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CONTENTS

1.

Vision, Mission, Quality Policy and Safety Policy

1

2.

Financial Highlights

2

3.

Message from the Chairman of the Board of Directors

4

4.

The Board of Directors

6

5.

Management Team

12

6.

General Information

14

7.

Nature of Business

17

8.

Risk Factors

29

9.

Capital Structure

32

10.

Management Structure

34

11.

Route Map of the M.R.T. Chaloem Ratchamongkhon Line Project

56

12.

Related Party Transactions

57

13.

Financial Condition and Results of Operations

71

14.

Significant Activities in the Year 2005

88

15.

Report on Responsibilities of the Board of Directors towards the Financial Report

92

16.

Audit Committee’s Report

93

17.

Financial Statements 17.1 Report and Financial Statements For the years ended 31 December 2005 and 31 December 2004

95

17.2 Report and Interim Financial Statements For the Three-Month and Six-Month Periods 30 June 2005 and 2004

130


Annual Report 2005

1. Vision, Mission, Quality Policy and Safety Policy Company’s Vision To be one of the world leading mass rapid transit operators with high quality of service.

Company’s Mission We will provide mass transit services to the public with a safe, convenient, fast, reliable and punctual metro system to alleviate traffic congestion, maintain the environment and improve quality of life.

Quality Policy The Company is committed to improving the quality of service as part of our goal to become one of the world’s leading mass rapid transit operators. To succeed in the said vision, the Company pledges to develop and implement quality management system in order to: 1. Provide rail mass rapid transit service that satisfies customer’s expectations with safe, convenient, fast, reliable and punctual metro system; 2. Continually improve quality of service and business performance; and 3. Encourage employees to have the knowledge, competency and commitment to their jobs needed to provide safety and quality service. The satisfaction of customers is essential for our business. Our entire staff is committed to improving quality so that we can better serve our customers and enhance our overall performance.

Safety Policy Safety is the heart of our mass transit railway service. To ensure the safety of our passengers, our contractors, and our own personnel, we are committed to making continuous improvements in our safety management system in order to: 1. Keep all possible risks associated with the operation of the railway system as low as reasonably practicable; 2. Ensure that all preventive and corrective measures designed to minimize such risks are implemented efficiently and effectively; and 3. Raise safety knowledge and safety awareness among all those involved. Safety is everyone’s responsibility. It is imperative that all our employees do everything they can to maintain the highest standards of safety for the sake of our passengers, our contractors and our own personnel.

1


Annual Report 2005

2. Financial Highlights Consolidated Financial Statements Bangkok Metro Public Company Limited and Its Subsidiaries (Unit: Baht Million) As at 31 December or for the years ended

2005

2004

2003

Total Assets

19,732

19,306

16,140

Total Liabilities

14,314

12,585

9,898

Total Shareholders’ Equity

5,417

6,721

6,242

Shareholders’ Equity (excluding minority interest)

5,411

6,699

6,242

990

443

-

Total Revenues

1,046

446

3

Net Profit (Loss)

(1,716)

(957)

(72)

(0.23)

(0.14)

(0.02)

0.74

0.92

0.97

7,347.12

7,030.49

4,791.13

7,350.00

7,250.00

6,404.84

Net Profit Margin (%)

(164)

(215)

(2,145)

Debt to Equity Ratio (times)

2.64

1.87

1.59

1.84

1.84

1.59

928

872

679

31 December

Fare Revenue

/1

Net Profit (Loss) per share /2 (Baht) /3

Book Value per share (Baht) Weighted average number of ordinary shares

/2

(million shares) Number of ordinary shares at the end of period /2 (million shares)

Debt to Equity Ratio (times) /4 Number of Employees at the end of period

/5

(persons) Notes:

/1

/2 /3 /4

/5

The Company started to generate fare revenue from the official commencement for service on July 3, 2004; Adjusted to Baht 1.00 per share for comparison; Calculated by excluding the minority interest; Debt to Equity Ratio calculated pursuant to the conditions in the Onshore Facilities Agreement, based on the figures from the Company’s unconsolidated financial statements by using total liabilities and contingent liabilities net of the sponsor support: subordinated loan divided by the total of paid-up capital, share premium, retained earnings (loss), reserves and sponsor support subordinated loan, but excluding the any amounts attributable to revaluation of assets; For the Company only, excluding the Subsidiaries.

2


Annual Report 2005

Average Number of Passengers Per Day January - December 2005

Passengers Per Day 250,000

Jan.7 - Jun.4 Baht 10 for First 3 Stations and Baht 15 for 4 Stations or above 200,000

Jun.5 - Sep.30 Fare Discount of 20 % for Stored Value Cards (Baht 10 - 25) 15 % for Token (Baht 12 - 31)

Oct.1, 2005 - Jul.2,2006 Fare Discount of 15% for Stored Value Cards (Baht 12 -31) Baht 14 - 36 for Token

150,000

100,000

50,000

Jan.05

Feb.05

Mar.05

Apr.05

May 05

Jun. 05

Jul.05

Aug.05

Sep.05

Oct.05

Nov.05

Dec.05

7 - Day Average

145,218

147,783

173,494

154,078

173,143

168,175

160,098

167,584

170,428

168,830

168,501

153,437

Weekdays

164,426

158,341

178,114

180,107

187,417

180,692

180,091

184,895

186,342

182,766

181,005

174,863

Weekends & Holidays

120,522

125,495

160,211

120,040

147,190

133,754

123,746

125,268

126,663

143,494

134,118

119,512

Average Revenue Per Day January - December 2005

Revenue (Baht/ Day) 4,000,000

3,500,000

Jan.7 - Jun.4 Baht 10 for First 3 Stations and Baht 15 for 4 Stations or above

3,000,000

2,500,000

Jun.5 - Sep.30 Fare Discount of 20 % for Stored Value Cards (Baht 10 -25) 15 % for Token (Baht 12 - 31)

2,000,000

1,500,000

Oct.1, 2005 - Jul.2,2006 Fare Discount of 15 % for Stored Value Cards (Baht 12 -31) Baht 14 - 36 for Token

1,000,000

Jan.05

Feb.05

Mar.05

Apr.05

May 05

Jun. 05

Jul.05

Aug.05

Sep.05

Oct.05

Nov.05

Dec.05

7 - Day Average

2,169,241

1,961,753

2,308,859

2,051,930

2,265,305

2,890,712

2,898,075

2,986,573

3,026,156

3,614,496

3,530,996

3,200,880

Weekdays

2,453,747

2,097,542

2,371,450

2,398,493

2,457,534

3,070,136

3,204,001

3,245,434

3,266,844

3,859,018

3,750,376

3,648,700

Weekends & Holidays

1,803,448

1,675,086

2,128,910

1,598,732

1,915,799

2,397,296

2,341,846

2,353,803

2,364,264

3,169,911

2,923,719

2,491,830

3


Annual Report 2005

3. Message from the Chairman of the Board of Directors The overall Thai economic condition in the year 2005 has slowed down from the year 2004, in both supply and demand, due to the impact of natural peril, a substantial increase in oil prices and the rise of interest rates, as well as an increase in inflation rate during the second half of the year due to the floating prices of oil and goods in the category of fresh food. However, the net capital inflow and international reserve status rose and remained stable, and the unemployment rate was low. The Company was granted a concession by the Mass Rapid Transit Authority of Thailand to develop the M.R.T. Chaloem Ratchamongkhon Line Project (Hua Lamphong – Bang Sue) in respect of investment in the M&E Equipment, operation and maintenance of the system for a period of 25 years. Since 3 July 2004 until the present time, the Company has commenced the operation for approximately more than one year. The M.R.T. Project not only plays a supporting role to raise the quality of life of people in Bangkok, but also helps conserve the energy consumption for the country. Furthermore, the Company is still committed to continuously improving the quality of its service provision. In the year 2005, the Company achieved the goal in the quality management system by obtaining the international standard certification of ISO 9001:2000 as audited and evaluated by RWTuW (TUV NORD) on 9 September 2005. In addition, the Company introduced its new services relating to the commercial development, such as, opening retail shops in two stations, namely, Sukhumvit Station and Phahon Yothin Station in September and December, respectively; rendering services of advertising media in the stations and the trains; and providing automatic teller machine services in all 18 stations. All of such services are aimed at promoting the quality of the service provision for the benefits of passengers and also enhancing the Company’s revenue. Over the past one year, Thai people have become more familiar with the use of the metro service, as evidenced by the average number of passengers per day, which increased from 147,458 passengers per day in the year 2004 to 163,403 passengers per day in the year 2005, or at an average of 151,255 passengers per working day in the year 2004 increasing to 179,145 passengers per working day in the year 2005, representing growth rates of 10.8 percent and 18.4 percent, respectively. The Company’s revenue from such provision of service also increased from Baht 443 million in the year 2004 to Baht 990 million as a result of an increase in the number of passengers and days of the provision of service for one full year. Furthermore, in this year, the Company has earned additional revenue from commercial development amounting to Baht 53 million. It is expected that in the future, the development of the areas along the metro routes, including the public sector’s expansion of the mass transit railway system will be a factor driving a continued increase in the Company’s revenue.

4


Annual Report 2005

In the year 2005, the Company has made several preparations for listing on the Stock Exchange of Thailand, such as, increasing its registered capital from Baht 7,350 million to Baht 11,950 million to accommodate the MRTA’s purchase of shares in the amount of Baht 2,987.50 million, or representing 25 percent of the registered capital, in accordance with the conditions of the Concession Agreement, and to accommodate the pubic offering of shares for capital increase. In this regard, the Company has already submitted an application form and filing documents for securities offering to the Office of the Securities and Exchange Commission on 5 July 2005, and offered such shares for capital increase to its directors, executives and staff in December 2005. The Company currently has the paid-up registered capital in the amount of Baht 7,646.69 million. In the year 2006, the Company targets to be listed on the Stock Exchange of Thailand so as to accommodate the expansion and the capability development for the provision of service in the future through investment in rolling stocks and the M&E Equipment to facilitate the provision of service and accommodate the increased number of passengers in the future as well as strengthen its financial stability to ensure the long-term growth. As the Chairman of the Board of Directors of the Company, I would like to take this opportunity to express my gratitude to all shareholders, the M.R.T. commuters, the MRTA, relevant government agencies and private entities as well as financial institutions, which have been providing great support to the Company’s operation, and all the Company’s staff who have been contributing and dedicating full knowledge and capability to the Company’s operation, and we look forward to your continued support.

(Mr. Plew Trivisvavet) Chairman of the Board of Directors

5


Annual Report 2005

4. The Board of Directors As at 31 December 2005, the Board of Directors is as follows:

Mr. Plew Trivisvavet Chairman of the Board of Directors Chairman of the Executive Committee Nomination and Remuneration Committee Member Age: 60 years Education: -

M.Sc. (Electrical Engineering), Osaka University, Japan

-

Director Certification Program (DCP), 50/2004, Thai Institute of Directors Association

Work Experience: 1994 – Present

Chairman of the Executive Board and Chief Executive Officer, CH. Karnchang Public Company Limited

2002 – Present

Director and Chairman of the Executive Board, Bangkok Expressway Public Company Limited

General Chetta Thanajaro Director Chairman of the Audit Committee Chairman of the Nomination and Remuneration Committee Age: 67 years Education: -

Master of Arts (Political Science), Ramkhamhaeng University

-

Director Certification Program (DCP), 33/2003

-

Directors Accreditation Program (DAP), 1/2003

-

Finance for Non-Finance Director Program, 2003, Thai Institute of Directors Association

Work Experience: 1996 – Present

President Advisor, The Royal Development Project

6


Annual Report 2005

Mr. Vitoon Tejatussanasoontorn Director Audit Committee Member Nomination and Remuneration Committee Member Age: 65 years Education: -

Bachelor of Commerce, Thammasat University

-

Director Certification Program (DCP), 2/2000, Thai Institute of Directors Association

Work Experience: 1999 – Present

Director, Chairman of the Audit Committee and Remuneration Committee Member, CH. Karnchang Public Company Limited

1991 – Present

Senior Executive Vice President, Thai Asahi Glass Public Company Limited

Lieutenant General Surat Sumrith Director Audit Committee Member Age: 56 years Education: -

Military Science (Special Class), Chulachomklao Royal Military Academy

-

Directors Accreditation Program (DAP), 40/2005, Thai Institute of Directors Association

Work Experience: 2004 – Present

Special Expert, Office of the Permanent Secretary for Defence

7


Annual Report 2005

Mr. Supong Chayutsahakij Director Executive Director Chairman of the Risk Management Committee Age: 64 years Education: -

Master of Management, Sasin Graduate Institute of Business Administration of Chulalongkorn University

-

Master of Engineering (Electrical), University of Tokyo, Japan

-

Director Certification Program (DCP), 8/2001, Thai Institute of Directors Association

Work Experience: 2003 – Present

Director and Vice Chairman of the Executive Board, Bangkok Expressway Public Company Limited

1994 – 2003

Managing Director, Bangkok Expressway Public Company Limited

Mr. Somchai Sirilertpanich Director Age: 43 years Education: -

MBA Operation Management, University of Scranton, Pennsylvania, U.S.A.

-

Directors Accreditation Program (DAP), 1/2003, Thai Institute of Directors Association

Work Experience: 2004 – Present

Vice Chairman of the Board and Managing Director, Syntec Construction Public Company Limited

2000 – 2004

Assistant Chief Executive Officer, Syntec Construction Public Company Limited

8


Annual Report 2005

Mrs. Vallapa Assakul Director Age: 55 years Education: -

Master of Economics, University of Detroit, U.S.A.

-

Directors Accreditation Program (DAP), 37/2005, Thai Institute of Directors Association

Work Experience: 2004 – Present

Vice Chief Executive Officer, TMB Bank Public Company Limited

1995 – 2004

Assistant Chief Executive Officer, TMB Bank Public Company Limited

Mrs. Nongnutch Thienpaitoon Director Age: 55 years Education: -

Master of Business Administration (Honors), Roosevelt University, U.S.A.

-

Directors Accreditation Program (DAP), 41/2005, Thai Institute of Directors Association

Work Experience: 2005 – Present

First Executive Vice President, Corporate Banking Group, Krung Thai Bank Public Company Limited

2003 – 2005

First Executive Vice President, Executive President of the Corporate Credit Group in the Metropolitan and Eastern Region Credit Area, and Acting Executive President of the Corporate Credit Group in the Metropolitan and Upper Southern Region Credit Area, Krung Thai Bank Public Company Limited

9


Annual Report 2005

Dr. Sombat Kitjalaksana Director Executive Director Risk Management Committee Member Managing Director Age: 48 years Education: -

Ph.D. of Engineering (Civil), University of Innsbruck, Austria

-

Directors Accreditation Program (DAP), 36/2005, Thai Institute of Directors Association

Work Experience: 2000 – Present

Managing Director, Bangkok Metro Public Company Limited

Mr. Ronnachit Yaemsaard Director Age: 45 years Education: -

Master of Comparative Jurisprudence, Howard University, Washington D.C., U.S.A.

-

Directors Accreditation Program (DAP), 35/2005, Thai Institute of Directors Association

Work Experience: 2003 – Present

Deputy Governor, Mass Rapid Transit Authority of Thailand

2000 – 2003

Assistant Governor, Mass Rapid Transit Authority of Thailand

10


Annual Report 2005

Mr. Anukool Tuntimas Director Executive Director Age: 38 years Education: -

Master of Business Administration, Kasetsart University

-

Director Certification Program (DCP), 43/2004, Thai Institute of Directors Association

Work Experience: 2001 – Present

Executive Vice President of Human Resource and General Administration Department, CH. Karnchang Public Company Limited

2004 – Present

Director and Vice President Academic Affairs, Lawyers’ Association of Thailand

11


Annual Report 2005

5. Management Team As at 31 December 2005, the management team is as follows:

Dr. Sombat Kitjalaksana Managing Director Acting Marketing & Commercial Development Director Age: 48 years Education: -

Ph.D. of Engineering (Civil), University of Innsbruck, Austria

-

Directors Accreditation Program (DAP), 36/2005, Thai Institute of Directors Association

Work Experience: 2000 – Present

Managing Director, Bangkok Metro Public Company Limited

Mr. Witoon Hatairatana Operations Director Age: 48 years Education: -

Master of Science (Business Administration), California University of Pennsylvania, U.S.A.

Work Experience: 2004 – Present

Operations Director, Bangkok Metro Public Company Limited

2002 – 2004

Traffic Manager, Bangkok Metro Public Company Limited

12


Annual Report 2005

Miss Pornpimol Chirtchoochai Accounting and Finance Director Age: 40 years Education: -

Master of Accounting, Thammasat University

Work Experience: 2000 – Present

Accounting and Finance Director, Bangkok Metro Public Company Limited

Miss Sattabusya Mekvichai Human Resources and Administration Director Age: 51 years Education: -

Master of Public Administration, Pennsylvania State University, U.S.A.

Work Experience: 2005 – Present

Human Resources and Administration Director, Bangkok Metro Public Company Limited

2002 – 2005

Advisor to the Managing Director, Bangkok Metro Public Company Limited

13


Annual Report 2005

6. General Information 6.1 Company Profile Bangkok Metro Public Company Limited

Company Registration No.

: 0107547000451 (previously 0107574700459)

Head Office

: Administration Building, Rama IX Road, Huaykhwang Subdistrict, Huaykhwang District, Bangkok 10310 Tel.

: 66 (0) 2354 2000

Fax

: 66 (0) 2354 2040

Customer Relations Center : 66 (0) 2624 5200 : E-mail : CRC@bangkokmetro.co.th Investor Relations

: 66 (0) 2354 2000 Ext. 3733 - 3735 : E-mail : IR@bangkokmetro.co.th

Registered Office

: 587 Soi Inthamara 37, Sutthisarnvinitchai Road, Din Daeng Subdistrict, Din Daeng District, Bangkok 10320

Homepage

: http://www.bangkokmetro.co.th

Type of business

: Mass Rapid Transit System Operation Concessionaire of the M.R.T. Chaloem Ratchamongkhon Line Project

Registered Capital

: Baht 11,950 million, divided into 11,950 million ordinary shares, at the par value of Baht 1.00 per share

Issued and Paid-up Capital

: As at 31 January 2006, the Company has the paid-up capital of Baht 7,646.69 million, divided into 7,646.69 million ordinary shares, at the par value of Baht 1.00 per share

14


Annual Report 2005

6.2 The Company invested in its Subsidiaries through a shareholding ratio of at least 10% of the number of shares sold in each Subsidiary as at 31 December 2005 as follows: Company Name

Business Category

Type of Shares

Total Number of Shares Sold

Par Value (Baht)

Shares held by the Company Number of Shares

(%)

1. Metro Mall Development Limited Head Office: 587 Sutthisarnvinitchai Road, Din Daeng Subdistrict, Din Daeng District, Bangkok 10320 Tel. : 66 (0) 22754559 Fax : 66 (0) 22754314 Homepage : http://www.metromall.co.th

Leasing of retail space for shops in the stations and in the park and ride facility at Lat Phrao Station

Ordinary

5,000,000

10

3,200,000

64.00

2. Triads Networks Company Limited Head Office: 587 Sutthisarnvinitchai Road, Din Daeng Subdistrict, Din Daeng District, Bangkok 10320 Tel. : 66 (0) 26908391 Fax : 66 (0) 26908395

Procurement of advertisement boards or media in the trains and stations

Ordinary

250,000

100

140,000

56.00

3. BMCL Network Limited * Rendering services Ordinary 10,500,000 10 10,499,998 Head Office: and maintenance of 587 Sutthisarnvinitchai telecommunications Road, Din Daeng system equipment in Subdistrict, Din Daeng the stations District, Bangkok 10320 Tel. : 66 (0) 26975900 Fax : 66 (0) 26908212 * BMCL Network Limited was previously named Radianz Communications Network Limited.

100.00

15


Annual Report 2005

6.3 Reference

Securities Registrar :

Thailand Securities Depository Co., Ltd. 62 The Stock Exchange of Thailand Building Klongtoey Subdistrict, Klongtoey District, Bangkok 10110

Auditors

:

Tel. : 66 (0) 2229 2800

Fax : 66 (0) 2359 1259

Mr. Ruth Chaowanagawi

Certified Public Accountant No. 3247

Ms. Siraporn Ouaanunkun

Certified Public Accountant No. 3844

Mr. Supachai Phanyawattano

Certified Public Accountant No. 3930

Ernst & Young Office Limited 33rd Floor, Lake Rajada Office Complex, 193/136-137 New Rajadapisek Road, Klongtoey District, Bangkok 10110 Tel. : 66 (0) 2264 0777

Legal Advisor

:

Fax : 66 (0) 2264 0789-90

The Legists Ltd. 9th Floor, 990 Abdulrahim Place, Rama IV Road, Silom Subdistrict, Bangrak District, Bangkok 10500 Tel. : 66 (0) 2636 1111

Financial Institutions

:

Fax : 66 (0) 2636 0000

Krung Thai Bank Public Company Limited TMB Bank Public Company Limited Bank of Ayudhya Public Company Limited Siam City Bank Public Company Limited

16


Annual Report 2005

7. Nature of Business 7.1 Background and Major Developments Bangkok Metro Public Company Limited (the “Company”) was established on 18 February 1998, with an initial registered capital of Baht 1,000,000, having the CH. Karnchang Group as its major shareholder, to participate in the bidding for the concession of the first underground mass transit system project in Thailand, to carry out the design, manufacture, supply, installation, testing and commission of the M&E Equipment for the operation and maintenance of the metro. In this respect, the Company was granted the exclusive concession for such project approved by the Council of Ministers on 28 March 2000 and 25 July 2000, respectively. On 1 August 2000, the Company entered into the Agreement for the MRTA Initial System Project – Chaloem Ratchamongkhon Line (the “Concession Agreement”) with the Mass Rapid Transit Authority of Thailand (“MRTA”). The Company has the exclusive right to collect fares and undertake activities and commercial development, including advertising and leasing space in the project for a period of 25 years from the date of issuance by the MRTA of the Notice of No Objection to commencement of revenue service, namely, on 2 July 2004, which would end on 1 July 2029. The official commencement of operations is on 3 July 2004. Under the Concession Agreement, the Company is obliged to make payment of remuneration from fares and commercial development to the MRTA at the rates as mentioned in the Concession Agreement. On 16 January 2003, the Company was granted investment promotion privileges for the M.R.T. Chaloem Ratchamongkhon Line (Blue Line) under Promotional Certificate No. 1029(1)/2546. The privileges include entitlement to 50% deduction of import duty on imported machinery according to specified conditions and exemption from corporate income tax on net profit from promoted operations for a period of 8 years commencing from the date of first earning operating income (3 July 2004). The Company was converted to a public limited company on 11 May 2004. Their Majesties the King and Queen and HRH Princess Maha Chakri Sirindhorn presided over the official opening ceremony of the M.R.T. Chaloem Ratchamongkhon Line (Hua Lamphong – Bang Sue) on 3 July 2004. On 9 September 2005, the Company obtained an ISO 9001:2000 certification from RWTuW (TUV NORD).

17


Annual Report 2005

7.2 Business Overview The Company’s revenue can be divided into two categories comprising revenue from fares and revenue from commercial development. •

Revenue from Fares Revenue from fares is the Company’s major revenue. The fare collection by the Company

is subject to the number of stations traveled by passengers. The fare rates of the metro as of the commencement date would be in accordance with the basic reference fare rates in force at the time of the revenue service commencement date. Under the Concession Agreement, the basic reference fare rates would be adjusted every 24 months based on the actual changes of the Bangkok NonFood Consumer Price Index compared to the basic reference fare rates as at 1 January 2002. At its first year of service, the Company agreed to discount the fare rates by 15%. •

Revenue from Commercial Development Besides revenue from fares, the Company also generates revenue from commercial

development, which can be divided into two groups as follows: 1. The Company directly executed agreements with other companies by granting rights to take the following actions: -

Providing automatic teller machine service in all 18 stations to 8 commercial banks;

-

Providing public telephone service to True Corporation Public Company Limited; and

-

Supplying or producing advertising media on Platform Screen Doors in all 18 stations to How Come Media Company Limited.

2. The Company has granted the following rights to the Subsidiaries: -

To procure still photo advertisement signboards to Triads Networks Company Limited;

-

To manage retail spaces to Metro Mall Development Limited; and

-

To service and maintain telecommunications system equipment to BMCL Network Limited.

In return, the Company shall receive a share of gross revenues, as well as dividends from the Subsidiaries. 18


Annual Report 2005

Business Operations of the Subsidiaries 1.

Triads Networks Company Limited Triads Networks Company Limited was established on 22 March 2002, with an initial

registered capital of Baht 15.00 million, to conduct the business of procuring and/or making advertising boards or other forms in all 18 stations and for all 19 trains. Triads Networks Company Limited started placing advertisements in the trains in June 2005 and in all stations in July 2005. 2.

Metro Mall Development Limited Metro Mall Development Limited was established on 9 February 2004, with an initial

registered capital of Baht 50 million, to conduct the business of leasing retail spaces in 11 stations and spaces in the basement level of the Lat Phrao park and ride facility, representing a total commercial leasing spaces of approximately 12,480 square metres (spaces for retail shops and sale promotion), starting with Sukhumvit Station on 9 September 2005, Phahon Yothin Station on 16 December 2005. 3.

BMCL Network Limited BMCL Network Limited (formerly known as Radianz Communications Network Limited)

was established on 30 January 2004, with an initial registered capital of Baht 50 million, to conduct the business of servicing and maintaining telecommunications system equipment in the stations. At present, there is still no revenue from its operations.

Shareholding Structure As at 31 January 2006

Bangkok Metro Public Company Limited (Registered capital of Baht 11,950.00 million Paid-up capital of Baht 7,646.69 million)

64%

100%

56%

Metro Mall Development Limited

BMCL Network Limited

Triads Networks Company Limited

(Registered capital of Baht 50.00 million Paid-up capital of Baht 50.00 million)

(Registered capital of Baht 105.00 million Paid-up capital of Baht 105.00 million)

(Registered capital of Baht 25.00 million Paid-up capital of Baht 25.00 million)

19


Annual Report 2005

Revenue Structure of the Company’s Group The Company had major revenue from fares since 3 July 2004. In June 2005, the Company started to derive revenue from advertising services by Triads Networks Company Limited. Metro Mall Development Limited started generating revenue from retail space leases in the third quarter of 2005.

Operated by

For the year 2004

(Unit: Million Baht) For the year 2005

Shareholding percentage of the Company

Revenue

%

Revenue

%

Revenue from train operations

The Company

-

443.14

99.39

990.39 /1

94.68

Revenue from advertising services

Triads Networks

56.00

-

-

37.63

3.60

Revenue from telecommunications system services

BMCL Network

100.00

-

-

-

-

Revenue from retail space leases

Metro Mall Development

64.00

-

-

4.75

0.45

Interest income

The Company and its Subsidiaries

-

0.98

0.22

0.79

0.08

Other income /2

The Company and its Subsidiaries

-

1.76

0.39

12.44

1.19

445.88

100.00

1,046.00

100.00

Total Notes:

/1

/2

This comprised revenue from fares of Baht 969.91 million and revenue from fare compensation of Baht 20.48 million from the MRTA, for the trial discount of fares from 7 January 2005 to 31 March 2005, whereby the MRTA agreed to compensate the Company at 80% of the amount of actual daily revenue below the amount of revenue set out in the memorandum of understanding. Other income in 2004 comprised revenue from leasing training space to Siemens and revenue from space leasing for public telephone service in the stations. Other income in 2005 comprised revenue from space leases for ATM and public telephone services.

20


Annual Report 2005

7.3 Procurement of Products and Services (1)

Management of the Metro Project The Company has engaged Joint Venture CKET as the project manager for the M.R.T.

project to manage technical operations, such as, procurement of the M&E Equipment as ordered from manufacturers and acting as agent for liaison with contractors and relevant authorities regarding the installation of the M&E Equipment. Joint Venture CKET is a joint venture between CH. Karnchang Public Company Limited and Expert Transport Company Limited (an affiliate of the CH. Karnchang Public Company Limited Group, the major shareholder of the Company). (2)

Procurement and Maintenance of the M&E Equipment Given the fact that the Company had the duties under the Agreement for the MRTA Initial

System Project - Chaloem Ratchamongkhon Line, to design, manufacture, supply, install, test and commission the M&E Equipment to ensure the readiness for the commencement of service to the public, the Company thus engaged third parties to manufacture and procure the M&E Equipment by way of turnkey contracts.

In essence, the manufacturer is responsible for the design,

manufacture and installation of the system ready for use, including training for every level of the Company’s staff. The Company engaged Lincas and Siemens, one of the world’s largest modern electric train manufacturers and developers of railway systems from Germany, to manufacture the M&E Equipment.

Lincas and Siemens are responsible for the design, manufacture, supply,

installation, testing and commissioning of the M&E Equipment, comprising the rolling stocks, power supply system, signaling and communication system, automatic fare collection, Platform Screen Doors, maintenance equipment, signage and signals, as well as responsible for proposing train operation plans, the Company’s management structure, a recruitment plan, and all requirements relating to train operations by way of training for every level of the Company’s staff to administer the train operation on their own. To ensure the confidence in the provision of service, the Company has engaged Lincas and Siemens for maintaining the M&E Equipment for a period of 10 years. (3)

M&E Equipment and Components of the Metro These can be divided into two parts: civil infrastructure operated by the MRTA, and the

M&E Equipment operated by the Company, as follows:

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Annual Report 2005

Civil Infrastructure Operated by the MRTA (3.1)

Stations All stations of the metro are supported by reinforced concrete structures which are

15-25 metres beneath the road surface. Each station has different levels and areas depending on the depth of the station. There are three kinds of platform, namely, central platform, side platform, and stack platform. Each station has a control room for the control, observation and monitoring of any malfunctions within the station. (3.2)

Tunnels Underground tunnels are supported by reinforced concrete structures designed to be

flexible and water-resistant. The inner diametre is 5.7 metres, thickness is 30 centimetres and outer diametre is 6.30 metres. It is a two single tunnel system equipped with running rails, power rails, maintenance walkways, a tunnel ventilation system, underplatform exhaust and heat detector systems for the maximum safety for the train operations inside the tunnels. (3.3)

Ventilation System Stations and tunnels have a ventilation system installed with ventilation fans on

either side of the station and within the tunnel for the safety of passengers. Fans control the temperature and condition inside the stations and tunnels. (3.4)

Rails/Tracks There are two types of tracks, running rails and power rails or third rails: - Running rails are double rails with 1.435 metres width (standard gauge) railway tracks are laid and directly fixed to the track base, which is made of a reinforced concrete structure between Hua Lamphong and Bang Sue; railway sleepers are used in the depot as is the case of the State Railway of Thailand. - Power rails or third rails are laid parallel to either side of the running rails in order to connect electricity from the source to the train, while the double running rails acts as an electric conductor back to the source.

M&E Equipment Operated by the Company (3.5)

Rolling Stocks The Company has ordered 19 trains from Siemens, the world’s leading electric train

manufacturer and assembler. The rolling stocks are made of robust and durable stainless steel

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Annual Report 2005

with modern style and would have a service life of approximately 30 years. Each train consists of three carriages with a total of approximately 70-metre long, and can carry up to 900 passengers with the transferring capacity of 40,000 passengers per hour per direction. (3.6)

Signaling and Communication A good signaling and communication system is necessary for safe, fast, reliable and

punctual train operations and is considered as an important factor of train management. The control centre is located in the depot. Train operations are automatic computer system supervised by engineers. In the stations, a radio communication system with direct phone lines is used for officers to communicate so that passengers can immediately notify an emergency. In case of any emergency to the officers, the automatic broadcasting system will start to provide relevant information and direct the way out of the station. (3.7)

Supervisory Control and Data Acquisition System (SCADA) and Closed Circuit Television Monitoring and supervision of the functions of the main equipment inside the

stations and tunnels, such as, the fire alarm system, cooling system, elevators and escalators, power supply system within the station and power supply system for the locomotive system, tunnel lighting system and ventilation system in the tunnels, are carried out by the SCADA installed at the operation control centre. In case of any malfunction, an alarm will start immediately to notify the officers in charge to rapidly and promptly check such system. Closed circuit televisions are installed in various important spots inside the stations to monitor for safety and playback to identify any incident. The closed circuit televisions are also installed in the train operator cabin to monitor passengers entering and leaving trains while docked at the stations to ensure safety before closing the doors. (3.8)

Automatic Fare Collection System (AFC) The AFC consists of tickets, token vending machines, ticketing offices and

automatic gates, with the following characteristics: 1)

Tickets are divided into two types: single journey tokens for a single trip, and stored value cards, which are contactless smart cards for multiple journeys, suitable for regular passengers.

2)

Token Vending Machines (TVM) TVMs are located on the concourse level and issue only single journey tokens.

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Annual Report 2005

3)

Ticketing Offices Ticketing offices are manned by officers and equipped with machines for issuing both tokens and stored value cards of all types.

4)

Automatic Gates The system is referred as a “contactless� system. Passengers enter or exit the system by using the ticket (token or stored value card) across the card readers located on the top of the automatic gates within 10 centimetres, without any contact required to open the gate.

(3.9)

Platform Screen Doors (PSD) Glass PSDs spanning from the floor to the ceiling are installed along the length of

the platforms, between the platform and the train. This is for the safety of passengers while entering and leaving the train so as to prevent any accident from passengers falling from the platforms or injury from the train docking at the stations, as well as helping saving energy in respect of the air-conditioning system and minimising noise pollution. (3.10)

Power Supply The power supply is designed in accordance with international standards for safety

and reliability in the supply of power to all electrical equipment, such as, sub-stations and transformers, which are necessary for supplying power to the train and in the stations and the tunnels. The system is designed based mainly on safety and continuity of services. (3.11)

Depot Building and Central Control Centre The depot consists of the depot building, operation control centre building, rolling

stock parking area, training centre and administration building and is located on a total area of approximately 300 rai on Rama IX Road, close to the Thailand Cultural Centre Station, owned by the MRTA while the Company has the right to use the same throughout the Concession period. The operation control centre is located in the same area as the depot. This centre is the most important component of the operation control system, namely, to control and direct every station and every train to ensure safe, rapid and punctual operations. In case of any force majeure preventing the functioning of this operation control centre, another back-up operation control centre located at the depot would control and direct the operation as normal.

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Annual Report 2005

(4) Full Passenger Capacity of the M.R.T. Chaloem Ratchamongkhon Line Table Indicating Full Passenger Capacity on the Metro and Number of Passengers in the years 2004 (July – December) and 2005 (January – December) 2004 July - December

January

February – December /2

182

16

334

336,680

336,680

301,240

5,386,880

100,614,160

Number of Days of Service (Days) /1 Full Passenger Capacity Per Day (Persons) Full Passenger Capacity of the Metro (Persons) Number of Passengers (Persons) Utilization Rate Per Full Passenger Capacity Notes:

/1 /2

2005

61,275,760

106,001,040

26,837,376

57,191,054

43.80%

53.95%

The number of actual days of service in the year 2004 was 182 days and in the year 2005 was 350 days. In the year 2004 – 17 January 2005, the Company had 19 trains in operation. After the train collision accident on 17 January 2005, the Company suspended its service operation during the period from 17 January 2005 – 31 January 2005, and resumed the service on 1 February 2005, with 17 trains in operation. The damaged two trains were under repair.

7.4 Industrial Conditions and Competition In the year 2005, the growth rate of personal cars was affected by the continuous increase in oil prices, which was a negative factor to personal car users and resulted in the decreased number of newly registered personal cars, and the traffic congestion problems in Bangkok. These factors encourage more people to use public transports, especially upon the development of a more efficiently connected public transport network. The transport system directly affecting the Company’s business includes personal cars, passenger buses, microbuses and taxis. In the past several years, the fare rates for public transport, especially, normal buses or air-conditioned buses, slightly changed. However, after the government cancelled the oil price subsidy for benzene and diesel in the years 2004 and 2005, respectively, the fare rates for public transports thus increased, which also resulted in the increase in traveling expenses of personal car users. Due to the said increase in the world’s oil prices, and the traffic congestion problems, especially, during rush hours, together with the increase in fare rates, consumers’ demand for use of the public transports, especially, the metro system also becomes increasing accordingly.

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Annual Report 2005

Government Policy towards the Expansion of the Mass Transit System The government by the Office of Transport and Traffic Policy and Planning (OTP) completed the Urban Rail Transportation Master Plan (URMAP) in 2000 and conducted further study in the practical implementation in 2004, referred to as URMAP2. The purpose of this program was to reduce and alleviate the existing traffic problems, which would help improving the country’s economic and social conditions, as well as minimise the environmental problems. The government sector has a policy to expand the urban rail transportation with the route networks as follows:

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Annual Report 2005

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Annual Report 2005

Mass Transit Project Development During the Period between 2005 and 2012 The time frame for implementation of the mass transit projects during 2005 – 2012 under the resolution passed by the Council of Ministers on 14 June 2005 for the government mega projects shall be as follows:

Mass Transit Projects

Distance (Kilometres)

Period

Target Year for Service

1. Purple Line

43.00

1.1 Bang Yai - Bang Sue

23.00

2005 - 2009

2009

1.2 Bang Sue - Rat Burana

20.00

2005 - 2012

2012

2. Blue Line (Extension)

27.00

2.1 Hua Lamphong - Bang Khae

14.00

2005 - 2012

2012

2.2 Bang Sue - Tha Phra

13.00

2005 - 2010

2010

3. Orange Line

24.00

2005 - 2012

2012

4. Red Line

66.80

4.1 Rangsit - Bang Sue

24.60

2005 - 2008

2008

4.2 Bang Sue - Hua Lamphong

6.20

2005 - 2009

2009

4.3 Hua Lamphong - Maha Chai

36.00

2005 - 2009

2009

5. Light Red Line

71.41

5.1 Airport Link

28.00

2005 - 2007

2007

5.2 Extension of Airport Link

21.10

2005 - 2011

2011

5.3 Bang Sue - Taling Chan

14.71

2005 - 2008

2008

5.4 Bang Sue - Makkasan

7.60

2005 - 2009

2009

6. Dark Green Line

26.50

2005 - 2010

2010

7. Light Green Line

18.70

2005 - 2010

2010

Total

277.41

Notes: 1. 2.

The above information may be subject to change. As at 17 December 2005, the Ministry of Transport announced its policy and plan to expand the M.R.T. Project to 10 lines, with the yellow line, pink line and brown line as the expected additional 3 lines, but the details of the said projects are currently pending the drafting of terms of reference (TOR), and further feasibility study in the future.

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Annual Report 2005

8. Risk Factors 8.1 Risks relating to businesses of the Company and its Subsidiaries 8.1.1

Risks relating to fare revenue •

The number of passengers of the metro

The underground mass transit is a new form of the mass transit system in Thailand. In the early stage of the service provision, people needed some time to be familiar with using such new service. The number of passengers depends upon several factors including those beyond the Company’s control, such as, fare rates, other available alternative transit systems, traffic congestion on roads, oil prices, passenger transportation capacity, quality, as well as safety of the metro of the Company and other mass transit systems. •

The maximum fare rate is determined by the Concession Agreement

Under the Concession Agreement, the maximum fare rate to be charged by the Company is determined in pursuance of a formula based on the Bangkok Metropolis Non-Food Consumer Price Index, whereby the adjustment shall be made once in every two years, while the Company’s costs would be likely to increase during the said period. 8.1.2

Risks relating to revenue from commercial development The revenue from commercial development, which represents approximately 6% of the

Company’s total revenue, throughout the Concession period of 25 years, may vary subject to the spending nature of customers and advertisers which depends on several factors beyond the Company’s control, such as, the economic fluctuation, the competition in the advertising media business and space leasing business for retailing, changes and amendment of laws and regulations governing such business operation in the metro, as well as the progress in opening retail shops in the stations. 8.1.3

Risks relating to fluctuation of cost of fare Cost of fare is deemed to be the main expenditure of the Company’s core business operation

which comprises maintenance costs for the metro (M&E contract and E&M contract), public utility cost, and the staff’s salaries and welfare. In this regard, the maintenance costs under the M&E contract, which has a 10 year term, may be adjusted subject to the consumer price index for Germany in respect of the Euro-denominated payments, and to the consumer price index for Bangkok Metropolis in respect of expenses for the Baht-denominated payments. In addition, the cost of electricity used at stations and for train operations, which are the main costs of the public utility cost, may be adjusted subject to the electricity cost rates of the Metropolitan Electricity Authority.

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Annual Report 2005

8.1.4

The Company relies on Siemens and Lincas for manufacture and maintenance of its M&E Equipment The Company entered into an agreement for procurement and maintenance of the M&E

Equipment with Siemens and Lincas for a period of 10 years ending in 2014. Thus, in the event where Siemens and Lincas are unable to provide such services to the Company or there is any change in the maintenance agreement, the Company’s business operation may be adversely affected. 8.1.5

Risks from terrorism Given the fact that in recent times, there have been terrorist attacks in many parts of the world,

such as, the terrorist attacks in the United States of America on 11 September 2001, the terrorist attacks in London mass transit system, and the unrest circumstances in the southern part of Thailand, it is possible that any one or several incidents stated above may lead to terrorist attacks in the mass transit system in Thailand, which could affect the Company’s business operation despite the fact that the Company has arranged an insurance against risks from such incidents. 8.1.6

Risks relating to the Concession Agreement and the government supervision Given that the Company operates its businesses in accordance with the Concession Agreement

under the supervision of the MRTA, difference in the contractual parties’ interpretations on terms and conditions of the Concession Agreement may arise. Should the Company and the MRTA cannot resolve any conflicts, the Company may require a certain period of time to solve the problem, thereby giving rise to an impact on the Company’s business operation. 8.1.7

Risks relating to the government policy in the construction and operation of the mass transit railway system The government has a policy to expand the mass transit railway system to cover the Bangkok

Metropolitan area and its vicinity with an accelerating plan for the construction of 10 train lines. However, there is uncertainty in respect of procedures and period for implementation of the government plan. In this regard, the Company’s growth also depends partly on such 10 train line operation plan. Furthermore, should the government have a policy requiring the Company to merge its business with other mass transit systems in the future under various terms and conditions, the Company’s business operation may be affected by such merger.

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Annual Report 2005

8.2 Other risks 8.2.1

The Company is unable to pay dividend in the forthcoming period Due to the fact that the MRTA Initial System Project requires quite large amount of investment

and continued use of working capital at the early stage of its operation, the Company still sustained loss on its operation during such period and would not be able to pay dividend in the forthcoming period. 8.2.2

Risks from the interest rate and foreign exchange rate fluctuations As at 31 December 2005, the Company had long-term loans amounting to Baht 12,114.50 million

extended by domestic banks at the interest rates ranging from the minimum lending rate (MLR) to MLR plus 0.25% - 0.50% per annum. The Company also had a loan amounting to Baht 1,403 million extended by CH. Karnchang Public Company Limited, which is the Company’s major shareholder, with the interest rate of MLR plus 0.50% per annum. In this regard, if the interest rates increase, the Company’s interest expense obligation would be affected. In addition, the Company also incurred expenses in foreign currencies for the maintenance cost of the M&E Equipment, in the amount of approximately Euro 3.92 million per year and insurance premiums of approximately US$ 3.33 million per year. Thus, should there be a depreciation of Baht value; the Company’s expenses would increase. 8.2.3

The Company relies on the financial support from its major shareholders Under the conditions stipulated in the sponsor support agreement, two major shareholders,

namely, CH. Karnchang Public Company Limited and Natural Park Public Company Limited, are required to provide financial support to the Company so as to maintain its liquidity in accordance with the loan agreement executed with the financial institutions. In the event where the Company does not receive the required financial support, the Company may be in default on the conditions of its existing loan agreement, which would affect the Company’s financial condition and results of its operations.

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Annual Report 2005

9. Capital Structure 9.1 Securities of the Company As at 31 January 2006, the Company has the registered capital of Baht 7,646.69 million, divided into 7,646.69 million ordinary shares, with par value of Baht 1.00, as well as Issued and Paidup Capital of Baht 7,646.69 million.

9.2 Shareholders of the Company The table below shows the shareholders of the Company as at 31 January 2006.

Number of Shares

Name

Held (shares)

1. CH. Karnchang Public Company Limited Group; - CH. Karnchang Public Company Limited

Percentage

3,078,760,296

40.26

2,158,312,416

28.23

- Mahasiri Siam Company Limited

/1

910,987,670

11.91

- Transit Expert Company Limited

/2

9,460,210

0.12

2. Bangkok Expressway Public Company Limited

1,444,092,607

18.89

3. Natural Park Public Company Limited Group;

1,433,951,276

18.75

1,066,120,418

13.94

367,830,858

4.81

730,669,200

9.56

725,000,000

9.48

5,669,200

0.07

5. TMB Bank Public Company Limited

367,500,000

4.81

6. Siam City Bank Public Company Limited

176,250,000

2.30

7. Tokyu Construction Company Limited

100,000,000

1.31

18,776,621

0.25

296,689,300

3.88

7,646,689,300

100.00

- Natural Park Public Company Limited - Syntec Construction Public Company Limited 4. Krung Thai Bank Public Company Limited Group; - Krung Thai Bank Public Company Limited - The Krung Thai Thana Wattana Fund

8. Others 9. Directors, Executives and staff Total Notes : /1

Mahasiri Siam Company Limited has a total of 9,000,000 shares, 7,747,788 shares of which or 86.09% is held by the Trivisvavet Family, and 1,252,212 shares of which or 13.91% is held by other shareholders.

/2

Transit Expert Company Limited has a total of 10,000 shares, 9,993 shares of which or 99.93% is held by Mahasiri Siam Company Limited, and 7 shares of which or 0.07% is held by other shareholders.

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Annual Report 2005

9.3 Dividend Policy The Board of Directors of the Company has a policy to pay dividends at the rate of approximately 40% of its net profits after deduction of all reserves as required by law and as required under the Onshore Facilities Agreement, in particular after reserving funds for the repayment of the principal and interest for a period of six months. As the Company has incurred losses during the initial years of revenue service and has had accumulated losses, it is thus not able to pay dividends to its shareholders. The Company’s Subsidiaries have policy to pay dividends at the rate of approximately 40% of net profits after deduction of all reserves as required by law and pursuant to the Loan Agreement. The Board of Directors of the Company will consider and propose the dividend payments to the Subsidiaries’ boards of directors for consideration and further submission to their shareholders’ meetings for approval, provided that this will depend on the Subsidiaries’ investment plans, requirements and other justifications which their boards of directors deem appropriate.

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Annual Report 2005

10. Management Structure 10.1 Management Structure The management structure of the Company comprises five committees, namely, the Board of Directors, the Executive Committee, the Audit Committee, the Nomination and Remuneration Committee, and the Risk Management Committee, as follows:

Nomination & Remuneration Committee

Board of Directors

Risk Management Committee

Executive Committee

Office of the Managing Director

Operations Division

A.

Audit Committee

Managing Director

Marketing and Commercial Development Division

Internal Audit Division

Accounting and Finance Division

Human Resources and Administration Division

Board of Directors As at 31 December 2005, the Board of Directors of the Company comprised 11 directors as

follows: Name

Position

1.

Mr. Plew Trivisvavet

Chairman of the Board of Directors

2.

General Chetta Thanajaro

3.

Mr. Vitoon Tejatussanasoontorn

Audit Committee Member and Independent Director

4.

Lieutenant General Surat Sumrith

Audit Committee Member and Independent Director

5.

Mr. Supong Chayutsahakij

Director

6.

Mr. Somchai Sirilertpanich

Director

7.

Mrs. Vallapa Assakul

Director

8.

Mrs. Nongnutch Thienpaitoon

Director

9.

Dr. Sombat Kitjalaksana

Director

Chairman of the Audit Committee and Independent Director

10. Mr. Ronnachit Yaemsaard

Director

11. Mr. Anukool Tuntimas

Director

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Annual Report 2005

Roles and Duties of the Board of Directors (1)

to supervise, monitor and manage the Company’s operations to ensure compliance with laws as well as the objectives and the Articles of Association of the Company and resolutions of the Company’s meetings of shareholders and to protect the interests of the Company, based on principles of good corporate governance as well as the rules and notifications of the Stock Exchange of Thailand and the Securities and Exchange Commission of Thailand;

(2)

to set policies and strategies of the Company and to supervise, control and monitor to ensure that the management performs in compliance with such policies in an efficient and effective manner to give rise to the maximum economic value to the business and wealth to the shareholders;

(3)

to hold the Company’s annual ordinary general meeting of shareholders within no later than four months from the end of the Company’s financial year and extraordinary general meetings of shareholders when it deems necessary;

(4)

to hold the Company’s Board of Directors meetings quarterly, at which not less than 50% of the total number of directors must attend the meeting to form a quorum. A majority vote is required for any decision made at such a meeting and in the case of a tied vote, the chairman of the meeting will have a casting vote;

(5)

to consider and approve the budget for the Company’s annual investment and operations, including monitoring the utilisation of the Company’s resources;

(6)

to arrange for the preparation of proper, accurate and adequate financial and general significant reports to the Company’s shareholders, including confirming the review and certification of the information contained therein;

(7)

to establish an efficient and effective internal control system, internal audit system and risk management measures, including regularly auditing such systems and measures;

(8)

to consider the appointment of any sub-committees or other persons to manage the Company’s operations under the control of the Board of Directors of the Company, or to grant such authority to such persons for such period of time as the Board of Directors of the Company deems appropriate, provided that the Board of Directors of the Company may cancel, revoke, change or amend such authorities as appropriate;

(9)

to consider the appointment of the authorised signatory directors of the Company, including the appointment of sub-committees as may be necessary and appropriate to operate the Company;

(10)

to consider and clearly specify the division of roles, duties and responsibilities among the Company’s Board of Directors, sub-committees and the management, including specifying the procedures and regularly communicating such roles, duties and responsibilities to directors, subcommittee members, the management and staff of the Company;

(11)

to supervise and monitor the Executive Committee to ensure compliance with the policies specified by the Board of Directors of the Company. The Executive Committee is authorised to approve any

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Annual Report 2005

transaction that is binding on the Company worth up to Baht 50,000,000 (Baht fifty million), excluding transactions which give rise to a conflict of interest with the Company and its Subsidiaries pursuant to the notification of the Securities and Exchange Commission, including transactions which require approval from the Company’s shareholders in accordance with the notifications of the Securities and Exchange Commission and the Stock Exchange of Thailand; (12)

to consider and specify the power, duties and responsibilities, procedures for the appointment and removal, disciplinary actions, salary, welfare benefits, bonus, gratuities and other remuneration, including expenses and fringe benefits, of the Managing Director of the Company;

(13)

to consider and approve interim dividend payments to the Company’s shareholders from time to time as it deems appropriate and in accordance with the law;

(14)

to approve the issuance of financial instruments and any other securities by the Company, to specify the number, price, date, procedures and conditions in respect of the underwriting of such securities under the law and/or as specified by the meeting of the shareholders of the Company, including the appointment of underwriters of such securities and underwriting agents. Selection Procedures for the Directors The Nomination and Remuneration Committee will consider selecting qualified persons to act

as directors and propose such persons to the Board of Directors for further submission to a meeting of the shareholders or to the Board of Directors of the Company for appointment in accordance with the Articles of Association of the Company: The Board of Directors of the Company must comprise at least five directors, of which not less than one-half must reside in Thailand. The directors must have the qualifications as specified by law and be appointed by a meeting of shareholders of the Company in accordance with the following rules and procedures: 1. Each shareholder shall be entitled to one vote per share; 2. Each shareholder must use all of the votes under paragraph 1 to appoint one or more directors and may not divide such votes among candidates; 3. The number of votes received is ranked from highest to lowest and the directors will be appointed from the highest to lowest according to the number of directors to be appointed by the Company at that time. Any tied votes for the final vacancy shall be decided by a drawing of lots.

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Annual Report 2005

Attendance at Meetings of the Board of Directors

2005 Name

Number of Meetings

Number of Meetings

Attended

Held

1. Mr. Plew Trivisvavet

8

8

2. Dr. Sombat Kitjalaksana

8

8

3. Mr. Ronnachit Yaemsaard

7

8

4. Mr. Supong Chayutsahakij

7

8

5. Mr. Anukool Tuntimas

8

8

6. Mr. Somchai Sirilertpanich /1

5

6

3

4

4

4

3

4

4

4

3

4

7. Mrs. Nongnutch Thienpaitoon

/2

8. Mrs. Vallapa Assakul /2 9. General Chetta Thanajaro /2 10. Mr. Vitoon Tejatussanasoontorn

/2

11. Lieutenant General Surat Sumrith

/2

Notes: Term of Office /1

/2

Appointed as a director since 14 September 2004 until the Company received his resignation letter on 10 March 2005. The Company registered such resignation with the Ministry of Commerce on 23 March 2005. He was re-elected as a director on 26 May 2005. Appointed as a director since 26 May 2005.

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Annual Report 2005

B.

Audit Committee As at 31 December 2005, the Company’s Audit Committee comprised three members,

each of whom met the qualifications as specified by the Stock Exchange of Thailand, as follows: Name 1. General Chetta Thanajaro

Position Chairman of the Audit Committee

2. Mr. Vitoon Tejatussanasoontorn

Audit Committee Member

3. Lieutenant General Surat Sumrith

Audit Committee Member

Role and Duties of the Audit Committee (1)

to ensure that the Company’s financial reports are accurate and adequate;

(2)

to ensure that the Company has suitable and efficient systems of internal control and internal audit;

(3)

to consider, select, nominate, appoint and recommend remuneration for the Company’s external auditors;

(4)

to ensure that the Company’s operations are full, adequate and appropriate in compliance with securities and exchange law and regulations of the Stock Exchange, or laws, regulations, articles and policies relating to the business of the Company;

(5)

to consider the disclosure of information by the Company, in the case of connected transactions or transactions that may give rise to a conflict of interest, to ensure accuracy and completeness;

(6)

to prepare a report on the monitoring activities of the Audit Committee and disclose the same in the Company’s annual report, and have such Audit Committee’s report signed by the Chairman of the Audit Committee;

(7)

to do any other act as prescribed by law or assigned by the Company’s Board of Directors with the approval of the Audit Committee. Selection Procedures for Independent Members of the Audit Committee The Nomination and Remuneration Committee will select persons with suitable

qualifications as independent members of the Audit Committee and propose such persons to the Board of Directors of the Company for further submission to a meeting of the shareholders or the Board of Directors of the Company for appointment.

The Company shall have one Audit

Committee, comprising at least three independent directors appointed for a period of three years each. The qualifications of the independent directors and Audit Committee members shall be in accordance with the minimum requirements as prescribed in the notifications of the SEC and the

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Annual Report 2005

Stock Exchange of Thailand and a meeting of the Board of Directors of the Company shall approve the establishment of the Audit Committee.

C.

Executive Committee As at 31 December 2005, the Company’s Executive Committee comprised four members, as

follows: Name

Position

1. Mr. Plew Trivisvavet

Chairman of the Executive Committee

2. Dr. Sombat Kitjalaksana

Member of the Executive Committee

3. Mr. Supong Chayutsahakij

Member of the Executive Committee

4. Mr. Anukool Tuntimas

Member of the Executive Committee

Role and Duties of the Executive Committee (1)

to set policies, appoint, specify authorities and their duties, supervise, monitor and liaise with, working groups or special working groups or management groups, including considering and approving any proposal by such working groups or special working groups or management groups;

(2)

to approve any proposals by working groups or management groups or any working groups for the benefits of the Company’s management and business operations under the objectives of the Company;

(3)

to enter into transactions binding the Company worth up to Baht 50,000,000 (Baht fifty million), but excluding transactions which give rise to a conflict of interests with the Company or its Subsidiaries, pursuant to the notification of the Securities and Exchange Commission, including transactions which require approvals from the Company’s shareholders in accordance with the notifications of the Securities and Exchange Commission and the Stock Exchange of Thailand. Such transactions include the following: a. undertaking any juristic acts which bind the Company; b. withdrawing from any bank account of the Company and applying credit with the Company’s current banks or financial institutions, including the application to open accounts and/or other forms of credit with any banks or financial institutions, as well as using the Company’s securities as security for such debts, regardless of whether registered or not; c. undertaking joint investments on behalf of the Company with individuals, juristic persons, other groups of persons under the law to proceed in accordance with the Company’s objectives, including other forms of investments, such as, share acquisitions and share swaps with other juristic persons, as it deems appropriate; 39


Annual Report 2005

d. undertaking feasibility studies of new projects as well as considering and approving projects as it deems appropriate; (4)

to specify, consider and approve articles, regulations, policies on the management and business operations of the Company or any operation binding on the Company;

(5)

to give recommendations and advice and specify policies, powers and duties of the Managing Director, working groups, special working groups and management groups;

(6)

to approve, appoint, employ, remove, impose disciplinary actions, fix salaries, welfare benefits, bonuses, gratuities and other remuneration, including expenses and fringe benefits of the officers or staff of the Company holding positions of department heads or higher, including the Deputy Managing Director or equivalent or the working groups, special working groups or management groups of the Company for specific purposes;

(7)

to perform any act as authorised by the Company’s Board of Directors from time to time;

(8)

to appoint persons or groups of persons to manage the Company under the control of the Executive Committee or to grant authority to such persons or groups of persons to do any acts as the Executive Committee deems appropriate and to change, amend, cancel or revoke such authorities;

(9)

to appoint the advisory chairperson or advisors or advisory committees to the Executive Committee as it deems appropriate and to fix the remuneration, allowance, welfare benefits, fringe benefits and other expenses of such appointees as appropriate;

(10) to call meetings of the Executive Committee and/or specify regulations and articles of such meetings as the Executive Committee or the Chairman of the Executive Committee deems appropriate; (11) when the Chairman of the Executive Committee cannot perform the duties, the Chairman shall appoint an acting Chairman to perform such duties on a case by case basis and such acting Chairman will have the same power and duties as the Chairman of the Executive Committee; (12) to consider and approve the authorities of the management of the Company according to the rules, regulations and articles of the Company. However, the Executive Committee does not have the power to approve any transactions or matters in respect of which the Executive Committee or persons have a conflict of interest with the Company or its Subsidiaries, pursuant to the notification of the Securities and Exchange Commission. Selection Procedures for the Executive Committee The Board of Directors of the Company shall appoint the Executive Committee in accordance with the Articles of Association of the Company, which provide that the Board of Directors of the Company may appoint any other person to manage the Company under the control 40


Annual Report 2005

of the Board of Directors, provided that any such person who is to be a member of the Executive Committee shall have the qualifications and capacity to perform their duties.

D.

Nomination and Remuneration Committee As at 31 December 2005, the Nomination and Remuneration Committee of the Company

comprised three members as follows: Name

Position

1. General Chetta Thanajaro

Chairman of the Nomination and Remuneration Committee

2. Mr. Plew Trivisvavet

Member of the Nomination and Remuneration Committee

3. Mr. Vitoon Tejatussanasoontorn

Member of the Nomination and Remuneration Committee

Role and Duties of the Nomination and Remuneration Committee (1)

to consider the nomination of persons with suitable qualifications as directors and to propose such persons to the Board of Directors for further submission to a meeting of the shareholders of the Company or the Board of Directors of the Company for appointment;

(2)

to select a person suitable for the Managing Director position and propose such person to the Board of Director of the Company for appointment;

(3)

to specify the rules for determination of remuneration of directors and the Managing Director;

(4)

to determine and to propose the directors’ remuneration to a meeting of the shareholders of the Company for approval;

(5)

to propose the salary and adjustments and other remunerations of the Managing Director to the Board of Directors of the Company for approval;

(6)

to undertake other matters as assigned by the Board of Directors of the Company. Selection Procedures for the Nomination and Remuneration Committee The Board of Directors of the Company shall appoint members of the Nomination and

Remuneration Committee who shall hold such office for a period of three years.

E. Risk Management Committee As at 31 December 2005, the Risk Management Committee of the Company comprised four members as follows:

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Annual Report 2005

Name

Position

1. Mr. Supong Chayutsahakij

Chairman of the Risk Management Committee

2. Dr. Sombat Kitjalaksana

Member of the Risk Management Committee

3. Mr. Vitoon Hatairatana

Member of the Risk Management Committee

4. Miss Pornpimol Chirtchoochai

Member of the Risk Management Committee

Role and Duties of the Risk Management Committee (1)

to consider and set the policies on risk management measures and plans for the operations of the business and Subsidiaries;

(2)

to monitor and assess the appropriateness of the overall risk management system of the Company;

(3)

to prepare recommendations to the Board of Directors of the Company in respect of risk management, standard practice, strategy, risk assessment in each matter and of the Company as a whole to ensure efficient and effective risk management;

(4)

to prepare risk reports for the Board of Directors of the Company;

(5)

to carry out other matters as assigned by the Board of Directors of the Company.

F. Management As at 31 December 2005, the management of the Company comprised four members as follows: Name

Position

1. Dr. Sombat Kitjalaksana

Managing Director and acting Marketing and Commercial Development Director /1

2. Mr. Witoon Hatairatana

Operations Director

3. Miss Pornpimol Chirtchoochai 4. Miss Sattabusya Mekvichai

Accounting and Finance Director Human Resources and Administration Director

Note: /1 The Company is currently in the process of nominating Marketing and Commercial Development Director.

Role and Duties of the Managing Director (1)

to control and monitor all businesses of the Company and to ensure compliance with resolutions and policies of the Board of Directors and the Executive Committee of the Company;

(2)

to approve, appoint, remove, employ, impose disciplinary actions, fix salary, bonus, gratuities, welfare benefits and other remuneration, including expenses and fringe benefits for management or staff with salary (exclusive of other remuneration) of up to Baht 200,000

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Annual Report 2005

(Baht two hundred thousand) per month, holding positions below division heads (excluding the Deputy Managing Director and division heads or equivalent), and the Managing Director may delegate such power or duties to the working groups or the Board of Directors, management group, group of persons or the management, as he deems appropriate; (3)

to have the power to enter into any transaction, binding on the Company, worth up to Baht 2,000,000 (Baht two million) for each transaction;

(4)

to authorise the management of the Company, such as, the Deputy Managing Director, Assistant Managing Director, the division heads or equivalent, to perform certain duties on behalf of the Managing Director (such as, procurement, hiring and ordering payments) as he deems appropriate;

(5)

to have the power to issue, amend, add, improve regulations, orders and work rules of the Company, including employment, appointment, removal and disciplinary actions of staff and employees, fixing of salaries and other remuneration, including gratuities and welfare benefits;

(6)

to have the duty to submit the balance sheet, financial statements and profit and loss accounts to the Board of Directors of the Company for approval;

(7)

to undertake feasibility studies of new projects as well as consider and approve such projects as assigned by the Executive Committee;

(8)

if the Managing Director cannot perform his duties, to appoint the Deputy Managing Director or any other person to perform his duties on his behalf and such appointee shall have the same power and duties as the Managing Director;

(9)

to appoint persons or groups of persons to manage the Company under the control of the Managing Director or to grant such authority to such persons or groups of persons to do any acts as the Managing Director deems appropriate, and to change, amend, cancel or revoke such authority;

(10) to propose any matter to the Board of Directors, the Executive Committee, the Audit Committee or meetings of the shareholders of the Company for consideration, approval or other purposes as he deems appropriate; (11) to do other acts as assigned by the Board of Directors or the Executive Committee of the Company from time to time. However, the managing director does not have the power to approve any transactions or matters in respect of which the managing director or other persons may have a conflict of interest with the Company or its Subsidiaries, pursuant to the notification of the Securities and Exchange Commission.

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Annual Report 2005

Selection Procedures for Management and Staff -

The Managing Director will be appointed by the Board of Directors of the Company

through the nomination by the Nomination and Remuneration Committee; -

Management at the level of division head or higher will be nominated, selected and

appointed by the Executive Committee; -

Management whose salary does not exceed Baht 200,000 per month and holding a position

lower than division head will be nominated, selected and appointed by the Managing Director; -

The selection, nomination and recruitment of positions lower than manager or equivalent

shall be carried out by the Human Resources and Administration Division which will make the selection jointly with the relevant division in accordance with the Company’s operation regulations in relation to recruitment of personnel. They shall recruit and appoint persons with knowledge, capacity and experience suitable to carry out their duties for the Company. Selection of Directors and Management of Subsidiaries The Subsidiaries of the Company, BMCL Network Limited, Metro Mall Development Limited, and Triads Networks Company Limited, do not have their own nomination committees. The selection of their directors is carried out by their shareholders and the selection of the management is carried out by their respective boards of directors, provided that their directors and management are suitably qualified without any prohibited characteristics under Section 68 of the Public Limited Companies Act B.E. 2535 (1992).

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Annual Report 2005

10.2 Remuneration of Management 10.2.1

Cash Remuneration

Remuneration of Directors of the Company (Only remuneration as directors and members of the Audit Committee) 2005 Name of Director

-

Nature of Remuneration -

-

-

235,000

monthly

4. Mr. Supong Chayutsahakij /1

-

-

5. Mr. Anukool Tuntimas /1

-

-

6. Mr. Somchai Sirilertpanich /2

210,000

monthly

7. Mrs. Nongnutch Thienpaitoon /3

175,000

monthly

8. Mrs. Vallapa Assakul /3

180,000

monthly

-

-

430,000

monthly

-

-

275,000

monthly

-

-

275,000

monthly

Amount (Baht)

1. Mr. Plew Trivisvavet /1 2. Dr. Sombat Kitjalaksana

/1

3. Mr. Ronnachit Yaemsaard

9. General Chetta Thanajaro

/3

As Director As Chairman of the Audit Committee 10. Mr. Vitoon Tejatussanasoontorn /3 As Director As Audit Committee Member 11. Lieutenant General Surat Sumrith As Director As Audit Committee Member Total

/2

1,780,000

Notes: Term of Office /1

/2

/3

Remuneration was presented in the topic of Total Remuneration of the Executive Committee and Executives Appointed as a director since 14 September 2004 until the Company received his resignation letter on 10 March 2005. The Company registered such resignation with the Ministry of Commerce on 23 March 2005. He was re-elected as a director on 26 May 2005. Appointed as a director since 26 May 2005.

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Annual Report 2005

Total Remuneration of the Executive Directors and Management

2005 Name

Number of Directors

Amount (Baht)

Nature of Remuneration

Total remuneration for executive directors

3

2,530,000

monthly

Total remuneration for management

4

16,112,345

salary, bonus, contributions to the provident fund and social security fund

Total

7

18,642,345

Note: “Management” means the Managing Director, top 4 executive positions inclusive, directly below the Managing Director, excluding the accounting or finance manager.

10.2.2

Other Remuneration On 30 June 2005, the Extraordinary General Meeting of Shareholders No. 1/2005 resolved

to issue and offer 450,000,000 new capital increase shares to the directors, management and staff of the Company (at the par value of Baht 1 each) and the Board of the Directors was authorised to allocate these shares. During 26 - 28 December 2005, 296,689,300 shares were allocated to the directors, management and staff of the Company.

The shares so allocated to the directors,

management and staff will be subject to a silent period for 2 years from the date the Company’s shares start trading on the Stock Exchange of Thailand. The directors, management and staff will be permitted to sell the shares at maximum of 50% of the locked-up shares every 12 months and 24 months thereafter from the date the Company’s shares start trading on the Stock Exchange of Thailand. Number of Shares in Bangkok Metro Public Company Limited held by the Directors and Management As at 31 January 2006 Number of Shares Held

Percentage of Shareholding (%)

1. Mr. Plew Trivisvavet

20,000,000

0.26

2. Dr. Sombat Kitjalaksana

15,000,000

0.20

3. Mr. Ronnachit Yaemsaard

-

-

4. Mr. Supong Chayutsahakij

15,000,000

0.20

5. Mr. Anukool Tuntimas

15,000,000

0.20

6. Mr. Somchai Sirilertpanich

15,000,000

0.20

7. Mrs. Nongnutch Thienpaitoon

15,000,000

0.20

8. Mrs. Vallapa Assakul

15,000,000

0.20

Name of Director and Management

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Annual Report 2005

9. General Chetta Thanajaro

15,000,000

0.20

10. Mr. Vitoon Tejatussanasoontorn

15,000,000

0.20

11. Lieutenant General Surat Sumrith

15,000,000

0.20

12. Mr. Witoon Hatairatana

10,000,000

0.13

13. Miss Pornpimol Chirtchoochai

10,000,000

0.13

14. Miss Sattabusya Mekvichai

10,000,000

0.13

10.3 Corporate Governance The Board of Directors of the Company realises the significant of the corporate governance for improving the transparency and responsibilities of the Board of Directors and management, and increasing the confidence of shareholders, investors and other related parties. The Company thus sets policies in support of good corporate governance, which contains the following fundamental principles: 1. Corporate Governance Policy (1) Equal and fair treatment to shareholders and other interested parties. (2) The Board of Directors is determined to create value added to the Company’s business on a long-term basis and to manage the business of the Company with due care and prudence, and to perform its duties with sufficient competency and efficiency, in order to optimise the benefit to the shareholders, to avoid conflicts of interest and to be responsible for their own decisions and management. (3) Management shall be transparent, allow for inspection and adequate information disclosure to all parties concerned. (4) Management shall operate the business by considering risks that might arise in relation to its business, and establishing appropriate risk control and management procedures. (5) The Company has set out a code of ethics for compliance by the directors and staff. 2. Shareholders: Rights and Equality The Company recognises the rights of all shareholders to receive accurate, adequate and complete information in due time to enable them to make decisions in shareholders’ meetings. Prior to all shareholders’ meetings, the Company shall send a notice convening the meeting, together with meeting agenda, to the shareholders and include an opinion from the Board of Directors on each agenda. Such notice will be sent at least seven days prior to any such meeting. The chairman of the meeting will allow the shareholders to inspect the operations of the Company on an equal basis, enquire and give opinions and other suggestions, and shall record issues that

47


Annual Report 2005

have been discussed and important opinions in the minutes of the meeting so that the shareholders will be able to examine such information. For shareholders who are not able to attend a meeting in person, the Company will allow those shareholders to empower the Chairman of the Audit Committee to attend the meeting and vote on their behalf. 3. Rights of Stakeholders The Company realises the importance of rights of all stakeholders, both internal stakeholders (that is, staff and management of the Company and its Subsidiaries), and external stakeholders (that is, competitors, creditors, the government sector and other related agencies). The Company realises that support from its stakeholders will create a competitive advantage and profit for the Company, which will help it to achieve its long-term success. 4. Shareholders’ Meetings To convene a shareholders’ meeting, the Company will choose an appropriate place and time that is convenient to shareholders. Directors, including the Chairman of the Audit Committee and the Chairman of the Executive Committee, will attend the meeting to answer any related queries. 5. Leadership and Vision The Company’s Board of Directors shall have leadership skills, vision, knowledge, competence and experience in various fields and be independent to make a decision in order to optimise their contributions to the Company and the shareholders. The Board of Directors has been involved in setting (or approving) vision, mission, strategy, objectives, business plan, and budget of the Company and has also taken steps to supervise management in carrying out the business plan and the budget efficiently and effectively in order to maximise the economic value of the business and security for the shareholders. 6. Conflict of Interest The Company recognises the significance of all transactions that may give rise to a conflict of interest, or are related party transactions. The Company has clearly specified a policy and regulations and procedures for considering and approving such transactions in accordance with the law, including the regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand, and has complied with good corporate governance principles to prevent conflicts of interests. The Company has also specified that any person who is connected to a transaction shall be required to inform the Company of his/her connection to such transaction and shall not be involved in any consideration or decision in relation to such transaction.

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Annual Report 2005

Furthermore, the Company has a policy and procedures relating to the use of insider information by management to prevent exploitation of insider information by management for personal gain. The Company has arranged to educate executives on their duties to report securities of the Company held by themselves or by their spouse and their minor children, including informing them of the relevant penalties under the Securities and Exchange Act B.E. 2535 (1992). Management are also required to report any changes in their securities holdings to the Securities and Exchange Commission under the Securities and Exchange Act B.E. 2535 (1992). In addition, the Company has prohibited management receiving insider information from taking any acts violating the provisions of the Securities and Exchange Act B.E. 2535 (1992) and other related laws.

The Company’s work rules prohibit the Company’s staff from disclosing confidential

information of the Company to any third party, or from unlawfully exploiting their positions for the advantage of themselves or others. Any violation of such rules shall lead to disciplinary actions and may result in the dismissal of employment. However, to date, there has never been any such incident of exploitation of information for personal advantage. 7. Code of Ethics relating to the Operation of the Business The Company has issued a code of ethics of the management and staff as guidelines for such persons to perform their duties in accordance with the Company’s mission, with integrity and fairness, including their treatment towards the Company, interested parties, the public, society, as well as the government sector. The Company is in the process of conducting an annual survey of the compliance with the said code of ethics. 8. Checks and Balances System for Directors who are not in the management The Board of Directors consists of not more than 13 qualified persons, as follows: -

5 directors who are in the management

-

4 independent directors

-

4 directors who are not in the management

The Company has four independent directors, representing approximately one-third of the Board of Directors, as directors who are not in the management to provide checks and balances. 9. Combination or Separation of Positions The Company plans to clearly separate the duties of the Company’s Board of Directors, the Executive Committee and the Managing Director under the assigned scope of work and authority. The authority, duties and responsibilities of the Executive Committee and the Managing Director will be subject to the supervision by the Board of Directors. In addition, the Chairman of 49


Annual Report 2005

the Board of Directors shall not be the same person as the Managing Director, in order to separate the setting of the corporate governance policy from the day-to-day management duties. The Company has also appointed an Audit Committee which consists of three independent directors to inspect the management of the Company. 10. Remuneration of Directors and Management Directors’ Remuneration

: The Company has clearly and transparently set out its policy on remuneration of directors and the Managing Director. The remuneration of directors is at a comparable level to the remuneration of directors in other similar businesses, and at a sufficient and appropriate level for the qualified positions of directors and the Managing Director.

Management’s Remuneration : The remuneration of management, excluding the Managing Director, follows the principle and policy as specified by the Executive Committee, which also takes into account the performance of the Company and of the management. 11. Meetings of the Board of Directors The Board of Directors will convene a meeting at least once every three months and may convene additional meetings as necessary. The agenda of the meetings will be clearly specified prior to the meetings. The Company will also normally include in the agenda a section to acknowledge the Company’s performance. The Office of the Managing Director, which acts as the secretary to the Company or the secretary to the Board of Directors, will, seven days prior to a meeting, send the notice convening the meeting specifying the agenda, and will also send other supporting documents three days prior to the meeting for the directors to have time to review the documents before attending the meeting. 12. Sub-Committees The Company has established three sub-committees, namely, the Audit Committee, the Nomination and Remuneration Committee and the Risk Management Committee. 13. Internal Control and Audit Systems The Company realises the significance of the arrangement for an internal control system. The Company thus has a manual of written rules and regulations governing work performance, with separation of duties and responsibilities for cross-checking purposes. The internal audit by

50


Annual Report 2005

the internal auditor can be independently performed and accurately reported, including the followup action and improvement of the internal auditor’s performance. The Company has five areas of internal control, namely, organisation and environment; risk management; operational control of management; information technology and communications system; and monitoring system. Furthermore, the results from internal audits shall be reported by the Audit Committee, which is appointed by the Board of Directors, at meetings of the Board of Directors. The Audit Committee shall hold a meeting every quarter, prior to each meeting of the Board of Directors and shall present the results of internal audits to the Board of Directors for its consideration. 14. Report of the Board of Directors The Board of Directors realises the importance of reporting by indicating in its report on the responsibilities of the Board of Directors towards the financial report in the annual report following the auditor’s report.

In addition, financial data and general information, such as,

shareholding structure, risk factors, and connected transactions, shall be correctly disclosed to shareholders and general investors in accordance with related laws and regulations. 15. Relationship with Investors The Board of Directors realises the significance of the accuracy, completeness, transparency and punctuality of information disclosure.

All of the financial data, results of

operations, and other related information, including important information that might affect price of the Company’s securities must be disclosed in accordance with the good corporate governance principles. Such information shall be released as news, so that investors and other related person can use the information for investment decisions, via the channels and media of the Stock Exchange of Thailand and the Office of the Securities and Exchange Commission, including the website of the Company (http://www.bangkokmetro.co.th). The Company has also established an Investor Relations Department, which includes management and officers who are responsible for public relations. For information, investors may contact Investor Relations Department at Tel. 0-2354-2000 ext. 3733-3735 or E-mail Address: ir@bangkokmetro.co.th.

10.4

Insider Information Supervision The Company has set the following guidelines to prevent the use of insider information as

per the resolution of the Board of Directors Meeting No. 3/2005 held on 10 March 2005.

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Annual Report 2005

10.4.1 General As the Company is a public limited company incorporated under the Public Limited Companies Act B.E. 2535 (1992) and is intending to have an initial public offering of its shares, following the listing of its shares on the Stock Exchange of Thailand, any sale or purchase of the Company’s securities by its management or staff based on material facts that may affect the market price of the shares or securities, which have not yet been disclosed to public, and which have been obtained by their duties or positions in the Company, would be considered as taking advantage of third parties, and may be subject to a criminal penalty under the law. Therefore, to prevent the Company’s staff and directors, including the Company itself, from encountering any such illegal acts which may violate such law, as well as to comply with good corporate governance guidelines of the Company, the Company’s Board of Directors has set guidelines to prevent the use of insider information. Such guidelines will be revised from time to time as appropriate and all directors, management and staff of the Company will strictly adhere to these guidelines with accountability as well as causes and effects on a case by case basis. These guidelines and policies will be more strict than the provisions of law, and will apply to directors, management and staff, including related persons. 10.4.2 Securities Sale and Purchase Using Insider Information Prohibited Persons Persons who should not sell or purchase securities pursuant to the guidelines to prevent the use of insider information are as follows: (1) Directors and management of the Company; (2) Directors and management of the Company’s Subsidiaries, including its affiliates; (3) All staff of the Company and of the Company’s Subsidiaries; (4) Spouses and minor children of the directors and staff; and (5) Relatives who live with such persons above. Prohibited Securities Securities refer to shares, share warrants, convertible debentures and transferable subscription rights issued by the Company. General Practice (1)

Prohibited persons as described above should not sell or purchase the securities under any circumstances if they are aware or should be aware of material information that

52


Annual Report 2005

may affect the market price of the Company’s securities, which has not yet been disclosed to the public. (2)

Prohibited persons who are in possession of such material information due to their duties and positions as the Company’s staff shall not disclose such information to any other person while such information has not yet been disclosed to the public, unless it is done in the performance of their duties in the Company.

Specific Guidelines In addition to the general guidelines to prevent the use of insider information, Prohibited Persons shall also follow the following guidelines: (1)

Prohibited persons who are directly involved in the preparation of the Company’s financial statements and balance sheet, are prohibited any purchase or sale from the commencement of such preparation until the day immediately following the disclosure date of such financial statements.

(2)

Any directors, management or staff who have received the draft financial statements as referred to above, are prohibited from selling or purchasing the Company’s securities from the day that they receive the draft financial statements until the disclosure date of the financial statements.

(3)

Prohibited persons, who know or should have known that the Company will disclose material information that may affect the market price of the Company’s securities, are prohibited from selling or purchasing the Company’s securities from the day that they know or should have known such information until the disclosure date of such information.

10.4.3 Report of Prohibited Persons A. Duty to Prepare Reports (1)

Directors, managers or persons who hold management positions as specified in the Securities and Exchange Act shall be required to prepare disclosure reports of their initial securities holdings, and changes in such holdings, pursuant to the relevant laws and regulations, together with such reports to the Company.

(2)

Officers in the position of division head or above shall report all acquisitions or disposals of securities holdings equal to 5% or more of the total issued shares.

B. Reporting Procedures (1)

Directors, managers or persons as specified in paragraph A. (1) above who have the duty under law to disclose their securities holdings, their spouse’s securities

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Annual Report 2005

holdings, and their minor children’s securities holdings to government agencies or regulators shall submit copies of such reports to the Company on the same day. (2)

Officers as specified in paragraph A. (2) shall disclose their securities holdings and changes in their own securities holdings as per paragraph B. (1) as well as holdings of their spouses and their minor children, to the Company within seven business days from the date of change in title to the Securities.

10.5

Internal Control On 24 May 2005, the Meeting of the Board of Directors No. 5/2005 was held to assess the

adequacy and suitability of the Company’s internal control system according to the internal control evaluation guidelines as prescribed by the Office of the Securities and Exchange Commission. Having inquired of the management, the Company concluded that the Company’s internal control system is adequate with respect to the following 5 areas: organisation and environment; risk management; operational control of management; information technology and communications system; and monitoring system. Organisation and Environment The Company has an appropriate organisational structure that ensures the efficiency in the operation of management. In addition, it has in place business goals and operational policies and guidelines which are clear and assessible, and include written codes of conduct, to prevent potential damage to assets of the Company and its Subsidiaries, including prevention of any misconduct by the Company’s management and staff. Risk Management The Company has established a Risk Management Committee responsible for managing, reviewing and maintaining the overall risk management system of the Company at an appropriate level. The Committee provides suggestions to the Board of Directors in relation to risk management policies, standard practice and strategy, and risk assessment in each matter and of the Company as a whole to ensure efficient and effective risk management, as well as preparing risk reports to the Board of Directors for acknowledgement. Operational Control of Management The Company clearly sets the scope of duties, responsibilities and transaction limits for each level of management in writing. In addition, for any transactions with major shareholders, directors, management or related parties, the Company has thorough guidelines in place to monitor and prevent any conflicts of interests to optimise the Company’s interests, including regularly 54


Annual Report 2005

monitoring the operations of the Subsidiaries and establishing guidelines for the persons as nominated and appointed as directors or management in the Subsidiaries to adhere thereto. Information Technology and Communications System The Company pays significant attention to its information technology and communications systems to ensure that the Company’s information is accurate, complete and adequate for the decision-making by the management and the Board of Directors, and maintains a system for storage of accounting records and all supporting documents in an organised manner, as well as using generally accepted accounting principles as appropriate to the nature of the Company’s business. Monitoring System The Company regularly monitors the results of operations against the set targets. Any material differences are reported to the Board of Directors/the Audit Committee for correction, which shall then be regularly reported on the progress of the correction. In addition, the Company also has policies in place for the management to immediately report to the Board of Directors any fraud, violation of law and other misconducts which may materially affect the Company’s reputation and financial condition.

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Annual Report 2005

11. Route Map of the M.R.T. Chaloem Ratchamongkhon Line Project

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Annual Report 2005

12. Related Party Transactions Transactions with persons who may have conflict of interest in the years 2004 and 2005. Persons/Juristic persons who may have conflict of interest

Relationship

1. CH. Karnchang - CH. Karnchang Public Public Company Company Limited is a major shareholder of the Company, Limited with 23.23% and 28.23% of shares in the Company, as at 31 January 2005 and 31 January 2006, respectively. - Mahasiri Siam Company Limited is a major shareholder of the Company, with 11.91% of shares in the Company as at 31 January 2006, and with 22.25% of shares in CH. Karnchang Public Company Limited. - Mr. Plew Trivisvavet, an executive director and in the management of CH. Karnchang Public Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company. - Mr. Sombat Kitjalaksana, the Managing Director of the Company, and Mr. Anukool Tuntimas, an executive director of the Company, are also in the management of CH. Karnchang Public Company Limited.

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

The Company - Project Costs

10,446.71

- Costs of Fare

4,280.00

- Construction and Other Payables (These three transactions are incurred from the Company’s hiring CH. Karnchang Public Company Limited to design and construct a depot and to maintain the existing civil infrastructure work and the depot.)

2,853.33

Necessity/Details

Year 2005

Opinions of the Audit Committee

- CH. Karnchang Public - The Company hired CH. Company Limited is an Karnchang Public Company experienced and specialised Limited for a total value of Baht 10,343.33 company in construction, and 900 million, to design and was also responsible for the construct a depot on 22 January 13,196.67 2002, as amended on 30 July 2003. civil infrastructure work in relation to this project from The construction was 100% Hua Lamphong Station to completed. Moreover, the Phra Ram 9 Station. The Company hired CH. Karnchang hiring was made in the form Public Company Limited for a of contract and payments are total value of Baht 85 million, to made according to the terms maintain the existing civil of the contract. infrastructure work in the area of the depot for 7 years from 1 March - Benaim (UK) Limited, an engineering consultant of the 2004 to 28 February 2011. Payments are made quarterly. The syndicated lenders, opined that the construction and Company recognises these maintenance costs are maintenance costs as cost of fare reasonable. after the commencement of operations. -

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest

Relationship

1. CH. Karnchang - CH. Karnchang Public Public Company Company Limited is a major shareholder of the Company, Limited with 23.23% and 28.23% of (Continued) shares in the Company, as at 31 January 2005 and 31 January 2006, respectively. - Mahasiri Siam Company Limited is a major shareholder of the Company, with 11.91% of shares in the Company as at 31 January 2006, and with 22.25% of shares in CH. Karnchang Public Company Limited. - Mr. Plew Trivisvavet, an executive director and in the management of CH. Karnchang Public Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company. - Mr. Sombat Kitjalaksana, the Managing Director of the Company, and Mr. Anukool Tuntimas, an executive director of the Company, are also in the management of CH. Karnchang Public Company Limited.

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

The Company - Amounts Due from Related Parties (relating to the Company’s sales of stored value cards)

- Administrative Expenses (relating to the Company’s payment of costs of installation of boards in the train stations and additional decorations around King Rama V statue in front of the Administration Building) - Construction and Other Payables

Necessity/Details

Year 2005

Opinions of the Audit Committee

360.00

92.72 - The Company sold stored value - The transaction was cards to CH. Karnchang Public conducted in the ordinary Company Limited and recognised course of business and the such sales as income when the discount was at the same rated cards were used. as for general customers.

6.81

24.91 - The Company paid Baht 6,806.00 - These were an urgent works in for the installation of boards in the respect of which CH. train stations and Baht 24,909.60 Karnchang Public Company for additional decorations around Limited became familiar with King Rama V statue in front of the the areas and was capable of Administration Building. coordinating and completing the works in time.

-

-

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest

Relationship

1. CH. Karnchang - CH. Karnchang Public Public Company Company Limited is a major shareholder of the Company, Limited with 23.23% and 28.23% of (Continued) shares in the Company, as at 31 January 2005 and 31 January 2006, respectively. - Mahasiri Siam Company Limited is a major shareholder of the Company, with 11.91% of shares in the Company as at 31 January 2006, and with 22.25% of shares in CH. Karnchang Public Company Limited. - Mr. Plew Trivisvavet, an executive director and in the management of CH. Karnchang Public Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company. - Mr. Sombat Kitjalaksana, the Managing Director of the Company, and Mr. Anukool Tuntimas, an executive director of the Company, are also in the management of CH. Karnchang Public Company Limited.

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

Year 2005

- Long-term Loans

-

- Accrued Interest

-

- Interest Expenses (arising from the Company’s borrowing of loans from CH. Karnchang Public Company Limited to the Company to finance the Company’s working capital, as sponsor support)

-

- Short-term Loan

-

- Accrued Interest

-

- Interest Expenses

-

Necessity/Details

Opinions of the Audit Committee

- The transactions are in 1,403,000.00 - The Company entered into accordance with the Sponsor subordinated loan agreements with Support Agreement. The 35,752.81 CH. Karnchang Public Company interest rate and terms of Limited on 11 March 2005/27 May payment are in accordance 35,752.81 2005/27 July 2005/25 August 2005/ with the conditions as 28 October 2005/30 November specified by the syndicated 2005/23 December 2005 and 30 lenders December 2005, for Baht 380.00 million/Baht 150.00 million/Baht 80.00 million/Baht 330.00 million/Baht 80.00 million/Baht 50.00 million/Baht 100.00 million and Baht 233.00 million, respectively, to finance the working capital and to maintain the debt-toequity ratio at not exceeding 2:1 pursuant to the conditions as specified by the syndicated lenders. These loans were subordinated and interest was charged at the rate of MLR+0.5% per annum. The loans are due and payable when there are sufficient residual amounts after provisioning for operating and investing activities, and the repayment of principal and interest, including other reserves in accordance with the conditions as specified by the syndicated lenders. - - The Company issued to CH. Karnchang Public Company Limited a short-term promissory note totaling Baht 233 million, at the interest rate of MLR+1.0% per annum. However, the short-term loan was 3,050.25 converted to be a long-term loan on 30 December 2005.

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest

Relationship

1. CH. Karnchang - CH. Karnchang Public Public Company Company Limited is a major shareholder of the Company, Limited with 23.23% and 28.23% of (Continued) shares in the Company, as at 31 January 2005 and 31 January 2006, respectively. - Mahasiri Siam Company Limited is a major shareholder of the Company, with 11.91% of shares in the Company as at 31 January 2006, and with 22.25% of shares in CH. Karnchang Public Company Limited. - Mr. Plew Trivisvavet, an executive director and in the management of CH. Karnchang Public Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company. - Mr. Sombat Kitjalaksana, the Managing Director of the Company, and Mr. Anukool Tuntimas, an executive director of the Company, are also in the management of CH. Karnchang Public Company Limited.

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

Year 2005

Necessity/Details

Opinions of the Audit Committee

Metro Mall Development Limited - Project Construction Cost

198,976.65

- Construction Payables

190,817.36

- Advance Payment for Construction

15,279.31

- Interest Expenses

4,183.29

- Accrued Interest (arising from hiring CH. Karnchang Public Company Limited to carry out construction)

4,183.29

18,243.42 - Metro Mall Development Limited - The contract was made with hired CH. Karnchang Public clear terms of payment. 206,179.66 Company Limited for a project - CH. Karnchang Public value of Baht 292.5 million to Company Limited is an construct the interior of the train experienced and specialised 12,421.99 stations to support the lease of company in this type of work retail shops. However, Metro Mall and was also responsible for the Development Limited has just civil infrastructure work in 13,610.46 started to generate revenue from relation to each train station. commercial development, it is not CH. Karnchang Public 17,203.16 yet able to pay the construction Company Limited has cost. CH. Karnchang Public information of electric systems Company Limited has charged and civil work, which would interest to Metro Mall enhance the efficiency in Development Limited at the rate of construction of such project. MLR+1.0% per annum. - A memorandum of agreement, - Approval from the MRTA is dated 3 June 2005, was required for such construction, in executed amending the original relation to safety. contract stipulating certain conditions and the interest rate arising from the delay in payment by Metro Mall Development Limited. The interest rate charged by CH. Karnchang Public Company Limited is in line with the rate that CH. Karnchang Public Company Limited charges other customers and close to the rate that Metro Mall Development Limited may borrow from commercial banks.

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest 2. CK. Office Tower Company Limited

Relationship

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

- CK. Office Tower Company Limited is an associated company with common directors. - CK. Office Tower Company Limited has interests in the Company through its 6.88% holding of shares in CH. Karnchang Public Company Limited. - The major shareholders of CK. Office Tower Company Limited are Mahasiri Siam Company Limited, the Trivisvavet Family and Mr. Anukool Tuntimas, holding 25%, 62.5% and 12.5% in CK. Office Tower Company Limited, respectively. - Mr. Plew Trivisvavet, a director of CK. Office Tower Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

The Company - Administrative Expenses

- Accrued Expenses (arising from the disbursement of public utilities expenses on behalf of a Subsidiary)

Metro Mall Development Limited - Selling and Administrative Expenses - Construction and Other Payables (arising from rental of office space and public utilities expenses)

Necessity/Details

Year 2005

29.64

-

1,307.62 13.97

-

-

Opinions of the Audit Committee

- The Company paid for public - The public utilities rate utilities expenses on behalf of a charged by CK. Office Tower Subsidiary, namely, BMCL Company Limited to the Network Limited, which rented Company is close to the rate office space after the Company’s charged to general customers. lease expired. The Company has These transactions ended already received payments in full. since the Company moved to a new office.

1,774.84 - Metro Mall Development Limited - This rental rate is comparable entered into an office space lease to the rental rates charged by and service agreement on the 1st the lessor to third party floor, covering a total area of lessees, which range Baht 349.63 square metres, for a period 270-370 per square metre. of 3 years, from 1 February 2004 until 31 January 2007. The rental and service charge rate is Baht 340 per square metre per month.

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest 2. CK. Office Tower Company Limited (Continued)

Relationship

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

- CK. Office Tower Company Limited is an associated company with common directors. - CK. Office Tower Company Limited has interests in the Company through its 6.88% holding of shares in CH. Karnchang Public Company Limited. - The major shareholders of CK. Office Tower Company Limited are Mahasiri Siam Company Limited, the Trivisvavet Family and Mr. Anukool Tuntimas, holding 25%, 62.5% and 12.5% in CK. Office Tower Company Limited, respectively. - Mr. Plew Trivisvavet, a director of CK. Office Tower Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

BMCL Network Limited - Selling and Administrative Expenses

- Construction and Other Payables (arising from rental of office space and public utilities expenses) Triads Networks Company Limited - Selling and Administrative Expenses - Construction and Other Payables (arising from rental of office space and public utilities expenses)

2,396.56

259.07

969.69 1,531.24

Year 2005

Necessity/Details

Opinions of the Audit Committee

2,968.28 - BMCL Network Limited entered - This rental rate is comparable into an office space lease and to the rental rates charged by service agreement on the 12th the lessor to other lessees. floor, covering a total area of 248.13 651.24 square metres, for a period of 3 years, from 16 January 2004 until 15 January 2007. The rental rate and service charge is Baht 320 per square metre per month.

1,857.21 - Triads Networks Company - This rental rate is comparable Limited entered into an office to the rental rates charged by the lessor to other lessees. 1,299.11 space lease and service agreement on the 9th floor, covering a total area of 461.76 square metres, for a period of 3 years, from 1 June 2004 until 31 May 2007. The rental and service charge rate is Baht 300 per square metre per month.

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest 3. Joint Venture CKET

Relationship

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

- Joint Venture CKET is an associated company. - Joint Venture CKET is a joint venture between CH. Karnchang Public Company Limited and Expert Transport Company Limited at 80% and 20%, respectively. - CH. Karnchang Public Company Limited holds 28.23% of shares in the Company. - Mahasiri Siam Company Limited, a major shareholder of the Company, holds 90% of shares in Expert Transport Company Limited. - Mr. Plew Trivisvavet, a director of Joint Venture CKET, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

Year 2005

The Company - Project Costs

99,991.50

- Costs of Fare

42,800.00

- Construction and Other Payables (arising from project management fees)

- Selling and Administrative Expenses - Construction and Other Payables (arising from the preparation of the opening ceremony areas)

Necessity/Details

8,560.00

185.04 -

Opinions of the Audit Committee

- The Company hired Joint Venture - The transactions are in accordance with the CKET, for a total value of Baht conditions of the Concession 62,060.00 2,275.22 million, as project Agreement which requires the manager to oversee the design, Company to appoint CH. 70,620.00 procurement, installation and testing of the M&E Equipment and Karnchang Public Company Limited, an affiliated the train operations, and to company, or any other party, continually oversee such activities as project manager, subject to for a period of the first 5 years approval from the MRTA. after the commencement of the train services. The contract term - The transactions are in the will expire in July 2009. Payments ordinary course of business with payments made pursuant are due and payable monthly. The to the terms of the relevant Company recognises these ongoing costs as costs of fare after contract. - Joint Venture CKET has both the commencement of revenue Thai and foreign teams with service. experience and expertise in engineering works, contract documents, which ensure that all contractors of the Company shall comply with the contract. - - The Company hired Joint Venture - The hiring of Joint Venture CKET to prepare areas for the CKET was urgent, and Joint opening ceremony of the metro Venture CKET, as project system. manager, was familiar with the relevant areas. -

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest 3. Joint Venture CKET (Continued)

Relationship

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

- Joint Venture CKET is an The Company associated company. - Selling and Administrative - Joint Venture CKET is a joint Expenses venture between CH. - Construction and Other Karnchang Public Company Payables Limited and Expert Transport (arising from the Company Limited at 80% and disbursement of electricity 20%, respectively. costs) - CH. Karnchang Public Company Limited holds 28.23% of shares in the Company. - Mahasiri Siam Company Limited, a major shareholder of the Company, holds 90% of shares in Expert Transport Company Limited. - Mr. Plew Trivisvavet, a director of Joint Venture CKET, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

Necessity/Details

Year 2005

130.03

-

130.03

-

Opinions of the Audit Committee

- The said transaction is - Joint Venture CKET made reasonable to prevent impact advance payments for electricity on the Company’s business used at the stations before the operations. commencement of the train operations in the amount of Baht - The electricity costs demanded by Joint Venture 130,027.25. As the stations have CKET are the same as the many electricity meters, it has not been concluded as to which meters amount billed by the Metropolitan Electricity will be under the responsibility of Authority to the Company. the MRTA and which will be Therefore, the transaction is under the responsibility of the considered reasonable and Company. Therefore, Joint fair. Venture CKET made advance payments for electricity to avoid the Metropolitan Electricity Authority disconnecting the electricity service. At present, the Company paid such electricity costs, as such costs are considered as expenses of the Company. The entity responsible for the costs of electricity recorded in each of the meters has been clearly identified. All electricity meters are the property of the MRTA.

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest 4. Expert Transport Company Limited

Relationship

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

- Expert Transport Company The Company Limited is an associated - Administrative Expenses company with common - Construction and Other directors. Payables - Mahasiri Siam Company (arising from vehicle leases) Limited , which is major shareholders of the Company and CH. Karnchang Public Company Limited, hold 90% of shares in Expert Transport Company Limited, the remaining 8.02% is held by the Trivisvavet Family. - Mr. Plew Trivisvavet, a director of Expert Transport Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

754.35 -

Necessity/Details

Year 2005

-

Opinions of the Audit Committee

- The Company rented 2 office cars - The rental rates and terms of for its 2 management staff at the the rent are comparable to the rates comparable to the market market rates. rates. - After the Company had purchased office cars, the car rents were terminated since December 2004.

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest 5. Joint Venture BCKT

Relationship

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

- Joint Venture BCKT is an associated company with common directors. - CH. Karnchang Public Company Limited, a major shareholder of the Company, holds 25% of shares in Joint Venture BCKT. - Mr. Plew Trivisvavet, a director of Joint Venture BCKT, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

The Company - Project Costs - Administrative Expenses - Construction and Other Payables (arising from lease transaction)

- Project Costs - Amounts Due from Related Parties (arising from signaling and automatic doors installation costs)

Necessity/Details

Year 2005

153.00

-

65.45

-

-

-

(22,427.94)

-

23,997.90

-

Opinions of the Audit Committee

- The rental rate is comparable - The Company entered into an office building lease agreement for to the market rates. However, the employment conditions an independent engineer under the were terminated, therefore, the employment conditions, with an transaction has ended. approximate area of 200 sq.m. at the rental rate of Baht 25,500 per month, ending in September 2004. Before commencement of the services, the rental was recorded as project costs and will be recognised as administrative expenses after the commencement of the services. - The Company demanded payment - Such transaction is necessary and reasonable as it relates to for installation of the Emergency the SCADA system, which is Egress Signage and Door important for the safety of the Monitoring which the Company system. This is also in carried out such work in lieu of Joint Venture BCKT, as contractor accordance with the memorandum of agreement for the civil infrastructure of the among Joint Venture BCKT, MRTA. The installation of the the MRTA and the Company. said equipment should have been The costs of installation and completed in accordance with the the terms of the transaction contract. However, such work are in line with the agreement must be linked with the SCADA system of the Company, therefore, among the three related parties. The terms of payment the Company must proceed with are as set out in the such work concurrently with the memorandum of agreement. installation of the Company’s system and collect such expenses from Joint Venture BCKT, which have been settled.

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest 6. Krung Thai Bank Public Company Limited

Relationship

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

- In 2004, Krung Thai Bank Public Company Limited held 10.00% of shares in the Company. In 2005, Krung Thai Bank Public Company Limited reduced its shareholding proportion to 9.86% and, at present, shareholding proportion of Krung Thai Bank Public Company Limited is 9.48%. - Mrs. Nongnutch Thienpaitoon, an executive of Krung Thai Bank Public Company Limited, is a director of the Company.

The Company - Accounts Payable: Longterm Loans - Accrued Interest

Year 2005

4,657,868.85

-

- Interest Expenses

143,348.48

- Project Costs (Interest Expenses)

127,177.62

- Bank Fees - Net Accounts Receivable under Forward Contract

11,310.17

Necessity/Details

Opinions of the Audit Committee

4,735,658.05 - The Company entered into the - The terms are in the ordinary Onshore Facilities Agreement with course of business under four Thai commercial banks, which commercial banks lend Krung Thai Bank Public Company to general large-sized Limited, TMB Bank Public businesses. Company Limited, Bank of 296,366.24 Ayudhya Public Company Limited and Siam City Bank Public Company Limited, for the total amount of Baht 12,150 million to pay for the relevant project costs and the procurement of the M&E 146.40 Equipment under the Concession Agreement. - - The Company executed a foreign - This is a transaction in the exchange forward contract with ordinary course of business. the lending banks to prevent The prescribed exchange rate foreign exchange risks in is comparable to the market connection with the payment for rates. procurement of the M&E Equipment. At present, the said contract has terminated.

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest 6. Krung Thai Bank Public Company Limited (Continued)

Relationship

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

- In 2004, Krung Thai Bank The Company Public Company Limited held - Project Costs 10.00% of shares in the (Guarantee Fee) Company. In 2005, Krung Thai Bank Public Company - Letter of Guarantee Fees Limited reduced its shareholding proportion to 9.86% and, at present, shareholding proportion of Krung Thai Bank Public Company Limited is 9.48%. - Mrs. Nongnutch Thienpaitoon, an executive of Krung Thai Bank Public Company Limited, is a director of the Company. - Project Costs - Bank Fees

Necessity/Details

Year 2005

215.70

-

4,280.00 -

Opinions of the Audit Committee

- The Company has letters of - The terms are in the ordinary guarantee issued by Krung Thai course of business for the Bank Public Company Limited same nature of transactions. 163.99 remaining in the name of the Company as security, in favor of the Metropolitan Electricity Authority for the installation of electric meters at the electricity sub-stations around the depot and the Administration Building. The bank fees are at the rate of 1.5% per annum. -

-

- The Company appointed Krung - The fees are based on the Thai Bank Public Company ordinary terms applied by the 4,280.00 Limited as the Facility Agent commercial banks in respect according to the terms of the of major clients. Onshore Facilities Agreement. The Company is required to pay fees at the rate specified in the fee letter as executed on the same date of the Onshore Facilities Agreement with the four financial institutions.

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Annual Report 2005

Persons/Juristic persons who may have conflict of interest 6. Krung Thai Bank Public Company Limited (Continued)

Relationship

Nature of Transaction

Transaction Value (Thousand Baht) Year 2004

- In 2004, Krung Thai Bank The Company Public Company Limited held - Commercial Development 10.00% of shares in the Revenue Company. In 2005, Krung Thai Bank Public Company Limited reduced its shareholding proportion to 9.86% and, at present, shareholding proportion of Krung Thai Bank Public Company Limited is 9.48%. - Mrs. Nongnutch Thienpaitoon, an executive of Krung Thai Bank Public Company Limited, is a director of the Company.

Year 2005

-

Necessity/Details

Opinions of the Audit Committee

1,292.00 - Krung Thai Bank Public Company - This is a transaction in the ordinary course of business. Limited leased spaces for 17 automatic teller machines (ATMs) The prescribed rental rate is at the same rate as applied to from 11 March 2005 - 31 May other customers. 2008 at the rental rate of Baht 12,000 per month per machine. There was a one-time installation fee of Baht 10,000 per machine which was the same rate and subject to the same terms as general customers.

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Annual Report 2005

Necessity and Justification of the Related Party Transactions At the Meeting of the Board of Directors No. 5/2005 on 24 May 2005, the Audit Committee jointly considered and reviewed the related party transactions, with the Company’s management, and opined that the transactions between the Company and persons or juristic persons who may have a conflict of interest were justified and necessary for the Company’s business operations. Measures or Steps for the Approval of Related Party Transactions The Company complied with the rules and regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand. In the case where the Company is entering into a related party transaction that may give rise to a conflict of interest, such a transaction must be approved by the Board of Directors and the Audit Committee would consider the justification of the transaction whilst taking into account the best interests of the Company. The determination of price and terms of the transaction must be based on the ordinary course of business and must be a fair price or be comparable to the market price. Furthermore, any person who has any interest or who may have a conflict of interest in connection with such transaction shall not be allowed to participate in the consideration and approval of such transaction. A related party transaction that is necessary and urgent with a transaction value of not exceeding Baht 100,000 or, if more than one transaction, in aggregate of not exceeding Baht 2,000,000 within a 12-month period, may be carried out, provided that a report on each transaction must be made to the Audit Committee, indicating its necessity and justification of the transaction. Policy or Future Trend of Related Party Transactions The Company shall comply with the rules and regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand, including the rules on the disclosure of related party transactions as well as acquisition and disposition of assets of the Company or its Subsidiaries and the accounting standards as prescribed by the Federation of the Accounting Professions. If there are transactions which may give rise to conflict of interest in the future, such as, hiring a group of persons who may have conflict of interest to carry out construction, project management, project maintenance, the Board of Directors, with the Audit Committee, shall consider the necessity and justification of such transactions, including the determination of price and terms of the transactions, which must be based on the ordinary course of business. The price must also be compared with the price applicable to third parties or the market price. A person who has any interest shall not be allowed to participate in the consideration and approval of the transactions. The Company has no policy to extend or guarantee a loan for a person who may have a conflict of interest under the definition of the SEC. In case that the Audit Committee does not have expertise to consider any particular related party transaction which may take place, the Company shall arrange for an independent expert or the Company’s auditor to opine on such related party transaction to support the decision-making of the Board of Directors and/or the Audit Committee or the shareholders, as the case may be. The Company will disclose the related party transactions in the notes to the financial statements that have been reviewed or audited by the Company’s auditor.

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Annual Report 2005

13. Financial Condition and Results of Operations 13.1

Overview of the Results of Past Operations

The Company was awarded the Concession for the first underground mass transit system project in Thailand for a Concession period of 25 years in relation to the M.R.T. Chaloem Ratchamongkhon Line (Blue Line), which is the main route for the railway mass transit system connecting the north-west, north, north-east and east of Bangkok to the city centre, and commenced its commercial services on 3 July 2004. The Company has been responsible for the design, manufacture, supply, installation, testing, commissioning and maintenance of the MRTA Initial System. The Company has been exclusively entitled to collect fares and to operate commercial development activities, including advertising and leasing of retail areas in the stations. Under the Concession Agreement, the Company is obliged to pay remuneration to the MRTA at the rates as specified in the Agreement, comprising remuneration from fare revenue and remuneration from commercial development. At the end of the Concession Agreement, the Company is required to hand over the title to the M&E Equipment, including the depot and administration building, to the MRTA according to the AOT (Acquire, Operate and Transfer) basis. The Company has licensed its Subsidiaries to operate the main parts of its commercial development activities: (i) Metro Mall Development Limited to manage the retail areas; (ii) Triads Networks Company Limited to operate advertisements; and (iii) BMCL Network Limited to service and maintain equipment for telecommunications systems. The Company will receive remuneration in the form of a percentage of its Subsidiaries’ revenue before expenses and dividend income from its Subsidiaries. The Company started the operation on 3 July 2004, and generated fare revenue and total revenue of Baht 443.15 million and Baht 445.88 million, respectively, for the year 2004. For the year 2005, the Company generated fare revenue and total revenue of Baht 990.39 million and 1,046.00 million, respectively. The average daily passengers in 2005 (calculated from a total of 350 days of service) amounted to 163,403 passengers, representing an increase from 147,458 passengers for the year 2004 (calculated from 3 July to 31 December 2004, a total of 182 days of service), or representing an increase of 10.81% from 2004. Costs and expenses of the Company before the service commencement date related mostly to project development, such as, management and consultant fees, design costs, electrical and mechanical work and rolling stock, interest expenses and financial costs. These were capitalised as project costs and amortised according to the number of passengers throughout the Concession period. The Company uses the Unit of Throughput Amortization Method which complied with Thai GAAP and used by other companies, such as, Bangkok Expressway Public Company Limited, Bangkok Mass Transit Public Company Limited and The Eurotunnel, a train service provider in Europe. The Units of Throughput Amortization Method takes into account the ratio between the actual number of passengers in each period, 71


Annual Report 2005

and the number of passengers in such period plus the forecasted number of passengers for the remaining Concession period. The project cost amortisation will increase as the number of passengers increases which will also result in an increase in fare revenue. The Company has a policy to regularly review the forecasted number of passengers, particularly, in the event that the actual number of passengers differs from the forecast by more than 20%. As the Company is in an early stage of operation, the initial revenue of the Company may remain low as target passengers have been going through a period of behavior adjustment and it would take some time for them to become familiar with the metro commute, which is a rather new form of mass transit for Thailand.

In addition, during the initial stage of service

commencement, the Company used a marketing strategy that included a fare reduction in order to attract potential passengers, thereby rendering the Company’s revenue during the initial years to gradually increase. Since the Company’s costs mainly comprised fixed costs, particularly, maintenance cost and amortisation of the project cost, the Company and its Subsidiaries incurred net losses for the years 2003, 2004 and 2005 of Baht 72.49 million, Baht 957.21 million, and Baht 1,715.99 million, respectively. Nevertheless, the Company is confident that the number of passengers on the M.R.T. Chaloem Ratchamongkhon Line will increase continuously. This is evident from the increase in the average daily passengers during the recent period due to the traffic congestion problems and the increase in oil prices. If the other railway mass transit system projects in Bangkok which are being accelerated by the government sector are completed, such event would well serve as a key factor to feed more passengers to the M.R.T. Chaloem Ratchamongkhon Line, which will cause the number of passengers on the Company’s Chaloem Ratchamongkhon Line to increase rapidly. Moreover, the Company has started to generate revenue from commercial development since the third quarter of 2005, amounting to Baht 53.34 million for the Company and its Subsidiaries in the year 2005. The expenses of the Company relating to commercial development are not high as it uses the existing infrastructure to generate additional revenue. The Company is therefore confident that the results of its operations will improve in the future. With respect to the train collision accident at the Thailand Cultural Center Station on 17 January 2005, the damage to the station area and various systems have been repaired and tested by experts in the Company, the MRTA and other relevant organisations to ensure the safety of the operation. The metro service resumed on 1 February 2005. A repair to the damaged trains is expected to be completed in October 2006. With respect to the damage to the trains and the systems at the station, the Company is responsible for deductible of US$ 250,000 or approximately Baht 10.00 million which has been realised in full as an expense during the period from January to September 2005. The expenses relating to the accident over and above this amount are covered by the insurance companies. Medical expenses and other compensation to injured passengers had been paid by the insurance companies.

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Annual Report 2005

13.2

Analysis of Results of Operations

In analysing the results of operations of the Company and its Subsidiaries, as the Company started to generate revenue from its operation since 3 July 2004, and for comparison purposes, the analysis will be divided into two periods. The first period is for the first half of 2005 (1 January – 30 June 2005) compared with the performance for the year 2004 (1 January – 31 December 2004), and the second period is for the second half of 2005 (1 July – 31 December 2005) compared with the first half of 2005 (1 January – 30 June 2005). This comparison period was based on an equal six month operation. Total Revenue Total revenue of the Company and its Subsidiaries comprises fare revenue, fare compensation revenue, revenue from commercial development and other income. Total revenue of the Company and its Subsidiaries for the first six months of 2005 was Baht 402.04 million, representing a decrease from Baht 445.88 million for the year 2004, or a decrease of Baht 43.84 million, due to the fact that the average fare during the first half of 2005 was 10.36% lower than the average fare for the year 2004 as a result of the Company’s sales promotion policy and the reduced number of days of service caused by the train collision accident in January 2005. Total revenue of the Company and its Subsidiaries for the last six months of 2005 was Baht 643.97 million, representing an increase by Baht 241.93 million or an increase of 60.18% compared with total revenue of Baht 402.04 million for the first six months of 2005. The result was mainly due to the increase of Baht 190.34 million in fare revenue of the Company or an increase of 47.58%, and the increase of Baht 51.48 million in revenue from commercial development. Fare Revenue Fare revenue was the main source of revenue of the Company. For the year 2004, fare revenue totaled Baht 443.14 million or 99.39% of total revenue, which was generated for a six month period (3 July – 31 December 2004), with an average revenue per day of Baht 2.43 million (calculated from a total of 182 days of service). The average daily passengers amounted to approximately 147,458 passengers, with the average daily fare per passenger of Baht 16.51 and the average trip length of 6.04 stations over this period. Fare revenue in the first six months of 2005 was Baht 400.03 million (included the fare compensation revenue of Baht 20.48 million), or representing an average revenue per day of Baht 2.41 million (calculated from a total of 166 days of services). The average daily passengers amounted to approximately 161,896 passengers, with the average fare per passenger of Baht 14.88 and the average trip length of 6.38 stations over this period. Fare revenue in the first six months of 2005 was approximately 9.73% less than fare revenue for the year 2004 although the average daily passengers increased by 9.79%

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as the average fare rate in the first six months of 2005 was 10.36% lower than the average fare rate for the year 2004 due to the Company’s sales promotion policy. Moreover, the number of days of service in the first six months of 2005 was lower than that for the year 2004 as a result of the train collision accident in January 2005. With respect to the results of operations for the last six months of 2005, the Company generated fare revenue of Baht 590.36 million, or an average revenue per day of Baht 3.21 million (calculated from a total of 184 days of service).

The average daily passengers amounted to approximately 164,762

passengers, with the average fare per passenger of Baht 19.47 and the average trip length of 5.87 stations over this period. The increase of total fare revenue was due to the total of 184 days of service for the last six months of 2005, which was higher than the total of 166 days of service for the first six months of 2005. Based on the day of service, the average fare revenue per day for the last six months of 2005 was Baht 3.21 million, representing an increase of 33.20% from the period of the first six months of 2005. The result was due to the increase at 1.77% of the average daily passengers and the increase at 30.85% of the average fare rate per passenger, compared with the first six months of 2005. The fare rate for the period of 7 January – 4 June 2005 was a special discounted fare rate as agreed between the Company and the MRTA to promote the use of the metro service. From 5 June 2005, the fare rate was adjusted at a discount of 15 – 20% from the fare rate per the Concession Agreement. The fare rate was re-adjusted according to the Concession Agreement on 1 October 2005, representing the increasing average fare rate for the last six months of 2005. Fare Compensation Revenue The Company received fare compensation revenue from the MRTA for the first six months of 2005 totaling Baht 20.48 million for the Company’s cooperation with the MRTA to test discounted fare rates of the M.R.T. Chaloem Ratchamongkhon Line from those specified under the Concession Agreement from 7 January 2005 to 4 June 2005. The MRTA agreed to compensate the Company for an amount equal to 80% of the shortfall of actual revenue received by the Company each day from the revenue specified in the memorandum of agreement dated 6 January 2005. Such fare compensation revenue applies only to the special fare rate period during the first six months of 2005. Commercial Development Revenue Apart from the right to operate the metro service, the Company is also entitled to solely conduct the commercial development under the Concession Agreement. Commercial development revenue can be divided into two categories as follows: 1) The Company has granted the rights directly to other companies, generating rental income from lease of space for ATM services, public telephone services, Platform Screen Doors (PSDs) for media advertisements, LCD installation inside the trains and plasma screen installation in the station areas. 74


Annual Report 2005

2) The Company has granted the rights to its Subsidiaries for management, generating rental income from retail spaces in the stations and the basement level in the Lat Phrao park and ride facility (by Metro Mall Development Limited), still advertising medias in the trains and station areas (by Triads Networks Company Limited), and service and maintenance of telecommunications system equipment (by BMCL Network Limited). For the last six months of 2005, the Company and its Subsidiaries generated revenue from the commercial development of Baht 52.14 million, representing an increase of Baht 50.94 million from Baht 1.20 million from advertising revenue and rental income from public telephone service in the first six months of 2005. The high increasing commercial development revenue in this last six month period comprised revenues mainly from (i) Triads Networks Company Limited, which started its advertising operations in June 2005, accounting for an increase of Baht 35.77 million; (ii) Metro Mall Development Limited, which started to operate the first rental space areas at Sukhumvit Station in September 2005 and the second at Phahon Yothin Station in December 2005, accounting for an increase of Baht 4.75 million; and (iii) the ATM installation, accounting for Baht 10.41 million. Other Income Other income of the Company and its Subsidiaries comprises interest income and profit from sale of assets. For the first six months of 2005, the Company and its Subsidiaries generated other income totaling Baht 1.08 million, representing a decrease from Baht 1.43 million for the same period of 2004, mainly due to the reduction of interest income from the decrease of available cash during the period. For the last six months of 2005, the Company and its Subsidiaries generated other income totaling Baht 1.19 million, representing a slight increase of Baht 0.11 million or 10.19% from the first six months of 2005. Total Expenses Total expenses of the Company and its Subsidiaries mainly comprise cost of fare, commercial development cost, amortisation of project costs and selling and administrative expenses. For the first six months of 2005, the total expenses amounted to Baht 1,010.83 million which was 3.31% lower than the total expenses of Baht 1,045.48 million for the year 2004, due to a decrease in selling and administrative expenses. For the last six months of 2005, the Company and its Subsidiaries had total expenses of Baht 949.83 million which decreased from total expenses of Baht 61.00 million for the first six months of 2005, representing a decrease of 6.03%. The Company recorded the selling and administrative expenses at an increase of approximately Baht 89 million for the first six months of 2005 due to the Company’s presenting

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the said amount to Their Majesties the King and the Queen for charity purposes at the discretion of their Majesties (from fare revenue during the period of 3 July 2004 – 12 August 2004). In addition, the Company and its Subsidiaries had the increased costs of commercial and development of Baht 33.11 million due to the commencement of two Subsidiaries’ operations. Cost of Fare The cost of fare mainly comprises project management costs, maintenance costs, insurance premiums, and public utilities costs, such as, electricity and water supply, salary and welfare costs of staff and remuneration to the MRTA. The cost of fare for the first six months of 2005 was Baht 704.10 million, consisting mainly of expenses for the maintenance of the M&E Equipment and the civil infrastructure of Baht 313.86 million, expenses for project management and insurance premiums of Baht 85.34 million, expenses for public utilities of Baht 165.21 million, salary and welfare for staff of Baht 101.25 million, and remuneration to the MRTA of Baht 3.80 million. The cost of fare slightly increased by Baht 29.63 million from the year 2004 which was Baht 674.47 million due to the increase of the maintenance expenses of the M&E Equipment and trackwork of Baht 28.92 million. For the year 2004, the cost of fare amounted to Baht 674.47 million, consisting mainly of expenses for the maintenance of the M&E Equipment and the civil infrastructure of Baht 288.66 million, expenses for project management and insurance premiums of Baht 91.00 million, expenses for public utilities of Baht 164.00 million, salary and welfare for staff of Baht 102.68 million, and remuneration to the MRTA of Baht 4.43 million. The Company’s cost of fare for the last six months of 2005 was Baht 713.30 million, consisting mainly of expenses for the maintenance of the M&E Equipment and the civil infrastructure of Baht 288.58 million, expenses for project management and insurance premiums of Baht 94.45 million, expenses for public utilities of Baht 188.12 million, salary and welfare for staff of Baht 105.91 million, and remuneration to the MRTA of Baht 5.90 million. The cost of fare increased by Baht 9.20 million mainly due to the increased insurance premiums caused by the train collision accident in early 2005. Commercial Development Cost In June 2005, the Company and its Subsidiaries first started to generate the commercial development revenue, thereby incurring the commercial development cost of Baht 0.41 million for the first six months of 2005, which increased by Baht 33.51 million for the last six months of 2005.

The

commercial development cost mainly comprises the remuneration to the MRTA of Baht 6.68 million, system maintenance costs and public utilities costs of Baht 14.26 million, and costs of operations of the Subsidiaries directly due to the commercial development of Baht 5.94 million.

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Annual Report 2005

Amortisation of Project Costs The amortisation of project costs for the first six months of 2005 was Baht 94.37 million, representing a slight decreased from Baht 125.00 million in the year 2004. For the last six months of 2005, the amortisation of project costs was Baht 77.34 million. Selling and Administrative Expenses The selling and administrative expenses of the Company and its Subsidiaries for the first six months of 2005 amounted to Baht 211.95 million, representing a decrease from the year 2004 of Baht 32.71 million or a decrease of Baht 121.71 million, excluding the total fare revenue of Baht 89 million collected from 3 July 2004 to 12 August 2004 which was presented to Their Majesties the King and Queen, as this amount was not an ordinary expense regularly incurred. The decrease in selling and administrative expenses was mainly due to a decrease in advertising expenses, public relations expenses and advisory fees. For the last six months of 2005, the selling and administrative expenses of the Company and its Subsidiaries amounted to Baht 125.67 million, representing a slight increase of Baht 2.72 million or 2.21% higher than the selling and administrative expenses for the first six months of 2005 which amounted to Baht 122.95 million (excluding the extraordinary expense of Baht 89 million). Interest Expenses Before the commencement of its commercial operations, interest expenses incurred from borrowings were capitalised as part of project costs. Interest expenses for the year 2004, the first six months of 2005 and the last six months of 2005, were Baht 375.90 million, Baht 378.99 million and Baht 432.01 million, respectively. The increase of interest expenses was due to the drawdown on additional long-term loans and the increased interest rates. Net Profit and Loss The results of operations of the Company and its Subsidiaries for the past three years of 2003, 2004 and 2005 showed net losses of Baht 72.49 million, Baht 957.21 million, and Baht 1,715.99 million, respectively. In 2003, the Company had not yet commenced its operations, therefore, the majority of expenses incurred were capitalised as project costs and amortised throughout the Concession period according to the Units of Throughput Amortization Method. In 2004 and 2005, the costs incurred after the operation commencement were treated as expenses for the respective years, resulting in increase of net losses in the income statements, as compared to 2003.

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Annual Report 2005

The net loss incurred during the last six months of 2005 was Baht 736.21 million, lower than that for the first six months of 2005 which was Baht 979.78 million, representing a decrease of Baht 243.57 million mainly due to the increase of fare revenue and commercial development revenue. The net loss generated in the early years of operation is common for investments in large-scale public infrastructure projects. The Company’s initial revenue from operations was insufficient to cover all expenses incurred which were mainly fixed costs under the relevant contracts, such as, maintenance costs, project management costs, project cost amortisation, depreciation and other amortisation including interest expense. The number of passengers using the metro may be rather low during the initial stage as it would take some time for passengers to become familiar with the railway mass transit, which is a new mass transit system. In addition, the Company had to use a favorable pricing policy to attract passengers and therefore fares were not at the normal rates. The management of the Company is however confident that the number of passengers using the M.R.T. Chaloem Ratchamongkhon Line will increase substantially resulting in improved results of operations of the Company in the near future. As at 31 December 2005, the Company and its Subsidiaries had the total accumulated losses of Baht 2,836.20 million.

13.3

Analysis of Financial Position

Assets Assets of the Company and its Subsidiaries consist mainly of cash and cash equivalents, amounts due from related parties, other current assets, project costs, equipment and other non-current assets. As at 31 December 2004, the Company and its Subsidiaries had total assets of Baht 19,305.65 million, representing an increase of Baht 3,165.65 million or 19.61% from Baht 16,140.00 million as at 31 December 2003. This was mainly due to the increase in project costs relating to the M&E Equipment for the train operation, and investment in infrastructure for commercial development by the Subsidiaries, including an increase in cash and cash equivalents. The main sources of funds were long-term loans and a capital increase of the Company in 2004. As at 31 December 2005, the Company and its Subsidiaries had total assets of Baht 19,731.50 million, representing an increase of Baht 425.85 million or 2.21% from Baht 19,305.65 million as at 31 December 2004. The increase was due to additional investment in project costs of Baht 420.58 million which comprises the M&E Equipment for the train operation, telecommunications equipment and infrastructure for retail areas in the stations as well as the increase of cash and cash equivalents of Baht 98.76 million.

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Annual Report 2005

Cash and Cash Equivalents Cash and cash equivalents as at 31 December 2004 amounted to Baht 343.92 million, representing an increase of Baht 167.81 million from Baht 176.11 million as at 31 December 2003 due to an increase in the Company’s capital of Baht 1,245.22 million and drawdowns on additional long-term loans of Baht 2,103.00 million for investment in the metro system and various equipment. Cash and cash equivalents as at 31 December 2005 amounted to Baht 442.68 million, representing an increase of Baht 98.76 million from Baht 343.92 million as at 31 December 2004. The increase was 28.72% due to, during late 2005, sponsor loan and drawdowns on long-term loans from financial institutions, as well as the offering of new ordinary shares to the directors, management and staff of the Company. Accounts Receivable As at 31 December 2005, the Company and its Subsidiaries had accounts receivable of Baht 21.62 million from commercial development operations of its Subsidiaries, consisting of accounts receivable from advertisement procurement of Baht 17.29 million and leasing of retail areas of Baht 4.33 million. The Company had no accounts receivable as at 31 December 2004 because the Subsidiaries started the operations in 2005. Amounts Due from Related Parties As at 31 December 2004, the Company and its Subsidiaries had amounts due from related parties of Baht 25.08 million, most of which were amounts invoiced by the Company for installation of emergency egress signage and door monitoring from Joint Venture BCKT. These amounts were subsequently paid in accordance with the conditions in the memorandum of agreement. As a consequence, as at 31 December 2005, the Company and its Subsidiaries had amounts due from related parties of only Baht 0.09 million, relating mainly to the business traveller stored value cards as New Year souvenirs. Short-term Loan to other company As at 31 December 2005, Triads Networks Company Limited had the short-term loan to other company of Baht 2.50 million. Other Current Assets Other current assets as at 31 December 2004 totaled Baht 127.02 million, mainly consisting of accounts receivable under forward contracts, prepaid expenses, and other accounts receivable, representing an increase of Baht 67.69 million or 114.09% from total other current assets of Baht 59.33 million as at 31 December 2003. This was mainly due to an increase in prepaid expenses from insurance premiums

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Annual Report 2005

incurred after the commencement of the operations, consisting of premiums for Property All Risk Insurance, premiums for Terrorism Insurance and premiums for other insurance. The increase in prepaid insurance premiums for the year 2004 was Baht 52.50 million. Other current assets of the Company and its Subsidiaries as at 31 December 2005 totaled Baht 155.83 million, mainly consisting of prepaid expenses of Baht 77.59 million, stored value card inventory of Baht 28.05 million, and accrued income of Baht 22.34 million. These represented an increase of Baht 28.81 million or 22.68% from other current assets of Baht 127.02 million as at 31 December 2004. The increase was mainly due to an increase in prepaid expenses of Baht 21.11 million, representing an increase in accrued income of Baht 22.30 million, and an increase in the stored value card inventory of Baht 22.90 million. Accounts receivable under forward contracts and other accounts receivable decreased by Baht 24.05 million and Baht 20.20 million, respectively. Advance Payment for Construction As at 31 December 2005, the Company and its Subsidiaries paid an advance for construction of Baht 12.42 million resulting from Metro Mall Development Limited employing CH. Karnchang Public Company Limited to construct retail areas in the stations, with a total project value of Baht 292.50 million. Under the construction contract, an advance payment for construction was charged at 15% of the total construction cost. Project Costs Costs and expenses for project development, such as, project management costs, advisory costs, design costs for the M&E Equipment, the depot and administration building, interest expenses and other financial expenses, including additional expenses due to an acceleration in the procurement of equipment of approximately Baht 500 million were recorded as project costs. The total project costs of the Company as at 31 December 2004 were Baht 18,448.72 million, representing an increase of Baht 2,589.53 million from Baht 15,859.19 million as at 31 December 2003. The net project costs as at 31 December 2005 were Baht 18,697.59 million, representing an increase of 1.35% from 31 December 2004. The increase was due to the completion of the M&E Equipment and the commencement of the operations. In 2005, the Company made payment for the M&E Equipment, telecommunications system in the stations, and investment in public utility system for retail spaces in the stations in the total amount of Baht 339.09 million. Net Equipment As at 31 December 2004, the Company and its Subsidiaries had net equipment with a total value of Baht 321.30 million, representing an increase from Baht 39.73 million as at 31 December 2003 due to 80


Annual Report 2005

investment by the Subsidiaries in the decoration of leased spaces of approximately Baht 210.13 million and in telecommunications equipment of Baht 42.13 million. As at 31 December 2005, the Company and its Subsidiaries had net equipment with a total value of Baht 364.62 million, representing a slight increase of Baht 43.32 million from Baht 321.30 million as at 31 December 2004. The increase was mainly due to investment in the leased spaces of approximately Baht 20.32 million and in advertising equipment of Baht 22.00 million. Total Liabilities As at 31 December 2004, the Company and its Subsidiaries had total liabilities of Baht 12,585.10 million, representing an increase of Baht 2,686.95 million from Baht 9,898.16 million as at 31 December 2003 or a 27.15% increase, mainly due to an increase in long-term loans and construction payables. Total liabilities as at 31 December 2005 was Baht 14,314.24 million, representing an increase of Baht 1,729.13 million from Baht 12,585.10 million as at 31 December 2004, due to increases in long-term loans from shareholders and accrued interest of Baht 1,438.75 million, long-term loans from financial institutions of Baht 199.00 million, and bank overdrafts and short-term loans from financial institutions of the Subsidiaries of Baht 16.25 million. Construction and Other Payables Construction and other payables of the Company and its Subsidiaries as at 31 December 2004 amounted to Baht 572.41 million consisting of accounts payable to related parties and other companies of Baht 204.17 million and Baht 368.25 million, respectively, as a result of a substantial increase in construction payables of Baht 492.34 million from Baht 80.08 million in 2003 or representing a 614.80% increase. The increase was mainly due to Metro Mall Development Limited employing CH. Karnchang Public Company Limited to carry out construction of retail areas in 11 stations, with a total project value of Baht 292.50 million. As at 31 December 2005, construction and other payables of the Company and its Subsidiaries amounted to Baht 591.70 million consisting of accounts payable to related parties and other companies of Baht 291.71 million and Baht 299.99 million, respectively, representing an increase of Baht 87.55 million from accounts payable to related parties as at 31 December 2004. The increase was due to accrued project management payables of Baht 83.13 million. The accounts payable to other companies decreased by Baht 68.26 million from 31 December 2004.

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Annual Report 2005

Unearned Fare Revenue Unearned fare revenue was derived from the sale of stored value cards. The Company records revenue from the sale of stored value cards as unearned fare revenue, which will be gradually recognised as revenue when passengers use the stored value cards. As at 31 December 2005, the Company had unearned fare revenue of Baht 33.19 million, representing an increase of Baht 11.33 million or 51.84% from Baht 21.86 million as at 31 December 2004. Passengers have increasingly shown a preference for using stored value cards as evidenced by the increase in the ratio of passengers using tokens to passengers using stored value cards for the years 2004 and 2005 was 74:26 and 56:44, respectively. Long-term Loans Long-term loans of the Company and its Subsidiaries as at 31 December 2004 and 31 December 2005 were Baht 11,915.50 million and Baht 12,114.50 million, respectively, (including current portion of long-term loans), comprising long-term loans under the following agreements:

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Annual Report 2005

Summary of the Company’s Long-term Loan Agreements Type of Long-term Loan Facilities 1) Long-term loan facilities from onshore syndicated lenders (Onshore Facilities Agreement): Tranche A

Facility Amount

- Total facility amount of Baht 11,000 million - Amount drawn as at 31 December 2005 was Baht 11,000 million

Objectives

- For procurement of the M&E Equipment in the M.R.T. Chloem Ratchamongkhon Line (Blue Line)

Interest/Fee

Repayment Conditions

- Interest at the rate of 7.75% per annum for the first 2 years from the date of the agreement (March 2002 – February 2004)

- Repay in 44 quarterly installments from March 2006 with the last installment in December 2016, as per the annual repayment schedule below:

- MLR + 0.25% per annum for the period after February 2004 until before the project completion date - MLR for the period after the project completion date

Year

Repayment of Principal (%)

2006

1.0%

2007

3.0%

2008

5.0%

2009

7.0%

2010

8.0%

2011

10.0%

2012-2014

12.0% per annum

2015

14.0%

2016

16.0%

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Annual Report 2005

Type of Long-term Loan Facilities 2) 2nd supplement to the loan agreement: Tranche D

3) 3rd supplement to the long-term loan agreement: Tranche E

Facility Amount

- Total facility amount of Baht 500 million - Amount drawn as at 31 December 2005 was Baht 500 million - Total facility amount of Baht 650 million, and the amount drawn as at 31 December 2005 was Baht 614.00 million

Objectives

Interest/Fee

- For payment of additional project costs incurred by the acceleration of the procurement of the M&E Equipment and additional construction work of the depot

- Interest at the rate of MLR + 0.25% per annum for the period prior to the project completion date.

- For payment of additional expenses incurred under the M&E Equipment Contracts, additional project management fees from payment of infrastructure works for the retail areas in relation to commercial development, costs of equipment in the stations, and mobilization fees for the civil infrastructure maintenance contracts and for investment in the Subsidiaries

- Interest at the rate of MLR + 0.5% per annum throughout the term of the agreement.

Repayment Conditions

- Full principal repayment in June 2017

- MLR per annum after the project completion date.

- Full principal repayment in June 2017

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Annual Report 2005

Shareholders’ Equity As at 31 December 2004, shareholders’ equity of the Company and its Subsidiaries was Baht 6,720.54 million, representing an increase of Baht 478.70 million from the end of the year 2003 due to the Company’s capital increase and call for share payment from Baht 6,404.84 million to Baht 7,250.00 million. Shareholders’ equity of the Company and its Subsidiaries as at 31 December 2005 was Baht 5,417.26 million, representing a decrease of Baht 1,303.28 million or 19.39% from Baht 6,720.54 million as at 31 December 2004. The decrease was mainly due to an increase in the Company’s net loss by Baht 1,716.00 million from the year 2005, which was common in the early years of investment in infrastructure project. In December 2005, the Company obtained a capital increase from the offering of new shares to the directors, management and staff in the amount of Baht 296.69 million. Liquidity As at 31 December 2005, the Company and its Subsidiaries had cash and cash equivalents of Baht 442.68 million, representing a net increase of Baht 98.76 million as at 31 December 2004, as per the details as follows: Cash Flow from Operating Activities The net cash flow from operating activities of the Company and its Subsidiaries was Baht 374.21 million, Baht 303.00 million and Baht 1,445.25 million for the years 2003, 2004 and 2005, respectively, representing the operating expenditure more than operating revenue. This was due to the fact that the Company commenced operations and actually generated revenue in the middle of 2004. As the nature of the Company’s business is a provision of infrastructure service, it requires a certain period of time for the number of passengers to increase, while the operating expenditure did not vary by the number of passengers. Cash Flow from Investing Activities For the year 2003, the net cash flow used in investing activities of the Company and its Subsidiaries was Baht 6,537.13 million, mostly comprising investments in project costs and equipment of Baht 6,613.36 million and Baht 33.07 million, respectively, which related to the Company’s investment in the M&E Equipment. Cash flow used in investing activities of the Company and its Subsidiaries in the year 2004 decreased significantly from the year 2003 to Baht 3,047.01 million, due to completion of the M&E Equipment ready for service, and decreased to merely Baht 501.33 million in the year 2005. Cash Flow from Financing Activities For the year 2003, the cash flow from financing activities of the Company and its Subsidiaries was Baht 7,079.53 million, resulting from the drawdowns on long-term loans of Baht 4,077.50 million and an 85


Annual Report 2005

increase in capital of Baht 3,002.03 million. Similarly in the year 2004, the Company drew down Baht 2,103.00 million on its long-term loans, and increased the registered capital from Baht 6,800.00 million to Baht 7,350.00 million and call for share payment in respect of the existing shares and partial payment of the new shares, in the total amount of Baht 1,245.22 million. For the year 2005, cash flow from financing activities of the Company and its Subsidiaries totaled Baht 2,045.33 million. Sources of funds comprised loans from financial institutions of Baht 215.25 million and long-term loans of Baht 1,403.00 million from CH. Karnchang Public Company Limited for use as working capital pursuant to the sponsor support agreement. From January to March 2005, the Company had a cash inflow of Baht 130.39 million from the issue and allocation of 43.46 million new shares for capital increase at the offering price of Baht 3 per share, and during December 2005, from the issue and allocation of Baht 296.69 million new shares for capital increase at the offering price of Baht 1 per share to directors, management and staff. The Company’s total liquidity was from the capital increase, long-term loans from financial institutions, including financial support from the Company’s major shareholder, namely, CH. Karnchang Public Company Limited, in the form of the sponsor support subordinated loan. This was because in the initial stage, the Company’s revenue was not sufficient to cover various expenses and interest incurred. Apart from funding from financial institutions and the Company’s major shareholder, the Company expects to raise funds on the Stock Exchange of Thailand and from sale of capital increase shares to the MRTA, which will improve the Company’s liquidity. The Company will use the proceeds from the capital increase to repay part of the loans from financial institutions to reduce the Company’s interest expense burden, and appropriately improve the financial structure. Auditor’s Fee For the fiscal year ended 31 December 2005, the audit fees paid to the Company’s auditor, namely, Ernst and Young Office Limited, totaled Baht 1,180,000.00, which included the audit fees of the Company and its Subsidiaries as detailed below: Summary of the Company and the Subsidiaries’ Audit Fees in 2005 Company

Auditor

Audit Fee (Baht)

Bangkok Metro Public Company Limited

Ruth Chaowanagawi

700,000.00

BMCL Network Limited

Siraporn Ouaanunkun

110,000.00

Triads Networks Company Limited

Siraporn Ouaanunkun

180,000.00

Metro Mall Development Limited

Siraporn Ouaanunkun

190,000.00

Total Audit Fees

1,180,000.00

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Annual Report 2005

The Company and its Subsidiaries had no other non-audit fees payable to the auditors, the auditing firm of which the auditor is a member, and any person or business relating to the auditors and the auditing firm of which the auditor is a member.

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Annual Report 2005

14.

Significant Activities in the Year 2005 In the year 2005, the Company organised significant activities as follows: Thai Children’s Day with the Metro The Company held activities for the 2005 National Children’s Day on Friday, 7 January 2005 and Saturday, 8 January 2005, at the open area in front of Fortune Town Building, around Gate 1 of Phra Ram 9 Station, with various performances on stage, questionnaires, recreational activities and informative session in relation to the safety of using the metro service.

Wedding Bells Ringing on the Valentine’s Day 2005 On the occasion of the love festival, the Company organised a marriage registration event on Monday, 14 February 2005, in the Northern Concourse Level of Bang Sue Station, with the Bang Sue District Officers as registrars. The first 200 couples participating in the registration event received souvenirs from various agencies, ticket packages as a gift. A wide range of agencies participating in this event include Krungthai AXA Life Insurance Co., Ltd. and the Faculty of Nursing, Mahidol University. There were 399 interested couples participating in this marriage registration event.

Elders on the Metro The Company in collaboration with the Mass Rapid Transit Authority of Thailand (MRTA) held an activity for the National Elderly Day on 14 April 2005, by arranging for 80 elders from the Vasanawet Homes for the Aged, Phra Nakhon Si Ayutthaya Province, to take a free trial commute on the metro and to use facilities in the stations, traveling from Hua Lamphong Station to Lat Phrao Station. The elders were impressed by the reception and services provided by the Company’s staff, and felt confident in the safety of using the metro service. As for those who missed the trip on board, the Company also organised a Thai traditional event at the Vasanawet Homes for the Aged, namely, Rod Nam Dam Hua (pouring water on elders’ palms to pay respect) and gave souvenirs.

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Annual Report 2005

1st Anniversary of Operation of the M.R.T. Chaloem Ratchamongkhon Line Project The Company in cooperation with the Mass Rapid Transit Authority of Thailand (MRTA) organised a thank you campaign for passengers who have been providing good support to its operations. Passengers using Stored Value Cards were to receive a lucky draw coupon for every Baht 100 of adding value to the cards at the Ticketing Offices in all 18 stations during 3 June 2005 – 3 July 2005. In this regard, passengers sent 130,000 coupons to attend such event from the total of 220,000 coupons distributed. The drawing event was held on 3 July 2005 at the Queen Sirikit National Convention Centre Station. In addition, an informative exhibition on the history of the metro, with a discussion about the metro by Dr. Sombat Kitjalaksana, the Managing Director of the Company, and Mr. Prapat Chongsanguan, the Governor of the MRTA. Moreover, during 4 – 8 July 2005, in trains and all 18 stations, there were game activities including delivering gifts to the metro commuters by the M.R.T. Pretty Girls.

White Cane Rally 2005 The Company in collaboration with the Mass Rapid Transit Authority of Thailand (MRTA) and the Thailand Association of the Blind held an event, “White Canes Lead the Blind to Sustainable Freedom on the International White Cane Day” by organising a rally on the M.R.T. train between Lat Phrao Station and Bang Sue Station on Saturday, 22 October 2005, with an aim to encouraging those visually impaired to have confidence and reliability in the use of the M.R.T. service.

Safety Zone Program The Company in cooperation with the Mass Rapid Transit Authority of Thailand (MRTA), government agencies and private entities, such as, the Metropolitan Police Bureau, the Railway Police Division and the City Law Enforcement Department, Bangkok Metropolitan Administration, held the Safety Zone Program on 24 June 2005, at the Concourse Level, Hua Lamphong Station, with an aim to publicising the Safety Zone Program in the M.R.T. system to commuters and the general public so as to build up their confidence in the security system whilst using the M.R.T. service.

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Annual Report 2005

The Company’s Booth in SET in the City The Company in cooperation with the CH. Karnchang Group held an exhibition at the Queen Sirikit National Convention Centre during 17 – 20 November 2005, with an aim to introducing and providing information regarding the Company in preparation for listing on the Stock Exchange of Thailand, presented by the Master of Ceremony and through the audio visual presentation relating to the M.R.T. Project, questionnaires, games for prizes, and souvenirs to visitors. This event caused the general public, investors and the M.R.T. commuters to have more knowledge and understanding about the Company’s operations, and confidence in the Company’s capability to become a listed company. In addition, the Company obtained information and suggestion from service users who participated in such event, which would be the important guidelines for the service quality improvement to meet the users’ requirements.

Training and Drills on “Crisis Management in the M.R.T. Chaloem Ratchamongkhon Line System” The Company in collaboration with the Mass Rapid Transit Authority of Thailand (MRTA), the Metropolitan Police Bureau, the Disaster Prevention and Mitigation Department, the Narenthorn Center, the Government Public Relations Department, the Railway Police Division and the Noppawong Railway Police Station, held the “Crisis Management in the M.R.T. Chaloem Ratchamongkhon Line System” training and drills during 17 – 23 September 2005 at Chatuchak Park Station, Thailand Cultural Centre Station, Hua Lamphong Station, Queen Sirikit National Centre Station, the Depot, the Administrative Building, the Operation Control Room and the Metropolitan Police Bureau. The objectives of this program were to ensure that officers of the Company and officers from the external agencies would be able to efficiently handle all emergency circumstances in the metro, to improve skills of the M.R.T. operation officers and to ensure rapidity and good cooperation between officers of the Company and officers from the external agencies, as well as to minimize damage, resulting in the optimum safety to the service users and the general public using the metro service.

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Annual Report 2005

M.R.T. Visits Educational Institutes

The Company organised the M.R.T. Project Visits Educational Institutes program during November 2004 January 2005, with an aim to promoting and public relations on the understanding on the safe use of the metro and assuring the confidence in the safety of the metro, focusing on the tasks regarding public disaster mitigation, liaison with external agencies in case of emergency, and safe use of the system.

The National Safety Week

The Company arranged an exhibition in the National Safety Week at the Impact Muang Thong Thani, during 9 – 11 May 2005, for the purpose of public relations on the management system, achievements, activities, products and safety system, by providing information to understand the metro through the audio visual presentation and images that reflect the safety system of the metro. In addition, there were questionnaires and quiz games for prizes, with approximately 3,000 people interested and participating in this event.

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Annual Report 2005

15. Report on Responsibilities of the Board of Directors towards the Financial Report The Board of Directors realizes the significance of its duties and responsibilities in supervising the Company’s business to ensure good management in accordance with laws, detailed objectives and the Company’s Articles of Association, as well as resolutions of the shareholders meetings with integrity and prudence. The Board of Directors protects the benefits of the Company and shareholders by ensuring that the Company’s financial report contains accurate and full accounting records that reflect the Company’s actual financial condition and results of its operations.

The Board of Directors established the Audit Committee comprising independent directors fully qualified in accordance with the requirements of the Stock Exchange of Thailand to review and ensure accuracy and sufficiency of the financial report, including accurate and complete disclosure of related party transactions or transactions with conflict of interest, in compliance with the requirements of the Stock Exchange of Thailand and relevant rules and regulations. In this regard, the Audit Committee has already reported their performance to the Board of Directors.

The Board of Directors is of the opinion that the financial statements for the year 2005 of the Company and its Subsidiaries present fairly, in all material aspects, the financial condition and the results of operations of the Company and its Subsidiaries in accordance with generally accepted accounting principles.

(Mr. Plew Trivisvavet)

(Dr. Sombat Kitjalaksana)

Director

Director

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Annual Report 2005

16. Audit Committee’s Report The 2005 Annual Ordinary General Meeting of Shareholders of Bangkok Metro Public Company Limited, which was held on April 29, 2005, resolved to appoint the Audit Committee of Bangkok Metro Public Company Limited, comprising three qualified persons in the fields of law, finance and corporate management, namely, General Chetta Thanajaro, as the Audit Committee Chairman, Lieutenant General Surat Samrith and Mr. Vitoon Tejatussanasoontorn, as the Audit Committee members. In the year 2005, the Audit Committee had three meetings with the high level executives and the management of the Company, and assigned the Company’s executives in the main lines of work to present results of the Company’s operations, and also had meetings with Ernst & Young Office Limited, the Company’s auditor, to review the Company’s financial reports. The Audit Committee has performed and been responsible for its duties as assigned by the Company’s Board of Directors, in accordance with the regulations of Bangkok Metro Public Company Limited on the rules and guidelines for practice of the Audit Committee in line with the requirements of the Stock Exchange of Thailand, as may be summarized as follows: 1. The Audit Committee, along with the management and Ernst & Young Office Limited, jointly reviewed the quarterly and 2005 annual financial statements in compliance with generally accepted accounting standards so as to ensure the correctness and reliability of the accounting system and its financial reports, as well as the sufficient disclosure of information in the financial statements. The Audit Committee also emphasized on review of related party transactions between the Company, and its subsidiaries and associated companies to ensure that the Company has executed the transactions in the ordinary course of business and in accordance with the rules as set forth by the Stock Exchange of Thailand, as well as disclosed sufficient information, for the benefits of investors. In review of the financial statements and compliance with applicable regulations and laws, the Audit Committee is of the opinion that the Company has complied with the applicable laws, and its accounting system and financial reports are correct and reliable. 2. The Audit Committee reviewed the evaluation of the Company’s internal control system, which is sufficient for the business operations and achieves the objectives of the internal control in respect of effectiveness and efficiency of its operation in resource utilization, which include the asset monitoring, prevention or minimization of error, damage, leakage, consumption or dishonesty, reliability of the financial reports and results of operations, compliance with laws, rules and regulations, in respect of which the Company’s auditor was of the common opinion that neither material fault nor problem were found. In the year 2005, the internal control evaluation undertaken by the Company’s management resulted that the Company’s internal control system was sufficient and effective.

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Annual Report 2005

3. The Audit Committee supervised the internal audit to be in line with the approved plan by reviewing the audit report for the year 2005 so as to ensure efficient and effective operation with good internal control system and compliance with the law on securities and exchange or the law relating to the business of the Company, and follow up the amendment in accordance with the audit report in material issues for the good corporate governance.

In addition, the Audit Committee has considered the audit plan for the year 2006 which was prepared based on the Company’s internal control evaluation and risk base by planning an audit, operation in relation to management for maintenance of main operating equipment, security system of the train system and revenue collection reporting system, compliance with the law on the listed companies on the Stock Exchange of Thailand, and enforcement of applicable rules and regulations for the staff of the Company. This is to ensure that the scope of the audit plan covers all material issues, accommodates the prevention from possible risk, provides appropriate internal control for the corporate risk management and brings optimum benefits to the Company and its shareholders. Furthermore, the Audit Committee proposed the Board of Directors to consider nominating either Miss Siraporn Ouaanunkun, Certified Public Accountant No. 3844, and/or Mr. Narong Puntawong, Certified Public Accountant No. 3315, and/or Mr. Supachai Phanyawattano, Certified Public Accountant No. 3930, of Ernst & Young Office Limited as the Company’s auditor for the year 2006, with the auditing fee in the total amount of not exceeding Baht 870,000, so as to propose such nomination to the Ordinary General Meeting of Shareholders for further approval.

(General Chetta Thanajaro) Chairman of the Audit Committee

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES REPORT AND FINANCIAL STATEMENTS 31 DECEMBER 2005 AND 2004

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Annual Report 2005

Report of Independent Auditor To The Board of Directors and Shareholders of Bangkok Metro Public Company Limited

I have audited the consolidated balance sheets of Bangkok Metro Public Company Limited and its subsidiaries as at 31 December 2005 and 2004, and the related consolidated statements of earnings, changes in shareholders’ equity and cash flows for the years then ended, and the separate financial statements of Bangkok Metro Public Company Limited for the same periods. These financial statements are the responsibility of the Company’s management as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bangkok Metro Public Company Limited and its subsidiaries, and of Bangkok Metro Public Company Limited as at 31 December 2005 and 2004, and the results of their operations, and cash flows for the years then ended in accordance with generally accepted accounting principles.

Ruth Chaowanagawi Certified Public Accountant (Thailand) No. 3247

Ernst & Young Office Limited Bangkok : 22 February 2006

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS AS AT 31 DECEMBER 2005 AND 2004 (Unit : Baht)

Consolidated Note ASSETS CURRENT ASSETS Cash and cash equivalents 4 Trade accounts receivable 5 Amounts due from related parties 12 Short-term loan to other company Other current assets Accounts receivable under forward contracts Prepaid expenses Value added tax refundable Other receivable Unbilled input tax Accrued income Inventory - tickets Others TOTAL CURRENT ASSETS NON-CURRENT ASSETS Investments accounted for under equity method 6 - subsidiaries Advance payment for construction - related company 12 7 Project costs, net Equipment, net 8 Other non-current assets Goodwill on consolidation, net Others TOTAL NON-CURRENT ASSETS TOTAL ASSETS

2005

The Company Only 2004

2005

2004

442,679,757 21,617,491 92,720 2,500,000

343,922,521 25,076,391 -

439,214,530 9,389,769 -

318,574,003 26,146,391 -

77,592,175 6,751,387 1,028,080 8,300,466 22,340,051 28,048,676 11,764,985 622,715,788

24,048,906 56,484,409 6,097,038 21,225,386 7,433,652 41,037 5,152,606 6,540,506 496,022,452

77,206,137 936,550 22,309,643 28,048,676 803,458 577,908,763

24,048,906 56,080,925 21,222,659 41,037 5,152,606 451,266,527

66,079,297

67,027,548

-

-

12,421,987 18,697,589,344 364,624,874

15,279,307 18,448,719,738 321,297,823

18,697,589,344 64,618,271

18,448,719,738 60,308,087

11,527,032 22,622,331 19,108,785,568 19,731,501,356

6,020,102 18,308,585 18,809,625,555 19,305,648,007

19,318,850 18,847,605,762 19,425,514,525

16,383,101 18,592,438,474 19,043,705,001

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

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS (Continued) AS AT 31 DECEMBER 2005 AND 2004 (Unit : Baht)

Consolidated Note LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft and short-term loan from financial institution 9 Construction and other payable Related parties 12 Other companies Current portion of long-term loans 10, 12 Unearned fare box revenue Deposits on stored value ticket Other current liabilities Withholding tax payable Deferred premium on forward contracts Retention for construction Accrued interest - related company 12 Accrued expense Others TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term loans, net of current portion 10, 12 Long-term loans from shareholder and accrued interest 11, 12 Deferred leasehold right revenue Guarantee on rental and service agreement Provision for loss on investments in subsidiaries 6 Other non-current liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES

2005

16,250,540

The Company Only 2004

2005

2004

-

-

-

291,710,920 299,988,130 110,000,000 33,194,529 17,712,142

204,165,003 368,247,976 21,862,294 8,085,592

83,816,667 286,886,683 110,000,000 33,194,529 17,712,142

11,543,361 360,286,803 21,862,294 8,085,592

5,229,886 4,720,246 17,203,162 29,900,783 3,561,930 829,472,268

5,276,706 15,006,230 4,026,033 4,183,290 790,854 4,208,706 635,852,684

4,747,245 2,759,523 28,838,371 2,040,861 569,996,021

4,517,676 15,006,230 3,220,274 147,743 4,080,144 428,750,117

12,004,500,000

11,915,500,000

12,004,500,000

11,915,500,000

1,438,752,812 26,655,035 14,653,000

22,110,000 11,500,988

1,438,752,812 -

-

-

204,436 13,484,765,283 14,314,237,551

140,175 11,949,251,163 12,585,103,847

1,725,112 13,444,977,924 14,014,973,945

11,915,500,000 12,344,250,117

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

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS (Continued) AS AT 31 DECEMBER 2005 AND 2004 (Unit : Baht)

Consolidated Note

2005

The Company Only 2004

2005

2004

SHAREHOLDERS' EQUITY Share capital 13 Registered 11,950,000,000 ordinary shares of Baht 1 each (2004 : 7,350,000,000 ordinary shares of Baht 1 each)

11,950,000,000

Issued and paid up 7,350,000,000 ordinary shares of Baht 1 each, fully paid (2004 : 7,250,000,000 ordinary shares of Baht 1 each, fully paid) 7,350,000,000 Share premium 600,051,778 Share subscription received in advance 13 296,689,300 Deficit (2,836,200,498) Total equity attributable to Company's shareholders 5,410,540,580 Minority interest - Equity attributable to minority shareholders of subsidiaries 6,723,225 TOTAL SHAREHOLDERS' EQUITY 5,417,263,805 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 19,731,501,356

7,350,000,000

11,950,000,000

7,350,000,000

7,250,000,000 400,051,778 169,608,738 (1,120,205,632) 6,699,454,884

7,350,000,000 600,051,778 296,689,300 (2,836,200,498) 5,410,540,580

7,250,000,000 400,051,778 169,608,738 (1,120,205,632) 6,699,454,884

21,089,276 6,720,544,160 19,305,648,007

5,410,540,580 19,425,514,525

6,699,454,884 19,043,705,001

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

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES EARNINGS STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 (Unit : Baht)

Consolidated Note REVENUES Fare box revenue Fare box compensation revenue 14 Commercial development revenue Other income TOTAL REVENUES EXPENSES Costs of fare box Cost of commercial development Amortisation of project costs Selling and administrative expenses Share of loss from investments accounted for under equity method TOTAL EXPENSES LOSS BEFORE INTEREST EXPENSES INTEREST EXPENSES 12 LOSS BEFORE MINORITY INTEREST MINORITY INTEREST NET LOSS FOR THE YEAR

2005

2004

2005

2004

969,908,851 20,481,123 53,337,532 2,275,970 1,046,003,476

443,144,725 2,738,054 445,882,779

969,908,851 20,481,123 23,820,815 3,210,996 1,017,421,785

443,144,725 2,565,199 445,709,924

1,417,401,451 33,921,037 171,711,851 337,618,788

674,470,360 124,991,370 244,662,035

1,417,401,451 27,576,637 171,711,851 274,662,541

674,470,360 124,991,370 195,219,911

1,960,653,127 (914,649,651) (810,999,573) (1,725,649,224) 9,654,358 (1,715,994,866)

1,355,358 1,045,479,123 (599,596,344) (375,897,773) (975,494,117) 18,283,876 (957,210,241)

45,113,342 1,936,465,822 (919,044,037) (796,950,829) (1,715,994,866) (1,715,994,866)

41,532,452 1,036,214,093 (590,504,169) (366,706,072) (957,210,241) (957,210,241)

(0.23)

(0.14)

(0.23)

(0.14)

7,347,122,085

7,030,498,378

7,347,122,085

7,030,498,378

BASIC LOSS PER SHARE Net loss (Baht) Weighted average number of ordinary shares (shares)

The Company Only

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

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 (Unit : Baht)

Consolidated Issued and paid-up share capital

Share premium

Share subscription received in advance

6,404,836,525

-

-

Called up ordinary shares

395,163,475

-

-

Issuance of additional ordinary shares

450,000,000

-

Balance - beginning of year 2004

6,241,841,134

-

-

395,163,475

-

-

-

450,000,000

-

-

-

400,051,778

-

-

169,608,738

-

(957,210,241)

-

Share subscription received in advance

-

-

169,608,738

Net loss for the year

-

-

-

Minority interest of subsidiaries

-

-

-

Issuance of additional ordinary shares (Note 13)

169,608,738

(162,995,391)

Total

-

Share premium

Balance - end of year 2004

400,051,778

Deficit

Minority interest Equity attributable to minority shareholders of subsidiaries

(957,210,241) (1,120,205,632)

21,089,276

21,089,276

21,089,276

6,720,544,160

7,250,000,000

400,051,778

43,463,754

86,927,508

-

-

-

56,536,246

113,072,492

(169,608,738)

-

-

-

-

296,689,300

-

(1,715,994,866)

130,391,262

Transfer share subscription received in advance to issued and paid up share capital (Note 13) Share subscription received in advance (Note 13)

-

-

296,689,300

Net loss for the year

-

-

-

Minority interest of subsidiaries

-

-

-

Balance - end of year 2005

7,350,000,000

600,051,778

296,689,300

(1,715,994,866) (2,836,200,498)

-

(14,366,051)

(14,366,051)

6,723,225

5,417,263,805

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

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 (Unit : Baht)

Issued and paid-up share capital

The Company Only Share subscription Share received premium in advance Deficit

6,404,836,525

-

-

Called up ordinary shares

395,163,475

-

-

-

395,163,475

Issuance of additional ordinary shares

450,000,000

-

-

-

450,000,000

Balance - beginning of year 2004

(162,995,391)

Total 6,241,841,134

Share premium

-

400,051,778

-

-

400,051,778

Share subscription received in advance

-

-

169,608,738

-

169,608,738

Net loss for the year

-

-

-

(957,210,241)

(957,210,241)

7,250,000,000

400,051,778

169,608,738

(1,120,205,632)

6,699,454,884

43,463,754

86,927,508

-

-

56,536,246

113,072,492

(169,608,738)

-

Balance - end of year 2004 Issuance of additional ordinary shares (Note 13)

130,391,262

Transfer share subscription received in advance to issued and paid up share capital (Note 13)

-

Share subscription received in advance (Note 13)

-

-

296,689,300

Net loss for the year

-

-

-

(1,715,994,866)

(1,715,994,866)

7,350,000,000

600,051,778

296,689,300

(2,836,200,498)

5,410,540,580

Balance end of year 2005

296,689,300

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

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES CASH FLOWS STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 (Unit : Baht)

Consolidated 2005 Cash flows from (used in) operating activities Net loss for the year (1,715,994,866) Adjustments to reconcile net loss to net cash provided by (paid from) operating activities Depreciation and other amortisation 27,871,422 Amortisation on project costs 171,711,851 Amortisation of prepaid expenses 138,728,811 Amortisation of premium on forward contracts (9,886,985) Withholding tax deducted at source written off Loss on disposal of equipment 506,471 Unrealised loss (gain) on exchange (859,341) Share of loss from investments accounted for under equity method Amortisation of goodwill 1,201,358 Minority interest in loss of subsidiaries (9,654,358) (1,396,375,637) Decrease (increase) in operating assets Trade accounts receivable (21,617,492) Amounts due from related parties 24,983,671 Withholding tax deducted at source (1,871,281) Accounts receivable under forward contracts 21,377,081 Prepaid expenses (159,836,577) Other current assets (32,382,252) Other non-current assets (6,272,695) Increase (decrease) in operating liabilities Construction and other payable - related parties 87,545,916 Construction and other payable - other companies (67,400,506) Unearned fare box revenue 11,332,235 Deposits on stored value ticket 9,626,550 Other current liabilities 77,883,231 Deferred leasehold right revenue 4,545,035 Other non-current liabilities 3,216,273 Net cash from used in operating activities (1,445,246,448)

2004

The Company Only 2005 2004

(957,210,241)

(1,715,994,866)

(957,210,241)

15,826,675 124,991,370 53,175,765 (3,676,697) 4,515,707 72,015 288,978

22,787,802 171,711,851 138,728,810 (9,886,985) 509,614 (895,515)

14,350,295 124,991,370 53,175,765 (3,676,697) 4,515,707 72,015 288,978

1,355,358 342,889 (18,283,876) (778,602,057)

45,113,342 (1,347,925,947)

41,532,452 (721,960,356)

(25,076,391) (1,518,161) 117,003,373 (109,145,544) (34,611,116) (17,394,097)

16,756,622 (1,132,417) 21,377,081 (159,854,023) (25,682,025) (6,272,395)

(26,146,391) (205,078) 117,003,373 (108,742,060) (25,553,109) (16,535,879)

140,199,126 334,705,754 21,862,294 8,085,592 10,792,184 22,110,000 8,584,361 (303,004,682)

72,273,306 (72,504,604) 11,332,235 9,626,550 62,172,976 (1,419,832,641)

(52,422,517) 337,872,322 21,862,294 8,085,592 6,383,288 (460,358,521)

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

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES CASH FLOWS STATEMENTS (Continued) FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 (Unit : Baht) Consolidated The Company Only Note 2005 2004 2005 2004

Cash flows from (used in) investing activities Increase in loans to other company Increase in investment in subsidiaries Net cash payments for purchase of investment in subsidiaries Increase in equipment Proceed from disposal of equipment Decrease (increase) in advance for construction - related company Increase in project costs Cash received from minority shareholders Cash paid to minority shareholders Net cash used in investing activities Cash flows from (used in) financing activities Increase in bank overdraft and short-term loan from financial institution Increase in long-term loans Increase in long-term loans from shareholder Cash received from called up ordinary shares and additional ordinary shares Share subscription received in advance Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental cash flows information Cash paid during the year for : Interest expenses (included interest expenses which capitalised to project costs) Corporate income tax and withholding tax deducted at source

(2,500,000) -

-

(42,439,980)

(108,560,000)

(67,239,781) 3,900

(33,547,988) (255,518,599) 2,001,932

(23,138,537) -

(37,180,573) 2,001,932

2,857,320 (423,028,877) 3,080,000 (14,499,980) (501,327,418)

(15,279,307) (2,771,265,515) 34,100,000 (7,500,000) (3,047,009,477)

(423,028,877) (488,607,394)

(2,771,265,515) (2,915,004,156)

16,250,540 199,000,000 1,403,000,000

2,103,000,000 -

199,000,000 1,403,000,000

2,103,000,000 -

130,391,262 296,689,300 2,045,331,102 98,757,236 343,922,521 442,679,757

1,245,215,253 169,608,738 3,517,823,991 167,809,832 176,112,689 343,922,521

130,391,262 296,689,300 2,029,080,562 120,640,527 318,574,003 439,214,530

1,245,215,253 169,608,738 3,517,823,991 142,461,314 176,112,689 318,574,003

762,298,999

692,847,020

761,198,017

687,838,610

1,871,281

1,518,161

1,132,417

205,078

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

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 31 DECEMBER 2005 AND 2004

1. GENERAL INFORMATION Bangkok Metro Company Limited was incorporated as a limited company under Thai laws and operated in Thailand. Its major shareholder is CH. Karnchang group of companies. The Company registered the change of its status to a public limited company under the Public Limited Companies Act and the change of its name to Bangkok Metro Public Company Limited with the Ministry of Commerce on 11 May 2004. The Company’s registered office is located at 587 Sutthisarn Road, Khwaeng Dindaeng, Khet Dindaeng, Bangkok.

a) On 1 August 2000, the Company entered into “Agreement for the MRTA Initial System Project Chaloem Ratchamongkhon Line” (“the Concession Agreement”) with the Mass Rapid Transit Authority of Thailand (“the MRTA”) to design, manufacture, supply, install, test and commission of the M&E Equipment and for the operation and maintenance of the MRTA Initial System. The Agreement is for 25 years from the date that MRTA issues a Notice of No Objection to Commencement of Revenue Service. The MRTA Initial System was officially opened on 3 July 2004.

Under the Agreement, the Company has certain commitments to make payment of remunerations to the MRTA which consist of remuneration from fares, remuneration from commercial development, apportion of profit calculated from the Return on Equity (ROE) and any benefit from the interest rate on a credit agreement which lower than the specified rate, at the rate as mentioned in the Agreement. Furthermore, the Agreement stipulates the maintenance of the proportion of shareholding of the main shareholders and a fine in case that the Project was delayed.

b) On 19 December 2001 the Company entered into a long-term loan agreement with a group of domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement). The loan agreement, which was amended by the first, the second, the third and the forth supplemental agreements dated 27 January 2003 and 18 June 2003, 2 April 2004 and 30 July 2004, respectively, provides the following 5 credit facilities : 1)

Tranche A Facility : A long-term loan facility of Baht 11,000 million for use in the payment of project costs.

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2)

Tranche B Facility : A performance guarantee facility of Baht 150 million provided to guarantee the Company’s obligations to the MRTA under the Concession Agreement.

3)

Tranche C Facility : A performance guarantee facility of Baht 60 million provided to guarantee the Company’s obligations to the relevant authorities in relation to the Project.

4)

Tranche D Facility : A long-term loan facility of Baht 500 million for use in the payment of additional costs incurred as a result of the programme to accelerate the procurement of M&E equipment and the depot modification.

5)

Tranche E Facility : A long-term loan facility of Baht 790 million for use in the payment of additional expenses incurred under the M&E Equipment Contracts, additional fees incurred under the Project Management Agreement, basic infrastructure works for the retail areas in relation to the Commercial Development, additional equipments in stations, mobilization fees for the Civil Infrastructure maintenance contracts and investment in the Commercial Development Subsidiaries. Subsequently, the Company and the lenders agreed to reduce the loan facility to Baht 650 million

2. BASIS OF CONSOLIDATION The consolidated financial statements for the years ended 31 December 2005 and 2004 include the financial statements of Bangkok Metro Public Company Limited (hereinafter called “the Company”) and subsidiaries as follows.

Company’s name

Metro Mall Development Limited BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”) Triads Networks Company Limited

Percentage of shareholding by the Company 2005 2004 % % 64.00 60.00 100.00 56.00

84.38 56.00

Nature of business

Rental of retail space in underground stations Telecommunications services Provision of advertising services in underground stations

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Annual Report 2005

Percentage of total assets of subsidiaries as included in the consolidated financial statements as at 31 December 2005 and 2004 and percentage of total revenue of subsidiaries as included in the consolidated financial statements for the years ended 31 December 2005 and 2004 are as follows :

Company’s name

Metro Mall Development Limited BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”) Triads Networks Company Limited

Percentage of total assets of subsidiaries as included in the consolidated financial statements as at 31 December 2005 2004 % % 1.36 1.36 0.26 0.26

0.27 0.05

Percentage of total revenue of subsidiaries as included in the consolidated financial statements for the years ended 31 December 2005 2004 % % 0.47 0.01 3.50

0.03 -

Material intercompany balances and transactions and investment in subsidiaries in the Company’s accounts and the subsidiaries’ share capital are eliminated on consolidation. Results of operations of the subsidiaries have been included in the consolidated financial statements from the effective date of acquisition.

3. SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Profession Act B.E. 2547. Significant accounting policies adopted by the Company and its subsidiaries are summarised below :

3.1

Revenues and expenses recognition

a)

Fare box revenue recognition Smart card and smart token sales are recognised as revenue when the services are rendered. Prepaid value in stored value smart card is recorded as unearned fare box revenue in the current liabilities in the balance sheet.

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b)

Commercial development revenue Commercial development revenue is recognised as income when service has been rendered.

c)

Other revenues and expenses recognition An accrual basis of accounting was adopted in recognition of other revenues and expenses.

3.2

Project costs and Unit of Throughput Amortisation Method (Unit of Production) All expenditures and other related expenses which are incurred to construct the System and to enable it to become operational (“Project costs”) are capitalised as assets and will be depreciated over the Concession Period upon the commencement of operation of the System. Such project costs include management and consultant fees, design costs, electrical and mechanical works and rolling stock purchased during the Concession Period, interest and other financing expenses. The Company has been adopting the unit of throughput method of amortisation to amortise such project costs to be costs of fare box in the earnings statement basing on the following unit of throughput amortisation formula :

Amortisation for the period

=

Net project costs x Percentage of Passengers for the period

Percentage of Passengers

=

Current period’s actual passengers (Actual passengers for the current period + Projected

for the period

passengers during the remaining Concession Period) Net project costs

3.3

=

Total project costs - Accumulated amortization

Investments in subsidiaries Investments in subsidiaries (in the separate financial statements of the Company) are stated under the equity method of accounting. Under this method, investments are recorded at costs. For each subsequent period, investments are adjusted to incorporate the Company’s proportionate share of the operating results in the subsidiaries.

3.4

Goodwill on consolidation Goodwill on consolidation which was incurred from the investments in subsidiaries being made at costs higher than the subsidiaries’ net book value, is regarded as assets and amortised on a straight-line basis over a period of 10 years.

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Annual Report 2005

3.5

Equipment and depreciation Equipment is stated at cost less accumulated depreciation. No depreciation is charged for asset during construction. Depreciation of equipment are calculated on the straight-line method over the estimated useful lives, which are as follows :

3.6

Leasehold improvement

Concession period of subsidiary

Communication equipment

5

years

Advertising equipment

5

years

Furniture, fixture and office equipment

3 - 5 years

Motor vehicles

5

years

Foreign currencies Foreign currency transactions incurred during the year are translated into Baht at the rates ruling on the transaction dates. Monetary assets and liabilities dominated in foreign currency outstanding on the balance sheet date are translated into Baht at the rates ruling on the balance sheet date. Exchange gains and losses incurred before the commencement of operations are capitalised as part of project costs. Exchange gains and losses incurred after the commencement of operations are included in determining earnings.

3.7

Financial derivative instruments The Company occasionally entered into forward exchange contracts to reduce its exposure from exchange rate fluctuation risk. Premiums or discounts (the difference between the spot exchange rate and the forward exchange rate at inception of the contracts) are deferred and amortised over the contract lives using the straight-line method. The amortisations incurred before the commencement of operations are capitalised as part of project costs. Amortisations incurred after the commencement of operations are included in determining earnings.

3.8

Employee benefits The Company and its employees have jointly established a provident fund as approved by the Ministry of Finance in accordance with Provident Fund Act B.E. 2530. The fund is monthly contributed to by employees at the rate of 3 percent of their basic salaries and by the Company at the same rate, and will be paid to the employees upon termination in accordance with the rules of the Company’s provident fund. The fund is managed by TMB Bank Public Company Limited.

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Annual Report 2005

3.9

Loss per share Loss per share as presented in the earnings statements is basic loss per share which is determined by dividing net loss for the year by the weighted average number of ordinary shares in issued during the year.

3.10 Cash and cash equivalents Cash and cash equivalents include cash on hand and deposits with financial institutions with an original maturity of 3 months or less since the deposit date.

3.11 Use of accounting estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates for certain accounting transactions, affecting amounts reported in the financial statements and notes related thereto. Subsequent actual results may differ from these estimates.

4. CASH AND CASH EQUIVALENTS The Company has pledged its rights to receive deposits from bank accounts, which have outstanding balances as at 31 December 2005 of approximately Baht 425.8 million (2004 : Baht 273.6 million) to a group of lenders to secure the Company’s long-term loans from the group of lenders.

5. TRADE ACCOUNTS RECEIVABLE Trade accounts receivable as at 31 December 2005 and 2004 classified by aging are as follows :

Not yet due Overdue Less than 3 months

(Unit : Baht) Consolidated 2005 2004 16,136,467 5,481,024 21,617,491

-

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Annual Report 2005

6. INVESTMENTS ACCOUNTED FOR UNDER EQUITY METHOD – SUBSIDIARIES / PROVISION FOR LOSS OF INVESTMENT IN SUBSIDIARIES

(Unit : Baht) The Company Only As at 31 December 2005

Company’s name - Metro Mall Development Limited - BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”) - Triads Networks Company Limited

Paid-up

Percentage owned by

Provision for loss of

capital

the Company

Cost

Equity

investment

Dividend

50,000,000

Percent 64.00

32,000,000

-

(1,725,112)

-

105,000,000 25,000,000

100.00 56.00

Investment

104,999,980

55,540,373

-

-

14,000,000

10,538,924

-

-

150,999,980

66,079,297 (1,725,112)

(Unit : Baht)

The Company Only As at 31 December 2004

Company’s name - Metro Mall Development Limited - Radianz Communications Network Limited - Triads Networks Company Limited

Paid-up

Percentage owned by

capital

the Company

Cost

50,000,000 80,000,000 19,750,000

Percent 60.00 84.38 56.00

30,000,000 67,500,000

Investment Equity

Provision for loss of investment

Dividend

19,536,481 43,347,576

-

-

11,060,000

4,143,491

-

-

108,560,000

67,027,548

-

-

-

Metro Mall Development Limited In May 2005, the Company purchased 200,000 ordinary shares of Metro Mall Development Limited, at par value of Baht 10 each, a total of Baht 2,000,000, from other shareholder, increasing the Company’s total investment in that company to 64 percent of its share capital.

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Annual Report 2005

BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”) In February 2005, the Company purchased 1,249,998 ordinary shares of BMCL Network Limited, at par value of Baht 10 each, a total of Baht 12,499,980, from other shareholders, increasing the Company’s total investment in that company to 100 percent of its share capital. Subsequently, in December 2005, BMCL Network Limited increased its share capital by Baht 25,000,000 million through the issuance of 2,500,000 ordinary shares at par value of Baht 10 each. The Company had therefore purchased all additional ordinary shares of that company to maintain its interest of shareholding in that company of 100 percent.

Triads Networks Company Limited In March 2005, Triads Networks Company Limited called up 75 percent of its share capital 39,200 ordinary shares, totaling of Baht 2,940,000. The Company has pledged certain part of share certificates of investments in these three subsidiaries with a group of lenders to secure the Company’s long-term loans from the group of lenders.

7. PROJECT COSTS

Consolidated M&E Equipment Project management fees per agreement Consultant fees Depot building and administration building Interest expenses Others Total Less : Accumulated amortisation of Project costs Project costs, net

2005 12,159,394,518 2,464,094,957 606,925,297 1,255,892,166 1,264,616,711 1,243,368,916 18,994,292,565

2004 11,949,158,041 2,464,094,957 600,899,697 1,255,223,416 1,264,616,711 1,039,718,286 18,573,711,108

(Unit : Baht) The Company Only 2005 2004 12,159,394,518 11,949,158,041 2,464,094,957 2,464,094,957 606,925,297 600,899,697 1,255,892,166 1,255,223,416 1,264,616,711 1,264,616,711 1,243,368,916 1,039,718,286 18,994,292,565 18,573,711,108

(296,703,221) (124,991,370) (296,703,221) (124,991,370) 18,697,589,344 18,448,719,738 18,697,589,344 18,448,719,738

M&E Equipment and depot building and administration building will be transferred to the Mass Rapid Transit Authority of Thailand after the end of concession agreement, of 25 years, on an Acquire Operate and Transfer basis. The Company has assigned the Project’s M&E Equipment, depot building and administration building to a group of lenders to secure the Company’s long-term loans from the group of lenders.

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Annual Report 2005

8. EQUIPMENT (Unit : Baht) Consolidated Equipment and leasehold improvement

Communication equipment

Advertising equipment

Office equipment

Office furniture

Asset during construction

Total

-

52,960,191

20,142,374

19,004,201

210,134,741

344,686,393

21,998,559

13,610,756

10,704,416

525,560

20,051,226

67,239,781

-

(93,233)

(8,025)

(2,384,700)

-

(2,485,958)

-

(18,611)

18,311

-

(33,381,421)

-

21,998,559

66,459,103

30,857,076

17,145,061

196,804,546

409,440,216

-

14,467,094

2,973,297

5,636,943

-

23,388,570

13,247,403

4,011,887

3,390,855

-

23,402,359

-

(60,469)

(2,815)

(1,912,303)

-

(1,975,587)

-

(1,433)

871

-

-

27,652,595

6,983,240

7,115,495

-

44,815,342

Vehicle

Cost 31 December 2004

-

Addition

270,599

Disposal

-

42,444,886 78,665 -

Reclassification

33,381,421

300

31 December 2005

33,652,020

42,523,851

Accumulated depreciation 31 December 2004

-

311,236

630,854

569,155

on disposal

-

-

Reclassification

-

31 December 2005

630,854

Depreciation for the year

1,552,205

Depreciation 562 880,953

1,552,205

-

Net book value 31 December 2004 31 December 2005

33,021,166

42,133,650

-

38,493,097

17,169,077

13,367,258

210,134,741

321,297,823

41,642,898

20,446,354

38,806,508

23,873,836

10,029,566

196,804,546

364,624,874

Depreciation charges of the years as included in the earnings statements 2004

14,352,069

2005

23,402,359

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Annual Report 2005

(Unit : Baht) Office equipment

The Company Only Office furniture Vehicle

Cost 31 December 2004 Addition Disposal 31 December 2005

47,286,998 12,506,967 (92,065) 59,701,900

15,586,591 10,590,776 (8,025) 26,169,342

19,004,201 40,794 (2,384,700) 16,660,295

81,877,790 23,138,537 (2,484,790) 102,531,537

Accumulated depreciation 31 December 2004 Depreciation for the year Depreciation on disposal 31 December 2005

13,714,061 11,893,436 (60,058) 25,547,439

2,218,699 3,087,233 (2,815) 5,303,117

5,636,943 3,338,070 (1,912,303) 7,062,710

21,569,703 18,318,739 (1,975,176) 37,913,266

Net book value 31 December 2004

33,572,937

13,367,892

13,367,258

60,308,087

31 December 2005

34,154,461

20,866,225

9,597,585

64,618,271

Total

Depreciation charges of the years as included in the earnings statements 2004

12,875,688

2005

18,318,739

9. BANK OVERDRAFT AND SHORT-TERM LOANS FROM FINANCIAL INSTITUTION The outstanding balance in the consolidated financial statements as at 31 December 2005 represents the bank overdraft and short-term loan from financial institution of a subsidiary. The bank overdraft, amounting to Baht 2.3 million, is from a local bank and subject to interest at the minimum overdraft rate plus 0.5 percent per annum, while the short-term loan, amounting to Baht 14 million, is from the same bank, carries interest at 7 percent per annum and is schedule for repayment in January 2006. Bank overdraft and short-term loan from financial institution are guaranteed by a related company.

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Annual Report 2005

10. LONG-TERM LOANS/CURRENT PORTION OF LONG-TERM LOANS On 19 December 2001, the Company entered into a long-term loan agreement with a group of domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement) to obtain a loan facility of Baht 11,000 million used in the payment of project costs. The loan facilities carry interest at 7.75 percent per annum for the first 2 years from the date of the agreement, and thereafter at MLR plus 0.25 percent per annum until the Project Completion Date, and at MLR per annum after the Project Completion Date. The loans are scheduled for repayment on an instalment basis commencing March 2006 and the last instalment in December 2016.

Subsequently, on 18 June 2003, the Company entered into a supplemental agreement to the Onshore Facilities Agreement to obtain an additional loan facility of Baht 500 million used in the payment of additional costs incurred as a result of the programme to accelerate the procurement of M&E equipment and depot modification. The loan carries interest at MLR plus 0.25 percent per annum until the Project Completion Date, and at MLR per annum after the Project Completion Date. The loan is scheduled for repayment in a single lump sum in June 2017.

Subsequently on 2 April 2004, the Company entered into a supplemental agreement to the Onshore Facilities Agreement (No.3), under which the loan facility was increased by addition of the Tranche E Facility of Baht 790 million and subsequently on 30 July 2004, the Company and the lenders agreed to reduce the loan facility to Baht 650 million. This is to be used for payment of additional expenses incurred under the M&E Equipment Contracts, additional fees incurred under the Project Management Agreement, basic infrastructure works for the retail areas in relation to the Commercial Development, additional equipments in stations, mobilization fees for the Civil Infrastructure maintenance contracts and investment in the Commercial Development Subsidiaries. The loan facility carries interest at MLR plus 0.5 percent per annum. The loan is scheduled for repayment in a single lump sum in June 2017.

The loans are secured by the mortgages of the Project’s M&E Equipment, depot building and administration building, pledges of the Company’s share certificates, share certificates of investments in subsidiaries, sponsors support, and the assignment of rights and obligations under the Concession Agreement and the rights to receive deposits in bank accounts.

The loan agreement included covenants imposed by the lenders on, among other things, the proportion of shareholding of the principal shareholders, changes of the Company’s management, entering into other loan agreements, entering into any new business or activity which is not related to the Project and the maintenance of certain financial ratios.

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Annual Report 2005

11. LONG-TERM LOANS FROM SHAREHOLDER AND ACCRUED INTEREST On 11 March 2005, 27 May 2005, 27 July 2005, 25 August 2005, 28 October 2005, 30 November 2005, 23 December 2005 and 30 December 2005, the Company entered into eight subordinated loans agreements with a shareholder, under which they were granted long-term loans facilities of Baht 380 million, Baht 150 million, Baht 80 million, Baht 330 million, Baht 80 million, Baht 50 million, Baht 100 million and Baht 233 million, respectively. The loans carry interest at MLR plus 0.5 percent per annum and principal and interest are to be paid after the Company has paid all indebtedness under the Onshore Facilities Agreement (as discussed in Note 10) or when the Company has excess cash.

12. RELATED PARTY TRANSACTIONS During the years, the Company and its subsidiaries had significant business transactions with related parties (related by the way of shareholding or common shareholders and/or common directors). Such transactions, which have been concluded on the terms and basis as determined by the Company, its subsidiaries and those related parties, are under the normal course of business of the Company and its subsidiaries. The transactions are summarised below :

Commercial development revenue Project construction costs Project maintenance costs Project management fees - Included as part of project costs - Included as part of costs of fare box Selling and administrative expenses Interest expense and related fee - Included as part of project costs - Included as part of selling and administrative expenses

Consolidated 2005 2004 18.2 209.6 10.3 4.3

The Company Only 2005 2004 11.8 10.6 10.3 4.3

(Unit : Million Baht) Pricing policy Based on contract Based on contract Based on contract

-

100.0

-

100.0

Based on contract

62.1

42.8

62.1

42.8

Based on contract

6.6

5.9

-

1.2

Agreed between parties

-

131.5

-

131.5

Based on contract

350.3

147.8

336.7

143.6

Based on contract

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Annual Report 2005

The outstanding balances of the above transactions are shown as separate items in the balance sheet as follows :

Consolidated Amounts due from related parties Subsidiaries - BMCL Network Company Limited (Formerly known as “Radianz Communications Network Limited�) - Triads Networks Company Limited - Metro Mall Development Limited Related parties - CH. Karnchang Public Company Limited - Joint Venture BCKT - Others

Advance payment for construction Related company - CH. Karnchang Public Company Limited Construction and other payable Related parties - CH. Karnchang Public Company Limited - Joint Venture CKET - Others Accrued interest - related company - CH. Karnchang Public Company Limited

2005

2004

-

92,720

(Unit : Baht) The Company Only 2005 2004

8,147,234 1,149,815 9,297,049

1,070,000 1,070,000

92,720

360,000 23,997,895 718,496 25,076,391 26,146,391

92,720 92,720

360,000 23,997,895 718,496 25,076,391 25,076,391

12,421,987 12,421,987

15,279,307 15,279,307

219,376,333 70,620,000 1,714,587

193,670,696 8,690,027 1,804,280

13,196,667 70,620,000 -

2,853,334 8,690,027 -

291,710,920

204,165,003

83,816,667

11,543,361

17,203,162 17,203,162

4,183,290 4,183,290

-

92,720 9,389,769

-

-

-

-

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Annual Report 2005

Consolidated Long-term loans from shareholder and accrued interest - CH. Karnchang Public Company Limited Loans Accrued interest Part of “Long-term loans” - Krungthai Bank Public Company Limited Current portion Long-term portion

(Unit : Baht) The Company Only 2005 2004

2005

2004

1,403,000,000 35,752,812 1,438,752,812

-

1,403,000,000 35,752,812 1,438,752,812

-

43,000,000

-

43,000,000

-

4,692,658,050

4,657,868,850

4,692,658,050

4,657,868,850

During the year, the movement of loan to subsidiary and accrued interest, long-term loans from shareholder and accrued interest and long-term loans are as follows : (Unit : Baht) Consolidated 2004 Increase Decrease 2005 Long-term loans from shareholder and accrued interest - CH. Karnchang Public Company Limited Loans 1,403,000,000 1,403,000,000 Accrued interest 38,803,059 (3,050,247) 35,752,812 Part of “Long-term loans” - Krungthai Bank Public Company Limited Current portion Long-term portion

-

1,441,803,059

-

43,000,000

4,657,868,850

77,789,200

(3,050,247)

(43,000,000)

1,438,752,812

43,000,000 4,692,658,050

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Annual Report 2005

(Unit : Baht) 2004 Loan to subsidiary and accrued interest - Triads Networks Company Limited Loans Accrued interest Long-term loans from shareholder and accrued interest - CH. Karnchang Public Company Limited Loans Accrued interest Part of “Long-term loans” - Krungthai Bank Public Company Limited Current portion Long-term portion

The Company Only Increase Decrease

2005

-

6,000,000 185,178 6,185,178

(6,000,000) (185,178) (6,185,178)

-

-

1,403,000,000 38,803,059

(3,050,247)

1,403,000,000 35,752,812

-

1,441,803,059

(3,050,247)

1,438,752,812

-

43,000,000

4,657,868,850

77,789,200

(43,000,000)

43,000,000 4,692,658,050

13. SHARE CAPITAL/SHARE SUBSCRIPTION RECEIVED IN ADVANCE During the fourth quarter of 2004, through a share offering the Company allocated 56,536,246 additional ordinary shares to its existing shareholders at a price of Baht 3 per share, making a total of Baht 169.6 million. The Company presented this amount as a “Share subscription received in advance” in the balance sheet as at 31 December 2004. Subsequently on 14 January 2005, the Company registered the above paid up share capital with the Ministry of Commerce.

During the first quarter of current year, through a share offering the Company allocated 43,463,754 additional ordinary shares to its existing shareholders at a price of Baht 3 per share, making a total of Baht 130.4 million. The Company registered the above paid up share capital with the Ministry of Commerce on 1 March 2005 to be a paid up share capital of Baht 7,350 million, comprises of 7,350 million ordinary shares of Baht 1 each.

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Annual Report 2005

On 29 April 2005, the Annual General Meeting of the Company’s shareholders passed resolution to increase the Company’s registered share capital from Baht 7,350 million to Baht 10,400 million through the issuance of 3,050 million ordinary shares with a par value of Baht 1 each, to be allocated at the following basis. a)

300 million ordinary shares are to be allocated and offered, in whole or in part, to directors, management, and employees of the Company. These may be made on one or several occasions. Any ordinary shares remaining after the allocation are to be allocated by means of public offerings. These offers may be in Thailand and/or abroad and made on one or several occasions. In this regard, the Executive Board or any persons assigned by the Company’s executive board are granted the authority to determine the allocation of offering rights, and all details and conditions in respect of the number of ordinary shares to be offered in each occasion, the offer period, the payment of share subscriptions and the offer price.

b)

2,750 million ordinary shares are to be allocated and offered, in whole or in part, by the way of public offering, on one or several occasions. In this regard, the Executive Board or any persons assigned by the Company’s executive board are granted the authority to determine the allocation of offering rights, and all details and conditions in respect of the number of ordinary shares to be offered in each occasion, the offer period, the payment of share subscriptions and the offer price.

On 15 May 2005, the Company registered its increased registered share capital with the Ministry of Commerce to be a registered share capital of Baht 10,400 million, comprise of 10,400 million ordinary shares of Baht 1 each.

Subsequent to 30 June 2005, an extraordinary general meeting of the Company’s shareholders passed resolutions regarding the Company’s registered share capital, summarised as follows. a)

Approved reductions of 300 million in the number of additional ordinary shares to be allotted and offered to directors, management, and employees of the Company and 2,750 million ordinary shares to be allotted and offered by the way of public offering, in order to comply with the allocation of the Company’s share capital to the Mass Rapid Transit Authority of Thailand.

b)

Approved an increase of Baht 4,600 million in the Company’s registered share capital, from Baht 7,350 million to Baht 11,950 million, through the issuance of 4,600 million ordinary shares with a par value of Baht 1 each. The allocation of the additional ordinary shares is to be as follows.

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Annual Report 2005

1)

2,600 million ordinary shares are to be allocated and offered to the Mass Rapid Transit Authority of Thailand at the price equivalent to par value of Baht 1 each.

2)

450 million ordinary shares are to be allocated and offered, in whole or in part, to directors, management, and employees of the Company at the price equivalent to par value of Baht 1 each. These may be offered on one or several occasions. Any ordinary shares remaining after the allocation are to be allocated by means of public offerings. These offers may be in Thailand and/or abroad and made on one or several occasions. In this regard, the Executive Board or any persons assigned by the Company’s executive board is granted the authority to determine the allocation of offering rights, and all details and conditions in respect of the number of ordinary shares to be offered on each occasion, the offer period, the payment of the share price and the offer price.

3)

1,550 million ordinary shares are to be allocated and offered to public. Any shares remaining after this allocation are to be allocated, in whole or in part, by means of private placement and/or to institutional investors, in accordance with the relevant Notifications of the Securities and Exchange Commission, on one or several occasions. In this regard, the Executive Board or any persons assigned by the Company’s Executive Board are granted the authority to determine the allocation of offering rights, and all details and conditions in respect of the number of ordinary shares to be offered on each occasion, the offer period, the payment of the share price and the offer price.

On 1 July 2005, the Company registered the reduction of its registered share capital to Baht 7,350 million, comprising of 7,350 million ordinary shares of Baht 1 each, with the Ministry of Commerce, as discussed in a) above.

On 4 July 2005, the Company registered the increase in its registered share capital to Baht 11,950 million, comprising of 11,950 million ordinary shares of Baht 1 each, with the Ministry of Commerce, as discussed in b) above.

During December 2005, the Company’s directors, management and employees exercised their rights to purchase 296,689,300 ordinary shares, as discussed in b) 2), at a price of Baht 1 per share, for a total of Baht 296,689,300. The remaining 153,310,700 ordinary shares will be allocated by means of public offerings, as granted resolution by the extraordinary general meeting of the Company’s shareholders. On 11 January 2006, the Company registered the increase in its paid up share capital to Baht 7,646,689,300 comprising 7,646,689,300 ordinary shares with a par value of Baht 1 each, with the Ministry of Commerce.

121


Annual Report 2005

The Company recorded proceeds of Baht 296,689,300 from the offering of the Company’s ordinary shares to its directors, management and employee as “Share subscription received in advance” in the balance sheet as at 31 December 2005.

14. FARE BOX COMPENSATION REVENUE On 6 January 2005, the Company entered into a memorandum of agreement with the Mass Rapid Transit Authority of Thailand (“the MRTA”) regarding the Company’s cooperation in the trial discounting of the fare box rate of the MRTA Initial System Project - “Chaloem Ratchamongkhon Line” stipulated in the Concession Agreement. The discounted fare box rates are to be effective during the period 7 January 2005 to 31 March 2005. In return the MRTA agreed to pay compensation to the Company at a rate of 80 percent of any shortfall between the actual fare box revenue and the standard fare box revenue figure as stipulated in the memorandum of agreement. The Company recorded a fare box compensation revenue of Baht 23.1 million as a revenue for the first quarter of current year.

On 20 May 2005, the Company received a letter from the MRTA regarding the period of the trial discounting of the fare box rate of the MRTA Initial System. In the letter, the MRTA indicated that the discount compensation period was to be suspended during the period of the accident when the MRT system service was unable to run as normal. The MRTA also indicated that the discount compensation period would then continue again from 21 March 2005 and would end on 4 June 2005.

Subsequently on 10 June 2005, the Company received another letter from the MRTA informing it that the discount compensation to be paid to the Company was approximately Baht 20.5 million. The Company has therefore adjusted the fare box compensation revenue to equivalent to the said amount.

15. FORWARD EXCHANGE CONTRACTS As at 31 December 2005, the balance of the liabilities of the Company outstanding in foreign currencies, net of foreign-currency denominated assets was 38.3 million yens and 2.0 million euro. The Company does not utilise forward exchange contract to hedge against foreign exchange rate risk.

16. NUMBER OF EMPLOYEES AND RELATED COSTS

Number of employees at end of year (Persons) Employee costs for the year (Thousand Baht)

Consolidated 2005 2004 1,022 940 298,240 265,838

The Company Only 2005 2004 928 872 272,044 244,138

122


Annual Report 2005

During the current year, the Company contributed Baht 5.9 million (2004 : Baht 4.8 million) to the provident fund which is included in the above employee costs.

17. BANK GUARANTEES As at 31 December 2005, there were outstanding bank guarantees issued by banks on behalf of the Company as follows : 17.1 A bank guarantee of Baht 150 million (2004 : Baht 150 million) was issued to the MRTA in respect of certain performance bonds required in the Concession Agreement. 17.2 Bank guarantees of Baht 32.4 million (2004 : Baht 32.4 million) was issued to the Metropolitan Electricity Authority as certain performance bonds in respect of electricity meters instalation at the power substations in the Depot area and Administration Building.

18. COMMITMENTS As at 31 December 2005, the Company had commitments from the following agreements. 18.1 The Procurement of M&E Equipment contracts and the Maintenance of M&E Equipment and Trackwork contracts for 10 years commencing from the Commercial Operation Date. Under the contracts, the Company has outstanding commitments totaling of Baht 1,247 million and 33 million euros (2004 : Baht 1,657 million and 39 million euros) excluding escalation in accordance with the general consumer price index. 18.2 The Company had commitments from a project management agreement with a joint venture as the agreement dated 15 August 2000 and a supplemental agreement dated 18 March 2004. Under the agreements, the Company has outstanding commitments in respect of project management fee during 2006 to 2008 totaling of Baht 127 million excluding escalation in accordance with the general consumer price index. 18.3 The Company had commitments from Contracts to repair and maintenance of infrastructure and civil works of the MRTA Initial System Project - Chaloem Ratchamongkhon Line with a related company and other 3 companies, totaling 5 contracts, under the contracts dated 6 November 2003 and 1 June 2004, for the period of 7 years. Under the contracts, the Company has commitments to pay maintenance fees totaling Baht 1,061 million. 18.4 The Company had commitments from Contracts to repair and maintenance of retail area of the MRTA Initial System Project - Chaloem Ratchamongkhon Line with 2 companies, under the contracts dated 1 September 2005 and 14 October 2005, for the period of 5 years and 6 months and 5 years and 4 months, respectively. Under the contracts, the Company has commitments to pay maintenance fees totaling Baht 139 million.

123


Annual Report 2005

18.5 The Company had commitments from various services agreements, under which, the Company has commitments in respect of service fees. Under the agreements, the Company has outstanding commitments to pay related fees totaling of approximately Baht 21 million. 18.6 The subsidiaries had commitments in respect of car rental agreement, and rental of office building agreements and related service agreements, under which, the subsidiaries have outstanding commitments to pay rental and service fees totaling of approximately Baht 13.7 million. 18.7 The subsidiary had commitments in respect of agreements for construction and design of infrastructure system of retail space in the underground stations totaling of approximately Baht 74 million.

19. LITIGATIONS On 10 October 2002, Alstom Transport S.A. (the first plaintiff) and Alstom Holdings (Thailand) Company Limited (the second plaintiff), as plaintiffs, filed a lawsuit against the Company with the Intellectual Properties and International Trade Court, seeking damages of approximately Baht 1,382 million. In addition, on 16 December 2002, Mitsubishi Electric Corporation (the third plaintiff), as plaintiff, filed a lawsuit against the Company with the Intellectual Properties and International Trade Court, seeking damages amounting to approximately Baht 621 million. The amounts claimed are the losses allegedly suffered by these companies as a result of the Company’s changing the contractor for procurement and maintenance of M&E Equipment and Trackwork for the MRTA Initial System Project - Chaloem Ratchamongkhon Line, whereby the said companies had incurred costs in relation to their performance of the Start-up Phase Works in accordance with the stipulations of the Memorandum of Agreement dated 1 September 2000 made between the Company and the consortium formed by these companies.

On 21 January 2003 and 28 January 2003, the Company filed defence testimony and countersuit with the Intellectual Properties and International Trade Court in relation to the lawsuit brought by Alstom Transport S.A. and Alstom Holdings (Thailand) Company Limited, as plaintiffs, and the lawsuit brought by Mitsubishi Electric Corporation, as plaintiff, respectively, requesting that the Court dismiss both cases and seeking damages from the plaintiffs totaling Baht 3,522 million.

On 8 July 2004, the Court had fixed a date of 28 September 2004 to allow the parties to try to compromise. In addition, the Intellectual Properties and International Trade Court fixed dates of 8, 9 and 10 March 2005 in order to settle the issue of dispute.

124


Annual Report 2005

On 5 August 2004, Alstom Transport S.A. (the first plaintiff), Alstom Holdings (Thailand) Company Limited (the second plaintiff) and the Company managed to agree a settlement to the dispute, whereby the Company is not liable for any damages, and filed a petition with the Intellectual Properties and International Trade Court to withdraw the lawsuits. The case with Mitsubishi Electric Corporation (the third plaintiff) is still pending in Court and the Intellectual Properties and International Trade Court fixed a further date on 3 December 2004 for the parties to try to compromise.

On 3 December 2004, the Company and Mitsubishi Electric Corporation (the third plaintiff) had discussed in front of the mediator with a view to compromise, but the discussion was not concluded. Subsequently on 26 April 2005, the parties again met in order to compromise, but the outcome of such meeting was not positive. The Court then proceeds with the hearing and fixed the hearing date to be done in October 2005.

Subsequently on 31 October 2005, the Company and Mitsubishi Electric Corporation (the third plaintiff) managed to agree a settlement to the dispute, whereby the Company is not liable for any damages, and Mitsubishi Electric Corporation (the third plaintiff) withdrew the lawsuit against the Company and the Company withdrew the countersuit lodged against Mitsubishi Electric Corporation (the third plaintiff) with the Intellectual Properties and International Trade Court. The Intellectual Properties and International Trade Court, on the same date, granted its permission and disposed the case from the Court’s docket.

20. PROMOTIONAL PRIVILEGES On 16 January 2003, the Company has been granted promotional privileges for the MRTA Initial System Project - Chaloem Ratchamongkhon Line (the blue line) under the Investment Promotion Act B.E. 2520, under BOI certificate number 1029(1)/2546. These privileges include a 100 percent exemption from corporate income tax on net profit from promoted operations for a period of 8 years commencing from the date of first earning operating income. The Company commenced its operations on 3 July 2004. Subject to certain imposed conditions, the main privileges include the following : -

Entitlement to 50% deduction of import duty on imported machinery according to specified condition.

-

Exemption from corporate income tax on earnings from promotional privileges operation for a period of eight years from the date on which operating income is first derived (in the year 2004).

125


Annual Report 2005

Net loss for the years ended 31 December 2005 and 2004 are divided into promoted and non-promoted operations as follows :

(Unit : Baht) Promoted operations 2005 2004 Revenues Fare box revenue Fare box compensation revenue Commercial development revenue Interest income Other income Total revenues Expenses Cost of fare box Cost of commercial development Amortisation of project costs Selling and administrative expenses Share of loss from investments accounted for under equity method Total expenses Loss before interest expenses Interest expenses Net loss for the year

The Company Only Non-promoted operations 2005 2004

969,908,851 20,481,123 990,389,974

443,144,725 909,464 444,054,189

23,820,815 902,224 2,308,772 27,031,811

1,411,183,666 168,133,603 267,180,533

674,311,358 123,162,778 188,779,325

6,217,785 27,576,637 3,578,248 7,482,008

1,846,497,802 (856,107,828) (774,585,371) (1,630,693,199)

986,253,461 (542,199,272) (365,343,759) (907,543,031)

45,113,342 89,968,020 (62,936,209) (22,365,458) (85,301,667)

-

Total 2005

2004

3,391 1,652,344 1,655,735

969,908,851 20,481,123 23,820,815 902,224 2,308,772 1,017,421,785

443,144,725 912,855 1,652,344 445,709,924

159,002 1,828,592 6,440,586

1,417,401,451 27,576,637 171,711,851 274,662,541

674,470,360 124,991,370 195,219,911

41,532,452 45,113,342 49,960,632 1,936,465,822 (48,304,897) (919,044,037) (1,362,313) (796,950,829) (49,667,210) (1,715,994,866)

41,532,452 1,036,214,093 (590,504,169) (366,706,072) (957,210,241)

21. FINANCIAL INFORMATION BY SEGMENT The Company’s and its subsidiaries’ operations involve principally two industry segments; the operation of the MRTA Initial System Project and commercial development, which comprises the rental of retail space in the underground train stations, telecommunications services and provision of advertising services in underground train stations. The operations of the Company and its subsidiaries are carried on in the single geographic area of Thailand.

126


Annual Report 2005

The Company and its subsidiaries’ financial information by segment of the operation of the MRTA Initial System Project and commercial development business in the consolidated statements of earnings for the years ended 31 December 2005 and 2004 is as follows :

(Unit : Million Baht)

Revenues

The MRTA Commercial Initial System Development Project Business 2005 2004 2005 2004 990 443 65 -

Operating profit (loss) (595) Common expenses Share of loss from investments accounted for under equity method Loss before interest expenses Interest expenses Loss before minority interest Minority interest Net loss for the year

(365)

15

-

Others Total Elimination 2005 2004 2005 2004 2005 2004 4 3 1,059 446 (13) 4

3

(576)

(353)

(1)

-

Total 2005 1,046

2004 446

(577) (338)

(353) (245)

(915) (811) (1,726) 10 (1,716)

(1) (599) (376) (975) 18 (957)

The business segment information by segment of the operation of the MRTA Initial System Project and commercial development business in the consolidated balance sheets as at 31 December 2005 and 2004 is as follows:

(Unit : Million Baht)

Project cost, net Equipment, net Other assets Total assets

The MRTA Initial System Project 2005 2004 18,199 18,114 65 60

Commercial Development business 2005 2004 499 335 300 261

Total 2005 18,698 365

2004 18,449 321

Elimination 2005 2004 -

Total 2005 18,698 365 668 19,731

2004 18,449 321 536 19,306

127


Annual Report 2005

22. FINANCIAL INSTRUMENTS

22.1 Financial risk management and policies The Company and its subsidiaries are exposed to risks from changes in market interest rates and in currency exchange rates, and from nonperformance of contractual obligations by counterparties. The Company and its subsidiaries do not hold or issue derivative instruments for speculative or trading purposes. 22.2 Interest rate risk The interest rate risk is the risk that future movements in market interest rates will affect the results of the operations and its cash flows. The Company’s and its subsidiaries’ exposure to interest rate risk relates primarily to its deposits with financial institutions and long-term loans from financial institutions.

Since the majority of these financial assets are short-term and

interests on its long-term liabilities are charged at rates which closed to market interest rate, the Company and its subsidiaries do not use derivative financial instruments to hedge such risk. The details of loans are set out in Notes 10 and 11. 22.3 Foreign currency risk The Company’s and its subsidiaries’ exposure to foreign currency risk relates primarily to their payables which are dominated in foreign currencies. As the amounts of accounts payable are immaterial, the Company and its subsidiaries do not use derivative financial instruments to hedge such foreign exchange rate risk. The details of assets and liabilities denominated in foreign currencies are set out in Note 15. 22.4 Fair value Since the majority of the financial assets are short-term and that the loans carry interest at rates close to market rates, the management believes that the Company’s and its subsidiaries’ fair value of financial assets and liabilities do not materially differ from their carrying value.

128


Annual Report 2005

23. SUBSEQUENT EVENTS On 1 February 1006, an extraordinary general meeting of the Company’s shareholders passed resolutions regarding the Company’s registered share capital, summarised as follows. 23.1 Approved the cancellation of the resolution alloting 2,600 million additional ordinary shares for offer to the Mass Rapid Transit Authority of Thailand. 23.2 Approved the cancellation of the allocation of the 153,310,700 remaining additional ordinary shares to be offered to directors, management, and employees of the Company, and their allocation to a public offering 23.3 Approved a reduction of 1,550 million in the number of additional ordinary shares to be allotted and offered by the way of public offering. 23.4 Approved the allocation and offer of 1,315,810,700 ordinary shares by way of public offering. Any shares remaining after this allocation are to be allocated, in whole or in part, by means of private placement and/or to institutional investors, in accordance with the relevant Notifications of the Securities and Exchange Commission, on one or several occasions. In this regard, the Executive Board or any persons assigned by the Company’s Executive Board are granted the authority to determine the allocation of offering rights, and all details and conditions in respect of the number of ordinary shares to be offered on each occasion, the offer period, the payment of the share price and the offer price. 23.5 Approved the allocation and offer of 2,987,500,000 ordinary shares to the Mass Rapid Transit Authority of Thailand.

24. PRESENTATION The presentation of the financial statements has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 14 September 2001, issued under the Accounting Act B.E. 2543.

25. APPROVAL OF FINANCIAL STATEMENTS These financial statements were authorised for issue by the Board of Directors on 22 February 2006.

129


Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES REPORT AND INTERIM FINANCIAL STATEMENTS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004

130


Annual Report 2005

Review Report of Independent Auditor To The Board of Directors and Shareholders of Bangkok Metro Public Company Limited

I have reviewed the accompanying consolidated balance sheet of Bangkok Metro Public Company Limited and its subsidiaries as at 30 June 2005, the related consolidated statements of earnings for the three-month and six-month periods ended 30 June 2005 and 2004, and the statements of changes in shareholders’ equity and cash flows for the six-month periods ended 30 June 2005 and 2004 and the separate financial statements of Bangkok Metro Public Company Limited for the same periods. These financial statements are the responsibility of the Company’s and its subsidiaries’ management as to their correctness and the completeness of the presentation. My responsibility is to issue a report on these financial statements based on my reviews. I conducted my reviews in accordance with the auditing standard applicable to review engagements. This standard requires that I plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of the Company’s and its subsidiaries’ personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. I have not performed an audit and, accordingly, I do not express an audit opinion. Based on my reviews, nothing has come to my attention that causes me to believe that the accompanying financial statements are not presented fairly, in all material respects, in accordance with generally accepted accounting principles. I have previously audited the consolidated financial statements of Bangkok Metro Public Company Limited and its subsidiaries for the year ended 31 December 2004, and the separate financial statements of Bangkok Metro Public Company Limited for the same year in accordance with generally accepted auditing standards and expressed an unqualified opinion on those statements under my report dated 24 January 2005. The balance sheet as at 31 December 2004, as presented herein for comparative purposes, formed an integral part of the financial statements which I audited and reported on. I have not performed any other audit procedures subsequent to the date of that report.

Ruth Chaowanagawi Certified Public Accountant (Thailand) No. 3247

Ernst & Young Office Limited Bangkok : 19 July 2005 131


Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS (Unit : Thousand Baht)

Consolidated Note

30 June 2005 (Unaudited but reviewed)

The Company Only

31 December 2004 (Audited)

30 June 2005 (Unaudited but reviewed)

31 December 2004 (Audited)

ASSETS CURRENT ASSETS Cash and cash equivalents

2

105,291

Trade accounts receivable

2,636

Amounts due from related parties

7

Loans to subsidiary and accrued interest

7

718

343,923

91,109

318,574

-

-

-

25,076

2,020

26,146

-

-

3,001

-

-

24,049

Other current assets Accounts receivable under forward contracts Prepaid expenses

8,348

56,484

Value added tax refundable

6,275

6,097

Other receivable

2,342

21,225

Unbilled input tax

7,551

7,434

Accrued fare box compensation revenue

9

Supply - tickets

20,481

-

-

24,049 8,245

-

56,081 -

2,289

21,223

-

-

20,481

-

34,960

4,642

34,960

4,642

8,439

7,092

927

552

197,041

496,022

163,032

451,267

3

-

-

60,413

67,027

7

15,279

15,279

-

-

4

18,636,404

18,448,720

18,636,404

18,448,720

327,737

321,298

63,003

60,308

Goodwill on consolidation, net

12,181

6,020

-

-

Others

21,286

18,309

19,200

16,383

TOTAL NON-CURRENT ASSETS

19,012,887

18,809,626

18,779,020

18,592,438

TOTAL ASSETS

19,209,928

19,305,648

18,942,052

19,043,705

Others TOTAL CURRENT ASSETS NON-CURRENT ASSETS Investments accounted for under equity method - subsidiaries Advance payment for construction - related company Project costs, net Equipment, net Other non-current assets

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

132


Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS (Continued) (Unit : Thousand Baht)

Consolidated Note

30 June 2005 (Unaudited but reviewed)

The Company Only

31 December 2004 (Audited)

30 June 2005 (Unaudited but reviewed)

31 December 2004 (Audited)

LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Construction and other payable Related parties

7

Other companies Current portion of long-term loans

5, 7

244,827

204,165

51,738

11,543

358,279

368,248

349,546

360,287

55,000

-

55,000

-

Unearned fare box revenue

27,533

21,862

27,533

21,862

Deposits on stored value ticket

12,392

8,086

12,392

8,086

1,960

5,277

1,675

4,518

Other current liabilities Withholding tax payable Deferred premium on forward contracts

-

Retention for construction

15,006 2,716

-

4,026

15,006 1,817

3,220

Short-term loans from other company and accrued interest Accrued interest - related company

12,808 7

-

-

-

-

-

10,621

4,183

43,168

791

42,625

148

3,757

4,209

3,367

4,080

773,061

635,853

545,693

428,750

5, 7

12,009,500

11,915,500

12,009,500

11,915,500

6, 7

536,793

Accrued expense Others TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term loans, net of current portion Long-term loans from shareholder and accrued interst

-

536,793

-

21,878

22,110

-

-

9,975

11,501

-

-

279

140

-

-

TOTAL NON-CURRENT LIABILITIES

12,578,425

11,949,251

12,546,293

11,915,500

TOTAL LIABILITIES

13,351,486

12,585,104

13,091,986

12,344,250

Deferred leasehold right revenue Guarantee on rental and service agreement Other non-current liabilities

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

133


Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS (Continued) (Unit : Thousand Baht)

Consolidated Note

SHAREHOLDERS' EQUITY Share capital 8 Registered 10,400,000,000 ordinary shares of Baht 1 each (31 December 2004 : 7,350,000,000 ordinary shares of Baht 1 each) Issued and paid up 7,350,000,000 ordinary shares of Baht 1 each, fully paid (31 December 2004 : 7,250,000,000 ordinary shares of Baht 1 each, fully paid) Share premium Share subscription received in advance Deficit Total equity attributable to Company's shareholders Minority interest - Equity attributable to minority shareholders of subsidiaries TOTAL SHAREHOLDERS' EQUITY TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

The Company Only

30 June 2005 31 December 2004 30 June 2005 31 December 2004 (Unaudited (Audited) (Unaudited (Audited) but reviewed) but reviewed)

10,400,000

7,350,000

10,400,000

7,350,000

7,350,000 600,052 (2,099,986) 5,850,066

7,250,000 400,052 169,609 (1,120,206) 6,699,455

7,350,000 600,052 (2,099,986) 5,850,066

7,250,000 400,052 169,609 (1,120,206) 6,699,455

8,376 5,858,442 19,209,928

21,089 6,720,544 19,305,648

5,850,066 18,942,052

6,699,455 19,043,705

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

134


Annual Report 2005

(UNAUDITED BUT REVIEWED)

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES EARNINGS STATEMENTS FOR THE THREE-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004 (Unit : Thousand Baht, except earnings per share expressed in Baht)

Consolidated Note REVENUES Fare box revenue Fare box compensation revenue Advertising income Other income TOTAL REVENUES EXPENSES Costs of fare box Costs of advertising Amortisation of project costs Selling and administrative expenses Share of loss from investments accounted for under equity method TOTAL EXPENSES LOSS BEFORE INTEREST EXPENSES INTEREST EXPENSES LOSS BEFORE MINORITY INTEREST MINORITY INTEREST NET LOSS FOR THE PERIOD

9

7

BASIC LOSS PER SHARE Net loss (Baht) Weighted average number of ordinary shares (shares)

2005

The Company Only 2004

218,488 (2,599) 927 849 217,665

-

358,535 406 38,144 156,334

-

2005

2004 -

538 538

218,488 (2,599) 1,052 216,941

-

57,427

358,535 38,144 142,657

553,419 (335,754) (194,053) (529,807) 3,808 (525,999)

432 57,859 (57,321) (57,321) 4,605 (52,716)

12,869 552,205 (335,264) (190,735) (525,999) (525,999)

(0.072)

(0.007)

(0.072)

(0.007)

7,350,000,000

7,048,035,916

7,350,000,000

7,048,035,916

505 505

44,648 8,573 53,221 (52,716) (52,716) (52,716)

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

135


Annual Report 2005

(UNAUDITED BUT REVIEWED)

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES EARNINGS STATEMENTS FOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004 (Unit : Thousand Baht, except earnings per share expressed in Baht)

Note REVENUES Fare box revenue Fare box compensation revenue Advertising income Other income TOTAL REVENUES EXPENSES Costs of fare box Costs of advertising Amortisation of project costs Selling and administrative expenses Share of loss from investments accounted for under equity method TOTAL EXPENSES LOSS BEFORE INTEREST EXPENSES INTEREST EXPENSES LOSS BEFORE MINORITY INTEREST MINORITY INTEREST NET LOSS FOR THE PERIOD

9

7

BASIC LOSS PER SHARE Net loss (Baht) Weighted average number of ordinary shares (shares)

Consolidated 2005 2004 379,546 20,481 927 1,082 402,036

-

The Company Only 2005 2004 -

1,432 1,432

379,546 20,481 1,269 401,296

704,097 406 94,374 211,950

89,979

704,097 94,374 186,104

75,333

1,010,827 (608,791) (378,990) (987,781) 8,001 (979,780)

1,355 91,334 (89,902) (89,902) 5,352 (84,550)

24,055 1,008,630 (607,334) (372,446) (979,780) (979,780)

10,616 85,949 (84,550) (84,550) (84,550)

(0.134)

(0.012)

(0.134)

(0.012)

7,337,753,307

6,872,419,484

7,337,753,307

6,872,419,484

1,399 1,399

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

136


Annual Report 2005

(UNAUDITED BUT REVIEWED)

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004 (Unit : Thousand Baht)

Consolidated Issued and paid-up share capital

Share premium

Share subscription received in advance

6,404,836

-

-

Called up ordinary shares

395,164

-

-

Issuance of additional ordinary shares

250,000

-

Balance as at 1 January 2004

Deficit (162,995)

Minority interest Equity attributable to minority shareholders of subsidiaries

Total

-

6,241,841

-

-

395,164

-

-

-

250,000

Net loss for the period

-

-

-

(84,550)

-

(84,550)

Minority interest of subsidiaries

-

-

-

-

32,069

32,069

-

-

(247,545)

32,069

6,834,524

(1,120,206)

21,089

6,720,544

Balance as at 30 June 2004

7,050,000

Balance as at 1 January 2005

7,250,000

400,052

43,464

86,927

56,536

113,073

Issuance of additional ordinary shares (Note 8)

169,609 -

-

-

-

-

130,391

Transfer share subscription received in advance to issued and paid up share capital (Note 8)

(169,609)

Net loss for the period

-

-

-

Minority interest of subsidiaries

-

-

-

Balance as at 30 June 2005

7,350,000

600,052

-

(979,780) (2,099,986)

-

-

(979,780)

(12,713)

(12,713)

8,376

5,858,442

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

137


Annual Report 2005

(UNAUDITED BUT REVIEWED) BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004 (Unit : Thousand Baht)

Issued and paid-up share capital

The Company Only Share subscription Share received premium in advance

Deficit

6,404,836

-

-

Called up ordinary shares

395,164

-

-

-

395,164

Issuance of additional ordinary shares

250,000

-

-

-

250,000

-

-

-

(84,550)

(84,550)

Balance as at 30 June 2004

7,050,000

-

-

(247,545)

6,802,455

Balance as at 1 January 2005

7,250,000

400,052

(1,120,206)

6,699,455

43,464

86,927

56,536

113,073

Balance as at 1 January 2004

Net loss for the period

Issuance of additional ordinary shares (Note 8)

169,609 -

(162,995)

Total

-

6,241,841

130,391

Transfer share subscription received in advance to issued and paid up share capital (Note 8) Net loss for the period Balance as at 30 June 2005

7,350,000

600,052

(169,609)

-

-

-

(979,780)

(979,780)

-

(2,099,986)

5,850,066

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

138


Annual Report 2005

(UNAUDITED BUT REVIEWED)

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES CASH FLOWS STATEMENTS FOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004 (Unit : Thousand Baht)

Consolidated 2005

The Company Only

2004

2005

2004

Cash flows from (used in) operating activities Net loss for the period

(979,780)

(84,550)

(979,780)

(84,550)

Depreciation and other amortisation

12,018

5,804

10,518

5,525

Amortisation on project costs

94,374

-

94,374

-

Amortisation of prepaid expenses

59,764

-

59,764

-

Amortisation of premium on forward contracts

(9,887)

-

(9,887)

-

Adjustments to reconcile net loss to net cash provided by (paid from) operating activities

Loss (gain) on disposal of assets

494

Unrealised gain on exchange

(5)

(13)

494

-

(5)

(13) -

Share of loss from investments accounted for under equity method

-

1,355

Amortisation of goodwill Minority interest in loss of subsidiaries

24,055

10,616

548

73

-

-

(8,001)

(5,352)

-

-

(830,475)

(82,683)

(800,467)

(68,422)

Decrease (increase) in operating assets Trade accounts receivable

(2,636)

-

-

Amounts due from related parties

24,358

-

24,126

(11)

Withholding tax deducted at source

-

(604)

(259)

(601)

(76)

Accounts receivable under forward contracts

21,377

51,366

21,377

51,366

Prepaid expenses

(11,628)

99

(11,929)

(29)

Other current assets

(33,712)

(9,198)

(32,241)

573

(4,327)

(914)

(4,325)

(530)

Construction and other payable - related parties

40,662

(56,560)

40,194

(56,560)

Construction and other payable - other companies

(9,965)

102,797

(10,736)

97,602

Unearned fare box revenue

5,671

-

5,671

-

Deposits on stored value ticket

4,307

-

4,307

-

Other non-current assets Increase (decrease) in operating liabilities

Other current liabilities

50,617

7,446

44,312

Other non-current liabilities

(1,619)

3,426

-

(747,974)

15,520

Net cash from (used in) operating activities

(720,312)

4,491 28,404

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

139


Annual Report 2005

(UNAUDITED BUT REVIEWED)

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES CASH FLOWS STATEMENTS (Continued) FOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004 (Unit : Thousand Baht)

Consolidated 2005 Cash flows from (used in) investing activities Increase in loans to subsidiary Increase in investment in subsidiaries Net cash payments for purchase of investment in subsidiar Increase in equipment (16,843) Proceed from disposal of equipment Increase in advance for construction - related party Increase in advance for construction Increase in project costs (284,506) Cash received from minority shareholders 3,080 Cash paid to minority shareholders (14,500) Net cash used in investing activities (312,769) Cash flows from (used in) financing activities Increase in short-term loans from other company 12,720 Increase in long-term loans 149,000 Increase in long-term loans from shareholder 530,000 Cash received from called up ordinary shares and additional ordinary shares 130,391 Net cash from financing activities 822,111 Net increase (decrease) in cash and cash equivalents (238,632) Cash and cash equivalents at beginning of period 343,923 Cash and cash equivalents at end of period 105,291 Supplemental cash flows information Cash paid during the period for : Interest expenses (included interest expenses which capitalised to project costs) 365,670 Corporate income tax and withholding tax deducted at source 604 The accompanying notes are an integral part of the financial statements.

The Company Only 2005 2004

2004 (33,548) (22,514) 815 (30,957) (8,669) (2,151,278) 26,600 (2,219,551)

(3,000) (17,440) (11,598) (284,506) (316,544)

(101,060) (18,549) 815 (2,151,278) (2,270,072)

1,824,000 -

149,000 530,000

1,824,000 -

645,164 2,469,164 265,133 176,113 441,246

130,391 809,391 (227,465) 318,574 91,109

645,164 2,469,164 227,496 176,113 403,609

321,133

365,653

321,133

259

601

76

140


Annual Report 2005

(UNAUDITED BUT REVIEWED)

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO INTERIM FINANCIAL STATEMENTS 30 JUNE 2005 AND 2004

1. GENERAL INFORMATION

1.1

General information of the Company a)

On 1 August 2000, the Company entered into “Agreement for the MRTA Initial System Project - Chaloem Ratchamongkhon Line” (“the Concession Agreement”) with the Mass Rapid Transit Authority of Thailand (“the MRTA”) to design, manufacture, supply, install, test and commission of the M&E Equipment and for the operation and maintenance of the MRTA Initial System. The Agreement is for 25 years from the date that MRTA issues a Notice of No Objection to Commencement of Revenue Service. The MRTA Initial System was officially opened on 3 July 2004. Under the Agreement, the Company has certain commitments to make payment of remunerations to the MRTA which consist of remuneration from fares, remuneration from commercial development, apportion of profit calculated from the Return on Equity (ROE) and any benefit from the interest rate on a credit agreement which lower than the specified rate, at the rate as mentioned in the Agreement. Furthermore, the Agreement stipulates the maintenance of the proportion of shareholding of the main shareholders and a fine in case that the Project was delayed.

b)

On 19 December 2001 the Company entered into a long-term loan agreement with a group of domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement). The loan agreement, which was amended by the first, the second and the third supplemental agreements dated 27 January 2003 and 18 June 2003, 2 April 2004 and 30 July 2004, respectively, provides the following 5 credit facilities : 1)

Tranche A Facility : A long-term loan facility of Baht 11,000 million for use in the payment of project costs.

2)

Tranche B Facility : A performance guarantee facility of Baht 150 million provided to guarantee the Company’s obligations to the MRTA under the Concession Agreement.

3)

Tranche C Facility : A performance guarantee facility of Baht 60 million provided to guarantee the Company’s obligations to the relevant authorities in relation to the Project.

141


Annual Report 2005

(UNAUDITED BUT REVIEWED)

4)

Tranche D Facility : A long-term loan facility of Baht 500 million for use in the payment of additional costs incurred as a result of the programme to accelerate the procurement of M&E equipment and the depot modification.

5)

Tranche E Facility : A long-term loan facility of Baht 790 million for use in the payment of additional expenses incurred under the M&E Equipment Contracts, additional fees incurred under the Project Management Agreement, basic infrastructure works for the retail areas in relation to the Commercial Development, additional equipments in stations, mobilization fees for the Civil Infrastructure maintenance contracts and investment in the Commercial Development Subsidiaries. Subsequently, the Company and the lenders agreed to reduce the loan facility to Baht 650 million.

1.2

Basis for preparation of interim financial statements These interim financial statements are prepared in accordance with Accounting Standards Pronouncement No. 41 “Interim financial statements”, with the Company choosing to present condensed interim financial statements. However, additional line items are presented in the balance sheets and the statements of earnings, changes in shareholders’ equity and cash flows to bring them into line with the full format used in the annual financial statements. The interim financial statements are intended to provide information additional to that included in the latest annual financial statements. Accordingly, they focus on new activities, events, and circumstances so as not to duplicate information previously reported. These interim financial statements should therefore be read in conjunction with the latest annual financial statements.

1.3

Basis of consolidation These consolidated financial statements have been prepared on the same basis as that applied for the consolidated financial statements for the year ended 31 December 2004. There have been no changes in the composition of the Group during the current period.

1.4

Significant accounting policies The interim financial statements are prepared using the same accounting policies and methods of computation as were used for the financial statements for the year ended 31 December 2004.

2. CASH AND CASH EQUIVALENTS The Company has pledged its rights to receive deposits from bank accounts, which have outstanding balances as at 30 June 2005 of approximately Baht 78.8 million (31 December 2004 : Baht 273.6 million) to a group of lenders to secure the Company’s long-term loans from the group of lenders.

142


Annual Report 2005

(UNAUDITED BUT REVIEWED)

3. INVESTMENTS ACCOUNTED FOR UNDER EQUITY METHOD - SUBSIDIARIES

(Unit : Thousand Baht)

Company’s name - Metro Mall Development Limited - BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”) - Triads Networks Company Limited

The Company Only As at 30 June 2005 Percentage Paid-up owned by Investment capital the Company Cost Equity Dividend Percent 50,000 64.00 32,000 13,355 -

80,000 25,000

100.00 56.00

80,000 14,000 126,000

43,116 3,942 60,413

-

(Unit : Thousand Baht)

Company’s name - Metro Mall Development Limited - Radianz Communications Network Limited - Triads Networks Company Limited

The Company Only As at 31 December 2004 Percentage Paid-up owned by Investment capital the Company Cost Equity Dividend Percent 50,000 60.00 30,000 19,536 80,000 84.38 67,500 43,348 19,750 56.00 4,143 11,060 67,027 108,560

BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”) In February 2005, the Company purchased 1,249,998 ordinary shares of BMCL Network Limited, at par value of Baht 10 each, a total of Baht 12,499,980, from other shareholders, increasing the Company’s total investment in that company to 100 percent of its share capital.

143


Annual Report 2005

(UNAUDITED BUT REVIEWED)

Triads Networks Company Limited In March 2005, Triads Networks Company Limited called up 75 percent of its share capital 39,200 ordinary shares, totaling of Baht 2,940,000.

Metro Mall Development Limited In May 2005, the Company purchased 200,000 ordinary shares of Metro Mall Development Limited, at par value of Baht 10 each, a total of Baht 2,000,000, from other shareholder, increasing the Company’s total investment in that company to 64 percent of its share capital. The Company has pledged certain part of share certificates of investments in these three subsidiaries with a group of lenders to secure the Company’s long-term loans from the group of lenders.

4.

PROJECT COSTS

M&E Equipment Project management fees per agreement Consultant fees Depot building and administration building Interest expenses Others Total Less : Accumulated amortisation of project costs Project costs, net

Consolidated 30 June 31 December 2005 2004 12,158,355 11,949,158 2,464,095 2,464,095 603,557 600,900

(Unit : Thousand Baht) The Company Only 30 June 31 December 2005 2004 12,158,355 11,949,158 2,464,095 2,464,095 603,557 600,900

1,255,892 1,264,617 1,109,254 18,855,770

1,255,223 1,264,617 1,039,718 18,573,711

1,255,892 1,264,617 1,109,254 18,855,770

1,255,223 1,264,617 1,039,718 18,573,711

(219,366) 18,636,404

(124,991) 18,448,720

(219,366) 18,636,404

(124,991) 18,448,720

M&E Equipment and depot building and administration building will be transferred to the Mass Rapid Transit Authority of Thailand after the end of concession agreement, of 25 years, on an Acquire Operate and Transfer basis. The Company has assigned the Project’s M&E Equipment, depot building and administration building to a group of lenders to secure the Company’s long-term loans from the group of lenders.

144


Annual Report 2005

(UNAUDITED BUT REVIEWED)

5. LONG-TERM LOANS/CURRENT PORTION OF LONG-TERM LOANS On 19 December 2001, the Company entered into a long-term loan agreement with a group of domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement) to obtain a loan facility of Baht 11,000 million used in the payment of project costs. The loan facilities carry interest at 7.75 percent per annum for the first 2 years from the date of the agreement, and thereafter at MLR plus 0.25 percent per annum until the Project Completion Date, and at MLR per annum after the Project Completion Date. The loans are scheduled for repayment on an instalment basis commencing March 2006 and the last instalment in December 2016.

Subsequently, on 18 June 2003, the Company entered into a supplemental agreement to the Onshore Facilities Agreement to obtain an additional loan facility of Baht 500 million used in the payment of additional costs incurred as a result of the programme to accelerate the procurement of M&E equipment and depot modification. The loan carries interest at MLR plus 0.25 percent per annum until the Project Completion Date, and at MLR per annum after the Project Completion Date. The loan is scheduled for repayment in a single lump sum in June 2017.

Subsequently on 2 April 2004, the Company entered into a supplemental agreement to the Onshore Facilities Agreement (No.3), under which the loan facility was increased by addition of the Tranche E Facility of Baht 790 million and subsequently on 30 July 2004, the Company and the lenders agreed to reduce the loan facility to Baht 650 million. This is to be used for payment of additional expenses incurred under the M&E Equipment Contracts, additional fees incurred under the Project Management Agreement, basic infrastructure works for the retail areas in relation to the Commercial Development, additional equipments in stations, mobilization fees for the Civil Infrastructure maintenance contracts and investment in the Commercial Development Subsidiaries. The loan facility carries interest at MLR plus 0.5 percent per annum. The loan is scheduled for repayment in a single lump sum in June 2017. The loans are secured by the mortgages of the Project’s M&E Equipment, depot building and administration building, pledges of the Company’s share certificates, share certificates of investments in subsidiaries, sponsors support, and the assignment of rights and obligations under the Concession Agreement and the rights to receive deposits in bank accounts.

The loan agreement included covenants imposed by the lenders on, among other things, the proportion of shareholding of the principal shareholders, changes of the Company’s management, entering into other loan agreements, entering into any new business or activity which is not related to the Project and the maintenance of certain financial ratios.

145


Annual Report 2005

(UNAUDITED BUT REVIEWED)

6. LONG-TERM LOANS FROM SHAREHOLDER AND ACCRUED INTEREST On 11 March 2005 and 27 May 2005, the Company entered into two subordinated loans agreements with a shareholder, under which they were granted long-term loans facilities of Baht 380 million and Baht 150 million, respectively. The loans carry interest at MLR plus 0.5 percent per annum and principal and interest are to be paid after the Company has paid all indebtedness under the Onshore Facilities Agreementnt (as discussed in Note 5).

7. RELATED PARTY TRANSACTIONS During the periods, the Company and its subsidiaries had significant business transactions with related parties (related by the way of shareholding or common shareholders and/or common directors). Such transactions, which have been concluded on the terms and basis as determined by the Company, its subsidiaries and those related parties, are under the normal course of business of the Company and its subsidiaries. The transactions are summarised below :

(Unit : Million Baht)

Project construction costs Project maintenance costs Project management fees - Included as part of project costs - Included as part of costs of fare box

For the three-month periods ended 30 June The Company Only Consolidated 2005 2004 2005 2004 3.0 3.0 2.9 2.9 -

Pricing policy Based on contract Based on contract

-

39.3

-

39.3

Based on contract

16.0

-

16.0

-

Based on contract

146


Annual Report 2005

(UNAUDITED BUT REVIEWED)

(Unit : Million Baht)

Selling and administrative expenses Interest expense and related fee - Included as part of project costs - Included as part of selling and administrative expenses

For the three-month periods ended 30 June The Company Only Consolidated 2005 2004 2005 2004 1.6 0.3 0.3

Pricing policy Agreed between parties

-

67.1

-

67.1

Based on contract

82.7

-

79.4

-

Based on contract

(Unit : Million Baht)

Project construction costs Project maintenance costs Project management fees - Included as part of project costs - Included as part of costs of fare box Selling and administrative expenses Interest expense and related fee - Included as part of project costs - Included as part of selling and administrative expenses

For the six-month periods ended 30 June The Company Only Consolidated 2005 2004 2005 2004 10.5 10.5 5.0 5.0 -

Pricing policy Based on contract Based on contract

-

88.6

-

88.6

Based on contract

35.3

-

35.3

-

Based on contract

0.7

-

0.7

Agreed between parties

-

131.5

-

131.5

Based on contract

158.6

-

152.2

-

Based on contract

3.2

147


Annual Report 2005

(UNAUDITED BUT REVIEWED)

The outstanding balances of the above transactions are shown as separate items and part of items in the balance sheet as follows :

Consolidated 30 June 31 December 2005 2004 Amounts due from related parties Subsidiaries - BMCL Network Company Limited (Formerly known as “Radianz Communications Network Limited�) - Triads Networks Company Limited Related parties - CH. Karnchang Public Company Limited - Joint Venture BCKT - Others

Loans to subsidiary and accrued interest - Triads Networks Company Limited Loans Accrued interest Advance payment for construction Related company - CH. Karnchang Public Company Limited

-

-

-

360 23,998 718 25,076 25,076

718 718 718

-

-

15,279 15,279

15,279 15,279

(Unit : Thousand Baht) The Company Only 30 June 31 December 2005 2004

1,070 232 1,302 -

-

1,070 1,070

718 718 2,020

360 23,998 718 25,076 26,146

3,000 1 3,001

-

-

148


Annual Report 2005

(UNAUDITED BUT REVIEWED)

Consolidated 31 March 31 December 2005 2004 Construction and other payable Related parties - CH. Karnchang Public Company Limited - Joint Venture CKET - Others Accrued interest - related company - CH. Karnchang Public Company Limited Long-term loans from shareholder and accrued interest - CH. Karnchang Public Company Limited Loans Accrued interest Part of “Long-term loans� - Krungthai Bank Public Company Limited Current Portion Long-term portion

198,664 43,891 2,272 244,827

193,671 8,690 1,804 204,165

10,621 10,621

4,183 4,183

(Unit : Thousand Baht) The Company Only 31 March 31 December 2005 2004

7,847 43,891 51,738

2,853 8,690 11,543

-

-

530,000 6,793 536,793

-

530,000 6,793 536,793

-

21,500

-

21,500

-

4,694,613

4,657,869

4,694,613

4,657,869

149


Annual Report 2005

(UNAUDITED BUT REVIEWED)

During the period, the movement of loan to subsidiary and accrued interest, long-term loans from shareholder and accrued interest and long-term loans are as follow :

(Unit : Thousand Baht) Consolidated 31 December 2004 Long-term loans from shareholder and accrued interest - CH. Karnchang Public Company Limited Loans Accrued interest Part of “Long-term loans� - Krungthai Bank Public Company Limited Current Portion Long-term portion

Increase

Decrease

30 June 2005

-

530,000 6,793 536,793

-

530,000 6,793 536,793

-

21,500

-

21,500

58,244

(21,500)

4,657,869

4,694,613

(Unit : Thousand Baht) The Company Only 31 December 2004 Loan to subsidiary and accrued interest - Triads Networks Company Limited Loans Accrued interest Long-term loans from shareholder and accrued interest - CH. Karnchang Public Company Limited Loans Accrued interest

Increase

Decrease

30 June 2005

-

3,000 1 3,001

-

3,000 1 3,001

-

530,000 6,793 536,793

-

530,000 6,793 536,793

150


Annual Report 2005

(UNAUDITED BUT REVIEWED)

(Unit : Thousand Baht) The Company Only 31 December 2004 Part of “Long-term loans” - Krungthai Bank Public Company Limited Current Portion Long-term portion

4,657,869

Increase

Decrease

21,500

-

58,244

(21,500)

30 June 2005

21,500 4,694,613

8. SHARE CAPITAL During the fourth quarter of 2004, through a share offering the Company allocated 56,536,246 additional ordinary shares to its existing shareholders at a price of Baht 3 per share, making a total of Baht 169.6 million. The Company presented this amount as a “Share subscription received in advance” in the balance sheet as at 31 December 2004. Subsequently on 14 January 2005, the Company registered the above paid up share capital with the Ministry of Commerce.

During the current quarter, through a share offering the Company allocated 43,463,754 additional ordinary shares to its existing shareholders at a price of Baht 3 per share, making a total of Baht 130.4 million. The Company registered the above paid up share capital with the Ministry of Commerce on 1 March 2005 to be a paid up share capital of Baht 7,350 million, comprises of 7,350 million ordinary shares of Baht 1 each.

On 29 April 2005, the Annual General Meeting of the Company’s shareholders passed resolution to increase the Company’s registered share capital from Baht 7,350 million to Baht 10,400 million through the issuance of 3,050 ordinary shares with a par value of Baht 1 each, to be allocated at the following basis. a) 300 million ordinary shares are to be allocated and offered, in whole or in part, to directors, management, and employees of the Company. These may be made on one or several occasions. Any ordinary shares remaining after the allocation are to be allocated by means of public offerings. These offers may be in Thailand and/or abroad and made on one or several occasions. In this regard, the Executive Board or any persons assigned by the Company’s executive board are granted the authority to determine the allocation of offering rights, and all details and conditions in respect of the number of ordinary shares to be offered in each occasion, the offer period, the payment of share subscriptions and the offer price.

151


Annual Report 2005

(UNAUDITED BUT REVIEWED)

b)

2,750 million ordinary shares are to be allocated and offered, in whole or in part, by the way of public offering, on one or several occasions. In this regard, the Executive Board or any persons assigned by the Company’s executive board are granted the authority to determine the allocation of offering rights, and all details and conditions in respect of the number of ordinary shares to be offered in each occasion, the offer period, the payment of share subscriptions and the offer price.

On 15 May 2005, the Company registered its increased registered share capital with the Ministry of Commerce to be a registered share capital of Baht 10,400 million, comprise of 10,400 million ordinary shares of Baht 1 each.

Subsequent to 30 June 2005, an extraordinary general meeting of the Company’s shareholders passed resolutions regarding the Company’s registered share capital, summarised as follows. a)

Approved reductions of 300 million in the number of additional ordinary shares to be allotted and offered to directors, management, and employees of the Company and 2,750 million ordinary shares to be allotted and offered by the way of public offering, in order to comply with the allocation of the Company’s share capital to the Mass Rapid Transit Authority of Thailand.

b)

Approved an increase of Baht 4,600 million in the Company’s registered share capital, from Baht 7,350 million to Baht 11,950 million, through the issuance of 4,600 million ordinary shares with a par value of Baht 1 each. The allocation of the additional ordinary shares is to be as follows. 1)

2,600 million ordinary shares are to be allocated and offered to the Mass Rapid Transit Authority of Thailand at the price equivalent to par value of Baht 1 each.

2)

450 million ordinary shares are to be allocated and offered, in whole or in part, to directors, management, and employees of the Company. These may be offered on one or several occasions. Any ordinary shares remaining after the allocation are to be allocated by means of public offerings. These offers may be in Thailand and/or abroad and made on one or several occasions. In this regard, the Executive Board or any persons assigned by the Company’s executive board is granted the authority to determine the allocation of offering rights, and all details and conditions in respect of the number of ordinary shares to be offered on each occasion, the offer period, the payment of the share price and the offer price.

152


Annual Report 2005

(UNAUDITED BUT REVIEWED)

3)

1,550 million ordinary shares are to be allocated and offered to public. Any shares remaining after this allocation are to be allocated, in whole or in part, by means of private placement and/or to institutional investors, in accordance with the relevant Notifications of the Securities and Exchange Commission, on one or several occasions. In this regard, the Executive Board or any persons assigned by the Company’s Executive Board are granted the authority to determine the allocation of offering rights, and all details and conditions in respect of the number of ordinary shares to be offered on each occasion, the offer period, the payment of the share price and the offer price.

On 1 July 2005, the Company registered the reduction of its registered share capital to Baht 7,350 million, comprising of 7,350 million ordinary shares of Baht 1 each, with the Ministry of Commerce, as discussed in a) above.

On 4 July 2005, the Company registered the increase in its registered share capital to Baht 11,950 million, comprising of 11,950 million ordinary shares of Baht 1 each, with the Ministry of Commerce, as discussed in b) above.

9. FARE BOX COMPENSATION REVENUE On 6 January 2005, the Company entered into a memorandum of agreement with the Mass Rapid Transit Authority of Thailand (“the MRTA”) regarding the Company’s cooperation in the trial discounting of the fare box rate of the MRTA Initial System Project - “Chaloem Ratchamongkhon Line” stipulated in the Concession Agreement. The discounted fare box rates are to be effective during the period 7 January 2005 to 31 March 2005. In return the MRTA agreed to pay compensation to the Company at a rate of 80 percent of any shortfall between the actual fare box revenue and the standard fare box revenue figure as stipulated in the memorandum of agreement. On 20 May 2005, the Company received a letter from the MRTA regarding the period of the trial discounting of the fare box rate of the MRTA Initial System. In the letter, the MRTA indicated that the discount compensation period was to be suspended during the period of the accident when the MRT system service was unable to run as normal. The MRTA also indicated that the discount compensation period would then continue again from 21 March 2005 and would end on 4 June 2005.

153


Annual Report 2005

(UNAUDITED BUT REVIEWED)

Subsequently on 10 June 2005, the Company received another letter from the MRTA informing it that the discount compensation to be paid to the Company was approximately Baht 20.5 million. The Company therefore adjusted the fare box compensation revenue to the said amount, resulting in the reversal of Baht 2.6 million of fare box compensation revenue which had been over recorded in the first quarter of current year.

10. FORWARD EXCHANGE CONTRACTS As at 30 June 2005, the balance of the liabilities of the Company outstanding in foreign currencies, net of foreign-currency denominated assets was 1.0 million euro. The Company does not utilise forward exchange contract to hedge against foreign exchange rate risk.

11. BANK GUARANTEES As at 30 June 2005, there were outstanding bank guarantees issued by banks on behalf of the Company as follows : 11.1 A bank guarantee of Baht 150 million (31 December 2004 : Baht 150 million) was issued to the MRTA in respect of certain performance bonds required in the Concession Agreement. 11.2 Bank guarantees of Baht 32.4 million (31 December 2004 : Baht 32.4 million) was issued to the Metropolitan Electricity Authority as certain performance bonds in respect of electricity meters instalation at the power substations in the Depot area, Administration Building and retail area in underground stations. 12. COMMITMENTS As at 30 June 2005, the Company and its subsidiaries had commitments from the following agreements. 12.1 The Procurement of M&E Equipment contracts and the Maintenance of M&E Equipment and Trackwork contracts for 10 years commencing from the Commercial Operation Date. Under the contracts, the Company has outstanding commitments totaling of Baht 1,322 Million and 36 million euros (31 December 2004 : Baht 1,657 million and 39 million euros) excluding escalation in accordance with the general consumer price index. 12.2 The Company had commitments from a project management agreement with a joint venture as the agreement dated 15 August 2000 and a supplemental agreement dated 18 March 2004. Under the agreements, the Company has outstanding commitments in respect of project management fee during 2005 to 2008 totaling of Baht 152 million excluding escalation in accordance with the general consumer price index.

154


Annual Report 2005

(UNAUDITED BUT REVIEWED)

12.3 The Company had commitments from Contracts to repair and maintenance of infrastructure and civil works of the MRTA Initial System Project - Chaloem Ratchamongkhon Line with a related company and other 3 companies, under the contracts dated 6 November 2003 and 1 June 2004, for the period of 7 years. Under the contracts, the Company has commitments to pay maintenance fees totaling Baht 1,145 million. 12.4 The Company had commitments from various services agreements, under which, the Company has commitments in respect of service fees. Under the agreements, the Company has outstanding commitments to pay related fees totaling of approximately Baht 41 million. 12.5 The Company had commitments from policies provide all risks insurance for loss incurred during installation and testing of M&E Equipment, including delays resulting from damage incurred and third party liability; as well as marine insurance for M&E Equipment. Under the insurance policies, the Company has commitments to pay the premium totaling of approximately 0.2 million euro. 12.6 The subsidiaries had commitments in respect of car rental agreement, and rental of office building agreements and related service agreements, under which, the subsidiaries have outstanding commitments to pay rental and service fees totaling of approximately Baht 19 million. 12.7 The subsidiary had commitments in respect of agreements for construction and design of infrastructure system of retail space in the underground stations totaling of approximately Baht 89 million.

13. LITIGATIONS On 10 October 2002, Alstom Transport S.A. (the first plaintiff) and Alstom Holdings (Thailand) Company Limited (the second plaintiff), as plaintiffs, filed a lawsuit against the Company with the Intellectual Properties and International Trade Court, seeking damages of approximately Baht 1,382 million. In addition, on 16 December 2002, Mitsubishi Electric Corporation (the third plaintiff), as plaintiff, filed a lawsuit against the Company with the Intellectual Properties and International Trade Court, seeking damages amounting to approximately Baht 621 million. The amounts claimed are the losses allegedly suffered by these companies as a result of the Company’s changing the contractor for procurement and maintenance of M&E Equipment and Trackwork for the MRTA Initial System Project - Chaloem Ratchamongkhon Line, whereby the said companies had incurred costs in relation to their performance of the Start-up Phase Works in accordance with the stipulations of the Memorandum of Agreement dated 1 September 2000 made between the Company and the consortium formed by these companies.

155


Annual Report 2005

(UNAUDITED BUT REVIEWED)

On 21 January 2003 and 28 January 2003, the Company filed defence testimony and countersuit with the Intellectual Properties and International Trade Court in relation to the lawsuit brought by Alstom Transport S.A. and Alstom Holdings (Thailand) Company Limited, as plaintiffs, and the lawsuit brought by Mitsubishi Electric Corporation, as plaintiff, respectively, requesting that the Court dismiss both cases and seeking damages from the plaintiffs totaling Baht 3,522 million.

On 8 July 2004, the Court had fixed a date of 28 September 2004 to allow the parties to try to compromise. In addition, the Intellectual Properties and International Trade Court fixed dates of 8, 9 and 10 March 2005 in order to settle the issue of dispute.

On 5 August 2004, Alstom Transport S.A. (the first plaintiff), Alstom Holdings (Thailand) Company Limited (the second plaintiff) and the Company reached a compromise on the dispute and filed a petition with the Intellectual Properties and International Trade Court to withdraw the lawsuits, without causing the Company to be liable. The case with Mitsubishi Electric Corporation (the third plaintiff) is still pending in Court and the Intellectual Properties and International Trade Court fixed a further date on 3 December 2004 for the parties to try to compromise.

On 3 December 2004, the Company and Mitsubishi Electric Corporation (the third plaintiff) had discussed in front of the mediator with a view to compromise, but the discussion was not concluded.

Subsequently on 26 April 2005, the parties again met in order to compromise, but the outcome of such meeting was not positive. The Court then proceed with the hearing and fixed the hearing date to be done in October 2005.

However, the Company’s management believes that the Company still has a good chance to successfully defend its cases claimed by Mitsubishi Electric Corporation (the third plaintiff) and does not expect that the Company will have to compensate the plaintiff for any losses as a result of the lawsuits.

156


Annual Report 2005

(UNAUDITED BUT REVIEWED)

14. PROMOTIONAL PRIVILEGES On 16 January 2003, the Company has been granted promotional privileges for the MRTA Initial System Project - Chaloem Ratchamongkhon Line (the blue line) under the Investment Promotion Act B.E. 2520, under BOI certificate number 1029(1)/2546. These privileges include a 100 percent exemption from corporate income tax on net profit from promoted operations for a period of 8 years commencing from the date of first earning operating income. The Company commenced its operations on 3 July 2004. Subject to certain imposed conditions, the main privileges include the following : -

Entitlement to 50% deduction of import duty on imported machinery according to specified condition.

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Exemption from corporate income tax on earnings from promotional privileges operation for a period of eight years from the date on which operating income is first derived.

15. FINANCIAL INFORMATION BY SEGMENT The Company’s and its subsidiaries’ operations involve principally two industry segments; the operation of the MRTA Initial System Project and commercial development, which comprises the rental of retail space in the underground train stations, telecommunications services and provision of advertising services in underground train stations. The operations of the Company and its subsidiaries are carried on in the single geographic area of Thailand, and since the operating results of the subsidiaries which conduct commercial development business are immaterial to the consolidated financial statements during the current period, there is no presentation of financial statements information by industry segment.

16. APPROVAL OF INTERIM FINANCIAL STATEMENTS These interim financial statements have been approved by the Company’s directors.

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587 ซ.อินทามระ 37 ถ.สุทธิสารวินจิ ฉัย แขวงดินแดง เขตดินแดง กรุงเทพฯ 10320 อาคารบริหาร ถ.พระราม 9 แขวงหวยขวาง เขตหวยขวาง กรุงเทพ ฯ 10310 โทรศัพท : 66(0) 2354-2000 โทรสาร : 66(0) 2354-2040 www.bangkokmetro.co.th ศูนยลูกคาสัมพันธ: 66 (0) 2624 5200 E-mail : CRC@bangkokmetro.co.th นักลงทุนสัมพันธ : 66 (0) 2354 2000 ตอ 3733 – 3735 E-mail : IR@bangkokmetro.co.th


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