128
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 customer’s various needs while continuing To create values to all stakeholders as well as Thailand’s tourism as a whole.
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2
2007 IN REVIEW 4 Financial Highlights
7 Chairman’s Statement
8 CEO’s Review
10 CFO’s Report
19 Statement from the Audit Committee
20 Report of the Board’s Responsibility to the Financial Statements
ABOUT ERAWAN 22 Corporate Profile
24 Our Business Strategy
26 Our Properties in Operation
28 Our Properties under Development
32 Our Capital Structure and Management
BUSINESS OVERVIEW 44 Hotel Industry
50 Rental Property
51 Risk Factors
CORPORATE GOVERNANCE 54 Corporate Governance
66 Connected Transactions
APPENDICES 69 Independent Auditor’s Report
71 Financial Statements
123 General Information of the Company
Contents
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2007 IN REVIEW
4
FINANCIAL HIGHLIGHTS
(Unit : Thousand Baht)
Description 2005 2006 2007
(Restated) (Restated)
Revenues from operations 2,858,278 3,330,922 3,194,350
Total revenues 2,901,201 3,384,964 3,391,397
Gross profit 1,588,951 1,928,751 1,833,994
EBITDA 897,568 1,152,938 1,010,823
Net profit (Loss) 257,789 409,845 401,921
Total Assets 7,580,848 8,720,766 10,255,349
Total Liabilities 5,571,086 5,814,289 6,504,815
Total Shareholders’ Equity 2,009,762 2,906,477 3,750,534
Equity attributable to company’s shareholders 1,913,097 2,797,555 3,649,392
Paid - up Share Capital (Baht in Thousand) 1,453,048 1,959,085 2,214,575
Number of paid - up shares (Thousand shares) 1,453,048 1,959,085 2,214,575
Par value per share (Baht) 1 1 1
Earning per share (Baht) 0.18 0.25 0.20
Dividend per share (Baht) 0.04 0.05 0.06
Book Value per share (Baht) 1.32 1.42 1.65
Significant Financial Ratio
Current ratio (Times) 0.25 0.44 0.22
Quick ratio (Times) 0.13 0.24 0.10
Liquidity ratio (Cash Flow Basis) (Times) 0.36 0.56 0.22
Gross profit ratio 55.59% 57.90% 57.41%
Net profit margin 8.88% 12.11% 11.85%
Return on Total Assets 3.58% 5.03% 4.24%
Return to Equity 14.11% 17.40% 12.47%
Debt to Equity Ratio (Times) 2.77 2.00 1.73
Interest Bearing Debts to Equity Ratio (Times) 2.19 1.58 1.37
Interest Coverage Ratio (Times) 5.96 5.22 4.64
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500
1,000
1,500
2,000
2,500
3,000
0
3,500
2,468 2,488
714
316
2,858
806
339
3,331
897
258
3,194
1,153
410
1,010
402
5 - YEAR FINANCIAL HIGHLIGHTS
Million Baht
Sales
EBITDA
Net Profit
JW Marriott Hotel Bangkok
2003 2004 2005 2006 2007
6
Grand Hyatt Erawan Bangkok Hotel
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The year of 2007 is considered by the current board of directors and management team as an important milestone for us all.
It marks the third full year that we have been working together with the single goal in mind, that is, to develop The Erawan Group
into one of Thailand’s leading hotel and resort developers. Along the way, roles and responsibilities were clearly and appropriately
established for those involved in every facet of this development. With the firm belief in potentials of Thai tourism, we have spent in
excess of Baht 4,500 million over the past 2-3 years. This is one part of an aggressive expansion plan, with over Baht 9,000 million
in investment budget. The objective is to expand and diversify our hotel and resort portfolio in order to cover all key business and
tourist destinations in Thailand. Our shareholders should be able to reap benefits from this plan from late 2007 onwards.
Still, we believe that development and improvement must be carried out on a continual basis. The platform is solid with 50% of our
board represented by independent directors and key responsibilities appropriately delegated to 4 subcommittees. One important
procedure that has allowed us to develop such solid platform is the nomination process. We have been bringing together
directors from diversity of background to supervise and monitor the development progress. Among responsibilities delegated are
investment and risk management, performance evaluation for top management, and development of succession plan. The “Board of
the Year for Distinctive Practices” award given to us during 2007 signifies that we are on the right path. The Erawan Group is one of
only 19 recipients of such precious commendation selected by Board of the Year Awards 2006/07 which made up of
representatives from Thai Institute of Directors, The Thai Chamber of Commerce, The Federation of Thai Industries, The Thai
Bankers’ Association, Listed Companies Association, Federation of Thai Capital Market Organizations, and The Stock Exchange
of Thailand.
Our shareholders have continued to show strong support with conversion of warrant into common shares during December 2007.
More than Baht 500 million was raised in the process to help support the said expansion plan. On behalf of all of us here at The
Erawan Group, I would like to thank for the supports from not just our shareholders but our customers, suppliers, lenders, and all
stakeholders. This board of directors promises to continue with diligent supervision and monitoring of The Erawan Group, as we have been
carried out over the past few years. Our company will certainly achieve sustainable growth, not only in terms of size but also quality,
while continuing to be a true citizen to Thai society.
CHAIRMAN’S STATEMENT
Mr.Luen Krisnakri Chairman of the Board of Directors
Board of the Year for Distinctive Practices 2006/07
8
It has been 3 years since the initial implementation of our plan to develop The Erawan Group into a ‘quality proxy’
for Thai tourism. One of the milestones in this plan has been achieved in 2007, resulting in our ownership of highest
market capitalization among companies listed on the Tourism and Leisure Sector. Although our normalized net profit
was negatively affected by political factor during 20071, we believe that fundamentals of Thai tourism have not been
deterred by this short-term impact. During the year, we acquired 4 more sites for economy hotels under the “Ibis”
brand. Consequently, there are now 8 Ibis hotels in development, from the total of 10 planned sites. As for
restructuring activities, we decided to sell Amarin Plaza, our very first property. At the time, the leasehold for this
property had less than 8 years remaining, making it not financially viable for us to further invest into this property
beyond the renovation undertaken back in 2005. This divestment effectively mitigates risks associated with the
operation of a building near the end of leasehold period. Additional benefits of this sale is the Baht 172 million gain
on sale of investment booked during the year, and cash proceed which was used to support our hotel expansion
plan. In the near future, hotel properties are then expected to account for more or less 90% of our revenues and profits.
Another milestone achieved during 2007 was the opening of Courtyard by Marriott Bangkok. This completes
a conversion of “Parklane Mansion”, 45-room service apartment, into a 4-star hotel with 316 rooms in
Soi Mahadlekluang 1 and denotes the beginning of our diversification outside 5-star hotel segment. We plan to
open 5 other hotels during 2008 and another 6 in 2009 to complete Phase 1 of our expansion plan. By then,
we will own 16 hotels, serving various market segments and covering all key business and tourist destinations in
Thailand. That will make us a true representation of Thai tourism.
With an aggressive expansion plan, we have always realized the need along the way to improve the standard for
internal process within our organization. Among many developments we have made internally are analytical skills for
evaluation and monitoring of hotels’ performances, an effective and transparent procurement procedure,
resourceful data and knowledge base, and efficient management of construction progress. More importantly, we
have developed a 3-layer succession plan from CEO down to Vice President Level. A corporate culture was
ultimately re-created with 4 specific mottos to support our goal to achieve success with integrity. These mottos are :
“Team spirit”, “Learning and improvement”, “Commit to success”, and “With Integrity”. Additionally, 10 meanings of
integrity according to Erawan’s culture were defined, for our employees to use as a guideline on how to conduct
themselves responsibly with customers, suppliers, alliance, debtors, other employees, shareholders, society, and
environment.
As for corporate stakeholder responsibility or SC: social contributions activities, an objective guideline has been
established. Each year, we will allocate 0.5% of the net profits as a budget for CSR-related activities. During the
past years, projects that we initiated or participated are as follows:
CEO’s REVIEW
1 CFO’s report
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• In conjunction with other members of Ratchaprasong Square Trade Association (RSTA), several CCTV (close-caption
television) sets have been installed to provide a security system in the Ratchaprasong intersection area and BTS walkway
between Chidlom station and Central World.
• Five computers were donated to Ban Konaka School in Phuket and a budget was also given to the school to install
ceramic floortiles for the purpose of sanitation.
• Landscape at Duangpitak Road was improved where green space was added as part of the project to do good deeds for
our Father.
• On the auspicious occasion of His Majesty the King’s 80th birthday anniversary, we initiated a “Thai Mural Painting
Photographs Project” in an attempt to preserve our nation’s forlorn treasures. More than 400 participants were drawn
and generously donated to the severalactivities namely the auction of mural photographs and sales of calendars and
booklets. We have raised a total of Baht 3,945,999 and presented the entire proceeds to His Majesty the King, for the
royal disbursement on worthy causes.
We will continue to develop The Erawan Group into an institution with a good blend of business excellence, integrity, and
corporate stakeholder responsibility. In order to achieve this long-term objective, some negative impacts may be perceived along
the way. Still, we believe that the strategic plan implemented over the past 3 years and still is in progress, will ultimately create a
solid platform for sustainable growth that will benefit our shareholders in the long run.
Mr.Kasama Punyagupta President and Chief Executive Officer
Courtyard by Marriott Bangkok
10
Baht Million 2006 2007 changes
Hotels’ Operating income 2,711.6 2,748.0 +1%
Rental and service income 619.3 446.4 -28%
Totel Operating Income 3,330.9 3,194.4 -4%
Operating expenses (2,164.9) (2,105.6) -3%
EBITDA 1,166.0 1,088.8 -7%
Deperation & amortization (400.9) (400.7) -0%
Operating Profit 765.1 688.0 -10%
Other income 31.2 25.2 -19%
Interest expenses (222.7) (221.3) -1%
Pre-tax Profit 573.6 491.9 -14%
Taxes (104.7) (95.6) -9%
Minority interest (68.8) (62.4) -9%
Normanlized Net Profit 400.1 333.9 -17%
Non recurring items - net* 9.8 68.0 +597%
Net Profit 409.8 401.9 -2% E.P.S. 0.25 0.20 -20%
2007 Profit & Loss
Financially, 2007 was one of the most eventful years in our 25-years history. Operation-wise, it is the year of two
halves for our two flagship hotels. In the first 6 months, Grand Hyatt Erawan and JW Marriott suffered from the
aftermath of New Year bombs in Bangkok. Events were cancelled and corporate travelers very slowly regained their
confidence in terms of safety around Bangkok. Occupancy, however, bounced back nicely in the second half of the
year especially the last few months as safety was no longer a concern and political tension started to ease. Thanks
to this second half recovery, the two hotels were able to maintain their revenues on par with the year before.
As for restructuring activities, we sold Amarin Plaza, our very first property, back to the landlord in March and
booked gains of Baht 172 million during the year. Consequently, there has been no income or profit from this
property since the second quarter of the year. We also merged the operations of JW Marriott and Ploenchit Center
into the parent company. Subsequently a 100%-own subsidiary, Erawan Ploenchit, is in the process of liquidation
and a one-time goodwill write-off of Baht 26 million was booked in December.
On the development side, we opened our fourth hotel, Courtyard by Marriott Bangkok, in October. More importantly,
this is the first among many to be opened during the on-going plan to expand and diversify our portfolio. During the
year, hotel projects in development along with already launched Courtyard combined to have a pre-opening
expense of Baht 78 million.
At the end, our net profit for 2007, Baht 402 million, remained relatively unchanged from a year ago. In short, gains
from Amarin Plaza sale were able to cover for all the negatives that happened during the year namely impacts from
New Year bombs; pre-opening expenses from our new hotels; one-time write-off of goodwill; and foregone profits
from Amarin Plaza from second quarter onwards.
CFO’s REPORT
* Details are explained in later section of this report
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2005 2006 2007
Btm % total Btm % total Btm % total
five-star Central Bangkok Hotels 2,329 80.3% 2,533 74.8% 2,529 74.6%
five-star Resort 51 1.8% 178 5.3% 188 5.5%
four-star Central Bangkok Hotel - 0.0% - 0.0% 31 0.9%
Income from hotel properties 2,380 82.0% 2,712 80.1% 2,748 81.0%
Rent from office space 152 5.2% 236 7.0% 178 5.2%
Rent from retail space 198 6.8% 244 7.2% 161 4.8%
Rent from Service Apartment 8 0.3% - 0.0% - 0.0%
Income from rental properties 358 12.3% 480 14.2% 339 10.0%
Others (Food Court, Parking, etc.) 164 5.6% 170 5.0% 132 3.9%
Gains from sales of onvestment - 0.0% 23 0.7% 172 5.1%
Total 2,901 100.0% 3,385 100.0% 3,391 100.0%
Renaissance Koh Samui Resort and Spa
More excitedly, however, is how our 5-year expansion plan has started to taking shape in our income breakdown. The table below
shows changes in our income structure over the past 3 years.
1,000
2,000
3,000
4,000
5,000
6,000
0
7,000
5,767
79%73%
82%78%
68% 71%
52%
4,876 5,137
3,991 4,032
6,378 6,339
2,070
1,075
4,317 4,5244,560
6,042
4,411
500
1,000
1,500
2,000
2,500
3,000
0
3,500
2,90116%
3,3623,219
-4%
12
If gains from sales of investment are excluded, this is how our income looks over the past 3 years.
The diagram above shows two significant changes: Sharp reduction in rental income from office and retail spaces as
a result of Amarin Plaza sale and gradual increase in contribution from hotels other than our two five-star CBD properties.
During 2007, operating statistics for our hotel properties including recently opened Courtyard by Marriott Bangkok
(“CY”) are as follows:
Other services
Retail
Office
4-Star CBD Hotels
5- Star Resort
5- Star CBD Hotels
Million Baht
2005 2006 2007
Baht/Room/Night
Nov-Dec 07
Grand Hyatt Erawan
JW Marriott Renaissance Koh Samui
Courtyard by Marriott
Occupancy Rate
Average Room Rate (ARR)
Revenue per available room (Rev Par)
2006 2007 2006 2007 2006 2007
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200
400
600
800
1,000
1,200
0
1,400
97
1,349 1,337
1,185 1,194
178 188
31123 129
633 612
619 635
642 649
427 437
40 44
90
116 108
As explained earlier, our two five-star hotels in Bangkok, Grand Hyatt Erawan Bangkok (“GHEB”) and JW Marriott Bangkok
(“JWM”) had a weak first half but a good recovery in the latter part of the year. Raising the average room rates (“ARR”) was not
much of an issue as both hotels’ ARR were up 5% from 2006. Business volume, in first 6-7 months in particular, was the main
difference between 2006 and 2007. During that period, occupancy rates for the two hotels drastically dropped from a year earlier
as travelers in the five-star segment prove to be very sensitive to safety concern and political climate. The situation improved
greatly in the second half as embassies stopped issuing travel warnings and political tension started to ease. Also, JWM has
exceptionally strong third quarter thanks to strong demand from the Middle East market. At the end, Revenue per available rooms
(“RevPar”) for GHEB and JWM remained relatively unchanged from a year ago as the diagram above shows.
It is also worthwhile to note that, same as 2006, these 2 hotels outperformed the five-star CBD segment which saw a year-on-year
drop in RevPar of 6% in 2007. GHEB and JWM rank 1st and 4th in terms of RevPar among 13 five-star hotels in CBD in 2007. As for
CY, our third Bangkok hotel, statistics above only reflect the first two months of operations. We are expecting much bigger things
from this property in 2008 and years to come.
2007 was the second full year of operations for our first resort hotel, Renaissance Koh Samui (“RKS”). The strategy of attracting
more volume by offering competitive pricing seems to work in 2007. Through increased occupancy rate, the resort was able to
achieve a mild 5% year-on-year growth in RevPar to despite a surprisingly weak performance for Koh Samui market.
As our hotels’ food & beverage (“F&B”) operations rely more on local customers than hotel guests, low occupancy rates in the first
half did not have much impact on this portion of our income. Combined F&B sales for 2007 were Baht 1,122 million, up 3% from
2006. The income breakdowns for our 4 hotels in 2007 are in the diagram below.
Nov-Dec 07 2006 2007
Grand Hyatt Erawan
JW Marriott Renaissance Koh Samui
Courtyard by Marriott
2006 2007 2006 2007
From the operations*
From food & beverages operations
From room sales
Million Baht
*Excluding rent and service income
100
200
300
400
500
0
50
150
250
350
450
550
412 364
510
468
354 324
464453
38 47
14
Six Senses Destination Spa Phuket
RKS again has the highest growth among our hotel properties with 6% increase from 2006. JWM’s and GHEB’s income
was relatively unchanged from a year ago, up 1% and down 1% respectively. A more evident change is seen, however,
at percentage breakdown structure among our hotels. Even with just 2 months of operations, CY contributed 1% of our total
income from hotel operations. GHEB and JWM, or descriptively five-star CBD properties, now accounts for just slightly
above 90% of our hotel revenues, compared to 100% just a few years ago. In terms of profitability, CY with only 2 months of operations still has reached not breakeven level in terms of profits.
Earnings before Interest, Depreciation, and Amortization (“EBITDA”) and operating profit from GHEB, JWM, and RKS
are shown below.
GHEB, JWM, and RKS combined to generate Baht 968 million in EBITDA and Baht 702 million in operating profit, down 4%
and 9% from a year ago respectively. Margins for GHEB and JWM dropped despite its ability to generate the same level of
revenues as last year. Again, the reason for lower margins is that there are several expense items which increase in line with
inflation rather than sales. All staff-related and property maintenance expenses fit in this category. For the same reason,
margins for RKS improved approximately 300 basis points from a year ago with its 6% revenue growth.
2006 2007 2006 2007 2006 2007
Million Baht
Grand Hyatt Erawan JW Marriott Renaissance Koh Samui
EBITDA
Operating Profit
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* Standalone basis excluding the effects of eliminations for consolidated accounts and head office expenses
10,000
20,000
30,000
40,000
0
5,000
15,000
25,000
35,000
45,000
82% 82%
502517
387 410
1,2931,208
95% 97%
89% 84%
For our rental properties, the diagram below shows the average occupancy and rental rates for 2007.
The statistics for Amarin Plaza and Tower (“AP”) in 2007 only reflect the first quarter before we sold the property at the end of
March. The transaction was made in a form of sale of all outstanding shares of Erawan Ratchaprasong Co., Ltd. (“ERP”),
previously a 100%-own subsidiary, to Gaysorn Holding Co., Ltd, who is also the landlord. We cited 3 main reasons for this
divestment as follows:
1. Protection for downside operational and financial risks for the last 3 years of leasehold (2012-2014)
2. Relocation of resources (Management time and any future funding requirement) to our core business, hotel development.
3. Neutralizing the effects from non-recurring expenses: Gains from this transaction more than compensated for pre-opening
expenses from CY and Six Senses Destination Spa Phuket.
Despite starting the year already at 97% occupancy, Ploenchit Center (“PC”) continued to show strong growth throughout 2007.
As agreements for office tenants gradually renewed, PC’s average monthly receipt increased to over Baht 430 per square metre
compared from Baht 390 at the beginning of the year. As for Erawan Bangkok (“EB”), occupancy rate bottomed out at 78% in May
then gradually increased to 85% by year-end. EB’s average monthly rent in 2007 was lower than a year ago as discounts were
given to tenants for a few months to help ease the impact slowdown in domestic economy.
For CY in 2007, excluding Baht 40 million pre-opening expenses (booked in “Selling & Administrative expenses” in our P&L), the hotel still
managed to generate Baht 2 million in EBITDA despite being in operation for just 2 months. This level of EBITDA was not able to cover for
depreciation and interest expenses which came on since the hotel was opened. So, CY posted a net loss of Baht 10 million in 2007 (Baht
50 million net loss if pre-opening expenses are included).
Average Receipt (Bt/sqm.month)
Vacancies
Occupied space
2006 1Q/2007 2006 2007 2006 2007
Amarin Plaza Ploenchit Center Erawan Bangkok
Sq.M.
50
100
150
200
0
25
75
125
175
225
250
275
101
242
69
29
1793 78
14
14
83
135
234
42
149
259
107
92
44
23
5857
67
20
40
60
80
010
30
50
70
90
100
120
110
130
140
29
84
22
3629
21
46
55
105
48
70
132
16
The growth is even higher, if AP was to be excluded. Our two remaining rental properties combined to achieve
an 11% growth in EBITDA to Baht 178 million and an 18% growth in operating profit to Baht 91 million.
EBITDA from rental properties was a combined Baht 214 million, down 12% again due mainly to absence of AP. But
with depreciation charges from AP gone, our rental properties were then able to register a 6% growth in operating
profit to Baht 113 million.
Including income from other services such as F&B sales from food courts, utility income, and parking fees, our rental
properties generated Baht 420 million in revenues in 2007. A 28% year-on-year decline is, evidently showed in the
diagram below, caused by the absence of AP’s contribution in the last 9 months of 2007. Separately, PC’s revenues
grew 11% year-on-year while EB’s total income dropped 14% to Baht 46 million in 2007.
Office
2006 1Q/2007 2006 2007 2006 2007
Amarin Plaza Ploenchit Center Erawan Bangkok
Retail
Others
2006 1Q/2007 2006 2007 2006 2007
Amarin Plaza Ploenchit Center Erawan Bangkok
EBITDA
Operating Profit
* Standalone basis excluding the effects of eliminations for consolidated accounts and head office expenses
Million Baht
Million Baht
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Margins improved for all our rental properties as some of the main cost items either stayed put or increased in line with inflation.
These costs are, for instance, rent to landlords, staff-related items, and utilities.
Outside financial figures from operations, these are items that have made differences to our 2007 Income Statement.
Non recurring items : Included in non recurring items (net) of Baht 68 million for 2007 are
1. Sale of Amarin Plaza On 30 March 2007, we sold Amarin Plaza to Gaysorn Holding, the landlord, via sale of
investment in ERP,a wholly-owned subsidiary. A total of Baht 172 million was booked as “Gains from sale of
investment in subsidiary” during the year.
2. Pre-opening expenses These costs consists mainly of salaries and sales & marketing costs which the hotels incur
prior to their openings. During 2007, the combined pre-opening expense was Baht 78 million, Baht 40 million from
CY (opened in November), Baht 37 million from Six Senses Destination Spa Phuket (to be open in the first half of
2008) and Baht 1 million from Ibis projects (to gradually be opened in the first half of 2008 onwards). These costs are
booked in “selling and administrative expenses”.
3. Goodwill write-off At the end of 2007, we merged the operations of JWM and PC into the parent company,
The Erawan Group Plc., to complete internal restructuring which had been on-going since 2005. Subsequently,
a one-time charge of Baht 26 million was booked in “Depreciation and amortization” to write off all the goodwill
from investment in subsidiaries.
In 2006, there were 3 non recurring items (1) Gain from sale of Hattawan Co., Ltd., land bank on Changwattana Road, of Baht 23
million (2) Commission on this share sale of Baht 4 million (booked as “selling and administrative expenses”) and (3) one-time
compensation for early retirement of Baht 9 million (Baht 3 million booked in “Cost of sales and direct costs of rental and
services”, another Baht 6 million in “selling and administrative expenses”).
Depreciation & amortization : Excluding goodwill write-off mentioned, this expense stay unchanged from 2006 at Baht 401 million.
Absence of depreciation from Amarin Plaza (since the second quarter) more than offset the additional charges from recent
renovations at GHEB and JWM (up Baht 24 million combined) and the opening of CY (Baht 8 million).
Interest expense : Baht 221 million in 2007 was 1% lower than last year despite our total interest-bearing debts being increased
by 12% to Baht 5,142 million as at 31 December 2007. There are two explanations for this. First, banks’ interest rates declined by
87.5 basis points during the year. Second, and more importantly, approximately 20% of our total debts are project loans whereas
interest expenses are capitalized as assets. In 2006, almost all of our loans’ interest went into Income Statements.
4%
8%
20% 32%
5%31%
18
Financial Status As of 31 December 2007, our total assets were Baht 10,255 million, an increase of 18% from Baht 8,721 million at the
end of 2006. This is a result of Baht 2,172 million capital expenditure occurred during the year. Most of these are for
projects which are parts of our 3-year master plan to become one of the leading player in Thailand’s hospitality
business. (See “Our Properties under development” for details of future projects) The breakdown of 2007 capital
expenditure is as follows :
Addition to cashflow from operations, Baht 770 million long-term loans drawn during the year and Baht 518 million
from warrant conversion were the sources of funding for 2007 capital expenditure. In December, 482,186,599 warrants
were converted into 241,098,001 common shares at Baht 2.15 each. Our paid-up capital at year end
was then increased to Baht 2,215 million which translated into a debt-to-equity ratio (D/E) of 1.7 times, lower from
2.0 times at the end of 2006. Perhaps a better indicator of our liquidity situation is net debt to EBITDA ratio which stood
at 4.9 times. Though relatively high, we considered this a manageable level since our interest coverage is still high at
4.6 times. We also have an unused short-term loan facility of Baht 1,020 million at end of 2007, Baht 680 million of
which is committed.
Six Senses Destination
Spa Phuket
Rental properties & Others Hotels in operation
Ibis budget hotels
Holiday Inn Pattaya Courtyard by Marriott
Mr.Poom Osatananda Chief Financial Officer (CFO)
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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 two years each, performed its duties within its scopes of responsibility and as entrusted by the
Board. In 2007, the Audit Committee met six times to consider the following:
1. To review the quarterly financial statements and the 2007 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 approve transactions that may cause a possible 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 2008 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 Ms.Rungnapa Lertsuwankul, CPA No. 3516 and/
or Mr. Sophon Permsirivallop, CPA No. 3182 and/or Ms. Sumalee Reewarabandith, CPA No. 3970 and/or
Mrs. Nonglak Pumnoi, CPA No. 4172 of Ernst & Young as the Company’s auditor in 2008.
STATEMENT FROM THE AUDIT COMMITTEE
Mr. Prakit Pradipasen Chairman of the Audit Committee
19 February 2008
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The Board of Directors was responsible for the financial statements of The Erawan Group Public Company Limited
and its subsidiaries as well as financial information in the Annual Report. 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 for transparency and benefits to shareholders
and investors.
The Board also set up and maintained an effective and appropriate internal auditing system so that accounting
information would be accurate, complete and enough to maintain the Company’s assets and prevent corruption or
unusual transactions with material essence.
The Board appointed the Audit Committee, which consisted of independent directors, to oversee the quality of the
financial statements and the internal control system. The Audit Committee’s opinion in this matter was in statement
from the Audit Commitee.
The Board is of the opinion that the overall internal auditing system of the Company is satisfying. This has so far
contributed to a reasonable belief that the financial statements of the Erawan Group Public Company Limited and
its subsidiaries for the year that ended 31 December 2007 are reliable and in compliance with the Generally-
Accepted Accounting Principles and all the laws, rules and regulations.
REPORT OF THE BOARD’S RESPONSIBILITY
TO THE FINANCIAL STATEMENTS
Mr.Luen Krisnakri Chairman of The Board of Directors
Mr.Kasama Punyagupta President and Chief Executive Officer
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ABOUT ERAWAN
22
1991 Grand Hyatt Erawan Bangkok
1996 Ploenchit Center
1997 JW Marriott Bangkok
CORPORATE PROFILE A
nn
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Rep
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07
Th
e Er
awan
Gro
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Pu
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The Erawan Group Public Co., Ltd.
The Erawan Group is proud of our achievements, including:
1985 : Amarin Plaza
1991 : Grand Hyatt Erawan Bangkok
1994 : Company registered on Stock Exchange of Thailand
1996 : Ploenchit Center
1997 : JW Marriott Bangkok
2004 : Erawan Bangkok
2005 : Renaissance Koh Samui Resort and Spa
2007 : Amarin Plaza Sold
Courtyard by Marriott Bangkok, Hotel
2004 Erawan Bangkok
2005 Renaissance Koh Samui Resort and Spa
2007 Courtyard by Marriott Bangkok
24
100% 74% 100%
100% 100%
At the Erawan Group Plc., we operate on three core business strategies as follows :
1. To maximize the values of our existing assets via proper usage and effective cost management.
2. To focus on developing a well-diversified portfolio of hotel and resort development in terms of income risks
while returns are.
3. To create long-term sustainability for our organization by developing systems, core competencies for our
staff, database to help decision-making, and corporate cultures.
OUR BUSINESS STRATEGY
Hotels
Grand Hyatt Erawan Bangkok JW Marriott Bangkok Renaissance Koh Samui Resort and Spa
Courtyard by Marriott Bangkok Six Senses Destination Spa Phuket *May 2008
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100% 100%
100% 100%
Hotels (Under Construction)
Holiday Inn Pattaya *Q3/2009
10 Ibis Hotels *2008-2009
Ploenchit Center
Offices/Retail Plaza
Erawan Bangkok
*Scheduled openings
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OUR PROPERTIES IN OPERATION
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 5 hotels in operations which, for now, represent our
core assets. As a non - core business, we also own and manage 2 rental properties. The details of these properties
are as follows :
Hotels and Resorts
Grand Hyatt Erawan Bangkok www.bangkok.grand.hyatt.com
• 5 - Star hotel • Located at the heart of Bangkok’s Central Business District on Rajdamri road. • 380 Rooms • 34 years remaining on the current lease
JW Marriott Bangkok Hotel www.marriott.com/bkkdt • 5 - Star hotel • Located in Bangkok’s Central Business District on Sukhumvit road. • 441 Rooms • 37 years remaining on the current lease
Renaissance Koh Samui Resort and Spa www.marriott.com/usmbr
• 5 - Star Resort • Lamai Beach, Koh Samui • 45 deluxe rooms and 33 pool villas
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Courtyard by Marriott Bangkok www.courtyard.com/bkkcy
• 4 - Star hotel (First “courtyard” hotel in Thailand) • Located at the heart of Bangkok’s CBD on Rajdamri road. • 316 Rooms • 30 years lease beginning Jan 2008
Six Senses Destination Spa Phuket www.sixsensesdestinationspas.com
• 5 - Star hotel • Located on Koh Naka Yai, Phuket • 67 deluxe pool villas and 30 treatment rooms • Opening : May 2008
Rental Properties - Office Buildings and Shopping Centers
Ploenchit Center • Located on Sukhumvit Road, adjacent to the JW Marriott Hotel Bangkok • 40,000 sq.m. of rental space company (85% office) • 17 years remaining on the current lease
Erawan Bangkok www.erawanbangkok.com
• Located at Ratchaprasong, adjacent to the Grand Hyatt Erawan Hotel Bangkok • 7,000 sq.m. of commercial rental space. • 34 years left on lease
P A T T A Y A
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OUR PROPERTIES UNDER DEVELOPMENT
No. of Rooms : 367 rooms 4 - star resort Location : On approximately 6.5 rai plot of land on North Pattaya’s 1 Road Target customer : MICE and Leisure Investment : Approx. Bt 1,800 million Scheduled opening : Q3/2009
Holiday Inn Pattaya
No. of Rooms : 260 rooms Location : On approximately 4 rai plot of land near Patong Beach. Target customer : Leisure Investment : Approx. Bt 470 million Scheduled opening : May 2008
Ibis Patong Phuket
No. of Rooms : 213 rooms Location : On approximately 1.5 rai plot of land on Soi Ngamduplee (5 minutes walk to Lumpini MRT station) 30 - years lease beginning Jan 2008 Target customer : Business & Leisure Investment : Approx. Bt 354 million Scheduled opening : July 2008
Ibis Sathorn Bangkok
No. of Rooms : 259 rooms Location : On approximately 2 rai plot of land on Pattaya sai 2 road. Target customer : MICE and Leisure Investment : Approx. Bt 430 million Scheduled opening : July 2008
Ibis Pattaya
No. of Rooms : 260 rooms Location : On approximately 7 rai plot of land on Bo Phut Beach Target customer : Leisure Investment : Approx. Bt 580 million Scheduled opening : October 2008
Ibis Samui
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No. of Rooms : 205 rooms Location : On approximately 1.5 rai plot of land on North Nana (Sukhumvit soi 4) 30 - years lease beginning Jan 2008 Target customer : Business & Leisure Investment : Approx. Bt 360 million Scheduled opening : Q1 / 2009
Ibis Nana Bangkok
No. of Rooms : 200 rooms Location : On approximately 4 rai plot of land on Ao Nang Target customer : Leisure Investment : Approx. Bt 350 million Scheduled opening : Q4 / 2009
Ibis Krabi
No. of Rooms : 200 rooms Location : On approximately 4 rai plot of land on Central commercial of Sriracha Target customer : Business Investment : Approx. Bt 330 million Scheduled opening : Q4 / 2009
Ibis Sriracha
No. of Rooms : 250 rooms Location : On approximately 6 rai plot of land on Chaopraya Riverside 26 years remaining lease (expire in 2034) Target customer : Leisure Investment : Approx. Bt 400 million Scheduled opening : Q4 / 2009
Ibis Riverside Bangkok
No. of Rooms : 260 rooms Location : On approximately 4 rai plot of land on Kata Beach Target customer : Leisure Investment : Approx. Bt 500 million Scheduled opening : Q4 / 2009
Ibis Kata Phuket
No. of Rooms : 200 rooms Location : On approximately 2 rai Target customer : Leisure Investment : Approx. Bt - 400 million Scheduled opening : Q1 / 2010
Ibis Hua-Hin
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Six Senses Destination Spa Phuket
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Grand Hyatt Erawan Bangkok
Courtyard by Marriott
Bangkok
JW Marriott Bangkok
Ibis Nana Bangkok
Ibis Sathorn Bangkok
Ibis Riverside Bangkok
Ibis Sriracha
Ibis Pattaya
Holiday Inn Pattaya Ibis Krabi
Ibis Samui
Renaissance Koh Samui
Resort and Spa
Six Senses Destination Spa Phuket
Ibis Patong Phuket
PHUKET KRABI
SAMUI
PATTAYA
SRIRACHA
BANGKOK
HOTELS AND RESORTS PORTFOLIO by 2010
HUA-HIN
Ibis Hua-Hin
Ibis Kata Phuket
32
As at 28 December 2007, the company ‘s paid up capital is 2,214,574,625 Baht (divided into : 2,214,574,625 ordinary
shares at par value 1 Baht/share) Top ten shareholders holding the highest number of shares as of 28 December 2007 are
as follows :
OUR CAPITAL STRUCTURE AND MANAGEMENT
Shareholder’s name No. of shareholding %
1 Mr. Sukakarn Wattanavekin** 379,185,716 17.1%
2 City Holding Co., Ltd.* 259,476,918 11.7%
3 Mitr Phol Sugar Co., Ltd.* 166,853,314 7.5%
4 MBK Plc. 92,270,838 4.2%
5 SOMERS (U.K.) Ltd. 92,064,000 4.2%
6 Mr. Isara Vongkusolkit* 90,936,777 4.1%
7 Chodthanawat Co., Ltd.** 85,785,687 3.9%
8 MP Particle Board Co., Ltd.* 76,530,614 3.5%
9 HSBC BANK PLC-CLIENTS GENERAL A/C 66,531,700 3.0%
10 Miss Chintana Kanjanakamnerd* 61,287,954 2.8%
Total top ten shareholders holding 1,370,923,518 61.9%
Note : 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.
The whole shareholders can be separated by groups as follows :
Major Shareholders’ Groups No. of shareholding %
Vongkusolkit Group* 876,937,794 39.6%
Wattanavekin Group** 696,045,599 31.4%
Total major shareholders’ groups 1,572,983,393 71.0%
Foreign Custodian Accounts Group 280,600,752 12.7%
Local Funds Group 61,648,974 2.8%
Insurance Co. Group 54,857,466 2.5%
Company’s executives 13,254,203 0.6%
Others 231,229,837 10.4%
Total 2,214,574,625 100.0%
Note : *and **are the groups of major shareholders whose behavior influences management policy or the Company’s operation significantly.
Management Structure currently consists of five boards and committees which govern each parts of management, namely:
The Board of Directors, The Financial and Risk Management Committee, The Audit Committee, The Nominating and
Corporate Governance Committee and The Management Development and Compensation Committee.
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Board of Directors consists of the following 12 directors:
Name Title Education
1. Mr. Luen Krisnakri Chairman of the Board* • Faculty of Engineering
• Honorary Doctoral of Engineering
Chulalongkorn University
2. Mr. Prakit Pradipasen Director and Chairman • MBA
of the Audit Committee* Wayne State University, Michigan, U.S.A.
3. Assoc. Prof. Manop Pongsadadt Director and Member of • Master of Architecture (M.Arch).
Audit Committee* Kansas State University, U.S.A.
4. Mr. Dej Bulsuk Director and Member of • Faculty of Commerce & Accountancy
Audit Committee* Thammasat University
5. Mr. Banyong Pongpanich Director* • MBA (Finance)
Sasin Graduate Institute of Business Administration
Chulalongkorn University
6. Mr. Dolchai Boonyaratavej Director* • MSA (Advertising Design) Syracuse University,
New York, U.S.A.
7. Mr. Vitoon Vongkusolkit Director • Bachelor of Science
Chulalongkorn University
8. Mr. Supol Wattanavekin Director • Master of Management
Sasin Graduate Institute of Business Administration
Chulalongkorn University
9. Mr. Chanin Vongkusolkit Director • MBA (Finance)
St. Louis University, Missouri, U.S.A.
10. Mrs. Panida Thepkanjana Director • MBA
Sasin Graduate Institute of Business Administration
Chulalongkorn University
• Master of Laws
Chulalongkorn University
• Barrister-at-Law
The Institute of Thai Bar Association
11. Mr. Krisda Monthienvichienchai Director • MBA
Chulalongkorn University
12. Mr. Kasama Punyagupta President & CEO • MBA (International Business)
University of Bridgeport, Connecticut,
U.S.A.
Company Secretary : Mr. Viboon Chaisutyakorn
Note: *Independent director according to the rules. Nomination is done by contacting competent and experienced experts. The variety for areas
of expertise must be sufficient in order to appropriately formulate direction for business development. At the same time, this group of experts must perform
check-and-balance roles with the management. Directors that represent the major shareholders are.
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Directors that represent the major shareholders are.
Director’s Names Groups of major shareholders
1. Mr. Vitoon Vongkusolkit Vongkusolkit Group
2. Mr. Chanin Vongkusolkit
3. Mr. Krisda Monthienvichienchai
4. Mr. Supol Wattanavekin Wattanavekin Group
5. Mrs. Panida Thepkanjana
The dividend payout ratio is increased from 25 percent, set for 2004-2006, to 35 percent of net profits after reserves
that are required by the law or set by the Company. The ratio, nonetheless, depends upon cashflow from operations,
funding requirement to support expansion by the Company and its subsidiaries, and any legal limitation and necessity
that shall arise.
Other important details of Management Structure are summarized as follows:
Qualifications 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.
5. Each director’s term of office is 3 years whereby the Board of Directors may nominate him to shareholders for
re-election which however will be assessed from his performance on an annual basis.
Specific Qualifications:
Chairman
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.
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• Chairman must be Non Executive Director (NED).
• Chairman must not be involved in a day-to-day management; nor shall he be employee, staff, advisor receiving monthly
salary o a person with controlling power of the company, affiliated company, associated company, auditing company,
or be a person who may have conflict of interest without having to have interest or stakes in such manner.
Executive Director
• Director who is also Chief Executive Officer (CEO) is advised not to become director in more than three other listed
companies.
Independent Director
• Independent director shall hold less than 5 per cent of the total shares with voting rights in a company, its affiliated
company, associated company or any other person with possible conflicts of interest.
• 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 one year.
• Independent director must have no direct or indirect business relationship, interest or stake financially and in the
management of a company, its affiliated company and associated company; nor shall he be a person with possible
conflict of interest in a manner that deprives him of his independence.
• Independent director must not be a closed relative of executives or major shareholders of a company or its affiliated
company, associated company or any person with possible conflicts of interest; nor shall he be appointed as
representative to take care of interest of directors or major shareholders.
• Independent director must not be director in company in which senior executives are co-directors.
• 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).
Transactions with Possible Effects to Independence
• Being authorized to approve transactions or signing to bind the company.
• Being employee, staff, advisor with monthly income or person with controlling power of the company, its affiliated
company, associate company, audit company; or being a person with possible conflict of interest.
• Attending a meeting or voting in a matter he has an interest or a conflict of interest therein.
Board of Director’s roles and responsibilities are:
1. To manage the Company is 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 Plan 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.
36
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 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
Note: *Independent directors
Financial and Risk Management Committee’s roles and responsibilities are:
1. To Supervise financial operations of companies within the Group.
2. To supervise, screen, approve and monitor approved investment projects.
3. To assess and formulate a systematic, clear-cut and efficient risk management plan.
4. To supervise and monitor risk assessment tasks as well as to adjust and develop the risk management on
a regular basis.
Term of Financial and Risk Management Director:
2 years each term.
The Audit Committee consists of three members as follows:
1. Mr. Prakit Pradipasen Chairman*
2. Assoc.Prof. Manop Pongsadadt Member of the Committee*
3. Mr.Dej Bulsuk Member of the Committee*
Note: *Independent directors
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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 select, propose for appointment and determine auditor’s fees.
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 supervise and ensure that proper and efficient 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.
6. To review an annual internal audit plan proposed by the Internal Audit Office.
7. To supervise, review and offer opinions towards the Internal Audit Office’s performances, the performances of
accounting director and finance director and the coordinate with auditors regarding financial auditing.
8. To promote and support the development of a financial reporting system that meets the international standards.
9. To control company’s compliance with the laws on securities and exchange and other legislations relating to its business.
10. To determine fraud prevention measures and review results of a corruption inspection report.
11. To review the accuracy and effectiveness of information technology relating to the internal control system; to offer advice for
regular updates.
12. 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.
13. To prepare the Audit Committee’s report to be signed by chairman of the Committee and disclosed it in the Company’s
annual report.
14. 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 & CEO, 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 director:
2 years each term.
The Nominating and Corporate Governance Committee consists of three members as follows:
1. Mr. Luen Krisnakri Chairman*
2. Mrs. Panida Thepkanjana Member of the Committee
3. Mr. Chanin Vongkusolkit Member of the Committee
Note: *Independent directors
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Nominating and Corporate Governance Committee’s roles and responsibilities are:
1. To determine the Board of Directors’ composition and qualification of its members as well as members of
board committees.
2. To nominate candidates for the Board of Directors and member of board committees.
3. To determine the Remuneration of Directors.
4. To propose corporate governance policies and guidelines to the Board of Directors and to review and
update such policies and guidelines on ongoing basis.
5. To evaluate the Board of Directors and each committee’s performance and to ensure that the Board of
Directors and management’s operations are being conducted within corporate governance policies and
guidelines.
6. To promote knowledge acquisition for the company’s nature of business, regulations, and strategy.
Term of Nominating and Corporate Governance Director:
2 years each term.
The Management Development and Compensation Committee consist s 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*
Note: *Independent directors
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 & CEO while offering him an advice regarding remunerations of senior executives.
2. To consider a plan to develop skills and competency of President & CEO 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 per cent of the program’s shares.
Term of Management Development and Compensation Director:
2 years each term.
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Executives
The company’s executives consist of 6 members as follows:
1. Mr. Kasama Punyagupta President and Chief Executive Officer
2. Mr. Poom Osatananda Executive Vice President, Chief of Financial Officer
3 Mr. Anuphong Wangphongsawasd Executive Vice President, Business Development
4. Mr. Petch Krainukul Assistant Executive Vice President, Hotel Business
5. Mr. Suchai Wuthworachairung Assistant Executive Vice President, Human Resources
6. Mr. Surapon Jaimsuwan Vice President, Office Buildings & Shopping Centers
Duties and Responsibilities of the President & CEO
(1) To formulate a long-term plan (four years) and a year plan as well as strategies to support the long-term plan to achieve its
objectives.
(2) Managing the organization structure with authority to do the following:
• To determine an organization structure.
• Issue rules and regulations, orders, circulars, line of command and organizational chart.
• Determine approval authority.
• Determine job descriptions and job specifications.
(3) Developing operation systems as follows:
• Information Technology system for management.
• Administration and assessment system based on balance score card procedures.
(4) Human resources management with authority to do the following:
• Hiring, determining salaries and wage, bonuses, remunerations of staff, positions from vice president and lower.
• Appointing, removing and transferring between departments.
• Considering welfare based on policies approved by the Board of Directors.
• Promoting corporate culture.
• Strengthening skills and expertise by supporting the Company’s strategies.
(5) Budgeting and managing business within the budget, work plan, projects and principles approved by the Board of Directors.
Nomination of directors and executives
• The Company has a nomination process of its appointed directors and top executives through the Nominating and
Corporate Governance Committee.
• Rights of retail investors to appoint director.
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Clause 19 of the Company’s Articles of Association provides details about director’s appointment. Clause 49.1
determines shareholder’s votes as follows.
Clause 19 The Shareholders’ Meeting shall elect directors according to the following rules and procedures:
19.1 Chairman of the Meeting shall propose names and work experiences of nominees submitted by the
Board of Directors for approval.
19.2 Each shareholder shall have voting rights equal to the number of shares he holds.
19.3 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 21.2 for each director. Dividing votes to a particular nominee is not permitted.
19.4 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 49 A resolution of the Shareholders’ Meeting shall consist of the following votes:
49.1 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.
Remunerations of the directors and Executives
Monetary remunerations 1. Remunerations of directors of the Company’s Board of Directors and Committees in 2007 are shown in the
Good Corporate Governance section.
2. Remunerations, which are total wages in 2007 of the 6 executives (their positions as shown in the above
table) paid by the Company and its subsidiaries to six executives, totaled Baht 28,228,166.
(Including with the remuneration of a former executive who resigned during the year)
Other remunerations Other remunerations are provident fund of the executives under item 2 above, totaling Baht 788,508.
Erawan Bangkok
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Shareholding of Directors and Executives in the Erawan Group Public Company Limited
Name Title
Number of shares Change
As of 31 Dec. 07 As of 31 Dec. 06 Increase (Decline)
1. Mr. Luen Krisnakri Chairman of the Board 1,069,972 666,829 403,143
2. Mr. Prakit Pradipasen Chairman of 150,058 - 150,058
the Audit Committee
3. Assoc. Prof. Manop Pongsadadt Audit Director 319,729 639,458 (319,729)
4. Mr. Dej Bulsuk Audit Director 959,187 639,458 319,729
5. Mr. Vitoon Vongkusolkit Director 11,138,141 3,554,258 7,583,883
6. Mrs. Panida Thepkanjana Director 959,187 - 959,187
7. Mr. Chanin Vongkusolkit Director 5,493,550 99,597 5,393,953
8. Mr. Supol Wattanavekin Director 58,379,187 51,040,000 7,339,187
9. Mr. Banyong Pongpanich Director 3,001,500 2,668,000 333,500
10. Mr. Krisda Monthienvichienchai Director - - -
11. Mr. Dolchai Boonyaratavej Director - - -
12. Mr. Kasama Punyagupta President & CEO 570,000 70,000 500,000
13. Mr. Poom Osatananda Executive Vice President 36,600 36,600 -
14. Mr. Anuphong Wangphongsawasd Executive Vice President 2,508,053 269,930 2,238,123
15. Mr. Petch Krainukul Assistant Executive 699,624 336,597 363,027
Vice President
16. Mr. Suchai Wuthworachairung Assistant Executive 1,201,054 949,054 252,000
Vice President
17. Mr. Surapon Jaimsuwan Vice President 1,193,150 290,000 903,150
18. Ms. Pakinee Pramtade Vice President - - -
19. Mr. Viboon Chaisutyakorn Vice President 1,221,443 233,389 988,054
42
Executives’ ESOP And Exercising their rights by 31 December 2007
Name Title
ESOP allocation Exercise
(shares) by 31 Dec. 07
1. Mr. Kasama Punyagupta President & CEO 11,510,276 -
2. Mr. Poom Osatananda Executive Vice President 6,948,325 2,600,000
3. Mr. Anuphong Wangphongsawasd Executive Vice President 8,464,327 3,988,109
4. Mr. Petch Krainukul Assistant Executive Vice President 1,209,187 569,729
5. Mr. Suchai Wuthworachairung Assistant Executive Vice President 4,476,216 1,919,054
6. Mr. Surapon Jaimsuwan Vice President 4,046,386 2,990,511
7. Mr. Viboon Chaisutyakorn Vice President 4,232,162 1,994,054
8. Mr. Prajak Anekritmongkol Vice President 4,859,892 2,429,946
9. Mr. Apichan Mapaisansin Vice President 4,859,892 350,000
10. Ms. Nattaporn Chevamongkol Assistant Vice President 1,139,458 650,000
11. Mr. Prayat Vajiratanakorn Assistant Vice President 1,220,342 900,613
Note: For the information of the Directors’ ESOP is summarized in the section “Good Corporate Governance”
Ploenchit Center
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BUSINESS OVERVIEW
9/11
18
16
14
12
10
8
6
4
2
0
30%
20%
10%
0%
-10%
44
Overview of Tourism Industry Trend
In 2007, Thailand tourism industry still showed a strong growth despite the negative factor such as political
uncertainty and Bangkok bomb in late 2006. The number of tourist is expected to be 14.5 million in 2007 compared
to 13.8 million in 2006 or a 5% increase. The main growth came from a high growth in Andaman provinces such as
Phuket which had a strong growth of 21% in 2007.
The Tourism Authority of Thailand (TAT) expects a sustainable growth of number of tourist to be 15.7 million in 2008
or an 8% increase. The key factors that will support the growth are a stable political situation after an election and
competitive advantage of the country compared to those in the region. In 2007, World Tourism Organization showed
the world tourism growth of 4.5% and expected to increase by at least 4% in 2008. In Thailand, the number of tourist
arrival from East Asia continued to grow with an average of 6.5% per annum. The other new markets that show a
high growth rate are countries in Eastern Europe, Far East and Russian. MICE business is also support the growth of
tourism industry. In addition, new tourist destination, booming in low cost carriers, opening of Suvarnabhumi Airport
and various government activities are also key factors to support a sustainable growth for Thailand tourism industry.
HOTEL INDUSTRY
Thailand Total Arrivals
Source : TAT
Arrivals
Growth
Asian Crisis
SARS
Tsunami
Coup
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008F
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Arrival (Millions) Growth
14
12
10
8
6
4
2
0
40%
30%
20%
10%
0%
-10%
-20%
Bangkok
In 2007, Bangkok tourism industry had a direct effect from negative factors occurred within the country resulting in a decline in
arrivals of foreign tourists. Nonetheless, TAT forecasts the number of foreign tourist arrivals through Bangkok in 2008 will reach
10.3 millions, an increase of 9.4% from 2007.
Bangkok Total Arrivals
Arrivals
Growth
SARS
Tsunami Coup
2001 2002 2003 2004 2005 2006 2007 2008F
Source: TAT and Company’s database
The political uncertainty and Bangkok bomb in 2006 caused a drop in tourist arrival in Bangkok mainly from business and MICE
segments. This results in a decrease in occupancy rate of the hotel in Bangkok by 3% from 2006. In terms of competition for five
star hotels in 2007, there is no major change as just only 2 new five stars hotels opened in the second half of 2007
(a 326 rooms Millennium Asoke and a 430 rooms Pullman King Power). This marks the total of 20 five star hotels which consists of
8,600 rooms (10% increase from 2006). However, number of occupied rooms of five star hotels in 2007 decreased by 5%.
In 2007, Bangkok hotel industry saw a decrease in corporate and meeting segment due to the bomb effect in Bangkok at the end
of 2006 together with ongoing unstable political issue. These above key factors were the main contributors to a decrease in
Bangkok hotel occupancy rate by 3% from 2006. The competition in 5 stars hotel market in 2008 did not change much because
of only 2 opening of 5-stars hotel; The Millennium Asoke (326 rooms) and Pullman King Power (430 rooms).
The addition of these 2 hotels increased total supply of 5 star markets to 20 hotels with approximately 8,600 rooms.
(An increase of 10% YoY)
Arrival (Millions) Growth
46
Occupancy Rate No of rooms
2006 2007 +/- 2006 2007 +/-
Grand Hyatt and JW Marriott 80.6% 75.9% -5% 821 821 -
Five Star River hotels 71.8% 67.3% -5% 2,845 2,845 0%
Five Star CBD 70.6% 66.1% -4% 3,751 4,507 20%
Total 70.6% 67.3% -5% 7,417 8,173 10%
Source: Company’s database
For the competition in Central Business District (“CBD”) four star hotels in Bangkok, there are more than 7,000 rooms
in the segment. However, less than 40% are international chain hotels. In 2007, only 1 international chain hotel was
opened which is 316 rooms Courtyard by Marriott Bangkok hotel. Negative factors in 2007 did not have any major
effect on the four star hotel segment as the market mainly targets the leisure travelers and they can maintain high
occupancy rate of over 80% in 2007.
The new hotel supply in Bangkok over the next 3 years will be concentrated in five star hotel segment and will help
accommodate the projected increase of tourist arrivals based on positive factors already mentioned earlier.
Table below shows list of Bangkok hotels to open in the next 1 - 3 years
Hotel’s name Location Estimated rooms Expected Year of Service
Le Meridien Surawongse Surawongse Rd. 542 rooms 1H/2008
Sofitel Sukhumvit Sukhumvit Soi 13 350 rooms 2H/2008
Renaissance Suites Ploenchit 300 rooms 1H/2009
Crowne Plaza Sukhumvit Sukhumvit Soi 27 342 rooms 1H/2009
Banyan Tree Extension Sathorn 216 rooms 1H/2009
The Regent Sukhumvit Sukhumvit Soi 13 327 rooms 2H/2009
Siam Kempinski Rama 1 300 rooms 2009/2010
St. Regis Rajdamri 200 rooms 1H/2010
W Hotel Sathorn 400 rooms 1H/2011
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1.5
1.0
0.5
0.0
20%
15%
10%
5%
0%
-5%
Koh Samui
Koh Samui tourism industry has seen a rapid growth over the last 10 years particularly after the Tsunami incident in late 2004
which hit Adaman provinces. The event has resulted in a shift of leisure travelers to the Gulf of Thailand as their destination
instead. However, the Samui saw a decrease in tourist arrivals of 1.5% in 2007 due to the strong recovery of destinations in the
Andaman provinces as well as the limitation of Samui airport.
Nonetheless, TAT forecasts that Samui is expected to grow over 10% in 2008 because of the new flight of THAI Airway which
started to operate flight to and from Samui in mid February 2008 as well as an increase in direct flight from international countries.
Furthermore, Suratthani Airport, which is an alternative route to Samui for budget travelers, is also seeing an increase in number of
flights operated by low cost carriers such as Air Asia and One-Two-Go. The above key factors together with strong interest from
tourist for Samui are expected to help boost number of tourist arrivals in the future.
Samui Total Arrivals
Arrivals
Growth
2001 2002 2003 2004 2005 2006 2007 2008F
Source: TAT and Company’s database
Competition among five star international chain hotels in 2007 remained relatively low due to limited supply in this segment.
Nonetheless, the shift of tourist to the Andaman Sea destinations effected the demand in Samui and occupancy rate slightly
decreased 1% from 2006 (69% in 2007 and 70% in 2006). As Samui’s tourism industry will continue to grow, it is expected that
there will be more five star international chain hotels to accommodate growing demand of tourists to Samui.
Arrival (Millions) Growth
7
6
5
4
3
2
1
0
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
48
Phuket
Phuket tourism industry is fully recovered from Tsunami impact in late 2004. It is estimated that Phuket tourist arrivals
in 2007 will reach 5.5 million, a 22% increase from 2007, particularly from the European and Asian market together
with continuous growth in the emerging market countries such as Indian and Russian market.
2007 tourist arrivals will be the highest arrivals figures the island has ever recorded. The increases in numbers of
flight to Phuket by low cost carriers particularly with direct flight from international countries, has resulted in
an anticipated expansion plan for Phuket International Airport. The capacity is expected to increase from current
6 million passengers to 10 million passengers by 2012.
Arrivals
Growth
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008F
Source: TAT and Company’s database
Pattaya
In 2007, it is estimated that Pattaya’s tourist arrival will reach 6.1 million. The opening of Suvannabhumi airport has a
positive effect to Pattaya in terms of ease of accessibility, which is expected to give the city additional
1 million visitors per year. Pattaya tourism industry will also benefit from the expansion of PEACE Convention Center,
which will be able to facilitate MICE customers from 5,800 people to 8,000 people by 2008. Furthermore, another
key growth factor for Pattaya is the 18 golfing facilities within its vicinity, where it is reported to have an average of
300% increase in number of golfers per year. The opening of new International chain hotels in Pattaya in the next
few years will also boost tourist arrivals due to their strong distribution network and client base. In 2008, Pattaya
tourists arrivals are expected to reach 6.5 million arrivals, an increase of 6% from 2007.
Phuket Total Arrivals
Tsunami
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Arrival (Millions) Growth
7
6
5
4
3
2
1
0
25%
20%
15%
10%
5%
0%
Arrivals
Growth Source: TAT and Company’s database
Pattaya Total Arrivals
JW Marriott Hotel Bangkok
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008F
Arrival (Millions) Growth
50
Trend and Competition within the Industry
Office Space Bangkok overall rental office supply at the end of 2007 was at 7.55 million square meter, a small growth compared to
7.46 million square meter available last year based on CB Richard Ellis’s database. Of the total 7.55 million square
meter, 3.72 million square meter is located within Bangkok Central Business District (CBD), with a total take-up of
88.7%, or 3.30 million sq.m. Rental rates of Bangkok office spaces in the third quarter to the fourth quarter 2007 did not show a strong growth.
The average rate for the office rental space in the fourth quarter for Grade A buildings is at 739 Baht per square
meter, which is in line with last year. For Grade B office in the CBD, rental rate is at 567 Baht per square meter, an
increase of 3.46% from last year. The demand for office space in both A and B grade buildings remain flat, while the
supply is limited due to unstable political situations. Please note that the company’s office rental building is classified
as Grade B building. Despite relatively static supply level, the fourth quarter 2007 occupancy rates had fallen below that of the fourth
quarter 2006 level, due to a slowdown in investments from international companies caused by Thailand’s political
uncertainties. Meanwhile, rates are able to remain at the same levels in the third and the fourth quarter 2007,
especially for A grade properties. Grade B buildings with access to mass transportation were able to command a
higher rate, as there is strong demand for such product. Looking forward, we expect political situations to stabilize within the first quarter 2008. On the supply side, office
space should increase by 226,000 square meter by the end of 2008, and another 241,300 square meter by the end
of 2009. Demand is expected to gain momentum towards the end of the first quarter 2008, and fully recover by the
second quarter, once investor confidence is regained. Investments which had been put on hold in the previous year
should return, and we should see an increase in rental activities, especially for Grade A and B buildings in CBD.
Commercial Space Total Bangkok commercial space supply at the end of 2007 was 4.75 million square meter, a 10.5% growth from last
year. Most of the supply growth was in the Greater Bangkok area rather than CBD. Rates did not show a radical
change from previous year, with Grade A, ground floor rate ranging 2,200-2,800 Baht per square meter and from
2,000 Baht down to 1,000 for higher floor. Rates for Grade B, ground floor commercial spaces, average between
900 – 1,300 Baht per square meter.
There is a general slowdown in commercial activities, despite increased sales efforts and promotion. Consumer
confidence and purchasing power were greatly affected by the uncertainty in economical and political situations.
Nevertheless, positive outlook in 2008 will help boost consumer confidence and, as a result, increase consumer
spending.
RENTAL PROPERTY OFFICE AND COMMERCIAL SPACES
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RISK FACTORS
Our board of directors has appointed some of its members to 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. Management risk: Dependence of third-party hotel management We have no policy to manage our hotels. International hoteliers are hired to utilize their reputation, 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 position. 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. Exchange risk Prior to December 2006, our hotel business, particularly room revenue, had been exposed to exchange risk. That is because the
agreed room rates were quoted in US dollar. Settlements, in Baht, were being made by using spot rate on the payment date. Baht
strengthening against US dollar could then result in lower average room rate or room revenue than earlier anticipated.
Nonetheless, all of our hotels have switched the room rate quotation into Baht since December 2006 to reduce the impact of
exchange rate fluctuation. Recent Baht strengthening has resulted in higher room rate in US dollar term, thereby reducing competitiveness of Thai hotels
compared to regional peers. Travelling to Thailand, however, still cost much less overall, room plus other expenses, if compared
to regional competitors such as Singapore and Hong Kong. The strategy to diversify our portfolio into 4-star and budget hotels
will also help mitigate this risk as well as creating more choices for budget-conscious customers.
3. Risk from increasing construction costs of new hotels Investment in new hotels may be faced with increasing costs of construction materials. However, before starting a new project,
the Company will do a feasibility study to ensure that the project will yield an expected return. In addition, when estimating costs
of each project, the Company also estimates contingency costs for possible cost increase. As a result, it can be assured that the
risk is kept minimal.
4. Risk from increasing supplies The hotel business grows ceaselessly, meaning more competitions to come in the future. This is especially the case if a price-
cutting strategy is implemented to increase market shares. This may affect incomes and operating profits from both the hotel
business and the office and shopping mall business. However, since our hotel business has been managed by Hyatt International
Corp. and Marriott International Inc., two well-recognized and highly-experienced hotel management groups, it has a lot of
advantages and is in good hands amid fierce competition. Regarding the office buildings and shopping centers business,
although the competition is intense, demands for space remain quite strong especially for that in the CBD area and the shopping
52
district, which are exactly where the Company’s projects are located. The risk is therefore minimal and manageable. 5. External risk External risk factors such as terrorism, political unrest, environment impact or natural disaster that may affect and 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 an all-risk, terrorism and business
interruption insurances to cover the aforesaid risks if it occurs directly to our properties, However, in the case that the
event does not occur directly with assets of our properties, which will not be covered under the above insurance, or
epidemic impact, which insurance cannot be obtained, we also have various action plan in place to manage operating
costs in order to reduce overall impact. Based on the past experience, it has already been proven that these factors
have only a short term impact to our business.
6. Interest rate risk Interest rate risk, which is a result of changes of market rates in the future, will affect the Company’s operating results
and cash flow. As of 31 December 2006, the Company had Baht 4.256 billion floating-rate loans, which accounted for
93.4 per cent of all its loans. So far, there has been no risk prevention measures against them as the Company is of the
opinion that hedging expenses at present remain at a level that will make the Company’s overall lending cost quite
high. However, the Company will continue to vigilantly monitor market conditions and will arrange risk prevention
measures to defer the risk when related expenses fall to a proper level.
7. 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 three years,
we have been changed and recruited employees and managements in key growth departments and provide
continuous training and development. More importantly, we develop a 3-layer succession plan from President & CEO
down to Vice president level which supervised by Management Development and Compensation Committee (“MDC”)
and Executive Vice President of each department respectively. In addition, with a professional run structure, we
operate under efficient system and do not rely on capability or decision of single person. We also decentralize authority
to various levels under the supervision of the Board of Directors. These structures of management will help reduce risk
from loss of key personnel. In addition, our key corporate cultures including “Team spirit” and “With integrity”, will also draw a capable professional
with integrity to join our company. Lastly, our competitive compensation and benefits, bonus scheme which links to
corporate strategy map as well as long term stock option plan for executive management also create commitment and
loyalty to our employees which will help them work more efficiently. This structure will also help to retain quality
employee with the company.
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CORPORATE GOVERNANCE
54
Good Corporate Governance The Board of Directors, having recognized the importance of good corporate governance in the management, strived
to collect information about the subject from both leading local and international corporations before adapting it to fit
its needs. So far, since there has been no practice considered the best, the Board is compelled to review it at least
once a year or even more if appropriate.
Aside from practicing the good corporate governance according to the Stock Exchange of Thailand (SET)’s
guidelines, the Board also appointed the Nominating and Corporate Governance Committee (NCG), whose main
tasks are to review the Board’s structure, determine qualifications of board members, nominate competent
candidates to the Board and make sure that directors, the management and employees recognize the importance of
the good corporate governance and implement it in a way that corresponds to our corporate culture.
We make sure that our policy, vision, business strategies, the principles of good corporate governance and business
ethics are communicated to the management and employees at all levels. Our President and CEO, who are
communicating the messages through the Management Committee (MC), are to organize at least two town hall
meetings once a year aside from small group meetings between employees and their highest-level supervisors.
Corporate Governance Policy and Corporate Social Responsibility “CSR”
Our business is run by the executives and staff under the CEO’s leadership. Shareholders have appointed
a 12-member Board of Directors from experts in finance, business administration, economics, management, marketing,
service, tourism and law. The Board supervises the management to ensure the creation of long-term values to our
shareholders, by taking into consideration the Company’s Corporate Social Responsibility (CSR)1 and by equally
treating everyone from shareholders to customers, trading partners, creditors, staff, community and the society.
All is given a fair and equal access to information. Related parties can directly contact the Board of Directors, the
Audit Committee and the Nominating and Corporate Governance Committee (NCG) for advice and for value creation
at our head office, 2 Ploenchit Center, 6th Floor, Sukhumvit Road, Klongtoey, Bangkok, or you may contact the Office
of Corporate Governance at [email protected]. All information will be treated confidential and sent directly to
the Board.
CORPORATE GOVERNANCE
Board of the Year for Distinctive Practices 2006/07
1http://www.theerawan.com/Files/2007/Code-of-Conduct_E.pdf or Code of Conduct page 7-11
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Very Good CG 2006
Business Ethics
Our business ethics policy is based on the principles of good corporate governance adapted to correspond to our corporate
strategy. A manual of business ethics has been distributed to our management, executives and employees. The same information
can be accessed from our website.
The Management Committee (MC) is promoting business ethics through the four values of team spirit, working with integrity,
promoting learning and improving the organization and committing to success. The Erawan Group Plc. believes that business
ethics is a mechanism to make each and everyone of us realize that we are also responsible to our stakeholders, our community,
our society and the environment. As our motto is to achieve the “success with integrity,” to do so, here are the ten qualities that
take us to the path of business ethics:
1. Ethics: This refers to commitment to integrity, legal compliance and ethical practices. Action that may cause any moral
or ethical conflict is to be avoided by all means.
2. Transparency: Transparency while working includes reporting any irregularities if found, ready for any inspection and
enthusiastic for self-improvement.
3. Honesty: This refers to a zero conflict of interest where staff will not use their title or corporate information for their business
or anyone’s business directly or indirectly. Honesty also includes denying or avoiding benefits that he may receive from
someone else because of his job.
4. Trust: In essence, this refers to speaking the truth and keeping one’s promise by trying the best to achieve what is said earlier.
5. Confidential: As corporate information is the Company’s valuable asset, it must be well-protected and carefully
implemented to avoid negative effect to others.
6. Courage: This refers to courage to do the right thing, to accept the fact and to report if something unusual is found.
7. Accountability: Accountability is working with a responsible mind for any mistake resulted from his decisions and actions
This includes admitting what’s wrong, explaining a reason if something wrong happens and fixing it, not blaming someone
else and not resenting if someone reports such a mistake.
8. Judgment: This refers to a decision made on the basis of accurate and adequate information where all risks and effects
are taken into consideration while personal preferences are excluded.
56
Board of the Year for Distinctive Practices 2006/07
9. Respect: Treating others politely, honoring other people’s opinions and providing constructive criticism are
what the respect is.
10. Social responsibility: A company can be a responsible member of the society by taking into consideration
social and environmental impacts when doing business and by contributing to the society within its means.
To assure the management that any decision relating to the Company’s business is ethically made for the best
interests of the Company, the Erawan Group Plc. has formulated the Executive Ethic Standards, which are stricter
than those of the Stock Exchange of Thailand (SET). Violation or any intentional misconduct of the following ten will be
subject to severe punishment.
Executives Ethic Standards
1. Keep confidential information secret and refrain from disclosing any information considered confidential to
the third party without proper authorization.
2. Those directly involved with financial information and/or other information which may affect the Company’s
securities price are prohibited to trade the Company’s securities during a 30-day period prior to the disclosing
date of the Company’s operation or the reporting date of its business to the Stock Exchange of Thailand and
the Securities and Exchange Commission.
3. Refrain or avoid expressing any opinion to the third party or the press in any matter related to the Company
without proper authorization.
4. Avoid using one’s position and/or information acquired as a result of duty to seek interests for oneself or others.
5. Refrain from doing anything or participating in any action or covering anything that might lead to a conflict of interest
or that prevents one from performing his duty with fairness or refrain from participating in any illegal cover-up operation.
6. Refrain from doing anything deemed as demanding for or receiving an object, gift, souvenir or entertainment
service worth more than Five thousand Baht a year. In case the request can’t be denied, the person receiving
such gift must reveal and turn over the gift to the Good Corporate Governance Center.
7. Those involving in negotiating a business deal worth more than One Hundred Thousand Baht are required to
reveal his personal relationship and a couple and closed relatives according to the personal relationship
disclosure form before submitting it to the Good Corporate Governance Center as an expression of opinion to
the President & CEO.
8. Mobile phone shall be avoided when negotiating a business deal worth more than One Hundred Thousand Baht
and at least one employee shall be present in such negotiation.
9. Any negotiation relating to the bidding shall be discussed at the Company’s premise only unless it is necessary
where the Good Corporate Governance Center shall be notified in advance and at least one representative
from the Bidding Committee shall attend such negotiation.
10. Avoid using or giving any information or indicating any detail about the operation which may prompt any one
or several bidder or bidding party to be more advantageous when submitting the tender.
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Very Good CG 2006
Components and Roles of the Board of Directors and the Executive Management Qualifications of members of our Board of Directors are corresponding to and not lower than those required by the Stock
Exchange of Thailand. Each director shall remain in the office for three years each term. Their scopes of work are clear with power
being properly balanced among one another.2 Half of the Board is independent directors. The 12-member Board consists of one
executive management, who is President and CEO; six independent directors and five directors having interests in the Company.
Chairman of the Board is an independent director and is not President and CEO for the purpose of transparency and effective
balance of power.
The Board has appointed four committees3 to perform various jobs to create the right balance of power and to promote a division
of labor. The term of each committee is two years. Members of the committee will be rotated on an appropriate occasion.
Chairman of the committee will submit policies already approved by his committee to the Board. Each sub-committee will appoint
a secretary to coordinate and monitor directors and the management for policy compliance and to record the Minute of Meeting in writing. The Board has also appointed the Corporate Secretariat who has a good grasp of the Company’s business fundamentals, rules
and regulations, the public limited company law and the Securities and Exchange Commission (SEC)’s rules and regulations.
The Corporate Secretariat is also competent in communicating and coordinating with directors, the Management and internal and
external parties. The Corporate Secretariat has a duty to record the minutes in writing where the essence of each agenda item,
directors’ opinions and the Meeting’s resolutions must be recorded in an accurate and adequate manner.
Nomination and Appointment of Directors The Board has designated the Nominating and the Corporate Governance Committee (NCG) to determine a clear policy and
process on director nomination. This includes reviewing the qualifications of would-be directors, courting them and nominating to
the Annual General Meeting of Shareholders. Directors should be experts from various fields with enough experiences to guide
the Company’s business. Each director will stay in the office for three years each term. At every Annual General Meeting of
Shareholders, one-third of directors shall retire in rotation according to the Company’s Articles of Association. If the retiring
director is nominated once again, the NCG must present an evaluation report of the director, his/her record of meeting
attendance, commitment and contributions to the Company as part of the consideration.
Evaluating the Board The Board of Directors is subject to a performance evaluation at least once a year. Twelve directors have a chance to self
evaluate and to freely evaluate the entire board. Results of the evaluation are sent to the NCG and used as a guideline to improve
its performances under the guidelines of the Stock Exchange of Thailand and Thailand’s Institute of Directors (IOD). In 2007, we
introduced a new evaluation form designed on the basis of the SET’s guidelines. The evaluation form was also in line with the
Board’s structure and covered work of various committee.
2http://www.theerawan.com/corporate_board.asp 3http://www.theerawan.com/corporate_governance.asp
58
More than 90 per cent of the respondents of the new evaluation form stated that the structure and components of the
Board of Directors were appropriate and there were enough independent directors to balance the power. The Board
was also perceived as understanding its roles, having freedom to make decision without no one dominating it, having
a good relationship with the management and able to talk frankly with the President and CEO. The only exception was
the internal audit where the Company was asked to increase the number of executive directors to become more
flexible in its management. The following chart shows all the evaluation results.
Board of Directors’ Meetings
The Company announces the number of times the Board must convene in advance where directors and related parties
were informed in advance throughout the year. In 2007, the Erawan Group held eight Board of Directors’ Meeting
(six ordinary and two extraordinary meetings); eight meetings of the Finance and Risk Management Committee,
six meetings of the Audit Committee (four ordinary, two extraordinary), three meetings of the Nominating and
Corporate Governance and two meetings of the Management Development and Compensation Committee. Minutes of
the meetings were recorded in writing and kept at the Secretariat Office and on a data server for easy access to
relevant parties. Details are in copy of meeting attendance by directors in 2007.
Board of the Year for Distinctive Practices 2006/07
Overall
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
6. Directors’ Improvement and Management Development
5. Relations with Executive Management
4. Director Fiduciary Duty
3. BOD’s meeting
2. Rule, duties and Responsibitity
1. BOD Structure and Componant
Strongly Agree
Strongly Disagree
Disagree Neither Agree or Disagree
Agree
An
nu
al R
epo
rt 2
00
7 T
he
Eraw
an G
rou
p P
ub
lic
Co
mp
any
Lim
ited
Very Good CG 2006
Tim
es o
f att
enda
nce
2007
Tim
es o
f atte
ndan
ce/N
umbe
r of T
otal
atte
ndan
ce
1.
Mr.L
uen
Kris
nakr
i C
hairm
an
Apr.
2006
- 20
09
8/8
- -
3/3
2.
Mr.P
raki
t Pr
adip
asen
D
irect
or
Apr.
2006
- 20
09
7/8
- 6/
6 -
-
3.
Ass
oc.P
rof.
Man
op P
ongs
adad
t D
irect
or
Apr.
2006
- 20
09
8/8
- 6/
6 -
-
4.
Mr.D
ej B
ulsu
k D
irect
or
Apr.
2006
- 20
09
8/8
- 6/
6 -
-
5.
Mr.B
anyo
ng P
ongp
anic
h D
irect
or
Apr.
2007
- 20
10
5/8
4/8
- -
2/2
6.
Mr.D
olch
ai B
oony
arat
avej
D
irect
or
Apr.
2005
- 20
08
3/8
- -
- -
7.
Mr.V
itoon
Von
gkus
olki
t D
irect
or
Apr.
2005
- 20
08
8/8
8/8
- -
2/2
8.
Mr.S
upol
Wat
tana
veki
n D
irect
or
Apr.
2007
- 20
10
7/8
6/8
- -
2/2
9.
Mr.C
hani
n V
ongk
usol
kit
Dire
ctor
Ap
r. 20
07 -
2010
6/
8 7/
8 -
3/3
-
10
. Mrs
.Pan
ida
The
pkan
jana
D
irect
or
Apr.
2005
- 20
08
6/8
7/8
- 3/
3 -
11
. Mr.K
risda
Mon
thie
nvic
hien
chai
D
irect
or
Apr.
2007
- 20
10
6/8
- -
- -
12
. Mr.K
asam
a P
unya
gupt
a Pr
esid
ent
Apr.
2005
- 20
08
8/8
8/8
- -
-
an
d C
EO
p
er c
ent o
f dire
ctor
s’ a
ttend
ed
83.3
3%
83.3
3%
100.
00%
10
0.00
%
100.
00%
N
ame
Title
Te
rm
Boar
d of
D
irect
ors
Fina
ncia
l and
Ri
sk M
anag
emen
t C
omm
ittee
Audi
t C
omm
ittee
Nom
inat
ing
an
d C
orpo
rate
G
over
nanc
e C
omm
ittee
Man
agem
ent
Dev
elop
men
t an
d C
ompe
nsat
ion
Com
mitt
ee
60
Board of the Year for Distinctive Practices 2006/07
Remunerations of Directors, Executive and Staff
The Board of Directors designates the following committees to determine a policy of remuneration payment to
directors, the management and staff as follows.
The Nominating and Corporate Governance Committee (NCG) has a duty to formulate a policy for reasonable
payment to directors, which was subject to an annual review. This however is in line with the Board’s scopes of
responsibility and the Company’s financial status as compared to performances of other companies within the group
and those earning the same level of incomes. Two types of payment are made: meeting allowance and bonus.
Directors appointed as members of other committees receive additional payment based on their increasing
responsibilities. The Annual General Meeting of Shareholders (AGM) approves payment every year. Remunerations
directors received from the Company and its subsidiaries are disclosed in a table showing remunerations of the Board
and each committee, on a committee-by-committee and an individual basis.
The Management Development and Compensation Committee (MDC) has a duty to evaluate President and CEO’s
performances, determine his annual payment and formulate the structure of his remunerations based on four goals,
which are financial performances, customer’s satisfactions, internal process and human resources and corporate
development. In addition, the Committee together with President and CEO also determine a guideline to pay the
executives and staff.
President and CEO review annual payments to each department executive based on the two evaluations; namely,
evaluation on the basis of the Balance Score Card (BSC) and evaluation based on Competency Skill Behavior (CSB).
The BSC evaluation looks into the department’s strategy in relation to the corporation’s strategy to determine how
strategies in the three levels; namely, organization, department and units, are crucial and complementing to each
other. The CSB evaluation assesses each manager on an individual basis and an immediate supervisor is the
evaluating person. Some of the evaluation topics are based on the Company’s policy while others are determined by
supervisors. The evaluation is 360 degrees, meaning that the supervisor evaluates his supervisees and vice versa
before each evaluates himself. Results of these two types of evolution are a basis for the Company to allocate its
incomes down to each department, division and section.
An
nu
al R
epo
rt 2
00
7 T
he
Eraw
an G
rou
p P
ub
lic
Co
mp
any
Lim
ited
Very Good CG 2006
Rem
uner
atio
ns fo
r th
e B
oard
of D
irec
tors
and
the
com
mit
tees
in 2
007
N
ame
Title
Boar
d of
D
irect
ors
Com
pens
atio
n in
cas
h fo
r the
Com
mitt
ee
Stoc
k O
wne
rshi
p Pr
ogra
m (E
SOP)
Fina
ncia
l and
Ri
sk
Man
agem
ent
Com
mitt
ee
Au
dit
Com
mitt
ee
Nom
inat
ing
and
Cor
pora
te
Gov
erna
nce
Com
mitt
ee
Man
agem
ent
Dev
elop
men
t an
d C
ompe
nsat
ion
Com
mitt
ee
Al
loca
tion
Ex
erci
ses
at
the
year
en
ded
Tota
l (B
aht/y
ear)
1.
Mr.L
uen
Kris
nakr
i C
hairm
an
490,
000
- -
45,0
00
- 53
5,00
0 1,
139,
458
819,
729
2.
Mr.P
raki
t Pr
adip
asen
D
irect
or
390,
000
- 15
0,00
0 -
- 54
0,00
0 1,
209,
187
889,
458
3.
Ass
oc.P
rof.
Man
op P
ongs
adad
t D
irect
or
390,
000
- 12
0,00
0 -
- 51
0,00
0 1,
278,
916
959,
187
4.
Mr.D
ej B
ulsu
k D
irect
or
390,
000
- 12
0,00
0 -
- 51
0,00
0 1,
278,
916
959,
187
5.
Mr.B
anyo
ng P
ongp
anic
h D
irect
or
390,
000
180,
000
- -
22,5
00
592,
500
1,27
8,91
6 -
6.
Mr.D
olch
ai B
oony
arat
avej
D
irect
or
390,
000
- -
- -
390,
000
1,27
8,91
6 -
7.
Mr.V
itoon
Von
gkus
olki
t D
irect
or
390,
000
240,
000
- -
22,5
00
652,
500
1,13
9,45
8 81
9,72
9
8.
Mr.S
upol
Wat
tana
veki
n D
irect
or
390,
000
180,
000
- -
30,0
00
600,
000
1,27
8,91
6 95
9,18
7
9.
Mr.C
hani
n V
ongk
usol
kit
Dire
ctor
39
0,00
0 18
0,00
0 -
33,7
50
- 60
3,75
0 1,
278,
916
-
10
. Mrs
.Pan
ida
The
pkan
jana
D
irect
or
390,
000
180,
000
- 33
,750
-
603,
750
1,27
8,91
6 95
9,18
7
11
. Mr.K
risda
Mon
thie
nvic
hien
chai
D
irect
or
390,
000
- -
- -
390,
000
1,13
9,45
8 70
0,00
0
12
. Mr.K
asam
a P
unya
gupt
a Pr
esid
ent
390,
000
180,
000
- -
- 57
0,00
0 11
,510
,276
-
and
CEO
Tota
l 4
,780
,000
1,
140,
000
390,
000
112,
500
75,0
00
6,49
7,50
0 25
,090
,249
7,
065,
664
62
Roles of the Board and the Management
The Board determines policies and practices for the management, which include important tasks of an executive both
as a corporate leader and as a supervisee. 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.
To ensure management continuity and for the best interests of the Company, the Board had entrusted the
Management Development and Compensation Committee to formulate a CEO’s succession plan by working with
President and CEO to determine qualifications and to appoint the CEO.
Rights of Shareholders
The Board respects the rights and treats all shareholders equally, whether they are executive, non-executive, local or
foreign shareholders. That’s why directors and executives are to comply with the Executive Ethics Standard. In 2008,
the Company will allow small shareholders to propose meeting agendas at the AGM in advance4.
Shareholder’s Meetings
The Company submits agenda items needed to be discussed according to the laws, the regulations of the Stock
Exchange of Thailand and its Articles of Association for shareholders’ approval. In addition, the Company prepares the
Meeting, organizes it and sends out an invitation to attend the Meeting together with supporting documents to
shareholders no fewer than 14 days in advance. Shareholders are allowed to also access the same materials at
www.theerawan.com at least 30 days so that they receive enough information above the required standards. In
addition, shareholders may choose to exercise their rights by themselves or appoint any of the six independent
directors attending the Meeting to vote on their behalf.
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 the 2007 Annual General Meeting of Shareholders (AGM), all 12 directors attended the Meeting. Chairman of the
Board allowed shareholders to ask enough questions while successfully ending the Meeting at an appropriate hour. In
addition, shareholders’ inquiries, the Meeting’s resolutions and votes received in each agenda item were recorded in
writing in the Minutes of the Meeting. The resolutions were reported to the Stock Exchange of Thailand (SET) within the
following business day. The Minutes of the Meeting was also posted at the Company’s website within 14 days from the AGM.
Board of the Year for Distinctive Practices 2006/07
4http://www.theerawan.com/Files/2007/Proposal-form-Rules-of-AGM_TH.pdf http://www.theerawan.com/Files/2007/Proposal-form-Rules-of-AGM_ENG.pdf
An
nu
al R
epo
rt 2
00
7 T
he
Eraw
an G
rou
p P
ub
lic
Co
mp
any
Lim
ited
Very Good CG 2006
Investor Relations
The Erawan Group Plc. sets up the Investor Relations (IR) Department as a center to provide complete company information to
retail and institutional investors, shareholders, analysts and the public sector. Contacts can be made directly at the Company’s
office or go to http://www.theerawan.com/investor.inf.asp. Inquiries can also be made through [email protected]. In addition, we
also do an IR survey at least once a year. In 2007, 35 responded in the survey. 69 per cent of the respondents said they found the
information adequate; 14 percent asked that date, time and place of meeting was notified in advance; 9 per cent had no opinion
as they attended the Meeting for the first time and because of other personal reasons and 9 per cent wanted to receive
information through other channels (2 wanted to receive it by email and one wanted to ask questions by phone if necessary). The
Company would use this information as a basis to improve its IR service.
Internal Control and Internal Auditing
The Audit Committee’s direct responsibility is to supervise the Internal Audit Department, propose and appoint the Company’s
auditor, review the Company’s financial statements and make sure that the Company has enough and adequate internal audit
system in place while enable to improve it to avoid damage and boost transparency. The Audit Committee designates the Office
of Corporate Governance to collect information and monitor the management’s operations in compliance with the policy and the
Board’s resolutions. Meanwhile, we conducted a survey over the satisfaction of those bidding the Company’s projects to which 59
responded. Of this, 90 per cent said the bidding process was fair and transparent and the process was quick and precise. Only
one respondent said the decision was not based on the quality of one’s goods or services but rather of executive management’s
decisions. Five respondents felt the procedures were too complicated and the working committee spent too much time making a
decision. The management would accept all of these opinions to improve the process.
Transactions with Possible Conflict of Interest
The Erawan Group Plc. 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 Company 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.
So far, the disclosure of connected transactions has showed that the transactions were reasonable within a normal course of
business. There was no special transaction. All transactions were for the Company’s best interest and conducted within an arm’s
length basis. The transactions were carried out according to the Company’s rules and regulations and those of the Securities and
Exchange Commission. They were also in line with the accounting standards on disclosure of information of connected persons or
businesses.
64
The Erawan for the Society and the Environment
The Erawan Group Plc. 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 per cent of
its annual net profit as a social contribution. Of the entire budget, 50 per cent will be spent for the benefits of communities
closed to the Company’s properties whereas the other 50 per cent will be spent for the benefit of the society in general.5
In 2007, we initiated the following projects:
1. “The Erawan Loves Elephant Project,” a sequel of our Elephant Photography Exhibition by the Erawan Gallery
project held in 2006 where winning photos of elephants were printed as calendar and sold. Baht 100,000 proceeds
from the sale was donated to the Thai Animal Guardians Association to continue helping strayed elephants while the
other Baht 100,000 was given to the Forest Industry Organization’s National Elephant Institute under the patronage of
Her Royal Highness Princess Galayani Vadhana.
2. The Royal Passages, A Charity Auction of Thai Mural Painting Photographs Project where proceeds from
the project were given to His Majesty the King’s 80th birthday anniversary. In this project, the Company had 12 mural
paintings having themes related to Lord Buddha’s life and Buddhism-related fables from nine temples all over the
country taken by Mr. Nitikorn Kraivixian, having Assoc. Prof. Sone Simatrang giving brief information about the mural.
The photos were made into the 2008 calendar and coffee-table book. In addition, the 12 photos were also auctioned,
at which Baht 3,945,999 was raised and donated to HM the King on his 80th Birthday Anniversary on December 5, 2007.
5http://www.theerawan.com/corporate_governance.asp
An
nu
al R
epo
rt 2
00
7 T
he
Eraw
an G
rou
p P
ub
lic
Co
mp
any
Lim
ited
3. Social, environmental and community projects to those in closed proximity of the Erawan Group Plc’s properties
• A CCTV was installed in Phase 1 of the “Shopping Street safety project” at Ratchaprasong area to boost confidence to Thai
and foreign shoppers as initiated by the Ratchaprasong Square Trade Association (RSTA), which represents businesses in
the Ratchaprasong shopping district.
• Five computers were donated to Ban Konaka School in Phuket and a budget was also given to the school to install
ceramic floor tiles for the purpose of sanitation.
• Landscape at Duangpitak Road was improved where green space was added as part of the project to do good deeds for
our Father.
In addition, 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.
66
1. E
raw
an R
atch
apra
song
Co.
, Ltd
Type
of b
usin
ess:
Real
est
ate:
Ren
ting,
sel
ling,
buyi
ng, o
pera
ting
N
atur
e of
rela
tions
hip:
a 99
.99-
per c
ent s
ubsi
diar
y of
the
Eraw
an G
roup
Plc
.
The
Com
pany
acq
uire
d
shar
es o
f Era
wan
Plo
ench
it
Co.
, Ltd
. (su
bsid
iary
) fro
m
Eraw
an R
atch
apra
song
C
o., L
td. (
subs
idia
ry)
• Pu
rcha
se O
rdin
ary
shar
e 32
5,00
0,00
6.50
The
trans
actio
n w
as to
rest
ruct
ure
an
inte
rnal
sha
reho
ldin
g st
ruct
ure
betw
een
the
Com
pany
and
its
subs
idia
ries
and
had
no e
ffect
to th
e m
anag
emen
t st
ruct
ure.
The
trans
actio
n w
as p
art o
f th
e C
ompa
ny’s
inte
rnal
man
agem
ent
rest
ruct
urin
g ba
sed
on it
s bu
sine
ss
plan
and
was
con
side
red
for t
he
best
inte
rest
of i
ts m
anag
emen
t. -
24,3
37,1
79.3
2
829,
464.
29
5,38
6,02
1.07
25,1
04,6
66.1
5
438,
920.
47
5,39
5,95
1.40
7,20
9,79
2.23
25,0
67.7
09,
628,
116.
84-
Pers
on/e
ntity
with
pos
sibl
e co
nflic
t of i
nter
est a
nd n
atur
e of
re
latio
nshi
p
Des
crip
tion
Tran
sact
ion
valu
e
2006
20
07
Reas
ons
for t
he tr
ansa
ctio
n Pr
icin
g po
licya
nd th
e Au
dit
Com
mitt
ee’s
opi
nion
s
In 2
007,
the
Com
pany
and
its
subs
idia
ries
had
conn
ecte
d tra
nsac
tions
with
thos
e th
at m
ay h
ave
poss
ible
con
flict
of i
nter
est.
The
audi
tor s
tate
d th
e fo
llow
ing
in th
e N
otes
to F
inan
cial
Sta
tem
ents
:
2. M
itr P
hol S
ugar
Gro
up o
f
Com
pani
es
Ty
pe o
f bus
ines
s:
su
gar f
acto
ries
N
atur
e of
rela
tions
hip:
• M
r. Vi
toon
Von
gkus
olki
t and
M
r. C
hani
n Vo
ngku
solk
it,
the
Com
pany
’s d
irect
ors,
are
au
thor
ized
dire
ctor
and
dire
ctor
of
Mitr
Pho
l Sug
ar C
o., L
td.
•
(The
Von
gkus
olki
t Fam
ily h
olds
39
.6 p
er c
ent i
n th
e C
ompa
ny’s
sh
ares
.)
Leas
e ag
reem
ent o
f spa
ce
on th
e
3rd, 2
5th F
loor
of P
loen
chit
Cen
ter :
•
Inco
mes
of r
ent a
nd
se
rvic
es
• Re
ceiv
able
s at
end
of
pe
riod
• Pa
yabl
es o
f ren
t dep
osits
• N
orm
al tr
ansa
ctio
n •
Leas
e te
rm: 3
yea
rs
(3
rd F
l. 01
/07/
05-3
0/06
/08)
(25th
Fl.
15/1
0/05
-14/
10/0
8)
A m
ajor
tena
nt; t
he a
gree
d pr
ice
w
as fa
ir an
d no
t low
er th
an
the
aver
age
pric
e ag
reed
with
ot
her t
enan
ts b
ased
on
th
e bu
sine
ss s
tand
ards
.
3. I
AG In
sura
nce
(Tha
iland
)
Co.
, Ltd
.
Ty
pe o
f bus
ines
s:
no
n-lif
e in
sura
nce
N
atur
e of
rela
tions
hip:
Mr.
Vito
on V
ongk
usol
kit,
dire
ctor
, is
dire
ctor
of
IA
G In
sura
nce
(Tha
iland
) Co.
, Ltd
Non
-life
insu
ranc
e ag
reem
ent f
ort t
he b
uild
ing
and
the
hote
l bus
ines
s
betw
een
the
Com
pany
and
its
sub
sidi
arie
s
• In
sura
nce
prem
ium
s
• In
sura
nce
prem
ium
s
paid
in a
dvan
ce
• N
orm
al tr
ansa
ctio
n •
Insu
ranc
e te
rm: 1
yea
r
(01/
01/0
7-31
/12/
07)
Sele
cted
on
the
basi
s of
the
serv
ice
prov
ider
’s p
oten
tial a
nd in
co
mpl
ianc
e w
ith th
e C
ompa
ny’s
re
gula
tions
.
CO
NN
ECTE
D T
RA
NSA
CTI
ON
S
An
nu
al R
epo
rt 2
00
7 T
he
Eraw
an G
rou
p P
ub
lic
Co
mp
any
Lim
ited
4. C
hai T
alay
Hot
el C
o., L
td.
(
Hya
tt R
egen
cy H
ua H
in H
otel
)
Type
of b
usin
ess:
hote
ls
N
atur
e of
rela
tions
hip:
• M
rs. P
anid
a Th
epka
njan
a,
dire
ctor
, is
a cl
osed
rela
tive
to
Mrs
. Cha
nsam
orn
Wat
tana
veki
n,
an a
utho
rized
dire
ctor
of
Cha
i Tal
ay C
o., L
td.
•
(The
Wat
tana
veki
n Fa
mily
hol
ds
31.4
per
cen
t of t
he C
ompa
ny’s
sh
ares
.)
Agre
emen
t to
leas
e of
fice
spac
e an
d th
e se
rvic
e ag
reem
ent w
ith T
he E
raw
an
Hot
el P
lc.
• Re
nt a
nd s
ervi
ce
in
com
es
• Re
ceiv
able
s at
end
of
pe
riod
• N
orm
al tr
ansa
ctio
n •
Leas
e te
rm: 1
yea
r
(01/
01/0
7-31
/12/
07)
Pric
e ag
reed
was
a m
arke
t pric
e co
mpa
red
to s
pace
in n
earb
y ar
eas
and
not l
ower
than
the
pric
e of
fere
d to
oth
er te
nant
s or
ser
vice
use
rs
com
pare
d to
the
stan
dard
of h
otel
bu
sine
ss.
1,
239,
600.
00
63
1,86
2.06
Pers
on/e
ntity
with
pos
sibl
e co
nflic
t of i
nter
est a
nd n
atur
e of
re
latio
nshi
p
D
escr
iptio
n Tr
ansa
ctio
n va
lue
2006
20
07
Reas
ons
for t
he tr
ansa
ctio
n Pr
icin
g po
licy
and
the
Audi
t C
omm
ittee
’s o
pini
ons
1,
408,
547.
60
35
2,55
2.12
5. M
inor
Cor
pora
tion
Plc.
Type
of b
usin
ess:
Reta
il Sa
le o
f boc
k, n
ewsp
aper
,
stat
ione
ry, r
eady
-to-w
ear,
cosm
etic
s an
d sp
are
parts
N
atur
e of
rela
tions
hip:
Mr.
Prak
it Pr
adip
asen
, dire
ctor
,
is d
irect
or o
f Min
or C
orpo
ratio
n Pl
c.
Agre
emen
t to
rent
Era
wan
Ba
ngko
k’s
spac
e on
the
third
flo
or,
Suite
# 3
02, 3
06, 3
07
• Re
nt a
nd s
ervi
ce
in
com
es
• Re
ceiv
able
s at
end
of
pe
riod
•
Paya
bles
of r
ent d
epos
it
• N
orm
al tr
ansa
ctio
n •
Leas
e te
rm: 3
yea
rs
(0
1/08
/07-
31/0
7/10
)
Pric
e ag
reed
was
a m
arke
t pric
e co
mpa
red
to s
pace
in n
earb
y ar
eas
and
not l
ower
than
the
pric
e of
fere
d to
oth
er te
nant
s or
ser
vice
use
rs
com
pare
d to
the
stan
dard
of h
otel
bu
sine
ss.
3,
711,
320.
66
1,
612,
764.
87
1,
499,
728.
00
33
5,64
8.51
5,59
5.03
176,
311.
80
6.
Bran
dity
Lim
ited
Partn
ersh
ip
Ty
pe o
f bus
ines
s:
O
ther
recr
eatio
nal a
ctiv
ities
.
N
atur
e of
rela
tions
hip:
Mr.
Dol
chai
Boo
nyar
atav
ej,
di
rect
or, i
s an
aut
horiz
ed p
artn
er
of
Bra
ndity
Lim
ited
Partn
ersh
ip.
Hire
d to
des
ign
and
prod
uce
a ca
lend
ar a
nd a
cof
fee-
tabl
e bo
ok fo
r the
Cha
rity
of T
hai
Mur
al P
roje
ct to
hon
or H
M th
e Ki
ng o
n th
e au
spic
ious
oc
casi
on o
f HM
the
King
’s
80th B
irthd
ay A
nniv
ersa
ry
• Se
rvic
es fe
es
One
-tim
e sp
ecia
l eve
nt
Pric
e ag
reed
was
fair;
the
Com
pany
ha
d as
ked
for f
our p
rice
quot
atio
ns
and
this
was
bas
ed o
n th
e C
ompa
ny’s
regu
latio
ns.
-
1,
557,
240.
16
รายง
านประ
จำป 2
550
บริษัท
ดิ เอราวัณ
กรุป
จำกัด
(มหาชน
)
68 68
APPENDICES
An
nu
al R
epo
rt 2
00
7 T
he
Eraw
an G
rou
p P
ub
lic
Co
mp
any
Lim
ited
INDEPENDENT AUDITOR’S REPORT
To The Shareholders of The Erawan Group Public Company Limited
I have audited the accompanying consolidated balance sheets of The Erawan Group Public Company Limited and its subsidiaries
as at 31 December 2007 and 2006, the related consolidated statements of income, changes in shareholders’ equity and cash
flows for the years then ended, and the separate financial statements of The Erawan Group Public Company Limited for the same
years. These financial statements are the responsibility of the management of the Company and its subsidiaries as to their
correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements
based on my audits.
I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Erawan
Group Public Company Limited and its subsidiaries and of The Erawan Group Public Company Limited as at 31 December 2007
and 2006, the results of their operations, and cash flows for the years then ended, in accordance with generally accepted
accounting principles.
Without qualifying my opinion on the above financial statements, I draw attention to the matter as discussed in Note 4 to the
financial statements whereby, effective 1 January 2007, the Company changed its accounting policy for recording investments in
subsidiaries in the separate financial statements from the equity method to the cost method. The Company has thus restated the
separate financial statements as at 31 December 2006 and for the year then ended to reflect this accounting change.
Ernst & Young Office Limited
Bangkok: 26 February 2008
Mr.Sophon Permsirivallop Certified Public Accountant (Thailand) No. 3182
70
In 2007, the audit fee paid to the external auditor of Ernst & Young Office Limited was Baht 3,630,000
• The Erawan Group Plc. Baht 950,000
• The Company’s subsidiary Bath 2,680,000
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 A
nn
ual
Rep
ort
20
07
Th
e Er
awan
Gro
up
Pu
bli
c C
om
pan
y Li
mit
ed
Hotels and Resorts
Consolidated financial statements Separate financial statements
Note 2007 2006 2007 2006 (Restated)
(Unit: Baht)
The accompanying notes are an integral part of the financial statements.
BALANCE SHEETS
THE ERAWAN GROUP PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES AS AT 31 DECEMBER 2007 AND 2006
ASSETS
Current assets
Cash and cash equivalents 167,379,414 116,229,025 3,923,811 2,031,909
Current investment - 36,166,639 - -
Trade accounts receivable - net 6 168,621,276 143,224,331 8,435,026 418,247
Trade accounts receivable - related parties 7 1,335,914 3,480,090 129,990 84,000
Inventories 42,154,569 43,770,723 - -
Other current assets
Prepaid expenses 14,060,056 20,325,043 483,187 401,349
Prepaid expenses - related parties 7 5,485,068 5,460,000 25,068 925,810
Withholding tax deducted at source
- refundable within one year 14 19,913,932 12,076,441 - -
Advances 123,519,907 98,996,482 102,646,428 1,356,277
Input tax refundable 161,286,024 38,562,669 58,350,557 11,976,133
Deposits for purchase of land 15,000,000 - 15,000,000 -
Others 32,725,371 18,070,881 10,112,340 800,695
Total current assets 751,481,531 536,362,324 199,106,407 17,994,420
Non-current assets
Restricted bank deposits - 234,125 - -
Investments in subsidiaries - net 8 - - 3,784,999,913 3,656,318,445
Investments in associates 9 544,477 544,477 544,477 -
Investments in related company 10 4,072,033 5,341,080 3,052,365 2,967,267
Long-term loans to and interest receivable
from subsidiaries 7 - - 399,506,120 998,217,602
Property, plant and equipment - net 11 7,389,852,153 6,972,715,856 1,589,469,292 1,010,527,680
Intangible assets - net 12 48,052,528 61,666,617 15,038,175 18,251,738
Leasehold rights to land and buildings - net 13 1,832,182,397 877,733,841 340,969,649 38,520,781
Other non-current assets
Deposits for lease of land, building and equipment 208,269,450 205,796,962 21,032,486 37,310,858
Withholding tax deducted at source - net of
refundable within one year 14 16,945,926 38,586,111 6,317,727 6,694,082
Others 3,948,833 21,784,414 - -
Total non-current assets 9,503,867,797 8,184,403,483 6,160,930,204 5,768,808,453
TOTAL ASSETS 10,255,349,328 8,720,765,807 6,360,036,611 5,786,802,873
72
BALANCE SHEETS (Continued)
THE ERAWAN GROUP PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES AS AT 31 DECEMBER 2007 AND 2006
420,450,000
497,119,316
-
10,288,150
1,187,107
1,803,750,000
300,000,000 --
378,176,638
3,410,971,211
25,573,044
734,158
2,580,457,587
-
360,000,000
103,315,720
23,763,782
3,093,844,291
6,504,815,502
312,400,000
211,069,628
-
10,288,150
1,596,249
330,943,030
-
-
-
354,628,589
1,220,925,646
32,971,485
884,828
3,614,488,293
300,000,000
360,000,000
194,165,124
90,853,284
4,593,363,014
5,814,288,660
375,450,000
138,526,599
441,208
-
1,187,107
40,000,000
300,000,000 --
43,399,989
899,004,903
-
734,158
541,950,000
-
-
43,180,678
-
585,864,836
1,484,869,739
296,700,000
11,639,491
742,319
-
1,596,249
40,000,000
-86,672,167 1,229,467
22,813,157
461,392,850
-
884,828
520,000,000
300,000,000
-
10,239,427
-
831,124,255
1,292,517,105
Consolidated financial statements Separate financial statements
Note 2007 2006 2007 2006 (Restated)
LIABILITIES AND SHAREHOLDERSû EQUITY
Current liabilities
Short-term loans from financial institutions
Accounts payable - trade and construction
Trade accounts payable - subsidiary companies
Current portion of liabilities under
finance lease agreements
Current portion of hire purchase payable
Current portion of long-term loans
Unsecured debentures
Short-term loans from and interest payable to a subsidiary
Other payable - subsidiary company
Other current liabilities
Total current liabilities
Non-current liabilities
Liabilities under finance lease agreements
- net of current portion
Hire purchase payable - net of current portion
Long-term loans - net of current portion
Unsecured debentures
Accounts payable for leasehold rights
Deposits from lessees
Deferred income - net
Total non-current liabilities
Total liabilities
(Unit: Baht)
The accompanying notes are an integral part of the financial statements.
15
7
16
17
18
7
7
19
16
17
18
31.3
20
21
23
2,281,143,099
2,214,574,625
323,542,015
786,681
79,300,000
1,031,188,388
3,649,391,709
101,142,117
3,750,533,826
10,255,349,328
2,281,143,099
1,959,084,768
30,069,567
1,677,005
83,162,577
723,560,678
2,797,554,595
108,922,552
2,906,477,147
8,720,765,807
2,281,143,099
2,214,574,625
323,542,015
625,068
66,890,000
2,269,535,164
4,875,166,872
-
4,875,166,872
6,360,036,611
2,281,143,099
1,959,084,768
30,069,567
983,799
66,890,000
2,437,257,634
4,494,285,768
-
4,494,285,768
5,786,802,873
BALANCE SHEETS (Continued)
THE ERAWAN GROUP PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES AS AT 31 DECEMBER 2007 AND 2006
Shareholdersû equity
Share capital
Registered
2,281,143,099 ordinary shares of Baht 1 each
Issued and fully paid up
2,214,574,625 ordinary shares of Baht 1 each
(2006: 1,959,084,768 ordinary shares
of Baht 1 each)
Additional paid-in capital
Premium on ordinary shares
Unrealised gain on changes in the value of investments
Retained earnings
Appropriated - statutory reserve
Unappropriated
Equity attributable to companyûs shareholders
Minority interest - equity attributable to minority
shareholders of subsidiaries
Total shareholdersû equity
Total liabilities and shareholdersû equity
Consolidated financial statements Separate financial statements
Note 2007 2006 2007 2006 (Restated)
(Unit: Baht)
The accompanying notes are an integral part of the financial statements.
An
nu
al R
epo
rt 2
00
7 T
he
Eraw
an G
rou
p P
ub
lic
Co
mp
any
Lim
ited
74
Revenues
Revenues from hotel operations
Rental of units in buildings and related services income
Other income
Gain on exchange
Dividend income
Interest income
Gain from cancellation of leasehold right
Gain from sale of investment in subsidiary
Others
Total revenues
Expenses
Cost of sales and direct cost of rental and services
Selling and administrative expenses
Loss from sale of investment in subsidiary
Provision for loss on impairment of investments
in subsidiaries
Depreciation and amortisation
Total expenses
Income (loss) before interest expenses and corporate income tax
Interest expenses
Corporate income tax
Income (loss) after corporate income tax
Net income attributable to minority interest
Net income (loss) for the year
Earnings per share
Basic earnings per share
Net income (loss)
Weighted average number of ordinary shares (million shares)
Diluted earnings per share
Net income (loss)
Weighted average number of ordinary shares (million shares)
2,747,993,350
446,356,676
303,253
593,453
777,508
-
171,886,893
23,486,222
3,391,397,355
1,360,356,451
823,170,618
-
-
426,698,896
2,610,225,965
781,171,390
(221,318,189)
(95,570,755)
464,282,446
(62,361,829)
401,920,617
0.20
1,977.9
0.19
2,102.5
2,711,608,606
619,313,491
6,375,492
-
1,245,625
-
22,865,273
23,555,946
3,384,964,433
1,402,170,619
775,813,852
-
-
400,927,279
2,578,911,750
806,052,683
(222,682,555)
(104,739,166)
478,630,962
(68,786,441)
409,844,521
0.25
1,624.7
0.24
1,728.8
-
70,146,243
-
185,437,449
27,728,140
56,267,934
-
4,644,234
344,224,000
32,136,085
93,964,923
188,826,007
11,999,995
35,641,870
362,568,880
(18,344,880)
(51,222,106)
-
(69,566,986)
-
(69,566,986)
(0.04)
1,977.9
(0.04)
1,977.9
-
22,523,778
-
150,366,564
77,251,318
-
22,865,273
956,048
273,962,981
16,629,122
98,739,205
-
-
13,028,943
128,397,270
145,565,711
(61,019,149)
-
84,546,562
-
84,546,562
0.05
1,624.7
0.05
1,728.8
13
2.2
2.2
8
25
26
INCOME STATEMENTS
THE ERAWAN GROUP PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006
Consolidated financial statements Separate financial statements
Note 2007 2006 2007 2006 (Restated)
(Unit: Baht)
The accompanying notes are an integral part of the financial statements.
1,4
53,0
48,0
08
- - -
5
06,0
36,7
60
- -
1,9
59,0
84,7
68
4,
000,
000
- - -
26,
069,
567
- -
30,0
69,5
67
62,
662,
577
-
-
-
-
2
0,50
0,00
0
-
83
,162
,577
3
92,3
48,0
77
-
409
,844
,521
(
58,1
31,9
20)
-
(20
,500
,000
)
-
723
,560
,678
96,
664,
808
-
-
-
-
-
12,2
57,7
44
1
08,9
22,5
52
1,
038,
152
638
,853
-
-
-
-
-
1,67
7,00
5
2,0
09,7
61,6
22
638
,853
4
09,8
44,5
21
(
58,1
31,9
20)
5
32,1
06,3
27
-
12,
257,
744
2,9
06,4
77,1
47
STA
TEM
ENTS
OF
CH
AN
GES
IN S
HA
REH
OLD
ERS’
EQ
UIT
Y
THE
ERA
WA
N G
RO
UP
PUB
LIC
CO
MPA
NY
LIM
ITED
AN
D IT
S SU
BSI
DIA
RIE
S FO
R T
HE
YEA
RS
END
ED 3
1 D
ECEM
BER
200
7 A
ND
200
6
Issue
d an
d pa
id-up
sh
are c
apita
l Pr
emium
on
or
dinary
sha
res
Unre
alise
d ga
in on
cha
nges
in th
e
value
of
inves
tmen
ts
Retai
ned
earn
ings
(def
icit)
Unap
prop
riate
d
Mino
rity
inter
est
Appr
opria
ted
Cons
olida
ted
finan
cial s
tatem
ents
(Unit
: Bah
t)
Total
Bala
nce
as a
t 1 J
anua
ry 2
006
Un
reali
sed
item
s in
incom
e sta
tem
ents
Chan
ges
in th
e va
lue o
f inv
estm
ents
Ne
t inc
ome
for t
he y
ear
Di
viden
d pa
id (N
ote
29)
Or
dinary
sha
re c
apita
l incre
ase
(Not
e 21
)
Le
gal r
eser
ve (N
ote
23)
In
creas
e in
mino
rity
inter
est
Bala
nce
as a
t 31
Dece
mbe
r 200
6
An
nu
al R
epo
rt 2
00
7 T
he
Eraw
an G
rou
p P
ub
lic
Co
mp
any
Lim
ited
76
1,9
59,0
84,7
68
- - -
255,
489,
857
- -
2,21
4,57
4,62
5
30,0
69,5
67
- - -
2
93,4
72,4
48
- -
3
23,5
42,0
15
83,
162,
577
- - -
-
(3,8
62,5
77)
-
79,3
00,0
00
7
23,5
60,6
78
-
4
01,9
20,6
17
(
98,1
55,4
84)
-
3,
862,
577
-
1,03
1,18
8,38
8
108
,922
,552
- - -
-
-
(7,7
80,4
35)
101,
142,
117
1,
677,
005
(8
90,3
24)
- -
-
- - 786,
681
2,9
06,4
77,1
47
(8
90,3
24)
4
01,9
20,6
17
(
98,1
55,4
84)
54
8,96
2,30
5
-
(7,7
80,4
35)
3,75
0,53
3,82
6
STA
TEM
ENTS
OF
CH
AN
GES
IN S
HA
REH
OLD
ERS’
EQ
UIT
Y (C
ontin
ued)
THE
ERA
WA
N G
RO
UP
PUB
LIC
CO
MPA
NY
LIM
ITED
AN
D IT
S SU
BSI
DIA
RIE
S FO
R T
HE
YEA
RS
END
ED 3
1 D
ECEM
BER
200
7 A
ND
200
6
Issue
d an
d pa
id-up
sh
are c
apita
l Pr
emium
on
or
dinary
sha
res
Unre
alise
d ga
in on
cha
nges
in th
e
value
of
inves
tmen
ts
Retai
ned
earn
ings
(def
icit)
Unap
prop
riate
d
Mino
rity
inter
est
Appr
opria
ted
Cons
olida
ted
finan
cial s
tatem
ents
(Unit
: Bah
t)
Total
Bala
nce
as a
t 1 J
anua
ry 2
007
Un
reali
sed
item
s in
incom
e sta
tem
ents
Chan
ges
in th
e va
lue o
f inv
estm
ents
Ne
t inc
ome
for t
he y
ear
Di
viden
d pa
id (N
ote
29)
Or
dinary
sha
re c
apita
l incre
ased
due
to c
onve
rsion
(Not
e 21
)
Tr
ansfe
r leg
al re
serve
of a
sub
sidiar
y to
retai
ned
earn
ings
- una
ppro
priat
ed
De
creas
e in
mino
rity
inter
est
Bala
nce
as a
t 31
Dece
mbe
r 200
7
The
acco
mpa
nyin
g no
tes
are
an in
tegr
al p
art o
f the
fina
ncia
l sta
tem
ents
.
1,45
3,04
8,00
8
-
1,45
3,04
8,00
8
-
-
-
50
6,03
6,76
0
-
1,95
9,08
4,76
8
4,00
0,00
0
-
4,00
0,00
0
-
-
-
2
6,06
9,56
7
-
3
0,06
9,56
7
4
6,39
0,00
0
-
4
6,39
0,00
0
- - - -
2
0,50
0,00
0
66,8
90,0
00
40
8,62
0,65
4
2,02
2,72
2,33
8
2,43
1,34
2,99
2
-
8
4,54
6,56
2
(5
8,13
1,92
0)
-
(2
0,50
0,00
0)
2,43
7,25
7,63
4
1,0
38,1
52
(4
09,3
94)
6
28,7
58
35
5,04
1
- - - -
9
83,7
99
1,91
3,09
6,81
4
2,02
2,31
2,94
4
3,93
5,40
9,75
8
3
55,0
41
8
4,54
6,56
2
(5
8,13
1,92
0)
53
2,10
6,32
7
-
4,49
4,28
5,76
8
STA
TEM
ENTS
OF
CH
AN
GES
IN S
HA
REH
OLD
ERS’
EQ
UIT
Y
THE
ERA
WA
N G
RO
UP
PUB
LIC
CO
MPA
NY
LIM
ITED
AN
D IT
S SU
BSI
DIA
RIE
S FO
R T
HE
YEA
RS
END
ED 3
1 D
ECEM
BER
200
7 A
ND
200
6
Issue
d an
d pa
id-up
sh
are c
apita
l Pr
emium
on
or
dinary
sha
res
Unre
alise
d ga
in on
cha
nges
in th
e
value
of
inves
tmen
ts
Retai
ned
earn
ings
(def
icit)
Unap
prop
riate
d Ap
prop
riate
d
Sepa
rate
finan
cial s
tatem
ents
Total
(Unit
: Bah
t)
Bala
nce
as a
t 1 J
anua
ry 2
006
- as
prev
ious
ly re
porte
d
Cum
ulativ
e ef
fect
of th
e ch
ange
in a
ccou
nting
poli
cy fo
r the
re
cogn
ition
of in
vestm
ents
in su
bsidi
ary c
ompa
nies
(Not
e 4)
Bala
nce
as a
t 1 J
anua
ry 2
006
- as
rest
ated
Unre
alise
d ite
ms
in inc
ome
state
men
ts
Ch
ange
s in
the
value
of i
nves
tmen
ts (R
estat
ed)
Net i
ncom
e fo
r the
yea
r (Re
state
d)
Divid
end
paid
(Not
e 29
)
Ordin
ary s
hare
cap
ital in
creas
ed (N
ote
21)
Lega
l res
erve
(Not
e 23
)
Bala
nce
as a
t 31
Dece
mbe
r 200
6 - a
s re
stat
ed
An
nu
al R
epo
rt 2
00
7 T
he
Eraw
an G
rou
p P
ub
lic
Co
mp
any
Lim
ited
78
STA
TEM
ENTS
OF
CH
AN
GES
IN S
HA
REH
OLD
ERS’
EQ
UIT
Y (C
ontin
ued)
THE
ERA
WA
N G
RO
UP
PUB
LIC
CO
MPA
NY
LIM
ITED
AN
D IT
S SU
BSI
DIA
RIE
S FO
R T
HE
YEA
RS
END
ED 3
1 D
ECEM
BER
200
7 A
ND
200
6
Issue
d an
d pa
id-up
sh
are c
apita
l Pr
emium
on
or
dinary
sha
res
Unre
alise
d ga
in on
cha
nges
in th
e
value
of
inves
tmen
ts
Retai
ned
earn
ings
(def
icit)
Unap
prop
riate
d Ap
prop
riate
d
Sepa
rate
finan
cial s
tatem
ents
Total
(Unit
: Bah
t)
1,95
9,08
4,76
8
-
1,95
9,08
4,76
8
- - -
25
5,48
9,85
7
2,21
4,57
4,62
5
3
0,06
9,56
7
-
3
0,06
9,56
7
- - -
29
3,47
2,44
8
32
3,54
2,01
5
6
6,89
0,00
0
-
6
6,89
0,00
0
- - - -
6
6,89
0,00
0
739
,833
,255
1
,697
,424
,379
2,43
7,25
7,63
4
-
(69,
566,
986)
(98,
155,
484)
-
2,
269,
535,
164
1,6
77,0
05
(6
93,2
06)
9
83,7
99
(3
58,7
31)
- - -
6
25,0
68
2,79
7,55
4,59
5
1,69
6,73
1,17
3
4,49
4,28
5,76
8
(3
58,7
31)
(
69,5
66,9
86)
(9
8,15
5,48
4)
54
8,96
2,30
5
4,87
5,16
6,87
2
Bala
nce
as a
t 1 J
anua
ry 2
007
- as
prev
ious
ly re
porte
d
Cum
ulativ
e ef
fect
of th
e ch
ange
in a
ccou
nting
poli
cy fo
r the
re
cogn
ition
of in
vestm
ents
in su
bsidi
ary c
ompa
nies
(Not
e 4)
Bala
nce
as a
t 1 J
anua
ry 2
007
- as
rest
ated
Unre
alise
d ite
ms
in inc
ome
state
men
ts
Ch
ange
s in
the
value
of i
nves
tmen
ts
Net l
oss
for t
he y
ear
Divid
end
paid
(Not
e 29
)
Ordin
ary s
hare
cap
ital in
creas
ed d
ue to
con
versi
on (N
ote
21)
Bala
nce
as a
t 31
Dece
mbe
r 200
7
The
acco
mpa
nyin
g no
tes
are
an in
tegr
al p
art o
f the
fina
ncia
l sta
tem
ents
.
CASH FLOW STATEMENTS
THE ERAWAN GROUP PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006
401,920,617
62,361,829
(171,886,893)
-
(160,862)
-
(1,469,798)
(1,959,119)
3,446,551
4,297,223
426,698,896
(3,889,247)
(8,447,978)
710,911,219
(38,290,001)
2,144,176
(1,830,397)
(24,523,425)
(25,068)
(139,948,022)
1,758,494
409,844,521
68,786,441
(22,865,273)
-
-
-
(3,037,273)
2,122,177
-
5,518,451
400,927,279
(11,920,307)
(15,109,719)
834,266,297
(35,217,897)
1,641,499
6,118,118
(98,450,916)
6,049,660
88,351,337
(2,480,932)
(69,566,986)
-
188,826,007
11,999,995
(20,835)
(56,267,934)
(367,188)
2,212,613
-
3,611,520
35,641,870
(662,581)
-
115,406,481
(13,792,597)
(45,990)
-
(101,290,151)
900,742
(62,336,890)
13,043,207
84,546,562
-
(22,865,273)
-
-
-
13,636
50,545
-
3,771,225
13,028,943
(3,824)
-
78,541,814
(334,133)
(84,000)
-
-
-
(11,528,569)
1,824,587
Consolidated financial statements Separate financial statements
2007 2006 2007 2006 (Restated)
(Unit: Baht)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash
provided by (paid from) operating activities:
Net income attributable to minority interest
Loss (gain) from sale of investment in subsidiary
Provision for loss on impairment of investments in subsidiaries
Gain from sales of investment in related company
Gain from cancellation of leasehold right
Loss (gain) on sales of property, plant and equipment
Allowance for doubtful accounts (reversal)
Allowance for obsolete inventories
Allowance for non-refundable withholding tax deducted
at source
Depreciation and amortisation
Rental deposits and leasehold rights received from lessees
applied as income
Deferred income and advance received from customers
applied as income
Income from operating activities before changes in operating
assets and liabilities
Decrease (increase) in operating assets
Trade accounts receivable
Trade accounts receivable - related parties
Inventories
Advances
Prepaid expenses - related parties
Other current assets
Other non-current assets
The accompanying notes are an integral part of the financial statements.
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nu
al R
epo
rt 2
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ited
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26,637,539
-
-
7,632,431
(3,980,979)
51,431,747
15,083,926
897,081,830
8,849,652
-
-
-
194,503,133
-
-
-
(1,709,646,839)
7,245,916
11,707,265
(6,125)
(1,487,346,998)
4,269,814
(301,111)
(1,229,467)
10,194
-
1,236,035
37,167,037
(6,962,696)
-
-
598,711,482
(640,679,863)
311,172,393
(544,477)
(507,741)
84,747
(814,791,272)
79,132,197
13,083,790
-
(454,338,744)
3,847,450
240,361
(1,798,727)
-
-
10,765,927
(10,418,001)
71,056,709
-
18,792,507
235,493,109
(210,000,000)
194,503,133
-
-
-
(1,017,562,298)
19,728
6,256,813
-
(772,497,008)
CASH FLOW STATEMENTS (Continued)
THE ERAWAN GROUP PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006
Consolidated financial statements Separate financial statements
2007 2006 2007 2006 (Restated)
(Unit: Baht)
Increase (decrease) in operating liabilities
Trade accounts payable
Trade accounts payable - subsidiaries
Other payable - subsidiaries
Advances from customers and deferred income
Income tax payable
Other current liabilities
Deposits from lessees
Net cash flows from (used in) operating activities
Cash flows from investing activities
Decrease in current investment
Decrease in short-term loans to a subsidiary
Decrease in long-term loans to and interest
receivable from subsidiaries
Increase in investments in subsidiary companies
Proceed from sale of investment in subsidiary
(Note 2.2)
Increase in investments in associated companies
Increase in investments in related company
Proceeds from sales of investments in
related company
Acquisition of property, plant and equipment
and leasehold rights to land and buildings
Proceeds from sales of property, plant and equipment
and leasehold rights
Increase in accounts payable - construction
and retention
Decrease (increase) in restricted bank deposits
Net cash flows used in investing activities
7,356,723
-
-
(7,197,954)
(12,146,554)
27,942,374
(26,137,610)
500,013,955
36,166,639
-
-
(3,250,000)
370,604,176
-
-
142,293
(2,171,919,943)
337,758,978
57,843,962
234,125
(1,372,419,770)
The accompanying notes are an integral part of the financial statements.
163,300,000
(12,359,945)
(130,339,959)
1,351,861,960
(1,174,687,447)
532,106,327
(58,131,920)
(54,573,823)
617,175,193
26,910,025
89,319,000
116,229,025
227,658,613
107,010,515
4,777,563
-
30,854,612
112,000,000
13,911,944
21,611,459
78,750,000
(1,641,312)
(86,672,167)
61,950,000
(40,000,000)
548,962,305
(98,155,484)
-
463,193,342
1,891,902
2,031,909
3,923,811
61,874,750
3,235,165
3,563,205
1,081,500
121,692,891
-
-
-
244,000,000
(1,790,502)
(43,667,792)
70,000,000
(40,000,000)
532,106,327
(58,131,920)
-
702,516,113
1,075,814
956,095
2,031,909
62,955,594
1,255,751
213,867
-
1,249,800
-
-
21,611,459
CASH FLOW STATEMENTS (Continued)
THE ERAWAN GROUP PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006
(Unit: Baht)
Consolidated financial statements Separate financial statements
2007 2006 2007 2006 (Restated)
Cash flows from financing activities
Increase in short-term loans from financial institutions
Decrease in liabilities under finance lease agreements
and hire purchase payable
Decrease in short-term loans from related parties
Cash receipt from long-term loans
Repayment of long-term loans
Proceeds from increase in share capital
Dividend paid
Dividend paid to minority interest
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental cash flows information
Cash paid during the year for: -
Interest expenses (consist of interest payment
for operation and interest payment for project cost)
Corporate income tax
Non-cash transactions: -
Settlement of rental deposit received from lessees with
accounts receivable
Vehicles purchased under finance lease agreements
and hire purchase agreements
Acquisition of fixed assets for which payment has yet
to be made
Transfer of deposits for purchases of land to property,
plant and equipment
Transfer of land awaiting development to property,
plant and equipment
Settlement of deposit received with cash received
from sale of investment in subsidiary
108,050,000
(6,876,753)
-
769,759,294
(330,983,030)
548,962,305
(98,155,484)
(67,200,128)
923,556,204
51,150,389
116,229,025
167,379,414
262,144,928
120,885,081
4,324,014
1,081,500
301,419,799
-
-
-
The accompanying notes are an integral part of the financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE ERAWAN GROUP PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006
1. GENERAL INFORMATION
1.1 Corporate information
The Erawan Group Public Company Limited (“The Company”) is a public company incorporated and domiciled
in Thailand. The Company is principally engaged as a holding company with investments in various companies,
whose businesses are described in Note 2.2 to the financial statements, in the building rental business, and in
hotel business and its registered address is 2 Sukhumvit Road, Klong Toey, Klong Toey, Bangkok, branch no. 1
is located at 494 Ploenchit Road, Lumpini, Pathumwan, Bangkok and branch no. 2 is located at JW Marriott Hotel
Bangkok, 4 Sukhumvit Road, Klong Toey, Klong Toey, Bangkok.
1.2 Fundamental accounting assumptions
As of 31 December 2007, certain subsidiaries have incurred losses from their operations and have significant
deficits. Although these conditions raise substantial doubt about the subsidiaries’ ability to continue as a going
concern, the subsidiaries’ management plan improvements to the subsidiaries’ and they believe that they will be
able to resolve these problems. For this reason, the financial statements of the subsidiaries as included in the
consolidated financial statements have been prepared on a going concern basis and hence do not include any
of the adjustments that might result should the subsidiaries be unable to continue as a going concern.
2. BASIS OF PREPARATION
2.1 The financial statements have been prepared in accordance with accounting standards enunciated under
the Accounting Profession Act B.E. 2547. The presentation of the financial statements has been made in
compliance with the stipulations of the Notification of the Department of Business Development dated 14
September 2001, issued under the Accounting Act B.E. 2543.
The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the
accounting policies.
2.2 Basis of consolidation
a) The consolidated financial statements include the financial statements of The Erawan Group Public
Company Limited and the following subsidiaries which have all their operations in Thailand: -
During the current year, the Company sold all investment in Erawan Ratchaprasong Co., Ltd. to the third party as
discussed in Note 8.
Revenues as a
percentage to
the consolidated total
revenues for
the years ended
31 December
Assets as a
percentage
to the consolidated
total assets as
at 31 December
Percentage of
shareholding
2007 percent
2006 percent
2007 percent
2006 percent
2007 percent
2006 percent
Companyûs name Nature of business
shareholding
Erawan Hotel Public Company Limited
Erawan Ratchaprasong Company
Limited
Erawan Ploenchit Company Limited
Erawan Rajdamri Company Limited
Ploenchit Real Estate Company Limited
Erawan Naka Company Limited
(2006: 99.99% held by
Erawan Ratchaprasong Co., Ltd.)
Erawan Chaophraya Company Limited
(99.99% held by
Erawan Rajdamri Co., Ltd.)
Erawan Phuket Company Limited
(99.99% held by
Erawan Ploenchit Co.,Ltd.)
Erawan Samui Company Limited
Hotel
Office and retail
building rental
Hotel/Office and retail
building rental
Hotel
Dissolution
Land owner
Real estate
development
Hotel
Hotel
73.64
-
99.99
99.99
99.99
99.99
-
-
99.99
73.64
99.99
99.75
99.99
99.99
-
-
-
99.99
17.60
-
32.16
10.64
-
0.14
0.41
10.69
7.16
20.94
8.59
39.48
4.92
-
0.16
0.65
3.85
8.85
39.85
2.92
43.35
0.91
-
-
-
-
5.56
40.95
9.86
42.36
-
-
-
-
-
5.46
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On 30 March 2007, the net asset value of Erawan Ratchaprasong Co., Ltd. was as follows: - (Unit: Thousand Baht)
Consolidated financial statements
Cash and deposits at financial institutions
Trade accounts receivable - net
Other current assets
Building and equipment - net
Leasehold right - net
Other non-current assets
Total assets
Trade accounts payable
Short-term loans from related parties
Other current liabilities
Deposits received
Deferred income - net
Total liabilities
Net asset value
Unrealised gain on related transactions
Total
Net asset value - equity attributable to Companyûs shareholders
Less: Sales proceeds
Additional share subscription in accordance with amendment memorandum of sales agreement
Gain from sale of investment in subsidiary
Sales proceeds
Add: Additional share subscription in accordance with amendment memorandum of sales agreement
Less: Cash and deposits at financial institutions of subsidiary
Add: Cash receipt from repayment of long-term loans
Net cash received from sale of investment in subsidiary
44,752
10,528
4,937
334,733
91,361
31,549
517,860
9,836
104,184
43,444
56,498
59,067
273,029
244,831
(105,545)
139,286
139,286
(298,300)
(12,872)
171,886
298,300
12,872
(44,752)
104,184
370,604
(Unit: Thousand Baht)
Separate financial statements
Cost of investment
Less: Sales proceeds
Additional share subscription in accordance with amendment memorandum of sales agreement
Loss from sale of investment in subsidiary
499,998
(298,300)
(12,872)
188,826
b) Material balances and transactions between the Company and its subsidiaries have been eliminated from the
consolidated financial statements.
c) Investments in the subsidiaries as recorded in the Company’s books of account are eliminated against the
equity of the subsidiaries. Most of the resultant differences are recognised on fair value of identified assets
and the remaining are amortised over a period of 10 years commencing as from the date of acquisition of the
investment. However, the goodwill was fully amortised in 2007.
3. ADOPTION OF NEW ACCOUNTING STANDARDS
The Federation of Accounting Professions (FAP) has issued Notifications No. 9/2550, 38/2550 and 62/2550 regarding
Accounting Standards. The notifications mandate the use of the following new Accounting Standards.
a) Accounting Standards which are effective for the current year
TAS 44 (revised 2007) Consolidated Financial Statements and Separate Financial Statements
TAS 45 (revised 2007) Investments in Associates
TAS 46 (revised 2007) Interests in Joint Ventures
These accounting standards become effective for the financial statements for fiscal years beginning on or after 1 January
2007. During the first quarter of the current year, the Company changed its accounting policy for recording investments in
subsidiaries in the separate financial statements in order to comply with the revised Thai Accounting Standards No. 44 as
discussed in Note 4.
b) Accounting Standards which are not effective for the current year
TAS 25 (revised 2007) Cash Flow Statements
TAS 29 (revised 2007) Leases
TAS 31 (revised 2007) Inventories
TAS 33 (revised 2007) Borrowing Costs
TAS 35 (revised 2007) Presentation of Financial Statements
TAS 39 (revised 2007) Accounting Policies, Changes in Accounting Estimates and Errors
TAS 41 (revised 2007) Interim Financial Reporting
TAS 43 (revised 2007) Business Combinations
TAS 49 (revised 2007) Construction Contracts
TAS 51 Intangible Assets
These accounting standards will become effective for the financial statements for fiscal years beginning on or after 1
January 2008. The management has assessed the effect of these revised accounting standards and believes that they will
not have any significant impact on the financial statements for the year in which they are initially applied.
4. CHANGE IN ACCOUNTING POLICY FOR RECORDING INVESTMENTS IN SUBSIDIARIES IN THE SEPARATE FINANCIAL STATEMENTS
During the first quarter of the current year, the Company changed its accounting policy for recording investments in
subsidiaries in the separate financial statements from the equity method to the cost method, in compliance with Accounting
Standard No. 44 (Revised 2007) regarding “Consolidated Financial Statements and Separate Financial Statements”, under
which investments in subsidiaries, jointly controlled entities and associates are to be presented in the separate financial
statements under the cost method.
2.3 The separate financial statements, which present investments in subsidiaries and associates presented
under the cost method, have been prepared solely for the benefit of the public.
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In this regard, the Company has restated the previous year’s separate financial statements as though the
investments in the subsidiaries had originally been recorded using the cost method. The change has the effect of
decreasing net income in the separate income statements for the years ended 31 December 2007 and 2006 by
Baht 471.5 million (Baht 0.24 per share) and Baht 325.3 million (Baht 0.20 per share), respectively. The
cumulative effect of the change in accounting policy has been presented under the heading of “Cumulative
effect of the change in accounting policy for investments in subsidiary companies” in the separate statements of
changes in shareholders’ equity.
Such change in accounting policy affects only the accounts related to investments in subsidiaries in the
Company’s separate financial statements, with no effect to the consolidated financial statements.
5. SIGNIFICANT ACCOUNTING POLICIES
5.1 Revenue recognition
Revenue from hotel and restaurant operations :
Revenue from hotel and restaurant operations mainly comprises room sales, food and beverage sales and
revenues from auxiliary activities, and represents the invoiced value (excluding value added tax) of goods
supplied and services rendered after deducting discounts and adding service charges.
Rental and services income :
Rental and related services income from units in office buildings and shopping center are recognised
on an accrual basis.
Interest income :
Interest income is recognised on an accrual basis based on the effective interest rate.
Dividends :
Dividends are recognised when the right to receive the dividends is established.
5.2 Cash and cash equivalents
Cash and cash equivalents consist of cash in hand, cash at banks, and all highly liquid investments
with an original maturity of three months or less and not subject to withdrawal restrictions.
5.3 Trade accounts receivable
Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is provided
for the estimated losses that may be incurred in collection of receivables. The allowance is generally based on
collection experiences and analysis of debtor aging.
5.4 Inventories
Inventories for the hotel business are valued at the lower of cost (the average method) and net realisable value.
5.5 Investments
a) Investments in securities held for trading are stated at fair value. Gains or losses arising from changes in the carrying
amounts of securities are included in determining income.
b) Investments in available-for-sale securities are stated at fair value. Changes in the carrying amounts of securities are
recorded as separate items in shareholders’ equity until the securities are sold, when the changes are then included
in determining income.
c) Investment s in associates are accounted for in the consolidated financial statements using the equity method.
d) Investments in subsidiaries and associates are accounted for in the separate financial statements using the cost
method.
The fair value of unit trusts is determined from their net asset value.
The weighted average method is used for computation of the cost of investments.
5.6 Property, plant and equipment and depreciation
Land is stated at cost. Buildings and equipment are stated at cost less accumulated depreciation and allowance
for loss on impairment of assets (if any).
Depreciation of buildings and equipment is calculated by reference to their costs on the straight-line basis over the
following estimated useful lives: -
Buildings and improvements 5 - 40 years
Hotel equipment 5 - 10 years
Furniture fixture and equipment 5 - 10 years
Motor vehicles 5 years
Depreciation is included in determining income.
No depreciation is provided on land and assets under construction.
The cost 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.
5.7 Intangible assets and amortisation
Intangible assets are stated at cost less accumulated amortisation. Amortisation is calculated by reference to cost on
a straight-line basis over the expected future period, for which the assets are expected to generate economic benefit,
as follows: -
Copyrights 5 - 10 years
The amortisation is included in determining income.
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5.8 Leasehold rights to land and buildings and amortisation
Leasehold rights to land and buildings are stated at cost less accumulated amortisation. Amortisation of leasehold
rights is calculated by reference to their costs on a straight-line basis over the shorter of the estimated useful
lives and the lease period, as follows: -
Leasehold rights to land and buildings 10 - 40 years
The amortisation is included in determining income.
5.9 Related party transactions
Related parties comprise enterprises and individuals that control, or are controlled by, the Company, whether
directly or indirectly, or which are under common control with the Company.
They also include associated companies and individuals which directly or indirectly own a voting interest
in the Company that gives them significant influence over the Company, key management personnel,
directors and officers with authority in the planning and direction of the Company’s operations.
5.10 Long-term lease
Leases of motor vehicles which transfer substantially all the risks and rewards of ownership are classified
as finance leases. Finance leases are capitalised at the lower of the fair value of the leased assets and the present
value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included
in other long-term payables, while the interest element is calculated by using the effective interest rate and
charged to the income statements over the lease period. The asset acquired under finance leases is depreciated
over the shorter of the useful life of the asset and the lease period.
5.11 Foreign currencies
Foreign currency transactions are translated into Baht at the exchange rates ruling on the transaction dates.
Assets and liabilities denominated in foreign currencies outstanding at the balance sheet date are translated
into Baht at the exchange rates ruling on the balance sheet date.
Gains and losses on exchange are included in determining income.
5.12 Impairment of assets
The Company and its subsidiaries assess at each reporting date whether there is an indication that an asset may
be impaired. If any such indication exists, the Company and its subsidiaries make an estimate of the asset’s
recoverable amount. Where the carrying amount of the asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. Impairment losses are recognised in
the income statement. An asset’s recoverable amount is the higher of fair value less costs to sell and value in use.
5.13 Employee benefits
Salaries, wages, bonuses and contributions to the social security fund and provident fund are recognised as
expenses when incurred.
5.14 Provisions
Provisions are recognised when the Company and its subsidiaries have a present obligation as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation, and a reliable estimate can be made of the amount of the obligation.
5.15 Income tax
Income tax is provided for in the accounts based on the taxable profits determined in accordance with tax legislation.
5.16 Capitalisation of interest costs
Interest costs on borrowings for use in projects construction are capitalised as part of the cost of the relevant assets.
Capitalisation will cease when projects are completed or when construction is suspended, until active development resumes.
5.17 Use of accounting estimates
Preparation of financial statements in conformity with generally accepted accounting principles requires management to
make estimates and assumptions in certain circumstances, affecting amounts reported in these financial statements and
related notes. Actual results could differ from these estimates.
6. TRADE ACCOUNTS RECEIVABLE
The outstanding balances of trade accounts receivable as at 31 December 2007 and 2006 are classified by aging
as follows: -
The trade accounts receivable classified by types of business are as follows: -
Age of receivables
Less than 3 months 163,997,018 130,588,247 5,415,706 242,426
3 - 6 months 4,356,599 10,766,052 1,586,276 69,459
6 - 12 months 1,541,151 6,086,105 1,100,895 420,546
Over 12 months 3,846,727 2,863,265 3,035,724 176,778
Total 173,741,495 150,303,669 11,138,601 909,209
Less: Allowance for doubtful accounts (5,120,219) (7,079,338) (2,703,575) (490,962)
Trade accounts receivable - net 168,621,276 143,224,331 8,435,026 418,247
(Unit: Baht)
(Unit: Baht)
Consolidated financial statements Separate financial statements
2007 2006 2007 2006 (Restated)
Accounts receivable - Hotel 151,131,967 104,114,164 - -
Accounts receivable - Rental 22,609,528 46,189,505 11,138,601 909,209
Total 173,741,495 150,303,669 11,138,601 909,209
Less: Allowance for doubtful accounts (5,120,219) (7,079,338) (2,703,575) (490,962)
Trade accounts receivable - net 168,621,276 143,224,331 8,435,026 418,247
Consolidated financial statements Separate financial statements
2007 2006 2007 2006 (Restated)
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7. RELATED PARTY TRANSACTIONS
During the years, the Company and its subsidiaries had significant business transactions with related parties,
which have been concluded on commercial terms and bases agreed upon in the ordinary course of business
between the Company and those companies. Below is a summary of those transactions.
(Unit: Million Baht)
(Unit: Million Baht)
Consolidated financial statements Transfer pricing policy
2007 2006
Transactions with related companies: - Rental and services income Utilities income Land rental Insurance expenses Management fee Other service expenses
32
4
11 7 1
2
63 9
11 10 1 -
Baht 300-450 per square meter per month depending on location Cost method Baht 11 million per annum Fair price under the best conditions At cost - allocated in proportion to shareholding Fair price under the best conditions
Separate financial statements Transfer pricing policy
2007 2006
Transactions with subsidiary companies: - (eliminated from the consolidated financial statements) Interest income Dividend income Utilities income Rental and service expenses Utilities expenses Interest expenses Gain from cancellation of leasehold rights Transactions with related parties: - Interest expenses Management fee Other service expenses
At the rates of 5.00 - 6.22% per annum (2006: at the rates of 5.18 - 6.22% per annum) Baht 3.20 per share (2006: Baht 2.60 per share) Cost method Baht 250 - 330 per square meter per month Cost method At the rates of 5.00 - 6.50% per annum (2006: at the rates of 5.66 - 6.64% per annum) Agreed upon basis At the rates of 4.15 - 5.50% per annum At cost - allocated in proportion to shareholding Fair price under the best conditions
28
185
2 17
- 3
56 - 1
2
77
150 -
11 1 1 -
6 - -
The balances of the accounts as at 31 December 2007 and 2006 between the Company and those related companies are as follows: -
(Unit: Baht)
Consolidated financial statements Separate financial statements
2007 2006 2007 2006 (Restated)
Trade accounts receivable - related parties: -
Subsidiaries
Erawan Hotel Plc.
Erawan Ratchaprasong Co., Ltd.
Related companies
Kiatnakin Bank Plc.
Minor Corporation Plc.
Armin Systems Ltd.
Mitr Phol Sugar Co., Ltd.
Chai Talay Hotel Co., Ltd.
Esmido Fashions Co., Ltd.
Other companies
Prepaid expenses - related parties: -
Subsidiary
Erawan Ratchaprasong Co., Ltd.
Related companies
The Syndicate of Thai Hotels & Tourists Enterprises Ltd.
IAG Insurance (Thailand) Ltd.
Long-term loans to and interest receivable from subsidiaries: -
Erawan Ratchaprasong Co., Ltd.
Erawan Ploenchit Co., Ltd.
Erawan Rajdamri Co., Ltd.
Erawan Samui Co., Ltd.
Erawan Naka Co., Ltd.
-
-
-
-
5,595
441,706
352,552
-
536,061
1,335,914
-
5,460,000
25,068
5,485,068
-
-
-
-
-
-
-
-
377,653
753,067
199,996
424,735
631,862
659,703
433,074
3,480,090
-
5,460,000
-
5,460,000
-
-
-
-
-
-
124,395
-
-
-
5,595
-
-
-
-
129,990
-
-
25,068
25,068
-
186,791,027
153,610,598
42,462,934
16,641,561
399,506,120
34,240
49,760
-
-
-
-
-
-
-
84,000
925,810
-
-
925,810
698,882,417
178,489,411
115,550,365
5,295,409
-
998,217,602
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During 2007, movements of short-term/long-term loans to and interest receivable from subsidiaries were as follows: -
Trade accounts payable - subsidiary companies: -
Erawan Ratchaprasong Co., Ltd. - - - 614,954
Erawan Ploenchit Co., Ltd. - - - 76,502
Erawan Rajdamri Co., Ltd. - - 6,750 -
Erawan Hotel Plc. - - 434,458 50,863
- - 441,208 742,319
Other payable - subsidiary company: -
Erawan Ratchaprasong Co., Ltd. - - - 1,229,467
Short-term loans from and interest payable to a subsidiary: -
Erawan Hotel Plc. - - - 86,672,167
Consolidated financial statements Separate financial statements
2007 2006 2007 2006 (Restated)
(Unit: Baht)
(Unit: Baht)
Balance as at 1 January
2007
Balance as at 31 December
2007
Separate financial statements During the year
Increase Decrease
Short-term loans to and interest receivable from subsidiary: -
Erawan Hotel Plc. - 183,348,357 (183,348,357) -
Long-term loans to and interest receivable from subsidiaries: -
Erawan Ratchaprasong Co., Ltd. 698,882,417 106,145,922 (805,028,339) -
Erawan Ploenchit Co., Ltd. 178,489,411 336,979,155 (328,677,539) 186,791,027
Erawan Rajdamri Co., Ltd. 115,550,365 383,162,503 (345,102,270) 153,610,598
Erawan Samui Co., Ltd. 5,295,409 74,585,343 (37,417,818) 42,462,934
Erawan Naka Co., Ltd. - 18,691,504 (2,049,943) 16,641,561
998,217,602 919,564,427 (1,518,275,909) 399,506,120
During 2007, movements of short-term loans from subsidiaries were as follows: -
Directors and management’s remuneration
In 2007 the Company and its subsidiaries paid salaries, meeting allowances and gratuities to their directors and
management totaling Baht 35.3 million (Separate financial statements: Baht 30.7 million) (2006: Baht 33.7 million, Separate
financial statements: Baht 28.7 million).
In addition, in 2006 the Company had allocated 14,820,879 warrants to its directors without charge. The details of the
warrants are presented in Note 21 c) to the financial statements.
Guarantee obligations with its subsidiaries
The Company has outstanding guarantee obligations with its subsidiaries, as described in Note 30.3 to the financial
statements.
(Unit: Baht)
Balance as at 1 January
2007
Balance as at 31 December
2007
Separate financial statements During the year
Increase Decrease
Short-term loans from subsidiaries: -
Erawan Hotel Plc. 86,672,167 173,370,401 (260,042,568) -
Erawan Ploenchit Co., Ltd. - 4,747,632 (4,747,632) -
Erawan Samui Co., Ltd. - 4,088,018 (4,088,018) -
86,672,167 182,206,051 (268,878,218) -
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8. I
NV
ESTM
ENTS
IN S
UB
SID
IAR
IES
Er
awan
Ploe
nchit
Co.
, Ltd
.
2,01
1.69
2,
011.
69
99.9
9 99
.75
2,13
6,84
1,00
2 1,
798,
461,
117
-
-
Er
awan
Hot
el Plc
. 11
9.50
11
9.50
73
.64
73.6
4 81
9,70
9,94
8 81
9,70
9,94
8 18
5,06
6,54
1 15
0,36
6,56
4
Er
awan
Rajd
amri
Co.,
Ltd.
45
0.00
16
0.00
99
.99
99.9
9 45
1,29
1,34
8 16
1,29
1,34
8 -
-
Er
awan
Ratc
hapr
ason
g Co
., Lt
d.
-
500.
00
-
99.9
9 -
49
9,99
8,40
0 -
-
Plo
ench
it Re
al Es
tate
Co.,
Ltd.
69
0.00
69
0.00
99
.99
99.9
9 1,
180,
499,
528
1,16
8,49
9,53
3 -
-
Er
awan
Sam
ui Co
., Lt
d.
330.
00
330.
00
99.9
9 99
.99
376,
857,
633
376,
857,
633
-
-
Er
awan
Nak
a Co
., Lt
d.
7.50
-
99
.99
-
299,
982
-
-
-
To
tal
4,96
5,49
9,44
1 4,
824,
817,
979
185,
066,
541
150,
366,
564
Le
ss: I
mpa
irmen
t los
s
(1,
180,4
99,52
8) (1,
168,4
99,53
4)
Ne
t
3,
784,
999,
913
3,65
6,31
8,44
5
Perce
ntag
e ow
ned
by
Di
viden
d re
ceive
d fo
r the
yea
rs
Paid-
up c
apita
l th
e Co
mpa
ny
Cost
ende
d 31
Dec
embe
r
20
07
2006
20
07
2006
20
07
2006
20
07
2006
(Milli
on B
aht)
(Milli
on B
aht)
Perce
nt
Perce
nt
(R
estat
ed)
Sepa
rate
finan
cial s
tatem
ents
(Unit
: Bah
t)
Com
pany
ûs N
ame
In January to March 2007, the Company purchased 50.0 million ordinary shares, 1.6 million ordinary shares, and 0.5 million
ordinary shares of Erawan Ploenchit Co., Ltd. from Erawan Ratchaprasong Co., Ltd., Erawan Rajdamri Co., Ltd., and other
company, respectively, at a price of Baht 6.50 per share, paying a total of Baht 338.4 million. The execution of these
transactions changed the Company’s indirect equity interest of 99.75% in Erawan Ploenchit Co., Ltd. to a direct equity
interest of 99.99%.
On 1 March 2007, the Company purchased 99,994 ordinary shares of Erawan Naka Co., Ltd. from Erawan Ratchaprasong
Co., Ltd., at a price of Baht 3 per share, paying a total of Baht 0.3 million. The execution of this transaction changed the
Company’s indirect equity interest of 99.99% in this company to a direct equity interest of 99.99%.
On 14 March 2007, the Company entered into an agreement to sell 4,999,984 ordinary shares of Erawan Ratchaprasong
Co., Ltd. at a price of Baht 59.66 per share, or a total of Baht 298.3 million. The value of the shares was calculated on the
basis of the fair value of the business, using the discounted cash flow method over the remaining term of the lease, after
adjusting by reflect net working capital and deducting liabilities. The Company transferred these shares to the purchaser.
Moreover, on 10 July 2007, the Company entered into an amendment memorandum to the agreement, whereby the
purchaser was to make additional net payment of Baht 12.9 million to the Company for the shares. The Company has
already received the above additional share subscription. However, the sale and purchase agreement places certain
obligations on the Company, such as that it is responsible for liabilities of Erawan Ratchaprasong Co., Ltd. that may arise.
On 4 April 2007, the Annual General Meeting of shareholders of Erawan Hotel Plc. approved the payment of a dividend of
Baht 3.20 per share to shareholders of 79,666,667 shares, or a total of Baht 254.9 million (The Company’s proportion was
Baht 185.1 million), in respect of the 2006 earnings of the subsidiary. The dividend was paid on 10 April 2007.
On 27 July 2007, a meeting of the Board of Directors of the Company approved the purchase and transfer of the entire
business of Erawan Ploenchit Co., Ltd. The transfer of business includes the transfer of all assets, employees and liabilities
of the subsidiary as at 30 September 2007 or other date fixed by the President & CEO and/or the Chairman of Board. The
Company holds a 99.99% interest in the equity of such subsidiary. Since there are a lot of steps involved in the transfer of an
entire business, the Company postponed the date of transfer to 1 January 2008, and executed the acquisition on that date.
Pursuant to the above resolution, the Company notified the Revenue Department of the transfer in order to request the tax
privileges available for the transfer of an entire business. The subsidiary registered its dissolution with the Ministry of
Commerce on 3 January 2008 and is now in the process of liquidation.
On 26 October 2007, a resolution of the Extraordinary General Meeting of the shareholders of Erawan Rajdamri Co., Ltd.
authorised a plan to increase that subsidiary’s share capital from Baht 160 million to Baht 450 million through the issue of 2.9
million additional ordinary shares, with a par value of Baht 100 each. The Company purchased all of the additional shares, to
maintain its existing shareholding.
On 31 October 2007, a resolution of a meeting of the Board of Directors of the Company authorised a plan to return to
Ploenchit Real Estate Co., Ltd. a portion of Baht 0.8 per share, or a total of Baht 12.0 million, of the amount that the Company
received in advance, without waiting for the completion of the liquidation process. This is because the subsidiary is in the
process of liquidation and has added tax liabilities as a result of the examinations of withholding tax and dissolution
conducted by the Revenue Department. The Company paid such amount in November 2007 and recorded it as an
investment and recorded impairment loss for the full amount in the income statement.
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During the year, the Company did not record its shares in the operating result of investments in associated
companies in the consolidated financial statements because it found that the amount was immaterial.
Held by the Company
(2006: held by Erawan
Ratchaprasong Co., Ltd.)
Tourianse Overseas
(Thailand) Ltd. Restaurant Common shareholders - 25.00 - - - -
Rajprasong Square Co., Ltd. Service Common shareholders 23.29 23.29 206,206 340,000 206,206 206,206
Rajprasong Development Common shareholders
Co., Ltd. Service and common directors 48.00 48.00 338,271 480,000 338,271 338,271
544,477 820,000 544,477 544,477
Consolidated financial statements
2007 2006 2007 2006 2007 2006 (Percent) (Percent)
Rajprasong Square Co., Ltd. Service Common shareholders 23.29 - 206,206 -
Rajprasong Development Co., Ltd. Service Common shareholders
and common directors 48.00 - 338,271 -
544,477 -
9. INVESTMENTS IN ASSOCIATED COMPANIES
9.1 Details of associates
Percentage owned by the Company
Cost Net book value from equity method
Type of relation
Nature of business
Companyûs name
(Unit: Baht)
(Unit: Baht)
Separate financial statements
2007 2006 2007 2006 (Percent) (Percent)
Percentage owned by the Company
Cost Type of relation Nature of
business
Companyûs name
9.2 Summarised financial information of associates
Related company
The Asia Recovery 2 Fund 0.2 0.2 3,285,339 3,570,241
Add: allowance for change in value 786,694 1,770,839
Total 4,072,033 5,341,080
Related company
The Asia Recovery 2 Fund 0.1 0.1 2,427,297 1,983,467
Add: allowance for change in value 625,068 983,800
Total 3,052,365 2,967,267
On 29 March 2007, the Company purchased 34,000 ordinary shares of Rajprasong Square Co., Ltd. for Baht 0.2 million and
4,800 ordinary shares of Rajprasong Development Co., Ltd. for Baht 0.3 million from Erawan Ratchaprasong Co., Ltd. As a
result of these transactions, the Company’s indirect equity interest of 23.29% and 48.00% in the latter company has
changed to a direct equity interest of 23.29% and 48.00%, respectively.
(Unit: Million Baht)
(Unit: Baht)
(Unit: Baht)
10. INVESTMENTS IN RELATED COMPANY
Net income (loss)
for the years ended
31 December
Total revenues for
the years ended
31 December
Total liabilities
as at 31 December
Total assets
as at 31 December
Paid-up capital
as at 31 December
Companyûs name
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
Rajprasong Square Co., Ltd. 1.5 1.5 0.8 0.8 - - - - - -
Rajprasong Development Co., Ltd. 1.0 1.0 1.2 0.9 0.1 0.1 1.3 1.2 (0.2) -
Equity interest Consolidated financial statements
2007 2006 2007 2006 (Percent) (Percent)
Equity interest Separate financial statements
2007 2006 2007 2006 (Percent) (Percent)
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Cost
31 December 2006 1,250,788,252 6,519,687,653 1,248,194,860 64,187,423 418,400,762 9,501,258,950
Additions 38,760,858 87,626,019 150,710,180 3,409,663 1,813,664,726 2,094,171,446
Transfer in (out) - 28,696,684 51,669,728 1,468,630 (100,600,754) (18,765,712)
Transfer to leasehold rights
to buildings - - - - (754,577,754) (754,577,754)
Disposals - (359,504,793) (28,706,204) (1,288,000) - (389,498,997)
Adjustment - - 18,181 - - 18,181
Capitalised interest - - - - 52,102,554 52,102,554
Disposals of subsidiary
during the year* - (891,303,108) (19,736,963) - - (911,040,071)
31 December 2007 1,289,549,110 5,385,202,455 1,402,149,782 67,777,716 1,428,989,534 9,573,668,597
Accumulated depreciation
31 December 2006 - 2,099,624,793 813,487,029 19,885,441 - 2,932,997,263
Depreciation for the year - 226,573,245 96,991,995 13,070,528 - 336,635,768
Depreciation on disposals - (90,941,546) (25,854,604) (1,287,999) - (118,084,149)
Adjustment - 11,961 (7,455) 205 - 4,711
Disposals of subsidiary
during the year* - (562,156,336) (14,150,263) - - (576,306,599)
31 December 2007 - 1,673,112,117 870,466,702 31,668,175 - 2,575,246,994
Net book value
31 December 2006 1,250,788,252 4,420,062,860 434,707,831 44,301,982 418,400,762 6,568,261,687
Eliminated 404,454,169
6,972,715,856
31 December 2007 1,289,549,110 3,712,090,338 531,683,080 36,109,541 1,428,989,534 6,998,421,603
Eliminated 391,430,550
7,389,852,153
Depreciation for the year
2006 352,236,394
Eliminated 13,023,617
365,260,011
2007 336,635,768
Eliminated 13,023,618
349,659,386
(Unit: Baht)
Consolidated financial statements
Land and land
improvements
Building and building
improvements
Equipment, furniture
and fixture
Motor vehicles
Assets under
construction
Total
11. PROPERTY, PLANT AND EQUIPMENT
* Assets were transferred out as a result of the sale of investment in Erawan Ratchaprasong Co., Ltd., as mentioned in Note 2.2.
Most of the above eliminate entries are recognised the identified assets of the subsidiaries, which the Company purchased,
to be fair value.
Cost
31 December 2006 947,484,113 12,184,427 24,116,249 10,365,000 44,324,995 1,038,474,784
Additions 38,760,858 52,609,203 4,551,026 1,442,000 486,435,461 583,798,548
Disposals - (3,290,749) (3,101,259) (1,288,000) - (7,680,008)
Adjustment - - 18,181 - - 18,181
Capitalised interest - - - - 11,130,703 11,130,703
31 December 2007 986,244,971 61,502,881 25,584,197 10,519,000 541,891,159 1,625,742,208
Accumulated depreciation
31 December 2006 - 6,085,638 16,065,197 5,796,269 - 27,947,104
Depreciation for the year - 9,770,943 3,551,436 1,890,216 - 15,212,595
Depreciation on disposals - (2,516,821) (3,081,963) (1,287,999) - (6,886,783)
31 December 2007 - 13,339,760 16,534,670 6,398,486 - 36,272,916
Net book value
31 December 2006 947,484,113 6,098,789 8,051,052 4,568,731 44,324,995 1,010,527,680
31 December 2007 986,244,971 48,163,121 9,049,527 4,120,514 541,891,159 1,589,469,292
Depreciation for the year
2006 7,446,142
2007 15,212,595
(Unit: Baht)
Separate financial statements
Land
Building and building
improvements
Equipment, furniture
and fixture
Motor vehicles
Assets under
construction
Total
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Cost
31 December 2006 61,687,920 108,748,989 (98,317,407) 72,119,502
Additions 3,115,825 308,457 - 3,424,282
Transfer in 18,765,712 - - 18,765,712
Disposals (120,562) - - (120,562)
Adjustment 8,073 - - 8,073
Disposals of subsidiary during the year (427,374) - - (427,374)
31 December 2007 83,029,594 109,057,446 (98,317,407) 93,769,633
Accumulated amortisation
31 December 2006 26,889,349 40,385,420 (56,821,884) 10,452,885
Amortisation for the year 8,430,991 68,672,026 (41,495,523) 35,607,494
Amortisation on disposals (119,232) - - (119,232)
Disposals of subsidiary during the year (224,042) - - (224,042)
31 December 2007 34,977,066 109,057,446 (98,317,407) 45,717,105
Net book value
31 December 2006 34,798,571 68,363,569 (41,495,523) 61,666,617
31 December 2007 48,052,528 - - 48,052,528
Amortisation expenses included in income
statements for the year
2006 8,001,776
2007 35,607,494
As at 31 December 2007, certain plant and equipment items of the Company and its subsidiaries have been fully
depreciated but are still in use. The original cost of those assets amounted to approximately Baht 601.0 million
(2006: Baht 652.1 million) (Separate financial statements: Baht 7.2 million, 2006: Baht 10.6 million).
Motor vehicles of the Company and Erawan Ploenchit Co., Ltd. of which are under hire purchase and finance
lease agreements. Their net book value as at 31 December 2007 is Baht 32.9 million (2006: Baht 44.2 million)
(Separate financial statements: Baht 4.0 million, 2006: Baht 4.6 million).
The Company and its subsidiaries have mortgaged their assets amounting to approximately Baht 4,888.0 million
(2006: Baht 5,038.3 million) (Separate financial statements: Baht 947.5 million, 2006: Baht 947.5 million) as
collateral against credit facilities received from financial institutions and transferred the related beneficiary rights
under insurance policies to the bank to secure the loans. The insurance benefits on the leased building of
Erawan Rajdamri Co., Ltd. are assigned to the lessor.
12. INTANGIBLE ASSETS
Copyrights Goodwill Negative goodwill Total
(Unit: Baht)
Consolidated financial statements
(Unit: Baht)
Separate financial statements Copyrights
Cost
31 December 2006 29,619,320
Additions 1,325,600
Disposals (120,562)
Adjustment 8,073
31 December 2007 30,832,431
Accumulated amortisation
31 December 2006 11,367,582
Amortisation for the year 4,545,907
Amortisation on disposals (119,233)
31 December 2007 15,794,256
Net book value
31 December 2006 18,251,738
31 December 2007 15,038,175
Amortisation expenses included in income statements for the year
2006 3,922,142
2007 4,545,907
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13. LEASEHOLD RIGHTS TO LAND AND BUILDINGS
Cost
31 December 2006 1,016,528,083 329,160,351 1,345,688,434
Additions 53,000,000 257,459,666 310,459,666
Transfer in - 754,577,754 754,577,754
Disposals - (48,613,238) (48,613,238)
Disposals of subsidiary during the year (79,240,000) (74,976,453) (154,216,453)
31 December 2007 990,288,083 1,217,608,080 2,207,896,163
Accumulated amortisation
31 December 2006 281,919,145 134,679,114 416,598,259
Amortisation for the year 23,895,763 19,086,232 42,981,995
Amortisation on disposals - (26,910,698) (26,910,698)
Adjustment 6,014 - 6,014
Disposals of subsidiary during the year (54,210,604) (8,644,391) (62,854,995)
31 December 2007 251,610,318 118,210,257 369,820,575
Net book value
31 December 2006 734,608,938 194,481,237 929,090,175
Eliminated (51,356,334)
877,733,841
31 December 2007 738,677,765 1,099,397,823 1,838,075,588
Eliminated (5,893,191)
1,832,182,397
Amortisation expenses included in income statements for the year
2006 31,272,867
Eliminated (3,607,375)
27,665,492
2007 42,981,995
Eliminated (1,549,979)
41,432,016
Leasehold rights to land
Leasehold rights to buildings
Total
(Unit: Baht)
Consolidated financial statements
On 1 January 2007, the Company entered into a memorandum of understanding to cancel Amarin Plaza building lease
agreements with Erawan Ratchaprasong Co., Ltd., and to transfer to such company rights and obligations under space
rental, equipment rental, service and other related agreements which the Company had made with third parties. The
Company received a total of Baht 98.6 million on 5 January 2007, comprising returned deposits and compensation for the
cancellation of the leased areas, and recognised a gain from the cancellation of leasehold rights amounting to Baht 50.3 million.
On 13 March 2007, the Company entered into agreements with Erawan Ratchaprasong Co., Ltd. to purchase and sell assets
in ErawanBangkok valued at Baht 334.5 million. Under the terms of the agreements, the Company was to purchase assets
outstanding as at 29 March 2007 and assume rights and obligations under lease and service agreements. The Company
has recorded these transactions.
On 1 November 2007, Erawan Hotel Plc. asked the Company to cancel the lease of part of the areas, and paid
compensation totaling Baht 14.2 million. As a result, the Company had a gain of Baht 6.0 million from the cancellation of the
leasehold rights.
The Company and its subsidiaries have mortgaged most of their leasehold land, which have a net book value as at 31
December 2007 of Baht 657.3 million (2006: Baht 654.2 million) (Separate financial statements: Baht 25 million), with banks
to secure the loans.
Cost
31 December 2006 25,000,000 39,744,375 64,744,375
Additions 53,000,000 287,034,756 340,034,756
Disposals - (48,298,011) (48,298,011)
31 December 2007 78,000,000 278,481,120 356,481,120
Accumulated amortisation
31 December 2006 - 26,223,594 26,223,594
Amortisation for the year - 15,883,368 15,883,368
Amortisation on disposals - (26,595,491) (26,595,491)
31 December 2007 - 15,511,471 15,511,471
Net book value
31 December 2006 25,000,000 13,520,781 38,520,781
31 December 2007 78,000,000 262,969,649 340,969,649
Amortisation expenses included in income statements for the year
2006 1,660,659
2007 15,883,368
(Unit: Baht)
Leasehold rights to land
Leasehold rights to buildings
Total
Separate financial statements
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14. WITHHOLDING TAX DEDUCTED AT SOURCE
As at 31 December 2007 and 2006, the Company and its subsidiaries have the following amounts of withholding
tax deducted at source in each year: -
The Company and its subsidiaries regard withholding tax deducted at source as an asset since they have the
right to claim a tax refund. In 2007 and 2006, two subsidiaries received a tax refund amounting to Baht 12.08
million and Baht 11.40 million, respectively. Moreover, a subsidiary received a tax refund amounting to Baht
19.91 million in February 2008.
15. SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONS As at 31 December 2007, short-term loans of the Company and its subsidiary consisted of Baht 420.5 million in
loans from a local bank which were payable in January 2008 and carried interest at rates of 3.70 - 3.75% per annum.
As at 31 December 2006, short-term loans of the Company and its subsidiary comprised Baht 312.4 million in
loans from a local bank which carried interest at the rate of 5.40% per annum and matured in January 2007.
The Company and its subsidiaries have mortgaged most of their freehold and leasehold land, and the
constructions thereon, with banks to secure bank overdrafts and short-term loans of the Company and its subsidiaries.
16. LIABILITIES UNDER FINANCE LEASE AGREEMENTS
Erawan Ploenchit Co., Ltd. had entered into finance lease agreements with leasing companies to lease motor
vehicles for operation and committed to pay rental fee on a monthly basis for a period of 4 years.
2003 11.48 11.48 0.07 0.07
2004 - 6.35 - 3.61
2005 2.29 14.37 1.75 1.75
2006 10.01 18.47 1.26 1.26
2007 13.08 - 3.24 -
Total 36.86 50.67 6.32 6.69
Less: Refundable within one year (19.91) (12.08) - -
Net 16.95 38.59 6.32 6.69
Liabilities under finance lease agreements 39,575,303 49,866,328
Less: Deferred interest expenses (3,714,109) (6,606,693)
35,861,194 43,259,635
Less: Portion due within one year (10,288,150) (10,288,150)
Liabilities under finance lease agreements - net 25,573,044 32,971,485
(Unit: Million Baht)
Consolidated financial statements Separate financial statements
2007 2006 2007 2006 Year
(Unit: Baht)
Consolidated financial statements
2007 2006
17. LONG-TERM LOANS
1 MLR-1.5 Repayable in semi-annual installments
of Baht 20 million per installment.
The remaining amount of the loan is
then to be repaid within
December 2010. 520,000,000 560,000,000 520,000,000 560,000,000
2 MLR-1.5* Repayable in quarterly installments
from November 2009 to August 2016. 38,950,000 - 38,950,000 -
3 MLR-1.5* Repayable in quarterly installments
from August 2009 to May 2016. 7,000,000 - 7,000,000 -
4 MLR-1.5* Repayable in quarterly installments
from September 2009 to June 2016. 16,000,000 - 16,000,000 -
5 3.5 Principal and interest are repayable
in monthly installments of Baht 0.85
million per month from October 2003
to December 2006. The remaining
amount of the loan is then to be
repaid within January 2007. - 642,461 - -
6 MLR-2** Repayable in semi-annual installments
of not less than Baht 50 million per
installment from June 2007 for the first
to sixth installment, not less than Baht
75 million per installment for the
seventh to tenth installment and not
less than Baht 100 million for the
eleventh to fourteenth installment with
the remainder of the loan then to be
repaid in the last installment. 900,000,000 1,000,000,000 - -
7 3.5 Principal and interest are repayable in
monthly installments of Baht 0.40
million per month from October 2003
to December 2006. The remaining
amount of the loan is then to be
repaid within January 2007. - 300,569 - -
(Unit: Baht)
Consolidated financial statements Separate financial statements
2007 2006 2007 2006
Interest rate Loan (% p.a.) Repayment schedule
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(Unit: Baht)
Consolidated financial statements Separate financial statements
2007 2006 2007 2006
Interest rate
Loan
(% p.a.) Repayment schedule
8 3.5*** Repayable in semi-annual
installments of Baht 70 - 80
million, from March 2005 to
March 2008, with the remainder
of the loan to be repaid within
September 2008. 1,580,000,000 1,720,000,000 - -
9 MLR-1.5**** Repayable in quarterly
installments from March 2006
until December 2012. 230,222,300 261,333,400 - -
10 MLR-1.5**** Repayable in quarterly
installments from March 2006
until December 2012. 27,922,300 32,033,400 - -
11 MLR-1.5**** Repayable in quarterly
installments from March 2006
until December 2012. 28,777,700 32,666,600 - -
12 MLR-1.5**** Repayable in quarterly
installations from March 2006
to December 2012. 14,760,000 16,800,000 - -
13 MLR-1.5**** Repayable in quarterly
installations from March 2006
to December 2012. 64,384,751 73,273,651 - -
14 MLR-1.5* Repayable in quarterly
installments from December
2008 to July 2016. 563,190,536 248,381,242 - -
15 MLR-1.5* Repayable in quarterly
installments from January
2009 to September 2016. 393,000,000 - - -
Total 4,384,207,587 3,945,431,323 581,950,000 560,000,000
Less: Current portion (1,803,750,000) (330,943,030) (40,000,000) (40,000,000)
Long-term loans - net 2,580,457,587 3,614,488,293 541,950,000 520,000,000
Note
* Interest at the rate of MLR minus 1.5 percent per annum for the first year to the seventh year and after that at the rate of MLR per annum.
** Interest at the rate of MLR minus 2.0 percent per annum for the first year, MLR minus 1.75 percent per annum for the second to the third year and MLR minus 1.5 percent per annum for the fourth to the seventh year.
*** Interest at the rate of 3.5 percent per annum until September 2006 and after that at the lower of the average 12-month fixed deposit rate plus 2.5 percent per annum or the average MLR minus 1.5 percent per annum.
**** Interest at the rate of one-year fixed deposit rate plus 3 percent per annum until March 2006 and after that at the rate of MLR minus 1.5 percent per annum.
The long-term loans are secured by the mortgage of land, leasehold rights and buildings thereon belonging to the Company
and its subsidiaries and the subsidiaries’ assignment of rights and benefits under insurance policies to the lenders. Part of
the balance is also secured by a guarantee provided by the Company and the pledging of all shares of Erawan Rajdamri
Co., Ltd. In addition, all shares of Erawan Ploenchit Co., Ltd. were additionally pledged by the Company in January 2008 to
secure loans. -
Most loan agreements contain certain covenants and restrictions imposed by the lenders regarding, among other things, the
proportion of shareholding of the major shareholders, changes in management, guarantees to loans or aval to promissory
notes of any other persons or other companies, dividend payments, merger or consolidation with any other companies, and
maintenance of certain financial ratios.
As at 31 December 2007, the long-term credit facilities of the Company and its subsidiaries which have not yet been drawn
down amounted to Baht 2,931.9 million.
18. UNSECURED DEBENTURES
On 9 May 2005, the Company issued 0.3 million unsubordinated, unsecured, unregistered debentures, with a
debentureholders’ representative. The debentures, which have a face value of Baht 1,000 each, are to be offered by private
placement to no more than 10 investors, at an offer price of Baht 1,000 per unit, or a total of Baht 300 million. They have a
tenor of 2 years and 320 days from the issue date, maturing on 25 March 2008, and the coupon rate is fixed at 5.2 percent
per annum until December 2006 and after that the coupon rate is fixed at 5.7 percent per annum.
The debentures impose certain restrictions on the Company relating to, among other things, the reduction of paid-up share
capital, dividend payment, and the maintenance of certain financial ratios.
19. OTHER CURRENT LIABILITIES
Management, royalty, marketing and other fees payable
- hotel business 33,160,176 36,643,651 - -
Retention 87,046,300 29,703,041 19,578,124 237,521
Advances from customers 16,553,927 24,204,935 36,000 25,806
Value added tax payable 13,669,324 15,488,677 - -
Accrued expenses 111,221,685 114,721,455 19,180,462 19,329,906
Income tax payable 46,560,796 58,707,350 - -
Deposits received - hotel business 32,385,075 37,219,708 - -
Others 37,579,355 37,939,772 4,605,403 3,219,924
Total 378,176,638 354,628,589 43,399,989 22,813,157
Consolidated financial statements Separate financial statements
2007 2006 2007 2006
(Unit: Baht)
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20. DEFERRED INCOME
As mentioned in Note 13, the Company and Erawan Ratchaprasong Co., Ltd. entered into a memorandum of
understanding to cancel agreements Amarin Plaza leasing building space and to transfer to Erawan
Ratchaprasong Co., Ltd. all rights and obligations of the Company with third parties. In addition, the Company
sold its investment in such company, as discussed in Note 8. As a result, the deferred income of such company
is no longer included in consolidated financial statements.
21. SHARE CAPITAL
On 25 April 2006, the Annual General Meeting of the shareholders of the Company passed resolutions approving
the following: -
a) The reduction of share capital from Baht 1,519.70 million to Baht 1,454.25 million, through the cancellation of
65.45 million ordinary shares with a par value of Baht 1 each. The Company registered the capital reduction with
the Ministryof Commerce on 2 May 2006.
b) The issue and offer of no more than 495.46 million shares to existing shareholders in a ratio of one new share
for every 3 existing ordinary shares held, at a price of Baht 1 per share.
c) The issue of up to 495.46 million warrants free of charge to the shareholders subscribing to the above shares.
These warrants are exercisable at a price of Baht 2.15 per share in a ratio of 2 warrants to 1 new ordinary share
for a period of 1 year from the issue date. These warrants can be exercised on a final exercised date.
d) The issue of up to 247.73 million ordinary shares to support the exercise of the above warrants.
e) The issue of up to 18.26 million additional shares with a par value of Baht 1 each to support the adjustment of
the rights under the employee stock option plan.
f) The increase of the registered share capital from Baht 1,454.25 million to Baht 2,281.14 million by issuing
826.90 million ordinary shares with a par value of Baht 1 each to be allocated as follows:
• Up to Baht 65.45 million, or 65.45 million ordinary shares, to support the exercise of the stock options of
the directors and employees of the Company and/or its subsidiaries.
• Up to Baht 495.46 million, or 495.46 million ordinary shares, to be offered to the shareholders in proportion
to their existing holdings, as discussed in item b).
Leasehold rights - building, service and equipment - third parties 56,720,484 299,934,484
Less: Accumulated amortisation (32,956,702) (209,081,200)
Net book value 23,763,782 90,853,284
Amortised to income for the year 8,021,927 11,033,905
(Unit: Baht)
Consolidated financial statements
2007 2006
• Up to Baht 247.73 million, or 247.73 million ordinary shares, to support the exercise of the warrants which
are to be granted to the existing shareholders.
• Up to Baht 18.26 million, or 18.26 million ordinary shares, to support the adjustment of rights under the employee
stock option plan.
The Company registered the increase in its share capital with the Ministry of Commerce on 3 May 2006. Therefore, the
Company’s registered share capital is Baht 2,281.14 million.
On 28 July 2006, the Securities and Exchange Commission granted approval for the offer of the warrants, as discussed in
item c).
In August and September 2006, the Company received additional share capital totalling Baht 487.76 million as a result of the
increase in the number of its shares as discussed in item b), from the offer of 487.76 million shares at Baht 1 each. In
addition, the Company issued 487.76 million warrants free of charge to shareholders who subscribed to these shares, in a
ratio of 1 warrant to 1 subscribed ordinary share. The details of warrants are disclosed in item c) and the warrants are
exercisable on 17 December 2007. The Company registered the increase in its paid-up share capital to Baht 1,951.06
million with the Ministry of Commerce on 13 September 2006. The Stock Exchange of Thailand approved the additional
ordinary shares and warrants as listed securities on 18 September 2006 and 25 September 2006, respectively.
In addition, in 2006 the Company received payment of additional share capital totaling Baht 44.34 million as a result of the
exercise of share options by the directors and employees under the ESOP scheme to purchase total of 18,272,791 ordinary
shares. The Company registered the increase in its paid-up share capital to Baht 1,959.08 million with the Ministry of
Commerce on 8 December 2006. The Stock Exchange of Thailand approved the additional ordinary shares as listed
securities on 15 December 2006.
During the current year, the Company received payment of additional share capital totalling Baht 30.60 million as a result of
the exercise of share options by the directors and employees under the ESOP scheme to purchase total of 14,391,856
ordinary shares. The Company registered the increase in its paid-up share capital to Baht 1,973.48 million with the Ministry
of Commerce on 7 September 2007. The Stock Exchange of Thailand approved the additional ordinary shares as listed
securities on 14 September 2007.
In December 2007, the Company received payment of additional share capital totaling Baht 518.36 million as a result of
further exercise of 482.20 million warrants as disclosed in item c), to purchase 241.10 million shares at Baht 2.15 per share.
The Company registered the increase in its paid-up share capital to Baht 2,214.57 million with the Ministry of Commerce on
21 December 2007. The Stock Exchange of Thailand approved the additional ordinary shares as listed securities on
28 December 2007.
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During the current year, movements in the number of the warrants are as follows: -
Reconciliation of number of ordinary shares
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 under 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.
Registered share capital
Number of ordinary shares at the beginning of year 2,281,143,099 1,519,700,408
Increase - 826,895,091
Decrease - (65,452,400)
Number of ordinary shares at the end of year 2,281,143,099 2,281,143,099
Issued and fully paid up share capital
Number of ordinary shares at the beginning of year 1,959,084,768 1,453,048,008
Increase from the additional shares - 487,763,969
Increase from the exercise of share options 14,391,856 18,272,791
Increase from the exercise of warrants 241,098,001 -
Number of ordinary shares at the end of year 2,214,574,625 1,959,084,768
Unit
Number of warrants at the beginning of year 487,763,969
Less: Exercised during the year (482,196,113)
Less: Number of warrants expired during the year (5,567,856)
Number of warrants at the end of year -
For the years ended 31 December
2007 2006
(Unit: Shares)
As discussed in Note 21 item f), the Annual General Meeting of the shareholders of the Company on 25 April 2006 approved
the issue of not more than 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 issue of warrants. The new exercise price and the number of
shares after adjustment are as follow: -
The directors and employees of the Company and its subsidiaries exercised their rights to purchase totals of 14,391,856
ordinary shares and 18,272,791 ordinary shares, in 2007 and 2006, respectively.
As at 31 December 2007 and 2006, 43,326,525 units and 57,718,381 units, respectively, of ESOP warrants remained
unexercised.
In addition, on 1 February 2008, the Company received payment of additional share capital totalling Baht 0.86 million as a
result of further exercise of share options by the directors and employees under the ESOP scheme, to purchase 400,000
shares at Baht 2.15 per share. The Company registered the increase in its paid-up share capital to Baht 2,214.97 million with
the Ministry of Commerce on 8 February 2008. The Stock Exchange of Thailand approved the additional ordinary shares as
listed securities on 14 February 2008.
23. STATUTORY RESERVE
Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company and its subsidiary company are
required to set aside a statutory reserve at least 5 percent of its net income after deducting accumulated deficit brought
forward (if any), until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for
dividend distribution.
24. NUMBER OF EMPLOYEES AND RELATED COSTS
1 11,277,627 shares 2.67 Baht per share 2.09 Baht per share
2 18,242,747 shares 2.71 Baht per share 2.12 Baht per share
3 21,310,743 shares 2.75 Baht per share 2.15 Baht per share
4 21,310,743 shares 2.79 Baht per share 2.18 Baht per share
29 September 2006
29 September 2006
1 June 2007
1 June 2008
- 30 December 2008
- 30 December 2008
- 30 December 2008
- 30 December 2008
Number of employees at the end of year (persons) 2,011 1,821 53 48
Employee costs for the year (Thousand Baht) 616,546 575,246 63,672 59,736
Number of shares Formerly New exercise
Period
Exercise periods after adjustment exercise prices prices
Consolidated financial statements Separate financial statements
2007 2006 2007 2006
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25. CORPORATE INCOME TAX
The Company is not liable to corporate income tax for the year 2006 due to tax loss brought forward.
26. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net income for the year by the weighted average number
of ordinary shares in issue during the year.
Diluted earnings per share is calculated by dividing the net income for the year by the weighted average
number of ordinary shares in issue during the year plus the weighted average number of ordinary shares which
would need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation
assumes that the conversion took place either at the beginning of the year or on the date the potential ordinary
shares were issued.
Reconciliation between basic earnings per share and diluted earnings per share is presented below.
Basic earnings per share
Net income 401,920,617 409,844,521 1,977,896,003 1,624,726,247 0.20 0.25
Effect of dilutive potential
ordinary shares
- Warrant - - 103,082,079 82,184,888
- ESOP - - 21,560,737 21,864,932
Diluted earnings per share
Net income of ordinary shareholders
assuming the conversion of warrants
to ordinary shares 401,920,617 409,844,521 2,102,538,819 1,728,776,067 0.19 0.24
2007 2006 2007 2006 2007 2006 (Baht) (Baht) (Shares) (Shares) (Baht) (Baht)
Consolidated financial statements For the years ended 31 December
Earnings per Net income
ordinary shares Weighted average number
of share
There is no disclosure of diluted earnings per share in the separate financial statements for the year ended 31 December
2007 since the effect of diluted earnings per share is antidilutive.
Separate financial statements For the years ended 31 December
2007 2006 2007 2006 2007 2006
(Baht) (Baht) (Shares) (Shares) (Baht) (Baht)
(Restated) (Restated)
Basic earnings (loss) per share
Net income (loss) (69,566,986) 84,546,562 1,977,896,003 1,624,726,247 (0.04) 0.05
Effect of dilutive potential ordinary shares
- Warrant - - 103,082,079 82,184,888
- ESOP - - 21,560,737 21,864,932
Diluted earnings (loss) per share
Net income (loss) of ordinary shareholders
assuming the conversion of warrants to
ordinary shares (69,566,986) 84,546,562 2,102,538,819 1,728,776,067 (0.03) 0.05
Weighted average number of ordinary shares Net income (loss)
Earnings (loss) pre share
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27. SEGMENT INFORMATION
The Company and its subsidiaries’ business operations involve two principal segments: building rental business
and hotel business. These operations are mainly carried on in Thailand. Below is the consolidated financial
information for the years ended 31 December 2007 and 2006 of the Company and its subsidiaries by segment.
Transfer prices between business segments are as set out in Note 7 to the financial statements.
Revenues from external customers 446 619 2,748 2,712 - - 3,194 3,331
Inter-segment revenues 25 28 - - (25) (28) - -
Total revenues 471 647 2,748 2,712 (25) (28) 3,194 3,331
Segment income 143 138 638 745 (38) (10) 743 873
Unallocated income and expenses:
Gain from sale of investment in subsidiary 172 23
Other income 25 31
Selling and administrative expenses (146) (107)
Depreciation and amortisation (13) (13)
Interest expenses (221) (223)
Corporate income tax (96) (105)
Minority interest (62) (69)
Net income 402 410
2007 2006 2007 2006 2007 2006 2007 2006
Inventories - - 42 44 - - 42 44
Property, plant and equipment - net 838 1,506 6,160 5,063 391 404 7,390 6,973
Leasehold rights to land and buildings - net 408 212 1,527 717 (103) (51) 1,832 878
Unallocated assets 991 826
Total assets 10,255 8,721
(Unit: Million Baht)
For the years ended 31 December
Building rental Hotel Business Business Eliminate Total
(Unit: Million Baht)
2007 2006 2007 2006 2007 2006 2007 2006
As at 31 December
Building rental Hotel Business Business Eliminate Total
28. PROVIDENT FUND
The Company and its subsidiaries and their employees have jointly established a provident fund in accordance with the
Provident Fund Act B.E. 2530. Both employees and the Company and its subsidiaries contributed to the fund monthly at
rates of 3 - 10 percent of basic salary. The fund, which is managed by Finansa Asset Management Limited, will be paid to
employees upon termination in accordance with the fund rules. During the year 2007, the Company and its subsidiaries
contributed Baht 15.7 million (Separate financial statements: Baht 1.4 million) (2006: Baht 15.0 million, Separate financial
statements: Baht 1.4 million) to the fund.
29. DIVIDENDS
Dividends Approved by Total dividends Dividend per share
(Unit: Baht)
30. COMMITMENTS AND CONTINGENT LIABILITIES
30.1 Capital commitments
• As at 31 December 2007, the Company and its subsidiaries have capital commitments of approximately Baht 859.1
million and USD 0.3 million, relating to the purchase and sell of land, interior design agreements, the renovation, SPA
service, and the purchase of hotel equipment.
• The Company had commitments of Baht 130 million in respect of the purchase and sell of land agreement dated
18 January 2008.
30.2 Operating commitments
Commitments with related parties
As at 31 December 2007, the Company has outstanding commitments of Baht 2.5 million in respect of uncalled
portion of investments in Erawan Naka Co., Ltd.
Commitments with third parties
The Company and its subsidiaries have commitments in respect of lease of equipment and related services
agreements with third parties.
As at 31 December 2007, the Company and its subsidiaries have commitments payable within one year amounting to
Baht 11.2 million (Separate financial statements: Baht 5.4 million) in respect of such agreements.
Final dividends for 2005 Annual General Meeting of the
shareholders on 25 April 2006 58,131,920 0.04
Final dividends for 2006 Annual General Meeting of the
shareholders on 24 April 2007 98,155,484 0.05
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30.3 Guarantees
• As at 31 December 2007, the Company has guaranteed bank credit facilities of Erawan Rajdamri Co., Ltd.
amounting to Baht 750 million.
• As at 31 December 2007, there were outstanding bank guarantees of approximately Baht 40.4 million
issued by the banks on behalf of the Company and its subsidiaries in respect of certain performance
bonds required in the normal course of business.
30.4 Litigation
In 2006, Erawan Ratchaprasong Co., Ltd. was sued for compensation of approximately Baht 1.3 million by
a company which is a customer of its building rental business, for breach of the agreement relating to
dilapidated rental areas. The court of first instance has ordered the company to pay damages to the
plaintiff. However, the legal department of the company believes that it has a chance of winning the case
in a higher court and the company is in the process of lodging an appeal. However, if the eventual
outcome of the case does require the company to pay damages, it could charge any losses back to the
Company, in accordance with the sale and purchase agreement mentioned in Note 8.
31. LONG-TERM AGREEMENTS
The Company and its subsidiaries have entered into the following long-term lease agreements and other
agreements with third parties, local companies, overseas companies, and Government organisations: -
31.1 Erawan Rajdamri Co., Ltd. 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 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.
31.2 Erawan Hotel Plc. has an agreement with a related company to lease land for a term of thirty years up to
the year 2022, 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.
31.3 Erawan Ploenchit Co., Ltd. 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 14.6 million per year 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 million. The subsidiary will pay this amount within the 30th year of the
lease and is recorded as part of “Accounts payable for leasehold rights” in the consolidated balance sheets.
2. Deposits for rental amounting to Baht 180 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 “Other assets” 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 8.
31.4 On 24 February 1988, Erawan Hotel Plc. 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.
31.5 On 3 February 1994, Erawan Ploenchit Co., Ltd. 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 term of the hotel 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 specified in the agreement. On 1 January 2008, the subsidiary transferred all
commitments under these agreements to the Company, as mentioned in Note 8.
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31.6 On 1 April 2002, Erawan Ploenchit Co., Ltd. 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 four 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 8.
31.7 Erawan Chaophraya Co., Ltd. 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.
31.8 On 4 July 2005, Erawan Rajdamri Co., Ltd. and Erawan Samui Co., Ltd. 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 by Marriott 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.
31.9 In June 2006, Erawan Phuket Co., Ltd. entered into agreements with Sarppasamphat Ltd. (Sarppasamphat)
where by Sarppasamphat 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.
31.10 On 28 September 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 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.
32. FINANCIAL INSTRUMENTS
32.1 Financial risk management
The Company and its subsidiaries’ financial instruments, as defined under Thai Accounting Standard No. 48 “Financial
Instruments: Disclosure and Presentations”, principally comprise cash and cash equivalents, trade accounts receivable,
loans, investments, and short-term and long-term loans. The financial risks associated with these financial instruments and
how they are managed is described below.
Credit risk
The Company and its subsidiaries are exposed to credit risk primarily with respect to trade accounts receivable and loans.
The Company and its subsidiaries manage the risk by adopting appropriate credit control policies and procedures and
therefore do not expect to incur material financial losses. In addition, the Company and its subsidiaries do not have high
concentration of credit risk since it has a large customer base. The maximum exposure to credit risk is limited to the carrying
amounts of receivables and loans as stated in the balance sheet.
Interest rate risk
The Company and its subsidiaries exposure to interest rate risk relates primarily to its cash at banks, short-term loans,
debentures and long-term borrowings. However, since most of the Company and its subsidiaries financial assets and
liabilities bear floating interest rates or fixed interest rates which are close to the market rate, the interest rate risk is
expected to be minimal.
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Significant financial assets and liabilities as at 31 December 2007 classified by type of interest rates are
summarized in the table below, with those financial assets and liabilities that carry fixed interest rates further
classified based on the maturity date, or the repricing date if this occurs before the maturity date.
Financial assets
Cash and cash equivalents - - 162.6 4.8 167.4 0.5
Trade accounts receivable - net - - - 168.6 168.6 -
- - 162.6 173.4 336.0
Financial liabilities
Short-term loans from financial
institutions 420.5 - - - 420.5 3.7 - 3.75
Accounts payable - trade and
construction - - - 497.1 497.1 -
Unsecured debentures 300.0 - - - 300.0 5.7
Long-term loans - - 4,384.2 - 4,384.2 MLR-1.5, MLR-1.75
and at the lower of
the average 12-month
fixed deposit rate
+ 2.5 or MLR-1.5
720.5 - 4,384.2 497.1 5,601.8
(Unit: Million Baht)
Consolidated financial statements
Fixed interest rates
Within 1 year
1 - 5 year
Floating interest
rate
Non- interest bearing
Total Interest rate (% p.a.)
32.2 Fair values of financial instruments
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.
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.
Financial assets
Cash and cash equivalents - - 3.9 - 3.9 0.5
Trade accounts receivable - net - - - 8.4 8.4 -
Long-term loans to and interest receivable
from subsidiaries - 399.5 - - 399.5 5.0
- 399.5 3.9 8.4 411.8
Financial liabilities
Short-term loans from financial institutions 375.5 - - - 375.5 3.7
Accounts payable - trade and construction - - - 138.5 138.5 -
Unsecured debentures 300.0 - - - 300.0 5.7
Long-term loans - - 582.0 - 582.0 MLR-1.5
675.5 - 582.0 138.5 1,396.0
(Unit: Million Baht)
Separate financial statements
Fixed interest rates
Within 1 year
1 - 5 year
Floating interest
rate
Non- interest bearing
Total Interest rate (% p.a.)
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33. SUBSEQUENT EVENT
On 26 February 2008, the meeting of the Board of Directors passed a resolution to propose a dividend
payment for the year 2007 of Baht 0.06 per share to the Annual General Meeting of the Company’s
shareholders for their approval. The payment of the dividend is dependent on an approval being granted by
the shareholders.
34. RECLASSIFICATION
In addition to the changes in accounting policies as mentioned in Note 4, which affects the previously reported
net income and shareholders’ equity, certain other amounts in the financial statements for the year ended 31
December 2006 have been reclassified to conform to the current year’s classification, but with no effect to
previously reported net income or shareholders’ equity other than from the change in accounting policy.
35. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were authorised for issue by the Company’s Board of Directors on 26 February 2008.
GENERAL INFORMATION OF THE COMPANY
The Erawan Group Public Company Limited Registration No. : 0107537001943
Head Office : 6th Floor, Ploenchit Center, 2 Sukhumvit Road,
Kwang Klongtoey, Khet Klongtoey, Bangkok 10110
Telephone No. : 66 (0) 2257 4588
Fax. : 66 (0) 2257 4577
Branch 1 : Erawan Bangkok, 494 Ploenchit Road, Kwang Lumpini, Khet Phathumwan, Bangkok 10330
Telephone : 66 (0) 2250 7777
Fax. : 66 (0) 2250 7788
Branch 2 : JW Marriott Hotel, 4 Sukhumvit Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110
Telephone : 66 (0) 2656 7700
Fax. : 66 (0) 2656 9831
Home page : www.TheErawan.com
Type of Business : Invest and develop hotel properties strategically located to match travelers’ different demand.
Company’s Capital as at 31 December 2007
Registered Capital : 2,281,143,099 Baht : 2,281,143,099 ordinary shares at par value 1 Baht/share.
Paid-Up Capital : 2,214,574,625 Baht : 2,214,574,625 ordinary shares at par value 1 Baht/share.
Other References
1. Registrar of Ordinary Shares:
Thailand Securities Depository Co., Ltd.
No. 62 Rachadapisek Road, Klongtoey, Bangkok 10110
Tel. 66 (0) 2359 1200-02 Fax: 66 (0) 2359 1259
2. Auditor:
Ernst & Young Office Limited by
Mr. Sophon Permsiriwanlop Certified Public Accountant (Thailand) No.3182
Ms. Sumaree Veevarabhandit Certified Public Accountant (Thailand) No.3970
Ms. Vissuta Jariyatanakorn Certified Public Accountant (Thailand) No.3853
Mrs. Nongluk Phumnoias Certified Public Accountant (Thailand) No.4172
Ernst & Young Office Limited
33rd Floor, Lake Rajada Office Complex,
No.193/136-137 New Rajadapisek Road, Bangkok 10110
Tel: 66 (0) 2264 0777 Fax: 66 (0) 2264 0789-90
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HEAD OFFICE
THE ERAWAN GROUP PUBLIC COMPANY LIMITED
6th Floor, Ploenchit Center
2 Sukhumvit Road, Klongtoey, Bangkok 10110 Thailand.
Phone : 66 (0) 2257 4588 Fax : 66 (0) 2257 4577
www.TheErawan.com
Hotels and Resorts
Grand Hyatt Erawan Bangkok
494 Ploenchit Road, Pathumwan, Bangkok, 10330 Thailand.
Tel : 66 (0) 2254 1234 Fax : 66 (0) 2254 6267
www.bangkok.grand.hyatt.com
JW Marriott Bangkok
4 Sukhumvit Road, Klongtoey, Bangkok, 10110 Thailand.
Phone : 66 (0) 2656 7700 Fax : 66 (0) 2656 7711
www.marriott.com/bkkdt
Renaissance Koh Samui Resort & Spa
208/1 Moo 4, T. Maret, Laem Nan Beach Koh Samui, Surat Thani 84310 Thailand.
Phone : 66 (0)77 429 300 Fax : 66 (0)77 429 333
www.marroitt.com/usmbr
Courtyard By Marriott Bangkok
155/1 Soi Mahadlekluang 1, Rajdamri Road, Bangkok, 10330 Thailand.
Phone : 66 (0) 2690 1888 Fax : 66 (0) 2690 1899
www.courtyard.com/bkkcy
Rental Properties Ploenchit Center
2 Sukhumvit Road, Klongtoey, Bangkok 10110 Thailand.
Phone : 66 (0) 2656 8600 - 4 Fax : 66 (0) 2656 9899
Erawan Bangkok
494 Ploenchit Road, Pathumwan, Bangkok 10330 Thailand.
Tel : 66 (0) 2250 7777 Fax : 66 (0) 2250 7788
www.erawanbangkok.com
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