The Company conducts business in conformity with “The Principles of Good Corporate Governance, published in 2006”, as set out by the Stock Exchange of Thailand. By doing so, the Company demonstrates its commitment to standards and conducts in building confidence of the shareholders, investors and other related entities or persons. The Audit Committee, through internal audit department, supervises financial statements, internal control, and practices of good corporate governance to ensure compliance to policies. The Company has also enacted a Code of Ethics to which all executives and employees are expected to adhere to in conducting business. The Company has set up a Nomination and Remuneration committee to oversee the process of directors’ nomination and to recommend fair and reasonable annual remuneration for the Board, the subcommittees and the top executives. To ensure efficient and productive business operations a Strategic Committee has been established to propose the Company’s strategic plan to the Board of Directors.

The Company has taken steps in other areas as well, in an effort to be accepted by its stakeholders and other related entities, as having good corporate governance as called for by the Stock Exchange of Thailand.

1. Rights of Shareholders

The Company considers each shareholder as an equal and stipulates procedures for the meeting according to the law and in compliance with guidelines of the Stock Exchange of Thailand.

In 2011 the Company held one annual shareholder’s meeting on 27 April 2011 at the Winsor Suites Hotel, Bangkok. An invitation letter with agenda of the meeting and related documents were sent to the shareholders 7 days prior to the meeting. Topics on the agenda included the opinion of the Board of Directors and minutes of the last meeting in order to allow shareholders ample time and opportunity to review and consider the topics. The Company made every effort to accommodate shareholders by arranging the meeting in a convenient location with an appropriately sized meeting space and permitted shareholder proxies in the event they were unable to attend. The Company has also posted the information regarding shareholders meetings on the Company’s website and shareholders could send questions related to the Company operations through the website prior to the meeting date.

During the 2011 annual shareholders’ meeting, a total of 9 directors attended, including the Chairman of the Audit Committee. The Chairman of the meeting allowed equal opportunity for all shareholders to question, comment or give suggestions regarding conduct of company operations. Notable inquiries and opinions were recorded in the minutes of the meeting.

In addition to the annual shareholders’ meeting, the Company will call additional shareholders’ meetings, if necessary, in the event that specific emergency agenda topics, which are vital to the shareholders’ interests or relate to by-laws or regulations that require the shareholders’ approval.

2. Equitable Treatment of Shareholders

The Company considers each shareholder as an equal and stipulates procedures for the meeting according to the law and in compliance with guidelines of the Stock Exchange of Thailand. Each shareholder shall have one vote for each share. Shareholders can send in their proxies in the event that they are unable to attend.

To protect against conflict of interest and use of inside information for personal gain, the Board of Directors investigates any instance which may lead to a dispute and has established a policy and guidelines to prevent executives and related persons from using internal company information for personal gains. Summary of company holdings by directors and executives is reviewed to monitor any use of inside information for gains by executives.

For the case of related parties transaction, the Company has disclosed all the necessary information together with Directors’ opinion to the public according to SET regulation.

The Company has established a channel (through company’s website) to allow shareholders to submit names of qualified candidates to be nominated as board members and to propose an agenda for and in advance of the annual general shareholders’ meeting.

3. Role of Stakeholders

The Company places much significance upon the rights of every group of stakeholders, particularly the society, its shareholders, customers and employees.

Commitment to Customers & Suppliers

PDI commits to provide, on time and at a reasonable price, products and services meeting the standards required by customers. The Company also has established technical service department to assist our customers. The Company will act fairly in all business dealings and in compliance with applicable laws and regulations.

Commitment to Shareholders

The Company respects the right of our major and minor shareholders equally. PDI commits to profitable and secure operations yielding an attractive long-term return for the benefit of our shareholders.

Commitment to Employees

The Company is committed to providing attractive and fair compensation. Human resources management has been applied along with the support for self-learning and development. The Company realizes that human resources development is vital in increasing capability and skills of the employees. The Company focuses mainly on providing technical knowledge in the areas of each individual’s responsibility and consistent self-development. In the previous year, on-the-job trainings, supervised by the supervisor of each individual unit, were provided and observation trips abroad were also offered. Additionally, the Company’s has introduced the Competency Model as a tool to consistently develop their employees and manage career advancement. In 2012, the Company will develop its employees, especially the management level, in accordance to the guideline of its Core Training Roadmap and Competency Model. Apart from this, there are plans to improve the salary structure so as to be able to compete with industry and in compliance with skilled labour standards and minimum wages mandate which will come into effect in the beginning of 2012.

In 2011, the Company provided increased welfare and assistance to employees and their families to improve their quality of life, including offering more scholarships for employees’ outstanding children, improving financial assistance for medical expenses, helping out employees and their families affected by the floods, as well as providing employee’s choice of provident fund.

The Company places the highest importance on workplace safety. Accordingly, the Company has implemented a more efficient occupational health and safety management system and at the same time promote as well as instilled safety consciousness amongst all parties by implementing the following measures:

• Review risk assessment of major activities and monitor health and safety in the work place on a regular basis;
• Inspect emergency equipment and conduct annual fire escape drills;
• Campaign and promote safety in the work place according to the OHSAS 18001/ TIS 18001 Occupational Health and Safety Management System;
• Holding annual health check-ups to monitor and prevent health threatening issues and to encourage good health and safety of all employees;
• Provide training to encourage employees and contractors to be more health and safety conscious.

Commitment to the Community (Local and National)

Over the past three decades, Padaeng Industry has demonstrated a strong commitment to operate its business under good corporate governance with responsibility to society, the environment and the surrounding communities. The Company has implemented several activities to improve the quality of life and encouraged the participation from the surrounding communities. In 2011, the Company distributed more than 10 million Baht in the following projects:

Education: The Company has sponsored more than 600 scholarships at all education levels to underprivileged students with outstanding grade and behavior in Tak province. Donations have also been made for school uniforms and equipment such as satellite dishes and computers with high-speed internet. School buses transportation and lunches project were also provided.

Environment: At Mae Sod mine the Company planted vetiver grass to preserve soils and waters according to His Majesty the King’s initiative. The mine organized this vetiver grass planting in collaboration with government agencies, local communities and schools with more than 1,000 participants joined the activities each year. The mine also support and participate with tree-planting of the communities. Open House activities were held giving an opportunity for more than 2,000 community leaders, villagers, teachers and students to witness the Company’s zinc ore production process and environmental management system.

Health: The Company donated medical equipments to the hospitals and public health centres in Tak province such as defibrillators to the King Taksin Maharaj hospital.

Religion and Culture: The Company donated funds to help restore and renovate religious sites and to participate in various religious and merit making ceremonies.

Community Work: The Company encourages its employees to volunteer in community development projects. The Company also supported and participated in other charity activities such as disaster relief for droughts, relief bags and drinking water donations during the floods and warm clothing and blankets donation during the cold seasons.

Building Community Networks to Promote Knowledge and Job Creation: The Company has worked with various agencies to improve the quality of life for people in the surrounding communities by supporting programmes to promote knowledge amongst sugarcane farmers in the Mae Tao and Mae Ku basins in order to improve their production yield and generate sustainable income. The Company also provided vocational training to villagers and youths of Pa Dae village of Mae Sod district in Tak province to make handicrafts to help them earn additional income.

Since 2007, the Company has collaborated with the Padaeng Quality of Life Development Foundation to carry out some Corporate Social Responsibility (CSR) programmes in order to help improve the quality of life for villagers in rural areas and remote villages. In 2011, the Padaeng Foundation has continued the following programmes:

• The 60th Coronation Anniversary Health and Social Welfare Fund: This programme has been designed for three sub districts of Mae Sod district and has continued for more than five years. In 2011, the membership increased from 2,888 to 3,479. The Padaeng Foundation contributed 180,000 Baht to the Fund in 2011. The Padaeng Foundation also provided observation trips to learn from the experience of other Funds such as Baan Don Chai Fund in Lampang province and arranged workshops in order to exchange and brainstorm ideas to better improve and maximize the effectiveness of the Fund.

• Helping out the Underprivileged, Disabled and the Elderly: The Padaeng Foundation jointly arranged healthcare activities with the Funds and local health centres in the three sub-districts surrounding the mine. These activities covered house visits, mobile healthcare, providing physical therapy equipment and meditation programmes for the elderly.

• Education and Research Support: In 2011, the Padaeng Foundation supported a follow-up programme of Mae Sod hospital for the treatment of patients with high levels of cadmium in sub districts of Mae Tao, Phratad Padaeng and Mae Ku.

4. Disclosure and Transparency

It is the Company’s philosophy to conduct business with honesty, righteousness and ethics, with responsibility towards all stakeholders, namely, customers, shareholders, employees, society. The Company has issued a Code of Ethics, which gives guidelines for work and employee conduct. All employees are to use this manual as a reference for carrying out duties according to the mission of the Company. The new Code of Ethics has been put in effect since 2008.

The Company ensures that important information, both financial and non-financial, as specified in relevant regulations through the channel of the SET is disclosed correctly, accurately, on a timely basis and transparently. In addition the financial report, the annual statement (Form 56-1) and the annual report are available on the Company’s website.

The Board of Directors has also called for the disclosure of company information in an accurate, complete, transparent and widespread manner. As such financial information as well as general information about the Company, which might impact the value of company stock, is readily available. Shareholders and other interested parties may locate any such information through the various the Stock Exchange of Thailand media outlets or from the Company’s website. A specific investor relations function has been established and existing and potential investors can obtain information by contacting the Company directly at Tel: 02-695 9499 or at www.padaeng.com or e-mail inquiries to the Investor Relation Manager at woratipr@padaeng.co.th.

The Company also recognizes the importance of internal control systems on both management and operational levels and has created an authority manual as the definitive reference. An independent internal audit department, reporting directly to the Audit Committee, works as an internal checks and balances and conducts audits as needed.

5. Responsibilities of the Board

The Company’s Board of Directors is responsible for acting in compliance with by-laws, objectives and guidelines of the Company and resolutions of the shareholders’ meeting, with honesty and prudence in the best interests of the Company. In addition Board of Directors has played a part in establishing the vision, mission, strategy, objectives, the business plans and budget of the Company with effectiveness and efficiency. Also the Board ensures that the management team conducts operations in accordance with the Company’s business plan, to add value to its business and ensure maximum stability for its shareholders.

The Board of Directors is of the opinion that the Company maintains adequate internal controls and can reasonably show credibility towards its financial statements as of 31 December, 2011.

Balance of Power for Non-Executive Directors

The Company’s Board of Directors consists of qualified directors with a broad realm of experience, totalling 10 members at the end of 2011 as follows:

Aggregation or Segregation of Positions

The position of the Chairman of the Board of Directors and position of MD are kept separate as to ensure a clear distinction between responsibilities, that of policy making and that of day to day operations respectively. The Company has clearly defined the authority and responsibilities of management at every level.

Remunerations for Directors and Management

Remuneration for Directors - Remuneration for Company directors has been determined in a clear manner and is comparable to that of similar companies in the industry. The amount of remuneration has been approved by shareholders. Directors who have been selected to sit on the Audit Committee, the Strategic Committee and the Nomination and Remuneration Committee receive additional remuneration reflective of the additional work responsibility.

Remuneration for Top Executives - Remuneration for top executives has been determined in accordance with the principles and policy set by the Board of Directors and corresponds with overall company performance and that of each individual executive.

Remuneration for the Board, subcommittees and top executives is reviewed by the Nomination and Remuneration Committee before submitting to the Board.

Remuneration for Executives consists of:

1. In the Form of Cash

a) In the year 2011 the Company paid a total of 2,884,835.16 Baht to Directors, 4 Strategic Committee Members, 3 Audit Committee Members and 4 Nomination and Remuneration Committee Members as director’s fees and director’s remuneration, detail as follows:

Note:

1) Director Bonus will be proposed to the 2012 Shareholders’ Meeting for approval.
2) Executive Director’s bonus are included in b) the Company bonus paid to the executives.
3) No remuneration payment for the executive directors.

b) The Company paid a total of 41,657,000 Baht to the 5 executives in the year 2011, as salaries and bonuses.

2. In Other Forms:
The Company contributed to employees’ provident fund savings, as a percentage of salary and period of time enrolled in the fund, ranging from 5 to 10%.

Meetings of the Board of Directors

The Board of Directors has regular meetings held every 3 months and may call additional special meetings as needed. Clear agenda topics and agenda minutes of the meetings are prepared in advance of each meeting and the Company Secretary sends out an invitation letter and relevant documents to Board members prior to the meeting, so as to allow sufficient time for review. During 2011, the Board of Directors met 5 times with records of attendance as follows:

Remark

1. Mr. Madhu Koneru resigned from the Director on 27 April 2011.
2. Mr. André van der Heyden resigned from Managing Director on 13 December 2011

Board Self Assessment
The Board has conducted self assessment yearly to allow all members of the Board to consider the Board’s performance and solve any problems they may have.

Subcommittees
The Board of Directors has established the Audit Committee, made up of independent directors, to supervise and be responsible for the integrity of the financial statements and internal control system. The opinions of the Audit Committee are written in the annual report. In addition the Company set up the Strategic Committee and the Nomination & Remuneration Committee to help in supervising company operations.

Padaeng Industry Public Company Limited has 4 sets of committees.

1) Board of Directors
The duties and responsibilities of the Company’s Board of Directors are as follows:

1. Manage company operations according to the law, rules and regulations, mission of the Company and resolutions of the Company shareholders
2. Determine the amount of dividend to be paid to shareholders
3. Determine the amount of compensation or bonus to be awarded to officers or employees or other staff working for the Company (permanent or temporary employees), not including pension benefits or other remuneration paid to directors
4. Review the Company’s strategic work plan and assessment of operations as submitted by the Strategic Committee

In carrying out its duties and responsibilities, the Board of Directors may assign the Managing Director, any or several directors or any other person(s) to take action on its behalf.

The Company’s Board of Directors consists of 10 members as follows:

The Definition of Independent Director
1. Holding shares not more than 5% of the paid-up capital of the Company, affiliated company, associated company or related company, which shall be inclusive of the shares held by related persons.
2. Being a director who does not take part in the management of the Company, affiliated company, associated company, related company or majority shareholder of the Company. Not being an employee, staff member or advisor who receives a regular salary from the Company, affiliated company, associated company, related company or majority shareholder of the Company.
3. Being a director who has no direct or indirect benefit or interest in finance and management of the Company, affiliated company, associated company or majority shareholder of the Company.
Being a director who has no benefit or interest of the said nature during the period of 1 year before his appointment as a director except where the Board of Directors has carefully considered that such previous benefit or interest does not affect the performance of duties and the giving of independent opinions.
4. Being a director who is not a related person or close relative of any management member or majority shareholder of the Company.
5. Being a director whom is not appointed as a representative to safeguard the interests of the Company’s directors, majority shareholders of the Company who are related to the Company’s majority shareholders.
6. Being capable of performing duties, giving opinions or reporting the results of performance of work according to the duties delegated by the Board of Directors free and clear of the management or the majority shareholders of the Company including related persons or close relatives of the said persons.

Authorized Directors
The authorized directors consist of Mr. Arsa Sarasin, Mr. Vinij Ongnegnun and Mr. Vinai Vamvanuj, two among three persons affix their signatures and seal of the Company.

2) Audit Committee
The Audit Committee has been established on 22 December 1998 and at present consists of 3 directors as follows:

Mr. Vinai Vamvanij, Chairman of the Audit Committee, who has knowledge and experience reviewing financial statements of the Company. His backgrounds on financial statements reviews are as follows:

In 2011 the committee met quarterly. In addition there were the non-management meetings among the committee and the auditors and reported to the Board of Directors.

The Audit Committee’s scope of authority is as follows:
1. The Audit Committee shall have the authority to request any information it sees relevant to its activities from the director or any managers of the Company.
2. The Audit Committee may seek independent professional advice as it considers necessary.
3. The Audit Committee will have no executive powers with regard to its findings and recommendations.

3) Strategic Committee
The Strategic Committee has been established on 13 July 2000 and at present consists of 4 members as follows:

Remark
1. Mr. Madhu Koneru has resigned from the Director and the Member of the Strategic Committee on 27 April 2011.
2. Mr. André van der Heyden has resigned from the Managing Director and the Member of the Strategic Committee on 13 December 2011

In 2011 the committee does not have the meetings.
The Strategic Committee is responsible for preparing and providing the Company’s strategic work plan and assessment for consideration by the Board of Directors, as well as giving recommendations to the Board of Directors. All matters regarding strategy and planning should be channeled through the Strategic Committee for presentation and/or recommendation to the Board of Directors for consideration. Moreover, the Strategic Committee acts as an advisor to the Board of Directors, but does not have decision-making authority.

4) Nomination and Remuneration Committee
The Nomination and Remuneration Committee has been established on 25 February 2005 and at present consists of 4 members as follows:

In 2011 the committee held 2 meetings and reported to the Board of Directors.

The Nomination and Remuneration Committee is responsible for
1. To recommend new nominees to the Board to fill positions made vacant by directors who complete their terms or resign.
2. To review for the Board the succession plan of the Company’s top executives.
3. To recommend fair and reasonable annual remuneration for the Board, the subcommittees and the top executives.

The Company Secretary

The Board, in the Board meeting No. 04-2551 on 13th May 2008, appointed Mr. Surin Tanticharoenkiat as the Company secretary responsible for organizing the meetings of the Board and of the shareholders. The Company secretary is also in charge of preparing the minutes of the Board’s meetings and the minutes of shareholders’ meetings as well as filing documents as stipulated by law.