bmcl 05

CONTENTS

1. Vision, Mission, Quality Policy and Safety Policy 1

2. Financial Highlights 2

3. Message from the Chairman of the Board of Directors 4

4. The Board of Directors 6

5. Management Team 12

6. General Information 14

7. Nature of Business 17

8. Risk Factors 29

9. Capital Structure 32

10. Management Structure 34

11. Route Map of the M.R.T. Chaloem Ratchamongkhon Line Project 56

12. Related Party Transactions 57

13. Financial Condition and Results of Operations 71

14. Significant Activities in the Year 2005 88

15. Report on Responsibilities of the Board of Directors towards 92 the Financial Report

16. Audit Committee’s Report 93 17. Financial Statements

17.1 Report and Financial Statements 95

For the years ended 31 December 2005 and 31 December 2004 17.2 Report and Interim Financial Statements 130

For the Three-Month and Six-Month Periods 30 June 2005 and 2004

Annual Report 2005

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1. Vision, Mission, Quality Policy and Safety Policy

Company’s Vision

To be one of the world leading mass rapid transit operators with high quality of service.

Company’s Mission

We will provide mass transit services to the public with a safe, convenient, fast, reliable

and punctual metro system to alleviate traffic congestion, maintain the environment and improve

quality of life.

Quality Policy

The Company is committed to improving the quality of service as part of our goal to

become one of the world’s leading mass rapid transit operators. To succeed in the said vision, the

Company pledges to develop and implement quality management system in order to:

1. Provide rail mass rapid transit service that satisfies customer’s expectations with safe,

convenient, fast, reliable and punctual metro system;

2. Continually improve quality of service and business performance; and

3. Encourage employees to have the knowledge, competency and commitment to their

jobs needed to provide safety and quality service.

The satisfaction of customers is essential for our business. Our entire staff is committed to

improving quality so that we can better serve our customers and enhance our overall performance.

Safety Policy

Safety is the heart of our mass transit railway service. To ensure the safety of our

passengers, our contractors, and our own personnel, we are committed to making continuous

improvements in our safety management system in order to:

1. Keep all possible risks associated with the operation of the railway system as low as

reasonably practicable;

2. Ensure that all preventive and corrective measures designed to minimize such risks are

implemented efficiently and effectively; and

3. Raise safety knowledge and safety awareness among all those involved.

Safety is everyone’s responsibility. It is imperative that all our employees do everything

they can to maintain the highest standards of safety for the sake of our passengers, our contractors

and our own personnel.

Annual Report 2005

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2. Financial Highlights

Consolidated Financial Statements Bangkok Metro Public Company Limited and Its Subsidiaries

As at 31 December or for the years ended

31 December

2005 2004 2003

Total Assets 19,732 19,306 16,140

Total Liabilities 14,314 12,585 9,898

Total Shareholders’ Equity 5,417 6,721 6,242

Shareholders’ Equity (excluding minority interest) 5,411 6,699 6,242

Fare Revenue /1 990 443 -

Total Revenues 1,046 446 3

Net Profit (Loss) (1,716) (957) (72)

Net Profit (Loss) per share /2 (Baht) (0.23) (0.14) (0.02)

Book Value per share /3 (Baht) 0.74 0.92 0.97

Weighted average number of ordinary shares /2

(million shares)

7,347.12 7,030.49 4,791.13

Number of ordinary shares at the end of period /2

(million shares)

7,350.00 7,250.00 6,404.84

Net Profit Margin (%) (164) (215) (2,145)

Debt to Equity Ratio (times) 2.64 1.87 1.59

Debt to Equity Ratio (times) /4 1.84 1.84 1.59

Number of Employees at the end of period /5

(persons)

928 872 679

(Unit: Baht Million)

Notes: /1 The Company started to generate fare revenue from the official commencement for service on July 3, 2004; /2 Adjusted to Baht 1.00 per share for comparison; /3 Calculated by excluding the minority interest;

/4 Debt to Equity Ratio calculated pursuant to the conditions in the Onshore Facilities Agreement, based on the figures from the Company’s unconsolidated financial statements by using total liabilities and contingent liabilities net of the sponsor support: subordinated loan divided by the total of paid-up capital, share premium, retained earnings (loss), reserves and sponsor support subordinated loan, but excluding the any amounts attributable to revaluation of assets;

/5 For the Company only, excluding the Subsidiaries.

Annual Report 2005

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Average Number of Passengers Per DayJanuary - December 2005

50,000

100,000

150,000

200,000

250,000

Passengers Per Day

7 - Day Average 145,218 147,783 173,494 154,078 173,143 168,175 160,098 167,584 170,428 168,830 168,501 153,437

Weekdays 164,426 158,341 178,114 180,107 187,417 180,692 180,091 184,895 186,342 182,766 181,005 174,863

Weekends & Holidays 120,522 125,495 160,211 120,040 147,190 133,754 123,746 125,268 126,663 143,494 134,118 119,512

Jan.05 Feb.05 Mar.05 Apr.05 May 05 Jun. 05 Jul.05 Aug.05 Sep.05 Oct.05 Nov.05 Dec.05

Jan.7 - Jun.4 Baht 10 for First 3 Stations

and Baht 15 for 4 Stations or above

Jun.5 - Sep.30Fare Discount of

20 % for Stored Value Cards (Baht 10 - 25)

15 % for Token (Baht 12 - 31)

Oct.1, 2005 - Jul.2,2006Fare Discount of

15% for Stored Value Cards (Baht 12 -31)

Baht 14 - 36 for Token

Average Revenue Per DayJanuary - December 2005

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Revenue (Baht/ Day)

7 - Day Average 2,169,241 1,961,753 2,308,859 2,051,930 2,265,305 2,890,712 2,898,075 2,986,573 3,026,156 3,614,496 3,530,996 3,200,880

Weekdays 2,453,747 2,097,542 2,371,450 2,398,493 2,457,534 3,070,136 3,204,001 3,245,434 3,266,844 3,859,018 3,750,376 3,648,700

Weekends & Holidays 1,803,448 1,675,086 2,128,910 1,598,732 1,915,799 2,397,296 2,341,846 2,353,803 2,364,264 3,169,911 2,923,719 2,491,830

Jan.05 Feb.05 Mar.05 Apr.05 May 05 Jun. 05 Jul.05 Aug.05 Sep.05 Oct.05 Nov.05 Dec.05

Jun.5 - Sep.30Fare Discount of

20 % for Stored Value Cards (Baht 10 -25)

15 % for Token (Baht 12 - 31)

Oct.1, 2005 - Jul.2,2006Fare Discount of

15 % for Stored Value Cards (Baht 12 -31)

Baht 14 - 36 for Token

Jan.7 - Jun.4 Baht 10 for First 3 Stations

and Baht 15 for 4 Stations or above

Annual Report 2005

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3. Message from the Chairman of the Board of Directors

The overall Thai economic condition in the year 2005 has slowed down from the year 2004, in both

supply and demand, due to the impact of natural peril, a substantial increase in oil prices and the rise of

interest rates, as well as an increase in inflation rate during the second half of the year due to the floating

prices of oil and goods in the category of fresh food. However, the net capital inflow and international

reserve status rose and remained stable, and the unemployment rate was low.

The Company was granted a concession by the Mass Rapid Transit Authority of Thailand to

develop the M.R.T. Chaloem Ratchamongkhon Line Project (Hua Lamphong – Bang Sue) in respect of

investment in the M&E Equipment, operation and maintenance of the system for a period of 25 years.

Since 3 July 2004 until the present time, the Company has commenced the operation for approximately

more than one year. The M.R.T. Project not only plays a supporting role to raise the quality of life of

people in Bangkok, but also helps conserve the energy consumption for the country. Furthermore, the

Company is still committed to continuously improving the quality of its service provision. In the year 2005,

the Company achieved the goal in the quality management system by obtaining the international standard

certification of ISO 9001:2000 as audited and evaluated by RWTuW (TUV NORD) on

9 September 2005. In addition, the Company introduced its new services relating to the commercial

development, such as, opening retail shops in two stations, namely, Sukhumvit Station and Phahon Yothin

Station in September and December, respectively; rendering services of advertising media in the stations

and the trains; and providing automatic teller machine services in all 18 stations. All of such services are

aimed at promoting the quality of the service provision for the benefits of passengers and also enhancing the

Company’s revenue.

Over the past one year, Thai people have become more familiar with the use of the metro service, as

evidenced by the average number of passengers per day, which increased from 147,458 passengers per day

in the year 2004 to 163,403 passengers per day in the year 2005, or at an average of 151,255 passengers per

working day in the year 2004 increasing to 179,145 passengers per working day in the year 2005,

representing growth rates of 10.8 percent and 18.4 percent, respectively. The Company’s revenue from

such provision of service also increased from Baht 443 million in the year 2004 to Baht 990 million as a

result of an increase in the number of passengers and days of the provision of service for one full year.

Furthermore, in this year, the Company has earned additional revenue from commercial development

amounting to Baht 53 million. It is expected that in the future, the development of the areas along the metro

routes, including the public sector’s expansion of the mass transit railway system will be a factor driving a

continued increase in the Company’s revenue.

Annual Report 2005

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In the year 2005, the Company has made several preparations for listing on the Stock Exchange of

Thailand, such as, increasing its registered capital from Baht 7,350 million to Baht 11,950 million to

accommodate the MRTA’s purchase of shares in the amount of Baht 2,987.50 million, or representing 25

percent of the registered capital, in accordance with the conditions of the Concession Agreement, and to

accommodate the pubic offering of shares for capital increase. In this regard, the Company has already

submitted an application form and filing documents for securities offering to the Office of the Securities

and Exchange Commission on 5 July 2005, and offered such shares for capital increase to its directors,

executives and staff in December 2005. The Company currently has the paid-up registered capital in the

amount of Baht 7,646.69 million.

In the year 2006, the Company targets to be listed on the Stock Exchange of Thailand so as to

accommodate the expansion and the capability development for the provision of service in the future

through investment in rolling stocks and the M&E Equipment to facilitate the provision of service and

accommodate the increased number of passengers in the future as well as strengthen its financial stability to

ensure the long-term growth.

As the Chairman of the Board of Directors of the Company, I would like to take this opportunity to

express my gratitude to all shareholders, the M.R.T. commuters, the MRTA, relevant government agencies

and private entities as well as financial institutions, which have been providing great support to the

Company’s operation, and all the Company’s staff who have been contributing and dedicating full

knowledge and capability to the Company’s operation, and we look forward to your continued support.

(Mr. Plew Trivisvavet)

Chairman of the Board of Directors

Annual Report 2005

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

Mr. Plew Trivisvavet

Chairman of the Board of Directors

Chairman of the Executive Committee

Nomination and Remuneration Committee Member

Age: 60 years

Education:

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

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

Directors Association

Work Experience:

1994 – Present Chairman of the Executive Board and Chief Executive

Officer, CH. Karnchang Public Company Limited

2002 – Present Director and Chairman of the Executive Board,

Bangkok Expressway Public Company Limited

General Chetta Thanajaro

Director

Chairman of the Audit Committee

Chairman of the Nomination and Remuneration Committee

Age: 67 years

Education:

- Master of Arts (Political Science), Ramkhamhaeng University

- Director Certification Program (DCP), 33/2003

- Directors Accreditation Program (DAP), 1/2003

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


Work Experience:

1996 – Present President Advisor, The Royal Development Project

Annual Report 2005

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Mr. Vitoon Tejatussanasoontorn

Director

Audit Committee Member

Nomination and Remuneration Committee Member

Age: 65 years

Education:

- Bachelor of Commerce, Thammasat University



Work Experience:

1999 – Present Director, Chairman of the Audit Committee and

Remuneration Committee Member,

CH. Karnchang Public Company Limited

1991 – Present Senior Executive Vice President,

Thai Asahi Glass Public Company Limited

Lieutenant General Surat Sumrith

Director

Audit Committee Member

Age: 56 years

Education:

- Military Science (Special Class), Chulachomklao Royal Military

Academy

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


Work Experience:

2004 – Present Special Expert, Office of the Permanent Secretary for

Defence

Annual Report 2005

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Mr. Supong Chayutsahakij

Director

Executive Director

Chairman of the Risk Management Committee

Age: 64 years

Education:

- Master of Management, Sasin Graduate Institute of Business

Administration of Chulalongkorn University

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



Work Experience:

2003 – Present Director and Vice Chairman of the Executive Board,


1994 – 2003 Managing Director,


Mr. Somchai Sirilertpanich

Director

Age: 43 years

Education:

- MBA Operation Management, University of Scranton, Pennsylvania,

U.S.A.



Work Experience:

2004 – Present Vice Chairman of the Board and Managing Director, Syntec

Construction Public Company Limited

2000 – 2004 Assistant Chief Executive Officer,

Syntec Construction Public Company Limited

Annual Report 2005

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Mrs. Vallapa Assakul

Director

Age: 55 years

Education:

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



Work Experience:

2004 – Present Vice Chief Executive Officer,

TMB Bank Public Company Limited

1995 – 2004 Assistant Chief Executive Officer,


Mrs. Nongnutch Thienpaitoon

Director

Age: 55 years

Education:

- Master of Business Administration (Honors), Roosevelt University,

U.S.A.



Work Experience:

2005 – Present First Executive Vice President, Corporate Banking Group,

Krung Thai Bank Public Company Limited

2003 – 2005 First Executive Vice President, Executive President of the

Corporate Credit Group in the Metropolitan and Eastern

Region Credit Area, and Acting Executive President of the

Corporate Credit Group in the Metropolitan and Upper

Southern Region Credit Area,

Krung Thai Bank Public Company Limited

Annual Report 2005

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Dr. Sombat Kitjalaksana

Director

Executive Director

Risk Management Committee Member

Managing Director

Age: 48 years

Education:

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



Work Experience:

2000 – Present Managing Director,

Bangkok Metro Public Company Limited

Mr. Ronnachit Yaemsaard

Director

Age: 45 years

Education:

- Master of Comparative Jurisprudence, Howard University, Washington

D.C., U.S.A.



Work Experience:

2003 – Present Deputy Governor, Mass Rapid Transit Authority of Thailand

2000 – 2003 Assistant Governor, Mass Rapid Transit Authority of

Thailand

Annual Report 2005

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Mr. Anukool Tuntimas

Director

Executive Director

Age: 38 years

Education:

- Master of Business Administration, Kasetsart University



Work Experience:

2001 – Present Executive Vice President of Human Resource and

General Administration Department,

CH. Karnchang Public Company Limited

2004 – Present Director and Vice President Academic Affairs,

Lawyers’ Association of Thailand

Annual Report 2005

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

Dr. Sombat Kitjalaksana

Managing Director

Acting Marketing & Commercial Development Director

Age: 48 years

Education:

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



Work Experience:

2000 – Present Managing Director,


Mr. Witoon Hatairatana

Operations Director

Age: 48 years

Education:

- Master of Science (Business Administration), California University of

Pennsylvania, U.S.A.

Work Experience:

2004 – Present Operations Director,


2002 – 2004 Traffic Manager,


Annual Report 2005

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Miss Pornpimol Chirtchoochai

Accounting and Finance Director

Age: 40 years

Education:

- Master of Accounting, Thammasat University

Work Experience:

2000 – Present Accounting and Finance Director,


Miss Sattabusya Mekvichai

Human Resources and Administration Director

Age: 51 years

Education:

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

Work Experience:

2005 – Present Human Resources and Administration Director,


2002 – 2005 Advisor to the Managing Director,


Annual Report 2005

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6. General Information

6.1 Company Profile


Company Registration No. : 0107547000451 (previously 0107574700459)

Head Office : Administration Building, Rama IX Road,

Huaykhwang Subdistrict, Huaykhwang District, Bangkok 10310

Tel. : 66 (0) 2354 2000

Fax : 66 (0) 2354 2040

Customer Relations Center : 66 (0) 2624 5200

: E-mail : [email protected]

Investor Relations : 66 (0) 2354 2000 Ext. 3733 - 3735

: E-mail : [email protected]

Registered Office : 587 Soi Inthamara 37, Sutthisarnvinitchai Road, Din Daeng

Subdistrict, Din Daeng District, Bangkok 10320

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

Type of business : Mass Rapid Transit System Operation

Concessionaire of the M.R.T. Chaloem Ratchamongkhon Line Project

Registered Capital : Baht 11,950 million, divided into 11,950 million ordinary shares,

at the par value of Baht 1.00 per share

Issued and Paid-up Capital : As at 31 January 2006, the Company has the paid-up capital of Baht

7,646.69 million, divided into 7,646.69 million ordinary shares,

at the par value of Baht 1.00 per share

Annual Report 2005

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6.2 The Company invested in its Subsidiaries through a shareholding ratio of at

least 10% of the number of shares sold in each Subsidiary as at 31

December 2005 as follows:

Shares held by the

Company Company Name Business Category Type of

Shares Total

Number of Shares Sold

Par Value (Baht) Number of

Shares

(%)

1. Metro Mall Development Limited Head Office: 587 Sutthisarnvinitchai Road, Din Daeng Subdistrict, Din Daeng District, Bangkok 10320

Tel. : 66 (0) 22754559 Fax : 66 (0) 22754314 Homepage :

http://www.metromall.co.th

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

Ordinary 5,000,000 10 3,200,000 64.00

2. Triads Networks Company Limited

Head Office: 587 Sutthisarnvinitchai Road, Din Daeng Subdistrict, Din Daeng District, Bangkok 10320

Tel. : 66 (0) 26908391 Fax : 66 (0) 26908395

Procurement of advertisement boards or media in the trains and stations

Ordinary 250,000 100 140,000 56.00

3. BMCL Network Limited * Head Office: 587 Sutthisarnvinitchai Road, Din Daeng Subdistrict, Din Daeng District, Bangkok 10320

Tel. : 66 (0) 26975900 Fax : 66 (0) 26908212

Rendering services and maintenance of telecommunications system equipment in the stations

Ordinary 10,500,000 10 10,499,998 100.00

* BMCL Network Limited was previously named Radianz Communications Network Limited.

Annual Report 2005

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6.3 Reference

Securities Registrar : Thailand Securities Depository Co., Ltd.

62 The Stock Exchange of Thailand Building

Klongtoey Subdistrict, Klongtoey District, Bangkok 10110

Tel. : 66 (0) 2229 2800 Fax : 66 (0) 2359 1259

Auditors : Mr. Ruth Chaowanagawi Certified Public Accountant No. 3247

Ms. Siraporn Ouaanunkun Certified Public Accountant No. 3844

Mr. Supachai Phanyawattano Certified Public Accountant No. 3930

Ernst & Young Office Limited

33rd Floor, Lake Rajada Office Complex,

193/136-137 New Rajadapisek Road,

Klongtoey District, Bangkok 10110

Tel. : 66 (0) 2264 0777 Fax : 66 (0) 2264 0789-90

Legal Advisor : The Legists Ltd.

9th Floor, 990 Abdulrahim Place, Rama IV Road,

Silom Subdistrict, Bangrak District, Bangkok 10500

Tel. : 66 (0) 2636 1111 Fax : 66 (0) 2636 0000

Financial Institutions : Krung Thai Bank Public Company Limited


Bank of Ayudhya Public Company Limited

Siam City Bank Public Company Limited

Annual Report 2005

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7. Nature of Business

7.1 Background and Major Developments

Bangkok Metro Public Company Limited (the “Company”) was established on 18 February

1998, with an initial registered capital of Baht 1,000,000, having the CH. Karnchang Group as its

major shareholder, to participate in the bidding for the concession of the first underground mass

transit system project in Thailand, to carry out the design, manufacture, supply, installation, testing

and commission of the M&E Equipment for the operation and maintenance of the metro. In this

respect, the Company was granted the exclusive concession for such project approved by the

Council of Ministers on 28 March 2000 and 25 July 2000, respectively.

On 1 August 2000, the Company entered into the Agreement for the MRTA Initial System

Project – Chaloem Ratchamongkhon Line (the “Concession Agreement”) with the Mass Rapid

Transit Authority of Thailand (“MRTA”). The Company has the exclusive right to collect fares

and undertake activities and commercial development, including advertising and leasing space in

the project for a period of 25 years from the date of issuance by the MRTA of the Notice of No

Objection to commencement of revenue service, namely, on 2 July 2004, which would end on 1

July 2029. The official commencement of operations is on 3 July 2004. Under the Concession

Agreement, the Company is obliged to make payment of remuneration from fares and commercial

development to the MRTA at the rates as mentioned in the Concession Agreement.

On 16 January 2003, the Company was granted investment promotion privileges for the

M.R.T. Chaloem Ratchamongkhon Line (Blue Line) under Promotional Certificate No.

1029(1)/2546. The privileges include entitlement to 50% deduction of import duty on imported

machinery according to specified conditions and exemption from corporate income tax on net

profit from promoted operations for a period of 8 years commencing from the date of first earning

operating income (3 July 2004). The Company was converted to a public limited company on 11

May 2004. Their Majesties the King and Queen and HRH Princess Maha Chakri Sirindhorn

presided over the official opening ceremony of the M.R.T. Chaloem Ratchamongkhon Line (Hua

Lamphong – Bang Sue) on 3 July 2004. On 9 September 2005, the Company obtained an ISO

9001:2000 certification from RWTuW (TUV NORD).

Annual Report 2005

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7.2 Business Overview

The Company’s revenue can be divided into two categories comprising revenue from

fares and revenue from commercial development.

• Revenue from Fares

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

is subject to the number of stations traveled by passengers. The fare rates of the metro as of the

commencement date would be in accordance with the basic reference fare rates in force at the time

of the revenue service commencement date. Under the Concession Agreement, the basic reference

fare rates would be adjusted every 24 months based on the actual changes of the Bangkok Non-

Food Consumer Price Index compared to the basic reference fare rates as at 1 January 2002. At its

first year of service, the Company agreed to discount the fare rates by 15%.

• Revenue from Commercial Development

Besides revenue from fares, the Company also generates revenue from commercial

development, which can be divided into two groups as follows:

1. The Company directly executed agreements with other companies by granting rights to

take the following actions:

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

banks;

- Providing public telephone service to True Corporation Public Company

Limited; and

- Supplying or producing advertising media on Platform Screen Doors in all 18

stations to How Come Media Company Limited.

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

- To procure still photo advertisement signboards to Triads Networks Company

Limited;

- To manage retail spaces to Metro Mall Development Limited; and

- To service and maintain telecommunications system equipment to BMCL

Network Limited.

In return, the Company shall receive a share of gross revenues, as well as dividends

from the Subsidiaries.

Annual Report 2005

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Business Operations of the Subsidiaries

1. Triads Networks Company Limited

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

registered capital of Baht 15.00 million, to conduct the business of procuring and/or making

advertising boards or other forms in all 18 stations and for all 19 trains. Triads Networks

Company Limited started placing advertisements in the trains in June 2005 and in all stations in

July 2005.

2. Metro Mall Development Limited

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

registered capital of Baht 50 million, to conduct the business of leasing retail spaces in 11 stations

and spaces in the basement level of the Lat Phrao park and ride facility, representing a total

commercial leasing spaces of approximately 12,480 square metres (spaces for retail shops and

sale promotion), starting with Sukhumvit Station on 9 September 2005, Phahon Yothin Station on

16 December 2005.

3. BMCL Network Limited

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

was established on 30 January 2004, with an initial registered capital of Baht 50 million, to

conduct the business of servicing and maintaining telecommunications system equipment in the

stations. At present, there is still no revenue from its operations.

Shareholding Structure

As at 31 January 2006


(Registered capital of Baht 11,950.00 million Paid-up capital of Baht 7,646.69 million)

Metro Mall Development Limited

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

BMCL Network Limited


Triads Networks Company Limited


64% 100% 56%

Annual Report 2005

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Revenue Structure of the Company’s Group

The Company had major revenue from fares since 3 July 2004. In June 2005, the Company started

to derive revenue from advertising services by Triads Networks Company Limited. Metro Mall

Development Limited started generating revenue from retail space leases in the third quarter of 2005.

(Unit: Million Baht) For the year

2004 For the year

2005 Operated by Shareholding percentage of the Company Revenue % Revenue %

Revenue from train operations The Company - 443.14 99.39 990.39 /1 94.68

Revenue from advertising services

Triads Networks 56.00 - - 37.63 3.60

Revenue from telecommunications system services

BMCL Network 100.00 - - - -

Revenue from retail space leases

Metro Mall Development 64.00 - - 4.75 0.45

Interest income The Company

and its Subsidiaries

- 0.98 0.22 0.79 0.08

Other income /2The Company

and its Subsidiaries

- 1.76 0.39 12.44 1.19

Total 445.88 100.00 1,046.00 100.00

Notes: /1 This comprised revenue from fares of Baht 969.91 million and revenue from fare compensation of Baht 20.48 million from the MRTA, for the trial discount of fares from 7 January 2005 to 31 March 2005, whereby the MRTA agreed to compensate the Company at 80% of the amount of actual daily revenue below the amount of revenue set out in the memorandum of understanding.

/2 Other income in 2004 comprised revenue from leasing training space to Siemens and revenue from space leasing for public telephone service in the stations.

Other income in 2005 comprised revenue from space leases for ATM and public telephone services.

Annual Report 2005

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7.3 Procurement of Products and Services

(1) Management of the Metro Project

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

project to manage technical operations, such as, procurement of the M&E Equipment as ordered

from manufacturers and acting as agent for liaison with contractors and relevant authorities

regarding the installation of the M&E Equipment. Joint Venture CKET is a joint venture between

CH. Karnchang Public Company Limited and Expert Transport Company Limited (an affiliate of

the CH. Karnchang Public Company Limited Group, the major shareholder of the Company).

(2) Procurement and Maintenance of the M&E Equipment

Given the fact that the Company had the duties under the Agreement for the MRTA Initial

System Project - Chaloem Ratchamongkhon Line, to design, manufacture, supply, install, test and

commission the M&E Equipment to ensure the readiness for the commencement of service to the

public, the Company thus engaged third parties to manufacture and procure the M&E Equipment

by way of turnkey contracts. In essence, the manufacturer is responsible for the design,

manufacture and installation of the system ready for use, including training for every level of the

Company’s staff. The Company engaged Lincas and Siemens, one of the world’s largest modern

electric train manufacturers and developers of railway systems from Germany, to manufacture the

M&E Equipment. Lincas and Siemens are responsible for the design, manufacture, supply,

installation, testing and commissioning of the M&E Equipment, comprising the rolling stocks,

power supply system, signaling and communication system, automatic fare collection, Platform

Screen Doors, maintenance equipment, signage and signals, as well as responsible for proposing

train operation plans, the Company’s management structure, a recruitment plan, and all

requirements relating to train operations by way of training for every level of the Company’s staff

to administer the train operation on their own. To ensure the confidence in the provision of

service, the Company has engaged Lincas and Siemens for maintaining the M&E Equipment for a

period of 10 years.

(3) M&E Equipment and Components of the Metro

These can be divided into two parts: civil infrastructure operated by the MRTA, and the

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

Annual Report 2005

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Civil Infrastructure Operated by the MRTA

(3.1) Stations

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

15-25 metres beneath the road surface. Each station has different levels and areas depending

on the depth of the station. There are three kinds of platform, namely, central platform, side

platform, and stack platform. Each station has a control room for the control, observation and

monitoring of any malfunctions within the station.

(3.2) Tunnels

Underground tunnels are supported by reinforced concrete structures designed to be

flexible and water-resistant. The inner diametre is 5.7 metres, thickness is 30 centimetres and

outer diametre is 6.30 metres. It is a two single tunnel system equipped with running rails,

power rails, maintenance walkways, a tunnel ventilation system, underplatform exhaust and

heat detector systems for the maximum safety for the train operations inside the tunnels.

(3.3) Ventilation System

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

either side of the station and within the tunnel for the safety of passengers. Fans control the

temperature and condition inside the stations and tunnels.

(3.4) Rails/Tracks

There are two types of tracks, running rails and power rails or third rails:

- Running rails are double rails with 1.435 metres width (standard gauge) railway

tracks are laid and directly fixed to the track base, which is made of a reinforced

concrete structure between Hua Lamphong and Bang Sue; railway sleepers are used

in the depot as is the case of the State Railway of Thailand.

- Power rails or third rails are laid parallel to either side of the running rails in order

to connect electricity from the source to the train, while the double running rails acts

as an electric conductor back to the source.

M&E Equipment Operated by the Company

(3.5) Rolling Stocks

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

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

Annual Report 2005

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with modern style and would have a service life of approximately 30 years. Each train

consists of three carriages with a total of approximately 70-metre long, and can carry up to

900 passengers with the transferring capacity of 40,000 passengers per hour per direction.

(3.6) Signaling and Communication

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

punctual train operations and is considered as an important factor of train management. The

control centre is located in the depot. Train operations are automatic computer system

supervised by engineers. In the stations, a radio communication system with direct phone

lines is used for officers to communicate so that passengers can immediately notify an

emergency. In case of any emergency to the officers, the automatic broadcasting system will

start to provide relevant information and direct the way out of the station.

(3.7) Supervisory Control and Data Acquisition System (SCADA) and Closed Circuit

Television

Monitoring and supervision of the functions of the main equipment inside the

stations and tunnels, such as, the fire alarm system, cooling system, elevators and escalators,

power supply system within the station and power supply system for the locomotive system,

tunnel lighting system and ventilation system in the tunnels, are carried out by the SCADA

installed at the operation control centre. In case of any malfunction, an alarm will start

immediately to notify the officers in charge to rapidly and promptly check such system.

Closed circuit televisions are installed in various important spots inside the

stations to monitor for safety and playback to identify any incident. The closed circuit

televisions are also installed in the train operator cabin to monitor passengers entering and

leaving trains while docked at the stations to ensure safety before closing the doors.

(3.8) Automatic Fare Collection System (AFC)

The AFC consists of tickets, token vending machines, ticketing offices and

automatic gates, with the following characteristics:

1) Tickets are divided into two types: single journey tokens for a single trip, and

stored value cards, which are contactless smart cards for multiple journeys,

suitable for regular passengers.

2) Token Vending Machines (TVM)

TVMs are located on the concourse level and issue only single journey tokens.

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3) Ticketing Offices

Ticketing offices are manned by officers and equipped with machines for

issuing both tokens and stored value cards of all types.

4) Automatic Gates

The system is referred as a “contactless” system. Passengers enter or exit the

system by using the ticket (token or stored value card) across the card readers

located on the top of the automatic gates within 10 centimetres, without any

contact required to open the gate.

(3.9) Platform Screen Doors (PSD)

Glass PSDs spanning from the floor to the ceiling are installed along the length of

the platforms, between the platform and the train. This is for the safety of passengers while

entering and leaving the train so as to prevent any accident from passengers falling from the

platforms or injury from the train docking at the stations, as well as helping saving energy in

respect of the air-conditioning system and minimising noise pollution.

(3.10) Power Supply

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

and reliability in the supply of power to all electrical equipment, such as, sub-stations and

transformers, which are necessary for supplying power to the train and in the stations and the

tunnels. The system is designed based mainly on safety and continuity of services.

(3.11) Depot Building and Central Control Centre

The depot consists of the depot building, operation control centre building, rolling

stock parking area, training centre and administration building and is located on a total area

of approximately 300 rai on Rama IX Road, close to the Thailand Cultural Centre Station,

owned by the MRTA while the Company has the right to use the same throughout the

Concession period.

The operation control centre is located in the same area as the depot. This centre is

the most important component of the operation control system, namely, to control and direct

every station and every train to ensure safe, rapid and punctual operations. In case of any

force majeure preventing the functioning of this operation control centre, another back-up

operation control centre located at the depot would control and direct the operation as normal.

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(4) Full Passenger Capacity of the M.R.T. Chaloem Ratchamongkhon Line

Table Indicating Full Passenger Capacity on the Metro and Number of Passengers

in the years 2004 (July – December) and 2005 (January – December)

2004 2005

July - December January February – December /2

Number of Days of Service (Days) /1 182 16 334

Full Passenger Capacity Per Day (Persons) 336,680 336,680 301,240

5,386,880 100,614,160 Full Passenger Capacity of the Metro (Persons)

61,275,760 106,001,040

Number of Passengers (Persons) 26,837,376 57,191,054

Utilization Rate Per Full Passenger Capacity 43.80% 53.95%

Notes: /1 The number of actual days of service in the year 2004 was 182 days and in the year 2005 was 350 days. /2 In the year 2004 – 17 January 2005, the Company had 19 trains in operation.

After the train collision accident on 17 January 2005, the Company suspended its service operation during the period from 17 January 2005 – 31 January 2005, and resumed the service on 1 February 2005, with 17 trains in operation. The damaged two trains were under repair.

7.4 Industrial Conditions and Competition

In the year 2005, the growth rate of personal cars was affected by the continuous increase in

oil prices, which was a negative factor to personal car users and resulted in the decreased number

of newly registered personal cars, and the traffic congestion problems in Bangkok. These factors

encourage more people to use public transports, especially upon the development of a more

efficiently connected public transport network.

The transport system directly affecting the Company’s business includes personal cars,

passenger buses, microbuses and taxis. In the past several years, the fare rates for public transport,

especially, normal buses or air-conditioned buses, slightly changed. However, after the government

cancelled the oil price subsidy for benzene and diesel in the years 2004 and 2005, respectively, the

fare rates for public transports thus increased, which also resulted in the increase in traveling

expenses of personal car users.

Due to the said increase in the world’s oil prices, and the traffic congestion problems,

especially, during rush hours, together with the increase in fare rates, consumers’ demand for use

of the public transports, especially, the metro system also becomes increasing accordingly.

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Government Policy towards the Expansion of the Mass Transit System

The government by the Office of Transport and Traffic Policy and Planning (OTP) completed

the Urban Rail Transportation Master Plan (URMAP) in 2000 and conducted further study in the

practical implementation in 2004, referred to as URMAP2. The purpose of this program was to

reduce and alleviate the existing traffic problems, which would help improving the country’s

economic and social conditions, as well as minimise the environmental problems. The government

sector has a policy to expand the urban rail transportation with the route networks as follows:

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2

7

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28

Mass Transit Project Development During the Period between 2005 and 2012

The time frame for implementation of the mass transit projects during 2005 – 2012 under the

resolution passed by the Council of Ministers on 14 June 2005 for the government mega projects shall be

as follows:

Mass Transit Projects Distance (Kilometres) Period Target Year for

Service

1. Purple Line 43.00

1.1 Bang Yai - Bang Sue 23.00 2005 - 2009 2009

1.2 Bang Sue - Rat Burana 20.00 2005 - 2012 2012

2. Blue Line (Extension) 27.00

2.1 Hua Lamphong - Bang Khae 14.00 2005 - 2012 2012

2.2 Bang Sue - Tha Phra 13.00 2005 - 2010 2010

3. Orange Line 24.00 2005 - 2012 2012

4. Red Line 66.80

4.1 Rangsit - Bang Sue 24.60 2005 - 2008 2008

4.2 Bang Sue - Hua Lamphong 6.20 2005 - 2009 2009

4.3 Hua Lamphong - Maha Chai 36.00 2005 - 2009 2009

5. Light Red Line 71.41

5.1 Airport Link 28.00 2005 - 2007 2007

5.2 Extension of Airport Link 21.10 2005 - 2011 2011

5.3 Bang Sue - Taling Chan 14.71 2005 - 2008 2008

5.4 Bang Sue - Makkasan 7.60 2005 - 2009 2009

6. Dark Green Line 26.50 2005 - 2010 2010

7. Light Green Line 18.70 2005 - 2010 2010

Total 277.41

Notes:

1. The above information may be subject to change. 2. As at 17 December 2005, the Ministry of Transport announced its policy and plan to expand the M.R.T. Project

to 10 lines, with the yellow line, pink line and brown line as the expected additional 3 lines, but the details of the said projects are currently pending the drafting of terms of reference (TOR), and further feasibility study in the future.

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8. Risk Factors

8.1 Risks relating to businesses of the Company and its Subsidiaries

8.1.1 Risks relating to fare revenue

• The number of passengers of the metro

The underground mass transit is a new form of the mass transit system in Thailand. In the early

stage of the service provision, people needed some time to be familiar with using such new service.

The number of passengers depends upon several factors including those beyond the Company’s

control, such as, fare rates, other available alternative transit systems, traffic congestion on roads, oil

prices, passenger transportation capacity, quality, as well as safety of the metro of the Company and

other mass transit systems.

• The maximum fare rate is determined by the Concession Agreement

Under the Concession Agreement, the maximum fare rate to be charged by the Company is

determined in pursuance of a formula based on the Bangkok Metropolis Non-Food Consumer Price

Index, whereby the adjustment shall be made once in every two years, while the Company’s costs

would be likely to increase during the said period.

8.1.2 Risks relating to revenue from commercial development

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

Company’s total revenue, throughout the Concession period of 25 years, may vary subject to the

spending nature of customers and advertisers which depends on several factors beyond the Company’s

control, such as, the economic fluctuation, the competition in the advertising media business and space

leasing business for retailing, changes and amendment of laws and regulations governing such business

operation in the metro, as well as the progress in opening retail shops in the stations.

8.1.3 Risks relating to fluctuation of cost of fare

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

which comprises maintenance costs for the metro (M&E contract and E&M contract), public utility

cost, and the staff’s salaries and welfare. In this regard, the maintenance costs under the M&E

contract, which has a 10 year term, may be adjusted subject to the consumer price index for Germany

in respect of the Euro-denominated payments, and to the consumer price index for Bangkok Metropolis

in respect of expenses for the Baht-denominated payments. In addition, the cost of electricity used at

stations and for train operations, which are the main costs of the public utility cost, may be adjusted

subject to the electricity cost rates of the Metropolitan Electricity Authority.

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8.1.4 The Company relies on Siemens and Lincas for manufacture and maintenance of its

M&E Equipment

The Company entered into an agreement for procurement and maintenance of the M&E

Equipment with Siemens and Lincas for a period of 10 years ending in 2014. Thus, in the event where

Siemens and Lincas are unable to provide such services to the Company or there is any change in the

maintenance agreement, the Company’s business operation may be adversely affected.

8.1.5 Risks from terrorism

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

such as, the terrorist attacks in the United States of America on 11 September 2001, the terrorist attacks

in London mass transit system, and the unrest circumstances in the southern part of Thailand, it is

possible that any one or several incidents stated above may lead to terrorist attacks in the mass transit

system in Thailand, which could affect the Company’s business operation despite the fact that the

Company has arranged an insurance against risks from such incidents.

8.1.6 Risks relating to the Concession Agreement and the government supervision

Given that the Company operates its businesses in accordance with the Concession Agreement

under the supervision of the MRTA, difference in the contractual parties’ interpretations on terms and

conditions of the Concession Agreement may arise. Should the Company and the MRTA cannot

resolve any conflicts, the Company may require a certain period of time to solve the problem, thereby

giving rise to an impact on the Company’s business operation.

8.1.7 Risks relating to the government policy in the construction and operation of the mass

transit railway system

The government has a policy to expand the mass transit railway system to cover the Bangkok

Metropolitan area and its vicinity with an accelerating plan for the construction of 10 train lines.

However, there is uncertainty in respect of procedures and period for implementation of the

government plan. In this regard, the Company’s growth also depends partly on such 10 train line

operation plan.

Furthermore, should the government have a policy requiring the Company to merge its business

with other mass transit systems in the future under various terms and conditions, the Company’s

business operation may be affected by such merger.

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8.2 Other risks

8.2.1 The Company is unable to pay dividend in the forthcoming period

Due to the fact that the MRTA Initial System Project requires quite large amount of investment

and continued use of working capital at the early stage of its operation, the Company still sustained

loss on its operation during such period and would not be able to pay dividend in the forthcoming

period.

8.2.2 Risks from the interest rate and foreign exchange rate fluctuations

As at 31 December 2005, the Company had long-term loans amounting to Baht 12,114.50 million

extended by domestic banks at the interest rates ranging from the minimum lending rate (MLR) to

MLR plus 0.25% - 0.50% per annum. The Company also had a loan amounting to Baht 1,403 million

extended by CH. Karnchang Public Company Limited, which is the Company’s major shareholder,

with the interest rate of MLR plus 0.50% per annum. In this regard, if the interest rates increase, the

Company’s interest expense obligation would be affected. In addition, the Company also incurred

expenses in foreign currencies for the maintenance cost of the M&E Equipment, in the amount of

approximately Euro 3.92 million per year and insurance premiums of approximately US$ 3.33 million

per year. Thus, should there be a depreciation of Baht value; the Company’s expenses would increase.

8.2.3 The Company relies on the financial support from its major shareholders

Under the conditions stipulated in the sponsor support agreement, two major shareholders,

namely, CH. Karnchang Public Company Limited and Natural Park Public Company Limited, are

required to provide financial support to the Company so as to maintain its liquidity in accordance with

the loan agreement executed with the financial institutions. In the event where the Company does not

receive the required financial support, the Company may be in default on the conditions of its existing

loan agreement, which would affect the Company’s financial condition and results of its operations.

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9. Capital Structure

9.1 Securities of the Company

As at 31 January 2006, the Company has the registered capital of Baht 7,646.69 million,

divided into 7,646.69 million ordinary shares, with par value of Baht 1.00, as well as Issued and Paid-

up Capital of Baht 7,646.69 million.

9.2 Shareholders of the Company

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

Name Number of Shares

Held (shares) Percentage

1. CH. Karnchang Public Company Limited Group; 3,078,760,296 40.26

- CH. Karnchang Public Company Limited 2,158,312,416 28.23

- Mahasiri Siam Company Limited /1 910,987,670 11.91

- Transit Expert Company Limited /2 9,460,210 0.12

2. Bangkok Expressway Public Company Limited 1,444,092,607 18.89

3. Natural Park Public Company Limited Group; 1,433,951,276 18.75

- Natural Park Public Company Limited 1,066,120,418 13.94

- Syntec Construction Public Company Limited 367,830,858 4.81

4. Krung Thai Bank Public Company Limited Group; 730,669,200 9.56

- Krung Thai Bank Public Company Limited 725,000,000 9.48

- The Krung Thai Thana Wattana Fund 5,669,200 0.07

5. TMB Bank Public Company Limited 367,500,000 4.81

6. Siam City Bank Public Company Limited 176,250,000 2.30

7. Tokyu Construction Company Limited 100,000,000 1.31

8. Others 18,776,621 0.25

9. Directors, Executives and staff 296,689,300 3.88

Total 7,646,689,300 100.00

Notes : /1 Mahasiri Siam Company Limited has a total of 9,000,000 shares, 7,747,788 shares of which or 86.09% is held

by the Trivisvavet Family, and 1,252,212 shares of which or 13.91% is held by other shareholders.

/2 Transit Expert Company Limited has a total of 10,000 shares, 9,993 shares of which or 99.93% is held by Mahasiri Siam Company Limited, and 7 shares of which or 0.07% is held by other shareholders.

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9.3 Dividend Policy

The Board of Directors of the Company has a policy to pay dividends at the rate of

approximately 40% of its net profits after deduction of all reserves as required by law and as

required under the Onshore Facilities Agreement, in particular after reserving funds for the

repayment of the principal and interest for a period of six months. As the Company has incurred

losses during the initial years of revenue service and has had accumulated losses, it is thus not able

to pay dividends to its shareholders.

The Company’s Subsidiaries have policy to pay dividends at the rate of approximately

40% of net profits after deduction of all reserves as required by law and pursuant to the Loan

Agreement. The Board of Directors of the Company will consider and propose the dividend

payments to the Subsidiaries’ boards of directors for consideration and further submission to their

shareholders’ meetings for approval, provided that this will depend on the Subsidiaries’ investment

plans, requirements and other justifications which their boards of directors deem appropriate.

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10. Management Structure

10.1 Management Structure

The management structure of the Company comprises five committees, namely, the Board

of Directors, the Executive Committee, the Audit Committee, the Nomination and Remuneration

Committee, and the Risk Management Committee, as follows:

Office of the Managing Director

Internal Audit Division

Executive Committee

Managing Director

Accounting and Finance Division

Marketing and Commercial

Development Division

Operations Division

Audit Committee Nomination & Remuneration

Committee

Board of Directors

Risk Management Committee

Human Resources and Administration

Division

A. Board of Directors

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

follows:

Name Position 1. Mr. Plew Trivisvavet Chairman of the Board of Directors 2. General Chetta Thanajaro Chairman of the Audit Committee and Independent Director 3. Mr. Vitoon Tejatussanasoontorn Audit Committee Member and Independent Director 4. Lieutenant General Surat Sumrith Audit Committee Member and Independent Director 5. Mr. Supong Chayutsahakij Director 6. Mr. Somchai Sirilertpanich Director 7. Mrs. Vallapa Assakul Director 8. Mrs. Nongnutch Thienpaitoon Director 9. Dr. Sombat Kitjalaksana Director 10. Mr. Ronnachit Yaemsaard Director 11. Mr. Anukool Tuntimas Director

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Roles and Duties of the Board of Directors

(1) to supervise, monitor and manage the Company’s operations to ensure compliance with laws as well

as the objectives and the Articles of Association of the Company and resolutions of the Company’s

meetings of shareholders and to protect the interests of the Company, based on principles of good

corporate governance as well as the rules and notifications of the Stock Exchange of Thailand and

the Securities and Exchange Commission of Thailand;

(2) to set policies and strategies of the Company and to supervise, control and monitor to ensure that the

management performs in compliance with such policies in an efficient and effective manner to give

rise to the maximum economic value to the business and wealth to the shareholders;

(3) to hold the Company’s annual ordinary general meeting of shareholders within no later than four

months from the end of the Company’s financial year and extraordinary general meetings of

shareholders when it deems necessary;

(4) to hold the Company’s Board of Directors meetings quarterly, at which not less than 50% of the

total number of directors must attend the meeting to form a quorum. A majority vote is required for

any decision made at such a meeting and in the case of a tied vote, the chairman of the meeting will

have a casting vote;

(5) to consider and approve the budget for the Company’s annual investment and operations, including

monitoring the utilisation of the Company’s resources;

(6) to arrange for the preparation of proper, accurate and adequate financial and general significant

reports to the Company’s shareholders, including confirming the review and certification of the

information contained therein;

(7) to establish an efficient and effective internal control system, internal audit system and risk

management measures, including regularly auditing such systems and measures;

(8) to consider the appointment of any sub-committees or other persons to manage the Company’s

operations under the control of the Board of Directors of the Company, or to grant such authority to

such persons for such period of time as the Board of Directors of the Company deems appropriate,

provided that the Board of Directors of the Company may cancel, revoke, change or amend such

authorities as appropriate;

(9) to consider the appointment of the authorised signatory directors of the Company, including the

appointment of sub-committees as may be necessary and appropriate to operate the Company;

(10) to consider and clearly specify the division of roles, duties and responsibilities among the

Company’s Board of Directors, sub-committees and the management, including specifying the

procedures and regularly communicating such roles, duties and responsibilities to directors, sub-

committee members, the management and staff of the Company;

(11) to supervise and monitor the Executive Committee to ensure compliance with the policies specified

by the Board of Directors of the Company. The Executive Committee is authorised to approve any

Annual Report 2005

36

transaction that is binding on the Company worth up to Baht 50,000,000 (Baht fifty million),

excluding transactions which give rise to a conflict of interest with the Company and its Subsidiaries

pursuant to the notification of the Securities and Exchange Commission, including transactions

which require approval from the Company’s shareholders in accordance with the notifications of the

Securities and Exchange Commission and the Stock Exchange of Thailand;

(12) to consider and specify the power, duties and responsibilities, procedures for the appointment and

removal, disciplinary actions, salary, welfare benefits, bonus, gratuities and other remuneration,

including expenses and fringe benefits, of the Managing Director of the Company;

(13) to consider and approve interim dividend payments to the Company’s shareholders from time to

time as it deems appropriate and in accordance with the law;

(14) to approve the issuance of financial instruments and any other securities by the Company, to specify

the number, price, date, procedures and conditions in respect of the underwriting of such securities

under the law and/or as specified by the meeting of the shareholders of the Company, including the

appointment of underwriters of such securities and underwriting agents.

Selection Procedures for the Directors

The Nomination and Remuneration Committee will consider selecting qualified persons to act

as directors and propose such persons to the Board of Directors for further submission to a meeting of the

shareholders or to the Board of Directors of the Company for appointment in accordance with the Articles

of Association of the Company:

The Board of Directors of the Company must comprise at least five directors, of which not less

than one-half must reside in Thailand. The directors must have the qualifications as specified by law and

be appointed by a meeting of shareholders of the Company in accordance with the following rules and

procedures:

1. Each shareholder shall be entitled to one vote per share;

2. Each shareholder must use all of the votes under paragraph 1 to appoint one or more

directors and may not divide such votes among candidates;

3. The number of votes received is ranked from highest to lowest and the directors will be

appointed from the highest to lowest according to the number of directors to be appointed

by the Company at that time. Any tied votes for the final vacancy shall be decided by a

drawing of lots.

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Attendance at Meetings of the Board of Directors

2005

Name Number of Meetings

Attended

Number of Meetings

Held

1. Mr. Plew Trivisvavet 8 8

2. Dr. Sombat Kitjalaksana 8 8

3. Mr. Ronnachit Yaemsaard 7 8

4. Mr. Supong Chayutsahakij 7 8

5. Mr. Anukool Tuntimas 8 8

6. Mr. Somchai Sirilertpanich /1 5 6

7. Mrs. Nongnutch Thienpaitoon /2 3 4

8. Mrs. Vallapa Assakul /2 4 4

9. General Chetta Thanajaro /2 3 4

10. Mr. Vitoon Tejatussanasoontorn /2 4 4

11. Lieutenant General Surat Sumrith /2 3 4

Notes: Term of Office

/1 Appointed as a director since 14 September 2004 until the Company received his resignation letter on 10 March 2005. The Company registered such resignation with the Ministry of Commerce on 23 March 2005. He was re-elected as a director on 26 May 2005.

/2 Appointed as a director since 26 May 2005.

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38

B. Audit Committee

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

each of whom met the qualifications as specified by the Stock Exchange of Thailand, as follows:

Name Position

1. General Chetta Thanajaro Chairman of the Audit Committee

2. Mr. Vitoon Tejatussanasoontorn Audit Committee Member

3. Lieutenant General Surat Sumrith Audit Committee Member

Role and Duties of the Audit Committee

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

(2) to ensure that the Company has suitable and efficient systems of internal control and internal

audit;

(3) to consider, select, nominate, appoint and recommend remuneration for the Company’s

external auditors;

(4) to ensure that the Company’s operations are full, adequate and appropriate in compliance with

securities and exchange law and regulations of the Stock Exchange, or laws, regulations,

articles and policies relating to the business of the Company;

(5) to consider the disclosure of information by the Company, in the case of connected

transactions or transactions that may give rise to a conflict of interest, to ensure accuracy and

completeness;

(6) to prepare a report on the monitoring activities of the Audit Committee and disclose the same

in the Company’s annual report, and have such Audit Committee’s report signed by the

Chairman of the Audit Committee;

(7) to do any other act as prescribed by law or assigned by the Company’s Board of Directors

with the approval of the Audit Committee.

Selection Procedures for Independent Members of the Audit Committee

The Nomination and Remuneration Committee will select persons with suitable

qualifications as independent members of the Audit Committee and propose such persons to the

Board of Directors of the Company for further submission to a meeting of the shareholders or the

Board of Directors of the Company for appointment. The Company shall have one Audit

Committee, comprising at least three independent directors appointed for a period of three years

each. The qualifications of the independent directors and Audit Committee members shall be in

accordance with the minimum requirements as prescribed in the notifications of the SEC and the

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39

Stock Exchange of Thailand and a meeting of the Board of Directors of the Company shall approve

the establishment of the Audit Committee.

C. Executive Committee

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

follows:

Name Position 1. Mr. Plew Trivisvavet Chairman of the Executive Committee 2. Dr. Sombat Kitjalaksana Member of the Executive Committee 3. Mr. Supong Chayutsahakij Member of the Executive Committee 4. Mr. Anukool Tuntimas Member of the Executive Committee

Role and Duties of the Executive Committee

(1) to set policies, appoint, specify authorities and their duties, supervise, monitor and liaise with,

working groups or special working groups or management groups, including considering and

approving any proposal by such working groups or special working groups or management

groups;

(2) to approve any proposals by working groups or management groups or any working groups

for the benefits of the Company’s management and business operations under the objectives of

the Company;

(3) to enter into transactions binding the Company worth up to Baht 50,000,000 (Baht fifty

million), but excluding transactions which give rise to a conflict of interests with the Company

or its Subsidiaries, pursuant to the notification of the Securities and Exchange Commission,

including transactions which require approvals from the Company’s shareholders in

accordance with the notifications of the Securities and Exchange Commission and the Stock

Exchange of Thailand. Such transactions include the following:

a. undertaking any juristic acts which bind the Company;

b. withdrawing from any bank account of the Company and applying credit with the

Company’s current banks or financial institutions, including the application to open

accounts and/or other forms of credit with any banks or financial institutions, as well as

using the Company’s securities as security for such debts, regardless of whether registered

or not;

c. undertaking joint investments on behalf of the Company with individuals, juristic persons,

other groups of persons under the law to proceed in accordance with the Company’s

objectives, including other forms of investments, such as, share acquisitions and share

swaps with other juristic persons, as it deems appropriate;

Annual Report 2005

40

d. undertaking feasibility studies of new projects as well as considering and approving

projects as it deems appropriate;

(4) to specify, consider and approve articles, regulations, policies on the management and

business operations of the Company or any operation binding on the Company;

(5) to give recommendations and advice and specify policies, powers and duties of the Managing

Director, working groups, special working groups and management groups;

(6) to approve, appoint, employ, remove, impose disciplinary actions, fix salaries, welfare

benefits, bonuses, gratuities and other remuneration, including expenses and fringe benefits of

the officers or staff of the Company holding positions of department heads or higher,

including the Deputy Managing Director or equivalent or the working groups, special working

groups or management groups of the Company for specific purposes;

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

(8) to appoint persons or groups of persons to manage the Company under the control of the

Executive Committee or to grant authority to such persons or groups of persons to do any acts

as the Executive Committee deems appropriate and to change, amend, cancel or revoke such

authorities;

(9) to appoint the advisory chairperson or advisors or advisory committees to the Executive

Committee as it deems appropriate and to fix the remuneration, allowance, welfare benefits,

fringe benefits and other expenses of such appointees as appropriate;

(10) to call meetings of the Executive Committee and/or specify regulations and articles of such

meetings as the Executive Committee or the Chairman of the Executive Committee deems

appropriate;

(11) when the Chairman of the Executive Committee cannot perform the duties, the Chairman shall

appoint an acting Chairman to perform such duties on a case by case basis and such acting

Chairman will have the same power and duties as the Chairman of the Executive Committee;

(12) to consider and approve the authorities of the management of the Company according to the

rules, regulations and articles of the Company.

However, the Executive Committee does not have the power to approve any transactions or

matters in respect of which the Executive Committee or persons have a conflict of interest with the

Company or its Subsidiaries, pursuant to the notification of the Securities and Exchange

Commission.

Selection Procedures for the Executive Committee

The Board of Directors of the Company shall appoint the Executive Committee in

accordance with the Articles of Association of the Company, which provide that the Board of

Directors of the Company may appoint any other person to manage the Company under the control

Annual Report 2005

41

of the Board of Directors, provided that any such person who is to be a member of the Executive

Committee shall have the qualifications and capacity to perform their duties.

D. Nomination and Remuneration Committee

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

comprised three members as follows:

Name Position

1. General Chetta Thanajaro Chairman of the Nomination and Remuneration Committee

2. Mr. Plew Trivisvavet Member of the Nomination and Remuneration Committee

3. Mr. Vitoon Tejatussanasoontorn Member of the Nomination and Remuneration Committee

Role and Duties of the Nomination and Remuneration Committee

(1) to consider the nomination of persons with suitable qualifications as directors and to propose

such persons to the Board of Directors for further submission to a meeting of the shareholders

of the Company or the Board of Directors of the Company for appointment;

(2) to select a person suitable for the Managing Director position and propose such person to the

Board of Director of the Company for appointment;

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

(4) to determine and to propose the directors’ remuneration to a meeting of the shareholders of

the Company for approval;

(5) to propose the salary and adjustments and other remunerations of the Managing Director to

the Board of Directors of the Company for approval;

(6) to undertake other matters as assigned by the Board of Directors of the Company.

Selection Procedures for the Nomination and Remuneration Committee

The Board of Directors of the Company shall appoint members of the Nomination and

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

E. Risk Management Committee

As at 31 December 2005, the Risk Management Committee of the Company comprised four

members as follows:

Annual Report 2005

42

Name Position

1. Mr. Supong Chayutsahakij Chairman of the Risk Management Committee

2. Dr. Sombat Kitjalaksana Member of the Risk Management Committee

3. Mr. Vitoon Hatairatana Member of the Risk Management Committee

4. Miss Pornpimol Chirtchoochai Member of the Risk Management Committee

Role and Duties of the Risk Management Committee

(1) to consider and set the policies on risk management measures and plans for the operations of

the business and Subsidiaries;

(2) to monitor and assess the appropriateness of the overall risk management system of the

Company;

(3) to prepare recommendations to the Board of Directors of the Company in respect of risk

management, standard practice, strategy, risk assessment in each matter and of the Company

as a whole to ensure efficient and effective risk management;

(4) to prepare risk reports for the Board of Directors of the Company;

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

F. Management

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

Name Position 1. Dr. Sombat Kitjalaksana Managing Director and acting Marketing and

Commercial Development Director /1

2. Mr. Witoon Hatairatana Operations Director 3. Miss Pornpimol Chirtchoochai Accounting and Finance Director 4. Miss Sattabusya Mekvichai Human Resources and Administration Director

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

Role and Duties of the Managing Director

(1) to control and monitor all businesses of the Company and to ensure compliance with

resolutions and policies of the Board of Directors and the Executive Committee of the

Company;

(2) to approve, appoint, remove, employ, impose disciplinary actions, fix salary, bonus, gratuities,

welfare benefits and other remuneration, including expenses and fringe benefits for

management or staff with salary (exclusive of other remuneration) of up to Baht 200,000

Annual Report 2005

43

(Baht two hundred thousand) per month, holding positions below division heads (excluding

the Deputy Managing Director and division heads or equivalent), and the Managing Director

may delegate such power or duties to the working groups or the Board of Directors,

management group, group of persons or the management, as he deems appropriate;

(3) to have the power to enter into any transaction, binding on the Company, worth up to Baht

2,000,000 (Baht two million) for each transaction;

(4) to authorise the management of the Company, such as, the Deputy Managing Director,

Assistant Managing Director, the division heads or equivalent, to perform certain duties on

behalf of the Managing Director (such as, procurement, hiring and ordering payments) as he

deems appropriate;

(5) to have the power to issue, amend, add, improve regulations, orders and work rules of the

Company, including employment, appointment, removal and disciplinary actions of staff and

employees, fixing of salaries and other remuneration, including gratuities and welfare benefits;

(6) to have the duty to submit the balance sheet, financial statements and profit and loss accounts

to the Board of Directors of the Company for approval;

(7) to undertake feasibility studies of new projects as well as consider and approve such projects

as assigned by the Executive Committee;

(8) if the Managing Director cannot perform his duties, to appoint the Deputy Managing Director

or any other person to perform his duties on his behalf and such appointee shall have the same

power and duties as the Managing Director;

(9) to appoint persons or groups of persons to manage the Company under the control of the

Managing Director or to grant such authority to such persons or groups of persons to do any

acts as the Managing Director deems appropriate, and to change, amend, cancel or revoke

such authority;

(10) to propose any matter to the Board of Directors, the Executive Committee, the Audit

Committee or meetings of the shareholders of the Company for consideration, approval or

other purposes as he deems appropriate;

(11) to do other acts as assigned by the Board of Directors or the Executive Committee of the

Company from time to time.

However, the managing director does not have the power to approve any transactions or

matters in respect of which the managing director or other persons may have a conflict of interest

with the Company or its Subsidiaries, pursuant to the notification of the Securities and Exchange

Commission.

Annual Report 2005

44

Selection Procedures for Management and Staff

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

through the nomination by the Nomination and Remuneration Committee;

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

appointed by the Executive Committee;

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

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

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

shall be carried out by the Human Resources and Administration Division which will make the

selection jointly with the relevant division in accordance with the Company’s operation

regulations in relation to recruitment of personnel. They shall recruit and appoint persons with

knowledge, capacity and experience suitable to carry out their duties for the Company.

Selection of Directors and Management of Subsidiaries

The Subsidiaries of the Company, BMCL Network Limited, Metro Mall Development

Limited, and Triads Networks Company Limited, do not have their own nomination committees. The

selection of their directors is carried out by their shareholders and the selection of the management is

carried out by their respective boards of directors, provided that their directors and management are

suitably qualified without any prohibited characteristics under Section 68 of the Public Limited

Companies Act B.E. 2535 (1992).

Annual Report 2005

45

10.2 Remuneration of Management

10.2.1 Cash Remuneration

Remuneration of Directors of the Company (Only remuneration as directors and members of

the Audit Committee)

2005 Name of Director Amount (Baht) Nature of

Remuneration 1. Mr. Plew Trivisvavet /1 - -

2. Dr. Sombat Kitjalaksana /1 - -

3. Mr. Ronnachit Yaemsaard 235,000 monthly

4. Mr. Supong Chayutsahakij /1 - -

5. Mr. Anukool Tuntimas /1 - -

6. Mr. Somchai Sirilertpanich /2 210,000 monthly

7. Mrs. Nongnutch Thienpaitoon /3 175,000 monthly

8. Mrs. Vallapa Assakul /3 180,000 monthly

9. General Chetta Thanajaro /3

As Director

As Chairman of the Audit Committee

-

430,000

-

monthly

10. Mr. Vitoon Tejatussanasoontorn /3

As Director

As Audit Committee Member

-

275,000

-

monthly

11. Lieutenant General Surat Sumrith /2

As Director

As Audit Committee Member

-

275,000

-

monthly

Total 1,780,000

Notes: Term of Office /1 Remuneration was presented in the topic of Total Remuneration of the Executive Committee and

Executives /2 Appointed as a director since 14 September 2004 until the Company received his resignation letter on 10

March 2005. The Company registered such resignation with the Ministry of Commerce on 23 March 2005. He was re-elected as a director on 26 May 2005.

/3 Appointed as a director since 26 May 2005.

Annual Report 2005

46

Total Remuneration of the Executive Directors and Management

2005

Name Number of Directors

Amount (Baht) Nature of Remuneration

Total remuneration for executive directors

3 2,530,000 monthly

Total remuneration for management

4 16,112,345 salary, bonus, contributions to the

provident fund and social security fund Total 7 18,642,345

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

10.2.2 Other Remuneration

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

to issue and offer 450,000,000 new capital increase shares to the directors, management and staff of

the Company (at the par value of Baht 1 each) and the Board of the Directors was authorised to

allocate these shares. During 26 - 28 December 2005, 296,689,300 shares were allocated to the

directors, management and staff of the Company. The shares so allocated to the directors,

management and staff will be subject to a silent period for 2 years from the date the Company’s

shares start trading on the Stock Exchange of Thailand. The directors, management and staff will be

permitted to sell the shares at maximum of 50% of the locked-up shares every 12 months and 24

months thereafter from the date the Company’s shares start trading on the Stock Exchange of

Thailand.

Number of Shares in Bangkok Metro Public Company Limited held by the Directors and

Management

As at 31 January 2006

Name of Director and Management Number of Shares Held Percentage of Shareholding

(%) 1. Mr. Plew Trivisvavet 20,000,000 0.26 2. Dr. Sombat Kitjalaksana 15,000,000 0.20 3. Mr. Ronnachit Yaemsaard - - 4. Mr. Supong Chayutsahakij 15,000,000 0.20 5. Mr. Anukool Tuntimas 15,000,000 0.20 6. Mr. Somchai Sirilertpanich 15,000,000 0.20 7. Mrs. Nongnutch Thienpaitoon 15,000,000 0.20 8. Mrs. Vallapa Assakul 15,000,000 0.20

Annual Report 2005

47

9. General Chetta Thanajaro 15,000,000 0.20 10. Mr. Vitoon Tejatussanasoontorn 15,000,000 0.20 11. Lieutenant General Surat Sumrith 15,000,000 0.20 12. Mr. Witoon Hatairatana 10,000,000 0.13 13. Miss Pornpimol Chirtchoochai 10,000,000 0.13 14. Miss Sattabusya Mekvichai 10,000,000 0.13

10.3 Corporate Governance

The Board of Directors of the Company realises the significant of the corporate governance for

improving the transparency and responsibilities of the Board of Directors and management, and

increasing the confidence of shareholders, investors and other related parties. The Company thus sets

policies in support of good corporate governance, which contains the following fundamental

principles:

1. Corporate Governance Policy

(1) Equal and fair treatment to shareholders and other interested parties.

(2) The Board of Directors is determined to create value added to the Company’s

business on a long-term basis and to manage the business of the Company with due

care and prudence, and to perform its duties with sufficient competency and

efficiency, in order to optimise the benefit to the shareholders, to avoid conflicts of

interest and to be responsible for their own decisions and management.

(3) Management shall be transparent, allow for inspection and adequate information

disclosure to all parties concerned.

(4) Management shall operate the business by considering risks that might arise in

relation to its business, and establishing appropriate risk control and management

procedures.

(5) The Company has set out a code of ethics for compliance by the directors and staff.

2. Shareholders: Rights and Equality

The Company recognises the rights of all shareholders to receive accurate, adequate and

complete information in due time to enable them to make decisions in shareholders’ meetings.

Prior to all shareholders’ meetings, the Company shall send a notice convening the meeting,

together with meeting agenda, to the shareholders and include an opinion from the Board of

Directors on each agenda. Such notice will be sent at least seven days prior to any such meeting.

The chairman of the meeting will allow the shareholders to inspect the operations of the Company

on an equal basis, enquire and give opinions and other suggestions, and shall record issues that

Annual Report 2005

48

have been discussed and important opinions in the minutes of the meeting so that the shareholders

will be able to examine such information. For shareholders who are not able to attend a meeting in

person, the Company will allow those shareholders to empower the Chairman of the Audit

Committee to attend the meeting and vote on their behalf.

3. Rights of Stakeholders

The Company realises the importance of rights of all stakeholders, both internal

stakeholders (that is, staff and management of the Company and its Subsidiaries), and external

stakeholders (that is, competitors, creditors, the government sector and other related agencies).

The Company realises that support from its stakeholders will create a competitive advantage and

profit for the Company, which will help it to achieve its long-term success.

4. Shareholders’ Meetings

To convene a shareholders’ meeting, the Company will choose an appropriate place and

time that is convenient to shareholders. Directors, including the Chairman of the Audit Committee

and the Chairman of the Executive Committee, will attend the meeting to answer any related

queries.

5. Leadership and Vision

The Company’s Board of Directors shall have leadership skills, vision, knowledge,

competence and experience in various fields and be independent to make a decision in order to

optimise their contributions to the Company and the shareholders. The Board of Directors has

been involved in setting (or approving) vision, mission, strategy, objectives, business plan, and

budget of the Company and has also taken steps to supervise management in carrying out the

business plan and the budget efficiently and effectively in order to maximise the economic value of

the business and security for the shareholders.

6. Conflict of Interest

The Company recognises the significance of all transactions that may give rise to a conflict

of interest, or are related party transactions. The Company has clearly specified a policy and

regulations and procedures for considering and approving such transactions in accordance with the

law, including the regulations of the Securities and Exchange Commission and the Stock Exchange

of Thailand, and has complied with good corporate governance principles to prevent conflicts of

interests. The Company has also specified that any person who is connected to a transaction shall

be required to inform the Company of his/her connection to such transaction and shall not be

involved in any consideration or decision in relation to such transaction.

Annual Report 2005

49

Furthermore, the Company has a policy and procedures relating to the use of insider

information by management to prevent exploitation of insider information by management for

personal gain. The Company has arranged to educate executives on their duties to report securities

of the Company held by themselves or by their spouse and their minor children, including

informing them of the relevant penalties under the Securities and Exchange Act B.E. 2535 (1992).

Management are also required to report any changes in their securities holdings to the Securities

and Exchange Commission under the Securities and Exchange Act B.E. 2535 (1992). In addition,

the Company has prohibited management receiving insider information from taking any acts

violating the provisions of the Securities and Exchange Act B.E. 2535 (1992) and other related

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

information of the Company to any third party, or from unlawfully exploiting their positions for

the advantage of themselves or others. Any violation of such rules shall lead to disciplinary

actions and may result in the dismissal of employment. However, to date, there has never been any

such incident of exploitation of information for personal advantage.

7. Code of Ethics relating to the Operation of the Business

The Company has issued a code of ethics of the management and staff as guidelines for

such persons to perform their duties in accordance with the Company’s mission, with integrity and

fairness, including their treatment towards the Company, interested parties, the public, society, as

well as the government sector. The Company is in the process of conducting an annual survey of

the compliance with the said code of ethics.

8. Checks and Balances System for Directors who are not in the management

The Board of Directors consists of not more than 13 qualified persons, as follows:

- 5 directors who are in the management

- 4 independent directors

- 4 directors who are not in the management

The Company has four independent directors, representing approximately one-third of the

Board of Directors, as directors who are not in the management to provide checks and balances.

9. Combination or Separation of Positions

The Company plans to clearly separate the duties of the Company’s Board of Directors,

the Executive Committee and the Managing Director under the assigned scope of work and

authority. The authority, duties and responsibilities of the Executive Committee and the Managing

Director will be subject to the supervision by the Board of Directors. In addition, the Chairman of

Annual Report 2005

50

the Board of Directors shall not be the same person as the Managing Director, in order to separate

the setting of the corporate governance policy from the day-to-day management duties. The

Company has also appointed an Audit Committee which consists of three independent directors to

inspect the management of the Company.

10. Remuneration of Directors and Management

Directors’ Remuneration : The Company has clearly and transparently set out its

policy on remuneration of directors and the Managing

Director. The remuneration of directors is at a comparable

level to the remuneration of directors in other similar

businesses, and at a sufficient and appropriate level for the

qualified positions of directors and the Managing Director.

Management’s Remuneration : The remuneration of management, excluding the Managing

Director, follows the principle and policy as specified by

the Executive Committee, which also takes into account the

performance of the Company and of the management.

11. Meetings of the Board of Directors

The Board of Directors will convene a meeting at least once every three months and may

convene additional meetings as necessary. The agenda of the meetings will be clearly specified

prior to the meetings. The Company will also normally include in the agenda a section to

acknowledge the Company’s performance. The Office of the Managing Director, which acts as the

secretary to the Company or the secretary to the Board of Directors, will, seven days prior to a

meeting, send the notice convening the meeting specifying the agenda, and will also send other

supporting documents three days prior to the meeting for the directors to have time to review the

documents before attending the meeting.

12. Sub-Committees

The Company has established three sub-committees, namely, the Audit Committee, the

Nomination and Remuneration Committee and the Risk Management Committee.

13. Internal Control and Audit Systems

The Company realises the significance of the arrangement for an internal control system.

The Company thus has a manual of written rules and regulations governing work performance,

with separation of duties and responsibilities for cross-checking purposes. The internal audit by

Annual Report 2005

51

the internal auditor can be independently performed and accurately reported, including the follow-

up action and improvement of the internal auditor’s performance. The Company has five areas of

internal control, namely, organisation and environment; risk management; operational control of

management; information technology and communications system; and monitoring system.

Furthermore, the results from internal audits shall be reported by the Audit Committee,

which is appointed by the Board of Directors, at meetings of the Board of Directors. The Audit

Committee shall hold a meeting every quarter, prior to each meeting of the Board of Directors and

shall present the results of internal audits to the Board of Directors for its consideration.

14. Report of the Board of Directors

The Board of Directors realises the importance of reporting by indicating in its report on

the responsibilities of the Board of Directors towards the financial report in the annual report

following the auditor’s report. In addition, financial data and general information, such as,

shareholding structure, risk factors, and connected transactions, shall be correctly disclosed to

shareholders and general investors in accordance with related laws and regulations.

15. Relationship with Investors

The Board of Directors realises the significance of the accuracy, completeness,

transparency and punctuality of information disclosure. All of the financial data, results of

operations, and other related information, including important information that might affect price

of the Company’s securities must be disclosed in accordance with the good corporate governance

principles. Such information shall be released as news, so that investors and other related person

can use the information for investment decisions, via the channels and media of the Stock

Exchange of Thailand and the Office of the Securities and Exchange Commission, including the

website of the Company (http://www.bangkokmetro.co.th). The Company has also established an

Investor Relations Department, which includes management and officers who are responsible for

public relations. For information, investors may contact Investor Relations Department at Tel.

0-2354-2000 ext. 3733-3735 or E-mail Address: [email protected].

10.4 Insider Information Supervision

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

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

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

Annual Report 2005

52

10.4.1 General

As the Company is a public limited company incorporated under the Public Limited

Companies Act B.E. 2535 (1992) and is intending to have an initial public offering of its shares,

following the listing of its shares on the Stock Exchange of Thailand, any sale or purchase of the

Company’s securities by its management or staff based on material facts that may affect the

market price of the shares or securities, which have not yet been disclosed to public, and which

have been obtained by their duties or positions in the Company, would be considered as taking

advantage of third parties, and may be subject to a criminal penalty under the law.

Therefore, to prevent the Company’s staff and directors, including the Company itself,

from encountering any such illegal acts which may violate such law, as well as to comply with

good corporate governance guidelines of the Company, the Company’s Board of Directors has set

guidelines to prevent the use of insider information. Such guidelines will be revised from time to

time as appropriate and all directors, management and staff of the Company will strictly adhere to

these guidelines with accountability as well as causes and effects on a case by case basis. These

guidelines and policies will be more strict than the provisions of law, and will apply to directors,

management and staff, including related persons.

10.4.2 Securities Sale and Purchase Using Insider Information

Prohibited Persons

Persons who should not sell or purchase securities pursuant to the guidelines to prevent the

use of insider information are as follows:

(1) Directors and management of the Company;

(2) Directors and management of the Company’s Subsidiaries, including its affiliates;

(3) All staff of the Company and of the Company’s Subsidiaries;

(4) Spouses and minor children of the directors and staff; and

(5) Relatives who live with such persons above.

Prohibited Securities

Securities refer to shares, share warrants, convertible debentures and transferable

subscription rights issued by the Company.

General Practice

(1) Prohibited persons as described above should not sell or purchase the securities under

any circumstances if they are aware or should be aware of material information that

Annual Report 2005

53

may affect the market price of the Company’s securities, which has not yet been

disclosed to the public.

(2) Prohibited persons who are in possession of such material information due to their

duties and positions as the Company’s staff shall not disclose such information to any

other person while such information has not yet been disclosed to the public, unless it

is done in the performance of their duties in the Company.

Specific Guidelines

In addition to the general guidelines to prevent the use of insider information, Prohibited

Persons shall also follow the following guidelines:

(1) Prohibited persons who are directly involved in the preparation of the Company’s

financial statements and balance sheet, are prohibited any purchase or sale from the

commencement of such preparation until the day immediately following the

disclosure date of such financial statements.

(2) Any directors, management or staff who have received the draft financial statements

as referred to above, are prohibited from selling or purchasing the Company’s

securities from the day that they receive the draft financial statements until the

disclosure date of the financial statements.

(3) Prohibited persons, who know or should have known that the Company will disclose

material information that may affect the market price of the Company’s securities,

are prohibited from selling or purchasing the Company’s securities from the day that

they know or should have known such information until the disclosure date of such

information.

10.4.3 Report of Prohibited Persons

A. Duty to Prepare Reports

(1) Directors, managers or persons who hold management positions as specified in the

Securities and Exchange Act shall be required to prepare disclosure reports of their

initial securities holdings, and changes in such holdings, pursuant to the relevant

laws and regulations, together with such reports to the Company.

(2) Officers in the position of division head or above shall report all acquisitions or

disposals of securities holdings equal to 5% or more of the total issued shares.

B. Reporting Procedures

(1) Directors, managers or persons as specified in paragraph A. (1) above who have the

duty under law to disclose their securities holdings, their spouse’s securities

Annual Report 2005

54

holdings, and their minor children’s securities holdings to government agencies or

regulators shall submit copies of such reports to the Company on the same day.

(2) Officers as specified in paragraph A. (2) shall disclose their securities holdings and

changes in their own securities holdings as per paragraph B. (1) as well as holdings

of their spouses and their minor children, to the Company within seven business

days from the date of change in title to the Securities.

10.5 Internal Control

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

adequacy and suitability of the Company’s internal control system according to the internal control

evaluation guidelines as prescribed by the Office of the Securities and Exchange Commission.

Having inquired of the management, the Company concluded that the Company’s internal control

system is adequate with respect to the following 5 areas: organisation and environment; risk

management; operational control of management; information technology and communications

system; and monitoring system.

Organisation and Environment

The Company has an appropriate organisational structure that ensures the efficiency in

the operation of management. In addition, it has in place business goals and operational policies and

guidelines which are clear and assessible, and include written codes of conduct, to prevent potential

damage to assets of the Company and its Subsidiaries, including prevention of any misconduct by

the Company’s management and staff.

Risk Management

The Company has established a Risk Management Committee responsible for

managing, reviewing and maintaining the overall risk management system of the Company at an

appropriate level. The Committee provides suggestions to the Board of Directors in relation to risk

management policies, standard practice and strategy, and risk assessment in each matter and of the

Company as a whole to ensure efficient and effective risk management, as well as preparing risk

reports to the Board of Directors for acknowledgement.

Operational Control of Management

The Company clearly sets the scope of duties, responsibilities and transaction limits

for each level of management in writing. In addition, for any transactions with major shareholders,

directors, management or related parties, the Company has thorough guidelines in place to monitor

and prevent any conflicts of interests to optimise the Company’s interests, including regularly

Annual Report 2005

55

monitoring the operations of the Subsidiaries and establishing guidelines for the persons as

nominated and appointed as directors or management in the Subsidiaries to adhere thereto.

Information Technology and Communications System

The Company pays significant attention to its information technology and

communications systems to ensure that the Company’s information is accurate, complete and

adequate for the decision-making by the management and the Board of Directors, and maintains a

system for storage of accounting records and all supporting documents in an organised manner, as

well as using generally accepted accounting principles as appropriate to the nature of the Company’s

business.

Monitoring System

The Company regularly monitors the results of operations against the set targets. Any

material differences are reported to the Board of Directors/the Audit Committee for correction,

which shall then be regularly reported on the progress of the correction. In addition, the Company

also has policies in place for the management to immediately report to the Board of Directors any

fraud, violation of law and other misconducts which may materially affect the Company’s reputation

and financial condition.

Annual Report 2005

56

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

Annual Report 2005

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

Transaction Value (Thousand Baht)

Persons/Juristic persons who may have conflict of

interest

Relationship Nature of Transaction Year 2004 Year 2005

Necessity/Details Opinions of the Audit

Committee

The Company - Project Costs 10,446.71 -

- Costs of Fare 4,280.00 10,343.33

1. CH. Karnchang Public Company Limited

- CH. Karnchang Public Company Limited is a major shareholder of the Company, with 23.23% and 28.23% of shares in the Company, as at 31 January 2005 and 31 January 2006, respectively.

- Construction and Other Payables

2,853.33 13,196.67

- Mahasiri Siam Company Limited is a major shareholder of the Company, with 11.91% of shares in the Company as at 31 January 2006, and with 22.25% of shares in CH. Karnchang Public Company Limited.

- Mr. Plew Trivisvavet, an executive director and in the management of CH. Karnchang Public Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

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

- The Company hired CH. Karnchang Public Company Limited for a total value of Baht 900 million, to design and construct a depot on 22 January 2002, as amended on 30 July 2003. The construction was 100% completed. Moreover, the Company hired CH. Karnchang Public Company Limited for a total value of Baht 85 million, to maintain the existing civil infrastructure work in the area of the depot for 7 years from 1 March 2004 to 28 February 2011. Payments are made quarterly. The Company recognises these maintenance costs as cost of fare after the commencement of operations.

- CH. Karnchang Public Company Limited is an experienced and specialised company in construction, and was also responsible for the civil infrastructure work in relation to this project from Hua Lamphong Station to Phra Ram 9 Station. The hiring was made in the form of contract and payments are made according to the terms of the contract.

- Benaim (UK) Limited, an engineering consultant of the syndicated lenders, opined that the construction and maintenance costs are reasonable.

- Mr. Sombat Kitjalaksana, the Managing Director of the Company, and Mr. Anukool Tuntimas, an executive director of the Company, are also in the management of CH. Karnchang Public Company Limited.

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Committee

The Company 1. CH. Karnchang

Public Company Limited (Continued)


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

360.00 92.72 - The Company sold stored value cards to CH. Karnchang Public Company Limited and recognised such sales as income when the cards were used.

- The transaction was conducted in the ordinary course of business and the discount was at the same rated as for general customers.

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

6.81 24.91 - The Company paid Baht 6,806.00 for the installation of boards in the train stations and Baht 24,909.60 for additional decorations around King Rama V statue in front of the Administration Building.

- These were an urgent works in respect of which CH. Karnchang Public Company Limited became familiar with the areas and was capable of coordinating and completing the works in time.





- -

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- Long-term Loans - 1,403,000.001. CH. Karnchang

Public Company Limited (Continued)

- Accrued Interest - 35,752.81


- 35,752.81


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

- The transactions are in accordance with the Sponsor Support Agreement. The interest rate and terms of payment are in accordance with the conditions as specified by the syndicated lenders


- The Company entered into subordinated loan agreements with CH. Karnchang Public Company Limited on 11 March 2005/27 May 2005/27 July 2005/25 August 2005/ 28 October 2005/30 November 2005/23 December 2005 and 30 December 2005, for Baht 380.00 million/Baht 150.00 million/Baht 80.00 million/Baht 330.00 million/Baht 80.00 million/Baht 50.00 million/Baht 100.00 million and Baht 233.00 million, respectively, to finance the working capital and to maintain the debt-to-equity ratio at not exceeding 2:1 pursuant to the conditions as specified by the syndicated lenders. These loans were subordinated and interest was charged at the rate of MLR+0.5% per annum. The loans are due and payable when there are sufficient residual amounts after provisioning for operating and investing activities, and the repayment of principal and interest, including other reserves in accordance with the conditions as specified by the syndicated lenders.

- Short-term Loan - -

- Accrued Interest - -


- Interest Expenses - 3,050.25

- The Company issued to CH. Karnchang Public Company Limited a short-term promissory note totaling Baht 233 million, at the interest rate of MLR+1.0% per annum. However, the short-term loan was converted to be a long-term loan on 30 December 2005.

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1. CH. Karnchang Public Company Limited (Continued)

- Project Construction Cost 198,976.65 18,243.42 - The contract was made with clear terms of payment.


- Construction Payables 190,817.36 206,179.66

- Advance Payment for Construction

15,279.31 12,421.99

- Interest Expenses 4,183.29 13,610.46

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

4,183.29 17,203.16

- CH. Karnchang Public Company Limited is an experienced and specialised company in this type of work and was also responsible for the civil infrastructure work in relation to each train station. CH. Karnchang Public Company Limited has information of electric systems and civil work, which would enhance the efficiency in construction of such project.



- Metro Mall Development Limited hired CH. Karnchang Public Company Limited for a project value of Baht 292.5 million to construct the interior of the train stations to support the lease of retail shops. However, Metro Mall Development Limited has just started to generate revenue from commercial development, it is not yet able to pay the construction cost. CH. Karnchang Public Company Limited has charged interest to Metro Mall Development Limited at the rate of MLR+1.0% per annum.

- Approval from the MRTA is required for such construction, in relation to safety.


- A memorandum of agreement, dated 3 June 2005, was executed amending the original contract stipulating certain conditions and the interest rate arising from the delay in payment by Metro Mall Development Limited. The interest rate charged by CH. Karnchang Public Company Limited is in line with the rate that CH. Karnchang Public Company Limited charges other customers and close to the rate that Metro Mall Development Limited may borrow from commercial banks.

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Committee

The Company 2. CK. Office

Tower Company Limited

- Administrative Expenses 29.64 -

- CK. Office Tower Company Limited is an associated company with common directors.

- CK. Office Tower Company Limited has interests in the Company through its 6.88% holding of shares in CH. Karnchang Public Company Limited.

- The major shareholders of CK. Office Tower Company Limited are Mahasiri Siam Company Limited, the Trivisvavet Family and Mr. Anukool Tuntimas, holding 25%, 62.5% and 12.5% in CK. Office Tower Company Limited, respectively.

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

- -

- The Company paid for public utilities expenses on behalf of a Subsidiary, namely, BMCL Network Limited, which rented office space after the Company’s lease expired. The Company has already received payments in full.

- The public utilities rate charged by CK. Office Tower Company Limited to the Company is close to the rate charged to general customers. These transactions ended since the Company moved to a new office.


- Selling and Administrative Expenses

1,307.62 1,774.84

- Mr. Plew Trivisvavet, a director of CK. Office Tower Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.


13.97 -

(arising from rental of office space and public utilities expenses)

- Metro Mall Development Limited entered into an office space lease and service agreement on the 1st floor, covering a total area of 349.63 square metres, for a period of 3 years, from 1 February 2004 until 31 January 2007. The rental and service charge rate is Baht 340 per square metre per month.

- This rental rate is comparable to the rental rates charged by the lessor to third party lessees, which range Baht 270-370 per square metre.

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BMCL Network Limited 2. CK. Office

Tower Company Limited (Continued)


2,396.56 2,968.28

- Construction and Other Payables (arising from rental of office space and public utilities expenses)

259.07 248.13

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

- This rental rate is comparable to the rental rates charged by the lessor to other lessees.



969.69 1,857.21

- CK. Office Tower Company Limited is an associated company with common directors.

- CK. Office Tower Company Limited has interests in the Company through its 6.88% holding of shares in CH. Karnchang Public Company Limited.

- The major shareholders of CK. Office Tower Company Limited are Mahasiri Siam Company Limited, the Trivisvavet Family and Mr. Anukool Tuntimas, holding 25%, 62.5% and 12.5% in CK. Office Tower Company Limited, respectively.

- Mr. Plew Trivisvavet, a director of CK. Office Tower Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

- Construction and Other Payables (arising from rental of office space and public utilities expenses)

1,531.24 1,299.11

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

- This rental rate is comparable to the rental rates charged by the lessor to other lessees.

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The Company 3. Joint Venture

CKET - Project Costs 99,991.50 -

- Costs of Fare 42,800.00 62,060.00

- Joint Venture CKET is an associated company.

- Joint Venture CKET is a joint venture between CH. Karnchang Public Company Limited and Expert Transport Company Limited at 80% and 20%, respectively.

- CH. Karnchang Public Company Limited holds 28.23% of shares in the Company.

- Mahasiri Siam Company Limited, a major shareholder of the Company, holds 90% of shares in Expert Transport Company Limited.

- Mr. Plew Trivisvavet, a director of Joint Venture CKET, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

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

8,560.00 70,620.00

- The Company hired Joint Venture CKET, for a total value of Baht 2,275.22 million, as project manager to oversee the design, procurement, installation and testing of the M&E Equipment and the train operations, and to continually oversee such activities for a period of the first 5 years after the commencement of the train services. The contract term will expire in July 2009. Payments are due and payable monthly. The Company recognises these ongoing costs as costs of fare after the commencement of revenue service.

- The transactions are in accordance with the conditions of the Concession Agreement which requires the Company to appoint CH. Karnchang Public Company Limited, an affiliated company, or any other party, as project manager, subject to approval from the MRTA.

- The transactions are in the ordinary course of business with payments made pursuant to the terms of the relevant contract.

- Joint Venture CKET has both Thai and foreign teams with experience and expertise in engineering works, contract documents, which ensure that all contractors of the Company shall comply with the contract.


185.04 -

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

- -

- The Company hired Joint Venture CKET to prepare areas for the opening ceremony of the metro system.

- The hiring of Joint Venture CKET was urgent, and Joint Venture CKET, as project manager, was familiar with the relevant areas.

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CKET (Continued)


130.03 -

- Joint Venture CKET is an associated company.

- Joint Venture CKET is a joint venture between CH. Karnchang Public Company Limited and Expert Transport Company Limited at 80% and 20%, respectively.

- CH. Karnchang Public Company Limited holds 28.23% of shares in the Company.

- Mahasiri Siam Company Limited, a major shareholder of the Company, holds 90% of shares in Expert Transport Company Limited.

- Mr. Plew Trivisvavet, a director of Joint Venture CKET, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

- Construction and Other Payables (arising from the disbursement of electricity costs)

130.03 -

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

- The said transaction is reasonable to prevent impact on the Company’s business operations.

- The electricity costs demanded by Joint Venture CKET are the same as the amount billed by the Metropolitan Electricity Authority to the Company. Therefore, the transaction is considered reasonable and fair.

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The Company - Administrative Expenses 754.35 -

4. Expert Transport Company Limited

- Expert Transport Company Limited is an associated company with common directors.

- Mahasiri Siam Company Limited , which is major shareholders of the Company and CH. Karnchang Public Company Limited, hold 90% of shares in Expert Transport Company Limited, the remaining 8.02% is held by the Trivisvavet Family.

- Mr. Plew Trivisvavet, a director of Expert Transport Company Limited, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

- Construction and Other Payables (arising from vehicle leases)

- - - The Company rented 2 office cars

for its 2 management staff at the rates comparable to the market rates.

- After the Company had purchased office cars, the car rents were terminated since December 2004.

- The rental rates and terms of the rent are comparable to the market rates.

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BCKT - Project Costs 153.00 -

- Administrative Expenses 65.45 -

- Joint Venture BCKT is an associated company with common directors.

- CH. Karnchang Public Company Limited, a major shareholder of the Company, holds 25% of shares in Joint Venture BCKT.

- Mr. Plew Trivisvavet, a director of Joint Venture BCKT, is the Chairman of the Board of Directors and the Chairman of the Executive Committee of the Company.

- Construction and Other Payables (arising from lease transaction)

- -

- The Company entered into an office building lease agreement for an independent engineer under the employment conditions, with an approximate area of 200 sq.m. at the rental rate of Baht 25,500 per month, ending in September 2004. Before commencement of the services, the rental was recorded as project costs and will be recognised as administrative expenses after the commencement of the services.

- The rental rate is comparable to the market rates. However, the employment conditions were terminated, therefore, the transaction has ended.

- Project Costs (22,427.94) -

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

23,997.90 -

- The Company demanded payment for installation of the Emergency Egress Signage and Door Monitoring which the Company carried out such work in lieu of Joint Venture BCKT, as contractor for the civil infrastructure of the MRTA. The installation of the said equipment should have been completed in accordance with the contract. However, such work must be linked with the SCADA system of the Company, therefore, the Company must proceed with such work concurrently with the installation of the Company’s system and collect such expenses from Joint Venture BCKT, which have been settled.

- Such transaction is necessary and reasonable as it relates to the SCADA system, which is important for the safety of the system. This is also in accordance with the memorandum of agreement among Joint Venture BCKT, the MRTA and the Company. The costs of installation and the terms of the transaction are in line with the agreement among the three related parties. The terms of payment are as set out in the memorandum of agreement.

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Committee

The Company 6. Krung Thai

Bank Public Company Limited

- Accounts Payable: Long-term Loans

4,657,868.85 4,735,658.05

- Accrued Interest - -

- The terms are in the ordinary course of business under which commercial banks lend to general large-sized businesses.

- Interest Expenses 143,348.48 296,366.24

- Project Costs (Interest Expenses)

127,177.62 -

- Bank Fees - 146.40

- The Company entered into the Onshore Facilities Agreement with four Thai commercial banks, Krung Thai Bank Public Company Limited, TMB Bank Public Company Limited, Bank of Ayudhya Public Company Limited and Siam City Bank Public Company Limited, for the total amount of Baht 12,150 million to pay for the relevant project costs and the procurement of the M&E Equipment under the Concession Agreement.

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

- Mrs. Nongnutch Thienpaitoon, an executive of Krung Thai Bank Public Company Limited, is a director of the Company. - Net Accounts Receivable -

under Forward Contract 11,310.17 - - The Company executed a foreign

exchange forward contract with the lending banks to prevent foreign exchange risks in connection with the payment for procurement of the M&E Equipment. At present, the said contract has terminated.

- This is a transaction in the ordinary course of business. The prescribed exchange rate is comparable to the market rates.

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The Company - Project Costs

(Guarantee Fee) 215.70 - - The terms are in the ordinary

course of business for the same nature of transactions.

6. Krung Thai Bank Public Company Limited (Continued)


- Mrs. Nongnutch Thienpaitoon, an executive of Krung Thai Bank Public Company Limited, is a director of the Company.

- Letter of Guarantee Fees - 163.99

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

- Project Costs 4,280.00 -

- Bank Fees - 4,280.00

- The Company appointed Krung Thai Bank Public Company Limited as the Facility Agent according to the terms of the Onshore Facilities Agreement. The Company is required to pay fees at the rate specified in the fee letter as executed on the same date of the Onshore Facilities Agreement with the four financial institutions.

- The fees are based on the ordinary terms applied by the commercial banks in respect of major clients.

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interest



Committee

The Company 6. Krung Thai

Bank Public Company Limited (Continued)


- Mrs. Nongnutch Thienpaitoon, an executive of Krung Thai Bank Public Company Limited, is a director of the Company.

- Commercial Development Revenue

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

- This is a transaction in the ordinary course of business. The prescribed rental rate is at the same rate as applied to other customers.

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Necessity and Justification of the Related Party Transactions

At the Meeting of the Board of Directors No. 5/2005 on 24 May 2005, the Audit Committee jointly considered and reviewed the related party transactions, with the Company’s management, and opined that the transactions between the Company and persons or juristic persons who may have a conflict of interest were justified and necessary for the Company’s business operations.

Measures or Steps for the Approval of Related Party Transactions

The Company complied with the rules and regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand. In the case where the Company is entering into a related party transaction that may give rise to a conflict of interest, such a transaction must be approved by the Board of Directors and the Audit Committee would consider the justification of the transaction whilst taking into account the best interests of the Company. The determination of price and terms of the transaction must be based on the ordinary course of business and must be a fair price or be comparable to the market price. Furthermore, any person who has any interest or who may have a conflict of interest in connection with such transaction shall not be allowed to participate in the consideration and approval of such transaction.

A related party transaction that is necessary and urgent with a transaction value of not exceeding Baht 100,000 or, if more than one transaction, in aggregate of not exceeding Baht 2,000,000 within a 12-month period, may be carried out, provided that a report on each transaction must be made to the Audit Committee, indicating its necessity and justification of the transaction.

Policy or Future Trend of Related Party Transactions

The Company shall comply with the rules and regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand, including the rules on the disclosure of related party transactions as well as acquisition and disposition of assets of the Company or its Subsidiaries and the accounting standards as prescribed by the Federation of the Accounting Professions. If there are transactions which may give rise to conflict of interest in the future, such as, hiring a group of persons who may have conflict of interest to carry out construction, project management, project maintenance, the Board of Directors, with the Audit Committee, shall consider the necessity and justification of such transactions, including the determination of price and terms of the transactions, which must be based on the ordinary course of business. The price must also be compared with the price applicable to third parties or the market price. A person who has any interest shall not be allowed to participate in the consideration and approval of the transactions. The Company has no policy to extend or guarantee a loan for a person who may have a conflict of interest under the definition of the SEC.

In case that the Audit Committee does not have expertise to consider any particular related party transaction which may take place, the Company shall arrange for an independent expert or the Company’s auditor to opine on such related party transaction to support the decision-making of the Board of Directors and/or the Audit Committee or the shareholders, as the case may be. The Company will disclose the related party transactions in the notes to the financial statements that have been reviewed or audited by the Company’s auditor.

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13. Financial Condition and Results of Operations

13.1 Overview of the Results of Past Operations

The Company was awarded the Concession for the first underground mass transit system project in

Thailand for a Concession period of 25 years in relation to the M.R.T. Chaloem Ratchamongkhon Line

(Blue Line), which is the main route for the railway mass transit system connecting the north-west, north,

north-east and east of Bangkok to the city centre, and commenced its commercial services on 3 July 2004.

The Company has been responsible for the design, manufacture, supply, installation, testing,

commissioning and maintenance of the MRTA Initial System. The Company has been exclusively entitled

to collect fares and to operate commercial development activities, including advertising and leasing of

retail areas in the stations. Under the Concession Agreement, the Company is obliged to pay remuneration

to the MRTA at the rates as specified in the Agreement, comprising remuneration from fare revenue and

remuneration from commercial development. At the end of the Concession Agreement, the Company is

required to hand over the title to the M&E Equipment, including the depot and administration building, to

the MRTA according to the AOT (Acquire, Operate and Transfer) basis. The Company has licensed its

Subsidiaries to operate the main parts of its commercial development activities: (i) Metro Mall

Development Limited to manage the retail areas; (ii) Triads Networks Company Limited to operate

advertisements; and (iii) BMCL Network Limited to service and maintain equipment for

telecommunications systems. The Company will receive remuneration in the form of a percentage of its

Subsidiaries’ revenue before expenses and dividend income from its Subsidiaries.

The Company started the operation on 3 July 2004, and generated fare revenue and total revenue of

Baht 443.15 million and Baht 445.88 million, respectively, for the year 2004. For the year 2005, the

Company generated fare revenue and total revenue of Baht 990.39 million and 1,046.00 million,

respectively. The average daily passengers in 2005 (calculated from a total of 350 days of service)

amounted to 163,403 passengers, representing an increase from 147,458 passengers for the year 2004

(calculated from 3 July to 31 December 2004, a total of 182 days of service), or representing an increase of

10.81% from 2004.

Costs and expenses of the Company before the service commencement date related mostly to

project development, such as, management and consultant fees, design costs, electrical and mechanical

work and rolling stock, interest expenses and financial costs. These were capitalised as project costs and

amortised according to the number of passengers throughout the Concession period. The Company uses

the Unit of Throughput Amortization Method which complied with Thai GAAP and used by other

companies, such as, Bangkok Expressway Public Company Limited, Bangkok Mass Transit Public

Company Limited and The Eurotunnel, a train service provider in Europe. The Units of Throughput

Amortization Method takes into account the ratio between the actual number of passengers in each period,

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and the number of passengers in such period plus the forecasted number of passengers for the remaining

Concession period. The project cost amortisation will increase as the number of passengers increases

which will also result in an increase in fare revenue. The Company has a policy to regularly review the

forecasted number of passengers, particularly, in the event that the actual number of passengers differs

from the forecast by more than 20%. As the Company is in an early stage of operation, the initial revenue

of the Company may remain low as target passengers have been going through a period of behavior

adjustment and it would take some time for them to become familiar with the metro commute, which is a

rather new form of mass transit for Thailand. In addition, during the initial stage of service

commencement, the Company used a marketing strategy that included a fare reduction in order to attract

potential passengers, thereby rendering the Company’s revenue during the initial years to gradually

increase. Since the Company’s costs mainly comprised fixed costs, particularly, maintenance cost and

amortisation of the project cost, the Company and its Subsidiaries incurred net losses for the years 2003,

2004 and 2005 of Baht 72.49 million, Baht 957.21 million, and Baht 1,715.99 million, respectively.

Nevertheless, the Company is confident that the number of passengers on the M.R.T. Chaloem

Ratchamongkhon Line will increase continuously. This is evident from the increase in the average daily

passengers during the recent period due to the traffic congestion problems and the increase in oil prices. If

the other railway mass transit system projects in Bangkok which are being accelerated by the government

sector are completed, such event would well serve as a key factor to feed more passengers to the M.R.T.

Chaloem Ratchamongkhon Line, which will cause the number of passengers on the Company’s Chaloem

Ratchamongkhon Line to increase rapidly. Moreover, the Company has started to generate revenue from

commercial development since the third quarter of 2005, amounting to Baht 53.34 million for the Company

and its Subsidiaries in the year 2005. The expenses of the Company relating to commercial development

are not high as it uses the existing infrastructure to generate additional revenue. The Company is therefore

confident that the results of its operations will improve in the future.

With respect to the train collision accident at the Thailand Cultural Center Station on 17 January

2005, the damage to the station area and various systems have been repaired and tested by experts in the

Company, the MRTA and other relevant organisations to ensure the safety of the operation. The metro

service resumed on 1 February 2005. A repair to the damaged trains is expected to be completed in

October 2006. With respect to the damage to the trains and the systems at the station, the Company is

responsible for deductible of US$ 250,000 or approximately Baht 10.00 million which has been realised in

full as an expense during the period from January to September 2005. The expenses relating to the

accident over and above this amount are covered by the insurance companies. Medical expenses and other

compensation to injured passengers had been paid by the insurance companies.

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13.2 Analysis of Results of Operations

In analysing the results of operations of the Company and its Subsidiaries, as the Company started

to generate revenue from its operation since 3 July 2004, and for comparison purposes, the analysis will be

divided into two periods. The first period is for the first half of 2005 (1 January – 30 June 2005) compared

with the performance for the year 2004 (1 January – 31 December 2004), and the second period is for the

second half of 2005 (1 July – 31 December 2005) compared with the first half of 2005 (1 January – 30 June

2005). This comparison period was based on an equal six month operation.

Total Revenue

Total revenue of the Company and its Subsidiaries comprises fare revenue, fare compensation

revenue, revenue from commercial development and other income. Total revenue of the Company and its

Subsidiaries for the first six months of 2005 was Baht 402.04 million, representing a decrease from Baht

445.88 million for the year 2004, or a decrease of Baht 43.84 million, due to the fact that the average fare

during the first half of 2005 was 10.36% lower than the average fare for the year 2004 as a result of the

Company’s sales promotion policy and the reduced number of days of service caused by the train collision

accident in January 2005.

Total revenue of the Company and its Subsidiaries for the last six months of 2005 was Baht 643.97

million, representing an increase by Baht 241.93 million or an increase of 60.18% compared with total

revenue of Baht 402.04 million for the first six months of 2005. The result was mainly due to the increase

of Baht 190.34 million in fare revenue of the Company or an increase of 47.58%, and the increase of Baht

51.48 million in revenue from commercial development.

Fare Revenue

Fare revenue was the main source of revenue of the Company. For the year 2004, fare revenue

totaled Baht 443.14 million or 99.39% of total revenue, which was generated for a six month period (3 July

– 31 December 2004), with an average revenue per day of Baht 2.43 million (calculated from a total of 182

days of service). The average daily passengers amounted to approximately 147,458 passengers, with the

average daily fare per passenger of Baht 16.51 and the average trip length of 6.04 stations over this period.

Fare revenue in the first six months of 2005 was Baht 400.03 million (included the fare

compensation revenue of Baht 20.48 million), or representing an average revenue per day of Baht 2.41

million (calculated from a total of 166 days of services). The average daily passengers amounted to

approximately 161,896 passengers, with the average fare per passenger of Baht 14.88 and the average trip

length of 6.38 stations over this period. Fare revenue in the first six months of 2005 was approximately

9.73% less than fare revenue for the year 2004 although the average daily passengers increased by 9.79%

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74

as the average fare rate in the first six months of 2005 was 10.36% lower than the average fare rate for the

year 2004 due to the Company’s sales promotion policy. Moreover, the number of days of service in the

first six months of 2005 was lower than that for the year 2004 as a result of the train collision accident in

January 2005.

With respect to the results of operations for the last six months of 2005, the Company generated

fare revenue of Baht 590.36 million, or an average revenue per day of Baht 3.21 million (calculated from a

total of 184 days of service). The average daily passengers amounted to approximately 164,762

passengers, with the average fare per passenger of Baht 19.47 and the average trip length of 5.87 stations

over this period. The increase of total fare revenue was due to the total of 184 days of service for the last

six months of 2005, which was higher than the total of 166 days of service for the first six months of 2005.

Based on the day of service, the average fare revenue per day for the last six months of 2005 was Baht 3.21

million, representing an increase of 33.20% from the period of the first six months of 2005. The result was

due to the increase at 1.77% of the average daily passengers and the increase at 30.85% of the average fare

rate per passenger, compared with the first six months of 2005. The fare rate for the period of 7 January –

4 June 2005 was a special discounted fare rate as agreed between the Company and the MRTA to promote

the use of the metro service. From 5 June 2005, the fare rate was adjusted at a discount of 15 – 20% from

the fare rate per the Concession Agreement. The fare rate was re-adjusted according to the Concession

Agreement on 1 October 2005, representing the increasing average fare rate for the last six months of 2005.

Fare Compensation Revenue

The Company received fare compensation revenue from the MRTA for the first six months of

2005 totaling Baht 20.48 million for the Company’s cooperation with the MRTA to test discounted fare

rates of the M.R.T. Chaloem Ratchamongkhon Line from those specified under the Concession Agreement

from 7 January 2005 to 4 June 2005. The MRTA agreed to compensate the Company for an amount equal

to 80% of the shortfall of actual revenue received by the Company each day from the revenue specified in

the memorandum of agreement dated 6 January 2005. Such fare compensation revenue applies only to the

special fare rate period during the first six months of 2005.

Commercial Development Revenue

Apart from the right to operate the metro service, the Company is also entitled to solely conduct

the commercial development under the Concession Agreement. Commercial development revenue can be

divided into two categories as follows:

1) The Company has granted the rights directly to other companies, generating rental income

from lease of space for ATM services, public telephone services, Platform Screen Doors (PSDs) for media

advertisements, LCD installation inside the trains and plasma screen installation in the station areas.

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2) The Company has granted the rights to its Subsidiaries for management, generating rental

income from retail spaces in the stations and the basement level in the Lat Phrao park and ride facility (by

Metro Mall Development Limited), still advertising medias in the trains and station areas (by Triads

Networks Company Limited), and service and maintenance of telecommunications system equipment (by

BMCL Network Limited).

For the last six months of 2005, the Company and its Subsidiaries generated revenue from the

commercial development of Baht 52.14 million, representing an increase of Baht 50.94 million from Baht

1.20 million from advertising revenue and rental income from public telephone service in the first six

months of 2005. The high increasing commercial development revenue in this last six month period

comprised revenues mainly from (i) Triads Networks Company Limited, which started its advertising

operations in June 2005, accounting for an increase of Baht 35.77 million; (ii) Metro Mall Development

Limited, which started to operate the first rental space areas at Sukhumvit Station in September 2005 and

the second at Phahon Yothin Station in December 2005, accounting for an increase of Baht 4.75 million;

and (iii) the ATM installation, accounting for Baht 10.41 million.

Other Income

Other income of the Company and its Subsidiaries comprises interest income and profit from sale

of assets.

For the first six months of 2005, the Company and its Subsidiaries generated other income totaling

Baht 1.08 million, representing a decrease from Baht 1.43 million for the same period of 2004, mainly due

to the reduction of interest income from the decrease of available cash during the period. For the last six

months of 2005, the Company and its Subsidiaries generated other income totaling Baht 1.19 million,

representing a slight increase of Baht 0.11 million or 10.19% from the first six months of 2005.

Total Expenses

Total expenses of the Company and its Subsidiaries mainly comprise cost of fare, commercial

development cost, amortisation of project costs and selling and administrative expenses. For the first six

months of 2005, the total expenses amounted to Baht 1,010.83 million which was 3.31% lower than the

total expenses of Baht 1,045.48 million for the year 2004, due to a decrease in selling and administrative

expenses.

For the last six months of 2005, the Company and its Subsidiaries had total expenses of Baht

949.83 million which decreased from total expenses of Baht 61.00 million for the first six months of 2005,

representing a decrease of 6.03%. The Company recorded the selling and administrative expenses at an

increase of approximately Baht 89 million for the first six months of 2005 due to the Company’s presenting

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the said amount to Their Majesties the King and the Queen for charity purposes at the discretion of their

Majesties (from fare revenue during the period of 3 July 2004 – 12 August 2004). In addition, the

Company and its Subsidiaries had the increased costs of commercial and development of Baht 33.11

million due to the commencement of two Subsidiaries’ operations.

Cost of Fare

The cost of fare mainly comprises project management costs, maintenance costs, insurance

premiums, and public utilities costs, such as, electricity and water supply, salary and welfare costs of staff

and remuneration to the MRTA.

The cost of fare for the first six months of 2005 was Baht 704.10 million, consisting mainly of

expenses for the maintenance of the M&E Equipment and the civil infrastructure of Baht 313.86 million,

expenses for project management and insurance premiums of Baht 85.34 million, expenses for public

utilities of Baht 165.21 million, salary and welfare for staff of Baht 101.25 million, and remuneration to the

MRTA of Baht 3.80 million. The cost of fare slightly increased by Baht 29.63 million from the year 2004

which was Baht 674.47 million due to the increase of the maintenance expenses of the M&E Equipment

and trackwork of Baht 28.92 million. For the year 2004, the cost of fare amounted to Baht 674.47 million,

consisting mainly of expenses for the maintenance of the M&E Equipment and the civil infrastructure of

Baht 288.66 million, expenses for project management and insurance premiums of Baht 91.00 million,

expenses for public utilities of Baht 164.00 million, salary and welfare for staff of Baht 102.68 million, and

remuneration to the MRTA of Baht 4.43 million.

The Company’s cost of fare for the last six months of 2005 was Baht 713.30 million, consisting

mainly of expenses for the maintenance of the M&E Equipment and the civil infrastructure of Baht 288.58

million, expenses for project management and insurance premiums of Baht 94.45 million, expenses for

public utilities of Baht 188.12 million, salary and welfare for staff of Baht 105.91 million, and

remuneration to the MRTA of Baht 5.90 million. The cost of fare increased by Baht 9.20 million mainly

due to the increased insurance premiums caused by the train collision accident in early 2005.

Commercial Development Cost

In June 2005, the Company and its Subsidiaries first started to generate the commercial

development revenue, thereby incurring the commercial development cost of Baht 0.41 million for the first

six months of 2005, which increased by Baht 33.51 million for the last six months of 2005. The

commercial development cost mainly comprises the remuneration to the MRTA of Baht 6.68 million,

system maintenance costs and public utilities costs of Baht 14.26 million, and costs of operations of the

Subsidiaries directly due to the commercial development of Baht 5.94 million.

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Amortisation of Project Costs

The amortisation of project costs for the first six months of 2005 was Baht 94.37 million,

representing a slight decreased from Baht 125.00 million in the year 2004. For the last six months of 2005,

the amortisation of project costs was Baht 77.34 million.

Selling and Administrative Expenses

The selling and administrative expenses of the Company and its Subsidiaries for the first six

months of 2005 amounted to Baht 211.95 million, representing a decrease from the year 2004 of Baht

32.71 million or a decrease of Baht 121.71 million, excluding the total fare revenue of Baht 89 million

collected from 3 July 2004 to 12 August 2004 which was presented to Their Majesties the King and Queen,

as this amount was not an ordinary expense regularly incurred. The decrease in selling and administrative

expenses was mainly due to a decrease in advertising expenses, public relations expenses and advisory

fees.

For the last six months of 2005, the selling and administrative expenses of the Company and its

Subsidiaries amounted to Baht 125.67 million, representing a slight increase of Baht 2.72 million or 2.21%

higher than the selling and administrative expenses for the first six months of 2005 which amounted to

Baht 122.95 million (excluding the extraordinary expense of Baht 89 million).

Interest Expenses

Before the commencement of its commercial operations, interest expenses incurred from

borrowings were capitalised as part of project costs. Interest expenses for the year 2004, the first six

months of 2005 and the last six months of 2005, were Baht 375.90 million, Baht 378.99 million and Baht

432.01 million, respectively. The increase of interest expenses was due to the drawdown on additional

long-term loans and the increased interest rates.

Net Profit and Loss

The results of operations of the Company and its Subsidiaries for the past three years of 2003,

2004 and 2005 showed net losses of Baht 72.49 million, Baht 957.21 million, and Baht 1,715.99 million,

respectively. In 2003, the Company had not yet commenced its operations, therefore, the majority of

expenses incurred were capitalised as project costs and amortised throughout the Concession period

according to the Units of Throughput Amortization Method. In 2004 and 2005, the costs incurred after the

operation commencement were treated as expenses for the respective years, resulting in increase of net

losses in the income statements, as compared to 2003.

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The net loss incurred during the last six months of 2005 was Baht 736.21 million, lower than that

for the first six months of 2005 which was Baht 979.78 million, representing a decrease of Baht 243.57

million mainly due to the increase of fare revenue and commercial development revenue.

The net loss generated in the early years of operation is common for investments in large-scale

public infrastructure projects. The Company’s initial revenue from operations was insufficient to cover all

expenses incurred which were mainly fixed costs under the relevant contracts, such as, maintenance costs,

project management costs, project cost amortisation, depreciation and other amortisation including interest

expense. The number of passengers using the metro may be rather low during the initial stage as it would

take some time for passengers to become familiar with the railway mass transit, which is a new mass transit

system. In addition, the Company had to use a favorable pricing policy to attract passengers and therefore

fares were not at the normal rates. The management of the Company is however confident that the number

of passengers using the M.R.T. Chaloem Ratchamongkhon Line will increase substantially resulting in

improved results of operations of the Company in the near future.

As at 31 December 2005, the Company and its Subsidiaries had the total accumulated losses of

Baht 2,836.20 million.

13.3 Analysis of Financial Position

Assets

Assets of the Company and its Subsidiaries consist mainly of cash and cash equivalents, amounts

due from related parties, other current assets, project costs, equipment and other non-current assets.

As at 31 December 2004, the Company and its Subsidiaries had total assets of Baht 19,305.65

million, representing an increase of Baht 3,165.65 million or 19.61% from Baht 16,140.00 million as at 31

December 2003. This was mainly due to the increase in project costs relating to the M&E Equipment for

the train operation, and investment in infrastructure for commercial development by the Subsidiaries,

including an increase in cash and cash equivalents. The main sources of funds were long-term loans and a

capital increase of the Company in 2004.

As at 31 December 2005, the Company and its Subsidiaries had total assets of Baht 19,731.50

million, representing an increase of Baht 425.85 million or 2.21% from Baht 19,305.65 million as at 31

December 2004. The increase was due to additional investment in project costs of Baht 420.58 million

which comprises the M&E Equipment for the train operation, telecommunications equipment and

infrastructure for retail areas in the stations as well as the increase of cash and cash equivalents of Baht

98.76 million.

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Cash and Cash Equivalents

Cash and cash equivalents as at 31 December 2004 amounted to Baht 343.92 million, representing

an increase of Baht 167.81 million from Baht 176.11 million as at 31 December 2003 due to an increase in

the Company’s capital of Baht 1,245.22 million and drawdowns on additional long-term loans of Baht

2,103.00 million for investment in the metro system and various equipment.

Cash and cash equivalents as at 31 December 2005 amounted to Baht 442.68 million, representing

an increase of Baht 98.76 million from Baht 343.92 million as at 31 December 2004. The increase was

28.72% due to, during late 2005, sponsor loan and drawdowns on long-term loans from financial

institutions, as well as the offering of new ordinary shares to the directors, management and staff of the

Company.

Accounts Receivable

As at 31 December 2005, the Company and its Subsidiaries had accounts receivable of Baht 21.62

million from commercial development operations of its Subsidiaries, consisting of accounts receivable

from advertisement procurement of Baht 17.29 million and leasing of retail areas of Baht 4.33 million.

The Company had no accounts receivable as at 31 December 2004 because the Subsidiaries started the

operations in 2005.

Amounts Due from Related Parties

As at 31 December 2004, the Company and its Subsidiaries had amounts due from related parties

of Baht 25.08 million, most of which were amounts invoiced by the Company for installation of emergency

egress signage and door monitoring from Joint Venture BCKT. These amounts were subsequently paid in

accordance with the conditions in the memorandum of agreement. As a consequence, as at 31 December

2005, the Company and its Subsidiaries had amounts due from related parties of only Baht 0.09 million,

relating mainly to the business traveller stored value cards as New Year souvenirs.

Short-term Loan to other company

As at 31 December 2005, Triads Networks Company Limited had the short-term loan to other

company of Baht 2.50 million.

Other Current Assets

Other current assets as at 31 December 2004 totaled Baht 127.02 million, mainly consisting of

accounts receivable under forward contracts, prepaid expenses, and other accounts receivable, representing

an increase of Baht 67.69 million or 114.09% from total other current assets of Baht 59.33 million as at 31

December 2003. This was mainly due to an increase in prepaid expenses from insurance premiums

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incurred after the commencement of the operations, consisting of premiums for Property All Risk

Insurance, premiums for Terrorism Insurance and premiums for other insurance. The increase in prepaid

insurance premiums for the year 2004 was Baht 52.50 million.

Other current assets of the Company and its Subsidiaries as at 31 December 2005 totaled Baht

155.83 million, mainly consisting of prepaid expenses of Baht 77.59 million, stored value card inventory of

Baht 28.05 million, and accrued income of Baht 22.34 million. These represented an increase of Baht

28.81 million or 22.68% from other current assets of Baht 127.02 million as at 31 December 2004. The

increase was mainly due to an increase in prepaid expenses of Baht 21.11 million, representing an increase

in accrued income of Baht 22.30 million, and an increase in the stored value card inventory of Baht 22.90

million. Accounts receivable under forward contracts and other accounts receivable decreased by Baht

24.05 million and Baht 20.20 million, respectively.

Advance Payment for Construction

As at 31 December 2005, the Company and its Subsidiaries paid an advance for construction of

Baht 12.42 million resulting from Metro Mall Development Limited employing CH. Karnchang Public

Company Limited to construct retail areas in the stations, with a total project value of Baht 292.50 million.

Under the construction contract, an advance payment for construction was charged at 15% of the total

construction cost.

Project Costs

Costs and expenses for project development, such as, project management costs, advisory costs,

design costs for the M&E Equipment, the depot and administration building, interest expenses and other

financial expenses, including additional expenses due to an acceleration in the procurement of equipment

of approximately Baht 500 million were recorded as project costs. The total project costs of the Company

as at 31 December 2004 were Baht 18,448.72 million, representing an increase of Baht 2,589.53 million

from Baht 15,859.19 million as at 31 December 2003.

The net project costs as at 31 December 2005 were Baht 18,697.59 million, representing an

increase of 1.35% from 31 December 2004. The increase was due to the completion of the M&E

Equipment and the commencement of the operations. In 2005, the Company made payment for the M&E

Equipment, telecommunications system in the stations, and investment in public utility system for retail

spaces in the stations in the total amount of Baht 339.09 million.

Net Equipment

As at 31 December 2004, the Company and its Subsidiaries had net equipment with a total value of

Baht 321.30 million, representing an increase from Baht 39.73 million as at 31 December 2003 due to

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investment by the Subsidiaries in the decoration of leased spaces of approximately Baht 210.13 million and

in telecommunications equipment of Baht 42.13 million.

As at 31 December 2005, the Company and its Subsidiaries had net equipment with a total value of

Baht 364.62 million, representing a slight increase of Baht 43.32 million from Baht 321.30 million as at 31

December 2004. The increase was mainly due to investment in the leased spaces of approximately Baht

20.32 million and in advertising equipment of Baht 22.00 million.

Total Liabilities

As at 31 December 2004, the Company and its Subsidiaries had total liabilities of Baht 12,585.10

million, representing an increase of Baht 2,686.95 million from Baht 9,898.16 million as at 31 December

2003 or a 27.15% increase, mainly due to an increase in long-term loans and construction payables.

Total liabilities as at 31 December 2005 was Baht 14,314.24 million, representing an increase of

Baht 1,729.13 million from Baht 12,585.10 million as at 31 December 2004, due to increases in long-term

loans from shareholders and accrued interest of Baht 1,438.75 million, long-term loans from financial

institutions of Baht 199.00 million, and bank overdrafts and short-term loans from financial institutions of

the Subsidiaries of Baht 16.25 million.

Construction and Other Payables

Construction and other payables of the Company and its Subsidiaries as at 31 December 2004

amounted to Baht 572.41 million consisting of accounts payable to related parties and other companies of

Baht 204.17 million and Baht 368.25 million, respectively, as a result of a substantial increase in

construction payables of Baht 492.34 million from Baht 80.08 million in 2003 or representing a 614.80%

increase. The increase was mainly due to Metro Mall Development Limited employing CH. Karnchang

Public Company Limited to carry out construction of retail areas in 11 stations, with a total project value of

Baht 292.50 million.

As at 31 December 2005, construction and other payables of the Company and its Subsidiaries

amounted to Baht 591.70 million consisting of accounts payable to related parties and other companies of

Baht 291.71 million and Baht 299.99 million, respectively, representing an increase of Baht 87.55 million

from accounts payable to related parties as at 31 December 2004. The increase was due to accrued project

management payables of Baht 83.13 million. The accounts payable to other companies decreased by Baht

68.26 million from 31 December 2004.

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Unearned Fare Revenue

Unearned fare revenue was derived from the sale of stored value cards. The Company records

revenue from the sale of stored value cards as unearned fare revenue, which will be gradually recognised as

revenue when passengers use the stored value cards. As at 31 December 2005, the Company had unearned

fare revenue of Baht 33.19 million, representing an increase of Baht 11.33 million or 51.84% from Baht

21.86 million as at 31 December 2004. Passengers have increasingly shown a preference for using stored

value cards as evidenced by the increase in the ratio of passengers using tokens to passengers using stored

value cards for the years 2004 and 2005 was 74:26 and 56:44, respectively.

Long-term Loans

Long-term loans of the Company and its Subsidiaries as at 31 December 2004 and 31 December

2005 were Baht 11,915.50 million and Baht 12,114.50 million, respectively, (including current portion of

long-term loans), comprising long-term loans under the following agreements:

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Summary of the Company’s Long-term Loan Agreements

Type of Long-term Loan Facilities

Facility Amount Objectives Interest/Fee Repayment Conditions

1) Long-term loan facilities from onshore syndicated lenders (Onshore Facilities Agreement): Tranche A

- Total facility amount of Baht 11,000 million

- Amount drawn as at 31 December 2005 was Baht 11,000 million

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

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

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

- MLR for the period after the project completion date

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

Year Repayment of Principal (%)

2006 1.0%

2007 3.0%

2008 5.0%

2009 7.0%

2010 8.0%

2011 10.0%

2012-2014 12.0% per annum

2015 14.0%

2016 16.0%

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Type of Long-term Loan Facilities

Facility Amount Objectives Interest/Fee Repayment Conditions

2) 2nd supplement to the loan agreement: Tranche D

- Total facility amount of Baht 500 million

- Amount drawn as at 31 December 2005 was Baht 500 million

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

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

- MLR per annum after the project completion date.

- Full principal repayment in June 2017

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

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

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

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

- Full principal repayment in June 2017

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Shareholders’ Equity

As at 31 December 2004, shareholders’ equity of the Company and its Subsidiaries was Baht

6,720.54 million, representing an increase of Baht 478.70 million from the end of the year 2003 due to the

Company’s capital increase and call for share payment from Baht 6,404.84 million to Baht 7,250.00 million.

Shareholders’ equity of the Company and its Subsidiaries as at 31 December 2005 was Baht

5,417.26 million, representing a decrease of Baht 1,303.28 million or 19.39% from Baht 6,720.54 million as

at 31 December 2004. The decrease was mainly due to an increase in the Company’s net loss by Baht

1,716.00 million from the year 2005, which was common in the early years of investment in infrastructure

project. In December 2005, the Company obtained a capital increase from the offering of new shares to the

directors, management and staff in the amount of Baht 296.69 million.

Liquidity

As at 31 December 2005, the Company and its Subsidiaries had cash and cash equivalents of Baht

442.68 million, representing a net increase of Baht 98.76 million as at 31 December 2004, as per the details

as follows:

Cash Flow from Operating Activities

The net cash flow from operating activities of the Company and its Subsidiaries was Baht 374.21

million, Baht 303.00 million and Baht 1,445.25 million for the years 2003, 2004 and 2005, respectively,

representing the operating expenditure more than operating revenue. This was due to the fact that the

Company commenced operations and actually generated revenue in the middle of 2004. As the nature of the

Company’s business is a provision of infrastructure service, it requires a certain period of time for the

number of passengers to increase, while the operating expenditure did not vary by the number of passengers.

Cash Flow from Investing Activities

For the year 2003, the net cash flow used in investing activities of the Company and its Subsidiaries

was Baht 6,537.13 million, mostly comprising investments in project costs and equipment of Baht 6,613.36

million and Baht 33.07 million, respectively, which related to the Company’s investment in the M&E

Equipment. Cash flow used in investing activities of the Company and its Subsidiaries in the year 2004

decreased significantly from the year 2003 to Baht 3,047.01 million, due to completion of the M&E

Equipment ready for service, and decreased to merely Baht 501.33 million in the year 2005.

Cash Flow from Financing Activities

For the year 2003, the cash flow from financing activities of the Company and its Subsidiaries was

Baht 7,079.53 million, resulting from the drawdowns on long-term loans of Baht 4,077.50 million and an

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increase in capital of Baht 3,002.03 million. Similarly in the year 2004, the Company drew down Baht

2,103.00 million on its long-term loans, and increased the registered capital from Baht 6,800.00 million to

Baht 7,350.00 million and call for share payment in respect of the existing shares and partial payment of the

new shares, in the total amount of Baht 1,245.22 million.

For the year 2005, cash flow from financing activities of the Company and its Subsidiaries totaled

Baht 2,045.33 million. Sources of funds comprised loans from financial institutions of Baht 215.25 million

and long-term loans of Baht 1,403.00 million from CH. Karnchang Public Company Limited for use as

working capital pursuant to the sponsor support agreement. From January to March 2005, the Company had

a cash inflow of Baht 130.39 million from the issue and allocation of 43.46 million new shares for capital

increase at the offering price of Baht 3 per share, and during December 2005, from the issue and allocation

of Baht 296.69 million new shares for capital increase at the offering price of Baht 1 per share to directors,

management and staff.

The Company’s total liquidity was from the capital increase, long-term loans from financial

institutions, including financial support from the Company’s major shareholder, namely, CH. Karnchang

Public Company Limited, in the form of the sponsor support subordinated loan. This was because in the

initial stage, the Company’s revenue was not sufficient to cover various expenses and interest incurred.

Apart from funding from financial institutions and the Company’s major shareholder, the Company

expects to raise funds on the Stock Exchange of Thailand and from sale of capital increase shares to the

MRTA, which will improve the Company’s liquidity. The Company will use the proceeds from the capital

increase to repay part of the loans from financial institutions to reduce the Company’s interest expense

burden, and appropriately improve the financial structure.

Auditor’s Fee

For the fiscal year ended 31 December 2005, the audit fees paid to the Company’s auditor, namely,

Ernst and Young Office Limited, totaled Baht 1,180,000.00, which included the audit fees of the Company

and its Subsidiaries as detailed below:

Summary of the Company and the Subsidiaries’ Audit Fees in 2005

Company Auditor Audit Fee (Baht) Bangkok Metro Public Company Limited Ruth Chaowanagawi 700,000.00 BMCL Network Limited Siraporn Ouaanunkun 110,000.00 Triads Networks Company Limited Siraporn Ouaanunkun 180,000.00 Metro Mall Development Limited Siraporn Ouaanunkun 190,000.00

Total Audit Fees 1,180,000.00

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The Company and its Subsidiaries had no other non-audit fees payable to the auditors, the auditing

firm of which the auditor is a member, and any person or business relating to the auditors and the auditing

firm of which the auditor is a member.

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14. Significant Activities in the Year 2005

In the year 2005, the Company organised significant activities as follows:

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

Thai Children’s Day with the Metro

Wedding Bells Ringing on the Valentine’s Day 2005

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

Elders on the Metro

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

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1st Anniversary of Operation of the M.R.T. Chaloem Ratchamongkhon Line Project

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

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

White Cane Rally 2005

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

Safety Zone Program

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

The Company’s Booth in SET in the City

Training and Drills on “Crisis Management in the M.R.T. Chaloem Ratchamongkhon Line System”

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

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

M.R.T. Visits Educational Institutes

The National Safety Week

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

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

The Board of Directors realizes the significance of its duties and responsibilities in supervising the

Company’s business to ensure good management in accordance with laws, detailed objectives and the

Company’s Articles of Association, as well as resolutions of the shareholders meetings with integrity and

prudence. The Board of Directors protects the benefits of the Company and shareholders by ensuring that

the Company’s financial report contains accurate and full accounting records that reflect the Company’s

actual financial condition and results of its operations.

The Board of Directors established the Audit Committee comprising independent directors fully

qualified in accordance with the requirements of the Stock Exchange of Thailand to review and ensure

accuracy and sufficiency of the financial report, including accurate and complete disclosure of related party

transactions or transactions with conflict of interest, in compliance with the requirements of the Stock

Exchange of Thailand and relevant rules and regulations. In this regard, the Audit Committee has already

reported their performance to the Board of Directors.

The Board of Directors is of the opinion that the financial statements for the year 2005 of the

Company and its Subsidiaries present fairly, in all material aspects, the financial condition and the results of

operations of the Company and its Subsidiaries in accordance with generally accepted accounting

principles.

(Mr. Plew Trivisvavet) (Dr. Sombat Kitjalaksana)

Director Director

Annual Report 2005

16. Audit Committee’s Report

The 2005 Annual Ordinary General Meeting of Shareholders of Bangkok Metro Public

Company Limited, which was held on April 29, 2005, resolved to appoint the Audit Committee of

Bangkok Metro Public Company Limited, comprising three qualified persons in the fields of law, finance

and corporate management, namely, General Chetta Thanajaro, as the Audit Committee Chairman,

Lieutenant General Surat Samrith and Mr. Vitoon Tejatussanasoontorn, as the Audit Committee

members. In the year 2005, the Audit Committee had three meetings with the high level executives and

the management of the Company, and assigned the Company’s executives in the main lines of work to

present results of the Company’s operations, and also had meetings with Ernst & Young Office Limited,

the Company’s auditor, to review the Company’s financial reports.

The Audit Committee has performed and been responsible for its duties as assigned by the

Company’s Board of Directors, in accordance with the regulations of Bangkok Metro Public Company

Limited on the rules and guidelines for practice of the Audit Committee in line with the requirements of

the Stock Exchange of Thailand, as may be summarized as follows:

1. The Audit Committee, along with the management and Ernst & Young Office Limited,

jointly reviewed the quarterly and 2005 annual financial statements in compliance with generally

accepted accounting standards so as to ensure the correctness and reliability of the accounting system and

its financial reports, as well as the sufficient disclosure of information in the financial statements. The

Audit Committee also emphasized on review of related party transactions between the Company, and its

subsidiaries and associated companies to ensure that the Company has executed the transactions in the

ordinary course of business and in accordance with the rules as set forth by the Stock Exchange of

Thailand, as well as disclosed sufficient information, for the benefits of investors.

In review of the financial statements and compliance with applicable regulations and laws,

the Audit Committee is of the opinion that the Company has complied with the applicable laws, and its

accounting system and financial reports are correct and reliable.

2. The Audit Committee reviewed the evaluation of the Company’s internal control system,

which is sufficient for the business operations and achieves the objectives of the internal control in

respect of effectiveness and efficiency of its operation in resource utilization, which include the asset

monitoring, prevention or minimization of error, damage, leakage, consumption or dishonesty, reliability

of the financial reports and results of operations, compliance with laws, rules and regulations, in respect

of which the Company’s auditor was of the common opinion that neither material fault nor problem were

found. In the year 2005, the internal control evaluation undertaken by the Company’s management

resulted that the Company’s internal control system was sufficient and effective.

93

Annual Report 2005

3. The Audit Committee supervised the internal audit to be in line with the approved plan

by reviewing the audit report for the year 2005 so as to ensure efficient and effective operation with good

internal control system and compliance with the law on securities and exchange or the law relating to the

business of the Company, and follow up the amendment in accordance with the audit report in material

issues for the good corporate governance.

In addition, the Audit Committee has considered the audit plan for the year 2006 which was

prepared based on the Company’s internal control evaluation and risk base by planning an audit,

operation in relation to management for maintenance of main operating equipment, security system of

the train system and revenue collection reporting system, compliance with the law on the listed

companies on the Stock Exchange of Thailand, and enforcement of applicable rules and regulations for

the staff of the Company. This is to ensure that the scope of the audit plan covers all material issues,

accommodates the prevention from possible risk, provides appropriate internal control for the corporate

risk management and brings optimum benefits to the Company and its shareholders.

Furthermore, the Audit Committee proposed the Board of Directors to consider nominating

either Miss Siraporn Ouaanunkun, Certified Public Accountant No. 3844, and/or Mr. Narong Puntawong,

Certified Public Accountant No. 3315, and/or Mr. Supachai Phanyawattano, Certified Public Accountant

No. 3930, of Ernst & Young Office Limited as the Company’s auditor for the year 2006, with the

auditing fee in the total amount of not exceeding Baht 870,000, so as to propose such nomination to the

Ordinary General Meeting of Shareholders for further approval.

(General Chetta Thanajaro)

Chairman of the Audit Committee

94

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95

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES REPORT AND FINANCIAL STATEMENTS

31 DECEMBER 2005 AND 2004

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96

Report of Independent Auditor To The Board of Directors and Shareholders of


I have audited the consolidated balance sheets of Bangkok Metro Public Company Limited and its

subsidiaries as at 31 December 2005 and 2004, and the related consolidated statements of earnings,

changes in shareholders’ equity and cash flows for the years then ended, and the separate financial

statements of Bangkok Metro Public Company Limited for the same periods. These financial statements

are the responsibility of the Company’s management as to their correctness and the completeness of the

presentation. My responsibility is to express an opinion on these financial statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require

that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are

free of material misstatement. An audit includes examining on a test basis, evidence supporting the

amounts and disclosures in the financial statements. An audit also includes assessing the accounting

principles used and significant estimates made by management, as well as evaluating the overall financial

statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the

financial position of Bangkok Metro Public Company Limited and its subsidiaries, and of Bangkok Metro

Public Company Limited as at 31 December 2005 and 2004, and the results of their operations, and cash

flows for the years then ended in accordance with generally accepted accounting principles.

Ruth Chaowanagawi

Certified Public Accountant (Thailand) No. 3247

Ernst & Young Office Limited Bangkok : 22 February 2006

Annual Report 2005

97

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS

AS AT 31 DECEMBER 2005 AND 2004(Unit : Baht)

Consolidated The Company OnlyNote 2005 2004 2005 2004

ASSETSCURRENT ASSETS Cash and cash equivalents 4 442,679,757 343,922,521 439,214,530 318,574,003 Trade accounts receivable 5 21,617,491 - - - Amounts due from related parties 12 92,720 25,076,391 9,389,769 26,146,391 Short-term loan to other company 2,500,000 - - - Other current assets Accounts receivable under forward contracts - 24,048,906 - 24,048,906 Prepaid expenses 77,592,175 56,484,409 77,206,137 56,080,925 Value added tax refundable 6,751,387 6,097,038 - - Other receivable 1,028,080 21,225,386 936,550 21,222,659 Unbilled input tax 8,300,466 7,433,652 - - Accrued income 22,340,051 41,037 22,309,643 41,037 Inventory - tickets 28,048,676 5,152,606 28,048,676 5,152,606 Others 11,764,985 6,540,506 803,458 -TOTAL CURRENT ASSETS 622,715,788 496,022,452 577,908,763 451,266,527 NON-CURRENT ASSETS Investments accounted for under equity method - subsidiaries 6 - - 66,079,297 67,027,548 Advance payment for construction - related company 12 12,421,987 15,279,307 - - Project costs, net 7 18,697,589,344 18,448,719,738 18,697,589,344 18,448,719,738 Equipment, net 8 364,624,874 321,297,823 64,618,271 60,308,087 Other non-current assets Goodwill on consolidation, net 11,527,032 6,020,102 - - Others 22,622,331 18,308,585 19,318,850 16,383,101 TOTAL NON-CURRENT ASSETS 19,108,785,568 18,809,625,555 18,847,605,762 18,592,438,474 TOTAL ASSETS 19,731,501,356 19,305,648,007 19,425,514,525 19,043,705,001

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

Annual Report 2005

98

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS (Continued)



LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIES Bank overdraft and short-term loan from financial institution 9 16,250,540 - - - Construction and other payable Related parties 12 291,710,920 204,165,003 83,816,667 11,543,361 Other companies 299,988,130 368,247,976 286,886,683 360,286,803 Current portion of long-term loans 10, 12 110,000,000 - 110,000,000 - Unearned fare box revenue 33,194,529 21,862,294 33,194,529 21,862,294 Deposits on stored value ticket 17,712,142 8,085,592 17,712,142 8,085,592 Other current liabilities Withholding tax payable 5,229,886 5,276,706 4,747,245 4,517,676 Deferred premium on forward contracts - 15,006,230 - 15,006,230 Retention for construction 4,720,246 4,026,033 2,759,523 3,220,274 Accrued interest - related company 12 17,203,162 4,183,290 - - Accrued expense 29,900,783 790,854 28,838,371 147,743 Others 3,561,930 4,208,706 2,040,861 4,080,144 TOTAL CURRENT LIABILITIES 829,472,268 635,852,684 569,996,021 428,750,117 NON-CURRENT LIABILITIES Long-term loans, net of current portion 10, 12 12,004,500,000 11,915,500,000 12,004,500,000 11,915,500,000 Long-term loans from shareholder and accrued interest 11, 12 1,438,752,812 - 1,438,752,812 - Deferred leasehold right revenue 26,655,035 22,110,000 - - Guarantee on rental and service agreement 14,653,000 11,500,988 - - Provision for loss on investments in subsidiaries 6 - - 1,725,112 - Other non-current liabilities 204,436 140,175 - -TOTAL NON-CURRENT LIABILITIES 13,484,765,283 11,949,251,163 13,444,977,924 11,915,500,000 TOTAL LIABILITIES 14,314,237,551 12,585,103,847 14,014,973,945 12,344,250,117


Annual Report 2005

99




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

Issued and paid up 7,350,000,000 ordinary shares of Baht 1 each, fully paid (2004 : 7,250,000,000 ordinary shares of Baht 1 each, fully paid) 7,350,000,000 7,250,000,000 7,350,000,000 7,250,000,000 Share premium 600,051,778 400,051,778 600,051,778 400,051,778 Share subscription received in advance 13 296,689,300 169,608,738 296,689,300 169,608,738 Deficit (2,836,200,498) (1,120,205,632) (2,836,200,498) (1,120,205,632) Total equity attributable to Company's shareholders 5,410,540,580 6,699,454,884 5,410,540,580 6,699,454,884 Minority interest - Equity attributable to minority shareholders of subsidiaries 6,723,225 21,089,276 - -TOTAL SHAREHOLDERS' EQUITY 5,417,263,805 6,720,544,160 5,410,540,580 6,699,454,884 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 19,731,501,356 19,305,648,007 19,425,514,525 19,043,705,001


Annual Report 2005

100

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES EARNINGS STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004(Unit : Baht)


REVENUES Fare box revenue 969,908,851 443,144,725 969,908,851 443,144,725 Fare box compensation revenue 14 20,481,123 - 20,481,123 - Commercial development revenue 53,337,532 - 23,820,815 - Other income 2,275,970 2,738,054 3,210,996 2,565,199 TOTAL REVENUES 1,046,003,476 445,882,779 1,017,421,785 445,709,924 EXPENSES Costs of fare box 1,417,401,451 674,470,360 1,417,401,451 674,470,360 Cost of commercial development 33,921,037 - 27,576,637 - Amortisation of project costs 171,711,851 124,991,370 171,711,851 124,991,370 Selling and administrative expenses 337,618,788 244,662,035 274,662,541 195,219,911 Share of loss from investments accounted for under equity method - 1,355,358 45,113,342 41,532,452 TOTAL EXPENSES 1,960,653,127 1,045,479,123 1,936,465,822 1,036,214,093 LOSS BEFORE INTEREST EXPENSES (914,649,651) (599,596,344) (919,044,037) (590,504,169) INTEREST EXPENSES 12 (810,999,573) (375,897,773) (796,950,829) (366,706,072) LOSS BEFORE MINORITY INTEREST (1,725,649,224) (975,494,117) (1,715,994,866) (957,210,241) MINORITY INTEREST 9,654,358 18,283,876 - -NET LOSS FOR THE YEAR (1,715,994,866) (957,210,241) (1,715,994,866) (957,210,241)

BASIC LOSS PER SHARE Net loss (Baht) (0.23) (0.14) (0.23) (0.14)

Weighted average number of ordinary shares (shares) 7,347,122,085 7,030,498,378 7,347,122,085 7,030,498,378


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101

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITYFOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004

(Unit : Baht)

Minority interest - Issued and Share subscription Equity attributable to

paid-up Share received minority shareholders share capital premium in advance Deficit of subsidiaries Total

Balance - beginning of year 2004 6,404,836,525 - - (162,995,391) - 6,241,841,134

Called up ordinary shares 395,163,475 - - - - 395,163,475

Issuance of additional ordinary shares 450,000,000 - - - - 450,000,000

Share premium - 400,051,778 - - - 400,051,778

Share subscription received in advance - - 169,608,738 - - 169,608,738

Net loss for the year - - - (957,210,241) - (957,210,241)

Minority interest of subsidiaries - - - - 21,089,276 21,089,276

Balance - end of year 2004 7,250,000,000 400,051,778 169,608,738 (1,120,205,632) 21,089,276 6,720,544,160

Issuance of additional ordinary shares (Note 13) 43,463,754 86,927,508 - - - 130,391,262

Transfer share subscription received in advance

to issued and paid up share capital (Note 13) 56,536,246 113,072,492 (169,608,738) - - -

Share subscription received in advance (Note 13) - - 296,689,300 - - 296,689,300

Net loss for the year - - - (1,715,994,866) - (1,715,994,866)

Minority interest of subsidiaries - - - - (14,366,051) (14,366,051)

Balance - end of year 2005 7,350,000,000 600,051,778 296,689,300 (2,836,200,498) 6,723,225 5,417,263,805


BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

Consolidated

Annual Report 2005

102

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITYFOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004

(Unit : Baht)The Company Only

Issued and Share subscription paid-up Share received

share capital premium in advance Deficit Total

Balance - beginning of year 2004 6,404,836,525 - - (162,995,391) 6,241,841,134

Called up ordinary shares 395,163,475 - - - 395,163,475

Issuance of additional ordinary shares 450,000,000 - - - 450,000,000

Share premium - 400,051,778 - - 400,051,778

Share subscription received in advance - - 169,608,738 - 169,608,738

Net loss for the year - - - (957,210,241) (957,210,241)

Balance - end of year 2004 7,250,000,000 400,051,778 169,608,738 (1,120,205,632) 6,699,454,884

Issuance of additional ordinary shares (Note 13) 43,463,754 86,927,508 - - 130,391,262


to issued and paid up share capital (Note 13) 56,536,246 113,072,492 (169,608,738) - -

Share subscription received in advance (Note 13) - - 296,689,300 - 296,689,300

Net loss for the year - - - (1,715,994,866) (1,715,994,866)

Balance end of year 2005 7,350,000,000 600,051,778 296,689,300 (2,836,200,498) 5,410,540,580



Annual Report 2005

103

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES CASH FLOWS STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004(Unit : Baht)

Consolidated The Company Only2005 2004 2005 2004

Cash flows from (used in) operating activities

Net loss for the year (1,715,994,866) (957,210,241) (1,715,994,866) (957,210,241) Adjustments to reconcile net loss to net cash provided by (paid from) operating activities Depreciation and other amortisation 27,871,422 15,826,675 22,787,802 14,350,295 Amortisation on project costs 171,711,851 124,991,370 171,711,851 124,991,370 Amortisation of prepaid expenses 138,728,811 53,175,765 138,728,810 53,175,765 Amortisation of premium on forward contracts (9,886,985) (3,676,697) (9,886,985) (3,676,697) Withholding tax deducted at source written off - 4,515,707 - 4,515,707 Loss on disposal of equipment 506,471 72,015 509,614 72,015 Unrealised loss (gain) on exchange (859,341) 288,978 (895,515) 288,978 Share of loss from investments accounted for under equity method - 1,355,358 45,113,342 41,532,452 Amortisation of goodwill 1,201,358 342,889 - - Minority interest in loss of subsidiaries (9,654,358) (18,283,876) - -

(1,396,375,637) (778,602,057) (1,347,925,947) (721,960,356) Decrease (increase) in operating assets Trade accounts receivable (21,617,492) - - - Amounts due from related parties 24,983,671 (25,076,391) 16,756,622 (26,146,391) Withholding tax deducted at source (1,871,281) (1,518,161) (1,132,417) (205,078) Accounts receivable under forward contracts 21,377,081 117,003,373 21,377,081 117,003,373 Prepaid expenses (159,836,577) (109,145,544) (159,854,023) (108,742,060) Other current assets (32,382,252) (34,611,116) (25,682,025) (25,553,109) Other non-current assets (6,272,695) (17,394,097) (6,272,395) (16,535,879) Increase (decrease) in operating liabilities Construction and other payable - related parties 87,545,916 140,199,126 72,273,306 (52,422,517) Construction and other payable - other companies (67,400,506) 334,705,754 (72,504,604) 337,872,322 Unearned fare box revenue 11,332,235 21,862,294 11,332,235 21,862,294 Deposits on stored value ticket 9,626,550 8,085,592 9,626,550 8,085,592 Other current liabilities 77,883,231 10,792,184 62,172,976 6,383,288 Deferred leasehold right revenue 4,545,035 22,110,000 - - Other non-current liabilities 3,216,273 8,584,361 - - Net cash from used in operating activities (1,445,246,448) (303,004,682) (1,419,832,641) (460,358,521)


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CASH FLOWS STATEMENTS (Continued)

FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004

(Unit : Baht)

Consolidated The Company Only

Note 2005 2004 2005 2004

Cash flows from (used in) investing activities Increase in loans to other company (2,500,000) - - -

Increase in investment in subsidiaries - - (42,439,980) (108,560,000) Net cash payments for purchase of investment in subsidiaries - (33,547,988) - - Increase in equipment (67,239,781) (255,518,599) (23,138,537) (37,180,573) Proceed from disposal of equipment 3,900 2,001,932 - 2,001,932 Decrease (increase) in advance for construction - related company 2,857,320 (15,279,307) - - Increase in project costs (423,028,877) (2,771,265,515) (423,028,877) (2,771,265,515) Cash received from minority shareholders 3,080,000 34,100,000 - - Cash paid to minority shareholders (14,499,980) (7,500,000) - - Net cash used in investing activities (501,327,418) (3,047,009,477) (488,607,394) (2,915,004,156) Cash flows from (used in) financing activities Increase in bank overdraft and short-term loan from financial institution 16,250,540 - - -

Increase in long-term loans 199,000,000 2,103,000,000 199,000,000 2,103,000,000 Increase in long-term loans from shareholder 1,403,000,000 - 1,403,000,000 - Cash received from called up ordinary shares and additional ordinary shares 130,391,262 1,245,215,253 130,391,262 1,245,215,253 Share subscription received in advance 296,689,300 169,608,738 296,689,300 169,608,738 Net cash from financing activities 2,045,331,102 3,517,823,991 2,029,080,562 3,517,823,991 Net increase in cash and cash equivalents 98,757,236 167,809,832 120,640,527 142,461,314 Cash and cash equivalents at beginning of year 343,922,521 176,112,689 318,574,003 176,112,689 Cash and cash equivalents at end of year 442,679,757 343,922,521 439,214,530 318,574,003

Supplemental cash flows information

Cash paid during the year for : Interest expenses (included interest expenses which capitalised to project costs) 762,298,999 692,847,020 761,198,017 687,838,610 Corporate income tax and withholding tax deducted at source 1,871,281 1,518,161 1,132,417 205,078


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105


NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2005 AND 2004

1. GENERAL INFORMATION

Bangkok Metro Company Limited was incorporated as a limited company under Thai laws and

operated in Thailand. Its major shareholder is CH. Karnchang group of companies. The Company

registered the change of its status to a public limited company under the Public Limited Companies Act

and the change of its name to Bangkok Metro Public Company Limited with the Ministry of

Commerce on 11 May 2004.

The Company’s registered office is located at 587 Sutthisarn Road, Khwaeng Dindaeng, Khet

Dindaeng, Bangkok.

a) On 1 August 2000, the Company entered into “Agreement for the MRTA Initial System Project -

Chaloem Ratchamongkhon Line” (“the Concession Agreement”) with the Mass Rapid Transit

Authority of Thailand (“the MRTA”) to design, manufacture, supply, install, test and commission

of the M&E Equipment and for the operation and maintenance of the MRTA Initial System. The

Agreement is for 25 years from the date that MRTA issues a Notice of No Objection to

Commencement of Revenue Service. The MRTA Initial System was officially opened on 3 July

2004.

Under the Agreement, the Company has certain commitments to make payment of remunerations

to the MRTA which consist of remuneration from fares, remuneration from commercial

development, apportion of profit calculated from the Return on Equity (ROE) and any benefit from

the interest rate on a credit agreement which lower than the specified rate, at the rate as mentioned

in the Agreement. Furthermore, the Agreement stipulates the maintenance of the proportion of

shareholding of the main shareholders and a fine in case that the Project was delayed.

b) On 19 December 2001 the Company entered into a long-term loan agreement with a group of

domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement). The loan

agreement, which was amended by the first, the second, the third and the forth supplemental

agreements dated 27 January 2003 and 18 June 2003, 2 April 2004 and 30 July 2004, respectively,

provides the following 5 credit facilities :

1) Tranche A Facility : A long-term loan facility of Baht 11,000 million for use in the

payment of project costs.

Annual Report 2005

106

2) Tranche B Facility : A performance guarantee facility of Baht 150 million provided to

guarantee the Company’s obligations to the MRTA under the Concession Agreement.

3) Tranche C Facility : A performance guarantee facility of Baht 60 million provided to

guarantee the Company’s obligations to the relevant authorities in relation to the Project.

4) Tranche D Facility : A long-term loan facility of Baht 500 million for use in the payment of

additional costs incurred as a result of the programme to accelerate the procurement of

M&E equipment and the depot modification.

5) Tranche E Facility : A long-term loan facility of Baht 790 million for use in the payment of

additional expenses incurred under the M&E Equipment Contracts, additional fees incurred

under the Project Management Agreement, basic infrastructure works for the retail areas in

relation to the Commercial Development, additional equipments in stations, mobilization

fees for the Civil Infrastructure maintenance contracts and investment in the Commercial

Development Subsidiaries. Subsequently, the Company and the lenders agreed to reduce

the loan facility to Baht 650 million

2. BASIS OF CONSOLIDATION

The consolidated financial statements for the years ended 31 December 2005 and 2004 include the

financial statements of Bangkok Metro Public Company Limited (hereinafter called “the Company”)

and subsidiaries as follows.

Percentage of shareholding

Company’s name by the Company Nature of business

2005 2004 % % Metro Mall Development Limited 64.00 60.00 Rental of retail space in underground stations BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”) 100.00 84.38 Telecommunications services Triads Networks Company Limited 56.00 56.00 Provision of advertising services in underground stations

Annual Report 2005

107

Percentage of total assets of subsidiaries as included in the consolidated financial statements as at 31

December 2005 and 2004 and percentage of total revenue of subsidiaries as included in the

consolidated financial statements for the years ended 31 December 2005 and 2004 are as follows :

Percentage of total assets of Percentage of total revenue of subsidiaries as included in subsidiaries as included in the consolidated the consolidated financial statements financial statements for

Company’s name as at 31 December the years ended 31 December

2005 2004 2005 2004 % % % % Metro Mall Development Limited 1.36 1.36 0.47 0.01 BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”) 0.26 0.27 - 0.03 Triads Networks Company Limited 0.26 0.05 3.50 -

Material intercompany balances and transactions and investment in subsidiaries in the Company’s

accounts and the subsidiaries’ share capital are eliminated on consolidation.

Results of operations of the subsidiaries have been included in the consolidated financial statements

from the effective date of acquisition.

3. SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance with accounting standards enunciated

under the Accounting Profession Act B.E. 2547.

Significant accounting policies adopted by the Company and its subsidiaries are summarised below :

3.1 Revenues and expenses recognition

a) Fare box revenue recognition

Smart card and smart token sales are recognised as revenue when the services are

rendered. Prepaid value in stored value smart card is recorded as unearned fare box

revenue in the current liabilities in the balance sheet.

Annual Report 2005

108

b) Commercial development revenue

Commercial development revenue is recognised as income when service has been

rendered.

c) Other revenues and expenses recognition

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

3.2 Project costs and Unit of Throughput Amortisation Method (Unit of Production)

All expenditures and other related expenses which are incurred to construct the System and to

enable it to become operational (“Project costs”) are capitalised as assets and will be depreciated

over the Concession Period upon the commencement of operation of the System. Such project

costs include management and consultant fees, design costs, electrical and mechanical works and

rolling stock purchased during the Concession Period, interest and other financing expenses. The

Company has been adopting the unit of throughput method of amortisation to amortise such

project costs to be costs of fare box in the earnings statement basing on the following unit of

throughput amortisation formula :

Amortisation for the period = Net project costs x Percentage of Passengers for the period

Percentage of Passengers = Current period’s actual passengers

for the period (Actual passengers for the current period + Projected

passengers during the remaining Concession Period)

Net project costs = Total project costs - Accumulated amortization

3.3 Investments in subsidiaries

Investments in subsidiaries (in the separate financial statements of the Company) are stated under

the equity method of accounting. Under this method, investments are recorded at costs. For each

subsequent period, investments are adjusted to incorporate the Company’s proportionate share of

the operating results in the subsidiaries.

3.4 Goodwill on consolidation

Goodwill on consolidation which was incurred from the investments in subsidiaries being made

at costs higher than the subsidiaries’ net book value, is regarded as assets and amortised on a

straight-line basis over a period of 10 years.

Annual Report 2005

109

3.5 Equipment and depreciation

Equipment is stated at cost less accumulated depreciation. No depreciation is charged for asset

during construction. Depreciation of equipment are calculated on the straight-line method over

the estimated useful lives, which are as follows :

Leasehold improvement Concession period of subsidiary

Communication equipment 5 years

Advertising equipment 5 years

Furniture, fixture and office equipment 3 - 5 years

Motor vehicles 5 years

3.6 Foreign currencies

Foreign currency transactions incurred during the year are translated into Baht at the rates ruling

on the transaction dates. Monetary assets and liabilities dominated in foreign currency

outstanding on the balance sheet date are translated into Baht at the rates ruling on the balance

sheet date.

Exchange gains and losses incurred before the commencement of operations are capitalised as

part of project costs. Exchange gains and losses incurred after the commencement of operations

are included in determining earnings.

3.7 Financial derivative instruments

The Company occasionally entered into forward exchange contracts to reduce its exposure from

exchange rate fluctuation risk. Premiums or discounts (the difference between the spot exchange

rate and the forward exchange rate at inception of the contracts) are deferred and amortised over

the contract lives using the straight-line method. The amortisations incurred before the

commencement of operations are capitalised as part of project costs. Amortisations incurred after

the commencement of operations are included in determining earnings.

3.8 Employee benefits

The Company and its employees have jointly established a provident fund as approved by the

Ministry of Finance in accordance with Provident Fund Act B.E. 2530. The fund is monthly

contributed to by employees at the rate of 3 percent of their basic salaries and by the Company at

the same rate, and will be paid to the employees upon termination in accordance with the rules of

the Company’s provident fund. The fund is managed by TMB Bank Public Company Limited.

Annual Report 2005

110

3.9 Loss per share

Loss per share as presented in the earnings statements is basic loss per share which is determined

by dividing net loss for the year by the weighted average number of ordinary shares in issued

during the year.

3.10 Cash and cash equivalents

Cash and cash equivalents include cash on hand and deposits with financial institutions with an

original maturity of 3 months or less since the deposit date.

3.11 Use of accounting estimates

Preparation of financial statements in conformity with generally accepted accounting principles

requires management to make estimates for certain accounting transactions, affecting amounts

reported in the financial statements and notes related thereto. Subsequent actual results may

differ from these estimates.

4. CASH AND CASH EQUIVALENTS

The Company has pledged its rights to receive deposits from bank accounts, which have outstanding

balances as at 31 December 2005 of approximately Baht 425.8 million (2004 : Baht 273.6 million) to a

group of lenders to secure the Company’s long-term loans from the group of lenders.

5. TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable as at 31 December 2005 and 2004 classified by aging are as follows :

(Unit : Baht) Consolidated 2005 2004

Not yet due 16,136,467 - Overdue Less than 3 months 5,481,024 -

21,617,491 -

Annual Report 2005

111

6. INVESTMENTS ACCOUNTED FOR UNDER EQUITY METHOD – SUBSIDIARIES /

PROVISION FOR LOSS OF INVESTMENT IN SUBSIDIARIES

(Unit : Baht)

The Company Only

As at 31 December 2005

Percentage Provision

Paid-up owned by Investment for loss of

Company’s name capital the Company Cost Equity investment Dividend

Percent

- Metro Mall Development Limited 50,000,000 64.00 32,000,000 - (1,725,112) -

- BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”) 105,000,000 100.00 104,999,980 55,540,373 - -

- Triads Networks Company Limited 25,000,000 56.00 14,000,000 10,538,924 - -

150,999,980 66,079,297 (1,725,112) -

(Unit : Baht)

The Company Only


Percentage Provision

Paid-up owned by Investment for loss of

Company’s name capital the Company Cost Equity investment Dividend

Percent

- Metro Mall Development Limited 50,000,000 60.00 30,000,000 19,536,481 - -

- Radianz Communications Network Limited 80,000,000 84.38 67,500,000 43,347,576 - -

- Triads Networks Company Limited 19,750,000 56.00 11,060,000 4,143,491 - -

108,560,000 67,027,548 - -


In May 2005, the Company purchased 200,000 ordinary shares of Metro Mall Development Limited, at

par value of Baht 10 each, a total of Baht 2,000,000, from other shareholder, increasing the Company’s

total investment in that company to 64 percent of its share capital.

Annual Report 2005

112

BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”)

In February 2005, the Company purchased 1,249,998 ordinary shares of BMCL Network Limited, at

par value of Baht 10 each, a total of Baht 12,499,980, from other shareholders, increasing the

Company’s total investment in that company to 100 percent of its share capital.

Subsequently, in December 2005, BMCL Network Limited increased its share capital by Baht

25,000,000 million through the issuance of 2,500,000 ordinary shares at par value of Baht 10 each. The

Company had therefore purchased all additional ordinary shares of that company to maintain its interest

of shareholding in that company of 100 percent.


In March 2005, Triads Networks Company Limited called up 75 percent of its share capital 39,200

ordinary shares, totaling of Baht 2,940,000.

The Company has pledged certain part of share certificates of investments in these three subsidiaries

with a group of lenders to secure the Company’s long-term loans from the group of lenders.

7. PROJECT COSTS

(Unit : Baht) Consolidated The Company Only

2005 2004 2005 2004M&E Equipment 12,159,394,518 11,949,158,041 12,159,394,518 11,949,158,041 Project management fees per agreement 2,464,094,957 2,464,094,957 2,464,094,957 2,464,094,957 Consultant fees 606,925,297 600,899,697 606,925,297 600,899,697 Depot building and administration building 1,255,892,166 1,255,223,416 1,255,892,166 1,255,223,416 Interest expenses 1,264,616,711 1,264,616,711 1,264,616,711 1,264,616,711 Others 1,243,368,916 1,039,718,286 1,243,368,916 1,039,718,286

Total 18,994,292,565 18,573,711,108 18,994,292,565 18,573,711,108 Less : Accumulated amortisation of Project costs (296,703,221) (124,991,370) (296,703,221) (124,991,370)

Project costs, net 18,697,589,344 18,448,719,738 18,697,589,344 18,448,719,738

M&E Equipment and depot building and administration building will be transferred to the Mass Rapid

Transit Authority of Thailand after the end of concession agreement, of 25 years, on an Acquire

Operate and Transfer basis.

The Company has assigned the Project’s M&E Equipment, depot building and administration building

to a group of lenders to secure the Company’s long-term loans from the group of lenders.

Annual Report 2005

113

8. EQUIPMENT

(Unit : Baht) Consolidated

Equipment and leasehold Communication Advertising Office Office Asset during improvement equipment equipment equipment furniture Vehicle construction Total

Cost

31 December 2004 - 42,444,886 - 52,960,191 20,142,374 19,004,201 210,134,741 344,686,393

Addition 270,599 78,665 21,998,559 13,610,756 10,704,416 525,560 20,051,226 67,239,781

Disposal - - - (93,233) (8,025) (2,384,700) - (2,485,958)

Reclassification 33,381,421 300 - (18,611) 18,311 - (33,381,421) -

31 December 2005 33,652,020 42,523,851 21,998,559 66,459,103 30,857,076 17,145,061 196,804,546 409,440,216

Accumulated depreciation

31 December 2004 - 311,236 - 14,467,094 2,973,297 5,636,943 - 23,388,570

Depreciation

for the year 630,854 569,155 1,552,205 13,247,403 4,011,887 3,390,855 - 23,402,359

Depreciation

on disposal - - - (60,469) (2,815) (1,912,303) - (1,975,587)

Reclassification - 562 - (1,433) 871 - - -

31 December 2005 630,854 880,953 1,552,205 27,652,595 6,983,240 7,115,495 - 44,815,342

Net book value

31 December 2004 - 42,133,650 - 38,493,097 17,169,077 13,367,258 210,134,741 321,297,823

31 December 2005 33,021,166 41,642,898 20,446,354 38,806,508 23,873,836 10,029,566 196,804,546 364,624,874

Depreciation charges of the years as included in the earnings statements 2004 14,352,069

2005 23,402,359

Annual Report 2005

114

(Unit : Baht) The Company Only

Office Office equipment furniture Vehicle Total

Cost 31 December 2004 47,286,998 15,586,591 19,004,201 81,877,790 Addition 12,506,967 10,590,776 40,794 23,138,537 Disposal (92,065) (8,025) (2,384,700) (2,484,790)

31 December 2005 59,701,900 26,169,342 16,660,295 102,531,537

Accumulated depreciation 31 December 2004 13,714,061 2,218,699 5,636,943 21,569,703 Depreciation for the year 11,893,436 3,087,233 3,338,070 18,318,739 Depreciation on disposal (60,058) (2,815) (1,912,303) (1,975,176)

31 December 2005 25,547,439 5,303,117 7,062,710 37,913,266

Net book value 31 December 2004 33,572,937 13,367,892 13,367,258 60,308,087

31 December 2005 34,154,461 20,866,225 9,597,585 64,618,271

Depreciation charges of the years as included in the earnings statements 2004 12,875,688

2005 18,318,739

9. BANK OVERDRAFT AND SHORT-TERM LOANS FROM FINANCIAL INSTITUTION

The outstanding balance in the consolidated financial statements as at 31 December 2005 represents the

bank overdraft and short-term loan from financial institution of a subsidiary. The bank overdraft,

amounting to Baht 2.3 million, is from a local bank and subject to interest at the minimum overdraft

rate plus 0.5 percent per annum, while the short-term loan, amounting to Baht 14 million, is from the

same bank, carries interest at 7 percent per annum and is schedule for repayment in January 2006.

Bank overdraft and short-term loan from financial institution are guaranteed by a related company.

Annual Report 2005

115

10. LONG-TERM LOANS/CURRENT PORTION OF LONG-TERM LOANS

On 19 December 2001, the Company entered into a long-term loan agreement with a group of

domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement) to obtain a loan

facility of Baht 11,000 million used in the payment of project costs. The loan facilities carry interest at

7.75 percent per annum for the first 2 years from the date of the agreement, and thereafter at MLR plus

0.25 percent per annum until the Project Completion Date, and at MLR per annum after the Project

Completion Date. The loans are scheduled for repayment on an instalment basis commencing March

2006 and the last instalment in December 2016.

Subsequently, on 18 June 2003, the Company entered into a supplemental agreement to the Onshore

Facilities Agreement to obtain an additional loan facility of Baht 500 million used in the payment of

additional costs incurred as a result of the programme to accelerate the procurement of M&E

equipment and depot modification. The loan carries interest at MLR plus 0.25 percent per annum until

the Project Completion Date, and at MLR per annum after the Project Completion Date. The loan is

scheduled for repayment in a single lump sum in June 2017.

Subsequently on 2 April 2004, the Company entered into a supplemental agreement to the Onshore

Facilities Agreement (No.3), under which the loan facility was increased by addition of the Tranche E

Facility of Baht 790 million and subsequently on 30 July 2004, the Company and the lenders agreed to

reduce the loan facility to Baht 650 million. This is to be used for payment of additional expenses

incurred under the M&E Equipment Contracts, additional fees incurred under the Project Management

Agreement, basic infrastructure works for the retail areas in relation to the Commercial Development,

additional equipments in stations, mobilization fees for the Civil Infrastructure maintenance contracts

and investment in the Commercial Development Subsidiaries. The loan facility carries interest at MLR

plus 0.5 percent per annum. The loan is scheduled for repayment in a single lump sum in June 2017.

The loans are secured by the mortgages of the Project’s M&E Equipment, depot building and

administration building, pledges of the Company’s share certificates, share certificates of investments

in subsidiaries, sponsors support, and the assignment of rights and obligations under the Concession

Agreement and the rights to receive deposits in bank accounts.

The loan agreement included covenants imposed by the lenders on, among other things, the proportion

of shareholding of the principal shareholders, changes of the Company’s management, entering into

other loan agreements, entering into any new business or activity which is not related to the Project and

the maintenance of certain financial ratios.

Annual Report 2005

116

11. LONG-TERM LOANS FROM SHAREHOLDER AND ACCRUED INTEREST

On 11 March 2005, 27 May 2005, 27 July 2005, 25 August 2005, 28 October 2005, 30 November

2005, 23 December 2005 and 30 December 2005, the Company entered into eight subordinated loans

agreements with a shareholder, under which they were granted long-term loans facilities of Baht 380

million, Baht 150 million, Baht 80 million, Baht 330 million, Baht 80 million, Baht 50 million, Baht

100 million and Baht 233 million, respectively. The loans carry interest at MLR plus 0.5 percent per

annum and principal and interest are to be paid after the Company has paid all indebtedness under the

Onshore Facilities Agreement (as discussed in Note 10) or when the Company has excess cash.

12. RELATED PARTY TRANSACTIONS

During the years, the Company and its subsidiaries had significant business transactions with related

parties (related by the way of shareholding or common shareholders and/or common directors). Such

transactions, which have been concluded on the terms and basis as determined by the Company, its

subsidiaries and those related parties, are under the normal course of business of the Company and its

subsidiaries. The transactions are summarised below :

(Unit : Million Baht) Consolidated The Company Only Pricing policy

2005 2004 2005 2004 Commercial development revenue - - 11.8 - Based on contract Project construction costs 18.2 209.6 - 10.6 Based on contract Project maintenance costs 10.3 4.3 10.3 4.3 Based on contract Project management fees - Included as part of - 100.0 - 100.0 Based on contract project costs - Included as part of 62.1 42.8 62.1 42.8 Based on contract costs of fare box Selling and administrative 6.6 5.9 - 1.2 Agreed between expenses parties Interest expense and related fee - Included as part of - 131.5 - 131.5 Based on contract project costs - Included as part of selling 350.3 147.8 336.7 143.6 Based on contract and administrative expenses

Annual Report 2005

117

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

follows :


2005 2004 2005 2004Amounts due from related partiesSubsidiaries - BMCL Network Company Limited (Formerly known as “Radianz Communications Network Limited”) - - - 1,070,000 - Triads Networks Company Limited - - 8,147,234 - - Metro Mall Development Limited - - 1,149,815 -

- - 9,297,049 1,070,000

Related parties - CH. Karnchang Public Company Limited 92,720 360,000 92,720 360,000 - Joint Venture BCKT - 23,997,895 - 23,997,895 - Others - 718,496 - 718,496

92,720 25,076,391 92,720 25,076,391

92,720 25,076,391 9,389,769 26,146,391

Advance payment for construction Related company - CH. Karnchang Public Company Limited 12,421,987 15,279,307 - -

12,421,987 15,279,307 - -

Construction and other payable Related parties - CH. Karnchang Public Company Limited 219,376,333 193,670,696 13,196,667 2,853,334 - Joint Venture CKET 70,620,000 8,690,027 70,620,000 8,690,027 - Others 1,714,587 1,804,280 - -

291,710,920 204,165,003 83,816,667 11,543,361

Accrued interest - related company - CH. Karnchang Public Company Limited 17,203,162 4,183,290 - -

17,203,162 4,183,290 - -

Annual Report 2005

118


2005 2004 2005 2004Long-term loans from shareholder and

accrued interest - CH. Karnchang Public Company Limited Loans 1,403,000,000 - 1,403,000,000 - Accrued interest 35,752,812 - 35,752,812 -

1,438,752,812 - 1,438,752,812 -

Part of “Long-term loans” - Krungthai Bank Public Company Limited Current portion 43,000,000 - 43,000,000 -

Long-term portion 4,692,658,050 4,657,868,850 4,692,658,050 4,657,868,850

During the year, the movement of loan to subsidiary and accrued interest, long-term loans from shareholder and accrued interest and long-term loans are as follows : (Unit : Baht) Consolidated

2004 Increase Decrease 2005Long-term loans from shareholder and

accrued interest - CH. Karnchang Public Company Limited Loans - 1,403,000,000 - 1,403,000,000 Accrued interest - 38,803,059 (3,050,247) 35,752,812

- 1,441,803,059 (3,050,247) 1,438,752,812

Part of “Long-term loans” - Krungthai Bank Public Company Limited Current portion - 43,000,000 - 43,000,000

Long-term portion 4,657,868,850 77,789,200 (43,000,000) 4,692,658,050

Annual Report 2005

119


2004 Increase Decrease 2005Loan to subsidiary and accrued interest - Triads Networks Company Limited Loans - 6,000,000 (6,000,000) - Accrued interest - 185,178 (185,178) -

- 6,185,178 (6,185,178) -

Long-term loans from shareholder and

accrued interest - CH. Karnchang Public Company Limited Loans - 1,403,000,000 - 1,403,000,000 Accrued interest - 38,803,059 (3,050,247) 35,752,812

- 1,441,803,059 (3,050,247) 1,438,752,812

Part of “Long-term loans” - Krungthai Bank Public Company Limited Current portion - 43,000,000 - 43,000,000

Long-term portion 4,657,868,850 77,789,200 (43,000,000) 4,692,658,050

13. SHARE CAPITAL/SHARE SUBSCRIPTION RECEIVED IN ADVANCE

During the fourth quarter of 2004, through a share offering the Company allocated 56,536,246

additional ordinary shares to its existing shareholders at a price of Baht 3 per share, making a total of

Baht 169.6 million. The Company presented this amount as a “Share subscription received in advance”

in the balance sheet as at 31 December 2004. Subsequently on 14 January 2005, the Company

registered the above paid up share capital with the Ministry of Commerce.

During the first quarter of current year, through a share offering the Company allocated 43,463,754


Baht 130.4 million. The Company registered the above paid up share capital with the Ministry of

Commerce on 1 March 2005 to be a paid up share capital of Baht 7,350 million, comprises of 7,350

million ordinary shares of Baht 1 each.

Annual Report 2005

120

On 29 April 2005, the Annual General Meeting of the Company’s shareholders passed resolution to

increase the Company’s registered share capital from Baht 7,350 million to Baht 10,400 million

through the issuance of 3,050 million ordinary shares with a par value of Baht 1 each, to be allocated at

the following basis.

a) 300 million ordinary shares are to be allocated and offered, in whole or in part, to directors,

management, and employees of the Company. These may be made on one or several occasions.

Any ordinary shares remaining after the allocation are to be allocated by means of public

offerings. These offers may be in Thailand and/or abroad and made on one or several occasions.

In this regard, the Executive Board or any persons assigned by the Company’s executive board

are granted the authority to determine the allocation of offering rights, and all details and

conditions in respect of the number of ordinary shares to be offered in each occasion, the offer

period, the payment of share subscriptions and the offer price.

b) 2,750 million ordinary shares are to be allocated and offered, in whole or in part, by the way of

public offering, on one or several occasions. In this regard, the Executive Board or any persons

assigned by the Company’s executive board are granted the authority to determine the allocation

of offering rights, and all details and conditions in respect of the number of ordinary shares to be

offered in each occasion, the offer period, the payment of share subscriptions and the offer price.

On 15 May 2005, the Company registered its increased registered share capital with the Ministry of

Commerce to be a registered share capital of Baht 10,400 million, comprise of 10,400 million ordinary

shares of Baht 1 each.

Subsequent to 30 June 2005, an extraordinary general meeting of the Company’s shareholders passed

resolutions regarding the Company’s registered share capital, summarised as follows.

a) Approved reductions of 300 million in the number of additional ordinary shares to be allotted

and offered to directors, management, and employees of the Company and 2,750 million

ordinary shares to be allotted and offered by the way of public offering, in order to comply with

the allocation of the Company’s share capital to the Mass Rapid Transit Authority of Thailand.

b) Approved an increase of Baht 4,600 million in the Company’s registered share capital, from Baht

7,350 million to Baht 11,950 million, through the issuance of 4,600 million ordinary shares with

a par value of Baht 1 each. The allocation of the additional ordinary shares is to be as follows.

Annual Report 2005

121

1) 2,600 million ordinary shares are to be allocated and offered to the Mass Rapid Transit

Authority of Thailand at the price equivalent to par value of Baht 1 each.

2) 450 million ordinary shares are to be allocated and offered, in whole or in part, to

directors, management, and employees of the Company at the price equivalent to par value

of Baht 1 each. These may be offered on one or several occasions. Any ordinary shares

remaining after the allocation are to be allocated by means of public offerings. These

offers may be in Thailand and/or abroad and made on one or several occasions.

In this regard, the Executive Board or any persons assigned by the Company’s executive

board is granted the authority to determine the allocation of offering rights, and all details

and conditions in respect of the number of ordinary shares to be offered on each occasion,

the offer period, the payment of the share price and the offer price.

3) 1,550 million ordinary shares are to be allocated and offered to public. Any shares

remaining after this allocation are to be allocated, in whole or in part, by means of private

placement and/or to institutional investors, in accordance with the relevant Notifications of

the Securities and Exchange Commission, on one or several occasions.

In this regard, the Executive Board or any persons assigned by the Company’s Executive

Board are granted the authority to determine the allocation of offering rights, and all

details and conditions in respect of the number of ordinary shares to be offered on each

occasion, the offer period, the payment of the share price and the offer price.

On 1 July 2005, the Company registered the reduction of its registered share capital to Baht 7,350

million, comprising of 7,350 million ordinary shares of Baht 1 each, with the Ministry of Commerce,

as discussed in a) above.

On 4 July 2005, the Company registered the increase in its registered share capital to Baht 11,950


as discussed in b) above.

During December 2005, the Company’s directors, management and employees exercised their rights to

purchase 296,689,300 ordinary shares, as discussed in b) 2), at a price of Baht 1 per share, for a total of

Baht 296,689,300. The remaining 153,310,700 ordinary shares will be allocated by means of public

offerings, as granted resolution by the extraordinary general meeting of the Company’s shareholders.

On 11 January 2006, the Company registered the increase in its paid up share capital to Baht

7,646,689,300 comprising 7,646,689,300 ordinary shares with a par value of Baht 1 each, with the

Ministry of Commerce.

Annual Report 2005

122

The Company recorded proceeds of Baht 296,689,300 from the offering of the Company’s ordinary

shares to its directors, management and employee as “Share subscription received in advance” in the

balance sheet as at 31 December 2005.

14. FARE BOX COMPENSATION REVENUE

On 6 January 2005, the Company entered into a memorandum of agreement with the Mass Rapid

Transit Authority of Thailand (“the MRTA”) regarding the Company’s cooperation in the trial

discounting of the fare box rate of the MRTA Initial System Project - “Chaloem Ratchamongkhon

Line” stipulated in the Concession Agreement. The discounted fare box rates are to be effective during

the period 7 January 2005 to 31 March 2005. In return the MRTA agreed to pay compensation to the

Company at a rate of 80 percent of any shortfall between the actual fare box revenue and the standard

fare box revenue figure as stipulated in the memorandum of agreement. The Company recorded a fare

box compensation revenue of Baht 23.1 million as a revenue for the first quarter of current year.

On 20 May 2005, the Company received a letter from the MRTA regarding the period of the trial

discounting of the fare box rate of the MRTA Initial System. In the letter, the MRTA indicated that the

discount compensation period was to be suspended during the period of the accident when the MRT

system service was unable to run as normal. The MRTA also indicated that the discount compensation

period would then continue again from 21 March 2005 and would end on 4 June 2005.

Subsequently on 10 June 2005, the Company received another letter from the MRTA informing it that

the discount compensation to be paid to the Company was approximately Baht 20.5 million. The

Company has therefore adjusted the fare box compensation revenue to equivalent to the said amount.

15. FORWARD EXCHANGE CONTRACTS

As at 31 December 2005, the balance of the liabilities of the Company outstanding in foreign

currencies, net of foreign-currency denominated assets was 38.3 million yens and 2.0 million euro. The

Company does not utilise forward exchange contract to hedge against foreign exchange rate risk.

16. NUMBER OF EMPLOYEES AND RELATED COSTS


2005 2004 2005 2004Number of employees at end of year (Persons) 1,022 940 928 872 Employee costs for the year (Thousand Baht) 298,240 265,838 272,044 244,138

Annual Report 2005

123

During the current year, the Company contributed Baht 5.9 million (2004 : Baht 4.8 million) to the

provident fund which is included in the above employee costs.

17. BANK GUARANTEES

As at 31 December 2005, there were outstanding bank guarantees issued by banks on behalf of the

Company as follows :

17.1 A bank guarantee of Baht 150 million (2004 : Baht 150 million) was issued to the MRTA in

respect of certain performance bonds required in the Concession Agreement.

17.2 Bank guarantees of Baht 32.4 million (2004 : Baht 32.4 million) was issued to the Metropolitan

Electricity Authority as certain performance bonds in respect of electricity meters instalation at

the power substations in the Depot area and Administration Building.

18. COMMITMENTS

As at 31 December 2005, the Company had commitments from the following agreements.

18.1 The Procurement of M&E Equipment contracts and the Maintenance of M&E Equipment and

Trackwork contracts for 10 years commencing from the Commercial Operation Date. Under the

contracts, the Company has outstanding commitments totaling of Baht 1,247 million and 33

million euros (2004 : Baht 1,657 million and 39 million euros) excluding escalation in

accordance with the general consumer price index.

18.2 The Company had commitments from a project management agreement with a joint venture as

the agreement dated 15 August 2000 and a supplemental agreement dated 18 March 2004. Under

the agreements, the Company has outstanding commitments in respect of project management

fee during 2006 to 2008 totaling of Baht 127 million excluding escalation in accordance with the

general consumer price index.

18.3 The Company had commitments from Contracts to repair and maintenance of infrastructure and

civil works of the MRTA Initial System Project - Chaloem Ratchamongkhon Line with a related

company and other 3 companies, totaling 5 contracts, under the contracts dated 6 November

2003 and 1 June 2004, for the period of 7 years. Under the contracts, the Company has

commitments to pay maintenance fees totaling Baht 1,061 million.

18.4 The Company had commitments from Contracts to repair and maintenance of retail area of the

MRTA Initial System Project - Chaloem Ratchamongkhon Line with 2 companies, under the

contracts dated 1 September 2005 and 14 October 2005, for the period of 5 years and 6 months

and 5 years and 4 months, respectively. Under the contracts, the Company has commitments to

pay maintenance fees totaling Baht 139 million.

Annual Report 2005

124

18.5 The Company had commitments from various services agreements, under which, the Company

has commitments in respect of service fees. Under the agreements, the Company has outstanding

commitments to pay related fees totaling of approximately Baht 21 million.

18.6 The subsidiaries had commitments in respect of car rental agreement, and rental of office

building agreements and related service agreements, under which, the subsidiaries have

outstanding commitments to pay rental and service fees totaling of approximately Baht 13.7

million.

18.7 The subsidiary had commitments in respect of agreements for construction and design of

infrastructure system of retail space in the underground stations totaling of approximately Baht

74 million.

19. LITIGATIONS

On 10 October 2002, Alstom Transport S.A. (the first plaintiff) and Alstom Holdings (Thailand)

Company Limited (the second plaintiff), as plaintiffs, filed a lawsuit against the Company with the

Intellectual Properties and International Trade Court, seeking damages of approximately Baht 1,382

million. In addition, on 16 December 2002, Mitsubishi Electric Corporation (the third plaintiff), as

plaintiff, filed a lawsuit against the Company with the Intellectual Properties and International Trade

Court, seeking damages amounting to approximately Baht 621 million. The amounts claimed are the

losses allegedly suffered by these companies as a result of the Company’s changing the contractor for

procurement and maintenance of M&E Equipment and Trackwork for the MRTA Initial System Project

- Chaloem Ratchamongkhon Line, whereby the said companies had incurred costs in relation to their

performance of the Start-up Phase Works in accordance with the stipulations of the Memorandum of

Agreement dated 1 September 2000 made between the Company and the consortium formed by these

companies.

On 21 January 2003 and 28 January 2003, the Company filed defence testimony and countersuit with

the Intellectual Properties and International Trade Court in relation to the lawsuit brought by Alstom

Transport S.A. and Alstom Holdings (Thailand) Company Limited, as plaintiffs, and the lawsuit

brought by Mitsubishi Electric Corporation, as plaintiff, respectively, requesting that the Court dismiss

both cases and seeking damages from the plaintiffs totaling Baht 3,522 million.

On 8 July 2004, the Court had fixed a date of 28 September 2004 to allow the parties to try to

compromise. In addition, the Intellectual Properties and International Trade Court fixed dates of 8, 9

and 10 March 2005 in order to settle the issue of dispute.

Annual Report 2005

125

On 5 August 2004, Alstom Transport S.A. (the first plaintiff), Alstom Holdings (Thailand) Company

Limited (the second plaintiff) and the Company managed to agree a settlement to the dispute, whereby

the Company is not liable for any damages, and filed a petition with the Intellectual Properties and

International Trade Court to withdraw the lawsuits. The case with Mitsubishi Electric Corporation (the

third plaintiff) is still pending in Court and the Intellectual Properties and International Trade Court

fixed a further date on 3 December 2004 for the parties to try to compromise.

On 3 December 2004, the Company and Mitsubishi Electric Corporation (the third plaintiff) had

discussed in front of the mediator with a view to compromise, but the discussion was not concluded.

Subsequently on 26 April 2005, the parties again met in order to compromise, but the outcome of such

meeting was not positive. The Court then proceeds with the hearing and fixed the hearing date to be

done in October 2005.

Subsequently on 31 October 2005, the Company and Mitsubishi Electric Corporation (the third

plaintiff) managed to agree a settlement to the dispute, whereby the Company is not liable for any

damages, and Mitsubishi Electric Corporation (the third plaintiff) withdrew the lawsuit against the

Company and the Company withdrew the countersuit lodged against Mitsubishi Electric Corporation

(the third plaintiff) with the Intellectual Properties and International Trade Court. The Intellectual

Properties and International Trade Court, on the same date, granted its permission and disposed the case

from the Court’s docket.

20. PROMOTIONAL PRIVILEGES

On 16 January 2003, the Company has been granted promotional privileges for the MRTA Initial

System Project - Chaloem Ratchamongkhon Line (the blue line) under the Investment Promotion Act

B.E. 2520, under BOI certificate number 1029(1)/2546. These privileges include a 100 percent

exemption from corporate income tax on net profit from promoted operations for a period of 8 years

commencing from the date of first earning operating income. The Company commenced its operations

on 3 July 2004. Subject to certain imposed conditions, the main privileges include the following :

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

condition.

- Exemption from corporate income tax on earnings from promotional privileges operation for a

period of eight years from the date on which operating income is first derived (in the year 2004).

Annual Report 2005

126

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

operations as follows :


Promoted operations Non-promoted operations Total

2005 2004 2005 2004 2005 2004Revenues Fare box revenue 969,908,851 443,144,725 - - 969,908,851 443,144,725 Fare box compensation revenue 20,481,123 - - - 20,481,123 - Commercial development revenue - - 23,820,815 - 23,820,815 - Interest income - 909,464 902,224 3,391 902,224 912,855 Other income - - 2,308,772 1,652,344 2,308,772 1,652,344

Total revenues 990,389,974 444,054,189 27,031,811 1,655,735 1,017,421,785 445,709,924

Expenses Cost of fare box 1,411,183,666 674,311,358 6,217,785 159,002 1,417,401,451 674,470,360 Cost of commercial development - - 27,576,637 - 27,576,637 - Amortisation of project costs 168,133,603 123,162,778 3,578,248 1,828,592 171,711,851 124,991,370 Selling and administrative expenses 267,180,533 188,779,325 7,482,008 6,440,586 274,662,541 195,219,911 Share of loss from investments accounted for under equity method - - 45,113,342 41,532,452 45,113,342 41,532,452

Total expenses 1,846,497,802 986,253,461 89,968,020 49,960,632 1,936,465,822 1,036,214,093

Loss before interest expenses (856,107,828) (542,199,272) (62,936,209) (48,304,897) (919,044,037) (590,504,169) Interest expenses (774,585,371) (365,343,759) (22,365,458) (1,362,313) (796,950,829) (366,706,072)

Net loss for the year (1,630,693,199) (907,543,031) (85,301,667) (49,667,210) (1,715,994,866) (957,210,241)

21. FINANCIAL INFORMATION BY SEGMENT

The Company’s and its subsidiaries’ operations involve principally two industry segments; the

operation of the MRTA Initial System Project and commercial development, which comprises the rental

of retail space in the underground train stations, telecommunications services and provision of

advertising services in underground train stations. The operations of the Company and its subsidiaries

are carried on in the single geographic area of Thailand.

Annual Report 2005

127

The Company and its subsidiaries’ financial information by segment of the operation of the MRTA

Initial System Project and commercial development business in the consolidated statements of earnings

for the years ended 31 December 2005 and 2004 is as follows :

(Unit : Million Baht) The MRTA Commercial Initial System Development Project Business Others Total Elimination Total

2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004

Revenues 990 443 65 - 4 3 1,059 446 (13) - 1,046 446

Operating profit (loss) (595) (365) 15 - 4 3 (576) (353) (1) - (577) (353) Common expenses (338) (245) Share of loss from investments accounted for under equity method - (1)

Loss before interest expenses (915) (599) Interest expenses (811) (376)

Loss before minority interest (1,726) (975) Minority interest 10 18

Net loss for the year (1,716) (957)

The business segment information by segment of the operation of the MRTA Initial System Project and

commercial development business in the consolidated balance sheets as at 31 December 2005 and 2004

is as follows:

(Unit : Million Baht) The MRTA Commercial Initial System Development Project business Total Elimination Total

2005 2004 2005 2004 2005 2004 2005 2004 2005 2004

Project cost, net 18,199 18,114 499 335 18,698 18,449 - - 18,698 18,449 Equipment, net 65 60 300 261 365 321 - - 365 321 Other assets 668 536

Total assets 19,731 19,306

Annual Report 2005

128

22. FINANCIAL INSTRUMENTS

22.1 Financial risk management and policies

The Company and its subsidiaries are exposed to risks from changes in market interest rates and

in currency exchange rates, and from nonperformance of contractual obligations by

counterparties. The Company and its subsidiaries do not hold or issue derivative instruments for

speculative or trading purposes.

22.2 Interest rate risk

The interest rate risk is the risk that future movements in market interest rates will affect the

results of the operations and its cash flows. The Company’s and its subsidiaries’ exposure to

interest rate risk relates primarily to its deposits with financial institutions and long-term loans

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

interests on its long-term liabilities are charged at rates which closed to market interest rate, the

Company and its subsidiaries do not use derivative financial instruments to hedge such risk. The

details of loans are set out in Notes 10 and 11.

22.3 Foreign currency risk

The Company’s and its subsidiaries’ exposure to foreign currency risk relates primarily to their

payables which are dominated in foreign currencies. As the amounts of accounts payable are

immaterial, the Company and its subsidiaries do not use derivative financial instruments to hedge

such foreign exchange rate risk. The details of assets and liabilities denominated in foreign

currencies are set out in Note 15.

22.4 Fair value

Since the majority of the financial assets are short-term and that the loans carry interest at rates

close to market rates, the management believes that the Company’s and its subsidiaries’ fair

value of financial assets and liabilities do not materially differ from their carrying value.

Annual Report 2005

129

23. SUBSEQUENT EVENTS

On 1 February 1006, an extraordinary general meeting of the Company’s shareholders passed


23.1 Approved the cancellation of the resolution alloting 2,600 million additional ordinary shares for

offer to the Mass Rapid Transit Authority of Thailand.

23.2 Approved the cancellation of the allocation of the 153,310,700 remaining additional ordinary

shares to be offered to directors, management, and employees of the Company, and their

allocation to a public offering

23.3 Approved a reduction of 1,550 million in the number of additional ordinary shares to be allotted

and offered by the way of public offering.

23.4 Approved the allocation and offer of 1,315,810,700 ordinary shares by way of public offering.

Any shares remaining after this allocation are to be allocated, in whole or in part, by means of

private placement and/or to institutional investors, in accordance with the relevant Notifications

of the Securities and Exchange Commission, on one or several occasions.

In this regard, the Executive Board or any persons assigned by the Company’s Executive Board

are granted the authority to determine the allocation of offering rights, and all details and

conditions in respect of the number of ordinary shares to be offered on each occasion, the offer

period, the payment of the share price and the offer price.

23.5 Approved the allocation and offer of 2,987,500,000 ordinary shares to the Mass Rapid Transit

Authority of Thailand.

24. PRESENTATION

The presentation of the financial statements has been made in compliance with the stipulations of the

Notification of the Department of Business Development dated 14 September 2001, issued under the

Accounting Act B.E. 2543.

25. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were authorised for issue by the Board of Directors on 22 February 2006.

Annual Report 2005

130


REPORT AND INTERIM FINANCIAL STATEMENTS

FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004

Annual Report 2005

131

Review Report of Independent Auditor

To The Board of Directors and Shareholders of


I have reviewed the accompanying consolidated balance sheet of Bangkok Metro Public Company Limited

and its subsidiaries as at 30 June 2005, the related consolidated statements of earnings for the three-month

and six-month periods ended 30 June 2005 and 2004, and the statements of changes in shareholders’ equity

and cash flows for the six-month periods ended 30 June 2005 and 2004 and the separate financial

statements of Bangkok Metro Public Company Limited for the same periods. These financial statements

are the responsibility of the Company’s and its subsidiaries’ management as to their correctness and the

completeness of the presentation. My responsibility is to issue a report on these financial statements based

on my reviews.

I conducted my reviews in accordance with the auditing standard applicable to review engagements. This

standard requires that I plan and perform the review to obtain moderate assurance as to whether the

financial statements are free of material misstatement. A review is limited primarily to inquiries of the

Company’s and its subsidiaries’ personnel and analytical procedures applied to financial data and thus

provides less assurance than an audit. I have not performed an audit and, accordingly, I do not express an

audit opinion.

Based on my reviews, nothing has come to my attention that causes me to believe that the accompanying

financial statements are not presented fairly, in all material respects, in accordance with generally accepted

accounting principles.

I have previously audited the consolidated financial statements of Bangkok Metro Public Company

Limited and its subsidiaries for the year ended 31 December 2004, and the separate financial statements of

Bangkok Metro Public Company Limited for the same year in accordance with generally accepted auditing

standards and expressed an unqualified opinion on those statements under my report dated 24 January

2005. The balance sheet as at 31 December 2004, as presented herein for comparative purposes, formed an

integral part of the financial statements which I audited and reported on. I have not performed any other

audit procedures subsequent to the date of that report.

Ruth Chaowanagawi

Certified Public Accountant (Thailand) No. 3247

Ernst & Young Office Limited

Bangkok : 19 July 2005

Annual Report 2005

132

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

Consolidated The Company OnlyNote 30 June 2005 31 December 2004 30 June 2005 31 December 2004

(Unaudited (Audited) (Unaudited (Audited)but reviewed) but reviewed)

ASSETS

CURRENT ASSETS

Cash and cash equivalents 2 105,291 343,923 91,109 318,574

Trade accounts receivable 2,636 - - -

Amounts due from related parties 7 718 25,076 2,020 26,146

Loans to subsidiary and accrued interest 7 - - 3,001 -

Other current assets

Accounts receivable under forward contracts - 24,049 - 24,049

Prepaid expenses 8,348 56,484 8,245 56,081

Value added tax refundable 6,275 6,097 - -

Other receivable 2,342 21,225 2,289 21,223

Unbilled input tax 7,551 7,434 - -

Accrued fare box compensation revenue 9 20,481 - 20,481 -

Supply - tickets 34,960 4,642 34,960 4,642

Others 8,439 7,092 927 552

TOTAL CURRENT ASSETS 197,041 496,022 163,032 451,267

NON-CURRENT ASSETS

Investments accounted for under equity method

- subsidiaries 3 - - 60,413 67,027

Advance payment for construction

- related company 7 15,279 15,279 - -

Project costs, net 4 18,636,404 18,448,720 18,636,404 18,448,720

Equipment, net 327,737 321,298 63,003 60,308

Other non-current assets

Goodwill on consolidation, net 12,181 6,020 - -

Others 21,286 18,309 19,200 16,383

TOTAL NON-CURRENT ASSETS 19,012,887 18,809,626 18,779,020 18,592,438

TOTAL ASSETS 19,209,928 19,305,648 18,942,052 19,043,705


Annual Report 2005

133


(Unit : Thousand Baht)Consolidated The Company Only

Note 30 June 2005 31 December 2004 30 June 2005 31 December 2004(Unaudited (Audited) (Unaudited (Audited)

but reviewed) but reviewed)

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Construction and other payable

Related parties 7 244,827 204,165 51,738 11,543

Other companies 358,279 368,248 349,546 360,287

Current portion of long-term loans 5, 7 55,000 - 55,000 -

Unearned fare box revenue 27,533 21,862 27,533 21,862

Deposits on stored value ticket 12,392 8,086 12,392 8,086

Other current liabilities

Withholding tax payable 1,960 5,277 1,675 4,518

Deferred premium on forward contracts - 15,006 - 15,006

Retention for construction 2,716 4,026 1,817 3,220

Short-term loans from other company and

accrued interest 12,808 - - -

Accrued interest - related company 7 10,621 4,183 - -

Accrued expense 43,168 791 42,625 148

Others 3,757 4,209 3,367 4,080

TOTAL CURRENT LIABILITIES 773,061 635,853 545,693 428,750

NON-CURRENT LIABILITIES

Long-term loans, net of current portion 5, 7 12,009,500 11,915,500 12,009,500 11,915,500


accrued interst 6, 7 536,793 - 536,793 -

Deferred leasehold right revenue 21,878 22,110 - -

Guarantee on rental and service agreement 9,975 11,501 - -

Other non-current liabilities 279 140 - -

TOTAL NON-CURRENT LIABILITIES 12,578,425 11,949,251 12,546,293 11,915,500

TOTAL LIABILITIES 13,351,486 12,585,104 13,091,986 12,344,250


Annual Report 2005

134



Note 30 June 2005 31 December 2004 30 June 2005 31 December 2004(Unaudited (Audited) (Unaudited (Audited)

but reviewed) but reviewed)SHAREHOLDERS' EQUITY Share capital 8 Registered 10,400,000,000 ordinary shares of Baht 1 each (31 December 2004 : 7,350,000,000 ordinary shares of Baht 1 each) 10,400,000 7,350,000 10,400,000 7,350,000

Issued and paid up 7,350,000,000 ordinary shares of Baht 1 each, fully paid (31 December 2004 : 7,250,000,000 ordinary shares of Baht 1 each, fully paid) 7,350,000 7,250,000 7,350,000 7,250,000 Share premium 600,052 400,052 600,052 400,052 Share subscription received in advance - 169,609 - 169,609 Deficit (2,099,986) (1,120,206) (2,099,986) (1,120,206) Total equity attributable to Company's shareholders 5,850,066 6,699,455 5,850,066 6,699,455 Minority interest - Equity attributable to minority shareholders of subsidiaries 8,376 21,089 - -TOTAL SHAREHOLDERS' EQUITY 5,858,442 6,720,544 5,850,066 6,699,455 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 19,209,928 19,305,648 18,942,052 19,043,705


Annual Report 2005

135

(UNAUDITED BUT REVIEWED)BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

EARNINGS STATEMENTSFOR THE THREE-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004

(Unit : Thousand Baht, except earnings per share expressed in Baht)Consolidated The Company Only

Note 2005 2004 2005 2004REVENUES Fare box revenue 218,488 - 218,488 - Fare box compensation revenue 9 (2,599) - (2,599) - Advertising income 927 - - - Other income 849 538 1,052 505 TOTAL REVENUES 217,665 538 216,941 505 EXPENSES Costs of fare box 358,535 - 358,535 - Costs of advertising 406 - - - Amortisation of project costs 38,144 - 38,144 - Selling and administrative expenses 156,334 57,427 142,657 44,648 Share of loss from investments accounted for under equity method - 432 12,869 8,573 TOTAL EXPENSES 553,419 57,859 552,205 53,221 LOSS BEFORE INTEREST EXPENSES (335,754) (57,321) (335,264) (52,716) INTEREST EXPENSES 7 (194,053) - (190,735) -LOSS BEFORE MINORITY INTEREST (529,807) (57,321) (525,999) (52,716) MINORITY INTEREST 3,808 4,605 - -NET LOSS FOR THE PERIOD (525,999) (52,716) (525,999) (52,716)




Annual Report 2005

136


EARNINGS STATEMENTSFOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004

(Unit : Thousand Baht, except earnings per share expressed in Baht)Consolidated The Company Only

Note 2005 2004 2005 2004REVENUES Fare box revenue 379,546 - 379,546 - Fare box compensation revenue 9 20,481 - 20,481 - Advertising income 927 - - - Other income 1,082 1,432 1,269 1,399 TOTAL REVENUES 402,036 1,432 401,296 1,399 EXPENSES Costs of fare box 704,097 - 704,097 - Costs of advertising 406 - - - Amortisation of project costs 94,374 - 94,374 - Selling and administrative expenses 211,950 89,979 186,104 75,333 Share of loss from investments accounted for under equity method - 1,355 24,055 10,616 TOTAL EXPENSES 1,010,827 91,334 1,008,630 85,949 LOSS BEFORE INTEREST EXPENSES (608,791) (89,902) (607,334) (84,550) INTEREST EXPENSES 7 (378,990) - (372,446) -LOSS BEFORE MINORITY INTEREST (987,781) (89,902) (979,780) (84,550) MINORITY INTEREST 8,001 5,352 - -NET LOSS FOR THE PERIOD (979,780) (84,550) (979,780) (84,550)




Annual Report 2005

137

(UNAUDITED BUT REVIEWED)

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITYFOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004

(Unit : Thousand Baht)

Minority interest -

Issued and Share subscription Equity attributable to paid-up Share received minority shareholders

share capital premium in advance Deficit of subsidiaries Total

Balance as at 1 January 2004 6,404,836 - - (162,995) - 6,241,841

Called up ordinary shares 395,164 - - - - 395,164

Issuance of additional ordinary shares 250,000 - - - - 250,000

Net loss for the period - - - (84,550) - (84,550)

Minority interest of subsidiaries - - - - 32,069 32,069

Balance as at 30 June 2004 7,050,000 - - (247,545) 32,069 6,834,524

Balance as at 1 January 2005 7,250,000 400,052 169,609 (1,120,206) 21,089 6,720,544

Issuance of additional ordinary shares (Note 8) 43,464 86,927 - - - 130,391


to issued and paid up share capital (Note 8) 56,536 113,073 (169,609) - - -

Net loss for the period - - - (979,780) - (979,780)

Minority interest of subsidiaries - - - - (12,713) (12,713)

Balance as at 30 June 2005 7,350,000 600,052 - (2,099,986) 8,376 5,858,442



Consolidated

Annual Report 2005

138


STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITYFOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004

(Unit : Thousand Baht)The Company Only

Issued and Share subscription paid-up Share received

share capital premium in advance Deficit Total

Balance as at 1 January 2004 6,404,836 - - (162,995) 6,241,841

Called up ordinary shares 395,164 - - - 395,164

Issuance of additional ordinary shares 250,000 - - - 250,000

Net loss for the period - - - (84,550) (84,550)

Balance as at 30 June 2004 7,050,000 - - (247,545) 6,802,455

Balance as at 1 January 2005 7,250,000 400,052 169,609 (1,120,206) 6,699,455

Issuance of additional ordinary shares (Note 8) 43,464 86,927 - - 130,391


to issued and paid up share capital (Note 8) 56,536 113,073 (169,609) - -

Net loss for the period - - - (979,780) (979,780)

Balance as at 30 June 2005 7,350,000 600,052 - (2,099,986) 5,850,066



Annual Report 2005

139


CASH FLOWS STATEMENTSFOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004


2005 2004 2005 2004

Cash flows from (used in) operating activities

Net loss for the period (979,780) (84,550) (979,780) (84,550)

Adjustments to reconcile net loss to net cash provided by

(paid from) operating activities

Depreciation and other amortisation 12,018 5,804 10,518 5,525

Amortisation on project costs 94,374 - 94,374 -

Amortisation of prepaid expenses 59,764 - 59,764 -

Amortisation of premium on forward contracts (9,887) - (9,887) -

Loss (gain) on disposal of assets 494 (13) 494 (13)

Unrealised gain on exchange (5) - (5) -

Share of loss from investments accounted for

under equity method - 1,355 24,055 10,616

Amortisation of goodwill 548 73 - -

Minority interest in loss of subsidiaries (8,001) (5,352) - -

(830,475) (82,683) (800,467) (68,422)

Decrease (increase) in operating assets

Trade accounts receivable (2,636) - - -

Amounts due from related parties 24,358 - 24,126 (11)

Withholding tax deducted at source (604) (259) (601) (76)

Accounts receivable under forward contracts 21,377 51,366 21,377 51,366

Prepaid expenses (11,628) 99 (11,929) (29)

Other current assets (33,712) (9,198) (32,241) 573

Other non-current assets (4,327) (914) (4,325) (530)

Increase (decrease) in operating liabilities

Construction and other payable - related parties 40,662 (56,560) 40,194 (56,560)

Construction and other payable - other companies (9,965) 102,797 (10,736) 97,602

Unearned fare box revenue 5,671 - 5,671 -

Deposits on stored value ticket 4,307 - 4,307 -

Other current liabilities 50,617 7,446 44,312 4,491

Other non-current liabilities (1,619) 3,426 - -

Net cash from (used in) operating activities (747,974) 15,520 (720,312) 28,404


Annual Report 2005


CASH FLOWS STATEMENTS (Continued)FOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004

(Unit : Thousand Baht)


2005 2004 2005 2004Cash flows from (used in) investing activities Increase in loans to subsidiary - - (3,000) - Increase in investment in subsidiaries - - (17,440) (101,060) Net cash payments for purchase of investment in subsidiar - (33,548) - - Increase in equipment (16,843) (22,514) (11,598) (18,549) Proceed from disposal of equipment - 815 - 815 Increase in advance for construction - related party - (30,957) - - Increase in advance for construction - (8,669) - - Increase in project costs (284,506) (2,151,278) (284,506) (2,151,278) Cash received from minority shareholders 3,080 26,600 - - Cash paid to minority shareholders (14,500) - - - Net cash used in investing activities (312,769) (2,219,551) (316,544) (2,270,072) Cash flows from (used in) financing activities Increase in short-term loans from other company 12,720 - - - Increase in long-term loans 149,000 1,824,000 149,000 1,824,000 Increase in long-term loans from shareholder 530,000 - 530,000 - Cash received from called up ordinary shares and additional ordinary shares 130,391 645,164 130,391 645,164 Net cash from financing activities 822,111 2,469,164 809,391 2,469,164 Net increase (decrease) in cash and cash equivalents (238,632) 265,133 (227,465) 227,496 Cash and cash equivalents at beginning of period 343,923 176,113 318,574 176,113 Cash and cash equivalents at end of period 105,291 441,246 91,109 403,609 Supplemental cash flows information Cash paid during the period for : Interest expenses (included interest expenses which capitalised to project costs) 365,670 321,133 365,653 321,133 Corporate income tax and withholding tax deducted at source 604 259 601 76 The accompanying notes are an integral part of the financial statements.

140

Annual Report 2005

141



NOTES TO INTERIM FINANCIAL STATEMENTS

30 JUNE 2005 AND 2004

1. GENERAL INFORMATION

1.1 General information of the Company

a) On 1 August 2000, the Company entered into “Agreement for the MRTA Initial System

Project - Chaloem Ratchamongkhon Line” (“the Concession Agreement”) with the Mass

Rapid Transit Authority of Thailand (“the MRTA”) to design, manufacture, supply, install,

test and commission of the M&E Equipment and for the operation and maintenance of the

MRTA Initial System. The Agreement is for 25 years from the date that MRTA issues a

Notice of No Objection to Commencement of Revenue Service. The MRTA Initial System

was officially opened on 3 July 2004.

Under the Agreement, the Company has certain commitments to make payment of

remunerations to the MRTA which consist of remuneration from fares, remuneration from

commercial development, apportion of profit calculated from the Return on Equity (ROE)

and any benefit from the interest rate on a credit agreement which lower than the specified

rate, at the rate as mentioned in the Agreement. Furthermore, the Agreement stipulates the

maintenance of the proportion of shareholding of the main shareholders and a fine in case

that the Project was delayed.

b) On 19 December 2001 the Company entered into a long-term loan agreement with a group

of domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement). The

loan agreement, which was amended by the first, the second and the third supplemental

agreements dated 27 January 2003 and 18 June 2003, 2 April 2004 and 30 July 2004,

respectively, provides the following 5 credit facilities :

1) Tranche A Facility : A long-term loan facility of Baht 11,000 million for use in the

payment of project costs.

2) Tranche B Facility : A performance guarantee facility of Baht 150 million provided

to guarantee the Company’s obligations to the MRTA under the Concession

Agreement.

3) Tranche C Facility : A performance guarantee facility of Baht 60 million provided to

guarantee the Company’s obligations to the relevant authorities in relation to the

Project.

Annual Report 2005

142


4) Tranche D Facility : A long-term loan facility of Baht 500 million for use in the

payment of additional costs incurred as a result of the programme to accelerate the

procurement of M&E equipment and the depot modification.

5) Tranche E Facility : A long-term loan facility of Baht 790 million for use in the

payment of additional expenses incurred under the M&E Equipment Contracts,

additional fees incurred under the Project Management Agreement, basic

infrastructure works for the retail areas in relation to the Commercial Development,

additional equipments in stations, mobilization fees for the Civil Infrastructure

maintenance contracts and investment in the Commercial Development Subsidiaries.

Subsequently, the Company and the lenders agreed to reduce the loan facility to

Baht 650 million.

1.2 Basis for preparation of interim financial statements

These interim financial statements are prepared in accordance with Accounting Standards

Pronouncement No. 41 “Interim financial statements”, with the Company choosing to present

condensed interim financial statements. However, additional line items are presented in the

balance sheets and the statements of earnings, changes in shareholders’ equity and cash flows to

bring them into line with the full format used in the annual financial statements.

The interim financial statements are intended to provide information additional to that included

in the latest annual financial statements. Accordingly, they focus on new activities, events, and

circumstances so as not to duplicate information previously reported. These interim financial

statements should therefore be read in conjunction with the latest annual financial statements.

1.3 Basis of consolidation

These consolidated financial statements have been prepared on the same basis as that applied for

the consolidated financial statements for the year ended 31 December 2004. There have been no

changes in the composition of the Group during the current period.

1.4 Significant accounting policies

The interim financial statements are prepared using the same accounting policies and methods of

computation as were used for the financial statements for the year ended 31 December 2004.

2. CASH AND CASH EQUIVALENTS

The Company has pledged its rights to receive deposits from bank accounts, which have outstanding

balances as at 30 June 2005 of approximately Baht 78.8 million (31 December 2004 : Baht 273.6

million) to a group of lenders to secure the Company’s long-term loans from the group of lenders.

Annual Report 2005

143


3. INVESTMENTS ACCOUNTED FOR UNDER EQUITY METHOD - SUBSIDIARIES

(Unit : Thousand Baht) The Company Only

As at 30 June 2005

Percentage Paid-up owned by Investment

Company’s name capital the Company Cost Equity Dividend

Percent - Metro Mall Development Limited 50,000 64.00 32,000 13,355 - - BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”) 80,000 100.00 80,000 43,116 - - Triads Networks Company Limited 25,000 56.00 14,000 3,942 -

126,000 60,413 -



Percentage Paid-up owned by Investment

Company’s name capital the Company Cost Equity Dividend

Percent - Metro Mall Development Limited 50,000 60.00 30,000 19,536 - - Radianz Communications Network Limited 80,000 84.38 67,500 43,348 - - Triads Networks Company Limited 19,750 56.00 11,060 4,143 -

108,560 67,027 -

BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”)

In February 2005, the Company purchased 1,249,998 ordinary shares of BMCL Network Limited, at

par value of Baht 10 each, a total of Baht 12,499,980, from other shareholders, increasing the

Company’s total investment in that company to 100 percent of its share capital.

Annual Report 2005

144



In March 2005, Triads Networks Company Limited called up 75 percent of its share capital 39,200

ordinary shares, totaling of Baht 2,940,000.


In May 2005, the Company purchased 200,000 ordinary shares of Metro Mall Development Limited, at

par value of Baht 10 each, a total of Baht 2,000,000, from other shareholder, increasing the Company’s

total investment in that company to 64 percent of its share capital.

The Company has pledged certain part of share certificates of investments in these three subsidiaries

with a group of lenders to secure the Company’s long-term loans from the group of lenders.

4. PROJECT COSTS

(Unit : Thousand Baht) Consolidated The Company Only

30 June 31 December 30 June 31 December 2005 2004 2005 2004

M&E Equipment 12,158,355 11,949,158 12,158,355 11,949,158 Project management fees per agreement 2,464,095 2,464,095 2,464,095 2,464,095 Consultant fees 603,557 600,900 603,557 600,900 Depot building and administration building 1,255,892 1,255,223 1,255,892 1,255,223 Interest expenses 1,264,617 1,264,617 1,264,617 1,264,617 Others 1,109,254 1,039,718 1,109,254 1,039,718

Total 18,855,770 18,573,711 18,855,770 18,573,711 Less : Accumulated amortisation of project costs (219,366) (124,991) (219,366) (124,991)

Project costs, net 18,636,404 18,448,720 18,636,404 18,448,720

M&E Equipment and depot building and administration building will be transferred to the Mass Rapid

Transit Authority of Thailand after the end of concession agreement, of 25 years, on an Acquire

Operate and Transfer basis.

The Company has assigned the Project’s M&E Equipment, depot building and administration building

to a group of lenders to secure the Company’s long-term loans from the group of lenders.

Annual Report 2005

145


5. LONG-TERM LOANS/CURRENT PORTION OF LONG-TERM LOANS

On 19 December 2001, the Company entered into a long-term loan agreement with a group of

domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement) to obtain a loan

facility of Baht 11,000 million used in the payment of project costs. The loan facilities carry interest at

7.75 percent per annum for the first 2 years from the date of the agreement, and thereafter at MLR plus

0.25 percent per annum until the Project Completion Date, and at MLR per annum after the Project

Completion Date. The loans are scheduled for repayment on an instalment basis commencing March

2006 and the last instalment in December 2016.

Subsequently, on 18 June 2003, the Company entered into a supplemental agreement to the Onshore

Facilities Agreement to obtain an additional loan facility of Baht 500 million used in the payment of

additional costs incurred as a result of the programme to accelerate the procurement of M&E

equipment and depot modification. The loan carries interest at MLR plus 0.25 percent per annum until

the Project Completion Date, and at MLR per annum after the Project Completion Date. The loan is

scheduled for repayment in a single lump sum in June 2017.

Subsequently on 2 April 2004, the Company entered into a supplemental agreement to the Onshore

Facilities Agreement (No.3), under which the loan facility was increased by addition of the Tranche E

Facility of Baht 790 million and subsequently on 30 July 2004, the Company and the lenders agreed to

reduce the loan facility to Baht 650 million. This is to be used for payment of additional expenses

incurred under the M&E Equipment Contracts, additional fees incurred under the Project Management

Agreement, basic infrastructure works for the retail areas in relation to the Commercial Development,

additional equipments in stations, mobilization fees for the Civil Infrastructure maintenance contracts

and investment in the Commercial Development Subsidiaries. The loan facility carries interest at MLR

plus 0.5 percent per annum. The loan is scheduled for repayment in a single lump sum in June 2017.

The loans are secured by the mortgages of the Project’s M&E Equipment, depot building and

administration building, pledges of the Company’s share certificates, share certificates of investments

in subsidiaries, sponsors support, and the assignment of rights and obligations under the Concession

Agreement and the rights to receive deposits in bank accounts.

The loan agreement included covenants imposed by the lenders on, among other things, the proportion

of shareholding of the principal shareholders, changes of the Company’s management, entering into

other loan agreements, entering into any new business or activity which is not related to the Project and

the maintenance of certain financial ratios.

Annual Report 2005

146


6. LONG-TERM LOANS FROM SHAREHOLDER AND ACCRUED INTEREST

On 11 March 2005 and 27 May 2005, the Company entered into two subordinated loans agreements

with a shareholder, under which they were granted long-term loans facilities of Baht 380 million and

Baht 150 million, respectively. The loans carry interest at MLR plus 0.5 percent per annum and

principal and interest are to be paid after the Company has paid all indebtedness under the Onshore

Facilities Agreementnt (as discussed in Note 5).

7. RELATED PARTY TRANSACTIONS

During the periods, the Company and its subsidiaries had significant business transactions with related

parties (related by the way of shareholding or common shareholders and/or common directors). Such

transactions, which have been concluded on the terms and basis as determined by the Company, its

subsidiaries and those related parties, are under the normal course of business of the Company and its

subsidiaries. The transactions are summarised below :

(Unit : Million Baht) For the three-month periods ended 30 June

Consolidated The Company Only Pricing policy

2005 2004 2005 2004 Project construction costs - 3.0 - 3.0 Based on contract Project maintenance costs 2.9 - 2.9 - Based on contract Project management fees - Included as part of - 39.3 - 39.3 Based on contract project costs - Included as part of 16.0 - 16.0 - Based on contract costs of fare box

Annual Report 2005

147


(Unit : Million Baht) For the three-month periods ended 30 June


2005 2004 2005 2004 Selling and administrative 1.6 0.3 - 0.3 Agreed between expenses parties Interest expense and related fee - Included as part of - 67.1 - 67.1 Based on contract project costs - Included as part of selling 82.7 - 79.4 - Based on contract and administrative expenses

(Unit : Million Baht) For the six-month periods ended 30 June


2005 2004 2005 2004 Project construction costs - 10.5 - 10.5 Based on contract Project maintenance costs 5.0 - 5.0 - Based on contract Project management fees - Included as part of - 88.6 - 88.6 Based on contract project costs - Included as part of 35.3 - 35.3 - Based on contract costs of fare box Selling and administrative 3.2 0.7 - 0.7 Agreed between expenses parties Interest expense and related fee - Included as part of - 131.5 - 131.5 Based on contract project costs - Included as part of selling 158.6 - 152.2 - Based on contract and administrative expenses

Annual Report 2005

148


The outstanding balances of the above transactions are shown as separate items and part of items in the

balance sheet as follows :


30 June 31 December 30 June 31 December 2005 2004 2005 2004

Amounts due from related partiesSubsidiaries - BMCL Network Company Limited (Formerly known as “Radianz Communications Network Limited”) - - 1,070 1,070 - Triads Networks Company Limited - - 232 -

- - 1,302 1,070

Related parties - CH. Karnchang Public Company Limited - 360 - 360 - Joint Venture BCKT - 23,998 - 23,998 - Others 718 718 718 718

718 25,076 718 25,076

718 25,076 2,020 26,146

Loans to subsidiary and accrued interest - Triads Networks Company Limited Loans - - 3,000 - Accrued interest - - 1 -

- - 3,001 -

Advance payment for constructionRelated company - CH. Karnchang Public Company Limited 15,279 15,279 - -

15,279 15,279 - -

Annual Report 2005

149



31 March 31 December 31 March 31 December 2005 2004 2005 2004

Construction and other payable Related parties - CH. Karnchang Public Company Limited 198,664 193,671 7,847 2,853 - Joint Venture CKET 43,891 8,690 43,891 8,690 - Others 2,272 1,804 - -

244,827 204,165 51,738 11,543

Accrued interest - related company- CH. Karnchang Public Company Limited 10,621 4,183 - -

10,621 4,183 - -


accrued interest - CH. Karnchang Public Company Limited Loans 530,000 - 530,000 - Accrued interest 6,793 - 6,793 -

536,793 - 536,793 -

Part of “Long-term loans” - Krungthai Bank Public Company Limited Current Portion 21,500 - 21,500 -

Long-term portion 4,694,613 4,657,869 4,694,613 4,657,869

Annual Report 2005

150


During the period, the movement of loan to subsidiary and accrued interest, long-term loans from

shareholder and accrued interest and long-term loans are as follow :

(Unit : Thousand Baht) Consolidated

31 December 30 June 2004 Increase Decrease 2005


accrued interest - CH. Karnchang Public Company Limited Loans - 530,000 - 530,000 Accrued interest - 6,793 - 6,793

- 536,793 - 536,793

Part of “Long-term loans” - Krungthai Bank Public Company Limited Current Portion - 21,500 - 21,500

Long-term portion 4,657,869 58,244 (21,500) 4,694,613



Loan to subsidiary and accrued interest - Triads Networks Company Limited Loans - 3,000 - 3,000 Accrued interest - 1 - 1

- 3,001 - 3,001


accrued interest - CH. Karnchang Public Company Limited Loans - 530,000 - 530,000 Accrued interest - 6,793 - 6,793

- 536,793 - 536,793

Annual Report 2005

151




Part of “Long-term loans” - Krungthai Bank Public Company Limited Current Portion - 21,500 - 21,500

Long-term portion 4,657,869 58,244 (21,500) 4,694,613

8. SHARE CAPITAL

During the fourth quarter of 2004, through a share offering the Company allocated 56,536,246


Baht 169.6 million. The Company presented this amount as a “Share subscription received in advance”

in the balance sheet as at 31 December 2004. Subsequently on 14 January 2005, the Company

registered the above paid up share capital with the Ministry of Commerce.

During the current quarter, through a share offering the Company allocated 43,463,754 additional

ordinary shares to its existing shareholders at a price of Baht 3 per share, making a total of Baht 130.4

million. The Company registered the above paid up share capital with the Ministry of Commerce on 1

March 2005 to be a paid up share capital of Baht 7,350 million, comprises of 7,350 million ordinary


On 29 April 2005, the Annual General Meeting of the Company’s shareholders passed resolution to

increase the Company’s registered share capital from Baht 7,350 million to Baht 10,400 million

through the issuance of 3,050 ordinary shares with a par value of Baht 1 each, to be allocated at the

following basis.

a) 300 million ordinary shares are to be allocated and offered, in whole or in part, to directors,

management, and employees of the Company. These may be made on one or several occasions.

Any ordinary shares remaining after the allocation are to be allocated by means of public offerings.

These offers may be in Thailand and/or abroad and made on one or several occasions. In this

regard, the Executive Board or any persons assigned by the Company’s executive board are

granted the authority to determine the allocation of offering rights, and all details and conditions in

respect of the number of ordinary shares to be offered in each occasion, the offer period, the

payment of share subscriptions and the offer price.

Annual Report 2005

152


b) 2,750 million ordinary shares are to be allocated and offered, in whole or in part, by the way of

public offering, on one or several occasions. In this regard, the Executive Board or any persons

assigned by the Company’s executive board are granted the authority to determine the allocation

of offering rights, and all details and conditions in respect of the number of ordinary shares to be

offered in each occasion, the offer period, the payment of share subscriptions and the offer price.

On 15 May 2005, the Company registered its increased registered share capital with the Ministry of

Commerce to be a registered share capital of Baht 10,400 million, comprise of 10,400 million ordinary


Subsequent to 30 June 2005, an extraordinary general meeting of the Company’s shareholders passed


a) Approved reductions of 300 million in the number of additional ordinary shares to be allotted

and offered to directors, management, and employees of the Company and 2,750 million

ordinary shares to be allotted and offered by the way of public offering, in order to comply with

the allocation of the Company’s share capital to the Mass Rapid Transit Authority of Thailand.

b) Approved an increase of Baht 4,600 million in the Company’s registered share capital, from Baht

7,350 million to Baht 11,950 million, through the issuance of 4,600 million ordinary shares with

a par value of Baht 1 each. The allocation of the additional ordinary shares is to be as follows.

1) 2,600 million ordinary shares are to be allocated and offered to the Mass Rapid Transit

Authority of Thailand at the price equivalent to par value of Baht 1 each.

2) 450 million ordinary shares are to be allocated and offered, in whole or in part, to

directors, management, and employees of the Company. These may be offered on one or

several occasions. Any ordinary shares remaining after the allocation are to be allocated by

means of public offerings. These offers may be in Thailand and/or abroad and made on one

or several occasions.

In this regard, the Executive Board or any persons assigned by the Company’s executive

board is granted the authority to determine the allocation of offering rights, and all details

and conditions in respect of the number of ordinary shares to be offered on each occasion,

the offer period, the payment of the share price and the offer price.

Annual Report 2005

153


3) 1,550 million ordinary shares are to be allocated and offered to public. Any shares

remaining after this allocation are to be allocated, in whole or in part, by means of private

placement and/or to institutional investors, in accordance with the relevant Notifications of

the Securities and Exchange Commission, on one or several occasions.

In this regard, the Executive Board or any persons assigned by the Company’s Executive

Board are granted the authority to determine the allocation of offering rights, and all

details and conditions in respect of the number of ordinary shares to be offered on each

occasion, the offer period, the payment of the share price and the offer price.

On 1 July 2005, the Company registered the reduction of its registered share capital to Baht 7,350


as discussed in a) above.

On 4 July 2005, the Company registered the increase in its registered share capital to Baht 11,950


as discussed in b) above.

9. FARE BOX COMPENSATION REVENUE

On 6 January 2005, the Company entered into a memorandum of agreement with the Mass Rapid

Transit Authority of Thailand (“the MRTA”) regarding the Company’s cooperation in the trial

discounting of the fare box rate of the MRTA Initial System Project - “Chaloem Ratchamongkhon

Line” stipulated in the Concession Agreement. The discounted fare box rates are to be effective during

the period 7 January 2005 to 31 March 2005. In return the MRTA agreed to pay compensation to the

Company at a rate of 80 percent of any shortfall between the actual fare box revenue and the standard

fare box revenue figure as stipulated in the memorandum of agreement.

On 20 May 2005, the Company received a letter from the MRTA regarding the period of the trial

discounting of the fare box rate of the MRTA Initial System. In the letter, the MRTA indicated that the

discount compensation period was to be suspended during the period of the accident when the MRT

system service was unable to run as normal. The MRTA also indicated that the discount compensation

period would then continue again from 21 March 2005 and would end on 4 June 2005.

Annual Report 2005

154


Subsequently on 10 June 2005, the Company received another letter from the MRTA informing it that

the discount compensation to be paid to the Company was approximately Baht 20.5 million. The

Company therefore adjusted the fare box compensation revenue to the said amount, resulting in the

reversal of Baht 2.6 million of fare box compensation revenue which had been over recorded in the

first quarter of current year.

10. FORWARD EXCHANGE CONTRACTS

As at 30 June 2005, the balance of the liabilities of the Company outstanding in foreign currencies, net

of foreign-currency denominated assets was 1.0 million euro. The Company does not utilise forward

exchange contract to hedge against foreign exchange rate risk.

11. BANK GUARANTEES

As at 30 June 2005, there were outstanding bank guarantees issued by banks on behalf of the Company

as follows :

11.1 A bank guarantee of Baht 150 million (31 December 2004 : Baht 150 million) was issued to the

MRTA in respect of certain performance bonds required in the Concession Agreement.

11.2 Bank guarantees of Baht 32.4 million (31 December 2004 : Baht 32.4 million) was issued to the

Metropolitan Electricity Authority as certain performance bonds in respect of electricity meters

instalation at the power substations in the Depot area, Administration Building and retail area in

underground stations.

12. COMMITMENTS

As at 30 June 2005, the Company and its subsidiaries had commitments from the following

agreements.

12.1 The Procurement of M&E Equipment contracts and the Maintenance of M&E Equipment and

Trackwork contracts for 10 years commencing from the Commercial Operation Date. Under the

contracts, the Company has outstanding commitments totaling of Baht 1,322 Million and 36

million euros (31 December 2004 : Baht 1,657 million and 39 million euros) excluding

escalation in accordance with the general consumer price index.

12.2 The Company had commitments from a project management agreement with a joint venture as

the agreement dated 15 August 2000 and a supplemental agreement dated 18 March 2004. Under

the agreements, the Company has outstanding commitments in respect of project management

fee during 2005 to 2008 totaling of Baht 152 million excluding escalation in accordance with the

general consumer price index.

Annual Report 2005

155


12.3 The Company had commitments from Contracts to repair and maintenance of infrastructure and

civil works of the MRTA Initial System Project - Chaloem Ratchamongkhon Line with a related

company and other 3 companies, under the contracts dated 6 November 2003 and 1 June 2004,

for the period of 7 years. Under the contracts, the Company has commitments to pay

maintenance fees totaling Baht 1,145 million.

12.4 The Company had commitments from various services agreements, under which, the Company

has commitments in respect of service fees. Under the agreements, the Company has outstanding

commitments to pay related fees totaling of approximately Baht 41 million.

12.5 The Company had commitments from policies provide all risks insurance for loss incurred

during installation and testing of M&E Equipment, including delays resulting from damage

incurred and third party liability; as well as marine insurance for M&E Equipment. Under the

insurance policies, the Company has commitments to pay the premium totaling of approximately

0.2 million euro.

12.6 The subsidiaries had commitments in respect of car rental agreement, and rental of office

building agreements and related service agreements, under which, the subsidiaries have

outstanding commitments to pay rental and service fees totaling of approximately Baht 19

million.

12.7 The subsidiary had commitments in respect of agreements for construction and design of

infrastructure system of retail space in the underground stations totaling of approximately Baht

89 million.

13. LITIGATIONS

On 10 October 2002, Alstom Transport S.A. (the first plaintiff) and Alstom Holdings (Thailand)

Company Limited (the second plaintiff), as plaintiffs, filed a lawsuit against the Company with the

Intellectual Properties and International Trade Court, seeking damages of approximately Baht 1,382

million. In addition, on 16 December 2002, Mitsubishi Electric Corporation (the third plaintiff), as

plaintiff, filed a lawsuit against the Company with the Intellectual Properties and International Trade

Court, seeking damages amounting to approximately Baht 621 million. The amounts claimed are the

losses allegedly suffered by these companies as a result of the Company’s changing the contractor for

procurement and maintenance of M&E Equipment and Trackwork for the MRTA Initial System

Project - Chaloem Ratchamongkhon Line, whereby the said companies had incurred costs in relation

to their performance of the Start-up Phase Works in accordance with the stipulations of the

Memorandum of Agreement dated 1 September 2000 made between the Company and the consortium

formed by these companies.

Annual Report 2005

156


On 21 January 2003 and 28 January 2003, the Company filed defence testimony and countersuit with

the Intellectual Properties and International Trade Court in relation to the lawsuit brought by Alstom

Transport S.A. and Alstom Holdings (Thailand) Company Limited, as plaintiffs, and the lawsuit

brought by Mitsubishi Electric Corporation, as plaintiff, respectively, requesting that the Court

dismiss both cases and seeking damages from the plaintiffs totaling Baht 3,522 million.

On 8 July 2004, the Court had fixed a date of 28 September 2004 to allow the parties to try to

compromise. In addition, the Intellectual Properties and International Trade Court fixed dates of 8, 9

and 10 March 2005 in order to settle the issue of dispute.

On 5 August 2004, Alstom Transport S.A. (the first plaintiff), Alstom Holdings (Thailand) Company

Limited (the second plaintiff) and the Company reached a compromise on the dispute and filed a

petition with the Intellectual Properties and International Trade Court to withdraw the lawsuits,

without causing the Company to be liable. The case with Mitsubishi Electric Corporation (the third

plaintiff) is still pending in Court and the Intellectual Properties and International Trade Court fixed a

further date on 3 December 2004 for the parties to try to compromise.

On 3 December 2004, the Company and Mitsubishi Electric Corporation (the third plaintiff) had

discussed in front of the mediator with a view to compromise, but the discussion was not concluded.

Subsequently on 26 April 2005, the parties again met in order to compromise, but the outcome of

such meeting was not positive. The Court then proceed with the hearing and fixed the hearing date to

be done in October 2005.

However, the Company’s management believes that the Company still has a good chance to

successfully defend its cases claimed by Mitsubishi Electric Corporation (the third plaintiff) and does

not expect that the Company will have to compensate the plaintiff for any losses as a result of the

lawsuits.

Annual Report 2005

157


14. PROMOTIONAL PRIVILEGES

On 16 January 2003, the Company has been granted promotional privileges for the MRTA Initial

System Project - Chaloem Ratchamongkhon Line (the blue line) under the Investment Promotion Act

B.E. 2520, under BOI certificate number 1029(1)/2546. These privileges include a 100 percent

exemption from corporate income tax on net profit from promoted operations for a period of 8 years

commencing from the date of first earning operating income. The Company commenced its operations

on 3 July 2004. Subject to certain imposed conditions, the main privileges include the following :

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

condition.

- Exemption from corporate income tax on earnings from promotional privileges operation for a

period of eight years from the date on which operating income is first derived.

15. FINANCIAL INFORMATION BY SEGMENT

The Company’s and its subsidiaries’ operations involve principally two industry segments; the

operation of the MRTA Initial System Project and commercial development, which comprises the rental

of retail space in the underground train stations, telecommunications services and provision of

advertising services in underground train stations. The operations of the Company and its subsidiaries

are carried on in the single geographic area of Thailand, and since the operating results of the

subsidiaries which conduct commercial development business are immaterial to the consolidated

financial statements during the current period, there is no presentation of financial statements

information by industry segment.

16. APPROVAL OF INTERIM FINANCIAL STATEMENTS

These interim financial statements have been approved by the Company’s directors.

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