ERAWAN: Annual Report 2010

The Erawan Group Public Company Limited

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

The Erawan Group Public Company Limited concerns about environmental protection by using recycled paper produced

by Thai company to publish the Annual Report 2010, for the purpose of reducing natural resources exploitation and the global warming crisis

Annual Report 2010 The Erawan Group Public Company Limited

Annual Report 2010 The Erawan Group Public Company Limited

Designed by Plan Grafik Co., Ltd. Tel. 0 2237 0080 # 300

VISION 2015 To become the leading hotel investor in Thailand.

MISSION To continue growing quality hotel portfolio in Thailand which optimize values to shareholders as well as other stakeholders.

Core Values “SPICE” System

“Systematic management approach to enhance efficiency as well as to lessen reliance

on individuals” People “Competent workforce with dedication to further learning and continual improvement” Information “Accurate, adequate, and up-to-date database for the purpose of management

and decision-making” Culture “Sound corporate culture to support sustainable growth” Environment “Being a good, responsible corporate citizen by taking care of all stakeholders including

community and environment” Back

Contents

IN REVIEW

004 006 007 008 010 021 022

024 026 030 031 032 040

042 044 046

050 062 063 067 069

072 073 074 134

Financial Highlights Hotel and Resorts Portfolio Chairman Review President and Chief Executive Officer Review CFO’s Report Report of the Audit Committee to Shareholder Report of the Board’s Responsibility in the Financial Statements

ABOUT ERAWAN

Corporate Profile Properties in Operation Properties under Development Our Business Strategy Our Capital Structure & Management Shareholding of the Board of Directors and Management

BUSINESS OVERVIEW

Hotel Industry Rental Property Risk Factors

GOOD CORPORATE GOVERNANCE

Corporate Governance Policy Remuneration of the Board of Directors and Management Corporate Social Responsibility Internal Control Connected Transactions

APPENDICES

Audit Report of Certified public Accountant Audit Fee Financial Statements Corporate Information

IN REVIEW

Ibis Bangkok Riverside / Ibis Samui Bophut / Ibis Phuket Patong

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Financial Highlights The Erawan Group Public Company Limited

(Unit: Thousand Baht)

Description

Revenues from Operations Total Revenues Gross Profit EBITDA Net Profit (Loss) Total Assets Total Liabilities Total Shareholders’ Equity Equity Attributable to Company’s Shareholders Paid-up Share Capital Number of Paid-Up Shares (Thousand Shares) Par Value Per Share (Baht) Earning Per Share (Baht) Dividend Per Share (Baht) Book Value Per share (Baht)

Significant Financial Ratio

Current Ratio (Times) Quick Ratio (Times) Liquidity Ratio (Cash Flow Basis) (Times) Gross Profit Ratio (%) Net Profit Margin (%) Return on Total Assets (%) Return to Equity (%) Debt to Equity Ratio (Times) Interest Bearing Debts to Equity Ratio (Times) Interest Coverage Ratio (Times)

004

2008

2009

2010

3,375,977 3,412,960 1,921,298 974,030 78,328

3,149,033 3,191,623 1,658,132 740,401 (229,411)

3,321,248 3,364,328 1,677,912 761,749 (275,017)

12,630,098 8,871,685 3,758,413 3,657,970 2,244,779 2,244,779 1 0.04 0.01 1.63

13,288,817 9,749,858 3,538,959 3,406,397 2,244,779 2,244,779 1 (0.10) - 1.52

12,950,427 9,677,477 3,272,950 3,130,975 2,244,779 2,244,779 1 (0.12) 1.39

0.41 0.23 0.33 56.91% 2.30% 0.68% 2.14% 2.36 2.06 3.12

0.52 0.27 0.38 52.66% n/a n/a n/a 2.76 2.42 2.38

0.44 0.27 0.63 50.52% n/a n/a n/a 2.96 2.63 2.70

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Unit: Baht Million

2006

2007

2008

2009

2010

Revenues from Operations 4,000

3,331

3,194

3,376

3,149

3,321

3,000 2,000 1,000 0

EBITDA 1,200

1,153 1,011

974

1,000 740

800

762

600 400 200 0

Net Profit 500

410

402

400 300 200 100

78

0

(229) (275)

005

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Hotel and Resorts Portfolio The Erawan Group Public Company Limited

Grand Hyatt Erawan Bangkok

JW Marriott Bangkok

Courtyard

by Marriott Bangkok

ibis Bangkok Nana

ibis Bangkok Sathorn

ibis Bangkok Riverside

Mercure ibis Bangkok Siam*

ibis Hua Hin*

ibis Phuket Kata ibis Phuket Patong

Bangkok Hua Hin

Pattaya

Samui

Phuket

ibis Pattaya

Holiday Inn Pattaya

Renaissance Koh Samui Resort and Spa ibis Samui Bophut

Six Senses Sanctuary Phuket * Properties under Development 006

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Chairman Review The Erawan Group Public Company Limited

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

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

We committed to strengthen our supervision in all

aspects of our operation in compliance with good corporate governance principles. It has been our key principle to treat all our stakeholders appropriately.

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

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

Mr. Prakit Pradipasen

Excellent CG Report 2009/2010 007

Chairman of The Board of Directors

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

Thailand’s tourism industry and hotel business was once again challenged in 2010 when the domestic political conflicts led to a prolonged demonstration in April and May. The incident caused business operators in the area including our three hotels and one shopping center to close temporarily. We did our best to protect our customers, our staff and our properties and fully engaged risk management action plans at all time.

We also closely collaborated with other business operators in the area including our business competitors and took the lead role to seek for protection and remedy measures from the government. This led to the government’s financial aids given to more than 2,000 business owners affected by the protest. Despite negative impacts from the incident, we managed to increase our revenues by 5 percent from the previous year mainly contributed from new hotels opened in recent years as part of our expansion. The business interruption during the political demonstration had adverse impact to both established hotels and the newly-opened hotels from achieving expected incomes.

Although the business recovered well as we

It can be said that we have been able to survive through various incidents negatively affecting the tourism industry over the past few years on the back of our well-prepared risk management plans 008

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

Through our implementation of Phase 1 expansion during 2005-2010, we were able to manage the development costs and hotel target openings as planned.

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

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than 20 hotels as well as to continue improving the existing hotels to increase our competitiveness with approximately Baht 10 billion investment range. The size of investment will depend very much on investment opportunities to increase a good return to shareholders.

In addition, we have also formulated a new strategy to enhance returns to our shareholders by recognizing our property values and by generating profits through sales of properties or through an incorporation of our properties into a property fund or by joint venture with interested party and also through developing residential projects on lands adjacent to our existing properties.

We aim to optimize returns to our shareholders for both short and long term.

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

We commit to the good corporate governance principles in doing business to align benefits of all stakeholders. As a platform, we create an awareness of corporate social 009

President and Chief Executive Officer Review

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

Overall speaking, we remain confident in the competitiveness of Thailand’s tourism in the long run.

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

Mr. Kasama Punyagupta

President and Chief Executive Officer

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CFO’s Report The Erawan Group Public Company Limited

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

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

Business strategy wise, on 21st December 2010, our Board of Directors passed a resolution to set forth business growth plan for the next 5 years (2011 - 2015) with the key highlights in three areas; (i) hotel growth strategy with the objective to increase revenue and profit from normal operations. We will continue our investment focus in Thailand with aim to be Thailand’s leading hotel developer and investor, (ii) enhancing returns strategy in addition to revenue and profit from normal operations by realizing the increasing value of our assets in the portfolio and also commencing residential projects on lands adjacent to our hotels, an (iii) strengthening our Corporate Governances to take care all stakeholders which will be the key factor for long term sustainable growth of ERAWAN. The capital plan to support the expansion will combine both equity and debt financing which can be categorized into 4 major funding sources including internally generated cash flow, proceeds from asset sale, warrants issuance to existing shareholders, and project loans.

As part of enhancing returns strategy, the Board of Directors resolved to approve the sale of our office building (Ploenchit Center) to a property fund. The transaction is expected to complete in the second quarter of 2011. The Board also resolved and agreed to propose to the Annual General Meeting of shareholders for the year 2011 to 010

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

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

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

Baht Million Hotels’ Operating Income Rental and Service Income Total Operating Income Operating Expenses EBITDA Depreciation & Amortisation Operating Profit Other Income Interest Expenses Pre-tax Profit/(Loss) Taxes Minority Interest Normalized Net Profit/(Loss) Non Recurring Items - net* Net Profit/(Loss) E.P.S.

2009

2010

Changes

2,748 401 3,149 (2,359) 790 (628) 162 43 (307) (102) (46) (32) (180) (50) (229) (0.10)

2,930 391 3,321 (2,551) 770 (684) 86 43 (361) (231) (20) (16) (267) (8) (275) (0.12)

+7% -2% +5% +8% -3% +9% -47% +1% +18% -127% -56% -51% -49% -84% -20% -20%

* Details are explained in later section of this report 011

CFO’s Report

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Income In line with our diversification strategy, the composition of our total income has changed over the years with “Midscale Hotels” and “Economy Hotels” segment contributed more income to the group as illustrated in the table below.

2008 2009 2010 Baht Million % Total Baht Million % Total Baht Million % Total

In Baht Million Luxury Central Bangkok Hotels Luxury Resorts Midscale Hotels Economy Hotels Income from Hotel Properties Rent from Office Space Rent from Retail Space Others (food court, parking, etc.)

Income from Rental Properties Other Income Gains from Sales of Investment Total Income

2,481 72.7% 187 5.5% 261 7.6% 58 1.7% 2,986 87.5% 159 4.7% 141 4.1% 89 2.6% 389 11.4% 28 0.8% 9 0.3% 3,413 100.0%

Baht Million 3,500

3,404

1,997 182 272 297 2,748 172 143 86 401 43 3,192

62.6% 5.7% 8.5% 9.3% 86.1% 5.4% 4.5% 2.7% 12.6% 1.3% 0.0% 100.0%

-6%

+5% 3,192

1,850 206 447 428 2,930 178 132 82 391 43 3,364

55.0% 6.1% 13.3% 12.7% 87.1% 5.3% 3.9% 2.4% 11.6% 1.3% 0.0% 100.0%

3,364

3,000 2,500

อื่นๆ รานคา สำนักงาน โรงแรม Economy (7) โรงแรม Midscale (2) รีสอรท Luxury (2) โรงแรม Luxury กรุงเทพฯ (2)

2,000 1,500 1,000 500 2008

Other income

Retail

Office

Economy Hotels (7)

Midscale Hotels (2)

2009 Luxury Resort (2)

2010 Luxury CBD Hotels (2)

Note: Exclude gain from sales of investment

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Operating statistics and analysis on income from all our properties for 2010 are as follows: • Luxury Hotels Our two luxury hotels in Bangkok, Grand Hyatt Erawan Bangkok Hotel (“GHEB”) and JW Marriott Hotel Bangkok (“JWM”) experienced a drop of 3 percent in average occupancy and 8 percent in average room rates (“ARR”). This resulted in a 12 percent decrease of revenue per available rooms (“RevPar”) and the combined room revenues from these two flagships. This was mainly from the impact of the political turmoil in the second quarter as mentioned earlier. Recovery was seen in the second half of the year.

Our luxury resort had shown the good improvement this year. Our Renaissance Koh Samui Resort and Spa (“RKS”) closed with 1 percent higher occupancy but 5 percent lower ARR which resulted in a 3 percent drop of RevPar and room revenues. As for our ultra-luxury Six Senses Sanctuary Phuket (“SSP”), its RevPar improved significantly this year with occupancy up by 7 percent year on year even the spending per room dropped by 7 percent.

Baht/room/night

Occupancy rate

25,000

12% 24,545

20,000

18% 22,838

Revenue Par available room (RevPar)

15,000 Average Room Rate (ARR)

10,000 5,000 0

63%

60%

55%

56%

4,958 3,110

4,572 2,754

5,163 2,835

4,889 2,735

2,832

2009

2010

2009

2010

2009

Luxury BKK

Renaissance Koh Samui

4,128

2010

Six Senses

Note: Six Senses ARR is based on Spending/Room

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Income from food & beverage (“F&B”) which mainly came from the two luxury hotels in Bangkok was in line with last year despite the business interruption in Bangkok during April and May. The F&B operations at GHEB and JWM have been strongly supported by local consumptions hence less dependent on hotel occupancy. The strong economic growth of Thailand not only helps expanding our local customer base but also enhancing their spending power.

In total, income from our four luxury hotels dropped 6 percent from previous year to Baht 2,055 million in 2010 which mainly caused by a 9 percent decrease of combined room revenues.

• Midscale Hotels We now have 2 hotels under the midscale segment, Courtyard by Marriott Bangkok (“CYB”) opened in November 2007 and Holiday Inn Pattaya (“HIP”) opened in Octerber 2009. CYB gradually recovered after a 2 month of operational interruption during the political demonstration in second quarter of 2010 and recorded lower performances as compared to the same period last year. HIP which was in its first full year operation showed good ramp up progress and achieved strong growth from both occupancy and ARR in 2010. Their statistics in 2010 and 2009 are as follows:

Baht/room/night

3,500 3,000 2,500 2,000

64%

59%

2,046

2,111

1,310

1,247

2009

2010

1,500 1,000 500

Occupancy rate Average Room Rate (ARR) Revenue Par available room (RevPar)

0

Our midscale hotels recorded total income of Baht 447 million in 2009, a 64 percent increase from last year, this was mainly contributed from HIP.

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• Economy Hotels Our hotel properties under this segment are all under “ibis” brand. At the end of 2010, we had total of 7 economy hotels with total of 1,704 rooms. Our first 4 ibis hotels opened in 2008 including ibis Phuket Patong (“IPK”), ibis Pattaya (“IPT”) ibis Bangkok Sathorn (“IST”) and ibis Samui Bophut (“ISM”). We opened 2 new ibis hotels in 2009 namely ibis Bangkok Nana (“INN”) and ibis Phuket Kata (“IKT”) and our 7th ibis, ibis Bangkok Riverside (“IRS”) in November 2010. This segment has proven to be the most resilient segment under the challenging market conditions. The segment also fit well with requirements of customers from growing mass markets such as China, India and Russia. This segment grew occupancy by 3 percent resulting in a 12 percent growth in Revpar from the same period last year. The diagram below provides their 2010 and 2009 statistics.

Baht/room/night

1,250 1,000 750

56% 995

556

59%

Occupancy rate

1,061

Average Room Rate (ARR)

624

500

Revenue Par available room (RevPar)

250 0 2009

2010

Our seven ibis hotels combined to generate Baht 428 million of revenues in 2010, a 44 percent increase year on year. Revenue from 4 hotels located outside Bangkok continued growing while the additional income from IRS which started operation in the fourth quarter this year helped the three ibis hotels in Bangkok to generate 13 percent growth regardless the impact from the demonstration in the second quarter. Majority of their revenues came from room sales.

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

Baht Million 3,500 3,000 2,500

176 1,092

160 1,170

2,000 1,500

1,480

1,600

2009

2010

1,000 500 0 From other operations

From food & beverages operations

From room sales

We recorded total revenues from hotel operations of Baht 2,930 million for 2010, an increase of 7 percent from 2009. Growth came mainly from midscale and economy hotels which major source of income was from room rather than food and beverage. Room revenues which generated approximately 55 percent to total revenue increased by 8 percent from last year. Food and beverage revenues which contributed 40 percent to total revenue grew 7 percent from 2009.

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

Baht Million 2,400 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2009 2010 Bangkok

2009 2010 Pattaya

2009 2010 Phuket

2009 2010 Samui

Income from hotel located in Bangkok declined in 2010 from the impact of political situation in the second quarter as aforementioned. Other destinations outside Bangkok still generated strong growth especially Pattaya which our revenues from this destination grew by 211 percent which helped alleviate the decline from Bangkok hotels.

• Rental Properties Our 2 rental properties, Ploenchit Center (“PC”) and Erawan Bangkok (“EB”), experienced slightly lower income this year. We achieved the growth in rental yield for both properties but the occupancy of EB was lower as some leases expired and pending for new tenants. The statistics are in the table below: PC Occupancy Average Receipt (Baht/sq.m./month)

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2009

2010

93.5% 496

95.9% 503

EB % ch +2.3% +1.4%

2009

2010

92.7% 1,223

85.9% 1,331

% ch -6.8% +8.9%

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The combined income from rental business (including those from shops in GHEB’s arcade) in 2010 was Baht 391 million representing a decrease of 2 percent from last year. EB’s income dropped 3 percent to Baht 85 million as some leases expired and the impact from the demonstration in the second quarter. The political unrest during April and May caused this shopping complex to temporarily close down during such period. To support our tenants which income very much dependent upon their services to public customers, we offered a waiver on monthly rental during such period. This waiver was partially subsidized by the government measures to help alleviate the impact to rental operator. PC’s income grew 3 percent to Baht 297 million on the back of higher occupancy from new tenants and higher rental yield from new tenants and contract renewal. Breakdown of income from rental properties are in the diagram below: Baht Million 500 400

86

300

143

81 132

200 172

178

2009

2010

100 0 Others

Retail

Office

Profit from Operations Our Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”) excluding other income and nonrecurring items recorded at 770 million in 2010, 3 percent lower than last year. We also recorded a lower EBITDA margin of 23 percent in 2010 amd 25 percent in 2009. This was mainly due to revenue contraction of the hotels and rental property located in Bangkok in the second quarter although hotel located outside Bangkok showed EBITDA and EBITDA margin improvement in 2010.

With the addition of 1 new hotel in 2010 and the 3 new hotels opened in 2009 were in their full year of operations in 2010, our Depreciation and Amortisation (“D&A”) increased by Baht 56 million or 9 percent from last year to record at Baht 684 million for 2010. With the said EBITDA above, our Earning before Interest and Tax (“EBIT”) stood at Baht 86 million for 2010 or a drop of 47 percent from a year ago.

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Finance Costs Total interest expenses increased 18 percent to Baht 361 million in 2010 which was mainly from two main reasons; the recognition of interest charges on our new hotel opened this year and the effects of full year operations from those opened in 2009 and the increasing interest rates over 2010. Our banks’ minimum lending rates were increased approximately 0.275 percent in 2010. For the purpose of financial risk mitigation in light of interest uptrend, we converted approximately 30 percent of long term loans outstanding from floating rates into fixed rates for 4 year terms. This transaction incurred additional finance cost of Baht 7 million for 2010. Our average cost of funding (on combined short term and long term loans) increased from 4.1 percent last year to 4.3 percent for 2010.

Non recurring items Non-recurring items for 2009 and 2010 were pre-opening expenses from new hotels prior to their openings. The net amount for 2009 was Baht 50 million (mainly from ibis Bangkok Nana, Holiday Inn Pattaya and ibis Phuket Kata).

These costs are booked under “Selling and administrative expenses” in our Profil & Loss For 2010 we recorded Baht 8 million for the pre-opening expenses of Ibis Bangkok Riverside.

(B) Financial Status Capital Expenditure We recorded total assets of Baht 12,950 million as of 31st December 2010, slightly lower from Baht 13,289 million at the end of 2009. This is a result of more utilization of VAT receivables resulting in lower current assets. Baht 653 million of capital expenditure occurred during the year, declined from Baht 1,373 million in 2009 mainly due to the lower capital expenditure of new hotel development. We developed 3 new hotel projects in 2009 while in 2010 we had only 1 hotel, ibis Bangkok Riverside, which opened in November 2010. For future project, we entered the land lease agreement for Mercure and ibis Siam project which will start the construction in 2011. Capital expenditure for normal maintenance for hotel and rental properties increased from the same period last year. We spend higher capital expenditure for the office building this year to enhance its competitiveness. Sources of funding to support this capital expenditure were our cash flow from operations and project loans.

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

20% Others Hotels 9% Rental properties & Others

6% Ibis Phuket Kata

40% Ibis Bangkok Riverside

25% Mercure & Ibis Bangkok Siam

Leverage Total liabilities of the Company decreased slightly from Baht 9,750 million as of 31st December 2009 to Baht 9,677 million as of 31st December 2010 due to lower current liabilities. Total interest-bearing debts increased from Baht 8,570 million at the end of last year to Baht 8,599 million as of 31st December 2010 from additional loan drawdown for the ibis Bangkok Riverside project and working capital requirements. With the net loss incurred this year, total equities decreased from Baht 3,539 million at the end of 2009 to Baht 3,273 million. Our liquidity was still manageable although we faced with the challenge market conditions during the year. Our cash flow from operations for this year remained higher than the same period last year while cash outflow for capital expenditure decreased.

Cash inflow from financing activities was lower since we repaid loans from financial institutions this year while we did not have any obligations in 2009 and lower loan drawdown for the new project. Combined with cash at the beginning of the year, we recorded ending cash as at 31st December 2010 of Baht 220 million vs. Baht 277 million at the end of 31st December 2009.

Mrs. Kamonwan Wipulakorn

Executive Vice President and Chief Financial Officer

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

To Shareholders of The Erawan Group Public Company Limited, The Audit Committee, consisting of three independent directors with qualifications as announced by the Stock Exchange of Thailand and whose terms are three years each, performed its duties within its scopes of responsibility and as entrusted by the Board of Directors. In 2010, the Audit Committee met four times to consider the following: 1. To review the quarterly financial statements and the 2010 financial statements where it exchanged views with the auditor, Executive Vice President and Chief Financial Officer and the internal auditor to determine that the financial statements of the Company and its subsidiaries were having accurate and complete information deserved to be trusted and were in line with the Generally-Accepted Accounting Principles, the SET’s announcements and the SEC’s notifications.

2. To evaluate an adequacy of the internal control system to see if the Company had an appropriate internal control system that well responded to its business, as well as a way and mean to take care of its properties and to prevent the Company from suffering damages. The evaluation was conducted through the internal auditor’s report, the auditor’s report and through inquiries with the management. So far, no material defect has been found. As a result, the Company’s internal control system is perceived to be efficient and adequate.

3. To review connected transactions or conflict of interest and to disclose information of these transactions to see if they were normal, reasonable and was for the best benefits to the Company while in compliance with the authorities’ rules and regulations.

4. To give advice and approve the annual auditing plan; to acknowledge and submit an internal auditing result to the Board of Directors; to review an annual budget and to supervise and evaluate the Internal Audit Department’s performance.

The Audit Committee, having reviewed the 2011 auditor and the soundness of the auditing fee, eventually proposed to the Board of Directors to seek the Annual General Meeting’s approval to appoint Mr.Charoen Phosamritlert, CPA No. 4068 and/or Miss Vannaporn Jongperadechanon, CPA No. 4098 and/or Mr. Vichien Thamtrakul, CPA No. 3183 of KPMG Phoomchai Audit Ltd. as the Company’s auditor.

Mr. Sansern Wongcha-um

Chairman of the Audit Committee 21 February 2011

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

The Board of Directors was responsible for the financial statements of The Erawan Group Public Company Limited and its subsidiaries. The financial statement was done according to the Generally-Accepted Accounting Principles in Thailand where an appropriate accounting policy was chosen and implemented. In addition, discretion was exercised, the best estimates were selected and adequate information was disclosed in Notes to Financial Statement.

The Board of Directors appointed the Audit Committee, which consisting of 3 independent directors, to responsible for auditing the company’s financial statements and to evaluate the internal control system for efficiency. The Audit Committee’s opinion in this matter was in Report of the Audit Committee to Shareholder.

In this regard, the Board of Directors is of the opinion that the Company’s internal control system is proven satisfactory and contributes to the Company’s credibility as of 31st December 2010.

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Mr. Prakit Pradipasen

Mr. Kasama Punyagupta

Chairman of The Board of Directors

President and Chief Executive Officer

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ABOUT ERAWAN

Renaissance Koh Samui Resort and Spa

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Corporate Profile The Erawan Group Public Company Limited

Established on 29 December 1982 and continue to develop various real-estate (Hotels and Rental Properties) over the past 29 years.

1991

Grand Hyatt Erawan Bangkok Hotel

1985

Amarin Plaza

1988

Company registered on Stock Exchange of Thailand

1991

Grand Hyatt Erawan Bangkok Hotel

1994

Converted in to a Public Company

1996

Ploenchit Center

1997

JW Marriott Hotel Bangkok

2004

Erawan Bangkok

2005

Renaissance Koh Samui Resort and Spa

2007

Amarin Plaza Sold Courtyard by Marriott Bangkok Hotel

2008

Six Senses Sanctuary Phuket 4 Ibis Hotels: Ibis Phuket Patong, Ibis Pattaya, Ibis Bangkok Sathorn and Ibis Samui Bophut

2009

Holiday Inn Pattaya 2 Ibis Hotels: Ibis Bangkok Nana and Ibis Phuket Kata

2010

Ibis Bangkok Riverside

1996 Ploenchit Center

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1997

JW Marriott Hotel Bangkok

2008 - 2010 7 Ibis Hotels

2008

Six Senses Sanctuary Phuket

2009 Holiday Inn Pattaya

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Corporate Profile

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Properties in Operation The Erawan Group Public Company Limited

Our main business objective is to invest in and develop hotel properties that are strategically located to cater to demand from diverse consumer segments.

We currently have 13 hotels in operations which represent our core assets. We also own and manage 2 rental properties. The details of these properties are as follows:

Hotels and Resorts

JW Marriott Hotel Bangkok

• Rating: Luxury Hotel • Number of rooms: 441 rooms • Location: Sukhumvit Soi 2, Bangkok • Remaining on the current lease: 34 years www.marriott.com/bkkdt

Grand Hyatt Erawan Bangkok

• Rating: Luxury Hotel • Number of rooms: 380 rooms • Location: Rajdamri Road, Bangkok • Remaining on the current lease: 31 years www.bangkok.grand.hyatt.com Renaissance Koh Samui Resort and Spa

• Rating: Luxury Hotel • Number of rooms: 45 Deluxe Rooms and 33 Pool Villas • Location: Lamai Beach, Koh Samui, Surat Thani www.marriott.com/usmbr 026

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Courtyard by Marriott Bangkok

• Rating: Midscale Hotel • Number of rooms: 316 rooms • Location: Soi Mahadlekluang, Rajdamri Road, Bangkok • Remaining on the current lease: 27 years www.courtyard.com/bkkcy

Holiday Inn Pattaya

• Rating: Midscale Hotel • Number of rooms: 367 rooms • Location: Pattaya Sai 1 Road, Nongprue, Banglamung, Chon Buri www.holidayinn.com/pattaya

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

• Rating: Luxury hotel and holistic spa • Number of rooms: 61 Pool Villas • Location: Koh Naka Yai, Phuket www.sixsenses.com

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Properties in Operation

Ibis Phuket Patong

• Rating: Economy Hotel • Number of rooms: 258 rooms • Location: Patong Beach, Phuket www.ibishotel.com

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Ibis Pattaya

• Rating: Economy Hotel • Number of rooms: 259 rooms • Location: Pattaya Sai 2 Road, Nongprue, Bang lamung, Chon Buri www.ibishotel.com

Ibis Samui Bophut

• Rating: Economy Hotel • Number of rooms: 250 rooms • Location: Bophut Beach, Koh Samui, Surat Thani www.ibishotel.com

Ibis Bangkok Sathorn

• Rating: Economy Hotel • Number of rooms: 213 rooms • Location: Soi Ngam Duphli, Rama IV Road, Bangkok • Remaining on the current lease: 28 years www.ibishotel.com

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Properties in Operation

Ibis Bangkok Nana

• Rating: Economy Hotel • Number of rooms: 200 rooms • Location: Sukhumvit Soi 4, Bangkok • Remaining on the current lease: 28 years www.ibishotel.com

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Rental Properties

Ibis Phuket Kata

• Rating: Economy Hotel • Number of rooms: 258 rooms • Location: Kata Beach, Phuket www.ibishotel.com Ploenchit Center

• Office Building: 42,590 sq.m.

• Location: Sukhumvit Road Soi 2, Bangkok • Remaining on the current lease: 14 years

Ibis Bangkok Riverside

• Rating: Economy Hotel • Number of rooms: 266 rooms • Location: Charoennakorn Road Soi 17, Chaophraya River, Bangkok • Remaining on the current lease: 24 years www.ibishotel.com

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Properties in Operation

Erawan Bangkok

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

• Location: Ploenchit Road/Rajdamri Road, Bangkok • Remaining on the current lease: 31 years www.erawanbangkok.com

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Properties Under Development The Erawan Group Public Company Limited

Ibis Hua Hin

• Rating: Economy Hotel • Number of rooms: 200 rooms • Location: Khao Takiap, Hua Hin, Prachuap Khiri Khan • Target customer: Leisure

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Mercure Ibis Bangkok Siam

• Rating: Midscale and Economy Hotel • Number of rooms: 380 rooms • Location: Opposite MBK, next to BTS National Stadium Station, Bangkok • Target customer: Business and Leisure • Remaining on the current lease: 32 years

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Our Business Strategy The Erawan Group Public Company Limited

The Erawan operate on three core business strategies as follows; 1. Maximizing value through effective management of current assets.

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

3. Ensuring stability and sustainable growth of our organization through development of systems, core competencies, database, and core corporate culture.

Hotels

74%

100%

100%

100%

100%

100%

100%

Offices Building and Retail Shops

100%

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100%

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Our Capital Structure & Management The Erawan Group Public Company Limited

Capital Structure

As at 31st December 2010, the company‘s paid up capital is Baht 2,244,779,001 divided into 2,244,779,001 ordinary shares at par value 1 Baht per share. Top ten shareholders holding the highest number of shares as of 31st December 2010 are as follows: Shareholder’s name 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Mr. Sukakarn Wattanavekin City Holding Co., Ltd. Mitr Phol Sugar Co., Ltd. Mrs. Wansamorn Wannamethee MBK Company Limited Mr. Isara Vongkusolkit SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) Miss Jintana Kanjanakumnerd PAN-ASIA SUGAR FUND LIMITED Mr. Supol Wattanavekin Total top ten shareholders holding

Number of shares

% of total shares

379,185,716 228,481,318 131,353,314 120,683,649 108,418,238 101,257,910 96,715,700 73,588,254 73,000,000 58,698,916 1,371,383,015

16.89% 10.18% 5.85% 5.38% 4.83% 4.51% 4.31% 3.28% 3.25% 2.61% 61.09%

Investor will be able to see the updated shareholders list from the Company’s website at www.TheErawan.com before the Annual General Shareholders’ Meeting. Detail Groups of Major Shareholders are as follows: Major Shareholders Vongkusolkit Group Wattanavekin Group Total major shareholders Foreign Institution Investor MBK Company Limited Group Institution Investor Company’s executives Others Total

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Number of shares

% of total shares

878,910,119 698,970,657 1,577,880,776 254,177,774 118,894,138 90,251,982 20,922,417 182,657,914 2,244,779,001

39.15% 31.14% 70.29% 11.32% 5.30% 4.02% 0.93% 8.14% 100.00%

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Directors that represent the major shareholders are as follows:

1.

2.

3.

4.

5.

Director’s Names

Groups of Major Shareholders

Mr. Vitoon Vongkusolkit Mr. Chanin Vongkusolkit Mr. Krisda Monthienvichienchai Mr. Supol Wattanavekin Mrs. Panida Thepkanjana

Vongkusolkit Group Vongkusolkit Group Vongkusolkit Group Wattanavekin Group Wattanavekin Group

Management Structure

The Board of Directors consists of the twelve (12) directors as belowing, the Board has appointed four different committees in a move to clearly define duties and responsibilities namely: The Audit Committee (AC), The Financial and Risk Management Committee (FRC), The Nominating and Corporate Governance Committee (NCG) and The Management Development and Compensation Committee (MDC).

Name 1. Mr. Prakit Pradipasen 2. Mr. Sansern Wongcha-um

3. Assoc. Prof. Manop Bongsadadt

4. Mr. Dej Bulsuk

5. Mr. Banyong Pongpanich

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Our Capital Structure & Management

Title Chairman of the Board and Independent Director Independent Director and Chairman of the Audit Committee Independent Director and Member of the Audit Committee Independent Director and Member of the Audit Committee Independent Director

Education • Master of Business Administration (MBA) Wayne State University, Michigan, USA • Master Degree of Business Economics University of Bridgeport, Connecticut, USA • Master of Architecture (M.Arch), Kansas State University, USA • Bachelor of Business Administration Thammasat University • Master of Business Administration (MBA) Sasin Graduate Institute of Business Administration of Chulalongkorn University

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Name 6. Mr. Ekasith Jotikasthira

Title Independent Director

7. Mr. Vitoon Vongkusolkit

Director

8. Mr. Supol Wattanavekin

Director

9. Mr. Chanin Vongkusolkit

Director

10. Mrs. Panida Thepkanjana

Director

11. Mr. Krisda Monthienvichienchai

Director

12. Mr. Kasama Punyagupta

President and Chief Executive Officer

Education • Master of Business Administration (MBA) Sasin Graduate Institute of Business Administration of Chulalongkorn University • Bachelor of Science Chulalongkorn University • Master of Business Administration (Executive) (EMBA) Sasin Graduate Institute of Business Administration of Chulalongkorn University • Master of Business Administration (Finance) St. Louis University, Missouri, USA • Master of Business Administration (MBA) Sasin Graduate Institute of Business Administration of Chulalongkorn University • Master of Laws, Chulalongkorn University • Barrister-at-Law. The Institute of Thai Bar Association • Master of Business Administration (MBA) Chulalongkorn University • Master of Business Administration (International Business) University of Bridgeport, Connecticut, USA

Company Secretary: Miss Kanokwan Thongsiwarugs

Authority to Sign on behalf of the Company Two of the following four directors namely, Mr. Vitoon Vongkusolkit or Mrs. Panida Thepkanjana or Mr. Kasama Punyagupta or Mr. Krisda Monthienvichienchai, shall jointly sign a document together.

Dividend Policy Approximately 35 percent of the net profits of the consolidated financial statements after deduction of all kind of reserves as specified by law and the Company (with additional conditions).

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Our Capital Structure & Management

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SUCCESS WITH INTEGRITY

Roles and Responsibilities of the Board of Directors and the Committee Board of Director’s Roles and Responsibilities are: 1. To manage the Company according to the laws, the Objects in Detail, the Articles of Association and resolutions of the Shareholders’ Meeting with integrity and prudence for the Company’s interests.

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

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

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

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

6. To supervise and develop risk assessment.

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

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

9. To take care of interests of both major and minor shareholders so that they can equally exercise and maintain their interests while accessing accurate and complete information with transparence and accountability.

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

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

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

The resigning directors may be re-elected.

The Audit Committee consists of three members as follows: 1. Mr. Sansern Wongcha-um Chairman 2. Assoc. Prof. Manop Bongsadadt Member of the Committee 3. Mr. Dej Bulsuk Member of the Committee Audit Committee’s Roles and Responsibilities are: 1. To review an annual financial statement already audited by auditors and to ensure that it meets the generally-accepted accounting principles; to consider and screen financial information together with the Financial and Risk Management Committee and the auditors before releasing it to the third party.

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

3. To review material problems and obstacles the auditor may come across while performing his duty and to settle differences between the auditor and the management.

4. To review the appropriateness and effectiveness of the internal control system and internal audit systems are in place according to international standards.

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Our Capital Structure & Management

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

6. To review an annual internal audit plan proposed by the Internal Audit Office. To provide opinion on the consideration of performance, appointment, removal, and remuneration of the Company’s internal auditor.

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

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

9. To determine fraud prevention measures and review results of a corruption inspection report.

10. To review the accuracy and effectiveness of information technology relating to the internal control system; to offer advice for roles and regular updates.

11. To consider the Company’s information disclosure in case of connected transactions or transactions which may involve conflict of interest to ensure that all are correct, sound and carried out in a normal course of business.

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

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

Term of Audit Directors: 3 years each term.

The Financial and Risk Management Committee consists of six members as follows: 1. Mr. Vitoon Vongkusolkit Chairman 2. Mr. Banyong Pongpanich Member of the Committee 3. Mr. Supol Wattanavekin Member of the Committee 4. Mr. Chanin Vongkusolkit Member of the Committee 5. Mrs. Panida Thepkanjana Member of the Committee 6. Mr. Kasama Punyagupta Member of the Committee Financial and Risk Management Committee’s Roles and Responsibilities are: 1. To supervise financial operations of companies within the group.

2. To supervise, screen, approve and monitor approved investment projects.

3. To assess and formulate a systematic, clear-cut and efficient risk management plan.

4. To supervise and monitor risk assessment tasks as well as to adjust and develop the risk management on a regular basis.

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

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Our Capital Structure & Management

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The Nominating and Corporate Governance Committee consists of three members as follows: 1. Mr. Prakit Pradipasen Chairman 2. Mrs. Panida Thepkanjana Member of the Committee 3. Mr. Chanin Vongkusolkit Member of the Committee Nominating and Corporate Governance Committee’s roles and responsibilities are: 1. To determine the Board of Directors’ composition and qualification of its members as well as members of board committees.

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

3. To determine the Remuneration of Directors.

4. To propose corporate governance policies and guidelines to the Board of Directors and to review and update such policies and guidelines on ongoing basis.

5. To evaluate the Board of Directors and each committee’s performance and to ensure that the Board of Directors and management’s operations are being conducted within corporate governance policies and guidelines.

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

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

The Management Development and Compensation Committee consists of three members as follows: 1. Mr. Supol Wattanavekin Chairman 2. Mr. Vitoon Vongkusolkit Member of the Committee 3. Mr. Banyong Pongpanich Member of the Committee Management Development and Compensation Committee’s roles and responsibilities are: 1. To assess and evaluate performances; to determine annual remunerations and a compensation structure of President and Chief Executive Officer while offering him an advice regarding remunerations of senior executives.

2. To consider a plan to develop skills and competency of President and Chief Executive Officer Nominees (in case of change).

3. To determine significant HR policies i.e. and structure of staff’s remunerations for Annual Remunerations and Budgeting, Rewards (bonus), etc.

4. To consider an allocation of the Employees Share Options Program (ESOP) in case such allocation exceeds 5 percent of the program’s shares.

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

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Our Capital Structure & Management

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Independent Directors, who account for 50 percent of the Company’s Board of Directors, consist of: 1. Mr. Prakit Pradipasen Independent Director 2. Mr. Sansern Wongcha-um Independent Director 3. Assoc. Prof. Manop Bongsadadt Independent Director 4. Mr. Dej Bulsuk Independent Director 5. Mr. Banyoung Pongpanich Independent Director 6. Mr. Ekasith Jotikasthira Independent Director The Company’s Executives consist of: 1. Mr. Kasama Punyagupta 2. Mrs. Kamonwan Wipulakorn 3. Mr. Petch Krainukul 4. Mrs. Varisara Gerjarusak 5. Mr. Apichan Mapaisansin 6. Mr. Suchai Wuthworachairung 7. Miss Pakinee Pramtade 8. Mr. Surapon Jaimsuwan 9. Mr. Viboon Chaisutyakorn

President and Chief Executive Officer Executive Vice President and Chief of Financial Officer Executive Vice President Executive Vice President Assistant Executive Vice President Assistant Executive Vice President Senior Vice President Vice President Vice President

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

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

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

4. To manage human resources starting from recruiting to setting salaries, wages, compensations and benefits; to set evaluation methods and to allocate special welfare and benefits; to appoint, remove and transfer staff and to issue rules, regulations and announcements as deemed appropriate.

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

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

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

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

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Duties and Responsibilities of Company Secretary The Company Secretary shall have duties and responsibilities that are no fewer than what the Securities and Exchange Act (No. 4) B.E. 2551 and/or other related laws, rules and regulations have stipulated. This includes: 1. To support the Board to perform its fiduciary duties with integrity and care as a normal person may do in the same situation; to offer advice to directors, the Management and staff to ensure compliances to the laws, rules and regulations of the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET) and other relevant legislations.

2. To supervise the internal auditing, the internal control system, compliance to the principle of good corporate governance and to be a center in compiling risk management plans.

3. To coordinate matters relating to directors such as changes of qualifications, changes of roles and duties, terms of offices of committees, resignation on rotation, resignation prior to a due term and appointment of new directors.

4. To specify and inform a place where important documents of the firm are kept and to disclose related information based on duties and responsibilities to the SEC. 5. To monitor the Management’s performances to ensure good practices.

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

7. To review invitation letters to the Annual General Meeting of Shareholders and the Extraordinary General Meeting of Shareholders, adequacy of documents, supporting documents and information disclosure to the meeting and minutes of the meeting.

8. To disclose related information under the Secretary’s duties and responsibilities to the SET. The Company’s Articles of Association of the Nomination of Directors Clause18 The Shareholders’ Meeting shall elect directors according to the following rules and procedures: 18.1 Chairman of the Meeting shall propose names and work experiences of nominees submitted by the Board of Directors for approval.

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

18.3 An election of director may be done by voting either one or several persons as director as the Shareholders’ Meeting deems appropriate. However, each shareholder must exercise all of his voting rights existed under Clause 18.2 for each director. Dividing votes to a particular nominee is not permitted.

18.4 Those receiving the highest votes in a sequent order shall be elected as directors for an available number of directors. Should those elected in a subsequent order enjoy equal votes which however exceed the number of the existing directors, Chairman of the Meeting shall have a casting vote.

Clause 48 A resolution of the Shareholders’ Meeting shall consist of the following votes: 48.1 In a normal case, majority votes of shareholders who attend the meeting (either by themselves or by proxy) and exercise their votes shall be considered a resolution.

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

Name 1. Mr. Prakit Pradipasen 2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

Title

Chairman of the Board of Directors Mr. Sansern Wongcha-um Director Assoc. Prof. Manop Bongsadadt Director Mr. Dej Bulsuk Director Mr. Banyong Pongpanich Director Mr. Ekasith Jotikasthira Director Mr. Vitoon Vongkusolkit Director Mr. Supol Wattanavekin Director Mr. Chanin Vongkusolkit Director Mrs. Panida Thepkanjana Director Mr. Krisda Monthienvichienchai Director Mr. Kasama Punyagupta President and Chief Executive Officer Mrs. Kamonwan Wipulakorn Executive Vice President Mr. Petch Krainukul Executive Vice President Mrs. Varisara Gerjarusak Executive Vice President Mr. Apichan Mapaisansin Assistant Executive Vice President Mr. Suchai Wuthworachairung Assistant Executive Vice President Miss Pakinee Pramtade Senior Vice President Mr. Surapon Jaimsuwan Vice President Mr. Viboon Chaisutyakorn Vice President

Ordinary Share (Units) 31 Dec.2010 31 Dec. 2009 + (-) 150,058

150,058

-

319,729 660,000 3,001,500 11,457,870 58,698,916 5,493,550 3,797,416 11,510,211

319,729 660,000 3,001,500 11,457,870 58,698,916 5,493,550 3,693,416 11,510,211

104,000 -

839,082 1,000,000

839,082 1,000,000

-

1,825,716

1,825,716

-

1,088,697

1,088,697

-

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

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BUSINESS OVERVIEW

Holiday Inn Pattaya

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Hotel Industry The Erawan Group Public Company Limited

Trend of the Tourism Industry

In 2010, it was the year that greatly showed the strength of Thailand tourism industry. Throughout the year, 15.7 million international tourist arrivals visited Thailand or an increase by 11 percent from the year before. Likewise, the domestic tourism sector expects to have 91 million trips or a rise of 5 percent from last year although the tourism industry did affect from various incidents last year ranging from the political unrest, natural disasters, an appreciation of Thai Baht and the Economic crisis in Europe.

The first quarter of 2010 witnessed the highest increase of foreign visitors coming to Thailand as the number rose 27 percent compared to the year before due largely to recovery of global economy. This was especially true with Chinese, Russian and Indian tourists, who registered a very high increasing rate compared to same period last year.

However, the country suffered the political unrest in the second quarter, which halted the flow of foreign tourists into Thailand. After normally resumed, foreign visitors gained confidence once again to come back to the country. The number of tourists gradually improved and grew by the same period last year. Although the slower recovery in Bangkok due to continued political protests, there still was a very strong growth contributed by major tourist destinations like Phuket, Pattaya, and Chiang Mai which were supported by both Thai and foreign traveller. This applied especially to foreign tourists who chartered flights directly to these destinations while various airlines also increased their direct flights.

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

Politics and H1N1

Politics

17.0 Coup

International tourist arrivals statistics

2007

2008

2009

2010

16.0 15.0 13.0 12.0

Tsunami

14.0

11.0 10.0 2004

2005

2006

2011F

Number of tourist arrival

Remark: Tourism Authority of Thailand, Ministry of Tourism and Sports 042

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2007

2008

100.0

80.0

Tsunami

90.0

Politics

Airport Closure

Times

Coup

Domestic tourists statistics

Politics and H1N1

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

by Thai people to increase 7 percent, or 97 million trips.

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

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

2009

2010

70.0 60.0 50.0 2004

2005

2006

2011F

Number of domestic tourist

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

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Rental Property The Erawan Group Public Company Limited

Industrial Outlook and Competition Conditions

During the first half of 2010, the local political unrest was a major negative factor affecting both the office rental business and the tourism-related business. Majority of the tenants preferred to renew the rental agreements together with negotiating for rent reduction rather than relocating to new premises.

In the third and fourth quarter of 2010, the domestic political situation still unchanged which continued to affect the office rental business. Demands hardly improved so leasing in both Grade A and Grade B office buildings remained idle. Together with the doldrums in the world’s economy and several countries suffered from natural disasters which required time for recovery, this indeed slowed down foreign investments in Thailand.

Office Building

Overall, on the latter period of 2010, the available spaces for office buildings had a total of 7.98 million square meters for rent, a slightly increasing of 7.86 million square meters from the same period the year before.

Approximately 2.81 million square meters were in Bangkok’s Central Business District (CBD) where 2.50 million square meters or 88.85 percent had already been rented. The remaining 0.31 million square meters or 11.15 percent were unoccupied. (Source: CB Richard Ellis (Thailand) Co., Ltd.) An average rental rate of Grade A office was around Baht 680 per square meter while Grade B office space (the same category as our office building) in Bangkok’s CBD area tumbled down 5.5 percent from Baht 578 per square meters to Baht 548 per square meters. The important factor was due to static demands as tenants either downsized the spaces or negotiated the rental rate in order to minimize cost which made landlords to opt to lower the rate down according to the unfavorable economic conditions.

In the last quarter, the vacant spaces remained as much as 1.10 million square meters. And in 2011, the supply is expected to increase around 114,480 square meters, all of which will be in the CBD area. It is hoped that in 2011, as the world’s economic condition is improving, business will start to expand and investment activities will once again pick up. This will positively effected Thailand’s overall economy especially the rental of office space in Bangkok’s CBD area. Yet, local political situation remains closely watched by investors for choosing Thailand as the potential investment destination.

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Shopping Centers

At the end of 2010, supply of shopping center space was at 5.55 million square meters increasing 0.17 million square meters more than the previous year, which accounted for approximately 3.0 percent . Of all this increasing space, most of them were around Bangkok and developed to Community Malls offering goods and services to customers around the area.

Rental rate on ground floor of Grade A shopping centers started from Baht 1,200 to Baht 3,200 per square meter while rents on the other floors were between Baht 700 to Baht 2,600 per square meter. As for Grade B, average rents were around Baht 1,000 to Baht 2,500 per square meter for ground floor and Baht 400 to Baht 1,200 per square meter for the rest.

In addition, the local political situation and the world’s economy remain to be the two major factors that caused more caution to consumers and entrepreneurs in their spending and their investing activities. It is expecting that in 2011 as the economy is getting better, this will be a boost to the retail market and operators’confidences to invest or expand their business, which in the end should drive more demands for spaces in this market.

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Risk Factors The Erawan Group Public Company Limited

Our company has the Financial and Risk Management Committee (“FRC”) to supervise and evaluate the risk management strategies to ensure efficiency and effectiveness of the program. Each head of department are responsible to analyze and formulate with the strategies to manage or mitigate the risks. Risks associated with our operations are:

1. Risk Management: Dependence of Third-party Hotel Management We have no policy to manage hotels by ourselves. International hoteliers are hired to utilize their reputations, experiences and expertise in managing and administering the hotels we have invested and developed. These hotel operators are Hyatt International, Marriott International, Accor Hospitality, Six Senses Resorts and Spas, and IHG InterContinental Hotels Group. The management agreements are long-term thereby exposed to the risk that the brand reputation and the operator’s capability to compete may decline. Performances of our hotels may not reach the level desired. Nonetheless, the operators we have selected are among the world’s largest with proven track record, tested systems, reputations, and strong financial positions. We then believe that the chance of such deterioration of performances is minimal. The diversifications in terms of hotel operators also help mitigate this risk. In addition, if the situation prolongs, each of the agreements has exit clause in case the hotel operator needs to be changed.

2. Risk from Increasing Supplies The unbalanced of supply and demand will cause a high competition in the market which may affect incomes and operating profits. However, our hotel business has been managed by well-recognized and highlyexperienced hotel management groups which can provide competitive advantage such as wide range of customer base to ensure certain level of demand, proactive crisis management under unpredictable situation, etc. In addition, we also have a strategy to diversify our investment portfolio in luxury, mid-scale and economy hotel in various tourist destinations. Regarding the office building and shopping center business, although the competition is intense, demands for space remain quite strong especially for that in the CBD area and the shopping district, which are exactly where the Company’s premises are located. The risk is therefore minimal and manageable.

3. Risk from External Factors Impacting on Property and On-going Business External risk factors such as natural disaster, terrorism or political unrest that may have an impact on property and business operation are inevitable and unpredictable. However, apart from implementing an international standard of emergency procedure and safety manual (i.e. restricted access to and from properties, occupation of vicinity, evacuation, etc.) in accordance with emergency level to prevent and/or reduce damage, we also have all-risk, terrorism and business interruption insurances to cover the aforesaid damage if it occurs directly to our properties.

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4. External Risk Factors Affecting Hotel Business Performance External risk factors affecting hotel business performance, such as political unrest or epidemic, are beyond our control and prevention. These will cause a sudden drop in number of foreign tourist arrival, which will directly impact on hotel revenue. Nevertheless, from historical data. these impacts are short around 3 - 9 month period. Our risk management strategy to handle this is to have a flexibility and responsiveness in our systems. Sales and marketing structures allow for fast reaction to market condition, while proactive cost management policies allow the company to be resilient in difficult periods.

5. Interest Rate Risk Interest rate risk, which is a result of changes of market rates in the future, will affect our operating results and cash flow. For the purpose of financial risk mitigation in light of interest uptrend, the Company converted a portion of long term loan from floating rates into fixed rates for a period of 4 years. As of 31st December 2010, approximately 68 percent of our long term loans were subject to a floating interest rate and 32 percent were subject to a fixed rate. Majority of our floating-rate term loans apply a Minimum Lending Rate (MLR) minus 1.5 - 2.0 percent while the remaining applies a 6-month Fixed Deposit Rate plus 2.0 percent which was lower.

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

However, human resources development and management is one of the key priorities of the company. Over the past years, we have been changed and recruited employees and managements in key growth departments and provide continuous training and development. More importantly, we develop a 3-layer succession plan from President and Chief Executive Officer down to Vice President level which supervised by the Management Development and Compensation Committee (“MDC”) and Executive Vice President of each department respectively. In addition, with a professional run structure, we operate under efficient system and do not rely on capability or decision of single person. We also decentralize authority to various levels under the supervision of the Board of Directors.

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

In addition, our key corporate cultures including “Team spirit” and “With integrity”, will also draw a capable professional with integrity to join our company. Lastly, our competitive compensation and benefits, bonus scheme which links to corporate strategy map as well as long term stock option plan for executive management also create commitment and loyalty to our employees which will help them work more efficiently. This structure will also help to retain quality employee with the company.

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Good Corporate Governance Award The Erawan Group Public Company Limited

Year 2010 • “Excellent recognized as Good Example” AGM Assessments Program Project: AGM Assessments Program 2010 • “Excellent” CGR Awards 2010 Project: Corporate Governance Report of Thai Listed Companies • Excellent IR Awards 2010 Project: SET Awards 2010 • 1 in 2 Nomination to “Excellent CSR Awards 2010” Project: SET Awards 2010 Year 2005 - 2009 • “2nd Quartile,Year 2005” (Top rating = 1st Quartile) Project: Corporate Governance Report of Thai Listed Companies • “very good” CGR Awards 2006 Project: Corporate Governance Report of Thai Listed Companies • “good” AGM Assessments Program Project: AGM Assessments Program 2006 • “very good” CGR Awards 2006 Project: Corporate Governance Report of Thai Listed Companies • “very good” AGM Assessments Program Project: AGM Assessments Program 2007 • Board of the Year for Distinctive Practices 2006/2007 Project: Board of the Year Awards 2006 • “very good” CGR Awards 2008 Project: Corporate Governance Report of Thai Listed Companies • “Excellent” AGM Assessments Program Project: AGM Assessments Program 2008 • “Excellent” CGR Awards 2009 Project: Corporate Governance Report of Thai Listed Companies • “Excellent” AGM Assessments Program Project: AGM Assessments Program 2009 • 1 in 3 Nomination to “IR Excellent” Awards 2009 Project: SET Awards 2009

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GOOD CORPORATE GOVERNANCE

Six Senses Sanctuary Phuket

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Corporate Governance Policy The Erawan Group Public Company Limited

The Erawan Group Plc. is managed on the principle of good corporate governance. The business is run in compliance with the laws and on the basis of the Business Code of Conduct where information is disclosed in a transparent and straightforward manner. We have also put in place efficient auditing mechanisms. We operate our business by taking into consideration our responsibility in every aspect to shareholders and stakeholders, the structure of our Board of Directors, supervision mechanisms and efficient management responsibility. Aside from complying with the OCED’s best practices, we also implement other best practices normally practiced overseas; for example, the Erawan have set up four sub-committees to help supervising each task or the fact that our board consists of as much as 50 percent of Independent Directors out of the entire board. With regard to corporate governance, the Erawan has set up the Nominating and Corporate Governance Committee (NCG) to regularly review and update corporate governance policies and practices so the company will continue to have up-to-date criteria that it can be actually implemented. To comply with the policy, the President and Chief Executive Officer (The President) has been directed to promote corporate governance among staff of all levels.

The President requires the Code of Conduct be made for employees of all levels as a clear guideline for practices under the corporate governance policy. Two Town Hall meetings a year are held to promote understanding in this subject matter. Besides, we also aim to do our work with integrity, which is one of the four values set as our corporate culture. We also ensure that staff understands the concept of Social Corporate Responsibility (CSR) where business is run by properly taking into consideration the interest of all stakeholders whether they are customers, suppliers, shareholders, creditors, employees, the society or the environment. The Erawan Group Plc. regularly conducts an opinion survey of stakeholders. Results of the survey are used to improve business efficiency and to be one of the factors evaluating our staff performances annually.

How we started our CSR?

It started at the corporate leader who had the right understanding of the CSR framework. The CSR core is to be responsible in one’s own duty and to treat all stakeholders whether they are shareholders, employees, their families, customers, creditors, suppliers, competitors, government, the society and industrial counterparts with respect and sincerity.

Today, when people heard about CSR, they tend to think of corporate activities held for the benefit of the community, society and the environment. This can be donations for various forms of campaigns to sponsoring a sports event to building schools to the less fortunate students or even promoting the use of green products.

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

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

Beyond this activity is the fact that for a company to set up a policy, work plan or strategy, it must take into consideration direct and indirect effects to other stakeholders and the company must not focus at shareholders’ profits alone and only. In short, the Board of Directors must come up with a policy that achieves a right balance of corporate social responsibility to everyone and this policy must function not only during a good time when the business enjoys profits but also when the company confronts the crisis.

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Excellent CG Report 2009/2010

At the Erawan, we believe that CSR is our path to sustainable success. The reason is because CSR is a key factor that makes our organization accepted by all stakeholders and it’s something that makes them want to associate with us. For example, to retain good staff, the Erawan must start first by making them happy to come to work.

Likewise, customers must be satisfied and wish to come back for our service time after time. Suppliers are glad to deal with us due to the way we do our business frankly while our decisions are made on the basis of facts and not the kickbacks or anything along that line. Minor and major shareholders are confident that they will get access to equal and direct information during the good and bad business time. Creditors are confident in the transparency of the information they receive from us as well as the Erawan’s accountability for debt payment, legal compliance as well as accurate tax record and payment. If every organization is able to take a good care of all stakeholders, the society and the economy will benefit as a whole. As such, one can see that social contribution projects are only a small part of the CSR. The organization will not achieve CSR if it continues to take advantage of other stakeholders.

At the Erawan, we have committed to the CSR concept for more than five years. We started first by making sure that there was a right understanding of the issue in our organization. One of our questions was how everyone can naturally incorporate CSR in their daily life without taking so much effort. That’s why we made it one of our four the Erawan mottos considered our DNA. In addition, an important factor of our corporate strategy is to take into consideration the satisfaction of all stakeholders when interacting with us and this very factor became one of the criteria to evaluate our staff during the Balance Score Card process, which results in the overall assessment of everyone’s performance in the organization. Creating awareness and accountability for all stakeholders is a timeconsuming process and cannot be forced to happen overnight. Only when everyone in the organization witnesses by his own that something good out of his practice actually happens to the organization, then, he will be confident and feel like pursuing it. Only then that everyone will communicate on the same basis. We are confident and committed to this path as we believe that it’s the right path although the result cannot be felt in the short term. The end result is not merely an accolade or an award but it must really exist and can be felt by everyone in the organization. Those interacting with us can feel it by their heart without any publicity because in the end, all stakeholders who feel good after interacting with us will be the best and most effective publicity vehicle in the whole world to tell the rest who we really are.

The Special Things We Did

2010 was the horrible year for the hotel and tourism industry. The Erawan’s incomes from hotel businesses account for 90 percent of all incomes. Yet, we had at least five hotels opening their doors for fewer than two years.

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

Worse, we were accused of supporting the anti-government red-shirt protestors during the crisis, a mystical miscomprehension that the public in general refused not to listen to the truth.

Based on our experience, we truly believe that it is not so difficult implementing the CSR policy by taking care of shareholders, our staff, their families, customers, creditors, suppliers, competitors, the government and the society or even the environment and other industries during the good time. Yet, at a time of the crisis, looking back, we believe 051

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

To elaborate, we disclosed information in a very transparent, speedy and timely manner to our investors, creditors and the public. We offered measures to relax financial situations for our clients. We became a center to gather information of all ten competing hotels that, like us, were all affected by the political turmoil. We represented and led a negotiation with the government to seek rehabilitation. We decided to completely shut down our hotel only a few days before the rally started to turn ugly on the basis of a safety issue of our customers, our staff, our properties and an attempt to respond to the state’s security measures. We continued to retain our staff and organized training to boost their morale and confidence at our organization. We also paid our staff during the hotel’s temporary closure similar to those not affected by the turmoil. We helped relocating our customers to a new workplace and we continued to pay every supplier on the same deadlines without requesting for any payment extension. Yet, despite all the doom and gloom, the Erawan continued our corporate contribution projects under a limited budget. We renovated a footpath beneath the Chalerm Maha Nakhon Expressway (Sukhumvit). We reforested for elephants and built a check dam at the Sublangka Wildlife Sanctuary, Lopburi province. The events offered an opportunity for staff and families to enjoy although some may have to partially sponsor the trip themselves.

Again, for more than five years, we believe that we are on the right path. Although CSR will never end, we will try to do more in the years to come as we choose this road with confidence.

We commit in community, social and environment activities through our clear policy and budget as we have clearly allocated 0.5 percent of our net profit to the activities. While the money is not much, we focus at a clear concept and an outcome of the project that can be further developed. In other words, we will not turn these social, environment or community projects into our PR tool to enhance our profit or to generate even more incomes.

In short, for us, these social, environmental and community programs are not profit-oriented. It’s a channel through which we can give something back to our society and something we can still do despite all the crisis we have been through. So far, we divide these activities into four categories as follows.

1. Tourism Promotion Activities ë The Welcome Guide to Thailand Project that has offered free English language lessons to taxi drivers since 2008 and so far, we have trained seven classes of taxi drivers. ë Thai Culture through Annual Calendar Project being a platform to promote Thai culture – the project has so far received so many awards from the Association of Publicists of Thailand as follows: • In 2007, 12 photos in the Erawan Loves Elephant Project printed on the calendar were voted the second winner for a desktop calendar.

• In 2008, 12 photos depicting the Lord Buddha’s history from the Thai Mural Painting Project were voted the second winner for a desktop calendar.

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

• In 2010, our calendar featured 12 photos depicting community lifestyles under the theme of “the Heart of Thai Community”.

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

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2. Community Development Projects – the Erawan focuses at enhancing areas closed to our properties and other areas in general. Details are as follows: ë Nice & Neat Surrounding Area – the idea behind this is to create an awareness in keeping our place clean through participation of our employees, those of our affiliates and trading partners.

• The renovation of pedestrian’s footpath beneath the Chalerm Maha Nakhon Expressway (Sukhumvit) to facilitate pedestrians in general.

• The improvement of landscape on street isles, Sukhumvit Road (Ploenchit-Nana) in collaboration with the Klongtoey District. ë Love Charity Project • Storytelling Tales Project, the 1st activity was held on February 12, 2010 when staff told tales to the visual-impaired children at Bangkok Branch, Christian Foundation for The Blind in Thailand under the Royal Patronage of H.M. the King.

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

• To help the Flood Victims Project, the 3rd activity was organized at Wat Natang Nai School, Bangsai District, Ayutthaya Province to renovate the school suffered from a flash flood. ë The Erawan for Flood Victims Project – Erawan’s staff donated money which was later translated into 333 bags of food and other amenities before being donated through Channel 3 TV for flood victims.

3. The Energy Saving and Let’s Green Project ë Redeeming Garbage Project – this project is held every two months all year round. Starting in 2007, the project aims to promote waste separation. Staff and the public are invited to turn in stuff they no longer use in an exchange for eggs. ë Let’s Green Project – the project aims to educate energy and environmental matters to our staff and tenants of the Ploenchit 2 Building. There are two running projects; namely, the Reuse and Waste Separation Project and the Efficient Energy Project. Some photos we posted at an elevator’s door or restrooms in the building to urge for energy savings were a courtesy from Green Peace.

4. Let’s Protect the Elephant Project The Erawan has sponsored the “Reforestation for Elephants” Project at Sublungka Wildlife Sanctuary, Lopburi province, as well as built a check dam to store water. The projects are held in two stages as follows: Stage one: Mobilizing funds – this involved selling small trees, vegetables, fabric bags, etc. to visitors of the Ploenchit Building as part of a campaign to reduce the use of plastic bags and to create an awareness in planting more trees. Proceeds from the activities went to buy seedlings while the rest was donated to the forest safeguard volunteers at Sublungka Wildlife Sanctuary, Lopburi province.

Stage two: Staff was bused to plant trees to create a habitat for the Thai elephants at Sublungka Wildlife Sanctuary, Lopburi province on September 18 - 19, 2010.

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While it would be so easy to just do these projects for the sake of doing it, yet, what matters more will be monitoring results, reviewing their benefits and the effects of what has been done as well as processing all information taken from the projects to make sure that they will be better managed next time. In the end, it’s the lesson we learn that matters. Following our evaluation, we believe that there is room for improvement. So far, a unit, which reports directly to the President, has been assigned to monitor and coordinate the matter.

Corporate Contributions – How to Attract Participation from Willing Stakeholders?

As we believe that our staff has a public mind, therefore, by creating an environment that allows them to participate in corporate contribution projects starting from offering them an opportunity to express their ideas, proposing a project within a required framework and encouraging them to join the activity on a voluntary basis, this has already attracted the participation. What’s more important is the activity should not be limited among our staff only. On the contrary, they must be open for all stakeholders. Participating in the activities is not related to the annual staff performance evaluation, either. Everyone is doing this out of a good intention that they are happy to do the activity with someone else. This way, we will see more and more people coming into the loop as some will start asking friends and neighbors to join the activities, which is indeed a beautiful outcome. Yet, the very important question involving the corporate contribution is what to do to let willing and interested stakeholders to join these activities without us having to beg or solicit for donations to achieve our corporate contribution objectives.

The Erawan’s Good Corporate Governance can be divided into nine areas as follows: 1. Code of Conduct

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

In 2005, we combined the best practices and the Code of Conduct, which not only were in line with our corporate strategy, but were also practicable, into our Code of Conduct manual. The manual was updated in 2008, which was indeed a significant move based on our motto of “Success with Integrity”. The updated Code of Conduct has been distributed to executive officers and staff for implementation to ensure our success with integrity and also to promote our corporate culture and ethical performances. Our Code of Conduct is now posted in our website at www.TheErawan.com, a mechanism to ensure that our executive officers and staff commit to their responsibilities to all stakeholders, communities, the society and the environment.

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

Not only qualifications of our directors are in line with the SET’s requirements but they are also much more intensive. Director’s term of office is three years each term with clear scopes of work and with power being balanced between non-executive directors. Half of the Board’s entire members are independent non-executive directors.

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The Board consists of Chairman of the Board, who is an Independent Director and different person from the President and Chief Executive Officer where their roles, authority and responsibilities are clearly separated to maintain balance between managing and supervising the company. In addition, there are five other Independent Directors, five non-executive directors and President and Chief Executive Officer. The total number is 12.

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

The Board also has a policy to promote rotation among directors to sit at different committees for appropriate timeframe and on appropriate occasions. Chairman of a committee has a duty to submit a clear-cut policy of his committee to the Board. Every committee must appoint a secretary, who will coordinate with directors and the Management to ensure that the policy is translated into action. In addition, the secretary must also record minutes of meeting in writing. The committees include the following: The Audit Committee (AC) The entire Audit Committee consists of Independent Directors and at least three members, who must have adequate accounting knowledge to be responsible for auditing the company’s financial statements and its internal control system and to monitor the company’s risk management practices on a regular basis. In addition, the Audit Committee will also review the independence of the company’s Internal Audit Unit; approve appointment, transfer or termination of supervisor who works as its secretary; review legal compliance; select, appoint and propose an auditor and auditor’s fees and review the auditing and disclose information about connected transactions to meet the criteria in an accurate and transparent manner.

The Financial and Risk Management Committee (FRC) This Committee consists of no fewer than six directors and is responsible for supervising and managing policies, plans and investment projects approved by the Board. The Committee also ensures that the firm has a systematic, distinct and effective risk management system.

The Nominating and Corporate Governance Committee (NCG) This Committee consists of no fewer than three members. Its chairman shall be an independent non-executive director while the remaining two members are non-executive directors. The Committee is responsible for reviewing the structure of the Board, setting qualifications of a particular position, reviewing and recruiting experts to become our directors as well as assessing the Board’s performances and other committees appointed by the Board.

The Nominating and Corporate Governance Committee also sees that directors, executive officers and staff of all levels comply with the Good Corporate Governance Practices and Code of Conduct.

The Management Development and Compensation Committee (MDC) The Committee, consisting of no fewer than three non-executive directors, is responsible for proposing development policies, assessing knowledge and skills of and compensations to new President and Chief Executive Officer, writing a senior management succession plan and reviewing the company’s HR development policy.

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The Board also appoints the company’s Secretary to perform duties as stipulated by the Securities and Exchange Act, No. 4, B.E. 2551 and/or other relevant legislations. The Secretary also monitors and coordinates with the Board, the Management and related internal and external parties.

3. Qualification of Directors

Principles: The Board of Directors should consist of members with a variety of knowledge and experiences, whether it is in finance, economy, management, business administration, marketing and service, tourism and law. The idea is to ensure that together, they can formulate a right policy for the development of hotel and resort business while having specialized skills, ability to see things in a big picture and enough independence to audit the Management in a balancing manner. The Board of Directors has two significant roles; namely, supporting the Management on the basis of the Good Corporate Governance and formulate a strategy to achieve our business goals.

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

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

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

4. Director should be able to assess himself and is ready to notify the Board of Directors upon change or if there is anything that prevents him from performing his job effectively.

Director’s Term of Office and Retirement Criteria 1. Director shall be in office three years each term. The Board may nominate a director for shareholders to re-elect him/her after his term ends by reviewing his performances on an annual basis. The term of a committee’s member is also three years each term.

2. Director shall retire when he/she is fully 75 years old effective from the day following the Annual General Meeting of Shareholders. The calculation will start after the day the director is fully 75 years old.

Specific Qualifications: Chairman of the Board of Directors: aside from the duties mentioned above, Chairman will have extra duties; namely, (1) acting as chairman of the Board of Directors’ meeting; (2) exercising a casting vote in case of tie at the Board of Directors’ meeting; (3) calling for the meeting of the Board of Directors; and (4) acting as chairman of the Shareholders’ Meeting. As a result, qualifications of the Chairman will be slightly different from those of other directors as follows: • Chairman must be Non-Executive Director (NED).

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•

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

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

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

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

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

• An Independent Director shall have no business relationship with the company during the previous two years. Details are as follows: • No relationship as a provider of professional service including being an auditor (in any case), or of other professions such as being a legal consultant, a financial advisor or an asset appraiser with an annual transaction value exceeding Baht 2 million.

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

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

• Independent Director must attend at least one of the following courses held by the Thai Institute of Directors (IOD); namely, • Directors Certification Program (DCP); or • Directors Accreditation Program (DAP); or • Audit Committee Program (ACP) 057

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

• He/she shall not be a director entrusted by the Board to make any decision with regard to a business of the company, its parent company, subsidiary, affiliate, subsidiary of the same level or other entities that may have a conflict of interest.

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

Transactions with Possible Effects to Independence • Being authorized to approve transactions or signing to bind the Company, to exempt collective decision.

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

Prohibited Characteristics Directors and executive officers must possess no qualifications that are conflicting with the Company’s requirements and announcements made by the SEC and the SET. Additional information can be read in the Company’s website.

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

The Board of Directors determines policies and practices for the management, which include important tasks of an executive. In addition, the Board also allows the management to formulate a management policy based on the Company’s objectives and missions, which will be subject to the Board’s approval.

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

5. Board of Directors’ Meeting

The company sets the number of the Board’s meetings and the meetings of its committees by scheduling them and letting directors and relevant parties know about them in advance throughout the year. The company also sets an agenda of the Board of Directors’ meeting every year to inform all directors in advance.

In 2010, the Company organized 9 Board of Directors’ meeting, 4 Audit Committee’s meetings, 9 Financial and Risk Management Committee’s meetings, 2 Nominating and Corporate Governance Committee’s meetings and 2 Management Development and Compensation Committee’s meetings (two ordinary meetings and one extraordinary meeting). Minutes of meeting were recorded in writing at each and every meeting and kept at the Office of Secretary and on a data server so that officers can conveniently access the database. Details of meeting attendance of directors are in the following table: 058

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4/4 4/4 4/4 100%

9/9 9/9 8/9 5/9 5/9 9/9 9/9 7/9 8/9 8/9 9/9 88%

Apr 2009 - 2012 Apr 2009 - 2012 Apr 2009 - 2012 Apr 2010 - 2013 Apr 2009 - 2011* Apr 2008 - 2011* Apr 2010 - 2013 Apr 2010 - 2013 Apr 2008 - 2011* Apr 2010 - 2013 Apr 2008 - 2011*

-

Audit Committee

9/9

Board of Directors

Apr 2009 - 2012

Term

95%

7/9 9/9 9/9 9/9 8/9 9/9

-

100%

2/2 2/2 -

2/2

100%

2/2 2/2 2/2 -

-

Financial Nominating Management and and Development Risk Corporate and Management Governance Compensation Committee Committee Committee

Times of attendance/Number of Total attendance

* To propose the Annual General Meeting of Shareholders on Tuesday 26th April 2011, to reappoint 4 directors who retire by rotation to succeed for another term.

Chairman Independent Director 2. Mr. Sansern Wongcha-um Independent Director 3. Assoc. Prof. Manop Bongsadadt Independent Director 4. Mr. Dej Bulsuk Independent Director 5. Mr. Banyong Bongpanich Independent Director 6. Mr. Ekasith Jotikasthira Independent Director 7. Mr. Vitoon Vongkusolkit Director 8. Mr. Supol Wattanavekin Director 9. Mr. Chanin Vongkusolkit Director 10. Mrs. Panida Thepkanjana Director 11. Mr. Krisda Monthienvichienchai Director 12. Mr. Kasama Punyagupta President and Chief Executive Officer percent of directors’ attended

1. Mr. Prakit Pradipasen

Name

Times of Attendance 2010

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6. Evaluation of the Board’s Performances

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

Based on such evaluation, more than 87 percent of assessors agreed that the structure and components of directors were appropriate and that there were enough Independent Directors to achieve a balanced power.

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

Evaluation of the Board’s Performances

Avg. (%)

100

87

87

92

88

91

88

80 60 40 20 0 BOD Rule, Structure & Duties & Componant Responsibility

BOD’s Meeting

Director Relations with Directors Fiduciary Executive Improvement & Duty Management Management

7. Nomination of Directors and Executives

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

An individual evaluation of a director’s performances while in the office will be used to support the consideration.

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Furthermore, the selection was independently conducted without being subject to anyone’s influence.

The President and Chief Executive Officer conducted a two-hour orientation session and arranged for a management team to meet the new director so that he learned about the company, got access to corporate information and strategic plans.

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

8. Remunerations of the Board of Directors and Management

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

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

The President and Chief Executive Officer reviews annual compensations of executives based on a formulated policy through two evaluation processes; namely, (1) Balance Score Card (BSC) evaluation, which reviews strategic significances of each department vis-à-vis corporate strategy through a linkage that will eventually trigger corporatelevel strategies to lower levels; namely, from corporate strategy, to departmental and section strategies; and (2) Competency Skill Behavior (CSB) evaluation, where behaviors that support corporate culture will be evaluated.

Supervisors will evaluate each individual. Some of the evaluation will be based upon the company’s policies; others upon something else, depending on criteria set by department supervisors. To ensure effective evaluation and to access information from co-workers of various levels, the assessment is conducted from every direction.

In this regard, supervisors will evaluate their supervisees and vice versa. In addition, staff of all levels is encouraged to conduct a self-evaluation. Results of both BSC and CSB evaluations are used to allocate the company’s overall returns to departments, sections and units.

Remunerations in cash for the year ending 31st December 2010 totaled Baht 35,333,941.40: 1. Remunerations of Directors of the Company’s Board of Directors and Committees totaled Baht 4,310,000.00 2. Remunerations of Directors of the Company’s subsidiary totaled Baht 1,980,000.00 3. Remunerations, which were total wages of the nine (9) executives paid by the Company and its subsidiaries totaled Baht 28,100,575.80 4. Provident fund of the executives under item 3 above totaled Baht 943,365.60 061

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2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

Title

Chairman Independent Director Mr. Sansern Wongcha-um Independent Director Assoc. Prof. Manop Bongsadadt Independent Director Mr. Dej Bulsuk Independent Director Mr. Banyong Pongpanich Independent Director Mr. Ekasith Jotikasthira Independent Director Mr. Vitoon Vongkusolkit Director Mr. Supol Wattanavekin Director Mr. Chanin Vongkusolkit Director Ms. Panida Thepkanjana Director Mr. Krisda Monthienvichienchai Director Mr. Kasama Punyagupta President and Chief Executive Officer Total

1. Mr. Prakit Pradipasen

Name

100,000 80,000 80,000 -

260,000

2,940,000

-

Audit Committee

240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000

300,000

Board of Directors

960,000

Do not get paid as Executive

180,000 240,000 180,000 180,000 180,000 -

-

Financial and Risk Management Committee

75,000

22,500 22,500 -

30,000

Nominating and Corporate Governance Committee

75,000

22,500 22,500 30,000 -

-

Management Development and Compensation Committee

Compensation in cash for member of the Committee

4,310,000

340,000 320,000 320,000 442,500 240,000 502,500 450,000 442,500 442,500 240,000 240,000

330,000

Total (Baht/year)

Remunerations for the Board of Directors and the Committees in the Year Ending 31st December 2010

Remuneration of the Board of Directors and Management

The Erawan Group Public Company Limited

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Corporate Social Responsibility The Erawan Group Public Company Limited

9. Corporate Social Responsibility (CSR)

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

We truly believe that CSR will guide our business while let us be accountable to shareholders, staff, suppliers, creditors, the society, the environment and neighboring communities where our properties are located. To ensure that everyone here understands the same thing, we have determined CSR guidelines and principles for those involved as follows:

Duties and Responsibilities of the Board to Shareholder The Board of Directors takes into consideration shareholders’ rights without limiting only to their fundamental rights as stipulated by laws. This refers to their rights to trade or transfer shares, to share the company’s profits, to adequately receive the company’s information, to attend meetings to vote at shareholders’ meeting in order to either appoint or remove directors and to appoint auditors and discuss important matters affecting the company.

In this regards, important matters can range from allocating dividends to formulating or amending rules and regulations and the Memorandum of Association, increasing or reducing capital and approving special transactions.

The Board of Directors also supervises to ensure that meeting’s time, date, place and meeting agendas are given to shareholders; that relevant documents and information required for making decisions at a meeting are available to shareholders, that shareholders are notified of applicable rules at the meeting, that voting procedures are not too complicated and that a meeting location is convenient and not expensive for shareholders to attend the meeting.

The Board of Directors has allowed shareholders to propose agendas of the Annual General Meeting of Shareholders in advance prior to the meeting date. Clear rules and regulations in doing so have been posted in the Company’s website to facilitate shareholders. Shareholders may submit a document to propose potential meeting agendas by January 31 of every year. The Board encourages shareholders to use Proxy Form B so that shareholders can determine a voting direction as there are names and information of six Independent Directors who can be alternative proxy for shareholders. In addition, the information must be posted in the Company’s website at least 30 days prior to the meeting. Documents must also be sent to shareholders in advance enough for them to study prior to the meeting.

During the Meeting, the Company treats every procedure equally. No agendas are shortened, deleted or alternated. This is especially the case of an agenda to appoint directors where shareholders are entitled to vote for directors individually upon enough information. All ballots featuring yes, no and abstention votes are duly kept as evidence.

At every the shareholders’ meeting, Chairman of the Board, Chairman of the Committees, Directors, President and Chief Executive Officer (The President) and Chief of Financial Officer (CFO) attend the meeting to allow shareholders to express their views and ask questions about relevant matters to the meeting. During the past 4 years (2007 - 2010), the entire Board attended the meeting to allow shareholders to ask questions in an adequate fashion, which however did not delay the meeting. In addition, Q&A sessions, resolutions adopted at the meeting and votes received at each agenda were properly recorded in writing in the Company’s minutes of meeting and posted at the Company’s website within 14 days from the shareholders’ meeting date.

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Aside from the Board’s responsibilities to shareholders as mentioned above, the Board also formulates a Corporate Social Responsibility policy, which includes responsibilities to shareholders as follows:

Responsibilities to Shareholders 1. To manage the Company in a way that will turn it into a quality corporation committed to integrity while creating sustainable strength and growth for shareholders in the long run.

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

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

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

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

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

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

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

Responsibilities to Investor Relation The Erawan Group Plc. sets up the Investor Relations (IR) Department as a center to provide complete company information to retail and institutional investors, shareholders, analysts and the public sector. Contacts can be made directly at the Company’s office or visit us at www.TheErawan.com. Inquiries can also be made through IR@TheErawan.com.

We conduct an Investor Relations Survey to gauge satisfaction in relation to our information disclosure at least once a year. In 2010, we conducted the survey by distributing questionnaires to analysts at the Quarterly Meeting held in November 2010, and also the last meeting of the year. All respondents were within a target group. 66 percent of the respondents had monitored our information for no less than 3 years. 91 percent of the respondents said they were satisfied with the information. In addition, we were also awarded “IR Excellence” among Group 1 listed companies in the SET with market capitalization of not exceeding Baht 10 billion.

Responsibility of the right to access information of stakeholders We give all stakeholders an access to information. We also determine guidelines and practices for our executive officers and staff to encourage their fair and equal interactions with all stakeholders. We also allow stakeholders to directly contact the Board, the Audit Committee and the Nominating and Corporate Governance Committee for their valuable suggestions that will not only benefit but also add more values to our management at our office, No. 2, Ploenchit Center Building, 6th Floor, Sukhumvit Road, Klongtoey District, Bangkok; or at the Office of Corporate Governance, email: GCG@TheErawan.com. All information is treated confidential and will be directly forwarded to the Board.

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Responsibilities to Employees 1. To determine an appropriate structure of remunerations in line with market rates, staff’s competency and responsibilities and their work performances through three levels of strategic assessments; namely, corporate strategy, department strategy and division strategy. The Competency Skill Behavior Assessment will be carried out in a 360-degree manner where supervisor will assess supervisees and vice versa and where everyone will have a self-evaluation at all levels.

2. To provide appropriate welfare and other benefits such as accident insurance to staff and executives working out of the office, health insurance and allowances for healthcare services as an out-patient, annual health check-up and coffee & tea corner for staff.

3. To ensure staff’s understanding about their professional roles and responsibilities as well as their career goals, to provide an opportunity for staff to grow professionally and to acknowledge and recognize staff’s work.

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

5. To ensure workplace safety, health and sanitation.

6. To have a clear and efficient working system that allows staff to exercise their knowledge and competency while supporting their knowledge enhancement and recognizing their participation role.

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

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

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

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

2. To treat all business deals equally without treating anyone more favorably where every deal is considered conducted on an arm’s length basis.

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

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

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

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

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

Responsibilities to Suppliers and Creditors 1. To offer a fair competition environment where the procurement and hiring process of goods and services is carried out properly, transparently and efficiently. This will include finalizing price negotiations, making quotations, bidding methods, special methods and procurement methods for government agencies and state enterprises. Questionnaire will be regularly issued to ask for opinions about the Company’s bid participation in order to regularly improve its procurement and hiring process of goods and services.

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2. Avoid specify a particular product or choosing a particular product intentionally unless otherwise there is an enough reason to do so. In case of change of products or specifications of the product, suppliers must be informed. If necessary, a new price quotation must be submitted. An original supplier must be given an opportunity to equally offer his quotation.

3. Choose a quality supplier who is really interested in doing the job. Avoid inviting suppliers just to have enough participating suppliers as stated in a regulation. All bidders are to receive the same written details, information and conditions. If notified verbally, they shall receive a written confirmation later.

4. Executives or staff involving in the procurement or hiring process must disclose information and/or their personal relationship as well as that of their spouses or closed relatives or a personal relationship with a particular bidder that may directly result in an opaqueness of their job. They shall also exercise their responsibility by not attending a decision-making process when a particular supplier is chosen.

5. Not demanding and receiving gifts, favors or treats unless otherwise on appropriate occasions; refrain from having a special relationship with suppliers so much so that others may believe it may lead to an unfair treatment especially if it makes other suppliers misunderstand, refuse to participate in quoting prices or spread ill words that damages the Company’s reputation.

6. To prepare a fair contract and to comply with an agreement executed with suppliers and creditors. In case the Company is unable to comply with its contract, negotiate with suppliers/creditors without delay to find a solution and to prevent further damage.

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

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

Responsibilities to Social and Environment The Erawan formulates a clear-cut policy for social, community and environmental causes. It plans to implement “the Erawan for the Society and the Environment” project, to which the Board has already approved to allocate 0.5 percent of its annual net profit as a social contribution. Of the entire budget, 50 percent will be spent for the benefits of communities closed to the Company’s properties whereas the other 50 percent will be spent for the benefit of the society in general.

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Internal Control The Erawan Group Public Company Limited

In 2009, the Board of Directors convened nine times at which the Audit Committee attended every time to give opinions about an adequacy and soundness of the internal control system. The Audit Committee summarized and reported internal audit activities to the Board of Directors on February 22, 2011 and the Board of Directors expressed the same opinions as the Audit Committee in this matter, which can be summarized as follows: 1. Internal Control System and Internal Auditing

The Audit Committee has direct responsibilities to supervise the Company’s internal control system in every aspect, whether it is finance and accounting, legal compliance and compliance to relevant rules and regulations.

The Audit Committee formulates auditing mechanisms to ensure effective balance of power. There is also the Internal Audit Department to audit performances of all departments based on a risk-based auditing plan and to offer advice on how to set up a good internal control system.

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

2. Protection of Information

One of our priorities is focused at the use of our internal information and the prevention of our directors and executives from using internal information for their benefit or the so-called abusing self-dealing. This applies specifically to internal information not yet disclosed to the public or information that may affect our corporate strategy, business, trade negotiations and share prices, which, if abused, not only means that our shareholders are taken advantage of but it can damage shareholders in general. That’s why we have set our Executives Ethic Standards as a practice with heavy penalties in case of violations or intended violation of the 10 practices stated in the Code of Conduct under the topic of “Executives Ethical Standards” We also allow different levels of staff to get access to different types of internal information based mainly on their responsibilities and duties. Disciplinary actions are stated in our Work Regulations under the topic of “Disciplinary Actions and Penalties.” For example, Clause 3.2 Re: Disciplines with regard to confidentiality and corporate profits prohibits employees to “seek inappropriate benefit from the Company or others relating to the Company. Employees are prohibited to conduct personal business or to work for others in an identical or similar business as the Company’s although the work may be performed outside the Company’s office hours”. With regard to disciplinary actions and punishment, the Company will normally appoint a disciplinary action committee to conduct an investigation and to ensure fairness to accused staff.

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3. Conflict of interest

The Erawan requires an approval from either the Audit Committee or the Board, as the case may be, when conducting a transaction that may cause a possible conflict of interest. In addition, details of transactions with possible conflict of interest during the past year and their values are disclosed while explanations and reasons for the transactions are clearly stated in the Annual Report. The Erawan requires its executive directors involving in the transaction to disclose the information and/or types of relationship not only of his own, but also of his spouse, closed relatives as well as personal relationship with any bidder for transparency purpose to the Office of the Corporate Governance. In addition, director shall abstain from voting and/or not be part of the decision-making process.

Connected transactions are shown in the Notes to Financial Statements and Connected Transactions Table.

All transactions were reasonable and were considered normal transactions. They were conducted for the company’s ultimate benefit. Connected transaction had already been reviewed by the Audit Committee and/or the Board on an arm’s length basis that they were in compliance with our requirements and rules and regulations of the SEC and the SET and that they were not against accounting standards Re: Disclosure of information in relation to connected persons or transactions.

In 2010 the Erawan has the other connected transaction in addition to the items mentioned above as follows.

All transactions were reasonable and were normal transactions.

Mitr Phol Sugar Group of Companies Revenue from Hotel Operation Receivables at end of period Banpu Plc. Group of Companies Revenue from Hotel Operation Receivables at end of period Pacific World (Thailand) Ltd. Revenue from Hotel Operation Receivables at end of period

068

Internal Control

Baht 3,778,067.20 Baht 586,400.00 Baht Baht

924,217.17 441,556.20

Baht Baht

614,375.95 438,067.00

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2,826,315.31 433,800.97

2,468,884.44 243,106.48

Price agreed was a market price compared to space in nearby areas and not lower than the price offered to other tenants or service users compared to the standard of hotel business.

Agreement to lease office space and the service agreement with The Erawan Hotel Public Company Limited • Rental and services income • Receivables at end of period

the Audit Committee’s opinions

2. Chai Talay Hotel Co., Ltd. (Hyatt Regency Hua Hin Hotel) Type of business: hotels Nature of relationship: • Mrs. Panida Thepkanjana, director, is a closed relative to Mrs. Wansamorn Wannamethee and Khunying Natthika Wattanavekin, are authorized director of Chai Talay Co., Ltd. • Wattanavekin Group holds 31.14 percent of the Company’s shares.

2010

Pricing policy and A major tenant, the agreed price was not lower than the average price agreed with other tenants based on the business standards.

2009

Transaction value (Baht)

Agreement to rent Ploenchit Center’s space, 3-year lease agreement.

• Rental and services income 38,880,207.20 45,131,880.54 • Receivables at end of period 596,469.30 1,209,192.21 • Payables of rent deposits 9,036,948.83 9,037,920.83

Description

1. Mitr Phol Sugar Group of Companies Type of business: sugar factories Nature of relationship: • Mr. Vitoon Vongkusolkit and Mr. Chanin Vongkusolkit, the Company’s directors, are authorized director and director of Mitr Phol Sugar Co., Ltd. • Vongkusolkit Group holds 39.15 percent in the Company’s shares.

interest and nature of relationship

Person/entity with possible conflict of

Connected transactions between businesses with the following relationships were executed:

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Connected Transactions

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Agreement to rent Ploenchit Center’s space, 3-year lease agreement.

• Rental and services income • Receivables at end of period • Payables of rent deposits

Description

2,099,000.86 17,528.21 497,174.40

2009

2,153,757.60 19,350.95 497,174.40

2010

Transaction value (Baht) Price agreed was a market price compared to space in nearby areas and not lower than the price offered to other tenants base of the business standard.

the Audit Committee’s opinions

Pricing policy and

Policy or Outlook for Future Connected Transactions -None-

Approval Measures or Procedures of Connected Transactions If the Company is to execute a contract or if there is any connected transaction between itself and its subsidiary, affiliate, related company, the third party and/or anyone with possible conflicts of interest, the Board of Directors requires the Erawan for the purpose of its benefits, to comply with the rules stated in the Stock Exchange of Thailand’s (SET) Announcement Re: Information disclosure and practices of listed companies in connected transactions. Meanwhile, prices and other conditions shall be as if the transaction is at an arm’s length where directors or staff having an interest in such transaction must not participate in any approval process.

Necessity and Soundness of Connected Transactions In case the Company signs an agreement or conducts a connected transaction with a subsidiary company, affiliate, related company and/or the third party, the Erawan will consider the necessity and soundness of such contract based mainly on the Erawan’s interests.

3. Bualuang Securities Public Company Limited Type of business: Other financial intermediation Nature of relationship: • Mr. Sansern Wongcha-um, Indepentdent director, is Chairman of the Board of Bualuang Securities Public Company Limited

interest and nature of relationship

Person/entity with possible conflict of

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APPENDICES

Grand Hyatt Erawan Bangkok

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Connected Transactions

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Audit Report of Certified Public Accountant The Erawan Group Public Company Limited and its Subsidiaries

To the Shareholders of The Erawan Group Public Company Limited

I have audited the accompanying consolidated and separate balance sheets as at 31 December 2010, and the related statements of income, changes in equity and cash flows for the year then ended of The Erawan Group Public Company Limited and its subsidiaries, and of The Erawan Group Public Company Limited, respectively.

The Company’s management is responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to express an opinion on these financial statements based on my audit.

The consolidated and separate financial statements of The Erawan Group Public Company Limited and its subsidiaries, and of The Erawan Group Public Company Limited, respectively, for the year ended 31 December 2009 were audited by another auditor of the same firm whose report dated 23 February 2010 expressed an unqualified opinion on those statements.

I conducted my audit in accordance with generally accepted auditing standards. Those standards require that

I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the consolidated and separate financial statements referred to above present fairly, in all material respects, the financial positions as at 31 December 2010 and the results of operations and cash flows for the year then ended of The Erawan Group Public Company Limited and its subsidiaries, and of The Erawan Group Public Company Limited, respectively, in accordance with generally accepted accounting principles.

(Vannaporn Jongperadechanon)

KPMG Phoomchai Audit Ltd. Bangkok 22 February 2011

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Certified Public Accountant Registration No. 4098

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Audit Fee The Erawan Group Public Company Limited

In 2010, the audit fee paid to the external auditor of KPMG Phoomchai Audit Ltd. was Baht 3,780,000

(The Erawan Group Plc. Baht 2,300,000 and the Company’s subsidiary Bath 1,480,000). The Company did not pay any non audit fee to the auditor, the auditor’s office, and person or company related to the auditor and the auditor’s office. The fee was excluding the out of pocket expenses.

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Balance sheets The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2010 and 2009

(Unit: in Baht)

Note

Assets Current assets Cash and cash equivalents 5 Trade accounts receivable 4, 6 Inventories 7 Advances-construction Value added tax refundable Other current assets 4, 8 Total current assets Non-current assets Investments in subsidiaries 9 Investment in associate 10 Investments in other related parties 11, 21 Long-term loans to subsidiaries 4 Property, plant and equipment 12, 16 Leasehold rights for land and buildings 13, 16 Intangible assets 14 Deposits for lease of land, building and equipment Other non-current assets 15 Total non-current assets Total assets

Consolidated financial statements 2010 2009

220,384,384 148,046,349 72,898,210 15,023,839 50,625,364 95,183,758 602,161,904

277,488,552 148,495,188 78,247,461 34,617,512 198,001,782 88,915,926 825,766,421

Separate financial statements 2010 2009

93,907,272 79,207,822 28,045,046 13,905,283 - 15,882,989 230,948,412

201,834,559 79,573,655 33,792,403 14,772,675 78,120,621 20,391,741 428,485,654

- - 2,299,159,881 2,299,159,881 338,271 338,271 338,271 338,271 2,571,029 3,305,168 1,975,973 2,525,360 - - 1,080,774,007 745,745,622 10,255,825,384 10,406,634,932 6,242,901,679 6,459,617,393 1,793,652,235 1,712,926,169 963,996,368 857,138,383 60,833,747 74,139,901 39,744,993 50,285,579 204,341,948 231,340,229 202,314,317 228,221,973 30,702,907 34,365,743 28,655,926 30,413,472 12,348,265,521 12,463,050,413 10,859,861,415 10,673,445,934 12,950,427,425 13,288,816,834 11,090,809,827 11,101,931,588

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

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Balance sheets (continued) The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2010 and 2009

(Unit: in Baht)

Note

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Liabilities and equity Current liabilities Short-term loans from financial institutions 16 195,700,000 207,200,000 195,700,000 152,200,000 Trade accounts payable 4, 17 211,897,440 230,684,342 90,083,357 75,101,006 Accounts payable - construction 40,952,783 100,481,328 20,235,144 59,303,424 Current portion of finance lease liabilities 16 - 25,701 - 25,701 Current portion of hire purchase payable 16 819,440 528,658 819,440 528,658 Current portion of long-term loans 16 573,750,000 697,250,000 403,750,000 371,000,000 Other current liabilities 18 348,220,977 366,065,534 151,375,348 151,988,590 Total current liabilities 1,371,340,640 1,602,235,563 861,963,289 810,147,379 Non-current liabilities Hire purchase payable 16 621,197 567,618 621,197 567,618 Long-term loans from a subsidiary 4, 16 - - 38,860,995 55,131,790 Long-term loans from financial institutions 16 7,829,517,051 7,665,467,051 5,314,750,000 5,370,900,000 Accounts payable for land leasehold rights 360,000,000 360,000,000 360,000,000 360,000,000 Deposits from lessees 100,677,747 103,452,269 99,232,325 102,033,939 Deferred income 19 15,320,798 18,135,126 15,320,798 18,135,126 Total non-current liabilities 8,306,136,793 8,147,622,064 5,828,785,315 5,906,768,473 Total liabilities 9,677,477,433 9,749,857,627 6,690,748,604 6,716,915,852

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

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Balance sheets (continued) The Erawan Group Public Company Limited and its Subsidiaries As at 31 December 2010 and 2009

(Unit: in Baht)

Note

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Liabilities and equity Equity Share capital 20 Authorised share capital 2,244,779,001 2,244,779,001 2,244,779,001 2,244,779,001 Issued and paid-up share capital 2,244,779,001 2,244,779,001 2,244,779,001 2,244,779,001 Premium on shares 21 358,142,539 358,142,539 358,142,539 358,142,539 Unrealised deficits of fair value changes on investments (596,603) (191,098) (405,036) (108,143) Retained earnings Appropriated Legal reserve 21 79,608,000 78,840,000 67,658,000 66,890,000 Unappropriated 449,041,861 724,826,403 1,729,886,719 1,715,312,339 Total equity attributable to equity holders of the Company 3,130,974,798 3,406,396,845 4,400,061,223 4,385,015,736 Minority interests 141,975,194 132,562,362 - Total equity 3,272,949,992 3,538,959,207 4,400,061,223 4,385,015,736 Total liabilities and equity 12,950,427,425 13,288,816,834 11,090,809,827 11,101,931,588

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

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Statements of income The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009

(Unit: in Baht)

Note

Income Revenues from hotel operations Rental of units in buildings and related service income 4 Net foreign exchange gain Dividend income 4 Interest income 4 Other income 4, 23 Total income Expenses Cost of hotel operations Cost of rental of units in buildings and related service 4 Depreciation and amortisation Selling expenses 24 Administrative expenses 25 Management benefit expenses 26 Loss from decline in value of investment in subsidiary 9 Total expenses Profit before finance costs and income tax expense Finance costs 4, 28 Profit (loss) before income tax expense Income tax expense 29 Profit (loss) for the year Attributable to:

Equity holders of the Company Minority interests Profit (loss) for the year Basic earnings profit (loss) per share 30

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

2,929,914,482 2,748,087,145 1,545,898,978 1,254,911,502 391,333,097 400,945,926 384,011,760 388,885,008 3,573,512 3,864,462 1,232,838 2,065,965 982,813 383,911 18,085,498 287,308 411,737 357,904 39,065,891 28,295,440 38,112,615 37,983,704 35,810,011 33,168,730 3,364,328,256 3,191,623,052 2,024,104,976 1,707,613,953 1,488,413,277 1,336,282,137 154,922,380 683,504,716 214,081,725 666,927,747 35,153,941

154,618,598 627,780,673 206,708,919 670,783,982 40,238,236

705,452,776

562,043,929

159,636,076 404,735,841 118,441,023 341,957,951 33,353,941

159,974,511 353,932,033 94,107,251 338,392,235 38,333,236

- - - 804,524 3,243,003,786 3,036,412,545 1,763,577,608 1,547,587,719 121,324,470 155,210,507 260,527,368 160,026,234 (360,761,571) (306,846,197) (245,184,988) (189,577,331) (239,437,101) (151,635,690) 15,342,380 (29,551,097) (19,866,597) (45,656,292) - (259,303,698) (197,291,982) 15,342,380 (29,551,097) (275,016,542) (229,410,772) 15,712,844 32,118,790 (259,303,698) (197,291,982) (0.12) (0.10)

15,342,380 - 15,342,380 0.01

(29,551,097) (29,551,097) (0.01)

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

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Consolidated financial statements

(Unit: in Baht)

460,000

-

-

-

(405,505) - - (405,505) - (405,505) - - (275,016,542) (275,016,542) 15,712,844 (259,303,698) - - - - (6,300,012) (6,300,012) - 768,000 (768,000) - - (596,603) 79,608,000 449,041,861 3,130,974,798 141,975,194 3,272,949,992

(460,000)

- - - - - - - - 2,244,779,001 358,142,539

-

- - 285,520 - 285,520 - (229,410,772) (229,410,772) 32,118,790 (197,291,982) - (22,447,636) (22,447,636) - (22,447,636)

(191,098) 78,840,000 724,826,403 3,406,396,845 132,562,362 3,538,959,207

-

-

285,520 - -

(476,618) 79,300,000 976,224,811 3,657,969,733 100,443,572 3,758,413,305

2,244,779,001 358,142,539

- - -

- - -

2,244,779,001 358,142,539

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

Balances at 31 December 2009 and 1 January 2010 Unrealised deficists of fair value changes on investment Profit (loss) for the year Dividend 31 Legal reserve 21 Balance at 31 December 2010

Balance at 1 January 2009 Unrealised surpluses of fair value changes on investment Profit (loss) for the year Dividend 31 Transfer legal reserve of a subsidiary to retained earnings - unappropriated 21

Unrealised

Total equity Retained earnings surpluses

Issued and attributable Minority Premium on (deficits) of

paid-up Total equity to equity interests fair value shares

share capital changes Legal reserve Unappropriated holders of

the Company on investment

Note

The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009

Statements of changes in equity

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358,142,539 - - - 358,142,539

- - - 2,244,779,001

- - -

- - - 2,244,779,001

358,142,539

Premium on shares

2,244,779,001

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

Balances at 31 December 2009 and 1 January 2010 Unrealised deficists of fair value changes on investment Profit for the year Legal reserve 21 Balance at 31 December 2010

Balance at 1 January 2009 Unrealised surpluses of fair value changes on investment Loss for the year Dividend 31

Note

Issued and paid-up share capital

The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009

(296,893) - - (405,036)

(108,143)

213,758 - -

(321,901)

- - 768,000 67,658,000

66,890,000

- - -

66,890,000

4,385,015,736

213,758 (29,551,097) (22,447,636)

4,436,800,711

Total equity attributable to equity holders of the Company

(Unit: in Baht)

- (296,893) 15,342,380 15,342,380 (768,000) 1,729,886,719 4,400,061,223

1,715,312,339

- (29,551,097) (22,447,636)

1,767,311,072

Unrealised Retained earnings surpluses (deficits) of fair value changes Legal reserve Unappropriated on investment

Separate financial statements

Statements of changes in equity (Continued)

Statements of cash flows The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009

(Unit: in Baht)

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Cash flows from operating activities Profit (loss) for the year (259,303,698) (197,291,982) 15,342,380 Adjustments for Depreciation and amortisation 683,504,716 627,780,673 404,735,841 Doubtful debts expense (reversal) 717,106 851,763 (914,539) Loss from decline in value of investment in subsidiary - - - Unrealised gain from increase in value of investment in related company (18,638) - - Allowance for non-refundable withholding tax deducted at source 3,794,537 1,496,186 3,302,220 Transfer rental deposits and deferred income to income (5,343,191) (3,140,513) (5,343,191) Transfer advance received from customers to income (1,368,177) (680,661) (1,368,177) Dividend income (982,813) (383,911) (18,085,498) Interest income (411,737) (357,904) (39,065,891) Gain on disposal of property, plant and equipment, intangible assets and leasehold rights (286,337) (14,870,147) (200,787) Finance costs 360,761,571 306,846,197 245,184,988 Income tax expense 19,866,597 45,656,292 -

800,929,936 765,905,993 603,587,346

(29,551,097) 353,932,033 1,314,166 804,524 1,256,544 (3,140,513) (680,661) (287,308) (28,295,440) (12,815,570) 189,577,331 472,114,009

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

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Statements of cash flows (continued) The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009

(Unit: in Baht)

Changes in operating assets and liabilities Trade accounts receivable Inventories Advances - construction Value added tax refundable Other current assets Deposits for lease of land, building, and equipment Other non-current assets Trade accounts payable Other current liabilities Deposits from lessees

Income tax paid

Consolidated financial statements 2010 2009 (4,284,401) 5,349,251 19,593,673 147,376,418 (6,267,833) 26,998,281 15,790,124 (18,786,899) (3,245,963) 3,770,476 987,223,063 (52,837,616)

(48,520,383) (20,197,890) 27,619,480 18,157,685 (27,932,924) (26,461,638) 9,921,545 95,768,997 9,964,022 3,589,521 807,814,408 (75,722,398)

Separate financial statements 2010 2009 (2,735,763) 5,747,357 867,392 78,120,621 1,952,884 25,907,656 12,906,147 14,982,351 344,593 3,743,384 745,423,968 (14,450,821)

(29,973,752) (10,565,192) 43,216,220 14,728,825 (8,328,428) (24,709,101) 9,396,549 16,746,326 16,017,955 3,762,739 502,406,150 (14,250,151)

Net cash provided by operating activities 934,385,447 732,092,010 730,973,147 488,155,999 Cash flows from investing activities Short-term loans to a subsidiary - - (184,861,134) (88,489,462) Proceeds from short-term loans to a subsidiary - - 184,861,134 88,489,462 Long-term loans to subsidiaries - - (334,017,866) (228,981,950) Investments in other related parties 347,271 (4,720) 252,494 Cash paid from the return of share capital of a subsidiary - - - (126,348) Acquisition of property, plant and equipment (488,502,754) (1,348,767,100) (170,188,057) (1,066,443,492) Acquisition of leasehold rights for land and buildings (156,279,790) (3,879,077) (150,000,000) Acquisition of intangible assets (8,544,905) (20,310,177) (3,511,734) (19,326,732) Proceeds from sales of property, plant and 24,711,907 equipment, and intangible assets 3,850,275 27,789,366 6,299,303 982,812 383,911 18,085,498 287,308 Dividend received Interest received 411,737 357,904 38,055,372 28,322,562 Net cash used in investing activities (647,735,354) (1,344,429,893) (595,024,990) (1,261,556,745)

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

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Statements of cash flows (continued) The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009

(Unit: in Baht)

Note

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Cash flows from financing activities Short-term loans from financial institutions (11,500,000) (822,850,000) 43,500,000 (745,350,000) Finance lease payments (1,130,340) (27,942,746) (1,130,340) (27,942,746) Payment for hire purchase payable - (515,574) - (515,574) Short-term loans from a subsidiary - - 11,027,304 Repayment of short-term loans from a subsidary - - (11,027,304) Long-term loans from a subsidiary - - 31,646,562 72,101,952 Repayment of long-term loans from a subsidary - - (47,917,357) (41,715,114) Long-term loans from financial institutions 209,200,000 1,687,300,000 139,000,000 1,648,800,000 Repayment of long-term loans from financial institutions (168,650,000) - (162,400,000) Finance costs paid (365,373,909) (339,799,013) (246,574,309) (222,360,167) Dividend paid - (22,447,636) - (22,447,636) Dividend paid to minority interests

(6,300,012) - - Net cash provided by (used in) financing activities (343,754,261) 473,745,031 (243,875,444) 660,570,715 Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year 5 Cash and cash equivalents at end of year 5 Non-cash transactions Offsetting rental deposit received from lessees with accounts receivable Vehicles purchased under hire purchase contract Acquisition of plant and equipment, intangible assets and leasehold rights for land and buildings for which payment has yet to be made

(57,104,168) (138,592,852) (107,927,287) (112,830,031) 277,488,552 220,384,384

416,081,404 277,488,552

201,834,559 93,907,272

314,664,590 201,834,559

4,016,134 1,449,000

1,592,109 -

4,016,134 1,449,000

1,592,109 -

38,086,089

93,925,423

18,911,350

55,423,761

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

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Notes to the financial statements The Erawan Group Public Company Limited and its Subsidiaries For the years ended 31 December 2010 and 2009

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Company’s Board of Directors on 22 February 2011.

1. General information

The Erawan Group Public Company Limited, the “Company”, is incorporated in Thailand and has its registered office at 2 Sukhumvit Road, Klongtoey Subdistrict, Klongtoey District, Bangkok. The Company has 9 branches in Bangkok, Chon Buri, Phuket and Surat Thani.

The Company was listed on the Stock Exchange of Thailand in June 1994.

The principal businesses of the Company are engaged as a holding company with investments in various companies, engaged in building rental business, and in hotel business. Details of the Company’s subsidiaries and associate as at 31 December 2010 and 2009 were as follows:

Name of the entity

Type of business

Direct subsidiaries Erawan Hotel Public Company Limited Hotel Erawan Chaophraya Company Limited Hotel Erawan Rajdamri Company Limited Hotel Erawan Phuket Company Limited Hotel Erawan Samui Company Limited Hotel Erawan Naka Company Limited Land owner The Reserve Company Limited Real estate

development Indirect subsidiaries Erawan Hotel Public Company Limited Hotel Erawan Chaophraya Company Limited Hotel Associate Rajprasong Development Service Company Limited

83 083

Notes to the financial statements

Country of incorporation

Ownership interest (%) 2010 2009

Thailand Thailand Thailand Thailand Thailand Thailand Thailand

72.59 95.77 99.99 99.99 99.99 99.99 99.99

72.59 95.77 99.99 99.99 99.99 99.99 99.99

Thailand Thailand

1.05 4.22

1.05 4.22

Thailand

48.00

48.00

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2. Basis of preparation of the financial statements

The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the

Thai language.

The financial statements are prepared and presented in Thai Baht. All financial information presented in

Thai Baht has been rounded in the notes to the financial statements to the nearest thousand unless otherwise stated.

They are prepared on the historical cost basis except as stated in the accounting policies.

The financial statements are prepared in accordance with Thai Financial Reporting Standards (“TFRS”); guidelines promulgated by the Federation of Accounting Professions (“FAP”); applicable rules and regulations of

the Thai Securities and Exchange Commission; and with generally accepted accounting principles in Thailand.

During 2010, the FAP announced the re-numbering of the following TFRS.

Former No. Revised No. Topic TAS 11 TAS 101 Doubtful Account and Bad Debts TAS 26 TAS 102 Income Recognition For Real Estate Business TAS 27 TAS 103 Disclosures in the Financial Statements of Banks and Similar

Financial Institutions TAS 34 TAS 104 Accounting for Troubled Debt Restructuring TAS 40 TAS 105 Accounting for Investment in Debt and Equity Securities TAS 42 TAS 106 Accounting For Investment Companies TAS 48 TAS 107 Financial Instruments Disclosure and Presentation

The Group has adopted the revised Framework for the Preparation and Presentation of Financial Statements (revised 2009), which was issued by the FAP during 2010 and effective on 26 May 2010. The adoption of the revised framework does not have any material impact on the consolidated or separate financial statements.

The FAP has issued during 2010 a number of new and revised TFRS which are not currently effective and have not been adopted in the preparation of these financial statements. These new and revised standards and interpretations are disclosed in note 37.

The preparation of financial statements in conformity with TFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which estimates are revised and in any future periods affected.

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Notes to the financial statements

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Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statement is included in the following notes: Note 35 Contingent liabilities Note 16 Lease classification

3. Significant accounting policies

(a) Basis of consolidation

The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interests in associate.

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly

or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are the same with the policies adopted by the Group.

Associate

Associate is the entity in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. The consolidated financial statements include the Group’s share of the income, expenses and equity movements of associate after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associate are eliminated against the investment to the extent of the Group’s interest in the investee.

Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

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(b) Foreign currency transactions

Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Thai Baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of income.

(c) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits and highly liquid short-term investments.

(d) Trade and other accounts receivable

Trade and other accounts receivable are stated at their invoice value less allowance for doubtful accounts.

The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer payments. Bad debts are written off when incurred.

(e) Inventories

Inventories are stated at the lower of cost (the weighted average method) and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete and to make the sale.

(f) Investments

Investments in subsidiaries and associate

Investments in subsidiaries and associate in the separate financial statements of the Company are accounted for using the cost method.

Investment in associate in the consolidated financial statements is accounted for using the equity method.

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Notes to the financial statements

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Investments in equity securities

Marketable equity securities, other than those securities held for trading or intended to be held to maturity, are classified as being available-for-sale investments. Available-for-sale investments are, subsequent to initial recognition, stated at fair value, and changes therein, other than impairment losses on available-for-sale monetary items, are recognised directly in equity. Impairment losses are recognised in the statement of income. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in the statement of income. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the statement of income.

(g) Property, plant and equipment

Owned assets

Lands are stated at cost. Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Leased assets

Leases in terms of which the Group substantially assumes all the risk and rewards of ownership are classified as finance leases. Equipment and vehicles acquired by way of finance leases is capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of income.

Depreciation

Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

Building and improvements 5 - 40 years Furniture, fixtures and equipment 5 - 10 years Vehicles 5 years

See in Note 33 to the financial statements.

No depreciation is provided on freehold land or assets under construction.

Operating equipment consists of linen, crockery, glass, silver and kitchen utensils purchased to meet the normal requirements of the hotel operations have been regarded as a base stock and subsequent purchases are expended when incurred.

Back 087 Notes to the financial statements

(h) Leasehold rights

Leasehold rights are stated at cost less accumulated amortisation and impairment losses.

Amortisation

Leasehold rights are amortised on a straight-line basis over the terms of the leases.

(i) Intangible assets

Intangible assets that are acquired by the Group, which have finite useful lives, are stated at cost less accumulated amortisation and impairment losses. The estimated useful lives are as follows:

Computer softwares 5 - 10 years

(j) Impairment

The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in the statement of income.

When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the value of the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the statement of income even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in the statement of income is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in the statement of income.

Calculation of recoverable amount

The recoverable amount of available-for-sale financial assets is calculated by reference to the fair value.

The recoverable amount of a non-financial asset is the greater of the asset’s value in use and fair value less cost to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using

a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets,

the recoverable amount is determined for the cash-generating unit to which the asset belongs.

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Reversals of impairment

An impairment loss in respect of a financial asset is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

Impairment losses recognised in prior periods in respect of other non-financial assets are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(k) Trade, construction and other accounts payable

Trade, construction and other accounts payable are stated at cost.

(l) Provisions

A provision is recognised when the Group has a present legal or constructive obligation as a result of

a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and

a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(m) Revenue

Revenue excludes value added taxes and is arrived at after deduction of trade discounts.

Revenue from hotel operations

Hotel revenues from room, food and beverages and other services are recognised when the rooms are occupied, food and beverages are sold and the services are rendered.

Rental and services income

Rental and services income from units in office buildings and shopping center are recognised in the statement of income on an accrual basis.

Interest income and dividend income

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Interest income is recognised in the statement of income as it accrues. Dividend income is recognised in the statement of income on the date the Group’s right to receive payments is established.

(n) Deferred income

The Company recognises deferred rental income as income on a straight-line basis over the terms of the leases.

(o) Expenses

Operating leases

Payments made under operating leases are recognised in the statement of income on a systematic basis over the term of the lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease payments made.

Finance costs

Interest expenses and similar costs are charged to the statement of income in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale. The interest component of finance lease payments is recognised in the statement of income using the effective interest rate method.

(p) Income tax

Income tax on the profit or loss for the year comprises current tax. Current is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable interest of previous years.

4. Related party transactions and balances

Related parties are those parties linked to the Group and the Company as shareholders or by common shareholders or directors. Transactions with related parties are conducted at prices based on market prices or, where no market price exists, at contractually agreed prices.

Relationships with related parties that control or jointly control the Company or are being controlled or jointlycontrolled by the Company or have transactions with the Group were as follows: 090

Notes to the financial statements

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Name of entities

Country of incorporation/nationality

Nature of relationships

Erawan Hotel Public Company Limited Thailand Subsidiary, 72.59% direct shareholding Erawan Chaophraya Company Limited Thailand Subsidiary, 95.77% direct shareholding Erawan Rajdamri Company Limited Thailand Subsidiary, 99.99% direct shareholding Erawan Phuket Company Limited Thailand Subsidiary, 99.99% direct shareholding Erawan Samui Company Limited Thailand Subsidiary, 99.99% direct shareholding Erawan Naka Company Limited Thailand Subsidiary, 99.99% direct shareholding The Reserve Company Limited Thailand Subsidiary, 99.99% direct shareholding Rajprasong Development Co., Ltd. Thailand Associate, 48.00% direct shareholding, some common directors Rajprasong Square Co., Ltd. Thailand Related company, 23.29% direct shareholding Chai Talay Hotel Co., Ltd. Thailand Related company, director is closed relative to a Company’s director Panel Plus Co., Ltd. Thailand Related company, some common directors Petro Green Co., Ltd. Thailand Related company, some common directors Mitr Phol Sugar Co., Ltd. Thailand Related company, some common directors Phu Khieo Bio Energy Co., Ltd. Thailand Related company, some common directors Banpu Public Co., Ltd. Thailand Related company, some common directors The Syndicate of Thai Hotels & Tourists Enterprises Ltd. Thailand Related company, some common directors IAG Insurance (Thailand) Ltd. Thailand Related company, some common directors Pacific World (Thailand) Ltd. Thailand Related company, some common directors Eastern Sugar and Cane Co., Ltd. Thailand Related company, some common directors

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

Transactions

Pricing policies

Subsidiaries Interest income At the rate of 4.15% - 4.53% per annum (2009: at the rate of 4.15% - 5.05% per annum) Dividend income According to the shareholders’ approval Utilities income Contractually agreed prices Rental and service expenses Baht 17 million per annum Interest expenses At the rate of 4.15% - 4.53% per annum (2009: at the rate of 4.15% - 5.05% per annum) 091

Notes to the financial statements

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Transactions

Pricing policies

Associate Management fee At cost - allocated in proportion to shareholding

Other related parties Rental and services income Baht 308 - 583 per square meter per month (2009: Baht 300 - 566 per square meter per month) depending on location Utilities income Contractually agreed prices Other service income Fair price under the best conditions Land rental Baht 11 million per annum Insurance expenses Fair price under the best conditions

Significant transactions for the years ended 31 December 2010 and 2009 with related parties were as follows: (Unit: in Thousand Baht)

Note

Subsidiaries Interest income Dividend income Utilities income Rental and service expenses Interest expenses 28 Other related parties Rental and services income Utilities income Other service income Land rental Management fee Insurance expenses

092

Notes to the financial statements

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

- - - - -

- - - - -

38,940 17,350 1,918 16,264 1,874

28,173 1,995 16,472 1,502

45,551 4,264 5,667 10,920 1,000 -

41,295 3,271 3,240 10,920 1,600 1,632

43,082 4,264 5,073 - 1,000 -

38,469 3,271 2,715 1,600 982

Back

SUCCESS WITH INTEGRITY

Balances as at 31 December 2010 and 2009 with related parties were as follows: (Unit: in Thousand Baht)

Note

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Trade accounts receivable from related parties Subsidiaries Erawan Hotel Public Company Limited Erawan Rajdamri Company Limited Erawan Samui Company Limited

- - -

- - -

126 880 328

105 672 273

Other related parties Mitr Phol Sugar Co., Ltd. Banpu Public Co., Ltd. Petro Green Co., Ltd. Panel Plus Co., Ltd. Phu Khieo Bio-Energy Co., Ltd. Chai Talay Hotel Co., Ltd. Pacific World (Thailand) Ltd. Eastern Sugar and Cane Co., Ltd. Other companies Total 6

986 442 63 727 19 243 438 292 55 3,265

907 325 280 191 16 434 - - 31 2,184

986 342 63 727 19 - 438 - 55 3,964

867 325 280 191 16 31 2,760

(Unit: in Thousand Baht)

Other receivable-related party Subsidiary Erawan Chaophraya Company Limited

093

Notes to the financial statements

Consolidated financial statements 2010 2009

-

-

Separate financial statements 2010 2009

746

-

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(Unit: in Thousand Baht)

Prepaid expense-related party Other related party The Syndicate of Thai Hotels & Tourists Enterprises Ltd.

Consolidated financial statements 2010 2009

5,460

5,460

(Unit: % per annum)

Separate financial statements 2010 2009

-

-

(Unit: in Thousand Baht)

Consolidated Separate Interest rate

financial statements financial statements 2010 2009 2010 2009 2010 2009

Loans to related parties Long-term loans Subsidiaries Erawan Samui Company Limited 4.53 4.15 Erawan Naka Company Limited 4.53 4.15 Erawan Phuket Company Limited 4.53 4.15 Erawan Chaophraya Company Limited 4.53 4.15 The Reserve Company Limited - - Total

094

Notes to the financial statements

- - - - - -

- 79,316 - 20,036 - 598,568 - 228,740 - 154,114 - 1,080,774

73,500 16,909 484,973 26,968 143,396 745,746

Back

SUCCESS WITH INTEGRITY

Movements during the years ended 31 December 2010 and 2009 of loans to related parties were as follows:

(Unit: in Thousand Baht)

Loans to related parties Short-term loans Subsidiary At 1 January Increase Decrease At 31 December Long-term loans Subsidiaries At 1 January Increase Decrease At 31 December

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

- - - -

- - - -

- 184,861 (184,861) -

88,489 (88,489) -

- - - -

- - - -

745,746 457,451 (122,423) 1,080,774

516,791 269,662 (40,707) 745,746

(Unit: in Thousand Baht)

Trade accounts payable-related party Subsidiaries Erawan Hotel Public Company Limited Erawan Chaophraya Company Limited

Other payable - related party Erawan Chaophraya Company Limited

095

Notes to the financial statements

Consolidated financial statements 2010 2009

- - -

- - -

Consolidated financial statements 2010 2009 -

-

Separate financial statements 2010 2009

257 30 287

200 - 200

(Unit: in Thousand Baht)

Separate financial statements 2010 2009 23

-

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(Unit: % per annum)

(Unit: in Thousand Baht)

Consolidated Separate Interest rate

financial statements financial statements

2010 2009 2010 2009 2010 2009 Loans from a related party Long-term loans Subsidiary Erawan Rajdamri Company Limited 4.53 4.15 - - 38,861 55,132

Movements during the years ended 31 December 2010 and 2009 of loans from related parties were as follows:

(Unit: in Thousand Baht)

Loans from a related party Short-term loans Subsidiary At 1 January Increase Decrease At 31 December Long-term loans Subsidiary At 1 January Increase Decrease At 31 December

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

- - - -

- - - -

- 11,027 (11,027) -

-

- - - -

- - - -

55,132 31,646 (47,917) 38,861

24,745 72,102 (41,715) 55,132

5. Cash and cash equivalents

(Unit: in Thousand Baht)

Consolidated financial statements 2010 2009

Cash on hand Cash at banks Highly liquid short-term investments Total

7,559 194,741 18,084 220,384

7,293 270,196 - 277,489

Separate financial statements 2010 2009 3,684 90,223 - 93,907

3,763 198,072 201,835

Cash and cash equivalents of the Group and the Company as at 31 December 2010 and 2009 were denominated in Thai Baht.

096

Notes to the financial statements

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SUCCESS WITH INTEGRITY

6. Trade accounts receivable (Unit: in Thousand Baht)

Note

Consolidated financial statements 2010 2009

Related parties 4 3,265 Other parties 146,722

149,987 Less allowance for doubtful accounts (1,941) Net 148,046 Doubtful debts expenses (reversal) for the year 717

Aging analyses for trade accounts receivable were as follows:

Separate financial statements 2010 2009

2,184 148,969 151,153 (2,658) 148,495

3,964 76,460 80,424 (1,216) 79,208

2,760 78,944 81,704 (2,130) 79,574

852

(914)

1,314

(Unit: in Thousand Baht)

Related parties Outstanding: Less than 3 months Other parties Outstanding: Less than 3 months 3 - 6 months 6 - 12 months Over 12 months

Less allowance for doubtful accounts

Net

Trade accounts receivable of the Group and denominated in Thai Baht.

097

Notes to the financial statements

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

3,265

2,184

3,964

2,760

141,574 4,127 949 72 146,722 (1,941) 144,781 148,046

147,152 1,345 246 226 148,969 (2,658) 146,311 148,495

73,482 1,957 949 72 76,460 (1,216) 75,244 79,208

77,833 639 246 226 78,944 (2,130) 76,814 79,574

the Company as at 31 December 2010 and 2009 were

Back

7. Inventories (Unit: in Thousand Baht)

Note

Food and beverage Operating supplies Real estate for sale 12 Others Total

Consolidated financial statements 2010 2009 32,801 15,365 17,684 7,048 72,898

35,071 12,044 23,254 7,878 78,247

Separate financial statements 2010 2009 9,118 989 17,684 254 28,045

9,215 237 23,254 1,086 33,792

8. Other current assets (Unit: in Thousand Baht)

Note

Other advances Prepaid expenses 4 Other receivables 4 Undue input value added tax Others Total

098

Notes to the financial statements

Consolidated financial statements 2010 2009 46,887 24,009 1,577 9,735 12,976 95,184

39,828 21,890 3,055 9,914 14,229 88,916

Separate financial statements 2010 2009 322 9,083 843 3,843 1,792 15,883

4,669 7,190 128 7,333 1,072 20,392

Back

099

Notes to the financial statements

(Unit: %)

(Unit: in Million Baht)

(Unit: in Thousand Baht) Separate financial statements

2010

2009

2010

2009

2009

2009

2010

- - - - - - -

68,000 68,000 - 451,291 451,291 - 582,001 582,001 - 376,858 376,858 - 300 300 - 1,000 1,000 - 2,299,160 2,299,160 17,350

- 819,710 819,710 17,350

2010

- - - - - - -

-

2009

Dividend income

During the first quarter of 2008 the Company received the transfer of the entire business of Erawan Ploenchit Company Limited. The subsidiary subsequently registered the dissolution with the Ministry of Commerce. In addition, a meeting of the Board of Directors of the subsidiary approved

the return of share capital to the shareholders prior to liquidation at the rate of Baht 7.36 per share, totalling Baht 1,480.3 million, and such amount has already been paid. The Company set up a loss from diminution in the value of investment in the subsidiary of Baht 656.5 million in the statement of income. However, on 4 April 2008, the Company returned to the subsidiary a portion of Baht 0.0032 per share, totalling Baht 0.6 million, of the amount that the Company received in advance, without waiting for the completion of the liquidation process. On 11 December 2009 the said subsidiary registered for dissolution. The Company received the rest of capital and recognised loss from written off investment in the said subsidiary in the amount of Baht 0.8 million.

- - - - - - -

68,000 68,000 451,291 451,291 582,001 582,001 376,858 376,858 300 300 1,000 1,000 2,299,160 2,299,160

2010 -

2009

819,710 819,710

2010

Ownership

Paid-up capital Cost method Impairment At cost - net Interest

Erawan Hotel Public Company Limited 72.59 72.59 119.50 119.50 Erawan Chaophraya Company Limited 95.77 95.77 71.00 71.00 Erawan Rajdamri Company Limited 99.99 99.99 450.00 450.00 Erawan Phuket Company Limited 99.99 99.99 550.00 550.00 Erawan Samui Company Limited 99.99 99.99 330.00 330.00 Erawan Naka Company Limited 99.99 99.99 7.50 7.50 The Reserve Company Limited 99.99 99.99 1.00 1.00 Total

Company’s name

Investments in subsidiaries as at 31 December 2010 and 2009, and dividend income from those investments for the years then ended were as follows:

9. Investments in subsidiaries

SUCCESS WITH INTEGRITY

Back

100

Notes to the financial statements

Back

48.00

1.00

1.00

Paid-up capital 2010 2009

Ownership interest 2010 2009

48.00

(Unit: in Million Baht)

(Unit: %)

338

338

Cost method 2010 2009

338

338

Equity method 2010 2009

-

-

Impairment 2010 2009

(Unit: in Thousand Baht) Consolidated financial statements

338

338

At equity - net 2010 2009

-

-

Dividend income 2010 2009

Associate Rajprasong Development Co., Ltd.

48.00

1.00

1.00

Paid-up capital 2010 2009

Ownership Interest 2010 2009 48.00

(Unit: in million Baht)

(Unit: %)

338

338

Cost method 2010 2009

-

-

Impairment 2010 2009

338

338

At cost - net 2010 2009

(Unit: in Thousand Baht) Separate financial statements

-

-

Dividend income 2010 2009

During the year, the Company did not record its shares in the operating result of investments in associate in the consolidated financial statements because it found that the amount was immaterial.

Associate Rajprasong Development Co., Ltd.

Investments in associate as at 31 December 2010 and 2009, and dividend income from the investment for the years then ended were as follows:

10. Investment in associate

SUCCESS WITH INTEGRITY

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

(Unit: %)

Ownership interest

Total assets

Total liabilities

Total revenues

Net loss

48.00

1,772

248

2,005

(477)

48.00

2,998

1,953

3,206

(41)

2010 Rajprasong Development Co., Ltd. 2009 Rajprasong Development Co., Ltd.

11. Investments in other related parties

(Unit: in Thousand Baht)

(Unit: %)

Equity interest

2010

(Unit: in Thousand Baht)

2009

Related companies Rajprasong Square Co., Ltd. 23.29 23.29 The Asia Recovery 2 Fund 0.17 0.17 Less allowance for change in value Total

(Unit: %)

Equity interest

2010

Notes to the financial statements

Consolidated financial statements 2010 2009 206 2,942 (577) 2,571

206 3,290 (191) 3,305

(Unit: in Thousand Baht)

2009

Related companies Rajprasong Square Co., Ltd. 23.29 23.29 The Asia Recovery 2 Fund 0.13 0.13 Less allowance for change in value Total

101

Separate financial statements 2010 2009 206 2,174 (405) 1,975

206 2,427 (108) 2,525 Back

102

Notes to the financial statements

Back

Cost At 1 January 2009 Additions Adjustments Transfers Transfer to real estate for sale 7 Disposals At 31 December 2009 and 1 January 2010 Additions Adjustments Transfers Disposals At 31 December 2010 1,652,000 6,434 - - (10,063) - 1,648,371 3,224 - - (3,014) 1,648,581

Land

Note

(a) The Group

12. Property, plant and equipment

7,563,967 1,639,925 93,423 364,107 (105) (384) 1,736,755 31,471 - - (1,747) (25,714) 9,392,293 2,009,405 48,954 33,731 (1,138) (287) 337,909 62,091 (6,249) (25,029) 9,771,769 2,079,911

84,555 4,670 24 306 - (55,691) 33,864 2,968 - - (1,357) 35,475

Total

163,578 1,097,056 12,201,081 48,397 837,342 1,354,373 - - (465) 3,519 (1,773,615) (1,564) - (13,191) (23,254) - - (83,152) 215,494 147,592 13,447,019 6,916 358,863 454,656 - (5,216) (6,641) 7,671 (411,077) (3,406) - - (35,649) 230,081 90,162 13,855,979

Building Furniture,

Assets Operating and fixtures and Vehicles

under equipment construction improvements equipment

Consolidated financial statements

(Unit: in Thousand Baht)

103

Building Furniture,

Assets Operating and fixtures and Vehicles under equipment improvements equipment construction

Consolidated financial statements Total

Depreciation At 1 January 2009 - 1,919,738 988,410 45,771 - - 2,953,919 Depreciation charge for the year - 316,590 192,827 13,063 - - 522,480 Adjustments - (2) (8) 3 - - (7) Disposals - (1,457) (24,830) (44,338) - - (70,625) At 31 December 2009 and 1 January 2010 - 2,234,869 1,156,399 14,499 - - 3,405,767 Depreciation charge for the year - 334,008 235,641 5,969 - - 575,618 Adjustments - (12) - - - - (12) Disposals - (5,071) (22,707) (1,293) - - (29,071) At 31 December 2010 - 2,563,794 1,369,333 19,175 - - 3,952,302 Net book value At 1 January 2009 Owned assets 1,652,000 5,644,229 651,446 20,428 163,578 1,097,056 9,228,737 Assets under finance leases - - 69 18,356 - - 18,425

1,652,000 5,644,229 651,515 38,784 163,578 1,097,056 9,247,162 Eliminated 378,407 9,625,569 At 31 December 2009 and 1 January 2010 Owned assets 1,648,371 7,157,424 852,956 19,365 215,494 147,592 10,041,202 - 50 Assets under finance leases - - 50 - -

1,648,371 7,157,424 853,006 19,365 215,494 147,592 10,041,252 Eliminated 365,383 10,406,635

Land

(Unit: in Thousand Baht)

SUCCESS WITH INTEGRITY

Notes to the financial statements

Back

104

Notes to the financial statements

Back

Building Furniture,

Assets and fixtures and Vehicles Operating under equipment construction improvements equipment

Consolidated financial statements Total

At 31 December 2010 Owned assets 1,648,581 7,207,975 710,578 15,044 230,081 90,162 9,902,421 Assets under finance leases - - - 1,256 - - 1,256

1,648,581 7,207,975 710,578 16,300 230,081 90,162 9,903,677 Eliminated 352,148 10,255,825 Depreciation for the year 2009 522,480 Eliminated 13,024

535,504 2010 575,618 Eliminated 13,024

588,642

Land

(Unit: in Thousand Baht)

105

Notes to the financial statements

- -

28 28

-

- -

- -

- -

- 4,264

31,407

Building Furniture,

Assets Operating and fixtures and Vehicles

under equipment construction improvements equipment

Consolidated financial statements

4,264

31,407

Total

The Gross amount of the Group’s fully depreciated plant and equipment of that was still in use as at 31 December 2010 amounted to Baht 924.7 million (2009: Baht 823.9 million).

Finance costs capitalised Finance costs capitalised during 2009 Rates of interest capitalised during 2009 (MLR-1.50 % per annum) Finance costs capitalised during 2010 Rates of interest capitalised during 2010 (MLR-1.50 % per annum)

Land

Note

(Unit: in Thousand Baht)

SUCCESS WITH INTEGRITY

Back

106

Notes to the financial statements

Back

Cost At 1 January 2009 Additions Adjustments Transfers Transfer to real estate for sale 7 Disposals At 31 December 2009 and 1 January 2010 Additions Adjustments Transfers Disposals At 31 December 2010 Depreciation At 1 January 2009 Depreciation charge for the year Adjustments Disposals At 31 December 2009 and 1 January 2010 Depreciation charge for the year Adjustments Disposals At 31 December 2010

Separate financial statements

4,042,411 8,585 (105) 1,634,039 - (1,747) 5,683,183 36,067 (904) 63,712 (6,234) 5,775,824 965,483 189,223 (2) (1,458) 1,153,246 208,943 (12) (5,064) 1,357,113

- - - - - - - - -

356,610 100,008 (4) (11,913) 444,701 136,320 - (14,928) 566,093

643,515 291,990 60 30,480 - (12,167) 953,878 22,318 (287) 7,030 (16,841) 966,098 42,509 9,495 3 (44,338) 7,669 2,299 - (1,246) 8,722

66,589 4,328 24 - - (55,692) 15,249 1,450 - - (1,246) 15,453 - - - - - - - - -

- - - - - - - - -

72,366 1,031,512 38,709 711,692 - - 573 (1,666,301) - (13,191) - - 111,648 63,712 2,720 80,809 - (5,215) 35 (70,804) - - 114,403 68,502

1,364,602 298,726 (3) (57,709) 1,605,616 347,562 (12) (21,238) 1,931,928

7,104,019 1,055,304 (21) (1,209) (23,254) (69,606) 8,065,233 143,364 (6,406) (27) (27,334) 8,174,830

Total

(Unit: in Thousand Baht) Building Furniture,

Assets Operating and fixtures and Vehicles

under equipment construction improvements equipment

1,247,626 - - - (10,063) - 1,237,563 - - - (3,013) 1,234,550

Land

Note

(b) The Company

107

Notes to the financial statements

3,076,928 - 3,076,928 4,529,937 - 4,529,937 4,418,711 - 4,418,711 - -

1,247,626 - 1,247,626 1,237,563 - 1,237,563 1,234,550 - 1,234,550 - -

-

-

400,005 - 400,005

509,127 50 509,177

286,836 69 286,905

-

-

5,475 1,256 6,731

7,580 - 7,580

5,724 18,356 24,080

-

-

114,403 - 114,403

111,648 - 111,648

72,366 - 72,366

1,799

31,366

68,502 - 68,502

63,712 - 63,712

1,031,512 - 1,031,512

Building Furniture,

Assets Operating and fixtures and Vehicles

under equipment construction improvements equipment

Separate financial statements

1,799

31,366

6,241,646 1,256 6,242,902

6,459,567 50 6,459,617

5,720,992 18,425 5,739,417

Total

The gross amount of the Company’s fully depreciated plant and equipment that was still in use as at 31 December 2010 amounted to Baht 411.7 million (2009: Baht 398.2 million).

Net book value At 1 January 2009 Owned assets Assets under finance leases

At 31 December 2009 and 1 January 2010 Owned assets Assets under finance leases

At 31 December 2010 Owned assets Assets under finance leases

Finance costs capitalised Finance costs capitalised during 2009 28 Rates of interest capitalised during 2009 (MLR-1.50% per annum) Finance costs capitalised during 2010 28 Rates of interest capitalised during 2010 (MLR-1.50% per annum)

Land

Note

(Unit: in Thousand Baht)

SUCCESS WITH INTEGRITY

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13. Leasehold rights for land and buildings (Unit: in Thousand Baht)

Consolidated financial statements

Leasehold Leasehold

rights for Total rights for land

buildings Cost At 1 January 2009 Additions Disposals At 31 December 2009 and 1 January 2010 Additions Disposals Adjustment At 31 December 2010

1,020,131 1,650 - 1,021,781 150,000 - 5,237 1,177,018

1,208,593 2,241 (6) 1,210,828 3,279 (768) (1,483) 1,211,856

2,228,724 3,891 (6) 2,232,609 153,279 (768) 3,754 2,388,874

Amortisation At 1 January 2009 Amortisation for the year At 31 December 2009 and 1 January 2010 Amortisation for the year Disposal Adjustment At 31 December 2010

275,607 26,226 301,833 26,875 - 1,998 330,706

165,516 47,342 212,858 47,884 (768) - 259,974

441,123 73,568 514,691 74,759 (768) 1,998 590,680

Net book value At 1 January 2009 744,524 1,043,077 Eliminated

At 31 December 2009 and 1 January 2010 719,948 997,970 Eliminated

At 31 December 2010 846,312 951,882 Eliminated

1,787,601 (5,443) 1,782,158 1,717,918 (4,992) 1,712,926 1,798,194 (4,542) 1,793,652

108

Notes to the financial statements

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SUCCESS WITH INTEGRITY

(Unit: in Thousand Baht)

Separate financial statements

Leasehold Leasehold

rights for Total rights for land

buildings Cost At 1 January 2009 Additions At 31 December 2009 and 1 January 2010 Additions 31 December 2010

845,645 - 845,645 150,000 995,645

278,481 - 278,481 - 278,481

1,124,126 - 1,124,126 150,000 1,274,126

Amortisation At 1 January 2009 Amortisation for the year At 31 December 2009 and 1 January 2010 Amortisation for the year 31 December 2010

188,206 22,483 210,689 22,776 233,465

35,933 20,366 56,299 20,366 76,665

224,139 42,849 266,988 43,142 310,130

Net book value At 1 January 2009 657,439 242,548 899,987 At 31 December 2009 and 1 January 2010 634,956 222,182 857,138 At 31 December 2010 762,180 201,816 963,996

The Group and the Company have mortgaged most of their and its leasehold rights for land, which have a net book value as at 31 December 2010 of Baht 677.5 million and Baht 612.1 million, respectively (2009: Baht 703.4 million and Baht 635.0 million, respectively), with banks to secure the loans.

(Unit: in Thousand Baht)

Amortisation for the year Less Capitalised amortisation Eliminated Amortisation included in statements of income

109

Notes to the financial statements

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

74,759 (381) (450)

73,568 (459) (450)

43,142 - -

42,849 -

73,928

72,659

43,142

42,849

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14. Intangible assets (Unit: in Thousand Baht)

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Computer Software Cost At 1 January Additions Transfers Disposals Adjustments At 31 December

143,189 5,115 3,322 (44) (807) 150,775

123,566 18,622 1,564 (563) - 143,189

99,233 3,556 25 (44) (90) 102,680

80,030 17,994 1,209 99,233

69,049 20,936 (44) 89,941

49,601 19,618 (170) 69,049

48,947 14,032 (44) 62,935

36,590 12,357 48,947

74,140 60,834

73,965 74,140

50,286 39,745

43,440 50,286

Amortisation and impairment losses At 1 January Amortisation charge for the year Disposals At 31 December Net book value At 1 January At 31 December

15. Other non-current assets (Unit: in Thousand Baht)

Withholding tax deducted at source Others Total

110

Notes to the financial statements

Consolidated financial statements 2010 2009 30,703 - 30,703

31,482 2,884 34,366

Separate financial statements 2010 2009 28,656 - 28,656

30,413 30,413

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16. Interest-bearing liabilities (Unit: in Thousand Baht)

Note

Current Short-term loans from financial institutions secured Current portion of long-term loans from financial institutions secured Current portion of finance lease liabilities Current portion of hire purchase payable

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

195,700

207,200

195,700

152,200

573,750 - 819 770,269

697,250 26 529 905,005

403,750 - 819 600,269

371,000 26 529 523,755

Non-current Long-term loans from financial institutions secured 7,829,517 7,665,467 5,314,750 5,370,900 Long-term loans from related parties unsecured 4 - - 38,861 55,132 Hire purchase payable 621 568 621 568

7,830,138 7,666,035 5,354,232 5,426,600 Total 8,600,407 8,571,040 5,954,501 5,950,355

The periods to maturity of interest-bearing liabilities, excluding finance lease liabilities and hire purchase payable, as at 31 December were as follows: (Unit: in Thousand Baht)

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

111

Notes to the financial statements

Consolidated financial statements 2010 2009 769,450 4,192,250 3,637,267 8,598,967

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

Separate financial statements 2010 2009 599,450 3,151,111 2,202,500 5,953,061

523,200 3,362,532 2,063,500 5,949,232

Back

Under the loan agreements, the Group has to comply with certain covenants and restrictions e.g.

the percentage of shareholding of the major shareholders, changes in directors, guarantees to loans of aval to promissory notes of any persons or any companies, dividend payments, merger or consolidation with any companies, and maintenance of certain financial ratios.

During the year 2010, the Company and certain subsidiaries were approved by various financial institutions to extend the due date of principal loan repayment which fall due in 2010 to be commenced in 2011. In addition,

the Company and certain subsidiaries were approved by those financial institutions to extend the principal loan repayment period for another 1 - 6 years.

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

(Unit: in Thousand Baht)

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Property, plant and equipment-net 8,611,172 8,731,712 5,541,237 5,772,469 Leasehold rights for land-net 677,546 703,445 612,180 634,956 Total 9,288,718 9,435,157 6,153,417 6,407,425

As at 31 December 2010 the Group and the Company had unutilised credit facilities of totalling Baht 441.3 million and Baht 250 million, respectively (2009: Baht 1,049.6 million and Baht 788.1 million, respectively).

Finance lease liabilities

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

(Unit: in Thousand Baht)

Principal

Consolidated/Separate financial statements 2010 2009 Interest Payments Principal Interest Payments

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

Interest-bearing liabilities of the Group as at 31 December 2010 and 2009 were denominated entirely in Thai Baht.

112

Notes to the financial statements

Back

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

17. Trade accounts payable

(Unit: in Thousand Baht)

Note

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Related party 4 - - 287 200 Other parties 211,897 230,684 89,796 74,901 Total 211,897 230,684 90,083 75,101

Trade accounts payable of the Group and the Company as at 31 December 2010 and 2009 were denominated entirely in Thai Baht.

18. Other current liabilities

(Unit: in Thousand Baht)

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Management, royalty, marketing and other fees payable hotel business Retention Advances from customers Value added tax payable Accrued expenses Income tax payable Deposits received - hotel business Others Total

25,358 65,957 23,709 14,852 100,542 10,629 56,656 50,518 348,221

10,099 13,457 6,775 8,160 58,569 - 24,232 30,083 151,375

29,152 70,082 19,420 7,000 104,107 27,678 54,017 54,610 366,066

10,835 23,057 6,755 60,474 22,204 28,664 151,989

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19. Deferred income (Unit: in Thousand Baht)

Consolidated financial statements

Leasehold rights - building, service and equipment - other parties Less accumulated amortisation Net book value Amortisation included in statements of income for the year

Separate financial statements

2010

2009

2010

2009

56,720 (41,399) 15,321

56,720 (38,585) 18,135

56,720 (41,399) 15,321

56,720 (38,585) 18,135

2,814

2,814

2,814

2,814

20. Share capital

(Unit: Thousand Shares/Thousand Baht)

Par value per share (in Baht)

Authorised At 1 January ordinary shares Reduction of authorised shares At 31 December ordinary shares

2010 Number

Amount

Number

2009

Amount

1 1

2,244,779 -

2,244,779 -

2,281,143 (36,364)

2,281,143 (36,364)

1

2,244,779

2,244,779

2,244,779

2,244,779

Issued and paid-up At 1 January ordinary shares 1 2,244,779 2,244,779 2,244,779 2,244,779 At 31 December ordinary shares 1 2,244,779 2,244,779 2,244,779 2,244,779

At the board of directors’ meeting of the Company held on 21 December 2010, the board of directors agreed to propose the following agenda to the 2011 annual general meeting of the shareholders of the Company as follows;

a) To consider the approval of the issuance of new warrants to existing shareholders of not exceeding 224,477,900 units and the issuance of ordinary shares to reserve for the conversion of the warrants.

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b) To consider the approval of the issuance and offering of 35,743,099 shares ordinary shares to employees of the group.

c) To consider the approval to increase the authorized share capital by issuing ordinary shares of not exceeding 260,220,999 shares at a par value of Baht 1 each to reserve for the conversion of warrants and for the rights to purchase ordinary shares of the employees of the Group.

At the annual general meeting of the shareholders of the Company held on 28 April 2009, the shareholders approved the reduction of authorised share capital from Baht 2,281.1 million to Baht 2,244.8 million by cancellation of unsold ordinary shares of 36,364,098 shares with a par value of Baht 1 each. The Company registered the reduction of authorised share capital with the Ministry of Commerce on 14 May 2009.

21. Additional paid-in capital and reserve

Share premium

Section 51 of the Public Companies Act B.E. 2535 requires companies to set aside share subscription monies received in excess of the par value of the shares issued to a reserve account (“share premium”). Share premium is not available for dividend distribution.

Legal reserve

The Public Companies Act B.E. 2535 Section 116 requires that a company shall allocate not less than 5% of its annual net profit, less any accumulated losses brought forward, to a reserve account (“legal reserve”), until this account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution.

Fair value changes

The fair value changes account within equity comprises the cumulative net change in the fair value of availablefor-sale financial assets until the investments are derecognised or impaired.

22. Segment information

Segment information is presented in respect of the Group’s business and geographic segments. The primary format, business segments, is based on the Group’s management and internal reporting structure.

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Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest or dividend-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Business segments

The Group comprises the following main business segments: Segment 1 Building rental business Segment 2 Hotel business

Geographic segments

Management considers that the Group operates in a single geographical area, namely in Thailand, and has, therefore, only one major geographical segment.

Business segments results in the consolidated financial statements for the years ended 31 December 2010 and 2009 were as follows:

(Unit: in Million Baht)

Building rental business 2010 2009

Hotel business

Eliminations

2010

2010

2009

2009

Total 2010

2009

Revenues from external 391 401 2,930 2,748 - - 3,321 3,149 Inter-segment revenues 20 20 - - (20) (20) - Total revenues 411 421 2,930 2,748 (20) (20) 3,321 3,149 Segment profit 138 153 41 80 (13) (13) 166 220 Unallocated income and expenses: Other income 43 43 Depreciation and amortisation (7) (10) Selling expenses (1) (2) Administrative expenses (80) (95) Finance costs (361) (307) Income tax (20) (46) Net profit attribute to minority interests (15) (32) Loss for the year (275) (229)

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Business segment financial position in the consolidated financial statements as at 31 December 2010 and 2009 were as follows: (Unit: in Million Baht)

Building rental business

2010

2009

Hotel business 2010

2009

Unallocated assets

Eliminations

2010

2010

2009

Total

2009

2010

2009

Inventories - - 55 55 18 23 - - 73 78 Property, plant and equipment 712 725 9,070 9,196 159 158 315 328 10,256 10,407 Leasehold rights for land and buildings 326 356 1,547 1,444 - - (79) (87) 1,794 1,713 Other assets 827 1,091 Total assets 12,950 13,289 (Unit: in Million Baht)

Building rental business

2010

2009

Hotel business 2010

2009

Unallocated liabilities

Eliminations

2010

2010

2009

2009

Total 2010

2009

Interest-bearing borrowings 475 480 8,976 8,561 268 330 (1,120) (801) 8,599 8,570 Account payable for land leasehold rights 180 180 180 180 - - - - 360 360 Other liabilities 718 820 Total liabilities 9,677 9,750

23. Other income (Unit: in Thousand Baht)

Gain from sale of fixed assets Gain from sale of investment Income from property tax Others Total

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Consolidated financial statements 2010 2009 286 - 7,834 29,993 38,113

14,870 526 6,719 15,869 37,984

Separate financial statements 2010 2009 201 - 7,704 27,905 35,810

12,816 506 6,531 13,316 33,169

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24. Selling expenses (Unit: in Thousand Baht)

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Marketing expenses Employee benefit expenses Total

155,611 58,471 214,082

101,798 16,643 118,441

150,608 56,101 206,709

74,053 20,054 94,107

25. Administrative expenses (Unit: in Thousand Baht)

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Employee benefit expenses Management and other fee Repair and maintenance expenses Others Total

234,486 168,299 39,358 224,785 666,928

150,475 95,201 21,328 74,954 341,958

243,331 159,375 44,705 223,373 670,784

145,553 89,596 16,154 87,089 338,392

26. Employee benefit expenses (Unit: in Thousand Baht)

Management Salaries, wages and other benefits Contributions to defined contribution plans

Consolidated financial statements 2010 2009 34,211 943 35,154

39,145 1,093 40,238

Separate financial statements 2010 2009 32,411 943 33,354

37,240 1,093 38,333

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(Unit: in Thousand Baht)

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Other employees Salaries, wages and other benefits 761,032 717,557 379,793 331,898 Contributions to defined contribution plans 18,356 17,830 7,900 6,738

779,388 735,387 387,693 338,636 Total 814,542 775,625 421,047 376,969

The defined contribution plans comprise provident funds established by the Group and the Company for its employees. Membership to the funds is on a voluntary basis. Contributions are made monthly by the employees at rates ranging from 3% to 10% of their basic salaries and by the Group and the Company at rates ranging from 3% to 10% of the employees’ basic salaries. The provident funds are registered with the Ministry of Finance as juristic entities and are managed by a licensed Fund Managers.

27. Expenses by nature

Significant expenses by nature are as follows: (Unit: in Thousand Baht)

Consolidated financial statements

Salaries and wages and other employee benefits Costs of food and beverage Rental expenses

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Separate financial statements

2010

2009

2010

2009

814,542 462,068 47,037

775,625 409,899 46,385

421,047 231,104 31,326

376,969 188,501 30,400

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28. Finance costs (Unit: in Thousand Baht)

Note

Interest: Related parties 4 Financial institutions Amortisation of transaction costs capitalised

Capitalised as cost of assets under construction 12 Net

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

- 363,477 1,549 365,026

- 337,750 503 338,253

1,874 245,080 31 246,985

1,502 219,401 40 220,943

(4,264) 360,762

(31,407) 306,846

(1,800) 245,185

(31,366) 189,577

29. Income tax expense (Unit: in Thousand Baht)

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

Current tax expense Current year 19,867 45,656 -

The current tax expense in the consolidated and separate statements of income does not equal the amount determined by applying the Thai corporation tax rate to the accounting profit for the year principally because:

(a) unutilised tax losses brought forward from previous years have been utilised during the year to set-off against the current year’s tax charge.

(b) the different treatment for accounting and taxation purposes of certain items of income and expenses.

(c) losses suffered by certain subsidiaries cannot be set-off against the profits of other subsidiaries for tax purposes.

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30. Basic earnings (loss) per share

The calculations of basic earnings (loss) per share for the years ended 31 December 2010 and 2009 were based on the profit (loss) for the year attributable to equity holders of the Company and the number of ordinary shares outstanding during the periods as follows: (Unit: in Thousand Baht/Thousand shares)

Profit (loss) attributable to equity holders of the Company (basic) Number of ordinary shares outstanding Earnings per share (basic) (in Baht)

Consolidated financial statements 2010 2009 (275,017) 2,244,779 (0.12)

(229,411) 2,244,779 (0.10)

Separate financial statements 2010 2009 15,342 2,244,779 0.01

(29,551) 2,244,779 (0.01)

31. Dividends

At the annual general meeting of the shareholders of a subsidiary held on 5 April 2010, the shareholders approved the appropriation of dividends of Baht 0.30 per share, amounting to Baht 23.9 million. The dividend was paid to shareholders on 4 May 2010

At the annual general meeting of the shareholders of the Company held on 27 April 2010, the shareholders approved the dividend omission because the Company has operating loss in the year 2009.

At the annual general meeting of the shareholders of the Company held on 28 April 2009, the shareholders approved the appropriation of dividends of Baht 0.01 per share, amounting to Baht 22.4 million. The dividend was paid to shareholders on 27 May 2009.

32. Financial instruments

Financial risk management policies

The Group is exposed to normal business risks from changes in market interest rates and currency exchange rates and from non-performance of contractual obligations by counterparties. The Group does not hold or issue derivative financial instruments for speculative or trading purposes.

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Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks.

The management continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved.

Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board monitors the return on capital, which the Group defines as result from operating activities divided by total shareholders’ equity, excluding non-controlling interests and also monitors the level of dividends to ordinary shareholders.

Interest rate risk

Interest rate risk is the risk that future movements in market interest rates will affect the results of the Group’s operations and its cash flows because loan interest rates are mainly floating or fixed. The Group is primarily exposed to interest rate risk from its borrowings (Note 16). The Group mitigates this risk by ensuring that the majority of its borrowings are close to the market rate.

The effective interest rates of loans receivable as at 31 December and the periods in which the loans receivable mature or re-price were as follows:

(Unit: in Thousand Baht)

Separate financial statements Effective After 1 year Within interest rate

but within After 5 years Total 1 year (% per annum)

5 years

2010 Loans receivable-related parties 2009 Loans receivable-related parties

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4.53

-

1,080,774

-

1,080,774

4.15

-

745,746

-

745,746

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The effective interest rates of interest-bearing financial liabilities as at 31 December and the periods in which those liabilities mature or re-price were as follows:

(Unit: in Thousand Baht)

Consolidated financial statements Effective After 1 year Within interest rate

but within After 5 years Total 1 year (% per annum)

5 years

2010 Loans payable-financial institutions

5, MLR-1.50, MLR-2.00, 6-month fixed deposit rate + 2.00

769,450

4,192,250 3,637,267

8,598,967

5, MLR-1.50, MLR-2.00, 6-month fixed deposit rate + 2.00

904,450

4,881,150 2,784,317

8,569,917

2009 Loans payable-financial institutions

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(Unit: in Thousand Baht)

Separate financial statements Effective After 1 year Within interest rate

but within After 5 years Total 1 year (% per annum)

5 years

2010 Loans payable-related party 4.53 - Loans payable-financial institutions 5, MLR-1.50,

MLR-2.00,

6-month fixed deposit

rate + 2.00 599,450 Total 599,450

38,861

-

3,112,250 2,202,500 3,151,111 2,202,500

38,861

5,914,200 5,953,061

2009 Loans payable-related party 4.15 - 55,132 - 55,132 Loans payable-financial institutions 5, MLR-1.50,

MLR-2.00,

6-month fixed deposit

rate + 2.00 523,200 3,307,400 2,063,500 5,894,100 Total 523,200 3,362,532 2,063,500 5,949,232

During the year 2010, the Company entered into interest rate swap contracts with a local financial institution for long-term loans in Baht with principal amounts of totaling Baht 2,665 million, which will swap interest at float interest rates to fixed interest rates as stipulated in the contracts. The terms of each contract are approximately 4 years, expiring on 31 December 2014.

Interest rate swap contracts protect the Group from movements in interest rates. Any differential to be paid or received on an interest rate swap contract is recognised as a component of finance costs over the period of the contract.

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The fair values of interest rate swap contracts as at 31 December 2010 are as follows: (Unit: in Thousand Baht)

Consolidated and Separate financial statements Fair valus 31 December 2010

31 December 2009

Interest rate swap contracts 16,479 -

Foreign currency risk

The Group operates mainly in Baht currency. Accordingly, the Company does not have material foreign currency risk.

Credit risk

Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Group as and when they fall due.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

Credit evaluations are performed on all customers requiring credit over a certain amount. At the reporting date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. However, due to the large number of parties comprising the Group’s customer base, Management does not anticipate material losses from its debt collection.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

Determination of fair values

For financial assets and liabilities which have short-term maturity and long-term loans which carrying interest approximate to the market rate, their carrying amounts in the balance sheet approximate their fair value.

The Company and its subsidiaries do not consider the fair value of financial assets and liabilities which have fixed interest rate over 1 year which is not significant when compare to the total loan amount.

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A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument.

33. Changing in estimate

Starting from 1 January 2010, the Company and certain subsidiaries have changed estimated useful lives of their building and building improvements from 30 years to 40 years. The effect of the change on the financial statements of the Group and the Company for the year ended 2010 was to decrease loss for the period by Baht 20.09 million. (Separate financial statements: increase profit Baht 6.71 million) respectively, and loss per share decreased

by Baht 0.008 per share (Separate financial statements: earnings per share increased by Baht 0.002 per share).

34. Commitments with non-related parties

(Unit: in Million Baht)

Capital commitments Contracted but not provided

Consolidated financial statements 2010 2009

Separate financial statements 2010 2009

305.1

400.9

248.2

167.0

Operating lease commitments Within one year After one year but within five years Total

33.8 2.8 36.6

36.0 3.4 39.4

13.2 0.9 14.1

28.2 3.2 31.4

Long-term lease commitments Within one year After one year but within five years After five years Total

46.5 213.9 2,669.5 2,929.9

43.2 195.6 2,224.2 2,463.0

27.3 135.5 1,852.9 2,015.7

26.9 109.6 1,906.5 2,043.0

750.0 30.1 780.1

750.0 31.0 781.0

750.0 21.5 771.5

750.0 22.4 772.4

Other commitments Guarantee for bank credit facilities Bank guarantees Total

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Long-term agreements

The Company and its subsidiaries have entered into several long-term lease agreements and several service agreements with third parties, local companies, overseas companies, and Government organizations as follows:

Long-term lease agreements

Erawan Rajdamri Company Limited entered into a building lease agreement with a Government organisation covering a term of thirty years, commencing 1 July 1987, whereby the subsidiary has to pay monthly rental at the rate for each year as specified in the agreement. However, on 9 January 2006 the subsidiary entered into the Building Renovation and Land and Renovated Building Lease Agreement. Under the terms of this agreement, the subsidiary is to pay remuneration of Baht 70.0 million, which had already been paid to the lessor, and monthly rental at the rate stipulated for each year, for a term of thirty years commencing 1 January 2008.

Erawan Hotel Public Company Limited has an agreement with a related company to lease land for a term of thirty years up to the year 2021, renewable for another twenty years. The subsidiary is to pay land rental charges of Baht 10.9 million per annum, and the land rental charge may be adjusted every ten years. Upon the expiration of the agreement, the ownership of buildings and building improvements on the leased land, including equipment, furniture and tools necessary for hotel operations, will be transferred to the lessor.

Erawan Ploenchit Company Limited entered into two lease agreements for the leasehold rights to land on which its hotel building and office building are situated from the lessor. Ownership of all structures constructed on the leased land, including that of equipment, furniture and tools which are vital to the project’s operation, will be transferred to the lessor upon the termination of the agreements. The subsidiary is to pay land rental charges of Baht 24.3 million (for the year 2005 - 2014) per annum and the land rental charge may be adjusted every ten years.

The term of the leases is a period of 30 years up to the year 2025. Under the terms of the lease agreements,

the subsidiary shall assume obligation to pay the following leasehold rights and deposits for rental.

1. Leasehold rights amounting to Baht 360.0 million. The subsidiary will pay this amount within the 30th year

of the lease and is recorded as part of “Accounts payable for land leasehold rights” in the balance sheets.

2. Deposits for rental amounting to Baht 180.0 million. The subsidiary has made the full payment of the deposits, which will be refunded in the 30th year and are presented as part of “Deposits for lease of land, building and equipment” in the balance sheets.

As at 24 December 2002, the subsidiary entered into an agreement to lease part of the land on which the hotel building is located for extend the period of agreement which allows the lessee to extend the term of the lease upon expiration of the agreement. The subsidiary was granted an extension of the term of the lease by 20 years as from

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24 January 2025 to 23 January 2045 and is to pay rental of Baht 216.1 million, which had already been paid to the lessor.

In addition to the above mentioned rental, the subsidiary also has a commitment to make the following rental payments:

Rental from 2025 to 2034 at the greater of Baht 44.7 million per annum or an amount determined based on an average of the consumer price index of Thailand.

Rental from 2035 to 2045 at the greater of Baht 89.4 million per annum or an amount determined based on an average of the consumer price index of Thailand.

On 1 January 2008, the subsidiary has transferred all commitments according to these agreements to the Company.

On 1 April 2002, Erawan Ploenchit Company Limited entered into a land lease agreement with third party for periods of 22 years and 10 months up to the year 2025. Under the agreement, the subsidiary agrees to pay rental totaling Baht 32.8 million, in three installments. The subsidiary had already paid the first and second installments of Baht 23.2 million and the remaining Baht 9.6 million will be repaid in 2025. In addition, the subsidiary is to pay a land rental charge of Baht 0.8 million per annum for the first three years, and such charge is then to be adjusted every ten years. Upon the expiration of the agreement, the ownership of all structures erected on the leased land, together with equipment, furniture and tools which are vital to the operation, are to be transferred to the lessor. On 1 January 2008, the subsidiary has transferred all commitments according to this agreement to the Company.

Erawan Chaophraya Company Limited entered into an agreement to lease land from a foundation for the purpose of land development and building construction. Under the terms of the agreement, the subsidiary is to pay rental charges of Baht 100,000 per month commencing 1 November 2004, and the rental charge may be adjusted every 10 years. The term of the lease is a period of 30 years up to the year 2034. The agreement is renewable upon its termination. In this regard, the subsidiary will have to give notice of its intention in writing to the lessor at least

1 year, and not more than 2 years in advance. Ownership of buildings and all structures constructed on the leased land will be transferred to the lessor upon the termination of the agreement.

On 9 June 2006, the Company entered into a land lease agreement with an unrelated party for a period of 30 years up to the year 2038. Under the terms of this agreement, the Company is to pay lease remuneration of Baht 25.0 million. The Company had already paid this remuneration. In addition, the Company is to pay a land rental charge of Baht 1.2 million per annum for the first three years, and such charge is then to be adjusted every 3 years. Upon the expiration of the agreement, the ownership of all constructures erected on the leased land, together with equipment which are unremovable, are to be transferred to the lessor.

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On 29 March 2007, the Company entered into a land lease agreement with an unrelated party for a period of 30 years up to the year 2039. Under the terms of this agreement, the Company is to pay lease remuneration of Baht 53.0 million. The Company had already paid this remuneration. In addition, the Company is to pay a land rental charge of Baht 0.4 million per annum for the first three years, and such charge is then to be adjusted every 3 years. Upon the expiration of the agreement, the ownership of all constructures erected on the leased land, together with equipment which are unremovable, are to be transferred to the lessor.

On 19 March 2010, the Company entered into a land lease agreement with 2 local companies for a period of 30 years up to the year 2043. Under the term of this agreement, the Company is to pay lease remuneration of Baht 150.0 million. The Company had already paid this remuneration. Upon the expiration of the agreement, the ownership of all constructures erected on the leased land, together with equipment which are unremovable, are to be transferred to the lessor.

Hotel management agreements

On 24 February 1988, Erawan Hotel Public Company Limited entered into agreements with various companies in the Hyatt International Corporation Limited Group (HYATT) whereby HYATT will provide necessary hotel construction and management services to the subsidiary. Under the terms of the agreements, the subsidiary is committed to pay a management fee, license fee, and a share of marketing expenses to HYATT, at the rates indicated in the agreements. The term of the management agreement is for twenty years, counting from commencement of hotel operations, to be extended for at least 10 years, dependent upon certain conditions as specified in the agreement.

On 29 October 2010, Erawan Hotel Public Company Limited entered into amendment agreement with Hyatt to amend certain conditions in the agreement. The subsidiary agreed to extend the term of the management agreement for another 9.5 years and extended for at least 10 years, dependent upon certain conditions as specified in the agreement.

On 3 February 1994, Erawan Ploenchit Company Limited entered into an agreement with Marriott Worldwide Corporation Group (‘Marriott’) to appoint the Marriott as management of the subsidiary’s hotel. The subsidiary also made agreements with Marriott relating to the hotel operations. Under the terms of the agreements, the subsidiary is committed to pay remuneration to Marriott at the rates, terms and basis specified in the agreements. The hotel management agreement will be terminated on 31 December 2032. On 1 January 2008, the subsidiary transferred all commitments under these agreements to the Company.

On 4 July 2005, Erawan Rajdamri Company Limited and Erawan Samui Company Limited entered into management agreements with Marriott Group (“Marriott”), to appoint the Marriott to manage the subsidiaries’ hotel as 129

Notes to the financial statements

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a standardised Courtyard by Marriott and Renaissance hotel. Under the terms of the agreements, the subsidiaries are committed to pay remuneration to Marriott in accordance with the rates, terms and basis specified in the agreements.

The terms of the hotel management agreements is to be for 30 years, counting from commencement of hotel operations, and is to be extendible for a further period of at least 10 years, dependent upon the fulfillment of certain conditions specified in the agreements.

In December 2005, the Company entered into agreement with Intercontinental Hotels Group to manage hotel under the brand Holiday Inn which located at Pattaya. Under the term of the agreements, the Company is committed to pay remuneration in accordance with the rates, terms and basis specifies in the agreements. The terms of the hotel management agreement is to be for 15 years, counting from commencement of hotel operations, and is to be extendible for a further period of at least 5 years, dependent upon the fulfillment of certain as conditions specified in the agreements.

In June 2006, Erawan Phuket Company Limited entered into agreements with the group of Six Senses Company which will provide resort management services to the subsidiary. Under the terms of the agreements, the subsidiary is committed to pay management fees at the rates indicated in the agreements. The term of the agreements is for 30 years, commencing from the resort operations, with an option to extend for further period, dependent upon certain as conditions specified in the agreements.

During June 2006 to March 2008, the Company and Erawan Chaopraya Company Limited entered into agreements with Accor Group to manage 10 hotels of the Company and a subsidiary under the brand Ibis which located in Thailand. Under the term of the agreements, the Company and a subsidiary are committed to pay remuneration in accordance with the rates, terms and basis specifies in the agreements. The terms of the hotel management agreement is to be for 15 years, counting from commencement of hotel operations, and is to be extendible for a further period of at least 5 years, dependent upon the fulfillment of certain conditions specified in the agreements. On 1 July 2009, the contract was extended from 15 to 20 years.

35. Contingent liabilities

130

Litigations and dispute a) During the year 2008, a former customer, who had rented a rental building, sued the Company for the return of a deposit for the lease of a building, which the Company had deducted against overdue payments for electricity amounting to approximately Baht 1.3 million. On 28 December 2010, the Court had dismissed the case and currently, the case is in the process of the Appeal Court. Management expects that there will be no significant impact to the Company as a result of the case.

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b) In February 2009, the Company received a summon to be a co-defendant in a case where the plaintiff,

a lessee of land together with building, sued the previous landlord who had sold the land together with building to the Company through the Civil Court for breach of a lease agreement and claimed compensation of approximately Baht 79.4 million. On 15 March 2010, the Court of First Instance had dismissed the case. The plaintiff filed for extension of appeal to the Court of First Instance, but the plaintiff had not appealed to the Court, thus the case has been finalized. c) In 2009, a subsidiary submitted a statement of claim to the Alternative Dispute Resolution Office, Arbitration Institute to consider the dispute with a contractor to pay for compensation arising from alleged breach of a construction contract. The contractor submitted a statement of defense and counterclaim to the Arbitration Institute as well. The dispute is in the arbitration process and has not been finalised.

Consequently, the subsidiary cannot estimate the impact as a result of the dispute.

36. Political demonstration

The political demonstration in Bangkok during April - May 2010 has impacted the Company and certain subsidiaries located in such area. As a result, revenues of the Company and such subsidiaries decreased by approximately Baht 180.3 million from the same period of previous year.

However, the Group received some supports from government measures to alleviate the impact from the demonstration.

37. Thai Accounting Standards (TAS) not yet adopted

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

TFRS Topic Year effective TAS 1 (revised 2009) TAS 2 (revised 2009) TAS 7 (revised 2009) TAS 8 (revised 2009) TAS 10 (revised 2009) TAS 12

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Notes to the financial statements

Presentation of Financial Statements Inventories Statement of Cash Flows Accounting Policies, Changes in Accounting Estimates and Errors Events after the Reporting Period Income Tax

2011 2011 2011 2011 2011 2011

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TFRS

Topic

Year effective

TAS 16 (revised 2009) Property, Plant and Equipment 2011 TAS 17 (revised 2009) Leases 2011 TAS 18 (revised 2009) Revenue 2011 TAS 19 Employee Benefits 2011 TAS 20 (revised 2009) Accounting for Government Grants and Disclosure of

Government Assistance 2013 TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates 2013 TAS 23 (revised 2009) Borrowing Costs 2011 TAS 24 (revised 2009) Related Party Disclosures 2011 TAS 26 Accounting and Reporting by Retirement Benefit Plans 2011 TAS 27 (revised 2009) Consolidated and Separate Financial Statements 2011 TAS 28 (revised 2009) Investments in Associates 2011 TAS 33 (revised 2009) Earnings per Share 2011 TAS 34 (revised 2009) Interim Financial Reporting 2011 TAS 36 (revised 2009) Impairment of Assets 2011 TAS 37 (revised 2009) Provisions, Contingent Liabilities and Contingent Assets 2011 TAS 38 (revised 2009) Intangible Assets 2011 TAS 40 (revised 2009) Investment Property 2011 TFRS 2 Share-based Payment 2011 TFRS 3 (revised 2009) Business Combinations 2011 TFRS 5 (revised 2009) Non-current Assets Held for Sale and Discontinued Operations 2011

Management has presently determined the effects from adoptions of the new and revised TFRS on the consolidated and separate financial statements as follows:

TAS 16 (revised 2009) - Property, plant and equipment

The principal changes introduced by the revised TAS 16 that will affect the Company is that (i) costs of asset dismantlement, removal and restoration have to be included as asset costs and subject to annual depreciation;

(ii) the depreciation charge has to be determined separately for each significant part of an asset; and (iii) the residual value of an item of property, plant and equipment has to be measured at the amount estimated receivable currently for the asset if the asset were already of the age and in the condition expected at the end of its useful life.

Furthermore, the residual value and useful life of an asset have to be reviewed at least at each financial year-end.

132

Notes to the financial statements

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SUCCESS WITH INTEGRITY

The revised TAS 16 (revised 2009) permits as a transitional provision that these changes may be introduced prospectively from the year of introduction. The Company intends to adopt this transitional provision which the management has already determined will not have any material impact on the financial statements.

TAS 19 - Employee benefits

The accounting standard, Employee Benefits, has been in effect for financial periods beginning on or after

1 January 2011. The Company therefore has not presently accounted for the costs of post-employment benefits under defined benefit plans; other long-term employee benefits; and termination benefits until such costs are incurred. This accounting standard includes the requirements to recognise expenses and provision for employee benefits in the period in which the service is performed. The standard requires actuarial assumptions to measure the obligations and expenses of long-term benefits and to measure on a discounted basis due to the settlement of these benefits would incur in the subsequent years of services.

Management has determined that the transitional liability as at 1 January 2011 for employee benefits would be increased Baht 39 million for the Group and Baht 16 million for the Company. Management has intention to recognise the liability by adjusting to retained earnings at that initial adoption of this standard.

TAS 40 (revised 2009) - Investment property

TAS 40 (revised 2009) has determined accounting practice for investment property and related disclosures.

Investment property is required to be presented separately in the statement of financial position. The entity can measure its investment property by fair value approach or cost approach. For fair value approach, changes in fair value are recognised in statement of income. The Group is in process of determining the approach to be applied at the initial adoption of the standard.

38. Events after the reporting period

On 22 February 2011, the meeting of the board of directors passed a resolution to propose to the annual general meeting of the Company’s shareholders for their approval of dividend omission for the year 2010.

133

Notes to the financial statements

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Corporate Information The Erawan Group Public Company Limited

The Erawan Group Public Company Limited

Registration No. 0107537001943 Head Office Ploenchit Center, 6th Floor 2 Sukhumvit Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2257 4588 Fax: 66 (0) 2257 4577

Branch 1 Erawan Bangkok, 494 Ploenchit Road, Kwang Lumpini, Khet Phathumwan, Bangkok 10330 Thailand Telephone: 66 (0) 2250 7777 Fax: 66 (0) 2250 7788

Branch 2 JW Marriott Hotel Bangkok, 4 Sukhumvit Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2656 7700 Fax: 66 (0) 2656 9831

Branch 3 Ibis Patong Phuket, 10 Chalermphrakiat Road, Patong, Katu, Phuket 83150 Thailand Telephone: 66 (0) 7630 3888 Fax: 66 (0) 7630 3889

Branch 4 Ibis Pattaya, 463/79 Pattaya Sai 2 Road, Nongprue, Bang Lamung, Chonburi 20150 Thailand Telephone: 66 (0) 3841 8188 Fax: 66 (0) 3841 8189

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Corporate Information

Branch 5 Ibis Samui 197 Rob Koh Road, Bophut, Koh Samui, Surat Thani 84320 Thailand Telephone: 66 (0) 7791 4888 Fax: 66 (0) 7791 4889

Branch 6 Ibis Sathorn, 29/9 Soi Ngam Duphli, Rama IV Road, Kwang Thung Mahamek, Khet Sathorn, Bangkok 10120 Thailand Telephone: 66 (0) 2610 5188 Fax: 66 (0) 2610 5189

Branch 7 Ibis Nana, 41 Soi Sukhumvit 4, Sukhumvit Road, Kwang KlongToey, Khet KlongToey, Bangkok 10110 Thailand Telephone: 66 (0) 2667 5888 Fax: 66 (0) 2667 5889

Branch 8 Holiday Inn Pattaya, 463/68 Pattaya Sai 1 Road, Nongprue, Bang Lamung, Chonburi 20150 Thailand Telephone: 66 (0) 3872 5555 Fax: 66 (0) 3872 5556

Branch 9 Ibis Kata, 88/8 Kata Road, Karon, Muang Phuket Phuket 83100 Thailand Telephone: 66 (0) 7636 3488 Fax: 66 (0) 7636 3489

Home Page www.TheErawan.com

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SUCCESS WITH INTEGRITY

Type of Business Invest and develop hotel properties strategically located to match travelers’

different demand.

Company’s Capital as at 31 December 2010 Registered Capital 2,244,779,001 Baht : 2,244,779,001 ordinary shares at par value 1 Baht/share.

Paid-Up Capital 2,244,779,001 Baht : 2,244,779,001 ordinary shares at par value 1 Baht/share.

Other References

1. Registrar of Ordinary Shares Thailand Securities Depository Co., Ltd.

No. 62 Rachadapisek Road, Klongtoey, Bangkok 10110 Thailand

Telephone: 66 (0) 2359 1200-02

Fax: 66 (0) 2359 1259

2. Auditor Mr. Charoen Phosamritlert Certificate Public Accountant (Thailand) No. 4068

Ms. Boonsri Chotpaiboonpan Certificate Public Accountant (Thailand) No. 3756

Ms. Vannaporn Jongperadechanon Certificate Public Accountant (Thailand) No. 4098

KPMG Phoomchai Audit Ltd. 48th Floor, Empire Tower 195 South Sathorn Road, Bangkok 10120 Thailand Telephone: 66 (0) 2677 2000 Fax: 66 (0) 2677 2222

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Corporate Information

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Head Office

The Erawan Group Public Company Limited 6th Floor, Ploenchit Center, 2 Sukhumvit Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2257 4588 Fax: 66 (0) 2257 4577 www.TheErawan.com

Hotel Business

Grand Hyatt Erawan Bangkok Hotel 494 Ploenchit Road, Pathumwan, Bangkok 10330 Thailand Telephone: 66 (0) 2254 1234 Fax: 66 (0) 2254 6267 www.bangkok.grand.hyatt.com

JW Marriott Hotel Bangkok 4 Sukhumvit Road, Soi 2, Klongtoey Bangkok 10110 Thailand Telephone: 66 (0) 2656 7700 Fax: 66 (0) 2656 7711 www.marriott.com/bkkdt

Renaissance Koh Samui Resort and Spa 208/1 Moo 4, Maret, Laem Nan Beach, Koh Samui, Surat Thani 84310 Thailand Telephone: 66 (0) 7742 9300 Fax: 66 (0) 7742 9333 www.marroitt.com/usmbr

Six Senses Sanctuary Phuket 32 Moo 5, Paklok, Thalang, Phuket 83110 Thailand Telephone: 66 (0) 7637 1400 Fax: 66 (0) 7637 1401 www.sixsenses.com

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Corporate Information

Courtyard by Marriott Bangkok 155/1 Soi Mahadlekluang 1, Rajdamri Road, Bangkok 10330 Thailand Telephone: 66 (0) 2690 1888 Fax: 66 (0) 2690 1899 www.courtyard.com/bkkcy

Holiday Inn Pattaya 463/68 Pattaya Sai 1 Road, Nongprue, Bang Lamung, Chonburi 20150 Thailand Telephone: 66 (0) 3872 5555 Fax: 66 (0) 3872 5556 www.holidayinn.com/pattaya

Ibis Patong Phuket 10 Chalermphrakiat Road, Patong, Katu, Phuket 83150 Thailand Telephone: 66 (0) 7630 3888 Fax: 66 (0) 7630 3889 www.ibishotel.com

Ibis Pattaya 463/79 Pattaya Sai 2 Road, Nongprue, Bang Lamung, Chonburi 20150 Thailand Telephone: 66 (0) 3841 8188 Fax: 66 (0) 3841 8189 www.ibishotel.com

Ibis Samui 197 Rob Koh Road, Bophut, Koh Samui, Surat Thani 84320 Thailand Telephone: 66 (0) 7791 4888 Fax: 66 (0) 7791 4889 www.ibishotel.com

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Ibis Sathorn 29/9 Soi Ngam Duphli, Rama IV Road, Kwang Thung Mahamek, Khet Sathorn, Bangkok 10120 Thailand Telephone: 66 (0) 2610 5188 Fax: 66 (0) 2610 5189 www.ibishotel.com

Ibis Nana 41 Sukhumvit Soi 4, Sukhumvit Road, Kwang Kloengteoy, Khet Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2667 5888 Fax: 66 (0) 2667 5889 www.ibishotel.com

Ibis Kata 88/8 Kata Road, Karon, Muang Phuket, Phuket 83100 Thailand Telephone: 66 (0) 7636 3488 Fax: 66 (0) 7636 3489 www.ibishotel.com

Ibis Riverside 27 Soi Charoennakorn 17, Charoennakorn Road, Banglamphulang, Klongsan, Bangkok 10600 Thailand Telephone: 66 (0) 2805 9888 Fax: 66 (0) 2805 9889 www.ibishotel.com

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Corporate Information

Rental Property

Ploenchit Center 2 Sukhumvit Road Soi 2, Klongtoey, Bangkok 10110 Thailand Telephone: 66 (0) 2656 8600-4 Fax: 66 (0) 2656 9899

Erawan Bangkok 494 Ploenchit Road, Pathumwan, Bangkok 10330 Thailand Telephone: 66 (0) 2250 7777 Fax: 66 (0) 2250 7788 www.erawanba

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Designed by Plan Grafik Co., Ltd. Tel. 0 2237 0080 # 300

The Erawan Group Public Company Limited

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

The Erawan Group Public Company Limited concerns about environmental protection by using recycled paper produced

by Thai company to publish the Annual Report 2010, for the purpose of reducing natural resources exploitation and the global warming crisis

Annual Report 2010 The Erawan Group Public Company Limited

Annual Report 2010 The Erawan Group Public Company Limited