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Annual Report 2010

CH. Karnchang Public Company Limited


Contents 2 3 4 6 8 9 9 10 36 39 47 54 58 61 66 76 78 96

Vision, Missions, Corporate Values and Strategies Financial Highlights Message from the Chairman Message from the Chairman of the Executive Board and the Chief Executive Officer The Board of Directors Management Team Advisors Committee for Board of Directors and the Executive Board Shareholding and Management Structure Nature of Business Operations Construction Industry Outlook and CK没s Strategic Direction Corporate Social Environment Responsibility General Information Corporate Governance Policy Risk Factors Connected Transactions Audit Committee没s Report Financial Position and Operational Results Financial Statement


CH. Karnchang Public Company Limited

1


Vision, Missions, Corporate Values and Strategies

Vision

Strategies : Sustainable Growth

To be the leader in construction business and the pre-eminent and comprehensive basic infrastructure developer in the region.

ë Select projects with good contribution to the society and our country and with fair business returns ë Manage construction projects under the principles of effective cost management, timeliness and quality of work ë Expand to regional market with an emphasis on Southeast Asia ë Enhance business opportunities in basic infrastructure investment projects that contribute to the countryûs development in order to generate construction works and to create opportunities for long-term infrastructure concessions ë Develop organizational capacity › human capital and management structure › to increase the companyûs competitiveness ë Develop and continuously update technology and knowledge to strengthen the companyûs comparative advantage

Missions ë Deliver quality work for our customers while committed to creating work that contributes to the society and country with good returns to our shareholders and providing fair treatment to all our stakeholders ë Manage our business with professionalism and in accordance with the guidelines of good Corporate Governance ë Be responsible to the community, society and the country ë Develop human capital and organization on a continuous and consistent basis

Corporate (Q-C-I-S-T) ë ë ë ë ë

2

Quality of Services Customer Satisfaction Integrity Social Responsibility Teamwork

Annual Report 2010


Financial Highlights Summary of Financial Information of CH. Karnchang Public Company Limited Unit : Thousand Baht Items Total assets Total liabilities

Amount December 31, 2008 December 31, 2009 December 31, 2010 22,227,715 26,393,160 28,017,187 16,903,013

20,599,514

21,029,014

Shareholders没 equity

5,324,702

5,793,646

6,988,173

Total revenue

6,963,315

5,470,743

4,014,430

Gross profit (loss)

166,452

(24,884)

175,815

Net profit (loss)

98,706

217,022

374,419

0.07

0.15

0.23

Profit (loss) per share

Summary of Financial Information of CH. Karnchang Public Company Limited, Subsidiaries and Jointly Controlled Entities Unit : Thousand Baht Items Total assets Total liabilities

Amount December 31, 2008 December 31, 2009 December 31, 2010 25,873,213 29,469,863 30,469,990 20,568,913

23,770,608

24,258,249

5,304,300

5,699,255

6,211,741

14,510,570

13,935,160

9,893,843

Gross profit (loss)

1,382,234

920,861

247,889

Net profit (loss)

544,739

89,731

(335,055)

0.38

0.06

(0.21)

Shareholders没 equity Total revenue

Profit (loss) per share

CH. Karnchang Public Company Limited

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Message from the Chairman

莽 In 2010, both the global没s and the Thai economy have recovered significantly with Thailand没s annual GDP growth returning to an impressive 7.5% from the negative rate in 2009. Construction business, however, endured another difficult year in 2010. A number of major obstacles hampered our business operations. The Thai Government remained committed to pushing forward the economic stimulus packages emphasizing large-scale infrastructure investments, thus letting the construction industry be the engine of growth for the country. However, domestic political instability, marked by the political protests in the first half of 2010, resulted in delays to many projects. The unprecedented flooding in Thailand during the latter half of 2010 further contributed to the delay of the Government没s project implementation as the budget priorities were understandably allocated for the immediate crisis relief. Moreover, severe flooding in Thailand and several countries around the world led to a drastic increase in the prices of raw materials and gasoline as well as to a labor shortage.

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Annual Report 2010


In this difficult environment, CH. Karnchang Public Company Limited has maintained our strategy to be selective in participating in projects with secure funding and appropriate returns and to optimize the cost management of the projects on hand. With the obstacles mentioned above, we faced further challenges as the few projects for which we tendered were delayed and the projects on hand were affected by the unexpected increase in material and gasoline prices. One of our major projects, Nam Ngum 2 Hydro-Electric Dam in Lao PDR was hard hit by the material price increase and contributed to the loss on our Consolidated Financial Statement. However, despite these difficulties, CH. Karnchang Public Company Limited was able to generate satisfactory profits on the companyûs Unconsolidated Financial Statement in 2010. Our effective cost management and strategy to diversify into sound infrastructure investments have enabled us to successfully deliver profits in challenging times. The outlook for the construction business is expected to be positive for the year 2011. Many large-scale projects in and outside Thailand will be tendered and we are well prepared to participate in good projects with prudence and confidence. The large-scale projects that were unexpectedly delayed in the last year will be executed. At the time of writing this message, we were finally awarded the MRT Blue Line Contracts 2 and 5. A number of projects, namely, the Xayaburi hydropower project in Laos and the SPP project in Bang Pa-In, are also expected to proceed soon and will boost CH. Karnchangûs backlog to its highest value in our history. The year 2011 will see a continuous growth with the construction industry remaining as one of the main drivers of economic expansion. While we acknowledge potential external risks due to domestic and global political situations, and material and labor price fluctuations, we remain confident that the upcoming year will bring great prospects to the construction business and CH. Karnchang Public Company Limited will be a major force in driving the Thai economy forward. As we are committed to strive to enhance our business performance, we are also committed to be a responsible corporate citizen of our society. We are proud to report that CH. Karnchang Public Company Limited was rated çvery goodé for corporate governance by the Thai Institute of Directors Association (IOD) with a score that has been improving for 3 consecutive years. Furthermore, we have established a Corporate Social Responsibility (CSR) Committee to assure that our company will not only continue to deliver excellent business performance but also bring optimal and fair returns and benefits to all our shareholders, stakeholders, society, and ultimately to our country and our world.

é Mr. Aswin Kongsiri Chairman of the Board of Directors

CH. Karnchang Public Company Limited

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Message from the Chairman of the Executive Board and the Chief Executive Officer

莽 2010 has been a year of significant economic recovery for Thailand. GDP has come back from the negative growth rate in 2009 to 7.5% in 2010, the fastest growth rate in many years. CH. Karnchang Public Company Limited saw great prospects appear in 2010 and prepared to bid and poised to win a number of large-scale construction projects. However, as we ventured into 2010, we found ourselves facing another year full of challenges. The well documented political problems continued to plague our country with the street protests and unrest in April-May 2010. The resulting political instability gravely affected us as the implementation of the government没s large-scale projects was unavoidably delayed. Consequently, we had to endure a year of lower revenues. To avoid further risk exposure, we remained selective in participating only in projects with sound financial sources and appropriate margins as we preserved our resources for large-scale projects. As there were not many new big projects launched in 2010, we geared our efforts towards finishing the Nam Ngum 2 Hydro-Electric Dam Project in Lao PDR and making good progress on the M.R.T. Purple Line Contract 1 Project. For the year 2009-2010, CH. Karnchang Public Company Limited没s consolidated total revenues were Baht 9,894 million and total expenditures were Baht 9,598 million. Our total assets amounted to Baht 30,470 million, total debts were Baht 24,258 million, and shareholder没s equity increased from Baht 5,699 million from 2009 to Baht 6,212 million in 2010 through capital increase. Our consolidated gross profit margin was 2.88% and net consolidated loss was Baht 335 million. The loss on our Consolidated Financial Statement was due mainly to the cost adjustments of the Nam Ngum 2 Hydro-Electric Dam project in Lao PDR, which was seriously affected by a drastic increase in prices of raw materials and gasoline and the labor shortage brought on by the unforeseen flooding. On a positive note, we were able to complete the Nam Ngum 2 project on time, enabling our subsidiary to commence the sale of electricity to the Electricity Generating Authority of Thailand (EGAT) since the beginning of 2011. While facing the major challenges mentioned above, CH. Karnchang Public Company Limited focused on effectively managing our project costs as well as infrastructure investments. As a result, CH. Karnchang Public Company Limited was able to generate satisfactory net profit of Baht 374 million on our Unconsolidated Financial Statement for the year 2009-2010. We are confident that the year 2011 will bring better prospects and stability to the construction industry. However, having learned from the unpredictability of external factors and risks which affected our business in the year 2010, CH. Karnchang will keep watchful eyes on potential risks and exercise utmost prudence in our business strategies and management. While external factors

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Annual Report 2010


such as political uncertainty, inflation, interest rate and fluctuations in raw materials and gasoline prices still loom ahead, Thailandûs GDP was predicted to grow and construction industry remains the main force of economic growth. The Thai government continues to show strong commitment to push forward many large-scale projects via the Stimulus Packages as well as via the regular budget appropriations. At the time of writing this report, CH. Karnchang Public Company Limited was awarded Contract 2 (contract value of Baht 10,688 million) and Contract 5 (contract value of Baht 4,999 million) of the M.R.T. Blue Line. In the near future, several mass transit systems › namely Red Line, Pink Line, Green Line, high speed train, etc › are expected to be tendered and CH. Karnchang is well prepared to participate in the bidding of all good projects. Having completed a number of projects in 2010, we are happy to start with clean slate and will work hard towards optimizing the margins of our up-coming projects. Aside from anticipating and preparing for large-scale projects from the government, CH. Karnchang Public Company Limited is now capable of developing good investments and construction projects by ourselves. The Xayaburi Hydro-Electric project and SPP project are prime examples of good projects that CH. Karnchang Group has helped developed and are expected to commence soon. With all these anticipated projects to be signed in 2011, our backlog will reach more than Baht 100,000 million, the highest in our companyûs history. It has been our business philosophy from the start that a good business is not only one that generates good returns but also a morally good one that contributes back to the society, the community and the country. Therefore, as we are working hard to improve our business performance, we are committed to improve our corporate governance (CG) and our corporate social responsibility (CSR). We have been implementing effective CG oversight and risk management through a Corporate Governance and Risk Management Committee, and in 2010, we also instituted a Corporate Social Responsibility Committee. We are hoping that in the upcoming new year and beyond, CH. Karnchang can continue to deliver good business performance and contribute even more to our society and country. On behalf of the CH. Karnchang management team, I would like to take this opportunity to thank our shareholders, customers in the public and private sectors, business partners, as well as the financial institutions for your continued trust and support. I would also like to thank all of the employees of CH. Karnchang who, as always, have shown strong dedication and commitment to help our company get through difficult times and to achieve good performance. Committed to continuously and diligently improving our company, the management team hopes that we have earned continued trust and support from you. Going forward, we will build a better life and sustainable future together.

é Mr. Plew Trivisvavet Chairman of the Executive Board and Chief Executive Officer

CH. Karnchang Public Company Limited

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The Board of Directors

1. Mr. Aswin Kongsiri ë Chairman of the Board of Directors ë Independent Director

2. Mr. Plew Trivisvavet ë Director ë Chairman of the Executive Board ë Nomination Committee Member ë Remuneration Committee Member ë Corporate Governance and Risk Management Committee Member

3. Mr. Vitoon Tejatussanasoontorn ë Director ë Chairman of the Audit Committee ë Chairman of the Nomination Committee ë Chairman of the Remuneration Committee ë Chairman of the Corporate Governance and Risk Management Committee ë Independent Director

4. Mr. Don Pramudwinai ë Director ë Audit Committee Member ë Chairman of the Corporate Social and Environmental Responsibility Committee ë Independent Director

5. Mr. Thawansak Sukhawun ë Director ë Audit Committee Member ë Corporate Governance and Risk Management Committee Member ë Independent Director

6. Mr. Pavich Tongroach ë Director ë Corporate Social and Environmental Responsibility Committee Member ë Independent Director

7. Mr. Narong Sangsuriya ë Director ë Executive Director ë Nomination Committee Member ë Remuneration Committee Member

8. Mr. Kamthorn Trivisvavet ë Director ë Executive Director

9. Mr. Prasert Marittanaporn ë Director ë Executive Director ë Corporate Social and Environmental Responsibility Committee Member

10. Mr. Ratn Santaannop ë Director ë Executive Director

11. Mr. Sombat Kitjalaksana ë Director

12. Mr. Anukool Tuntimas ë Director ë Executive Director

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Annual Report 2010


Management Team

1.

2.

3.

Mr. Plew Trivisvavet Mr. Narong Sangsuriya Mr. Prasert Marittanaporn ë Chief Executive Officer ë Senior Executive Vice ë Senior Executive Vice President : President : Operation Group Administration Group

6.

7.

8.

Mr. Samai Paiboon ë Executive Vice President : Engineering

Mr. Anukool Tuntimas Mr. Sittidej Trivisvavet ë Executive Vice ë Executive Vice President : Human President : Purchasing Resource and General Administration

4.

5.

Mr. Ratn Santaannop ë Executive Vice President : Construction 1

Mr. Viboon Mongkolpiyathana ë Executive Vice President : Construction 2

9.

10.

Mr. Vorapote Uchupaiboonvong Miss Supamas Trivisvavet ë Executive Vice ë Executive Vice President : Accounting President : Office of President and Finance

Advisors Committee for Board of Directors and the Executive Board

1.

2.

3.

Pol. General Narong Mahanonda ë Chairman of the Advisory Committee

Pol. Major General Sawat Vijaranakorn ë Senior Executive Advisor

Mr. Prasert Trivisvavet ë Advisory Committee for Executive Board

4.

5.

6.

Mr. Thep Trivisvavet ë Advisory Committee for Executive Board

Mr. Yim Trivisvavet ë Advisory Committee for Executive Board

Mr. Charn Chongchit ë Legal Advisor

CH. Karnchang Public Company Limited

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Shareholding and Management Structure 1. Shareholders Top ten major shareholders of the Company, as at the most recent record date on March 11, 2010, are as follows: Shareholders

Total Shares

Percentage of Shareholding (%)

1. Trivisvavet Family 1.1 Mrs. SopidaTrivisvavet 1.2 Mr. Plew Trivisvavet 1.3 Mr. Prasert Trivisvavet 1.4 Mrs. Saikasem Trivisvavet 1.5 Mr. Kamthorn Trivisvavet 1.6 Mahasiri Siam Co., Ltd.1 1.7 CH. Karnchang Holding Co., Ltd.2 1.8 CK. Office Tower Co., Ltd.3 1.9 Bang Pa-in Land Development Co., Ltd.4 2. Mrs. Pranee Tongkittikul 3. State Street Bank and Trust Company for London5 4. Thai NVDR Co., Ltd.6 5. Mr. Charnarong Wongseenin 6. Mrs. Yupphanari Sakphonsub 7. Mrs. Phennapha Pathomwanit 8. Deutsche Wertpapierservice Bank AG 9. Mr. Chitarun Anuphanthanan 10. SCB Dividend Stock 70/30 Long Term Equity Fund

13,678,200 23,825,851 13,257,200 3,390,000 1,000 358,840,747 184,216,127 91,071,427 22,992,500 69,289,622 40,958,613 37,686,483 30,857,142 26,640,000 12,660,000 11,003,427 9,026,171 8,995,200

0.853 1.485 0.826 0.234 0.000 22.368 11.483 5.677 1.433 4.319 2.553 2.349 1.923 1.661 0.789 0.686 0.563 0.561

Remarks : 1 2 3 4 5

The Trivisvavet Family holds shares representing 93.09 percent, and all directors of the company are the Trivisvavet Family. The Trivisvavet Family holds shares representing 87.50 percent, and all directors of the company are the Trivisvavet Family. The Trivisvavet Family holds shares representing 100.00 percent. The Trivisvavet Family holds shares representing 91.66 percent. This is a foreign company trading securities on the Stock Exchange of Thailand without disclosing whether its shareholding is for personal interest or for others. In this regard, the Company has no power to request such shareholder to disclose the said information. 6 This is a subsidiary established by the Stock Exchange. NVDR represents automatically listed securities. NVDR investors enjoy the same financial benefits as investment in ordinary shares in companies, except that they have no right to vote in the shareholders没 meeting.

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Annual Report 2010


2. Management (1) Management structure

Board of Directors Organization Chart of CH. Karnchang Public Company Limited

Audit Committee

Advisor to the Board of Directors Company Secretary

Nomination Committee

Executive Board Remuneration Committee

Advisor to the Executive Board

President and Chief Executive Officer

Corporate Governance and Risk Management Committee Corporate Social and Environmental Responsibility Committee Legal Advisor Vice President : Internal Audit Department

Vice President : Information Technology Office

Senior Executive Vice President : Operation Group

Executive Vice President : Construction 1

Executive Vice President : Construction 2

CH. Karnchang Public Company Limited

Executive Vice President : Engineering

Senior Executive Vice President : Administration Group

Executive Vice President : Business Development

Executive Vice President : Purchasing

Executive Executive Vice Vice President : President : Accounting Human Resource and Finance and General Administration

Executive Vice President : Office of President

11


The Company没s management structure consists of the Board of Directors and six subcommittees, namely, the Executive Board, the Audit Committee, the Nomination Committee, the Remuneration Committee, the Corporate Governance and Risk Management Committee, and the Corporate Social and Environmental Responsibility Committee, including Chief Executive Officer as the top executive of the management team comprising ten persons. The Board of Directors consists of seven non-executive directors (five independent directors representing more than one-third of the total number of directors) and five executive directors. The names of members of such board and six subcommittees and executives, including authority and responsibilities of the respective committees are as follows: A. Board of Directors 1. As at December 31, 2010, the Board of Directors consists of 12 directors as listed below (details are shown in Attachment): Names 1. Mr. Aswin Kongsiri 2. Mr. Plew Trivisvavet

Positions Chairman of the Board of Directors Director Chairman of the Executive Board Nomination Committee Member Remuneration Committee Member Corporate Governance and Risk Management Committee Member Chief Executive Officer 3. Mr. Vitoon Tejatussanasoontorn Director Chairman of the Audit Committee Chairman of the Nomination Committee Chairman of the Remuneration Committee Chairman of the Corporate Governance and Risk Management Committee 4. Mr. Don Pramudwinai Director Audit Committee Member Chairman of the Corporate Social and Environmental Responsibility Committee 5. Mr. Thawansak Sukhawun Director Audit Committee Member Corporate Governance and Risk Management Committee Member 6. Mr. Pavich Tongroach Director Corporate Social and Environmental Responsibility Committee Member 7. Mr. Narong Sangsuriya Director Executive Director Nomination Committee Member Remuneration Committee Member 8. Mr. Kamthorn Trivisvavet Director Executive Director 12

Category Independent Director Executive Director

Independent Director

Independent Director

Independent Director

Independent Director Executive Director

Non-Executive Director Annual Report 2010


Names 9. Mr. Prasert Marittanaporn

10. Mr. Ratn Santaannop 11. Mr. Sombat Kitjalaksana 12. Mr. Anukool Tuntimas

Positions Director Executive Director Corporate Social and Environmental Responsibility Committee Member Director Executive Director Director Director Executive Director

Category Executive Director

Executive Director Non-Executive Director Executive Director

In 2008, the Board of Directorsû Meeting No. 4/2008, held on August 29, 2008, resolved to adjust the requirements relating to independent directors and Audit Committee members in accordance with the requirements set out by the Office of the Securities and Exchange Commission and the Stock Exchange of Thailand, as per the details of independent directorsû qualifications as follows: Qualifications of Independent Directors 1. Holding shares of not exceeding one percent of the number of voting shares of the Company, its parent company, subsidiaries, associated companies or legal entities which may have conflict of interest, including shares held by related persons; 2. Not being a director having involvement in the management/employee/staff/advisor receiving regular salary/ controller of the Company, its parent company, subsidiaries, associated companies, subsidiaries at the same level or legal entities which may have conflict of interest at present and during the past two years prior to appointment; 3. Having neither relationship by blood or by legal registration in the capacity as parent, spouse, sibling and offspring, including spouse of the offspring, with any executive, major shareholder, controller or person to be nominated as executive or controller of the Company or its subsidiaries; 4. Having neither business relationship with the Company, its parent company, subsidiaries, associated companies, or legal entities which may have conflict of interest at present and during the past two years prior to appointment in the following manners: (1) Provision of professional services, i.e., auditor, other professional service provider receiving fee more than Baht 2 Million per year, such as, legal advisor, financial advisor, property appraiser, etc. (2) Trading/business with a transaction value of Baht 20 Million or more or at least 3 percent of the Companyûs net tangible asset value, whichever is lower, and, in considering the transaction value, any transactions executed during the past six months prior to the date of this transaction execution shall be included; 5. Not being a director appointed as representative of the Companyûs director, major shareholder or shareholder who is a related person of the Companyûs major shareholder; 6. Not having any other characteristics preventing provision of independent opinions. 2. The Companyûs authorized signatory directors are two of the following four directors, namely, Mr. Plew Trivisvavet, Mr. Kamthorn Trivisvavet, Mr. Narong Sangsuriya, Mr. Prasert Marittanaporn, jointly sign and affix the Companyûs seal, or any one of the said four directors and either Mr. Ratn Santaannop or Mr. Sombat Kitjalaksana or Mr. Anukool Tuntimas, totaling two directors, jointly sign and affix the Companyûs seal. 3. Board of Directorsû Authority ë Determining policies and directions of the Companyûs operation and supervising the management to comply with the specified policies as well as taking steps to ensure that the Company has efficient and effective internal control system and the intention to continue its business operations; CH. Karnchang Public Company Limited

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ë Performing the duties in compliance with laws, objectives and Articles of Association of the Company, as well as resolutions passed by shareholdersû meetings, taking into account the integrity and protection of the Companyûs interest; ë Being responsible for preparation of balance sheet and income statement at the close of the Companyûs accounting period to ensure that they contain accurate information and truly and fairly reflect the Companyûs status, in compliance with generally accepted accounting standards, and having said financial statements audited by the Companyûs auditor so as to submit the same to the Annual Ordinary General Meeting of Shareholders for consideration and approval; ë Focusing on the duty to disclose the Companyûs information in accordance with the Stock Exchange of Thailandûs requirements, Re: Rules and Procedures for Disclosure of Information and Acts of Listed Companies, so as to disclose to the public such information which is material and necessary to the decision to invest in securities; ë Having the authority to appoint other person to operate the Companyûs business subject to the supervision of the Board of Directors or the Managing Director or delegating to such person the authorities as the Board deems appropriate and during a certain period as the Board deems appropriate, provided that the Board of Directors may cancel, revoke or amend such authorities and that said authorization in no way allows such authorized person to approve any transactions in which such authorized person or another person may have conflict, interest or conflicts of interest in other manners with the Company or its subsidiaries. ë Considering and granting approval for capital increase, issuance of debentures, for submission to the shareholdersû meeting for further approval; ë Considering and granting approval for operating expenses in excess of the amount authorized to be approved by the Managing Director, for submission to the Board of Directorsû meeting for further approval. The authority to take the foregoing actions shall not extend to connected transactions and such transactions relating to acquisition or disposition of significant assets of listed companies in accordance with the rules and regulations of the Stock Exchange and the Company shall comply with the Stock Exchangeûs rules, regulations and requirements governing those related matters. In addition, the foregoing authority shall not include any other matters subject to approval by the shareholdersû meeting in accordance with the Companyûs Articles of Association. B. Executive Board 1. As at December 31, 2010, the Executive Board consists of six executive directors, namely: Names Positions 1. Mr. Plew Trivisvavet Chairman of the Executive Board 2. Mr. Narong Sangsuriya Executive Director 3. Mr. Kamthorn Trivisvavet Executive Director 4. Mr. Prasert Marittanaporn Executive Director 5. Mr. Ratn Santaannop Executive Director 6. Mr. Anukool Tuntimas Executive Director The Executive Board meets monthly for consideration of various matters within the scope of the authority assigned by the Board of Directors and for screening matters to be proposed to the Board of Directors for consideration and approval. 2. Executive Boardûs Authority: The Board of Directors authorizes the Executive Board to have the following authority: ë Providing policy guidelines, appointing, prescribing powers and duties, supervising, monitoring, coordinating and prescribing powers and duties of special working groups or work management groups, as well as considering and approving various proposals submitted by the management groups or the special working groups; ë Approving proposals submitted by various working groups for the purposes of managing work and conducting business in accordance with the Companyûs objectives; 14

Annual Report 2010


ë Conducting feasibility studies on new projects and having power to consider approving participation in various biddings, including operation of various projects as it deems appropriate, as well as entering into any juristic acts related thereto until completion; ë Conducting feasibility studies on investment in new projects and having power to consider granting approval for the Company to invest or jointly invest with other persons, legal entities, groups of persons in various forms for conducting business in compliance with the objectives within the amount of not exceeding Baht 3,000 Million per project, including investment in other manners, such as, purchase of shares, exchange of shares with other legal entities as it deems appropriate, as well as entering into any juristic acts related thereto until completion; ë Prescribing, considering, approving regulations, rules, work management and business operation policy guidelines or any actions binding the Company; ë Providing advice, consultation and determining policy guidelines and authorities of Chief Executive Officer and special working groups; ë Having power to approve, appoint, employ, remove, impose disciplinary action, determine salary, wages, benefits, bonus, allowances, and other remunerations, including expenses and facilities of the Companyûs officers or staff in the position of department directors or higher, including Executive Vice President, Senior Executive Vice President or equivalent or various special working groups for specific operation; ë Proceeding with other matters in accordance with the policy as assigned by the Board of Directors; ë Having power to appoint any person or group of persons to operate the Companyûs business under control of the Executive Board or authorize such person or group of persons to take any action as the Executive Board deems appropriate, and change, amend, repeal and revoke such authority; ë Having power to appoint the Chairman of the Advisory Committee or advisors or Advisory Committee for Executive Board as appropriate, and determine remuneration, allowances, benefits, facilities and other expenses of the Chairman of the Advisory Committee or advisors or the Advisory Committee as appropriate; ë The Executive Board or the Chairman of the Executive Board has power to convene the Executive Boardûs meetings and/or determine rules and regulations of the meetings as it deems appropriate; ë In the case that the Chairman of the Executive Board cannot perform duties, the Chairman of the Executive Board shall appoint a substitute to perform duties on his or her behalf on each occasion, whereby the substitute shall have authorities equal to the Chairman of the Executive Board; ë Considering and approving for authorization of executives to operate and manage business in accordance with the relevant rules, regulations and requirements; ë Having power to approve and withdraw money from all accounts of the Company, and use credits provided by all banks or financial institutions for the Company, including apply for opening accounts and/or apply for credits in various forms with all banks or financial institutions, as well as placing securities of the Company as collateral against such debts, regardless of whether or not it requires registration. C. Audit Committee 1. As at December 31, 2010, the Audit Committee consists of three members, namely: Names Positions 1. Mr. Vitoon Tejatussanasoontorn* Chairman of the Audit Committee 2. Mr. Don Pramudwinai Audit Committee Member 3. Mr. Thawansak Sukhawun Audit Committee Member With a three-year term of office. Remark : * Serving as Audit Committee member with the knowledge and experience in review of the Companyûs financial statements.

CH. Karnchang Public Company Limited

15


The Audit Committee regularly meets at least every three months with the external auditor, internal auditor, management team and executives who are accountable for accounting and finance for review of financial statements on a quarterly basis and reports to the Board of Directors, or in case the management team would execute any connected transactions or transactions relating to acquisition or disposition of assets, which shall take into account appropriateness, justification of such transactions and the utmost benefits of the Company, the Chairman of the Audit Committee may convene additional meeting. In 2010, the Audit Committee convened four meetings. 2. Audit Committeeûs Authority ë Reviewing to ensure that the Companyûs financial reports are accurate and adequate; ë Reviewing to ensure that the Companyûs internal control and internal audit systems are suitable and effective, considering the independence of the internal audit unit as well as providing opinions on consideration for appointment, transfer, termination of employment of head of the internal audit unit or any other unit responsible for the internal audit; ë Reviewing to ensure the Companyûs performance in compliance with the securities and exchange law, requirements of the Stock Exchange and the laws relating to the Companyûs business; ë Considering, selecting, submitting for appointment of person who is independent to serve as the Companyûs auditor, proposing remuneration of such person as well as meeting with the auditor without the management team at least once a year; ë Considering connected transactions or transactions which may have conflict of interest in compliance with the laws and requirements of the Stock Exchange in order to ensure that such transactions are justified and of the utmost benefit to the Company; ë Preparing reports of the Audit Committee to be disclosed in the Companyûs Annual Report, whereby such reports must be signed by the Chairman of the Audit Committee and be comprised of at least the following information: (a) opinions on correctness, completeness, and reliability of the Companyûs financial reports; (b) opinions on adequacy of the Companyûs internal control system; (c) opinions on compliance with the securities and exchange law, requirements of the Stock Exchange or laws relating to the Companyûs business; (d) opinions on appropriateness of the auditor; (e) opinions on transactions which may have conflict of interest; (f) number of meetings of the Audit Committee and attendance of each Audit Committee member; (g) overall opinions or observations by the Audit Committee from the performance of duties in accordance with the charter; (h) other matters that should be informed to shareholders and general investors within the scope of the authority and responsibilities assigned by the Board of Directors. ë Performing any other activities as assigned by the Board of Directors of the Company and approved by the Audit Committee. D. Nomination Committee The Board of Directors appointed the Nomination Committee to support in the consideration and selection of qualified persons to hold the position of the Companyûs directors, the Managing Director. As at December 31, 2010, the Nomination Committee consists of three members, namely: Names Positions 1. Mr. Vitoon Tejatussanasoontorn Chairman of the Nomination Committee 2. Mr. Plew Trivisvavet Nomination Committee Member 3. Mr. Narong Sangsuriya Nomination Committee Member With a three-year term of office. 16

Annual Report 2010


Nomination Committeeรปs Authority 1. Considering, selecting and proposing qualified persons to hold the position of the Companyรปs directors to the Board of Directors so as to nominate them to the shareholdersรป meeting, or proposing the nomination to the Board of Directors for appointment; 2. Considering, selecting and proposing qualified persons to hold the position of the Managing Director to the Board of Directors for appointment; 3. Proceeding with other matters as assigned by the Board of Directors. E. Remuneration Committee The Board of Directors appointed the Remuneration Committee to support in the consideration and determination of criteria for consideration of remuneration and determine remuneration for directors and the Managing Director, and review rates of salary and other remuneration for the Managing Director. As at December 31, 2010, the Remuneration Committee consists of three members, namely: Names Positions 1. Mr. Vitoon Tejatussanasoontorn Chairman of the Remuneration Committee 2. Mr. Plew Trivisvavet Remuneration Committee Member 3. Mr. Narong Sangsuriya Remuneration Committee Member With a three-year term of office. Remuneration Committeeรปs Authority 1. Considering and determining criteria for consideration of remuneration for directors and the Managing Director; 2. Considering, determining and proposing remuneration for directors to the shareholdersรป meeting for approval; 3. Considering and reviewing rates of salary and other remuneration for the Managing Director and proposing the same to the Board of Directors for approval; 4. Proceeding with other matters as assigned by the Board of Directors. F. Corporate Governance and Risk Management Committee The Board of Directors appointed the Corporate Governance and Risk Management Committee to supervise and monitor performance of the directors and the management to ensure compliance with the Good Corporate Governance Principles and to oversee and support the risk management to achieve success in the organizational level. As at December 31, 2010, the Corporate Governance and Risk Management Committee consists of three members, namely: Names Positions 1. Mr. Vitoon Tejatussanasoontorn Chairman of the Corporate Governance and Risk Management Committee 2. Mr. Plew Trivisvavet Corporate Governance and Risk Management Committee Member 3. Mr. Thawansak Sukhawun Corporate Governance and Risk Management Committee Member With a three-year term of office.

CH. Karnchang Public Company Limited

17


Corporate Governance and Risk Management Committeeรปs Authority Corporate Governance 1. Determining and proposing policies and directions of operations in respect of the good corporate governance of the Company, including the code of business ethics, to the Board of Directors for consideration and approval for further compliance at all levels; 2. Supervising and monitoring the business operation of the Company and performance of the Board of Directors, the management and personnel of the Company to ensure compliance with Clause 1; 3. Evaluating and reviewing policies, directions, code of ethics, and best practices or practical guidelines in respect of the good corporate governance of the Company to ensure compliance with the international practices and recommendations of various institutions, as well as proposing the same to the Board of Directors for further consideration and approval; 4. Following up on movement, tendencies, as well as comparing performance in respect of the good corporate governance of the Company with the practices of other leading companies; 5. Overseeing and supporting performance in compliance with the good corporate governance policies to ensure continual effectiveness and appropriateness to the Companyรปs business; 6. Giving advice to the Company, the Board of Directors, the management and working groups on the matters relating to the good corporate governance; 7. Reporting on the corporate governance of the Company to the Board of Directors on a regular basis, and immediately reporting to the Board of Directors for consideration in case there is any matter materially affecting the Company, as well as providing opinions on the practices and suggestions for improvement and resolution as appropriate; 8. Disclosing information relating to the good corporate governance of the Company to related parties and in the Annual Report, provided that it shall be always proposed to the Board of Directors for prior approval; 9. Establishing the working groups as it deems appropriate. Risk Management 1. Determining policies and scope of risk management operations of the Company, as well as giving advice to the Board of Directors and the management on risk management; 2. Overseeing and supporting the risk management to ensure successful implementation by emphasizing the significance of and taking into account risk factors in support of the decision making as appropriate; 3. Considering the Companyรปs material risks in line with the Companyรปs business, e.g., in terms of investment, finance, security, law, rules and regulations, by suggesting measures to prevent and minimize risks to stay at an acceptable level, as well as following up, evaluating and improving the working plans for minimizing risks on a continual basis as appropriate to the condition of the business operation; 4. Reporting risk evaluation results and operations for minimizing risks to the Board of Directors on a regular basis, and promptly reporting to the Board of Directors for consideration in case there is any matter materially affecting the Company; G. Corporate Social and Environmental Responsibility Committee The Board of Directors appointed the Corporate Social and Environmental Responsibility Committee to supervise the Companyรปs operations in respect of the corporate social and environmental responsibility by focusing on the impact on its shareholders and stakeholders. As at December 31, 2010, the Corporate Social and Environmental Responsibility Committee consists of three members, namely: Names Positions 1. Mr. Don Pramudwinai Chairman of the Corporate Social and Environmental Responsibility Committee 2. Mr. Pavich Tongroach Corporate Social and Environmental Responsibility Committee Member 3. Mr. Prasert Marittanaporn Corporate Social and Environmental Responsibility Committee Member With a three-year term of office. 18

Annual Report 2010


Corporate Social and Environmental Responsibility Committeeûs Authority 1. Considering establishing the corporate social and environmental guidelines and policies for submission to the Board of Directors; 2. Considering and approving the Companyûs strategies to meet the CSR target and policies; 3. Considering the action plans and the annual budget for arrangement of the CSR activities for submission to the Executive Board and the Board of Directors; 4. Considering and following up the progress of the arrangement of the CSR activities as well as assessing the result and the quality of the CSR projects; 5. Proceeding with other matters as assigned by the Board of Directors. H. Management Team As at December 31, 2010, the management team1 of the Company consists of 10 persons (as per details in Attachment) as listed below: Names Positions 1. Mr. Plew Trivisvavet Chief Executive Officer 2. Mr. Narong Sangsuriya Senior Executive Vice President: Operation Group 3. Mr. Prasert Marittanaporn Senior Executive Vice President: Administration Group 4. Mr. Ratn Santaannop Executive Vice President: Construction 1 5. Mr. Viboon Mongkolpiyathana Executive Vice President: Construction 2 6. Mr. Samai Paiboon Executive Vice President: Engineering 7. Mr. Sittidej Trivisvavet Executive Vice President: Purchasing 8. Mr. Vorapote Uchupaiboonvong Executive Vice President: Accounting and Finance 9. Mr. Anukool Tuntimas Executive Vice President: Human Resource and General Administration 10. Miss Supamas Trivisvavet Executive Vice President: Office of President Remark :

(1)

The management team refers to the definition of çexecutiveé of the Office of the Securities and Exchange Commission.

Managing Directorûs Authority The Managing Director shall have the authority to control and manage the Companyûs core business and monitor all businesses of the Company to ensure compliance with resolutions and policies of the Board of Directors, including their suggestions. In this regard, the Board of Directors shall evaluate the Managing Directorûs performance in comparison with the annual goals, whereby the Remuneration Committee shall consider remuneration for the Managing Director by evaluating from the performance in the past year for proposal to the Board of Directors for consideration and approval in accordance with the criteria. I. Company Secretary The Board of Directors appointed Miss Supamas Trivisvavet to hold the office of the Company Secretary with duties and responsibilities as follows: 1. Providing advice to directors as to relevant legal provisions, rules, criteria, and regulations; 2. Ensuring compliance with laws, the Articles of Association, relevant regulations and the Good Corporate Governance Principles by the Company; 3. Arranging for the meetings as specified by law and the Articles of Association, preparing and keeping directors registration, notices and minutes of the Board of Directorsû meetings and annual reports of the Company, notices and minutes of the shareholdersû meetings as well as coordinating to ensure compliance with resolutions of the Board of Directors or resolutions of the shareholders with efficiency;

CH. Karnchang Public Company Limited

19


4. 5. 6. 7.

Ensuring disclosure of information and report on information to the regulatory units; Contacting and communicating with shareholders and the related regulatory units; Promoting training in various courses and providing information useful for new directors; and Proceeding with other matters as assigned by the Board of Directors.

J. Structure of Subsidiariesû Directors As at December 31, 2010, the Boards of Directors of subsidiaries consist of qualified persons as listed below:

20

ë Construction Material Supply Co., Ltd. 1. Mr. Plew Trivisvavet 2. Mr. Kamthorn Trivisvavet 3. Mrs. Saikasem Trivisvavet 4. Mr. Narong Sangsuriya 5. Mr. Prasert Marittanaporn

Chairman of the Board of Directors Director Director Director Director

ë CH. Karnchang Real Estate Co., Ltd. 1. Mr. Plew Trivisvavet 2. Mr. Prasert Trivisvavet 3. Mr. Thep Trivisvavet 4. Mr. Yim Trivisvavet 5. Mr. Kamthorn Trivisvavet

Director Director Director Director Director

ë CH. Karnchang-Tokyu Construction Co., Ltd. 1. Mr. Plew Trivisvavet 2. Mr. Kamthorn Trivisvavet 3. Mr. Thep Trivisvavet 4. Mr. Yim Trivisvavet 5. Mr. Narong Sangsuriya 6. Mr. Prasert Marittanaporn 7. Mr. Masami Ichikawa 8. Mr. Hideo Miyagawa 9. Mr. Tsuneo Izuka 10. Mr. Kunito Sakai 11. Mr. Masahiro Shimizu

Chairman of the Board of Directors Director Director Director Director Director Director Director Director Director Director

ë CH. Karnchang (Lao) Co., Ltd. 1. Mr. Ratn Santaannop

Director

ë Bangpa-in Cogeneration Limited 1. Mr. Narong Sangsuriya 2. Mr. Kamphuy Jirararuensak

Chairman of the Board of Directors Director

Annual Report 2010


3. Mr. Vorapote 4. Mr. Woravudh 5. Miss Supamas

Uchupaiboonvong Anuruxwongsri Trivisvavet

ë Xayaburi Power Company Limited 1. Dr. Thanong Bidaya 2. Mr. Plew Trivisvavet 3. Mr. Narong Sangsuriya 4. Mr. Prasert Marittanaporn 5. Mr. Van Hoang Dau 6. Mr. Thanawat Trivisvavet

Director Director Director

Chairman of the Board of Directors Director Director Director Director Director

(2) Nomination of Directors and Executives Board of Directors The Nomination Committee shall select qualified and appropriate persons to hold the position of directors or persons nominated for appointment as directors in advance as it deems appropriate and propose the same to the Board of Directors so as to consider nominating them to the shareholdersû meeting or to the Board of Directorsû meeting for appointment. In the case of appointment of directors by shareholders, the criteria and procedures are as follows: 1. Each shareholder has one vote for one share held. 2. The group election of all directors to be appointed on such occasion shall be by a single vote or if deemed appropriate by the shareholdersû meeting, the election may be on an individual basis, the vote for any candidate by each individual shareholder, whether as individual or group election, shall reflect the number of all shares held by such shareholder at the time of the vote in accordance with Clause 1 and no shareholder shall apportion a partial vote to any specific candidate. 3. In case of an election on an individual basis, the candidates with the highest number of votes in descending order shall be elected as directors up to the number of directors to be elected or vacancies at that time. If more than one candidate has equal votes for the final vacancies, the appointment shall be made by drawing of lots. Executive Board The Board of Directors shall appoint the Executive Board in accordance with the Companyûs Articles of Association which provide that the Companyûs directors may assign one or several directors to perform any activity on behalf of the Board of Directors. Audit Committee The Board of Directors shall appoint the Audit Committee as nominated by the Nomination Committee from independent directors of the Company and at least one person thereof shall have accounting and financial knowledge, which shall have a term of office of three years. Audit Committee members who retire by rotation may be re-appointed. Nomination Committee The Board of Directors shall appoint the Nomination Committee, which shall have a term of office of three years. Remuneration Committee The Board of Directors shall appoint the Remuneration Committee, which shall have a term of office of three years.

CH. Karnchang Public Company Limited

21


Corporate Governance and Risk Management Committee The Board of Directors shall appoint the Corporate Governance and Risk Management Committee, which shall have a term of office of three years. Corporate Social and Environmental Responsibility Committee The Board of Directors shall appoint the Corporate Social and Environmental Responsibility Committee, which shall have a term of office of three years.

(3) Remuneration for Directors and Executives The Company has considered providing appropriate remuneration to directors and executives as per the criteria of determination of remuneration for directors as follows: (1) Remuneration shall be appropriate for and in line with the scope of duties and responsibilities of each director, e.g., Chairman of the Board of Directors, Chairman of each subcommittee and members of the Executive Board, the Audit Committee, the Nomination Committee, the Remuneration Committee and the Corporate Governance and Risk Management Committee, who shall receive additional remuneration for such position; (2) Remuneration shall be sufficient to attract and retain knowledgeable and qualified directors to perform duties for the Company; (3) Elements of remuneration are clear, transparent and easy to understand. The remuneration for executives shall be subject to the criteria as specified by the Board of Directors, namely, such remuneration is appropriate and at a sufficient level to attract and retain qualified high level executives to work for the Company, as well as at a rate comparable to companies at the same level or in the same business. In 2010, the remuneration of directors and executives is as follows: 3.1 Monetary Remuneration for the year ended December 31, 2010 (a) Remuneration for directors consists of remuneration and meeting allowance, allowance, bonus, bringing the total remuneration for directors in 2010 to Baht 13,349,000, as per the following details: Unit: Baht Office Remuneration and Meeting Allowance in 2010 Board Executive Audit Nomination Remuneration Corporate of Board Committee Committee Committee Governance Bonus and Directors Positions Directors 2009 Risk Management Committee 1. Mr. Aswin Kongsiri Chairman of the 870,000 - 675,000 Board of Directors 2. Mr. Plew Trivisvavet Chairman of the 320,000 400,000 5,000 5,000 40,000 675,000 Executive Board - 440,000 30,000 30,000 140,000 675,000 3. Mr. Vitoon Tejatussanasoontorn Chairman of the 320,000 Audit Committee 4. Mr. Don Pramudwinai Audit Committee Member 320,000 - 230,000 - 562,000 5. Mr. Thawansak Sukhawun Audit Committee Member 320,000 - 240,000 40,000 562,000 6. Mr. Pavich Tongroach Director 320,000 - 450,000

22

Total

1,545,000 1,445,000 1,635,000 1,112,000 1,162,000 770,000

Annual Report 2010


Unit: Baht

Directors

7. Mr. Narong Sangsuriya 8. Mr. Kamthorn Trivisvavet 9. Mr. Prasert Marittanaporn 10. Mr. Ratn Santaannop 11. Mr. Sombat Kitjalaksana 12. Mr. Anukool Tuntimas Total

Positions

Executive Director Executive Director Executive Director Executive Director Director Executive Director

Office Remuneration and Meeting Allowance in 2010 Board Executive Audit Nomination Remuneration Corporate of Board Committee Committee Committee Governance Bonus and Total Directors 2009 Risk Management Committee 300,000 100,000 5,000 5,000 - 562,000 972,000 320,000 100,000 - 562,000 982,000 320,000 100,000 - 562,000 982,000 320,000 100,000 - 562,000 982,000 320,000 - 450,000 770,000 320,000 100,000 5,000 5,000 - 562,000 992,000 4,370,000 900,000 910,000 45,000 45,000 220,000 6,859,000 13,349,000

(b) Remuneration for executive directors consists of remuneration, meeting allowance as well as allowance. Remuneration for executives consists of salary and bonus. The total remuneration for six executive directors and six executives in 2010 amounted to Baht 62,568,650.3.2 Other Remuneration - None Increase or Decrease in Number of Shares Held by Executives in 2010

Executives Mr. Aswin Kongsiri Mr. Plew Trivisvavet Mr. Vitoon Tejatussanasoontorn Mr. Don Pramudwinai Mr. Thawansak Sukhawun Mr. Pavich Tongroach Mr. Narong Sangsuriya Mr. Kamthorn Trivisvavet Mr. Prasert Marittanaporn Mr. Ratn Santaannop Mr. Sombat Kitjalaksana Mr. Anukool Tuntimas Mr. Viboon Mongkolpiyathana Mr. Samai Paiboon CH. Karnchang Public Company Limited

Brought Forward as at January 1, 2010 20,847,620 500,000 150,000 920,000 1,000 983,000 3,884,000 -

Changes during the Year 21,769 50,000 50,000 220,000 -

Balance as at December 31, 2010 20,825,851 450,000 100,000 700,000 1,000 983,000 3,884,000 23


Executives Mr. Sittidej Trivisvavet Mr. Vorapote Uchupaiboonvong Miss Supamas Trivisvavet

Brought Forward as at January 1, 2010 3,200,000 1,500 -

Changes during the Year 10,000 2,000,000

Balance as at December 31, 2010 3,200,000 11,500 2,000,000

(4) Corporate Governance The Companyûs administration has been complying with the good corporate governance principles, focusing on the significance of and responsibilities towards the shareholders and the stakeholders of the Company. The Board of Directors, in recognition of the good corporate governance principles to reinforce the confidence of shareholders, investors and all related parties, has set out the corporate governance policy and scheduled to review such policy and its compliance at least once a year. The Companyûs corporate governance policy is as follows: Corporate Governance Policy 1) Shareholdersû Rights Promoting shareholders to exercise their basic rights and taking care of shareholders better than their rights as specified by law without any actions in violation of or depriving shareholders of their rights. 2) Equitable Treatment towards Shareholders Monitoring to ensure that all shareholders are equally treated and protected in respect of their basic rights, implementing measures to prevent inside information usage for personal gain or others, which would cause damage to shareholders as a whole. 3) Roles of Stakeholders Taking care of stakeholders based on their rights under applicable laws without any actions in violation of stakeholdersû rights as well as establishing measures to compensate any stakeholders suffering from damage arising from violation of rights, promoting cooperation between the Company and stakeholders for the Companyûs prosperity, financial stability and sustainability. 4) Information Disclosure and Transparency Undertaking all activities with transparency, open for inspection, and sufficient information disclosure to all relevant parties as well as monitoring disclosure of material information relating to the Company, both financial and non-financial records, to ensure accuracy, completeness, timeliness and transparency through easy access with equality and reliability. 5) The Board of Directorsû Responsibilities Ensuring that the Board of Directors performs duties with honesty and due care to the best interest of the Company and in fairness to all shareholders under the good internal control system and appropriate risk management, including compliance with the Companyûs code of ethics. In 2010, the Company has adhered to the good corporate governance principles for listed companies as stipulated by the Stock Exchange of Thailand as follows: 1. Shareholdersû Rights The Company realizes the significance of the shareholders and their rights of ownership to control the Company through appointment of the Board of Directors and their rights to make decisions on significant changes of the Company. The Company thus promotes the shareholders to exercise their protected basic rights. In this respect, the shareholders shall be informed of the Companyûs correct, complete, sufficient and up-to-date information and news, including the right to attend the shareholdersû meeting, the right to appoint proxy to attend and vote at the meeting, the right to share opinions and make inquiries in the shareholdersû meeting in order to jointly make decisions on the Companyûs important matters, e.g., profit allocation, election of directors, determination of remuneration for directors, appointment of the auditor, determination of the audit fees, and approval of important 24

Annual Report 2010


transactions which may affect the Companyûs business direction, etc. The Board of Directors clearly sets out the corporate governance policy that the Company shall promote the shareholders to exercise their basic rights without taking any actions in violation of or depriving shareholders of their rights. The Company greatly realizes the significance of the shareholdersû meeting, i.e., the meeting place must be convenient for the shareholdersû commute, including suitable and sufficient time. The Company thus uses its office as the meeting place, which is located at No. 587 Viriyathavorn Building, Sutthisarnvinitchai Road, Dindaeng Subdistrict, Dindaeng District, Bangkok, and which is convenient for commuting, close to a subway station and an expressway on- and off-ramp, with sufficient parking areas for shareholders. In 2010, the Company convened two shareholdersû meetings, i.e., the Extraordinary General Meeting of Shareholders No. 1/2010 on January 20, 2010 and the 2010 Annual Ordinary General Meeting of Shareholders on April 21, 2010 at Supunnika Room on 4th Floor, No. 587, Viriyathavorn Building, Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok. The notice of the meeting, together with information in support of each agenda item, along with opinions of the Board of Directors, proxy as required by law, clarification, method of proxy, profiles of directors due to retire by rotation, the Companyûs Articles of Association regarding the shareholdersû meeting, details of independent directors, and procedures for attendance of the shareholdersû meeting, as well as route map of the meeting place, was sent in advance to the shareholders 14 days prior to the meeting date, and advertised in a newspaper for three consecutive days prior to the meeting date. Moreover, the Company also posted the notice of the meeting, together with details of each agenda item on the Companyûs website in advance 30 days prior to the meeting date for the shareholders to have time to consider details of each agenda item. As for those shareholders unable to attend the meeting in person, the Company suggested them authorizing the Chairman of the Audit Committee or an Audit Committee member or another person to attend the meeting and vote on their behalf. On the meeting date, the shareholders can register to attend the meeting at least two hours prior to the meeting time. The Company arranged for staff to facilitate the meeting registration for shareholders and proxies, and used the barcode system in the convenient and rapid registration of the meeting and vote counting. Refreshments and duty stamps were provided, free of charge, to the shareholders and their proxies who attended the meeting on their behalf. The Board of Directors realizes the significance of their attendance of the shareholdersû meeting for answering questions and taking suggestions of the shareholders into consideration. In the 2010 Annual Ordinary General Meeting of Shareholders, all 11 directors attended the said meeting, including the chairmen and all subcommittees, the Managing Director and the management team of the Company. The shareholdersû meeting proceeded in accordance with the order of the agenda as specified in the notice of the meeting sent in advance to the shareholders, and the shareholders were allowed to express their opinions and make inquiries in each agenda item. Before starting the meeting, the chairman of the meeting clearly informed the shareholders of the voting method and the shareholdersû rights as follows: 1. One share represents one vote. For agenda items requiring resolutions, such resolutions shall be passed by the majority of votes. Agenda item for acknowledgment shall not require any resolution. As for agenda item for determination of remuneration for directors, resolution shall be passed by votes of not less than two-thirds of the total number of votes of the shareholders present at the meeting. 2. In case that shareholders have appointed their proxies and voted on various matters, the Companyûs staff would collect and record such votes in the computer, and the Companyûs legal advisor would check the vote casting to ensure the transparency and compliance with the laws and regulations. Proxies would not be required to vote again in the meeting unless the information on such agenda item would change. Any shareholders intending to change their votes shall request the voting cards from the Companyûs staff. 3. The shareholders attending the meeting in person and intending to vote against or abstain from voting shall use the voting cards as provided by the Companyûs staff. 4. The shareholders who attend the meeting after the meeting was already called to order shall be allowed to exercise their rights to vote or vote on such agenda item which is currently pending the consideration and resolution has not yet been passed. CH. Karnchang Public Company Limited

25


In regard to the minutes of the shareholdersû meeting, the Company has clearly recorded the list of directors attending the meeting, material clarifications, questions and answers or opinions in brief, the resolutions of the meeting with the voting results, divided into agree, disagree or abstain, which shall be available in Thai and English languages on the Companyûs website: www.ch-karnchang.co.th within 14 days from the shareholdersû meeting date. The shareholders shall then have convenient access to such information and news instead of until the next shareholdersû meeting. Thereafter, the said minutes would be proposed to the shareholders for approval in the next meeting. 2. Equitable Treatment towards Shareholders The Company has a policy to promote and ensure equal and fair treatment towards all shareholders, including minority and foreign shareholders, with the following measures for protection of the shareholdersû basic rights: 1. Shareholders may propose any agenda item of the Ordinary General Meeting of Shareholders and nominate qualified persons to be appointed as directors for the Companyûs Annual Ordinary General Meeting of Shareholders prior to the meeting date, as published on the Stock Exchange of Thailandûs website, subject to the criteria for consideration as posted on the Companyûs website. The Board of Directors will consider the appropriateness to include or not include such agenda item proposed by the shareholders. As for the nominated persons to be appointed as directors, the management will propose the same to the Nomination Committee for further consideration and submission to the Board of Directors and the shareholdersû meeting. 2. The shareholdersû meeting shall proceed in accordance with the order of the agenda as specified in the notice of the meeting, and no additional agenda item would be considered at the meeting without prior notice to the shareholders. This is to ensure that the shareholders have opportunity to study information in support of consideration of each agenda item. 3. Any shareholder unable to attend the meeting in person may vote by proxy. In this regard, at least two independent directors are nominated for proxy appointment. Proxy form is in accordance with the form as set out by the Ministry of Commerce, in which each shareholder may direct his/her voting decisions. This is to encourage the shareholders to exercise their rights to attend the meeting and vote on each agenda item. In this regard, the proxy form is enclosed with the notice of the shareholdersû meeting, clearly listing the documents and evidence required for proxy appointment, along with instructions as to the proxy procedures for the shareholders to make proper arrangements without any complication. 4. Voting cards shall be provided for every agenda item for the shareholders to vote as they consider appropriate. The Company uses the barcode system to record and display the voting results, and arranges for its staff to collect voting cards in the meeting room. To ensure transparency, the Company also has its legal advisor oversee the counting of votes. 5. As for the appointment of directors in replacement of the retired directors, the shareholders may exercise the right to appoint any director individually. 6. The Company has set out the guidelines on confidentiality of information and measures to prevent directors and executives from using inside information for personal gain. All directors and executives are well informed of the roles and duties to report their own securities holding, and on the Companyûs securities holding by spouses or minor children; and to report every change in such securities holding from purchase, sale, transfer or acceptance of transfer of securities, to the Securities and Exchange Commission in accordance with Section 59 of the Securities and Exchange Act B.E. 2535 (1992) within three business days from the date of purchase, sale, transfer or acceptance of transfer of securities, whereby the Company gives prior notice thereof in every meeting of the Board of Directors and the Executive Board. Moreover, directors and executives have also been informed of their duties and responsibilities, including penalties under the Securities and Exchange Act B.E. 2535 (1992). In addition, the Company prohibits executives who have access to inside information from taking any actions contrary to Section 241 of such Act, including relevant rules and regulations.

26

Annual Report 2010


7. The information on the Companyûs connected transactions and opinions of the Board of Directors regarding such transactions shall be disclosed to the shareholders, and no connected transactions shall be executed in violation of or against the rules of the Stock Exchange of Thailand and/or the Office of the Securities and Exchange Commission. Moreover, the Company discloses the connected transactions in the Annual Report. 3. Roles of Stakeholders The Company realizes the significance of rights of all groups of stakeholders, whether inside, such as staff and executives of the Company and the subsidiaries, or outside, such as customers, traders, competitors, creditors, communities, society, public sector and other relevant authorities, to ensure that the basic rights of these stakeholders are well protected and taken care of under the provisions of the laws and other relevant rules and regulations. The Company recognizes support from these stakeholders which could help building up the Companyûs competitiveness and profitability to result in long-term success for the Company. The Companyûs Board of Directors has set out the corporate governance policy that the Company shall take care of the stakeholders based on their rights under the relevant laws, shall not take any acts in violation of the rights of stakeholders, and shall establish measures to compensate any stakeholders suffering from damage arising from violation of rights. In addition, the Company also realizes the significance of communication with all groups of stakeholders to exchange information, as well as listening to opinions and suggestions of all groups of stakeholders for common interest. In case where any stakeholders are not fairly treated by the Company, they may file complaints directly with the Company at the Office of President, Telephone 0-2275-0026 ext. 2315 or e-mail: president_office@ch-karnchang.co.th. In 2010, the Company has taken care of the rights of all groups of stakeholders, both inside and outside the Company, as follows: Shareholders:

- The Company has performed duties with integrity, honesty and fairness, taking into account both major and minor shareholders, and for the benefit of the group of related persons as a whole; - The Company has managed its business to ensure prosperity, stability and good return for the shareholders; - The Company has protected its assets from depreciation or unnecessary loss; - The Company has, regularly and in a timely manner, disclosed the accurate and sufficient information, both financial and non-financial, relating to the Companyûs business and the operational results, and representing the Companyûs actual operational and financial status; Traders and/or - Every trader and/or creditor/debtor has been equally and fairly treated by the Company, Creditors/Debtors: taking into account the Companyûs optimum benefit and based on the fair returns for both parties; - The Company has avoided the situation which causes a conflict of interest, as well as complying with the contractual obligations; - The Company has provided actual information and accurate report. The negotiation for problem resolution is based on the business relation; Customers: - The Company maintains the optimism and gives priority to customers, treats customers willingly, actively, politely, keeps customersû confidential information from misuse for personal gain or others, as well as treating all customers equally without discrimination; Competitors: - The Company has free trading policy and believes that competition is a positive factor to encourage the development of service standard and innovations to be offered to customers; - The Company has complied with the fair competition framework; - The Company in no way discredits any trading competitorûs reputation by negative accusation without actual information; - The Company in no way accesses any competitorûs confidential information through any dishonest or other inappropriate methods; CH. Karnchang Public Company Limited

27


Business - The Company has clearly determined policies and procedures for approval of connected interested parties: transactions to prevent any potential conflicts of interest; Staff: - The Company truly realizes the significance of its staff, and to meet its objectives, the Company recruits and employs knowledgeable, capable and experienced personnel to perform works, and in response to the Companyûs requirements and growth, by continually organizing programs for development of staff knowledge and capacities to advance their skills; - The Company has equally and fairly treated its staff through proper and fair remuneration and welfare, such as, establishment of a provident fund, medical treatment packages in hospitals designated by the Company, and loans for staff; - The Company truly realizes the significance of personnel development by establishing clear internal personnel development plans, encouraging all levels of its staff up to high ranking executives to receive training for improvement of their knowledge and capacities, both in theory and practice, so as to ensure the efficient performance skills, including fair employment conditions suitable for the market and in compliance with the labor laws; Society - The Company has taken into account the public interest and refrained from taking and Public: any acts which may cause damage to the countryûs reputation, natural resources, environment and public interest; - The Company has promoted and instilled into its staff at all levels the corporate social responsibility; - The Company in no way facilitates, supports or allows to be instrumental in any avoidance of compliance with the law; Communities: - The Company has considered communities as part to be concerned and facilitated, and thus focuses on various activities for improvement of the quality of life and environment as its contribution to society; Environment: - The Company has developed and improved the environmental management system in all activities of the Company to continuously minimize pollution and impact on the environment, with clear objectives, goals, action plans and evaluation; - The Company has promoted the environment preservation, as well as publicizing the information and news, and cooperated with the staff, customers, government agencies and private entities, including the public, as a gesture of the Companyûs image and awareness of the environmental management; - The Company has rapidly and efficiently responded to any events giving rise to impact on the environment and communities caused by the Companyûs operation. 4. Information Disclosure and Transparency 1. The Board of Directors establishes the policy that the Company shall undertake activities with transparency and open for inspection with sufficient information disclosure to all relevant parties as well as monitoring to ensure disclosure of correct, complete, timely and reliable information, and everyone can easily access to such information on an equal basis. In disclosing the Companyûs significant information, other than by way of dissemination under the specified criteria via the Stock Exchangeûs channels, the Company also disseminates such information on the Companyûs website, both Thai and English, such as, Annual Report, Annual Registration Statement (Form 56-1), Corporate Governance Policy, the Companyûs information, and public relations news. The Company regularly updates the website for up-to-date information and news for the convenience and to the best interest of users.

28

Annual Report 2010


2. In respect of investor relations, the Board of Directors is well aware of the significance of accurate, complete, transparent, thorough and timely disclosure of information relating to the Company. Therefore, the Company has set up an Investor Relations unit to be responsible for disclosure of information to shareholders and investors, both financial and non-financial, such as, financial report, operational results, financial ratio, dividend history and other information which may impact the Companyûs securities value. Such information and news in support of their decision making are published for investors and relevant parties through various channels and media of the Stock Exchange of Thailand, the Office of the Securities and Exchange Commission, including the Companyûs website at http://www.ch-karnchang.co.th in both Thai and English languages. Those interested to receive information in support of investment may contact Khun Rakchanok Trivisvavet at Investor Relations, Telephone 0-2275-0026 ext. 2317-2319. 3. The Company discloses its financial information and reports the responsibilities of the Board of Directors towards the financial report, together with the auditorûs report, the management discussion and analysis, general information and significant information in the Annual Report correctly and in a timely manner in accordance with the regulations of the Office of the Securities and Exchange Commission. 4. The Company discloses the roles and duties of the Board and various subcommittees, number of meetings and attendances of each director in 2010. 5. In regard to the policy on payment of remuneration for directors and executives, the Company establishes clear and transparent policy on remuneration for directors and executives, subject to review by the Remuneration Committee. The remuneration shall be at the same level as that in the same industry and sufficient to retain the qualified directors and the Managing Director, and remuneration for executives, excluding the Managing Director, shall be in accordance with the principles and policies determined by the Executive Board corresponding to the Companyûs operational results and performance of the executives, as per the details of Remuneration for Directors and Executives on pages 22 to 23. 5. The Board of Directorsû Responsibilities 5.1 The Board of Directorsû Structure The structure of the Board of Directors consists of 12 qualified members, comprising: five executive directors, and seven non-executive directors (five independent directors representing more than one-third of the total number of directors). The Chairman of the Board of Directors is an independent director by the definition of the Office of the Securities and Exchange Commission and has no relationship with the management and is not the Managing Director, so as to separate the policy making and supervisory duty from the regular managerial duty. The Board of Directors has not yet determined the policy on holding the position of director in other companies since, after considering the matter, it deems that all directors of the Company devote their time to regularly attend meetings and provide useful suggestions to the Company. Furthermore, the Board of Directors also appointed the Company Secretary in accordance with the guidelines for the good corporate governance principles to perform the duty to provide suggestions relating to various laws and regulations as required by the Board of Directors and to supervise activities of the Board of Directors as well as coordinating to ensure performance in compliance with the Board of Directorsû resolutions. 5.2 Subcommittees The Company has established six subcommittees to closely monitor and supervise the operation and regularly report to the Board of Directors, namely, the Executive Board, the Audit Committee, the Nomination Committee, the Remuneration Committee, the Corporate Governance and Risk Management Committee, and the Corporate Social and Environmental Responsibility Committee. In this regard, the Board of Directors has determined duties and responsibilities of each subcommittee as detailed on pages 14 to 19.

CH. Karnchang Public Company Limited

29


5.3 Role, Duties and Responsibilities of the Board of Directors 1. The Board of Directors comprises personnel having knowledge, ability, skills and experiences in various fields to exercise their judgment independently with leadership, who determine vision, missions, strategies, goals, business plan and budget of the Company, and supervise the management to take actions in compliance with the business plans and forecast budget with efficiency and effectiveness so as to optimize the economic value to the business, including monitoring the operational results to meet the objectives and comply with the policies, rules, laws and other relevant regulations. 2. The Board of Directors has established written corporate governance policy which has already been approved and subject to review at least once a year. 3. The Company has prepared its code of business ethics since the year 2003, with the approval by the Board of Directors. The code of business ethics contains proper conduct and practices for directors, executives and staff, and guidelines for conduct and treatment towards the Company, colleagues, third parties and society, in accordance with the ethics. In the past, all directors, executives and staff have been informed and well understood of the proper and ethical conduct and complied with such practices in the performance of their duties in line with the Company没s mission, with honesty, integrity and equality, to build up confidence of shareholders and all groups of stakeholders, including the public and society. 4. Conflict of Interest The Board of Directors has considered the transactions which may have conflict of interest or connected transactions or related party transactions properly under the good ethics subject to review by the Audit Committee to ensure compliance with the rules of the Stock Exchange of Thailand and the Office of the Securities and Exchange Commission, as well as the disclosure of information on the execution of such transactions which may have conflict of interest to the public. In this regard, the Company has established the policy, rules and regulations, and procedures for approval of the transactions which may have conflict of interest for the executives, staff and the relevant persons for compliance with the significant principles, as follows: 4.1 Compliance with the rules set out by the Stock Exchange of Thailand in the execution of connected transactions to propose the connected transactions to the Audit Committee for consideration and approval prior to seeking approval of the Board of Directors under the good corporate governance principles. 4.2 Disclosure of information on the transactions which may have conflict of interest or connected transactions or related party transactions pursuant to the rules set out by the Office of the Securities and Exchange Commission/the Stock Exchange of Thailand, by disclosing in the Annual Registration Statement (Form 56-1) and the Annual Report, as well as disclosing the information of such transactions in the financial statements in accordance with the accounting standard. 4.3 In the consideration of the execution of the transactions which may have conflict of interest, the interested directors shall not attend the meeting nor vote on such agenda. 5. Policy on Risk Management The Board of Directors greatly realizes the significance of the risk management. The Board of Directors appointed the Corporate Governance and Risk Management Committee on December 7, 2007. The Company has determined and assessed its business risks, and measures to prevent and manage such risks. Risk Management Policy 1. The Board of Directors, all executives, staff and units own the risks and have the duties to be responsible for, assess, follow up, and support the risk management process with efficiency. 2. All units of the Company shall have the risk management process, as well as having the systematic and continuous assessment and follow-up, subject to regular review at least once a year in line with changes in business sector. 30

Annual Report 2010


3. The risk assessment shall be determined as part of the annual work plan of all units, by considering all risks of the entire organization, taking into account such risk factors, both inside and outside the organization, including proper risk management. 4. The Corporate Governance and Risk Management Committee has the duties to assess the risk management and propose its opinion to the Board of Directors. 5. The organization culture will focus on common understanding and awareness of risks. The body of knowledge shall be established for staff at all levels to have access for study and research and sharing of experiences, which would pave the way for development and improvement of the risk management process to become an efficient mechanism in the strategic administration. In addition, the Companyûs code of business ethics shall be regularly reviewed. Should the proper conduct and practices in the Companyûs code of business ethics not cover its business operation, the Company will immediately make revisions as appropriate. The Company has continuously supported training on corporate governance to high and middle level executives, so as to enhance their knowledge, understanding, visions, good attitudes towards the Companyûs management in compliance with the good corporate governance principles to build leadership and succession to the management. The Board of Directors and executives adhere to the guidelines for the good corporate governance principles by regularly improving their conduct and practices towards stakeholders to ensure compliance with such guidelines, e.g., independence of the Board of Directors, giving priority to shareholders to the extent that the Company was awarded a çVery Goodé rating of the ordinary general meeting of shareholders by the Office of the Securities and Exchange Commission in association with the Listed Companies Association and the Thai Investors Association. Furthermore, all staff also share the corporate social responsibility by participating in the mangrove forestation project to honor His Majesty the King in the celebration of His Majesty the Kingûs 80th birthday at the Mangrove Forest Resources Development Station 2 (Chanthaburi Province) and participating in lunch and activities with the elderly at Ban Bang Khae Social Welfare Development Center for the Elderly (Ban Bang Khae 1), the çOne Drop is Life, CH. Karnchang Creates New Lifeé program: the management, staff and local residents jointly donated blood on the occasion of the çWorld Blood Donor Dayé to the National Blood Center in order to solve the blood shortage problem, the program of building check dam and saltlicks at the Kui Buri National Park, Prachuap Khiri Khan Province, the School Recovery from 2010 Flood Crisis program at Bangsai School, Phra Nakhon Si Ayutthaya Province, etc. 5.4 The Board of Directorsû Meetings The Company schedules the Board of Directorsû meetings in advance for directors to manage their time to attend the meetings, except for special agenda, the Chairman of the Board of Directors or the directors in the number specified by law may convene additional meetings as necessary. The Board of Directors regularly meets every three months. The President Office shall deliver the notice of the meeting, together with agenda and supporting documents, at least seven days prior to the meeting date for the Boardûs review prior to attending each meeting. The agenda shall be determined by mutual discussion between the Chairman of the Board of Directors and the Managing Director. In 2010, the Board of Directors convened six meetings. Most of the directors were able to attend the meetings, except where they were engaged by urgent business. In every meeting, the Chairman of the Board of Directors shall serve as the chairman of the meeting to ensure each item shall be carefully considered and all directors shall be allowed to express their opinions and take part in discussions. In addition, the high level executives will attend the meeting to clarify the information in the capacity as persons directly relevant to the problems to the satisfaction prior to voting on each item. Furthermore, the minutes of the meetings are recorded in writing and systematically kept for inspection.

CH. Karnchang Public Company Limited

31


Meeting attendance of each director (attendances/total number of meetings) shall be summarized as follows: Directors

1. Mr. Aswin Kongsiri 2. Mr. Plew Trivisvavet 3. Mr. Vitoon Tejatussanasoontorn 4. Mr. Don Pramudwinai* 5. Mr. Thawansak Sukhawun 6. Mr. Pavich Tongroach 7. Mr. Narong Sangsuriya 8. Mr. Kamthorn Trivisvavet 9. Mr. Prasert Marittanaporn 10.Mr. Ratn Santaannop 11.Mr. Sombat Kitjalaksana 12.Mr. Anukool Tuntimas Remark

Board of Directors

6/6 6/6 6/6 3/6 6/6 6/6 5/6 6/6 6/6 6/6 6/6 6/6

Executive Board

Audit Committee

15/15 4/4 1/4 4/4 15/15 15/15 14/15 15/15

Nomination Remuneration Committee Committee

1/1 1/1

1/1 1/1

Corporate Governance and Risk Management Committee 4/4 4/4 4/4

1/1

1/1

15/15

* Mr. Don Pramudwinai attended two meetings of the Board of Directors via video-conference and attended two Audit Committeeรปs meetings via video-conference.

5.5 Self-Evaluation of the Board of Directors The Company has a policy for the Board of Directors to evaluate its overall performance at least once a year. In 2010, the Company Secretary delivered the performance evaluation form to each director for evaluating the overall performance of the Board of Directors so as to use the evaluation results for improvement of the Board of Directorsรป performance. In this regard, the evaluation results, divided into six subjects, namely, structure and qualifications of the Board of Directors; roles, duties and responsibilities of the Board of Directors; the Board of Directorsรป meetings, directorsรป performance of duties; relations with the management; and self-development of directors and development of executives, are summarized as follows: 1. Structure and Qualifications of the Board of Directors Most directors are of the view that the structure and qualifications of the Board of Directors are proper, namely, there are 12 directors, comprising seven non-executive directors (five independent directors or more than one-third of the total number of directors) and five executive directors which are suitable to the nature of business operations of the Company. The Board of Directors comprises personnel with sufficient knowledge, ability and experiences in a variety of fields and performed their overall duties efficiently. In this regard, the Board of Directors appointed another six subcommittees, namely, 1. the Audit Committee with the duty to help supervise and monitor the business as well as considering the appropriateness and justifications of various transactions for the optimum benefit of the Company; 2. the Nomination Committee with the duty to consider criteria and procedures for nomination of qualified persons to be appointed as the Companyรปs directors based on transparency, fairness, without influence of any persons; 3. the Remuneration Committee with the duty to consider determining criteria for consideration of remuneration for directors and the Managing Director; 4. the Corporate Governance and Risk Management Committee with the duty to establish policies and directions of operations in respect of the good corporate governance of the Company; 5. the Corporate Social and Environmental 32

Annual Report 2010


Responsibility Committee with the duty to establish guidelines and policies on corporate social and environmental activities; and 6. the Executive Board with the duty to supervise and provide suggestions to the management, and proceed with other matters as assigned by the Board of Directors. 2. Roles, Duties and Responsibilities of the Board of Directors Most directors are of the view that the roles, duties and responsibilities of the Board of Directors are proper, namely, the Board of Directors gives priority and contributes sufficient time to consider significant matters relating to directions of the Companyûs business operations, review the good corporate governance policy of the Company, as well as ensuring compliance with various policies, review of the code of business ethics, together with monitoring to ensure no conflict of interest. The Board of Directors also follows the procedures by taking into account the optimum benefit of the Company. Furthermore, the Board of Directors regularly reviews the internal control system to ensure good and sufficient internal control system and appropriate risk management, as well as following up and monitoring the performance of duties of the management in accordance with the policies as assigned by the Board of Directors. 3. The Board of Directorsû Meetings Most directors are of the view that the Board of Directorsû meetings are proper, namely, the Company gives prior notice of annual schedule of the meetings to directors so that they would be able to manage their time to attend every meeting. The number of meetings and agenda are suitable, thereby supporting the Board of Directors to perform duties efficiently and be able to supervise and monitor the Companyûs business operations with success. Moreover, directors also receive supporting documents prior to each meeting and have sufficient time to study additional information in preparation for each meeting. The supporting documents contain sufficient information for decision making to the benefit of the Company. Furthermore, the atmosphere at each Board of Directorsû meeting allows all directors to express constructive opinions without any influence of any persons. In addition, directors could fully discuss significant issues at each meeting. 4. Directorsû Performance of Duties Most directors are of the view that directorsû performance of duties is satisfactory, namely, they are well prepared and sufficiently study information prior to each meeting and regularly attend the meetings. In addition, directors independently provide their opinions and impartially consider various matters and are independent on voting, including useful suggestions for the Companyûs operations; and understand the significance of each matter and properly contribute their time to consider such matter. 5. Relations with the Management Most directors are of the view that the relations with the management are proper. Directors could straightforwardly discuss with the Managing Director and maintain good relations with the management, whereby the Managing Director could request directorsû advice as necessary and the Board of Directors does not intervene in performance of duties of the management. Moreover, the Board of Directors also participates in solving problems as appropriate in case the managementûs performance of duties does not meet the operational plans and forecast budget. 6. Self-Development of Directors and Development of Executives Most directors are of the view that the self-development of directors and development of executives are satisfactory, namely, directors understand their roles, duties and responsibilities, have sufficient knowledge and understanding of the Companyûs business, pay attention to significant information or news relating to economic and industrial conditions, changes in rules and regulations and the state of competition, which would allow directors to efficiently perform their duties. In this regard, all directors are trained to ensure their understanding of performance of duties in the capacity of directors. Furthermore, in case of new directors, the Board of Directors would have the management provide documents or briefing for the new directors to understand the business and performance of duties as directors. In addition, the Board of Directors also sets out the succession plan to ensure continuity of performance of duties of the Companyûs high level executives. CH. Karnchang Public Company Limited

33


The Corporate Governance and Risk Management Committee adopts the self-evaluation results of the Board of Directors for proposing the practice and guidelines of the Board of Directors in compliance with the good corporate governance principles to the Board of Directors for consideration as appropriate. 5.6 Remuneration for Directors and Executives Remunerationfor directors : The Company establishes clear and transparent policy on remuneration for directors and the Managing Director, subject to review by the Remuneration Committee. The remuneration shall be at the same level as that in the same industry and sufficient to retain the qualified directors and the Managing Director. Remuneration for executives : Remuneration for executives shall be in accordance with the principles and policies determined by the Board of Directors corresponding to the Company没s operational results and performance of the executives. 5.7 Development of Directors and Executives - Training for Directors and Executives The Board of Directors and the high level executives realize the significance of participation in training or seminars in various courses or development of their knowledge and skills. The Board of Directors attends training courses organized by the Thai Institute of Directors Association (IOD), namely, Director Certification Program (DCP) and Directors Accreditation Program (DAP), the Audit Committee Program. In this regard, the Company also continues to coordinate with IOD to send its directors to participate in various training courses as provided by IOD. - Orientation for New Directors The Company also arranges for orientation for newly-appointed directors, whereby the Board of Directors assigns the Company Secretary to meet newly-appointed directors by convening a meeting with the relevant directors and/or executives and/ or officers for clarification and answer to questions, as well as preparing documents and briefing for new directors, such as, information relating to the Company, listed company director没s handbook, the good corporate governance principles, code of ethics, power and duties of the Board of Directors, the annual schedule of the Board of Directors没 meetings. 5.8 Succession Plan The Board of Directors sets out succession plan in the executive level and in the primary line, by significantly taking into account the performance and potentials of each person. In this regard, the Company makes preparations for those potential successors in the development of their knowledge, competency and skills as required for their work positions.

(5) Control of Inside Information Usage The Company introduces measures requiring executives to report their securities holding on every purchase/sale/transfer of securities to the Office of the Securities and Exchange Commission. Executives are reminded at every meeting of the Board of Directors of such measures and also required to sign their names in the acknowledgment of such obligations and responsibilities for report on securities holding. The Company also has an information disclosure policy in line with the guidelines set forth by the Stock Exchange of Thailand. In this respect, the Company shall disclose such information necessary to the decision of the public. Such information must be accurate, sufficient and made available in a timely manner. In addition, the Company shall endeavor to ensure that all investors in the Company没s securities shall equally obtain such information. The Company also maintains good inside information control system. As for information having impact or effect on prices, such information is sensitive or confidential and shall be subject 34

Annual Report 2010


to measures to prevent improper usage of inside information. For example, only high ranking executives would be granted access to such information and disclosure of such information to staff of the Company shall be made on a need to know basis. Staff who has such access shall be reminded that such information is confidential and subject to restrictions on usage as well as prohibition from purchase or sale of the Companyûs securities in reliance upon such information. Should any staff violate or fail to comply with such requirements, the Company shall impose disciplinary actions starting from written warning, wage cut, work suspension without pay or dismissal, depending upon the severity of such violation.

(6) Internal Control The Board of Directors continuously realizes the significance of the internal control system to prevent and minimize the risk which may arise, by assigning the Audit Committee comprising independent directors to review the evaluation of the internal control system. The Internal Audit Department shall report directly to the Audit Committee and review the operation systems in various departments of the Company in accordance with the annual audit plan as approved by the Audit Committee, for the purpose of ensuring that the work performance is efficient and effective, that the Companyûs resources are used cost-efficiently, that the financial reporting is properly controlled to ensure correctness, reliability and timeliness, that it complies with the policy in accordance with the provisions of the laws and the official regulations, and that the efficiency of the internal control system is regularly reviewed, to ensure the best interest of the shareholders on the basis of fair returns to all stakeholders. In addition, the Audit Committee also has the duty to consider disclosing the Companyûs correct and complete information in case of connected transactions and transactions which may have conflict of interest. The Company recognizes the significance of the risk management, by assigning the Corporate Governance and Risk Management Committee to consider the risk factors currently being encountered or expected to be encountered by the Company, to analyze the impact and the possibility of such risks and then establish measures to prevent and manage such risks. The risk management system shall be reviewed and evaluated for its effectiveness every year and every interval in which the risk level has changed, subject to regular monitoring. In 2010, the Board of Directors and the Audit Committee have evaluated the adequacy and suitability of the Companyûs internal control system as per the internal control adequacy evaluation form, comprising five elements, namely, organization and environment; risk management; operational control of the management; information technology and communications system; and monitoring system, together with the audit results by the Internal Audit Department. They are of the opinion that the Companyûs internal control system is adequate and suitable to the business operation without any material fault, which would prevent the Companyûs and the subsidiariesû assets from misuse or unauthorized use by the executives. The Companyûs financial reports have been prepared in accordance with the generally accepted accounting principles. The information disclosed in the financial reports is correct and reliable. The Company operates its business in compliance with the securities and exchange law and other relevant laws.

3. Policy on Dividend Payment The Company has the policy on dividend payment for the shareholders at the rate expected to be paid at least 40 percent of net profit after tax for each year, which shall be payable in the following year should there be no any other necessary grounds and such dividend payment not materially affect the Companyûs normal operations. As for the subsidiaries, joint ventures and associated companies of the Company, the policy on dividend payment has not yet been set out.

CH. Karnchang Public Company Limited

35


Nature of Business Operations 1. Summary of Nature of Business Operations of the Company and Subsidiaries CH. Karnchang Public Company Limited was incorporated as a limited company on November 27, 1972 to engage in general construction business. Initially, the Company没s scope of work covered construction of buildings and general civil works and its major clients were government agencies, such as, the Royal Thai Army and the Royal Thai Air Force. The achievements bringing reputation to the Company in the initial period included, for example, various buildings, hospitals and public utilities for the Royal Thai Army and the television station building for the Mass Communication Organization of Thailand (MCOT). Subsequently, the Company realized the need to enlarge the scope of its business operations for long-term prosperity. In this respect, in 1981, the Company entered into a joint venture with Tokyu Construction Co., Ltd., one of Japan没s top ten construction contractors, for the purpose of acceptance of technology transfer and business alliance. Since 1994, the Company was converted into a public company and listed on the Stock Exchange of Thailand, at which time the Company has been rapidly growing and improving its capabilities and potential by both work management and development of human resources, as well as construction technology development through its joint ventures with foreign companies which possess expertise, to improve the Company没s work potential for more efficiency. This enabled the Company to expand its scope of capabilities to engage in various construction works to the point at which the Company became one of a few construction contractors which were sufficiently well-prepared to carry out sophisticated construction requiring advanced construction technology, such as, large scale infrastructure projects. In addition to the contracts for normal large scale infrastructure projects, the Company also developed its capabilities in terms of both engineering and management, allowing the Company to operate construction projects on a design and construction basis, i.e., the so-called turnkey, including investments in concession projects on a build-transfer-operate (BTO), build-operate-transfer (BOT), build-own-operate (BOO) and acquire-operate-transfer (AOT) basis, as well as other small, medium and large scale projects. Among these outstanding and successful projects were, for example, the Bang Na - Chon Buri Expressway Construction Project; the Development Project for Enhancement of the Capabilities of the Bangkok International Airport; the Park and Ride Building Construction Project for Bangkok Metro Public Company Limited; the Bang Pli - Suksawad (Bang Pli - Bang Khun Thien) Expressway Project; Concession Projects for Water Production and Distribution for the Provincial Waterworks Authority in Nakhon Pathom, Samut Sakhon and Pathum Thani Provinces; the MRTA Initial System Project, Chaloem Ratchamongkhon Line; and the Concession Project for Electricity Generation and Distribution for the Electricity Generating Authority of Thailand.

36

Annual Report 2010


ªï 2551

√“¬‰¥â %

2. Revenue Structure Unit : Million Baht

% Share Products

Operated by

2009

2010

holding of

Revenues

%

Revenues

%

Revenues

%

100.00 55.00

4,890.95 5,162.52 1,631.00

33.71 35.58 11.24

3,368.12 7,593.12 816.59

24.17 54.49 5.86

1,693.69 3,573.95 1,218.92

17.12 36.12 12.32

75.00 51.89 70.00 60.00

340.68 1,109.60 14.27 -

2.35 7.65 0.10 -

122.29 765.53 42.74 -

0.88 5.49 0.31 -

16.16 1,982.15 1.66

0.16 20.04 0.02

99.99

13,149.02 47.18

90.63 12,708.39 0.33 18.00

91.20 0.13

8,486.53 27.11

85.78 0.27

-

3.57

0.11

-

-

the Company Revenue from Construction CH. Karnchang Public Company Limited CH. Karnchang (Lao) Co., Ltd. CH. Karnchang-Tokyu Construction Co., Ltd. Phrompratharn Construction Limited Partnership Joint Venture CKLX Joint Venture CKNNL Joint Venture CKTC Joint Venture CH. KarnchangKrung Thon Engineers Total Revenue from Construction Revenue from Sales of Construction Material Construction Materials Supply Co., Ltd. Bangkok Concrete Industry Co., Ltd. (2) CH. Karnchang Public Company Limited Total Revenue from Sales of Construction Materials Interest Income Dividend Revenue and Profit Sharing from Jointly Controlled Entities Other Income (3) TOTAL Remarks

2008

-

0.02

15.83

3.25 0.02 50.75 0.35 37.08 0.26 255.16 1.76 264.02 1.90 138.64 0.96 262.08 1.88 917.00 6.30 663.59 4.76 14,510.57 100.00 13,935.16 100.00

5.84 0.06 32.95 0.33 253.79 2.57 160.53 1.62 960.04 9.70 9,893.84 100.00

1) The figures of revenue from the respective companies as indicated in the foregoing table have been net of connected transactions. 2) The Company held shares in Bangkok Concrete Industry Co., Ltd. representing 49.99 percent, and on December 25, 2007, the Company sold all such shares to other company. However, since the Company remained as the large source of fund of Bangkok Concrete Industry Co., Ltd., the financial statements of such company were still included in the 2008 and 2009 Financial Statements. 3) Other income comprises gain on disposal of property, gain on sales of investments, gain on exchange rate, miscellaneous income, reversal of provision for doubtful debts, reversal of provision for impairment of assets, reversal of interest payable, miscellaneous income, etc.

3. Summary of Significant Changes over the Previous Year in the Nature of Business Operations There is no significant change over the previous year. The industrial trend in the future will continue to slow down due to the overall ongoing economic problems. However, the government has managed to cause the economy to improve gradually and imposed measures providing assistance to those business operators encountering difficulty, which would likely render the construction industry to become more promising.

CH. Karnchang Public Company Limited

37


38

Annual Report 2010


Construction Industry Outlook and CK没s Strategic Direction Economic Recovery and Continuous Growth in 2010 In 2010, the global economy still struggles to handle the impact due to the global financial crisis, as evidenced by the necessary injection of the government bond for economic stimulation in the United States of America, debt problems in many countries in Europe, inflation in China, etc. As for Thailand, other than the economic impact, in 2010, Thailand also encountered various problems namely political uncertainty and protest during the first half of 2010, the historically high appreciation of the Thai Baht, and flooding in various provinces, etc. However, in 2010, the world and the Thai economy started to recover as a result of a gradually stable growth in the industrial sector in the United States of America, China and Europe, as well as effective economic measures giving rise to positive impacts on the global economy. In 2010, the recovery of the Thai economy was significant and was a result of the global economic recovery. More importantly, the recovery of the Thai economy was mainly due to the Thai government没s effective policies such as: economic stimulus strategy via investments in the infrastructure projects, continued from last year into the second phase of the economic stimulus measure (莽Stimulus Package茅 or SP2), with the investments of up to Baht 350,000 Million; the promotion of the machinery and equipment imports for the industrial sector in order to benefit from the exchange rate; as well as the investment flows into the capital markets in Thailand and Asia. All these factors resulted in an improvement of the Gross Domestic Product (GDP) from a deficit of 2.2 percent in 2009 to a positive growth rate of 7.5 percent as at the end of 2010. We expect that in 2011 the Thai economy will continue to grow, although at a slower rate of 4.0 percent. This trend in line with various countries all over the world, such as, the United States of America, Europe, Japan, Korea and Singapore. (International Monetary Fund: World Economic Outlook Database, October 2010)

Table 1: GDP Growth GDP Growth (%)

2008

2009

2010

2011p

Cambodia Indonesia Laos Malaysia Philippines Singapore Thailand Vietnam China Korea Japan U.S.A. Europe

6.7 6.0 7.8 4.7 3.7 1.8 2.5 6.3 9.6 2.3 (-1.2) 0.0 0.5

(-2.0) 4.5 7.6 (-1.7) 1.1 (-1.3) (-2.2) 5.3 9.1 0.2 (-5.2) (-2.6) (-4.1)

4.8 6.0 7.7 6.7 7.0 15.0 7.5 6.5 10.5 6.1 2.8 2.6 1.7

6.8 6.2 7.5 5.3 4.5 4.5 4.0 6.8 9.6 4.5 1.5 2.3 1.5

Source :

International Monetary Fund: World Economic Outlook Database, October 2010 (p) - Preliminary

CH. Karnchang Public Company Limited

39


Thailandûs Economic Trend in 2011 Thailandûs economic trend in 2011 is expected to grow at a slower rate than 2010 of 4.0 percent due to various risks such as political uncertainty, inflation which reached 3.2 percent in 2010 and is likely to rise to 2.5 - 4.5 percent in 2011 (Office of the National Economic and Social Development Board, January 2011), as well as interest rate which is anticipated to rise along with inflation rate. However, despite such risk factors, the Thai economy is expected to grow through a continuous implementation of the second phase of the economic stimulus measures under the çStimulus Packageé (SP2), as well as an increase in budget appropriations for investments in the construction of large-scale infrastructure projects. The construction industry in the private sector has recovered in the same direction, thus contributing towards increase in overall investments in construction in both public and private sectors in 2010 and contributing towards further stimulus for Thailandûs economic recovery. This recovery will continue well in to 2011 giving good prospects of further growth in the construction industry. As for the sources of funds for Governmentûs investments, the public debt and the external debt started to decline (Asian Development Bank, December 2010) due to the efficient policy on debt management. It can thus be assured that the Thai government will have sufficient sources of funds to support the investments in the large-scale projects for short- to medium-term economic stimulus in Thailand, as well as the development of the infrastructure systems for the competitiveness and sustainable growth of Thailand.

Table 2: Governmentûs Debts Debt (% of GDP)

2007

2008

2009

2010

Public Debt External Debt

37.4 17.0

38.2 14.3

43.8 13.8

43.3 12.6

Source : Asian Development Bank, December 2010

Construction Industry Outlook in 2011: Growth Driven by Large-Scale Government Projects Thailandûs construction industry has continuously expanded from 2009 to 2010, as evidenced by an increase in investments in both the public and private sectors. The construction investments in the public sector increased from Baht 399,978 Million in 2009 to Baht 422,670 Million in 2010; while the investments in the private sector increased from Baht 340,438 Million in 2009 to Baht 387,663 Million in 2010 (Office of the National Economic and Social Development Board, as at February 21, 2011: Gross Fixed Capital Formation at Current Market Price Classified by Type of Capital (Original)(Continued)). In 2011, the construction industry is expected to grow continuously due to the recovery of the private sector and a higher construction demand. Most importantly, the Thai government is committed to place the construction industry as one of the main driving forces for the economic growth by way of investments under the second phase of the economic stimulus measure or çStimulus Package 2012é (SP2), in the total amount of Baht 1.43 Trillion from 2010-2012 in the mass rapid transit networks (12 lines), which have already commenced since 2009 and continued onwards. The projects which already opened for bidding in 2010 are the Blue Line Extension Project, Bang Sue - Tha Phra, Hua Lamphong - Bang Khae, covering a total distance of 27 kilometers, 5 contracts, with a total value of Baht 48,505 Million, and the Red Line Extension Project, Bang Sue - Rangsit, covering a total distance of 26 kilometers, 3 contracts, with a total value of Baht 63,000 Million. The projects pending the bidding process in 2011 under the accelerated plan of the mass rapid transit networks (Bureau of the Budget: Office of the Prime Minister) include the Dark Green Line Extension Project, Mo Chit - Saphan Mai Section, covering a distance of 12 kilometers, with a total value of approximately Baht 31,118 Million, and the Light Green Line, Bae Ring - Samut Prakan Section, covering a distance of 13 kilometers, with a total value of approximately Baht 24,585 Million. Other projects pending bidding in 2011 40

Annual Report 2010


include construction and improvement projects for roads, projects relating to water management, repairing projects for infrastructure and utilities damaged by flood, the new Parliament Building Project, Phase 2 of the Suvarnabhumi Airport Project, and the Extension of the Si Rat Expressway, etc. We expect that driven by these large-scale Government projects, construction industry will enjoy a year of stable growth. Investments in Construction and Growth Rate at Current Prices (%) Investments in construction by the government sector (Million Baht) Growth rate of investments in construction by the government sector (%) (*) Investments in construction by the private sector (Million Baht) Growth rate of investments in construction by the private sector (%) (*)

2007 400,919 10.46 346,720 0.45

2008 397,353 (0.89) 382,318 10.27

2009p 399,978 0.66 340,438 (10.95)

2010p1 422,670 5.40 387,663 13.87

Source : Office of the National Economic and Social Development Board, as at February 21, 2011: Gross Fixed Capital Formation at Current Market Price Classified by Type of Capital (Original)(Continued). (*) The calculation of the growth rate of investment in construction by the government and private sectors is based on the figures from the Office of the National Economic and Social Development Board, as at February 21, 2011. (p) - Preliminary (p1) - Preliminary No. 1

The Mass Rapid Transit Network (12 Lines)

çM-MAP PLAN BMT Plan improvement, together with route extensions, as well as new routes, to accommodate the growth of the cityÊ

Source: The Mass Rapid Transit Authority of Thailand

CH. Karnchang Public Company Limited

41


The Dark Green Line Project (Mo Chit - Saphan Mai)

The Dark Green Line Project (Bearing - Samut Prakan) Illustration of External Scenery : E 19 - City Hall Station

The Orange Line Project (Taling Chan - Min Buri)

The Pink Line Project (Khae Rai - Min Buri)

Source : The Office of Transport and Traffic Policy and Planning

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Annual Report 2010


The New Parliament Building Project

Motorway Projects 1. Bang Yai - Nakhon Pathom - Ban Pong - Kanchanaburi

Note : The Association of Siamese Architects under the Royal Patronage of His Majesty the King

The Road Connecting Thanon Ratchaphruek and Thanon Kanchanaphisek Project

2. Bang Pa-in - Nakhon Sawan

3. Bang Pa-in - Saraburi - Ko Rat

Source : Department of Rural Roads

Source : Department of Highways

CH. Karnchang Public Company Limited

43


Si Rat Expressway Project - Outer Bangkok Ring Road

CH. Karnchang and Sustainable Growth CH. Karnchang Public Company Limited has been continuously improving its ability and readiness in all aspects, namely, state-of-the-art technology in engineering and construction, knowledgeable and experienced staff, efficient and quality project management, prudent financing, and developing the ability to be the comprehensive undertaker of project development, financing, contractor and concession management. This outstanding and distinguished ability has enabled us to cope with challenges during the economic recession and be well prepared in the time of economic recovery. Our selective strategy means that we participate in the bidding only of the projects beneficial to the country, with appropriate returns, emphasizing particularly the large-scale construction projects in the public and private sectors, both domestic and overseas. Other than construction projects, CH. Karnchang maintains appropriate investments in various concession projects and companies in order to provide secure revenue streams, such as, Bangkok Expressway Public Company Limited (BECL), Bangkok Metro Public Company Limited (BMCL), Thai Tap Water Supply Public Company Limited (TTW), SouthEast Asia Energy Company Limited (SEAN) and Xayaburi Power Company Limited, etc.

Xayaburi Hydro-Electric Power Project

Source : CH. Karnchang Public Company Limited

44

Annual Report 2010


As we anticipate that clean energy will help meet the higher power demand in Thailand in the most economical and sustainable way, we have set out a strategic direction to expand our investments in clean energy namely hydro-electric, natural gas and steam energy (Co-Generation), as well as solar energy. We successfully completed the construction of the Nam Ngum 2 Hydro-electric Project in the Lao People没s Democratic Republic in 2010 enabling SouthEast Asia Energy Company Limited to commence the power production and sale to the Electricity Generating Authority of Thailand (EGAT). Currently, we are carrying out the development of the Small Power Plant Project (SPP) using the Co-Generation System, with a project value of approximately Baht 5,000 Million, in Bang Pa-in Industrial Estate, Phra Nakhon Si Ayutthaya Province. In addition, we are developing the Xayaburi Hydro-electric Project, with a project value of approximately Baht 110,000 Million, in the Lao People没s Democratic Republic, as well as the Solar Power Plant Project to produce approximately 100 MW of electricity. Furthermore, we have been looking into new construction and investment opportunities in various countries in the region and in Asia such as Laos, Vietnam, Myanmar and India, etc. We are confident that with our distinguished ability, readiness in all aspects and prudent strategies, we will successfully tender and win good projects and we will work diligently on project management in order to generate satisfactory profits in the future. CH. Karnchang Public Company Limited is confident that with the positive economic trends both in Thailand and worldwide and bright prospects for the construction industry, the construction projects will be the engine of growth for Thailand. And we are confident that, together with our country, CH. Karnchang will move forward with stability towards sustainable growth.

Small Power Plant Project (SPP)

Source : CH. Karnchang Public Company Limited

CH. Karnchang Public Company Limited

45


46

Annual Report 2010


Corporate Social Responsibility : CSR

While Thailand is prospering in terms of economy, industry and technology, the social and environmental problems, on the contrary, are on the increase, and inevitably impact peopleûs living in society and the country. We, CH. Karnchang Public Company Limited, a member of Thai society, are well aware of duties and responsibilities towards society and the country, that is, to operate business with responsibility for the country, society and environment under the çCH. Karnchang, Building Sustainablyé concept, focusing on integration of the corporate social responsibility principles into every step of business operation, as well as instilling in our staff an awareness of and participation in the corporate social and environmental responsibility activities through our responsible operation of business and various social activities. In addition, we clearly define the corporate social and environmental responsibility as part of our Vision, Missions and Corporate Values to be adhered to and comply with our commitment to become a çsmart and goodé organization. In 2010, CH. Karnchang Public Company Limited has expressed the intention to develop its business operation in line with the corporate social and environmental responsibility. To this effect, the Board of Directors passed a resolution to form a Corporate Social and Environmental Responsibility Committee to set out policies and action plans for corporate social and environmental responsibility to ensure clarity and consistency with its operations under the code of ethics and good corporate governance, along with proper attention to and care for the society and environment in order to lead our organization towards sustainable business development, subject to monitoring on progress and evaluation. The Company has genuinely and continuously organized the corporate social and environmental responsibility activities in 2010, which may be summarized as follows:

Responsible Management: Towards International Standard Organization One of the key missions of CH. Karnchang Public Company Limited is to administer the business responsibly by adhering to the good corporate governance principles and code of business ethics, developing and taking care of our staff and conducting risk management efficiently to ensure our efficient business operation, good returns and fairness to our staff, customers, shareholders and all groups of stakeholders in society, focusing on achieving our business objectives.

CH. Karnchang Public Company Limited

47


(1) Good Corporate Governance The Company is committed to business administration by adhering to the good corporate governance principles; focusing on the business operation with efficiency, integrity, clarity, transparency and auditability; equal treatment of stakeholders and the corporate social and environmental responsibility, thereby leading to the organization没s sustainable growth. In this regard, CH. Karnchang Public Company Limited has received an excellent score in the assessment of the good corporate governance for 2010 from the Office of the Securities and Exchange Commission (SEC), the Stock Exchange of Thailand, and the Thai Institute of Directors Association. (2) Code of Conduct and Business Ethics The Company has prepared the code of conduct and business ethics handbook to serve as guidelines for directors, management and staff to adhere to the principles of integrity and transparency, decency, proper conduct, morality and corporate social and environmental responsibility. (3) Internal Control and Audit and Risk Management With regard to internal control, pursuant to the Securities and Exchange Act (No. 4) with which the listed companies on the Stock Exchange of Thailand shall comply regarding internal control and audit for review of the operating systems, the Corporate Governance and Risk Management Committee shall assess the accuracy of the internal control system via the internal audit. As for risk management, to oversee and manage the organization没s risks at an appropriate level, the Corporate Governance and Risk Management Committee shall establish policies covering every aspect of operations in order for the organization to run its business efficiently and effectively in accordance with its objectives and achieve its goals. (4) Human Capital Development CH. Karnchang Public Company Limited has given top priority to development of personnel which is regarded as valuable resources. The Company encourages staff to develop their skills so that they have knowledge and capabilities required for works under their responsibility; and to regularly enhance their potential. In so doing, the Company organized various activities to promote the personnel development in the previous year as follows: (4.1) Training and Skill Development The Company provided staff with appropriate training courses to improve their learning and performance skills, as well as allowing staff to choose interesting external training courses. (4.2) Volunteer Spirit The Company没s initiation of concrete program for corporate social and environmental responsibility which allows staff from various lines of work both in the head office and project offices to join the program and several activities, serves to raise their awareness of volunteer spirit and contribution to society and environment, i.e., each and everyone forms a part of society and is obliged to make our society a better place.

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Annual Report 2010


Responsible Business Operations: Towards çGreen ConstructionÊ CH. Karnchang Public Company Limited realizes the significance of the business operations taking into account the corporate social and environmental responsibility; i.e., operate its core business in construction and invest in large-sized basic infrastructure concession projects by accepting construction works as well as investing in projects beneficial to the country and society as a whole, particularly various large-sized projects in basic infrastructure, such as, expressway projects, railway systems, tap water systems, hydroelectric power projects, etc. In respect of construction, the Company employs advanced and high standard construction technology and techniques, and sets out rules and regulations on work performance for strict compliance by every project so as to minimize impacts; to take responsibility for and take care of environment, society, communities, including all staff in the project offices, with the following details: (1) Compliance with Criteria, Requirements and Appropriate Measures on Safety, Occupational Health and Environment The Company not only strictly complies with the provisions of laws on construction in every step of operations, but also employs advanced and high standard technology and techniques as well as conforming to the ISO 9001/2000: Quality Management Systems, and other related requirements and practices for international standard construction projects in every step of operations of all projects. That is, the project management teams of every project would be required to formulate a management system and action plans on occupational health and safety, including a monitoring plan to minimize impacts on communities and environment, training of staff at all levels, and with regular, continuous and efficient system for quality control. These arrangements are in place to ensure safety and confidence for staff, people, and nearby communities in the standards of management and mitigation of impacts on the sites with efficiency and assure the communities and society of the least possible impacts. Such actions include an inspection of machinery every three months, display of proper warning signs for staff and people, provision of proper equipment, lighting, reflective equipment for safety, engagement of specialists to analyze traffic simulation and its impacts, etc. Another example of the measures to alleviate impacts caused by the construction projects on the communities and environment is evidenced by the CompanyÝs placement of at least 2-meter high concrete fences surrounding the project site, and placement of higher concrete fences if the site is adjacent to any public areas. For a construction site that is deep and airless, the Company would install such equipment for safety, occupational health and environment in compliance with the requirements on safety standard, such as, ventilators and gas measurement tools in the site of construction projects for buildings, treatment plant, water inlet; including provision of stretchers and first-aid kits, as well as providing first-aid training to staff assigned to perform works in such site. Even though the implementation of the construction projects in public areas may more or less affect nearby communities, the Company is committed to taking measures in various aspects which may give rise to impacts on communities and environment the most and facilitating nearby residents to the greatest extent.

Concrete fences of at least 2.0 meters high during construction

CH. Karnchang Public Company Limited

49


The Purple Line and the Green World The Purple Line is a large-scale construction project carried out by the Company, which commenced in 2010 and serves as a good example of our business operations with corporate social and environmental responsibility in mind under the Green Construction concept. The railway system project is invaluably beneficial to society, environment and national development, by way of, among others, reduction of pollution and traffic congestion, improvement of peopleûs quality of life, and increased competitiveness to Bangkok, including Thailand. Every step of the construction is also taken with corporate social and environmental responsibility. The Company monitors and inspects the environmental quality and other factors related to the construction; compares various parameters from the measurements to set the base line both before and during construction, which would be undertaken seriously and regularly. Such parameters include ambient air quality, general sound level, and vibration, as well as preparation of statistics of traffic volume and accidents, attitudes and opinions of the communities along the project route, including the results of monitoring of compliance with the preventive and corrective measures or the measures to minimize the environmental impacts on the communities or motorists along the project route. Should the results be found beyond the base line, the corrective actions must be taken immediately. By operation of the stringent environmental measures set out by the Office of Natural Resources and Environmental Policy and Planning (çONEPé), and the supervision of a working team comprising the Mass Rapid Transit Authority of Thailand (çMRTAé) and the Company, as well as the environmental management consulting company of international repute, society may rest assured that the parts of the Purple Line Project which are carried out by the Company would be eco-friendly or a Green Project under the Green Construction concept for the purpose of social and environmental responsibility with genuine benefit to Thai society. (2) Promoting Close Participation of Communities and People The project offices posted public relations signboards to provide details of the project, time schedule, and traffic signs, as well as distributing documents on bypasses and shortcuts for local residents to alleviate and reduce traffic problem. Public relations were also made through media as to the traffic flow switching under the supervision of the Bangkok Metropolitan Administration and traffic police in such area in every step of construction. During construction, the Company not only implemented procedures and measures under the quality systems, but also provided channels for people to express opinions and attitudes or make complaints in order for the Company to take corrective actions for those affected by the construction.

Community Relations: Staff are surveying the attitudes and opinions of the affected communities along the project route.

Installation of Environmental Quality Monitoring Equipment

Moreover, the project offices provided other helpful support to society and the communities adjacent to the project site, such as, temporary bus stop signs, road construction and connection of the road shoulders to be at the same level as the road for local people to use such area conveniently and safely during construction, as well as construction of ingress-egress for nearby communities for more convenient passage in the rainy season for local people, etc. In addition to the business operation under the principles of the corporate social and environmental responsibility, CH. Karnchang Public Company Limited also regularly organizes various social and environmental activities to contribute to, among others, society, education and youth, and environment. 50

Annual Report 2010


Responsible to Our Society Last year, the Company organized various social activities, i.e., projects initiated by the Company and projects joined by the Company with public organizations, with highlights of such activities as follows: (1) Blood Donation Drive: çEvery Drop is Life, CH. Karnchang Gives New Lifeé. The Company, in association with the Thai Red Cross Society, hosted a blood donation drive at Viriyathavorn Building, the Companyûs head office, with overwhelming response from the Companyûs staff and nearby residents. Donated blood was given to the Thai Red Cross Society to save lives of patients and victims.

Blood Donation Drive: çEvery Drop is Life, CH. Karnchang Gives New Lifeé At the Head Office of CH. Karnchang Public Company Limited

(2) çDharma Talk by Phramaha Vudhijaya Vajiramedhié The Company held such program during Songkran festival. The Companyûs staff and interested people nearby were welcome to participate in order to support the Dharma and the Buddhism, as well as carrying on the religious tradition.

Dharma Talk by Phramaha Vudhijaya Vajiramedhi

(3) Food Offerings and Money Donation for Religious Support Every year, the Company organizes our annual food offerings activity with an aim to maintaining the tradition and boost morale and encouragement for work performance. The Company also provides religious support, such as, robe offerings, construction of the Buddhist temples, etc.

Management and staff are offering food to Buddhist monks.

CH. Karnchang Public Company Limited

51


(4) Relief to Flood Victims Last year, many provinces of Thailand were severely affected by flood crisis. The Company joined force to provide relief to flood victims by donating money to various funds via agencies dedicated to give such donations or necessary supplies to flood victims. Our staff team also joined various organizations, such as, the Thai Red Cross Society, the Ministry of Defence, the Ministry of Interior, etc., to help pack and load necessary supplies for flood victims, and restore and improve such locations affected by the flood. Moreover, the Company provided support and assistance to not only flood victims through external organizations, but also our staff who suffered from such flood crisis.

Donations and Support for Relief to Flood Victims

(5) Reading books onto CDs for the blind is a program that we have initiated in late 2010, and will continue in 2011 to raise an awareness of contributing to those in need in society. It is aimed at inspiring learning and entertainment for the blind at every age. The Company, in association with the Thailand Association of the Blind, held a reading training course regarding proper voice for reading, tips for selection of books with good content, books which are useful and entertaining, as well as how to record the reading to prepare audio books for the blind, our friends in need in society.

Responsible to our Future Generation Appropriate educated youths will grow and become decent people to bring our country towards the right and suitable direction and push forward the national development in the future. To this end, CH. Karnchang Public Company Limited organized various educational activities, as follows: (1) Scholarships and Educational Support We have been granting scholarships to high school students and university students or educational institutes and providing support to educational exhibitions, and workshops. For example, the Science Week of Suankularb School, we presented construction knowledge and technology to high school students; and the CE Smart Camp, which we supported in association with the Department of Computer Engineering of King Mongkut没s Institute of Technology Ladkrabang; or other volunteer camps of university students, etc. Moreover, the Company contributed financial support for purchase of educational supplies and materials and built permanent structures, such as, streetcars for Kasetsart University for educational purpose, support for construction of the 100-Year Wachirawuth Building, schools in southern provinces or jointly contribute funds to develop the King Mongkut没s University of Technology Thonburi as well as renovation of the library room of Triam Udom Suksa School, etc.

52

Annual Report 2010


The Science Week, Suankularb School

(2) School Restoration from Flood Crisis The çSchool Restoration from 2010 Flood Crisis by CH. Karnchangé activity at Bangsai School, Phra Nakhon Si Ayutthaya Province, was led by our management and staff coming together to brainstorm and utilize our construction expertise to restore various areas which were affected by the flood in Bangsai School, an elementary school under the umbrella of the Ministry of Education, during December 1-2, 2010. Such activity not only helped the school to resume its teaching and learning activities, but also urged our staff to experience the power of unity and teamwork. In addition, the Company cooperated with and provided monetary and labor support to various public and private agencies in several relief programs to the victims.

Repair and Restoration of Bangsai School, Amphoe Bangsai, Phra Nakhon Si Ayutthaya Province

Responsible to our Environment Last year, the Company continued many environmental programs, and encouraged our staff to participate. We campaigned to optimize and recycle the use of paper, and went further to join our business alliance, InfoZafe Company Limited, an affiliate of Siam Cement Group, to host the Shred2Share program, a paper recycle program. In this program, we donated used papers and CDs for shredding in order to minimize tree cutting, water consumption and carbon footprint. InfoZafe Company Limited would donate money to a fund for supply of necessary educational materials to Border Patrol Police Schools based on the volume of papers donated by companies in the program. Furthermore, we intend to continue our support to such program in 2011. The çShred2Shareé Program: Boxes for Storage of Used Papers for Shredding and Recycle CH. Karnchang Public Company Limited

53


General Information 1. Company Profile CH. Karnchang Public Company Limited Head Office : 587 Viriyathavorn Building, Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok 10400 Telephone 66(0)2277-0460, 66(0)2275-0026 Fax 66(0)2275-7029 Business Category : To operate the business of general contract construction for government agencies, state enterprises and private entities, in the form of main contractor, subcontractor or joint venture or consortium. Registered Capital : Baht 1, 652,585,336 Divided into Ordinary Shares : 1,652,585,336 shares Par Value : Baht 1 per share Paid-up Capital : Baht 1, 652,585,336

2. The Company invested in each of its subsidiaries through a shareholding ratio of at least 10 percent of the number of shares sold in each subsidiary as follows: Company Name

Business Total Number Par Shares Held by Share holding Category of Shares Value the Company Ratio Trading of 300,000 Baht 100 299,992 99.99% Construction Materials

1. Construction Material Supply Co., Ltd. The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026 Fax 66(0)2275-7029 1,600,000 2. CH. Karnchang Real Estate Co., Ltd. Trading of Land, The head office is located at No. 587 Sutthisarn Road, Allocation of Land and Dindaeng Subdistrict, Dindaeng District, Bangkok Residential Buildings Telephone 66(0)2275-0026 Fax 66(0)2275-7029 1,000,000 3. CH. Karnchang-Tokyu Construction Co., Ltd. Contract for All Kinds The head office is located at No. 587 Sutthisarn Road, of Construction Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-3651-5 Fax 66(0)2275-3657 4. Bangpa-in Cogeneration Limited Operation of Business of 15,000,000 The head office is located at No. 587 Power Plants, including Sutthisarnvinijchai Road, Dindaeng Subdistrict, Businesses Relating to Dindaeng District, Bangkok Electricity and All Types Telephone 66(0)2275-0026 Fax 66(0)2275-7029 of Energies

54

Type of Shares Ordinary Shares

Baht 100

1,584,000

99.00%

Ordinary Shares

Baht 100

549,994

55.00%

Ordinary Shares

Baht 10

12,150,000

81.00%

Ordinary Shares

Annual Report 2010


Company Name 5. CH. Karnchang (Lao) Co., Ltd.* The head office is located at Ban Xiang Yuen, Chantaburi, Vientiane 6. Xayaburi Power Company Limited The head office is located at Ban Xiang Yuen, Chantaburi, Vientiane

Business Total Number Par Shares Held by Share holding Category of Shares Value the Company Ratio Operation of Business of Construction of the Nam Ngum 2 Hydroelectric Power Dam Study, Survey and Design 80,000,000 Baht 10 76,000,000 95.00% of the Hydroelectric Power Dam Construction Project in the Mekong River around Xayaburi under the Project Development Agreement (çPDAé) with the Government the Lao Peopleûs Democratic Republic

Type of Shares

Ordinary Shares

Remark:*CH. Karnchang (Lao) Co., Ltd. has paid-up share capital of USD 1,000,000 wherein CH. Karnchang Public Company Limited has invested 100%

The Company also invested in other companies through a shareholding ratio of at least 10 percent of the number of shares sold in each company as follows: Business Total Number Par Category of Shares Value 1. Thai Tap Water Supply Public Company Limited Supply and Development 3,990,000,000 Baht 1 The head office is located at No. 30/10 Moo 12, of Projects for Tambon Rai Khing Amphoe Sam Phran, Production and Nakhon Pathom Province, Distribution Telephone 66(0)2811-7526 Fax 66(0)2811-7687 of Tap Water 2. Pathum Thani Water Co., Ltd.* Supply and Development 12,000,000 Baht 100 The head office is located at No. 43 Moo 3, of Projects for Production Chiang Rak Noi - Bang Sai Road, Tambon Ban Pathum, and Distribution of Tap Amphoe Sam Khok, Pathumthani Province 12160 Water under Arrangement Telephone 66(0)2979-8530-2 Fax 66(0)2979-8533 with the Provincial Waterworks Authority 3. SouthEast Asia Energy Limited Operation of Business of 660,675,000 Baht 10 th All Types of Power Plants The head office is located at No. 587, 20 Floor, and Distribution of Viriyathavorn Building, Sutthisarnvinijchai Road, Electricity inside Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-4873 Fax 66(0)2691-8307 and outside Thailand Company Name

Remark:

Shares Held by Share holding Type of the Company Ratio Shares 1,198,777,700 30.04% Ordinary Shares

-

-

Ordinary Shares

251,056,499

38.00%

Ordinary Shares

*CH. Karnchang Public Company Limited indirectly holds shares in Pathum Thani Water Co., Ltd. via Thai Tap Water Supply Public Company Limited, namely, currently, CH. Karnchang Public Company Limited holds shares representing 30.04 percent in Thai Tap Water Supply Public Company Limited and Thai Tap Water Supply Public Company Limited holds shares representing 98.00 percent in Pathum Thani Water Co., Ltd.

CH. Karnchang Public Company Limited

55


Company Name 4. Bangkok Metro Public Company Limited The head office is located at No. 189 Rama IX Road, Huai Khwang Subdistrict, Huai Khwang District, Bangkok Telephone 66(0)2354-2000 Fax 66(0)2354-2000 5. Bangkok Expressway Public Company Limited The head office is located at No. 238/7 Asoke-Dindaeng Road, Bangkapi Subdistrict, Huaykwang District, Bangkok Telephone 66(0)2641-4611 Fax 66(0)2641-4610

Business Total Number Par Shares Held by Share holding Category of Shares Value the Company Ratio Construction, Operation and 11,950,000,000 Baht 1 2,940,999,916 24.61% Maintenance of Railway System, Train, Electric Train System or Other Powered Carriage System Construction and Operation 770,000,000 Baht 10 116,669,550 15.15% of the Second Stage Expressway Project and Various Extensions, including Related Businesses

Type of Shares Ordinary Shares

Ordinary Shares

The Company also invested in the form of joint venture as follows: Joint Venture Name

Nature of Work

1. CKAE Consortium comprising CH. Karnchang Public Company Limited, 110 Architect Co., Ltd., Arun Chaiseri Consulting Engineers Co., Ltd., Environmental Engineering Consultants Co., Ltd. and Epsilon Co., Ltd. The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026, Fax 66(0)2275-7029 2. Joint Venture CKET comprising CH. Karnchang Public Company Limited and Expert Transport Co., Ltd. The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026, Fax 66(0)2354-1919

Design and Construction of the Development Project for Enhancement of the Capacities of the Bangkok International Airport

Invesment Ratio 98.00%

Project Operation and Management under 80.00% the Agreement for Concession for Design, Manufacture, Delivery, Installation, Testing and Commissioning of M&E Equipment and for Operation and Maintenance of the MRTA Initial System, Chaloem Ratchamongkhon Line Construction of the (Bang Pa-in - Pak Kret) 99.97% 3. Joint Venture BBCT comprising CH. Karnchang Public Company Limited, Bilfinger + Berger Bauaktiengesellschaft, Tokyu Construction Co., Ltd. and CH. Karnchang-Tokyu Construction Co., Ltd. Expressway The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, (Sectors D and C1 A) Dindaeng District, Bangkok Telephone 66(0)2275-0026, Fax 66(0)2275-7029 35.00% 4. Joint Venture BBCD comprising Bilfinger + Berger AG, CH. Karnchang Public Company Limited Construction of the (Bang Na and Walter Bau AG Bang Pli - Bang Pakong) Expressway The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-8414, Fax 66(0)2691-9167

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Annual Report 2010


Joint Venture Name

Nature of Work

5. Joint Venture BCKT comprising Bilfinger + Berger Bauaktiengesellschaft, CH. Karnchang Design and Construction of the Public Company Limited, Kumagai Gumi Limited and Tokyu Construction Co., Ltd. Underground Structure, The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Subway Project, South Section Telephone 66(0)2275-0026, Fax 66(0)2275-7029 (Hua Lamphong - Huai Khwang) 6. Joint Venture CKNNL comprising CH. Karnchang Public Company Limited and Nongnuch Construction of Buildings, together with Landscape & Garden Design Company Limited Public Utility, and Landscaping for the The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok International Horticultural Exposition 2006 Telephone 66(0)2275-0026, Fax 66(0)2275-7029 7. Joint Venture CKLX comprising CH. Karnchang Public Company Limited and Loxley Public Construction of the Toll Collection and Traffic Company Limited Safety Control Systems for the Bang Pli The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Suksawad Expressway and Highway No. 37, Telephone 66(0)2275-0026, Fax 66(0)2275-7029 Outer Bangkok Ring Road (the Bang Pli Bang Khun Thien Expressway in respect of Suksawad - Bang Khun Thien Section) 8. Joint Venture CKTC comprising CH. Karnchang Public Company Limited Operations for Construction Project of and Tokyu Construction Co., Ltd. the Purple Line, Bang Yai - Rat Burana, The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Bang Yai - Bang Sue Section; Contract 1: Telephone 66(0)2275-0026, Fax 66(0)2275-7029 Elevated Structures (East) 9. Joint Venture CH. Karnchang-Krung Thon Engineers comprising Operations for Construction of Phra Ong CH. Karnchang Public Company Limited and Krung Thon Engineers Company Limited Chao Chaiyanuchit Canal Conduit System The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Bang Phra Reservoir and Appurtenant Telephone 66(0)2275-0026, Fax 66(0)2275-7029 Structures Contract 1 Project, Project for Diversion of Water from Eastern Chao Phraya River Basin - Bang Phra Reservoir, Chon Buri Province

Invesment Ratio 25.00%

51.89%

75.00%

70.00%

60.00%

3. Reference Securities Registrar

Auditors

CH. Karnchang Public Company Limited

: Thailand Securities Depository Co., Ltd. 2/7 Moo 4, Capital Market Academy Building The Stock Exchange of Thailand, 2nd Floor North Park Project, Vibhavadi Rangsit Road, Km. 27 Thung Song Hong Subdistrict, Lak Si District Bangkok 10210 Telephone 0-2596-9000, 0-2596-9302-11 Fax 0-2832-4994-6 62 The Stock Exchange of Thailand Building 4th, 7th Floors, Rachadapisek Road Klongtoey Subdistrict, Klongtoey District Bangkok 10110 Telephone 0-2229-2800 Fax 0-2359-1262-3 : Miss Siraporn Ouaanunkul, CPA License No. 3844 Mr. Narong Puntawong, CPA License No. 3315 Mr. Supachai Phanyawattano, CPA License No. 3930 Ernst & Young Office Limited 33rd Floor, Lake Rajada Office Complex, 193/136-137 New Ratchadaphisek Road, Klongtoey District, Bangkok 10110 Telephone 0-2264-0777 Fax 0-2264-0789-90 57


Corporate Governance Policy

SHAREHOLDERS The Board of Directors focuses on compliance with good corporate governance so as to improve transparency and responsibility for duties of directors and executives, and build up confidence for shareholders, investors and all parties concerned. In this regard, the policy in support of good corporate governance has been introduced covering important matters as follows: 1. Shareholders and interested parties shall be equally and fairly treated. 2. The Board of Directors is committed to create value added to the operations in the long term through careful and prudent management, is responsible to perform the duties to ensure sufficient for the optimum benefit to shareholders, and to prevent any conflicts of interest, as well as is also responsible for any decisions and arrangements made by the Company itself. 3. All activities are undertaken with transparency and are open for inspection with disclosure of sufficient information to all relevant parties. 4. The business operations always take into account various risks with appropriate risk control and management. The Company realizes the shareholders没 right to receive the Company没s information correctly, completely, sufficiently, instantly, and equally for decision making in the shareholders meeting. The Company offers opportunity to shareholders to have equal right to scrutinize the Company没s operations, make inquiries and provide comments and suggestions.

PERSONNEL The Company arranges for continuous human resource development, are the management realizes the significance of development of employees没 capabilities and potentials in management, team building and specific professional learning, including encouraging employees to have knowledge about information technology, foreign languages and business working skills of employees and executives, which the Company intends to develop its personnel, both employees and the management, to catch up with changes in the world of technology and the business nature which constitutes a more intense competition, so as to be in line with the whole organization.

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Annual Report 2010


The Company issues the code of business ethics in respect of the Board of Directors, the management and staff, as guidelines for compliance in the performance of their duties in accordance with the Company没s mission, with honesty, integrity and equality as well as responsibility towards the interested parties, shareholders and all parties concerned. The code of ethics also covers disciplinary actions. The Company provides such information to new employees in the employee orientation and distribute information via leaflets and office newsletters on a regular basis.

GOVERNANCE Due to the national development and industrial sector promotion, the demand for construction in various fields has increased. The Company has been considering the market growth, and developing personnel, machinery and equipment for the works. The construction works in the past projects, as well as the Company没s reputation in respect of construction and work quality, including responsibility towards customers in the operations, has caused the Company to gain trust in the carrying out of a number of construction projects of the government sector. The Company realizes the significance of rights of all interested groups, whether inside, such as staff and executives of the Company and the subsidiaries, or outside, such as competitors, creditors, government sectors and other relevant authorities. The Company recognizes support from these interested parties which could help building up the Company没s competitiveness and profitability to result in long term success for the Company.

BUSINESS PARTNERS The Company engages in the business of contract construction as a primary business activity, for government agencies, state enterprises and private entities, in the form of main contractor or subcontractor, by way of bidding and negotiation through the cooperation with overseas contractors in the form of joint venture, which is a joint investment in the construction projects in which items or volume of works are indivisible among the partners. Each partner shall be responsible for profit or loss in the proportion as mutually agreed upon in respect of all items of the work. The Company also engaged in construction in the form of consortium, which is a joint investment in the construction project in which items or volume of works are divisible among the partners. Each partner shall be independently responsible for profit or loss. The Company has experience and expertise in construction, engineering, namely infrastructure works such as roads, bridges, elevated ways, expressways, construction of buildings and industrial factories, mechanical and electrical system work, such as installation of equipment and machinery for factories.

CUSTOMERS The Company encourages the policy on team effort and enhancing state of the art technology to ensure the optimum safety and efficiency in the operation to meet the requirements and offer benefits to the customers with satisfaction in quality and services, including strict compliance with the terms of the agreements made with counterparties. The Company also provides care and is responsible to customers, ensure confidentiality for customers, as well as completion of work in a timely manner or earlier than scheduled.

PUBLIC The Company没s business operation regularly focuses on promotion in activities for improvement of the quality of life and environment, representing our gratitude to society.

CH. Karnchang Public Company Limited

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Annual Report 2010


Risk Factors 1. Risk from Management and Risk from Delays in Projects The Company realized the risks from management and therefore, determined guidelines to prevent any flaws which might occur, by implementing the quality management system of ISO 9001:2000 to maintain the operation standards both in projects and in the Companyûs head office, taking into account the continued improvement of quality management system. The Company group also set out guidelines for staff improvement to ensure that staff would have knowledge, skills, ethics and accountability towards the organization, including all interested persons, so as to minimize and prevent damage which might be caused by such risk. The Company obtained the international quality system standard accreditation of ISO 9001:2000 in 2002 from two institutions, namely, UKAS and NAC Thailand, which was upgraded to ISO 9001:2008, with the accreditation of total 12 scopes of works, as follows, the business of construction work design and management for buildings, roads, bridges, underground structure and tunneling, piping work and aviation fueling hydrant control system, fuel depot and control system, expressway, landscape, wastewater treatment plant, hydro-electric power development dam, high voltage transmission line and substation, and rock quarry and mill. Generally, risks from delays in various projects might be caused by delays on the part of employers or contractors or by events without any liable party. Delays on the part of employers included, for example, site delivery, review and approval on various matters relating to construction work. These delays might affect the construction period and costs. However, the Company minimized risks from such delays through cooperation and coordination with employers to ensure successful completion of the construction works. Delays on the part of contractors included, for example, shortages of construction materials. The Company prevented such problem by entering into forward agreements for purchase › sale of various materials, as evidenced by the signed agreements for purchase › sale of cements and metals to accommodate the Companyûs projects, of which contracts have already been executed. Delays caused by any events without any liable party included, for example, natural perils. In the execution of a contract, there generally is a requirement for the contractor to take out insurance for various construction projects undertaken by the Company. Based on the Companyûs past experience, the Company has never encountered any events caused by delays on the part of the Company group, but risks from delays caused by the Companyûs contractual party, such as, in the Bang Na › Bang Pli › Bang Pakong Expressway Construction Project, and the Company group rectified such circumstance by requiring the employer to promptly resolve such problems and the Company also accelerated the construction to meet the specified schedule.

2. Risk from Accounts Receivable in the Form of Compensation for Increased Costs as per Arbitral Award Joint Venture BBCD (Bilfinger Berger AG, CH. Karnchang Public Company Limited and Dyckerhoff & Widmann AG), in which the Company has 35 percent interest, claimed for increased costs due to changes by the Expressway Authority of Thailand (the Employer) in the scope of work, additional work orders, requirements of relevant authorities, delayed design approval, design revision and delay of site handover.

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The Arbitral Tribunal rendered an award in the dispute on September 20, 2001 requiring the Employer to pay said increased costs to the Joint Venture in the amount of approximately Baht 6,000 Million (the increased costs, together with interest, as calculated until September 30, 2001 amounting to approximately Baht 6,800 Million). Subsequently, the Employer issued a letter dated November 22, 2001, informing the Joint Venture that the Employer deemed it appropriate to comply with the arbitral award. Based on such reason, the Joint Venture then recorded such amount as revenue in the third quarter of the accounting year 2001 since the opportunity of receiving such amount and the relevant figures became certain at that time, which was in accordance with the normal accounting principles. Such increased costs to be paid by the Employer were recorded in the consolidated financial statements for 2001 as revenue and assets based on the groupûs participation in the Joint Venture, amounting to approximately Baht 2,500 Million. Subsequently, the Expressway Authority of Thailand issued a letter dated December 21, 2001 indicating that it could not comply with the arbitral award due to the argument of the government agency requiring a review of such matter which caused delay of such payment as per the arbitral award. The Company group confirmed the compliance with the procedures as specified by the laws, and therefore, believed that there would be no impact from the news regarding the argument of the government agency. Due to such delay, on May 1, 2002, the Joint Venture therefore filed a lawsuit against the Expressway Authority of Thailand with the Civil Court of Southern Bangkok for enforcement of compliance with the arbitral award. On December 30, 2003, the Civil Court of Southern Bangkok adjudged enforcing the compliance with the arbitral award, by requiring the Expressway Authority of Thailand (the Employer) to make payment to the Joint Venture as per the arbitral award. Thereafter, in January 2004, the Expressway Authority of Thailand filed an appeal in respect of such matter with the Supreme Court. On February 15, 2007, the Supreme Court adjudged in favor of the appeal of the Expressway Authority of Thailand and then rendered its judgment reversing the Civil Court of Southern Bangkokûs judgment which enforced the compliance with the arbitral award. The Joint Venture and the Company therefore recorded a loss from accounts receivable in respect of claims for increased costs previously recorded in 2006, and as a result, the Joint Venture and the Company had no risk from such accounts receivable on claims for increased costs. However, the said judgment did not prejudice the Joint Ventureûs legal right to claim for the increased costs of Baht 6,039.89 Million, together with interest at the rate of 7.50 percent per annum. Subsequently, after the Companyûs management had thoroughly reviewed the said judgment by the Supreme Court, it then filed a lawsuit against the Employer with the Civil Court on February 11, 2008 to claim for costs paid by Joint Venture BBCD against the Employer on grounds of undue enrichment, in the total amount, inclusive of interest calculated until the date of the plaint, of approximately Baht 3,400 Million (based on the groupûs participation in such Joint Venture). The case is now pending the consideration of the Civil Court.

3. Risk from Exchange Rate Given the fact that the Company group earned income and incurred costs in certain projects in foreign currencies, the fluctuation of the foreign currencies against Baht would affect the Companyûs costs or performance. The Company has managed the risk from exchange rate by matching revenue with expenses in foreign currencies, i.e., depositing income in foreign currencies in the çFCDé (Foreign Currency Deposit) account. When the project incurs any expenses in foreign currencies, the Company shall use funds in the FCD account to pay such expenses. However, at present, there is only one project deriving income and incurring costs in foreign currencies, namely, the construction of the Hydroelectric Power Project (Nam Ngum 2). The proportions of revenue and costs denominated in foreign currencies are rather small as compared to the total revenue and expenses of the Company group, representing merely 7.19 percent and 10.61 percent of the total revenue and expenses as at December 31, 2010.

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As at December 31, 2010, the Company group had an unrealized loss on exchange rate in the amount of Baht 0.28 Million in the consolidated financial statements. Details of assets and liabilities denominated in foreign currencies as at December 31, 2010 in the consolidated financial statements can be summarized as follows : Description Assets Cash at bank Trade accounts receivable Total Liabilities Trade accounts payable Total Assets (Liabilities), net Assets (Liabilities), net (Baht)*

As at December 31, 2010 US DOLLARS 5,909,463 1,000,000 6,909,463 14,923,139 14,923,139 (8,013,676) (242,784,719)

Remark: * Average exchange rate calculated by The Bank of Thailand at the close of December 31, 2010.

4. Risk from Construction Material Price, Labor Cost and Fluctuation of Oil Price The management of construction work contract in each project to gain the gross profit depends on the precise projection of the project cost and the control of the cost actually incurred within the specified projection. The factors of cost projection depend on not only construction material price and labor cost which fluctuate by the demand and supply circumstances, but also oil price, which is indirect cost towards the operating costs. However, in 2010, the fluctuation of material price, especially metals, labor cost and oil, may give rise to impact on the construction cost. The Company group managed said risk through construction contracts in two manners as follows: - In case of a construction contract with construction price adjustment in accordance with an escalation (K) factor, said K factor would vary depending on the changing production costs, whereby such adjustment may not cover all increased costs of construction materials and labor, but would cover an increase of the construction material and labor prices beyond the projection, thereby giving rise to a slight impact on the construction cost. As for the projects of the Company group, most customers were government sector, as at December 31, 2010, representing 88.29 percent of the remaining project value to be recognized in the future; - In case of a construction contract with fixed costs or lump sum, whereby it does not specify or it is not possible to identify a K factor, which would mostly apply to turnkey projects, provisional sums would also be included to accommodate the case where the construction material costs would be included in the total project value. Most customers in this category were private sector, as at December 31, 2010, representing 11.71 percent of the remaining project value to be recognized in the future; - Furthermore, the Company also established a subsidiary for the purpose of manufacturing necessary construction materials so as to minimize risk from shortage of materials and unrealistic price increase, as well as to strengthen its bargaining power with major traders of construction materials under high competition. However, the Company has a policy to prevent such risk by considering and reviewing the construction plan every month, as well as completing the construction of all projects before or within the period of time specified by employers. CH. Karnchang Public Company Limited

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5. Risk from Changes of Governmentûs Policies Given the fact that the Company groupûs revenue structure in the future from the total value of projects in hand which would be recognized as revenue in the future, as at December 31, 2010, representing 88.29 percent involves works for the government sector, the Company groupûs revenue therefore relates to the national budget spending, which depends on the economic growth rate and investment climate, including the political stability. As for the government projects for which the contracts have already been signed, the Company group did not have any risk from economic and political circumstances since such projects would be supported by the allocated budgets in the form of tied budgets, which represent guarantee of budgets to be spent by the government in said projects. Nevertheless, in respect of the government projects which were awarded to the Company group, but the contracts have not yet been signed, the government may hold a new bidding for said project based on the justifications of each respective project. The Company group reengineered to expand its channel of revenue sources by way of project investment and management. The Company group thus expanded its investments to business activities which would derive more definite revenue, such as, the Companyûs investments in Bangkok Expressway Public Company Limited, which manages the expressway projects; Bangkok Metro Public Company Limited, which manages the M.R.T. Chaloem Ratchamongkhon Line; Pathum Thani Water Co., Ltd., which produces tap water for sale to the Provincial Waterworks Authority for distribution to the public in Pathum Thani Province; Thai Tap Water Supply Public Company Limited, which produces tap water for sale to the Provincial Waterworks Authority for distribution to the public in Samut Sakhon Province and Nakhon Pathom Province; SouthEast Asia Energy Limited, which would generate electricity for distribution to the Electricity Generating Authority of Thailand; Xayaburi Power Company Limited, which would generate electricity for distribution to the Electricity Generating Authority of Thailand; and Bangpa-in Cogeneration Limited, which is the Companyûs subsidiary operating a business relating to public utilities on energy. These projects are long-term concession projects which would not be affected by changes of governmentûs policies.

6. Risk from Investments in Subsidiaries, Associated Companies, Joint Ventures, Related Companies and Other Companies The Company groupûs structure comprises several subsidiaries, associated companies, including jointly controlled entities, related companies and other companies which accorded with the Company groupûs nature of business, namely, investment and construction of several projects, which are being implemented by different groups of investors. However, most jointly controlled entities are established with the objectives to carry out a few projects, and would be dissolved upon completion of the projects. In this respect, the number of companies or legal entities in the group would decrease accordingly. Risks that might be caused by investments in subsidiaries, associated companies, jointly controlled entities, related companies and other companies would be limited to the investments in each respective organization. In each investment, the Company would carefully conduct feasibility study of each project or company in addition to the consideration of the rate of return to be derived in the future. The Company might appoint third party advisors or specialists to serve in certain projects prior to submission of such matter to the Executive Board and the Board of Directors. Most of the companies invested by the group have satisfactory performance and derive profits from their business operations. As at December 31, 2010, the Companyûs investments in subsidiaries, associated companies, jointly controlled entities, related companies and other companies amounted to Baht 11,709.28 Million, representing 38.43 percent of the total asset value. In 2007, the Company changed its accounting policy on investments in subsidiaries, jointly controlled entities and associated companies in the separate financial statements from the equity method to the cost method in accordance with the Notification of the Federation of Accounting Professions No. 26/2549 Re: Thai Accounting Standards No. 44. Moreover, the Company also arranged for a provision for loss from investments in subsidiaries, jointly controlled entities and associated companies, and unrealized gain (loss) on changes in value of investment from related companies and other companies in the total amount of Baht 845.65 Million, which was a balance of the provision for deficit on investments in jointly controlled entities comprising Joint Venture BBCT and Joint Venture BBCD, associated company comprising Bangkok Metro Public Company Limited, related company comprising Bangkok Expressway Public Company Limited, and other companies comprising Nava Finance and Securities Public Company Limited and Kruasakul Company Limited. 64

Annual Report 2010


7. Risk from Loans to Subsidiaries, Associated Companies, Jointly Controlled Entities, Related Companies and Other Companies The Company had risks from loans to subsidiaries, associated companies, related companies and jointly controlled entities, namely, only short-term loans were provided for use as working capital. As at December 31, 2010, the Company had a balance of loans and accrued interest receivable in respect of subsidiaries, associated companies, related companies and jointly controlled entities in the total amount of Baht 9,885.74 Million, representing 35.29 percent of the total assets. In addition, the Company arranged for a provision for loss from such loans to a jointly controlled entity in the amount of Baht 3,362.34 Million. Said loans were short-term working capital subject to interest at the Minimum Loan Rate plus a stipulated margin (MLR + margin) per annum and certain fixed rates per annum, which shall become due for repayment upon demand. Moreover, Joint Venture CKET entered into agreements granting loans to two other companies, in the total amount of Baht 1,600 Million. As at December 31, 2010, such two companies gradually made partial repayment of the loans and interest, therefore, the balance of long-term loans to other companies with accrued interest receivable amounted to Baht 1,339.41 Million (in proportion to the Companyรปs participation in the Joint Venture) for use as working capital. Such loans are subject to interest at the Minimum Loan Rate plus a stipulated margin (MLR + margin) per annum and would become due for repayment by June 2007. Thereafter, the borrowers notified to repay the loans to the Joint Venture in the amount of half of the outstanding loans by March 31, 2008 and the remaining loans by June 30, 2008 in full. Subsequently, the borrowers issued a letter requesting an extension of time for loan repayment in the amount of half of the outstanding loans by December 31, 2008 and the remaining loans by June 30, 2009 in full. On December 24, 2008, the Board of Directors considered granting approval for the Company in the name of Joint Venture CKET to extend the time for loan repayment to the borrowers as per the repayment schedule proposed by the borrowers. As a result, the repayment schedule was requested to be extended from the existing schedule which required to make loan repayment in the amount of half of the outstanding loans by December 31, 2008 and the remaining loans by June 30, 2009 in full to gradually make repayment of the principal on a quarterly basis for 23 installments, starting in March 2009 until September 2014, and payment of accrued interest payable in September and December 2014 and March 2015. This was because the national economic condition was affected by the domestic political circumstances, as well as economic slowdown, as a result, the borrowersรป business operations had insufficient income to repay the debts as per the existing schedule and the real estate, golf course, resort and housing development projects required to be postponed, therefore, the projects could not proceed according to plan, but the borrowers prepared and proposed the business plan and debt repayment schedule to the Joint Venture to show their loan serviceability. Therefore, as at December 31, 2010, the Joint Venture reclassified the current portion of long-term loans to other companies and accrued interest receivable as current assets and non-current assets in the balance sheet. The borrowers furnished security to the Joint Venture, namely, certain land with structures in the total value of Baht 1,781.7 Million (in proportion to the Companyรปs participation in the Joint Venture) as appraised by an independent appraiser in January 2011 and the major shareholders of the borrowers also provided personal guarantee for the repayment of the outstanding loans in full and allowed the Joint Venture to charge additional interest at the rate of 1.25 percent per annum of the loans from the borrowing date until the repayment would be made in full by the borrowers. In addition, as at December 31, 2010, the Company provided guarantee for two subsidiaries for the purposes of applying for credit facilities from banks and financial institutions in the total amount of Baht 9,062.3 Million. Nevertheless, the Company has policies on management of risks that might occur from loans to subsidiaries, associated companies and jointly controlled entities, significantly taking into account the necessity and justification of transactions as well as the Companyรปs benefits. Such policies need to be approved by the Companyรปs Audit Committee to scrutinize any possible consequences.

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Connected Transactions 1. Connected Transactions between the Company, Subsidiaries, Associated and Related Companies (Only connected transactions with value of Baht 500,000 or higher are shown) Company Name/ Interested Party

Relationship

Nature of Transaction

1. Bangkok Metro Public Company - This is an associated company. 1.1 The Company Limited - The Company holds shares representing - The Company was hired to manage and 24.61 percent. maintain the existing civil infrastructure Operation of concession - Mahasiri Siam Co., Ltd., as a major work in the area of the depot for 7 years, business for mass transit in shareholder in the Company, holds shares with a project value of Baht 85 Million, Bangkok by the metro representing 2.95 percent. expected to be completed in February 2011. - Two directors of the Company, namely, Mr. Vitoon Tejatussanasoontorn, 1.2 Joint Venture CKET and Mr. Sombat Kitjalaksana, serve as directors - The Joint Venture was hired to supervise and in Bangkok Metro Public Company Limited. manage the electric train construction project - Two executive directors of the Company, and manage the maintenance of the project namely, Mr. Plew Trivisvavet, and for first 5 years after the commencement of Mr. Anukool Tuntimas, serve as directors the operations, with a contract value of Baht in Bangkok Metro Public Company Limited. 2,181.7 Million. 1.3 The Company extended a loan in its capacity as a shareholder under the Sponsor Loan Agreement, which requires that shareholders shall arrange for a loan to Bangkok Metro Public Company Limited in the total loan amount of not exceeding Baht 3,000 Million. - Principal at the end of the period - Interest receivable at the end of the period - This is an associated company. 2.1 The Company - The Company holds shares representing - The Com[any was engaged to carry out construction 30.04 percent. of Expansion Phase 1, with a value of approximately Operation of concession business - A director of the Company, namely, Baht 639 Mil ion in the areas of Nakhon Pathom-Samut for water production and Mr. Sombat Kitjalaksana, serves as director in Sakhon Provinces, scheduled to be completed in 2010. distribution in Samut Sakhon Thai Tap Water Supply Company Limited Province and certain areas of - Three executive directors of the Company, namely, 2.2 The Company Nakhon Pathom Province for Mr. Plew Trivisvavet, Mr. Narong Sangsuriya, and - The Company received dividend from its the Provincial Waterworks Mr. Prasert Marittanaporn, serve as directors in shareholding in Thai Tap Water Supply Authority Thai Tap Water Supply Public Company Limited. Public Company Limited.

2. Thai Tap Water Supply Public Company Limited

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Annual Report 2010


Unit : Baht Transaction Value of 2010

15,333,333

7,200,000

2,633,090,793 530,689,446

256,441,279

395,775,768

Necessity/Justification

- This transaction is an ordinary course of business. - The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects. - This project is of a nature in which the Company has experience and expertise. - This transaction provides a credit term of 30-45 days.

- This transaction is an ordinary course of business. - The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects. - This project requires a team with experience and expertise, and coordination with all parties concerned so as to achieve the target construction completion. - This transaction provides a credit term of 30-45 days.

- Such loan is extended by the Company at the interest rate of MLR+0.5. - The loan is scheduled to be repaid after Bangkok Metro Public Company Limited has repaid loans to local financial institutions (pursuant to the conditions of the Sponsor Loan Agreement), provided that all loans are scheduled to be repaid to local financial institutions by 2024.† The Company has a policy to require Bangkok Metro Public Company Limited to repay the loan in full within one year after Bangkok Metro Public Company Limited has repaid loans to financial institutions or when the Company has excess cash. - This is in accordance with the agreement of shareholders in Bangkok Metro Public Company Limited with financial institutions providing financial support. - This transaction is an ordinary course of business. - This project is of a nature in which the Company has experience and expertise. - The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects.

- This project is of a nature in which the Company has experience and could be completed within the scheduled period. - This transaction is an ordinary course of business.

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Company Name/ Interested Party 3. Bangkok Expressway Public Company Limited Operation of concession business for expressway construction and management

Relationship

Nature of Transaction

- This is a related company. 3.1 The Company - The Company holds shares representing - The Company received dividend from its shareholding 15.15 percent. An executive director of the in Bangkok Expressway Public Company Limited. Company, namely, Mr. Plew Trivisvavet, serves as director in Bangkok Expressway 3.2 The Company Public Company Limited. - The Company was engaged to carry out construction, - Director and managing director of Bangkok repair and improvement of the expressway system, Expressway Public Company Limited, namely, with a project value of Baht 231.2 Million. Mrs. Payao Marittanaporn, Mr. Prasert Marittanaporn没s spouse, serves as 3.3 CH. Karnchang-Tokyu Construction Co., Ltd. director in the Company. - The company received dividend from its shareholding in Bangkok Expressway Public Company Limited. 3.4 CH. Karnchang-Tokyu Construction Co., Ltd. - CH. Karnchang-Tokyu Construction Co., Ltd. was engaged to construct additional roads and bridges at the intersection of the Si Rat Expressway and Ngam Wong Wan Road, with a value of Baht 104.92 Mil ion.

4. Expert Transport Co., Ltd. Operation of business of large vehicles for transportation

68

- This is a related company. 4.1 Joint Venture BBCT - Mahasiri Siam Co., Ltd., as a major shareholder in - Vehicles, such as, trucks, trailers, etc., the Company, holds shares representing were sold to Expert Transport Co., Ltd. 90.00 percent. at the replacement cost. - A director of the Company, namely, Mr. Kamthorn Trivisvavet, serves as director in Expert Transport Co., Ltd. 4.2 The Company - Two executive directors of the Company, namely, - This company took on lease of area and Mr. Plew Trivisvavet and Mr. Prasert Marittanaporn, public utilities services from the Company. serve as directors in Expert Transport Co., Ltd. - An executive of the Company, namely, Mr. Sittidej Trivisvavet, serves as director in Expert Transport Co., Ltd. 4.3 CH. Karnchang (Lao) Co., Ltd. - CH. Karnchang (Lao) Co., Ltd. used the construction material and equipment transportation service.

Annual Report 2010


ÀπàUnit «¬ :: Baht ∫“∑ Transaction Value of 2010

Necessity/Justification

- This transaction is an ordinary course of business. 145,986,312

105,196,788

11,938,925

77,020,778

5,615,814

5,488,177

2,878,052

- This transaction is an ordinary course of business. - This project is of a nature in which the Company has experience and could be completed within the scheduled period. - The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects. - This transaction provides a credit term of 30-45 days. - This transaction is an ordinary course of business. - The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects. - This transaction is an ordinary course of business. - This project is of a nature in which the Company has experience and could be completed within the scheduled period. - The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects. - This transaction provides a credit term of 30-45 days.

- This is a sale of vehicles, which the Joint Venture does not use, at the reasonable rate not different from sale to the general public. - Trade accounts receivable were accrued for a long period due to the economic crisis during 1997-2000 and a portion of revenue must be used for loan repayment. The company could make periodic repayment to the Joint Venture by 2010. - This transaction provides a credit term of 30-45 days. - Expert Transport Co., Ltd. took on lease for a total area of 1,119 square meters at the rental rate of Baht 148 per square meter and service fee of Baht 222 per square meter, with a lease term of three years from June 1, 2008 to May 31, 2011. - Expert Transport Co., Ltd. took on lease and paid public utilities fees in the amount of approximately Baht 0.4 Million per month. - This rental rate is close to market rate, representing an ordinary course of business. - This transaction provides a credit term of 30-45 days. - The rate is close to market rate, representing an ordinary course of business. - This transaction provides a credit term of 30-45 days.

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Company Name/ Interested Party 5. North Bangkok Expressway Company Limited Operation of concession business for expressway construction and management

6. SouthEast Asia Energy Limited

Relationship

Nature of Transaction

- This is a related legal entity. 5.1 CH. Karnchang-Tokyu Construction Co., Ltd. - Bangkok Expressway Public Company Limited - CH. Karnchang-Tokyu Construction Co., Ltd. holds shares representing 53.33 percent. was engaged to construct toll booths at - An executive director of the Company, Mueang Thong Thani Toll Plaza, with namely, Mr. Plew Trivisvavet, serves as a value of Baht 4.7 Million Chairman of the Executive Boards in North Bangkok Expressway Company Limited. - Acting managing director of North Bangkok Expressway Company Limited, namely, Mrs. Payao Marittanaporn, Mr. Prasert Marittanaporn没s spouse, serves as director in the Company.

- This is an associated company. - The Company holds shares representing Operation of concession business 38.00 percent. for design, development, - Three executive directors of the Company, construction and management of namely, Mr. Plew Trivisvavet, the Hydroelectric Power Project Mr. Narong Sangsuriya, (Nam Ngum 2) for the government and Mr. Prasert Marittanaporn, serve as of the Lao People没s Democratic directors in SouthEast Asia Energy Limited. Republic

6.1 The Company - The Company extended a loan in its capacity as a shareholder under the Shareholders Loan Agreement, which requires that shareholders shall arrange for a loan to SouthEast Asia Energy Limited in the total loan amount of Baht 156.25 Million, at the interest rate of the average MLR of three lending banks of SouthEast Asia Energy Limited, plus one (MLR+1), with the due date of repayment of the principal, together with interest, within 18 months or the date of Financial Closing of the Project, whichever occurs first. - Principal at the end of the period - Interest receivable at the end of the period 6.2 CH. Karnchang (Lao) Co., Ltd. - SouthEast Asia Energy Limited Company Limited) to carry out construction of the Hydroelectric Power Project (Nam Ngum 2), with a project value of Baht 22,472 engaged CH. Karnchang (Lao) Co., Ltd. (in which 100 percent of shares are held by CH. Karnchang Public Mil ion.)

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ÀπàUnit «¬ :: Baht ∫“∑ Transaction Value of 2010

2,751,854

Necessity/Justification

- This transaction is an ordinary course of business. - This project is of a nature in which the Company has experience and could be completed within the scheduled period. - The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects. - This transaction provides a credit term of 30-45 days.

- This is considered a financial support based on the shareholding percentage, and the interest rate equals the loan interest rate of the existing creditors of SouthEast Asia Energy Limited for survey and development of new project which would enhance the capacity of the Nam Ngum 2 Project and which would be beneficial to the Company as a shareholder. - In 2009, SouthEast Asia Energy Limited requested an extension of time for repayment of the loan for another 12 months from the due date until March 2010. - In 2010, SouthEast Asia Energy Limited has requested an extension of time for repayment of the loan on the date which the Company made the first drawdown of the project from the financial institutions or until September 2011.

156,250,000 31,740,232

1,212,745,209

- CH. Karnchang (Lao) Co., Ltd. is capable to carry out the works properly and is well-prepared to promptly start the works. In addition, the project value is reasonable, representing an ordinary course of business. - This transaction provides a credit term of 30 days.

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Company Name/ Interested Party

Relationship

Nature of Transaction

7. Bang Pa-in Land Development Co., Ltd.

- This is a related company. - CK. Office Tower Co., Ltd., as a major shareholder in the Company, holds shares representing 25 percent. - Mahasiri Siam Co., Ltd., as a major shareholder in the Company, holds shares representing 25 percent. - An executive director of the Company, namely, Mr. Plew Trivisvavet, serves as director in Bang Pa-in Land Development Co., Ltd. - A director of the Company, namely, Mr. Kamthorn Trivisvavet, serves as director in Bang Pa-in Land Development Co., Ltd. - An executive of the Company, namely, Miss Supamas Trivisvavet, serves as director in Bang Pa-in Land Development Co., Ltd.

7.1 The Company - The Company rendered transportation services and other services, such as, lease of water tank trailers, shovels, backhoe.

Operation of Bang Pa-in Industrial Estate

8. Bangkok Metro Networks Limited Operation of service business for common areas and public utilities in the metro

7.2 Phrompratharn Construction Limited Partnership - The Partnership rendered transportation services and other services, such as, lease of water tank trailers, shovels, backhoe. 7.3 The Company - The Company leased out area and charged public utilities fees.

7.4 The Company - The Company was engaged to carry out the construction for improvement of earth dike and roads surrounding the projects in the Bang Pa-in Industrial Estate, with a value of Baht 72.7 Mil ion, scheduled to be completed in 2010.

- This is a related company. 8.1 The Company - Bangkok Metro Public Company Limited (CH. Karnchang - The Company leased out area and Public Company Limited没s associated company) holds shares charged public utilities fees. representing 65.19 percent. - A director of the Company, namely, Mr. Sombat Kitjalaksana, serves as director in Bangkok Metro Networks Limited. - An executive director of the Company, namely, Mr. Anukool Tuntimas, serves as director in Bangkok Metro 8.2 The Company Networks Limited. - Interest income from construction Remark : Bangkok Metro Networks Limited was incorporated through the amalgamation of Metro Mall Development Limited, BMCL Network Limited, and Triads Networks Company Limited.

9. Xayaburi Power Company Limited - This is an associated company. - The Company holds shares representing Operation of study, survey, and 95.00 percent (as at December 31, 2010). design business for the Hydroelectric - The Company is reducing its shareholding to Power Dam Construction Project in 30 percent in 2011. the Mekong River, Xayaburi, with - Three executive directors of the Company, the Government of the Lao namely, Mr. Plew Trivisvavet, People没s Democratic Republic Mr. Narong Sangsuriya, and Mr. Prasert Marittanaporn, serve as directors in Xayaburi Power Company Limited. 72

9.1 CH. Karnchang (Lao) Co., Ltd. - Xayaburi Power Company Limited engaged CH. Karnchang (Lao) Co., Ltd. (in which 100 percent of shares are held by CH. Karnchang Public Company Limited) under the Preliminary Construction Works Agreement, with a value of Baht 750 Million, and the Xayaburi Hydroelectric Power Project Construction Agreement, with a value of approximately Baht 76,000 Million (pending the signing of the Agreement). Annual Report 2010


ÀπàUnit «¬ :: Baht ∫“∑ Transaction Value of 2010

729,213

593,224

897,544

8,368,726

6,388,100

7,928,365

2,361,200,000

Necessity/Justification

- The rate is close to market rate, representing an ordinary course of business. - This transaction provides a credit term of 30-45 days. - The rate is close to market rate, representing an ordinary course of business. - This transaction provides a credit term of 30-45 days

- Bang Pa-in Land Development Co., Ltd. took on lease from the Company for a total area of 174 square meters at the rental rate of Baht 128 per square meter and service fee of Baht 192 per square meter, with a lease term of three years from November 1, 2008 to October 31, 2011. - Bang Pa-in Land Development Co., Ltd. took on lease and paid public utilities fees in the amount of approximately Baht 0.07 Mil ion per month. - This rental rate is close to market rate, representing an ordinary course of business. - This transaction provides a credit term of 30-45 days. - This is an ordinary course of business. This project is of a nature in which the Company has experience and could be completed within the scheduled period. The Company has earned a return at a rate not lower than the rate of return generally received in other projects. - This transaction provides a credit term of 30-45 days.

- Bangkok Metro Networks Limited took on lease from the Company for a total area of 1,291.4 square meters at the rental rate of Baht 140 per square meter and service fee of Baht 210 per square meter, with a lease term of three years from February 10, 2010 to February 9, 2013. - Bangkok Metro Networks Limited took on lease and paid public utilities fees in the amount of approximately Baht 0.5 Mil ion per month. - This rental rate is close to market rate, representing an ordinary course of business. - This transaction provides a credit term of 30-45 days. - Metro Mall Development Limited executed a contract engaging CH. Karnchang Public Company Limited for a project value of Baht 292.5 Mil ion to construct the interior of the train stations to support the lease of retail shops. However, since Metro Mall Development Limited has insufficient revenue from commercial development, it has paid the construction cost in installment. The Company has charged interest at the rate of MLR+1% per annum. - This is an ordinary course of business. This project is of a nature in which the Company has experience and could be completed within the scheduled period. The Company has earned a return at a rate not lower than the rate of return generally received in other projects. - This transaction provides a credit term of 30-45 days. - CH. Karnchang (Lao) Co., Ltd. is capable to carry out the works properly and is well-prepared to promptly start the works. In addition, the project value is reasonable, representing an ordinary course of business. - This transaction provides a credit term of 30 days.

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2. The Opinion of Company Directors and the Audit Committee - The Company没s contracts with its related companies to carry out construction on a subcontract basis are undertaken at reasonable prices, whereby the costs of relevant projects under such contracts were reviewed and deemed appropriate by the Company没s engineers and based on an ordinary course of business. - Project management fees are derived from transactions where the Company arranged for personnel to various related companies and joint ventures for the purpose of project management, whereby the Company entered into contracts for management fees with those related companies and joint ventures, and such management fees covered salaries, bonuses, benefits and other management expenses. - Service fees are derived from transactions where the Company leased out to joint ventures and subsidiaries equipment and machinery at the rental rates close to market rates, representing an ordinary course of business. - Costs of goods are derived from transactions where the Company traded goods with related companies at the price close to market price, representing an ordinary course of business. - Accounts receivable in the form of intercompany loans bear interest at an appropriate rate and subject to an ordinary course of business. Connected transactions have been submitted to the meeting of the Board of Directors or the Executive Board, for consideration in respect of their suitability.

3. Measures or Procedures for Approval of Connected Transactions The Company has complied with the relevant rules, regulations and requirements of the Securities and Exchange Commission. As for any transactions that might give rise to conflict of interest and require approval of the Board of Directors and of the Audit Committee, the Company has already complied with such rules, regulations or requirements, whereby the grant of approval for the said connected transactions shall take into account the optimum benefits to the Company, fairness and justifications of the transactions as well as based on market prices in the ordinary course of business. In addition, the interested parties or those who might have conflict of interest in such connected transactions shall not be allowed to participate in the consideration and approval of the connected transactions so as to ensure the fairness and the optimum benefits to the Company. As for any connected transactions falling under the criteria as specified in the regulations, notifications, orders, requirements or rules of the Stock Exchange of Thailand, the Company has complied with the applicable requirements of the Stock Exchange of Thailand.

4. Policy or Trend of Future Connected Transactions The Company shall comply with the relevant rules, regulations and requirements of the Securities and Exchange Commission. As for any transactions that might give rise to conflict of interest and require approval of the Board of Directors and of the Audit Committee, the Company has already complied with such rules, regulations or requirements, whereby the grant of approval for the said connected transactions shall take into account the optimum benefits to the Company, fairness and justifications of the transactions as well as based on market prices in the ordinary course of business.

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In addition, the interested parties or those who might have conflict of interest in such connected transactions shall not be allowed to participate in the consideration and approval of the connected transactions so as to ensure the fairness and the optimum benefits to the Company. As for any connected transactions falling under the criteria as specified by the regulations, notifications, orders, requirements or rules of the Stock Exchange of Thailand, the Company shall comply with the applicable requirements of the Stock Exchange of Thailand. Furthermore, the Companyûs related businesses have the shareholding structures as follows: (1) Such businesses with shareholding structure in which the Company and its major shareholders jointly hold shares include Bangkok Metro Public Company Limited, etc. The shareholding structure is based on general investment pattern by which the major shareholders may jointly invest with the Company in those businesses in which the Companyûs investment might be limited by, among others, the Companyûs cash flow, investment policy, etc. The fact that the Companyûs major shareholders also hold shares in those businesses would render the Company to be in an advantageous position in regard to the controlling power so as to ensure that the operation of these businesses would be consistent. (2) Such businesses with shareholding structure in which the Company holds shares include Bangkok Expressway Public Company Limited, Thai Tap Water Supply Public Company Limited, SouthEast Asia Energy Limited, Xayaburi Power Company Limited, Bangpa-in Cogeneration Limited, and Nakhon Ratchasima Solar Co., Ltd., etc. (3) Such businesses with shareholding structure in which the Companyûs major shareholders hold shares include CK. Office Tower Co., Ltd., Mahasiri Co., Ltd., Expert Transport Co., Ltd., Silasaicrete Limited Partnership, etc. The policy on consideration and approval of connected transactions with related businesses shall comply with the procedures that require consideration by the Board of Directors and the Audit Committee while those who have interest or might have conflict of interest in connected transactions shall not be allowed to participate in the approval of such connected transactions. The criteria by which the Board of Directors and the Audit Committee use as guidelines in the consideration is that related businesses are required to propose competitive products or services in terms of price and quality. On the contrary, should the Company be to render services to any related businesses, the Company is required to propose price and quality in line with standards or market price without giving any favorable benefit to the related businesses, which may result in transfer of benefits to those who might have conflict of interest with the Company. Future connected transactions in the form of loans tend to be loans among the Company, subsidiaries and joint ventures for the purpose of financial support in business operation so as to support and facilitate each other, which will be deemed as ordinary course of business. Consideration and approval for such transactions will be mainly based on the optimum benefits of the Company. However, for the loans between the Company, subsidiaries or joint ventures, and related companies in which the Companyûs major shareholders, directors or executives hold shares, the Company group has no policy to extend any intercompany loans in the future. However, in the past, the advantage of connected transactions with related businesses is that it gives rise to flexibility in work performance and results in timely delivery of work, which constitute factors material to construction business and continuously support the Companyûs operations. As for any future connected transactions, the Company group will strictly comply with the regulations of the Office of the Securities and Exchange Commission and the Stock Exchange of Thailand.

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75


Audit Committeeûs Report The Audit Committee of CH. Karnchang Public Company Limited, by the appointment of the Companyûs Board of Directors, comprises three qualified independent directors, namely, Mr. Vitoon Tejatussanasoontorn, Chairman of the Audit Committee, Mr. Don Pramudwinai and Mr. Thawansak Sukhawun, Audit Committee Members, and President of Internal Audit as secretary to the Audit Committee. The Audit Committee has performed under the scope, duties and responsibilities as assigned by the Companyûs Board of Directors, in accordance with the regulations of the Stock Exchange of Thailand, as well as relevant suggestions on various matters, which were fully cooperated by the Companyûs management, internal auditors and auditor. In 2010, the Audit Committee held four meetings with the executives, internal auditors and auditor as appropriate, including a meeting with the auditor without the management once a year, which may be summarized as follows: 1. The Audit Committee has reviewed the quarterly financial statements and the 2010 financial statements, by making inquiries and taking into consideration the clarifications of the executives and the auditor in respect of accuracy and completeness of the financial statements and sufficiency of information disclosure, which the Audit Committee is of the opinion in line with the auditor that the said financial statements are fairly accurate in all material aspects and comply with generally accepted accounting standards. 2. The Audit Committee has reviewed the compliance with the provisions of laws and the Companyûs internal control system, and is of the opinion according to the assessment that the internal control system is sufficient, proper and efficient without any material fault in order to support the operations to achieve the specified goal. The Company properly maintains its property and work operations in compliance with the law on securities and exchange and the relevant rules and regulations on business. The authorization and approval are systematically conducted in accordance with the good internal control system, and the corporate governance is transparent, as well as being amended to efficiently conform to the changed situation. 3. The Audit Committee has reviewed the internal audit, by taking into consideration the mission, scope of work, duties, responsibilities and independence of the Internal Audit in order to conform to the guidelines on internal audit of the Stock Exchange of Thailand, which the Audit Committee is of the opinion that the Companyûs internal audit system is sufficient and proper, including the consideration for approval of the appointment of President of Internal Audit and secretary to the Audit Committee. The Audit Committee is of the opinion that the Companyûs internal audit system is sufficient, proper and efficient in accordance with the international standards.

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Annual Report 2010


4. The Audit Committee has reviewed the risk management in order to connect with the internal control system to manage general risks. The Company has specified objectives and criteria for assessment of the overall risks and risk levels, risk assessment and rating, determination of management plan on existing risks, and preparation of report on risk assessment and management plan on existing risks, which the Audit Committee is of the opinion that the Companyรปs risk management system is efficient and effective, by determining objectives for indicating, assessing, managing and monitoring risks on a quarterly basis, risk appetite and risk tolerance, as well as regularly reviewing the risks to be in line with the current situation. 5. The Audit Committee has reviewed and provided an opinion on the connected transactions or transactions which may have conflict of interest, including disclosure of such transactions in accordance with the regulations of the Stock Exchange of Thailand and the Office of the Securities and Exchange Commission, which the auditor is of the opinion that the transactions with material aspects executed with the related companies have already been disclosed and shown in the financial statements and notes to the financial statements. The Audit Committee is of the opinion in line with the auditor, as well as providing an opinion that such transactions are reasonable and for the optimum benefit to the Companyรปs business operations, and the information disclosure is accurate and complete. 6. The Audit Committee has considered selecting the auditor for appointment and proposing the remuneration of the auditor, by taking into account the performance of the auditor in the previous year, reliability, capability to provide service and consultation on accounting standards, auditing and certification of the financial statements in a timely manner, and has then provided an opinion to the Companyรปs Board of Directors to seek approval of the Shareholdersรป Meeting for appointment of either Mr. Supachai Phanyawattano or Miss Waraporn Prapasirikul or Mr. Narong Puntawong of Ernst & Young Office Limited as the Companyรปs auditor for 2011, with the auditing fee in the amount of not exceeding Two Million Six Hundred Twenty Thousand Baht.

(Mr. Vitoon Tejatussanasoontorn) Chairman of the Audit Committee

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Financial Position and Operational Results Operational Results for 2010 As at December 31, 2010, with respect to the operational results of CH. Karnchang Public Company Limited, its subsidiaries and jointly controlled entities as compared to that of the same accounting period of 2009, the consolidated financial statements showed an operating loss of Baht 335.06 Million, representing a decrease by 473.40 percent from 2009, while the separate financial statements showed a profit of Baht 374.42 Million, representing an increase from 2009 by Baht 157.40 Million or representing 72.53 percent, mainly due to the following causes: (1) In 2010, according to the consolidated financial statements and the separate financial statements of the Company, the proportion of cost of construction, sales of construction materials and services to the core revenues increased due to the fact that from the first quarter of 2010, CH. Karnchang (Lao) Co., Ltd., a subsidiary, had reviewed the estimated construction cost of the Nam Ngum 2 Hydroelectric Power Project in the Lao Peopleûs Democratic Republic which was impacted by the increasing price of materials, as well as the accelerated construction of such project to be completed three months earlier than planned, and as a result, the estimated project cost needed to be adjusted based on the costs actually incurred and the remaining construction works to be carried out, namely, in the amount of approximately Baht 1,070 Million, or representing 4.7 percent of the contract value. Given that the majority of the works is nearly completed, the profit of the project was thus decreased by Baht 930 Million, and the cost was thus increased considerably, thereby causing the proportion of the cost of construction, sales of construction materials and services to the core revenues to increase accordingly. However, as for the three-month period of 2010, the Companyûs consolidated financial statements showed a decreased proportion of cost of construction, sales of construction materials and services to the core revenues, with a gross profit of 15.41 percent, as compared to that of the same period of 2009 with a gross loss of 9.34 percent. This was due to the fact that the construction of most projects which had been affected by the fluctuation of the material price was completed, as well as new projects which had been signed since late 2009 have a gross profit with progress in the construction. (2) Both in the consolidated financial statements and the separate financial statements, the core revenues, especially the revenue from construction and the revenue from sales of construction materials in 2010, decreased due to the fact that the construction of various projects was completed in 2009, and the construction of the Nam Ngum 2 Hydroelectric Power Project in the Lao Peopleûs Democratic Republic is nearly completed, at which time, not much revenue could be recognized, including the construction of the Purple Line Project, Contract 1, which was executed in the second half of 2009, has not yet recognized revenue from construction during the first half of 2010, but started to recognize revenue in the second half of the year; and in the second half of the year, the subsidiariesû preliminary construction works of the Xayaburi Project somewhat progressed, but it was not sufficient to cover the decreased revenue from the completed construction of the existing projects, thereby resulting in a decrease in revenue recognition, as compared to the revenue from construction for the same accounting period of 2009. On the contrary, during the three-month period of 2010 in the Companyûs consolidated financial statements, the revenue from construction amounted to Baht 3,645.51 Million, representing an increase by Baht 1,912.14 Million or 110.31 percent. (3) Revenue from reversal of provision for loss from investments in joint venture and revenue from waiver of accrued interest payable in 2010 totaled Baht 590.50 Million or representing 5.97 percent of total revenues for the consolidated financial statements, and 14.71 percent of total revenues for the separate financial statements. However, in 2009, there was no such item in the consolidated financial statements and the separate financial statements, due to the fact that the Company made the prepayment to the lending bank in respect of the loan transferred from Joint Venture BBCD to the Company, in full amount of Baht 1,621 Million by June 2010. As a result, the bank waived the accrued interest payable for the Company, and the Company recorded revenue from waiver of accrued interest payable in the total amount of approximately Baht 144.21 Million, and the Company then reversed provision for loss from investments in joint venture. The recorded provision for interest to be incurred in the future under the loan agreement from banks was decreased to a total of approximately Baht 446.29 Million. (4) Administration expenses and remuneration for executives in 2010 represented 12.73 percent of total revenues, which were higher than that of 2009 representing 8.04 percent of total revenues, due to the fact that the Company was well-prepared in terms of manpower to accommodate new projects, and in 2010, the Company submitted bids for several projects. As for successful projects, these expenses would be recorded as project costs of such projects, but as for such projects which the Company was not selected as the lowest bidder, the Company would then recorded such expenses as administration expenses. In addition, the Companyûs new

78

Annual Report 2010


projects of which contracts had been signed did commence not in line with the completed construction projects, thereby rendering the Company to incur the selling and administration expenses in an amount higher than the existing works, as a result, the Companyûs performance is lower than its existing potentials. 1. Financial Position and Operational Results for 2010 Operational Results (1) Total revenues in 2010 amounted to Baht 9,893.84 Million, which decreased from 2009 by Baht 4,041.32 Million, or representing 29.00 percent, due to the decreased revenue from construction as mentioned in Item (1) in the Operational Results, with the details of total revenues as follows: ë Core revenues comprise revenue from construction, sales of construction materials, and project management. In 2010, the total core revenues amounted to Baht 8,586.37 Million, representing 86.79 percent of total revenues, which decreased by Baht 4,194.23 Million or representing 32.82 percent, due to the fact that the Nam Ngum 2 Hydroelectric Power Project in the Lao Peopleûs Democratic Republic is nearly completed, thereby causing a slight progress in construction, including impact of the political unrest, which caused the volume of investments in new projects from government sector and private sector to delay, and the construction of the Purple Line Project, Contract 1, is in the process of preparation, in respect of which revenue has not yet been recognized, and as such, core revenues decreased, with the details of core revenues as follows: ë Revenue from construction for 2010 in Baht 8,486.53 Million decreased by Baht 4,221.86 Million or presenting 33.22 percent. ë Revenue from sales of construction materials for 2010 decreased by Baht 4.13 Million or representing 11.14 percent. ë Revenue from project management for 2010 increased by Baht 31.76 Million or representing 90.42 percent due to assignment of personnel for management of the construction of the Purple Line Project, Contract 1, and that as mentioned in Item (4) in the Operational Results. ë Rental income and transportation income amounted to Baht 53.20 Million, representing 0.54 percent of total revenues, which decreased by Baht 22.26 Million or representing 29.50 percent, namely, increased revenues from rental service and transportation and equipment and machinery for construction of the Nam Ngum Hydroelectric Power Project in the Lao Peopleûs Democratic Republic which is nearly completed. ë Other income in 2010 amounted to Baht 1,254.27 Million, representing 12.68 percent of total revenues, which increased by Baht 175.18 Million or representing 16.23 percent, comprising: ë Interest income in 2010 which decreased from that of 2009 by Baht 10.23 Million or representing 3.88 percent. ë Dividend income and profit sharing from jointly controlled entities in 2010 amounting to Baht 160.53 Million, which decreased from that of 2009 by Baht 101.55 Million or representing 38.75 percent. ë Gain on sale of property, plant and equipment in 2010 amounting to Baht 20.40 Million, which decreased from that of 2009 by Baht 21.38 Million or representing 51.20 percent. ë Gain on exchange rate in 2010 amounting to Baht 7.82 Million, which decreased from that of 2009 by Baht 86.49 Million or representing 91.71 percent, due to the fact that the construction of the Nam Ngum 2 Hydroelectric Power Project in the Lao Peopleûs Democratic Republic recognized revenue in foreign currency in respect of certain completed parts. ë Gain on sales of investments in associated companies in 2010 amounting to Baht 175.88 Million, or representing 1.78 percent of total revenues, namely, gain on sales of ordinary shares in Thai Tap Water Supply Public Company Limited (çTTWé). ë Revenue from reversal of provision for loss on investments in joint venture in 2010, as mentioned in Item (3) in the Operational Results. ë Revenue from waiver of accrued interest payable in 2010 amounting to Baht 144.21 Million or representing 1.46 of total revenues, as mentioned in Item (3) in the Operational Results. ë Miscellaneous and others amounting to Baht 45.37 Million, which decreased from that of 2009 by Baht 6.18 Million or representing 12.00 percent.

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(2) Total expenses in 2010 amounted to Baht 9,597.56 Million, which decreased from that of 2009 by Baht 3,383.36 Million or representing 26.06 percent, due to the following: ë Cost of construction, sales of construction materials and services in 2010 amounted to Baht 8,338.48 Million, representing 84.28 percent of total revenues, which decreased from that of 2009 by Baht 3,521.26 Million or representing 29.69 percent, as a result of a decrease in the core revenues, especially the revenue from construction and the revenue from sales of construction materials, as mentioned in Item (1) in the Operational Results. However, the proportion of the main costs to the core revenues increased higher than the core revenues, i.e., the consolidated financial statements of the Company showed a decreased gross profit (çGPé), whereby in 2010, the GP showed a gross loss of (3.26) percent, as compared to that of 2009 with a gross profit of 0.64 percent, as a result of those mentioned in Items (1) and (2) in the Operational Results. ë Administration expenses in 2010 amounted to Baht 1,153.23 Million, which increased from that of 2009 by Baht 121.31 Million or representing 11.76 percent. As for the proportion of the administration expenses to total revenues, it appeared that in 2010, the administration expenses amounted to 11.66 percent of total revenues, which increased from 2009 with the administration expenses at 7.41 percent of total revenues, as mentioned in Item (4) in the Operational Results. ë Remuneration for executives in 2010 amounted to Baht 105.86 Million, which increased from that of 2009 by Baht 16.59 Million or representing 18.58 percent. (3) Share of profit (loss) from investments in associated companies in 2010 amounted to Baht 384.09 Million, representing 3.88 percent of total revenues, which increased from that of 2009, which sustained a share of loss, by Baht 302.20 Million or representing 369.03 percent, due to the net operating income of Thai Tap Water Supply Public Company Limited and SouthEast Asia Energy Limited which was higher than the total operating loss of Bangkok Metro Public Company Limited. (4) Finance cost in 2010 amounted to Baht 943.09 Million, representing 9.53 percent of total revenues, which increased from that of 2009 by Baht 60.79 Million or representing 6.89 percent, due to the Companyûs borrowing of additional loans for construction of the Purple Line Project, Contract 1, and for use as working capital. (5) Corporate income tax in 2010 amounted to Baht 56.56 Million, which increased from that of 2009 by Baht 0.31 Million or 0.54 percent, due to increase in operating income of subsidiaries and jointly controlled entities. (6) Net income (loss) of the Company, inclusive of minority interests of the subsidiaries for 2010, the consolidated financial statements showed a net loss amounting to Baht 319.27 Million. In 2009, the net income was Baht 97.57 Million. The operational results decreased by Baht 416.84 Million or representing 427.22 percent, comprising: ë Equity holders of the parent company, in the consolidated financial statements, the net loss amounted to Baht 335.06 Million, representing the decreased operational results from that of 2009 by Baht 424.79 Million or 473.40 percent. ë Minority interests of the subsidiaries, the net income amounted to Baht 15.78 Million, representing an increase from that of 2009 by Baht 7.94 Million or 101.31 percent. (7) Earnings (loss) per share (EPS) for 2010 amounted to a loss of Baht (0.21) per share, compared to earnings of Baht 0.06 per share of 2009. Financial Position (1) Total assets in 2010 amounted to Baht 30,469.99 Million, representing an increase from that of 2009 by Baht 1,000.13 Million or 3.39 percent as compared to that of 2009, with the details of significant increases and decreases as follows: ë Cash and cash equivalents in 2010 amounted to Baht 1,524.50 Million, which decreased from that as at the end of 2009 by Baht 1,994.94 Million or representing 56.68 percent, due to the fact that the Company used cash to make the prepayment under the Agreement to the lending bank in respect of the loan transferred from Joint Venture BBCD to the Company, and the subsidiaries repaid the loans for construction projects, and the Company invested such amount temporarily in the fixed income open-end fund with a higher rate of return than deposits at bank. ë Current investments in 2010 amounted to Baht 3,041.53 Million, which increased from that of 2009 by Baht 372.51 Million or representing 13.96 percent. ë Trade accounts receivable in 2010 amounted to Baht 1,549.99 Million, which increased from that as at the end of 2009 by Baht 469.08 Million or representing 43.40 percent, due to the progress in the construction of the projects, of which most payments did not yet fall due. 80

Annual Report 2010


ë Accounts receivable and loans to related parties-net in 2010 amounted to Baht 86.33 Million, which decreased from that as at the end of 2009 by Baht 82.24 Million or 48.79 percent, due to the debt repayment made by Joint Venture BCKT. ë Income pending collection in 2010 amounted to Baht 5,261.25 Million, which increased from that as at the end of 2009 by Baht 1,420.72 Million or representing 36.99 percent, due to the fact that the subsidiaries partially operated the Xayaburi Project. ë Inventories and supplies for construction-net in 2010 amounted to Baht 349.77 Million, which increased from that as at the end of 2009 by Baht 6.50 Million or representing 1.89 percent. ë Advance payment to subcontractors-net in 2010 amounted to Baht 931.45 Million, which decreased from that as at the end of 2009 by Baht 118.86 Million or representing Baht 11.32 percent. ë Loans to associated company, namely, SouthEast Asia Energy Limited (çSEANé) and current portion of interest receivable, in order to conduct the feasibility study and development of the Nam Bak 1-2 Hydroelectric Power Project, in 2010, amounted to Baht 187.99 Million, which increased from that as at the end of 2009 by Baht 187.99 Million, due to the fact that SEAN is scheduled to make loan repayment to the Company and SEANûs shareholders for the principal and interest on one occasion, namely, on the date of financial closing of the project with financial institutions, or by September 4, 2011, whichever occurs first. ë Loans to subcontractors and current portion of interest receivable, in 2010, amounted to Baht 41.98 Million, which decreased from that as at the end of 2009 by Baht 135.56 Million or 76.35 percent, due to the fact that the subcontractors made repayment of loans, including interest, in accordance with the debt repayment schedule. ë Long-term loans to other companies and current portion of interest receivable amounted to Baht 251.18 Million, which increased from that as at the end of 2009 by Baht 95.43 Million or 61.27 percent, due to an increase under the debt repayment schedule. ë Other current assets in 2010 amounted to Baht 762.81 Million, which increased from that as at the end of 2009 by Baht 177.45 Million or representing 30.31 percent. ë Restricted bank deposits in 2010 amounted to Baht 519.34 Million, which increased from that as at the end of 2009 by Baht 111.06 Million or representing 27.20 percent. ë Long-term loans to jointly controlled entities and interest receivable in 2010 amounted to Baht 220.20 Million, which decreased from that as at the end of 2009 by Baht 24.67 Million or representing 10.08 percent. ë Long-term loans to associated companies and interest receivable in 2010 amounted to Baht 3,163.78 Million, which increased from that as at the end of 2009 by Baht 435.40 Million or representing 15.96 percent, namely, loan under the Subordinated Loan Agreement which the Company as shareholder extended to Bangkok Metro Public Company Limited çBMCLé in the amount of Baht 3,000.00 Million. In 2010, the Company extended an additional loan to BMCL in the amount of Baht 450.00 Million and the interest receivable from BMCL increased. ë Long-term loans to other companies and interest receivable-net of current portion in 2010 amounted to Baht 1,088.22 Million, which decreased from that as at the end of 2009 by Baht 188.00 Million or representing 14.73 percent, comprising the long-term loans to other companies and interest receivable due to the fact that Joint Venture CKET received debt repayment from other companies, namely, Rayong Real Estate Co., Ltd. and Private Inter Construction Co., Ltd., in accordance with the payment plan in the debt repayment schedule, and such loans were secured by certain land and buildings, as well as the personal guarantee by the principal shareholder of the borrower. ë Investments in associated companies-net in 2010 amounted to Baht 5,602.08 Million, which increased from that as at the end of 2009 by Baht 909.64 Million or representing 19.39 percent, with the details as follows: ë Investment in CH. Karnchang (Qatar) Contracting Co., Ltd. in 2010 remained unchanged from that as at the end of 2009. ë Investment in Bangkok Metro Public Company Limited (çBMCLé) in 2010 at book value based on the cost method-net amounted to Baht 3,058.64 Million, which remained unchanged from that as at the end of 2009, whereby the Companyûs investment in BMCL represented 24.61 percent of the paid-up registered capital. ë Investment in Thai Tap Water Supply Public Company Limited (çTTWé) in 2010 at book value based on the cost method-net amounted to Baht 2,032.45 Million, which decreased from that as at the end of 2009 by Baht 126.60 Million. In 2010, the Company gradually sold 60 million shares in TTW, whereby the Companyûs investment in TTW decreased from 31.55 percent to 30.04 percent of the paid-up registered capital. CH. Karnchang Public Company Limited

81


ë Investment in SouthEast Asia Energy Limited (çSEANé) in 2010 at book value based on the cost method-net amounted to Baht 2,443.41 Million, which increased from that as at the end of 2009 by Baht 274.12 Million, resulting from additional payment of shares. The Companyûs shareholding in SEAN represented 38.00 percent of the paid-up registered capital. ë Investment in Xayaburi Power Company Limited in 2010 amounting to Baht 760.00 Million, as an associated company incorporated by the Company for the concession for design, development, construction and operation of the Xayaburi Hydroelectric Power Project from the Government of the Lao Peopleûs Democratic Republic. ë Other long-term investments-net in 2010 amounted to Baht 2,493.96 Million, which decreased from that as at the end of 2009 by Baht 126.22 Million or 4.82 percent as a result of changes in value of investment at market price, namely, ordinary shares in Bangkok Expressway Public Company Limited as at December 31, 2010 which were priced lower than cost. ë Long-term trade accounts receivable in 2010 totaled Baht 265.81 Million, which decreased from that as at the end of 2009 by Baht 114.45 Million or 30.10 percent, comprising: ë Long-term trade accounts receivable to related company in 2010 amounting to Baht 134.11 Million, representing an increase from that as at the end of 2009 by Baht 0.55 Million or 0.41 percent, comprising construction cost owed by Bangkok Metro Networks Limited, subject to interest rate at MLR plus 1 per annum; ë Long-term trade accounts receivable to other company in 2010 totaling Baht 131.70 Million, representing a decrease from that as at the end of 2009 by Baht 115.00 Million or 46.62 percent, comprising construction cost owed by Rayong Real Estate Co., Ltd., which the Board of Directors granted approval for it to make repayment in 13 installments on a quarterly basis, from December 2009 to December 2012. ë Property, plant and equipment-net in 2010 amounted to Baht 2,290.42 Million, which increased from that as at the end of 2009 by Baht 88.08 Million or 4.00 percent, due to the fact that Joint Venture CKTC purchased machinery for use in the construction of the Purple Line Project, Contract 1. ë Other non-current assets in 2010 totaled Baht 491.21 Million, which decreased from that as at the end of 2009 by Baht 494.01 Million or 50.14 percent, whereby the Company demanded a return of advance payments for construction project of subsidiaries. (2) Total liabilities in 2010 amounted to Baht 24,258.25 Million, as compared to the end of 2009, representing an increase by Baht 487.64 Million or 2.05 percent, with the details of significant increases and decreases as follows: ë Bank overdrafts and short-term loans from financial institutions in 2010 amounted to Baht 3,378.67 Million, which increased from that as at the end of 2009 by Baht 718.95 Million or 27.03 percent, whereby the Company issued additional bills of exchange. ë Trade accounts payable in 2010 totaled Baht 1,258.75 Million, which increased from that as at the end of 2009 by Baht 57.31 Million or 4.77 percent. ë Current portion of hire purchase creditors in 2010 amounted to Baht 40.98 Million, which decreased from that as at the end of 2009 by Baht 57.16 Million or 58.24 percent. ë Current portion of long-term loans in 2010 amounted to Baht 820.75 Million, which increased from that as at the end of 2009 by Baht 196.33 Million or 31.44 percent. ë Current portion of debentures in 2010 amounted to Baht 3,000.00 Million, which decreased from that as at the end of 2009 by Baht 100.00 Million or 3.23 percent. ë Accounts payable and loans from related parties in 2010 amounted to Baht 17.24 Million, which decreased from that as at the end of 2009 by Baht 108.05 Million or 86.24 percent, as a result of Joint Venture CKTCûs commencement of construction of the Purple Line Project, Contract 1, and repayment of advances from the joint venture partners. ë Advances received from employers and construction revenue in 2010 amounted to Baht 1,650.78 Million, which increased from that as at the end of 2009 by Baht 37.78 Million or 2.34 percent. ë Retention money in 2010 amounted to Baht 371.07 Million, which decreased from that as at the end of 2009 by Baht 154.79 Million or 29.44 percent. ë Other current liabilities in 2010 totaled Baht 564.15 Million, which increased from that as at the end of 2009 by Baht 64.88 Million or 12.99 percent. ë Hire purchase creditors-net of current portion in 2010 decreased from that as at the end of 2009 in full amount of Baht 14.40 Million. 82

Annual Report 2010


ë Long-term loans-net of current portion in 2010 amounted to Baht 4,098.25 Million, which increased from that as at the end of 2009 by Baht 750.24 Million or 22.41 percent, as mentioned in Item (3) in the Operational Results. ë Debentures-net of current portion in 2010 amounted to Baht 8,975.72 Million, which increased from that as at the end of 2009 by Baht 97.96 Million or 1.10 percent. ë Long-term accrued interest in 2010 was not recorded as it was the Companyûs acceptance of the transfer of Joint Venture BBCDûs long-term accrued interest owed to commercial banks as the Companyûs debts, and the Company made the debt repayment to the banks in full, as mentioned in Item (3) in the Operational Results. ë Provision for loss on investments in joint ventures in 2010 amounted to Baht 81.90 Million, which decreased from that as at the end of 2009 by Baht 677.06 Million or 89.21 percent, as a result of the Companyûs reversal of such provision for loss from investments in Joint Venture BBCD as revenue from reversal of provision for loss from investments in joint venture, as mentioned in Item (3) in the Operational Results. (3) Shareholdersû equity as at December 31, 2010 amounted to Baht 6,211.74 Million, representing an increase by Baht 512.49 Million or 8.99 percent from the end of 2009, with the details of significant increases and decreases as follows: ë Registered, issued and paid-up share capital amounted to Baht 1,652.59 Million, which increased from that of 2009 by Baht 206.57 Million or representing 14.29 percent. The ordinary share premium in 2010 amounted to Baht 4,869.41 Million, which increased by Baht 896.53 Million or representing 22.57 percent, due to the fact that the Company allocated 206.57 million ordinary shares for capital increase at the price of Baht 5.34 per share, at the allocation proportion of one new ordinary shares to seven existing ordinary shares, any fraction thereof shall be rounded off, to the Companyûs existing shareholders. There were 158.26 million shares subscribed and paid for by the shareholders, and the Company then allocated the remainder of 48.31 million shares from the share subscription and payment by the shareholders by way of private placement, totaling Baht 1,103.10 Million, with the ordinary share premium amounting to Baht 896.53 Million, and the issued and paid-up capital increased by Baht 206.57 Million. ë Unrealized gain (loss) on changes in value of investments represents revaluation of investment in securities available for sale, amounting to Baht (86.40) Million, representing a decrease from that as at the end of 2009 by Baht 122.99 Million or 336.09 percent (as at December 31, 2010, BECL closing price = Baht 19.70 per share, and in 2009, BECL closing price = Baht 20.80 per share). ë Retained earnings decreased due to the net operating loss of Baht (349.73) Million in 2010, which decreased from that as at the end of 2009, due to the Companyûs operating loss, as mentioned in the Operational Results above. ë Minority interests of subsidiaries amounted to Baht 241.83 Million, which increased from that as at the end of 2009 by Baht 23.62 Million or 10.82 percent. (4) The Companyûs net debt to equity ratio as at December 31, 2010 in the consolidated financial statements was 2.45, which increased from that as at the end of 2009. Liquidity In the cash flow statements for the year ended December 31, 2010, the Companyûs cash decreased during the year in the amount of Baht 1,994.94 Million, and when combined with cash brought forward from 2009 in the amount of Baht 3,519.43 Million, the cash balance carried forward as at December 31, 2010 amounted to Baht 1,524.50 Million, with the details as follows: (1) Net cash flows used in operating activities after interest expenses and corporate income tax amounted to Baht 3,114.27 Million, due to the fact that the Company carried out the construction of the Nam Ngum 2 Dam Project in the Lao PDR, the cost of which was adjusted to be considerably higher than revenue from such project, and the subsidiaries partially operated the Xayaburi Project, which accounted for revenue pending collection. In addition, the Companyûs interest payment was increased due to the Companyûs borrowing of additional loans for construction of the Purple Line Project, Contract 1, and for use as working capital. (2) Net cash flows used in investing activities amounted to Baht 1,273.44 Million, due to the fact that the Company used cash for payment of provisional investments with interest rate higher than deposits at bank, and the Company invested in Xayaburi Power Company Limited and SouthEast Asia Energy Limited. (3) Net cash flows from financing activities amounted to Baht 2,395.08 Million, as a result of the Companyûs additional drawdown of long-term loan.

CH. Karnchang Public Company Limited

83


Attachment : Details of the Company没s Directors, Executives and Authorized Persons Information of the Company没s Directors, Executives and Authorized Persons are as follows :

Name-Surname/Position

Age (Years)

Education

1. Mr. Aswin Kongsiri Chairman of the Board of Directors

65

- B.A. (Hons.) in Philosophy, Politics and Economics, Oxford University, England - Chairman 2000 Course, (Class 5/2001) Thai Institute of Directors Association - Director Certification Program (DCP 11/2001) Thai Institute of Directors Association

2. Mr. Plew Trivisvavet Director Chaiman of the Executive Board Nomination Committee Member Remuneration Committee Member Corporate Governance and Risk Management Committee Member Authorized Signatory Director

65

- M.Sc. (Electrical Engineering), Osaka University, Japan - B.A. (Electrical Engineering), Osaka University, Japan - Director Accreditation Program (DAP 18/2004) Thai Institute of Directors Association - Director Certification Program (DCP 50/2004) Thai Institute of Directors Association - Finance for Non-Finance Directors (FND 13/2004) Thai Institute of Directors Association - Capital Market Academy Leadership Program, Capital Market Academy (CMA Course), Class 4/2007

84

Proportion of Shareholding (%) -

1.26

Annual Report 2010


Family Relationship Among Executives

Experience in the Last Five Years Period

- None -

2010 - Present 2010 - Present 2009 - Present 2007 - Present 2005 - Present 2001 - Present 1999 - Present 1994 - Present 1993 - Present 1981 - Present 2009 - 2010 2005 - 2010 2006-2008 1999-2003 Mr. Kamthorn没s Dec. 2007 - Present brother 2006 - Present 2004 - Present Miss Supamas没s Feb. 2003- Present father 1998 - Present 1998-Present 1994-Present 2004 - 2008

CH. Karnchang Public Company Limited

Position Chairman of the Board of Directors Chairman of the Board of Directors Deputy Chairman of the Board of Directors Chairman of the Board of Directors Independent Director Independent Director Director and Chairman of the Audit Committee Independent Director Independent Director Independent Director Director and Audit Committee Member Director and Executive Director Member of the National Legislative Assembly Director and Executive Director Corporate Governance and Risk Management Committee Member Director Director Nomination Committee Member and Remuneration Committee Member Chairman of the Board of Directors and Chairman of the Executive Board Director and Chairman of the Executive Board President and Chief Executive Officer Director

Organization/Company/ Business Thoresen Thai Agencies Plc. Thai Orix Leasing Co., Ltd. Electricity Generating Plc. CH. Karnchang Plc. Bangkok Aviation Fuel Services Plc. Electricity Generating Plc. OHTL Plc. CH. Karnchang Plc. Thai Reinsurance Plc. Padaeng Industry Plc. Thoresen Thai Agencies Plc. Krung Thai Bank Plc. The National Legislative Assembly Siam Commercial Bank Plc. CH. Karnchang Plc. Thai Tap Water Supply Plc. SouthEast Asia Energy Limited CH. Karnchang Plc Bangkok Metro Plc. Bangkok Expressway Plc. CH. Karnchang Plc. BMCL Network Limited

85


Name-Surname/Position 3. Mr. Vitoon Tejatussanasoontorn Director Chairman of the Audit Committee Chairman of the Nomination Committee Chairman of the Remuneration Committee Chairman of the Corporate Governance and Risk Management Committee

Age (Years)

- B.A. in Commerce, Thammasat University - Director Certification Program (DCP 2/2000) Thai Institute of Directors Association - IOD Chartered Directors, Thai Institute of Directors Association, Class 1/2007 - Advanced Audit Committee Programs (AACP 3/2010) Thai Institute of Directors Association

0.03

4. Mr. Don Pramudwinai 60 Director Audit Committee Member Chairman of the Corporate Social and Environmental Responsibility Committee

- M.A. (International Relations), Tufts University, U.S.A. - M.A. (International Relations), University of California, Los Angeles, U.S.A. - B.A. in Political Science (Hons.), University of California, Los Angeles, U.S.A.

0.006

5. Mr. Thawansak Sukhawun Director Audit Committee Member Corporate Governance and Risk Management Committee Member

- M.A. in Political Science with the Certificate in International Affairs, University of North Carolina at Chapel Hill, N.C., U.S.A. - Bachelor of Arts, Chulalongkorn University - Certificate of Modern Management, National Defence College (NDC) of Thailand - Director Certification Program (DCP 61/2005) Thai Institute of Directors Association - Finance for Non-Finance Directors (FND 19/2005) Thai Institute of Directors Association - Fraud and Corruption Risk in Economic Downturn Thai Institute of Directors Association - Advanced Audit Committee Programs (AACP 3/2010) Thai Institute of Directors Association

86

70

Education

Proportion of Shareholding (%)

73

-

Annual Report 2010


Family Relationship Among Executives - None -

- None -

- None -

Experience in the Last Five Years Period 2007 - Present

Position

Chairman of the Corporate Governance and Risk Management Committee Chairman of the Nomination Committee and Chairman of the Remuneration Committee 2005 - Present Director, Audit Committee Member and Nomination and Remuneration Committee Member 2002 - Present Advisor of the Federation of Thai Industries of Samutprakarn Province 2001 - Present Vice Chairman of Thai Chamber of Commerce of Samutprakarn Province 1999 - Present Director and Chairman of the Audit Committee 1991 - Present Deputy Senior Managing Director 1986 - Present Director and Executive Director Feb. 2003 - Sep. 2007 Nomination Committee Member and Remuneration Committee Member 1994 - Present Director and Audit Committee Member 2009 - 2010 Ambassador 2007 - 2008 Ambassador and Permanent Representative of Thailand 2004 - 2007 Ambassador 2001 - 2004 Ambassador 1999 - 2000 Director-General of the Department of Information Dec. 2007 - Present Corporate Governance and Risk Management Committee Member 2000 - Present Director and Audit Committee Member 1989 - 1998 Director General Deputy Director General

CH. Karnchang Public Company Limited

Organization/Company/ Business CH. Karnchang Plc.

Bangkok Metro Plc.

CH. Karnchang Plc. Thai Asahi Glass Plc. Sakata-Thai Corporation Ltd. CH. Karnchang Plc. CH. Karnchang Plc. Embassy in Washington DC, U.S.A. In the United Nations, New York City In Belgium In The People没s Republic of China Ministry of Foreign Affairs CH. Karnchang Plc. CH. Karnchang Plc. Thai News Agency Mass Communication Organization of Thailand (M.C.O.T.)

87


Name-Surname/Position

Age (Years)

Education

6. Mr. Pavich Tongroach Director Corporate Social and Environmental Responsibility Committee Member

64

- Doctor of Philosophy (Ph.D.) in Pharmacology (The School of Pharmacy, The University of London, U.K.) - Post-doctoral Research at Faculty of Medicine, University of Tokyo (specialisation : neuronal signaling & learning model) - Master of Science (M.Sc.) in Neurobiology, (Bedford & Chelsea Colleges, The University of London, U.K.) - Bachelor of Pharmacy, Mahidol University - Director Certification Program (DCP 131/2010) Thai Institute of Directors Association

7. Mr. Narong Sangsuriya Director Executive Director Nomination Committee Member Remuneration Committee Member Authorized Signatory Director

66

- Bachelor of Engineering (Civil), Chulalongkorn University - Director Certification Program (DCP 54/2005) Thai Institute of Directors Association

8. Mr. Kamthorn Trivisvavet Director Executive Director Authorized Signatory Director

61

- Master of Business Administration, Kasetsart University - Bachelor of Agricultural Technology, Bandit Sakonnakhon College - Director Certification Program (DCP 50/2004) Thai Institute of Directors Association - Finance for Non-Finance Directors (FND 13/2004) Thai Institute of Directors Association - The Leadership Grid of 2008, Grid Thailand

88

Proportion of Shareholding (%) -

0.04

0.00006

Annual Report 2010


Family Relationship Among Executives - None -

Experience in the Last Five Years Period 2007 - Present Present Present Present Present Present 2005 - 2006 2005 - Sep. 2006 2005 - Sep. 2006

- None -

Jun. 2004 - Sep. 2006 Jun. 2004 - Sep. 2006 Mar. 2009 - Present Sep. 2007 - Present 2004 - Present 2001 - Present 2000 - Present 1994 - Present 1994 - 2000

Mr. Plew没s brother

2009 - Present Present 1999 - Present 1994 - Present 1992 - Present 1990 - Present 1988 - Present 1983 - Present 1981 - Present 1973 - Present

CH. Karnchang Public Company Limited

Position

Organization/Company/ Business

Director CH. Karnchang Plc. President of the Council Nakhon Pathom Rajabhat University President The Pharmacy Council President Thai Neuroscience Society Emeritus President Mahasarakham University Advisory member, Senate没s Research and Development Committee The National Legislative Assembly President Nakhon Phanom University 2005 President Princess of Narathiwat University Acting Chairman of the Administrative Board National Institute of Academic Testing Service (Public Organization) Chairman of the Administrative Board Office of Higher Education Financial Reform Secretary General, Commission on Higher Education Ministry of Education Member, Education Council Director Bangpa-in Cogeneration Limited Nomination Committee Member and Remuneration Committee Member CH. Karnchang Plc. Director SouthEast Asia Energy Limited Director and Senior Executive Vice CH. Karnchang Plc. President: Operation Group Director Thai Tap Water Supply Plc. Executive Director CH. Karnchang Plc. Director and Senior Executive Vice President: CH. Karnchang Plc. Construction Group Director and Executive Director CH. Karnchang Plc. Advisor Pathum Thani Water Co., Ltd. Director Construction Material Supply Co., Ltd. Director CH. Karnchang Holding Co., Ltd. Director CK. Office Tower Co., Ltd. Director Expert Transport Co., Ltd. Director Bang Pa-in Land Development Co., Ltd. Director Mahasiri Siam Co., Ltd. Director CH. Karnchang-Tokyu Construction Co., Ltd. Managing Partner Presertvit Construction Limited Partnership

89


Name-Surname/Position

Age (Years)

9. Mr. Prasert Marittanaporn Director Executive Director Corporate Social and Environmental Responsibility Committee Member Authorized Signatory Director

54

10. Mr. Ratn Santaannop Director Executive Director Authorized Signatory Director

67

11. Mr. Sombat Kitjalaksana Director Authorized Signatory Director

53

90

Education

Proportion of Shareholding (%)

- Master of Business Administration, Kasetsart University - Bachelor of Accounting, Chulalongkorn University - Director Certification Program (DCP 54/2005) Thai Institute of Directors Assocaiton - Role of the Compensation Committee (RCC 6/2008) Thai Institute of Directors Association - Capital Market Academy Leadership Program, Capital Market Academy (CMA 9/2009) - Successful Formulation & Execution of Strategy (SFE 6/2010) Thai Institute of Directors Association - Bachelor of Engineering (Civil), Chulalongkorn University - Director Certification Program (DCP 88/2007) Thai Institute of Directors Association - Understanding the Fundamental of Financial Statements (UFS 9/2007) Thai Institute of Directors Association

-

- Ph.D. of Engineering (Soil Mechanic), University of Innsbruck, Austria - Master of Engineering (Civil), Chulalongkorn University - Bachelor of Engineering (Civil), Chulalongkorn University - Director Accreditation Program (DAP 36/2005) Thai Institute of Directors Association - Finance for Non-Finance Directors (FND 19/2005) Thai Institute of Directors Association - Director Certification Program (DCP 81/2006) Thai Institute of Directors Association - DCP Refresher Course (RE DCP 2/2009) Thai Institute of Directors Association

0.06

-

Annual Report 2010


Family Relationship Among Executives

Experience in the Last Five Years Period

Position

Organization/Company/ Business

- None -

Jan. 2009 - Present Sep. 2007 - Present 2007 - Present 2006 - Present 2004 - Present 2000 - Present 2005 - Sep. 2007 2001 - 2008 1994 - 2000

Senior Executive Vice President: Administration Group Executive Director Director Director Director Director Director Executive Vice President: Accounting and Finance Senior Vice President: Accounting and Finance

CH. Karnchang Plc. CH. Karnchang Plc. CH. Karnchang-Tokyu Construction Co., Ltd. CH. Karnchang Co., Ltd. SouthEast Asia Energy Limited Thai Tap Water Supply Plc. Pathum Thani Water Co., Ltd. CH. Karnchang Plc. CH. Karnchang Plc.

- None -

2010 - Present Sep. 2007 - Present 2006 - Present 2001 - Present 2007 - 2009 2007 - Mar. 2008 2005 - Sep. 2007 1994 - 2000 Mar. 2009 - Present 2006 - Present 2004 - Present 2000 - Present 2005 - Sep. 2007 2004 - 2008

Director Executive Director Director Executive Vice President: Construction 1 Director Director Director First Senior Vice President: Project Construction Group Director Director Director, Executive Director and Managing Director Director Director Director Director Director Executive Vice President: Business Development Senior Vice President: International Business

Thai Water Operations Co., Ltd. CH. Karnchang Plc. CH. Karnchang Plc. CH. Karnchang Plc. BJT Water Co., Ltd. Bangkok Concrete Industries Co., Ltd. Pathum Thani Water Co., Ltd. CH. Karnchang Plc. Bangkok Metro Networks Limited CH. Karnchang Plc. Bangkok Metro Plc. Thai Tap Water Supply Plc. Pathum Thani Water Co., Ltd. Metro Mall Development Limited BMCL Network Limited Triads Networks Co., Ltd. CH. Karnchang Plc. CH. Karnchang Plc.

- None -

2001 - 2010 1994 - 2000

CH. Karnchang Public Company Limited

91


Name-Surname/Position

Age (Years)

12. Mr. Anukool Tuntimas Director Executive Director Authorized Signatory Director

43

13. Mr. Viboon Mongkolpiyathana

60

14. Mr. Samai Paiboon

66

15. Mr. Sittidej Trivisvavet

57

92

Education

Proportion of Shareholding (%)

- Doctor of Business Administration, University of South Australia - Master of Laws, Chulalongkorn University - Master of Business Administration, Kasetsart University - Barrister at Law, The Institute of Legal Education - Bachelor of Laws, Chulalongkorn University - Bachelor of Business Administration (Accounting and Finance) Ramkhamhaeng University - Director Certification Program (DCP 43/2004) Thai Institute of Directors Association - Advanced Audit Committee Programs (AACP 1/2009) Thai Institute of Directors Association - Corporate Governance and Social Responsibility (CSR 1/2007) Thai Institute of Directors Association - Finance for Non-Finance Directors (FND 38/2007) Thai Institute of Directors Association - Role of the Compensation Committee (RCC 9/2009) Thai Institute of Directors Association - Bachelor of Engineering (Civil), Songklanakarin University - Director Certification Program (DCP 132/2010) Thai Institute of Directors Association - Bachelor of Engineering (Civil), Chulalongkorn University - Director Certification Program (DCP 127/2010) Thai Institute of Directors Association

0.24

- Bachelor of Business Administration in Construction Management, Sukhothai Thammathirat Open University - Director Certification Program (DCP 127/2010) Thai Institute of Directors Association

0.19

-

-

Annual Report 2010


Family Relationship Among Executives - None -

Experience in the Last Five Years Period Mar. 2009 - Present Sep. 2007 - Present 2006 - Present 2004 - Present 2001 - Present

Position

Organization/Company/ Business Bangkok Metro Networks Limited CH. Karnchang Plc. CH. Karnchang Plc. Bangkok Metro Plc. CH. Karnchang Plc.

2004 - 2006

Director Executive Director Director Director and Executive Director Executive Vice President: Human Resource and General Administration Director Director Director Director and Vice President, Academic Affairs

- None -

2001 - Present 1997 - 2000 1994 - 1996

Executive Vice President: Construction 2 Project Manager Engineering Manager

CH. Karnchang Plc. CH. Karnchang Plc. CH. Karnchang-Tokyu Construction Co., Ltd.

- None -

2001 - Present 1994 - 2000

Executive Vice President: Engineering Senior Vice President: Civil Engineering and Architecture

CH. Karnchang Plc. CH. Karnchang Plc.

- None -

2009 - Present 2000 - Present 1994 - Present 1979 - Present

Executive Vice President: Purchasing Director Director Director

CH. Karnchang Plc. Expert Transport Co., Ltd. Vetprasert Co., Ltd. Songvet Co., Ltd.

2004 - 2008

CH. Karnchang Public Company Limited

Metro Mall Development Limited Triads Networks Co., Ltd. BMCL Network Limited Lawyers Association of Thailand

93


Name-Surname/Position

Age (Years)

16. Mr. Vorapote Uchupaiboonvong

49

17. Miss Supamas Trivisvavet

36

94

Education - Master of Business Administration (International Finance and Banking), University of Birmingham, U.K. - Master of Accountancy (Costing), Chulalongkorn University - Bachelor of Accountancy, Thammasat University - Director Certification Program (DCP 61/2005) Thai Institute of Directors Association - Audit Committee Program (ACP 10/2005) Thai Institute of Directors Association - Monitoring the System of Internal Control and Risk Management (MIR 2/2008) Thai Institute of Directors Association - Company Secretary Program (CSP 25/2008) Thai Institute of Directors Association - Developing Corporate Governance Policy, Thai Institute of Directors Association - Effective Minute Taking (EMT 12/2008) Thai Institute of Directors Association - Successful Formulation & Execution of Strategy (SFE 6/2010) Thai Institute of Directors Association - Doctor of Public Administration, University of Southern California, U.S.A. - Master of Public Policy, Duke University, U.S.A. - Bachelor of Arts, Chulalongkorn University - Director Certification Program (DCP 106/2008) Thai Institute of Directors Association - Developing Corporate Governance Policy, Thai Institute of Directors Association - Effective Minute Taking (EMT 16/2010) Thai Institute of Directors Association - Company Secretary Program (CSP 37/2010) Thai Institute of Directors Association - Board Reporting Program (BRP 3/2010) Thai Institute of Directors Association

Proportion of Shareholding (%) 0.0006

0.12

Annual Report 2010


Family Relationship Among Executives

Experience in the Last Five Years Organization/Company/ Business

Period

Position

- None -

Mar. 2009 - Present Jan. 2009 - Present 2005 - Present 2006 - 2009 1990 - 2008

Director Executive Vice President: Accounting and Finance Independent Director Director Project Management Manager

Bangpa-in Cogeneration Limited CH. Karnchang Plc. Union Petrochemical Plc. BJT Water Co., Ltd. CH. Karnchang Plc.

Mr. Plew没s daughter

Aug. 2009 - Present Mar. 2009 - Present Jul. 2008 - Present Jul. 2008 - Present

Executive Vice President: Office of President Director Director Director

CH. Karnchang Plc. Bangpa-in Cogeneration Limited Bang Pa-in Land Development Co., Ltd. Cholavet Civil Co., Ltd.

CH. Karnchang Public Company Limited

95


+ Financial Statement Report 2010 CH. Karnchang Public Company Limited

96

Annual Report 2010


Report of Independent Auditor

To the Shareholders of CH. Karnchang Public Company Limited I have audited the accompanying consolidated balance sheets of CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities as at 31 December 2010 and 2009, the related consolidated statements of income, changes in shareholders没 equity and cash flows for the years then ended, and the separate financial statements of CH. Karnchang Public Company Limited for the same periods. These financial statements are the responsibility of the management of the Company, its subsidiaries and its jointly controlled entities 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 CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities and of CH. Karnchang Public Company Limited as at 31 December 2010 and 2009, and the results of their operations, and cash flows for the years then ended, in accordance with generally accepted accounting principles.

Siraporn Ouaanunkun Certified Public Accountant (Thailand) No. 3844 Ernst & Young Office Limited Bangkok: 28 February 2011

CH. Karnchang Public Company Limited

97


Balance sheets CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities As at 31 December 2010 and 2009

Note Assets Current assets Cash and cash equivalents Current investments Trade accounts receivable Related parties, net Unrelated parties, net Accounts receivable and loans to related parties, net Unbilled receivables Inventories and construction supplies Advance payment to subcontractors, net Current portion of long-term loans to associated company and interest receivable Current portion of loans to subcontractors and interest receivable Current portion of long-term loans to other companies and interest receivable Other current assets Prepaid expenses Accrued income Interest receivable Refundable input tax, net Unbilled input tax Withholding tax deducted at source Others Total current assets Non-current assets Restricted bank deposits Long-term loans to jointly controlled entities and interest receivable Long-term loans to associated companies and interest receivable, net of current portion Long-term loans to other companies and interest receivable, net of current portion Investments in subsidiaries, net Investments in joint ventures, net Investments in associated companies, net Other long-term investments, net Long-term accounts receivable Related party Unrelated party Property, plant and equipment, net Investments in land, net Intangible assets, net Accounts receivable-claims for additional costs Less: Allowance for doubtful accounts Accounts receivable-claims for additional costs, net

(Unit : Baht) Consolidated financial statements Separate financial statements 2010 2009 2010 2009

7 8

1,524,498,186 3,041,527,621

3,519,433,926 2,669,015,838

442,163,612 3,041,527,621

1,890,662,136 2,669,015,838

6, 9 9 6 10 11 6

668,218,928 881,767,910 86,331,924 5,261,252,432 349,766,455 931,454,816

519,249,577 561,655,157 168,568,161 3,840,530,566 343,266,423 1,050,314,607

249,351,836 449,903,217 2,991,667,942 2,256,748,076 114,977,105 210,673,327

407,454,593 430,941,729 1,228,291,350 2,463,514,865 123,603,858 273,381,502

6

187,990,232

-

187,990,232

-

13

41,984,694

177,544,214

-

-

13

251,183,838

155,749,495

-

-

34,988,478 44,419,088 15,363,385 446,126,755 233,919,850 444,409,381 2,935,422 8,686,700 2,397,942 103,920,019 106,771,863 898,158 47,026,765 43,429,398 12,846,863 80,857,174 132,764,823 48,071,386 46,955,859 15,369,863 18,980,413 13,988,787,508 13,590,689,549 10,487,970,496

22,279,962 233,919,851 5,266,702 8,657,496 18,470,006 95,251,155 2,760,341 9,873,471,384

12 6

519,341,577 220,200,605

408,276,703 244,872,648

360,341,577 1,101,003,027

244,242,890 1,245,518,207

6

3,163,780,239

2,728,379,261

3,163,780,239

2,728,379,261

13 14 15 16 17

1,088,224,979 5,602,075,087 2,493,963,638

1,276,224,979 4,692,442,183 2,620,184,328

363,676,501 8,294,499,694 2,303,526,180

283,162,501 7,386,986,694 2,420,195,730

6, 9 9 18 19 20 27 27

134,110,988 131,698,655 2,290,423,514 281,888,858 64,286,231 2,515,620,262 (2,515,620,262) -

133,564,400 246,698,655 2,202,339,221 281,888,858 59,079,310 2,515,620,262 (2,515,620,262) -

134,110,988 131,698,655 1,355,348,028 140,511,922 58,522,639 -

133,564,400 246,698,655 1,489,635,736 140,511,922 59,079,310 -

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

98

Annual Report 2010


Balance sheets (continued) CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities As at 31 December 2010 and 2009

Note Other non-current assets Advances for future projects Withholding tax deducted at source Deposits Others Total non-current assets Total assets Liabilities and shareholders没 equity Current liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Related parties Unrelated parties Current portion of hire purchase creditors Current portion of long-term loans Current portion of debentures Accounts payable and loans from related parties Advances received from employers and construction revenue received in advance Retention for construction Other current liabilities Accrued interest Corporate income tax payable Accrued expenses Unbilled output tax Other payables Others Total current liabilities Non-current liabilities Hire purchase creditors, net of current portion Long-term loans, net of current portion Debentures, net of current portion Long-term accrued interest Provision for loss on investments in joint ventures Total non-current liabilities Total liabilities

28

(Unit : Baht) Consolidated financial statements Separate financial statements 2010 2009 2010 2009 228,329,282 941,832,750 10,377,692 133,878,358 5,200,442 95,251,155 37,174,628 18,247,322 11,357,316 91,825,548 19,942,280 5,211,221 16,481,202,187 15,879,173,340 17,529,216,834 30,469,989,695 29,469,862,889 28,017,187,330

124,673,122 11,917,744 5,122,926 16,519,689,098 26,393,160,482

21

3,378,670,357

2,659,717,619

3,378,670,357

1,890,300,000

6 22 23 24 6

23,656,882 1,235,089,748 40,981,660 820,750,000 3,000,000,000 17,239,140

31,070,496 1,170,369,692 98,136,105 624,420,000 3,100,000,000 125,286,738

11,465,007 444,437,112 37,657,613 820,750,000 3,000,000,000 -

39,417,428 461,268,538 89,569,408 624,420,000 3,100,000,000 -

6, 10 6

1,650,779,700 371,065,633

1,613,001,594 525,853,206

365,376,863 71,109,012

484,705,822 155,168,359

145,650,365 179,882,535 18,575,480 26,955,760 170,189,286 125,801,618 97,958,972 107,558,036 34,839,453 12,470,202 96,935,101 46,602,583 11,102,381,777 10,447,126,184

145,650,364 108,747,040 111,881,222 32,514,888 77,714,821 8,605,974,299

179,267,885 71,475,639 126,197,455 8,281,524 32,641,607 7,262,713,665

14,401,582 4,098,250,000 3,348,005,212 3,349,250,000 8,975,715,490 8,877,760,492 8,975,715,490 324,349,959 81,902,000 758,964,424 98,074,822 13,155,867,490 13,323,481,669 12,423,040,312 24,258,249,267 23,770,607,853 21,029,014,611

11,077,535 3,348,005,212 8,877,760,492 324,349,959 775,607,246 13,336,800,444 20,599,514,109

22 23 24 15 15

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

CH. Karnchang Public Company Limited

99


Balance sheets (continued) CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities As at 31 December 2010 and 2009

Note Shareholders没 equity Share capital Registered 1,652,585,336 ordinary shares of Baht 1 each (2009: 1,450,000,000 ordinary shares of Baht 1 each) Issued and paid up 1,652,585,336 ordinary shares of Baht 1 each (2009: 1,446,012,169 ordinary shares of Baht 1 each) Share premium Unrealised gain (loss) Revaluation surplus (deficit) on changes in value of investments Retained earnings Appropriated-statutory reserve Unappropriated (Deficit) Difference on reorganization of business of group companies Equity attributable to the company没s shareholders Minority interest-equity attributable to minority shareholders of subsidiaries Total shareholders没 equity Total liabilities and shareholders没 equity

(Unit : Baht) Consolidated financial statements Separate financial statements 2010 2009 2010 2009

25

1,652,585,336

1,450,000,000

1,652,585,336

1,450,000,000

25

1,652,585,336 4,869,410,139

1,446,012,169 3,972,882,594

1,652,585,336 4,869,410,139

1,446,012,169 3,972,882,594

(86,396,390)

36,594,257

(112,641,521)

5,096,000

64,391,471 (349,734,594) (180,349,005) 5,969,906,957

45,670,523 169,297,505 (189,414,484) 5,481,042,564

58,891,471 519,927,294 6,988,172,719

40,170,523 329,485,087 5,793,646,373

241,833,471 218,212,472 6,211,740,428 5,699,255,036 6,988,172,719 30,469,989,695 29,469,862,889 28,017,187,330

5,793,646,373 26,393,160,482

26

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

100

Annual Report 2010


Income statements CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2010 and 2009

Note Revenues Revenues from construction services 29 Sales of construction materials Project management income Rental income Transportation income Other income Interest income Dividend income and profit sharing from jointly controlled entities 6, 16 Gain on sales of property, plant and equipment Gain on exchange 30 Gain on sales of investments in associated company 16 Revenue from reversal of provision for loss on investment in subsidiary Revenue from reversal of provision for loss on investment in joint venture 15 Revenue from forgiveness of accrued interests 15 Miscellaneous income Others Total revenues Expenses Cost of construction services, sales of construction materials and services 29 Administrative expenses Management benefit expenses 6 Loss on exchange 30 Total expenses Income before share of income from investments in associated companies, finance cost and corporate income tax Share of income from investments in associated companies 16 Income before finance cost and corporate income tax Finance cost Income (loss) before corporate income tax Corporate income tax 32 Net income (loss) for the year Net income (loss) attributable to: Equity holders of the parent Minority interests of the subsidiaries

Earnings (loss) per share Basic earnings (loss) per share Net income (loss) attributable to equity holders of the parent Weighted average number of ordinary shares (shares)

(Unit : Baht) Consolidated financial statements Separate financial statements 2010 2009 2010 2009 8,486,531,289 32,951,407 66,889,085 49,041,052 4,160,100

12,708,395,908 37,080,969 35,126,473 74,332,824 1,128,640

1,741,023,974 5,845,379 182,429,016 131,940,666 15,547,251

3,517,953,635 3,248,970 38,537,332 382,893,051 9,927,485

253,787,163 160,531,509 20,375,511 7,816,112 175,883,879

264,025,775 262,079,960 41,756,272 94,308,769 343,065,996

395,712,874 675,735,868 18,355,863 276,518 171,148,640

291,339,050 738,930,520 63,267,501 324,320,000

-

22,300,937

-

-

446,290,299 144,212,982 36,819,024 21,122,519 8,553,847 30,434,811 9,893,843,259 13,935,159,853

446,290,299 144,212,982 79,978,468 5,931,971 4,014,429,769

48,711,099 51,614,500 5,470,743,143

8,338,483,258 1,153,225,843 105,855,628 9,597,564,729

11,859,741,990 1,031,916,453 89,270,130 12,980,928,573

1,753,483,753 917,818,777 75,033,450 2,746,335,980

3,584,623,655 817,230,597 64,722,473 1,849,133 4,468,425,858

296,278,530 384,094,953 680,373,483 (943,088,273) (262,714,790) (56,557,535) (319,272,325)

954,231,280 81,892,179 1,036,123,459 (882,299,114) 153,824,345 (56,252,708) 97,571,637

1,268,093,789 1,268,093,789 (893,674,820) 374,418,969 374,418,969

1,002,317,285 1,002,317,285 (785,295,128) 217,022,157 217,022,157

(335,055,337) 15,783,012 (319,272,325)

89,731,014 7,840,623 97,571,637

374,418,969

217,022,157

(0.21) 1,618,114,701

0.06 1,446,012,169

0.23 1,618,114,701

0.15 1,446,012,169

33

The accompanying notes are an integral part of the financial statements. CH. Karnchang Public Company Limited

101


Statements of changes in shareholders没 equity CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2010 and 2009 Consolidated financial statements Equity attributable to the parent没s shareholders Revaluation surplus Issued and Share (deficit) on changes paid-up premium in value of share capital investments Balance as at 31 December 2008 Income recognised directly in equity: Investment in available-for-sale securities Gain recognised in shareholders没 equity Net income recognised directly in equity Net income for the year Total income for the year Dividend payment (Note 37) Unappropriated retained earnings transferred to statutory reserve (Note 26) Difference on reorganization of business of group companies Increase in minority interests from investment in subsidiary Decrease in minority interests in subsidiaries from dividend payment of subsidiary Balance as at 31 December 2009

1,446,012,169

3,972,882,594

(377,744,905)

-

-

414,339,162 414,339,162 414,339,162 -

1,446,012,169

3,972,882,594

36,594,257

Balance as at 31 December 2009 Expenses recognised directly in equity: Investment in available-for-sale securities Loss recognised in shareholders没 equity Net expenses recognised directly in equity Net loss for the year Total expenses for the year Dividend payment (Note 37) Unappropriated retained earnings transferred to statutory reserve (Note 26) Share capital issued (Note 25) Difference on reorganization of business of group companies Increase in minority interests from investment in subsidiary Decrease in minority interests in subsidiaries from dividend payment of subsidiary Balance as at 31 December 2010

1,446,012,169

3,972,882,594

36,594,257

206,573,167 -

896,527,545 -

(122,990,647) (122,990,647) (122,990,647) -

1,652,585,336

4,869,410,139

(86,396,390)

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

102

Annual Report 2010


(Unit: Baht)

Retained earnings Appropriated

Unappropriated (Deficit)

Difference on reorganization of business of group companies

Total equity attributable to the parent没s shareholders

Minority interest equity attributable to minority shareholders of subsidiaries

Total

34,819,415

234,974,096

(211,988,128)

5,098,955,241

205,344,604

5,304,299,845

10,851,108 -

89,731,014 89,731,014 (144,556,497) (10,851,108) -

22,573,644 -

414,339,162 414,339,162 89,731,014 504,070,176 (144,556,497) 22,573,644 -

14,613,245 14,613,245 7,840,623 22,453,868 3,914,000

428,952,407 428,952,407 97,571,637 526,524,044 (144,556,497) 22,573,644 3,914,000

45,670,523

169,297,505

(189,414,484)

5,481,042,564

(13,500,000) 218,212,472

(13,500,000) 5,699,255,036

45,670,523

169,297,505

(189,414,484)

5,481,042,564

218,212,472

5,699,255,036

18,720,948 -

(335,055,337) (335,055,337) (165,255,814) (18,720,948) -

9,065,479 -

(122,990,647) (122,990,647) (335,055,337) (458,045,984) (165,255,814) 1,103,100,712 9,065,479 -

(4,298,013) (4,298,013) 15,783,012 11,484,999 18,886,000

(127,288,660) (127,288,660) (319,272,325) (446,560,985) (165,255,814) 1,103,100,712 9,065,479 18,886,000

64,391,471

(349,734,594)

(180,349,005)

5,969,906,957

(6,750,000) 241,833,471

(6,750,000) 6,211,740,428 -

CH. Karnchang Public Company Limited

103


Statements of changes in shareholders没 equity

(continued) CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2010 and 2009 Separate financial statements

Issued and paid-up share capital

Share premium

Balance as at 31 December 2008 Income recognised directly in equity: Investment in available-for-sale securities Gain recognised in shareholders没 equity Net income recognised directly in equity Net income for the year Total income for the year Dividend payment (Note 37) Unappropriated retained earnings transferred to statutory reserve (Note 26) Balance as at 31 December 2009

1,446,012,169

3,972,882,594

1,446,012,169

3,972,882,594

Balance as at 31 December 2009 Expenses recognised directly in equity: Investment in available-for-sale securities Loss recognised in shareholders没 equity Net expenses recognised directly in equity Net income for the year Total income (expenses) for the year Dividend payment (Note 37) Unappropriated retained earnings transferred to statutory reserve (Note 26) Share capital issued (Note 25) Balance as at 31 December 2010

1,446,012,169

3,972,882,594

206,573,167 1,652,585,336

896,527,545 4,869,410,139

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

104

Annual Report 2010


(Unit: Baht)

Revaluation surplus (deficit) on changes in value of investments

Retained earnings Total Appropriated

Unappropriated

(391,382,531)

29,319,415

267,870,535

5,324,702,182

396,478,531 396,478,531 396,478,531 5,096,000

10,851,108 40,170,523

217,022,157 217,022,157 (144,556,497) (10,851,108) 329,485,087

396,478,531 396,478,531 217,022,157 613,500,688 (144,556,497) 5,793,646,373

5,096,000

40,170,523

329,485,087

5,793,646,373

(117,737,521) (117,737,521) (117,737,521) (112,641,521)

18,720,948 58,891,471

374,418,969 374,418,969 (165,255,814) (18,720,948) 519,927,294

(117,737,521) (117,737,521) 374,418,969 256,681,448 (165,255,814) 1,103,100,712 6,988,172,719

CH. Karnchang Public Company Limited

105


Cash flow statements CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2010 and 2009 (Unit: Baht)

Consolidated financial statements Separate financial statements 2010 2009 2010 2009 Cash flows from operating activities Net income (loss) before tax Adjustments to reconcile net income (loss) before tax to net cash provided by (paid from) operating activities: Depreciation and amortisation Amortisation of prepaid expenses and other assets Withholding tax deducted at source written-off Dividend income and profit sharing from jointly controlled entities Revenue from forgiveness of accrued interests Revenue from reversal of provision for loss on investment in joint venture Gain on sales of current investments Gain on sales of investments in associated company Gain on sales of investments in related company Provision for doubtful accounts Reversal of allowance for doubtful accounts Gain on sales of property, plant and equipment Transfer of cost of construction service to equipment Unrealised loss on exchange Revenue from reversal of provision for loss on investment in subsidiary Unrealised gain on changes in value of investments in marketable securities Amortisation of deferred debenture issuing cost Share of income from investments in associated companies Interest expenses Income (loss) from operating activities before changes in operating assets and liabilities Operating assets (increase) decrease Trade accounts receivable Accounts receivable-related parties Unbilled receivables Inventories and construction supplies Advance payment to subcontractors Other current assets Other non-current assets Operating liabilities increase (decrease) Trade accounts payable Accounts payable-related parties Advances received from employers and construction revenue received in advance Retention for construction Other current liabilities Cash flows from (used in) operating activities Cash paid for interest expenses Cash paid for corporate income tax Net cash flows from (used in) operating activities

(262,714,790)

153,824,345

374,418,969

217,022,157

326,571,969 6,870,879 2,293,439 (160,531,509) (144,212,982) (446,290,299) (26,698,454) (175,883,879) (2,123,087) (20,375,511) (38,585,123) 280,457 (746,450) 11,804,998 (384,094,953) 921,267,819

329,453,086 6,231,065 7,743 (148,996,131) (21,847,243) (343,065,996) (403,804) 3,327,355 (41,756,272) 2,546,699 (22,300,937) (293,700) 7,646,575 (81,892,179) 871,217,857

216,814,027 (675,735,868) (144,212,982) (446,290,299) (26,698,454) (171,148,640) (2,020,202) (18,355,863) (38,585,123) 610,221 (746,450) 11,804,998 871,854,366

214,263,137 (738,930,520) (21,847,243) (324,320,000) (403,804) (42,847,632) (63,267,501) 1,415,694 (293,700) 7,646,575 774,213,871

(393,167,476)

713,698,463

(48,291,300)

22,651,034

(354,525,807) 69,199,780 (1,420,721,867) (6,500,031) 118,859,791 (373,760,164) 622,659,102

1,296,604,059 (6,925,400) (773,674,689) 535,723,283 312,849,667 457,555,285 (696,406,176)

253,594,682 (338,773,078) 206,766,789 31,239,660 62,708,175 (390,402,249) 92,154,657

903,453,087 33,958,373 240,784,545 420,969,023 278,851,326 (130,094,588) 490,489,811

64,684,123 (115,461,211)

(795,106,547) 46,979,476

(44,690,904) -

(746,549,520) (208,582,641)

37,778,106 (152,719,328) 114,906,639 (1,788,768,343) (1,178,719,092) (146,781,522) (3,114,268,957)

174,103,954 181,210,221 (56,257,215) 1,390,354,381 (965,339,329) (174,265,941) 250,749,111

(119,328,959) (84,059,347) 99,678,014 (279,403,860) (1,128,690,989) (48,071,386) (1,456,166,235)

160,774,821 21,144,559 (52,096,373) 1,435,753,457 (869,823,514) (95,251,155) 470,678,788

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

106

Annual Report 2010


Cash flow statements (continued) CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2010 and 2009 (Unit: Baht)

Consolidated financial statements Separate financial statements 2010 2009 2010 2009 Cash flows from investing activities Increase in restricted bank deposits Cash payment for purchase of current investments Cash receipt from sales of current investments Decrease (increase) in loans to related parties Increase in long-term loans to associated company Decrease in loans to subcontractors Decrease in long-term loans to other companies Cash receipt from profit sharing from jointly controlled entities Dividend receipt from subsidiary, associated and related companies Increase in investments in subsidiary Increase in investments in associated companies Cash receipt from sales of investments in related company Cash receipt from sales of investments in associated company Cash receipt from minority interest from investment in subsidiary Increase in property, plant and equipment Increase in intangible assets Proceeds from sales of property, plant and equipment Net cash flows used in investing activities Cash flows from financing activities Increase (decrease) in bank overdrafts and short-term loans from financial institutions Proceeds from increase in share capital Decrease in loans from related parties Cash receipt from long-term loans Repayment of long-term loans Repayment for loans from venturers under the Payment Agreement Cash receipt from issuance of debentures Repayment of debentures Dividend payment Dividend payment of subsidiary Net cash flows from financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental disclosures of cash flows information Non-cash transactions Sale of equipment on credit Profit sharing receivable from jointly controlled entity

(111,064,874) (9,981,689,371) 9,630,651,530 24,732,322 (450,000,000) 114,997,953 92,565,656 2,606,272 553,701,006 (1,034,113,000) 297,748,640 18,886,000 (458,649,704) (10,282,464) 36,473,594 (1,273,436,440)

(85,837,139) (6,282,962,129) 3,682,995,000 (9,072,225) (600,000,000) 66,686,951 25,050,505 2,917,278 582,799,907 (598,936,905) 21,140,750 645,000,000 3,914,000 (531,807,969) (21,114,284) 146,497,277 (2,952,728,983)

(116,098,686) (9,981,689,371) 9,630,651,530 (1,455,272,156) (450,000,000) 125,723,787 550,012,081 (80,514,000) (1,034,113,000) 297,748,640 (117,615,202) (3,839,345) 33,436,554 (2,601,569,168)

(12,825,837) (6,282,962,129) 3,682,995,000 (395,398,982) (600,000,000) 15,655,674 588,316,097 (16,686,000) (598,936,905) 21,140,750 645,000,000 (448,884,126) (21,114,284) 7,244,051 (3,416,456,691)

718,952,738 1,103,100,712 3,129,000,000 (2,182,425,212) (187,690,000) 3,086,150,000 (3,100,000,000) (165,255,814) (6,750,000) 2,395,082,424 (2,312,767) (1,994,935,740) 3,519,433,926 1,524,498,186

(14,661,528) (2,109,866) 750,000,000 (598,050,000) (188,680,000) 6,878,416,200 (3,000,000,000) (144,556,497) (13,500,000) 3,666,858,309 (2,103,680) 962,774,757 2,556,659,169 3,519,433,926

1,488,370,357 1,103,100,712 2,380,000,000 (2,182,425,212) 3,086,150,000 (3,100,000,000) (165,255,814) 2,609,940,043 (703,164) (1,448,498,524) 1,890,662,136 442,163,612

847,712,415 750,000,000 (598,050,000) 6,878,416,200 (3,000,000,000) (144,556,497) 4,733,522,118 (1,379,642) 1,786,364,573 104,297,563 1,890,662,136

-

18,447,840 -

-

61,492,800 134,958,750

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

CH. Karnchang Public Company Limited

107


Notes to consolidated financial statements CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2010 and 2009

1. General information CH. Karnchang Public Company Limited (çthe Companyé) is a public company incorporated and domiciled in Thailand. The major shareholder of the Company is Mahasiri Siam Company Limited, which was also incorporated in Thailand. The Company is principally engaged in the provision of construction services. The registered office of the Company is at 587 Suthisarn Road, Khwaeng Dindaeng, Khet Dindaeng, Bangkok.

2. Basis of preparation 2.1 The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Professions Act B.E. 2547 and their presentation has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 30 January 2009, issued under the Accounting Act B.E. 2543. The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from the Thai language financial statements. The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policies. 2.2 Basis of consolidation a) The consolidated financial statements include the financial statements of CH. Karnchang Public Company Limited (çthe Companyé), its subsidiaries (çthe subsidiariesé) and its jointly controlled entities (çthe jointly controlled entitiesé) as follows:

Name of entity

Nature of business

Percentage of shareholding

Country of incorporation

Assets as a Revenues as a percentage to percentage to the the consolidated consolidated total total assets as at revenues for the year 31 December ended 31 December 2010 2009 2010 2009

2010

2009

Percent

Percent

Percent

Percent

Percent

Percent

Thailand

99.99

99.99

0.31

0.32

0.32

0.15

Investment company

Thailand

99.00

99.00

0.74

0.89

0.05

1.14

Construction

Thailand

55.00

55.00

2.63

2.22

12.08

5.98

Construction

The Lao

100.00

100.00

13.18

12.79

34.82

55.18

81.00

0.39

0.07

-

-

Investments in subsidiaries (held by the Company) Construction Material Supply Company Limited

Manufacturer and distributor of construction materials

CH. Karnchang Realestate Company Limited (included equity interest in Prompratarn Construction Limited Partnership and Prasertwit Construction Limited Partnership) CH. Karnchang-Tokyu Construction Company Limited (included equity interest in Joint Ventures CKCT) CH. Karnchang (Lao) Company Limited

Peopleûs Democratic Republic Bangpa-in Cogeneration Limited

Generation and sale of electricity

Thailand

81.00

and other energy

108

Annual Report 2010


Name of entity

Equity interest in jointly controlled entities (proportionate consolidation) Joint Venture CH. Karnchang Public Company Limited, Tokyu Construction Company Limited in joint venture with CH. Karnchang-Tokyu Construction Company Limited (hereinafter called çJoint Venture CKCTé) - Highway Project - Expressway Project Joint Venture CH. Karnchang Public Company Limited, Bilfinger Berger AG, Tokyu Construction Company Limited and CH. Karnchang-Tokyu Construction Company Limited (hereinafter called çJoint Venture BBCTé) - Second Stage Expressway Project Sector B Route Phayathai - Bangkhlo - Second Stage Expressway Project Sector C+ Route Chaeng Wattana -Bang Phun & Bang Sai - Second Stage Expressway Project Sector D Route Asoke - Srinakarin - Second Stage Expressway Project Sector C1A Route Ngam Wong Wan - Chaeng Wattana The TWCK (Thames Water International (Thailand) Limited and CH. Karnchang Public Company Limited) Joint Venture (hereinafter called çThe TWCK Joint Ventureé) Joint Venture BCKT (Bilfinger Berger AG, CH. Karnchang Public Company Limited, Kumagai Gumi Company Limited and Tokyu Construction Company Limited) (hereinafter called çJoint Venture BCKTé) Joint Venture BBCD Bilfinger Berger AG, CH. Karnchang Public Company Limited and Dyckerhoff & Widmann AG (hereinafter called çJoint Venture BBCDé) Joint Venture CKSL (CH. Karnchang Public Company Limited and SNC - Lavalin Inc.) (hereinafter called çJoint Venture CKSLé) Joint Venture CKAE Consortium Joint Venture CKET Joint Venture CKNNL CKLX Joint Venture CKTC Joint Venture CH. Karnchang-Krungthon Engineers Joint Venture

CH. Karnchang Public Company Limited

Nature of business

Country of incorporation

Percentage of profit sharing in jointly controlled entities 2010 2009

Assets as a Revenues as a percentage to percentage to the the consolidated consolidated total total assets as at revenues for the year 31 December ended 31 December 2010 2009 2010 2009

Percent

Percent

Percent

Thailand Thailand

60.00 40.00

60.00 40.00

-

Thailand

99.97

99.97

Thailand

99.97

Thailand

Percent

Percent

Percent

-

-

-

0.03

0.04

-

-

99.97

0.02

0.01

-

-

99.97

99.97

1.05

1.09

0.01

0.01

Thailand

99.97

99.97

0.02

0.02

-

-

Construction and project management (Dissolution during 2009)

Thailand

-

-

-

-

-

-

Construction

Thailand

25.00

25.00

0.01

0.08

-

-

Construction

Thailand

35.00

35.00

0.04

0.04

-

-

Construction (Dissolution during 2009)

Thailand

-

-

-

-

-

-

Construction Project management Construction Construction Construction Construction

Thailand Thailand Thailand Thailand Thailand Thailand

98.00 80.00 51.89 75.00 70.00 60.00

98.00 80.00 51.89 75.00 70.00 -

0.354.47 0.01 0.10 7.40 0.42

0.88 5.20 0.01 0.77 4.06 -

0.12 0.08 0.16 19.40 0.02

0.16 0.12 5.50 0.31 -

Construction (No trading activities during the years 2009 and 2010)

Construction

109


Name of entity

Investments in subsidiaries (held by subsidiary company) Prompratarn Construction Limited Partnership (99.00 percent held by CH. Karnchang Realestate Company Limited) Prasertwit Construction Limited Partnership (99.00 percent held by CH. Karnchang Realestate Company Limited)

Country of Nature of business incorporation

Construction and construction equipment rental service Construction and construction equipment rental service

Percentage of indirect shareholding 2010 2009 Percent Percent

Thailand

98.01

98.01

Thailand

98.01

98.01

b) Subsidiaries are fully consolidated as from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. c) Jointly controlled entities are fully consolidated applying the proportionate consolidation method as from being the date on which the Company assumed joint control, and continue to be consolidated until the date when such control ceases. d) The financial statements of the subsidiaries and jointly controlled entities are prepared using the same significant accounting policies as the Company. e) Material balances and transactions between the Company, its subsidiaries and its jointly controlled entities have been eliminated from the consolidated financial statements. f) Minority interests represent the portion of net income or loss and net assets of the subsidiaries that are not held by the Company and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet. 2.3 The separate financial statements, which present investments in subsidiaries, joint ventures and associates under the cost method, have been prepared solely for the benefit of the public.

3. Adoption of new accounting standards During the current year, the Federation of Accounting Professions issued a number of revised and new accounting standards as listed below. 3.1 Accounting standards that are effective for fiscal years beginning on or after 1 January 2011 (except Framework for the Preparation and Presentation of Financial Statements, which is immediately effective): Framework for the Preparation and Presentation of Financial Statements (revised 2009) TAS 1 (revised 2009) Presentation of Financial Statements TAS 2 (revised 2009) Inventories TAS 7 (revised 2009) Statement of Cash Flows TAS 8 (revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors 110

Annual Report 2010


TAS 10 (revised 2009) TAS 11 (revised 2009) TAS 16 (revised 2009) TAS 17 (revised 2009) TAS 18 (revised 2009) TAS 19 TAS 23 (revised 2009) TAS 24 (revised 2009) TAS 26 TAS 27 (revised 2009) TAS 28 (revised 2009) TAS 29 TAS 31 (revised 2009) TAS 33 (revised 2009) TAS 34 (revised 2009) TAS 36 (revised 2009) TAS 37 (revised 2009) TAS 38 (revised 2009) TAS 40 (revised 2009) TFRS 2 TFRS 3 (revised 2009) TFRS 5 (revised 2009) TFRS 6 TFRIC 15

Events after the Reporting Period Construction Contracts Property, Plant and Equipment Leases Revenue Employee Benefits Borrowing Costs Related Party Disclosures Accounting and Reporting by Retirement Benefit Plans Consolidated and Separate Financial Statements Investments in Associates Financial Reporting in Hyperinflationary Economies Interests in Joint Ventures Earnings per Share Interim Financial Reporting Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Investment Property Share-Based Payment Business Combinations Non-current Assets Held for Sale and Discontinued Operations Exploration for and Evaluation of Mineral Resources Agreements for the Construction of Real Estate

3.2 Accounting standards that are effective for fiscal years beginning on or after 1 January 2013: TAS 12 Income Taxes TAS 20 (revised 2009) Accounting for Government Grants and Disclosure of Government Assistance TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates The Company没s management believes that these accounting standards will not have any significant impact on the financial statements for the year when they are initially applied, except for the following accounting standards which management expects the impact on the financial statements in the year when they are adopted. TAS 19 Employee Benefits This accounting standard requires employee benefits to be recognised as expense in the period in which the service is performed by the employee. In particular, an entity has to evaluate and make a provision for post-employment benefits using actuarial techniques. Currently, the Company accounts for such employee benefits when they are incurred. At present, the management is evaluating the impact on the financial statements in the year when this standard is adopted.

CH. Karnchang Public Company Limited

111


TAS 40 (revised 2009) Investment Property This accounting standard requires an entity to classify property held to earn rental or for capital appreciation as investment property and allows to present it by using either a cost model or a fair value model. For the cost model, the entity requires to disclose its fair value in notes to financial statements. For fair value model, the entity requires to recognise the changes in value of the cost model and the fair value model in income statement. At present, the management is evaluating the impact on the financial statements in the year when this standard is adopted. TAS 12 Income Taxes This accounting standard requires an entity to identify temporary differences, which are differences between the carrying amount of an asset or liability in the accounting records and its tax base, and to recognise deferred tax assets and liabilities under the stipulated guidelines. At present, the management is evaluating the impact on the financial statements in the year when this standard is adopted.

4. Significant accounting policies 4.1 Revenues and expenses recognition a) Revenues from construction services The Company, its subsidiaries and its jointly controlled entities recognised revenues from construction services on a percentage of completion basis. The percentage of completion is measured based on comparison of actual construction costs incurred up to the end of the period and total anticipated construction costs to be incurred to completion. The recognised revenue which is not yet due per the contracts has been presented under the caption of çUnbilled receivablesÊ in the balance sheets. Revenues from additional work and other contracted work for which the working period does not exceed one year are recognised on the basis of work done and billed to the customer. Revenues from moving infrastructure, additional work and other contracted work are recognised on the basis of work done and billed to the customer. b) Sales of construction materials Sales of construction materials are recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are the invoiced value, excluding value added tax, of goods supplied after deducting discounts and allowances. c) Interest income Interest income is recognised on an accrual basis based on the effective rate. d) Dividends Dividends are recognised when the right to receive the dividends is established. e) Other revenues and expenses Other revenues and expenses are recognised on an accrual basis. Provision for losses on construction projects is made in the accounts in full when the possibility of loss is ascertained.

112

Annual Report 2010


4.2 Cash and cash equivalents Cash and cash equivalents consist of cash in hand, cash at banks, and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions.

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

4.4 Unbilled receivables Unbilled receivables comprises the costs of materials and labor, subcontractor charges, services and overheads plus the attributable net gains or losses less the amounts already billed to customers. The excess of the value of a construction contract in progress over the amount billed to the customer is presented as current assets. The excess of the amount billed to a customer over the value of the construction contract in progress is presented as çConstruction revenue received in advanceÊ under current liabilities.

4.5 Inventories and construction supplies Inventories and construction supplies are valued at the lower of cost (weighted average) and net realisable value. Supplies in process for installation and construction in progress are valued at cost. Work in process and construction in progress comprise the costs of materials and labor, subcontractor charges, cost of service and overheads of projects for which contracts are in the process of being executed.

4.6 Investments a) Investments in securities held for trading are stated at fair value. Changes in the fair value of these securities are recorded as gains or losses in the income statement. b) Investments in available-for-sale securities are stated at fair value. Changes in the fair value of these securities are recorded as a separate item in shareholdersĂť equity, and will be recorded as gains or losses in the income statement when the securities are sold. c) Investments in debt securities, both due within one year and expected to be held to maturity, are recorded at amortised cost. The premium/discount on debt securities is amortised/accreted by the effective rate method with the amortised/accreted amount presented as an adjustment to the interest income. d) Investments in non-marketable equity securities, which the Company and the subsidiary classify as other investments, are stated at cost net of allowance for loss on diminution in value (if any). e) Investments in associates are accounted for in the consolidated financial statements using the equity method. f) Investments in subsidiaries, joint ventures and associates are accounted for in the separate financial statements using the cost method. The fair value of marketable securities is based on the latest bid price of the last working day of the year. The fair value of debt instruments is determined based on yield rates quoted by the Thai Bond Market Association. The fair value of unit trusts is determined from their net asset value.

CH. Karnchang Public Company Limited

113


4.7 Property, plant and equipment/Depreciation Land is stated at cost. Building and equipment are stated at cost less accumulated depreciation and allowance for loss on impairment of assets (if any). Depreciation of building and equipment is calculated by reference to their costs on the straight-line basis over the following estimated useful lives: Condominium building 35 years Buildings and construction 3, 15 and 20 years Land improvement 5 years Machinery and equipment 5 to 15 years Furniture, fixtures and office equipment 5 years Motor vehicles 5 years Building improvements 10 years Depreciation is included in determining income. No depreciation is provided on land and construction in progress. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on disposal of an asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.

4.8 Investments in land Investments in land are recorded at cost. If the fair value of the land declines to significantly less than its cost, the land is stated at cost net of provision for impairment loss.

4.9 Intangible assets Intangible assets are recognised at cost. Following the initial recognition, the intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses (if any). Intangible assets with finite lives are amortised on a systematic basis over the economic useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method of such intangible assets are reviewed at least at each financial year end. The amortisation expense is charged to the income statement. Intangible assets of the Company with finite useful lives comprise computer software, and have useful lives of 5 and 20 years.

4.10 Related party transactions Related parties comprise enterprises and individuals that control, or are controlled by, the Company, whether directly or indirectly, or which are under common control with the Company. They also include associated companies and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, key management personnel, directors and officers with authority in the planning and direction of the Company没s operations.

114

Annual Report 2010


4.11 Long-term leases Leases of equipment which transfer substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included in other long-term payables, while the interest element is charged to the income statements over the lease period. The property, plant or equipment acquired under finance leases is depreciated over the useful life of the asset. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.

4.12 Foreign currencies Transactions in foreign currencies are translated into Baht at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Baht at the exchange rate ruling at the balance sheet date. Gains and losses on exchange are included in determining income.

4.13 Impairment of assets At each reporting date, the Company, its subsidiaries and its jointly controlled entities performs impairment reviews in respect of the property, plant and equipment and other intangible assets whenever events or changes in circumstances indicate that an asset may be impaired. An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the asset没s fair value less costs to sell and its value in use, is less than the carrying amount. In determining value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by a valuation model that, based on information available, reflects the amount that the Company, its subsidiaries and its jointly controlled entities could obtain from the disposal of the asset in an arm没s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. An impairment loss is recognised in the income statement.

4.14 Employee benefits Salarys, wages, bonuses and contributions to the social security fund and provident fund are recognised as expenses when incurred.

4.15 Income tax Income tax is provided in the accounts at the amount expected to be paid to the taxation authorities, based on taxable profits determined in accordance with tax legislation.

CH. Karnchang Public Company Limited

115


5. Significant accounting judgments and estimates The preparation of financial statements in conformity with generally accepted accounting principles at times requires management to make subjective judgments and estimates regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures; and actual results could differ from these estimates. Significant judgments and estimates are as follows:

Leases In determining whether a lease is to be classified as an operating lease or finance lease, the management is required to use judgment regarding whether significant risk and rewards of ownership of the leased asset has been transferred, taking into consideration terms and conditions of the arrangement.

Allowance for doubtful accounts In determining an allowance for doubtful accounts, the management needs to make judgment and estimates based upon, among other things, past collection history, aging profile of outstanding debts and the prevailing economic condition.

Fair value of financial instruments In determining the fair value of financial instruments that are not actively traded and for which quoted market prices are not readily available, the management exercise judgment, using a variety of valuation techniques and models. The input to these models is taken from observable markets, and includes consideration of liquidity, correlation and longer-term volatility of financial instruments.

Impairment of equity investments The Company and the subsidiary treat investments as impaired when the management judges that there has been a significant or prolonged decline in the fair value below their cost or where other objective evidence of impairment exists. The determination of what is çsignificanté or çprolongedé requires judgment.

Property, plant and equipment/Depreciation In determining depreciation of plant and equipment, the managements are required to make estimates of the useful lives and salvage values of the Company, its subsidiaries and its jointly controlled entitiesû plant and equipment and to review estimate useful lives and salvage values when there are any changes. In addition, the managements are required to review property, plant and equipment for impairment on a periodical basis and record impairment losses in the period when it is determined that their recoverable amount is lower than the carrying amount. This requires judgments regarding forecast of future revenues and expenses relating to the assets subject to the review.

Estimated construction project costs The Company, its subsidiaries and its jointly controlled entities estimate costs of construction projects based on details of the construction work, taking into account the volume and value of construction materials to be used in the project, labour costs and other miscellaneous costs to be incurred to completion of service, taking into account the direction of the movement in these costs. Estimates are reviewed regularly or whenever actual costs differ significantly from the figures used in the original estimates.

116

Annual Report 2010


Provision for losses on construction projects Management applied judgement in estimating the loss they expect to be realised on each construction project, based on estimates of anticipated costs that take into account the progress of the project and actual costs incurred to date, together with fluctuations in costs of construction materials, labour and the current situation.

Litigation The Company and its jointly controlled entity have contingent liabilities as a result of litigation. The Company and its jointly controlled entity没s management have used judgment to assess of the results of the litigation and believe that no loss will result. Therefore no contingent liabilities are recorded as at the balance sheet date.

6. Related party transactions During the years, the Company, its subsidiaries and its jointly controlled entities had significant business transactions with related parties. Such transactions, which are summarised below, arose in the ordinary course of business and were concluded on commercial terms and bases agreed upon between the Company and those related parties. (Unit: Million Baht) Consolidated financial statements 2010 2009 Transactions with subsidiaries (eliminated from the consolidated financial statements) Project management income Rental and transportation income Space rental and service income Interest income

Separate financial statements 2010 2009

-

-

2.9 77.1 5.9 97.4

301.4 6.0 24.3

Dividend income Other income

-

-

8.3 34.9

16.5 14.3

Cost of construction materials and construction work Administrative expenses

-

-

23.6

51.5

-

-

0.5

0.5

Transactions with jointly controlled entities Revenues from construction services 74.3 Project management income 54.2

49.9 8.2

73.7 178.0

199.8 28.9

0.5 0.5 15.5

19.0 0.6 78.3

1.8 1.7 82.4

Rental and transportation income Space rental and service income Interest income

CH. Karnchang Public Company Limited

6.0 0.2 15.6

Transfer Pricing Policy

Based on contracts Close to service fee charged to third parties Based on contracts Interest rates of MLR + 0.25% (2009: 6.25% to 8.25%, MLR + 0.25% and MLR + 0.5%) As declared Cost plus margin and agreed between the parties Close to prices charged by third parties Agreed between the parties

Based on construction contracts Based on contracts and agreed between the parties Close to service fee charged to third parties Based on contracts Interest rates of MLR + 1%, MLR + 1.25%, MLR + 2% and MOR + 0.75% (2009: 8% to 10%, MLR + 0.25%, MLR + 1%, MLR + 2% and MOR + 0.75%)

117


(Unit: Million Baht) Consolidated financial

Separate financial

statements 2010 2009

statements 2010 2009

Transfer Pricing Policy

Profit sharing from jointly controlled entities Gain on sales of equipment

2.7 5.2

2.9 18.3

125.7 2.1

150.6 61.1

Other income

5.8

1.1

18.7

3.2

Cost plus margin and agreed between the parties

Cost of construction materials and construction work

-

-

-

0.2

Closed to prices charged by third parties

Administrative expenses

-

0.1

-

0.2

Agreed between the parties

Transactions with associated companies Revenues from construction services 3,095.1

8,007.8

271.8

414.6

8.8 2.7

17.1 2.7

1.6 2.7

1.5 2.7

173.4 -

141.4 -

173.4 395.8

141.4 436.7

Gain on sales of land Other income

2.2 -

0.1

2.2 -

-

Based on contracts Based on contracts

Cost of construction materials and construction work

6.0

0.1

-

-

Close to prices charged by third parties

Administrative expenses Interest expenses

0.2 -

7.5

-

0.1 -

Project management income Space rental and service income Interest income Dividend income

As declared Agreed between the parties

Based on construction contracts Based on contracts Based on contracts Interest rates of MLR + 0.5% and MLR + 1% As declared

Agreed between the parties Interest rates of MLR, MLR + 1% and LIBOR + 3%

Transactions with related parties Revenues from construction services Sales of construction materials Project management income Rental and transportation income Space rental and service income Interest income Dividends income Other income Cost of construction materials and construction work Administrative expenses Interest expenses

118

944.1

316.8

113.6

184.3

Based on construction contracts

3.8

2.2 1.8

-

-

1.0 13.9

4.5 13.5

0.4 13.9

1.7 13.5

7.9 157.8

52.1 145.9

7.9 145.8

18.0 135.0

6.6

0.4

0.4

0.3

Based on contracts and close to service fee charged to third parties

18.9

220.6

0.8

0.7

Close to prices charged by third parties

2.5 0.1

1.6 -

0.2 -

-

Agreed between the parties Interest rate of MLR and MLR + 0.25%

Cost plus margin Based on contracts Close to service fee charged to third parties Based on contracts Interest rate of MLR + 1% As declared

Annual Report 2010


The balances of the accounts as at 31 December 2010 and 2009 between the Company and those related parties are as follows: (Unit: Baht)

Consolidated financial statements 2010 2009 Trade accounts receivable - related parties Construction contract receivables Jointly controlled entities - Joint Venture BBCD - Joint Venture CKET - CKLX Joint Venture - CKTC Joint Venture Associated companies - Bangkok Metro Public Company Limited - Thai Tap Water Supply Public Company Limited - Nam Ngum 2 Power Company Limited Related parties - Bangkok Expressway Public Company Limited - Bangpa-in Land Company Limited - Bangkok Metro Networks Limited - Other related companies and related parties Total construction contract receivables Less: Allowance for doubtful accounts Construction contract receivables, net Retention as per contracts Jointly controlled entity - CKLX Joint Venture Associated company - Thai Tap Water Supply Public Company Limited Related companies - Bangkok Expressway Public Company Limited - Northern Bangkok Expressway Company Limited Total retention as per contracts Total trade accounts receivable - related parties, net CH. Karnchang Public Company Limited

Separate financial statements 2010 2009

29,935,476 42,623,941 72,559,417

30,007,785 11,074,251 3,852 41,085,888

253,358,255 149,677,378 403,035,633

253,358,255 149,677,378 44,297,003 447,332,636

5,528,333 399,797,300 405,325,633

6,905,907 29,295,045 200,016,785 236,217,737

5,528,333 5,528,333

5,171,667 29,295,045 34,466,712

10,550,596 163,578,322 13,550 174,142,468 652,027,518 652,027,518

17,759,999 91,223,385 100,000,000 208,983,384 486,287,009 486,287,009

3,113,144 77,863,900 80,977,044 489,541,010 (253,358,255) 236,182,755

16,790,609 100,000,000 116,790,609 598,589,957 (253,358,255) 345,231,702

432,266 432,266

10,005,694 10,005,694

1,729,064 1,729,064

40,022,775 40,022,775

-

7,900,746 7,900,746

-

7,900,746 7,900,746

15,519,997 239,147 15,759,144 16,191,410 668,218,928

15,056,128 15,056,128 32,962,568 519,249,577

11,440,017 11,440,017 13,169,081 249,351,836

14,299,370 14,299,370 62,222,891 407,454,593 119


As at 31 December 2010 and 2009, an allowance for doubtful accounts amounting to Baht 253.4 million was set up in the separate financial statements of the Company for trade accounts receivable from a jointly controlled entity of which overdue for more than 12 months. (Unit: Baht)

Consolidated financial statements 2010 2009 Long-term trade accounts receivable - related party Related company - Bangkok Metro Networks Limited 134,110,988 Total long-term trade accounts receivable - related party 134,110,988

133,564,400 133,564,400

Separate financial statements 2010 2009

134,110,988 134,110,988

133,564,400 133,564,400

The outstanding balance of such account receivable is due within 2010. However, in accordance with the conditions stipulated in the long-term loan agreement between a bank and Bangkok Metro Networks Limited, such company can settle amounts payable to related companies if it receives consent from the bank with respect to the arrangement of sufficient cash flows to meet its operational and financing requirements. The Company expects to receive settlement of such debt more than one year in the future, and has reclassified the trade account receivable from that company to non-current assets under the caption çLong-term trade accounts receivable - related partyÊ in the balance sheet. The Company charges interest on the outstanding balance of construction costs at the Minimum Loan Rate plus 1 percent (MLR + 1%) per annum. (Unit: Baht)

Consolidated financial statements 2010 2009 Accounts receivables and loans to related parties Receivables from sales of construction materials and others Subsidiaries - Construction Material Supply Company Limited - CH. Karnchang (Lao) Company Limited - Other subsidiaries Jointly controlled entities - Joint Venture BBCT - Joint Venture BBCD - Joint Venture BCKT - Joint Venture CKAE Consortium - Joint Venture CKET - CKLX Joint Venture - CKTC Joint Venture - CH. Karnchang-Krungthon Engineers Joint Venture Associated companies - SouthEast Asia Energy Limited - Bangkok Metro Public Company Limited - Xayaburi Power Company Limited

120

Separate financial statements 2010 2009

-

-

1,251,028 534,115,578 444,323 535,810,929

2,921,930 100,976,262 556,018 104,454,210

47,907 107,374 5,706 25,313,294 26,166,572 1,548,871 53,189,724

47,871 67,183,222 5,706 24,620,797 137,227 27,921,638 119,916,461

159,688,781 382,845,800 143,166 285,291 124,747,471 86,900,544 3,872,179 758,483,232

159,571,286 382,845,800 89,577,630 285,291 122,742,436 548,910 93,072,125 848,643,478

228,092 10,596,016 33,698 10,857,806

473,828 47,016 520,844

171,587 10,596,016 33,698 10,801,301

193,656 47,016 240,672 Annual Report 2010


(Unit: Baht)

Consolidated financial statements 2010 2009 Related parties - Bangpa-in Land Company Limited - Mahasiri Company Limited - Expert Transport Company Limited - Silasaicrete Limited Partnership - Other related companies and related parties Venturers in jointly controlled entities - Tokyu Construction Company Limited - Bilfinger Berger AG Total receivables from sales of construction materials and others Less: Allowance for doubtful accounts Total receivables from sales of construction materials and others, net Loans to related parties and interest receivable Subsidiaries - Construction Material Supply Company Limited - CH. Karnchang (Lao) Company Limited - Prasertwit Construction Limited Partnership Jointly controlled entities - Joint Venture BBCD - Joint Venture CKAE Consortium Total loans to related parties and interest receivable Less: Allowance for doubtful accounts Total loans to related parties and interest receivable, net Total accounts receivables and loans to related parties, net

CH. Karnchang Public Company Limited

Separate financial statements 2010 2009

6,511,995 211,280 5,716,970 41,944 486,375 12,968,564

34,195,013 211,280 5,720,861 44,733 13,346,861 53,518,748

45,255 211,280 91,679 41,944 253,655 643,813

169,261 211,280 95,570 44,733 13,106,993 13,627,837

8,115,280 8,115,280

2,306,775 4,020,682 6,327,457

-

-

85,131,374 -

180,283,510 (12,976,178)

1,305,739,275 (384,701,593)

966,966,197 (397,677,771)

85,131,374

167,307,332

921,037,682

569,288,426

-

-

61,095,311 1,983,635,872 25,899,077 2,070,630,260

84,465,671 552,440,000 22,097,253 659,002,924

1,200,550 1,200,550 1,200,550 -

895,050 365,779 1,260,829 1,260,829 -

3,362,340,377 3,362,340,377 5,432,970,637 (3,362,340,377)

3,174,180,377 3,174,180,377 3,833,183,301 (3,174,180,377)

1,200,550

1,260,829

2,070,630,260

659,002,924

86,331,924

168,568,161

2,991,667,942

1,228,291,350

121


During 2010, movements of loans to related parties and interest receivable were as follows: (Unit: Baht)

Balance as at 1 January 2010 Loans to related parties and interest receivable Jointly controlled entities - Joint Venture BBCD - Joint Venture CKAE Consortium

895,050 365,779 1,260,829

Consolidated financial statements During the year Balance as at Increase Decrease 31 December 2010

305,500 4,131 309,631

(369,910) (369,910)

1,200,550 1,200,550 (Unit: Baht)

Balance as at 1 January 2010 Loans to related parties and interest receivable Subsidiaries - Construction Material Supply Company Limited - CH. Karnchang (Lao) Company Limited - Prasertwit Construction Limited Partnership Jointly controlled entity - Joint Venture BBCD

Separate financial statements During the year Increase Decrease

Balance as at 31 December 2010

84,465,671 552,440,000 22,097,253 659,002,924

11,752,529 2,181,195,872 3,801,824 2,196,750,225

(35,122,889) (750,000,000) (785,122,889)

61,095,311 1,983,635,872 25,899,077 2,070,630,260

3,174,180,377 3,174,180,377 3,833,183,301

188,160,000 188,160,000 2,384,910,225

(785,122,889)

3,362,340,377 3,362,340,377 5,432,970,637

Loans to related parties are subject to interest at the Minimum Loan Rate plus a stipulated margin (MLR + margin) per annum and certain fixed rates per annum and due for repayment at call. On 16 February 2007, Bilfinger Berger AG and the Company, which are venturers in Joint Venture BBCD, agreed to waive the entire amount of interest accrued up to the agreed date on the loan from the venturers, but they retain the right to claim such interest if the joint venture receives compensation for additional costs from the Expressway and Rapid Transit Authority of Thailand. On 29 September 2008, the Company entered into a Baht 2,984.1 million loan agreement with Joint Venture BBCD, covering loans to such joint venture and the transfer to the Company of banks loans of the Joint Venture BBCD (as discussed in Note 15). This loan carries interest at the Minimum Loan Rate plus a stipulated margin (MLR + margin) per annum and interest is waived under the same conditions as applied to the loans discussed in the preceding paragraph. The loan principal and interest are to be paid on the earlier of (a) the Joint Venture BBCD receives compensation for additional costs from the Expressway and Rapid Transit Authority of Thailand and (b) the Company calls the loan.

122

Annual Report 2010


(Unit: Baht)

Consolidated financial statements 2010 2009 Advance payment to subcontractor related party Venturer in jointly controlled entity - Krungthon Engineers Company Limited Total advance payment to subcontractor related party Long-term loans to jointly controlled entities and interest receivable Jointly controlled entities - Joint Venture CKAE Consortium - Joint Venture CKET Total long-term loans to jointly controlled entities and interest receivable

Separate financial statements 2010 2009

78,488,874

-

-

-

78,488,874

-

-

-

220,200,605

470,110 244,402,538

1,101,003,027

23,505,518 1,222,012,689

220,200,605

244,872,648

1,101,003,027

1,245,518,207

During 2010, movements of long-term loans to jointly controlled entities and interest receivable were as follow: (Unit: Baht)

Balance as at 1 January 2010 Loans: - Joint Venture CKAE Consortium - Joint Venture CKET Total loans Interest receivable: - Joint Venture CKAE Consortium - Joint Venture CKET Total interest receivable

CH. Karnchang Public Company Limited

Consolidated financial statements During the year Balance as at Increase Decrease 31 December 2010

469,156 209,955,314 210,424,470

-

(469,156) (469,156)

209,955,314 209,955,314

954 34,447,224 34,448,178 244,872,648

4,839 15,620,100 15,624,939 15,624,939

(5,793) (39,822,033) (39,827,826) (40,296,982)

10,245,291 10,245,291 220,200,605

123


(Unit: Baht)

Balance as at 1 January 2010 Loans: - Joint Venture CKAE Consortium - Joint Venture CKET Total loans Interest receivable: - Joint Venture CKAE Consortium - Joint Venture CKET Total interest receivable

Separate financial statements During the year Increase Decrease

Balance as at 31 December 2010

23,457,799 1,049,776,571 1,073,234,370

-

(23,457,799) (23,457,799)

1,049,776,571 1,049,776,571

47,719 172,236,118 172,283,837 1,245,518,207

241,930 78,100,500 78,342,430 78,342,430

(289,649) (199,110,162) (199,399,811) (222,857,610)

51,226,456 51,226,456 1,101,003,027

Loans to Joint Venture CKAE Consortium were previously subject to interest at fixed rates of 6.25 to 8.25 percent per annum and the Minimum Loan Rate plus 0.25 percent (MLR + 0.25%) per annum. Loans to Joint Venture CKET were previously subject to interest at the Minimum Loan Rate (MLR) per annum. These loans to the joint ventures were due for repayment at call. Subsequently, on 21 January 2008, the joint ventures entered into memorandums of agreement with the Company, whereby the Joint Venture CKAE Consortium agreed to pay an additional interest charge of 1.75 percent per annum from the borrowing date until the date on which repayment is made and agreed to make repayment in full within 31 March 2009, and the Joint Venture CKET agreed to pay an additional interest charge of 1 percent per annum from the borrowing date until the date on which repayment is made and agreed to make repayment in full within 30 September 2009. Subsequently, in January 2009, the joint ventures entered into memorandums of agreement with the Company, whereby the Joint Venture CKAE Consortium requested to extend the due date for all debt repayment from 31 March 2009, such that loan principal and accrued interests would be paid in installments within June 2011 (the joint venture paid all such debt during the first quarter of 2010); and the Joint Venture CKET requested to extend the due date for all debt repayment from 30 September 2009, such that loan principal and accrued interest would be paid in installments within December 2015. In June 2010, the Joint Venture CKET entered into a memorandum of agreement with the Company, whereby the joint venture agreed to pay an additional interest charge of 0.25 percent per annum on the loan, as from 1 July 2010.

124

Annual Report 2010


(Unit: Baht)

Consolidated and separate financial statements 2010 2009 Long-term loans to associated companies and interest receivable Loans: - Bangkok Metro Public Company Limited - SouthEast Asia Energy Limited Total loans Interest receivable: - Bangkok Metro Public Company Limited - SouthEast Asia Energy Limited Total interest receivable Less: Current portion Long-term loans to associated companies and interest receivable, net of current portion

2,633,090,793 156,250,000 2,789,340,793

2,183,090,793 156,250,000 2,339,340,793

530,689,446 31,740,232 562,429,678 3,351,770,471 (187,990,232)

368,511,897 20,526,571 389,038,468 2,728,379,261 -

3,163,780,239

2,728,379,261

Transfer Pricing Policy

MLR + 0.5% per annum MLR + 1.0% per annum

During 2010, movements of long-term loans to associated companies and related interest receivable were as follows: (Unit: Baht)

Consolidated and separate financial statements Balance as at 1 January 2010

Loans: - Bangkok Metro Public Company Limited - SouthEast Asia Energy Limited Total loans Interest receivable: - Bangkok Metro Public Company Limited - SouthEast Asia Energy Limited Total interest receivable

CH. Karnchang Public Company Limited

During the year Increase Decrease

Balance as at 31 December 2010

2,183,090,793 156,250,000 2,339,340,793

450,000,000 450,000,000

-

2,633,090,793 156,250,000 2,789,340,793

368,511,897 20,526,571 389,038,468 2,728,379,261

162,177,549 11,213,661 173,391,210 623,391,210

-

530,689,446 31,740,232 562,429,678 3,351,770,471

125


Bangkok Metro Public Company Limited The outstanding balances represent loans to Bangkok Metro Public Company Limited under the Subordinated Loan Agreement that the Company entered into with Bangkok Metro Public Company Limited and a group of lenders of such company, under which the Company granted long-term loan facilities totaling Baht 3,000 million. The loans carry interest at the Minimum Loan Rate plus 0.5 percent (MLR + 0.5%) per annum, and principal and interest are to be paid after Bangkok Metro Public Company Limited has paid all indebtedness under the Onshore Facilities Agreement or when the associated company has excess cash. During 2010, the Company entered into 11 subordinated loan agreements with Bangkok Metro Public Company Limited, under which the Company granted long-term loan facilities totaling Baht 450 million to that company, as part of the loan facilities of Baht 3,000 million.

SouthEast Asia Energy Limited On 4 September 2007, the Company and two shareholders of SouthEast Asia Energy Limited entered into the Shareholdersû Loan Agreement with SouthEast Asia Energy Limited, granting a facility of Baht 250 million, with the Company agreeing to provide a portion of the loans as stipulated in the agreement, amounting to Baht 156.25 million, in order to fund a feasibility study and the development of the Nam Bak 1-2 Hydroelectric Power Project. The loan carries interest at MLR plus 1 percent (MLR + 1%) per annum, and principal and interest are to be paid in full in one repayment on the earlier of (a) the Financial Closing of the Project and (b) the date eighteen months after the agreement is signed. On 2 March 2009, the Company and two shareholders of SouthEast Asia Energy Limited entered into an agreement to extend the term of the shareholdersû loan with SouthEast Asia Energy Limited, whereby the loan and interest are to be paid in full in one repayment on the earlier of (a) the Financial Closing of the Project and (b) within 4 March 2010. Subsequently, on 2 March 2010, the Company and two shareholders of SouthEast Asia Energy Limited entered into an agreement to extend the term of the shareholdersû loan with SouthEast Asia Energy Limited, whereby the loan and interest are to be paid in full in one repayment on the earlier of (a) the Financial Closing of the Project and (b) within 4 September 2011. The Company has reclassified the loans to current assets under the caption çCurrent portion of long-term loans to associated company and interest receivableé in the balance sheet as at 31 December 2010. (Unit: Baht)

Consolidated financial statements 2010 2009 Trade accounts payable - related parties Subsidiaries - Construction Material Supply Company Limited - Prompratarn Construction Limited Partnership - CH. Karnchang (Lao) Company Limited Jointly controlled entities - Joint Venture BBCT - Joint Venture CKAE Consortium Associated companies - Thai Tap Water Supply Public Company Limited - Nam Ngum 2 Power Company Limited - SouthEast Asia Energy Limited

126

Separate financial statements 2010 2009

-

-

1,534,323 1,040,760 2,307,983 4,883,066

38,043,025 1,012,507 39,055,532

2,730 2,730

27 2,730 2,757

136,480 136,480

88,917 136,480 225,397

6,049,099 1,306,275 7,355,374

11,876 11,876

1,306,275 1,306,275

-

Annual Report 2010


(Unit: Baht)

Consolidated financial statements 2010 2009 Related parties - Expert Transport Company Limited - Other related companies and related parties

Separate financial statements 2010 2009

5,364,091 394,524 5,758,615

3,499,387 3,499,387

4,875,000 264,186 5,139,186

136,499 136,499

4,998,500 1,047,663 4,494,000 10,540,163 23,656,882

5,013,496 22,542,980 27,556,476 31,070,496

11,465,007

39,417,428

Accounts payable and loans from related parties Other payable Venturer in jointly controlled entity - Bilfinger Berger AG 15,036,738 Total other payable 15,036,738

15,036,738 15,036,738

-

-

-

110,250,000 110,250,000

-

-

2,202,402 2,202,402 2,202,402

110,250,000

-

-

-

-

-

-

Total loans from related parties and accrued interest Total accounts payable and loans from related parties 17,239,140

125,286,738

-

-

Venturers in jointly controlled entities - Bilfinger Berger AG - Loxley Public Company Limited - Krungthon Engineers Company Limited - Tokyo Construction Company Limited Total trade accounts payable - related parties

Advance received from related parties Venturer in jointly controlled entity - Tokyu Construction Company Limited Related company - Bangpa-in Land Company Limited Total advance received from related parties Loans from related parties and accrued interest Venturer in jointly controlled entity - Expert Transport Company Limited Related company - Bangpa-in Land Company Limited

CH. Karnchang Public Company Limited

127


During 2010, the movements of loans from related parties and accrued interest were as follows: (Unit: Baht)

Balance as at 1 January 2010 Loans from related parties and accrued interest Venturer in jointly controlled entity - Expert Transport Company Limited Related company - Bangpa-in Land Company Limited

Consolidated financial statements During the year Balance as at Increase Decrease 31 December 2010

-

1,782,344 1,782,344

(1,782,344) (1,782,344)

-

-

8,030,438 8,030,438 9,812,782

(8,030,438) (8,030,438) (9,812,782)

(Unit: Baht)

Consolidated financial statements 2010 2009 Advances received from employers related parties Jointly controlled entities - CH. Karnchang-Krungthon Engineers Joint Venture - CKTC Joint Venture Associated company - Thai Tap Water Supply Public Company Limited Related company - Bangkok Expressway Public Company Limited Total Advances received from employers - related parties Retention for construction - related parties Subsidiary - Construction Material Supply Company Limited Venturer in jointly controlled entity - Loxely Public Company Limited Total retention for construction - related parties 128

Separate financial statements 2010 2009

31,424,426 52,970,213 84,394,639

-

78,561,065 78,561,065

-

2,069,416 2,069,416

41,452,975 41,452,975

2,069,416 2,069,416

41,452,975 41,452,975

16,143,232 16,143,232 102,607,287

15,452,201 15,452,201 56,905,176

7,509,329 7,509,329 88,139,810

15,452,201 15,452,201 56,905,176

-

-

-

5,429,344 5,429,344

677,909 677,909 677,909

30,911,050 30,911,050 30,911,050

-

5,429,344 Annual Report 2010


Directors and management没s remuneration In 2010 the Company and its subsidiaries had salaries, bonuses and meeting allowances of their directors and management recognised as expenses totaling Baht 105.9 million (Separate financial statements: Baht 75.0 million) (2009: Baht 89.3 million, Separate financial statements: Baht 64.7 million). Guarantee obligations with related parties The Company has outstanding guarantee obligations with its related parties, as described in Note 38.4 to the financial statements.

7. Cash and cash equivalents (Unit: Baht)

Consolidated financial statements 2010 2009 Cash Bank deposits Bills of exchange Total

19,384,646 1,263,614,091 241,499,449 1,524,498,186

Separate financial statements 2010 2009

18,763,663 2,253,530,707 1,247,139,556 3,519,433,926

6,484,516 334,179,647 101,499,449 442,163,612

4,790,783 868,731,797 1,017,139,556 1,890,662,136

As at 31 December 2010, bank deposits in saving accounts, fixed deposits and bills of exchange carried interests between 0.5 and 2.0 percent per annum (2009: between 0.5 and 1.75 percent per annum).

8. Current investments (Unit: Baht)

Consolidated and separate financial statements 2010 2009 Fixed Deposit Investments in trading securities Marketable equity securities - Fair value Investments in held-to-maturity debt securities due within one year Debentures of Bank of Ayudhya Public Company Limited Debentures of Thai Airways International Public Company Limited Investments in available-for-sale securities Unit trust in fixed income open-ended fund Government and state-owned enterprise bonds State-owned enterprise debt securities Private sector debt securities Add: Unrealised gain on changes in value of investments Fair Value Total current investments CH. Karnchang Public Company Limited

9,989,346 9,989,346

9,940,082 9,940,082

2,927,000 2,927,000

2,180,550 2,180,550

-

20,000,000 10,000,000 30,000,000

1,781,537,451 620,487,257 626,001,719 584,848 3,028,611,275 3,041,527,621

151,532,451 2,357,513,321 20,615,396 97,010,888 223,150 2,626,895,206 2,669,015,838 129


9. Trade accounts receivable The balances of trade accounts receivable as at 31 December 2010 and 2009, aged on the basis of due dates, are summarised below. (Unit: Baht)

Related parties 2010 2009 Construction contract receivables Not yet due Overdue - Less than 3 months - 3 - 6 months - 6 - 12 months - Over 12 months

Consolidated financial statements Unrelated parties 2010 2009

458,513,720

351,582,876

579,470,594

77,863,900 85,714,422 164,046,464 786,138,506 Less: Allowance for doubtful accounts Construction contract receivables, net 786,138,506 Retention as per contracts 16,191,410 Total 802,329,916

4,696,347 72,310 263,499,876 619,851,409 619,851,409 32,962,568 652,813,977

2,682,881 43,408,937 299,364,442 924,926,854 (9,881,930) 915,044,924 98,421,641 1,013,466,565

341,759,856

Total 2010

2009

1,037,984,314

693,342,732

33,597,579 2,682,881 38,293,926 731,207 77,863,900 803,517 22,191,953 129,123,359 22,191,953 339,982,052 463,410,906 603,481,928 738,262,647 1,711,065,360 1,358,114,056 (9,984,814) (9,881,930) (9,984,814) 728,277,833 1,701,183,430 1,348,129,242 80,075,979 114,613,051 113,038,547 808,353,812 1,815,796,481 1,461,167,789 (Unit: Baht)

Related parties 2010 2009 Construction contract receivables Not yet due Overdue - Less than 3 months - 3 - 6 months - 6 - 12 months - Over 12 months

Separate financial statements Unrelated parties 2010 2009

8,641,477

76,784,342

215,993,626

260,781,038

77,863,900 537,146,621 623,651,998 Less: Allowance for doubtful accounts (253,358,255) Construction contract receivables, net 370,293,743 Retention as per contracts 13,169,081 Total 383,462,824

18,769,982 636,600,033 732,154,357 (253,358,255) 478,796,102 62,222,891 541,018,993

1,740,000 43,408,937 286,851,153 547,993,716 547,993,716 33,608,156 581,601,872

30,648,121 22,191,953 315,698,655 629,319,767 629,319,767 48,320,617 677,640,384

130

Total 2010

224,635,103

2009

337,565,380

1,740,000 49,418,103 77,863,900 43,408,937 22,191,953 823,997,774 952,298,688 1,171,645,714 1,361,474,124 (253,358,255) (253,358,255) 918,287,459 1,108,115,869 46,777,237 110,543,508 965,064,696 1,218,659,377

Annual Report 2010


On 24 December 2008, the CompanyÝs Board of Directors approved the terms of repayment of construction contract debt of Baht 325.7 million for a trade receivable, Rayong Real Estate Company Limited, whereby payment is to be made in 13 quarterly installments, with the first of these due in September 2009 and the last installment due in December 2012 (as discussed in Note 13). The Company reclassified the accounts receivable of such company, amounting to Baht 131.7 million and Baht 246.7 million, as non-current assets under the caption of çLong-term trade accounts receivableÊ in the balance sheet as at 31 December 2010 and 2009, respectively, as per the repayment plan. The management of the Company believes that the allowance for doubtful accounts as set up in the accounts is adequate at this current stage.

10. Unbilled receivables/advances received from employers and construction revenue received in advance (Unit: Baht)

Consolidated financial statements 2010 2009 Unbilled receivables Project value as per contract Accumulated amount recognised as revenue on percentage of completion basis Less: Value of total billed Unbilled receivables

137,037,008,353

66,312,314,103

25,122,511,907

30,545,000,910

51,878,934,270 (46,617,681,838) 5,261,252,432

52,554,213,451 (48,713,682,885) 3,840,530,566

23,491,759,174 (21,235,011,098) 2,256,748,076

27,939,926,937 (25,476,412,072) 2,463,514,865

114,613,051

113,038,547

46,777,237

110,543,508

1,227,725,382 957,986,225

1,228,707,639 1,009,043,498

130,762,096 80,699,905

79,699,290 2,001,230

(882,776,728) 75,209,497 1,575,570,203 1,650,779,700

(878,920,883) 130,122,615 1,482,878,979 1,613,001,594

(73,549,483) 7,150,422 358,226,441 365,376,863

2,001,230 482,704,592 484,705,822

Retentions as per contracts Advances received from employers and construction revenue received in advance Project value as per contract Value of total billed Less: Accumulated amount recognised as revenue on percentage of completion basis Construction revenue received in advance Advances received from employers Total

Separate financial statements 2010 2009

11. Inventories and construction supplies (Unit: Baht)

Consolidated financial statements 2010 2009 Construction supplies Spare parts Construction in progress and work in process Total CH. Karnchang Public Company Limited

161,418,203 139,871,463 48,476,789 349,766,455

110,057,368 226,262,415 6,946,640 343,266,423

Separate financial statements 2010 2009 36,381,922 52,889,211 25,705,972 114,977,105

47,334,998 71,315,588 4,953,272 123,603,858 131


12. Restricted bank deposits The outstanding balances represent bank deposit accounts which have been pledged with banks to secure the issuance of bank guarantees for electricity utilisation, bidding, issuance of other bank guarantees, letters of credit opened as security for part of the facilities under the Subordinated Loan Agreement of an associated company, the bank overdraft of a subsidiary, and as a guarantee of loans from bank of a subsidiary.

13. Loans to subcontractors and interest receivable/long-term loans to other companies and interest receivable Loans to subcontractors and interest receivable The balance of loans to subcontractors and related interest receivable as at 31 December 2010, amounting to Baht 42 million (in proportion to the Companyรปs interest in the joint venture), represented loans to the former subcontractors of Joint Venture CKAE Consortium, Modern Construction Material Company Limited and Best Plan Technology Company Limited, in the form of promissory notes. These loans are subject to interest at fixed rates per annum which were tied to the Minimum Loan Rate plus 0.25 percent (MLR + 0.25%) as at borrowing dates and repayable within 31 December 2007. In January 2007, the borrowers issued letters confirming that they agreed to pay an additional charge of interest of 2.25 percent per annum from the borrowing date until the date on which repayment is made in full. In addition, the major shareholders of the borrowers have provided personal guarantees for the full amount of the outstanding loans. The loans are also secured by the share certificates of a company listed on the Stock Exchange of Thailand, worth approximately Baht 8.5 million (Baht 8.3 million in proportion to the Companyรปs interest in the joint venture) as at 31 December 2010, which are owned by the borrower and have been endorsed to transfer them to the joint venture. Therefore, the joint venture recorded the additional interest of 2.25 percent per annum for all loans made in the past up to the repayment date and will recognise interest on the basis of this new rate until the joint venture receives full settlement from the borrowers. In November 2007, the borrowers issued letters requesting an extension of the period for loan repayment, whereby from repayment being due in full by no later than 31 December 2007, repayment would be due in full by no later than 31 December 2008. In addition, the borrower placed the title deeds to plots of land with independently appraised values (appraised in June 2006) totaling approximately Baht 236.9 million (Baht 232.2 million in proportion to the Companyรปs interest in the joint venture) with the joint venture as security for these loans. On 24 December 2008, the Companyรปs Board of Directors granted approval for CH. Karnchang Public Company Limited, in the name of Joint Venture CKAE Consortium, to extend the loan repayment schedule for the borrowers as per the repayment plan proposed by the borrowers. Modern Construction Material Company Limited, whose outstanding debt as at 31 December 2008 amounted to Baht 6.34 million (in proportion to the Companyรปs interest in the joint venture), requested an extension of the period for loan repayment, whereby from repayment being due in full by no later than 31 December 2008, repayment would be due in full by no later than 30 June 2009 (the company paid such debt in June 2009). Best Plan Technology Company Limited requested an extension of the period for loan repayment, whereby from repayment being due in full by no later than 31 December 2008, repayment of principal and interest would be due in 8 installments in a quarterly basis, with the first of these due in 31 March 2009 and the last installment due in 31 December 2010. Subsequently, on 26 December 2008, the borrowers and the Joint Venture CKAE Consortium entered into memorandums, whereby the joint venture agreed to extend the loans for the borrowers as per this repayment plan. The joint venture reclassified the loans to subcontractors and interest receivable as current assets and non-current assets in accordance with payment schedule stipulated in the repayment plan in the balance sheet. 132

Annual Report 2010


Long-term loans to other companies and interest receivable The balance of long-term loans to other companies and related interest receivable as at 31 December 2010, amounting to Baht 1,339.4 million (in proportion to the Company没s interest in the joint venture), represented loans to two other companies, Rayong Real Estate Company Limited and Private Inter Construction Company Limited. Joint Venture CKET entered into long-term loan agreements with these companies granting facilities during 2003, with the loans subject to interest at the Minimum Loan Rate plus 0.25 percent (MLR + 0.25%) per annum and to be repaid within June 2005. Subsequently, the repayment term was extended such that payment was to be made within June 2006. The borrowers placed the title deeds to plots of land and construction thereon with independently appraised values (appraised in January 2011) totaling approximately Baht 2,227.1 million (Baht 1,781.7 million in proportion to the Company没s interest in the joint venture) to the joint venture as security for these loans. In addition, the borrowers allowed the Company to use part of the land and construction thereon as security for bank guarantee facilities of Baht 500 million and long-term loans provided to the Company by banks, and provided guarantees for the Company没s bank loans. On 1 July 2006, the Joint Venture CKET entered into an addendum to these agreements with these two other companies, whereby the repayment term was extended until June 2007. Subsequently, in March 2007, the borrowers issued letters confirming that they would repay one half of the loan balances no later than 31 December 2007, and that the remaining debts would be repaid in full by 30 June 2008, and agreeing to pay an additional interest charge of 1.25 percent per annum from the borrowing date until the date on which the repayment is made in full. In addition, a major shareholder of both of the borrowers entered into an agreement to provide a personal guarantee of settlement of the full amount of the outstanding debt to the joint venture. Therefore, the joint venture recorded the additional interest of 1.25 percent per annum for all loans made in the past up to the repayment date, and will recognise interest on the basis of this new rate until the joint venture receives full settlement from the borrowers. In November 2007, the borrowers issued letters requesting an extension of the period for loan repayment, whereby from half of the loan balances being due no later than 31 December 2007 and full settlement of the remaining debts due by 30 June 2008, half of the loan balance would be due no later than 31 December 2008 and full settlement of the remaining debts would be due by 30 June 2009. On 24 December 2008, the Company没s Board of Directors granted approval for CH. Karnchang Public Company Limited, in the name of Joint Venture CKET, to extend the loan repayment schedule for the borrowers, as well as the construction contract debt of one borrower to the Company, as per the repayment plan proposed by the borrowers. The borrowers, Rayong Real Estate Company Limited and Private Inter Construction Company Limited, had requested an extension of the period for loan repayment, whereby from half of the loan balances being due no later than 31 December 2008 and full settlement of the remaining debts due by 30 June 2010, repayment of principal would be due in 23 installments in a quarterly basis, from March 2009 until September 2014, and interest payment would be due in September and December 2014 and in March 2015. In addition, Rayong Real Estate Company Limited had requested an extension of the period for settlement of its construction contract debt to the Company, amounting to Baht 325.7 million, whereby payment would be made in 13 quarterly installments, from September 2009 until December 2012 (as discussed in Note 9). Subsequently, on 26 December 2008, the borrowers and the Joint Venture CKET entered into an addendum to the loan agreement, whereby the loans and construction contract debt were extended as per this repayment plan. The joint venture reclassified the long-term loans to other companies and interest receivable to current assets and non-current assets in accordance with payment schedule stipulated in the repayment plan in the balance sheet. For reasons of prudence, the Joint Venture CKET ceased recognition of interest income from the borrowers from 1 July 2008.

CH. Karnchang Public Company Limited

133


14. Investments in subsidiaries Details of investments in subsidiaries as presented in separate financial statements are as follows: (Unit: Baht)

Paid-up capital

Company没s name 2010

Construction Material Supply Company Limited 15,000,000 CH. Karnchang Realestate Company Limited 160,000,000 CH. Karnchang-Tokyu Construction Company Limited 100,000,000 CH. Karnchang (Lao) Company Limited (paid-up share capital of USD 1,000,000) 39,636,203 Bangpa-in Cogeneration Limited 120,000,000 Total Less: Allowance for loss on investments in subsidiaries Total investments in subsidiaries, net

2009

Separate financial statements Shareholding Cost percentage 2010 2009 2010 2009 (%) (%)

Dividend received during the years 2010 2009

15,000,000

99.99

99.99

14,999,600

14,999,600

-

-

160,000,000

99.00

99.00

158,400,000

158,400,000

-

-

100,000,000

55.00

55.00

54,999,600

54,999,600

8,250,000

16,500,000

39,636,203 20,600,000

100.00 81.00

100.00 81.00

39,636,203 97,200,000 365,235,403

39,636,203 16,686,000 284,721,403

8,250,000

16,500,000

(1,558,902) 363,676,501

(1,558,902) 283,162,501

Bangpa-in Cogeneration Limited In April 2010, Bangpa-in Cogeneration Limited entered into a memorandum of understanding to change the counterparty to a power purchase agreement made between a related company and the Electricity Generating Authority of Thailand (EGAT), whereby Bangpa-in Cogeneration Limited would become the counterparty with EGAT. The agreement is for a period of 25 years commencing from the Commercial Operation Date. In January 2010, Bangpa-in Cogeneration Limited called up an additional 60 percent of the value of the 3.97 million ordinary shares held by the Company which were not fully paid (par value of Baht 10 each), or a total of Baht 23.8 million. The Company made payment of the share price during the same month. In September 2010 and December 2010, Extraordinary General Meetings of the shareholders of Bangpa-in Cogeneration Limited approved increases in its registered share capital from Baht 50 million to Baht 100 million and from Baht 100 million to Baht 120 million, through respective issues of 5 million and 2 million ordinary shares with a par value of Baht 10 each. The new shares were to be allocated to the existing shareholders in proportion to their shareholding and full payment was to be called up. The Company made payment for the shares of such company in proportion to its shareholding, amounting to Baht 40.5 million and Baht 16.2 million, respectively. In January 2011, an Extraordinary General Meeting of the shareholders of Bangpa-in Cogeneration Limited approved an increase in its registered share capital from Baht 120 million to Baht 150 million, by issuing 3 million ordinary shares with a par value of Baht 10 each, with such new shares to be allocated to the existing shareholders in proportion to their shareholding and full payment to be called up in February 2011. The Company made payment for the shares of such company in proportion to its shareholding, amounting to Baht 24.3 million, in January 2011.

134

Annual Report 2010


15. Investments in joint ventures/Provision for loss on investments in joint ventures 15.1 Details of investments in joint ventures: Investments in joint ventures represent investments in entities which are jointly controlled by the Company and other companies. Details of these investments are as follows: (Unit: Baht)

Jointly controlled entities没 name

Nature of business

Joint Venture BBCT Construction - Second Stage Expressway Project Sector B Route Phayathai - Bangkhlo - Second Stage Expressway Project Sector C+ Route Chaeng Wattana - Bang Phun & Bang Sai - Second Stage Expressway Project Sector D Route Asoke - Srinakarin - Second Stage Expressway Project Sector C1A Route Ngam Wong Wan Chaeng Wattana The TWCK Joint Venture Construction and project management (Dissolution during 2009) Joint Venture BCKT Construction Joint Venture BBCD Construction Joint Venture CKSL Construction (Dissolution during 2009) Joint Venture CKAE Consortium Construction Joint Venture CKET Project management Joint Venture CKNNL Construction CKLX Joint Venture Construction CKTC Joint Venture Construction CH. Karnchang-Krungthon Construction Engineers Joint Venture Total Presented as: Investments in joint ventures Provision for loss on investments in joint ventures

CH. Karnchang Public Company Limited

Shareholding percentage 2010 2009 (%) (%)

Separate financial statements Allowance for loss Cost on investments 2010 2009 2010 2009

Carrying amounts based on cost method - net 2010 2009

99.97

99.97

-

-

-

-

-

-

99.97

99.97

-

-

-

-

-

-

99.97

99.97

-

-

-

-

-

-

99.97

99.97

-

- (18,019,822) (18,019,822) (18,019,822) (18,019,822)

-

-

-

-

-

-

-

-

25.00 35.00 -

25.00 35.00 26,250,000 26,250,000 (106,305,000) (783,837,424) (80,055,000) (757,587,424) -

98.00 80.00

98.00 80.00

-

-

-

-

-

-

51.89 75.00 70.00 60.00

51.89 75.00 70.00 -

-

-

-

-

-

-

26,250,000 26,250,000 (124,324,822) (801,857,246) (98,074,822) (775,607,246) (98,074,822) (775,607,246)

135


The outstanding balances of provision for loss on investments in joint ventures comprise of provision for loss in excess of investments in Joint Venture BBCT and Joint Venture BBCD.

15.2 Share of profit During the years, the Company recognised its share of profit from investments in the jointly controlled entities in the separate financial statements as follows: (Unit: Baht)

Separate financial statements Profit sharing from jointly controlled entities during the years 2010 2009 134,958,750 148,272 9,000,000 5,773,544 2,675,515 882,130 122,900,000 125,723,787 150,614,424

Jointly controlled entities没 name Joint Venture BBCT Joint Venture CKSL The TWCK Joint Venture Joint Venture CKNNL Joint Venture CKAE Consortium Total

15.3 Summarised financial information of significant jointly controlled entities The Company没s proportionate shares of the assets, liabilities, revenues and expenses of significant jointly controlled entities, according to proportion under joint venture agreements, are as follows: (Unit: Million Baht)

As at 31 December

2010

2009

Joint Venture CKAE Consortium 2010 2009

339.1 0.5 339.6 (179.9) 159.7

338.3 0.5 338.8 (180.1) 158.7

106.1 106.1 (3.2) 102.9

Joint Venture BBCT

Current assets Non-current assets Current liabilities Non-current liabilities Net assets (liabilities)

260.8 260.8 (44.9) 215.9

Joint Venture CKET 2010

2009

271.7 177.9 1,089.5 1,353.9 1,361.2 1,531.8 (238.4) (1,213.8) (880.8) 242.0 318.0

2009

CH. KarnchangJoint Venture Krungthon Engineers CKTC Joint Venture 2010 2009 2010 2009

226.5 1.5 228.0 (195.3) 32.7

2,028.7 1,145.7 337.9 51.6 2,366.6 1,197.3 (1,545.9) (1,203.9) (749.0) 71.7 (6.6)

Joint Venture CKLX 2010 27.5 2.0 29.5 (3.7) 25.8

173.9 1.2 175.1 (178.5) (3.4)

-

(Unit: Million Baht)

For the years ended 31 December Joint Venture BBCT

Total revenues Total expenses Net income (loss)

136

2010 2.6 (1.5) 1.1

2009 1.1 (2.5) (1.4)

Joint Venture CKAE Consortium 2010 2009 12.6 22.3 (5.2) (12.7) 7.4 9.6

Joint Venture CKET 2010 10.5 (86.4) (75.9)

Joint Venture CKLX

2009 2010 17.1 16.3 (91.6) (23.2) (74.5) (6.9)

2009 765.8 (747.9) 17.9

CH. KarnchangJoint Venture Krungthon Engineers CKTC Joint Venture 2010 2009 2010 2009 1,994.1 42.8 1.7 (1,915.8) (49.4) (5.1) 78.3 (6.6) (3.4) -

Annual Report 2010


Joint Venture BBCD On 7 February 2008, the Company entered into the Payment Agreement with Bilfinger Berger AG, which is a venturer in Joint Venture BBCD, whereby details of the agreement are as follow: 1. The Company is to provide loans to Joint Venture BBCD, for the joint venture to use to make full settlement of loans from banks and related accrued interest, or to accept the transfer of loans from banks of the joint venture totaling approximately Baht 2,400 million. 2. Bilfinger Berger AG agrees to waive its claims in loans to Joint Venture BBCD amounting to 70 million euros (or approximately Baht 3,500 million). 3. The Company is to provide loans to Joint Venture BBCD, with which it is to make payment of loans from Bilfinger Berger AG totaling 13.5 million euros (or approximately Baht 675 million) as per the scheduled payments. The joint venture will make such payments within 2010. During 2008, the Company entered into agreements to accept the transfer of debts in the form of banks loans from Joint Venture BBCD, comprising loan principal and accrued interest totaling approximately Baht 2,290 million (as presented in item 1 of the above details). On 30 September 2008, Bilfinger Berger AG issued a letter stating that it had forgiven loans to the Joint Venture BBCD in an amount of 70 million euros (as presented in item 2 of the above details). Since the conditions stipulated in the Payment Agreement, as detailed above in items 1 to 3, have been fully met, debts of the Company and Bilfinger Berger AG that are outstanding in the accounts of the Joint Venture BBCD, in the form of trade accounts payable and loans, are the responsibility of each party. Therefore, the Company has excluded the debts of the Joint Venture BBCD to Bilfinger Berger AG from the preparation of the consolidated financial statements, effective from 30 September 2008. As a result of this transaction, the liabilities from the Joint Venture BBCD for which the Company was responsible decreased by approximately Baht 408 million. The Company therefore reversed the provision for loss on investments in joint ventures previously recorded and presented as çRevenue from reversal of provision for loss on investments in joint ventureé in the consolidated income statements for the third quarter of 2008 (Separate financial statements: Baht 242 million). During the year ended 31 December 2010, the Company granted a loan to the joint venture, with which it is to settle loans from Bilfinger Berger AG amounting to approximately Baht 187.7 million. In June 2010, the Company made payment of loans totaling approximately Baht 1,621 million from three banks that had been transferred from Joint Venture BBCD to the Company (as presented in item 1 of the above details), prior to the scheduled dates per the agreements. The Company repaid the loans with cash receipts from the additional share offering (as discussed in Note 25) and from the sale of ordinary shares of Thai Tap Water Supply Public Company Limited, and the banks agreed to waive accrued interest amounting to approximately Baht 144 million. The Company recorded the forgiveness of the interest as çRevenue from forgiveness of accrued interestsé in the consolidated and separate income statements for the year 2010. As a result of these transactions, liabilities in the form of future interest on the loans stipulated in the loan agreements for which the Company is responsible decreased by approximately Baht 446.2 million. The Company therefore reversed provision for loss on investments in joint ventures previously recorded and presented it as çRevenue from reversal of provision for loss on investments in joint ventureé in the consolidated and separate income statements for the year 2010. As at 31 December 2010, the balance of provision for loss on investments in Joint Venture BBCD comprised liabilities for which the Company was responsible in respect of the loans to Joint Venture BBCD detailed above in item 3.

CH. Karnchang Public Company Limited

137


CH. Karnchang-Krungthon Engineers Joint Venture In October 2010, CH. Karnchang-Krungthon Engineers Joint Venture signed an engagement contract with the Royal Irrigation Department for the construction works of Phra Ong Chaiyanuchit Water Distribution Line - Bang Phra Reservoir and Consisting Buildings of Contract 1: Water Diversion from Eastern Chaophraya Basin Area Project - Bang Phra Reservoir, Chon Buri Province. The CH. Karnchang-Krungthon Engineers Joint Venture comprises a joint investment between the Company and Krungthon Engineers Company Limited, with the Company没s interest in the venture being 60 percent. The Company has therefore included the financial statements of the joint venture (applying the proportionate consolidation method) in the consolidated financial statements since the fourth quarter of 2010.

Joint Venture BBCT In December 2009, the Company and Bilfinger Berger AG, which are venturers in the Joint Venture BBCT, entered into an addendum to the joint venture agreement stipulating a change in the Company没s interest in the venture, as follows: Shareholding percentage New Previous (%) (%) Joint Venture BBCT - Second Stage Expressway Project Sector B Route Phayathai - Bangkhlo - Second Stage Expressway Project Sector C+ Route Chaeng Wattana - Bang Phun & Bang Sai - Second Stage Expressway Project Sector D Route Asoke - Srinakarin - Second Stage Expressway Project Sector C1A Route Ngam Wong Wan - Chaeng Wattana

99.97

53.20

99.97

59.99

99.97

59.99

99.97

59.99

The Company has therefore included the financial statements of the Joint Venture BBCT in the consolidated financial statements based on the new interest as from December 2009. The Company recognised the result of the change, amounting to approximately Baht 116 million, under the caption of 莽Profit sharing from jointly controlled entities茅 in the consolidated income statements for the year 2009.

138

Annual Report 2010


16. Investments in associated companies 16.1 Details of associated companies: (Unit: Baht)

Consolidated financial statements Company没s name

Nature of business

Country of Shareholding incorporation percentage 2010 (%)

2009 (%)

Carrying amounts based on equity method

Cost 2010

2009

2010

2009

CH. Karnchang (Qatar) Contracting Company

Construction

Qatar

49.00

49.00

837,900

837,900

-

-

Bangkok Metro Public Company Limited

Operation of the MRTA Initial System Project -

Thailand

24.61

24.61

3,593,304,884

3,593,304,884

593,668,317

861,173,720

Thailand

30.04

31.55

2,032,452,517

2,159,052,517

2,428,722,333

2,344,370,788

Thailand

38.00

38.00

2,443,407,265

2,169,294,265

2,066,053,623

1,486,897,675

The Lao

95.00

-

760,000,000

-

513,630,814

-

8,830,002,566

7,922,489,566

5,602,075,087

4,692,442,183

Chaloem Ratchamongkhon Line and Commercial Thai Tap Water Supply Public Company Limited

SouthEast Asia Energy Limited

development Production and sale of treated water to the Provincial Waterworks Authority Making investment in as well as provision of consulting services relating to electricity generating projects both

Xayaburi Power Company Limited

locally and overseas Generating and sale of electricity

People没s Democratic Republic

Total

CH. Karnchang Public Company Limited

139


(Unit: Baht) Separate financial statements Nature of

Country of Shareholding

Company没s name business

CH. Karnchang (Qatar) Contracting Company Bangkok Metro Public Company Limited

Allowance for loss

Carrying amounts based

on investments

on cost method - net

Cost incorporation percentage

Construction

Operation of the MRTA Initial System Project Chaloem Ratchamongkhon Line and Commercial development Thai Tap Water Supply Production and sale Public Company Limited of treated water to the Provincial Waterworks Authority SouthEast Asia Energy Making investment in Limited as well as provision of consulting services relating to electricity generating projects both locally and overseas Xayaburi Power Generating and sale Company Limited of electricity

2010 2009

2010

Qatar

(%) 49.00

(%) 49.00

837,900

Thailand

24.61

24.61 3,593,304,884 3,593,304,884 (534,664,972) (534,664,972) 3,058,639,912 3,058,639,912

Thailand

30.04

31.55 2,032,452,517 2,159,052,517

-

- 2,032,452,517 2,159,052,517

Thailand

38.00

38.00 2,443,407,265 2,169,294,265

-

- 2,443,407,265 2,169,294,265

-

-

The Lao 95.00 People没s Democratic Republic

Total

- 760,000,000

2009 837,900

2010

2009

(837,900)

(837,900)

-

2010

2009 -

-

760,000,000

-

8,830,002,566 7,922,489,566 (535,502,872) (535,502,872) 8,294,499,694 7,386,986,694

16.2 Share of income (loss) and dividend received During the years, the Company has recognised its share of net income (loss) from investments in associated companies in the consolidated financial statements and dividend income in the separate financial statements as follows: (Unit: Baht)

Company没s name

CH. Karnchang (Qatar) Contracting Company Bangkok Metro Public Company Limited and its subsidiaries Thai Tap Water Supply Public Company Limited and its subsidiaries SouthEast Asia Energy Limited and its subsidiary Xayaburi Power Company Limited Total 140

Consolidated financial statements Share of income (loss) from investments in associated companies during the years 2010 2009

Separate financial statements Dividend received during the years 2010 2009

(267,505,404)

(321,766,371)

-

-

592,926,595

532,123,476

395,775,768

436,721,054

305,042,948

(128,464,926)

-

-

(246,369,186) 384,094,953

81,892,179

395,775,768

436,721,054 Annual Report 2010


16.3 Fair value investments in listed associates The fair values of investments in associated companies that are listed on the Stock Exchange of Thailand are based on the latest bid price of the last working days of December 2010 and 2009, as quoted on the Stock Exchange of Thailand. Such fair values are as follow: (Unit: Million Baht)

Fair values as at 31 December 2010 2009 2,088.1 2,294.0 7,552.3 5,589.0 9,640.4 7,883.0

Company没s name Bangkok Metro Public Company Limited Thai Tap Water Supply Public Company Limited Total

16.4 Summarised financial information of associated companies Financial information of the associated companies is summarised below. (Unit: Million Baht)

Company没s name

Bangkok Metro Public Company Limited and its subsidiaries Thai Tap Water Supply Public Company Limited and its subsidiaries SouthEast Asia Energy Limited and its subsidiary Xayaburi Power Company Limited

Paid-up capital Total assets Total liabilities as at 31 December as at 31 December as at 31 December 2010 2009 11,950.0 11,950.0

Total revenues for Net income (loss) the years ended for the years ended

2010 18,583.1

2009 18,876.1

2010 15,448.5

2009 14,658.3

31 December 2010 2009 1,750.1 1,687.3

31 December 2010 2009 (1,113.5) (1,334.0)

3,990.0

3,990.0

21,488.3

21,064.3

12,004.7

12,369.5

4,419.8

4,067.1

2,062.9

1,593.6

6,430.0 800.0

5,708.7 -

28,917.2 794.2

25,997.9 -

20,742.6 0.8

18,696.8 -

5.7 -

7.1 -

(66.1) (6.6)

(77.3) -

Bangkok Metro Public Company Limited The Company has pledged part of its share certificates of investment in Bangkok Metro Public Company Limited with a group of banks to secure parts of the long-term loans obtained from that group of banks by the associated company.

Thai Tap Water Supply Public Company Limited On 25 February 2009, a meeting of the Board of Directors of Thai Tap Water Supply Public Company Limited passed a resolution to propose a dividend payment of Baht 0.2 per share to the shareholders from the earnings of the promoted operations for the year 2008, or a total of Baht 798 million, for approval by the Annual General Meeting of the company没s shareholders. The share register is to be closed as of 13 March 2009 with respect to determining the entitlement to receive dividend payment. This dividend was approved by the Annual General Meeting of the company没s shareholders on 3 April 2009. Subsequently, on 11 August 2009, a meeting of the Board of Directors of Thai Tap Water Supply Public Company Limited passed a resolution to approve an interim dividend payment of Baht 0.11 per share to the shareholders from the earnings of the promoted operations for January to June 2009, or a total of Baht 438.9 million. The share register is to be closed as of 28 August 2009 with respect to determining the entitlement to receive dividend payment.

CH. Karnchang Public Company Limited

141


The Company recorded dividend income of Baht 281.8 million and Baht 154.9 million, in proportion to its investment in the ordinary shares of such company, in the separate income statement for the first quarter and the third quarter of the year 2009, respectively. On 21 December 2009, a meeting of the Companyûs Board of Directors passed a resolution granting approval for the Company to sell 180 million of the ordinary shares it held in Thai Tap Water Supply Public Company Limited to persons or legal entities who have no relationship and/or connection with the Company, or its directors, executives, related parties or major shareholders, representing 4.51 percent of the registered capital of such company. The offering price was to be not less than Baht 4.15 per share, equivalent to a total price of not less than Baht 747 million, based on the average closing price of such shares for the 15 business days prior to the date of the meeting of the Companyûs Board of Directors. Subsequently, the Company sold 150 million ordinary shares of Thai Tap Water Supply Public Company Limited, equivalent to 3.76 percent of its registered capital, to Histeel Products Company Limited at a price of Baht 4.30 per share, or a total of Baht 645 million. The buyer and seller agreed to pay for and transfer the shares on 29 December 2009. As a result, the Companyûs equity interest in the above company fell from 35.31 percent to 31.55 percent. The Company recognised a gain of Baht 343.1 million from the sale of this investment in associated company in the consolidated income statements for the year 2009 (Separate income statements: Bath 324.3 million). On 5 February 2010, a meeting of the Board of Directors of Thai Tap Water Supply Public Company Limited passed a resolution to propose a dividend payment of Baht 0.17 per share to the shareholders from the earnings of the promoted operations for the second half year 2009, or a total of Baht 678.3 million, for approval by the Annual General Meeting of the companyûs shareholders. The share register is to be closed as of 26 February 2010 with respect to determining the entitlement to receive dividend payment. This dividend was approved by the Annual General Meeting of the companyûs shareholders on 2 April 2010. Subsequently, on 30 July 2010, a meeting of the Board of Directors of Thai Tap Water Supply Public Company Limited passed a resolution to approve an interim dividend payment of Baht 0.15 per share to the shareholders from the earnings of the promoted operations for January to June 2010, or a total of Baht 597.5 million. The share register is to be closed as of 16 August 2010 with respect to determining the entitlement to receive dividend payment. The Company recorded dividend income of Baht 211.5 million and Baht 184.3 million, in proportion to its investment in the ordinary shares of such company, in the separate income statement for the first quarter and the third quarter of 2010, respectively. In 2010, the Company gradually sold 60 million ordinary shares of Thai Tap Water Supply Public Company Limited, equivalent to 1.5 percent of its registered capital, at a average price of Baht 4.96 per share, or a total of Baht 297.7 million. As a result, the Companyûs equity interest in the above company fell from 31.55 percent to 30.04 percent. The Company recognised gains of Baht 175.9 million from the sales of this investment in associated company in the consolidated income statements for the year 2010 (Separate income statements: Baht 171.1 million). The Company has pledged part of the share certificates for its investment in Thai Tap Water Supply Public Company Limited with banks to secure its loans from banks.

SouthEast Asia Energy Limited On 26 May 2006, the Company entered into an Equity Contribution Agreement with SouthEast Asia Energy Limited and Nam Ngum 2 Power Company Limited (co-borrower), other shareholders and lenders of SouthEast Asia Energy Limited. Under the agreement, the Company agreed to provide equity contributions of up to Baht 469 million for any revenue shortfall in the event that the construction of the Nam Ngum 3 Hydroelectric Power Project negatively impacts on the energy production of the above company, causing such company to be unable to comply with its obligations under the Financing Documents. It also agreed to provide additional equity contributions of up to Baht 313 million if the co-borrower of that company defaults on loan payment or is unable to comply with its obligations under the Financing Documents. In addition, the Company agrees to provide equity contributions of up to USD 12.5 million in the event of any budget cost overruns in the Nam Ngum 2 Hydroelectric Power Project.

142

Annual Report 2010


On 11 April 2007, SouthEast Asia Energy Limited entered into the Memorandum of Understanding with the Lao Peopleûs Democratic Republic for exclusive rights to carry out the feasibility study and the development of the Nam Bak 1-2 Hydroelectric Power Project within 18 months after the signing date. On 9 January 2008, the branch of SouthEast Asia Energy Limited entered into a novation agreement to transfer all rights and obligations under the Project Documents of the Nam Ngum 2 Hydroelectric Power Project to Nam Ngum 2 Power Company Limited (the subsidiary of SouthEast Asia Energy Limited), as approved by the meeting of the Board of Directors of SouthEast Asia Energy Limited. In this regard, SouthEast Asia Energy Limited transferred its major assets and liabilities to Nam Ngum 2 Power Company Limited in payment of the additional share capital of the subsidiary. The result of the novation agreement is that the rights and obligations under the Nam Ngum 2 Hydroelectric Power Project and rights to carry out the feasibility study and the development of the Nam Bak 1-2 Hydroelectric Power Project have been transferred to the subsidiary. On 9 October 2008, Nam Ngum 2 Power Company Limited entered into the Addendum to Memorandum of Understanding with the Government of the Lao Peopleûs Democratic Republic for the extension of the exclusive rights to carry out the feasibility study and the development of the Nam Bak 1-2 Hydroelectric Power Project for the further period of 1 year after the expiration date, as approved by the resolution of meeting of the companyûs Executive Board. The Government of the Lao Peopleûs Democratic Republic extended the exclusive rights under such Memorandum of Understanding until 30 June 2010, and currently the Government of the Lao Peopleûs Democratic Republic is in the process of extension of the Memorandum of Understanding for a further period. During 2009, the Company made share payments in proportion to its investment in SouthEast Asia Energy Limited amounting to Baht 598.9 million, as such company called additional share payments of 43.7 percent of the value of the 137.1 million ordinary shares held by the Company which were not fully paid (par value of Baht 10 each). During 2010, the Company made share payments in proportion to its investment in SouthEast Asia Energy Limited amounting to Baht 274.2 million, as such company called additional share payments of 20 percent of the value of the 137.1 million ordinary shares held by the Company which were not fully paid (par value of Baht 10 each). In January 2011, the Company made share payment in proportion to its investment in SouthEast Asia Energy Limited amounting to Baht 45.2 million, as such company called additional share payment of 3.3 percent of the value of the 137.1 million ordinary shares held by the Company which were not fully paid (par value of Baht 10 each). The Company has pledged share certificates for its investment in SouthEast Asia Energy Limited with a group of banks to guarantee a loan facility granted to that company by the group of banks.

Xayaburi Power Company Limited In June 2010, the Company registered the establishment of a company named Xayaburi Power Company Limited, for the purpose of obtaining a concession to design, develop, construction and operate the Xayaburi Hydroelectric Power Project from the Government of the Lao Peopleûs Democratic Republic for a period of 29 years commencing from the Commercial Operation Date. This company has an initial registered capital of USD 25 million or equivalent to Baht 800 million, with the Company holding 95 percent of shares. Subsequently, in August 2010 and November 2010, such company called up 6.6 percent and 93.4 percent of the value of its registered capital of Baht 800 million and the Company made share payments in proportion to its investment of Baht 50.2 million and Baht 709.8 million in September 2010 and December 2010, respectively. However, the Company excluded the financial statements of this company from the consolidated financial statements for the year ended 31 December 2010 since the Companyûs Board of Directors approved the sale of some of the shares in such company, as a result of which the Company will hold not less than 30 percent of the registered share capital. Currently, the Company is in the process of diluting its shareholding and expects it will be reduced to 30 percent within the first half of 2011. The Company therefore classified the investment in this company as çInvestment in associated companyé in the balance sheet and accounted for the investment in the associated company using the equity method in the consolidated financial statements.

CH. Karnchang Public Company Limited

143


17. Other long-term investments (Unit: Baht)

Consolidated financial statements Shareholding Investments percentage 2010 2009 Percent Investments in available for sale related company Bangkok Expressway Public Company Limited Add (less): Unrealised gain (loss) on changes in value of investments Other Investments - other companies Nava Finance and Securities Public Company Limited Bangkok Tokyu Department Store Company Limited Kruasakul Company Limited The Bangkok Club Company Limited Chanthaburi Country Club Company Limited Other related parties Less: Provision for loss on diminution in value of investments Other long-term investments, net

16.39

2,552,052,757 2,552,052,757

Separate financial statements Shareholding Investments percentage 2010 2009 Percent

15.15

(65,505,163) 60,715,527 2,486,547,594 2,612,768,284

2,411,613,718 2,411,613,718 (113,223,582) 3,445,968 2,298,390,136 2,415,059,686

-

27,291,095

27,291,095

-

27,291,095

27,291,095

19.00 10.14 0.57 0.25

2,280,000 43,750,000 3,000,000 2,000,000 136,044 78,457,139

2,280,000 43,750,000 3,000,000 2,000,000 136,044 78,457,139

10.14 0.57 0.25

43,750,000 3,000,000 2,000,000 136,044 76,177,139

43,750,000 3,000,000 2,000,000 136,044 76,177,139

(71,041,095) (71,041,095) 7,416,044 7,416,044 2,493,963,638 2,620,184,328

(71,041,095) (71,041,095) 5,136,044 5,136,044 2,303,526,180 2,420,195,730

The Company has pledged part of the share certificates for its investment in Bangkok Expressway Public Company Limited with banks to secure its long-term loans from banks.

144

Annual Report 2010


18. Property, plant and equipment (Unit: Baht) Consolidated financial statements Furniture, Land and

Buildings

Machinery

Condominium land

Building and

building

Motor

Construction

and office

vehicles

in progress

Total

improvements

improvement

fixtures and

construction

equipment equipment

Cost 31 December 2009

303,982,108

631,756,243

145,924,376

188,063,901

396,907,119

Additions

5,416,718

-

-

-

76,965,459

38,313,539

26,067,409

240,330,552

387,093,677

Disposals/write off

(3,603,540)

-

(2,270,663)

-

(128,593,171)

(22,073,215)

(10,908,375)

-

(167,448,964)

-

-

37,129,306

3,168,384

18,405,523

(5,556,020)

(30,000)

(12,297,690)

40,819,503

305,795,286

631,756,243

180,783,019

334,224,380 2,959,977,444

198,748,205

412,036,153

263,062,862 5,286,383,592

17,901,094

32,007,207

89,129,221

322,587,835 1,873,401,253

141,461,888

273,231,889

- 2,749,720,387

6,642,158

14,761,495

7,201,881

1,872,190

212,672,773

22,741,940

55,592,657

-

321,485,094

(614,758)

-

(2,270,662)

-

(116,898,195)

(21,091,943)

(10,488,430)

-

(151,363,988)

-

-

-

-

7,287,799

(5,016,938)

(12,044)

-

2,258,817

23,928,494

46,768,702

94,060,440

324,460,025 1,976,463,630

138,094,947

318,324,072

31 December 2009

73,859,768

-

-

-

-

-

-

-

73,859,768

31 December 2010

73,859,768

-

-

-

-

-

-

-

73,859,768

31 December 2009

212,221,246

599,749,036

56,795,155

8,468,161 1,119,798,380

46,602,013

123,675,230

35,030,000 2,202,339,221

31 December 2010

208,007,024

584,987,541

86,722,579

9,764,355

60,653,258

93,712,081

263,062,862 2,290,423,514

2009 (Baht 300 million included in cost of construction services, sales of construction materials and services, and the balance in administrative expenses)

325,815,035

2010 (Baht 303 million included in cost of construction services, sales of construction materials and services, and the balance in administrative expenses)

321,485,094

Reclassification/transfer in (out) 31 December 2010

331,055,996 2,993,199,633

35,030,000 5,025,919,376

Accumulated depreciation 31 December 2009 Depreciation for the year Depreciation on disposals/ write off Reclassification/transfer in (out) 31 December 2010

- 2,922,100,310

Allowance for impairment loss

Net book value

983,513,814

Depreciation for the year

CH. Karnchang Public Company Limited

145


(Unit: Baht) Separate financial statements Furniture, Land and

Buildings

Machinery

Condominium land

Building and

building

Motor

Construction

and office

vehicles

in progress

Total

improvements

improvement

fixtures and

construction

equipment equipment

Cost 31 December 2009

290,365,719

631,756,243

117,326,092

94,529,524

291,521,425

Additions

5,269,400

-

-

-

23,808,223

7,886,398

15,478,050

2,183,797

54,625,868

Disposals/write off

(2,988,780)

-

-

-

(77,009,453)

(16,799,856)

(2,814,465)

-

(99,612,554)

-

-

8,792,984

3,168,384

46,405,523

(5,530,400)

(30,000)

(11,961,368)

40,845,123

292,646,339

631,756,243

126,119,076

19,545,408 1,608,212,812

80,085,666

304,155,010

20,658,476 3,083,179,030

15,144,774

32,007,207

63,455,276

8,001,876 1,129,032,019

67,809,823

208,374,114

- 1,523,825,089

6,550,905

14,761,495

6,892,185

1,852,537

132,597,428

9,341,818

40,434,752

-

212,431,120

-

-

-

-

(66,196,834)

(15,870,722)

(2,477,415)

-

(84,544,971)

-

-

-

-

7,287,799

(5,015,759)

(12,044)

-

2,259,996

21,695,679

46,768,702

70,347,461

9,854,413 1,202,720,412

56,265,160

246,319,407

31 December 2009

73,859,768

-

-

-

-

-

-

-

73,859,768

31 December 2010

73,859,768

-

-

-

-

-

-

-

73,859,768

31 December 2009

201,361,177

599,749,036

53,870,816

8,375,148

485,976,500

26,719,701

83,147,311

30,436,047 1,489,635,736

31 December 2010

197,090,892

584,987,541

55,771,615

9,690,995

405,492,400

23,820,506

57,835,603

20,658,476 1,355,348,028

2009 (Baht 191 million included in cost of construction services, sales of construction materials and services, and the balance in administrative expenses)

210,625,086

2010 (Baht 201 million included in cost of construction services, sales of construction materials and services, and the balance in administrative expenses)

212,431,120

Reclassification/transfer in (out) 31 December 2010

16,377,024 1,615,008,519

30,436,047 3,087,320,593

Accumulated depreciation 31 December 2009 Depreciation for the year Depreciation on disposals/ write off Reclassification/transfer in (out) 31 December 2010

- 1,653,971,234

Allowance for impairment loss

Net book value

Depreciation for the years

As at 31 December 2010, the Company and a subsidiary had machinery, vehicles and equipment under hire purchase agreements with net book values amounting to Baht 157 million (Separate financial statements: Baht 148 million). As at 31 December 2010, certain plant and equipment items have been fully depreciated but are still in use. The gross carrying amount (before deducting accumulated depreciation) of those assets amounted to approximately Baht 1,558 million (2009: Baht 1,429 million) (Separate financial statements: Baht 939 million, 2009: Baht 773 million).

146

Annual Report 2010


19. Investments in land (Unit: Baht)

Consolidated financial statements 2010 2009 Cost Less: Allowance for impairment loss of investments in land Investments in land, net

Separate financial statements 2010 2009

341,737,495

341,737,495

182,346,124

182,346,124

(59,848,637) 281,888,858

(59,848,637) 281,888,858

(41,834,202) 140,511,922

(41,834,202) 140,511,922

The Company and its subsidiaries appraised the value of investments in land and adjusted them to fair value, which is equivalent to the price appraised by the Land Department.

20. Intangible assets Details of intangible assets which are computer software are as follows: (Unit: Baht)

Cost Accumulated amortisation Net book value Amortisation expenses included in the income statements for the year

Consolidated financial statements 2010 2009 73,920,355 63,639,772 (9,634,124) (4,560,462) 64,286,231 59,079,310 5,086,875

3,638,051

Separate financial statements 2010 2009 67,451,617 63,639,772 (8,928,978) (4,560,462) 58,522,639 59,079,310 4,382,907

3,638,051

21. Bank overdrafts and short-term loans from financial institutions Bank overdrafts and short-term loans from financial institutions as at 31 December 2010 and 2009 are comprised of: (Unit: Baht)

Bank overdrafts Short-term loans from banks Bills of exchange Total

Interest rate (% p.a.) MOR MLR - 1.5 and MLR - 1 3.15 to 3.85

Consolidated financial statements 2010 2009 6,170,357 19,227,322 372,500,000 1,140,490,297 3,000,000,000 1,500,000,000 3,378,670,357 2,659,717,619

Separate financial statements 2010 2009 6,170,357 372,500,000 390,300,000 3,000,000,000 1,500,000,000 3,378,670,357 1,890,300,000

The outstanding balance of bills of exchange represented bills of exchange issued to commercial banks, open-ended funds and individual investors, which carried interest at rates of 3.15 to 3.85 percent per annum, and matured within 1 year. Parts of the bank overdrafts and short-term loans from financial institutions of the Company are secured by the transfer of rights over collection of revenues from construction projects.

CH. Karnchang Public Company Limited

147


Bank overdrafts and short-term loans from financial institutions of subsidiaries are secured by certain saving deposits of a subsidiary, certain bank deposits of the Company, the transfer of the rights over saving deposits of a subsidiary, the transfer of rights over receipt of payment under construction contracts of subsidiaries, the transfer of bank guarantees provided by subcontractors and are guaranteed by the Company and subsidiaries没 shareholders. The bank overdrafts of two limited partnerships, which were invested in by a subsidiary, are secured by the mortgage of the securities of a related company and are guaranteed by the partners of these partnerships and the Company没s directors.

22. Hire purchase creditors (Unit: Baht)

Consolidated financial statements 2010 2009 Liabilities under hire purchase Less: Deferred interest expenses Less: Portion due within one year Liabilities under hire purchase, net of current portion

Separate financial statements 2010 2009

43,036,939 (2,055,279) (40,981,660)

118,424,300 (5,886,613) (98,136,105)

39,645,055 (1,987,442) (37,657,613)

105,999,173 (5,352,230) (89,569,408)

-

14,401,582

-

11,077,535

The Company and its subsidiary has entered into hire purchase agreements with leasing companies for rental of equipment and motor vehicles for use in their operation, whereby they are committed to pay rental on a monthly basis. The terms of the agreements are generally between 3 to 5 years.

23. Long-term loans (Unit: Baht)

Loans

1 2 3 4 5 6

148

Repayment schedule The Company Quarterly installments as from 18 August 2006 to 18 May 2011 Quarterly installments as from 31 October 2009 to 31 July 2013 Quarterly installments as from 30 June 2009 to 30 September 2013 Semi-annual installments as from 30 June 2009 to 30 December 2015 Semi-annual installments as from 31 December 2008 to 30 December 2015 Semi-annual installments as from 30 September 2008 to 30 March 2014

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

50,000,000

150,000,000

50,000,000

150,000,000

382,500,000

516,500,000

382,500,000

516,500,000

690,000,000

880,000,000

690,000,000

880,000,000

-

628,000,000

-

628,000,000

-

609,570,000

-

609,570,000

-

438,355,212

-

438,355,212

Annual Report 2010


(Unit: Baht)

Loans

Repayment schedule

7

Semi-annual installments as from 28 February 2011 to 31 August 2015 8 Quarterly installments as from 30 December 2010 to 30 September 2014 9 Semi-annual installments as from 30 September 2010 to 30 September 2013 CKTC Joint Venture 10 Installments due each time payment for construction work is received, from 1 March 2011 to 1 December 2014 Total Less: Current portion Long-term loans, net

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

750,000,000

750,000,000

750,000,000

750,000,000

1,937,500,000

-

1,937,500,000

-

360,000,000

-

360,000,000

-

749,000,000

-

-

-

4,919,000,000 (820,750,000) 4,098,250,000

3,972,425,212 (624,420,000) 3,348,005,212

4,170,000,000 (820,750,000) 3,349,250,000

3,972,425,212 (624,420,000) 3,348,005,212

Long-term loans presented in item 8 carry interest at a fixed interest rate of 4.25 percent per annum for a period of two years from the drawdown date and thereafter at the Minimum Loan Rate minus stipulated margins (MLR - margin) per annum. Long-term loans presented in item 9 carry interest at a fixed interest rate of 3 percent per annum. Other long-term loans carry interest at rates between the Minimum Loan Rate minus stipulated margins (MLR - margin) per annum and Minimum Loan Rate (MLR) per annum. In June 2010, the Company repaid approximately Baht 1,621 million of the loans from three banks presented in items 4 to 6, as discussed in Note 15. Long-term loans of the Company were secured by the pledge of parts of share certificates of investments in associated and related companies, the mortgage of land and construction thereon of other company (as discussed in Note 13) and the guarantee of the Company没s directors, certain related companies and other companies. The long-term loans of a joint venture were secured by the transfer of the rights over a savings deposit of the joint venture. The loan agreements contain covenants that, among other things, require the Company to maintain certain debt to equity and debt to collateral value ratios.

CH. Karnchang Public Company Limited

149


24. Debentures (Unit: Baht)

Debentures

Life

Date of issue

Maturity date

Interest rate (% p.a.)

Consolidated and separate financial statements 2010

1 4 years 7 months 12 days 2 3 years 3 3 years 4 3 years 5 5 years 6 3 years 7 2 years 8 4 years 9 4 years 10 3 years 11 5 years

July 2005 July 2007 April 2008 6 February 2009 6 February 2009 25 June 2009 22 October 2009 22 October 2009 25 March 2010 9 July 2010 9 July 2010

Total Less: Current portion of debentures Less: Deferred debenture issuing costs Debentures, net of current portion

26 February 2010 26 July 2010 30 April 2011 6 February 2012 6 February 2014 25 June 2012 22 October 2011 22 October 2013 25 March 2014 9 July 2013 9 July 2015

5.2 5.25 5.0 5.3 and 5.9 5.5 and 6.3 5.3 and 6.0 5.0 5.4 and 6.2 4.9 4.0 4.75

2,000,000,000 1,616,200,000 883,800,000 1,400,000,000 1,000,000,000 2,000,000,000 1,100,000,000 1,000,000,000 1,000,000,000 12,000,000,000 (3,000,000,000) (24,284,510) 8,975,715,490

2009 1,100,000,000 2,000,000,000 2,000,000,000 1,616,200,000 883,800,000 1,400,000,000 1,000,000,000 2,000,000,000 12,000,000,000 (3,100,000,000) (22,239,508) 8,877,760,492

All debentures of the Company are unsecured, registered, senior debentures with trustees and with a par value of Baht 1,000 each. The interest is payable every 6 months throughout the life of the debentures. Debentures presented as items 4 to 6 and item 8 in the above table carry interest at two rates, with the first rate applicable for the first two years and a second rate then applicable until maturity. On 21 April 2010, the Annual General Meeting of the Company没s shareholders passed a resolution approving an increase in the maximum outstanding balance of debentures approved for issue at any particular time, from a limit of Baht 12,000 million to a limit of Baht 17,000 million. The conditions of the debentures include covenants that, among other things, require the Company to maintain a certain debt to equity ratio.

25. Share capital/Share premium On 20 January 2010, the Extraordinary General Meeting of the Company没s Shareholders No.1/2010 approved the resolutions relating to share capital of the Company as follows: 1) Approved the reduction of the Company没s registered capital by means of canceling 3,987,831 unissued ordinary shares, or registered capital of Baht 3,987,831, from Baht 1,450,000,000 to Baht 1,446,012,169, which is equivalent to the paid-up capital. The Company registered the reduction of its registered share capital with the Ministry of Commerce on 29 January 2010. 2) Approved the increase of the Company没s registered capital by Baht 206,573,167, from Baht 1,446,012,169 to Baht 1,652,585,336, by issuing 206,573,167 new ordinary shares with a par value of Baht 1. The Company registered the increase of its registered share capital with the Ministry of Commerce on 1 February 2010.

150

Annual Report 2010


3) Approved the allotment of 206,573,167 ordinary shares to existing shareholders entitled to participate in a rights offering in proportion to their shareholding. The shares are to be offered in a ratio of 1 new ordinary share for every 7 existing ordinary shares, with fractions of shares to be discarded. The offering price is to be discounted by 15 percent from the weighted average price during the 15 working days prior to the date of the Board of Directorsรป Meeting, which was Baht 5.34, and the subscription and payment periods run from 22 to 26 February 2010. If any shares remain after the rights offering, the Board of Directors or any person(s) appointed by the Board of Directors are authorized to offer the remaining shares to investors by way of private placement, including institutional investors and/or investors with specific characteristic, at any price that the Board of Directors deems fit, but not lower than the price at which the shares were offered to existing shareholders, in compliance with the notification of the Capital Market Supervisory Board. The offer can be made in multiple tranches or a single tranche. If the Company offers to sell the shares to a connected person of the Company, it must comply with the regulations of the Stock Exchange of Thailand regarding connected transactions prior to making such offer. In February and March 2010, the Company received payment for 206,573,167 additional shares at a price of Baht 5.34 per share from existing shareholders and from private placements, or a total of Baht 1,103.1 million, and share premium increased by Baht 896.5 million. The Company registered the increase in its paid-up capital with the Ministry of Commerce on 26 March 2010.

26. Statutory reserve Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside to a statutory reserve at least 5 percent of its net income after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for dividend distribution.

27. Accounts receivable - claims for additional costs In 2000, Joint Venture BBCD had claimed for payment of additional construction costs from the Expressway and Rapid Transit Authority of Thailand (the employer). The employerรปs consulting engineer considered the joint ventureรปs claims and issued a letter confirming its acceptance of the additional costs. Subsequently, the Arbitral Tribunal issued its award, ruling that the employer was to pay the joint venture for such additional costs and accrued interest. Later the employer sent a letter to the joint venture informing that, after consideration, the employer had decided to comply with the arbitral award. Consequently, the joint venture had recorded such amounts as asset and income in the financial statements of 2001. The Groupรปs proportionate interest in such amounts is approximately Baht 2,500 million. As a result of the delay in the payment, the joint venture filed a lawsuit against the employer with a Civil Court to ordering compliance with the arbitral award. On 30 December 2003, the court ruled in favor of the joint venture, ordering compliance with the arbitral award requiring the Expressway and Rapid Transit Authority of Thailand (the employer) to pay the joint venture in accordance with the arbitral award. Subsequently, in January 2004, the employer appealed the ruling to the Supreme Court of Thailand. On 15 February 2007, the Supreme Court handed down a judgment reversing that of the Civil Court enforcing the arbitral award requiring the employer to make payments to the Joint Venture BBCD. The joint venture therefore recorded allowance for doubtful accounts for the full amount of the accounts receivable recorded in respect of the claim for additional costs as an expense in the income statement of 2006, with the Groupรปs proportionate interest in such allowance being approximately Baht 2,500 million.

CH. Karnchang Public Company Limited

151


Subsequently, after the management of the Company carefully reviewed the details of the Supreme Courtรปs judgment, on 11 February 2008 a lawsuit was filed against the employer with the Civil Court, to recover costs paid by the Joint Venture BBCD from the employer, on the grounds of undue enrichment. Such costs and accrued interest calculated up to the date of filing of the lawsuit amounted to approximately Baht 3,400 million (per the Groupรปs proportionate interest). Currently, the case is in the process of consideration of the Civil Court.

28. Advances for future projects This mostly represents cash payments made for the new hydroelectric power plant projects in the Lao Peopleรปs Democratic Republic, which the Company will establish a new company or assign a group company to operate in the future. The Company will refund these advances from the companies that operate the projects.

29. Adjustment of estimated construction project costs During the first quarter of 2010, a subsidiary reviewed the estimated construction project costs for the hydroelectric power plant project in the Lao Peopleรปs Democratic Republic in order to ensure they reflected actual costs and the value of the remaining construction works since the construction work is nearly completed. Consequently, the subsidiary increased its estimated construction project costs by a total of approximately Baht 1,070 million, equivalent to 4.7 percent of the project value as per the contracts. As a result of the adjustment of the estimates, the profit of the subsidiaryรปs project decreased by Baht 930 million and the income statement for the first quarter of 2010 was affected in the same amount.

30. Gain (loss) on exchange The Company, its subsidiaries and its jointly controlled entities recorded the following gain (loss) on exchange for the years ended 31 December 2010 and 2009. (Unit: Baht)

Consolidated financial statements 2010 2009 Gain (loss) on exchange - Realised - Unrealised Total

152

8,096,569 (280,457) 7,816,112

96,855,468 (2,546,699) 94,308,769

Separate financial statements 2010 2009 886,739 (610,221) 276,518

(433,439) (1,415,694) (1,849,133)

Annual Report 2010


31. Expenses by nature Significant expenses by nature are as follows: (Unit: Baht)

Consolidated financial statements 2010 2009 Salary and wages and other employee benefits Depreciation Construction materials and consumables used and subcontractors costs Repair and maintenance expenses

Separate financial statements 2010 2009

1,303,841,583 321,485,094

1,277,296,642 325,815,035

543,080,042 212,431,120

488,162,021 210,625,086

6,702,594,296 138,153,540

11,148,325,713 255,895,992

1,364,577,829 78,905,625

3,167,307,123 107,880,795

32. Corporate income tax The Company has no corporate income tax liabilities for the years 2010 and 2009 since the Company has tax losses for such years. Corporate income tax of subsidiaries and jointly controlled entities for the year 2010 and 2009 were calculated on net income before income tax after adding back expenses and deducting income which are disallowable for tax computation purposes.

33. Earnings (loss) per share Basic earnings (loss) per share is calculated by dividing the net income (loss) for the year by the weighted average number of ordinary shares in issue during the year.

34. Contracts in progress As at 31 December 2010, the aggregate amount of construction cost incurred and recognised profits or losses to date for contracts in progress of the Company, its subsidiaries and its jointly controlled entities was approximately Baht 50,859.3 million (Separate financial statements: Baht 23,413.8 million), gross amounts due from customers for contracts in progress were approximately Baht 5,287.1 million (Separate financial statements: Baht 2,282.5 million), and gross amounts due to customers for contracts in progress were approximately Baht 75.2 million (Separate financial statements: Baht 7.2 million).

35. Segment information The Company, its subsidiaries and its jointly controlled entities没 operations involve principally a single industry segment, construction service, and are carried on in two geographic areas in Thailand and in the Lao People没s Democratic Republic, as operated by a subsidiary. The financial information of the Company, its subsidiaries and its jointly controlled entities by geographical segment, for the years ended 31 December 2010 and 2009 are as follows:

CH. Karnchang Public Company Limited

153


(Unit: Million Baht)

2010

2009

The Lao People没s Democratic Republic 2010 2009

5,066 88 5,154 (511)

5,263 331 5,594 (372)

3,574 3,574 (438)

Thailand

Revenue from external customers Inter-segment revenues Total revenues Segment operating profit (loss) Unallocated income and expenses: Other income Share of income from investments in associated companies Finance cost Corporate income tax Minority interests Net income (loss)

7,593 7,593 341

Elimination of inter-segment revenues 2010 2009 (88) (88) -

(331) (331) -

Consolidated financial statements 2010 2009 8,640 8,640 (949)

12,856 12,856 (31)

1,246

985

384 (943) (57) (16) (335)

82 (882) (56) (8) 90

(Unit: Million Baht)

2010

2009

The Lao People没s Democratic Republic 2010 2009

1,417 2,956 764 1,724 22,112

1,264 2,554 794 1,543 20,204

400 2,305 167 566 579

Thailand

Trade accounts receivable, net Unbilled receivables Advance payment to subcontractors, net Property, plant and equipment, net Unallocated assets Total assets

200 1,287 256 659 1,365

Elimination of inter-segment revenues 2010 2009

Consolidated financial statements 2010 2009

(1) (2,519)

1,816 5,261 931 2,290 20,172 30,470

(3) (653)

1,461 3,841 1,050 2,202 20,916 29,470

Transfer prices between business segments are as set out in Note 6.

36. Provident funds The Company, some subsidiaries and their employees have jointly established provident funds in accordance with the Provident Fund Act B.E. 2530. The Company, the subsidiaries and their employees contribute to the funds monthly at the rate of 5 percent of basic salary. The funds, which are managed by TMB Asset Management Company Limited and TISCO Asset Management Company Limited (Separate financial statements: TMB Asset Management Company Limited) will be paid to employees upon termination in accordance with the fund rules. During the years 2010 and 2009, the Company and the subsidiaries contributed Baht 21.3 million and Baht 19.9 million, respectively (Separate financial statements: Baht 14.0 million and Baht 12.5 million, respectively) to the funds. 154

Annual Report 2010


37. Dividends On 23 April 2009, the Annual General Meeting of the Company没s shareholders passed resolutions approving the payment of a dividend for 2008 of Baht 0.10 per share, or a total of Baht 144.6 million. The dividend was paid on 22 May 2009. On 21 April 2010, the Annual General Meeting of the Company没s shareholders passed resolutions approving the payment of a dividend for 2009 of Baht 0.10 per share, or a total of not exceeding Baht 165.3 million. The dividend was paid on 20 May 2010.

38. Commitments and contingent liabilities 38.1 Capital commitments As at 31 December 2010, the Company and its subsidiaries had capital commitment of approximately Baht 303.8 million, relating to the acquisition of fixed assets and costs of the power plant project (Separate financial statements: Baht 0.8 million).

38.2 Operating lease commitments A subsidiary and jointly controlled entities have entered into lease agreements in respect of the lease of office building space, land and motor vehicles. The term of the agreements are between 1 to 3 years. As at 31 December 2010, future minimum lease payments required under the operating lease contracts were as follows: (Unit: Million Baht) Payable within: 1 year 11.2 2 to 3 years 8.3

38.3 Service commitments and other commitments As at 31 December 2010, the Company, its subsidiaries and its jointly controlled entities have the following service commitments and other commitments: a) The Company, its subsidiaries and its jointly controlled entities have commitments totaling Baht 4,664.7 million (Separate financial statements: Baht 717.0 million) in respect of project construction costs and services, which the Company, its subsidiaries and its jointly controlled entities had already entered into agreements. b) The Company has commitment in respect of uncalled portion of investments in a subsidiary and an associated company of approximately Baht 82.2 million (2009: Baht 380.1 million). c) The Company has commitments of Baht 366.9 million in respect of the Subordinated Loan Agreement to provide funding to Bangkok Metro Public Company Limited, as stipulated in the agreement (as discussed in Note 6). d) The Company has commitments of up to Baht 782 million and USD 12.5 million in respect of its undertaking to provide equity contributions to SouthEast Asia Energy Limited as stipulated in the agreement (as discussed in Note 16). e) The Company has commitments as stipulated in the Payment Agreement (as discussed in Note 15).

38.4 Related party guarantees As at 31 December 2010, the Company has provided guarantees totaling Baht 9,062.3 million for bank credit facilities on behalf of two subsidiaries.

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155


38.5 Bank guarantees As at 31 December 2010 and 2009, there were outstanding bank guarantees of approximately Baht 13,146.8 million and Baht 8,884.0 million, respectively (Separate financial statements: Baht 8,377.9 million and Baht 4,895.7 million, respectively) issued by banks on behalf of the Company, its subsidiaries and its jointly controlled entities (in proportionate of the Companyûs interest in joint ventures) in respect of certain performance bonds as required in the normal course of business of the Company, its subsidiaries and its jointly controlled entities. The details of bank guarantees are as follows: (Unit: Million Baht)

Guarantee of construction contracts bidding and debt repayment Guarantee of advance payment bond and retention Other guarantees

Consolidated financial statements 2010 2009 9,701.3 5,078.7

Separate financial statements 2010 2009 6,804.9 2,853.5

3,336.0

3,719.2

1,505.6

2,005.8

109.5 13,146.8

86.1 8,884.0

67.4 8,377.9

36.4 4,895.7

38.6 Contingent liabilities Joint Venture BBCD In 2006, the Central Tax Court issued a judgement ordering the Joint Venture BBCD to pay additional customs duties on construction equipment imports amounting to approximately Baht 109 million (in proportion to the Companyûs interest in the joint venture). The joint venture filed an appeal against the judgement with the Supreme Court and the case is currently before the Supreme Court. However, since the management of the Joint Venture BBCD believes that the joint venture has no liability in respect of such additional customs duties, it has not set aside provision for loss for the customs duty assessment in the accounts.

39. Financial instruments 39.1 Financial risk management The Companyûs, its subsidiariesû and its jointly controlled entitiesû financial instruments, as defined under Thai Accounting Standard No.107 çFinancial Instruments: Disclosure and Presentationsé, principally comprise the following:

-

156

Financial assets Cash and cash equivalents Current investments Trade accounts receivable Accounts receivable and loans to related parties Restricted bank deposits Long-term loans to jointly controlled entities and interest receivable Long-term loans to associated companies and interest receivable Loans to subcontractors and interest receivable Long-term loans to other companies and interest receivable Other long-term investments

Financial liabilities - Bank overdrafts and short-term loans from financial institutions - Trade accounts payable - Hire purchase creditors - Retention for construction - Long-term loans - Debentures

Annual Report 2010


The financial risks associated with these financial instruments and how they are managed is described below. a) Credit risk The Company, its subsidiaries and its jointly controlled entities are exposed to credit risk primarily with respect to construction receivables and loans. However, since the majority of the Companyûs, its subsidiariesû and jointly controlled entitiesû construction contracts are made with government agencies and other creditworthy customers, they do not anticipate material losses from their debt collection outside those for which provision has already been set aside. b) Interest rate risk The Companyûs, its subsidiariesû and its jointly controlled entitiesû exposure to interest rate risk relates primarily to its cash at banks, lendings, bank overdrafts and short-term loans, hire purchase creditors, long-term borrowings and debentures. However, since most of these financial assets and liabilities bear floating interest rates or fixed interest rates which are close to the market rate, the interest rate risk is expected to be minimal. Significant financial assets and liabilities as at 31 December 2010 classified by type of interest rates are summarised in the table below, with those financial assets and liabilities that carry fixed interest rates further classified based on the maturity date, or the repricing date if this occurs before the maturity date. (Unit: Million Baht)

Consolidated financial statements Fixed interest rates Within Over 1-5 years 1 year 5 years

Floating interest

Non-interest Total

Effective interest rate

bearing rate

(% p.a.)

Financial assets Cash and cash equivalents Current investments

108 1,259

1 -

-

1,329 -

86 1,783

1,524 3,042

0.5 to 2.0 0.25 to 3.88

-

-

-

134

1,682

1,816

MLR + 1

354

15

-

150

86 -

86 519

0.75 to 1.75

Long-term loans to jointly controlled entities and interest receivable

-

-

-

220

-

220

MLR + 1.25

Long-term loans to associated companies and interest receivable

-

-

-

3,352

-

42

-

-

-

-

42

-

-

-

1,339

-

1,339

MLR + 1.5

1,763

16

-

6,524

2,494 6,131

2,494 14,434

-

Trade accounts receivable, net Accounts receivable and loans to related parties, net Restricted bank deposits

Loans to subcontractors and interest receivable Long-term loans to other companies and interest receivable Other long-term investments

CH. Karnchang Public Company Limited

3,352 MLR + 0.5 and MLR + 1 9.5

157


(Unit: Million Baht)

Consolidated financial statements Fixed interest rates Within Over 1-5 years 1 year 5 years

Floating interest

Non-interest Total

Effective interest rate

bearing rate

(% p.a.)

Financial liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Hire purchase creditors Retention for construction Long-term loans Debentures

3,200

-

-

179

-

3,379

3.15 to 3.85, MOR,

-

-

-

-

1,259

1,259

MLR - 1.5 and MLR - 1 -

41 -

-

-

-

371

41 371

2.66 to 4.65 -

-

2,298

-

2,621

-

4,919

3.0, 4.25, MLR - margin and MLR

3,000 6,241

8,976 11,274

-

2,800

1,630

11,976 21,945

4.0 to 5.5

(Unit: Million Baht)

Separate financial statements Fixed interest rates Floating Non-interest Within Over interest Total bearing 1-5 years 1 year 5 years rate Financial assets Cash and cash equivalents

Effective interest rate (% p.a.)

104

1

-

300

37

442

0.5 to 2.0

Current investments Trade accounts receivable, net

1,259 -

-

-

134

1,783 831

3,042 965

0.25 to 3.88 MLR + 1

Accounts receivable and loans to related parties, net

-

-

-

2,071

921

2,992

MLR + 0.25

355

-

-

5

-

360

0.9 to 1.75

-

-

-

1,101

-

1,101

MLR + 1.25

-

-

-

3,352

-

3,352

MLR + 0.5 and MLR + 1.0

1,718

1

-

6,963

2,304 5,876

2,304 14,558

-

Restricted bank deposits Long-term loans to jointly controlled entities and interest receivable Long-term loans to associated companies and interest receivable Other long-term investments

158

Annual Report 2010


(Unit: Million Baht)

Separate financial statements Fixed interest rates Within Over 1-5 years 1 year 5 years

Floating interest

Effective interest rate

Non-interest Total bearing

rate

(% p.a.)

Financial liabilities Bank overdrafts and short-term loans from financial institutions

3,200

179

-

3,379

3.15 to 3.85, MOR,

-

-

-

-

456

456

38 -

-

-

-

71

38 71

2.66 to 4.65 -

-

2,298

-

1,872

-

4,170

3.0, 4.25, MLR - margin and MLR

3,000 6,238

8,976 11,274

-

2,051

527

11,976 20,090

4.0 to 5.5

Long-term loans Debentures

-

MLR - 1.5 and MLR - 1 -

Trade accounts payable Hire purchase creditors Retention for construction

-

c) Foreign currency risk The Companyûs, its subsidiariesû and its jointly controlled entitiesû exposure to foreign currency risk arises mainly from construction contracts, purchasing transactions, advances received from employers and borrowings that are denominated in foreign currencies. The balances of financial assets and liabilities denominated in foreign currencies as at 31 December 2010 are summarised below.

Foreign currency

Consolidated financial statements Separate financial statements Financial Financial Financial Financial assets liabilities assets liabilities (Million) (Million) (Million) (Million)

US Dollar

7.0

15.0

0.2

0.2

Average exchange rate as at 31 December 2010 (Bath per 1 foreign currency unit) 30.1513

The Company, its subsidiaries and its jointly controlled entities do not utilise forward exchange contracts to hedge foreign exchange rate risk.

39.2 Fair values of financial instruments Since the majority of the Companyûs, its subsidiariesû and its jointly controlled entitiesû financial assets are short-term in nature, and the significant financial assets and liabilities comprise loans to, loans from and debentures which bear interests at rates close to market rates, the fair values of these financial assets and liabilities are not expected to differ materially from the amounts presented in the balance sheets.

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159


A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable willing parties in an armรปs length transaction. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument.

40. Capital management The primary objective of the Companyรปs capital management is to ensure that it has an appropriate financial structure and preserves the ability to continue its business as a going concern. The Group has to maintain a debt-to-equity ratio as stipulated in long-term loan agreements and condition of debentures.

41. Subsequent events On 28 February 2011, a meeting of the Companyรปs Board of Directors passed resolutions approving the appropriation of 5 percent of the 2010 net income, or Baht 18.7 million, to the statutory reserve and the payment of a dividend for 2010 of Baht 0.1 per share, or a total of Baht 165.3 million. This resolution will be proposed for approval by the Annual General Meeting of the Companyรปs shareholders for the year 2011.

42. Approval of financial statements These financial statements were authorised for issue by the Companyรปs Board of Directors on 28 February 2011.

160

Annual Report 2010


Contents 2 3 4 6 8 9 9 10 36 39 47 54 58 61 66 76 78 96

Vision, Missions, Corporate Values and Strategies Financial Highlights Message from the Chairman Message from the Chairman of the Executive Board and the Chief Executive Officer The Board of Directors Management Team Advisors Committee for Board of Directors and the Executive Board Shareholding and Management Structure Nature of Business Operations Construction Industry Outlook and CK没s Strategic Direction Corporate Social Environment Responsibility General Information Corporate Governance Policy Risk Factors Connected Transactions Audit Committee没s Report Financial Position and Operational Results Financial Statement


Annual Report 2010

CH. Karnchang Public Company Limited


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