ERAWAN: Annual Report 2009

Annual Report 2009

The Erawan Group Public Company Limited

Annual Report 2009

The Erawan G

roup Public Company Lim

ited


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

12 Destinations of Traditional Thai Market

1. ตลาดน้ำอัมพวา จ.สมุทรสงคราม2. ตลาดโบราณบางพลี จ.สมุทรปราการ3. ตลาดร้อยปีสามชุก จ.สุพรรณบุรี

4. ตลาดเจ็ดเสมียน จ.ราชบุรี5. ตลาดน้ำตลิ่งชัน กรุงเทพมหานคร6. ตลาดเก่าอ่างศิลา จ.ชลบุรี7. กาดกองต้า จ.ลำปาง

1

2 3

4 5 10

611

12

97 8

1. Amphawa Floating Market, Samut Songkhram2. Bang Phli Old Market, Samut Prakan3. Sam Chuk 100 Years Old Market, Suphan Buri

4. Jet Samian Market, Ratchaburi5. Taling Chan Floating Market, Bangkok6. Ang Sila Old Market, Chon Buri

Des

ign

ed b

y P

lan

Gra

fik

Tel.

: 0

22

37

00

80

# 3

00

“Succe s s wi th Integr i t y”

01


The Erawan would like to depict the uniqueness of Thai history

and way of life through these 12 markets.

7. Kadgongta, Lampang8. Nang Loeng Market, Bangkok9. China Town, Bangkok

10. Takua Pa Old Town Market, Phang-nga11. Klong Suan 100 Year Market, Samut Prakan12. Ban Mai Market, Chachoengsao

Annual Report 2009

02

IN REVIEW Vision Mission and Core Values 004

Our Business Strategy 005

Financial Highlights 008

Hotel and Resorts Portfolio 010

Chairman Review 011

President and Chief Executive Officer Review 012

CFO’s Report 014

Report of the Audit Committee to Shareholder 025

Report of the Board’s Responsibility in the Financial Statements 026

ABOUT ERAWAN Corporate Profile 028

Properties in Operation 030

Properties under Development 034

Capital Structure and Management 035

Shareholding of the Board of Directors and Management 043

BUSINESS OVERVIEW Hotel Industry 045

Rental Property 047

Risk Factors 048

GOOD CORPORATE GOVERNANCE Corporate Governance Policy 051

Remuneration of the Board of Directors and Management 060

Corporate Social Responsibility 061

Internal Control 068

Connected Transactions 070

APPENDICES Audit Report of Certified Public Accountant 073

Audit Fee 074

Financial Statements 075

Corporate Information 142

Contents


03


IN REVIEW

Six Senses Destination Spa Phuket

Annual Report 2009

04

VISION To be one of Thailand’s leading hotel and resort developers.

MISSION To develop a well – diversified portfolio of hotels and resorts that fulfills diverse

customers’ needs while continuing to create values to all stakeholders

as well as Thailand’s tourism as a whole.

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 part in activities

that promote community and environment”

004

Annual Report 2009


05


“Succe s s wi th Integr i t y”“Succe s s wi th Integr i t y”

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.

005

Our Business Strategy

Offices Building and Retail Shops

Hotels

74% 100% 100% 100% 100% 100% 100%

100% 100%

Annual Report 2009

06

12 Destinations of Thai Hospitality

Bangkok

1. Grand Hyatt Erawan Bangkok Hotel2. Courtyard by Marriott Bangkok Hotel3. JW Marriott Bangkok Hotel4. ibis Bangkok Nana5. ibis Bangkok Sathorn

Pattaya

6. Holiday Inn Pattaya7. ibis Pattaya

1

2 3

4 6 9

5 7

8

11

1210


07


Samui

8. Renaissance Koh Samui Resort and Spa9. ibis Samui Bophut

Phuket

10. Six Senses Destination Spa Phuket11. ibis Phuket Patong12. ibis Phuket Kata

Annual Report 2009

08

Description 2007 2008 2009

Revenues from Operations 3,194,350 3,375,977 3,149,033

Total Revenues 3,391,397 3,412,960 3,191,623

Gross Profit 1,833,994 1,921,298 1,658,132

EBITDA 1,010,823 974,030 740,401

Net Profit (Loss) 401,921 78,328 -229,411

Total Assets 10,255,349 12,630,098 13,288,817

Total Liabilities 6,504,816 8,871,685 9,749,858

Total Shareholders’ Equity 3,750,534 3,758,413 3,538,959

Equity Attributable to Company’s Shareholders 3,649,392 3,657,970 3,406,397

Paid-up Share Capital 2,214,574 2,244,779 2,244,779

Number of Paid-up Shares (Thousand shares) 2,214,574 2,244,779 2,244,779

Par Value Per Share (Baht) 1 1 1

Earning Per Share (Baht) 0.2 0.04 -0.1

Dividend Per Share (Baht) 0.06 0.01 -

Book Value Per Share (Baht) 1.65 1.63 1.52

Significant Financial Ratio

Current Ratio (Times) 0.22 0.41 0.52

Quick Ratio (Times) 0.1 0.23 0.27

Liquidity Ratio (Cash Flow Basis) (Times) 0.34 0.33 0.38

Gross Profit Ratio 57.41% 56.91% 52.66%

Net Profit Margin 11.85% 2.30% n/a

Return on Total Assets 4.24% 0.68% n/a

Return to Equity 12.47% 2.14% n/a

Debt to Equity Ratio (Times) 1.73 2.36 2.76

Interest Bearing Debts to Equity Ratio (Times) 1.37 2.06 2.42

Interest Coverage Ratio (Times) 3.42 3.12 2.38

(Unit: Thousand Baht)

008

Financial Highlights

Annual Report 2009


09


4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Net Profit EBITDA Revenue

2005

2006

2007

2008

2009

2005

2006

2007

2008

2009

“Succe s s wi th Integr i t y”“Succe s s wi th Integr i t y”

009

2005

2006

2007

2008

2009


Baht Million

897

1,15

3

1,01

1

974

740

258

410

402

78

(229

)

2,85

8

3,33

1

3,19

4 3,37

6

3,14

9

Annual Report 2009

010

รายงานประจำปี2552

010

Renaissance Koh Samui

Resort and Spa

ibis Samui Bophut

ibis Krabi*


ibis Phuket Kata

ibis Phuket Patong

ibis Bangkok Nana

ibis Bangkok Sathorn

ibis Bangkok Riverside*

ibis Sriracha*

ibis Pattaya

Holiday Inn Pattaya

Grand Hyatt Erawan Bangkok

Courtyard by Marriott Bangkok

JW Marriott Bangkok

ibis Hua-Hin*

* Properties under Development

010

Annual Report 2009

Hotel and Resorts Portfolio


011


The world’s economic slowdown, Thailand’s political uncertainties and the H1N1 influenza undoubtedly led to the adverse effect of the Thai tourism industry in 2009. For The Erawan, thanks to our risk management programs implemented since late 2008, we practically managed through the crisis although we did suffer from operating loss. This was certainly a result of an effective collaboration between our management and Board of Directors. More importantly, this would not have been achieved without solid support from all stakeholders including our suppliers, our hotel management partners, our lenders and our employees, and our investors’ patience and understanding. Despite on-going events, we remain committed to strengthen our fundamental and enhance our development for sustainable growth. Supervision mechanisms were essentially based on the principle of corporate governance. We committed to do our business on a transparency basis as well as to adequately, openly and regularly disclose relevant information on a timely basis. As a result, in 2009, The Erawan received the highest ranking, “Excellence”, from the survey of the Corporate Governance Report of Thai Listed Companies 2009 as evaluated by the Thai Institute of Directors. We were also one of the three listed companies with market capitalization of no more than Baht 10 billion in Group 1 that was nominated for the IR Excellence Award from the Stock Exchange of Thailand. Last but not least, our annual general meeting of shareholders was rated “Excellence” in terms of quality assessment. We would like to express our deep appreciation to everyone who has supported us through the difficult times in 2009. We intend to continue developing our organization for the benefit of our shareholders and all stakeholders and we strive to be a good corporate citizen of a society we call home.

Mr. Prakit Pradipasen Chairman of the Board of Directors


Board of the Year for Distinctive Practices 2006/2007

Excellent CG Report 2009

Chairman Review

Annual Report 2009

012

2009 was indeed a year of test – the test of strength of Thailand’s tourism industry and hotel business. All negative events ranging from the world’s economic crisis to political instability started since late 2008 and the H1N1 epidemic influenza inevitably affected our business. For The Erawan Group (“The Erawan”), we opened eight hotels as planned over of the past 18 months starting from mid 2008 as part of our Phase I expansion plan set forth 4 years ago to become Thailand’s leading hotel investment group. The said industry downturn led to a 20 percent reduction in revenues from our hotels operating before 2008 while those from newly-opened hotels failed to meet their targets. As a result, we incurred a net loss of Baht 229 million for 2009. Nevertheless, this did not cause us financial difficulties as we still registered nearly Baht 800 million of EBITDA which sufficiently cover our fixed obligations for the year. (More details of our financial performances in the CFO’s Report) Despite all the said unusual events, we continued to receive strong support from financial institutions in developing our hotels. In 2009, we opened three new hotels including a 200-room ibis Bangkok Nana in Q1; a 367-room Holiday Inn Pattaya and a 258-room ibis Phuket Kata in Q4. We now own 12 hotels with total of 3,089 rooms in Thailand’s major destinations which can accommodate a wide range of customers from luxury to economy segment and have become one of the hotel owners with the largest number of rooms offered in Thailand. Our strategy set forth through the Phase I expansion aims not only to generate revenues and assets growth but also to diversify our risk that may incur from a particular market at different time. We experienced that despite difficulties during the past year, our new hotels under the Phase I expansion plan managed to contribute approximately 24 percent incomes to total revenues. As a result, our total revenues declined 7 percent only from the previous year. With regard to project management, we successfully complete all new hotels with brand standards and lower than expected investments. We have so far saved more than Baht 400 million investment budget or approximately 6 percent of the total investment. As a result, our expected return of investment is still more or less closed to the original target we set for the project even though the hotel revenues during their ramp up periods did not reach the expected level.

President and Chief Executive Officer Review


013


President and Chief Executive Officer Review


We believe we were able to get through the industry crisis this time and several other incidents in the past because of our well-prepared risk management plans as well as our ability to quickly adjust ourselves to cope with the situation. This included not only a timely investment readjustment of new projects and financial obligations rearranging but also an on-going review of cost reduction in personnel and operation expenses. In addition, it has been our intention to always restore and modernize our existing assets to increase our competitiveness, continue to enhance our corporation by upgrading our operating systems and human resources, build database to better serve decision-making and promote our corporate culture, all of which is for a sustainable growth. We commit to manage our business under the principle of good corporate governance and to raise corporate social responsibility (CSR) awareness to ensure that it is actually implemented among staff of all levels so that our interactions with all stakeholders will be in line with what we have set. (More details in Corporate Social Responsibility) To ascertain the results, we regularly conduct a survey of stakeholders to improve our operations and practices. Such surveys have been applied as one of the important factors to determine annual remunerations of our employees at all levels. We remain confident in Thailand’s tourism competitiveness in the long run. Recovery of tourists’ arrivals since Q3 and particularly in Q4 once again demonstrated the resilience of the country’s tourism industry despite internal and external difficulties. Furthermore, Asia Pacific, in particular Southeast Asia, continues to be the region which international tourism organizations expect to see a higher growth rate than any other regions in the world. We therefore strongly believe that all 12 hotels of The Erawan will respond well to the needs of a diverse mix of the customers. This will not only benefit our shareholders and stakeholders but also strengthen the standard of Thailand’s hotel industry. Mr. Kasama Punyagupta President and Chief Executive Officer

Annual Report 2009

014

(A) 2009 Profit & Loss Overview Thailand faced with number of turbulences over the year from internal political conflicts to the effects of the economic downturn which spread through every part of the world since late 2008. Knowing that we would face with such a challenging market environment in 2009, we implemented various risk management action plans from operating cost-savings at property level which can be timely adjusted to deal with different market scenarios at different time to an execution of various financial measures at the company level to prepare for the worst including prioritising capital expenditure and rearranging loan repayment which reduce our debt obligation in 2009 to only the interest charges and no long term loan principal repayments with no penalty. As such, repayment amounts for 2009 and 2010 were reduced by almost Baht 1 billion. Key financial covenants were also waived or relaxed to further mitigate financial risks. Having these counter measures put in place since before the end of 2008 allowed us to focus on business strategy for 2009 which is no doubt a challenging year for every industry. On demand side, Thailand tourism industry gradually picked up from its dip in Dec-08 with a rebound of tourist arrivals since January this year. Though not back to normal or near the level our hotels experienced during the good years, an increasing occupancy and revenue per available room (“RevPar”) on a month-on-month (“m-m”) basis during the first three months of this year represented a good sign of recovery and in line with pattern of recovery we experienced through several incidents in the past which demands progressively returned within 4 - 6 weeks. Such promising demand recovery was however put on the brakes during the second quarter when the internal political conflicts led to violence in mid-April followed by concerns over the spread of H1N1 influenza across many countries in the world in early May which was certainly an unexpected factor. As political situations positively developed and the world learns how to handle H1N1 on everyday life, we saw demand picked up again in the third quarter and continued through the last quarter of the year. International tourist arrivals at Suvarnabhumi International Airport which is the main gate to Thailand started to show year-on-year (“y-y”) growth from September through the year end and Thailand was able to maintain total tourist arrivals at 14 millions level in 2009 despite the aforementioned hiccup and global economic downturn. Business operation wise, our focus has been on maximising top line while cost-savings initiatives remained in tact. The benefits from our hotel diversification strategy set out 4 years ago have become more visible under these market difficulties. In general, our midscale and economy hotels were relatively less affected than the luxury hotels. The strongest growth came from our economy segment.

CFO’s Report


015


CFO’s Report


On new hotel developments, we opened 3 new hotels as planned in 2009 including our 5th ibis hotel (2nd in Bangkok), ibis Bangkok Nana in March, our 2nd midscale hotel, Holiday Inn Pattaya in October and our 6th ibis hotel (2nd in Phuket), ibis Phuket Kata in December. These newly opened hotels added another 825 rooms to our hotel portfolio. We now own 12 hotels, total of 3,089 rooms, from luxury to midscale and to economy segment across Thailand’s major tourist destinations. The construction of our 7th ibis (3rd in Bangkok) on the riverside of Bangkok’s renowned Chaophraya River is on schedule with target opening in the fourth quarter of 2010. This ibis Bangkok Riverside will be the largest among our ibis hotels with 267 rooms in total. All in all, the market weakness in 2009 led to 8 percent drop of hotel income despite 295 percent income growth of the 5 hotels opened in 2008 and approximately Baht 120 million additional income generated from the 3 new hotels opened in 2009. Our rental properties were not materially impacted and continued to generate income and profit growth to the consolidated performance. Consolidated earnings before interest, tax and depreciation & amortization (“EBITDA”) remained positive at Baht 790 million which was above our finance costs, taxes and non-recurring expenses. However the remaining balance was not sufficient to cover the non-cash item such as

depreciation & amortization and hence leading to a net loss for the year of Baht 229 million in 2009.

Hotels’ Operating Income 2,986 2,748 -8%

Rental and Service Income 389 401 +3%

Total Operating Income 3,376 3,149 -7%

Operating Expenses (2,299) (2,359) +3%

EBITDA 1,077 790 -27%

Depreciation & Amortization (505) (628) +24%

Operating Profit 572 162 -72%

Other Income 28 43 +50%

Interest Expenses (274) (307) +12%

Pre-tax Profit (Loss) 327 (102) -131%

Taxes (93) (46) -51%

Minority Interest (61) (32) -48%

Normalized Net Profit (Loss) 173 (180) -204%

Non Recurring Items - Net* (94) (50) -47%

Net Profit (Loss) 78 (229) -393%

E.P.S. 0.04 (0.10) -391%

Baht Million 2008 2009 Changes

Note: *Details are explained in later section of this report.

Annual Report 2009

016

In Baht Million

CFO’s Report

Income In line with our diversification strategy, the composition of our total income has changed over the years with the most significant growth from “Economy Hotels” segment as illustrated in the table below.

Numbers of hotels, if more than one, are in parentheses.

3,500

3,000

2,500

2,000

1,500

1,000

500

0

2007 2008 2009

Baht Million

Luxury Central Bangkok Hotels 2,528 74.6% 2,482 72.7% 1,997 62.6%

Luxury Resorts 189 5.6% 187 5.5% 182 5.7%

Midscale Hotels 31 0.9% 261 7.6% 272 8.5%

Economy Hotels - 0.0% 58 1.7% 297 9.3%

Income from Hotel Properties 2,748 81.0% 2,987 87.5% 2,748 86.1%

Rent from Office Space 178 5.2% 159 4.7% 172 5.4%

Rent from Retail Space 164 4.8% 141 4.1% 144 4.5%

Others (food court, parking, etc.) 104 3.1% 89 2.6% 84 2.6%

Income from Rental Properties 446 13.2% 389 11.4% 401 12.6%

Other Income 25 0.7% 28 0.8% 43 1.3%

Gains from Sales of Investment 172 5.1% 9 0.3% 0 0.0%

Total Income 3,391 100.0% 3,413 100.0% 3,192 100.0%

2007 2008 2009

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

Remark: No contribution from Amarin Plaza from the first quarter of 2007 onwards.

Other income

Retail

Office

Economy Hotels (6)

Midscale Hotels (2)

Luxury Resort (2)

Luxury CBD Hotels (2)

3,220 3,405+6% -6% 3,192


017


CFO’s Report

Operating statistics and analysis on income from all our properties, including 3 new hotels, for 2009 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 9 percent in average occupancy and 14 percent in average room rates (“ARR”). This resulted in a 25 percent decrease of revenue per available rooms (“RevPar”) and the combined room revenues from these two flagships. Nevertheless, GHEB and JWM continued to demonstrate their competitiveness against their peers with GHEB maintaining its No. 1 RevPar ranking in the CBD and JWM’s RevPar ranked No. 4 regardless the tough business environment. For resort destinations, Phuket remained stronger than Samui. Our Renaissance Koh Samui Resort and Spa (“RKS”) closed the year with 11 percent lower occupancy and 17 percent lower ARR which resulted in a 31 percent drop of RevPar and room revenues. As for our ultra-luxury Six Senses Destination Spa Phuket (“SSP”), fully opened in Dec-08, its RevPar improved almost double in 2009 which was its first full year of operation with occupancy up by 8 percent y-y as driven by the promotional prices given throughout the year.

In total, income from the four luxury hotels dropped 18 percent from a year ago to Baht 2,203 million in 2009 which mainly caused by a 24 percent decrease of combined room revenues while income from food & beverage (“F&B”) dropped only 9 percent. The lower drop of F&B was mainly due to the fact that our F&B operations at GHEB and JWM normally supported by local customers than hotel guests, thus not much dependent on hotel occupancy. The income breakdowns for our 4 luxury hotels in 2009 are in the diagram as follows:

40,000

36,000

32,000

28,000

24,000

20,000

16,000

12,000

8,000

4,000

0

Baht/room/night

2008 2009 2008 2009 2008 2009 2008 2009Six Senses Destination

Spa PhuketRenaissance SamuiJW MarriottGrand Hyatt

Erawan

Average Room Rate

(ARR)

Revenue per available room

(RevPar)

6,334

69%

4,3945,589

59%

3,305

5,30475%

3,9554,47066%

2,943

6,192

66%

4,0995,163

55%

2,835

42,345

4%

1,524

24,558

12%

2,834

Occupancy rate

Note: Six Senses ARR is based on Spending/Room.

Annual Report 2009

018

• Midscale Hotels We now have 2 hotels under the midscale segment, Courtyard by Marriott Bangkok Hotel (“CYB”) in its second year of operation and the newly opened Holiday Inn Pattaya (“HIP”). As a result of industry softness, CYB recorded 20 percent lower RevPar in 2009 as compared to the same period a year ago. HIP which offered promotional rates during its first three months of operations was able to command 61 percent occupancy. Their statistics in 2009 or since openings are as follows:

CFO’s Report

Baht Million

2008 2009 2008 2009 2008 2009 2008 2009Six Senses Destination

Spa PhuketRenaissance SamuiJW MarriottGrand Hyatt

Erawan

From other operations

From food & beverages operations

From room sales

621

611

570

458

419

638

366

474

1,400

1,200

1,000

800

600

400

200

0

Note: Standalone basis (excluding the effects of eliminations for consolidated accounts).

106

80110

73

38 293316

1,338

1,167

913

169 118

1763

1,109

117 81

Baht/room/night

2008Courtyard by Marriott Bangkok

2,394

70%

1,686

3,500

3,000

2,500

2,000

1,500

1,000

500

0

2009

2,067

65%

1,342

Oct-Dec 2009

1,968

61%

1,203

Holiday Inn Pattaya

Occupancy rate Average Room Rate

(ARR)


(RevPar)



019


• Economy Hotels Our properties under this segment are all under “ibis” brand. At the end of 2009, we had total of 6 economy hotels which proven to be the most resilient segment providing the highest growth y-y. 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”) had their occupancy and RevPar grew significantly y-y while the newly opened ibis Bangkok Nana (“INN”) led the pack with highest occupancy (77 percent) and RevPar and ibis Phuket Kata (“IKT”) in its first month of operation achieved 58 percent occupancy with the highest ARR as Phuket moved toward its high season in Dec-09. The diagram below provides their 2009 statistics.

Our midscale hotels recorded total income of Baht 274 million in 2009, a 4 percent increase from last year despite an 18 percent drop of CYB’s total income. This was mainly contributed from HIP which had only three months of operation during the fourth quarter of 2009. The income breakdowns for our 2 midscale hotels in 2009 are in the diagram below.

CFO’s Report

Baht Million

2008Courtyard by Marriott Bangkok

400

350

300

250

200

150

100

50

0

2009 Oct-Dec 2009Holiday Inn Pattaya


54

261

195

12

50

215

155

10

15

57

41



From room sales

Annual Report 2009

020

The six ibis hotels combined to generate Baht 297 million in revenue in 2009, a 411 percent increase y-y. Majority of their revenue came from room sales. Revenue breakdown by property and by type of income are listed below.

Baht/room/night

May-Dec 2008

2009

ibis Phuket Patong

Average Room Rate

(ARR)


(RevPar)

1,168

355

Occupancy rate


1,136

726

Jul-Dec 2008

2009

ibis Pattaya

885

248

790

502

Sep-Dec 2008

2009

ibis BangkokSathorn

1,062

418

948

565

Oct-Dec 2008

2009

ibis Samui Bophut

1,286

155

1,147

272

Mar-Dec 2009

Dec2009

ibis Phuket Kata

1,024

788

1,203

694

ibis BangkokNana

2,500

2,250

2,000

1,750

1,500

1,250

1,000

750

500

250

0

30% 64%

28%64%

39%60%

12%24%

77%

58%

90

80

70

60

50

40

30

20

10

0

Baht Million

27

22Note: Standalone basis (excluding the effects of eliminations for consolidated accounts).

13

83

68

14

12

10

58

47

110

9

10

56

44

5

8

36

26

6

56

48

1

7

6



From room sales

4

4

2

May-Dec 2008

2009

ibis Phuket Patong

Jul-Dec 2008

2009

ibis Pattaya

Sep-Dec 2008

2009

ibis BangkokSathorn

Oct-Dec 2008

2009

ibis Samui Bophut

Mar-Dec 2009

Dec 2009

ibis Phuket Kata

ibis BangkokNana

1

2

1 2

2

1

2

CFO’s Report


021


Occupancy 96.1% 93.5% -2.6% 89.8% 92.7% +2.9%

Average Receipt (Baht/sqm/month) 452 496 +10% 1,206 1,223 +1%

PC EB

2008 2009 2008 2009 % change % change

• Rental Properties Our 2 rental properties, Ploenchit Center (“PC”) and Erawan Bangkok (“EB”), continued to generate steady income growth to the group with higher rental rates continuously y-y. The statistics are in the table below:

The combined income from rental business (including those from shops in GHEB’s arcade) in 2009 was Baht 401 million representing an increase of 3 percent from last year. PC’s income grew 4 percent to Baht 289 million and EB’s income also increase 3 percent to Baht 98 million as our tenants were renewing rental agreements at higher rates during the year. Breakdown of income from PC and EB over the past 2 years are in the diagram below:

Ploenchit Center Erawan Bangkok

3253002752502252001751501251007550250

2008 2009 2008 2009

277 289

Baht Million

95

13

83

98

11

86

71

48

159

69

48

172

Others

Retail

Office

CFO’s Report

Annual Report 2009

022CFO’s Report

Profit from Operations Our Earnings before Interest, Tax, Depreciation and Amortization (“EBITDA”) excluding other income and non-recurring items was down to Baht 790 million in 2009. We also recorded a lower EBITDA margin of 25 percent in 2009 vs. 32 percent in 2008 which was mainly due to revenue contraction of the pre-2008 hotels as the new hotels opened during 2008 and the rental properties all showed both EBITDA and margins improvement from 2008. With the addition of 3 new hotels in 2009 and the 5 new hotels opened in 2008 were in their full year of operations in 2009, our Depreciation and Amortization (“D&A”) increased by Baht 123 million or 24 percent from last year to record at Baht 628 million for 2009. With the said EBITDA above, our consolidated operating profits stood at Baht 162 million for 2009 or a drop of 72 percent from a year ago. The diagram below shows by-property profits excluding allocation of head-office’s selling and administrative expenses:

2008 2009

500

450

400

350

300

250

200

150

100

50

0

Baht Million

Erawan Bangkok

PloenchitCenter


Renaissance Koh Samui

JWMarriott

Grand HyattErawan

299

436

169

301

17 20

358

472

187

318

* Standalone basis (excluding the effects of eliminations for consolidated accounts and head office expenses).

EBITDA

Operating Profit

32

8396

161

104

170

3660

3963

1061

2008 2009 2008 2009 2008 2009 2008 2009 2008 2009

49 49

6 ibis

2009


023


Finance Costs Our average cost of funding maintained within the same range of 4 percent as the year before. Total interest expenses increased 12 percent to Baht 307 million in 2009 which was mainly due to the recognition of interest charges on our 3 new hotels opened this year and the effects of full year operations from those opened in 2008. The 5 new hotels opened in 2008 which had Baht 36 million of interest payments during 2008 recorded Baht 91 million in 2009 while the 3 new hotels opened in 2009 added another Baht 19 million. Interest charges of the pre-2008 properties in 2009 were actually lower than those in 2008. Non Recurring Items Non-recurring items for 2009 were mainly pre-opening expenses from new hotels prior to their openings. The net amount this year is a negative Baht 50 million (mainly from ibis Bangkok Nana opened in Mar-09, Holiday Inn Pattaya opened in Oct-09 and ibis Phuket Kata opened in Dec-09). These costs are booked under “Selling and administrative expenses” in our P&L. For the year 2008, the net amount in our P&L is a negative Baht 94 million which resulting from a combined pre-opening expense of Baht 103 million and Baht 9 million additional gains from the Sale of Amarin Plaza (although transaction was completed in 2007, gradual completion of due diligence process resulted in this Baht 9 million additional gains in 1Q08 and was booked as “Other income” in our P&L). (B) Financial Status Capital Expenditure We recorded total assets of Baht 13,289 million as of 31 December 2009, an increase of 5 percent from Baht 12,630 million at the end of 2008. This is a result of Baht 1,373 million capital expenditure occurred during the year, majority of which were for the 3 new hotel projects already opened in 2009 and one new project (the ibis Riverside) under construction due to open in 2010. Sources of funding to support this capital expenditure were project loans drawn during the year and our cashflow from operation. At the end of 2009, we already completed 10 hotels of our Phase I expansion which initially targeted to add 14 hotels to our investment portfolio to become one of the leading players in Thailand’s hospitality business. The remaining 3 ibis hotels in Hua Hin, Krabi, and Sriracha which we have already secured land and project financing remained on hold at the end of 2009. The 3 projects are expected to require additional Baht 880 million in total should we decide to resume.

CFO’s Report

Annual Report 2009

024

The breakdown of 2009 capital expenditure is as follows:

CFO’s Report

Leverage Total liabilities of the Company increased 9 percent from Baht 8,872 million as of 31 December 2008 to Baht 9,750 million as of 31 December 2009. This is mainly from the project loan drawdown for new projects, since we did not have to pay back long term loan principal in 2009, total existing long term loans remained the same as 2008 while the additional drawn down of project loans led to an increase of total interest-bearing debts increase to Baht 8,570 million at the end of 2009 vs. Baht 7,705 million in Dec-08. On the other hand, total equity was thinner from a net loss incurred in 2009. As a result, debt-to-equity ratio (D/E) increased to 2.7 times at the end of this year. Despite this high leverage, we believe that our liquidity is still at a manageable level on several accounts. All project loans have over 2 years’ grace period and the repayments have been designed to gradually match with the expected cash flow generated by each project especially during its first three year ramp up period. In the next three years (2010 - 2012), only 25 percent of total loan outstanding will be repaid. Additionally, our interest coverage is still high at 2.4 times while Baht 1,732 million out of total credit lines of Baht 1,939 million short-term loan facility remained unused at end of 2009. Kamonwan Wipulakorn Chief Financial Officer

Holiday Inn Pattaya

ibis #1 - 6

ibis #7

Pre-2008 Hotels

Rental properties & Others

1%

47%

27%

5%

20%


025


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. In 2009, the Audit Committee met four times to consider the following: 1. To review the quarterly financial statements and the 2009 financial statements where it exchanged views with the auditor, Executive Vice President, Treasury Department, 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 interests of 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; to review an annual budget and to supervise and evaluate the Internal Audit Department’s performance. The Audit Committee, having reviewed the 2010 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 Miss Boonsri Chotpaiboonpun, CPA No. 3756 and/or Mr. Charoen Phosamritlert, CPA No. 4068 and/or Miss Vannaporn Jongperadechanon, CPA No. 4098 of KPMG Phoomchai Audit Ltd. as the Company’s auditor. Mr. Sansern Wongcha-um Chairman of the Audit Committee 19 February 2010


Report of the Audit Committee to Shareholder

Annual Report 2009

026

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 31 December 2009.

Mr. Prakit Pradipasen Mr. Kasama Punyagupta Chairman of the Board of Directors President and Chief Executive Officer

Report of the Board’s Responsibility in the Financial Statements

027



ABOUT ERAWAN


028

Annual Report 2009

The Erawan Group Public Company Limited: Established on 29 December 1982 and continue to develop various real-estate (Hotels and Rental Properties) over the past 28 years.

2008 Six Senses Destination Spa Phuket1991 Grand Hyatt Erawan Bangkok 1996 Ploenchit Center 1997 JW Marriott Hotel Bangkok

1985 Amarin Plaza

1988 Company

registered on

Stock Exchange

of Thailand

1991 Grand Hyatt

Erawan Bangkok

1994 Converted in to

a Public Company

1996 Ploenchit Center

1997 JW Marriott Hotel

Bangkok

Annual Report 2009

028

Corporate Profile

029



2009 Holiday Inn Pattaya2008 Six Senses Destination Spa Phuket 2008 - 2009 6 ibis Hotels

2004 Erawan Bangkok

2005 Renaissance

Koh Samui Resort

and Spa

2007 Amarin Plaza Sold

Courtyard by

Marriott Bangkok

2008 Six Senses

Destination Spa

Phuket


029


2008 4 ibis Hotels:

- ibis Phuket Patong

- ibis Pattaya

- ibis Bangkok

Sathorn

- ibis Samui Bophut

2009 Holiday Inn Pattaya

2 ibis Hotels:

- ibis Bangkok Nana

- ibis Phuket Kata

Corporate Profile

030

Annual Report 2009

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 12 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


Rating : Luxury Hotel Number of rooms : 380 rooms Location : Ratchadamri Road, Bangkok Remaining on the current lease: 32 years

www.bangkok.grand.hyatt.com

JW Marriott Hotel Bangkok

Rating : Luxury Hotel Number of rooms : 441 rooms Location : Sukhumvit Soi 2, Bangkok Remaining on the current lease: 35 years

www.marriott.com/bkkdt

Renaissance Koh Samui Resort and Spa

Rating : Luxury Hotel Number of rooms : 45 deluxe rooms

and 33 pool villas Location : Lamai Beach, Koh Samui,

Surat Thani www.marriott.com/usmbr

Properties in Operation

031





Rating : Midscale Hotel Number of rooms : 316 rooms Location : Soi Mahadlekluang,

Ratchadamri Road, Bangkok Remaining on the current lease: 28 years

www.courtyard.com/bkkcy

Holiday Inn Pattaya

Rating : Midscale Hotel Number of rooms : 367 rooms Location : No. 1 Beach Road Pattaya,

Chon Buri www.holidayinn.com/pattaya

ibis Phuket Patong

Rating : Economy Hotel Number of rooms : 258 rooms Location : Patong Beach, Phuket

www.ibishotel.com



Rating : Luxury Destination Spa Number of rooms : 61 pool villas Location : Koh Naka Yai, Phuket

www.sixsensesdestinationspas.com

032

Annual Report 2009

ibis Pattaya

Rating : Economy Hotel Number of rooms : 259 rooms Location : Second Road, Nhongprue,

Bang Lamung, Pattaya, Chon Buri www.ibishotel.com

ibis Bangkok Sathorn

Rating : Economy Hotel Number of rooms : 213 rooms Location : Soi Ngam Duphli,

Rama IV Road, Bangkok Remaining on the current lease: 28 years

www.ibishotel.com

ibis Bangkok Nana

Rating : Economy Hotel Number of rooms : 200 rooms Location : Sukhumvit Soi 4, Bangkok Remaining on the current lease: 29 years

www.ibishotel.com


ibis Samui Bophut

Rating : Economy Hotel Number of rooms : 258 rooms Location : Bophut Beach, Koh Samui,

Surat Thani www.ibishotel.com

033



Rental Properties

ibis Phuket Kata

Rating : Economy Hotel Number of rooms : 258 rooms Location : Kata Beach, Phuket

www.ibishotel.com

Ploenchit Center

Office Building : 34,490 sq.m. Location : Sukhumvit Soi 2, Bangkok Remaining on the current lease: 15 years

Erawan Bangkok

Retail Shops: : 6,680 sq.m. Location : Ploenchit Road/

Ratchadamri Road, Bangkok Remaining on the current lease: 32 years

www.erawanbangkok.com


034

Annual Report 2009

ibis Krabi

Rating : Economy Hotel Number of rooms : 200 rooms Location : Plot of Iand on Ao-Nang, Krabi Target customer : Leisure

www.ibishotel.com

Ibis Sriracha

Rating : Economy Hotel Number of rooms : 200 rooms Location : Central Commercial

of Sriracha, Chon Buri Target customer : Business

www.ibishotel.com

ibis Hua-Hin

Rating : Economy Hotel Number of rooms : 200 rooms Location : Khao Takiap, Hua-Hin,

Prachuap Khiri Khan Target customer : Leisure

www.ibishotel.com

ibis Bangkok Riverside

Rating : Economy Hotel Number of rooms : 267 rooms Location : Charoen Nakhon Road Soi 17,

Chaophraya River, Bangkok Target customer : Leisure Remaining on the current lease: 25 years

www.ibishotel.com

Properties under Development

035




Capital Structure As at 30 December 2009, the company’s paid up capital is Baht 2,244,779,001 divided into: 2,244,779,001 ordinary shares at par value Baht 1 per share. Top ten shareholders holding the highest number of shares as of 30 December 2009 are as follows:

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:

Shareholder’s name Number of shares % of total shares

Major Shareholders Number of shares % of total shares

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

2. City Holding Co., Ltd. 243,481,318 10.85%

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

4. Mrs. Wansamorn Wannamethee 120,683,649 5.37%

5. SKANDINAVISKA ENSKILDA BANKEN A/S 105,423,400 4.70%

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

7. MBK Company Limited 96,605,538 4.30%

8. STATE STREET BANK AND TRUST COMPANY 78,315,700 3.49%

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 1,388,005,461 61.82%

Vongkusolkit Group 871,077,021 38.80%

Wattanavekin Group 698,966,657 31.14%

Total major shareholders 1,570,043,678 69.94%

Foreign Custodian Accounts Group 271,747,020 12.11%

Local Funds Group 45,585,598 2.03%

Insurance Co. Group 1,409,400 0.06%

Company’s executives 20,922,417 0.93%

Others 335,070,888 14.93%

Total 2,244,779,001 100.00%

Capital Structure & Management

036

Annual Report 2009

Directors that represent the major shareholders are as follows:

Management Structure

The Board of directors consists of the twelve (12) directors as bellowing, 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. 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

Name Title Education

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

and Independent Director Wayne State University, Michigan, U.S.A.

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

and Chairman of University of Bridgeport, Connecticut, U.S.A.

the Audit Committee

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

and Member of Kansas State University, U.S.A.

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

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




037





Company Secretary: Miss Kanokwan Thongsiwarugs Authority to Sign on Behalf of the Company Two of the following four; 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)

Name Title Education

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, U.S.A.

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 Chief • Master of Business Administration

Executive Officer (International Business),

University of Bridgeport, Connecticut, U.S.A.

038

Annual Report 2009

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 and 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 Pongsadadt 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 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.


039



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.


040

Annual Report 2009

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

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 strategies.

Term of Nominating and Corporate Governance Directors: 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.


041



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 Pongsadadt 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, 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. Mr. Surapon Jaimsuwan Vice President 8. Mr. Viboon Chaisutyakorn Vice President 9. Ms. Pakinee Pramtade 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 data bases for the purposes of management and decision making.


042

Annual Report 2009

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 Clause 18 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.


043




Shareholding of the Board of Directors and Management

Name Title

1. Mr. Prakit Pradipasen Chairman of the Board

of Directors 150,058 150,058 -

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

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

4. Mr. Dej Bulsuk Director 660,000 1,162,916 (502,916)

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 3,693,416 1,278,916 2,414,500

11. Mr. Krisda Monthienvichienchai Director - - -

12. Mr. Kasama Punyagupta President and Chief

Executive Officer 11,510,211 11,510,211 -

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

Vice President 1,000,000 - 1,000,000

17. Mr. Suchai Wuthworachairung Assistant Executive

Vice President 1,825,716 1,825,716 -

18. Mr. Surapon Jaimsuwan Vice President - - -

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

20. Ms. Pakinee Pramtade Vice President - - -

Number of shares

As of 31 Dec. 2009 As of 31 Dec. 2008 Change +(-)

Note: From report of securities held by the Company’s directors as of 30 December 2009.

044

Annual Report 2009

BUSINESS OVERVIEW

Holiday Inn Pattaya


045



Hotel Industry

Outlook of the Tourism Industry In 2009, it was an extremely challenging year for Thai tourism due to the world economic slowdown, after effect of the airport closure in late 2008, political unrest during Songkran Day and the H1N1 influenza epidemic in Q2 to which the World Health Organization (WHO) elevated the situation to Level 5 at that time. The average occupancy rate of hotels all over the country recorded low at 48 percent in 1H09, which was even lower than the rate in 1H03 when there was a SARS epidemic. The number of international tourist arrivals decreased to 6.6 million in 1H09, or -16 percent compared to the same period last year. However, during the second half of 2009, both tourist arrivals and hotel occupancy rate slightly increased. In the last quarter, the number of tourists arrivals was closed to the same period of 2007, which was a year before the crisis. As a result, the number of tourist arrival recorded at 14.1 million in 2009 full year, which decreased only 3 percent from 2008. Based on the Tourism Authority of Thailand (TAT), the number of international passengers in the last quarter of 2009 increased 31 percent from the previous year. There was a growth in demand from domestic market due to campaigns initiated by the TAT and public sectors through various projects such as the Thais-Travel-Thailand campaign, the Traveling-Thailand-Joyfully campaign, the Thais-Travel-Thailand for Economic Stimulus campaign and the 12 Months-Seven Stars-Nine Suns campaign. In addition, government agencies were urged to organize seminars locally. As a result, the TAT expected the Thais to hit 87 million trips as targeted.

International tourist statistics

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010F

Remark: Tourism Authority of Thailand,

Ministry of Tourism and Sports

25%

20%

15%

10%

5%

0%

-5%

-10%

Percent changeNumber of tourist arrival

18.0

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0.0

Millions

SARS

Coup

Polit

ics

Tsun

ami H

1N1

046

Annual Report 2009

In 2010, Thai tourism industry is expected a growth from various factors ranging from the better world economic outlook, consumer price index that continues to rise, positive sign of Thai and overseas tourists arrivals from late last year and tourism promoting policies from both public and private sectors. The TAT estimates that the number of tourist arrivals will be 15 - 15.5 million or the expected revenue of Baht 600 billion in 2010. The TAT will continue focusing on its “Amazing Thailand, Amazing Value” campaign, bringing roadshows to newly-emerging markets and developing other markets based on their specific interests. Other factors that help promoting tourisms are economic growth in Asia, which will attract Asian tourists especially from China and India to come to Thailand. In addition, low-cost airlines also expand their strategic alliance, making the cost of travelling in the region even lower. However, negative effects that may hinder the 2010 tourism industry are political instability, risk from the H1N1 influenza and cost of fuel that may increase. Regarding domestic market, the TAT plans to launch more marketing campaigns to promote local tourism, in order to meet the target of 97 million trips. This expects to generate at least Baht 430 billion. As for marketing activities to promote local tourism, the TAT will do through the Thais-Travel-Thailand campaign, the Two Wonders of Southern Coast campaign, the Amazing I-San Fair campaign and the One Night One Price campaign. Supply of hotel rooms in 2010 is not to increase much from the previous year as various hotel projects in Bangkok and the provinces are stalled or postponed due to economic crisis during the past year. It is expected to take a long time before these hotels could open and operate, making the already-opening hotels reap more profit from the delay of new supply coming into the market. Yet, pricing competition is expected to remain intense. We expect to see a better prospect for the Thai tourism industry in 2010 from various supporting factors and Thailand’s competitive advantage over other countries due to good reputation in Thai hospitality, the diversity of tourism attractions and value for money. We strongly believe that, in the long term, Thai tourism will be able to grow strongly in a sustainable manner.

Domestic tourist statistics

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010F

Remark: Tourism Authority of Thailand,

Ministry of Tourism and Sports

Number of domestic tourism

100.0

90.0

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

Times

SARS

Tsun

ami

Coup Polit

ics

H1N

1

Hotel Industry


047



Rental Property

Industrial Outlook and Business Competition During Q1 and Q2 of 2009, local political condition and the world’s economic slowdown still continued to make renting

of office space quite sensitive. Based on CB Richard Ellis (Thailand) Co., Ltd.’s marketing report, tenants preferred to renew the

spaces in order to streamline their costs rather than moving out to new premises. In addition, rents in Grade A and Grade B

buildings also fell from the previous year. In Q3, the situation remained unchanged without any significant improvement.

Demands hardly rose to an expected direction while supply in the market remained limited. For Q4, the current worldwide

economic situation in general started to recover, many projects initiated by the Thai government to stimulate the local economy

turned to be in a concrete manner, which has boosted a certain level of investment confidence. Office Buildings

The availability of total office space for rent during the last quarter of 2009 was 7.98 million square meters compared

to 7.66 million square meters from the year before. From overall space available above, 3.9 million square meters were in the

Central Business District (CBD) areas where 3.39 million square meters had been rented, which accounted for 86.7 percent.

Another 0.52 million square meters or 13.3 percent remained vacant.

Rental Rates of office building from the last two quarters of 2009 continued to slide from the same period a year

before. An average rate of Grade A office buildings fell from Baht 744 per square meter to Baht 685 per square meter

accounted for 7.9 percent. For Grade B buildings (to which our office building belongs) in the CBD area, an average rent per

square meter fell as much as 14 percent to Baht 503 from Baht 585 a year earlier. The important factor that drove the rental

rate to fall in comparison to the previous year was less demands according to local political and economic climate that did not

allow for expansion. Tenants either downsized their spaces or negotiated to lower their rents to minimize costs which affected

directly to landlords. In late Q4 of 2009, there has been 1.19 million square meters remaining supply of office space on

delayed or postponed projects and another 79,464 square meters of increasing space in 2010, all of which are in CBD area.

As the world’s economy seemed to pick up, the currently stalled investment plans will be moving ahead which should further

support the overall economy and expected that rental demand for office space will improve in 2010. Yet local political condition

remains a very important factor for foreign investors to invest in Thailand. Shopping Centers

At the end of 2009, the total supply of shopping center space is 5.38 million square meters, increasing 0.34 million

square meters which accounted for 6.7 percent from the previous year. Of all the increased space, 36.1 percent is in the CBD

area while the rest is around the heart of the city and Bangkok parameters. Moreover, the commercial spaces have been

developed to Community Malls offering products and services to specific groups. Rental rates on ground floor of Grade

A shopping centers start from Baht 1,200 to Baht 3,200 per square meter. As for Grade B, an average ground floor rental

rates per square meter are around Baht 1,000 to Baht 2,500. Throughout 2009 retail market was impacted because of

the overall economic downturn and the local political uncertainties. As a result, consumers were more cautious on spending.

In the last quarter, as the worldwide economic situation started to recover, this would send a signal to retailers to decide

whether to expand or invest appropriately in new business. And it is expected that demands of space renting will gradually

increase in 2010.

048

Annual Report 2009

Our board of directors has appointed some of its members to the Financial and Risk Management Committee (“FRC”). The responsibilities of this subcommittee are to supervise and evaluate the risk management strategies to ensure that they are systematic, clear, and effective. The highest ranked officer of each department is the “risk owner”. Their responsibilities are then 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 worlds 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 Effected Property Damage and Business Management Risk from external factors such as terrorism, political unrest, environment impact or natural disaster that may affect retail building are inevitable and unpredictable. However, apart from implementing securities and other preventive measures based on international standard practice to reduce these risks, we also take all-risk, terrorism and business interruption insurances to cover the aforesaid risks if it occurs directly to our properties.

Risk Factors


049



Risk Factors

4. External Risk Factors Affecting Hotel Business Performance External factors affecting Hotel Business performance, such as political unrest or epidemic, are beyond our control and prevention. Abnormal circumstances such as these lead to sudden drop in number of foreign tourist arrival, and in turn directly impact on company’s earnings. Nevertheless, historical evidences proved that these impacts are short term (3 - 9 months). Our risk management strategy is flexibility and responsiveness of 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. As of 31 December 2009, approximately 97 percent of our long term loans were subject to a floating interest rate, most of which apply a Minimum Lending Rate (MLR) minus 1.5 - 2.0 percent and the remaining apply 6-month Fixed Deposit Rate plus 2.0 percent. We have a policy to reduce the interest rate risk by converting a portion of float rate to fix rate. However, the hedging expenses remain at uneconomical level. We continue to vigilantly monitor market conditions and will arrange risk prevention measures to defer the risk when related expenses fall to a proper level.

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 changed and recruited employees and managements in key 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 persons 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.

050

Annual Report 2009

GOOD CORPORATE GOVERNANCE



051




Corporate Governance Policy

The Erawan 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 aspects 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 (President and CEO) has been directed to promote corporate governance among staff at all levels. The President and CEO requires the Code of Conduct be made for employees of all levels to be 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 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. The Erawan’s corporate governance activities 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 http://www.TheErawan.com, a mechanism to ensure that our executive officers and staff commit to their responsibilities to all stakeholders, communities, society and environment.

052

Annual Report 2009

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. 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, whom 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.




053





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). • Chairman must not be involved in a day-to-day management, Auditor, or of other professions such as being 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.

054

Annual Report 2009

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 (To be count on related person). • 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: • Norelationshipasaproviderofprofessionalserviceincludingbeinganauditor(inanycase),orofother 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)




055




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 have met Executive officers lower is President and Chief Executive Officer’s duty. 5. Board of Directors’ Meeting The company sets the number of both 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 to have agendas’ Board of Directors’ Meeting every year so that all directors (11) not within President and Chief Executive Officer, Management’s duty and Company Secretary. In 2009, the company organized 6 Board of Directors’ meeting, 4 Audit Committee’s meetings, 6 Financial and Risk Management Committee’s meetings, 3 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:

056

Annual Report 2009



1. M

r. Lu

en K

risna

kri

Chair

man

Ap

r. 20

08 -

2009

2/2

- -

2/2

-

2. M

r. Pr

akit

Prad

ipase

n Ch

airm

an

Apr.

2009

- 20

12

5/6

1/1

- 1/1

-

3. M

r. Sa

nser

n W

ongc

ha-um

Inde

pend

ent D

irector

Ap

r. 20

09 -

2012

6/6

3/3

- -

-

4. A

ssoc

. Pro

f. M

anop

Pon

gsad

adt

Inde

pend

ent D

irector

Ap

r. 20

09 -

2012

6/6

4/4

- -

-

5. M

r. De

j Buls

uk

Inde

pend

ent D

irector

Ap

r. 20

09 -

2012

6/6

4/4

- -

-

6. M

r. Ba

nyon

g Po

ngpa

nich

Inde

pend

ent D

irector

Ap

r. 20

07 -

2010

5/6

- 4/6

- 2/2

7. M

r. Ek

asith

Jot

ikasthir

a Inde

pend

ent D

irector

Ap

r. 20

09 -

2011

3/4

- -

- -

8. M

r. Vito

on V

ongk

usolk

it Di

rector

Ap

r. 20

08 -

2011

6/6

- 6/6

- 2/2

9. M

r. Su

pol W

attana

vekin

Di

rector

Ap

r. 20

07 -

2010

6/6

- 6/6

- 2/2

10

. M

r. Ch

anin

Vong

kuso

lkit

Dire

ctor

Ap

r. 20

07 -

2010

6/6

- 6/6

3/3

-

11

. M

rs. P

anida

The

pkan

jana

Dire

ctor

Ap

r. 20

08 -

2011

5/6

- 6/6

3/3

-

12

. M

r. Kr

isda

Mon

thien

vichie

ncha

i Di

rector

Ap

r. 20

07 -

2010

6/6

- -

- -

13

. M

r. Ka

sam

a Pu

nyag

upta

Pres

ident

Apr.

2008

- 20

11

6/6

- 6/6

- -

and

Chief

Exe

cutiv

e

Offic

er

Pe

rcen

t of d

irector

s’ a

ttend

ed

94

.44%

10

0%

94.44%

10

0%

100%

Na

me

Title

Term

Times

of a

ttend

ance

/Num

ber o

f tot

al atte

ndan

ce

Tim

es o

f Att

enda

nce

2009

Note

: On

29

April

2009

, Mr.

Luen

Kris

nakri,

Inde

pend

ent Di

rector

res

igned

fro

m the

Cha

irman

of th

e Bo

ard. T

he B

oard

app

ointe

d M

r. Pr

akit

Prad

ipase

n as

the

Cha

irman

effe

ctive

on

29 A

pril

2009

and

appo

inted

Mr.

Ekas

ith J

otika

sthir

a as

the

Inde

pend

ent D

irector

effe

ctive

on

29 A

pril

2009

.

Man

agem

ent

Deve

lopm

ent

and

Com

pens

ation

Co

mm

ittee

Nom

inatin

g

and

Corp

orate

Gove

rnan

ce

Com

mitt

ee

Finan

cial a

nd

Risk

Man

agem

ent

Com

mitt

ee

Board

of D

irector

s Au

dit C

omm

ittee


057


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 94 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. 90 percent agreeing with the Board understood its independence in making decisions without being influenced by anyone. Meanwhile, 91 percent agreed that matter regarding the number of meetings, 93 percent acknowledgement when the meeting would be held and the getting of documents in advance was getting much better than before. 95 percent agreed that there was a good relationship with the Management Team and directors could directly discuss with the President and Chief Executive Officer. 90 percent agreed that better self-development among directors, better understanding about business and their duties and responsibilities. Details are in the following:



BOD Structure & Componant

Rule, Duties &

Responsibility

BOD’s Meeting

Director Fiduciary

Duty

100

80

60

40

20

0

Avg. (%)

Relations with Executive

Management

Directors’ Improvement

& Management

959090

94 9391

058

Annual Report 2009

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. In 2009, our directors nominated a total of 6 nominees to the Nominating and Corporate Governance Committee in order to replace independent directors and to fill vacancies due to resignations. The selection was independently conducted without being subject to anyone’s influence. Nominees were submitted to the Board’s meeting on 28 April 2009, which unanimously agreed to appoint Mr. Ekasith Jotikasthira as our independent director (11 votes from 11 directors). The Management conducted a two-hour orientation session for him and arranged for management team to meet the new director so that he learned about the company, got access to corporate information, business directions 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-æ -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 to seek its approval on an annual basis.




059


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 31 December 2009 1. Remunerations of directors of the Company’s Board of Directors and Committees, totaled Baht 4,347,500.00 2. Remunerations of directors of the Company’s subsidiary, totaled Baht 2,0850,000 3. Remunerations, which are total wages of the nine (9) executives paid by the Company and its subsidiaries, totaled Baht 29,122,937.04 4. Provident fund of the executives under item 3 above, totaled Baht 922,848.00



060

Annual Report 2009

Remuneration of the Board of Directors and Management

1. M

r. Lu

en K

risna

kri

Chair

man

10

0,00

0 -

- 30

,000

-

130,00

0

2. M

r. Pr

akit

Prad

ipase

n Ch

airm

an

280,00

0 25

,000

-

15,000

-

320,00

0

3. M

r. Sa

nser

n W

ongc

ha-um

Inde

pend

ent D

irector

24

0,00

0 75

,000

-

- -

315,00

0

4. A

ssoc

. Pro

f. M

anop

Pon

gsad

adt

Inde

pend

ent D

irector

24

0,00

0 80

,000

-

- -

320,00

0

5. M

r. De

j Buls

uk

Inde

pend

ent D

irector

24

0,00

0 80

,000

-

- -

320,00

0

6. M

r. Ba

nyon

g Po

ngpa

nich

Inde

pend

ent D

irector

24

0,00

0 -

180,00

0 -

22,500

44

2,50

0

7. M

r. Ek

asith

Jot

ikasthir

a Inde

pend

ent D

irector

16

0,00

0 -

- -

- 16

0,00

0

8. M

r. Vito

on V

ongk

usolk

it Di

rector

24

0,00

0 -

240,00

0 -

22,500

50

2,50

0

9. M

r. Su

pol W

attana

vekin

Di

rector

24

0,00

0 -

180,00

0 -

30,000

45

0,00

0

10

. M

r. Ch

anin

Vong

kuso

lkit

Dire

ctor

24

0,00

0 -

180,00

0 33

,750

-

453,75

0

11

. M

rs. P

anida

The

pkan

jana

Dire

ctor

24

0,00

0 -

180,00

0 33

,750

-

453,75

0

12

. M

r. Kr

isda

Mon

thien

vichie

ncha

i Di

rector

24

0,00

0 -

- -

- 24

0,00

0

13

. M

r. Ka

sam

a Pu

nyag

upta

Pres

ident

24

0,00

0 -

-

- 24

0,00

0

and

Chief

Exe

cutiv

e

Offic

er

Tot

al

2,94

0,00

0 26

0,00

0 96

0,00

0 11

2,50

0 75

,000

4,34

7,50

0

Na

me

Title

Com

pens

ation

in c

ash

for m

embe

r of t

he C

omm

ittee

Rem

uner

atio

ns f

or t

he B

oard

of

Dir

ecto

rs a

nd t

he C

omm

itte

es i

n th

e Ye

ar E

ndin

g 31

Dec

embe

r 20

09

Note

: On

29

April

2009

, Mr.

Luen

Kris

nakri,

Inde

pend

ent Di

rector

res

igned

fro

m the

Cha

irman

of th

e Bo

ard. T

he B

oard

app

ointe

d M

r. Pr

akit

Prad

ipase

n as

the

Cha

irman

effe

ctive

on

29 A

pril

2009

and

appo

inted

Mr.

Ekas

ith J

otika

sthir

a as

the

Inde

pend

ent D

irector

effe

ctive

on

29 A

pril

2009

.

Total

(Bah

t/yea

r)M

anag

emen

t De

velop

men

t an

d Co

mpe

nsation

Co

mm

ittee

Nom

inatin

g

and

Corp

orate

Gove

rnan

ce

Com

mitt

ee

Finan

cial a

nd

Risk

Man

agem

ent

Com

mitt

ee

Board

of D

irector

s Au

dit C

omm

ittee

Do n

ot g

et

paid

as

Exec

utive


061




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 Shareholders 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 31 January 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 (President and CEO) 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 three years (2007 - 2009), 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.

Corporate Social Responsibility

062

Annual Report 2009

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.

Responsibility to Investor Relations The Erawan 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 go to www.TheErawan.com. Inquiries can also be made through [email protected]. We conduct an Investor Relations IR Survey to gauge satisfaction in relation to our information disclosure at least once a year. In 2009, we conducted the survey by distributing questionnaires to analysts at the Quarterly Meeting held in November 2009, which was a quarterly analyst’s meeting and also the last meeting of the year. All respondents were within a target group. 54 percent of the respondents had monitored our information for no less than 3 years. 99 percent of the respondents said they were satisfied with the information. In 2009, we were nominated by the Stock Exchange of Thailand (SET) as one of the three listed companies of which market capitalization was not over Baht 10 billion under Group 1 for the IR Excellence Awards, among other SET Awards we achieved in 2009.

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




063



our office, No. 2, Ploenchit Center Building, 6th Floor, Sukhumvit Road, Klongtoey District, Bangkok; or at Office of Corporate Governance, email: [email protected]. All information is treated confidential and will be directly forwarded to the Board.

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.


064

Annual Report 2009

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. 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.




065




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. We support corporate social activities to allow executive officers and employees to be a good citizen of our society. We continue to initiate projects that focus at sustainable development in our neighboring communities and that allow us to work with public and private counterparts. These are our main missions and we continued to do the following in 2009: • Love Charity Project - the company and our staff donated necessary items and provided financial support to the lunch fund of the Foundation for Slum Child Care (FSCC) under the Royal patronage of HRH Princess Galayani Vadhana every 3 months. We have a plan to extend this activity to other foundations. • Welcome Guide to Thailand Project where activity was held every 3 months. The aim of the project is to promote tourism in Thailand by enhancing language skills to taxi and tuk-tuk drivers, who are major forces behind the local tourism industry, in order to create a good impression among our visitors. • Blood Donation Project - together with the JW Marriot Hotel, which provided a location for our blood drive, we coordinated with the blood center of the Rajavithi Hospital every 3 months.

066

Annual Report 2009

• Redeeming Garbage Project - wastes with chicken’s eggs Project - organized every 2 months, the project allowed employees and the interested public to bring in their waste or any stuff they no longer used to exchange for eggs. The idea of the project is to promote waste separation and ensure that waste is re-used in a proper manner to help reduce the global warming. • The Let’s Green Project through which we published leaflets and brochures for tenants of the Ploenchit Center Building to reduce their energy use. • Keep our Surrounding Nice and Neat Project - designed to raise awareness in keeping our home clean, we collected waste around our office from areas stretching from Ploenchit Center to around Duangpitak Road and Sukhumvit Soi 4. The event was participated by our employees, staff from our subsidiaries and our suppliers. • Keep Our Neighbor Nice and Neat Project aimed to support communities where we also have our business. Through this project, we gave 30 waste bins to Ao Por Beach in Phuket Province as part of the Keep Ao Por Beach Clean Project. We also donated 50 waste bins to the Big Cleaning Day organized by Phuket’s Patong Municipality.




067


• The Erawan Loves Elephant Project, which is an annual project held since 2005, aims to conserve the Thai elephants. Events were organized to raise funds, which were subsequently donated to various elephant foundations such as the National Elephant Institute, the Thai Elephant Conservation Center under the patronage of HRH Princess Galayani Vadhana, the Thai Animal Guardians Association and the Friends of the Asian Elephant Foundation. • The Education Support for Thai Children Project was designed to help our children by donating stationary and improving school environment to keep it clean and sanitary for children. • Other projects such as a project to promote Thai culture through annual desk calendar.

In addition, we also supported other social projects such as a project to build floating buoy at Ban Koh Naka Pier in Phuket Province to facilitate transportation of local produce of farmers and fishermen in the community. Currently, there are two projects we plan to do in the future; namely, the improvement of pedestrian’s footpath beneath the Chalerm Maha Nakhon Expressway (Sukhumvit), which we will collaborate with the Expressway Authority of Thailand and the Pathumwan District, and the beautifying of traffic islands in the middle of Nana-Ploenchit Road. The Erawan, to ensure the safety of our property and to lessen impacts to the environment, the Company has so far formulated a series of building management plans for its office building, shopping center and hotels. The plan calls for changes of air conditioners that meet environmental standards and changes from electrical-based or bunker oil-based hot water to the hot water Heat Pump system. In addition, the Company requires all of its current and future hotels to save energy at a time oil prices were hiking and striving to become a green hotel by avoiding to release emissions. Besides, the systems of its buildings ranging from security to engineering, fire protection and wastewater treatment systems have been upgraded to meet public building standards. (More detail in www.TheErawan.com).



068

Annual Report 2009

In 2009, the Board of Directors convened 6 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 in 2009 to the Board of Directors on 23 February 2010 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.

Internal Control


069



Internal Control

3. Connected Transactions 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 2009 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 2,610,376.45 Receivables at end of period Baht 797,523.99 Banpu Plc. Group of Companies Revenue from Hotel Operation Baht 629,915.25 Receivables at end of period Baht 332,307.22

070

Annual Report 2009

Connected Transactions

Conn

ecte

d tra

nsac

tions

bet

wee

n bu

sines

ses

with

the

follo

wing

relat

ionsh

ips w

ere

exec

uted

:

1. M

itr P

hol S

ugar

Gro

up o

f Co

mpa

nies

Ty

pe o

f bu

sine

ss: s

ugar fa

ctor

ies

N

atur

e of

rel

atio

nshi

p:

•

Mr.

Vito

on V

ongk

usolk

it an

d M

r. Ch

anin

Vong

kuso

lkit,

th

e Co

mpa

ny’s d

irector

s, are

auth

orize

d dir

ecto

r

and

direc

tor o

f Mitr

Pho

l Sug

ar C

o., L

td.

•

The

Vong

kuso

lkit F

amily

hold

s 38

.80

percen

t

in

the

Com

pany

’s s

hare

s.

2. I

AG

Insu

ranc

e (T

haila

nd) Co

., Lt

d.

Ty

pe o

f bu

sine

ss: n

on-lif

e ins

uran

ce

N

atur

e of

rel

atio

nshi

p:

•

Mr.

Vito

on V

ongk

usolk

it, d

irector

,

is

direc

tor o

f IAG

Insu

ranc

e (Tha

iland

) Co., L

td.

3. C

hai T

alay

Hot

el C

o., L

td. (

Hyat

t Reg

ency

Hua

Hin

Hot

el)

Ty

pe o

f bu

sine

ss: h

otels

Nat

ure

of r

elat

ions

hip:

• M

rs. P

anida

The

pkan

jana,

direc

tor,

is a

close

d re

lative

to

Mrs. W

ansa

mor

n W

anna

met

hee

and

Khun

ying

Natth

ika

W

attana

vekin

, are

aut

horiz

ed d

irector

of C

hai T

alay

Co.,

Ltd.

•

The

Wattana

vekin

Fam

ily h

olds

31.14

percen

t

of

the

Com

pany

’s s

hare

s.

Prici

ng p

olicy

and

the

Audit

Com

mitt

ee’s o

pinion

s

Agre

emen

t to

rent

Ploe

nchit

Ce

nter

’s s

pace

, 3-ye

ar le

ase

agre

emen

t. •

Rent

al an

d se

rvice

s inc

omes

•

Rece

ivable

s at e

nd o

f per

iod

• Pa

yable

s of

rent

dep

osits

No

n-life

insu

ranc

e ag

reem

ent

fort

the

build

ing a

nd th

e ho

tel

busin

ess

betw

een

the

Com

pany

an

d its

sub

sidiar

ies

• Insu

ranc

e ex

pens

es

• Insu

ranc

e ex

pens

es p

aid

in

adva

nce

Agre

emen

t to

lease

offi

ce s

pace

an

d th

e se

rvice

agr

eem

ent w

ith

The

Eraw

an H

otel

Publi

c Co

mpa

ny L

imite

d •

Rent

al an

d se

rvice

inco

mes

•

Rece

ivable

s at e

nd o

f per

iod

A m

ajor t

enan

t, th

e ag

reed

pr

ice w

as n

ot lo

wer

than

th

e av

erag

e pr

ice a

gree

d with

oth

er te

nant

s ba

sed

on

the

busin

ess

stan

dard

s.

Se

lecte

d on

the

basis

of

the

service

pro

vider

’s

pote

ntial

and

in c

ompli

ance

with

the

Com

pany

’s

regu

lation

s.

Pr

ice a

gree

d was

a m

arke

t pr

ice c

ompa

red

to s

pace

in

nearby

are

as a

nd n

ot lo

wer

th

an th

e pr

ice o

ffere

d to

ot

her t

enan

ts o

r ser

vice

user

s co

mpa

red

to th

e stan

dard

of h

otel

busin

ess.

Person

/ent

ity w

ith p

ossib

le co

nflic

t of i

nter

est

and

natu

re o

f rela

tions

hip

Desc

riptio

nTr

ansa

ction

valu

e (B

aht)

20

08

2009

29

,462

,885

.94

38,880

,207

.20

74

5,41

7.25

59

6,46

9.30

8,12

2,90

8.83

9,03

6,94

8.83

979,83

9.60

1,63

2,37

6.88

- -

2,57

8,08

7.93

2,82

6,31

5.31

15

9,48

4.08

43

3,80

0.97


071


Connected Transactions


Nec

essi

ty a

nd S

ound

ness

of Co

nnec

ted

Tran

sact

ions

In c

ase

the

Com

pany

sign

s an

agr

eem

ent o

r con

ducts

a co

nnec

ted

trans

actio

n with

a s

ubsid

iary

com

pany

, affi

liate

, rela

ted

com

pany

and

/or t

he th

ird

party

, the

Erawan

will

cons

ider t

he n

eces

sity

and

soun

dnes

s of

suc

h co

ntract b

ased

main

ly on

the

Eraw

an’s in

tere

sts.

App

rova

l Mea

sure

s or

Pro

cedu

res

of C

onne

cted

Tra

nsac

tions

If

the

Com

pany

is

to e

xecu

te a

con

tract o

r if

ther

e is

any

conn

ecte

d tra

nsac

tion

betw

een

itself

and

its s

ubsid

iary,

affili

ate, r

elate

d co

mpa

ny,

the

third

party a

nd/or an

yone

with

pos

sible

conf

licts o

f int

eres

t, th

e Bo

ard

of D

irector

s re

quire

s th

e Er

awan

for

the

pur

pose

of its

ben

efits

, to

com

ply w

ith

the

rules

state

d in

the

Stoc

k Ex

chan

ge o

f Th

ailan

d’s

(SET

) An

noun

cem

ent

Re:

Info

rmation

disc

losur

e an

d pr

actic

es o

f lis

ted

com

panie

s in

conn

ecte

d tra

nsac

tions

. Mea

nwhil

e, p

rices

and

oth

er c

ondit

ions

shall

be

as if

the

trans

actio

n is

at a

n arm

’s le

ngth

whe

re d

irector

s or

staff

havin

g an

inte

rest in

suc

h tra

nsac

tion

mus

t not

partic

ipate

in a

ny a

ppro

val p

roce

ss.

Polic

y or

Out

look

for

Fut

ure

Conn

ecte

d Tr

ansa

ctio

ns

-Non

e-

Person

/ent

ity w

ith p

ossib

le co

nflic

t of i

nter

est

and

natu

re o

f rela

tions

hip

Prici

ng p

olicy

and

the

Audit

Com

mitt

ee’s o

pinion

sDe

scrip

tion

4. M

inor

Cor

pora

tion

Publ

ic C

ompa

ny L

imite

d

Type

of bu

sine

ss: R

etail

Sale

of b

ook,

newsp

aper

,

station

ery,

read

y-to-wea

r, co

smet

ics a

nd s

pare

parts

N

atur

e of

rel

atio

nshi

p:

•

Mr.

Prak

it Pr

adipa

sen, d

irector

,

is

direc

tor o

f Mino

r Cor

poratio

n Pu

blic

Com

pany

Lim

ited

5.

Bua

luan

g Se

curit

ies

Publ

ic C

ompa

ny L

imite

d

Type

of bu

sine

ss: O

ther

fina

ncial

inte

rmed

iation

Nat

ure

of r

elat

ions

hip:

• M

r. Sa

nser

n W

ongc

ha-um

, dire

ctor

,

is

Chair

man

of t

he B

oard

of B

ualua

ng S

ecur

ities

Pu

blic

Com

pany

Lim

ited

Agre

emen

t to

rent

Erawan

Ba

ngko

k’s

spac

e, 3

-year le

ase

agre

emen

t. •

Rent

al an

d se

rvice

inco

mes

•

Rece

ivable

s at e

nd o

f per

iod

• Pa

yable

s of

rent

dep

osit

Agre

emen

t to

rent

Ploe

nchit

Ce

nter

’s s

pace

, 3-ye

ar le

ase

agre

emen

t.

• Re

ntal

and

service

inco

mes

•

Rece

ivable

s at e

nd o

f per

iod

• Pa

yable

s of

rent

dep

osits

Price

agr

eed

was

a m

arke

t pr

ice c

ompa

red

to s

pace

in

nearby

are

as a

nd n

ot

lower

than

the

price

offe

red

to o

ther

tena

nts

base

of

the

busin

ess

stan

dard

.

Pr

ice a

gree

d was

a m

arke

t pr

ice c

ompa

red

to s

pace

in

nearby

are

as a

nd n

ot

lower

than

the

price

offe

red

to o

ther

tena

nts

base

of

the

busin

ess

stan

dard

.

Tran

saction

valu

e (B

aht)

20

08

2009

67

2,39

0.71

70

0,79

7.60

5,52

7.62

5,97

0.60

19

6,31

1.80

19

6,31

1.80

47

6,72

6.35

2,09

9,00

0.86

12

,718

.84

17,528

.21

46

7,17

4.40

49

7,17

4.40

072

Annual Report 2009ibis Samui

APPENDICES


073


073

To the Shareholders of The Erawan Group Public Company Limited I have audited the accompanying consolidated and separate balance sheets as at 31 December 2009, 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 audits. 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 2008 were audited by another auditor whose report dated 20 February 2009 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 2009 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.

(Boonsri Chotpaiboonpun)Certffiied Public Accountant

Registration No. 3756

KPMG Phoomchai Audit Ltd.Bangkok 23 February 2010

Audit Report of Certified Public Accountant


074

Annual Report 2009

In 2009, the audit fee paid to the external auditor of KPMG Phoomchai Audit Limited was Baht 3,600,000.

(The Erawan Group Plc. Baht 2,145,000 and the Company’s subsidiary Baht 1,455,000). 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.

Audit Fee

Six Senses DestinationSpa Phuket

(Unit: Baht)

The Erawan Group Public Company Limited and its Subsidiaries

075

Consolidated financial statements Separate financial statements

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


Note 2009 2008 2009 2008

Assets

Current assets

Cash and cash equivalents 6 277,488,552 416,081,404 201,834,559 314,664,590

Trade accounts receivable 5, 7 148,495,188 102,418,677 79,573,655 52,506,178

Inventories 8 78,247,461 47,986,509 33,792,403 13,164,149

Advances - construction 34,617,512 62,236,992 14,772,675 57,988,895

Value added tax refundable 198,001,782 216,159,467 78,120,621 92,849,446

Other current assets 5, 9 88,915,926 63,913,173 20,391,741 16,056,619

Total current assets 825,766,421 908,796,222 428,485,654 547,229,877

Non-current assets

Investments in subsidiaries 10 - - 2,299,159,881 2,299,838,057

Investment in associate 11 338,271 338,271 338,271 338,271

Investments in other related parties 12 3,305,168 3,014,928 2,525,360 2,311,602

Long-term loans to subsidiaries 5 - - 745,745,622 516,790,794

Property, plant and equipment 13 10,406,634,932 9,625,568,502 6,459,617,393 5,739,417,019

Leasehold rights for land and buildings 14 1,712,926,169 1,782,157,846 857,138,383 899,986,969

Intangible assets 15 74,139,901 73,964,547 50,285,579 43,439,895

Deposits for lease of land, building and equipment 231,340,229 204,878,591 228,221,973 203,512,872

Other non-current assets 16 34,365,743 31,379,076 30,413,472 26,816,414

Total non-current assets 12,463,050,413 11,721,301,761 10,673,445,934 9,732,451,893

Total assets 13,288,816,834 12,630,097,983 11,101,931,588 10,279,681,770

As at 31 December 2009 and 2008

Balance sheets


076

(Unit: Baht)



Annual Report 2009

Note 2009 2008 2009 2008

Liabilities and equity

Current liabilities

Short-term loans from financial institutions 17 207,200,000 1,030,050,000 152,200,000 897,550,000

Trade accounts payable 5, 18 230,684,342 134,915,345 75,101,006 58,354,680

Accounts payable - construction 100,481,328 145,001,459 59,303,424 120,343,958

Current portion of finance lease liabilities 17 25,701 27,942,746 25,701 27,942,746

Current portion of hire purchase payable 17 528,658 515,574 528,658 515,574

Current portion of long-term loans 17 697,250,000 514,000,000 371,000,000 245,000,000

Other current liabilities 19 366,065,534 373,990,030 151,988,590 138,068,224

Total current liabilities 1,602,235,563 2,226,415,154 810,147,379 1,487,775,182

Non-current liabilities

Finance lease liabilities 17 - 25,701 - 25,701

Hire purchase payable 17 567,618 1,096,276 567,618 1,096,276

Long-term loans from a subsidiary 5, 17 - - 55,131,790 24,744,952

Long-term loans from financial institutions 17 7,665,467,051 6,161,417,051 5,370,900,000 3,848,100,000

Accounts payable for land leasehold rights 360,000,000 360,000,000 360,000,000 360,000,000

Deposits from lessees 103,452,269 101,781,042 102,033,939 100,189,494

Deferred income 20 18,135,126 20,949,454 18,135,126 20,949,454

Total non-current liabilities 8,147,622,064 6,645,269,524 5,906,768,473 4,355,105,877

Total liabilities 9,749,857,627 8,871,684,678 6,716,915,852 5,842,881,059


Balance sheets (continued)

(Unit: Baht)


077




Note 2009 2008 2009 2008

Equity

Share capital 21

Authorised share capital 2,244,779,001 2,281,143,099 2,244,779,001 2,281,143,099

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 23 358,142,539 358,142,539 358,142,539 358,142,539

Unrealised deficits of fair value changes

on investments (191,098) (476,618) (108,143) (321,901)

Retained earnings

Appropriated

Legal reserve 23 78,840,000 79,300,000 66,890,000 66,890,000

Unappropriated 724,826,403 976,224,811 1,715,312,339 1,767,311,072

Total equity attributable to equity holders

of the Company 3,406,396,845 3,657,969,733 4,385,015,736 4,436,800,711

Minority interests 132,562,362 100,443,572 - -

Total equity 3,538,959,207 3,758,413,305 4,385,015,736 4,436,800,711

Total liabilities and equity 13,288,816,834 12,630,097,983 11,101,931,588 10,279,681,770


Balance sheets (continued)


078

(Unit: Baht)



Annual Report 2009

Note 2009 2008 2009 2008

Revenues

Revenues from hotel operations 2,748,087,145 2,986,499,727 1,254,911,502 1,216,352,143

Rental of units in buildings and related

service income 5 400,945,926 389,477,331 388,885,008 375,239,837

Net foreign exchange gain 3,864,462 4,211,339 2,065,965 2,576,834

Dividend income 5 383,911 2,440,767 287,308 172,437,798

Interest income 5 357,904 745,762 28,295,440 17,058,927

Other income 5, 26 37,983,704 29,585,400 33,168,730 26,590,201

Total revenues 3,191,623,052 3,412,960,326 1,707,613,953 1,810,255,740

Expenses

Cost of hotel operations 1,336,282,137 1,298,268,182 562,043,929 512,035,843

Cost of rental of units in buildings

and related service 154,618,598 156,410,689 159,974,511 161,903,594

Depreciation and amortisation 627,780,673 504,623,725 353,932,033 278,985,321

Selling expenses 27 206,708,919 198,294,584 94,107,251 90,914,980

Administrative expenses 28 670,783,982 701,421,779 338,392,235 278,108,232

Management benefit expenses 29 40,238,236 47,551,389 38,333,236 45,496,389

Loss from decline in value of investment

in subsidiary 10 - - 804,524 656,500,000

Total expenses 3,036,412,545 2,906,570,348 1,547,587,719 2,023,944,359

For the years ended 31 December 2009 and 2008

Statements of income

(Unit: Baht)


079




Note 2009 2008 2009 2008

Profit (loss) before finance costs

and income tax expense 155,210,507 506,389,978 160,026,234 (213,688,619)

Finance costs 5, 30 (306,846,197) (273,872,602) (189,577,331) (155,243,468)

Profit (loss) before income tax expense (151,635,690) 232,517,376 (29,551,097) (368,932,087)

Income tax expense 31 (45,656,292) (92,937,349) - -

Profit (loss) for the year (197,291,982) 139,580,027 (29,551,097) (368,932,087)

Attributable to:

Equity holders of the Company (229,410,772) 78,328,428 (29,551,097) (368,932,087)

Minority interests 32,118,790 61,251,599 - -


Earnings (loss) per share 32

Basic (0.10) 0.04 (0.01) (0.17)

Diluted (0.10) 0.04 (0.01) (0.17)


Statements of income (continued)

080

Annual Report 2009

The

acco

mpa

nying

not

es a

re a

n int

egral p

art o

f the

se fi

nanc

ial s

tate

men

ts.

Cons

olid

ated

fin

anci

al s

tate

men

ts

Unre

alise

d

surp

luses

(def

icits)

of fa

ir va

lue

chan

ges

on

inves

tmen

ts

Retaine

d ea

rning

sTo

tal e

quity

attri

butable

to

equit

y ho

lders o

f

the

Com

pany

Issue

d

and

paid-

up

share

capit

al

Mino

rity

inter

ests

Prem

ium o

n

share

Lega

l res

erve

Unap

prop

riate

d

Total e

quity

(Unit

: Bah

t)

The

Eraw

an G

roup

Pub

lic C

ompa

ny L

imite

d an

d its

Sub

sidiar

ies

For t

he y

ears e

nded

31

Dece

mbe

r 200

9 an

d 20

08

Stat

emen

ts o

f ch

ange

s in

eq

uit

y

Bala

nce

at 1

Jan

uary

200

8

2,21

4,57

4,62

5

323,

542,

015

78

6,68

1

79,3

00,0

00

1,03

1,18

8,38

8

3,64

9,39

1,70

9

101,

142,

117

3,

750,

533,

826

Unre

alise

d de

ficit

of fa

ir va

lue c

hang

es

on

inve

stm

ents

-

- (1,263

,299

) -

- (1,263

,299

) (27)

(1,263

,326

)

Prof

it fo

r the

yea

r

- -

- -

78,328

,428

78

,328

,428

61

,251

,599

13

9,58

0,02

7

Divid

end

33

- -

- -

(133

,292

,005

) (133

,292

,005

) (61,95

0,11

7)

(195

,242

,122

)

Issue

of o

rdina

ry s

hare

s 21

30

,204

,376

34

,600

,524

-

- -

64,804

,900

-

64,804

,900

Bala

nce

at 3

1 Dec

embe

r 20

08

an

d 1

Janu

ary

2009

2,24

4,77

9,00

1

358,

142,

539

(4

76,6

18)

79,3

00,0

00

976,

224,

811

3,

657,

969,

733

10

0,44

3,57

2

3,75

8,41

3,30

5

Unre

alise

d su

rplus

es o

f fair

valu

e ch

ange

s

on

inve

stm

ents

-

- 28

5,52

0

- -

285,52

0

- 28

5,52

0

Prof

it (lo

ss) f

or th

e ye

ar

-

- -

- (229

,410

,772

) (229

,410

,772

) 32

,118

,790

(197

,291

,982

)

Divid

end

33

- -

- -

(22,44

7,63

6)

(22,44

7,63

6)

- (22,44

7,63

6)

Tran

sfer

lega

l res

erve

of a

sub

sidiar

y

to

retaine

d ea

rning

s - u

napp

ropr

iated

- -

- (460

,000

) 46

0,00

0

- -

-

Bala

nce

at 3

1 Dec

embe

r 20

09

2,

244,

779,

001

35

8,14

2,53

9

(191

,098

) 78

,840

,000

72

4,82

6,40

3

3,40

6,39

6,84

5

132,

562,

362

3,

538,

959,

207

Note


081


The

acco

mpa

nying

not

es a

re a

n int

egral p

art o

f the

se fi

nanc

ial s

tate

men

ts.

Sepa

rate

fin

anci

al s

tate

men

ts

Unre

alise

d

surp

luses

(def

icits)

of fa

ir va

lue

chan

ges

on

inves

tmen

ts

Retaine

d ea

rning

sIss

ued

and

paid-

up

share

capit

al

Prem

ium o

n

share

Lega

l res

erve

Unap

prop

riate

dNo

te

(Unit

: Bah

t)

Bala

nce

at 1

Jan

uary

200

8

2,21

4,57

4,62

5

323,

542,

015

62

5,06

8

66,8

90,0

00

2,26

9,53

5,16

4

4,87

5,16

6,87

2

Unre

alise

d de

ficit

of fa

ir va

lue c

hang

es

on

inve

stm

ents

-

- (946

,969

) -

- (946

,969

)

Loss

for t

he y

ear

-

- -

- (368

,932

,087

) (368

,932

,087

)

Divid

end

33

- -

- -

(133

,292

,005

) (133

,292

,005

)

Issue

of o

rdina

ry s

hare

s 21

30

,204

,376

34

,600

,524

-

- -

64,804

,900

Ba

lanc

e at

31

Dec

embe

r 20

08

an

d 1

Janu

ary

2009

2,24

4,77

9,00

1

358,

142,

539

(3

21,9

01)

66,8

90,0

00

1,76

7,31

1,07

2

4,43

6,80

0,71

1

Unre

alise

d su

rplus

es o

f fair

valu

e ch

ange

s

on

inve

stm

ents

-

- 21

3,75

8

- -

213,75

8

Loss

for t

he y

ear

-

- -

- (29,55

1,09

7)

(29,55

1,09

7)

Divid

end

33

- -

- -

(22,44

7,63

6)

(22,44

7,63

6)

Bala

nce

at 3

1 Dec

embe

r 20

09

2,

244,

779,

001

35

8,14

2,53

9

(108

,143

) 66

,890

,000

1,

715,

312,

339

4,

385,

015,

736

The

Eraw

an G

roup

Pub

lic C

ompa

ny L

imite

d an

d its

Sub

sidiar

ies

For t

he y

ears e

nded

31

Dece

mbe

r 200

9 an

d 20

08

Stat

emen

ts o

f ch

ange

s in

eq

uit

y (c

on

tin

ued

)

Total e

quity

attri

butable

to

equit

y ho

lders o

f

the

Com

pany


082

(Unit: Baht)



Annual Report 2009

Note 2009 2008 2009 2008

Cash flows from operating activities


Adjustments for

Depreciation and amortisation 627,780,673 504,623,725 353,932,033 278,985,321

Doubtful debts expense (reversal) 851,763 (3,314,273) 1,314,166 (3,565,227)

Loss from decline in value of investment

in subsidiary - - 804,524 656,500,000

Allowance for non-refundable withholding tax

deducted at source 1,496,186 2,368,450 1,256,544 1,826,811

Transfer rental deposits and deferred income

to income (3,140,513) (3,806,779) (3,140,513) (3,806,779)

Transfer advance received from customers

to income (680,661) (683,546) (680,661) (683,546)

Dividend income (383,911) (2,440,767) (287,308) (172,437,798)

Interest income (357,904) (745,762) (28,295,440) (17,058,927)

Loss (gain) on disposal of property, plant

and equipment, intangible assets

and leasehold rights (14,870,147) 114,873 (12,815,570) 183,987

Finance costs 306,846,197 273,872,602 189,577,331 155,243,468

Income tax expense 45,656,292 92,937,349 - -

765,905,993 1,002,505,899 472,114,009 526,255,223


Statements of cash flows

(Unit: Baht)


083





Note 2009 2008 2009 2008

Changes in operating assets and liabilities

Trade accounts receivable (48,520,383) 65,461,396 (29,973,752) 12,832,519

Inventories (20,197,890) (5,831,940) (10,565,192) (32,795)

Advances - construction 27,619,480 61,282,915 43,216,220 44,657,533

Value added tax refundable 18,157,685 (54,873,443) 14,728,825 (34,498,889)

Other current assets (27,932,924) 11,657,945 (8,328,428) 19,268,172

Deposits for lease of land, building, and equipment (26,461,638) 3,390,859 (24,709,101) (2,078,886)

Other non-current assets 9,921,545 498,571 9,396,549 19,913,932

Trade accounts payable 95,768,997 (39,718,289) 16,746,326 (10,065,675)

Other current liabilities 9,964,022 3,229,785 16,017,955 23,960,201

Deposits from lessees 3,589,521 4,849,162 3,762,739 5,227,571

807,814,408 1,052,452,860 502,406,150 605,438,906

Income tax paid (75,722,398) (109,509,884) (14,250,151) (12,928,328)

Net cash provided by operating activities 732,092,010 942,942,976 488,155,999 592,510,578

Cash flows from investing activities

Decrease (increase) in long-term loans to subsidiaries - - (228,981,950) 97,443,136

Increase in investments in other related parties (4,720) - - -

Increase in investments in subsidiaries - - - (428,999,970)

Net cash payment from the business transfer 4 - - - (1,437,817,467)

Cash receipt (paid) from the return of

share capital of a subsidiary - - (126,348) 1,479,662,826

Acquisition of property, plant and equipment (1,348,767,100) (2,763,403,233) (1,066,443,492) (2,034,795,901)

Acquisition of leasehold rights for land and buildings (3,879,077) (20,370,246) - (29,843,151)

Acquisition of intangible assets (20,310,177) (40,536,072) (19,326,732) (25,860,332)

Proceeds from sales of property,

plant and equipment, and intangible assets 27,789,366 3,502,673 24,711,907 1,981,295

Dividend received 383,911 2,440,767 287,308 172,437,798

Interest received 357,904 745,762 28,322,562 15,406,994

Net cash used in investing activities (1,344,429,893) (2,817,620,349) (1,261,556,745) (2,190,384,772)

Statements of cash flows (continued)


084

(Unit: Baht)



Annual Report 2009


Note 2009 2008 2009 2008

Cash flows from financing activities

Increase (decrease) in short-term loans from

financial institutions (822,850,000) 609,600,000 (745,350,000) 522,100,000

Finance lease payments (27,942,746) (7,892,747) (27,942,746) (7,892,747)

Payment for hire purchase payable (515,574) (1,330,915) (515,574) (1,330,915)

Increase in long-term loans from a subsidiary - - 30,386,838 24,744,952

Cash receipt from long-term loans 1,687,300,000 4,114,959,464 1,648,800,000 3,571,150,000

Repayment of long-term loans - (1,823,750,000) - (1,640,000,000)

Repayment of debentures - (300,000,000) - (300,000,000)

Proceeds from issue of ordinary shares 21 - 64,804,900 - 64,804,900

Finance costs paid (339,799,013) (337,769,217) (222,360,167) (191,669,212)

Dividend paid (22,447,636) (133,292,005) (22,447,636) (133,292,005)

Dividend paid to minority interests - (61,950,117) - -

Net cash provided by financing activities 473,745,031 2,123,379,363 660,570,715 1,908,614,973

Net increase (decrease) in cash

and cash equivalents (138,592,852) 248,701,990 (112,830,031) 310,740,779

Cash and cash equivalents at beginning of year 6 416,081,404 167,379,414 314,664,590 3,923,811

Cash and cash equivalents at end of year 6 277,488,552 416,081,404 201,834,559 314,664,590

Non-cash transactions

Offsetting rental deposit received from lessees

with accounts receivable 1,592,109 5,391,390 1,592,109 5,069,148

Vehicles purchased under hire purchase contract - 1,021,500 - 1,021,500

Acquisition of plant and equipment, intangible assets

and leasehold rights for land and buildings

for which payment has yet to be made 93,925,423 135,515,382 55,423,761 112,470,989


(Unit: Baht)



Statements of cash flows (continued)


085


สำหรับแต่ละปีสิ้นสุดวันที่ 31 ธันวาคม 2552 และ 2551

ห ม า ย เ ห ต ุป ร ะ ก อ บ ง บ ก า ร เ ง ิน

“Succe s s wi th Integr i t y”The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2009 and 2008

1. General information

The Erawan Group Public Company Limited, the “Company”, is incorporated in Thailand and has its registered office at 2 Sukhumvit Road, Klong Toey Subdistrict, Klong Toey 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 2009 and 2008 were as follows:

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 development Thailand 99.99 99.99

Erawan Ploenchit Company Limited Dissolution Thailand - 99.99

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 Company Limited Service Thailand 48.00 48.00

Country of

incorporationName of the entity Type of business

Ownership interest (%)

2009 2008

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 23 February 2010.

Notes to the financial statements

086

Annual Report 2009

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 in accordance with Thai Accounting Standards (“TAS”) and Thai Financial Reporting Standards (“TFRS”) including related interpretations and guidelines promulgated by the Federation of Accounting Professions (“FAP”) and with generally accepted accounting principles in Thailand.

On 15 May 2009, the FAP announced (Announcement No. 12/2009) the re-numbering of TAS to the same numbers as the International Accounting Standards (“IAS”) on which the TAS/TFRS are based.

The Group has adopted the following revised TAS/TFRS and accounting guidance which were issued by the FAP during 2008 and 2009 and effective for annual accounting periods beginning on or after 1 January 2009:

TAS 36 (revised 2007) Impairment of Assets

TFRS 5 (revised 2007) Non-current Assets Held for Sale and Discontinued Operations (formerly TAS 54)

Framework for the Preparation and Presentation of Financial Statements (revised 2007) (effective on 26 June 2009)

Accounting Guidance about Leasehold Right (effective on 26 June 2009)

Accounting Guidance about Business Combination under common control

The adoption of these revised TAS/TFRS and accounting guidance does not have any material impact on the consolidated or separate financial statements.

The FAP has issued during 2009 a number of new and revised TAS which are not currently effective and have not been adopted in the preparation of these financial statements. These new and revised TAS are disclosed in note 38.

The financial statements are presented in Thai Baht, 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 preparation of financial statements in conformity with TAS and 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.



087


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 36 Provisions and contingencies

Note 17 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.

During the year of 2008, the Company changes from an indirect shareholding to a direct shareholding in the subsidiaries and additional shareholding in a subsidiary as discussed in note 10.

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.


088

Annual Report 2009

(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) Cash and cash equivalents Cash and cash equivalents in the statements of cash flows comprise cash balances, call deposits and highly liquid short-term investments.

(d) Trade and other accounts receivable 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.

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.



089


(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

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 recorded at cost less accumulated amortisation and impairment losses.

Amortisation Leasehold rights are amortised on a straight-line method 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


090

Annual Report 2009

(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.

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.



091


(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 using the straight-line method over the terms of contracts.

(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 recognized in the statement of income using the effective interest rate method.

(p) Income tax Income tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date.


092

Annual Report 2009

Cash and deposits at financial institutions 42,053

Trade accounts receivable 58,277

Inventories 13,131

Other current assets 30,264

Investments in subsidiary 222,001

Long-term loans to subsidiary 399,867

Building and equipment 2,321,556

Intangible assets 11,306

Leasehold right for land 569,841

Other non-current assets 189,799

Trade accounts payable (56,237)

Accounts payable - construction (4,766)

Current portion of long-term loans (1,580,000)

Other current liabilities (83,251)

Long-term loans from parent company (186,791)

Accounts payable for land leasehold rights (360,000)

Other non-current liabilities (107,179)

Transfer price - net book value 1,479,871

Transfer price 1,479,871

Less Cash and deposits at financial institutions of subsidiary (42,053)

Net cash payment from the business transfer 1,437,818

จำนวนเงิน

4. Transfer of all business of a subsidiary to the Company

A meeting of the Board of Directors of the Company approved the transfer of the entire business of Erawan Ploenchit Company Limited. Such transfer of business includes the transfer of all assets, employees and liabilities as at 31 December 2007. The Company executed the transfer during the year of 2008 and payment has been made. In addition, pursuant to the above resolution, the Company notified the Revenue Department of the transfer in order to request the tax privileges available for a business transfer. On 2 July 2008, the Company received a letter of notification to support the tax exemption from the Revenue Department. During the first quarter of 2008, the subsidiary transferred all of its business to the Company, with assets and liabilities transferred at their net book values. Details of the transfer of business can be summarised as follows:

(Thousand Baht)

Amount



093


5. 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:

Name of entities Nature of relationships

Country of

incorporation/

nationality

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 Company Limited Thailand Associate, 48.00% direct shareholding,

some common directors

Rajprasong Square Company Limited Thailand Related company, 23.29% direct shareholding

Chai Talay Hotel Company Limited Thailand Related company, director is closed relative to

a Company’s director

Panel Plus Company Limited Thailand Related company, some common directors

Petro Green Company Limited Thailand Related company, some common directors

Mitr Phol Sugar Company Limited Thailand Related company, some common directors

Phu Khieo Bio-Energy Company Limited Thailand Related company, some common directors

Banpu Public Company Limited Thailand Related company, some common directors

The Syndicate of Thai Hotels & Tourists

Enterprises Limited Thailand Related company, some common directors

IAG Insurance (Thailand) Limited Thailand Related company, some common directors


094

Annual Report 2009

Significant transactions for the years ended 31 December 2009 and 2008 with related parties were as follows:

Note 2009 2008 2009 2008



Subsidiaries

Interest income - - 28,173 16,890

Dividend income - - - 170,608

Utilities income - - 1,995 2,155

Rental and service expenses - - 16,472 16,617

Interest expenses 30 - - 1,502 1,729

The pricing policies for particular types of transactions are explained further below:

Subsidiaries

Interest income At the rate of 4.15% - 5.05% per annum

(2008: at the rate of 4.91% - 5.63% 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% - 5.05% per annum

(2008: at the rate of 4.91% - 5.63% per annum)

Associate

Management fee At cost - allocated in proportion to shareholding

Other related parties

Rental and services income Baht 540 - 610 per square meter per month (2008: Baht 350 - 560

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

Pricing policiesTransactions



095


Balances as at 31 December 2009 and 2008 with related parties were as follows:

2009 2008 2009 2008



Trade accounts receivable

from related parties

Subsidiaries

Erawan Hotel Public Company Limited - - 105 100

Erawan Rajdamri Company Limited - - 672 768

Erawan Samui Company Limited - - 273 122


Mitr Phol Sugar Company Limited 907 534 867 534

Banpu Public Company Limited 325 - 325 -

Petro Green Company Limited 280 7 280 7

Panel Plus Company Limited 191 55 191 55

Phu Khieo Bio-Energy Company Limited 16 149 16 149

Chai Talay Hotel Company Limited 434 160 - -

Other companies 31 24 31 24

Total 2,184 929 2,760 1,759

2009 2008 2009 2008




Rental and services income 41,295 30,526 38,469 27,948

Utilities income 3,271 2,724 3,271 2,724

Other service income 3,240 3,414 2,715 3,233

Land rental 10,920 10,920 - -

Management fee 1,600 1,009 1,600 1,009

Insurance expenses 1,632 980 982 603


096

Annual Report 2009

Separate financial

statements


Consolidated

financial statements

2009 2008 2009 2008 2009 2008

Loans to related parties

Long-term loans

Subsidiaries

Erawan Samui Company Limited 4.15 5.63 - - 73,500 69,524

Erawan Naka Company Limited 4.15 5.63 - - 16,909 16,730

Erawan Phuket Company Limited 4.15 5.63 - - 484,973 294,038

Erawan Chaophraya Company Limited 4.15 5.63 - - 26,968 9,888

The Reserve Company Limited 4.15 5.63 - - 143,396 126,611

Total - - 745,746 516,791

2009 2008 2009 2008



Prepaid expense - related party

Other related party

The Syndicate of Thai Hotels & Tourists

Enterprises Ltd. 5,460 5,460 - -

2009 2008 2009 2008



Other receivable - related party

Subsidiary

Erawan Chaophraya Company Limited - - - 143

Interest rate

(% per annum)



097


Movements during the years ended 31 December 2009 and 2008 of loans to related parties were as follows:

Loans to related parties

Short-term loans

Subsidiary

At 1 January - - - -

Increase - - 88,489 14,059

Decrease - - (88,489) (14,059)

At 31 December - - - -

Long-term loans

Subsidiaries

At 1 January - - 516,791 399,506

Increase - - 269,662 1,022,646

Decrease - - (40,707) (905,361)

At 31 December - - 745,746 516,791

2009 2008 2009 2008



2009 2008 2009 2008



Trade accounts payable-related party

Subsidiary

Erawan Hotel Public Company Limited - - 200 223


098

Annual Report 2009

Movements during the years ended 31 December 2009 and 2008 of loans from related parties were as follows:

2009 2008 2009 2008



Loans from a related party

Short-term loans

Subsidiary

At 1 January - - - -

Increase - - - 198,010

Decrease - - - (198,010)

At 31 December - - - -

Long-term loans

Subsidiary

At 1 January - - 24,745 -

Increase - - 72,102 86,455

Decrease - - (41,715) (61,710)

At 31 December - - 55,132 24,745

2009 2008 2009 2008 2009 2008

Loans from a related party

Long-term loans

Subsidiary

Erawan Rajdamri Company Limited 4.15 5.63 - - 55,132 24,745


Separate financial

statements

Consolidated

financial statements

Interest rate

(% per annum)



099


6. Cash and cash equivalents

Cash and cash equivalents of the Group and the Company as at 31 December 2009 and 2008 were denominated in Thai Baht. 7. Trade accounts receivable

2009 2008 2009 2008



Cash at banks and on hand 277,489 122,396 201,835 50,077

Highly liquid short-term investments - 293,685 - 264,588

Total 277,489 416,081 201,835 314,665

Note 2009 2008 2009 2008



Related parties 5 2,184 929 2,760 1,759

Other parties 148,969 103,296 78,944 51,563

151,153 104,225 81,704 53,322

Less allowance for doubtful accounts (2,658) (1,806) (2,130) (816)

Total 148,495 102,419 79,574 52,506

Doubtful debts expenses (reversal)

for the year 852 (3,314) 1,314 (3,565)


100

Annual Report 2009


Trade accounts receivable of the Group and the Company as at 31 December 2009 and 2008 were denominated in Thai Baht.

Aging analyses for trade accounts receivable were as follows:

2009 2008 2009 2008



Related parties

Outstanding:

Less than 3 months 2,184 929 2,760 1,759

Other parties

Outstanding:

Less than 3 months 147,152 99,010 77,833 48,022

3 - 6 months 1,345 3,238 639 2,796

6 - 12 months 246 154 246 70

Over 12 months 226 894 226 675

148,969 103,296 78,944 51,563

Less allowance for doubtful accounts (2,658) (1,806) (2,130) (816)

Net 146,311 101,490 76,814 50,747

Total 148,495 102,419 79,574 52,506


101



Note 2009 2008 2009 2008



Food and beverage 35,071 25,779 9,215 9,276

Operating supplies 12,044 10,776 237 518

Real estate for sale 13 23,254 - 23,254 -

Others 7,878 11,432 1,086 3,370

Total 78,247 47,987 33,792 13,164

8. Inventories

Note 2009 2008 2009 2008



Prepaid expenses 5 30,827 21,336 7,190 6,786

Other advances 30,891 25,980 4,669 329

Other receivables 5 3,055 1,380 128 452

Undue input value added tax 9,914 11,943 7,333 8,259

Others 14,229 3,274 1,072 231

Total 88,916 63,913 20,392 16,057

9. Other current assets

102

Annual Report 2009


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tal

2,29

9,16

0 2,

956,

338

- (6

56,5

00)

2,29

9,16

0 2,

299,

838

- 17

0,60

8

20

09

200

8

2009

2

008

20

09

200

8

2009

2

008

20

09

200

8

2009

2

008


103



During the first quarter of 2008 the Company received the transfer of the entire business of Erawan Ploenchit Company Limited. The subsidiary subsequently registered the dissolution with the Ministry of Commerce. In addition, a meeting of the Board of Directors of the subsidiary approved the return of share capital to the shareholders prior to liquidation at the rate of Baht 7.36 per share, totalling Baht 1,480.3 million, and such amount has already been paid. The Company set up a loss from diminution in the value of investment in the subsidiary of Baht 656.5 million in statement of income. However, on 4 April 2008, the Company returned to the subsidiary a portion of Baht 0.0032 per share, totalling Baht 0.6 million, of the amount that the Company received in advance, without waiting for the completion of the liquidation process. On 11 December 2009 the said subsidiary registered for dissolution. The Company received the rest of capital and recognised loss from written off investment in the said subsidiary in the amount of Baht 0.8 million.

The Company received the transfer investment in Erawan Phuket Company Limited valued at Baht 222.0 million. This consists of 189,994 ordinary shares of such company. In addition, on 3 March 2008, a resolution of the Extraordinary General Meeting of the shareholders of Erawan Phuket Company Limited authorised a plan to increase that subsidiary’s share capital from Baht 190.0 million to Baht 550.0 million through the issue of 0.4 million additional ordinary shares, with a par value of Baht 1,000 each. The Company purchased all of the additional shares. As a result of the acquisition, the Company’s indirect equity interest of 99.99% in that company has changed to a direct equity interest of 99.99%.

On 3 March 2008, a resolution of the Extraordinary General Meeting of the shareholders of Erawan Chaophraya Company Limited authorised a plan to increase that subsidiary’s share capital from Baht 3.0 million to Baht 71.0 million through the issue of 0.7 million additional ordinary shares, with a par value of Baht 100 each. The Company purchased all of the additional shares. As a result of these transactions, the Company’s indirect equity interest of 99.99% has changed to an indirect equity interest of 4.22% and a direct equity interest of 95.77%.

On 8 April 2008, the Annual General Meeting of the shareholders of Erawan Hotel Public Company Limited approved the payment of a dividend of Baht 2.95 per share to the shareholders of 79,666,667 shares totalling Baht 235.0 million, in respect of the 2007 income. The dividend was paid on 11 April 2008.

On 19 August 2008, a resolution of the meeting of the Financial and Risk Management Committee of the Company authorised investment in 99,997 ordinary shares of The Reserve Company Limited with a par value of Baht 10 each. As a result of this transaction, the Company has a direct equity interest of 99.99%.

104

Annual Report 2009


11.

Inve

stm

ent

in a

ssoc

iate

Inve

stm

ents in

ass

ociat

e as

at 3

1 De

cem

ber 2

009

and

2008

, and

divi

dend

inco

me

from

the

inves

tmen

t for

the

years

then

end

ed w

ere

as fo

llows:

As

soci

ate

Ra

jpras

ong

Deve

lopme

nt

Co.,

Ltd.

48.00

48

.00

1.00

1.00

338

338

338

338

- -

338

338

- -

20

09

2008

2009

20

08

20

09

2008

2009

20

08

20

09

2008

2009

20

08

20

09

2008

As

soci

ate

Ra

jpras

ong

Deve

lopme

nt Co

., Lt

d.

48

.00

48.00

1.0

0 1.0

0 33

8 33

8 -

- 33

8 33

8 -

-

20

09

2008

2009

20

08

20

09

2008

2009

20

08

20

09

2008

2009

20

08

Owne

rship

Inte

rest (%

)

Paid-

up c

apita

l

(Milli

on B

aht)

Cost m

etho

d Eq

uity

met

hod

Impa

irmen

t Di

viden

d inc

ome

At e

quity

- ne

t

(Unit

: Tho

usan

d Ba

ht)

Co

nsol

idat

ed fin

anci

al s

tate

men

ts

Du

ringtheyear,theCom

panydidnotrecorditssharesintheoperating

resultofinvestmentsinassociateintheconsolidatedfinancialstatementsbecause

it fo

und

that th

e am

ount

was

imm

ater

ial.

Divid

end

incom

e

(Unit

: Tho

usan

d Ba

ht)

Sepa

rate

fin

anci

al s

tate

men

ts

Owne

rship

Inte

rest (%

)

Paid-

up c

apita

l

(Milli

on B

aht)

Cost m

etho

d Im

pairm

ent

At c

ost -

net


105



The following summarised financial information on associated companies which have not been accounted for using the equity method but have not been adjusted for the percentage of ownership held by the Group:

2009

Rajprasong Development Co., Ltd. 48.00 2,998 1,953 3,206 (41)

2008

Rajprasong Development Co., Ltd. 48.00 1,127 123 2,007 (12)

12. Investments in other related parties


Net

loss

Ownership

interest

(%)

Total

assets

Total

liabilities

Total

revenue

2009 2008 2009 2008


Equity interest (%) Consolidated financial statements

Related company

Rajprasong Square Co., Ltd. 23.29 23.29 206 206

The Asia Recovery 2 Fund 0.17 0.17 3,290 3,285

Less allowance for change in value (191) (476)

Total 3,305 3,015

2009 2008 2009 2008


Equity interest (%) Separate financial statements

Related company

Rajprasong Square Co., Ltd. 23.29 23.29 206 206

The Asia Recovery 2 Fund 0.13 0.13 2,427 2,427

Less allowance for change in value (108) (321)

Total 2,525 2,312

106

Annual Report 2009


13.

Prop

erty

, pla

nt a

nd e

quip

men

t

Co

st

At

1 J

anua

ry 2

008

1,28

9,54

9 5,38

5,20

2 1,29

1,20

1 67

,778

10

3,23

2 1,42

8,99

0 9,56

5,95

2

Ad

dition

s

362,45

1 49

,009

27

0,22

6 11

,022

50

,766

1,92

0,07

1 2,66

3,54

5

Ad

justm

ent

-

- 63

-

- (1)

62

Tr

ansfer

s

- 2,13

1,50

0 99

,137

7,11

8 9,58

0 (2,252

,004

) (4,669

)

Di

spos

als

-

(1,744

) (20,70

2)

(1,363

) -

- (23,80

9)

At 31

Dec

embe

r 20

08

and

1 Ja

nuar

y 20

09

1,

652,

000

7,56

3,96

7 1,

639,

925

84,5

55

163,

578

1,09

7,05

6 12

,201

,081

Ad

dition

s

6,43

4 93

,423

36

4,10

7 4,67

0 48

,397

83

7,34

2 1,35

4,37

3

Ad

justm

ent

-

(105

) (384

) 24

-

- (465

)

Tr

ansfer

s

- 1,73

6,75

5 31

,471

30

6 3,51

9 (1,773

,615

) (1,564

)

Tr

ansfer

to re

al es

tate

for s

ale

8 (10,06

3)

- -

- -

(13,19

1)

(23,25

4)

Di

spos

als

-

(1,747

) (25,71

4)

(55,69

1)

- -

(83,15

2)

At 31

Dec

embe

r 20

09

1,

648,

371

9,39

2,29

3 2,

009,

405

33,8

64

215,

494

147,

592

13,4

47,0

19

Cons

olid

ated

fin

anci

al s

tate

men

ts

Total

Land

Bu

ilding

and

impr

ovem

ents

Furn

iture

,

fixtu

res

and

equip

men

t Ve

hicles

Oper

ating

equip

men

t

Asse

ts

unde

r

cons

truction

No

te

(Unit

: Tho

usan

d Ba

ht)


107



Total

Land

Bu

ilding

and

impr

ovem

ents

Furn

iture

,

fixtu

res

and

equip

men

t Ve

hicles

Oper

ating

equip

men

t

Asse

ts

unde

r

cons

truction

No

te

(Unit

: Tho

usan

d Ba

ht)

Acc

umul

ated

dep

reci

atio

n

At

1 J

anua

ry 2

008

-

1,67

3,11

2 86

2,75

0 31

,668

-

- 2,56

7,53

0

De

prec

iation

cha

rge

for t

he y

ear

- 24

7,62

6 14

3,87

6 15

,079

-

- 40

6,58

1

Di

spos

als

-

(1,000

) (18,21

6)

(976

) -

- (20,19

2)

At 31

Dec

embe

r 20

08

and

1 Ja

nuar

y 20

09

-

1,91

9,73

8 98

8,41

0 45

,771

-

- 2,

953,

919

De

prec

iation

cha

rge

for t

he y

ear

- 31

6,59

0 19

2,82

7 13

,063

-

- 52

2,48

0

Ad

justm

ent

-

(2)

(8)

3 -

- (7)

Di

spos

als

-

(1,457

) (24,83

0)

(44,33

8)

- -

(70,62

5)

At 31

Dec

embe

r 20

09

-

2,23

4,86

9 1,

156,

399

14,4

99

- -

3,4

05,7

67

Cons

olid

ated

fin

anci

al s

tate

men

ts

108

Annual Report 2009


Total

Land

Bu

ilding

and

impr

ovem

ents

Furn

iture

,

fixtu

res

and

equip

men

t Ve

hicles

Oper

ating

equip

men

t

Asse

ts

unde

r

cons

truction

No

te

(Unit

: Tho

usan

d Ba

ht)

Cons

olid

ated

fin

anci

al s

tate

men

ts

N

et b

ook

valu

e

Ow

ned

asse

ts

1,65

2,00

0 5,64

4,22

9 65

1,44

6 20

,428

16

3,57

8 1,09

7,05

6 9,22

8,73

7

As

sets u

nder

fina

nce

lease

s

- -

69

18,356

-

- 18

,425

To

tal a

t 31

Dec

embe

r

2008

1,65

2,00

0 5,

644,

229

651,

515

38,7

84

163,

578

1,09

7,05

6 9,

247,

162

El

imin

ate

37

8,40

7

9,62

5,56

9

Ow

ned

asse

ts

1,64

8,37

1 7,15

7,42

4 85

2,95

6 19

,365

21

5,49

4 14

7,59

2 10

,041

,202

As

sets u

nder

fina

nce

lease

s

- -

50

- -

- 50

To

tal a

t 31

Dec

embe

r

2009

1,64

8,37

1 7,

157,

424

853,

006

19,3

65

215,

494

147,

592

10,0

41,2

52

El

imin

ate

36

5,38

3

10

,406

,635

Dep

reci

atio

n fo

r th

e ye

ar

20

08

40

6,58

1

Elim

inate

13,024

41

9,60

5

20

09

52

2,48

0

Elim

inate

13,024

53

5,50

4


109



Total

Land

Bu

ilding

and

impr

ovem

ents

Furn

iture

,

fixtu

res

and

equip

men

t Ve

hicles

Oper

ating

equip

men

t

Asse

ts

unde

r

cons

truction

No

te

(Unit

: Tho

usan

d Ba

ht)

Cons

olid

ated

fin

anci

al s

tate

men

ts

The

gros

s am

ount

of th

e Gr

oup’

s fu

lly d

epre

ciate

d pla

nt a

nd e

quipm

ent th

at w

as s

till in

use

as

at 3

1 De

cem

ber 20

09 a

mou

nted

to

Baht

823

.9 m

illion

(20

08:

Baht

681

.5 m

illion

).

Fi

nanc

e co

sts

capi

talis

ed

Fin

ance

cos

ts c

apita

lised

durin

g 20

08

30

- -

- -

- 60

,418

60

,418

Ra

tes

of in

tere

st

capit

alise

d du

ring

2008

(MLR

-1.50%

per

ann

um)

Fin

ance

cos

ts c

apita

lised

durin

g 20

09

30

- -

- -

- 31

,407

31

,407

Ra

tes

of in

tere

st

capit

alise

d du

ring

2009

(MLR

-1.50%

per

ann

um)

110

Annual Report 2009


Total

Land

Bu

ilding

and

impr

ovem

ents

Furn

iture

,

fixtu

res

and

equip

men

t Ve

hicles

Oper

ating

equip

men

t

Asse

ts

unde

r

cons

truction

No

te

(Unit

: Tho

usan

d Ba

ht)

Sepa

rate

fin

anci

al s

tate

men

ts

Co

st

At

1 J

anua

ry 2

008

98

6,24

5 61

,503

25

,584

10

,519

-

541,89

1 1,62

5,74

2

Ad

dition

s

261,38

1 32

,087

20

6,47

6 4,30

9 24

,916

1,53

4,15

5 2,06

3,32

4

Tr

ansfer

s

- 1,04

3,28

7 13

,742

-

2,96

4 (1,063

,431

) (3,438

)

Di

spos

als

-

(1,519

) (7,920

) (1,363

) -

- (10,80

2)

Increa

se fr

om b

usine

ss

trans

fer

-

2,90

7,05

3 40

5,63

3 53

,124

44

,486

18

,897

3,42

9,19

3

At 3

1 Dec

embe

r 20

08

and

1 Ja

nuar

y 20

09

1,

247,

626

4,04

2,41

1 64

3,51

5 66

,589

72

,366

1,

031,

512

7,10

4,01

9

Ad

dition

s

- 8,58

5 29

1,99

0 4,32

8 38

,709

71

1,69

2 1,05

5,30

4

Ad

justm

ent

-

(105

) 60

24

-

- (21)

Tr

ansfer

s

- 1,63

4,03

9 30

,480

-

573

(1,666

,301

) (1,209

)

Tr

ansfer

to re

al es

tate

for s

ale

8 (10,06

3)

- -

- -

(13,19

1)

(23,25

4)

Di

spos

al

- (1,747

) (12,16

7)

(55,69

2)

- -

(69,60

6)

At 3

1 Dec

embe

r 20

09

1,

237,

563

5,68

3,18

3 95

3,87

8 15

,249

11

1,64

8 63

,712

8,

065,

233


111



Total

Land

Bu

ilding

and

impr

ovem

ents

Furn

iture

,

fixtu

res

and

equip

men

t Ve

hicles

Oper

ating

equip

men

t

Asse

ts

unde

r

cons

truction

No

te

(Unit

: Tho

usan

d Ba

ht)

Sepa

rate

fin

anci

al s

tate

men

ts

Acc

umul

ated

dep

reci

atio

n

At

1 J

anua

ry 2

008

-

13,340

16

,535

6,39

8 -

- 36

,273

De

prec

iation

cha

rge

for t

he y

ear

- 15

1,38

0 65

,101

12

,847

-

- 22

9,32

8

Di

spos

als

-

(843

) (6,818

) (975

) -

- (8,636

)

Increa

se fr

om b

usine

ss

trans

fer

-

801,60

6 28

1,79

2 24

,239

-

- 1,10

7,63

7

At 3

1 Dec

embe

r 20

08

and

1 Ja

nuar

y 20

09

-

965,

483

356,

610

42,5

09

- -

1,36

4,60

2

De

prec

iation

cha

rge

for t

he y

ear

- 18

9,22

3 10

0,00

8 9,49

5 -

- 29

8,72

6

Ad

justm

ent

-

(2)

(4)

3 -

- (3)

Di

spos

als

-

(1,458

) (11,91

3)

(44,33

8)

- -

(57,70

9)

At 3

1 Dec

embe

r 20

09

-

1,15

3,24

6 44

4,70

1 7,

669

- -

1,60

5,61

6

112

Annual Report 2009


Total

Land

Bu

ilding

and

impr

ovem

ents

Furn

iture

,

fixtu

res

and

equip

men

t Ve

hicles

Oper

ating

equip

men

t

Asse

ts

unde

r

cons

truction

No

te

(Unit

: Tho

usan

d Ba

ht)

Sepa

rate

fin

anci

al s

tate

men

ts

N

et b

ook

valu

e

Ow

ned

asse

ts

1,24

7,62

6 3,07

6,92

8 28

6,83

6 5,72

4 72

,366

1,03

1,51

2 5,72

0,99

2

As

sets u

nder

fina

nce

lease

s

- -

69

18,356

-

- 18

,425

To

tal a

t 31

Dec

embe

r

2008

1,24

7,62

6 3,

076,

928

286,

905

24,0

80

72,3

66

1,03

1,51

2 5,

739,

417

Ow

ned

asse

ts

1,23

7,56

3 4,52

9,93

7 50

9,12

7 7,58

0 11

1,64

8 63

,712

6,45

9,56

7

As

sets u

nder

fina

nce

lease

s

- -

50

- -

- 50

To

tal a

t 31

Dec

embe

r

2009

1,23

7,56

3 4,

529,

937

509,

177

7,58

0 11

1,64

8 63

,712

6,

459,

617


113



Total

Land

Bu

ilding

and

impr

ovem

ents

Furn

iture

,

fixtu

res

and

equip

men

t Ve

hicles

Oper

ating

equip

men

t

Asse

ts

unde

r

cons

truction

No

te

(Unit

: Tho

usan

d Ba

ht)

Sepa

rate

fin

anci

al s

tate

men

ts

Th

e gr

oss

amou

nt o

f th

e Co

mpa

ny’s full

y de

prec

iated

plan

t an

d eq

uipm

ent th

at w

as s

till in

use

as

at 3

1 De

cem

ber 20

09 a

mou

nted

to

Baht

398

.2 m

illion

(200

8: B

aht 2

90.5 m

illion

).

Fi

nanc

e co

sts

capi

talis

ed

Fin

ance

cos

ts c

apita

lised

durin

g 20

08

30

- -

- -

- 33

,516

33

,516

Ra

tes

of in

tere

st

capit

alise

d du

ring

2008

(MLR

-1.50%

per

ann

um)

Fin

ance

cos

ts c

apita

lised

durin

g 20

09

30

- -

- -

- 31

,366

31

,366

Ra

tes

of in

tere

st

capit

alise

d du

ring

2009

(MLR

-1.50%

per

ann

um)

114

Annual Report 2009


14. Leasehold rights for land and buildings


Consolidated financial statements

Leasehold

rights for land

Leasehold rights

for buildings Total

Cost

At 1 January 2008 990,288 1,217,608 2,207,896

Additions 29,843 - 29,843

Disposals - (9,015) (9,015)

At 31 December 2008 and 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 1,021,781 1,210,828 2,232,609

Accumulated amortisation

At 1 January 2008 251,610 118,210 369,820

Amortisation for the year 23,997 47,307 71,304

Adjustment - (1) (1)

At 31 December 2008 and 1 January 2009 275,607 165,516 441,123


At 31 December 2009 301,833 212,858 514,691

Net book value

At 1 January 2008 744,524 1,043,077 1,787,601

Eliminated (5,443)

1,782,158

31 December 2009 719,948 997,970 1,717,918

Eliminated (4,992)

1,712,926


115



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 2009 of Baht 703.4 million and Baht 635.0 million, respectively (2008: Baht 717.2 million and Baht 657.4 million, respectively), with banks to secure the loans.

Cost

At 1 January 2008 78,000 278,481 356,481

Additions 29,843 - 29,843

Increase from business transfer 737,802 - 737,802

At 31 December 2008 and 1 January 2009 845,645 278,481 1,124,126

At 31 December 2009 845,645 278,481 1,124,126


At 1 January 2008 - 15,511 15,511


Increase from business transfer 167,961 - 167,961

At 31 December 2008 and 1 January 2009 188,206 35,933 224,139


At 31 December 2009 210,689 56,299 266,988

Net book value

31 December 2008 657,439 242,548 899,987

31 December 2009 634,956 222,182 857,138


Separate financial statements

Leasehold

rights for land

Leasehold rights

for buildings Total

116

Annual Report 2009


15. Intangible assets

Computer software

2009 2008 2009 2008



Amortisation for the year 73,568 71,304 42,849 40,667

Less Capitalise amortisation (459) (459) - -

Eliminated (450) (450) - -

Amortisation expenses included

in statements of income 72,659 70,395 42,849 40,667

2009 2008 2009 2008



At 1 January 123,566 83,030 80,030 30,832

Additions 18,622 35,867 17,994 22,648

Transfers 1,564 4,669 1,209 3,438

Disposals (563) - - -

Increase from business transfer - - - 23,112

At 31 December 143,189 123,566 99,233 80,030


At 1 January 49,601 34,977 36,590 15,794

Amortisation charge for the year 19,618 14,624 12,357 8,990

Disposals (170) - - -

Increase from business transfer - - - 11,806

At 31 December 69,049 49,601 48,947 36,590

Net book value

At 31 December 74,140 73,965 50,286 43,440


117



16. Other non-current assets

17. Interest-bearing liabilities

Withholding tax deducted at source 31,482 27,963 30,413 26,816

Others 2,884 3,416 - -

Total 34,366 31,379 30,413 26,816

2009 2008 2009 2008



Current

Short-term loans from financial

institutions secured 207,200 1,030,050 152,200 897,550

Current portion of long-term loans

from financial institutions secured 697,250 514,000 371,000 245,000

Current portion of finance lease liabilities 26 27,943 26 27,943

Current portion of hire purchase payable 529 516 529 516

905,005 1,572,509 523,755 1,171,009

Note 2009 2008 2009 2008



118

Annual Report 2009


The periods to maturity of interest-bearing liabilities, excluding finance lease liabilities and hire purchase payables, as at 31 December were as follows:

Under the loan agreements, the Group have 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.

Non-current

Long-term loans from financial

institutions secured 7,665,467 6,161,417 5,370,900 3,848,100

Long-term loans from related parties

unsecured 5 - - 55,132 24,745

Finance lease liabilities - 26 - 26

Hire purchase payable 568 1,096 568 1,096

7,666,035 6,162,539 5,426,600 3,873,967

Total 8,571,040 7,735,048 5,950,355 5,044,976

Note 2009 2008 2009 2008



Within one year 904,450 1,544,050 523,200 1,142,550

After one year but within five years 4,881,150 3,963,317 3,362,532 2,378,245

After five years 2,784,317 2,198,100 2,063,500 1,494,600

Total 8,569,917 7,705,467 5,949,232 5,015,395

2009 2008 2009 2008




119



Secured interest-bearing liabilities as at 31 December were secured on the following assets:

As at 31 December 2009 the Group and the Company had unutilised credit facilities totalling Baht 1,049.6 million and 788.1 million, respectively (2008: Baht 2,086.9 million and Baht 2,086.9 million, respectively).

Finance lease liabilities

Finance lease liabilities as at 31 December were payable as follows:

Interest-bearing liabilities of the Group as at 31 December 2009 and 2008 were denominated entirely in Thai Baht.

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

Property, plant and equipment - net 8,731,712 7,609,948 5,772,469 4,765,199

Leasehold right for land - net 703,445 717,222 634,956 657,439

Total 9,435,157 8,327,170 6,407,425 5,422,638

2009 2008 2009 2008



Within one year 27 (1) 26 29,323 (1,380) 27,943

After one year but within five years - - - 27 (1) 26

Total 27 (1) 26 29,350 (1,381) 27,969


2009 2008

Interest Payments Principal Interest PrincipalPayments

Consolidated financial statements/Separate financial statements

120

Annual Report 2009


18. Trade accounts payable

Related party 5 - - 200 223

Other parties 230,684 134,915 74,901 58,132

Total 230,684 134,915 75,101 58,355

Note 2009 2008 2009 2008



Trade accounts payable of the Group and the Company as at 31 December 2009 and 2008 were denominated entirely in

Thai Baht.

19. Other current liabilities

Management, royalty, marketing

and other fees payable - hotel business 29,152 23,870 10,835 7,104

Retention 70,082 106,823 23,057 54,841

Advances from customers 19,420 16,900 6,755 6,579

Value added tax payable 7,000 5,006 - -

Accrued expenses 104,107 110,095 60,474 41,340

Income tax payable 27,678 43,340 - -

Deposits received - hotel business 54,017 28,225 22,204 6,604

Others 54,610 39,731 28,664 21,600

Total 366,066 373,990 151,989 138,068

2009 2008 2009 2008




121



20. Deferred income

21. Share capital

Leasehold rights - building,

service and equipment - other parties 56,720 56,720 56,720 56,720

Less accumulated amortisation (38,585) (35,771) (38,585) (35,771)

Net book value 18,135 20,949 18,135 20,949

Amortisation expenses included

in statements of income for the year 2,814 2,814 2,814 2,814

2009 2008 2009 2008



Par value

per share

(Baht)

Number (Thousand shares)

Amount (Thousand

Baht)

Authorised

At 1 January

Ordinary shares 1 2,281,143 2,281,143 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 2,281,143 2,281,143

Issued and paid-up

At 1 January

Ordinary shares 1 2,244,779 2,244,779 2,214,575 2,214,575

Increase from the exercise of ESOP 1 - - 30,204 30,204

At 31 December

Ordinary shares 1 2,244,779 2,244,779 2,244,779 2,244,779

2009 2008

Number (Thousand shares)

Amount (Thousand

Baht)

122

Annual Report 2009


Ordinary shares

Date from the exercise

(Shares)

During the year 2008, the Company received payment of additional share capital totalling Baht 64.8 million as a result of the exercise of share options by the directors and employees under the employee stock option plan scheme as follows:

1 February 2008 400,000 2.15 860

3 March 2008 319,729 2.09 668

3 March 2008 638,783 2.12 1,354

3 March 2008 5,615,675 2.15 12,074

2 June 2008 1,203,756 2.15 2,588

2 June 2008 3,437,089 2.18 7,493

1 July 2008 600,000 2.09 1,254

1 July 2008 569,729 2.18 1,242

1 August 2008 200,000 2.09 418

1 August 2008 200,000 2.18 436

1 September 2008 64,973 2.09 136

1 September 2008 1,214,973 2.12 2,575

1 September 2008 839,458 2.18 1,830

1 October 2008 2,877,569 2.09 6,014

1 October 2008 3,389,136 2.12 7,186

1 October 2008 4,795,948 2.15 10,311

1 October 2008 3,837,558 2.18 8,366

Total 30,204,376 64,805

The Company registered the increase in its paid-up share capital to Baht 2,244.8 million with the Ministry of Commerce on 10 October 2008. The Stock Exchange of Thailand approved the additional ordinary shares as listed securities on 17 October 2008.

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.

Exercise price

(Baht/share)

Amount

(Thousand Baht)


123



22. Employee stock option plan (ESOP)

On 4 November 2004, the Extraordinary Meeting of shareholders No. 1/2547 approved the employee stock option plan. Under the plan, the Company is to offer 66,652,400 ordinary shares with a par value of Baht 1 each, equivalent to 4.59% of the total paid-up shares, to its directors and its employees and/or its subsidiaries. The plan is to cover a period of not more than 5 years from the date it is approved by the Securities and Exchange Commission (SEC). Directors and employees who are granted options can exercise one-quarter of the total options granted during each of four exercise periods.

Following the final exercise period, any remaining options will be deemed to have expired and no further exercise will be possible.

In addition, at the Annual General Meeting of the shareholders of the Company held on 25 April 2006, the shareholders approved the issuance of not more than Baht 18.26 million additional shares to support the adjustment of rights under the ESOP, as a result of the increase in the number of shares and the corresponding issuance of warrants. The new exercise price and the number of shares after adjustment are as follows:

Period

1 29 September 2006 - 30 December 2008 11,277,627 2.67 2.09

2 29 September 2006 - 30 December 2008 18,242,747 2.71 2.12

3 1 June 2007 - 30 December 2008 21,310,743 2.75 2.15

4 1 June 2008 - 30 December 2008 21,310,743 2.79 2.18

Exercise periods

Number of shares

after adjustment

(Shares)

Formerly

exercise prices

(Baht per share)

New exercise

prices

(Baht per share)

The directors and employees of the Company and its subsidiaries exercised their rights to purchase totalling 30,204,376 ordinary shares in 2008.

During the year 2008, movements in the number of ordinary share options are as follows:

Number of share options at the beginning of year 43,326,525

Less exercised during the year (30,204,376)

Less number of share options cancellation since the directors resigned during the year (319,729)

Less number of share options expired during the year (12,802,420)

Number of share options at the end of year -

Shares

124

Annual Report 2009


23. Reserves

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 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. 24. Expenses by natures

Significant expenses by nature are as follows:

25. 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.

Salary and wages and other employee

benefits 896,878 710,839 498,222 324,796

Costs of food and beverage 409,899 417,215 188,501 188,637

Rental expenses 46,385 45,677 30,400 29,035

2009 2008 2009 2008




125



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 geographic area, namely in Thailand, and has, therefore, only one major geographic segment.

Business segments results in the consolidated financial statements for the years ended 31 December 2009 and 2008 were as follows:

Revenues from

external 401 389 2,748 2,987 - - 3,149 3,376

Inter - segment

revenues 20 20 - - (20) (20) - -

Total revenues 421 409 2,748 2,987 (20) (20) 3,149 3,376

Segment profit 153 146 80 443 (13) (13) 220 576

Unallocated income

and expenses:

Other income 43 37

Depreciation and

amortisation (10) (12)

Selling expenses (2) (2)

Administrative

expenses (95) (93)

Finance costs (307) (274)

Income tax (46) (93)

Net profit attribute

to minority

interests (32) (61)

Profit (loss)

for the year (229) 78

2009 2008

Hotel business Total

(Unit: Million Baht)

Eliminations

2009 2008 2009 2008 2009 2008

Building rental business

126

Annual Report 2009


Inventories - - 55 48 23 - - - 78 48

Property, plant

and equipment 725 791 9,196 8,342 158 152 328 341 10,407 9,626

Leasehold rights for

land and buildings 356 386 1,444 1,491 - - (87) (95) 1,713 1,782

Other assets 1,091 1,174

Total assets 13,289 12,630


2009 2008

Business segment financial position in the consolidated financial statements as at 31 December 2009 and 2008 were as follows:

Hotel business Total Eliminations Building rental

business Unallocated

assets

2009 2008 2009 2008 2009 2008 2009 2008

Interest-bearing

borrowings 480 480 8,561 6,929 330 838 (801) (541) 8,570 7,706

Account payable for

land leasehold rights 180 180 180 180 - - - - 360 360

Other liabilities 820 806

Total liabilities 9,750 8,872


2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

Hotel business Total Eliminations Building rental

business Unallocated

liablities


127



26. Other income

27. Selling expenses

Gain from sale of fixed assets 14,870 - 12,816 -

Gain from sale of investment 526 685 506 588

Income from additional capital paid up - 8,645 - 8,645

Income from property tax 6,719 6,383 6,531 6,263

Others 15,869 13,872 13,316 11,094

Total 37,984 29,585 33,169 26,590

2009 2008 2009 2008



Marketing expenses 150,608 151,533 74,053 77,983

Personnel expenses 56,101 46,762 20,054 12,932

Total 206,709 198,295 94,107 90,915

2009 2008 2009 2008



28. Administrative expenses

Personnel expenses 243,331 186,682 145,553 89,138

Management and other fee 159,375 187,472 89,596 100,053

Repair and maintenance expenses 44,705 51,880 16,154 12,602

Others 223,373 275,388 87,089 76,315

Total 670,784 701,422 338,392 278,108

2009 2008 2009 2008



128

Annual Report 2009


29. Employee benefit expenses

The defined contribution plans comprise provident funds established by the Group and 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 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 Manager.

Management

Salary and wage and other benefits 39,145 46,508 37,240 44,453

Contribution to defined contribution plans 1,093 1,043 1,093 1,043

40,238 47,551 38,333 45,496

Other employees

Salary and wage and other benefits 838,810 646,909 453,151 272,431

Contribution to defined contribution plans 17,830 16,379 6,738 6,869

856,640 663,288 459,889 279,300

Total 896,878 710,839 498,222 324,796

2009 2008 2009 2008




129



30. Finance costs

Interest:

Related parties 5 - - 1,502 1,729

Financial institutions 337,750 334,291 219,401 187,030

Transaction costs 503 - 40 -

338,253 334,291 220,943 188,759

Capitalised as cost of assets under

construction 13 (31,407) (60,418) (31,366) (33,516)

Net 306,846 273,873 189,577 155,243

Note 2009 2008 2009 2008



31. Income tax expense

The current tax expense in the consolidated statements of income more than the amount determined by applying the Thai corporation tax rate to the accounting profit for the year principally because the different treatment for accounting and taxation purposes of certain items of income and expenses.

Current tax expense

Current year 45,656 92,937 - -

2009 2008 2009 2008



32. Earnings (loss) per share

Basic earnings (loss) per share The calculations of basic earnings (loss) per share for the years ended 31 December 2009 and 2008 were based on the profit (loss) for the year attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding during the periods as follows:

130

Annual Report 2009


Diluted earnings (loss) per share The calculations of diluted earnings (loss) per share for the years ended 31 December 2009 and 2008 were based on the profit (loss) for the period attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding during the year after adjusting for the effects of all dilutive potential ordinary shares as follows:

Profit (loss) for the year attributable to

equity holders of the Company

(basic) (229,411) 78,328 (29,551) (368,932)

Number of ordinary shares outstanding

as at 1 January 2,244,779 2,214,575 2,244,779 2,214,575

Effect of shares issued during the year - 13,734 - 13,734

Weighted average number of ordinary

shares outstanding (basic) 2,244,779 2,228,309 2,244,779 2,228,309

Earnings (loss) per share (basic)

(in Baht) (0.10) 0.04 (0.01) (0.17)

2009 2008 2009 2008

(Unit: Thousand Baht/Thousand Shares)


Profit (loss) for the year attributable to

equity holders of the Company

(dilute) (229,411) 78,328 (29,551) (368,932)

Weighted average number of ordinary shares

outstanding (basic) 2,244,779 2,228,309 2,244,779 2,228,309

Effect of exercise of share options by

the Group’s directors and employees - 8,233 - 8,233

Weighted average number of ordinary

shares outstanding (dilute) 2,244,779 2,236,542 2,244,779 2,236,542

Earnings (loss) per share (dilute)

(in Baht) (0.10) 0.04 (0.01) (0.17)

2009 2008 2009 2008

(Unit: Thousand Baht/Thousand Shares)



131



33. Dividends

At the Annual General Meeting of the shareholders of the Company held on 28 April 2009, the shareholders 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.

At the Annual General Meeting of the shareholders of the Company held on 22 April 2008, the shareholders approved the appropriation of dividends of Baht 0.06 per share, amounting to Baht 133.3 million. The dividend was paid to shareholders on 21 May 2008. 34. 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.

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 17). 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:

132

Annual Report 2009



Within 1 year After 1 year but

within 5 years After 5 years Total

Separate financial statements Effective

interest rate

(% per annum)

2009

Loans receivable - related

parties 4.15 - 745,746 - 745,746

2008

Loans receivable - relate

parties 5.63 - 516,791 - 516,791

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 Effective

interest rate

(% per annum)

2009

Loans payable - 5, MLR-1.50,

financial institutions MLR-2.00,

6-month fixed

deposit rate

+2.00 904,450 4,881,150 2,784,317 8,569,917

2008



MLR-2.00,

6-month fixed

deposit rate

+2.00 1,544,050 3,963,317 2,198,100 7,705,467


133






Separate financial statements Effective

interest rate

(% per annum)

2009

Loans payable -

related party 4.15 - 55,132 - 55,132



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

2008

Loans payable -

related party 5.63 - 24,745 - 24,745



6-month fixed

deposit rate

+2.00 1,142,550 2,353,500 1,494,600 4,990,650

Total 1,142,550 2,378,245 1,494,600 5,015,395

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.

134

Annual Report 2009


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.

Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future development of the business. The Board monitors the return on capital which is considered from operating activities divided by total shareholders’ equity, excluding minority interests and also considers the level of dividends to ordinary shareholders. 35. Commitments with non-related parties

Operating lease commitments

Within one year 36.0 26.5 28.2 17.2

After one year but within five years 3.4 18.3 3.2 12.3

After five years - 2.5 - -

Total 39.4 47.3 31.4 29.5

2009 2008 2009 2008




135



2009 2008 2009 2008



Long-term lease commitments

Within one year 43.2 37.0 26.9 27.1

After one year but within five years 195.6 172.6 109.6 109.5

After five years 2,224.2 2,240.7 1,906.5 1,933.9

Total 2,463.0 2,450.3 2,043.0 2,070.5

Other commitments

Guarantee for bank credit facilities 750.0 750.0 750.0 750.0

Bank guarantees 31.0 30.8 22.4 20.2

Total 781.0 780.8 772.4 770.2

Capital expenditure commitments As at 31 December 2009, the Company and its subsidiaries have capital commitments of approximately Baht 400.9 million (31 December 2008: Baht 838.2 million and U.S. Dollar 0.2 million), relating to construction, interior design, renovation, and the purchase of hotel operating equipment.

Long-term agreements The Company and its subsidiaries have entered into the following long-term lease agreements and several service agreements with third parties, local companies, overseas companies, and Government organisations:

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 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.

136

Annual Report 2009


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 consolidated 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 consolidated 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, as mentioned in Note 4.


137



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, as mentioned in Note 4.

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.

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.

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Annual Report 2009


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 a year of at least 10 years, dependent upon certain conditions specific 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, as mentioned in Note 4.

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 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 conditions specified in the agreements.


139



During June 2006 to March 2008, the Company and Erawan Chaophraya 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. 36. Contingent liabilities

Litigations

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. At present, the case is at the stage of investigating witnesses and has not been finalised. However, the legal adviser of the Company expects that there will be no significant impact to the Company as a result of the case.

b) In year 2009, the Company receives a summon to be 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. At present, the case is in the process of Court of First Instance and has not been finalised. However, the legal adviser of the Company expects that there will be no significant impact to the Company as a result of the case. 37. Events after the reporting period

On 23 February 2010, 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 no dividend distribution for the year 2009. 38. Thai Accounting Standards (TAS) not yet adopted

The Group has not adopted the following revised TAS which are relevant to the Company that have been issued as of the reporting date but are not yet effective. The revised TAS are anticipated to become effective for annual financial periods beginning on or after 1 January in the year indicated.

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Annual Report 2009


Management is presently considering the potential impact of adopting and initial application of these new and revised TAS on the consolidated and separate financial statements. 39. Reclassification of accounts

Certain accounts in the 2008 financial statements have been reclassified to conform to the presentation in the 2009 financial statements as follows:

TAS/TFRS Topic Year effective

TAS 24 (revised 2009) Related Party Disclosures 2011

(formerly TAS 47)

TAS 40 (revised 2009) Investment Property 2011




Before

reclass.

After

reclass.

Reclass. Before

reclass.

After

reclass.

Reclass.

Balance sheet

Value added tax refundable - 216,159 216,159 - 92,849 92,849

Advances - construction - 62,237 62,237 - 57,989 57,989

Other current assets 342,309 (278,396) 63,913 166,895 (150,838) 16,057

Investment in associate 544 (206) 338 544 (206) 338

Investments in other related parties 2,809 206 3,015 2,105 206 2,311

Deposits for lease of land,

building and equipment - 204,879 204,879 - 203,513 203,513

Other non-current assets 236,258 (204,879) 31,379 230,330 (203,513) 26,817

Trade accounts payable and construction 279,917 (279,917) - 178,475 (178,475) -

Trade accounts payable - subsidiaries - - - 223 (223) -

Trade accounts payable - 134,916 134,916 - 58,354 58,354

Accounts payable - construction - 145,001 145,001 - 120,344 120,344

- -

2008


141



The reclassifications have been made to comply with the classification set out in the Pronouncement of the Department of Business Development Re: Determination of items in the financial statements B.E. 2552 dated 30 January 2009 and the new classification is more appropriate to the Group’s business.

Statement of income

Net foreign exchange gain - 4,211 4,211 - 2,577 2,577

Dividend income - 2,441 2,441 - 172,438 172,438

Interest income - 746 746 - 17,059 17,059

Other income 36,983 (7,398) 29,585 218,664 (192,074) 26,590

Cost of sales and direct costs of rental

and services 1,454,679 (1,454,679) - 673,939 (673,939) -

Cost of hotel operations - 1,298,268 1,298,268 - 512,036 512,036

Cost of rental of units in buildings

and related service - 156,411 156,411 - 161,903 161,903

Administrative expenses 748,858 (47,436) 701,422 323,420 (45,312) 278,108

Other expenses 115 (115) - 184 (184) -

Management benefit expenses - 47,551 47,551 - 45,496 45,496

- -




Before

reclass.

After

reclass.

Reclass. Before

reclass.

After

reclass.

Reclass.

2008

142

Annual Report 2009


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, 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 Second Road, Nongprue,

Bang Lamung, Chon Buri 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 Sathon,

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,


Telephone: 66 (0) 2667 5888

Fax: 66 (0) 2667 5889

Branch 8

Holiday Inn Pattaya, 463/68 Pattaya First Road, Nongprue,

Bang Lamung, Chon Buri 20150, Thailand

Telephone: 66 (0) 3872 5555

Fax: 66 (0) 3872 5556

Branch 9

ibis Kata, 88/8 Kata Road, Karon, Mueang Phuket,

Phuket 83100, Thailand

Telephone: 66 (0) 7636 3488

Fax: 66 (0) 7636 3489

Home page www.TheErawan.com

Corporate Information


143




Type of Business

Invest and develop hotel properties strategically located to

match travelers’ different demand.

Company’s Capital as at 31 December 2009

Registered Capital Baht 2,244,779,001:

2,244,779,001 ordinary shares at

par value Baht 1 per share.

Paid-Up Capital Baht 2,244,779,001:

2,244,779,001 ordinary shares at

par value Baht 1 per share.

Other References

1. Registrar of Ordinary Shares

Thailand Securities Depository Co., Ltd.

No. 62 Rachadapisek Road, Klongtoey,


Telephone: 66 (0) 2359 1200-02

Fax: 66 (0) 2359 1259

2. Auditor

•Mr. Charoen Phosamritlert

CertificatePublicAccountant(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

Head Office

• The Erawan Group Public Company Limited

6th Floor, Ploenchit Center, 2 Sukhumvit Road,

Kwang Klongtoey, Khet Klongtoey,


Telephone: 66 (0) 2257 4588

Fax: 66 (0) 2257 4577

www.TheErawan.com

Hotel Business

• Grand Hyatt Erawan Hotel Bangkok

494 Ploenchit Road, Pathumwan,


Telephone: 66 (0) 2254 1234

Fax: 66 (0) 2254 6267

www.bangkok.grand.hyatt.com

•JWMarriottHotelBangkok

4 Sukhumvit Road, Soi 2, Klongtoey,


Telephone: 66 (0) 2656 7700

Fax: 66 (0) 2656 7711

www.marriott.com/bkkdt

•RenaissanceKohSamuiResortandSpa

208/1 Moo 4, Maret, Laem Nan Beach Koh Samui,


Telephone: 66 (0) 7742 9300

Fax: 66 (0) 7742 9333

www.marriott.com/usmbr

•SixSensesDestinationSpaPhuket

32 Moo 5, Paklok, Thalang, Phuket 83110, Thailand

Telephone: 66 (0) 7637 1400

Fax: 66 (0) 7637 1401

www.sixsenses.com


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Annual Report 2009


•CourtyardbyMarriottBangkok

155/1 Soi Mahadlekluang 1, Rajdamri Road,


Telephone: 66 (0) 2690 1888

Fax: 66 (0) 2690 1899

www.courtyard.com/bkkcy

•Holiday Inn Pattaya

463/68 Pattaya Soi 1 Road, Nongprue, Bang Lamung,

Chon Buri 20150, Thailand

Telephone: 66 (0) 3872 5555

Fax: 66 (0) 3872 5556

www.holidayinn.com/pattaya

• ibis Patong

10 Chalermphrakiat Road, Patong, Katu,


Telephone: 66 (0) 7630 3888

Fax: 66 (0) 7630 3889

www.ibishotel.com

• ibis Pattaya

463/79 Pattaya Second Road, Nongprue, Bang Lamung,

Chon Buri 20150, Thailand

Telephone: 66 (0) 3841 8188

Fax: 66 (0) 3841 8189

www.ibishotel.com

• ibis Samui

197 Rob Koh Road, Bophut, Koh Samui,


Telephone: 66 (0) 7791 4888

Fax: 66 (0) 7791 4889

www.ibishotel.com

• ibis Sathorn

29/9 Soi Ngam Duphli, Rama IV Road,

Kwang Thung Mahamek, Khet Sathorn,


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,


Telephone: 66 (0) 2667 5888

Fax: 66 (0) 2667 5889

www.ibishotel.com

• ibisKata

88/8 Kata Road, Karon, Mueang Phuket,


Telephone: 66 (0) 7636 3488

Fax: 66 (0) 7636 3489

www.ibishotel.com

Rental Property

•Ploenchit Center

2 Sukhumvit Road Soi 2, Klongtoey,


Telephone: 66 (0) 2656 8600-4

Fax: 66 (0) 2656 9899

•Erawan Bangkok

494 Ploenchit Road, Pathumwan,


Telephone: 66 (0) 2250 7777

Fax: 66 (0) 2250 7788

www.erawanbangkok.com


12 Destinations of Traditional Thai Market

1. ตลาดน้ำอัมพวา จ.สมุทรสงคราม2. ตลาดโบราณบางพลี จ.สมุทรปราการ3. ตลาดร้อยปีสามชุก จ.สุพรรณบุรี

4. ตลาดเจ็ดเสมียน จ.ราชบุรี5. ตลาดน้ำตลิ่งชัน กรุงเทพมหานคร6. ตลาดเก่าอ่างศิลา จ.ชลบุรี7. กาดกองต้า จ.ลำปาง

1

2 3

4 5 10

611

12

97 8

1. Amphawa Floating Market, Samut Songkhram2. Bang Phli Old Market, Samut Prakan3. Sam Chuk 100 Years Old Market, Suphan Buri

4. Jet Samian Market, Ratchaburi5. Taling Chan Floating Market, Bangkok6. Ang Sila Old Market, Chon Buri

Des

ign

ed b

y P

lan

Gra

fik

Tel.

: 0

22

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80

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00

Annual Report 2009


Annual Report 2009

The Erawan G

roup Public Company Lim

ited


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

ERAWAN: Annual Report 2009

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