The Company realizes the importance of the good corporate governance and therefore has established the Principles of Good Corporate Governance according to the direction established by the Stock Exchange of Thailand, in order for the Company to have the management that is efficient, transparent, can be audited and trusted by the shareholders, investors, stakeholders and all relevant parties, which is the means to add value and promote sustainable growth for the Company. Therefore, the Company has established the following important corporate governance policy.

Risk Management

1. Risks from external factors

1.1 Risks from asbestos usage control regulations from the government

The Company may face regulatory risks as the Ministry of Public Health has issue policy and regulations to reduce and gradually eliminate asbestos usage. The label committee issued a draft law to make any products with asbestos content be labeled, such as brake, clutch, etc. in automotive industry or roof tiles, rubber tile, pipeline, etc. in construction industry.

The Company has followed up closely on this issue to study and evaluate the impacts together with other roof tile producers. The Company also took part in sourcing international specialist to educate the regulators and producers how to use asbestos safely and presented findings from various international institutes that asbestos is not critically hazardous substance. Moreover, the Company has gradually launched products with no asbestos content such as Jearanai tile, siding board, etc.

However, the Rotterdam Convention, COP IV meetings at Rome, Italy, dated October 27, 2008, was considering to announce Chrysotile Asbestos a hazardous substance, which will be added in appendix 3 of sub-contract Rotterdam, which are the substances that must be reduced and eliminated. For Thailand, a representative from Thai Environment Institute participated in the meeting. The meeting resolved not to include Chrysotile Asbestos in the PIC List in Appendix 3 of Rotterdam Sub-Contract.

1.2 Risks from pricing and raw material scarcity

• Cement is the Company’s key raw material. The Company does not have any raw material supplier problem as there are many producers. There is also no pricing problem as the Company buys cement from many producers, which gives the Company good bargaining power.
• Asbestos is currently one of the key raw materials that face both scarcity and pricing risk due to an increasing demand from China and India, while the producers gradually exit the industry, resulting in the remaining producers raising prices. Moreover, many ship vessels around the world prohibit the transportation of asbestos. The Company manages this risk by increasing inventory, make annual ordering plan from 5 major producers in an adequate and appropriate amount, and cooperates with suppliers to come up with procurement and logistic plan to reduce transportation problems.

1.3 Risk from rising transportation costs

The Company’s products are heavy and fragile. Therefore, the transportation cost to clients’ premises is one of the major production cost. The energy crises in mid-2007 caused continued impact to mid-2008, which directly increased transportation cost. However, toward the end of 2008, the oil price fell sharply from the global financial crisis. The Company monitors the situation carefully and continues to prepare itself if the oil price would rise again. The Company determined the following measures:

• Plans truck route appropriately and carry full loading on every truck
• Increase round-trip trucks, which carry goods in both trips, as they cost less than single-trip trucks.
• Use multimodal transportation between truck and boat in southern Thailand.
• Encourage clients to pick products up by themselves, where the Company will subsidize part of the transportation costs for the clients, which is cheaper than the Company doing all delivery.
• Encourage transportation sub-contractor to improve trucks to use other alternative energies, such as NGV. These trucks constitute about 24% of total fleets, and expect to rise in 2009.

1.4 Risk from machine disruption

As there are increasing demand for wider product varieties and quick delivery, the Company must plan continued running of the machines. Any disruption, including annual maintenance or machine break down, may affect delivery plan. The engineering division determines annual maintenance plan to ensure that the Company can continuously produce products, such as.

• Using preventive maintenance measures, collect maintenance record, determine maintenance plan, make follow-up and prepare spare parts to support according to plans.
• Preparation of annual maintenance plan by using computers. Prepare and test spare parts to reduce machine down time by 7-15 days.

1.5 Risk from pricing competition

During 2008, the Company faced the risk from pricing competition as the economy slowdown and many producers still have excess capacity. Therefore, the Company focused on before and after-sales service, installation service and timely delivery to create differentiation. The Company has also continued to launch new products to the market.

1.6 Risk from financial management and foreign exchange

The company does not have policy to make loan in foreign currencies. However, the normal trade creditors from importing raw material, machine and equipment may put the company at risk of foreign exchange. The Company enters into currency forward contract and opens foreign currency deposit (FCD) by deposit US dollar receipt to deposit in the FCD account to pay for raw materials without having to make foreign exchange again, thus reduce foreign currency volatility risk.

2. Management risks

Management risks of major shareholder

The Company is a subsidiary of Myriad Materials Co., Ltd. As of December 31, 2008, Myriad Materials Co., Ltd. has 73.33% holding in the company. Including the shareholding of the directors that represent Myriad Materials Co., Ltd., it will have more than 75% holding in the Company, which enables Myriad Materials Co., Ltd. to have complete control of shareholders’ meeting resolution. However, the Company has practiced public company’s Code of Best Practices and is determined to operate business according to the Good Corporate Governance guideline to ensure operation ethics and fair information disclosure. For the connected transaction, the persons who have potential conflict of interest cannot vote on the relevant issue. The Audit Committee will provide comments for those transactions and proposes to the Board of Directors and/or shareholders’ meeting for further approval. The Company will disclose any connected transaction in the notes attached to financial statements.

Internal Control

The Audit Committee is responsible for auditing the Company’s operation according to the policies and regulations set forth by the Company, the laws and regulations of the relevant regulators and promote the Company to have accounting consistent with generally accepted accounting standard. This includes auditing the Company for proper internal controls, internal auditing and management practices that minimize risk and are properly controlled, proper, up to date and effective. The Audit Committee is non-biased and free to conduct such audits as deemed necessary and may make use of the Office of Internal Audit and Compliance Control which directly reports to the Audit Committee.

The Office of Internal Audit and Compliance Control are responsible to control and assess the proper controls according to the Audit Committee’s directions. Whereas, their main job is to assess if there are proper controls to prevent problems from occurring, assess the integrity of the information and financial reports and present the information in a timely and transparent method to assure that the policies of Good Corporate Governance are abided by effectively according to the international standard.

From the assessment of the Company’s internal control in 5 main areas, which are organization and environment, risk management, management control, information system, and follow-up and assessment methods, the Audit Committee concluded that the Company has adequate internal control systems for transactions related to the major shareholders, directors, management, or other related person. The Committee also agreed that there are sufficient internal control systems on other areas as well. The Company’s internal control system can be concluded as follow:

1. Organization and Environment

The Company has set up and provided for the establishment of this Organization and has delegated responsibility accordingly for management flexibility. The Company realizes the importance of developing and enhancing information systems for effectiveness of the Company as a whole. Therefore, in order to develop this effectiveness, it has implemented the computer system ERP and the program SAP version ECC6 to improve its information systems since January 2008.

In 2008, the Company stressed the importance on environment conservation. Moreover, the Company was certified Industrial Standard for Service Excellence ISO 9001:2000 and Environmental and Occupational Safety (OHSAS 18000:2007) from SGS. The Company expects to receive certification ISO 14001 in 2009.

The Company also encourages employees to enhance the company’s effectiveness by initiating 5S committee to supervise, promote, advice and coordinate the operation effectively and to continue to improve workplace to a better and safe environment

2. Risk Management

The Company has conducted a proper analysis of the risks that may occur both inside and outside that may have an effect on the organization. These include; use of asbestos risk; price and availability of raw materials risk; rising delivery costs risks; equipment breakdown risk; competitive pricing risk; and management risk due to major shareholder and management of finances and foreign currency.

As information technology has become widely used, the Company appointed the IT department to oversee the Company’s IT system and comply with the Computer-Violation Act BC2550. The Company has managed the use of the Company’s IT system properly and effectively to prevent problem that may risk violating this Act and other relevant laws. The Company issues regulations concerning computer usage and indicate measures against those who fail to comply with the regulations.

To determine measures and methods to prevent, fix and follow-up on any situation that would cause the risk factor and to review the current controls in place and the need to increase or change these controls to prevent further problems. Thus, the Company assigned the Risk Management Committee to be responsible for this problem. The Committee comprises of 1 supervisor and 10 management members as the committee and appoints Deputy Managing Director, Sales and Marketing to be the chairman of the committee, which comprises a total of 12 members. This Committee has the following responsibilities:

1. Propose risk management policy to the Management Committee for approval prior to the operation.
2. Implement Risk Management policies by closely cooperating with the department responsible for risk management and introduce appropriate measures and investment to prevent risk.
3. Review risk management report, oversee risk management effectiveness to correct unacceptable risks.
4. Propose report concerning adequacy of risk management system to the Management Committee and Audit Committee to further propose to the Board of Directors.

3. Control of Work Effectiveness of Administrative Department

The Company has laid down the parameters and responsibilities of its officers and the amount of petty cash or cash that each level of management is allowed to authorize. It has also divided the responsibility among them. Thus, the steps for reimbursement or procurement of money; hiring employees; and other activities are clearly stated in the regulations of the Company and have been disbursed to the employees involved. In addition, any activities involving legal matters carried out by the major shareholder, Directors, Management or others involving the Company shall be carried out according to the by-laws of the Securities and Exchange Commission of Thailand and the related laws. This includes any preventative measures to enforce that these activities are authorized accordingly as such that may be carried out with an outsider in order to ensure that these activities are done for the good of the Company as a whole.

4. Management Information Systems and Communications

The Company realizes the importance of continuing development of its Management Information Systems for the effectiveness and linking of information of the organization. From January 2, 2008, the Company has implemented Enterprise Resources Planning (ERP) of SAP version ECC6 to replace the old system. The Company has continuously developed database to enhance management decision, so that the management and shareholders can be confident in the Company’s information management system.

5. Follow-up and Assessment Methods

The Company has continuously followed up on its performance in comparison to its planned goals and budgets. Reports were sent to the Company’s Director’s at least every 3 months. In 2008, there were 13 planning and budgeting meetings. Furthermore, if there was found to be an issue impacting the Company, additional meetings could be called to change or add to the goals and plans to accommodate with changing situation. Additionally, the Company also has the Office of Internal Audit and Compliance Control that has the responsibility to audit the various departments and units to see if they are working according the goals and budgetary guidelines. If it is found to have a discrepancy, the Office of Internal Audit and Compliance Control would report to the Audit Committee within a specified time. In turn, the Audit Committee would then report to the Company’s Board of Directors every quarter, whereas the Audit Committee would also have to offer its recommendations for a solution to the problem in order to promote effective internal control system of the Company.

Occupational Health and Safety