IRPC : Annual Report 2007 by orapan shareinvestor

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CONTENT MESSAGE FROM THE CHAIRMAN MESSAGE FROM THE CEO GENERAL INFORMATION BRIEF HISTORY MILESTONES IN 2007 BOARD OF DIRECTORS MANAGEMENT TEAM MANAGEMENT STRUCTURE SHAREHOLDING STRUCTURE NATURE OF BUSINESS REVENUE STRUCTURE MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL HIGHLIGHTS GOOD CORPORATE GOVERNANCE INTERNAL CONTROL RISK FACTORS FUTURE PROJECTS SOCIAL RESPONSIBILITY ENVIRONMENTAL RESPONSIBILITY CONNECTED TRANSACTIONS REPORT OF THE AUDIT COMMITTEE STATEMENT OF DIRECTORS RESPONSIBILITIES AUDIT REPORT OF CERTIFIED PUBLIC ACCOUNTANT

5 7 9 11 12 14 23 29 41 43 48 53 56 59 70 72 74 77 81 82 92 93 94

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

MESSAGE FROM THE CHAIRMAN IRPC PUBLIC COMPANY LIMITED

After the exit from business rehabilitation in April 2006, it has been such a great glory for IRPC in 2007 in getting our business back on track. Our success in the tough years through the world economic uncertainty has not been resulted only from the great vision and strategy of the Board of Directors but also the support from our major shareholders, minor shareholders, and the Companyûs managements and employees at all level who gain incredible ability and experience and are considered our valuable resources. Hereby, I would like to take this opportunity to thank you all. The Board of Directors has set clear policy in doing the business fairly, transparently, and with accountability following the good corporate governance principles. All stakeholders and business partners are taken into account. This year, the Board of Directors has initiated the Companyûs good corporate governance policy in accordance with the Corporate Governance guidelines from the Stock Exchange of Thailand. In 2008, IRPC has started an implementation of projects according to the companyûs 5-year development plan (2007-2011), containing such as the Refinery Improvement project, the 200 Megawatt Combined Heat and Power Plant project, the petrochemical production capacity expansion project and the Propylene booster project. Their completion will significantly enhance IRPCûs competitive advantage, reduce cost and accelerate future revenue. The Board of Directors believes that business evolution and growth is crucial, however, it should go hand in hand with social, environmental and community development. The Company, therefore, cooperates with the province of Rayong in planting mangrove trees, providing educational supports for local education improvement and career supports for the community around IRPCûs industrial park. With business policies and strategies set out by the Board of Directors together with dedication and competencies of all IRPCûs managements and employees, we are confident that we will breakthrough the change we believe in and on our way forward to be the best fully-integrated petroleum and petrochemical business in South East Asia. General (Mongkon Ampornpisit) Chairman

MESSAGE FROM THE CEO IRPC PUBLIC COMPANY LIMITED

Driving the business through global economic crisis in 2007, despite of its impact in numerous aspects, IRPC has managed to overcome the obstacles and has achieved its goal according to plans and strategies outlined with satisfactory performance. Gratefully, we have received a strong support from all creditors, major shareholders and minor shareholders as well as a fruitful collaboration from the managements and employees at all level, who unite and harmoniously contribute to our organizationûs success that I would like to express my thankfulness on this occasion. According to our 5-year development plans (2007-2011) as reported in 2006, many projects have been already processed, for instance, the refinery improvement project with the objectives to increase production capacity, to reduce costs and to protect the environment. We have appointed Shell Global Solutions, who owns international expertise in many refinery businesses, as a consultant for the improvement of our refinery. We expect that the operation will be completed by mid of 2009 and will enable us to cut our expenses by approximately 60 million US dollars per year. In addition, the 200 Megawatt Combined Heat and Power Plant project has also been developed, utilizing natural gas as a replacement of fuel oil in order to help alleviate todayûs raging problem of global warming and air pollution. Besides, by this means, the company can reduce costs from steam expenses and generate electricity more efficiently as supplies for the factories in our complexes and those of our subsidiaries. The canal excavation project in the deep sea port area has been conducted to accommodate very large crude carriers (VLCC). As well, it is aimed to significantly reduce our transportation cost. Propylene booster project is another production capacity expansion project aimed to meet the marketûs needs and enhance the companyûs revenue. Above all, administrative, accounting, financial and human resources management systems within the organization have been improved as to enhance businessûs flexibility, transparency and fairness for all stakeholders, as well as our commitment to the society, our neighbor communities and the environment has been established for the sustainable and solid growth. Once again, I would like to thank you for all your trust and support. I do believe that IRPC Public Company Limited will be a strong organization that flourishes with continuous development and will continually contribute to our society and our countryûs economy.

(Mr. Piti Yimprasert) Chief Executive Officer

CHANGE WE CAN BELIEVE IN

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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GENERAL INFORMATION IRPC PUBLIC COMPANY LIMITED

Name of Company Symbol Company Registration Business Industry Sector Registered capital Paid-up capital Headquarter

: : : : : : : : :

Bangkok Office :

Web site : Share Registrar :

Auditor :

IRPC Public Company Limited IRPC 0107537002567 Petroleum and petrochemical Natural Resources Energy & Utilities 20,475,000,000 shares at par value of 1 baht each 19,500,000,000 shares at par value of 1 baht each 299 Moo 5 Sukhumvit Rd., Cheong Nern, Rayong, Thailand Tel. (038) 611-333 Fax : (038) 612-813 123 Sun Tower B, 12th Floor, Vipavadee Rangsit Rd., Jomphol, Jatujak, Bangkok 10900 Tel. (662) 649-7000 Fax : (662) 649-7001 www.irpc.co.th Thailand Securities Depository Company Limited 62 Stock Exchange of Thailand Building Ratchadapisek, Klong Toey, Bangkok 10110 Tel. (662) 229-2800 Fax : (662) 359-1259 Call Center : (662) 229-2888 Mr.Vairoj Jindamaneepitak CPA No. 3565 KPMG Phoomchai Audit Limited 50-51 Empire Tower 195 South Sathorn Bangkok 10120 Tel. (662) 677-2000 Fax : (662) 677-2222

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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BRIEF HISTORY IRPC PUBLIC COMPANY LIMITED

IRPC Public Company Limited or IRPC was founded in 1978 as Thai Petrochemical Industry Company Limited or TPI by the Leophairatana family. TPI had been transformed into a public company limited on October 10, 1994 and listed on the Stock Exchange of Thailand on March 17, 1995. Started as a producer of plastic resin pellets in 1982, IRPC gradually expanded its line of product and facilities to become a fully-integrated petrochemical complex. The Company was suffered from financial crisis after the Thai government announced the change of the exchange rate system to the Manged Float System in 1997 and went into debt restructuring process in 2000. The debt restructuring had completed successfully on April 26, 2006. IRPC and its subsidiaries Southeast Asia没s first fully-integrated petrochemical complex are located in Rayong on its own industrial park with supported facilities such as a deep sea port, tank farm and a power plant.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

MILESTONES IN 2007 CHANGE WE CAN BELIEVE IN May

Rated Baa3 by Moodyûs and BBB- from Standard & Poorûs for international credit rating Hired Shell Global Solution (Thailand) Co., Ltd. as a consultant for crude refinery and petrochemical plant revamp Sold unsecured, unsubordinated 10-year bond of $250 million face value with a fixed coupon rate of 6.375 percent with maturity in 2017

June

Repaid the remaining bridge loan of $302 million with cash from operations Issued and allocated 965 million warrants to current employees under the ESOP

July

Sold two lots of unsecured and unsubordinated bonds with a total face value of 10 billion Baht Lot 1: 7 million units of 1,000 baht bond with coupon rate of 5.05 percent per annum and a maturity in 2014 Lot 2: 3 million units of 1,000 baht bond with coupon rate of 5.29 percent per annum and a maturity in 2017 Allocated warrants for former employees of the Company and its subsidiaries under rehabilitation. The allocations of warrants for the current and former staff in total do not exceed 975 million units.

September

Ranked 231st among 250 top global energy firms and 10th in the Fastest Growing Asian Energy Companies 2007 categorized by leading energy information firm Plattûs

December

Awarded çThe Asset Triple A Award: Best Thailand Dealé by çthe Asseté, an Asian leading financial magazine, for the most successful issuance of 10-year bond total face value of $250 million in the international markets.

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°‘®°√√¡∑’Ë ”§—≠ª’ 2550 IRPC PUBLIC COMPANY LIMITED

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

General Mongkon Ampornpisit Chairman of the Board/ Chairman of the Executive Committee Education ◆ Bachelor of Science, Chulachomklao Royal Military Academy ◆ Honorary Doctorate in Political Science, Ramkamhaeng University ◆ National Defence College Class of 344 ◆ Director Accreditation Program (DAP), IOD Class of 39 ◆ Director Certification Program (DCP), IOD Class of 61 ◆ Role of The Chairman Program (RCP), IOD Class of 17 ◆ Capital Market Academy Leaderchip Program, CMA Class of 4

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Experience Apr 2006-Present ◆ Chairman/Board of Directors of IRPC Plc. Jul 2003 - Apr 2006 ◆ Chairman, Plan Administrators of Thai Petrochemical Industry Plc. Apr 2002 - Aug 2005 ◆ Chairman, Board of Directors of Krung Thai Bank Plc. Aug 2000 - Jan 20002 ◆ Chairman, Board of Directors of The New Bangkok International Airport

BOARD OF DIRECTORS IRPC PUBLIC COMPANY LIMITED

Mr. Prasert Bunsumpun Vice - Chairman/Chairman of Nomination and Remuneration Committee Education ◆ Bachelor of Engineering (Civil), Chulalongkorn University ◆ MBA, Utah State University, U.S.A. ◆ Ph.D Engineering Honorary Degree, Chulalongkorn University ◆ Thai Institute of Directors (IOD) for DAP Class 26 ◆ Capital Market Academy Leadership Program, Capital Market Academy (Class 3) Experience Present ◆ Vice-Chairman/Chairman of Nomination and Remuneration Committee of IRPC Plc. Apr 2006 - Present ◆ Vice-Chairman, Chairman of Nomination And Remuneration Committee, IRPC Plc. 2003 - Present ◆ President, PTT Plc. Present ◆ Director of PTT Exploration And Production Plc.

Mr. Aree Wongsearaya Director Education ◆ Bachelor of Political Science (Local Administration) Chulalongkorn University ◆ Master of Science (Community Development) University of Philippines. ◆ Master of Science (Public Administration) University of Missouri, U.S.A. Experience Present ◆ Director of IRPC Plc. Oct 2006 - Oct 2007 ◆ Minister of Interior Apr 2006 - Oct 2006 ◆ Director of Thai Petrochemical Industry Plc.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Mr. Pala Sookawesh Director/Executive Director Education ◆ Bacherlor of Engineering (Hon) in Electrical Engineering (Power), Chulalongkorn University ◆ M.S. in Industrial Engineering (Operation Research) Oregon State University, U.S.A. ◆ Honorary Doctorate Degree in Engineering From Chulalongkorn University ◆ Certificate, The Role of Chairman (RCM) 2/2001 Thai Institute of Directors (IOD) ◆ Certificate, Director Accreditation Program (DAP) 14/2004 Thai Institute of Directors (IOD) ◆ The Role of the Compensation (RCC) 3/2007 Experience Apr - Present ◆ Director/Executive Director of IRPC Plc. 2005 - Present ◆ Director, PTT Chemical Plc. ◆ Chairman, Thaioleo Chemicals Co., Ltd. 2004 - Present ◆ Chairman, Ratchaburi Power Co., Ltd. ◆ Director, Thai Oil Power Co., Ltd.

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Mr. Piti Yimprasert Director/Executive Director/ Chief Executive Officer Education ◆ B.Sc. in Civil Engineering, Chulalongkorn University ◆ M.Sc. in Civil Engineering, University of Texas at Austin, U.S.A. ◆ Ph.D. in Civil Engineering, University of Texas at Austin, U.S.A. Experience Present ◆ Chief Executive Officer, IRPC Plc. ◆ Chairman of the Board, Thai Paraxylene Co., Ltd. ◆ Chairman of the Board, Thai Oil Marine Co., Ltd. ◆ Chairman of the Board, IRPC A&L Co., Ltd.

BOARD OF DIRECTORS IRPC PUBLIC COMPANY LIMITED

Mr. Virabongsa Ramangkura Director Education ◆ B.A. First Class Honors in Political Science, Chulalongkorn University, Thailand ◆ M.A. in Economics, University of Pennsylvania, U.S.A. ◆ Ph.D. in Economics, University of Pennsylvania, U.S.A. ◆ Doctor of Law (Honorary), Webster University, U.S.A. Experience Apr 2006 - Present ◆ Director, IRPC Plc. Present ◆ Chairman of The Executive Board, Advance Agro Plc. Jun 2004 - Present ◆ Chairman, Thai-Lao Association for Friendship.

Pol. Gen. Sereepisut Taemeeyaves Independent Director/ Chairman of Audit Committee Education ◆ Master Degree of Art (Honorary Degree) Political Science, Ramkhamhaeng University ◆ Doctorate (Honorary Degree) Political Science Ramkhamhaeng University ◆ Doctorate (Honorary Degree) Public Administration, Ubon Ratchathani University ◆ Directors Accreditation Program (DAP) 60/2006 Experience Apr 2006 - Present ◆ Independent Director and Chairman of Audit Committee, IRPC Plc. Present ◆ National Commissioner General, National Police Oct 1998 ◆ Assistant Direction ◆ Assistant Commissions General

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Mr. Visit Tantisunthorn Director/Executive Director Education ◆ B.Sc. in Statistics Chulalongkorn University ◆ MBA. in Finance University of Wisconsin, Madison, U.S.A. ◆ Advanced Management Program Harvard Business School, U.S.A. Experience 2006 - Present ◆ Director/Executive Director of IRPC Plc. ◆ Secretary, General Government Pension Fund ◆ Director, Dhipaya Insurance Plc.

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Mr. Rutt Phanijpand Independent Director/ Audit Committee Member Education ◆ M.S. in Business Ad., Fort Hays Kansas State College, U.S.A. ◆ B.Sc., Kasetsart University ◆ Directors Accreditation Program : Governance Training for Listed Company Director (DAP 4/2003), IOD ◆ Directors Certification Program (DCP 61/2005), IOD Experience Oct 2006 - Present ◆ Independent Director/Audit Committee Director, IRPC Plc. Apr 2007 - Present ◆ Chairman of the Nomination & Remuneration Committee, Home Product Centre Plc. Dec 2005 - Present ◆ Chairman of Executive Director, Land & Houses Retail Bank Plc.

BOARD OF DIRECTORS IRPC PUBLIC COMPANY LIMITED

Mr. Prajya Phinyawat Mr. Chaivat Churitti Director/Executive Director/ Director/Nomination Corporate Governance Committee Director and Remuneration Director Education ◆ B.E. (Civil Engineering), Chulalongkorn University ◆ M.S. (Civil Engineering), Stanford University, U.S.A. ◆ Ph.D (Civil Engineering), University of Texas at Austin, U.S.A. Experience Jun 2007 - Present ◆ Corporate Governance Director of IRPC Plc. 2007 - Present ◆ Board of Director, PTT Aromatics and Refining Plc. Apr 2006 - Present ◆ Director /Executive Director of IRPC Plc. 2005 - Present ◆ Board of Director, Ptt Chemical Plc. 2004 - Present ◆ Board of Director, Thaioil Plc.

Education ◆ B.Sc. Economics, Nathaniel Hawthorne College, U.S.A. Experience 2007 - Present ◆ Director/Nomination and Remuneration Director, IRPC Plc. 2005 - Present ◆ Senior Executive Vice President, Oil Business Group, PTT Plc. Present ◆ Director of The Board, Thailube Blending Company Limited ◆ Director of The Board, Fuel Pipeline Transportation Company Limited ◆ Director of The Board, Retail Business Alliance Company Limited ◆ Director of The Board, Energy Complex Company Limited

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Mr. Sangiam Santad Director/Audit Committee Member

General Voradej Bhumichitra Independent Director

Education ◆ Bachelor Degree in Law, Ramkhamhang University ◆ M.P.A. National Institute of Development Administration ◆ Directors Accreditation Program (DAP) 2004 ◆ Directors Certification Program (DCP) 2004 Experience Apr 2006 - Present ◆ Director / Audit Committee Director of IRPC Plc. 2004 - Present ◆ Independent Director of Tisco Bank Plc. 2005 - 2007 ◆ Inspector General, Office of Permanent Secretary for Finance Ministry ◆ Independent Director of Tisco Corporation Plc.

Education ◆ Chulachomklao Royal Military Academy ◆ Command and General Staff College, Rta. ◆ National Defense College Experience 2007 - Present ◆ Independent Director of IRPC Plc. ◆ Chief of the Staff to the Commander in Chief 2005 ◆ Commander Army Air Defense Command

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BOARD OF DIRECTORS IRPC PUBLIC COMPANY LIMITED

Mr. Goanpot Asvinvichit Director/Nomination and Remuneration Director

Mr. Tienchai Chongpeerapieng Independent Director/ Corporate Governance Director

Education ◆ B.A. (Economics), Thammasat University ◆ MBA., University of Southern California, U.S.A. Experience Apr 2007 - Present ◆ Director of IRPC Plc. Jun 2007 - Present ◆ Nomination and Remuneration Director of IRPC Plc. 2006 - Present ◆ Advisor to the Board of Directors of MFC Asset Management Plc. 2006 - Present ◆ The Un Advisers Group on Inclusive Financial Sectors 2004 - 2007 ◆ President and CEO of Government Savings Bank

Education ◆ B. Econ Economics, Chulalongkorn University ◆ M.S Economics, Illinois State University ◆ Ph.D. Economics, University of Houston Experience 2007 - Present ◆ Independent Director / Corporate Governance Director of IRPC Plc. 1992 - Present ◆ President of Bera Co., Ltd. Management Consultant Company Specializing in Energy, Transportation, Business and Economic Research 2006 - 2007 ◆ Board Member, Oil Fund Management Institute, Ministry of Energy

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

BOARD OF DIRECTORS

Mrs. Jantima Sirisaengtaksin Independent Director/ Chairman of Corporate Governance Committee Education ◆ Bachelor of Accountancy, Chulalongkorn University ◆ Master of Accountancy, Chulalongkorn University ◆ The Management Development Programs, Sasin Graduate Institute of Business Administration of Chulalongkorn University Experience Apr 2007 - Present ◆ Independent Director of IRPC Plc. Jun 2007 - Present ◆ Chairman of Corporate Governance Committee of IRPC Plc. Oct 2007 - Present ◆ Deputy Permanent Secretary, Ministry of Finance Sep 2005 - Present ◆ Director of Thailand Tobacco Monopoly

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MANAGEMENT TEAM IRPC PUBLIC COMPANY LIMITED

Mr. Banlue Chantadisai Chief Financial Officer Education ◆ B.Sc., Massachusetts Institute of Technology ◆ MBA., University of Chicago Business School ◆ Directors Certification Program (DCP) Class 9/2001), IOD ◆ Certification, The National Defense College, Class of 4515 Experience 2006 - Present ◆ Chief Financial Officer, IRPC Plc. ◆ Director, IRPC A&L Co., Ltd. 1998 - 2006 ◆ Executive Vice President, Investment Banking Group Bangkok Bank Plc.

Mr. Suphon Tubtimcharoon Chief Planning and Administration Officer/Chief Marketing Office Education ◆ Diploma in Highway Engineering, King Mongkutûs Institute of Technology ◆ Bs.CE., Mapua Institute of Technology, Philippines ◆ Certificate of Gas Engineering, Scholarship under Colombo Plan ◆ Directors Certification Program (DCP) Class 61/2005 IOD ◆ Advanced Management Program (AMP), Harvard Business School, U.S.A. Experience 2006 - Present ◆ Chief Planning and Administration Officer, Chief Marketing Office IRPC Plc. 2003 - Present ◆ Executive Vice President, PTT Pcl. Gas Business Group, PTT Plc. 2006 - Present ◆ Managing Director, IRPC A&L Co., Ltd.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Ms. Nitaya Direksathapon Senior Vice President/ Finance & Accounting Education ◆ B.A, Accounting (Second Honor), Chulalongkorn University ◆ MBA. (Financial Management), National Institute of Development Administration Experience 2006 - Present ◆ Senior Vice President Finance & Accounting IRPC Plc. 2001 - 2006 ◆ Vice President, Financial Risk Management &Credit Policy Dept. PTT Plc. 1996 - 2001 ◆ Vice president, Financial & Accounting Dept. Natural Gas Business Unit, PTT Plc.

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Mrs. Trithip Sivakriskul Senior Vice President/ Corporate Planning and Business Development Education ◆ B.A, (Finance Banking), Chulalongkorn University ◆ MBA., Sasin, Chulalongkorn University ◆ Attended The Director Accreditation Program, Thai Institute of Direstors Experience Present ◆ Senior Vice President Corporate Planning and Business Development, IRPC Plc. ◆ Director and Audit Committee Member, Superblock Plc. 2005 - Jan 2007 ◆ Advisor, Muang Thai Insurance Co., Ltd. 2003 - Apr 2006 ◆ Working Team of the Plan Administrator of Thai Petrochemical Industry Plc.

MANAGEMENT TEAM IRPC PUBLIC COMPANY LIMITED

Mrs. Chitra Thavara Senior Vice President/ Advisor to CEO

Mrs. Srisuda Suralertrungsun Senior Vice President/ Human Resource and Administration

Education ◆ Bachelor Degree in Commerce Thammasart University Experience 2006 - Present ◆ Senior Vice President, Advisor to CEO IRPC Plc. ◆ Acting CEO, IRPC Oil Co., Ltd. ◆ Acting CEO, Thai ABS Co., Ltd. ◆ Acting CEO, IRPC Polyol Co., Ltd.

Education ◆ B.A, Chulalongkorn University ◆ MM. (Executive MBA). Sasin, Chulalongkorn University Experience Oct 2007 ◆ Senior Vice President Human Resources and Administration Dec 2006 - Sep 2007 ◆ Senior Vice President Planning and Administration IRPC Plc.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Mr. Prateep Wattanasriroj Senior Vice President/ Operation 1

Vadm. Sanchai Panyam Rtn., Advisor to CEO/ Operation 2

Education ◆ B.Sc. (Chem.Eng.), Prince of Songkhla University Experience Present ◆ Senior Vice President Operation 1 IRPC Plc. 1981 - Apr 2006 ◆ Complex 1 Manager Thai Petrochemical Industry Plc.

Education ◆ Bachelor Degree of Science in Chemical Technology Department Chulalongkorn University Experience 2006 - Present ◆ Advisor to CEO Operation 2 IRPC Plc. 2005 ◆ Advisor to Plan Administrator/ Thai Petrochemical Industry Plc. 2000 - 2002 ◆ Expert of the Office of Secretariate Ministry of Defence

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MANAGEMENT TEAM IRPC PUBLIC COMPANY LIMITED

Mr. Fu Houng Chi Advisor to CPO/ Operation 3 Education ◆ EMBA. Sasin, Chulalongkorn University ◆ Chun - Yuan College of Science & Engineering Chun - Li Tau Yang Taiwan R.O.C. Experience Dec 2006 - Present ◆ Advisor to CPO Operation 3 IRPC Plc. 1994 - Dec 2006 ◆ Vice President, Petroleum & Lube Base Oil Products Business Office,/ Thai Petrochemical Industry Plc.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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MANAGEMENT STRUCTURE IRPC PUBLIC COMPANY LIMITED

IRPCûs management consists of the Board of Directors and 4 subcommittees including the Executive Committee, the Audit Committee, the Nomination and Remuneration Committee and the Good Corporate Governance Committee.

The Board of Directors The Board of Directors consists of at least 5 and up to 17 directors, with eligible qualifications comply to the Public Companies Act. The Board of Directors has authorities and responsibilities to manage overall operation in compliance with the laws, the companyûs objectives, the Companyûs Articles of Association as well as resolutions of the shareholdersû meeting. The Board of Directors shall obtain the approval from eligible shareholders by not less than three-fourth (3/4) of the total votes of the shareholders attending the meeting in the following cases; 1) Selling out or transferring all of the Companyûs business or some units to other parties. 2) Acquiring or taking over other companies or other public companies. 3) Entering into, amending, or annulling contracts on the leasing parts or all of the Companyûs operation. 4) Assigning other parties to manage the Companyûs business 5) Consolidating the Companyûs business with other parties for profit sharing. 6) Amending the Companyûs Memorandum of Association or Articles of Association. 7) Increasing or decreasing the Companyûs capital or issuing debentures 8) Merging or closing down the Company

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN

There are 16 members of the Board of Directors. Their meetings and shareholdings are as follows : Name

Position

Chairman 2. Mr. Prasert Bunsumpun Vice Chairman 3. Mr. Pala Sookawesh Director 4. Mr. Virabongsa Ramangkura Director 5. Mr. Prajya Phinyawat Director 6. Mr. Sangiam Santad Director 7. Mr. Visit Tantisunthorn Director 8. Pol. Gen. Sereepisut Taemeeyaves Director 9. Mr. Rutt Phanijpand Director 10. Mr. Goanpot Asvinvichit Director 11. General Voradej Bhumichitra Director 12. Mrs. Jantima Sirisaengtaksin Director 13. Mr. Tienchai Chongpeerapieng Director 14. Mr. Chaivat Churitti Director 15. Mr. Aree Wongsearaya Director 16. Mr. Piti Yimprasert Director/Secretary 1. General Mongkon Ampornpisit

Meeting Attendance/Total Meetings 12/12 12/12 11/12 12/12 12/12 12/12 11/12 11/12 9/12 5/8 8/8 8/8 8/8 8/8 1/2 12/12

Shares as of Shares increased December (decreased) 31, 2007 during the year 8,000 58,742 50,000 300,000

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MANAGEMENT STRUCTURE IRPC PUBLIC COMPANY LIMITED

The Authorized Directors The authorized directors are General Mongkon Ampornpisit, Mr. Pala Sookawesh, Mr. Piti Yimprasert, Mr. Prasert Bunsumpun, Mr. Prajya Phinyawat, Mr. Virabongsa Ramangkura and Mr. Visit Tantisunthorn. Any two of these seven directors are authorized to jointly sign and affix the Companyûs seal to bind the Company. The Sub-committees are appointed by the Board of Directors in order to carefully and efficiently consider important issues for decision making. Four sub-committees are as follows; 1. The Executive Committee is appointed to facilitate management of the Company in compliance with the boardûs policies. The executive committee taking current and future business risks into account in making decisions in line with the Companyûs vision, mission and business ethics as well as corporate governance principle. Five members of the Board of Executive Committee are as follows;

Name

Position

1. General Mongkon Ampornpisit 2. Mr. Pala Sookawesh 3. Mr. Prajya Phinyawat 4. Mr. Visit Tantisunthorn 5. Mr. Piti Yimprasert

Chairman Member Member Member Member

Meeting Attendance/Total meetings

13/13 10/13 12/13 13/13 13/13

The Executive Committee has duties and responsibilities as follows : 1) Reviewing the business plan and annual budget before proposing to the Board of Directors. 2) Considering the Companyûs financial and investment policy in accordance with the Companyûs policy and approving investment criterias and proposals following the Companyûs regulations. 3) Considering and taking actions on important matters related to the Companyûs business. 4) Reviewing and providing recommendations to all matters proposing to the Board of Directors.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN 5) Considering appointing directors of direct and indirect subsidiaries or joint venture according to the Companyûs shareholding or shareholders agreements. 6) Considering other matters assigned by the Board of Directors. 2. The Audit Committee comprises of three directors as follows:

Name 1. Pol. Gen. Sereepisut Taemeeyaves 2. Mr. Rutt Phanijpand 3. Mr. Sangiam Santad

Position

Meeting Attendance/Total Meetings

Chairman Member Member

14/15 15/15 15/15

The Audit Committee has duties and responsibilities assigned by the Board pursuant to Notification of the Stock Exchange of Thailand on Qualifications, Scope of Duties of the Audit Committee (No. 1), 1999 and The Good Practices of the Audit Committee as follows: 1) Reviewing the Companyûs financial reporting process to ensure accuracy and adequacy by cooperating with an external auditor and the Companyûs managements responsible for the quarterly and annually financial reporting. 2) Ensuring that the Company has appropriate and effective internal control system and internal audit. 3) Reviewing the performance of the Company to ensure compliance with the securities and exchange law, regulations of the Exchange or laws relating to the Companyûs business. 4) Considering, selecting, nominating and recommending remuneration of the Companyûs external auditor. 5) Determining the disclosure of the Companyûs information in case that there is a connected transaction or transaction that may lead to conflict of interest so as to ensure the accuracy and completeness. 6) Performing any other act as assigned by the Board of Directors with approval of the Audit Committee. For example, reviewing policies on financial and risk management, reviewing managementûs compliance with business ethics, reviewing the Companyûs management important report which must be disclosed to the public according to laws.

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MANAGEMENT STRUCTURE IRPC PUBLIC COMPANY LIMITED

7) Preparing reports on monitoring activities of the Audit Committee and disclosing it in an annual report of the Company and such the report must be signed by the Chairman of the Audit Committee. 8) The Audit Committee may seek for independent professional comments from external advisors when deem appropriate at the Company没s expenses. 3. The Nomination and Remuneration Committee comprises of four directors as follows: Position

Meeting Attendance/Total Meetings

1. Mr. Prasert Bunsumpun

Chairman

1/1

2. Mr. Goanpot Asvinvichit

Member

3. General Voradej Bhumichitra

Member

4. Mr. Chaivat Churitti

Member

Name

Directors Completing Terms and Resigning in 2007 Position

Meeting Attendance/Total Meetings

1. Mr. Pakorn Malakul Na Ayudhya

Member

1/1

2. General Pornchai Granlert

Member

1/1

3. Mrs. Paitoon Pongkuesorn

Member

1/1

Name

4. Mr. Nathachak Patamasing Na Ayudhya

Member

1/1

The Nomination and Remuneration Committee has the following duties and responsibilities: 1) Selecting qualified nominees as candidates for new directors or Chief Executive Officer as well as present opinions to the Board of Directors who will be responsible for proposing the candidates to the shareholders没 meeting. 2) Determining the procedure and criteria for the nomination of directors or Chief Executive Officer.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN 3) Considering the compensation of directors to be proposed to the shareholdersû meeting for approval. 4) Considering Chief Executive Officerûs compensation and considering raising the Chief Executive Officerûs compensation. 4. The Good Corporate Governance Committee was appointed by the resolution of the Board of Directors meeting no. 5/2007 on May 15, 2007. The committee consists of three members as follows:

Name 1. Mrs. Jantima Sirisaengtaksin 2. Mr. Prajya Phinyawat 3. Mr. Tienchai Chongpeerapieng

Position

Chairman Member Member

Meeting Attendance/Total Meetings

2/2 2/2 2/2

The Good Corporate Government Committee has the following duties and responsibilities. 1) Outlining the Companyûs good corporate governance policy to the Working Group on the Development of Good Corporate Governance System. 2) Proposing the operation guidelines regarding the good corporate governance to the Companyûs Board of Directors. 3) Supervision of the operation of the Companyûs Board of Directors and management team to be in compliance with the principles of the good corporate governance. 4) Providing recommendations to the Companyûs Board of Directors regarding the good corporate governance. 5) Reviewing the principles of good corporate governance in comparison to international practices and recommend to the Board of Directors.

34 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

MANAGEMENT STRUCTURE IRPC PUBLIC COMPANY LIMITED

Management Team The Board of Directors has authorized the Chief Executive Officer to be responsible for the administration in compliance with the Companyûs policies. The Chief Executive Officerûs mandate for approval of significant transactions has clearly written in the Companyûs rules and announcements such as the Companyûs regulations regarding the financial management, the accounting, the budgeting and the loan extension, the announcement on human resources management and the announcement on the authorization to work on transactions related to accounting. The above authorization does not include any transactions which may constitute a conflict of interest with him or persons with potential conflicts of interest. The Board of Directors also appointed the Risk Management Committee at management level to directly responsible for the reviewing and managing of risks such as Financial Risks, Operation Risks, Business Risks or Event Risks. The Risk Management Committee has to report to the Audit Committee every quarter in order to scrutinize the report before submitting to the Companyûs Board of Directors. The Companyûs Risk Management Committee has to prepare the analysis of potential external and internal risks that may impact the Companyûs operation. The committee must also present the Risk Management Report to the Board of Directors.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN Management Ownership in IRPC Shares and Warrants: Name

1. Mr. Piti Yimprasert 2. Mr. Bunlue Chantadisai 3. Mr. Suphon Tubtimcharoon 4. Mr. Prateep Wattanasriroj 5. Vadm. Sanchai Panyam Rtn. 6. Mr. Fu Houng Chi 7. Mrs. Srisuda Suralertrungsun 8. Ms. Nitaya Direksathapon 9. Mrs. Trithip Sivakrikul 10. Mrs. Chitra Thavara*

Number of Shares increased shares As of (decreased) December 31, 2007 during the year 300,000 1,000 1,000 181,100 -

(1,250,000)

Warrants allocated in 2007 355,866 355,866 381,009 -

Note : Mrs. Chitra Thavara, Senior Vice President, is appointed to be the advisor to Human Resources & Administration.

Nomination of Directors and Management The Nomination and Remuneration Committee is appointed to select and nominate persons with suitable qualifications to become directors and advisors to the Board of Directors by considering the following criteria: 1. They must not have prohibited qualifications as stipulated in the Public Companies Act. 2. They must have knowledge in different fields so they can coordinate in applying the knowledge where necessary. They should comprise at least three members with knowledge in petroleum business and petrochemical industry, one member with legal knowledge and one member with knowledge in finance and accounting. 3. The appointment of directors must be transparent and clear as the candidates must be presented with full qualifications adequate for the decision making of the Nomination Committee. The Board of Directors will seek for the approval at the shareholders没 meeting. 4. The qualifications of all directors must be disclosed at every change of the directors. 5. Newly appointed directors should get the briefing on necessary and useful information for them to work as the Company没s directors within three months after the appointment.

36 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

MANAGEMENT STRUCTURE IRPC PUBLIC COMPANY LIMITED

Board of Directors and Executives Remuneration Board of Directors Remuneration The Board of Directors has appointed a Nomination and Remuneration Committee to consider the guidelines for the remuneration of the Company没s directors and members of the sub-committees to ask for approval from the Board of Directors and the Shareholders Meeting. The criteria for remuneration are as follows: 1. The remuneration shall be fair and suitable for the responsibilities as well as the Company没s performance. 2. The remuneration shall be attractive to retain qualified directors or shall be comparable to the compensation paid in the same industry. 3. The structure and factors for the determination of remuneration shall be clear, transparent and easy to understand. The 2007 Annual General Meeting held on April 20, 2007 approved the remuneration of Board of Directors and members of sub-committees as follows: 1. Board of Directors and Sub-Committees Remuneration in 2007: Board of Directors

Monthly remuneration/person

Meeting allowances/person

1. The Board of Directors Chairman 60,000 Baht 60,000 Baht Director 45,000 Baht 45,000 Baht 2. Sub-committees including the Audit Committee, the Nomination and Remuneration Committee and the Executive Committee Chairman of the committee 60,000 Baht Member 45,000 Baht

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN 2. Bonus for Directors : Determining in comparison to other companies in the same industry as well as taking into account business expansion and growth in profit. For the performance of the year 2006, the Company paid bonus of 30 million baht to the Board of Directors, or 0.44% of the Company没s net profit. The payment of bonus to each director was based on the attendance at the meetings of the Board of Directors. Chairman of the Board of Directors received bonus approximately 30% more than the Company没s directors.

Name

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

General Mongkon Ampornpisit Mr. Prasert Bunsumpun Mr. Pala Sookawesh Mr. Virabongsa Ramangkura Mr. Prajya Phinyawat Mr. Sangiam Santad Mr. Visit Tantisunthorn Pol. Gen. Sereepisut Taemeeyaves Mr. Rutt Phanijpand Mr. Goanpot Asvinvichit General Voradej Bhumichitra Mrs. Jantima Sirisaengtaksin Mr. Tienchai Chongpeerapieng Mr. Chaivat Churitti Mr. Aree Wongsearaya Mr. Piti Yimprasert

38 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Meeting allowances Compensation for directors and sub-committees

Bonus

Total

720,000

1,500,000

2,746,516

4,966,516

540,000 540,000 540,000

600,000 945,000 540,000

1,414,235 1,384,887 2,059,887

2,554,235 2,869,887 3,139,887

540,000 540,000 540,000 540,000

1,080,000 1,215,000 1,080,000 1,335,000

1,864,235 1,834,887 1,864,235 2,059,887

3,484,235 3,589,887 3,484,235 3,934,887

540,000 376,500 376,500

1,170,000 225,000 360,000

408,673 -

2,118,673 601,500 736,500

376,500 376,500

360,000 360,000

736,500 736,500

376,500 113,225 540,000

360,000 45,000 1,125,000

1,441,911 2,059,887

736,500 1,600,137 3,724,887

MANAGEMENT STRUCTURE IRPC PUBLIC COMPANY LIMITED

The changes in directors and members of sub-committees for 2007 are as follows: 1) Mr. Tayuti Sriyuksiri, Mr. Prateep Leopairut, Mr. Pramual Leopairatana, Miss Malinee Leopairatana, Mr. Kamol Eimsakulrat and Mr. Tavich Techanavakul had been removed from the Board of Directors following the resolution of the Extraordinary Shareholders Meeting no. 1/2007 held on January 19, 2007. 2) Mr. Chainarong Taepaisitpong and Mr. Chaiwat Taepaisitpong resigned from the Board of Directors, effective from January 17, 2007. 3) Mr. Nathachak Patamasing Na Ayudhya, General Pornchai Granlert, Mr. Vachiraphan Promprasert and Mrs. Paitoon Pongkaesorn had vacated the office after the end of term according to the resolution of the 2007 Annual General Meeting held on April 20, 2007. 4) Mr. Goanpot Asvinvichit, General Voradej Bhumichitra, Mr. Tienchai Chongpeerapieng, Mrs. Jantima Sirisaengtaksin and Mr. Chaivat Churitti were appointed as directors according to the resolution of the 2007 Annual General Meeting held on April 20, 2007. 5) Mr. Pakorn Malakul Na Ayudhya resigned from the Board of Directors, effective from August 23, 2007. 6) Mr. Aree Wongsearaya was appointed as director according to the resolution of the Board of Directors on October 16, 2007. 7) Mr. Bajara Yutithamdamrong resigned from the Board of Directors, effective from November 3, 2007.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

MANAGEMENT STRUCTURE CHANGE WE CAN BELIEVE IN

Management Remuneration Ten managements received compensation for the performance of the year 2007 in terms of salary and bonus in total of 89 million Baht. For the year 2006, ten managements received compensation for the performance in terms of salary and bonus in total of 65 million Baht. There were five of them who did not receive the full-year compensation as they were appointed during 2006. The full-year calculation of compensation for ten managements for 2006 would be of 81 million Baht.

Non-cash Remuneration The Company contributed money into a provident fund for 7 executives who are members of the provident fund also other benefits for the year 2007 in total of 2.7 million Baht and of 2 million Baht for the year 2006.

40 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

SHAREHOLDING STRUCTURE IRPC PUBLIC COMPANY LIMITED

The company has 20,475 million registered shares with par value of one baht each, 19,500 millions were paid up. Major shareholders as of January 2, 2008: Shareholders 1 2 3 4 5 6 7 8 9 10

PTT Public Company Limited Government Savings Bank Government Pension Fund Vayupak Fund I by MFC Asset Management Vayupak Fund I by Krung Thai Asset Management Bangkok Bank Public Company Limited Thai NVDR DEUTSCHE BANK AG, LONDON Thai Tavee Tun Fund HSBC (SINGAPORE) NOMINEES PTE LTD

Shares 6,142,500,000 1,950,000,000 1,676,696,970 975,000,000 975,000,000 504,906,708 247,460,112 244,246,783 243,000,000 209,777,404

% 31.50% 10.00% 8.60% 5.00% 5.00% 2.59% 1.27% 1.25% 1.25% 1.08%

Dividend Policy IRPC没s policy is to pay dividend of at least 25 percent of the Company没s net profit after taxes and all reserves as stipulated in the Company没s Articles of Association. However, actual payments will be depending on the Company没s investment plan and other necessities as the Board of Director consider appropriate.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

42 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

NATURE OF BUSINESS IRPC PUBLIC COMPANY LIMITED

IRPC is a producer of integrated petrochemical products. Its complex consists of an upstream, an oil refinery unit and a downstream petrochemical production. The companyûs oil refinery unit has the total capacity of 215,000 barrels per day, accounting for 21% of the countryûs total refining capacity. The IRPCûs production complex is located in an industrial estate managed by the company in Rayong. The estate provides necessary infrastructures that are used to support the production including a deep-sea port, oil storage tanks and a power plant. The companyûs operation and production qualities have been proven by numerous international standards ranging from the ISO 9001 for quality, administration and management system, to the ISO 14001 for environment, with another standard approach for Occupational Health and Safety Management Systems - OHSAS 18001 - and Thai Standardûs Institute initiated of TIS 18001. The product lines of IRPC can be categorized as below.

Petrochemical Products The companyûs petrochemical products for sale are as following; (1) Olefins the upstream petrochemical product that is including Ethylene, Propylene and Butadiene. The products are used widely as a raw material for the other plastic resin. The company has a production capacity of 728,000 tonnes of olefins per year. (2) Aromatics the upstream petrochemical product that is including Benzene, Toluene and Xylene, mostly used for producing intermediate petrochemical products. The aromatic production capacity stood at 367,000 tonnes annually. (3) Plastic Resins the downstream product, which is a raw material for the production of various types of finished plastic products. The companyûs downstream products consist of High Density Polyethylene (HDPE), Polypropylene (PP), Acrylonitrile Butadiene Styrene (ABS) Acrylonitrile

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN

Styrene (SAN), Polystyrene (PS), Expandable Polystyrene (EPS). At present, the company has a combined production capacity of plastic resin at 841,000 tonnes per year. (4) Polyol including Polyester and Polyether Polyol, the raw material of Polyurethane is used for producing a number of related products such as foam for furniture production, insulation foam for the construction industry to prevent heat, etc. The company has an annual capacity of Polyol at 25,000 tonnes.

The Market Situation and Competition In 2007, the fluctuation in crude oil prices, driven by political tensions in oil producing and exporting countries and global climate changes, remained a main reason behind the vibration in the petrochemical industry. Dubai crude oil prices were traded between $52 to $86 per barrel on average while ethylene prices were between $1,056 to $1,320 per tonne, and HDPE prices moved in a range of $1,260 to $1,523 per tonne. Demand for petrochemical products in the domestic market was declining due to surging oil prices and political uncertainties. The US sub-prime mortgage crisis had caused a decline of consumer demand across the globe. While the global supply was on the rise from the expansion of production capacity around the world and the Thai currency continued to appreciate against the US dollar, this resulted in the fiercer competition in both domestic and overseas markets. The tougher competition has motivated global major players to develop a strategy for survival

44 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

NATURE OF BUSINESS IRPC PUBLIC COMPANY LIMITED

by joining the operations with each other in a form of business partnership and aiming at reducing the import of raw materials, for example the venture between Kuwait-China and Taiwan-China etc. The Thai petrochemical business is expected to have a positive outlook in 2008. However, risks remain underlying the industry even though the local political situation has improved largely, which will result in a rise of domestic demand. As well, negative external factors will affect Thailand eventually. The global demand is seemingly declining caused by the global economic slowdown and crude oil prices will slightly drop. On the supply side, it is expected to increase due to additional supply from the capacity expansion by petrochemical producers across the globe. Furthermore, the baht appreciation will continue, the market competition therefore will be even tougher. Nevertheless, the export sector to some markets particularly China and Japan has a bright prospect. The massive growth of consumption in China came from its preparation to host Olympic 2008. Consequently, the country decided to delay many petrochemical projects indefinitely such as Ethylene Cracker, Polyethylene and Polypropylene production due to its inadequate workforces, mostly chemicals engineers. This could become an opportunity for Thailand to boost more product shipments to China, in particular downstream or finished petrochemical products. China, presently, is the largest export market for downstream petrochemical products for Thailand. As Japan is considered one of significant export markets for Thailand, Thailand, on November 1, 2007, started complying with the Japan-Thailand Economic Partnership Agreement. Thailand is gaining benefits from the pact as Japan has reduced import tariffs on plastic resin pellets to 2.3%, 2.6% and 5.4% in the first year (2007) and to zero by 2012, which will help boosting up the export of petrochemical products. Next year, the export volume to Japan will increase drastically. The petrochemicals industry has its owned nature as demand and supply will ride in different periods. The fact is that demand and consumption of petrochemical ties up with the economic growth while additional capacities increase from time to time determined by the industry没s nature. As the industry capital is intensive and takes time for the preparation of new project investments and constructions, all expansion projects in each country are aimed at meeting their economies of scale in a bid to make their operations to be less dependent on import products. The constructions of these new projects are scheduled to complete around 2010-2011. This will make an influx of additional outputs in the same time and the market is likely to have large surplus, which will probably drive petrochemical prices down. However, the petrochemical producers in Thailand have been adjusting their strategies to compete with international competitors by expanding their capacity also integrating their

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN productions to become more fully integrated which will help reduce production costs, especially from higher feedstock prices. As well, the integration from upstream to downstream could alleviate risks as the producers could choose to produce products which has higher margin. Over the past few years, Thailand recorded an export surplus for intermediate and downstream products.

Petroleum Products The company没s petroleum products include; (1) Refined Product includes gasoline, high-speed diesel, fuel-oil, Kerosene and Liquefied Petroleum Gas (LPG), etc. (2) Long Residue the by-product from oil refining process used as a main raw material in the production of Lube Base Oil. (3) Naphtha the skimming oil came from the crude oil refining process used as a feedstock for producing petrochemical products. (4) Lube Base Oil the heavy distillate obtaining from crude oil refining process used for producing Lubricant oil as well as other by-products such as Slack Wax and Extract, etc. (5) Asphalt the product used as main construction materials for road.

The Market Situation and Competition The consumption of refined-oil products in 2007 fell by 1% compared to the previous year, driven by the rise of crude oil prices. With the implementation of energy conservation campaign by the government, demand of gasoline and diesel dropped eventually. Furthermore, the Electricity Generating Authority of Thailand has reduced its fuel-oil usage sharply by 29%. This affected a decline in overall oil consumption, meanwhile, the use of Liquefied Petroleum Gas (LPG) gained much more due to the subsidy by the government. As a result, more consumers are shifting to use alternative fuels, for example, Gasohol, Bio-diesel and Natural Gas Vehicles (NGV), with the demand of gasohol jumping from 3.5 million litres per day in 2006 to 4.6 million litres per day in 2007. This is due mainly to the gasohol promotional policy initiated by the Ministry of Energy by cutting levy collection rate to the oil fund for particular Gasohol item to be far below premium gasoline没s rate, resulting in a sharp increase in gasohol consumption. In addition, the public awareness campaigns were implemented continuously with an aim to boost motorist confidence in Gasohol. This prompted to a sharp rise of Bio-diesel sales volume from 0.12 million litres per day in 2006 to 1.58 million litres per day in 2007 or jumping over 10 times within only one year, and the tendency that the rise will continue.

46 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

NATURE OF BUSINESS IRPC PUBLIC COMPANY LIMITED

In the middle of 2007, the government commercially launched Bio-diesel (B2). It has been promoting B2 among the public and planning to make a country-wide distribution from February 1, 2008 which is two months earlier than the original plan. Therefore, in 2008, 1.1 million litres of bio-diesel will be used per day in the blending of regular diesel. With the declining growth rate of domestic oil consumption, the domestic oil operators still need to apply the pricing strategy, better service and aggressive marketing promotion in order to maintain their market shares. In 2007, IRPC maintained the market shares at 10% of the total market. It mostly sold products to wholesales clients. The refined-oil consumption in 2008 is expected to close to the volume in the previous year. It is forecasted that demand for gasoline and diesel will continue to decline due to consumer switching to alternative fuels such as LPG and NGV. The gasoline consumption is likely to fall by 0.3% while diesel will soar slightly by 0.4%. LPG consumption in vehicles tends to increase at lower rate after the The breakdown of sales government decided to float LPG price. Some taxi according to distribution channels drivers are shifted to use NGV in line with the government没s promotional policy, the growth rate of LPG, therefore, is expected to drop to 6.6%.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN

REVENUE STRUCTURE OF IRPC AND ITS SUBSIDIARIES (unit : million baht) Products

Operator Percentage of Shareholding

2005

2006

2007

1 Petrochemical Products 1.1 Plastic resins

IRPC Plc., Thai ABS Co., Ltd.

38,355

19%

39,265

19%

41,995

18%

IRPC Plc. IRPC Plc.

8,418 7,902

4% 4%

9,381 9,489

4% 5%

8,165 10,501

4% 5%

IRPC Polyol Co., Ltd.

1,191

1,329

1,307

55,866

27%

59,465

28%

61,968

27%

93,045

45%

100,518

48%

114,110

49%

(99.99%) 1.2 Olefins 1.3 Aromatics 1.4 Polyol Total

2 Petroleum Products 2.1 Refined Product

IRPC Plc., IRPC Oil Co., Ltd. (99.99%)

2.2 Long Residues 2.3 Naphtha

IRPC Plc. IRPC Plc.

11,718 9,714

6% 5%

11,385 12,071

5% 6%

19,263 11,687

8% 5%

2.4 Lube Base Oil

IRPC Plc., IRPC Oil Co., Ltd.

9,074

13,042

10,940

(99.99%) IRPC Plc.

4,796

5,990

6,703

128,346

62%

143,006

68%

162,702

70%

2.5 Asphalt and by-products Total

3 Other sale revenues 3.1 Electricity and steam

IRPC Plc.

2,077

2,251

2,276

3.2 Rent and

IRPC Plc.

843

639

572

2,920

2,889

2,848

187,132

91%

205,360

98%

227,518

98%

other materials Total Total of sale revenues

48 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

REVENUE STRUCTURE IRPC PUBLIC COMPANY LIMITED

(unit : million baht) Products

4 Others 4.1 4.2 4.3 4.4 4.5 4.6 4.7

Operator Percentage of Shareholding

Gain from sales of long-term investment (1) Gain from sale and revaluation of investment Gain from sales of property, plant and equipment Foreign exchange gains Interest income Dividend income Share of profits from investments accounted for using the equity method 4.8 Other revenues (2) Total Grand Total

Notes :

2005

2006

2007

18,207 0 0 0 341 90 18

9% 0% 0% 0% 0% 0% 0%

0 0 0 2,451 790 175 0

0% 0% 0% 1% 0% 0% 0%

0 1,538 668 1,265 673 65 0

0% 1% 0% 1% 0% 0% 0%

504 19,160 206,292

0% 9% 100%

675 4,092 209,452

0% 2% 100%

579 4,789 232,307

0% 2% 100%

(1)

In 2005, The Company sold 249,007,294 shares in TPI Polene Plc. to its creditors as stated in its restructuring plan (2) Other revenues are tax refunds, compensation for import duties, rental income and sales of scrap

Revenues by markets 1. Domestic sales 2. Export sales Total sales revenue

119,343 67,789 187,132

64% 36% 100%

133,185 72,176 205,360

65% 35% 100%

156,777 70,741 227,518

69% 31% 100%

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

52 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS IRPC PUBLIC COMPANY LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS Operating Performance IRPC Plc. and its subsidiaries had net profit of 12,986 million baht in year 2007, comparing to year 2006, net profit increased by 6,163 million baht, or 90%, resulting from an increase in sales volume and higher refining utilization rate in year 2007 which increased by 11% to 189,447 barrel per day, compared to the year 2006 in which the company had a major turnaround for 45 days. Gross profit increased by 5,693 million baht, or 62% as the appreciation of Thai baht against US dollar reduced imported raw material costs. Integrated GRM were increased to 11.45 USD/bbl, as compared to 9.87 USD/bbl in 2006. Revenues from sales in 2007 amounted to 227,518 million baht, an increase of 11%. Sales of petroleum products accounted for 72% or 162,702 million baht, sales of petrochemical products accounted for 27% or 61,968 million baht and 1% from other products. For the year 2007, sales of petroleum products increased from the previous year by 19,696 million baht, or an increase of 14%, mostly from the increased domestic sales. GRM of petroleum products increased to 5.81 USD/bbl, an increase of 1.16 USD/bbl from last year. Petrochemical product sales increased from the previous year by 2,503 million baht, an increase of 4%, with GRM of petrochemical at 5.64 USD/bbl, an increase of 0.42 USD/bbl. Plastic resins sales of 41,995 million baht, an increase of 7% from the previous year, as a result of tight supply which caused the sales volume and unit prices to increase. For the year 2007, the company has the non-recurring items of gain from sales of long term investments in the amount of 1,538 million baht and gain from sales of property, plant and equipment in the amount of 668 million baht, resulting from sales of the investments in PTT Chemical Plc. and 195 rai vacant land in Mabtaphut Sub-district of Rayong Province to the companies in PTT group.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN Selling and administrative expenses for the year 2007 was 5,458 million baht, an increase of 1,338 million baht, or 32% resulting from contribution to employee resignation of 942 million baht and loss from impairment on long term investment of 513 million baht while selling expenses decreased by 178 million baht, partly as a result of the company没s closure of 39 company-managed gas stations with only 1 gas station remaining in Rayong. Interest expenses in 2007 was 1,107 million baht, a decrease from the previous year of 973 million baht, resulting from decreases in principle as the company repaid bridge loans by the issuance of debentures and cash flow from operation. Income Tax for 2007 was 31 million baht which was the income taxes of the company没s subsidiaries, while the company exempts from income taxes because of the tax benefits from loss carry forward. Financial Status Total assets at the end of 2007 amounted to 130,814 million baht, an increase of 2,986 million baht from 2006 or 2%. Major item is property, plant and equipment which accounted for 48%, and inventory which accounted for 28%. Higher utilization rates of refining capacity and the increases in crude oil prices resulted in an inventory increase of 5,305 million baht or 17%, while trade account receivable increased by 6,610 million baht, or 99%. The 2007 trade account receivable amounted to 13,315 million baht, of which 3,022 million baht was from undue trade account of related parties没 receivable as the company sold more products to companies in the PTT group and other trade account receivable whose undue debts amounted to 8,584 million baht. Total liabilities at the end of 2007 amounted to 40,399 million baht, a decrease of 4,476 million baht from 2006, as a result of the repayment of bridge loans in the amount of 805 million USD by issuing USD debentures for 250 million USD, or 8,417 million baht, and Thai baht debentures for 10,000 million baht. Details are as follow:

54 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

MANAGEMENT DISCUSSION IRPC PUBLIC COMPANY LIMITED

Date

Repayment of Bridge Loans and Issuance of Debentures

(Millions in USD or Equivalent) Bridge Debentures Interest Rates Loans

29/9/2006

Bridge Loans

805

25/5/2007

Issuance of 10 years USD debentures and paid for bridge loans on 29/5/2007 Repayment of bridge loans with cash flow from operations Repayment of bridge loans with cash flow from operations Issuance of 7 and 10 years Thai Baht debentures, 10,000 million baht Remaining Debt

(250)

29/5/2007 29/6/2007 2/7/2007

250

MLR - 1.75% and LIBOR + 0.4% 6.375%

(253) (302) 295 0

7,000 million baht = 5.05% 3,000 million baht = 5.29%

545

Shareholders没 equity at the end of 2007 amounted to 90,415 million baht, an increase of 7,462 million baht from 2006, as a result of the 2007 net profit less dividend payment of 4,280.17 million baht in total, comprising 2006 dividend paid in 2007 at 0.12 baht per share and 2007 interim dividend payment 0.10 baht per share. Cash Flow Statement For the year 2007, the company had net cash from operations in the amount of 10,887 million baht and net cash from investments in the amount of 7,264 million baht as the company sold its short-term investments, vacant lands and investments in PTT Chemical Plc. shares. Net cash flow used in financing activities in the amount of 16,980 million baht, as a result of repayment of bridge loans and payment of dividends, while cash receipts resulted from the issuance of debentures. Thus, the company had an increase of 1,170 million baht in cash. Combined with beginning cash balance of 9,974 million baht, the company had ending cash balance of 2007 at 11,144 million baht.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

FINANCIAL HIGHLIGHTS CHANGE WE CAN BELIEVE IN

(unit : million baht)

Balance Sheet Current Assets Total Assets (1) Current Liabilities Total Liabilities Shareholders没 Equity Share Capital - Authorized Share Capital - Issued and fully paid Par value (baht) Statements of Income Sales Total Revenues Cost of Sales (2) SG&A (2) Total Expenses EBIT Interest Expenses Extraordinary Item Net Profit Financial Ratios Net Profit Margin (%) Return on Assets (%) Return on Equity (%) Dividend Payout Ratio Debt to Equity Ratio (%) Book Value per share (baht) Earning per share (baht)

2003

2004

2005

2006

2007

29,754 140,972 22,573 128,234 12,739 81,000 78,489 10

44,016 146,723 57,624 126,355 20,368 81,000 78,489 10

60,915 128,277 18,260 51,966 76,311 20,475 19,500 1

63,042 127,828 44,840 44,875 82,953 20,475 19,500 1

66,043 130,814 21,859 40,399 90,415 20,475 19,500 1

90,296 96,135 75,511 11,087 87,086 9,049 6,502 2,546

154,546 156,147 122,461 14,423 138,019 18,128 5,826 12,284

187,132 206,292 159,615 14,659 176,799 29,493 3,118 35,559 61,909

205,360 209,452 196,246 4,120 200,506 8,945 2,080 6,823

227,518 232,307 212,711 5,458 218,169 14,138 1,107 12,986

2.65% 1.86% 39.07% 10.07 1.62 0.32

7.87% 8.54% 74.21% 6.20 2.60 1.57

30.01% 45.02% 128.07% 0.68 3.91 7.32

3.26% 5.33% 8.57% 34.30% 0.54 4.25 0.35

5.59% 10.04% 14.98% 45.05% (3) 0.45 4.64 0.67

Note : (1)

(2)

(3)

In 2005, the company has changed the accounting policy of Land, Building and Equipment valuation from the revaluation method to the historical cost method In 2006 and 2007, the company has reclassified the excise tax transactions from recording in Selling expenses items to cost of goods sold items IRPC Board of directors approved the rate of dividend paid to the shareholders on March 4, 2008 and the rate will be brought to the 2008 AGM for resolution on April 9, 2008

56 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

BALANCE SHEET

Note :

Since 2005 the accounting policy for property, plant and equipment (PP&E) has been changed from the revaluation method to historical cost method

SALE REVENUE & NET PROFIT

Note :

2005 :

2006 :

IRPC recorded profits from business reorganisation as follow: - Gain from transfer of long-term investment in related company (TPI Polene Plc.) of 18,207 million baht - Gain from rehabilitation plan of 35,559 million baht Plants shut down for major maintenance for 45 days costed 1,021 million baht. Average refinery capacity for the year decreased to 79% from 83% in 2005.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

58 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

GOOD CORPORATE GOVERNANCE IRPC PUBLIC COMPANY LIMITED

The Company has realized the importance of good corporate governance, which is one among key factors to promote corporate efficiency in management as well as to be the foundation for sustainable business growth. On February 26, 2007, the IRPC Good Corporate Governance Working Group (CGW) comprising executives from various departments was established. On May 15, 2007, the Board of Directors appointed the Corporate Governance Committee which has responsibilities and authorities in setting the Company没s corporate governance frameworks in compliance with the guidelines for best practice in good corporate governance for listed companies. CGW has its duty in outlining the corporate policy framework and its action plan as well as how to communicate with staff to create their concerns over the good corporate governance in compliance with the best practice of corporate governance for listed companies. On September 18, 2007, the Company announced its CG policy and distributed the Corporate Governance Handbook to directors, management and staff for acknowledgement and understanding, to use it as guidelines for work. Moreover, the Company has promoted the Corporate Governance Handbook through the Internet and organized many activities to enhance understanding about corporate governance for its staff in each CG agent. New staff will be informed about the policy and has to follow all six corporate governance practices as following; 1. Having accountability in their decision making as well as ability to explain why the decision is made 2. Having responsibility for their work with the mercy of sufficient ability and efficiency 3. Providing equitable treatment and fairness to all stakeholders

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN 4. Having transparency in the work process and disclosing information to related parties 5. Having a vision to create long-term value for the organization 6. Applying code of conducts and business ethics in the management structure and promote a relationship between the board, the management and shareholders. In 2007, the Company implemented the good governance practices following the regulations and the best practice of corporate governance for listed companies. There are five categories as follow:

1. Rights of Shareholders 1) The Company will send an invitation letter with adequate supports for the shareholders in advance. The invitation letter has details and meeting agendas as well as documents related to rules and regulations and opinions from directors. The proxy form and the map of the meeting place are also included and the letter notifies shareholders to prepare documents to be shown at the meeting and used when exercising their rights and voting. The shareholders can look for information about the meeting rules and agendas on the Companyรปs website before they get the invitation letter. Moreover, the Company will open for advance registration at least two hours before the meeting. It also uses the barcode system to register shareholders attending the meeting. 2) Before every meeting, the Chairman of the meeting will explain the voting method and the vote-counting method as stated in the Companyรปs Articles of Association. The Chairman also informs the meeting the voting result for every agenda. 3) The Chairman of the meeting has to arrange sufficient time for the meeting and manage it properly and transparently. During the meeting, the Chairman will give chances for shareholders to express their opinions and ask questions to the board before voting and concluding the meeting resolution for each agenda. 4) The Company will disclose information to shareholders regularly through the Stock Exchange of Thailand and the Companyรปs website. 5) The Company will provide minor shareholders with access to information directly via electronic mail of the Companyรปs investor relation department. 6) The Company will disclose the shareholding structure of the Companyรปs subsidiaries and associate companies to ensure transparency and accountability to the shareholders.

60 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

GOOD CORPORATE GOVERNANCE IRPC PUBLIC COMPANY LIMITED

7) The Company will operate with efficiency in building sustainable growth for the organization and generating appropriate returns for the shareholders.

2. Equitable Treatment of Shareholders The Company emphasizes on providing fair and equitable treatments for all shareholders as follow; 1. Arranging the shareholders没 meeting following the sequence of agendas notified in the invitation letter and having no policy to add more agendas without informing shareholders in advance providing shareholders with enough time to study details and related information in each agenda before making a decision. 2. Encouraging shareholders to use ballat paper separately for each agenda. Ballots will be gathered within the meeting room to count the votes and merge them with the advance voting via proxy forms. Then, the voting result will be informed at the meeting. 3. The minute of meeting is to be made precisely before submission to the Stock Exchange of Thailand within 14 days after the meeting which it will also be disclosed via the Company没s website.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN 4. Outlining the measures regarding information security and prevention of insider trading in the Company没s CG policy to create fairness for shareholders. The directors, the management and related persons including spouses and children age under 20 must be informed that they are prohibited to use undisclosed information for insider trading as it will violate the Section 241 of the Securities and Exchange Act B.E. 2535. The directors and the management must report their shareholdings to the Securities and Exchange Commission in the Company when they are appointed and when they have any change of holdings within three working days.

3. Role of stakeholders The Company realizes the importance of role of stakeholders including shareholders, staff, trading partners, competitors, debtors, customers, the community, the society and the environment. Treatments for each stakeholder have been notified clearly in the Corporate Governance Handbook which staff at all levels will use it as a guideline of their duties and responsibilities. Shareholders

Customers

Trading partners:

Competitors

Staff

62 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

The Company is determined to take responsibility and to satisfy the shareholders by making a sustainable growth and an appropriate return constantly along with transparency in management and reliable accounting system. The Company will ensure customer satisfaction and confidence about quality products and services at reasonable prices. It will build long-term good relationship with customers. The Company is concerned about fairness, honesty and mutual benefit with its trading partners. Thus, the trading partners shall strictly comply with related rules and regulations as well as have business ethics. The Company will follow rules of fair competition to avoid any dishonest act. The Company considers staff as one of key factors for success. Staff will feel that they have good working environment and friendly corporate culture and this will promote a strong teamwork and staff confidence.

GOOD CORPORATE GOVERNANCE IRPC PUBLIC COMPANY LIMITED

Society and Environment

While the Company has operated an integrated oil refinery complex in Rayong province, it is seriously concerned about social and environmental safety as well as quality of life of people living nearby its complex. It has frequently undergone a check-up of environmental impact in line with related laws. Moreover, the Company is determined to have good governance, help the society and conserve environment. It will also promote an efficient consumption of energy and implement a number of social and environmental projects to benefit all groups of people.

4. Information Disclosure and Transparency The Company has disclosed corporate information and financial performances as well as other important information on the clear, easy-to-understand, transparent, accurate, sufficient, reliable and timely manner. It also prepared a statement of directors没 responsibility, financial statements and a report of auditor in its annual report. Together, the forms to report annualized information (form 56-1) and annual report (form 56-2) will be disclosed through the Company没s website and shareholders will have an equal access to the information. The Board of Directors and executives who hold the positions from senior vice president must report their shareholdings in the Company as required by the Stock Exchange of Thailand and the Securities and Exchange Commission. As being a listed Company on the Stock Exchange of Thailand, the Company is required to follow all rules and regulations related to insider trading. It must provide fairness and equitable treatment to all shareholders. To prevent any wrongdoing by staff and the management and their family members, these people will be prohibited to use information, which is not disclosed to the public, to buy or sell shares of the Company, subsidiaries and/or joint ventures. If they do violate the rule, the SET will consider the transaction as a means of share speculation or insider trading.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN The Company has provided a tight security system to protect database and confidential information with a limited access to undisclosed information. Only related persons such as information owners and holders will have authorized access to the undisclosed information and they will have to follow the security process strictly. Those who violate the use of undisclosed information will get either legal or principle punishment or both based on the case-by-case basis. As well, the Company is in the petroleum and petrochemical business, having an integrated production from upstream to downstream, and this will benefit shareholders and the overall economy. It has to embrace its professional shills, flexibility and freedom. To maintain such the high standard of business, the Company has endorsed the best practice for the management and staff - in other words means the code of conducts and ethics. They will work with responsibility, honesty and determination and follow restrictions and policies of the Company as well as corporate culture. The Companyûs interest is their priority and they are willing to help any activity to conserve environment, create good working atmosphere and develop the excellent organization.

The Sub-Committee To have a careful and efficient consideration on important plans and operation, the Companyûs Board of Directors shall appoint four sub-committees as follow; 1. The Executive Committee At least three directors specializing in the petroleum and petrochemical business will be appointed as the executive committee and have duty and responsibility to screen business plans and financial budgets which, then, will be proposed to the Board of Directors. The Executive Committee will outline the investment policy to suit the Companyûs major policy and approve the investment guideline and criteria following the Companyûs Articles of Associations. It will also consider and handle important issues related to the Companyûs business operation, as well as examine and suggest on all kinds of work projects before submitting to the Board of Directors. Furthermore, the Executive Committee have duty to appoint directors for subsidiaries and joint venture companies, based on the proportion of the Companyûs shareholdings or agreements signed between shareholders. Lastly, the committee may work on other projects assigned by the Board of Directors. 2. The Audit Committee The Audit Committee is appointed from at least three board directors and at least one among them must be an independent director and have knowledge and expertise

64 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

GOOD CORPORATE GOVERNANCE IRPC PUBLIC COMPANY LIMITED

on accounting and finance. The Audit Committee must have independence as required by the Announcement of the Securities and Exchange Commission and the Stock Exchange of Thailand. The Audit Committee has a duty to monitor and supervise the Company没s operation, financial statements and internal controls. It may also consider the nomination of auditor, consider conflict of interests and manage risks for the Company. 3. The Nomination and Remuneration Committee The Nomination and Remuneration Committee is appointed from at least three directors and at least one among them must be an independent director. The committee has a duty to select appropriate persons to become directors and Chief Executive Officer. The selection process must be reasonable and transparent. Compensations for directors and CEO are to be proposed for approval by the Board of Directors and the Shareholders没 meeting. 4. The Good Corporate Governance Committee At least three Directors, which at least one among them is an independent director, are appointed as the Good Corporate Governance Committee whose duty is to set policies and suggestion on corporate governance practices for the Board of Directors of the company.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN Roles and Responsibilities of the Board of Directors The Board of Directors shall be responsible for their role in managing for the best interest of the Company. Role, duties and responsibility of the Board of Directors shall comply with legislations, Companyûs Articles of Association, resolutions of the shareholdersû meeting and corporate governance principles. The board should work with honesty, integrity, responsibility and accountability, along with transparent disclosure of information. It will supervise the management performance to meet the corporate goal, maximize profits for shareholders and also concern about interests of the stakeholders. To enhance the Companyûs strength and efficiency, the Board of Directors has active roles and duties as follow: 1. Contributing time and emphasizing the importance of vision, direction and strategy for the Company by jointly expressing opinions and gathering important information. The board will also consider risk factors to make sure that the management is able to implement the Companyûs business vision, direction and strategy for the highest benefit. 2. Examining and giving approval on the Companyûs important strategy and policy as well as financial projections and business plans. The board will regularly follow up the management to work and implement all action plans initiated to meet the Companyûs business direction and strategy. 3. Establishing the reliable accounting system, financial statements and auditing and pursuing the procedure and assessments of internal controls efficiently and effectively. 4. Examining business risks which may happen in the future and carefully adopt risk management policy. The board will supervise the management to arrange the efficient risk-management system and explore new business opportunities arisen from the risks. 5. Examining and solving problems arisen from conflict of interests and connected transactions. The board should consider major transactions which will benefit the Company, shareholders and stakeholders the most. 6. Arranging the remuneration system for the Companyûs executives to create incentives to perform in both short and long term. 7. Evaluating the performance of the CEO regularly and proposing remunerations for the CEO, which is in line with the Companyûs performance. 8. Providing a channel to communicate with each group of shareholders and to evaluate the information disclosure to ensure that it is accurate, precise, transparent and highly reliable. 9. Having leadership and being a role model whose work comply with the Companyûs corporate governance practices.

66 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

GOOD CORPORATE GOVERNANCE IRPC PUBLIC COMPANY LIMITED

The Board of Directors没 Meeting and Information Distribution The Company will set the date and time of the Board of Directors没 meeting in advance for the whole year and inform all directors. The directors will manage their owned schedules to attend the meeting. There may be special meetings to consider some important issues if necessary. Prior to the meeting, the Company will send each director an invitation letter attached with clear meeting agendas and sufficient related information for consideration in advance. In each meeting, the Chairman of the Board of Directors will arrange enough time for the Company没s management to present proposal and information so directors are able to discuss some important issues cautiously. Moreover, the Chairman encourages directors to freely express their opinions and carefully make considerations. The Board of Directors encourages the CEO to invite executives to attend the meeting so the executives who are directly related to the agenda can clarify or give additional information. The Board of Directors may ask executives to provide them with information, documents, advices and services related to the Company没s operation. Additionally, the Board can seek opinions from independent directors and external advisors if necessary. Directors who have potential conflict of interest in each agenda shall not vote or give opinion or shall be absent from the meeting. After the meeting, the minutes of meeting will be recorded precisely in writing and should cover resolutions and opinions from the Board of Directors. Approved minutes are signed by the Chairman and filed properly so directors and related persons can review and use them as references. Meanwhile, the Company emphasizes the importance of accurate, timely, and transparent information disclosure. The Investor Relations Department will represent the Company to communicate and provide information to institutional investors, analysts and general investors. In 2007, the Company held a number of analyst meeting and briefing for institutional investors and staged many road shows to meet shareholders and investors locally and aboard. A lot of company visits were organized for fund managers and analysts to meet executives and ask for investment progress. Here are the activities the IR department arranged in 2007.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CHANGE WE CAN BELIEVE IN Road show to meet shareholders and investors in overseas Road show to meet shareholders and investors in Thailand Company visit Plant visit for retail investors Analyst meeting Booth display

6 3 52 2 4 2

times times times times times times

Besides, the Company also provides information to investors and interested people through the Companyûs website at www.irpc.co.th. Investors who would like to ask for more information can contact the Company at (062) 649-7000 ext. IR or send electronic mail to ir@irpc.co.th.

5. Board of Directors Responsibilities The Board of Directors is the key of the Companyûs good corporate governance practices. The board should comprise of those who possess knowledge and experience in the fields related to the Companyûs business and willing to contribute time for the Company. The Composition of the Board of Directors The Board of Directors The Board of Directors comprises 16 persons. All directors must have qualifications required by laws and regulations and are experts in various fields, so the combination of their expertise and experiences can benefit the Company and should spend time to work as the Companyûs directors. Chairman of the Board of Directors The Chairman of the Board of Directors shall not be the Companyûs CEO and shall have a clear role and responsibility, separately from the CEO and freely express his or her opinion and to exercise right to decide when the voting by directors is equal. Vice Chairman of the Board of Directors The Vice Chairman has a duty assigned by the Chairman of the Board of Directors and will work temporarily on behalf of the Chairman when he or she is not able to perform or when the position is vacant. CEO The CEO is appointed to outline the management framework under the board resolutions and policies. He or she will serve as secretary of the Board of Directors to arrange the Board and shareholdersû meetings efficiently.

68 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

GOOD CORPORATE GOVERNANCE IRPC PUBLIC COMPANY LIMITED

Independent Directors The Company imposes a stricter qualification requirement for independent directors than the ones used by the Securities and Exchange Commission and the Stock Exchange of Thailand as follow; 1. Independent directors must not hold more than 0.5% of the Company没s total shares with voting rights as well as in subsidiaries and joint ventures or even in legal entities, which have conflict of interests with the Company (including persons specified in the Section 258 of the Securities and Exchange Act). 2. Independent directors are prohibited to involve in any management and are not Company temporary staff, employee, advisor with monthly salary, auditor, legal consultant and other advisors or those who control the Company, subsidiaries, and joint ventures. They should not have conflict of interests at least in two years. 3. Independent directors must not have any business relationships with the Company as customers, trading partners, trade creditors/debtors, and financial creditors/debtors. They must not have any direct or indirect benefit related to the finance and management of the Company, subsidiaries, and joint ventures or legal entities with conflict of interests. 4. Independent directors should not be relatives or having relationship, which possibly makes them lack independence from management and major shareholders of the Company, nor subsidiaries and joint ventures or legal entities with conflict of interests with the Company. They should not be appointed to represent or protect the interest of any director or shareholder.

Enrichment for Directors and Managements The Board of Directors encourages and facilitates trainings for employees involved in supervising the Company没s corporate governance practices as this will continuously promote work improvement. Every time new director is appointed, the Company will provide information and document which will support his or her work as the director.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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INTERNAL CONTROL The Company recognizes the significance of having sufficient internal control and risk management as an effective measure in managing business which helps to reduce or prevent the business from risks and damages it may cause to the Company没s assets. In 2007, the Audit Committee has reviewed the Company没s internal control covering the following aspects:

1. The Organisation and Its Environment The Board of Directors creates an environment where managements and employees realize the importance of having good internal control which is based on integrity and business ethics. Also, clear and measurable business objectives are reviewed regularly. CG Committee is appointed to set out written guidelines for managements and employees.

2. Risk Management The Company appoints the Risk Management Committee to monitor and control risk to an acceptable level. An external consultant in development of risk management system is hired with an objective in achieving critical risk management organisation-wide. In 2008, it is in a process of identifying and evaluating the whole process risk.

3. Management Control The Company defines roles, responsibilities and limitations in approval of financial transactions for managements in each level in writing to ensure that corporate policies and directions are followed by the whole organisation. Regular audit are applied in subsidiaries and affiliated companies to ensure compliance with laws, to reduce business risk and to maintain reputation of the Company.

4. IT System and Communications The Company creates reporting system to ensure directors, managements and other related persons sufficient information in making decision which promotes better internal control

70 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

INTERNAL CONTROL IRPC PUBLIC COMPANY LIMITED

system. The information system securities committee is appointed to govern security of the Company没s information system and to set out a company-wide policy in using technologies and communications within the organisation.

5. Monitoring System The Company regularly observes and adjusts the plan to the changing situations and report the progress to the Board of Directors and the Audit Committee.

Summary of the Audit Committee没s Opinion The evaluation of the internal control system is done by managements and the Internal Audit Department and reviewed by the Audit Committee. There are no significant problems or issues found.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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RISK FACTORS Risks Associated with the Potential Conflict of Interest from PTT PTT Plc., a dominant manufacturer and distributor of natural gas, petroleum and petrochemical products in Thailand, is a major shareholder holding 31.50% of IRPC shares which allow PTT Plc. to influence the Companyûs management decision. Since PTT Plc. and also other major shareholders including the Government Savings Bank, the Government Pension Fund and Vayupak Fund 1 which in total hold another 30% of IRPC shares are government corporations. This gives the Government of Thailand influence over the Companyûs policies or to cause the Company to act following the national economic and social policies though it may not be for the best interest of the Company or its shareholders. Nonetheless, IRPC has a policy to create maximum values for its shareholders with careful consideration on its stakeholders. The Company has been acting on transparency basis. In case of connected transaction, the Company has a policy to duly, carefully, and independently consider any conflict of interest in ethical manner which is in compliance with the çRules, Conditions and Procedures Governing the Disclosure of Information and Other Acts of a Listed Companyé of the Stock Exchange of Thailand.

Risks Associated with Fluctuation in Crude Oil Price Since the cost of crude oil the Company used in its refining and marketing is derived from the reference prices of petroleum products domestically and internationally, the financial status and performance of the Company is directly influenced by the market price of crude oil and refined products. The market price of such products fluctuates due to the change in regional and international demand and supply from economic cycle, seasonal weather, domestic and regional production capacity, and political factor especially in the Middle East. This risk is common for all companies in Petroleum-related industry. The fluctuation in crude oil price effects the price of the Companyûs products especially Naphtha which is an input of petrochemical business. The rising price of products may cause the demand for petroleum and petrochemical products to fall. This may affect the financial status and the performance of the Company. The Company believes that it will be able to reduce its reliance on crude oil from Middle East sources in the long run by planning an investment in its refinery improvement in 2010-2011. The investment is targeted to reduce the Companyûs cost of crude input by adjusting its refinery to take more sour-crude.

72 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

RISK FACTORS IRPC PUBLIC COMPANY LIMITED

Exchange Rate Risk The Companyรปs business transaction is based on US currency either or refers to US currency. Revenue is received in US Dollar for international sales and in Thai Baht equivalent at the time of payment for domestic sales. The Company pays for a part of its inputs by using US Dollar derived from export sales and exchanges some US Dollar to pay for the rest. Natural Hedge principle is used in the Companyรปs financial risk management. The Company plans for its foreign currency demand and supply in advance and times the flow of foreign currency transactions to even out the executed exchange rate. Foreign currency forward and swap contracts are used for the payments of crude oil. In case Thai Baht depreciates, it may result in the rise in cost of fuels and production inputs and the decrease in the domestic demand for the Companyรปs products. Export markets will help to balance the production capacity during this time though with less margin. This risk is common for a capital intensive business. However, as the Company is a fully integrated manufacturer, the effect from slump margin can be coped.

Litigation Risk Results of the following continuing litigations between the Company and the former managements leading by Mr. Prachai Leophairatana may affect the Companyรปs shareholding structure, management, and business strategies: 1. Abrogation of the Resolution of the Shareholders Meeting The former managements submitted a petition to the Rayong Court demand for an abrogation of the resolutions of the shareholders meeting on April 27, 2006 for the alleged meeting illegal and claimed for a compensation of 240 million Baht from directors of the Company. The Rayong Court ordered the termination of the case. The former managements, then, submitted the like petition to the Central Bankruptcy Court. At present, it is in the process of examining the cause. 2. Abrogation or Cancellation of the Sales of Existing and New Capital The former managements submitted a petition demand the Central Bankruptcy Court to abrogate or cancel the sales of Existing and New capital. The Court issued an order to dismiss the petition. However, the former managements appealed to object the Court order on September 30, 2005 and the current management also submitted a counter petition on August 11, 2006. At present, it is in the process of the Supreme Courtรปs consideration.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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FUTURE PROJECTS The Company plans to invest in projects aiming at increasing efficiency and decreasing production cost such as the refinery improvement project to meet EURO IV standard and a project to improve plants没 utilities. Investment projects can be divided into 2 phases as follow:

Investment Project Phase 1 (2007-2009) Investment (USD Million)

Details & Expected Benefits

HDPE Pipe Grade Production Capacity Expansion Project

Increase the production capacity for HDPE Pipe Grade, which has better margin from 17,000 tons per year to 57,000 tons per year.

ABS & CCM Plastic Production Capacity Expansion Project

Increase the production capacity for Natural Grade ABS from 78,000 tons per year to 86,000 tons per year, and CCM Grade ABS from 19,000 tons per year to 31,000 tons per year

200 MW Combined Heat and Power Plant Project

200

Produce electricity for factories in the group and reduce steam costs

Improvement of Environment & Safety Project

Total

261

Project

74 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

FUTURE PROJECTS IRPC PUBLIC COMPANY LIMITED

Investment Project Phase 2 (2010-2011) The investment projects in phase 2 are refinery improvement projects, projects for improving shipping ports and petrochemical production capacity expansion with the following details: Euro IV Standards Compliance The Company has a project for improving its oil refinery in order to comply with Euro IV standards which the government declared to be effective from January 1, 2012. Refinery Improvement Project The Company has a project to improve its refinery and to increase oil refining capacity from 215,000 barrels per day to 258,000 barrels per day. The new specification will be able to process more sour crude which is less expensive, thus reducing the Company没s costs of feedstock. Propylene Production Capacity Expansion Project The Company has a project for increasing propylene production capacity from 312,000 tons per year to 412,000 tons per year in order to meet the need of polypropylene production. Port Improvement Project The Company has a project to excavate the canals in the deep sea port area in order to be able to accommodate very large crude carriers (VLCC) and to reduce transportation cost.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

76 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

SOCIAL RESPONSIBILITY IRPC PUBLIC COMPANY LIMITED

In addition to commercial goals and determination toward business success in an international level, IRPC is also striving to improve the quality of life and the environment through its corporate social responsibility activities. IRPC firmly believes that our business should grow together with better quality of life of our neighborhood and the healthier environment. The activities IRPC has continuously performed for its local communities and social developments are:

1. The Environment IRPC awares that the country没s development should be done along with natural and environmental conservation. During the past year, IRPC commenced an important project to transform a mangrove forest in the area adjoining IRPC没s industrial park into an area for studying the conditions of the mangrove forest and a new tourist spot for Rayong in the future. Therefore, IRPC together with Rayong Province and the communities surrounding Klong Konpeuk planted permanent mangrove forests on the occasion of the World Environment Day on June 5, 2007. In addition, IRPC also supported the Rayong Municipality in taking students to plant mangrove forests in the area of Pra Chedi Klangnam, Rayong Municipality. The president of IRPC and the executives also organized the event 莽Planting Trees Together for Our Mother茅 in the honor of Her Majesty the Queen on August 12, 2007. It is noticed that the Rayong River is the main river of Rayong. Thus, IRPC, in cooperation with the Rayong Municipality and Rayong Conservation Association, held a project to release microorganisms into the river to improve the water quality.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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2. Employees Voluntary Activities IRPC encourages all employees to give their hands-on help to the local communities started by improving community schools at least once a month including playground maintenance, painting, improving landscapes, and planting trees, etc. in order to create good relationships between IRPC and local communities. Examples of schools which had been visited are Ban Nernsaothong, Wat Pluag Ket, Wat Nern Pra, Baan Nong Jog, Wat Changchonsiriratbumrung, Baan Takraothong, and Song Phinong, etc.

3. Public Health Good health is what everyone desires. IRPC, in cooperation with Queen Sirikit Hospital, organized the project Ă§Mobile Medical UnitsĂŠ to provide free on-site medical examinations and treatment for various communities such as the Rayong Municipality and the sub-districts of Cherng Nern, Tapong, Ban Lang, and Na Ta Kwan, making services available in the villages. In addition, services have been expanded to provide free eye examinations, eyeglass assembly, haircuts and tooth exclusion, which drew great attention from large numbers of the community members.

78 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

SOCIAL RESPONSIBILITY IRPC PUBLIC COMPANY LIMITED

4. Education An education of the children in the community is another issue IRPC gives priority, especially Wat Pluag Ket School which IRPC donates lunch funds to the children annually. Moreover, IRPC also supports education in other forms such as scholarships to schools within the boundaries of Rayong Province along with computers to various schools, etc. Since the nation没s youth will play a significant role in future environmental conservation, IRPC has organized an environmental conservation camp with the goal in providing opportunities to our youth to be in touch with the nature and to sustainably live in the society. This camp was held in conjunction with the 2nd Mangrove Development Station, Thasorn Village, Bor Sub-district, Kloong District, Chantaburi Province.

5. Social Support Helping and supporting our neighbors has always been important to IRPC, especially when our community is overwhelmed with natural disasters such as floods or drought. Whenever there is a drought, IRPC, in cooperation with the Tapong, Ban Lang, Cherng Nurn Local Administrative Organizations, runs the project 莽IRPC Ruam Jai Taan Pai Lang茅 (a project to help fighting droughts) which allocated water from IRPC industrial park没s large reservoir to help ease the suffering from drought. At a time there is flood, IRPC helps the community by allowing its heavy machinery to go into the affected areas to provide immediate relief for fellow residents in the community.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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6. Religious Support Activities aiming to promote religious belief are at the heart of important community events. IRPC, in conjunction with local area temples, has organized annual merit making events which have been honored by senior executives who have also served as the president of the activities. In addition, the company has donated candles to be lit for Buddhist Lent to various temples. IRPC employees have organized tray decoration contests at the merit making festivals, creating an atmosphere of excitement for the merit-making participants.

7. Safety Road accidents and fires are unwanted in the community. Thus, IRPC, in conjunction with Rayong Province and Rayong Police Department, has organized the Driving Safely with a Safety Helmet Project in honor of His Majesty the King没s 80th birthday celebration by focusing on campaigns for safe motorcycle riding, conscientiousness, and traffic disciplines in order to help reduce the occurrence of accidents in the community. Furthermore, IRPC and the Rayong Disaster Prevention Office have organized a public disaster prevention project as IRPC sees the necessity for each Sub-district to have its own public disaster prevention and relief plans. Therefore, IRPC helps by organizing training sessions for community leaders to familiarize themselves with written plans and practice for utmost results. IRPC, moreover, has given fire extinguishers to be installed at various locations in the villages, continuously participated with Rayong Province in emergency drills on the provincial level.

8. Sports Promoting community sports is one of IRPC没s major projects. IRPC has built a community sports ground for the Cherng Nern Sub-district including football fields, basketball courts, and takraw courts. As a part of the society, we are willing to devote our physical and intellectual capability for improving the community also the good quality of life of our neighbors. IRPC will continue in its efforts to give back to society 莽because we always remember that Rayong is our home and Thailand is our motherland茅.

80 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

ENVIRONMENTAL RESPONSIBILITY IRPC PUBLIC COMPANY LIMITED

IRPC gives priorities in achieving environmental management and occupational health and safety management standard for the sustainable and well-being condition of its business and its surrounding communities. The Company is certified for ISO 14001 Environmental Management Standard and is focusing on maximized utilisation of resources and protection of the environment. Community relations activities are continuously held to promote good knowledge and understanding of local communities to the Company. IRPC also supports environmental activities organised by public and private organisations such as cooperating with Rayong provincial municipal office to improve the landscape of schools, temples, and communities around the industrial park, participating in a mangrove forest plantation project in honor to His Majesty the King没s the 80th birthday anniversary, and organising Rayong watershed protection seminar. The Company has contributed 370 million Baht on environmental activities in 2007. Most are investments in pollutants prevention and reduction system. IRPC没s industrial park was audited during March-April 2007 by a working team from the Department of Industrial Works to observe and gather information related to the Company没s environmental management. For example, air and water quality control, scrap management, chemical substance management, and governance of internal safety. The result of the audit shows that the Company complies with the standards. Moreover, the Company also develops an Environmental auditing and monitoring system which later combined with the master execution plan to reduce pollution in Rayong area from 2007-2011 with objective to sustainably improve and protect Rayong environment.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

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CONNECTED TRANSACTIONS Details of connected transaction between IRPC and its subsidiaries with Connected Parties had occurred in 2006 and 2007 are disclosed in notes no.4 to the financial statements for the year 2006 and 2007. Summary of significant transactions are as follow: 1. PTT Group: Transactions occurred between PTT Group and the Company is in normal course of business where PTT Group conducting the oil refining and petrochemical businesses similar to the business of the Company. (unit : million baht) Connected Parties PTT Plc.

Type&Relationship ◆

◆

Major sharcholder with 31.50% of shares Common Directors: Mr. Prasert Bunsumpun

Transaction

2006

2007

◆

Sales of goods

5,595

8,602

◆

Purchases of goods

3,809

98,779

◆

Account receivable

216

1,227

◆

Account payable Selling and Administrative Expenses

56 -

11,960 23

◆

Sales of goods

226

◆

Purchases of goods

6,640

4,829

◆ ◆

Account payable Sales of Land

627 -

335 328

◆

PTT Chemical Plc.

◆

a subsidiary of PTT, holding 54.82% of shares Common Directors: Mr. Pala Sookawesh Mr. Prasert Bunsumpun Mr. Prajya Phinyawat

Description The Company sold oil products to PTT at market price. The Company purchased feedstock in cluding crude oil and benzene from PTT at market price.

The Company sold aromatics products to PTT Chemical at market price. The Company purchased Propylene from PTT Chemical at market price. The Company sold land to PTT Chemical at an agreed upon price which referred to market price.

PTT Polymer Logistics Co., Ltd.

PTT holds 100% of shares ◆ Common Directors: Mr. Prajya Phinyawat

◆

Sales of Land

267

The Company sold land to PTT Polymer Logistics at an agreed upon price which referred to market price..

Thai Oil Plc.

◆

Sales of goods

105

◆

Purchases of goods

711

The Company sold crude oil to Thai Oil at market price. The Company purchased crude oil from Thai Oil at market price.

◆

82 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

PTT holds 49.54% of shares Common Directors: Mr. Pala Sookawesh Mr. Prasert Bunsumpun

CONNECTED TRANSACTIONS IRPC PUBLIC COMPANY LIMITED

(unit : million baht) Connected Parties

Type&Relationship Mr. Prajya Phinyawat

Thai Lube Base Plc.

Thai Oil holds 99.99% of shares ◆ Common Directors: Mr. Prasert Bunsumpun Mr. Prajya Phinyawat

Transaction

2,856

◆

Account payable

Sales of goods ◆ Purchases of goods

892

779 1,059

◆

Crude oil trading with no actual delivery for the purpose of maintaining crude oil re serves in compliance with the law. The aforementioned transaction is not included in the income statement.

The Company sold asphalt at market price. The Company purchased basic lubrication oil at market price.

◆

Account payable Account receivable

374 -

112 89

427

755

The Company sold aromatic products (Toluene) to Aromatics at market price.

1,286

952

Crude oil trading with no actual delivery for the purpose of maintaining crude oil reserves in compliance with the law. The aforementioned transaction is not included in the income statement.

3,568

10,767

321

1,079

273

The Company sold aromatics products (Mixylene) to Thai Para-xylene at market price.

1,286

952

Crude oil trading with no actual delivery for the purpose of maintaining crude oil reserves in compliance with the law. The aforementioned transaction is not included in the income statement.

◆

Sales of goods

Rayong Refinery Plc.*

PTT holds 48.46% of shares ◆ Common Directors: Mr. Prasert Bunsumpun Mr. Prajya Phinyawat

◆

Purchases and Sales of goods with no actual delivery

Bangchak Petroleum Plc.

PTT holds 29.75% of shares ◆ Common Directors: Mr. Chaivat Churitti

Sales of goods Account receivable Sale of goods

Star Petroleum Refining PTT holds 36.00% of share Co., Ltd. ◆ Common Directors: Mr. Prajya Phinyawat

◆

Sale of goods with no actual delivery

PTT ICT Solutions Co., Ltd.

◆

Paid Consulting Fees

PTT holds 20.00% of shares

Description

Purchases and Sales of goods with no actual delivery

PTT holds 48.86% of shares ◆ Common Directors: Mr. Pala Sookawesh Mr. Prajya Phinyawat Mr. Piti Yimprasert

Thai Oil Plc. holds 99.99% shares; ◆ Common Directors: Mr. Piti Yimprasert Mr. Prajya Phinyawat

2007

◆

Aromatics Plc.*

Thai Para-xylene Co., Ltd.

2006

The Company sold oil products to Bang Chak Petroleum at market price.

The Company hired PTT ICT Solutions Company Limited as an IT System Development Project consultant

Remarks: *Aromatics Plc. And Rayong Refinery Plc. merged and became PTT Aromatics and Refining Plc. which registered with the Ministry of Commerce on 27 December 2007.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

2. The companies affiliated with former managements: including the Leophairatana Group and its affiliates. The following connected transactions occurred in the past. Pricing decisions, conditions, and necessities were judgments of the former managements. At present, the Leophairatana Group and its affiliated companies decrease equity holding and role of directorship in IRPC as follow. Change in shareholding : 1 February 2005 17 November 2005 Mr. Prachai Leophairatana没s group & affiliated companies

12.70%

9.96%

30 June 2006

29 December 2006

2 January 2008

1.62%

0.90%

0.88%

Change in directorship : 1 2 3 4 5 6 7 8

Mr. Prateep Leopairut Mr. Pramuan Leophairatana Ms. Malinee Liewphairatana Mr. Kamol Iamsakulrat Mr. Thavich Taychanavakul Mr. Tayuth Sriyuksiri Mr. Chainarong Taephaisitphongse Mr. Chaiwat Taephaisitpongse

84 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Terminated by the resolution of the EGM no. 1/2007 on January 19, 2007 Terminated by the resolution of the EGM no. 1/2007 on January 19, 2007 Terminated by the resolution of the EGM no. 1/2007 on January 19, 2007 Terminated by the resolution of the EGM no. 1/2007 on January 19, 2007 Terminated by the resolution of the EGM no. 1/2007 on January 19, 2007 Terminated by the resolution of the EGM no. 1/2007 on January 19, 2007 Resigned from the Board of Directors effective from January 17, 2007 Resigned from the Board of Directors effective from January 17, 2007

CONNECTED TRANSACTIONS IRPC PUBLIC COMPANY LIMITED

(unit : million baht) Connected Parties TPI Polene Plc.

Type&Relationship ◆

◆

TPI Concrete Co., Ltd.

◆

Leophairatana Enterprises Co., Ltd.

◆

Transaction

2006

2007

6,732

6,364

Description

The Leophairatana Group is the major shareholder Currently rehabilitating business activities with TPI Polene as the administrative planner. Common directors (2006): Mr. Prateep Leopairut Mr. Pramual Leophairatana Mr. Chainarong Taephaisitpongse Mr. Kamol Iamsakulrat

◆

Sales of goods and utilities

◆

Purchase of LDPE

382

303

Other Revenue ◆ Account receivables ◆ Account payables ◆ Other payable and advances ◆ Guarantor long-term loan

2 815 22 10

13 1,145 36 10

127

132

See details in Remark

TPI Polene Plc. holds 99% of shares Common of directors (2006): Mr. Prateep Leopairut Mr. Pramuan Leophairatanana

◆

124

146

The Company sold electricity and utilities to TPI Concrete Co., Ltd. at market price. The Company bought concrete products from TPI Concrete Co., Ltd. at market price.

The Leophairatana Group holds 100% of sheres Common directors (2006) : Mr. Prateep Leopairut Mr. Pramuan Leophairatanana Miss Malinee Liewphairatana

◆

Sales of Electricity and Utilities ◆ Purchase of concrete products

Other payable and advances

The Company sold ethylene as a feedstock, sold electricity and public utilities to TPI Polene Polene Plc. at market price. The Company purchased plastic pellets from TPI Polene at market price.

(1)

TPI Aromatics Public Company Limited, a subsidiary of IRPC, owe share certificates borrowing fees to be used as collateral for a bank loan.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

(unit : million baht) Connected Parties Pornchai Enterprises Co., Ltd.

TPI Holding Co., Ltd.

Type&Relationship

0.4

893

3,482

1,708 16

1,709 12

◆

Liaophairattana Enterprises Co., Ltd. Holds 51% of shares Common directors (2006) : Mr. Prateep Leopairut Mr. Pramuan Leophairatana Mr. Thayut Sriyuksiri

◆

Short-term loans

1,685

◆

Interest Receivables

965

TPI Holding Company Limited holds 75% of shares IRPC holds 25% of shares Interest Receivables Common directors (2006) : Mr. Prateep Leopairut Mr. Pramuan Leophairatana

◆

Short-term loans

829

440

A subsidiary of Grain Enterprise Industries Co., Ltd. holds 99% of shares ◆ Common directors (2006) : Mr. Prateep Leopairut Mr. Pramuan Leophairatana Ms. Malinee Liewphairatana Mr. Chainarong Taephaisitpongse

◆

114

Market price

◆

IRPC PUBLIC COMPANY LIMITED

Description

Interest Receivables ◆ Other payables and advances

◆

86 ANNUAL REPORT 2007

2007

◆

Thai Plastic Products Co., Ltd.

2006

Leophairatana Enterprises Co., Ltd. Holds 48% of shares. IRPC holds 25% of shares ◆ TPI Polene Plc. holds 17% of shares ◆ Common directors (2006) : Mr. Prateep Leopairut Mr. Pramuan Leophairatana Miss Malinee Liewphairatana

◆

TPI EOEG Co., Ltd.

Transaction

◆

Selling and Administrative Expenses ◆ Other receivables and advances ◆ Short-term loans ◆

sales of plastic resin ◆ purchase of plastic products ◆ Account receivables

See details in Remark (3) See notes 4 to the 2007 financial statements for details.

See notes 4 to the 2007 financial statements for details.

IRPC PUBLIC COMPANY LIMITED

(unit : million baht) Connected Parties United Grain Industry Co., Ltd.

Type&Relationship ◆

◆

Thai Plastic Film Co., Ltd.

◆

Transaction

2006

2007

Description

Leophairatana Enterprises Co., Ltd. holds 34% of shares TPI Polene Plc. holds 19% of shares Mr. Prachai Leophairatana holds 11% of shares IRPC Plc. holds 7.5% of shares Common directors (2006) : Mr. Prateep Leopairut Mr. Pramual Leophairatana Ms. Malinee Liewphairatana Mr. Chainarong Taephaisidpong

◆

sales of plastic resin

◆

Account receivables

A subsidiary of Grain Enterprise Industries Co., Ltd. holds 99% of shares Common directors (2006) : Mr. Prateep Leopairut Mr. Pramuan Leophairatana Ms. Malinee Liewphairatana Mr. Chainarong Taephaisidpong

◆

Plastic pellet sales

Market price

Purchase of finished plastic products ◆ Account payables ◆ Account receivables

146

Market price

11 14

◆

Market price

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

(unit : million baht) Connected Parties

Type&Relationship

Transaction

2006

2007

108

Description

Other Groups Plastic Transport Co., Ltd.

Khemjira Transport Co., Ltd. (In the process of registering to terminate the Company)

◆

IRPC employees are the directors : Mr. Sompong Leophairatana Mr. Kraisit Anukuluthaiwong Mr. Prayut Suphatsophon Mr. Somchai Thanarakpongsakorn Mr. Chatchai Phuttaraksa Mrs. Somsri Rodprasert

IRPC employees are the directors: Mr. Chalermchai Somboonpakorn Mr. Wirachai Ariyapornpirun Miss Suthinee Suphakit

◆

Revenue from vehicle repairs ◆ Revenue from vehicle rentals ◆ transportation fees

◆

Other receivables and advances ◆ Other payables and advances ◆ Account receivables

◆

Revenue from vehicle rentals ◆ Transportation fees for oil products

◆

Other receivables and advances ◆ Other payables and advances

The Company received vehicle repair fees from Plastic Transport Co., Ltd. The Company received vehicle rental fees from Plastic Transport Co., Ltd. The Company paid plastic resin transportation fees to Plastic Transport Company Limited by calculating the price according to contract; details as in Remark (2)

IRPC Oil Co., Ltd. received rental fees from Khemjira Transport Company Limited IRPC Oil Co., Ltd. paid oil product shipping fees to Khemjira Transport Company Limited, prices are according to contract; see details in Remark (2)

Remark (1)

Contingent Liabilities: the Company was a guarantor for a loan to TPI Polene Public Company Limited. At present, the terms of the loan are according to the rehabilitation plan of TPI Polene Public Company Limited where the Central Bankruptcy Court appointed TPI Polene Public Company Limited as the plan administrator on February 9, 2001.

Remark (2)

Transport Fees: the Company hired Plastic Transport Company Limited and Khemjira Transport Company Limited to transport petrochemical goods and oil products where the transport fees were calculated according to the price in the contracts. The relevant details of those contracts are as follows:

88 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CONNECTED TRANSACTIONS IRPC PUBLIC COMPANY LIMITED

Company IRPC Plc. & Plastic Transport Co., Ltd.

IRPC Oil Co., Ltd. & Khemjira Transport Co., Ltd.

Execution

Expiration

Details

Shipping Fees

1 November 2003

31 October 2006

Transport of plastic resin and other goods

A price according to contract; the shipping rate was according to the terms specified in the Shipping documents calculated from fixed expenses and repair fee per kilometer and cost of fuel according to the distance, which was no higher than the market price.

1 November 2003

31 October 2006

Rental of cargo vehicles with equipments

Paid in monthly installments at a rate including value-added taxes, but not including withholding taxes. Single truck : 16,135.60 Baht and 18,404.00 Baht per month. Trailer truck : 25,134.30 Baht per month.

1 November 2003

31 October 2006

Transportation of fuels and petroleum products

Contract price; calculated by distance multiplied by shipping fee rate as agreed in the contract which is no higher than the market price.

1 November 2003

31 October 2006

Rental of transport vehicles with equipment

Paid monthly including value-added taxes and excluding withholding tax. 10-wheel truck: 11,000 Baht per month. Trailer truck/18-wheel trailer truck: 17,000 Baht per month.

After the termination of the contract, the Company continues using the service without renewing the contract. Transportation fees is payable monthly at the same prices stated in the contract.

Remarks (3)

The Company and its subsidiaries rented office spaces from Pornchai Enterprises Company Limited. The lease period stated in the contract was 3 years with a right to renew at the end of the contract in total of 90 years. The Company has already paid advance deposit for the total period. Later, on November 24, 2006, the Company requested to terminate the lease contract in writing effective from December 31, 2006. On February 14, 2007, the Company sent a letter requesting refund for advance deposit of 785 million baht and other advance payments of 164 million baht. The mentioned advances are categorised as receivables-other related company. The Company is now moved out of the mention office spaces.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

Policy and Necessity on Connected Transactions IRPC and its subsidiaries conduct a full range of petrochemical businesses and also other related types of business, thus generating connected transactions between the Company and its subsidiaries are involved in regular business operations wherein the following transactions occurred: purchase and sales of feedstock, finished products, borrowing and lending of money, leasing of office buildings, etc. for the marketing benefit and reduction of inventory costs. The Companyûs policy connected transactions are as follows: ◆ ◆

Revenue from the purchase and sales of goods: market prices Borrowing and lending money: the Company lends and borrows money to and from its affiliates on necessity basis for business operations by using interest rates in compliance with contracts. (As referred to market interest rates for loans)

Connected Transactions Measures The Companyûs Board of Directors considers appropriateness and benefit of each connected transaction to the Company also compliance with rules and regulations of the Stock Exchange of Thailand, the Companyûs Articles of Association, and SET CG guidelines in connected transaction. çIn case a listed company or a subsidiary company decides to enter into a connected transaction, which is deemed as a transaction as stipulated in the Regulations of the Exchange Re: Decision of Information and Act of Listed Companies Concerning the Acquisition and Disposition of Assets, the listed company shall comply with what is stated in such terms.é

90 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

CONNECTED TRANSACTIONS IRPC PUBLIC COMPANY LIMITED

In case a listed company needs to seek approval from shareholders for a decision to enter into a connected transaction concerning the acquisition and disposition of assets, a resolution of the Shareholderûs Meeting to approve the decision must consist of at least three-fourths of the total votes of shareholders attending the meeting and having voting righs, excluding interested shareholderûs equity. Policy on future connected transactions The Companyûs future connected transactions will be conducted on normal course of business where the Company considered reasonable and appropriate in terms of prices and conditions. Shareholders and other stakeholders will be treated fairly following Corporate Governance Principles. Any directors who have conflict of interest are not allowed to present in the meeting nor to vote. Opinion of the Audit Committee çBy considering the Companyûs connected transactions, the Audit Committee shall see that the Company has acted according to necessity and suitability of each transaction for the greatest benefits to the Company. Each transaction is made at arm length at market price in compliance with rules and regulations of the Stock Exchange of Thailand on disclosure of acquisition and disposition of assets.é

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

REPORT OF THE AUDIT COMMITTEE IRPC PUBLIC COMPANY LIMITED FOR THE YEAR 2007

Dear shareholders, The Audit Committee has performed its duty and taken responsibility as assigned by the Board of Directors. There were 15 audit committee meetings held in 2007 to examine and to make observations and recommendations on various matters as follow: 1. Reviewing quarterly and annual financial statements for the year 2007 with management team, auditor, and internal audit staff to ensure that the financial statements are prepared in compliance with GAAP and has disclosed of accurate, sufficient, and accountable information. 2. Reviewing and addressing opinion on connected transactions to ensure that the transactions are absolutely acted on normal course of business in compliance of the criteria set by the Stock Exchange of Thailand. 3. Risk management: the Board of Directors and managements have given priority on risk management. The Risk Management Committee is appointed with the duty to monitor and control risks to an acceptable level. Presently, the committee is involved in the process of identification and assessment of risks in every process and regularly reports to the Audit Committee. 4. Good corporate governance: the Company appointed the Good Corporate Governance Committee to monitor the business administration to comply with the principles of good corporate governance for confidence of the shareholders, investors and stakeholders. 5. Governing the internal audit function: the Audit Committee considers internal audit reports and gives suggestions for improvement of performance also follow up the change after issuing to report and consider the Annual Internal Audit Plan in order that internal audit could be at utmost benefit to the company. 6. Considering proposal of auditors and their remuneration for 2007 to be proposed to the Board of Directors for approval from shareholders meeting. In 2007, the audit committee has meticulously performed its duty with independence by cooperation from all stakeholders and the Board of Directors and the Company没s managements possess perform their duties with ethics and determine to achieve the Company没s goal as well as improving the Company没s operations. Pol.Gen (Sereepisut Taemeeyaves) Chairman of the Audit Committee

STATEMENT OF DIRECTORS RESPONSIBILITIES IRPC PUBLIC COMPANY LIMITED

The financial statements of IRPC Public Company Limited and its subsidiaries have been prepared and consolidated in compliance with notification of Department of Commercial Registration dated September 14, 2001 issued under the third paragraph of section 11 of Accounting Act. B.E. 2000 in accordance with Thai Account Standard (çTASé) promulgated by the Institute of Certified Accountant and Auditors of Thailand. The Board of Directors is responsible for the integrity and objectivity of the financial statements of IRPC Public Company Limited and its subsidiaries in providing reasonable assurance that the financial statements present fairly financial position, performance, and cash flows for the year 2007 by maintaining the books and records of the Company accurately reflect all transactions, the Companyûs assets are properly safeguarded, including the control systems designed to protect against fraud and irregularity transaction. The financial statements have been prepared with the chosen accounting policy deemed appropriate and applied on the consistency basis compliance with generally accepted accounting principles and significant information has been adequately disclosed in note to financial statements, in which the independent auditor expressed an opinion on the financial statements of IRPC Public Company limited and its subsidiaries in the report of the auditor.

General (Mongkon Ampornpisit) Chairman

(Mr. Piti Yimprasert) Chief Executive Officer

AUDIT REPORT OF CERTIFIED PUBLIC ACCOUNTANT

To the Shareholders of IRPC Public Company Limited I have audited the accompanying consolidated and separate balance sheets as at 31 December 2007, and the related statements of income, changes in shareholderûs equity and cash flows for the year then ended of IRPC Public Company Limited and its subsidiaries, and of IRPC Public Company Limited, respectively. The Companyûs management is responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to express an opinion on these financial statements based on my audit. The consolidated financial statements and the Companyûs financial statements of IRPC Public Company Limited and its subsidiaries, and of IRPC Public Company Limited, for the year ended 31 December 2006 were audited by another auditor whose report dated 16 February 2007 expressed an unqualified opinion on those statements with emphasis that 1) the consolidated and the separate financial statements were prepared using financial information of 4 subsidiaries which were prepared by the management of IRPC Public Company Limited 2) there was a change in accounting policy for property, plant and equipment from the revaluation of assets method to the historical cost method and 3) his opinion on the 2005 financial statements differed from the previously issued report, as the Central Bankruptcy Court had dismissed the petition and ordered the management of a subsidiary, Rayong Tank Terminal Co., Ltd., to withdraw petitions on the termination of the land lease agreement with the Company and the acknowledgement of the Companyûs invoice for guarantee payments made by the Company on behalf of Rayong Tank Terminal Co., Ltd. to adjust outstanding payables to the Company. The Companyûs financial statements for the year ended 31 December 2006 have been restated for the effects of 1. the change in accounting policy for investments in subsidiaries and associates from the equity method of accounting to the cost method as described in Note 28 to the financial statements and are now termed ùseparateû financial statements; and 2. during 2007, the Company included a subsidiaryûs financial statements in the preparation of the consolidated financial statements, the effects of including such subsidiaryûs financial statements are disclosed in Note 29 to the financial statements. I have audited the adjustments that were applied to the

94 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

AUDIT REPORT OF CERTIFIED PUBLIC ACCOUNTANT

restatement of the Company没s 2006 financial statements and in my opinion these adjustments are appropriate and have been properly applied. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the consolidated and separate financial statements referred to above present fairly, in all material respects, the financial positions as at 31 December 2007 and the results of operations and cash flows for the year then ended of IRPC Public Company Limited and its subsidiaries, and of IRPC Public Company Limited, respectively, in accordance with generally accepted accounting principles. I draw your attention to Note 2 to the financial statements. The consolidated financial statements for the year ended 31 December 2007 were prepared using the unaudited financial information of 3 subsidiaries which was prepared by the management of IRPC Public Company Limited, and a subsidiary which was prepared by the plan administrator of the subsidiary.

(Mr. Vairoj Jindamaneepitak) Certified Public Accountant Registration No. 3565 KPMG Phoomchai Audit Ltd. Bangkok 15 February 2008

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

BALANCE SHEETS As at 31 December 2007 and 2006 The accompanying notes are an integral part of these financial statements.

Consolidated financial statement Assets

Note

2007

Separate financial statement

2006

2007

2006 (restated)

(in baht) Current assets Cash and cash equivalents Current investments Trade accounts receivable Short-term loans to and receivables from related parties Inventories Other receivables Value added tax receivable Prepaid excise tax Other current assets Total current assets Non-current assets Investments in subsidiaries and associates Long-term investments in related parties Other long-term investments Long-term loans to related parties Property, plant and equipment Intangible assets Other non-current assets Total non-current assets Total assets

96 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

5 6 4, 7

11,143,925,775 1,528,614,788 13,314,643,855

9,973,893,969 7,668,231,548 6,704,923,644

10,443,511,034 1,528,614,788 15,023,445,821

9,171,400,386 7,668,231,548 8,015,706,680

4 8

79,084,181 36,002,570,591 532,091,214 2,689,661,310 193,456,928 559,021,598 66,043,070,240

4,336,708,641 30,697,397,463 411,636,386 2,372,809,187 264,346,964 612,303,913 63,042,251,715

4,387,159,879 34,702,410,662 415,576,645 2,583,590,182 193,456,928 489,448,836 69,767,214,775

3,805,044,738 28,188,001,934 326,396,264 2,059,949,276 264,346,964 537,299,853 60,036,377,643

9 10 6 4 11 12 13

11,462,765 74,152,393 62,310,716,250 1,565,000,510 809,616,045 64,770,947,963

1,680,616,762 122,522,291 61,387,855,774 1,574,775,588 20,367,591 64,786,138,006

4,571,787,195 8,035,527 28,021,000 6,819,621,066 51,971,815,391 1,565,000,509 775,956,645 65,740,237,333

4,392,989,789 1,675,326,394 73,246,000 8,113,376,889 53,642,396,106 1,572,713,921 15,310,440 69,485,359,539

130,814,018,203

127,828,389,721 135,507,452,108 129,521,737,182

IRPC PUBLIC COMPANY LIMITED

BALANCE SHEETS As at 31 December 2007 and 2006 The accompanying notes are an integral part of these financial statements.

Consolidated financial statement Liabilities and sharesholders没 equity

Note

2007

Separate financial statement

2006

2007

2006 (restated)

(in baht) Current liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Short-term loans from and payables to related parties Current portion of finance lease liabilities Other payables Accrued interest expense Accrued bonus Accrued freight expense Advance receipts for goods Other current liabilities Total current liabilities Non-current liabilities Debentures Finance lease liabilities Other non-current liabilities Total non-current liabilities Total liabilities

14 4, 15

34,700,000 17,062,438,085

29,803,740,185 9,126,546,181

20,088,284,773

29,788,783,053 8,988,653,803

4, 14 14

124,397,587 20,910,074 1,189,755,234 322,035,452 1,143,807,569 273,695,599 959,006,535 727,997,551 21,858,743,686

996,695,106 5,890,423 2,144,572,337 1,135,865 990,614,239 110,347,955 1,249,974,034 410,430,733 44,839,947,058

2,457,373,413 19,722,958 1,045,893,070 320,259,880 1,033,983,764 273,695,599 947,212,647 595,796,263 26,782,222,367

3,176,220,064 5,039,192 2,103,026,547 1,135,865 869,287,283 110,347,955 1,005,891,269 348,895,373 46,397,280,404

16 14

18,416,651,874 110,385,338 13,099,421 18,540,136,633 40,398,880,319

20,998,252 14,006,271 35,004,523 44,874,951,581

18,416,651,874 106,197,067 13,099,421 18,535,948,362 45,318,170,729

18,134,283 14,006,271 32,140,554 46,429,420,958

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

BALANCE SHEETS As at 31 December 2007 and 2006 The accompanying notes are an integral part of these financial statements.

Consolidated financial statement Liabilities and sharesholdersรป equity

Note

2007

Separate financial statement

2006

2007

2006 (restated)

(in baht) Shareholdersรป equity Share capital Authorised share capital Issued and paid-up share capital Reserves Share premium Fair value changes Retained earnings Appropriated Legal reserve Unappropriated Treasury shares Total equity attributable to the Companyรปs shareholders Minority interest Total shareholdersรป equity Total liabilities and shareholdersรป equity

98 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

17 20,475,000,000 19,500,000,000

20,475,000,000 19,500,000,000

26,797,504,215 (30,110,902)

26,797,504,215 558,230,500

26,797,504,215 (3,370,775)

26,797,504,215 580,107,497

2,047,500,000 42,278,238,959 (226,501,324)

400,000,000 35,884,622,829 (226,501,324)

2,047,500,000 41,847,647,939 -

400,000,000 35,814,704,512 -

90,366,630,948 48,506,936 90,415,137,884

82,913,856,220 39,581,920 82,953,438,140

90,189,281,379 90,189,281,379

83,092,316,224 83,092,316,224

18 18

130,814,018,203

127,828,389,721 135,507,452,108 129,521,737,182

IRPC PUBLIC COMPANY LIMITED

Statements of income For the years ended December 2007 and 2006

Consolidated financial statement Note

2007

Separate financial statement

2006

2007

2006 (restated)

(in baht) Revenues 4 Revenues from sales Interest income Net foreign exchange gain Dividends income Gain from sale and revaluation of investments Gain from sales of property, plant and equipment Other income Total revenues Expenses Cost of sales Selling and administrative expenses Rehabilitation expenses Total expenses Profit before interest and income tax expenses Interest expense Income tax expense Profit after tax Net profit of minority interest Net profit Earnings per share (Baht) Basic Diluted

227,518,064,190 673,223,112 1,264,704,488 65,375,695 1,538,418,821 668,192,524 578,964,948 232,306,943,778

205,360,447,212 237,765,379,659 207,129,234,581 790,375,562 999,809,456 1,244,549,144 2,450,744,547 1,262,605,499 2,370,907,761 174,773,351 65,329,692 171,658,343 1,538,418,821 561,517,263 1,229,642 675,408,664 464,466,835 600,883,609 209,451,749,336 242,657,527,225 211,518,463,080

4 11 212,710,689,318 4, 11, 20 5,458,218,241 4 218,168,907,559

196,246,029,719 224,889,869,700 198,993,085,651 4,119,939,205 4,604,212,149 3,277,525,161 140,449,814 140,349,814 200,506,418,738 229,494,081,849 202,410,960,626

4, 22 23

14,138,036,219 1,106,823,837 31,493,784 12,999,718,598 13,732,037 12,985,986,561

8,945,330,598 2,079,518,198 32,017,849 6,833,794,551 11,223,195 6,822,571,356

13,163,445,376 1,193,001,949 11,970,443,427 11,970,443,427

9,107,502,454 1,951,096,147 7,156,406,307 7,156,406,307

0.67 0.66

0.35 0.35

0.61 0.61

0.37 0.37

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

100 ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

19,500,000,000 26,797,504,215

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

Balance at 31 December 2007

Dividends

Legal reserve

Net profit

Total recognised income and expense

19,500,000,000 26,797,504,215

in shareholdersû equity

Net income (expense) recognised directly

Net change in fair value

Changes in shareholdersû equity for 2007

Restated balance

of consolidated financial statements

Cumulative effect of preparation

Balance at 1 January 2007

Balance at 31 December 2006

Legal reserve

Net profit

Total recognised income and expense

- (24,323,370,210)

19,500,000,000 26,797,504,215

Revaluation surpluses

19,500,000,000 26,797,504,215 24,323,370,210

Share premium

in shareholdersû equity

Net income (expense) recognised directly

Net changes in fair value

Changes in shareholdersû equity for 2006

Restated balance

Change in accounting policy

Balance at 1 January 2006

Note

Issued and paid-up share capital

Reserves

(30,110,902)

(588,341,402)

558,230,500

(219,788,400)

778,018,900

Fair value changes

(75,904,441)

(400,000,000)

6,822,571,356

(664,699,151)

2,047,500,000 42,278,238,959

1,647,500,000 (1,647,500,000)

- (4,280,171,280)

- 12,985,986,561

400,000,000 35,219,923,678

400,000,000 35,884,622,829

400,000,000

- 29,462,051,473

Appropriated to Unapprolegal reserve priated (in baht) - 29,537,955,914

Retained earnings

Consolidated financial statements (restated)

6,602,782,956

6,822,571,356

(219,788,400)

(664,699,151)

12,397,645,159

12,985,986,561

(588,341,402)

(226,501,324) 90,366,630,948

- (4,280,171,280)

(226,501,324) 82,249,157,069

(226,501,324) 82,913,856,220

(226,501,324) 76,311,073,264

- (24,399,274,651)

(226,501,324) 100,710,347,915

Treasury shares

Total equity attributable to the Companyûs shareholders Total shareholdersû equity

6,642,321,331

6,833,794,551

(191,473,220)

(664,699,151)

12,406,570,175

12,999,718,598

(593,148,423)

48,506,936 90,415,137,884

- (4,280,171,280)

8,925,016

13,732,037

(4,807,021)

39,581,920 82,288,738,989

39,581,920 82,953,438,140

39,538,375

11,223,195

28,315,180

43,545 76,311,116,809

- (24,399,274,651)

43,545 100,710,391,460

Minority interest

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

STATEMENTS OF CHANGES IN SHAREHOLDERSû EQUITY

For the years ended 31 December 2007 and 2006

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

Balance at 31 December 2007

Legal reserve

19,500,000,000 26,797,504,215

Total recognised income and expense

Dividends

Net expense recognised directly in shareholdersû equity

Net profit

19,500,000,000 26,797,504,215

Net changes in fair value

Changes in shareholdersû equity for 2007

Restated balance

Cumulative effect from preparation of consolidated financial statements

Balance at 1 January 2006

Balance at 31 December 2006

Legal reserve

Net profit

Total recognised income and expense

Net expense recognised directly in shareholdersû equity

- (24,323,370,210)

19,500,000,000 26,797,504,215

(3,370,775)

(583,478,272)

580,107,497

21,876,997

558,230,500

580,107,497

(200,373,232)

780,480,729

2,461,829

778,018,900

Total equity attributable to the Companyûs Shareholders

(158,833,975) (24,479,742,356)

(400,000,000)

7,156,406,307

6,956,033,075

7,156,406,307

(200,373,232)

250,905,417

272,782,414

11,970,443,427

(583,478,272)

2,047,500,000 41,847,647,939 90,189,281,379

1,647,500,000 (1,647,500,000)

- (4,290,000,000) (4,290,000,000)

- 11,970,443,427

400,000,000 35,814,704,512 83,092,316,224

400,000,000 35,563,799,095 82,819,533,810

400,000,000 35,814,704,512 83,092,316,224

400,000,000

- 29,058,298,205 76,136,283,149

- 29,217,132,180 100,616,025,505

Unappropriated

Retained earnings Appropriated to Fair value legal changes reserve

(in baht)

Revaluation surpluses

19,500,000,000 26,797,504,215 24,323,370,210

Share premium

Net changes in fair value

Changes in shareholdersû equity for 2006

Restated balance

Change in accounting policy

Balance at 1 January 2006

Note

Issued and paid-up share capital

Reserves

Separate financial statements (restated)

IRPC PUBLIC COMPANY LIMITED

STATEMENTS OF CHANGES IN SHAREHOLDERSû EQUITY

For the years ended 31 December 2007 and 2006

ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

101

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

STATEMENTS OF CASH FLOWS For the years ended 31 December 2007 and 2006 The accompanying notes are an integral part of these financial statements.

Note

Consolidated financial statement 2007 2006

Separate financial statement 2007 2006 (restated) (in baht)

Cash flows from operating activities Net profit Adjustments for Depreciation Amortisation Interest income Dividend income Interest expense Allowance (reversal of allowance) for doubtful accounts Allowance (reversal of allowance) for decline in value of inventories Unrealised (gain) losses on exchange rate Realised (gains) losses on exchange rate for repayment creditors under the rehabilitation plan Unrealised gain on swap contracts Gain on sale and revaluation of investments (Gain) loss on sales of property, plant and equipment Allowance for impairment of long-term investment Reversal of impairment of deposit for land Reversal of impairment of assetsrental deposits for office building Minority interest Income tax expense

Changes in operating assets and liabilities Trade accounts receivable Inventories Other receivables Value added tax receivable Prepaid excise tax Advance payment for raw material Other current assets Trade accounts payable Other payables Accrued bonus Accrued freight expense Advance receipts for goods Other current liabilities Proceeds from withholding tax refund Income taxes paid Net cash provided by operating activities

102 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

12,985,986,561

6,822,571,356

11,970,443,427

7,156,406,307

2,948,283,587 129,894,568 (673,223,112) (65,375,695) 1,106,823,837

2,936,199,895 139,679,467 (790,375,562) (174,773,351) 2,079,518,198

2,642,760,398 129,792,068 (999,809,456) (65,329,692) 1,193,001,949

2,580,569,088 138,418,973 (1,244,549,144) (171,658,343) 1,951,096,147

(28,145,716)

382,599,190

66,012,448

288,193,394

145,813,439 (240,512,550)

(67,035,699) (195,706,544)

115,772,154 (240,837,753)

(68,278,144) (195,517,995)

(40,973,786) (1,538,418,821) (668,192,524) 513,250,000 (15,968,925)

(1,710,059,908) 2,904,465 (22,040,750)

(40,973,786) (1,538,418,821) (561,517,263) 334,452,594 (15,968,925)

(1,612,294,106) (1,229,642) (22,040,750)

13,732,037 31,493,784 14,604,466,684

(10,035,430) 11,223,195 32,017,849 9,436,686,371

12,989,379,342

(9,770,043) 8,789,345,742

(6,713,699,576) (5,450,986,567) (115,962,346) (316,852,123) 70,890,036 101,768,633 9,355,699,818 (907,287,822) 153,193,329 163,347,644 (290,967,499) 316,057,616 15,176,147 (97,965,797) 10,886,878,177

1,201,980,223 (314,811,628) (259,646,212) (270,614,317) (62,451,508) 1,317,120,220 (230,582,123) (196,395,503) 1,166,807,185 436,598,300 (273,855,403) (52,518,829) (63,165,926) 92,747,514 (83,953,560) 11,843,944,804

(6,957,545,067) (6,630,180,883) (89,180,381) (523,640,905) 70,890,036 87,982,842 11,111,689,144 (1,008,487,286) 164,696,480 163,347,644 (58,678,622) 246,900,890 (45,436,576) 9,521,736,658

977,671,835 478,260,230 (190,660,696) (19,760,013) (62,451,508) 1,312,472,720 (213,990,805) (4,654,086,740) 1,168,727,439 385,335,337 (273,511,743) (184,955,371) (38,046,715) 78,419,668 (35,594,017) 7,517,175,363

IRPC PUBLIC COMPANY LIMITED

STATEMENTS OF CASH FLOWS For the years ended 31 December 2007 and 2006 The accompanying notes are an integral part of these financial statements.

Note

Consolidated financial statement 2007 2006

Separate financial statement 2007 2006 (restated) (in baht)

Cash flows from investing activities Interest received Dividends received (Purchases) sales of current investments Short-term loans to related parties Proceeds from sale of long-term investments Purchases of property, plant and equipment Proceeds from sale of assets Purchase of intangible assets Other non-current assets Net cash provided by (used in) investing activities Cash flows from financing activities Interest paid Dividends paid Bank overdraft and short-term loans from financial institutions Short-term loans from related parties Repayment of creditors under the rehabilition plan Proceeds from issuance of debentures Finance lease payments Minority interests Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash at bank pledged as collateral at end of year Cash and cash equivalents at end of year Non-cash transactions Purchase of vehicles under the finance lease agreements

567,576,771 65,375,695 6,227,331,157 (419,391,062) 2,066,636,915 (1,066,539,084) 718,856,349 (120,119,490) (776,227,040) 7,263,500,211

730,215,611 174,773,351 (6,316,407,495) (1,132,692,273) 39,688,655 (722,623,150) 18,481,218 (10,040,432) (15,858,216) (7,234,462,731)

655,320,578 65,329,692 6,227,331,157 944,136,778 2,066,492,018 (983,836,077) 589,142,582 (122,078,656) (747,624,791) 8,694,213,281

917,798,835 171,658,343 (6,316,407,495) (1,351,030,983) (198,400) (662,215,145) 12,069,252 (7,750,325) (15,206,440) (7,251,282,358)

(783,517,811) (4,280,171,280)

(2,078,382,334) -

(783,398,480) (4,290,000,000)

(1,843,256,093) -

(29,803,740,185) (833,256,809) 18,620,739,785 104,406,738 (4,807,020) (16,980,346,582)

29,916,320,775 (29,788,783,053) 29,928,391,031 332,388,828 (805,144,093) (216,063,037) (36,213,504,951) - (31,437,687,960) - 18,620,739,785 26,888,675 102,746,550 23,173,475 28,315,179 (7,987,973,828) (16,943,839,291) (3,545,442,584)

1,170,031,806

(3,378,491,755)

1,272,110,648

(3,279,549,579)

9,973,893,969

9,940,966,327

9,171,400,386

9,061,976,412

3,411,419,397

3,388,973,553

11,143,925,775

9,973,893,969

10,443,511,034

9,171,400,386

116,911,001

26,888,675

114,701,607

23,173,475

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

103

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Note 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

104 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Contents General information Basis of preparation of the financial statements Significant accounting policies Related party transactions and balances Cash and cash equivalents Other investments Trade accounts receivable Inventories Investments in subsidiaries and associates Long-term investments in related party Property, plant and equipment Intangible assets Other non-current assets Interest-bearing liabilities Trade accounts payable Debentures Share capital Reserves Segment information Selling and administrative expenses Personnel expenses Interest expense Income tax Earnings per share Long-term lease agreements Promotional privileges Dividends Changes in accounting policy Cumulative effects on preparation of the consolidated financial statements Financial instruments Commitments with non-related parties Contingent liabilities New and revised accounting standards not yet adopted Reclassification of accounts

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

These notes form an integral part of the financial statements. The financial statements were authorised for issue by the directors on 15 February 2008. 1 General information IRPC Public Company Limited, the çCompanyé, registered the change of its name from Thai Petrochemical Industry Public Company Limited on 31 October 2006. The Company is incorporated in Thailand and has its registered head office at 299 Moo 5 Sukhumvit Road, Choengnuen District, Aumphur Muang, Rayong Province. The Companyûs and subsidiarieûs offices are located at Sun Tower and Lao Peng Nhuan Building. The Companyûs subsidiaries registered the change of their names as follows Date of register 1 February 2007 23 February 2007 23 February 2007 28 February 2007 16 August 2007 11 September 2007

Former name TPI Sumika ABS Company Limited TPI Oil Company Limited TPI Energy Company Limited TPI Polyol Company Limited Rayong TPI Service Company Limited TPI Technology Company Limited

New name IRPC A&L Company Limited IRPC Oil Company Limited IRPC Energy Company Limited IRPC Polyol Company Limited IRPC Service Company Limited IRPC Technology Company Limited

The Company was listed on the Stock Exchange of Thailand in March 1995. The Companyûs major shareholders during the financial year were PTT Public Company Limited (31.50% shareholding), Government Savings Bank (10% shareholding), Vayupak Mutual Fund One (10% shareholding) and Government Pension Fund (GPF) (8.60% shareholding). All the major shareholders are incorporated in Thailand. The principal activities of the Company are the manufacture of petrochemical and petroleum products such as plastic resins, refinery products, lube base oil and other petrochemical products. Details of the Companyûs subsidiaries are as follows:

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

105

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Name of the entity Direct subsidiaries Thai Petrochemical Industry (Cayman Island) Ltd. Thai ABS Co., Ltd. IRPC Oil Co., Ltd. Thai Polyurethane Industry Co., Ltd. IRPC Polyol Co., Ltd. TPI Philippines Vinyl Corp. TPI Aromatics Plc. Asian Dragon Oil Refinery Corp. IRPC Technology Co., Ltd. IRPC Energy Co., Ltd. Rayong Energy Co., Ltd. Rayong Port Service Co., Ltd. IRPC Service Co., Ltd. TPI Infrastructure Co., Ltd. International Plastic Trading Co., Ltd. Indirect subsidiaries TPI Internet Portal Co., Ltd. TPI Oil (1996) Co., Ltd. TPI Techs Co., Ltd. TPI Oil (1999) Co., Ltd. TPI Oil (2001) Co., Ltd. TPI Oil (1997) Co., Ltd. TPI Refinery (1997) Co., Ltd. TPI Tank Terminal Co., Ltd. IRPC A&L Co., Ltd.

106 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Type of business

Country of incorporation

Ownership interest 2007 2006

Holding company Producing and distributing resin Distributing gasoline, diesel and lube oil product Manufacturing and distributing polyurethane product Manufacturing and distributing flexible and rigid polyol PVC product distributor Manufacturing and distributing petrochemical products Joint venture of refinery plant in Philippines School Power plant and distributor Power plant Port service Guard service Public utility service Trading

Oil trading Oil trading Oil trading Oil trading Oil vessel renting Oil trading Refinery Leasing of tank farm and chemical tank Manufacturing and distributing petrochemical products

England Thailand

100.00% 99.99%

Thailand

99.99%

Thailand

99.99%

Thailand Philippines

99.99% 99.99%

Thailand

99.99%

Philippines Thailand Thailand Thailand Thailand Thailand Thailand Thailand

99.99% 99.99% 99.99% 99.89% 99.50% 98.90% 99.02% 99.99%

99.99% 99.99% 99.99% 99.93% 99.70% 98.30% 99.02% 99.99%

Thailand Thailand Thailand Thailand Thailand Thailand Thailand

99.89% 99.90% 99.98% 99.90% 99.98% 99.99% 99.98%

99.92% 99.93% 99.98% 99.93% 99.98% 99.99% 99.99%

Thailand

99.98%

Thailand

59.94%

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

The Central Bankruptcy Court approved the rehabilitation plan of IRPC Public Company Limited on 15 December 2000 and the proposed plan amendments of the Plan Administrator dated 21 May 2003, 10 November 2004 and 2 November 2005, respectively. Subsequently, the Central Bankruptcy Court cancelled the rehabilitation of the Company in accordance with the Bankruptcy Act B.E. 1940 on 26 April 2006. Therefore, the authorisation and duties of business and asset management were transferred back to the management of the Company and the legal rights of the Companyûs shareholders were reinstated in accordance with the notification of Royal Gazette on 13 June 2006. The Central Bankruptcy Court approved the rehabilitation plan of 6 subsidiaries (Thai ABS Co., Ltd., IRPC Oil Co., Ltd., TPI Aromatics Plc., IRPC Polyol Co., Ltd., Thai Polyurethane Industry Co., Ltd. and IRPC Energy Co., Ltd.) on 15 December 2000 and the proposed plan amendments of the Plan Administrator dated 21 May 2003, 10 November 2004 and 2 November 2005, respectively. Subsequently, the Central Bankruptcy Court cancelled the rehabilitation of those subsidiaries in accordance with the Central Bankruptcy Act B.E. 1940 on 26 April 2006. Therefore, the authorisation and duties of business and asset management were transferred back to the management of the 6 subsidiaries and the legal rights of the 6 subsidiarieûs shareholders were reinstated in accordance with the notification of Royal Gazette on 13 June 2006. 2 Basis of preparation of the financial statements The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the Thai language. The financial statements are prepared in accordance with Thai Accounting Standards (çTASé) including related interpretations and guidelines promulgated by the Federation of Accounting Professions (çFAPé) and with generally accepted accounting principles in Thailand. During 2007, the FAP issued the following revised TAS relevant to the Groupûs operations and effective for accounting periods beginning on or after 1 January 2007:

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

107

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

TAS 44 (revised 2007) TAS 45 (revised 2007)

Consolidated and Separate Financial Statements Investments in Associates

The adoption of these revised TAS has resulted in a change in the Company没s accounting policy for interests in subsidiaries and associates in the separate financial statements of the Company. The effects of this change are disclosed in Note 28. In addition to the above revised TAS, the FAP has issued during 2007 a number of other new and revised TAS which are only effective for financial statements beginning on or after 1 January 2008 and have not been adopted in the preparation of these financial statements. These new and revised TAS are disclosed in Note 33. The financial statements are presented in Thai Baht, rounded in the notes to the financial statements to the nearest million unless otherwise stated. They are prepared on the historical cost basis except as stated in the accounting policies. The preparation of financial statements in conformity with TAS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. Accordingly, actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

108 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Consolidation of 4 subsidiaries The consolidated financial statements as at and for the year ended 31 December 2007 were prepared using financial information of 3 subsidiaries (TPI Aromatics Plc., TPI Refinery (1997) Co., Ltd. and TPI Tank Terminal Co., Ltd.) as at 31 December 2007 and 4 subsidiaries for the year ended 31 December 2006 (TPI Aromatics Plc, TPI Refinery (1997) Co., Ltd., TPI Tank Terminal Co., Ltd. and TPI Oil (1997) Co., Ltd.) which was prepared by the management of IRPC Public Company Limited and has not been audited by the auditors. Financial information on these subsidiaries was not available because of changes of the Boards of Directors and the managements of these subsidiaries. In addition, the 2007 consolidated financial statements were prepared using financial information of a subsidiary (Rayong Tank Terminal Co., Ltd) which was prepared by the management of its subsidiaries and has not been audited by auditors because the representative of the Company was recently appointed as the new Plan Administrator and is in the process of changing the Board of Directors and the management of this subsidiary.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

109

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Management of the Company does not believe that the effects of not having updated information for these subsidiaries are significant to the consolidated and separate financial statements for the years ended 31 December 2007 and 2006. Summarised balance sheet information related to the 4 subsidiaries as at 31 December 2007 and 2006 was as follows: 2007

2006 (in million baht)

Consolidated Balance sheet information (before eliminations) Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Separate balance sheet information Investments in subsidiaries

3,830 3,764 7,594 6,783 5,416 12,199

2,259 928 3,187 1,213 5,322 6,535

Summarised statement of income information related to the 4 subsidiaries for the years ended 31 December 2007 and 2006 was as follows: 2007

2006 (in million baht)

Consolidated statement of income information (before eliminations) Total revenues Total expenses Interest expense Net loss

110 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

85 263 178

94 7 365 278

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

The consolidated financial statements for the years ended 31 December 2006 did not include the financial statements of a 99.99% held subsidiary, Rayong Tank Terminal Co., Ltd., because the subsidiary was under a separate rehabilitation plan administered by Churchill Pryce Planner Limited. Consequently, the Company was unable to control, direct or to govern the financial and operating policies of that subsidiary. However, on 9 October 2007, the representative of the Company was appointed as the new Plan Administrator of the subsidiary, accordingly, the consolidated financial statements for the year ending 31 December 2007 include the financial statements of this subsidiary. 3 Significant accounting policies (a) Basis of consolidation The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the 莽Group茅) andthe Group没s interests in associates. Significant intra-group transactions between the Company and its subsidiaries are eliminated on consolidation. Subsidiaries Subsidiaries are those companies controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Associates Associates are those companies in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group没s share of the total recognised gains and losses of associates on an

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

111

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the Group没s share of losses exceeds its interest in as associate, the Group没s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an associate. (b) Foreign currencies Foreign currency transactions Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Thai Baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of income. (c) Derivative financial instruments Derivative financial instruments are used to manage exposure to foreign exchange, interest rate and commodity price risks arising from operational and financing activities. Derivative financial instruments are not used for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are recognised initially at cost; attributable transaction costs are recognised in the statement of income when incurred. Subsequent to initial recognition, they are remeasured at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the statement of income. The fair value of forward exchange contracts is based on their listed market price.

112 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

(d) Cash and cash equivalents Cash and cash equivalents comprise cash balances, call deposits and highly liquid short-term investments. Bank overdrafts that are repayable on demand are a component of financing activities for the purpose of the statement of cash flows. (e) Trade and other accounts receivable Trade and other accounts receivable (including balances with related parties) are stated at their invoice value less allowance for doubtful accounts. The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer payments. Bad debts are written off when incurred. The Group records the allowance for doubtful accounts on trade accounts receivable at the rate of 50% for accounts overdue for more than 3 months to 6 months and at the rate of 100% for accounts overdue for more than 6 months and receivables under litigation. (f) Inventories Inventories are stated at the lower of cost and net realisable value. Cost of inventory comprises all costs of purchase, cost of conversion and other cost incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of overheads based on normal operating capacity. Costs of finished goods from the downstream petrochemical industry, spare parts and repair materials are calculated using the average cost method.

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NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Costs of raw materials and finished goods from refinery, upstream petrochemical industry are calculated using the last-in, first-out (LIFO) method. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete and to make the sale. Allowance for decline in value is made for all deteriorated, obsolete and slow-moving inventories as follows:

Type Obsolete finished goods Spare parts Repair materials Chemical obsolete or over 2 years Chemical less than 2 years

Rate for setting up allowance for decline in value of inventory (%) 5-20 3 3 100 3

(g) Investments Investments in subsidiaries and associates Investments in subsidiaries and associates in the separate financial statements of the Company are accounted for using the cost method. This is a change of accounting policy, the effects of which are disclosed in Note 28. Investments in associates in the consolidated financial statements are accounted for using the equity method.

114 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Investments in other equity securities Marketable equity securities held for trading are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the statement of income. Marketable equity securities other than those securities held for trading or intended to be held to maturity, are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss being recognised directly in equity. The exceptions are impairment losses and foreign exchange gains and losses, which are recognised in the statement of income. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in the statement of income. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the statement of income. Equity securities which are not marketable are stated at cost less impairment losses. The fair value of financial instruments classified as held-for-trading and available-for-sale is determined as the quoted bid price at the balance sheet date. Disposal of investments On disposal of an investment, the difference between net disposal proceeds and the carrying amount together with the associated cumulative gain or loss that was reported in equity is recognised in the statement of income.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

(h) Property, plant and equipment Owned assets Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Leased assets Leases in terms of which the Group substantially assumes all the risk and rewards of ownership are classified as finance leases. Equipment acquired by way of finance leases is capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of income. Depreciation Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows: Buildings and structures Machinery and pipe (for HDPE) Machinery and pipe (for PP) Machinery and pipe (for EPS) Machinery (for ABS) Machinery (for Polyurethane)

116 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

20-40 years Production units estimated to be a total of 3,040,000 tons Production units estimated to be a total of 14,250,000 tons Production units estimated to be a total of 900,000 tons 30 years Production units approximately 105,000-168,000 tons

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Other machinery Mechanical equipment Tools and factory equipment Furniture, fixtures and office equipment Vehicles

10-30 years 8-20 years 10 years 5-10 years 10 years

No depreciation is provided on freehold land or assets under construction. (i) Intangible assets Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Amortisation Amortisation is charged to the statement of income on a straight-line basis from the date that intangible assets are available for use over the estimated useful lives of the assets, unless such lives are indefinite. Intangible assets with an indefinite useful life are not amortised but are systematically tested for impairment at each balance sheet date. The estimated useful lives are as follows: Leasehold land Dredging expenses Deferred charges: water mains and computer development expenses

20-30 years 20 years 5-20 years

(j) Impairment The carrying amounts of the Group没s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets'recoverable amounts are estimated.

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NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and as and when indicators of impairment are identified. An impairment loss is recognised whenever the carrying amount of an asset or its cashgenerating unit exceeds its recoverable amount. The impairment loss is recognised in the statement of income unless it reverses a previous revaluation credited to equity, in which case it is charged to equity. When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the value of the asset is impaired, the cumulative loss that had been recognized directly in equity is recognised in the statement of income even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in the statement of income is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in the statement of income. Calculation of recoverable amount The recoverable amount is the greater of the assets'net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversals of impairment An impairment loss in respect of receivables carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

118 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

An impairment loss is reversed only to the extent that the asset没s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (k) Interest-bearing liabilities Interest-bearing liabilities are recognised initially at fair value less attributable transaction charges. Subsequent to initial recognition, interest-bearing liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of income over the period of the borrowings on an effective interest basis (l) Trade and other accounts payable Trade and other accounts payable (including balances with related parties) are stated at cost. (m) Employee share options No compensation cost or obligation is recognised when share options are issued under employee incentive programmes. When options are exercised, equity is increased by the amount of the proceeds received. (n) Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

(o) Revenue Revenue excludes value added taxes or other sales taxes and is arrived at after deduction of trade discounts. Sale of goods and services rendered Revenue is recognised in the statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there is continuing management involvement with the goods or there are significant uncertainties regarding recovery of the consideration due, associated costs or the probable return of goods. Service income is recognised as services are provided. Interest and dividend income Interest income is recognised in the statement of income as it accrues. Dividend income is recognised in the statement of income on the date the Group没s right to receive payments is established which in the case of quoted securities is usually the ex- dividend date. Other income Other income is recognised in the statement of income as it accrues. (p) Expenses Expenses is recognised in the statement of income as it accrues. Operating leases Payments made under operating leases are recognised in the statement of income on a straight line basis over the term of the lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease payments made.

120 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Contin gent rentals are charged to the statement of income for the accounting period in which they are incurred. Finance costs Interest expenses and similar costs are charged to the statement of income for the period in which they are incurred. Other expenses Other expenses are charged to the statement of income for the period in which they are incurred. (q) Income tax Income tax on the profit or loss for the year comprises current tax. Income tax is recognised in the statement of income except to the extent that it relates to items recognised directly in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date and applicable to the reporting period, and any adjustment to tax payable in respect of previous years.

4 Related party transactions and balances Related parties are those parties linked to the Group and the Company as shareholders or by common shareholders or directors. Transactions with related parties are conducted at prices based on market prices or, where no market price exists, at contractually agreed prices. Relationships with related parties that control or jointly control the Company or are being controlled or jointly controlled by the Company or have transactions with the Group are as follows:

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Name of entites

Country of incorporation/nationality

Thai Petrochemical Industry (Cayman Island) Ltd. Thai ABS Co., Ltd

England

IRPC Oil Co., Ltd

Thailand

Thai Polyurethane Industry Co., Ltd

Thailand

IRPC Polyol Co., Ltd

Thailand

TPI Philippines Vinyl Corp.

Philippines

TPI Aromatics Plc. Asian Dragon Oil Refinery Corp.

Thailand Philippines

IRPC Technology Co., Ltd.

Thailand

IRPC Energy Co., Ltd

Thailand

Rayong Energy Co., Ltd

Thailand

Rayong Port Service Co., Ltd

Thailand

IRPC Service Co., Ltd

Thailand

TPI Infrastructure Co., Ltd

Thailand

International Plastic Trading Co., Ltd

Thailand

TPI Internet Portal Co., Ltd

Thailand

TPI Oil (1996) Co., Ltd.

Thailand

TPI Techs Co., Ltd.

Thailand

TPI Oil (1999) Co., Ltd.

Thailand

TPI Oil (2001) Co., Ltd.

Thailand

TPI Oil (1997) Co., Ltd.

Thailand

TPI Refinery (1997) Co., Ltd

Thailand

122 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Thailand

Nature of relationships

Subsidiary, 100% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.99% shareholding Subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.89% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.50% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 98.90% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.02% shareholding, more than 50% of directors are representatives of the Company Indirect subsidiary, 99.89% shareholding, more than 50% of directors are representatives of the Company Indirect subsidiary, 99.89% shareholding, more than 50% of directors are representatives of the Company Indirect subsidiary, 99.89% shareholding, more than 50% of directors are representatives of the Company Indirect subsidiary, 99.90% shareholding, more than 50% of directors are representatives of the Company Indirect subsidiary, 99.98% shareholding, more than 50% of directors are representatives of the Company Indirect subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company Indirect subsidiary, 99.89% shareholding, more than 50% of directors are representatives of the Company

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Name of entites

Country of incorporation/nationality

TPI Tank Terminal Co., Ltd

Thailand

IRPC A&L

Thailand

Rayong Tank Terminal Co., Ltd.

Thailand

PTT Pcl. PTT Chemical Public Co., Ltd. Thai Lube.Co., Ltd. Thai Oil Plc. Aromatics (Thailand) Plc. Bangchak Petroleum Plc. Thai Paraxylene Co., Ltd. Star Petroleum Refining Co., Ltd. Rayong Refinery Co., Ltd. PTT ICT Solutions Co., Ltd. PTT Polymer Logistics Co., Ltd. TPI Polene Plc. Pornchai Enterprises Co., Ltd. TPI Holding Co., Ltd. TPI EOEG Co., Ltd. The former management

Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand

Nature of relationships

Indirect subsidiary, 99.98% shareholding, more than 50% of directors are representatives of the Company Indirect subsidiary, 59.94% shareholding, more than 50% of directors are representatives of the Company Subsidiary, 99.99% shareholding, and the Company没s representative was appointed as the Plan Administrator Common major shareholder and director Common shareholder and director Common major shareholder and director Common major shareholder and director Common major shareholder and director Common major shareholder and director Common major shareholder and director Common shareholder and director Common major shareholder and director Common major shareholder and director Common major shareholder and director Common shareholdings Common shareholdings, 25% shareholding Common shareholdings Common shareholdings Shareholdings and director

The pricing policies for particular types of transactions are explained further below: Pricing Policies Sale and purchase of goods Dividends received Interest income and interest expense

Tank storage and service Rehabilitation expenses Directors'remuneration e.g. meeting allowance

Market price Determined as dividend announcement Interest rate as specified in the agreement, which is 5.29%, MLR, MLR-1%, MLR-1.75%, MLR+2% and the weighted average interest rate of fixed deposits for four domestic commercial banks and 7.5% Former contractually agreed prices Former contractually agreed prices As determined at the rate approved by the directors and the shareholders.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Significant transactions for the years ended 31 December 2007 and 2006 with related parties were as follows: Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Major shareholder Sale of goods 8,602 5,595 8,602 5,595 Purchase of goods 98,779 3,809 98,779 3,809 Selling and administrative expenses 23 23 Subsidiaries Sale of goods 23,910 26,293 Interest income 383 547 Other income 15 10 Purchase of goods 16,971 6,419 Interest expense 86 124 Selling and administrative expenses 346 281 Associates Sale of goods 14 7 14 7 Interest income 4 Purchase of goods 1 Selling and administrative expenses 41 37 Others related parties Sale of goods 19,649 7,522 19,639 7,499 Interest income 110 102 60 55 Other income 186 182 145 133 Dividend received 65 175 65 172 Gain from sales of property plant and equipment 594 594

124 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Purchase of goods Selling and administrative expenses Tank storage and services Rehabilitation expenses Directors'remuneration

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 6,225 9,935 6,196 9,773 330 205 239 75 312 344 312 344 140 140 66 23 57 20

On 20 June 2006, the meeting of the Board of Directors of the Company (No. 3/2549) approved monthly directors'remuneration for the Chairman of the Board of Directors of Baht 0.06 million per month, for other directors of Baht 0.05 million per month per person and meeting allowances for the Chairman of the Board of Directors of Baht 0.06 million per meeting and for other directors of Baht 0.05 million per meeting per person. The sub-directors'remuneration (e.g. audit committee, selection and remuneration determination committee and management committee) was approved at meeting allowances for the Committee Chairman of Baht 0.06 million per meeting per person and Baht 0.05 million per meeting per person for Committee members starting from 27 April 2006 onwards. The Extraordinary General Meetings of 2 subsidiaries (IRPC Oil Co., Ltd. and Thai ABS Co., Ltd.) (No. 2/2549) approved monthly directors'remuneration for the Chairman of the Board of Directors of Baht 0.04 million per month, for directors of Baht 0.03 million per month per person starting from 8 July 2006 onwards. The Extraordinary General Meeting of a subsidiary (IRPC Polyol Co., Ltd.) (No. 2/2549) approved monthly directors'remuneration for the Chairman of the Board of Directors of Baht 0.03 million per month, for directors of Baht 0.02 million per month per person starting from 8 July 2006 onwards.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

125

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CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Balances as at 31 December 2007 and 2006 with related parties were as follows: Trade accounts receivable from related parties

Major shareholder PTT Plc. Subsidiaries Thai ABS Co., Ltd. IRPC Oil Co., Ltd. IRPC Polyol Co., Ltd. IRPC Technology Co., Ltd. IRPC A&L Co., Ltd. Rayong Tank Terminal Co.,Ltd Associates Thai International Tanker Co., Ltd. Other related parties TPI Polene Plc. Rayong Tank Terminal Co., Ltd. The Bangchak Petroleum Plc. Thai Lube Base Plc. Others Less allowance for doubtful accounts Net (Reverse) bad and doubtful debts expenses for the year

126 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 1,227

216

1,227

216

1,174 666 87 4 5 170

829 988 226 3 1 -

1,145 1,079 89 91 3,633 (84) 3,549

815 25 201 1,258 (158) 1,100

1,144 1,079 89 91 5,738 (99) 5,639

814 25 200 3,303 (158) 3,145

(61)

(60)

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Short-term loans to andreceivables from related parties Interest rate (%) 2007 2006 Short-term loans Subsidiaries Thai Petrochemical Industry (Cayman Island) Ltd. TPI Aromatics Plc. IRPC Polyol Co., Ltd. IRPC Energy Co., Ltd. IRPC Service Co., Ltd. Rayong Tank Terminal Co., Ltd. Associates Pornchai Enterprise Co., Ltd. TPI EOEG Co., Ltd. Other related parties Rayong Tank Terminal Co., Ltd. TPI Holding Co., Ltd. TPI Automation System Co., Ltd. Total short-term loans

MLR-1.75% 5.29% MLR-1.75, 5.29%, and 7.5% MLR-5.29% MLR-1.75% and 5.29% MLR-1.75% and 5.29% MLRMLR+2% MLR+2% MLR+2% MLRMLR+2% MLR+2% MLR+2% and 5.29%

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht)

50 25

50 -

114

434

3,482 829

3,476 829

1,685

774 1,685

1,685

413 1,685

1 5,997

1 6,771

1 6,621

1 6,535

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Accrued interest receivables Subsidiaries Thai Petrochemical Industry (Cayman Island) Ltd. TPI Aromatics Plc. IRPC Polyol Co., Ltd. IRPC Energy Co., Ltd. IRPC Services Co., Ltd. Rayong Tank Terminal Co., Ltd. Associates Pornchai Enterprise Co., Ltd. TPI EOEG Co., Ltd. Other related parties Rayong Tank Terminal Co., Ltd. TPI Holding Co., Ltd. TPI Automation System Co., Ltd. Others Total accrued interest receivables Other receivables and advances Subsidiaries Thai Petrochemical Industry (Cayman Island) Ltd. Thai ABS Co., Ltd. IRPC Oil Co., Ltd. TPI Aromatics Plc.

128 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

1 353 1 63 19 334

1 240 43 14 -

1,710 440

1,708 440

1,706 440

965 1 3,116

491 965 1 1 3,606

965 1 3,883

274 965 1 1 3,685

12 1 1 56

12 18 56

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

IRPC Polyol Co., Ltd. IRPC Service Co., Ltd. IRPC Technology Co., Ltd. TPI Philippines Vinyl Corp. IRPC A&L Co., Ltd. Rayong Tank Terminal Co., Ltd. Associates Pornchai Enterprises Co., Ltd. (Please see Note 30) Other related parties Rayong Tank Terminal Co., Ltd. Plastic Transport Co., Ltd. Others Advance to the former management Total other receivables and advances Less allowance for doubtful accounts Short-term loans to and receivables from related parties, net Bad and doubtful debts expenses for the year

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 1 1 69 48 11 11 3 2 2 2 3,634 893

893

801

63 6 394 1,356 10,469 (10,390)

3,225 53 19 395 4,585 14,962 (10,625)

47 6 26 4,669 15,173 (10,786)

3,225 46 6 26 4,254 14,474 (10,669)

4,337

4,387

3,805

345

117

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

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NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

As at 31 December 2007 and 2006, allowance for doubtful accounts consisted of: Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Subsidiaries Thai Petrochemical Industry (Cayman Island) Ltd. TPI Aromatics Plc. IRPC Service Co., Ltd. IRPC Technology Co., Ltd. TPI Philippines Vinyl Corp. Rayong Tank Terminal Co., Ltd. Associates Pornchai Enterprises Co., Ltd. TPI EOEG Co., Ltd. Other related parties Rayong Tank Terminal Co., Ltd. TPI Holding Co., Ltd. Plastic Transport Co., Ltd. The former management Others Total

130 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

28 346 189 11 3 270

28 346 119 11 2 -

6,071 1,269

6,067 1,269

5,970 1,269

5,967 1,269

2,652 59 335 4 10,390

270 2,652 335 32 10,625

2,652 43 5 10,786

270 2,652 5 10,669

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Long-term loans to related parties Interest rate (%) 2007 2006 Long-term loans Subsidiaries Thai ABS Co., Ltd.

IRPC Oil Co., Ltd.

TPI Aromatics Plc.

IRPC Polyol Co., Ltd.

IRPC Energy Co., Ltd. Total long-term loans

The weighted average interest rate of fixed deposits for 4 domestic commercial banks The weighted average interest rate of fixed deposits for 4 domestic commercial banks The weighted average interest rate of fixed deposits for 4 domestic commercial banks, 5.29% and MLR-1.75% The weighted average interest rate of fixed deposits for 4 domestic commercial banks MLR-1.75%

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht)

1,870

3,311

1,989

5,107

140 364 9,470

144 364 10,915

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CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Accrued interest receivables Subsidiaries Thai ABS Co., Ltd. IRPC Oil Co., Ltd. TPI Aromatics Plc. IRPC Polyol Co., Ltd. Total accrued interest receivables Less allowance for doubtful accounts (TPI Aromatics Plc.) Long-term loans to related parties, net

4 126 225 12 367 9,837

14 65 129 8 216 11,131

(3,017) 6,820

(3,017) 8,114

Movements of loans to related parties during the years ended 31 December 2007 and 2006 were as follows: Trade accounts payable-related parties

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht)

Short-term loans Subsidiaries At 1 January Increase Transfer Decrease At 31 December

Associates At 1 January Increase Decrease At 31 December

4,311 4,311

132 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

131 86 413 630

103 28 131

4,311 4,311

4,305 4,305

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Trade accounts payable-related parties

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht)

Other related parties At 1 January Increase Transfer Decrease At 31 December

2,460 (774) 1,686

2,455 5 2,460

2,099 (413) 1,686

2,094 5 2,099

Total short-term loans to related parties At 1 January Increase Transfer Decrease At 31 December

6,771 (774) 5,997

6,766 5 6,771

6,535 86 6,621

6,502 33 6,535

10,915 (1,445) 9,470

10,164 751 10,915

Long-term loans Subsidiaries At 1 January Increase Decrease At 31 December

After the Company repaid all of the remaining debts to the creditors under the rehabilitation plan on 29 September 2006, the Company reclassified the receivable under rehabilitation plan-related parties to short-term loan to related parties. Notes receivables on land - related parties as at 31 December 2007 and 2006, which are included in other non-current assets in the consolidated and the Seperate没s financial statements, consisted of:

Thai Special Steel Public Company Limited Less allowance for doubtful accounts Total

(in million baht) 1,739 (1,739) -

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CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Trade accounts payable-related parties Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Major shareholder PTT Plc. Subsidiaries Thai ABS Co., Ltd. IRPC Oil Co., Ltd. Rayong Tank Terminal Co., Ltd. Associates Thai International Tanker Co., Ltd. Other related parties PTT Chemical Plc. Thai Lube Base Oil Plc. Rayong Tank Terminal Co., Ltd. Others Total

11,960

1,808 39 1,407

1 22 -

335 112 47 12,454

627 374 324 74 1,458

335 112 48 15,709

627 374 324 61 1,468

Short-term loans from and payables to related parties Interest rate (%) 2007 2006 Short-term loans Subsidiaries TPI Aromatics Plc. Thai Polyurethane Industry Co., Ltd. Total short-term loans

134 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

MLR-1, -1.75% and 5.29% MLR-1, -1.75% and 5.29%

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht)

1,541

23 1,564

24 1,565

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Accrued interest expense Subsidiaries TPI Aromatics Plc. Thai Polyurethane Industry Co., Ltd. Total accrued interest expenses Other payables and advances Subsidiaries IRPC Oil Co., Ltd. Rayong Tank Terminal Co., Ltd. Associates Pornchai Enterprises Co., Ltd. Other related parties Rayong Tank Terminal Co., Ltd. Others Total other payables and advances Short-term loans from and payables to related parties

713 109 822

628 108 736

5 39

112 124

822 159 997

15 71

822 38 875

124

997

2,457

3,176

Movements of loans from related parties during the year ended 31 December 2007 and 2006 were as follows: Loans from related partied

Short-term loans Subsidiaries At 1 January Increase Decrease At 31 December

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht)

1,565 (1) 1,564

1,811 (246) 1,565

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CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

çPaper transactionsé between related parties for the purchase and sale of crude oil, which were entered into only for the purpose of maintaining minimum levels of crude oil inventory, have not been recognised in the financial statements for the year ended 31 December 2007 and 2006 as follows: Consolidated and separate financial statements 2007 2006 (In million baht) Other related parties Rayong Refinery Plc. Star Petroleum Refinning Co., Ltd. Thai Oil Plc. Total

952 952 2,856 4,760

1,286 1,286 2,572

Situations between the Company and Rayong Tank Terminal Co., Ltd. (çthe related partyé) Guarantee payment to WestLB AG Rayong Tank Terminal Co., Ltd. had an outstanding balance of debt under the plan with WestLB AG amounting to approximated USD 62 million for which the Company guaranteed an amount of approximately USD 55 million. On 16 February 2006, the Company submitted a petition to the Central Bankruptcy Court stating that the Company had paid SPSD 1, 2 and Tranche D, C, B and A including interest under the rehabilitation plan and advance for withholding tax of interest payment totalling 1,356 million Baht to creditors under the rehabilitation plan of the related party. The Plan Administrator of the related party has not yet acknowledged receipt of the invoices relating to the aforementioned payments, which were made in accordance with the framework of the Companyûs rehabilitation plan. Therefore, the Company submitted a petition to the Court to consider and to issue an order to the Plan Administrator of the related party to implement the plan, acknowledge the invoices and adjust the balance of debt equal to the Companyûs payment. Subsequently, the creditor agent of the related party repaid USD 28 million (equivalent to 1,082 million Baht as at 30 June 2006) to the Company. The Plan Administrator of the related company has delayed payment of interest on the loan (calculated from the outstanding balance from January 2006 to June 2006) of 22 million Baht.

136 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

On 29 September 2006, the Company paid the remaining principal including interest to the creditors under the rehabilitation plan for the related party (calculated from January to September 2006) in total amount of 1,767 million Baht. This payment included the payment of debt amounting to USD 28 million including interest that was formerly recorded as short-term loan to related parties. On 25 January 2007, the Central Bankruptcy Court ordered the management of the Company to withdraw the above petitions. On 20 January 2007, the Company entered into a debt purchase agreement with a creditor of Rayong Tank Terminal Co., Ltd. (WestLB AG) for Baht 464 million in order to be the major creditor of Rayong Tank Terminal Co., Ltd.. The Management of the Company has determined a guideline for receivable - Rayong Tank Terminal Co., Ltd.. The Company will offer to amend the rehabilitation plan of Rayong Tank Terminal Co., Ltd. and determine a guideline for payment so that Rayong Tank Terminal Co., Ltd. is able to repay to the Company and its subsidiary the whole amount of the net outstanding debt as at 31 December 2007 and 2006, as follows: Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Outstanding balances: - Trade account receivable - Short-term loan to related parties Less allowance for doubtful account Less trade account payable other payable and advance from related parties Total before elimination Less elimination Outstanding balances, net

170 5,030 (270) 4,930 (1,407)

25 4,490 (270) 4,245 (324)

70 4,402 (270) 4,302 (1,407)

25 3,912 (270) 3,667 (324)

(39) (1,446) 3,484 (3,484) -

(822) (1,146) 3,099 3,099

(39) (1,446) 2,856 2,856

(822) (1,146) 2,521 2,521

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

137

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

As at 31 December 2007, the Company considered the value of the fixed assets of Rayong Tank Terminal Co., Ltd. (56 oil storage tanks), based on the latest independent appraisal report dated 29 January 2008 applying the fair market value method, to be 3,738 million Baht. The management of the Company believes, accordingly, that the current value of the fixed assets (56 oil storage tanks) of Rayong Tank Terminal Co., Ltd. is higher than the net outstanding debt owed to IRPC Public Company Limited. Therefore, the Company has not set up an allowance for doubtful account in respect of this debt. On 18 September 2007, the Central Bankruptcy Court approved Churchill Pryce Planner Limited to resign as Plan Administrator of Rayong Tank Terminal Co., Ltd. Subsequently, on 9 October 2007, Ms. Trithip Sivakriskul and Mr. Chalermchai Somboonpakorn were appointed as the new Plan Administrator according to the intention of the Company and IRPC Oil Co., Ltd. on behalf of the creditors of Rayong Tank Terminal Co., Ltd. Situation between the Company and IRPC Oil Co., Ltd. On 23 May 2006, the management of IRPC Oil Co., Ltd. on behalf of a guarantor repaid principal debts of 34 million Baht, including accrued interest expense, to a creditor under the rehabilitation plan on behalf of the Company. The Company recorded such transaction as creditors under the rehabilitation plan because the Company did not accept the repayment which IRPC Oil Co., Ltd. had made on behalf of the Company. Moreover, the Company has stopped recording accrued interest expense with such creditor under the rehabilitation plan of 0.21 million Baht. On 30 September 2006 the Company reclassified this amount to other payable. Significant agreements with related parties Land rental agreement for installation of oil storage tanks and pipes The Company agreed to rent the Company没s land to Rayong Tank Terminal Co., Ltd. in order to install oil storage tanks and pipes. The term of the agreement was 5 years commencing

138 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

on 16 January 2001 until 15 January 2006. At present, the agreement has not been renewed, but the Company has continued to comply with the conditions of the former agreement in determining the annual rental fee at USD 1,529,700. Service oil tank storage and pipe agreement The Company agreed to provide services to Rayong Tank terminal Co., Ltd. regarding oil tank storage and pipes in compliance with an oil storage management agreement. The period of the agreement was 5 years from 16 January 2001 to 15 January 2006. At present, the agreement has not been renewed, but the Company has continued to comply with the conditions of the former agreement in determining the initial monthly service fee amounted at USD 60,025 in 2002 and USD 232,500 in 2001 and a supplementary fee when the delivery amount of the in-bound products in any particular month exceeds the base delivery amount. The supplementary fee is calculated at the rate of USD 0.03 per barrel of in-bound products in excess of the base delivery amount. TPI Depot, Chumporn province, Services agreement On 1 January 2006, the Company entered into a depot and other related services agreement with PTT Plc. The service rate was determined based on oil service quantity and other services charges including oil quantity. The agreement will expire on 31 December 2008. Crude and Feedstock Supply Agreement On 17 January 2007, the Company entered into a Benzene Supply Agreement with PTT Plc. to determine the quantity of purchase order of 4,000 to 6,000 tons per month and determine pricing structure from the average market price of Korea before bill of lading date. The agreement expired on 31 December 2007. The Company has renewed the agreement to expire on 31 December 2008 under the same terms and conditions except that the quantity of purchase orders has been amended to 2,000 to 4,000 tons per month.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

139

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

On 1 April 2007, the Company entered into a Crude Supply Agreement with PTT Plc. to determine quantity of purchase order of 115,000 barrels per day and determine pricing structure from average market price of Dubai and Oman in the month of bill of lading plus related expense at the rate 0.03 USD per barrel. The agreement expired on 31 December 2007. The Company has renewed the agreement to expire on 31 December 2008 under the same terms and conditions. Consulting agreement for improvement of main operation system On 8 November 2006, the Company entered into an agreement with PTT ICT Solution Co., Ltd. for the hire of a consultant for improvement of main operation system in relation to the development of information technology and communication using an enterprise resource planning system. The term of service is 2 years 5 months from 1 July 2006 to 30 November 2008. The fee is determined at 50 million Baht excluding value add tax and payment term is every 3 months. 5 Cash and cash equivalents Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Cash on hand Cash at banks - current accounts Cash at banks - savings accounts Highly liquid short-term investments Total

140 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

2 3,478 1,664 6,000 11,144

25 222 2,609 7,118 9,974

1 3,418 1,025 6,000 10,444

1 181 1,922 7,067 9,171

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

The currency denomination of cash and cash equivalents as at 31 December was as follows: Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Thai Baht (THB) 10,662 8,456 9,961 7,654 United States Dollars (USD) 482 1,518 483 1,517 Total 11,144 9,974 10,444 9,171 6 Other investments Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Current investments Short-term deposits at financial institutions Debt securities held for trading Equity securities held for trading Allowance for revaluation of investments Long-term investments Equity securities available for sale Other non marketable equity securities Allowance for revaluation of investments Total

3 1,563 1,566 (37) 1,529

26 7,642 7,668 7,668

3 1,563 1,566 (37) 1,529

26 7,642 7,668 7,668

636 251 887 (813) 74 1,603

636 276 912 (790) 122 7,790

531 249 780 (752) 28 1,557

531 274 805 (732) 73 7,741

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

141

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Movements during the years ended 31 December 2007 and 2006 of equity securities held for trading were as follows: Consolidated and separate financial statements 2007 2006 (In million baht) At 1 January Purchases during the year 4,580 Sales during the year (3,017) Valuation adjustment (37) At 31 December 1,526 As at 31 December 2007, short-term deposits at financial institutions of Baht 3 million in the consolidated and separate financial statements was pledged to the Court. 7 Trade accounts receivable

Note

Related parties Other parties Total Less allowance for doubtful accounts Net Bad and doubtful debt expense for the year

142 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 3,633 1,258 5,738 3,303 9,916 5,746 9,427 4,905 13,549 7,004 15,165 8,208 (234) (299) (142) (192) 13,315 6,705 15,023 8,016 (55)

(51)

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Aging analyses for trade accounts receivable were as follows: Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Related parties Within credit terms Overdue: Less than 3 months 3-6 months 6-12 months Over 12 months

Less allowance for doubtful accounts Net Other parties Within credit terms Overdue: Less than 3 months 3-6 months 6-12 months Over 12 months

Less allowance for doubtful accounts Net Total

3,022

865

4,873

1,856

527 1 2 81 611 3,633 (84) 3,549

165 116 37 75 393 1,258 (158) 1,100

670 83 4 108 865 5,738 (99) 5,639

1,212 121 37 77 1,447 3,303 (158) 3,145

8,584

5,040

8,235

4,408

1,163 13 20 136 1,332 9,916 (150) 9,766 13,315

556 12 1 137 706 5,746 (141) 5,605 6,705

1,129 13 20 30 1,192 9,427 (43) 9,384 15,023

456 10 1 30 497 4,905 (34) 4,871 8,016

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

143

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

The normal credit term granted by the Group ranges from 19 days to 30 days. The currency denomination of trade accounts receivable as at 31 December was as follows:

Thai Baht (THB) United States Dollars (USD) Others Total

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 8,720 4,776 10,633 6,213 4,595 1,928 4,390 1,803 1 13,315 6,705 15,023 8,016

8 Inventories

Finished goods Work in process Raw materials Chemicals Fuel Oil Spare parts Repair materials Finished goods in transit Raw materials in transit Spare parts and chemical in transit Less allowance for decline in value Inventories, net

144 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 16,866 15,762 16,560 14,399 285 269 117 120 6,912 8,502 6,551 8,034 389 387 248 205 47 34 43 27 2,028 1,846 1,780 1,626 327 364 233 267 298 186 298 179 8,946 3,340 8,920 3,325 193 149 189 127 36,291 30,839 34,939 28,309 (288) (142) (237) (121) 36,003 30,697 34,702 28,188

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

As at 31 December 2007 and 2006, the carrying amounts of finished goods and raw materials valued by the LIFO method compared with their net realisable values in the consolidated financial statements and the seperate financial statements were as follows: Consolidated financial statements Carrying amount of inventory Net valued by realisable LIFO method value Difference (in million Baht) 2007 Finished goods Crude oil Total

5,980 5,869 11,849

8,738 6,618 15,356

2,758 749 3,507

Consolidated financial statements Carrying amount of inventory Net valued by realisable LIFO method value Difference (in million baht) 2006 Finished goods Crude oil Total

5,455 7,388 12,843

6,919 7,563 14,482

1,464 175 1,639

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

145

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Separate financial statements Carrying amount of inventory Net valued by realisable LIFO method value Difference (in million baht) 2007 Finished goods Crude oil Total

5,933 5,869 11,802

8,617 6,618 15,235

2,684 749 3,433

Separate financial statements Carrying amount of inventory Net valued by realisable LIFO method value Difference (in million baht) 2006 Finished goods Crude oil Total

5,248 7,388 12,636

6,546 7,563 14,109

1,298 175 1,473

Under the regulations of the Ministry of Energy, the Company is required to maintain a minimum level of inventory of crude oil and Liquefied Petroleum Gas and finished products at all times which depends on the quantity of production plan for the year. As at 31 December 2007, the value of this minimum level of inventory amounted to Baht 9,356 million and 9,313 million Baht, respectively, in the consolidated financial statements and the separate financial statements.

146 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

9 Investments in subsidiaries and associates Movements on investments during the years ended 31 December 2007 and 2006 were as follows: Consolidated financial statements 2007 2006

At 1 January Reversal of impairment loss Valuation adjustment Excess of loss over cost of investment in subsidiaries Effect of change in accounting policy Decrease from change in proportion of investment At 31 December

Separate financial statements 2007 2006 (restated) (in million baht) 42 4,393 4,338 179 20

274 (239)

(42) -

4,572

4,393

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

147

148 ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

39.99

25.00

Phil Thai Holding Corp.

Pornchai Enterprise Co., Ltd.

TPI EOEG Co., Ltd.

(%)

* Baht equivalent at the time of acquisition

Total

39.99

49.99

Kapuluan Holding Corp.

Co., Ltd.

Thai International Tanker

Associates

2007

281

2007

281

2006

Paid-up capital

25.00

39.99

180

39.99 Peso 1 Peso 1

49.99

2006

interest

Ownership

215

141

2007

215

141

2006

Cost method

2007 2007

(215)

(74)

141

(215)

(74)

141

2006

Impairment

(in million baht)

2006

Equity method

Consolidated financial statements

2007

Net

2006

2007

2006

Dividends income

Investments in subsidiaries and associates as at 31 December 2007 and 2006, and dividend income from these investments for the years then ended were as follows :

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

Subsidiaries Thai Petrochemical Industry (Cayman Island) Ltd. Thai ABS Co., Ltd. IRPC Oil Co., Ltd. IRPC Polyol Co., Ltd. Thai Polyurethane Industry Co., Ltd. TPI Philippines Vinyl Corp. Asian Dragon Oil Refinery Corp. TPI Aromatics Plc. IRPC Technology Co., Ltd. IRPC Energy Co., Ltd. IRPC Service Co., Ltd. Rayong Port Service Co., Ltd. TPI Infrastructure Co., Ltd. Rayong Tank Terminal Co.,Ltd International Plastic Trading Co., Ltd . Rayong Energy Co., Ltd.

(%)

100.00 99.99 99.99 99.99 99.99 99.99 99.99 99.99 99.99 99.99 99.50 99.89 98.90 99.90 99.02 99.99

2007 2007 2006

Paid-up capital

100.00 352 352 99.99 2,500 2,500 99.99 2,000 2,000 99.99 300 300 99.99 150 150 99.99 Peso 17 Peso 17 99.99 99.99 4,100 4,100 99.99 750 750 99.99 3,342 3,342 99.50 99.89 98.90 99.02 4 4 99.99 -

2006

interest

Ownership

352 2,500 2,000 300 150 17* 4,100 750 3,342 1,000 4 14,515

2007

352 2,500 2,000 300 150 17* 4,100 750 3,342 4 13,515

2006

Cost method 2007

2,500 1,282 300 130 274 85 1 4,572

2,321 1,282 300 130 274 85 1 4,393

2006

At cost-net

(in million baht)

2006

(352) (352) - (179) (718) (718) (20) (20) (17) (17) (4,100) (4,100) (476) (476) (3,257) (3,257) (1,000) (3) (3) (9,943) (9,122)

2007

Impairment

Separate financial statements

2007

2006

Dividends income

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

149

150 ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

* Baht equivalent at the time of acquisition

Total

Associates Kapuluan Holding Corp. Phil Thai Holding Corp. Pornchai Enterprises Co., Ltd. TPI EOEG Co., Ltd.

(%)

39.99 39.99 25.00 25.00

2007 2007 2006

Paid-up capital

39.99 Peso 1 Peso 1 39.99 25.00 180 180 25.00 1 1

2006

interest

Ownership

-* 74 74 14,589

2007 2007 2007

4,572 4,393

2006

At cost-net

(in million baht)

2006

Impairment

-* 74 (74) (74) 74 (74) (74) 13,589 (10,017) (9,196)

2006

Cost method

Separate financial statements

2007

2006

Dividends income

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

0.02 0.35

Equity Securities Available for-sales securities TPI Polene Plc. PTT Chemical Plc. Bangkok Union Insurance Plc.

Total

16.24 13.04 18.05

(%)

General investments Rayong Tank Terminal Co., Ltd. Thai Special Steel Plc. Rayong Acetylene Co., Ltd. United Grain Industry Co., Ltd.

2007

0.02 1.53 0.35

99.99 16.24 13.04 18.05

2006

20,190 14,901 200

4,220 115 550

2007

20,190 14,901 200

4,220 115 550

2006

14 2 16 803

673 15 99 787

2007

14 590 2 606 2,393

1,000 673 15 99 1,787

2006 2007

(780) (1,780)

7 7

3 1 4 11

(in million baht)

2006

- (1,000) (673) (673) (8) (8) (99) (99) (780) (1,780)

2007

Impairment

7 7

6 1,667 1 1,674 1,681

2006

Market price

Cost method

interest Paid-up capital

At cost/

Ownership

Consolidated financial statements

39 39 39

2007

171 171 171

2006

Dividends income

Long-term investments in related parties as at 31 December 2007 and 2006 and dividend income from those investments for the years then ended were as follows:

10 Long-term investments in related parties

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

151

152 ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

0.35

Equity Securities Available for-sales securities PTT Chemical Plc. Bangkok Union Insurance Plc.

Total

16.24 13.04 18.05

(%)

General investments Rayong Tank Terminal Co., Ltd. Thai Special Steel Plc. Rayong Acetylene Co., Ltd. United Grain Industry Co., Ltd.

2007

1.53 0.35

99.99 16.24 13.04 18.05

2006

14,901 200

4,220 115 550

2007

14,901 200

4,220 115 550

2006

2 2 731

673 15 41 729

2007

590 2 592 2,321

1,000 673 15 41 1,729

2006 2007

(in million baht)

2006

(722) (1,722)

- (1,000) (673) (673) (8) (8) (41) (41) (722) (1,722)

2007

Impairment

1 1 8

7 7 7 7

1,667 1 1,668 1,675

2006

Market price

Cost method

interest Paid-up capital

At cost/

Ownership

Separate financial statements

39 39 39

2007

171 171 171

2006

Dividends income

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

Disposals

(13)

Disposals

17,377

Transfers

At 31 December 2007

Additions

1 January 2007

17,369

Transfers

At 31 December 2006 and

17,347

Additions

At 1 January 2006

Cost

183

182

(2)

184

21,450

(229)

452

2,617

18,610

(125)

180

18,555

877

553

324

Buildings and building Land improveLand improvements ments Pipes

11 Property, plant and equipment

62,941

(2)

62,927

62,904

2,609

(131)

910

1,825

(7)

175

1,657

555

(121)

601

(35)

577

644

(270)

120

794

(79)

836

Furniture, Machinery Tools and fixtures and factory and office equipment equipment equipment Vehicles (in million baht)

Consolidated financial statements

243

123

120

Oil vessels

(8)

561

(468)

685

344

208

136

Machinery and Property equipment under intransit construction

107,487

(766)

5,102

103,151

(248)

250

496

102,653

Total

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

153

154 ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

10,685

Disposals

At 31 December 2007

Depreciation charge for the year

1 January 2007

10,685

Disposals

At 31 December 2006 and

10,685

Depreciation charge for the year

At 1 January 2006

Impairment Losses

Accumulated depreciation/

(2)

6,945

(198)

1,174

5,969

(108)

592

5,485

192

121

Buildings and building Land improveLand improvements ments Pipes

24,558

(1)

2,173

22,386

2,146

20,240

1,813

(117)

504

1,426

(6)

1,336

359

(104)

425

(33)

421

491

(270)

740

(76)

765

Furniture, Machinery Tools and fixtures and factory and office equipment equipment equipment Vehicles (in million baht)

Consolidated financial statements

131

Oil vessels

Machinery and Property equipment under intransit construction

45,176

(690)

4,103

41,763

(225)

2,936

39,052

Total

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

181

14,505

12,641

685

253

38,383

40,541

796

399

196

176

153

136

Furniture, Machinery Tools and fixtures and factory and office equipment equipment equipment Vehicles (in million baht)

112

Oil vessels

561

344

Machinery and Property equipment under intransit construction

62,311

136

62,175

61,388

61,360

Total

depreciation in the consolidated financial statements.

As at 31 December 2007 and 2006, accumulated impairment losses of 10,917 million Baht and Baht 11,033 million, respectively were included in accumulated

6,692

Total at 31 December 2007

6,692

Owned assets

6,684

Total at 31 December 2006

Assets under finance leases

6,684

Assets under finance leases

Owned assets

Net book value

Buildings and building Land improveLand improvements ments Pipes

Consolidated financial statements

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

155

156 ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

Disposals

21 (14) 4,293

Additions

Transfers

Disposals

At 31 December 2007

1 January 2007 4,286

Transfers

At 31 December 2006 and

4,263

Additions

At 1 January 2006

Cost

Land

168

16,300

(7)

444

15,852

(1)

(101)

178

15,776

57,146

57,141

(3)

57,122

1,356

177

1,179

(14)

169

1,024

483

(91)

502

(27)

479

Buildings Tools Furniture, and building Machinery and fixtures Land improveand factory and office Improvements ments equipment equipment equipment (in million Baht)

385

(11)

116

280

(75)

323

Vehicles

Separate financial statements

(156)

184

472

(444)

589

327

(199)

402

124

Machinery and Property equipment under in transit construction

80,647

123)

1,000

79,770

(120)

(456)

1,060

79,286

Total

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

Disposals

Depreciation charge for the year

Disposals

At 31 December 2007

1 January 2007 -

Depreciation charge for the year

At 31 December 2006 and

At 1 January 2006

Impairment Losses

Accumulated depreciation/

Land

5,340

(3)

548

4,795

(93)

527

4,361

21,873

1,974

19,899

1,945

17,954

913

841

779

308

(81)

356

(23)

349

Buildings Tools Furniture, and building Machinery and fixtures Land improveand factory and office Improvements ments equipment equipment equipment (in million Baht)

241

(11)

237

(73)

293

Vehicles

Separate financial statements

Machinery and Property equipment under in transit construction

28,675

(95)

2,642

26,128

(189)

2,581

23,736

Total

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

157

158 ANNUAL REPORT 2007

IRPC PUBLIC COMPANY LIMITED

4,293

Total at 31 December 2007

4,293

Owned assets -

4,286

Total at 31 December 2006

Assets under finance leases

4,286

Assets under finance leases

Owned assets

Net book value

Land

168

10,960

11,057

35,273

37,242

443

338

175

146

Buildings Tools Furniture, and building Machinery and fixtures Land improveand factory and office Improvements ments equipment equipment equipment (in million baht)

144

Vehicles

Separate financial statements

472

327

Machinery and Property equipment under in transit construction

51,972

130

51,842

53,642

53,618

Total

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS

For the years ended 31 December 2007 and 2006

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Depreciation included in:

Cost of sales Selling and administrative expenses Total

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 2,823 2,791 2,581 2,547 125 145 61 34 2,948 2,936 2,642 2,581

As at 31 December 2007 and 2006, the gross carrying amount of fully depreciated buildings and equipment that were still in use was as follows: Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Buildings and equipment

2,265

2,160

1,411

1,311

As at 31 December 2007: * 25 units of machinery of the Company with net book value of 1,156 million Baht and 5 title deeds of land including structures with net book value of 1 million Baht were in the process of release from pledge under old loan agreements. * 119 units of machinery of a subsidiary (Thai ABS Company Limited) with net book value of 1,043 million Baht were in the process of release from pledge under old loan agreements. * the Company has deposited platinum and palladium, that form part of equipment which has been fully depreciated, with a foreign bank for value of 169 million Baht (calculated from the weight of platinum and palladium and the market price in US Dollars at the date of deposit converted at the exchange rate at the end of the year) and with interest at 2.8% and 0.2% per annum, respectively. This deposit will be redeemed on 2 February 2009.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

159

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

12 Intangible assets Consolidated financial statements Leasehold Dredging Deferred land expenses charges Total (in million baht) Cost At 1 January 2006 Additions 2 Disposals At 31 December 2006 and 1 January 2007 Additions Disposals At 31 December 2007 Accumulated amortisation At 1 January 2006 Amortisation charge for the year Disposals At 31 December 2006 and 1 January 2007 Amortisation charge for the year Disposals At 31 December 2007

160 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

56 -

2,512 8 -

210 10 -

2,778

58 (29) 29

2,512 2,512

218 121 (207) 132

2,788 121 (236) 2,673

15 1 -

841 126 -

207 2 -

1,063 129 -

16 1 (6) 11

967 125 1,092

209 3 (207) 5

1,192 129 (213) 1,108

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Consolidated financial statements Leasehold Dredging Deferred land expenses charges Total (in million baht) Impairment losses At 1 January 2006 Increases Decreases At 31 December 2006 and 1 January 2007 Increases Decreases At 31 December 2007 Net book value At 31 December 2006 At 31 December 2007

21 -

21 (21) -

21 18

1,545 1,420

9 127

1,575 1,565

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

161

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Consolidated financial statements Leasehold Dredging Deferred land expenses charges Total (in million baht) Cost At 1 January 2006 Additions Disposals At 31 December 2006 and 1 January 2007 Additions Disposals At 31 December 2007

29 -

2,512 -

210 8 -

2,751 8 -

29 29

2,512 2,512

218 121 (207) 132

2,759 121 (207) 2,673

Accumulated amortisation At 1 January 2006 Amortisation charge for the year Disposals At 31 December 2006 and 1 January 2007 Amortisation charge for the year Disposals At 31 December 2007

9 1 -

841 126 -

207 2 -

1,057 129 -

10 1 11

967 125 1,092

209 3 (207) 5

1,186 129 (207) 1,108

Net book value At 31 December 2006 At 31 December 2007

19 18

1,545 1,420

9 127

1,573 1,565

162 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

13 Other non-current assets

Note

Deposit for land Less Impairment losses

Rental deposit for office building Less Impairment losses Notes receivable on land Less Impairment losses Deposit for machinery Others Net

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 267 283 267 283 (267) (283) (267) (283) 14 14 1,739 (1,739) 790 6 810

14 14 1,739 (1,739) 6 20

12 12 1,739 (1,739) 761 3 776

12 12 1,739 (1,739) 3 15

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

163

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

14 Interest-bearing liabilities

Note

Current Bank overdrafts Short-term loans from financial institutions Unsecured Short-term loans from related parties Unsecured Current portion of finance lease liabilities

Non-current Debentures Unsecured Finance lease liabilities Total

164 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) -

156

35 35

29,633 29,789

1,564

1,565

21 56

6 29,795

20 1,584

5 31,359

18,417 110 18,527 18,583

21 21 29,816

18,417 106 18,523 20,107

18 18 31,377

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

The periods to maturity of interest-bearing liabilities, excluding finance lease liabilities, as at 31 December were as follows: Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Within one year 35 29,789 1,564 31,354 After one year but within five years After five years 18,417 18,417 Total 18,452 29,789 19,981 31,354 The currency denomination of interest-bearing liabilities as at 31 December was as follows:

Thai Baht (THB) United States Dollars (USD) Others Total

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 10,166 15,383 11,690 16,944 8,417 8,417 14,433 14,433 18,583 29,816 20,107 31,377

Short-term loans from financial institutions were drawn down under loan facilities in order to repay remaining principal loan and interest due to creditors under the rehabilitation plan. The credit facilities are divided into two contracts as follows: 1) On 21 September 2006, the Company entered into an agreement with 6 domestic commercial banks for loans totaling 15,200 million Baht . The principal is repayable within one year with interest at the average of the MLR of four commercial banks minus 1.75% per annum. Interest is payable monthly. The loans are unsecured.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

165

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

2) On 22 September 2006, the Company entered into an agreement with 2 foreign commercial banks for loans totaling Yen 47,200 million (equivalent to 14,433 million Baht as at 31 December 2006). The principal is repayable within one year with interest at LIBOR minus 0.4% per annum. Interest is payable quarterly. The loans are unsecured. Under the aforementioned Loan Facility Agreements, the Company is required to maintain a ratio of Debts to its Equity ratio not exceeding 1:1 The Company has credit facilities from three domestic commercial banks of 5,500 million Baht for working capital. Interest is charged at market rate and LIBOR plus 0.5% per annum. Finance lease liabilities Finance lease liabilities as at 31 December were payable as follows:

Principal Within one year After one year but within five years Total

166 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

21 110 131

Consolidated financial statements 2007 2006 Interest Payments Principal Interest Payments (in million baht) 8 29 6 1 7 16 24

126 155

21 27

2 3

23 30

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Principal Within one year After one year but within five years Total

20 106 126

Separate financial statements 2007 2006 Interest Payments Principal Interest Payments (in million baht) 8 28 5 1 6 15 23

121 149

18 23

1 2

19 25

15 Trade accounts payable

Note

Related parties Other parties Total

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 12,454 1,458 15,709 1,468 4,608 7,669 4,379 7,521 17,062 9,127 20,088 8,989

The currency denomination of trade accounts payable as at 31 December was as follows:

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

167

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Thai Baht (THB) United States Dollars (USD) Euro (EUR) Japan Yen (JPY) Other Total

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 11,511 2,025 14,633 1,911 5,532 7,068 5,439 7,047 13 6 13 6 1 2 1 2 5 26 2 23 17,062 9,127 20,088 8,989

16 Debentures

USD currency Less discount on debentures Net Baht currency Net

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 8,472 8,472 (55) (55) 8,417 8,417 10,000 10,000 18,417 18,417 -

On 25 May 2007, the Company issued unsecured and non-subordinated debentures with face value of USD 250 million at the discount price of 99.323% of face value, for the net amount of USD 248.31 million. The debentures bear interest at 6.375% per annum, payable semi-annually in arrears commencing on 25 November 2007. The debentures will mature on 25 May 2017

168 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

On 2 July 2007, the Company issued Thai Baht unsecured and non-subordinated debentures with total face value of 10,000 million Baht . The Company offered these debentures to financial institution investors in two tranches, 7,000 million Baht for a 7 years term with fixed interest of 5.05% per annum and 3,000 million Baht for a 10 years term with fixed interest of 5.29% per annum. Interest is payable semi-annually until maturity of the debentures on 2 July 2014 and 2 July 2017, respectively. Under the terms of the debentures, the Company has to comply with certain conditions as stipulated therein such as, not creating any future lien, or other security interest of the Company and its principal subsidiaries, consolidation, amalgamation, merger and sale of assets without the debentureholders没 consent; maintaining direct and indirect ownership interest of PTT Plc.; etc. 17 Share Capital

Authorised At 1 January - ordinary shares At 31 December - ordinary shares Issued and paid up At 1 January - ordinary shares At 31 December - ordinary shares

Par value per share (in Baht)

2007

2006 Amount Number Amount (million shares/million baht)

Number

20,475

19,500

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

169

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

On 5 June 2007 and 21 September 2007, the Securities and Exchange Commission (SEC) approved the Company to issue securities in accordance with the Employee Stock Option Program (ESOP) as follows: - Allocate and offer 907,805,702 units of warrant at the fixed exercise price of Baht 2.88 per share, offering price at Baht 0 per unit and exercise ratio of 1:1 for a 4 years term expiring on 28 June 2011. - Allocate and offer 39,636,318 units of warrants to former employees of IRPC group who had been terminated from the Company under the Companys没 rules and regulations at the fixed exercise price of Baht 2.88 per unit, offering price at Baht 0 per unit and exercise ratio of 1:1 for a 4 years term expiring on 27 September 2011. - The first exercise period shall commence one year from the warrant issuing date. Warrants not exceeding 50% and 25% of total warrants shall be exercised in the second and third year, respectively, and the remaining portion shall be exercised in the fourth year. The warrants shall be exercised on the last business day of every March, June, September and December in every year. Exercisable warrants not exercised in the second and third year may be exercised in the following year until the maturity date. The Company will cancel any remaining warrants that are not allocated to employees and former employees.

170 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

18 Reserves Share premium The share premium account is set up under the provisions of Section 51 of the Public Companies Act B.E. 2535, which requires companies to set aside share subscription monies received in excess of the par value of the shares issued to a reserve account (çshare premiumé). The account is not available for dividend distribution. Fair value changes Fair value changes recognised in shareholdersû equity relate to net changes in the fair value of available-for-sale investments le0000ss any impairment losses, which are recognised in the statement of income. Legal reserve The legal reserve is set up under the provisions of Section 116 of the Public Companies Act B.E. 2535. Section 116 requires that a company shall allocate not less than 5% of its annual net profit, less any accumulated losses brought forward (if any), to a reserve account (çlegal reserveé), until this account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution. In 2007, the Company appropriated 1,647.50 million Baht from net profit to legal reserve (2006: 400 million Baht). Accordingly, the balance of the legal reserve as of December 31, 2007 is 2,047.50 million Baht which has reached 10% of the Companyûs authorized share capital, as stipulated in the Act.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

171

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Treasury shares Consolidated financial statements 2007 2006 (in million baht) Subsidiaries Thai ABS Co., Ltd. TPI Oil Co., Ltd. Total

26 201 227

As at 31 December 2007 and 2006, two subsidiaries, Thai ABS Company Limited and TPI Oil Company Limited, had purchased 6,190,800 shares and 2,063,600 shares, respectively of the Company没s common shares. These investments held by the two subsidiaries are presented in the balance sheets as a deduction within total shareholders没 equity, and are stated at cost.

19 Segment information Segment information is presented in respect of the Group没s business segments, is based on the Group没s management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest or dividend-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

172 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Business segments The Group comprises the following main business segments: Petrochemical product : Petroleum product Others

Olefins, Aromatics which are raw material for produce resins Fuel oil, Lubricant and Asphalt Interest income

Revenue and results, based on business segments for the years ended 31 December 2007 and 2006 were as follows: Sales and other income 2007 2006 The Company:Petrochemical product Petroleum product Other income Unallocated assets

64,745 173,021 4,892 242,658

57,283 149,847 4,387 211,517

Net profit (loss) 2007 2006 (in million baht)

Assets employed 2007 2006

3,918 6,077 1,975 11,970

27,273 56,687 51,547 135,507

4,428 2,340 388 7,156

25,682 48,144 55,695 129,521

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

173

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Sales and other income 2007 2006 Subsidiaries:Petrochemical product Petroleum product Others Total Less Inter-segment transactions Sales and other income Net profit Total Assets

174 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Net profit (loss) 2007 2006 (in million baht)

Assets employed 2007 2006

14,445 16,284 321 31,050 242,567

1,219 138 (280) 1,077 13,047

82 (157) (329) (404) 6,752

7,908 8,451 4,237 20,596 156,103

7,799 4,431 4,145 16,375 145,896

(41,804) (33,115) 232,307 209,452

(61)

(25,289)

(18,068)

12,986

6,822 130,814

127,828

19,257 11,888 308 31,453 274,111

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

20 Selling and administrative expenses

Selling expenses Personnel expenses Consultant fee Depreciation Rental Advertising Doubtful accounts Loss on impairment Others Total

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 1,245 1,423 1,366 1,366 2,190 1,278 1,672 966 352 157 352 153 125 145 61 34 122 80 80 40 126 63 125 62 383 66 288 497 318 801 591 564 368 5,458 4,120 4,604 3,277

21 Personnel expenses

Wages and salaries Bonus Contribution to defined contribution plans Compensation for retirement Others Total Number of employees as at 31 December

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 3,561 3,481 3,042 2,893 1,135 980 1,013 844 162 141 143 121 898 579 352 274 298 236 6,108 4,876 5,075 4,094 (number of employees) 6,409 7,155 5,220 5,587

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

175

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

The defined contribution plans comprise provident funds established by the Group for its employees. Membership to the funds is on a voluntary basis. Contributions are made monthly by the employees at rates ranging from 5% to 7% of their basic salaries and by the Group at from 5% to 7% of the employees没 basic salaries. The provident funds are registered with the Ministry of Finance as juristic entities and are managed by a licensed Fund Manager. 22 Interest expense

Note

Interest expense: Related parties Others Net

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 1,107 1,107

2,079 2,079

86 1,107 1,193

124 1,827 1,951

23 Income tax Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Current tax expense Current year

There is no tax charge on the Company没s profit for the year due to the utilisation of brought forward tax losses.

176 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

24 Earnings per share Basic earnings per share The calculation of basic earnings per share in the consolidated and separate financial statements for the year ended 31 December 2007 was based on the consolidated and separate net profit attributable to ordinary shareholders for the year of 12,986 million Baht and Baht 11,970 million, respectively, (2006: 6,823 million Baht and 7,156 million Baht, respectively) and the number of shares outstanding during the year of 19,500 million shares, (2006: 19,500 million shares). Diluted earnings per share The calculation of diluted earnings per share for the year ended 31 December was based on the net profit attributable to ordinary shareholders and the weighted average number of shares outstanding during each period as follows: Net profit attributable to ordinary shareholders (diluted) Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Net profit attributable to ordinary Shareholders (basic and diluted)

12,986

6,823

11,970

7,156

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

177

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Weighted average number of ordinary shares (diluted)

Number of ordinary shares (basic) Effect of conversion of warrants Number of ordinary shares (diluted)

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) 19,500 19,500 19,500 19,500 264 264 19,764 19,500 19,764 19,500

25 Long-term lease agreements The Group had long-term office building lease agreements with a related company. The initial lease term for each lease was for 3 years with the condition that the lease can be renewed for an unspecified number of additional 3 year terms at the option of the lessee, up to 90 years. In July 1999, the Company and its subsidiaries entered into long-term office building lease agreements with a related company (a lessor). These new agreements are for 90 years and have replaced certain previous 3 years term agreements which have expired. The Group made a rental deposit payment of 557 million Baht for the new leases by offsetting against the previous rental deposits. However, such lease agreements have not been registered with the Land Department. Should either party terminate the lease agreement, the unused rental deposit is refundable to such party. Both parties had agreed in principle to execute a second mortgage on the office building as collateral for the unused deposits. However, it is not known whether the fair market value of the building, net of existing first mortgage, is in excess of the deposit. Therefore, it is uncertain as to whether or not the Company and its subsidiaries will be able to recover the deposit in full from the related party. Later, the Plan Administrator (Effective Planners Ltd.) recorded an impairment loss in respect of the full amount.

178 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

On 24 November 2006, the Company notified the lessor of its intention to terminate the agreement for the rental of office space with effect from 31 December 2006 and to refund the rental deposit of 785 million Baht, addition money and allowance at a rate of 20% of 164 million Baht which must be refunded by 15 days from the termination date. As at 31 December 2007 and 2006, commitments under long-term lease agreements of a subsidiary were as follows: Type

Commitments for land lease agreement within one year Commitments for land lease agreement more than one year but within\five years Commitments for land lease agreement over five years

Amount of rental payment 2007 2006 (in million baht) 2 16 16

12 162 176

26 Promotional privileges By virtue of the provisions of the Industrial Investment Promotion Act of B.E. 2520, the Company and a subsidiary have been granted privileges by the Board of Investment relating to manufacture of Acetylene Black, Compounded Plastic and expansion of capacity. The privileges granted include: (a)exemption from payment of import duty on machinery as approved by the Board; (b)exemption from payment of income tax for certain operations for a period of five to eight years from the date on which the income is first derived from such operations; and (c)a 50% reduction in the normal income tax rate on the net profit derived from certain operations for a period of five years, commencing from the expiry date in (b) above.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

179

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

As promoted companies, the Company and the subsidiary must comply with certain terms and conditions prescribed in the promotional certificates. Revenues from sales in the Company没s statements of income, for the years ended 31 December 2007 and 2006 is classified into the promoted business and the non-promoted business as follows: Promoted 2007 IRPC Plc. - Export sales - Domestic sale Total Thai ABS Co., Ltd. - Export sales - Domestic sales Total 2006 IRPC Plc. - Export sales - Domestic sale Total Thai ABS Co., Ltd. - Export sales - Domestic sale Total

180 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Nonpromoted (in million baht)

Total

14,984 43,925 58,909

8,636 170,220 178,856

23,620 214,145 237,765

51 14,002 14,053

201 2,946 3,147

252 16,948 17,200

15,949 40,597 56,546

3,537 147,046 150,583

19,486 187,643 207,129

4,368 6,526 10,894

667 1,039 1,706

5,035 7,565 12,600

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

27 Dividends At the annual general meeting of the shareholders of the Company held on 20 April 2007, the shareholders approved the appropriation of dividends of Baht 0.12 per share, amounting to 2,340 million Baht. The dividend was paid to shareholders during 2007. At the Board of Directors没 meeting of the Company held on 21 August 2007, the Board of Directors approved the appropriation of interim dividends of Baht 0.10 per share, amounting to 1,950 million Baht. The interim dividend was paid to shareholders during 2007. 28 Changes in accounting policies Property, plant and equipment from revaluation of assets to historical cost In the fourth quarter of 2006, the management of the Company approved for the Company and most subsidiaries to change their accounting policy for property, plant and equipment from the revaluation method to historical cost, in order to conform to the accounting policy of a major shareholder. The Company and its subsidiaries made retrospective adjustments to the consolidated and the separate financial statements for the year 2005. In addition, the Company made a retrospective adjustment to the separate financial statements for its equity in subsidiaries. Investment in subsidiaries and associates The following change of accounting policy by the Company has no effect on the consolidated financial statements of the Group. Until 31 December 2006, the Company accounted for its investments in subsidiary and associated companies in its financial statements using the equity method.

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

181

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

During 2007, the FAP issued the following new TAS which are effective for accounting periods beginning on or after 1 January 2007: TAS 44 (revised 2007) Consolidated and Separate Financial Statements TAS 45 (revised 2007) Investment in Associates These new TAS require a parent company which has investment in a subsidiary company, an entity under joint control, or an associate company, which is not classified as a 莽held for sale茅 investment, to record such investment in accordance with either the cost method or with the recognition and measurement basis for financial instruments (when an announcement is made), instead of the equity method currently used. Starting from 1 January 2007, the Company has, accordingly, changed its accounting policy for its investments in subsidiary companies and associate companies in its financial statements from the equity method to the cost method. The change in accounting policy has been applied retrospectively and the Company没s 2006 financial statements, which are included in the Company没s 2007 financial statements for comparative purposes, have been restated accordingly.

182 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

The effects of the changes in accounting policies on the Company没s 2007 and 2006 financial statements are as follows: Separate financial statements 2007 2006 (in million baht) Investments in subsidiaries and associates Balance at 1 January before change in accounting policy Increase (decrease) in retained earnings Increase (decrease) in revaluation surpluses Change in accounting policy from evaluation method to historical method for property, plant and equipment Net increase (decrease) Balance at 1 January after change in accounting policy Retained earnings Balance at 1 January before change in accounting policy Increase (decrease) in share of profits from investments accounted for using the equity method Change in accounting policy from revaluation method to historical method for property, plant and equipment Net increase (decrease) Balance at 1 January after change in accounting policy Net profit Net profit before change in accounting policy Decrease in share of profits from investments accounted for using the equity method Net increase Net profit for 2006 after change in accounting policy Increase in earnings per share (Baht)

4,120 251 22

5,851 (83) 2

273 4,393

(1,432) (1,513) 4,338

35,564

29,217

251

(83)

251 35,815

(76) (159) 29,058

6,822

334 334 7,156 0.02

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

183

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

29 Cumulative effect on preparation of the consolidated financial statements On 9 October 2007 the representative of the Company who acts on behalf of the creditor under the Rehabilitation Plan of a subsidiary, Rayong Tank Terminal Co., Ltd. çRTTé, was appointed by the Central Bankruptcy Court to be the plan administrator. Accordingly, RTT has started to be controlled by the Company. As at 31 December 2007, the consolidated financial statements included the financial statement of RTT. The cumulative effects to the consolidated financial statements as at 31 December 2007 were as follows: (in million baht) Total Assets - decreased 2,072 Total Liabilities - decreased 1,407 Retained Earnings (B/F)-decreased 665 30 Financial instruments Financial risk management policies The Group is exposed to normal business risks from changes in market interest rates and currency exchange rates and from non-performance of contractual obligations by counterparties. The Group does not hold or issue derivative financial instruments for speculative or trading purposes. Interest rate risk Interest rate risk is the risk that future movements in market interest rates will affect the results of the Groupûs operations and its cash flows. The Group is primarily exposed to interest rate risk from its borrowings (Notes 14 and 16) and uses derivative financial instruments, principally interest rate swaps, to manage exposure to fluctuations in interest rates on specific debt securities and borrowings.

184 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

The effective interest rates of debt securities and loans receivable as at 31 December and the periods in which the loans receivable and debt securities mature or reprice were as follows: Consolidated financial statements Effective Within 1 After 1 year but After 5 interest rates year within 5 year year (% perannum) (in million baht) 2007 Current Loans receivable Related parties Total 2006 Current Debt securities Loans receivable Related parties Total

Total

5.29

5,997 5,997

4.75-5.125

7,642

6.0-9.5

6,771 14,413

ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

185

IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Separate financial statements Effective Within 1 After 1 year but After 5 interest rates year within 5 year year (% perannum) (in million baht) 2007 Current Loans receivable Related parties Non-current Loans receivable Related parties Total 2006 Current Debt securities Loans receivable Related parties Non-current Loans receivable Related parties Total

186 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

Total

5.29-8.86875

6,621

2.3125-5.29

6,621

9,470 9,470

9,470 16,091

4.75-5.125

7,642

6.0-9.5

6,535

4.875-6.0

14,177

10,915 10,915

10,915 25,092

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

The effective interest rates of interest-bearing financial liabilities as at 31 December and the periods in which those liabilities mature or reprice were as follows: Consolidated financial statements Effective Within 1 After 1 year but After 5 interest rates year within 5 year year (% perannum) (in million baht) 2007 Current Loans payable - Financial institutions Non-current Debentures Total 2006 Current Loans payable - Financial institutions Total

Total

8.25

5.05-6.375

18,417 18,417

18,417 18,452

0.94438-6.0

29,804 29,804

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IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Separate financial statements Effective Within 1 After 1 year but After 5 interest rates year within 5 year year (% perannum) (in million baht) 2007 Current Loans payable Financial institutions Non-current Debentures Total 2006 Current Loans payable Financial institutions Loans payable Related parties Total

Total

5.29

1,564

5.05-6.375

1,564

18,417 18,417

18,417 19,981

0.94438-6.0

29,789

6.0

1,565 31,354

Foreign currency risk The Group is exposed to foreign currency risk relating to purchases, sales and loans which are denominated in foreign currencies. The Group primarily utilizes forward exchange contracts with maturities of less than one year to hedge such financial assets and liabilities denominated in foreign currencies. The forward exchange contracts entered into at the balance sheet date also relate to foreign currencies for the subsequent period.

188 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Credit risk Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle its financial and contractual obligations to the Group as and when they fall due. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Liquidity risk The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group没s operations and to mitigate the effects of fluctuations in cash flows. Fair values The fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm没s length transaction. The following methods and assumptions are used to estimate the fair value of each class of financial instruments. Cash and cash equivalents and short-term investments - the carrying values are approximate to their fair values due to the relatively short-term maturity of these financial instruments. The fair value of trade and other short-term receivables is taken to approximate the carrying value. Trade accounts payable and other payables - the carrying amounts of these financial liabilities are approximate to their fair values due to the relatively short-term maturity of these financial instruments.

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IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Fair values of financial liabilities, together with the carrying values shown in the balance sheets at 31 December were as follows: Consolidated and Separate Financial statements Fair value Carrying value (in million baht) Non-current Debentures

18,511

18,417

31 Commitments with non - related parties Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Capital Commitment Contracted but not provided for - Under purchase agreements for machinery purchases and construction - Under consultant agreements Total

190 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

4,293 286 4,579

1,598 1,598

4,276 286 4,562

1,580 1,580

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Non - cancelable operating lease commitments:Office building rental agreement: From 1 - 5 years Land Lease Agreement: Within 1 year From 1 - 5 years Over 5 years Total Other Commitments:Unused letters of credit

42 16 16 58

66 2 12 162 176 242

30 30

48 48

2,819

4,286

2,359

4,084

On 24 November 2006, the Company notified a related party, Pornchai Enterprises Co., Ltd. to terminate an agreement for the rental of office space effective on 31 December 2006 and is in the process of being refunded a rental deposit and other charges totaling 785 million Baht within 15 days from the termination of the rental agreement. Consequently, the Company reclassified the rental deposits for office buildings-related parties as other receivables-related parties. On 28 June 2006, the Company entered into rental office building agreements for Sun Tower with monthly prepaid rental at the rate of 3 million Baht and guarantee deposit of 8 million Baht. The rental term is 3 years from 1 August 2006 until 31 July 2009. On 7 September 2006, the Company entered into a rental office building agreement for Lao Peng Nhuan with monthly prepaid rental at the rate of 1 million Baht and guarantee deposit of 3 million Baht. The rental term is 3 years from 16 November 2006 until 15 November 2009.

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IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

As at 31 December 2007, the Company had commitments under currency and interest rate swap agreements with financial institutions as follows: - Interest rate swap agreements on debentures for a total of USD 100 million with maturity date in ten years effective from 25 May 2007 in two tranches of USD 50 million each from fixed rate at 6.375% per annum to floating rate during the first and second years at the fixed rates of 5.485% and 5.5%, respectively and in the third to ten years at floating rate of six-month LIBOR. However, after the end of the second year the two commercial banks have an option to cancel these agreements. - Currency and interest rate swap agreement on debentures with maturity date in ten years effective from 3 July 2007 to exchange 3,000 million Baht with fixed interest at 5.29% per annum to USD 86,780,445.47 with floating interest rate of LIBOR 6 month plus 0.995% - Currency swap agreement on debentures of USD 30 million with maturity date in ten years effective from 25 May 2007 in exchange for 1,005 million Baht. The Company will receive interest in US dollar currency at the fixed rate of 0.66% per annum on a semi-annually basis. - Currency swap agreement on debentures of USD 75 million for Baht at the average of each weekly exchange rate, effective from 23 July 2007 to 24 May 2017 less discount rate of Baht 0.87. - Currency swap agreement on debentures of USD 10 million in exchange for 309 million Baht, with maturity date on 24 May 2017.

192 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

On 15 February 2007, the Company entered into an agreement with a company in order to improve operation system that supports work, resource planning and management by using SAP software. The fee is determined at not more than 224 million Baht in total excluding value added tax. The term of service is up to 1 October 2008. On 16 May 2007, the Company entered into an agreement with a company in order to provide advice and service in business planning for efficient utilisation of the Company没s existing assets. The fee is determined at not more than Euro 6 million in total and at the rate of Euro 65,000 per hours for the part of work over the scope specified in the agreement excluding value add tax, The term of service is 2 years from the agreement date. On 30 May 2007, the Company entered into an assigned agreement which PTT group had entered with a supplier company in order to provide equipment for production of electricity service for the modifier 200 mega-watt power plant project. The value of the agreement is Euro 54 million in total and the agreement will expire on 31 December 2008. On 31 August 2007, the Company entered into an agreement with a company in order to supply machinery for production of HDPE pipe for the expansion of CD 1 project. The value of the agreement is Euro 6.67 million in total and the agreement will expire on 30 June 2008.

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IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

32 Contingent liabilities As at 31 December 2007 and 2006, contingent liabilities were as follows: Consolidated Separate financial statements financial statements 2007 2006 2007 2006 (in million baht) Contingent liabilities in respect of:- Bank guarantees issued on behalf of the Company and its subsidiaries - Guarantees issued on behalf of related companies - Defendant in a litigation with respect to a claim for compensation on land dispute - Others Total

370

354

368

350

132

127

395

330

821 52 1,375

820 1,375 1,458

821 52 1,636

820 63 1,563

The Company was contingently liable for compensation of four former members of management, due to termination of employment without advance notice for which the litigation claim amounted to 451 million Baht at the date of litigation. In addition, on 31 March 2005, three of the four former members of management submitted additional petitions in relation to compensation for the alleged unfair termination to the Central Labour Court. The litigation claim as at the litigation date amounted to 623 million Baht. On 18 December 2006 and 8 May 2007, the meeting of management committee resolved approval of payment of wages, including interest to three former members of management amounting to 58 million Baht. As at 31 December 2007, the remaining petition of a member of former management, with remaining claim没s amounting to 44 million Baht, is still under the consideration of the Court.

194 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Some of the Company没s tank farm are located in yellow zone (Less crowded community zone) and green zone (recreational & environmental conserved zone) of the Town and Country Planning of Rayong Province which restricted from construction of factory, oil and gas tanks. Part of the lands are also on the expropriate areas for construction of 2 public roads. Presently, the Company is in the process of petition to modify of the Town and Country Planning of Rayong Province in the area of the Company没s tank farm from yellow and green to purple zone (industrial zone). and to modify the construction of 2 public roads away from the area. Unsuccessful modification of Town and Country Planning of Rayong Province and construction of 2 public roads may affect the company没s oil tank. The status of claims and legal proceedings As at 31 December 2007, the Company had significant cases with other persons or companies as litigants as follows:Case No./Date

Plaintiff/Creditors

The Black Case Mr. Prachai No. 2864-8/2549 Leopairatana, Thai ABS Co., Ltd, IRPC Oil Co., Ltd., IRPC Polyol Co., Ltd., RPC EnergyCo., Ltd., and Thai Polyurethane Industry Co., Ltd.

Defendant/Debtors

Details of cases

IRPC Public Company Limited, No. 1,Mr. Banlue Chantadisai No. 2, Ms. Chitra Thavara No. 3

Demand for terminate the resolution of the committee and claim for the compensation amount to 240 million Baht (for each case 80 million Baht) for the alleged the meeting and the resolution of the meeting were illegal.

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IRPC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Case No./Date

Plaintiff/Creditors

Red Case No. Mr. Prachai For. 8/2543 the Leopairatana, Central Bank- TPI Polene Plc. ruptcy Court

Defendant/Debtors

Details of cases

Bangkok Bank No. 1 and others creditors. The Ministry of Finance, the Plan Administrator, IRPC Plc.

Mr. Prachai Leopairattana and TPI Polene Plc. submitted the appeal to object to the sale of TPI Poleneûs shares. The Central Bankruptcy Court dismissed the petition. At present, it is in the process of the Supreme Courtûs consideration

Red Case No. For. 8/2543, the Central Bankruptcy Part 10/5

Mr. Prachai Leopairatana as the management of debtor

The Ministry of Finance, the Plan Administrator, IRPC Plc.

The management of the debtor submitted the petition appealing the Central Bankruptcy Courtûs order to temporarily hold the sale of TPIûs increase shares under the sale and purchase agreement. The Central Bankruptcy Court dismissed the petition At present, it is in the process of the Supreme Courtûs consideration

Red Case No. For. 8/2543 Part 28

Mr. Prachai Leopairatana as the management of debtor Four minor shareholders

Bangkok Bank No. 1 and others in total of 5 persons, IRPC Plc.

The management of the debtor and the four minor shareholders submitted the petition appealing the Courtûs in order to sell equity under the plan to former shareholders. . The Central Bankruptcy Court dismissed the petition. At present, the case has been in the process of the Supreme Courtûs consideration.

196 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Case No./Date

Plaintiff/Creditors

Defendant/Debtors

Details of cases

Red Case No. For. 8/2543 the Central Bankruptcy Court Part 34

Mr. Prachai Leopairatana as the management of debtor

The Ministry of Finance, The Plan Administrator, IRPC Plc.

The management of the debtor submitted the petition requesting the Central Bankruptcy Court没s order that the Plan Administrator implemented the plan with honesty and justice by determining the selling price of equity under the plan. At present, the case has been in the process of the Supreme Court没s consideration.

Black Case No. For. 782/2550 Rayong Bankruptcy Court

TPI Polene Public Company Limited

IRPC Public Company Limited

TPI Polene Plc. requested the Court to order IRPC Plc. to transfer concession rights on 26 land and temporarily prohibit the Company to transfer such concession rights to other person. At present, the case is in the process of the Court没s consideration.

IRPC Public Company Limited and other 20 persons

On 7 August 2007, the plaintiff filed a libel on the advertisement according to the Criminal law code and Publishing Act B.E. 2484, At present, the case is in the process of the Court没s consideration.

Mr. Prachai Black Case Aor. 2848/2550, Leopairatana the Criminal Court

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CHANGE WE CAN BELIEVE IN

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

Case No./Date

Plaintiff/Creditors

Defendant/Debtors

Details of cases

Black Case 3595/2550, the Civil Court

Mr. Prachai Leopairatana

IRPC Public Company Limited and other 20 persons

On 8 August 2007, the plaintiff filed a claim from dissemination of misstatement of 100,000 million Baht. At present, the case is in the process of the Court没s consideration.

Black Case Ror.Yor.258-259/ 2550, the Labour Court part 2, Rayong Province

Mr. Prachai Leopairatana and Ms. Orapin Leopairatana

IRPC Public Company Limited

Mr. Prachai Leopairatana and Ms. Orapin Leopairatana filed a claim on the salary and compensation for the alleged unfair termination of 1,344 million Baht and 694 million Baht, respectively excluding interest. At present, the case is in the process of the Court没s consideration.

Mr. Prachai Black Case 03544/2550 Leopairatana

198 ANNUAL REPORT 2007 IRPC PUBLIC COMPANY LIMITED

General Mongkol The accusation was the defendants Ampornpisit and objected to get the unauthorised benefit in case to change the other 17 persons Court没s office from TPI Tower Building to Sun Tower Building. At present, the case is in the process of investigation.

IRPC PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS For the years ended 31 December 2007 and 2006

33 New and revised accounting standards not yet adopted The Group has not adopted the following TAS that have been issued as of the balance sheet date but are not yet effective. These TAS will become effective for financial periods beginning on or after 1 January 2008. TAS 25 (revised 2007) TAS 29 (revised 2007) TAS 31 (revised 2007) TAS 33 (revised 2007) TAS 35 (revised 2007) TAS 39 (revised 2007) TAS 41 (revised 2007) TAS 43 (revised 2007) TAS 49 (revised 2007) TAS 51

Cash Flows Statements Leases Inventories Borrowing Costs Presentation of Financial Statements Accounting Policies, Changes in Accounting Estimates and Errors Interim Financial Reporting Business Combinations Construction Contracts Intangible Assets

34 Reclassification of accounts Certain accounts in the 2006 financial statements have been reclassified to conform with the 2007

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