- Information Memorandum - P.C.S. MACHINE GROUP...

- Information Memorandum - P.C.S. MACHINE GROUP HOLDING PUBLIC COMPANY LIMITED (“PCSGH”, the “Company”)

Head Office and Factory Location 2/1-4 Moo 3 Mittraphap Road, Kokkruad, Muang Nakhon Ratchasima District,

Nakhon Ratchasima Tel. 044-701-300 Fax 044-701-399 website www.pcsholding.com

Listing Date 14 March 2014 Listing Securities No. of common shares 1,545,000,000 Shares, Par value per share 1 Baht,

Total Value 1,545,000,000 Baht (Initial Public Offering (“IPO”) shares of 389,000,000 shares)

Capital As of 14 March 2014 Registered Capital Common Shares 1,545,000,000 Baht Paid-up Capital Common Shares 1,545,000,000 Baht Secondary Market the Stock Exchange of Thailand (SET) Offering Price 8.60 Baht Offering Date 5-7 March 2014 Objectives and plans The Company receives proceeds from the Initial Public Offering of

approximately 3,345,400,000 Baht (after deducting fee and other associated cost) to be used in the following objectives

Objectives Amount

(Baht mm)

Estimated time to use

proceeds

1. To repay loans from Ms.Wanna

Raomanacha, major shareholder,

for the dividend payment

3,000.00 Within first quarter of

2014

2. To use as working capital for

business operation 345.40 Within 2014

The Company and its subsidiaries have borrowed Baht 3,000 mm without interest from shareholder to pay the remaining

interim dividend in 2013.

Green Shoe Option - none -

Type of Business and Nature of Operation

1. Products

PCSGH is a holding company which main business is to invest in other companies that manufacture and sale

automotive parts. PCSGH main incomes are from the dividend payment from its subsidiaries. Currently, PCSGH

has three automotive part makers as subsidiaries; (1) P.C.S. Precision Works Co., Ltd. (“PCW”) (2) P.C.S. Die

Casting Co., Ltd. (“PCD”) (3) P.C.S. Forging Co., Ltd. (“PCF”) with PCW as the core company. Their products can

be classified into three main categories as follows:

a. Machining Products

PCW is the manufacture of high accuracy machining automotive parts, i.e., engine, transmission, and chassis. The

main raw materials are steel bar, forging steel and aluminum die cast.

PCW customers can be classified into 2 categories

(1) Car manufacturers, such as GM Group, Isuzu Motors, Toyota Motors, and Auto Alliance (Thailand); for

these customers PCW will act as OEM supplier tier 1

(2) OEM supplier tier 1, such as Continental Automotive, ZF and Kayaba; for these customers PCW will act as

OEM supplier tier 2

PCW products can be classified into 3 categories

(1) Engine part, such as Camshaft, Engine Cover, Engine Oil Pan, and Engine Ladder Frame

(2) Power transmission system, such as Transmission Gears, Transmission Shaft, and Transmission Coupling

(3) Chassis part, such as Knuckle, ABS Rotor, Brake Caliper, and Wheel Spindle

There are two types of product ordered by customers which can be classified as follows

(1) Module Level; combination of several parts to form a large module, such as Camshaft Assembly, Front

Case Cover, Balance Mass Unit and Common Rail Assembly

(2) Part Level; separate pieces, such as Gear, Shaft and Knuckle

b. Die Casting Products

PCD is the manufacturer of aluminum die casting automotive parts. PCD specializes in casting large aluminum

auto-parts with die casting machines of 900 tons to 2,500 tons. The examples of parts are Engine Crank Case,

Engine Oil Pan, Engine Cover, and Transmission Case Housing.

PCD customers can be classified into 2 categories

(1) Car manufacturers, such as Isuzu Motors, Auto Alliance (Thailand) and SNC Renault; for these customers

PCD will act as OEM Supplier Tier 1

(2) OEM supplier tier 1, such as Thai Engineering Products; for these customers PCD will act as OEM

Supplier Tier 1

c. Forging Products

PCF is the manufacturer of steel forging automotive parts. PCF sells product to PCW to manufacture finished

products. PCF specializes in the Micro Alloy steel hot forging, which gives steel extra hardness. PCF is also

specializes in steel forging of large parts with steel forging capabilities of 1,600 tons to 6,000 tons. The examples

of PCF products are Crankshaft, Knuckle, and Balancing Shafts, Common Rail, Diesel Fuel injection Pump,

Knuckle, Gear, and Drive Shaft. PCF’s major customer is PCW.

PCF products can be classified into following categories

(1) Hot forging steel for large part which requires forging machines of 4,000 to 6,000 tons, such as

Crankshaft and Knuckle for commercial vehicles

(2) Hot forging steel for medium size part which requires forging machines of 2,000 to 4,000 tons, such as

Crankshaft, Balancing Shaft and Knuckle for personal vehicles

(3) Hot forging steel for small part which requires forging machines of less than 2,000 tons, such as Gear,

Common Rail, Wheels Hub, Engine Axel and Diesel Fuel Injection Pump

2. Revenue Structure

Combined Financial Statement for specific purpose3/

Consolidated

Financial Statement

2010 2011 2012 2013

Baht mm %1/ Baht mm %

1/ Baht mm %

1/ Baht mm %

1/

Machining Product (PCW) 2,502.30 80.63 2,745.60 76.01 4,258.70 67.56 4,015.89 66.20

Die Casting Product (PCD) 350.30 11.29 495.30 13.71 1,367.00 21.69 1,415.20 23.33

Forging Product (PCF) 250.80 8.08 371.30 10.28 677.90 10.75 635.29 10.47

Total revenue (inclusive

of intra-company transactions) 3,103.40 100.00 3,612.20 100.00 6,303.60 100.00 6,066.38 100.00

Adjustment for intra-company

transactions 2/

(312.90) (438.00) (1,009.90) (941.89)

Total revenue as stated in

combined and consolidated

financial statement

2,790.50 3,174.20 5,293.70 5,124.49

Note: 1/

Percentage of total revenue (inclusive of intra-company transactions)

2/ Intra-company transactions are the transactions that PCD and PCF sold their products to PCW

3/

PCSGH has no actual operation prior to 10 April 2013 as it has recently become the major shareholder of its subsidiaries. However,

to reflect the Company performance under the new structure, PCSGH has prepared the combined financial statement to show

operations results and financial position of the Company as if the Company was the major shareholder of its subsidiaries since 1

January 2010

3. Target Customers

PCSGH target customers are automobile manufacturer with production base both in Thailand and overseas and

OEM Supplier Tier 1 with factories in Thailand and overseas.

4. Distribution Channels

Unlike other manufacturing businesses, automotive part makers are approached by customers and each product

is manufactured according to customers’ specification. Thus, there is no clear distribution channel for automotive

part makers. The Company has to be in the approved vendor list in order to receive order from the customer. After

being an approved vendor list, the customer will contact directly to the Company for quotation of a product.

Usually, PCW PCD and PCF can promote themself via various roadshow with government agencies (Department of

International Trade Promotion) and through the introduction by Thailand Board of Investment and Thai Auto-Part

Manufacturing Association. For the delivery of products, customers will specify to the Company whether to have

the Company deliver to the customers or to pick up the products by themselves or to have the Company deliver to

specific destinations.

5. Sources of Supply

5.1 Customers contact and orders from the customers

PCW, PCD, and PCF can be known to target customers through many channel including roadshows with

government agencies (Department of International Trade Promotion) and introduction by Thailand Board of

Investment (BOI) and Thai Auto-Part Manufacturing Association.

Ordering process from automotive customers is as follows:

(1) The Company must become an approved vendor list in order to receive orders from the customer.

(2) When the customer wants to order parts, they will send request for quotations (RFQ) to all vendors.

(3) The customer considers quotations received and select the manufacturer.

(4) The customer and part-maker then make an agreement to become a partner.

(5) The customer then sends an order for production.

In order to be in customer’s approved vendor list, the Company must pass certain qualifications which can be

varies across companies. All in all, the main considerations are financial stability and production feasibility which

includes four primary factors of production; Man, Material, Machine, and Methodology (4M)

5.2 The supply of raw material

a. PCW

PCW primary raw materials are steel bar, forging steel and die casting aluminum. PCW purchases steel bar from

Japan and Europe, purchases forging steel from PCF, and purchases aluminum die casting from PCD and some

from other domestic producers.

b. PCD

PCD primary material is Aluminum Ingot from domestic suppliers.

c. PCF

PCF main materials are hot-rolled steel bar with various chemical properties (different proportion of carbon

magnesium and chromium) and diameter size specified by the Company and customers. PCF purchases hot-

rolled steel bar mostly from Japanese and European producers.

6. Market Competition

In automotive part making industry each producer has specific expertise in their product and method of

production. Customers are large automobile producers with wide range of part suppliers. Customers make a lot of

effort to improve and maintain best production quality from their part makers as the malfunction in any part of the

vehicle might cause severe problem in the product leading to production interruption or fines from lawsuit.

Because it is hard to develop a good network between them and the part manufacturer, automobile producers

tend to maintain long relationship with their part makers. For these reasons, there are not a lot of direct

competitions between automotive part makers. Still, each part maker must strives to maintain and continuously

improves their production quality in order to maintain their competitive edges and remain as part producer for their

customers.

PCSGH competitors are as follows: PCF main competitors are Somboon Advance Technology PCL., leading steel

forging automotive part manufacture, and TFO Tech (Thailand) Co.,Ltd, steel forging part maker for Honda Motors.

PCD main competitors is Asahi Tech Aluminum (Thailand) Co.,Ltd, one of the largest die casting firm in Thailand

whose manufacture aluminum die casting part for large automobile producers, such as Mitsubishi Motors, Auto

Alliance (Thailand), Honda Motors and General Motors. PCW has no direct competitor as the Company

manufactures parts with high accuracy which requires modern equipment and high investment. The Company

main competitors are automobile producers’ subsidiaries, such as TBKK (Thailand) Co.,Ltd (Subsidiaries of

ISUZU) and subsidiaries of Toyota Motors and Honda Motors.

Environmental Impact

PCSGH is well aware of the environmental impact from production processes and is committed to minimize the

environmental impact. As a result, PCSGH has set up policies and communicated them to employees. PCSGH’s

policies are as follows:

(1) Wastewater management

PCSGH has a standard water management system as requires by law. The Company controls, monitors, and

analyses all wastewater from the production process. The process includes the analysis of pH, Biological Oxygen

Demand (BOD), Chemical Oxygen Demand (COD), Total Dissolved Solid (TDS), Total Suspended Solids (TSS),

and Oil and Grease, which, currently, is within the standard required by law.

(2) Quality of air

PCSGH has an appropriate system to control the complete combustion of the manufacturing process to be in

compliance with the law. In addition, the Company also monitors the air from its factory vent as requires by law.

The process includes the analysis of the total dust, Sulfur dioxide, Nitrogen dioxide, Carbon monoxide, which,

currently, within the standard requires by law.

(3) Overall waste management

PCSGH has properly managed waste from production in accordance with the requirements from the Department

of Industrial Works.

(4) Manufacturing procedures

PCSGH follows environmental standard as required by customers in addition to the requirements by government

agencies

Summary of material agreements

Land rental agreement

Parties : Lessor: P.C.S. Estate Co., Ltd.

Lessee: P.C.S. Precision Works Co., Ltd. (“PCW”)

Locations and size : In the lessor’s industrial real estate; Kokkruad, Nakhon Ratchasima

Space: 72 Rai 1 Ngan 23 sq. wah

lease period : 3 years, from 1 January 2012

Material contract terms : - At the end of the lease period, lessee has the right to renew the lease for

another 3 years for the maximum of 7 times (total maximum lease period is 22

years 6 months from 1 July 2013). The lessee must submit a written request

for lease renewal not less than 60 days prior to the end of each period.

- At every contract renewal, both parties agree to follow the same term and

condition as stated herein this agreement, except the rental rate, which lessee

will appoint SEC’s approved independent appraiser to evaluate the

appropriate rental rate to be used or the average rental rate (in the case of

appraised rate is in range).

- The lessor agrees not to sell or to transfer the ownership of the leased

property to a third party and agrees not to create obligations or any rights in

the leased property, except that with a third party whose the transferee of the

leased property agrees in written with the lessee to be binded under terms

and conditions and obligations of the lessor as stipulated in this agreement.

Also, the lessor shall not do or omit to do any acts which might prevent the

lessee from using the leased property for the purposes under this lease

agreement.

Rental rate : In the first contract, 216,000 baht/ month

On 1 July 2013, both parties agreed to cancel the contract and entered into new

one and amended the rental rate to 844,000 baht per month which was effective

from 1 July 2013. Later, on 30 September 2013, both parties agreed to amend

rental rate to 23.50 baht/ sq.wah/ month refer to the report done by SEC’s

approved independent appraiser. The new rate is effective on 1 October 2013

with the approximate rent of 679,691 baht/month (calculated from the area of 72

Rai 1 Ngan 23 Talangwah)

Parties : Lessor: P.C.S. Estate Co.,Ltd

Lessee: P.C.S. Die Casting Co.,Ltd (“PCD”)


Space: 48 Rai 3 Ngan 65 Talangwah



another 3 years period for the maximum of 7 times (total maximum lease

period is 22 years 6 months from 1 July 2013). The lessee must submit a

written request for lease renewal not less than 60 days prior to the end of each

period.













agreement.






approved independent appraiser. The new rental rate is effective on 1 October

2013 with the approximate rent of 459,778 baht/month (calculated from the area

of 72 Rai 1 Ngan 23 Talangwah)

Parties : Lessor: P.C.S. Estate Co.,Ltd

Lessee: P.C.S. Forging Co.,Ltd (“PCF”)


Space: 17 Rai 2 Ngan 61 Talangwah



another 3 years period for the maximum of 7 times (total maximum lease

period is 22 years 6 months from 1 July 2013). The lessee must submit a

written request for lease renewal not less than 60 days prior to the end of each

period.













agreement.






approved independent appraiser. The new rental rate is effective on 1 October

2013 with the approximate rent of 165,934 baht/month (calculated from the area

of 72 Rai 1 Ngan 23 Talangwah)

Non-competition agreement

Parties : P.C.S. Machine Group Holding PCL. (“PCSGH”) and

P.C.S. Machine (Thailand) Co., Ltd. (“PCM”)

Date : 24 September 2013

Term of agreement : Both parties agree that:

- PCM business policy is to be an engineering service company, and a

manufacturer and seller of a variety of equipment, parts, and iron casting

products.

- PCSGH business policy is to be an automotive-part manufacturer. Currently,

PCSGH is OEM Supplier Tier 1 and OEM Supplier Tier 2 in automotive-part

business.

- PCM agrees to follow own business policy and will not manufacture and

distribute final automotive-part product, unless such manufacturing or

distributing is requested by PCSGH (final automotive-part product means

automotive part that requires the processing of raw material, for instances,

machining process, and hot forging process).

Termination : This agreement will be terminated when Rungrojkitiyos family and Mrs. Wanna

Raomanachai is not the major shareholder of PCSGH and/or PCM, or once

PCSGH is delisted from the Stock Exchange of Thailand.

Enforcement and

interpretation

: This agreement is enforced and interpreted under the law of Thailand

Parties : P.C.S. Machine Group Holding PCL. (“PCSGH”) and

SW&Sons Co., Ltd. (“SWS”)

Date : 24 September 2013

Term of agreement : Both parties agree that:

- SWS business policy is to be the manufacturer of engine for agricultural

vehicles, general parts, and after-market parts (use as replacement and

maintenance).

- PCSGH business policy is to be an automotive-part manufacturer. Currently,

PCSGH is OEM Supplier Tier 1 and OEM Supplier Tier 2 in automotive-part

business.

- SWS agrees to follows own business policy and will not manufacture and

distribute automotive-part, unless such production is for after-market or such

manufacturing or distributing is requested by PCSGH.

- SWS has the right to manufacture and sell automotive parts for its current

OEM supplier tier 1 clients (2 companies) until the end of the contract/project.

Termination : This agreement will be terminated when Rungrojkitiyos family and Mrs. Wanna

Raomanachai is not the major shareholder of PCSGH and/or SWS or once

PCSGH is delisted from the Stock Exchange of Thailand.

Enforcement and

interpretation

: This agreement is enforced and interpreted under the law of Thailand

Feasibility Study: - none -

Technical and Management Assistance: - none -

Future Projects

Major projects that the Company and/or its subsidiaries have secured (received letter of intent) with the clients,

which the production will start in 2-3 years, are as follows:

1. Differential case production

Company and/or its subsidiaries will invest around 400 million baht to set up a differential case manufacturing line

for one new OEM supplier tier 1 client. The production quantity will be approximately 300,000 pieces per year and

the production will start in late 2014.

2. Camshaft cover production

Company and/or its subsidiaries will invest around 300 million baht to set up a camshaft cover manufacturing line

for one new automobile manufacturer from Europe. The production quantity will be approximately 300,000 pieces

per year and the production will start in late 2014.

3. Camshaft assembly production

Company and/or its subsidiaries will invest around 300 million baht to set up a camshaft assembly manufacturing

line for one current automobile manufacturer. The production quantity will be approximately 300,000 pieces per

year and the production will start in 2015.

4. Balancer shaft driver module production

Company and/or its subsidiaries will invest around 200 million baht to set up a balancer shaft driver module

manufacturing line for one current automobile manufacturer. The production quantity will be approximately

120,000 pieces per year and the production will start in 2015.

5. Commonrail Euro 6 part production

Company and/or its subsidiaries will invest around 100 million baht to set up a commonrail Euro 6 part

manufacturing line for one current automobile manufacturer. The production quantity will be approximately

100,000 pieces per year and the production will start in 2016.

6. Capacity increase for gear production

Company and/or its subsidiaries will invest around 600 million baht to increase gear production capacity to around

1,440,000 million pieces. The investment will improve the accuracy of the gear production, which will make it

compatible for Euro 5 engine. The expected start date is by 2014.

These six projects are expected to require total investment of around 1,900 million baht. Company and/or its

subsidiaries have already started to invest in some projects. The Company and/or its subsidiaries will use

operating cash flow and loan from financial institutions (if required) as a source of funding to such projects in the

future.

Related Party Transactions

Related party transactions of P.C.S. Precision Works Co., Ltd.

Persons who

may have

Conflicts of

Interest

Nature of Transaction 2012 (Baht) 2013

(Baht) Opinion of the Audit Committee

1. P.C.S.

Machine

(Thailand)

Co., Ltd.

(“PCM”)

Sale of products and raw

material

Sale of assets

Trade account receivables – to

related parties

Other account receivables – to

related parties

• Normal trading transaction

that has been agreed upon

the start of the project.

Such products are tractor

parts

• The selling price is agreed

upon the start of the project

and pricing policy is cost

plus margin of not more

than 15%, which is in the

normal range of automotive

industry

• PCW sells the old machines

and equipments that are not

used in the manufacturing

process of PCW to PCM

• Other account receivables

are the transaction that

PCM still has not paid PCW

for the purchased old

machines and equipments.

PCW will settle this

transaction within March

2014

5,287,796

0

2,636,090

0

15,829,865

6,977,225

16,563,105

7,465,631

- Audit committee opines that this sale of

products and raw material is a normal

course of business. The selling price of

which is reasonable as it is agreed upon

the start of the project and the price is in

the normal range of industry

- For the sale of assets, as it is the sale of

old machines and equipments that are

not used in the manufacturing process of

PCW, PCW compares the offering price

between third party and related parties

and sell to PCM that is the one offering

the highest price. The selling price

mostly is not lower than net book value.

Thus, the sale of old assets that are not

used in the manufacturing process will

benefit PCW

Policy for the Transaction in the Future

- PCW has policy to operate in the core

business relating to the manufacturing

and distributing automotive parts as

OEM Supplier Tier 1 and OEM Supplier

Tier 2

- The sale of tractor parts is not in the core

business of PCW. Thus, PCW has no

policy to do this transaction in the future

after the program ends

- In the future, if PCW has old machines

and equipments that are not used in the

manufacturing process, management

will consider options including sale of

such assets and details for

considerations such as comparison of

offering price, buyer, and etc. to ensure

the benefits to PCW

Persons who

may have

Conflicts of

Interest



Purchase of products and

service

Other account payables – to

related parties

• The purchase of products

and service as part of

manufacturing process are

specified by customers

such as purchases of jig,

coating, EDP coating etc.

• The purchase price is

negotiated and compared

to others as far as possible

and applicable, and

presents to the customers

as part of purchase order

with PCW. For products

and services that are not

comparable to the market,

PCW sets policy at cost


than 15% in which it is in

the normal range of

automotive industry, and

such cost is also presented

to customers of PCW as

part of purchase order with

PCW

48,255,034

2,275,591

50,847,524

6,482,562

- Audit committee opines that this

transaction is a normal course of

business for automotive industry in

which customers of PCW will consider

the raw material used, suppliers of raw

material, and all relevant cost in the

supply chain, including, production cost,

and cost of any other special services

from vendors as part of the

manufacturing of such products, and

once customers agree on all details,

suppliers will not change it for the entire

project life.

- This transaction is necessary for PCW as

it does not do EDP coating due to

stringent environmental standard of

OEM Supplier Tier 1 or OEM Supplier

Tier 2. In addition, PCW has compared

price as well as other terms and

conditions with other suppliers and finds

that PCM offers the best term. Thus, this

transaction is reasonable and creates

most benefit to PCW.


- PCW will continue to have the

transactions until the program ends (no

purchase order from customers)

Persons who

may have

Conflicts of

Interest



2. SWS

Motors Co.,

Ltd. (“SWSM”)


material

Sale of assets


related parties


under the term that has

been agreed upon the start

of the project. Such

products are golf cart parts


upon the start of project

and that pricing policy is

cost plus margin of not

more than 15% in which it is

in the normal range of

automotive industry

• PCW sells old vehicle,

machines and equipments

that are not used in the

manufacturing process of

PCW to SWSM

346,913

0

148,814

82,930

6,136,561

35,469

- Audit committee opines that this sale of

products and raw material is a normal

course of business, the selling price of

which is reasonable as it is agreed upon

the start of the project and such price is

in the normal range of industry


old vehicle, machines and equipments

that are not used in the manufacturing

process of PCW, PCW compares the

offering price between third party and

related parties and sell to SWSM that is

the one offering the highest price. The

selling price mostly is not lower than net

book value. Thus, the sale of old assets

that are not used in the manufacturing

process will benefit PCW


- PCW has policy to operate in the core

business relating to the manufacturing

and distributing automotive parts as

OEM Supplier Tier 1 and OEM Supplier

Tier 2

- Though, the sale of golf cart parts is not

in the core business of PCW,

management of PCW will consider pros

and cons of this business to decide

whether to carry on this operation after

the program ends

- In the future, if PCW has old machines

and equipments that are not used in the

manufacturing process, management

will consider options including sale of

such assets and details for

considerations such as comparison of

offering price, buyer, and etc. to ensure

the benefits to PCW

Persons who

may have

Conflicts of

Interest



Purchase of products and raw

material

Trade account payables – to

related parties


and raw material are

special services including

coating of the manufactured

parts which another service

provider is the competitor of

SWSM




and applicable, and


of PCW. For products and

services that are not




than 15% which is in the


industry, and such cost is

also presented to

customers

8,000

0

10,061,280

1,495,372













project life. This transaction is necessary

for PCW as it does not do coating due to

stringent environmental standard of

OEM Supplier Tier 1 or OEM Supplier

Tier 2. In addition, PCW checks price as

well as other terms and conditions with

other suppliers and finds that the offer

from SWSM is better. Thus, this

transaction is reasonable and create

most benefit to PCW





Persons who

may have

Conflicts of

Interest



3. S.W. &

Sons Co., Ltd.

(“SWS”)


material

Sale of assets


related parties


related parties


of products and raw

materials that mostly are

non-automotive in which the

pricing policy is cost plus

margin of not more than

15%

• PCW sells old office

equipments such as

furniture, table, and etc.

and old machines that are

not used in the

manufacturing process to

SWS


are the transaction that

SWS still has not paid PCW

for the purchased old

machines. PCW will settle

this transaction within

March 2014

0

0

2,043,604

0

93,275,146

148,478,919

62,701,118

22,342,721



business and the selling price is

reasonable.


old office equipments, machines and

equipments that are not used in the

manufacturing process of PCW, PCW

compares the offering price between

third party and related parties and sell to

SWS that is the one offering the highest

price. The selling price mostly is not

lower than net book value. Thus, the

sale of old assets that are not used in the

manufacturing process will benefit PCW

Persons who

may have

Conflicts of

Interest




material

Service expense (electricity)

Puchase of assets


related parties

• It is the purchase of product

and raw material that are

off-production in which

normally the manufacturers

do not want to produce

themself but rather

purchased from other due

to its low volume and not

reaching break-even for

mass production of PCW


negotiated with SWS and

the policy is at cost plus


15% in which it is in the


industry

• The service expense

(electricity) is the payment

to SWS for the electricity

charges incurred during the

old unused machines’

transfer process, and the

expense was charged at

actual cost.

• PCW purchases

machineries and factory

equipments such as

measuring gauge from SWS

to use in production

194,656

19,949,825

0

0

147,622

0

4,411,074

4,719,850



business and to purchase/hire others to

manufacture off-production parts will

create most benefit to PCW. In addition,

it is necessary to purchase/hire trusted

party to manufacture the products since

PCW still has to be responsible for the

product quality.

- Audit committee opines that the service

expense (electricity) is reasonable as it

is based on actual cost

- PCW purchases necessary machineries

and factory equipments to manufacture

the products. In addition, PCW checks

price with third party suppliers and the

net book value prices is reasonable and

beneficial to PCW





Persons who

may have

Conflicts of

Interest



4. P.C.S.

Estate Co.,

Ltd. (“PCSE”)

Sale of assets


related parties

Service expense (infrastructure)

Land rental


related parties

• PCW sells the old machines

and equipments that are not

used in the manufacturing

process of PCW to PCSE

• PCSE charges PCW service

expense (infrastructure)

such as water, electricity,

common area, waste water

management etc. as actual

expenses incurred

• PCW leases a land with

total area of 72 rai 1 ngan

23 sq. wah from PCSE as

agreed in land lease

agreement dated 10

November 2011 having 3

years term with rental rate

of Baht 216,000 per month

0

0

22,017,958

2,592,000

0

100,000

0

13,566,608

5,865,256

218,011


old machines and equipments that are

not used in the manufacturing process of

PCW, PCW compares the offering price

between third party and related parties

and sell to PCSE that is the one offering

the highest price. The selling price

mostly is not lower than net book value.

Thus, the sale of old assets that are not

used in the manufacturing process will

benefit PCW


transaction is necessary and reasonable

as rental and service expense are

reasonable and benefit PCW

- However, to make the rental rate more

standard but still benefit PCW, audit

committee meeting on 7 October 2013

approved the amendment to the land

lease agreement by changing the rental

rate to Baht 23.50 per sq. wah base on

the appraiser report done by SEC

approved appraiser. This new rental

rate will be effective from 1 October

2013. Based on this new rental rate, the

land rental will be approximately Baht

679,691 per month (calculated from area

of 72 rai 1 ngan 23 sq. wah or 28,923 sq.

wah). In addition, PCW has the right to

extend the lease term for another 3 years

for maximum 7 times (please find more

detail at the summary for material

agreement)

- Audit committee opines that the rental

rate and service charge are reasonable

and benefit PCW


- PCW will continue to have this

transaction since it is necessary and

creates most benefit to PCW

Persons who

may have

Conflicts of

Interest



5. Korat

Matsushita

Co., Ltd.

(“Korat”)


material


related parties


such as springs and raw

material as part of

manufacturing process

specified by customers for

sale the products to the

customers



to others and presents to

the customers as part of

purchase order with PCW.



than 15% in which it is in

the normal range of

automotive industry

• Trade account payables

come from the purchase of

spring vacuum pump

1,990,779

0

4,379,696

3,753













project life. Thus, this transaction is

reasonable


• PCW will continue to have the

transactions until program ends (no


Persons who

may have

Conflicts of

Interest



6. S.W. &

Sons

(Qingyuan)

Co., Ltd.

(“SWS-China”)


material

Puchase of assets


related parties


and raw material as normal

course of business such as

steel bar


market price

• PCW purchase machineries

and factory equipment from

SWS-China to use in

production

19,982,039

0

0

38,732,684

15,074,041

4,464,611



business in which the purchase price is

reasonable and creates most benefit to

PCW since it is cheaper than the

imported steel bar

- PCW purchases necessary machineries

and factory equipments to manufacture

the products. In addition, PCW checks

price with third party suppliers and the

net book value prices is reasonable and

beneficial to PCW


- SWS-China is in the process of closing

down the Company, and there will not be

purchase of products and raw material

transactions after September 2013

7. S.W. &

Sons USA Inc.

(“SWS-USA”)

Service expense

• It is the transaction to hire

SWS-USA to perform quality

control of PCW’s products

sold to oversea customers


market price and within

policy at cost plus margin

of not more than 15% in

which it is in the normal

range of automotive

industry

649,382

1,054,370

- Audit committee opines that this quality

control check of products delivered to

customers in America is necessary and

done as a normal course of business

and creates most benefit to PCW


- PCW may continue to have this

transaction if it is necessary and creates

most benefit to PCW

Persons who

may have

Conflicts of

Interest



8. Hometown

Pattana Ltd.,

Partnership

(“Hometown”)


equipment


related parties

• It is the transaction to

purchase general products

and equipment such as

pump, gear, and factory

supplies etc.






range of automotive

industry

6,609,770

0

2,920,095

63,023



business and creates most benefit to

PCW since the purchase price is lower

than other suppliers

Related party transactions of P.C.S. Die Casting Co., Ltd.

Persons who

may have

Conflicts of

Interest



1. P.C.S.

Machine

(Thailand)

Co., Ltd.

(“PCM”)


material

Sale of assetsl


related parties


related parties

• Trading transaction under

the project that has been

agreed for long time







automotive industry

• PCD sales old unused

machines to SWS


are transaction that PCM

still has not paid PCD for

the purchased old

machines. PCD will settle

this transaction within

January 2014

398,703

0

0

0

63,954

1,400,000

67,244

1,498,000


transaction is a normal course of business,

the selling price of which is reasonable

and is in the normal range of industry


old unused machines that are not used in

the manufacturing process of PCD, PCD

compares the offering price between third

party and related parties and sell to PCM

that is the one offering the highest price.

The selling price mostly is not lower than

net book value. Thus, the sale of old

assets that are not used in the

manufacturing process will benefit PCD


- PCD will continue to have the transactions

until program ends (no purchase order

from PCM)

- In the future, if PCD has old machines and


manufacturing process, management will

consider options including sale of such

assets and details for considerations such

as comparison of offering price, buyer,

and etc. to ensure the benefits to PCD

Persons who

may have

Conflicts of

Interest




service


related parties

• The purchase of specific

products and service such

as purchase of jig, shaft,

and quality check of upper

case etc.




and applicable, and


as part of purchase order

with PCD. For products

and services that are not


PCD sets policy at cost plus


15% in which it is in the


industry, and such cost is

also presented to

customers of PCD as part of

purchase order with PCD

19,813,088

3,576,060

47,848,877

13,281,039


transaction is a normal course of business

for automotive industry in which customers

of PCD will consider the raw material used,

suppliers of raw material, and all relevant

cost in the supply chain, including,

production cost, and cost of any other

special services from vendors as part of

the manufacturing of such products, and



project life.

- In addition, PCD checks price as well as

other terms and conditions with third party

suppliers as far as possible and

applicable. The offer from PCM is cheaper

than others. Thus, this transaction is

reasonable and create most benefit to

PCD




from customers)

Persons who

may have

Conflicts of

Interest



2. S.W. &

Sons Co., Ltd.

(“SWS”)


material

Sale of assets


related parties


related parties


under the project that has

been agreed in the past.

Such product is housing

belt







automotive industry

• PCD sales old unused

machines to SWS

680,260

0

(12,373)

0

950,171

600,000

173,850

0



and the selling price is reasonable that is

agreed upon the start of project, all of

which is the normal practice and is in the

normal range of automotive industry


old unused machines that are not used in

the manufacturing process of PCD, PCD

compares the offering price between third

party and related parties and sell to SWS

that is the one offering the highest price.

The selling price mostly is not lower than

net book value. Thus, the sale of old

assets that are not used in the

manufacturing process will benefit PCD




from SWS)

- In the future, if PCD has old machines and






and etc. to ensure the benefits to PCD

Purchase of assets


related parties


related parties

• It is the transaction that

PCD owes for products and

normal raw material

• PCD purchases assets from

SWS for production

0

12,400,230

0

1,849,479

1,978,943

0



and is reasonable

- PCD purchases necessary machineries

and factory equipments to manufacture the

products. In addition, PCD checks price

with third party suppliers and the net book

value prices is reasonable and beneficial

to PCD

Persons who

may have

Conflicts of

Interest



3. P.C.S.

Estate Co.,

Ltd. (“PCSE”)


Land rental


related parties

• PCSE charges PCD service





expenses incurred

• PCD leases a land with total

area of 25 rai 2 ngan 57 sq.

wah from PCSE as agreed

in land lease agreement

dated 10 November 2011

having 3 years term with

rental rate of Baht 75,000

per month. During 3

quarter of 2013, PCD

expands the area and

leases the total area of 48

rai 3 ngan 65 sq. wah

7,610,145

900,000

0

7,663,576

3,424,715

233,929



as rental and service expense are cheap

and benefit PCD


standard but still benefit PCD, audit


approves the amendment to the land lease

agreement by changing the rental rate to

Baht 23.50 per sq. wah based on the

appraiser report done by SEC certified

appraiser. This new rental rate will be

effective from 1 October 2013. Based on

this new rental rate, the land rental will be

approximately Baht 459,778 per month

(calculated from area of 48 rai 3 ngan 65

sq. wah or 19,565 sq. wah). In addition,

PCD has right to extend the lease term for

another 3 years for maximum 7 times

(summary of land lease agreement and its

amendment is in part 5)

- Audit committee opines that the rental rate

and service charge are reasonable and

benefit PCD


- PCD will continue to have this transaction

since it is necessary and creates most

benefit to PCD

Persons who

may have

Conflicts of

Interest



4. PCS-Nissin

Co., Ltd.

(“PCS-Nis”)

Purchase of products, raw

material, and service


related parties

• The purchase of specific

products and service such

as purchase of jig, and wire

cut service etc.




and applicable. For

products and services that

are not comparable to the

market, PCD sets policy at




automotive industry, and

such cost is also presented

to customers of PCD as part

of purchase order with PCD

1,491,107

0

1,402,541

66,447


transaction is a specific products and

service in which besides PCS-Nis, there is

no other company in Nakornrachasima has

machine that can provide such service. In

addition, for comparable parts, the offer

from PCS-Nis is cheaper than others.

Thus, this transaction is reasonable and

create most benefit to PCD

5. Hometown

Pattana Ltd.,

Partnership

(“Hometown”)


equipment


related parties

• It is the transaction to

purchase general products

and equipment such as

pump, gear, and factory

supplies etc.






range of automotive

industry

1,989,075

0

3,053,043

3,424



and creates most benefit to PCD since the

purchase price is lower than other

suppliers

Related party transactions of P.C.S. Forging Co., Ltd.

Persons who

may have

Conflicts of

Interest



1. S.W. &

Sons Co., Ltd.

(“SWS”)


material

Sale of assets


related parties


related parties


under the project that has

been agreed in the past







automotive industry

• The sale of assets is PCF

sells measuring gauge

such as max gage block to

SWS in which will be settled

in January 2014

7,092,090

0

0

0

2,298,308

19,995

1,054,160

21,394



and the selling price is reasonable that is

agreed upon the start of project, all of

which is the normal practice and is in the

normal range of automotive industry

- For the sale of assets, it is the sale of

tooling and selling price is at book value.

Thus, the selling price is reasonable


- PCF will continue to have the transactions


from SWS)

- In the future, if PCF has old machines and






and etc. to ensure the benefits to PCF


material

Purchase of assets


related parties

• It is the purchase of raw

material such as raw BRKT:

fuel pipe with the pricing

policy is cost plus margin of

not more than 15% in which

it is in the normal range of

automotive industry

• PCF purchases assets from

SWS for production process

0

0

0

208,378

19,475

20,838



and is reasonable which is in the normal

range of automotive industry

Persons who

may have

Conflicts of

Interest



2. P.C.S.

Estate Co.,

Ltd. (“PCSE”)


Land rental


related parties

• PCSE charges PCF service





expenses incurred

• PCF leases a land with total

area of 17 rai 2 ngan 61 sq.

wah from PCSE as agreed

in land lease agreement

dated 10 November 2011

having 3 years term with

rental rate of Baht 51,000

per month

5,097,886

612,000

0

3,357,722

1,421,497

95,402



as rental and service expense are cheap

and benefit PCF


standard but still benefit PCF, audit


approves the amendment to the land lease

agreement by changing the rental rate to

Baht 23.50 per sq. wah based on the

appraiser report done by SEC certified

appraiser. This new rental rate will be

effective from 1 October 2013. Based on

this new rental rate, the land rental will be

approximately Baht 165,934 per month

(calculated from area of 17 rai 2 ngan 61

sq. wah or 7,061 sq. wah). In addition,

PCF has right to extend the lease term for

another 3 years for maximum 7 times

(summary of land lease agreement and its

amendment is in part 5)

- Audit committee opines that the rental rate

and service charge are reasonable and

benefit PCF


- PCF will continue to have this transaction

since it is necessary and creates most

benefit to PCF

In 2013, the Company borrowed Baht 3,000 mm without interest from its shareholder to pay the remaining interim

dividend, which has been fully paid to the shareholders in 2013. Moreover, such shareholder’s loan to pay the

interim dividend has been opined by the Company’s Audit Committee as beneficial to the Company and is a better

term comparing to loan from financial institution as the loan from shareholder has no interest burden.

The Board of Directors meeting no.1/2014 on 20 February 2014 has approved the dividend payment from the 2013

earnings of 3 subsidiaries, which was profit under BOI, amounting to Baht 430.14 mm. The source of funding for

such payment may come from the subsidiaries internal cash flow or loans from financial institutions and/or the

Company’s directors. In case the source of funding is directors’ loan, the terms will be equivalent or better than the

financial institution. In case the subsidiaries borrow loan from shareholders or related parties, the Company and

subsidiaries will comply with the terms of transaction with related parties under the provision of the Securities and

Exchange Commission Torjor 21/2551 and notification from the Stock Exchange of Thailand about the disclosure of

information and other acts of listed companies concerning the connected Transactions 2003.

The Company also approves the interim dividend payment to the shareholders from the operations during 1

January 2014 to 20 February 2014 amounting to Baht 231.75 mm or equivalent to Baht 0.15 per share which

calculated from 1,545,000,000 shares. The Company will sign up shareholders who are not entitled to dividends

(XD) on 24 March 2014. The Company will determine the shareholders whose entitled to receive the interim

dividend (record date) on 26 March 2014 and the closing date for collecting shareholders list and to compile a list

of shareholder under section 225 of Securities and Exchange Act 1992 (including amendment) on 27 March 2014.

The Company plans to pay out such dividend within one month after approval from the shareholders general

meeting which will be held on 4 March 2014.

Contingencies and Commitments - None -

Risk Factors

1. Business risks

1.1 Risk from fluctuation in cost of raw materials

Raw materials used in PCSGH production can be classified into two main groups, (1) primary material, i.e., steel

bar, and aluminum ingot and (2) secondary material, i.e., hot forging steel, cold forging steel, die casting

aluminum, and sintering metal. All PCSGH’s raw materials are commodity, so their price depends on the demand

and supply of world market which is beyond PCSGH control. This makes it hard for the Company to manage its

raw material cost in the time where there is a high price fluctuation. Also, the Company might lose its profitability

when there is an unexpected price increase. However, when there is a significant change in the raw material price,

the Company can negotiate for a new price with customers. Furthermore, the Company also makes 3-6 months

advance steel procurement to prevent price fluctuation in the period.

1.2 Risk from fluctuation of exchange rate

PCSGH has the risk from fluctuation of exchange rate since the Company purchases all steel bar and numerous

machines from abroad, where the price is quoted in term of foreign currency (i.e., Japanese Yen, US Dollars). The

material directly ordered from abroad accounted for 15.4% and 10.1% of total cost for the year 2012 and the first 9

month period of 2013, respectively.

Still, the Company can use the foreign currency earned from direct export to purchase steel bar from abroad to

reduce risk from exchange rate fluctuation (natural hedge). For the secondary material, PCSGH has ordered most

of its products from domestic producers which don’t affect much by the exchange rate.

1.3 Risk from contract termination and/or not receiving new contracts from the customers

All PCSGH projects are contract based which might not specify the exact contract length or volume. Furthermore,

at the end of the contract life or the end of car model, customers will start new part manufacturers selection

process. Thus, PCSGH has to face the risk from contract termination and/or not receiving new contracts from the

customers.

However, automotive companies do not often change their suppliers during the product life, which is usually 5 – 10

years since the selection process will take long time (usually 3 – 36 months) and might lead to production

disruption or drop in product quality.

1.4 Risk from commencing of ASEAN Economic Community in 2015 (AEC 2015)

The commencing of ASEAN Economic Community in 2015 will bring many opportunities to Thai automotive

industry, but it might have some negative effects to the industry as well:

1.4.1 PCSGH’s major customers might relocate their production base to other ASEAN countries with lower

production cost or faster economic growth

PCSGH’s major customers (foreign based automobile manufacturer) might allocate their production to a lower cost

ASEAN country. This will directly affect automotive part-maker in Thailand; including PCSGH. Even though, Thai

part-maker can still export their products to the customers, they will be less competitive due to the long distance.

Moreover, if consider domestic sales to total production of leading ASEAN countries, Thailand is the only country

with sufficient production for domestic demand. Thus, even there were a lot of new direct investments to other

countries; it is only to serve the unfulfilled domestic demand, which should not have much effect to Thai automotive

industry. Also, in the future, PCSGH is planning to expand customer base and production plant to other countries

in the region, including Japan and Indonesia, by using its own know-how.

1.4.2 Increasing competition from foreign designer and manufacturer in domestic market. This might raise

market competition which will affect PCSGH’s earnings.

The commencing of ASEAN Economic Community will make it easier for foreign manufacturers to compete in Thai

market as there will be free flow of capital and labor. Nevertheless, PCSGH still has several competitive

advantages as follows:

(1) PCSGH has few direct competitors since the Company focuses on high margin and high volume advance

parts

(2) Comparing to other ASEAN countries, Thailand has the highest emission standard (Euro 4 by 2013 and

Euro 5 by 2015). Thus, parts produced in countries with lower emission standard should not be able to

compete with PCSGH’s parts.

(3) Setting up new production base in Thailand requires high initial investment and takes long time before

production can start.

(4) Without a serious breach of contract, automobile manufacturers do not change their suppliers during the

production period. Moreover, PCSGH has maintained good relationship with all customers which make

the Company more likely to be re-selected for future products. Also, if the customers want to change their

part maker, they have to start new evaluation processes which might take long time and might risk the

quality of the production.

(5) Automobile manufacturer prefers to order part from domestic supplier as it is easier to manage their

supply chain.

1.5 Risk from reliance on major customers

For the year 2012 and in the first six month of 2013, PCSGH’s top five customers’ sales represented 84.1%, and

84.3% of total revenue, respectively. Moreover, in the first 9 month of 2013, there is one customer who’s

contributed to more than 30% of PCSGH revenue for the period. Thus, PCSGH’s earnings are significantly

depending on the earnings from these customers. However, there are only 12 automobile manufactures in

Thailand, so, as an OEM supplier tier 1 supplying part directly to the automakers, it is typical that PCSGH’s top five

customers representing most of its total revenue.

1.6 Risk from relying on land owned by major shareholders

Currently, PCW, PCD, and PCF are leasing their operating land from PCS Estate Co.,Ltd, a company owned by Mr.

Siripong Rungrojkitiyos and Mrs. Wanna Raomanachai (please see summary for material agreements for more

information). Thus, the Company has to rely on land owned by its major shareholder. However, as stated in the

contract, both parties agree the lease fee at comparable market rate or an average of comparable market rate and

both parties agree to evaluate the lease fee again by SEC’s approved independent appraiser upon every contract

renewal. Also, the lessee has the right to renew contract for 7 times (3 years each, total lease period is 22 years 6

months), so the companies are prevented from contract termination during such period. Moreover, the leasing

agreement has helped PCSGH in maintaining high liquidity and saves lump-sum cash needed for the purchase of

land. It also helps PCSGH to achieve great efficiency ratio, for instance, a high return from total asset ratio, and a

high return from total fixed asset ratio.

1.7 Risk from relying on Thailand automotive industry

PCSGH is an OEM supplier tier 1 whose customers are mainly in automotive industry. As a result, PCSGH’s

performance depends greatly on the performance of automotive industry, which highly correlates with the

economy. Its growth and earnings are vulnerable to the slowdown in automotive industry, the downturn of economy

as a whole, or the termination of certain government support measure.

However, Thailand automotive industry is very strong. In the past year, it topped export value of all industry.

According to Thailand Automotive Institute, Thailand will be able to achieve a cumulative annual production of 3

million units by 2017.

1.8 Risk from relying on world automotive industry since PCSGH’s customers export their product to the

world market

PCSGH’s direct export has represented 13.8% and 11.3% of total annual sales in 2012 and total six months sales

in 2013, respectively. These direct exports together with indirect exports through customers (Thailand’s domestic

sales represent 53.6 % of total production in the first 9 months of 2013) have exposed PCSGH to the risk from

downturn in global automotive demands.

1.9 Risk from limitations in the manufacturing line

Each PCSGH’s manufacturing line is designed for pre-determined drawing and volume. Once the line was set up,

the Company cannot make adjustment to meet drawing changes or additional demands. Normally, customers will

estimate the volume needed for the next 3 – 12 months as guidance for the production plan. This helps PCSGH

managed its inventory and allows the Company to stock up for extra volume. In the case of changes in drawing or

specification, the Company can pass through all additional investment to customers; also customers will provide

reasonable time for the line modification.

1.10 Risk from raw materials procurement

The procurement of raw materials is involved by both PCSGH and its customers. Customers specify suppliers and

choose the raw material (by common industrial standard such as the American Iron and Steel Institute (AISI), the

Japanese Industrial Standards (JIS), or the Deutsches Institut für Normung (DIN)). Then, PCSGH has to review the

supplier and material as required by ISO/TS16949. These complexity and specificity has limited feasible suppliers

to few. Thus, the Company has the risk of unsecured supply of raw material when some suppliers faced difficulty in

their production. For example, in early 2011, when large Tsunami hit Japan, many Japanese suppliers could not

provide steel for the Company. In order to mitigate such risk, the Company always recommended alternative

materials for customers’ consideration, and suggested additional suppliers as an option.

1.11 Risk from being fined for defective products

PCSGH is obligated by Thai law to hold responsible from any damages causing by an unsafe product. In case the

car manufactured by PCSGH’s customers is proven unsafe, PCSGH might have to compensate the end user if

damages are caused by PCSGH’s product. In addition, PCSGH’s customers are very serious about product quality

as the deficiency in automotive part might harm their reputation or even cause a disruption of the manufacturing

line. This lead to a strict requirement to all OEM suppliers; for example, every OEM supplier must pass

ISO/TS16949. If PCSGH’s product are in low quility, customers could reduce or even stop ordering product from

the Company. Even though there has not been any major production misspecification, the risk from having to

compensate for a defective product is still a major concern for PCSGH. Hence, the Company has set guidelines

and certain measures to prevent the problem. Moreover, as a guarantee to the Company’s competency, PCSGH is

certified by several international qualification standard, including, ISO9001:2000, ISO14001:2002, and

ISO/TS16949.

1.12 Risks from possible loss of revenues or customers in the event of catastrophes or natural disasters

If there is any catastrophe or natural disaster that causes damage to the Company’s plants and machines,

resulting in production or business interruption, the Company will probably lose revenues and customers as it is

very likely that the customers will replace the Company with new suppliers in order to make sure the customers will

have continual production lines. When this is the case, it is very unlikely that the Company will get all the lost

customers to switch back. The Company realizes the importance of taking out insurance as a risk management

tool to prevent the massive catastrophe, particularly the ones that cause business interruption, or even make the

Company lose its customers from failure to deliver goods on agreed time.

Currently, the Company has taken out an insurance against adverse effect events, including fire, natural disaster,

or theft with the insured assets are buildings, plants, machines and inventories which covers entire book value of

the insured assets. In addition to insurance, the Company implements the environment and safety management

system conforming to ISO 14001:2004 and strictly abides by the regulations of the relevant government agencies

in terms of safety for the Company’s personnel, tools, equipment and premises.

1.13 Risks from shortage of skillful employees

The auto industry in Thailand grew rapidly. This could cause a contraction in the labor market, especially the skillful

workforce, which may cause difficulty for the Company to attract new employees for growing production in the

future.

However, the Company’s business is production auto parts by using state-of-the-art technology with high

precision, and the Company has changed the production system by employing more state-of-the-art automated

machine which can increase production efficiency from 2012 onwards. Moreover, the Company has improved its

efficiency and productivity on an ongoing basis, and trained its staff to become more familiar with automated

machines. Furthermore, the Company has hired higher-educated persons to commensurate with more

sophisticated machines the Company employs. For these reasons, the Company is able to maintain its productivity

to meet the growing customers’ demands.

1.14 Risks from cancellation of government subsidy on diesel fuel

The Company sells mainly diesel-engine-related auto parts. Therefore, the demand of diesel-engine automotive

plays a crucial role in the Company’s operating performance. Partial demand is determined by diesel fuel prices

which are considered complementary goods.

Diesel fuel is considered a type of fuel crucial to Thai economy since the commercial, logistics and agricultural

sectors are all dependent on diesel fuel for their operations. Hence, rendering the diesel fuel is levied tax on at the

second lowest level (the fuel with lowest tax levied on is gasohol E85) of less than 2 baht per liter. The diesel fuel is

also the fuel that the government puts an effort to control the retail price by within a limit of 30 baht per liter.

However, in the world market, the diesel fuel is more expensive than the benzene fuel because of the highest

supply and higher costs of distillation. Thus, the cheaper price of diesel fuel in Thailand may cause artificially high

demand of diesel-engine automotive.

In the future, if the crude oil prices rise, the costs of producing diesel fuel will also rise, which may curtail the

government’s ability to fix the diesel fuel price at the desired level or even cancel the subsidy on diesel fuel price.

In turn, when the diesel fuel prices increase, there will be an effect on demand of diesel-engine automotive, which

will create the risk that the Company’s revenue may reduce. Nevertheless, most of the Company’s customers are

commercial automotive makers with most of the production bases are in Thailand, and the primary objective of

using this type of automotive is to carry goods (as engine power of diesel is key to this activity). Thus, this type of

goods – commercial automotive – has high elasticity of demand and, consequently, the rising diesel fuel prices

may not significantly affect the demand for this type of automotive.

1.15 Risk from the Government support of the environmentally friendly automotive

In the past, the Thai government placed automotive used for transporting agricultural produces and products as

product champion, and the consequence was good in a sense that Thailand ranked as top 5 of the country with

the largest production base of commercial vehicles. This makes Thai auto industry more competitive from the

regional and global perspectives. One of the important factors that the Thai government is concerned about is a

change in trend of auto industry among foreign countries, especially the trend of technology focusing on

becoming more environmentally friendly, more energy/fuel efficient, and safer. According to information from the

master plan of the auto industry year 2012-2016, the target of the master plan indicates that the government is in

support of the production of environmentally friendly automotive or eco cars to a greater extent by making the eco

cars production the secondary objective. In addition, the government is in support of enforcing the higher level of

emission standard by planning on implementing the Euro 5 Emission Standard in 2017. As the Company is a

maker of diesel-engine-related auto parts, if auto makers in Thailand turn to producing more eco cars, benzene-

engine, compact cars, the Company’s revenue could be affected.

However, such an impact on the Company may not be significant as the commercial vehicles are the target

vehicles that require a use of diesel engines for the purpose of carrying a large number of goods. It is very unlikely

that the commercial vehicle producers will turn to benzene engines, which has lower power of carrying goods,

rather than diesel engines. For the enforcement of Euro 5 Emission Standard, the Company has prepared to be

Euro 5 Emission Standard compliant and has already begun producing certain products.

2. Management Risk

2.1 Risk relating to major shareholder holding shares more than 50% of total paid-up shares

As of 26 June 2013, the Company’s major shareholders are Mr. Siripong Rungrojkitiyos and Ms. Wanna

Raomanacha, both of whom held all shares of the Company, amounting to 1,156 million shares, representing 100%

of total paid-up shares. After this IPO, the two major shareholders mentioned above will have a decreasing

shareholding to about 75% of total paid-up shares, which is sufficient for them to have a power to control the

Company and nearly all the shareholders’ meeting resolutions, including director appointment or resolutions

requiring a majority voting (three fourth of voting rights of all shareholders present at the meeting). Thus, other

shareholders of the Company has the risk of inability to gather voting rights sufficient to maintain checks and

balances with respect to agendas proposed by the major shareholders.

Pre-IPO Post-IPO

Number of Shares % Number of Shares %

1. Mr. Siripong Rungrojkitiyos 578,000,000 50.00 578,000,000 37.41

2. Ms. Wanna Raomanachai 577,999,990 50.00 577,999,990 37.41

3. Mr. Ponake Rungrojkitiyos 10 0.00 10 0.00

4. Public 0 0.00 389,000,000 25.18

Total 1,156,000,000 100.00 1,545,000,000 100.00

However, the Company’s management structure is comprised of 2 sets of committees which are board of directors

and audit committee. The Board of Directors consists of 9 directors, 3 of which are independent directors who will

undergo the duties of inspection, create checks and balances environment and consider and approve

transactions before presenting them in the shareholders’ meetings. In addition, when the Company is to enter into

connected transactions with directors, major shareholders, controlling shareholders, related entities, as well as

conflicting persons, these persons/entities will have to abstain from voting for or against those transactions, and

the approval of these transactions must be in compliance with SEC’s and SET’s rules and regulations.

2.2 Risk from Nature of Business of Holding Company (whose operation is dependent upon the operations of

subsidiaries)

As the Company is a holding company that is a company whose the main revenue is from investment income from

its investee(s) and that has no its own business that generates material revenues to the Company. Thus, the

Company’s operation is dependent upon the subsidiaries’ operations and their ability to pay dividends to the

Company. The risk pertaining to this nature of business is the risk of subsidiaries’ business and their abilities to pay

dividends back to the Company.

Currently, revenues from subsidiaries represent 100% of net revenues of the Company. Thus, the operations of the

subsidiaries are vitally important to the Company’s profit. If the subsidiaries face any operating difficulties, it will

affect the Company’s operation inevitably. In addition, dividend payments by the Company to its shareholders are

paid out of the separate financial statement of the Company which hinges on the subsidiaries’ ability to pay

dividends to the Company. Dividend income constitutes nearly all revenues of the separate financial statement of

the Company. In the case that the subsidiaries cannot pay the dividends to the Company as stated in their

dividend policies because either the subsidiaries have no profit or other business reasons such as cash needs for

business expansion or for debt repayments, there will be an effect on the Company’s ability to pay the dividends,

too.

In the past, the three subsidiaries (PCW PCD PCF) had financially strong operational results and good track

records with a CAGR over 2010-2012 of combined revenues (of the three subsidiaries) of 37.78%. In addition, the

net profit margin rose from 24.2% in 2010 to 37.8% in 2012. For these reasons, the Company expects that the

subsidiaries have the ability to pay dividends to all of their shareholders, including the Company, on a continual

basis in line with their dividend policies, which, in turn, allow the Company to pay dividends to its shareholders too.

However, to lay the foundation for succinct policies and guidelines for investing in other companies, the Company

has set the investment policies and investee operation policies as well as a mechanism for controlling subsidiaries

and/or associated companies whereby the appointed representatives of the Company is to become either

directors or executives of the subsidiaries. In addition to this mechanism, the Company will prescribe the duties

and responsibilities of the representative directors or executives (details can be found in the Company’s

investment policies as described in section 2 number 9).

Lawsuit

As at 30 September 2013, the Company and subsidiaries had no lawsuit that would have adverse effect on assets

of the Company and subsidiaries at the level of greater than 5% of their shareholders’ equity and had no lawsuit

that would have a material effect on their operations.

Number of Employees

As of 30 September 2013, the Company and subsidiaries had a total of 2,566 employees

Company Background

As for the subsidiaries of the Company, the Rungrojkitiyos Family founded PCW in 2002 with the initial registered

share capital of 20 million baht to operate in the business of production and distribution of primary automotive

parts, which are engine, transmission, and powertrain. PCW began its business by producing common rail parts

for export to European customers. Later in 2004, the Rungrojkitiyos Family founded PCF with the initial registered

share capital of 200 million baht to operate in the business of production and distribution of forging parts and dies

as well as forging of metals. Later in 2005, the Rungrojkitiyos Family founded PCD to operate in the business of

production and distribution of die casting parts, metal parts, and auto parts and electronic parts. In the same year,

there was an introduction of robots in operation management process. Later, the subsidiaries expanded its

businesses and continuously improved their manufacturing processes. The examples are

- In 2008, PCW focused on producing balancing mass module and engine front cover module to prepare for

Euro-5-Emission-Standards engines to be effective in 2015

- In 2009, PCW began producing common rail parts in preparation for producing engines conforming to Euro 6

Emission Standards, and PCF developed and started producing micro alloy materials which would be used for

common rail parts of Euro 6 Emission Standards

- In 2010, PCD made change in production lines in relation to machining by making them full automatic

- In 2011, PCD purchased 6 2,500-ton die casting machines to prepare for production of engine conforming to

Euro 5 Emission Standards at a minimum

As for the Company itself, PCSGH was formed on 10 April 2013 with the registered share capital of 6,000,000

shares, totaling 6,000,000 baht with the business purpose of investing in shares of PCW, PCD, and PCF

(collectively “subsidiaries”), which are companies under common control of the Company’s shareholders.

On 24 June 2013, the Company transformed to a public limited company and increased its registered share

capital by 1,420 million shares, equivalent to 1,420 million baht, resulting in the total registered share capital of

1,426 million shares, equivalent to 1,426 million baht. On 26 June 2013, the Company issued 1,150 million shares

in exchange for cash and shares of PCW, PCD, and PCF, held by the Company’s shareholders. The combined

registered share capital of PCW, PCD, and PCF is 1,150 million baht. Thus, the Company holds 100% shareholding

in PCW, 100% shareholding in PCD, and 100% shareholding in PCF. Later, in the 3/2013 extraordinary general

meeting of shareholders has resolved the decrease of registered capital of the Company from 1,426,000,000

shares to 1,156,000,000 shares by reducing PCSGH’s unpaid capital of 270,000,000 shares at par value of 1 baht

per share and has resolved the increase of registered capital from 1,156,000,000 shares to 1,545,000,000 shares

by issuing the new ordinary share of 389,000,000 shares at par value of 1 baht per share

Investments in Subsidiaries: as of 31 December 2013

(In million baht)

# Name Type of Business Paid-up

Capital

% of

Shareholding

Investment

Cost

1. P.C.S. Precision Works Company

Limited

Production and distribution of

metal parts, auto parts,

transmission, brake system, shock

absorber system, other metal

automotive part, and electronics

450.0 100.00 450.0

2. P.C.S. Die Casting Company

Limited

Production and distribution of die

casting parts, metal parts, and

auto parts and electronic parts

350.0 100.0 350.0

3. P.C.S. Forging Company Limited Production and distribution of

forging parts and dies as well as

forging of metals

350.0 100.0 350.0

Change in Capital in the Last 3 Years: The Company decrease its registered capital from 1,426,000,000 shares to

1,156,000,000 shares by reducing PCSGH’s unpaid capital of 270,000,000 shares at par value of 1 baht per share

and has resolved the increase of registered capital from 1,156,000,000 shares to 1,545,000,000 shares by issuing

the new ordinary share of 389,000,000 shares at par value of 1 baht per share for this initial public offering.

Accounting Period: 1 January – 31 December

Auditor

Mrs. Munchupa Singsuksawat, a certified public accountant, registration no. 6112, from KPMG Phoomchai Audit

Company Limited

Share Registrar

Thai Securities Depository Company Limited (“TSD”)

Financial Advisor

Bualuang Securities Public Company Limited

Lead Underwriter

Bualuang Securities Public Company Limited and SCB Securities Company Limited

Dividend Policy

The Company (“PCSGH”) will pay dividends of at least 50% of its net profit after deducting taxes and legal reserve

on a separate financial statement. Making the dividend payment decision, the Board of Directors will take into

account future capital expenditures needs, debt repayment plans, or working capital needs, being in the best

interests of the shareholders

Each of the subsidiaries will pay dividends of at least 70% of its net profit after deducting taxes and legal reserve

on a separate financial statement. However, making the dividend payment decision, the subsidiaries’ Board of

Directors and/or shareholders will take into account the current business conditions such as business expansion

plans of a subsidiary or debt repayment plans.

BOI Certificates

Presently, the Company’s subsidiaries have BOI certificates which provide benefits as followed;

1. Permission to bring skillful foreign employees or experts into the country in the allowed quantity and

period of time

2. Exemption of import duty on machinery (For new machinery imported within 18 November 2013)

3. Exemption of corporate income tax for net profit in connection with business operation prescribed under

BOI certificate (Until 3 January 2020)

4. Permission to use net losses over the BOI periods to deduct against net profit arising after the tax

exemption periods (From 4 January 2020 to 3 January 2025)

5. Exemption from inclusion of dividends in income tax calculation (Until 3 January 2020)

6. 50% reduction of income tax on net profit arising out of investments (From 4 January 2020 to 3 January

2025)

7. Double deductions of transportation, electricity, and water costs (Until 3 January 2020)

8. Additional deductions of investments in installations or constructions of facilities (25% of investment)

9. Permission to bring into or take out of the country foreign currencies

Number of Shareholders as of 11 March 2014

Number of

Shareholders

Number of

Shares

% of Paid-

up Capital

1. Strategic shareholders

1.1 Directors, manager, and executive management including

related persons and associated persons 3 1,156,000,000 74.82

1.2 Shareholders who have a holding of above 5% including

related persons - - -

1.3 Controlling Shareholders - - -

2. Non-Strategic shareholders hold > 1 trading unit 3,826 389,000,000 25.18

3. Non-Strategic shareholders hold < 1 trading unit - - -

Total Shareholders 3,829 1, 545,000,000 100.00

Top 10 Major Shareholders as of 11 March 2014

Post-IPO Pre-IPO

Number of

Shares

% of Paid-up

Capital

Number of

Shares

% of Paid-up

Capital

Rungrojkitiyos Family 1,156,000,000 74.82 1,156,000,000 100.00

1. Mr. Siripong Rungrojkitiyos 578,000,000 37.41 578,000,000 50.00

2. Ms. Wanna Raomanachai 577,999,990 37.41 577,999,990 50.00

3. Mr. Ponake Rungrojkitiyos 10 0.00 10 0.00

4. Bualuang Long-Term Mutual Funds 17,189,700 1.11 - -

5. Mrs. Somporn Juangroongruangkit 15,000,000 0.97 - -

6. AIA COMPANY LIMITED-TIGER 15,000,000 0.97 - -

7. AIA COMPANY LIMITED-APEX 10,000,000 0.65 - -

8. Bualuang Long-Term Mutual Funds 75/25 8,053,600 0.52 - -

9. Provident fund of employees of EGAT 6,924,300 0.45 - -

10. MORGAN STANLEY & CO. INTERNATIONAL

PLC

5,700,000 0.37

-

-

Total 1,233,867,600 79.86 1,150,000,000 100.00

Foreign shareholders as of 11 March 2014 the Company has 28 foreign shareholders holding 35,974,100 shares,

representing 2.33 % of paid-up shares

Note : The Company has a limitation on the percentage of equity shares held by foreign shareholders stated in the article of

association clause 11 that “share of the Company can be liberally transferred without constraint and shares held by foreign

shareholders at any time must not exceed forty-nine percent (49%) of total paid-up shares of the Company. In the event in

which any shares transfer that may cause the proportion of shareholding by foreign shareholders to exceed such limit

mentioned above, the Company has the right to refuse such transfer of the Company shares.”

Board of Directors

Name Position Starting Date

1. Mr. Chakramon Phasukavanich Chairman, Independent Director and Member

of Audit Committee

20 June 2013

2. Mr. Siripong Rungrojkitiyos Vice Chairman 20 June 2013

3. Ms. Wanna Raomanachai Director 20 June 2013

4. Mr. Prasong Adulratananukul Director and Chief Executive Officer 20 June 2013

5. Mr. Angkrit Rungrojkitiyos Director 7 October 2013

6. Mr. Koonchorn Raomanachai Director Chief Operation Officer and Head of

Engineering Development Department

20 June 2013

7. Mr. Ponake Rungrojkitiyos Director 10 April 2013

8. Mr. Pramote Techasupatkul Independent Director and Chairman of Audit

Committee

20 June 2013

9. Mr. Veerachai Chaochankij Independent Director and Member of Audit

Committee

20 June 2013

Note: Mr. Siripong Rungrojkitiyos and Ms. Wanna Raomanachai are major shareholders of PCSGH and are parents of Mr. Angkrit

Rungrojkitiyos and Mr. Ponake Rungrojkitiyos. Mr. Koonchorn Raomanachai is Ms. Wanna Raomanachai’s brother

Audit Committee

The shareholders’ meeting no1/2556 on 20 June 2013 has passed the resolution to appoint the Audit Committee

as follows:

Members of Audit Committee

Chairman of Audit Committee : Mr. Pramote Techasupatkul

Member of Audit Committee : Mr. Chakramon Phasukavanich and Mr. Veerachai Chaochankij

Secretary to Audit Committee : P&L Internal Audit Company Limited

Scope of Authorities, Duties and Responsibilities

1. To review the Company’s financial reporting to ensure its accuracy and sufficiency

2. To review the Company’s internal control system and internal audit system to ensure its appropriateness

and effectiveness, to evaluate the independence of internal audit function and to approve the

appointment or termination of head of internal audit function and/or the engagement of outsourced

internal audit firm or other entity responsible for internal audit function

3. To review the Company’s compliance with the laws pertaining to securities and stock exchange, SET

regulations, and other laws pertaining to the Company’s business

4. To consider, select, and nominate an independent person to be the Company’s auditor and to propose

the auditor remuneration, and to convene a meeting, at least once a year, with the auditor in the absence

of the Company’s management

5. To consider connected transaction or transactions that may give rise to conflict of interests to ensure that

they are in compliance with the laws and SET’s regulation with the purpose of ensuring that these

transactions are conducted on a reasonable basis and are in the best interests of the Company

6. To prepare Audit Committee Report which will be disclosed in the Company’s annual report and the Audit

Committee Report shall be signed on by the Chairman of Audit Committee and should be comprised of

the following

(1) Opinion on accuracy, completeness and reliability of the Company’s financial reporting

(2) Opinion on adequacy of the Company’s internal control

(3) Opinion on compliance with securities and stock exchange laws, SET’s regulations, or laws pertaining to

the Company’s business

(4) Opinion on appropriateness of the auditor

(5) Opinion on transactions that may give rise to conflict of interests

(6) Number of audit committee’s meetings and attendance records of each member of the audit committee

(7) Overall opinion or comments formed by the audit committee associated with carrying out work under the

charter

(8) Other transactions which, according to the Audit Committee’s duties and responsibilities delegated by the

Board of Directors, should be made aware of to the Company’s shareholders and general investors

7. When undergoing its duties, if the Audit Committee comes across or has doubt about the certain events or

actions which may have a material effect on financial position and operation of the Company, the Audit

Committee shall report them to the Board of Directors in order to make an improvement within the time

period the Audit Committee deems appropriate. Such events or actions are as follows:

(1) Conflict-of-interest transactions

(2) Fraud or irregularities or significant deficiencies in internal control

(3) Violation of securities and stock exchange laws, SET’s regulations, or laws pertaining to the Company’s

business

If the Board of Directors or management fails to make any improvement within the time period mentioned above,

any member of the Audit Committee may report such event or action to the Office of Securities and Exchange

Commission or the SET

8. Carry out any actions delegated by the Board of Directors with the consent of the Audit Committee

Term of Member of Audit Committee

1. Chairman of Audit Committee: 3 years

2. Member of Audit Committee: 3 years

Listing Conditions

-None-

Silent Period

Shareholders, who own common shares before the Company’s public offering, holding 849,750,000 shares or 55%

of paid-up capital after the initial public offering certify to the Stock Exchange of Thailand that their shares will not

be sold for the period of one year from the first trading day,. Upon the expiry of 6 months period of the prescribed

time, those shareholders will be allowed to sell 25% of the total amount of shares prohibited for sale and the rest

after one year.

Relaxation

-None-

Others

-None-

Statistical Summary

P.C.S. Machine Group Holding Public Company Limited

Year

Total Sales

(Million Baht)

Net Profit (Loss)

(Million Baht)

Earnings (Loss)

(Baht/Share)

Dividend

(Baht/Share)

Book Value

(Baht/Share)

Payout Ratio

(%)

2010 2,793.0 675.47 5.87 0.63 2.69 106.59

2011 3,180.82 788.60 6.86 - 3.37 -

2012 5,302.09 1,705.97 14.83 0.39 4.47 26.38

2013 5,162.34 1,376.58 1.19 4.19 1.46 351.61

Note: For comparability purposes, adjusted basic earnings per share for the years ended 31 December 2010, 2011 and 2012 are

calculated by using the number of shares of 1,150 million shares with a par value of 1 Baht as if the Company had changed its par

value from 10 Baht to 1 Baht from 2010. The basic earnings per share for the year ended 31 December 2013 is calculated by using the

number of shares of 1,156 million shares as appeared on the consolidated financial statements.

The Board of Directors meeting no.1/2014 on 20 February 2014 has approved the dividend payment from the 2013 earnings of 3

subsidiaries, which was subsidising by BOI, amounting to Baht 430.14 mm. The source of funding for such payment may come from

the subsidiaries internal cash flow or loans from financial institutions and/or the Company’s directors. In case the source of funding is

directors’ loan, the terms will be equivalent or better than the financial institution. Over and above, the Company and subsidiaries will

comply with the terms of transaction with related parties under the provision of the Securities and Exchange Commission Torjor 21/2008

and notification from the Stock Exchange of Thailand about the disclosure of information and other acts of listed companies concerning

the connected Transactions 2003.

The Company also approved the interim dividend payment to the shareholders from the operations during 1 January 2014 to 20

February 2014 amounting to Baht 231.75 mm or equivalent to Baht 0.15 per share which calculated from 1,545,000,000 shares. The

Company will sign up shareholders who are not entitled to dividends (XD) on 24 March 2014. The Company will determine the

shareholders whose entitled to receive the interim dividend (record date) on 26 March 2014 and the closing date for collecting

shareholders list and to compile a list of shareholder under section 225 of Securities and Exchange Act 1992 (including amendment) on

27 March 2014.

The Company plans to pay out such dividend within one month after approval from the shareholders general meeting which will be held

on 4 March 2014.

Statements of Financial Position of P.C.S. Machine Group Holding Public Company Limited

Statements of financial position

Combined financial statements for specific purpose Consolidated

financial statement

As at 31 December

2010 2011 2012 2013

Million

Baht %

Million

Baht %

Million

Baht %

Million

Baht %

Assets

Current Assets

Cash and cash equivalents 129.92 3.15 139.76 2.76 384.43 6.47 318.89 5.73

Trade accounts receivable 476.64 11.56 544.43 10.73 907.95 15.27 801.04 14.39

Other receivables - related parties 0.00 - 0.00 - 0.00 - 31.33 0.56

Other receivables - others 34.89 0.85 4.56 0.09 7.48 0.13 20.15 0.36

Inventories 479.52 11.63 823.00 16.22 738.84 12.43 669.68 12.03

Other current assets 23.91 0.58 56.24 1.11 37.25 0.63 11.46 0.21

Total current assets 1,144.87 27.76 1,568.00 30.91 2,075.95 34.92 1,852.55 33.28

Non-current assets

Plant and equipment-net 2,977.00 72.17 3,501.29 69.02 3,858.29 64.90 3,699.05 66.45

Intangible assets-net 2.86 0.07 3.52 0.07 5.57 0.09 9.13 0.16

Deferred tax assets 0.00 - 0.00 - 4.80 0.08 6.12 0.11

Total non-current assets 2,979.86 72.24 3,504.81 69.09 3,868.67 65.08 3,714.30 66.72

Total assets 4,124.73 100.00 5,072.81 100.00 5,944.62 100.00 5,566.85 100.00

Statements of financial position


financial statement

As at 31 December

2010 2011 2012 2013

Million

Baht %

Million

Baht %

Million

Baht %

Million

Baht %

Liabilities and shareholders’ equity

Liabilities

Current liabilities

Overdrafts and short-term loans

from financial institutions 700.00 16.97 730.00 14.39 200.00 3.36 500.00 8.98

Trade accounts payable 183.32 4.44 267.41 5.27 459.94 7.74 201.73 3.62

Other payables 132.17 3.20 173.01 3.41 117.85 1.98 149.36 2.68

Short term loan – related parties 0.00 - 0.00 - 0.00 - 3,000.00 53.89

Tax payable 0.63 0.01

Other current liabilities 1.44 0.03 2.67 0.05 3.02 0.05 2.24 0.04

Total current liabilities 1,016.93 24.65 1,173.08 23.12 780.81 13.13 3,853.95 69.23

Non-current liabilities

Employee benefit obligations 15.17 0.37 18.49 0.36 22.90 0.39 29.63 0.53

Total non-current liabilities 15.17 0.37 18.49 0.36 22.90 0.39 29.63 0.53

Total liabilities 1,032.10 25.02 1,191.57 23.49 803.72 13.52 3,883.58 69.76

Shareholders’ equity

Issued and paid-up share capital 1,150.001/ 27.88

1,150.001

/ 22.67

1,150.001

/ 19.35 1,156.00 20.77

Share premium on business

restructuring under common control - - - - - - 95.95 1.72

Retained earnings (losses) after

business restructuring 2/

Appropriated – legal reserve - - - - - - 0.37 0.01

Inappropriate - - - - - - 430.95 7.74

Retained earnings (losses) before

business restructuring 3/

Appropriated – legal reserve 45.00 1.09 45.00 0.89 45.00 0.76 0.00 -

Inappropriate 1,897.63 46.01 2,686.23 52.95 3,945.90 66.38 0.00 -

Total parent’s shareholders’ equity 3,092.63 74.98 3,881.23 76.51 5,140.90 86.48 1,683.27 30.24

Non-controlling interests 0.00 - 0.00 - 0.00 - 0.00 -

Total shareholders’ equity 3,092.63 74.98 3,881.23 76.51 5,140.90 86.48 1,683.27 30.24

Total liabilities and shareholders’

equity 4,124.73 100.00 5,072.81 100.00 5,944.62 100.00 5,566.85 100.00

Note: 1/

The Company was incorporated and registered on 10 April 2013; therefore, the initial registered capital of 6,000,000 Baht does not

include in the consolidated financial statements for specific purpose.

2/ Retained earnings (losses) after business restructuring means retained earnings (losses) from 26 June 2013 (date of business

restructuring) to 31 December 2013 (end of financial reporting period), both days inclusive.

3/ Retained earnings before business restructuring means retained earnings before 26 June 2013 (date of business restructuring).

Statements of Comprehensive Income of P.C.S. Machine Group Holding Public Company Limited

Statements of comprehensive

income


financial statement

For the years ended 31 December

2010 2011 2012 2013

Million

Baht %

1/

Million

Baht %

1/

Million

Baht %

1/

Million

Baht %

1/

Revenues

Sales 2,790.59 99.91 3,174.28 99.79 5,293.71 99.84 5,124.49 99.27

Investment income 0.18 0.01 0.57 0.02 0.55 0.01 0.56 0.01

Other income 2.28 0.08 5.98 0.19 7.83 0.15 37.30 0.72

Total revenues 2,793.06 100.00 3,180.82 100.00 5,302.09 100.00 5,162.34 100.00

Expenses

Cost of sales 1,996.69 71.49 2,259.07 71.02 3,431.91 64.73 3,575.57 69.26

Cost of services - - - - - - 26.25 0.51

Selling expenses 44.49 1.59 47.05 1.48 67.98 1.28 70.69 1.37

Administrative expenses 73.26 2.62 74.97 2.36 92.54 1.75 107.78 2.09

Total expenses 2,114.45 75.70 2,381.09 74.86 3,592.43 67.75 3,780.30 73.23

Profit before finance costs and income

tax expense 678.61 24.30 799.73 25.14 1,709.66 32.25 1,382.04 26.77

Finance costs 3.15 0.11 11.12 0.35 4.80 0.09 6.14 0.12

Profit before income tax expenses 675.47 24.18 788.60 24.79 1,704.86 32.15 1,375.90 26.65

Income tax revenue - - - - 1.11 0.02 0.68 0.01

Net profit for the year/period 675.47 24.18 788.60 24.79 1,705.97 32.18 1,376.58 26.67

Other comprehensive income - - - - - - - -

Net profit attributable

Shareholders before the business

restructuring3/

675.47 24.18 788.60 24.79 1,705.97 32.18 945.27 18.31

Shareholders after the business

restructuring4/

- - - - - - 431.32 8.36

Earnings per share2/ 5.87 - 6.86 - 14.83 - 1.19 0.00

Note: 1/ Percentage of total revenues are comprised of sales, investment income, and other income.

2/ For comparability purposes, adjusted basic earnings per share for the years ended 31 December 2010, 2011 and 2012 are calculated

by using the number of shares of 1,150 million shares with a par value of 1 Baht as if the Company had changed its par value from 10

Baht to 1 Baht from 2010. The basic earnings per share for period ended 31 December 2013 is calculated by using the number of

shares of 1,156 million shares as appeared on the consolidated financial statements.

3/ Net profit (loss) attributable to shareholders before the business restructuring means net profit (loss) before 26 June 2013 (date of

business restructuring)

4/ Net profit (loss) attributable to shareholders after the business restructuring means net profit (loss) from 26 June 2013 to 31 December 2013,

both days inclusive.

Statements of Cash Flows of P.C.S. Machine Group Holding Public Company Limited

Statements of cash flows

Combined financial statements for specific purpose

Consolidated

financial

statement

For the year ended 31 December

2010 2011 2012 2013

Million Baht Million Baht Million Baht Million Baht

Cash flows from operating activities

Net profit for the year/period 675.47 788.60 1,705.97 1,376.58

Items to reconcile net profit for the year/period to cash received

from (paid to) operating activities:

Depreciation expense 393.16 407.99 416.23 542.04

Amortization expense 1.59 1.59 1.89 1.55

Investment income (0.18) (0.57) (0.55) (0.56)

Finance costs 3.15 11.12 4.80 6.14

Employee benefit obligation 2.71 3.32 4.41 6.85

Loss on revaluation of inventories to NRV - - 9.70 (7.62)

Unrealized loss on exchange rate - - 0.03 (3.49)

Loss on disposal of plant and equipment 1.16 3.99 1.81 (0.89)

Tax revenue (1.11) (0.68)

Profit from operating before changes in operating assets and

liabilities 1,077.05 1,216.05 2,143.18 1,919.93

(Increase) decrease in operating assets

Trade accounts receivable (43.04) (67.80) (363.52) 112.43

Other receivables 53.34 30.32 (2.92) (43.99)

Inventories (86.87) (343.48) 74.47 76.78

Other current assets (21.25) (32.34) 19.00 26.75

Increase (decrease) in operating liabilities

Trade accounts payable (205.86) 155.92 160.96 (258.41)

Other payables 92.09 (38.73) 6.67 (2.05)

Employee benefit payment - - - (0.12)

Other current liabilities (21.43) 1.23 0.35 (0.77)

Cash flows generated from operating activities 844.03 921.17 2,038.17 1,830.54

Tax payment - - - (0.97)

Cash flows generated from operating activities - net 844.03 921.17 2,038.17 1,829.57

Cash flows from investing activities

Interest receipts 0.05 0.57 0.55 0.56

Cash payment for plant and equipment (794.37) (866.73) (727.22) (546.43)

Proceeds from disposals of plant and equipment 2.69 11.39 2.86 212.86

Payments for payables from purchasing plant and equipment (4.97) (73.19) (80.92) (17.75)

Payments of intangible assets (0.01) (2.25) (3.94) (5.11)

Cash flows used in investing activities (796.60) (930.21) (808.67) (355.88)

Statements of cash flows

Combined financial statements for specific purpose

Consolidated

financial

statement

For the year ended 31 December

2010 2011 2012 2013

Million Baht Million Baht Million Baht Million Baht

Cash flows from financing activities

Interest payments (3.15) (11.12) (4.80) (6.14)

Dividend payment (720.00) - (450.00) (4840.21)

Cash receipts from short-term loan from directors - - - 3,000.00

Increase (decrease) in overdrafts and short-term loans from

financial institutions 700.00 730.00 200.00 860.00

Repayments of short-term loan from financial institutions - (700.00) (730.00) (560.00)

Proceed from the issuance of common stock - - - 6.00

Cash flows generated from (used in) financing activities (23.15) 18.88 (984.80) (1540.35)

Net increase (decrease) in cash and cash equivalents 24.28 9.83 244.70 (66.66)

Cash and cash equivalents, beginning 105.52 129.92 139.76 385.58

Cash and cash equivalents, ending 129.80 139.76 384.46 318.92

Prepared by Bualuang Securities Public Company Limited

- Information Memorandum - P.C.S. MACHINE GROUP...

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