,318)

159,859,320

(212,337,749)

385,060,504

The accompanying notes are an integral part of the financial statements.

Annual Report 2014

Thai Factory Development Public Company Limited

Statements of comprehensive income (continued) Thai Factory PublicPublic Company Limited and its subsidiaries Thai FactoryDevelopment Development Company Limited and its subsidiaries Statements of comprehensive income (continued) For the year ended 31 December 2014 For the year ended 31 December 2014

(Unit: Baht) Consolidated financial statements Note

2014

2013

Separate financial statements 2014

2013

Profit (loss) attributable to: Equity holders of the Company

(169,148,671)

The major shareholder of the Company

Total

(169,148,671)

Non-controlling interests of the subsidiary

11,333,303

151,320,113

(197,259,357)

370,660,504

(212,337,749)

385,060,504

(0.1783)

0.3124

(1,775,302) 149,544,811 4,314,509

(157,815,368)

153,859,320

(185,240,736)

157,320,113

Total comprehensive income attributable to: Equity holders of the Company The major shareholder of the Company

Total

(185,240,736)

Non-controlling interests of the subsidiary

Earnings per share

11,397,418

(1,775,302) 155,544,811 4,314,509

(173,843,318)

159,859,320

(0.1529)

0.1275

Basic earnings per share Profit (loss) attributable to equity holders of the Company Loss attributable to the major shareholder of the Company

(0.0015)

Diluted earnings per share Profit (loss) attributable to equity holders of the Company

(0.1470)

0.1206

(0.1714)

0.2955

Loss attributable to the major shareholder of the Company

The accompanying notes are an integral part of the financial statements.

(0.0014)

Annual Report 2014

Cash flow statement

Thai Factory Development Public Company Limited and its subsidiaries Thai Factory Development Public Company Limited and its subsidiaries Cash flow statement For the year ended 31 December 2014 For the year ended 31 December 2014 (Unit: Baht) Consolidated financial statements 2014

Separate financial statements

2013

2014

2013

Cash flows from operating activities Profit (loss) before tax

(213,963,351)

196,028,100

(254,357,807)

414,687,278

Adjustments to reconcile profit before tax to net cash provided by (paid from) operating activities: Allowance for doubtful accounts

1,872,180

204,209

Provision for long-term employee benefits

4,944,394

3,743,957

4,177,584

3,081,927

Depreciation and amortisation

77,827,315

71,850,024

11,636,666

7,190,681

Loss from impairment of assets

12,459,561

Realised gain on sale of trading securities

(25,137,021)

Unrealised losses on trading securities

18,665,053

Realised gain on sale of open-end fixed income fund

(2,293,793)

(78,102)

Unrealised gain on open-end fixed income fund Dividend income Loss on sales of equipment

(16,063,810) 55,709

Gain on sales of investment properties

Proceeds from the transfer of land-purchasing rights

(7,815,000) (134,330,943) -

(16,063,810)

(204,535,923)

6,504

(16,032,000)

Interest income

(30,969,963)

(13,490,315)

(124,060,132)

(32,825,847)

Interest expenses

305,058,175

98,904,686

241,666,220

74,855,682

132,376,347

214,890,509

(145,634,429)

246,421,798

77,672,303

(1,818,022)

Profit (loss) from operating activities before changes in operating assets and liabilities Operating assets (increase) decrease Trade and other receivables

(9,901,485)

Advance to related party Project development costs

(277,286,045)

Deposit for purchase of land - related party Deposit for purchase of land - unrelated parties

(83,000,000) (531,808,848) (300,000,000)

(320,698,965) -

(8,529,611) (79,111,457) -

(63,669,500)

(84,127,069)

(38,553,000)

(104,839,419)

Deposit for construction

69,030,763

(75,000,000)

79,000,000

(75,000,000)

Other current assets

(7,609,283)

4,761,398

(3,770,544)

3,279,636

Other non-current assets

(7,203,245)

15,665,804

(6,055,234)

797,975

(39,232,735)

Operating liabilities increase (decrease) (234,215,364)

(398,737,094)

Rental deposit received

Trade and other payable

(4,527,201)

(6,977,696)

Other current liabilities

5,616,226

(11,808,738)

Other non-current liabilities Cash flows used in operating activities Cash paid for long-term employee benefit Cash paid for interest expenses Withholding tax received Cash paid for corporate income tax Net cash flows used in operating activities

(340,000) (397,728,787) (2,240,000) (320,425,027) 7,217,382

766,998 (1,177,702,433) (250,782,007) 6,515,572

(414,198) (340,000) (477,517,127) (2,240,000) (255,272,252) -

(448,539,169) (248,007) 2,385,600 (463,382,654) (105,975,643) -

(79,600,760)

(140,266,214)

(38,453,115)

(88,166,971)

(792,777,192)

(1,562,235,082)

(773,482,494)

(657,525,268)

The accompanying notes are an integral part of the financial statements.

Annual Report 2014

Thai Factory Development Public Company Limited

Cash flow statement (continued)

Thai Factory Development Public Company Limited and its subsidiaries For the year ended 31 December 2014 For the year ended 31 December 2014 Thai Factory Development Public Company Limited and its subsidiaries Cash flow statement (continued)

(Unit: Baht) Consolidated financial statements 2014

2013

Separate financial statements 2014

2013

Cash flows from investing activities Cash paid for open-end fixed income fund Cash received from sales of open-end fixed income fund Cash paid from investments in trading securities

(1,551,000,000)

1,526,000,000

(684,453,911)

Cash received from sales of investment in trading securities

604,833,231

(Increase) decrease in restricted bank deposits

(50,830,681)

13,711,584

(50,226,358)

Increase in short-term loan to subsidiaries

(1,134,000,000)

Cash received from repayment of short-term loan to a subsidiaries

474,075,533

35,000,000

18,347,358

12,564,179

115,494,142

Cash received from repayment of long-term loan to subsidiary Decrease (increase) in short-term loan to related parties

(20,000,000)

Cash paid for investment in a subsidiary

(396,900,835)

Investments in avaliable-for-sales securities

(75,000,000)

268,588,951

Proceeds from sale of investment properties Increase in leasehold rights improvement Dividend income Acquisition of investment properties Acquisition of equipment Proceeds from sales of equipment Cash received from interest Net cash flows used in investing activities

(755,984) 16,063,810

(112,350) 7,815,000

(341,794,368)

(1,612,349)

(12,746,240)

(1,868,965)

714,953

17,802

30,822,900

13,488,259

(483,146,290)

(56,378,761)

(299,999,790)

14,258,166 (1,317,075,533)

(396,900,835) (88,968,000) -

16,063,810

204,535,923

(11,230,277) 714,953 54,385,370 (1,036,490,081)

(1,160,281) 10,303,653 (1,527,442,728)

Cash flows from financing activities Increase (decrease) short-term loans from financial institutions

(1,012,200,000)

2,056,200,000

(840,200,000)

Decrease in short-term loans from other individuals

(53,500,000)

Repayment of short-term loans from related party

(21,272,040)

Increase in short-term loans from subsidiary

Repayment of short-term loans from subsidiary

Repayment of liabilities under financial lease agreements Increase in long-term loans from financial institutions Cash received from issued debentures Cash paid from redeemtion of debentures

(5,053,236)

Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

551,578,545 1,342,689,176

(1,350,000,000) -

(1,239,297,763)

(66,710,880)

(44,384,575) (61,741,164)

(1,350,000,000) (314,910,904)

(343,470,219)

200,000,000

807,317,688

586,564

807,317,688

586,564

1,200

45,235,743

1,200

45,235,743

(292,395,087) 167,322,756

(90,279,195)

(292,395,087)

(90,279,195)

2,483,382,021

649,530,015

3,244,660,317

(2,184,683)

(1,110,785,409)

864,768,178

(1,160,442,560)

1,268,664,102

403,895,924

1,192,374,575

132,682,254

157,878,693

1,268,664,102

31,932,015

1,192,374,575

The accompanying notes are an integral part of the financial statements.

(4,380,297)

800,000,000

Cash received from share premium

Net increase (decrease) in cash and cash equivalents

(5,782,882)

1,693,500,000

(18,347,358)

Increase in translation adjustment

(175,500,000)

553,552,696

200,000,000

Net cash flows from financing activities

175,500,000

(48,000,000)

1,342,689,176

Repayment of long-term loans from related party

Dividend paid

211,210,429

Proceeds from increase in share capital

Cash received from exercise of warrants

(53,500,000)

1,693,500,000

Repayment of long-term loans from financial institutions Repayment of debt restructuring payable

(4,407,421)

1,796,200,000

1,059,692,321

Annual Report 2014

Cash flow statement (continued)

Thai Factory Development Public Company Limited and its subsidiaries

Thai Factory Development Public Company Limited and its subsidiaries For the year ended 31 December 2014 For the year ended 31 December 2014 Cash flow statement (continued)

(Unit: Baht) Consolidated financial statements 2014

2013

Separate financial statements 2014

2013

Supplemental cash flow information: Non-cash transactions Stock dividend Purchase of assets under finance lease agreements

180,557,604

17,255,250

16,280,250

54,642,250

59,197,169

54,642,250

59,197,169

46,238,235

100,000,000

11,596,780

Transfer of deposit for purchase of land to project development costs Transfer project development costs to equipments Transfer deposit for acquisition of ordinary shares of a subsidiary to investment in subsidiary Transfer prepaid expenses to equipment

The accompanying notes are an integral part of the financial statements.

Annual Report 2014

Thai Factory Development Public Company Limited

Statements of changes in shareholdersâ&#x20AC;&#x2122; equity Thai Factory Development Public Company Limited and its subsidiaries For the year ended 31 December 2014

Thai Factory Development Public Company Limited and its subsidiaries Statements of changes in shareholders' equity For the year ended 31 December 2014

(Unit: Baht) Consolidated financial statements Equity attributable to owners of the Company Other components of equity Other comprehensive income

Share Issued and fully

subscriptions

paid-up

received

share capital Balance as at 1 January 2013

Share premium

789,530,385

147,196,958

Retained earnings

in advance 68,176,473

Appropriated

Unappropriated

32,122,695

559,166,754

Equity

Surplus (deficit)

Enchange

Difference

on changes

differences on

from changing

Total equity

attributable to

invalue of

translation of

investment

from business

components of

attributable to

non-controlling

Total

financial statements

proportion

combination under

shareholders'

owners of

interests of

shareholders'

securities

in foreign currency

in subsidiaries

common control

equity

the Company

the subsidiaries

8,400,000

(45,699,839)

Profit for the year

151,320,113

6,000,000

Total comprehensive income for the year

151,320,113

6,000,000

113,412,216

586,564

(68,176,473)

Total other

available-for-sale

Other comprehensive income for the year

Increase share capital

Surplus

357,637,243 (1,775,302) (1,775,302) -

Surplus from business combination under common control

(496,900,835)

320,337,404 (1,775,302)

equity

1,916,530,669

93,066,936

2,009,597,605 153,859,320

149,544,811

4,314,509

6,000,000

4,224,698

155,544,811

4,314,509

159,859,320

45,822,307

(496,900,835)

18,533,026

Cash dividend

(90,279,195)

Stock dividend

180,557,604

(180,557,604)

Balance as at 31 December 2013

1,083,500,205

147,783,522

50,655,721

421,117,042

14,400,000

(45,699,839)

(141,038,894)

Balance as at 1 January 2014

1,083,500,205

147,783,522

50,655,721

421,117,042

14,400,000

(45,699,839)

(141,038,894)

Profit (loss) for the year

(169,148,671)

11,333,303

Other comprehensive income for the year

(274,074)

(14,400,000)

(1,417,992)

(15,817,992)

(16,092,066)

64,116

(16,027,950)

Total comprehensive income for the year

(169,422,745)

(14,400,000)

(1,417,992)

(15,817,992)

(185,240,737)

11,397,419

(173,843,318)

200,000,000

807,312,888

1,200

4,800

(292,545,115)

1,283,501,405

955,101,210

50,655,721

(40,850,818)

Unappropriated retained earnings transferred to statutory acquisition

(18,533,026)

(496,900,835)

Dividend paid (Note 34) (90,279,195)

(90,279,195)

(172,338,733)

1,530,717,757

97,381,445

1,628,099,202

(172,338,733)

1,530,717,757

97,381,445

1,628,099,202

Increase share capital (Note 26)

1,007,312,888

(157,815,368)

1,007,312,888

Share subscription received from exercise of warrants (Note 27) Dividend paid (Note 34) Balance as at 31 December 2014

(1,417,992)

(45,699,839)

(141,038,894)

(188,156,725)

6,000 (292,545,115) 2,060,250,793

108,778,864

6,000 (292,545,115) 2,169,029,657 -

The accompanying notes are an integral part of the financial statements.

Annual Report 2014

Statements of changes in shareholdersâ&#x20AC;&#x2122; equity (continued) Thai Factory Development Public Company Limited and its subsidiaries Statements of changes in shareholders' equity (continued)

Thai Development Company Limited and its subsidiaries For Factory the year ended 31 December Public 2014 For the year ended 31 December 2014

(Unit: Baht) Separate financial statements Other components of equity Other comprehensive income Surplus (deficit) on changes

Issued and

fully paid-up

subscription

share capital

Balance as at 1 January 2013

Share premium

invalue of Retained earnings

received in advance

Appropriated

Unappropriated

available-for-sale

Total shareholders'

securities

equity

789,530,385

147,196,958

68,176,473

32,122,695

316,351,673

1,353,378,184

Profit for the year

370,660,504

Other comprehensive income for the year

14,400,000

Total comprehensive income for the year

370,660,504

14,400,000

385,060,504

113,412,216

586,564

45,822,307

18,533,026

(18,533,026)

Cash dividend

(90,279,195)

Stock dividend

180,557,604

(180,557,604)

Balance as at 31 December 2013

1,083,500,205

147,783,522

50,655,721

397,642,352

14,400,000

1,693,981,800

Balance as at 1 January 2014

397,642,352

14,400,000

1,693,981,800

Increase share capital

(68,176,473)

Unappropriated retained earnings transferred to statutory reserve Dividend paid (Note 34) (90,279,195)

1,083,500,205

147,783,522

50,655,721

Profit (loss) for the year

(197,259,357)

Other comprehensive income for the year

(678,392)

(14,400,000)

(15,078,392)

Total comprehensive income for the year

(197,937,749)

(14,400,000)

(212,337,749)

200,000,000

807,312,888

1,007,312,888

1,200

4,800

6,000

(292,545,115)

1,283,501,405

955,101,210

50,655,721

(92,840,512)

Increase share capital (Note 26)

(197,259,357)

Share subscription received from exercise of warrants (Note 27) Dividend paid (Note 34) Balance as at 31 December 2014

TheTheaccompanying notes are an integral part of the financial statements. accompanying notes are an integral part of the financial statements.

(292,545,115) 2,196,417,824 -

Annual Report 2014

Thai Factory Development Public Company Limited

Notes to consolidated financial statements Thai Factory Development Public Company Limited and its subsidiaries

Thai Factory Development Public Companystatements Limited and its subsidiaries Notes to consolidated financial For yearyear ended 31 December 2014 2014 Forthe the ended 31 December 1.

General information Thai Factory Development Public Company Limited (“the Company”) is a public company incorporated and domiciled in Thailand. The Company is principally engaged in the property development. The registered office of the Company is at 18 Soi Sathorn 11 Yaek 9, TFD Building, Yannawa, Sathorn, Bangkok.

Basis of preparation

2.1

The financial statements have been prepared in accordance with Thai Financial Reporting 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 28 September 2011, 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 a)

The consolidated financial statements include the financial statements of Thai Factory Development Public Company Limited (“the Company”) and the following subsidiary companies (“the subsidiaries”):

Company’s name

Nature of business

Country of

Percentage of

incorporation

shareholding 2014

2013

Percent

Held by the Company Total Industrial Services Company Limited

Factory rental

Thailand

100.00

SG Land Company Limited

Office rental

Thailand

49.91

VSSL Enterprise Company

Residential condominium units Thailand

100.00

United Kingdom

100.00

Limited

for sale

Held by Total Industrial Services Company Limited Barnsley Warehouse Limited

Investment in land and warehouse for lease and sale

Annual Report 2014

52 On 29 April 2014, Total Industrial Services Company Limited, a subsidiary, invested in a new subsidiary company named Barnsley Warehouse Limited, a company corporate in United Kingdom in order to operate the investment in land and warehouse for lease and sale. Total Industrial Services Company Limited holds 630,000 shares with a par value of GBP 1 each ( a total of Baht 34.3 million), representing 100% of the registered capital of such company. b)

Subsidiaries are fully consolidated, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases.

The financial statements of the subsidiaries are prepared using the same significant accounting policies as the Company.

Material balances and transactions between the Company and its subsidiary companies have been eliminated from the consolidated financial statements.

Non-controlling interests represent the portion of profit or loss and net assets of the subsidiaries that are not held by the Company and are presented separately in the consolidated profit or loss and within equity in the consolidated statement of financial position.

2.3

The separate financial statements, which present investments in subsidiaries under the cost method, have been prepared solely for the benefit of the public.

New financial reporting standards Below is a summary of financial reporting standards that became effective in the current accounting year and those that will become effective in the future. (a) Financial reporting standards that became effective in the current accounting year Conceptual Framework for Financial Reporting (revised 2014) Accounting Standards: TAS 1 (revised 2012)

Presentation of Financial Statements

TAS 7 (revised 2012)

Statement of Cash Flows

TAS 12 (revised 2012)

Income Taxes

TAS 17 (revised 2012)

Leases

TAS 18 (revised 2012)

Revenue

TAS 19 (revised 2012)

Employee Benefits

TAS 21 (revised 2012)

The Effects of Changes in Foreign Exchange Rates

TAS 24 (revised 2012)

Related Party Disclosures

TAS 28 (revised 2012)

Investments in Associates

TAS 31 (revised 2012)

Interests in Joint Ventures

TAS 34 (revised 2012)

Interim Financial Reporting 2

Annual Report 2014

Thai Factory Development Public Company Limited

TAS 36 (revised 2012)

Impairment of Assets

TAS 38 (revised 2012)

Intangible Assets

Financial Reporting Standards: TFRS 2 (revised 2012)

Share-based Payment

TFRS 3 (revised 2012)

Business Combinations

TFRS 5 (revised 2012)

Non-current Assets Held for Sale and Discontinued Operations

TFRS 8 (revised 2012)

Operating Segments

Accounting Standard Interpretations: TSIC 15

Operating Leases - Incentives

TSIC 27

Evaluating the Substance of Transactions Involving the Legal Form of a Lease

TSIC 29

Service Concession Arrangements: Disclosures

TSIC 32

Intangible Assets - Web Site Costs

Financial Reporting Standard Interpretations: TFRIC 1

Changes in Existing Decommissioning, Restoration and Similar Liabilities

TFRIC 4

Determining whether an Arrangement contains a Lease

TFRIC 5

Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

TFRIC 7

Applying the Restatement Approach under TAS 29 Financial Reporting in Hyperinflationary Economies

TFRIC 10

Interim Financial Reporting and Impairment

TFRIC 12

Service Concession Arrangements

TFRIC 13

Customer Loyalty Programmes

TFRIC 17

Distributions of Non-cash Assets to Owners

TFRIC 18

Transfers of Assets from Customers

Accounting Treatment Guidance for Stock Dividend These financial reporting standards were amended primarily to align their content with the corresponding International Financial Reporting Standards. Most of the changes were directed towards revision of wording and terminology, and provision of interpretations and accounting guidance to users of the accounting standards. These financial reporting standards do not have any significant impact on the financial statements.

Annual Report 2014

54 (b) Financial reporting standards that will become effective in the future The Federation of Accounting Professions has issued a number of revised and new financial reporting standards that become effective for fiscal years beginning on or after 1 January 2015. These financial reporting standards were aimed at alignment with the corresponding International Financial Reporting Standards, with most of the changes directed towards revision of wording and terminology, and provision of interpretations and accounting guidance to users of accounting standards. The management of the Company and its subsidiaries believes they will not have any significant impact on the financial statements in the year in which they are adopted. However, some of these financial reporting standards involve changes to key principles, as discussed below: TAS 19 (revised 2014) Employee Benefits This revised standard requires that the entity recognise actuarial gains and losses immediately in other comprehensive income while the existing standard allows the entity to recognise such gains and losses immediately in profit or loss, or in other comprehensive income, or to recognise them gradually in profit or loss. This revised standard does not have any impact on the financial statements as the Company and its subsidiaries already recognised actuarial gains and losses immediately in other comprehensive income. TFRS 10 Consolidated Financial Statements TFRS 10 prescribes requirements for the preparation of consolidated financial statements and replaces the part dealing with consolidated financial statements as included in TAS 27 Consolidated and Separate Financial Statements. This standard changes the principles used in considering whether control exists. Under this standard, an investor is deemed to have control over an investee if it has rights, or is exposed, to variable returns from its involvement with the investee, and it has the ability to direct the activities that affect the amount of its returns, even if it holds less than half of the shares or voting rights. This important change requires the management to exercise a lot of judgement when reviewing whether the Company and its subsidiaries have control over the investees and determine which entities have to be included for preparation of the consolidated financial statements. The management of the Company and its subsidiaries believes that this standard will not have any significant impact on the Company and its subsidiariesâ&#x20AC;&#x2122; financial statements.

Annual Report 2014

Thai Factory Development Public Company Limited

TFRS 11 Joint Arrangements TFRS 11 supersedes TAS 31 Interests in Joint Ventures. This standard requires an entity to account for an investment in a jointly controlled entity that meets the definition of a joint venture using the equity method, while TAS 31 allows the entity to apply either the proportionate consolidation method or the equity method to account for such an investment. The management of the Company and its subsidiaries believes that this standard is not relevant to their business. TFRS 12 Disclosure of Interests in Other Entities This standard stipulates disclosures relating to an entityâ&#x20AC;&#x2122;s interests in subsidiaries, joint arrangements and associates, including structured entities. This standard therefore has no financial impact to the financial statements of the Company and its subsidiaries. TFRS 13 Fair Value Measurement This standard provides guidance on how to measure fair value and stipulates disclosures related to fair value measurements. Entities are to apply the guidance under this standard if they are required by other financial reporting standards to measure their assets or liabilities at fair value. The effect of the change from the adoption of this standard is to be recognised prospectively. Based on the preliminary analysis, the management of the Company and its subsidiaries believes that this standard will not have any significant impact on the Company and its subsidiariesâ&#x20AC;&#x2122; financial statements. 4.

Significant accounting policies

4.1

Revenue recognition Revenues recognition from real estate sales Revenues from sales of land, factory and condominium units are recognised as revenues when significant risks and rewards of ownership of the goods have passed to the buyer, whereby construction works are completed and the ownerships have been transferred to buyers after all payments received from the buyers. Rental and related service income Rental income is recognised as income over the periods of the leases. Service income is recognised when services have been rendered taking into account the stage of completion. Interest income Interest income is recognised on an accrual basis based on the effective interest rate. Dividends Dividends are recognised when the right to receive the dividends is established. 5

Annual Report 2014

56 4.2

Cost of property sales In determining the costs of land, factory and condominium units sold, the Company and its subsidiaries allocated anticipated total development costs (after receognising the costs incurred to date) are attributed to units already sold on the basis of the salable area and then recognised as costs in the income statements. Project development costs are stated at the lower of cost and net realisable value. Cost comprises cost of land, design fees, utilities, construction costs and directly related finance cost and expenses. The Company and its subsidiaries recognise loss on diminution in project value (if any) in the income statements.

4.3

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.

4.4

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.

4.5

Investments a)

Investments in securities held for trading are stated at fair value. Changes in the fair value of these securities are recorded in profit or loss.

Investments in available-for-sale securities are stated at fair value. Changes in the fair value of these securities are recorded in comprehensive income, and will be recorded in profit or loss when the securities are sold.

Investments in subsidiaries are accounted for in the separate financial statements using the cost method.

The fair value of marketable securities is based on the lastest bid price of the last working day of the year. The weighted average method is used for computation of the cost of investments.

Annual Report 2014

Thai Factory Development Public Company Limited

In the event the Company reclassifies investments from one type to another, such investments will be readjusted to their fair value as at the reclassification date. The difference between the carrying amount of the investments and the fair value on the date of reclassification are recorded in profit or loss or recorded as other components of shareholdersâ&#x20AC;&#x2122; equity, depending on the type of investment that is reclassified. On disposal of an investment, the difference between net disposal proceeds and the carrying amount of the investment is recognised in profit or loss. 4.6

Investment properties Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and allowance for loss on impairment (if any). Depreciation of investment properties is calculated by reference to their costs on the straight-line basis over the following estimated useful lives: Building and factory Office building Improvement of leasehold building Improvement of office building Infrastructure system Improvement of leasehold land

25, 30 years 28 years 29 - 30 years 5 years 20 years 8, 29 years

Depreciation of the investment properties is included in determining income. On disposal of investment properties, the difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period when the asset is derecognised. 4.7

Equipment/Depreciation Equipment are stated at cost less accumulated depreciation and allowance for loss on impairment of assets (if any). Depreciation of equipment is calculated by reference to their costs on the straight-line basis over the following estimated useful lives: Improvement of leasehold office building Furniture and office equipment Motor vehicles

5 years 5, 8 years 5 years

Depreciation is included in determining income. No depreciation is provided on assets under installation. An item of equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on disposal of an asset is included in profit or loss when the asset is derecognised. 7

Annual Report 2014

58 4.8

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.

4.9

Leasehold right and amortisation Leasehold right are stated at cost less accumulated amortisation and any accumulated impairment losses (if any). Amortisation is calculated by reference to its cost on a straightline basis over the following leasehold period: Leasehold rights - land Leasehold rights - factory

30, 40 years 15 years

The amortisation is included in determing income. 4.10 Related party transactions Related parties comprise enterprises and individuals that control, or are controlled by, the Company and its subsidiaries, whether directly or indirectly, or which are under common control with the Company and its subsidiaries. They also include associated companies and individuals which directly or indirectly own a voting interest in the Company and its subsidiaries that gives them significant influence over the Company and its subsidiaries, key management personnel, directors, and officers with authority in the planning and direction of operations of the Company and its subsidiaries. 4.11 Long-term leases Leases of property, plant or 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 longterm payables, while the interest element is charged to profit or loss over the lease period. The assets acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease period. Lease of property, plant or equipment which do not transfer substantially all the risks and rewards of ownership are classified as operating leases. Operating lease payments are recognised as an expense in profit or loss on a straight line basis over the lease term.

Annual Report 2014

Thai Factory Development Public Company Limited

4.12 Foreign currencies The consolidated and separate financial statements are presented in Baht, which is also the Company’s functional currency. Items of each entity included in the consolidated financial statements are measured using the functional currency of that entity. 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 end of reporting period. Gains and losses on exchange are included in determining income. 4.13 Impairment of assets At the end of each reporting period, the Company and its subsidiaries performs impairment reviews in respect of the 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 profit or loss. 4.14 Employee benefits Short-term employee benefits Salaries, wages, bonuses and contributions to the social security fund are recognised as expenses when incurred. Post-employment benefits Defined contribution plans The Company and its subsidiaries, and its employees have jointly established a provident fund. The fund is monthly contributed by employees and by the Company and its subsidiaries. The fund’s assets are held in a separate trust fund and contributions of the Company and its subsidiaries are recognised as expenses when incurred.

Annual Report 2014

60 Defined benefit plans The Company and its subsidiaries have obligations in respect of the severance payments they must make to employees upon retirement under labor law. The Company and its subsidiaries treat these severance payment obligations as a defined benefit plan. The obligation under the defined benefit plan is determined by a professionally qualified independent actuary based on actuarial techniques, using the projected unit credit method. Actuarial gains and losses arising from post-employment benefits are recognised immediately in other comprehensive income. The defined benefits liability comprises the present value of the defined benefit obligation less unrecognised past service cost and unrecognised actuarial gain or losses. For the first-time adoption of TAS 19 Employee Benefits, the Company elected to recognise the transitional liability, which exceeds the liability that would have been recognised at the same date under the previous accounting policy, as an expense on a straight-line basis over up to five years from the date of adoption. 4.15 Provisions Provisions are recognised when the Company and its subsidiaries have 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. 4.16 Income tax Income tax expense represents the sum of corporate income tax currently payable and deferred tax. Current tax Current income tax is provided in the accounts at the amount expected to be paid to the taxation authorities, based on taxable profits determined in accordance with tax legislation. Deferred tax Deferred income tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts at the end of each reporting period, using the tax rates enacted at the end of the reporting period. The Company and its subsidiaries recognise deferred tax liabilities for all taxable temporary differences while they recognise deferred tax assets for all deductible temporary differences and tax losses carried forward to the extent that it is probable that future taxable profit will be available against which such deductible temporary differences and tax losses carried forward can be utilised.

Annual Report 2014

Thai Factory Development Public Company Limited

At each reporting date, the Company and its subsidiaries review and reduce the carrying amount of deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. The Company and its subsidiaries record deferred tax directly to shareholders' equity if the tax relates to items that are recorded directly to shareholders' equity. 5.

Significant accounting judgements and estimates The preparation of financial statements in conformity with financial reporting standards at times requires management to make subjective judgements and estimates regarding matters that are inherently uncertain. These judgements and estimates affect reported amounts and disclosures; and actual results could differ from these estimates. Significant judgements and estimates are as follows: Recognition and derecognition of assets and liabilities In considering whether to recognise or to derecognise assets or liabilities, the management is required to make judgement on whether significant risk and rewards of those assets or liabilities have been transferred, based on its best knowledge of the current events and arrangements. 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. Impairment of investments The Company and its subsidiaries treats available-for-sale investments and investments in subsidiaries as impaired when there has been a significant or prolonged decline in the fair value below their cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged” requires judgement of the management.

Annual Report 2014

62 Equipment/Depreciation In determining depreciation of equipment, the management is required to make estimates of the useful lives and residual values of the equipment and to review estimate useful lives and residual values when there are any changes. In addition, the management is required to review equipment for impairment on a periodical basis and record impairment losses 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. Investment property The initial recognition and measurement of goodwill and intangible assets, and subsequent impairment testing, require management to make estimates of cash flows to be generated by the asset or the cash generating units and to choose a suitable discount rate in order to calculate the present value of those cash flows. Deferred tax assets Deferred tax assets are recognised for deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the temporary differences and losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of estimate future taxable profits. Post-employment benefits under defined benefit plans The obligation under the defined benefit plan is determined based on actuarial techniques. Such determination is made based on various assumptions, including discount rate, future salary increase rate, mortality rate and staff turnover rate. Litigation The Company and its subsidiaries have contingent liabilities as a result of litigation. The Companyâ&#x20AC;&#x2122;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 end of reporting period.

Annual Report 2014

63 6.

Thai Factory Development Public Company Limited

Related party transactions During the years, the Company and its subsidiaries 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 and those related parties. (Unit: Million Baht) Consolidated

Separate

financial statements

2014

2013

Transfer Pricing Policy

2013

Transactions with subsidiary companies (eliminated from the consolidated financial statements) Interest income

112

Interest rate at 5.25 - 7.0 % per annum and 15% per annum (2013: 5.5% and 7.0% per annum)

Dividend income

197

Recorded all amount declared

Proceeds from the transfer of landpurchasing rights Building management income

Revenue from sale of land

208

Interest expense

Contract price Contract price Market price Interest rate at MLR per annum (2013: MLR per annum)

Transactions with related companies Interest income

Interest rate at 5.5% - 5.8% per annum (2013: at 8.4% per annum)

Interest expense

Interest rate at 15% per annum (2013: at 15% per annum)

During the year 2013, the Company transferred land-purchasing rights to the subsidiary and received proceeds of such transfer amounting to Baht 16 million from the subsidiary. In addition, the Company sold the 49-rai land to a subsidiary amounting to Baht 208 million. The Company received partial payment by securities which were classified as available for sales investment as describe in Note 13 to the financial statement.

Annual Report 2014

64 As at 31 December 2014 and 2013, the balances of the accounts between the Company and those related companies are as follows: (Unit: Thousand Baht) Consolidated financial statements 2014

2013

Separate financial statements 2014

2013

Trade account receivables (Note 9) Subsidiaries SG Land Company Limited

473

429

Total Industrial Services Company Limited

618

Total

473

1,047

Schubert Holdings Pte. Ltd.

139

Total

139

Grand total

139

473

1,186

Schubert Holdings Pte.Ltd.

573

Total

573

JC Kevin Development Company Limited

753

104

753

104

Total

753

104

753

104

SG Land Company Limited

129,500

Total

129,500

JC Kevin Development Company Limited

300,000

Total

300,000

Related party

Other receivable (Note 9) Related party

Trade account payable (Note 18) Related party

Deposit from sale of project Subsidiary

Deposit from purchase of land Related party

Annual Report 2014

Thai Factory Development Public Company Limited

Deposit from purchase of land On 25 December 2013, VSSL Enterprise Company Limited (“a subsidiary”) made 138-rai land sale agreement amounting to Baht 800 million with JC Kevin Development Company Limited (“Seller”), which is a related party to the Company and a subsidiary, for which the subsidiary has paid Baht 300 million and Baht 20 million to the seller during the year 2013 and 2014 respectively, totally Baht 320 million Subsequently, on 3 March 2014, the Board of Directors’ Meeting No. 4/2557 approved the cancelation such land sale agreement. On 30 July 2014, the Board of Directors’ Meeting No. 14/2557 approved a subsidiary to purchase the land from the seller and proposed the transaction to the Shareholders’ Meeting for approval. On 30 September 2014, the Extraordinary General Meeting of Shareholders No.2/2557 disapproved a subsidiary to buy the land from JC Kevin Development Company Limited (“Seller”) and the seller agreed to refund the deposit amount of Baht 320 million with interest 5.5% per annum to a subsidiary from date that the seller received the deposit from a subsidiary until the date that a subsidiary receives the deposit refund from the seller within 90 days from the date that the Shareholders’ Meeting of the Company has disapproved and Mr. Apichai Taechaubol (the Executive Chairman of the seller) agreed to be the guarantor. Subsequently, on 24 December 2014, the Board of Directors’ Meeting No. 21/2557 approved to amend the conditions for the extension payment term as follow; 1) Extend JC Kevin Development Company Limited ("Seller") to refund the deposit amount of Baht 320 million for one year from the due date of repayment to a subsidiary on 29 December 2014. 2) The monthly payment of interest, at the rate of 5.75% per annum from 29 December 2014 until the date that a subsidiary receives the deposit refund from the seller in full. (On 6 February 2015, the subsidiary has increased the interest rate from 5.75% to 7% per annum). 3) The mortgage of "Sathorn Heritage Residences" Building C as collateral. (currently in the process to mortgage). 4) Mr. Apichai Taechaubol (the Executive Chairman of the seller) agreed to be continued as a guarantor. The Company will proposed the above an extension payment term to the Shareholders’ Meeting for approval.

Annual Report 2014

66 Loans to related parties and loan from related parties As at 31 December 2014 and 2013, the balance of loans between the Company and those related companies and the movement are as follows: (Unit: Thousand Baht) Consolidated financial statements During the year Balance as at

Balance as at

31 December Related by

31 December Increase

2013

Decrease

2014

Short-term loan to and interest receivable from related party JC Kevin Development Company

Common director

Limited Loan

320,000

Interest payable

17,835

(17,684)

151

337,835

(17,684)

320,151

Loan

146,273

(18,348)

127,9258

Interest payable

167,097

20,324

(2,624)

184,797

313,370

20,324

(21,972)

312,722

Total

320,000

Long-term loans and interest payable from related party (Note 23) Schubert Holdings Pte. Ltd.

Shareholders of a subsidiary

Total

(Unit: Thousand Baht) Separate financial statements During the year

Related by

Balance as at

31 December

31 December Increase

2013

Decrease

2014

Short-term loans to and interest receivable from related parties Total Industrial Services Company

Subsidiary

Limited Loan

671,000

(75,000)

596,000

Interest receivable

14,450

(328)

14,122

685,450

(75,328)

610,122

1,282,076

463,000

(399,076)

1,346,000

6,259

79,987

(39,134)

47,112

1,288,335

542,987

(438,210)

1,393,112

1,288,335

1,288,437

(513,538)

2,003,234

Total VSSL Enterprise Company Limited Loan Interest receivable Total

Subsidiary

Annual Report 2014

Thai Factory Development Public Company Limited

(Unit: Thousand Baht) Separate financial statements During the year

Related by

Balance as at

31 December

2013

Increase

Decrease

2014

Long-term loans to and interest receivable from subsidiary SG Land Company Limited

Subsidiary

Loan

126,272

(18,347)

107,925

Interest receivable

107,865

17,324

(2,625)

122,564

234,137

17,324

(20,972)

230,489

48,000

(48,000)

8,333

352

56,333

352

Total Short-term loans from and interest payable to subsidiary SG Land Company Limited

Subsidiary

Loan Interest payable Total

(48,000)

8,685 8,685

Short-term loans to related parties The Company has short-term loans to subsidiaries under a form of promissory note, carrying interest at a rate of 5.3 - 7.0 percent per annum (2013: 5.5 - 7.0 percent per annum) and is repayable on demand. Short-term loan to related party is refund of land deposit. Long-term loans to subsidiary The Company entered into loan agreements with a subsidiary, of which details are as follows: Credit line (1)

A credit line of Baht 90 million which was fully drawn down, carrying interest at a rate of 15 percent per annum, with principal shall be repaid monthly, together with interest at a relaxed rate, in amounts not lower than Baht 1 million per month. The subsidiary must repay the loan to the Company at the earlier of 9 years from the first draw down date and the loan closing date. As at 31 December 2014, there was no outstanding principal amount due to repayment in full during the current year.

Annual Report 2014

68 Credit line (2)

A credit line of Baht 135 million which was fully drawn down, carrying interest at a rate of 15 percent per annum. Interest is to be paid monthly at a relaxed rate. The agreement stipulates that the first payment of principal is to be made in the month of the loan closing date, and full settlement is to be made within 3 years after the loan closing date.

Remark:

â&#x20AC;&#x153;the loan closing dateâ&#x20AC;? means the date that liabilities under the debt restructuring agreement (Note 22) and liabilities under the Baht 180 million loan agreement (entered into by Thai Factory Development Public Company Limited and Schubert holdings Pte. Ltd. with Siam Commercial Bank Plc.) are to have been fully repaid. (During the year 2014, such liabilities under debt restructuring and such loan were already repaid in full.)

In addition, the Company also has long-term loans to subsidiary under promissory note, carrying interest at a rate of 5.5% - 7.0% per annum, due at call and unsecured. Short-term loan from subsidiary This represents a short-term loan from a subsidiary under a promissory note, carrying interest at a rate of MLR percent per annum, due at call and unsecured. Directors and managementâ&#x20AC;&#x2122;s benefits During the year ended 31 December 2014 and 2013, the Company and its subsidiaries had employee benefit expenses of their directors and management as detailed below. (Unit: Thousand Baht)

Short-term employee benefits Post-employment benefits Total

Consolidated

Separate

financial statements

2014

2013

2014

2013

60,383

46,336

43,154

42,037

3,894

872

3,641

872

64,277

47,208

46,795

42,909

Guarantee obligations with related parties The Company has outstanding guarantee obligations with its related parties, as described in Note 35.4.1 to the financial statements.

Annual Report 2014

69 7.

Thai Factory Development Public Company Limited

Cash and cash equivalents (Unit: Thousand Baht)

Cash

Consolidated

Separate

financial statements

2014

2013

512

460

345

325

Bank deposits

157,367

1,268,204

31,587

1,192,050

Total

157,879

1,268,664

31,932

1,192,375

As at 31 December 2014, bank deposits in saving accounts and fixed deposits carried interests between 0.1 and 2.6 percent per annum (2013: between 0.5 and 2.8 percent per annum). 8.

Investment in trading securities As at 31 December 2014 and 2013, the balance of investment in trading securities are as follows: (Unit: Thousand Baht) Consolidated financial statements / Separate financial statements 2014

2013

Cost

Fair value

Cost

Fair value

102,715

84,050

Trading securities Equity securities Less: Unrealised loss on changes in value of trading securities Total securities - net

(18,665) 84,050

Annual Report 2014

70 During the year, the movement of trading securities are as follows: (Unit: Thousand Baht) Consolidated financial statements / Separate financial statements 2013

2014 Book value as at 1 January 2014 - net Acquisition Disposal Changes in value of trading securities Book value as at 31 December 2014 - net

684,454

(581,739)

(18,665)

84,050

During the year, the Company and its subsidiaries have realised gain (loss) on trading securities and unrealised gain (loss) on changes in value of trading securities as follow: (Unit: Thousand Baht) Consolidated financial statements / Separate financial statements 2014 Realised gain on trading securities Unrealised loss on changes in value of trading securities Net

2014

25,137

(18,665)

6,472

Annual Report 2014

71 9.

Thai Factory Development Public Company Limited

Trade and other receivables (Unit: Thousand Baht) Consolidated

Separate

financial statements

2014

2013

Trade receivables - related parties (Note 6) Aged on the basis of due dates Past due Up to 3 months

473

850

3 - 6 months

197

Over 12 months

139

473

1,186

1,755

1,927

Up to 3 months

4,169

9,732

2,612

1,648

3 - 6 months

1,532

1,655

218

6 - 12 months

5,994

129

Over 12 months

5,311

6,387

193

189

Total

18,761

19,764

3,152

1,928

Less: Allowance for doubtful debts

(5,714)

(3,842)

Total trade receivables - unrelated parties, net

13,047

15,922

2,948

1,926

Total trade receivable - net

13,047

16,061

3,421

3,114

Others

573

Total other receivables - related parties

573

Others

17,422

3,806

7,150

3,801

Total other receivables - unrelated parties

17,422

3,806

7,150

3,801

Total other receivables

17,465

4,379

7,150

3,801

Trade and other receivables - net

30,512

20,440

10,571

6,915

Total trade receivables - related parties Trade receivables - unrelated parties Aged on the basis of due dates Not yet due Past due

(204)

Other receivables - related parties (Note 6)

Other receivables - unrelated parties

Annual Report 2014

72 10.

Project development costs (Unit: Thousand Baht) Consolidated

Separate

financial statements

2014

2013

2014

2013

2,431,674

1,788,880

1,937,544

1,622,710

Interest cost*

362,622

468,784

90,816

73,287

Construction in progress

901,686

346,534

400,750

333,817

Condominium units available for sale

1,506,881

2,220,051

Project development cost - net

5,202,863

4,824,249

2,429,110

2,029,814

5.50% - 6.88%

4.77% - 6.61%

6.75% - 6.88%

4.77% - 6.61%

Land and land improvement

Capitalisation rates

During the year ended 31 December 2014, the amount of borrowing costs capitalised by the Company and its subsidiaries to their projects was approximately Baht 28 million (separate financial statements: Baht 23 million) (2013: Baht 165 Million (separate financial statements: Baht 29 million)). The Company and its subsidiaries have mortgaged land for sale under the property development project and the construction thereon, totaling Baht 4,235 million (separate financial statements: Baht 1,796 million) (2013: Baht 4,309 million (separate financial statements: Baht 1,688 million)), as collateral for bank overdraft facilities and long-term loans from financial institutions. 11.

Restricted bank deposits This balance represents fixed deposits pledged with banks to secure credit facilities of long-term loans from financial institutions and letters of guarantee issued by the banks on behalf of the Company and its subsidiaries.

Annual Report 2014

73 12.

Thai Factory Development Public Company Limited

Investments in subsidiaries Details of investments in subsidiaries as presented in separate financial statements are as follows: (Unit: Thousand Baht) Dividend received Companyâ&#x20AC;&#x2122;s name

Paid-up capital 2014

Shareholding percentage

2013

2014

2013

(Percent)

during the year

Cost 2014

2013

2014

2013

Total Industrial Services Company Limited SG Land Company Limited

400,000

100,000

100.00

397,550

97,550

196,721

100,450

49.91

45,523

701,000

100.00

496,901

939,974

639,974

196,721

(41,497)

898,477

598,477

196,721

VSSL Enterprise Company Limited Total Less: Allowance for diminution in value of investments in subsidiary Net

Investment in Total Industrial Services Company Limited On 14 January 2014, Total Industrial Services Company Limited has increased its registered capital from Baht 100 million to Baht 400 million, by issue of 30 million ordinary shares at a par value of Baht 10 each, to the existing shareholders. The increase shares were fully called up in March 2014. The Company already paid in its share of the additional capital, amounting to Baht 300 million. 13.

Investment in available-for-sales securities (Unit: Thousand Baht) Consolidated financial statements / Separate financial statements Unrealised gain on changes in value of

Shareholding Fundâ&#x20AC;&#x2122;s name

percentage 2014

2013

(Percent)

13.08

investment

Cost 2014

2013

2014

2013

225,000

Carrying amount 2014

2013

18,000

225,000

243,000

18,000

225,000

243,000

MFC Industrial Investment Property and Leasehold Fund (M-II) Total

Annual Report 2014

74 During the year 2013, the Company purchased unit fund of MFC Industrial Investment Property and Leasehold Fund (M-II) (â&#x20AC;&#x153;the Fundâ&#x20AC;?) from Total Industrial Services Company Limited (a subsidiary) at a par value of Baht 10, totaling Baht 150 million. The Company paid Baht 12 million to a subsidiary and the remaining amount was the offset of debts between parties as follows: 1. The amount of Baht 100 million was deemed as deposit for land which a subsidiary purchased from the Company (Note 6)

2. The amount of Baht 38 million was proceeds of the transfer of land-purchasing rights amounting to Baht 16 million and repayment of outstanding debts (Note 6) In addition, on 27 November 2013, the Company purchased 7.5 million unit fund of the Fund at a par value of Baht 10, totaling Baht 75 million, in accordance with the investment in the Fund agreement as described in Note 15; therefore, as at 31 December 2013, the Company has proportion in the Fund at 13.08 percent of the value of the Fund. During the current year, the Company received dividend amounting to Baht 14 million from MFC Industrial Investment Property and Leasehold Fund (M-II) (2013: Baht 8 million). 14.

Leasehold rights (Unit: Thousand Baht) Separate financial statements

Consolidated financial statements Prepaid rental

Prepaid rental

Leasehold

- Land

- Building

right - Land

right - Building

right - Land

Total

Cost As at 1 January 2013 Addition Disposal As at 31 December 2013 Addition As at 31 December 2014

132,264

476,256

83,316

9,096

700,932

56,376

112

(26,940)

132,264

476,368

56,376

9,096

674,104

56,376

756

132,264

477,124

56,376

9,096

674,860

56,376

35,674

143,135

14,457

5,402

198,668

8,293

7,635

30,952

2,235

616

41,438

1,414

Accumulated amortisation As at 1 January 2013 Amortisation for the year

(6,985)

As at 31 December 2013

43,309

174,087

9,707

6,018

233,121

9,707

Amortisation for the year

7,635

30,966

1,415

616

40,632

1,415

As at 31 December 2014

50,944

205,053

11,122

6,634

273,753

11,122

As at 31 December 2013

88,955

302,281

46,669

3,078

440,983

46,669

As at 31 December 2014

81,320

272,071

45,254

2,462

401,107

45,254

Depreciation on disposals

Net Book Value

Annual Report 2014

Thai Factory Development Public Company Limited

14.1 Separate financial statements The Company has leased land from the Privy Purse Bureau to construct a residential building (Mahadlekluang project). The residential building is to be the property of the Privy Purse Bureau from the commencement of construction, and the Company has to comply with conditions stipulated in the lease agreement, as stated in Note 35.2.2. In 2008, the Company entered into an agreement with an overseas investor holding shares of a subsidiary (SG Land Company Limited), whereby the leasehold rights and other rights of the Mahadlekluang project are to be sold to the subsidiary for a total of Baht 280 million. The Company and the overseas investor each hold equal investments of 50%, or equivalent to Baht 140 million each. The Company has received partial payment from the subsidiary amounting to Baht 130 million. The Company recorded such amount as a liability under the caption of deposit from sale of project in the statement of financial position. 14.2 Subsidiary 1)

The subsidiary records leasehold rights to land that it has leased since 1993 from the Privy Purse Bureau as prepaid rental - land. The subsidiary constructed an office building for rent on the leased land and the office building has been the property of the lessor since the commencement of the construction. The subsidiary has received the right to use the office building for rent until the end of the lease term, and therefore has recorded value of the office building as prepaid rental - building.

The subsidiary received leasehold rights to land from a company to construct an office building for rent, and leasehold rights to land from natural persons to construct a factory for lease, as stated in Note 15.

The subsidiary has placed the land leasehold rights under agreements with the Privy Purse Bureau, with total net book values as at 31 December 2014 of Baht 73 million, as collateral to electricity use (2013: Baht 318 million, as collateral to secure debt restructuring liabilities).

Annual Report 2014

76 15.

Investment properties The net book value of the investment properties as at 31 December 2014 and 2013 is presented below. (Unit: Thousand Baht) Consolidated financial statements Land and factory building

Office building

for lease

Total

31 December 2014: Cost Less Accumulated depreciation

343,235 (7,849)

341,505

684,740

(128,993)

(136,842)

Less Allowance for diminution in value

(11,950)

Net book value

323,436

212,512

535,948

3,001

339,944

342,945

(1,509)

(109,247)

(110,756)

1,492

230,697

232,189

(11,950)

31 December 2013: Cost Less Accumulated depreciation Net book value

The subsidiary operates its factory rental business on land leased from the Industrial Estate Authority of Thailand and natural persons, as stated in Note 35.2.3, and office rental business on land leased from a company, as stated in Note 35.2.4. A reconciliation of the net book value of investment properties for the years 2014 and 2013 is presented below. (Unit: Thousand Baht) Consolidated financial statements 2013

2014 Net book value at beginning of year

232,189

365,005

Acquisition of assets/adjustment

341,794

1,612

Disposals - net book value

Depreciation charged

(26,342)

Allowance for diminution in value

(12,460)

Translation adjustment Net book value at end of year

(110,225) (24,203) -

767

535,948

232,189

Annual Report 2014

Thai Factory Development Public Company Limited

The fair value of the investment properties as at 31 December 2014 and 2013 stated below: (Unit: Thousand Baht) Consolidated financial statements 2014

2013

Land and factory building for rent

232,436

350,000

Office building for rent

617,000

946,000

The fair values of the above investment properties have been determined based on valuations performed by an accredited independent valuer. The fair value of the land and factory building for rent and office building for rent has been determined using the income approach. The main assumptions used in the valuation are yield rate, inflation rate, long-term vacancy rate and long-term growth real rates. The subsidiary have pledged investment properties amounting to approximately Baht 210 million (2013: Baht 232 million) as collateral for letter of guarantee to guarantee electricity use and against debt restructuring liabilities. Sale of assets to MFC Industrial Investment Property and Leasehold Fund in 2013 On 8 August 2013, the Company and its subsidiary entered into an agreement with MFC Industrial Investment Property and Leasehold Fund (â&#x20AC;&#x153;the Fundâ&#x20AC;?) as follows: 1.

The Company and Total Industrial Services Company Limited (a subsidiary) entered into a sales and purchase agreement whereby the Company agreed to sell assets consisting of property and a factory building in TFD industrial Park and a factory building in Kingkaew Project to the Fund at a price of Baht 460 million (inclusive of VAT) and Baht 265 million (inclusive of VAT), respectively. The Company and its subsidiary registered the transfer of the ownership of the assets to the Fund in December 2013.

Total Industrial Services Company Limited (a subsidiary) entered in to a land lease agreement to grant the Fund land leasehold rights in Kingkaew Project at the consideration of Baht 25 million (inclusive of VAT). On 4 December 2013, the Fund has entered in to a land lease agreement with a group of owners.

The Company and a subsidiary have agreed to invest in an addition of unit trusts of the Fund as follows: 3.1 The Fund has planned to increase the unit trust of the Fund to Baht 750 million with a purpose to buy a property and a factory building located in TFD industrial Park and Kingkaew Project and received the transfer of leasehold right of Kingkaew Project. The Company and a subsidiary agreed to pay the increase of unit trust to the Fund amounting to Baht 15 million and Baht 10 million, respectively. The Company and a subsidiary already paid an additional of unit trusts to the Fund.

Annual Report 2014

78 3.2 An agreement regarding compensation for property and factory building in a plot of which a sublease agreement has not been made or a sublease has been made but rental or service fee has not started or has started but the remaining lease period is less than 6 months. The Company and a subsidiary agreed to guarantee the minimum rental rate and service fee for these assets for a period of three years from the date the property ownership was transferred. 3.3 An agreement relating to investment in unit trusts of the Fund, whereby the Company or its subsidiary agree to invest in unit trusts not less than 10% of the increase value in unit trust, equivalent to Baht 75 million (7.5 million units). As at 31 December 2013, the Company made an investment in the Fund, equivalent to 13.08 % of the value of the Fund’s unit trusts. The Company recorded a gain of Baht 18 million on the measurement of its investment in the unit trusts as “Gain on changes in value of available-for-sale securities”, in other comprehensive income for the year 2013 (Note 13). 1.

An amendment agreement of Property manager appointment agreement No. 1 made with the Fund whereby the Fund appointed the Company as the Management Company to manage the property of the increase of unit trusts to seek benefits from the property. In this regard, the Company agreed to place additional deposit of Baht 0.5 million with the Fund as a performance guaranteed the Management Company.

On 23 December and 27 December 2013, the Fund issued a letter to inform the result of acceptance of construction of the TFD Industrial Estate with significant details as follows: 1) An agreement related to property and a factory building under correction, addition, repair or refurbishment work. According to the asset transfer agreement, the Company agreed to place a Baht 79 million, Baht 4 million deducted from the sale value of land and factory building and Baht 75 million paid in cash, as security with the Fund to guarantee the asset transfer. The Fund will return this money to the Company when the above mentioned work is completed. 2) The Company agreed to guarantee of the factory’s construction for the period of 5 years after the date of transfer of the factory building to the Fund. The Company estimated the cost of minimum revenue guarantee for leasing in No. 3.2, and guarantee of the construction which states that the Company must pay to the Fund at Baht 6 million and recorded this amount as cost of sale in profit and loss statement. The Company had gain from sales of land and factory building amounting to Baht 222 million (net of related selling expenses) and realised it in profit or loss for the year 2013.

Annual Report 2014

Thai Factory Development Public Company Limited

The subsidiary estimated the cost of minimum revenue guarantee for leasing in No. 3.2, which states that the subsidiary must pay to Fund at Baht 2 million and record this amount as a deduction against gain from sale of investment property. The Company had gain of sales of assets and transfer of land leasehold right amounting to Baht 134 million (net of related selling expenses) and realised it in profit or loss for the year 2013. During the year 2014, the Company and its subsidiaries paid additional compensation of minimum rental guarantee to the Fund in amounting to Baht 24 million (Separate financial statements: Baht 22 million), and recognised as administrative expenses. 16.

Equipment (Unit: Thousand Baht) Consolidated financial statements Improvement of

Furniture,

leasehold office

fixtures and

building

Motor vehicles

office equipment

Total

Cost As at 1 January 2013

6,608

30,612

35,688

72,908

Additions

711

467

747

1,925

Disposals

Transfers

46,238

As at 31 December 2013

7,319

31,079

82,654

121,052

Additions

1,334

20,164

8,503

30,001

Disposals

(4,521)

(6,084)

(6,976)

(17,581)

Transfers

11,428

169

11,597

As at 31 December 2014

15,560

45,159

84,350

145,069

6,595

20,574

26,910

54,079

Depreciation for the year

3,356

2,914

6,273

Depreciation on disposals

As at 31 December 2013

6,598

23,930

29,820

60,348

Depreciation for the year

2,149

5,116

3,588

10,853

Depreciation on disposals

(4,521)

(5,363)

(6,926)

(16,810)

As at 31 December 2014

4,226

23,683

26,482

54,391

As at 31 December 2013

721

7,149

52,834

60,704

As at 31 December 2014

11,334

21,476

57,868

90,678

(19)

Accumulated depreciation: As at 1 January 2013

(4)

Net book value:

Depreciation for the year 2013 (All included in an administrative expenses)

6,273

2014 (All included in an administrative expenses)

10,853

Annual Report 2014

(Unit: Thousand Baht) Separate financial statements Improvement of

Furniture, fixtures

leasehold office

and office Motor vehicles

building

Total

equipment

Cost As at 1 January 2013

4,533

25,692

18,730

48,955

Disposals

467

693

1,160

Transfers

46,238

As at 31 December 2013

4,533

26,159

65,661

96,353

Additions

1,334

18,864

7,312

27,510

Disposals

(4,521)

(4,500)

(6,903)

(15,924)

Transfers

11,597

As at 31 December 2014

12,943

40,523

66,070

119,536

4,522

15,902

10,658

31,082

Depreciation for the year

3,107

2,668

5,776

As at 31 December 2013

4,523

19,009

13,326

36,858

Depreciation for the year

2,040

4,928

3,254

10,222

Depreciation on disposals

(4,521)

(3,778)

(6,904)

(15,203)

As at 31 December 2014

2,042

20,159

9,676

31,877

As at 31 December 2013

7,150

52,335

59,495

As at 31 December 2014

10,901

20,364

56,394

87,659

Accumulated depreciation: As at 1 January 2013

Net book value:

Depreciation for the year 2013 (All included in an administrative expenses)

5,776

2014 (All included in an administrative expenses)

10,222

As at 31 December 2014, the Company had vehicles and equipment under finance lease agreements with net book values amounting to Baht 27 million (2013: Baht 11 million). As at 31 December 2014, certain improvement of leasehold office building and equipment items have been fully depreciated but are still in use. The gross carrying amount before deducting accumulated depreciation of those assets amounted to approximately Baht 37 million (2013: Baht 45 million) (Separate financial statements: Baht 14 million, 2013: Baht 22 million).

Annual Report 2014

81 17.

Thai Factory Development Public Company Limited

Short-term loans from financial institutions (Unit: Thousand Baht)

Bill of exchange

Interest rate

Consolidated

Separate

(percent per annum)

financial statements

MLR-1%, 4.9 - 5.5%

2014

2013

2014

2013

1,548,000

2,560,200

1,190,000

2,030,200

1,548,000

2,560,200

1,190,000

2,030,200

Bank overdrafts facility of the Company are secured by part of the project development of the Company. Such short-term loans are unsecured bill of exchange. However, the Company has provided guarantee for a subsidiaryâ&#x20AC;&#x2122;s issuance and sale of bill of exchange as stated in Note 35.4.1. 18.

Trade and other payables (Unit: Thousand Baht) Consolidated

Separate

financial statements

2014

2013

2014

2013

Trade payables Trade accounts payable - unrelated parties

22,335

14,024

10,475

6,039

753

104

753

104

69,087

75,143

483

522

92,175

89,793

11,228

6,626

113,573

390,033

2,214

6,860

Retention for constructors

39,056

24,443

10,811

12,097

Accrued expenses

75,856

75,054

24,282

57,417

Other

11,113

6,172

2,280

Total other payables

239,598

495,702

37,387

78,654

Total trade and other payables

331,773

585,495

48,165

85,280

Trade accounts payable - related parties (Note 6) Accounts payable - construction Accounts payable - land Total trade payables Other payables Advance received from customers

Annual Report 2014

82 19.

Debenture (Unit: Thousand Baht) Consolidated / Separate financial statements 2014

2013

Senior and unsecured debenture 1/2556

500,000

Senior and unsecured debenture 2/2556

850,000

Senior and unsecured debenture 1/2557

1,693,500

Less: Unamortised cost relating to the issuance of debenture Total Less: Current portion of debentures Debenture - net of current portion

(6,047)

(5,452)

1,687,453

1,344,548 (1,344,548)

1,687,453

Movements in debenture account during the year ended 31 December 2014 are summarised below. (Unit: Thousand Baht) Consolidated / Separate financial statements Balance as at 1 January 2014

1,344,548

Add: Issue debenture during the year

1,693,500

Amortisation of deferred debenture issuing costs Less: Redemption Deferred debenture issuing cost Balance as at 31 December 2014

6,773 (1,350,000) (7,368) 1,687,453

The Extraordinary General Meeting of the Companyâ&#x20AC;&#x2122;s shareholders held on 24 June 2013 passed resolutions to approve the issue and offer of senior and unsecured debenture not more than Baht 3,500 million with term to maturity of not more than 5 years to institutional investors, private investors and the public. On 3 July 2013, the Company issued and offered 500,000 units of the senior and unsecured secured debenture#1 with a par value of Baht 1,000 each, or a total value of Baht 500 million. The debenture mature on 3 July 2014, bearing interest at a rate of 5.3% per annum and pay interest every 6 months.

Annual Report 2014

Thai Factory Development Public Company Limited

Subsequently on 22 November 2013, the Company issued and offered 850,000 units of senior unsecured debentures #2 with a par value of Baht 1,000 each, or a total of Baht 850 million. The debentures mature on 22 November 2014, bearing interest at a rate of 5.5% per annum and pay interest every 3 months. On 10 July 2014, the Company issued and offered 1,693,500 units of senior and unsecured debenture#3 with a par value of Baht 1,000 each, or a total of Baht 1,694 million. The debentures mature on 10 July 2016, bearing interest at a rate of 5.5% per annum that will be paid in every 3 months. The balance of the debenture presented net of deferred debenture issuing costs. Under the debenture agreement, there are normal covenants relating to various matters as required in the normal course of business. 20.

Liabilities under finance lease agreements (Unit: Thousand Baht) Consolidated

Separate

financial statements

2014

2013

2014

Liabilities under finance lease agreements

20,394

7,863

19,527

Less: Deferred interest expenses

(1,931)

Total

18,463

7,192

17,671

7,174

Less: Portion due within one year

(6,958)

(3,450)

(6,714)

(3,432)

11,505

3,742

10,957

3,742

(671)

7,844

(1,856)

(670)

Liabilities under finance lease agreements - net of current portion

The Company and subsidiaries has entered into finance lease agreements with leasing companies to lease motor vehicles, truck, backhoe loaders and photocopying machines for use in its operations, whereby it is committed to pay rental on a monthly basis. The average term of the agreements is 48 months. Future minimum lease payments required under the finance lease agreements were as follows: (Unit: Thousand Baht) Consolidated financial statements Less than 1 year

Future minimum lease payments Deferred interest expenses

2014

2013

7,965

3,880

(1,007)

(430)

1 - 4 years 2014 12,429 (924)

2013 3,983 (241)

Total 2014 20,394 (1,931)

2013 7,863 (671)

Present value of future minimum lease payments

6,958

3,450

11,505

3,742

18,463

7,192

Annual Report 2014

84 (Unit: Thousand Baht) Separate financial statements Less than 1 year

Future minimum lease payments Deferred interest expenses

2014

2013

7,698

3,861

1 - 4 years 2014 11,829

(429)

(984)

(872)

Total

2013

2014

3,983

19,527

(241)

7,844

(1,856)

(670)

Present value of future minimum

21.

3,432

6,714

lease payments

10,957

3,742

17,671

7,174

Long-term loans from financial institutions (Unit: Thousand Baht)

Credit No.

Credit facilities

Consolidated

Separate

(Million Baht)

financial statements

2014

2013

2014

18,347

1,796

312,249

322,162

312,249

322,162

990

150,000

1,550

558,716

800

513,349

150

150,000

380

134,838

5,756

1,260,436

1,049,225

975,598

490,509

Total Less : Current portion

Long-term loans - net of current portion

Credit line (1)

(521,037)

(894,223)

(503,550)

(335,507)

739,399

155,002

472,048

155,002

On 30 April 2008, the Company had a loan facility of Baht 90 million from a local bank. The same facility is also used by a joint investor giving a total amount of Baht 180 million (which has been drawn down in full). It carries interest at MLR - 1% per annum and principal and interest are to be paid together, in monthly installments of Baht 1 million, commencing from May 2008. The loan must be fully repaid within May 2017. Such loan was secured by the pledge of 10,022,950 ordinary shares of a subsidiary with a par value of Baht 5 each held by the Company, and by such subsidiary as a joint receivable. Subsequently, during the year 2014 the Company repaid such loan in full and redeemed the pledge of ordinary shares of a subsidiary company.

Annual Report 2014

85 Credit line (2)

Thai Factory Development Public Company Limited

On 9 June 2011, the Company received a loan facility of Baht 1,796 million from a local bank (Baht 1,223 million of which was drawn down), carrying interest at MLR per annum. The interest must be paid monthly and principal is to be paid using funds from the sale of real estate that is released from mortgage, in accordance with the agreement conditions. The loan must be repaid in full within June 2017. Such loan was secured by the following: (1)

The mortgage of land with construction thereon and the assignment of the beneficiary rights under the insurance policies covering these assets to the lender.

(2)

The pledge of the Companyâ&#x20AC;&#x2122;s rights to the fixed deposit with the bank.

Credit line (3)

On 26 December 2012, the Company received a loan facility of Baht 990 million from a local bank (Baht 150 million has been drawn down), carrying interest at MLR+0.5% per annum. The principal is to be paid using funds from the sale of condominium units, in accordance with the agreement conditions. The loan must be repaid in full within December 2017. Such loan was secured by the following: (1)

The mortgage of land with construction thereon and the assignment of the beneficiary rights under the insurance policies covering these assets to the lender.

(2) Credit line (4)

Letter of guarantee from the Executive Chairman.

On 25 March 2010, the subsidiary received a loan facility of Baht 1,550 million from a local bank (Baht 1,455 million has been drawn down), carrying interest at SPRL+ risk rate 1.25% per annum. The principal is to be paid using funds from the sale of condominium units, in accordance with the agreement conditions. Such loan was secured by the following: (1)

The mortgage of land with construction thereon and the assignment of the beneficiary rights under the insurance policies covering these assets to the lender.

(2)

Letter of guarantee from the Executive Chairman.

The subsidiary had repaid this loan in full during the current year. 35

Annual Report 2014

86 Credit line (5)

On 31 July 2014, the Company received a loan facility of Baht 800 million from a local bank (which has been drawn down in full), carrying interest at MLR per annum. The principal is to be paid using funds from the sale of condominium units, in accordance with the agreement conditions. The loan must be repaid in full within 31 July 2016. Such loan was secured by the following: (1)

The mortgage of land with construction of a subsidiary thereon and the assignment of the beneficiary rights under the insurance policies covering these assets to the lender.

(2)

Letter of guarantee from the Executive Chairman and a subsidiary as a joint receivable.

Credit line (6)

On 14 August 2014, a subsidiary received a loan facility of Baht 150 million from a local bank (which has been drawn down in full), carrying interest at MLR - 1% per annum. The principal and interest must be repaid monthly in accordance with the agreement conditions. The loan must be repaid in full within 10 years from the drawn down date. Such loan was secured by the following: (1)

The mortgage of land with construction of a subsidiary thereon and the assignment of the beneficiary rights under the insurance policies covering these assets to the lender.

(2) Credit line (7)

Letter of guarantee from the Company.

On 14 August 2014, a subsidiary received a loan facility of Baht 380 million from a local bank (Baht 135 million has been drawn down), carrying interest at MLR-1% per annum. The principal and interest must be repaid monthly in accordance with the agreement conditions. The loan must be repaid in full within 10 years from the drawn down date. Such loan was secured by the following: (1)

The mortgage of land with construction of a subsidiary thereon and the assignment of the beneficiary rights under the insurance policies covering these assets to the lender.

(2)

Letter of guarantee from the Company.

Annual Report 2014

Thai Factory Development Public Company Limited

The loan agreements contain certain covenants as restrictions on the Company and its subsidiaries imposed by the lenders, related to such matters as the maintenance of a certain financial ratio in normal course of business, dividend payment and maintenance of the shareholder structure. The long-term credit facilities of the Company and its subsidiaries which have not yet been drawn down were as follows. (Unit: Million Baht) Consolidated

Separate

financial statements

2014

2013

Long-term credit facilities which have not yet been drawn down

22.

1,753

1,508

1,413

Debt restructuring payable (Unit: Thousand Baht) Consolidated financial statements 2013

2014 Debt restructuring payable

66,711

Less: Current portion

(47,180)

Debt restructuring payable - net of current portion

19,531

A subsidiary has made a debt restructuring agreement with a financial institution at interest rate MLR-1% per annum whereby principal and interest payment of Baht 4 million is to be made monthly and it must be fully paid within April 2017. Such loan was guaranteed by the pledge of leasehold rights and mortgage of office for rent of the subsidiary, including the assignment of the beneficiary rights under the insurance policies covering these assets to the lender. During the current year, the subsidiary repaid the outstanding debt under restructuring agreement in full.

Annual Report 2014

88 23.

Long-term loans from related party and interest payable (Unit: Thousand Baht) Consolidated financial statements 2014

2013

Long-term loans from related party

127,925

146,273

Interest payable

184,797

167,097

Total

312,722

313,370

Less: Current portion

(13,334)

Long-term loans from related party and interest payable - net of 312,722

current portion

300,036

On 30 April 2008, a subsidiary entered into loan agreements with an overseas related party with details as follows: Credit line (1)

A loan facility of Baht 90 million, which is fully drawn down, carries the interest at 15 percent per annum. The principal and interest must be repaid monthly with interest charged at a relaxed rate. Payments must be at least Baht 1 million per month. As stipulated in the agreement, such loan must be repaid at the earlier of 9 years after the first draw down date and the loan closing date. The subsidiary had repaid in full during the current year.

Credit line (2)

A loan of Baht 135 million, drawn down in full, carries the interest at 15 percent per annum, and to be monthly repaid at a relaxed rate. According to the agreement, the first principal payment is to be made in the month of the loan closing date and full repayment is to be made within 3 years after the loan closing date.

Credit line (3)

The subsidiary obtained a loan of Baht 140 million (Baht 120 million drawn down) to use in acquiring Companyâ&#x20AC;&#x2122; leasehold rights of Mahadlekluang project. The loan carries interest at a rate of 15% per annum, to be paid on a monthly basis. As stipulated in the agreement, payment conditions are the same as those of credit line (2).

Annual Report 2014

Thai Factory Development Public Company Limited

Remark: â&#x20AC;&#x153;The loan closing dateâ&#x20AC;? means the date that liabilities under the debt restructuring agreement (Note 22) and liabilities under loan agreements of Baht 180 million (entered by Thai Factory Development Public Company Limited and Schubert Holdings Pte. Ltd. with Siam Commercial Bank Plc.) have fully been repaid. (During the year 2014, such liabilities under debt restructuring and such loan were already repaid in full.) There was no collateral for such long-term loans. 24.

Provision for long-term employee benefits Provision for long-term employee benefits, which is compensations on employeesâ&#x20AC;&#x2122; retirement, was as follows: (Unit: Thousand Baht)

Defined benefit obligation at beginning of year Current service cost

Separate

financial statements

2014

2013

2014

2013

12,530

10,580

10,259

8,684

2,635

1,496

2,248

1,203

516

454

421

372

Interest cost Benefits paid during the year

Consolidated

(2,240)

262

848

Defined benefit obligation at end of year

13,703

12,530

11,536

10,259

Unrecognised transitional provisions

(1,794)

(3,588)

(1,507)

(3,015)

11,909

8,942

10,029

7,244

Actuarial losses

Provisions for long-term employee benefits at end of year

Long-term employee benefit expenses included in the profit or loss was as follows: (Unit: Thousand Baht) Consolidated

Separate

financial statements

2014

Current service cost and interest cost

2013

2,635

1,496

2,248

1,203

516

454

421

372

Transitional liability recognised during the year

1,794

1,507

Total expense recognised in profit or loss

4,945

3,744

4,176

3,082

Interest cost

Such expenses are included in Administrative expenses

Annual Report 2014

90 As at 31 December 2014, cumulative actuarial losses, which were recognised in other comprehensive income of the Company and its subsidiaries, amounted to Baht 0.3 million (2013: Nil) (Separate financial statements: Baht 0.8 million and 2013: Nil). Key actuarial assumptions used for the valuation are as follows: Consolidated financial statements

Separate financial statements

2014

2013

2014

2013

(% per annum)

Discount rate

Future salary increase rate

0% - 15%

0% - 6%

Staff turnover rate (depending on age and level of staffs)

The amounts of defined benefit obligations and experience adjustments for the current year and the past four years are as follows: (Unit: Thousand Baht) Experience adjustments Defined benefit obligation

25.

on the obligation

Consolidated

Separate

Consolidated

Separate

financial

statements

Year 2014

13,703

11,536

134

111

Year 2013

12,530

10,529

Year 2012

10,580

8,684

Year 2011

10,582

8,695

Year 2010

8,970

7,536

Long-term provisions (Unit: Thousand Baht)

1 January 2013

Consolidated

Separate

financial statements

Increase during the year

2,373

31 December 2013

2,373

31 December 2014

2,373

Annual Report 2014

Thai Factory Development Public Company Limited

Provision of construction guarantee for factory building projects As mentioned in Note 15, in December 2013, the Company has estimated a provision of construction guarantee for factory building projects paid to the Fund for 5 years amounting to Baht 2.3 million. 26.

Share Capital On 18 April 2013, the 2012 Annual General Meeting of Companyâ&#x20AC;&#x2122;s shareholders approved the changes in the registered share capital of the Company as follows: Register share

Amount per share

capital

(Thousand shares)

(Baht)

(Thousand Baht)

902,880

Decrease Increase New

(1)

902,880

(1)

361,150

1,264,029

In addition, the Company has registered the paid up capital as follows: Shares

Amount per share

Paid up capital

(Thousand shares)

(Baht)

(Thousand Baht)

789,530

Increase from stock dividend paid

180,558

Increase from exercise of warrant

113,412

1,083,500

New

The Company registered the changes in its registered and paid up share capital with the Ministry of Commerce in January, April, May, July and October 2013. On 30 January 2014, the Extraordinary General Meeting of the Companyâ&#x20AC;&#x2122;s shareholders No. 1/2557 approved the changes in the registered share capital of the Company as follows: Register share

Previous Decrease Increase New

Amount per share

capital

(Thousand shares)

(Baht)

(Thousand Baht)

1,264,029 (118)

1 1

1,264,029 (118)

235,950

1,499,861

Annual Report 2014

92 The Company registered the changes in its registered share capital with the Ministry of Commerce in January and February 2014. On 12 November 2014, the Extraordinary General Meeting of the Companyâ&#x20AC;&#x2122;s shareholders No. 3/2557 approved the changes in the registered share capital of the Company as follows: Register share

Amount per share

capital

(Thousand shares)

(Baht)

(Thousand Baht)

1,499,861

Decrease

(235,950)

Increase

651,000

1,914,911

New

In addition, the Company has registered the paid up capital as follows:

Amount per share

Paid up capital

(Thousand shares)

(Baht)

(Thousand Baht)

1,083,500

200,000

1,283,501

Increase from exercise of warrant Increase from issues share capital New

The Company registered the changes in its registered and paid up share capital with the Ministry of Commerce in November 2014. 27.

Warrants to purchase ordinary shares On 18 April 2013, the Annual General Meeting of the Companyâ&#x20AC;&#x2122;s shareholders approved the issue and offer of the TFD-W2 in the amount not exceeding 181 million units to the existing shareholders of the Company at the ratio 5 existing shares to the rights receive 1 unit of the TFD-W2. The conversion exercise ratio is one warrant holder is entitled to buy one ordinary share at the price of Baht 5 whereby the warrant has 3-year tenor and the offer to sell is free of charge. The offer to sell to the existing shareholders is on 16 May 2013.

Annual Report 2014

Thai Factory Development Public Company Limited

The warrant No. 2 (TFD-W2) exercised of the holders are as follows: Number of exercised rights

Received subscription

(Units)

(Baht)

30 June 2013

56,261

281,305

30 September 2013

90,380

451,900

31 December 2013

31 March 2014

1,200

6,000

30 June 2014

30 September 2014

31 December 2014

Exercise date

As at 31 December 2014, there were 180,409,765 warrants (TFD-W2) to purchase ordinary shares that have not yet been exercised. On 30 January 2014, the Extraordinary General Meeting of the Company’s shareholders No. 1/2557 approved the issuance and offering of the Warrants to purchase the Company’s newly issued ordinary shares No.3 (“Warrant No.3” or “TFD-W3”) in the amount not exceeding 120 million units, details are as follows: 1.

Warrant No.3 in the amount not exceeding 12 million units to be offered free of charge to the general investors who subscribe for newly issued ordinary shares at the ratio of 10 newly issued shares:1 unit of Warrant No.3 (10 newly issued ordinary shares shall be allotted by 1 unit of Warrant No.3) (any fraction shall be disregarded).

Warrant No.3 in the amount not exceeding 108 million units to be offered free of charge to the existing shareholders of the Company whose names appear on the Record Date i.e. on 5 March 2014 in proportion to their respective shareholdings (the “Rights Offering”), by the ratio of 10 existing shares:1 unit of Warrant No.3.

Subsequently, on 30 April 2014, the Annual General Meeting of the Company’s shareholder approved the changes of the exercise price and offering ratio of Warrant to purchase the Company’s newly issued ordinary shares No.3 (“Warrant No.3” or “TFD-W3”) as follow; 1.

The changed of the exercise price from Baht “6.30” as previously determined to “not less than 90% of the weighted average price of shares traded in the Stock Exchange of Thailand in the 7 trading days prior to the offering date which date shall be the first offering date to the investors”. (The new exercise price shall be determined after the SEC grants permission for the Company to issue and offer the newly issued ordinary shares and Warrant No.3 to the general investors).

Annual Report 2014

94 2.

The changed of allotment ratio of Warrant No.3 as follows; (a)

The offering to the general investors who subscribe for newly issued ordinary shares shall be amended from previously determined at the ratio of 10 newly issued shares: 1 unit of Warrant No.3 to the ratio of 12 newly issues shares: 1 unit of Warrant No.3 (12 newly issued ordinary shares shall be allotted per 1 unit of Warrant No.3), any fraction thereof shall be disregarded; and

(b)

The offering to existing shareholders shall be amended from previously determined at the ratio of 10 existing shares: 1 unit of Warrant No.3 to the ratio of 12 existing shares: 1 unit of Warrant No.3, any fraction thereof shall be disregarded.

On 12 November 2014, the Extraordinary General Meeting of the Company No.3/2557 has approved to issuance and offering the 3rd series of warrants (â&#x20AC;&#x153;TFD-W3â&#x20AC;?) in an amount not exceeding 318,000,000 units to the existing shareholders in proportion of shareholdings without charge, at the ratio of 5 existing shares to 1 unit of warrant (fractions will be discarded). The exercise price is Baht 5.00 per share, details as follows: No. of warrants granted (Units)

Not exceeding 318,000,000 units

Life of warrants

Not exceeding 1 year and 6 months from issued date of TFD-W3

Exercisable

Every last business day of March, June, September and December of each year until the maturity date of TFD-W3. The last exercise date is the maturity date.

Exercise price per 1 ordinary share (Baht)

Baht 5.00, except to change in accordance with the adjustment of rights.

Exercise ratio (warrant to ordinary share)

1 Warrant to 1 ordinary share, except to change in accordance with the adjustment of rights.

The Company issued the warrants to existing shareholders of the Company on 15 December 2014. On 24 December 2014, the Stock Exchange of Thailand accepted the listing of 257 million of the warrants as securities (TFD-W3). The warrants can be exercised to subscribe to newly issued ordinary shares in a ratio of 1 warrant per 1 ordinary share, at an exercise price of Baht 5.00 each, with the exercise periods commencing on the last business days of each March, June, September and December. The exercise period starts on 31 March 2015.

Annual Report 2014

95 28.

Thai Factory Development Public Company Limited

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 percent of its net profit after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for dividend distribution.

29.

Expenses by nature Significant expenses by nature are as follows: (Unit: Thousand Baht) Consolidated

Separate

financial statements

2014

2013

2014

2013

1,254,597

980,356

399,296

357,979

(378,614)

(703,923)

(399,296)

(40,405)

Salaries and wages and other employee benefits

43,676

41,820

34,480

26,799

Depreciation and amortisation expenses

77,827

71,843

11,637

7,191

Director and management benefits

61,579

56,246

44,677

50,106

Rental expenses from operating lease agreements

15,400

20,498

14,265

3,578

Purchase of land, construction in progress and project development cost Changes in project development costs

30.

Income tax Income tax expenses for the years ended 31 December 2014 and 2013 are made up as follows: (Unit: Thousand Baht) Consolidated

Separate

financial statements

2014

2013

2014

12,778

72,964

(68,926)

(30,796)

(57,098)

(1,406)

(56,148)

42,168

(57,098)

44,026

2013

Current income tax: Current income tax charge

45,432

Deferred tax: Relating to origination and reversal of temporary differences Income tax expense reported in the statement of comprehensive income

Annual Report 2014

96 The amounts of income tax relating to each component of other comprehensive income for the years ended 31 December 2014 and 2013 are as follows: (Unit: Thousand Baht) Consolidated

Separate

financial statements

2014

2013

2014

2013

Deferred tax relating to gain (loss) on changes in value of available-for-sale investments Deferred tax relating to actuarial losses Total

(3,600)

1,500

(3,600)

3,600

(52)

(170)

(3,652)

1,500

(3,770)

3,600

The reconciliation between accounting profit and income tax expense is shown below. (Unit: Thousand Baht) Consolidated

Separate

financial statements

2014

2013

2014

2013

(213,963)

196,028

(254,358)

414,687

20%

(42,793)

39,206

(50,872)

82,937

Dividend income which exempt for income tax

(3,213)

(1,563)

(3,213)

(40,907)

Non-deductible expenses

10,636

5,620

5,461

634

(41,328)

(3,668)

(8,600)

(30)

Accounting profit before tax

Applicable tax rate Accounting profit before tax multiplied by income tax rate Effects of:

Additional expense deductions allowed Unrecognised deferred tax assets Others Total

11,073

9,477

2,574

126

1,392

(13,355)

2,963

(6,226)

(38,911)

(56,148)

42,169

(57,098)

44,026

Income tax expenses reported in the statement of comprehensive income

Annual Report 2014

Thai Factory Development Public Company Limited

The components of deferred tax assets and deferred tax liabilities are as follows: (Unit: Thousand Baht) Statements of financial position Consolidated financial statements

Separate financial statements

As at

31 December 2014

31 December 2013

31 December 2014

31 December 2013

Deferred tax assets Allowance for doubtful accounts

1,142

768

30,241

11,415

Provision for long-term employee benefits

1,832

1,788

1,424

1,449

Liabilities under financial lease

3,777

3,534

Unrealised gain Accumulated depreciation - Investment property

Long term provision

923

1,773

475

1,753

Unused tax loss

93,302

14,229

56,625

Actuarial losses

170

Others

136

415

131,523

60,629

62,269

3,202

3,600

117

2,110

312

2,110

312

2,227

3,912

2,110

3,912

Total Deferred tax liabilities Unrealised gain on available-for-sale securities Actuarial gain Effect of depreciation expenses between account base and tax base of the financial lease Total

As at 31 December 2014 a Subsidiary has deductible temporary differences and unused tax losses totaling Baht 55 million (2013: Nil). No deferred tax assets have been recognised on these amounts as the Subsidiary believes future taxable profits may not be sufficient to allow utilisation of the temporary differences and unused tax losses. 31.

Earnings per share Basic earnings per share is calculated by dividing profit for the year attributable to equity holders of the Company (excluding other comprehensive income) by the weighted average number of ordinary shares in issue during the year, after adjusting the number of ordinary shares to reflect the impact of the stock dividend as discussed in Note 34 to the financial statements. The prior periodâ&#x20AC;&#x2122;s basic earnings per share has been recalculated as if the stock dividend and the change in number of ordinary shares had been distributed and incurred at the beginning of the earliest period reported.

Annual Report 2014

98 Diluted earnings per share is calculated by dividing profit for the year attributable to equity holders of the Company (excluding other comprehensive income) by the weighted average number of ordinary shares in issue during the year plus the weighted average number of ordinary shares which would need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation assumes that the conversion took place either at the beginning of the year or on the date the potential ordinary shares were issued. In addition, the number of ordinary shares reflect the impact of the stock dividend as discussed in Note 34 to the financial statements. The prior yearâ&#x20AC;&#x2122;s diluted earnings per share has been recalculated as if the stock dividend and the change in number of ordinary shares had been distributed and incurred at the beginning of the earliest period reported. The following table sets for the computation of basic and diluted earnings per share: Consolidated financial statements For the year ended 31 December

Profit

Weighted average

Earnings

number of ordinary shares

per share

2014

2013

2014

2013

2014

2013

(Thousand

(Baht)

Baht)

shares)

Basic earnings per share Profit (loss) attributable to equity holders of the Company

(169,149)

151,320

1,106,076

1,186,455

(0.1529)

0.1275

44,653

68,016

(169,149)

151,320

1,150,729

1,254,471

(0.1470)

0.1206

(1,775)

1,106,076

1,186,455

(0.0015)

44,653

68,016

(1,775)

1,150,729

1,254,471

(0.0014)

Effect of dilutive potential ordinary shares Warrants Diluted earnings per share Profit (loss) attributable to ordinary shareholders assuming the conversion of warrants to ordinary shares Basic earnings per share Loss attributable to the major shareholder of the Company Effect of dilutive potential ordinary shares Warrants Diluted earnings per share Loss attributable to the major shareholder of the Company assuming the conversion of warrants to ordinary shares

Annual Report 2014

Thai Factory Development Public Company Limited

Separate financial statements For year ended 31 December

Profit

Weighted average

Earnings

number of ordinary shares

per share

2014

2013

2014

2013

2014

2013

(Thousand

(Baht)

Baht)

shares)

(197,259)

370,661

1,106,076

1,186,455

44,653

68,016

1,150,729

1,254,471

Basic earnings per share Profit (loss) attributable to equity holders of the Company

(0.1783)

0.3124

(0.1714)

0.2955

Effect of dilutive potential ordinary shares -

Warrants Diluted earnings per share Profit (loss) attributable to ordinary shareholders assuming the conversion of warrants to ordinary shares

32.

(197,259)

370,661

Segment information Operating segment information is reported in a manner consistent with the internal reports that are regularly reviewed by the chief operating decision maker in order to make decisions about the allocation of resources to the segment and assess its performance. The chief operating decision maker has been identified as the Executive Chairman of the group. For management purposes, the Company and its subsidiaries have four reportable segments as follows: (1)

Land and factory building for sale segment concerns purchase of land to develop and to construct a factory as well as utilities with an objective to sell the empty developed land and the land with factory thereon.

(2)

Land and factory building for rent segment concerns purchase or long-term lease of land for development and construction of factory as well as utilities with an objective to rent out the land with factory thereon.

(3)

Office building for rent segment concerns long-term lease of land for development and construction of office with an objective to rent out office space and provide services.

(4)

Residential condominium units for sale segment concerns construction of residential condominium in city center and suburban area for sale to general people.

Annual Report 2014

100 No operating segments have been aggregated to form the above reportable operating segments of the Company and its subsidiaries. The chief operating decision maker monitors the operating results of the business units separately for the purpose of making decisions about resource allocation and assessing performance. Segment performance is measured based on operating profit or loss, total assets and total liabilities and on a basis consistent with that used to measure operating profit or loss, total assets and total liabilities in the financial statements. The basis of accounting for any transactions between reportable segments is consistent with that for third party transactions. The following tables present revenue, profit, total assets and total liabilities information regarding the Company and its subsidiariesâ&#x20AC;&#x2122; operating segments for the year ended 31 December 2014 and 2013.

Annual Report 2014

101

Thai Factory Development Public Company Limited

(Unit: Million Baht) For the year ended 31 December Residential Land and factory

Land and factory

Office building

condominium units

building for sale

building for rent

for lease

for sale

2014

2013

2014

2013

2014

Consolidation

2013

2014

2013

Revenue External customers

460

185

200

1,151

1,385

748

Segment profit

216

273

354

323

Gain from sell of investment properties

134

(65)

(53)

(252)

(158)

Revenue and expense did not allocate: Other revenue Selling expenses Administrative expenses Loss on exchange rate Finance cost Income tax expenses Profit (loss) for the year Profit attributable to non-controlling interest of the subsidiary Loss attributable to the major shareholder of the Company Profit (loss) for the year (Equity holders of the Company)

(26)

(305)

(113)

(42)

(158)

153

(11) (169)

(4) 2 151

Annual Report 2014

102 (Unit: Million Baht) Residential Land and factory

Land and factory

Office building for

condominium units

building for sale

building for rent

lease

for sale

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

Equipment

Investment properties

323

213

231

536

232

3,601

2,030

330

1,773

2,620

5,203

4,824

353

391

401

441

Central properties

4,198

3,756

231

237

375

352

(3,559)

(2,251)

1,269

2,125

Total assets

7,847

5,893

347

366

797

859

2,148

2,972

(3,730)

(2,407)

7,409

7,683

Loans from financial institutions

1,693

2,520

455

210

170

879

2,318

3,676

159

467

(1)

244

585

1,687

1,345

1,687

1,345

647

211

735

586

594

1,393

1,291

(2,372)

(1,709)

989

399

4,076

4,200

1,206

248

609

680

1,722

2,637

(2,373)

(1,710)

5,240

6,055

As at 31 December

Project development costs Leasehold rights

Trade and other payables Debentures Income tax payable Central liabilities Total liabilities

Eliminations

(171) -

Consolidation

(156) -

Annual Report 2014

103

Thai Factory Development Public Company Limited

Geographic information Revenue from external customers is based on locations of the customers. (Unit: Thousand Baht) 2014

2013

Revenue from external customers Thailand

1,446,039

945,423

19,097

1,465,136

945,423

Thailand

948,119

1,003,335

United Kingdom

322,243

1,270,362

1,003,335

United Kingdom Total Non-current assets (other than financial instruments and deferred tax assets)

Total Major customers

For the year 2014, the Company and its subsidiary have no major customer with revenue of 10 percent or more of an entityâ&#x20AC;&#x2122;s revenues (2013: The Company and its subsidiaries obtained revenue from one major customer amounting to Baht 460 million and Baht 290 million, arising from sales of land and factory building for sale and from land factory building for leases). 33.

Provident fund The Company, its subsidiaries and their employees have jointly established a provident fund in accordance with Provident Fund Act B.E. 2530. The Company, its subsidiaries and their employees contributed to the fund monthly at the rates of 5 to 10 percent of basic salary. The fund, which is managed by MFC Asset Management Public Company Limited and TMB Asset Management Company Limited, will be paid to employees upon termination in accordance with the fund rules. During the year 2014, the Company and its subsidiaries contributed Baht 3 million (2013: Baht 3 million) to the fund.

Annual Report 2014

104 34.

Dividend paid Dividend

Final dividends for 2012

Approved by

Total dividend

Dividend per share

(Thousand Baht)

(Baht)

Annual General Meeting of the shareholders held on 18 April 2013

- Cash dividend

90,279

0.10

180,558

0.20

270,837

0.30

238,370

0.22

54,175

0.05

292,545

0.27

- Stock dividend

Total dividend paid during the year ended 31 December 2013

Interim dividend for the year 2013

Board of Directorsâ&#x20AC;&#x2122; Meeting held on 3 March 2014

Annual dividend for the year 2013

Proposed by Board of Directors Meeting held on 20 March 2014, and approved by Annual General Meeting of the shareholders held on 30 April 2014

Total dividend paid during the year ended 31 December 2014

35.

Commitments and contingent liabilities

35.1 Capital commitments 35.1.1 As at 31 December 2014, the Company and its subsidiaries had commitments in respect of agreements to design, improve and construct a residential condominium and a construction management and supervision agreement as follows: (Unit: Million Baht) Consolidated financial statements

Separate financial statements

2014

2013

2014

2013

Agreements to design, improve and construct a residential condominium Total

Annual Report 2014

105

Thai Factory Development Public Company Limited

35.1.2 As at 31 December 2014, the Company had commitments under the following agreements in respect of TFD Industrial Estate project. -

Commitments of approximately Baht 179 million (2013: Baht 67 million) under an agreement to construct building and utilities system.

Commitments of approximately Baht 349 million under an agreement to buy land for project development and of Baht 2 million in commission for land acquisition (2013: Baht 238 million and Baht 0.1 million, respectively).

35.2 Operating lease commitments 26.2.1 The Company and its subsidiaries has entered into several lease agreement in respect of the lease of building space and other services. The terms of the agreements are generally between 1 and 3 years. As at 31 December 2014, future minimum lease payments required under these non - cancellable operating leases contracts were approximately Bath 29 million (2013 : 22 million) 35.2.2 The Company leased land from the Privy Purse Bureau on which it has the right to construct a residential building. In January 2007, a permit to construct the residential building was received from the relevant government agency. In June 2007 and February 2008, the Company entered into an agreement with Privy Purse Bureau to construct the building and to lease the land with completed building thereon for a period of 30 years, commencing from 1January 2010. On 21 September 2010, the Company received a letter from the Privy Purse Bureau approving the Companyâ&#x20AC;&#x2122;s request to change the pattern and size of the project provided that the Company complied with new conditions. As at 31 December 2013, the Company had the following commitments in respect of the agreement: (1)

The permit to construct the residential building is to be under the name of the Privy Purse Bureau and the ownership of the building and other constructions on this land is to be transferred to the Privy Purse Bureau, while the Company is to pay all expenses related to the construction of the building until completion.

(2)

The construction period is 5 years starting from the date the permit to construct the new building is granted by the relevant government agency.

Annual Report 2014

106 (3)

The lease period is 30 years commencing from the end of the construction period as per (2). However, if the construction is completed earlier than the specified completion date, the lease period shall commence from the completion date. Rental payment is to be made on a monthly basis at a rate of Baht 500,000 per month in the first year, with the rate to be increased by 5% every year until the end of the lease period.

(4)

Throughout the construction period, the Company is obliged to pay compensation for loss of benefit at a rate of Baht 500,000 per month, commencing from September 2010, together with a gate pass fee of Baht 4,700 per month.

(5)

The Company was to submit a letter of guarantee with a credit line of Baht 50 million within 20 December 2010 and it was partially submitted of Baht 22 million in 2010. The Company already submitted all letter of guarantee on 9 July 2014.

35.2.3 The subsidiary has annual lease payment commitments to the Industrial Estate Authority of Thailand and natural persons related to its operation of its factory rental business for a period of 15 years and 30 years. As at 31 December 2014 and 2013, the balance of commitments is as follows: (Unit: Million Baht) 2014

2013

Up to 1 year

From 1 to 5 years

Payable:

Total

During the year 2013, the subsidiary transferred land leasehold under the lease agreement with natural persons to the Fund as mentioned in Note 15.

Annual Report 2014

107

Thai Factory Development Public Company Limited

35.2.4 The Privy Purse Bureau granted the subsidiary leasehold rights to land and the right to construct a residential building on such land, with a lease term of 30 years from November 1993 to October 2023. The residential building is initially under the ownership of the Privy Purse Bureau. As at 31 December 2014, the subsidiary has the following outstanding rental commitments: (Unit: Million Baht) 2014

2013

From 1 to 5 years

Over 5 years

Payable: Up to 1 year

Total

The subsidiary also has gate pass fee commitments of Baht 50,000 per month. 35.2.5 The subsidiary was granted leasehold rights to land by a company and the right to construct an office building on such land, with a lease term of 30 years, from December 1995 to November 2025. The ownership of this office building will be assigned to the sub-leasers upon the termination of the lease agreement. 35.3 Long-term service commitments 35.3.1 As at 31 December 2014, the Company had commitments in respect of an agreement to develop TFD Industrial Estate project in collaboration with the Industrial Estate Authority of Thailand. The Company has to pay an annual fee for supervision of services rendered within the area of the project of approximately Baht 1 million, commencing in 2009. Such fee may be increased by no more than 10% on the existing fee, every 3 years. 35.3.2 As at 31 December 2014, the Company and subsidiaries have commitments under service agreement as follows: (Unit: Million Baht) Consolidated financial statements

Separate financial statements

2014

2013

2014

2013

Payable: Up to 1 year From 1 to 5 years Total

Annual Report 2014

108 35.4 Guarantees 35.4.1 As at 31 December 2014, the Company has provided guarantees for bank loan and credit facilities of subsidiaries totaling Baht 888 million. (2013: Baht 530 million). 35.4.1 As at 31 December 2014, there were outstanding bank guarantees issued by the banks on behalf of the Company and its subsidiaries as follows: (Unit: Million Baht) Letter of guarantee

Consolidated

Separate

financial statements

2014

2013

To guarantee performance under the agreement with the Industrial Estate Authority of Thailand

To guarantee relating to the electricity use and others Total

35.5 Litigations Outstanding litigations as at 31 December 2014 are detailed below. a)

In 2012, a company (the plaintiff) sued the Company as a joint defendant (the fourth defendant), together with the local administration of Paknampran Sub-District), petitioning the Court to revoke the construction permit of The Colonial Kao Tao Hua Hin project, a project of the Company, since the construction permit allowed the construction closer than the-200-meter distance from the shoreline stated in an announcement by the Ministry of Natural Resources and Environment and such construction permit was therefore in violation of the law. The plaintiff also petitioned to have the court order the defendants not to carry out construction or any other action until the case is finalised. Subsequently, on 23 August 2013, the Administrative Court of First Instance ordered the suspension of the construction under the permit until the Court issues a judgement or others order otherwise. However, the Company appealed the order of the Administrative Court of First Instance on 25 September 2013. On 27 March 2014, the Supreme Administrative Court reversed the order of the Administrative Court of First Instance, lifting the measures for temporary relief or protection before judgment. On 21 November 2014, the Administrative Court of First Instance order to revoked the construction permit of condominium with a height over 12 meters from ground level up to the height of the building. However, the Company appealed against the order of the Administrative Court of First Instance on 19 December 2014. 58

Annual Report 2014

109

Thai Factory Development Public Company Limited

The Company’s management have used judgment to assess the outcome of the lawsuit and the damage caused by the suspension of construction work, and believes that they will not result in any damage to the value of project. The Company therefore did not record allowance for diminution in the value of the project or a provision for liabilities as a result of the lawsuit as at the end of the reporting period. b)

In April 2014, the Company was sued by buyer of a project for a claim of Baht 7.28 million plus interest at rate of 7.5 per annum and monthly compensation of Baht 80,000, for damages resulting from cannot use condominium unit as a result of the order of the competent Civil Construction. The case is currently being considered by the Civil Court. The management of the Company believes that the Company will not incur significant losses as a result of this case. Because this case arose after the buyer was buy condominium unit from another, not directly from the Company.

35.6 Contingent liabilities Total Industrial Services Company Limited (“the Subsidiary”) has contingent liabilities in respect of the compensation payable to MFC Industrial Investment Property and Leasehold Fund (“the Fund”), in the event that the land of the Kingkaew Project is expropriated, in accordance with the conditions of agreement made between the Subsidiary and the Fund. The maximum amount that the Subsidiary may have to pay to the Fund is approximately Baht 27 million, calculated based on the rate specified in the agreement. The Company and the Subsidiary’s management have used judgement to estimate the losses in this event and believes that the Fund would not suffer any losses in the event that the land is expropriated and the Subsidiary will not have to pay any compensation to the Fund. The Company and its subsidiary therefore did not record any contingent liabilities in respect of this matter as at the end of the reporting period. 36.

Financial instruments

36.1 Financial risk management The Company’s financial instruments, as defined under Thai Accounting Standard No.107 “Financial Instruments: Disclosure and Presentations”, principally comprise cash and cash equivalents, trade and other receivable, loans, investments, and short-term and long-term loans. The financial risks associated with these financial instruments and how they are managed is described below.

Annual Report 2014

110 Credit risk The Company is exposed to credit risk primarily with respect to trade and other receivable and loans to. The Company manages the risk by adopting appropriate credit control policies and procedures and therefore does not expect to incur material financial losses. The maximum exposure to credit risk is limited to the carrying amounts of receivables and loans to as stated in the statement of financial position. Interest rate risk The Companyâ&#x20AC;&#x2122;s exposure to interest rate risk relates primarily to its cash at banks, loans to, bank overdrafts, short-term and long-term borrowings. However, since most of the Companyâ&#x20AC;&#x2122;s financial assets and liabilities 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 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. (Unit: Million Baht) Consolidated financial statement as at 31 December 2014 Fixed interest rates Within

1-5

Floating

Non- interest

1 year

years

interest rate

bearing

Effective Total

interest rate (% per annum.)

Financial Assets Cash and cash equivalent

157

158

0.58 - 2.80

0.30 - 2.70

157

222

1,548

2.00 - 5.70

1,260

MLR

3.60 - 12.20

313

15.00

1,687

5.50

3,235

331

1,260

4,827

Deposits at bank with restrictions

Financial liabilities Short-term loans from financial institutions Long-term loans from financial institutions Liabilities under finance lease agreements Long-term loans from related parties and interest payable Debenture

Annual Report 2014

111

Thai Factory Development Public Company Limited

(Unit: Million Baht) Separate financial statement as at 31 December 2014 Fixed interest rates Within

1-5

Floating

Non- interest

1 year

years

interest rate

bearing

Effective Total

interest rate (% per annum.)

Financial Assets -

0.10 - 2.60

2,234

5.30 - 15.00

0.30 - 2.70

2,295

2,237

1,190

Long-term loans from financial institutions

976

MLR

Liabilities under finance lease agreements

3.60 - 12.20

1,687

2,877

976

3,879

Cash and cash equivalent Loan to related parties and interest receivable Deposits at bank with restrictions

Financial liabilities Short-term loans from financial institutions

2.00 - 5.60

Short-term loans from subsidiary and interest payable

Debenture

5.50

(Unit: Million Baht) Consolidated financial statement as at 31 December 2013 Fixed interest rates Within

1-5

Floating

Non- interest

1 year

years

interest rate

bearing

Effective Total

interest rate (% per annum.)

Financial Assets -

1,033

236

1,269

0.50 - 2.80

1.90 - 2.50

1,033

236

1,282

2,560

1,049

Liabilities under finance lease agreements

3.60 - 12.20

Debt restructuring payable

MLR-1

313

1,345

3,905

320

1,116

5,341

Cash and cash equivalent Deposits at bank with restrictions

Financial liabilities Short-term loans from financial institutions

Reference to MLR

Long-term loans from financial institutions

4.70 - 5.50

and SPRL

Long-term loans from related parties and interest payable Debenture

15.00 5.30 and 5.50

Annual Report 2014

112 (Unit: Million Baht) Separate financial statement as at 31 December 2013 Fixed interest rates Within

1-5

Floating

Non- interest

1 year

years

interest rate

bearing

Effective Total

interest rate (% per annum.)

Financial Assets Cash and cash equivalent

240

1,192

0.50 - 0.60

1,288

1,522

5.50 - 15.00

1.90 - 2.50

234

2,240

240

2,725

2,030

5.30 - 5.45

5.50 - 7.00

234

952

Loan to related parties and interest receivable Deposits at bank with restrictions

11 11

Financial liabilities Short-term loans from financial institutions Short-term loans from subsidiary and interest payable

Reference to MLR Long-term loans from financial institutions

491

and SPRL

Liabilities under finance lease agreements

3.60 - 12.20

547

Debenture

1,345 3,375

1,345

5.30 and 5.50

3,929

Foreign currency risk The Companyâ&#x20AC;&#x2122;s exposure to foreign currency risk is limited since nearly all business transactions are denominated in Thai Baht. In addition, the Company and its subsidiaries are exposed to foreign exchange risk on their investment in overseas subsidiary. This investment is currently not hedge by derivative financial investments. 36.2 Fair values of financial instruments Since the majority of the Companyâ&#x20AC;&#x2122;s financial instruments are short-term in nature or bear floating interest rates, their fair value is not expected to be materially different from the amounts presented in statement of financial position. A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an armâ&#x20AC;&#x2122;s length transaction. The fair value is determined by reference to the market price of the financial instruments or by using an appropriate valuation technique, depending on the nature of the instrument.

Annual Report 2014

113 37.

Thai Factory Development Public Company Limited

Capital management The primary objective of the Company’s capital management is to ensure that it has appropriate capital structure in order to support its business and maximise shareholder value. As at 31 December 2013, the Group's debt-to-equity ratio was 2.42:1 (2013: 3.72:1) and the Company's was 1.86:1 (2013: 2.48:1).

38.

Events after the reporting period On 22 January 2015, the Board of Directors’ Meeting No. 1/2558 passed the resolution in approving Total Industrial Services Company Limited, a subsidiary, established a new subsidiary company named Bognor Regis Warehouse Limited, a company incorporate in United Kingdom in order to operate the investment in land and warehouse for lease and sale. The newly set up has registered of 1,620,000 shares with a par value of GBP 1 each. Total Industrial Services Company Limited holds 100% of the registered capital of such company.

39.

Approval of financial statements These financial statements were authorised for issue by the Company’s Board of Directors on 23 February 2015.

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114

Business Overview 1. Structure of incomes of the Company and subsidiaries Million Baht

2012 1

Million Baht

2013 1

Million Baht

2014

1 Land and factory building business at the TFD Industrial Estate and other industrial estates - Sales incomes 327.71 24.09 460.00 48.66 - Rent and service incomes 112.94 8.30 47.92 5.07 44.70 3.06 2. Office space for rent business - Rent and service incomes 197.78 14.54 200.21 21.18 188.90 12.89 3. Residential condominium business 130.43 9.59 40.36 4.27 1,151.35 78.58 4. Profit from sales of properties for investment purpose 554.89 40.78 134.33 14.21 5. Other incomes 36.83 2.71 62.60 6.62 80.18 5.47 Total incomes 1,360.58 100.00 945.42 100.00 1,465.13 100.00 (1) Note : During Q2 of 2013, the Company invested in VSSL which had once been held by the Company’s major shareholder, an action considered as a merger of business as it would be subject to the same control. As such, statements of comprehensive profits and loss for the year that ended December 31, 2012 and 2013 of the Company and subsidiaries were adjusted in retrospect and shown here for comparison purpose.

2. Business of each product line 2.1 Nature of products and service The Company and subsidiaries develop properties in a variety of shapes and forms, as of December 31, 2014 can be classified into five main business groups as follows. • Industrial estate - operated by the Company • Standard factory/warehouse - operated by TISCOM and Barnsley • Residential project (condominium) - operated by the Company and VSSL • Office building for rent - operated by SG (SG owns the right to lease the land and the SG Tower 1 office building as well as the right to sub-lease the land and the Millennia office building.) • Property management service - operated by the Company

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Thai Factory Development Public Company Limited

In the past, TFD and TISCOM handled the business of standard ready-built factory/warehouse within the Group. However, in 2013, TFD planned to list TISCOM in the Stock Exchange of Thailand (SET) and as a result re-organized its business for a clearer structure to have TISCOM and Barnsley focus and oversee the Groups’ entire business of standard ready-built factories and warehouses instead. 2.1.1 Industrial estate In 2007, the Company set up the TFD Industrial Estate at Bangpakong District, Chachoengsao Province, to develop land, set up basic infrastructure and build standard factory buildings. The Company signed a joint-operation contract with the Industrial Estate Authority of Thailand (IEAT) and provided for Thai and foreign investors lands for rent in two zones; namely, General Zone and Free Zone. Target groups of customers were businesses in the auto part industry, electronics and manufacturing industry not generating pollution. To facilitate investors, the Company chose the site located not so far from Bangkok along the Motorway at Km 43 next to an exit into the Chachoengsao-Chonburi Highway. The site is flanked with convenient highways and not prone to flood which makes it extremely ideal to build factories and warehouses as a logistics center. Thanks to the site’s competitive advantage as it’s no more than 20 minutes from the Suvarnabhumi Airport and no more than 40 minutes from the Laem Chabang Deep Sea Port plus its close proximity to Bangkok, Thailand’s capital, the location has become a very highly potential one. Most of the Company’s customers are Japanese investors who have invested in electronic parts and auto part industries. As of December 31, 2014, the TFD Industrial Estate is operated in two phases as follows. (1) Phase 1 Of the project’s entire area totaling 302.44 rai, 231.23 rai of the Phase 1 Project are generating incomes. Of this, 74.59 rai are in Free Zone and 156.64 rai are in General Zone. Since 2011, the Company has recognized incomes from the project both from sales of vacant land and sales of land along with completed factory buildings between 1,500-3,000 square meters. As of December 31, 2014, the Phase 1 TFD Industrial Estate sold as many as 225.48 rai of its areas. There remained only 5.75 rai or 2.49 percent of the total income-generating lands left unsold. (2) Phase 2 The Company plans to expand the TFD Phase 2 Industrial Estate project area which is adjacent to its Phase 1 by another 2,500 rai. The project is currently under development, having landscape architecture and infrastructure systems designed while an environment impact assessment (EIA) report is under preparation to seek permission from the authorities as well as approval to use the land for an industrial purpose. As of December 31, 2014, the Company has already bought approximately 1,162.30 rai of vacant land for the Phase 2 project. During the 2015-2017 investment plan, it expects to buy 750 additional rai of land which will cost the Company around Baht 3 billion. The total project value is around Baht 7 billion and the Company expects to debut its sales in 2015.

Annual Report 2014

116 2.1.2 Standard factory/warehouse building TISCOM’s business is to build standard ready-built factories and warehouses for sales in industrial estates and industrial zones at various locations to offer to investors where commuting conveniences, transport, communications, infrastructure, safety and appropriate surrounding environment are taken into consideration. Besides, factories are built both in the industrial zones and at free-trade zone as required by investors. As of April 22, 2014, TISCOM set up a subsidiary named Barnsley in the UK to invest in a land and warehouse business for rent and sale there. (1) Completed factory building The standard completed factory is typically offered as a one-floor building with mezzanine floor for use as office in varying sizes from 1,000 square meters to 3,000 square meters. The factory is built at a fenced-in site to also include a security guard’s house and parking space. The factory floor can accommodate 3 metric tons per square meter. TISCOM is able to offer various options to investors such as purchase or lease of warehouses or with a right to buy them later. The rental term of most lease agreements that TISCOM has signed with customers is three years with an option for renewal. Customer is required to deposit six months’ worth of rent as a down payment. The following table features information of completed factory buildings and occupancy rate of both the Company and TISCOM. Number of factory Average annual Completed Number of factory Number of factory buildings sold to the buildings at end of period occupancy rate factory building buildings at the property fund With tenants No tenants beginning of period 2012 Number (buildings) 35 30 3 2 Area (square meters) 41,970.00 34,320.00 4,200.00 3,450.00 54.90% 2013 Number (buildings) 5 7 5 Area (square meters) 7,650.00 14,970.00 7,650.00 100.00% 2014 Number (buildings) 5 4 1 Area (square meters) 7,650.00 6,900.00 750.00 90.20% Note : 1. This is TISCOM’s right to lease derived from the IEAT

In Q4/2013, the Company built seven ready-built factories before selling them as soon as the construction was completed to the M-II Property Fund. As of December 31, 2014, there were five ready-built factories left totaling 7,650 square meters of area at the Laem Chabang Industrial Estate with an average area ranging from 750 to 3,330 square meter a factory. These five ready-built factories with the land represent TISCOM’s right to lease from the Industrial Estate Authority of Thailand (IEAT). In addition, as of December 31, 2014, TISCOM was building 22 ready-built factories at Bangsaothong District, Samut Prakan Province, which was to be opened for operation within 2015.

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Thai Factory Development Public Company Limited

(2) Completed warehouse TISCOM’s standard warehouse building is a one-storey building with mezzanine floor for use as office offered in various sizes from 2,000 square meters to 10,000 square meters. The warehouse is built at a fenced-in site with a security guard’s house, parking space and loading space. The warehouse’s floor can accommodate up to 3 metric tons per square meter. TISCOM is able to offer various options to investors such as purchase or lease of warehouses or with a right to buy them later. The rental term of most lease agreements that TISCOM has signed with customers lasts three years with option for customers to renew. TISCOM requires customers to deposit four months’ rent as a down payment. The following table features information of completed warehouse buildings and occupancy rate of both the Company and TISCOM. Number of warehouses at Average annual Number of Completed Number of end of period occupancy rate warehouse building warehouses at warehouses sold to beginning of period the property fund With tenants No tenants 2012 Number (buildings) 17 17 Area (square meters) 15,034.10 15,034.10 100.00% 2013 Number (buildings) 17 17 Area (square meters) 15,034.10 15,034.10 2014 Number (buildings) Area (square meters) As of December 31, 2014, TISCOM had no ready-built factories left in its inventory since it had sold them all to the M-II Property Fund in Q4/2013. As of December 31, 2014, TISCOM was building eight readybuilt factories at Tambon Tha Sa-an, Bangpakong District, Chachoengsao Province, the project expected to start operating within 2015. The table presents the ratio as of December 31, 2014 of rent incomes vs. total rent incomes from lease agreements of factories and warehouses based on years the lease term under them will be due. Year when lease agreements become due Ratio of rent incomes vs. total rent incomes (%) 2014 28.18 2015 71.82 Total 100.00 2.1.3 Residential project (condominium) The Company started developing two residential condominium projects for the first time; namely, the Lakegreen Apartment Project and the 59 Heritage Project, both of which were completely sold. At present, there are three ongoing projects; namely, the 15 Sukhumvit Residence Project, the Colonial Kao Tao Hua Hin Project and the Mahadlek Residence Project.

Annual Report 2014

118 The Company and subsidiaries are developing condominiums for sales to respond to the need of those eyeing for condominiums in the city close to skytrain and other facilities as well as to those wishing to own the second home at a serene seaside resort town at Pranburi District, Prachuab Kiri Khan Province. As of December 31, 2014, there are three projects currently under development and/or sold and/or about to be transferred to customers. Details are as follows. (1) The 15 Sukhumvit Residence Project Situated between Soi 13 and Soi 15 on Sukhumvit Road, the 2-3-73 rai project is a 25-floor reinforced concrete tower bought by VSSL in 2010. The total project value is Baht 3,995.38 million. The projectâ&#x20AC;&#x2122;s total useable area is 59,113 square meters of which 31,659.43 square meters are sellable areas. There are 505 units for sales of which 492 units are residential condominium and 13 units are for commercial purpose. As of December 31, 2014, VSSL completely finished the projectâ&#x20AC;&#x2122;s construction and sold 45.94% of both residential and commercial units out of the total project value.

(2) The Colonial Kao Tao Hua Hin Project A residential condominium, the project is located at Kao Tao, Tambon Paknam Pran, Pranburi District, Prachuab Kiri Khan Province, in the 9-0-42.3 rai of land. With a total value of around Baht 3.375 billion. The Company already completed the construction of the 3-storey office building which was used as a sales office. The foundation of the two residential buildings and the parking lot building was being built. However, as of December 31, 2014, TFD temporarily suspended the project which is currently subject to litigation. (Please see Section 1: Nature of Business, Topic 3: Risk Factors)

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Thai Factory Development Public Company Limited

(3) The Mahadlek Residence Project The residential project consists of one 41-storey building located in a 1-3-28 rai of land in Soi Mahadlek Luang 2, Rajdamri Road. The Company bought the sub-leasehold right over the land owned by Office of Privy Purse from Capital Planner Co Ltd for a total of Baht 61 million with a purpose to develop a residential project. The lease term is 30 years from the due construction period (which according to the contract requires that the construction period of the project be five years from the day it has been approved by Bangkok Metropolitan Administration (BMA) to build a project) or from the day the construction is finished, whichever is earlier. The project’s Environmental Impact Assessment (EIA) report has already been approved by the Office of the Environmental Policy and Planning Office since June 10, 2014.

2.1.4 Office building for rent In 2008, the Company jointly invested in the office for rent business via SG in which it holds 49.91 percent shares where SG has invested in the right to lease the land and the SG Tower 1 office building as well as the right to sub-lease the land and The Millennia office building (SG Tower 2) located in Soi Mahadlek Luang 3, Rajdamri Road, and Langsuan Road for a total rentable area of 26,846.18 square meters. Both the land and the SG Tower 1 are owned by the Office of the Private Privy (the lessor) while the ownership of the land where the Millennia Office Building is located is held by GF Holding Co Ltd (the sub-lessor). The ownership of the Millennia building itself however is held by SG which will belong to GF Holding Co Ltd when the lease term is due in 2025. TFD meanwhile manages the two office buildings for rent. Details are as follows. (1) SG Tower 1 The building is located on the 2-3-85 rai of land at No. 161/1 Soi Mahadlekluang 3, Rajdamri Road, Kwaeng Lumpini, Pathumwan District, Bangkok. SG Tower 1 is a 19-storey office tower plus two stories of underground parking space offering a total area of 30,752.00 square meters for rent. This could be broken down into 14,932.53 square meters of space for rent; 7,711.62 square meters of common areas and 8,107.85 square meters of parking space (for 220 cars). As of December 31, 2014, 86.70 percent of the tower’s total rentable areas were rented. (2) The Millennia (SG Tower 2) The building which is located at 62 Langsuan Road, Kwaeng Lumpini, Pathumwan District, Bangkok is situated on the 1-3-22 rai of land and houses one 26-storey office building plus one underground parking space totaling 29,700 square meters. This consists of 11,913.65 square meters for rent, 7,916.35 square meters of common areas and 9,870 square meters of parking space (to accommodate 220 cars). As of December 31, 2014, 82.04 percent of The Millennia’s total areas were rented.

Annual Report 2014

120 Most of the rental terms of lease agreements between SG and its customers are three years with options for customers to renew the lease. SG requires customers to deposit three months’ rent as a down payment. The following table features the Company’s office buildings as of December 31, 2014 under operation. Office building Location Nature Total rental Rent area Remaining Occupancy rate under lease rent areas areas (square agreements (square meters) (square meters) meters) 77..71% One 19-storey 14,932.53 11,305.41 3,627..12 SG Tower 1 161/1 Soi Mahadlekluang 3, office tower plus Rajdamri Road, two stories of Kwaeng Lumpini, underground Pathumwan District, parking space Bangkok 9,599.06 2,314.59 80.57% The Millennia 62 Langsuan Road, One 26-storey 11,913.65 Kwaeng Lumpini, office building Pathumwan District, plus one underground Bangkok parking space Grand total 26,846.18 20,904.47 5,941.71 77.87% 2.1.5 Property management service The Company and TISCOM started selling land and factory buildings to the TIF1 Property Fund for the first time in 2005 before selling additional assets to the TIF1 Property Fund and the M-II Property Fund again in 2007, 2012 and 2013. Aside from selling land, factory and warehouse buildings, the Company has been appointed as a property manager of the property funds as well as property manager of SG’s office buildings for rent in return for management fees summarized as follows. The TIF1 Property Fund and the M-II Property Fund • Property management fees and additional premiums • Brokerage fees for securing new tenants • Brokerage fees for contract renewal • Brokerage fees in case of property sales or transfer of property leasehold (excluding sales of property to property manager or persons within the group of property manager) (More details can be seen in the property manager appointment contract under Section 5: Operating assets.) As of December 31, 2014. the following are properties managed by the Company : (1) The TIF1 Fund is a property fund consisting of freehold assets which mainly invests in land and Factory building located in industrial estates. The TIF1’s properties include 25 factories and one consist of 12-units Flatted Factory building located in each of the following sites :

Annual Report 2014

121 Industrial estate/industrial zone 1. The Hi-Tech Industrial Estate 2. The Bangpa-in Industrial Estate 3. The Navanakorn Industrial Estate 4. The Amata Nakorn Industrial Estate 5. The Bangkadi Industrial Estate 6. The Bangkadi Industrial Estate (four-storey apartment building) 7. The TFD Industrial Estate

Thai Factory Development Public Company Limited

Location

Types of service

Ayutthaya Ayutthaya Pathum Thani Chonburi Pathum Thani Pathum Thani

Land+Factory Land+Factory Land+Factory Land+Factory Land+Factory Apartment

Chachoengsao

Vacant land Land+Factory

Grand total

Areas (square meters) 17,248.00 1,980.00 2,310.00 9,150.00 1,800.00 8,811.00

Number of units (units) 12 1 1 7 2 12

3,240.00

44,539.00

(2) The M-II Fund is a property fund of freehold and leasehold assets which mainly invests in properties and the rights to lease property. The M-IIâ&#x20AC;&#x2122;s properties include 39 factories and 17 warehouses located in each of the following sites: Industrial estate/ industrial zone

Location

Types of service

Types of ownership

Areas Number (square of units meters) (units) 2,160.00 2 32,820.00 19 19,350.00 18 15,034.10 17

1. The Navanakorn Industrial Estate Pathum Thani Land+Factory Freehold 2. The TFD Industrial Estate Chachoengsao Land+Factory Freehold 3. The Laem Chabang Industrial Estate Chonburi Land+Factory Freehold+Leasehold1 4. The Kingkaew Warehouse Samut Prakan Land+ Freehold+Leasehold2 Warehouse Grand total 69,364.10

Note

: 1. Factories are freehold properties while lands are leasehold properties. The right to lease the land (28-0-66.09 rai) is to be expired in 2042 while the right to sub-lease the land (1-0-80 rai) will expire in 2018. 2. Warehouses are freehold properties while lands are leasehold properties. The right to lease the land (25-1-96 rai) is to be expired in 2036.

(3) SGâ&#x20AC;&#x2122;s office buildings for rent which consist of two office buildings connected to each other between Soi Mahadlekluang 3, Rajdamri Road and Langsuan Road. Details are as follows: Office buildings for rent 1. SG Tower 1 2. The Millennia Total

Rentable area Type of assets Ownership of the assets (square meters) 14,932.63 Right to lease the land and office The Office of Private Privy building (expired in 2023) 11,913.65 Right to sub-lease the land and SG office building (expired in 2025) 26,846.18

Annual Report 2014

122 Rights and benefits received by the Company and subsidiaries: • Rights and benefits from being a listed company in the Stock Exchange of Thailand (SET) - Corporate income tax exemption from dividends received from having invested in the M-II Property Fund which is listed in the SET.

3. Marketing and competitions 3.1.1 Marketing strategies Industrial estate Target groups of customers for the Company’s industrial estate business are supporting industry and major operators who have already bought vacant land in the TFD Industrial Estate. Major target groups of customers are small and medium-sized enterprises which do not generate pollution who however look for transportation convenience. This refers especially to electronics and auto part manufacturers. Thailand’s major flood in 2011 led to demand surge from investors who wanted to buy vacant land and rent factory building in the TFD Industrial Estate which is situated at least two meters above the sea level and therefore is perceived safe from flood. In addition, the industrial estate also enjoys rights and privileged granted by the Board of Investment (BOI) for Zone 2 investment of which the location is nearest to Bangkok. The site where the industrial estate is situated is a strategic location and is indeed the Company’s competitive advantage. Besides, as of December 31, 2014, the Company has gathered 1,211.80 rai of land ready for development as its Phase 2 TFD Industrial Estate Project within the next five to eight years. The lands were purchased at lower costs compared to sales prices. There isn’t as much land available for industrial development purpose at the moment. That’s a reason why raw land price dramatically increases compared to what happened in the past. This refers especially to land adjacent to highways in the area where the TFD Industrial Estate is situated as well as land along Bangna-Trad Highway between Km 20 and Km 40. Together with the fact that land in any industrial estate is highly demanded by investors and there appears to be a shortage of such land, demands for land in the TFD Industrial Estate have consistently increased. The Company’s pricing of its land and rent will however be based on construction costs, funding costs and land prices in the neighborhood. The Company adjusts both the rent and sales prices of vacant land to accord with market conditions on a yearly basis. The Company has two major sales and distribution channels; namely, sales office at the TFD Industrial Estate and real estate agents. At the other end, it communicates with markets through billboards erected at the TFD Industrial Estate, newspapers, websites and joint events co-organized with the BOI. Standard factory building/warehouse building TISCOM’s target groups of customers in the completed factory and warehouse for rent business are small and medium-sized enterprises (SME) as well as Thai and foreign operators wishing to restrict their investment risk during the initial investment phase. Some foreign investors prefer to set up factory and warehouse in an industrial estate thanks to available public infrastructure and related industrial services. In addition, by concentrating in the industrial estate, they can take advantage from developed transportation system, raw material management and interdependency with other industrial counterparts. This is especially the case of the automobile industry and the petrochemical industry. In addition, completed factory and warehouse building help them save time and labor costs to build a factory to manufacture products. That’s why factory and warehouse building for rent is an alternative that enables investors to reduce investment costs while enhancing their

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Thai Factory Development Public Company Limited

competition flexibility. Customers can choose to rent factory and warehouse buildings during an initial phase and will only buy industrial land, factory or warehouse of their own when business subsequently expands. This service also helps the Company to maintain a good long-term relationship with customers as they could focus more at their strategic investment without having to put money into land, factory or warehouse and thereby reduces investment costs while increasing investment returns. As a result, TISCOM’s factory and warehouse location and its comprehensive one-stop service center are indeed its competitive advantage. Rents charged factory and warehouse buildings depend mainly on costs of construction and funding costs. When setting a rent, TISCOM will take into consideration the site of factory and warehouse together with rents offered by competitors in nearby industrial estates to ensure competitiveness. TISCOM has two main distribution channels; namely, through salespersons and real estate agents In addition, TISCOM also advertises through media such as billboards erected at the TFD Industrial Estate, newspapers, website and joint events co-organized by the BOI similar to market communications carried out by the industrial estate business. Residential building (Condominium) Target groups of customers in the residential building project of both the Company and VSSL are medium-income earners who eye for a condominium in the heart of the city close to skytrain and those wishing to have the second home for weekend retreat. As of December 31, 2014, the Company and VSSL have three condominium projects under development and/or sold and/or waiting to be transferred to customers which include (1) the 15 Sukhumvit Residence Project; (2) the Colonial Kao Tao Hua Hin Project; and (3) The Mahadlek Residence Project. Competitive advantage of the Company and VSSL in the condominium business is a result of the management’s long-time experience in the real estate development industry which enables the Company to effectively select an ideal site for residential projects The Company and VSSL have two major sales and distribution channels; namely, contact target customers through seller of the Company and VSSL and sales through broker companies. Office building for rent SG’s target groups of customers are Thai and foreign operators wishing to secure an office in the Central Business District (CBD). SG’s main group of customers is foreign business introduced to SG by word-of-mouth. The Company has co-invested in the office for rent business through SG in which it holds 49.91 per cent shares. SG has two office buildings for rent; namely (1) SG Tower 1; and (2) The Millennia (SG Tower 2). Locations of these two office buildings are connected between Soi Mahadlekluang 3, Rajdamri Road and Langsuan Road which are close to two BTS Skytrain stations of Rajdamri and Chidlom. The site is considered a strategic location which helps enhancing SG’s competitive advantage in this office for rent business. SG determines the rent of its office space on the basis of original rents it currently charges customers while rents of neighboring offices are also taken into consideration to ensure SG’s competitiveness. SG has a policy to adjust its rents every three years based on the rental term to consistently reflect market conditions. SG has two major sales and distribution channels consisting of direct sales through SG’s sales office and sales through brokers.

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Status of Industry and Competition Industrial Estate 31 December 2014, Currently the Industrial Estate Authority of Thailand (â&#x20AC;&#x153;IEATâ&#x20AC;?) has 56 industrial estates in operation in 16 provinces, 11 of them are operated by I-EA-T and 45 are jointly operated with other developers. The others are industrial estates and industrial parks which are operated by the public companies. According to Colliers International Thailandâ&#x20AC;&#x2122;s report, as of the first six months of 2014, accumulated supply of space in industrial estates was around 152,460 rai where 70% of the entire supply was in the eastern region of Thailand followed by the central area which located approximately 25% of the total supply.

Diagram: Accumulated supply of space in industrial estates

Source: Industrial Estate Authority of Thailand and Research Department, Colliers International Thailand The occupation rate of industrial estate space as of the first half of 2014 stood at 88% of the entire supply which represented an increase of 3% of the total space from the year before. The fact that Thailand is becoming part of the Asean Economic Community (AEC) members in 2015 should increase investment values in Thailand as the AEC should likely attract foreign investors looking for efficient production base equipped with quality infrastructure and logistics facilities.

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125

Diagram: Occupation rate classified by locations

Source: Research Department, Colliers International Thailand

Thai Factory Development Public Company Limited

An average land price in industrial estate during the first half of 2014 remained relatively unchanged from the second half of 2013. Most business owners tried to attract investors during Thailandâ&#x20AC;&#x2122;s political unrest which saw people to the streets to protest the government by maintaining or slightly increasing their sales price since the second half of 2013. The competition in industrial estate is considered not too high due to few numbers of developers and also the high initial investment required. The direct competitors of the company are others industrial estate in the same zoning which are the Gateway City Industrial Estate and the Well Grow Industrial Estate. Because of the superb location of TFD Industrial Estate which is the strategic and competitive advantage point, the Company can compete fairly high and hence is able to be the Price Leader or Maker to other industrial estates which are closed by. Land with standard ready built factory / warehouse For industrial estate development industry, the process will start from the industrial land development, invest in fundamental structures in the industrial land and then sell land to industrial entrepreneurs to build factory and warehouse. The manufacturers / investors may have a choice to rent the factory and warehouse instead so as to decrease such investment and also risk from any uncertainties which may occur. Also the investors will have convenience from full range services from the industrial estate developer. In addition the industrial estate development, the standard ready-built factory and warehouse also attract foreign entrepreneurs who want to set up their manufacturing bases in Thailand without to invest in ownership in factories and warehouses. Supply of standard ready-built factory and warehouse can be classified into 2 main types : supply from developers who also own industrial lands , thus the developer of factory and warehouse is the same person as the owner of industrial estate , and supply from developers who build factory and warehouse on the industrial land , either purchased or rent from other developers. For example, the company that builds factory and warehouse for rent on the land purchased from the industrial estate developer in various locations etc. The demands of the standard ready-built factory and warehouse for rent come from the manufacturers who do not want to own the factory and warehouse in order to decrease the projectâ&#x20AC;&#x2122;s investment and for the flexibility in the operation. Moreover, Thailand is still a great choice for foreign investors because of its location, which located in the central part of Asia, skill workers, good infrastructure including the rules and regulations which support the investment from abroad. Therefore, the demand for the factory and warehouse for rent is still increase.

Annual Report 2014

126 CBRE Thailand Co., Ltd. reported that as of Q2/2014, the rental rate of ready-built factories (RBFs) was 74.80% which was slightly down from 76% from the previous quarter. The total supply of the RBFs totaled 2.10 million square meters or an increase of 4.10% from the past quarter. The RBF rent however remained unchanged during the same period. At the other front, demands for Modern Logistics Properties (MLPs) in Q2/2014 significantly increase to 0.30 million square meters from the previous quarter. Diagram : Supply, demand and rental rates Industrial space for rent ďżź

Source: CBRE Research

The competitions in the industrial land and standard ready built factory and warehouse is still considered moderate as there are few developers because of the high cost of investment same as to the industrial estate developers. In addition, most of the entrepreneurs and investors which have demand in the factory and warehouse for rent, normally have target location in which such developers can support their needs. Direct competitors of TISCOM are the industrial estate developers, which provide the land and standard ready built factory / warehouse for rent in the same location. However, due to the good location of TFD Industrial Estate which is considered a strategic point and a competitive advantage to the Group Company. As a result , the Company and TISCOM still have high competitive potential and thus make them to be a Price maker in the nearby industrial estates. Residential Condominium Colliers International Thailand reported that as of Q3/2014, around 11,700 new condominium units were launched which was 8% lower than the past quarter. Several projects were delayed from previous quarters while certain developers deferred the launch of their new projects to 2015. During the first nine months of 2014, there were 34,450 units of condominium available in the market while other listed property developers planned to launch around 6,000 units of their new condominium projects during the last quarter of 2014 which should bring new condominium units launched in 2014 to be more than 40,000 units. As of Q3/2014, 3,159 condominium units were completed and registered with Department of Lands. During the same period, condominium supply in Bangkok stood at 417,650 units.

Annual Report 2014

127 Diagram: Newly-launched condominiums

Unit

Thai Factory Development Public Company Limited

Source: Research Department, Colliers International Thailand

An average sales rate of new condominium launched during Q3/2014 was around 59%, down from 64% in the previous quarter of the same year due to several factors affecting Thai consumer’s confidence including the rate of household debt and Thailand’s economic slowdown, all of which produced an impact to sales activities during Q3/2014. However, certain projects by certain listed property developers continued to enjoy high sales rate in the past quarter which underlines the fact that consumers still trust reputable developers

Diagram: Average sales rate of newly-launched condominiums

Quarter

Source: Research Department, Colliers International (Thailand)

An average sales price of newly-launched condominiums in Q3/2014 stood at Baht 91,600 a square meter which represented a constant increase from Q1 and Q2 of the same year. An average sales price of new condominium projects in the inner core of the city rose at the highest rate to more than Baht 160,000 per square meter. Several high-ended condominium projects were launched in Q3. An average sales price of new condominiums in the outer Bangkok area stood at Baht 75,000 per square meter or an increase by 20% from the previous quarter.

Annual Report 2014

128 Diagram: Average sales price of newly-launched condominiums

Source: Research Department, Colliers International (Thailand)

Baht per Square Meter

The competitive situations in the residential condominiums of the Company and VSSL are considered highly competitive because the demand of the condominium market does not decrease or slightly decrease while the developers, both small and large, still increase to develop high-rise buildings even in the areas where supply is high. . Direct competitors of the Group Company are the other condominium projects in the same or nearby area of the Company. However, due to the long experiences on the real estate sector of the Companyâ&#x20AC;&#x2122;s management, the Company can select the right and appropriate location to develop its condominium project effectively. Altogether with the reasonable and very competitive price, these factors result in that the Company and VSSL still have potential to compete with other developers in this industry. Office Building As of Q3/2014, Colliers International Thailand found that the supply of office building space at the end of Q3/2014 stood at 8,174,460 square meter which will increase to 8,674,280 square meters by the end of 2015. In addition, there will be more than 249,700 square meters of office space to be completed during 2015-2016. Most office buildings under construction and opened for reservation were almost 100% rented even before the buildings were finished. Diagram: Accumulated supply of office space

Square Meter

Supply of Completed during the year

Ratings Supply

Source: Research Department, Colliers International (Thailand)

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129

Thai Factory Development Public Company Limited

An average of 90% of office space in Bangkok was rented which was a slight increase from the previous quarter. Grade-A office space along Phahonyothin Road saw its rental rate increased the most to around 98% while Grade B office building in the Central Business District (CBD) saw their space being rented at a rate of 95%. The average rental rate of office space rose the highest during the past recent years thanks largely to increasing demands for office building space from both Thai and foreign enterprises especially in the CBD area and along Ratchadapisek Road. Diagram: Rental rates of office building space classified by locations as at Q3/2014

Central Business District (CBD)

Phahonyotin Road Grade A Grade B

Ratchadapisek Road

Source: Research Department, Colliers International (Thailand)

An average rent of office space in the CBD was the highest or 67% higher than the average market rate thanks to their strategic locations together with the fact that demands for Grade A office space significantly rose during the past several quarters. Most Grade A office space commanded the very high rental rate or almost to their 100% full rental capacity which sent a chain reaction to their rents which continued to climb up every quarter. Certain Grade A office space in the CBD commanded a rent of more than Baht 1,000 per square meter per month. Some Grade-A office building increased their rent by more than 5% after the occupation rate was about to be saturated. Other office buildings along Ratchadapisek Road adjusted their rents by 5-10% after witnessing robust demands in the area. In addition, certain new office buildings saw their occupation rates nearly reach 100% or up to 100% even before their construction would complete. Diagram: Average rent classified by locations as at Q3/2014 Baht per Square Meter per Month

Central Business District (CBD)

Phahonyotin Road Grade A Grade B

Source: Research Department, Colliers International Thailand

Ratchadapisek Road

Annual Report 2014

130 The competitive condition of the office building for rent under the operation by SG deemed to be low because of continuous growth in demand while the supply was limited especially in the CBD. In addition, the target customers of SG are the foreign customers who are introduced by the existing customers. The direct competitor in this business is other office buildings for rent in the same location of SG. However, with the strategic and competitive advantage point of SG from its location, SG still have a potential to compete with other companies in the same industry.

Product or Service procurement industrial estate The Company has spent 3-5 years duration to develop land for the project TFD Industrial Estate phase 1 . Such time does not include the time in process of asking for permission from related authorities which is the key factor to the time duration. Another factor is season as it is very hard to develop in the rainy season. The main materials and services in developing land to set up Industrial estate comprises of land, contractor, project designer or planner and construction materials such as cement and steel etc. The contractor that the Group Company has assigned to do the construction part for the project will also responsible to procure such materials. standard ready-built factory / warehouse TISCOM has spent 6-7 months duration to build the standard ready built factory and warehouse in the phase 1 of TFD Industrial Estate which also exclude the time spent on permission from related authorities. The duration of time for building depend on the time spent on permission from related authorities and also the season as it is hard to build in the rainy season, same factors as the case to develop the industrial estate. The main materials and services in building the standard ready built factory and warehouse consists of land, contractor, project designer or planner and construction materials, the same ingredients as used to develop land for the industrial estate. The contractor that the Group Company has assigned to do the construction part for the project will also responsible to procure such construction materials. Residential Condominium The Company and VSSL have spent 2.5-3 years duration to develop and build the Condominium, not taking in to account the time in process of asking for permission from related authorities. The time used in building each condominium project will depend mainly on the size of the project. Main materials in building Condominium project are land , contractor, Project designer and construction materials such as Precast concrete, glass and aluminum etc. The contractor that the Group Company has assigned to do the construction will also responsible to procure such construction materials. Office building The Company also operate the office building for rent, by co-operate with the partnership ,Schubert Holdings Plc., Ltd, to take over SG Company which owns 2 office buildings. After such investment, the Company also acts as the project management company.

Annual Report 2014

131

Thai Factory Development Public Company Limited

2.1.1 Unfinished Work At 31 December 2014, the inventory of the Company are as shown in the table. Number of Number of units % Rai-ngan- % of units awaiting for already progress type wa progress transfer transfer the of sales ownership units Value units Value units Value units Value units Value (MB) (MB) (MB) (MB) (MB) Condominium 26 2-3-73 100 505 3,995 302 1,556 203 2,439 59.80 232 1,191 70 364 storey Total unit

Project

15 Sukhumvit Residence

Projectâ&#x20AC;&#x2122;s details Number of Number of units sold units unsold

Annual Report 2014

132

Policy on the conflict of interest 1. Policy on the conflict of interest The policy of the Company involves the conflict of interest is based on the principle that any decision-making of the personnel at all levels of the business must perform for the optimized interest of the Company only. The said decision shall be made free of personal influence, family tie or close associates, who may affect the decision-making to decide which the optimized interest of the Company is. Especially for all personnel to work full time for the Company in full capability, and should not have interest in other business outside the Company to take the time off or dedication to the duty on responsibility for the Company, and may cause damage to it. The conflict of interest may happen in case the personnel of all levels have the personal interest or family members or close associates on finance or other sides in the business, which may receive interest from the decision-making of that person in performance of duty to the Company or realize its activity or operation or future plan. The Company deems to be the duty of personnel of all levels to avoid having involvement in finance and/or relation with the outsiders, who may result in the Company to lose interest or cause conflict on loyalty or interest or obstruction of effective performance. The Company has the policy to safeguard its justified interests, while to have the scope of freedom in various activities of the personnel of all levels to the minimum.

2. Examples of the situations on the conflict of interest The personnel of all levels should take the following examples as guidelines for their interest and consider it as an importance thing for working Disclose and consult in step to help unravel problems or lead into the appropriate solutions. They should ask for advice when they are in situation of doubt or confuse. 2.1 General investment The general rule of this matter is the personnel of all levels, family members or close associates must not hold the shares or receive interest from the competitor companies or any enterprises, including the customers, trade partners/sellers that the Company has contact. The purchase of shares of the listed companies in the SET or investment via the mutual fund or investment units are not conflict of interest, as long as it does not affect the performance with the Company. 2.2 Supply of goods and services to the Company The conflict of interest may happen if the personnel at the level of family or close associates supply goods or service to the Company as a trade partner/seller. If that person can lead or influence to the said operations, although no duty involved the business operations of the Company with that business. In the event that the personnel of all levels of the Company have a family member or close associate as an employee, owner, customer, trade partner/seller or competitor, and s/he participates in the decision-making involve with the business related with that enterprise, shall be regarded as conflict of interest.

Annual Report 2014

133

Thai Factory Development Public Company Limited

Likewise, if the customer, trade partner/seller or employee of a competitor has a family member as employee of the Company, then it is not appropriate to authorize that person the power to influence on a decision-making in the company’s activity involve with the family member. The Company shall not buy or lease property, equipment, raw material or use service from an employee of the Company, family member or close associate, and not sign a contract for that matter (except the employment contract) except in a special case and approved in writing from the Managing Director. 2.3 Entertainment and gifts The personnel of all levels should not receive entertained things, gifts, passenger tickets, sports tickets and other tickets for recreation or entertainment or offers that are personal matters involving their duty, if such action can lead to binding the Company or cause them to be put in the situation of conflict of interest. 2.4 Accepting academic job as a host or public service or any positions The management or employee can participate in the outside activities with good reasons. In several cases the Company encourages its personnel to participate in the external activities as it deems those activities may expand the perspective and experience to its personnel, which can help to improve the job of these people to the Company even more. The personnel who accept the jobs in professional institutions as lecturers, public service or offices such as a director, consultant, etc, they must ask for approval from the Managing Director before acceptance of the job or title. The employee that received approval should be realized that s/he would not bring the Company or his/her title to bind the outside activity, except by approval to do so. In the event that the management or employee is appointed the secretary of the board of directors of the Company or agent in the management of a project/director in an affiliate or subsidiary shall not be regarded as a conflict of interest.

3. Definitions “Family” means the person with relation to the personnel of all levels from the bloodline or legal marriage, including legally adopted persons. “Close member” means the person with involvement with the personnel of all levels in any relations closely.

Connected Transactions

The Company and subsidiaries conducted transactions with persons having potential conflict of interest. The transactions were those executed with directors, executives and/or shareholders of the Company and subsidiaries as well as those with persons having potential conflict of interest of directors, executives and/or shareholders. Details of the Company’s relationship with persons having potential conflict of interest are as follows. 1. Persons with potential conflict of interest and nature of relationship Person with potential conflict of interest Nature of relationship Mrs. Chalida Taechaubol (Mr. Apichai’s wife) holds 100 JC Kevin Development Co Ltd (“JC Kevin”) percent of its shares. (formerly named V.C.A.L Business Group Co Ltd) The company develops condominiums for sales, office Mr. Apichai Taechaubol and Mr. Chotiwit Taechaubol (Mr. Apichai’s son) are JC Kevin Co Ltd’s directors. space for rent and hotels. Mr. Apichai Taechaubol CEO and major shareholder Mrs. Chalida Taechaubol Mr. Apichai Taechaubol’s wife Mr. Adisorn Taechaubol Mr. Apichai Taechaubol’s brother

Annual Report 2014

134 2. Connected transactions between the Company and subsidiaries vs persons with possible conflict of interest In 2012 and 2013, TFD and subsidiaries executed transactions with persons having a possible conflict of interest but the transactions did not cause any conflict of interest. Details are as follows. Transactions relating to operation in general Persons with possible conflict of interest

JC Kevin

Company

Description

TFD

Reception/banquet expenses: TFD used JC Kevin’s restaurant and hotel services to entertain guests as well as its meeting room to hold the Board of Directors’ meeting and the Shareholders’ Meeting Account payables Office rent: TFD signed an agreement to lease a total of 2,497 square meters of office space from JC Kevin’s Floor 2 and Floor 4-6 for use as its headquarters at a rental and service rate of Baht 1,123,650 a month (Baht 450 per square meter). The lease period is three years and will expire on December 31, 2016. Advanced deposit

JC Kevin

TISCOM

Office rent: TISCOM signed an agreement to lease a total of 196 square meters of office space from JC Kevin’s Floor 3 for use as its headquarters at a rental and service rate of Baht 88,200 a month (Baht 450 per square meter). The lease period is three years and will expire on December 31, 2016. Advanced deposit

Transaction value (Million Baht) 2013 2014

0.42

Reasonable and rationale

0.86 JC Kevin charged a service fee minus 10% discount from normal rates it charged customers in general. Audit Committee’s opinion: The transaction was reasonable as it facilitated TFD when entertaining guests and when holding a meeting as the hotel was close to TFD’s office and TFD received a discount.

0.10 0.75 - 10.47 TFD and subsidiaries required appropriate space due to their business expansion for use as their office since the current office space was inadequate to accommodate increasing number of staff. Besides, the existing lease agreement was expired on June 30, 2013. TFD decided to lease JC Kevin’s office space as the new building offered enough space to answer to its demand and the rent was competitive to other office buildings nearby.

Audit Committee’s opinion: The Audit Committee’s Meeting No. 2/2556 held on March 14, 2013 was of the opinion that the 6.98 connected transaction was reasonable since not only JC Kevin office building was brand-new 0.83 and that it offered adequate space as required, but TFD was also offered a lower rent than what it had paid and the new rent was competitive to what nearby office buildings offered at the time.

0.53

Annual Report 2014

135 Persons with possible conflict of interest

Company

JC Kevin

VSSL

Description

Transaction value (Million Baht) 2013 2014

Thai Factory Development Public Company Limited Reasonable and rationale

300.00 - VSSL signed an agreement to buy and sell a total of 138 rai of land at Khao Yai for Baht 800 Down payment for land purchase : On million with JC Kevin with a purpose to develop a property project for sale since TFD’s Board of December 25, 2013, VSSL entered an Directors had viewed that the transaction was a normal one with business conditions as usual and agreement to buy and sell a total of 138 it would benefit TFD as it would allow VSSL to develop an ongoing project after the Sukhumvit rai of land totaling Baht 800 million with 15 Residences Project was completed. Before buying the land, TFD had hired a land appraisal JC Kevin upon the following terms of company to provide information to support its decision. payment: 1. 1st down payment of Baht 300 Asia Plus Advisory Co Ltd, TFD’s financial advisor who helped preparing documents and submitting million on the contract-signing date. an application to the Securities and Exchange Commission (SEC) for TFD to offer and sell its 2. 2nd down payment of Baht 20 shares, subsequently expressed an opinion that the transaction, which was normal business but million on January 30, 2014 and contained irregular commercial terms and it transaction’s size exceeded 3% of TFD’s net tangible another Baht 180 million on March assets which according to relevant notifications means TFD was to seek an approval from its 31, 2014 Board, disclose information to the Stock Exchange of Thailand (SET) and seek permission from 3. The remaining Baht 300 million to the Shareholders’ Meeting. be paid within June 30, 2014 or the - 320.00 TFD however viewed that the transaction, if proceeded, would have required the firm to hire an ownership transfer date. - 0.15 independent financial advisor to express its opinion to the Shareholders’ Meeting which would As of January 30, 2014, VSSL already have further delayed the land purchase and affected its fund-mobilizing plan already setto launch. paid Baht 320 million to JC Kevin. Its Board of Directors’ Meeting No. 3/2557 dated March 3, 2014 therefore resolved to approve Other receivables VSSL to terminate the land purchase and ask JC Kevin to pay back the down payment to VSSL. Accrued interest However, the SEC recommended that TFD had the Shareholders’ Meeting participate in an approval of this transaction for the purpose of transparency and corporate governance under the SEC and the SET’s notifications. TFD submitted the transaction to its Board’s Meeting No. 14/2557 dated July 30, 2014 for another review of its approval. On this occasion, TFD re-adjusted the project development model to respond to economic and political conditions perceived not so stable at the time before hiring two appraisers to appraise the land which was valued at Baht 808.20 million and Baht 777.71 million, respectively. The management thereby negotiated with JC Kevin to reduce the land price to reflect the newly-appraised prices as well as VSSL’s cost of opportunity from not being able to seek profit from the down payment it had earlier paid to JC Kevin. Conditions of the new agreement could be summarized as follows. 1. If shareholders approved the land purchase: JC Kevin would agree to reduce the land price to Baht 755 million which when deducted by Baht 320 million down payment already paid would leave only Baht 435 million to be paid by VSSL within 90 days from the approval date by the Shareholders’ Meeting.

Annual Report 2014

136 Persons with possible conflict of interest

Company

JC Kevin (Con’t)

VSSL (Con’t)

Description

Transaction value (Million Baht) 2013 2014

Reasonable and rationale

2. If shareholders did not approve the land purchase: JC Kevin agreed to return Baht 320 million down payment back to VSSL together with a 5.5% interest rate per annum from the day JC Kevin received the down payment from VSSL to the day VSSL received its money pack. This would take place within 90 days from the day the Shareholders’ Meeting decided not to approve the land purchase. TFD’s Board of Directors resolved to allow VSSL to buy the land from JC Kevin and to submit this matter to seek approval from TFD’s Shareholders’ Meeting which, on September 30, 2014, the Extraordinary Shareholders’ Meeting No. 2/2557 resolved not to allow VSSL to buy the land. JC Kevin therefore had to pay back Baht 320 million down payment together with a 5.5% interest per annum in return to VSSL within 90 days from the day TFD’s Shareholders Meeting decided not to approve the transaction (due payment on December 29, 2014). On December 29, 2014, JC Kevin paid Baht 17.68 million accrued interest to VSSL before requesting to expand the repayment period of this down payment to VSSL with the following details: 1. The repayment of Baht 320 million down payment to VSSL be extended by another year from the due payment date which was December 29, 2014. 2. The interest would be paid on a monthly basis at 7% per annum from December 29, 2014 to the day VSSL is duly paid both the principle and the interest from JC Kevin. 3. A total of 30 condominium units in Building C of the “Sathorn Heritage Residences” condominium project located on Naradhiwas Rajanagarin Road, Kwaeng Yannawa, Sathorn District, Bangkok, which accounted for a sales area of 3,288.49 square meters would be mortgaged and registered as a collateral against the debt repayment. JC Kevin would solely be responsible for all mortgage registration fees and other expenses, if any. Mr. Apichai Taechaubol who guaranteed the repayment would continue to be the guarantor. The transaction however was a connected one categorized under financial assistance and the size exceeded 3% of the net tangible assets which according to relevant notifications required TFD to seek approval from its Board of Directors, to disclose the information to the SET and to seek approval from the Shareholders’ Meeting. TFD’s Board of Directors in its Meeting No 2/2558 dated February 23, 2015 resolved to allow VSSL to extend the payback period of the down payment and to submit the matter before TFD’s Shareholders’ Meeting scheduled on April 27, 2015 to seek its approval.

Annual Report 2014

137 Persons with possible conflict of interest

Company

JC Kevin (Con’t)

VSSL (Con’t)

Description

Transaction value (Million Baht) 2013 2014

Thai Factory Development Public Company Limited Reasonable and rationale

Audit Committee’s opinion: The Audit Committee’s Meeting No. 10/2557 held on July 30, 2014 was of the opinion that buying the land from JC Kevin could be another channel for VSSL and TFD to generate future income and profit. Besides, the new sales price of the land was lower than an appraised price submitted by independent land appraisers. In addition, sales conditions were aligned with land sales conditions in general. The Audit Committee felt appropriate to submit the matter to TFD’s Board of Directors for consideration and to seek approval from TFD’s Shareholders’ Meeting which on September 30, 2014 resolved in its Extraordinary Meeting No. 2/2557 not to allow VSSL to buy the land. The Audit Committee No. 2/2558 on February 20, 2015 subsequently viewed that JC Kevin had proposed in its request to extend the repayment period to offer to VSSL an interest rate of 7% per annum which was higher than TFD’s average financial costs and JC Kevin had already paid the accrued interest in 2014 to VSSL. Besides, JC Kevin also agreed to additionally mortgage its property to guarantee the repayment where the collateral value, based on the appraisal by independent land appraisers, was higher than the amount of debt due for payment at the moment. Finally, Mr. Apichai Taechaubol also personally guaranteed the repayment of this amount. All of these had made the Audit Committee feel appropriate to propose the matter for TFD’s Board of Directors’ consideration as well as to seek an approval from TFD’s Shareholders’ Meeting.

Annual Report 2014

138 Persons with possible conflict of interest

Company

Mr. Apichai and Mrs.Chalida Taechaubol

TFD

Description

Transaction value (Million Baht) 2013 2014

On April 1, 2013, TFD acquired 7.01 million 496.90 shares of VSSL which accounted for 100% of its registered and paid-up capital from Mr. Apichai and Mrs. Chalida Taechaubol for a total of Baht 497 million (the agreed price was Baht 500 million but TFD paid before the due date and thus enjoyed Baht 3 million discount).

Reasonable and rationale

- TFD acquired VSSL to expand its investment in a business with potential to generate incomes and profits in the near future as this would allow TFD to earn sales revenues from the Sukhumvit 15 Residences Project to compensate for TFD’s sales incomes from condominium projects whose sales had been closed while other projects remained under development. The transaction price was reasonable since an independent land appraiser had appraised it at Baht 582.98 million. The transaction price therefore was lower than the fair value. The transaction meanwhile was approved by the Extraordinary Shareholders’ Meeting No. 1/2556 on February 14, 2013. Audit Committee’s opinion: The Audit Committee in its Meeting No. 8/2555 dated December 26, 2012 viewed that the acquisition of VSSL’s shares was reasonable to TFD’s business as it would general nearfuture income and cash flow for TFD and thus would benefit TFD. The Audit Committee felt appropriate to submit this VSSL acquisition which was a connected transaction to the Board of Directors who would seek further approval from the Shareholders’ Meeting which in its ExtraordinaryShareholders’ Meeting No. 1/2556 on February 14, 2013 resolved to allow TFD to acquire 7,009,998 ordinary shares of VSSL at Bath 100 par value per share or 100% of VSSL’s registered and paid-up capital at Baht 71.3266 per share for a total sales value of Baht 500 million from Mr. Apichai Taechaubol and Mr. Chalida Taechaubol.

Annual Report 2014

139 Persons with possible conflict of interest

Mr. Adisorn Taechaubol

Son of a board member

Company

Description

TFD

Down payment: On April 5, 2012, Mr. Adisorn Taechaubol signed an agreement to buy and sell a condominium unit of the Colonial Khao Tao Hua Hin Project for Baht 5.19 million where he had already paid Baht 0.78 million as a deposit for his unit. Down payment: On December 23, 2011, son of one board member signed an agreement to buy four condominium units of the Sukhumvit 15 Residences Project for a total price of Baht 41.12 million where he had paid Baht 9.24 million as a deposit when signing the contract and as a down payment.

VSSL

However, on July 25, 2014, the person expressed in writing to terminate the agreement to sell and buy the four condominium units and asked to have his Baht 9.24 million deposit and down payment paid when the agreement had been signed refunded. VSSL subsequently paid him back the amount on August 1, 2014.

Thai Factory Development Public Company Limited

Transaction value (Million Baht) 2013 2014

0.78

Reasonable and rationale

0.78 These two sales transactions were normal transactions where prices and other business conditions were as usual as other sales transactions executed with general customers. Audit Committeeâ&#x20AC;&#x2122;s opinion: The Audit Committee was of the view that the two transactions were normal business transactions.

9.24

Annual Report 2014

140 Loans between the Company and subsidiaries with persons having potential conflict of interest Person with potential conflict of interest

JC Kevin

Nature of Transaction

Carried forward (Million Baht)

JC Kevin borrowed money from VSSL and issued VSSL a promissory note (P/N) with the following details: - Issue date: Nov 30, 2010 for a face value of Baht 124.2 million with due payment upon demand and 8 per cent interest per annum - New P/N was issued in 2011 and 2012 to replace the existing one for a total of Baht 104.15 million with an interest rate being adjusted to 8.4 per cent per annum - During Q1 of 2013, VSSL was entirely repaid for both the shortterm loan and interest incomes.

Principal 104.15 Accrued 11.35 interest

3.24

(104.15) (14.59)

115.50

3.24

(118.73)

Total

2013 Outstanding Increase Payment

Necessity and Rationality

- This transaction - had taken place before the Company bought VSSL who was repaid before being acquired by the Company. -

Loans between the Company and subsidiaries with persons having potential conflict of interest Person with potential conflict of interest

Nature of Transaction

Carried forward (Million Baht)

Mrs. Chalida VSSL borrowed from Mrs. Chalida Principal Tachaubol Tachaubol and a P/N was issued in return on December 27, 2012 for a face value of Baht 33.57 million with due payment upon demand and without interest.

33.57

2013 Outstanding Increase Payment

(33.57)

Necessity and Rationality

- This transaction had taken place before the Company bought VSSL as a subsidiary.

Annual Report 2014

141

Thai Factory Development Public Company Limited

Loan guarantee with financial institutions Person with Borrower Guarantee Loan amount Outstanding debts Nature of potential as of Dec 31, As of Dec As of Dec transaction conflict of 2014 31, 2013 31, 2014 interest

Mr. Apichai Taechaubol

TFD VSSL TFD

ü ü ü

990.00 1,550.00 800.00

150.00 558.72 -

Necessity and Rationality

150.00 Personal This guarantee was given in accordance - guarantee with loan conditions of a financial institution from which a loan was borrowed for use as 513.35 working capital and to buy land and build projects of the Company and subsidiaries, which is a transaction carried out for the best interest of the Company and subsidiaries. The Audit Committee’s opinion: The Audit Committee is of the opinion that loan guarantee of the Company and subsidiaries was reasonable and necessary and it would benefit performance of both the Company and subsidiaries.

3. Approval measures/procedures of connected transaction The Board of Directors will approval a connected transaction whereby - The management has to submit a report to the Board with adequate information for its consideration for the purpose of investor projection. The report should detail why a transaction is necessary and appropriate. - Person relating to the transaction has no rights to vote. - An appraisal must be carried out by a recognized independent appraiser. - Independent directors or members of the Audit Committee are to express opinions. - The transaction shall be in compliance with relevant laws and regulations. If a connected transaction is within a guideline given by the Board or if it’s a normal transaction during the normal course of business, the transaction will be considered within the authority of the Executive Board and/or the management to approve.

Annual Report 2014

142 4. Policy or possibility to continue executing a connected transaction in the future The Company has a policy to continue executing connected transactions carried out at the moment in the future subject to the corporate governance principle where conditions of the transactions will be aligned with what is done during ordinary course of business and at a market price which can be comparable to a price offered to the third party. In addition, the Audit Committee will take part in the process to review the soundness of the connected transaction’s price and its rationality. The Board of Directors will comply with the laws on securities and exchange as well as regulations, announcements, orders or requirements of the Office of the Securities and Exchange (SEC), the Capital Market Supervisory Board and the Stock Exchange of Thailand (SET) when executing a connected transaction possible taking place in the future. The Board will also comply with requirements to disclose information of connected transactions as well as the acquisition or disposal of major assets of the Company and subsidiaries. It is anticipated that a volume of the Company’s connected transactions to be executed in the future will remain relatively the same as what’s happening now. However, this volume is subject to change based on what’s necessary and proper to the business of the Group. If the Company or subsidiaries execute a connected transaction with a person with potential conflict of interest, a stakeholder, or a person who could have a conflict of interest in the future, the Company will have the Audit Committee express its opinion regarding the transaction’s necessity and soundness. If the Audit Committee doesn’t have any expertise to review such connected transaction, an independent expert or an auditor of the Company will provide an opinion instead for the Board or shareholders, as the case may be, to use in their decision-making process. The Company will disclose connected transactions in notes to the financial statements audited or reviewed by the Company’s auditor. 5. Future measures to avoid conflict of interest TFD has companies considered related businesses in the same real estate development business as they share the same directors and/or shareholders under the SEC’s related rules and regulations which TFD however has not yet re-organized to subject to its control. For better transparency under TFD’s own management and for compliance with practices stipulated under the Securities and Exchange Act, B.E 2535 (1992) pertaining protection of minor shareholders, related companies have already issued a letter disclosing the list of properties and lands held thereby and provided a covenant to TFD that they shall in no case conduct any business that will directly or indirectly compete with TFD; neither will they do anything with the lands held thereby on a commercial basis that could be regarded as competing with TFD. In addition, they covenant to offer the right to TFD, first and foremost before selling to someone else, to buy such property development projects and/or lands in order to minimize an opportunity to create any conflict of interest with TFD.

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Thai Factory Development Public Company Limited

Risk Factors 1. Operation risk of the Group of Companies

1.1 Legal risk relating to the real estate sector Amendments of laws, rules and regulations relating to the real estate sector such as the Land Development Act, zoning regulations, the town and city planning laws and attempts to set more areas as green zones defined as farm and rural areas and fewer areas as purple zone catered for industrial activity could expose the Group to a possible risk. Such amendments may affect the Group’s operation or delay the Group’s ongoing projects. The Group manages this risk by studying and consistently monitoring possible regulatory changes for to stay ready for possible change. 1.2 Risk from delay of the TFD Industry Estate Project (Phase II), as a result of change and adjustment of master plan or the Bangpakong Community, Chachaoengsao Province’s town planning master plan. An industrial estate developer is required to submit a master plan together with a conceptual design and other supporting documents to the Industrial Estate Authority of Thailand (IEAT) for approval. The master plan has to correspond to relevant laws, rules and regulations. In case of legal or regulatory amendment, the developer must update its master plan to correspond to the change. That’s why there is likelihood for the TFD Phase 2 Industrial Estate Project to be delayed as a result of change and adjustment of its master plan. In addition, based on the Ministerial Regulation which has enforced the 2011 comprehensive town and city planning of the Bangpakong Community, Chachaoengsao Province, land under area No. 6.2 where the TFD Phase 2 Industrial Estate is located is classified s rural and farm lands (Green Zone) and therefore not allowed for industrial purpose. However, the Green Zone can be used for contruction of a warehouse at September 30, 2014, the Company is seeking permission from the authorities to change certain parts of the land under area No. 6.2 into land for industrial and warehousing purpose (Purple Zone), a process which could further delay this project. The Town and Country Planning Board has already approved the amendment and a public hearing was already conducted to which stakeholders were invited to review the amended plan, requirements and specifications. The Company continues to study and monitor possible regulatory changes for any adjustment of the master plan, conceptual design and other supporting documents to accommodate possible change without delay. 1.3 Risk from the legal dispute over the Colonial Khao Tao Huahin Project In 2012, VAL Commercial Associates Co Ltd (a company associated with the Milford Group which operates a hotel and a golf course in an area close to the Colonial Khao Tao Huahin Project) sued Tambon Paknam Pran Local Adminsitration Organization and TFD as a co-defendant with the Central Administrative Court alleging that a construction permit had been issued despite the project was less than 200 meters setback from the seashore line as required by the Notification of Minsitry of Natural Resources and Environment, making the issuance of this permit an illegal one. The firm asked the Court to withdraw the permit and to temporarily suspend the project’s construction until upon the Court’s final decision. The Central Adminsitration Court did order the construction to be temporarily suspended.

Annual Report 2014

144 TFD subsequently appealed the Central Adminsitrative Court’s order with the Supreme Administrative Court to withdraw such order. As of March 27, 2014, the Supreme Adminsitrative Court did revoke the Central Administrative Court’s suspension order. However, the Central Administrative Court is in the process of ruling the case. As of December 31, 2014, TFD already invested Baht 422.59 million in the project. Yet, if the Central Administrative Court rules against TFD, we are still able to appeal the Court’s decision or the Central Adminsitrative Court’s order with the Supreme Administrative Court. If eventually, the Supreme Adminstrative Court rules against TFD which will prevent us from constructing this project based on its original design, we would amend the design to be in compliance with the law which however may reduce the project’s size or the firm may consider selling the project to other investors. If TFD is losing the case or if there is any court ruling or order to terminate the construction permit, TFD will sue Tambon Paknam Pran Local Admnistrationi Organization for compensation and an opportunity cost in the project. Brook Real Esate Co Ltd, the property appraiser, has appraised the project to be valued at Baht 589 million which is higher than TFD’s current investment in the project. 1.4 Risk from sourcing additional lands for the development of the TFD Phase 2 Industrial Estate Project As of December 31, 2014, the Company bought approximately 1,211.80 rai of additional vacant land in the Phase 2 project. The land which is located close to the project’s Phase 1 is part of the Company’s plan to expand its Phase 2 project by another 2,500 rai. It is currently doing landscape architecture, designing infrastructure and preparing an EIA report for submission to the authorities. The Company therefore could be exposed to a risk of not able to buy as much land for the development of the TFD Phase 2 project as it needs or at a location it wishes. It may also be exposed to higher land prices which could deprive the Company of a chance to achieve the land size and location as required in the TFD Phase 2 project development plan; or which could result in higher costs of project development and thereby may affect the Company’s financial position and operation results. However, the Company manages this risk by signing a contract with property brokers to negotiate land prices upon the Company’s conditions as well as to complete land purchase transactions. The Company’s property brokers are both from outside Chachoengsao Province and residents in the area who help facilitating the attempt. 1.5 Risk from the shortage of construction contractors Construction contractors are vital to the real estate sector. The Company and its subsidiaries therefore could be exposed to a shortage of contractors which could delay the Group’s construction projects and project development plans from original schedules and which may affect the Group’s financial position and operation results. However, the Company and subsidiaries manage the risk by sourcing construction contractors through a bidding process. After selecting a contractor, the Company and subsidiaries will monitor his activity and evaluate his performance based on quality of his work. Contractor passing an evaluation by the Company and subsidiaries will have his name kept in the Approved Supplier List for opportunity to work in the Group’s future projects. 1.6 Risk from economic and political conditions The business of both the Company and subsidiaries may be affected from economic and political volatility as well as other macroeconomic factors. This refers especially to the industrial estate business, the property development business which offers standard factory/warehouse buildings and the office space for rent business since their major clients are foreign operators who could curtail or relocate their investments from Thailand and thereby reduce demands for factory. The risk may affect the Group’s financial position and operation results.

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However, the Group manages the risk by diversifying its business which now ranges from industrial estate projects to residential projects and office towers for rent. Besides, the Group provides alternatives for business operators to either buy or lease land, factory and warehouse building to reduce their investment risk which not only answers to their need but also reduces fluctuated demands the Group usually experienced by economic, political and other macroeconomic factors. 1.7 Risk from lease agreement renewal The business in which standard factory or warehouse buildings are built for customers to rent in several industrial estates or industrial zones operated by the Company and subsidiaries is one of the Group’s major sources of incomes. In addition, incomes from property management directly vary with rent incomes derived from the property. As a result, the Company and subsidiaries are exposed to risk from having to secure new customers or from the fact that most lease agreements for existing clients are short-term. An average term of a lease agreement is three years which when due may not be renewed by customers and therefore could affect the Group’s future incomes. However, based on past performances, occupancy rate of standard factory and warehouses buildings of the Company and TISCOM remained as high as 70-90 per cent where some were 100 per cent fully rented. In other words, we could not build enough factory and warehouse buildings to respond to customer’s need. Besides, most customers renew the agreements which hardly leave the factory and warehouse vacant. The risk in this area remains low and the Company can compete with other contenders. SG’s office space for rent business is also exposed to a risk of tenants not renewing lease agreements of which the term is mostly three years. If a lot of tenants choose not to renew the agreement and SG could not secure new tenants, this could directly affect cash flows and operating results of both SG and the Company. However, based on past performances, SG’s occupancy rate was as high as 80-90 per cent and most customers opted to renew their lease agreements since SG’s office towers are strategically located. The risk is therefore low and the business is considered competitive. 1.8 Risk from the renewal of rights to lease and sub-lease in the office building business เSG has invested in the right to lease the land and SG Tower 1 Building by signing an agreement with the Office of the Privy Purse. SG has also invested in the right to sub-lease the land together with the Millenia Office Building (SG Tower II) by signing an agreement with GF Holdings Co Ltd to operate an office building for rent. The rental term between SG and the Office of Privy Purse is 30 years with the term set to expire in October 2023 or approximately nine years from now. Meanwhile, the sub-lease term between SG and GF Holdings Co Ltd is 30 years and will expire in November 2025 or 11 years from now. SG is exposed to a risk of not being able to renew the lease and the sub-lease agreement with the Office of Privy Purse and SG Holdings Co Ltd, respectively. This could materially affect TFD and its subsidairies’ financial position and performances in the future. In 2014, SG earned Baht 211.19 million from rent and service fees which was translated into Baht 39.07 million worth of net profit or an account of 18.50% of the total revenues.

Annual Report 2014

146 1.9 Risk from having to pay compensation under agreements executed between the Company and its subsidiaries vs the M-II Property Fund In December 2012 and August 2013, TFD and TISCOM agreed to sell their properties consisting of land and factories for rent in the TFD Industrial Estate, the Navanakorn Industrial Zone and the Laemchabang Industrial Estate to the M-II Property Fund. In addition, TISCOM also transferred the right of land lease in the Laemchabang Industrial Estate to the property fund. It also agreed to sell the land together with structure and buildings built for rent located in the Kingkaew Project thereto. In the agreement mentioned above, the following has been agreed which could result in the Company and TISCOM paying a compensation or having an additional expense to pay in the future. Details are as follows. 1. An agreement by TFD and TISCOM in relation to the M-II Property Fund’s right to lease in the agreement to lease a land belonged to the Port Authority of Thailand (PAT): TFD and TISCOM have agreed to be mutually and severally liable to compensate Baht 10 million worth of damage to the M-II Property Fund if the Fund cannot register the renewal of the rights to lease PAT’s land to be equal at least to the land lease term under the land lease agreement done with the Industrial Estate Authority of Thailand. 2. An agreement for factories located in land plots under construction and factories located in land plots with no lease agreement (Guarantee rent and service fee rates): TFD has agreed to guarantee a minimum rental and service rate of Baht 200 per square meter for land and factory located in land plots under construction or land plots with no lease agreement signed with any lessee or already with such lease agreement where payment of the rent or service fee has not yet been made or where the rental term is fewer than six months to the M-II Property Fund for three years from the day the property ownership is transferred. 3. An agreement relating to TISCOM’s asset (in case the land in the Kingkaew Project is expropriated): TFD and TISCOM have mutually and severally agreed to compensate the M-II Property Fund. The amount will be calculated from a compensation per square meter multiplied by the number of land plots affected by land expropriation if all or part of the Kingkaew land is expropriated. In addition, TFD and TISCOM have also agreed to build, replace, renovate or repair the property to its original condition ready for use prior to the land expropriation if the expropriation prevents the M-II Property Fund or smaller lessees to exploit it or if any part of the property has to be built, replaced, renovated or repaired. 4. An agreement relating to TISCOM’s asset (if no lease agreement can be renewed with the Huabcham Group): Under this agreement, TFD and TISCOM have agreed to compensate Baht 40 million to the M-II Property Fund if the Fund can neither renew the lease agreement with the Huabcham Family (a lessor under the land lease and development agreement with TISCOM) nor register the lease for 30 years. 5. An agreement relating to TISCOM’s asset (rent and service fee guaranteed): TFD and/or TISCOM have agreed to guarantee the rental and service fee at a minimum rate of Baht 180 per square meter for TISCOM’s properties without contract yet with small lessees or of which the rental term is fewer than six months. The guaranteed fee will be paid to the M-II Fund throughout the three-year period. 6. An agreement to guarantee the factory construction: TFD agrees to guarantee the construction of the factory for five years starting from the day the M-II Property Fund registers to take transfer of the factory building.

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As a result, TFD and TISCOM may be exposed to a risk of having to pay a compensation based on what has been agreed above with the M-II Property Fund which will add more expense burden to TFD and TISCOM. However, we have estimated a minimum rental fee guarantee which TFD and TISCOM have to pay the M-II Property Fund (under Clause 2 and 4 above) for a period of 2-12 months and for two years, respectively, before booking it by deducting it from profit resulted from sales of real estate property for investment purpose. We have also estimated the factory construction guarantee (under Clause 6) to be paid to the M-II Property Fund where the amount has been booked as a cost of sales in the Statement of Profit and Loss. Meanwhile, the period during which an estimated guarantee for minimum rent income of each factory is to be paid is not the same as this depends on forecast of the sales department. 1.10 Risk from dependence on major clients TFD’s subsidiary has invested in two projects of warehouses and factories for rent in the UK, each of which is entirely rented by one single major tenant which could pose a risk of the single tenant not renewing the lease agreement and thereby affecting future incomes of both TFD and its subsidiary. However, the tenant has already renewed the lease agreement (of which the term remains for no fewer than 10 years) and this very same tenant is keen to renew the lease agreement again. Besides, the tenant has leased this warehouse and factory for his business for a long time. Moving the factory to a new location will cost the tenant a lot of expenses in the procurement and relocation of both assets and machinery. 1.11 Risk from exchange rates As TFD’s subsidiary has invested in the UK, incomes, expenses, assets and liabilities are booked in a foreign currency (Pound sterling), an exchange rate volatility could result in the Company enjoying profit or loss from the exchange rates. However, as of December 31, 2014, investment revenues in the UK accounted for 2.11% of the Company’s total revenues in 2014. The exchange rate risk therefore remained low.

2 Financial Risk 2.1 Risk from interest rates and Bank of Thailand’s rules and regulations on the real estate sector Risk from interest rate change 1. Impact to customer’s home-buying decision Since most targeted customers in the condominium business will apply for residential loans from financial institutions, interest rates and loan payment conditions are crucial to their decision to buy a condominium unit. If loan interest is up, this will affect the customer’s costs of fund which could delay his/her buying decision. The Company manages this risk by studying customer’s behavior and needs before offering sales and down payment conditions that could minimize their financial burden when buying a condominium unit. 2. Impact to the Group’s costs of fund: Since the Group seeks loans from financial institutions to develop various real estate projects now and in the future, increase of interest rates will also affect the Group’s financial costs.

Annual Report 2014

148 Risk from changes of the Bank of Thailandâ&#x20AC;&#x2122;s regulations relating to the real estate sector At present, the Bank of Thailand closely monitors quality of loans extended by commercial banks which has made them stricter when approving customer loans. Besides, loan approval procedures were adjusted and loan amounts given to general customers who may not be major business were reduced compared to collaterals. As a result, this group of customers is required to place a higher down payment when applying for home loan from financial institutions, an act which could affect their purchasing power and decision. On the other hand, the fact that commercial banks are stricter when extending loans helps the Group screen and reach customers who are really qualified and indeed having a real purchasing power. 2.2 Liquidity risk and risk from accessing funding sources The property development business is a capital-intensive business where a lot of investments are needed from the start to buy land, develop the property, construct buildings and conduct sales activities. All of these activities require money before the Group gets paid from the majority of sales values on the day the ownership is transferred which will be realized only after the construction is completed. As a result, the Group has to endure a project management period for 2-5 years depending on the projectâ&#x20AC;&#x2122;s type and size. In other words, the business is exposed to a risk of having to manage financial liquidity and accessing funding sources required in the business. Yet, the Company manages this risk by carefully reviewing a development plan which starts from selecting a site, studying and analyzing the projectâ&#x20AC;&#x2122;s feasibility and hiring project consultant to ensure success to every project. In addition, the Company and subsidiaries mobilize funds from a variety of channels whether through the capital market or financial institutions to reduce dependency risk from having to depend on a single source of fund.

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Thai Factory Development Public Company Limited

Management Discussion and Analysis 1. Overview of the business operations and significance changes The Company and its subsidiaries have operated the business of real estate development for sales and rent in many sectors, with the core business is in the Industrial Estate Development The Company’s business currently can be classified in 5 sectors as follows : 1. Business of industrial estate development : operated by The Company (TFD) 2. Business of land with standard ready-built factory / warehouse: operated by TISCOM 3. Business of residential buildings (condominium) : operated by The Company and VSSL 4. Business of office building for rent : operated by SG 5. Business of asset management services - operated by The Company In the past, the land business with standard ready-built factory warehouses was operated by TFD and TISCOM. However, following our corporate restructuring in 2013 for clearer roles and responsibilities, TISCOM has operated the standard ready-built factory / factory warehouses business of the Group since.

Key milestones in 2013 • Increase and reduction of the Company’s registered capital April 18, 2013: TFD reduced its registered capital from Baht 902.880 million to Baht 902.878 million before increasing its registered capital from Baht 902.878 million to Baht 1,264.029 million to accommodate dividend shares and the conversion of the TFD-W2 warrants. • June 24, 2013: The Extraordinary Shareholders’ Meeting No. 2/2556 resolved to issue and offer no more than Baht 3.5 billion worth of debentures. TFD offered its 1/2556 debentures totaling Baht 500 million during Q3/2013 and proceeded to offer its 2/2556 debentures totaling Baht 850 million in Q4 of the same year. • April 1, 2013: TFD bought 100% of VSSL’s ordinary shares. VSSL is a real estate developer and owns the Sukhumvit 15 Residences Condominium of which the investment value totals Baht 496.60 million. • In Q4/2013, the following properties were sold to the M-II Property Fund: - TISCOM sold its right to lease land and factory buildings totaling Baht 290 million to the Fund. - TFD sold land and factories totaling Baht 460 million to the Fund.

Key milestones in 2014: • March 25, 2014: TFD increased its capital in TISCOM by another Baht 300 million. • March 27, 2014: TFD announced the payment of an interim dividend at a rate of Baht 0.22 a share totaling Baht 238.37 million to its existing shareholders. • April 22, 2014: TISCOM established its subsidiary named Barnsley in the UK with a registered capital of £ 0.63 million in order to invest in land and warehouse for rent valued at £ 6.30 million. • May 23, 2014: TFD paid an annual dividend at a rate of Baht 0.05 per share totaling Baht 54.18 million for its existing shareholders.

Annual Report 2014

150 • July 10, 2014: TFD issued its 1/2014 Debentures worth Baht 1,693.50 million. • September 24, 2014: TFD signed a Memorandum of Understanding (MOU) with SPCG Public Company Limited to conduct a joint study and to produce a business plan on Solar PV rooftop to be installed on the roof of warehouses and industrial plants. • September 30, 2014: The Extraordinary Shareholders Meeting No. 2/2014 resolved not to approve VSSL to buy a land totaling 138-3-51 rai from JC Kevin Development Co Ltd. • November 12, 2014: The Extraordinary Shareholders Meeting No. 3/2014 resolved to approve TFD’s fundmobilizing plan as follows: (1) To issue and offer no more than 120 million ordinary capital-increase shares at Baht 1 par value per share as a public offering where the offered price must not be lower than 90% of the average trading price of TFD’s shares in the Stock Exchange of Thailand (SET) during at least the previous seven consecutive business days but not exceeding 15 consecutive business days prior to the day the capital-increase shares to be offered to the public will have their price set. (2) To issue and offer no more than 318 million units of the TFD-W3 warrants to TFD’s existing shareholders as a right offering without charge at the rate of five ordinary shares to one unit of the TFD-W3 warrant (any remain will be rounded off). The exercise price is Baht 5 per share. (3) To approve and offer no more than 200 million ordinary capital-increase shares at Baht 1 par value per share as a private placement including to institutional investors and/or those with specific qualifications on one single or several occasions. The offered price of the capital-increase shares must not be lower than 90% of the average trading price of TFD’s shares in the Stock Exchange of Thailand (SET) during at least the previous seven consecutive business days but not exceeding 15 consecutive business days prior to the first day on each occasion the capital-increase shares to be offered as a private placement will have their price set. (4) To issue and offer no more than 13 million shares at Baht 1 par value per share to accommodate the right adjustment of the TFD-W2 warrants which will take place when TFD duly allocates the TFD-W3 warrants to its existing shareholders. • November 2014: TFD allocated 200 million capital-increase shares as a private placement, resulting in the Company’s paid-up capital to be amounted to Baht 1,283.50 million at present. • December 15, 2014: TFD offered 256.56 million units of the TFD-W3 warrants at a rate of one warrant to one ordinary share to its existing shareholders at the rate of one warrant to five ordinary shares they currently held at Baht 0.00 per unit. • December 18, 2014: The Board of Directors resolved to allow VSSL to invest in the land and construction of the Twin Tower Building worth Baht 385 million.

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Thai Factory Development Public Company Limited

2. Operating Performance and Profitability 2.1 Revenue Total Revenue. TFDâ&#x20AC;&#x2122;s total revenues come from sales revenues of land and factory buildings, sales revenues of condominiums, rent incomes and service fees, profits from sales of property for investment purpose, dividend incomes and other incomes. Total revenues

2012

2013

2014

Sales revenues of land and factory buildings 327.71 460.00 Sales revenues of condominiums 130.43 40.36 1,151.35 Revenues from rent and service 310.72 248.13 233.60 Profits from sales of property for investment purpose 554.89 134.33 Interest incomes 7.82 16.06 Other revenues 36.83 54.78 64.12 Total revenues 1,360.58 945.42 1,465.13 TFDâ&#x20AC;&#x2122;s total revenues accounted for Baht 1,360.58 million, Baht 945.42 million and Baht 1,465.13 million in 2012, 2013 and 2014, respectively. This represented 30.51% decline in 2013 before it increased by 54.97% a year later thanks to increasing sales revenues from condominium projects.

Revenue from sale of land and factory building Revenue from sale of land and factory building (Million Baht)

Revenue from sale of developed land Revenue from sale of land and factory building Total Revenue

Year 2012

Year 2013

327.71 327.71

460.00 460.00

Year 2014

Revenues from sales of land and factory buildings totaled Baht 327.71 million and Baht 460 million in 2012 and 2013, respectively, which represented 40.37% increase in 2013 during which TFD had sold its land and factory buildings to the M-II Property Fund in Q4. In 2014, TFD had no such revenue from sales of land and factory building as its vacant land was in the process of seeking an approval to be classified as an industrial land (Purple area under the town planning regulation) while its factory buildings remained under construction. Revenue from sale of Condominium units TFD builds residential condominiums in the Central Business District and resort area for sales to the public. At present, it has three condominium projects; namely, the Sukhumvit 15 Residences Project, the Colonial Khao Tao Huahin Project and the Mahadlek Residence Project. Revenue from sale of Condominium units (Million Baht)

The 59 Heritage Condominium Project The 15 Sukhumvit Residence Project Total

Year 2012

Year 2013

Year 2014

130.43 130.43

40.36 40.36

1,151.35 1,151.35

Revenues from condominium sales totaled Baht 130.43 million, Baht 40.36 million and Baht 1,151.35 million in 2012, 2013 and 2014, respectively. While sales revenues were down 69.06% in 2013, it shot up 2,752.70% a year later. The fall in

Annual Report 2014

152 2013 was because TFD had completely transferred the ownership in its 59 Heritage Project to buyers in 2012 while VSSL just completed the Sukhumvit 15 Residences Project in late 2013 and thus not much ownership of this project could yet be transferred to their owners. Yet, the 2014 revenue significantly increased after the ownership of condominium units in the Sukhumvit 15 Residences Project continued to be transferred throughout the year. TFD is currently delaying the Colonial Khao Tao Huahin Project after the project has been sued at the Central Administrative Court who ordered a temporary suspension to the construction of the project. TFD appealed to the Supreme Administrative Court to revoke this order. As of March 27, 2014, the Supreme Administrative Court did indeed revoke the temporary suspension order. Regarding the Mahadlek Residences Project, TFDâ&#x20AC;&#x2122;s Environmental Impact Assessment Report (EIA) had already been approved by the Natural Resources and Environmental Plan and Policy Office since June 10, 2014. The project is currently applying for a construction permit. Revenue from Rental and Services Revenue from rental and services is the revenue attributed to the land and building for rent. In this sector, the Company will acquire the land (purchased or long term leased) , then develop the land and the factory has been built including the infrastructure and utility for long term lease of developed land and ready-built standard factory including office building for rent, which the Company will long term lease land and then develop and build the office building for rent and provide related services. Revenue from Rental and Services ( Million Baht)

Rental Revenue from factory Rental Revenue from warehouse Rental Revenue from office building Total Revenue from Rental and Services

Year 2012

Year 2013

Year 2014

38.92 74.03 197.78 310.72

9.24 38.97 199.93 248.13

14.90 29.80 188.90 233.60

Rental revenues and revenues from service fees totaled Baht 310.72 million, Baht 248.13 million and Baht 233.60 million in 2012, 2013 and 2014, respectively. This reflected a constant decline in both years at a rate of 20.14% and 5.86%, respectively. The revenue fall in 2013 was after TFD and TISCOM had sold factories and warehouses for rent to the M-II Property Fund. Gain on sale of investment properties Gain on sale of investment properties is the profit gain from sale of assets and the transfer of leasehold rights to the Property Fund . Gain on sale of investment properties (Million Baht)

Gain from sale of real estate to TIF1 Gain from sale of real estate to M-II Total gain on sale of investment properties

Year 2012

Year 2013

28.97 525.92 554.89

134.33 134.33

Year 2014

Revenue from gain on sale of investment properties of the Company was Baht 554.89 million and Baht 134.33 million in the year 2012 - 2013, consecutively. In 2012, the Company and TISCOM have sold the ready built factory and the land leasehold in the TFD Industrial Estate and other industrial estates to the Thai Industrial 1 Fund (TIF 1) and MFC Industrial Investment (M-II) in total of Baht 1,044 million and has recognized the gain from these transactions of Baht 554.89 million.

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Thai Factory Development Public Company Limited

In year 2013, TISCOM has also transferred leasehold of land and sold factory building to Property Fund for Baht 290 million which TISCOM has recognized the profit fain of Baht 134.33 million In 2014, no property was sold for investment purpose. Other revenue Other revenue is all other incomes from non-core business of the Company which includes dividend, interest, management fee and other miscellaneous income. Other revenue ( Million Baht)

Year 2012

Dividends Management Fee Interest earned Other miscellaneous incomes Total Other revenue

Year 2013

8.58 0.63 27.62 36.83

7.82 10.98 13.49 30.31 62.60

Year 2014

16.06 10.10 30.97 23.05 80.18

TFD’s other revenues totaled Baht 36.83 million, Baht 62.60 million and Baht 80.18 million in 2012, 2013 and 2014, respectively which represented an increase of 69.96% in 2013 and 28.08% in 2014 thanks to dividend incomes received from the Property Fund. 2.2 Cost and Expense Total Cost TFD’s total expenses consist of costs of sales of land and factory buildings, costs of sales of condominium units, costs of rental and services, sales expenses, administrative expenses and losses from exchange rates as follows. Total Cost (Million Baht)

Year 2012

Cost of land and factory building Cost of condominium unit Cost of rental and services Selling Expenses Administrative Expenses Losses from exchange rates Total Cost / Expenses

Year 2013

164.68 77.30 157.99 81.76 136.12 617.86

244.23 32.20 148.91 52.76 158.15 636.26

Year 2014

878.14 152.14 65.26 252.25 26.24 1,374.03

Total cost of the Company in the year 2012-2014 was Baht 617.86 million, Baht 636.26 million and Baht 1,374.03 million with the increase of 2.98 % in the year 2013 and then the increase of 115.96% in the final year. 1) Cost of land and factory building Sales costs of land and factory buildings

Sales cost of vacant land Sales cost of land with factory Total

Million Baht

164.68 164.68

2012

% of revenues

50.25% n/a 50.25%

Million Baht

244.23 244.23

2013

% of revenues

n/a 53.09% 53.09%

Million Baht

2014

% of revenues

n/a n/a n/a

TFD’s sales costs of land and factory buildings totaled Baht 164.68 million and Baht 244.23 million in 2012 and 2013, respectively, which accounted for 50.25% and 53.09% of the revenues in a respective category during the same period of 2012 and 2013. In 2012, this was the costs of selling vacant lands while in 2013, this involved the costs of TFD selling its land and factory buildings to the M-II Property Fund in Q4. In 2014, however, no land and factory building was sold and that’s why there wasn’t any sale cost.

Annual Report 2014

154

2) Cost of Condominium unit Sales costs of condominium

The 59 Heritage Project The Sukhumvit 15 residences Project Total

Million Baht

2012

% of revenues

77.30 77.30

59.27% n/a 59.27%

Million Baht

2013

% of revenues

32.20 32.20

n/a 79.80% 79.80%

Million Baht

2014

% of revenues

878.14 878.14

n/a 76.27% 76.27%

Sales cost of TFD’s condominium units totaled Baht 77.30 million, Baht 32.20 million and Baht 878.14 million in 2012, 2013 and 2014, respectively. While revenues and sales costs of condominium units in 2012 belonged to the 59 Heritage Project, in 2013 and 2014, the costs belonged to the Sukhumvit 15 Residences Project. As a percentage of its revenues, cost of selling condominium units in 2013 was higher when compared to the previous year since the cost of the Sukhumvit 15 Residences Project was higher than that of the 59 Heritage project. Cost of sales in 2014 however was down from 2013 because an average sales price of condominium unit of which the ownership was transferred in 2014 was higher than that of the previous year.

3) Cost of rental and services Costs of rent and service

Rental cost of factories Rental cost of warehouses Rental cost of office buildings Total

Million Baht

2012

% of revenues

12.61 22.80 122.58 157.99

32.40% 30.80% 61.98% 50.85%

Million Baht

2013

2014

% of revenues

Million Baht

96.99% 29.46% 64.26% 60.01%

11.63 9.91 130.60 152.14

8.96 11.48 128.47 148.91

% of revenues

78.06% 33.26% 69.14% 65.13%

Cost of TFD’s rental and services totaled Baht 157.99 million, Baht 148.91 million and Baht 152.14 million in 2012, 2013 and 2014, respectively. As a percentage to its revenues in each respective category, TFD saw its rental cost of factory and warehouses fell in 2013 and 2014 after the properties had been sold to the property fund. Meanwhile, rental cost of office buildings was up following the refurbishment of the buildings. 4) Selling and Administrative Expenses Selling expenses of the Company consists of the advertising and promotion, salary, sale management and commission etc. While the administrative expenses which consists of salary, director’s remuneration, traveling expenses and allowances. Sales and administrative expenses

Sales expenses Administrative expenses Total

Million Baht

2012

81.76 136.12 217.88

2013

% of revenues

Million Baht

6.01% 10.00% 16.01%

52.76 158.15 210.91

% of revenues

5.58% 16.73% 22.31%

Million Baht

2014

% of revenues

65.26 4.45% 252.25 17.22% 317.51 21.67%

Annual Report 2014

155

Thai Factory Development Public Company Limited

TFD’s sales expenses totaled Baht 81.76 million, Baht 52.76 million and Baht 65.26 million in 2012, 2013 and 2014, respectively, which represented 6.01%, 5.58% and 4.45% of the total revenues in respective years. Sales expenses in 2013 went down from the previous year after fewer condominium units were transferred, prompting ownership transfer and special business tax expenses to fall as well. Yet, although more condominium ownership was transferred in 2014 than the previous year, sales expenses as a percentage of the total revenues fell as sales revenues from condominium projects rose at a higher rate than the increasing sales expenses. TFD’s administrative expenses totaled Baht 136.12 million, Baht 158.15 million and Baht 252.25 million in 2012, 2013 and 2014, respectively, which accounted for 10%, 16.73% and 17.22% of the total revenues in respective years. Administrative expenses in 2013 increased due to higher expenses pertaining financial and legal advisors to accommodate TFD’s business expansion. The increase of administrative expenses in 2014 was also due to a compensation paid to the M-II Property Fund for rent and service, office building rent, unrealized loss from securities invested for commercial purpose and expenses of a condominium juristic person. Financial expenses TFD’s financial expenses consist of, among a few, interest expenses and fees. In 2012, 2013 and 2014, TFD’s financial expenses stood at 85.52 million, Baht 113.14 million and Baht 305.06 million, respectively. This represented an increase of 32.29% in 2013 after TFD had issued debentures totaling Baht 1.35 billion plus promissory notes (P/N) totaling Baht 1,403.70 million. In 2014, the financial expenses rose 169.63% after TFD had issued Baht 1,693.50 million worth of debentures. In addition, the increase was also contributed by the fact that VSSL had booked its loan interest as an expense since completely-built condominiums may no longer be booked as part of the property development’s costs. 2.3 Profitability Gross margin TFD’s gross profit margin stood at 47.98%, 43.17% and 25.61% in 2012, 2013 and 2014, respectively. The gross profit margin fell in 2014 as there was no sales income from land and factory buildings. TFD’s gross profit margin can be divided according to its three groups of business as follows. Gross Profit Margin ( % )

Year 2012

Year 2013

Year 2014

Sale of land and factory building 49.75% 46.91% n/a Sale of condominium units 40.73% 20.20% 23.73% Sale from rental and services 49.15% 39.99% 34.87% Total Gross Margin 47.98% 43.17% 25.61% In this table, the gross profit margin of the business which sells land and factory buildings stood at 49.75% and 46.91% in 2012 and 2013, respectively. In 2012, this was a result of the sales of vacant lands of which the cost was low. A year later, this involved the Group’s sales of land and factory buildings to the M-II Property Fund in Q4. No land or factory building was sold in 2014. The gross profit margin from sales of condominium units totaled 40.73%, 20.20% and 23.73% in 2012, 2013 and 2014, respectively. In 2012, this was the gross profit margin from sales of units under the 59 Heritage Project; while a year later, the falling gross profit margin was due largely to a low gross profit margin enjoyed by the Sukhumvit 15 Residences Project since the project cost was quite high. The gross profit margin of the rental and service business stood at 49.15%, 39.99% and 34.87% in 2012, 2013 and 2014, respectively. The fall in 2013 represented the sales of most factory buildings to the property fund.

Annual Report 2014

156 Operation profit TFD’s operation profit totaled 19.64%, 15% and 0.79% in 2012, 2013 and 2014, respectively. The fall of its operating profit in 2013 and 2014 was due to the fact that the gross profit margin tended to decline while the ratio of sales and administrative expenses to revenues tended to increase. Net profit TFD’s net profit totaled 37.60%, 16.01% and -11.55% in 2012, 2013 and 2014, respectively, due largely to the falling gross profit margin while financial expenses rose. Earnings per share (EPS) TFD’s EPS was 31.68%, 8.78% and -9.42% in 2012, 2013 and 2014, respectively.

3 Ability in assets management Assets Main assets of the Company comprises of the Project development cost, leasehold rights and Investment properties. TFD’s total assets were Baht 5,977.45 million, Baht 7,683.01 million and Baht 7,409.30 million in 2012, 2013 and 2014, respectively. In 2013, this represented 28.53% increase or Baht 1,705.56 million while a year later, this went down 3.56% or Baht 273.71 million. TFD saw its total assets increase in 2013 after it received more cash resulted from the sales of property to the property fund and the fact that the cost of property development also increased after TFD had bought additional land to develop its TFD Phase II project plus a payment of deposit set to be acquired by a related company. In 2014, the total assets fell after TFD had spent its cash in the operation. The Return on Asset (ROA) ratio totaled 9.82%, 2.25% and -2.09% in 2012, 2013 and 2014, respectively. The ROA fell in 2013 after profits from sales of property for investment purpose had dipped while total assets increased from cash acquired after the sales of property to the property fund towards the end of financial period as well as increasing costs of property development. In 2014, the ROA fell due to the operating loss. The Return on Fixed Assets ratio totaled 54.06%, 28.60% and -17.92% in 2012, 2013 and 2014, respectively. Its 2013 decline reflected the fall of TFD’s sales profit of its property. In 2014, the returns on fixed assets ratio also felt due to TFD’s operation loss. The asset turnover ratio totaled 0.27, 0.14 and 0.19 in 2012, 2013 and 2014, respectively. The decline in 2013 was due to declining profit generated from properties sold for investment purpose while total assets resulted from investment in real estate development projects which could not yet generate an immediate income in the same fiscal period increased instead. In 2014, the asset turnover ratio slightly increased following the rise of sales revenues from condominium units. Trade receivables and other receivables TFD’s trade receivables and other receivables totaled Baht 19.21 million, Baht 20.44 million and Baht 30.51 million in 2012, 2013 and 2014, respectively. This represented Bath 1.23 million increase or 6.40% in 2013 and another Baht 10.07 million increase or 49.27% in 2014. Changes in trade receivables and other receivables were due to revenue changes of TFD and its subsidiaries. Costs of property development TFD’s costs of property development totaled Baht 4,120.33 million, Baht 4,824.25 million and Baht 5,202.86 million in 2012, 2013 and 2014, respectively. This represented an increase of Baht 703.92 million or 17.08% in 2013 and Baht 378.61 million or 7.85% a year later. TFD’s increasing costs of property development was mainly due to its additional investment in land and project development as well as TISCOM’s additional investment in the construction of new warehouses and factories.

Annual Report 2014

157

Thai Factory Development Public Company Limited

Down payment for land purchase TFD’s down payment paid for land purchase stood at Baht 29.71 million, Baht 54.64 million and Baht 46.50 million in 2012, 2013 and 2014, respectively, which represented an increase of Baht 24.93 million or 83.91% in 2013 and a fall of Baht 8.14 million or 14.90% in 2014. Down payment paid to buy land in 2013 increased after TFD had bought land to expand its TFD Phase II Project while it went down a year later after TFD had the ownership of part of the land transferred. Investment in available-for-sales securities The Group’s investment in available-for-sales securities totaled Bath 160.50 million, Baht 243 million and Baht 225 million in 2012, 2013 and 2014, respectively, which represented an increase of 51.40% or 82.50 million in 2013 and a fall of 7.41% or Baht 18 million in 2014. TFD and its subsidiaries had bought 15 million investment units in the M-II Property Fund at Baht 10 par value per unit totaling Baht 150 million in 2012. It additionally bought 7.50 million investment units at Baht 10 par value per in the same M-II Property Fund totaling Baht 75 million. Leasehold rights TFD’s right to rent consist of land lease right and right to rent factory building. TFD’s right to rent valued Baht 502.26 million, Baht 440.98 million and Baht 401.11 million in 2012, 2013 and 2014, respectively, which was down Baht 61.28 million or 12.20% in 2013 and Baht 39.87 million or 9.04% in 2014 after the right to rent was sold to the property fund. Properties for investment purpose TFD’s properties for investment purpose consist mainly of office buildings for rent, factories and warehouses for rent. In 2012, 2013 and 2014, TFD’s properties for investment purpose totaled Baht 365.01 million, Baht 232.19 million and Baht 535.95 million. This represented a decline by Baht 132.82 million or 36.39% in 2013 after the properties had been sold to the property fund. In 2014, the properties for investment purpose however rose Bath 303.76 million or 130.82% after TISCOM had invested in warehouses for rent in the UK. Analysis of quality of Trade receivables Trade receivables of the Company comprise of trade receivable from the office building rental, from factory and warehouse rental and from the asset management business. The Company has its policy to give credit for 30 days. The details of Trade receivables in the year 2012-2014 are as follows ; Payment maturity

Not yet due for payment Overdue for fewer than three months Overdue for 3-6 months Overdue for 6-12 months Overdue longer than 12 months Total Less provision for loan loss Total net trade receivables

Trade receivables of connected business 2012 2013 2014

0.14 0.14 0.14

Trade receivables of nonconnected business 2012 2013 2014 2012

Total 2013

2014

- 2.11 1.93 1.76 2.11 1.93 1.76 - 6.61 9.73 4.17 6.61 9.73 4.17 - 5.29 1.66 1.53 5.29 1.66 1.53 - 2.41 0.06 5.99 2.41 0.06 5.99 - 5.14 6.39 5.31 5.28 6.53 5.31 - 21.56 19.76 18.76 21.70 19.90 18.76 - (3.84) (3.84) (5.71) (3.84) (3.84) (5.71) - 17.72 15.92 13.05 17.86 16.06 13.05

Annual Report 2014

158 In determining an allowance for doubtful debts, Company’s management will need to make judgment and estimates the loss which may incur from each debtor based upon past collection history, the aging profile of the outstanding debts including the prevailing economic condition.

4 Liquidity and sufficiency of funds

4.1 Source of Funds Source of funds

Total liabilities Total equity Debt to equity ratio

Year 2012

Year 2013

Year 2014

3,967.85 2,009.60 1.97

6,054.91 1,628.10 3.72

5,240.27 2,169.03 2.42

Liabilities Main liabilities of the Company comprises of short term borrowing from financial institutions, debenture and long-term borrowing from financial institutions. TFD’s total liabilities stood at Baht 3,967.85 million, Baht 6,054.90 million and Baht 5,240.27 million in 2012, 2013 and 2014, respectively. In 2013, this was up Baht 2,087.05 million or 52.60% after additional P/N and debentures had been issued during the period. In 2014, the total liabilities went down Baht 814.63 million or 13.45% after the debentures were redeemed. Short-term loans from financial institutions As at end of 2014, TFD’s short-term loans from financial institutions were P/N with no collateral. Yet, it guaranteed the issuance and offering of P/N to its subsidiary at an interest rate of MLR -1% and between 4.90-5.50% TFD’s short-term loans from financial institutions stood at Baht 504.01 million, Baht 2,560.20 million and Baht 1.548 billion in 2012, 2013 and 2014, respectively. This was up 407.97% or Baht 2,056.19 million in 2013 before falling 39.54% or Baht 1,012.20 million a year later. Trade payables and other payables TFD’s trade payables and other payables consist of trade payables, construction cost payables and land cost payables. Other payables consist of advanced payments from customers, performance bonds, accrued expenses and others. TFD’s trade payables and other payables totaled Baht 968.01 million, Baht 585.50 million and Baht 331.77 million in 2012, 2013 and 2014, respectively. This was down by Baht 382.51 million or 39.52% in 2013 and again a decline of 43.34% or Baht 253.73 million a year later as TFD had already recognized advanced payments from customers as its revenues from sales of condominium units. Debenture According to the Resolution of the Extraordinary General Meeting of Shareholders, held on 24 June, 2013, has approved the issuance and offering of senior and unsecured debentures in total amount up to Baht 3,500 million with term to maturity not more than 5 years to the institutional investors, private investors and public. On 3 July, 2013, the Company issued and offered the senior and unsecured debenture (lot # 1) 500,000 units , with a par value of Baht 1,000 , totaled Baht 500 million, matured on 3 July, 2014 with interest 5.3 % per annum, paying every 6 months. Then on the 22 November, 2013, the Company issued and offered the second lot of senior and unsecured debenture (lot # 2) 850,000 units ,with a par value of Baht 1,000, total amount of Baht 850 million, matured on 22 November, 2014 with interest 5.5 % per annum, paying every 3 months.

Annual Report 2014

159

Thai Factory Development Public Company Limited

Long-term loans from financial institutions TFD’s long-term loans from financial institutions stood at Baht 1,734.97 million, Baht 1,049.22 million and Baht 1,260.44 million in 2102, 2013 and 2014, respectively. This was down by Baht 685.75 million or 39.53% in 2013 before it rose by Baht 211.22 million or 20.13% in 2014. The decline of long-term loans from financial institutions in 2013 can be explained from the fact that the Group had restructured its capital by using money received from the issuance and offering of debentures to repay loans from financial institutions to reduce its funding costs. In 2014, the increase was due to TISCOM’s borrowing to construct its warehouses in the Tha Sa-an Project. Shareholders’ equity TFD’s total shareholders’ equity valued Baht 2,009.60 million, Baht 1,628.10 million and Baht 2,169.03 million in 2012, 2013 and 2014, respectively. This represented a fall of 18.98% or Baht 381.50 million in 2013 and an increase of 33.22% or Baht 540.93 million in 2014. The fall in 2013 could be explained by a cash dividend payment totaling Baht 90.28 million during the fiscal period. Besides, TFD booked the difference between the cost of business merger and VSSL’s net book value totaling Baht 141.04 million. This difference was booked as an equity premium resulted from the business merger and acquisition to remain under the same control as a separate item under the topic of other companies within the Shareholders’ Equity section. In 2014, the shareholders’ equity rose following the issuance of capital-increase shares in November 2014 when TFD offered 200 million capital-increase ordinary shares in the private placement. Debt to Equity ratio (D/E ratio) TFD’s D/E ratio was 1.97, 3.72 and 2.42 in 2012, 2013 and 2014, respectively. The increase of the D/E ratio at the end of 2013 was due to the issuance of P/N and debentures during the year, pushing its total liabilities to increase. However, the ratio fell by the end of 2014 following the issuance of capital-increase shares in November 2014 when it offered 200 million shares in the private placement. 4.2 Investment Cost Investment cost of the Company and its subsidiaries, have the main objective to expand the Group’s business. The Investment projects in the past and under operation now are TFD Industrial Estate ( phase 1 & 2) , The Lake Green Project, The 59 Heritage Condominium , The 15 Sukhumvit Residence( via the investment in VSSL), The Colonial Khao Tao Hua Hin, , The Mahadlek Residence, the investment project in office for rent ( through investment in SG) , investment in the MFC Industrial Investment Property and leasehold Fund ( M-II) etc. Most source of funds to operate the above-mentioned projects come from the credit lines with the financial institutions.

Annual Report 2014

160

The Group’s investment plan in the year 2015 are as follows : Investment plan

TFD Industrial Estate Mahadlek Residence Tha Sa-an warehouse Bangsaothong ready-built factory Residential condominium

Purpose

Land development for sale/rent Residential condominium for sale Warehouses for sale/rent Factories for sale/rent Residential condominium for sale

Year when Investment investment value fund will be (Million Baht) paid

Funding sources

Impact to liquidity

594.00

2015

Loan+investment fund

257.21

2015

Loan+investment fund

991.41 946.61

2015 2015

Loan+investment fund Loan+investment fund

No No

698.48

2015

Loan+investment fund

4.3 Liquidity adequacy Cash flow

2012

2013

2014

Cash flow from operation activities (925.61) (1,562.23) (792.78) Cash flow from investment activities 738.46 (56.38) (483.15) Cash flow from financing activities 557.81 2,483.38 167.32 Increase difference from adjustment of statement of (2.18) cash flow Net cash flow between the periods 370.66 864.77 (1,110.79) Note : (1) Company executives adjusted, in retrospect, the statement of cash flow for the year that ended December 31, 2012 and 2013 of TFD and subsidiaries of which the information was shown here for comparison purpose to reflect the outcome of business merger to be under the same control. TFD’s cash flow from operation totaled Baht -925.61 million, Baht -1,562.23 million and Baht -792.78 million in 2012, 2013 and 2014, respectively. Cash flow spent in operation activities in 2013 rose Baht 636.62 million after paying trade and other payables. In 2014, cash flow spent in the operation went down Baht 769.45 million after an advance payment for land by a connected business was re-adjusted and booked instead as a short-term loan under cash flow from investment activities instead and after TFD had earned more revenues from sales of its condominium units. TFD’s cash flow from investment activities stood at Baht 738.46 million, Baht -56.38 million and Baht -483.15 million in 2012, 2013 and 2014, respectively. The fact that its cash flow from investment activities in 2012 remained positive was because TFD had received Baht 1,000.60 million cash from sales of property for investment purpose. Yet, cash flow from investment activities a year later in 2013 was in red due mainly to cash paid to buy investment funds in VSSL. In 2014, cash flow for investment activities rose as a result of TISCOM’s investment in Barnsley as well as increasing short-term loans to connected businesses. TFD’s cash flow from financing activities totaled Baht 557.81 million, Baht 2,483.38 million and Baht 167.32 million in 2012, 2013 and 2014, respectively. The cash flow from financing activities in 2013 rose as a result of short-term loans from financial institutions for investment in the TFD Phase II Project and the Colonial Khao Tao Project and for use as a working capital. In 2014, cash flow from financing activities went down after the firm redeemed its debentures and repaid its short-term loan borrowed from financial institutions.

Annual Report 2014

161

Thai Factory Development Public Company Limited

At the end of 2012, 2013 and 2014, the current ratio stood at 1.64, 1.20 and 2.45, respectively. The decline of the ratio in 2013 was mainly due to an increase of short-term loans from financial institutions and debentures issued for the purpose of business expansion. Meanwhile, the current ratio in 2014 mainly increased from end of 2013 after short-term loans from financial institutions and debentures due for maturity within one year fell following the repayment and redemption by the Company during that fiscal period. 4.4 Ability to provide the additional fund At the end of the year 2013, the Company has undrawn loans as follows: Undrawn portion (million)

Type of loans

Debenture 1,807.00 Long term loan from financial institutions 1,658.00 Total 3,465.00 However, according to the high Debt to Equity ratio of 2.41, together with the interest coverage ratio and Debt Service coverage ratio were both negative, all these resulted in low possibility for the Company’ to obtain additional funds through liabilities . However, the Company has planned to solve the problem by increase its share capital and also to speed up the transfer of condominium units of The 15 Sukhumvit Residence Project in the second quarter of the year 2014.

5 The details of the payment in the investment project

Details of the payment of existing project as at the end of Year 2014

Project

The 15 Sukhumvit Residence Project

Selling Value (1)

Cumulative Cumulative Past due Amount O/S * payment due payment received (2) – (3) (1) – (2) (2) (3) million % of the million % of the million % of the million % of the value cumulative cumulative value already payment payment already sold due due sold

1,556.41 1,292.36

83.03% 1,292.36

100.00%

0.00%

264.05

16.97%

Note : * amount outstanding which is not yet due will be the payment received on the day of transfer the rights Amount Cumulative past due at the end of year 2014 Cumulative Past due Past due 1-3 months Project

The 15 Sukhumvit Residence Project

# of customer

None

million

# of customer

None

million

Past due 3-6 months # of million customer

None

Past due over 6 months # of million customer

None

Annual Report 2014

162

Report of the Board of Directors’ Accountability to the Financial Statements The Board of Directors is responsible for the accuracy and completion of a consolidated statement of the company and its subsidiaries and financial information published in the Annual Report. The financial statement has been prepared on the basis of the Generally-Accepted Accounting Principles (GAAP) of Thailand upon an appropriate accounting policy regularly practiced, an exercise of discretion, the best estimate and the disclosure of adequate material information in notes to the financial statements for the best interest of shareholders and investors. The Board of Directors has established and maintained an effective internal control to ensure that the company’s accounting record is accurate, complete and adequate for the maintenance of our assets and for monitoring weaknesses to prevent corrupted or unusual practices that are material. In this regard, the Board of Directors has set up the Audit Committee consisting of non-executive independent directors to be responsible for the quality of the financial statement and the internal control. The Auditor Committee’s opinions regarding the matters are published in the Auditor Committee’s report also included in the Annual Report. The Board of Directors is of the opinion that the company’s internal control system, in general, remains satisfactory, leading to its reasonable confidence that the financial statements of the company and subsidiaries as of December 31, 2014 are reliable in compliance with the GAAP and relevant laws, rules and regulations.

Dr. Sunthorn Sathirathai Chairman of the Board

Mr. Gumpol Tiyarat Managing Director

Annual Report 2014

163

Thai Factory Development Public Company Limited

Shareholders and Management

The Directors and Management who are holding Ordinary Shares of the Company as at December 30, 2014 Full Name

1. Mr. Apichai Taechaubol 2. Mr. Gumpol Tiyarat

30 Dec. 14

268,038,875 2,000

Number of Ordinary Shares (Share) 31 Dec. 13 Increase (Decrease)

264,333,775 2,000

3,705,100 -

Directors’ and managements’ remuneration as at December 31, 2014 (1) Baht 10,000,000 was approved by the 2014 AGM as remunerations for the Board of Directors where the Board of Directors shall allocate such remunerations to each director. The directors’ remuneration received as the meeting allowance and annual compensation as follows: Full Name

1. Dr. Sunthorn Sathirathai 2. Mr. Apichai Taechaubol 3. Mr. Prasong Vara-ratanakul

Positions

Chairman and Independent Director Director and Executive Chairman Audit Committee Chairman, Corporate Governance, Nomination and Remuneration Chairman and Independent Director 4. Mr. Nan Kitjalaksana Audit Committee Member, Corporate Governance, Nomination and Remuneration Committee and Independent Director 5. Mr. Sommart Sangkhasap Audit Committee Member, Corporate Governance, Nomination and Remuneration Committee and Independent Director 6. Mr. Gumpol Tiyarat Director, Executive Director and Managing Director 7. Mr. Anukul Ubonnuch Director 1 8. Mr. Bunyong Visatemongkolchai Director 9. Mr. Krittawat Taechaubol1 Director 2 10. Mr. Pisuth Viriyamettakul Director 3 11.Mrs. Sumalee Ongcharit Director Total

Meeting Annual Total Allowance Compensation Remuneration (Bt. / Y) (Bt. / Y) (Bt. / Y)

450,000 432,000 491,000

1,440,000 960,000 720,000

1,890,000 1,390,000 1,211,000

443,000

600,000

1,043,000

430,000

600,000

1,030,000

408,000

563,000

971,000

325,000 195,000 117,000 182,000 3,473,000

540,000 336,660 336,660 349,720 21,935 6,467,975

865,000 531,660 453,660 531,720 21,935 9,938,975

Annual Report 2014

164

(2) The managementâ&#x20AC;&#x2122;s remuneration starts from the Assistant Managing Director level up to the Executive Chairman as follow: Total of Remuneration

Salary / Annual Incentive

Managements

Remark : In 2014, there were 5 managements consist of

2013

32,942,942.69

Managements

1) Mr. Apichai Taechaubol 2) Mr. Gumpol Tiyarat 3) Ms. Vilai S. Ngow 4) Ms. Siriporn Pinprayong 5) Mrs. Rachanee Siwawej

2012

27,603,875.-

Annual Report 2014

165

Thai Factory Development Public Company Limited

Major Shareholders as at December 30, 2014

No. of Shares

1. Dr. Apichai Taechaubol 2. Mrs.Chalida Taechaubol 3. Mr. Krittawat Taechaubol 4. Mr. Chotiwit Taechaubol 5. Mr. Pisuth Viriyamettakul 6. Mr. Mitrpan Satavornmanee 7. Mrs. Khanthong Udommahantisuk 8. Ms. Kantakorn Samittanon 9. Mr. Chaisith Viriyamettakul 10. Other Total

268,038,875 194,199,772 43,995,000 40,346,359 20,000,000 14,826,300 11,800,200 11,704,100 11,400,000 667,190,799 1,283,501,405

20.883 15.130 3.428 3.143 1.558 1.155 0.919 0.912 0.888 51.982 100

Annual Report 2014

166

General Information The Thai Factory Development Public Company Limited (“TFD”), registered no. 0107537000475 (Bor Mor Jor. 294) with head office at 18 Soi Sathorn 11 Yaek 9, TFD Building, Yannawa, Sathorn, Bangkok 10120, Thailand Tel : (66) 2676 4031-6 , (66) 2676 3836-9 Fax : (66) 2676 4038-9 Website : www.tfd-factory.com

Nature of Business

The Company’s main activities are categorized according to its sources of revenue into 4 types as follows: 1. Industrial Estate 2. Sale and rental, Land, ready-made factory, warehouses, and management 3. Rental for office space, and property management service of real estate 4. Construction, Design, and Construction Control

The Company’s Capital The Company’s registered capital is Baht 1,914,911,170.- divided into 1,914,911,170 of ordinary shares with a par value of Baht 1. The Company’s shares issued has registered at 1,283,501,405 shares with a par value of Baht 1, and paid up of Baht 1,283,501,405.-. The ordinary shares remaining at 631,409,765 shares, divided as unpaid as follows: 1). Ordinary shares in the amount of 180,409,765 shares to be reserved for the exercise of Warrants No. 2 (TFD-W2) which non exercise at 180,409,765 units with exercised price of Baht 4.853 and the last exercised date is on May 15, 2016. 2) Ordinary shares in the amount of 13,000,000 shares to be reserved for the ratio adjustment of Warrants No. 2 (TFD-W2) 3) Ordinary shares in the amount of 256,563,552 shares to be reserved for the exercise of Warrants No. 3 (TFD-W3) which non exercise at 256,563,552 units with exercised price of Baht 5 and the last exercised date is on May 14, 2016. 4) Ordinary shares in the amount of 61,436,448 shares left after the allocation of Warrants No.3(TFD-W3) 5) Ordinary shares in the amount of 120,000,000 shares at the par value of Baht 1 each to general investors through the Public Offering.

Annual Report 2014

167

Thai Factory Development Public Company Limited

The Subsidiary Companies Total Industrial Services Co., Ltd. was established in April 2003 with registered capital of Baht 400 millions, TFD holds 100% of shares, and the Company’s activity provides the construction of standard factory and warehouses for sale and rent. Head office is situated at 18 Soi Sathorn 11 Yaek 9, TFD Building, Yannawa, Sathorn, Bangkok 10120, Thailand Tel. : (662) 676-4055-57 Fax. : (662) 676-4064 Website : www.tiscom-factory.co.th Barnsley Warehouses Limited was established in April 2014 with registered capital of GBP 630,000. TISCOM holds 100% of shares, with the objective to operate the investment in land and warehouse for lease and sale. Head office is situated at 10 Norwich Street, London EC4A 1BD, United Kingdom. Bognor Regis Warehouses Limited was established in January 2015 with registered capital of GBP 1,620,000. TISCOM holds 100% of shares, with the objective to operate the investment in land and warehouse for lease and sale. Head office is situated at 189 Piccadilly St. James, London W1J 9ES, United Kingdom. VSSL Enterprise Co., Ltd. was established in July 1998 with registered capital of Baht 701 millions, TFD holds 100% of shares, and the Company’s activity provides real estate business. Head office is situated at 18 Soi Sathorn 11 Yaek 9, TFD Building, Yannawa, Sathorn, Bangkok 10120, Thailand Tel. : (662) 676-4031 Fax. : (662) 676-4038 SG Land Co., Ltd. was established in June 1988 with registered capital of Baht 100.45 millions, TFD holds 49.91% of shares, and the Company’s activity provides office building rental. Head office is situated at No. 161/1, Soi Mahad Lek Luang 3, Ratchadamri Road, Lumpini, Pathumwan, Bangkok 10500. Tel. : (662) 651-9485, (662) 651-8577-78 Fax. : (662) 651-8575, (662) 651-9471

The Shares Registrar Thailand Securities Depository Co., Ltd. 4th and 7th Floor, No. 62 The Stock Exchange of Thailand Building, Ratchadapisek Road, Klongtoey, Bangkok 10110 Tel. : (662) 229-2000 Fax. : (662) 654-5649

Annual Report 2014

168 The Auditor

Ms. Siraporn Ouaanunkun CPA No. 3844 or Ms. Chonlaros Suntiasvaraporn CPA No. 4523 or Ms. Waraporn Prapasirikul CPA No. 4579 EY Office Limited 33rd Floor, Lake Rajada Office Complex, 193/136-137 Rajadapisek Road, Klongtoey, Bangkok 10110 Tel. : (662) 264-0777 Fax. : (662) 264-0789-90

The Solicitor The Far East Law Office (Thailand) Co., Ltd. 24th Floor, No. 121/74-75, R.S. Tower, Dindaeng, Bangkok 10310 Tel. : (662) 711-4912 Fax. : (662) 711-4920

The Advisor

Mr. Thumrong Chientachakul No. 501/126, Sathu Pradit Road, Chong Nonsi, Yannawa, Bangkok 10120

The financial advisors DS Prudential Management Co., Ltd. 5th Floor 540 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Tel. : (662) 658-5988 Fax. : (662) 658-5877

The Share Listings

The Companyâ&#x20AC;&#x2122;s shares are listed and traded on the Stock Exchange of Thailand.

The Bankers and Other Financiers

Isalamic Bank of Thailand The Siam Commercial Bank Plc Bank of Ayudhya Plc. Kasikornthai Bank Plc. Bangkok Bank Plc. Thanachart Bank Plc. Krungthai Bank Plc. Land and Houses Bank Plc.

Green Park

ANNUAL

REPORT

YOUR SATISFACTION I S O U R B U S I N E S S.

Green Park, Logistic and Factory Warehouses, Bangpakong.

Green Park, Factory Warehouses Project I, Bang-Na km.23

Green Park, Factory Warehouses Project II, Bang-Na km.23

2014