HMPRO: Annual Report 2010 by Shareinvestor Thailand

Annual Report 2010

Moving forward to Service Excellence

www.homepro.co.th

Shop.homepro.co.th

Home Product Center Plc. 96/27 Moo 9 Tambon Bangkhen, Amphoe Muang, Nonthaburi 11000 Telephone (66) 02-832-1000 Fax (66) 02-832-1400 Greater Bangkok : Chaengwatthana Ekamai-Ramindra Fashion Island Future Mart Latphrao Lumlukka Petchkasem Ploenchit Prachachuen Rama II Ramkhamhaeng

02-962-6955 02-933-5000 02-947-6365 02-689-0844 02-983-7444 02-997-4800 02-444-4699 02-655-3400 02-955-5888 02-895-6555 02-735-4999

Rangsit Ratchadaphisek Ratchapruk Rattanathibet Seri Center Sukhaphiban 3 Suvarnabhumi (Bangna) The Mall Bangkae

02-958-5699 02-641-2900 02-423-3222 02-921-2400 02-746-0377 02-976-9114 02-325-1200 02-454-9299

Central : Ayutthaya Hua Hin Nakhonpathom

035-23-6655 032-52-6000 034-21-3200

North :

East :

Chiangmai 053-85-1229 Chiangmai-Hangdong 053-44-7939 Phitsanulok 055-28-9009

Chonburi Pattaya Rayong

North-East :

Had Yai Krabi Nakhonsitammarat Phuket Phuket-Chalong Samui uratthani

038-78-5111 038-36-0422 038-80-9333

South : Khao Yai Khonkaen Nakhonratchasima

044-32-8799 043-36-5365

(Bypass 2)

044-28-2550 044-28-8345 042-30-9000

The Mall Korat Udonthani

074-46-9055 075-81-0499 075-32-4740 076-25-5189 076-60-2399 077-23-1900 077-48-9199

Moving forward to Service Excellence

Loving home by homepro

Annual Report 2010

Board of Directors HomePro

is the leading home improvement retailer in Thailand.

We operate 40 stores nationwide, providing product range cover 60,000 items with complete services as One Stop Shopping to attain highest customer satisfaction.

Sales

Net Profit

+18.4%

Total Assets

+44.9%

+2,718MB

New

5 Branches

Mr. Anant Asavabhokhin

Mr. Pong Sarasin

Mr. Manit Udomkunnatum

Chairman

Independent Director

Director and Chairman of Executive Directors

Mr. Rutt Phanijphand

Mr. Apilas Osatananda

Director, Executive Director and Chairman of the Nomination and Remuneration Committee

Independent Director and Chairman of the Audit Committee

Mr. Thaveevat Tatiyamaneekul Independent Director and Audit Committee

24,073 16,592 20,329

1,638

18,540

13,873 40

13,369 12,274

15,944

33 1,131

Mr. Chanin Roonsamrarn

Mr. Apichat Natasilpa

Mr. Khunawut Thumpomkul

Independent depe de t Director, Director,Audit ecto ,Audit ud t Committee Co ttee and Nomination and Remuneration Committee

Director and Nomination and Remuneration Committee

Director, Executive Director Director and Managing Director

959 710

2007 2008 2009 2010

2010 retail sales increased by 18.4% to Baht 24,073 million.

2007 2008 2009 2010

NPAT increased by 44.9% to Baht 1,638 million.

2007 2008 2009 2010

Total assets increased from investment in property of 5 new stores.

2007 2008 2009 2010

Lumlukka, Sukhaphiban 3, Nakhonpathom, Nakhonratchasima and Nakhonsitammarat

Mr. Naporn Soonthornchitcharoen

Mr. Joompol Meesuk

Mrs. Suwanna Buddhaprasart

Director and Executive Director

Director

Contents 2 3 12 15 16 18 21 22 23 36 42 43 43 46 50 51 53 54

Message from the Chairman Message from the Managing Director General Information Financial Information Nature of Business Risk Factors Shareholding Structure Organization Chart Management Corporate Governance Internal Control Dividend Policy Related Transactions Financial Analysis and Business Operation Results Report of Board of Directors’ Responsibilities in the Financial Statements Audit Committee’s Report Independent Auditor’s Report Financial Statements

Message from the Chairman Dear Shareholders and Stakeholders, The year 2010 marked the actual start to Thailand economic recovery. After the world economic crisis in 2008, the export value had driven the expansion of Thai economy and the consumer confidence index, raising 2010 Gross Domestic Product (GDP) growth above 7%. With the aforementioned economic situation, in 2010, HomePro successfully achieved sales goal with the expansion of gross sales up to 18%, and net profits increase up to 43%, resulting from the business foundation which the Company has strongly established in terms of the expansion of the branch network, the increase in efficiency of internal management, improvement of the competencies and advantage over the competitors in the aspect of merchandises, increased efficiency of cost management, and the development of the feature of services including relevant marketing strategy. For 2011, while the economy of Thailand has been expected to maintain growth, there remains to be many noted vulnerabilities such as the financial crisis in Europe, political situation of Thailand, and business competition. Therefore, the Company has prepared a work plan including different strategies to achieve its goals. It is necessary to depend on the efforts and determination of all employees in every department; cooperation of all shareholders including the support of the trade partners; trusting and acceptance from all groups of customers of the

â&#x20AC;&#x153; The Company has

prepared a work plan including different strategies to achieve its goals

Company. Finally, the Company wishes to thank those who have supported the business of the Company in every aspect and hopefully the Company could continue to receive your cordial cooperation and support. The Company has committed to operate and develop the business to be prosperous for maximum benefits of the shareholders, trade partners, customers and more than 6,000 employees of the Company.

â&#x20AC;?

(Mr. Anant Asavabhokhin) Chairman

Message from the Managing Director Dear Shareholders and Stakeholders, In 2010, many favorable economic factors indicated a positive sign such as the local and international economic recovery and the increase of local consumer confidence which led to the expansion of Thailand’s Gross Domestic Products (GDP) of more than 7%, driving the Company’s operating results to reach satisfactory level with an increase of the sales volume by 18% and net profit by 44%. The increases came from the sales growth of the existing branches, opening of new branches, HomePro Expo, an increase of Private Brand products, service efficiency enhancement, advertising and sales promotion revenue, and other services revenues. In 2010 the Company had expanded five more branches: the Nakornpathom, Nakhonratchasima, a third branch of Home Pro in Nakhonratchasima Province, Lamlukka, Sukhaphiban 3 and Nakhonsitammarat. There were a total 40 service branches in 2010. In 2011 the Company plans to expand approximately 4-5 more branches including a renovation of the existing branches in order to enhance the spending atmosphere. Furthermore, in 2010, the Company continuously improved its efficiency, particularly in the IT systems, by reimplementing the latest version of the SAP system including the Company’s entire database structure in order to reduce the duplication of information, operate with efficiency, and be able to access information that is used to accurately formulate the strategy of the Company. With 6 years of continuous operation, HomePro EXPO was a highly successful sales exhibition and continued to grasp the interest of our customers beyond the expectation. Both events in the periods of March and October were able to reach the satisfactory sales target. The Company remains focused on a continuous development of service excellence with the principal goal to deliver maximum satisfaction to customers. We also developed services under the title Home Service to serve designing aspect in the 3 dimensional system or 3D Design, and HomeCare to deliver services in improvement, modification and maintenance by experienced technicians. Moreover, the Company has focused on sales promotions to accommodate the demands of the target groups, together with the introduction of an additional sales channel via the E-Commerce system which is expected to fully operate in 2011. In addition, the Company is proud to be a socially responsible citizen, continuously create activities to give back to our community. In 2010 the Company had collaborated with the Department of Health to raise the hygienic level of toilets under the operation of the Kid’s Toilets Project by improving and/or constructing additional 219 safe and hygienic toilets for elementary schools. As of today, the Company has implemented the project in 16 provinces, 60 schools, with the total of 745 toilettes. At the same time, the Company has organized the One Hundred Thousand Tree Planting Project within three years to preserve the nature of the mangrove forest at Bangpu Recreation Center, Royal Thai Army in Samutprakarn Province. Regarding the flood

“ The Company

remains focused on a continuous development of services with the principal goal to deliver maximum satisfaction to customers

”

situation in 2010, we along with business alliances had offered a discount of 50% on the products that victims need to rebuild their homes. Furthermore, we made donations to help victims and invited our customers to donate at HomePro’s branches nationwide. Subsequent to these successes, the Company wishes to thank all employees for the determination in their work and hopefully our shareholders and trade partners would continue to cordially support the operation of the Company’s business in the future.

(Mr. Khunawut Thumpomkul) Managing Director

Business Expansion

Store Expansion HomePro has expanded 5 new branches in 2010. There are 2 branches in Greater Bangkok; Lumlukka and Sukhaphiban 3, and another 3 branches in upcountry; Nakornpathom, Nakhonratchasima (the third outlet in this province) and Nakhonsithammarat.

HomePro Expo HomePro, together with our business alliances, Financial Institutions, and more than 300 manufacturers and distributors have cooperated to hold HomePro Expo No.11 and 12. The company reached total sales of more than 1,200 million baht. In addition, the activity of the fourth HomePro Champion Contest offered an opportunity for home lovers to join interior design competition under the given themes to win prizes worth over 200,000 Baht.

Product Mix Expansion 6

Product Mix Expansion Aside from diversifying the product assortment which has been supported by our local business partners, in 2010 the company has continuously developed Private Brand with the core objective to create customer value. We selected quality products with reasonable price by evaluating customer demands and behaviors. This not only maintained our customer base, but also differentiates us from the competitor. To date, we have a total of 36 private brands and over 1,000 items.

Service Expansion Home Service Nationwide Home Service is our service for home lovers that includes 3D system design and HomeCare consisting of Installation Service, Maintenance Service and Home Improvement Service which are based on our true understanding of customer needs. The customers will be served from our professional technicians who have the knowledge in their jobs and related products. Moreover, they can help customers accurately control budget and time. Having customersâ&#x20AC;&#x2122; acceptance, HomePro has extended Home Service to all 40 branches nationwide.

Installation Service

Home Improvement Service

Maintenance Service

Customer Satisfaction through HomePro Call Center 02-831-6000 Because increasing Customer Satisfaction is one of our core objectives, in 2010, HomePro has moved forward to develop the Call Center system to facilitate news and information for customer. We use Information Technology, Telecommunications and Customer Relation Management to provide information, follow up, check and respond, and also coordinate with the related unit to solve customersâ&#x20AC;&#x2122; problems promptly.

Benefit Expansion Privileges for home lovers

HomeCard and Professional Card In 2010, HomePro has launched new privilege card under the name of “Professional Card” for the project owners, contractors, architects, engineers, interior designers and other technicians. The customers with the card will get a discount for purchasing the general product or service, or get a special discount for purchasing the hard line product such as construction materials, hand tools and equipments etc. Every purchase made with the card will accumulate points to redeem a cash equivalent for use on the next purchase. Besides that, the customers also get other privileges such as joining the workshop.

HomePro Visa HomePro has launched a new privileged design “HomePro Visa credit card” that offers discounts for buying HomePro’s products and service, a gasoline purchase discount, accumulating flight mileage etc., under the concept “Fill your house, fulfill your lifestyle”.

Corporate Social Responsibility (CSR)

Kidsâ&#x20AC;&#x2122; Toilet At the end of 2010, HomePro contributed a total 745 restrooms to 60 schools in 16 provinces nationwide, under the Kidsâ&#x20AC;&#x2122; Toilets Project which received national public toilet standard from the Department of Health, the Ministry of Public Health.

Plant Growth Under the “HomePro helps to reduce global warming” project, HomePro has the objective to plant 100,000 Avicennia marina and LamPu trees within 3 years at Bangpu Recreation Center, Royal Thai Army in Samutprakarn Province. In 2010, HomePro carried out the reforestation in May and September.

Computer Lab Under the “School Computer Lab Project”, in January 2010, we provided computers together with equipment installation to Baan Boong Toey School, Mhoo Si sub-district, Pak Chong district, Nakhonratchasima Province.

Flood Help With social responsibility, HomePro strives to help and support the community in any chance. Regarding the flood situation in 2010, we along with business alliances had offered a discount of 50% on the products that victims need to rebuild their homes. Furthermore, we made donations to help victims and invited our customers to donate at HomePro’s branches nationwide.

General Information Home Product Center Public Company Limited was established on June 27, 1995 with the initial registered capital of Baht 150 million, being a joint venture between Land and Houses Group and American International Assurance Co., Ltd. The Company has been listed on the Stock Exchange of Thailand since October 30, 2001.

The Company was established with an objective to operate a retail business in home improvement segment by selling goods and providing complete range of services relating to construction, addition, renovation of buildings, houses, and residence places under the trade name of “HOMEPRO” which is the Company’s trademark. Rangsit branch is the first branch of the Company operating in September 1996. As of 31 December 2010, the Company has 40 branches in total, of which 19 branches are located in Bangkok and its vicinity and another 21 branches in upcountry provinces. There were 5 newly opened branches in 2010, i.e. Nakhonpathom, Nakhonratchasima, Lumlukka, Sukhaphiban 3 and Nakhonsithammarat.

Information of Home Product Center Public Company Limited Location

96/27 Moo 9 Tambon Bangkhen, Amphoe Muang, Nonthaburi 11000

Telephone

(66) 02-832-1000

Facsimile

(66) 02-832-1400

Website

www.homepro.co.th

Type of Business

selling goods and providing complete range of services relating to construction, addition, refurbishment, improvement of buildings, houses, and residence places as One Stop Shopping

Registration No.

Bor Mor Jor. 665

Registered Capital

4,426,605,527 shares

Paid-up Capital

4,352,991,862 shares

Information of company in which Home Product Center Plc. holds shares from 10 percent up

Name

Market Village Co., Ltd

Location

234/1 Petchkasem Road, Tambon Hua Hin, Amphoe Hua Hin, Prachaub Kirikhan Province 77110

Telephone

(66) 032-61-8888

Facsimile

(66) 032-61-8800

Type of Business

management of leasing space together with provision of facilities services

Number of Issued Shares

50,000 ordinary shares at par value of Baht 100

Number of Held Shares

49,993 shares

Branches Information

1. Rangsit 161/2 Moo 2, Phaholyothin Rd., AmphoeThunyaburi, Pathumthanee 12130

2. Rattanathibet 6/1 Moo 6, Tambon Saothonghin, Amphoe Bangyai, Nonthaburi 11140

3. Fashion Island 587, 589 Ramindra Road, Khannayao, Bangkok 10230

4. Future Mart 295 Rama 3 Rd., Bangkholeam, Bangkholeam, Bangkok 10120

5. Paradise Park (Formerly Seri Center) 61 Srinakarin Rd., Nongbon, Praves, Bangkok 10260

6. The Mall Bangkae 275 Moo 1, Petchkasem Rd., North Bangkae, Bangkae, Bangkok 10160

7. The Mall Korat 1242/2 Mittraphap Rd., Amphoe Muang, Nakhon Ratchasima 30000

8. Ratchadaphisek 125 Ratchadaphisek Rd., Dindang, Dindang, Bangkok 10320

9. Ploenchit 55 Wave Place Building, Wireless Rd., Pathumwan, Bangkok 10330

10. Phuket 104 Moo 5, Tambon Rasada, Amphoe Muang, Phuket 83000

11. Chiangmai

21. Hua Hin 234/1 Petchkasem Rd., Amphoe Hua-Hin, Prachuabkhirikhan 77110

22. Samui 1/7 Moo 6, Tambon Bophut, Amphoe Kho Samui, Suratthani 84320

23. Phitsanulok 959 Moo 10, Tambon Aranyik, Amphoe Muang, Phitsanulok 65000

24. Khonkaen 177/98 Moo 17, Tambon Naimuang, Amphoe Muang, Khonkaen 40000

25. Udonthani 89/20 Moo 9, Soi Bannonglek, Tambon Markkang, Amphoe Muang,

Udonthani 41000

26. Suratthani 9/1 Moo 3, Tambon Makham Tia, Amphoe Muang, Suratthani 84000

27. Petchkasem 28 Moo 11, Nongkhangplu , Nong Kham , Bangkok 10160

28. Chonburi 15/16 Moo 3, Tambon Huykapi, Amphoe Muang, Chonburi 20000

29. Ekamai-Ramindra 14/12 Moo 8, Latphrao, Latphrao, Bangkok 10310

30. Rayong 560 Sukhumvit Rd., Tambon Noenphra, Amphoe Muang, Rayong 21000

31. Ayutthaya

94 Moo 4, Chiang mai-Lampang Rd., Tambon Nong Pa Kruang, Amphoe Muang,

Chiangmai 50000

12. Ramkhamhaeng 647/19 Ramkhamhaeng (Sukhaphibal 3) Rd., Huamark, Bangkapi, Bangkok 10240

13. Rama II 45/581 Moo 6, Samaedam, Bangkhunthien, Bangkok 10150

14. Prachachuen 96/27 Moo 9, Tambon Bangkhen, Amphoe Muang, Nonthaburi 11000

15. Latphrao 669 Latphrao Rd., Chompol, Chatuchak, Bangkok 10900

16. Pattaya 333 Moo 9, Tambon Nongprue, Amphoe Banglamung, Chonburi 20260

17. Chaengwatthana 113 Moo 5, Tambon Pakkret, Amphoe Pakkret, Nonthaburi 11120

18. Had Yai 677 Petchkasem Rd., Tambon Had Yai, Amphoe Had Yai, Songkhla 90110

19. Ratchapruk 82 Moo 2, Tambon Bang Khun Kong, Amphoe Bang Kruai , Nonthaburi 11130

20. Suvarnabhumi 99/28 Moo 1, Tambon Rachatawa, Amphoe Bangplee, Samutprakarn 10540

80 Moo 2, Tambon Bangrod, Amphoe Bangpain, Ayutthaya 13160

32. Chiangmai – Hangdong 433/4-5 Moo 7, Tambon Mae-Hiya, Amphoe Muang, Chiangmai 50100

33. Krabi 349 Moo 11, Tambon Krabinoy, Amphoe Muang, Krabi 81000

34. Phuket – Chalong 61/10 Moo 10, Tambon Chalong, Amphoe Muang, Phuket 83130

35. Khao Yai 288 Moo 11, Tambon Nong Nam Daeng, Amphoe Pakchong, Nakhonratchasima 30130

36. Nakhonpathom 752/3 Petchkasem Rd., Tambon Huai-Charakhe , Amphoe Muang, Nakhonpathom 73000

37. Nakhonratchasima 384 Mittraphap Rd., Amphoe Muang, Nakhonratchasima 30000

38. Lumlukka 99 Moo.6, Tambon Buengkhamphroi, Amphoe Lumlukka, Pathumthanee 12150

39. Sukhaphiban 3 101 Ramkhamheng Rd. (Sukhaphiban 3), Minburi, Minburi, Bangkok 10510

40. Nakhonsithammarat 89 Nakhon-Pakpanang Rd., Amphoe Muang, Nakhonsithammarat 80000

Information of the referrals

Auditor

Ernst & Young Office Limited 33rd Floor, Lake Rajada Office Complex, 193/136-137 Ratchadaphisek Rd., Klongtoey, Bangkok 10110 Tel. (66) 02-264-0777

Fax. (66) 02-264-0789-90

Share Registrar Thailand Securities Depository Co., Ltd. 4th, 6-7th floor Stock Exchange of Thailand Building, 62 Ratchadaphisek Rd., Klongtoey, Bangkok 10110 Tel. (66) 02-229-2800

Legal Counsel

Fax. (66) 02-359-1262-3

Wissen & Co Ltd. 8th Floor Office # 3801, BB Building, 54 Sukhumvit 21 (Asoke) Rd., Klongtoey-Nua, Wattana, Bangkok 10110 Tel. (66) 02-259-262

Fax. (66) 02-259-2630

Representative of Debenture Holder The Unsubordinated and Unsecured Debentures of Home Product Center Plc. 1/2008 (Amortization type) and The Unsubordinated and Unsecured Debentures of Home Product Center Plc. 2/2008 TMB Bank Plc. 3000 Phaholyothin Rd., Chomphon, Jatujak, Bangkok 10900 Tel. (66) 02-264-0777

Fax. (66) 02-264-0789-90

The Unsubordinated and Unsecured Debentures of Home Product Center Plc. 1/2009 and The Unsubordinated and Unsecured Debentures of Home Product Center Plc. 1/2010 CIMB Thai Bank Plc. 44 Langsuan Rd., Lumpini, Patumwan, Bangkok 10330 Tel. (66) 02-626-7503-4 02-626-7218

Fax. (66) 02-626-7542 02-626-7587

The Unsubordinated and Unsecured Debentures of Home Product Center Plc. 2/2010 Siam Commercial Bank Plc. 9 Ratchadapisek Rd., Jatujak, Bangkok 10900 Tel. (66) 02-256-2323-7

Fax. (66) 02-256-2406

Financial Information (Unit : Million Baht)

Item

Consolidated Financial 2010 2009 2008

Separate Financial Statements 2010 2009 2008

Total Assets

16,591.99

13,872.83

13,369.07

16,543.68

13,824.31

13,318.38

Total Liabilities

10,353.78

8,662.91

8,412.86

10,332.80

8,630.51

8,373.62

Equity

6,238.21

5,209.92

4,956.21

6,210.88

5,193.81

4,944.76

Sales

24,072.76

20,329.12

18,540.27

24,073.78

20,330.43

18,541.73

Total Revenues

25,914.90

21,799.09

19,824.19

25,816.76

21,710.98

19,743.97

1,638.43

1,130.88

959.42

1,627.21

1,126.22

953.95

0.38

0.26

0.50

0.37

0.26

0.49

0.186

0.212

0.35

0.186

0.212

0.35

4,352.99

3,703.93

1,933.61

4,352.99

3,703.93

1,933.61

Net profit EPS (Baht) Dividend per share (Baht)* Paid-up Capital (Million Shares)* Remark :

In the Extraordinary Shareholdersâ&#x20AC;&#x2122; Meeting No. 1/2010 held on 4th October 2010, the meeting approved for the payment of interim dividends at the rate of 0.186 Baht/share by dividing into cash dividends at the rate of 0.0193 Baht/share and stock dividend at the rate of 0.1667 Baht/share. The meeting

also approved the increase of the registered capital for the amount of 632.39 million shares in order to support the payment of stock

dividends and the execise of warrant under the employee stock option plan No. 4 (ESOP 4).

Financial Ratio

Item

Consolidated Financial 2010 2009 2008

Separate Financial Statements 2010 2009 2008

Liquidity Ratio Liquidity ratio (time)

0.77

0.67

0.62

0.76

0.66

0.61

Gross Profit (%)

25.01

24.27

23.70

25.01

24.28

23.70

Profit from Operation (%)

10.00

8.57

8.01

9.94

8.54

7.98

6.32

5.19

4.84

6.30

5.19

4.83

28.62

22.25

20.68

28.54

22.22

20.60

10.76

8.30

7.48

10.72

8.30

7.47

1.66

1.70

1.66

1.69

33.89

27.56

22.37

33.32

27.14

21.91

Profitability Ratio

Net Profit (%) Return on equity (%)

Operation Efficiency Ratio Return on assets (%)

Financial Analysis Ratio Debts to Equity ratio (time) Interest coverage ratio (time)

Nature of Business Vision To be the leader of home center business in Thailand and South East Asia.

Mission 1. We will offer the value in terms of products, services, and prices to our customers, to be the first on customer’s mind. 2. We will collaborate with our business alliance to improve efficiency which leads to increasing of mutual benefits. 3. We will give the importance to and develop personnel to have working efficiency and responsibility to customers. 4. We will manage professionally according to the good governance, and to build good relationship with society and community. 5. We will seek new business opportunity for the future and to create reasonably incremental value for associated parties.

Nature of Business of Home Product Center Public Company Limited The Company was established with objective to operate a retail business in home improvement segment by selling goods and providing complete range of services relating to construction, addition, refurbishment, renovation, improvement of buildings, houses, and residential places through One Stop Shopping Home Center under the trade name of “HomePro” which is the Company’s trademark. Presently, the Company has the nature of business as follows; 1. Providing home improvement products, by having 3 groups Hard Line 1

Hard Line 2

Soft Line

Construction material, Home improvement

Kitchenware, Electrical appliances,

Bedding and Household

accessories, Bathroom and Sanitaryware

Electrical equipment and Lighting

decorative goods

To provide the services relating to retail business Due to most of the Company’s products having instruction details and working process which customers need to understand, the Company has provided various kinds of related services by giving consultation and useful information for customers to make decision to select the products that mostly match the usage objectives. In addition, the Company has provided HomeCare services, including installation service, repairing, and maintenance of equipments, electrical appliance, system work, painting service, tile service etc., product delivery service, technician and contractor selection and placement service, products exchange service, as well as arranging DIY demonstration (Do It Yourself) and workshop for customers etc.

2. To provide space rental service for retail tenant stores The Company has arranged for its rental space in some branches to provide the service for retail tenant shops. At the sametime, the Company has developed the format of its branches so called HomePro Village which operates the business in the form of full service shopping center. Inside the project, in addition to HomePro’s branch, there are areas of shopping center in which most of tenants consist of supermarkets, restaurants, banks, bookstores, and IT shops etc. As of December 31, 2010, the Company has a total of 4 branches in the format of HomePro Village: Suvannabhumi branch, Hua Hin branch, Phuket-Chalong branch and Ratchapruk branch.

Nature of Business of Subsidiary Market Village Co., Ltd. (“Market Village”) was incorporated, on May 26, 2005, located at 234/1 Petchkasem Road, Tambon Hua-Hin, Amphoe Hua-Hin, Prachaubkirikhan Province, in which Home Product Center Plc. holds 99.99% of total shares. Presently, its registered capital is Baht 5 million. Market Village was formed with objectives to manage rental space for Home Product Center Plc., and to provide utilities services to tenants. In the first quarter of 2006, it commenced operation on the “Hua-Hin Market Village” project which is located at Petchkasem Road, Amphoe Hua-Hin, Prachaubkirikhan.

Revenue Structure Revenue of Company and subsidiaries consist of sales revenue and other revenues. Total structure of revenue can be classified by the line of products as follows: (Unit : Million Baht)

2010

Item

Amount

2009 %

Amount

2008 %

Amount

1. Revenue from retailing - Hard Line 1

10,108.3

39.0

8,604.1

39.5

7,782.2

39.3

- Hard Line 2

9,742.3

37.6

8,123.0

37.3

7,520.9

37.9

3,989.4

15.4

3,428.9

15.7

2,998.9

15.1

232.7

0.9

173.1

0.8

238.3

1.2

24,072.8

92.9

20,329.1

93.3

18,540.3

93.5

1,842.1

7.1

1,470.0

6.7

1,283.9

6.5

25,914.9

100.0

21,799.1

100.0

19,824.2

100.0

- Soft Line 2. Revenue from project sales

Total Revenue from Sales 3. Other incom 2 Total Remark

1. Revenue from project sales is from the purchase of project owners which cannot be categorized per product lines. 2. Other income is revenue from rental of space, in-store promotion fee etc.

Supply of Products The Company sources products by: 1. Purchase order. The Company makes the purchase order of products categorized by product lines from both domestic and overseas manufacturer or sales agent, in which the Company mainly emphasizes on quality and variety of products. Currently, the Company sources products from more than 700 manufacturers and sales agents which, throughout the time, provided good support and cooperation, in terms of advertisement, public relation, joint sale promotion, joint planning of sale strategies, support and joining new branch to be opened. 2. Make to order. The Company orders manufacturing of Private Brand and House Brand from both domestic and overseas manufacturer. The Company will initially select the manufacturer by considering factors including being certified of manufacturing standard, reputation, quality of service and types of harmonized operation. Moreover, the Company also visits the factory and inspects products in order to ensure the overall quality.

Market and Competitive Condition The Company is the leader in home improvement retailing which offers a full range of complete services. As for competitors, the Company has classified other operators who sell goods in similar nature as follows: 1. Operators of Home Center â&#x20AC;˘

HomeWorks is a retail business unit of home products in Central Retail Corporation Group of Companies. There are currently 7 branches in operation.

â&#x20AC;˘

Global House operates the business of selling products in the form of warehouse store. Products include construction materials, decorative goods, tools, equipments to be used for construction, addition, decoration of house and garden. It is managed by the Siam Global House Plc. There are currently 11 branches in operation.

However, the Company believes that this business still has plenty of potential and marketing opportunities and that the increase of such business operators will help stimulate consumers familiarity and more rapidly change their behavior to purchase products from Modern Trade home centers.

2. Specialty Store. Retail businesses who focus on selling specific goods as follows: •

Ceramic, Sanitaryware, and Kitchenware stores i.e. Boonthavorn, Grand Home Mart.

•

Furniture and Home decoration stores i.e. Index Living Mall

•

Retail stores that sell only construction materials i.e. Cement Thai Home Mart, Thai Watsadu.

•

Other Specialty Stores.

3. Operators of large retail business in the group of Hypermarket. These businesses mainly aim at selling of consumer goods and edible products, not home products. While some groups of products sold may overlap, their main customer targets are different.

Risk Factors The Company separately explains the risk factors which may affect the operations of business as follows:

1. Business Risk Although the economic situation throughout the year 2010 had confronted many unfavorable factors such as uncertainty of the world economy, local political instability, fluctuation of the Thai Baht and fund flow, and several natural calamities, the Thai economy expanded by more than 7% due to the increase of export and services which was in line with the economic recovery of important trading partner countries as well as the continuous recovery of the local demand. All of these factors had shown their effects in the second half of the year. The overall retail business in 2010 had a fair expansion which followed the better economic situation, more stable political situation, the government’s economic stimulus policy, and salary increase of all government sectors. As a result, the consumers had regained their confidence in the economy, employment, and future income. The Company, however, has closely kept abreast of the economic and political situation in order to plan and find measures and strategies to prevent the risks that may occur, and to operate the business so as to successfully reach the planned target. 1.1

Inventory As of the 31st December 2010, 2009, and 2008, the Company had net Inventory equal of Baht 3,714.23 million, Baht

2,905.14 million, and Baht 2,728.08 million respectively. The average inventory turnover periods of 2010 and 2009 were at 66 days, and of 2008 was at 67 days. The decrease in inventory turnover period reflects the success in adopting a marketing strategy and our developing capability of inventory management. However, the Company has been continuingly attempting to increase the turnover of Inventory, whether by developing of service quality of sale persons, continual sales promotion, improving products display and internal appearance of branches, regularly adding new products to the store, including attempting to reduce the volume storing level. For the reduction of inventory in 2006, the Company has expanded space of the distribution center. As of 31st December 2010, the total area amounted to 44,000 square meters and the Company also plans to expand the distribution center area, in order to be capable of supporting the increase of branches in the future and to manage inventory more efficiently. 2.2

Investment As of 31st December 2010, the Company has branches in operation totaling 40 branches. It has expanded 5 new branches

in 2010. There are 2 branches in Greater Bangkok; Lumlukka and Sukhaphiban 3, and another 3 branches in upcountry; Nakhonpathom, Nakhonratchasima (the third outlet in this province) and Nakhonsithammarat.

Since the Company has a policy to continuously increase branches, there may be a risk with respect to the result of performance of new branches that may not be as forecasted. This will affect the result of the overall operation. The Company avoids the risk by analyzing the investment return before every investment decision, and preparing the action plan and annual budget. When a new branch starts operating, the results of operations and progress plan are being followed up on a monthly basis. This will facilitate the Company to set the plan for handling the risk and to solve problems which may occur in timely manner. 1.3

Operation The Company has the risk of loss or damage of property due to the operation of the sale personnel, and has set up a work

unit to handle with such risk, that is Loss Prevention Unit, which is responsible for laying preventive and safety system against various risks of the Company including the risk that the employees may incur from the operation. 1.4

Accounts Receivable The Company has divided the customers into 2 groups: retail customer and group of contractor and project owner.

The retail customer is customer at store who purchases products by cash, the group of contractor and project owner is customer who purchases products by credit term. The major sales revenue comes from retail customer. As in 2010 the proportion of cash sales was 99.0% to total sales. For 2009 and 2008, the proportion was at 99.1% and 98.7%. However, for the credit sales, the Company will consider only project that has reliable financial status, which the company has analyzed the result of operation and financial status or having the contractor place with a letter of guarantee as security against debt payment, etc. As of 31st December 2010, 2009, and 2008, the Company has accounts receivable of Baht 164.02 million, Baht 144.58 million, and Baht 160.63 million, being credit card debtor of Baht 80.44 million, Baht 65.55 million, and Baht 34.06 million respectively. The allowance for doubtful bad debts was set to be approximately Baht 2.65 million, Baht 5.40 million, and Baht 25.64 million, which the management have already estimated the debt repayment period and have evaluated financial status of each debtor. The Company believes that the allowance for doubtful bad debts has been set sufficiently and appropriately.

2. Competitive Risk The Company operates a retail business with products relating to houses and residential places where there are both direct and indirect competitors such as retailing shops, department stores, specialty stores, and general small retail shops. The Company has differentiated itself by focusing on offering a variety of products and complete range of services for construction, repairing, decoration, and addition. Also, the Company provides a team of experts for several kinds of system work such as electrical system, plumbing, and related installation, etc. Furthermore, the Company has concentrated on strengthening efficiency of internal management in order to improve, its capability and advantages against both local and international competition in the future.

3. Legal Risk The laws which are relevant and may cause a risk to business operation are as follows: 3.1

The Bangkok Metropolis Town Planning Law Announced on 16th May 2006, with objectives to be a guidance on the development of Bangkok Metropolis and

to support the expansion in the future. If there shall be modification of the town planning in the future, the Company will not be affected from this limitation, as the Company had put its investment to cover almost all areas of Bangkok. On the other hand, it is being seen as a restriction on business expansion of competitor, which is a benefit to the Company. 3.2

The Trade Competition Act In 2006, the Trade Competition Commission has adopted its resolution on the Guideline for Unfair Trade Practices in

the Wholesale/Retail Business, by virtue of the Trade Competition Act B.E. 2542 into 8 ways as follows:

1. Unfair price fixing. 2. Unfair request for economic benefit. 3. Unfair returning of goods. 4. Unfair use of agreement of sell on consignment. 5. Coercion to Purchase or to pay for service fee. 6. Unfair use of personnel of manufacturer/vendor. 7. Refusing to accept products by order/customized made as its own private brand, or of House Brand. 8. Other unfair practices. Such 8 clauses of Guideline for unfair trade practices have affected the modern retail business. However, in order to perform the business in conjunction with the above announcement, the Company has agreed with its business partner in amending the agreement to be more specific and clearer. At present, the Thai Chamber of Commerce has made a new draft amendment of guide line, which is now under negotiation between the Thai Chamber of Commerce and the Retailers Association in order to find a fair solution among the manufacturers and the wholesalers and retailers. 3.3

Anti â&#x20AC;&#x201C; Dumping and Countervailing Act B.E. 2542 (1999) At present, the Company has imported many categories of goods from overseas. In 2010, there will be also a reduction

in import duty for goods imported from a country that is a party in the Agreement on Economic Cooperation. Therefore, according to the agreement, a manufacturer in Thailand may possibly file complaint regarding dumping.

Shareholdering Structure The first ten shareholders holding the shares on the closing date as of October 15, 2010 having paid-up registered capital in the total of 3,728,518,496 shares consists of: Rank

Name of natural person / Juristic Person

Land and Houses Public Company Limited

No. of Shares

% of total Paid-up shares

1,128,118,175

30.26

Quality Houses Public Company Limited

759,959,070

20.38

American International Assurance Company Limited

185,900,145

4.99

Mr. Niti Osathanuklor

178,339,985

4.78

Thai NVDR Company Limited

161,942,217

4.34

Mr. Manit Udomkunnatum

116,126,806

3.11

BNP PARIBAS SECURITIES SERVICES LUXEMBOURG

72,420,800

1.94

HSBC (Singapore) Nominees PTE Limited

54,518,702

1.46

Mr. Khunawut Thumpomkul

52,441,480

1.41

48,087,430

1.29

970,663,686

26.03

10. Sarasin Co., Ltd. 11. Others Remark:

The above table shows the number of shares before the distribution of interim stock dividend on 29 October 2010, which the Company has distributed to shareholders whose names appeared on the closing date of the registration book on 15 October 2010, at the rate of the existing 6 shares per 1 share of stock dividend.

Foreign Limit Foreign shareholders are capable to hold shares and appear their names on the Companyâ&#x20AC;&#x2122;s asset registration of totaling not exceeding 30% of the issued shares and paid up. As of 30th December 2010, the shares of the Company held by foreigner was at approximately 15%.

Director who is representative of the group of major shareholders These following directors are the representative of major shareholders which hold shares of the Company at more than 20% Name - Surname

Representative of Shareholders

Position

Land and Houses Plc.

Chairman

Mr. Anant

Asavabhokhin

Mr. Rutt

Phanijphand

Quality Houses Plc.

Director

Mr. Joompol

Meesook

Quality Houses Plc.

Director

Mrs. Suwanna

Buddhaprasart

Quality Houses Plc.

Director

Mr. Naporn

Soonthornchitcharoen

Land and Houses Plc.

Director

Organization Chart

Board of Directors

Nomination and Remuneration Commitee

Executive Directors

Audit Commitee

Managing Director

Internal Audit Department

Senior Vice President Merchandising - Hard Line and International Business

Business Development

Senior Vice President

Merchandising - Soft Line

Human Resource and Loss Prevention

Senior Vice President

Merchandising Home Electric Product and The Power

Senior Vice President International Merchandising and Sanitaryware and Tile product

Senior Vice President Operation

Senior Vice President Marketing

Senior Vice President Distribution Center

Senior Vice President

Information Technology

Senior Vice President Accounting Treasury and Legal

Management The structure of Company’s management consists of the Board of Directors, Sub-Committees, and Executive Directors. There are 3 sets of the Sub-Committees i.e. Executive Director, Audit Committee, and Nomination and Remuneration Committee, having details as follows:

1. Board of Directors has totaling 12 persons, consisting of 4 Independent Directors, 1 Director who is management, and 7 Non-Executive Directors, as follows: Position

Name - Surname 1. Mr. Anant

Asavabhokhin

Chairman

2. Mr. Rutt

Phanijphand

Director, Executive Director and Chairman of the Nomination and Remuneration Committee

3. Mr. Joompol

Meesook

Director

4. Mr. Apichat

Natasilapa

Director and Nomination and Remuneration Committee

5. Mrs. Suwanna

Buddhaprasart

Director

6. Mr. Manit

Udomkunnatum

Director and Chairman of the Executive Director

7. Mr. Naporn

Soonthornchitcharoen

Director and Executive Director

8. Mr. Khunawut

Thumpomkul

Director, Executive Director and Managing Director

9. Mr. Pong

Sarasin

Independent Director

10. Mr. Apilas

Osatananda

Independent Director and Chairman of the Audit Committee

11. Mr. Thaveevat

Tatiyamaneekul

Independent Director and Audit Committee

12. Mr. Chanin

Roonsamrarn

Independent Director, Audit Committee and Nomination and Remuneration Committee

Remark : The company secretary is Ms. Wannee Juntamongkol, Senior Vice President - Accounting, Treasury and Legal.

Authorized Signatory Directors on the Company 1. Mr. Anant

Asavabhokhin

5. Mr. Manit

Udomkunnatum

2. Mr. Joompol

Meesook

6. Mr. Naporn

Soonthornchitcharoen

3. Mr. Apichat

Natasilapa

7. Mr. Khunawut

Thumpomkul

4. Mrs. Suwanna

Buddhaprasart

Two of the seventh authorized signatory Directors are to co sign with the company’s stamp. Roles and Responsibilities of the Board of Directors 1. To manage the Company, in compliance with the Company’s objectives and Articles of Association and the lawful resolutions of shareholders’ meeting, and has power to perform any act specified in Memorandum of Association. 2. The Board has power to appoint directors as the Executive Directors in a number as determined by the Board, comprising of Chief Executive Director, Deputy Chief Executive Directors, who will perform any tasks designated by the Board of Directors. 3. The Board may appoint any person(s) to operate the Company’s businesses under the supervision of the Board or empower the said person(s) to have power as deemed suitable by the Board. At the time deemed appropriate by the Board, the Board may revoke, cancel, or change the said power. 4. The Board must hold a meeting at least once every 3 months. 5. The directors must not operate the business of the same nature as and being in competitive with the Company’s business or be a partner of the ordinary partnership, or be a partner with unlimited liabilities of the limited partnership or be a director of a private company or other companies of the same nature as and being in competition with the Company’s

business,whether for his/her benefits or other person(s) benefits unless it is notified to the shareholders’ meeting prior to the resolution for his/her appointment. 6. The director must immediately inform the Company if he/she has direct or indirect stake in any contract or even holds shares or debentures in the Company and its affiliates. 7. The director, who has interest in any issue, shall have no right to vote on that issue. 8. Investment propositions concerning store expansion or high value non-routine investments except for the following issues must be approved by shareholders first: • Matters that laws and regulations of the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET) require the resolutions from the Shareholder’s Meeting. • The related transaction being worth more than 3% of the latest financial statements’ net tangible assets. • The acquisition or disposition of core assets with value more than 50% of the latest financial statements’ assets. 9. In the event of tie votes, the Chairman of the Board will have a casting vote. Definition of Independent Director “Independent Director” means the director who is independent in expressing his opinion to the operation of the Company, must be a person who has no involvement or interest to the result of operation either directly or indirectly. The qualifications of the Independent Director are as follows: 1. Hold share not more than 1% of paid up capital of the Company, affiliates company, joint company, associated company, including the shares held by the related person. 2. Being independent either directly or indirectly of both financial and management of the Company or joint company or major shareholders of the Company, and having no benefit or interest in such manner within 2 years before being appointed as the Independent Director, unless the Board of Director has carefully considered and see that such participation in having benefit or interest will not affect the duty performing and the independence in giving an opinion. 3. Must not be the Director who has been appointed as the representative to maintain the interest of the Director of the Company, major shareholders, or shareholders who are related to the major shareholders of the Company. 4. Must not participate in management and must not be employee, staff or consultant who receives regular salary in the Company, affiliate company, joint company, company or major shareholder of the Company. 5. Must not be related person or relatives of the executive or major shareholders of the Company. 6. Capable to perform his duty and express opinion or report result of duty performing as assigned by the Board of Directors, freely and not under the control of the Executive or major shareholders of the Company, including related person or close relatives of such person. 7. No other character that causes the inability to give opinion to operation of the Company independently. Terms of the Director of the Company According to every Annual General Shareholders Meeting, the directors shall retire from the position of one third, the directors who have been longest in position shall retire. A retiring director is eligible for re-election, and beside the retirement, the directors may leave from his position when: 1. Death 2. Resignation 3. Lacking of qualifications or possess prohibited character under Section 68 of the Public Company Act B.E. 2535 4. The Shareholders Meeting resolved to dismiss under Section 76 of the Public Company Act B.E. 2535 5. Dismissal ordered by the Court

6. Review and jointly consider with the auditor the financial report, remarks and suggestions. 7. Consider, select, propose to appoint person who is independent to be an auditor of the Company and propose remuneration of the auditor to the Board of Directors of the Company. 8. Consider the independence of internal audit unit, also approve the appointment, relocation and termination of employment, including to consider result of annual performance of the chief of internal audit. 9. Consider and approve regulations of internal audit office. 10. Consider and approve annual internal audit plan including to consider the scope of audit and audit plan of internal audit and the auditor of the Company, in order to have supportive connections. 11. Harmonize the understanding into the same line between Audit Committee, management, Internal Auditor and External Auditor. 12. Review and consider the result of audit reporting and recommendation. 13. Review and amend the regulations of Audit Committee usually once a year to be up to date and appropriate with the environment of organization. 14. Carry on examination of the matters notified by the auditor of the Company. In case the auditor finds doubtful behavior that the director, manager or person who is responsible for the operation of the Company has committed an offence as stipulated in the Securities and Stock Exchange Act (The 4th Issue) B.E. 2551, and report the result of preliminary examination to the Office of the Securities Exchange Commission and auditor of the Company within 30 days from the date receiving notification from the auditor. 15. Perform any other act as stipulated by law or the Board of Directors of the Company under approved by the Audit Committee. 16. Making report on the directing and supervising of the business activities of the Audit Committee, by disclosing it in the annual report of the Company, which such report must be signed by the Chairman of the Audit Committee and must consist of minimum information as follows: 16.1 Opinion in relation to accuracy, completeness, reliability of the financial report of the Company. 16.2 Opinion in relation to sufficiency of internal control system of the Company. 16.3 Opinion in relation to the compliance with the law of Securities and Stock Exchange and regulations of the Stock Exchange or law relating to business of the Company. 16.4 Opinion in relation to the appropriate of the External auditor. 16.5 Opinion in relation to the transaction that may have a conflict of interest. 16.6 Number of the Audit Committeeâ&#x20AC;&#x2122;s meeting, and the attending to the meeting of each Audit Committee. 16.7 Overview opinion or remarks that the Audit Committee have received from performing his duty under the charter. 16.8 Other information that the shareholders and general investors ought to know, under the scope of duty and responsibility which have been assigned by the Board of Directors of the Company. Terms of holding office 1. Taking position for 3 years of each time, including additional appointment and removal from Audit Committee. 2. In case retire from position, such person may be re-appointed. 3. Audit Committee shall leave from the position when: 3.1

Completion of term

3.2

Leave from being a director of the Company

3.3

Resignation

3.4

Death

3.5

Lacking of qualification to be an Audit Committee under this regulations or by the rules of the Stock Exchange of Thailand.

3.6

The Board of Director has resolution to remove from the position.

4. In case of resigning, the resignation letter shall be submitted to the Chairman of the Company not less than 30 days in advance, the approval shall be made by Board of Directors who shall then send copy of resignation letter to the Stock of Exchange of Thailand. 5. In case of any vacancy other than by rotation, the Board of Director shall appoint person who is qualified to be an Audit Committee in order to fill up the number of Audit Committee as stipulated in regulations. Persons who will be appointed as the Audit Committee shall be in position only for the time period remaining of the former Audit Committee, and shall inform the Stock of Exchange of Thailand. 2.3 Nomination and Remuneration Committee consists of:

Name - Surname

Position

1. Mr. Rutt

Phanijphand

Chairman of the Nomination and Remuneration Committee

2. Mr. Chanin

Roonsamrarn

Nomination and Remuneration Committee

3. Mr. Apichat

Natasilapa

Nomination and Remuneration Committee

Remark:

On January 10, 2011, the Nomination and Remuneration Committee No. 1/2011 has a resolution to appoint Mr. Nitat Aroontippaitoon, Senior Vice President - Human Resource and Loss Prevention, to be the Nomination and Remuneration Committeeâ&#x20AC;&#x2122;s secretary.

Roles and Responsibilities 1. Select persons who deserve to be nominated as the new Directors, or select of Managing Director. 2. Determine the procedures and regulations on selection of Directors or Managing Director to ensure the transparency. 3. Set up the procedures and criterions of paying which have been fair and proper remuneration and other benefits to the Board of Directors and Sub-Committee appointed by the Board of Directors, and then propose to the Shareholders meeting for approval. 4. Consider and guide on determining remuneration and other benefits concerning duty and responsibility of the Managing Director including consider the criterions and evaluation of operation in order to determine annual remuneration from the operation. 5. Review the structure of criterions of remuneration on items 3 and 4 to fit with duty, responsibility, operation result of the Company, and harmonized with market condition. 6. Consider salary budget, annual merit increase and annual reward, welfare, including other benefits of personnel of the Company and its subsidiary. 7. Prepare operation report presenting to the Board of Directors at least once a year. Set up policy of overall Employee Stock Option Plan as proposed by the Managing Director. 8. Perform other duties as assigned by the Board of Directors. Terms of holding office 1. Nomination and Remuneration Committee shall leave from the position when 1.1 Completion of term 1.2 Leave from being a Director of the Company 1.3 Resignation 1.4 Death 1.5 The Board of Director has resolution to remove from position. 2. In case of the resigning, the resignation letter shall be submitted to the Chairman of the Company of not less than 30 days in advance, approved by the Board of Directors.

3. In case of any vacancy other than by rotation, the Board of Director shall appoint person who is qualified to be the Nomination and Remuneration Committee, in order to fill up the number as stipulated in the regulations by the Board of Directors. Selection of Directors The Company appointed the Nomination and Remuneration Committee to determine selection of appropriate person to be nominated as the Director or Managing Director, by considering persons who have knowledge, capability and experience as required by the Company, and must not have the prohibited qualification under the rules of the Securities Exchange Commission and Stock Exchange of Thailand, the relevant laws, rules or other regulations., upon approval, the Nomination and Remuneration Committee will propose to the Shareholders Meeting in order to be adopted for the appointing as the Directors of the Company. Criteria of vote to appoint the Companyâ&#x20AC;&#x2122;s Director in the Shareholders Meeting: 1. Each Shareholder has the vote equivalent to one vote per one share held. 2. Each Shareholder shall use all of his/her voting rights under item 1 to elect one person or more persons as the Director, but is not capable to share his/her varied voting rights to any person. 3. A person, who receives highest votes gradually order would be elected as director subject to the number of Directors allowed to be elected in such meeting. In the event of persons who have been elected in the lower order have received equal votes but there will be over the number of allowed or elected Directors in such election, the Chairman of such Meeting shall have a casting vote. In 2010, there were 4 Directors who must be retired by rotation as follows: 1. Mr. Joompol Meesook 2. Ms. Suwanna Buddhaprasart 3. Mr. Thaveevat Tatiyamaneekul and 4. Mr. Chanin Roonsamrarn. The Nomination and Remuneration Committee, having considered in accordance with the criteria of selection, viewed that all 4 directors have the qualifications required according to the Public Limited Company Act B.E. 2535 and also have knowledges, abilities, and experiences in business relating to the Companyâ&#x20AC;&#x2122;s operation. In this regard, such matter has been proposed through the resolution of the board of directors of the Company in order to be presented as an agenda in the Annual General Meeting of Shareholders of 2010 in which the meeting, then, has approved to re-appoint the said directors to their office for another term. Roles and Responsibilities of Managing Director As resolved in the Board of Directors Meeting no. 7/2544 on 21st June 2001 and the Board of Directors Meeting no. 9/2544 on 16th August 2001, the Managing Director who has authority to manage the Company as assigned by the Board of Directors and shall strictly and carefully manage the Company according to the framework or budget approved by the Board of Directors, and maintain the best interest of the Company and shareholders. Authorization of the Directors also covers other matters as follows: 1. Daily Operation and, management of the Company. 2. Approval of expense on operation, expense of selling and administrative and capital expenditure according to the budget approved by the Board of Directors, however, not including the loan and guarantee. 3. Filling the post, appointing, removing, relocating, promoting, reducing or cutting salary or wages, disciplinary punishmen to the staff and employees, and order the staff and employee to leave from position according to the regulations as stipulated by the Board of Directors.

4. Other operation as assigned by the Board of Directors, by having following authorities: • Having authority to administrate under the objectives, regulations, policy, rules, order, and resolution of the Board of Directors meeting and the resolution of the Shareholders Meeting. • Having authority to operate and enter into juristic act, agreement, order or any letter for contacting with the government authority, State Enterprise, and other person, including authorities to act as necessary and proper in order to succeed on the above mentioned acts. • Having authority to appoint other person to be proxy to act on specific work, which must be under the rules, regulations, or order that the Board of Directors or as imposed by the Company. However, the Managing Director is unable to approve transaction that himself or person who may have conflict of interest in any other ways with the Company or its subsidiary. Secretary of the Company On 20th March 2008, the Board of Directors has resolution to appoint Ms. Wannee Juntamongkol as the Secretary of the Company in order to comply with the “Securities and Stock Exchange Act (4th Issue) B.E. 2551”. The Company has already notified the name and place to retain documents of the Company to the Securities and Exchange Commission on 26th August 2008. Authority of Secretary of the Company 1. Facilitate for activities of the Board of Directors. 2. Follow up and coordinate with relevant person in order to be in compliance with the resolution of the Board of Directors, and closely report the result of such operation. 3. Arrange and maintain documents as follows: • Director registration. • Notice calling for the Board of Directors Meeting, Minutes of the Board of Directors Meeting, and the Annual Report of the Company. • Notice calling for the Shareholders Meeting and Minutes of the Shareholders Meeting. 4. Maintain the report on interests which have been reported by the directors or executives. 5. Manage other matters as stipulated by the Capital Market Supervisory Board.

3. Management as December 31, 2010 consists of: Name - Surname

Position

Department

Mr. Khunawut

Thumpomkul

Managing Director

Mr. Vathunyu

Visuthikosol

Senior Vice President

Business Development

Mr. Anuchar

Jitjaturunt

Senior Vice President

Merchandising - Hard Line and International Business

Ms. Jarusopha Thumkathikanon

Senior Vice President

Merchandising - Soft Line

Ms. Tharathip

Trimankhong

Senior Vice President

International Purchasing and Sanitaryware and Tile product

Mr. Weerapun

Ungsumalee

Senior Vice President

Operation

Ms. Jariya

Sorathorn

Senior Vice President

Merchandising - Home Electric Product and The Power

Mr. Nat

Jaritchana

Senior Vice President

Marketing

Mr. Chaiyuth

Karunyasopon

Senior Vice President

Distribution Center

10. Mr. Hanchai

Laowpanitchakorn

Senior Vice President

Information Technology

11. Mr. Nitat

Aroontippaitoon

Senior Vice President

Human Resource and Loss Prevention

12. Ms. Wannee

Juntamongkol

Senior Vice President

Accounting, Treasury and Legal

30 -

(DAP) 2004

** At the present, Mr. Apichat is the director

competing with the Company.

companies which are not doing business

of 1 listed company and 2 non-listed

Director Accreditation Program

- Thai Institute of Directors Association

- MBA, University of Southern California

and Remuneration Committee

Director and Nomination

Mr. Apichat Natasilpa

(DCP) 2008

Director Certification Program

- Thai Institute of Directors Association

1999 - Present

2001 - Present

1992 - 2010

1993 - 2010

1994 - 2010

Director

and Remuneration Committee

Director and Nomination

Director

Chief Executive Director

Director and Advisor of President and

Director

1995 - 2010

(DAP) 2004

Director Director

1997 - 2010

Director

Director Accreditation Program

- Thai Institute of Directors Association

2004 - 2010

- BS.CE, F.E.U., Philippines

** At the present, Mr. Joompol is the director

for the Company only.

2006 - 2010

2001 - Present

- BS.ARCH, F.E.U., Philippines

0.03

Co., Ltd

Millennium Microtech (Thailand)

Pine Bridge (Thailand) Limited

Home Product Center Plc.

Q.H Management Co., Ltd

Quality House Plc.

Casa Co., Ltd.

Quality Construction Products Plc.

Q.H. International Co., Ltd.

Harbourview Co., Ltd

Q.H. International Co., Ltd (BVI)

Q-Con Eastern Co., Ltd

Centre Point Management Co., Ltd

Home Product Center Plc.

Q.H. International Co., Ltd.

Director

- MBA Thammasat University

Quality Houses Plc.

Director President and Chief Executive Officer

Banpu Plc.

Land and House Retail Bank Plc.

IRPC Plc.

LH Financial Group Plc.

(DCP) 2005

Independent Director and

Chairman of the Executive Director

Director and

Audit Committeeâ&#x20AC;&#x2122;s Director

Independent Director and

Chairman of the Executive Director

Executive Director

Home Product Center Plc.

Chairman of the Compensation Committee 2001 - Present

2005 - Present

2006 - 2009

Director, Chairman of the Nomination and Remuneration Committee and

Quality Houses Plc.

Land and Houses Plc.

Bangkok Chain Hospital Plc.

Quality Construction Products Plc.

Q-Con Eastern Co., Ltd.

Land and House Retail Bank Plc.

Home Product Center Plc.

Company Name

Director Certification Program

- Thai Institute of Directors Association

(DAP) 2003

Director Accreditation Program

- Thai Institute of Directors Association

Kasetsart University

2009 - Present

2001 - Present

Director

Mr. Joompol Meesook

competing with the Company.

companies which are not doing business

3 listed companies and 3 non-listed

** At the present, Mr. Rutt is the director of

Hays, Kansas, USA.

- Bachelor Degree of Science

Chairman of the Nomination and

- M.S. in Business Ad.,

Fort Hays Kansas State University,

Remuneration Committee

Chairman of the Board of Directors

Director

1983 - Present

1985 - Present

1994 - Present

2004 - Present

2005 - Present

1995 - Present

Position

(DCP) 2004 -

During

Experience in 5 years

and Chief Executive Officer

0.15

ProporFamily tional relationship of share in with the Company manage% ment

As of December 31, 2010

Director Certification Program

- Thai Institute of Directors Association

Chulalongkorn University

- Bachelor of Civil Engineering

Illinois Institute of Technology, USA

- M.S. Industrial Engineering,

- M.B.A. Thammasat University

Education

Director Executive Director and

Mr. Rutt Phanijphand

competing with the Company.

companies which are not doing business

of 5 listed companies and 7 non-listed

** At the present, Mr. Anant is the director

Mr. Anant Asavabhokhin

Chairman

Age

Name - Surname

Bord of Directors Information

Semiconductor packaging

Investment consultant

Home improvement retailing

Project after-sale service

Property development

Construction supplies manufacturing

Property development

Hotel in overseas

Overseas property development

Construction supplies manufacturing

Building management

Home improvement retailing

Building management

Property development

Energy

Financial institution

Energy

Financial institution

Home improvement retailing

Property development

Hospital

Construction supplies

Construction supplies manufacturing

Financial institution

Home improvement retailing

Type of Business

the director for the Company only.

** At the present, Mr. Khunawut is

Managing Director

Director, Executive Director and

Mr. Khunawut Thumpomkul

competing with the Company.

companies which are doing business

of 4 listed companies and 9 non-listed

** At the present, Mr. Naporn is the director

Director and Executive Director

Mr. Naporn Soonthornchitcharoen

competing with the Company.

companies which are doing business

of 1 listed company and 14 non-listed

Director

2000 - Present

Director

Director and Senior Vice President

Director

(DCP) 2001

Director Certification Program

- Thai Institute of Directors Association

Development Administration

- MBA National Institute of

(DAP) 2004

Director Accreditation Program

- Thai Institute of Directors Association

1995 - Present

1994 - Present

Managing Director

Director, Executive Director and

Director

1995 - 2004

1995 - Present

2002 - Present

2005 - Present

Director and Executive Director

Director

2001 - 2010

1995 - Present

Chairman of the Executive Committee

Director

Chairman of the Executive Committee

Home Product Center Plc.

Bangkok Chain Hospital Plc.

Quality Construction Products Plc.

Assets Plus Securities Plc.

Land and House North Co.,Ltd.

Land and House North-East Co.,Ltd.

Land and House Plc.

Land and House Retail Bank Plc.

Home Product Center Plc.

Rangsit Plaza Co., Ltd

Thananonsee Co., Ltd

USI Holding Co.,Ltd.

Phuket Patong Club Co.,Ltd.

Phuket Resort Club Co., Ltd.

R. L. P. Co.,Ltd.

Home Product Center Plc.

The Confidence Co., Ltd.

Director Director and

Q.H. International Co., Ltd

Quality House Plc.

Q.H. Management Co., Ltd

Casa Ville Co., Ltd.

Land and House Retail Bank Plc.

Idea Fitting Co., Ltd.

Home Product Center Plc.

Company Name

Director

Director and Senior Vice President

Director

Position

2001 - Present

2002 - Present

2003 - Present

2000 - Present

2003 - Present

2005 - Present

2010 - Present

2003 - Present

Director

(DCP) 2005

1.41

3.11

During

Experience in 5 years

Director Certification Program

- Thai Institute of Directors Association

Chiangmai University

- Bachelor of Civil Engineering

- MBA Thammasart University

Director Accreditation Program

(DAP) 2004

- Thai Institute of Directors Association

- Secondary

(DAP) 2004

Director Accreditation Program

- Thai Institute of Directors Association

(DCP) 2007

Director Certification Program

- Thai Institute of Directors Association

- MBA Chulalongkorn University

Education

** At the present, Mr. Manit is the director

Age

Chairman of the Executive Director

Director and

Mr. Manit Udomkunatum

competing with the Company.

companies which are not doing business

of 2 listed companies and 7 non-listed

** At the present, Mrs. Suwanna is the director

Director

Mrs. Suwanna Buddhaprasart

Name - Surname

ProporFamily tional relationship of share in with the Company manage% ment

Home improvement retailing

Hospital

Construction supplies

Mutual fund

Property development

Financial institution

Home improvement retailing

Department store

Holding

Hotel

Holding

Home improvement retailing

Property development

Building management

Property development

Project after-sale service

Property development

Financial institution

Interior design and Furnished

Home improvement retailing

Type of Business

32 Chairman, Chief Executive Director

Nomination and Remuneration Committee

Independent Director, Audit Committee and

Chairman of Executive Dirctor

Independent Director and Audit Committee

Chairman

competing with the Company.

company which are not doing business

The Role of Chairman (RCM) 2002

- Thai Institute of Directors Association

1986 - Present

1996 - 2009

Nomination Committee

Remuneration Committee and

Independent Director, Audit Committee,

Remuneration and Nomination Committee

Independent Director, Audit Committee and

Remuneration Director

Director, Human Resource and

Director and Chief Executive Director

of 3 listed company and 1 non-listed

2003 - Present

Independent Director and Chairman of the Audit Committee

(DCP) 2002

2002 - 2009

2005 - Present

1989 - Present

2001 - Present

1996 - 2009

2001 - Present

Asian Property Development Plc.

Director

Thai Reinsurance Plc.

The Siam Industrial Credit Plc.

Insurance Plc.

The Siam Commercial Samaggi

SICCO Advisor Co., Ltd.

SICCO Securities Plc.

Home Product Center Plc.

Star Fashion (2008) Co., Ltd

Home Product Center Plc.

Tokyo Leasing

Home Product Center Plc.

Insurance

Financial institution

Insurance

Financial advisor

Securities

Home improvement retailing

Apparel manufacture and distributor

Home improvement retailing

Leasing

Home improvement retailing

Property development

Crown cap manufacturing

Property development

Crown seal Plc.

Director

1990 - Present

Property development

Sammakorn Plc.

Construction supplies

Property development

Hotel

Soft drink distribution

Home improvement retailing

Type of Business

Rojana Industrial Park Plc.

Director

1994 - Present

Quality Construction Products Plc.

Tararom Enterprise Plc.

Shangri-La Hotel Plc.

Director

Chairman of the Board of Director

Thai Namthip Ltd.

Home Product Center Plc.

Company Name

1994 - 2010

1996 - Present

Director Chairman of the Board of Director

** At the present, Mr. Chanin is the director

1995 - Present 2000 - Present

Position

and Remuneration Committee

During

Experience in 5 years

Director Certification Program

- Thai Institute of Directors Association

Kansas, USA.

0.22

ProporFamily tional relationship of share in with the Company manage% ment

and Remuneration Committee

Audit Committee and Nomination

Independent Director,

Mr. Chanin Roonsamrarn

ness competing with the Company.

listed company which are not doing busi-

- MBA, Fort Hays State University

(DAP) 2004

director of 1 listed company and 1 non-

Director Accreditation Program

** At the present, Mr. Thaveevat is the

- Primary

- Thai Institute of Directors Association

Audit Committee

Independent Director and

Mr. Thaveevat Tatiyamaneekul

the director for the Company only.

Director Accreditation Program

(DAP) 2004

- Thai Institute of Directors Association

- Ph.D. In Agricultural Technology

Chulalongkorn University

- Ph.D. (Hon.) Business Administration

Education

Chairman of the Audit Committee

Age

** At the present, Mr. Apilas is

Independent Director and

Mr. Apilas Osatananda

competing with the Company.

companies which are not doing business

of 6 listed companies and 5 non-listed

** At the present, Mr. Pong is the director

Independent Director

Mr. Pong Sarasin

Name - Surname

Mr. Anuchar Jitjaturant

Ms. Jarusopha Thumkathikanon

Ms. Tharathip Trimankhong

Mr. Weerapun Ungsumalee

Ms. Jariya Sorathorn

Mr. Nat Jaritchana

Mr. Chaiyuth Karunyasopon

Mr. Hanchai Laowpanitchakorn

Mr. Nitat Aroontippaitoon

Ms. Wannee Juntamongkol

Age

Mr. Vathunyu Visuthikosol

Name - Surname

Chulalongkorn University

Business Administration of

- MBA, Sasin Graduate Institute of

Development Administration 0.06

2004 - Mar 2005

Mar 2005 - Present

2005 - 2010

Finance Director

Senior Vice President

Vice President - Internal Audit

Senior Vice President

Service Manager

2010 - Present

2002 - 2004 -

SAP Consultant & Trainer

2004 - 2005

- MBA National Institute of

Project Manager (IT)

SAP Manager

2005

0.06

Operation & IT Director

2002 - 2004

Senior Vice President

GM - Contract Logistics

2005

2007 - Present

GM - Contract Logistics

2006 - Jun 2007

Senior Vice President

Vice President - Marketing

Jul 2007 - Present

Senior Vice President

1999 - 2005

Vice President - Operation

2006 - Present

Vice President - The Power

2002 - 2005

Senior Vice President

Director

Senior Vice President

2005 - 2007

Sep 2007 - Present

2001 - Sep 2005

Sep 2005 - Present

2000 - Present

2003 - Present

2002 - Present

Position

Chulalongkorn University

During

Experience in 5 years

2006 - 2007

0.02

0.01

0.08

0.07

0.04

0.24

0.07

0.14

0.08

ProporFamily tional relationship of share in with the Company manage% ment

As of December 31, 2010

and Accountancy,

- Bachelor of Faculty of Commerce

Ramkhamhaeng University

- Bachelor of Faculty of Finance,

- MBA, Kasetsart University

in Social Work, Thammasat University

- Masterâ&#x20AC;&#x2122;s Degree Program

Asian Institute of Technology

- Master of Engineering,

- Junior High School

of Commerce

The University of The Thai Chamber

- Bachelor of Faculty of Economics,

Chulalongkorn University

Business Administration of

- MBA, Sasin Graduate Institute of

- MBA, Georgia State University, USA.

Education

Management Information

Thainox Stainless Plc.

Home Product Center Plc.

Microsoft (Thailand) Ltd.

Standard Chartered Bank

DKSH (Thailand) Co., Ltd.

Home Product Center Plc.

Davids Distribution (Thailand) Ltd.

Excel Logistics (Far-East) Ltd.

DHL Exel Supply Chain Thailand

Home Product Center Plc.

Solution Delivery

Home Product Center Plc.

Company Name

Stainless steel producer

Home improvement retailing

Computer software

Computer software consulting

Commercial bank

Consumer goods wholesale

Home improvement retailing

Logistics services

Home improvement retailing

Computer consulting

Home improvement retailing

Type of Business

Detail of Directors and Management who are Authorized to Control Subsidiary Name - Surname

Home Product Center Plc.

Market Village Co., Ltd. (Subsidiary)

Mr. Anant

Asavabhokhin

Chairman of the Board of Directors

Mr. Rutt

Phanijphand

Director

Mr. Joompol

Meesook

Director

Mr. Apichat

Natasilpa

Director

Mrs. Suwanna

Buddhaprasart

Director

Mr. Manit

Udomkunnatum

Director

Mr. Naporn

Soonthornchitcharoen

Director

Mr. Khunawut

Thumpomkul

Director and Managing Director

Chairman of the Board of Directors

Mr. Pong

Sarasin

Independent Director

10. Mr. Apilas

Osatananda

Independent Director

11. Mr. Thaveevat

Tatiyamaneekul

Independent Director

12. Mr. Chanin

Roonsamrarn

Independent Director

13. Mr. Vathunyu

Visuthikosol

Senior Vice President

Director

14. Mr. Anuchar

Jitjaturunt

Senior Vice President

15. Ms. Jarusopha Thumkathikanon

Senior Vice President

16. Ms. Tharathip

Trimankhong

Senior Vice President

17. Mr. Weerapun

Ungsumalee

Senior Vice President

18. Ms. Jariya

Sorathorn

Senior Vice President

19. Mr. Nat

Jaritchana

Senior Vice President

20. Mr. Chaiyuth

Karunyasopon

Senior Vice President

21. Mr. Hanchai

Laowpanitchakorn

Senior Vice President

22. Mr. Nitat

Aroontippaitoon

Senior Vice President

23. Ms. Wannee

Juntamongkol

Senior Vice President

Director

24. Mr.Thee

Phromphol

Director

Remark: Mr. Thee Phromphol has retired from work since 1 January 2011, and the Company has appointed Mr. Nitat Aroontippaitoon to replace him.

Remuneration for the Directors and the Executives 1. Remuneration for the Directors Basis of remuneration for the Directors are remuneration for giving advice on any matters to working team of the Company and fees for the meeting, which the Company normally has at least the Board of Directors Meeting once a month, and the Meeting of sub-committees, i.e. Audit Committee Meeting, Executive Committee Meeting, Nomination and Remuneration Committee Meeting. The Nomination and Remuneration Committee and the Company’s board of directors have considered to specify the remuneration for directors by relying on the Company’s overall operating results, the payment of dividends to shareholders, obligations and responsibilities of each committee. For the criteria of remuneration payment, the Company will base on the same criteria as used for the payment of the director’s remuneration of the Company which operates in the same type of business. On 7th April 2010, the Shareholders Meeting of 2010 has a resolution to grant the annual remuneration not exceeding Baht 12 million and pension to the directors not exceeding Baht 11 million. Details of remuneration payment are as follows:

1. Monthly Remuneration

•

Chairman

Baht 70,000 / person / month

•

Director

Baht 35,000 / person / month

2. Remuneration for Meeting

for the Board of Directors Meeting and Sub-Committee Meeting which shall be paid

according to the number of meeting attendance. •

Chairman

Baht 25,000 / person / month

•

Director

Baht 15,000 / person / month Meeting Allowances

Name – Surname

1. Mr. Anant

Asavabhokhin

2. Mr. Pong

Board of Director

Executive Director

Audit Committee

Nomination and Remuneration Committee

Pension

Total (Baht)

1,015,000

1,692,308

2,707,308

Sarasin

570,000

846,154

1,416,154

3. Mr. Rutt

Phanijphand

585,000

180,000

75,000

846,154

1,686,154

4. Mr. Joompol

Meesook

600,000

846,154

1,446,154

5. Mr. Apichat

Natasilapa 1

600,000

45,000

846,154

1,491,154

6. Mrs. Suwanna

Buddhaprasart

600,000

846,154

1,446,154

7. Mr. Manit

Udomkunnatum

570,000

275,000

846,154

1,691,154

8. Mr. Naporn

Soonthornchitcharoen

585,000

135,000

846,154

1,566,154

9. Mr. Khunawut

Thumpomkul 2

600,000

180,000

846,154

1,626,154

10. Mr. Apilas

Osatananda

600,000

300,000

846,154

1,746,154

11. Mr. Thaveevat

Tatiyamaneekul

585,000

180,000

846,154

1,611,154

12. Mr. Chanin

Roonsamrarn

600,000

180,000

45,000

846,154

1,671,154

7,510,000

770,000

660,000

165,000

11,000,000

20,105,000

Total

Remark : 1. Mr. Apichat Natasilapa, an authorized person of the American International Assurance Company Limited, received remuneration in the name of Pine Bridge (Thailand) Limited. 2. Mr. Khunawut Thumpomkul, holding the position of Director and Managing Director, received compensation as the meeting allowance and Director’s fee. However, salary and bonus were included in the remuneration of the Executive.

2. Remuneration for the Executives The Company has criteria on the making of payment of the remuneration to the Executives by considering from knowledge, capability, experience, and performance, and by comparing with other companies in the same industry. Remuneration of 12 Executives for the year 2009 and 2010 consisted of salary, bonus, and other remunerations for the total amount of Baht 50.3 million and Baht 54.9 million respectively. Moreover, the Executives of the Company have also received other remunerations in form of warrant to buy ordinary shares of the Company.

Human Resources Detail of numbers of employee during year 2008 - 2010. Number of Employees

31 Dec 2010

31 Dec 2009

31 Dec 2008

Head Office

1,547

1,420

1,232

Branches

4,426

3,849

3,662

Total (persons)

5,973

5,269

4,894

Number of Branches

Remark: The number of employees in each year already includes some of employees of the branches which will be opened next year.

On December 31, 2010, the Company had a total of 5,973 permanent employees with related expenses of Baht 1,786 million.

Corporate Governance The Board of Directors realizes the importance of Corporate Governance and believes that the good Corporate Governance is the crucial factor for business operation, in order to efficiently and effectively manage the business to have stability, continuous growth and fairness to all stakeholders. From such reasons, the Board of Directors stipulates the Corporate Governance Policy, having content covering the important principle on the rights of shareholders, equitable treatment to shareholders, considering to the roles of interest person, disclosure of information and transparency, and responsibility of the Directors, in order to be guideline for managing business to achieve the company’s objectives and goal that have been set according to business policy sticking to correctness and transparency. The policy of Corporate Governance of the Company is disclosed at www.homepro.co.th/ir/investor_th.html

1. Rights of Shareholders The Board of Directors of the Company gives the importance to the right of shareholders by not performing any act that violates or lessens the rights, and to facilitate the exercise of rights on various matters. It is then the guideline of operation is set in order to ensure that shareholders that they will be protected under the basic rights as follows: •

The Company gives an opportunity to the shareholders to propose agenda and propose the name list to be appointed as directors, including to pass question about the Company in the shareholders meeting in advance, which the company has notified the rules and supplementary documents on the web site of the Company since 1st December 2010. However, shareholders may submit such question until 31st January 2011.

•

The Company has delivered the notice calling for the meeting with information, documentation supplement to each agenda with proxy to shareholders 7 days prior to the meeting date, or as stipulated by law of both Thai and English language, including the Company’s Articles of Association in relation to the Shareholders Meeting and casting of vote.

•

In case the shareholders are unable to attend the meeting, they may give proxy to the Independent Directors in casting the vote instead or may indicate their own vote. In 2010, the Company has arranged for Mr. Chanin Roonsamrarn to be the proxy director.

•

Prior to the meeting commencement, the Board of Directors will explain to the shareholders to acknowledge the rights under the Articles of Association of the Company, the proceeding of the meeting, casting the vote, including the giving of the rights to shareholders to raise questions and express opinion equally.

•

After the meeting, the Company will notify the meeting minutes to the Stock Exchange of Thailand (SET) within the time frame specified by the SET, together with detail of voting result in each agenda. Generally, the meeting minutes will be reported to the SET within 14 days and also publicized it on web site of the Company.

2. Equitable Treatment of Shareholders The Company, being aware of the importance, ensures that the every shareholder, whether executive shareholders, non-executive shareholders, and foreign shareholders should receive equitable and fair treatment. The Company has policy to prevent the use of inside information which is prescribed in the ethic handbook, and has disclosed to staff, executive, and director of the Company. The policy and method to control executive in private use of internal information of the Company are as follows: •

Provide knowledge to executive in each department in relation to duty that executive shall report the holding of securities of the Company and penalty under the Securities and Stock Exchange Act B.E. 2535 and under the regulations of the Stock Exchange of Thailand.

•

The Company has required the executive to report the change of securities holding to the Office of Securities and Stock Exchange Commission under Section 59 of the Securities and Stock Exchange Act B.E. 2535, and delivered copy of such report to the Company on the same day as sending to the Securities and Stock Exchange Commission.

•

The Company has notified to the executive to restrain from the purchase and sale of securities of the Company 1 month before disclosing of financial statements or inside information to the public, and the disclosure of material information to other person is not allowed and such has been notified via e-mail every quarter.

However, if there is the violation of regulations mentioned above, the Company will proceed with discipline punishment as appropriate as the case may be.

3. Roles of Stakeholders The Company has stipulated the regulations for the interest person in the “Handbook of Business Ethic” of the Company in order to ensure that the Company will comply with in order to provide the rights to interest person under the relevant laws, whether the shareholder, staff, customer, business partner, community, society, and environment. Moreover, the Company has also strengthen cooperation with the interest person in each groups in order to be able to ensure business sustainability with the fair benefits to all parties, in order to build the long-term success.

Shareholder Shareholders and interest person may file complaint, or communicate or notify matters relating to the Company through the director or audit committee at www.homepro.co.th/ir/investor_th.html •

Communication with the Director of the Company. In case requiring for notifying or communicating in relation to operation of the Company, by such information will be sent to the Managing Director.

•

Communication with the Audit Committee. In case requiring for filing complaint in relation to violation of laws or ethics, accounting doubt, internal controlling, etc. Such information shall be sent to the office of internal audit of the Company in order to be compiled and proposed to the Audit Committee for further consideration.

Business Partner The Company complies with the Trade Competition Act according to the resolution of the Trade Competition Commission in year 2006, announced to be as Guideline for Unfair Trade Practices in the Wholesale/Retail Business by virtue of the Trade Competition Act B.E. 2542. To be able to operate business according to the above announcement, the Company has mutually agreed with business partner to amend the provision of the agreement to be more specific and clearer.

Employee The Company realises that the employees are significant resource for achieving the business goals. The Company cannot sustain and grow with strength if the personnel have not been developed and promoted. In order to achieve the vision and commitment of the Company, the Company has a clear and determined policy in the development of personnel by supporting and developing all personnel to have quality, knowledge and ability up to highest capability of them, and to grow simultaneously with the Company. The Company’s personnel shall have their opportunity and get support to learn and to develop to be a good capable and decent person, to have higher effectiveness, and to be ready to take any change in the future. This also includes the policy to provide the fairness on compensation, career advancement, promotion and transfer, in which, throughout the time, the Company has looked after its employees on significant issues as follows: 1. The Company has looked after its employees by ensuring that they receive fair and appropriate compensation based on their duties and responsibilities and also be able to compete in the labor market. Moreover, the Company has provided welfares such as annual physical check-up, medical treatment fee, accident insurance, employee uniform, emergency fund assistance in case of natural disaster and has also arranged for activities to enhance the happiness in their working life i.e. “HomePro Jai Aar Sar” Program which encourages the employees to join activities for providing benefits to community, to arrange for company sport competition, to arrange for the merit making ceremony in their own month ot birth etc.

2. Providing the provident fund in order for the employees to have saving for retirement. 3. The Company gives the importance to the developing of knowledge, all kind of capabilities of staff for knowledge on products, standard on work performing, providing service, management, including attitude and team work. The Company has promoted its staff as follows: • Allocating budget in personnel development appropriately and sufficiently for employees at every level. • Teaching and Learning course have always been updated. • Set up the DIY workshop center, having knowledge skilled expert and in each group of products. • Set up Learning Center to each branch for new staff for self learning • Having the Individual Development Program in order to develop personnel as the Talent Group to be promoted to the higher position, to be ready to support the expansion of the Company. • Promote the personnel to pursue education in the bachelor and master degree, and set up scholarship for studying English language in order to increase efficiency of personnel to be able to perform their work more effectively.

Customer The Company aims to operate business on the basis of highest satisfactory of customer and in order to operate according to the objectives, the Company has policy and procedures to customer as follows: 1. Strictly deliver goods and provide service under the conditions as agreed with customer. In case of the inability to comply with the conditions, the Company will notify customer in order to find the solution. 2. Giving information and suggestion about the products and services, including relevant commercial terms correctly, completely, not exaggeratedly which may cause misunderstanding to the customer. 3. Giving opportunity for customer to suggest or complain about the products and services, including servicing of staff or any inconvenience that customer has experienced via website; www.homepro.co.th/cs/ccm.asp

Community, Society and Environment The Company has a policy to support social activity by creating projects that may benefit the community and society as follows: 1. “Computer Lab Construction” project, provides primary school students an opportunity to learn via the internet. In 2010, HomePro provided computers together with equipment installation to Baan Boong Toey School, Mhoo Si sub-district, Pak Chong district, Nakhonratchasima Province. 2. “The Kids’ Toilet” project, received cooperation from the Department of Health, the Ministry of Public Health, and the Office of the Basic Education Commission, the Ministry of Education to examine the standard and provide additional improvement till most of the toilets in the project passed the national standard or HAS (Healthy Accessibility and Safety). At the end of 2010, HomePro contributed a total 745 restrooms to 60 schools in 16 provinces nationwide. 3. “HomePro helps reduce global warming” project, it was started in 2009 under the objective of Avicennia marina and Lampu forestation of 100,000 trees within 3 years at BangPu Education Center of the Royal Thai Army in Samut Prakarn Province. 4. “Flood Victim Support”, regarding the flood situation in 2010, the Company along with business alliances had offered a discount on the products that victims need to rebuild/ repair their homes. Furthermore, donations are made to help victims and invited our customers to donate at HomePro’s branches nationwide.

4. Disclosure and Transparency The Board of Directors has given the importance to the disclosure of information which are accurate, complete, transparent, in timely manner, and equitably distributed to the investor and stakeholders to acknowledge, of both financial reports and material information that affect the value of the Companyâ&#x20AC;&#x2122;s Securities which will be disclosed through the publication of the Stock Exchange of Thailand and web site of the Company. The Company has the Investor Relationship office to be responsible for giving information and hearing to opinion of shareholders and investor regularly, by contacting Mr. Rakpong Aroonwatdhana, Tel. 02-832-1416 or via e-mail at ir@homepro.co.th Furthermore, the Company has also specified the opportunity to communicate and activities between shareholders, investors and high rank executive of the Company, apart from the Annual Shareholders Meeting as follows:

Web Site

The Company has presented the operational result, annual report, annual transactions information 56-1 form, minutes of shareholders meeting, news about the Company, news notified to the Stock Exchange, webcast, documentations supplemented to the analyst meeting and contact channel, and also distribute information of the Company in relations to Corporate Governance, Board of Directors and Executives Chart, shareholding structure. To facilitate and provide equal opportunity in searching information, such have been prepared in both Thai and English version. The shareholders, investors, and interested person of the Company may express opinion and propose additional agenda to the meeting and propose the person who has qualification to be the director before the Company will send a notice calling for the meeting through web site.

Analyst Meeting

The Company has arranged for the meeting for the analyst and investors, including shareholders who are interested in disclosing the operational result on every quarter for 4 times in 2010.

One on One

All through 2010, the Company opened the opportunity to analysts, shareholders and institutional

meeting and

investors both domestic and international to meet with the executives of the Company, including

Company visit

conference calls, in order to answer the questions relating to the operations of business for the total of 78 times, and also had the opportunity to welcome group of people for their company visit of 4 times.

Road Show

In 2010, the Company attended the conference and Road show as arranged of both domestic and international totaling 11 times as follows, 1. Having met foreign investors as arranged by Financial Institution in Thailand for 3 times 2. Joining the Conference and Roadshow in England, Singapore, Malaysia and Hong Kong for 8 times.

Press Conference

The Company has made the press conference twice about the annual report on business operation

and Media

in 2009 and direction to operate business in 2010, and report the result of operation for the first

Relationship

6 months of 2010 to the media. At the same time, the Company has as well prepared the Press Release for the media. Besides, Mr. Khunnawut Thumponkul, Managing Director of the Company has given his interview to television program of Money Channel, and other medias in the matter relating to industrial trends and the business direction of the Company. And, also he joined as a co-lecturer to student taking the course of TLCA Executive Development Program (EDP), the 6th Class, organized by the Thai Listed Companies Associations, the Stock Exchange of Thailand and Capital Market Academy on 15 October 2010.

5. Board Responsibilities Board of Directors of the Company consists of 12 persons as follows: 1. 4 Executive Directors 2. 4 Non-Executive Directors 3. 4 Independent Directors in which 3 of 4 directors are in the position of Audit Committee.

Responsibilities The Board of Directors has participated in determining the Companyâ&#x20AC;&#x2122;s policy, goal, business plan, and budget of the Company, as well as ensuring that the management has operated according to the plan and budget with efficiency and effectiveness. The Chairman of the Company, President of Executive Committee, and Managing Directors of the Company are not the same persons. Moreover, there are obviously separation of roles and duty to control and management, in order to balance the power and create transparency for work performing. The Company has appointed the Audit Committee who are Independent Directors to review the accuracy, sufficiency of the disclosure of information and the reliability of financial report, Corporate Governance and internal control of the Company which have details of obligations as specified in â&#x20AC;&#x153;Clause 9 management of duty of the Audit Committeeâ&#x20AC;?. In case there was transaction that was not under normal course of business of the Company, the Board of Directors of the Company has duty to consider such transaction, in which there shall be Independent Director in the meeting as well. The Company has the Nomination and Remuneration Committee to set the procedures and rules on selecting the Director of the Company, and set the period of remuneration or other benefits which is fair and reasonable and present to the shareholders meeting for consideration. To promote every parties to perform their duty according to assigned responsibility with transparency, the Company has prepared the policy of Corporate Governance, handbook of ethic, and code of conduct on ethics of Directors, the management, and staff in order for the relevant persons to comply with the guideline in performing assignment of the Company honestly, and to follow up with the compliance of the guideline regularly, including to stipulate discipline penalty.

First orientation and giving knowledge in the business of the Company to the new Director The Company has policy to provide the first orientation for the new directors, in order to acknowledge the roles, duty, and responsibility, including giving knowledge, understanding of business and operating in any part of the Company, which is to prepare the readiness to perform duty of the Directors. Due to the Company has no new Directors in 2010, there was no arrangement of such first orientation.

The Board of Directors Meeting The Board of Directors of the Company and Executive Directors shall have regular meeting every month and may have special extra meeting as necessary. There shall be fixing the date and time of the meeting in advance for the whole year, and there shall be sending of the notice calling for meeting with agenda of the meeting approximately 7 days in advance for the Directors to be prepared. In 2010, the Company had 12 times of Board of Directors Meeting and the meeting of Sub-Committee i.e. 12 times of Executive Directors meeting, 12 times of Audit Committee meeting, and 3 times of Nomination and Remuneration Committee meeting, details of attending the Board of Directors meeting and other sub-committee meetings are as follows:

Attendance / Number of all meetings (times) Name â&#x20AC;&#x201C; Surname 1. Mr. Anant

Board of Directors

Asavabhokhin

Executive Directors

Audit Committee

7 / 12

2. Mr. Pong

Sarasin

10 / 12

3. Mr. Rutt

Phanijphand

11 / 12

4. Mr. Joompol

Meesook

12 / 12

5. Mr. Apichat

Natasilapa

12 / 12

3/3 3/3

6. Mrs. Suwanna Buddhaprasart

12 / 12

7. Mr. Manit

Udomkunnatum

10 / 12

11 / 12

8. Mr. Naporn

Soonthornchitcharoen

11 / 12

9 / 12

9. Mr. Khunawut

Thumpomkul

12 / 12

10. Mr. Apilas

Osatananda

12 / 12

11. Mr. Thaveevat Tatiyamaneekul

11 / 12

12 / 12

12. Mr. Chanin

12 / 12

Roonsamrarn

Nomination and Remuneration Committee

3/3

Evaluation of the work performance of the Managing Directors The Company has the Nomination and Remuneration Committee to propose opinion to the Board of Directors of the Company in consideration of setting the annual Key Performance Indicators (KPI) to be used in evaluation of work performance of the Managing Director, such KPI shall be in accordance with the goal of the Company for both short term and long term.

Succession plan of the High rank of Executive The Company has prepared the succession plan to prepare in the event the executive is unable to perform his duty, by having initiatively structured the replacement of the low rank of executive in the level of branch manager already. The plan for mid-level executive and high-rank executive are in progress, which this will to ensure that the operation of the Company can be continued.

Risk management by Executive The Company has policy of risk management, group of management shall jointly consider and analyze risk factors both external and internal the organization, by having meeting every 2 weeks and following up the situation that is a cause of risk closely, and notifying to the relevant staff for acknowledgement and to comply with the stipulated measurement of risk management.

Forming the Internal Audit Department In order to promote the procedures of good governance, the Company has formed an internal audit to review and followed up the result of work performing to the Management, by performing its work independently, and reporting the result of the operation to the Audit Committee directly and regularly. Moreover, there was a proposal to appoint the auditor to evaluate efficiency of internal accounting control of the Company which the resolution of the shareholders in 2009, approved to appoint the auditor from Ernst & Young Co., Ltd., by Mrs. Gingkarn Atsawarangsalit, an auditor License number 4496 as the auditor of the Company and its subsidiaries for the year 2010.

Internal Control On February 16, 2011, the Board of Directors, Audit Committee and management evaluated the Company’s internal control system. The evaluation was done on the following five criteria:

1. Organization and Environment The Board of Directors opines that the Company has clear organization chart and has specified scope of authority, responsibility of each department in writing, having specified clear target of business operation which is measurable, which the setting of the target and work plan the management and each executive of each field of work have jointly considered and set the business target and the strategy of operation by using the result of operation in the past years as the basic information. It is then ensured to be properly and shall be able to achieve the target. For our policy, operating regulation, and provision relating to ethics (Code of Conduct), the Company has specified such in the business ethics manual in order for directors, executives, and employees in all departments to use as a guideline for operation. Regarding this business ethics manual, the Company has provided such in consideration of relevant laws and regulations including the effects which may occur to interested parties.

2. Risk Management The Board of Directors opines that the group of executives has regularly considered and evaluated the risks that may affect the result of operation of the Company, by specifying operation plan of every year and fixed to have meeting in every 2 weeks in order to follow up the result of operation, and the risk factors closely for setting management method and for controlling the risk to be at the acceptable level, and notified relevant staff to be aware of and to comply with the measurement of risk management.

3. Controlling The Board of Directors opines that the Company has specified the scope of authority, approval credit limit of executive in each level clearly in writing, and completely separate duty and responsibility for approval work, account booking and information technology, and the looking after of property separately in order to examine each other. In case the Company has entered into transactions with the major shareholders, director, executive, or relevant persons, the Company shall propose such transaction through the Audit Committee Meeting and complete such transaction as if such were made with outsider.

4. Information Technology and Communication System The Board of Directors opines that the Company has prepared the notice calling for the Board of Directors Meeting, stating information and details of agenda to the meeting, including summary of information to the Board of Directors for consideration of at least 7 days before the meeting, and has made the complete minutes of the Board of Directors meeting which may be referable, and such can be used to examine the appropriateness in performing the duty of the Director. The Company has selected the accounting policy that is generally accepted in accounting principle, and retained documents supplement to records properly. The Company hired Brambles (Thailand) Co., Ltd., a document retaining company, as the document keeper with the appropriate controlling system.

5. Mornitoring The Board of Directors opines that the Company has added an agenda on monitoring the result of operation every month, in order to notify to the Board of Directors and to propose suggestions for work performing. For operation plan and budget, the Company will make and review them every half year. The Company regularly conducts and audit by internal control system to ensure the compliance with the policy. There are two levels of internal control and compliance policies; namely (1) self-inspection between inter- related departments according to the good internal compliance; and (2) there are inspection and evaluation processes responsible by internal audit department. The internal auditor must report directly to the Board of Directors or the Audit Committee so that the internal auditors can perform their duties independently and accurately. Apart from this, the Company’s auditor, Mrs. Gingkarn Atsawarangsalit, the auditor with certified license no. 4496 of Ernst & Young Office Co., Ltd, as the auditor of the Company for the year end on December 31, 2010 has given her comment on the assessment of the efficiency of the internal control of the Company’s accounting that no significant weak points were found in the internal audit system on the accounting.

Dividend Policy The Company has the policy to pay dividend to shareholders not less than 40% of the net profit of each year. However, the consideration for dividend payment will take other factors into account such as result of operation and financial status of the Company, Liquidity, Expansion of Business and other factors relating to the management of the Company. Each dividend payment is required to obtain approval from shareholders and Board of Directors. Dividend payment during 2008 â&#x20AC;&#x201C; 2010 is as follows:

Dividend

2008

2009

2010

Baht per Share

0.35

1.161

0.1862

Remark : 1. The Company paid dividends from the 2009 profit totaling 1.16 Baht/share by dividing into the interim divided payment from the first 6 months operation of 1 Bath/share consisting of cash dividend of 0.10 Baht/share and stock dividend at the rate of 10 existing shares per 9 stock dividend or equivalent to 0.90 Baht/share, according to the resolution of the Extraordinary General Meeting of Shareholders No. 1/2009, and the dividend payment from the last 6 months operation of another 0.16 Baht/share according to the resolution of the Annual General Meeting of Shareholders 2010. 2. October 29, 2010, the Company paid interim dividends at the rate of 6 existing shares per 1 stock dividend or equivalent to 0.186 Baht/share by dividing into cash dividends at the rate of 0.0193 Baht/share and stock dividends at the rate of 0.1667 Baht/share according to the resolution of the Extraordinary General Meeting of Shareholders No. 1/2010.

Related Transaction In 2010, the Company and its subsidiary had significant business transactions with related parties, which have been concluded on commercial terms and bases agreed upon in the ordinary course of business between the Company and those companies. As of December 31, 2010 and 2009, the Company had outstanding balance with the related transaction, which can be summarized as follows:

Amount Name of Company / Nature of relationship

Transaction

(Thousand Baht) 31 Dec 10

31 Dec 09

Audit Committee and Managementâ&#x20AC;&#x2122;s opinion

1. Land and Houses Plc. and subsidiaries -

Being a major shareholder of the Company

Sales income

8,478

3,755

by holding 30.26% of total paid-up capital,

Account Receivable

2,363

432

Being a major shareholder of the Company

Sales income

3,021

617

by holding 20.38% of total paid-up capital,

Account Receivable

959

142

as of October 15, 2010. -

With 2 co-directors 1. Mr. Anant Asavabhokhin 2. Mr. Naporn Soonthornchitcharoen

Such value was the appropriate selling price as it was the same as the market price which the Company sales to the other manufacturers or sellers.

2. Quality Houses Plc. and subsidiaries -

as of October 15, 2010. -

With 4 co-directors: 1. Mr. Rutt Phanijphand 2. Mr. Anant Asavabhokhin

Such value was the appropriate selling price as it was the same as the market price which the Company sales to the other manufacturers or sellers.

3. Mrs. Suwanna Buddhaprasart 4. Mr. Joompol Meesook

Amount Name of Company / Nature of relationship

Transaction

(Thousand Baht) 31 Dec 10

31 Dec 09

Audit Committee and Managementâ&#x20AC;&#x2122;s opinion

3. Land and Houses Retail Bank Plc. -

With 2 co-shareholders:

Interest income

1. Land and Houses Plc.

Deposit with financial

2. Quality Houses Plc. -

institution

5,703

1,809

1,196,575

677,977

547

1,411

With 4 co-directors: 1. Mr. Anant Asavabhokhin 2. Mr. Rutt Phanijphand

The Company received the interest with the same rate as other customers of the bank, such rate was a normal rate of other banks and financial institutions.

3. Mr. Naporn Soonthornchitcharoen 4. Mrs. Suwanna Buddhaprasart

4. Quality Construction Products Plc. and subsidiaries -

Land and Houses Plc. is the co-shareholder.

Purchase of goods

With 3 co-directors:

Other Receivable

1. Mr. Anant Asavabhokhin

Trade Accounts Payable

162

17,645

17,918

2. Mr. Naporn Soonthornchitcharoen 3. Mr. Joompol Meesook

Such value was the appropriate purchase price because it was the same market price which the Company could purchase from other manufacturers or sellers.

5. Quality Houses Property Fund -

With 2 co-shareholders 1. Quality Houses Plc.

2. Land and Houses Plc.

Rental and service expenses Other Payable

1,436

1,302

Rental guarantee deposit

3,000

Such value was generated from the transactions of rent and services fee for the space in the Wave Place building. The Audit Committee opined that such price was calculated from the appropriate rate.

Necessity and Appropriate Reason of Transaction The connected transaction made was necessary and reasonable to create the highest benefit to the Company. The Audit committee concluded that such was in accordance with business and the general ordinary course of received and paid consideration by and from the Company was fair.

Measure/Procedure of Approval of Connected Transaction The connected transaction being made at present and expectedly in the future, e.g. sales of goods to Land and Houses Plc. and Quality Houses Plc., purchase of goods from Quality Construction Products Plc., renting space in the Wave Place building of Land and Houses Property Fund and Deposit transaction with Land and Houses Retail Bank Plc. For the sale of goods transaction, the Company determined the price according to the market price which was the price that buyer could buy them from other manufacturers or sellers. Generally, the specification and price of goods would be determined earlier. For the purchase of goods transactions, the Company purchased them at the market price which it could to purchase from other manufacturers or sellers. The Audit Committee considered the connected transactions and concluded that the Company received and paid remuneration in the fair price according to the general ordinary course of business.

Policy or Tendency of Inter-Transaction The Company has policy to specify the trade conditions for entering into inter-transaction to be as normal business operation. Price of products to be sold shall be prescribed at the level that can be competed to other vendors. As for Inter-transaction that may be occurred in the future, the Board of Directors shall comply with the laws on Securities and Stock Exchange, and Regulations, Announcement, Order, or Regulations of Stock Exchange of Thailand, and including compliance with the regulations on disclosure of information of connected transaction and acquiring or disposing of material assets of the Company or the Subsidiary. However, if there will be inter-transactions of the Company or its subsidiary occurred to person who may have conflict of benefit, or may have conflict of interest in the future, the Company shall have the Audit Committee give the opinion on necessity and appropriateness for such transactions. In case the Audit Committee is not skillful in considering the inter-transactions that may be occurred, the Company shall arrange for an Independent expert or auditor of the Company to give opinion on such inter-transactions in order to bring such information to supplement for the decision making of the Board of Directors or shareholders as the case may be. However, the Company shall disclose inter-transactions in the note of the financial statement audited by the Auditor of the Company.

Financial Analysis and Business Operation Results Overview of Business Operation Results Although the economic situation throughout the year 2010 had confronted many unfavorable factors such as uncertainty of the world economy, local political instability, fluctuation of the Thai Baht and fund flow, and several natural calamities, the Thai economy expanded by more than 7% due to the increase of export and services which was in line with the economic recovery of important trading partner countries as well as the continuous recovery of the local demand. All of these factors had shown their effects in the second half of the year. The overall retail business in 2010 had a fair expansion which followed the better economic situation, more stable political situation, the government’s economic stimulus policy, and salary increase of all government sectors. As a result, the consumers had regained their confidence in the economy, employment, and future income. The Company, however, has closely kept abreast of the economic and political situation in order to plan and find measures and strategies to prevent the risks that may occur, and to operate the business so as to successfully reach the planned target. For the Company operation result in 2010, sales, total revenues and net profit are still growing from the previous year due to many driving factors such as an increase in the number of branches, same store sales growth, sales of new stores, efficiency of inventory management, revenues from space rental business, and revenues from HomePro Expo etc.

Operating Result Comparing the results of operation for the year ended 31st December 2010 to the same period of year 2009.

1. Revenue from Sales In 2010, the Company and its subsidiary generated revenue from sales of Baht 24,072.76 million, increased from the previous year by Baht 3,743.64 million or 18.42%. The increase was mainly driven by the same store sales growth, sales of the newly opened branches in 2010, and sales from HomePro EXPO in the 1st and 4th quarter of the year.

2. Other Revenues In 2010, the Company and its subsidiary generated other revenues of Baht 1,842.15 million, increased from 2009 by Baht 372.17 million or 25.32%. The proportion as percent to sales increased from 7.23% to 7.65%. The details of increase are as follows: • Revenue from rental and service, increased by Baht 83.46 million, from space rental revenue of HomePro Village branch and HomePro EXPO No. 11 and 12. • Other Revenues, increased by Baht 288.71 million, revenue from advertising fee, support fee of promotional activities from business partners, service fee related to sales of goods.

3. Cost of Sales and Gross Profit Margin In 2010, the Company and its subsidiary had the cost of sales of Baht 18,052.22 million, increased from the previous year by 2,657.15 million or 17.26%, which was the result of the increase of sales. The Company had gross profit of Baht 6,020.53 million, increased from the previous year of Baht 1,086.49 million. The gross profit margin as percent to sales was 25.01%, moved up from the previous year of 24.27%. The increase of gross profit was a result of the increase in efficiency of inventory management system as well as the increase in volume discount of order in the large quantity. As a result, the increase rate of cost of good sold is less than the increase rate of gross margin. The gross margin has also increased by the increase in sales volume of house brand products.

4. Selling and Administrative Expenses In 2010, the Company and its subsidiary had selling and administrative expenses amounted to Baht 5,456.17 million, increased from the previous year by Baht 793.90 million or 17.03%. The proportion as percent to sales slightly decreased from 22.93% to 22.67%. The details of expenses in each group are as follows:

• Selling expenses of Baht 4,493.71 million, being expenses for branches, operation and distribution unit, increased by Baht 674.43 million from expenses on salaries, cost of transportation and cost of service, maintenance, expenses of HomePro Expo event and pre-opening expenses. • Administrative expenses of Baht 915.74 million, mostly being expenses of Head Offi ce, increased by Baht 134.85 million from expenses on salary and remuneration, consultation, tax, and fees. • Other expenses amounted to Baht 46.72 million, decreased by Baht 15.38 million.

5. Financial Expenses Financial Expenses of year 2010 were Baht 103.49 million, decreased from the previous year by Baht 9.64 million or 8.52%. The proportion as percent to sales decreased from 0.56% to 0.43%, which was mainly driven by the decrease of paid interest from partial payment of long-term loan and the lower interest rate.

6. Net Profit For the result of operation in 2010, the Company and its subsidiary had net profit of Baht 1,638.43 million, increased from the previous year by Baht 507.55 million or 44.88 %. The increase of net profit was caused by the increase of sales and other revenues, together with the decrease of cost of sales and decrease of interest payment. These made the proportion of net profit to sales to move up from 5.56% to 6.81%.

7. Return on Equity The return on equity as of 31st December 2010 was 28.62%, increased from the previous year of 22.25%. The increase shows that the Company has the ability to generate earnings from shareholders’ equity more efficiently.

Financial Status Comparing financial status as at 31st December 2010 and 31st December 2009

1. Net Assets As at 31 st December 2010, the Company and its subsidiary had total assets of Baht 16,591.99 million, increased from 31st December 2009 by Baht 2,719.16 million or 19.60%. The growth of asset value was due to the change of significant transactions as follows: • Cash and cash equivalents increased by Baht 570.91 million which was from the increase in bank deposit received from issuance of debenture during the Year and outstanding cash at branches at the year end date. • Net inventory increased by Baht 809.09 million, which was a result of the increase in number of new branches in 2010. • Other receivables increased by Baht 130.61 million, which was from the support fee of promotional activities and other service fee. • Net Property, plant and equipment, and net leasehold rights and software totaling increased by Baht 1,128.71 million or 11.87%, which was from the investment in new store expansion in 2010 and 2011. • Other assets increased by Baht 79.84 million.

Accounts Receivable As of December 31, 2010, the Company and its subsidiary had total net accounts receivable of Baht 164.02 million, increased from the previous year by Baht 19.43 million or 13.44%. The outstanding balances are aged as follows:

Unit : MB Age of receivables Not yet Due

Consolidated Financial Statement 31 Dec 2010

31 Dec 2009

Separate Financial Statement 31 Dec 2010

31 Dec 2009

143.40

133.07

140.42

130.67

20.82

11.80

18.99

9.52

0.04

2.45

5.07

2.45

5.07

166.67

149.98

161.87

145.26

Past Due: - Up to 6 months - 6 - 12 months - Over 12 months Total

As of December 31, 2010, the Company and its subsidiary had overdue accounts receivable exceeding 12 months of Baht 2.45 million, decreased from the previous year more than 50%, which was partly from the debtors who had difficulty relating to their operation affected by the economic situation in 1997. However, the Company had already proceeded with lawsuits and set provisions for bad debts. As of December 31, 2009 and December 31, 2010, the Company set allowance for doubtful bad debts for the said debtors of Baht 5.40 million, and Baht 2.65 million, respectively.

2. Liabilities As of December 31, 2010, total liabilities of the Company and its subsidiary were Baht 10,353.78 million increased from 2009 by Baht 1,690.87 million or 19.52%, which was from the change of the following crucial transactions: • Accounts Payable was increased by Baht 719.94 million which was from the increase products order according to sales growth. • Debenture-net was increased by Baht 1,540 million, during the middle of the Year, there were redemption of Baht 160 million. Also, there were issuances of unsubordinated and unsecured debentures for Baht 1,700 million, in which Baht 730 million will mature within 1 year in 2011. • Repayment of the long-term loan to the Commercial Bank for Baht 980.32 million • Other debts were increased by Baht 411.25 million.

3. Shareholders’ equity As of December 31, 2010, shareholders’ equity was Baht 6,238.21 million, increased from the previous year by Baht 1,028.29 million or 19.74% which the increase was from following transactions: • The issued and paid-up ordinary share was increased by Baht 649.07 million due to the payment of stock dividend in October 2010. Also, another part of issued and paid-up ordinary share was increased from the exercise of right under warrants to purchase ordinary shares of employee No. 3 and 4 for the total of Baht 27.65 million. • Share premium was increased by Baht 27.49 million. • Retained earning was increased by Baht 351.73 million by dividing into the appropriated retained earnings for statutory reserve of Baht 81.40 million and the unappropriated retained earnings of Baht 270.33 million.

4. Capital Structure The capital structure of the Company as of 31st December 2010 consisted of the Company’s debt for the total of Baht 10,353.78 million and the shareholders equity in the total of Baht 6,238.21 million. In this regard, if such amount is calculated as the total amount of debt to shareholder equity ratio, it will be equivalent to 1.66 which is equal to the previous year. The ratio shows that the proportion of the Company’s Capital Structure is the same with the previous year.

Liquidity Summary of cash flow statement as of December 31, 2010 compared to the same period of 2009. Unit : MB Transactions

Consolidated Financial Statement 2010

Cash from operating activities

2,624.55

Cash from investing activities Cash from financing activities Net increase (decrease) in cash

2009

Separate Financial Statement 2010

2009

2,454.23

2,605.17

2,445.17

(2,005.68)

(900.96)

(2,004.84)

(899.96)

(47.96)

(1,310.73)

(32.96)

(1,300.73)

570.91

242.54

567.37

244.48

As of December 31, 2010, the Company and its subsidiary’s cash and cash equivalents were Baht 1,417.24 million, net increased from December 31, 2009 by Baht 570.91 million, which derived from the following activities: 1. Net cash from operating activities of Baht 2,624.55 million which were received from the net profit before changes in operating assets and liabilities of Baht 2,726.38 million, and working capital increased from changes in operating assets and liabilities e.g. inventories increased by Baht 873.59 million, other receivables increased by Baht 130.60 million, other current assets increased by Baht 74.80 million, trade accounts payable increased by Baht 719.93 million, accrued expenses increased by Baht 91.19 million, and other liabilities increased by Baht 166.04 million. 2. Net cash used for investing activities totaled Baht 2,005.68 million which such amount was the investment in the asset for the expansion of branches in 2010 for the total of Baht 1,791.15 million, the computer software for the total of Baht 57.68 million, and the leasehold right for the total of Baht 160.08 million. 3. Cash received from financing activities, net used in the total of Baht 47.96 million in which such amount was derived from the issuance of debenture for Baht 1,700 million, repayment of the debenture for Baht 160 million and repayment of the long-term loan for Baht 980.32 million and for the payment of dividend of Baht 665.11 million.

Liquidity Ratio As of December 31, 2010, the Company and its subsidiaries have current assets in the total of Baht 5,889.46 million and current liabilities in the total of 7,634.17 million. In this regard, such amount can be calculated into liquidity ratio of 0.77 times which was increased from the previous year’s ratio of 0.10 times. The liquidity ratio of the Company and its subsidiaries as of December 31, 2008, 2009, and 2010 was at 0.62 times, 0.67 times, and 0.77 times. Such continuous increase in ratio shows our increase in ability to reduce short-term debt.

Auditing Fee According to the minutes of the annual general shareholders meeting in 2010, which resolved to appoint the Auditors of Ernst & Young Office Co., Ltd as the Company’s auditor of 2010, with the fee of Baht 2,400,000. The actual audit fee for 2010 includes auditing fee for the Company and its subsidiary at the amount of Baht 2,400,000 and other services fee at the amount of Baht 100,000, totaling Baht 2,500,000.

Report of Board of Directorsâ&#x20AC;&#x2122; Responsibilities in the Financial Statements Dear Shareholders

The company consolidated financial statements of Home Product Center Public Company Limited and its subsidiary have been prepared in conformity with the requirements of the Public Company Act B.E. 2535 (1992), the Securities and Exchange Act B.E. 2535 (1992), the Announcement of the Department of Commercial Registration dated September 14, 2001, and the accounting standards prescribed by the Federation of Accounting Professions. The Board of Directors had an opinion that the companyâ&#x20AC;&#x2122;s overall internal control system is at satisfactory level, sufficient to maintain the assets and to protect from fraud, and is responsible for the financial report of the Company and its subsidiary in order to ensure that it shows the actual result of operation, financial status, and cash flows. There have been proper recording of accurate and complete accounting information. Preparing of the financial reports has been considered of selecting appropriate accounting policy and regularly in compliance with the general accepted accounting standard, and there has been disclosing of sufficient significant information in the supplementary to the financial statements.

(Mr. Anant Asavabhokhin) Chairman

(Mr. Khunawut Thumpomkul) Managing Director

Audit Committee’s Report Dear Shareholders The Audit Committee of the Company consists of 3 independent directors who have abilities, qualifications and independent according to the regulations of the Stock Exchange of Thailand by having Mr. Apilas Osatananda, as Chairman, Mr. Thaveevat Tatiyamaneekul and Mr. Chanin Roonsamrarn, as directors, having the duty to examine the reliability of financial statement. For the year 2010, the Audit Committee has performed the duty according to the scope of responsibility as stipulated in the charter of the Audit Committee and according to the assignment from the Company’s Board of Directors. There were 12 meetings which at each meeting all the directors attended, and the auditor was invited to attend for the agenda which was relevant. The Audit Committee has the duty and responsibility as assigned by the Board of Directors, which includes the review for the company in order to have the accurate and sufficient financial report, have efficient internal control system and corporate governance, have the compliance with relevant laws and regulations, have monitored the transaction which may have conflict of interest in order to be in compliance with the relevant rules and regulations and to earn the utmost benefits to the company, as well as the selection and proposing the opinion for appointment of the external auditor. Essence of the Work Performed in year 2010 1. Having considered and review the quarterly financial report of the company and the annual financial state ments before such were disclosed to the Stock Exchange of Thailand and the Office of the Securities and Stock Exchange Commission, which such was made in the agenda of the review of the financial report of the company. 2. Having considered the selection and nomination of company’s independent auditor and determination of the remuneration to propose to the Company’s Board of Directors for the request for approval from the meeting of shareholders. 3. Having convened with the independent auditor for 4 times for considering the guidelines for the performance and scope for the proceeding to examine the accounting, for the result of the audit and recommendation in order to ensure that the audit of the financial statement has been made completely and appropriately according to the standard of accounting audit, which the meeting with the auditor had no attendance of the management. 4. Having had the meeting with the Office of Internal Audit for the operation and scope of proceeding, the review of examination plan in order to ensure that the internal audit has been made completely and appropriately according to the standard of internal audit, which for the year 2010, the audits were made to evaluate the sufficiency and efficiency of the internal control system of the Company and its subsidiary. In general, and there was an acknowledgement of the report on the result of the audit and following up of the improvement and correction according to the recommendations in order to cause more effectiveness and efficiency to the internal control system. 5. Having reviewed the performance to be in compliance with the laws on Securities and Stock Exchange, the rules of the Stock Exchange or the laws relevant to the business proceeding of the company. 6. Having considered the disclosure of information, inter and related transactions and the transaction which may have conflicts of interest. 7. Having made the evaluation of the sufficiency and appropriateness of the internal control system which covers the matter of organization and environment, risks management, the operation control of the management, information technology and communication, and tracking system.

The Audit Committee has the following opinion; 1. The financial report of the Company is reliable, accurate and complete according to the generally accepted accounting principle and has sufficiently and timely disclosed material information. 2. The company has sufficient and efficient internal control system, risks management system, system of operational control, and the tracking system. 3. The Company has not performed any act in violation to the laws on Securities and Stock Exchange, the rules of the Stock Exchange or the laws relevant to the business of the Company. 4. The appointed external auditor has experience for the work, and has coverage network and is acceptable both in the country and overseas, which such causes the standard of the companyâ&#x20AC;&#x2122;s audits to be in the international level. Also, every auditor and the person who were assigned to sign to certify the financial statements are independent, have no relation or transaction which may cause conflicts of interest with the Company. This can be ensured that the accounting audits were made completely and appropriately according to the accounting standard and were efficient and transparent. 5. The entering into the transaction with related business or the entering into the transaction which may have conflicts of interest have been made in accordance with the law, the rules of the Stock Exchange of Thailand, with appropriate reason for the utmost benefits for the Company, and have no indication or other observations to imply any abnormal circumstance. 6. The Audit Committee has performed the duty completely, correctly and independently, according to the Charter that the Audit Committee has prescribed with good cooperation from every party.

(Mr. Apilas Osatananda) Chairman of the Audit Committee

Independent Auditorâ&#x20AC;&#x2122;s Report To the Shareholders of Home Product Center Public Company Limited

I have audited the accompanying consolidated balance sheet of Home Product Center Public Company Limited and its subsidiary as at 31 December 2010, the related consolidated statements of income, changes in shareholdersâ&#x20AC;&#x2122; equity and cash flows for the year then ended, and the separate financial statements of Home Product Center Public Company Limited for the same year. These financial statements are the responsibility of the management of the Company and its subsidiary as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audit. The consolidated financial statements of Home Product Center Public Company Limited and its subsidiary, and the separate financial statements of Home Product Center Public Company Limited for the year ended 31 December 2009, as presented herein for comparative purposes, were audited by another auditor in our firm who expressed an unqualified opinion on those statements under her report dated 18 February 2010. 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 financial statements referred to above present fairly, in all material respects, the financial position of Home Product Center Public Company Limited and its subsidiary and of Home Product Center Public Company Limited as at 31 December 2010, and the results of their operations and cash flows for the year then ended in accordance with generally accepted accounting principles.

Gingkarn Atsawarangsalit Certified Public Accountant (Thailand) No. 4496

Balance Sheets As at 31 December 2010 and 2009 (Unit : Baht)

Consolidated financial statements Note

2009

2010

Separate financial statements 2010

(Restated)

2009 (Restated)

Assets Current assets Cash and cash equivalents

7, 12

1,417,245,111

846,330,829

1,391,744,140

824,376,948

Trade accounts receivable - net

8, 12

164,019,004

144,584,882

159,220,872

139,866,504

3,714,231,755

2,905,138,033

3,714,231,755

2,905,138,033

28,231,172

303,776

28,231,172

478,399,129

347,794,276

480,832,986

350,048,810

87,334,310

63,747,426

80,232,000

58,154,929

5,889,460,481

4,307,899,222

5,854,492,925

4,277,585,224

Inventories - net

Value added tax receivable Other receivables - net

9, 12

Other current assets Total current assets Non-current assets Investment in subsidiary

4,999,300

Property, plant and equipments - net

9,672,822,674

8,710,587,478

9,668,997,414

8,703,030,061

Computer software - net

130,201,480

92,115,899

129,864,210

92,110,169

Leasehold rights - net

831,392,108

702,999,498

831,392,108

702,999,498

4,174,122

47,700,842

37,821,322

47,700,842

37,821,322

16,238,088

17,230,349

2,056,352

1,595,201

Total non-current assets

10,702,529,314

9,564,928,668

10,689,184,348

9,546,729,673

Total assets

16,591,989,795

13,872,827,890

16,543,677,273

13,824,314,897

Property foreclosed Rental guarantee deposits

Other non-current assets

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

Balance Sheets (Continued) As at 31 December 2010 and 2009 (Unit : Baht)

Consolidated financial statements Note

2009

2010

Separate financial statements 2010

2009

(Restated)

Liabilities and shareholdersâ&#x20AC;&#x2122; equity Current liabilities Trade accounts payable

4,936,826,558

4,216,890,094

4,930,933,267

4,211,189,025

financial lease agreements

4,598,239

3,539,452

4,598,239

3,539,452

Short-term loans from related party

85,000,000

70,000,000

Current portion of debentures

730,000,000

160,000,000

730,000,000

160,000,000

Current portion of long-term loans

486,240,000

Payables from purchases of assets

186,444,811

119,219,458

186,444,811

119,219,458

Accrued expenses

518,499,518

422,114,603

501,302,666

404,673,798

Corporate income tax payable

313,024,859

247,190,722

313,024,859

247,190,722

Advances received from customers

471,439,028

430,697,315

471,439,028

430,697,315

254,731,780

197,239,903

248,156,063

191,781,208

218,604,858

165,356,564

216,348,822

163,453,254

7,634,169,651

6,448,488,111

7,687,247,755

6,487,984,232

6,905,501

5,635,594

6,905,501

5,635,594

Debentures - net of current portion

2,000,000,000

1,030,000,000

2,000,000,000

1,030,000,000

Long-term loans - net of current portion

494,080,000

Provision for employee benefits

76,786,033

63,515,819

76,786,033

63,515,819

Rental received in advance

499,498,041

521,145,727

499,498,041

521,145,727

Other non-current liabilities

136,421,226

100,042,095

62,361,347

28,144,671

2,719,610,801

2,214,419,235

2,645,550,922

2,142,521,811

10,353,780,452

8,662,907,346

10,332,798,677

8,630,506,043

Current portion of liabilities under

Other payables

Other current liabilities Total current liabilities Non-current liabilities Liabilities under financial lease agreements - net of current portion

Total non-current liabilities Total liabilities

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

Balance Sheets (Continued) As at 31 December 2010 and 2009 (Unit : Baht)

Consolidated financial statements

Separate financial statements

Note 2010

2009

2010

2009

(Restated)

Shareholders’ equity Share capital

21, 22

Registered share capital 4,426,605,527 ordinary shares of Baht 1 each (2009: 3,794,213,851 ordinary shares of Baht 1 each)

4,426,605,527

3,794,213,851

4,426,605,527

3,794,213,851

4,352,991,862

3,703,926,216

4,352,991,862

3,703,926,216

621,806,886

594,317,420

621,806,886

594,317,420

316,800,000

235,400,000

316,800,000

235,400,000

946,606,069

676,273,953

919,279,848

660,165,218

6,238,204,817

5,209,917,589

6,210,878,596

5,193,808,854

4,526

2,955

6,238,209,343

5,209,920,544

6,210,878,596

5,193,808,854

16,591,989,795

13,872,827,890

16,543,677,273

13,824,314,897

Issued and paid-up share capital 4,352,991,862 ordinary shares of Baht 1 each (2009: 3,703,926,216 ordinary shares of Baht 1 each) Share premium Retained earnings Appropriated - statutory reserve

Unappropriated Equity attributable to the Company’s shareholders Minority interest - equity attributable to minority shareholders of subsidiary Total shareholders’ equity Total liabilities and shareholders’ equity

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

Income Statements For the years ended 31 December 2010 and 2009 (Unit : Baht)

Consolidated financial statements

Separate financial statements

Note 2010

2009

2010

(Restated)

2009 (Restated)

Revenues Sales income Rental and service income Other income Total revenues

24,072,755,450

20,329,115,960

24,073,781,310

20,330,434,724

767,698,279

684,236,990

641,854,232

572,842,217

1,074,447,671

785,735,252

1,101,125,208

807,702,375

25,914,901,400

21,799,088,202

25,816,760,750

21,710,979,316

18,052,220,987

15,395,071,205

18,052,220,987

15,395,071,205

4,493,709,519

3,819,276,323

4,405,352,452

3,740,567,347

836,282,688

709,946,423

841,147,954

705,554,421

79,459,900

70,950,247

79,459,900

70,950,247

46,720,978

62,097,147

46,674,253

62,035,902

23,508,394,072

20,057,341,345

23,424,855,546

19,974,179,122

2,406,507,328

1,741,746,857

2,391,905,204

1,736,800,194

(103,492,795)

(113,129,135)

(104,539,836)

(114,485,389)

2,303,014,533

1,628,617,722

2,287,365,368

1,622,314,805

(664,583,692)

(497,738,690)

(660,153,584)

(496,099,245)

1,638,430,841

1,130,879,032

1,627,211,784

1,126,215,560

1,638,429,270

1,130,878,380

1,627,211,784

1,126,215,560

1,571

652

1,638,430,841

1,130,879,032

0.38

0.26

0.37

0.26

0.37

0.26

0.37

0.26

Expenses Cost of sales Selling expenses Administrative expenses Management benefit expenses

Other expenses Total expenses Income before financial cost and corporate income tax Financial cost Income before corporate income tax Corporate income tax Net income for the year Net income attributable to: Equity holders of the parent Minority interests of the subsidiary

Earnings per share

Basic earnings per share Net income attributable to equity holders of the parent Diluted earnings per share Net income attributable to equity holders of the parent

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

Statements of cash flows For the years ended 31 December 2010 and 2009 (Unit : Baht)

Consolidated financial statements 2010

Separate financial statements 2010

2009 (Restated)

Cash flows from operating activities Net income before tax

2,303,014,533

1,628,617,722

2,287,365,368

1,622,314,805

860,458,906

804,523,182

856,264,684

800,383,504

Reversal allowance for doubtful accounts

(2,754,168)

(11,245,058)

(2,754,168)

(11,245,058)

Allowance for stock obsolescence

64,498,619

59,219,925

64,498,619

59,219,925

Loss from sales of assets

11,147,490

2,658,249

11,100,767

2,597,003

Assets written-off, net

39,891,005

2,752,544

39,891,005

2,752,544

Allowance for impairment of assets

32,698,000

57,000,000

32,698,000

57,000,000

3,864

76,352

3,864

76,352

Interest expenses

99,825,120

110,975,824

101,046,449

112,514,434

Provision for employee benefits

15,198,214

11,979,050

15,198,214

11,979,050

3,423,981,583

2,666,557,790

3,405,312,802

2,657,592,559

(16,685,000)

24,242,894

(16,605,246)

24,245,788

(873,592,341)

(236,279,432)

(873,592,341)

(236,279,432)

Value added tax receivable

(27,927,396)

10,959,440

(28,231,172)

11,263,216

Rental guarantee deposits

(9,879,520)

569,560

(9,879,520)

569,560

(130,599,807)

(59,273,969)

(130,779,130)

(54,600,254)

(23,586,884)

7,097,415

(22,077,071)

214,673

3,280,505

1,369,372

(461,151)

1,369,373

719,932,600

519,656,096

719,740,378

518,660,474

Other payables

57,491,877

(1,069,839)

56,374,855

4,669,520

Advances received from customers

40,741,713

(26,830,710)

40,741,713

(26,830,710)

Accrued expenses

91,190,947

104,080,618

91,434,900

102,511,051

Other current liabilities

53,072,642

(6,803,407)

52,719,916

(7,059,267)

(21,647,686)

Payment of employee benefits

(1,928,000)

Other non-current liabilities

36,379,131

3,995,800

34,216,676

(2,084,275)

3,320,224,364

2,986,623,942

3,295,339,923

2,972,594,590

(94,631,152)

(110,016,181)

(95,852,481)

(111,554,791)

(601,037,799)

(422,378,455)

(594,319,447)

(415,871,285)

2,624,555,413

2,454,229,306

2,605,167,995

2,445,168,514

Adjustments to reconcile net income before tax to net cash provided by (paid for) operating activities: Depreciation and amortisation

Unrealised exchange losses - net

Income from operating activities before changes in operating assets and liabilities Decrease (increase) in operating assets Trade accounts receivable Inventories

Other receivables Other current assets Other non-current assets Increase (decrease) in operating liabilities Trade accounts payable

Rental received in advance

Cash from operating activities Cash paid for interest expenses Cash paid for corporate income tax Net cash flows from operating activities

The accompanying notes are an integral part of the financial statements. 58

Statements of cash flows (Continued) For the years ended 31 December 2010 and 2009 (Unit : Baht)

Consolidated financial statements 2010

Separate financial statements 2010

2009

(Restated)

Cash flows from investing activities Acquisition of computer software

(57,679,118)

(23,846,186)

(57,331,067)

(23,846,186)

Acquisition of leasehold rights

(160,076,067)

(9,347,368)

(160,076,067)

(9,347,368)

Proceeds from sales of assets

3,219,510

1,125,744

3,216,711

1,119,505

Acquisition of assets

(1,791,147,760)

(868,891,001)

(1,790,652,684)

(867,884,386)

Net cash flows used in investing activities

(2,005,683,435)

(900,958,811)

(2,004,843,107)

(899,958,435)

(124,823,805)

Increase in short-term loans from related party

15,000,000

25,000,000

Repayment of short-term loans from related party

(15,000,000)

Increase in long-term loans

745,000,000

2,328,694

(5,591,053)

2,328,694

(5,591,053)

1,700,000,000

300,000,000

1,700,000,000

300,000,000

Repayment of debentures

(160,000,000)

(660,000,000)

(160,000,000)

(660,000,000)

Repayment of long-term loans

(980,320,000)

(739,680,000)

(980,320,000)

(739,680,000)

55,139,056

45,816,199

55,139,056

45,816,199

(665,105,446)

(871,449,157)

(665,105,446)

(871,449,157)

Net cash flows used in financing activities

(47,957,696)

(1,310,727,816)

(32,957,696)

(1,300,727,816)

Net increase in cash and cash equivalents

570,914,282

242,542,679

567,367,192

244,482,263

Cash and cash equivalents at beginning of year

846,330,829

603,788,150

824,376,948

579,894,685

1,417,245,111

846,330,829

1,391,744,140

824,376,948

has been paid

67,225,353

5,381,343

67,225,353

5,381,343

Stock dividends

621,416,056

1,752,012,439

621,416,056

1,752,012,439

Cash flows from financing activities Decrease in bank overdrafts and short-term loans from financial institutions

Increase (decrease) in liabilities under financial lease agreements Increase in debentures

Converted warrants to share capital Dividend paid

Cash and cash equivalents at end of year Supplemental cash flows information: Non-cash items consist of Purchases of equipment for which no cash

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

60 -

statutory reserve

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

Balance as at 31 December 2010

Converted warrants to share capital

Unappropriated retained earnings transferred to

Dividend paid

4,352,991,862

27,649,590

621,416,056

Total income for the year

Stock dividends

3,703,926,216

Net income for the year

Balance as at 31 December 2009 - as restated

for provision for employee benefits

3,703,926,216

Balance as at 31 December 2009 - as previously reported

3,703,926,216

Balance as at 31 December 2009

Cumulative effect of the change in accounting policy

18,303,177

Converted warrants to share capital

statutory reserve

Unappropriated retained earnings transferred to

Dividend paid

1,752,012,439

Stock dividends

Total income for the year

1,933,610,600 -

1,933,610,600

Issued and paid-up share capital

Net income for the year (restated)

Balance as at 31 December 2008 - as restated

for provision for employee benefits

Cumulative effect of the change in accounting policy

Balance as at 31 December 2008 - as previously reported

Note

621,806,886

27,489,466

594,317,420

27,513,022

566,804,398

Share premium

316,800,000

81,400,000

235,400,000

57,000,000

178,400,000

Appropriated - statutory reserve

946,606,069

(81,400,000)

(665,281,098)

(621,416,056)

1,638,429,270

676,273,953

(63,515,819)

739,789,772

676,273,953

(57,000,000)

(871,449,157)

(1,752,012,439)

1,130,878,380

2,225,857,169

(51,536,769)

2,277,393,938

Unappropriated

Retained earnings

6,238,204,817

55,139,056

(665,281,098)

1,638,429,270

5,209,917,589

(63,515,819)

5,273,433,408

5,209,917,589

45,816,199

(871,449,157)

1,130,878,380

4,904,672,167

(51,536,769)

4,956,208,936

Total equity attributable to the parentâ&#x20AC;&#x2122;s shareholders

Consolidated financial statements

4,526

1,571

2,955

652

2,303

Minority interest - equity attributable to minority shareholders of subsidiary

6,238,209,343

55,139,056

(665,281,098)

1,638,430,841

5,209,920,544

(63,515,819)

5,273,436,363

5,209,920,544

45,816,199

(871,449,157)

1,130,879,032

4,904,674,470

(51,536,769)

4,956,211,239

Total

For the years ended 31 December 2010 and 2009 (Unit : Baht)

Equity attributable to the parentâ&#x20AC;&#x2122;s shareholders

Statements of changes in shareholdersâ&#x20AC;&#x2122; equity

3,703,926,216

Balance as at 31 December 2009 - as previously reported

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

Balance as at 31 December 2010

Converted warrants to share capital

Dividend paid

Unappropriated retained earnings transferred to statutory reserve

4,352,991,862

27,649,590

621,416,056

Total income for the year

Stock dividends

3,703,926,216

Net income for the year

Balance as at 31 December 2009 - as restated

for provision for employee benefits

3,703,926,216

Balance as at 31 December 2009

Cumulative effect of the change in accounting policy

18,303,177

1,752,012,439

Converted warrants to share capital

Dividend paid

Unappropriated retained earnings transferred to statutory reserve

Stock dividends

Total income for the year

1,933,610,600

Issued and paid-up share capital

Net income for the year (restated)

Balance as at 31 December 2008 - as restated

for provision for employee benefits

Cumulative effect of the change in accounting policy

Balance as at 31 December 2008 - as previously reported

Note

621,806,886

27,489,466

594,317,420

27,513,022

566,804,398

316,800,000

81,400,000

235,400,000

57,000,000

178,400,000

Appropriated - statutory reserve

919,279,848

(81,400,000)

(665,281,098)

(621,416,056)

1,627,211,784

660,165,218

(63,515,819)

723,681,037

660,165,218

(57,000,000)

(871,449,157)

(1,752,012,439)

1,126,215,560

2,214,411,254

(51,536,769)

2,265,948,023

Unappropriated

Retained earnings

Separate financial statements

6,210,878,596

55,139,056

(665,281,098)

1,627,211,784

5,193,808,854

(63,515,819)

5,257,324,673

5,193,808,854

45,816,199

(871,449,157)

1,126,215,560

4,893,226,252

(51,536,769)

4,944,763,021

Total

For the years ended 31 December 2010 and 2009 (Unit : Baht)

Share premium

Statements of changes in shareholdersâ&#x20AC;&#x2122; equity

Notes to consolidated financial statements For the years ended 31 December 2010 and 2009 1. Corporate information Home Product Center Public Company Limited (“the Company”) is a public company incorporated and domiciled in Thailand. Its major shareholders are Land and Houses Plc. and Quality Houses Plc., which were incorporated in Thailand. The Company is principally engaged in the trading of a complete range of goods and materials for construction, addition, refurbishment and renovation of buildings and residences, and provision for related services, together with space rental. Its registered address is 96/27 Moo 9, Tambol Bangkhen, Amphur Muang, Nonthaburi. As at 31 December 2010, the Company has a total of 40 branches operating in Bangkok and other provinces (2009: 35 branches).

2. Basis of preparation 2.1 The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Profession Act B.E. 2547, except for the Thai Accounting Standard No. 19 regarding “Employee Benefits”, which the Company had early adopted before the date of enforcement. The presentation of the financial statement has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 30 January 2009, issued under the Accounting Act B.E. 2543. The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from the Thai language financial statements. The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policies. 2.2 Basis of consolidation a) The consolidated financial statements include the financial statements of the Company (“the Company”) and the following subsidiary (“the subsidiary”):

Company’s name

Nature of business

Country of incorporation

Space Market Village Co., Ltd.

rental

Thailand

Percentage of shareholding

Assets as a percentage to the consolidated total assets as at 31 Dec

Revenues as a percentage to the consolidated total revenues for the years ended 31 Dec

2010

2009

2010

2009

2010

2009

Percent

99.99

0.34

0.40

1.09

1.20

b) Subsidiary is fully consolidated as from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. c) The financial statements of the subsidiary are prepared using the same significant accounting policies as the Company. d) Material balances and transactions between the Company and its subsidiary have been eliminated from the consolidated financial statements. e) Investment in the subsidiary as recorded in the Company’s books of account is eliminated against the equity of the subsidiary. f)

Minority interest represents the portion of net income or loss and net assets of the subsidiary that is not held by the Company and is presented separately in the consolidated income statement and within equity in the consolidated balance sheet.

2.3 The separate financial statements, which present investment in subsidiary presented under the cost method, have been prepared solely for the benefit of the public.

3. Adoption of new accounting standards During the current year, the Federation of Accounting Professions issued a number of revised and new accounting standards as listed below. a)

Accounting standards that are effective for fiscal years beginning on or after 1 January 2011 (except Framework for the Preparation and Presentation of Financial Statements, which is immediately effective): Framework for the Preparation and Presentation of Financial Statements (revised 2009)

TAS 1 (revised 2009)

Presentation of Financial Statements

TAS 2 (revised 2009)

Inventories

TAS 7 (revised 2009)

Statement of Cash Flows

TAS 8 (revised 2009)

Accounting Policies, Changes in Accounting Estimates and Errors

TAS 10 (revised 2009)

Events after the Reporting Period

TAS 11 (revised 2009)

Construction Contracts

TAS 16 (revised 2009)

Property, Plant and Equipment

TAS 17 (revised 2009)

Leases

TAS 18 (revised 2009)

Revenue

TAS 19

Employee Benefits

TAS 23 (revised 2009)

Borrowing Costs

TAS 24 (revised 2009)

Related Party Disclosures

TAS 26

Accounting and Reporting by Retirement Benefit Plans

TAS 27 (revised 2009)

Consolidated and Separate Financial Statements

TAS 28 (revised 2009)

Investments in Associates

TAS 29

Financial Reporting in Hyperinflationary Economies

TAS 31 (revised 2009)

Interests in Joint Ventures

TAS 33 (revised 2009)

Earnings per Share

TAS 34 (revised 2009)

Interim Financial Reporting

TAS 36 (revised 2009)

Impairment of Assets

TAS 37 (revised 2009)

Provisions, Contingent Liabilities and Contingent Assets

TAS 38 (revised 2009)

Intangible Assets

TAS 40 (revised 2009)

Investment Property

TFRS 2

Share-Based Payment

TFRS 3 (revised 2009)

Business Combinations

TFRS 5 (revised 2009)

Non-current Assets Held for Sale and Discontinued Operations

TFRS 6

Exploration for and Evaluation of Mineral Resources

TFRIC 15

Agreements for the Construction of Real Estate

Accounting standards that are effective for fiscal years beginning on or after 1 January 2013: TAS 12

Income Taxes

TAS 20 (revised 2009)

Accounting for Government Grants and Disclosure of Government Assistance

TAS 21 (revised 2009)

The Effects of Changes in Foreign Exchange Rates

The Companyâ&#x20AC;&#x2122;s management believes that these accounting standards will not have any significant impact on the financial statements for the year when they are initially applied, except for the following accounting standards which management expects the impact on the financial statements in the year when they are adopted. TAS 12 Income Taxes This accounting standard requires an entity to identify temporary differences, which are differences between the carrying amount of an asset or liability in the accounting records and its tax base, and to recognize deferred tax assets and liabilities under the stipulated guidelines. At present, the management is evaluating the impact on the financial statements in the year when this standard is adopted. TAS 23 (revised 2009) Borrowing Costs This accounting standard requires entities to capitalize borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Currently, the Company elected to expense such borrowing costs when incurred. The change in this accounting policy will be applied for borrowing costs incurred on or after 1 January 2011.

4. Significant accounting policies 4.1 Revenue recognition Sales of goods Sales of goods are recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are recorded based on the selling prices after deducting discounts and allowances. Rendering of services Service revenue is recognised when services have been rendered taking into account the stage of completion. Rental income Rental income under operating leases is recognised over the lease period. Interest income Interest income is recognised on an accrual basis based on the effective interest rate. 4.2 Cash and cash equivalents Cash and cash equivalents consist of cash in hand and at banks, and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions. 4.3 Trade accounts receivable Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in collection of receivables. The allowance is generally based on collection experiences and analysis of debt aging. 4.4 Inventories Inventories are valued at the lower of cost (moving average cost method) and net realisable value. Volume incentives received from the supplier are accounted for as a reduction of the value of inventory and recognised in income statement when the related inventory is sold. 4.5 Investment Investment in subsidiary is accounted for in the separated financial statements using the cost method.

4.6 Property, plant and equipment/Depreciation Land is stated at cost, buildings and equipment are stated at cost less accumulated depreciation, and less allowance for loss on impairment of assets (if any). Depreciation of plant and equipment is calculated by reference to their costs, on the straight-line basis over the following estimated useful lives: Buildings

20 years

Buildings on lease land and building improvement

useful lives but not over lease periods

Computer equipment

3 - 10 years

Furniture, fixtures and office equipment

5 - 10 years

Motor vehicles

5 years

Depreciation is included in determining income. No depreciation is provided on land and assets under installation and under construction. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on disposal of an asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised. 4.7 Intangible assets Intangible assets are initially recognised at cost. Following the initial recognition, the intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses (if any). Intangible assets (computer software) with finite lives are amortised on a systematic basis over the economic useful life (10 years) and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method of such intangible assets are reviewed at least at each financial year end. The amortisation expense is charged to the income statement. 4.8 Leasehold rights and amortisation Leasehold rights are stated at cost less accumulated amortisation. The Company amortises leasehold rights on a straight-line basis over the leasehold period. The amortisation is included in determining income. 4.9 Borrowing costs Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are recognised as an expense when incurred. 4.10 Related party transactions Related parties comprise enterprises and individuals that control, or are controlled by, the Company, whether directly or indirectly, or which are under common control with the Company. They also include individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, key management personnel, directors and officers with authority in the planning and direction of the Companyâ&#x20AC;&#x2122;s operations.

4.11 Long-term leases Leases of equipment and motor vehicles which transfer substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included in other long-term payables, while the interest element is charged to the income statements over the lease period. The equipment and motor vehicles acquired under finance leases are depreciated over the useful life of the assets. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term. 4.12 Foreign currencies Transactions in foreign currencies are translated into Baht at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Baht at the exchange rates ruling at the balance sheet date. Gains and losses on exchange are included in determining income. 4.13 Impairment of assets At each reporting date, the Company performs impairment reviews in respect of the properly, plant and equipment and other assets whenever events or changes in circumstances indicate that an asset may be impaired. An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the asset’s fair value less costs to sell and its value in use, is less than the carrying amount. In determining 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. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by a valuation model that, based on information available, reflects the amount that the Company could obtain from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. An impairment loss is recognised in the income statement. In the assessment of asset impairment if there is any indication that previously recognised impairment losses may no longer exist or may have decreased, the Company estimates the asset’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The increased carrying amount of the asset attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement. 4.14 Employee benefits Salaries, wages, bonuses and contributions to the social security fund and provident fund are recognised as expenses when incurred. The provision for employee retirement benefits is calculated by estimating the amount of future benefit earned by employees in return for service provided to the Company in the current and future periods, using the actuarial valuation. Such benefits are discounted to determine the present value. The reference point for setting the discount rate is the yield rate of government bonds as at the reporting date. The calculation is performed by a qualified actuary using the Projected Unit Credit Method.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised in the income statement on a straight-line basis over the average period until the benefits become vested. Any actuarial gains or losses are recognised in the statement of income in the period in which they arise. 4.15 Provisions Provisions are recognised when the Company has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 4.16 Income tax Income tax is recognised using the income tax payable method, calculated based on taxable profits determined in accordance with tax legislation.

5. Significant accounting judgments and estimates The preparation of financial statements in conformity with generally accepted accounting principles at times requires management to make subjective judgments and estimates regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures and actual results could differ. Significant judgments and estimates are as follows: Leases In determining whether a lease is to be classified as an operating lease or finance lease, the management is required to use judgment regarding whether significant risk and rewards of ownership of the leased asset has been transferred, taking into consideration terms and conditions of the arrangement. Allowance for damaged goods In determining an allowance for damaged goods due to loss or deterioration, the management needs to exercise judgment in making estimates based upon the condition of goods and the duration such goods have remained in stock. Allowance for doubtful accounts In determining an allowance for doubtful accounts, the management needs to make judgment and estimates based upon, among other things, past collection history, aging profile of outstanding debts and the prevailing economic condition. Fair value of financial instruments In determining the fair value of financial instruments that are not actively traded and for which quoted market prices are not readily available, the management exercise judgment, using a variety of valuation techniques and models. The input to these models is taken from observable markets, and includes consideration of liquidity, correlation and longer-term volatility of financial instruments. Property plant and equipment/Depreciation In determining depreciation of plant and equipment, the management is required to make estimates of the useful lives and salvage values of the Companyâ&#x20AC;&#x2122;s plant and equipment and to review estimate useful lives and salvage values when there are any changes. In addition, the management is required to review property, plant and equipment for impairment on a periodical basis and record impairment losses in the period when it is determined that their recoverable amount is lower than the carrying cost. This requires judgments regarding forecast of future revenues and expenses relating to the assets subject to the review.

Marketing promotion expenses Marketing promotion expenses arise in respect of advertising and promotional activities, including various sales promotion activities that are undertaken when the Company has already sold merchandise but still has obligations to customers to make payment related to such sales promotion in the future. Certain transactions are estimates based on experience and comparison with various information available in the related market. However, the use of different estimates and assumptions could affect the amounts of marketing promotion expenses and adjustments to this expense may therefore be required in the future. Pension and post-retirement benefits Pension and post-retirement benefit costs are based on actuarial calculations. Inherent within these calculations are assumptions as to salary increases and discount rate, among others.

6. Change in accounting policy During the current year, the Company hired an independent actuarial company to assess the value of provision for employee retirement benefits using the Projected Unit Credit Method, in order to reflect such value appropriately. The Company applied the change retrospectively, by adjusting provision of Baht 63.5 million against retained earnings brought forward of the year 2010, and restating the financial statements for the year 2009 as though such provision had always been recorded. As a result, net income in the consolidated and separate financial statements for the year ended 31 December 2009 decreased by Baht 12.0 million. The cumulative effect of the change in accounting policy has been presented under the heading of â&#x20AC;&#x153;Cumulative effect of the change in accounting policy for provision for employee benefitsâ&#x20AC;? in the statements of changes in shareholdersâ&#x20AC;&#x2122; equity.

7. Cash and cash equivalents (Unit : Baht)

Consolidated financial statements 2010 Cash

2009

Separate financial statements 2010

2009

86,922,003

60,264,352

86,191,705

59,686,438

135,323,108

111,066,477

110,552,435

89,690,510

Bills of exchange

1,195,000,000

675,000,000

1,195,000,000

675,000,000

Total

1,417,245,111

846,330,829

1,391,744,140

824,376,948

Bank deposits

As at 31 December 2010, bank deposits in saving accounts and bills of exchange carried interests between 0.25 and 1.60 percent per annum (2009: between 0.50 and 2.85 percent per annum).

8. Trade accounts receivable (Unit : Baht)

Consolidated financial statements 2010

2010

2009

Trade accounts receivable

84,015,217

79,645,437

79,217,085

74,973,931

Check returned receivable

2,211,537

4,788,722

2,211,537

4,788,722

80,441,476

65,549,071

80,441,476

65,502,199

166,668,230

149,983,230

161,870,098

145,264,852

(2,649,226)

(5,398,348)

(2,649,226)

(5,398,348)

164,019,004

144,584,882

159,220,872

139,866,504

Credit card and coupon receivable Total Less: Allowance for doubtful accounts Trade accounts receivable - net

2009

Separate financial statements

The outstanding balances of trade accounts receivable as at 31 December 2010 and 2009 are aged as follows: (Unit : Baht)

Consolidated financial statements 2010

Separate financial statements

2009

2010

2009

Age of receivables Not yet due

143,397,176

133,064,836

140,420,729

130,671,318

20,816,374

11,801,713

18,994,689

9,520,286

43,433

2,454,680

5,073,248

2,454,680

5,073,248

166,668,230

149,983,230

161,870,098

145,264,852

(2,649,226)

(5,398,348)

(2,649,226)

(5,398,348)

164,019,004

144,584,882

159,220,872

139,866,504

Past due: Upto 6 months 6 - 12 months Over 12 months Total Less: Allowance for doubtful accounts Trade accounts receivable - net

9. Other receivables Other receivables mainly consist of receivables from sale support operation and area rental and related service receivables. The outstanding balances of other receivables as at 31 December 2010 and 2009 are aged as follows: (Unit : Baht)

Consolidated financial statements 2010

Separate financial statements

2009

2010

2009

Age of receivables Not yet due

169,956,341

122,516,249

172,390,198

124,770,783

304,083,566

222,275,208

304,083,566

222,275,208

1,971,495

3,083,936

1,971,495

3,083,936

11,382,681

8,918,883

11,382,681

8,918,883

487,394,083

356,794,276

489,827,940

359,048,810

(8,994,954)

(9,000,000)

(8,994,954)

(9,000,000)

478,399,129

347,794,276

480,832,986

350,048,810

Past due: Up to 6 months 6 - 12 months Over 12 months Total Less: Allowance for doubtful accounts Other receivables - net

10. Inventories (Unit : Baht)

Consolidated and separate financial statements 2010 Inventories Less: Allowance for stock obsolescence Net Less: Inventories - repaid its cost when sold Purchase discount Inventories - net

2009

4,559,357,759

3,613,453,916

(149,360,727)

(112,301,165)

4,409,997,032

3,501,152,751

(566,259,876)

(495,509,317)

(129,505,401)

(100,505,401)

3,714,231,755

2,905,138,033

11. Investment in subsidiary (Unit : Baht) Separate financial statements Paid-up capital

2010

Shareholding percentage

2009

Subsidiary Market Village Company Limited

5,000,000

2010

2009

(Percent)

99.99

Dividend received during the year

Cost

2010

2009

4,999,300

2010

2009

12. Related party transactions During the years, the Company and its subsidiary had significant business transactions with related parties. Such transactions, which are summarised below, arose in the ordinary course of business and were concluded on commercial terms and bases agreed upon between the Company and those related parties. (Unit : Baht) Consolidated financial statements

Separate financial statements

2010

2009

Pricing policy

2009

Transactions with subsidiary company (eliminated from the consolidated financial statements) Sales of goods

1,025,860

1,318,764 Market price

Rental and service income

- 146,311,429 138,894,845 Baht 11.7 - 12.3 million per month for 2010 (Baht 10.9 - 11.7 million per month for 2009)

Other income

27,671,890 24,293,934 Percentage of core revenue

Service income

9,277,234

Service expense

603,020

Interest expenses

1,221,329

7,558,230 Actual cost 64,540 Market price 1,538,610 1.50 - 1.85 percent per annum (2009: 1.50 - 4.00 percent per annum)

Transactions with related companies Sales of goods

11,499,285

4,371,699

11,499,285

Interest income

5,702,548

1,809,526

5,702,548

4,371,699 Market price 1,809,526 0.25 - 1.60 percent per annum (2009: 0.75 - 2.85 percent per annum)

Purchases of goods Rental and service expenses

547,100

1,410,774

17,645,175 17,918,221

547,100

1,410,774 Market price

17,645,175 17,918,221 Percentage of sales but not less than a minimum rate

As at 31 December 2010 and 2009, the Company had the outstanding balances with related parties which had been included in the following accounts: (Unit : Baht) Consolidated financial statements

Separate financial statements

2010

2009

2010

2009

1,196,574,649

677,976,592

1,196,574,649

677,976,592

2,363,253

432,460

2,363,253

432,460

959,041

141,868

959,041

141,868

124,190

81,800

3,322,294

574,328

3,446,484

656,128

3,210

2,433,857

2,254,534

3,210

2,437,067

2,257,744

3,000,000

161,918

85,000,000

70,000,000

1,436,038

1,302,452

1,436,038

1,302,452

13,977

1,436,038

1,302,452

1,450,015

1,302,452

Bill of exchanges and deposits with financial institution (included in cash and cash equivalents) Land and Houses Retail Bank Plc. (1) Trade accounts receivable Land and Houses Plc. and subsidiaries (2) Quality Houses Plc. and subsidiaries (2) Market Village Co., Ltd. (eliminated from the consolidated financial statements) Total Other receivables Quality Construction Products Plc. (3) Market Village Co., Ltd. (eliminated from the consolidated financial statements) Total Rental guarantee deposits Quality Houses Property Fund(1) Trade account payable Quality Construction Products Plc.(3) Short-term loans from related party Market Village Co., Ltd. (eliminated from the consolidated financial statements) Other payables Quality Houses Property Fund(1) Market Village Co., Ltd. (eliminated from the consolidated financial statements) Total Relationship with the related companies

(1) has common shareholders

(2) the major shareholders

(3) has common directors

During the year 2010, movements in the balances of short-term loans from related party were as follows: (Unit : Baht) As at 31 Dec 2009

During the year Increase

As at 31 Dec 2010

Decrease

Subsidiary Market Village Co., Ltd.

70,000,000

15,000,000

85,000,000

The Company has received unsecured loans of Baht 85 million on which interest is payable on a monthly basis at a rate of 1.50 - 1.85 percent per annum (2009: 1.50 - 4.00 percent per annum). The loans are repayable at call.

Directors and managementâ&#x20AC;&#x2122;s benefits In 2010, the Company and its subsidiary had salaries, bonus, meeting allowance and gratuities of their directors and management recognised as expenses totaling Baht 79.46 million (2009: Baht 70.95 million).

13. Property, plant and equipment (Unit : Baht)

Consolidated financial statements Land and land Buildings and improvement building improvement

Computer equipment

Furniture, fixtures and office equipment

Assets under installation and under construction

2,380,384,994

7,200,605,936

307,060,222

1,981,422,476

41,964,035

99,117,491

12,010,555,154

97,469,176

83,646,056

45,512,958

299,361,183

7,947,553

1,324,436,187

1,858,373,113

(75,769,581)

(16,439,486)

(107,943,786)

(6,331,808)

(206,484,661)

4,302,000

526,948,245

11,028,913

156,436,536

(698,715,694)

2,482,156,170

7,735,430,656

347,162,607

2,329,276,409

43,579,780

724,837,984

13,662,443,606

As at 31 December 2009

1,616,665,539

252,826,116

1,325,845,362

27,090,659

3,222,427,676

Depreciation for the year

446,961,250

39,670,440

314,482,694

7,434,872

808,549,256

(40,828,948)

(16,424,483)

(91,308,221)

(6,032,348)

(154,594,000)

2,022,797,841

276,072,073

1,549,019,835

28,493,183

3,876,382,932

13,000,000

64,540,000

77,540,000

Increase during the year

53,598,000

Decrease during the year

(17,900,000)

As at 31 December 2010

13,000,000

100,238,000

113,238,000

31 December 2009

2,367,384,994

5,519,400,397

54,234,106

655,577,114

14,873,376

99,117,491

8,710,587,478

31 December 2010

2,469,156,170

5,612,394,815

71,090,534

780,256,574

15,086,597

724,837,984

9,672,822,674

Motor vehicles

Total

Cost: As at 31 December 2009 Additions Disposals and written-off Transfers in (out) As at 31 December 2010 Accumulated depreciation:

Depreciation on disposals and written-off As at 31 December 2010 Allowance for impairment loss: As at 31 December 2009

Net book value:

Depreciation for the year

2009 (Baht 714.4 million included in selling expenses, and the balance in administrative expenses)

756,319,116

2010 (Baht 773.3 million included in selling expenses, and the balance in administrative expenses)

808,549,256

(Unit : Baht)

Separate financial statements Assets under installation and under construction

Land and land Buildings and improvement building improvement

Computer equipment

Furniture, fixtures and office equipment

2,380,384,994

7,199,960,219

306,812,940

1,961,881,890

41,366,990

99,117,491

11,989,524,524

97,469,176

83,646,056

45,391,909

299,098,418

7,947,553

1,324,324,925

1,857,878,037

(75,769,581)

(16,439,486)

(107,723,277)

(6,331,809)

(206,264,153)

4,302,000

526,948,245

11,028,913

156,436,536

(698,715,694)

2,482,156,170

7,734,784,939

346,794,276

2,309,693,567

42,982,734

724,726,722

13,641,138,408

As at 31 December 2009

1,616,509,808

252,675,868

1,313,145,786

26,623,001

3,208,954,463

Depreciation for the year

446,896,679

39,582,207

310,575,360

7,317,300

804,371,546

(40,828,948)

(16,424,483)

(91,137,236)

(6,032,348)

(154,423,015)

2,022,577,539

275,833,592

1,532,583,910

27,907,953

3,858,902,994

13,000,000

64,540,000

77,540,000\

Increase during the year

53,598,000

Decrease during the year

(17,900,000)

As at 31 December 2010

13,000,000

100,238,000

113,238,000

31 December 2009

2,367,384,994

5,518,910,411

54,137,072

648,736,104

14,743,989

99,117,491

8,703,030,061

31 December 2010

2,469,156,170

5,611,969,400

70,960,684

777,109,657

15,074,781

724,726,722

9,668,997,414

Motor vehicles

Total

Cost: As at 31 December 2009 Additions Disposals and written-off Transfers in (out) As at 31 December 2010 Accumulated depreciation:

Depreciation on disposals and written-off As at 31 December 2010 Allowance for impairment loss: As at 31 December 2009

Net book value:

Depreciation for the year 2009 (Baht 714.4 million included in selling expenses, and the balance in administrative expenses)

752,180,384

2010 (Baht 773.3 million included in selling expenses, and the balance in administrative expenses)

804,371,546

As at 31 December 2010, the Company had vehicles and equipment under finance lease agreements with net book values amounting to Baht 15.2 million (2009: Baht 15.4 million). As at 31 December 2010, certain plant and equipment items have been fully depreciated but are still in use. The gross carrying amount (before deducting accumulated depreciation) of those assets amounted to approximately Baht 859.2 million (2009: Baht 512.6 million) (The separate financial statements: Baht 858.9 million, 2009: Baht 512.6 million). As at 31 December 2009, the Company had mortgaged buildings and leasehold rights (Note 15) with net book value of Baht 625.4 million to secure credit facilities from banks. In November 2010, the Company released the pledged assets in full, as discussed in Note 20

14. Computer software (Unit : Baht)

Consolidated financial statements

Separate financial statements

Cost 31 December 2009

234,652,474

234,643,018

Acquisitions during the year

57,679,118

57,331,067

Written-off during the year

(6,296,962)

286,034,630

285,677,123

31 December 2009

99,536,575

99,532,849

Amortisation for the year

20,873,036

20,856,524

Amortisation on written-off

(4,576,461)

(4,576,460)

115,833,150

115,812,913

31 December 2009

43,000,000

Decrease during the year

(3,000,000)

31 December 2010

40,000,000

31 December 2009

92,115,899

92,110,169

31 December 2010

130,201,480

129,864,210

31 December 2010 Accumulated amortisation

31 December 2010 Allowance for impairment loss

Net book value

15. Leasehold rights (Unit : Baht)

Consolidated and Separate financial statements Cost 31 December 2009

870,798,826

Acquisitions during the year

160,076,067

Written-off during the year 31 December 2010

(870,573) 1,030,004,320

Accumulated amortisation 31 December 2009 Amortisation for the year Amortisation on written-off 31 December 2010

167,799,328 31,036,614 (223,730) 198,612,212

Net book value

31 December 2009

702,999,498

31 December 2010

831,392,108

16. Bank overdrafts and short-term loans from financial institutions As at 31 December 2010 and 2009, the Company had overdraft lines from banks totaling Baht 175 million and Baht 155 million, respectively, and other credit facilities amounting to Baht 4,203 million and Baht 3,929 million, respectively.

17. Liabilities under financial lease agreements (Unit : Baht)

Consolidated and separate financial statements Portion due within one year 2010 Liabilities under financial lease agreements Less: Deferred interest expense Net

2009

Portion due over one year 2010

2009

5,145,326

3,996,042

7,429,996

5,995,160

(547,087)

(456,590)

(524,495)

(359,566)

4,598,239

3,539,452

6,905,501

5,635,594

The Company has entered into the finance lease agreements with leasing companies for rental of motor vehicles and equipment for use in its operation, whereby it is committed to pay rental on a monthly basis. The terms of the agreements are generally between 3 to 5 years. As at 31 December 2010, Future minimum lease payments required under the finance lease agreements were as follows: (Unit : Baht)

Less than 1 year Future minimum lease payments Deferred interest expenses Present value of future minimum lease payments

1 - 5 years

Total

5.15

7.43

12.58

(0.55)

(0.52)

(1.07)

4.60

6.91

11.51

18. Provision for employee benefits Movements in the defined benefit obligation for the year ended 31 December 2010 are summarised below. (Unit : Baht)

Consolidated and separate financial statements 2010

2009

Defined benefit obligation at the beginning of year

63,515,819

51,536,769

Current service cost

12,212,971

9,556,822

Interest cost

2,985,243

2,422,228

Benefits paid

(1,928,000)

Defined benefit obligation at the end of year

76,786,033

63,515,819

The amounts recognised in the income statements for the year ended 31 December 2010 and 2009 are as follows: (Unit : Baht)

Consolidated and separate financial statements 2010 Current service cost

2009

12,212,971

9,556,822

2,985,243

2,422,228

15,198,214

11,979,050

Selling expenses

3,991,941

3,596,118

Administrative expenses

8,224,174

5,690,985

Management benefit expenses

2,982,099

2,691,947

Interest cost Total benefit expenses Benefit expenses recognised in:

Principal actuarial assumptions at the valuation date were a discount rate 4.7% per annum, a future salary increase rate of 6.7% - 7.2% per annum, and an inflation rate of 2.0% per annum.

19. Debentures (Unit : Baht)

Consolidated and separate financial statements Number of debentures (Unit) 2010 2553

2009 2552

Amount (Baht) 2010 2553

2009 2552

Unsecured debentures #1/2008

500,000

100,000,000

260,000,000

#2/2008

630,000

630,000,000

#1/2009

300,000

300,000,000

#1/2010

700,000

700,000,000

#2/2010

1,000,000

1,000,000,000

3,130,000

1,430,000

2,730,000,000

1,190,000,000

(730,000,000)

(160,000,000)

2,000,000,000

1,030,000,000

Total Less: Current portion Debentures - net of current portion

Details of the Company’s debentures are as follows: 1. The Principal paid by installment of the Unsubordinated and Unsecured Debentures of Home Product Center Plc. No. 1/2008 Due 2011

Name of debentures

“The Principal paid by installment of the Unsubordinated and Unsecured Debentures of Home Product Center Plc. No. 1/2008 Due 2011”

Amount

Baht 500 million

Term

3 years, starting from date of issuance

Issue date

2 May 2008

Interest rate

4.00% per annum

Interest payment schedule

Quarterly in February, May, August and November

Principal repayment

12 quarterly payments totaling Baht 40 million each (the last of Baht 60 million), starting 2 August 2008 and with the last payment due on 2 May 2011

Covenants

Maintenance of debt to equity ratio

During 2010, the Company repaid the principal of debenture amounting to Baht 40 million per each installment, totalling Baht 160 million, as stipulated in the terms of repayment of the above debentures, to the debenture holders. 2. The Unsubordinated and Unsecured Debentures of Home Product Center Plc. No.2/2008 Due 2011.

Name of debentures

“The Unsubordinated and Unsecured Debentures of Home Product Center Plc. No. 2/2008 due 2011”

Amount

Baht 630 million

Term

3 years, starting from date of issuance

Issue date

21 November 2008

Interest rate

5.50% per annum

Interest payment schedule

Quarterly in November, February, May and August

Principal repayment

On the redemption date of 21 November 2011

Covenants

Maintenance of debt to equity ratio and restriction on dividend payment

On 8 April 2009, the Annual General Meeting of the shareholders of the Company passed resolution approving the cancellation of debentures which previously approved for issuance and has not yet been offered at the amount of Baht 1,870 million, and the issuance and offering of debt instruments, details are as follows: •

The issuance and offering of bills of exchange and/or short-term debentures of which the maturity date shall not exceed 270 days from the date of issuance, in the amount of not exceeding Baht 2,000 million.

•

The issuance and offering of long-term debentures of which the maturity date shall not exceed 10 years from the date of issuance, in the amount of not exceeding Baht 4,000 million.

3. The Unsubordinated and Unsecured Debentures of Home Product Center Plc. No. 1/2009 due 2012

Name of debentures

“The Unsubordinated and Unsecured Debentures of Home Product Center Plc. No. 1/2009 due 2012”

Amount

Baht 300 million

Term

3 years, starting from date of issuance

Issued date

1 October 2009

Interest rate

4.00% per annum

Interest payment schedule

Quarterly in January, April, July and October, starting from 1 January 2010 and with the last payment due on 2 October 2012

Principal repayment

On the redemption date of 2 October 2012

Covenants

Maintenance of debt to equity ratio and restriction on dividend payment

4. During 2010, the Company issued the Unsubordinated and Unsecured Debentures of Home Product Center Plc., to be sold to institutional investor and/or major investor, in accordance with a resolution of the Annual General Meeting of the Company held on 8 April 2009. Details are as follows: 4.1 The Unsubordinated and Unsecured Debentures of Home Product Center Plc. No. 1/2010 due 2013

Name of debentures

“The Unsubordinated and Unsecured Debentures of Home Product Center Plc. No. 1/2010 due 2013”

Amount

Baht 700 million

Term

3 years, starting from date of issuance

Issued date

8 January 2010

Interest rate

3.65% per annum

Interest payment schedule

Quarterly in January, April, July and October, starting from 8 April 2010 and with the last payment due on 8 January 2013

Principal repayment

On the redemption date of 8 January 2013

Covenants

Maintenance of debt to equity ratio and restriction on dividend payment

4.2 The Unsubordinated and Unsecured Debentures of Home Product Center Plc. No. 2/2010 due 2013

Name of debentures

“The Unsubordinated and Unsecured Debentures of Home Product Center Plc. No. 2/2010 due 2013”

Amount

Baht 1,000 million

Term

3 years, starting from date of issuance

Issued date

25 June 2010

Interest rate

3.00% per annum

Interest payment schedule

Semi-annually in June and December, starting from 25 December 2010 and with the last payment due on 25 June 2013

Principal repayment

On the redemption date of 25 June 2013

Covenants

Maintenance of debt to equity ratio and restriction on dividend payment

20. Long-term loans Details of the Companyâ&#x20AC;&#x2122;s long-term loans are as follows:

(Unit : Baht) Consolidated and separate financial statements

No.

Principal

Outstanding balances 2010

2009

Terms of payment (per month)

Interest Rate

1,500,000,000

675,000,000

Baht 25.00 million

845,000,000

305,320,000

Baht 15.52 million

Total

980,320,000

Less: Current portion

(486,240,000)

Long-term loans - net of current portion

494,080,000

* At 4.15% - 4.25% per annum and from June 2010 onwards at MLR ** At MLR minus an agreed margin 1)

The Company had pledged its assets and leasehold rights to secure loans (facility #1) (Note 13 and 15).

On 8 June 2007, the Company entered into a Baht 2,000 million loan agreement with a commercial bank (facility #2). The loans would be repaid within 78 monthly installments of not less than Baht 33 million each, and were subject to interest at the MLR minus the agreed margin. The loans were secured by a negative pledge over some of the Companyâ&#x20AC;&#x2122;s assets and certain leasehold rights. On 28 July 2008, the Company and the bank jointly amended the loan agreement to decrease the facility from Baht 2,000 million to Baht 845 million. On 5 February 2009, the Company and the bank jointly amended certain conditions of use of loan facilities, including the term of repayment. The term of loan repayment had been changed from monthly payment in the amount of not less than Baht 33.00 million, within 61 months to monthly payment in the amount of not less than Baht 15.52 million, within 48 months. In September 2009, the Company had utilised the long-term loan facility in full.

The Company had to comply with certain covenants stipulated in the loan agreements such as the maintenance of debt to equity ratio.

In 2010, the Company repaid the loan principals of facility # 1 and facility # 2 in full and released the assets pledged against these loans.

21. Share capital As discussed in Note 22, in 2010, the holders of the warrants of the Company exercised the warrants as follows: Ordinary shares (Shares)

Exercise price (Baht/share)

259,650

508,133

1.000

508,133

9,480

18,551

1.000

18,551

- The first quarter

2,265,025

4,376,019

2.059

9,010,391

- The second quarter

7,107,309

13,830,789

2.044

28,270,176

- The third quarter

3,010,695

5,858,788

2.044

11,975,386

- The fourth quarter

1,346,244

3,057,310

1.752

5,356,419

13,998,403

27,649,590

2010

Warrants (Unit)

Amount (Baht)

ESOP-W3 - The first quarter - The second quarter ESOP-W4

Total

55,139,056

As discussed in the above matter, the number of ordinary shares, the paid-up share capital and premium on ordinary shares are increased as follows: Number of ordinary shares (Thousand shares)

Paid-up share capital (Thousand Baht)

Premium on ordinary shares (Thousand Baht)

Registered share capital At the beginning of the year

3,794,213.9

Increase in registered share capital to support the payment of a stock dividend and exercising of the rights of the warrants At the end of the year

632,391.6 4,426,605.5

Issued and paid-up share capital At the beginning of the year Increase in capital from exercising of the rights of the warrants Increase in capital from a payment of stock dividend At the end of the year

3,703,926.2

594,317.4

27,649.6

27,489.5

621,416.1

4,352,991.9

621,806.9

On 19 August 2010, the Meeting of the Board of Directors of the Company approved the following resolutions which were proposed to the Extraordinary General Meeting of the shareholders for approval on 4 October 2010: 1. The following allocations of the Companyâ&#x20AC;&#x2122;s retained earnings and interim dividend payment: - Allocation of 5% of net income of January 2010 through June 2010, amounting to Baht 35.20 million, to the statutory reserve. - Payment of a stock dividend not exceeding 622.64 million shares with a par value of Baht 1.00 each, or a total of Baht 622.64 million, to the Companyâ&#x20AC;&#x2122;s shareholders. The rate of payment is 1 dividend share for every 6 existing shares, or Baht 0.1667 per share. Any existing shareholdings, after such allocation, with less than 10 shares are to receive a cash dividend of Baht 0.1667 per share.

- Payment of a cash dividend of Baht 0.0193 per share, or not exceeding a total of Baht 72.10 million. The total dividend was to be paid at a rate of Baht 0.186 per share within 29 October 2010. 2. Approval of the cancellation of the allocation of the ordinary shares from the exercise of the warrants allotted to employees of the Company (ESOP-W3) for which the exercise rights expired in April 2010 and reallocation of the remaining ordinary shares to be reserved for adjusting the rights of the warrants allotted to employees of the Company (ESOP-W4). 3. Approval of a Baht 632.39 million increase in registered capital, from Baht 3,794.21 million to Baht 4,426.61 million, by issuing an additional 632.39 million ordinary shares with a par value of Baht 1.00 each. The meeting approved the following allocations of the shares: - 622.64 million shares allocated to support the payment of a stock dividend. - 9.75 million shares reserved for the exercise of the warrants allotted to employees of the Company (ESOP-W4), of which the conversion rights will be adjusted when the stock dividend is paid. In October 2010, the Company paid a cash dividend of Baht 71.96 million and allocated 621.42 million ordinary shares for stock dividend payment. It registered the increase in its paid-up share capital to Baht 4,349.94 million with the Ministry of Commerce on 21 October 2010. In addition, the Company filed an application with the Stock Exchange of Thailand (SET) to register the additional 621.42 million shares as listed securities. The SET approved the trading of the additional shares through the stock market to be effective from 28 October 2010. The Board of Directors is to consider and propose to the next shareholders’ meeting the allocation of the remaining shares from the above stock dividend payment. As of the date of the financial statements, the Company has recorded the Baht 621.42 million stock dividends paid, at its par value, as issued and paid-up share capital under the caption of shareholders’ equity. The Company registered the increase in its paid-up share capital to Baht 4,352.99 million with the Ministry of commerce on 8 December 2010.

22. Warrants Details of the warrants of the Company which were issued without charge, are as follows: -

Type of warrant

Issue to

ESOP-W3

Directors and employees of the Company

ESOP-W4

Number of warrants issued (Units)

Period of warrant

Exercise price per share

Exercise ratio per 1 warrant

2 April 2007

15,000,000

3 years

Baht 1.00

1 ordinary shares

23 May 2008

50,000,000

5 years

Baht 3.98

1 ordinary shares

Issuance date of warrant

Directors and employees of the Company and its subsidiary

During 2008, the Company had issued ESOP-W4 to the Company’s and subsidiary’s employees. The issue of ESOP-W4 has affected the exercise of ESOP-W3 as follows:

Type of warrant

Exercise price per share

ESOP-W3

Baht 1.00

Exercise ratio per 1 warrant 1.007 ordinary shares

According to the resolution of the Annual General Meeting of Shareholders dated on 8 April 2009, that approve the Company to pay dividend at the rate of more than 55% of net income after income tax in 2008. As a result, the Company had to adjust the exercise price and exercise ratio the warrants allotted to employees of the Company (ESOP-W3 and ESOP-W4) in accordance with the prospectus for the offering of warrants as detailed of follows: Type of warrant

Exercise price per share

Exercise ratio per 1 warrant

ESOP-W3

Baht 1.000

1.030 ordinary shares

ESOP-W4

Baht 3.912

1.017 ordinary shares

The adjusted exercise prices and exercise ratios of ESOP-W3 and ESOP-W4 were effective from 16 April 2009. According to the resolution of the Extraordinary General Meeting of the shareholders of the Company dated 29 September 2009, that approve the Company to pay the interim dividend to the shareholders in the amount of 1,752.0 million ordinary shares. As a result, the Company needs to adjust the right of the warrants allotted to the employees of the Company (ESOP-W3 and ESOP-W4) in accordance with the prospectus for the offering of warrants in respect of the condition to adjust the right of warrants and the changes in prices. Type of warrant

Exercise price per share

Exercise ratio per 1 warrant

ESOP-W3

Baht 1.000

1.957 ordinary shares

ESOP-W4

Baht 2.059

1.932 ordinary shares

The adjusted exercise prices and exercise ratios of ESOP-W3 and ESOP-W4 were effective from 12 October 2009. According to the resolution of the Annual General Meeting of Shareholders dated on 7 April 2010, that approve the Company to pay dividend at the rate of more than 55% of net income after income tax in 2009. As a result, the Company had to adjust the exercise price and exercise ratio of the warrants allotted to employees of the Company (ESOP-W4) in accordance with the prospectus for the offering of warrants as detailed below. Type of warrant

Exercise price per share

ESOP-W4

Baht 2.044

Exercise ratio per 1 warrant 1.946 ordinary shares

The adjusted exercise prices and exercise ratios of ESOP-W4 were effective from 12 April 2010. According to the resolution of the Extraordinary General Meeting of the shareholders of the Company dated 4 October 2010, that approve the Company to pay an interim stock dividend to the shareholders of a total of not more than 622.64 million ordinary shares. As a result, the Company needs to adjust the rights of the warrants allotted to the employees of the Company (ESOP-W4) in accordance with the condition in the prospectus for the offering of warrants to adjust the rights of warrants and changes in prices. Type of warrant

Exercise price per share

ESOP-W4

Baht 1.752

Exercise ratio per 1 warrant 2.271 ordinary shares

The adjusted exercise prices and exercise ratios of ESOP-W4 are effective from 12 October 2010. During 2010, the movements of warrants of the Company are as follows: (Unit : Unit)

Type of warrant

Number of warrants outstanding as at 31 December 2009

Number of warrants exercised during the year

Number of warrants expired during the year

Number of warrants outstanding as at 31 December 2010

ESOP-W3

580,931

(269,130)

(311,801)

ESOP-W4

36,148,625

(13,729,273)

22,419,352

23. Statutory reserve Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside to a statutory reserve at least 5 percent of its net income, until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for dividend distribution.

24. Expenses by nature Significant expenses by nature are as follows: (Unit : Million Baht)

Consolidated financial statements 2010 Employee remuneration

Separate financial statements

2009

2010

2009

1,786

1,437

1,786

1,437

Premises expenses

918

820

918

820

Depreciation and amortisation

860

805

856

800

Sales promotion and operation support expenses

974

784

946

758

Financial costs

103

114

105

114

Tax expenses

727

558

722

557

(917)

(265)

(917)

(265)

Changes in finished goods

25. Earnings per share Basic earnings per share is calculated by dividing the net income for the year by the weighted average number of ordinary shares in issue during the year, after adjusting the number of ordinary shares in proportion to the change in the number of shares as a result of the increase in share capital arising from the issue of a stock dividend of 621.42 million shares on 21 October 2010, as discussed in Note 21. The number of ordinary shares of the prior year has been adjusted as if the stock dividend had been issued at the beginning of the earliest period reported. Diluted earnings per share is calculated by dividing net income for the year by the weighted average number of ordinary shares in issue during the year, after adjusting the number of ordinary shares in proportion to the change in the number of shares as a result of the increase in share capital arising from the issue of a stock dividend, as discussed in the above paragraph, plus the weighted average number of ordinary shares that would need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation assumes that the conversion took place either at the beginning of the year or on the date the potential ordinary shares were issued. The following table sets forth the computation of basic and diluted earnings per share: Consolidated financial statements Weighted average number of ordinary shares (shares)

Net income (Baht)

2010

2009

2010

(Restated)

2009

Earnings per share (Baht)

2010

(Restated)

2009 (Restated)

Basic earnings per share Net income attributable to equity holders of the parent Effect of dilutive potential ordinary shares

1,638,429,270

1,130,878,380

4,339,764,479

4,313,635,897

48,535,285

48,733,170

1,638,429,270

1,130,878,380

4,388,299,764

4,362,369,067

0.38

0.26

0.37

0.26

Diluted earnings per share Net income of ordinary shareholders assuming the conversion of warrants to ordinary shares

Seperate financial statements Weighted average number of ordinary shares (shares)

Net income (Baht)

2010

2009

2010

2009

(Restated)

Earnings per share (Baht)

2010

(Restated)

2009 (Restated)

Basic earnings per share Net income attributable to equity holders of the parent

1,627,211,784

1,126,215,560

4,339,764,479

4,313,635,897

48,535,285

48,733,170

1,627,211,784

1,126,215,560

4,388,299,764

4,362,369,067

Effect of dilutive potential ordinary shares

0.37

0.26

0.37

0.26

Diluted earnings per share Net income of ordinary shareholders assuming the conversion of warrants to ordinary shares

26. Financial information by segment The majority of the operations of the Company and subsidiary involve the business segments of trading of a complete range of goods and materials for construction, addition, refurbishment and renovation of buildings and residences, and provision of related services, together with space rental (as having revenue and assets less than 10 percent of total revenue and total assets of all segments) and are carried on in a single geographic area, Thailand. As a result, all revenues, operating profits and assets as reflected in these financial statements pertain to the aforementioned trading industry and geographic area.

27. Provident fund The Company and its employees have jointly established a provident fund in accordance with the Provident Fund Act B.E. 2530. Both employees and the Company contributed to the fund monthly at the rate of 3 - 5 percent of basic salary. The fund, which is managed by American International Assurance Co., Ltd., will be paid to employees upon termination in accordance with the fund rules. During the year 2010, the Company contributed Baht 34.25 million (2009: Baht 30.24 million) to the fund.

28. Dividend paid

Approved by

Total dividends (Million Baht)

Dividend per share (Baht)

Paid on

Interim stock dividend for 2010

Meeting of the Board of Directors on 19 August 2010 and Extraordinary General Meeting of the shareholders on 4 October 2010

621.42

0.1667

29 October 2010

Interim dividend for 2010

Meeting of the Board of Directors on 19 August 2010 and Extraordinary General Meeting of the shareholders on 4 October 2010

71.96

0.0193

29 October 2010

Final dividend for 2009

Annual General Meeting of the shareholders on 7 April 2010

593.32

0.1600

30 April 2010

Interim stock dividend for 2009

Extraordinary General Meeting of the shareholders on 29 September 2009

1,752.01

0.9000

27 October 2009

Interim dividend for 2009

Extraordinary General Meeting of the shareholders on 29 September 2009

194.67

0.1000

27 October 2009

Annual General Meeting of the shareholders on 8 April 2009

676.78

0.3500

28 April 2009

Final dividend for 2008

29. Commitments and contingent liabilities 29.1 As at 31 December 2010 and 2009, the Company had commitments totaling Baht 89.16 million and Baht 66.65 million, respectively, to commercial banks in respect of guarantees provided for leasing, purchases of goods or hire of work, as bonds with State Enterprise. 29.2 As at 31 December 2010, the Company had commitments under letters of credit opened with two commercial banks, amounting to USD 3.99 million (2009: USD 3.53 million).

30. Commitments under long-term lease agreements 30.1 Long-term lease agreements - as lessee a) The Company has entered into 16 land lease agreements. The terms of the agreements are generally between 24 to 30 years and they are non cancelable, except with the consent of the counterparties. As at 31 December 2010, future minimum lease payments required under these operating leases contracts were as follows: Million Baht Payable within: 1 year

48.01

2 to 5 years Thereafter

221.92 1,144.35 1,414.28

b) The Company has entered into 17 lease agreements to lease commercial space. The terms of the agreements are generally between 17 to 30 years and they are not cancelable, except with the consent of the counterparties. As at 31 December 2010, future minimum lease payments required under these operating leases contracts were as follows: Million Baht Payable within: 1 year

84.67

2 to 5 years Thereafter

363.70 1,236.38 1,684.75

30.2 Long-term lease agreements - as leaser The Company has entered into seven agreements with two companies to lease and sub-lease parts of premises in 5 branches for periods of 29-30 years, with a total of rental received in advance amounting to Baht 640.0 million. The terms of the agreements are until 2033 - 2036. The Company recognises this income systematically on a straight-line basis over the useful lives of the leaseholds. The outstanding balance of rental received in advance, net of recognised rental income, as of 31 December 2010 was Baht 521.2 million (2009: Baht 556.4 million).

31. Financial instruments 31.1 Financial risk management The Company’s financial instruments, as defined under Thai Accounting Standard No. 107 “Financial Instruments: Disclosure and Presentations”, principally comprise cash and cash equivalents, trade accounts receivable and other receivables, trade accounts payable and other payables, short-term loans and debentures. The financial risks associated with these financial instruments and how they are managed is described below. Credit risk The Company is exposed to credit risk primarily with respect to trade accounts receivable and other receivable. The Company manages the risk by adopting appropriate credit control policies and procedures and therefore does not expect to incur material financial losses. In addition, the Company does not have high concentrations, of credit risk since it has a large customer base. The maximum exposure to credit risk is limited to the carrying amounts of trade accounts receivable and others receivable as stated in the balance sheet. Interest rate risk The Company’s exposure to interest rate risk relates primarily to its deposits with financial institutions, short-term loans and debentures. However, since the Company’s financial assets and some of its financial liabilities bear floating interest rates and some of financial liabilities bear fixed interest rates which are close to the market rate, the interest rate risk is expected to be minimal. Significant financial assets and liabilities as at 31 December 2010, classified by type of interest rate, are summarised in the table below, with those financial assets and liabilities that carry fixed interest rates further classified based on the maturity date, or the repricing date if this occurs before the maturity date.

Consolidated financial statements Fixed interest rates

Floating interest rate (Baht)

Non- interest bearing

Total

Interest rate (% p.a.)

Within 1 year

Over 1-5 years

1,195,000,000

34,843,680

187,401,431

1,417,245,111

0.25 - 1.60

730,000,000

2,000,000,000

2,730,000,000

3.00 - 5.50

Financial assets Cash and cash equivalents Financial liabilities Debentures

Separate financial statements Fixed interest rates

Floating interest rate (Baht)

Non- interest bearing

Total

Interest rate (% p.a.)

Within 1 year

Over 1-5 years

1,195,000,000

10,075,107

186,669,033

1,391,744,140

0.25 - 1.60

85,000,000

1.50 - 1.85

730,000,000

2,000,000,000

2,730,000,000

3.00 - 5.50

815,000,000

2,000,000,000

2,815,000,000

Financial assets Cash and cash equivalents Financial liabilities Short-term loans from related party Debentures

Foreign currency risk The Company’s exposure to foreign currency risk arises mainly from good purchase transactions that are denominated in foreign currencies. The Company has not entered into forward exchange contracts to hedge this risk. The balances of financial liabilities denominated in foreign currencies as at 31 December 2010 are summarised below.

Foreign currency

Financial liabilities (Dollar)

Average exchange rate as at 31 December 2010 (Baht per dollar)

USD

488,141

30.2963

31.2 Fair values of financial instruments Since some of the Company’s financial assets and liabilities are short-term in nature and debentures bear interest at rates close to market rate, their fair value is not expected to be materially different from the amounts presented in the balance sheets. 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.

32. Capital management The primary objective of the Company’s capital management is to ensure that it has an appropriate financial structure and preserves the ability to continue its business as a going concern.

The Company manages its capital position with reference to its debt-to-equity ratio in order to comply with a condition in the stipulations of debentures, which requires the Company to maintain a debt-to-equity ratio of not more than 1.75:1.

No changes were made in the objectives, policies or processes during the years end 31 December 2010 and 2009.

33. Subsequent event On 16 February 2011, the Meeting of the Board of Directors of the Company approved the dividend payment from operating results of July 2010 to December 2010 as follows. -

Payment of a stock dividend to the Company’s shareholders. The rate of payment is 1 dividend share for every 6 existing shares, or Baht 0.1667 per share.

Payment of a cash dividend of Baht 0.0193 per share.

The total dividend is to be paid at a rate of Baht 0.186 per share within 29 April 2011. However, the Company’s Board of Directors’ meeting, held on 19 August 2010, approved the resolution to pay interim dividend to the shareholders as stock dividend of Baht 0.1667 per share and cash dividend of Baht 0.0193 per share. This was proposed to the Extraordinary General Meeting of the shareholders and approved on 4 October 2010. The dividend was paid on 29 October 2010. Such interim dividend per share after adjusting the issuance of interim stock dividend would be Baht 0.1594 per share. As a result, total dividend per share for the year 2010 is Baht 0.3454 per share. The above dividend payment will be proposed to the Annual General Meeting of the Company’s shareholders for approval.

34. Reclassification Certain amounts in the financial statements for the year ended 31 December 2009 have been reclassified to conform to the current year’s classification but with no effect to previously reported net income or shareholders’ equity except for the effect of the change in accounting policy discussed in Note 6. The reclassifications are as follows: (Unit : Baht)

Consolidated financial statements As reclassified

As previously reported

Trade accounts receivable - net

144,584,882

128,785,030

Other receivables - net

347,794,276

356,794,276

Accrued expenses

422,114,603

365,409,521

Advances received from customers

430,697,315

423,897,463

Other current liabilities

165,356,564

222,061,646 (Unit : Baht)

Separate financial statements As reclassified

As previously reported

Trade accounts receivable - net

139,866,504

124,066,652

Other receivables - net

350,048,810

359,048,810

Accrued expenses

404,673,798

347,968,716

Advances received from customers

430,697,315

423,897,463

Other current liabilities

163,453,254

220,158,336

35. Approval of financial statements These financial statements were authorised for issue by the Company’s Board of Directors on 16 February 2011.

Board of Directors HomePro

is the leading home improvement retailer in Thailand.

We operate 40 stores nationwide, providing product range cover 60,000 items with complete services as One Stop Shopping to attain highest customer satisfaction.

Sales

Net Profit

+18.4%

Total Assets

+44.9%

+2,718MB

New

5 Branches

Mr. Anant Asavabhokhin

Mr. Pong Sarasin

Mr. Manit Udomkunnatum

Chairman

Independent Director

Director and Chairman of Executive Directors

Mr. Rutt Phanijphand

Mr. Apilas Osatananda

Director, Executive Director and Chairman of the Nomination and Remuneration Committee

Independent Director and Chairman of the Audit Committee

Mr. Thaveevat Tatiyamaneekul Independent Director and Audit Committee

24,073 16,592 20,329

1,638

18,540

13,873 40

13,369 12,274

15,944

33 1,131

Mr. Chanin Roonsamrarn

Mr. Apichat Natasilpa

Mr. Khunawut Thumpomkul

Independent depe de t Director, Director,Audit ecto ,Audit ud t Committee Co ttee and Nomination and Remuneration Committee

Director and Nomination and Remuneration Committee

Director, Executive Director Director and Managing Director

959 710

2007 2008 2009 2010

2010 retail sales increased by 18.4% to Baht 24,073 million.

2007 2008 2009 2010

NPAT increased by 44.9% to Baht 1,638 million.

2007 2008 2009 2010

Total assets increased from investment in property of 5 new stores.

2007 2008 2009 2010

Lumlukka, Sukhaphiban 3, Nakhonpathom, Nakhonratchasima and Nakhonsitammarat

Mr. Naporn Soonthornchitcharoen

Mr. Joompol Meesuk

Mrs. Suwanna Buddhaprasart

Director and Executive Director

Director

Annual Report 2010

Moving forward to Service Excellence

www.homepro.co.th

Shop.homepro.co.th

02-962-6955 02-933-5000 02-947-6365 02-689-0844 02-983-7444 02-997-4800 02-444-4699 02-655-3400 02-955-5888 02-895-6555 02-735-4999

Rangsit Ratchadaphisek Ratchapruk Rattanathibet Seri Center Sukhaphiban 3 Suvarnabhumi (Bangna) The Mall Bangkae

02-958-5699 02-641-2900 02-423-3222 02-921-2400 02-746-0377 02-976-9114 02-325-1200 02-454-9299

Central : Ayutthaya Hua Hin Nakhonpathom

035-23-6655 032-52-6000 034-21-3200

North :

East :

Chiangmai 053-85-1229 Chiangmai-Hangdong 053-44-7939 Phitsanulok 055-28-9009

Chonburi Pattaya Rayong

North-East :

Had Yai Krabi Nakhonsitammarat Phuket Phuket-Chalong Samui uratthani

038-78-5111 038-36-0422 038-80-9333

South : Khao Yai Khonkaen Nakhonratchasima

044-32-8799 043-36-5365

(Bypass 2)

044-28-2550 044-28-8345 042-30-9000

The Mall Korat Udonthani

074-46-9055 075-81-0499 075-32-4740 076-25-5189 076-60-2399 077-23-1900 077-48-9199

Moving forward to Service Excellence

Loving home by homepro

Annual Report 2010