Download - ERAWAN: Annual Report 2010

Annual R

eport 2010 The Erawan G

roup Public Com

pany Limited

The Erawan Group Public Company Limited

6th Floor, Ploenchit Center, 2 Sukhumvit Road, Klongtoey, Bangkok 10110, Thailand Tel.: 66 (0) 2257 4588 Fax: 66 (0) 2257 4577 Reg. No. 0107537001943

www.TheErawan.com

Annual Report 2010 The Erawan Group Public Company Limited

The Erawan Group Public Company Limited concerns about environmental protection by using recycled paper produced by Thai company to publish the Annual Report 2010, for the purpose of reducing natural resources exploitation and the global warming crisis

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VISION 2015

To become the leading hotel investor

in Thailand.

Core Values “SPICE” System “Systematic management approach to enhance efficiency as well as to lessen reliance on individuals” People “Competent workforce with dedication to further learning and continual improvement” Information “Accurate, adequate, and up-to-date database for the purpose of management and decision-making” Culture “Sound corporate culture to support sustainable growth” Environment “Being a good, responsible corporate citizen by taking care of all stakeholders including community and environment”

MISSION

To continue growing quality hotel portfolio

in Thailand which optimize values to

shareholders as well as other stakeholders.

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Contents

IN REVIEW

Financial Highlights

Hotel and Resorts Portfolio

Chairman Review

President and Chief Executive Officer Review

CFO’s Report

Report of the Audit Committee to Shareholder

Report of the Board’s Responsibility in the Financial Statements

ABOUT ERAWAN

Corporate Profile

Properties in Operation

Properties under Development

Our Business Strategy

Our Capital Structure & Management

Shareholding of the Board of Directors and Management

BUSINESS OVERVIEW

Hotel Industry

Rental Property

Risk Factors

GOOD CORPORATE GOVERNANCE

Corporate Governance Policy

Remuneration of the Board of Directors and Management

Corporate Social Responsibility

Internal Control

Connected Transactions

APPENDICES

Audit Report of Certified public Accountant

Audit Fee

Financial Statements

Corporate Information

004

006

007

008

010

021

022

024

026

030

031

032

040

042

044

046

050

062

063

067

069

072

073

074

134

Ibis Bangkok Riverside / Ibis Samui Bophut / Ibis Phuket Patong

IN REVIEW

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Financial Highlights The Erawan Group Public Company Limited

004

(Unit: Thousand Baht)

2008 2009 2010

DescriptionRevenues from Operations 3,375,977 3,149,033 3,321,248

Total Revenues 3,412,960 3,191,623 3,364,328

Gross Profit 1,921,298 1,658,132 1,677,912

EBITDA 974,030 740,401 761,749

Net Profit (Loss) 78,328 (229,411) (275,017)

Total Assets 12,630,098 13,288,817 12,950,427

Total Liabilities 8,871,685 9,749,858 9,677,477

Total Shareholders’ Equity 3,758,413 3,538,959 3,272,950

Equity Attributable to Company’s Shareholders 3,657,970 3,406,397 3,130,975

Paid-up Share Capital 2,244,779 2,244,779 2,244,779

Number of Paid-Up Shares (Thousand Shares) 2,244,779 2,244,779 2,244,779

Par Value Per Share (Baht) 1 1 1

Earning Per Share (Baht) 0.04 (0.10) (0.12)

Dividend Per Share (Baht) 0.01 - -

Book Value Per share (Baht) 1.63 1.52 1.39

Significant Financial RatioCurrent Ratio (Times) 0.41 0.52 0.44

Quick Ratio (Times) 0.23 0.27 0.27

Liquidity Ratio (Cash Flow Basis) (Times) 0.33 0.38 0.63

Gross Profit Ratio (%) 56.91% 52.66% 50.52%

Net Profit Margin (%) 2.30% n/a n/a

Return on Total Assets (%) 0.68% n/a n/a

Return to Equity (%) 2.14% n/a n/a

Debt to Equity Ratio (Times) 2.36 2.76 2.96

Interest Bearing Debts to Equity Ratio (Times) 2.06 2.42 2.63

Interest Coverage Ratio (Times) 3.12 2.38 2.70

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2006 2007 2008 2009 2010

Net Profit

500

400

300

200

100

0

410 402

(229) (275)

78

Revenues from Operations

4,000

3,000

2,000

1,000

0

3,331 3,194 3,149 3,376 3,321

EBITDA

1,200

1,000

800

600

400

200

0

1,153

1,011 974

762 740

005

Unit: Baht Million

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Hotel and Resorts Portfolio The Erawan Group Public Company Limited

Grand Hyatt Erawan

Bangkok

JW Marriott Bangkok

Courtyard by Marriott

Bangkok

ibis Bangkok Nana

ibis Bangkok Sathorn

ibis Bangkok Riverside

Mercure ibis

Bangkok Siam*

ibis Pattaya

Holiday Inn Pattaya

ibis Hua Hin*

ibis Samui Bophut

Renaissance Koh Samui Resort and Spa

ibis Phuket Patong

ibis Phuket

Kata

Six Senses Sanctuary

Phuket

* Properties under Development

Bangkok

Pattaya Hua Hin

Samui

Phuket

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007

SUCCESS WITH INTEGRITY SUCCESS WITH INTEGRITY

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Chairman Review The Erawan Group Public Company Limited

The domestic political conflicts in 2010 made it another difficult year for Thailand’s hotel business and Thailand’s tourism industry. Thanks to our risk management plan and effective collaboration between the management and the Board of Directors as well as supports from all stakeholders including our suppliers, our hotel operators, our staff and financial institutions, we tolerated through the incident and recovered well afterward. Nevertheless, we did suffer a net loss at the bottom line, which was a result of external factors that were beyond our control.

With promising demand trend from both foreign tourists and domestic markets, we continue developing and strengthening our fundamentals for long term sustainable growth through expanding a network of our hotels in locations and markets we felt confident. We committed to strengthen our supervision in all

aspects of our operation in compliance with good corporate governance principles. It has been our key principle to treat all our stakeholders appropriately. We compel to do our business transparently and to provide sufficient and timely disclosure of information both in the normal situation and at time of crisis. During the political unrest in April and May this year, we took a great care of our customers, suppliers and staff and kept all concerned parties informed of the situation and our actions taken. With such continuous belief and practices, the Erawan Group was voted “Excellence” in corporate governance by the survey of the Corporate Governance Report of Thai Listed Companies 2553 (2010) conducted by the Institute of Directors (IOD) in 2010. We received 100 out of 100 scores for our excellent quality of the 2010 Annual General Meeting of Shareholders. We were also awarded “IR Excellence” among Group 1 listed companies in the SET with market capitalization of not exceeding Baht 10 billion and we were one of the two companies in the service business sector to be nominated for Corporate Social Responsibility Excellence.

We would like to thank everyone for all supports through the difficult time this year. We will continue to operate the business and enhance our organization for the benefit of our shareholders and all stakeholders and be a good member of the society.

Mr. Prakit Pradipasen Chairman of The Board of Directors

Excellent CG Report 2009/2010

008 Back

Thailand’s tourism industry and hotel business was once again challenged in 2010 when the domestic political conflicts led to a prolonged demonstration in April and May. The incident caused business operators in the area including our three hotels and one shopping center to close temporarily. We did our best to protect our customers, our staff and our properties and fully engaged risk management action plans at all time. We also closely collaborated with other business operators in the area including our business competitors and took the lead role to seek for protection and remedy measures from the government. This led to the government’s financial aids given to more than 2,000 business owners affected by the protest. Despite negative impacts from the incident, we managed to increase our revenues by 5 percent from the previous year mainly contributed from new hotels opened in recent years as part of our expansion. The business interruption during the political demonstration had adverse impact to both established hotels and the newly-opened hotels from achieving expected incomes. A l though the bus iness recovered we l l as we

approached high seasons in the second half of the year, the lower-than-expected income was not sufficient to accommoda te i nc reas ing expenses such as depreciation and finance costs from the openings of new hotels. As such, we suffered another year of net loss of approximately Baht 275 million (See more information of the Company’s financial performance in a CFO’s report of Executive Vice President and Chief Financial Officer). Despite negative impacts from this incident, we continued to receive solid supports from our lenders. Our cash flow remained flexible and we continued the development of our 266-room Ibis Bangkok Riverside for the opening in the fourth quarter as planned. At the end of 2010, we own 13 hotels with total of 3,347 rooms across major tourist destinations of Thailand to capture diverse groups of customers from luxury through economy segments. We are now one of the largest hotel owners in term of number of hotels and rooms in Thailand.

Through our implementation of Phase 1 expansion during 2005-2010, we were able to manage the development costs and hotel target openings as planned. We saved more than Baht 400 million in investment costs or 6 percent of the projects’ total investments. This gives us confidence that we will be able to generate returns as expected from our investments although incomes from the hotel business during the past years were lower than what we originally projected. Towards the end of last year, we announced the five-year business plan for period during 2011-2015 with a vision to become a leading hotel developer and investor in Thailand. In brief, we aim to expand the ownership of our hotel network to more

It can be said that we have been able to survive through various incidents negatively affecting the tourism industry over the past few years on the back of our well-prepared risk management plans

President and Chief Executive Officer Review The Erawan Group Public Company Limited

009


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than 20 hotels as well as to continue improving the existing hotels to increase our competitiveness with approximately Baht 10 billion investment range. The size of investment will depend very much on investment opportunities to increase a good return to shareholders. In addition, we have also formulated a new strategy to enhance returns to our shareholders by recognizing our property values and by generating profits through sales of properties or through an incorporation of our properties into a property fund or by joint venture with interested party and also through developing residential projects on lands adjacent to our existing properties. We aim to optimize returns to our shareholders for both short and long term.

It can be said that we have been able to survive through various incidents negatively affecting the tourism industry over the past few years on the back of our well-prepared risk management plans together with our ability to adapt quickly and timely to any situation based on our pre-formulated plan. This refers to not only our ability and flexibility to adjust the investment plan of new projects but also timely implementing actions towards cost savings and preserving cash flows. In addition, we continued to improve our existing assets to enhance our competitiveness and update or upgrade various systems in the organization including operations, management information system to support decision-making, human capitals and our corporate culture, all of which we view as critical fundamentals to achieve long term sustainable growth. We commit to the good corporate governance principles in doing business to align benefits of all stakeholders. As a platform, we create an awareness of corporate social

responsibility to our staff at all levels so that the interactions with our stakeholders in all aspects will be in line with our principles. (See more details in the corporate governance policy section.) We regularly conduct a survey to seek opinions from our stakeholders in all aspects, the result of which is applied to improve our operations and directly reflected in the annual remuneration review of our staff.

Overall speaking, we remain confident in the competitiveness of Thailand’s tourism in the long run. A strong recovery of tourist arrivals in the fourth quarter of 2010 through early 2011 once again evidenced the strength of the Thai tourism sector despite the impact from neither external nor internal factors. In addition, it is expected that the Asia-Pacific region will remain the highest economic growth region and hence the region’s travelling activities are likely to be more active than the rest of the world. Thailand is definitely one of the countries to benefit from a healthy growth of the region. We are confident that our hotels in the group including the 13 hotels in operations and the new hotels in our expansion plan, with the mix of hotel segments from low- to high-end and destinations from business- to leisure-oriented, will well respond to demands from various groups of customers, which will not only benefit our shareholders and stakeholders but will also strengthen the standards of the hotel industry in Thailand.

Mr. Kasama Punyagupta President and Chief Executive Officer

President and Chief Executive Officer Review

010 Back

CFO’s Report The Erawan Group Public Company Limited

(A) 2010 Profit & Loss Overview The year of 2010 was a difficult year for hotel business and tourism industry of Thailand caused mainly by

internal political instability which led to political demonstration in Bangkok during April and May this year. Such incident put a pause on Thailand tourism industry’s growth which started the year 2010 with very promising demand in the first quarter with tourist arrivals increasing 27 percent from previous year. The political demonstrations in Bangkok also caused our properties in the area including 3 hotels; Grand Hyatt Erawan Bangkok Hotel (“GHEB”), Courtyard By Marriott Bangkok Hotel (“CYB”) and ibis Bangkok Sathorn and one rental property; Erawan Bangkok (“EB”); to temporarily cease their services to public during the period. Our diversification strategy set out six years ago to expand from Bangkok to other tourist destinations and from luxury hotels to lower segment such as midscale and economy hotels have become more visible under these market difficulties. Our non Bangkok hotels were not only less affected during the disruptions in Bangkok but also quicker resumed to normal business environments. In addition, our risk management policy which can be timely adjusted to deal with different market situations at different time and our effective financial management allowed us to focus on business strategy under the challenging business conditions. To preserve appropriate cash flow and maintain financial flexibility in case of market fluctuation, we rescheduled loan repayment due in 2010 of approximately Baht 347 million through the loan maturity and also reduced total principal repayments during 2011 - 2013 by Baht 415 million.

On demand side, the significant growing arrivals in first quarter of 2010 and strong recovery in third quarter of 2010 and four quarter of 2010 led Thailand to set a new record high with total number of tourist arrivals of 15.7 millions for 2010, representing an increase of 11 percent from the previous year regardless of the aforementioned incident in second quarter of 2010. Growth was seen across all source markets with highest growth coming from Asia and Middle East markets. Domestic tourists who are less sensitive to internal political conflicts and less affected by global economic slowdown continued growing on the back of Thailand’s strong economy. Our hotels in midscale and economy segment fit well with these growing markets, particularly those located in destinations outside of Bangkok.

Business strategy wise, on 21st December 2010, our Board of Directors passed a resolution to set forth business growth plan for the next 5 years (2011 - 2015) with the key highlights in three areas; (i) hotel growth strategy with the objective to increase revenue and profit from normal operations. We will

continue our investment focus in Thailand with aim to be Thailand’s leading hotel developer and investor, (ii) enhancing returns strategy in addition to revenue and profit from normal operations by realizing the

increasing value of our assets in the portfolio and also commencing residential projects on lands adjacent to our hotels, an

(iii) strengthening our Corporate Governances to take care all stakeholders which will be the key factor for long term sustainable growth of ERAWAN.

The capital plan to support the expansion will combine both equity and debt financing which can be categorized into 4 major funding sources including internally generated cash flow, proceeds from asset sale, warrants issuance to existing shareholders, and project loans.

As part of enhancing returns strategy, the Board of Directors resolved to approve the sale of our office building (Ploenchit Center) to a property fund. The transaction is expected to complete in the second quarter of 2011. The Board also resolved and agreed to propose to the Annual General Meeting of shareholders for the year 2011 to

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BackCFO’s Report

Baht Million 2009 2010 Changes

Hotels’ Operating Income 2,748 2,930 +7%

Rental and Service Income 401 391 -2%

Total Operating Income 3,149 3,321 +5%

Operating Expenses (2,359) (2,551) +8%

EBITDA 790 770 -3%

Depreciation & Amortisation (628) (684) +9%

Operating Profi t 162 86 -47%

Other Income 43 43 +1%

Interest Expenses (307) (361) +18%

Pre-tax Profi t/(Loss) (102) (231) -127%

Taxes (46) (20) -56%

Minority Interest (32) (16) -51%

Normalized Net Profi t/(Loss) (180) (267) -49%

Non Recurring Items - net* (50) (8) -84%

Net Profi t/(Loss) (229) (275) -20%

E.P.S. (0.10) (0.12) -20%

* Details are explained in later section of this report

approve the issuance of warrants to be given without cost to the existing shareholders and the issuance and offering ordinary shares to employees of the Company. This will support the company growth strategy as it will allow the company to maintain the capital structure at appropriate level and motivate the employees to drive the performance towards the success of the Company’s strategic objectives set forth over the next five years.

On new hotel development, we opened our 7th ibis hotel (3rd in Bangkok), ibis Bangkok Riverside in November 2010 as planned. With this opening, we now have 13 hotels in operations with total of 3,347 room inventory in our portfolio. As part of our hotel growth strategy, our focus will continue on midscale and economy segment hotels which demands continue to be promising. We plan to commence constructions of 3 new hotels in first quarter of 2011 including ibis Hua Hin with target opening in first quarter of 2012 and the Mercure and ibis Siam Bangkok, the first hotel to combine 2 brands (Mercure and ibis) in the same building with target to open in January 2013. These three hotels will add approximately 600 new rooms to our hotel portfolio.

Our consolidated revenue in 2010 showed the growth of 5 percent year on year regardless the impact from the situation in the second quarter of 2010 and the slow down of hotel industry. Revenue from hotel business increased 7 percent year on year, mainly from additional revenues from new hotels of which the revenues from 3 hotels opened in 2009 increased by 250 percent and the additional income from new hotel opened in 2010. Revenues from our rental properties were down slightly by 2 percent, mainly from the temporarily cease of operation of Erawan Bangkok in second quarter of 2010. We recorded EBITDA of Baht 770 million, representing 3 percent dropped from the previous year. With higher depreciation and interest expenses from new hotels we recorded a higher loss from last year.

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อื่นๆ รานคา สำนักงาน โรงแรม Economy (7) โรงแรม Midscale (2) รีสอรท Luxury (2) โรงแรม Luxury กรุงเทพฯ (2)

Other income Retail Office Economy Hotels (7) Midscale Hotels (2) Luxury Resort (2) Luxury CBD Hotels (2)

In Baht Million 2008 2009 2010

Baht Million % Total Baht Million % Total Baht Million % Total

Luxury Central Bangkok Hotels 2,481 72.7% 1,997 62.6% 1,850 55.0%

Luxury Resorts 187 5.5% 182 5.7% 206 6.1%

Midscale Hotels 261 7.6% 272 8.5% 447 13.3%

Economy Hotels 58 1.7% 297 9.3% 428 12.7%

Income from Hotel Properties 2,986 87.5% 2,748 86.1% 2,930 87.1%

Rent from Offi ce Space 159 4.7% 172 5.4% 178 5.3%

Rent from Retail Space 141 4.1% 143 4.5% 132 3.9%

Others (food court, parking, etc.) 89 2.6% 86 2.7% 82 2.4%

Income from Rental Properties 389 11.4% 401 12.6% 391 11.6%

Other Income 28 0.8% 43 1.3% 43 1.3%

Gains from Sales of Investment 9 0.3% - 0.0% - 0.0%

Total Income 3,413 100.0% 3,192 100.0% 3,364 100.0%

Note: Exclude gain from sales of investment

2008 2009 2010

3,500

3,000

2,500

2,000

1,500

1,000

500

3,404

3,192

-6% +5% 3,364

Baht Million

Other income Retail Office Economy Hotels (7) Midscale Hotels (2) Luxury Resort (2) Luxury CBD Hotels (2) Other income Retail Office Economy Hotels (7) Midscale Hotels (2) Luxury Resort (2) Luxury CBD Hotels (2) Other income Retail Office Economy Hotels (7) Midscale Hotels (2) Luxury Resort (2) Luxury CBD Hotels (2) Other income Retail Office Economy Hotels (7) Midscale Hotels (2) Luxury Resort (2) Luxury CBD Hotels (2) Other income Retail Office Economy Hotels (7) Midscale Hotels (2) Luxury Resort (2) Luxury CBD Hotels (2) Other income Retail Office Economy Hotels (7) Midscale Hotels (2) Luxury Resort (2) Luxury CBD Hotels (2)

CFO’s Report

Income

In line with our diversification strategy, the composition of our total income has changed over the years with

“Midscale Hotels” and “Economy Hotels” segment contributed more income to the group as illustrated in the table

below.

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Note: Six Senses ARR is based on Spending/Room

2009 2009 2009 Luxury BKK Renaissance Koh Samui Six Senses

2010 2010 2010

25,000

20,000

15,000

10,000

5,000

0

Occupancy rate Baht/room/night

Revenue Par available room (RevPar)

Average Room Rate (ARR)

63% 55%

12%

60% 56%

18%

22,838

4,128

24,545

2,832

4,958

3,110 4,572

2,754

5,163

2,835

4,889

2,735

CFO’s Report

Operating statistics and analysis on income from all our properties for 2010 are as follows:

• Luxury Hotels Our two luxury hotels in Bangkok, Grand Hyatt Erawan Bangkok Hotel (“GHEB”) and JW

Marriott Hotel Bangkok (“JWM”) experienced a drop of 3 percent in average occupancy and 8 percent in average

room rates (“ARR”). This resulted in a 12 percent decrease of revenue per available rooms (“RevPar”) and the

combined room revenues from these two flagships. This was mainly from the impact of the political turmoil in the

second quarter as mentioned earlier. Recovery was seen in the second half of the year.

Our luxury resort had shown the good improvement this year. Our Renaissance Koh Samui Resort and Spa

(“RKS”) closed with 1 percent higher occupancy but 5 percent lower ARR which resulted in a 3 percent drop of

RevPar and room revenues. As for our ultra-luxury Six Senses Sanctuary Phuket (“SSP”), its RevPar improved

significantly this year with occupancy up by 7 percent year on year even the spending per room dropped by 7 percent.

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2009

Baht/room/night

2010

3,500

3,000

2,500

2,000

1,500

1,000

500

0

64% 59% Occupancy rate



2,046

1,310

2,111

1,247

CFO’s Report

Income from food & beverage (“F&B”) which mainly came from the two luxury hotels in Bangkok was in line with

last year despite the business interruption in Bangkok during April and May. The F&B operations at GHEB and JWM

have been strongly supported by local consumptions hence less dependent on hotel occupancy. The strong

economic growth of Thailand not only helps expanding our local customer base but also enhancing their spending

power.

In total, income from our four luxury hotels dropped 6 percent from previous year to Baht 2,055 million in 2010

which mainly caused by a 9 percent decrease of combined room revenues.

• Midscale Hotels We now have 2 hotels under the midscale segment, Courtyard by Marriott Bangkok (“CYB”)

opened in November 2007 and Holiday Inn Pattaya (“HIP”) opened in Octerber 2009. CYB gradually recovered after a

2 month of operational interruption during the political demonstration in second quarter of 2010 and recorded lower

performances as compared to the same period last year. HIP which was in its first full year operation showed good

ramp up progress and achieved strong growth from both occupancy and ARR in 2010. Their statistics in 2010 and

2009 are as follows:

Our midscale hotels recorded total income of Baht 447 million in 2009, a 64 percent increase from last year,

this was mainly contributed from HIP.

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2009 2010

1,250

1,000

750

500

250

0

56% 59% Occupancy rate



Baht/room/night

556

995 1,061

624

CFO’s Report

• Economy Hotels Our hotel properties under this segment are all under “ibis” brand. At the end of 2010, we

had total of 7 economy hotels with total of 1,704 rooms. Our first 4 ibis hotels opened in 2008 including ibis Phuket

Patong (“IPK”), ibis Pattaya (“IPT”) ibis Bangkok Sathorn (“IST”) and ibis Samui Bophut (“ISM”). We opened 2 new ibis

hotels in 2009 namely ibis Bangkok Nana (“INN”) and ibis Phuket Kata (“IKT”) and our 7th ibis, ibis Bangkok Riverside

(“IRS”) in November 2010. This segment has proven to be the most resilient segment under the challenging market

conditions. The segment also fit well with requirements of customers from growing mass markets such as China, India

and Russia. This segment grew occupancy by 3 percent resulting in a 12 percent growth in Revpar from the same

period last year. The diagram below provides their 2010 and 2009 statistics.

Our seven ibis hotels combined to generate Baht 428 million of revenues in 2010, a 44 percent increase year on

year. Revenue from 4 hotels located outside Bangkok continued growing while the additional income from IRS which

started operation in the fourth quarter this year helped the three ibis hotels in Bangkok to generate 13 percent growth

regardless the impact from the demonstration in the second quarter. Majority of their revenues came from room sales.

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3,500

3,000

2,500

2,000

1,500

1,000

500

0

Baht Million

2009 2010

176

1,092

1,480 1,600

1,170 160

From other operations From food & beverages operations From room sales From other operations From food & beverages operations From room sales

CFO’s Report

Revenue breakdown by type of income in 2009 and 2010 are listed below.

We recorded total revenues from hotel operations of Baht 2,930 million for 2010, an increase of 7 percent from

2009. Growth came mainly from midscale and economy hotels which major source of income was from room rather

than food and beverage. Room revenues which generated approximately 55 percent to total revenue increased

by 8 percent from last year. Food and beverage revenues which contributed 40 percent to total revenue grew

7 percent from 2009.

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Occupancy 93.5% 95.9% +2.3% 92.7% 85.9% -6.8%

Average Receipt (Baht/sq.m./month) 496 503 +1.4% 1,223 1,331 +8.9%

2009 2009 2009 2009 2010

Bangkok Pattaya Phuket Samui

2010 2010 2010

2,400 2,000 1,800 1,600 1,400 1,200 1,000

800 600 400 200

0

PC EB

2009 2010 % ch 2009 2010 % ch

Baht Million

CFO’s Report

Revenue breakdown by destinations in 2009 and 2010 are listed below.

Income from hotel located in Bangkok declined in 2010 from the impact of political situation in the second

quarter as aforementioned. Other destinations outside Bangkok still generated strong growth especially Pattaya

which our revenues from this destination grew by 211 percent which helped alleviate the decline from Bangkok

hotels.

• Rental Properties Our 2 rental properties, Ploenchit Center (“PC”) and Erawan Bangkok (“EB”), experienced

slightly lower income this year. We achieved the growth in rental yield for both properties but the occupancy of EB

was lower as some leases expired and pending for new tenants. The statistics are in the table below:

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500

400

300

200

100

0

Baht Million

2009 2010

Others Retail Office

178

132

81 86

143

172

Others Retail Office

CFO’s Report

The combined income from rental business (including those from shops in GHEB’s arcade) in 2010 was Baht

391 million representing a decrease of 2 percent from last year. EB’s income dropped 3 percent to Baht 85 million as

some leases expired and the impact from the demonstration in the second quarter. The political unrest during April

and May caused this shopping complex to temporarily close down during such period. To support our tenants which

income very much dependent upon their services to public customers, we offered a waiver on monthly rental during

such period. This waiver was partially subsidized by the government measures to help alleviate the impact to rental

operator. PC’s income grew 3 percent to Baht 297 million on the back of higher occupancy from new tenants

and higher rental yield from new tenants and contract renewal. Breakdown of income from rental properties are in

the diagram below:

Profit from Operations

Our Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”) excluding other income and non-

recurring items recorded at 770 million in 2010, 3 percent lower than last year. We also recorded a lower EBITDA

margin of 23 percent in 2010 amd 25 percent in 2009. This was mainly due to revenue contraction of the hotels and

rental property located in Bangkok in the second quarter although hotel located outside Bangkok showed EBITDA

and EBITDA margin improvement in 2010.

With the addition of 1 new hotel in 2010 and the 3 new hotels opened in 2009 were in their full year of

operations in 2010, our Depreciation and Amortisation (“D&A”) increased by Baht 56 million or 9 percent from last

year to record at Baht 684 million for 2010. With the said EBITDA above, our Earning before Interest and Tax (“EBIT”)

stood at Baht 86 million for 2010 or a drop of 47 percent from a year ago.

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BackCFO’s Report

Finance Costs

Total interest expenses increased 18 percent to Baht 361 million in 2010 which was mainly from two main

reasons; the recognition of interest charges on our new hotel opened this year and the effects of full year operations

from those opened in 2009 and the increasing interest rates over 2010. Our banks’ minimum lending rates were

increased approximately 0.275 percent in 2010. For the purpose of financial risk mitigation in light of interest uptrend,

we converted approximately 30 percent of long term loans outstanding from floating rates into fixed rates for 4 year

terms. This transaction incurred additional finance cost of Baht 7 million for 2010. Our average cost of funding (on

combined short term and long term loans) increased from 4.1 percent last year to 4.3 percent for 2010.

Non recurring items

Non-recurring items for 2009 and 2010 were pre-opening expenses from new hotels prior to their openings. The

net amount for 2009 was Baht 50 million (mainly from ibis Bangkok Nana, Holiday Inn Pattaya and ibis Phuket Kata).

These costs are booked under “Selling and administrative expenses” in our Profil & Loss For 2010 we recorded Baht

8 million for the pre-opening expenses of Ibis Bangkok Riverside.

(B) Financial Status

Capital Expenditure

We recorded total assets of Baht 12,950 million as of 31st December 2010, slightly lower from Baht 13,289

million at the end of 2009. This is a result of more utilization of VAT receivables resulting in lower current assets. Baht

653 million of capital expenditure occurred during the year, declined from Baht 1,373 million in 2009 mainly due to the

lower capital expenditure of new hotel development. We developed 3 new hotel projects in 2009 while in 2010 we had

only 1 hotel, ibis Bangkok Riverside, which opened in November 2010. For future project, we entered the land lease

agreement for Mercure and ibis Siam project which will start the construction in 2011. Capital expenditure for normal

maintenance for hotel and rental properties increased from the same period last year. We spend higher capital

expenditure for the office building this year to enhance its competitiveness. Sources of funding to support this capital

expenditure were our cash flow from operations and project loans.

020 Back

20% Others Hotels

25% Mercure & IbisBangkok Siam

6% Ibis Phuket Kata

9% Rental properties & Others

40% Ibis Bangkok Riverside

CFO’s Report

The breakdown of 2010 capital expenditure by asset type are as follows:

Leverage

Total liabilities of the Company decreased slightly from Baht 9,750 million as of 31st December 2009 to Baht

9,677 million as of 31st December 2010 due to lower current liabilities. Total interest-bearing debts increased from

Baht 8,570 million at the end of last year to Baht 8,599 million as of 31st December 2010 from additional loan

drawdown for the ibis Bangkok Riverside project and working capital requirements. With the net loss incurred this

year, total equities decreased from Baht 3,539 million at the end of 2009 to Baht 3,273 million. Our liquidity was still

manageable although we faced with the challenge market conditions during the year. Our cash flow from operations

for this year remained higher than the same period last year while cash outflow for capital expenditure decreased.

Cash inflow from financing activities was lower since we repaid loans from financial institutions this year while we did

not have any obligations in 2009 and lower loan drawdown for the new project. Combined with cash at the beginning

of the year, we recorded ending cash as at 31st December 2010 of Baht 220 million vs. Baht 277 million at the end of

31st December 2009.

Mrs. Kamonwan Wipulakorn

Executive Vice President and Chief Financial Officer

021


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Report of the Audit Committee to Shareholder The Erawan Group Public Company Limited

To Shareholders of The Erawan Group Public Company Limited,

The Audit Committee, consisting of three independent directors with qualifications as announced by the Stock

Exchange of Thailand and whose terms are three years each, performed its duties within its scopes of responsibility

and as entrusted by the Board of Directors. In 2010, the Audit Committee met four times to consider the following:

1. To review the quarterly financial statements and the 2010 financial statements where it exchanged views

with the auditor, Executive Vice President and Chief Financial Officer and the internal auditor to determine

that the financial statements of the Company and its subsidiaries were having accurate and complete

information deserved to be trusted and were in line with the Generally-Accepted Accounting Principles,

the SET’s announcements and the SEC’s notifications.

2. To evaluate an adequacy of the internal control system to see if the Company had an appropriate internal

control system that well responded to its business, as well as a way and mean to take care of its properties

and to prevent the Company from suffering damages. The evaluation was conducted through the internal

auditor’s report, the auditor’s report and through inquiries with the management. So far, no material defect

has been found. As a result, the Company’s internal control system is perceived to be efficient and

adequate.

3. To review connected transactions or conflict of interest and to disclose information of these transactions

to see if they were normal, reasonable and was for the best benefits to the Company while in compliance

with the authorities’ rules and regulations.

4. To give advice and approve the annual auditing plan; to acknowledge and submit an internal auditing result

to the Board of Directors; to review an annual budget and to supervise and evaluate the Internal Audit

Department’s performance.

The Audit Committee, having reviewed the 2011 auditor and the soundness of the auditing fee, eventually

proposed to the Board of Directors to seek the Annual General Meeting’s approval to appoint Mr.Charoen

Phosamritlert, CPA No. 4068 and/or Miss Vannaporn Jongperadechanon, CPA No. 4098 and/or Mr. Vichien

Thamtrakul, CPA No. 3183 of KPMG Phoomchai Audit Ltd. as the Company’s auditor.

Mr. Sansern Wongcha-um

Chairman of the Audit Committee

21 February 2011

022 Back

Report of the Board’s Responsibility in the Financial Statements The Erawan Group Public Company Limited

The Board of Directors was responsible for the financial statements of The Erawan Group Public Company

Limited and its subsidiaries. The financial statement was done according to the Generally-Accepted Accounting

Principles in Thailand where an appropriate accounting policy was chosen and implemented. In addition, discretion

was exercised, the best estimates were selected and adequate information was disclosed in Notes to Financial

Statement.

The Board of Directors appointed the Audit Committee, which consisting of 3 independent directors,

to responsible for auditing the company’s financial statements and to evaluate the internal control system for

efficiency. The Audit Committee’s opinion in this matter was in Report of the Audit Committee to Shareholder.

In this regard, the Board of Directors is of the opinion that the Company’s internal control system is proven

satisfactory and contributes to the Company’s credibility as of 31st December 2010.

Mr. Prakit Pradipasen Mr. Kasama Punyagupta

Chairman of The Board of Directors President and Chief Executive Officer

023

SUCCESS WITH INTEGRITY


ABOUT ERAWAN

Back

024 Back

Established on 29 December 1982 and continue

to develop various real-estate (Hotels and Rental

Properties) over the past 29 years.

1985 Amarin Plaza

1988 Company registered on Stock Exchange of Thailand

1991 Grand Hyatt Erawan Bangkok Hotel

1994 Converted in to a Public Company

1996 Ploenchit Center

1997 JW Marriott Hotel Bangkok

2004 Erawan Bangkok

2005 Renaissance Koh Samui Resort and Spa

2007 Amarin Plaza Sold

Courtyard by Marriott Bangkok Hotel

2008 Six Senses Sanctuary Phuket

4 Ibis Hotels: Ibis Phuket Patong, Ibis Pattaya,

Ibis Bangkok Sathorn and Ibis Samui Bophut

2009 Holiday Inn Pattaya

2 Ibis Hotels: Ibis Bangkok Nana and Ibis Phuket Kata

2010 Ibis Bangkok Riverside

1991 Grand Hyatt Erawan Bangkok Hotel

1996 Ploenchit Center

Corporate Profile The Erawan Group Public Company Limited

025


Back

1997 JW Marriott Hotel Bangkok

2008 - 2010 7 Ibis Hotels

2008 Six Senses Sanctuary Phuket

2009 Holiday Inn Pattaya

Corporate Profile

026 Back

Properties in Operation The Erawan Group Public Company Limited

Our main business objective is to invest in and

develop hotel properties that are strategically located

to cater to demand from diverse consumer segments.

We currently have 13 hotels in operations which

represent our core assets. We also own and manage

2 rental properties. The details of these properties are

as follows:

Hotels and Resorts

Grand Hyatt Erawan Bangkok

• Rating: Luxury Hotel

• Number of rooms: 380 rooms

• Location: Rajdamri Road, Bangkok

• Remaining on the current lease: 31 years

www.bangkok.grand.hyatt.com

JW Marriott Hotel Bangkok



• Location: Sukhumvit Soi 2, Bangkok


www.marriott.com/bkkdt



• Number of rooms: 45 Deluxe Rooms and 33 Pool Villas

• Location: Lamai Beach, Koh Samui, Surat Thani

www.marriott.com/usmbr

027


BackProperties in Operation

Holiday Inn Pattaya

• Rating: Midscale Hotel


• Location: Pattaya Sai 1 Road, Nongprue,

Banglamung, Chon Buri

www.holidayinn.com/pattaya

Ibis Phuket Patong

• Rating: Economy Hotel


• Location: Patong Beach, Phuket

www.ibishotel.com

Courtyard by Marriott Bangkok

• Rating: Midscale Hotel


• Location: Soi Mahadlekluang,

Rajdamri Road, Bangkok


www.courtyard.com/bkkcy

Six Senses Sanctuary Phuket (Formerly “Six Senses Destination Spa Phuket”)

• Rating: Luxury hotel and holistic spa

• Number of rooms: 61 Pool Villas

• Location: Koh Naka Yai, Phuket

www.sixsenses.com

028 Back

Ibis Samui Bophut



• Location: Bophut Beach, Koh Samui, Surat Thani

www.ibishotel.com

Ibis Bangkok Nana



• Location: Sukhumvit Soi 4, Bangkok


www.ibishotel.com

Ibis Pattaya



• Location: Pattaya Sai 2 Road, Nongprue,

Bang lamung, Chon Buri

www.ibishotel.com

Ibis Bangkok Sathorn



• Location: Soi Ngam Duphli, Rama IV Road,

Bangkok


www.ibishotel.com

Properties in Operation

029


BackProperties in Operation

Ploenchit Center

• Office Building: 42,590 sq.m.

• Location: Sukhumvit Road Soi 2, Bangkok


Erawan Bangkok

• Retail Shops (up scale): 6,849 sq.m.

• Location: Ploenchit Road/Rajdamri Road,

Bangkok


www.erawanbangkok.com

Ibis Phuket Kata



• Location: Kata Beach, Phuket

www.ibishotel.com

Ibis Bangkok Riverside



• Location: Charoennakorn Road Soi 17,

Chaophraya River, Bangkok


www.ibishotel.com

Rental Properties

030 Back

Properties Under Development The Erawan Group Public Company Limited

Ibis Hua Hin



• Location: Khao Takiap, Hua Hin,

Prachuap Khiri Khan

• Target customer: Leisure

Mercure Ibis Bangkok Siam

• Rating: Midscale and Economy Hotel


• Location: Opposite MBK,

next to BTS National Stadium Station, Bangkok

• Target customer: Business and Leisure


031


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74%

100% 100%

100% 100% 100% 100% 100% 100%

Our Business Strategy The Erawan Group Public Company Limited

The Erawan operate on three core business strategies as follows;

1. Maximizing value through effective management of current assets.

2. Developing a well-diversified hotel portfolio to meet diverse customers’ needs which yield diversified risk

and returns.

3. Ensuring stability and sustainable growth of our organization through development of systems, core

competencies, database, and core corporate culture.

Hotels

Offices Building and Retail Shops

032 Back

Our Capital Structure & Management The Erawan Group Public Company Limited

1. Mr. Sukakarn Wattanavekin 379,185,716 16.89%

2. City Holding Co., Ltd. 228,481,318 10.18%

3. Mitr Phol Sugar Co., Ltd. 131,353,314 5.85%

4. Mrs. Wansamorn Wannamethee 120,683,649 5.38%

5. MBK Company Limited 108,418,238 4.83%

6. Mr. Isara Vongkusolkit 101,257,910 4.51%

7. SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) 96,715,700 4.31%

8. Miss Jintana Kanjanakumnerd 73,588,254 3.28%

9. PAN-ASIA SUGAR FUND LIMITED 73,000,000 3.25%

10. Mr. Supol Wattanavekin 58,698,916 2.61%

Total top ten shareholders holding 1,371,383,015 61.09%

Capital Structure

As at 31st December 2010, the company‘s paid up capital is Baht 2,244,779,001 divided into 2,244,779,001

ordinary shares at par value 1 Baht per share. Top ten shareholders holding the highest number of shares as of

31st December 2010 are as follows:

Shareholder’s name Number of shares % of total shares

Major Shareholders Number of shares % of total shares

Investor will be able to see the updated shareholders list from the Company’s website at www.TheErawan.com

before the Annual General Shareholders’ Meeting. Detail Groups of Major Shareholders are as follows:

Vongkusolkit Group 878,910,119 39.15%

Wattanavekin Group 698,970,657 31.14%

Total major shareholders 1,577,880,776 70.29%

Foreign Institution Investor 254,177,774 11.32%

MBK Company Limited Group 118,894,138 5.30%

Institution Investor 90,251,982 4.02%

Company’s executives 20,922,417 0.93%

Others 182,657,914 8.14%

Total 2,244,779,001 100.00%

033


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Directors that represent the major shareholders are as follows:

1. Mr. Vitoon Vongkusolkit Vongkusolkit Group

2. Mr. Chanin Vongkusolkit Vongkusolkit Group

3. Mr. Krisda Monthienvichienchai Vongkusolkit Group

4. Mr. Supol Wattanavekin Wattanavekin Group

5. Mrs. Panida Thepkanjana Wattanavekin Group

Director’s Names Groups of Major Shareholders

Management Structure

The Board of Directors consists of the twelve (12) directors as belowing, the Board has appointed four different

committees in a move to clearly define duties and responsibilities namely: The Audit Committee (AC), The Financial

and Risk Management Committee (FRC), The Nominating and Corporate Governance Committee (NCG) and

The Management Development and Compensation Committee (MDC).

1. Mr. Prakit Pradipasen Chairman of the Board • Master of Business Administration (MBA)

and Independent Director Wayne State University, Michigan, USA

2. Mr. Sansern Wongcha-um Independent Director • Master Degree of Business Economics

and Chairman of University of Bridgeport, Connecticut,

the Audit Committee USA

3. Assoc. Prof. Manop Bongsadadt Independent Director • Master of Architecture (M.Arch),

and Member of Kansas State University, USA

the Audit Committee

4. Mr. Dej Bulsuk Independent Director • Bachelor of Business Administration

and Member of Thammasat University

the Audit Committee

5. Mr. Banyong Pongpanich Independent Director • Master of Business Administration (MBA)

Sasin Graduate Institute of Business

Administration of Chulalongkorn University

Name Title Education

Our Capital Structure & Management

034 BackOur Capital Structure & Management

Authority to Sign on behalf of the Company

Two of the following four directors namely, Mr. Vitoon Vongkusolkit or Mrs. Panida Thepkanjana or Mr. Kasama

Punyagupta or Mr. Krisda Monthienvichienchai, shall jointly sign a document together.

Dividend Policy

Approximately 35 percent of the net profits of the consolidated financial statements after deduction of all kind of

reserves as specified by law and the Company (with additional conditions).

6. Mr. Ekasith Jotikasthira Independent Director • Master of Business Administration (MBA)



7. Mr. Vitoon Vongkusolkit Director • Bachelor of Science

Chulalongkorn University

8. Mr. Supol Wattanavekin Director • Master of Business Administration (Executive)

(EMBA) Sasin Graduate Institute of Business


9. Mr. Chanin Vongkusolkit Director • Master of Business Administration (Finance)

St. Louis University, Missouri, USA

10. Mrs. Panida Thepkanjana Director • Master of Business Administration (MBA)



• Master of Laws, Chulalongkorn University

• Barrister-at-Law. The Institute of Thai Bar

Association

11. Mr. Krisda Monthienvichienchai Director • Master of Business Administration (MBA)

Chulalongkorn University

12. Mr. Kasama Punyagupta President and • Master of Business Administration

Chief Executive Officer (International Business)

University of Bridgeport, Connecticut, USA

Company Secretary: Miss Kanokwan Thongsiwarugs

Name Title Education

035


BackOur Capital Structure & Management

Roles and Responsibilities of the Board of Directors and the Committee

Board of Director’s Roles and Responsibilities are:

1. To manage the Company according to the laws, the Objects in Detail, the Articles of Association and

resolutions of the Shareholders’ Meeting with integrity and prudence for the Company’s interests.

2. To determine the Company’s visions, obligations and business policy.

3. To review the business development plans to increase potential of itself.

4. To consider budgets to maximum the business’s economic values and for better returns to shareholders.

5. To formulate the compensation policy and a succession plan of executives.

6. To supervise and develop risk assessment.

7. To supervise and develop the Company’s corporate governance compliance.

8. To supervise and set up an internal control and an internal audit system.

9. To take care of interests of both major and minor shareholders so that they can equally exercise and

maintain their interests while accessing accurate and complete information with transparence and

accountability.

10. To appoint committees in order to determine scopes of work and monitor their performances.

11. To performance evaluation’s executives and the HR development policy.

Term of Directors

3 years each term. At the Annual General Meeting (AGM), one-third of all directors shall resign by rotation.

The resigning directors may be re-elected.

The Audit Committee consists of three members as follows:

1. Mr. Sansern Wongcha-um Chairman

2. Assoc. Prof. Manop Bongsadadt Member of the Committee

3. Mr. Dej Bulsuk Member of the Committee

Audit Committee’s Roles and Responsibilities are:

1. To review an annual financial statement already audited by auditors and to ensure that it meets the

generally-accepted accounting principles; to consider and screen financial information together with

the Financial and Risk Management Committee and the auditors before releasing it to the third party.

2. To consider and select, propose for appointment and determine auditor’s fees and met four times a year with

the auditors.

3. To review material problems and obstacles the auditor may come across while performing his duty and

to settle differences between the auditor and the management.

4. To review the appropriateness and effectiveness of the internal control system and internal audit systems are

in place according to international standards.


5. To set up a defensive work system for business units in the company to increase operation efficiency and

effectiveness.

6. To review an annual internal audit plan proposed by the Internal Audit Office. To provide opinion on the

consideration of performance, appointment, removal, and remuneration of the Company’s internal auditor.

7. To promote and support the development of a financial reporting system that meets the international

standards. 8. To control Company’s compliance with the laws on Securities and Exchange and other legislations relating

to its business. 9. To determine fraud prevention measures and review results of a corruption inspection report. 10. To review the accuracy and effectiveness of information technology relating to the internal control system;

to offer advice for roles and regular updates. 11. To consider the Company’s information disclosure in case of connected transactions or transactions which

may involve conflict of interest to ensure that all are correct, sound and carried out in a normal course of business.

12. To prepare the Audit Committee’s report to be signed by chairman of the Committee and disclosed it in the Company’s annual report.

13. To act otherwise as required by the laws or entrusted by the Board of Directors; when performing along its scopes of work, the Audit Committee shall be empowered to order President and Chief Executive Officer, senior executives, heads of department or related staff to provide their opinions, participate in meeting or submit documents deemed necessary or relevant.

Term of Audit Directors: 3 years each term. The Financial and Risk Management Committee consists of six members as follows:

1. Mr. Vitoon Vongkusolkit Chairman 2. Mr. Banyong Pongpanich Member of the Committee 3. Mr. Supol Wattanavekin Member of the Committee 4. Mr. Chanin Vongkusolkit Member of the Committee 5. Mrs. Panida Thepkanjana Member of the Committee 6. Mr. Kasama Punyagupta Member of the Committee

Financial and Risk Management Committee’s Roles and Responsibilities are: 1. To supervise financial operations of companies within the group. 2. To supervise, screen, approve and monitor approved investment projects. 3. To assess and formulate a systematic, clear-cut and efficient risk management plan. 4. To supervise and monitor risk assessment tasks as well as to adjust and develop the risk management on

a regular basis.

Term of Financial and Risk Management Directors: 3 years each term.

037



The Nominating and Corporate Governance Committee consists of three members as follows: 1. Mr. Prakit Pradipasen Chairman 2. Mrs. Panida Thepkanjana Member of the Committee 3. Mr. Chanin Vongkusolkit Member of the Committee

Nominating and Corporate Governance Committee’s roles and responsibilities are:

1. To determine the Board of Directors’ composition and qualification of its members as well as members of

board committees.

2. To nominate candidates for the Board of Directors and member of board committees.

3. To determine the Remuneration of Directors.

4. To propose corporate governance policies and guidelines to the Board of Directors and to review and

update such policies and guidelines on ongoing basis.

5. To evaluate the Board of Directors and each committee’s performance and to ensure that the Board of Directors

and management’s operations are being conducted within corporate governance policies and guidelines.

6. To promote knowledge acquisition for the Company’s nature of business, regulations, and strategy.

Term of Nominating and Corporate Governance Director: 3 years each term.

The Management Development and Compensation Committee consists of three members as follows:

1. Mr. Supol Wattanavekin Chairman

2. Mr. Vitoon Vongkusolkit Member of the Committee

3. Mr. Banyong Pongpanich Member of the Committee

Management Development and Compensation Committee’s roles and responsibilities are:

1. To assess and evaluate performances; to determine annual remunerations and a compensation structure of

President and Chief Executive Officer while offering him an advice regarding remunerations of senior

executives.

2. To consider a plan to develop skills and competency of President and Chief Executive Officer Nominees

(in case of change).

3. To determine significant HR policies i.e. and structure of staff’s remunerations for Annual Remunerations and

Budgeting, Rewards (bonus), etc.

4. To consider an allocation of the Employees Share Options Program (ESOP) in case such allocation exceeds

5 percent of the program’s shares.

Term of Management Development and Compensation Directors: 3 years each term.


Independent Directors, who account for 50 percent of the Company’s Board of Directors, consist of:

1. Mr. Prakit Pradipasen Independent Director

2. Mr. Sansern Wongcha-um Independent Director

3. Assoc. Prof. Manop Bongsadadt Independent Director

4. Mr. Dej Bulsuk Independent Director

5. Mr. Banyoung Pongpanich Independent Director

6. Mr. Ekasith Jotikasthira Independent Director

The Company’s Executives consist of:

1. Mr. Kasama Punyagupta President and Chief Executive Officer

2. Mrs. Kamonwan Wipulakorn Executive Vice President and Chief of Financial Officer

3. Mr. Petch Krainukul Executive Vice President

4. Mrs. Varisara Gerjarusak Executive Vice President

5. Mr. Apichan Mapaisansin Assistant Executive Vice President

6. Mr. Suchai Wuthworachairung Assistant Executive Vice President

7. Miss Pakinee Pramtade Senior Vice President

8. Mr. Surapon Jaimsuwan Vice President

9. Mr. Viboon Chaisutyakorn Vice President

Duties and Authorities of President and Chief Executive Officer 1. To collaborate with the Board to formulate the Company’s visions and missions.

2. To formulate business plans and both short and long-term strategies to achieve the goals; to formulate risk

management plans.

3. To formulate an annual budget and to allocate resources that in line with strategic plans.

4. To manage human resources starting from recruiting to setting salaries, wages, compensations and

benefits; to set evaluation methods and to allocate special welfare and benefits; to appoint, remove and

transfer staff and to issue rules, regulations and announcements as deemed appropriate.

5. To design the management structure; to determine roles, duties and approval authorities.

6. To build and nurture our corporate culture to support our operations.

7. To develop various systems to ensure effective and efficient operations.

8. To develop skills, knowledges and databases for the purposes of management and decision making.

039



Duties and Responsibilities of Company Secretary The Company Secretary shall have duties and responsibilities that are no fewer than what the Securities and

Exchange Act (No. 4) B.E. 2551 and/or other related laws, rules and regulations have stipulated. This includes:

1. To support the Board to perform its fiduciary duties with integrity and care as a normal person may do in the

same situation; to offer advice to directors, the Management and staff to ensure compliances to the laws,

rules and regulations of the Securities and Exchange Commission (SEC) and the Stock Exchange of

Thailand (SET) and other relevant legislations.

2. To supervise the internal auditing, the internal control system, compliance to the principle of good corporate

governance and to be a center in compiling risk management plans.

3. To coordinate matters relating to directors such as changes of qualifications, changes of roles and duties,

terms of offices of committees, resignation on rotation, resignation prior to a due term and appointment of

new directors.

4. To specify and inform a place where important documents of the firm are kept and to disclose related

information based on duties and responsibilities to the SEC.

5. To monitor the Management’s performances to ensure good practices.

6. To prepare enough annual reports for distribution to shareholders and related persons.

7. To review invitation letters to the Annual General Meeting of Shareholders and the Extraordinary General

Meeting of Shareholders, adequacy of documents, supporting documents and information disclosure to the

meeting and minutes of the meeting.

8. To disclose related information under the Secretary’s duties and responsibilities to the SET.

The Company’s Articles of Association of the Nomination of Directors

Clause18 The Shareholders’ Meeting shall elect directors according to the following rules and procedures:

18.1 Chairman of the Meeting shall propose names and work experiences of nominees submitted by the

Board of Directors for approval.

18.2 Each shareholder shall have voting rights equal to the number of shares he holds.

18.3 An election of director may be done by voting either one or several persons as director as the

Shareholders’ Meeting deems appropriate. However, each shareholder must exercise all of

his voting rights existed under Clause 18.2 for each director. Dividing votes to a particular nominee

is not permitted.

18.4 Those receiving the highest votes in a sequent order shall be elected as directors for an available

number of directors. Should those elected in a subsequent order enjoy equal votes which however

exceed the number of the existing directors, Chairman of the Meeting shall have a casting vote.

Clause 48 A resolution of the Shareholders’ Meeting shall consist of the following votes:

48.1 In a normal case, majority votes of shareholders who attend the meeting (either by themselves or

by proxy) and exercise their votes shall be considered a resolution.

040 Back

Shareholding of the Board of Directors and Management The Erawan Group Public Company Limited

1. Mr. Prakit Pradipasen Chairman of 150,058 150,058 -

the Board of Directors

2. Mr. Sansern Wongcha-um Director - - -

3. Assoc. Prof. Manop Bongsadadt Director 319,729 319,729 -

4. Mr. Dej Bulsuk Director 660,000 660,000 -

5. Mr. Banyong Pongpanich Director 3,001,500 3,001,500 -

6. Mr. Ekasith Jotikasthira Director - - -

7. Mr. Vitoon Vongkusolkit Director 11,457,870 11,457,870 -

8. Mr. Supol Wattanavekin Director 58,698,916 58,698,916 -

9. Mr. Chanin Vongkusolkit Director 5,493,550 5,493,550 -

10. Mrs. Panida Thepkanjana Director 3,797,416 3,693,416 104,000

11. Mr. Krisda Monthienvichienchai Director - - -

12. Mr. Kasama Punyagupta President and 11,510,211 11,510,211 -

Chief Executive Officer

13. Mrs. Kamonwan Wipulakorn Executive Vice President - - -

14. Mr. Petch Krainukul Executive Vice President 839,082 839,082 -

15. Mrs. Varisara Gerjarusak Executive Vice President - - -

16. Mr. Apichan Mapaisansin Assistant Executive 1,000,000 1,000,000 -

Vice President

17. Mr. Suchai Wuthworachairung Assistant Executive 1,825,716 1,825,716 -

Vice President

18. Miss Pakinee Pramtade Senior Vice President - - -

19. Mr. Surapon Jaimsuwan Vice President - - -

20. Mr. Viboon Chaisutyakorn Vice President 1,088,697 1,088,697 -

Name Title

Ordinary Share (Units)

31 Dec.2010 31 Dec. 2009 + (-)

Note: From report of securities held by the Company’s directors as of 31st December 2010

041


BUSINESS OVERVIEW

Holiday Inn Pattaya

Back

042 Back

International tourist arrivals statistics

Millions

Remark: Tourism Authority of Thailand, Ministry of Tourism and Sports

2004 2005 2006 2007 2008 2009 2010 2011F

17.0

16.0

15.0

14.0

13.0

12.0

11.0

10.0

Tsun

ami

Cou

p

Airp

ort C

losu

re

Polit

ics

and

H1N

1

Polit

ics

Number of tourist arrival

Trend of the Tourism Industry In 2010, it was the year that greatly showed the strength of Thailand tourism industry. Throughout the year,

15.7 million international tourist arrivals visited Thailand or an increase by 11 percent from the year before. Likewise, the domestic tourism sector expects to have 91 million trips or a rise of 5 percent from last year although the tourism industry did affect from various incidents last year ranging from the political unrest, natural disasters, an appreciation of Thai Baht and the Economic crisis in Europe.

The first quarter of 2010 witnessed the highest increase of foreign visitors coming to Thailand as the number rose 27 percent compared to the year before due largely to recovery of global economy. This was especially true with Chinese, Russian and Indian tourists, who registered a very high increasing rate compared to same period last year. However, the country suffered the political unrest in the second quarter, which halted the flow of foreign tourists into Thailand. After normally resumed, foreign visitors gained confidence once again to come back to the country. The number of tourists gradually improved and grew by the same period last year. Although the slower recovery in Bangkok due to continued political protests, there still was a very strong growth contributed by major tourist destinations like Phuket, Pattaya, and Chiang Mai which were supported by both Thai and foreign traveller. This applied especially to foreign tourists who chartered flights directly to these destinations while various airlines also increased their direct flights.

To conclude, for the whole year, there were total 15.7 millions foreign tourists, growing by 11 percent which was higher than the original estimated of Tourism Authority of Thailand (TAT). This spectacular increase was a result of several positive factors; namely, global economy recovery, ongoing road shows by the TAT to promote Thailand overseas and fee-exempted measures. In term of local tourism in 2010, TAT estimates there were 91 million trips of domestic tourism which increased by 5 percent from last year. This was a result of supporting measures from the public and private sectors, which included personal tax exemption given to hotel rooms paid by local tourists, the government’s announcement of extended holidays and ongoing promotions of visiting Thailand campaigns initiated by the private sector and TAT.

Hotel Industry The Erawan Group Public Company Limited

043


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Remark: Tourism Authority of Thailand, Ministry of Tourism and Sports

Domestic tourists statistics

Times

2004 2005 2006 2007 2008 2009 2010 2011F

100.0

90.0

80.0

70.0

60.0

50.0

Tsun

ami C

oup

Airp

ort C

losu

re

Polit

ics

and

H1N

1

Polit

ics

Number of domestic tourist

Hotel Industry

As for 2011, the tourism sector is expected to expand further from 2010 thanks to several positive factors

ranging from global economy showing steady improvement, high demands of tourist in the end of 2010 which continue to the first quarter of 2011, an expansion of low-cost airlines and the fact that Bangkok has been voted the world’s most attractive city for visiting in 2010 by Travel & Leisure Magazine, followed by our own Chiang Mai in the second. The TAT expects that 16.5 millions foreign visitors will visit Thailand in 2011 or a 5 percent increase, generating approximate revenue of 600 billion baht or an increase of 3.7 percent from 2010. Yet, this depends largely on the political stability. In 2011, tourists from East Asia will remain the largest group of visitors to Thailand accounting for 51 percent of all foreign visitors, a situation similar to what happened in 2010. Similarly, Chinese, Russian and Indian tourists will continue to remain high. Tourism Council of Thailand expects the number of local visits by Thai people to increase 7 percent, or 97 million trips.

As for new supply of international chain and regional chain hotels expected to open in 2011, most are luxury hotels and mid-scale hotels. In Bangkok, some mid-scale hotels have gradually opened since late 2010 and several hotels expected to complete their construction in 2011 to support demands of Asian tourists to visit in Thailand in the near future.

Overall speaking, 2011’s prospect is rosier than that of last year thanks to Thailand’s good fundamentals such as its long reputation as a preferred tourism destination, friendliness, cultural diversity and extraordinary nature and its affordability, all of which will continue to propel the Thailand tourism industry to a solid growth in the future.

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Industrial Outlook and Competition Conditions

During the first half of 2010, the local political unrest was a major negative factor affecting both the office rental

business and the tourism-related business. Majority of the tenants preferred to renew the rental agreements together

with negotiating for rent reduction rather than relocating to new premises.

In the third and fourth quarter of 2010, the domestic political situation still unchanged which continued to affect

the office rental business. Demands hardly improved so leasing in both Grade A and Grade B office buildings

remained idle. Together with the doldrums in the world’s economy and several countries suffered from natural

disasters which required time for recovery, this indeed slowed down foreign investments in Thailand.

Office Building

Overall, on the latter period of 2010, the available spaces for office buildings had a total of 7.98 million square

meters for rent, a slightly increasing of 7.86 million square meters from the same period the year before.

Approximately 2.81 million square meters were in Bangkok’s Central Business District (CBD) where 2.50 million

square meters or 88.85 percent had already been rented. The remaining 0.31 million square meters or 11.15 percent

were unoccupied. (Source: CB Richard Ellis (Thailand) Co., Ltd.)

An average rental rate of Grade A office was around Baht 680 per square meter while Grade B office space (the

same category as our office building) in Bangkok’s CBD area tumbled down 5.5 percent from Baht 578 per square

meters to Baht 548 per square meters. The important factor was due to static demands as tenants either downsized

the spaces or negotiated the rental rate in order to minimize cost which made landlords to opt to lower the rate down

according to the unfavorable economic conditions.

In the last quarter, the vacant spaces remained as much as 1.10 million square meters. And in 2011, the supply

is expected to increase around 114,480 square meters, all of which will be in the CBD area. It is hoped that in 2011,

as the world’s economic condition is improving, business will start to expand and investment activities will once again

pick up. This will positively effected Thailand’s overall economy especially the rental of office space in Bangkok’s

CBD area. Yet, local political situation remains closely watched by investors for choosing Thailand as the potential

investment destination.

Rental Property The Erawan Group Public Company Limited

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BackRental Property

Shopping Centers

At the end of 2010, supply of shopping center space was at 5.55 million square meters increasing 0.17 million

square meters more than the previous year, which accounted for approximately 3.0 percent . Of all this increasing

space, most of them were around Bangkok and developed to Community Malls offering goods and services

to customers around the area.

Rental rate on ground floor of Grade A shopping centers started from Baht 1,200 to Baht 3,200 per square

meter while rents on the other floors were between Baht 700 to Baht 2,600 per square meter. As for Grade B, average

rents were around Baht 1,000 to Baht 2,500 per square meter for ground floor and Baht 400 to Baht 1,200 per square

meter for the rest.

In addition, the local political situation and the world’s economy remain to be the two major factors that caused

more caution to consumers and entrepreneurs in their spending and their investing activities. It is expecting that in

2011 as the economy is getting better, this will be a boost to the retail market and operators’confidences to invest

or expand their business, which in the end should drive more demands for spaces in this market.

046 Back

Our company has the Financial and Risk Management Committee (“FRC”) to supervise and evaluate the risk

management strategies to ensure efficiency and effectiveness of the program. Each head of department are

responsible to analyze and formulate with the strategies to manage or mitigate the risks. Risks associated with our

operations are:

1. Risk Management: Dependence of Third-party Hotel Management

We have no policy to manage hotels by ourselves. International hoteliers are hired to utilize their reputations,

experiences and expertise in managing and administering the hotels we have invested and developed. These hotel

operators are Hyatt International, Marriott International, Accor Hospitality, Six Senses Resorts and Spas, and IHG

InterContinental Hotels Group. The management agreements are long-term thereby exposed to the risk that the brand

reputation and the operator’s capability to compete may decline. Performances of our hotels may not reach the level

desired. Nonetheless, the operators we have selected are among the world’s largest with proven track record, tested

systems, reputations, and strong financial positions. We then believe that the chance of such deterioration

of performances is minimal. The diversifications in terms of hotel operators also help mitigate this risk. In addition,

if the situation prolongs, each of the agreements has exit clause in case the hotel operator needs to be changed.

2. Risk from Increasing Supplies

The unbalanced of supply and demand will cause a high competition in the market which may affect

incomes and operating profits. However, our hotel business has been managed by well-recognized and highly-

experienced hotel management groups which can provide competitive advantage such as wide range of customer

base to ensure certain level of demand, proactive crisis management under unpredictable situation, etc. In addition,

we also have a strategy to diversify our investment portfolio in luxury, mid-scale and economy hotel in various tourist

destinations. Regarding the office building and shopping center business, although the competition is intense,

demands for space remain quite strong especially for that in the CBD area and the shopping district, which are

exactly where the Company’s premises are located. The risk is therefore minimal and manageable.

3. Risk from External Factors Impacting on Property and On-going Business

External risk factors such as natural disaster, terrorism or political unrest that may have an impact on

property and business operation are inevitable and unpredictable. However, apart from implementing an international

standard of emergency procedure and safety manual (i.e. restricted access to and from properties, occupation of

vicinity, evacuation, etc.) in accordance with emergency level to prevent and/or reduce damage, we also have

all-risk, terrorism and business interruption insurances to cover the aforesaid damage if it occurs directly to our

properties.

Risk Factors The Erawan Group Public Company Limited

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4. External Risk Factors Affecting Hotel Business Performance

External risk factors affecting hotel business performance, such as political unrest or epidemic, are beyond

our control and prevention. These will cause a sudden drop in number of foreign tourist arrival, which will directly

impact on hotel revenue. Nevertheless, from historical data. these impacts are short around 3 - 9 month period. Our

risk management strategy to handle this is to have a flexibility and responsiveness in our systems. Sales and

marketing structures allow for fast reaction to market condition, while proactive cost management policies allow the

company to be resilient in difficult periods.

5. Interest Rate Risk

Interest rate risk, which is a result of changes of market rates in the future, will affect our operating results

and cash flow. For the purpose of financial risk mitigation in light of interest uptrend, the Company converted

a portion of long term loan from floating rates into fixed rates for a period of 4 years. As of 31st December 2010,

approximately 68 percent of our long term loans were subject to a floating interest rate and 32 percent were subject

to a fixed rate. Majority of our floating-rate term loans apply a Minimum Lending Rate (MLR) minus 1.5 - 2.0 percent

while the remaining applies a 6-month Fixed Deposit Rate plus 2.0 percent which was lower.

6. Human Risk

Loss of executive management or key personnel of the company is also considered a risk for the company.

However, human resources development and management is one of the key priorities of the company. Over the past

years, we have been changed and recruited employees and managements in key growth departments and provide

continuous training and development. More importantly, we develop a 3-layer succession plan from President and

Chief Executive Officer down to Vice President level which supervised by the Management Development and

Compensation Committee (“MDC”) and Executive Vice President of each department respectively. In addition,

with a professional run structure, we operate under efficient system and do not rely on capability or decision of single

person. We also decentralize authority to various levels under the supervision of the Board of Directors.

These structures of management will help reduce risk from loss of key personnel.

In addition, our key corporate cultures including “Team spirit” and “With integrity”, will also draw a capable

professional with integrity to join our company. Lastly, our competitive compensation and benefits, bonus scheme

which links to corporate strategy map as well as long term stock option plan for executive management also create

commitment and loyalty to our employees which will help them work more efficiently. This structure will also help to

retain quality employee with the company.

Risk Factors

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Year 2010

• “Excellent recognized as Good Example”

AGM Assessments Program

Project: AGM Assessments Program 2010

• “Excellent” CGR Awards 2010

Project: Corporate Governance Report of Thai Listed Companies

• Excellent IR Awards 2010

Project: SET Awards 2010

• 1 in 2 Nomination to “Excellent CSR Awards 2010”


Year 2005 - 2009

• “2nd Quartile,Year 2005” (Top rating = 1st Quartile)


• “very good” CGR Awards 2006


• “good” AGM Assessments Program




• “very good” AGM Assessments Program


• Board of the Year for Distinctive Practices 2006/2007 Project: Board of the Year Awards 2006



• “Excellent” AGM Assessments Program


• “Excellent” CGR Awards 2009


• “Excellent” AGM Assessments Program


• 1 in 3 Nomination to “IR Excellent” Awards 2009


Good Corporate Governance Award The Erawan Group Public Company Limited

049


Corporate Governance Policy

Six Senses Sanctuary Phuket

GOOD CORPORATE GOVERNANCE

Back

050 BackCorporate Governance Policy

Corporate Governance Policy The Erawan Group Public Company Limited

The Erawan Group Plc. is managed on the principle of good corporate governance. The business is run

in compliance with the laws and on the basis of the Business Code of Conduct where information is disclosed in

a transparent and straightforward manner. We have also put in place efficient auditing mechanisms. We operate

our business by taking into consideration our responsibility in every aspect to shareholders and stakeholders,

the structure of our Board of Directors, supervision mechanisms and efficient management responsibility. Aside from

complying with the OCED’s best practices, we also implement other best practices normally practiced overseas;

for example, the Erawan have set up four sub-committees to help supervising each task or the fact that our board

consists of as much as 50 percent of Independent Directors out of the entire board. With regard to corporate

governance, the Erawan has set up the Nominating and Corporate Governance Committee (NCG) to regularly review

and update corporate governance policies and practices so the company will continue to have up-to-date criteria that

it can be actually implemented. To comply with the policy, the President and Chief Executive Officer (The President)

has been directed to promote corporate governance among staff of all levels.

The President requires the Code of Conduct be made for employees of all levels as a clear guideline for

practices under the corporate governance policy. Two Town Hall meetings a year are held to promote understanding

in this subject matter. Besides, we also aim to do our work with integrity, which is one of the four values set as our

corporate culture. We also ensure that staff understands the concept of Social Corporate Responsibility (CSR) where

business is run by properly taking into consideration the interest of all stakeholders whether they are customers,

suppliers, shareholders, creditors, employees, the society or the environment. The Erawan Group Plc. regularly

conducts an opinion survey of stakeholders. Results of the survey are used to improve business efficiency and to be

one of the factors evaluating our staff performances annually.

How we started our CSR?

It started at the corporate leader who had the right understanding of the CSR framework. The CSR core is to be

responsible in one’s own duty and to treat all stakeholders whether they are shareholders, employees, their families,

customers, creditors, suppliers, competitors, government, the society and industrial counterparts with respect and

sincerity.

Today, when people heard about CSR, they tend to think of corporate activities held for the benefit of the

community, society and the environment. This can be donations for various forms of campaigns to sponsoring

a sports event to building schools to the less fortunate students or even promoting the use of green products.

In short, any social project aims to return something good to the society we live in is considered a CSR project.

While this is right, this aspect of CSR is only a minor part of the overall CSR activity.

Beyond this activity is the fact that for a company to set up a policy, work plan or strategy, it must take into

consideration direct and indirect effects to other stakeholders and the company must not focus at shareholders’

profits alone and only. In short, the Board of Directors must come up with a policy that achieves a right balance of

corporate social responsibility to everyone and this policy must function not only during a good time when the

business enjoys profits but also when the company confronts the crisis.

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BackCorporate Governance Policy


At the Erawan, we believe that CSR is our path to sustainable success. The reason is because CSR is a key

factor that makes our organization accepted by all stakeholders and it’s something that makes them want to associate

with us. For example, to retain good staff, the Erawan must start first by making them happy to come to work.

Likewise, customers must be satisfied and wish to come back for our service time after time. Suppliers are glad to

deal with us due to the way we do our business frankly while our decisions are made on the basis of facts and not the

kickbacks or anything along that line. Minor and major shareholders are confident that they will get access to equal

and direct information during the good and bad business time. Creditors are confident in the transparency of the

information they receive from us as well as the Erawan’s accountability for debt payment, legal compliance as well as

accurate tax record and payment. If every organization is able to take a good care of all stakeholders, the society and

the economy will benefit as a whole. As such, one can see that social contribution projects are only a small part of the

CSR. The organization will not achieve CSR if it continues to take advantage of other stakeholders.

At the Erawan, we have committed to the CSR concept for more than five years. We started first by making sure

that there was a right understanding of the issue in our organization. One of our questions was how everyone can

naturally incorporate CSR in their daily life without taking so much effort. That’s why we made it one of our four the

Erawan mottos considered our DNA. In addition, an important factor of our corporate strategy is to take into

consideration the satisfaction of all stakeholders when interacting with us and this very factor became one of the

criteria to evaluate our staff during the Balance Score Card process, which results in the overall assessment of

everyone’s performance in the organization. Creating awareness and accountability for all stakeholders is a time-

consuming process and cannot be forced to happen overnight. Only when everyone in the organization witnesses by

his own that something good out of his practice actually happens to the organization, then, he will be confident and

feel like pursuing it. Only then that everyone will communicate on the same basis. We are confident and committed to

this path as we believe that it’s the right path although the result cannot be felt in the short term. The end result is not

merely an accolade or an award but it must really exist and can be felt by everyone in the organization. Those

interacting with us can feel it by their heart without any publicity because in the end, all stakeholders who feel good

after interacting with us will be the best and most effective publicity vehicle in the whole world to tell the rest who we

really are.

The Special Things We Did

2010 was the horrible year for the hotel and tourism industry. The Erawan’s incomes from hotel businesses

account for 90 percent of all incomes. Yet, we had at least five hotels opening their doors for fewer than two years.

Of this, three hotels had to shut down during the political unrest for at least two months. We suffered heavy loss.

Worse, we were accused of supporting the anti-government red-shirt protestors during the crisis, a mystical

miscomprehension that the public in general refused not to listen to the truth.

Based on our experience, we truly believe that it is not so difficult implementing the CSR policy by taking care

of shareholders, our staff, their families, customers, creditors, suppliers, competitors, the government and the society or

even the environment and other industries during the good time. Yet, at a time of the crisis, looking back, we believe



the CSR policy and practice was actively exercised in a very concrete manner especially during the crisis.

To elaborate, we disclosed information in a very transparent, speedy and timely manner to our investors, creditors

and the public. We offered measures to relax financial situations for our clients. We became a center to gather

information of all ten competing hotels that, like us, were all affected by the political turmoil. We represented and led a

negotiation with the government to seek rehabilitation. We decided to completely shut down our hotel only a few days

before the rally started to turn ugly on the basis of a safety issue of our customers, our staff, our properties and an

attempt to respond to the state’s security measures. We continued to retain our staff and organized training to boost

their morale and confidence at our organization. We also paid our staff during the hotel’s temporary closure similar to

those not affected by the turmoil. We helped relocating our customers to a new workplace and we continued to pay

every supplier on the same deadlines without requesting for any payment extension. Yet, despite all the doom and

gloom, the Erawan continued our corporate contribution projects under a limited budget. We renovated a footpath

beneath the Chalerm Maha Nakhon Expressway (Sukhumvit). We reforested for elephants and built a check dam at

the Sublangka Wildlife Sanctuary, Lopburi province. The events offered an opportunity for staff and families to enjoy

although some may have to partially sponsor the trip themselves.

Again, for more than five years, we believe that we are on the right path. Although CSR will never end, we will try

to do more in the years to come as we choose this road with confidence.

We commit in community, social and environment activities through our clear policy and budget as we have

clearly allocated 0.5 percent of our net profit to the activities. While the money is not much, we focus at a clear

concept and an outcome of the project that can be further developed. In other words, we will not turn these social,

environment or community projects into our PR tool to enhance our profit or to generate even more incomes.

In short, for us, these social, environmental and community programs are not profit-oriented. It’s a channel through

which we can give something back to our society and something we can still do despite all the crisis we have been

through. So far, we divide these activities into four categories as follows.

1. Tourism Promotion Activities

ë The Welcome Guide to Thailand Project that has offered free English language lessons to taxi drivers

since 2008 and so far, we have trained seven classes of taxi drivers. ë Thai Culture through Annual Calendar Project being a platform to promote Thai culture – the project has

so far received so many awards from the Association of Publicists of Thailand as follows:

• In 2007, 12 photos in the Erawan Loves Elephant Project printed on the calendar were voted the

second winner for a desktop calendar.

• In 2008, 12 photos depicting the Lord Buddha’s history from the Thai Mural Painting Project were

voted the second winner for a desktop calendar.

• In 2009, 12 winning photos from the Land of Smiles photo contest were voted the winner for

a desktop calendar.

• In 2010, our calendar featured 12 photos depicting community lifestyles under the theme of

“the Heart of Thai Community”.

• We stopped printing the 2011 calendar due to our policy to save paper.

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2. Community Development Projects – the Erawan focuses at enhancing areas closed to our properties and

other areas in general. Details are as follows:

ë Nice & Neat Surrounding Area – the idea behind this is to create an awareness in keeping our place

clean through participation of our employees, those of our affiliates and trading partners.

• The renovation of pedestrian’s footpath beneath the Chalerm Maha Nakhon Expressway (Sukhumvit)

to facilitate pedestrians in general.

• The improvement of landscape on street isles, Sukhumvit Road (Ploenchit-Nana) in collaboration with

the Klongtoey District.

ë Love Charity Project

• Storytelling Tales Project, the 1st activity was held on February 12, 2010 when staff told tales to the

visual-impaired children at Bangkok Branch, Christian Foundation for The Blind in Thailand under the

Royal Patronage of H.M. the King.

• Filling of Love Project, the 2nd activity was held on April 8, 2010 at Baan Bangkae Adult House 2,

Bangkok.

• To help the Flood Victims Project, the 3rd activity was organized at Wat Natang Nai School, Bangsai

District, Ayutthaya Province to renovate the school suffered from a flash flood.

ë The Erawan for Flood Victims Project – Erawan’s staff donated money which was later translated into

333 bags of food and other amenities before being donated through Channel 3 TV for flood victims.

3. The Energy Saving and Let’s Green Project

ë Redeeming Garbage Project – this project is held every two months all year round. Starting in 2007,

the project aims to promote waste separation. Staff and the public are invited to turn in stuff they

no longer use in an exchange for eggs.

ë Let’s Green Project – the project aims to educate energy and environmental matters to our staff and

tenants of the Ploenchit 2 Building. There are two running projects; namely, the Reuse and Waste

Separation Project and the Efficient Energy Project. Some photos we posted at an elevator’s door or

restrooms in the building to urge for energy savings were a courtesy from Green Peace.

4. Let’s Protect the Elephant Project

The Erawan has sponsored the “Reforestation for Elephants” Project at Sublungka Wildlife Sanctuary,

Lopburi province, as well as built a check dam to store water. The projects are held in two stages as follows:

Stage one: Mobilizing funds – this involved selling small trees, vegetables, fabric bags, etc. to visitors of

the Ploenchit Building as part of a campaign to reduce the use of plastic bags and to create an

awareness in planting more trees. Proceeds from the activities went to buy seedlings while the rest was

donated to the forest safeguard volunteers at Sublungka Wildlife Sanctuary, Lopburi province.

Stage two: Staff was bused to plant trees to create a habitat for the Thai elephants at Sublungka Wildlife

Sanctuary, Lopburi province on September 18 - 19, 2010.


While it would be so easy to just do these projects for the sake of doing it, yet, what matters more will be

monitoring results, reviewing their benefits and the effects of what has been done as well as processing all

information taken from the projects to make sure that they will be better managed next time. In the end, it’s the lesson

we learn that matters. Following our evaluation, we believe that there is room for improvement. So far, a unit, which

reports directly to the President, has been assigned to monitor and coordinate the matter.

Corporate Contributions – How to Attract Participation from Willing Stakeholders?

As we believe that our staff has a public mind, therefore, by creating an environment that allows them to

participate in corporate contribution projects starting from offering them an opportunity to express their ideas,

proposing a project within a required framework and encouraging them to join the activity on a voluntary basis,

this has already attracted the participation. What’s more important is the activity should not be limited among our staff

only. On the contrary, they must be open for all stakeholders. Participating in the activities is not related to the annual

staff performance evaluation, either. Everyone is doing this out of a good intention that they are happy to do the

activity with someone else. This way, we will see more and more people coming into the loop as some will start asking

friends and neighbors to join the activities, which is indeed a beautiful outcome. Yet, the very important question

involving the corporate contribution is what to do to let willing and interested stakeholders to join these activities

without us having to beg or solicit for donations to achieve our corporate contribution objectives.

The Erawan’s Good Corporate Governance can be divided into nine areas as follows:

1. Code of Conduct We have announced a policy to conduct our business based on the principles of good corporate governance.

In 2005, we combined the best practices and the Code of Conduct, which not only were in line with our corporate

strategy, but were also practicable, into our Code of Conduct manual. The manual was updated in 2008, which was

indeed a significant move based on our motto of “Success with Integrity”. The updated Code of Conduct has been

distributed to executive officers and staff for implementation to ensure our success with integrity and also to promote

our corporate culture and ethical performances. Our Code of Conduct is now posted in our website at

www.TheErawan.com, a mechanism to ensure that our executive officers and staff commit to their responsibilities to

all stakeholders, communities, the society and the environment.

2. Qualifications, Structure, Duties and Responsibilities of the Board and the Management

Not only qualifications of our directors are in line with the SET’s requirements but they are also much more

intensive. Director’s term of office is three years each term with clear scopes of work and with power being balanced

between non-executive directors. Half of the Board’s entire members are independent non-executive directors.

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The Board consists of Chairman of the Board, who is an Independent Director and different person from the President

and Chief Executive Officer where their roles, authority and responsibilities are clearly separated to maintain

balance between managing and supervising the company. In addition, there are five other Independent Directors,

five non-executive directors and President and Chief Executive Officer. The total number is 12.

The Board has appointed four different committees in a move to clearly define duties and responsibilities.

The Board also has a policy to promote rotation among directors to sit at different committees for appropriate

timeframe and on appropriate occasions. Chairman of a committee has a duty to submit a clear-cut policy of his

committee to the Board. Every committee must appoint a secretary, who will coordinate with directors and the

Management to ensure that the policy is translated into action. In addition, the secretary must also record minutes of

meeting in writing. The committees include the following:

The Audit Committee (AC)

The entire Audit Committee consists of Independent Directors and at least three members, who must have

adequate accounting knowledge to be responsible for auditing the company’s financial statements and its internal

control system and to monitor the company’s risk management practices on a regular basis. In addition, the Audit

Committee will also review the independence of the company’s Internal Audit Unit; approve appointment, transfer or

termination of supervisor who works as its secretary; review legal compliance; select, appoint and propose an auditor

and auditor’s fees and review the auditing and disclose information about connected transactions to meet the criteria

in an accurate and transparent manner.

The Financial and Risk Management Committee (FRC)

This Committee consists of no fewer than six directors and is responsible for supervising and managing

policies, plans and investment projects approved by the Board. The Committee also ensures that the firm has a

systematic, distinct and effective risk management system.

The Nominating and Corporate Governance Committee (NCG)

This Committee consists of no fewer than three members. Its chairman shall be an independent non-executive

director while the remaining two members are non-executive directors. The Committee is responsible for reviewing

the structure of the Board, setting qualifications of a particular position, reviewing and recruiting experts to become

our directors as well as assessing the Board’s performances and other committees appointed by the Board.

The Nominating and Corporate Governance Committee also sees that directors, executive officers and staff of all

levels comply with the Good Corporate Governance Practices and Code of Conduct.

The Management Development and Compensation Committee (MDC)

The Committee, consisting of no fewer than three non-executive directors, is responsible for proposing

development policies, assessing knowledge and skills of and compensations to new President and Chief Executive

Officer, writing a senior management succession plan and reviewing the company’s HR development policy.


The Board also appoints the company’s Secretary to perform duties as stipulated by the Securities and

Exchange Act, No. 4, B.E. 2551 and/or other relevant legislations. The Secretary also monitors and coordinates with

the Board, the Management and related internal and external parties.

3. Qualification of Directors

Principles:

The Board of Directors should consist of members with a variety of knowledge and experiences, whether it is in

finance, economy, management, business administration, marketing and service, tourism and law. The idea is to

ensure that together, they can formulate a right policy for the development of hotel and resort business while having

specialized skills, ability to see things in a big picture and enough independence to audit the Management in a

balancing manner. The Board of Directors has two significant roles; namely, supporting the Management on the basis

of the Good Corporate Governance and formulate a strategy to achieve our business goals.

General Qualifications: 1. Director should possess a variety of knowledge and experiences while being a professional with an ethical

mind.

2. Director should fully understand his obligations and practices with a commitment to create long-term values

to the business and shareholders.

3. Director should have enough time to perform his duties effectively.

4. Director should be able to assess himself and is ready to notify the Board of Directors upon change or

if there is anything that prevents him from performing his job effectively.

Director’s Term of Office and Retirement Criteria 1. Director shall be in office three years each term. The Board may nominate a director for shareholders to

re-elect him/her after his term ends by reviewing his performances on an annual basis. The term of a

committee’s member is also three years each term.

2. Director shall retire when he/she is fully 75 years old effective from the day following the Annual General

Meeting of Shareholders. The calculation will start after the day the director is fully 75 years old.

Specific Qualifications:

Chairman of the Board of Directors: aside from the duties mentioned above, Chairman will have extra duties;

namely, (1) acting as chairman of the Board of Directors’ meeting; (2) exercising a casting vote in case of tie at

the Board of Directors’ meeting; (3) calling for the meeting of the Board of Directors; and (4) acting as chairman of

the Shareholders’ Meeting. As a result, qualifications of the Chairman will be slightly different from those of other

directors as follows:

• Chairman must be Non-Executive Director (NED).

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• Chairman must not be involved in a day-to-day management, be an auditor, or others such as a legal consultant; nor shall he be employee, staff, advisor receiving monthly salary or a person with controlling power of the company, affiliated company, associated company, auditing company, or be a person who may have conflict of interest without having to have interest or stakes in such manner.

Executive director

• Director who is also Chief Executive Officer (CEO) is advised not to become director in more than three other listed companies.

Independent Director

• Independent Director shall hold less than 1 percent of the total shares with voting rights in a company, its affiliated company, associated company or any other person with possible conflicts of interest (including shares held by related persons).

• Independent Director must not be involved in the management and is currently not being and has never been employee, staff, advisor enjoying monthly income or person with controlling power of the company, its affiliated company, associated company and auditing company; nor shall he be a person with conflict of interest without having to have any interest or stake in such manner for no less than two years.

• An Independent Director shall have neither blood nor registered relationship as a father, mother, spouse, sibling and children including spouse of children of executive officers, major shareholders, persons with controlling authority or anyone to be nominated as an executive officer or a person with controlling power of the company or its subsidiary.

• An Independent Director shall have no business relationship with the company during the previous two years. Details are as follows:

• No relationship as a provider of professional service including being an auditor (in any case), or of other professions such as being a legal consultant, a financial advisor or an asset appraiser with an annual transaction value exceeding Baht 2 million.

• A business and trade relationship including normal transactions, renting or leasing of property, transactions relating to assets and services and giving or getting financial assistance with a transaction value from Baht 20 million or 3 percent of the Company’s NTA, whichever is lower. This however shall include values of all retroactive transactions during at least the six previous months prior to the latest transaction.

• An Independent Director shall possess no other characteristic that prevents him/her from expressing his opinion independently.

• Independent Director must attend at least one of the following courses held by the Thai Institute of Directors (IOD); namely,

• Directors Certification Program (DCP); or • Directors Accreditation Program (DAP); or • Audit Committee Program (ACP)


Member of the Audit Committee

• He/she shall be an Independent Director appointed by the Board or Shareholders.

• He/she shall not be a director entrusted by the Board to make any decision with regard to a business of the

company, its parent company, subsidiary, affiliate, subsidiary of the same level or other entities that may

have a conflict of interest.

• His duties must not be fewer than what is stipulated by the SET.

Transactions with Possible Effects to Independence

• Being authorized to approve transactions or signing to bind the Company, to exempt collective decision.

• Attending a meeting or voting in a matter he has an interest or a conflict of interest therein.

Prohibited Characteristics

Directors and executive officers must possess no qualifications that are conflicting with the Company’s

requirements and announcements made by the SEC and the SET. Additional information can be read in

the Company’s website.

4. Rules and Responsibility of the Board of Directors and the Management

The Board of Directors determines policies and practices for the management, which include important tasks of

an executive. In addition, the Board also allows the management to formulate a management policy based on the

Company’s objectives and missions, which will be subject to the Board’s approval.

The Board of Directors also sets to have its Independent Directors meeting every year so that all directors meet

the management.

5. Board of Directors’ Meeting

The company sets the number of the Board’s meetings and the meetings of its committees by scheduling them

and letting directors and relevant parties know about them in advance throughout the year. The company also sets an

agenda of the Board of Directors’ meeting every year to inform all directors in advance.

In 2010, the Company organized 9 Board of Directors’ meeting, 4 Audit Committee’s meetings, 9 Financial and

Risk Management Committee’s meetings, 2 Nominating and Corporate Governance Committee’s meetings and

2 Management Development and Compensation Committee’s meetings (two ordinary meetings and one extraordinary

meeting). Minutes of meeting were recorded in writing at each and every meeting and kept at the Office of Secretary

and on a data server so that officers can conveniently access the database. Details of meeting attendance of

directors are in the following table:

059




Tim

es o

f Atte

ndan

ce 2

010

Ti

mes

of a

ttend

ance

/Num

ber o

f Tot

al a

ttend

ance

Fina

ncia

l N

omin

atin

g M

anag

emen

t

N

ame

Title

Te

rm

Boar

d of

Au

dit

and

and

Dev

elop

men

t

Dire

ctor

s C

omm

ittee

Ri

sk

Cor

pora

te

and

Man

agem

ent

Gov

erna

nce

Com

pens

atio

n

Com

mitt

ee

Com

mitt

ee

Com

mitt

ee

1.

Mr.

Prak

it Pr

adip

asen

C

hairm

an

Apr 2

009

- 201

2 9/

9 -

- 2/

2 -

Inde

pend

ent D

irect

or

2.

Mr.

Sans

ern

Won

gcha

-um

In

depe

nden

t Dire

ctor

Ap

r 20

09 -

2012

9/

9 4/

4 -

- -

3.

Ass

oc. P

rof.

Man

op B

ongs

adad

t In

depe

nden

t Dire

ctor

Ap

r 20

09 -

2012

9/

9 4/

4 -

- -

4.

Mr.

Dej

Bul

suk

Inde

pend

ent D

irect

or

Apr

2009

- 20

12

8/9

4/4

- -

-

5.

Mr.

Bany

ong

Bong

pani

ch

Inde

pend

ent D

irect

or

Apr

2010

- 20

13

5/9

- 7/

9 -

2/2

6.

Mr.

Ekas

ith J

otik

asth

ira

Inde

pend

ent D

irect

or

Apr

2009

- 20

11*

5/9

- -

- -

7.

Mr.

Vito

on V

ongk

usol

kit

Dire

ctor

Ap

r 20

08 -

2011

* 9/

9 -

9/9

- 2/

2

8.

Mr.

Supo

l Wat

tana

veki

n D

irect

or

Apr

2010

- 20

13

9/9

- 9/

9 -

2/2

9.

Mr.

Cha

nin

Vong

kuso

lkit

Dire

ctor

Ap

r 20

10 -

2013

7/

9 -

9/9

2/2

-

10.

Mrs

. Pan

ida

Thep

kanj

ana

Dire

ctor

Ap

r 20

08 -

2011

* 8/

9 -

8/9

2/2

-

11.

Mr.

Kris

da M

onth

ienv

ichi

ench

ai

Dire

ctor

Ap

r 20

10 -

2013

8/

9 -

- -

-

12.

Mr.

Kasa

ma

Puny

agup

ta

Pres

iden

t and

Ap

r 20

08 -

2011

* 9/

9 -

9/9

- -

C

hief

Exe

cutiv

e O

ffice

r

pe

rcen

t of d

irect

ors’

atte

nded

88%

10

0%

95%

10

0%

100%

* To

prop

ose

the

Annu

al G

ener

al M

eetin

g of

Sha

reho

lder

s on

Tue

sday

26th

Apr

il 20

11, t

o re

appo

int 4

dire

ctor

s w

ho re

tire

by ro

tatio

n to

suc

ceed

for a

noth

er te

rm.


100

80

60

40

20

0

6. Evaluation of the Board’s Performances

We evaluate performances of our Board annually. Twelve directors conduct a self-evaluation and an evaluation of the entire board independently before sending evaluation results to the Nominating and Corporate Governance Committee for further assessment. Evaluation results are used to improve and develop directors and work processes according to the guidelines recommended by the SET and Institute of Thai Directors.

Based on such evaluation, more than 87 percent of assessors agreed that the structure and components of directors were appropriate and that there were enough Independent Directors to achieve a balanced power. 87 percent agreed that the Board understood its independence in making decisions without being influenced by anyone. Meanwhile, 92 percent agreed that matters regarding the number of meetings, acknowledgement when the meeting would be held and the getting of documents in advance was getting much better than before. 88 percent agreed that every director shall bear the fiduciary duties of overseeing the management of the company that it operates in the best interests of the shareholders, for whom the director is responsible. 91 percent agreed that there was a good relationship with the Management Team and Directors could directly discuss with the President and Chief Executive Officer. 88 percent agreed about better self-development among directors, better understanding about business and their duties and responsibilities. Details are in the following:

Evaluation of the Board’s Performances

Avg. (%)

BOD Structure & Componant

BOD’s Meeting

Relations with Executive

Management

Rule, Duties &

Responsibility

Director Fiduciary

Duty

Directors Improvement & Management

7. Nomination of Directors and Executives

The Board entrusts the Nominating and Corporate Governance Committee to draft a clear nomination policy and process for directors. This refers to a process to initially check a nominee’s qualifications to ensure that his are in compliance with director’s qualifications; a selection and courting process of a nominee to be our director; a nomination process to the Board or shareholders and a reviewing process of director being re-nominated. An individual evaluation of a director’s performances while in the office will be used to support the consideration.

87 87 92 91 88 88

061




Furthermore, the selection was independently conducted without being subject to anyone’s influence. The President and Chief Executive Officer conducted a two-hour orientation session and arranged for a management team to meet the new director so that he learned about the company, got access to corporate information and strategic plans.

The Board designated the Management Development and Compensation Committee to recruit and formulate a succession plan of executives; namely, President and Chief Executive Officer, to ensure continued performances and to avoid business disruption.

8. Remunerations of the Board of Directors and Management

The Board entrusts several committees to formulate a compensation plan for directors, executives and staff as follows:

The Nominating and Corporate Governance Committee has a duty to formulate a compensation policy of directors where it is to review the soundness of compensations being paid on an annual basis on the basis of directors’ scopes of duties as well as their roles and responsibilities and the Company’s financial status and operation results vis-à-vis others in a similar business enjoying the same amount of revenues. Compensations will be paid in two types: meeting allowances (retainer fees or attendance fees) and bonuses. Director entrusted as a committee’s member shall receive additional compensations based on his additional responsibilities and this will be submitted to the Annual General Meeting of Shareholders for approval on an annual basis.

The Management Development and Compensation Committee evaluates performances of President and Chief Executive Officer based on four aspects; namely, finance, customer satisfaction, internal process and HR and corporate development, as part of a review of his compensation and annual compensation. Together with President and Chief Executive Officer, the Committee formulates a policy to pay executives and Staffs based on the nature of their work.

The President and Chief Executive Officer reviews annual compensations of executives based on a formulated policy through two evaluation processes; namely, (1) Balance Score Card (BSC) evaluation, which reviews strategic significances of each department vis-à-vis corporate strategy through a linkage that will eventually trigger corporate-level strategies to lower levels; namely, from corporate strategy, to departmental and section strategies; and (2) Competency Skill Behavior (CSB) evaluation, where behaviors that support corporate culture will be evaluated. Supervisors will evaluate each individual. Some of the evaluation will be based upon the company’s policies; others upon something else, depending on criteria set by department supervisors. To ensure effective evaluation and to access information from co-workers of various levels, the assessment is conducted from every direction. In this regard, supervisors will evaluate their supervisees and vice versa. In addition, staff of all levels is encouraged to conduct a self-evaluation. Results of both BSC and CSB evaluations are used to allocate the company’s overall returns to departments, sections and units.

Remunerations in cash for the year ending 31st December 2010 totaled Baht 35,333,941.40: 1. Remunerations of Directors of the Company’s Board of Directors and Committees totaled Baht 4,310,000.00 2. Remunerations of Directors of the Company’s subsidiary totaled Baht 1,980,000.00 3. Remunerations, which were total wages of the nine (9) executives paid by the Company and its subsidiaries

totaled Baht 28,100,575.80 4. Provident fund of the executives under item 3 above totaled Baht 943,365.60


Rem

uner

atio

ns fo

r th

e B

oard

of D

irec

tors

and

the

Com

mitt

ees

in th

e Ye

ar E

ndin

g 31

st D

ecem

ber

2010

C

ompe

nsat

ion

in c

ash

for m

embe

r of t

he C

omm

ittee

Fi

nanc

ial a

nd

Nom

inat

ing

Man

agem

ent

N

ame

Title

Bo

ard

of

Audi

t Ri

sk

and

Cor

pora

te

Dev

elop

men

t To

tal

D

irect

ors

Com

mitt

ee

Man

agem

ent

Gov

erna

nce

and

(Bah

t/yea

r)

Com

mitt

ee

Com

mitt

ee

Com

pens

atio

n

C

omm

ittee

1.

Mr.

Prak

it Pr

adip

asen

C

hairm

an

300,

000

- -

30,0

00

- 33

0,00

0

In

depe

nden

t Dire

ctor

2.

Mr.

Sans

ern

Won

gcha

-um

In

depe

nden

t Dire

ctor

24

0,00

0 10

0,00

0 -

- -

340,

000

3.

Asso

c. P

rof.

Man

op B

ongs

adad

t In

depe

nden

t Dire

ctor

24

0,00

0 80

,000

-

- -

320,

000

4.

Mr.

Dej

Bul

suk

Inde

pend

ent D

irect

or

240,

000

80,0

00

- -

- 32

0,00

0

5.

Mr.

Bany

ong

Pong

pani

ch

Inde

pend

ent D

irect

or

240,

000

- 18

0,00

0 -

22,5

00

442,

500

6.

Mr.

Ekas

ith J

otik

asth

ira

Inde

pend

ent D

irect

or

240,

000

- -

- -

240,

000

7.

Mr.

Vito

on V

ongk

usol

kit

Dire

ctor

24

0,00

0 -

240,

000

- 22

,500

50

2,50

0

8.

Mr.

Supo

l Wat

tana

veki

n D

irect

or

240,

000

- 18

0,00

0 -

30,0

00

450,

000

9.

Mr.

Cha

nin

Vong

kuso

lkit

Dire

ctor

24

0,00

0 -

180,

000

22,5

00

- 44

2,50

0

10.

Ms.

Pan

ida

Thep

kanj

ana

Dire

ctor

24

0,00

0 -

180,

000

22,5

00

- 44

2,50

0

11.

Mr.

Kris

da M

onth

ienv

ichi

ench

ai

Dire

ctor

24

0,00

0 -

- -

- 24

0,00

0

12.

Mr.

Kasa

ma

Puny

agup

ta

Pres

iden

t and

24

0,00

0 -

Do

not g

et

- -

240,

000

C

hief

Exe

cutiv

e

pa

id a

s

O

ffice

r

Ex

ecut

ive

Tota

l

2,94

0,00

0 26

0,00

0

960,

000

75,0

00

75,0

00

4,31

0,00

0

Remuneration of the Board of Directors and Management The Erawan Group Public Company Limited

063




Corporate Social Responsibility The Erawan Group Public Company Limited

9. Corporate Social Responsibility (CSR)

Corporate Social Responsibility, shortly called CSR, is one of the Erawan Plc.’s major business strategies.

We truly believe that CSR will guide our business while let us be accountable to shareholders, staff, suppliers,

creditors, the society, the environment and neighboring communities where our properties are located. To ensure that

everyone here understands the same thing, we have determined CSR guidelines and principles for those involved

as follows:

Duties and Responsibilities of the Board to Shareholder The Board of Directors takes into consideration shareholders’ rights without limiting only to their fundamental

rights as stipulated by laws. This refers to their rights to trade or transfer shares, to share the company’s profits,

to adequately receive the company’s information, to attend meetings to vote at shareholders’ meeting in order to

either appoint or remove directors and to appoint auditors and discuss important matters affecting the company.

In this regards, important matters can range from allocating dividends to formulating or amending rules and

regulations and the Memorandum of Association, increasing or reducing capital and approving special transactions.

The Board of Directors also supervises to ensure that meeting’s time, date, place and meeting agendas are given to

shareholders; that relevant documents and information required for making decisions at a meeting are available to

shareholders, that shareholders are notified of applicable rules at the meeting, that voting procedures are not too

complicated and that a meeting location is convenient and not expensive for shareholders to attend the meeting.

The Board of Directors has allowed shareholders to propose agendas of the Annual General Meeting of

Shareholders in advance prior to the meeting date. Clear rules and regulations in doing so have been posted in

the Company’s website to facilitate shareholders. Shareholders may submit a document to propose potential meeting

agendas by January 31 of every year. The Board encourages shareholders to use Proxy Form B so that shareholders

can determine a voting direction as there are names and information of six Independent Directors who can be

alternative proxy for shareholders. In addition, the information must be posted in the Company’s website at least

30 days prior to the meeting. Documents must also be sent to shareholders in advance enough for them to study

prior to the meeting.

During the Meeting, the Company treats every procedure equally. No agendas are shortened, deleted or

alternated. This is especially the case of an agenda to appoint directors where shareholders are entitled to vote for

directors individually upon enough information. All ballots featuring yes, no and abstention votes are duly kept as

evidence.

At every the shareholders’ meeting, Chairman of the Board, Chairman of the Committees, Directors, President

and Chief Executive Officer (The President) and Chief of Financial Officer (CFO) attend the meeting to allow

shareholders to express their views and ask questions about relevant matters to the meeting. During the past 4

years (2007 - 2010), the entire Board attended the meeting to allow shareholders to ask questions in an adequate

fashion, which however did not delay the meeting. In addition, Q&A sessions, resolutions adopted at the meeting and

votes received at each agenda were properly recorded in writing in the Company’s minutes of meeting and posted at

the Company’s website within 14 days from the shareholders’ meeting date.

064 Back

Aside from the Board’s responsibilities to shareholders as mentioned above, the Board also formulates a

Corporate Social Responsibility policy, which includes responsibilities to shareholders as follows:

Responsibilities to Shareholders 1. To manage the Company in a way that will turn it into a quality corporation committed to integrity while

creating sustainable strength and growth for shareholders in the long run.

2. To perform our job with thorough care and competency as a business may do under the same situation.

3. To perform our duty with integrity and to fairly treat both major and minor shareholders for the benefit of all

relevant parties.

4. To manage the Company’s properties in a manner that avoids their depreciation.

5. To report the Company’s status and operation results regularly, accurately and completely based on existing

facts.

6. To prevent the Company’s confidential information from being improperly disclosed to the third party.

7. To avoid doing anything that may lead to a conflict of interest against the Company without any advanced

notice.

8. To respect the rights and to equally treat all shareholders, whether they are executive or non-executive

shareholders, and foreign shareholders.

Responsibilities to Investor Relation The Erawan Group Plc. sets up the Investor Relations (IR) Department as a center to provide complete

company information to retail and institutional investors, shareholders, analysts and the public sector. Contacts can

be made directly at the Company’s office or visit us at www.TheErawan.com. Inquiries can also be made through

[email protected].

We conduct an Investor Relations Survey to gauge satisfaction in relation to our information disclosure at least

once a year. In 2010, we conducted the survey by distributing questionnaires to analysts at the Quarterly Meeting

held in November 2010, and also the last meeting of the year. All respondents were within a target group. 66 percent

of the respondents had monitored our information for no less than 3 years. 91 percent of the respondents said

they were satisfied with the information. In addition, we were also awarded “IR Excellence” among Group 1 listed

companies in the SET with market capitalization of not exceeding Baht 10 billion.

Responsibility of the right to access information of stakeholders We give all stakeholders an access to information. We also determine guidelines and practices for our executive

officers and staff to encourage their fair and equal interactions with all stakeholders. We also allow stakeholders to

directly contact the Board, the Audit Committee and the Nominating and Corporate Governance Committee for their

valuable suggestions that will not only benefit but also add more values to our management at our office, No. 2,

Ploenchit Center Building, 6th Floor, Sukhumvit Road, Klongtoey District, Bangkok; or at the Office of Corporate

Governance, email: [email protected]. All information is treated confidential and will be directly forwarded to the

Board.


065


Back

Responsibilities to Employees 1. To determine an appropriate structure of remunerations in line with market rates, staff’s competency and

responsibilities and their work performances through three levels of strategic assessments; namely,

corporate strategy, department strategy and division strategy. The Competency Skill Behavior Assessment

will be carried out in a 360-degree manner where supervisor will assess supervisees and vice versa and

where everyone will have a self-evaluation at all levels.

2. To provide appropriate welfare and other benefits such as accident insurance to staff and executives

working out of the office, health insurance and allowances for healthcare services as an out-patient, annual

health check-up and coffee & tea corner for staff.

3. To ensure staff’s understanding about their professional roles and responsibilities as well as their career

goals, to provide an opportunity for staff to grow professionally and to acknowledge and recognize staff’s work.

4. Award and punishment will be conducted based on the concept of right and wrong and with integrity.

5. To ensure workplace safety, health and sanitation.

6. To have a clear and efficient working system that allows staff to exercise their knowledge and competency

while supporting their knowledge enhancement and recognizing their participation role.

7. To promote the Code of Conduct to staff to help them duly understand and fully comply with the Code.

8. To comply with all the rules and regulations relating to labor laws and staff welfare.

9. To avoid action considered unfair and illegitimate that may affect staff’s advancement and job security while

respecting an individual’s rights.

Responsibilities to Customers 1. To set up a pricing policy considered fair and appropriate.

2. To treat all business deals equally without treating anyone more favorably where every deal is considered

conducted on an arm’s length basis.

3. To procure and improve the procurement process considered appropriate and meeting business conditions.

4. To execute a fair contract with customers (without depriving a customer of his benefits).

5. To disclose related and beneficial information accurately, completely and in time without any distortion.

6. To keep customer’s confidential information secret as if it is the Company’s own information and not using it

for the Company’s own benefit.

7. Not demanding, receiving from or not giving any illicit profit to customers.

Responsibilities to Suppliers and Creditors 1. To offer a fair competition environment where the procurement and hiring process of goods and services is

carried out properly, transparently and efficiently. This will include finalizing price negotiations, making

quotations, bidding methods, special methods and procurement methods for government agencies and

state enterprises. Questionnaire will be regularly issued to ask for opinions about the Company’s bid

participation in order to regularly improve its procurement and hiring process of goods and services.


066 Back

2. Avoid specify a particular product or choosing a particular product intentionally unless otherwise there is an

enough reason to do so. In case of change of products or specifications of the product, suppliers must be

informed. If necessary, a new price quotation must be submitted. An original supplier must be given an

opportunity to equally offer his quotation.

3. Choose a quality supplier who is really interested in doing the job. Avoid inviting suppliers just to have

enough participating suppliers as stated in a regulation. All bidders are to receive the same written details,

information and conditions. If notified verbally, they shall receive a written confirmation later.

4. Executives or staff involving in the procurement or hiring process must disclose information and/or their

personal relationship as well as that of their spouses or closed relatives or a personal relationship with a

particular bidder that may directly result in an opaqueness of their job. They shall also exercise their

responsibility by not attending a decision-making process when a particular supplier is chosen.

5. Not demanding and receiving gifts, favors or treats unless otherwise on appropriate occasions; refrain from

having a special relationship with suppliers so much so that others may believe it may lead to an unfair

treatment especially if it makes other suppliers misunderstand, refuse to participate in quoting prices or

spread ill words that damages the Company’s reputation.

6. To prepare a fair contract and to comply with an agreement executed with suppliers and creditors. In case

the Company is unable to comply with its contract, negotiate with suppliers/creditors without delay to find a

solution and to prevent further damage.

7. To refrain from doing anything that will prevent suppliers from paying tax to the state.

8. To disclose related and beneficial information accurately, completely and in time without distortion.

Responsibilities to Social and Environment

The Erawan formulates a clear-cut policy for social, community and environmental causes. It plans to implement

“the Erawan for the Society and the Environment” project, to which the Board has already approved to allocate 0.5

percent of its annual net profit as a social contribution. Of the entire budget, 50 percent will be spent for the benefits

of communities closed to the Company’s properties whereas the other 50 percent will be spent for the benefit of the

society in general.


067


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Internal Control The Erawan Group Public Company Limited

In 2009, the Board of Directors convened nine times at which the Audit Committee attended every time to give opinions about an adequacy and soundness of the internal control system. The Audit Committee summarized and reported internal audit activities to the Board of Directors on February 22, 2011 and the Board of Directors expressed the same opinions as the Audit Committee in this matter, which can be summarized as follows:

1. Internal Control System and Internal Auditing The Audit Committee has direct responsibilities to supervise the Company’s internal control system in every

aspect, whether it is finance and accounting, legal compliance and compliance to relevant rules and regulations. The Audit Committee formulates auditing mechanisms to ensure effective balance of power. There is also the Internal Audit Department to audit performances of all departments based on a risk-based auditing plan and to offer advice on how to set up a good internal control system.

The Audit Committee has duties to review auditing plans; to control and supervise the Internal Auditing Department’s independence; to approve appointment, transfer and termination of the Internal Auditing Department’s Supervisor and to ensure that the Internal Auditing Department remains independent. The Committee must also make sure that the Department can perform its auditing functions and balance the existing power according to the prevailing standards. The Department is to directly report its auditing work to the Audit Committee at least once each quarter to ensure that the Company’s internal control and internal auditing work is conducted in a thorough manner and will not damage shareholders.

2. Protection of Information

One of our priorities is focused at the use of our internal information and the prevention of our directors and executives from using internal information for their benefit or the so-called abusing self-dealing. This applies specifically to internal information not yet disclosed to the public or information that may affect our corporate strategy, business, trade negotiations and share prices, which, if abused, not only means that our shareholders are taken advantage of but it can damage shareholders in general. That’s why we have set our Executives Ethic Standards as a practice with heavy penalties in case of violations or intended violation of the 10 practices stated in the Code of Conduct under the topic of “Executives Ethical Standards”

We also allow different levels of staff to get access to different types of internal information based mainly on their responsibilities and duties. Disciplinary actions are stated in our Work Regulations under the topic of “Disciplinary Actions and Penalties.” For example, Clause 3.2 Re: Disciplines with regard to confidentiality and corporate profits prohibits employees to “seek inappropriate benefit from the Company or others relating to the Company. Employees are prohibited to conduct personal business or to work for others in an identical or similar business as the Company’s although the work may be performed outside the Company’s office hours”. With regard to disciplinary actions and punishment, the Company will normally appoint a disciplinary action committee to conduct an investigation and to ensure fairness to accused staff.

068 Back

3. Conflict of interest

The Erawan requires an approval from either the Audit Committee or the Board, as the case may be, when

conducting a transaction that may cause a possible conflict of interest. In addition, details of transactions with

possible conflict of interest during the past year and their values are disclosed while explanations and reasons for

the transactions are clearly stated in the Annual Report. The Erawan requires its executive directors involving in

the transaction to disclose the information and/or types of relationship not only of his own, but also of his spouse,

closed relatives as well as personal relationship with any bidder for transparency purpose to the Office of

the Corporate Governance. In addition, director shall abstain from voting and/or not be part of the decision-making

process.

Connected transactions are shown in the Notes to Financial Statements and Connected Transactions Table.

All transactions were reasonable and were considered normal transactions. They were conducted for the company’s

ultimate benefit. Connected transaction had already been reviewed by the Audit Committee and/or the Board on an

arm’s length basis that they were in compliance with our requirements and rules and regulations of the SEC and

the SET and that they were not against accounting standards Re: Disclosure of information in relation to connected

persons or transactions.

In 2010 the Erawan has the other connected transaction in addition to the items mentioned above as follows.

All transactions were reasonable and were normal transactions.

Mitr Phol Sugar Group of Companies

Revenue from Hotel Operation Baht 3,778,067.20

Receivables at end of period Baht 586,400.00

Banpu Plc. Group of Companies

Revenue from Hotel Operation Baht 924,217.17


Pacific World (Thailand) Ltd.

Revenue from Hotel Operation Baht 614,375.95


Internal Control

069


Back

1.

Mitr

Pho

l Sug

ar G

roup

of C

ompa

nies

Ag

reem

ent t

o re

nt

A m

ajor

tena

nt, t

he a

gree

d pr

ice

Type

of b

usin

ess:

sug

ar fa

ctor

ies

Ploe

nchi

t Cen

ter’s

spa

ce,

was

not

low

er th

an th

e av

erag

e

Nat

ure

of re

latio

nshi

p:

3-ye

ar le

ase

agre

emen

t.

pr

ice

agre

ed w

ith o

ther

tena

nts

•

Mr.

Vito

on V

ongk

usol

kit a

nd

• Re

ntal

and

ser

vice

s in

com

e 38

,880

,207

.20

45

,131

,880

.54

base

d on

the

busi

ness

sta

ndar

ds.

Mr.

Cha

nin

Vong

kuso

lkit,

•

Rece

ivab

les

at e

nd o

f per

iod

596,

469.

30

1,20

9,19

2.21

the

Com

pany

’s d

irect

ors,

•

Paya

bles

of r

ent d

epos

its

9,03

6,94

8.83

9,

037,

920.

83

are

auth

oriz

ed

di

rect

or a

nd d

irect

or o

f

M

itr P

hol S

ugar

Co.

, Ltd

.

• Vo

ngku

solk

it G

roup

hol

ds

39.1

5 pe

rcen

t in

the

Com

pany

’s s

hare

s.

2.

Cha

i Tal

ay H

otel

Co.

, Ltd

. Ag

reem

ent t

o le

ase

offic

e sp

ace

Pr

ice

agre

ed w

as a

mar

ket p

rice

(Hya

tt R

egen

cy H

ua H

in H

otel

)

and

the

serv

ice

agre

emen

t

co

mpa

red

to s

pace

in n

earb

y

Type

of b

usin

ess:

hot

els

with

The

Era

wan

Hot

el

area

s an

d no

t low

er th

an th

e pr

ice

N

atur

e of

rela

tions

hip:

Pu

blic

Com

pany

Lim

ited

offe

red

to o

ther

tena

nts

or s

ervi

ce

•

Mrs

. Pan

ida

Thep

kanj

ana,

•

Rent

al a

nd s

ervi

ces

inco

me

2,82

6,31

5.31

2,

468,

884.

44

user

s co

mpa

red

to th

e st

anda

rd

dire

ctor

, is

a cl

osed

rela

tive

to

• Re

ceiv

able

s at

end

of p

erio

d 43

3,80

0.97

24

3,10

6.48

of

hot

el b

usin

ess.

M

rs. W

ansa

mor

n W

anna

met

hee

and

Khun

ying

Nat

thik

a W

atta

nave

kin,

ar

e au

thor

ized

dire

ctor

of

Cha

i Tal

ay C

o., L

td.

•

Wat

tana

veki

n G

roup

hol

ds

31.1

4 pe

rcen

t of t

he C

ompa

ny’s

sha

res.

Con

nect

ed tr

ansa

ctio

ns b

etw

een

busi

ness

es w

ith th

e fo

llow

ing

rela

tions

hips

wer

e ex

ecut

ed:

Pe

rson

/ent

ity w

ith p

ossi

ble

conf

lict o

f D

escr

iptio

n Tr

ansa

ctio

n va

lue

(Bah

t) Pr

icin

g po

licy

and

in

tere

st a

nd n

atur

e of

rela

tions

hip

20

09

2010

th

e Au

dit C

omm

ittee

’s o

pini

ons

Connected Transactions The Erawan Group Public Company Limited

Connected Transactions 070 Back

Nec

essi

ty a

nd S

ound

ness

of C

onne

cted

Tra

nsac

tions

In c

ase

the

Com

pany

sig

ns a

n ag

reem

ent o

r con

duct

s a

conn

ecte

d tra

nsac

tion

with

a s

ubsi

diar

y co

mpa

ny, a

ffilia

te, r

elat

ed c

ompa

ny a

nd/o

r the

third

par

ty, t

he E

raw

an w

ill co

nsid

er th

e ne

cess

ity a

nd s

ound

ness

of s

uch

cont

ract

bas

ed m

ainl

y on

the

Eraw

an’s

inte

rest

s.

Appr

oval

Mea

sure

s or

Pro

cedu

res

of C

onne

cted

Tra

nsac

tions

If th

e C

ompa

ny is

to e

xecu

te a

con

tract

or

if th

ere

is a

ny c

onne

cted

tran

sact

ion

betw

een

itsel

f and

its

subs

idia

ry, a

ffilia

te, r

elat

ed c

ompa

ny,

the

third

par

ty a

nd/o

r any

one

with

pos

sibl

e co

nflic

ts o

f int

eres

t, th

e Bo

ard

of D

irect

ors

requ

ires

the

Eraw

an fo

r the

pur

pose

of i

ts b

enef

its, t

o co

mpl

y

with

the

rul

es s

tate

d in

the

Sto

ck E

xcha

nge

of T

haila

nd’s

(SE

T) A

nnou

ncem

ent R

e: I

nfor

mat

ion

disc

losu

re a

nd p

ract

ices

of l

iste

d co

mpa

nies

in

conn

ecte

d tra

nsac

tions

. Mea

nwhi

le, p

rices

and

oth

er c

ondi

tions

sha

ll be

as

if th

e tra

nsac

tion

is a

t an

arm

’s le

ngth

whe

re d

irect

ors

or s

taff

havi

ng a

n

inte

rest

in s

uch

trans

actio

n m

ust n

ot p

artic

ipat

e in

any

app

rova

l pro

cess

.

Polic

y or

Out

look

for F

utur

e C

onne

cted

Tra

nsac

tions

-Non

e-

3.

Bual

uang

Sec

uriti

es P

ublic

Com

pany

Lim

ited

Agre

emen

t to

rent

Pr

ice

agre

ed w

as a

mar

ket p

rice

Type

of b

usin

ess:

Pl

oenc

hit C

ente

r’s s

pace

,

co

mpa

red

to s

pace

in n

earb

y

Oth

er fi

nanc

ial i

nter

med

iatio

n 3-

year

leas

e ag

reem

ent.

ar

eas

and

not l

ower

than

the

pric

e

Nat

ure

of re

latio

nshi

p:

• Re

ntal

and

ser

vice

s in

com

e 2,

099,

000.

86

2,15

3,75

7.60

of

fere

d to

oth

er te

nant

s ba

se o

f

• M

r. Sa

nser

n W

ongc

ha-u

m,

•

Rece

ivab

les

at e

nd o

f per

iod

17,5

28.2

1

19,3

50.9

5 th

e bu

sine

ss s

tand

ard.

In

depe

ntde

nt d

irect

or, i

s C

hairm

an o

f •

Paya

bles

of r

ent d

epos

its

497,

174.

40

497,

174.

40

the

Boar

d of

Bua

luan

g Se

curit

ies

Publ

ic C

ompa

ny L

imite

d

Pe

rson

/ent

ity w

ith p

ossi

ble

conf

lict o

f D

escr

iptio

n Tr

ansa

ctio

n va

lue

(Bah

t) Pr

icin

g po

licy

and

in

tere

st a

nd n

atur

e of

rela

tions

hip

20

09

2010

th

e Au

dit C

omm

ittee

’s o

pini

ons

Connected Transactions


071

Grand Hyatt Erawan Bangkok

APPENDICES

Back

To the Shareholders of The Erawan Group Public Company Limited

I have audited the accompanying consolidated and separate balance sheets as at 31 December 2010, and the

related statements of income, changes in equity and cash flows for the year then ended of The Erawan Group Public

Company Limited and its subsidiaries, and of The Erawan Group Public Company Limited, respectively.

The Company’s management is responsible for the correctness and completeness of information presented in these

financial statements. My responsibility is to express an opinion on these financial statements based on my audit.

The consolidated and separate financial statements of The Erawan Group Public Company Limited and its

subsidiaries, and of The Erawan Group Public Company Limited, respectively, for the year ended 31 December 2009

were audited by another auditor of the same firm whose report dated 23 February 2010 expressed an unqualified

opinion on those statements.

I conducted my audit 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 audit provides a reasonable basis for my opinion.

In my opinion, the consolidated and separate financial statements referred to above present fairly, in all material

respects, the financial positions as at 31 December 2010 and the results of operations and cash flows for the year

then ended of The Erawan Group Public Company Limited and its subsidiaries, and of The Erawan Group Public

Company Limited, respectively, in accordance with generally accepted accounting principles.

(Vannaporn Jongperadechanon) Certified Public Accountant

Registration No. 4098

KPMG Phoomchai Audit Ltd.

Bangkok

22 February 2011

072

Audit Report of Certified Public Accountant The Erawan Group Public Company Limited and its Subsidiaries

Back

073 Back

Audit Fee The Erawan Group Public Company Limited

In 2010, the audit fee paid to the external auditor of KPMG Phoomchai Audit Ltd. was Baht 3,780,000

(The Erawan Group Plc. Baht 2,300,000 and the Company’s subsidiary Bath 1,480,000). The Company did not pay

any non audit fee to the auditor, the auditor’s office, and person or company related to the auditor and the auditor’s

office. The fee was excluding the out of pocket expenses.

074 Back

Assets

Current assets

Cash and cash equivalents 5 220,384,384 277,488,552 93,907,272 201,834,559

Trade accounts receivable 4, 6 148,046,349 148,495,188 79,207,822 79,573,655

Inventories 7 72,898,210 78,247,461 28,045,046 33,792,403

Advances-construction 15,023,839 34,617,512 13,905,283 14,772,675

Value added tax refundable 50,625,364 198,001,782 - 78,120,621

Other current assets 4, 8 95,183,758 88,915,926 15,882,989 20,391,741

Total current assets 602,161,904 825,766,421 230,948,412 428,485,654

Non-current assets

Investments in subsidiaries 9 - - 2,299,159,881 2,299,159,881

Investment in associate 10 338,271 338,271 338,271 338,271

Investments in other related parties 11, 21 2,571,029 3,305,168 1,975,973 2,525,360

Long-term loans to subsidiaries 4 - - 1,080,774,007 745,745,622

Property, plant and equipment 12, 16 10,255,825,384 10,406,634,932 6,242,901,679 6,459,617,393

Leasehold rights for land and buildings 13, 16 1,793,652,235 1,712,926,169 963,996,368 857,138,383

Intangible assets 14 60,833,747 74,139,901 39,744,993 50,285,579

Deposits for lease of land, building

and equipment 204,341,948 231,340,229 202,314,317 228,221,973

Other non-current assets 15 30,702,907 34,365,743 28,655,926 30,413,472

Total non-current assets 12,348,265,521 12,463,050,413 10,859,861,415 10,673,445,934

Total assets 12,950,427,425 13,288,816,834 11,090,809,827 11,101,931,588

Consolidated Separate financial statements financial statements

Note 2010 2009 2010 2009

(Unit: in Baht)

Balance sheets The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2010 and 2009

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

075 Back

Liabilities and equity

Current liabilities

Short-term loans from financial institutions 16 195,700,000 207,200,000 195,700,000 152,200,000

Trade accounts payable 4, 17 211,897,440 230,684,342 90,083,357 75,101,006

Accounts payable - construction 40,952,783 100,481,328 20,235,144 59,303,424

Current portion of finance lease liabilities 16 - 25,701 - 25,701

Current portion of hire purchase payable 16 819,440 528,658 819,440 528,658

Current portion of long-term loans 16 573,750,000 697,250,000 403,750,000 371,000,000

Other current liabilities 18 348,220,977 366,065,534 151,375,348 151,988,590

Total current liabilities 1,371,340,640 1,602,235,563 861,963,289 810,147,379

Non-current liabilities

Hire purchase payable 16 621,197 567,618 621,197 567,618

Long-term loans from a subsidiary 4, 16 - - 38,860,995 55,131,790

Long-term loans from financial institutions 16 7,829,517,051 7,665,467,051 5,314,750,000 5,370,900,000

Accounts payable for land leasehold rights 360,000,000 360,000,000 360,000,000 360,000,000

Deposits from lessees 100,677,747 103,452,269 99,232,325 102,033,939

Deferred income 19 15,320,798 18,135,126 15,320,798 18,135,126

Total non-current liabilities 8,306,136,793 8,147,622,064 5,828,785,315 5,906,768,473

Total liabilities 9,677,477,433 9,749,857,627 6,690,748,604 6,716,915,852


Note 2010 2009 2010 2009

(Unit: in Baht)

Balance sheets (continued) The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2010 and 2009


076 Back

Liabilities and equity

Equity

Share capital 20

Authorised share capital 2,244,779,001 2,244,779,001 2,244,779,001 2,244,779,001

Issued and paid-up share capital 2,244,779,001 2,244,779,001 2,244,779,001 2,244,779,001

Premium on shares 21 358,142,539 358,142,539 358,142,539 358,142,539

Unrealised deficits of fair value changes

on investments (596,603) (191,098) (405,036) (108,143)

Retained earnings

Appropriated

Legal reserve 21 79,608,000 78,840,000 67,658,000 66,890,000

Unappropriated 449,041,861 724,826,403 1,729,886,719 1,715,312,339

Total equity attributable to equity

holders of the Company 3,130,974,798 3,406,396,845 4,400,061,223 4,385,015,736

Minority interests 141,975,194 132,562,362 - -

Total equity 3,272,949,992 3,538,959,207 4,400,061,223 4,385,015,736

Total liabilities and equity 12,950,427,425 13,288,816,834 11,090,809,827 11,101,931,588


Note 2010 2009 2010 2009

(Unit: in Baht)

Balance sheets (continued) The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2010 and 2009


077 Back

Income

Revenues from hotel operations 2,929,914,482 2,748,087,145 1,545,898,978 1,254,911,502

Rental of units in buildings and related

service income 4 391,333,097 400,945,926 384,011,760 388,885,008

Net foreign exchange gain 3,573,512 3,864,462 1,232,838 2,065,965

Dividend income 4 982,813 383,911 18,085,498 287,308

Interest income 4 411,737 357,904 39,065,891 28,295,440

Other income 4, 23 38,112,615 37,983,704 35,810,011 33,168,730

Total income 3,364,328,256 3,191,623,052 2,024,104,976 1,707,613,953

Expenses

Cost of hotel operations 1,488,413,277 1,336,282,137 705,452,776 562,043,929

Cost of rental of units in buildings and

related service 4 154,922,380 154,618,598 159,636,076 159,974,511

Depreciation and amortisation 683,504,716 627,780,673 404,735,841 353,932,033

Selling expenses 24 214,081,725 206,708,919 118,441,023 94,107,251

Administrative expenses 25 666,927,747 670,783,982 341,957,951 338,392,235

Management benefit expenses 26 35,153,941 40,238,236 33,353,941 38,333,236

Loss from decline in value of investment

in subsidiary 9 - - - 804,524

Total expenses 3,243,003,786 3,036,412,545 1,763,577,608 1,547,587,719

Profit before finance costs and

income tax expense 121,324,470 155,210,507 260,527,368 160,026,234

Finance costs 4, 28 (360,761,571) (306,846,197) (245,184,988) (189,577,331)

Profit (loss) before income tax expense (239,437,101) (151,635,690) 15,342,380 (29,551,097)

Income tax expense 29 (19,866,597) (45,656,292) - -

Profit (loss) for the year (259,303,698) (197,291,982) 15,342,380 (29,551,097)

Attributable to:

Equity holders of the Company (275,016,542) (229,410,772) 15,342,380 (29,551,097)

Minority interests 15,712,844 32,118,790 - -


Basic earnings profit (loss) per share 30 (0.12) (0.10) 0.01 (0.01)


Note 2010 2009 2010 2009

(Unit: in Baht)

Statements of income The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009


078 Back

(Uni

t: in

Bah

t)

Bala

nce

at 1

Jan

uary

200

9

2,24

4,77

9,00

1 35

8,14

2,53

9 (4

76,6

18)

79,3

00,0

00

976,

224,

811

3,65

7,96

9,73

3 10

0,44

3,57

2 3,

758,

413,

305

Unr

ealis

ed s

urpl

uses

of f

air

va

lue

chan

ges

on in

vest

men

t

- -

285,

520

- -

285,

520

-

285,

520

Profi

t (lo

ss) f

or th

e ye

ar

-

- -

- (2

29,4

10,7

72)

(229

,410

,772

) 32

,118

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(1

97,2

91,9

82)

Div

iden

d 31

-

- -

- (2

2,44

7,63

6)

(22,

447,

636)

-

(22,

447,

636)

Tran

sfer

lega

l res

erve

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sub

sidi

ary

to

reta

ined

ear

ning

s - u

napp

ropr

iate

d 21

-

- -

(460

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) 46

0,00

0 -

- -

Bala

nces

at 3

1 D

ecem

ber 2

009

an

d 1

Janu

ary

2010

2,24

4,77

9,00

1 35

8,14

2,53

9 (1

91,0

98)

78,8

40,0

00

724,

826,

403

3,40

6,39

6,84

5 13

2,56

2,36

2 3,

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ealis

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sts

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ir

va

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chan

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on in

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men

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- (4

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05)

- (4

05,5

05)

Profi

t (lo

ss) f

or th

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ar

-

- -

- (2

75,0

16,5

42)

(275

,016

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) 15

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(2

59,3

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98)

Div

iden

d 31

-

- -

- -

- (6

,300

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Lega

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-

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768,

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- -

Bala

nce

at 3

1 D

ecem

ber 2

010

2,

244,

779,

001

358,

142,

539

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,608

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44

9,04

1,86

1 3,

130,

974,

798

141,

975,

194

3,27

2,94

9,99

2

Consolidatedfinancialstatements

N

ote

Reta

ined

ear

ning

sIs

sued

and

paid

-up

shar

e ca

pita

l

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ium

on

shar

es

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on in

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men

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al re

serv

e Un

appr

opria

ted

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l equ

ity

attri

buta

ble

to e

quity

hold

ers

of

the

Com

pany

Min

ority

inte

rest

sTo

tal e

quity

The

acco

mpa

nyin

g no

tes

are

an in

tegr

al p

art o

f the

se fi

nanc

ial s

tate

men

ts.

Stat

emen

ts o

f cha

nges

in e

quity

Th

e Er

awan

Gro

up P

ublic

Com

pany

Lim

ited

and

its S

ubsi

diar

ies

For t

he y

ears

end

ed 3

1 D

ecem

ber 2

010

and

2009

079 Back

Stat

emen

ts o

f cha

nges

in e

quity

(Con

tinue

d)

The

Eraw

an G

roup

Pub

lic C

ompa

ny L

imite

d an

d its

Sub

sidi

arie

s Fo

r the

yea

rs e

nded

31

Dec

embe

r 201

0 an

d 20

09

(Uni

t: in

Bah

t)

Bala

nce

at 1

Jan

uary

200

9

2,24

4,77

9,00

1 35

8,14

2,53

9 (3

21,9

01)

66,8

90,0

00

1,76

7,31

1,07

2 4,

436,

800,

711

Unr

ealis

ed s

urpl

uses

of f

air

va

lue

chan

ges

on in

vest

men

t

- -

213,

758

- -

213,

758

Loss

for t

he y

ear

-

- -

- (2

9,55

1,09

7)

(29,

551,

097)

Div

iden

d 31

-

- -

- (2

2,44

7,63

6)

(22,

447,

636)

Bala

nces

at 3

1 D

ecem

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009

an

d 1

Janu

ary

2010

2,24

4,77

9,00

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080 Back

Cashflowsfromoperatingactivities


Adjustments for

Depreciation and amortisation 683,504,716 627,780,673 404,735,841 353,932,033

Doubtful debts expense (reversal) 717,106 851,763 (914,539) 1,314,166

Loss from decline in value of

investment in subsidiary - - - 804,524

Unrealised gain from increase in value of

investment in related company (18,638) - - -

Allowance for non-refundable withholding tax

deducted at source 3,794,537 1,496,186 3,302,220 1,256,544

Transfer rental deposits and deferred

income to income (5,343,191) (3,140,513) (5,343,191) (3,140,513)

Transfer advance received from

customers to income (1,368,177) (680,661) (1,368,177) (680,661)

Dividend income (982,813) (383,911) (18,085,498) (287,308)

Interest income (411,737) (357,904) (39,065,891) (28,295,440)

Gain on disposal of property, plant and equipment,

intangible assets and leasehold rights (286,337) (14,870,147) (200,787) (12,815,570)

Finance costs 360,761,571 306,846,197 245,184,988 189,577,331

Income tax expense 19,866,597 45,656,292 - -

800,929,936 765,905,993 603,587,346 472,114,009


2010 2009 2010 2009

(Unit: in Baht)

Statements of cash flows The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009


081 Back

Changes in operating assets and liabilities

Trade accounts receivable (4,284,401) (48,520,383) (2,735,763) (29,973,752)

Inventories 5,349,251 (20,197,890) 5,747,357 (10,565,192)

Advances - construction 19,593,673 27,619,480 867,392 43,216,220

Value added tax refundable 147,376,418 18,157,685 78,120,621 14,728,825

Other current assets (6,267,833) (27,932,924) 1,952,884 (8,328,428)

Deposits for lease of land, building, and equipment 26,998,281 (26,461,638) 25,907,656 (24,709,101)

Other non-current assets 15,790,124 9,921,545 12,906,147 9,396,549

Trade accounts payable (18,786,899) 95,768,997 14,982,351 16,746,326

Other current liabilities (3,245,963) 9,964,022 344,593 16,017,955

Deposits from lessees 3,770,476 3,589,521 3,743,384 3,762,739

987,223,063 807,814,408 745,423,968 502,406,150

Income tax paid (52,837,616) (75,722,398) (14,450,821) (14,250,151)

Netcashprovidedbyoperatingactivities 934,385,447 732,092,010 730,973,147 488,155,999

Cashflowsfrominvestingactivities

Short-term loans to a subsidiary - - (184,861,134) (88,489,462)

Proceeds from short-term loans to a subsidiary - - 184,861,134 88,489,462

Long-term loans to subsidiaries - - (334,017,866) (228,981,950)

Investments in other related parties 347,271 (4,720) 252,494 -

Cash paid from the return of share capital

of a subsidiary - - - (126,348)

Acquisition of property, plant and equipment (488,502,754) (1,348,767,100) (170,188,057) (1,066,443,492)

Acquisition of leasehold rights for land and buildings (156,279,790) (3,879,077) (150,000,000) -

Acquisition of intangible assets (8,544,905) (20,310,177) (3,511,734) (19,326,732)

Proceeds from sales of property, plant and

equipment, and intangible assets 3,850,275 27,789,366 6,299,303 24,711,907

Dividend received 982,812 383,911 18,085,498 287,308

Interest received 411,737 357,904 38,055,372 28,322,562

Netcashusedininvestingactivities (647,735,354) (1,344,429,893) (595,024,990) (1,261,556,745)


2010 2009 2010 2009

(Unit: in Baht)

Statements of cash flows (continued) The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009


Cashflowsfromfinancingactivities

Short-term loans from financial institutions (11,500,000) (822,850,000) 43,500,000 (745,350,000)

Finance lease payments (1,130,340) (27,942,746) (1,130,340) (27,942,746)

Payment for hire purchase payable - (515,574) - (515,574)

Short-term loans from a subsidiary - - 11,027,304 -

Repayment of short-term loans from a subsidary - - (11,027,304) -

Long-term loans from a subsidiary - - 31,646,562 72,101,952

Repayment of long-term loans from a subsidary - - (47,917,357) (41,715,114)

Long-term loans from financial institutions 209,200,000 1,687,300,000 139,000,000 1,648,800,000

Repayment of long-term loans from

financial institutions (168,650,000) - (162,400,000) -

Finance costs paid (365,373,909) (339,799,013) (246,574,309) (222,360,167)

Dividend paid - (22,447,636) - (22,447,636)

Dividend paid to minority interests (6,300,012) - - -

Netcashprovidedby(usedin)financingactivities (343,754,261) 473,745,031 (243,875,444) 660,570,715

Netdecreaseincashandcashequivalents (57,104,168) (138,592,852) (107,927,287) (112,830,031)

Cash and cash equivalents at

beginning of year 5 277,488,552 416,081,404 201,834,559 314,664,590

Cashandcashequivalentsatendofyear 5 220,384,384 277,488,552 93,907,272 201,834,559

Non-cash transactions

Offsetting rental deposit received from

lessees with accounts receivable 4,016,134 1,592,109 4,016,134 1,592,109

Vehicles purchased under hire purchase contract 1,449,000 - 1,449,000 -

Acquisition of plant and equipment,

intangible assets and leasehold rights for

land and buildings for which payment

has yet to be made 38,086,089 93,925,423 18,911,350 55,423,761


Note 2010 2009 2010 2009

(Unit: in Baht)

Statements of cash flows (continued) The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009


082 Back

83 Notes to the financial statements


Back

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Company’s Board of Directors on 22 February 2011.

1. General information

The Erawan Group Public Company Limited, the “Company”, is incorporated in Thailand and has its registered

office at 2 Sukhumvit Road, Klongtoey Subdistrict, Klongtoey District, Bangkok. The Company has 9 branches in

Bangkok, Chon Buri, Phuket and Surat Thani.

The Company was listed on the Stock Exchange of Thailand in June 1994.

The principal businesses of the Company are engaged as a holding company with investments in various

companies, engaged in building rental business, and in hotel business. Details of the Company’s subsidiaries and

associate as at 31 December 2010 and 2009 were as follows:

Name of the entity Type of business

Countryof Ownershipinterest(%)

incorporation 2010 2009

Direct subsidiaries

Erawan Hotel Public Company Limited Hotel Thailand 72.59 72.59

Erawan Chaophraya Company Limited Hotel Thailand 95.77 95.77

Erawan Rajdamri Company Limited Hotel Thailand 99.99 99.99

Erawan Phuket Company Limited Hotel Thailand 99.99 99.99

Erawan Samui Company Limited Hotel Thailand 99.99 99.99

Erawan Naka Company Limited Land owner Thailand 99.99 99.99

The Reserve Company Limited Real estate Thailand 99.99 99.99

development

Indirect subsidiaries

Erawan Hotel Public Company Limited Hotel Thailand 1.05 1.05

Erawan Chaophraya Company Limited Hotel Thailand 4.22 4.22

Associate

Rajprasong Development Service Thailand 48.00 48.00

Company Limited

Notes to the financial statements The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009

083

084 Notes to the financial statements Back

2. Basis of preparation of the financial statements

The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the Thai language.

The financial statements are prepared and presented in Thai Baht. All financial information presented in

Thai Baht has been rounded in the notes to the financial statements to the nearest thousand unless otherwise stated. They are prepared on the historical cost basis except as stated in the accounting policies.

The financial statements are prepared in accordance with Thai Financial Reporting Standards (“TFRS”);

guidelines promulgated by the Federation of Accounting Professions (“FAP”); applicable rules and regulations of the Thai Securities and Exchange Commission; and with generally accepted accounting principles in Thailand.

During 2010, the FAP announced the re-numbering of the following TFRS.

FormerNo. RevisedNo. Topic

TAS 11 TAS 101 Doubtful Account and Bad Debts TAS 26 TAS 102 Income Recognition For Real Estate Business TAS 27 TAS 103 Disclosures in the Financial Statements of Banks and Similar Financial Institutions TAS 34 TAS 104 Accounting for Troubled Debt Restructuring TAS 40 TAS 105 Accounting for Investment in Debt and Equity Securities TAS 42 TAS 106 Accounting For Investment Companies TAS 48 TAS 107 Financial Instruments Disclosure and Presentation

The Group has adopted the revised Framework for the Preparation and Presentation of Financial Statements

(revised 2009), which was issued by the FAP during 2010 and effective on 26 May 2010. The adoption of the revised framework does not have any material impact on the consolidated or separate financial statements.

The FAP has issued during 2010 a number of new and revised TFRS which are not currently effective and have

not been adopted in the preparation of these financial statements. These new and revised standards and interpretations are disclosed in note 37.

The preparation of financial statements in conformity with TFRS requires management to make judgements,

estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates

are recognised in the period in which estimates are revised and in any future periods affected.



Back

Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statement is included in the following notes:

Note 35 Contingent liabilities Note 16 Lease classification

3. Significant accounting policies

(a) Basis of consolidation

The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interests in associate.

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly

or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are the same with the policies adopted by the Group.

Associate

Associate is the entity in which the Group has significant influence, but not control, over the financial and

operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. The consolidated financial statements include the Group’s share of the income, expenses and equity movements of associate after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group

transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associate are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.


(b) Foreign currency transactions

Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the

dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to

Thai Baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are

recognised in the statement of income.

(c) Cashandcashequivalents

Cash and cash equivalents comprise cash balances, call deposits and highly liquid short-term

investments.

(d) Tradeandotheraccountsreceivable

Trade and other accounts receivable are stated at their invoice value less allowance for doubtful accounts.

The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future

expectations of customer payments. Bad debts are written off when incurred.

(e) Inventories

Inventories are stated at the lower of cost (the weighted average method) and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated

costs to complete and to make the sale.

(f) Investments

Investments in subsidiaries and associate

Investments in subsidiaries and associate in the separate financial statements of the Company are

accounted for using the cost method.

Investment in associate in the consolidated financial statements is accounted for using the equity method.



Back

Investments in equity securities

Marketable equity securities, other than those securities held for trading or intended to be held to maturity, are classified as being available-for-sale investments. Available-for-sale investments are, subsequent to initial recognition, stated at fair value, and changes therein, other than impairment losses on available-for-sale monetary items, are recognised directly in equity. Impairment losses are recognised in the statement of income. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in the statement of income. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the statement of income.

(g) Property, plant and equipment

Owned assets

Lands are stated at cost. Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Leased assets

Leases in terms of which the Group substantially assumes all the risk and rewards of ownership are

classified as finance leases. Equipment and vehicles acquired by way of finance leases is capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of income.

Depreciation

Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives

of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

Building and improvements 5 - 40 years Furniture, fixtures and equipment 5 - 10 years Vehicles 5 years

See in Note 33 to the financial statements. No depreciation is provided on freehold land or assets under construction. Operating equipment consists of linen, crockery, glass, silver and kitchen utensils purchased to meet the

normal requirements of the hotel operations have been regarded as a base stock and subsequent purchases are expended when incurred.


(h) Leasehold rights

Leasehold rights are stated at cost less accumulated amortisation and impairment losses.

Amortisation

Leasehold rights are amortised on a straight-line basis over the terms of the leases. (i) Intangible assets

Intangible assets that are acquired by the Group, which have finite useful lives, are stated at cost less accumulated amortisation and impairment losses. The estimated useful lives are as follows:

Computer softwares 5 - 10 years

(j) Impairment

The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its

recoverable amount. The impairment loss is recognised in the statement of income. When a decline in the fair value of an available-for-sale financial asset has been recognised directly in

equity and there is objective evidence that the value of the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the statement of income even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in the statement of income is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in the statement of income.

Calculation of recoverable amount

The recoverable amount of available-for-sale financial assets is calculated by reference to the fair value. The recoverable amount of a non-financial asset is the greater of the asset’s value in use and fair value less

cost to sell. In assessing 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. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.



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Reversals of impairment

An impairment loss in respect of a financial asset is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

Impairment losses recognised in prior periods in respect of other non-financial assets are assessed at

each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(k) Trade, construction and other accounts payable

Trade, construction and other accounts payable are stated at cost. (l) Provisions

A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(m) Revenue

Revenue excludes value added taxes and is arrived at after deduction of trade discounts. Revenue from hotel operations Hotel revenues from room, food and beverages and other services are recognised when the rooms are

occupied, food and beverages are sold and the services are rendered.

Rental and services income

Rental and services income from units in office buildings and shopping center are recognised in the statement of income on an accrual basis.

Interest income and dividend income


Interest income is recognised in the statement of income as it accrues. Dividend income is recognised in the statement of income on the date the Group’s right to receive payments is established.

(n) Deferred income

The Company recognises deferred rental income as income on a straight-line basis over the terms of the leases.

(o) Expenses

Operating leases

Payments made under operating leases are recognised in the statement of income on a systematic basis over the term of the lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease payments made.

Finance costs

Interest expenses and similar costs are charged to the statement of income in the period in which they are

incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale. The interest component of finance lease payments is recognised in the statement of income using the effective interest rate method.

(p) Income tax

Income tax on the profit or loss for the year comprises current tax. Current is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable interest of previous years.

4. Related party transactions and balances

Related parties are those parties linked to the Group and the Company as shareholders or by common shareholders or directors. Transactions with related parties are conducted at prices based on market prices or, where no market price exists, at contractually agreed prices.

Relationships with related parties that control or jointly control the Company or are being controlled or jointly-

controlled by the Company or have transactions with the Group were as follows:



Back

Name of entities Country of incorporation/nationality Nature of relationships

Erawan Hotel Public Company Limited Thailand Subsidiary, 72.59% direct shareholding

Erawan Chaophraya Company Limited Thailand Subsidiary, 95.77% direct shareholding

Erawan Rajdamri Company Limited Thailand Subsidiary, 99.99% direct shareholding

Erawan Phuket Company Limited Thailand Subsidiary, 99.99% direct shareholding

Erawan Samui Company Limited Thailand Subsidiary, 99.99% direct shareholding

Erawan Naka Company Limited Thailand Subsidiary, 99.99% direct shareholding

The Reserve Company Limited Thailand Subsidiary, 99.99% direct shareholding

Rajprasong Development Co., Ltd. Thailand Associate, 48.00% direct shareholding,

some common directors

Rajprasong Square Co., Ltd. Thailand Related company, 23.29%

direct shareholding

Chai Talay Hotel Co., Ltd. Thailand Related company, director is closed relative

to a Company’s director

Panel Plus Co., Ltd. Thailand Related company, some common directors

Petro Green Co., Ltd. Thailand Related company, some common directors

Mitr Phol Sugar Co., Ltd. Thailand Related company, some common directors

Phu Khieo Bio Energy Co., Ltd. Thailand Related company, some common directors

Banpu Public Co., Ltd. Thailand Related company, some common directors

The Syndicate of Thai Hotels &

Tourists Enterprises Ltd. Thailand Related company, some common directors

IAG Insurance (Thailand) Ltd. Thailand Related company, some common directors

Pacific World (Thailand) Ltd. Thailand Related company, some common directors

Eastern Sugar and Cane Co., Ltd. Thailand Related company, some common directors

The pricing policies for particular types of transactions are explained further below:

Transactions Pricing policies

Subsidiaries

Interest income At the rate of 4.15% - 4.53% per annum

(2009: at the rate of 4.15% - 5.05% per annum)

Dividend income According to the shareholders’ approval

Utilities income Contractually agreed prices

Rental and service expenses Baht 17 million per annum

Interest expenses At the rate of 4.15% - 4.53% per annum

(2009: at the rate of 4.15% - 5.05% per annum)


Transactions Pricing policies

Associate

Management fee At cost - allocated in proportion to shareholding

Other related parties

Rental and services income Baht 308 - 583 per square meter per month (2009: Baht 300 - 566

per square meter per month) depending on location

Utilities income Contractually agreed prices

Other service income Fair price under the best conditions

Land rental Baht 11 million per annum

Insurance expenses Fair price under the best conditions

Significant transactions for the years ended 31 December 2010 and 2009 with related parties were as follows:

(Unit: in Thousand Baht)

Consolidated Separate

financial statements financial statements

Note 2010 2009 2010 2009

Subsidiaries

Interest income - - 38,940 28,173

Dividend income - - 17,350 -

Utilities income - - 1,918 1,995

Rental and service expenses - - 16,264 16,472

Interest expenses 28 - - 1,874 1,502


Rental and services income 45,551 41,295 43,082 38,469

Utilities income 4,264 3,271 4,264 3,271

Other service income 5,667 3,240 5,073 2,715

Land rental 10,920 10,920 - -

Management fee 1,000 1,600 1,000 1,600

Insurance expenses - 1,632 - 982



Back

Balances as at 31 December 2010 and 2009 with related parties were as follows:




Note 2010 2009 2010 2009

Tradeaccountsreceivablefrom

related parties

Subsidiaries

Erawan Hotel Public Company Limited - - 126 105

Erawan Rajdamri Company Limited - - 880 672

Erawan Samui Company Limited - - 328 273


Mitr Phol Sugar Co., Ltd. 986 907 986 867

Banpu Public Co., Ltd. 442 325 342 325

Petro Green Co., Ltd. 63 280 63 280

Panel Plus Co., Ltd. 727 191 727 191

Phu Khieo Bio-Energy Co., Ltd. 19 16 19 16

Chai Talay Hotel Co., Ltd. 243 434 - -

Pacific World (Thailand) Ltd. 438 - 438 -

Eastern Sugar and Cane Co., Ltd. 292 - - -

Other companies 55 31 55 31

Total 6 3,265 2,184 3,964 2,760




2010 2009 2010 2009

Otherreceivable-relatedparty

Subsidiary

Erawan Chaophraya Company Limited - - 746 -





2010 2009 2010 2009

Prepaid expense-related party

Other related party

The Syndicate of Thai Hotels &

Tourists Enterprises Ltd. 5,460 5,460 - -

(Unit: % per annum) (Unit: in Thousand Baht)

Interest rate



2010 2009 2010 2009 2010 2009

Loans to related parties

Long-term loans

Subsidiaries

Erawan Samui Company Limited 4.53 4.15 - - 79,316 73,500

Erawan Naka Company Limited 4.53 4.15 - - 20,036 16,909

Erawan Phuket Company Limited 4.53 4.15 - - 598,568 484,973

Erawan Chaophraya Company Limited 4.53 4.15 - - 228,740 26,968

The Reserve Company Limited - - - - 154,114 143,396

Total - - 1,080,774 745,746



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Movements during the years ended 31 December 2010 and 2009 of loans to related parties were as follows:




2010 2009 2010 2009

Loans to related partiesShort-term loansSubsidiaryAt 1 January - - - -Increase - - 184,861 88,489Decrease - - (184,861) (88,489)At 31 December - - - -

Long-term loansSubsidiariesAt 1 January - - 745,746 516,791Increase - - 457,451 269,662Decrease - - (122,423) (40,707)At 31 December - - 1,080,774 745,746



2010 2009 2010 2009

Trade accounts payable-related partySubsidiariesErawan Hotel Public Company Limited - - 257 200Erawan Chaophraya Company Limited - - 30 - - - 287 200



2010 2009 2010 2009

Other payable - related partyErawan Chaophraya Company Limited - - 23 -


(Unit: % per annum) (Unit: in Thousand Baht)

Interest rate


2010 2009 2010 2009 2010 2009

Loans from a related party Long-term loans Subsidiary Erawan Rajdamri Company Limited 4.53 4.15 - - 38,861 55,132

Movements during the years ended 31 December 2010 and 2009 of loans from related parties were as follows:



2010 2009 2010 2009

Loans from a related partyShort-term loansSubsidiaryAt 1 January - - - -Increase - - 11,027 -Decrease - - (11,027) -At 31 December - - - -

Long-term loansSubsidiaryAt 1 January - - 55,132 24,745Increase - - 31,646 72,102Decrease - - (47,917) (41,715)At 31 December - - 38,861 55,132

5. Cash and cash equivalents (Unit: in Thousand Baht)


2010 2009 2010 2009

Cash on hand 7,559 7,293 3,684 3,763Cash at banks 194,741 270,196 90,223 198,072Highly liquid short-term investments 18,084 - - -Total 220,384 277,489 93,907 201,835

Cash and cash equivalents of the Group and the Company as at 31 December 2010 and 2009 were denominated in Thai Baht.



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6. Trade accounts receivable (Unit: in Thousand Baht)


Note 2010 2009 2010 2009

Related parties 4 3,265 2,184 3,964 2,760Other parties 146,722 148,969 76,460 78,944 149,987 151,153 80,424 81,704Less allowance for doubtful accounts (1,941) (2,658) (1,216) (2,130)Net 148,046 148,495 79,208 79,574Doubtful debts expenses (reversal) for the year 717 852 (914) 1,314

Aging analyses for trade accounts receivable were as follows:



2010 2009 2010 2009

Related partiesOutstanding: Less than 3 months 3,265 2,184 3,964 2,760Other partiesOutstanding: Less than 3 months 141,574 147,152 73,482 77,833 3 - 6 months 4,127 1,345 1,957 639 6 - 12 months 949 246 949 246 Over 12 months 72 226 72 226 146,722 148,969 76,460 78,944Less allowance for doubtful accounts (1,941) (2,658) (1,216) (2,130) 144,781 146,311 75,244 76,814Net 148,046 148,495 79,208 79,574

Trade accounts receivable of the Group and the Company as at 31 December 2010 and 2009 were

denominated in Thai Baht.


7. Inventories (Unit: in Thousand Baht)



Note 2010 2009 2010 2009

Food and beverage 32,801 35,071 9,118 9,215

Operating supplies 15,365 12,044 989 237

Real estate for sale 12 17,684 23,254 17,684 23,254

Others 7,048 7,878 254 1,086

Total 72,898 78,247 28,045 33,792

8. Other current assets (Unit: in Thousand Baht)



Note 2010 2009 2010 2009

Other advances 46,887 39,828 322 4,669

Prepaid expenses 4 24,009 21,890 9,083 7,190

Other receivables 4 1,577 3,055 843 128

Undue input value added tax 9,735 9,914 3,843 7,333

Others 12,976 14,229 1,792 1,072

Total 95,184 88,916 15,883 20,392



Back

9.

Inve

stm

ents

in s

ubsi

diar

ies

In

vest

men

ts in

sub

sidi

arie

s as

at 3

1 D

ecem

ber 2

010

and

2009

, and

div

iden

d in

com

e fro

m th

ose

inve

stm

ents

for t

he y

ears

then

end

ed w

ere

as

follo

ws:

(Uni

t: %

) (U

nit:

in M

illion

Bah

t) (U

nit:

in T

hous

and

Baht

)

Se

para

te fi

nanc

ial s

tate

men

ts

C

ompa

ny’s

nam

e O

wne

rshi

p Pa

id-u

p ca

pita

l C

ost m

etho

d Im

pairm

ent

At c

ost -

net

D

ivid

end

Inte

rest

in

com

e

2010

20

09

2010

20

09

2010

20

09

2010

20

09

2010

20

09

2010

20

09

Dur

ing

the

first

qua

rter o

f 200

8 th

e C

ompa

ny re

ceiv

ed th

e tra

nsfe

r of t

he e

ntire

bus

ines

s of

Era

wan

Plo

ench

it C

ompa

ny L

imite

d. T

he s

ubsi

diar

y su

bseq

uent

ly r

egis

tere

d th

e di

ssol

utio

n w

ith th

e M

inis

try o

f Com

mer

ce. I

n ad

ditio

n, a

mee

ting

of th

e Bo

ard

of D

irect

ors

of th

e su

bsid

iary

app

rove

d th

e re

turn

of s

hare

cap

ital t

o th

e sh

areh

olde

rs p

rior t

o liq

uida

tion

at th

e ra

te o

f Bah

t 7.3

6 pe

r sha

re, t

otal

ling

Baht

1,4

80.3

milli

on, a

nd s

uch

amou

nt h

as

alre

ady

been

pai

d. T

he C

ompa

ny s

et u

p a

loss

from

dim

inut

ion

in th

e va

lue

of in

vest

men

t in

the

subs

idia

ry o

f Bah

t 656

.5 m

illion

in th

e st

atem

ent o

f in

com

e. H

owev

er, o

n 4

April

200

8, th

e C

ompa

ny re

turn

ed to

the

subs

idia

ry a

por

tion

of B

aht 0

.003

2 pe

r sha

re, t

otal

ling

Baht

0.6

milli

on, o

f the

am

ount

th

at th

e C

ompa

ny r

ecei

ved

in a

dvan

ce, w

ithou

t wai

ting

for

the

com

plet

ion

of th

e liq

uida

tion

proc

ess.

On

11 D

ecem

ber

2009

the

said

sub

sidi

ary

regi

ster

ed fo

r dis

solu

tion.

The

Com

pany

rece

ived

the

rest

of c

apita

l and

reco

gnis

ed lo

ss fr

om w

ritte

n of

f inv

estm

ent i

n th

e sa

id s

ubsi

diar

y in

the

amou

nt

of B

aht 0

.8 m

illion

.

Eraw

an H

otel

Pu

blic

Com

pany

Lim

ited

72.5

9 72

.59

119.

50

119.

50

819,

710

819,

710

- -

819,

710

819,

710

17,3

50

-

Eraw

an C

haop

hray

a

C

ompa

ny L

imite

d 95

.77

95.7

7 71

.00

71.0

0 68

,000

68

,000

-

- 68

,000

68

,000

-

-

Eraw

an R

ajda

mri

Com

pany

Lim

ited

99

.99

99.9

9 45

0.00

45

0.00

45

1,29

1 45

1,29

1 -

- 45

1,29

1 45

1,29

1 -

-

Eraw

an P

huke

t Com

pany

Lim

ited

99.9

9 99

.99

550.

00

550.

00

582,

001

582,

001

- -

582,

001

582,

001

- -

Eraw

an S

amui

Com

pany

Lim

ited

99.9

9 99

.99

330.

00

330.

00

376,

858

376,

858

- -

376,

858

376,

858

- -

Eraw

an N

aka

Com

pany

Lim

ited

99.9

9 99

.99

7.50

7.

50

300

300

- -

300

300

- -

The

Rese

rve

Com

pany

Lim

ited

99.9

9 99

.99

1.00

1.

00

1,00

0 1,

000

- -

1,00

0 1,

000

- -

Tota

l

2,

299,

160

2,29

9,16

0 -

- 2,

299,

160

2,29

9,16

0 17

,350

-


(U

nit:

%)

(Uni

t: in

milli

on B

aht)

(Uni

t: in

Tho

usan

d Ba

ht)

Se

para

te fi

nanc

ial s

tate

men

ts

O

wne

rshi

p In

tere

st

Paid

-up

capi

tal

Cos

t met

hod

Impa

irmen

t At

cos

t - n

et

Div

iden

d in

com

e

20

10

2009

20

10

2009

20

10

2009

20

10

2009

20

10

2009

20

10

2009

10.

Inve

stm

ent i

n as

soci

ate

In

vest

men

ts in

ass

ocia

te a

s at

31

Dec

embe

r 201

0 an

d 20

09, a

nd d

ivid

end

inco

me

from

the

inve

stm

ent f

or th

e ye

ars

then

end

ed w

ere

as fo

llow

s:

(U

nit:

%)

(Uni

t: in

Milli

on B

aht)

(Uni

t: in

Tho

usan

d Ba

ht)

C

onso

lidat

ed fi

nanc

ial s

tate

men

ts

O

wne

rshi

p in

tere

st

Paid

-up

capi

tal

Cos

t met

hod

Equi

ty m

etho

d Im

pairm

ent

At e

quity

- ne

t D

ivid

end

inco

me

20

10

2009

20

10

2009

20

10

2009

20

10

2009

20

10

2009

20

10

2009

20

10

2009

Dur

ing

the

year

, the

Com

pany

did

not

reco

rd it

s sh

ares

in th

e op

erat

ing

resu

lt of

inve

stm

ents

in a

ssoc

iate

in th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts

beca

use

it fo

und

that

the

amou

nt w

as im

mat

eria

l.

Asso

ciat

e

Rajp

raso

ng D

evel

opm

ent C

o., L

td.

48.0

0 48

.00

1.00

1.

00

338

338

- -

338

338

- -

Asso

ciat

e

Rajp

raso

ng

D

evel

opm

ent C

o., L

td.

48.

00

48.0

0 1.

00

1.00

33

8 33

8 33

8 33

8 -

- 33

8 33

8 -

-



Back

The following summarised financial information on associated company which have not been accounted for

using the equity method but have not been adjusted for the percentage of ownership held by the Group:

(Unit: %) (Unit: in Thousand Baht)

Ownership Total Total TotalNet loss

interest assets liabilities revenues

2010 Rajprasong Development Co., Ltd. 48.00 1,772 248 2,005 (477) 2009 Rajprasong Development Co., Ltd. 48.00 2,998 1,953 3,206 (41)

11. Investments in other related parties (Unit: %) (Unit: in Thousand Baht)

Equity interest

Consolidated

financialstatements

2010 2009 2010 2009

Related companiesRajprasong Square Co., Ltd. 23.29 23.29 206 206The Asia Recovery 2 Fund 0.17 0.17 2,942 3,290Less allowance for change in value (577) (191)Total 2,571 3,305

(Unit: %) (Unit: in Thousand Baht)

Equity interest

Separate

financialstatements

2010 2009 2010 2009

Related companiesRajprasong Square Co., Ltd. 23.29 23.29 206 206The Asia Recovery 2 Fund 0.13 0.13 2,174 2,427Less allowance for change in value (405) (108)Total 1,975 2,525


(Uni

t: in

Tho

usan

d Ba

ht)

Cos

t

At 1

Jan

uary

200

9

1,65

2,00

0 7,

563,

967

1,63

9,92

5 84

,555

16

3,57

8 1,

097,

056

12,2

01,0

81

Addi

tions

6,43

4 93

,423

36

4,10

7 4,

670

48,3

97

837,

342

1,35

4,37

3

Adju

stm

ents

- (1

05)

(384

) 24

-

- (4

65)

Tran

sfer

s

- 1,

736,

755

31,4

71

306

3,51

9 (1

,773

,615

) (1

,564

)

Tran

sfer

to re

al e

stat

e fo

r sal

e 7

(10,

063)

-

- -

- (1

3,19

1)

(23,

254)

Dis

posa

ls

-

(1,7

47)

(25,

714)

(5

5,69

1)

- -

(83,

152)

At 3

1 D

ecem

ber 2

009

and

1 Ja

nuar

y 20

10

1,

648,

371

9,39

2,29

3 2,

009,

405

33,8

64

215,

494

147,

592

13,4

47,0

19

Addi

tions

3,22

4 48

,954

33

,731

2,

968

6,91

6 35

8,86

3 45

4,65

6

Adju

stm

ents

- (1

,138

) (2

87)

- -

(5,2

16)

(6,6

41)

Tran

sfer

s

- 33

7,90

9 62

,091

-

7,67

1 (4

11,0

77)

(3,4

06)

Dis

posa

ls

(3

,014

) (6

,249

) (2

5,02

9)

(1,3

57)

- -

(35,

649)

At 3

1 D

ecem

ber 2

010

1,

648,

581

9,77

1,76

9 2,

079,

911

35,4

75

230,

081

90,1

62

13,8

55,9

79

Consolidatedfinancialstatements

Build

ing

Furn

iture

,

Ope

ratin

g As

sets

Land

an

d fix

ture

s an

d Ve

hicl

es

equi

pmen

t un

der

Tota

l

N

ote

im

prov

emen

ts

equi

pmen

t

co

nstru

ctio

n

12.

Prop

erty

, pla

nt a

nd e

quip

men

t

(a)

The

Gro

up



Back

(Uni

t: in

Tho

usan

d Ba

ht)

Dep

reci

atio

n

At 1

Jan

uary

200

9 -

1,91

9,73

8 98

8,41

0 45

,771

-

- 2,

953,

919

Dep

reci

atio

n ch

arge

for t

he y

ear

- 31

6,59

0 19

2,82

7 13

,063

-

- 52

2,48

0

Adju

stm

ents

-

(2)

(8)

3 -

- (7

)

Dis

posa

ls

- (1

,457

) (2

4,83

0)

(44,

338)

-

- (7

0,62

5)

At 3

1 D

ecem

ber 2

009

and

1 Ja

nuar

y 20

10

- 2,

234,

869

1,15

6,39

9 14

,499

-

- 3,

405,

767

Dep

reci

atio

n ch

arge

for t

he y

ear

- 33

4,00

8 23

5,64

1 5,

969

- -

575,

618

Adju

stm

ents

-

(12)

-

- -

- (1

2)

Dis

posa

ls

- (5

,071

) (2

2,70

7)

(1,2

93)

- -

(29,

071)

At 3

1 D

ecem

ber 2

010

- 2,

563,

794

1,36

9,33

3 19

,175

-

- 3,

952,

302

Net

boo

k va

lue

At 1

Jan

uary

200

9

Ow

ned

asse

ts

1,65

2,00

0 5,

644,

229

651,

446

20,4

28

163,

578

1,09

7,05

6 9,

228,

737

Asse

ts u

nder

finan

ce le

ases

-

- 69

18

,356

-

- 18

,425

1,65

2,00

0 5,

644,

229

651,

515

38,7

84

163,

578

1,09

7,05

6 9,

247,

162

Elim

inat

ed

378,

407

9,62

5,56

9

At 3

1 D

ecem

ber 2

009

and

1 Ja

nuar

y 20

10

Ow

ned

asse

ts

1,64

8,37

1 7,

157,

424

852,

956

19,3

65

215,

494

147,

592

10,0

41,2

02

Asse

ts u

nder

finan

ce le

ases

-

- 50

-

- -

50

1,64

8,37

1 7,

157,

424

853,

006

19,3

65

215,

494

147,

592

10,0

41,2

52

Elim

inat

ed

365,

383

10,4

06,6

35

C

onso

lidat

ed fi

nanc

ial s

tate

men

ts

Build

ing

Furn

iture

,

Ope

ratin

g As

sets

Land

an

d fix

ture

s an

d Ve

hicl

es

equi

pmen

t un

der

Tota

l

im

prov

emen

ts

equi

pmen

t

co

nstru

ctio

n


(Uni

t: in

Tho

usan

d Ba

ht)

At 3

1 D

ecem

ber 2

010

Ow

ned

asse

ts

1,64

8,58

1 7,

207,

975

710,

578

15,0

44

230,

081

90,1

62

9,90

2,42

1

Asse

ts u

nder

finan

ce le

ases

-

- -

1,2

56

- -

1,25

6

1,

648,

581

7,20

7,97

5 71

0,57

8 16

,300

23

0,08

1 90

,162

9,

903,

677

Elim

inat

ed

352,

148

10

,255

,825

Dep

reci

atio

n fo

r the

yea

r

2009

52

2,48

0

Elim

inat

ed

13,0

24

53

5,50

4

2010

57

5,61

8

Elim

inat

ed

13,0

24

58

8,64

2

C

onso

lidat

ed fi

nanc

ial s

tate

men

ts

Build

ing

Furn

iture

,

Ope

ratin

g As

sets

Land

an

d fix

ture

s an

d Ve

hicl

es

equi

pmen

t un

der

Tota

l

im

prov

emen

ts

equi

pmen

t

co

nstru

ctio

n



Back

(Uni

t: in

Tho

usan

d Ba

ht)

Fina

nce

cost

s ca

pita

lised

Fina

nce

cost

s ca

pita

lised

dur

ing

2009

28

-

- -

- -

31,4

07

31,4

07

Rate

s of

inte

rest

cap

italis

ed d

urin

g 20

09

(M

LR-1

.50

% p

er a

nnum

)

Fina

nce

cost

s ca

pita

lised

dur

ing

2010

28

-

- -

- -

4,26

4 4,

264

Rate

s of

inte

rest

cap

italis

ed d

urin

g 20

10

(M

LR-1

.50

% p

er a

nnum

)

C

onso

lidat

ed fi

nanc

ial s

tate

men

ts

Build

ing

Furn

iture

,

Ope

ratin

g As

sets

Land

an

d fix

ture

s an

d Ve

hicl

es

equi

pmen

t un

der

Tota

l

N

ote

im

prov

emen

ts

equi

pmen

t

co

nstru

ctio

n

The

Gro

ss a

mou

nt o

f the

Gro

up’s

fully

dep

reci

ated

pla

nt a

nd e

quip

men

t of t

hat w

as s

till i

n us

e as

at 3

1 D

ecem

ber 2

010

amou

nted

to B

aht 9

24.7

milli

on (2

009:

Bah

t 823

.9 m

illion

).


(Uni

t: in

Tho

usan

d Ba

ht)

Cos

t

At 1

Jan

uary

200

9

1,24

7,62

6 4,

042,

411

643,

515

66,5

89

72,3

66

1,03

1,51

2 7,

104,

019

Addi

tions

- 8,

585

291,

990

4,32

8 38

,709

71

1,69

2 1,

055,

304

Adju

stm

ents

- (1

05)

60

24

- -

(21)

Tran

sfer

s

- 1,

634,

039

30,4

80

- 57

3 (1

,666

,301

) (1

,209

)

Tran

sfer

to re

al e

stat

e fo

r sal

e 7

(10,

063)

-

- -

- (1

3,19

1)

(23,

254)

Dis

posa

ls

-

(1,7

47)

(12,

167)

(5

5,69

2)

- -

(69,

606)

At 3

1 D

ecem

ber 2

009

and

1 Ja

nuar

y 20

10

1,

237,

563

5,68

3,18

3 95

3,87

8 15

,249

11

1,64

8 63

,712

8,

065,

233

Addi

tions

- 36

,067

22

,318

1,

450

2,72

0 80

,809

14

3,36

4

Adju

stm

ents

- (9

04)

(287

) -

- (5

,215

) (6

,406

)

Tran

sfer

s

- 63

,712

7,

030

- 35

(7

0,80

4)

(27)

Dis

posa

ls

(3

,013

) (6

,234

) (1

6,84

1)

(1,2

46)

- -

(27,

334)

At 3

1 D

ecem

ber 2

010

1,

234,

550

5,77

5,82

4 96

6,09

8 15

,453

11

4,40

3 68

,502

8,

174,

830

Dep

reci

atio

n

At 1

Jan

uary

200

9

- 96

5,48

3 35

6,61

0 42

,509

-

- 1,

364,

602

Dep

reci

atio

n ch

arge

for t

he y

ear

-

189,

223

100,

008

9,49

5 -

- 29

8,72

6

Adju

stm

ents

- (2

) (4

) 3

- -

(3)

Dis

posa

ls

-

(1,4

58)

(11,

913)

(4

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13. Leasehold rights for land and buildings (Unit: in Thousand Baht)

Consolidated financial statements

Leasehold

Leasehold

rights for land

rights for Total

buildings

Cost

At 1 January 2009 1,020,131 1,208,593 2,228,724

Additions 1,650 2,241 3,891

Disposals - (6) (6)

At 31 December 2009 and 1 January 2010 1,021,781 1,210,828 2,232,609

Additions 150,000 3,279 153,279

Disposals - (768) (768)

Adjustment 5,237 (1,483) 3,754

At 31 December 2010 1,177,018 1,211,856 2,388,874

Amortisation

At 1 January 2009 275,607 165,516 441,123

Amortisation for the year 26,226 47,342 73,568

At 31 December 2009 and 1 January 2010 301,833 212,858 514,691


Disposal - (768) (768)

Adjustment 1,998 - 1,998

At 31 December 2010 330,706 259,974 590,680

Net book value

At 1 January 2009 744,524 1,043,077 1,787,601

Eliminated (5,443)

1,782,158

At 31 December 2009 and 1 January 2010 719,948 997,970 1,717,918

Eliminated (4,992)

1,712,926

At 31 December 2010 846,312 951,882 1,798,194

Eliminated (4,542)

1,793,652



Back


Separate financial statements

Leasehold

Leasehold

rights for land

rights for Total

buildings

Cost

At 1 January 2009 845,645 278,481 1,124,126

Additions - - -

At 31 December 2009 and 1 January 2010 845,645 278,481 1,124,126

Additions 150,000 - 150,000

31 December 2010 995,645 278,481 1,274,126

Amortisation

At 1 January 2009 188,206 35,933 224,139




31 December 2010 233,465 76,665 310,130

Net book value

At 1 January 2009 657,439 242,548 899,987


At 31 December 2010 762,180 201,816 963,996

The Group and the Company have mortgaged most of their and its leasehold rights for land, which have a net

book value as at 31 December 2010 of Baht 677.5 million and Baht 612.1 million, respectively (2009: Baht 703.4

million and Baht 635.0 million, respectively), with banks to secure the loans.




2010 2009 2010 2009

Amortisation for the year 74,759 73,568 43,142 42,849

Less Capitalised amortisation (381) (459) - -

Eliminated (450) (450) - -

Amortisation included

in statements of income 73,928 72,659 43,142 42,849


14. Intangible assets (Unit: in Thousand Baht)



2010 2009 2010 2009

ComputerSoftware

Cost

At 1 January 143,189 123,566 99,233 80,030

Additions 5,115 18,622 3,556 17,994

Transfers 3,322 1,564 25 1,209

Disposals (44) (563) (44) -

Adjustments (807) - (90) -

At 31 December 150,775 143,189 102,680 99,233

Amortisation and impairment losses

At 1 January 69,049 49,601 48,947 36,590

Amortisation charge for the year 20,936 19,618 14,032 12,357

Disposals (44) (170) (44) -

At 31 December 89,941 69,049 62,935 48,947

Net book value

At 1 January 74,140 73,965 50,286 43,440

At 31 December 60,834 74,140 39,745 50,286

15. Other non-current assets (Unit: in Thousand Baht)



2010 2009 2010 2009

Withholding tax deducted at source 30,703 31,482 28,656 30,413

Others - 2,884 - -

Total 30,703 34,366 28,656 30,413



Back

16. Interest-bearing liabilities (Unit: in Thousand Baht)



Note 2010 2009 2010 2009

Current

Short-term loans from financial institutions

secured 195,700 207,200 195,700 152,200

Current portion of long-term loans from

financial institutions

secured 573,750 697,250 403,750 371,000

Current portion of finance lease liabilities - 26 - 26

Current portion of hire purchase payable 819 529 819 529

770,269 905,005 600,269 523,755

Non-current

Long-term loans from financial institutions

secured 7,829,517 7,665,467 5,314,750 5,370,900

Long-term loans from related parties

unsecured 4 - - 38,861 55,132

Hire purchase payable 621 568 621 568

7,830,138 7,666,035 5,354,232 5,426,600

Total 8,600,407 8,571,040 5,954,501 5,950,355

The periods to maturity of interest-bearing liabilities, excluding finance lease liabilities and hire purchase

payable, as at 31 December were as follows:




2010 2009 2010 2009

Within one year 769,450 904,450 599,450 523,200

After one year but within five years 4,192,250 4,881,150 3,151,111 3,362,532

After five years 3,637,267 2,784,317 2,202,500 2,063,500

Total 8,598,967 8,569,917 5,953,061 5,949,232


Under the loan agreements, the Group has to comply with certain covenants and restrictions e.g.

the percentage of shareholding of the major shareholders, changes in directors, guarantees to loans of aval to

promissory notes of any persons or any companies, dividend payments, merger or consolidation with any companies,

and maintenance of certain financial ratios.

During the year 2010, the Company and certain subsidiaries were approved by various financial institutions to

extend the due date of principal loan repayment which fall due in 2010 to be commenced in 2011. In addition,

the Company and certain subsidiaries were approved by those financial institutions to extend the principal loan

repayment period for another 1 - 6 years.

Secured interest-bearing liabilities as at 31 December were secured on the following assets:




2010 2009 2010 2009

Property, plant and equipment-net 8,611,172 8,731,712 5,541,237 5,772,469

Leasehold rights for land-net 677,546 703,445 612,180 634,956

Total 9,288,718 9,435,157 6,153,417 6,407,425

As at 31 December 2010 the Group and the Company had unutilised credit facilities of totalling Baht 441.3

million and Baht 250 million, respectively (2009: Baht 1,049.6 million and Baht 788.1 million, respectively).

Finance lease liabilities

Finance lease liabilities as at 31 December were payable as follows:


Consolidated/Separate financial statements

2010 2009

Principal Interest Payments Principal Interest Payments

Within one year - - - 27 (1) 26

After one year but within five years - - - - - -

Total - - - 27 (1) 26

Interest-bearing liabilities of the Group as at 31 December 2010 and 2009 were denominated entirely in Thai Baht.



Back

In determining whether a lease is to be classified as an operating lease or a finance lease, the management is

required to use judgement regarding whether significant risks and rewards of ownership of the leased asset has been

transferred, taking into consideration terms and conditions of the arrangement.

17. Trade accounts payable (Unit: in Thousand Baht)



Note 2010 2009 2010 2009

Related party 4 - - 287 200

Other parties 211,897 230,684 89,796 74,901

Total 211,897 230,684 90,083 75,101

Trade accounts payable of the Group and the Company as at 31 December 2010 and 2009 were denominated

entirely in Thai Baht.

18. Other current liabilities (Unit: in Thousand Baht)



2010 2009 2010 2009

Management, royalty, marketing

and other fees payable -

hotel business 25,358 29,152 10,099 10,835

Retention 65,957 70,082 13,457 23,057

Advances from customers 23,709 19,420 6,775 6,755

Value added tax payable 14,852 7,000 8,160 -

Accrued expenses 100,542 104,107 58,569 60,474

Income tax payable 10,629 27,678 - -

Deposits received - hotel business 56,656 54,017 24,232 22,204

Others 50,518 54,610 30,083 28,664

Total 348,221 366,066 151,375 151,989


19. Deferred income (Unit: in Thousand Baht)



2010 2009 2010 2009

Leasehold rights - building,

service and equipment - other parties 56,720 56,720 56,720 56,720

Less accumulated amortisation (41,399) (38,585) (41,399) (38,585)

Netbookvalue 15,321 18,135 15,321 18,135

Amortisation included in

statements of income for the year 2,814 2,814 2,814 2,814

20. Share capital (Unit: Thousand Shares/Thousand Baht)

Par value 2010 2009

per share (in Baht) Number Amount Number Amount

Authorised

At 1 January

ordinary shares 1 2,244,779 2,244,779 2,281,143 2,281,143

Reduction of authorised shares 1 - - (36,364) (36,364)

At 31 December

ordinary shares 1 2,244,779 2,244,779 2,244,779 2,244,779

Issued and paid-up

At 1 January

ordinary shares 1 2,244,779 2,244,779 2,244,779 2,244,779

At 31 December

ordinary shares 1 2,244,779 2,244,779 2,244,779 2,244,779

At the board of directors’ meeting of the Company held on 21 December 2010, the board of directors agreed to

propose the following agenda to the 2011 annual general meeting of the shareholders of the Company as follows;

a) To consider the approval of the issuance of new warrants to existing shareholders of not exceeding

224,477,900 units and the issuance of ordinary shares to reserve for the conversion of the warrants.



Back

b) To consider the approval of the issuance and offering of 35,743,099 shares ordinary shares to employees

of the group.

c) To consider the approval to increase the authorized share capital by issuing ordinary shares of not

exceeding 260,220,999 shares at a par value of Baht 1 each to reserve for the conversion of warrants and for the

rights to purchase ordinary shares of the employees of the Group.

At the annual general meeting of the shareholders of the Company held on 28 April 2009, the shareholders

approved the reduction of authorised share capital from Baht 2,281.1 million to Baht 2,244.8 million by cancellation of

unsold ordinary shares of 36,364,098 shares with a par value of Baht 1 each. The Company registered the reduction

of authorised share capital with the Ministry of Commerce on 14 May 2009.

21. Additional paid-in capital and reserve

Share premium

Section 51 of the Public Companies Act B.E. 2535 requires companies to set aside share subscription monies

received in excess of the par value of the shares issued to a reserve account (“share premium”). Share premium is

not available for dividend distribution.

Legal reserve

The Public Companies Act B.E. 2535 Section 116 requires that a company shall allocate not less than 5% of its

annual net profit, less any accumulated losses brought forward, to a reserve account (“legal reserve”), until this

account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available

for dividend distribution.

Fair value changes

The fair value changes account within equity comprises the cumulative net change in the fair value of available-

for-sale financial assets until the investments are derecognised or impaired.

22. Segment information

Segment information is presented in respect of the Group’s business and geographic segments. The primary

format, business segments, is based on the Group’s management and internal reporting structure.


Segment results, assets and liabilities include items directly attributable to a segment as well as those that can

be allocated on a reasonable basis. Unallocated items mainly comprise interest or dividend-earning assets and

revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Business segments

The Group comprises the following main business segments:

Segment 1 Building rental business

Segment 2 Hotel business

Geographic segments

Management considers that the Group operates in a single geographical area, namely in Thailand, and has,

therefore, only one major geographical segment.

Business segments results in the consolidated financial statements for the years ended 31 December 2010

and 2009 were as follows:

(Unit: in Million Baht)

Building rental Hotel business Eliminations Total

business

2010 2009 2010 2009 2010 2009 2010 2009

Revenues from external 391 401 2,930 2,748 - - 3,321 3,149

Inter-segment revenues 20 20 - - (20) (20) - -

Total revenues 411 421 2,930 2,748 (20) (20) 3,321 3,149

Segment profit 138 153 41 80 (13) (13) 166 220

Unallocated income and expenses:

Other income 43 43

Depreciation and amortisation (7) (10)

Selling expenses (1) (2)

Administrative expenses (80) (95)

Finance costs (361) (307)

Income tax (20) (46)

Net profit attribute to minority interests (15) (32)

Loss for the year (275) (229)



Back

Business segment financial position in the consolidated financial statements as at 31 December 2010 and

2009 were as follows:


Building rental Hotel Unallocated Eliminations Total

business business assets

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Inventories - - 55 55 18 23 - - 73 78

Property, plant and equipment 712 725 9,070 9,196 159 158 315 328 10,256 10,407

Leasehold rights for

land and buildings 326 356 1,547 1,444 - - (79) (87) 1,794 1,713

Other assets 827 1,091

Total assets 12,950 13,289


Building rental Hotel Unallocated Eliminations Total

business business liabilities

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Interest-bearing borrowings 475 480 8,976 8,561 268 330 (1,120) (801) 8,599 8,570

Account payable for

land leasehold rights 180 180 180 180 - - - - 360 360

Other liabilities 718 820

Total liabilities 9,677 9,750

23. Other income (Unit: in Thousand Baht)



2010 2009 2010 2009

Gain from sale of fixed assets 286 14,870 201 12,816

Gain from sale of investment - 526 - 506

Income from property tax 7,834 6,719 7,704 6,531

Others 29,993 15,869 27,905 13,316

Total 38,113 37,984 35,810 33,169


24. Selling expenses (Unit: in Thousand Baht)



2010 2009 2010 2009

Marketing expenses 155,611 150,608 101,798 74,053

Employee benefit expenses 58,471 56,101 16,643 20,054

Total 214,082 206,709 118,441 94,107

25. Administrative expenses (Unit: in Thousand Baht)



2010 2009 2010 2009

Employee benefit expenses 234,486 243,331 150,475 145,553

Management and other fee 168,299 159,375 95,201 89,596

Repair and maintenance expenses 39,358 44,705 21,328 16,154

Others 224,785 223,373 74,954 87,089

Total 666,928 670,784 341,958 338,392

26. Employee benefit expenses (Unit: in Thousand Baht)



2010 2009 2010 2009

Management

Salaries, wages and other benefits 34,211 39,145 32,411 37,240

Contributions to defined contribution plans 943 1,093 943 1,093

35,154 40,238 33,354 38,333



Back




2010 2009 2010 2009

Other employees

Salaries, wages and other benefits 761,032 717,557 379,793 331,898

Contributions to defined contribution plans 18,356 17,830 7,900 6,738

779,388 735,387 387,693 338,636

Total 814,542 775,625 421,047 376,969

The defined contribution plans comprise provident funds established by the Group and the Company for its

employees. Membership to the funds is on a voluntary basis. Contributions are made monthly by the employees at

rates ranging from 3% to 10% of their basic salaries and by the Group and the Company at rates ranging from 3% to

10% of the employees’ basic salaries. The provident funds are registered with the Ministry of Finance as juristic

entities and are managed by a licensed Fund Managers.

27. Expenses by nature

Significant expenses by nature are as follows:




2010 2009 2010 2009

Salaries and wages and other employee benefits 814,542 775,625 421,047 376,969

Costs of food and beverage 462,068 409,899 231,104 188,501

Rental expenses 47,037 46,385 31,326 30,400


28. Finance costs (Unit: in Thousand Baht)



Note 2010 2009 2010 2009

Interest:

Related parties 4 - - 1,874 1,502

Financial institutions 363,477 337,750 245,080 219,401

Amortisation of transaction costs capitalised 1,549 503 31 40

365,026 338,253 246,985 220,943

Capitalised as cost of assets under

construction 12 (4,264) (31,407) (1,800) (31,366)

Net 360,762 306,846 245,185 189,577

29. Income tax expense (Unit: in Thousand Baht)



2010 2009 2010 2009

Current tax expense

Current year 19,867 45,656 - -

The current tax expense in the consolidated and separate statements of income does not equal the amount

determined by applying the Thai corporation tax rate to the accounting profit for the year principally because:

(a) unutilised tax losses brought forward from previous years have been utilised during the year to set-off

against the current year’s tax charge.

(b) the different treatment for accounting and taxation purposes of certain items of income and expenses.

(c) losses suffered by certain subsidiaries cannot be set-off against the profits of other subsidiaries for tax

purposes.



Back

30. Basic earnings (loss) per share

The calculations of basic earnings (loss) per share for the years ended 31 December 2010 and 2009 were

based on the profit (loss) for the year attributable to equity holders of the Company and the number of ordinary shares

outstanding during the periods as follows:

(Unit: in Thousand Baht/Thousand shares)



2010 2009 2010 2009

Profit(loss)attributabletoequityholdersof

the Company (basic) (275,017) (229,411) 15,342 (29,551)

Number of ordinary shares outstanding 2,244,779 2,244,779 2,244,779 2,244,779

Earnings per share (basic) (in Baht) (0.12) (0.10) 0.01 (0.01)

31. Dividends

At the annual general meeting of the shareholders of a subsidiary held on 5 April 2010, the shareholders

approved the appropriation of dividends of Baht 0.30 per share, amounting to Baht 23.9 million. The dividend was

paid to shareholders on 4 May 2010


approved the dividend omission because the Company has operating loss in the year 2009.


approved the appropriation of dividends of Baht 0.01 per share, amounting to Baht 22.4 million. The dividend was

paid to shareholders on 27 May 2009.

32. Financial instruments

Financial risk management policies

The Group is exposed to normal business risks from changes in market interest rates and currency exchange

rates and from non-performance of contractual obligations by counterparties. The Group does not hold or issue

derivative financial instruments for speculative or trading purposes.


Risk management is integral to the whole business of the Group. The Group has a system of controls in place

to create an acceptable balance between the cost of risks occurring and the cost of managing the risks.

The management continually monitors the Group’s risk management process to ensure that an appropriate balance

between risk and control is achieved.

Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market

confidence and to sustain future development of the business. The Board monitors the return on capital, which the

Group defines as result from operating activities divided by total shareholders’ equity, excluding non-controlling

interests and also monitors the level of dividends to ordinary shareholders.

Interest rate risk

Interest rate risk is the risk that future movements in market interest rates will affect the results of the Group’s

operations and its cash flows because loan interest rates are mainly floating or fixed. The Group is primarily exposed

to interest rate risk from its borrowings (Note 16). The Group mitigates this risk by ensuring that the majority of its

borrowings are close to the market rate.

The effective interest rates of loans receivable as at 31 December and the periods in which the loans

receivable mature or re-price were as follows:



Effective After 1 year

interest rate Within

but within After 5 years Total

(% per annum) 1 year

5 years

2010

Loans receivable-related parties 4.53 - 1,080,774 - 1,080,774

2009

Loans receivable-related parties 4.15 - 745,746 - 745,746



Back

The effective interest rates of interest-bearing financial liabilities as at 31 December and the periods in which

those liabilities mature or re-price were as follows:


Consolidated financial statements





5 years

2010

Loans payable-financial institutions 5, MLR-1.50,

MLR-2.00,

6-month

fixed deposit

rate + 2.00 769,450 4,192,250 3,637,267 8,598,967

2009


MLR-2.00,

6-month

fixed deposit

rate + 2.00 904,450 4,881,150 2,784,317 8,569,917








5 years

2010

Loans payable-related party 4.53 - 38,861 - 38,861


MLR-2.00,

6-month fixed deposit

rate + 2.00 599,450 3,112,250 2,202,500 5,914,200

Total 599,450 3,151,111 2,202,500 5,953,061

2009

Loans payable-related party 4.15 - 55,132 - 55,132


MLR-2.00,

6-month fixed deposit

rate + 2.00 523,200 3,307,400 2,063,500 5,894,100

Total 523,200 3,362,532 2,063,500 5,949,232

During the year 2010, the Company entered into interest rate swap contracts with a local financial institution for

long-term loans in Baht with principal amounts of totaling Baht 2,665 million, which will swap interest at float interest

rates to fixed interest rates as stipulated in the contracts. The terms of each contract are approximately 4 years,

expiring on 31 December 2014.

Interest rate swap contracts protect the Group from movements in interest rates. Any differential to be paid or

received on an interest rate swap contract is recognised as a component of finance costs over the period of the

contract.



Back

The fair values of interest rate swap contracts as at 31 December 2010 are as follows:


Consolidated and Separate financial statements

Fair valus

31 December 2010 31 December 2009

Interestrateswapcontracts 16,479 -

Foreign currency risk

The Group operates mainly in Baht currency. Accordingly, the Company does not have material foreign

currency risk.

Credit risk

Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its

financial and contractual obligations to the Group as and when they fall due.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

Credit evaluations are performed on all customers requiring credit over a certain amount. At the reporting date there

were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying

amount of each financial asset in the balance sheet. However, due to the large number of parties comprising the

Group’s customer base, Management does not anticipate material losses from its debt collection.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by

management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

Determination of fair values

For financial assets and liabilities which have short-term maturity and long-term loans which carrying interest

approximate to the market rate, their carrying amounts in the balance sheet approximate their fair value.

The Company and its subsidiaries do not consider the fair value of financial assets and liabilities which have fixed

interest rate over 1 year which is not significant when compare to the total loan amount.


A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable,

willing parties in an arm’s length transaction. The fair value is determined by reference to the market price of the

financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument.

33. Changing in estimate

Starting from 1 January 2010, the Company and certain subsidiaries have changed estimated useful lives of

their building and building improvements from 30 years to 40 years. The effect of the change on the financial

statements of the Group and the Company for the year ended 2010 was to decrease loss for the period by Baht 20.09

million. (Separate financial statements: increase profit Baht 6.71 million) respectively, and loss per share decreased

by Baht 0.008 per share (Separate financial statements: earnings per share increased by Baht 0.002 per share).

34. Commitments with non-related parties




2010 2009 2010 2009

Capital commitments

Contracted but not provided 305.1 400.9 248.2 167.0

Operating lease commitments

Within one year 33.8 36.0 13.2 28.2

After one year but within five years 2.8 3.4 0.9 3.2

Total 36.6 39.4 14.1 31.4

Long-term lease commitments

Within one year 46.5 43.2 27.3 26.9

After one year but within five years 213.9 195.6 135.5 109.6

After five years 2,669.5 2,224.2 1,852.9 1,906.5

Total 2,929.9 2,463.0 2,015.7 2,043.0

Other commitments

Guarantee for bank credit facilities 750.0 750.0 750.0 750.0

Bank guarantees 30.1 31.0 21.5 22.4

Total 780.1 781.0 771.5 772.4



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Long-term agreements The Company and its subsidiaries have entered into several long-term lease agreements and several service

agreements with third parties, local companies, overseas companies, and Government organizations as follows: Long-term lease agreements Erawan Rajdamri Company Limited entered into a building lease agreement with a Government organisation

covering a term of thirty years, commencing 1 July 1987, whereby the subsidiary has to pay monthly rental at the rate for each year as specified in the agreement. However, on 9 January 2006 the subsidiary entered into the Building Renovation and Land and Renovated Building Lease Agreement. Under the terms of this agreement, the subsidiary is to pay remuneration of Baht 70.0 million, which had already been paid to the lessor, and monthly rental at the rate stipulated for each year, for a term of thirty years commencing 1 January 2008.

Erawan Hotel Public Company Limited has an agreement with a related company to lease land for a term of

thirty years up to the year 2021, renewable for another twenty years. The subsidiary is to pay land rental charges of Baht 10.9 million per annum, and the land rental charge may be adjusted every ten years. Upon the expiration of the agreement, the ownership of buildings and building improvements on the leased land, including equipment, furniture and tools necessary for hotel operations, will be transferred to the lessor.

Erawan Ploenchit Company Limited entered into two lease agreements for the leasehold rights to land on which

its hotel building and office building are situated from the lessor. Ownership of all structures constructed on the leased land, including that of equipment, furniture and tools which are vital to the project’s operation, will be transferred to the lessor upon the termination of the agreements. The subsidiary is to pay land rental charges of Baht 24.3 million (for the year 2005 - 2014) per annum and the land rental charge may be adjusted every ten years. The term of the leases is a period of 30 years up to the year 2025. Under the terms of the lease agreements, the subsidiary shall assume obligation to pay the following leasehold rights and deposits for rental.

1. Leasehold rights amounting to Baht 360.0 million. The subsidiary will pay this amount within the 30th year

of the lease and is recorded as part of “Accounts payable for land leasehold rights” in the balance sheets. 2. Deposits for rental amounting to Baht 180.0 million. The subsidiary has made the full payment of the

deposits, which will be refunded in the 30th year and are presented as part of “Deposits for lease of land, building and equipment” in the balance sheets.

As at 24 December 2002, the subsidiary entered into an agreement to lease part of the land on which the hotel

building is located for extend the period of agreement which allows the lessee to extend the term of the lease upon expiration of the agreement. The subsidiary was granted an extension of the term of the lease by 20 years as from


24 January 2025 to 23 January 2045 and is to pay rental of Baht 216.1 million, which had already been paid to the lessor.

In addition to the above mentioned rental, the subsidiary also has a commitment to make the following rental

payments: Rental from 2025 to 2034 at the greater of Baht 44.7 million per annum or an amount determined based on an

average of the consumer price index of Thailand. Rental from 2035 to 2045 at the greater of Baht 89.4 million per annum or an amount determined based on an

average of the consumer price index of Thailand. On 1 January 2008, the subsidiary has transferred all commitments according to these agreements to the

Company. On 1 April 2002, Erawan Ploenchit Company Limited entered into a land lease agreement with third party for

periods of 22 years and 10 months up to the year 2025. Under the agreement, the subsidiary agrees to pay rental totaling Baht 32.8 million, in three installments. The subsidiary had already paid the first and second installments of Baht 23.2 million and the remaining Baht 9.6 million will be repaid in 2025. In addition, the subsidiary is to pay a land rental charge of Baht 0.8 million per annum for the first three years, and such charge is then to be adjusted every ten years. Upon the expiration of the agreement, the ownership of all structures erected on the leased land, together with equipment, furniture and tools which are vital to the operation, are to be transferred to the lessor. On 1 January 2008, the subsidiary has transferred all commitments according to this agreement to the Company.

Erawan Chaophraya Company Limited entered into an agreement to lease land from a foundation for the

purpose of land development and building construction. Under the terms of the agreement, the subsidiary is to pay rental charges of Baht 100,000 per month commencing 1 November 2004, and the rental charge may be adjusted every 10 years. The term of the lease is a period of 30 years up to the year 2034. The agreement is renewable upon its termination. In this regard, the subsidiary will have to give notice of its intention in writing to the lessor at least 1 year, and not more than 2 years in advance. Ownership of buildings and all structures constructed on the leased land will be transferred to the lessor upon the termination of the agreement.

On 9 June 2006, the Company entered into a land lease agreement with an unrelated party for a period of 30

years up to the year 2038. Under the terms of this agreement, the Company is to pay lease remuneration of Baht 25.0 million. The Company had already paid this remuneration. In addition, the Company is to pay a land rental charge of Baht 1.2 million per annum for the first three years, and such charge is then to be adjusted every 3 years. Upon the expiration of the agreement, the ownership of all constructures erected on the leased land, together with equipment which are unremovable, are to be transferred to the lessor.



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On 29 March 2007, the Company entered into a land lease agreement with an unrelated party for a period of 30

years up to the year 2039. Under the terms of this agreement, the Company is to pay lease remuneration of Baht 53.0

million. The Company had already paid this remuneration. In addition, the Company is to pay a land rental charge of

Baht 0.4 million per annum for the first three years, and such charge is then to be adjusted every 3 years. Upon the

expiration of the agreement, the ownership of all constructures erected on the leased land, together with equipment

which are unremovable, are to be transferred to the lessor.

On 19 March 2010, the Company entered into a land lease agreement with 2 local companies for a period of

30 years up to the year 2043. Under the term of this agreement, the Company is to pay lease remuneration of Baht

150.0 million. The Company had already paid this remuneration. Upon the expiration of the agreement, the ownership

of all constructures erected on the leased land, together with equipment which are unremovable, are to be transferred

to the lessor.

Hotel management agreements

On 24 February 1988, Erawan Hotel Public Company Limited entered into agreements with various companies

in the Hyatt International Corporation Limited Group (HYATT) whereby HYATT will provide necessary hotel

construction and management services to the subsidiary. Under the terms of the agreements, the subsidiary is

committed to pay a management fee, license fee, and a share of marketing expenses to HYATT, at the rates

indicated in the agreements. The term of the management agreement is for twenty years, counting from

commencement of hotel operations, to be extended for at least 10 years, dependent upon certain conditions as

specified in the agreement.

On 29 October 2010, Erawan Hotel Public Company Limited entered into amendment agreement with Hyatt to

amend certain conditions in the agreement. The subsidiary agreed to extend the term of the management agreement

for another 9.5 years and extended for at least 10 years, dependent upon certain conditions as specified in the

agreement.

On 3 February 1994, Erawan Ploenchit Company Limited entered into an agreement with Marriott Worldwide

Corporation Group (‘Marriott’) to appoint the Marriott as management of the subsidiary’s hotel. The subsidiary also

made agreements with Marriott relating to the hotel operations. Under the terms of the agreements, the subsidiary is

committed to pay remuneration to Marriott at the rates, terms and basis specified in the agreements. The hotel

management agreement will be terminated on 31 December 2032. On 1 January 2008, the subsidiary transferred all

commitments under these agreements to the Company.

On 4 July 2005, Erawan Rajdamri Company Limited and Erawan Samui Company Limited entered into

management agreements with Marriott Group (“Marriott”), to appoint the Marriott to manage the subsidiaries’ hotel as


a standardised Courtyard by Marriott and Renaissance hotel. Under the terms of the agreements, the subsidiaries are

committed to pay remuneration to Marriott in accordance with the rates, terms and basis specified in the agreements.

The terms of the hotel management agreements is to be for 30 years, counting from commencement of hotel

operations, and is to be extendible for a further period of at least 10 years, dependent upon the fulfillment of certain

conditions specified in the agreements.

In December 2005, the Company entered into agreement with Intercontinental Hotels Group to manage hotel

under the brand Holiday Inn which located at Pattaya. Under the term of the agreements, the Company is committed

to pay remuneration in accordance with the rates, terms and basis specifies in the agreements. The terms of the hotel

management agreement is to be for 15 years, counting from commencement of hotel operations, and is to be

extendible for a further period of at least 5 years, dependent upon the fulfillment of certain as conditions specified in

the agreements.

In June 2006, Erawan Phuket Company Limited entered into agreements with the group of Six Senses

Company which will provide resort management services to the subsidiary. Under the terms of the agreements, the

subsidiary is committed to pay management fees at the rates indicated in the agreements. The term of the

agreements is for 30 years, commencing from the resort operations, with an option to extend for further period,

dependent upon certain as conditions specified in the agreements.

During June 2006 to March 2008, the Company and Erawan Chaopraya Company Limited entered into

agreements with Accor Group to manage 10 hotels of the Company and a subsidiary under the brand Ibis which

located in Thailand. Under the term of the agreements, the Company and a subsidiary are committed to pay

remuneration in accordance with the rates, terms and basis specifies in the agreements. The terms of the hotel

management agreement is to be for 15 years, counting from commencement of hotel operations, and is to be

extendible for a further period of at least 5 years, dependent upon the fulfillment of certain conditions specified in the

agreements. On 1 July 2009, the contract was extended from 15 to 20 years.

35. Contingent liabilities

Litigations and dispute

a) During the year 2008, a former customer, who had rented a rental building, sued the Company for the

return of a deposit for the lease of a building, which the Company had deducted against overdue

payments for electricity amounting to approximately Baht 1.3 million. On 28 December 2010, the Court had

dismissed the case and currently, the case is in the process of the Appeal Court. Management expects

that there will be no significant impact to the Company as a result of the case.



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b) In February 2009, the Company received a summon to be a co-defendant in a case where the plaintiff,

a lessee of land together with building, sued the previous landlord who had sold the land together with

building to the Company through the Civil Court for breach of a lease agreement and claimed

compensation of approximately Baht 79.4 million. On 15 March 2010, the Court of First Instance had

dismissed the case. The plaintiff filed for extension of appeal to the Court of First Instance, but the plaintiff

had not appealed to the Court, thus the case has been finalized.

c) In 2009, a subsidiary submitted a statement of claim to the Alternative Dispute Resolution Office,

Arbitration Institute to consider the dispute with a contractor to pay for compensation arising from alleged

breach of a construction contract. The contractor submitted a statement of defense and counterclaim to

the Arbitration Institute as well. The dispute is in the arbitration process and has not been finalised.

Consequently, the subsidiary cannot estimate the impact as a result of the dispute.

36. Political demonstration

The political demonstration in Bangkok during April - May 2010 has impacted the Company and certain

subsidiaries located in such area. As a result, revenues of the Company and such subsidiaries decreased by

approximately Baht 180.3 million from the same period of previous year.

However, the Group received some supports from government measures to alleviate the impact from the

demonstration.

37. Thai Accounting Standards (TAS) not yet adopted

The Group has not adopted the following new and revised TFRS that have been issued as of the reporting date

but are not yet effective. The new and revised TFRS are anticipated to become effective for annual financial periods

beginning on or after 1 January in the year indicated in the following table.

TFRS Topic Yeareffective

TAS 1 (revised 2009) Presentation of Financial Statements 2011

TAS 2 (revised 2009) Inventories 2011

TAS 7 (revised 2009) Statement of Cash Flows 2011

TAS 8 (revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors 2011

TAS 10 (revised 2009) Events after the Reporting Period 2011

TAS 12 Income Tax 2011


TFRS Topic Yeareffective

TAS 16 (revised 2009) Property, Plant and Equipment 2011

TAS 17 (revised 2009) Leases 2011

TAS 18 (revised 2009) Revenue 2011

TAS 19 Employee Benefits 2011

TAS 20 (revised 2009) Accounting for Government Grants and Disclosure of

Government Assistance 2013

TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates 2013

TAS 23 (revised 2009) Borrowing Costs 2011

TAS 24 (revised 2009) Related Party Disclosures 2011

TAS 26 Accounting and Reporting by Retirement Benefit Plans 2011

TAS 27 (revised 2009) Consolidated and Separate Financial Statements 2011

TAS 28 (revised 2009) Investments in Associates 2011

TAS 33 (revised 2009) Earnings per Share 2011

TAS 34 (revised 2009) Interim Financial Reporting 2011

TAS 36 (revised 2009) Impairment of Assets 2011

TAS 37 (revised 2009) Provisions, Contingent Liabilities and Contingent Assets 2011

TAS 38 (revised 2009) Intangible Assets 2011

TAS 40 (revised 2009) Investment Property 2011

TFRS 2 Share-based Payment 2011

TFRS 3 (revised 2009) Business Combinations 2011

TFRS 5 (revised 2009) Non-current Assets Held for Sale and Discontinued Operations 2011

Management has presently determined the effects from adoptions of the new and revised TFRS on the

consolidated and separate financial statements as follows:

TAS 16 (revised 2009) - Property, plant and equipment

The principal changes introduced by the revised TAS 16 that will affect the Company is that (i) costs of asset

dismantlement, removal and restoration have to be included as asset costs and subject to annual depreciation;

(ii) the depreciation charge has to be determined separately for each significant part of an asset; and (iii) the residual

value of an item of property, plant and equipment has to be measured at the amount estimated receivable currently

for the asset if the asset were already of the age and in the condition expected at the end of its useful life.

Furthermore, the residual value and useful life of an asset have to be reviewed at least at each financial year-end.



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The revised TAS 16 (revised 2009) permits as a transitional provision that these changes may be introduced

prospectively from the year of introduction. The Company intends to adopt this transitional provision which the

management has already determined will not have any material impact on the financial statements.

TAS 19 - Employee benefits

The accounting standard, Employee Benefits, has been in effect for financial periods beginning on or after

1 January 2011. The Company therefore has not presently accounted for the costs of post-employment benefits

under defined benefit plans; other long-term employee benefits; and termination benefits until such costs are

incurred. This accounting standard includes the requirements to recognise expenses and provision for employee

benefits in the period in which the service is performed. The standard requires actuarial assumptions to measure the

obligations and expenses of long-term benefits and to measure on a discounted basis due to the settlement of these

benefits would incur in the subsequent years of services.

Management has determined that the transitional liability as at 1 January 2011 for employee benefits would be

increased Baht 39 million for the Group and Baht 16 million for the Company. Management has intention to recognise

the liability by adjusting to retained earnings at that initial adoption of this standard.

TAS 40 (revised 2009) - Investment property

TAS 40 (revised 2009) has determined accounting practice for investment property and related disclosures.

Investment property is required to be presented separately in the statement of financial position. The entity can

measure its investment property by fair value approach or cost approach. For fair value approach, changes in fair

value are recognised in statement of income. The Group is in process of determining the approach to be applied at

the initial adoption of the standard.

38. Events after the reporting period

On 22 February 2011, the meeting of the board of directors passed a resolution to propose to the annual

general meeting of the Company’s shareholders for their approval of dividend omission for the year 2010.

134 Corporate Information Back

Corporate Information The Erawan Group Public Company Limited


Registration No. 0107537001943

Head Office Ploenchit Center, 6th Floor 2 Sukhumvit Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2257 4588 Fax: 66 (0) 2257 4577 Branch 1 Erawan Bangkok, 494 Ploenchit Road, Kwang Lumpini, Khet Phathumwan, Bangkok 10330 Thailand Telephone: 66 (0) 2250 7777 Fax: 66 (0) 2250 7788 Branch 2 JW Marriott Hotel Bangkok, 4 Sukhumvit Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2656 7700 Fax: 66 (0) 2656 9831 Branch 3 Ibis Patong Phuket, 10 Chalermphrakiat Road, Patong, Katu, Phuket 83150 Thailand Telephone: 66 (0) 7630 3888 Fax: 66 (0) 7630 3889 Branch 4 Ibis Pattaya, 463/79 Pattaya Sai 2 Road, Nongprue, Bang Lamung, Chonburi 20150 Thailand Telephone: 66 (0) 3841 8188 Fax: 66 (0) 3841 8189

Branch 5 Ibis Samui 197 Rob Koh Road, Bophut, Koh Samui, Surat Thani 84320 Thailand Telephone: 66 (0) 7791 4888 Fax: 66 (0) 7791 4889 Branch 6 Ibis Sathorn, 29/9 Soi Ngam Duphli, Rama IV Road, Kwang Thung Mahamek, Khet Sathorn, Bangkok 10120 Thailand Telephone: 66 (0) 2610 5188 Fax: 66 (0) 2610 5189 Branch 7 Ibis Nana, 41 Soi Sukhumvit 4, Sukhumvit Road, Kwang KlongToey, Khet KlongToey, Bangkok 10110 Thailand Telephone: 66 (0) 2667 5888 Fax: 66 (0) 2667 5889 Branch 8 Holiday Inn Pattaya, 463/68 Pattaya Sai 1 Road, Nongprue, Bang Lamung, Chonburi 20150 Thailand Telephone: 66 (0) 3872 5555 Fax: 66 (0) 3872 5556 Branch 9 Ibis Kata, 88/8 Kata Road, Karon, Muang Phuket Phuket 83100 Thailand Telephone: 66 (0) 7636 3488 Fax: 66 (0) 7636 3489 Home Page www.TheErawan.com

135 Corporate Information


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Type of Business Invest and develop hotel properties strategically located to match travelers’

different demand.

Company’s Capital as at 31 December 2010

Registered Capital 2,244,779,001 Baht : 2,244,779,001 ordinary shares at par value 1 Baht/share.

Paid-Up Capital 2,244,779,001 Baht : 2,244,779,001 ordinary shares at par value 1 Baht/share.

Other References 1. Registrar of Ordinary Shares Thailand Securities Depository Co., Ltd.

No. 62 Rachadapisek Road, Klongtoey, Bangkok 10110 Thailand

Telephone: 66 (0) 2359 1200-02

Fax: 66 (0) 2359 1259

2. Auditor Mr. Charoen Phosamritlert

Certificate Public Accountant (Thailand) No. 4068

Ms. Boonsri Chotpaiboonpan


Ms. Vannaporn Jongperadechanon


KPMG Phoomchai Audit Ltd.

48th Floor, Empire Tower

195 South Sathorn Road, Bangkok 10120 Thailand

Telephone: 66 (0) 2677 2000

Fax: 66 (0) 2677 2222

136 Corporate Information Back

Head Office TheErawanGroupPublicCompanyLimited 6th Floor, Ploenchit Center, 2 Sukhumvit Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2257 4588 Fax: 66 (0) 2257 4577 www.TheErawan.com Hotel Business GrandHyattErawanBangkok Hotel 494 Ploenchit Road, Pathumwan, Bangkok 10330 Thailand Telephone: 66 (0) 2254 1234 Fax: 66 (0) 2254 6267 www.bangkok.grand.hyatt.com JW Marriott Hotel Bangkok 4 Sukhumvit Road, Soi 2, Klongtoey Bangkok 10110 Thailand Telephone: 66 (0) 2656 7700 Fax: 66 (0) 2656 7711 www.marriott.com/bkkdt Renaissance Koh Samui Resort and Spa 208/1 Moo 4, Maret, Laem Nan Beach, Koh Samui, Surat Thani 84310 Thailand Telephone: 66 (0) 7742 9300 Fax: 66 (0) 7742 9333 www.marroitt.com/usmbr Six Senses Sanctuary Phuket 32 Moo 5, Paklok, Thalang, Phuket 83110 Thailand Telephone: 66 (0) 7637 1400 Fax: 66 (0) 7637 1401 www.sixsenses.com

Courtyard by Marriott Bangkok 155/1 Soi Mahadlekluang 1, Rajdamri Road, Bangkok 10330 Thailand Telephone: 66 (0) 2690 1888 Fax: 66 (0) 2690 1899 www.courtyard.com/bkkcy Holiday Inn Pattaya 463/68 Pattaya Sai 1 Road, Nongprue, Bang Lamung, Chonburi 20150 Thailand Telephone: 66 (0) 3872 5555 Fax: 66 (0) 3872 5556 www.holidayinn.com/pattaya Ibis Patong Phuket 10 Chalermphrakiat Road, Patong, Katu, Phuket 83150 Thailand Telephone: 66 (0) 7630 3888 Fax: 66 (0) 7630 3889 www.ibishotel.com Ibis Pattaya 463/79 Pattaya Sai 2 Road, Nongprue, Bang Lamung, Chonburi 20150 Thailand Telephone: 66 (0) 3841 8188 Fax: 66 (0) 3841 8189 www.ibishotel.com Ibis Samui 197 Rob Koh Road, Bophut, Koh Samui, Surat Thani 84320 Thailand Telephone: 66 (0) 7791 4888 Fax: 66 (0) 7791 4889 www.ibishotel.com

137 Corporate Information


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Ibis Sathorn 29/9 Soi Ngam Duphli, Rama IV Road, Kwang Thung Mahamek, Khet Sathorn, Bangkok 10120 Thailand Telephone: 66 (0) 2610 5188 Fax: 66 (0) 2610 5189 www.ibishotel.com Ibis Nana 41 Sukhumvit Soi 4, Sukhumvit Road, Kwang Kloengteoy, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2667 5888 Fax: 66 (0) 2667 5889 www.ibishotel.com Ibis Kata 88/8 Kata Road, Karon, Muang Phuket, Phuket 83100 Thailand Telephone: 66 (0) 7636 3488 Fax: 66 (0) 7636 3489 www.ibishotel.com IbisRiverside27 Soi Charoennakorn 17, Charoennakorn Road, Banglamphulang, Klongsan, Bangkok 10600 Thailand Telephone: 66 (0) 2805 9888 Fax: 66 (0) 2805 9889 www.ibishotel.com

Rental Property Ploenchit Center 2 Sukhumvit Road Soi 2, Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2656 8600-4 Fax: 66 (0) 2656 9899 ErawanBangkok494 Ploenchit Road, Pathumwan, Bangkok 10330 Thailand Telephone: 66 (0) 2250 7777 Fax: 66 (0) 2250 7788 www.erawanba

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6th Floor, Ploenchit Center, 2 Sukhumvit Road, Klongtoey, Bangkok 10110, Thailand Tel.: 66 (0) 2257 4588 Fax: 66 (0) 2257 4577 Reg. No. 0107537001943

www.TheErawan.com

Annual Report 2010 The Erawan Group Public Company Limited

The Erawan Group Public Company Limited concerns about environmental protection by using recycled paper produced by Thai company to publish the Annual Report 2010, for the purpose of reducing natural resources exploitation and the global warming crisis

Download - ERAWAN: Annual Report 2010

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