Annual report tipco asphalt 2013 by 1929 Media Creation

MISSION A well-recognized leading asphalt focused company in Asia Pacific

VISION To distribute 2 million tons of asphalt products by 2015 and be the key contributor to the success of all stakeholders while maintaining the highest Corporate Social Responsibility standards at all times

MOVING TOWARDS TO BE A WELL-RECOGNIZED LEADING ASPHALT FOCUSED COMPANY IN ASIA PACIFIC

INTRODUCTION TO TIPCO ASPHALT PUBLIC COMPANY LIMITED Tipco Asphalt Public Company Limited was established in 1979. The Company, its subsidiaries and associated companies (“Tipco Asphalt Group”) are the leading manufacturers and distributors of asphalt products in Thailand and Asia-Pacific region. Tipco Asphalt products are used for building and maintaining roads, highways and airport runways. The Group also sells non-asphalt products, such as Naphtha, Gas Oil and Fuel Oil from crude refining processes to traders, road contractor and manufacturing companies in Thailand and countries in Southeast Asia. With the cooperation of one of its major shareholders, Colas S.A. of France (the world’s leading road construction company), Tipco Asphalt Group is able to deliver the highest quality and innovative products to its customers. Despite the challenges in the world of commodity market, the Group shall continue to focus its long term strategies in order to drive the Group forward in achieving its Vision of two million tons of asphalt sales in 2015.

CONTENT

Financial Highlights

Message from the Chairman

Board of Directors

Organization Structure

Major Shareholders

Revenue Structure

Business Performance

Risk Management and Risk Factors

Corporate Governance Report

Social Responsibility Policy

Internal Controls and Internal Audit

Related Transactions

133

Management Discussion and Analysis

Report and consolidated financial statements

Statement of financial position

Company Information

FINANCIAL HIGHLIGHTS

(Unit : Million Baht)

2013

2012

2011

2010

2009

Financial Highlights Total Revenue

34,140.37

38,414.29

23,053.76

26,303.34

14,186.43

Gross Profit

1,739.97

1,101.45

1,214.40

1,615.34

1,385.59

EBITDA

1,789.49

1,503.80

1,394.91

1,837.12

776.68

831.45

642.27

735.57

1,007.67

493.82

Assets

20,273.52

18,669.76

15,520.51

10,748.61

12,513.83

Liabilities

14,382.58

13,627.06

11,077.57

7,120.60

9,660.63

5,241.71

4,424.67

3,849.95

3,046.15

2,224.48

152,580,868

152,548,068

152,547,663

34.35

29.01

25.24

19.97

14.58

Earnings per share (Baht)

5.45

4.21

4.82

6.61

3.24

Dividends per share (Baht)

1.00

1.25

Net profit margin (%)

2.44

1.67

3.19

3.83

3.48

Return on equity (%)

17.20

15.52

21.33

38.24

25.03

Return on assets (%)

4.27

3.76

5.60

8.66

4.61

Debt to Equity Ratio

2.44

2.70

2.49

1.96

3.39

Net Profit Financial Overview Balance Sheet

Shareholders' Equity Financial Ratio Total number of shares issued (shares) Book value per share (Baht)

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

34,140

TOTAL REVENUE

1,739

(MILLION BAHT)

EBITDA

NET PROFIT

(MILLION BAHT)

831

1,008 2010

2013

831

494 2009

2013

1,789 2013

642

1,504 2012

2012

1,395 2011

736

1,837 2010

2011

777

MILLION BAHT

2009

MILLION BAHT

1,739

1,101

1,386 2009

2012

34,140 2013

1,214

38,414 2012

2011

23,053 2011

1,615

26,303 2010

1,789

2010

14,186

MILLION BAHT

2009

MILLION BAHT

GROSS PROFIT

ANNUAL REPORT 2013

MESSAGE FROM THE CHAIRMAN

It is my great pleasure to report that Tipco Asphalt Group has recorded yet another impressive achievement with the second highest ever revenue of Baht 34 billion (or exceeding USD 1 billion) in 2013. More importantly, the Group has achieved an impressive operating net profit attributable to equity shareholders of Baht 831 million or 29.4% increment, compared to Baht 642 million in the corresponding period 2012. The return on equity has also improved to 17.2% from 15.5% in 2013.

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

The Group shall continue to focus on its long term strategies on human capital investment and Enterprise Risk Management, in order to drive the Group forward in achieving its Vision of two million tons of asphalt sales in 2015 Thailand GDP’s growth was strong in the early part of 2013, but the economy lost its growth momentum rapidly to a very slow pace at 1.3% and 0.6 % during Quarter 3 and Quarter 4 respectively, comparing to a 6.5% growth in 2012. As a result, sales volume in domestic market was slightly lower than 2012. The consensus GDP forecast for 2014 is 2.8% due to the prolonged political uncertainties and falling Agriculture prices. We believe the impact to the Group’s domestic sale should not be material as the lagging demand will catch up after the political uncertainties subsided. At the international level, we expect the competition becoming more intense with demand remain stable but driven by more supply. Being an asphalt focused company, our Group is well equipped and keen to defend its market presence.

to weak economy outlook for US and China. The Group is now well experienced in managing this risk and I am pleased to highlight that our hedging strategy has contributed a significant turnaround with a positive impact of Baht 85 million to this year result as compared to a cost of Baht 806 million in the corresponding year 2012. The Group is confident that the currently employed hedging strategy protects it’s crude oil procurement in the highly volatile commodity market.

In 2013, the refinery processed 6.6 million barrels of crude oil, representing 73% of the total refining capacity. Many improvement projects were implemented throughout the year to improve efficiency and increase production capacity of the refinery. One of the projects was the conversion from fuel oil to natural gas heating which resulting in significant cost saving and better efficient use of clean energy in line with the Group’s CSR strategy. We will continue to invest in our refinery to improve its operation efficiency and quality of the products.

In conclusion, on behalf of the Board of Directors, I would like to thank our shareholders, customers and suppliers for their continuing support. The year 2013 was a challenging but successful year and the “Prudence” is the third core value of the Group that has been enshrined in the desired behavior of our business and social relationship. I would like to express my sincere appreciation to the management and staff for their high team spirit and integrity in performing their duties and responsibilities.

Another challenging task of the Group is the crude and inventory working capital management. Rapid fluctuation in crude oil prices during the first half of 2013 was one of the challenges, attributable to the geopolitical tension caused by US sanction against Iran and Syria. The world crude market responded with Brent crude price went up to USD 118 per barrel in early February 2013 and then touched a low USD 97 per barrel in April 2013 attributable

Similarly, the Group shall continue to focus on its long term strategies on Human Capital Investment, and Enterprise Risk Management, in order to drive the Group forward in achieving its Vision of two million tons of asphalt sales in 2015.

Laksana Supsakorn Chairman

ANNUAL REPORT 2013

BOARD OF DIRECTORS

MS. LAKSANA SUPSAKORN CHAIRMAN, AUTHORIZED DIRECTOR

MR. JACQUES PASTOR VICE CHAIRMAN, MEMBER OF THE NOMINATION AND REMUNERATION COMMITTEE, AUTHORIZED DIRECTOR

MR. SOMCHIT SERTTHIN CHIEF EXECUTIVE OFFICER, EXECUTIVE DIRECTOR, AUTHORIZED DIRECTOR

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

MS. LAKSANA SUPSAKORN CHAIRMAN Age 61 Education

Related Experience

• M.B.A. Wharton Business School, University of Pennsylvania, USA • Bachelor Degree in Accounting (Honor), Chulalongkorn University

2013 - Present 2013 - Present 2013 - Present 2012 - Present 2012 - Present 2011 - Present 2003 - Present

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

• Director Accreditation Program (DAP) • General Member of Thai Institute of Directors

Chairman of the Board, Tipco Asphalt PLC. Chairman of the Board, Tipco Foods PLC. Chairman of the Board, Tipco F&B Co., Ltd. Director, Siam Container Terminal Co., Ltd. Director, Peyanarongwit Co., Ltd. Director, Vanichapark Co., Ltd. Director, Thanomwongse Service Co., Ltd.

Shareholding in Company

• 1,478,000 shares (0.969%) Family Relationship with Management

Sister of Mr. Sitilarb Supsakorn and sister-in-law of Mr. Somchit Sertthin

MR. JACQUES PASTOR VICE CHAIRMAN Age 59 Education

Related Experience

• Advanced Management Program (AMP), Harvard Business School, MA, USA • Ecole Nationale Superieure d’ Arts et Metiers

2013 - Present 2004 - Present 2000 - 2013 1993 - Present

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

Vice Chairman, Tipco Asphalt PLC Director, Thai Slurry Seal Co., Ltd. Executive Director, Tipco Asphalt PLC Asia Area Manager, COLAS S.A.

• 2013 Director Accreditation Program (DCP) • 2013 Director Certification Program (DAP) Shareholding in Company Family Relationships with Management in Company -

MR. SOMCHIT SERTTHIN CHIEF EXECUTIVE OFFICER Age 61 Education

Related Experience

• B.S. Business Administration Babson College, MA, USA

2001 - Present 2005 - Present 1986 - Present 1980 - 1986

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

• 2013 Director Certification Program (DCP) • 2003 Director Accreditation Program (DAP)

CEO, Tipco Asphalt PLC Director, Tipco Foods PLC Executive Director, Tipco Asphalt PLC Vice President and Country Corporate Manager, Chase Manhattan Bank, Taipei Branch

Shareholding in Company

2,530,016 shares (1.658%) Family Relationships with Management

Brother-in-law of Ms. Laksana Supsakorn and Mr. Sitilarb Supsakorn

ANNUAL REPORT 2013

BOARD OF DIRECTORS

MR. CHAIWAT SRIVALWAT MANAGING DIRECTOR, MEMBER OF THE CORPORATE GOVERNANCE COMMITTEE AUTHORIZED DIRECTOR

MR. HERVÉ LE BOUC DIRECTOR, AUTHORIZED DIRECTOR

MR. JACQUES LEOST DIRECTOR, AUTHORIZED DIRECTOR

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

MR. CHAIWAT SRIVALWAT MANAGING DIRECTOR Age 54 Education

Related Experience

• B.Eng. (Engineering), Liverpool University, England

2002 - Present Managing Director, Tipco Asphalt PLC 1996 - 2002 Marketing Director, Tipco Asphalt PLC 1990 - 1996 Senior Operations Manager , Tipco Asphalt PLC

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

• 2003 Director Certification Program (DCP) Shareholding in Company Family Relationships with Management -

MR. HERVÉ LE BOUC DIRECTOR Age 62 Education

Related Experience

• Ecole Superieure des Travaux Publics

2008 - Present Director, Tipco Asphalt PLC 2007 - Present Chairman and Chief Executive Officer, COLAS Group 2002 - 2007 Chairman and Chief Executive Officer, SAUR Group 2001 - 2002 Chief Operating Officer, BOUYGUES CONSTRUCTION 1998 - 2002 Chairman and Chief Executive Officer, BOUYGUES OFFSHORE

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors Shareholding in Company Family Relationships with Management -

MR. JACQUES LEOST DIRECTOR Age 62 Education

Related Experience

• Engineering Degree from Ecole Centrale Lille

2011 - Present Director, Tipco Asphalt PLC 2010 - Present International Managing Director, COLAS Group 2002 - 2010 Chairman and CEO, SAIPEM SA 2001 CEO, Bouygues Offshore 1996 - 2000 COO, Bouygues Offshore 1994 - 1995 Vice President (Africa, North Sea and Mexico), Petromar 1989 - 1993 Vice President (Africa), Petromar

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors Shareholding in Company Family Relationships with Management -

ANNUAL REPORT 2013

BOARD OF DIRECTORS

MR. NIPHON SUTHIMAI INDEPENDENT DIRECTOR, CHAIRMAN OF THE AUDIT COMMITTEE

MRS. ANNE-MARIE MACHET INDEPENDENT DIRECTOR, MEMBER OF THE NOMINATION AND REMUNERATION COMMITTEE, MEMBER OF THE CORPORATE GOVERNANCE COMMITTEE

MR. KOH BAN HENG INDEPENDENT DIRECTOR

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

MR. NIPHON SUTHIMAI INDEPENDENT DIRECTOR Age 56 Education

Related Experience

• Master Degree in Operational Research, London School of Economics, UK • Licence de Droit (Law), Universite de Droit, Lyon, France

2006 - Present 2012 - Present 2005 - Present 1999 - Present 2007 - 2013

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

Independent Director, Tipco Asphalt PLC Vice President - People, Nok Airlines PLC Consultant, Thai Air Cargo Co., Ltd. Associate Director, Geodis Overseas Co., Ltd. Managing Partner, CLY International Limited

• 2006 Audit Committee Program (ACP) • 2006 Director Accreditation Program (DAP) Shareholding in Company Family Relationships with Management -

MRS. ANNE-MARIE MACHET INDEPENDENT DIRECTOR Age 58 Education

Related Experience

• MBA Finance, ESCP-EAP • Bachelor Degree in Math and Science • International Coaching Academy - Accredited Coach in 2008

2010 - Present Independent Director, Tipco Asphalt PLC 2009 - Present Vice President of Franco, Thai Chamber of Commerce - in charge of HR Committee 2008 - 2009 President of French International School of Bangkok 2007 - 2008 Executive Advisor and Team Motivator, FP Coaching to Lead (Thailand)

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

• 2010 Director Accreditation Program (DAP) Shareholding in Company Family Relationships with Management -

MR. KOH BAN HENG INDEPENDENT DIRECTOR Age 65 Education

Related Experience

• Post-Graduate Diploma in Business Administration, University of Singapore • Bachelor’s Degree in Applied Chemistry

2011 - Present Independent Director, Tipco Asphalt PLC 2013 - Present Director, Linc Energy Limited 2013 - Present Director, Keppel Infrastructure Holdings Pte. Ltd. 2011 - Present Senior Advisor, Singapore Petroleum Company (SPC) 2000 - Present Director, Singapore Refining Company Private Limited 2003 - Present Chairman, Singapore Petroleum Venture Private Limited 2009 - 2013 Director, Keppel Energy Pte. Ltd 2003 - 2011 Chief Executive Officer, Singapore Petroleum Company (SPC)

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors Shareholding in Company Family Relationships with Management -

ANNUAL REPORT 2013

BOARD OF DIRECTORS

MR. NOPPORN THEPSITHAR INDEPENDENT DIRECTOR, MEMBER OF THE AUDIT COMMITTEE, CHAIRMAN OF THE NOMINATION AND REMUNERATION COMMITTEE

MR. PHIRASILP SUBHAPHOLSIRI INDEPENDENT DIRECTOR, MEMBER OF THE AUDIT COMMITTEE, CHAIRMAN OF THE CORPORATE GOVERNANCE COMMITTEE

MR. PARNCHALERM SUTATAM INDEPENDENT DIRECTOR, MEMBER OF THE AUDIT COMMITTEE, MEMBER OF THE NOMINATION AND REMUNERATION COMMITTEE

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

MR. NOPPORN THEPSITHAR INDEPENDENT DIRECTOR Age 60 Education

Related Experience

• Bachelor Degree in Electrical Engineering, Chulalongkorn University

2012 - Present 2009 - 2013 2004 - 2011 2000 - 2001

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

• 2012 Audit Committee Effectiveness Seminar • 2005 Director Accreditation Program (DAP)

Independent Director, Tipco Asphalt PLC Chairman of Global Logistics Committee, Thai National Shippers’ Council (TNSC) Member of Executive Committee and Senior, Vice President - Logistics, Siam City Cement PLC Executive Director, TCC Holding Co., Ltd.

Shareholding in Company Family Relationships with Management -

MR. PHIRASILP SUBHAPHOLSIRI INDEPENDENT DIRECTOR Age 61 Education

Related Experience

• B.A., Business Administration, Yokohama National University, Japan

2013 - Present Independent Director, Tipco Asphalt PLC 2009 - Present Chairman, Food and Drinks PLC 1998 - 2008 President, BankThai PLC 1993 - 1998 President, Krungthai Thanakit PLC (KTT)

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

• 2005 Director Accreditation Program (DAP) Shareholding in Company Family Relationships with Management -

MR. PARNCHALERM SUTATAM INDEPENDENT DIRECTOR Age 60 Education

Related Experience

• M.B.A., University of Bridgeport, CT, USA • Bachelor Degree, Accounting, Babson College, MA, USA

2004 - Present Independent Director, Tipco Asphalt PLC 1987 - Present Director, Boonmitra Building Co., Ltd.

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

• 2006 Audit Committee Program (ACP) • 2005 Director Accreditation Program (DAP) Shareholding in Company Family Relationships with Management -

ANNUAL REPORT 2013

BOARD OF DIRECTORS

MR. JACQUES MARECHAL EXECUTIVE DIRECTOR, MEMBER OF THE CORPORATE GOVERNANCE COMMITTEE, AUTHORIZED DIRECTOR

MR. SITILARB SUPSAKORN EXECUTIVE DIRECTOR, AUTHORIZED DIRECTOR

MR. HUGUES DE CHAMPS CHIEF OPERATING OFFICER - INTERNATIONAL, EXECUTIVE DIRECTOR, AUTHORIZED DIRECTOR

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

MR. JACQUES MARECHAL EXECUTIVE DIRECTOR Age 48 Education

Related Experience

• Corporate Finance Dauphine University

2012 - Present Executive Director, Tipco Asphalt PLC 2000 - 2011 International Finance Manager, COLAS SA, Paris, France 1996 - 2000 Deputy International Finance Manager, COLAS SA, Paris, France

Seminars on Director Roles and Responsibilities / Thai Institute of Directors

• 2013 Director Accreditation Program (DAP) Shareholding in Company Family Relationships with Management -

MR. SITILARB SUPSAKORN EXECUTIVE DIRECTOR Age 63 Education

Related Experience

• B.S. Business Administration, Babson College, MA, USA

2001 - Present 2012 - Present 1997 - Present 1996 - Present

Seminars on Director Roles and Responsibilities / Thai Institute of Directors

• 2012 Director Accreditation Program (DAP)

Executive Director, Tipco Asphalt PLC Director, Tipco Foods PLC Director, Siam Container Terminal Co., Ltd. Director, Thanomwongse Service Co.,Ltd.

Shareholding in Company

1,000,000 shares (0.66%) Family Relationships with Management

Brother of Ms. Laksana Supsakorn and elder brother-in-law of Mr. Somchit Sertthin

MR. HUGUES DE CHAMPS EXECUTIVE DIRECTOR Age 45 Education

Related Experience

• Master degree in Public and Maritime Works • Civil Engineering Option, University of Technology Degree

2014 - Present Chief Operating Officer - International, Tipco Asphalt PLC 2011 - 2013 Director - Joint Ventures, Tipco Asphalt PLC 2011 - Present Operations Manager, COLAS Asia area 2004 - 2011 Managing Director, COLAS South Africa (Pty) Ltd. 1995 - 2004 Operations Manager, COLAS Asia area 1993 - 1994 Project Manager, COLAS India 1992 - 1993 Project Manager, COLAS Morocco, GTR Company

Seminars on Director Roles and Responsibilities / Thai Institute of Directors

• 2013 Director Accreditation Program (DAP) Shareholding in Company Family Relationships with Management -

ANNUAL REPORT 2013

EXECUTIVE OFFICERS

EXECUTIVE OFFICERS MR. KOH LAI HUAT

CHIEF FINANCIAL OFFICER Age 54 Education

• Chartered Association of Certified Accountant (UK) • M.B.A. International Marketing Seminars on Director Roles and Responsibilities/ Thai Institute of Directors Shareholding in Company Family Relationships with Management Related Experience

2014 - Present Chief Financial Officer, Tipco Asphalt PLC 2010 - 2013 Director - Accounting and Budgeting, Tipco Asphalt PLC 2009 - Present Chief Financial Officer, Kemaman Oil Corporation Sdn. Bhd. 2004 - 2008 Chief Financial Officer, Seloga Holdings Bhd.

MR. CHAYONGSAK PISITPONG (RETIRED) CHIEF DIRECTOR-FINANCE Age 56 Education

• M.B.A. North West Missouri State University, USA • M.A. Economics, University of Kansas, USA • B.A. Business Administration, Benedictine College, KA, USA Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

• 2003 : Director Accreditation Program (DAP) Shareholding in Company Family Relationships with Management Related Experience

2009 - 2013 1995 - 2009 1981 - 1995

Chief Director - Finance, Tipco Asphalt PLC Chief Financial Officer, Tipco Asphalt PLC Vice President, Chase Manhattan Bank, Bangkok Branch

MS. AUCHCHA RATTRAKULTIP

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors Shareholding in Company Family Relationships with Management Related Experience

2002 - Present Director - Finance, Credit and Legal, Tipco Asphalt PLC 2001 - 2002 Senior Manager, Tipco Asphalt PLC

MR. KASIDIS CHAREANCHOLWANICH CHIEF OPERATING OFFICER - THAILAND Age 53 Education

• M.B.A. Finance and Marketing, George-August University, Gottingen, Germany • B.A. Business Administration, Marketing, Assumption University • Bachelor Degree of Law, Ramkhamhaeng University Seminars on Director Roles and Responsibilities/ Thai Institute of Directors Shareholding in Company Family Relationships with Management Related Experience

2014 - Present Chief Operating Officer - Thailand, Tipco Asphalt PLC 2008 - 2013 Director - Business and Support, Tipco Asphalt PLC 2006 - 2007 Director - Domestic Marketing and Sales, Tipco Asphalt PLC 2000 - 2005 Sales Director, ICI Paints (Thailand) Co., Ltd.

MR. PRAVEEN PENMANEE DIRECTOR - OPERATIONS Age 56 Education

• M.B.A., National Institute of Development Administration (NIDA) • Electrical Engineering, King Mongkut Institute of Technology Ladkrabang Campus

Education

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors Shareholding in Company Family Relationships with Management Related Experience

• Mini M.B.A. Economics, Business Administration • Mini M.B.A. Commerce and Accounting, Business Administration Kasetsart University

2010 - Present Director - Operations, Tipco Asphalt PLC 2002 - 2009 Production Division Manager, Guardian Industries Rayong Co., Ltd.

DIRECTOR - FINANCE, CREDIT AND LEGAL Age 67

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

MR. LOUIS - FREDERIC SACHS

MR. ISMAIL BIN ABDUL HAMID

Age 39

Age 51

Education

• Master’s Degree in Nautical Science, Antwerp Maritime Academy, Antwerp, Belgium • Bachelor in Business Administration, NEOMA B.S., Reims, France

• Masters Degree (MSc), Highway Management & Engineering, University of Birmingham, UK • Civil Engineering Degree (BSc), Western Kentucky University, USA

Seminars on Director Roles and Responsibilities/ Thai Institute of Directors Shareholding in Company Family Relationships with Management Related Experience

2013 - Present Director - Marine Group, Tipco Asphalt PLC 2008 - 2013 Regional Marine Risk Manager - Asia, AXA Corporate Solutions 2005 - 2008 Chief Officer LNG Tankers, Gazocean GDF SUEZ 1996 - 2005 Deck Officer, EXMAR

2011 - Present Director - International Sales and Marketing, Tipco Asphalt PLC 2006 - 2011 General Manager, Sales & Marketing, Kemaman Bitumen Company Sdn Bhd, 1990 - 2006 Sales, Marketing, Product Development and Technical Services, Shell Company

DIRECTOR – MARINE GROUP

MRS. UDOMPORN PUNPATCH DIRECTOR - HUMAN RESOURCES Age 53 Education

• Master Degree in Human Resources Management, College of Management, Mahidol University, Bangkok. • Mini-Master of Business Administration, Thammasat University, Bangkok. • Bachelor of Industrial Psychology, Chaingmai University, Chiangmai Seminars on Director Roles and Responsibilities/ Thai Institute of Directors Shareholding in Company

921 shares (0.006%) Family Relationships with Management Related Experience

2011 - Present Director - Human Resources, Tipco Asphalt PLC 2007 - 2010 Senior Manager - Human Resources, Tipco Asphalt PLC 2000 - 2006 Group Manager - Human Resources, Tipco Asphalt PLC

DIRECTOR - INTERNATIONAL SALES AND MARKETING

MR. PORNSATIAN SAOWAPAKSOONTORN COMPANY SECRETARY Age 42 Education

• Certified Public Accountant (Thailand) • MS. (Accounting), Thammasat University Seminars on Director Roles and Responsibilities/ Thai Institute of Directors

• Company Secretary Program (CSP) Shareholding in Company Family Relationships with Management Related Experience

2011 - Present Company Secretary and Group Manager Accounting & Budgeting, Tipco Asphalt PLC 2008 - 2011 Senior manager of Finance and Accounting, Mermaid Maritime PLC 2007 - 2008 Corporate Accounting Assistant Director, Bangkok Dusit Medical Services PLC 2006 - 2007 System Project Director, Minor Corporation PLC

ANNUAL REPORT 2013

ORGANIZATION STRUCTURE

ORGANIZATION STRUCTURE At 1st January 2014

Board of Directors

Nomination and Remuneration Committee

Corporate Governance Committee

Executive Committee

Chief Executive Officer

Managing Director

Chief Operating Officer - Thailand

Chief Operating Officer - International

Director - Domestic & Marketing

Director - International Sales and Marketing

Director Operations

Director Marine Group

Board of Directors

At 31st December 2013

Nomination and Remuneration Committee

Corporate Governance Committee

Executive Committee

Chief Executive Officer

Managing Director Chief Director Finance

Director Finance Credit Control and Legal

ANNUAL REPORT 2013

Director - Finance and International Legal Affairs

Director Accounting and Budgeting

Director Joint Ventures and Subsidiaries

Director Marine Group

Tipco Asphalt Public Company Limited

Audit Committee

Chief Financial Officer

Director - Finance Credit Control and Legal

Director - Finance and International Legal Affairs

Director - Human Resources

Senior Manager Internal Audit

Audit Committee

Director Operations

Director International Sales and Marketing

Director Business and Support

Director Human Resources

Senior Manager Internal Audit ANNUAL REPORT 2013

PRODUCTION FACILITIES, OIL AND ASPHALT TERMINALS

Lang Fang (Hebei province)

Zhen Jiang (Jiangsu province)

Bahadurgarh Jhansi Baroda

Haldia Xin Hui (Guangdong province)

Vashi Visakh Phitsanulok Nakhonratchasima Mangalore

Chennai

Phrapradaeng Rayong

Poipet (Cambodia) Keo Phos (Cambodia)

Suratthani

Kemaman Bitumen Company Sdn. Bhd. AE and PMA Production Facility Oil and Asphalt Terminal

ANNUAL REPORT 2013

SHAREHOLDING STRUCTURE OF THE GROUP

Tipco Asphalt Public Company Limited

SHAREHOLDING STRUCTURE OF THE GROUP TIPCO ASPHALT GROUP

Asphalt Business

Tipco Asphalt PLC

TASCO Shipping Co., Ltd (99.99%)

Thai Bitumen Co., Ltd (99.99%)

Alpha Maritime Co., Ltd (99.99%)

Raycol Asphalt Co., Ltd. (41.44%)

Delta Shipping Co., Ltd. (99.99%)

Vessel Business

Asphalt Group in China

TASCO Int’l (Hong Kong) Ltd. (100%) Langfang Tongtai Road Material Co.,Ltd. (51%)

Bitumen Marine Co., Ltd. (99.99%)

Colasie Co., Ltd. (40%)

Zhenjiang Tipco Asphalt Co.,Ltd. (51%) Tipco Asphalt (Xinhui) Co., Ltd. (100%)

Tipco Maritime Co., Ltd. (99.97%)

Asphalt Refinery

Kemaman Oil Corporation Sdn. Bhd. (63.12%) KBC Energy Pte. Ltd. (100%)

(44.80%) (54.50%)

Asphalt Group in Cambodia Tipco Asphalt (Cambodia) Co., Ltd. (100%)

Kemaman Bitumen Company Sdn Bhd

RELATIONSHIP BETWEEN THE MAJOR SHAREHOLDER’S BUSINESS GROUPS There are 2 major shareholder groups in the Company. The first is the Tipco Foods Pcl and the Supsakorn family, the founding shareholders. The other group is Colas S.A. of France, a world leading road and highway construction and maintenance company. Colas became a 22.7 strategic shareholder in the Company in 2000. The shareholding currently stands at 32.13%. Through a Technical Assistance Agreement, the Company receives unlimited assistance on asphalt technology from Colas which include access to the latter’s central asphalt research and development center in France as well as all specialty asphalt products formulations and application techniques.

ANNUAL REPORT 2013

MAJOR SHAREHOLDERS

MAJOR SHAREHOLDERS as at 27th December 2013

NO.

SHAREHOLDERS SHARES

NO. OF ORDINARY SHARES

BNP PARIBAS SECURITIES (ASIA) PTE LTD-FOR COLAS

49,024,804

32.130

Tipco Foods PLC.

37,113,166

24.324

Supsakorn Family

11,532,828

7.559

Thai NVDR Co., Ltd.

10,928,251

7.162

AIA Company Limited-APEX

3,000,000

1.966

Dr. Pichit Lerttamrapth

1,800,000

1.180

Mr. Kittipong Patrachaikul

1,520,000

0.996

AIA Company Limited-TIGER

1,500,016

0.983

Mr. Viwat Kowitsophon

1,417,800

0.929

10.

Mr. Thanathip Pichedvanichok

1,173,700

0.769

11.

Others

33,570,303

22.002

152,580,868

100.000

Total

DIVIDEND POLICY The Company has a policy to pay dividends of not less than 60% of its Company alone net profit of each fiscal year. However, the actual dividend payment depends on cash flow, investment plans of the Company and its subsidiaries, terms and conditions of agreements entered into by the Company.

ANNUAL REPORT 2013

REVENUE STRUCTURE

Tipco Asphalt Public Company Limited

REVENUE STRUCTURE During 2013, 76% of total revenue derived from the sale of asphalt products. Domestic and international sales contributed approximately 27% and 73% of total sales, respectively. Based on the Companyâ&#x20AC;&#x2122;s consolidated financial statements for the years 2011, 2012 and 2013, revenues categorized by business units are as follows: (UNIT: MILLION BAHT)

PRODUCT LINE/ BUSINESS CATEGORY

2013 SHAREHOLDING (%)

REVENUE

2012 %

REVENUE

2011 %

REVENUE

1. Asphalt Business Tipco Asphalt PLC

26,257.39

77.01

30,687.44

79.96

6,183.23

26.86

Surat Bitumen Co., Ltd.

99.99

262.05

1.14

Thai Bitumen Co., Ltd.

99.99

1,303.78

3.82

1,584.37

4.13

12,088.12

52.51

Raycol Asphalt Co., Ltd.

41.44

992.84

2.91

1,259.65

3.28

734.19

3.19

100.00

524.84

1.54

599.74

1.56

428.83

1.86

8.73 2,606.52 94.02 36,737.72

6.79

868.45

3.77

95.72 20,564.87

89.34

Tipco Asphalt (Cambodia) Co., Ltd. Kemaman Oil Corp. Sdn. Bhd.

63.12

2,977.78 32,056.63

Total 2. Vessel Business Tipco Maritime Co., Ltd.

99.97

31.80

0.09

31.48

0.08

4.46

0.02

Delta Shipping Co., Ltd.

99.99

66.49

0.20

121.10

0.32

104.82

0.46

Alpha Maritime Co., Ltd.

99.99

68.39

0.20

66.78

0.17

64.78

0.28

Bitumen Marine Co., Ltd.

99.99

302.36

0.89

301.59

0.79

264.23

1.15

Tasco Shipping Co., Ltd.

99.99

352.06

1.03

217.28

0.57

98.96

0.43

(746.25)

(2.19)

(727.61)

(1.90)

(476.34)

(2.07)

74.85

0.22

10.62

0.03

60.90

0.26

1,803.43 1,803.43

5.29 5.29

914.80

2.38

1,678.04

7.29

914.80

2.38

1,678.04

7.29

33,934.91

99.53

37,663.14

98.13

22,303.81

96.89

159.25

0.47

715.81

1.87

715.99

3.11

Elimination Total 3. Holding Companies Tasco International (Hong Kong) Ltd.

100.00 Total

Total Sales and Services Other Revenue Total Revenue

34,094.16 100.00 38,378.95 100.00 23,019.80 100.00

Note: Excluded of share of profit (loss) from investment in associate.

ANNUAL REPORT 2013

PRODUCTS AND THAILAND DOMESTIC MARKET

TYPES OF PRODUCTS PRODUCED BY THE GROUP INCLUDE: •

Asphalt Cement (AC) accounted for more than 80% of asphalt sales in 2013. The Group refines its own AC from heavy crude oil in addition to AC purchased from other local and international suppliers.

•

Asphalt Emulsion (AE) is a mixture of Asphalt Cement, water and chemicals.

•

Cutback Asphalt is a mixture of Asphalt Cement and petroleum solvents. It is used mainly for prime coating. Today it has become less popular because it is costly and unfriendly to the environment.

ANNUAL REPORT 2013

•

Polymer Modified Asphalt (PMA) is a mixture of polymer and Asphalt Cement. It is a durable binder with elastic characteristic to ensure higher rutting resistance on highways. This special property extends the useful life of highways and airport runways.

•

Premix is a ready-mix product that is sold in bags. This product is made from readily mixed Asphalt Emulsion and selected aggregates with proper gradation. It is best for small road surface repairs.

Tipco Asphalt Public Company Limited

PRODUCTS FOR WHICH THE GROUP IS A DISTRIBUTOR ARE: •

AC purchased from local and international suppliers.

•

Diesel and bunker oil purchased from oil refineries and brokers.

TYPES AND SOURCES OF PRODUCTS AND RAW MATERIALS AC is a product from refining of crude oil and processing of base lubricating oil. AC is used as the raw material for manufacturing Asphalt Emulsion, Polymer Modified Asphalt and Cutback Asphalt. Currently, the Group produces AC from its own asphalt refinery in Malaysia as well as from other refineries, both locally and internationally, to reduce the risk of relying on a single source and to control the cost of raw materials for manufacturing.

OTHER RAW MATERIALS The Group imports approximately 35% of the raw materials it requires for use in the Asphalt Emulsion and Polymer Modified Asphalt manufacturing process. The remaining 65% of raw materials is sourced through local suppliers. •

•

Tipco Joint Sealer and Tipco Joint Primer are Asphalt Cement mixed with additives, which is durable for extreme hot and cold weather conditions. It is highly flexible and adheres to joint components. It is used for sealing joints between concrete slabs. Atmospheric Gas Oil (AGO), Vacuum Gas Oil (VGO), Kerosene and Naphtha are byproducts from Tipco Asphalt refinery. The Group sells these products to local and regional customers.

THE TWO TYPES OF RAW MATERIAL REQUIRED ARE AS FOLLOWS: •

Solvents: The price of solvents varied depending on oil price. It is purchased from local suppliers and there is no shortage of this raw material in the market.

•

Emulsifiers: There are several kinds of emulsifiers, which can be purchased locally or from international suppliers through their sales agents. The price of emulsifiers is quite stable.

ANNUAL REPORT 2013

BUSINESS PERFORMANCE

BUSINESS PERFORMANCE The Company remains the market leader for asphalt products in Thailand by achieving strong customer loyalty; which, in turn, is built through exceptional product quality, superior customer services and on-time deliveries.

DOMESTIC MARKET Domestic market asphalt consumption in Thailand during 2013 was 704,000 tons, which consisted of 598,000 tons of Asphalt Cement and 106,000 tons of Asphalt Emulsion and other products (such as Polymer Modified Asphalt and Cutback Asphalt). The consumption of 704,000 tons was 11% less than 2012. However, 2012 was an exceptional year, as there was additional government funding for the repair and reconstruction of roads damaged from widespread flooding across Thailand in late 2011.

ANNUAL REPORT 2013

The Company remains the market leader for asphalt products in Thailand with strong customer loyalty; which, in turn, is built through exceptional product quality, superior customer services and on-time deliveries. During 2013, we further reinforced our market leadership position through the supply of a new type of Polymer Modified Asphalt for runway repairs at the Suvarnabhumi Airport. Additionally, the Company had also supplied the following new techniques to some key projects;

Tipco Asphalt Public Company Limited

In 2013, international asphalt sales for the Group exceeded 900,000 tons and represented another year of good performance

MICRO SURFACING TECHNIQUE •

Don Muang Tollway

•

Buraphawithi Expressway (Bangna - Chonburi)

•

Kanjanapisek Expressway (Bang Plee - Suksawad)

COLORED ASPHALT TECHNIQUE •

Department of Rural Road

# 3176 Bangtaboon Laemsing District, Petchaburi

# 3201 Ban Bangjak Patill District, Chumporn

PREMIUM GRADE ASPHALT TECHNIQUE •

Ultra-thin Friction Course (UTFC) technique on the Chaloem-maha-nakorn Expressway (Dindaeng Bangna)

•

Porous Asphalt on the Srinagarindra Road

•

Special Designed Method of track pavement for test driving, Nissan Motor Asia Pacific (Thailand)

The Company has manufacturing facilities and asphalt terminals located in the center of every region of the country, such as Nakhonratchasima, Phitsanulok, Rayong and Suratthani. With these four domestic manufacturing facilities strategically covering all regions, the Group can promptly deliver asphalt products to domestic customers, as well as to neighboring countries via our own fleet of 300 road tanker trucks. This unique logistic capability is key to Tipco Asphalt’s dominance in the domestic market. The Company also owns and operates 7 ocean-going asphalt vessels which significantly expand our presence in the export market. These vessels also import asphalt into Thailand when there is a shortage in domestic supply.

Our domestic marketing and sales teams served more than 550 contractors and customers across Thailand. With a track record of more than 30 years of solid service, our committed sales teams are well-trained to provide quality services and technical advice to customers. Furthermore, our sales teams are also backed by dedicated technical support teams who have extensive experience and knowledge of new techniques in road maintenance and are ready to provide on-site support to our customers. The Group also has a Customer Relationship Management (CRM) team to study the complex requirements of each group of customers in order to devise effective sales and service plans.

INTERNATIONAL MARKET In 2013, international asphalt sales exceeded 900,000 tons and represented another good year of performance for the Group. The main reasons for the high sales were the combined effect of higher demand in the region, including China, Australia, Malaysia and Indonesia - the key markets for our international sales, and tighter asphalt availability following reduction of production in both Thailand and Singapore. Tipco Asphalt refinery in Kemaman, Malaysia continued to produce and supply significant volume of the Group’s asphalt requirement. The Group also secured the balance of the asphalt supplies from other regional refineries, in supporting our international sales by providing wider product grades and utilization of our bitumen vessels.

ANNUAL REPORT 2013

BUSINESS PERFORMANCE

Indonesia is still one of our largest export destination, with sales volume representing about 30% of total international sales. The Indonesian market continued its strong demand supported by increase in public spending, and lower volume of asphalt production at the local refinery, resulting in an increase in the requirement of asphalt imports. Indonesia is likely to remain a strong contributor to our international business over the next few years. Vietnam is another key market for the Group. Our presence in this market is still significant with support from our regular and new customers in that country. We have managed to take away some of the competitorsâ&#x20AC;&#x2122; volume and customers with better supply and efficient delivery logistics. However, the number of new players, supply alternatives and traders in the Vietnamese market had increased during 2013, causing higher competition and tension in the market. With the continued support from associate companies of Colas, better supply coordination and focusing on our loyal customers, the Group will continue to be a major player in Vietnam .

ANNUAL REPORT 2013

Sales to China showed significant growth of 16% compared with 2012 and reached its highest ever historical level for the Group. This was achieved under fierce competition while the market was kept under margin pressure from the 2nd quarter until the end of the year. Meanwhile, the total import asphalt market in China remained steady at about 3 million tons per annum. Most of this growth occurred in North China where the Groupâ&#x20AC;&#x2122;s market share is not significant due to competitiveness of Korean origin supplies. Our subsidiaries in China performed significantly better in 2013, thanks to increased business and better cost controls. In a highly competitive environment, sales volume surged by 50% driven mainly by our subsidiary in Jiangsu province. Similar to China, the Australian market were amongst those markets where 2013 sales increased compared to the previous year. The Group remained a key partner of Colasâ&#x20AC;&#x2122; subsidiary in Australia and remained as the 4th largest destination for our international trade. The Group faced new import players in our sales to Australia, where

Tipco Asphalt Public Company Limited

the downstream business changed hands in several parts of Australia. Oil traders took over several import terminals previously owned by the oil majors. This situation represents both opportunity and threat to our marketing effort to this market. Being one of the big import markets, Australia remains a key market to grow our international sales in the years to come. Sales to Laos and our Cambodian subsidiary Tipco Asphalt Cambodia (TAC) remained steady throughout the year, and then slowed down during the rainy season. This was amplified by the completion of major contracts, slow payment process to contractors and lesser new investment by the Government. Within the above difficult environment, TAC still managed to remain as the leader in its market with above 80% market share. Sales by our Malaysian subsidiary, Kemaman Bitumen Company Sdn. Bhd. (KBC), recorded another record high which represented an increase of 18% compared to 2012. The increase was due to more consistent supply from our refinery in Kemaman, customer focus and the growth in local demand, including the paving of a few major sections of the new East Coast Expressway, paving of the new airport runway for KLIA2, and new Penang Bridge 2. The KBC sales team supported by the head office technical team also managed to convince Malaysian project owners and contractors to utilize polymer - modified asphalt and high quality emulsion sourced from Thailand. Other than the above mentioned markets, the international sales group sells to 10 other countries which include the Philippines, South Africa, New Zealand, Bangladesh, Reunion Island, Mauritius, Fiji and Tahiti.

CONTINUOUS UPGRADING OF PRODUCTION PROCESSES IN LINE WITH CORPORATE SOCIAL RESPONSIBILITY INITIATIVES There has been researches and studies to improve the quality of asphalt with new techniques by using natural rubber (Para Asphalt Cement or Natural Rubber Modified Asphalt Cement). Natural rubber is an agricultural product and has been thoroughly tested before gaining acceptance as the standard requirements of the Department of Highways. This has contributed to an increase in demand for domestic natural rubber; which particularly benefits local farmers during periods of low demand for natural rubber in the global market. Put simply, this results in the use of an organic, renewable substance to serve as a substitute raw material to improve the quality of traditional asphalt (Polymer Modified Asphalt, or â&#x20AC;&#x153;PMAâ&#x20AC;?). Such quality improvement process requires less petroleum polymers obtained from refining of fossil crude oil and thereby reducing emissions of greenhouse gases and effect of global warming. In addition, the Company had launched a new prime coat emulsion in 2013 which uses less than half the amount of oil which is needed to produce cutback asphalt. This product has reduced the release / evaporation of oil vapor into the atmosphere. In addition, we have converted from using fuel oil to liquefied petroleum gas (LPG) at our manufacturing plants. The latter is a clean fuel and provides complete combustion with limited emissions to the atmosphere, especially sulfur oxides.

ANNUAL REPORT 2013

BUSINESS PERFORMANCE

Fuel savings have also been achieved through repairs and change of insulation material and removing carbon scales on the surface of the heat transferring pipes at our asphalt storage terminal. These initiatives contribute towards fuel savings through more efficient heat exchanges. The Group is also replacing the use of firewood with liquefied petroleum gas (LPG) as the fuel for heating asphalt transported in our road tankers. LPG is a superior fuel produces no smoke. The use of LPG greatly reduced the environmental effects caused by the use of firewood. The Company makes use of a Safety Index as a key corporate KPI. This is intended to reduce accidents, increase safety standards and prioritize the safety of employees (particularly for those involved in production processes). CCTV cameras are being installed in all our road tankers in Thailand. The CCTV surveillance cameras, in conjunction with the real-time GPS tracking system (which is already installed in all our trucks) acts to provide addition safeguard for safety of our truck drivers and the general public.

ANNUAL REPORT 2013

THE MARINE GROUP The Marine Group is a key component of our supply chain for the transportation of our products across the Asia Pacific/ Indian Ocean region. It consists of two major activities: •

A full in-house vessel management function responsible for the operation of our 7 Asphalt/ Bitumen Tankers of 22,450 tons carrying capacity, and

•

A chartering department responsible for commercial fleet activities.

Our vessels are operated by an in-house vessel management team under strict tanker quality management systems. The vessel management team follows leading industry practices and strives to achieve KPIs as per the TMSA (Tanker Management Self-Assessment) guidelines. The Chartering activities achieved a high utilization of vessels in 2013 which greatly supported the sales growth in Asia Pacific. During 2013, the Group ordered a new built vessel from Japan with a delivery date of July 2014. The addition of this new asphalt tanker of 3,900 tons of cargo carrying capacity will strengthen the Company’s presence on long ton-mile destinations in the Asia Pacific region.

Tipco Asphalt Public Company Limited

ASPHALT REFINERY IN MALAYSIA Tipco Asphalt operates a refinery in Kemaman, Malaysia through its subsidiary, Kemaman Bitumen Company Sdn. Bhd. (Tipco Asphalt refinery). The refinery is located on 40 hectares (250 rais) of land in the Telok Kalong Industrial Estate. It has a nameplate refining capacity of 25,000 barrels of heavy crude oil per day or the equivalent of 9 million barrels or 1.4 million tons of crude oil per year. This translates into production of about one million tons of asphalt per year. The refinery processed 6.65 million barrels of crude in 2013. The amount of asphalt produced in 2013 was 719,000 metric tons. During 2013, the refinery undertook several capital expenditure projects to improve efficiency and safety of its operations. The main projects were;

of Marine Loading Arms was completed in October 2013 and has immediately resulted in major benefit by reducing the loading/unloading time. More importantly, the Marine Loading Arms significantly reduce the risk of oil spills, making our operation extremely environment friendly and supporting our efforts to progressively improve our sustainability.

3. SCRUBBER In yet another initiative to improve our environmental friendliness, KBC installed 2 Scrubbers at the bitumen tank and waste water holding basin areas. These advanced units, with a design duly approved by the Department of Environment, will help reduce volatile organic compounds (VOC) emissions into the atmosphere.

1. CONVERSION OF STEAM BOILER AND PROCESS HEATER FROM SINGLE FUEL FIRING BURNER (FO) TO DUAL FUEL (FO AND NG) KBC successfully converted the Boilers and Process Heaters in the Refinery to dual-fuel configuration - the equipment can now use Fuel Oil as well as Natural Gas depending upon the requirement and availability. Use of Natural Gas as the primary fuel is highly environmentally friendly as it is expected to reduce by as much as 26% the emission of CO2 and CO. In addition, this would help the refinery to have significant reduction in the heating cost.

2. MARINE LOADING ARMS (MLA) KBC has been proactively upgrading the marine oil transfer facilities to meet the world class refinery requirements for safe marine operations at all times. It had initiated the Marine Loading Arms installation project in 2012, with a view to ensure that our group business activities are carried out in the safest possible manner. The installation

ANNUAL REPORT 2013

RISK MANAGEMENT AND RISK FACTORS

RISK MANAGEMENT AND RISK FACTORS RISK MANAGEMENT The Group has remained focused in strengthening the framework of enterprise risk management (ERM) amidst significant strides made in terms of growth in 2013. The aligning of objectives within the various business units of the Group has assisted in formulating a 2 tier risk management system. In line with the Groupâ&#x20AC;&#x2122;s strategy, Risk Management Committee remains proactive by focusing on continuous improvements in managing risk in all areas of business and creating risk awareness culture within the organization.

The challenges of enterprise risk management amidst diverse nature of the Group business from oil refining and shipping to the sale of oil products and asphalt in the infrastructure industry are being countered by implementing comprehensive risk management programs covering specific areas of business operations. The Risk Management Committee has been functioning in compliance with the Principles of Good Corporate Governance. The risk management policy is formulated to ensure that all stakeholders follow prudent risk management practices and are fully prepared for all possible scenarios.

ANNUAL REPORT 2013

DUTIES AND RESPONSIBILITIES 1. To implement the scope or framewor k of r isk management; 2. To m o n i to r d e ve l o p m e nt o f t h e s co p e o f r i s k management, the risk indication process and risk assessment; 3. To assess and approve the risk management plan; and 4. To report to the Board of Directors concerning potential risks, as well as, on their management and also to communicate with the Audit Committee about these issues as appropriate.

Tipco Asphalt Public Company Limited

In managing risks, the Risk Management Committee has created risk management team of managers headed by a Risk Officer to carry out day-to-day operations on behalf of the committee. Such team will adhere to risk management policies, scope or framework and process and render support, advice or guidance on risk management to all units. Such team will also report to the Risk Management Committee on a monthly basis about foreseeable risks in their respective departments, along with remedies and opportunities. Follow-up meetings with the Risk Management Committee will be planned monthly to review corporate risks, receive feedback and work towards continuous improvement.

RISK FACTORS RISKS RELATED TO FINANCE The Group’s business activities are exposed to various financial risks, including those related to credit, liquidity, foreign currency, interest rate and oil prices. The Group utilizes various financial instruments to manage the identified financial risks. The Group does not use financial instruments for trading or speculative purposes. Th e G ro u p’s Fi n a n ce D e p a r t m e n t o p e r a te s a s a service center providing treasury advice, funding, risk management assistance, coordinates access to financial markets and manages financial risks relating to the Group’s overall operations to ensure that Tipco Asphalt’s strategic objectives are met. The use of financial instrument is strictly controlled by policies approved by the Group’s Board of Directors. The policies provide specific direction in relation to financial risk management including commodity hedging, foreign currency, interest rate, credit and liquidity risk.

The Group has ample unsecured short term trade and working capital financing facilities with reputable local and international banks that have combined limits of over USD 1.2 billion

CREDIT RISK Credit policy is regularly reviewed and the exposure to credit risk is monitored on an ongoing basis. Credit review and evaluations are performed on all customers while credit approvals are based on delegated limits of authority. There was no significant exposure to any customer group in 2013. Credit risk related to financial instruments is minimized by using reputable local and international banks and other counterparty.

LIQUIDITY RISK The Group operates under unsecured short term trade and working capital facilities arrangement with reputable local and international banks that have combined limits of over USD 1.2 billion. Financing associated to crude purchase is self-liquidating and short term in nature with short asset to cash conversion cycle.

CURRENCY RISK The Group is exposed to foreign currency risk. This occurs as the result of purchases of raw materials and export revenue. This risk is adequately mitigated with financing and exporting revenue in the same currency. There are also forward contracts booked for known foreign currency expenses which all have maturities of less than six months.

ANNUAL REPORT 2013

RISK MANAGEMENT AND RISK FACTORS

INTEREST RATE RISK The Group entered into interest swap to achieve fixed interest rate borrowing on the long-term loans. There are more opportunities for the subsidiaries to enter into interest swap in the future.

RISKS RELATED TO OIL PRICE FLUCTUATION Petroleum product markets have been extremely volatile during the year due to the US’ sanction against Iran and blockage supply of Libya crude production. The Group’s hedging policy is effective in managing these market risks. In order to address and mitigate price fluctuation risks for both crude oil and finished products at all times, the Group evaluates carefully its hedging strategy for each crude cargo.

RISKS RELATED TO SOURCING HEAVY CRUDE OIL The Company’s refinery has been designed to process heavy crude oils as it is the best suited for the company’s business model. Due to the geographical distribution of heavy crude oil in terms of commercially viable sources of supply, the crude oil availability is crucial to keep the refinery operative and for the company to meet its asphalt supply obligations. The company continues to make efforts on three important fronts to address the crude oil availability related risk,

ANNUAL REPORT 2013

1. To diversify its crude oil supply sources by evaluating crude oil assays from different sources to ascertain their suitability for the refinery 2. To work on a firm mid-to-long term agreement with one of the key suppliers that would ensure continuous and timely supplies to the refinery and allow for better operational planning 3. To make continuous upgradation in the refinery infrastructure to improve its ability to store and process different types of crude oils and produce commercially acceptable products to meet the market demand.

RISK RELATED TO REFINERY OPERATIONS The Group has continued its focus on managing the overall Business Risk relating to the operations of its Refinery. The recommendations of the technical integrity study are being implemented in a phased manner, depending in line with the local statutory approvals and the operating schedule. The Refinery is also taking up a detailed firefighting infrastructure study and a waste water treatment/ handling study in order to develop a robust philosophy and design for both these important activities. The refinery team also continues to engage with the local authorities like the Department of Health and Safety, the Fire Department and the Department of Environment to ensure their advice and recommendations are taken into account while designing and implementing any key equipment and/or technology. The refinery continues to upgrade the skills and competency of its personnel and to ensure all key positions are manned by well qualified and experienced professionals.

Tipco Asphalt Public Company Limited

RISKS RELATED TO ASPHALT CEMENT SUPPLY

Markets such as China, Indonesia, Malaysia, Australia and Vietnam were heavily relied upon in 2013 and will continue to be the pillars of our international sales for the Group.

Fluctuations in raw material prices posed a major risk to the Group. The Group continuously seeks to mitigate supply risk by maintaining good long-term relationships with all refineries in Asia, which is accomplished through regular supply contracts and enquiries. As of now, supply risk is mitigated by the ability to source Asphalt Cement from the Groupâ&#x20AC;&#x2122;s own subsidiary asphalt refinery in Malaysia. Expanding collaborative networks with key partners helps the Group to identify new sources of supply at competitive prices.

Within this market conditions, the risk of credit with some customers was identified in some areas and were addressed accordingly. Meanwhile, the emergence of new supply sources from far distances, and new competitors entering the game, the market became more aggressive, customers having more choices and indeed the risk of losing customers was identified. The Company addressed the risk by increasing focus on customer relationship, term sales contracts or multiple cargoes between 3-6 months and strengthening internal communication to optimize supply, logistics, deliveries, and sales operations support.

RISKS RELATED TO DOMESTIC MARKET The domestic market still relies mainly on government budgets. The instability of the political situation then affected total demand in the domestic market. As the result, fierce price competition tremendously took place, which caused by the over-supply situation of asphalt in the market.

RISKS RELATED TO INTERNATIONAL MARKET In 2013, TIPCO Asphalt product sales to the international market contracted by 4% year-on-year basis, although remaining close to its historical high. Difficult market conditions in some specific countries, along with more competition, did not create conditions in favor of another year of growth.

RISKS RELATED TO SHIPPING The Group owns 7 Asphalt/Bitumen tankers. The Group is focused to maintain a quality tonnage which is managed by prudent sale and purchase activities. In 2014, new Japanese built Asphalt/Bitumen tanker Tasco Nirand will join the fleet to bring the average age of the fleet to 12 years which is well below the industry average. The young quality tonnage maintained by the Group suitably supports increased sales activities in the Asia PacificAustralia range. All ship owning companies in the Group operate with the mission of zero accidents, zero injuries and zero oil spills. The Group ensures that all subsidiary-owned asphalt tankers are insured by first class risk coverage to protect assets against damages and also protect from third-party claims. The biggest challenge facing the industry is shortage of well-trained personnel. Group has made serious efforts to train and prepare shipping personnel to face industry challenges.

ANNUAL REPORT 2013

RESPONSIBILITIES OF THE BOARD

RESPONSIBILITIES OF THE BOARD BOARD OF DIRECTORS

QUALIFICATIONS FOR DIRECTORS

The members of the Board of Directors of Tipco Asphalt PLC are as follows:

To serve as members of the Board of Directors, individuals must meet the following qualifications:

1. Ms. Laksana Supsakorn

Chairman

2. Mr. Jacques Pastor

Vice Chairman

3. Mr. Nopporn Thepsithar

Independent Director

4. Mr. Phirasilp Subhapholsiri

Independent Director

5. Mr. Parnchalerm Sutatam

Independent Director

6. Mr. Niphon Suthimai

Independent Director

7. Mrs. Anne-Marie Machet

Independent Director

8. Mr. Koh Ban Heng

Independent Director

9. Mr. Hervé Le Bouc

Director

10. Mr. Jacques Leost

Director

11. Mr. Hugues de Champs

Executive Director

12. Mr. Jacques Marechal

Executive Director

13. Mr. Sitilarb Supsakorn

Executive Director

14. Mr. Somchit Sertthin

Chief Executive Officer

15. Mr. Chaiwat Srivalwat

Managing Director

DIRECTORS WITH AUTHORITY TO SIGN ON BEHALF OF THE COMPANY The authorized Directors who can bind the Company consist of two groups of Directors. To bind the Company requires one Director from Group A and another Director from Group B to jointly sign and affix the Company’s seal. The Directors in Group A are Mr. Jacques Pastor, Mr. Hugues de Champs, Mr. Hervé Le Bouc and Mr. Jacques Marechal. The Directors in Group B are Ms. Laksana Supsakorn, Mr. Somchit Sertthin, Mr. Sitilarb Supsakorn and Mr. Chaiwat Srivalwat.

1. Possess an unblemished record. 2. Apply both vision and a broad business perspective. 3. Exhibit good interpersonal skills, a sense of justice and an amenable personality. 4. Apply effective communication skills. 5. Demonstrate systematic business thinking and decision making. 6. Understand financial matters, commerce or industry, and show business management experience. 7. Have prior experience as a director of a company or state enterprise.

GUIDELINES FOR SELECTION OF DIRECTORS 1. Individual candidates must possess the qualifications as specified above. 2. Overall, the Board of Directors should be comprised of persons with a variety of skills that are of benefit to the determination of corporate direction and guidance.

TERM OF OFFICE FOR DIRECTORS AND EXECUTIVE DIRECTORS OF THE BOARD OF DIRECTORS 1. The term of office for Directors of the Board of Directors 1.1 Retirement age is 75. 1.2 A member will be allowed to retain his/her directorship after his/her 75th birthday and remain as Director until his/her three-year term expires. 2. The term of office for Executive Directors 2.1 Retirement age is 55. 2.2 After the age of 55, the term of service can be extended (by the Board of Directors) to the age of 70 with the first extension running for four years maximum; subsequent extensions are for a period of two years each.

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

RESPONSIBILITIES OF THE BOARD The Company has determined the roles, duties and responsibilities of the Board of Directors. The Board defines the Company’s vision and strategies clearly, covering marketing, production, management, human resources, finance and budgeting in order to measure their performance against the Key Performance Indicators (KPI) and budget. Furthermore, operations are periodically audited by the internal audit team, whose report of significant findings is scrutinized, and any corrective measures determined, under the close supervision of the Audit Committee and Board of Directors.

SCOPE OF AUTHORITY OF THE BOARD OF DIRECTORS 1. The Board of Directors must conduct the business according to the Company’s bylaws, objectives, regulations and shareholders’ resolutions with honesty and in accordance with the Company’s best interest. 2. Each Director has to inform the Company promptly if there is any conflict of interest with the Company, or if he or she holds, acquires or divests shares or debentures in the Company or its subsidiaries. 3. The Board of Directors has authority to set policies and to scrutinize investment plans of the Company. The Chief Executive Officer is authorized to control the operations of all departments to conform to the Company’s policies in order to maximize efficiency in the business and for the shareholders.

REQUIREMENT FOR APPOINTMENT TO THE BOARD OF DIRECTORS In selecting persons to be appointed as the Company’s Directors, the Nomination and Remuneration Committee is empowered to select and screen qualified persons. H owe ve r, t h e p e r s o n s w h o w i l l b e a p p o i nte d a s the Company ’s Directors must have the necessar y qualifications under Section 68 of the Public Companies Act B.E. 2535 (including its amendments) and the Company’s Articles of Association. The requirements, nomination, appointment and dismissal of the Company’s Directors are summarized as follows: 1. The number of Directors is fixed by a shareholders’ meeting resolution. The total number of Directors must not be less than 10 persons but not more than 15 persons. One half of the number of Directors must reside in Thailand. The Board of Directors may authorize one or more persons to perform any act on behalf of the Board of Directors but cannot authorize any other person to perform any act as a Director. Any act carried out by such authorized person will be deemed to have been performed by the Board of Directors and the Company will be bound by such an act. In performing their duties, the Board of Directors is entitled to remuneration which will be paid in the form of salary, meeting fees, bonus and allowance. 2. A shareholders’ meeting resolution, having not less than three-fourths of the total attending and eligible shareholders’ votes for the Board of Directors’ meeting resolution, has the power to determine the names of the authorized Directors. The authorized Directors who can bind the Company comprises of two groups of Directors and to bind the Company requires one Director from the first group and another Director from the second group to jointly sign and affix the Company’s seal.

ANNUAL REPORT 2013

RESPONSIBILITIES OF THE BOARD

3. The shareholders’ meeting must elect the Directors in accordance with the following procedures and rules: 3.1 The shareholders’ meeting must vote to elect Directors one person at a time 3.2 In exercising the voting rights for election of each Director, each shareholder will have voting rights according to the number of shares held with one share equal to one vote. 3.3 In exercising the voting rights for the election of each Director, the person who obtains the highest votes and received not less than threefourth of the total votes of attending and eligible shareholders will be elected as a Director. 4. At every Annual General Meeting of the Shareholders, one-third of the Directors, or if it is not, a multiple of three, then the number nearest to one-third must retire from office. There must be a drawing by lots to determine the Directors who will retire in the first and second years following the registration of the Company. In each subsequent year, the Directors who occupy the position for the longest period must retire. A retiring Director is eligible for re-election. 5. Any Direc tor wishing to resign must submit a resignation letter to the Company which will become effective on the date the Company receives the letter. A Director who resigns as described above may notify the Public Companies Registrar of his/her resignation. 6. If there is any vacancy among Directors other than retirement by rotation, the Board of Directors may at its next meeting elect a person who is qualified and is not subject to any restriction imposed under Section 68 of the Public Companies Act B.E. 2535 to fill the vacancy except where the remaining term of the vacant directorship is less than two months. The term of a new Director replacing a vacant directorship will be equal to the remaining term of that vacant directorship. The resolution of the Board of Directors as specified above must be passed by three-fourths or more of the votes cast by the remaining Directors.

ANNUAL REPORT 2013

7. A shareholders’ meeting may remove any Director before the expiration of his/her term by passing a resolution having the approval of not less than threefourths or more of the total attending and eligible number of shareholders and such shareholders must hold in aggregate 75% or more of the total number of shares held by attending and eligible shareholders.

BALANCE OF NON-EXECUTIVE DIRECTORS The Board of Directors has 15 members, consisting of: Executive Directors Non-executive Directors Independent Directors

6 3 6

SEPARATION OF POSITION The positions of Chairman of the Board of Directors and Chief Executive Officer are not held by the same individual.

BOARD MEETINGS Board meetings are scheduled to be held a minimum of four times per year. Invitation letters were sent with complete agenda details and related documents for consideration prior to the meetings. The minutes of each Board of Directors meeting is recorded in writing and arranged for the safe keeping of such certified minutes at 25th Floor, Tipco Tower, 118/1 Rama 6 Rd., Samsen Nai, Phayathai, Bangkok 10400. Directors approved these minutes and they are made available for review. Attendance of Board of Directors Meetings, Audit Committee Meetings and Nomination and Remuneration Committee Meetings for 2013 by the Direc tors is summarized as follows:

Tipco Asphalt Public Company Limited

NUMBER OF MEETINGS ATTENDED (TIMES) NAME

TITLE

BOARD OF DIRECTORS

AUDIT COMMITTEE

NOMINATION AND REMUNERATION

CORPORATE GOVERNANCE COMMITTEE

Ms. Laksana Supsakorn 1

Chairman

1/1

Mr. Jacques Pastor

Vice Chairman

5/5

4/5

Mr. Niphon Suthimai

Independent Director (Chairman of the Audit Committee)

5/5

8/9

Mr. Parnchalerm Sutatam 3

Independent Director

5/5

9/9

Mr. Nopporn Thepsithar

Independent Director (Chairman of Nomination and Remuneration Committee)

5/5

8/9

5/5

Mr. Phirasilp Subhapholsiri 2 Independent Director (Chairman of Corporate Governance Committee)

2/2

6/6

1/1

Mrs. Anne-Marie Machet

Independent Director

4/5

5/5

1/1

Mr. Koh Ban Hang

Independent Director

5/5

Mr. Hervé Le Bouc

Director

0/5

Mr. Jacques Leost

Director

2/5

Mr. Hugues de Champs

Executive Director

5/5

Mr. Sitilarb Supsakorn

Director

5/5

Mr. Somchit Sertthin

Chief Executive Officer

5/5

Mr. Chaiwat Srivalwat

Managing Director

5/5

1/1

Mr. Jacques Marechal 5

Executive Director

5/5

1/1

1,4

Remarks: 1. The Board of Directors meeting No. 4/2013 held on 14 th August 2013 passed the resolution to appoint Ms. Laksana Supsakorn as the Company’s Director replacing Mrs. Anurat Tiamtan who resigned from the position, effective on 15th August 2013. And Ms. Laksana Supsakorn was also appointed as a Chairman and Mr. Jacques Pastor was appointed as Vice Chairman at a Board of Directors’ Meeting No.5/2013 held on 15th November 2013. 2. The Board of Directors meeting No. 3/2013 held on 13th May 2013 passed the resolution to appoint Mr.Phirasilp Subhapholsiri as Director, Independent Director and Member of the Audit Committee replacing Mr. Chainoi Puankosoom who resigned from the position.

3. The Board of Directors meeting No. 5/2013 held on 15 th November 2013 passed the resolution to appoint Mr. Parnchalerm Sutatam as Nomination and Remuneration Committee replacing Mr. Somchit Sertthin. 4. Mr. Jacques Leost and Mr. Jacques Pastor joined a Board of Directors meeting No. 3/2013 via video conference on 13th May 2013. 5. Mr. Jacques Marechal joined a Board of Directors meeting No. 4/2013 video conference on 2013 held on 14th August 2013. The Board of Directors has recorded the minutes of each meeting in writing and arranged for the safe keeping of such certified minutes at 25 th Floor, Tipco Tower, 118/1 Rama 6 Rd., Samsen Nai, Phayathai, Bangkok 10400.

ANNUAL REPORT 2013

RESPONSIBILITIES OF THE BOARD

POSITIONS IN SUBSIDIARIES AND ASSOCIATED COMPANIES

THAI SLURRY SEAL CO., LTD.

KEMAMAN BITUMEN COMPANY SDN BHD

KEMAMAN OIL CORPORATION SDN BHD

TIPCO ASPHALT (CAMBODIA) CO., LTD.

TASCO INTERNATIONAL (HONG KONG) LTD.

TASCO SHIPPING CO., LTD.

RAYCOL ASPHALT CO., LTD.

BITUMEN MARINE CO., LTD.

THAI BITUMEN CO., LTD.

ALPHA MARITIME CO., LTD.

DELTA SHIPPING CO., LTD.

TIPCO F & B CO., LTD

SIAM CONTAINER TERMINAL CO., LTD.

Mr. Nopporn Thepsithar

THANOMWONGSE SERVICE CO., LTD.

OTHERS

THE TIPCO FOODS PCL.

Ms. Laksana Supsakorn

TIPCO MARITIME CO., LTD.

NAME

TIPCO ASPHALT PUBLIC COMPANY LIMITED

SUBSIDIARIES

COLASIE CO., LTD.

ASSOCIATED

Company officers holding management and authorized positions in subsidiaries, associated companies or other companies are as follows:

Mr. Phirasilp Subhapholsiri / Mr. Panchalerm Sutatam

Mr. Niphon Suthimai

Mrs. Anne-Marie Machet

Mr. Koh Ban Heng

Mr. Hervé Le Bouc

Mr. Jacques Leost

Mr. Jacques Pastor

Mr. Sitilarb Supsakorn

Mr. Somchit Sertthin

Mr. Chaiwat Srivalwat

Mr. Hugues de Champs

Mr. Jacques Marechal

Mr. Chayongsak Pisitpong

Ms. Auchcha Rattrakultip

/ /

X = Chairman

ANNUAL REPORT 2013

/ /

// = Executive Director

/ /

/ / /

/ = Director

Mr. Koh Lai Huat Note:

Tipco Asphalt Public Company Limited

INDEPENDENT DIRECTORS The Board of Directors has six Independent Directors as follows: 1. Mr. Nopporn Thepsithar 2. Mr. Phirasilp Subhapholsiri 3. Mr. Parnchalerm Sutatam 4. Mr. Niphon Suthimai 5. Mrs. Anne-Marie Machet 6. Mr. Koh Ban Heng

GUIDELINES FOR SELECTION OF INDEPENDENT DIRECTORS All Independent Directors have been appointed according to the Guidelines of SEC. 1. Candidates must possess the requisite qualifications as stated by the Company. A Director should perform his or her duties and express opinions using independent judgment and integrity by taking into consideration the benefit of the Company as a pr ior it y. The individual should not consider the interests of majority shareholders, individual shareholders or himself or herself. 2. A candidate must possess the complete set of characteristics specified by the Stock Exchange of Thailand and Tipco Asphalt’s Code of Good Conduct, as follows: 2.1 Does not have shareholding in excess of 1% of the total number of shares with voting rights in the Company, businesses in the Group, associated companies or with persons with possible conflict of interest (including connected persons as per Measure 258 of the Securities Act); 2.2 Does not have any involvement in Company management, is not an employee or consultant receiving a regular monthly salar y, nor an individual with controlling authority in the Company, nor have businesses within the Group or associated companies. This extends to persons who may have possible conflict of interest, and candidates must have had no interest or stake as aforementioned for a period of not less than two years;

2.3 The nominee may not have any business relation; have no interest or stake-whether direct or indirect-in financial or management matters of the Company, businesses within the Group, associated companies or persons with a possible conflict of interest of a nature that may compromise independence; 2.4 The nominee must not be a close relative of management members, majority shareholders in the Company, those doing business within the Group, associated companies or persons with possible conflict of interest, nor may the individual be an appointee to maintain the interest of Directors or major shareholders; 2.5 The individual is obliged to disclose any relations to the Board of Directors which may compromise independence.

TIPCO ASPHALT’S DEFINITION OF INDEPENDENT DIRECTOR The Company adopts the above guidelines recommended by the SEC. Th e Co m p a ny h a s 6 I n d e p e n d e n t D i re c t o r s. A n Independent Director is a Director holding not more than 1 percent of paid - up capital of the Company; does not take part in the management of the Company; is not an employee, staff member or advisor who receives a regular salary from the Company or controlling persons or conflict persons; who have no business related to the Company such as customer, supplier, creditor, debtor; who has no direct or indirect benefit or interest in finance and management of the Company; who is not appointed as a representative to safeguard the interests of a Company director, majority shareholders or shareholders who are related to the Company’s majority shareholders.

THE COMPANY SECRETARY The Board of Direc tors appointed M r. Pornsatian Saowapaksoontorn, Group Manager - Corporate Affairs and Planning, on 24th November 2011 as Company Secretary to take responsibility as set forth by law. The Company Secretary reports functionally to the Chaiman of the Board of Directors and perationally to the Managing Director. The curriculum vitae of the company secretary has been included the curriculum vitae of the directors and management. ANNUAL REPORT 2013

RESPONSIBILITIES OF THE BOARD

ROLES AND DUTIES OF COMPANY SECRETARY Corporate Secretary has the important roles as follows: • • • • •

Act as a Consultant and Secretary of board of directors and other committees. Act as a Corporate Governance and Compliance Officer. Act as a Corporate Communication Officer by being the center of communication among the Company’s directors, management and stakeholders. Act as a Controller of Management Functions in following up on all the resolutions of board of director into practice. Act as a Co-ordinator with Thailand Security Depository Co., Ltd. the Company’s registrar.

DUTIES OF CORPORATE SECRETARY: • • •

• •

• • •

To adhere to good corporate governance. To plan meetings and propose relevant agenda To manage the Board of Directors’ meeting and coordinate with the minutes recorder in conducting the meeting in a proper manner and in line with the Company’s regulations To administer the Shareholders’ meeting in line within the legal framework To give advises on legal matters, Public Companies Act and all other rules and regulations of listed companies, the Company’s affidavits aiming at full compliance with relevant laws To make sure that the resolutions of Board of Directors are adhered to Become a contact point providing information to Directors and third parties All matters concerning the Company’s registrar and related document in safe keeping

THE BOARD OF DIRECTORS’ SUB-COMMITTEES The Board has appointed Board committees to study and review specific matters. At present, Tipco Asphalt has four committees appointed by the Board of Directors: the Executive Committee; the Audit Committee; the Nomination and Remuneration Committee and the Risk Management Committee.

1. EXECUTIVE COMMITTEE The Company established an Executive Committee to assume full executive responsibilities on behalf of the Board of Directors in order to have flexibility in management and operations. Members of the Executive Committee are as follows: 1. 2. 3. 4. 5. 6. 7.

Mr. Somchit Sertthin Mr. Jacques Pastor Mr. Chayongsak Pisitpong Mr. Chaiwat Srivalwat Mr. Koh Lai Huat Mr. Hugues de Champs Mr. Jacques Marechal

Chairman Member Member (Retired) Member Member Member Secretary

The Executive Committee has responsibilities as established by the Board of Directors. The Chairman of the Executive Committee has the highest authority to set operational policies related to the Company, while the Chief Executive Officer has the highest authority for implementation

SCOPE OF AUTHORITY OF THE EXECUTIVE COMMITTEE The Executive Committee, pursuant to the resolutions of the Board of Directors of the Company, is responsible for the following: 1. Proposing agenda for meetings of the Board of Directors and counseling the Board of Directors on major decisions. 2. Establishing the policies and operating procedures of the Company. 3. Managing, making decisions and directing the business and affairs of the Company.

2. AUDIT COMMITTEE The Company has a process that inspects and controls the business by appointing four Independent Directors to the Audit Committee. 1. 2. 3. 4.

Mr. Niphon Suthimai Mr. Parnchalerm Sutatam Mr. Nopporn Thepsithar Mr. Phirasilp Subhapholsiri Mr. Joseph Soosay

Chairman Member Member Member Secretary

All members of the Audit Committee have adequate expertise and experience to review creditability of the financial reports.

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

TERMS OF OFFICE OF THE AUDIT COMMITTEE The Audit Committee directly reports to the Board of Directors. The Audit Committee has a three-year term and new members will be appointed by the Board of Directors at the end of the term.

SCOPE OF AUTHORITY OF THE AUDIT COMMITTEE The role of the Audit Committee, as assigned by the Company Board of Directors, is as follows: 1. Review the reporting of the Company’s financial statements for their accuracy and adequacy. 2. Review the suitability and effectiveness of the Company’s internal control system, internal audit function and the independence of the Internal Audit Department, while providing concurrence to the appointments, transfers, and terminations of the Head of the Internal Audit Department or any other department responsible for performing internal audit responsibilities. 3. Review the Company’s compliance to any regulations on securities, the regulations of the SET and any other regulations relevant to the Company’s business. 4. Consider, propose and select the independent external auditor to the Company Board of Directors with recommendation on his remuneration. In addition, the Audit Committee participates in the meeting with the external auditor at least once a year without presence of the Company Management. 5. Consider the Company’s business transactions with related parties or any transaction that may lead to potential conflicts of interest in compliance with the relevant rules and regulations of the SET to ensure their rationality and maximum benefit to the Company. 6. Issue a report of the Audit Committee, to be signed by the Chairman of the Audit Committee and disclosed in the Company’s Annual Report, and shall at least contain comments in the following areas: 6.1 Accurac y, adequac y and credibility of the Company’s financial statements. 6.2. Adequacy of the Company’s internal control system.

6.3. Compliance to any regulations on securities, the regulations of the SET and other regulations relevant to the Company’s business. 6.4. Appropriateness of the external auditor. 6.5. Transactions of possible conflicts of interests. 6.6. M e e t i n g s o f t h e Au d i t Co m m i t te e a n d contributions of members. 6.7. Overall comments from performing in accordance to this Charter. 6.8. Other transactions that shareholders or other investors should be aware of in accordance to the role and responsibility assigned by the Company Board of Directors. 7. Perform any other task as assigned by the Company’s Board of Directors with the approval of the Audit Committee. 8. Pe r fo r m d u t i e s i n e n s u r i n g t h e s u cc e s s a n d effectiveness of the Company’s operations, as well as overseeing the management of enterprise risks of the Company (which will include advising the Board of Directors, management, and the Risk Management Committee on matters related to enterprise risk management).

REQUIREMENTS FOR APPOINTMENT OF THE AUDIT COMMITTEE 1. The Board of Directors may appoint at least three Independent Directors as the Audit Committee, provided that one of the members of the Audit Committee must have accounting knowledge. The Audit Committee must elect one of the members to be the Chairman. 2. The term of an Audit Committee member is three years. 3. The Audit Committee must be independent in carrying out the work and will be directly responsible to the Board of Directors. 4. The status of the Audit Committee member will cease upon any member’s death, resignation, dismissal or retirement by rotation. 5. The Audit Committee’s remuneration will be decided by the Board of Directors. 6. There must be at least four Audit Committee meetings each year, with results reported to the Board of Directors.

ANNUAL REPORT 2013

RESPONSIBILITIES OF THE BOARD

3. THE NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee consists of four directors of whom one director is an Executive Director and three directors are Independent Directors. One of the Independent Director is appointed as Chairman of the Nomination and Remuneration Committee. Members of Nomination and Remuneration Committee are as follows; 1. 2. 3. 4.

Mr. Nopporn Thepsithar Mrs. Anne-Marie Machet Mr. Parnchalerm Sutatam Mr. Jacques Pastor

Chairman Member Member Member

The Board of Directors meeting No. 5/2013 held on 15th November 2013 passed the resolution to appoint Mr. Parnchalerm Sutatam as Nomination and Remuneration Committee replacing Mr. Somchit Sertthin.

SCOPE OF AUTHORITY OF THE NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee’s functions are: 1. To screen and select the appropriate persons as members of the Board of Directors and to present the selected individuals to the Board of Directors, who then submit names to the shareholders’ meeting for approval. 2. To screen and select appropriate qualified persons to be nominated as the Chief Executive Officer, Managing Director and Executive Director and then propose their names to the Board of Directors for approval. 3. To screen the remuneration of the Company’s Directors to the Board of Directors and to further propose same to the shareholders’ meeting for approval. 4. To propose the remuneration packages for the Chief Executive Officer, Managing Director and Executive Directors and then make proposals to the Board of Directors for approval.

of Good Corporate Governance for listed companies, consisting of four directors (of which two are independent directors and the other two are executive directors) as follows: 1. 2. 3. 4.

Mr. Phirasilp Subhapholsiri Mrs. Anne-Marie Machet Mr. Jacques Marechal Mr. Chaiwat Srivalwat

Chairman Member Member Member

ROLES AND RESPONSIBILITIES OF THE CORPORATE GOVERNANCE COMMITTEE 1. Propose corporate governance (CG) guidelines to the Board. 2. Advise the Board on CG matters. 3. Ensure that the duties and responsibilities of directors and the management conform to CG principles. 4. Revise guidelines for Tipco Asphalt’s CG against those of international organizations and present its recommendations to the Board. 5. Delegate corporate governance policies to the management to promote and implement

GOOD CORPORATE GOVERNANCE SELF ASSESSMENT The Company has undertaken the Corporate Governance Self Assessment Based on the Principles of Good Corporate Governance, relying on the Stock Exchange of Thailand (SET ), as a vital tool for reviewing and improving the Company’s performance and providing reference data for corporate governance rating. The exercise also helps to increase the operational effectiveness of the Company when the assessment results are analyzed and evaluated to indicate the level of achievement of objectives and opportunities for improvement.

BOARD SELF ASSESSMENT

4. CORPORATE GOVERNANCE COMMITTEE The Committee appointed the Corporate Governance Committee to improve corporate governance practices of the Company in order to comply with the Principles

ANNUAL REPORT 2013

The Board Self Assessment form provided by the SET is for consideration by the boards of listed companies. The main objective of the self assessment form is to evaluate the performance of the board, as a team, and of Directors, as

Tipco Asphalt Public Company Limited

a collective body, in light of recognized best practices and principles of good corporate governance. The six categories covered by the Board Self Assessment Form are as follows: 1. 2. 3. 4. 5. 6.

Structure and characteristics of the board Roles and responsibilities of the board Conduct of board meetings The board’s performance of duties Relationship with management S elf- development of Direc tors and executive development

The company scored 2.5 out of 4 rating on the Board Self Assessment evaluation.

DIRECTOR’S ORIENTATION For new Directors, the Company arranges orientation program to inform him/her of its business policies, capital structure, shareholding structure, business performance, information systems and related laws and regulations. Moreover, each Director receives a Director’s Handbook and other information. The new Director will also receive briefing from the CEO and/or Managing Director on the Company policies, relevant information (including the capital structure, shareholders, performance, and processes in use at the Company), laws, regulations, a marketing/ operational overview, and update on performance.

SUCCESSION PLAN The Nomination and Remuneration Committee has been assigned by the Board to be responsible for a succession plan, especially to ensure that the Company has an appropriate succession plan in place for the positions of the CEO, MD and other senior executives, and to make recommendations to the Board for approval. Nomination for appropriate leaders has been recognized as a priority by the Board in order to strengthen the Company’s management and ensure continued progress.

EXECUTIVE OFFICERS The Company’s executive officers are as follows: 1. Mr. Somchit Sertthin 2. Mr. Jacques Pastor 3. Mr. Chaiwat Srivalwat 4. Mr. Kasidis Chareancholwanich 5. Mr. Hugues de Champs 6. Mr. Koh Lai Huat 7. Mr. Chayongsak Pisitpong (Retired) 8. Mr. Sitilarb Supsakorn 9. Mr. Jacques Marechal 10. Ms. Auchcha Rattrakultip 11. Mr. Praveen Penmanee 12. Mr. Louis - Frederic SACHS 13. Mr. Ismail Bin Abdul Hamid 14. Mrs. Udomporn Punpatch

Chief Executive Officer Vice Chairman Managing Director Chief Operating Officer - Thailand Chief Operating Officer - International Chief Financial Office Chief Director Finance Executive Director Director - Finance and International Legal Affairs Director - Finance, Credit Control and Legal Director - Operations Director - Marine Group Director - International Sales and Marketing Director - Human Resources

PERFORMANCE ASSESSMENT OF TOP EXECUTIVES The Nomination and Remuneration Committee assesses the performance of the CEO based on the Company’s operating results, implementation of the Board’s policies, BSC (Balanced Scorecard) performance and the overall socio-economic circumstances. The Nomination and Remuneration Committee will then consider the appropriate remuneration for the Executive Directors and propose such amount to the Board for approval.

POLICY ON DIRECTORSHIPS AT OTHER LISTED COMPANIES The Board of Directors has established guidelines that none of the Company’s Directors and Executives Directors may hold directorships at more than 5 listed companies in addition to serving on the Board of Tipco Asphalt PLC.

ANNUAL REPORT 2013

REMUNERATION FOR THE BOARD AND EXECUTIVES

REMUNERATION FOR THE BOARD AND EXECUTIVES 1. Total cash remuneration in 2013 for the Board of Directors, Audit Committee and the Nomination and Remuneration Committee was Baht 4,556,000

NAME 1. Ms. Laksana Supsakorn 2. Mr. Niphon Suthimai 3. Mr. Nopporn Thepsithar

4. Mr. Parnchalerm Sutatam 5. Mr. Phirasilp Subhapholsiri 6. 7. 8. 9.

Mrs. Anne-Marie Machet Mr. Koh Ban Heng Mr. HervĂŠ Le Bouc Mr. Jacques Pastor

10. Mr. Jacques Leost 11. Mr. Hugues de Champs 12. Mr. Sitilarb Supsakorn 13. Mr. Jacques Marechal 14. Mr. Somchit Sertthin 15. Mr. Chaiwat Srivalwat

POSITION Chairman Independent Director Chairman of the Audit Committee Independent Director Audit Committee Member Chairman of the Nomination and Remuneration Committee Independent Director Audit Committee Member Independent Director Audit Committee Member Independent Director Independent Director Director Executive Director Nomination and Remuneration Committee Member Director Executive Director Executive Director Executive Director Executive Director Nomination and Remuneration Committee Member Executive Director

2013 (BAHT) FIXED VARIABLE 50,000 50,000 590,000 200,000

2012 (BAHT) FIXED VARIABLE 530,000 200,000

532,000

200,000

318,000

150,000

512,000

200,000

488,000

200,000

260,000

100,000

220,000 200,000 200,000 220,000

200,000 200,000 200,000 200,000

200,000 200,000 200,000 220,000

200,000 200,000 200,000 200,000

200,000 200,000 200,000 200,000 220,000

200,000 200,000 200,000 200,000 200,000

200,000 200,000 200,000 150,000 220,000

200,000 200,000 200,000 150,000 200,000

200,000

300,000 252,000

400,000 318,000

400,000 150,000

4,556,000

2,750,000

4,504,000

3,050,000

RETIRED DIRECTORS 2013 16. Mrs. Anurat Tiamtan 17. Mr. Chainoi Puankosoom

ANNUAL REPORT 2013

Chairman Independent Director Audit Committee Member Total

Tipco Asphalt Public Company Limited

Note : •

Ms. Laksana Supsakorn was appointed as Director on 15th August 2013, replacing Mrs. Anurat Tiamtan and appointed as Chairman on 15th November 2013.

•

Mr. Phirasilp Subhapholsiri was appointed as Director on 14th May 2013, replacing Mr. Chainoi Puankosoom.

•

The remuneration of total Baht 552,000 was paid to 2 Directors prior to their retirements.

•

Variable Remuneration payments not exceeding one time of the total annual fixed remuneration to all the Board of Director members shall be considered and paid by the Company on condition that the Company is profitable. As the Company was profitable in 2012, the variable remuneration of Baht 2,750,000 was paid in 2013.

2. There was no non-financial remuneration for Directors in 2013. 3. Other remuneration-None 4. Total remuneration in 2012 and 2013 for 14 Executive Directors and Executive Offices, which included salary, bonus, retirement fund and provident fund was Baht 96 Million and Baht 96 Million respectively.

LITIGATION AGAINST THE BOARD OF DIRECTORS There is no record of litigation against the Board of Directors during the past 14 years.

ANNUAL REPORT 2013

CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE REPORT The Board of Directors recognizes the critical importance of corporate governance in supporting the Company’s sustainable growth, creating shareholder value, and securing trust from all stakeholders, including shareholders, customers, employees, and the general public. Thus, they have determined to adhere to good corporate governance practices, for which the Company has been awarded a “very good” corporate governance rating by the Thai Institute of Directors. Such rating was based on OECD Principles of Corporate Governance and was awarded for 5 years consecutively (2009 to 2013).

CORPORATE GOVERNANCE POLICY The Board of Directors of the Tipco Asphalt Group (“Group”) continuously strives for regulating good corporate governance practices in order to maintain sustainable development of the Group with respect to the interests of all stakeholders and to observe ethical business practices with transparency and traceability. The Group has established the following corporate governance policy for the Board of Directors, the directors, and the employees to abide by:

ANNUAL REPORT 2013

1. The Board of Directors shall take the lead in the matter of business ethics by setting the code of conduct to manage and monitor the Group’s operations to ensure all business activities are conducted in accordance with the applicable laws and ethical standards. 2. The Board of Directors shall play an important role to develop and govern strategies, policies and action plans, taking into consideration the involved risk factors in order to set the appropriate management guidelines for the best interests of the Group.

Tipco Asphalt Public Company Limited

Good Corporate Governance is essential to establish relationships between a company’s board of directors, its management, and shareholders in order to have a common vision and goal.

3. The Board of Directors shall strive to add value to the business in the long run as well as manage the business with prudent practices in order to maximize shareholders’ returns, while maintaining the highest standards of social responsibility at all times. 4. The Board of Directors shall encourage shareholders to be aware of their rights as the owners of the Group and exercise their rights through the process of appointing the Company’s Board of Directors to act as their representatives. Shareholders are also eligible to make decisions on any significant changes of the Group. 5. The Board of Directors shall treat all shareholders, including minority shareholders, fairly and equally. 6. The Board of Directors shall create the optimal balance between the existing needs and future expectations of the Company and all stakeholders respectively based upon the sustainable mutual benefits. 7. The Board of Directors shall disclose the information, both financial and non-financial, correctly, adequately, transparently and traceably through the proper two-way communication channels for the benefit of stakeholders’ decision making.

Company e.g. the election of directors, approval of significant transactions influencing the direction of the Company, amendment of Articles of Association and regulations of the Company, etc. Shareholders have the right to vote at meetings according to the number of shares owned by each shareholder, whereby one share is for one vote and no particular share allows them privilege to limit the rights of other shareholders. A p a r t f ro m t h e a b ove m e n t i o n e d r i g h t s o f t h e shareholders, Tipco Asphalt has carried out additional tasks to encourage and facilitate shareholders in the exercising of their rights. • Providing essential, clear and up-to-date information for shareholders regarding the Company’s business. Even though some information is not required to be disclosed by law, if Tipco Asphalt considers that it is of significance to the shareholders, the Company will notify shareholders of the information through Tipco Asphalt’s website and SET. •

All shareholders will receive significant and sufficient detailed information concerning the date and the agenda prior to the date of the shareholders’ meeting. Such information will be posted on Tipco Asphalt’s website around two months before the related documents are submitted to shareholders at least than 14 days prior to the meeting. The shareholders’ right to attend the meetings and the right to vote on resolutions will be clearly stated in the notice of the meeting submitted by the Company.

•

In a case where shareholders are unable to attend a meeting, they are entitled to appoint a representative e.g. an independent director or a person to act as their proxy, using any proxy form attached to the notice of

RIGHTS OF SHAREHOLDERS Tipco Asphalt ensures that shareholders, both as investors and as owners of the Company, are entitled to all basic rights at acceptable and trusted standards, which include the right to freely trade or transfer their own shares, the right to receive dividends from the Company, the right to attend the shareholders’ meeting, the right to propose the agenda of the meeting, the right to nominate a person to be a director, the right to express opinions independently, the right to make decisions on important affairs of the

ANNUAL REPORT 2013

CORPORATE GOVERNANCE REPORT

the meeting. The Company has prepared the proxy forms in compliance with the specifications defined by the Ministry of Commerce in which the shareholders can exercise their voting rights as wished. These forms can also be downloaded from Tipco Asphalt’s website. In addition, Tipco Asphalt provides shareholders with the duty stamp to be sealed on the proxy form for their convenience. Shareholders who arrive after the meeting has commenced are able to vote on the agenda item being considered provided that a resolution is not yet made. They will constitute part of the quorum starting from the agenda item that they are in attendance and may exercise their voting rights unless the meeting states otherwise. •

•

Prior to the Annual General Meeting No. 1/2014, shareholders of the Company have the right to suggest issues to be included in the agenda of the ordinary general meeting of shareholders for the year 2013. Shareholders have been allowed to exercise such right from 1st November 2013 to 20th January 2014 for the consideration of the Board of Directors. Should the proposed issue be included on the meeting agenda, the Company will specify in the notice of the meeting that such agenda was proposed by a shareholder. However, in case the proposed issue is rejected, the Company will inform shareholders of the reasons at the ordinary general meeting of shareholders. Moreover, any shareholder is entitled to nominate any qualified candidates for the election as a Board member in advance. The Nomination and Remuneration Committee will consider the proposed nominees together with other nominated persons according to the Company’s criteria for the nomination of directors. The committee then presents the nominees to the Board for consideration before proposing them to the shareholders’ meeting for approval. On the date of the meeting, the Company uses the barcode system for registration to ensure convenience of shareholders as each reference number is already included in the registration form and proxy form. In

ANNUAL REPORT 2013

addition, for each agenda, the Company will collect the ballot paper from the shareholders who vote “disapprove” or “abstain” in order to deduct the votes from the total entitled voting rights. The Company also applies the barcode system to perform the calculation in order to ensure immediate voting results promptly for announcement right after the end of each agenda. Shareholders are entitled to verify each voting result after the meeting. • One-third of the directors must retire from office on a rotation basis in each ordinary general meeting of shareholders and the election of directors to replace the retired directors takes place during the meeting. However, if the numbers of candidates exceed the number of directors required, each candidate is then elected individually. During the meeting, shareholders are entitled to freely propose the name of an individual for directorship of the Company. • At the meetings, shareholders are allowed to freely express their opinions, give suggestions, and raise questions on any agenda item before casting votes to ensure that shareholders have sufficient detailed information on the matter. Should shareholders have questions or inquiries, specialists in specific fields are available to answer queries under the responsibility of the Board. • An agenda on the Board’s remuneration is included to inform the shareholders of the amount and type of remuneration received by each director including meeting allowance and the Board’s bonus.

EQUITABLE TREATMENT OF SHAREHOLDERS The Company provides equitable treatment to every individual shareholder, major or minor, as well as institutional or foreign investors. To that effect, Tipco Asphalt strives to find means to ensure equality especially for minor shareholders. These means are:

Tipco Asphalt Public Company Limited

INTERNAL INFORMATION CONTROL The Board of Directors has established measures to control the usage and prevent the misuse of internal information (insider trading) for the personal benefit of the concerned person, namely the Board of Directors, Tipco Asphalt top executives and employees working in related departments (including their spouses and children who are minors). All concerned persons are recommended to refrain from trading the Company shares for a one-month period prior to the release of the Company’s quarterly and annual financial statements (blackout period). In addition, the Board of Directors will monitor all required actions in accordance with the related standards. Any changes in shareholding of directors must be reported in the Board of Directors’ meetings. In this regard, it will be included in the agenda of the Board of Directors meeting on a quarterly basis.

CONFLICT OF INTEREST PREVENTION The Board has established policies and measures as follows: 1. Tipco Asphalt has a clear and transparent shareholder struc ture. There is no cross-holding of major shareholders, thereby, preventing any conflict of interests or transfer of benefits to one party or another. The shareholder structure of Tipco Asphalt and its subsidiaries is published in the Company’s annual report, also the Board member’s ordinary shares. 2. There is a clear separation of duties and responsibilities of the Board, the management, and shareholders, thereby, ensuring no overlapping of their duties and responsibilities. The directors or executives who may have interests in any agenda under consideration must not attend the meeting nor vote on such an agenda. This is to ensure that the Board and executives make decisions in a fair manner for the utmost benefit of shareholders.

3. The Company has an established policy governing the use of internal information and has incorporated it into employee regulations with penalties for the executives or employees in the event the internal information is disclosed to the public or used for personal benefit. 4. Tipco Asphalt Code of Conduct includes the additional guidelines that prohibit employees from using the Company’s assets or spending working hours to search, contact or conduct share-trading activities on a regular basis for personal gain or for others without justifiable reasons and not for Tipco Asphalt’s interests. The Company will treat all shareholders equally and in a proper manner. By law, shareholders are provided with adequate information at least seven days before the meeting date with accurate, detailed information on the various agenda items along with a proxy form. The Company provides shareholders with proxy form to appoint another individual or one of the Company’s Independent Directors to attend and vote on their behalf. Any opinions and questions relevant to the agenda from minority shareholders can be made directly to the Chairman of the Audit Committee via email to ind_dir@tipcoasphalt.com.

THE ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE Company Directors place great emphasis on appreciating the contributions of all stakeholders: shareholders, employees, customers, suppliers, creditors, business partners and even competitors. All stakeholders are invited to work with the Company toward shared goals and mutual benefits, while making Tipco Asphalt a competitive and successful business. We therefore adhere to the principle of fulfilling corporate social responsibilities as well as contractual obligations that the Company is a party to, as they pertain to our stakeholder relationships.

ANNUAL REPORT 2013

CORPORATE GOVERNANCE REPORT

SHAREHOLDERS

CUSTOMERS

Shareholders have basic rights stipulated by law and by Company regulations, such as the right to expect a fair return, to request a determination of the number of shares, to receive share certificates, and to attend, vote and freely express their opinions at shareholders’ meetings.

To develop and maintain sustainable relationships, the Company is determined that customers should enjoy the maximum benefits in terms of service, quality, and price. A new Customer Support Office opened in 2012 and continue doing in 2013 to provide product information, solve problems, and receive any complaints in a way that can improve quality and ensure total satisfaction.

Tipco Asphalt also believes that shareholders, as owners of the Company, have the right to make suggestions and comments on the affairs of the Company. It is a responsibility of the Independent Directors to receive such an input. Each comment and suggestion is carefully considered and presented to the Board of Directors.

EMPLOYEES The Company truly believes that employees are Tipco Asphalt’s most valuable asset and is determined to ensure that every employee is proud of and confident in the organization. During 2012, Company activities promoted a collaborative working environment to drive innovation and enhance competence by preparing employees to work globally and cope with volatile economic situations. At the same time, the Company focuses on promoting a beneficial workplace with attention to employees’ health, safety, working conditions and competitive remuneration. To encourage long-term savings by employees, the Company joined the Provident Fund Scheme of CIMB Principal Assets management Co., Ltd.

BUSINESS PARTNERS Operating within a competitive business context requires building and maintaining trust. Tipco Asphalt strictly adheres to its Company Code of Conduct, honors its promises and upholds its commitments to trading partners in all ways, including quality products and on time delivery

COMPETITORS The Company also operates within a competitive business context by being fair and strictly following both laws and its own Code of Conduct in its dealings in the industry and market. The Company has never been in any disputes with its competitors.

CREDITORS The Company practices business under the terms of its loans and obligations to creditors and depositors. The Company, moreover, initiates various measures to maintain good relations with creditors.

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

DISCLOSURE AND TRANSPARENCY Disclosure of the Company ’s general and financial i n fo r m at i o n i s d o n e a cc u rate l y, co m p l e te l y a n d transparently in a timely manner. Disclosed information in the Annual Report and SEC Form 56-1 is reviewed by the Company’s Directors, executives and members of the Audit Committee, annotated by the Board of Directors and the external auditor, and posted on the Company’s website (www.tipcoasphalt.com). Reports are also made on major shareholders, shareholding interests of Directors and Executives, remuneration of Directors and details of board meetings. The Company prohibits any Directors, executives or employees from using internal information for personal gain or benefit. Realizing the importance of transparent information disclosure, the Company has set and supervises clear policies, approved by the Board of Directors, concerning communication with external parties. For disclosures on important information, the Company uses various communication channels and disseminates regularly through the public media. Other means by which shareholders and stakeholders are apprised or given access to Company information include: • Disclosures filed with the Stock Exchange of Thailand (SET ) such as financial statements, resignations of Directors, etc. • Information is posted on the Company’s website at www.tipcoasphalt.com, in the Investor Relations section.

• I nformation is disseminated elec tronically to employees via e-mail and the Company’s intranet. • Company visits from shareholders, investors, analysts, and fund managers are welcomed. • Information requests, comments and inquiries related to investor relation should be made by contacting Mr. Chaiwat Srivalwat (Managing Director) at tel. +66 2273 6646, fax. +66 2271 3417, or by email at investors@tipcoasphalt.com We have been selected from 1 of 20 listed companies by Stock Exchange of Thailand (“SET”) to participate in the project aiming to develop Good Corporate Governance for listed companies in 2013. The project has been arranged by SET through TRIS Corporation Limited (“TRIS”) in order to improve good corporate governance of the listed companies and provide the recommendations in the following areas: 1. Good Corporate Governance and Board Practices; 2. Risk Management; 3. Internal Control. We received constructive recommendation by both SET and TRIS and we are pleased to report that our Company is recognized as one of the very few well-established listed companies with the best internal control system. Good Corporate Governance is essential to establish relationships between a company’s board of directors, its management, and shareholders in order to have a common vision and goal.

ANNUAL REPORT 2013

HUMAN RESOURCES

EMPLOYEE DEVELOPMENT POLICY The Tipco Asphalt Group’s Core Values continue to serve as the foundation for employee development to support our 2015 Vision. Our core value of “Prudence” served as the focus area for 2013. This facilitates the building of trust with our stakeholders through openness and transparency of our business conduct; and builds upon our other Core Values of “Teamwork” and “Integrity” which were the focus areas in prior years (since 2011).

Indeed, our Core Values forms an integral part of all employee development activities. Examples include: •

Reinforcement training of our Core Values using e x p e r i e n t i a l - b a s e d a p p ro a c h - We A re T I P CO (“Teamwork”, “Integrity”, “Prudence”, “Commitment” and “Open-mind”). In a two-day experience at the Baan Jamroong Village, Rayong, groups of staff from Plants and the Head Office learned and reflected upon the TIPCO Core Values. This was done through observation of, and interaction with the village’s self-sufficient community business practices and concepts. At the end of 2013, 254 of our staff had joined this training, which will continue in 2014.

ANNUAL REPORT 2013

•

Workshops and training courses were delivered to promote “Prudence” in the way of work for inter-departmental / corporate-wide understanding, such as Business Concept for Supervisors as well as Product Knowledge and Plant Visit. At the same time, specific workshops are held to integrate behaviors embodied by “Prudence” into technical skills such as Advanced Defensive Driving for sales functions, Effec tive Business Presentation, and Essential Negotiation for various functions.

Tipco Asphalt Public Company Limited

•

Coaching for executive staffs, groups of management successors, and high potential employees were conducted to promote leadership competency.

Furthermore, we conducted workshops such as the “CSR Day” coaching as well as the “Carbon Footprint of the Organization” to further reinforce our corporate social responsibility concepts and tools for all employees. As a fur ther example of our commitment towards employee development, the Tipco Asphalt Group has engaged an external consultant for a two-year (2013 and 2014) employee development project. This project, entitled the “Immersion of Leadership, Management and Human Capital Development for the Future”, addresses key processes such as hiring, development, and succession planning in order to encourage leadership development at all levels of the organization from staff to management level. A wide range of methods is applied for this objective, such as off-site external training and workshops, on-site work, as well as special assignments. Additionally, the Tipco Asphalt Group also continues to promote language skills and operational excellence as part of our employee development. The language competency development scheme was extended in 2013 to cover other relevant languages in addition to English. Such initiative will better equip our employees’ competency to meet the increasing internationalization of our business; especially in light of the regional economic integration goals of the ASEAN Economic Community, or “AEC”. In the area of operational excellence: •

We have continued our Quality Control Circle (“QCC”) program for operational excellence;

•

We have also rolled-out the 5S method as the basis of our efficiency improvement program in all five manufacturing plants in Thailand as well as our Head Office; and finally

•

We have continued the Driver Excellence program by reinforcing development of safety and service standards for our 200 truck drivers nation-wide. This program also provides an incentive package for drivers who can uphold our safety and service targets.

Collectively, the programs above have had a significant positive impact to the efficiency and effectiveness of the operations of the Tipco Asphalt Group.

2014 DIRECTION IN HUMAN RESOURCES DEVELOPMENT In 2014, the focus of our employee development policies will continue to support the business growth. This will provide positive career advancement opportunities for our employees. We will also promote a positive work environment and improved work processes in preparation for further evolutions of the Tipco Asphalt Group. Fundamentally, a three-pronged approach shall be taken towards the goal of developing our human resources: 1. We will revolutionize our candidate screening and hiring strategy with the use of the “Right Hire; Right Match” program. The objective is to screen high caliber candidates with superb attitudes who fit well with our corporate culture and business growth objectives. 2. The development of high potential employees in the “High Potential Development” and “Next Generation” programs will continue; with the focus of grooming potential successors for middle and top management positions. This includes “Talent Calibration” sessions involved by executives, and various development tools such as workshops, seminars and e-coaching. 3. The continuing development of leadership and general management skills of supervisors and managers.

ANNUAL REPORT 2013

SOCIAL RESPONSIBILITY POLICY

SOCIAL RESPONSIBILITY POLICY The Tipco Asphalt Group continuously strives to promote good corporate governance practices to be the key contributor to the success of all stakeholders while maintaining high standards of social responsibility at all times. The Group has adopted a social responsibility policy that aligns to leading international standards to serve as the operating guidelines for the Board of Directors, the directors and employees in the matters of economy, society and environment: 1. The Group shall manage business under good corporate governance practices and the code of business conduct. 2. The Group shall respect and support the human rights of employees and all stakeholders in the value-chain of the Group’s business, and refuse to support any activities that violate such human rights. 3. The Group shall continuously improve the human resources operations, particularly in matters concerning health, security, safety, and the environment. 4. The Group shall strategically and continually improve the capability of environmental operations in order to minimize the environmental impact of our operations in a sustainable manner. 5. The Group shall treat all stakeholders fairly by observing a good code of business conduct. 6. The Group shall treat both current and prospective customers fairly.

ANNUAL REPORT 2013

7. Everyone in the Group is encouraged to participate in community development initiatives and contribute their talents to facilitate the sustainable environmental practices advocated by the Group. 8. The Group shall strategically integrate the social responsibility guidelines into the decision-making process of the business in order to better define the value-chain of the Group’s business. 9. The Group shall regularly review and manage its business impact in line with the expectations of all stakeholders; and also in accordance with the changes of environmental conditions. 10. The Group shall communicate its social responsibility guidelines to employees and all stakeholders clearly and in a timely manner in order to raise the awareness and voluntary spirit of social responsibility among them to better support the value-chain of the Group’s business.

Tipco Asphalt Public Company Limited

In late 2012, our Group was the first asphalt company in Thailand to be assessed against the international standard of

ISO 26000:2010

Our Group has participated in the Corporate Social Responsibility promotion program which has been run by the Department of Industrial Works (“CSR-DIW”) continuously since 2008. In late 2012, our Group was the first asphalt company in Thailand to be assessed against the international standard of ISO 26000 (Guidance on Social Responsibility) or TIS 26000-2553 by Management System Certification Institute (Thailand). This reflects our commitment towards integrating social responsibility into our standard work processes and the local communities for the purpose of achieving a strategic sustainable development. In 2011, our Phitsanulok Plant had been selected as one of the outstanding workplaces in Thailand with regards to health, safety and environmental matters. We are pleased to mention that we have received this award for 13 consecutive years. In 2012, our Group has launched a new asphalt product, namely, CSS-1P asphalt emulsion (Penetrated Prime Coat), which is beneficial for the society and the environment as it helps reducing global warming. It can replace Cutback asphalt which has substantial toxic mixture of oil or fossil fuel that causes pollution and harmful to the environment. In year 2013, we received Merit Award for “Economics Contribution” from National Innovation Agency, for the product called Para Asphalt Emulsion or CSS-1h (EMA). The award was won based on the fact that it benefits the economy, society and environmental.

ANTI CORRUPTION In 2013, the Board of Directors of the Company had adopted the anti-corruption policy in order to prevent corruption in every activity of the value supply chain and to have vigilant operations. For instance, the Board of Directors, executives and staff of the Group are prohibited from participating in or agreeing to or encouraging corruption of all forms, either directly or indirectly. Meanwhile, good internal control system is applied in our working process to promote anti-corruption measures in addition to participating in the Listed Companies Development Project of the Stock Exchange of Thailand regarding corporate governance of 2013, which was organized by Trist Corporation Co., Ltd. The purpose is to apply the survey results and recommendations regarding internal control according to international standards of COSO (the Committee of Sponsoring Organization of the Treadway Commission) in the Group’s development and improvement of internal control on a continual basis.

RESPONSIBILITY TO THE STAKEHOLDERS The Group has established action guidelines for our staff to interact and respond to each group of stakeholders by prioritizing for discussion, communicating and assessing the benefits and desired impact to the local communities. For example, our plants have been using CSR-DIW’s processes to review our status, set up dialogues with communities, plan CSR projects, and follow-up and review the CSR plans with local communities in surrounding areas. We also conduct regular surveys of our supplier and customer satisfaction as a way to improve our response to the various Stakeholders’ expectations.

ANNUAL REPORT 2013

SOCIAL RESPONSIBILITY POLICY

ENVIRONMENT PRESERVATION AND NATURAL RESOURCE MANAGEMENT We re co gn i ze t h e i m p o r t a n ce o f p re s e r v i n g t h e environment, managing natural resources, preventing pollution, as well as issues pertaining to climate change. On our part, we have worked relentlessly to improve the environment, quality of life of our key stakeholders (including employees, subcontractors and communities around our plants) in compliance with ISO 26000, such as to reduce the use of fossil fuel for heating in the production of asphalt products. In addition, our Group also organizes trainings and workshops to raise awareness in maintaining sustainable clean and healthy environment. We have also embarked on projects to increase the energy efficiency of our operations. This includes:

ANNUAL REPORT 2013

•

Reducing solvent content in our products without impacting the end-product quality;

•

Reducing fuel usage by employing the use of larger road asphalt tanker and trucks to reduce delivery trips. The asphalt tankers are also installed with highefficiency insulation to minimize heat loss during delivery ;

•

Reducing fuel consumption by using GPS technology in our trucks to optimize transport routes and time;

•

Reducing CO2 emissions by replacing fuel oil with LPG in heating asphalt products;

•

Reducing energy consumption through better preventive maintenance of production equipment ;

•

Increasing the use of clean energy by using LPG in place of fire woods to provide heat for products in road asphalt tankers.

Tipco Asphalt Public Company Limited

Though our production process is still unable to achieve zero discharge pollutant, we are committed towards further improvement in this area with the waste reduction hierarchy, as reflected in the following examples: •

Recycling of treated waste water in producing asphalt emulsion;

•

Recycling of lubricants and engine oil from asphalt trucks for use as additives in the asphalt production process;

•

Regular monitoring of the air quality released from our plants’ chimneys; and last but not least

•

Reducing nitrogen oxide (NOx) emissions through the procurement of engines that meet “ Tier II” specifications for new build ocean going asphalt tanker.

FUTURE PLANS AND EFFORTS TO REDUCE GLOBAL WARMING Our Group has set out the goal for all plants to participate in a project that promote social responsibility under the Department of Industrial Works (“CSR-DIW”) and set targets to reduce the emission of CO2 in our production process with respect to global warming as well as upgrading the standard of occupational health and safety of TISI 18001-2554 to the international standard of OHSAS 18001-2007. We aim to integrate these practices into working process for further sustainable development in line with social responsibility guideline of TISI 26000-2553 (ISO 26000:2010).

ANNUAL REPORT 2013

SOCIAL RESPONSIBILITY POLICY

CERTIFIED MANAGEMENT SYSTEM MANAGEMENT SYSTEM

ISO STANDARD

THAILAND STANDARD

CERTIFIED PLANT

Quality

ISO 9001:2008

TIS 9001 - 2552

All plants in Thailand

Environmental

ISO 14001:2004

TIS 14001 - 2548

All plants in Thailand

Health and Safety

TIS 18001 - 2554

All plants in Thailand

Energy

PROMOTION OF ENERGY CONSERVATION ACT, B.E. 2535 (1992)

All plants in Thailand

TIS 17025 - 2548

Nakhonratchasima Plant Only

CSR-DIW2555

All plants in Thailand

Laboratory

ISO/IEC 17025:2005

Corporate Social Responsibility, the Department of Industrial Works

CONSISTENT COMMUNITY INVOLVEMENT AND DEVELOPMENT In 2013, our employees both at the Head Office and all the production plants participated in various strategic CSR activities involving activities in education, sports, environment protection, cultural and community services as well as economic development. Some of these CSR projects are as follows: •

•

Suppor ting sustainable reforestation with the communities by planting trees in integrated manner of economic plants and perennial trees as well as making commitment to continually care for such trees for 5 years until they are perennial in Banna Community in Surat Thani Province and Wat Bangkrasob Community in Samut Prakan Province;

•

Contributing to the community in cleaning the beach at Monica Bay, Malaysia and the river shore at Lu Hu Ping scenic, China;

Conducting joint research projection conducting academic research in the development of asphalt products with the faculty of engineering of Naresuan University in order to obtain academic excellence, technology, and innovation which will bring benefits to the future engineers, universities as well as the country;

•

Joining with school teachers in building Surau at Sekolah Kebangsaan Bukit Mentok, Malaysia;

•

Participating with community on Sports day at Sekolah Kebangsaan Teluk Kalong, Malasia and Pitsanulok Plant.

Having recognized the value of education and maintaining of Thai arts and cultures, our Group has provided support to Ban Rien Lakorn Moradokmai, the New Heritage Drama Art School by providing public relations and organizing plays to generate income. Besides that, our Group has collaborated with other parties to construct a dormitory for the school;

HOURS OF COMMUNITY SERVICES

Engaging schools, institutions and local communities, including inviting them to visit our Plants. We also invite local teachers, students and the local communities to participate in our “Safety Week” on a regular basis;

• R e d u c i n g a cc i d e n t s a t wo r k fo r a gr i c u l t u r a l communities and promoting occupational health through constructing and controlling the quality of water for consumption at Baan Nayai School and Jomthong Buddhist Monastery of Surat Thani Province,

construction of barriers are also constructed to prevent danger from the rotary tillers (Klub) at Baan Pongmorhao in Pitsanulok Province;

ANNUAL REPORT 2013

Finally, in order to embed volunteering spirit into our corporate culture, our Group has (since 2011) set a target for individual staff to achieve at least 16 hours of community service annually. This target provides an opportunity for our staff to participate in community activities and also to foster an improved awareness of CSR. In 2013, our staffs have recorded a remarkable 17,238 man hours for community activities, which have far surpassed our target of 9,742 man hours.

INTERNAL CONTROLS AND INTERNAL AUDIT

Tipco Asphalt Public Company Limited

INTERNAL CONTROLS AND RISK MANAGEMENT

INTERNAL CONTROLS

INTERNAL AUDIT

The Company places great importance on internal control and audit both at the managerial and the operational levels; supported by good corporate governance and systematic risk management.

The Company’s Internal Audit Department is committed to the International Standards for the Professional Practice of Internal Auditing (‘Standards’) as issued by the Institute of Internal Auditors. This has been embraced in the Company’s new Internal Audit Charter (as approved in 2012).

The Company defines and develops an efficient and effective internal controls system in terms of setting an appropriate control environment, performing risk assessments, implementing control practices, making use of appropriate information technology, communication systems, and continuous monitoring and assessments. This control system generally conforms with the internal control model as advocated by the Committee of Sponsoring Organisations of the Treadway Commission (or, “COSO”). The organizational structure is designed to suit a business plan, with clear responsibility outlines, with the availability of Procedure Manuals and Approval Authority limits for each level of operations to enable proper control. Moreover, the company encourages all employees to constantly follow the internal controls. These are to be regularly updated to keep up with the changing business environment.

The Company’s Internal Audit Department examines internal controls, operations, security of assets and adherence to policies and procedures including those of subsidiaries. The Internal Audit Department establishes plans consistent with the profile of previous audit observations as well as the risk profile of the Company. Internal Audit results are regularly reported (not less than once a quarter) to the Audit Committee.

ANNUAL REPORT 2013

REPORT OF THE AUDIT COMMITTEE

REPORT OF THE AUDIT COMMITTEE The Audit Committee consists of four independent directors who are knowledgeable and experienced in law, business administration, accounting, management and engineering. The Committee is chaired by Mr. Niphon Suthimai, with Mr. Parnchalerm Sutatam, Mr. Nopporn Thepsithar and Mr. Phirasilp Subhapholsiri making up the remaining three members. Mr. Phirasilp Subhapholsiri was appointed into the Audit Committee during 2013, following the resignation of Mr. Chainoi Puankosoomfrom the Committee). This year, the Committee had performed its duties as assigned by the Board of Directors, while adhering to the Company’s Audit Committee Charter which is aligned to the regulations of the Stock Exchange of Thailand (SET ). Given the Company’s strong growth (especially in international markets), the Committee focused on conformance to good corporate governance as well as good internal controls by: • Focusing on preventive controls as well as the promotion of leading business practices in audit reviews to foster improved work performance (and especially in minimizing errors); • Promoting a risk-based approach for internal audit activity at the Company. During 2013, the Committee held nine meetings, for which attendance by executives, the external auditor and the Internal Audit Department can be summarized as follows:

REVIEW OF FINANCIAL REPORTS Th e Co m m i t te e re v i e we d q u a r te r l y, a n n u a l a n d consolidated financial statements with Management and the external auditors. Among other activities, the Committee held discussions with the external auditor to ascertain the completeness of accuracy of the presentation of the Company’s financial statements, key accounting adjustments, adequacy of accounting methods, scope of the audit, accuracy and adequacy of disclosures, as well as the external auditor’s independence. The outcome of these discussions contributed to the Committee’s satisfaction that the Company’s financial statements had complied with all relevant accounting standards and regulations. Consequently, the Committee was satisfied that the accounting procedures and financial statements were both accurate and reliable, and that adequate and timely information had been disclosed in the financial statements for the benefit of investors and other users of the statements.

RISK MANAGEMENT The current enterprise risk management (“ERM”) process as employed in the Company was implemented in 2013. This process includes a formal ERM framework which consists of an ERM policy as well as related procedures. The Corporatelevel risks as identified and assessed during this process are a key input into the development of the Annual Internal Audit Plan for 2014 as reviewed and approved by the Audit Committee.

Attendance By Executives

External Auditor

Internal Audit Department

Monthly Meetings

Quarterly Meetings

Quarterly Meetings (without the presence of Management)

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

REVIEW OF INTERNAL CONTROL EFFECTIVENESS The Audit Committee has reviewed the adequacy, appropriateness and effectiveness of the internal control system from the 2013 audit results of the Internal Audit Department on the Company and its subsidiaries. The Audit Committee is satisfied that the internal control system of the Company and its subsidiaries is adequate and effective for its business. The Audit Committee also evaluated the adequacy of the internal control system in accordance to The Securities and Exchange Commission and noted that an adequate, appropriate and effective system of internal control has been implemented.

REVIEW OF GOOD CORPORATE GOVERNANCE The Committee has been satisfied that the Company has complied to the relevant laws, regulations (including regulations of the SET ) and agreements with external parties (as necessary). The Committee was also satisfied that the significant related party business transactions have been disclosed in the financial statements and the notes thereon in accordance to the requirements of the SET and the Securities Exchange Commission. The Audit Committee agreed with the external auditor that such transactions conformed to the agreed criteria of normal business conduct.

OVERSIGHT OF INTERNAL AUDIT The Audit Committee reviewed the reports of the Internal Audit Department as well as the completion of planned projects against the annual internal audit plan. The Committee was satisfied that the internal audit projects were generally completed as planned; and where this was not the case, such projects were duly included into the audit plan for the subsequent year. The Committee also focused on the timely and satisfactory completion of action plans as committed to by management to address the underlying risks.

APPOINTMENT OF THE EXTERNAL AUDITOR FOR 2014 The Audit Committee has considered the appointment of Ernst & Young as the Company’s external auditor for another year and also reviewed their proposed fees for 2014. Consequently, the Audit Committee proposed these to the Board for approval by the shareholders at the Annual General Meeting of 2014. In conclusion, the Audit Committee has comprehensively performed in accordance to the Audit Committee Charter approved by the Board of Directors. The Audit Committee also commented that the Company and its subsidiaries have properly presented their financial statements, performed in good business conduct, implemented an appropriate and effective internal control system and internal auditing process. The Company and its subsidiaries have complied with relevant laws, regulations and agreements while properly disclosing related party transactions under good governance practices of transparency and trustworthiness. The Company and its subsidiaries have also continually improved the internal system in terms of quality and suitability to its business environment.

(Niphon Suthimai) Chairman of the Audit Committee

ANNUAL REPORT 2013

AUDIT COMMITTEE’S OPINION OF THE SENIOR MANAGER - INTERNAL AUDIT DEPARTMENT

AUDIT COMMITTEE’S OPINION OF THE SENIOR MANAGER - INTERNAL AUDIT DEPARTMENT Senior Management of Tipco Asphalt Group, with the concurrence of the Audit Committee, appointed Mr. Joseph Soosay as a Senior Manager - Internal Audit Department with effect from 16th July 2012. We hereby express our opinion that the Senior Manager Internal Audit Department of the Company is adequately experienced to manage the Internal Audit Department. As

FULL NAME

a Certified Internal Auditor, the Senior Manager - Internal Audit Department is suitably qualified to fulfil his duties in accordance to the Standards of the Institute of Internal Auditors. The professional credentials of the Senior Manager - Internal Audit Department is as included in the table below;

EDUCATION / PROFESSIONAL CERTIFICATIONS

Joseph Mugilen Soosay Manickam Certified Internal Auditor (CIA) Senior Manager - Internal Audit Department

Chartered Management Accountant (ACMA)

EXPERIENCE IN 5 YEARS AGO PERIOD

POSITION - COMPANY

2012 - Present

Senior Manager - Internal Audit Department; Tipco Asphalt Public Co., Ltd.

2008 - 2012

Associate Director - Advisory Services, PricewaterhouseCoopers FAS Ltd.

The appointment, removal and transfer of The Senior Manager - Internal Audit Department is subject to approval from Senior Management and the Audit Committee.

Niphon Suthimai

Audit Committee Chairman

ANNUAL REPORT 2013

Technical Assistance Fee Expenses Paid to

Rental and Service Expenses Paid to

Sales and Services Provided to Other Services - Internet Equipment Sales - AC, Oil and Services Sales - Oil Other Services - Internet Equipment Sales - AC Freight charge

Thanomwongse Service Co., Ltd.

Thai Slurry Seal Co., Ltd.

Tipco Foods PLC

Colas S.A. (Colas S.A. Sami Bitumen Technology and Highway Resources)

Office Lease Food & Beverage Shipping Costs

Thanomwongse Service Co., Ltd.

Tipco F&B Co., Ltd.

Colas S.A. (Colas S.A. Sami Bitumen Technology and Highway Resources)

Colas S.A.

Service - Transportation & Customs Clearance

Siam Container Terminal Co., Ltd.

Grand Total Expenses

Technical Assistance Fee Expenses

subtotal

Service - Transportation & Customs Clearance

Ekachai Container Terminal Co., Ltd.

Grand Total Revenue

Sales - AC and Oil

Thanomwongse Service Co., Ltd.

RELATED COMPANIES, DETAILS AND AMOUNT

RELATED TRANSACTIONS

42 83

51 96

4,845

2012

Market price/ Contract price

PRICING POLICY

3,707

3,442

140

114

2013

Unit: THB Million

RELATED TRANSACTIONS Tipco Asphalt Public Company Limited

ANNUAL REPORT 2013

MANAGEMENT DISCUSSION AND ANALYSIS

MANAGEMENT DISCUSSION AND ANALYSIS OPERATIONAL ANALYSIS The Company and its subsidiaries, “the Group” reported a 2013 consolidated net profit of Baht 831 million compared to a net profit of Baht 642 million in 2012. It was the second best operational performance records in Tipco’s history. Sales and services stood at Baht 33.9 billion reflecting a decrease of 9.9% from the same period last year. Despite the higher sales in the 4th Quarter, the annual export sales revenue was lower than 2012 mainly attributable to the weaker demand in export markets during the first half year and also lower asphalt price. Domestic sales reported lower sales revenue due to the extraordinary sales in 2012 attributable to the lagging demand effect from the major Thailand flooding in 2011. Overall, the Company still maintains its market shares both in export and domestic market. The Group’s consolidated gross profit margin in 2013 was 4.90% compared to 5.07% in 2012, before the allowance for diminution in value of inventories and hedging gain/ loss. The reduction of its Gross Profit margin was due to the sales products mix and the sudden increase of crude cost in the 3rd Quarter of 2013, attributable to the potential US strike against Syria. We would like to mention that this GP margin cannot be viewed in isolation but to include with the FX, hedging and net realisable value (“NRV”) provision as all these three items of reporting are concerning with the same crude sales and stock inventory. The International Financial Reporting Standards (IFRS) requires these risk management activities of crude inventory to be reported in separate lines. The hedging strategy has contributed a significant turnaround with a positive impact of Baht 85 million gain to this year result as compared to a cost of Baht 806 million in the corresponding year 2012. The Company is confident that its current hedging strategy provide adequate protections to the crude procurement process under the highly volatile commodity market conditions. In additions, the company has marked to market (MTM) and provided a NRV provision of Baht 8 million on its crude inventory.

ANNUAL REPORT 2013

For the year 2013, the Group recorded only FX gain of Baht 35 million attributable to the weakening of Baht in the 4 th Quarter and reversing almost all the FX gain in the first half year. Most of this MTM FX gain/loss is merely an accounting profit/loss in Thai Baht due to timing difference in the “stock to cash conversion” cycle of the working capital. From cash flow prospective, the Group enjoys natural hedge of "buying and selling in the same currency". In 2013, selling and administrative expenses stood at Baht 126.9 million and Baht 658.4 million, representing 0.37% and 1.94% of sales, respectively. Comparatively, these expenses in 2012 stood at Baht 108.8 million and Baht 594.1 or 0.29% and 1.58% of sales. These expenses increased in the normal course of business and were tightly controlled. Financial expense in 2013 was Baht 195 million, a decrease from Baht 282 million in 2012 due to a reduction in interest rate and a repayment/decrease in long-term loans. The Net Profit attributable to Equity holders of the Company (excluding minority interest) for the year 2013 was Baht 831 million compared to Baht 642 million in 2012, representing a ROE of 17.2% and 15.5% in 2013 and 2012 respectively. The earning per share for the full year is Baht 5.45 and Baht 4.21 in 2013 and 2012 respectively.

FINANCIAL ANALYSIS Financial status of the Group at the end of 2013 can be summarized as follows; The management of the Company fully recognizes the high investment CAPEX and working capital in the Group’s new refinery business. Effective working capital management has been one of the key challenges in 2013. With the higher volume of heavy crude intake in 2013, efforts were made to shorten “asset to cash conversion”

Tipco Asphalt Public Company Limited

cycle to reduce trade debt associated with each crude cargo purchased. As a result, cash flow in 2013 was strong and the Company continues to manage cash and trade collection closely in order to minimize external borrowings and interest expenses. The Group continues to receive full support from commercial banks in both inventory and other working capital financing. In order to reduce interest cost and FX exposure, the Group has switched to USD loan funding that matching its USD assets and hence, resulting a lower WACC for the Group. Despite the increase of crude financing for the higher crude inventory level at year end, the Group’s consolidated debt to equity ratio (D/E ratio) has decreased from 2.70 to 2.44. The real D/E ratio (Total Liability/Equity) excluding crude inventory financing has improved from 1.07 to 0.84 due to the strong EBITDA generated during the year.

KEY FINANCIAL RATIO Key financial ratio of the Group at the end of 2013 can be summarized as follows; •

Net profit margin improved from 2012 at 1.67% to 2.44% in 2013;

•

Return on equity improved from 2012 at 15.52% to 17.20% in 2013;

•

Return on assets improved from 2012 at 3.76% to 4.27% in 2013;

•

Consolidated debt-equity ratio improved from 2.70 to 2.44 in 2013.

CASH FLOW

FINANCIAL POSITION

Cash flow of the Group during year 2013 can be summarized as follows :

A change in financial position of the Group at the end of 2013 compared to 2012 can be summarized as follows :

•

Net cash used in operating activities of Baht 78 million was mainly due the higher inventories level despite the better effort in receivable collections;

•

Net cash used in investing activities of Baht 789 million was mainly due to the increase in acquisition of equipment in our refinery;

•

Net cash from financing activities of Baht 622 million was mainly due to the increase of short-term loans from financial institutions.

•

Decrease in trade and other receivables due to the improvement in collection days;

•

Increase in inventories due to an increase in crude in transit at end of the year;

•

Increase in property, plant, and equipment due to an expansion of our refinery;

•

Increase in short-term loans from financial institutions due to an increase in crude financing for the higher crude inventory level at the end of year;

•

Decrease in trade and other payables due to the timing of crude payment;

•

Decrease in long-term loans from financial institutions due to loan instalment repayment.

ANNUAL REPORT 2013

THE CONFIRMATION FOR THE COMPLETE CORRECTNESS OF THE PAYMENT TO AUDITOR

THE CONFIRMATION FOR THE COMPLETE CORRECTNESS OF THE PAYMENT TO AUDITOR for the year ended 31th December 2013

AUDIT FEE NO.

COMPANY

AUDIT FEE (BAHT)

Tipco Asphalt Public Company Limited

Ernst & Young Office Limited (by Mr. Supachai Phanyawattano)

1,970,000

Raycol Asphalt Company Limited

Ernst & Young Office Limited (by Mr. Supachai Phanyawattano)

520,000

Thai Bitumen Company Limited

Ernst & Young Office Limited (by Mr. Supachai Phanyawattano)

1,050,000

Bitumen Marine Company Limited

Ernst & Young Office Limited (by Mr. Supachai Phanyawattano)

310,000

Tipco Maritime Company Limited

Ernst & Young Office Limited (by Mr. Supachai Phanyawattano)

250,000

Alpha Maritime Company Limited

Ernst & Young Office Limited (by Mr. Supachai Phanyawattano)

230,000

Delta Shipping Company Limited

Ernst & Young Office Limited (by Mr. Supachai Phanyawattano)

250,000

Tasco Shipping Company Limited

Ernst & Young Office Limited (by Mr. Supachai Phanyawattano)

250,000

Total audit fee

NAME OF AUDITOR

ANNUAL REPORT 2013

4,830,000

Tipco Asphalt Public Company Limited

NON-AUDIT FEE NON-AUDIT FEE NO.

COMPANY

NON-AUDIT SERVICE

NAME OF COMPANY SERVICE

PAID FOR PERIOD

FOR PAYMENT IN THE THE FUTURE

Bitumen Marine Company Limited

Agreed-upon proceduresErnst & Young Office Limited Compliance with conditions (By Mr. Supachai stipulated in the investment Phanyawattano) promotion certificate

40,000

Alpha Marine Company Limited

Consultant for conversion to International Financial Reporting Standards

Ernst & Young Office Limited (By Mr. Supachai Phanyawattano)

40,000

Tasco Shipping Company Limited

Agreed-upon proceduresErnst & Young Office Limited Compliance with conditions (By Mr. Supachai stipulated in the investment Phanyawattano) promotion certificate

80,000

Tipco Asphalt Public Company Limited

Tax consult

Ernst & Young Corporate Service Limited

140,000

Tipco Asphalt Public Company Limited

Consultant for conversion to International Financial Reporting Standards

Ernst & Young Corporate Service Limited

585,000

Total non-audit fee

725,000

160,000

ABOVE INFORMATION: (x) Correct and complete. I hereby confirmed that there was no other service performed to the Company and Subsidiaries which generated any fee income to the auditing company which I am a partner of and/or from other related individuals and/or other related parties that I am aware of and is not disclosed in the above information. ( ) Incorrect and incomplete: in amending the above information (if any), I hereby confirm that all the information in this report herewith shows the compensation for auditing work and other services that the Company and Subsidiaries paid to the undersigned, the auditing firm which I am

(Mr. Supachai Phanyawattano) Ernst & Young Auditing Office Limited The auditor of TIPCO ASPHALT PUBLIC COMPANY LIMITED

ANNUAL REPORT 2013

REPORT OF THE BOARD OF DIRECTORS’ RESPONSIBILITIES FOR FINANCIAL STATEMENTS

REPORT OF THE BOARD OF DIRECTORS’ RESPONSIBILITIES FOR FINANCIAL STATEMENTS The Company’s Board of Directors is responsible for the consolidated and separate financial statements of Tipco Asphalt Public Company Limited and other financial information appears in the Annual Report pertaining to the Company and its subsidiaries. The financial statements are prepared in accordance with Thai Financial Reporting Standards and free from material misstatement, whether due to fraud or error, while the Accounting Policies are selected for their appropriateness and consistently i m p l e m e nte d. Th e f i n a n c i a l s t ate m e nt s a re a l s o prepared with careful considerations and best possible estimates while significant information is sufficiently and transparently disclosed in the notes for the benefits of shareholders and other investors.

(Ms. Laksana Supsakorn) Chairman

ANNUAL REPORT 2013

The B oard of Direc tors had appointed the Audit Committee, comprised of independent directors whose qualifications are in accordance with requirements of the Stock Exchange of Thailand, to review the accuracy and sufficiency of the Company’s financial reports and the disclosures of related transactions and the adequacy and efficiency of internal control system. Opinion of the Audit Committee is reported in the Audit Committee’s report published in this Annual Report. The Board of Directors is of opinion that the consolidated and separate financial statements of the Company ended 31 st December 2013, of which audited by the external auditor and jointly reviewed by the Audit Committee and, Management had presented fairly, in all material respects, the financial position and financial performance in accordance with Thai Financial Reporting Standards.

(Mr. Chaiwat Srivalwat) Managing Director

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

Tipco Asphalt Public Company Limited

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT To the Shareholders of Tipco Asphalt Public Company Limited I have audited the accompanying consolidated financial statements of Tipco Asphalt Public Company Limited and its subsidiaries, which comprise the consolidated statement of financial position as at 31st December 2013, and the related consolidated statements of comprehensive income, changes in shareholders’ 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 Tipco Asphalt 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 judgment, 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. 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 Tipco Asphalt Public Company Limited and its subsidiaries and of Tipco Asphalt Public Company Limited as at 31st December 2013, their financial performance and cash flows for the year then ended in accordance with Thai Financial Reporting Standards.

OTHER MATTER The financial statements of Tipco Asphalt Public Company Limited and its subsidiaries for the year ended 31st December 2012 were audited by another auditor of our office who, under her report dated 11th February 2013, expressed an unqualified opinion on those financial statements and drew attention to the change in accounting policy.

Supachai Phanyawattano Certified Public Accountant (Thailand) No. 3930 Ernst & Young Office Limited Bangkok: 12th February 2014 ANNUAL REPORT 2013

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

Tipco Asphalt Public Company Limited and its subsidiaries

Statement of financial position As at 31 December 2013

(Unit: Baht) Consolidated financial statements

Separate financial statements

2013

2012

2013

495,434,890

739,597,042

89,695,844

44,140,952

6, 7

3,966,572,674

5,347,921,360

3,663,366,890

5,442,063,490

Short-term loans to related parties

40,620,582

40,243,540

Inventories

9,349,415,454

7,048,482,865

8,651,623,150

6,443,284,016

Price hedging contracts

134,593,745

27,359,301

134,593,745

27,359,301

Forward exchange contracts

1,625,030

7,801,110

1,562,772

6,650,434

Other current assets

270,943,416

104,971,269

40,638,530

35,455,728

Total current assets

14,218,585,209

13,276,132,947

12,622,101,513

12,039,197,461

45,423,693

Investments in subsidiaries

3,829,060,794

3,827,571,247

Investment in associate

110,520,585

60,648,740

18,403,580

Investment properties

199,432,500

100,651,528

101,197,924

Property, plant and equipment

5,246,623,305

4,595,800,707

455,783,574

490,569,772

Goodwill

146,293,504

21,790,227

19,972,993

21,223,020

17,981,683

Note

2012

Assets Current assets Cash and cash equivalents Trade and other receivables

Assets held for sales - Vessel Non-current assets

Other intangible assets - Computer software Leasehold rights

217,812,961

207,872,195

3,874,337

4,102,239

Deferred tax assets - net

102,407,897

106,845,698

45,871,803

44,776,746

10,052,516

11,331,624

4,931,288

5,380,932

6,054,933,495

5,348,197,961

4,479,799,924

4,509,984,123

20,273,518,704

18,669,754,601

17,101,901,437

16,549,181,584

Other non-current assets Total non-current assets Total assets

The accompanying notes are an integral part of the financial statements. 80

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

Tipco Asphalt Public Company Limited and its subsidiaries

Statement of financial position (continued) As at 31 December 2013

(Unit: Baht) Consolidated financial statements Note

2013

2012

Separate financial statements 2013

2012

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

9,416,459,737

8,236,833,408

9,164,536,336

8,158,509,798

7, 16

1,611,815,321

2,202,837,490

1,682,324,035

2,212,017,359

7,009,538

8,595,644

5,238,513

4,618,291

688,820,992

596,304,373

352,500,000

322,383,480

13,735,830

69,328,878

1,457,547

38,501,527

Current portion of liabilities under finance lease agreements Current portion of long-term loans from financial institutions

Income tax payable Price hedging contracts

119,813,680

12,708,499

119,813,680

12,708,499

Forward exchange contracts

7,812,219

502,902

6,586,252

492,279

228,942,475

26,039,584

28,568,012

16,776,473

12,094,409,792

11,153,150,778

11,361,024,375

10,766,007,706

8,279,000

13,415,586

7,337,095

9,938,202

2,179,870,256

2,364,592,294

772,500,000

1,103,408,346

7,950,789

7,227,108

Interest rate swap contracts

22,250,378

19,445,155

21,111,486

19,445,155

Provision for long-term employee benefits

69,821,799

69,231,320

55,544,867

56,821,784

2,288,172,222

2,473,911,463

856,493,448

1,189,613,487

14,382,582,014

13,627,062,241

12,217,517,823

11,955,621,193

Other current liabilities Total current liabilities Non-current liabilities Liabilities under finance lease agreements net of current portion Long-term loans from financial institutions net of current portion Long-term loan from related party

Total non-current liabilities Total liabilities

The accompanying notes are an integral part of the financial statements. ANNUAL REPORT 2013

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

Tipco Asphalt Public Company Limited and its subsidiaries

Statement of financial position (continued) As at 31 December 2013

(Unit: Baht) Consolidated financial statements Note

2013

2012

Separate financial statements 2013

2012

Shareholders' equity Share capital

Registered 171,059,929 ordinary shares (2012: 170,043,729 ordinary shares) of Baht 10 each

1,710,599,290

1,700,437,290

1,710,599,290

1,700,437,290

1,525,808,680

1,525,480,680

1,525,808,680

1,525,480,680

887,824,106

886,112,274

887,824,106

886,112,274

6,237,755

12,904,468

23,254,939

13,140,737

23,254,939

13,140,737

162,053,000

140,503,000

162,053,000

140,503,000

2,682,128,935

2,024,808,519

2,289,092,238

2,032,966,638

(58,505,345)

(184,521,435)

(3,649,349)

(4,642,938)

5,241,706,538

4,424,665,998

4,884,383,614

4,593,560,391

649,230,152

618,026,362

5,890,936,690

5,042,692,360

4,884,383,614

4,593,560,391

Issued and fully paid 152,580,868 ordinary shares (2012: 152,548,068 ordinary shares) of Baht 10 each Premium on share capital Non-controlling interests of subsidiary acquired by the Company at price lower than book value Change in the Company's interest in subsidiary which did not result in a loss of control Capital reserve for share-based payment transactions Retained earnings Appropriated - statutory reserve Unappropriated Other components of shareholders' equity Equity attributable to owners of the Company Non-controlling interests of the subsidiaries Total shareholders' equity Total liabilities and shareholders' equity

20,273,518,704

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

ANNUAL REPORT 2013

18,669,754,601 17,101,901,437 16,549,181,584

Tipco Asphalt Public Company Limited

Tipco Asphalt Public Company Limited and its subsidiaries

Statement of comprehensive income For the year ended 31 December 2013

(Unit: Baht) Consolidated financial statements Note

2013

Separate financial statements

2012

2013

2012

Revenues Sales and service income

33,934,919,398

37,663,155,183

31,860,052,018

35,898,367,645

Other income Dividend income from subsidiaries

16,100,000

204,947,351

Dividend income from associate

16,789,105

26,659,535

Gain on exchange

35,305,530

567,189,427

5,353,351

517,221,811

Compensation received from claims for damages

Income from liquidation of subsidiary

50,308,840

123,941,836

98,310,237

127,106,669

72,772,845

34,094,166,764

38,378,963,687

32,008,612,038

36,736,758,292

32,271,716,606

35,754,713,865

30,975,116,488

34,773,472,639

(84,606,270)

805,913,511

(84,606,270)

804,611,289

7,831,398

1,081,594

1,196,947

560,977

Others Total revenues Expenses Cost of sales and services (Gain) loss from price hedging contracts Reduce cost of inventory to net realisable value

32,194,941,734

36,561,708,970

30,891,707,165

35,578,644,905

Selling expenses

126,902,787

108,782,788

65,392,144

60,759,321

Administrative expenses

658,427,546

594,138,146

419,021,660

386,061,700

(19,669,545)

31,475,421

(4,991,993)

(7,227,555)

Other expenses Allowance for doubtful accounts (reversal) Impairment loss of assets held for sales

4,800,298

Impairment loss of investment properties

4,767,500

Impairment loss of equipment

Total expenses

1,756,500

20,834,537

32,962,359,022

37,326,507,660

31,371,128,976

36,018,238,371

1,131,807,742

1,052,456,027

637,483,062

718,519,921

Profit before share of profit from investment in associate, finance cost and income tax expenses Share of profit from investment in associate

46,207,339

35,323,425

Profit before finance cost and income tax expenses

1,178,015,081

1,087,779,452

637,483,062

718,519,921

Finance cost

(194,704,205)

(282,340,477)

(131,703,116)

(225,094,917)

Profit before income tax expenses Income tax expenses

Profit for the year

983,310,876

805,438,975

505,779,946

493,425,004

(121,703,983)

(129,589,957)

(75,525,378)

(39,518,542)

861,606,893

675,849,018

430,254,568

453,906,462

148,818,782

(60,204,158)

1,241,986

1,610,686

1,241,986

1,610,686

(248,397)

(544,569)

(248,397)

(544,569)

149,812,371

(59,138,041)

993,589

1,066,117

1,011,419,264

616,710,977

431,248,157

454,972,579

Other comprehensive income: Exchange differences on translation of financial statements in foreign currencies Change in fair value of interest rate swap contract Income tax effect Other comprehensive income for the year Total comprehensive income for the year

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

ANNUAL REPORT 2013

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

Tipco Asphalt Public Company Limited and its subsidiaries

Statement of comprehensive income For the year ended 31 December 2013

(Unit: Baht) Consolidated financial statements Note

2013

2012

Separate financial statements 2013

2012

Profit attributable to: Equity holders of the Company Non-controlling interests of the subsidiaries

831,449,384

642,273,946

430,254,568

453,906,462

30,157,509

33,575,072

861,606,893

675,849,018

957,465,474

593,042,917

53,953,790

23,668,060

431,248,157

454,972,579

1,011,419,264

616,710,977

5.45

4.21

2.82

2.98

5.44

4.21

2.81

2.98

Total comprehensive income attributable to: Equity holders of the Company Non-controlling interests of the subsidiaries Earnings per share

Basic earnings per share Profit attributable to equity holders of the Company Diluted earnings per share Profit attributable to equity holders of the Company

ANNUAL REPORT 2013

of subsidiaries

1,525,808,680

887,824,106

1,711,832

886,112,274

Consolidated financial statements

lower than

6,237,755

book value

12,904,468

a loss of control

result in

which did not

23,254,939

10,114,202

13,140,737

8,496,085

4,644,652

transactions

payment

for share-base Retained earnings Appropriated -

162,053,000

21,550,000

140,503,000

25,000,000

115,503,000

statutory reserve

2,682,128,935

(21,550,000)

831,449,384

(152,578,968)

2,024,808,519

(25,000,000)

642,273,946

(190,684,210)

1,598,218,783

Unappropriated

(3,649,349)

993,589

(4,642,938)

1,066,117

(5,709,055)

swap contract

interest rate

Fair value of

subsidiary

at price

differences on

interest in

acquired by the Company

(54,855,996)

125,022,501

(179,878,497)

(50,297,146)

(129,581,351)

foreign currencies

statements in

financial

translation of

Exchange

Other comprehensive income

the Company's

subsidiary

Other components of equity Change in

Capital reserve

Equity attributable to owners of the Company

interests of

Non-controlling

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

Balance as at 31 December 2013

Appropriation of statutory reserve (Note 23)

Total comprehensive income for the year

Dividend paid (Note 32)

Dividend paid to non-controlling interests

328,000

1,525,480,680

Share-based payment transactions (Note 22)

Increase in share capital (Note 20)

Balance as at 1 January 2013

Balance as at 31 December 2012

Appropriation of statutory reserve (Note 23)

Total comprehensive income for the year

Dividend paid (Note 32)

Dividend paid to non-controlling interests

1,525,480,680

Share-based payment transactions (Note 22)

Balance as at 1 January 2012

Premium on

share capital

paid-up

share capital

Issued and

For the year ended 31 December 2013

Statement of changes in shareholdersâ&#x20AC;&#x2122; equity

Tipco Asphalt Public Company Limited and its subsidiaries

(58,505,345)

126,016,090

(184,521,435)

(49,231,029)

(135,290,406)

equity

shareholders'

components of

Total other

5,241,706,538

957,465,474

(152,578,968)

10,114,202

2,039,832

4,424,665,998

593,042,917

(190,684,210)

8,496,085

4,013,811,206

the Company

shareholders of

attributable to

Total equity

Equity

649,230,152

53,953,790

(22,750,000)

618,026,362

23,668,060

(6,220)

594,364,522

the subsidiaries

interests of

non-controlling

attributable to

5,890,936,690

1,011,419,264

(22,750,000)

(152,578,968)

10,114,202

2,039,832

5,042,692,360

616,710,977

(6,220)

(190,684,210)

8,496,085

4,608,175,728

equity

the shareholders'

Total

(Unit: Baht)

Tipco Asphalt Public Company Limited

ANNUAL REPORT 2013

ANNUAL REPORT 2013 -

Total comprehensive income for the year

Appropriation of statutory reserve (Note 23) 887,824,106

1,711,832

886,112,274

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

1,525,808,680

Dividend paid (Note 32)

Balance as at 31 December 2013

328,000

1,525,480,680

Share-based payment transactions (Note 22)

Increse in share capital (Note 20)

Balance as at 1 January 2013

1,525,480,680

Appropriation of statutory reserve (Note 23)

Balance as at 31 December 2012

886,112,274

share capital

1,525,480,680

Premium on share capital

Issued and paid-up

Total comprehensive income for the year

Dividend paid (Note 32)

Share-based payment transactions (Note 22)

Balance as at 1 January 2012

For the year ended 31 December 2013

payment

23,254,939

10,114,202

13,140,737

8,496,085

4,644,652

transactions

162,053,000

21,550,000

140,503,000

25,000,000

115,503,000

statutory reserve

Appropriated -

Retained earnings

2,289,092,238

(21,550,000)

430,254,568

(152,578,968)

2,032,966,638

(25,000,000)

453,906,462

(190,684,210)

1,794,744,386

Unappropriated

(3,649,349)

993,589

(4,642,938)

1,066,117

(5,709,055)

contracts

interest rate swap

income Fair value of

for share-base

comprehensive

(3,649,349)

993,589

(4,642,938)

1,066,117

(5,709,055)

equity

shareholders'

component of

Total other

Other component of equity Other

Capital reserve

Separate financial statements

Statement of changes in shareholdersâ&#x20AC;&#x2122; equity

Tipco Asphalt Public Company Limited and its subsidiaries

4,884,383,614

431,248,157

(152,578,968)

10,114,202

2,039,832

4,593,560,391

454,972,579

(190,684,210)

8,496,085

4,320,775,937

equity

shareholders'

Total

(Unit: Baht)

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

Tipco Asphalt Public Company Limited

Tipco Asphalt Public Company Limited and its subsidiaries

Cash flow statement For the year ended 31 December 2013

(Unit: Baht) Consolidated financial statements

Separate financial statements

2013

2012

2013

2012

983,310,876

805,438,975

505,779,946

493,425,004

434,352,337

418,850,240

74,454,840

80,230,131

10,751

1,177,404

(19,669,545)

31,475,421

(4,991,993)

(7,227,555)

7,831,398

1,081,594

1,196,947

560,977

Dividend income from subsidiaries

(16,100,000)

(204,947,351)

Dividend income from associate

(16,789,105)

Cash flows from operating activities: Profit before tax Adjustments to reconcile profit before tax to net cash provided by (paid from) operating activities: Depreciation and amortisation Write-off withholding tax Allowance for doubtful accounts (reversal) Reduce cost of inventory to net realisable value

Income from liquidation of subsidiary Unrealised (gain) loss on exchange rate

(26,659,535)

249,370,473

(46,386,441)

188,480,393

(22,931,806)

Realised gain on exchange from amendment of long-term loan agreement

(28,988,684)

Gain on sales of equipment

(8,318,007)

(2,761,185)

(7,773,877)

(3,054,992)

Impairment loss of assets held for sales

4,800,298

Impairment loss of investment properties

4,767,500

Impairment loss of equipment Share of profit from investment in associate Share-based payment transactions Provision for long-term employee benefits Change in fair value of forward exchange contracts Change in fair value of price hedging contracts

1,756,500

20,834,537

(46,207,339)

(35,323,425)

10,114,202

8,496,085

8,624,655

6,065,341

9,397,208

10,269,170

7,361,043

8,125,296

13,485,397

(17,216,444)

11,181,635

(11,044,004)

(129,263)

25,143,876

(129,263)

25,143,876

3,550,518

22,637,827

2,411,626

11,664,947

179,624,390

250,515,438

122,287,638

204,792,744

1,789,491,212

1,503,800,870

892,783,590

537,353,968

1,415,991,486

(1,737,761,316)

1,834,292,316

(3,815,246,272)

(2,308,969,227)

(1,293,721,153)

(2,214,733,747)

(1,651,200,783)

(210,018,640)

(73,572,920)

(17,507,250)

(23,104,662)

28,338

(93,104,560)

(8,423,075)

9,568,118

(631,176,805)

(1,280,789,497)

(555,965,601)

(621,566,429)

Change in fair value of interest rate swap contract recognised in profit or loss Interest expenses Profit from operating activities before changes in operating assets and liabilities (Increase) decrease in operating assets Trade and other receivables Inventories Other current assets Other non-current assets Increase (decrease) in operating liabilities Trade and other payables Other current liabilities

194,592,853

(78,364,177)

3,650,270

(35,730,661)

249,939,217

(3,053,512,753)

(65,903,497)

(5,599,926,721)

Cash paid for interest expenses

(165,736,319)

(260,374,184)

(105,604,706)

(210,800,565)

Cash paid for corporate income tax

(162,329,515)

(38,476,765)

(113,912,812)

(20,239,149)

Net cash used in operating activities

(78,126,617)

(3,352,363,702)

(285,421,015)

(5,830,966,435)

Cash flows from (used in) operating activities

The accompanying notes are an integral part of the financial statements. ANNUAL REPORT 2013

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

Tipco Asphalt Public Company Limited and its subsidiaries

Cash flow statement (continued) For the year ended 31 December 2013

(Unit: Baht) Consolidated financial statements 2013

Separate financial statements

2012

2013

2012

Cash flows from investing activities: Decrease in restricted bank deposits

66,065,220

Cash receipt from business transfer to subsidiary

61,067,790

Cash paid for investment in subsidiary

(98,000,000)

Cash receipt from liquidation of subsidiary

968,450

Cash receipt from share capital reduction of subsidiary

800,000,000

Dividend received from subsidiaries

16,100,000

204,947,351

Dividend received from associate

16,789,105

Increase in short-term loans to related parties

(15,000,000)

(842,195,847)

(725,051,764)

(63,131,935)

(38,721,697)

Acquisition of computer software

(4,369,546)

(17,212,991)

(4,198,500)

(16,688,664)

Proceeds from sales of equipment and vessel

57,957,383

6,612,691

4,849,510

3,329,9 80

Net cash from (used in) investing activities

(788,608,010)

(652,797,739)

14,686,865

857,624,525

937,729,804

4,483,942,513

771,972,889

5,824,946,986

Acquisition of equipment

Cash flows from financing activities: Increase in short-term loans from banks Cash paid under finance lease agreements Cash drawdown from long-term loans Repayment of long-term loans Cash receipt from increase share capital Dividend paid to shareholders

(8,674,693)

(9,452,812)

(4,465,792)

(4,950,336)

488,288,300

700,128,119

(622,410,446)

(1,244,331,016)

(300,791,827)

(1,042,383,480)

2,039,832

(152,466,060)

(190,644,272)

(152,466,060)

(190,644,272)

Dividend paid to non-controlling interests of subsidiaries

(22,750,000)

(6,220)

Net cash from financing activities

621,756,737

3,739,636,312

316,289,042

4,586,968,898

815,738

3,303,437

(244,162,152)

(262,221,692)

45,554,892

(386,373,012)

Cash and cash equivalents at beginning of year

739,597,042

1,001,818,734

44,140,952

430,513,964

Cash and cash equivalents at end of year

495,434,890

739,597,042

89,695,844

44,140,952

3,231,432

6,811,771

2,628,700

5,927,191

17,953,938

15,079,974

125,690,385

Exchange differences on translation of financial statements in foreign currencies Net increase (decrease) in cash and cash equivalents

Supplemental cash flows information Non-cash transactions Acquistion of assets through finance lease Accounts payable from purchase of equipment Settlement of proceed from liquidation of subsidiary with account payable

The accompanying notes are an integral part of the financial statements. 88

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

Tipco Asphalt Public Company Limited and its subsidiaries

Notes to consolidated financial statements For the year ended 31 December 2013 1. General information

Tipco Asphalt Public Company Limited (“the Company”) is a public company incorporated and domiciled in Thailand. The major shareholders of the Company are Supsakorn family and Colas Group, a company incorporated in French Republic. The Company is principally engaged in the manufacture and distribution of asphalt and petroleum products and its registered address is 118/1 Rama 6 Road, Samsen-nai Sub district, Phayathai District, Bangkok.

On 10 August 2012, the Meeting of the Company’s Board of Directors passed a resolution to transfer vessel operation to its subsidiary. This business transfer was completed on 30 April 2013. The Company transferred assets amounting to Baht 63.2 million and transferred liabilities amounting to Baht 2.1 million. The Company received cash payment for the net assets value amounting to Baht 61.1 million, on 30 April 2013 and 17 May 2013.

2. Basis of preparation

2.1

The financial statements have been prepared in accordance with Thai Financial Reporting Standards enunciated under the Accounting Profession 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.

ANNUAL REPORT 2013

2.2

ANNUAL REPORT 2013

Companyâ&#x20AC;&#x2122;s name

1,500

Holding company and manufacture and distribution of asphalt products Shipping management and agency Marine transportation Marine transportation Marine transportation Marine transportation

Thai Bitumen Co., Ltd.

Tipco Maritime Co., Ltd.

Alpha Maritime Co., Ltd.

Bitumen Marine Co., Ltd.

Delta Shipping Co., Ltd.

Tasco Shipping Co., Ltd.

Holding company

Manufacture and distribution of asphalt products

2.10 Million USD 20.00 Million RMB 2.10 Million USD

Manufacture and distribution of asphalt products Manufacture and distribution of asphalt products Manufacture and distribution of asphalt products

Zhenjiang Tipco Asphalt Co., Ltd.

Tipco Asphalt (Xinhui) Co., Ltd.

30.97 Million HKD

20.00 Million riel

0.01 Million USD

305.55 Million ringgit

151.96 Million ringgit

Langfang Tongtai Road Material Co., Ltd.

Subsidiaries incorporated in China (owned by Tasco International (Hong Kong) Ltd.)

Tasco International (Hong Kong) Ltd.

Subsidiary incorporated in Hong Kong

Tipco Asphalt (Cambodia) Co., Ltd.

Subsidiary incorporated in Cambodia

KBC Energy Pte. Ltd. (Owned by KOC)

Dormant

Manufacture and distribution of asphalt products

Kemaman Bitumen Company Sdn Bhd (KBC) (41.98% owned by the Company, 12.52% owned by Thai Bitumen Co., Ltd. and 44.80% owned by KOC)

Subsidiary incorporated in Singapore

Holding company

Kemaman Oil Corporation Sdn Bhd (KOC) (11.30% owned by the Company and 51.82% owned by Thai Bitumen Co., Ltd.)

290

150

111

Manufacture and distribution of asphalt products

Subsidiaries incorporated in Malaysia

Paid-up capital 2012 (Million Baht)

2.10 Million USD

20.00 Million RMB

2.10 Million USD

30.97 Million HKD

20.00 Million riel

0.01 Million USD

305.55 Million ringgit

151.96 Million ringgit

290

150

1,500

111

(Except for other specified currency)

2013 (Million Baht)

Raycol Asphalt Co., Ltd.

Nature of business

a) The consolidated financial statements include the financial statements of the Company and the following subsidiaries:

Basis of consolidation

Subsidiaries incorporated in Thailand

100.00

51.00

100.00

63.12

82.77

63.12

99.99

99.97

99.99

41.44

2013 (%)

100.00

51.00

100.00

63.12

82.77

63.12

99.99

99.97

99.99

41.44

2012 (%)

Percentage of shareholding

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

Tipco Asphalt Public Company Limited

b) Subsidiaries are fully consolidated as from the date on which the Company obtains control and continue to be

c) The financial statements of the subsidiaries are prepared using the same significant accounting policies as

consolidated until the date when such control ceases.

those of the Company.

d) The assets and liabilities in the financial statements of overseas subsidiary companies are translated to Baht

using the exchange rate prevailing on the end of reporting period, and revenues and expenses translated

using monthly average exchange rates. The resulting differences are shown under the caption of “Exchange

differences on translation of financial statements in foreign currencies” in the statement of changes in

shareholders’ equity.

e) Material balances and transactions between the Company and its subsidiaries 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.

g) The financial statements of Raycol Asphalt Co., Ltd. are included in the consolidated financial statements

even though the Company’s shareholding is 41.44 percent. This is due to the fact that the Company has

control over that company through its board of directors, and it is therefore regarded as a subsidiary.

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

3. New accounting standards Below is a summary of accounting standards that became effective in the current accounting year and those that will become effective in the future.

(a) Accounting standards that became effective in the current accounting year Accounting standards: TAS 12

Income Taxes

TAS 20 (revised 2009)

Accounting for Government Grants and Disclosure of Government Assistance

TAS 21 (revised 2009)

The Effects of Changes in Foreign Exchange Rates

Financial Reporting Standard: TFRS 8

Operating Segments

Accounting Standard Interpretations: TSIC 10

Government Assistance - No Specific Relation to Operating Activities

TSIC 21

Income Taxes - Recovery of Revalued Non-Depreciable Assets

TSIC 25

Income Taxes - Changes in the Tax Status of an Entity or its Shareholders

Accounting Treatment Guidance for Transfers of Financial Assets These accounting standards, financial reporting standard, accounting standard interpretations and accounting treatment guidance do not have any significant impact on the financial statements. However, the Company and its subsidiaries have early adopted TAS 12 “Income Taxes” before the effective date. ANNUAL REPORT 2013

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

(b)

Accounting standards that will become effective in the future Effective date

Accounting Standards: TAS 1 (revised 2012)

Presentation of Financial Statements

1 January 2014

TAS 7 (revised 2012)

Statement of Cash Flows

1 January 2014

TAS 12 (revised 2012)

Income Taxes

1 January 2014

TAS 17 (revised 2012)

Leases

1 January 2014

TAS 18 (revised 2012)

Revenue

1 January 2014

TAS 19 (revised 2012)

Employee Benefits

1 January 2014

TAS 21 (revised 2012)

The Effects of Changes in Foreign Exchange Rates

1 January 2014

TAS 24 (revised 2012)

Related Party Disclosures

1 January 2014

TAS 28 (revised 2012)

Investments in Associates

1 January 2014

TAS 31 (revised 2012)

Interests in Joint Ventures

1 January 2014

TAS 34 (revised 2012)

Interim Financial Reporting

1 January 2014

TAS 38 (revised 2012)

Intangible Assets

1 January 2014

TFRS 2 (revised 2012)

Share-based Payment

1 January 2014

TFRS 3 (revised 2012)

Business Combinations

1 January 2014

TFRS 4

Insurance Contracts

1 January 2016

TFRS 5 (revised 2012)

Non-current Assets Held for Sale and Discontinued Operations

1 January 2014

TFRS 8 (revised 2012)

Operating Segments

1 January 2014

TSIC 15

Operating Leases - Incentives

1 January 2014

TSIC 27

Evaluating the Substance of Transactions Involving the Legal

1 January 2014

TSIC 29

Form of a Lease Service Concession Arrangements: Disclosures

1 January 2014

TSIC 32

Intangible Assets - Web Site Costs

1 January 2014

TFRIC 1

Changes in Existing Decommissioning, Restoration and

1 January 2014

TFRIC 4

Similar Liabilities Determining whether an Arrangement contains a Lease

1 January 2014

TFRIC 5

Rights to Interests arising from Decommissioning, Restoration

1 January 2014

TFRIC 7

and Environmental Rehabilitation Funds Applying the Restatement Approach under TAS 29 Financial

1 January 2014

TFRIC 10

Reporting in Hyperinflationary Economies Interim Financial Reporting and Impairment

1 January 2014

TFRIC 12

Service Concession Arrangements

1 January 2014

TFRIC 13

Customer Loyalty Programmes

1 January 2014

TFRIC 17

Distributions of Non-cash Assets to Owners

1 January 2014

TFRIC 18

Transfers of Assets from Customers

1 January 2014

Financial Reporting Standards:

Accounting Standard Interpretations:

Financial Reporting Standard Interpretations:

The management of the Company and its subsidiaries believe that these accounting standards, financial reporting standard, accounting standard interpretations and financial reporting standards interpretations will not have any significant impact on the financial statements for the year when they are initially applied.

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

4. Significant accounting policies 4.1 Revenue recognition

Sales of goods Sales of goods are recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are the invoiced value, excluding value added tax of goods supplied after deducting discounts and allowances. Rendering of services Service revenue is recognised when services have been rendered taking into account the stage of completion. Vessel operating income consists of time charters and voyage charters. Income from time charters is recognised when the right to use a vessel is transferred to a lessee for an agreed period of time, while income from voyage charters is recognised by reference to 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.

4.2 Cash and cash equivalents Cash and cash equivalents consist of cash in hand, cash at banks, and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions. 4.3 Trade and other receivables Trade and other receivables are stated at the net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in collection of receivables. The allowance is generally based on collection experience and analysis of debt aging. 4.4 Inventories Finished goods are valued at the lower of cost determined under the weighted average cost method and net realisable value. Cost of finished goods includes all production costs and attributable factory overheads. Raw materials, packaging materials, spare parts and factory supplies are valued at the lower of cost determined under at the weighted average cost method and net realisable value. Raw materials, packaging materials, spare parts and factory supplies are charged to production costs whenever consumed. 4.5 Assets held for sales - Vessel Assets held for sales are assets whose carrying amounts will be recovered through a sales transaction rather than through continuing use. The assets are measured at the lower of carrying amount and fair value less costs to sell, and they are not depreciated. ANNUAL REPORT 2013

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 4.6 Investments

Investment in associate is accounted for in the consolidated financial statements using the equity method.

Investments in subsidiaries and associate are accounted for in the separate financial statements using

the cost method less allowance for loss on impairment.

4.7 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.

Depreciation of investment properties is calculated by reference to their costs on the straight-line basis over

estimated useful lives of 5 and 20 years. Depreciation is included in profit or loss. No depreciation is provided on land.

On disposal of investm ent 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.

4.8 Property, plant and equipment/Depreciation

Land is stated at cost. Building and equipment are stated at cost less accumulated depreciation and less allowance

for loss on impairment of assets.

Depreciation of plant and equipment is calculated by reference to their costs less residual value on the straight-line

basis over the following estimated useful lives: Land improvement

20 years

Buildings and complements

20 to 47 years

Building improvements

20 to 30 years

Machinery, tools and equipment

5 to 20 years

Furniture and office equipment

3 to 5 years

Vehicles

5 to 10 years

Vessels

10 to 30 years

Depreciation is included in profit or loss. No depreciation is provided on land, construction in progress and equipment under installation. An item of property, plant and 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. 4.9 Borrowing costs

Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a

substantial period of time to get ready for its intended use are capitalised as part of the cost of the respective asset.

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.

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

4.10 Intangible assets - computer software

Computer software is measured at cost. Following initial recognition, computer software is carried at cost less any

accumulated amortisation and allowance for impairment loss (if any).

Computer software with finite life is amortised on a straight line basis over the economic useful life of 5 years and

tested for impairment whenever there is an indication that the software may be impaired. The amortisation period

and the amortisation method of such software are reviewed at least at each financial year end. The amortisation

expense is charged to profit or loss.

4.11 Goodwill

Goodwill is initially recorded at cost, which equals to the excess of cost of business combination over the fair value

of the net assets acquired. If the fair value of the net assets acquired exceeds the cost of business combination,

the excess is immediately recognised as gain in profit or loss.

Goodwill is carried at cost less allowance for impairment loss (if any). Goodwill is tested for impairment annually

and when circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the

Companyâ&#x20AC;&#x2122;s group of cash-generating unit that are expected to benefit from the synergies of the combination. The

Company estimates the recoverable amount of each group of cash-generating unit to which the goodwill relates.

Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is

recognised in profit or loss and will not be reversed in future periods.

4.12 Leasehold rights

Leasehold rights are stated at cost less accumulated amortisation and less allowance for impairment loss of

leasehold rights (if any). Amortisation is calculated by reference to cost on a straight-line basis over the lease

period.

The amortisation is included in profit or loss.

4.13 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.

4.14 Long-term leases

Leases of equipment which transfer substantially all the risks and rewards of ownership are classified as finance

leases. Finance leases are capitalised at the lower of the fair value of the leased assets and the present value

of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included in long-

term payables, while the interest element is charged to profit or loss over the lease period. The assets acquired ANNUAL REPORT 2013

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

under finance leases are depreciated over the shorter of the useful life of the assets and the lease period, if the

Company and its subsidiaries expect not to purchase such assets at the end of the lease period. Operating lease payments are recognised as an expense in profit or loss on a straight line basis over the lease term.

4.15 Foreign currencies The consolidated and separate financial statements are presented in Baht, which is also the Companyâ&#x20AC;&#x2122;s functional currency. Items of each entity included in the consolidated financial statements of each entity 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 the reporting period. Gains and losses on exchange are included in profit or loss. 4.16 Impairment of assets At the end of each reporting period, the Company and its subsidiaries perform impairment reviews in respect of the property, plant and equipment, investment properties and other intangible assets whenever events or changes in circumstances indicate that an asset may be impaired. The Company and its subsidiaries also carry out annual impairment reviews in respect of goodwill. An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the assetâ&#x20AC;&#x2122;s fair value less costs to sell and its value in use, is less than the carrying amount. An impairment loss is recognised in profit or loss. In the assessment of asset impairment if there is any indication that previously recognised impairment losses may no longer exist or may have decreased, such reversal except for that of goodwill, is recognised in profit or loss. 4.17 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 and other long-term employee benefits Defined contribution plans The Company, 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 fundâ&#x20AC;&#x2122;s assets are held in a separate trust fund and contributions of the Company and its subsidiaries are recognised as expenses when incurred. Defined benefit plans and other long-term employee benefits The Company and its local subsidiaries have obligations in respect of the severance payments they must make to employees upon retirement under labor law and other employee benefit plans. The Company and the local subsidiaries treat these severance payment obligations as a defined benefit plan. In addition, the Company and its

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

local subsidiaries provide other long-term employee benefit plan, namely long service awards. The obligation under the defined benefit plans and other long-term employee benefit plans is determined by a professionally qualified independent actuary based on actuarial techniques, using the projected unit credit method. 4.18 Equity-settled share-based payment transactions The Company and its subsidiaries recognise the share-based payment transactions at the date on which the options are granted, based on the fair value of the share options. They are recorded as expenses over the expected life of the share options, and a capital reserve for share-based payment transactions is presented in shareholdersâ&#x20AC;&#x2122; equity. 4.19 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. 4.20 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. 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 shareholdersâ&#x20AC;&#x2122; equity if the tax relates to items those are recorded directly to shareholdersâ&#x20AC;&#x2122; equity. 4.21 Derivatives Forward exchange contracts Forward exchange contracts are presented in the financial statements at fair value. Unrealised gain or loss from ANNUAL REPORT 2013

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS the forward contracts is recorded in profit or loss. Price hedging contracts Forward price hedging contracts and option contracts with banks are presented in the financial statements at fair value. Unrealised gain or loss from the price hedging contracts is recorded in profit or loss. Interest rate swap contracts Interest rate swap contracts are the contracts under which the counter-parties agreed to exchange the amounts of interest, which are determined based on the pre-determined notional amount and the interest rates over the periods specified in the contracts. The Company and its subsidiaries recognised, on an accrual basis, the net amount of interest to be received or paid for each period under the interest rate swap contracts as income/expense in profit or loss. The interest rate swap contracts are presented in the financial statements at fair value. Unrealised gain or loss on interest rate swap contract of the Company and its subsidiaries deferred in shareholdersâ&#x20AC;&#x2122; equity of the Company and its subsidiaries until realised or recorded in profit or loss.

5. Significant accounting judgments and estimates The preparation of financial statements in conformity with financial reporting standards accounting principles at times requires management to make subjective judgments and estimates regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures, and actual results could differ from these estimates. Significant judgments 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 judgment on whether significant risk and rewards of those assets or liabilities have been transferred, based on their 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 judgment 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 judgment and estimates based upon, among other things, past collection history, aging profile of outstanding debts and the prevailing economic condition. Net realisable value of inventories The management uses judgment to estimate the net realisable value of inventories taking into consideration the fluctuation of price or cost directly relating to events occurring after the reporting period. Fair value of financial instruments In determining the fair value of financial instruments that are not actively traded and for which quoted market prices are

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

not readily available, the management exercises judgment, using a variety of valuation techniques and models. The input to these models is taken from observable markets and includes consideration of liquidity, correlation and longerterm volatility of financial instruments. Impairment of investments The Company and its subsidiaries treats investments as impaired when the management judges that 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 judgment of the management. Investment properties The investment properties are measured at cost less allowance for impairment loss. The carrying value of the assets is determined based on fair value appraised by an independent valuer. Such valuation is based on certain assumptions and estimates. Property plant and equipment/Depreciation In determining depreciation of plant and equipment, the management is required to make estimates of the useful lives and residual values of the plant and equipment of the Company and subsidiaries and to review estimate useful lives and residual values when there are changes. In addition, the management is required to review property, plant and equipment for impairment on a periodical basis and record impairment losses in the period when it is determined that their recoverable amount is lower than the carrying cost. This requires judgments regarding forecast of future revenues and expenses relating to the assets subject to the review. Goodwill The initial recognition and measurement of goodwill, and subsequent impairment testing, require management to make estimates of cash flows to be generated by the asset 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 differences can be utilised. Significant management judgment 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 benefi ts under defined benefit plans and other long-term employee benefits The obligation under the defined benefit plan and other long-term employee benefit plans 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. Cost of share-based payment transactions Estimating the cost of share-based payment transactions requires the determination of the fair value of the options granted under the transactions which involves appropriate assumptions, including but not limited to the expected life of the share options, share price volatility and dividend yield. ANNUAL REPORT 2013

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

6. Trade and other receivables (Unit: Thousand Baht)

Consolidated financial statements 2013

Separate financial statements

2012

2013

2012

Trade receivables - related parties (Note 7) Aged on the basis of due dates Not yet due

490,525

453,024

1,269,351

1,139,533

21,051

448,143

279,848

1,019,038

3 - 6 months

56,375

83,755

6 - 9 months

176

9 - 12 months

3,272

176

511,871

901,343

1,608,846

2,242,326

2,749,017

3,521,307

1,827,445

2,646,853

Up to 3 months

454,089

731,293

152,994

460,384

3 - 6 months

120,295

51,350

22,959

14,881

6 - 9 months

39,668

22,591

669

2,537

9 - 12 months

6,878

70,262

1,824

5,514

115,022

114,826

82,325

92,791

Total

3,484,969

4,511,629

2,088,216

3,222,960

Less: Allowance for doubtful accounts

(115,833)

(132,390)

(76,033)

(81,025)

Total trade receivables - unrelated parties, net

3,369,136

4,379,239

2,012,183

3,141,935

Total trade receivables - net

3,881,007

5,280,582

3,621,029

5,384,261

12,224

7,809

26,409

16,497

5,866

39,410

5,866

39,410

Other receivables

67,476

20,120

10,063

1,895

Total other receivables

85,566

67,339

42,338

57,802

3,966,573

5,347,921

3,663,367

5,442,063

Past due Up to 3 months

Over 12 months Total trade receivables - related parties

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

Over 12 months

Other receivables Amounts due from related parties (Note 7) Accounts receivable from price hedging contracts

Trade and other receivables - net

100

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

7. 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 its subsidiaries and those related parties. (Unit: Million Baht) Consolidated financial statements

Separate financial statements

2013

2012

Transfer Pricing Policy

Transactions with subsidiaries (eliminated from the consolidated financial statements) Sales and service income

5,602

5,211

Cost plus certain margin

Rental and service income

Contract price

Technical assistance fee income

Contract price

Interest income

Dividend income

205

Purchases of goods

535

Rental and service expenses

1,438

1,766

3,703

4,840

3,531

4,633

2.8 percent per annum Cost plus certain margin Contract price

Transactions with associate Dividend income Transactions with related companies Sales and service income Rental and service income

Market price / contract price

Contract price

Rental and service expenses

Contract price

Technical assistance fee expenses

Contract price

The balances of the accounts between the Company and its subsidiaries and those related companies as at 31 December 2013 and 2012 are as follows: (Unit: Thousand Baht) Consolidated financial statements

Trade and other receivables- related parties (Note 6) Subsidiaries

2013

Separate financial statements

2012

2013

2012

1,154,376

1,364,109

Related companies (common shareholders and directors)

524,095

909,152

480,879

894,714

Total trade and other receivables - related parties

524,095

909,152

1,635,255

2,258,823

40,621 40,621

40,244 40,244

Short-term loans to related parties Subsidiaries Total short-term loans to related parties Trade and other payables - related parties (Note 16) Subsidiaries

449,778

338,560

Related companies (common shareholders and directors)

45,198

47,273

37,879

35,412

Total trade and other payables - related parties

45,198

47,273

487,657

373,972

7,951 7,951

7,227 7,227

Long-term loan from related party Related company (shareholder of subsidiary) Total long-term loan from related party

ANNUAL REPORT 2013

101

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Loans to related parties and loan from related parties As at 31 December 2013 and 2012, the balances of loans between the Company and those related companies and the movement are as follows: (Unit: Thousand Baht) Separate financial statements

Loans to related parties

Related by

Balance as at

Unrealise gain on

Balance as at

31 December 2012

exchange rate

31 December 2013

Alpha Maritime Co., Ltd.

Subsidiary

35,000

Kemaman Oil Corporation Sdn Bhd

Subsidiary

5,244

377

5,621

40,244

377

40,621

Total

(Unit: Thousand Baht) Consolidated financial statements Balance as at

Translation

Balance as at

Related by

31 December 2012

adjustment

31 December 2013

Shareholder of subsidiary

7,227

724

7,951

7,227

724

7,951

Loans from related parties

Zhenjiang Highway Materials Company Total

Directors and managementâ&#x20AC;&#x2122;s benefits During 2013 and 2012, the Company and its subsidiaries had employee benefit expenses of their directors and management as below. (Unit: Million Baht) Consolidated financial statements

Separate financial statements

2013

2012

2013

2012

Short-term employee benefits

102

104

Post-employment benefits

Share-based payment transactions (Note 22)

Total

112

Guarantee obligations with related parties The Company and its subsidiaries have outstanding guarantee obligations with its related parties, as described in Note 18 to the financial statements.

102

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

8. Inventories (Unit: Thousand Baht) Consolidated financial statements Reduce cost to net realisable value

Cost 2013

2012

Finished goods

1,419,466

1,487,167

Raw materials

2,406,331

2,338,736

101,443

Goods in transit Total

Packaging materials, spare parts and factory supplies

2013

Inventories - net

2012

2013

2012

(157)

1,419,466

1,487,010

(7,759)

(730)

2,398,572

2,338,006

110,403

(3,726)

(2,529)

97,717

107,874

5,433,660

3,115,593

5,433,660

3,115,593

9,360,900

7,051,899

(11,485)

(3,416)

9,349,415

7,048,483

(Unit: Thousand Baht) Separate financial statements Reduce cost to net realisable value

Cost 2013

2012

Finished goods

1,287,299

1,353,790

Raw materials

1,919,566

1,964,899

15,035

Goods in transit Total

Packaging materials, spare parts and factory supplies

2013

Inventories - net

2012

2013

2012

1,287,299

1,353,790

1,919,566

1,964,899

20,926

(3,282)

(2,085)

11,753

18,841

5,433,005

3,105,754

5,433,005

3,105,754

8,654,905

6,445,369

(3,282)

(2,085)

8,651,623

6,443,284

9. Assets held for sales - Vessel The vessel held for sales was an asset of Delta Shipping Company Limited. In December 2012, this subsidiary entered into a contract to sell the vessel, together with tools and instruments on the vessel, to an overseas company for approximately USD 1.5 million. As a result, the subsidiary reclassified these assets from property, plant and equipment to vessel held for sale and recorded impairment loss on the assets of approximately Baht 4.8 million as an expense in profit or loss for 2012. In January 2013, the subsidiary received payment and transferred the vessel to the buyer. ANNUAL REPORT 2013

103

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

10. Investments in subsidiaries

Details of investments in subsidiaries as presented in the separate financial statements are as follows: (Unit: Thousand Baht) Company’s name

Investment cost of the Company 2013

2012

Dividend received during the year by the Company 2013

2012

Domestic subsidiaries Raycol Asphalt Co., Ltd.

193,200

16,100

1,499,917

187,450

(60,775)

Tipco Maritime Co., Ltd.

1,999

17,497

Alpha Maritime Co., Ltd.

17,999

Bitumen Marine Co., Ltd.

149,999

Delta Shipping Co., Ltd.

79,999

Tasco Shipping Co., Ltd.

289,999

130,008

115,849

173,677

1,231,719

165

3,823,755

16,100

204,947

5,306

3,816

3,829,061

3,827,571

Thai Bitumen Co., Ltd. Less: Provision for impairment loss of investment

Overseas subsidiaries Tasco International (Hong Kong) Ltd. Add: Additional investment cost from the

acquisition of subsidiary under common control

Kemaman Oil Corporation Sdn Bhd (KOC)

(11.30% owned by the Company and 51.82%

owned by Thai Bitumen Co., Ltd.) Kemaman Bitumen Company Sdn Bhd (KBC)

(41.98% owned by the Company, 12.52% owned

by Thai Bitumen Co., Ltd. and 44.80% owned by

KOC) Tipco Asphalt (Cambodia) Co., Ltd. Investments in subsidiaries Cost of share-based payment transactions, under

warrants to purchase new ordinary shares of the

Company issued to the subsidiaries’ employees

(Note 22)

Total investments in subsidiaries

104

The paid-up capital and percentage of shareholding were presented in Note 2.2 to the financial statements.

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

Warrants to purchase new ordinary shares of the Company issued to the subsidiaries’ employees During 2013, the Company recorded cost of share-based payment transactions, under warrants to purchase new ordinary shares of the Company issued to the subsidiaries’ employees (Note 22) amounted to Baht 1.5 million (2012: Baht 2.4 million), as a cost of investments in subsidiaries. Kemaman Oil Corporation Sdn Bhd (“KOC”) and Kemaman Bitumen Company Sdn Bhd (“KBC”) After the Company and Thai Bitumen signed the KOC’s shareholder agreement with Seloga Holdings Berhad (“SHB”) and Aras Jalinan Sdn Bhd (“Aras”) offered to exercise the rights under such agreement on behalf of SHB, the Company and Thai Bitumen have had disputes with Aras since 2008. In May 2011, the International Chamber of Commerce Arbitral Tribunal made the final arbitration award relating to the dispute between the Company and Thai Bitumen, and Aras, which the Company and Thai Bitumen brought to arbitration. The arbitration award denied all the disputed claims by ARAS, except that KOC shall accept the share acquisition payment amounting to MYR 5 million which was made by Aras to KOC on 3 March 2008. KOC registered additional capital amounting to MYR 5 million belonging to Aras in July 2011. As a result, the shareholdings of the Company and its subsidiaries in KOC and KBC decreased by 2.14 percent and 0.96 percent, respectively. The Company recorded the change in the subsidiaries’ interest under the caption of “Change in the Company’s interest in subsidiary which did not result in a loss of control” over the consolidated shareholders’ equity. Currently, the Federal Court of Malaysia is considering the appeal against the judgment of the Court of First Instance filed by Aras regarding the extraordinary general meeting of KOC’s shareholders because the said judgment was in favor of the Company and Thai Bitumen. The management of the Company and Thai Bitumen believed that the outcome of the appeal, which has not been reached, would not affect the value of the investments and the equity interests of the Company and Thai Bitumen in KOC and KBC. As at 31 December 2013, the value of the Company’s investment costs in KOC and KBC accounted for under the cost method in the separate financial statements were higher than the Company’s attributable equity interests in these subsidiaries by Baht 477 million (2012: Baht 553 million). The Company believed that the recoverable benefits from these investments would exceed their costs. Therefore, no allowance for impairment was made in the account.

11. Investment in associate 11.1 Details of associate: (Unit: Thousand Baht) Consolidated financial statements Company’s name

Colasie Co., Ltd.

Shareholding percentage 2013

2012

(%)

Carrying amounts based on equity method

Cost 2013

2012

2013

2012

18,404

110,521

60,649

18,404

110,521

60,649

(Registered under the law of France) (Holding company) Total investment in associate

ANNUAL REPORT 2013

105

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

(Unit: Thousand Baht) Separate financial statements Company’s name

Shareholding percentage

Colasie Co., Ltd.

2013

2012

(%)

Cost 2013

Total investment in associate

Carrying amounts based on cost method 2012

2013

2012

18,404

11.2 Share of profit and dividend received

During the years, the Company has recognised its share of profit from investment in associate in the consolidated

financial statements and dividend income in the separate financial statements as follows: (Unit: Thousand Baht)

Company’s name

Consolidated financial statements

Separate financial statements

Share of profit from investment in associate during the year

Di vidend received during the year by the Company

2013

2012

2013

2012

Colasie Co., Ltd.

46,207

35,323

16,789

Total

46,207

35,323

16,789

11.3 Summarised financial information of associate

Financial information of the associate is summarised below. (Unit: Million Euro)

Company’s name

Colasie Co., Ltd.

106

ANNUAL REPORT 2013

Paid-up capital as at 31 December

Total assets as at 31 December

Total liabilities as at 31 December

Total revenues for the year ended 31 December

Profit for the year ended 31 December

2013

2012

2013

2012

2013

2012

2013

2012

2013

2012

1.04

3.04

2.61

0.01

2.87

2.26

2.83

2.20

Tipco Asphalt Public Company Limited

12. Investment properties

The net book value of investment properties as at 31 December 2013 and 2012 are presented below. (Unit: Thousand Baht) Consolidated financial statements The Company’s land, buildings and equipment located at Petchburi Plant

As at 31 December 2013: Cost

Land of Thai Bitumen

Total

268,377

383,608

651,985

(138,692)

Less Allowance for diminution in value Net book value

(95,885) 33,800

(217,975) 165,633

(313,860) 199,433

As at 31 December 2012: Cost Less Accumulated depreciation Less Allowance for diminution in value Net book value

268,377 (138,692) (95,885) 33,800

383,608 (217,975) 165,633

651,985 (138,692) (313,860) 199,433

Less Accumulated depreciation

(Unit: Thousand Baht) Separate financial statements The Company’s land, buildings and equipment located at Petchburi Plant

The Company’s land for rent located at Suratthani Province

Total

As at 31 December 2013: Cost Less Accumulated depreciation Less Allowance for diminution in value Net book value

268,377 (138,692) (95,885) 33,800

76,960 (10,108) 66,852

345,337 (148,800) (95,885) 100,652

As at 31 December 2012: Cost Less Accumulated depreciation Less Allowance for diminution in value Net book value

268,377 (138,692) (95,885) 33,800

76,960 (9,562) 67,398

345,337 (148,254) (95,885) 101,198

A reconciliation of the net book value of investment properties for 2013 and 2012 is presented below.

(Unit: Thousand Baht) Consolidated financial statements 2013

Separate financial statements

2012

2013

2012

199,433

204,200

101,198

101,745

Depreciation charged during the year

(546)

(547)

Impairment loss recorded during the year

(4,767)

199,433

100,652

101,198

Net book value at beginning of year

Net book value at end of year

ANNUAL REPORT 2013

107

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS The fair values of the investment properties, appraised by an independent professional valuer using the Sales Comparison Approach, as at 31 December 2013 and 2012 are stated below: (Unit: Thousand Baht) Consolidated financial statements 2013

The Companyâ&#x20AC;&#x2122;s land for rent located at Suratthani Province The Companyâ&#x20AC;&#x2122;s land, buildings and equipment located at Petchburi Plant Land of Thai Bitumen

Separate financial statements

2012

2013

2012

141,000

33,800

165,633

During the year 2012, Thai Bitumen received a letter from Land Office relating to investigation of revocation of some title deeds that had been issued illegally. The case currently has not been concluded. However, Thai Bitumen recorded impairment loss on the land of approximately Baht 4.8 million as an expense in profit or loss for 2012.

108

ANNUAL REPORT 2013

Accumulated depreciation As at 1 January 2012 Depreciation for the year Accumulated depreciation on disposal/write-off Transfer to assets held for sales (Note 9) As at 31 December 2012 Depreciation for the year Accumulated depreciation on disposal/write-off As at 31 December 2013 Allowance for impairment loss As at 1 January 2012 Increase during the year As at 31 December 2012 Increase during the year As at 31 December 2013

Cost As at 1 January 2012 Additions Disposals/write-off Transfer in (transfer out) Transfer to assets held for sales (Note 9) Interest capitalized As at 31 December 2012 Additions Disposals/write-off Transfer in (transfer out) Interest capitalized As at 31 December 2013

13. Property, plant and equipment

1,183 1,183

373,464 22,823 (993) 395,294

282,113 17,261 299,374 1,183 -

348,491 24,973 -

264,898 17,466 (251) -

20,835 1,756 22,591

20,835

1,690,599 211,721 (5,805) 1,896,515

1,481,570 217,179 (5,916) (2,234)

Machinery, tools and equipment

Buildings, building improvements and complements

Land and land improvement

775,639 11,877 (57,282) 40,074 770,308

737,442 22,955 (33,395) 49,592 (955) -

Furniture, office equipment and vehicles

609,310 41,975 (55,637) 595,648

601,192 39,161 (30,097) (946)

Furniture, office equipment and vehicles

Consolidated financial statements

3,839,114 33,569 (8,091) 315,868 4,180,460

625,460 (1,286) 4,275 628,449

633,720 6,021 639,741

3,777,545 66,693 (6,113) 3,923 (2,934) -

Machinery, tools and equipment

618,960 6,500 -

Buildings, building improvements and complements

627,369 1,608 (332) 5,075 -

Land and land improvement

Consolidated financial statements

302,328 91,358 393,686

324,121 77,556 (99,349)

Vessels

1,765,132 54,282 1,819,414

1,185,053 12,266 716,677 (148,864) -

Vessels

8,019,949 848,553 (66,659) 4,892 8,806,735

7,330,357 866,265 (39,840) (152,753) 15,920

Total

Construction in progress and equipment under installation

22,018 1,756 23,774

1,183 20,835

3,257,814 385,138 (62,435) 3,580,517

3,020,272 376,335 (36,264) (102,529)

Total

(Unit: Thousand Baht)

380,884 748,825 (366,238) 4,892 768,363

383,988 762,743 (781,767) 15,920

Construction in progress and equipment under installation

(Unit: Thousand Baht)

Tipco Asphalt Public Company Limited

ANNUAL REPORT 2013

109

110

ANNUAL REPORT 2013

252,899

19,744

339,184

16,599

255,141

3,145

350,424

8,916 (5,771)

Buildings, building improvements and complements

2,288,823

2,027,012

27,469

128,137

(100,668)

(77,077)

(23,591)

Machinery, tools and equipment

As at 31 December 2013

Business transfer to subsidiary (Note 1)

443,799

5,066

Disposals/write-off

Transfer in (transfer out)

Additions

63 438,733

As at 31 December 2012

(332)

Disposals/write-off

Transfer in (transfer out)

3,090

435,912

Additions

As at 1 January 2012

Cost

Land and land improvement

216,625

3,177

(1,281)

214,729

644

5,732

208,353

complements

Buildings, building improvements and

Machinery, tools and equipment

508,240

(1,546)

8,954

(1,844)

2,614

500,062

1,249

(2,881)

7,165

494,529

176,591

165,933

1,931

2,327

(396)

(233)

(163)

Furniture, office equipment and vehicles

572,079

(322)

30,901

(31,389)

6,348

566,541

16,796

(22,017)

21,395

550,367

Furniture, office equipment and vehicles

Separate financial statements

2013 (Baht 306 million included in manufacturing cost, and the balance in selling expenses and administrative expenses)

2012 (Baht 281 million included in manufacturing cost, and the balance in selling expenses and administrative expenses)

Depreciation for the year

As at 31 December 2013

As at 31 December 2012

Net book value

As at 31 December 2013

Translation adjustments during the year

As at 31 December 2012

Translation adjustments during the year

As at 1 January 2012

Translation adjustments

Land and land improvement

Consolidated financial statements

(96,306)

96,306

Vessels

1,425,728

1,462,804

Vessels

385,138

376,335

5,246,623

4,595,801

44,179

188,495

(144,316)

(83,081)

(61,235)

Total

19,181

(48,098)

60,458

6,821

(18,752)

6,821

18,752

Construction in progress and equipment under installation

1,759,924

(98,174)

(34,514)

69,420

1,823,192

(25,230)

44,203

1,804,219

Total

(Unit: Thousand Baht)

763,398

334,487

(4,965)

41,432

(46,397)

Construction in progress and equipment under installation

(Unit: Thousand Baht)

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

1,183

As at 31 December 2013

120,131

50,885

(46,754)

1,333

19,181

6,821

455,784

490,570

1,183

1,302,957

(48,505)

(34,114)

54,137

1,331,439

(24,856)

59,116

1,297,179

Total

54,137

25,745

108,228

451,948

(322)

(31,280)

25,223

45,421

4,563

40,858

Vessels

Construction in progress and equipment under installation

2013 (Baht 25 million included in manufacturing cost, and the balance in selling expenses and administrative expenses)

46,569

21,941

482,495

(1,429)

534

(1,844)

7,113

458,313

(21,731)

25,300

454,744

Furniture, office equipment and vehicles

59,116

244,158

52,011

170,056

(990)

8,328

478,121

(2,874)

7,594

473,401

Machinery, tools and equipment

2012 (Baht 26 million included in manufacturing cost, and the balance in selling expenses and administrative expenses)

Depreciation for the year

As at 31 December 2013

As at 31 December 2012

250,684

1,183

As at 31 December 2012

Net book value

1,183

198,458

(548)

As at 1 January 2012

Allowance for impairment loss

As at 31 December 2013

Business transfer to subsidiary (Note 1)

Transfer in (transfer out)

Accumulated depreciation on disposal/ write-off

12,140

Depreciation for the year

162,718

(251) 186,866

8,867

153,851

complements

Buildings, building improvements and

12,792

174,325

As at 31 December 2012

Accumulated depreciation on disposal/ write-off

Depreciation for the year

As at 1 January 2012

Accumulated depreciation

Land and land improvement

Separate financial statements

(Unit: Thousand Baht)

Tipco Asphalt Public Company Limited

ANNUAL REPORT 2013

111

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS During the year 2013, an overseas subsidiary assessed machinery, tools and equipment and found that some of machinery, tools and equipment were not appropriate for its current operations and needed replacement. The subsidiary therefore recorded impairment loss of machinery, tools and equipment amounting to USD 0.1 million (2012: USD 0.7 million) as expense in profit or loss. During the year 2013, borrowing costs totaling approximately Baht 5 million were capitalised as cost of the vessel (2012: Baht 16 million). The weighted average rate used to determine the amount of borrowing costs eligible for capitalisation was 3% (2012: 5%). As at 31 December 2013, certain building and equipment items had been fully depreciated but were still in use. The original cost of those assets amounted to approximately Baht 1,426 million (2012: Baht 1,436 million) (The Company Only: Baht 961 million, 2012: Baht 898 million).

14. Leasehold rights The Company and subsidiaries entered into agreements to lease buildings and land. The lease agreements can be summarised below.

Leasee

Country the leased asset located in

Lease period

Lease agreement ending year

Prepaid lease amount at inception of the lease

2031 2029 2050 2055 2055

1.4 million renminbi

(year)

1. The Company

China

2. A subsidiary in China

China China China

30 50 45

Malaysia

3. A subsidiary in China 4. A subsidiary in China 5. A subsidiary in Malaysia

5.7 million renminbi 6.9 million renminbi 2.5 million renminbi 19.8 million ringgit

The book value of the leasehold rights as at 31 December 2013 and 2012 can be summarised below. (Unit: Thousand Baht) Consolidated financial statements 2013

Cost Less Accumulated amortisation

Translation adjustment Net book value

Separate financial statements 2012

2013

2012

254,299

6,837

(44,859)

(39,122)

(2,963)

(2,735)

8,373

(7,305)

217,813

207,872

3,874

4,102

A reconciliation of the net book value of leasehold rights for the years 2013 and 2012 is presented below. (Unit: Thousand Baht) Consolidated financial statements 2013

2012

207,872

Amortisation Translation adjustments Net book value at end of year

Net book value at beginning of year

112

Separate financial statements

ANNUAL REPORT 2013

2013

2012

220,175

4,102

4,330

(5,737)

(5,697)

(228)

15,678

(6,606)

217,813

207,872

3,874

4,102

Tipco Asphalt Public Company Limited

15. Short-term loans from financial institutions (Unit: Thousand Baht) Consolidated financial statements 2013

Trust receipts

Separate financial statements 2012

2013

2012

9,164,536

8,158,510

9,164,536

8,158,510

Loans in renminbi

140,626

29,498

Loans in US Dollars

111,298

48,825

9,416,460

8,236,833

9,164,536

8,158,510

Total

As at 31 December 2013, the Company had short-term loans from local banks, which carry interest at the rates of 0.85 percent per annum (2012: 0.9 to 1.2 percent per annum). In addition, overseas subsidiaries had short-term loans from overseas financial institutions, which carry interest at the rates ranging from 2.1 to 7.2 percent per annum (2012: 5.2 to 7.9 percent per annum).

16. Trade and other payables

(Unit: Thousand Baht) Consolidated financial statements 2013

Separate financial statements 2013

2012

4,735

11,165

444,577

339,036

1,233,559

1,894,277

1,031,012

1,748,531

Amounts due to related parties (Note 7)

40,463

36,108

43,080

34,936

Accounts payable from price hedging contracts

60,952

214,271

191,548

92,299

73,849

57,835

69,739

10,404

15,665

1,611,815

2,202,837

1,682,324

2,212,017

Trade payables - related parties (Note 7) Trade payables - unrelated parties

Accrued expenses Other payables Total trade and other payables

2012

ANNUAL REPORT 2013

113

114

ANNUAL REPORT 2013

Borrower

Fixed rate for the first three years and for the fourth to the fifth years at a rate referenced to BIBOR Fixed rate for the first three years and for the fourth to the eighth years at a rate referenced to BIBOR Rate referenced to THBFIX (2012: Rate referenced to USD LIBOR)

(5) Alpha Maritime Company Limited

(6) Tasco Shipping Company Limited

(7) Tasco Shipping Company Limited

Rate referenced to Lenderâ&#x20AC;&#x2122;s Cost of Funds

(10) Kemaman Bitumen Company Sdn Bhd

Long-term loans from financial institutions - net of current portion

Less: Current portion

Total

Rate referenced to Lenderâ&#x20AC;&#x2122;s Cost of Funds

(9) Kemaman Bitumen Company Sdn Bhd

Long-term loans in USD from bank in Malaysia

(8) Alpha Maritime Company Limited

Rate referenced to LIBOR

Rate referenced to THBFIX

(4) Bitumen Marine Company Limited

Long-term loans in USD from bank in Thailand

Quarterly installments, as stipulated in the agreement, commencing June 2012

Fixed rate for the first two years and for the third to the eighth years at a rate referenced to THBFIX

(3) The Company

Quarterly installments of USD 1.10 million each, commencing November 2012 to August 2017

Quarterly installments of USD 0.83 million each, commencing November 2011 to August 2016

Quarterly installments as stipulated in the agreements, commencing July 2015

Quarterly installments as stipulated in the agreements, commencing October 2012

Quarterly installments as stipulated in the agreement, commencing May 2012

Quarterly installments as stipulated in the agreement, commencing April 2012

Quarterly installments of Baht 9.2 million each, commencing December 2010 to September 2013

Quarterly installment, totalling Baht 200 million for 2011 and Baht 240 million for 2012 to 2015

Rate referenced to THBFIX

(2) The Company

Monthly installments of Baht 0.3 million each, commencing April 2009 to March 2014

Repayment schedule

Fixed rate

Interest rate

(1) The Company

Long-term loans in Baht from Bank in Thailand

Loan

17. Long-term loans from financial institutions

2,960,896 (596,304) 2,364,592

(688,821) 2,179,870

389,545

381,363

503,777

185,400

47,550

27,470

701,250

720,000

4,541

2012

2,868,691

613,615

299,588

199,673

424,615

168,400

37,800

645,000

480,000

2013

Consolidated financial statements

772,500

(352,500)

1,125,000

645,000

480,000

2013

1,103,408

(322,383)

1,425,791

701,250

720,000

4,541

2012

Separate financial statements

(Unit: Thousand Baht)

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

Tipco Asphalt Public Company Limited

Loan No. (7) of Tasco Shipping Company Limited : In April 2013, Tasco Shipping Company Limited has amended longterm loan agreement from a local bank to change currency from United States Dollar to Thai Baht and the interest rate of long-term loan from interest rate with referenced to LIBOR to interest rate with referenced to THBFIX. As at 31 December 2013, the long-term credit facilities of a subsidiary which has not yet been drawn down amounted to USD 6.1 million. Loan covenants The loan agreements of the Company and its subsidiaries contain certain restrictive covenants pertaining to, among others things, the maintenance of financial ratios, the prohibition from creating lien over assets, the loan to related parties, the maintenance of trade accounts receivable and inventory balance, restriction on dividend payment, the maintenance of shareholders and the limitation on creation of additional long-term debt. Interest rate swap agreements In May 2009, the Company entered into an interest rate swap agreement to swap a floating interest rate on a longterm loan from a local bank to a fixed rate interest at 4.365 percent per annum. As at 31 December 2013, the notional amount of Baht 480 million (2012: Baht 720 million) was outstanding. The notional amount reduces on a quarterly basis in accordance with the long-term loan repayment schedule of the Company in (2), starting from May 2009 and matures in November 2015. In May 2012, the Company entered into an interest rate swap agreement to swap a floating interest rate on a long-term loan from a local bank to a fixed interest rate at 5.21 percent per annum. As at 31 December 2013, the notional amount of Baht 645 million (2012: Baht 701 million), was outstanding, and this will reduce every quarter in accordance with the related long-term loan repayment schedule of the Company in (3), starting from June 2012 and ending when the loan mature in March 2018. In December 2013, Kemaman Bitumen Company Sdn Bhd entered into an interest rate swap agreement to swap a floating interest rate on a long-term loan from a bank in Malaysia to a fixed interest rate at 0.2416 percent per annum. As at 31 December 2013, the notional amount of USD 29 million was outstanding, and this will mature in January 2014.

18 Credit facilities The credit facilities of the Company and its subsidiaries granted by financial institutions are secured by the following collaterals: a)

The guarantees by the Company, its subsidiaries and a shareholder of a subsidiary.

The pledges/mortgages by the assets of subsidiaries of which the net book value as at 31 December 2013 and

2012 of the assets are summarised below. (Unit: Million Baht) Consolidated financial statements

Leasehold rights - net

Property, plant and equipment - net Computer software - net

2013

2012

201

151

3,524

2,880

1 ANNUAL REPORT 2013

115

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS c)

The prohibition from creating lien over assets of the Company and its subsidiaries.

Financial support letters provided by the Company and its subsidiaries to banks.

The Company allows its subsidiaries to use its facilities obtained from banks, with the Company responsible to the

banks for the amounts drawn down by the subsidiaries.

19. 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) Consolidated financial statements

Balance at beginning of year Defined benefit plans: Current service cost

Interest cost

Benefits paid during the year

Long service awards: Balance at end of year

Separate financial statements

2013

2012

2013

2012

69,231

65,129

56,822

52,778

6,604 (8,135)

7,641 2,324 (4,234)

5,148 2,004 (8,135)

(372)

(1,629)

(294)

69,822

69,231

55,545

6,023 1,889 (2,580) (1,288) 56,822

2,494

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

Separate financial statements

2013

2012

2013

2012

Current service cost

6,826

7,857

5,303

6,175

Interest cost

2,571

2,412

2,058

1,950

Total expense recognised in profit or loss

9,397

10,269

7,361

8,125

Line items under which such expenses are included in profit or loss Cost of sales Selling and administrative expenses

944

1,232

331

628

8,453

9,037

7,030

7,497

Principal actuarial assumptions at the valuation date were as follows: Consolidated/Separate financial statements

Discount rate

116

2013

2012

(% per annum)

3.9

Future salary increase rate (depending on age of employee)

3.0 - 8.0

Staff turnover rate (depending on age of employee)

0.0 - 14.0

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

20. Share capital The Annual General Meeting of the shareholders held on 5 April 2013 approved the following resolutions. Decrease of share capital Decrease the Company’s registered capital by Baht 1,838,000 from Baht 1,700,437,290 (170,043,729 ordinary shares of Baht 10 each) to Baht 1,698,599,290 (169,859,929 ordinary shares of Baht 10 each), by decreasing the ordinary shares reserved for the exercise of ESOP-W1 and ESOP-W2 of 183,800 shares at the par value of Baht 10 each. The Company registered the capital decrease on 18 April 2013. Increase of share capital 1. Increase the Company’s registered capital by Baht 12,000,000 from Baht 1,698,599,290 (169,859,929 ordinary

shares of Baht 10 each) to Baht 1,710,599,290 (171,059,929 ordinary shares of Baht 10 each), through the issue of

1,200,000 new ordinary shares of Baht 10 each.

2. Allocate and reserve the 1,200,000 new ordinary shares to support the exercise of the ESOP-W3 warrants (Note 22). The Company registered the capital increase on 19 April 2013. Below is the summarisation of the exercise of ESOP-W1 warrants in 2013. No. of warrants exercised (warrants)

32,800

No. of ordinary shares issued (shares)

32,800

Amount of cash received (Baht) Share registration date Issued and paid-up share capital after share registration

2,039,832 9 July 2013 Baht 1,525,808,680 (152,580,868 ordinary shares of Baht 10 each)

21. Warrants to purchase new ordinary shares of the Company issued to the Company’s shareholders The Annual General Meeting of the shareholders held on 5 April 2011 approved the issuance of the warrants to purchase new ordinary shares of the Company (TASCO-W3) without charge to the Company’s shareholders, at a rate of 10 existing ordinary shares for 1 TASCO-W3 warrant. Each TASCO-W3 can be exercised to purchase 1 new ordinary share at the following exercise prices:

Exercise month (from date of issuance)

Exercise price (Baht per share)

Months 1 to 12

62.19

Months 13 to 18

63.74

Months 19 to 24

65.30

Months 25 to 30

66.85

Months 31 to 36

68.41

The exercise prices are subject to change according to the conditions of any rights adjustment. The holders of TASCO-W3 are able to exercise their rights to purchase the Company’s ordinary shares from the last ANNUAL REPORT 2013

117

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS business day of the month in which such warrants are issued (18 April 2011). TASCO-W3 warrants have a term of 3 years. The Stock Exchange of Thailand approved the listing of TASCO-W3 warrants, and the warrants began trading on 6 May 2011. As at 31 December 2013, the remained unexercised of TASCO-W3 was 15,253,916 units (2012: 15,253,916 units).

22. Warrants to purchase new ordinary shares of the Company issued to the executive directors and/or employees of the Company and subsidiaries (ESOP) The Annual General Meetings of the shareholders each approved the issuance of 1,200,000 warrants each time to purchase new ordinary shares of the Company to the executive directors and/or employees of the Company and its subsidiaries, without charge. Details of these issues of ESOP warrants are summarised below.

ESOP-W1

ESOP-W2

ESOP-W3

5 April 2011

27 April 2012

5 April 2013

62.19 Baht per share

49.13 Baht per share

53.06 Baht per share

18 April 2011

18 May 2012

30 April 2013

1,088,100 warrants

1,128,700 warrants

1,182,600 warrants

111,900 warrants

71,300 warrants

17,400 warrants

Annual General Meeting of

the shareholders date

Exercise price Issue date Number of warrants subscribed Number of warrants unsubscribed

Each ESOP warrant can be exercised to purchase 1 new ordinary share at the exercise prices specified above. However, these exercise prices are subject to change in accordance with the conditions of any subsequent rights adjustment. The holders of ESOP-W1 and ESOP-W2 warrants can exercise their rights to purchase the Companyâ&#x20AC;&#x2122;s ordinary shares after the second year and the holders of ESOP-W3 can exercise their rights to purchase the Companyâ&#x20AC;&#x2122;s ordinary shares after the third year counting from the warrant issuance date. Moreover, they must still be executive directors and/or employees of the Company or its subsidiaries on the date the warrants are exercised. The warrants have terms of 5 years. The Company plans to cancel the unallocated ESOP warrant specified above later. The expenses recognised for employee services received during 2013 of the Company and its subsidiaries were totaled Baht 10 million (2012: Baht 8 million) (Separate financial statements Baht 9 million (2012: Baht 6 million)). The fair value of option granted and the inputs of the model used are summarised below. ESOP-W1

ESOP-W2

ESOP-W3

Baht 12.10 per share

Baht 5.41 per share

Baht 27.63 per share

Dividend yield

3.75%

2.58%

1.79%

Expected stock volatility*

40.0%

45.4%

43.3%

Risk-free interest rate

2.82%

3.30%

3.03%

Expected life of share options

2 years

3 years

Black-Scholes

Fair value of options granted

Model used

118

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

*The expected volatility of the share options is based on historical data of the Companyâ&#x20AC;&#x2122;s stock price. As at 31 December 2013, the remain unexercised of ESOP are summarized below. 2013

2012

ESOP-W1

932,300 units

1,077,200 units

ESOP-W2

1,009,800 units

1,128,700 units

ESOP-W3

1,128,600 units

23. 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 income 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.

24. Compensation received from claims for damages In 2011, the tribunal for arbitration between Thai Bitumen Company Limited (Thai Bitumen) and an overseas company awarded in favor of Thai Bitumen over a sales contract, where the counterparty had failed to make contracted delivery of goods to Thai Bitumen. The award was approximately USD 20.2 million plus interest of approximately USD 1.7 million. In late 2011, Thai Bitumen received the awarded amount and recorded the cash receipt, which net of expenses relating to this matter amounted to Baht 74 million, as income in profit or loss for 2011. In 2012, Thai Bitumen received a sum of USD 1.6 million being the claim for reimbursement expenses incurred from the same case. Thai Bitumen recorded the cash receipt as income in the consolidated profit or loss for 2012 and the case has been fully settled accordingly.

25. Expenses by nature Significant expenses by nature are as follows: (Unit: Million Baht) Consolidated

Separate

financial statements

2013

2012

2013

2012

Salary and wages and other employee benefits

725

613

326

290

Depreciation and maintenance expenses

514

507

103

108

31,857

35,070

30,854

34,289

Costs related to production of goods and

services (excluding of staff cost, depreciation

and maintenance expenses)

ANNUAL REPORT 2013

119

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

26. Income tax Income tax expenses for the years ended 31 December 2013 and 2012 are made up as follows: (Unit: Thousand Baht) Consolidated

Separate

financial statements

2013

2012

2013

2012

117,514

77,989

76,868

40,012

3,425

(11,267)

(1,343)

(5,452)

765

50,061

12,807

4,959

121,704

129,590

75,525

39,519

Current income tax: Current income tax charge Deferred tax: Relating to origination and reversal of temporary differences Utilisation of tax loss carried forward

during the year

Effects of changes in the applicable tax rates Income tax expense reported in the statement of

comprehensive income

The amounts of income tax relating to each component of other comprehensive income for the years ended 31 December 2013 and 2012 are as follows: (Unit: Thousand Baht) Consolidated financial statements

Deferred tax relating to change in fair value of

interest rate swap contract

Effects of changes in the applicable tax rates

120

ANNUAL REPORT 2013

Separate financial statements

2013

2012

2013

2012

248

371

248

371

174

248

545

248

545

Tipco Asphalt Public Company Limited

Reconciliation between income tax expenses and the product of accounting profit multiplied by the applicable tax rates for the years ended 31 December 2013 and 2012 are as follows:

(Unit: Thousand Baht)

Accounting profit before tax

Consolidated

Separate

financial statements

2013

2012

2013

2012

983,311

805,439

505,780

493,425

196,662

185,251

101,156

113,488

(27,782)

(50,065)

12,807

4,959

(62,770)

(47,143)

(25,016)

(31,217)

15,823

30,174

2,902

3,904

(297)

(616)

(297)

(616)

(878)

(3,220)

(50,999)

15,526

28,680

(615)

(47,711)

121,704

129,590

75,525

39,519

Income tax at Thai corporate income tax rate of

20% (2012: 23%)

Adjustment in respect of current income tax of

previous year

Utilisation of previously unrecognised tax losses Effects of changes in the applicable tax rates Difference in tax rate in group companies Effects of:

Non-deductible expenses

Additional expense deductions allowed

Exemption of income

Total Income tax expenses reported in the statement

of comprehensive income

The tax rates enacted at the end of the reporting period of the Company and its subsidiaries is 0% to 25% (2012: 0% to 25%).

ANNUAL REPORT 2013

121

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS The components of deferred tax assets and deferred tax liabilities are as follows: (Unit: Thousand Baht) Consolidated financial statements

Separate financial statement

2013

2012

2013

2012

Provision for long-term employee benefits

13,964

13,846

11,109

11,364

Allowance for doubtful accounts

21,278

25,559

13,967

15,031

1,887

521

656

417

Allowance for asset impairment

63,018

19,414

Fair value of price hedging contracts

23,963

2,542

23,963

2,542

8,880

10,723

6,789

4,795

132,990

116,209

75,898

53,563

(26,919)

(5,472)

(26,919)

(5,472)

Difference depreciation for tax purpose

(3,338)

(2,331)

(2,795)

(1,984)

Fair value of forward exchange contracts

(325)

(1,560)

(312)

(1,330)

Total

(30,582)

(9,363)

(30,026)

(8,786)

Deferred tax assets - net

102,408

106,846

45,872

44,777

Deferred tax assets

Reduce cost of inventories to net realisable value

Others Total Deferred tax liabilities Fair value of price hedging contracts

The Company and its subsidiaries in Thailand calculated deferred tax assets and liabilities based on a reduction in the corporate income tax rate from 30 percent to 23 percent in 2012, and then to 20 percent in 2013 and 2014, in compliance with Royal Decree dated December 2011 governing corporate income tax reduction. As at 31 December 2013 the two subsidiaries have deductible temporary differences and unused tax losses totaling Baht USD 74 million and 5 million ringgit (2012: USD 80 million and 5 million ringgit), on which deferred tax assets have not been recognised as these subsidiaries believe that future taxable profits may not be sufficient to allow utilisation of the temporary differences and unused tax losses.

122

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

27. Promotional privileges The Company and its subsidiaries were granted investment promotional privileges by the Board of Investment. Important tax privileges granted to the companies are summarised below.

Tipco Asphalt Public Company Limited Manufacture of asphalt Raycol Asphalt Company Limited Manufacture of asphalt Bitumen Marine Company Limited Marine transportation

Exemption from corporate income tax for 8 years commencing from

50% reduction of corporate income tax rate for 5 years commencing from

1 December 2000

2 December 2008

2 May 2001

3 May 2009

9 February 2006*

24 May 2011* 19 December 2012*

28 June 2011*

Tasco Shipping Company Limited Marine transportation Alpha Maritime Company Limited Marine transportation

*Exemption of corporate income tax not exceeding of the stipulated amount. In addition, Kemaman Bitumen Company Sdn Bhd received tax privilege in reduction of corporate income tax in Malaysia from the stipulated investment amount.

28. Tax privileges for maritime commerce The Company and two subsidiaries, Delta Shipping Company Limited and Bitumen Marine Company Limited, are entitled to withholding income tax privileges under Revenue Department Instruction No. Por 110/2545 since they are international marine transportation business operators, whereby income from vessel rental is subject to withholding tax at a rate of 1%. Moreover, the Company and the subsidiaries are exempted from corporate income tax on their income from international marine transportation under Announcement of the Director-General of the Revenue Department No. 72.

29. Earnings per share Basic earnings per share is calculated by dividing profit for the period attributable to equity holders of the Company (excluding other comprehensive income) by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share is calculated by dividing profit for the period 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 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. However, TASCO-W3 was not included in calculation of diluted earnings per share for the year ended 31 December 2013 and there is no calculation of diluted earnings per share for the year ended 31 December 2012 since the exercise prices to purchase ordinary shares of the Company were higher than the average market price of the Companyâ&#x20AC;&#x2122;s shares for the years. The following tables set forth the computation of basic and diluted earnings per share: ANNUAL REPORT 2013

123

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS .

Consolidated financial statements

Profit for the year

Weighted average number of ordinary shares

Earnings per share

2013

2012

2013

2012

2013

2012

(Thousand Baht)

(Thousand shares)

(Baht)

831,449

642,274

152,565

152,548

5.45

4.21

ESOP-W1

ESOP-W2

246

ESOP-W3

129

393

831,449

642,274

152,958

152,548

Basic earnings per share Profit attributable to equity

holders of the Company

Effect of potential ordinary shares

Diluted earnings per share Profit of ordinary shareholders assuming the conversion of warrants to ordinary shares

5.44

4.21

Separate financial statements Weighted average number of ordinary shares

Profit for the year

Earnings per share

2013

2012

2013

2012

2013

2012

(Thousand Baht)

(Thousand shares)

(Baht)

430,255

453,906

152,565

152,548

2.82

2.98

ESOP-W1

ESOP-W2

246

ESOP-W3

129

393

430,255

453,906

152,958

152,548

2.81

2.98

Basic earnings per share Profit attributable to equity holders of the Company Effect of potential ordinary

Diluted earnings per share Profit of ordinary shareholders assuming the conversion of warrants to ordinary shares

30. Segment information The Company and its subsidiaries are engaged in single operating segment which is manufacturing and trading of asphalt and petroleum oil products. Whereas, the marine logistic business complements the manufacturing and trading of asphalt and petroleum oil products. The Board of Directors of the group is the chief operating decision makers of the Company and its subsidiaries. As a result, all of the revenues, operating profits and assets as reflected in these financial statements pertain to the aforementioned reportable operating segment. Therefore, financial information by segment has been presented only by geographical based on locations of each company, as follows:

124

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

(Unit: Million Baht) Geographic segment located Geographic segment located in Thailand in overseas

Eliminated transactions

2013

2012

2013

2012

Revenue from external customers

28,629

33,542

5,306

4,121

Inter segment revenues

4,567

4,057

766

1,118

33,196

37,599

6,072

693

547

130

Total revenue Segment operating income

2013

2012

Total 2013

2012

33,935

37,663

(5,333)

(5,175)

5,239

(5,333)

(5,175)

33,935

37,663

124

(29)

831

642

Non-current assets (other than deferred tax assets-net) (Unit: Million Baht) Geographic segment located Geographic segment located in Thailand in overseas

Non-current assets

Eliminated transactions

Total

2013

2012

2013

2012

2013

2012

2013

2012

2,708

2,550

3,245

2,691

5,953

5,241

Transfer prices between the segments are as set out in Note 7 to the financial statements.

31. Provident fund The Company, its subsidiaries and their employees have jointly established a provident fund in accordance with the Provident Fund Act B.E. 2530. Both employees and the Company and its subsidiaries contribute to the fund on a monthly basis. The fund, which is managed by CIMB-Principal Asset Management Co., Ltd., will be paid to employees upon termination in accordance with the fund rules. During 2013, the Company and its subsidiaries contributed Baht 9 million (2012: Baht 8 million) to the fund (Separate financial statements: Baht 8 million, 2012: Baht 7 million).

32. Dividend (Unit: Million Baht) Dividends

Final dividends for 2011

Approved by

Total dividends

Dividend per share

Annual General Meeting of the shareholders on 27 April 2012

191

1.25

191

1.25

153

1.00

153

1.00

Total for 2012

Interim dividends for 2013 Total for 2013

Board of Directorsâ&#x20AC;&#x2122; meeting on 14 August 2013

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REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

33. Commitments and contingent liabilities 33.1 Capital commitment As at 31 December 2013 and 2012, the Company and its subsidiaries had outstanding capital commitments relating to the purchase of land, machinery, equipment, computer software and vessel, as follows: Foreign currency

Consolidated financial statements

Separate financial statements

2013

2012

2013

2012

(Million)

Baht Ringgit US Dollar

33.2 Operating lease commitments The Company and its subsidiaries have entered into several agreements in respect of the lease of buildings, warehouses and motor vehicles, and other service agreements. The terms of the agreements are generally between 1 and 4 years. Future minimum rental and service fees payable under these agreements were as follows: Separate financial statements

Consolidated financial statements Million Baht

Million ringgit

Million Baht

2013

2012

2013

2012

2013

2012

Payable within: 1 year

2 to 5 years

31 45

1 -

34 26

32 39

33.3 Long-term service commitments Service agreements with Colas S.A. to receive management and marketing services and advice on methods and systems of management and technical assistance in the manufacture of Asphalt Emulsion and Modified Asphalt: Counterparty

Agreement term

Expiry date

Fee

The Company

5 years

31 December 2017

Annual lump sum administrative fee of Euro 145,000 plus a technical assistance fee equivalent to 0.75 percent of the consolidated revenues of the Company generated from the stipulated products

A subsidiary

5 years

30 September 2017

Annual fee of at least Baht 8 million

33.4 Crude oil purchase commitments As at 31 December 2013, the Company had outstanding commitment in respect of the purchase of crude oil approximately 0.8 million barrels (2012: 0.8 million barrels).

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Tipco Asphalt Public Company Limited

33.5 Bank guarantees As at 31 December 2013 and 2012, there were outstanding bank guarantees issued by the banks on behalf of the Company and its subsidiaries in respect of certain performance bonds as required in the normal course of business which are summarised below. Foreign currency

Consolidated financial statements

Separate financial statements

2013

2012

2013

2012

(Million)

Baht

Ringgit

Renminbi

34. Financial instruments 34.1 Financial risk management The Company and its subsidiaries’ financial instruments, as defined under Thai Accounting Standard No. 107 “Financial Instruments: Disclosure and Presentations”, principally comprise cash and cash equivalents, trade and other receivables, trade and other payables, liabilities under finance lease agreements and loans. The financial risks associated with these financial instruments and how they are managed are described below. Credit risk The Company and its subsidiaries are exposed to credit risk primarily with respect to trade accounts receivable and loans. The Company and its subsidiaries manage the risk by adopting appropriate credit control policies and procedures and therefore does not expect to incur material financial losses. In addition, the Company and its subsidia ries do not have high concentrations of credit risk since it has a large customer base. The maximum exposure to credit risk is limited to the carrying amounts of receivables and loans, as stated in statements of financial position. Interest rate risk The Company and its subsidiaries’ exposure to interest rate risk relates primarily to its cash at banks, short-term loans from banks, liabilities under finance lease agreements and long-term borrowings. However, since most of the Company and its subsidiaries’ 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.

ANNUAL REPORT 2013

127

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS (Unit: Million Baht) Consolidated financial statements As at 31 December 2013 Fixed interest rates Within 1 year

1-5 years

Floating interest rate

Noninterest bearing

Total

Interest rate (% p.a.)

Financial Assets Cash and cash equivalents Trade and other receivables

433

495

0.3 - 2.4

3,967

Financial liabilities Short-term loans from financial institutions

9,416

0.9 - 7.2

Trade and other payables

1,612

Liabilities under finance lease agreements

7 -

8 -

2,869

15 2,869

2.7 - 75.9 2.1 - 4.1

Long-term loans from financial institutions Long-term loans from related party

(Unit: Million Baht)

Consolidated financial statements As at 31 December 2012 Fixed interest rates Within 1 year

1-5 years

Floating

Non-

interest rate

interest bearing

Total

Interest rate (% p.a.)

Financial Assets Cash and cash equivalents

681

740

0.2 - 2.4

Trade and other receivables

5,348

8,237

0.9 - 7.9

Trade and other payables

2,203

Liabilities under finance lease agreements

2.7 - 75.9

Long-term loans from financial institutions

2,956

2,961

2.2 - 4.6

Long-term loans from related party

Financial liabilities Short-term loans from financial institutions

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ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

(Unit: Million Baht) Separate financial statements As at 31 December 2013 Fixed interest rates Within 1 year

1-5 years

Floating

Non-

interest rate

interest bearing

Total

Interest rate (% p.a.)

Financial Assets Cash and cash equivalents Trade and other receivables Short-term loans to related parties Financial liabilities Short-term loans from financial institutions Trade and other payables Liabilities under finance lease agreements Long-term loans from financial institutions

6 -

84 3,663 6

90 3,663 41

0.6 2.8

9,165 5 -

8 -

1,125

1,682 -

9,165 1,682 13 1,125

0.9 4.8 - 75.9 3.5 - 4.1

(Unit: Million Baht) Separate financial statements As at 31 December 2012 Fixed interest rates Within 1 year

1-5 years

Floating

Non-

interest rate

interest bearing

Total

Interest rate (% p.a.)

7 -

37 5,442 -

44 5,442 40

0.7 - 0.8 2.8

8,159 -

2,212

8,159 2,212

0.9 - 1.2 -

4.8 - 75.9

1,421

1,426

3.7 - 4.6

Foreign currency risk The Company and its subsidiariesâ&#x20AC;&#x2122; exposure to foreign currency risk arises mainly from trading transactions and borrowings that are denominated in foreign currencies. The Company and its subsidiaries seek to reduce risk by entering into forward exchange contracts when it considers appropriate. Generally, the forward contracts mature within one year. The balances of financial assets and liabilities of the Company and its subsidiaries denominated in foreign currencies are summarised below.

ANNUAL REPORT 2013

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REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Consolidated financial statements Foreign currency

Financial assets as at 31 December

Financial liabilities as at 31 December

Average exchange rate as at 31 December

2013

2012

2013

2012

(Million)

45 -

87 1

309 -

306 -

32.8 5.4

30.6 4.9

Yen

0.3

0.4

Ringgit

10.0

Vietnam Dong

0.0016

0.0015

Indonesia Rupiah

0.0027

0.0032

US Dollar Renminbi

2013

2012

(Baht per 1 foreign currency unit)

Separate financial statements Foreign currency

Financial liabilities as at 31 December

Average exchange rate as at 31 December

2013

2012

2013

2012

(Million)

US Dollar

118

303

288

32.8

30.6

Renminbi

5.4

4.9

HK Dollar

4.2

4.0

10.0

Ringgit

130

Financial assets as at 31 December

ANNUAL REPORT 2013

2013

2012

(Baht per 1 foreign currency unit)

Tipco Asphalt Public Company Limited

The Company and its subsidiaries outstanding foreign exchange contracts which maturity date within one year are summarised below. As at 31 December 2013 Consolidated financial statements

Foreign currency

US Dollar

Separate financial statements

Sold

Bought

Sold

Bought

amount

(Million)

Contractual exchange rate Sold

31.4 - 32.9 Baht per 1 US Dollar

Bought

31.7 - 32.8 Baht per 1 US Dollar

As at 31 December 2012 Consolidated financial statements

Foreign currency

US Dollar

Separate financial statements

Sold

Bought

Sold

Bought

amount

(Million)

30.6

18.6

29.1

18.6

Contractual exchange rate Sold

30.6 - 32.1 Baht per 1 US Dollar

Bought

30.6 - 30.9 Baht per 1 US Dollar

In addition, the Company and its subsidiaries are exposed to foreign exchange risk on their investments in overseas subsidiaries and associate. These investments are currently not hedged by derivative financial instruments. Risk from fluctuation in raw materials and finished goods prices The Company is exposed to risk from fluctuations in the price of raw materials and finished goods. To manage these risks, the Company has entered into price hedging contracts with banks to hedge the risk from fluctuation in such prices. As at 31 December 2013 and 2012, the outstanding price hedging contracts which maturity date within one year are summarised below. (Unit: Million Baht) Consolidated/Separate financial statement

Contracts presented as assets Contracts to sell finished goods

Four-ways collar options to purchase raw materials Total price hedging contracts presented as assets

2013

2012

135

Contracts presented as liabilities Contracts to sell raw materials

Contracts to sell finished goods Total price hedging contracts presented as liabilities

111

120

13 ANNUAL REPORT 2013

131

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

34.2 Fair value of financial instruments Since the majority of the Company and its subsidiaries’ 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. For derivatives, fair value is generally derived from quoted market prices, or based on generally accepted pricing models when no market price is available. A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument.

35. Capital management The primary objective of the capital management of the Company and its subsidiaries is to ensure that they have an appropriate financial structure and preserves the ability to continue their business as a going concern. The Group manages its capital position with reference to its debt-to-equity ratio. As at 31 December 2013, the Group’s debt-to-equity ratio was 2.44:1 (2012: 2.70:1) and the Company’s was 2.50:1 (2012: 2.60:1).

36. Approval of financial statements

132

These financial statements were authorised for issue by the Company’s authorised directors on 12 February 2014.

ANNUAL REPORT 2013

Tipco Asphalt Public Company Limited

COMPANY INFORMATION HEAD OFFICE

Tipco Tower, 118/1 Rama 6 Road, Samsen Nai, Phayathai District, Bangkok 10400, Thailand. Tel. +66 2273 6000 Fax. +66 2278 0043 Email : info@tipcoasphalt.com

PRODUCTION FACILITIES Domestic production facilities of the Tipco Asphalt Group are located as follows:

NAKHON RATCHASIMA

259 Soi Ror Por Chor 12032, Mittapap Road, Naklang, Soongnoen, Nakhon Ratchasima 30380 Tel. +66 4433 5495-9, +66 2273 6000 Ext. 3 Fax. +66 4433 5495-9 Ext. 14, +66 4433 5050

PHITSANULOK

271 Moo 15 Baan Wang Koom, Bangrakam, Phitsanulok 65140 Tel. +66 5537 1581-3, +66 2273 6000 Ext. 5 Fax. +66 5537 1461-2 Ext. 6360

PHUNPHIN (subsidiary)

139/5 Moo 3, Suratthani-Takuapa Road, Tharongchang, Phunphin District, Suratthani 84130 Tel. +66 7735 7214-6, +66 7735 7218, +66 2273 6000 Ext. 4 Fax. +66 7735 7217, +66 2273 6749 Ext. 4

THATHONG (subsidiary)

123 Moo 3, Suratthani-Kanchanadit Road, Bangkung, Muang District, Suratthani 84000 Tel. +66 7722 4683-5, +66 2273 6000 Ext. 7 Fax. +66 2273 6000 Ext. 5340

RAYONG (subsidiary)

93 Moo 5 Makumkoo, Nikompattana District, Rayong 21180 Tel. +66 3889 3641-5 Fax. +66 3889 3640

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COMPANY INFORMATION

OIL AND ASPHALT TERMINALS The Company operates domestic asphalt terminals and oil depots at the following locations:

PHRAPRADAENG

61 Moo 5, Suksawat Road, Bangjak, Phrapradaeng, Samut Prakan 10130 Tel. +66 2463 0169-70, +66 2817 5111-5, +66 2273 6000 Ext. 6 Fax. +66 2817 5117

THATHONG (subsidiary)

123 Moo 3, Suratthani-Kanchanadit Road, Bangkung, Muang District, Suratthani 84000 Tel. +66 7722 4683-5, +66 2273 6000 Ext. 7 Fax. +66 7792 2575, +66 2273 6749 Ext. 7

SUBSIDIARIES AND ASSOCIATED COMPANIES Juristic entities in which the Company has equity in excess of 10%.

SUBSIDIARIES IN THAILAND THAI BITUMEN CO., LTD. Nature of business Head Office Phunphin Thathong Plant Ordinary shares Registered capital Percentage holding

Producer and distributor of asphalt product It is also a holding company for Kemaman Oil Corporation Sdn. Bhd. (KOC) and Kemaman Bitumen Company Sdn. Bhd. (KBC), Malaysia. 118/1 Rama VI Rd., Samsen Nai, Phayathai,Bangkok 10400 Tel. +66 2273 6000 Fax. +66 2273 6030 139/5 Moo 3, Suratthani-Takuapa Road, Tharongchang, Phunphin District, Suratthani 84130 Tel. +66 7735 7214-6, +66 7735 7218, +66 2273 6000 Ext. 4 Fax. +66 7735 7217, +66 2273 6749 Ext. 4 123 Moo 3, Suratthani - Kanchanadit Road, Bangkung, Muang District, Suratthani 84000 Tel. +66 7722 4683-5, +66 2273 6000 Ext. 7 Fax. +66 7792 2575, +66 2273 6749 Ext. 7 15,000,000 Baht 1,500 million 99.99%

BITUMEN MARINE CO., LTD. Nature of business Head Office Ordinary shares Registered capital Percentage holding

134

ANNUAL REPORT 2013

Marine transportation 118/1 Rama VI Rd., Samsen Nai, Phayathai, Bangkok 10400 Tel. +66 2273 6000 Ext. 6774 Fax. +66 2271 3370 1,500,000 Baht 150 million 99.99%

Tipco Asphalt Public Company Limited

DELTA SHIPPING CO., LTD. Nature of business Head Office Ordinary shares Registered capital Percentage holding

Marine transportation 118/1 Rama VI Rd., Samsen Nai, Phayathai, Bangkok 10400 Tel. +66 2273 6000 Ext. 6774 Fax. +66 2271 3370 800,000 Baht 80 million 99.99%

ALPHA MARITIME CO., LTD. Nature of business Head Office Ordinary shares Registered capital Percentage holding

Marine transportation 118/1 Rama VI Rd., Samsen Nai, Phayathai, Bangkok 10400 Tel. +66 2273 6000 Ext. 6774 Fax. +66 2271 3370 180,000 Baht 18 million 99.99%

TIPCO MARITIME CO., LTD. Nature of business Head Office Ordinary shares Registered capital Percentage holding

Ship management and agency 118/1 Rama VI Rd., Samsen Nai, Phayathai, Bangkok 10400 Tel. +66 2273 6000 Ext. 6774 Fax. +66 2271 3370 20,000 Baht 2 million 99.97%

TASCO SHIPPING CO., LTD. Nature of business Head Office Ordinary shares Registered capital Percentage holding

Marine transportation 118/1 Rama VI Rd., Samsen Nai, Phayathai, Bangkok 10400 Tel. +66 2273 6000 Ext. 6774 Fax. +66 2271 3370 2,900,000 Baht 290 million 99.99 %

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COMPANY INFORMATION

RAYCOL ASPHALT CO., LTD. Nature of business Head Office Rayong Ordinary shares Registered capital Percentage holding

Producer and distributor of asphalt products 118/1 Rama VI Rd., Samsen Nai, Phayathai, Bangkok 10400 Tel. +66 2273 6000 Fax. +66 2273 6030 93 Moo 5 Makumkoo, Nikompattana District, Rayong 21180 Tel. +66 3889 3641-5 Fax. +66 3889 3640 11,100,000 Baht 111 million 41.44%

FOREIGN SUBSIDIARIES TASCO INTERNATIONAL (HONG KONG) LTD. Nature of business Address Registered capital Percentage holding

Holding company for investments in China Room 1A, 1st Floor, O.T.B. Building, 259-265 Des Voeux Road. Central, Hong Kong. Hong Kong Dollars 30.97 million 100%

KEMAMAN OIL CORPORATION SDN. BHD. Nature of business Address Registered capital Percentage holding

Holding company for investment in an asphalt refinery in Malaysia A-06-3A, Empire Tower, Empire Subang Jalan SS16/1, SS16 47500 Subang Jaya Selangor, Malaysia Tel. +603 5635 0998 Fax. +603 5635 0993 Malaysian Ringgit 250.7 million 63.12% (11.30% owned by the Company and 51.82% owned by Thai Bitumen Co., Ltd)

KEMAMAN BITUMEN COMPANY SDN. BHD. Nature of business Asphalt refinery in Malaysia Address A-06-3A, Empire Tower, Empire Suban Jalan SS16/1, SS16 47500 Subang Jaya Selangor, Malaysia Tel. +603 5635 0998 Fax. +603 5635 0993 Email: info@kbc.com.my Website: www.kbc.com.my Refinery address Plot PT 7195, Telok Kalong Industrial Area 24000 Kemaman Terenqqanu, Malaysia Registered capital Malaysian Ringgit 500 million Percentage holding 82.77% (44.81% held by Kemaman Oil Corporation Sdn. Bhd., 12.52% held by the Company and 11.82% held by Thai Bitumen Co., Ltd.)

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COMPANY INFORMATION

Tipco Asphalt Public Company Limited

TIPCO ASPHALT (CAMBODIA) CO., LTD. Nature of business Address Registered capital Percentage holding

Producer and distributor of asphalt products in Cambodia No. 67, St. 322, Sangkat Boeung Keng Kang I, Khan Chamkamon, Phnom Penh, Cambodia Mobile: +855 1273 9988 Tel: +855 2399 7991 Fax: +855 2399 7992 Email : tac@tipcoasphalt.com Riel 20 million 100%

ASSOCIATED COMPANIES COLASIE CO., LTD. Nature of business Address Registered capital Percentage holding

Holding company for investment in Asphalt Emulsion and Polymer Modified Asphalt plants in India 7, Place Rene Clair F-92653 Boulogne - Billancourt France Cedex Euro 1 million 40%

OTHER IMPORTANT INFORMATION Stock Code Registration No No. of Shares Issued Registered Capital Paid Up Capital Website

TASCO (Listed on the Stock Exchange of Thailand - SET) 0107535000044 152,580,868 Shares 1,710,599,290 Baht 1,525,808,680 Baht www.tipcoasphalt.com

Registrar of Shares Thailand Securities Depository Co., Ltd. 7th Floor, The Stock Exchange of Thailand Building 62 Ratchadaphisek Road, Klongtoey, Bangkok 10110 Tel. +66 2229 2878 Fax. +66 2654 5642, +66 2654 5645 Auditor

Mr. Supachai Phanyawattano, Certified Public Accountant Registration No. 3930 and/or Mr.Termphong Opanaphan Certified Public Accountant Registration No. 4501 and/or Mr. Khitsada Lerd wana Certified Public Accountant Registration No. 4958 Ernst & Young Office Limited 33rd Floor, Lake Rajada Office Complex 193/136-137 Rajadapisek Road Klongtoey, Bangkok 10110 Tel. +66 2264 0777, +66 2661 9190 Fax. +66 2264 0789-90, +66 2661 9192

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COMPANY INFORMATION

Legal Consultants Mr. Parama Saovabha Hunton & Williams (Thailand) LLP. 34Th Floor Q.House Lumpine Building 1 South Sathorn Road Thungmahamek, Sathorn Bangkok 10120 Tel. +66 2645 8866 Fax. +66 2645 8800 Mr. Tawatchai Jaranakaran Chor. Chanasongkram Advocates & Solicitors 52/3 Phrasumeru Rd., Bangkok Tel. +66 2282 2995

Financial Advisor

Phatra Securities Public Company Limited 6,8-11 Muang Thai-Phatra Office Tower 1 252/6 Ratchadapisek Road, Huaykwang, Bangkok 10310 Tel. +66 2275 0888 Fax. +66 2693 2355

Advisory Plus Co., Ltd. 1550 Thanapoom Tower 10th Floor New Phetchaburi Road, Khwang Makkasan, Khet Ratcha Thewi, Bangkok 10400 Tel. +66 2652 7858-65 Fax. +66 2652 7867

Consultant or Contract None Manager Investors can learn more information of the Company from the Company’s annual registration statement

(form 56-1) displaying at www.sec.or.th or the Company’s website: www.tipcoasphalt.com

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ANNUAL REPORT 2013