PRINC: Principal Capital Public Company Limited | Annual ...

2ANNUAL REPORT 2013

Principal Capital Public Company Limited

3ANNUAL REPORT 2013

Principal Capital Public Company Limited

4ANNUAL REPORT 2013

Dr.Pongsak Viddayakorn (M.D.)Chairman of the Board and Chairman of

Executive Committee

Dr.Satit Viddayakorn (Ph.D.)Director, Executive Committee, Chief

Executive Officer and Managing Director

Miss Seerada TiemprasertDirector and Executive Committee

CHAIRMAN OF THE BOARD AND BOARD OF DIRECTORS

5ANNUAL REPORT 2013

Mr.Yarnsak Manomaiphiboon Director and Chairman of the

Audit Committee

Miss Patraporn JarupatDirector

Miss Aranya ChalermpornvarodomDirector and Member of the

Audit Committee

Mr.Sastra ChuntarasuptDirector

6ANNUAL REPORT 20136ANNUAL REPORT 2013

Message from

the Chairman

.....................................................................

Dr.Pongsak Viddayakorn (M.D.) Chairman of the Board

and Chairman of Executive Committee

Generally speaking, the real estate business is still considered to be constantly growing, which in turn reflects the strong demands of both consumers in the estate sector and tourism, even though in a certain recent periods of time Thailand has been experiencing internal political conflict.

During the year 2013, Principal Capital Company Public Company Limited (PRINC), has expanded its business from real estate development in prime locations of Bangkok’s business center and property rental business to other ventures including one-stop office bui lding services that are inclusive of office building management, sales, and administration, IT, finance and accountancy.

Besides all this, PRINC has seen a growth potent ia l opportuni ty to invest in the Information Technology Systems business by acquiring Convergence Systems Company Limited into its portfolio as of October 2013 – obtaining a 99.99 % shareholder stake, with 35 million Baht paid-of capital. Moreover, in July 2013, PRINC set up Principal Investment Company Limited as its business consultancy company, with an initial capital of 10 million THB, and a 99.99% holding share.

Heading into 2014, PRINC has a strong determinat ion to eff ic ient ly develop i ts existing projects and services. Meanwhile, we are constant ly keeping an eye on investing in potential businesses, in and out of the stock market, and aiming to grow our business both domestically and internationally. We strongly believe that with experience and a hard-working manage ment team, together with all our hard-working staff, PRINC will confidently move forward while maintaining sustainable growth.

This expected success could not have happened without the support of shareholders, customers, financial institutions, members of the press, and business partners. PRINC itself relies on the expertise and commitment of all of its directors, management and staff. On behalf of PRINC, I would like to extend my sincere thanks and appreciation to all of the parties concerned, and we hope for their continued support in the future.

7ANNUAL REPORT 2013

7ANNUAL REPORT 2013

.....................................................................

Dr. Satit ViddayakornChief Executive Officer and Managing Director

Message from

the CEO

Principal Capital Public Company Limited has an absolute standout core value to run a business that produces gains and benefits for its shareholders by adhering to good governance policies, so that the company is run with a foundation of efficiency and transparency.

In the year 2013, the new management team has continued to perform their tasks in real estate business focusing in Bangkok’s central business district and other prime areas. The new management team will have completed their one-year operation on April 29, 2014. The performance of the company affter its one-year operation have been considered successful. The losses of the company have been significantly reduced, with a current figure of 1.2 million Baht in loss. This can be taken as an indication of the company’s extraordinary growth, and highly successful performance, by turning a big loss company closer into a “no loss” company. The company’s sucess is proven by its latest 4th quarter performance, and it is expected that from now on, the performance of the company will gradually pick up and meet the planned targets.

Investors started to show positive response on the change in management team which reflected in our recent share price and the trading volume. This is due to the fact that the company has used the newly increased capital to pay off the debt and stop the interest

expense. This results in a better performance for the company. The new projects for the year 2014, have also been positively supported by the shareholders.

Last year (2013), the company focused its interest in 2 major areas. The first focus was to utilize the existing resources, and seek for more business opportunities. In other words, the company, which is running its real estate business with adequate human resources, has utilized the same group of human resources, as well as the same structure and the same resources, to create new job opportunities for the organization. By doing this, the company doesn’t have to build new buildings, but just manage the existing buildings with our expertise and existing resources which - in turn, led to the company’s increase in revenue of nearly 20 million Baht.

For the second focus, the company foresaw that Information Technology (IT) is a bright direction in today’s business world, as it is essentially a tool every corporation uses, and so we have invested in an IT business, and are geared up to drive it to the peak of its performance.

This year (2014), we are preparing to expand more to other business lines, having prepared ourselves (in the year 2013) to make the company internally ready, with strength in all areas, before gearing up to meet our target goals.

In addition, this year we are interested in the current market’s business management strategies, and are looking into expanding our business through partners, or alliances, in the model of joint ventures. We are now moving forward with strong determination to build a company with an image and a performance record that catch the eye of both investors and the stock market, with revenue and profits that are dramatically up, and a sustainable economy and policies designed to gain confidence from all investors.

8ANNUAL REPORT 2013

Stock Exchange of Thailand, and the company’s own internal

auditing standard, which was set forth to be independent,

impartial and handled with integrity.

3. The list of legal actions – subject to stocks and

stock exchange – as well as the regulations of the Stock

Exchange of Thailand, and laws related to the company’s

business and it’s regulations, were all examined.

4. Any Transactions related to the company, or

against the company’s profit, were examined and found

to be accurate and profitable, subject to the regulations

of the Stock Exchange of Thailand.

5. After the major shareholders had been changed,

and the registered and paid-up capital had been increased

in 2013, the company improved its operations by adding

more businesses and investing in the stock market to

ensure better profit margins for the shareholders. In addition,

the auditor company from 2013, which has been responsible

for this duty since 2006, and in order to better accommodate

the company’s growing and diversified businesses,

the executives had proposed a new auditor candidate

for comparison during the selection process.

The audit committee compared the audit firms

that the executives had proposed, and agreed to

choose PricewaterhouseCoopers ABAS Ltd., as the

specialized and independent auditor to be in charge. In

order to maximize effective cooperation, and forward the

business expansion plans, this change in auditors was

submitted to the board of directors in order to propose

for approval at the annual general meeting to appoint Mr.

Chanchai Chaiprasit, authorized auditor no. 3760, and/or

Mr. Phisit Thangthanakul, authorized auditor no. 4095, and/

or Ms. Sakuna Yamsakul, all from PricewaterhouseCoopers

ABAS Ltd., as the auditors in 2014.

6. The 2013 internal auditing plan was examined

and approved, according to the evaluation of the internal

controlling system, and the analysis of risks pertaining to

more significant actions.

................................................

(Mr. Yarnsak Manomaiphiboon)

Chairman of Audit Committee

February 28, 2014

Report from the Audit Committee

Dear Shareholders,

In 2013, the major shareholders at PRINC underwent

a change. Therefore the former audit committee, which

consisted of Mrs. Philai Piamphongsan, the chairman of

the audit committee, Mr. Phaiboon Siriphanusatian, and

Police Colonel Kidanan KhomKham, will not assume their

positions on the board of directors, nor, consequently, on the

audit committee in the next term.

On April 26, 2013, the board of directors appointed a new

audit committee consisting of 3 independent persons, who

do not involve in company’s business as executives, and

are qualified in dealing with financial statements, and have

business managing experience. The committee is led by

Mr. Yarnsak Manomaiphiboon, acting as chairman,

Ms. Aranya Chalermponvarodom, Ms.Orawan Tejapaibul,

and Ms.Thiranan Saengphungtham who acts as the

committee’s secretary. However, Ms.Orawan Tejapaibul

subsequently resigned from her position on January 27, 2014.

The audit committee has followed the line of duty and

responsibilities assigned to it by the board of directors, which

are in accordance with the regulations of the Stock Exchange

of Thailand. Four meetings were held in 2013 between

the audit committee, the executives, the auditors and the

internal auditors, to estimate problems, exchange ideas,

listen to, and make suggestions to, the board of directors.

The conclusions arrived at are as follow:

1. The quarterly financial report, and the financial report

of 2013, were examined by hearing from, and questioning,

the account auditors on the accuracy and reliability of

the company’s financial report, which declares sufficiently

significant information, as well as important changes in

accounting regulations. The audit committee therefore

concluded that the company’s financial reports, unconditionally

presented by the account auditors, are significantly accurate

according to generally accepted accounting regulations.

2. The internal auditor’s results, and the internal

controlling system’s results, were examined in conjunction

with estimations and analysis of any risks in significant

working systems. Thus, it was concluded that the company

possesses a sufficient and effective internal control system.

Furthermore, in cases where ways were found by which the

internal controlling system could be improved and be more

effective, all ideas were suggested and accepted with due

cooperation. In addition, the process of internal auditing was

also examined, and it can be concluded that these actions

followed the regulations of internal auditing stipulated by the

9ANNUAL REPORT 2013

ContentsINTRODUCTION

CHAIRMAN OF THE BOARD AND THE BOARD OF DIRECTORS 4

MESSAGE FROM THE CHAIRMAN 6

MESSAGE FROM THE CEO 7

REPORT FROM THE AUDIT COMMITTEES 8

SECTION 1 BUSINESS CONDUCT

POLICY AND OVERVIEW 10

TYPE OF BUSINESS OPERATIONS 12

RISK FACTORS 17

OPERTING ASSETS 19

LEGAL DISPUTES

GENERAL INFORMATION AND OTHER KEY DATA

SECTION 2 MANAGEMENT AND CORPORATE GOVERNANCE

DETAILS OF SECURITIES AND SHAREHOLDERS 20

MANAGEMENT STRUCTURE 21

CORPORATE GOVERNANCE 24

CORPORATE SOCIAL RESPONSIBILITIES : CSR 33

INTERNAL CONTROL AND RISK MANAGEMENT 33

RERATED PARTY TRANSACTIONS (RPT) 34

SECTION 3 FINANCIAL STATEMENTS AND OPERTING RESULTS

KEY FINANCIAL INFORMATION

INDEPENDENT AUDITOR’S REPORT 36

FINANCIAL STATEMENTS 37

NOTES TO FINANCIAL STATEMENTS

ANALYSIS AND MANAGING DEPARTMENT’S EXPLANATION 43

SECTION 4 DETAILS OF BOARD OF DIRECTORS, EXECUTIVES, AND CORPARATE SECRETARY

DETAILS OF DIRECTORS, EXECUTIVES, AND CORPORATE SECRETARY 69

10ANNUAL REPORT 2013

Section1 Business Conduct1. Policy and Overview Principal Capital Public Company Limited (the Company), formerly Metrostar Property Public Company Limited, was primarily engaged in Bangkok’s Central Business District property development in prime locations such as Silom, Sathorn, and other business districts in the city. The Company subsequently expanded to include rental properties and full-service office management, covering building management, sales, administration, finance and accounting.

In addition to the real estate business, the Company sees investment opportunities in information technology services because this business holds significant growth potential. The expansion can also help diversify the Company’s overall investment portfolio. As a result, the Company accessed to the investment in the ordinary shares of Convergence Systems Company Limited in October 2013 at 99.99 percent of its paid- up capital amounting to 35 million Baht

In July 2013, the Company establ ished Principal Investment Company Limited with a registered and paid up capital of 10 million Baht, and 99.99 percent of shares held by the Company to serve as a business consultant.

1.1 Operational Goals The Company started up as a leading residential property developer by developing quality projects in response to the needs of target customers in Bangkok’s Central Business District. The Company currently adjusts its business plan to be in line with increasing competition in the market. Given that the construction of new residential development projects in commercial areas requires hefty capital, varying with the costs of land, and that revenue fluctuates due to project construction and the risk of delays possibly caused by external factors such as economic and political circumstances, The Company has set its focus on businesses that generate a steady income stream, and rely on the expertise of its new shareholders. Hence, the Company starts with commercial property management services. Since a large number of commercial buildings and condominiums lack efficient management, the Company sees opportunities to expand its business to various asset management solutions. In addition, the acquisition of Convergence Systems

Company Limited, a consulting firm for information technology implementation, will help build a steady income stream for the Company without the need for heavy investment. Convergence Systems’ key customers are hospitals, while other customers include universities and private companies. The Company’s current major shareholders have long-term experience in these businesses, and they are capable of providing effective advice.

For information technology services, the Company focuses on providing sales and services to commercial organizations both in Bangkok and upcountry areas in Thailand, in line with the increasing demand for the development of corporate information systems. The Company is also in the process of studying the transition to ‘Cloud Computing’. This technology is expected to be more prevalent in the near future. The Company is also preparing for expansion to accommodate the regional competition after the introduction of the ASEAN Economic Community (AEC).

Convergence Systems Company Limited was founded in 2008. It provides consulting services and software implementation related to Hospital Information System, Enterprise Resource Planning, financial management and Human Resource Management, Supply Chain Management, Business Intelligence. Most customers are in the hospital, financial, and industrial sectors. In addition, Convergence Systems Company Limited also provides System Maintenance & Support for companies.

1.2 Key Events and Developments Principal Capital Public Company Limited was renamed from Metrostar Property Public Company Limited on August 27, 2013, and listed on the Stock Exchange of Thailand as “PRINC”. The Company operates property development, having started with “Silom Terrace”, which is valued at 341.87 million Baht. The project developed a 8-story condominium located on Saladaeng Road, Soi 2, which had been unfinished and abandoned because its original owner encountered financial problems with non-performing loans in times of economic crisis. The condominium was acquired in 2000 and opened for sales in 2001. The Company’s key events and developments are as follows.


2003 • The Company increased its registered capital from 5 million Baht to 100 million Baht, with paid-up capital of 30

million Baht, to acquire a piece of land for development projects in Bangkok’s

• Saladaeng area, starting with the construction of Silom Grand Terrace, which is located in the same area of

Silom Terrace.

February 2004 • The registered capital of 100 million Baht was fully paid up.

July 2004 • The Company increased its registered capital from 100 million Baht to 200 million Baht, fully paid up to repay

short term loans with gradual repayment due to be ended by 2004.

August 2004 • The construction of St. Louis Grand Terrace began. The Company increased its registered capital from 200

million Baht to 300 million Baht.

September 2004 • The Company became a public company limited and increased its registered capital by 170 million Baht to 470

million Baht in total, in preparation for the initial public offering of 150 million Baht and to be listed on the Stock

Exchange of Thailand. After the IPO, the remaining registered capital of 20 million Baht was reserved for the

conversion of the warrants granted to its board of directors and employees.

June 2005 • The construction of Sathorn Terrace.

July 2005 • The construction of Baan Ravipa Sukhumvit (Townhouse), Soi Udomsuk, began.

October 2005 • The Company’s stock was traded on the Stock Exchange of Thailand.

May 2006 • The Company reduced the par value of 2 Baht per share to 1 Baht as of the resolution of the 2006 Annual

General Meeting of shareholders held on April 25, 2006, and increased its registered capital by 140 million Baht

to support the convertible bonds. As a result, its registered ordinary shares increased from 470 million Baht to

610 million Baht.

July 2006 • The Company was nominated for “The Best Newly Listed Company” from SET Award 2006.

August 2006 • Land in Bangkok’s Sukhumvit area was acquired to develop Metro Avenue Sukhumvit 66.

December 2006 • Land in the Ratchayothin intersection area was acquired to develop Metro Avenue Ratchayothin.

March 2007 • Opening ceremony of Metro Avenue Ratchayothin Sukhumvit 66.

November 2007 • Sathorn Terrace was renamed to Marriott Executive Apartments - Sathorn Vista Bangkok.

December 2007 • A property fund was planned.

As of December 31, 2007, the Company had paid-up capital of 459.11 million Baht following an increase in its

capital from the exercise of warrants during the year.

July 2008 • The Company sold a 1,750 square wah area of land in the Sathorn area for 1,400 million Baht, and gained a

profit of 737.40 million Baht.

September 2008 • The Company was granted “Good Property Development Certificate 2007-2008” from the Commission for

Consumer Protection.

December 2008 • As of December 31, 2008, the Company had paid-up capital of 466.90 million Baht. The Company increased

its capital for three exercises of warrants, granted to its board of directors and employees, for a total 7.78 million

Baht.

March 2009 • Marriott Executive Apartments - Sathorn Vista Bangkok was completed and operational.

June 2009 • St. Louis Grand Terrace received “The Outstanding Architecture Award” in Residential Building 2008 from Her

Royal Highness Princess Maha Chakri Sirinthorn, nominated by the Association of Siamese Architects under

the Royal Patronage of His Majesty the King.

January 2010 • The Company sold a 5,921 square wah area of land and a building in Ratchayothin area for 681 million Baht.

December 2010 • The Company sold a 1,832 square wah area of land and a building in Sukhumvit 66 area for 513 million Baht.

July 2013 • The Company established Principal Investment Company Limited with registered capital of 10 million Baht and

held a total of 99.99 per cent shares as a business consultant to support the Company’s investment.

September 2013 • The Company expanded its asset management service by offering full- service solutions to manage assets of

Bangkok Business Center Building, Ekkamai.

October 2013 • Since the Company did not issue a convertible debenture as planned, the Company reduced its registered

capital by 140 million Baht, previously planned to increase to support the warrant of the convertible debenture.

The Company raised its capital by 933,800,000 Baht as resolved by the Extraordinary Meeting of Shareholders

on August 20, 2013, resulting in an increase of its registered capital to 1,400,700,000 Baht with 933,800,000

Baht paid up, and 466,900,000 shares reserved for conversion of warrants to purchase common stock of the

Company (PRINC-W1).

The Company acquired Convergence Systems Company Limited, a consulting firm and information systems

(IT) implementation provider for hospitals and other corporate clients, by taking up its 99.99 per cent stake on

October 15, 2010. The acquisition was to diversify the investment risk of the Company, which relies on real

estate as its sole revenue stream.


PRINC

Convergence Systems Principal Investment

99.99% 99.99%

1.3 Shareholders’ Structure P r i n c i p a l C a p i t a l P u b l i c C o m p a n y Limited was previously known as Metrostar Property Public Company Limited, founded by Mr. Veera Buraphachaisri on August 22, 2000. The Company’s ordinary shares were l isted on the Stock Exchange of Thailand on October 26, 2005.

Mr. Satit Viddayakorn bought a stake of the Company on April 22, 2013, making him the Company’s major shareholder. The Company later changed its name from Metrostar Property Public Company Limited, to Principal Capital Public Company Limited, on August 27, 2013 and operated properties for rent only.

In September 2013, the Company signed a contract to manage Bangkok Business Center

2. Type of Business Operations The Company was previously engaged in property development for houses and condominiums. The Company later expanded its business to properties for rent and started to offer a full range of property management in the areas of full-service management solutions engaged in building management, sales, administration, finance and accounting. The Company’s projects are as follows:

Marriott Executive Apartments -Sathorn Vista, a 5-star premium, 31-story serviced apartment building for rent, located on No. 1 Soi Sathorn 3, South Sathorn Road, Tungmahamak, Sathorn, Bangkok.

Office management for Bangkok Business Center Building, Ekkamai, an office building

Building, an office building located on Sukhumvit 63 (Ekkamai). The management income has been realized since September 2013.

On July 26, 2013, the Company established a subsidiary Principal Investment Company Limited to serve as a business consultant. The Company holds 99.99 per cent of its stake.

On October 15, 2013, the Company acquired Convergence Systems Company Limited, a consulting firm providing software implementat ion serv ices, system software training, and maintenance of information systems. The Company holds 99.99 per cent of i ts stake and started to realize revenue since the acquisition date.

for rent, located on Sukhumvit 63 (Ekkamai), Wattana, Bangkok.

The Company’s key revenue is derived from rent and services at Marriott Executive Apartments - Sathorn Vista, Bangkok, the Company’s first property project for rent, and operational since March 2009. The property will continue to be the Company’s key revenue in the future. In September 2013, the Company added full-service office management solutions to its revenue. There is also an income from liquidity management from the funds received from capital increase while the Company is looking for secure, high-return, and long-term investment potentials. In October, the Company had additional revenue from investing in Convergence Systems Company Limited, a consulting firm and information system implementation service provider.


Revenue Structure

Notes: *Revenue from information technology services by Convergence Systems Company Limited was recorded in the course of the period from October to December 2013.

2.1 Products and ServicesProperty Business Metrostar Property Public Company Limited formerly focused on real estate development projects related to condominiums, houses, lands, and properties for rent. After the change of its main shareholders, the Company was renamed to Principal Capital Public Company Limited on August 27, 2013. The Company operated only properties for rent. The Company’s major project is the Marriott Executive Apartments – Sathorn Vista, Bangkok, located in Soi Sathorn 3 (Soi Suan Plu ) , a Class-A, serviced apartment having been in operation since March 2009. In 2013 the Company began to expand to the field of office management. The Company currently

manages Bangkok Business Center Building, located on Sukhumvit Soi 63 (Soi Ekkamai), a 30- story office building comprised of 61 rental office units, 9 serviced offices for rent for both short and long term contracts, 7 meeting rooms, and a 50-seat conference room. In addition, a number of shops for rent are available. The Company also provides management consulting services and project management services to renovate buildings and improve their look and design. The Company has managed to operate Bangkok Business Center Building, and conduct building improvements and image improvements, since September 2013, and has received management fee in return.

Type of Revenue 2011 2012 2013

Million Bt % Million Bt % Million Bt %

Serviced Apartment revenue 153.89 93.93 190.19 97.04 202.20 68.21

Service revenue* - - - - 68.17 22.99

Building management revenue - - - - 14.00 4.72

Others revenue 9.95 6.07 5.80 2.96 12.09 4.08

Total 163.84 100.00 195.99 100.00 296.46 100.00

Location 1SoiSathorn3(SuanPlu),SouthSathonRoad,Thoongmahamek.

ProjectArea 834.30squarewah

SaleArea 17,290squaremeter

ProjectDetails A31-storyserviceapartmentforrent

ProjectHighlights Highquality,5-starresidentialbuildingforrentincentralbusinessdistrictofBangkok,fully-

equippedwithfacilitiesandsharedamenities.

NumberofUnits *Residentialzone:184units,unitsize:61-163squaremeter

Targetcustomers Businessmen–Thaiandexpat–includingthoseworkingintheSathornarea(ClassAtoA+),

andtouristswhopreferfully-equippedroomsandamenitiesforlongstays.

ProjectValue Approximately2,500millionBaht

InvestmentValue Approximately1,800millionBaht

Operational SinceMarch2009

Project Description: Residential properties for rentMarriott Executive Apartments – Sathorn Vista, Bangkok (fomerly Sathorn Terrace)


Information Technology Business Convergence Systems Company Limited provides two major types of services.

1) Software Implementation Services T h e c o m p a n y p r o v i d e s s o f t w a r e implementation services including analyzing and designing systems that meet the needs of customers. Its services are divided into different software formats available in the market.

PeopleSoft: The company implements PeopleSoft, a software by Oracle, for Enterprise Resource P lann ing (ERP) , wh ich enab les organizations to integrate their core business processes – including procurement, manufacturing, sales, accounting, and personnel management – both seamlessly, and in realtime. The organizations are thus enabled to operate effectively, with all data from every section being centralized, and without conflicts of information, all of which helps reduce work processes and costs.

Hospital Information System: The company implements HealthObject software, which collects and manages information related to medical and public health services of hospitals and clinics, such as information about patients, medicines, medical services, and financial data, etc.

Bus iness In te l l igence: The Company implements QlickView software, which helps management to make effective decisions. The software displays data via different presentation formats, such as tables, charts, and important ratios. It also features multiple data sets simultaneously, which enables management to operate the flow of information in their organization quickly and efficiently.

2) System Maintenance & Support Service The company provides maintenance and technical support for enterprise software systems by adept personnel, including inspection and maintenance on schedules. Such services increase the efficiency of the system and ensure that work is delivered to meet clients’ objectives accurately and completely. The support helps reduce software errors that may occur in operations.

2.2 Marketing and Competition

Real Estate BusinessPolicy and Nature of the Market In regard to the serviced apartment business, the Company focuses on an upper market, targeting high-level executives who are both Thai and expatriate. In addition, there are also foreign corporate customers that sign contracts to lease the property for foreign management and staff who come to work in Thailand. Long-term contracts are the most common. Most customers are confident with the Company’s reputation, and the services of the team of executives from Marriott. The main sales channel is handled primarily by the sales team of the project. Booking can also be made via Marriott’s reservation system.

Industry Outlook and Trends The competition in serviced apartments in the past year began intensifying because the supply of new serviced apartments in some areas has been increasing. However, the growth rate of the overall supply remains low. In the meantime, the demand for rental property remains unchanged. Should the economy of Thailand continues to grow, the investment will be expanded, and an increase in the number of foreign visitors will be seen. Consequently, rental rates are likely to increase. However, in certain areas the rates may not be much adjusted, and they are in fact likely to be reduced. Key competitors are condominium operators, some of whom have spare units to rent, and offer services similar to serviced apartments. The operators are required to come up with strategies to find new markets to draw more attention of customers.

In 2013 , the occupancy rate for Class-A and Class-B buildings was significantly improved. But in 2014, it is likely to slow down due to the economic downturn and Thailand’s prolonged political concerns. The operators may opt for more price cuts, which will benefit consumers. A survey shows that many operators spend more on renovating rooms to better meet the changing requirement by customers, and lower prices to attract existing demand.


According to a survey of the market value of software and software services in Thailand for the years 2012/2013, the value of software and software services produced in Thailand was 31,979 million Baht, a 24.0 per cent increase from 2011. A preliminary look at 2013 is estimated that the value of software and software services in Thailand would hit over 39,096 million Baht, or a growth rate of 22.2 percent. The growth was divided into package softwares with a production value of about 7,962 million Baht and a growth rate of 35.5 percent, and software services with a production

1SummaryofasurveyontheinformationandcommunicationtechnologymarketinThailandfortheyear2011andforecastfor2012bythePolicyResearchOffice,theNationalScienceandTechnologyDevelopmentAgencyandSoftwareIndustryPromotionAgency(PublicOrganization). 2SummaryofasurveyontheinformationandcommunicationtechnologymarketinThailandfortheyear2012/2013and forecast for2014by thePolicyResearchOffice, theNationalScienceandTechnologyDevelopmentAgencyandSoftwareIndustryPromotionAgency(PublicOrganization).

value of approximately 31,134 million Baht and a growth rate of 19.3 percent. The growth of software and software services was spurred by the economic growth o the country and both private and public sectors focusing more on investments in information technology. In addition, entrepreneurs in the software and software services industry paid more attention on new product development and new services to be better respond to the needs of customers. The software market in 2014 is expected to be approximately 44,062 million Baht, growing by 12.6 percent .

Competitive Strategy and Advantages. • The highlights of the Company are its executives with experiences in software business, especial ly softwares for hospital information management system. In addition, the Company considers it is important to increase skill development for its staff to have the ability to respond to the rapidly changing landscape of the ICT industry.

• The Company is a distributor for many world-class, high-quality software developers and the exclusive distributor for some softwares in the country, making the Company more competitive in the market. Changes in technology will result in different services that the Company can offer in the future, enabling the Company to enjoy a revenue growth, especially in the area of System Maintenance & Support. It is expected to grow in accordance with the growing software service

business. The Company is also eying to expand to other services such as IT Outsourcing , etc.

• The Company has proactively responded to technological changes by preparing to educate its staff and plans to support new technologies such as Could Computing, which is expected to be very influential in the near future.

Industry Outlook and TrendsThe information and communications technology (ICT) market in Thailand in 2011 was approximately valued at 531,853 million Baht with a growth rate of 6.3 percent from the year 2011. The market is divided into communications: 76.9 percent; computer hardware 17.6 percent; and software as well as software services 5.5 percent. It is expected that the ICT market to grow by 11.2 percent in 2012 with a market capitalization of about THB 590 billion1

MarketValueofInformationandCommunicationTechnology2011Total531,853MillionBaht

Hardware Computer 18%

Communication 77%

Software and Software Service 5%


3SummaryofasurveyontheinformationandcommunicationtechnologymarketinThailandfortheyear2011andforecastfor2012bythePolicyResearchOffice,theNationalScienceandTechnologyDevelopmentAgencyandSoftwareIndustryPromotionAgency(PublicOrganization).

Based on a market survey 2011, the production value came largely from the Software Maintenance Service at 42.7 percent and followed by the Software Service Outsourcing 30.81 percent, thanks to the growth in the software market, entrepreneurs’s growing interest to expand software services business, and customers’ rising demand for using softwares.

Current trends in the software business can be categorized into six groups:

• App l i ca t ion So f tware Indus t ry fo r Enterprise, the largest group in the software industry, consists of Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Human Resource Management, Logistics & Transpor ta t ion Management , Bus iness Intelligence, for example.

• Software Industry for specific services business who provide services on Information

System Technology i.e. banking, transportation, healthcare, travel and navigation services, etc. • Software Industry for education and education media. • An ima t i on So f twa re I ndus t r y, f o r communication and film productions. • Software Industry for Entertainment and Games.

• Sof tware Indust ry fo r Natu re and Environment. The technology used to preserve environment energy saving and daily living.

Market Share of Software Service 2011

Software Service Outsourcing, 30.8%

Software Related Traning & Education, 3.1%

Software Maintenance Services, 42.7%

Software as a Service, 9.5%

Service and Application Hosting, 13.9%

Market Value of Software and Software Service (Million Baht)

50,000

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

-

30%

25%

20%

15%

10%

5%

0%

25,780

31,979

39,096

44,026

13%

22%

24%

2554 2555 2556E 2557E

Market Value Growth Rate


Competition

The Company operates the business in terms of projects by focusing on implementing application softwares for enterprises and providing ongoing user support with expertise in enterprise resource management system. The market sector is growing rapidly and requires a good support system to enhance business operations.

The current competition in the software services market is confined in the group of existing information technology providers. The number of competitors is relatively small. Although the software service industry has a low barrier to entry, the market requires a set of experiences and skills to build confidence for clients. Besides, the competition from foreign companies is still not very high because the software implementation in the business sector in Thailand demands a deep understanding of guidelines and laws related to the business conduct of the clients. In addition, local companies still have advantages of relatively low labour costs, which are key to the cost of software service business.

However, the opening of the ASEAN Economic Community (AEC) in 2015 will not only prompt the influx of massive foreign funds,but intensifies the competition in the region. Given that Thailand has weaknesses in the delay of state’s investments in infrastructure development and personal development, it’s likely to see more merger and acquisition trends in the information technology business to support rapid growth and increased competitiveness.

Factors to Affect the Industry.Economic Conditions The growth of the software service industry is associated with the expansion of economic activities and the proportion of spending on ICT of each organization especially in the service sector with high usage of IT systems, such as in finance, insurance, retail, medical and healthcare, etc. Although the economy is likely to slow in 2014, the value of software and software services is expected to grow at a rate of 13 per cent, which is lower than 22 per cent earlier estimated in 2013. However, the business sector continues to focus on improving their information systems.

Trends of Technology Change The current information technology is expected to adopt Cloud Computing Service, a new IT resource management system, which is highly flexible. It enables businesses to add, reduce, adjust their IT systems at the same time as required by business policy without pending for placing orders of additional equipment and supplies because the structure of the system is working on virtual system which supports several software and applications as well concurrent work of several operating systems. In terms of business expansion, when new business units are introduced and expanded, investments will be higher, but Cloud Computing Service will help lower the cost of IT systems because all infrastructures are built and connected by virtual structures, allowing immediate use of IT, which helps management to make a faster decision.

Cloud Computing is currently used widely abroad. But in Thailand the new technology is yet growing fast in the near future because users are studying it especially in regard to system security. The providers of the service are still in the experimental phase for the market.

Personnel The growth of the information technology industry in Thailand is confined to the shortage of qualified personnel because the courses of educational institutions do not comply with the requirements of the rapidly changing market. The development is lagging behind the industry, which leads to an increase in labor costs. In addition, the upcoming ASEAN Economic Community (AEC) in 2015 is likely to force the Thai industry to compete with foreign companies in attracting qualified personnel, which will directly affect business operation.

2.3 Providing Products or Services Real Estate To maintain service standards for top-level customers, the Company has entered into management agreements with Marriott, a famous international hotel chain to manage the Company’s residential buildings under Marriott Executive Apartments - Sathorn Vista, Bangkok.

Information Technology Business In the consulting, development, and software installation services, the Company has always selected and represented quality products and ensured that the Company’s personnel have knowledge and are confident in the quality of the softwares. In 2013, the Company’s key manufacturers and business counterparts included Oracle (PeopleSoft), IdeaObject (HealthObject), QlikTech (QlikView), for example.

2.4 Tasks Pending for Delivery A subsidiary has not delivered one project worth 148 million Baht, accounted for more than 10 percent of the total revenues on the 2013 Financial Statement. The delivery is expected within two years.

3. Risk Factors Risk factors affecting the Company’s operations can be classified as follows.

3.1 Risks to the Business. Risk of Revenue Fluctuation. The Company’s revenue structure originally depended primarily on real estate business with major income derived from rents and services by Marriott Executive Apartments - Sathorn Vista, Bangkok, where the income is stable through out the year. Meanwhile, a large chunk of revenue from housing and condo projects would only be recognized when the projects were completed. This revenue will be halted until the Company began developing new projects over again. The circumstance made the Company’s total revenue volatile.

In 2013, after the Company’s major shareholders were changed, the Company has not undertaken


any property development, but focused on offering full-service building management by a team with experience in the real estate business. In addition, the Company has expanded its business into IT consulting services and system implementation, under which revenue has been recognized along the progression of project. Marriott Executive Apartments - Sathorn Vista, Bangkok continues to be the core business that generates major income. The new revenue structure is giving smoother income stream to the company.

Risk of Political Unrest Political issues and conflicts of the society are factors to watch. When the problems show signs of intensity and impacts on public safety and security, making the government to declare a state of emergency in the country, the revenue from residential rental will likely to be declined because most clients are foreigners who are concerned about the political situation in Thailand. However, given that the rally which has started in October 2013, prompting the government to declare the decree of emergency, the Company believes that such issues will impact on the demand in the short term because the Company’s projects are located on Sathorn Road, which are quite far away from the rally and secure for most businesses to continue as usual.

Risk of Delivery. For the business of providing information services, on-time delivery and quality are essential. Providing software services usually takes 6-24 months for delivery depending on the size of the project. If the Company is unable to deliver the project within the time specified in the contract, The Company could be fined by the delay. However, the Company establishes a process to consistently track and monitor project delivery.

Risk of Technology Change. The information technology business is highly competitive and rapidly changing over time. The Company may encounter risks in service absoleteness, which could cause the Company to lose competitiveness. Therefore, the Company is focused on investment plans to keep up with changes in technology as well as encourage its staff to always be alert in learning and accepting new innovations.

The risk of a shortage of human resources. Because information technology services business is a business that is dependent on the capabilities and expertise of personnel. Company highly focus on human resource management, training to develop their skil ls regularly, and having manpower planning to prevent a shortage of human resources, which could affect deliveries to customers.

3.2 Financial Risk Risk of Capital Structure and Liquidity Before the year 2009 the company’s main business was selling real estates. The revenue recognition was based on the percentage of completed phases of work, coupled with a few projects in hand at that time, which apparently caused the fluctuation of revenue and revenue

recognition, especially in the time of the economic slowdown. Since 2009, the Company has expanded to properties for rent such as residential buildings for rent. The business requires high investment and it takes time to the break-even point. But it helps the Company to enjoy a steady revenue stream despite the recession. The investment in the rental business results in higher debt to equity ratio and longer-term of interest payment when compared with the sale business.

In 2013, the Company launched new businesses: office building management and information technology counseling and implementation. They are not capital-intensive businesses, but largely require the expertise of personnel. Therefore, the Company’s financial liquidity is not affected.

Therefore, when considering the overall financial structure of the Company, its total revenue is less impacted by the fluctuation. While there is no more investments in housing and condominium projects, the Company will have only the interest and principal of the loan, used to invest in residential building projects for rent, required to gradually repay the banks. In October 2013, the Company’s prepayment of the banks’ loans by using the proceeds from the sale of new shares. This allows the Company to be free from an obligation to pay principal and interest on long-term loan since November 2013.

Risk of Loans and Account Receivables.The Company manages account receivable risk by issuing policies and procedures for the appropriate credit control. Therefore, the Company does not expect to receive significant damages from facilitating the credit. Besides, the loans offered by the Company and its subsidiaries have no significant concentration because the Company has a diverse customer base. The maximum loss posible is based on the book value of the loans stated in the financial statement.

Risk of Changes in Interest Rates. When considering the previous business conduct of the Company, which focused only on real estates, interest rates posed major risks on the Company’s interest expenses. Also, they impacted the purchasing power of the customers who received loans from banks as well. The interest rates were floating, which would be fluctuating based on economic conditions and other risk factors affecting the economy, including the political situation.

However, after the loan prepayment in full in October 2013 and the company has no plans to invest in housing and condominium projects, the risk related to changes in interest rates is relatively low.


5. Legal disputesAs of December 31, 2013, the Company has legal disputes between the prosecution of two cases in which investors can obtain more information from the 56-1 report.

4. Operating Assets.As of December 31, 2013, the Company had major assets for running the business, including buildings and land for residential development project, which investors can obtain more information from the 56-1 report.

Source: Bangkok Bank

Changes in loan interest rates (MLR) of Bangkok Bank.

End-month Dec 11 Feb 12 Oct 12 Nov 12 Jan 13 Dec 13

MLR 7.25 7.13 7.00 7.00 7.00 6.88

12-m deposit (avg.) 2.88 2.88 2.88 2.5 2.44 2.25

6. General Information and Other Key Data6.1 Generation information of listed company

English title

Type of Business

Headquarters location

Branch location

Business registration number

Tel:

Fax:

Website:

Principal Capital Public Company LimitedFormerly known as Metrostar Property Public Company Limited

Real Estate

No.29, 23rd

Floor, Bangkok Business Center, Sukhumvit 63, Klongton Nua, Wattana, Bangkok 10110.

1 Soi Suan Plu, Sathorn, Thungmahamek, Sathorn, Bangkok 10120

0107547000869 (formerly 0107574700864)

02-714-2184

02-714-2185

www.principalcapital.co.th

6.1 Other Important Information

Other References

Registrar: Thailand Securities Depository Co., Ltd. 62 The Stock Exchange of Thailand Building, Floor 7th

Rachadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel: (66 2) 229 2800

Auditors: Mr. Sopon Permsiriwallop, Registration No. 3182 Ms. Rungnapa Lertsuwankul, Registration No. 3516 Mr.Chayapol Suppasedtanon, Registration No. 3972 Ms. Pimjai Manitkajonkit, Registration No. 4521

E Y Office Limited (Formerly Ernst & Young Office Limited) No. 193/136-137, Floor 33, Lake Rajada Office Complex Rajadapisek Road, Bangkok 10110 Tel: 02-264-0777. Fax: 02-264-0789-90

3.3 Risk to shareholders

Risk affecting the rights and investments of the shareholders.

Risk occurred by the Company's single shareholder holding more than 50 percent. As of September 18, 2013 Mr. Satit Viddhayakorn held the Company's 334,503,900 shares, accounting for 71.64 percent of paid shares, allowing Mr. Satit

Viddhayakorn to control almost all shareholders' resolutions including the appointment of directors and other matters that require the approval of a majority of the shareholders' meeting except the issues related to laws or regulations, which requires the Company to get a 3 out of 4 votes from the general meeting of shareholders. Therefore, other shareholders may not have enough votes to examine and balance the power over issues proposed by the major shareholder.


7.2 Shareholders Top ten largest shareholders as of March 18, 2014

Section2 Management andCorporate Governance

7. Details of securities and shareholders7.1 Number of registered capital and paid-up shares As of December 31, 2012, the Company recorded its registered capital of 606,900,000 Baht at a par value of 1 Baht per share, and paid-up shares of 466,900,000 Baht. In 2013 the Extraordinary General Meeting of 2013 resolved that the Company reduced its registered capital of 140,000,000 Baht by dropping the issued shares previously prepared for the warrant of the convertible debenture, which was not issued, and approved the increase of 933,800,000 shares in the registered capital at a par value of 1 Baht per share to total 933,800,000 Baht, in preparation for the subscription of newly issued ordinary shares, up to 466,900,000 shares, and for the sale of the warrants reserved to purchase the common stock of the Company (METRO-W1, later renamed to PRINC-W1) in the

amount of 466,900,000 shares to be exercised at a ratio of 1:1. As a result, the Company’s registered capital rose to 1,400,700,000 Baht. With the newly issued 466,900,000 shares fully subscribed, the Company’s paid-up capital increased to 933,800,000 Baht on November 22, 2013. As of December 31, 2013, the Company recorded its registered capital of 1,400,700,000 Baht under which 933,800,000 Baht paid up in the amount of 933,800,000 shares at a par value of 1 Baht per share. As of December 27, 2013, The Company allocated 20,000 shares of common stock to accommodate the exercise of PRINC-W1 warrant and registered the increased capital with the Ministry of Commerce on January 9, 2014. As of January 9, 2014, the Company recorded its paid-up registered capital of 933,820,000 Baht comprising of 933,820,000 ordinary shares at a par value of 1 Baht per share.

No. Name No.ofshares %

1. Satit Viddhayakorn 669,007,800 71.64

2. Payao Chalacheep 26,297,380 2.82

3. Udomsak Hemsathapat 19,468,800 2.08

4. Suparada Chalacheep 19,386,600 2.08

5. Nakorn Hankraiwilai 8,950,000 0.96

6. Suchart Kettoprakarn 8,532,300 0.91

7. Ampai Hankraiwilai 7,000,000 0.75

8. Thai NVDR Co., Ltd. 6,107,600 0.65

9. Kanok Rattanapansri 5,755,400 0.62

10. Peeraphol Suwannapasri 5,507,000 0.59

Total 776,012,880 83.10 Others157,807,120 16.90

Totalofpaidupshares 933,820,000 100


8. Management Structure

8.1 Board of Directors Board of Directors The Board of Directors of Principal Capital Public Company Limited consists of 7 qualified persons with knowledge and experience to benefit the company.

Notes - Due to a change of the entire board of directors following the change of major shareholders, the times of attendance by each director is not the same. - Ayuth Charnsirikul resigned from Director, effectively December 15, 2013 (in selection process) - Orawan Tejapaibul resigned from Independent Director and Audit Committee, effectively January 27, 2014 (in selection process)

Other issued securitiesWarrants to subscribe ordinary shares

On August 20, 2013, the Extraordinary General Meeting of 2013 resolved to approve the allocation of newly issued ordinary shares (PRINC-W1) of the Company up to 466,900,000 shares to existing shareholders of the Company at the ratio of 1 existing share to 1 newly issued shares. Details are as follows:Type of shares : Specified holders and transferableOffered price per share : 0 Baht (Zero Baht)Subscription ratio : 1 existing share to 1 newly issued shareExercise price per share : 1.20 Baht per shareDate of exercise : Every 3 months, starting from the issuance date. First date of exercise : December27, 2013 andlast day of exercise : September 30, 2016. Date of issuance : October 1, 2013Validity : 3 years after the issuance date

The Stock Exchange of Thailand approved the warrants as registered securities on November 1, 2013 in the amount of 466,850,000 shares.

During 2013, one holder of warrants exercised his right to purchase 20,000 ordinary shares, under

which the Company recorded the increase in its registered capital with the Ministry of Commerce on January 9, 2014.

As of December 31. 2013, there were unsubscribed warrants in the amount of 466,830,000 shares.

7.4 Dividend payout policy The Company has dividend payout policy of no less than 40% of net profit. The Company will consider various factors to determine the dividend, such as operation result, business expansion

plans, liquidity, necessity, and other factors in the future. The Company’s Board of Directors holds the right to consider and make decision for the best benefit of shareholders.

Name Position BoardMeetingAttendance/No. Reason

ofMeetingsforabsence

1. Dr. Pongsak Viddayakorn, MD Chairman 8/82. Dr. Satit Viddayakorn Director 10/103. Yarnsak Manomaiphiboon Director 9/9 Independent Director Chairman of the Audit Committee4. Seerada Tiemprasert Director 8/10 Sickness, other obligation5. Patraporn Jarupat Director 10/106. Aranya Chalermpornvarodom Director 6/9 Other obligation Independent Direct Audit Committee7. Sastra Chuntarasupt Director 9/9


Scope of the Company’s Board of Directors’ responsibilities The board of directors performs duties as prescribed by law, and in accordance with the objectives and articles of the Company, as well as the resolutions of the shareholders’ meeting, with honesty, integrity, and prudence, in the best interests of the Company. The scope of the board of directors’ responsibilities are as follows: 1. Arrange a general ordinary shareholders’ meeting within 4 months after the end of Company’s fiscal year. 2. Arrange a board of directors’ meeting at least every 3 months. 3. Prepare an audited balance sheet and an income statement as of the end of each fiscal year and propose them to the shareholders, at the annual general shareholders’ meeting, for approval. 4. Authorize one or more directors to be in charge of any one or several activities under the control of the board of directors, or delegate the person or persons to, as deemed appropriate and within an appropriate timeframe. The board of directors holds the right to nullify or change the person(s) as deemed appropriate. The board of directors may delegate authority to the executive committee, executives, or an executive to carry out tasks under the scope of responsibilities of the executive committee. The delegation of authority must not be in the aspect that the executive committee, executives, or an exective be allowed to consider and approve an issues that may carry conflicts of interest with the Company or its subsidiaries, except in case of normal course of business practice of the Company pursuant to its policy and principles considered and approved by the board of directors. expense, as well as make available full-time staff to follow up, seek information and coordinate in support of the operations of the committees/ subcommittees.

5. Determine the Company’s objectives, guidelines, policies, plans, and budgets. Supervise and monitor the management’s business administration as assigned, except the following issues, that the board of directors is required to seek the approval of at shareholders’ meeting. For example: issues related to the law, including capital increase, capital reduction, issuance of debenture stock, sale or transfer of the whole, or in important part, of the Company’s businesses to others, as well as acquisition or transfer of businesses from others to the Company, corrections of Memorandum of Association or regulations. In addition, the board is required to supervise and monitor the Company to comply with the laws in regards to securities, the stock market, and the market’s regulations such as related transactions, purchase and sale of important assets under the regulations of the Stock Exchange of Thailand or the laws related to the Company’s businesses. 6. Consider the structure of management, appoint the board of management, chairman, president, and other directors as deemed appropriate, as well as evaluate the performance and compensation payments to the management. 7. Ensure the actual operations are on track compared with the budgets. 8. Neither engage in a business of the same nature as the Company, that might compete with either the Company, a partner in the partnership, unlimited-liability partner in limited partnership, or director of another company limited, or public company limited, that engages in the business of the same nature as the Company that might compete with the Company, unless informing the shareholders’ meeting prior to the appointment. 9. Promptly inform the Company of any conflict of interest, direct or indirect, arising from any contract made with the Company, or any increase or reduction in holding of the Company’s or subsidiaries’ shares or debentures. Items, directors or persons with conflict of interests are discharged from any approval of the matters.

8.2 Management Team

Board of Directors

Secretary Audit Committees

Internal Auditor

Secretariat

Chairman of the Board

CEO /Managing Director

Business and Marketing

Development

Asset Management

HR and Admin Accounting Finance


8.3 Corporate Secretary The board of directors appointed Mrs. Parichat Songsurawate as Acting Corporate Secretary to be effective on December 16, 2013. The qualifications of the corporate secretary appear in the Attachment 1.

Note: Mr. Thanadech Kupvong resigned from corporate secretary, effective December 15, 2013.

8.4 Remuneration for the Board of Directors and Executives In 2013 the Company held 11 meetings for the board of directors and made a payment in total of 945,000 Baht to the board of directors, and 10 meetings for the executive committee and made a payment in total of 115,000 Baht. In 2013, the Company did not pay special bonus to the board of directors and total compensation for the meetings in an amount of 1.06 million Baht.

Names of Executives

NameofExecutives Position1. Dr. Pongsak Viddayakorn, MD Chairman

2. Dr. Satit Viddayakorn Chief Executive Officer and Managing Director

3. Naruepol Phansupamongkol Vice President - HR & Administration

4. Samuerkhae Sathapong Vice President -Assets Management

5. Preeyaporn Apivatvitaya Deputy Vice President - Accounting

6. Thiranan Sangphungtham Assistant Vice President - Administration

Note- Thanadet Kupvong resigned from Corporate Secretary and Vice President – Finance, effectively December 15, 2013 (in selection process)

Notes - Pimchai Burapachaisri resigned from Director, effectively April 22, 2013. - Pilai Piempongsarn, Kidanan Komkam, Paiboon Siripanusatien resigned from Director and Audit Committee, effectively April 26, 2013. - Ayuth Charnsethikul resigned from Director, effectively December 15, 2013. - Orawan Tejapaibul resigned from Director and Audit Committee, effectively January 27, 2014.

Name AttendanceFee Bonus Attendance Directors Allowance FeeExecutives Total

Pimchai Burapachaisri

Pilai Piempongsarn

Kidanan Komkam

Paiboon Siripanusatien

Pongsak Viddayakorn, MD

Dr. Satit Viddayakorn

Yarnsak Manomaiphiboon

Seerada Tiemprasert

Patraporn Jarupat

Aranya Chalermpornvarodom

Sastra Chuntarasupt

Orawan Tejapaibul

Ayuth Charnsethikul

Totalremuneration

30,000

50,000

50,000

20,000

115,000

100,000

140,000

80,000

100,000

45,000

90,000

65,000

60,000

945,000

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

20,000

35,000

-

30,000

-

-

-

-

30,000

115,000

30,000

50,000

50,000

20,000

135,000

135,000

140,000

110,000

100,000

45,000

90,000

65,000

90,000

1,060,000

Remuneration of Board of Directors (Baht)


(2) Other remunerations for executives

Other remunerations to the board of directors None

Other remunerations to executives

• Provident Funds In 2013 the Company did not set any provident funds for employees and executives.

But a provident fund was started in January 2014, with the Company’s contribution of 3 percent of each salary.

8.5 Personnel As of December 31, 2013, the Company had 29 personnel (including executives). In 2013, the Company made compensations in total of 14.78 mill ion Baht. These included salaries, overtime payments, bonuses, social security, and other social welfare supports, for example. The Company also had another team of 120 personnel working for the Marriott Executives Apartment Sathorn – Vista Bangkok under the management contract of Principal Capital Public Company Limited and Marriott Hotels (Thailand)

Ltd, with the compensations in total of 41.12 million Baht in 2013. Regarding its two subsidiaries, the number of personnel and compensations are described below. The Company recognized the expenditure on the personnel of Convergence Systems Company Limited since the first day of its acquisition on October 15, 2013 and recognized the expenditure of Principal Investment Co., Ltd. since its inception on July 26. 2013.

Guidelines for bonuses The Company determines bonus payments from t ime to t ime, based on the fol lowing guidelines, such as the Company’s performance, and evaluation of the performance of particular personnel.

Labour dispute -None-

Employee Development Policy The Company aims to develop the employee capabilities in preparation for the competitive market by supporting them with opportunities to participate in training courses related to the operation of the Company. With respect to staff who wish to further their education, the Company has set policies for support.

9. Corporate Governance9.1 Corporate Governance Policy

To comply with the principles of good corporate governance, the Company has established a set of structures to be consistent with the nature of the Company’s businesses, under the supervision of each executive with sub-committees including the Executive Committee and the Audit Committee for initial assessment. The board of

directors is in charge of making decisions and ensuring the operations of the Company comply with the Company’s regulations and resolutions, set forth in the shareholder’s meetings. The scope of each committee’s responsibilities is determined to ensure maximum efficiency in operations with adequate checks and balances as follows:

Notes - The compensation does not include the compensations payable to employees’ early retirement in the amount of 2.94 million Baht. - The compensation of Convergence Systems Co., Ltd. is realized from October 15, 2013. - The compensation of Principal Investment Co., Ltd. is realized from July 26, 2013.

Year2013 PrincipalCapital Convergence Principal

HeadquarterMEA Systems Investment

Operation Personnel 23 120 60 1

Management Personnel 6 - 3 2

Total 29 120 63 3

Compensation (million Baht) 14.78 41.12 8.20 3.00


Executive Committee In 2013 The Executive Committee of the Company had 3 persons:

Scope of the Executive Committee’s responsibilities The Executive Committee performs duties and responsibilities as assigned and determined by the board of directors. The summary of duties and responsibilities of the Executive Committee are as follows: 1. Be accountable for the Company’s common conduct of businesses and management. Determine business plans, budgets, the structure of management, scopes of authorities, and principles of business operation, to comply with economic circumstances, for submission to the board of directors for consideration and approval. Supervise and monitor the Company’s operation in pursuant with the Company’s policy. 2. Undertake the operation and the management of the Company in consistency with every aspect of the Company’s objectives, rules, regulations, policies, orders, and the resolutions of the board of directors, and the resolutions of shareholders’ meetings. 3. Appoint, supervise, and monitor a working group of committees to meet policies and objectives as required. 4. Determine the capital expenditure under 25 million Baht (for each item), for submission to the board of directors for consideration/approval/ratification.

5. Approve key investment spending as specified in the annual budget for expenditure, as assigned by the board of directors, or as agreed in principle by the board of directors. 6. Determine loans, credit channels, or credit application of the Company under an amount not exceeding to 100 million Baht (for each item), for submission to the board of directors for consideration/approval/ratification. 7. Consider dividend payout during the year or an annual payout, for submission to the board of directors for consideration and approval. 8. Set the structure of the Company, authority, appointment, employment, transfer, compensation, remuneration, bonuses for executives who are non-members of the executive committee, and also termination. The authority of the executive committee and /or any items under the scope of the responsibilities of the executive committee, must not be in conflict of interest with the Company or its subsidiaries, as specified in the regulations of the Stock Exchange Commission and the Stock Exchange of Thailand. Any approval of any item mentioned must be submitted to the meeting of the board of directors for consideration and approval, in accordance with the Company’s regulations and relevant laws.

Audit Committee The Audit Committee is composed of three independent directors, or at least a 1:4 ratio of the directors from the board of directors. The Audit Committee shall be qualified in regards to the Notifications of the Stock Exchange of Thailand and the Office of the Stock Exchange Commission. At least one of the committee is required to possess

sufficient knowledge and experience in accounting, or finance and banking, to verify the reliability of the Company’s financial reports, and has no role in the management of executives under the principles of the Stock Exchange of Thailand. The Audit Committee members have three years for one term, and their terms can be extended indefinitely. The Company has three Audit Committee members:

Notes: Ayuth Charnsethikul resigned as Executive Committee member, effectively December 15, 2013.

NameofExecutiveCommittees Position

1. Dr. Pongsak Viddayakorn, MD Chairman of the Executive Committee

2. Dr. Satit Viddayakorn Executive Committee member

3. Seerada Tiemprasert Executive Committee member

Notes: Orawan Tejapaibul regisned as audit committee member, effectively January 27, 2014.

NamesofAuditCommittee Position

1. Yarnsak Manomaiphiboon Chairman of Auditor Committee

2. Aranya Chalermpornvarodom Audit Committee member

3. Orawan Tejapaibul Audit Committee member


Scope of the Audit Committee’s responsibilities The Audit Committee is required to submit the following reports under the scope of responsibilities as assigned by the board of directors. 1. Verify the Company’s financial statements to be accurately and adequately disclosed. 2. Verify that the Company has appropriate and effective internal control and internal audit system. Consider the independency of the internal audit unit as well as undertaking the consideration of appointing, transferring, or terminating the employment of the internal audit unit. 3. Verify the Company’s business operation to be complying with relevant laws and regulations, and good corporate governance with respect to the Stock Exchange of Thailand. 4. Consider, select, and/or propose independent auditors to audit the Company and propose remuneration for said person(s). Participate in a meeting with the Company’s auditors, without the Company’s executives in attendance, at least once a year. 5. Consider the Company disclosure of any related transaction, or any action that may arise in conflicts, to ensure the compliance with laws and regulations under the Stock Exchange of Thailand, and in the best interests of the Company. 6. Disclose an Audit Committee report in the Company’s annual report, where the audit committee members sign for its verification. Such report must contain the following details: (A) The committee’s opinion on the accuracy, sufficiency and reliability of the Company financial report. (B) The committee’s opinion on the adequacy of the Company’s internal control system. (C) The committee’s opinion on the Company’s Good Governance and compliance with the Stock Exchange of Thailand’s laws and regulations, or any other related laws. (D) The committee’s opinion on the suitability of the Company’s auditors. (E) The committee’s opinion on any action that may cause conflicts. (F) The number of audit committee members and the participation of each auditor. (G) Other actions that general investors are supposed to know under the under the scope and responsibilities given from the board of directors. 7. The Audit Committee has the scope and responsibilities as assigned by the board of directors. Meanwhile, the scope and responsibilities regarding business operations with outsiders remains under the control of the board of directors.

9.2 Sub-committee None

9.3 Selection and Appointment of Directors and Executives The Board of Director is in change of appointing directors and considering the remuneration by considering various factors including knowledge,

skills, and experience with the business. The person(s) must not possess any characteristic prohibited under the Public Company Act and the laws governing securities and exchange and any relevant rules, regulations and /or notifications of the Office of the Stock Exchange Commission. The Board of Directors is also responsible for determining the remuneration of the directors who are not executives of the company. The principles in appointing and removing directors as stipulated in the Company’s board of directors are as follows: 1. The board of directors shall consist of not less than five directors, elected at the shareholder’s meeting. No less than half of the total number of directors shall have domicile in the Kingdom. 2. At each annua l genera l meet ing of shareholders, one-third of the Company’s directors shall retire in rotation. Should the number of directors to retire in rotation not be divisible by three, the number of directors nearest to one-third of all directors shall retire. In the first and second year of the registration of the Company, directors shall draw lots to decide who shall retire. In subsequent years, the longest-serving directors shall retire. Directors who retire may be re-elected. 3. The shareholder’s meeting appoints directors by passing a majority vote of shareholders based on the following principles and procedures as follows: 3.1 Each shareholder shall have one vote for one share. 3.2 Each shareholder shall use all his or her votes to elect one or several persons as a director. However, he or she may not divide his or her votes among the candidates. 3.3 The persons who receive the highest votes in ranking order will be elected as directors up to the number of directors required, or the number that shall be elected at that meeting. In case the persons elected in subsequent order have equal votes but their election would exceed the number of directors required or the number that shall be elected at that meeting, the Chairman of the meeting shall have a casting vote. 4. In case of a vacancy, for reasons other than retirement by rotation, the board of directors may select persons, whose qualifications are not prohibited under the Public Company Act, to represent at the next board Meeting. In cases where the remaining term of the absent director is less than two months, the replacement will be able to keep the position for the remaining term of the member he replaces. The resolution of the board of directors shall consist of not less than three-fourths vote of the remaining number of directors. 5. A resolution for any director to leave office prior to the expiration of his term requires the votes of at least three-fourths of the number of shareholders attending the meeting, and having voting rights and holding in aggregate shares amounting to not less than half (1/2) of the number of shares held by shareholders who attend the meeting and have voting rights.


9.4 Corporate Governance To comply with the guidelines of the Stock Exchange of Tha i land, the Company has implemented Good Corporate Governance to be essential to the existence of the enterprise, and introduced a good auditing system, with an effective measurement of performance, which will help encourage businesses to develop and grow at a reasonable level. Details of the policy are as follows.

Report on the Principles of Good Corporate Governance 1. Policy on Corporate Governance The board recognizes the importance of good corporate governance, to create confidence in the minds of shareholders, investors, and other stakeholders, which will eventually lead to increased competitiveness and the sustainable growth of the business, as well as strengthen the transparency and efficiency of the management.The Board of Directors has set up the policy of support ing governance by focusing on subjects concerning the board of directors, transparency in operations and disclosure, a n d r e g u l a t o r y m a n a g e m e n t p o l i c i e s , t o b e e f f e c t i v e t o l o n g - t e r m b e n e f i t s to shareholders under applicable laws and business ethics. 2. Rights of Shareholders The Company respects the basic rights of its shareholders as investors, and as owners of the Company, on an equal basis of treatment. The shareholders are eligible to acknowledge the performance, management policy, properly enter into connected transactions, and access facts through the website of the Stock Exchange of Thailand at: www.set.or.th. Shareholders are assured that such rights are always protected and treated fairly. For example: - The right to attend the general meeting of shareholders, which is usually held once a year, on an informed date, time and venue. The Company shall send the invitation and attachment with sufficient detail and completeness, accompanied by the opinions of the board of directors in every agenda. The details are as follows: • Information for persons who have been nominated as director in place of those who are due to retire by rotation. • Information background of the person who makes the nomination.

• Specific rules and regulations of the Company in regards to the shareholders’ meeting. • Document and evidence that the attendees are required to present before attending the meeting. • Advice on using proxy to register, and voting process in the shareholders’ meeting. • Map of the general meeting of shareholders. • Proxy Form B (a form with specific detail). The Company shall prepare a proxy statement based on the notifications of the Ministry of Commerce. There are 3 types of forms. Form A, Form B, and Form C. Shareholders are given the right to choose from these choices, all available for download from the Company’s website. This will allow the shareholders time to consider and decide on each voting at least 7 days in advance. The Company shall publish the invitation in newspapers for three consecutive days, not less than three days prior to the meeting. The shareholders can pre-register prior to the meeting not less than one hour. - The Company adds another channel to distribute the invitations and attachments, via the Company’s website at: www.principalcapital.co.th. This allows the shareholders more time to consider important agenda. - The Company gives the right to shareholders who attend the meeting after it starts, to vote on the agenda item being considered and not yet voted. The persons will be counted as the quorum from the agenda item they have attended and voted on. - At a shareholders’ meeting – before the agenda starts to roll – all members of the board and auditors who attend the meeting shall be introduced. The shareholders shall be imformed how to vote, and will be informed about their r ights. The chairman of the meet ing must manage to keep the meeting’s agenda items on track as indicated in the invitation, allocating sufficient time for presenting each agenda item, and open opportunities for the shareholders to express their opinions, and ask questions about the Company’s operation. The meeting shall be completely recorded in details by proper minute taking. All resolutions and vote counting shall be concluded on transparent and fair basis. In the 2014 annual general meet ing of shareholders, in an agenda regarding the selection of new directors to replace those retiring by rotation, the Company invites each individual shareholder to vote to elect directors he/she prefers.


During the meeting, the board presents an opportunity for shareholders to express their opinions, suggestions or questions on each agenda freely before voting. The Company prepares a detailed and complete report, based on the facts in the meeting, to the shareholders after the meeting. The report is also submitted to the Stock Exchange of Thailand and the Ministry of Commerce within 14 days after the meeting, and distributed through the Company’s website at: www.principalcapital.co.th. The Company is in the process of considering appropriate guidelines and the possibility to provide an opportunity for shareholders to nominate directors and agenda, through its website, as benefits the Company best.

3. Fair Treatment of Shareholders The Company operates businesses based on ethical principles and social responsibilities, with fair treatment of all the shareholders and related parties with respect to the rights of the shareholders, without benefitting any particular group of interests. The shareholders are assured that their basic rights are always protected and treated fairly. - The Company makes operating results, management policy, and related transactions, available for accurate, complete, timely, transparent, and fair disclosure, and disseminates the information necessary for the shareholders to decide on, through the Stock Exchange of Thailand’s website at: www.set.or.th, and the Company’s website at: www.principalcapital.co.th. - The Company runs agenda orderly in its shareholders’ meeting as indicated in the invitation notice. New agenda items are not allowed to be added at the meeting unless the shareholders are informed in advance. New agenda items, not recorded in the invitation notice, can be added when more than one third of the total sold shares with voting rights are counted in the shareholders’ meeting. - For every shareholders’ meet ing, the Company shall distribute the invitation notice, with completely detailed attachment, accompanied by the opinions of the board of directors on each particular agenda item in sufficient period of time as set by relevant laws. The distribution of the invitation notice and attachment can be accessed in advance so that the shareholders have more time to consider via the Company’s website: www.principal.co.th.

- If a shareholder is not able to attend a meeting, the Company will send a proxy form as designed by the Ministry of Commerce and the invitation notice. The shareholder can appoint a proxy or an independent director of the Company to attend and vote on his/her behalf. - The voting right in the shareholders’ meeting is based on number of shares. A shareholder shall have one vote for one share.

4. Shareholders’ Meeting The board of directors considers shareholders’ meetings very important. At each shareholder’s meeting, members of the board directors, whose names are disclosed in the minutes, shall attend. During the meeting, the Chairman of the meeting opens opportunities for every shareholder to verify the Company’s operation, ask questions, express opinions, and make comments, or give suggestions, on a fair basis. Important input from the shareholders, such as points of view, inquiries, and comments, shall be recorded in the minutes of the meeting. 5. Rights of Stakeholders The Company recognizes the rights of all stakeholders, be they internal, such as employees or management executives, or external persons, such as competitors, credits from the public and private institutions, because the Company realizes that the support from all of the stakeholders will contribute to the Company’s competitiveness and profits, which will ensure the sustainable growth of the Company’s business. • Employees: The Company treats employees on equal and fair basis, providing them appropriate compensation to retain quality personnel within the Company.

•Bus iness Par tners : The Company purchases goods and services from suppliers and meets the conditions of trade, and complies with contracted partners. • Creditors: The Company complies with the conditions as agreed in the agreements. • Customers: The Company is responsible for its customers, and produces products with high quality and standards. Also, a department or a person is assigned to receive any complaints from customers, and to take action as soon as possible. • Competitors: The Company supports and maintains an ethical mode of competition, and refrains from acting in bad faith to the detriment of its competitors.


• Communities: The Company is responsible for the environment and society. Regarding the environment is very important, and the Company has complied with the laws and regulations of the relevant authorities, such as the Office of Natural Resources and Environmental Policy and Planning, under the Public Works Department, Bangkok Metropolitan Administration.

6. Leadership and VisionThe board of directors has been involved in determining the vision, mission, strategy, goals, business plans and budget of the Company, as well as supervising the management operations to meet the business plans and prepared budgets effectively and efficiently, in order to increase the maximum economic value to the enterprise and maximum security to its shareholders. 7. Conflict of Interest The Company establishes the audit committee to consider proper disclosure of information in regards to related transactions and other matters that may contain conflicts of interest. In addition, the board of directors has a duty to prevent a conflict of interest between the stakeholders of the Company, by specifying well-defined policies and procedures in writing for approval of related transactions, and laying down policies and procedures to prevent its executives and related parties to use the internal information for their own benefits. The details are as follows: Transactions that may have conflict of interests: The audit committee is aware of the matters concerning any conflict of interest, and related transactions, and always considers the situation carefully whenever appropriate. The committee also complies with the rules of the stock market and “arm’s-length transactions”. Detai ls of transactions with contract partners are not only disclosed, including reasons and necessity, in the Company’s annual report and Form 56-1, but also the Company establishes policies and procedures to prevent executives and stakeholders within the company from using the information for their own benefit.

8. Business Ethics The Company issues the ethical codes of conduct for the board of directors, management, and employees. Referred to as “Business Ethics”, they are for parties involved to follow in their performance, with accountability, integrity, and fairness to treat the Company, the public, and

the stakeholders, and the society as a whole, accordingly. The Company has informed its stakeholders to acknowledge and practice the codes of conduct. The Company also communicates with its employees on a regular basis about the practice.

9. The Balance of Non-Executive Directors The Company comprises a total of nine directors (now seven persons, currently selecting two more persons) as details below. • Directors who are executives: 3 members, representing 1 in 3 of all directors. •Directors who are non-executives: 3 members, representing 1 in 3 of all directors. • Audit Directors: 3 members, representing 1 in 3 of all directors. 10. Remunerat ion of Directors and Exceutives The Company sets a transparent policy on remuneration at the rate in line with the industry, which is high enough to attract and retain qualified directors, and in approval by a meeting of shareholders. Directors assigned to have additional duties and responsibilities receive reasonable compensation for their increased duties and responsibilities.

11. Board of Directors Meetings The board of directors is usually scheduled for a meeting every 3 months, or at least 4 times a year, in addition to special meetings, as deemed necessary, with a clear agenda in advance plus an agenda to monitor the performance regularly. The administration and law departments will prepare the meeting notice, its agenda, and documents, prior to the meeting at least seven days, allowing sufficient time for the board of directors to study the information before attending the meeting. It is required that minutes be taken, and board-approved records kept, for the board of directors and related parties to examine. 12. Subcommittee The Company appoints a sub-committee to help assist in the corporate governance of the Company, which is the audit committee consisting of three independent directors, or at least one person who have knowledge in accounting or finance.

13.Internal Control and Internal Audits The Company emphasizes the necessity of an internal control system by undertaking the


search for an internal auditor, and selecting Easy Accounting Co., Ltd to conduct the internal auditing and make suggestions to correct the weaknesses of the internal control system of the Company. The Company also supports the need to have a manual for internal audits. Easy Accounting Co., Ltd is not the Company’s auditor and independent to issue an audit report directly to the audit committee. The Company arranges a meeting of the audit committee at least every 3 months prior to board meetings.

14. Report of the Board of Directors The board of directors takes responsibility for the financial statements of the Company, and f inancia l informat ion contained in the annual report. The f inancial statements are prepared in accordance with accounting principles generally accepted in Thailand in the aspects of selecting appropriate accounting policies, regular practices, cautious discretion, the best estimate of the preparation, and adequate disclosure in the information memorandum to the financial statements. The board of directors also maintains a system of internal control to be effective to ensure reasonable accuracy, completeness, and adequacy of financial positions, in order to safeguard the assets of the Company and to acknowledge weakness, and prevent and detect fraud and other irregularities of significance.

15. The Relationship with Investors The board realizes the Company’s information, both financial and non-financial, are influential to the decision making process of investors and stakeholders of the Company. The management is therefore instructed to proceed in regards to the disclosure of information with completeness, accuracy, integrity, consistency, and timeliness. The management has considered them important, and has adopted the practice accordingly. Currently, the Company has not established a unit to be in charge of the investor relations because these activities are still minimal. But a Managing Director is assigned to be responsible for communicating with institutional investors, shareholders, analysts and concerned government agencies. Investors are advised to contact 02-714-2184 or www.principalcapital.co.th for detailed information. In addition, the Company sets a policy to comply with the ‘Code of Best Practices of Listed Companies’, stating duties and responsibilities of the board of directors. For example, the board of directors is required to: comply with all laws,

and the articles of association of the Company; conduct themselves honestly and with integrity, competency, knowledge and experience; ensure the Company is determined to carry on the business continuously; put in place policies and direction for the Company; ensure the management’s accountability to execute the policies and direction effectively; and be held accountable for the financial statements. The Company is obliged to hold board of directors meetings on a regular basis, and appoint an audit committee to oversee the operations of the Company. However, the Company adopts the Principles of Good Corporate Governance for Listed Companies 2006, by the Stock Exchange of Thailand, and applies it as deemed appropriate to the structure and business operation of the Company as follows. In the categories of Rights of Shareholders, and Fair Treatment of Shareholders (referred to the Principles of Good Governance for Listed Companies on items 2 and 4). 1) The Company ensures the protection the fundamental rights of shareholders, as stipulated by law, and encourages shareholders to exercise their right as stipulated by law. 2) In 2007 the Company ensured shareholders were eligible to access relevant and adequate information independently, takes no action that could hinder shareholders from exercising their right, refrain from adding agenda items or distributing supporting attachments after the invitation notices had been sent out, and provided guidelines for every shareholders meeting. 3) The Company puts in place criteria to facilitate shareholders to fully participate and vote in meetings. For example: 3.1 The Company arranges the distribution of invitation notices, and supporting documents, on its website. The information is the same as what is distributed by post. 3.2 The Company distributes the invitation notice in advance, before the date of the meeting, as stipulated by law. 3.3 The Company allows Chairman of the Audit Committee and audit committees who are independent directors, to be the proxy of the shareholders. 3.4 The Company gives shareholders adequate time to express their opinions and ask questions.


9.5 Control of Inside Information. The Company has a policy of controll ing and prohibiting personnel from disclosing inside information to others, or using it for their own benefit. The Company puts in place the following policy and procedures to oversee its executives: 1. Provide knowledge to the board of directors and executives about their duties to report the ownership of securities by their spouses and/or underage children, as well as punishments under the Securities Exchange Act of B.E. 2535, as stipulated by the regulations of the Stock Exchange of Thailand. 2. Designate the executives to report a change of the ownership of their securities to the Securities Exchange Commission and the Stock Exchange of Thailand, and file a copy of the report to the Company on the same as the documents being submitted to the SEC and SET. 3. Arrange the distribution of internal notices to inform of executives or relevant business units receiving significant inside information that can impact

stock prices. The trading of the Company’s stock will be suspended for one month before the financial statements, or the inside information are disclosed to public. Inside information with significant importance is not allowed to be disclosed to third parties or individuals. If relevant parties violate the criteria in using such inside information, it is considered that said parties have committed an offense, and the parties will face disciplinary punishment as defined in “Regulations governing the operation of Principal Capital Public Company Limited”. The disciplinary punishment consists of 4 actions, varied by the nature of the faults and their degree of seriousness. • A verbal warning

• A written warning

• A written warning and being suspended without pay for up to 7 days

• Dismissal without compensation

9.7 Compliance with the Principles of Good Governance in Others The Company defines the scope of the authority of Executives and the Company Secretary:The Authorities of the Chairman 1.Superv ise the operat ion and/or da i ly administration of the Company. 2. Comply with policies, plans, and budgets approved by the board and/or the board of directors of the Company. 3. Be authorized to manage the businesses of the Company to meet the objectives, articles, policies, procedures, guidelines, orders, and resolutions of shareholders’ meetings/resolutions of board

of directors’ meetings, and the management executives in all aspects. 4. Appoint and manage working committees to the benefit and efficiency of good management and transparency, and have the authority to sub-grant power and/or authorize any other person to per form spec i f ic tasks on h is behalf. The sub-grant power authority and/or assignment shall be under the scope of its authority by power of attorney, which was approved by the board of directors and/or to comply with rules and regulations or orders of the board of directors of the Company and/or the orders of the Company.

9.6 Remuneration of auditors. In 2013, the Company and its subsidiaries have auditor’s expenses as follows.

In2012theOfficeofErnst&YoungCo.,Ltd.actedastheauditoroftheCompany.Thetotalexpensesofauditingamountedto0.56millionBaht,comprisingof0.55millionBahtforauditfees,andoutofpocketexpenseof0.01millionBaht.

NamesofPayers Auditor AuditFee(Baht)Outofpocketexpenses(Baht)

PrincipalCapitalPCL. EYOfficeLimited600,0009,546 PrincipalInvestmentCo.,Ltd. EYOfficeLimited70,000315 ConvergenceSystemsCo.,Ltd.EYOfficeLimited370,0001,035

Payment of Auditor in total w1,040,000 10,896

4) Following the principle to allow minority shareholders to submit issues to add into the agenda prior to the shareholders meeting, and nominate candidates for directorships, the board of directors considers such matters are inappropriate with the structure and the business operation of the Company. However, the Company

is now preparing to support the operation of this principle. Other principles, including Rights of Stakeholders, Disclosure and Transparency, and Responsibilities of the Board, are based on the Company’s good corporate governance policy, which complies with relevant regulations of government agencies.


power authority and/or assignment shall be under the scope of its authority by power of attorney, which was approved by the board of directors and/or to comply with rules and regulations or orders of the board of directors of the Company and/or the orders of the Company. 5. Determine mission, objectives, policies, as well as supervise of the overall operations, to maximize the benefits of the management. 6. Monitor and evaluate the operations of the Company to prevent the risk of various factors both from internal and external matters. 7. Authorize employment of employees, appointments, transfers, and removal for cross-functionals / departments / divisions or termination of employment. 8. Authorize issuing orders, regulations, notifications, and recordings in compliance with the policy and benefits of the Company in order to maintain procedures and discipline within the organization. 9. Perform other duties as assigned by the board of directors from time to time. 10. Financial approval l imit of CEO and Managing Director is based the management manual declared by the Company. The powers of, and the granting of powers of, the CEO and Managing Director to others as deemed appropriate, shall not include the power and/or granting of powers to approve any transaction for any person who may have any conflict of interest, have a vested interest, or may have any other conflict of interest with the Company, as defined in the notifications of SEC and SET, except where the approval of such transaction is proposed to a working committee and/or at a shareholders’ meeting, in order to consider and approve as defined by governing articles or laws.

5.Determine the company’s mission, objectives, company policies, as well as supervise of the overall operations to maximize the benefits of the management. 6. Monitor and evaluate the operations of the Company to prevent the risk of various factors both from internal and external matters. 7. Authorize employment of employees, appointments, transfers, and removal for cross-functionals / departments / divisions or termination of employment. 8. Authorize issuing orders, regulations, notifications, and recordings in compliance with the policy and benefits of the Company in order to maintain procedures and discipline within the organization. 9. Perform other duties as assigned by the board of directors from time to time. 10. Financial approval limit of the Chairman, is based on the management manual as declared by the Company.

Roles, Duties and Responsibilities of CEO and Managing Directors 1. Supervise the operat ion and/or dai ly administration of the Company. 2. Comply with policies, plans, and budgets approved by the board and/or the board of directors of the Company. 3. Be authorized to manage the businesses of the Company to meet the objectives, articles, policies, procedures, guidelines, orders, resolutions of shareholders’ meetings/resolutions of board of directors’ meetings, and the management executives in all aspects. 4. Appoint and manage working committees to the benefit and efficiency of good management and transparency, and have the authority to sub-grant power and/or authorize any other person to perform specific tasks on his behalf. The sub-grant

Roles, Duties and Responsibilities of Company Secretary

1.Prepare and keep the important documents of the Company. 2. Keep reports on related transactions, and supervise the activities as assigned by the SEC. 3. Make arrangements for the Board meetings, and specific committees’s meetings. 4 .Prepare meet ing repor ts , impor tant documents, and arrange a venue for the meeting of the board of directors and shareholders, prepare minutes of meetings, prepare meeting documents, and record the minutes of the meetings. 5.Prepare annual reports to propose to shareholders’ meeting.

6.Hold shareholders’ meetings, and take care of shareholders and investors. 7.Prepare draft management policies. 8.Supervise the Company and the board of directors to comply with the laws and regulations of the Office of the Stock Exchange Commission (SEC), and the Stock Exchange of Thailand (SET). 9.Support the Company to practice good corporate governance. 10.Serve as the Company’s registrar and coordinate dividend payment activity. 11.Follow up the execution in accordance with the resolutions of the board of directors and shareholders meetings.


11. Internal Control and Risk Management Principal Capital Public Company Limited has emphasized the importance of internal control. The board of directors assigns the audit committee to evaluate the assessment of the internal control system to ensure that the internal control system be adequate, appropriate, effective, and eff ic ient, for the conduct of the business. The evaluation also includes an assessment of resource usage, asset maintenance and prevention, reduction of flaws, loss, leakage, and/or waste, as well as accounting systems and reliable financial reports, in compliance with the rules and regulations of the Company. For the internal control, the Company hires an external auditor, Easy Accounting Co., Ltd., to create an internal control plan. The audit company

is independent in reporting its assessment. The company conducts its assessment every quarter. The assessment covers many aspects, such as sales control, management of marketing and revenue, expenses control, procurement control, control of assets and liabilities, control of cost accounting, for example. The auditor also focuses on the assessment of the internal control for the new systems of the Company’s new businesses, which were introduced in 2013. The assessment is assigned at least every quarter and reported to the audit committee every quarter for follow-up, in order to fix any problems as per the auditor’s suggestions, and to ensure that there is adjustment for appropriateness, efficiency, and compliance with the rules and regulations in conducting business of the Company.

10. Corporate Social Responsibilities (CSR)One of Principal Capital Public Company Limited (PRINC)’s policies is to advocate the community by constantly creating supportive social activities in order to lift up the quality of life of people in the community. We’re aiming for a future Thai society that will be better than it is today, and this aim can be realized if we start now to plant a high quality underlying fundamental structure. We do this because we too are a part of the society.

“From Us to the Temple, and From the Temple to the Community” ProjectPRINC has initiated project to develop quality of life of people in the society through healthcare scheme under the project title “From Us to the Temple, and From the Temple to the Community”. The essential idea for this project is that as in the past, the temple is the center of the community, both spiritually and with regards to socially activities. Therefore, PRINC launched this project with several donators and the cooperation of the temples, and links it to the community’s healthcare and hospital(s).

PRINC coordinated with private sponsors to raise fund for buying digital X-Ray machine to Wat Nayoong HospitalIn 2013, PRINC initiated fund raising activities with

various donators to offer a digital X-Ray machine to the Wat Nayoong Hospital, a community temple hospital in Udon Thani Province. In the past, the hospital possessed only an old-fashioned black and white X-Ray machine, with limited performance. By replacing outdated equipment with a modern digital system, patients gain more benefits from the qualified performance of the machine, and the doctors can diagnose the cases more efficiently.

Future ProjectsPRINC has a strong determination in being part of developing communities for a better life. Therefore, in the year 2014, the company will continue “From Us to the Temple, and From the Temple to the Community” by running activities, via donators and the temples, for communities throughout Thailand that are in need. In addition, this year we will add on a new project called “Bringing Good Doctors to the Community”. Groups of volunteer doctors will visit local communities in Thailand’s various regions, and set up healthcare checks, and basic treatment services, for those local people who are in need. We believe that healthy people can, in turn, make thier society a better place to live.


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2013

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Typeof

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uditC

ommittee

Metro M

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V. Intelligence Co., Ltd.

Patraporn Jarupat

Service fee

Rental fees and

service fee.

Service fee

Creditor

0.52

---

0.18

0.38

1.04

0.21

As a com

pany with

the comm

on direc-tors and sharehold-ers (S

ince May

2013, no comm

on shareholders and directors betw

een the com

panies.)

As a com

pany with

comm

on directors. (since S

eptember

2013, no comm

on directors).

Director

A service contract for w

ater and electricity supply in the office instead of leasing an office. S

tarting in July 2011 the rate is 4.28 B

aht per unit for electricity and 17.38 Baht per

unit for water, based on the actual rates of utilities of each

month until the cancellation of the office. The service use

is based on comm

ercial terms and criteria agreed upon

between the C

ompany and related parties.

Leased office space of 220 square meters, starting from

June 2013 for a period of three years.The audit com

mittee view

s that the Com

pany has an urgent need to m

ove to its new headquarters in lim

ited time and

the rental rate is lower w

hen compared others nearby. The

rental rate is 475 Baht / sq m

/ month, w

hile the average rental rate of the C

ompany is 450 baht / sq m

/ month.

A legal contract starting in A

ugust 2013. The audit com

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s the transaction is appropriate because the C

ompany is required by law

to contract a legal advisor w

ho thoroughly understands the business of the C

ompany. The cost of such services is low

er than the m

arket.

A creditor of the com

pany providing the services with fees

as detailed above.


12.2 Necessity and Appropriateness of Related TransactionsThe related transactions were appropriate, necessary, and most beneficial for the Company. The audit committee has issued their opinion regarding the related transaction as mentioned, and found that it was appropriate and normal business practice, with fair prices and conditions, and not causing a conflict of interest.

12.3 Related Transactions Policy For any re lated t ransact ion of the Company with a person who may have a vested interest, the audit committee will provide an opinion on the necessity and appropriateness of entering into the transaction. In the event that the audit committee does not have appropriate expertise to consider the related transaction, the Company will arrange for an independent expert the Company’s auditor to provide an opinion as input for the audit committee’s decision. In approving related transactions that may occur in the future, the Company’s board of committees will comply with the Company’s regulations related to the laws governing securities and exchange, regulations, notifications, orders or rules of the Stock Exchange of Thailand.

In case of transactions that occur in the future, the Company will arrange the approval for the transaction. The person with a vested interest, or who may cause a conflict of interest, must not participate in the consideration of the transaction. The audit committee will issue an opinion regarding the related transaction. The consideration of the transaction will strictly comply with the regulations or notifications of the Office of the Securities and Exchange Commission and the regulations on related transaction of the Stock Exchange of Thailand, as well as the Company’s rules and regulations. Pricing, compensation or fees related to the related transaction will be compared with the market price and the accounting standard as prescribed by the Certified Public Accountant Association of Thailand. The appropriateness and the Company’s benefit are key factors in the consideration, which will be disclosed in the Notes of the financial statements and the Company’s annual report.


313. Key Financial Information13.1 Independent Auditor’s ReportTo the Shareholders of Principal Capital Public Company Limited(formerly known as “Metrostar Property Public Company Limited”)

I have audited the accompanying consolidated financial statements of Principal Capital Public Company Limited and its subsidiaries, which comprise of the consolidated statement of financial position as of 31 December 2013, and the related consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, and have also audited the separate financial statements of Principal Capital Public Company Limited for the same period.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Thai Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Thai Standards on Auditing. Those standards require that I comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used, and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Principal Capital Public Company Limited and its subsidiaries, and of Principal Capital Public Company Limited as of 31 December 2013, and their financial performance and cash flows for the year then ended, in accordance with Thai Financial Reporting Standards.

Rungnapa Lertsuwankul Certified Public Accountant (Thailand) No. 3516 EY Office Limited (Formerly known as Ernst & Young Office Limited) Bangkok: 27 February 2014

Financial Statements and Operating Results Section


Assets

Current assets

Cash and cash equivalents 7 68,315,263 46,426,295 44,536,238

Current investments 8 324,322,965 324,322,965 9,419,550

Trade and other receivables 9 83,139,703 17,360,862 8,154,586

Inventories 259,191 259,191 231,696

Other current assets 6 4,059,198 2,632,356 1,088,068

Total current assets 480,096,320 391,001,669 63,430,138

Non-current assets

Restricted bank deposits 10 520,000 - 307,081,878

Investments in subsidiaries 11 - 44,999,950 -

Property, plant and equipment 12 1,514,201,694 1,511,150,682 1,558,564,403

Intangible assets 13 33,489,971 2,392,306 1,488,184

Goodwill 2.2 4,575,754 - -

Other non-current assets 14 2,788,450 2,064,173 1,460,032

Total non-current assets 1,555,575,869 1,560,607,1111,868,594,497

Total assets 2,035,672,189 1,951,608,7801,932,024,635

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

13.2 Financial Statements Principal Capital Public Company Limited and its subsidiaries (formerly known as “Metrostar Property Public Company Limited”) As at 31 December 2013

(Unit: Baht)

Consolidatedfinancialstatements

Note 2013

Separatefinancialstatements

2013 2012


Liabilities and shareholders’ equity

Current liabilities

Bank overdrafts from bank 15 13,649,802 - -

Trade and other payables 6, 16 46,771,539 31,196,135 29,595,926

Short-term loans 17 11,546,355 - -

Current portion of liabilities under

finance lease agreements 20 338,743 - -

Current portion of long-term loans 18 - - 76,000,000

Income tax payable 2,644,976 - -

Other current liabilities 19 20,736,655 16,291,343 11,943,842

Total current liabilities 95,688,070 47,487,478 117,539,768

Non-current liabilities

Liabilities under finance lease agreements,

net of current portion 20 172,227 - -

Long-term loans, net of current portion 18 - - 818,000,000

Provision for long-term employee benefits 21 5,160,677 2,366,292 3,645,388

Long-term provision 22 1,241,079 1,241,079 -

Deferred tax liabilities 27 6,067,162 172,578 -

Total non-current liabilities 12,641,145 3,779,949 821,645,388

Total liabilities 108,329,215 51,267,427 939,185,156

Shareholders’ equity

Share capital 24

Registered

1,400,700,000 ordinary shares of Baht 1 each

(2012: 606,900,000 ordinary shares of Baht 1 each) 1,400,700,000 1,400,700,000 606,900,000

Issued and fully paid-up

933,800,000 ordinary shares of Baht 1 each

(2012: 466,900,000 ordinary shares of Baht 1 each) 933,800,000 933,800,000 466,900,000

Premium on share capital 24 857,890,000 857,890,000 390,990,000

Share subscription received in advance 23 24,000 24,000 -

Retained earnings

Appropriated - statutory reserve 25 36,180,000 36,180,000 36,180,000

Unappropriated 99,448,974 72,447,353 98,769,479

Total shareholders’ equity 1,927,342,974 1,900,341,353 992,839,479

Total liabilities and shareholders’ equity 2,035,672,189 1,951,608,780 1,932,024,635


Principal Capital Public Company Limited and its subsidiaries (formerly known as “Metrostar Property Public Company Limited”) Statement of financial position (continued) As at 31 December 2013

(Unit: Baht)


Note 2013


2013 2012


Profit or loss:

Revenues

Revenues from serviced apartment operations 202,205,406 202,205,406 190,186,590

Revenues from office building management 14,000,000 14,000,000 -

Service income 68,167,352 - -

Interest income 2,043,757 2,025,384 3,374,252

Gain from sales of investments 5,589,461 5,589,461 -

Other income 4,453,721 4,435,165 2,429,581

Total revenues 296,459,697 228,255,416 195,990,423

Expenses

Cost of serviced apartment operations 113,838,671 113,838,671 114,903,118

Cost of office building management 5,165,296 5,165,296 -

Cost of serviced 24,552,338 - -

Service expenses 14,149,447 14,149,447 13,883,856

Administrativeexpenses 6 99,981,428 91,224,334 84,757,776

Total expenses 257,687,180 224,377,748 213,544,750

Profit (loss) before finance cost and income tax expenses 38,772,517 3,877,668 (17,554,327)

Finance cost (32,303,874) (31,967,778) (40,906,980)

Profit (loss) before income tax expenses 6,468,643 (28,090,110) (58,461,307)

Income tax expenses 27 (7,656,411) (172,578) -

Loss for the year (1,187,768) (28,262,688) (58,461,307)

Other comprehensive income:

Acturial gain, net of income tax 27 1,867,263 v1,940,562 -

Total comprehensive income for the year 679,495 (26,322,126) (58,461,307)

(Restated)

Earnings per share 28

Basic loss per share

Loss for the year (0.002) (0.047) (0.120)


Principal Capital Public Company Limited and its subsidiaries (formerly known as “Metrostar Property Public Company Limited”) Statement of comprehensive income For the year ended 31 December 2013

(Unit: Baht)


Note 2013


20132012


Cash flows from operating activities

Profit (loss) before tax 6,468,643 (28,090,110) (58,461,307)

Adjustments to reconcile profit (loss) before tax to

net cash provided by (paid from) operating activities

Depreciation and amortisation 67,910,298 63,119,062 62,820,858

Allowance for doubtful accounts 9,694 9,694 19,438

Unrealised gain on changes in value of unit trusts (862,891) (862,891) -

Gain from disposals/write-off of equipment (869,127) (856,061) (54,165)

Gain from sales of investments (5,589,461) (5,589,461) -

Long-term employee benefit expenses 1,670,985 1,462,395 811,638

Long-term provision 1,241,079 1,241,079 -

Interest income (2,043,757) (2,025,384) (3,374,252)

Interest expenses 31,886,399 31,594,573 40,763,850

Profit from operating activities before changes in

operating assets and liabilities 99,821,862 60,002,896 42,526,060

Decrease (increase) in operating assets

Trade and other receivables (47,075,390) (9,215,969) (2,934,921)

Inventories (27,495) (27,495) (3,066)

Other current assets (364,159) (1,872,022) 1,501,434

Other non-current assets (848,823) (431,600) (1,213,546)

Increase (decrease) in operating liabilities

Trade and other payables 9,184,599 1,711,210 10,196,116

Other current liabilities 4,795,743 4,234,001 1,204,124

Cash paid for long-term employee benefits (800,929) (800,929) -

Cash flows from operating activities 64,685,408 53,600,092 51,276,201

Cash paid for interest expenses (31,997,399) (31,705,573) (40,764,877)

Cash paid for income tax expenses (447,006) (172,541) (71,882)

Net cash flow from operating activities 32,241,003 21,721,978 10,439,442


Principal Capital Public Company Limited and its subsidiaries (formerly known as “Metrostar Property Public Company Limited”) Statement of cash flows For the year ended 31 December 2013

(Unit: Baht)

Consolidatedfinancialstatements 2013


20132012


Cash flows from investing activities

Increase in current investments (304,299,920) (304,299,920) (2,419,550)

Cash received from sales of investments 1,255,037,828 1,255,037,828 -

Cash paid for purchase of investments (1,249,448,367) (1,249,448,367) -

Cash paid for investments in subsidiaries (Note 2.2) (34,239,418) (44,999,950) -

Decrease (increase) in restricted bank deposits 307,081,878 307,081,878 (6,830,914)

Cash received from interest income 2,371,491 2,353,117 3,062,503

Proceeds from sales of equipment 1,424,100 1,411,016 88,390

Cash paid for acquisition of plant and equipment

and intangible assets (17,863,001) (17,050,919) (1,497,271)

Net cash flows used in investing activities (39,935,409) (49,915,317) (7,596,842)

Cash flows from financing activities

Increase in bank overdrafts from bank 1,127,179 - -

Increase in short-term loans 374,000 - -

Repayment of long-term loans from financial institution (894,000,000) (894,000,000) -

Repayment of liabilities under finance lease agreements (111,144) - -

Share subscription received in advance 24,000 24,000 -

Proceeds from increase in share capital 933,800,000 933,800,000 -

Net cash flows from financing activities 41,214,035 39,824,000 -

Net increase in cash and cash equivalents 33,519,629 11,630,661 2,842,600

Cash and cash equivalents at beginning of year 44,536,238 44,536,238 41,693,638

Cash and cash equivalents at end of year (Note 7) 78,055,867 56,166,899 44,536,238

-

Supplemental cash flows information:

Non-cash items:

Purchase of intangible assets - unpaid 113,500 113,500 -

Acturial gain 1,848,938 1,940,562 -


Principal Capital Public Company Limited and its subsidiaries (formerly known as “Metrostar Property Public Company Limited”) Statement of cash flows (continued) For the year ended 31 December 2013

(Unit: Baht)


2013


2013 2012


Principal Capital Public Company Limited and its subsidiaries(formerly known as “Metrostar Property Public Company Limited”) Statement of changes in shareholders’ equity For the year ended 31 December 2013

Principal Capital Public Company Limited and its subsidiaries (formerly known as “Metrostar Property Public Company Limited”) Statement of changes in shareholders’ equity (continued) For the year ended 31 December 2013

Balance as at 1 January 2013 466,900,000 390,990,000 - 36,180,000 98,769,479 992,839,479

Increase share capital (Note 24) 466,900,000 466,900,000 - - - 933,800,000

Share subscription received in

advance (Note 23) - - 24,000 - - 24,000

Total comprehensive income for the year - - - - 679,495 679,495

Balance as at 31

December 2013 933,800,000 857,890,000 24,000 36,180,000 99,448,974 1,927,342,974


Consolidated financial statements

Retained earnings

(Unit: Baht)

Issued and

paid-up

share capital

Premium on

share capital

Share subscrip-

tion received

in advance

Appropriated-

statutory reserve

Total

shareholders’

equity

Unappropriated

Balance as at 1 January 2012 466,900,000 390,990,000 - 36,180,000 157,230,786 1,051,300,786

Totalcomprehensiveincome

fortheyear - - - - (58,461,307) (58,461,307)

Balance as at 31 December 2012 466,900,000 390,990,000 - 36,180,000 98,769,479 992,839,479

Balance as at 1 January 2013 466,900,000 390,990,000 - 36,180,000 98,769,479 992,839,479

Increasesharecapital(Note24) 466,900,000 466,900,000 - - - 933,800,000

Sharesubscriptionreceived

inadvance(Note23) - - 24,000 - - 24,000

Totalcomprehensiveincomefortheyear - - - - (26,322,126) (26,322,126)

Balance as at

31 December 2013 933,800,000 857,890,000 24,000 36,180,000 72,447,353 1,900,341,353

Theaccompanyingnotesareanintegralpartofthefinancialstatements.

Separate financial statements

Retained earnings

(Unit: Baht)

Issued and

paid-up

share capital

Premium on

share capital

Share subscrip-

tion received

in advance

Appropriated-

statutory reserve

Total

shareholders’

equity

Unappropriated


1. General information Principal Capital Public Company Limited (“the Company”) is a public company incorporated and domiciled in Thailand. The Company is principally engaged in the residential building service (serviced apartment) business and office building management business. On 16 May 2013, the Company registered with the Ministry of Commerce for changing of its address from No. 1758/4, Sukhumvit Road, Bangjak, Prakhanong, Bangkok to No. 29, 12th floor, Bangkok Business Center Building, Sukhumvit 63 Road, Klongtonnua, Wattana, Bangkok. On 22 November 2013, the Company registered with the Ministry of Commerce for changing of its address to No. 29, 23rd floor, Bangkok Business Center Building, Sukhumvit 63 Road, Klongtonnua, Wattana, Bangkok. In addition, the Company has one branch located at No. 1, Soi Suanplu, Sathorn Road, Thungmahamek, Sathorn, Bangkok.

On 22 Apri l 2013, Mr. Satit Viddayakorn acquired shares of the Company, causing the major shareholder of the Company to change from the group of Mr. Veera Burapachaisri to Mr. Satit Viddayakorn.

On 22 April 2013, the Board of Directors’ Meeting No.3/2556 approved the resignation of directors Ms. Pimjai Burapachaisri, Mrs. Vibhavadee Burapachaisri and Mr. Thanadet Kupwong, and appointed Mr. Satit Viddayakorn, Ms. Seerada Tiemprasert and Ms. Patraporn Jarupat as directors of the Company, effective from 22 April 2013. The 2013 Annual General Meeting of the Company’s shareholders, held on 26 Apr i l 2013, acknowledged the departures Mrs. Pilai

Pieampongsan, Mr. Phaipoon Siripanusathien and Pol.Col.Kidanan Komkhum, who retired by rotation and are not being reappointed to other positions, and appointed Mr. Yarnsak Manomaiphiboon, Mr. Satra Chantarasub and Mr. Ayuth Charnsethikul as directors of the Company, and appointed Ms. Orawan Tejapaibul and Ms. Aranya Chaloemphornwarodom as new directors of the Company, effective from 26 April 2013. On 26 April 2013, the Board of Directors’ Meeting No.4/2556 approved the resignation of Mr. Veera Burapachaisri, and appointed Dr. Pongsak Viddayakorn as a director of the Company, effective from 26 April 2013. On 2 May 2013, the Company was notified of a tender offer for the Company’s shares, by Mr. Satit Viddayakorn as the tenderer. The tender remained open from 8 May 2013 to 12 June 2013. At the expiration of the tender offer period, no securities had been offered to Mr. Satit Viddayakorn. On 27 August 2013, the Company registered the change of the Company’s name f rom “Metrostar Property Public Company Limited” to “Principal Capital Public Company Limited” with the Ministry of Commerce. On 28 January 2014, the Board of Directors’ Meeting No.1/2557 acknowledged the resignation of Mr. Ayuth Charnsethikul, as director of the Company, effective from 15 December 2013, and acknowledged the resignation of Ms. Orawan Tejapaibul, as a director and member of the audit committee, effective from 27 January 2014.

2. Basis of preparation 2.1 The financial statements have been prepared in accordance with Thai Financial Reporting Standards enunciated under the Accounting Professions Act B.E. 2547, and their presentation has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 28 September 2011, issued under the Accounting Act B.E. 2543. The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from the Thai language financial statements.

The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policies.

2.2 Basis of consolidationa) The consol idated f inanc ia l s tatements include the financial statements of Principal Capital Public Company Limited (“the Company”) and the fo l low ing subs id ia ry compan ies (“the subsidiaries”):

13.3 Notes to Financial Statement


On 26 July 2013, the Company established a subsidiary, Principal Investment Company Limited, to engage in business consulting. On 15 October 2013, the Company acquired ordinary shares of Convergence System Company Limited at a total price of Baht 35 million, to merge with said company. The proportion of the Company’s investment is equal to 100 percent of its issued and paid up share capital. Convergence System Company Limited was incorporated in Thailand, and provides software consultancy, implementation and training services, together with information system maintenance and support services. The Company paid for such investments by cash on 15 October 2013.

These consolidated financial statements include the statement of financial position of Convergence System Company Limited, as of 31 December 2013, and the comprehensive income for the period from the investment date to 31 December 2013. The Company has recorded the net assets acquired at their fair value as of the acquisition date. The remaining excess of the purchase price, over the fair value of the net assets acquired, has been recorded as goodwill. Details of the fair value and book value of the ne t asse ts o f Convergence Sys tem Company Limited as at the acquisition date, are as follows:

Principal Investment Company LimitedConvergence System Company Limited

Business Consultant

Implementation information system service business

Thailand

Thailand

100

100

-

-

Percentageof

Company’sname Natureofbusiness Countryof shareholding

2013 2012 (Percent) (Percent)

incorporation

Assets

Cash and cash equivalents

Trade and other receivables

Restricted bank deposit

Equipment

Intangible assets

Deferred tax assets

Other assets

Total assets

Liabilities

Bank overdrafts from financial institution

Trade and other payables

Short-term loans

Provision for long-term employee benefits

Deferred tax liabilities

Other liabilities

Total liabilities

Net assets value

Proportion of investment (%)

Net asset value attributable to the

Company’s investment

Excess of the purchase price over the net

assets value (Goodwill)

Purchase price

Less: Cash and cash equivalents of subsidiary

Net cash paid for purchase of subsidiary

761

27,919

520

2,591

35,536

4,897

4,356

76,580

(12,523)

(8,102)

(11,172)

(2,494)

(7,359)

(4,506)

(46,156)

30,424

100

30,424

4,576

35,000

(761)

34,239

761

27,919

520

1,285

46

4,897

4,356

39,784

(12,523)

(8,102)

(11,172)

(2,494)

-

(4,506)

(38,797)

987

(Unit:ThousandBaht)

Fairvalue Netbookvalue


Goodwill amounting to Baht 4.6 million is the business value of confidence in experience and expert ise of the management team of Convergence System Company Limited to move this information system service business unit forward, and generate profit for shareholders. The revenue and ope ra t i ng p ro f i t o f Convergence System Company Limited, from the acquisition date to 31 December 2013, amounts to Baht 68 million and Baht 30 million, respectively. b) Subsidiaries are fully consolidated, as per the date upon which the Company obtains control,

and continue to be consolidated until the date when such control ceases. c) The financial statements of the subsidiaries are prepared using the same significant accounting policies as the Company. d) Material balances and transactions between the Company and its subsidiary companies have been eliminated from the consolidated financial statements.

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

3. New accounting standards Below is a summary of accounting standards that became effective in the current accounting year, and those that will become effective in the future. (a) Accounting standards that became effective in the current accounting yearAccounting standards: TAS 12 Income Taxes TAS 20 ( rev ised 2009) Account ing for Government Grants and Disclosure of Government Assistance TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates Financial Reporting Standard: TFRS 8 Operating Segments Accounting Standard Interpretations: TSIC 10 Government Assistance - No Specific Relation to Operating Activities TSIC 21 Income Taxes - Recovery of Revalued Non-Depreciable Assets TSIC 25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders. Accounting Treatment Guidance for Transfers of Financial Assets

These accounting standards, financial reporting standards, accounting standard interpretations, and accounting treatment guidelines do not have any significant impact on the financial statements, except for the following accounting standard.

TAS 12 Income Taxes This accounting standard requires an entity to identify temporary differences between the carrying amount of an asset or liability in the statement of financial position and its tax base, and recognize the tax effects as deferred tax assets or liabilities subjecting to certain recognit ion cr iter ia. The Company and its subsidiaries have changed this accounting policy in this current year, and restated the prior year’s financial statements, presented as comparative information, as though the Company and its subsidiaries had initially recognized the tax effects as deferred tax assets or liabilities. However, this accounting standard does not effect the financial statements of prior years. Therefore there has been no cumulative effect resulting from this change in this accounting policy.

(Unit: Thousand Baht)

Purchase price - cash paid 35,000

Fair value of net assets received (30,424)

Goodwill 4,576

Details of acquisition of Convergence System Company Limited are as follows:


(b) Accounting standards that will become effective in the future

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

Effective date

Accounting Standards:

TAS 1 (revised 2012) Presentation of Financial Statements 1 January 2014

TAS 7 (revised 2012) Statement of Cash Flows 1 January 2014

TAS 12 (revised 2012) Income Taxes 1 January 2014

TAS 17 (revised 2012) Leases 1 January 2014

TAS 18 (revised 2012) Revenue 1 January 2014

TAS 19 (revised 2012) Employee Benefits 1 January 2014

TAS 21 (revised 2012) The Effects of Change in Foreign Exchange Rates 1 January 2014

TAS 24 (revised 2012) Related Party Disclosures 1 January 2014

TAS 28 (revised 2012) Investments in Associates 1 January 2014

TAS 31 (revised 2012) Interests in Joint Ventures 1 January 2014

TAS 34 (revised 2012) Interim Financial Reporting 1 January 2014

TAS 36 (revised 2012) Impairment of Assets 1 January 2014

TAS 38 (revised 2012) Intangible Assets 1 January 2014

Financial Reporting Standards:

TFRS 2 (revised 2012) Share-based Payment 1 January 2014

TFRS 3 (revised 2012) Business Combinations 1 January 2014

TFRS 4 Insurance Contracts 1 January 2016

TFRS 5 (revised 2012) Non-current Assets Held for Sale and Discontinued Operations 1 January 2014

TFRS 8 (revised 2012) Operating Segments 1 January 2014

Accounting Standard Interpretations:

TSIC 15 Operating Leases - Incentives 1 January 2014

TSIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease 1 January 2014

TSIC 29 Service Concession Arrangements: Disclosures 1 January 2014

TSIC 32 Intangible Assets - Web Site Costs 1 January 2014

Financial Reporting Standard Interpretations:

TFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities 1 January 2014

TFRIC 4 Determining whether an Arrangement Contains a Lease 1 January 2014

TFRIC 5 Rights to Interests arising from Decommissioning, Restoration and

Environmental Rehabilitation Funds 1 January 2014

TFRIC 7 Applying the Restatement Approach under TAS 29 Financial Reporting

in Hyperinflationary Economies 1 January 2014

TFRIC 10 Interim Financial Reporting and Impairment 1 January 2014

TFRIC 12 Service Concession Arrangements 1 January 2014

TFRIC 13 Customer Loyalty Programmes 1 January 2014

TFRIC 17 Distributions of Non-cash Assets to Owners 1 January 2014

TFRIC 18 Transfers of Assets from Customers 1 January 2014


4. Significant accounting policies

4.1 Revenue recognition Residential building service income Res ident ia l bu i ld ing serv ice income is recognized on an accrual basis. Recognized revenue does not include valued added tax, and states net of discounts.Rendering of services Service revenue is recognized when services have been rendered, taking into account the stage of completion.Interest income Interest income is recognized on an accrual basis, based on the effective interest rate.

4.2 Cash and cash equivalents Cash and cash equ iva lents cons is t o f cash in hand and at banks, and all highly liquid investments with an original maturity of three months or less, and not subject to withdrawal restrictions.

4.3 Trade accounts receivable Trade accounts receivable are stated at the net realizable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in collection of receivables. The allowance is generally based on collection experiences and analysis of debt aging.

4.4 Inventories Inventories are valued at the lower of average cost and net realizable value.

4.5 Investments a) Investments in securities held for trading are stated at fair value. Changes in the fair value of these securities are recorded in profit or loss. b) Investments in debt securities, both due within one year and expected to be held to maturity, are recorded at amortized cost. The premium/discount on debt securities is amortized/accreted by the effective rate method with the amortized/accreted amount presented as an adjustment to the interest income. c) Investments in subsidiaries are accounted for in the separate financial statements using the cost method. The fair value of marketable securities is based on the latest bid price of the last working day of the year. The fair value of unit trusts is determined from their net asset value at the end of reporting period. The weighted average method is used for computation of the cost of investments. On disposal of an investment, the difference between net d isposa l p roceeds and the carrying amount of the investment is recognized in profit or loss.

4.6 Depreciation of property, plant and equipment Land is s ta ted a t cost . Bu i ld ing and equipment are stated at cost, less accumulated deprec ia t ion and a l lowance fo r loss on impairment of assets (if any). Depreciation of building and equipment is calculated by reference to their costs on the straight-line basis over the following estimated useful lives: Building and improvements - 10, 20 and 40 years Office equipment - 3 and 5 years Furniture, fixture and equipment supplies - 5 years Motor vehicles - 5 years Depreciation is included in determiningincome. No depreciation is provided on land. The cost of linen, crockery, glassware, silverware and certain utensils, purchased to meet the normal requirements of the serviced apartment operations, has been regarded as a base stock and subsequent purchases are expended when incurred. An item of property, plant and equipment is derecognized upon disposal, or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on disposal of an asset is included in profit or loss when the asset is derecognized.

4.7 Intangible assets Intangible assets acquired through business combination are initially recognized at their fair value on the date of business acquisition, while intangible assets acquired in other cases are recognized at cost. Following the initial recognition, the intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses (if any). Intangible assets with finite lives are amortized on a systematic basis over their economic useful life, and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for such intangible assets are reviewed at each financial year-end. The amortization expense is charged to profit or loss.

A summary of the intangible assets with finite useful lives is as follows:

Useful lives

Information system service 1 - 2 yearsagreements

Computer software 3 and 5 years


4.8 Business combination The Company accounted for the business combination as discussed in Note 2.2 by applying the acquisition method. The cost of an acquisition is measured at fair value, which is the amount of cash or cash equivalents, or the fair market value of any other consideration given, as determined at the date of acquisition. The Company accounted for acquisition-related costs, such as professional fees and other consulting fees, as expenses in the period in which the costs are incurred and the services are received.

4.9 Goodwill Goodwill is initially recorded at cost, which equals to the excess of cost of business combination over the fair value of the net assets acquired. If the fair value of the net assets acquired exceeds the cost of business combination, the excess is immediately recognized as gain in profit or loss. Goodwill is carried at cost less any accumulated impairment losses. Goodwill is tested for impairment annually, and when circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Company’s cash generating units (or group of cash-generating units) that are expected to benefit from the synergies of the combination. The Company estimates the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognized in profit or loss. Impairment losses relating to goodwill cannot be reversed in future periods.4.10 Related party transactions Related parties comprise enterprises and individuals that control, or are controlled by, the Company, whether directly or indirectly, or which are under common control with the Company. They also include associated companies and individuals who directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, key management personnel, directors and officers with authority in the planning and direction of the Company’s operations.4.11 Long-term leases Leases of property, plants, or equipment, that transfer substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalized at the lower of the fair values of the leased assets, and the present value of the minimum lease payments. Outstanding rental obligations, net of finance charges, are included in long-term payables, while the interest element is charged to profit or loss over the lease period. The assets acquired under finance leases are depreciated over the useful life of the asset.

Leases of property, plants, or equipment that do not transfer substantially all the risks and rewards of ownership, are classified as operating leases. Operating lease payments are recognized as an expense in profit or loss on a straight-line basis over the lease term.4.12 Foreign currencies The consolidated and separate f inancial statements are presented in Baht, which is also the Company’s functional currency. Items included in the consolidated financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are translated into Baht at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Baht at the exchange rate ruling at the end of reporting period. Gains and losses on exchange are included in determining income.4.13 Impairment of assetsAt the end of each reporting period, the Company and its subsidiaries perform impairment reviews with respect to the property, plant and equipment, and other intangible assets, whenever events or changes in circumstances indicate that an asset may be impaired. The Company and its subsidiaries also carry out annual impairment reviews with respect to goodwill. An impairment loss is recognized when the recoverable amount of an asset, which is the higher of the asset’s fair value less costs to sell, and its value in use, is less than the carrying amount. An impairment loss is recognized in profit or loss.4.14 Employee benefits Short-term employee benefits Salaries, wages, bonuses and contributions to the social security fund are recognized as expenses when incurred. Post-employment benefits Defined contribution plans The Company and their employees have jointly established a provident fund. The fund is contributed to on a monthly basis, by employees and by the Company. The fund’s assets are held in a separate trust fund and the Company contributions are recognized as expenses when incurred. Defined benefit plans The Company and its subsidiar ies have obligations with respect to severance payments, and they must make to employees, upon retirement, under labor law. The Company and its subsidiaries treat these severance payment obligations as a defined benefit plan. The obligation under the defined benefit plan is determined by the Company and its subsidiaries, based on actuarial techniques using the projected unit credit method. Actuarial gains and losses arising from post-employment benefits are recognized immediately in other comprehensive income. For the first-time adoption of TAS 19 Employee Benefits in 2011, the Company and its subsidiaries


elected to recognize the transitional liability, which exceeds the liability that would have been recognized at the same date under the previous accounting policy, immediately as an expense in profit or loss for the year.4.15 Provisions Provisions are recognized when the Company and its subsidiaries have a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 4.16 Income tax Income tax expense represents the sum of corporate income tax currently payable and deferred tax. Current tax Current income tax is provided in the accounts at the amount expected to be paid to the taxation authorities, based on taxable profits determined in accordance with tax legislation. Deferred tax Deferred income tax is provided on temporary

differences between the tax bases of assets and liabilities and their carrying amounts at the end of each reporting period, using the tax rates enacted at the end of the reporting period. The Company and its subsidiaries recognize deferred tax liabilities for all taxable temporary differences while they recognize deferred tax assets for all deductible temporary differences and tax losses carried forward to the extent that it is probable that future taxable profit will be available against which such deductible temporary differences and tax losses carried forward can be utilized. At each reporting date, the Company and its subsidiaries review and reduce the carrying amount of deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. The Company and its subsidiaries record deferred tax directly to shareholders’ equity if the tax relates to items that are recorded directly to shareholders’ equity.

5. Significant accounting judgments and estimates The preparation of financial statements in conformity with financial reporting standards at times requires management to make subjective judgments and estimates regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures; and actual results could differ from these estimates. Significant judgments and estimates are as follows:Leases In determining whether a lease is to be classified as an operating lease or finance lease, the management is required to use judgment regarding whether significant risks and rewards of ownership of the leased asset have been transferred, taking into consideration terms and conditions of the arrangement. Allowance for doubtful accounts In determining an allowance for doubtful accounts, the management needs to make judgment and estimates based upon, among other things, past collection history, aging profile of outstanding debts, and the prevailing economic condition. Fair value of financial instruments In determining the fair value of f inancial instruments that are not actively traded, and for which quoted market prices are not readily available,

the management exercises judgment using a variety of valuation techniques and models. The input to these models is taken from observable markets, and includes consideration of liquidity, correlation, and longer-term volatility of financial instruments.Property plant and equipment/Depreciation In determining depreciation of plant and equipment, the management is required to make estimates of the useful lives and residual values of both plant and equipment, and to review estimates of useful lives and residual values when there are any changes. In addition, the management is required to review property, plant and equipment for impairment on a periodic basis, and record impairment losses when it is determined that their recoverable amount is lower than the carrying amount. This requires judgments regarding forecast of future revenues and expenses relating to the assets subject to the review.Goodwill and intangible assets The initial recognition and measurement of goodwill and intangible assets, and subsequent impairment testing, require management to make estimates of cash flows to be generated by the asset or the cash generating units and to choose a suitable discount rate in order to calculate the present value of those cash flows.


6. Related party transactions

During the years, the Company and its subsidiaries had significant business transactions with related parties. Such transactions, which are summarized below, arose in the ordinary course of

business and were concluded on commercial terms and bases agreed upon between the Company and those related parties.

Asof31December2013,and31December2012,thebalancesoftheaccountsbetweentheCompanyandthose

relatedcompaniesareasfollows:

Deferred tax asset Deferred tax asset is recognized for deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the temporary differences and losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of estimate future taxable profits.Post-employment benefits under defined benefit plans The obligation under the defined benefit plan

is determined based on actuarial techniques. Such determination is made based on various assumptions, including discount rate, future salary increase rate, mortality rate and staff turnover rate.Litigation The Company has contingent liabilities as a result of litigation. The Company’s management has used judgment to assess the results of the litigation, and recorded certain provisions at the end of reporting period. However, actual results could differ from the estimates.

The relationships between the Company and the related parties are summarized below.

List of related parties Relationship

Principal Investment Company Limited Subsidiary

Convergence System Company Limited Subsidiary

V Intelligence Co., Ltd. Common director (No common director since September 2013)

Metro Machinery Co., Ltd. Common shareholders and common directors (No common

shareholders and common directors since May 2013)

Ms. Patraporn Jarupat Director

Transactions with subsidiary company(eliminated from the consolidated financial statements)

Service expensesTransactions with related partiesService expenses

Rental expenses

Approximate to other - 1,500 - companies’ rate

1,473 1,473 525 Approximate to other companies’ rate 132 132 - Approximate to other companies’ rate

(Unit: Thousand Baht) Consolidated financial statements Separate financial statements Transfer

2013 20132012pricingpolicy

AdvanceConvergence System Company LimitedAccrued expensesMetro Machinery Co., Ltd.Ms. Patraporn Jarupat

- 200 -

- - 35206 206 -206 206 35

Consolidated financial statements Separate financial statements2013 2013 2012



8. Current investments

Directors and management’s benefits During the year ended 31 December 2013 and 2012, the Company and its subsidiaries had employee benefit expenses payable to their directors and management as follows:

Asof31December2013,bankdepositsinsavingsaccounts,billsofexchangeandcertificatesofdeposit,carried

interestsbetween0.40%and3.10%perannum(2012:between0.75%and2.75%perannum).

(Unit: Thousand Baht) Consolidated financial statements Separate financial statements

2013 2013 2012

Cost Fairvalue Cost Fairvalue Cost Fairvalue

Tradingsecurities

Investments in unit trusts

Add: Unrealized gain on changes

in value of unit trusts

Held-to-maturity debt securities

Certificates of deposit with maturity within

3 months but intends to continue holding

in the same from/in

over 3 months and up to 1 year

Current investments - net

313,719

863

314,582

9,741

324,323

314,582

-

314,582

9,741

324,323

313,719

863

314,582

9,741

324,323

314,582

-

314,582

9,741

324,323

-

-

-

9,420

9,420

-

-

-

9,420

9,420



Consolidated financial statements Separate financial statements

Short-term employee benefits 13,743 8,822 10,271

Post-employment benefits 497 447 61

Total 14,240 9,269 10,332

2013 20132012

2013 20132012

Consolidated financial statements Separate financial statements

Cash 223 190 190

Bank deposits 68,092 46,236 17,346

Bills of exchange - - 27,000

Cash and cash equivalents 68,315 46,426 44,536

Current investment - Certificates

of deposit with an original

maturity of 3 months or less 9,741 9,741 -


in cash flow statements 78,056 56,167 44,536


9. Trade and other receivables

10. Restricted bank deposits As of 31 December 2013, a subsidiary had a fixed deposit pledged with a company to install the software (The Company only: Nil). As of 31 December 2012, the Company had savings deposits pledged with the bank to secure long-term loans, as mentioned in Note 18. In October 2013, the Company repaid the loans in full and redeemed the pledged.

Principal Investment Company Limited On 26 July 2013, the Company registered with the Ministry of Commerce the establishment of Principal Investment Company Limited, in which it holds 1 million ordinary shares (or 100% of the issued and paid-up shares of such company) with a par value of 10 Baht per share. The Company has paid the full amount for a total of Baht 10 million.

Convergence System Company Limited The meeting of the Company’s Board of Directors No. 10/2556 held on 9 October 2013 approved an investment in Convergence System Company Limited, which was incorporated in Thailand, as mentioned in Note 2.2.

11. Investment in subsidiariesDetails of investment in subsidiaries as presented in the separate financial statements are as follows.

(Unit: Thousand Baht) Consolidated financial statements Separate financial statements 2013 2013 2012

Tradereceivables-unrelatedparties

Age on the basis of due dates

Not yet due

Past due

Up to 3 months

3 - 6 months

6 - 12 months

Over 12 months

Total

Less: Allowance for doubtful debts

Trade accounts receivable - net

Otherreceivables

Accrued income

Other receivables

Total other receivables

Total trade and other receivables - net

26,072

9,255

3,756

4,892

1,068

45,043

(77)

44,966

38,123

51

38,174

83,140

9,781

7,655

-

-

-

17,436

(77)

17,359

-

2

2

17,361

7,758

24

-

-

-

7,782

(67)

7,715

-

440

440

8,155

Natureof Countryof Shareholding

Company’sname business incorporation Paid-upcapital percentage Cost

2013 2012 2013 2012 2013 2012

(Percent) (Percent)

Principal Investment

Company Limited

Convergence

System Company

Limited

Total

Business consultant

Implementation

information system

service business

Thailand

Thailand

10,000

35,000

-

-

100

100

-

-

10,000

35,000

45,000

-

-

-



12. Property, plant and equipment


Furniture,fixture

Buildingand Office andequipment Motor

Land improvements equipment supplies vehicles Total

Cost:

As of 1 January 2013

Increase from acquisition of subsidiary

(Note 2.2)

Additions

Disposals/write off

As at 31 December 2013

Accumulated depreciation:


Increase from acquisition of subsidiary

(Note 2.2)

Depreciation for the year

Depreciation on disposals/write off

As of 31 December 2013

Net book value:



227,517

-

-

-

227,517

-

-

-

-

-

227,517

1,421,006

-

1,816

-

1,422,822

143,174

-

37,581

-

180,755

1,242,067

5,514

2,803

1,951

(4,995)

5,273

5,266

1,937

372

(4,910)

2,665

2,608

145,136

27

806

(4,517)

141,452

92,169

2

23,646

(4,047)

111,770

29,682

-

5,527

10,990

-

16,517

-

3,827

363

-

4,190

12,327

1,799,173

8,357

15,563

(9,512)

1,813,581

240,609

5,766

61,962

(8,957)

299,380

1,514,201

2013 (Baht 60.9 million included in cost of serviced apartment operations, and the balance in

administration expenses) 61,962



As of 31 December 2013, a subsidiary had equipment under finance lease agreement with net book values amounting to Baht 1 million. As of 31 December 2013, certain equipment items of the Company and its subsidiaries have been fully depreciated but are still in use. The gross carrying amount before deducting accumulated depreciat ion of those assets amounted to approximately Baht 8 million. (The Company only: Baht 4 million, 2012: Baht 7 million).

The Company has mortgaged property, plants and equipment with a total net book value as at 31 December 2012 of Baht 1,558 million as collateral for long-term credit facilities granted by commercial banks, as mentioned in Note 18. In October 2013, the Company repaid the loans in full and redeemed the mortgage.


Furniture,fixture

Buildingand Office andequipment Motor

Land improvements equipment supplies vehicles Total

Cost:


Additions

Disposals


Additions

Disposals/write off


Accumulateddepreciation:



Depreciation on disposals



Depreciation on disposals/write off


Netbookvalue:



Depreciationfortheyear

227,517

-

-

227,517

-

-

227,517

-

-

-

-

-

-

-

227,517

227,517

1,421,006

-

-

1,421,006

1,816

-

1,422,822

105,701

37,473

-

143,174

37,581

-

180,755

1,277,832

1,242,067

5,458

56

-

5,514

1,208

(4,396)

2,326

4,933

333

-

5,266

235

(4,311)

1,190

248

1,136

143,867

1,441

(172)

145,136

763

(4,517)

141,382

68,635

23,671

(137)

92,169

23,645

(4,047)

111,767

52,967

29,615

-

-

-

-

10,990

-

10,990

-

-

-

-

175

-

175

-

10,815

1,797,848

1,497

(172)

1,799,173

14,777

(8,913)

1,805,037

179,269

61,477

(137)

240,609

61,636

(8,358)

293,887

1,558,564

1,511,150

61,477

61,636


administration expenses)


administration expenses)



13. Intangible assets

Cost:


Increase from acquisition of subsidiary (Note 2.2)

Additions

Disposals


Accumulatedamortization:


Increase from acquisition of subsidiary (Note 2.2)

Amortization for the year

Disposals for the year


Netbookvalue:


Amortizationfortheyearincludedinadministra-

tiveexpensesinprofitorloss

2013


Information

system service

agreement

-

35,490

-

-

35,490

-

-

4,436

-

4,436

31,054

Computer

software

7,993

800

2,414

(30)

11,177

6,505

754

1,512

(30)

8,741

2,436

Total

7,993

36,290

2,414

(30)

46,667

6,505

754

5,948

(30)

13,177

33,490

5,948


Computer software


Computer software

(Unit: Thousand Baht) (Unit: Thousand Baht)

Cost:

As at 1 January 2012

Additions


Additions

Disposals


Accumulated amortization:

As at 1 January 2012




Disposals


Netbookvalue:



Amortizationfortheyears

includedinadministrative

expensesinprofitorloss

2012

2013

7,993

-

7,993

2,387

(30)

10,350

5,161

1,344

6,505

1,483

(30)

7,958

1,488

2,392

1,344

1,483



14. Other non-current assets

15. Bank overdrafts from bank

17. Short-term loans

16. Trade and other payables

The above bank overdrafts are guaranteed by a director of the Company, a director and management of a subsidiary and land of the management of a subsidiary.

The above short-term loans from management of a subsidiary are unsecured.

18. Long-term loans

Consolidatedfinancial statements

2013

Separatefinancial statements

2013 2012

Prepaid corporate income tax

Deposits

Total

244

2,544

2,788

244

1,820

2,064

72

1,388

1,460






Bank overdrafts from bank MRR + 0.75 13,650 - -

Interest rate (percent

perannum)



2013 2013 2012


2013


2013 2012

Trade accounts payable

Other payables

Accrued expenses

Total

4,685

17,761

24,325

46,771

4,685

16,889

9,622

31,196

5,315

12,566

11,715

29,596

Short-term loans None 11,546 - -

Interest rate(percent

perannum)


2013


2013 2012

Long-term loans - - 894,000

Less: Current portion - - (76,000)

Long-term loans, net of current portion - - 818,000


2013


2013 2012


In October 2007, the Company entered into a loan agreement with a local bank to obtain a loan facility of Baht 1,029 million for the purpose of making payment for construction and equipment of its serviced apartment project. Interest on the loan was charged based on MLR minus 1.00 - 1.25% per annum, and the savings deposit rate plus 1% per annum for the loan principal which is secured by savings deposits. The loan was to be repaid, in installments, within 2016. The loans were secured by the mortgage of

land and construction of the serviced apartment project thereon, and the pledge of savings deposits of the Company. The loan agreement contained covenants as specified in the agreement that, among other things, require the Company to maintain debt to equity ratio according to the agreement. In October 2013, the Company repaid the loans in full, and redeemed the mortgage of the land and construction for serviced apartment project thereon, and the pledge of savings deposits.

19. Other current liabilities

20. Liabilities under finance lease agreements

A subsidiary has entered into the finance lease agreements with leasing companies for rental of computers for use in its operation, whereby it is committed to pay rental on a monthly basis. The terms of the agreements are generally 3 years.

Future minimum lease payments required under the finance lease agreements were as follows:

Advance received from customers 15,275 15,275 11,847

Other current liabilities 5,462 1,016 97

Total 20,737 16,291 11,944


2013


2013 2012




Liabilities under finance lease agreements 547 - -

Less: Deferred interest expenses (36) - -

Total 511 - -

Less: Portion due within one year (339) - -

Liabilities under finance lease agreements - net of current portion 172 - -


2013


2013 2012

2013

Future minimum lease payments 370 177 - 547

Deferred interest expenses (31) (5) - (36)

Present value of future minimum lease payments 339 172 - 511

Less than 1 year 1-5 years Over 5 years Total


21. Provision for long-term employee benefits Provision for long-term employee benefits, which is compensated upon the employees’ retirement, was as follows:

Principal actuarial assumptions at the valuation date were as follows:

Amounts of defined benefit obligation for the current and previous two periods are as follows:

Long-term employee benefit expenses included in the profit or loss were as follows:

Definedbenefitobligationatbeginningofyear 3,645 3,645 2,834

Increase from acquisition of subsidiary (Note 2.2) 2,494 - -

Current service cost 1,492 1,301 695

Interest cost 179 161 116

Benefits paid during the year (800) (800) -

Actuarial gain (1,849) (1,941) -

Provisionforlong-termemployeebenefits

atendofyear 5,161 2,366 3,645


2013


2013 2012




Current service cost 1,492 1,301 695

Interest cost 179 161 116

Total expenses recognized in profit or loss 1,671 1,462 811


2013


2013 2012

Discount rate 4.4 - 4.5 4.4 4.0

Future salary increase rate 0 - 5 0 - 3 0 - 8

Staff turnover rate (depending on age) 0 - 8 0 - 8 0 - 8


2013


2013 2012(%perannum) (%perannum)(%perannum)

Year 2013 5,161 2,366 (1,648) (1,708)

Year 2012 - 3,645 - -

Year 2011 - 2,834 - -

Consolidated financial

statements


statements


statements


statements

Defined benefit obligation Experience adjustments on the obligation

The cumulative amount of actuarial gains recognized in the other comprehensive income and taken as part of retained earnings of the Company and its subsidiaries as of 31 December 2013, amounted to Baht 1.8 million (The Company only: Baht 1.9 million 2012: Nil).


22. Long-term provision

24. Share capital On 20 August 2013, the Extraordinary General Meeting of the Company’s shareholders approved the followings: a) Decrease the registered share capital from Baht 606,900,000 to Baht 466,900,000, through the cancellation of the 140,000,000 shares, with a par value of 1 Baht each, remaining from the issuance of shares to support the exercise of the conversion rights of the convertible bonds. The Company has yet to take any action with respect to the issuance of these bonds. The Company registered the decrease of its share capital with the Ministry of Commerce on 27 August 2013. b) Increase the registered share capital from Baht 466,900,000 to Baht 1,400,700,000 through the issuance of 933,800,000 new ordinary shares, with a par value of 1 Baht each, to repay loans, to use as working capital and to fund new investment. The Company registered the increase of its share capital with the Ministry of Commerce on 28 August 2013.

c) Allocate up to 466,900,000 additionally issued ordinary shares of the Company, with a par value of 1 Baht each, to existing shareholders in a ratio of 1 new share for each 1 existing share, with a stipulated selling price of Baht 2 per share. During 30 September - 4 October 2013, 466,900,000 shares were subscribed. The Company received paid-up capital of Baht 933,800,000. The Company registered i ts additional shares with the Ministry of Commerce on 15 October 2013 and the shares were first traded on the Stock Exchange of Thailand on 18 October 2013. Consequently, there was increasing of premium on share capital from additional shares amounting to Baht 466,900,000. d) Allocate up to 466,900,000 additionally issued ordinary shares of the Company, with a par value of 1 Baht each, to support the exercise warrants for offer to the existing shareholders (PRINC-W1) at an exercise price of Baht 1.20 per share.

23. Warrants On 20 August 2013, the Extraordinary General Meeting of the Company’s shareholders approved the issuance of 466,900,000 warrants (PRINC-W1), for offer to the existing shareholders in a ratio of 1 warrant for each existing share. Details of the issuance are as follows:


ConsolidatedandseparatefinancialstatementsLitigation

As of 1 January 2013 -

Increase during the year 1,241

As of 31 December 2013 1,241

Type : Named and transferableOffering price per unit : Baht 0 Exercise ratio : 1 warrant to 1 ordinary shareExercise price : Baht 1.20 per shareExercise date : Every 3 months from the date of issuance, the first exercise date is 27 December 2013 and the final exercise date is 30 September 2016Date of issuance : 1 October 2013Maturity of warrants : 3 years from the date of issuance warrants The Stock Exchange of Thailand approved the warrants of 466,850,000 units as listed securities on 1 November 2013. During the year 2013, the warrant holders exercised their rights to purchase 20,000 ordinary shares. The Company registered the additional shares with the Ministry of Commerce on 9 January 2014, and recorded subscription received in advance from the exercise of warrants amounting to Baht 24,000 in shareholders’ equity, under the caption of “Share subscription received in advance” in the statement of financial position. There are 466,830,000 outstanding unexercised warrants of the Company as of 31 December 2013.


Reconciliation of number of ordinary shares

26. Expenses by nature Significant expenses by nature are as follows:

25. Statutory reserve Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside a statutory reserve of at least 5% of its net profit, after deducting accumulated

deficit brought forward (if any), until the reserve reaches 10% of the registered capital. The statutory reserve is not available for dividend distribution.

Consolidatedandseparate

financialstatements

Registeredsharecapital

Number of ordinary shares as of 1 January 2013 606,900,000

Decrease from approval of the Extraordinary General Meeting of

the Company’s shareholders on 20 August 2013 (140,000,000)

Increase from approval of the Extraordinary General Meeting of

the Company’s shareholders on 20 August 2013 933,800,000

Number of ordinary shares as of 31 December 2013 1,400,700,000

Issuedandpaid-upsharecapital

Number of ordinary shares as of 1 January 2013 466,900,000

Increase in share capital during the year 466,900,000

Number of ordinary shares as of 31 December 2013 933,800,000



Salary, wages and other employee benefits 67,074 55,876 55,709

Depreciation 61,962 61,636 61,477

Management fee 13,521 13,521 11,897

Amortization expenses 5,948 1,483 1,344

Rental expenses from operating lease agreements 981 794 461


2013


2013 2012


27. Income tax 27.1 Deferred tax assets/liabilities The components of deferred tax assets and deferred tax liabilities are as follows:

27.2 Income tax expenses Income tax expenses for the years ended 31 December 2013 and 2012 are made up as follows:




Deferredtaxassets Provision for long-term employee benefits 559 - -Total 559 - -Deferredtaxliabilities Revaluations of equipment to fair value 242 - -Revaluation of intangible assets to fair value 6,211 - -Unrealized gain on changes in value of unit trusts 173 173 -Total 6,626 173 -Deferred tax liabilities - net 6,067 173 -

Statementsoffinancialposition


2013


2013 2012

Currentincometax:

Currentincometaxchargedduringtheyear 4,033 - -

Deferredtax:

Relatingtooriginationandreversaloftemporarydifferences 3,623 173 -

Incometaxexpensesreportedinthestatements

ofcomprehensiveincome 7,656 173 -

Accountingprofit(loss)beforetax 6,469 (28,090) (58,461)

Applicabletaxrate 20% 20% 23%

Accountingprofit(loss)beforetaxmultipliedbyapplicabletaxrate 1,293 (5,618) (13,446)

Effectof:

Taxexemptedrevenues (48) (43) -

Non-deductibleexpenses 443 419 259

Temporarydifferencesandtaxlossesrelated

tounrecognizeddeferredtaxassets 5,968 5,415 13,187

Total 6,363 5,791 13,446

Incometaxexpensesreportedinthestatements

ofcomprehensiveincome 7,656 173 -


2013


2013


2013 2012


2013 2012


In October 2011, the cabinet passed a resolution to reduce the corporate income tax rate from 30 percent to 23 percent in 2012, and then to 20 percent from 2013. In addition, in order to comply with the resolution of the cabinet, in December 2011, the decreases in tax rates for 2012 - 2014 were enacted through a royal decree. The Company and its subsidiaries have reflected the changes in the income tax rates in their

deferred tax calculation, as presented above. As at 31 December 2013 the Company and its subsidiaries have deductible temporary differences and unused tax losses totaling Baht 27 million (2012: Baht 57 million), on which deferred tax assets have not been recognized, as the Company and its subsidiaries believe future taxable profits may not be sufficient to allow utilization of the temporary differences and unused tax losses.

The following table sets forth the computation of basic loss per share:

28. Earnings per shareBasic earnings per share are calculated by dividing profit for the year attributable to equity holders of the Company (excluding other comprehensive income) by the weighted average number of ordinary shares in issue during the year, after adjusting the number of ordinary shares in proportion to the change in the number of shares as a result of the offer for sale of the newly issued ordinary shares to existing shareholders in accordance with the resolutions of the Extraordinary General Meeting of the Company’s shareholders, held on 20 August 2013, as discussed in Note 24. The number of ordinary shares of the prior year used for the calculation, as presented for comparative purposes, has been adjusted in proportion to the change in the number of shares, as if such change had been occurred at the beginning of the earliest period reported.

Diluted earnings per share are calculated by dividing profit for the year attributable to equity holders of the Company (excluding other comprehensive income) by the weighted average number of ordinary shares in issue during the year, plus the weighted average number of ordinary shares that would need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation assumes that the conversion took place either at the beginning of the year, or on the date the potential ordinary shares were issued. However, the Company did not calculate diluted earnings per share for the year ended 31 December 2013, related to PRINC-W1 warrants, because the effect of diluted earnings per share is antidilutive because the Company operations for the year became loss.

27.3 Income tax relating to each component of other comprehensive income The amounts of income tax relating to each component of other comprehensive income for the years ended 31 December 2013 and 2012 are as follows:

Deferred tax relating to the actuarial gain or loss 18 - -


2013


2013 2012




Basiclosspershare Loss attributable to equity holders of the Company (1,188) 602,432 (0.002)


Fortheyearended31December2013

Lossfortheyear(ThousandBaht)

Weightedaveragenumberofordinary

shares(Thousandshares)

Losspershare(Baht)

BasiclosspershareLossattributabletoequityholders oftheCompany (28,263) (58,461) 602,432 489,133 (0.047) (0.120)


Fortheyearended31December

Lossfortheyear20132012

Weightedaveragenumberofordinary

shares20132012

Losspershare20132012

(Thousand Baht) (Thousand Baht) (Thousand shares) (Thousand shares) (Baht) (Baht) (Restated) (Restated)


29. Segment information Operating segment information is reported in a manner consistent with the internal reports that are regularly reviewed by the chief operating decision maker in order to make decisions about the allocation of resources to the segment and assess its performance. The Company and its subsidiaries’ business operations involve 4 segments: (1) Residential building service business (2) Office building management business (3) Implement information system service business and (4) Business consultant No operating segments have been aggregated to form the above reportable operating segments.

The chief operating decision maker monitors the operating results of the business units separately for the purpose of making decisions about resource allocation and assessing performance. Segment performance is measured based on operating profit or loss that is used to measure operating profit or loss in the financial statements. The basis of accounting for any transactions between reportable segments is consistent with that for third party transactions. The following tables present revenue and profit information regarding the Company and its subsidiaries’ operating segments for the years ended 31 December 2013, and 2012, respectively.

Geographic information The Company and its subsidiaries operate in Thailand only. As a result, all of the revenues and assets as reflected in these financial statements pertain exclusively to this geographical reportable segment.

Major customer In 2013, a subsidiary had revenue from one

major customer, in the amount of Baht 35 million, from providing software implementation services and maintenance of information systems.

(In 2012, The Company had no major customers with revenues of 10 percent or more of an entity’s revenues).

Revenue

External customers 202.2 190.2 14.0 - 68.2 - - - - - 284.4 190.2

Inter-segment revenue - - - - - - 1.5 - (1.5) - - -

Total 202.2 190.2 14.0 - 68.2 - 1.5 - (1.5) - 284.4 190.2

Interestincome 0.4 0.3 1.6 3.1 - - - - - - 2.0 3.4

Depreciationand

amortization (62.3) (61.7) (0.8) (1.1) (4.8) - - - - - (67.9) (62.8)

Interestexpenses (31.9) (40.9) (0.1) - (0.3) - - - - - (32.3) (40.9)

Segmentgain(loss) (18.0) (42.7) (0.8) (5.5) 37.4 - (2.8) - - - 15.8 (48.2)

Unallocated expenses:

Administrative expenses (9.3) (10.3)

Income tax expenses (7.7) -

Lossfortheyear (1.2) (58.5)

Additions to non-current assets other than financial instruments, deferred tax assets, and other

non-current assets 4 3 14 - 1 - - - - - 19 3

Residential building service

Business

Office building management

business

Implement infor-mation system

service businessBusiness

consultant Elimination Consolidated

2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012


30. Provident fund The Company and its employees have jointly established a provident fund in accordance with the Provident Fund Act B.E. 2530. Both employees and the Company contribute to the fund monthly, at rates of 2-5% of basic salary. The fund, which is managed by Thanachart Fund Management

Company Limited, will be paid to employees upon termination in accordance with the fund rules. During the year 2013, the Company contributed Baht 0.5 million (2012: Baht 0.5 million) to the fund.

31. Commitments and contingent liabilities

31.1 Operating lease commitments The Company and its subsidiaries have entered into several operating lease agreements with

respect to the lease of equipment, and service agreements. The terms of the agreements are generally between 1 and 4 years.

31.2 Long-term service commitments On 24 January 2007, the Company entered into management agreements with a group company of a well-known international standard hotel chain, appointing the hotel group to manage the Company’s serviced apartment. Under the conditions of the agreements, the Company is to pay remuneration to the hotel group at rates as stipulated in the agreements. The terms of the serviced apartment management agreements are 30 years, counting from commencement of operations, extendible for a further period of at least 10 years dependent upon certain conditions specified in the agreements being met. Consulting fees and expenses under the contract for the year 2013 amounting to Baht 14 million (2012: Baht 12 million).

31.3 Guarantee a) As of 31 December 2013, there was an outstanding bank guarantee of approximately Baht 10 million (2012: Nil) issued by the bank, on behalf of the Company, with respect to certain performance bonds that are required in the normal course of business.

b) As at 31 December 2013, there were outstanding bank guarantees of approximately Baht 8 million issued by banks on behalf of the subsidiary, with respect to certain performance bonds that are required in the normal course of business.

31.4 Litigations a) In 2009, the Company’s customer sued the Company for the return of payments totaling Baht 0.5 million made for a condominium unit in the Company’s project. In August 2011, the Appeals Court dismissed the case. However, the plaintiff appealed again to the Supreme Court on 24 January 2012. At present, the case is being heard by the Supreme Court. However, the management believes that there will be no material loss to the Company, and therefore no provision for contingent liability has been set aside in the accounts. b) In 2009, the Company was sued by the juristic person of Saint Louis Grand Terrace to transfer title deed servitude or pay compensation of Baht 49 million and to provide parking areas or pay compensation of Baht 106 million, including

Future minimum payments required under these operating lease contracts and relevant service agreements were as follows.

Payable:

In up to 1 year 5 3 4

In over 1 and up to 3 years 4 3 1


2013


2013 2012



payment of building maintenance compensation of Baht 4 million. The Court of First Instance dismissed the case in December 2010. In March 2011, the plaintiff lodged an appeal with the Appeals Court, and in July 2013 the Appeals Court dismissed the case in respect of the transfer title deed servitude and to provide parking areas, while ordering payment of building maintenance compensation of not more than Baht 3 million, plus interest at 7.5% per annum. In September 2013, the Company lodged an appeal with the Supreme Court, which is currently hearing the case. However, the Company has set aside provisions totaling Baht 1 million, which the Company deems appropriate, for the loss arising from these litigations.

32. Financial instruments32.1 Financial risk management The Company and its subsidiaries’ financial instruments, as defined under Thai Accounting Standard No. 107 “Financia l Instruments: Disclosure and Presentations”, principally comprise cash and cash equivalents, current investments, trade and other receivables, restricted bank deposits, bank overdrafts from bank, trade and other payables, loans, and liabilities under finance lease agreements. The financial risks associated with these financial instruments and how they are managed is described below.

Credit risk The Company and its subsidiaries are exposed to credit risk primarily with respect to trade accounts receivable. The Company and its subsidiaries manage the risk by adopting appropriate credit control policies and procedures, and therefore do not expect to incur any material financial losses. In addition, the Company and its subsidiaries do not have a high concentration of credit risk since they have a large customer base. The maximum exposure to credit risk is limited to the carrying amounts of receivables, as stated in the statement of financial position. Interest rate risk The Company and its subsidiaries’ exposure to interest rate risk relates primarily to their cash at banks, current investments, bank overdrafts from bank, borrowings with interest bearing and liabilities under finance lease agreements. Most of the Company and its subsidiaries’ financial assets and liabilities bear floating interest rates or fixed interest rates that are close to the market rate.Significant financial assets and liabilities classified by type of interest rates are summarized in the table below, with those financial assets and liabilities that carry fixed interest rates further classified, based on the maturity date, or the repricing date (if this occurs before the maturity date).


Consolidatedfinancialstatementsasat31December2013

Fixedinterestrate

Within 1-2

1year year

FloatingNon-interest

interestratebearing Total Interestrate

Financialassets


Current investments


Restricted bank deposits

Financialliabilities

Bank overdrafts from bank


Short-term loans

Liabilities under finance lease

agreements

-

10

-

1

11

-

-

-

-

-

-

-

-

-

-

-

-

-

1

1

58

-

-

-

58

14

-

-

-

14

10

314

83

-

407

-

47

12

-

59

68

324

83

1

476

14

47

12

1

74

(% per annum)

0.40 - 0.90

3.00 - 3.10

-

2.25

Note 15

-

-

8.55

Separatefinancialstatementsasat31December2013

Fixedinterestrate

(within1year)Floating

interestrate InterestrateTotalNon-interest

bearing

Financialassets


Current investments




-

10

-

10

-

-

36

-

-

36

-

-

10

314

17

341

31

31

46

324

17

387

31

31

0.40 - 0.90

3.00 - 3.10

-

-

(%perannum)

Separatefinancialstatementsasat31December2013

Fixedinterestrate

(within1year)Floating

interestrate InterestrateTotalNon-interest

bearing

Financialassets


Current investments


Restricted bank deposits



Long-term loans

27

9

-

-

36

-

-

-

17

-

-

307

324

-

894

894

1

-

8

-

9

30

-

30

45

9

8

307

369

30

894

924

0.75 - 2.75

3.50

-

0.75

-

Note 18

(%perannum)





32.2 Fair values of financial instruments Since the majority of the Company and its subsidiaries’ financial instruments are short-term in nature, or bear floating interest rates, their fair value is not expected to be materially different from the amounts presented in statements of financial position. A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, wil l ing parties, in an arm’s length transaction. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument.

33. Capital management The primary objective of the Company’s capital management is to ensure that it has appropriate capital structure in order to support its business and maximize shareholder value. As of 31 December 2013, the Group’s debt-to-equity ratio was 0.06:1 and the Company’s was 0.03:1 (2012: 0.95:1).

34. Approval of financial statements These financial statements were authorized for issue by the Company’s Board of Directors on 27 February 2014.

14 Management Discussion and Analysis: MD&A

Principal Capital Public Company Limited (“PRINC”) would like to clarify the company and its subsidiaries operating result for the period ending 31 December 2013. Please note that the comparison will be provided for company’s financial statements only since PRINC do not have 2012 consolidated statements.

Overall 2013 Operating Result

Remarks1 % Cost of Service Apartment Operations is based on Revenue from Service Apartment Operation2 % Cost of Office Building Management is based on Revenue from Office Building Management

Revenues from service apartment

operations

Revenues from office building

management

Service income

Interest income

Gain from sales of investments

Other income

Totalrevenues

Cost of service apartment opera-

tions1

Cost of office building manage-

ment2

Cost of service

Service expenses

Administrative expenses

Totalexpenses

Profit (loss) before finance cost

and income tax expenses

Finance cost

Profit(loss)beforeincometax

expenses income tax expenses

Lossfortheyear

Other comprehensive income:

Actuarial gain, net of income tax

Total comprehensive income for the year

202,205

14,000

68,167

2,044

5,589

4,454

296,460

113,839

5,165

24,552

14.149

99,981

257,687

38,773

(32,304)

6,469

(7,656)

(1,188)

1,867

679

202,205

14,000

-

2,025

5,589

4,435

228,255

113,839

5,165

-

14,149

91,224

224,378

3,878

(31,968)

(28,090)

(173)

(28,263)

1,941

(26,322)

190,187

-

-

3,374

-

2,430

195,990

114,903

-

-

13,884

84,758

213,545

(17,554)

(40,907)

(58,461)

-

(58,461)

-

(58,461)

12,019

14,000

-

(1,349)

5,589

2,006

32,255

(1,064)

5,165

-

266

6,467

10,833

21,432

8,939

30,371

(173)

30,199

1,941

32,139

6.32

100.00

-

-39.98

100.00

82.55

16.46

-0.93

100.00

-

1.91

7.63

5.07

122.09

21.85

51.66

110.00

51.66

100.00

54.98

Statementof

ComprehensiveIncome

CompanyFinancialStatementConsolidated

December2013 December2012 Increase(Decrease)% % %

FinancialStatements

December2013

88.59

6.13

-

0.89

2.45

1.94

100.00

56.30

36.89

-

6.20

39.97

98.30

1.70

-14.01

-12.13

-0.08

-12.38

0.85

-11.63

97.04

-

-

1.72

-

1,24

100.00

60.42

-

-

7.08

43.25

108.04

-8.96

-20.87

-29.83

-

-29.83

-

-29.83


Revenue For 2013, PRINC generated 228.26 MB in total revenue, increasing from last year by 32.27 MB or +16.46%. The key factors of revenue increase are from the growth in revenue from serviced apartment business, Marriott Executive Apartment Sathorn Vista (“MEA”), of 12.02 MB and the new revenue generated first time in 2013 from office building management of 14 MB and profit from security sales of 5.59 MB. In 2013, PRINC has one time income from selling of unused asset of 1.08 MB and unrealized gain from investment of 0.86 MB, both were recorded in Other Income.

The revenue increase from the MEA was the result of 9.4% growth in room rate comparing to last year, while the occupancy growth dropped from 88.1% in 2012 to 85.8% in 2013 mainly because of the political unrest during the year end, causing guests to cancel their bookings or delay their travelling to Thailand during that period. For the consolidated statements, PRINC recognized revenue of its subsidiary, Convergence Systems Company Limited (“Convergence”) in the amount of 68.17 MB, which is the revenue recognized from the acquisition date on 15 October 2013 to the end of accounting period.

Cost of Sales Cost of Service Apartment Operations in 2013 accounted for 56.3% of Revenue from Service Apartment, declining 1.07 MB or 1% from last year due to saving from contingency plan for political unrest during the end of 2013. Despite the revenue growth in 2013, MEA was able to manage the cost down, thus showing management’s capability during crisis. Cost of Office Building Management was mainly the salary of staff and general expenses required to run the building operation, which accounted for 36.89% of Revenue from Office Building Management. Cost of Service in both subsidiar ies of 24.55 MB as shown in Consolidated Statement composes of 2 parts, the salary of 9 MB and the cost of IT & software of Convergence Systems Co., Ltd.

Service Expenses and Administrative Expenses Service Expenses in 2013 were mainly MEA’s sales and marketing expense, increasing 0.27 MB or 1.91% from previous year to accommodate revenue growth. Administrative Expenses in 2013 increased 6.47 MB or 7.63% from previous year due to one-time expenses in 2013: (1) Financial Consultant fee of 4.16 MB during the capital increase process and (2) Provision for contingent liability from litigation of 1.24 MB.

Finance Cost Finance cost in 2013 was 31.97 MB, decreasing from previous year by 8.94 MB because PRINC had pre-paid its long term loan for the whole amount in October 2013.

Income Tax Expense PRINC incurred no tax expense in 2012 due to its net operating loss. In 2013, income tax expense was 0.17 MB from Deferred Tax Liability on the unrealized gain from revaluation of trading investment. Tax expense of 7.65 MB shown in consolidated statement was a result of recognizing tax liability of subsidiary in compliance with accounting standard, which comprised of (1) Actual tax charge 4.03 MB and Deferred Tax Liability relating to origination and reversal of temporary differences of 3.62 MB.

Net Profit / Loss In 2013, PRINC incurred net loss of 28.26 MB which is better than last year by 30.20 MB or reduction in loss by 51.66%. The main reason of performance improvement was due to the revenue growth from MEA and the new income from office building management and gain from security sales. On the other hand, interest expense substantially reduced due to the pre-payment of long term loan in October 2013. Consolidated statement showed net loss of 1.19 MB because PRINC has recognized revenue and profit from its subsidiaries. PRINC and its subsidiaries also recognized the actuarial gain on employee’s long term benefit of 1.87 MB and derived to a comprehensive income of 0.68 MB.


Key Financial Ratios

Remark:

RatiosforCompanyFinancialStatementarecalculatedfrom2-yearaveragefigureswhereapplicable.

RatiosforConsolidatedStatementarecalculatedfromcurrentyearfigure.

Liquidity ratio, overall, PRINC showed improvement in its liquidity due its short term investment of 324 MB in 2013, increasing 314 MB from 2012, which resulted in its current ratio increased from 0.5 in 2012 to 8.2 in 2013. Average collection period has increased from 12 days to 21 days mainly due to the accounting team of office building management unit was recently set up and accounting system was not properly implemented. Consolidated statement showed 57 days in average collection period as a result of subsidiary’s receivables were based on long term contract work. Payment period remained stable. Profitability ratios, comprising of Gross Profit Ratio, Net Profit Margin Ratio and Return on Equity Ratio, improved from 2012 due to

the growth in serviced apartment revenue, new income from office building management and gain from security sales, while the expense reduced from last year because of loan repayment in October 2013. Despite net operating loss in 2013, profitability has significantly improved from 2012.

Efficiency ratios in 2013 also showed an improved result f rom 2012 in i ts asset management, despite the negative figure.

Financial policy ratios, D/E ratio increased from 0.95 in 2012 to 0.03 in 2013 due to long-term loan repayment. Interest bearing debt ratio also showed improvement from lower interest expense in 2013 due to loan-prepayment in October 2013, when the interest expense stopped incurring for the year.

ConsolidatedFinancialStatement

December2013

CompanyFinancialStatement

December2013 December2012

LiquidityRatioCurrent ratioQuick ratioOperating cash flow ratioAccount Receivable turnoverAverage collection periodAccount Payable turnoverPayable payment period

ProfitabilityRatioGross profit ratioOperating profit margin ProfitOperating Cash Flow/Opera-tion ProfitNet profit margin ratioReturn on equity ratio(ROE)

EfficiencyRatioReturn on assets ratio (ROA)Total assets turnover ratio

Financial Policy RatioDebt to equity ratioInterest bearing debt ratio

TimeTimeTimeTimeDaysTimeDays

%%%%%

%Time

TimeTime

5.05.00.36.357

30.612

49.52.3

498.4 - 0.4 - 0.1

-0.1 0.1

0.12.2

8.28.20.3

17.121

23.815

45.0-13.0-77.3-12.4

-2.0

-1.50.1

0.031.7

0.50.50.1

29.112

23.515

39.6-30.7-17.9-29.8

-5.7

-3.00.1

0.951.3


Section 4 Details of Board of Directors, Executives,and Corparate Secretary

Details of Directors, Executives, Controlling Persons, Corporate Secretary

Dr. Pongsak

Viddayakorn, MD

Chairman

Father of

Dr. Satit

Viddayakorn

May 2013-

present

1977-2007

1991-2001

Chairman

President Board

of Directors

Board of Advisors

Deputy Chairman

Principal Capital PCL

Bangkok Dusit Medical

Services PCL

Samitivej PCL

80 - Doctor of Medicine,

Faculty of Medicine,Siriraj

Hospital, Mahidol Uni

versity DTM & H, Faculty

of Tropical Medicine,

Mahidol University

- Post graduated study,

University of Pennsylva

nia, Philadelphia, USA.

- The National Defence

College

- Director Accreditation

Program (DAP)

Name-Lastname/ Position

Age (Year)

Shareholding(%)*

Board’sFamilial

Relationship

Education/ Training Work experience of the past 5 years

Period Position Organization/Company/ Type of Business

Dr. Satit

Viddayakorn

Director, Executive

Director, CEO

71.64 Son of

Dr. Pongsak

Viddayakorn,

MD

May 2013

-present

2012

2008

Board of

Directors,

Executive

Director,

CEO

Assistant to

President

MD.


Bangkok Dusit Medical

Services PCL

Bangkok Ratchasima

Hospital Co., Ltd.

50 - Bachelor of Engineering,

Mechanical Engineering

Chulalongkorn

University

- MBA, Golden Gate

University, San Fran

cisco, USA

- Phd., Business Admin

istration, Joint Program

of Bangkok University

and University of

Nebraska-Lincoln, USA.

- Senior Executive

Program (Sasin, Gradu

ate Institute of Business

Administration of Chula

longkorn University)

- Executive Education,

Harvard Business School


Age (Year)

Shareholding(%)*

Board’sFamilial

Relationship






Age (Year)

Shareholding(%)*

Board’sFamilial

Relationship


Ms. Seerada

Tiemprasert

Director, Executive

Director

Ms.Patraporn

Jurupat

Director

Mr. Sastra

Chuntarasapt

Director

BSc, Engineering, Chiang

Mai University

- None May 2013-

Present

Jul 2010-

Present

Aug 2008-

Jul 2010

Director

Chief Advisor

-Engineering

Assistant

Chief Engineer


Sooksamosorn Co., Ltd.

RR B Private Group Co., Ltd.

-

-

None

None

May 2013 -

Present

2013 -

Present

2011-2013

2007-2010

May 2013- Present

Jan 2014- Present

Feb 2014-Present

Feb 2013-Present

Feb 2013-Sep 2013

Oct 2004-Dec 2011

Director,

Executive

Director

Executive

Director

Director

Assistant

Director

Director

Legal Advisor

Director

Director

Director

Vice President of Legal Affairs

Vice President of Legal Affairs

Director

Director

Director


Danali Smith Capital Co., Ltd.

Credit Suisse AG, Repre-

sentative Office, Thailand

Credit Suisse AG, Singapore

37

48

42

- Bachelor of Science-

Business Administration,

Babson College,

Wellesley, Massachu

setts, USA

- Master of Science-Inter

national Business,

Boston University,

Massachusetts, USA

BA, Faculty of Law,

Thammasat University

-MBA, East Texas State

University, Texas,USA.

(Master of Laws in

Business Laws (English

Program)


Work experience of the past 5 yearsName-Lastname/ Position

Age (Year)

Shareholding(%)*

Board’sFamilial

Relationship

Education/ Training

Work experience of the past 5 yearsName-Lastname/ Position

Age (Year)

Shareholding(%)*

Board’sFamilial

Relationship

Education/ Training


Feedback 180 Co., Ltd.

The Juris Co., Ltd.

V Residence Co., Ltd.

V Intelligence Co., Ltd.

Millennium Microtech Co., Ltd.

Millennium Microtech Holding (Thailand) Co., Ltd.

Millennium Microtech Holding (Thailand) Co., Ltd.Millennium Microtech Holding (Shanghai) Co., Ltd.Millennium Microtech Holding (USA) Co., Ltd.


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