Ck 08

Contents

002 Vision, Missions, Corporate Values and Strategies for 2009

006 Message from Chairman of the Executive Board and Chief Executive Officer

009 Advisors Committee for Board of Directors and the Executive Board

039 Construction Industry Outlook and CK没s Strategic Direction

054 Corporate Governance Policy

074 Audit Committee没s Report

003 Financial Highlights

008 The Board of Directors

010 Shareholding and Management Structure

043 Corporate Social and Environmental Responsibility

056

005 Message from the Chairman

009 Management Team

036 Nature of Business Operations

050 General Information

062

Risk Factors

Connected Transactions

075

089

Financial Position and Operational Results

Financial Statement

Growth - Stability - Sustainability A big, stable and strong tree grows from a strong root. With care and responsible heart, it becomes a big tree that provides shade and bears flowers and fruits. Similarly, for more than 37 years, CH. Karnchang Public Company Limited has been operating business that is beneficial to our country and society. We manage our business under the principle of good corporate governance and business ethics while aiming to bring good and fair returns to our stakeholders.

With the continued responsibility to the society and the public, CH. Karnchang is committed to do business that contributes to creating good, stable and sustainable life for all.

CH. Karnchang Public Company Limited

01

Vision, Missions, Corporate Values and Strategies for 2009 Vision To be the leader in construction business and the pre-eminent and comprehensive basic infrastructure developer in the region.

Missions ë Deliver quality work for our customers while committed to creating work that contributes to the society and country with good returns to our shareholders and providing fair treatment to all our stakeholders ë Manage our business with professionalism and in accordance with the guidelines of good Corporate Governance ë Be responsible to the community, society and the country ë Develop human capital and organization on a continuous and consistent basis

Corporate Values (Q-C-I-S-T) ë ë ë ë ë

Quality of Services Customer Satisfaction Integrity Social Responsibility Teamwork

2009 Strategies: Sustainable Growth ë Select projects with good contribution to the society and our country and with fair business returns ë Manage construction projects under the principles of effective cost management, timeliness and quality of work ë Expand to regional market with an emphasis on Southeast Asia ë Enhance business opportunities in basic infrastructure investment projects that contribute to the countryûs development in order to generate construction works and to create opportunities for long-term infrastructure concessions ë Develop organizational capacity › human capital and management structure › to increase the companyûs competitiveness ë Develop and continuously update technology and knowledge to strengthen the companyûs comparative advantage

02

Annual Report 2008

Financial Highlights

Summary of Financial Information of CH. Karnchang Public Company Limited Unit : Thousand Baht Items Total assets Total liabilities Shareholders没 equity Total revenue Gross profit (loss) Net profit (loss) Profit (loss) per share

December 31, 2008 22,227,715 16,903,013 5,324,702 6,963,315 166,452 98,706 0.07

Amount December 31, 2007 21,927,530 15,756,393 6,171,137 9,387,994 134,877 659,488 0.47

December 31, 2006 28,279,828 23,529,610 4,750,218 16,432,840 1,101,533 (1,064,816) (0.95)

Summary of Financial Information of CH. Karnchang Public Company Limited, Subsidiaries and Joint Ventures Unit : Thousand Baht Items Amount December 31, 2008 December 31, 2007 December 31, 2006 Total assets 25,873,213 24,475,770 30,289,122 Total liabilities 20,568,913 18,784,685 25,487,027 Shareholders没 equity 5,304,300 5,691,085 4,802,095 Total revenue 14,510,570 14,918,077 21,605,286 Gross profit (loss) 1,382,234 1,127,020 1,822,170 Net profit (loss) 544,739 14,537 (1,212,844) Profit (loss) per share 0.38 0.01 (1.08)

CH. Karnchang Public Company Limited

03

Grow with a Strong Foundation

04

For more than 37 years... a long experience and a well-established expertise in construction and basic infrastructure project management have provided a strong foundation for us to grow and become well-recognized in Thailand and in the region.

Annual Report 2008

Message from the Chairman

2008 was a challenging year. The financial crisis in the U.S.A. created a contagious effect on a global scale and Thailand unfortunately could not eschew this global crisis. Coupled with the domestic political situation, the Thai economy and consequently construction industry were unavoidably affected. The key challenges faced by CH. Karnchang Public Company Limited were the delays and decline in public and private investments as well as fluctuating prices of raw materials in the volatile world market. Nevertheless, even facing these challenging factors, CH. Karnchang has proven that our commitment to prudent business strategies and effective management have helped us mitigate these difficulties. First and foremost, CH. Karnchang emphasizes effective management for all of our construction projects. We also have been expanding our market into the region in order to reduce our reliance on the domestic market. Another prudent strategy we have adopted is to create our capacity to develop and manage large scale basic infrastructure projects. These projects not only provide CH. Karnchang with construction works but may also lead to concessions that generate stable long-term revenue streams. With this commitment and strategic prudence, CH. Karnchang Public Company Limited had a good performance and was able to generate satisfactory profits in 2008.

The importance of competitiveness, preparedness, and the ability to improve and adapt to new environments are vital for Mr. Aswin Kongsiri business survival in times of crisis and challenges. In realizing Chairman of the Board of Directors this, CH. Karnchang implemented several programs to enhance organizational capacity and efficiency as well as to increase the transparency of management according to the principle of good corporate governance (CG). We are very proud to announce that CH. Karnchang Public Company Limited was rated, by the Thai Institute of Directors Association (IOD), çVery Goodé in their çCorporate Governance Report for Thai Listed Companies 2008é. We remain committed to improving our corporate governance in order to be fair to all our shareholders and stakeholders.

In the coming year of 2009, we believe that all sectors and parties will be committed to the shared goal of bringing Thailandûs economy back on the path to recovery and prosperity. The construction industry will be a key engine of economic stimulus as the Thai government aims to use construction of large scale infrastructure projects to stir investments and create jobs, thus stimulating the economy in the short-term. Moreover, these large scale infrastructure projects will enhance Thailandûs long-term competitiveness. For this year and beyond, CH. Karnchang is committed to create new business opportunities and to strengthen our capacity to take on new construction and infrastructure development projects in both the public and private sectors, here in Thailand and abroad. We are ready to be a key performer in the effort to strengthen our countryûs economy and we remain committed to bring optimal and fair returns to our shareholders.

CH. Karnchang Public Company Limited

05

Message from Chairman of the Executive Board and Chief Executive Officer

Mr. Plew Trivisvavet Chairman of the Executive Board and Chief Executive Officer

06

2008 was a year of pride for CH. Karnchang Public Company Limited because our capacity and commitment have proven to help us achieve good performance and maintain a profit making ability despite economic challenges. Undeniably, the global economic crisis as well as domestic economic and political situations have made doing business more challenging in the past year. Investments from both the public and private sector in the construction industry have declined. As a result, large scale construction projects, such as the infrastructure Mega Projects, were delayed. Furthermore, price fluctuation of raw materials, particularly oil and steel, made cost management that much more difficult in 2008. Nevertheless, with efficient and effective management and strong commitment from every staff member of CH. Karnchang, we were able to achieve our targeted performance and generate a net profit for the year 2007-2008.

The total revenue was Baht 14,511 million, total expenditures were Baht 13,035 million. Our total assets amounted to Baht 25,873 million, total debt was Baht 20,569 million, and CH. Karnchang was able to turn a net profit of Baht 545 million with an average gross margin at 10.45%.

Another great piece of news that we are proud to share is that CH. Karnchang was rated by the Thai Institute of Directors (IOD) çVery Goodé in their çCorporate Governance Report for Thai Listed Companies 2008é, a wonderful improvement from our rating of çGoodé in the previous year of 2007. This shows that our continuous commitment to improve managerial effectiveness as well as corporate governance and transparency has been fruitful.

To further enhance our organizational capacity in 2008, we implemented a number of projects such as: an implementation of the Enterprise Resource Planning program (ERP); human resource management; risk management plan and monitoring system; as well as several Corporate Social Responsibility (CSR) projects. All these efforts demonstrate our belief that a high performing company must be efficient and effective in business while responsible to the society and fair to its staff, shareholders and stakeholders.

Annual Report 2008

Sustainable Growth, We are confident that we can continue to improve our business performance and bring good and fair returns to our shareholders as well as to the society.

The continued success of CH. Karnchang is also a result of our prudent policies and strategies. For our construction business, we undertake projects that not only provide good returns but also are beneficial for the society and the country. We expand our market into the region, emphasizing our neighbors in Southeast Asia. In the past year, the performance and progress of our project backlog were satisfactory, with a competitive gross margin. Our overseas projects namely Nam Ngum II Hydro-Electric dam in Laos, National Road in Cambodia, and Paper Mill Factory in Vietnam, have shown good work progress. Another key business strategy that has set us apart from other construction companies is our comprehensive ability to develop, arrange financing and investments, to undertake construction works as well as perform concession operations for basic infrastructure projects. The strategy to diversify into infrastructure projects has strengthened our business as these projects provide construction works. Also, investment stakes in concessions can generate dividends and opportunities for capital gains in the long-run. In fact, on May 22, 2008, CH. Karnchang, as the major shareholder, successfully listed Thai Tap Water Public Company Limited in the Stock Exchange of Thailand, giving CH. Karnchang capital gains, future revenue streams and key strategic partners.

In 2009, CH. Karnchang management team believes that the Thai economy will be in an improved position. The Thai government announced the policy to stimulate the economy through investments in large scale projects, including the aforementioned Mega Projects.

A number of these projects are ready to proceed or start the bidding process in 2009, such as the Purple Line, the Green Line, extension of the Red Line, extension of the Blue Line, and other up-coming projects. The government has also shown strong commitment to help the business sector by properly managing the inflation rate, interest rates and the Thai currency. Nevertheless, to reduce further risks, CH. Karnchang will continue to expand our regional market. We recently signed a Project Development Agreement (PDA) with the government of Laos to study and develop the Xaiyaburi dam, which is expected to commence in 1-2 years.

CH. Karnchang is proud that we use keen business strategies and we strive to continuingly improve our competitiveness in order to successfully survive and perform even in times of great challenges. With our commitment to the strategy of Sustainable Growth, we are confident that we will continue to deliver good performance in the future. On behalf of CH. Karnchang management, I would like to take this opportunity to thank our shareholders, business partners, customers in the public and private sectors as well as the financial institutions for your continued trust and support. I would also like to thank all of the employees of CH. Karnchang who have worked hard together to make our company stronger and better. The management team remains committed to our mission to deliver quality work that contributes to the public at large and provides optimal and fair returns to all CH. Karnchang shareholders and stakeholders.

CH. Karnchang Public Company Limited

07

The Board of Directors

1

2

3

Mr. Aswin Kongsiri ë Chairman of the Board of Directors ë Independent Director

Mr. Plew Trivisvavet ë Chairman of the Executive Board ë Director ë Nomination Committee Member ë Remuneration Committee Member ë Corporate Governance and Risk Management Committee Member

Mr. Vitoon Tejatussanasoontorn ë Chairman of the Audit Committee ë Chairman of the Nomination Committee ë Chairman of the Remuneration Committee ë Chairman of the Corporate Governance and Risk Management Committee ë Director ë Independent Director

4

5

6

Mr. Don Pramudwinai ë Director ë Audit Committee Member ë Independent Director

Mr. Thawansak Sukhawun ë Director ë Audit Committee Member ë Corporate Governance and Risk Management Committee Member ë Independent Director

Mr. Pavich Tongroach ë Director ë Independent Director

7

8

9

Mr. Narong Sangsuriya ë Director ë Executive Director ë Nomination Committee Member ë Remuneration Committee Member

Mrs. Saikasem Trivisvavet ë Director ë Executive Director

Mr. Ratn Santaannop ë Director ë Executive Director

10

11

12

Mr. Prasert Marittanaporn ë Director ë Executive Director

Mr. Sombat Kitjalaksana ë Director

Mr. Anukool Tuntimas ë Director ë Executive Director

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Annual Report 2008

Management Team

1

2

3

4

1. Mr. Plew Trivisvavet ë Chief Executive Officer 2. Mr. Narong Sangsuriya ë Senior Executive Vice President : Operation Group 3. Mrs. Saikasem Trivisvavet ë Executive Vice President : Purchasing

5

6

7

8

9

4. Mr. Ratn Santaannop ë Executive Vice President : Construction 1

7. Mr. Prasert Marittanaporn ë Executive Vice President : Accounting and Finance

5. Mr. Viboon Mongkolpiyathana ë Executive Vice President : Construction 2

8. Mr. Sombat Kitjalaksana ë Executive Vice President : Business Development

6. Mr. Samai Paiboon ë Executive Vice President : Engineering

9. Mr. Anukool Tuntimas ë Executive Vice President : Human Resource and General Administration

Advisors Committee for Board of Directors and the Executive Board

1

2

1. Pol. General Narong Mahanonda ë Chairman of the Advisory Committee 2. General Akapol Somroop ë Senior Executive Advisor

3

4

5

4. Mr. Thep Trivisvavet ë Advisory Committee for Executive Board

5. Mr. Prasert Trivisvavet ë Advisory Committee 3. Pol. Major General Sawat Vijaranakorn for Executive Board ë Senior Executive Advisor 6. Mr. Yim Trivisvavet ë Advisory Committee for Executive Board

CH. Karnchang Public Company Limited

6

7

8

7. Mr. Akadej Bijaphala ë Advisory Committee for Executive Board 8. Mr. Charn Chongchit ë Legal Advisor

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Shareholding and Management Structure

1.

Shareholders

Top ten major shareholders of the Company on April 9, 2008, the most recent date of closing the shareholders register book, are as follows: Shareholders

Trivisvavet Family 1.1 Mr. Thavorn Trivisvavet 1.2 Mr. Plew Trivisvavet 1.3 Mr. Prasert Trivisvavet 1.4 Mrs. Saikasem Trivisvavet 1.5 Mr. Kamthorn Trivisvavet 1.6 Mahasiri Siam Co., Ltd.1/ 1.7 CH. Karnchang Holding Co., Ltd.2/ 1.8 CK. Office Tower Co., Ltd.3/ 1.9 Bang Pa-in Land Development Co., Ltd.4/ 2 TMB Bank Public Company Limited 3 Thai NVDR Co., Ltd. 4 Mrs. Pranee Tongkittikul 5 State Street Bank and Trust Company for London 6 Mr. Charnarong Wongseenin 7 SCBS Securities Co., Ltd. 8 Morgan Stanley & Co. International Limited 9. Citibank Nominees Singapore Pte Ltd-UBS AG London Branch-NRBS IPB CLIENT SEG 10 Mrs. Walaiporn Sawongthrakul

Total Shares

Percentage of Shareholding (%)

21,277,200 21,047,620 11,600,048 2,990,000 1,000 293,784,788 151,707,400 75,000,000 18,935,000 90,914,200 83,002,700 56,163,420 28,058,000 27,000,000 22,194,100 14,580,200 12,039,200

1.47 1.46 0.80 0.21 0.00 20.32 10.49 5.19 1.31 6.29 5.74 3.88 1.94 1.87 1.54 1.01 0.83

8,600,000

0.60

1

(at the par value of Baht 1) Remarks: 1/ The Trivisvavet Family holds shares representing 91.71 percent, with the remainder held by other shareholders, and all directors of the company are the Trivisvavet Family.

2/ The Trivisvavet Family holds shares representing 87.50 percent, with the remainder held by other shareholders, and all directors of the company are the Trivisvavet Family.

3/ The Trivisvavet Family holds shares representing 75.00 percent, with the remainder held by other shareholders.

4/ The Trivisvavet Family holds shares representing 41.66 percent, with the remainder held by other shareholders.

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Annual Report 2008

2.

Management (1) Management Structure

Board of Directors

Organization Chart of CH. Karnchang Public Company Limited

Audit Committee

Advisor to the Board of Directors Company Secretary

Executive Board

Nomination Committee Remuneration Committee

Advisor to the Executive Board

President and Chief Executive Officer

Corporate Governance and Risk Management Committee

Legal Advisor Vice President: President Office

Vice President: Internal Audit Department

Vice President: Information Technology Office

Senior Executive Vice President: Operation Group

Executive Vice President: Construction 1

Executive Vice President: Construction 2

Executive Vice President: Engineering

CH. Karnchang Public Company Limited

Senior Executive Vice President: Administration Group

Executive Vice President: Business Development

Executive Vice President: Purchasing

Executive Vice President: Accounting and Finance

Executive Vice President: Human Resource and General Administration 011

The Company没s management structure consists of the Board of Directors and five subcommittees, namely, the Executive Board, the Audit Committee, the Nomination Committee, the Remuneration Committee, and the Corporate Governance and Risk Management Committee, including Chief Executive Officer as the top executive of the management team comprising nine persons.

The Board of Directors consists of five non-executive directors (five independent directors representing more than one-third of the total number of directors) and seven executive directors.

The names of members of such six boards or committees and executives, including authority and responsibilities of the respective committees are as follows:

A. Board of Directors 1. As at December 31, 2008, the Board of Directors consists of 12 directors as listed below (details are shown in Attachment): Names 1. Mr. Aswin Kongsiri 2. Mr. Plew Trivisvavet

3. Mr. Vitoon Tejatussanasoontorn

4. Mr. Don Pramudwinai 5. Mr. Thawansak Sukhawun

6. Mr. Pavich Tongroach 7. Mr. Narong Sangsuriya

8. Mrs. Saikasem Trivisvavet* 9. Mr. Ratn Santaannop

012

Positions Chairman of the Board of Directors Director Chairman of the Executive Board Nomination Committee Member Remuneration Committee Member Corporate Governance and Risk Management Committee Member Chief Executive Officer Director Chairman of the Audit Committee Chairman of the Nomination Committee Chairman of the Remuneration Committee Chairman of the Corporate Governance and Risk Management Committee Director Audit Committee Member Director Audit Committee Member Corporate Governance and Risk Management Committee Member Director Director Executive Director Nomination Committee Member Remuneration Committee Member Director Executive Director Director Executive Director

Category Independent Director Executive Director

Independent Director

Independent Director Independent Director

Independent Director Executive Director

Executive Director Executive Director

Annual Report 2008

Names 10.Mr. Prasert Marittanaporn 11.Mr. Sombat Kitjalaksana 12.Mr. Anukool Tuntimas

Positions Director Executive Director Director Director Executive Director

Category Executive Director Executive Director Executive Director

Remark: *Mrs. Saikasem Trivisvavet resigned from the office as director on December 18, 2008.

In the year 2008, the Board of Directorsû Meeting No. 4/2008, held on August 29, 2008, resolved to adjust the requirements relating to independent directors and Audit Committee members in accordance with the requirements set out by the Office of the Securities and Exchange Commission and the Stock Exchange of Thailand, as per the details of independent directorsû qualifications as follows: Qualifications of Independent Directors ë Holding shares of not exceeding one percent of the number of voting shares of the Company, its parent company, subsidiaries, associated companies or legal entities which may have conflict of interest, including shares held by related persons; ë Not being a director having involvement in the management/employee/staff/advisor receiving regular salary/controller of the Company, its parent company, subsidiaries, associated companies, subsidiaries at the same level or legal entities which may have conflict of interest at present and during the past two years prior to appointment; ë Having neither relationship by blood or by legal registration in the capacity as parent, spouse, sibling and offspring, including spouse of the offspring, with any executive, major shareholder, controller or person to be nominated as executive or controller of the Company or its subsidiaries; ë Having neither business relationship with the Company, its parent company, subsidiaries, associated companies, or legal entities which may have conflict of interest at present and during the past two years prior to appointment in the following manners: (1) Provision of professional services, i.e., auditor, other professional service provider receiving fee more than Baht 2 Million per year, such as, legal consultant, financial advisor, property appraiser, etc.

(2) Trading/business with a transaction value of Baht 20 Million or more or at least 3 percent of the Companyûs net tangible asset value, whichever is lower, and, in considering the transaction value, any transactions executed during the past six months prior to the date of this transaction execution shall be included. ë Not being a director appointed as representative of the Companyûs director, major shareholder or shareholder who is a related person of the Companyûs major shareholder; ë Not having any other characteristics preventing provision of independent opinions; 2. The Companyûs authorized signatory directors are two of the following four directors, namely, Mr. Plew Trivisvavet, Mrs. Saikasem Trivisvavet, Mr. Narong Sangsuriya, Mr. Prasert Marittanaporn, jointly sign and affix the Companyûs seal, or any one of the said four directors and either Mr. Ratn Santaannop or Mr. Sombat Kitjalaksana or Mr. Anukool Tuntimas, totaling two directors, jointly sign and affix the Companyûs seal.

3. Board of Directorsû Authority ë Determining policies and directions of the Companyûs operation and supervising the management to comply with the specified policies as well as taking steps to ensure that the Company has efficient and effective internal control system and the intention to continue its business operations;

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ë Performing the duties in compliance with laws, objectives and Articles of Association of the Company, as well as resolutions passed by shareholdersû meetings, taking into account the integrity and protection of the Companyûs interest; ë Being responsible for preparation of balance sheet and income statement at the close of the Companyûs accounting period to ensure that they contain accurate information and truly and fairly reflect the Companyûs status, in compliance with generally accepted accounting standards, and having said financial statements audited by the Companyûs auditor so as to submit the same to the Annual Ordinary General Meeting of Shareholders for consideration and approval; ë Focusing on the duty to disclose the Companyûs information in accordance with the Stock Exchange of Thailandûs requirements, Re: Rules and Procedures for Disclosure of Information and Acts of Listed Companies, so as to disclose to the public such information which is material and necessary to the decision to invest in securities; ë Having the authority to appoint other person to operate the Companyûs business subject to the supervision of the Board of Directors or the Managing Director or delegating to such person the authorities as the Board deems appropriate and during a certain period as the Board deems appropriate, provided that the Board of Directors may cancel, revoke or amend such authorities and that said authorization in no way allows such authorized person to approve any transactions in which such authorized person or another person may have conflict, interest or conflicts of interest in other manners with the Company or its subsidiaries. ë Considering and granting approval for capital increase, issuance of debentures, for submission to the shareholdersû meeting for further approval; ë Considering and granting approval for operating expenses in excess of the amount authorized to be approved by the Managing Director, for submission to the Board of Directorsû meeting for further approval.

The authority to take the foregoing actions shall not extend to connected transactions and such transactions relating to acquisition or disposition of significant assets of listed companies in accordance with the rules and regulations of the Stock Exchange and the Company shall comply with the Stock Exchangeûs rules, regulations and requirements governing those related matters. In addition, the foregoing authority shall not include any other matters subject to approval by the shareholdersû meeting in accordance with the Companyûs Articles of Association.

B. Executive Board 1. As at December 31, 2008, the Executive Board consists of six executive directors, namely: Names 1.

2.

3.

4.

5.

6.

Mr. Plew Trivisvavet Mr. Narong Sangsuriya Mrs. Saikasem Trivisvavet* Mr. Ratn Santaannop Mr. Prasert Marittanaporn Mr. Anukool Tuntimas

Positions Executive Board Chairman Executive Director Executive Director Executive Director Executive Director Executive Director

Remark: *Mrs. Saikasem Trivisvavet resigned from the office as executive director on December 18, 2008.

The Executive Board meets monthly for consideration of various matters within the scope of the authority assigned by the Board of Directors and for screening matters to be proposed to the Board of Directors for consideration and approval.

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Annual Report 2008

2. Executive Boardûs Authority: The Board of Directors authorizes the Executive Board to have the following authority: ë Providing policy guidelines, appointing, prescribing powers and duties, supervising, monitoring, coordinating and prescribing powers and duties of special working groups or work management groups, as well as considering and approving various proposals submitted by the management groups or the special working groups; ë Approving proposals submitted by various working groups for the purposes of managing work and conducting business in accordance with the Companyûs objectives; ë Conducting feasibility studies on new projects and having power to consider approving participation in various biddings, including operation of various projects as it deems appropriate, as well as entering into any juristic acts related thereto until completion; ë Conducting feasibility studies on investment in new projects and having power to consider granting approval for the Company to invest or jointly invest with other persons, legal entities, groups of persons in various forms for conducting business in compliance with the objectives within the amount of not exceeding Baht 3,000 Million per project, including investment in other manners, such as, purchase of shares, exchange of shares with other legal entities as it deems appropriate, as well as entering into any juristic acts related thereto until completion; ë Prescribing, considering, approving regulations, rules, work management and business operation policy guidelines or any actions binding the Company; ë Providing advice, consultation and determining policy guidelines and authorities of Chief Executive Officer and special working groups; ë Having power to approve, appoint, employ, remove, impose disciplinary action, determine salary, wages, benefits, bonus, allowances, and other remunerations, including expenses and facilities of the Companyûs officers or staff in the position of department directors or higher, including Executive Vice President, Senior Executive Vice President or equivalent or various special working groups for specific operation; ë Proceeding with other matters in accordance with the policy as assigned by the Board of Directors; ë Having power to appoint any person or group of persons to operate the Companyûs business under control of the Executive Board or authorize such person or group of persons to take any action as the Executive Board deems appropriate, and change, amend, repeal and revoke such authority; ë Having power to appoint the Chairman of the Advisory Committee or advisors or Advisory Committee for Executive Board as appropriate, and determine remuneration, allowances, benefits, facilities and other expenses of the Chairman of the Advisory Committee or advisors or the Advisory Committee as appropriate; ë The Executive Board or the Chairman of the Executive Board has power to convene the Executive Boardûs meetings and/or determine rules and regulations of the meetings as it deems appropriate; ë In the case that the Chairman of the Executive Board cannot perform duties, the Chairman of the Executive Board shall appoint a substitute to perform duties on his or her behalf on each occasion, whereby the substitute shall have authorities equal to the Chairman of the Executive Board; ë Considering and approving for authorization of executives to operate and manage business in accordance with the relevant rules, regulations and requirements; ë Having power to approve and withdraw money from all accounts of the Company, and use credits provided by all banks or financial institutions for the Company, including apply for opening accounts and/or apply for credits in various forms with all banks or financial institutions, as well as placing securities of the Company as collateral against such debts, regardless of whether or not it requires registration.

CH. Karnchang Public Company Limited

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C. Audit Committee 1. As at December 31, 2008, the Audit Committee consists of three members, namely: Names 1. Mr. Vitoon Tejatussanasoontorn* 2. Mr. Don Pramudwinai 3. Mr. Thawansak Sukhawun

Positions Audit Committee Chairman Audit Committee Member Audit Committee Member

With a three-year term of office.

Remark: *Serving as Audit Committee member with the knowledge and experience in review of the Companyûs financial statements.

The Audit Committee regularly meets at least every three months with the external auditor, internal audit, the management team and the executives who be accountable for accounting and finance for review of financial statements on a quarterly basis and reports to the Board of Directors, or in case the management team would execute any connected transactions or transactions relating to acquisition or disposition of assets, which shall take into account appropriateness, justification of such transactions and the utmost benefits of the Company, the Audit Committee Chairman may convene additional meeting. In the year 2008, the Audit Committee convened seven meetings.

2. Audit Committeeûs Authority ë Reviewing to ensure that the Companyûs financial reports are accurate and adequate; ë Reviewing to ensure that the Companyûs internal control and internal audit systems are suitable and effective, considering the independence of the internal audit unit as well as providing opinions on consideration for appointment, transfer, termination of employment of head of the internal audit unit or any other unit responsible for the internal audit; ë Reviewing to ensure the Companyûs performance in compliance with the securities and exchange law, requirements of the Stock Exchange and the laws relating to the Companyûs business; ë Considering, selecting, submitting for appointment of person who is independent to serve as the Companyûs auditor, proposing remuneration of such person as well as meeting with the auditor without the management team at least once a year; ë Considering connected transactions or transactions which may have conflict of interest in compliance with the laws and requirements of the Stock Exchange in order to ensure that such transactions are justified and of the utmost benefit to the Company; ë Preparing reports of the Audit Committee to be disclosed in the Companyûs Annual Report, whereby such reports must be signed by the Audit Committee Chairman and be comprised of at least the following information: (a) opinions on correctness, completeness, and reliability of the Companyûs financial reports; (b) opinions on adequacy of the Companyûs internal control system; (c) opinions on compliance with the securities and exchange law, requirements of the Stock Exchange or laws relating to the Companyûs business; (d) opinions on appropriateness of the auditor; (e) opinions on transactions which may have conflict of interest; (f) number of meetings of the Audit Committee and attendance of each Audit Committee member; (g) overall opinions or observations by the Audit Committee from the performance of duties in accordance with the charter; (h) other matters that should be informed to shareholders and general investors within the scope of the authority and responsibilities assigned by the Board of Directors. ë Performing any other activities as assigned by the Board of Directors of the Company and approved by the Audit Committee.

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Annual Report 2008

D. Nomination Committee The Board of Directors appointed the Nomination Committee to support in the consideration and selection of qualified persons to hold the position of the Companyûs directors, the Managing Director. As at December 31, 2008, the Nomination Committee consists of three members, namely: Names 1. Mr. Vitoon Tejatussanasoontorn 2. Mr. Plew Trivisvavet 3. Mr. Narong Sangsuriya

Positions Nomination Committee Chairman Nomination Committee Member Nomination Committee Member

With a three-year term of office.

Nomination Committeeûs Authority 1. Considering, selecting and proposing qualified persons to hold the position of the Companyûs directors to the Board of Directors so as to nominate them to the shareholdersû meeting, or proposing the nomination to the Board of Directors for appointment; 2. Considering, selecting and proposing qualified persons to hold the position of the Managing Director to the Board of Directors for appointment; 3. Proceeding with other matters as assigned by the Board of Directors.

E. Remuneration Committee The Board of Directors appointed the Remuneration Committee to support in the consideration and determination of criteria for consideration of remuneration and determine remuneration for directors and the Managing Director, and review rates of salary and other remuneration for the Managing Director. As at December 31, 2008, the Remuneration Committee consists of three members, namely: Names 1. Mr. Vitoon Tejatussanasoontorn 2. Mr. Plew Trivisvavet 3. Mr. Narong Sangsuriya

Positions Remuneration Committee Chairman Remuneration Committee Member Remuneration Committee Member

With a three-year term of office.

Remuneration Committeeûs Authority 1. Considering and determining criteria for consideration of remuneration for directors and the Managing Director; 2. Considering, determining and proposing remuneration for directors to the shareholdersû meeting for approval; 3. Considering and reviewing rates of salary and other remuneration for the Managing Director and proposing the same to the Board of Directors for approval; 4. Proceeding with other matters as assigned by the Board of Directors.

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F. Corporate Governance and Risk Management Committee The Board of Directors appointed the Corporate Governance and Risk Management Committee to supervise and monitor performance of the directors and the management to ensure compliance with the Good Corporate Governance Principles and to oversee and support the risk management to achieve success in the organizational level. As at December 31, 2008, the Corporate Governance and Risk Management Committee consists of three members, namely: Names 1. Mr. Vitoon Tejatussanasoontorn 2. Mr. Plew Trivisvavet 3. Mr. Thawansak Sukhawun

Positions Corporate Governance and Risk Management Committee Chairman Corporate Governance and Risk Management Committee Member Corporate Governance and Risk Management Committee Member

With a three-year term of office.

Corporate Governance and Risk Management Committee没s Authority Corporate Governance 1. Determining and proposing policies and directions of operations in respect of the good corporate governance of the Company, including the code of business ethics, to the Board of Directors for consideration and approval for further compliance at all levels; 2. Supervising and monitoring the business operation of the Company and performance of the Board of Directors, the management and personnel of the Company to ensure compliance with Clause 1; 3. Evaluating and reviewing policies, directions, code of ethics, and best practices or practical guidelines in respect of the good corporate governance of the Company to ensure compliance with the international practices and recommendations of various institutions, as well as proposing the same to the Board of Directors for further consideration and approval; 4. Following up on movement, tendencies, as well as comparing performance in respect of the good corporate governance of the Company with the practices of other leading companies; 5. Overseeing and supporting performance in compliance with the good corporate governance policies to ensure continual effectiveness and appropriateness to the Company没s business; 6. Giving advice to the Company, the Board of Directors, the management and working groups on the matters relating to the good corporate governance; 7. Reporting on the corporate governance of the Company to the Board of Directors on a regular basis, and immediately reporting to the Board of Directors for consideration in case there is any matter materially affecting the Company, as well as providing opinions on the practices and suggestions for improvement and resolution as appropriate; 8. Disclosing information relating to the good corporate governance of the Company to related parties and in the Annual Report, provided that it shall be always proposed to the Board of Directors for prior approval; 9. Establishing the working groups as it deems appropriate.

018

Annual Report 2008

Risk Management 1. Determining policies and scope of risk management operations of the Company, as well as giving advice to the Board of Directors and the management on risk management; 2. Overseeing and supporting the risk management to ensure successful implementation by emphasizing the significance of and taking into account risk factors in support of the decision making as appropriate; 3. Considering the Companyûs material risks in line with the Companyûs business, e.g., in terms of investment, finance, security, law, rules and regulations, by suggesting measures to prevent and minimize risks to stay at an acceptable level, as well as following up, evaluating and improving the working plans for minimizing risks on a continual basis as appropriate to the condition of the business operation; 4. Reporting risk evaluation results and operations for minimizing risks to the Board of Directors on a regular basis, and promptly reporting to the Board of Directors for consideration in case there is any matter materially affecting the Company; 5. Establishing the working groups as it deems appropriate.

G. Management Team As at December 31, 2008, the management team(1) of the Company consists of nine persons (as per details in Attachment) as listed below: Names 1.

2.

3.

4.

5.

6.

7.

8.

9.

Mr. Plew Trivisvavet Mr. Narong Sangsuriya Mrs. Saikasem Trivisvavet(2) Mr. Ratn Santaannop Mr. Viboon Mongkolpiyathana Mr. Samai Paiboon Mr. Sombat Kitjalaksana Mr. Prasert Marittanaporn Mr. Anukool Tuntimas

Remarks:

(1) (2)

Positions Chief Executive Officer Senior Executive Vice President: Operation Group Executive Vice President: Purchasing Executive Vice President: Construction 1 Executive Vice President: Construction 2 Executive Vice President: Engineering Executive Vice President: Business Development Executive Vice President: Accounting and Finance Executive Vice President: Human Resource and General Administration

The management team refers to the definition of çexecutiveé of the Office of the Securities and Exchange Commission.

Mrs. Saikasem Trivisvavet resigned from the office as Executive Vice President: Purchasing on December 18, 2008.

Managing Directorûs Authority The Managing Director shall have the authority to control and manage the Companyûs core business and monitor all businesses of the Company to ensure compliance with resolutions and policies of the Board of Directors, including their suggestions. In this regard, the Board of Directors shall evaluate the Managing Directorûs performance in comparison with the annual goals, whereby the Remuneration Committee shall consider remuneration for the Managing Director by evaluating from the performance in the past year for proposal to the Board of Directors for consideration and approval in accordance with the criteria.

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H. Company Secretary The Board of Directors appointed Mr. Vorapote Uchupaiboonvong to hold the office of the Company Secretary with duties and responsibilities as follows: 1. Providing advice to directors as to relevant legal provisions, rules, criteria, and regulations; 2. Ensuring compliance with laws, the Articles of Association, relevant regulations and the Good Corporate Governance Principles by the Company; 3. Arranging for the meetings as specified by law and the Articles of Association, preparing and keeping the minutes of the meetings as well as coordinating to ensure compliance with resolutions of the Board of Directors or resolutions of the shareholders with efficiency; 4. Ensuring disclosure of information and report on information to the regulatory units; 5. Contacting and communicating with shareholders and the related regulatory units; 6. Promoting training in various courses and providing information useful for new directors; and 7. Proceeding with other matters as assigned by the Board of Directors.

I. Structure of Subsidiariesû Directors As at December 31, 2008, the Boards of Directors of subsidiaries consist of qualified persons as listed below: ë Construction Material Supply Co., Ltd. 1. Mr. Plew Trivisvavet Chairman of the Board of Directors 2. Mr. Kamthorn Trivisvavet Director 3. Mrs. Saikasem Trivisvavet Director 4. Mr. Narong Sangsuriya Director 5. Mr. Prasert Marittanaporn Director ë CH. Karnchang Real Estate Co., Ltd. 1. Mr. Thavorn Trivisvavet Director 2. Mr. Plew Trivisvavet Director 3. Mr. Prasert Marittanaporn Director 4. Mr. Thep Trivisvavet Director 5. Mr. Yim Trivisvavet Director 6. Mr. Kamthorn Trivisvavet Director ë CH. Karnchang-Tokyu Construction Co., Ltd. 1. Mr. Plew Trivisvavet Chairman of the Board of Directors 2. Mr. Kamthorn Trivisvavet Director 3. Mr. Thep Trivisvavet Director 4. Mr. Yim Trivisvavet Director 5. Mr. Narong Sangsuriya Director 6. Mr. Prasert Marittanaporn Director 7. Mr. Masami Ichikawa Director 8. Mr. Hideo Nagashima Director 9. Mr. Naoto Okada Director 10. Mr. Kunito Sakai Director 11. Mr. Seijiro Motomura Director ë CH. Karnchang (Lao) Co., Ltd. 1. Mr. Ratn Santaannop Director

020

Annual Report 2008

(2) Nomination of Directors and Executives Board of Directors The Nomination Committee shall select qualified and appropriate persons to hold the position of directors or persons nominated for appointment as directors in advance as it deems appropriate and propose the same to the Board of Directors so as to consider nominating them to the shareholdersรป meeting or to the Board of Directorsรป meeting for appointment. In the case of appointment of directors by shareholders, the criteria and procedures are as follows: 1. Each shareholder has one vote for one share held.

2. The group election of all directors to be appointed on such occasion shall be by a single vote or if deemed appropriate by the shareholdersรป meeting, the election may be on an individual basis, the vote for any candidate by each individual shareholder, whether as individual or group election, shall reflect the number of all shares held by such shareholder at the time of the vote in accordance with Clause 1 and no shareholder shall apportion a partial vote to any specific candidate.

3. In case of an election on an individual basis, the candidates with the highest number of votes in descending order shall be elected as directors up to the number of directors to be elected or vacancies at that time. If more than one candidate has equal votes for the final vacancies, the appointment shall be made by drawing of lots.

Executive Board The Board of Directors shall appoint the Executive Board in accordance with the Companyรปs Articles of Association which provide that the Companyรปs directors may assign one or several directors to perform any activity on behalf of the Board of Directors.

Audit Committee The Board of Directors shall appoint the Audit Committee as nominated by the Nomination Committee from independent directors of the Company and at least one person thereof shall have accounting and financial knowledge, which shall have a term of office of three years. Audit Committee members who retire by rotation may be re-appointed.

Nomination Committee The Board of Directors shall appoint the Nomination Committee, which shall have a term of office of three years.

Remuneration Committee The Board of Directors shall appoint the Remuneration Committee, which shall have a term of office of three years.

Corporate Governance and Risk Management Committee The Board of Directors shall appoint the Corporate Governance and Risk Management Committee, which shall have a term of office of three years.

(3) Remuneration for Directors and Executives The Company has considered providing appropriate remuneration to directors and executives as per the criteria of determination of remuneration for directors as follows: (1) Remuneration shall be appropriate for and in line with the scope of duties and responsibilities of each director, e.g., Chairman of the Board of Directors, Chairman of each subcommittee and members of the Executive Board, the Audit Committee, the Nomination Committee, the Remuneration Committee and the Corporate Governance and Risk Management Committee, who shall receive additional remuneration for such position; (2) Remuneration shall be sufficient to attract and retain knowledgeable and qualified directors to perform duties for the Company; (3) Elements of remuneration are clear, transparent and easy to understand.

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The remuneration for executives shall be subject to the criteria as specified by the Board of Directors, namely, such remuneration is appropriate and at a sufficient level to attract and retain qualified high level executives to work for the Company, as well as at a rate comparable to companies at the same level or in the same business. In the year 2008, the remuneration of directors and executives is as follows: 3.1 Monetary Remuneration for the year ended December 31, 2008 (a) Remuneration for directors consists of remuneration and meeting allowance, allowance, bonus, bringing the total remuneration for directors in the year 2008 to Baht 13,289,000, as per the following details: Unit: Baht

Directors

Positions

1. Mr. Aswin Kongsiri

Remuneration and Meeting Allowance in 2008 Board Executive Audit Nomination Remune- Corporate Bonus of Board Committee Committee ration Governance 2007 Directors Committee and Risk Management Committee

Chairman of 850,000 the Board of Directors 2. Mr. Plew Trivisvavet Chairman of 600,000 220,000 the Executive Board 300,000 - 470,000 3. Mr. Vitoon Tejatussanasoontorn Audit Committee Chairman 4. Mr. Don Pramudwinai Audit Committee Member 280,000 - 240,000 5. Mr. Thawansak Sukhawun Audit Committee Member 300,000 - 270,000 6. Mr. Pavich Tongroach Director 300,000 7. Mr. Narong Sangsuriya Executive Director 280,000 220,000 8. Mrs. Saikasem Trivisvavet Executive Director 280,000 220,000 9. Mr. Ratn Santaannop Executive Director 300,000 220,000 10. Mr. Prasert Marittanaporn Executive Director 300,000 220,000 70,000 11. Mr. Sombat Kitjalaksana Director 280,000 12. Mr. Anukool Tuntimas Executive Director 300,000 220,000 Total 4,370,000 1,320,000 1,050,000

Total

-

-

-

675,000

1,525,000

5,000

5,000

10,000

675,000

1,515,000

22,500

22,500

45,000

675,000

1,535,000

5,000 5,000 37,500

5,000 5,000 37,500

10,000 65,000

562,000 1,082,000 562,000 1,142,000 300,000 562,000 1,072,000 562,000 1,062,000 562,000 1,082,000 562,000 1,162,000 450,000 730,000 562,000 1,082,000 6,409,000 13,289,000

(b) Remuneration for executive directors consists of remuneration, meeting allowance as well as allowance. Remuneration for executives consists of salary and bonus. The total remuneration for six executive directors and three executives in the year 2008 amounted to Baht 48,869,480.

3.2 Other Remuneration - None -

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Annual Report 2008

Increase or Decrease in Number of Shares Held by Executives in the Year 2008 Executives

Brought Forward as at January 1, 2008

Changes during the Year

Balance as at December 31, 2008

17,298,000 500,000 150,000 1,570,000 2,990,000 983,000 3,884,000 100,000

3,549,620 1,100,000 300,000 -

20,847,620 500,000 150,000 1,570,000 4,090,000 983,000 3,884,000 300,000 100,000

Mr. Aswin Kongsiri Mr. Plew Trivisvavet Mr. Vitoon Tejatussanasoontorn Mr. Don Pramudwinai Mr. Thawansak Sukhawun Mr. Pavich Tongroach Mr. Narong Sangsuriya Mrs. Saikasem Trivisvavet Mr. Ratn Santaannop Mr. Prasert Marittanaporn Mr. Sombat Kitjalaksana Mr. Anukool Tuntimas Mr. Viboon Mongkolpiyathana Mr. Samai Paiboon

(4) Corporate Governance The Companyรปs administration has been complying with the good corporate governance principles, focusing on the significance of and responsibilities towards the shareholders and the stakeholders of the Company. The Board of Directors, in recognition of the good corporate governance principles to reinforce the confidence of shareholders, investors and all related parties, has set out the corporate governance policy and scheduled to review such policy and its compliance at least once a year. The Companyรปs corporate governance policy is as follows: Corporate Governance Policy 1) Shareholdersรป Rights Promoting shareholders to exercise their basic rights and taking care of shareholders better than their rights as specified by law without any actions in violation of or depriving shareholders of their rights.

2) Equitable Treatment towards Shareholders Monitoring to ensure that all shareholders are equally treated and protected in respect of their basic rights, implementing measures to prevent inside information usage for personal gain or others, which would cause damage to shareholders as a whole.

3) Roles of Stakeholders Taking care of stakeholders based on their rights under applicable laws without any actions in violation of stakeholdersรป rights as well as establishing measures to compensate any stakeholders suffering from damage arising from violation of rights, promoting cooperation between the Company and stakeholders for the Companyรปs prosperity, financial stability and sustainability.

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4) Information Disclosure and Transparency Undertaking all activities with transparency, open for inspection, and sufficient information disclosure to all relevant parties as well as monitoring disclosure of material information relating to the Company, both financial and non-financial records, to ensure accuracy, completeness, timeliness and transparency through easy access with equality and reliability.

5) The Board of Directorsû Responsibilities Ensuring that the Board of Directors performs duties with honesty and due care to the best interest of the Company and in fairness to all shareholders under the good internal control system and appropriate risk management, including compliance with the Companyûs code of ethics.

In the year 2008, the Company has adhered to the good corporate governance principles for listed companies as stipulated by the Stock Exchange of Thailand as follows: 1. Shareholdersû Rights The Company realizes the significance of the shareholders and their rights of ownership to control the Company through appointment of the Board of Directors and their rights to make decisions on significant changes of the Company. The Company thus promotes the shareholders to exercise their protected basic rights. In this respect, the shareholders shall be informed of the Companyûs correct, complete, sufficient and up-to-date information and news, including the right to attend the shareholdersû meeting, the right to appoint proxy to attend and vote at the meeting, the right to share opinions and make inquiries in the shareholdersû meeting in order to jointly make decisions on the Companyûs important matters, e.g., profit allocation, election of directors, determination of remuneration for directors, appointment of the auditor, determination of the audit fees, and approval of important transactions which may affect the Companyûs business direction, etc. The Board of Directors clearly sets out the corporate governance policy that the Company shall promote the shareholders to exercise their basic rights without taking any actions in violation of or depriving shareholders of their rights.

The Company greatly realizes the significance of the shareholdersû meeting, i.e., the meeting place must be convenient for the shareholdersû commute, including suitable and sufficient time. The Company thus uses its office as the meeting place, which is located at No. 587 Viriyathavorn Building, Sutthisarnvinitchai Road, Dindaeng Subdistrict, Dindaeng District, Bangkok, and which is convenient for commuting, close to a subway station and an expressway on- and off-ramp, with sufficient parking areas for shareholders.

In 2008, the Company convened one shareholdersû meeting, i.e., the 2008 Annual Ordinary General Meeting of Shareholders on April 30, 2008 at the Conference Room on 4th Floor, No. 587, Viriyathavorn Building, Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok. The notice of the meeting, together with information in support of each agenda item, along with opinions of the Board of Directors, proxy as required by law, clarification, method of proxy, profiles of directors due to retire by rotation, the Companyûs Articles of Association regarding the shareholdersû meeting, details of independent directors, and procedures for attendance of the shareholdersû meeting, as well as route map of the meeting place, was sent in advance to the shareholders 14 days prior to the meeting date, and advertised in a newspaper for three consecutive days prior to the meeting date. Moreover, the Company also posted the notice of the meeting, together with details of each agenda item on the Companyûs website in advance one month prior to the meeting date for the shareholders to have time to consider details of each agenda item. As for those shareholders unable to attend the meeting in person, the Company suggested them authorizing the Audit Committee Chairman or an Audit Committee member or another person to attend the meeting and vote on their behalf.

On the meeting date, the shareholders can register to attend the meeting at least one hour prior to the meeting time.

The Company arranged for staff to facilitate the meeting registration for shareholders and proxies, and used the barcode system in the convenient and rapid registration of the meeting and vote counting. Refreshments and duty stamps were provided, free of charge, to the shareholders and their proxies who attended the meeting on their behalf.

The Board of Directors realizes the significance of their attendance of the shareholdersû meeting for answering questions and taking suggestions of the shareholders into consideration. In 2008, all 12 directors attended the said meeting, including the chairmen and all subcommittees, the Managing Director and the management team of the Company.

024

Annual Report 2008

The shareholdersû meeting proceeded in accordance with the order of the agenda as specified in the notice of the meeting sent in advance to the shareholders, and the shareholders were allowed to express their opinions and make inquiries in each agenda item. Before starting the meeting, the chairman of the meeting clearly informed the shareholders of the voting method and the shareholdersû rights as follows: 1. One share represents one vote. For agenda items requiring resolutions, such resolutions shall be passed by the majority of votes. Agenda item for acknowledgment shall not require any resolution. As for agenda item for determination of remuneration for directors, resolution shall be passed by votes of not less than two-thirds of the total number of votes of the shareholders present at the meeting.

2. In case that shareholders have appointed their proxies and voted on various matters, the Companyûs staff would collect and record such votes in the computer, and the Companyûs legal advisor would check the vote casting to ensure the transparency and compliance with the laws and regulations. Proxies would not be required to vote again in the meeting unless the information on such agenda item would change. Any shareholders intending to change their votes shall request the voting cards from the Companyûs staff.

3. The shareholders attending the meeting in person and intending to vote against or abstain from voting shall use the voting cards as provided by the Companyûs staff.

4. The shareholders who attend the meeting after the meeting was already called to order shall be allowed to exercise their rights to vote or vote on such agenda item which is currently pending the consideration and resolution has not yet been passed.

In regard to the minutes of the shareholdersû meeting, the Company has clearly recorded the list of directors attending the meeting, material clarifications, questions and answers or opinions in brief, the resolutions of the meeting with the voting results, divided into agree, disagree or abstain, which shall be available in Thai and English languages on the Companyûs website: www.ch-karnchang.co.th within 14 days from the shareholdersû meeting date. The shareholders shall then have convenient access to such information and news instead of until the next shareholdersû meeting. Thereafter, the said minutes would be proposed to the shareholders for approval in the next meeting.

2. Equitable Treatment towards Shareholders The Company has a policy to promote and ensure equal and fair treatment towards all shareholders, including minority and foreign shareholders, with the following measures for protection of the shareholdersû basic rights: 1. Shareholders may propose any agenda item of the Ordinary General Meeting of Shareholders and nominate qualified persons to be appointed as directors for the Companyûs Annual Ordinary General Meeting of Shareholders prior to the meeting date, as published on the Stock Exchange of Thailandûs website, subject to the criteria for consideration as posted on the Companyûs website. The Board of Directors will consider the appropriateness to include or not include such agenda item proposed by the shareholders. As for the nominated persons to be appointed as directors, the management will propose the same to the Nomination Committee for further consideration and submission to the Board of Directors and the shareholdersû meeting.

2. The shareholdersû meeting shall proceed in accordance with the order of the agenda as specified in the notice of the meeting, and no additional agenda item would be considered at the meeting without prior notice to the shareholders. This is to ensure that the shareholders have opportunity to study information in support of consideration of each agenda item.

3. Any shareholder unable to attend the meeting in person may vote by proxy. In this regard, at least two independent directors are nominated for proxy appointment. Proxy form is in accordance with the form as set out by the Ministry of Commerce, in which each shareholder may direct his/her voting decisions. This is to encourage the shareholders to exercise their rights to attend the meeting and vote on each agenda item. In this regard, the proxy form is enclosed with the notice of the shareholdersû meeting, clearly listing the documents and evidence required for proxy appointment, along with instructions as to the proxy procedures for the shareholders to make proper arrangements without any complication.

CH. Karnchang Public Company Limited

025

4. Voting cards shall be provided for every agenda item for the shareholders to vote as they consider appropriate.

The Company uses the barcode system to record and display the voting results, and arranges for its staff to collect voting cards in the meeting room. To ensure transparency, the Company also has its legal advisor oversee the counting of votes.

5. As for the appointment of directors in replacement of the retired directors, the shareholders may exercise the right to appoint any director individually.

6. The Company has set out the guidelines on confidentiality of information and measures to prevent directors and executives from using inside information for personal gain. All directors and executives are well informed of the roles and duties to report their own securities holding, and on the Company没s securities holding by spouses or minor children; and to report every change in such securities holding from purchase, sale, transfer or acceptance of transfer of securities, to the Securities and Exchange Commission in accordance with Section 59 of the Securities and Exchange Act B.E. 2535 (1992) within three business days from the date of purchase, sale, transfer or acceptance of transfer of securities, whereby the Company gives prior notice thereof in every meeting of the Board of Directors and the Executive Board. Moreover, directors and executives have also been informed of their duties and responsibilities, including penalties under the Securities and Exchange Act B.E. 2535 (1992). In addition, the Company prohibits executives who have access to inside information from taking any actions contrary to Section 241 of such Act, including relevant rules and regulations.

7. The information on the Company没s connected transactions and opinions of the Board of Directors regarding such transactions shall be disclosed to the shareholders, and no connected transactions shall be executed in violation of or against the rules of the Stock Exchange of Thailand and/or the Office of the Securities and Exchange Commission. Moreover, the Company discloses the connected transactions in the Annual Report.

3. Roles of Stakeholders The Company realizes the significance of rights of all groups of stakeholders, whether inside, such as staff and executives of the Company and the subsidiaries, or outside, such as customers, traders, competitors, creditors, communities, society, public sector and other relevant authorities, to ensure that the basic rights of these stakeholders are well protected and taken care of under the provisions of the laws and other relevant rules and regulations. The Company recognizes support from these stakeholders which could help building up the Company没s competitiveness and profitability to result in long-term success for the Company. The Company没s Board of Directors has set out the corporate governance policy that the Company shall take care of the stakeholders based on their rights under the relevant laws, shall not take any acts in violation of the rights of stakeholders, and shall establish measures to compensate any stakeholders suffering from damage arising from violation of rights.

In addition, the Company also realizes the significance of communication with all groups of stakeholders to exchange information, as well as listening to opinions and suggestions of all groups of stakeholders for common interest. In case where any stakeholders are not fairly treated by the Company, they may file complaints directly with the Company at President Office, Telephone 0-2275-0026 ext.1615 or e-mail: president_office@ch-karnchang.co.th

026

Annual Report 2008

In the year 2008, the Company has taken care of the rights of all groups of stakeholders, both inside and outside the Company, as follows: Shareholders:

- The Company has performed duties with integrity, honesty and fairness, taking into account both major and minor shareholders, and for the benefit of the group of related persons as a whole; - The Company has managed its business to ensure prosperity, stability and good return for the shareholders; - The Company has protected its assets from depreciation or unnecessary loss; - The Company has, regularly and in a timely manner, disclosed the accurate and sufficient information, both financial and non-financial, relating to the Companyûs business and the operational results, and representing the Companyûs actual operational and financial status;

Traders and/or Creditors/Debtors: - Every trader and/or creditor/debtor has been equally and fairly treated by the Company, taking into account the Companyûs optimum benefit and based on the fair returns for both parties; - The Company has avoided the situation which causes a conflict of interest, as well as complying with the contractual obligations; - The Company has provided actual information and accurate report. The negotiation for problem resolution is based on the business relation; Customers:

- The Company maintains the optimism and gives priority to customers, treats customers willingly, actively, politely, keeps customersû confidential information from misuse for personal gain or others, as well as treating all customers equally without discrimination;

Competitors:

- The Company has free trading policy and believes that competition is a positive factor to encourage the development of service standard and innovations to be offered to customers; - The Company has complied with the fair competition framework; - The Company in no way discredits any trading competitorûs reputation by negative accusation without actual information; - The Company in no way accesses any competitorûs confidential information through any dishonest or other inappropriate methods;

Business interested parties:

- The Company has clearly determined policies and procedures for approval of connected transactions to prevent any potential conflicts of interest;

Staff:

- The Company truly realizes the significance of its staff, and to meet its objectives, the Company recruits and employs knowledgeable, capable and experienced personnel to perform works, and in response to the Companyûs requirements and growth, by continually organizing programs for development of staff knowledge and capacities to advance their skills; - The Company has equally and fairly treated its staff through proper and fair remuneration and welfare, such as, establishment of a provident fund, medical treatment packages in hospitals designated by the Company, and loans for staff;

CH. Karnchang Public Company Limited

027

- The Company truly realizes the significance of personnel development by establishing clear internal personnel development plans, encouraging all levels of its staff up to high ranking executives to receive training for improvement of their knowledge and capacities, both in theory and practice, so as to ensure the efficient performance skills, including fair employment conditions suitable for the market and in compliance with the labor laws; Society and Public:

- The Company has taken into account the public interest and refrained from taking any acts which may cause damage to the countryûs reputation, natural resources, environment and public interest; - The Company has promoted and instilled into its staff at all levels the corporate social responsibility; - The Company in no way facilitates, supports or allows to be instrumental in any avoidance of compliance with the law;

Communities:

- The Company has considered communities as part to be concerned and facilitated, and thus focuses on various activities for improvement of the quality of life and environment as its contribution to society;

Environment:

- The Company has developed and improved the environmental management system in all activities of the Company to continuously minimize pollution and impact on the environment, with clear objectives, goals, action plans and evaluation; - The Company has promoted the environment preservation, as well as publicizing the information and news, and cooperated with the staff, customers, government agencies and private entities, including the public, as a gesture of the Companyûs image and awareness of the environmental management; - The Company has rapidly and efficiently responded to any events giving rise to impact on the environment and communities caused by the Companyûs operation.

4. Information Disclosure and Transparency 1. The Board of Directors establishes the policy that the Company shall undertake activities with transparency and open for inspection with sufficient information disclosure to all relevant parties as well as monitoring to ensure disclosure of correct, complete, timely and reliable information, and everyone can easily access to such information on an equal basis.

In disclosing the Companyûs significant information, other than by way of dissemination under the specified criteria via the Stock Exchangeûs channels, the Company also disseminates such information on the Companyûs website, both Thai and English, such as, Annual Report, Annual Registration Statement (Form 56-1), Corporate Governance Policy, the Companyûs information, and public relations news. The Company regularly updates the website for up-to-date information and news for the convenience and to the best interest of users.

2. In respect of investor relations, the Board of Directors is well aware of the significance of accurate, complete, transparent, thorough and timely disclosure of information relating to the Company. Therefore, the Company has set up an Investor Relations unit to be responsible for disclosure of information to shareholders and investors, both financial and non-financial, such as, financial report, operational results, financial ratio, dividend history and other information which may impact the Companyûs securities value. Such information and news in support of their decision making are published for investors and relevant parties through various channels and media of the Stock Exchange of Thailand, the Office of the Securities and Exchange Commission, including the Companyûs website at http:/ /www.ch-karnchang.co.th in both Thai and English languages.

Those interested to receive information in support of investment may contact Khun Rakchanok Trivisvavet at Investor Relations, Telephone 0-2275-0026 ext. 1617-1619.

028

Annual Report 2008

3. The Company discloses its financial information and reports the responsibilities of the Board of Directors towards the financial report, together with the auditorûs report, the management discussion and analysis, general information and significant information in the Annual Report correctly and in a timely manner in accordance with the regulations of the Office of the Securities and Exchange Commission.

4. The Company discloses the roles and duties of the Board and various subcommittees, number of meetings and attendances of each director in the year 2008.

5. In regard to the policy on payment of remuneration for directors and executives, the Company establishes clear and transparent policy on remuneration for directors and executives, subject to review by the Remuneration Committee. The remuneration shall be at the same level as that in the same industry and sufficient to retain the qualified directors and the Managing Director, and remuneration for executives, excluding the Managing Director, shall be in accordance with the principles and policies determined by the Executive Board corresponding to the Companyûs operational results and performance of the executives, as per the details of Remuneration for Directors and Executives on pages 21 to 22.

5. The Board of Directorsû Responsibilities 5.1 The Board of Directorsû Structure The structure of the Board of Directors consists of 12 qualified members, comprising: seven executive directors and five independent directors, as a counterbalance by the non-executive directors. Five independent directors of the Company represent one-third of all directors. The Chairman of the Board of Directors is an independent director by the definition of the Office of the Securities and Exchange Commission and has no relationship with the management and is not the Managing Director, so as to separate the policy making and supervisory duty from the regular managerial duty.

The Board of Directors has not yet determined the policy on holding the position of director in other companies since, after considering the matter, it deems that all directors of the Company devote their time to regularly attend meetings and provide useful suggestions to the Company. Furthermore, the Board of Directors also appointed the Company Secretary in accordance with the guidelines for the good corporate governance principles to perform the duty to provide suggestions relating to various laws and regulations as required by the Board of Directors and to supervise activities of the Board of Directors as well as coordinating to ensure performance in compliance with the Board of Directorsû resolutions.

5.2 Subcommittees The Company has established five subcommittees to closely monitor and supervise the operation and regularly report to the Board of Directors, namely, the Executive Board, the Audit Committee, the Nomination Committee, the Remuneration Committee, and the Corporate Governance and Risk Management Committee. In this regard, the Board of Directors has determined duties and responsibilities of each subcommittee as detailed on pages 14 to 19.

5.3 Role, Duties and Responsibilities of the Board of Directors 1. The Board of Directors comprises personnel having knowledge, ability, skills and experiences in various fields to exercise their judgment independently with leadership, who determine vision, missions, strategies, goals, business plan and budget of the Company, and supervise the management to take actions in compliance with the business plans and forecast budget with efficiency and effectiveness so as to optimize the economic value to the business, including monitoring the operational results to meet the objectives and comply with the policies, rules, laws and other relevant regulations.

2. The Board of Directors has established written corporate governance policy which has already been approved and subject to review at least once a year.

3. The Company has prepared its code of business ethics since the year 2003, with the approval by the Board of Directors. The code of business ethics contains proper conduct and practices for directors, executives and staff, and guidelines for conduct and treatment towards the Company, colleagues, third parties and society, in accordance with the ethics. In the past, all directors, executives and staff have been informed and well understood of the proper and ethical conduct and complied with such practices in the performance of their duties in line with the Companyûs mission, with honesty, integrity and equality, to build up confidence of shareholders and all groups of stakeholders, including the public and society.

CH. Karnchang Public Company Limited

029

4. Conflict of Interest The Board of Directors has considered the transactions which may have conflict of interest or connected transactions or related party transactions properly under the good ethics subject to review by the Audit Committee to ensure compliance with the rules of the Stock Exchange of Thailand and the Office of the Securities and Exchange Commission, as well as the disclosure of information on the execution of such transactions which may have conflict of interest to the public. In this regard, the Company has established the policy, rules and regulations, and procedures for approval of the transactions which may have conflict of interest for the executives, staff and the relevant persons for compliance with the significant principles, as follows: 4.1 Compliance with the rules set out by the Stock Exchange of Thailand in the execution of connected transactions to propose the connected transactions to the Audit Committee for consideration and approval prior to seeking approval of the Board of Directors under the good corporate governance principles.

4.2 Disclosure of information on the transactions which may have conflict of interest or connected transactions or related party transactions pursuant to the rules set out by the Office of the Securities and Exchange Commission/the Stock Exchange of Thailand, by disclosing in the Annual Registration Statement (Form 56-1) and the Annual Report, as well as disclosing the information of such transactions in the financial statements in accordance with the accounting standard.

4.3 In the consideration of the execution of the transactions which may have conflict of interest, the interested directors shall not attend the meeting nor vote on such agenda.

5. Policy on Risk Management The Board of Directors greatly realizes the significance of the risk management. The Board of Directors appointed the Corporate Governance and Risk Management Committee on December 7, 2007. The Company has determined and assessed its business risks, and measures to prevent and manage such risks.

Risk Management Policy 1. The Board of Directors, all executives, staff and units own the risks and have the duties to be responsible for, assess, follow up, and support the risk management process with efficiency.

2. All units of the Company shall have the risk management process, as well as having the systematic and continuous assessment and follow-up, subject to regular review at least once a year in line with changes in business sector.

3. The risk assessment shall be determined as part of the annual work plan of all units, by considering all risks of the entire organization, taking into account such risk factors, both inside and outside the organization, including proper risk management.

4. The Corporate Governance and Risk Management Committee has the duties to assess the risk management and propose its opinion to the Board of Directors.

5. The organization culture will focus on common understanding and awareness of risks. The body of knowledge shall be established for staff at all levels to have access for study and research and sharing of experiences, which would pave the way for development and improvement of the risk management process to become an efficient mechanism in the strategic administration.

In addition, the Company没s code of business ethics shall be regularly reviewed. Should the proper conduct and practices in the Company没s code of business ethics not cover its business operation, the Company will immediately make revisions as appropriate. The Company has continuously supported training on corporate governance to high and middle level executives, so as to enhance their knowledge, understanding, visions, good attitudes towards the Company没s management in compliance with the good corporate governance principles to build leadership and succession to the management.

030

Annual Report 2008

The Board of Directors and executives adhere to the guidelines for the good corporate governance principles by regularly improving their conduct and practices towards stakeholders to ensure compliance with such guidelines, e.g., independence of the Board of Directors, giving priority to shareholders to the extent that the Company was awarded a çVery Goodé rating of the ordinary general meeting of shareholders by the Office of the Securities and Exchange Commission in association with the Listed Companies Association and the Thai Investors Association. Furthermore, all staff also share the corporate social responsibility by participating in the mangrove forestation project to honor His Majesty the King in the celebration of His Majesty the Kingûs 80th birthday at the Mangrove Forest Resources Development Station 2 (Chanthaburi Province) and participating in social activity at Ban Bang Khae Social Welfare Development Center for the Elderly (Ban Bang Khae 1).

5.4 The Board of Directorsû Meetings The Company schedules the Board of Directorsû meetings in advance for directors to manage their time to attend the meetings, except for special agenda, the Chairman of the Board of Directors or the directors in the number specified by law may convene additional meetings as necessary. The Board of Directors regularly meets every three months. The President Office shall deliver the notice of the meeting, together with agenda and supporting documents, at least seven days prior to the meeting date for the Boardûs review prior to attending each meeting.

The agenda shall be determined by mutual discussion between the Chairman of the Board of Directors and the Managing Director. In the year 2008, the Board of Directors convened five meetings. Most of the directors were able to attend the meetings, except where they were engaged by urgent business. In every meeting, the Chairman of the Board of Directors shall serve as the chairman of the meeting to ensure each item shall be carefully considered and all directors shall be allowed to express their opinions and take part in discussions. In addition, the high level executives will attend the meeting to clarify the information in the capacity as persons directly relevant to the problems to the satisfaction prior to voting on each item. Furthermore, the minutes of the meetings are recorded in writing and systematically kept for inspection.

Meeting attendance of each director (attendances/total number of meetings) shall be summarized as follows: Directors

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

Mr. Aswin Kongsiri Mr. Plew Trivisvavet Mr. Vitoon Tejatussanasoontorn Mr. Don Pramudwinai* Mr. Thawansak Sukhawun Mr. Pavich Tongroach Mr. Narong Sangsuriya Mrs. Saikasem Trivisvavet Mr. Ratn Santaannop Mr. Prasert Marittanaporn Mr. Sombat Kitjalaksana Mr. Anukool Tuntimas

Remarks

Board of Directors

5/5 5/5 5/5 1/5 5/5 5/5 4/5 4/4 5/5 5/5 4/5 5/5

Executive Board

Audit Committee

15/15 7/7 1/7 7/7 15/15 15/15 15/15 15/15

Nomination Remuneration Corporate Committee Committee Governance and Risk Management Committee

2/2 2/2

1/1 1/1

1/1 1/1 1/1

2/2

1/1

15/15

* Mr. Don Pramudwinai attended three meetings of the Board of Directors via video-conference and attended two Audit Committeeûs meeting via video-conference.

CH. Karnchang Public Company Limited

031

5.5 Self-Evaluation of the Board of Directors The Company has a policy for the Board of Directors to evaluate its overall performance at least once a year. In the year 2008, the Company Secretary delivered the performance evaluation form to each director for evaluating the overall performance of the Board of Directors so as to use the evaluation results for improvement of the Board of Directorsû performance.

In this regard, the evaluation results, divided into six subjects, namely, structure and qualifications of the Board of Directors; roles, duties and responsibilities of the Board of Directors; the Board of Directorsû meetings, directorsû performance of duties; relations with the management; and self-development of directors and development of executives, are summarized as follows: 1. Structure and Qualifications of the Board of Directors Most directors are of the view that the structure and qualifications of the Board of Directors are proper, namely, there are 12 directors, comprising five non-executive directors (five independent directors or more than one-third of all directors) and seven executive directors which are suitable to the nature of business operations of the Company. The Board of Directors comprises personnel with sufficient knowledge, ability and experiences in a variety of fields and performed their overall duties efficiently. In this regard, the Board of Directors appointed another five subcommittees, namely, 1. the Audit Committee with the duty to help supervise and monitor the business as well as considering the appropriateness and justifications of various transactions for the optimum benefit of the Company; 2. the Nomination Committee with the duty to consider criteria and procedures for nomination of qualified persons to be appointed as the Companyûs directors based on transparency, fairness, without influence of any persons; 3. the Remuneration Committee with the duty to consider determining criteria for consideration of remuneration for directors and the Managing Director; 4. the Corporate Governance and Risk Management Committee with the duty to establish policies and directions of operations in respect of the good corporate governance of the Company; and 5. the Executive Board with the duty to administer and advise to the executives and the other procedures as assigned by the Board of Directors.

2. Roles, Duties and Responsibilities of the Board of Directors Most directors are of the view that the roles, duties and responsibilities of the Board of Directors are proper, namely, the Board of Directors gives priority and contributes sufficient time to consider significant matters relating to directions of the Companyûs business operations, review the good corporate governance policy of the Company, as well as ensuring compliance with various policies, review of the code of business ethics, together with monitoring to ensure no conflict of interest. The Board of Directors also follows the procedures by taking into account the optimum benefit of the Company. Furthermore, the Board of Directors regularly reviews the internal control system to ensure good and sufficient internal control system and appropriate risk management, as well as following up and monitoring the performance of duties of the management in accordance with the policies as assigned by the Board of Directors.

3. The Board of Directorsû Meetings Most directors are of the view that the Board of Directorsû meetings are proper, namely, the Company gives prior notice of annual schedule of the meetings to directors so that they would be able to manage their time to attend every meeting.

The number of meetings and agenda are suitable, thereby supporting the Board of Directors to perform duties efficiently and be able to supervise and monitor the Companyûs business operations with success. Moreover, directors also receive supporting documents prior to each meeting and have sufficient time to study additional information in preparation for each meeting. The supporting documents contain sufficient information for decision making to the benefit of the Company. Furthermore, the atmosphere at each Board of Directorsû meeting allows all directors to express constructive opinions without any influence of any persons. In addition, directors could fully discuss significant issues at each meeting.

4. Directorsû Performance of Duties Most directors are of the view that directorsû performance of duties is satisfactory, namely, they are well prepared and sufficiently study information prior to each meeting and regularly attend the meetings. In addition, directors independently provide their opinions and impartially consider various matters and are independent on voting, including useful suggestions for the Companyûs operations; and understand the significance of each matter and properly contribute their time to consider such matter.

032

Annual Report 2008

5. Relations with the Management Most directors are of the view that the relations with the management are proper. Directors could straightforwardly discuss with the Managing Director and maintain good relations with the management, whereby the Managing Director could request directorsû advice as necessary and the Board of Directors does not intervene in performance of duties of the management.

Moreover, the Board of Directors also participates in solving problems as appropriate in case the managementûs performance of duties does not meet the operational plans and forecast budget.

6. Self-Development of Directors and Development of Executives Most directors are of the view that the self-development of directors and development of executives are satisfactory, namely, directors understand their roles, duties and responsibilities, have sufficient knowledge and understanding of the Companyûs business, pay attention to significant information or news relating to economic and industrial conditions, changes in rules and regulations and the state of competition, which would allow directors to efficiently perform their duties. In this regard, all directors are trained to ensure their understanding of performance of duties in the capacity of directors. Furthermore, in case of new directors, the Board of Directors would have the management provide documents or briefing for the new directors to understand the business and performance of duties as directors. In addition, the Board of Directors also sets out the succession plan to ensure continuity of performance of duties of the Companyûs high level executives.

The Corporate Governance and Risk Management Committee adopts the self-evaluation results of the Board of Directors for proposing the practice and guidelines of the Board of Directors in compliance with the good corporate governance principles to the Board of Directors for consideration as appropriate.

5.6 Remuneration for Directors and Executives Remuneration for directors: The Company establishes clear and transparent policy on remuneration for directors and the Managing Director, subject to review by the Remuneration Committee. The remuneration shall be at the same level as that in the same industry and sufficient to retain the qualified directors and the Managing Director.

Remuneration for executives:

Remuneration for executives shall be in accordance with the principles and policies determined by the Board of Directors corresponding to the Companyûs operational results and performance of the executives.

5.7 Development of Directors and Executives - Training for Directors and Executives The Board of Directors and the high level executives realize the significance of participation in training or seminars in various courses or development of their knowledge and skills. The Board of Directors attends training courses organized by the Thai Institute of Directors Association (IOD), namely, Director Certification Program (DCP) and Directors Accreditation Program (DAP). In this regard, the Company also continues to coordinate with IOD to send its directors to participate in various training courses as provided

by IOD. - Orientation for New Directors The Company also arranges for orientation for newly-appointed directors, whereby the Board of Directors assigns the Company Secretary to meet newly-appointed directors by convening a meeting with the relevant directors and/or executives and/or officers for clarification and answer to questions, as well as preparing documents and briefing for new directors, such as, information relating to the Company, listed company directorûs handbook, the good corporate governance principles, code of ethics, power and duties of the Board of Directors, the annual schedule of the Board of Directorsû meetings.

CH. Karnchang Public Company Limited

033

5.8 Succession Plan The Board of Directors sets out succession plan in the executive level and in the primary line, by significantly taking into account the performance and potentials of each person. In this regard, the Company makes preparations for those potential successors in the development of their knowledge, competency and skills as required for their work positions.

(5) Control of Inside Information Usage The Company introduces measures requiring executives to report their securities holding on every purchase/sale/transfer of securities to the Office of the Securities and Exchange Commission. Executives are reminded at every meeting of the Board of Directors of such measures and also required to sign their names in the acknowledgment of such obligations and responsibilities for report on securities holding. The Company also has an information disclosure policy in line with the guidelines set forth by the Stock Exchange of Thailand. In this respect, the Company shall disclose such information necessary to the decision of the public. Such information must be accurate, sufficient and made available in a timely manner. In addition, the Company shall endeavor to ensure that all investors in the Company没s securities shall equally obtain such information. The Company also maintains good inside information control system. As for information having impact or effect on prices, such information is sensitive or confidential and shall be subject to measures to prevent improper usage of inside information. For example, only high ranking executives would be granted access to such information and disclosure of such information to staff of the Company shall be made on a need to know basis. Staff who has such access shall be reminded that such information is confidential and subject to restrictions on usage as well as prohibition from purchase or sale of the Company没s securities in reliance upon such information. Should any staff violate or fail to comply with such requirements, the Company shall impose disciplinary actions starting from written warning, wage cut, work suspension without pay or dismissal, depending upon the severity of such violation.

(6) Internal Control The Board of Directors continuously realizes the significance of the internal control system to prevent and minimize the risk which may arise, by assigning the Audit Committee comprising independent directors to review the evaluation of the internal control system. The Internal Audit Department shall report directly to the Audit Committee and review the operation systems in various departments of the Company in accordance with the annual audit plan as approved by the Audit Committee, for the purpose of ensuring that the work performance is efficient and effective, that the Company没s resources are used cost-efficiently, that the financial reporting is properly controlled to ensure correctness, reliability and timeliness, that it complies with the policy in accordance with the provisions of the laws and the official regulations, and that the efficiency of the internal control system is regularly reviewed, to ensure the best interest of the shareholders on the basis of fair returns to all stakeholders. In addition, the Audit Committee also has the duty to consider disclosing the Company没s correct and complete information in case of connected transactions and transactions which may have conflict of interest.

The Company recognizes the significance of the risk management, by assigning the Corporate Governance and Risk Management Committee to consider the risk factors currently being encountered or expected to be encountered by the Company, to analyze the impact and the possibility of such risks and then establish measures to prevent and manage such risks. The risk management system shall be reviewed and evaluated for its effectiveness every year and every interval in which the risk level has changed, subject to regular monitoring.

034

Annual Report 2008

In the year 2008, the Board of Directors and the Audit Committee have evaluated the adequacy and suitability of the Companyûs internal control system as per the internal control adequacy evaluation form, comprising five elements, namely, organization and environment; risk management; operational control of the management; information technology and communications system; and monitoring system, together with the audit results by the Internal Audit Department. They are of the opinion that the Companyûs internal control system is adequate and suitable to the business operation without any material fault, which would prevent the Companyûs and the subsidiariesû assets from misuse or unauthorized use by the executives. The Companyûs financial reports have been prepared in accordance with the generally accepted accounting principles. The information disclosed in the financial reports is correct and reliable. The Company operates its business in compliance with the securities and exchange law and other relevant laws.

3.

Policy on Dividend Payment

The Company has the policy on dividend payment for the shareholders at the rate expected to be paid at least 40 percent of net profit after tax for each year, which shall be payable in the following year should there be no any other necessary grounds and such dividend payment not materially affect the Companyûs normal operations.

As for the subsidiaries, joint ventures and associated companies of the Company, the policy on dividend payment has not yet been set out.

CH. Karnchang Public Company Limited

035

Nature of Business Operations

1.

Summary of Nature of Business Operations of the Company and Subsidiaries

CH. Karnchang Public Company Limited was incorporated as a limited company on November 27, 1972 to engage in general construction business. Initially, the Companyís scope of work covered construction of buildings and general civil works and its major clients were government agencies, such as, the Royal Thai Army and the Royal Thai Air Force. The achievements bringing reputation to the Company in the initial period included, for example, various buildings, hospitals and public utilities for the Royal Thai Army and the television station building for the Mass Communication Organization of Thailand (MCOT).

Subsequently, the Company realized the need to enlarge the scope of its business operations for long-term prosperity. In this respect, in the year 1981, the Company entered into a joint venture with Tokyu Construction Co., Ltd., one of Japanís top ten construction contractors, for the purpose of acceptance of technology transfer and business alliance.

Since the year 1994, the Company was converted into a public company and listed on the Stock Exchange of Thailand, at which time the Company has been rapidly growing and improving its capabilities and potential by both work management and development of human resources, as well as construction technology development through its joint ventures with foreign companies which possess expertise, to improve the Companyûs work potential for more efficiency. This enabled the Company to expand its scope of capabilities to engage in various construction works to the point at which the Company became one of a few construction contractors which were sufficiently well-prepared to carry out sophisticated construction requiring advanced construction technology, such as, large scale infrastructure projects. In addition to the contracts for normal large scale infrastructure projects, the Company also developed its capabilities in terms of both engineering and management, allowing the Company to operate construction projects on a design and construction basis, i.e., the so-called turnkey, including investments in concession projects on a build-transfer-operate (BTO), build-operate-transfer (BOT), build-own-operate (BOO) and acquire-operate-transfer (AOT) basis, as well as other small, medium and large scale projects. Among these outstanding and successful projects were, for example, the Bang Na - Chon Buri Expressway Construction Project; the Development Project for Enhancement of the Capabilities of the Bangkok International Airport; the Park and Ride Building Construction Project for Bangkok Metro Public Company Limited; the Bang Pli - Suksawad (Bang Pli - Bang Khun Thien) Expressway Project; Concession Projects for Water Production and Distribution for the Provincial Waterworks Authority in Nakhon Pathom, Samut Sakhon and Pathum Thani Provinces; the MRTA Initial System Project, Chaloem Ratchamongkhon Line; and the Concession Project for Electricity Generation and Distribution for the Electricity Generating Authority of Thailand.

036

Annual Report 2008

2.

Revenue Structure Unit :Million Baht Products

Operated By

2006 holding of Revenues % % Share

2007 Revenues %

2008 Revenues %

the Company

Revenue from Construction

CH. Karnchang Plc. CH. Karnchang (Lao) Co., Ltd. CH. Karnchang-Tokyu Construction Co., Ltd. Phrompratharn Construction Limited Partnership Joint Venture CKLX Joint Venture CKNNL (3)

100.00 55.00

13,814.63 3,442.47 1,134.43

6,973.43 5,350.16 962.99

46.74 35.86 6.46

4,890.95 5,162.52 1,631.00

33.71 35.58 11.24

68.45

0.46

340.68

2.35

65.89 2.44 19.51 87.56 13,440.43 0.33 86.16

0.44 0.13 90.09 0.58

1,109.60 14.27 13,149.02 47.18

7.65 0.10 90.63 0.33

0.34

0.00

3.57

0.02

0.90 86.50 1.67 462.11 0.76 125.43 9.11 803.60 100.00 14,918.07

0.58 3.10 0.84 5.39 100.00

50.75 255.16 138.64 917.00 14,510.57

0.35 1.76 0.96 6.30 100.00

-

99.99

527.19 18,918.72 70.59

-

123.36

Total Revenue from Sales of Construction Materials Interest Income Dividend Income and Profit Sharing from Jointly Controlled Entities Other Income (2) TOTAL

193.95 361.38 163.64 1,967.59 21,605.28

Total Revenue from Construction Revenue from Sales of Construction Material Supply Construction Materials Co., Ltd. Bangkok Concrete Industry Co., Ltd. (4)

63.94 15.93 5.25

75.00 51.89

0.57

Remarks: 1) The figures of revenue from the respective companies as indicated in the foregoing table have been net of connected transactions.

2) Other income comprises gain on disposal of property, gain on sales of investments, gain on exchange rate, miscellaneous income, reversal of provision for doubtful debts, reversal of provision for impairment of assets, reversal of interest payable, miscelleneous income, etc.

3) As at December 31, 2006, the Company held shares in joint ventures representing 51.32 percent.

4) As at December 31, 2006 and 2007, the Company held shares in Bangkok Concrete Industry Co., Ltd. representing 49.99 percent, and on December 25, 2007 the Company sold all such shares to other company.

3.

Summary of Significant Changes over the Previous Year in the Nature of Business Operations

There is no significant change over the previous year. The industrial trend in the future will continue to slow down due to the overall ongoing economic problems. Howover, the government has managed to cause the economy to improve gradually and imposed measures providing assistance to those business operators encountering difficulty, which would likely reder the construction industry to become more promising.

CH. Karnchang Public Company Limited

037

Stability through the Strong CH. Karnchang Group Companies

038

Unifying the strength to achieve long-term stability... with our basic infrastructure investments in various strong companies in key sectors including transportation, power and utilities, we are able to generate revenue and stability.

Annual Report 2008

Construction Industry Outlook and CK没s Strategic Direction

Challenging Times in 2008 2008 has been one of the most difficult years, not only for Thailand, but for the whole world. The global economy, already slowing down in the past few years, witnessed one of the worst financial crises in 2008, later attributed to the Sub-Prime mortgage crisis in the U.S.A., its disastrous impact has been felt throughout the world. Though Thailand did not invest much in the derivative market, Thailand felt this global financial crisis in its stock market and financial market. Foreign capital outflows led to drastic decline in market capitalization in Thailand没s Stock Exchange. Subsequently, liquidity crunch and higher cost of funds in the financial market have contributed to great difficulties for the real sector in Thailand, including the construction industry.

Aside from the global financial crisis, Thailand also suffered from political instability in the year 2008. Both financial and political issues have exacerbated Thailand没s already slow economy, lowering the GDP growth to only 4% in 2008 and causing the a projected GDP growth of 2% for 2009 (Thailand Economic Monitor, World Bank, 2008). This negative economic and political environment also led to a decline in public investment, private consumption and investment in 2008. With declining public and private demands, delayed government projects, and increased raw material prices, the construction industry has consequently suffered from a declining growth since 2007.

This slow-down is projected to continue through out 2009 but is not expected to deteriorate much further (The National Social and Economic Development Board and Krung Thai Bank Business Research, 2008).

Table 1: Annual GDP Growth and Construction Industry Growth in Thailand 2006 2007 GDP Growth (%) Cambodia 10.8 10.2 Indonesia 5.5 6.3 Lao PDR 8.3 7.9 Malaysia 5.8 6.3 Philippines 5.4 7.2 Singapore 8.2 7.7 Thailand 5.2 4.9 Vietnam 8.2 8.5 China 11.6 11.9 Korea 5.1 5.0 Japan 2.0 2.4 U.S.A. 2.9 2.2 Euro Zone 2.8 2.6

2008p

2009p

6.5 6.1 7.5 5.0 4.5 2.3 4.0 6.3 9.5 4.2 0.5 1.4 1.2

4.7 5.0 6.5 3.5 3.5 1.2 2.0 5.0 8.2 3.0 -0.2 -0.7 -0.5

1.5 4.3 3.0

1.5 4.0 2.8

Source: World Bank没s Economic Monitor, April 2008

Construction Industry Growth (%) Private Public Overall

7.3 11.2 9.3

1.2 10.5 5.9

Source: National Economic and Social Development Board Krung Thai Bank, Business Research, 2008

CH. Karnchang Public Company Limited

039

Construction Industry Against All Odds The sluggish 2008 economy could not be avoided. However, despite such challenging times, the outlook for the year 2009 shows some promises. Thailandรปs macroeconomic fundamentals have remained strong. Inflation rate fell from 4.6% in 2006 to 2.5% in 2007 and remained stable at 2.5% in 2008 (IMF, 2007). Interest rates have been kept low. The MLR of most banks hovered around 6.75-7.5% in 2008 (Bank of Thailand, 2009) and the trend is likely to continue on the low side for 2009.

As for the government financial situation, the indicators have also remained positive. Even though the global financial crisis has contributed to Thailandรปs current account deficit in 2008 (as export revenues and tax revenues fell), the government has managed to maintain strong fiscal fundamentals. On the debt side, the public sector debt has been falling, down to below 40% of GDP in 2007-2008.

This shows that there is room for further borrowings. On the consumption and investment side, the budget for public investment has been steadily increased while the disbursement rate has been rather low, even lower than 50% in 2008, showing that there is ample opportunity to speed up spending and disbursement on public investment projects.

Table 2: Thailandรปs Public Debt and Public Investment Budget 2000-2004 2005 Average Debt (% of GDP) Public Debt 54.5 47.3 External Debt 37.2 20.9

2006

2007

2008p

40.3 19.3

37.5 14.8

38.2 12.8

137.99 71.52

179.59 60.08

183.56 49.5

Source: World Bank Thailand Economic Monitor, April 2008

Public Investment Budget (Billion Baht) and Disbursement Rate (%) Investment Disbursement

-

-

Source: ACL Securities, October 2008

On the brighter note for the construction industry, the Business Monitor International forecasts an annual growth rate of 5.1% for Thailandรปs construction industry over the period of 2008-2012 (Thailand Infrastructure Report, Business Monitor International, 2009).

This illustrates high confidence for Thailandรปs construction industry in the near future. However, a number of business research institutes have cautioned that there are potential risks to the construction industry outlook in 2009. With the looming impact of the global financial crisis, the Thai government might have financial difficulties given that GDP growth is forecasted to decrease and government revenues are likely to fall due to declined export and tax revenues. Corporate as well as government borrowing might also be more difficult with tight global liquidity. The long delay of large construction projects might also mean higher competition in the construction industry. Nevertheless, against all odds, the construction industry in Thailand in 2009 shows positive prospects for the following reasons.

040

Annual Report 2008

First and foremost, political stability has been restored with a new government. The new government has since announced, with support from business sector and prominent research institutes, that the first policy priority is to stimulate Thailandûs economy. The economic stimulus package definitely includes a number of large scale construction projects, especially the Mega projects that have been long delayed. Mega projects in various sectors such as Mass transit, highway, energy and water system are expected to proceed in 2009, creating opportunities for construction works, stimulating Thai economy in the short-term and strengthening the countryûs basic infrastructure in the long-run.

In addition to potential new large-scale projects by the government, the construction industry is expected to enjoy the benefits of decreased raw material prices, especially steel and oil. Further- Source: National Economic and Social Development Board more, while the global financial market is forecasted to be on the tight side, Thai financial market still possesses rather strong liquidity with money supply awaiting viable project financing even at competitive interest rates.

CH. Karnchang: Turning Crisis into Opportunity As for CH. Karnchang, we have successfully managed through the difficult year of 2008 through our prudent investments, project management and efficient cost management. Our strategy to create new markets in the region has allowed us to maintain strong backlog even in the time of constrained domestic market. Our construction projects, namely the Nam Ngum 2 hydro-electric dam in Lao PDR, National Highway in Cambodia and Paper Mill in Vietnam, have been progressing satisfactorily. Our emphasis in the Southeast Asian region has proven prudent as we were able to reduce market risks and to minimize dependency on the domestic market. Many countries in Southeast Asia where we have invested have also proved resilient to the global economic crisis, all of which have maintained positive economic growth (Refer to Table 1), promising even more prospects for future construction and infrastructure projects. At the time, we plan to expand our market in Lao PDR with large scale dam projects › Nam Bak 1 & 2 and Xaiyaburi › in the final study and development phase and expected to commence in the near future.

CH. Karnchang also turned the crisis time into opportunity to strengthen our organizational capacity. In 2008, we implemented an Enterprise Resource Planning (ERP) system, strengthened human resource system and re-assessed risk management strategies. These efforts will give us comparative advantage in time when competition in construction industry is expected to be stronger. CH. Karnchang aims to actively participate in large-scale construction projects in Thailand to stimulate Thailandûs economy in 2009 and to continue to explore new opportunities overseas. As we hope for a better economy in Thailand and worldwide, we remain confident that, despite potential economic uncertainty, CH. Karnchang will move towards the year 2009 with great performance and sustainable growth.

CH. Karnchang Public Company Limited

041

Sustainability with Social Awareness and Responsibility

042

We believe that... in order for business to achieve sustainable growth: it must be managed with good ethics and social responsibility; it must create good and fair returns for all stakeholders; and above all, it must create quality works that contribute to the country and society in order to improve and sustain quality of life for all.

Annual Report 2008

CSR: Corporate Social Responsibility

Corporate Social and Environmental Responsibility

Even though the philosophy of Corporate Social Responsibility (CSR) or Corporate Social and Environmental Responsibility (CSER) in business operation is rather a new concept in recent years, CH. Karnchang Public Company Limited has been operating our both construction and concession businesses over the past 37 years by adhering to the Corporate Social and Environmental Responsibility principle as the fundamental philosophy, including at every step of project management and work procedures. Moreover, CH. Karnchang has continuously emphasized fostering and raising the consciousness of the Company没s employees and communities, as a whole, in relation to the Corporate Social and Environmental Responsibility.

1)

Construction Business

CH. Karnchang Public Company Limited has systematically operated the core business of the large-sized project construction concession in compliance with the international operation standards and also emphasized the construction business operation with our commitment to protection of nature and environment as well as maintaining a decent society, coupled with the national development, in respect of which the Company has accumulated its reputation over the long past period. In the year 2008, the Company still constantly emphasized the business operation with our commitment and awareness of the Corporate Social and Environmental Responsibility. In the operation of all construction projects, the Company has 1) emphasized the construction projects which are beneficial to society and environment in the country and its neighboring countries, 2) employed construction technology and technique, including work procedures with the Corporate Social and Environmental Responsibility, 3) monitored and been responsible to the communities in the vicinity of the construction project site. In this connection, the Company没s construction projects also showed that CH. Karnchang Public Company Limited has its commitment to integration of the Corporate Social and Environmental Responsibility principle into the construction business in all respects, as follows:

CH. Karnchang Public Company Limited

043

1.1) Nam Ngum 2 Dam Construction Project in the Lao PDR As to the Nam Ngum 2 Dam construction which is considered a large-sized construction project, the Company has realized the significance of the close monitoring of the construction operation, and the monitoring of the ecosystem and environment since the project is located in the Lao Peopleûs Democratic Republic, which has always been Thailandûs good neighboring country in a long time; and located in the midst of wonderful forests and nature. As such, the construction operation subject to control of the environmental impact has been applied in design and supervision of the construction of the Nam Ngum 2 Dam, starting from the subsidiaryûs design and delineation of the locations for construction of buildings in support of generating electricity of the dam to be adjacent so as to prevent the project areas from scattering in a wide area, which would affect the existing forest areas. The Company has also mapped the construction site of residential and office buildings along the banks adjacent to the road alignment of the project as well as preparing areas for dumping topsoil in order not to encroach upon the forest areas. The construction of the Nam Ngum 2 Dam Project has been carried out with the Corporate Social and Environmental Responsibility in mind, to preserve the ecosystem of the forests and the Nam Ngum River, subject to proper practices as follows: ë A sophisticated construction system in accordance with international standards has been utilized to ensure the quality and efficient construction and safety of employees and workers in the construction project; ë Construction works have been managed with our commitment to preserving nature and environment as well as our best efforts to minimize environmental impact caused by the dam construction, whereby a specific environmental working group has been established to oversee, protect and preserve the environment and society to ensure concrete results; ë In respect of follow-up, evaluation and monitoring, the Company has monitored the weather, water and forest conditions in the surrounding areas during the dam construction period, which might give rise to pollution, to ensure that the ecosystem and the state of living of local people would be protected with the least possible impacts. In this respect, the project has complied with the environmental regulations of the Lao Peopleûs Democratic Republic and followed up the development of work from time to time to ensure that any work procedures which might cause pollution could be resolved and revised in a timely manner; ë The supervision and responsibility towards safety and welfare of employees and local communities have been maintained by ensuring a good occupational health system for the project workers and local communities, such as, drinking water production system, wastewater treatment system, sanitary system and garbage disposal system, contagious disease prevention and control system, as well as arranging medical center in the project site; ë We have developed our employeesû consciousness of the Corporate Social and Environmental Responsibility through training on environmental protection and conservation to be well aware of the significance of preserving nature and environment as well as contributions to communities and foreign colleagues during work performance in the project in order to improve work efficiency and promote good international relationship.

044

Annual Report 2008

1.2) PTT Natural Gas Pipeline Construction Project to Chememan Company Limited The natural gas pipeline construction for PTT Public Company Limited to Chememan Company Limited has been carefully and systematically managed to prevent and control impact on the environment and local communities in order to complete the construction within a short period of time without causing or with the least possible impact on the communities and the environment, as follows: ë The gas pipeline has been designed for construction by way of the Horizontal Directional Drilling (HDD) system, instead of the open-cut method, in order to minimize impact on the communities, households and traffic in certain areas; ë The gas pipeline construction alignment has been set to avoid removal of big trees, and if unavoidable, the Company would remove big trees for caring and planting them back to the original locations, as well as planting additional trees in the local areas; ë Various technology and techniques have been utilized to minimize pollution, such as, chemical degradation to prevent pollution and be beneficial to cultivation, provision of site covering to prevent the polishing dust from spreading to pollute the areas adjacent to the construction site, etc; ë A co-working group has been formed to inspect and follow up the results as well as receiving feedbacks from local communities for improvements. The Company has also participated in such various social activities as grant of scholarships to Nongbua School and donation of water coolers to Wat Sri Chomthong School, as another contribution of the Company to society.

1.3) National Road No. 67 Construction Project in Cambodia: Chaom-Sangam › Anlong Veng › Siem Reap For the construction of National Road No. 67 in Cambodia, the project made social contributions by spraying mosquito repellent for the neighboring communities once a month, and provided local residents with information on the negative effects of narcotics, whether from taking or trafficking, as well as knowledge and prevention of AIDS to minimize its spreading. These activities represent our social and educational contributions to local residents in our neighboring country, etc.

1.4) Construction of Drainage Canal and Road with Facilities Phase 1 Project; Drainage System Project in the Suvarnabhumi Airport, Samut Prakan Province Such projects are undertaken through the initiative of His Majesty the King who is greatly concerned about his Thai peopleûs çfloodé problems, a natural disaster causing heavy loss to our country. These projects would help prevent and alleviate flood problems in Bangkok and its vicinities on the eastern bank of the Chao Phraya River by accelerating drainage into the sea through the Bang Pakong River and Khlong Phraongchaiyanuchit. Not only these projects are clearly beneficial to the society and environment, but also the Company has utilized the construction technology and technique to ensure the best quality of work at the least possible impact on the environment, such as: ë Soil cement column construction is a technique to improve the quality of soft soil layer for increased stabilization, reduced permeability and declining rate of ground settlement; ë Design of the water pumping station has complied with procedures, with inspection to meet construction standards and measures for follow-up and prevention of environmental impact in order to ensure the efficient prevention of and solution to flood problems in Bangkok and its vicinities on the eastern bank of the Chao Phraya River in accordance with His Majesty the Kingûs initiative.

CH. Karnchang Public Company Limited

045

1.5) Energy Complex Center Construction Project, Third Contract: Construction of Buildings B, C, D, E and Exterior Work The Energy Complex Center Construction Project is for the purpose of development of the national energy business complex center where the Office of the Ministry of Energy, companies in the PTT group, including private energy companies are located. It is designed as the sustainable buildings, with pleasant surroundings and high safety concern, as well as the unique and distinctive architectural style, which may be described as follows: ë In respect of utilization and conservation, the buildings are construction to ensure maximum utilization, with conservation and energy saving in mind, and without causing any environmental impact. The Energy Complex Center Project is designed to use electricity and cooling water from the Combined Heat and Power Facility fueled by natural gas; ë As for safety of building users, the building control systems use the intelligent systems of advanced technology.

The structural design of the Energy Complex Center complies with the international standards to handle a 7.2 Richter earthquake; ë The design philosophy focuses on the identity and symbolic of an energy organization to truly materialize the philosophy of energy conservation, i.e., building layouts featuring two oil drops facing each other, aerodynamically designed exterior to minimize temperature and thermal building envelope, representing an original innovation of energy conservation prototype, for the purpose of management to benefit from the energy saving concept of the project by using energy efficiently based on suitable technology within budget and for balancing between energy saving and staffûs convenient working conditions, together with easy, convenient and low-cost maintenance in the long run, as well as information technology for building management in order to rapidly and accurately check various systems to ensure the long-lasting useful life of the buildings.

1.6) Bang Sue Environmental Education and Conservation Project of Bangkok Metropolitan Administration and Construction Work of the Bang Sue Environmental Education and Conservation Center of Bangkok Metropolitan Administration, and Wastewater Treatment System (First Contract) Due to the crisis of water pollution in various water sources, canals and the Chao Phraya River in Bangkok, the Department of Drainage and Sewerage, Bangkok Metropolitan Administration, thus initiated the çBang Sue Environmental Education and Conservation Center Project of Bangkok Metropolitan Administrationé to connect with other wastewater collection and treatment systems in order to alleviate and solve the water pollution in the Chao Phraya River and other canals in the project site, such as, Bang Sue Canal, Premprachakorn Canal, Bang Khen Canal, with the capacity of wastewater treatment of around 120,000 cubic meters/day, and covering the total service area of 22 square kilometers. This should serve as a water quality control facility to improve the quality of water to meet the effluent standards prior to releasing it to public water sources and for reuse within Wachirabenchatat Park, Chatuchak Park and Queen Sirikit Park, and a knowledge center for youths and people interested in environmental education. The building consists of the environmental exhibition hall, history and technology hall, wastewater treatment exhibition hall, library, conference rooms and etc. The Company has adopted the construction and architectural concept which promotes the Corporate Social and Environmental Responsibility, as follows: ë We studied various efficient odor control systems, i.e., an activated sludge diffusion system and a biofilter system, in order to minimize pollution for neighboring communities; ë Landscape architectural design is taken into account by having a water quality control facility located underground in the existing swamp in Wachirabenchatat Park to preserve its original landscape as well as improving the overall landscaping for aesthetic appearance and increased utilization, including creating a water garden for study and education on aquatic plants and wetland or riverside plants, creating a large waterfall curtain which not only uses the water treated to meet the effluent quality standards and improves the air quality around the area, but also is a significant and beautiful landscape architectural composition. ë Design of traffic flow in the project is related to the existing environment of the park by maintaining the main routes, such as, the existing bicycle lane, footpath, running lane connecting as a circle with the traffic flow in the park. Visitors of this park can also conveniently visit the museum and aquatic plant exhibition. In addition, the damaged traffic surface in the adjacent areas has been restored for maximum utilization.

046

Annual Report 2008

2)

Concession Business

Other than the construction business, CH. Karnchang Public Company Limited also adheres to the principles of the Corporate Social and Environmental Responsibility in the concession business. The concession business operation in respect of basic infrastructure, with the primary objective that it is a business which creates benefit to the society, the country and the public没s quality of living. The Company没s significant concession business includes: 2.1) Hydroelectric Power Production Concession Business Currently, electricity demand in Thailand has grown at a high rate and has a tendency to require higher power consumption.

Such circumstances urge the relevant agencies to increase the electricity production to meet such demand. At present, the domestic electricity production mainly relies on fuels from natural gas which may give rise to pollution while lignite or nuclear power plants not only cause pollution, but also produce wastes harmful to the environment and local communities. Based on such reasoning, a hydroelectric power plant which is under construction by SouthEast Asia Energy Limited, our subsidiary, namely, the Nam Ngum Dam 2 (NN 2) in Laos for distribution of electricity to the Electricity Generating Authority of Thailand, should therefore help accommodate the increasing demand of electricity in Thailand and also protect the environment through the hydroelectric power production as the most clean source of energy, with measures to sustain the natural environment for this neighboring country, let alone the fact that this would not give rise to more pollution currently caused by other types of power plants which may be constructed or increase the production capacity in Thailand.

In respect of the society, the Nam Ngum 2 Dam construction project has creates an interdependent relationship between Thailand and Laos. That is, Laos has an abundance of natural resources and needs country development; SouthEast Asia Energy Limited and CH. Karnchang (Lao) Company Limited, as the Company没s subsidiaries, expanded their investments in Laos which would help support social development in Laos by generating income to local people, along with compliance with international operation standards under the management of the Company group through various measures, for instance, the Company introduces the environmental management measures, people relocation plans and social development plans. Particularly, arrangements have been made for those residents in such areas to be flooded by the dam construction, with participation of several committees from both governmental and private sectors, including other concerned parties, to jointly identify problems and solutions. In this respect, the Company cooperated with the government sector to procure new land and residences, construct new houses, schools and public utilities to the communities, as well as providing the people with sufficient compensation for agricultural produce from their former land.

2.2) Mass Rapid Transit System Concession Business The M.R.T. Project and train operation concession as well as projects for mass rapid transit operation with the metro as carried out by the Company group serve to encourage people to travel without using their personal cars or to minimize the use of personal cars.

Traveling by motor vehicles will cause environmental pollution in various aspects, i.e., heat generated by fuel combustion of engines partially causing global warming, noise pollution caused by engines and driving, visual pollution caused by a large number of motor vehicles congested on roads and flyovers which impair the beautiful landscape, including air pollution due to fumes and emission from fuel combustion. In contrast, traveling by a mass rapid transit system like the metro will not cause any such pollution as the train operation produces neither emission nor air and noise pollution, let alone the fact that the entire metro system is constructed and located underground which would in no way hinder any landscape.

CH. Karnchang Public Company Limited

047

2.3) Other Concession Business CH. Karnchang Public Company Limited group has also operated the concession business in respect of tap water production of the CompanyĂťs subsidiaries, e.g., Thai Tap Water Supply Public Company Limited, Pathum Thani Water Co., Ltd. and Bang Pa-in Land Development Co., Ltd., in order to ensure distribution of clean tap water to the communities, including better health quality, and to systematically accommodate expansion of the industrial sector. Moreover, Bang Pa-in Land Development Co., Ltd., which is a company in the group, has established the Administrative Center for Public Utilities and Environment to safeguard the environment in the industrial estate and constructed an incinerator of waste from production process of the factories in the industrial estate. This waste incinerator is also capable of disposing at high temperature of toxic-contaminated and infectious wastes to help protect the environment for society. Currently, the waste disposal center offers disposal services covering approximately 2,400 tons each year of toxic and medical wastes as they are solid, toxic-contaminated and infectious wastes which are not acceptable for landfill.

3)

Awareness of the Corporate Social and Environmental Responsibility

When we recall our childhood memories filled with a lot of fun with the surroundings; then, one of those feelings which occur to us is change in environment and surrounding society. While Thailand needs to develop the industrial and infrastructure potentials in order to catch up with the ever increasing number of population, the understanding of the significance of the balance of nature, as well as the ecosystem and society in which we live, is essential for Thai people from all walks of life to realize so as to preserve and restore nature and environment, which should enable us to create a better environment and society in a more realistic way. Besides, in order to make sure that the upcoming changes would support and preserve a good environment through the awareness of the true values of our land, we, CH. Karnchang Public Company Limited group, as a group of Thai citizens, are well aware of these values and truly treasure the natural resources and environment, as well as society and way of living that are our concerns in business operations at all times, alongside the responsibility and preservation of a good environment and society, and our firm commitment to continued improvement and restoration in order that Thailand where we were born and are now living will become a more pleasant home for our younger generations in the future.

3.1) Environment CH. Karnchang Public Company Limited group has initiated campaigns for the awareness of environmental preservation by encouraging our employees to help saving energy in the workplaces regularly, and campaigns for the voluntary mangrove reforestation led by our President and Chief Executive Officer, together with the Management Team and more than 200 employees, on an 80-rai area. In addition, we also helped releasing a great number of sea crabs back to nature through our CH. Karnchang CH. Chuay Sang Project in the çReturn the Forest to FatherÊ Activity at the Mangrove Resource Administration and Management Division 2, Ban Tha Sorn, Chanthaburi Province, for 2 days. Apart from these voluntary programs, in the year 2008, the Company also supported other campaigns for environmental preservation, such as, grant of scholarships for research on Eco-Efficiency in Water Treatment Industry of the Graduate School of Mahidol University.

048

Annual Report 2008

3.2) Social Contribution As for social and charitable activities which the Company has been making contributions regularly every year, in the year 2008, one of our campaigns for voluntary social activity was that our President and Chief Executive Officer led the Companyûs executives and staff to visit the elderly and donate money and necessary items in the çWith Love and Care from Our Heart, CH. Karnchangé Project at Ban Bang Khae Social Welfare Development Center For Elderly (Ban Bang Khae 1) on August 30, 2008. This activity not only supports society through the elderly care, but also encourage and instill in our staff the awareness of helping others especially the elderly who represent our parents whom their children should give them love and care. Moreover, other activities and donations of money or necessary items in various public charity projects included our donations in the çOn Sai Jai Thai Day, Stream of Kindness Never Runs Dryé to the Sai Jai Thai Foundation under the Royal Patronage, donations to students of Capital Market Academy for construction of patientûs rooms at the Kusinara Hospital, donations to the Supreme Command Headquarters for helping the Cyclone Nagis victims, donations to the Office of the Permanent Secretary of Defense in the çHelp Newborn Babies in the Slumé Project, and our sponsor for construction of the çYuwawisakornborpit 36é Bridge at Ban Mae Kong La, Tambon Mae Lan, Amphoe Li, Lamphun Province by the Work Camp Club of the Faculty of Engineering, Chulalongkorn University, and etc.

3.3) Education CH. Karnchang Public Company Limited group has realized the significance of development of Thai youths to play the key role in the national development from generation to generation.

This is to ensure that they are knowledgeable and skilled for the national development with the awareness of protecting the environment. Therefore, the Company has continuously provided educational support. In the year 2008, the Companyûs educational contributions include our sponsorship on modern and quality instructional media materials to young students in the remote areas from schools under the Distance Learning Foundation for 2,000 schools altogether throughout the country under the çFatherûs Sproutsé Project for extensive source of knowledge for students, grant of scholarships (for further education) for the second year to the Thai-Nichi Institute of Technology, sponsorship in the building architecture book publishing, grant of continuous scholarships to the Thaicom Foundation, sponsorship in the Asian Law Student Association for the International Conference, donations for research and educational development to the Faculty of Engineering of Kasetsart University, donations to the Standards & Quality Association of Thailand for the ANQ Congress 6, as well as donations to the Faculty of Science of King Mongkut’s Institute of Technology Ladkrabang for Science Conference, etc.

3.4) Religions CH. Karnchang Public Company Limited group has also realized the significance of maintaining the religions and made our continued contributions to religious activities in various provinces. In the year 2008, our activities included the sponsorship in the Phra Baht Nam Phu Templeûs publishing of the Buddha Story books, offering of the royal lent robe to Ammart Temple in Laos, merit-making and robe offerings at Ban Yaeng Temple, Amphoe Chiang Saen, Chiang Rai Province, merit-making at Sangkharattanaram Temple in Australia, merit-making and robe offerings at Soda Praditharam Temple, Ratchaburi Province, Ban Kalantha, Buri Ram Province, Doi Ti Temple, Tambon Pa Sak, Lamphun Province, and Tha Cham Pi Temple, Amphoe San Pa Tong, Chiang Mai Province, host sponsorship in the 100 years Robe Offering Ceremony, Historical Building, the Buddhist Association, Chachoengsao Province, merit-making and robe offerings at Tha Yeam Temple, Lop Buri Province, as well as sponsorship in the Worship of Phra Buddha Sihing Event, etc.

CH. Karnchang Public Company Limited

049

General Information 1.

Company Profile CH. Karnchang Public Company Limited Head Office

: 587 Viriyathavorn Building, Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok 10400 Telephone 66(0)2277-0460, 66(0)2275-0026 Fax 66(0)2275-7029 : To operate the business of general contract construction for government agencies, state enterprises and private entities, in the form of main contractor, subcontractor or joint venture or consortium. : Baht 1,450,000,000 : 1,450,000,000 shares : Baht 1 per share : Baht 1,446,012,169

Business Category

Registered Capital Divided into Ordinary Shares Par Value Paid-up Capital

2.

The Company invested in each of its subsidiaries through a shareholding ratio of at least 10 percent of the number of shares sold in each subsidiary as follows: Company Name

Business Category

1. Construction Material Supply Co., Ltd. Trading of Construction The head office is located at No. 587 Sutthisarn Road, Materials Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026 Fax 66(0)2275-7029 2. CH. Karnchang Real Estate Co., Ltd. Trading of Land, Allocation The head office is located at No. 587 Sutthisarn Road, of Land and Dindaeng Subdistrict, Dindaeng District, Bangkok Residential Buildings Telephone 66(0)2275-0026 Fax 66(0)2275-7029 3. CH. Karnchang-Tokyu Construction Co., Ltd. Contract for All Kinds The head office is located at No. 587 Sutthisarn Road, of Construction Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-3651-5 Fax 66(0)2275-3657 4. Bangkok Concrete Industries Co., Ltd.* Operation of Factory The head office is located at No. 30/1 Moo 4, Business for Manufacturing Tambon Khlong Udom Chonjorn, Amphoe Mueang of Post Tensioned Chachoengsao, Chachoengsao Province Concrete Piles Telephone 038-845867-70 Fax 038-845871

Total Number of Shares

Par Value

Shares ShareHeld by holding the Company Ratio

Type of Shares

300,000

Baht 100

299,992

99.99%

Ordinary Shares

1,600,000

Baht 100

1,584,000

99.00%

Ordinary Shares

1,000,000

Baht 100

549,994

55.00%

Ordinary Shares

2,000,000

Baht 100

-

-

Ordinary Shares

Remarks * CH. Karnchang Public Company Limited has sold the whole of 999,994 ordinary shares in Bangkok Concrete Industries Co., Ltd. to Widen Holding Co., Ltd. on December 25, 2007.

050

Annual Report 2008

The Company also invested in other companies through a shareholding ratio of at least 10 percent of the number of shares sold in each company as follows: Company Name

Business Category

Total Number of Shares

Par Value

1. Thai Tap Water Supply Public Company Limited The head office is located at No. 30/10 Moo 12, Tambon Rai Khing Amphoe Sam Phran, Nakhon Pathom Province, Telephone 66(0)2811-7526 Fax 66(0)2811-7687 2. Pathum Thani Water Co., Ltd.* The head office is located at No. 43 Moo 3, Chiang Rak Noi - Bang Sai Road, Tambon Ban Pathum, Amphoe Sam Khok, Pathumthani Province 12160 Telephone 66(0)2979-8530-2 Fax 66(0)2979-8533

Supply and Development of Projects for Production and Distribution of Tap Water

3,990,000,000

Baht 1

1,408,777,400

35.31%

Ordinary Shares

Supply and Development of Projects for Production and Distribution of Tap Water under Arrangement with the Provincial Waterworks Authority Operation of Business of All Types of Power Plants and Distribution of Electricity inside and outside Thailand

12,000,000

Baht 100

-

-

Ordinary Shares

660,675,000

Baht 10

251,056,499

38.00%

Ordinary Shares

Baht 1

2,940,999,916

24.61%

Ordinary Shares

Baht 10

117,974,750

15.32%

Ordinary Shares

3. SouthEast Asia Energy Limited The head office is located at No. 587, 20th Floor, Viriyathavorn Building, Sutthisarnvinijchai Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-4873 Fax 66(0)2691-8307 4. Bangkok Metro Public Company Limited The head office is located at No. 189 Rama IX Road, Huai Khwang Subdistrict, Huai Khwang District, Bangkok Telephone 66(0)2354-2000 Fax 66(0)2354-2000 5. Bangkok Expressway Public Company Limited The head office is located at No. 238/7 Asoke-Dindaeng Road, Bang Kapi Subdistrict, Huai Khwang District, Bangkok Telephone 66(0)2641-4611 Fax 66(0)2641-4610

Construction, Operation and 11,950,000,000 Maintenance of Railway System, Train, Electric Train System or Other Powered Carriage System Construction and Operation 770,000,000 of the Second Stage Expressway Project and Various Extensions, including Related Businesses

Shares ShareHeld by holding the Company Ratio

Type of Shares

Remarks * CH. Karnchang Public Company Limited indirectly holds shares in Pathum Thai Water Co., Ltd. via Thai Tap Water Supply Public Company Limited, namely, currently, CH. Karnchang Public Company Limited holds shares representing 35.31 percent in Thai Tap Water Supply Public Company Limited and Thai Tap Water Supply Public Company Limited holds shares representing 98.00 percent in Pathum Thani Water Co., Ltd.

CH. Karnchang Public Company Limited

051

The Company also invested in the form of joint venture as follows: Joint Venture Name 1. Joint Venture CKSL comprising CH. Karnchang Public Company Limited and SNC Lavalin Inc. The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026, Fax 66(0)2275-7029 2. CKAE Consortium comprising CH. Karnchang Public Company Limited, 110 Architect Co., Ltd., Arun Chaiseri Consulting Engineers Co., Ltd., Environmental Engineering Consultants Co., Ltd. and Epsilon Co., Ltd. The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026, Fax 66(0)2275-7029 3. Joint Venture CKET comprising CH. Karnchang Public Company Limited and Expert Transport Co., Ltd. The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026, Fax 66(0)2354-1919 4. Joint Venture BBCT comprising CH. Karnchang Public Company Limited, Bilfinger + Berger Bauaktiengesellschaft, Tokyu Construction Co., Ltd. and CH. Karnchang-Tokyu Construction Co., Ltd. The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026, Fax 66(0)2275-7029 5. Join Venture CKOBA comprising Obayashi Corporation, CH. Karnchang Public Company Limited and Nantawan Co., Ltd. The head office is located at No. 161 Ratchadamri Road, Lumpini Subdistrict, Pathumwan District, Bangkok Telephone 66(0)2252-5200, Fax 66(0)2252-5381 6. Joint Venture BBCD comprising Bilfinger + Berger AG, CH. Karnchang Public Company Limited and Walterbau AG The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-8414, Fax 66(0)2691-9167 7. Joint Venture BCKT comprising Bilfinger + Berger Bauaktiengesellschaft, CH. Karnchang Public Company Limited, Kumagai Gumi Limited and Tokyu Construction Co., Ltd. The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026, Fax 66(0)2275-7029

052

Nature of Work

Investment Ratio

Design, Manufacture, Delivery and Installation of Trackwork for the Initial System of the Mass Rapid Transit Authority of Thailand

99.90%

Design and Construction of the Development Project for Enhancement of the Capacities of the Bangkok International Airport

98.00%

Project Operation and Management under the Agreement for Concession for Design, Manufacture, Delivery, Installation, Testing and Commissioning of M&E Equipment and for Operation and Maintenance of the MRTA Initial System, Chaloem Ratchamongkhon Line Construction of the (Bang Pa-in - Pak Kret) Expressway (Sectors D and C1 A)

80.00%

Construction of Wat Nakhon Indra Bridge and Connecting Road

44.00%

Construction of the (Bang Na - Bang Pli Bang Pakong) Expressway

35.00%

Design and Construction of the Underground Structure, Subway Project, South Section (Hua Lamphong - Huai Khwang)

25.00%

59.99%

Annual Report 2008

Joint Venture Name 8. Joint Venture BBC comprising Bilfinger + Berger (Thai) Construction Co., Ltd., in association with Bilfinger + Berger Bauaktiengesellschaft, International Division, and CH. Karnchang Public Company Limited The head office is located at No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2245-6400-7, Fax 66(0)2245-7736 9. Joint Venture CKNNL comprising CH. Karnchang Public Company Limited and Nongnuch Landscape & Garden Design Company Limited The head office is located No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026, Fax 66(0)2275-7029 10. Joint Venture CKLX comprising CH. Karnchang Public Company Limited and Loxley Public Company Limited The head office is located No. 587 Sutthisarn Road, Dindaeng Subdistrict, Dindaeng District, Bangkok Telephone 66(0)2275-0026, Fax 66(0)2275-7029

3.

Nature of Work

Investment Ratio

Construction of Tunnels, together with Reservoir and Conduit, for Underground Cables, Terminal Station at Vibhavadi Rangsit Road, Dindaeng Road, Ratchawithee Road, Ratchaparop Road, Mitmaitree Road, Payathai Road and Soi Choei Puang, Bangkok Construction of Buildings, together with Public Utility, and Landscaping for the International Horticultural Exposition 2006

25.00%

Construction of the Toll Collection and Traffic Safety Control Systems for the Bang Pli - Suksawad Expressway and Highway No. 37, Bangkok Outer Ring Road (the Bang Pli-Bang Khun Thien Expressway in Respect of Suksawad-Bang Khun Thien Section)

46.00%

75.00%

Reference Securities Registrar

Auditors

: Thailand Securities Depository Co., Ltd. 2/7 Moo 4, Capital Market Academy Building The Stock Exchange of Thailand, 2nd Floor North Park Project, Vibhavadi Rangsit Road, Km. 27 Thung Song Hong Subdistrict, Lak Si District, Bangkok 10210 Telephone 0-2596-9000, 0-2596-9302-11 Fax 0-2832-4994-6 or 62 The Stock Exchange of Thailand Building 4th, 7th Floors, Ratchadapisek Road, Khlong Toei Subdistrict, Khlong Toei District, Bangkok 10110 Telephone 0-2229-2800 Fax 0-2359-1262-3 : Miss Siraporn Ouaanunkul, CPA License No. 3844 Mr. Narong Puntawong, CPA License No. 3315 Mr. Supachai Phanyawattano, CPA License No. 3930 Ernst & Young Office Limited 33rd Floor, Lake Rajada Office Complex, 193/136-137 New Ratchadapisek Road, Khlong Toei District, Bangkok 10110 Telephone 0-2264-0777 Fax 0-2264-0789-90

CH. Karnchang Public Company Limited

053

Corporate Governance Policy

SHAREHOLDERS The Board of Directors focuses on compliance with good corporate governance so as to improve transparency and responsibility for duties of directors and executives, and build up confidence for shareholders, investors and all parties concerned. In this regard, the policy in support of the good corporate governance has been introduced covering important matters as follows : 1. Shareholders and interested parties shall be equally and fairly treated.

2. The Board of Directors is committed to create value added to the operations in the long term through careful and prudent management, is responsible to perform the duties to ensure sufficient efficiency for the optimum benefit to shareholders, and to prevent any conflicts of interest, as well as is also responsible for any decisions and arrangements made by the Company itself.

3. All activities are undertaken with transparency and are open for inspection with disclosure of sufficient information to all relevant parties.

4. The business operations always take into account various risks with appropriate risk control and management.

The Company realizes the shareholders没 right to receive the Company没s information correctly, completely, sufficiently, instantly and equally for decision making in the shareholders meeting. The Company offers opportunity to shareholders to have equal right to scrutinize the Company没s operations, make inquiries and provide comments and suggestions.

054

Annual Report 2008

PERSONNEL The Company arranges for continuous human resource development, as the management realizes the significance of development of employeesรป capabilities and potentials in management, team building and specific professional learning, including encouraging employees to have knowledge about information technology, foreign languages and business working skills of employees and executives, which the Company intends to develop its personnel, both employees and the management, to catch up with changes in the world of technology and the business nature which constitutes a more intense competition, so as to be in line with the management of the whole organization.

The Company issues the code of business ethics in respect of the Board of Directors, the management and staff, as guidelines for compliance in the performance of their duties in accordance with the Companyรปs mission, with honesty, integrity and equality as well as responsibility towards the interested parties, shareholders and all parties concerned. The code of ethics also covers disciplinary actions.

The Company is making preparations to disseminate such code of ethics to staff and would then hold training and circulate to staff through the media, e.g., distribution of leaflets, small group meetings in the respective departments.

GOVERNANCE Due to the national development and industrial sector promotion, the demand for construction in various fields has increased. The Company has been considering the market growth, and developing personnel, machinery and equipment for the works. The construction works in the past projects, as well as the Companyรปs reputation in respect of construction and work quality, including responsibility towards customers in the operations, has caused the Company to gain trust in the carrying out of a number of construction projects of the government sector.

The Company realizes the significance of rights of all interested groups, whether inside, such as staff and executives of the Company and the subsidiaries, or outside, such as competitors, creditors, government sector and other relevant authorities. The Company recognizes support from these interested parties which could help building up the Companyรปs competitiveness and profitability to result in long term success for the Company.

BUSINESS PARTNERS The Company engages in the business of contract construction as a primary business activity, for government agencies, state enterprises and private entities, in the form of main contractor or subcontractor, by way of bidding and negotiation through the cooperation with overseas contractors in the form of joint venture, which is a joint investment in the construction projects in which items or volume of works are indivisible among the partners. Each partner shall be responsible for profit or loss in the proportion as mutually agreed upon in respect of all items of the work. The Company also engages in construction in the form of consortium, which is a joint investment in the construction projects in which items or volume of works are divisible among the partners. Each partner shall be independently responsible for profit or loss. The Company has experience and expertise in construction, engineering, namely infrastructure works such as roads, bridges, elevated ways, expressways, construction of buildings and industrial factories, mechanical and electrical system work, such as installation of equipment and machinery for factories.

CUSTOMERS The Company encourages the policy on team effort and enhancing state of the art technology to ensure the optimum safety and efficiency in the operation to meet the requirements and offer benefits to the customers with satisfaction in quality and services, including strict compliance with the terms of the agreements made with counterparties. The Company also provides care and is responsible to customers, ensures confidentiality for customers, as well as completion of work in a timely manner or earlier than scheduled.

PUBLIC The Companyรปs business operation regularly focuses on promotion in activities for improvement of the quality of life and environment, representing our gratitude to society.

CH. Karnchang Public Company Limited

055

Risk Factors

1.1

Risk from Management and Risk from Delays in Projects The Company realized the risks from management and therefore, determined guidelines to prevent any flaws which might occur, by implementing the quality management system of ISO 9001:2000 to maintain the operation standards both in projects and in the Companyûs head office, taking into account the continued improvement of quality management system. The Company group also set out guidelines for staff improvement to ensure that staff would have knowledge, skills, ethics and accountability towards the organization, including all interested persons, so as to minimize and prevent damage which might be caused by such risk.

The Company obtained the international quality system standard accreditation of ISO 9001:2000 in 2002 from two institutions, namely, UKAS and NAC Thailand. To date, the Company has extended the scope of work which has been certified on February 8, 2008 to the business of construction work design and management for roads, bridges, buildings, landscape architecture, quarry and aggregate mining, oil pipeline work, feeder line and oil depot construction with control system.

Generally, risks from delays in various projects might be caused by delays on the part of employers or contractors or by events without any liable party.

Delays on the part of employers included, for example, site delivery, review and approval on various matters relating to construction work. These delays might affect the construction period and costs. However, the Company minimized risks from such delays through cooperation and coordination with employers to ensure successful completion of the construction works.

Delays on the part of contractors included, for example, shortages of construction materials. The Company prevented such problem by entering into forward agreements for purchase › sale of various materials, as evidenced by the signed agreements for purchase › sale of cements and metals to accommodate the Companyûs projects, of which contracts have already been executed.

Delays caused by any events without any liable party included, for example, natural perils. In the execution of a contract, there generally is a requirement for the contractor to take out insurance for various construction projects undertaken by the Company.

Based on the Companyûs past experience, the Company has never encountered any events caused by delays on the part of the Company group, but risks from delays caused by the Companyûs contractual party, such as, in the Bang Na › Bang Pli › Bang Pakong Expressway Construction Project, and the Company group rectified such circumstance by requiring the employer to promptly resolve such problems and the Company also accelerated the construction to meet the specified schedule.

056

Annual Report 2008

1.2

Risk from Accounts Receivable in the Form of Compensation for Increased Costs as per Arbitral Award Joint Venture BBCD (Bilfinger Berger AG, CH. Karnchang Public Company Limited and Dyckerhoff & Widmann AG), in which the Company has 35 percent interest, claimed for increased costs due to changes by the Expressway Authority of Thailand (the Employer) in the scope of work, additional work orders, requirements of relevant authorities, delayed design approval, design revision and delay of site handover.

The Arbitral Tribunal rendered an award in the dispute on September 20, 2001 requiring the Employer to pay said increased costs to the Joint Venture in the amount of approximately Baht 6,000 Million (the increased costs, together with interest, as calculated until September 30, 2001 amounting to approximately Baht 6,800 Million). Subsequently, the Employer issued a letter dated November 22, 2001, informing the Joint Venture that the Employer deemed it appropriate to comply with the arbitral award. Based on such reason, the Joint Venture then recorded such amount as revenue in the third quarter of the accounting year 2001 since the opportunity of receiving such amount and the relevant figures became certain at that time, which was in accordance with the normal accounting principles. Such increased costs to be paid by the Employer were recorded in the consolidated financial statements for 2001 as revenue and assets based on the groupûs participation in the Joint Venture, amounting to approximately Baht 2,500 Million (Baht 23.81 per share).

Subsequently, the Expressway Authority of Thailand issued a letter dated December 21, 2001 indicating that it could not comply with the arbitral award due to the argument of the government agency requiring a review of such matter which caused delay of such payment as per the arbitral award. The Company group confirmed the compliance with the procedures as specified by the laws, and therefore, believed that there would be no impact from the news regarding the argument of the government agency.

Due to such delay, on May 1, 2002, the Joint Venture therefore filed a lawsuit against the Expressway Authority of Thailand with the Civil Court of Southern Bangkok for enforcement of compliance with the arbitral award. On December 30, 2003, the Civil Court of Southern Bangkok adjudged enforcing the compliance with the arbitral award, by requiring the Expressway Authority of Thailand (the Employer) to make payment to the Joint Venture as per the arbitral award. Thereafter, in January 2004, the Expressway Authority of Thailand filed an appeal in respect of such matter with the Supreme Court. On February 15, 2007, the Supreme Court adjudged in favor of the appeal of the Expressway Authority of Thailand and then rendered its judgment reversing the Civil Court of Southern Bangkokûs judgment which enforced the compliance with the arbitral award. The Joint Venture and the Company therefore recorded a loss from accounts receivable in respect of claims for increased costs previously recorded in 2006, and as a result, the Joint Venture and the Company had no risk from such accounts receivable on claims for increased costs. However, the said judgment did not prejudice the Joint Ventureûs legal right to claim for the increased costs of Baht 6,039.89 Million, together with interest at the rate of 7.50 percent per annum. Subsequently, after the Companyûs management had thoroughly reviewed the said judgment by the Supreme Court, it then filed a lawsuit against the Employer with the Civil Court on February 11, 2008 to claim for costs paid by Joint Venture BBCD against the Employer on grounds of undue enrichment, in the total amount, inclusive of interest calculated until the date of the plaint, of approximately Baht 3,400 Million (based on the groupûs participation in such Joint Venture). The case is now pending the consideration of the Civil Court.

1.3

Risk from Exchange Rate Given the fact that the Company group earned income and incurred costs in certain projects in foreign currencies, the fluctuation of the foreign currencies against Baht would affect the Companyûs costs or performance. The Company has managed the risk from exchange rate by matching revenue with expenses in foreign currencies, i.e., depositing income in foreign currencies in the çFCDé (Foreign Currency Deposit) account. When the project incurs any expenses in foreign currencies, the Company shall use funds in the FCD account to pay such expenses. However, at present, there are only two projects deriving income and incurring costs in foreign currencies, namely, the construction of the Hydroelectric Power Project (Nam Ngum 2) and the building construction of the Kraft Paper Mill Project (which was completely delivered at the end of 2008). The proportions of revenue and costs denominated in foreign currencies are rather small as compared to the total revenue and costs of the Company group, representing merely 14.41 percent and 13.34 percent of the total revenue and costs as at December 31, 2008.

As at December 31, 2008, the Company group had an unrealized gain on exchange rate in the amount of Baht 94.77 Million in the consolidated financial statements. Details of assets and liabilities denominated in foreign currencies as at December 31, 2008 in the consolidated financial statements can be summarized as follows:

CH. Karnchang Public Company Limited

057

As at December 31, 2008 VND US. DOLLARS

EURO Assets Cash at bank Trade accounts receivable Loans receivable Advance payments to subcontractors Total Liabilities Bank loan Trade accounts payable Joint Venture accounts payable Loans from Joint Venture Total Assets (Liabilities), net Assets (Liabilities), net (Baht)*

YEN

-

9,825,875,542 827,648,444 -

23,122,519 127,003 -

-

94,207 94,207

10,653,523,986

13,851,668 37,101,190

-

94,207 4,677,519

2,599,395,824 2,599,395,824 8,054,128,162 16,913,669

7,529,678 7,529,678 29,571,512 1,037,439,612

100,000 100,000 (100,000) (38,981)

Remark: * Average exchange rate calculated by The Bank of Thailand at the close of December 31, 2008.

1.4

Risk from Construction Material Price and Fluctuation of Oil Price Costs of construction in the respective projects depended on not only construction material price which fluctuates by the demand and supply circumstances, but also oil price, which is indirect cost towards the operating costs. However, in 2008, the fluctuation of material price, especially metals and oil, considerably affected the construction cost.

The Company group managed said risk through construction contracts in two manners as follows: - In case of a construction contract with construction price adjustment in accordance with an escalation (K) factor, said K factor would vary depending on the changing production costs, such as, prices of construction materials, metals, cements, high speed diesel oil, and there would not be any impact on the construction price. Most customers in this category were government sector, representing 29.63 percent of the remaining project value to be recognized in the future; - In case of a construction contract with fixed costs or lump sum, whereby it does not specify or it is not possible to identify a K factor, which would mostly apply to turnkey projects, provisional sums would also be included to accommodate the case where the construction material costs would be included in the total project value. Most customers in this category were private sector, representing 70.37 percent of the remaining project value to be recognized in the future; - Furthermore, the Company also established a subsidiary for the purpose of manufacturing necessary construction materials so as to minimize risk from shortage of materials and unrealistic price increase, as well as to strengthen its bargaining power with major traders of construction materials under high competition. However, the Company has a policy to prevent such risk by considering and reviewing the construction plan every month, as well as completing the construction of all projects before or within the period of time specified by employers.

058

Annual Report 2008

1.5

Risk from Changes of Governmentûs Policies Given the fact that the Company groupûs revenue structure in the future from the total value of projects in hand which would be recognized as revenue in the future representing 29.63 percent involves works for the government sector, the Company groupûs revenue therefore relates to the national budget spending, which depends on the economic growth rate and investment climate, including the political stability. As for the government projects for which the contracts have already been signed, the Company group did not have any risk from economic and political circumstances since such projects would be supported by the allocated budgets in the form of tied budgets, which represent guarantee of budgets to be spent by the government in said projects. Nevertheless, in respect of the government projects which were awarded to the Company group, but the contracts have not yet been signed, the government may hold a new bidding for said project based on the justifications of each respective project.

The Company group reengineered to expand its channel of revenue sources by way of project investment and management.

The Company group thus expanded its investments to business activities which would derive more definite revenue, such as, the Companyûs investments in Bangkok Expressway Public Company Limited, which manages the expressway projects; Bangkok Metro Public Company Limited, which manages the M.R.T. Chaloem Ratchamongkhon Line; Pathum Thani Water Co., Ltd., which produces tap water for sale to the Provincial Waterworks Authority for distribution to the public in Pathum Thani Province; Thai Tap Water Supply Public Company Limited, which produces tap water for sale to the Provincial Waterworks Authority for distribution to the public in Samut Sakhon Province and Nakhon Pathom Province; and SouthEast Asia Energy Limited, which would generate electricity for distribution to the Electricity Generating Authority of Thailand. These projects are long-term concession projects which would not be affected by political changes.

1.6

Risk from Investments in Subsidiaries, Associated Companies, Jointly Controlled Entities, Related Companies and Other Companies The Company groupûs structure comprises several subsidiaries, associated companies, including jointly controlled entities, related companies and other companies which accorded with the Company groupûs nature of business, namely, investment and construction of several projects, which are being implemented by different groups of investors. However, most jointly controlled entities are established with the objectives to carry out a few projects, and would be dissolved upon completion of the projects. In this respect, the number of companies or legal entities in the group would decrease accordingly. Risks that might be caused by investments in subsidiaries, associated companies, jointly controlled entities, related companies and other companies would be limited to the investments in each respective organization. In each investment, the Company would carefully conduct feasibility study of each project or company in addition to the consideration of the rate of return to be derived in the future. The Company might appoint third party advisors or specialists to serve in certain projects prior to submission of such matter to the Executive Board and the Board of Directors. Most of the companies invested by the group have satisfactory performance and derive profits from their business operations. As at December 31, 2008, the Companyûs investments in subsidiaries, associated companies, jointly controlled entities, related companies and other companies amounted at cost to Baht 10,477.1 Million, representing 47.14 percent of the total asset value. In 2007, the Company changed its accounting policy on investments in subsidiaries, jointly controlled entities and associated companies in the separate financial statements from the equity method to the cost method in accordance with the Notification of the Federation of Accounting Professions No. 26/2549 Re: Thai Accounting Standards No. 44. Moreover, the Company also arranged for a provision for loss from investments in subsidiaries, jointly controlled entities and associated companies, and unrealized loss on changes in value of investment from related companies and other companies in the total amount of Baht 2,088.5 Million, respectively, which was a balance of the provision for deficit on investments in jointly controlled entities comprising Joint Venture BBCT and Joint Venture BBCD, associated company comprising Bangkok Metro Public Company Limited, and related company comprising Bangkok Expressway Public Company Limited. etc. As at December 31, 2008, the Company had dividends from investments in subsidiaries, associated companies and related companies and profit sharing from jointly controlled entities in the total amount of Baht 359.6 Million.

CH. Karnchang Public Company Limited

059

1.7

Risk from Loans to Subsidiaries, Associated Companies, Jointly Controlled Entities, Related Companies and Other Companies The Company had risks from loans to subsidiaries, associated companies, related companies and jointly controlled entities, namely, only short-term loans were provided for use as working capital. As at December 31, 2008, the Company had a balance of loans and accrued interest receivable in respect of subsidiaries, associated companies, related companies and jointly controlled entities in the total amount of Baht 6,690.8 Million, representing 30.11 percent of the total assets. In addition, the Company arranged for a provision for loss from such loans to a subsidiary and a jointly controlled entity in the amount of Baht 3,091.2 Million. Said loans were short-term working capital subject to interest at the minimum lending rate of interest (MLR + margin) per annum and at a fixed rate of interest per annum, which shall become due for repayment upon demand. Moreover, Joint Venture CKET entered into agreements granting loans to two other companies, in the total amount of Baht 1,600 Million. As at December 31, 2008, such two companies gradually made partial repayment of the loans and interest, therefore, the balance of long-term loans to other companies with accrued interest receivable amounted to Baht 1,457.1 Million (in proportion to the Companyรปs participation in the Joint Venture) for use as working capital. Such loans are subject to interest at the minimum lending rate of interest (MLR + margin) per annum and would become due for repayment by June 2007. Thereafter, the borrowers notified to repay the loans to the Joint Venture in the amount of half of the outstanding loans by March 31, 2008 and the remaining loans

by June 30, 2008 in full. Subsequently, the borrowers issued a letter requesting an extension of time for loan repayment in the amount of half of the outstanding loans by December 31, 2008 and the remaining loans by June 30, 2009 in full. On December 24, 2008, the Board of Directors considered granting approval for the Company in the name of Joint Venture CKET to extend the time for loan repayment to the borrowers as per the repayment schedule proposed by the borrowers. As a result, the repayment schedule was requested to be extended from the existing schedule which required to make loan repayment in the amount of half of the outstanding loans by December 31, 2008 and the remaining loans by June 30, 2009 in full to gradually make repayment of the principal on a quarterly basis for 23 installments, starting in March 2009 until September 2014, and payment of accrued interest payable in September and December 2014 and March 2015.

This was because the national economic condition was affected by the domestic political circumstances, as well as economic slowdown, as a result, the borrowersรป business operations had insufficient income to repay the debts as per the existing schedule and the real estate, golf course, resort and housing development projects required to be postponed, therefore, the projects could not proceed according to plan, but the borrowers prepared and proposed the business plan and debt repayment schedule to the Joint Venture to show their loan serviceability. Therefore, as at December 31, 2008, the Joint Venture reclassified the current portion of long-term loans to other companies and accrued interest receivable as current assets and non-current assets in the balance sheet.

The borrowers furnished security to the Joint Venture, namely, certain land with structures in the total value of Baht 1,588.9 Million (in proportion to the Companyรปs participation in the Joint Venture) as appraised by an independent appraiser in January 2008 and the major shareholders of the borrowers also provided personal guarantee for the repayment of the outstanding loans in full and allowed the Joint Venture to charge additional interest at the rate of 1.25 percent per annum of the loans from the borrowing date until the repayment would be made in full by the borrowers.

In addition, as at December 31, 2008, the Company provided guarantee for two subsidiaries for the purposes of applying for credit facilities from banks and financial institutions in the total amount of Baht 6,262.3 Million.

Nevertheless, the Company has policies on management of risks that might occur from loans to subsidiaries, associated companies and jointly controlled entities, significantly taking into account the necessity and justification of transactions as well as the Companyรปs benefits. Such policies need to be approved by the Companyรปs Audit Committee to scrutinize any possible consequences.

060

Annual Report 2008

1.8

Risk from Terms and Conditions Stating the Rights of Unsubordinated and Unsecured Debenture Issuer and Holders of CH. Karnchang Public Company Limited, as well as the Company没s Existing Loan Conditions The terms and conditions stating the rights and duties of unsubordinated and unsecured debenture issuer and holders of the Company are considered an important document to enforce the debt payment under the obligation between the Company and the debenture holders, and between the Company and lending financial institutions. In this regard, the Securities and Exchange Commission issued its notification requiring that in the general issuance and offering of debentures for sale, the terms and conditions stating the rights of debenture issuer and holders shall be prepared in all cases, with the minimum particulars and essence contained pursuant to Section 42 of the Securities and Exchange Act. However, the terms and conditions stating the rights of unsubordinated and unsecured debenture issuer and holders of CH. Karnchang Public Company Limited No. 1/2009 Tranche 1, with maturity in 2012; and the unsubordinated and unsecured debenture of CH. Karnchang Public Company Limited No. 1/2009 Tranche 2, with maturity in 2014, were different from the terms and conditions stating the rights of debenture issuer and holders of the Company for other issue, as well as being different from the Company没s existing loan conditions, by specifying that the debenture issuer shall maintain the net debt to equity ratio as per the consolidated financial statements of the debenture issuer not exceeding 3 to 1 as at the close of the second quarter and as at the close of each accounting year, which was different from the previously issues of debentures and the Company没s loan conditions which required such financial ratio at 2.5 to 1.

The Company is now expanding its investments in the electricity businesses, both domestic and overseas. It is considered an investment in business with relatively low risk upon good contract management with secured return, since there is no risk in respect of marketing and sale price because it is clearly specified in the long-term power purchase and sale agreement with the Electricity Generating Authority of Thailand by specifying the certain off-take quantity of electricity (based on the production capacity) and specifying the structure of electricity charges adjustable based on fuel price and Baht exchange rate at such time. The Nam Ngum 2 Power Plant will be able to open for production and distribution of electricity in late 2010, which the Company will have derived return on investment to partially lessen its obligations. As for the preparations to accommodate the infrastructure projects of the government, the Company has managed risk from debt to equity, by setting up goal to ensure that the risk stays at a suitable level with the situation and monitoring the allocation of both short-term and long-term loans to be in line with the purposes of debentures and loans and types of investments.

CH. Karnchang Public Company Limited

061

Connected Transactions 11.

Connected Transactions 11.1 Connected Transactions between the Company, Subsidiaries, Associated and Related Companies (Only connected transactions with value of Baht 500,000 or higher are shown) Company Name/ Interested Party

1. Bangkok Metro Public Company Limited Operation of concession business for mass transit in Bangkok by the metro

Relationship

- This is an associated company.

- The Company holds shares representing 24.61 percent.

- Mahasiri Siam Co., Ltd., as a major shareholder in the Company, holds shares representing 2.95 percent.

- Three executive directors of the Company, namely, Mr. Plew Trivisvavet, Mr. Sombat Kitjalaksana and Mr. Anukool Tuntimas, serve as directors in Bangkok Metro Public Company Limited.

Nature of Transaction

1.1 The Company - The Company was hired to manage and maintain the infrastructure and public utilities system, with a project value of Baht 85 Million, expected to be completed in February 2011.

1.2 Joint Venture CKET - The Joint Venture was hired to supervise and manage the electric train construction project and manage the maintenance of the project, with a project value of Baht 2,181.7 Million, whereby main contract works were completed in December 2008.

1.3 The Company extended a loan in its capacity as a shareholder under the Sponsor Loan Agreement, which requires that shareholders shall arrange for a loan to Bangkok Metro Public Company Limited in the total loan amount of not exceeding Baht 3,000 Million.

- Principal at the end of the period - Interest receivable at the end of the period

2. Pathum Thani Water Co., Ltd.

- This is an associated company.

- Thai Tap Water Supply Public Company Operation of business of sole Limited holds shares representing concession for water production 98.00 percent. (The Company holds and supply in the areas of Pathum 35.31 percent of shares in Thai Tap Water Thani and Rangsit Supply Public Company Limited.)

062

2.1 The Company - The Company was engaged to supply and carry out construction to improve the capacity of production plant with a value of Baht 125.5 Million and also supply and carry out construction of extension for enhancement of production capacity of production plant with a value of approximately Baht 567.6 Million in the areas of Pathum Thani - Rangsit, scheduled to be completed in 2008.

Annual Report 2008

Transaction Value in 2008

Necessity/Justification

13,250,000

- This transaction is an ordinary course of business.

- The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects.

- This project is of a nature in which the Company has experience and expertise.

- This transaction provides a credit term of 30-45 days.

24,400,000

- This transaction is an ordinary course of business.

- The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects.

- This project requires a team with experience and expertise, and cooperation with all parties concerned so as to achieve the target of the construction.

- This transaction provides a credit term of 30-45 days.

1,583,090,793 238,555,999

256,955,690

- Such loan is extended by the Company at the interest rate of MLR+0.5.

- The loan is scheduled to be repaid after Bangkok Metro Public Company Limited has repaid loans to local financial institutions (pursuant to the conditions of the Sponsor Loan Agreement), provided that all loans are scheduled to be repaid to local financial institutions †by 2024. The Company has a policy to require Bangkok Metro Public Company Limited to repay the loan in full within one year after Bangkok Metro Public Company Limited has repaid loans to financial institutions.

- This is in accordance with the agreement of shareholders in Bangkok Metro Public Company Limited with financial institutions providing financial support.

- This transaction is an ordinary course of business.

- This project is of a nature in which the Company has experience and expertise.

- The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects.

CH. Karnchang Public Company Limited

063

Company Name/ Interested Party

Relationship

Nature of Transaction

3. Thai Tap Water Supply Public Company Limited

- This is an associated company.

- The Company holds shares representing 35.31 percent.

- Four executive directors of the Company, namely, Mr. Plew Trivisvavet, Mr. Narong Sangsuriya, Mr. Prasert Marittanaporn and Mr. Sombat Kitjalaksana, serve as directors in Thai Tap Water Supply Public Company Limited.

3.1 The Company - The Company received dividend from its shareholding in Thai Tap Water Supply Public Company Limited.

- This is a related company.

- The Company holds shares representing 15.32 percent. An executive director of the Company, namely, Mr. Plew Trivisvavet, serves as director in Bangkok Expressway Public Company Limited.

4.1 The Company - The Company received dividend from its shareholding in Bangkok Expressway Public Company Limited.

Operation of concession business for water production and distribution in Samut Sakhon Province and certain areas of Nakhon Pathom Province for the Provincial Waterworks Authority 4. Bangkok Expressway Public Company Limited Operation of concession business for expressway construction and management

4.2 The Company - The Company was engaged to carry out construction, repair and improvement of the expressway system.

4.3 CH. Karnchang-Tokyu Construction Co., Ltd. - The Company received dividend from its shareholding in Bangkok Expressway Public Company Limited.

5. Expert Transport Co., Ltd. Operation of business of large vehicles for transportation

064

- This is a related company.

- Mahasiri Siam Co., Ltd., as a major shareholder in the Company, holds shares representing 90.00 percent.

- Two executive directors of the Company, namely, Mr. Plew Trivisvavet and Mr. Prasert Marittanaporn, serve as directors in Expert Transport Co., Ltd.

5.1 Joint Venture BBCT - Vehicles, such as, trucks, trailers, etc., were sold to Expert Transport Co., Ltd. at the replacement cost.

Annual Report 2008

Transaction Value in 2008

Necessity/Justification

209,441,610

- This project is of a nature in which the Company has experience and could be completed within the scheduled period.

- This transaction is an ordinary course of business.

127,992,025

- This transaction is an ordinary course of business.

133,913,594

- This transaction is an ordinary course of business.

- This project is of a nature in which the Company has experience and could be completed within the scheduled period.

- The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects.

- This transaction provides a credit term of 30-45 days.

10,506,254

- This transaction is an ordinary course of business.

- The Company has earned a return at market price at a rate not lower than the rate of return generally received in other projects.

3,369,939

- This is a sale of vehicles, which the Joint Venture does not use, at the reasonable rate not different from sale to the general public.

- Trade accounts receivable were accrued for a long period due to the economic crisis during 1997-2000 and a portion of revenue must be used for loan repayment. The company could make periodic repayment to the Joint Venture by 2009.

- This transaction provides a credit term of 30-45 days.

CH. Karnchang Public Company Limited

065

Company Name/ Interested Party

Relationship

Nature of Transaction

5.2 The Company - This company took on lease of area and public utilities services from the Company.

5.3 The Company - The Company used the service of transportation of construction materials.

6. Silasaicrete Limited Partnership Operation of business of sale of construction materials, such as, stone, sand, etc.

7. SouthEast Asia Energy Limited

- This is a related legal entity.

- CK. Office Tower Co., Ltd. is a partner with limited liability of not exceeding Baht 5 Million.

- Bang Pa-in Land Development Co., Ltd. is a partner with limited liability of not exceeding Baht 4 Million.

- This is an associated company.

- The Company holds shares representing 38.00 percent.

Operation of concession business - Four executive directors of the Company, for design, development, namely, Mr. Plew Trivisvavet, construction and management of Mr. Narong Sangsuriya, the Hydroelectric Power Project Mr. Prasert Marittanaporn and (Nam Ngum 2) for the government Mr. Ratn Santaannop, serve as of the Lao People没s Democratic directors in SouthEast Asia Energy Limited.

Republic

6.1 The Company - The Company purchased raw materials, such as, stone, sand, for use in construction projects.

7.1 The Company - The Company extended a loan in its capacity as a shareholder under the Shareholders Loan Agreement, which requires that shareholders shall arrange for a loan to South East Asia Energy Limited in the total loan amount of Baht 156.25 Million, at the interest rate of the average MLR of three lending banks of SouthEast Asia Energy Limited, plus one (MLR+1), with the due date of repayment of the principal, together with interest, within 18 months or the date of Financial Closing of the Project, whichever occurs first.

- Principal at the end of the period - Interest receivable at the end of the period 7.2 CH. Karnchang (Lao) Co., Ltd. - SouthEast Asia Energy Limited engaged CH. Karnchang (Lao) Co., Ltd. (in which 100 percent of shares are held by CH. Karnchang Public Company Limited) to carry out construction of the Hydroelectric Power Project (Nam Ngum 2), with a project value of Baht 20,400 Million.

066

Annual Report 2008

Transaction Value in 2008

Necessity/Justification

5,202,600

- Expert Transport Co., Ltd. took on lease for a total area of 1,119 square meters at the rental rate of Baht 148 per square meter and service fee of Baht 222 per square meter, with a lease term of three years from June 1, 2008 to May 31, 2011.

- Expert Transport Co., Ltd. took on lease and paid public utilities fees in the amount of approximately Baht 0.4 Million per month.

- This rental rate is close to market rate, representing an ordinary course of business.

- This transaction provides a credit term of 30-45 days.

1,133,237

- This rate is close to market rate, representing an ordinary course of business.

- This transaction provides a credit term of 30-45 days.

2,593,410

- This price is close to market rate, representing an ordinary course of business.

- The Company has a policy to purchase products from companies in the group, provided that the quoted prices are competitive.

- This transaction provides a credit term of 30-45 days.

- This is considered a financial support based on the shareholding percentage, and the interest rate equals the loan interest rate of the existing creditors of SouthEast Asia Energy Limited for survey and development of new project which would enhance the ca pacity of the Nam Ngum 2 Project and which would be beneficial to the Company as a shareholder.

- In 2009, SouthEast Asia Energy Limited has requested an extension of time for repayment of the loan for another 12 months from the due date until March 2010.

156,250,000 9,125,628

5,162,523,137

- CH. Karnchang (Lao) Co., Ltd. is capable to carry out the works properly and is well-prepared to promptly start the works. In addition, the project value is reasonable, representing an ordinary course of business.

- This transaction provides a credit term of 30 days.

CH. Karnchang Public Company Limited

067

Company Name/ Interested Party 8. Bangkok Concrete Industry Co., Ltd. Operation of business of manufacture, sale of piles and pile driving service

9. Bang Pa-in Land Development Co., Ltd. Operation of Bang Pa-in Industrial Estate

Relationship

Nature of Transaction

- This is a subsidiary.

8.1 The Company - The Company held shares representing - The Company extended a loan for 49.99 percent (whereby the Company sold management in the amount all such shares to other company on of Baht 120 Million.

December 25, 2007).

- Principal at the end of the period - Mahasiri Siam Co., Ltd., as a major - Interest receivable at the end of the period shareholder in the Company, held shares representing 38.75 percent (whereby Mahasiri Siam Co. Ltd. sold all such shares to other company on December 25, 2007).

- Two directors of the Company, namely, Mr. Narong Sangsuriya and Mr. Ratn Santaannop, served as directors in Bangkok Concrete Industry Co., Ltd. and resigned from directorships in Bangkok Concrete Industry Co., Ltd. since March 18, 2008.

- This is a related company.

- CK. Office Tower Co., Ltd., as a major shareholder in the Company, holds shares representing 25 percent.

- Mahasiri Siam Co., Ltd., as a major shareholder in the Company, holds shares representing 25 percent.

9.1 The Company - The Company rendered transportation services and other services, such as, lease of water tank trailers, shovels, backhoe.

9.2 Phrompratharn Construction Limited Partnership - Phrompratharn Construction Limited Partnership was engaged to carry out construction of the tap water production system in Bang Pa-in Industrial Estate, with a project value of Baht 398,582,302, in 2007. (In 2008, there were additional works from the employer, with a value of Baht 33,556,033.)

068

Annual Report 2008

Transaction Value in 2008

Necessity/Justification

- This is considered a provision of financial support to the subsidiary, whereby the Company extended the loan at the interest rate close to market rate, namely, 6.25 - 7.25 percent per annum.

111,416,742 19,026,456

714,313

340,683,774

- The rate is close to market rate, representing an ordinary course of business.

- This transaction provides a credit term of 30-45 days.

- This is an ordinary course of business. This project is of a nature in which the Company has experience and could be completed within the scheduled period. The Company has earned a return at a rate not lower than the rate of return generally received in other projects.

- This transaction provides a credit term of 30-45 days.

CH. Karnchang Public Company Limited

069

Company Name/ Interested Party

Relationship

Nature of Transaction

9.3 The Company - The Company leased out area and charged public utilities fees.

10. Siam Wire Industry Co., Ltd. Operation of business of manufacture and sale of construction materials, such as, post tensioned wire, etc.

070

This is a related company.

10.1 The Company - Three executive directors of the Company, - Siam Wire Industry Co., Ltd. purchased namely, Mr. Narong Sangsuriya, construction materials from the Company.

Mr. Prasert Marittanaporn and Mr. Ratn Santaannop, serve as directors in Siam Wire Industry Co., Ltd. 10.2 Construction Material Supply Co., Ltd. - The Trivisvavet Family held shares - Siam Wire Industry Co., Ltd. purchased representing 5.22 percent, and construction materials from Construction the Trivisvavet Family sold all such shares Material Supply Co., Ltd. to other legal entity on September 5, 2008.

- As at September 13, 2007, the existing directors, who were directors and executives of CH. Karnchang Public Company Limited, resigned from directorships in Siam Wire Industry Co., Ltd.

Annual Report 2008

Transaction Value in 2008

1,422,978

Necessity/Justification

- Bang Pa-in Land Development Co., Ltd. took on lease from the Company for a total area of 174 square meters at the rental rate of Baht 128 per square meter and service fee of Baht 192 per square meter, with a lease term of three years from November 1, 2008 to October 31, 2011.

- Bang Pa-in Land Development Co., Ltd. took on lease and paid public utilities fees in the amount of approximately Baht 0.4 Million per month.

- This rental rate is close to market rate, representing an ordinary course of business.

- This transaction provides a credit term of 30-45 days.

59,356,148

- The Company has a policy to sell certain products to its related companies at reasonable prices.

- This transaction provides a credit term of 30-45 days.

1,105,607

- Construction Material Supply Co., Ltd. is a subsidiary in which CH. Karnchang Public Company Limited holds shares representing 99.99 percent.

- The subsidiary has a policy to sell certain products to its related companies at reasonable prices.

- This transaction provides a credit term of 30-45 days.

CH. Karnchang Public Company Limited

071

11.2 The Opinion of Company Directors and the Audit Committee - The Company没s contracts with its related companies to carry out construction on a subcontract basis are undertaken at reasonable prices, whereby the costs of relevant projects under such contracts were reviewed and deemed appropriate by the Company没s engineers and based on an ordinary course of business.

- Project management fees are derived from transactions where the Company arranged for personnel to various related companies and joint ventures for the purpose of project management, whereby the Company entered into contracts for management fees with those related companies and joint ventures, and such management fees covered salaries, bonuses, benefits and other management expenses.

- Service fees are derived from transactions where the Company leased out to joint ventures and subsidiaries equipment and machinery at the rental rates close to market rates, representing an ordinary course of business.

- Costs of goods are derived from transactions where the Company traded goods with related companies at the price close to market price, representing an ordinary course of business.

- Rentals and public utilities fees are derived from transactions where the Company owns the building for lease-out as office at the rates of rentals and public utilities fees close to market rates, representing an ordinary course of business.

- Accounts receivable in the form of intercompany loans bear interest at an appropriate rate and subject to an ordinary course of business. Connected transactions have been submitted to the meeting of the Board of Directors or the Executive Board, for consideration in respect of their suitability.

11.3 Measures or Procedures for Approval of Connected Transactions The Company has complied with the relevant rules, regulations and requirements of the Securities and Exchange Commission.

As for any transactions that might give rise to conflict of interest and require approval of the Board of Directors and of the Audit Committee, the Company has already complied with such rules, regulations or requirements, whereby the grant of approval for the said connected transactions shall take into account the optimum benefits to the Company, fairness and justifications of the transactions as well as based on market prices in the ordinary course of business. In addition, the interested parties or those who might have conflict of interest in such connected transactions shall not be allowed to participate in the consideration and approval of the connected transactions so as to ensure the fairness and the optimum benefits to the Company. As for any connected transactions falling under the criteria as specified in the regulations, notifications, orders, requirements or rules of the Stock Exchange of Thailand, the Company has complied with the applicable requirements of the Stock Exchange of Thailand.

11.4 Policy or Trend of Future Connected Transactions The Company shall comply with the relevant rules, regulations and requirements of the Securities and Exchange Commission.

As for any transactions that might give rise to conflict of interest and require approval of the Board of Directors and of the Audit Committee, the Company has already complied with such rules, regulations or requirements, whereby the grant of approval for the said connected transactions shall take into account the optimum benefits to the Company, fairness and justifications of the transactions as well as based on market prices in the ordinary course of business.

In addition, the interested parties or those who might have conflict of interest in such connected transactions shall not be allowed to participate in the consideration and approval of the connected transactions so as to ensure the fairness and the optimum benefits to the Company. As for any connected transactions falling under the criteria as specified by the regulations, notifications, orders, requirements or rules of the Stock Exchange of Thailand, the Company shall comply with the applicable requirements of the Stock Exchange of Thailand.

072

Annual Report 2008

Furthermore, the Companyûs related businesses have the shareholding structures as follows: (1) Such businesses with shareholding structure in which the Company and its major shareholders jointly hold shares include Bangkok Metro Public Company Limited, etc. The shareholding structure is based on general investment pattern by which the major shareholders may jointly invest with the Company in those businesses in which the Companyûs investment might be limited by, among others, the Companyûs cash flow, investment policy, etc. The fact that the Companyûs major shareholders also hold shares in those businesses would render the Company to be in an advantageous position in regard to the controlling power so as to ensure that the operation of these businesses would be consistent.

(2) Such businesses with shareholding structure in which the Company holds shares include Bangkok Expressway Public Company Limited, Thai Tap Water Supply Public Company Limited, SouthEast Asia Energy Limited, etc.

(3) Such businesses with shareholding structure in which the Companyûs major shareholders hold shares include CK. Office Tower Co., Ltd., Mahasiri Co., Ltd., Expert Transport Co., Ltd., Silasaicrete Limited Partnership, etc.

The policy on consideration and approval of connected transactions with related businesses shall comply with the procedures that require consideration by the Board of Directors and of the Audit Committee while those who have interest or might have conflict of interest in connected transactions shall not be allowed to participate in the approval of such connected transactions. The criteria by which the Board of Directors and the Audit Committee use as guidelines in the consideration is that related businesses are required to propose competitive products or services in terms of price and quality. On the contrary, should the Company be to render services to any related businesses, the Company is required to propose price and quality in line with standards or market price without giving any favorable benefit to the related businesses, which may result in transfer of benefits to those who might have conflict of interest with the Company.

Future connected transactions in the form of loans tend to be loans among the Company, subsidiaries and joint ventures for the purpose of financial support in business operation so as to help each other, which will be deemed as ordinary course of business.

Consideration and approval for such transactions will be mainly based on the optimum benefits of the Company. However, for the loans between the Company, subsidiaries or joint ventures, and related companies in which the Companyûs major shareholders, directors or executives hold shares, the Company group has no policy to extend any intercompany loans in the future.

However, in the past, the advantage of connected transactions with related businesses is that it gives rise to flexibility in work performance and results in timely delivery of work, which constitute factors material to construction business and continuously support the Companyûs operations.

As for any future connected transactions, the Company group will strictly comply with the regulations of the Office of the Securities and Exchange Commission and the Stock Exchange of Thailand.

CH. Karnchang Public Company Limited

073

Audit Committeeûs Report

The Audit Committee of CH. Karnchang Public Company Limited, by the appointment of the Companyûs Board of Directors, comprises three qualified independent directors, namely, Mr. Vitoon Tejatussanasoontorn, Audit Committee Chairman, Mr. Don Pramudwinai and Mr. Thawansak Sukhawun, Audit Committee Members, and President of Internal Audit as secretary to the Audit Committee.

The Audit Committee has performed under the scope, duties and responsibilities as assigned by the Companyûs Board of Directors, in accordance with the regulations of the Stock Exchange of Thailand, as well as relevant suggestions on various matters, which were fully cooperated by the Companyûs management, internal auditors and auditor. In 2008, the Audit Committee held seven meetings with the executives, internal auditors and auditor as appropriate, which may be summarized as follows: 1. The Audit Committee has reviewed the quarterly financial statements and the 2008 financial statements, by making inquiries and taking into consideration the clarifications of the executives and the auditor in respect of accuracy and completeness of the financial statements and sufficiency of information disclosure, which the Audit Committee is of the opinion in line with the auditor that the said financial statements are fairly accurate in all material aspects and comply with generally accepted accounting standards.

2. The Audit Committee has reviewed the compliance with the provisions of laws and the Companyûs internal control system, and is of the opinion according to the assessment that the internal control system is sufficient, proper and efficient without any material fault in order to support the operations to achieve the specified goal. The Company properly maintains its property and work operations in compliance with the law on securities and exchange and the relevant rules and regulations on business.

The authorization and approval are systematically conducted in accordance with the good internal control system, and the corporate governance is transparent, as well as being amended to efficiently conform to the changed situation.

3. The Audit Committee has reviewed the internal audit, by taking into consideration the mission, scope of work, duties, responsibilities and independence of the Internal Audit in order to conform to the guidelines on internal audit of the Stock Exchange of Thailand, which the Audit Committee is of the opinion that the Companyûs internal audit system is sufficient and proper, including the consideration for approval of the appointment of President of Internal Audit and secretary to the Audit Committee. The Audit Committee is of the opinion that the Companyûs internal audit system is sufficient, proper and efficient in accordance with the international standards.

4. The Audit Committee has reviewed the risk management in order to connect with the internal control system to manage general risks. The Company has engaged a consulting company to jointly prepare a handbook on risk management, by specifying objectives and criteria for assessment of the overall risks and risk levels, risk assessment and rating, determination of management plan on existing risks, and preparation of report on risk assessment and management plan on existing risks, which the Audit Committee is of the opinion that the Companyûs risk management system is efficient and effective, by determining risk appetite and risk tolerance, and criteria and procedures, and indicating, assessing, managing and monitoring risks on a quarterly basis, as well as regularly reviewing the risks to be in line with the current situation.

5. The Audit Committee has reviewed and provided an opinion on the connected transactions or transactions which may have conflict of interest, including disclosure of such transactions in accordance with the regulations of the Stock Exchange of Thailand and the Office of the Securities and Exchange Commission, which the auditor is of the opinion that the transactions with material aspects executed with the related companies have already been disclosed and shown in the financial statements and notes to the financial statements. The Audit Committee is of the opinion in line with the auditor, as well as providing an opinion that such transactions are reasonable and for the optimum benefit to the Companyûs business operations, and the information disclosure is accurate and complete.

6. The Audit Committee has considered selecting the auditor for appointment and proposing the remuneration of the auditor, by taking into account the performance of the auditor in the previous year, reliability, capability to provide service and consultation on accounting standards, auditing and certification of the financial statements in a timely manner, and has then provided an opinion to the Companyûs Board of Directors to seek approval of the Shareholdersû Meeting for appointment of either Miss Siraporn Ouaanunkun or Mr. Supachai Phanyawattano or Mr. Narong Puntawong of Ernst & Young Office Limited as the Companyûs auditor for 2009, with the auditing fee in the amount of not exceeding Two Million Three Hundred Thousand Baht.

074

Annual Report 2008

Financial Position and Operational Results The operational results for the year ended December 31, 2008 compared to that of the same period ended December 31, 2007 and the balance sheet as at December 31, 2008 compared to that as at December 31, 2007 in support of review of the financial statements and consolidated financial statements should be read with the çAudit Report on Consolidated Financial Statements as at December 31, 2007é.

1

Consolidated Income Statements for the Year Ended December 31, 2008 Compared to that of the Same Period Ended December 31, 2007

1.1 Total revenues amounted to Baht 14,510.57 Million, which decreased from the same period of the previous year by Baht 407.51 Million, or representing 2.73 percent, due to the fact that the large-sized projects are nearly completed, thereby causing slight progress in construction, with the details as follows: ë Core revenues comprise revenue from construction, sales of construction materials, and project management amounting to Baht 13,230.06 Million, representing 91.18 percent of total revenues, which decreased by Baht 334.53 Million or representing 2.45 percent, due to the fact that the large-sized projects are nearly completed, thereby causing slight progress in construction, including financial crisis in the United States of America, fluctuation of materials prices, including local political problems, which caused the volume of investments in new projects from government sector and private sector to decline, and as such, core revenues decreased, with the details as follows: - Revenue from construction for 2008 decreased by Baht 291.41 Million or presenting 2.17 percent.

- Revenue from sales of construction materials decreased by Baht 35.75 Million or representing 41.86 percent.

- Revenue from project management decreased by Baht 7.39 Million or representing 18.42 percent. ë Rental income and transportation income amounted to Baht 48.69 Million, representing 0.34 percent of total revenues, which increased by Baht 23.17 Million or representing 46.11 percent, namely, increased revenues from rental service and transportation and equipment and machinery for the Nam Ngum Dam Construction Project in Lao Peopleûs Democratic Republic. ë Other income amounted to Baht 1,231.83 Million, representing 8.48 percent of total revenues, which decreased by Baht 96.14 Million or representing 7.24 percent, comprising: - Interest income of 2008 decreased from that of 2007 by Baht 206.95 Million or representing 44.81 percent, due to the fact that in 2007, the Company adjusted interest rates extended by the Company to Joint Venture CKET Consortium and Joint Venture CKET because of extension of time for debt repayment.

- Dividend income and profit sharing from jointly controlled entities amounted to Baht 138.64 Million.

- Gain on exchange rate amounted to Baht 78.96 Million.

- Gain on sales of ordinary shares in Thai Tap Water Supply Public Company Limited in respect of current investments amounted to Baht 8.12 Million.

- Gain on sales of investments in associated companies amounted to Baht 278.66 Million or representing 1.92 percent of total revenues, which decreased by Baht 352.86 Million or representing 55.87 percent, namely, gain on sales of investment in ordinary shares in Thai Tap Water Supply Public Company Limited, while in 2007, gain on sales of investments in ordinary shares in Pathum Thani Water Co., Ltd. amounted to Baht 631.5 Million.

- Revenue from reversal of provision for loss on investments in joint ventures amounted to Baht 408.12 Million, representing 2.81 percent of total revenues, resulting from decrease in liabilities for which the Company must take responsibility for Joint Venture BBCD under the mutual agreement with joint venture partner in relation to sharing of liabilities of the Joint Venture.

- Miscellaneous and others amounted to Baht 64.19 Million.

CH. Karnchang Public Company Limited

075

1.2 Total expenses amounted to Baht 13,035.13 Million, which decreased by Baht 617.82 Million or representing 4.53 percent, due to the fact that: ë Cost of construction, sales of construction materials and services amounted to Baht 11,847.82 Million, representing 81.65 percent of total revenues, which decreased from that of 2007 by Baht 589.75 Million or representing 4.74 percent, resulting from the fact that the large-sized projects with high cost of construction have been already delivered, such as, the construction of the Bang Pli - Suksawad Expressway (Southern Ring Road) and the Makkasan Drainage Tunnel Project. ë Selling and administrative expenses amounted to Baht 1,187.31 Million, representing 8.18 percent of total revenues, which increased from that of 2007 by Baht 101.95 Million or representing 9.39 percent. Most of increased expenses were expenses for maintenance of machinery for the Companyûs construction works.

1.3 Finance cost amounted to Baht 824.26 Million, representing 5.68 percent of total revenues, which decreased from that of 2007 by Baht 119.26 Million or representing 12.64 percent, due to the Companyûs repayment of loan in full for the Bang Pli - Suksawad Expressway Construction Project (Southern Ring Road) which was already delivered to the Expressway Authority of Thailand in October 2007, including decreased finance costs due to issuance of Baht 2,000.00 Million debentures in April 2008 at the interest rate of 5 percent per annum for operations and investments in replacement of banksû loans at higher interest rates.

1.4 Share of loss from investments in associated companies amounted to Baht 26.02 Million, representing 0.18 percent of total revenues, which decreased from that of 2007 by Baht 211.88 Million or representing 89.06 percent, due to the fact that Thai Tap Water Supply Public Company Limitedûs net operating income was higher than the total operating losses of Bangkok Metro Public Company Limited (due to change in conditions in the loan agreement with the group of domestic lenders in 2008) and SouthEast Asia Energy Limited.

1.5 Corporate income tax amounted to Baht 52.76 Million, representing an increase by Baht 2.48 Million or 4.94 percent from 2007, due to increase in operating income of subsidiaries and jointly controlled entities.

1.6 Net income before minority interests of the subsidiaries for the year ended December 31, 2008 amounted to Baht 572.40 Million, which increased from Baht 538.96 Million of the same period of 2007, or representing 1,611.45 percent, comprising: ë Equity holders of the parent company amounted to Baht 544.74 Million, representing an increase of Baht 530.20 Million or 3,647.28 percent. ë Minority interests of the subsidiaries amounted to Baht 27.66 Million, representing an increase of Baht 8.76 Million or 46.31 percent.

1.7 Earnings per share (EPS) for the year ended December 31, 2008 amounted to Baht 0.38 per share, compared to Baht 0.01 per share of 2007.

2.

Consolidated Balance Sheets as at December 31, 2008 Compared to Consolidated Balance Sheets as at December 31, 2007

2.1 Total assets amounted to Baht 25,873.21 Million, representing an increase of Baht 1,397.44 Million or 5.71 percent as compared to that as at December 31, 2007, with the details of significant increases and decreases as follows: ë Cash and cash equivalents amounted to Baht 2,556.66 Million, which decreased by Baht 125.64 Million or representing 4.68 percent. ë Current investments amounted to Baht 12.73 Million, which decreased by Baht 306.59 Million or representing 96.01 percent, as the Company sold all current investments in Thai Tap Water Supply Public Company Limited. ë Trade accounts receivable amounted to Baht 2,111.22 Million, which increased by Baht 333.29 Million or representing 18.75 percent, as a result of the acceleration of construction and delivery of the existing projects. ë Construction contracts in progress amounted to Baht 3,066.86 Million, which increased by Baht 168.43 Million or representing 5.81 percent, due to the fact that the Company accelerated the construction. ë Inventories and supplies for construction-net amounted to Baht 1,099.45 Million, which increased by Baht 471.62 Million or representing 75.12 percent. ë Advance payment to subcontractors-net amounted to Baht 1,362.00 Million, which increased by Baht 313.65 Million or representing Baht 29.92 percent.

076

Annual Report 2008

ë Advance for construction of subsidiaryûs project amounted to Baht 12.36 Million, which increased by Baht 6.88 Million or representing 125.55 percent. ë Other current assets amounted to Baht 525.73 Million, which decreased by Baht 177.27 Million or representing 25.22 percent. ë Restricted bank deposits amounted to Baht 322.44 Million, which increased by Baht 21.34 Million or representing 7.09 percent, since these bank deposits were placed as security for credit with banks. ë Long-term loans to jointly controlled entities and interest receivable amounted to Baht 236.46 Million, which increased by Baht 10.45 Million or representing 4.62 percent. ë Long-term loans to associated companies and interest receivable amounted to Baht 1,987.02 Million, which increased from that of 2007 by Baht 798.08 Million or representing 67.13 percent, namely, loan under the Subordinated Loan Agreement which the Company as shareholder extended to Bangkok Metro Public Company Limited in the amount of Baht 3,000.00 Million, and loan under the Shareholdersû Loan Agreement in the amount of Baht 156.25 Million by the Company to SouthEast Asia Energy Limited (çSEANé) in order to conduct the feasibility study and development of the Nam Bak 1-2 Hydroelectric Power Project. ë Long-term loans to subcontractors and interest receivable amounted to Baht 268.15 Million, due to the fact that the Board of Directors granted an extension of time for loan repayment for subcontractors, namely, Modern Construction Material Co., Ltd. and Best Plan Technology Co., Ltd. owed to Joint Venture CKAE Consortium, subject to repayment in installments on a quarterly basis which shall be made in full by 2010. In this regard, such loans were secured by shares listed on the Stock Exchange of Thailand, certain land title deeds as well as the personal guarantee (security value of Baht 246 Million in proportion of participation in the Joint Venture). ë Long-term loans to other companies and interest receivable amounted to Baht 1,457.02 Million, which increased by Baht 26.59 Million or representing 1.86 percent as the Board of Directors granted an extension of time for debt repayment for Rayong Real Estate Co., Ltd. and Private Inter Construction Co., Ltd. owed to Joint Venture CKET, subject to repayment in installments on a quarterly basis which shall be made in full by March 2015. In this regard, such loans were secured by certain land title deeds and the personal guarantee (security value of Baht 1,588.9 Million in proportion of participation in the Joint Venture). ë Investments in associated companies-net amounted to Baht 4,727.69 Million, which increased from that of 2007 by Baht 208.67 Million or representing 4.59 percent, with the details as follows: - Investment in CH. Karnchang (Qatar) Contracting Co., Ltd. as at December 31, 2008 remained unchanged from that of 2007.

- Investment in Bangkok Metro Public Company Limited (çBMCLé) as at December 31, 2008 based on the equity method amounted to Baht 1,182.94 Million, which decreased from that of 2007 by Baht 352.61 Million, whereby the Companyûs investment in BMCL represented 24.61 percent of the paid-up registered capital.

- Investment in Thai Tap Water Supply Public Company Limited (çTTWé) as at December 31, 2008 based on the equity method amounted to Baht 2,528.33 Million, which increased from that of 2007 by Baht 171.85 Million, whereby the Companyûs investment in TTW represented 35.31 percent of the paid-up registered capital.

- Investment in SouthEast Asia Energy Limited (çSEANé) as at December 31, 2008 based on the equity method amounted to Baht 1,016.43 Million, which increased from that of 2007 by Baht 359.43 Million, resulting from additional payment of shares. On January 2, 2008, SEAN decreased its registered capital from Baht 8,809.00 Million to Baht 6,606.75 Million to be the share capital in Nam Ngum Power 2 Company Limited as SEANûs subsidiary. As a result, the Companyûs shareholding in SEAN increased from 28.50 percent to 35.31 percent of the paid-up registered capital. ë Other long-term investments-net were Baht 2,243.61 Million, representing a decrease by Baht 674.61 Million or 23.12 percent as a result of changes in value of investment at market price, namely, ordinary shares in Bangkok Expressway Public Company Limited as at December 31, 2008 which were priced lower than cost. ë Long-term trade accounts receivable totaled Baht 649.96 Million, representing an increase by Baht 336.35 Million or 107.25 percent as the Board of Directors granted an extension of time for accounts receivable for construction of Wangchan Golf Course in the name of Rayong Real Estate Co., Ltd. owed to the Company (construction cost and loan amounted to Baht 1,773 Million: security value amounted to Baht 1,588.9 Million). ë Other non-current assets totaled Baht 3,091.31 Million, representing a decrease by Baht 157.70 Million or 5.38 percent.

CH. Karnchang Public Company Limited

077

2.2 Total liabilities amounted to Baht 20,568.91 Million, as compared to the end of 2007, representing an increase by Baht 1,784.23 Million or 9.50 percent, with the details of significant increases and decreases as follows: ë Bank overdrafts and short-term loans from financial institutions amounted to Baht 2,674.27 Million, representing an increase

by Baht 9.60 Million or 0.36 percent. ë Trade accounts payable and notes payable amounted to Baht 2,074.06 Million, representing an increase by Baht 232.28 Million or 12.61 percent, as a result of the acceleration of construction in various projects. ë Current portion of long-term loans amounted to Baht 378.70 Million, representing a decrease by Baht 277.04 Million or 42.25 percent. ë Accounts payable and loans from related parties amounted to Baht 2.11 Million, representing a decrease by Baht 2,963.46 Million or 99.93 percent, as a result of Bilfinger Berger AGûs release of the loans borrowed by Joint Venture BBCD. ë Advances received from employers and deferred construction revenue amounted to Baht 1,438.90 Million, representing an increase by Baht 153.41 Million or 11.93 percent, as a result of the Companyûs receipt of advances of the Bang Sue Environmental Education and Conservation Project of Bangkok Metropolitan Administration and Wastewater Treatment System (First Contract). ë Hire purchase creditors totaled Baht 209.65 Million, representing a decrease by Baht 90.75 Million or 30.21 percent. ë Long-term loans-net of current portion increased by Baht 3,191.78 Million or 1,276.71 percent, as a result of the Companyûs acceptance of conversion of Joint Venture BBCDûs debts owed to three commercial banks into the Companyûs debts. ë Debentures totaled Baht 8,091.70 Million, representing an increase by Baht 297.68 Million or 3.82 percent. In April 2008, the Company issued the debentures in the amount of Baht 2,000.00 Million at the interest rate of 5 percent per annum to replace the debentures due in October 2007 in the amount of Baht 1,700.00 Million. ë Long-term accrued interest amounted to Baht 342.53 Million. The Company accepted the transfer of Joint Venture BBCDûs long-term accrued interest owed to commercial banks as the Companyûs debts. ë Provision for loss on investments in joint ventures amounted to Baht 1,045.15 Million, comprising: - When the Company accepted the transfer of Joint Venture BBCDûs loans from three commercial banks as the Companyûs debts, the Company would be required to gradually extend loans to Joint Venture BBCD for repayment of debts to Bilfinger Berger AG (çBBé) approximately Euro 13.50 Million under the loan repayment schedule which shall be made in full by 2010, whereby BB agreed to release the loans owed by Joint Venture BBCD in the amount of approximately Euro 70.00 Million.

- The Company therefore recorded the liabilities for contingent interest on loans from banks which were transferred from Joint Venture BBCD and the remaining debts of Joint Venture BBCD in the amount of Euro 13.50 Million as provision for loss on investments in joint ventures, net of gain on the release of debts by BB. 2.3 Shareholdersû equity as at December 31, 2008 amounted to Baht 5,304.30 Million, representing a decrease by Baht 386.78 Million or 6.80 percent from the end of 2007, with the details of significant increases and decreases as follows: ë Unrealized gain (loss) on changes in value of investments represents revaluation of investment at market price, amounting to Baht 377.74 Million, representing a decrease by Baht 761.86 Million or 198.34 percent. In 2008, the investment in Bangkok Expressway Public Company Limited was reduced (in 2008, BECL closing price = Baht 17.30 per share, and in 2007, BECL closing price = Baht 23.70 per share). ë Retained earnings increased from the net operating income of Baht 269.79 Million in 2008 due to higher operating income in 2008.

2.4 The Companyûs net debt to equity ratio as at December 31, 2008 in the consolidated financial statements was 2.24, which improved from 2007 in which the net debt to equity ratio was 1.47.

078

Annual Report 2008

3.

Cash Flow Statements for the Year Ended December 31, 2008 Compared to the Same Period Ended December 31, 2007

In the cash flow statements for the year ended December 31, 2008, the Companyûs cash decreased during the year in the amount of Baht 125.64 Million, and when combined with cash brought forward from 2007 in the amount of Baht 2,682.30 Million, the cash balance carried forward as at December 31, 2008 amounted to Baht 2,556.66 Million, with the details as follows: 3.1 Net cash flows used in operating activities after interest expenses and corporate income tax amounted to Baht 805.65 Million, as a result of increase in inventories and supplies for construction in order to accelerate the construction, and interest payment of the Companyûs loan.

3.2 Net cash flows used in investing activities amounted to Baht 986.31 Million, with the followings essence: ë The Company made repayment of debt instruments in the amount of Baht 1,520.00 Million. ë The Company extended loans to its associated companies, comprising: - SouthEast Asia Energy Limited (çSEANé) under the Shareholdersû Loan Agreement in the amount of Baht 156.25 Million, in order to conduct the feasibility study and development of the Nam Bak 1-2 Hydroelectric Power Project.

- Bangkok Metro Public Company Limited (çBMCLé) under the Subordinated Loan Agreement for another Baht 580.00 Million. ë The Company increased its investments in an associated company, namely, SouthEast Asia Energy Limited (çSEANé). ë The Company additionally invested in long-term investments, namely, ordinary shares in Bangkok Expressway Public Company Limited.

3.3 Net cash flows from financing activities amounted to Baht 1,659.98 Million, as a result of the Companyûs new issue of Debentures No. 1/2008 in the amount of Baht 2,000.00 Million, and loan drawdown for the construction project signed in 2008, namely, the Bang Sue Environmental Education and Conservation Project of Bangkok Metropolitan Administration and Wastewater Treatment System (First Contract). In addition, the Company accepted the conversion of Joint Venture BBCDûs debts owed to three commercial banks into the Companyûs debts. At the same time, the Company received repayment of loans from its related businesses in the amount of Baht 62.67 Million, made repayment of the loans, upon due, in the amount of Baht 1,700.00 Million and made dividend payment in the amount of Baht 216.90 Million, and its subsidiaries made dividend payments in the amount of Baht 18.00 Million.

CH. Karnchang Public Company Limited

079

Attachment Details of the Company没s Directors, Executives and Authorized Persons Details of the Company没s Directors, Executives and Authorized are as follows: Name-Surname/Position

Age (Years)

Education

1. Mr. Aswin Kongsiri Chairman

63

- B.A. (Hons.) in Philosophy, Politics and Economics, Oxford University, England - Chairman 2000 Course (class 5/2001) Thai Institute of Directors Association - Director Certification Program (DCP 11/2001) Thai Institute of Directors Association

2. Mr. Plew Trivisvavet Director Chairman of the Executive Board Nomination Committee Member Remuneration Committee Member Corporate Governance and Risk Management Committee Member Authorized Signatory Director 3. Mr. Vitoon Tejatussanasoontorn Director Chairman of the Audit Committee Chairman of the Nomination Committee Chairman of the Remuneration Committee Chairman of the Corporate Governance and Risk Management Committee

63

- M.Sc. (Electrical Engineering), Osaka University, Japan - B.A. (Electrical Engineering), Osaka University, Japan - Director Certification Program (DCP 50/2004) Thai Institute of Directors Association - Finance for Non-finance Director (FND) course 2004 Thai Institute of Directors Association - Capital Market Academy Leadership Program, Capital Market Academy (CMA Course), Class 4/2007 - B.A. in Commerce, Thammasat University - Director Certification Program (DCP 2/2000) Thai Institute of Directors Association - IOD Chartered Director, Thai Institute of Directors Association (class 1/2007)

080

68

Proportion of Family Shareholding Relationship (%) Among Executives -

- None -

1.44

Mrs. Saikasem没s husband

0.03

- None -

Annual Report 2008

Experience in the Last Five Years Position

Period

September 2007- Present 2005-Present 2005-Present 2001-Present 1999-Present 1994-Present 1993-Present 1981-Present 2006-2008 1999-2003 December 2007-Present 2006-Present 2004-Present February 2003-Present 1998-Present 1998-Present 1994-Present 2004-2008 December 2007-Present September 2007-Present 2005-Present 2002-Present 2001-Present 1999-Present 1991-Present 1986-Present February 2003September 2007

Chairman Director and Executive Director Director and Chairman of the Risk Management Committee and Chairman of the Nomination Committee Director and Nomination and Remuneration Committee Member Director and Chairman of the Audit Committee Independent Director Director, Audit Committee Member and Nomination Committee Member Director and Audit Committee Member and Nomination and Remuneration Committee Member Member of the National Legislative Assembly Director and Executive Director Corporate Governance and Risk Management Committee Member Director Director Nomination Committee Member and Remuneration Committee Member Chairman of the Board of Directors and Chairman of the Executive Board Director and Chairman of the Executive Board President and Chief Executive Officer Director Chairman of the Corporate Governance and Risk Management Committee Chairman of the Nomination Committee and Chairman of the Remuneration Committee Director, Audit Committee Member, Nomination Committee Member and Remuneration Committee Member Advisor of the Federation of Thai Industries of Samutprakarn Province Vice Chairman of Thai Chamber of Commerce of Samutprakarn Province Director and Audit Committee Chairman Deputy Senior Managing Director Director and Executive Director Nomination Committee Member and Remuneration Committee Member

CH. Karnchang Public Company Limited

Organization/Company/ Business CH. Karnchang Plc. Krung Thai Bank Plc. Bangkok Aviation Fuel Services Plc. Electricity Generating Plc. The Oriental Hotel (Thailand) Plc. CH. Karnchang Plc. Thai Reinsurance Plc. Padaeng Industry Plc. The National Legislative Assembly Siam Commercial Bank Plc. CH. Karnchang Plc. Thai Tap Water Supply Plc. SouthEast Asia Energy Limited CH. Karnchang Plc. Bangkok Metro Plc. Bangkok Expressway Plc. CH. Karnchang Plc. BMCL Network Limited CH. Karnchang Plc. CH. Karnchang Plc. Bangkok Metro Plc.

CH. Karnchang Plc. Thai Asahi Glass Plc. Sakata-Thai Corporation Ltd. CH. Karnchang Plc.

081

Attachment Details of the Company没s Directors, Executives and Authorized Persons Details of the Company没s Directors, Executives and Authorized are as follows: Name-Surname/Position

Age (Years)

4. Mr. Don Pramudwinai Director Audit Committee Member

58

5. Mr. Thawansak Sukhawun Director Audit Committee Member Corporate Governance and Risk Management Committee Member

71

6. Mr. Pavich Tongroach Director

62

7. Mr. Narong Sangsuriya Director Executive Director Nomination Committee Member Remuneration Committee Member Authorized Signatory Director

64

082

Education

Proportion of Family Shareholding Relationship (%) Among Executives

- M.A. (International Relations), Tufts University, U.S.A. - M.A. (International Relations), University of California, Los Angeles, U.S.A. - M.A. (Political Science) (Hons.) University of California, Los Angeles, U.S.A. - M.A. in Political Science with the Certificate in International Affairs, University of North Carolina at Chapel Hill, NC., U.S.A. - Bachelor of Arts, Chulalongkorn University - Certificate of Modern Management, National Defence College (NDC) of Thailand - Director Certification Program (DCP 61/2005) Thai Institute of Directors Association - Doctor of Philosophy (Ph.D.) in Pharmacology, (The School of Pharmacy, The University of London, U.K.) - Post-doctoral Research at Faculty of Medicine, University of Tokyo (specialisation : neuronal signaling & learning model) - Master of Science (M.Sc.) in Neurobiology (Bedford & Chelsea Colleges, The University of London, U.K.) - Bachelor of Pharmacy Mahidol University - Director Accreditation Program (DAP) 2004 Thai Institute of Directors Association

0.01

- None -

-

- None -

-

- None -

- Bachelor of Engineering (Civil), Chulalongkorn University - Director Certification Program (DCP 54/2005) Thai Institute of Directors Association

0.11

- None -

Annual Report 2008

Experience in the Last Five Years Position

Period

Organization/Company/ Business

2007-Present 1994-Present 2004-2007 2001-2004 1999-2000 December 2007-Present 2000-Present 1989-1998

Ambassador Director and Audit Committee Member Ambassador Ambassador Director-General of the Department of Information Corporate Governance and Risk Management Committee Member Director and Audit Committee Member Director General Deputy Director General

In The United Nations, New York City CH. Karnchang Plc. In Belgium In The People没s Republic of China Ministry of Foreign Affairs CH. Karnchang Plc. CH. Karnchang Plc. Thai News Agency Mass Communication Organization of Thailand (M.C.O.T.)

2007-Present Present Present Present Present Present 2005-2006 2005 2005-September 2006

Director President of the Council President President Emeritus President Advisory member, Senate没s Research and Development Committee President President Acting Chairman of the Administrative Board

2005-September 2006

Chairman of Administrative Board

June 2004-September 2006 June 2004-September 2006 September 2007-Present 2004-Present 2001-Present 2000-Present 1994-Present 1994-2000

Secretary General, Commission on Higher Education Member, Education Council Nomination Committee Member and Remuneration Committee Member Director Director and Senior Executive Vice President: Operation Group Director Executive Director Director and Senior Executive Vice President: Construction Group

CH. Karnchang Plc. Nakorn Pathom Rajabhat University The Pharmacy Council Thai Neuroscience Society Mahasarakham University The National Legislative Assembly Nakorn Phanom University Princess of Narathiwat University National Institute of Academic Testing Service Office of Higher Education Financial Reform Ministry of Education

CH. Karnchang Public Company Limited

CH. Karnchang Plc. SouthEast Asia Energy Limited CH. Karnchang Plc. Thai Tap Water Supply Plc. CH. Karnchang Plc. CH. Karnchang Plc.

083

Attachment Details of the Company没s Directors, Executives and Authorized Persons Details of the Company没s Directors, Executives and Authorized are as follows: Name-Surname/Position

Age (Years)

8. Mrs. Saikasem Trivisvavet Director Executive Director Authorized Signatory Director 9. Mr. Ratn Santaannop Director Executive Director Authorized Signatory Director

63

- Bachelor of Arts, Chulalongkorn University - Director Certification Program (DCP 43/2004) Thai Institute of Directors Association

65

10. Mr. Prasert Marittanaporn Director Executive Director Authorized Signatory Director

11. Mr. Sombat Kitjalaksana Director Authorized Signatory Director

084

Education

Proportion of Family Shareholding Relationship (%) Among Executives 0.28

Mr. Plew没s wife

- Bachelor of Engineering (Civil), Chulalongkorn University - Director Certification Program (DCP 88/2007) Thai Institute of Directors Association

-

- None -

52

- Master of Business Administration, Kasetsart University - Bachelor of Accounting, Chulalongkorn University - Director Certification Program (DCP 54/2005) Thai Institute of Directors Association

-

- None -

51

- PhD. of Engineering (Soil Mechanic), University of Innsbruck, Austria - Master of Engineering (Civil), Chulalongkorn University - Bachelor of Engineering (Civil), Chulalongkorn University - Director Accreditation Program (DAP 36/2005) Thai Institute of Directors Association - Director Certification Program (DCP 81/2006) Thai Institute of Directors Association

0.07

- None -

Annual Report 2008

Experience in the Last Five Years Position

Period

Organization/Company/ Business

2001-2008 1994-2008 1994-2000

Executive Vice President: Purchasing Director and Executive Director Senior Vice President: Procurement

CH. Karnchang Plc. CH. Karnchang Plc. CH. Karnchang Plc.

September 2007-Present 2007-Present 2006-Present 2001-Present 2007-March 2008 2005-September 2007 1994-2000 1984-1993 September 2007-Present 2006-Present 2001-Present 2004-Present 2000-Present 2005-September 2007 1994-2000 2006-Present 2004-Present 2001-Present 2000-Present 2005-September 2007 2004-2008

Executive Director Director Director Executive Vice President: Construction 1 Director Director First Senior Vice President: Project Construction Group Senior Vice President: Project Construction Group Executive Director Director Executive Vice President : Accounting and Finance Director Director Director Senior Vice President: Accounting and Finance Director Director, Executive Director and Managing Director Executive Vice President: Business Development Director Director Director Director Director Senior Vice President: International Business

CH. Karnchang Plc. BJT Water Co., Ltd. CH. Karnchang Plc. CH. Karnchang Plc. Bangkok Concrete Industries Co., Ltd. Pathum Thani Water Co., Ltd. CH. Karnchang Plc. Italian-Thai Development Plc. CH. Karnchang Plc. CH. Karnchang Plc. CH. Karnchang Plc. SouthEast Asia Energy Limited Thai Tap Water Supply Plc. Pathum Thani Water Co., Ltd. CH. Karnchang Plc. CH. Karnchang Plc. Bangkok Metro Plc. CH. Karnchang Plc. Thai Tap Water Supply Plc. Pathum Thani Water Co., Ltd. Metro Mall Development Limited BMCL Network Limited Triads Networks Co., Ltd CH. Karnchang Plc.

1994-2000

CH. Karnchang Public Company Limited

085

Attachment Details of the Company没s Directors, Executives and Authorized Persons Details of the Company没s Directors, Executives and Authorized are as follows: Name-Surname/Position

Age (Years)

Education

12. Mr. Anukool Tuntimas Director Executive Director Authorized Signatory Director

41

0.27

- None -

13. Mr. Viboon Mongkolpiyathana

58

- Doctor of Business Administration, University of South Australia - Master of Law, Chulalongkorn University - Master of Business Administration, Kasetsart University - Barrister at Law, The Institute of Legal Education Thai Bar Association - Bachelor of Law, Chulalongkorn University - Director Certification Program (DCP 43/2004) Thai Institute of Directors Association - Understanding of Fundamental of Financial Statements Thai Institute of Directors Association - Finance for Non-finance Director Thai Institute of Directors Association - Audit Committee Program Class 20/2007 Thai Institute of Directors Association - Bachelor of Engineering (Civil), Songklanakarin University

0.02

- None -

14. Mr. Samai Paiboon

64

- Bachelor of Engineering (Civil), Chulalongkorn University

0.01

- None -

086

Proportion of Family Shareholding Relationship (%) Among Executives

Annual Report 2008

Experience in the Last Five Years Position

Period

September 2007-Present 2006-Present 2004-Present 2001-Present 2004-2008

Organization/Company/ Business

2004-2006

Executive Director Director Director and Executive Director Executive Vice President: Human Resource and General Administration Director Director Director Director and Vice President, Academic Affairs

CH. Karnchang Plc. CH. Karnchang Plc. Bangkok Metro Plc. CH. Karnchang Plc. Metro Mall Development Limited Triads Networks Co., Ltd. BMCL Network Limited Lawyers Association of Thailand

2001-Present 1997-2000 1994-1996

Executive Vice President: Construction 2 Project Manager Engineering Manager

2001-Present 1994-2000

Executive Vice President: Engineering Senior Vice President: Civil Engineering and Architecture

CH. Karnchang Plc. CH. Karnchang Plc. CH. Karnchang-Tokyu Construction Co., Ltd. CH. Karnchang Plc. CH. Karnchang Plc.

CH. Karnchang Public Company Limited

087

Financial Statement Report 08 ë Report of Independent Auditor ë Financial Statements ë Notes to Consolidated Financial Statements

088

Annual Report 2008

Report of Independent Auditor CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities report and consolidated financial statements 31 December 2008 and 2007

To the Shareholders of CH. Karnchang Public Company Limited I have audited the accompanying consolidated balance sheets of CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities as at 31 December 2008 and 2007, the related consolidated statements of income, changes in shareholdersû equity and cash flows for the years then ended, and the separate financial statements of CH. Karnchang Public Company Limited for the same periods. These financial statements are the responsibility of the management of the Company, its subsidiaries and its jointly controlled entities as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities and of CH. Karnchang Public Company Limited as at 31 December 2008 and 2007, and the results of their operations, and cash flows for the years then ended, in accordance with generally accepted accounting principles.

Without qualifying my opinion on the financial statements, I draw attention to the matter as discussed in Note 26 to the financial statements, in 2000 Joint Venture BBCD had claimed for payment of additional construction costs from the Expressway and Rapid Transit Authority of Thailand (the employer). The employerûs consulting engineer considered the joint ventureûs claims and issued a letter confirming its acceptance of the additional costs. Subsequently, the Arbitral Tribunal issued its award, ruling that the employer was to pay the joint venture for such additional costs and accrued interest. Consequently, the joint venture recorded such amounts as assets and income in the financial statements of 2001. The Groupûs proportionate interest in such amounts is approximately Baht 2,500 million.

As a result of the delay in the payment, the joint venture filed a lawsuit against the employer with the Civil Court to enforce compliance with the arbitral award. On 30 December 2003, the court ruled in favor of the joint venture, ordering compliance with the arbitral award requiring the Expressway and Rapid Transit Authority of Thailand (the employer) to pay the joint venture in accordance with the arbitral award. Subsequently, in January 2004, the employer appealed the ruling to the Supreme Court of Thailand. On 15 February 2007 the Supreme Court handed down a judgment reversing that of the Civil Court enforcing the arbitral award requiring the employer to make payments to the Joint Venture BBCD. The joint venture therefore recorded allowance for doubtful accounts for the full amount of the account receivable recorded in respect of the claim for additional costs as an expense in the income statement of 2006, with the Groupûs proportionate interest in such allowance being approximately Baht 2,500 million. Subsequently, after the management of the Company carefully reviewed the details of the Supreme Courtûs judgment, on 11 February 2008 a lawsuit was filed against the employer with the Civil Court, to recover costs paid by the Joint Venture BBCD from the employer, on the grounds of undue enrichment. Such costs and accrued interest calculated up to the date of filing of the lawsuit amounted to approximately Baht 3,400 million (per the Groupûs proportionate interest). Currently, the case is in the process of consideration of the Civil Court.

Ernst & Young Office Limited Bangkok: 27 February 2009

CH. Karnchang Public Company Limited

(Siraporn Ouaanunkun) Certified Public Accountant (Thailand) No. 3844 089

Balance Sheets CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities As at 31 December 2008 and 2007

(Unit : Baht) Consolidated financial statements Separate financial statements

Note Assets Current assets Cash and cash equivalents Current investments Trade accounts receivable Related parties, net Unrelated parties, net Accounts receivable and loans to related parties, net Construction contracts in progress Inventories and supplies for construction, net Advance payment to subcontractors, net Advance for construction of subsidiary没s project Current portion of loans to subcontractors and interest receivable Current portion of long-term loans to other companies and interest receivable Other current assets Prepaid expenses Accrued income Interest receivable Refundable input tax, net Unbilled input tax Withholding tax deducted at source Others Total current assets Non-current assets Restricted bank deposits Long-term loans to jointly controlled entities and interest receivable Long-term loans to associated companies and interest receivable Loans to subcontractors and interest receivable, net of current portion Long-term loans to other companies and interest receivable, net of current portion Investments in subsidiaries, net Investments in joint ventures, net Investments in associated companies, net Other long-term investments, net Long-term accounts receivable Related party Unrelated party Property, plant and equipment, net Investments in land, net Intangible assets, net Accounts receivable - claims for additional costs Less: Allowance for doubtful accounts Accounts receivable - claims for additional costs, net Other non-current assets Withholding tax deducted at source Deposits Others Total non-current assets Total assets

2008

2007

2008

2007

7, 15

2,556,659,169 12,732,450

2,682,298,568 319,320,076

104,297,563 12,732,450

1,174,044,530 319,320,076

6, 8 8 6 9 10 6

825,312,153 1,285,910,181 142,536,641 3,066,855,877 1,099,453,297 1,361,995,953 12,357,340

549,898,082 1,228,038,218 285,121,892 2,898,424,408 627,829,607 1,048,342,271 5,481,102

462,950,733 1,009,284,864 731,839,873 2,704,299,410 544,572,881 552,232,828 12,357,340

304,059,664 1,046,084,481 692,520,036 2,818,126,867 168,636,920 233,413,325 5,481,102

12

107,275,019

267,149,152

-

-

12

24,800,000

715,219,604

-

-

21,239,698 118,389,394 5,665,875 175,287,199 71,033,320 119,833,466 14,280,486 11,021,617,518

32,338,869 112,768,212 563,035 131,956,078 72,525,282 335,532,652 17,212,250 11,330,019,358

17,364,061 123,389,364 62,877 109,465,261 26,633,824 91,522,730 251,287 6,503,257,346

24,712,632 117,768,182 79,821,667 31,839,469 312,271,118 5,233,989 7,333,334,058

11

322,439,563

301,100,770

231,417,054

211,816,900

6

236,458,703

226,013,898

1,300,612,859

1,256,940,869

6

1,987,022,420

1,188,944,233

1,987,022,420

1,188,944,233

12

160,869,946

-

-

-

12 13 14 15 16

1,432,224,979 4,727,694,513 2,243,613,941

715,219,604 4,549,027,861 2,918,223,737

266,476,501 7,108,729,789 2,076,099,220

266,476,501 6,747,300,603 2,689,581,719

6 8 17 18 19 26 26

334,260,978 315,698,655 2,216,652,419 281,888,858 41,603,077 2,515,620,262 (2,515,620,262) -

313,611,611 2,391,997,644 281,888,858 1,466,982 2,515,620,262 (2,515,620,262) -

334,260,978 315,698,655 1,393,701,874 140,511,922 41,603,077 -

313,611,611 1,541,957,535 140,511,922 1,466,982 -

487,980,662 19,572,396 43,613,983 14,851,595,093 25,873,212,611

172,658,070 26,159,539 59,438,117 13,145,750,924 24,475,770,282

468,836,878 13,341,891 46,144,764 15,724,457,882 22,227,715,228

156,565,761 20,348,300 58,672,678 14,594,195,614 21,927,529,672

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

090

Annual Report 2008

Balance Sheets

(cont.)

CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities As at 31 December 2008 and 2007

(Unit : Baht) Consolidated financial statements Separate financial statements

Note Liabilities and shareholders没 equity Current liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable and notes payable Related parties Unrelated parties Current portion of hire purchase creditors Current portion of long-term loans Current portion of debentures Accounts payable and loans from related parties Advances received from employers and deferred construction revenue Retention for construction Other current liabilities Accrued interest Corporate income tax payable Accrued expenses Unbilled output tax Other payables Others Total current liabilities Non-current liabilities Hire purchase creditors, net of current portion Long-term loans, net of current portion Debentures, net of current portion Long-term accrued interest Provision for loss on doubtful accounts from subsidiaries and jointly controlled entities Provision for loss on investments in joint ventures Total non-current liabilities Total liabilities

2008

2007

2008

2007

20

2,674,273,427

2,664,677,389

1,042,587,585

1,051,364,559

6 21 22 23 6

109,377,758 1,964,683,117 123,737,027 378,700,000 3,000,000,000 2,109,866

402,099,565 1,439,683,521 184,848,226 655,736,824 1,700,000,000 2,965,567,226

15,140,930 1,245,622,968 112,664,965 378,700,000 3,000,000,000 195,100,941

38,120,136 759,436,330 179,683,044 200,000,000 1,700,000,000 -

6, 9 6

1,438,897,640 342,934,712

1,285,483,330 199,046,702

323,931,001 134,023,800

809,422,235 106,654,277

158,514,387 12,204,115 111,306,727 165,325,187 18,172,244 61,609,172 10,561,845,379

287,671,756 3,624,261 105,181,567 151,241,561 15,618,446 41,313,038 12,101,793,412

157,184,453 65,626,739 165,527,447 14,329,819 39,765,932 6,890,206,580

145,597,165 61,961,046 137,291,675 11,538,085 21,129,973 5,222,198,525

85,917,946 3,441,775,212 5,091,697,717 342,529,357

115,554,578 250,000,000 6,094,016,438 -

74,027,203 3,441,775,212 5,091,697,717 342,529,357

107,588,603 250,000,000 6,094,016,438 -

1,045,147,155 10,007,067,387 20,568,912,766

223,320,946 6,682,891,962 18,784,685,374

1,062,776,977 10,012,806,466 16,903,013,046

4,082,589,509 10,534,194,550 15,756,393,075

21 22 23 14, 22

14

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

CH. Karnchang Public Company Limited

091

Balance Sheets

(cont.)

CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities As at 31 December 2008 and 2007

(Unit : Baht) Consolidated financial statements Separate financial statements

Note Shareholders没 equity Share capital Registered 1,450,000,000 ordinary shares of Baht 1 each Issued and paid up 1,446,012,169 ordinary shares of Baht 1 each Share premium Unrealised gain (loss) Revaluation surplus (deficit) on changes in value of investments Retained earnings Appropriated - statutory reserve Unappropriated (deficit) Difference on reorganization of business of group companies Equity attributable to the company没s shareholders Minority interest - equity attributable to minority shareholders of subsidiaries Total shareholders没 equity Total liabilities and shareholders没 equity

24 25

25

2008

2007

2008

2007

1,450,000,000

1,450,000,000

1,450,000,000

1,450,000,000

1,446,012,169 3,972,882,594

1,446,012,169 3,972,882,594

1,446,012,169 3,972,882,594

1,446,012,169 3,972,882,594

(377,744,905)

384,117,665

(391,382,531)

336,860,027

34,819,415 234,974,096

29,884,121 (87,931,244)

29,319,415 267,870,535

24,384,121 390,997,686

(211,988,128) 5,098,955,241

(277,067,462) 5,467,897,843

5,324,702,182

6,171,136,597

205,344,604 5,304,299,845 25,873,212,611

223,187,065 5,691,084,908 24,475,770,282

5,324,702,182 22,227,715,228

6,171,136,597 21,927,529,672

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

092

Annual Report 2008

Income statements CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2008 and 2007

(Unit : Baht) Consolidated financial statements Separate financial statements

Note Revenues Revenues from construction services Sales of construction materials Project management income Rental income Transportation income Other income Interest income Dividends income and profit sharing from jointly controlled entities 6 Gain on disposal of property, plant and equipment Gain on exchange 27 Gain on sales of current investments 7, 15 Gain on sales of investments in associated companies 15 Reversal of allowance for loss on diminution of investments in associated company Revenue from reversal of provision for loss on investment in joint venture 14 Miscellaneous income Others Total revenues Expenses Cost of construction services, sales of construction materials and services Administrative expenses Allowance for investments in subsidiaries and joint ventures Loss on exchange 27 Total expenses Income before finance cost and corporate income tax Finance cost Share of loss from investments in associated companies 15 Income before corporate income tax Corporate income tax 29 Net income for the year Net income attributable to: Equity holders of the parent Minority interests of the subsidiaries

Earnings per share 30 Basic earnings per share Net income attributable to equity holders of the parent Weighted average number of ordinary shares (shares) Diluted earnings per share Net income attributable to equity holders of the parent Weighted average number of ordinary shares (shares)

2008

2007

2008

13,149,025,829 50,751,417 30,275,950 40,089,995 8,595,729

13,440,434,502 86,496,757 37,663,461 12,247,766 13,267,623

5,344,593,379 10,710,344 292,727,434 18,968,333

7,075,788,789 99,586,761 241,113,875 16,976,462

255,157,751

462,110,892

251,586,589

381,805,180

138,639,529 78,953,436 8,120,132 278,657,607

125,430,365 21,287,950 5,882,113 631,515,276

359,687,791 8,120,132 291,040,186

235,545,210 18,891,277 5,882,113 1,089,252,771

-

-

-

118,889,997

408,107,780 61,837,952 2,356,214 14,510,569,321

71,390,528 10,349,977 14,918,077,210

242,792,019 142,507,926 580,880 6,963,315,013

104,261,821 9,387,994,256

11,847,819,048 1,187,309,514

12,437,574,272 1,085,357,443

5,188,851,670 985,464,973

7,040,498,913 801,673,442

13,035,128,562

130,013,857 13,652,945,572

2,723,137 6,177,039,780

41,985,970 7,941,583 7,892,099,908

1,475,440,759 (824,257,768) (26,017,681) 625,165,310 (52,762,108) 572,403,202

1,265,131,638 (943,513,419) (237,894,602) 83,723,617 (50,278,145) 33,445,472

786,275,233 (687,569,345) 98,705,888 98,705,888

1,495,894,348 (836,406,066) 659,488,282 659,488,282

544,738,379 27,664,823 572,403,202

14,536,884 18,908,588 33,445,472

98,705,888

659,488,282

0.38 1,446,012,169

0.01 1,400,097,821

0.07 1,446,012,169

0.47 1,400,097,821

0.01 1,484,359,500

2007

0.44 1,484,359,500

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

CH. Karnchang Public Company Limited

093

Statements of changes in shareholdersûequity CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2008 and 2007 Consolidated financial statements Equity attributable to the parentûs shareholders Issued and paid-up share capital

Share premium

Share subscription received in advance

1,247,191,570

3,965,010,495

17,646,525

3,921,450 194,899,149 1,446,012,169

13,725,075 682,147,024 (688,000,000) 3,972,882,594

(17,646,525) -

1,446,012,169

3,972,882,594

-

1,446,012,169

3,972,882,594

-

Balance as at 31 December 2006 Expenses recognised directly in equity: Investment in available-for-sale securities Loss recognised in shareholdersû equity Net expenses recognised directly in equity Net income for the year Total income (expenses) for the year Transfer share subscription received in advance to issued and paid-up share capital Increase in share capital from exercise of warrants (Note 24) Transfer statutory reserve and share premium to offset deficit (Note 25) Dividend payment (Note 34) Unappropriated retained earnings transferred to statutory reserve (Note 25) Balance as at 31 December 2007

1,247,191,570

3,965,010,495

17,646,525

3,921,450 194,899,149 1,446,012,169

13,725,075 682,147,024 (688,000,000) 3,972,882,594

(17,646,525) -

Balance as at 31 December 2007 Expenses recognised directly in equity: Investment in available-for-sale securities Loss recognised in shareholdersû equity Net expenses recognised directly in equity Net income for the year Total income (expenses) for the year Dividend payment (Note 34) Unappropriated retained earnings transferred to statutory reserve (Note 25) Balance as at 31 December 2008 The accompanying notes are an integral part of the financial statements.

1,446,012,169

3,972,882,594

-

1,446,012,169

3,972,882,594

-

Balance as at 31 December 2006 Expenses recognised directly in equity: Investment in available-for-sale securities Loss recongnised in shareholderûs equity Net expenses recongnised directly in equity Net income for the year Total income (expenses) for the year Transfer share subscription received in advance to issued and paid-up share capital Increase in share capital from exercise of warrants (Note 24) Transfer statutory reserve and share premium to offset deficit (Note 25) Dividend payment (Note 34) Unappropriated retained earnings transferred to statutory reserve (Note 25) Difference on reorganization of business of group companies Decrease in minority interests in subsidiaries from dividend payment of subsidiary Balance as at 31 December 2007 Balance as at 31 December 2007 Expenses recognised directly in equity: Investment in available-for-sale securities Loss recognised in shareholdersû equity Net expenses recognised directly in equity Net income for the year Total income (expenses) for the year Dividend payment (Note 34) Unappropriated retained earnings transferred to statutory reserve (Note 25) Difference on reorganization of business of group companies Decrease in minority interests in subsidiaries from dividend payment of subsidiary Balance as at 31 December 2008

Separate financial statements

094

Annual Report 2008

(Unit : Baht)

Revaluation surplus (deficit) on changes in value of investments

Retained earnings Unappropriated Appropriated (Deficit)

Difference on reorganization of business of group companies

Total equity attributable to the parent没s shareholders

Minority interest equity attributable to minority shareholders of subsidiaries

Total

429,533,741

135,345,770

(823,629,169)

(386,251,713)

4,584,847,219

217,247,685

4,802,094,904

(45,416,076) (45,416,076) (45,416,076) 384,117,665

(129,845,770) 24,384,121 29,884,121

14,536,884 14,536,884 817,845,770 (72,300,608) (24,384,121) (87,931,244)

109,184,251 (277,067,462)

(45,416,076) (45,416,076) 14,536,884 (30,879,192) 877,046,173 (72,300,608) 109,184,251 5,467,897,843

(1,719,208) (1,719,208) 18,908,588 17,189,380 (11,250,000) 223,187,065

(47,135,284) (47,135,284) 33,445,472 (13,689,812) 877,046,173 (72,300,608) 109,184,251 (11,250,000) 5,691,084,908

384,117,665

29,884,121

(87,931,244)

(277,067,462)

5,467,897,843

223,187,065

5,691,084,908

(761,862,570) (761,862,570) (761,862,570) (377,744,905)

4,935,294 34,819,415

544,738,379 544,738,379 (216,897,745) (4,935,294) 234,974,096

65,079,334 (211,988,128)

(761,862,570) (761,862,570) 544,738,379 (217,124,191) (216,897,745) 65,079,334 5,098,955,241

(27,507,284) (27,507,284) 27,664,823 157,539 (18,000,000) 205,344,604

(789,369,854) (789,369,854) 572,403,202 (216,966,652) (216,897,745) 65,079,334 (18,000,000) 5,304,299,845

380,174,852

129,845,770

(989,651,637)

4,750,217,575

(43,314,825) (43,314,825) (43,314,825) 336,860,027

(129,845,770) 24,384,121 24,384,121

659,488,282 659,488,282 817,845,770 (72,300,608) (24,384,121) 390,997,686

(43,314,825) (43,314,825) 659,488,282 616,173,457 877,046,173 (72,300,608) 6,171,136,597

336,860,027

24,384,121

390,997,686

6,171,136,597

(728,242,558) (728,242,558) (728,242,558) (391,382,531)

4,935,294 29,319,415

98,705,888 98,705,888 (216,897,745) (4,935,294) 267,870,535

(728,242,558) (728,242,558) 98,705,888 (629,536,670) (216,897,745) 5,324,702,182

CH. Karnchang Public Company Limited

095

Cash flow statements CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2008 and 2007

(Unit : Baht) Consolidated financial statements Separate financial statements

Cash flows from operating activities Net income before tax Adjustments to reconcile net income to net cash provided by (paid from) operating activities: Depreciation and amortisation Amortisation of prepaid expenses and other assets Withholding tax deducted at source written off Dividends income and profit sharing from jointly controlled entities Gain on sales of current investments Gain on sales of investments in associated companies Gain on sales of investments in related company Amortisation of deferred debenture issuing cost Provision for doubtful debts Loss (gain) on disposal of property, plant and equipment Transfer cost of construction service to equipment Allowance for loss on diminution in value of finished goods Unrealised loss (gain) on exchange Allowance for loss on investments in subsidiaries and joint ventures Reversal of allowance for loss on diminution of investment in associated company Revenue from reversal of provision for loss on investment in joint venture Unrealised loss (gain) on changes in value of investments in marketable securities Loss from equipment written off Share of loss from investments in associated companies Interest expenses Income from operating activities before changes in operating assets and liabilities Operating assets (increase) decrease Trade accounts receivable Accounts receivable - related parties Construction contracts in progress Inventories and supplies for construction Advance payment to subcontractors Advance for construction of subsidiary没s project Other current assets Other non-current assets Operating liabilities increase (decrease) Trade accounts payable Accounts payable - related parties Advances received from employers and deferred construction revenue Retention for construction Financing fee and project management fee received in advance Other current liabilities Cash flows from (used in) operating activities Cash paid for interest expenses Cash paid for corporate income tax Net cash flows from (used in) operating activities

2008

2007

2008

2007

625,165,310

83,723,617

98,705,888

659,488,282

481,232,298 6,426,968 2,779,896 (138,639,529) (8,059,235) (278,657,607) (580,880) 3,681,279 9,184,409 15,296,098 (5,174,752) (94,782,306) -

413,406,731 2,858,029 1,815 (125,430,365) (5,943,010) (631,515,277) 1,016,438 6,572,355 (21,287,950) (80,621,602) 8,979,436 112,510,546 -

258,558,536 (359,687,791) (8,059,235) (291,040,186) (580,880) 3,681,279 17,313,293 18,721,479 (1,857,585) -

225,133,569 838,461 (235,545,210) (5,943,011) (1,089,252,771) 1,016,438 (18,891,277) (80,621,602) (7,510,309) 41,985,970

-

-

-

(118,889,997)

(408,107,779)

-

(242,792,019)

-

1,174,700 4,909,794 26,017,681 814,355,013

(429,700) 1,799,753 237,894,602 939,889,728

1,174,700 4,164,882 677,666,590

(429,700) 959,227 832,782,375

1,056,221,358

943,425,146

175,968,951

205,120,445

(673,766,205) (10,011,751) (168,431,469) (471,623,690) (312,315,008) (6,876,238) (176,753,801) 22,377,478

4,760,813,202 (1,493,144) (10,932,470) (327,776,749) 306,606,828 4,709,703 973,813,957 (49,701,293)

(458,439,474) 139,266,523 113,827,457 (375,935,961) (318,819,502) (133,393,585) 12,658,085

4,228,332,822 356,815,555 (82,902,528) 55,501,885 172,798,338 778,975,171 (46,466,796)

589,974,922 (174,327)

(710,939,372) (277,614,055)

487,555,818 171,260,022

(777,260,788) 29,718,946

153,414,310 142,090,001 76,134,849 220,260,429 (859,263,608) (166,645,344) (805,648,523)

(266,807,102) (351,040,151) (20,954,083) (853,934,868) 4,118,175,549 (785,775,090) (386,282,635) 2,946,117,824

(485,491,234) 27,369,523 53,329,159 (590,844,218) (707,239,686) (91,522,730) (1,389,606,634)

114,225,480 (378,612,674) (20,954,083) (893,366,922) 3,741,924,851 (617,182,688) (312,271,118) 2,812,471,045

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

096

Annual Report 2008

Cash flow statements (cont.)

CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2008 and 2007

(Unit : Baht) Consolidated financial statements Separate financial statements

Cash flows from investing activities Increase in restricted bank deposits Cash payment for purchase of unit trust Cash received from sale of unit trust Increase in current investments Decrease (increase) in loans to related parties Decrease (increase) in loans to associated parties Decrease in loans to subcontractors Decrease in long-term loans to other companies Cash received from profit sharing from jointly controlled entities Dividend received from subsidiary Dividends received from associated and related companies Increase in investments in associated companies Increase in other long-term investments Cash received from sales of investments in associated companies Cash received from sales of other long-term investments Cash received from return of investments in joint ventures Increase in property, plant and equipment Increase in intangible assets Proceeds from disposals of property, plant and equipment Net cash flows from (used in) investing activities Cash flows from financing activities Increase (decrease) in bank overdrafts and short-term loans from financial institutions Increase (decrease) in loans from related parties Increase (decrease) in long-term loans Cash received from issuance of debentures Repayment of debentures Cash received from exercise of warrants Dividend payment Dividend payment of subsidiary Net cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Supplemental disclosures of cash flows information Non-cash transactions Increase in property, plant and equipment from hire purchase Received transfer of loan debt from Joint Venture BBCD Decrease in liabilities from the Payment Agreement

2008

2007

2008

2007

(21,338,793) (1,520,000,000) 1,733,000,000 (9,818,396) (302,736,148) (701,278,697) 5,892,213 348,081,139 (562,946,160) (118,989,970) 600,860,400 6,798,110 (423,694,015) (40,813,988) 20,671,895 (986,312,410)

(17,688,187) (499,939,103) 400,000,000 (20,000) (51,347,995) 473,066,157 379,881,697 667,116 200,430,335 (1,452,923,484) 1,892,905,460 (1,056,109,035) (1,711,500) 40,729,640 307,941,101

(19,600,154) (1,520,000,000) 1,733,000,000 (9,818,396) (684,168,791) (692,500,000) 112,906 22,000,000 337,574,885 (562,946,160) (118,989,970) 600,860,400 6,798,110 966,250 (244,662,437) (40,813,988) 11,571,613 (1,180,615,732)

(15,348,018) (500,000,000) 400,000,000 (20,000) 993,156,215 473,065,857 30,916,015 13,750,000 190,879,195 (1,452,863,050) 1,892,905,460 3,340,000 (842,324,143) (1,711,500) 38,176,110 1,223,922,141

243,245,537 (62,668,134) 1,420,300,000 1,994,000,000 (1,700,000,000) (216,897,745) (18,000,000) 1,659,979,658

(1,158,635,815) 512,362,804 (3,441,306,780) 1,993,000,000 (2,200,000,000) 877,046,171 (72,300,608) (11,250,000) (3,501,084,228)

(8,776,974) 1,430,800,000 1,994,000,000 (1,700,000,000) (216,897,745) 1,499,125,281

(2,138,455,425) (3,482,215,904) 1,993,000,000 (2,200,000,000) 877,046,171 (72,300,608) (5,022,925,766)

6,341,876 (125,639,399) 2,682,298,568 2,556,659,169

(3,938,115) (250,963,418) 2,933,261,986 2,682,298,568

1,350,118 (1,069,746,967) 1,174,044,530 104,297,563

(387,791) (986,920,371) 2,160,964,901 1,174,044,530

90,747,832 1,493,619,591 1,980,356,000

93,255,037 -

100,579,479 2,297,876,293 -

85,296,074 -

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

CH. Karnchang Public Company Limited

097

Notes to consolidated financial statements CH. Karnchang Public Company Limited, its subsidiaries and its jointly controlled entities For the years ended 31 December 2008 and 2007

1.

General information

CH. Karnchang Public Company Limited (çthe Companyé) is a public company incorporated and domiciled in Thailand. The major shareholder of the Company is Mahasiri Siam Company Limited, which was also incorporated in Thailand. The Company is principally engaged in the provision of construction services and its registered address is 587 Suthisarn Road, Khwaeng Dindaeng, Khet Dindaeng, Bangkok.

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 and their presentation has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 14 September 2001, issued under the Accounting Act B.E. 2543.

The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from such financial statements in Thai language.

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 CH. Karnchang Public Company Limited (çthe Companyé), its subsidiaries (çthe subsidiariesé) and its jointly controlled entities (çjointly controlled entitiesé) as follows:

Name of entity

Investments in subsidiaries (held by the Company) Construction Material Supply Company Limited CH. Karnchang Realestate Company Limited (included equity interest in Prompratarn Construction Limited Partnership and Prasertwit Construction Limited Partnership) CH. Karnchang-Tokyu Construction Company Limited (included equity interest in Joint Ventures CKCT) Bangkok Concrete Industries Company Limited (under the Companyûs control) CH. Karnchang (Lao) Company Limited

098

Nature of business

Revenues as a Assets as a percentage percentage to the to the consolidated consolidated total Country of Percentage of total assets as at revenues for the year incorporation shareholding 31 December ended 31 December 2008 2007 2008 2007 2008 2007 Percent Percent Percent Percent Percent Percent

Manufacturer and distributor of construction materials Investment company

Thailand

99.99

99.99

0.49

0.57

0.34

0.58

Thailand

99.00

99.00

1.94

0.87

2.35

0.47

Construction

Thailand

55.00

55.00

2.69

3.13

11.36

6.57

Manufacturer and distributor Thailand of construction materials Construction The Lao Peopleûs 100.00 Democratic Republic

-

0.48

0.53

0.03

0.01

100.00

16.03

12.35

35.69

35.89

Annual Report 2008

Name of entity

Nature of business

Equity interest in jointly controlled entities (proportionate consolidation) Joint Venture CH. Karnchang Public Company Construction Limited, Tokyu Construction Company (No trading activities Limited in joint venture with CH. Karnchang- during the years 2007 Tokyu Construction Company Limited and 2008) (hereinafter called çJoint Venture CKCTé) - Highway Project - Expressway Project Joint Venture CH. Karnchang Public Company Construction Limited, Bilfinger Berger AG, Tokyu Construction Company Limited and CH. Karnchang-Tokyu Construction Company Limited (hereinafter called çJoint Venture BBCTé) - Second Stage Expressway Project Sector B Route Phayathai - Bangkhlo - Second Stage Expressway Project Sector C+ Route Chaeng Wattana Bang Phun & Bang Sai - Second Stage Expressway Project Sector D Route Asoke - Srinakarin - Second Stage Expressway Project Sector C1A Route Ngam Wong Wan Chaeng Wattana The TWCK (Thames Water International Construction and (Thailand) Limited and CH. Karnchang Public project management Company Limited) Joint Venture (hereinafter called çThe TWCK Joint Ventureé) Joint Venture BCKT (Bilfinger Berger AG, Construction CH. Karnchang Public Company Limited, Kumagai Gumi Company Limited and Tokyu Construction Company Limited) (hereinafter called çJoint Venture BCKTé) Joint Venture BBCD (Bilfinger Berger AG, Construction CH. Karnchang Public Company Limited and Dyckerhoff & Widmann AG) (hereinafter called çJoint Venture BBCDé) Joint Venture CKSL (CH. Karnchang Public Construction Company Limited and SNC - Lavalin Inc.) (hereinafter called çJoint Venture CKSLé) Joint Venture CKAE Consortium Construction Joint Venture CKET Project management CKOBA Joint Venture Construction (Dissolution during 2008) Joint Venture BBC (Bilfinger Berger (Thai) Construction Construction Company Limited, Bilfinger (Dissolution during 2008) Berger AG, International Division and CH. Karnchang Public Company Limited) (hereinafter called çJoint Venture BBCé) Joint Venture CKNNL Construction CKLX Joint Venture Construction CH. Karnchang Public Company Limited

Percentages of Revenues as a profit sharing Assets as a percentage percentage to the in jointly to the consolidated consolidated total Country of controlled total assets as at revenues for the year incorporation entities 31 December ended 31 December 2008 2007 2008 2007 2008 2007 Percent Percent Percent Percent Percent Percent

Thailand Thailand

60.00 40.00

60.00 40.00

-

-

-

-

Thailand

53.20

53.20

0.02

0.02

-

-

Thailand

59.99

59.99

0.01

0.02

-

-

Thailand

59.99

59.99

0.74

0.78

0.01

0.01

Thailand

59.99

59.99

0.01

0.01

-

-

Thailand

50.00

50.00

0.01

0.02

-

-

Thailand

25.00

25.00

0.10

0.10

-

-

Thailand

35.00

35.00

0.05

0.12

8.68

0.01

Thailand

99.90

99.90

0.02

0.03

-

-

Thailand Thailand Thailand

98.00 80.00 -

98.00 80.00 44.00

1.38 6.04 -

1.43 6.30 -

0.18 0.56 -

0.78 1.30 -

Thailand

-

25.00

-

-

0.01

0.01

Thailand Thailand

51.89 75.00

51.89 75.00

0.02 2.15

0.03 0.94

0.10 7.65

0.13 0.44

099

Nature of business

Country of incorporation

Construction and construction equipment rental service Construction and construction equipment rental service

Thailand

98.01

98.01

Thailand

98.01

98.01

Name of entity

Investments in subsidiaries (held by subsidiary company) Prompratarn Construction Limited Partnership (99.00 percent held

by CH. Karnchang Realestate Company Limited) Prasertwit Construction Limited Partnership (99.00 percent held by CH. Karnchang Realestate Company Limited)

Percentage of indirect shareholding 2008 2007 Percent Percent

b) Subsidiaries are 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) Jointly controlled entities are fully consolidated applying the proportionate consolidation method as from being the date on which the Company assumed joint control, and continue to be consolidated until the date when such control ceases. d) The financial statements of the subsidiaries and jointly controlled entities are prepared for the same reporting period as the parent company, using consistent significant accounting policies. e) Material balances and transactions between the Company, its subsidiaries and its jointly controlled entities have been eliminated from the consolidated financial statements. f) Minority interests represent the portion of net income or loss and net assets of the subsidiaries that are not held by the Company and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet.

2.3 The separate financial statements, which present investments in subsidiaries, joint ventures and associates presented under the cost method, have been prepared solely for the benefit of the public.

3.

Adoption of new accounting standards

3.1 Accounting standards which are effective for the current year The Federation of Accounting Professions has issued Notification No. 9/2550, 38/2550 and 62/2550 mandating the use of new accounting standards as follows: TAS 25 (revised 2007) Cash Flow Statements TAS 29 (revised 2007) Leases TAS 31 (revised 2007) Inventories TAS 33 (revised 2007) Borrowing Costs TAS 35 (revised 2007) Presentation of Financial Statements TAS 39 (revised 2007) Accounting Policies, Changes in Accounting Estimates and Errors TAS 41 (revised 2007) Interim Financial Reporting TAS 43 (revised 2007) Business Combinations TAS 49 (revised 2007) Construction Contracts TAS 51 Intangible Assets These accounting standards become effective for the financial statements for fiscal years beginning on or after 1 January 2008. The management has assessed the effect of these standards and believes that TAS 33 and TAS 43 are not relevant to the business of the Company, while TAS 25, TAS 29, TAS 31, TAS 35, TAS 39, TAS 41, TAS 49 and TAS 51 do not have any significant impact on the financial statements for the current year.

100

Annual Report 2008

3.2 Accounting standards which are not effective for the current year The Federation of Accounting Professions has also issued Notification No. 86/2551 mandating the use of the following new accounting standards: TAS 36 (revised 2007) Impairment of Assets TAS 54 (revised 2007) Non-current Assets Held for Sale and Discontinued Operations These accounting standards will become effective for the financial statements for fiscal years beginning on or after 1 January 2009. The management has assessed the effect of these standards and believes that they will not have any significant impact on the financial statements for the year in which they are initially applied.

4.

Significant accounting policies

4.1 revenues and expenses recognition a) Revenues from construction services The Company, its subsidiaries and its jointly controlled entities recognised revenues from construction on a percentage of completion basis. The percentage of completion is measured based on comparison of actual construction costs incurred up to the end of the period and total anticipated construction costs to be incurred to completion.

Revenues from additional work and other contracted work for which the working period does not exceed one year are recognised on the basis of work done and billed to the customer.

Revenues from moving infrastructure, additional work and other contracted work are recognised on the basis of work done and billed to the customer. b) Sales of construction materials Sales of construction materials are recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are the invoiced value, excluding value added tax, of goods supplied after deducting discounts and allowances. c) Interest income Interest income is recognised as interest accrues based on the effective rate method. d) Dividends Dividends are recognised when the right to receive the dividends is established. e) Other revenues and expenses Other revenues and expenses are recognised on an accrual basis.

Provision for losses on construction projects is made in the accounts in full when the possibility of loss is ascertained.

4.2 Cash and cash equivalents Cash and cash equivalents consist of cash in hand, cash at banks, and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions.

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 Construction contracts in progress The cost of construction contracts in progress comprises the costs of materials and labor, subcontractor charges, services and overheads plus the attributable net gains or losses less the amounts already billed to customers.

The excess of the value of a construction contract in progress over the amount billed to the customer is presented as current assets. The excess of the amount billed to a customer over the value of the construction contract in progress is presented as çDeferred construction revenueÊ under current liabilities.

CH. Karnchang Public Company Limited

101

4.5 Inventories and supplies for construction Inventories and supplies for construction are valued at the lower of cost (first-in, first-out) and net realisable value.

Supplies in process for installation and construction in progress are valued at cost.

Work in process and construction in progress comprise the costs of materials and labor, subcontractor charges, cost of service and overheads of projects for which contracts are in the process of being executed.

4.6 Investments a) Investments in securities held for trading are stated at fair value. Gains or losses arising from changes in the carrying amounts of securities are included in determining income. b) Investments in available-for-sale securities are stated at fair value. Changes in the carrying amounts of securities are recorded as separate items in shareholders没 equity until the securities are sold, when the changes are then included in determining income. c) Investments in debt securities, both due within one year and expected to be held to maturity, are recorded at amortised cost. The premium/discount on debt securities is amortised by the effective rate method with the amortised amount presented as an adjustment to the interest income. d) Investments in non-marketable equity securities, which the Company classifies as other investments, are stated at cost net of allowance for loss on diminution in value (if any). e) Investments in associates are accounted for in the consolidated financial statements using the equity method. f) Investments in subsidiaries, joint ventures and associates are accounted for in the separate financial statements using the cost method.

The fair value of marketable securities is based on the latest bid price of the last working day of the year as quoted on the Stock Exchange of Thailand. The fair value of unit trusts is determined from their net asset value.

4.7 Property, plant and equipment/Depreciation Land is stated at cost. Building and equipment are stated at cost less accumulated depreciation and allowance for loss on impairment of assets (if any).

Depreciation of building and equipment is calculated by reference to their costs on the straight-line basis over the following estimated useful lives: Condominium building 35 years Buildings 20 years Land improvement 5 years Machinery and equipment 5 years Future, fixtures and office equipment 5 years Motor vehicles 5 years Leasehold improvement 10 years Depreciation is included in determining income.

No depreciation is provided on land and construction in progress.

4.8 Investments in land Investments in land are recorded at cost. If the fair value of the land declines to significantly less than its cost, the land is stated at cost net of provision for impairment loss.

102

Annual Report 2008

4.9 Intangible assets Acquired intangible assets are measured at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

Intangible assets with finite lives are amortised on a systematic basis over the economic useful life 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.

Intangible assets of the Company with finite useful lives comprise computer software, and have useful lives of five years.

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 associated companies and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, key management personnel, directors and officers with authority in the planning and direction of the Company没s operations.

4.11 Long-term leases Leases of equipment 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 property, plant or equipment acquired under finance leases is depreciated over the useful life of the asset.

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 rate 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, its subsidiaries and its jointly controlled entities performs impairment reviews in respect of the property, plant and equipment and other intangible 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没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, its subsidiaries and its jointly controlled entities could obtain from the disposal of the asset in an arm没s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.

An impairment loss is recognised in the income statement.

4.14 Employee benefits Salarys, wages, bonuses and contributions to the social security fund and provident fund are recognised as expenses when incurred.

4.15 Income tax Income tax is provided in the accounts based on taxable profits determined in accordance with tax legislation.

CH. Karnchang Public Company Limited

103

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 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.

Impairment of equity investments The Company and the subsidiary treat available-for-sale investments and other investments as impaired when the management judges that there has been a significant or prolonged decline in the fair value below their cost or where other objective evidence of impairment exists. The determination of what is çsignificanté or çprolongedé requires judgment.

Property plant and equipment/Depreciation In determining depreciation of plant and equipment, the managements are required to make estimates of the useful lives and salvage values of the Company, its subsidiaries and its jointly controlled entitiesû plant and equipment and to review estimate useful lives and salvage values when there are any changes.

In addition, the managements are 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 amount. This requires judgments regarding forecast of future revenues and expenses relating to the assets subject to the review.

Estimated construction project costs The Company, its subsidiaries and its jointly controlled entities estimate costs of construction projects based on details of the construction work, taking into account the volume and value of construction materials to be used in the project, labour costs and other miscellaneous costs to be incurred to completion of service, taking into account the direction of the movement in these costs. Estimates are reviewed regularly or whenever actual costs differ significantly from the figures used in the original estimates.

Provision for losses on construction projects Management applied judgement in estimating the loss they expect to be realised on each construction project, based on estimates of anticipated costs that take into account the progress of the project and actual costs incurred to date, together with fluctuations in costs of construction materials, labour and the current situation.

Litigation The Company and its jointly controlled entity have contingent liabilities as a result of litigation. The Company and its jointly controlled entityûs management have used judgment to assess of the results of the litigation and believe that no loss will result. Therefore no contingent liabilities are recorded as at the balance sheet date.

104

Annual Report 2008

6.

Related party transactions

During the years, the Company, its subsidiaries and its jointly controlled entities 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: Million Baht) Consolidated financial statements 2008 2007 Transactions with subsidiaries (eliminated from the consolidated financial statements) Revenues from construction services Project management income Rental and transportation income Space rental and service income Interest income

Dividend income Other income Cost of construction materials Close to prices charged by third parties and construction work Administrative expenses Transactions with jointly controlled entities Revenues from construction services Project management income Space rental and service income Interest income

Profit sharing from jointly controlled entities Cost of construction materials Close to prices charged by third parties and construction work Administrative expenses Transactions with associated companies Revenues from construction services Project management income Space rental and service income Interest income

Dividend income Other income Cost of construction materials and construction work Sales of investments in associated company Transactions with related parties Revenues from construction services Sales of construction materials Project management income Rental and transportation income Space rental and service income Interest income Dividend income Other income Cost of construction materials and construction work Administrative expenses

CH. Karnchang Public Company Limited

Separate financial statements 2008 2007

-

-

2.6 257.5 6.0 18.5

85.3 232.5 1.0 30.5

-

-

22.0 82.1 104.5 0.4

13.8 34.4 158.4 4.6

156.1 2.2 0.3 17.5

84.7 2.1 0.1 28.6

606.7 8.9 0.5 94.6

138.4 6.9 0.1 203.7

0.1 0.1 0.2

0.1 -

0.1 0.1 0.4

30.9 0.2 -

5,489.1 26.2 2.7 105.6

5,890.0 31.2 0.4 82.5

273.3 1.7 2.6 105.6

510.4 2.4 0.4 82.5

209.4 1.5 -

2.5 0.7 2.4 1,892.9

209.4 0.3 -

77.5 0.2 0.3 1,892.9

141.0 1.1 0.3 0.9 12.8 21.2 138.5 1.9 186.5

11.7 0.2 2.3 3.8 1.9 20.8 122.8 2.1 26.6

133.9 0.9 12.8 20.6 128.0 1.9 4.1

11.7 2.3 3.2 1.9 20.8 113.3 0.9 1.4

-

28.2

-

22.1

Transfer Pricing Policy

Based on construction contracts Cost plus margin Close to service fee charged to third parties Based on contracts Interest rates of 6.25% to 8.25%, MLR + 0.25%, MLR+0.5% and LIBOR + 4% (2007: 6.25% to 8.25%, MLR + 0.25% and LIBOR + 4%) As declared Based on contracts Agreed between the parties

Based on construction contracts Based on contracts Based on contracts Interest rates of 8.0% to 10.0%, MLR + 0.5%, MLR + 1%, MLR + 2% and MOR + 0.75% (2007: 8.0% to 10.0%, MLR + 0.25%, MLR + 1%, MLR + 2% and MOR + 0.75%) As declared Agreed between the parties

Based on construction contracts Based on contracts Based on contracts Interest rates of MLR + 0.5% and MLR + 1% (2007: MLR - 0.5%, MLR + 0.5% and MLR + 1%) As declared Based on contracts Close to prices charged by third parties Based on contracts Based on construction contracts Cost plus margin Based on contracts Close to service fee charged to third parties Based on contracts Interest rate of MLR + 1% As declared Based on contracts Close to prices charged by third parties Agreed between the parties

105

The balances of the accounts as at 31 December 2008 and 2007 between the Company and those related parties are as follows: (Unit : Baht) Consolidated financial statements Separate financial statements

2008

2007

2008

2007

29,935,475 52,582,484 82,517,959

164,682,865 29,940,826 15,529,918 210,153,609

253,358,255 149,677,378 210,329,938 613,365,571

253,358,255 149,677,378 62,119,670 465,155,303

3,611,250 308,095,386 311,706,636

3,343,750 23,861,681 398,807,940 426,013,371

3,611,250 3,611,250

3,343,750 23,861,681 27,205,431

7,732,924 358,349,038 45,298,582 411,380,544 805,605,139 805,605,139

10,352,139 57,613,889 139,877 242,346 68,348,251 704,515,231 (164,682,865) 539,832,366

7,732,924 44,104,330 51,837,254 668,814,075 (253,358,255) 415,455,820

10,352,139 44,639,330 54,991,469 547,352,203 (253,358,255) 293,993,948

9,380,770 9,380,770

-

37,523,081 37,523,081

-

-

1,251,169 1,251,169

-

1,251,169 1,251,169

9,959,075 367,169 10,326,244 19,707,014 825,312,153

7,406,628 1,407,919 8,814,547 10,065,716 549,898,082

9,604,663 367,169 9,971,832 47,494,913 462,950,733

7,406,628 1,407,919 8,814,547 10,065,716 304,059,664

Trade accounts receivable - related parties Construction contract receivables Jointly controlled entities

- Joint Venture BBCD - Joint Venture CKET - CKLX Joint Venture Associated companies - Bangkok Metro Public Company Limited - Pathum Thani Water Company Limited - Nam Ngum 2 Power Company Limited - SouthEast Asia Energy Limited Related companies - Bangkok Expressway Public Company Limited - Bangpa-in Land Company Limited - Siam Wire Industry Company Limited - Other related companies Total construction contract receivables Less: Allowance for doubtful accounts Construction contract receivables, net Retention as per contracts Jointly controlled entities - CKLX Joint Venture Associated company - Pathum Thani Water Company Limited Related companies - Bangkok Expressway Public Company Limited - Northern Bangkok Expressway Company Limited Total retention as per contracts Trade accounts receivable - related parties, net

As at 31 December 2008 and 2007, an allowance for doubtful accounts amounting to Baht 253.4 million was set up in the separate financial statements of the Company for trade accounts receivable from a jointly controlled entity of which overdue for more than 12 months.

(Unit : Baht) Consolidated financial statements Separate financial statements

Long-term trade accounts receivable - related party Related company - Metro Mall Development Limited Total long-term trade accounts receivable - related party

2008

2007

2008

2007

334,260,978 334,260,978

313,611,611 313,611,611

334,260,978 334,260,978

313,611,611 313,611,611

During the first quarter of 2007, Metro Mall Development Limited issued a letter requesting that the Company grant a grace period for repayment of construction costs, whereby that company would pay all construction costs within 4 years (within the year 2010), and the Company issued a letter agreeing to such request. The Company has reclassified the trade account receivable from that company to non-current assets under the caption çLong-term trade accounts receivable - related partyÊ in the balance sheet since 31 March 2007.

The Company charged interest on the outstanding balance of construction costs at the Minimum Loan Rate plus 1 percent (MLR + 1%) per annum.

106

Annual Report 2008

(Unit : Baht) Consolidated financial statements Separate financial statements

2008 Accounts receivables and loans to related parties Receivables from sales of construction materials and others Subsidiaries - Construction Material Supply Company Limited - Bangkok Concrete Industries Company Limited - Prompratarn Construction Limited Partnership - CH. Karnchang (Lao) Company Limited - Other subsidiaries Jointly controlled entities - Joint Venture BBCT - Joint Venture BBCD - Joint Venture BCKT - Joint Venture CKAE Consortium - Joint Venture CKET - Joint Venture CKNNL - CKLX Joint Venture Associated company - SouthEast Asia Energy Limited Related parties - Siam Wire Industry Company Limited - Bangpa-in Land Company Limited - Mahasiri Company Limited - Expert Transport Company Limited - Sirasaicrete Limited Partnership - Other related companies and related parties Venturers in jointly controlled entities - Bilfinger Berger AG - Bilfinger Berger (Thai) Construction Company Limited Total receivables from sales of construction materials and others Less: Allowance for doubtful accounts Receivables from sales of construction materials and others, net Loans to related parties and interest receivable Subsidiaries - Bangkok Concrete Industries Company Limited - Construction Material Supply Company Limited - Prompratarn Construction Limited Partnership - Prasertwit Construction Limited Partnership Jointly controlled entities - Joint Venture BBCD - Joint Venture CKAE Consortium Total loans to related parties and interest receivable Less: Allowance for doubtful accounts Total loans to related parties and interest receivable, net Total accounts receivables and loans to related parties, net

CH. Karnchang Public Company Limited

2007

2008

2007

-

-

2,601,363 65,754,076 1,568,565 100,862,719 334,181 171,120,904

3,898,013 66,394,218 1,137,148 221,965,399 606,668 294,001,446

9,841,629 68,600,196 5,706 23,527,707 18,359 101,993,597

9,856,316 248,883,776 68,600,196 5,706 24,894,097 83,549 1,169,127 353,492,767

24,597,850 382,845,800 91,466,929 285,291 117,638,536 38,160 616,872,566

24,612,536 382,889,635 91,466,928 285,291 124,443,736 83,549 4,676,507 628,458,182

195,207 195,207

460,643 460,643

195,207 195,207

460,643 460,643

15,318,703 17,042,327 207,000 4,421,576 363,218 37,352,824

18,439,214 810,652 63,500 3,844,837 520,232 677,705 24,356,140

14,742,966 164,751 207,000 1,042,161 127,465 16,284,343

18,041,165 810,652 63,500 465,423 520,232 918,300 20,819,272

2,392,464 2,392,464 141,934,092 141,934,092

104,103 2,392,464 2,496,567 380,806,117 (250,056,035) 130,750,082

804,473,020 (384,701,593) 419,771,427

943,739,543 (384,701,593) 559,037,950

-

-

130,443,198 61,547,696 217,859,050 8,852,916 418,702,860

122,334,998 97,273,324 8,247,147 227,855,469

253,500 349,049 602,549 602,549 -

154,041,988 329,822 154,371,810 154,371,810 -

2,984,513,377 2,984,513,377 3,403,216,237 (3,091,147,791)

236,987,674 236,987,674 464,843,143 (331,361,057)

602,549 142,536,641

154,371,810 285,121,892

312,068,446 731,839,873

133,482,086 692,520,036

107

During 2008, movements of loans to related parties and interest receivable were as follows: (Unit: Baht) Consolidated financial statements

During the year

Loans to related parties and interest receivable Jointly controlled entities - Joint Venture BBCD - Joint Venture CKAE Consortium - CKLX Joint Venture

Balance as at 1 January 2008

Increase

Decrease

154,041,988 329,822 154,371,810

293,897,116 19,227 4,699,592 298,615,935

(1,625,000) (4,699,592) (6,324,592)

Decrease from the apportioning of debt from Balance the Payment as at Agreement 31 December 2008

(446,060,604) (446,060,604)

253,500 349,049 602,549 (Unit: Baht)

Separate financial statements

During the year

Loans to related parties and interest receivable Subsidiaries - Bangkok Concrete Industries Company Limited - Construction Material Supply Company Limited - Prompratarn Construction Limited Partnership - Prasertwit Construction Limited Partnership Jointly controlled entities - Joint Venture BBCD - CKLX Joint Venture

Balance as at 1 January 2008

Increase due Balance to transfer of as at debt 31 December 2008

Increase

Decrease

122,334,998 97,273,324 8,247,147 227,855,469

8,108,200 14,432,123 217,859,050 605,769 241,005,142

(50,157,751) (50,157,751)

-

130,443,198 61,547,696 217,859,050 8,852,916 418,702,860

236,987,674 236,987,674 464,843,143

452,149,410 18,798,367 470,947,777 711,952,919

(2,500,000) (18,798,367) (21,298,367) (71,456,118)

2,297,876,293 2,297,876,293 2,297,876,293

2,984,513,377 2,984,513,377 3,403,216,237

Loans to related parties are subject to interest at the Minimum Loan Rate plus a stipulated margin (MLR + margin) per annum and certain fixed rates per annum and due for repayment at call.

On 16 February 2007, Bilfinger Berger AG and the Company, which are venturers in Joint Venture BBCD, agreed to waive the entire amount of interest accrued up to the agreed date on the loan from the venturers, but they retain the right to claim such interest if the joint venture receives compensation for additional costs from the Expressway and Rapid Transit Authority of Thailand.

On 29 September 2008, the Company entered into a Baht 2,984.1 million loan agreement with Joint Venture BBCD, covering loans to such joint venture and the transfer to the Company of banks loans of the Joint Venture BBCD (as discussed in Note 14). This loan carries interest at the Minimum Loan Rate plus a stipulated margin (MLR + margin) per annum and interest is waived under the same conditions as apply to the loans discussed in the preceding paragraph. The loan principal and interest are to be paid on the earlier of (a) the Joint Venture BBCD receives compensation for additional costs from the Expressway and Rapid Transit Authority of Thailand and (b) the Company calls the loan.

108

Annual Report 2008

(Unit : Baht) Consolidated financial statements Separate financial statements

Advance payment to subcontractor - related party Venturer in jointly controlled entity - Loxley Public Company Limited Total Advance payment to subcontractor - related party Long-term loans to jointly controlled entities and interest receivable Jointly controlled entities - Joint Venture CKET - Joint Venture CKAE Consortium Total long-term loans to jointly controlled entities and interest receivable

2008

2007

2008

2007

19,875,090 19,875,090

33,919,935 33,919,935

-

-

2,629,319 233,829,384 236,458,703

2,819,364 223,194,534 226,013,898

131,465,938 1,169,146,921 1,300,612,859

140,968,197 1,115,972,672 1,256,940,869

During 2008, movements of long-term loans to jointly controlled entities and interest receivable were as follow: (Unit : Baht) Consolidated financial statements

Balance as at 1 January 2008 Loans: - Joint Venture CKAE Consortium - Joint Venture CKET Total loans Interest receivable: - Joint Venture CKAE Consortium - Joint Venture CKET Total interest receivable

During the year Increase

Decrease

Balance as at 31 December 2008

1,971,528 208,235,314 210,206,842

36,000 36,000

(270,941) (270,941)

1,736,587 208,235,314 209,971,901

847,836 14,959,220 15,807,056 226,013,898

156,673 17,333,850 17,490,523 17,526,523

(111,777) (6,699,000) (6,810,777) (7,081,718)

892,732 25,594,070 26,486,802 236,458,703 (Unit : Baht)

Separate financial statements

Loans: - Joint Venture CKAE Consortium - Joint Venture CKET Total loans Interest receivable: - Joint Venture CKAE Consortium - Joint Venture CKET Total interest receivable

CH. Karnchang Public Company Limited

Balance as at 1 January 2008

Increase

Decrease

Balance as at 31 December 2008

98,576,410 1,041,176,571 1,139,752,981

1,800,000 1,800,000

(13,547,037) (13,547,037)

86,829,373 1,041,176,571 1,128,005,944

42,391,787 74,796,101 117,187,888 1,256,940,869

7,833,629 86,669,249 94,502,878 96,302,878

(5,588,851) (33,495,000) (39,083,851) (52,630,888)

44,636,565 127,970,350 172,606,915 1,300,612,859

During the year

109

Loans to Joint Venture CKAE Consortium were previously subject to interest at fixed rates of 6.25 to 8.25 percent per annum and the Minimum Loan Rate plus 0.25 percent (MLR + 0.25%) per annum. Loans to Joint Venture CKET were previously subject to interest at the Minimum Loan Rate (MLR) per annum. These loans to joint ventures were due for repayment at call. Subsequently, on 21 January 2008, the joint ventures entered into memorandums of agreement with the Company, whereby the Joint Venture CKAE Consortium agreed to pay an additional interest charge of 1.75 percent per annum from the borrowing date until the date on which repayment is made and agreed to make repayment in full within 31 March 2009, and the Joint Venture CKET agreed to pay an additional interest charge of 1 percent per annum from the borrowing date until the date on which repayment is made and agreed to make repayment in full within 30 September 2009. The Company recorded the additional interest charges for all loans made in the past up to 31 December 2007, amounting to approximately Baht 11.7 million (Separate financial statements: Baht 96.4 million), as part of interest income in the income statement for the year 2007, and will recognise the additional interest charge until the Company receives full settlement from the joint venture. Subsequently, in January 2009, the joint ventures entered into memorandums of agreement with the Company, whereby the Joint Venture CKAE Consortium requested to extend the due date for all debt repayment from 31 March 2009, such that loan principal and accrued interests would be paid in installments within June 2011; and the Joint Venture CKET requested to extend the due date for all debt repayment from 30 September 2009, such that loan principal and accrued interest would be paid in installments within December 2015.

(Unit : Baht) Consolidated and Separate financial statements

Long-term loans to associated companies and interest receivable Loans: - Bangkok Metro Public Company Limited - SouthEast Asia Energy Limited Total loans Interest receivable: - Bangkok Metro Public Company Limited - SouthEast Asia Energy Limited Total interest receivable

2008

2007

1,583,090,793 156,250,000 1,739,340,793

1,003,090,793 43,750,000 1,046,840,793

238,555,999 9,125,628 247,681,627 1,987,022,420

141,756,508 346,932 142,103,440 1,188,944,233

Transfer Pricing Policy

MLR + 0.5% per annum MLR + 1% per annum

During 2008, movements of long-term loans to associated companies and related interest receivable were as follows: (Unit : Baht) Consolidated and Separate financial statements

Loans: - Bangkok Metro Public Company Limited - SouthEast Asia Energy Limited Total loans Interest receivable: - Bangkok Metro Public Company Limited - SouthEast Asia Energy Limited Total interest receivable

110

Balance as at 1 January 2008

Increase

Decrease

Balance as at 31 December 2008

1,003,090,793 43,750,000 1,046,840,793

580,000,000 112,500,000 692,500,000

-

1,583,090,793 156,250,000 1,739,340,793

141,756,508 346,932 142,103,440 1,188,944,233

96,799,491 8,778,696 105,578,187 798,078,187

-

238,555,999 9,125,628 247,681,627 1,987,022,420

During the year

Annual Report 2008

Bangkok Metro Public Company Limited The outstanding balances represent loans to Bangkok Metro Public Company Limited under the Subordinated Loan Agreement that the Company entered into with Bangkok Metro Public Company Limited and a group of lenders of such company, under which the Company granted long-term loan facilities totaling Baht 3,000 million. The loans carry interest at the Minimum Loan Rate plus 0.5 percent (MLR + 0.5%) per annum, and principal and interest are to be paid after Bangkok Metro Public Company Limited has paid all indebtedness under the Onshore Facilities Agreement or when the associated company has excess cash. During the year 2008, the Company entered into nine subordinated loan agreements with Bangkok Metro Public Company Limited, under which the Company granted long-term loan facilities totaling Baht 580 million to that company.

SouthEast Asia Energy Limited On 4 September 2007, the Company and two shareholders of SouthEast Asia Energy Limited entered into the Shareholders没 Loan Agreement with SouthEast Asia Energy Limited, granting a facility of Baht 250 million, with the Company agreeing to provide a portion of the loans as stipulated in the agreement, amounting to Baht 156.25 million, in order to fund a feasibility study and the development of the Nam Bak 1-2 Hydroelectric Power Project. The loan carries interest at MLR plus 1 percent (MLR + 1%) per annum, and principal and interest are to be paid in full on the earlier of (a) the Financial Closing of the Project and (b) the date eighteen months after the agreement is signed.

Subsequently, On 13 February 2009, the Company received a letter from SouthEast Asia Energy Limited requesting for extension of its debts repayment under the Shareholders没 Loan Agreement for another 12 months as from the due date to 4 March 2010. On 27 February 2009, a meeting of the Board of Directors approved the extension of the debt repayment to that company.

(Unit : Baht) Consolidated financial statements Separate financial statements

2008 Trade accounts payable - related parties Subsidiaries - Construction Material Supply Company Limited - Bangkok Concrete Industries Company Limited - CH. Karnchang-Tokyu Construction Company Limited - Prompratarn Construction Limited Partnership Jointly controlled entities - Joint Venture BBCT - Joint Venture BCKT - Joint Venture CKAE Consortium - Other jointly controlled entities Assosiated company - Pathum Thani Water Company Limited Related companies - Siam Wire Industry Company Limited - Silasaicrete Limited Partnership - CH. Karnchang Holding Company Limited - Mahasiri Company Limited - Expert Transport Company Limited - Other related companies and related parties

CH. Karnchang Public Company Limited

2007

2008

2007

-

-

10,880,978 1,451 2,651,223 13,533,652

29,522,352 1,451 5,983,333 1,883,492 37,390,628

5,052 2,730 19,265 27,047

17,549 2,730 321 20,600

12,626 136,479 29,639 178,744

23,399 136,479 1,605 161,483

89,377 89,377

15,888 15,888

89,377 89,377

15,888 15,888

52,245 431,470 260,000 980,436 997,045 646,680 3,367,876

108,622 187,131 40,504,086 1,271,524 251,561 175,728 42,498,652

52,245 253,296 20,000 997,045 16,571 1,339,157

66,972 187,131 20,000 251,561 26,473 552,137

111

(Unit : Baht) Consolidated financial statements Separate financial statements

Venturers in jointly controlled entities - Bilfinger Berger AG - Bilfinger Berger (Thai) Construction Company Limited - Loxley Public Company Limited Total trade accounts payable - related parties Accounts payable and loans from related parties Other payable Venturer in jointly controlled entity Loxley Public Company Limited Total other payable Advance received from related party Subsidiary - CH. Karnchang (Lao) Company Limited Total advance received from related party Loans from related parties and accrued interest Related company - Siam Wire Industry Company Limited Venturer in jointly controlled entity - Bilfinger Berger AG Total loans from related parties and accrued interest Total accounts payable and loans from related parties

2008

2007

2008

2007

2,999,500 102,893,958 105,893,458 109,377,758

356,564,925 2,999,500 359,564,425 402,099,565

15,140,930

38,120,136

-

174,327 174,327

-

-

-

-

195,100,941 195,100,941

-

2,109,866 2,109,866

-

-

-

2,109,866 2,109,866

2,965,392,899 2,965,392,899 2,965,392,899 2,965,567,226

195,100,941

-

During 2008, movements of loans from related parties were as follow: (Unit : Baht) Consolidated financial statements

During the year

Balance as at 1 January 2008 Loans from related parties and accrued interest Related company - Siam Wire Industry Company Limited Venturer in jointly controlled entity - Bilfinger Berger AG

Increase

-

2,109,866 2,109,866

2,965,392,899 2,965,392,899 2,965,392,899

2,109,866

Decrease from the apportioning Decrease of debt from from forgiven the Payment of debt Agreement

Unrealised gain on exchange

Repayment

-

-

-

Balance as at 31 December 2008

-

2,109,866 2,109,866

(64,778,000) (65,574,458) (1,185,900,450) (1,649,139,991) (64,778,000) (65,574,458) (1,185,900,450) (1,649,139,991) (64,778,000) (65,574,458) (1,185,900,450) (1,649,139,991)

2,109,866

As at 31 December 2007, Joint Venture BBCD had foreign currency loans from a venturer (Bilfinger Berger AG) of 154.1 million euros (53.9 million euros in proportion to the Company没s interest in the joint venture). The loans were scheduled for repayment in the year 2004 and subsequently rescheduled to June 2006.

112

Annual Report 2008

On 1 July 2006, the Joint Venture BBCD entered into agreements to extend the terms of loans, under which repayments of the loans were rescheduled to be made within June 2007. The loans carried interest at the inter bank rate plus 1 percent (LIBOR + 1%) per annum and subsequently, on 16 February 2007, Bilfinger Berger AG and the Company, which are venturers in the Joint Venture BBCD, agreed to waive the entire amount of interest accrued up to the agreed date on the loan from the venturers, but they retain the right to claim such interest if the joint venture receives compensation for additional costs from the Expressway and Rapid Transit Authority of Thailand.

On 1 July 2007, the Joint Venture BBCD entered into agreements to extend the terms of the loans, under which repayments were rescheduled to be made within June 2008, and this subsequently rescheduled to June 2011.

On 27 April 2007, the Joint Venture BBCD entered into new loan agreements with Bilfinger Berger AG granting new loans amounting to Baht 289.8 million (in proportion to the Company没s interest in the joint venture) in order to repay short-term loans from bank of the joint venture. These loans carry interest at the inter bank rate plus 1 percent (BIBOR + 1%) per annum and interest is waived under the same condition as apply to the loans discussed in the preceding paragraph. These loans are repayable in full within April 2008 and can be rescheduled with the mutual consent of the borrower and the lender. Subsequently, on 1 May 2008, the Joint Venture BBCD entered into agreements to extend the terms of loans, under which repayments of the loans were rescheduled to be made within June 2011.

On 30 September 2008, Bilfinger Berger AG issued a letter stating that it had forgiven loans to the Joint Venture BBCD in an amount of 70 million euros in compliance with conditions stipulated in the Payment Agreement between the Company and Bilfinger Berger AG. However, as a result of the this agreement, relating to the apportioning of debt between the Company and Bilfinger Berger AG (as discussed in Note 14), the Company has excluded the loans from Bilfinger Berger AG in the preparation of the consolidated financial statements as from 30 September 2008.

(Unit : Baht) Consolidated financial statements Separate financial statements

2008

2007

2008

2007

Advances received from employers - related parties Jointly Controlled Entity

- CKLX Joint Venture Associated company - Pathum Thani Water Company Limited Related companies - Bangkok Expressway Public Company Limited - Bangpa-in Land Company Limited Total advances received from employers - related parties Retention for construction - related parties Subsidiaries - CH. Karnchang-Tokyu Construction Company Limited - Construction Material Supply Company Limited Total retention for construction - related parties

-

8,763,456 8,763,456

-

35,053,822 35,053,822

-

42,592,517 42,592,517

-

42,592,517 42,592,517

19,075,275 1,750,028 20,825,303 20,825,303

15,389,594 11,850,000 27,239,594 78,595,567

19,075,275 19,075,275 19,075,275

15,389,594 15,389,594 93,035,933

-

-

4,927,843 4,006,189 8,934,032

6,090,306 6,090,306

Directors and management没s remuneration In 2008 the Company and its subsidiaries had expenses related to the salaries, bonuses and meeting allowances to their directors and management totaling Baht 89 million (Separate financial statements: Baht 62 million) (2007: Baht 62 million, Separate financial statements: Baht 55 million).

Guarantee obligations with related parties The Company has outstanding guarantee obligations with its related parties, as described in Note 35.4 to the financial statements.

CH. Karnchang Public Company Limited

113

7.

Current investments (Unit : Baht) Consolidated and separate financial statements

2008 Fixed Deposit

Investments in trading securities Marketable equity securities - Fair value

Invetments in available-for-sale securities Unit trust in fixed income open-ended fund Add: Unrealised gain on changes in value of investments

Other investments - related company Thai Tap Water Public Company Limited Total current investments

2007

9,838,396 9,838,396

-

1,886,850 1,886,850

3,061,550 3,061,550

1,002,246 4,958 1,007,204

205,882,113 2,053,173 207,935,286

12,732,450

108,303,240 108,303,240 319,300,076

In May 2008, the Company sold all ordinary shares of Thai Tap Water Supply Public Company Limited classified as current investments and the gain on sales of these shares was presented under gain on sales of investments in associated company (as discussed in Note 15).

8.

Trade accounts receivable The balances of trade accounts receivable as at 31 December 2008 and 2007, aged on the basis of due dates, are summarised

below.

(Unit: Baht) Consolidated financial statements

Related parties 2008 2007 Construction contract receivables Not yet due Overdue - Less than 3 months - 3 - 6 months - 6 - 12 months - Over 12 months Less: Allowance for doubtful accounts Construction contract receivables, net Retention as per contracts Total

114

Unrelated parties 2008 2007

Total 2008

2007

368,824,403

435,378,780

1,031,608,856

734,827,881

1,400,433,259

1,170,206,661

137,986,992 109,054,327 102,725,052 87,014,365 805,605,139 805,605,139 19,707,014 825,312,153

16,521,998 13,216,905 239,397,548 704,515,231 (164,682,865) 539,832,366 10,065,716 549,898,082

36,747,817 25,726,422 37,408,220 282,628,856 1,414,120,171 (25,851,269) 1,388,268,902 213,339,934 1,601,608,836

117,373,161 734,873 378,866 185,793,627 1,039,108,408 (21,719,121) 1,017,389,287 210,648,931 1,228,038,218

174,734,809 134,780,749 140,133,272 369,643,221 2,219,725,310 (25,851,269) 2,193,874,041 233,046,948 2,426,920,989

133,895,159 13,951,778 378,866 425,191,175 1,743,623,639 (186,401,986) 1,557,221,653 220,714,647 1,777,936,300

Annual Report 2008

(Unit: Baht) Separate financial statements

Related parties 2008 2007 Construction contract receivables Not yet due Overdue - Less than 3 months - 3 - 6 months - 6 - 12 months - Over 12 months

Unrelated parties 2008 2007

Total 2008

2007

208,883,550

83,155,242

873,846,236

581,144,750

1,082,729,786

664,299,992

12,790,562 447,139,963 668,814,075 Less: Allowance for doubtful accounts (253,358,255) Construction contract receivables, net 415,455,820 Retention as per contracts 47,494,913 Total 462,950,733

16,521,998 447,674,963 547,352,203 (253,358,255) 293,993,948 10,065,716 304,059,664

33,828,261 25,726,422 28,424,550 257,814,003 1,219,639,472 1,219,639,472 105,344,047 1,324,983,519

103,882,256 161,792,203 846,819,209 846,819,209 199,265,272 1,046,084,481

46,618,823 25,726,422 28,424,550 704,953,966 1,888,453,547 (253,358,255) 1,635,095,292 152,838,960 1,787,934,252

120,404,254 609,467,166 1,394,171,412 (253,358,255) 1,140,813,157 209,330,988 1,350,144,145

On 24 December 2008, the Companyûs Board of Directors approved the terms of repayment of construction contract debt of Baht 325.7 million for a trade receivable, Rayong Real Estate Company Limited, whereby payment is to be made in 13 quarterly installments, with the first of these due in September 2009 and the last installment due in December 2012 (as discussed in Note 12). The Company reclassified the accounts receivable of such company as at 31 December 2008, amounting to Baht 315.7 million, as non-current assets under the caption of çLong-term trade accounts receivableé in the balance sheet, as per the repayment plan.

9.

Construction contracts in progress/advances received from employers and deferred construction revenue (Unit : Baht) Consolidated financial statements Separate financial statements

Construction contracts in progress Project value as per contact Accumulated amount recognised as revenue on percentage of completion basis Less: Value of total billed Construction contracts in progress Retentions as per contracts Advances received from employers and deferred construction revenue Project value as per contact Value of total billed Less: Accumulated amount recognised as revenue on percentage of completion basis Deferred construction revenue Advances received from employers Total

CH. Karnchang Public Company Limited

2008

2007

2008

2007

30,056,297,270

30,684,976,285

27,171,599,498

28,769,673,855

25,684,334,095 (22,617,478,218) 3,066,855,877

24,746,505,967 (21,848,081,559) 2,898,424,408

23,642,847,022 (20,938,547,612) 2,704,299,410

24,575,770,992 (21,757,644,125) 2,818,126,867

233,046,948

220,714,647

152,838,960

209,330,988

22,814,143,869 16,002,406,827

23,908,372,045 11,939,072,187

863,781,631 736,613,130

3,185,273,182 2,502,407,451

(14,988,779,331) 1,013,627,496 425,270,144 1,438,897,640

(11,298,338,188) 640,733,999 644,749,331 1,285,483,330

(727,501,279) 9,111,851 314,819,150 323,931,001

(2,158,824,736) 343,582,715 465,839,520 809,422,235

115

10. Inventories and supplies for construction (Unit: Baht) Consolidated financial statements Separate financial statements

Supplies for construction Construction in progress and work in process Finished goods Total Less: Allowance for loss on diminution in value of finished goods Inventories and supplies for construction, net

11.

2008 650,793,072 444,860,573 11,591,648 1,107,245,293 (7,791,996) 1,099,453,297

2007 292,091,011 332,464,754 18,144,792 642,700,557 (14,870,950) 627,829,607

2008 328,105,410 216,467,471 544,572,881 544,572,881

2007 73,627,593 95,009,327 168,636,920 168,636,920

Restricted bank deposits

The outstanding balances represent bank deposit accounts which have been pledged with banks to secure the issuance of bank guarantees for electricity utilisation, bidding, issuance of other bank guarantees, letter of credit of an associated company and the bank overdraft of a subsidiary.

12. Loans to subcontractors and interest receivable/long-term loans to other companies Loans to subcontractors and interest receivable The balance of loans to subcontractors and related interest receivable as at 31 December 2008, amounting to Baht 268.1 million (in proportion to the Companyûs interest in the joint venture), represented loans to the former subcontractors of Joint Venture CKAE Consortium, Modern Construction Material Company Limited and Best Plan Technology Company Limited in the form of promissory notes.

These loans are subject to interest at fixed rates per annum which were tied to the Minimum Loan Rate plus 0.25 percent (MLR + 0.25%) as at borrowing dates and repayable within 31 December 2007.

In January 2007, the borrowers issued letters confirming that they would make loan repayments amounting to Baht 20 million to the Joint Venture no later than 30 April 2007 (the borrowers paid such accrued interest amount of Baht 20 million in April 2007) and the borrowers agreed to pay an additional charge of interest of 2.25 percent per annum from the borrowing date until the date on which repayment is made in full. In addition, the major shareholders of the borrowers have provided personal guarantees for the full amount of the outstanding loans. The loans are also secured by the share certificates of a company listed on the Stock Exchange of Thailand, worth approximately Baht 13.6 million (Baht 13.3 million in proportion to the Companyûs interest in the joint venture) as at 31 December 2008, which are owned by the borrower and have been endorsed to transfer them to the joint venture.

Therefore, the joint venture recorded the additional interest of 2.25 percent per annum for all loans made in the past up to the earlier of the repayment date or 31 March 2007, amounting to approximately Baht 74.6 million (in proportion to the Companyûs interest in the joint venture) as part of interest income in the consolidated income statement for the first quarter of 2007, and will recognise interest on the basis of this new rate until the joint venture receives full settlement from the borrowers.

In November 2007, the borrowers issued letters requesting an extension of the period for loan repayment, whereby from repayment being due in full by no later than 31 December 2007, repayment would be due in full by no later than 31 December 2008. In addition, the borrower placed the title deeds to plots of land with independently appraised values (appraised in June 2006) totaling approximately Baht 236.9 million (Baht 232.2 million in proportion to the Companyûs interest in the joint venture) with the joint venture as security for these loans.

On 24 December 2008, the Companyûs Board of Directors granted approval for CH. Karnchang Public Company Limited, in the name of Joint Venture CKAE Consortium, to extend the loan repayment schedule for the borrowers as per the repayment plan proposed by the borrowers. Modern Construction Material Company Limited, whose outstanding debt as at 31 December 2008 amounted to Baht 6.34 million (in proportion to the Companyûs interest in the joint venture), requested an extension of the period for loan repayment, whereby from repayment being due in full by no later than 31 December 2008, repayment would be due in full by no later than 30 June 2009. Best Plan Technology Company Limited requested an extension of the period for loan repayment, whereby from repayment being due in full by no later than 31 December 2008, repayment of principal and interest would be due in 8 installments in a quarterly basis, with the first of these due in 31 March 2009 and the last installment due in 31 December 2010, on the grounds that they had been affected by fluctuations in 116

Annual Report 2008

prices of construction materials and the domestic economic slowdown. Subsequently, on 26 December 2008, the borrowers and the Joint Venture CKAE Consortium entered into memorandums, whereby the joint venture agreed to extend the loans for the borrowers as per this repayment plan. The joint venture reclassified the loans to subcontractors and interest receivable as current assets and non-current assets in accordance with payment schedule stipulated in the repayment plan in the balance sheet as at 31 December 2008.

Long-term loans to other companies and interest receivable The balance of long-term loans to other companies and related interest receivable as at 31 December 2008, amounting to Baht 1,457.0 million (in proportion to the Companyûs interest in the joint venture), represented loans to two other companies, Rayong Real Estate Company Limited and Private Inter Construction Company Limited. Joint Venture CKET entered into long-term loan agreements with these companies granting facilities during 2003, with the loans subject to interest at the Minimum Loan Rate plus 0.25 percent (MLR + 0.25%) per annum and to be repaid within June 2005. Subsequently, the repayment term was extended such that payment was to be made within June 2006. The borrowers placed the title deeds to plots of land and construction thereon with independently appraised values (appraised in January 2008) totaling approximately Baht 1,986.1 million (Baht 1,588.9 million in proportion to the Companyûs interest in the joint venture) to the joint venture as security for these loans. In addition, the borrowers allowed the Company to use part of the land and construction thereon as security for bank guarantee facilities of Baht 500 million and long-term loans provided to the Company by banks, and provided guarantees for the Companyûs bank loans.

On 1 July 2006, the Joint Venture CKET entered into an addendum to these agreements with these two other companies, whereby the repayment term was extended until June 2007.

Subsequently, in March 2007, the borrowers issued letters confirming that they would repay one half of the loan balances no later than 31 December 2007, and that the remaining debts would be repaid in full by 30 June 2008, and agreeing to pay an additional interest charge of 1.25 percent per annum from the borrowing date until the date on which the repayment is made in full. In addition, a major shareholder of both of the borrowers entered into an agreement to provide a personal guarantee of settlement of the full amount of the outstanding debt to the joint venture.

Therefore, the joint venture recorded the additional interest of 1.25 percent per annum for all loans made in the past up to the earlier of the repayment date or 31 March 2007, which amounted to approximately Baht 53.7 million (in proportion to the Companyûs interest in the joint venture). This was recorded as part of interest income in the consolidated income statement for the first quarter of 2007, and interest is to be henceforth recognised on the basis of this new rate until the joint venture receives full settlement from the borrowers.

In November 2007, the borrowers issued letters requesting an extension of the period for loan repayment, whereby from half of the loan balances being due no later than 31 December 2007 and full settlement of the remaining debts due by 30 June 2008, half of the loan balance would be due no later than 31 December 2008 and full settlement of the remaining debts would be due by 30 June 2009.

On 24 December 2008, the Companyûs Board of Directors granted approval for CH. Karnchang Public Company Limited, in the name of Joint Venture CKET, to extend the loan repayment schedule for the borrowers, as well as the construction contract debt of one borrower to the Company, as per the repayment plan proposed by the borrowers. The borrowers, Rayong Real Estate Company Limited and Private Inter Construction Company Limited, had requested an extension of the period for loan repayment, whereby from half of the loan balances being due no later than 31 December 2008 and full settlement of the remaining debts due by 30 June 2009, repayment of principal would be due in 23 installments in a quarterly basis, from March 2009 until September 2014, and interest payment would be due in September and December 2014 and in March 2015. In addition, Rayong Real Estate Company Limited had requested an extension of the period for settlement of its construction contract debt to the Company, amounting to Baht 325.7 million, whereby payment would be made in 13 quarterly installments, from September 2009 until December 2012 (as discussed in Note 8). Because of the current impact on Thailandûs economy of the political situation, together with the economic recession, Private Inter Construction Company Limitedûs revenue was insufficient to cover debt payment as formerly scheduled, and Rayong Real Estate Company Limited had to suspend the development of real estate and golf course, resort, and residential projects, thereby preventing it from providing services as planned. However, Rayong Real Estate Company Limited prepared and submitted a business plan and a debt repayment schedule to the joint venture to ensure its ability to repay the loan in installments. Subsequently, on 26 December 2008, the borrowers and the Joint Venture CKET entered into an addendum to the loan agreement, whereby the loans and construction contract debt were extended as per this repayment plan. The joint venture reclassified the long-term loans to other companies and interest receivable to current assets and non-current assets in accordance with payment schedule stipulated in the repayment plan in the balance sheet as at 31 December 2008. For reasons of prudence, the Joint Venture CKET ceased recognition of interest income from the borrowers from 1 July 2008.

CH. Karnchang Public Company Limited

117

13. Investments in subsidiaries Details of investments in subsidiaries as presented in separate financial statements are as follows: (Unit: Baht) Separate financial statements

Company没s name

Construction Material Supply Company Limited CH. Karnchang Realestate Company Limited CH. Karnchang-Tokyu Construction Company Limited Bangkok Concrete Industries Company Limited CH. Karnchang (Lao) Company Limited (paid-up share capital of USD 1,000,000) Total Less: Allowance for loss on investments in subsidiaries Total investments in subsidiaries, net

Paid-up capital 2008 2007

Shareholding percentage 2008 2007 (%) (%)

Cost 2008

15,000,000

15,000,000

99.99

99.99

14,999,600

160,000,000

160,000,000

99.00

99.00

100,000,000

100,000,000

55.00

55.00

54,999,600

200,000,000

200,000,000

-

-

-

39,636,203

39,636,203

100.00

100.00

Dividend received during the years 2007 2008 2007

14,999,600

-

-

158,400,000 158,400,000

-

-

54,999,600

22,000,000

13,750,000

-

-

-

39,636,203 39,636,203 268,035,403 268,035,403

22,000,000

13,750,000

(1,558,902)

(1,558,902)

266,476,501 266,476,501

Bangkok Concrete Industries Company Limited On 25 December 2007, the Company sold all of the 999,994 ordinary shares that the Company held in Bangkok Concrete Industries Company Limited to Widen Holding Company Limited at a price of Baht 5 per share, or for a total of approximately Baht 5 million. The Company received cash from the sale of these shares in January 2008. The Company has not recorded a gain on the sale of these shares, but recorded the transaction as allowance for doubtful accounts for loans to such company, since the Company remains the major source of financial support of Bangkok Concrete Industries Company Limited. The Company therefore continued to include the financial statements of such company in the consolidated financial statements for the years ended 31 December 2008 and 2007.

118

Annual Report 2008

CH. Karnchang Public Company Limited

119

Nature of business

53.20 59.99 59.99 59.99 50.00 25.00 35.00 99.90 98.00 80.00 44.00 25.00 51.89 75.00

53.20 59.99 59.99 59.99 50.00 25.00 35.00 99.90 98.00 80.00 51.89 75.00

Shareholding percentage 2008 2007 (%) (%)

-

-

-

-

26,250,000 26,250,000

2008

Cost

-

-

-

-

26,250,000 9,927,260 36,177,260

2007

(4,082,589,509)

(18,019,822)

-

-

-

(1,062,776,977)

(18,019,822)

-

-

-

(4,064,569,687) (4,082,589,509)

(18,019,822)

-

-

-

Carrying amounts based on cost method - net 2008 2007

(1,071,007,155) (4,090,819,687) (1,044,757,155) (9,927,260) (1,089,026,977) (4,118,766,769) (1,062,776,977)

(18,019,822)

-

-

-

Allowance for loss on investments 2008 2007

(Unit: Baht)

The outstanding balances of provision for loss on investments in joint ventures comprise of provision for loss in excess of investments in Joint Venture BBCT and Joint Venture BBCD.

Joint Venture BBCT Construction - Second Stage Expressway Project Sector B Route Phayathai - Bangkhlo - Second Stage Expressway Project Sector C+ Route Chaeng Wattana - Bang Phun & Bang Sai - Second Stage Expressway Project Sector D Route Asoke - Srinakarin - Second Stage Expressway Project Sector C1A Route Ngam Wong Wan - Chaeng Wattana The TWCK Joint Venture Construction and project management Joint Venture BCKT Construction Joint Venture BBCD Construction Joint Venture CKSL Construction Joint Venture CKAE Consortium Construction Joint Venture CKET Project management CKOBA Joint Venture Construction (Dissolution during 2008) Joint Venture BBC Construction (Dissolution during 2008) Joint Venture CKNNL Construction CKLX Joint Venture Construction Total Presented as: Investments in joint ventures Provision for loss on investments in joint ventures

Jointly controlled entities没 name

Separate financial statements

14.1 Details of investments in joint venture: Investments in joint ventures represent investments in entities which are jointly controlled by the Company and other companies. Details of these investments are as follows:

14. Investments in joint ventures/Provision for loss on investments in joint ventures

14.2 Share of profit During the years, the Company recognised its share of profit from investments in the jointly controlled entities in the separate financial statements as follows: (Unit: Baht) Separate financial statements

Jointly controlled entities没 name Joint Venture BBCT - Second Stage Expressway Project Sector C+ Route Chaeng Wattana - Bang Phun&Bang Sai - Second Stage Expressway Project Sector D Route Asoke - Srinakarin The TWCK Joint Venture Joint Venture BCKT CKOBA Joint Venture Joint Venture CKNNL Total

120

Profit sharing from jointly controlled entities during the years 2008 2007

112,906 112,906

6,597,800 2,999,000 4,830,000 2,500,000 6,380,120 7,609,095 30,916,015

Annual Report 2008

CH. Karnchang Public Company Limited

121

Joint Venture CKNNL 2008 2007 14.3 19.7 (15.0) (26.4) (0.7) (6.7)

For the years ended 31 December Joint Venture BBCD Joint Venture CKAE Consortium Joint Venture CKET 2008 2007 2008 2007 2008 2007 1,259.6 1.4 26.0 116.4 80.8 193.1 (24.9) (174.6) (14.3) (86.6) (104.1) (154.8) 1,234.7 (173.2) 11.7 29.8 (23.3) 38.3

Joint Venture BBCT 2008 2007 1.0 0.9 (1.7) (1.7) (0.7) (0.8)

Current liabilities Non-current liabilities Net assets (liabilities)

Total revenues Total expenses Net income (loss)

Current assets Non-current assets

Joint Venture CKNNL 2008 2007 4.5 6.6 1.4 0.1 5.9 6.7 (0.2) (0.2) 5.7 6.5

As at 31 December Joint Venture BBCD Joint Venture CKAE Consortium Joint Venture CKET 2008 2007 2008 2007 2008 2007 11.6 29.7 196.3 350.7 52.8 1,465.5 0.2 0.2 160.9 1,509.0 75.9 11.8 29.9 357.2 350.7 1,561.8 1,541.4 (175.7) (4,507.0) (150.8) (156.0) (1,169.3) (1,125.6) (163.9) (4,477.1) 206.4 194.7 392.5 415.8

Joint Venture BBCT 2008 2007 203.9 204.6 0.3 0.3 204.2 204.9 (18.1) (18.1) 186.1 186.8

CKLX Joint Venture 2008 2007 1,109.8 65.9 (1,095.5) (65.5) 14.3 0.4

(Unit: Million Baht)

CKLX Joint Venture 2008 2007 555.5 257.0 1.6 557.1 257.0 (542.3) (256.6) 14.8 0.4

(Unit: Million Baht)

14.3 Summarised financial information of significant jointly controlled entities The Company没s proportionate shares of the assets, liabilities, revenues and expenses of significant jointly controlled entities, according to proportion under joint venture agreements, are as follows:

Joint Venture BBCD On 7 February 2008, the Company entered into the Payment Agreement with Bilfinger Berger AG, which is a venturer in Joint Venture BBCD, whereby details of the agreement are as follow: 1. The Company is to provide loans to Joint Venture BBCD, for the joint venture to use to make full settlement of loans from banks and related accrued interest, or to accept the transfer of loans from banks of the joint venture totaling approximately Baht 2,400 million.

2. Bilfinger Berger AG agrees to waive its claims in loans to Joint Venture BBCD amounting to 70 million euros (or approximately Baht 3,500 million).

3. The Company is to provide loans to Joint Venture BBCD, with which it is to make payment of loans from Bilfinger Berger AG totaling 13.5 million euros (or approximately Baht 675 million) as per the scheduled payments. The joint venture will make such payments within 2010.

On 31 March 2008, the Company entered into an agreement to accept the transfer of debts in the form of bank loans from Joint Venture BBCD, comprising loan principal and accrued interest totaling approximately Baht 900 million (as discussed in Note 22).

The Company recorded this transaction in the accounts in the first quarter of 2008.

On 13 August 2008 and on 29 September 2008, the Company entered into agreements to accept the transfer of debts in the form of two banks loans from Joint Venture BBCD, comprising loan principal and accrued interest totaling approximately Baht 806 million and loan principal totaling approximately Baht 584 million, respectively (as discussed in Notes 20 and 22). The Company recorded these transactions in the accounts in the third quarter of 2008.

On 30 September 2008, Bilfinger Berger AG issued a letter stating that it had forgiven loans to the Joint Venture BBCD in an amount of 70 million euros (as presented in the above details 2) since the Company had accepted the transfer of debts in the form of three banks loans from Joint Venture BBCD. Under the Payment Agreement, if the conditions stipulated in the agreement detailed above in 1 to 3 are fully met, debts of the Company and Bilfinger Berger AG that are outstanding in the accounts of the Joint Venture BBCD, in the form of trade accounts payable and loans, are the responsibility of each party. Therefore, the Company has excluded the debts of Bilfinger Berger AG in the Joint Venture BBCD from the preparation of the consolidated financial statements as from 30 September 2008. The Company recorded liabilities for future interest payable in respect of the loans transferred from the Joint Venture BBCD detailed above in 1 and for the loans to the Joint Venture BBCD detailed above in 3, amounting to approximately Baht 1,076 million, under the caption of çProvision for loss on investments in joint venturesé in the balance sheet as at 30 September 2008. As a result of this transaction, the liabilities from the Joint Venture BBCD for which the Company was responsible decreased by approximately Baht 408 million. The Company therefore reversed the provision for loss on investments in joint ventures previously recorded and presented as çRevenue from reversal of provision for loss on investments in joint ventureé in the consolidated income statements for the third quarter of 2008 (Separate financial statements: Baht 242 million).

122

Annual Report 2008

CH. Karnchang Public Company Limited

123

Total

SouthEast Asia Energy Limited

Thai Tap Water Supply Public Company Limited

CH. Karnchang (Qatar) Contracting Company Bangkok Metro Public Company Limited

Company没s name Nature of business

Construction Operation of the MRTA Intitial System Project - Chaloem Ratchamongkhon Line and Commercial development Production and sale of treated water to the Provincial Waterworks Authority Making investment in as well as provision of consulting services relating to electricity generating projects both locally and overseas

15.1 Details of associated companies:

Thailand

Thailand

38.00

35.31

24.61

Qatar

Thailand

2008 (%) 49.00

Country of incorporation

15. Current investments/Investments in associated companies

Shareholding percentage

28.50

45.59

24.61

2007 (%) 49.00

1,570,357,360 7,644,232,661

2,479,732,517

3,593,304,884

837,900

2008

837,900

2007

1,015,811,200 7,282,803,475

2,672,849,491

3,593,304,884

Cost

Consolidated financial statements

1,016,425,695 4,727,694,513

2,528,328,726

1,182,940,092

-

-

657,001,509 4,549,027,861

2,356,478,950

1,535,547,402

Carrying amounts based on equity method 2008 2007

(Unit: Baht)

124

Annual Report 2008

Total

SouthEast Asia Energy Limited

Thai Tap Water Supply Public Company Limited

CH. Karnchang (Qatar) Contracting Company Bangkok Metro Public Company Limited

Company没s name

Construction Operation of the MRTA Intitial System Project - Chaloem Ratchamongkhon Line and Commercial development Production and sale of treated water to the Provincial Waterworks Authority Making investment in as well as provision of consulting services relating to electricity generating projects both locally and overseas

Nature of business

Thailand 38.00

35.31

24.61

Thailand

Thailand

49.00

28.50

45.59

24.61

49.00

Shareholding percentage 2008 2007 (%) (%)

Qatar

Country of incorporation Cost

837,900

2007

1,570,357,360 1,015,811,200 7,644,232,661 7,282,803,475

2,479,732,517 2,672,849,491

3,593,304,884 3,593,304,884

837,900

2008

(535,502,872)

-

(534,664,972)

(837,900)

(535,502,872)

-

(534,664,972)

(837,900)

Allowance for loss on investments 2008 2007

Separate financial statements

-

1,570,357,360 1,015,811,200 7,108,729,789 6,747,300,603

2,479,732,517 2,672,849,491

3,058,639,912 3,058,639,912

-

Carrying amounts based on cost method - net 2008 2007

(Unit: Baht)

15.2 Share of income (loss) and dividend received

During the years, the Company has recognised its share of net income (loss) from investments in associated companies in the consolidated financial statements and dividend income in the separate financial statements as follows: (Unit: Baht) Consolidated financial statements Separate financial statements

Company没s name CH. Karnchang (Qatar) Contracting Company Pathum Thani Water Company Limited and its subsidiary Bangkok Metro Public Company Limited and its subsidiaries Thai Tap Water Supply Public Company Limited and its subsidiaries SouthEast Asia Energy Limited and its subsidiaries Total

Share of income (loss) from investments in associated companies during the years 2008 2007 (83,477,750) (352,607,311) (356,573,523) 521,711,604 384,300,765 (195,121,974) (182,144,094) (26,017,681) (237,894,602)

Dividend received during the years 2008 2007 209,441,610 77,491,970 209,441,610 77,491,970

15.3 Fair value investments in listed associates In respect of investments in associated companies that are listed companies on the Stock Exchange of Thailand, their fair values are as follows: (Unit: Million Baht) Fair values as at 31 December 2008 2007 1,176.4 3,058.6 5,888.7 7,065.1 3,058.6

Company没s name Bangkok Metro Public Company Limited Thai Tap Water Supply Public Company Limited Total

15.4 Summarised financial information of associated companies Financial information of the associated companies is summarised below.

Company没s name

Paid-up capital as at 31 December 2008 2007

Bangkok Metro Public Company Limited and its subsidiaries 11,950.0 Thai Tap Water Supply Public Company Limited and its subsidiaries 3,990.0 SouthEast Asia Energy Limited and its subsidiary 4,132.5

Total assets as at 31 December 2008 2007

(Unit: Million Baht) Net income (loss) Total liabilities as Total revenues for the years for the years at 31 December ended 31 December ended 31 December 2008 2007 2008 2007 2008 2007

11,950.0

19,187.6

19,705.3

13,680.7

12,737.4

1,578.7

1,445.8

(1,459.3)

(1,475.4)

3,290.0

17,894.6

18,681.1

9,558.2

13,966.4

3,638.8

2,623.2

1,358.4

920.0

3,564.3

19,148.6

11,796.4

13,846.7

8,372.8

0.8

0.2

(16.2)

(44.0)

CH. Karnchang Public Company Limited

125

Pathum Thani Water Company Limited On 25 June 2007, a meeting of the Company没s Board of Directors approved the sales of all 5,567,371 ordinary shares of Pathum Thani Water Company Limited at a price of Baht 340 per share (the share price is close to the value appraised by an independent financial advisor) to Thai Tap Water Supply Public Company Limited, whereby the Company is to enter into a share sale and purchase agreement and initially transferred 5,067,371 shares, or a total of Baht 1,722.9 million, while the remaining 500,000 shares, or a total of Baht 170 million, are to be transferred and paid for at a later date, provided that the transfer takes place before the date that the ordinary shares of Thai Tap Water Supply Public Company Limited are listed as securities on the Stock Exchange of Thailand.

On 25 June 2007, the group of existing shareholders of Pathum Thani Water Company Limited, comprised of the Company, two shareholders of the Company and another company, entered into a share sale and purchase agreement for the shares of Pathum Thani Water Company Limited with Thai Tap Water Supply Public Company Limited, whereby they sold 10,313,865 ordinary shares of Pathum Thani Water Company Limited at a price of Baht 340 per share (the share price is close to the value appraised by an independent financial advisor), for a total of Baht 3,506.7 million to Thai Tap Water Supply Public Company Limited. The Company没s portion in these shares sold amounted to 5,067,371 shares, for a total of Baht 1,722.9 million. The Company received cash from the sale of these shares of Baht 1,722.9 million on 29 June 2007. As a result, the Company recorded gains on the sale of investments in associated company amounting to Baht 574.8 million (after the reversal of provision for loss on investments in such associated company and the elimination of profit between parties) in the consolidated income statement, and amounting to Baht 1,033.9 million (after the reversal of an allowance for loss on diminution of investments in such associated company) in the separate income statement for the second quarter of the year 2007.

The Company holds a remaining 500,000 ordinary shares in Pathum Thani Water Company Limited, or equivalent to 4.17 percent of the paid-up capital of such company.

Subsequently, on 14 December 2007, the Company entered into a share sale and purchase agreement for the shares of Pathum Thani Water Company Limited with Thai Tap Water Supply Public Company Limited, whereby it sold 499,998 ordinary shares of Pathum Thani Water Company Limited at a price of Baht 340 per share, for a total of Baht 170.0 million to Thai Tap Water Supply Public Company Limited. The Company received cash from the sale of these shares on 18 December 2007. As a result, the Company recorded gains on the sale of investments in associated company for the year 2007, amounting to Baht 56.7 million (after the reversal of provision for loss on investment in such associated company and the elimination of profit between parties) in the consolidated income statement and Baht 55.4 million in the separate income statement.

In addition, the Company (as contractor for the expansion of a treated water production project for Pathum Thani Water Company Limited) entered into a Sponsor Support Agreement with Pathum Thani Water Company Limited and a group of lenders of that company, whereby the Company agreed to provide cash support to such company.

Bangkok Metro Public Company Limited A silent period has been imposed for the 1,888.3 million ordinary shares of Bangkok Metro Public Company Limited, although they will be released from such commitment in March and September of every year and will be fully released within the year 2009. As at 31 December 2008, 755.3 million ordinary shares of Bangkok Metro Public Company Limited have been released from the commitment.

The Company has pledged part of its share certificates of investment in Bangkok Metro Public Company Limited with a group of banks to secure parts of the long-term loans obtained from that group of banks by the associated company.

Thai Tap Water Supply Public Company Limited On 3 December 2007, Thai Tap Water Supply Public Company Limited issued 40 million new ordinary shares with a par value of Baht 1 each, which it offered to directors, management, and employees of such company and employees of WaterFlow Company Limited at an offer price of Baht 1.2 per share, or a total of Baht 48 million. Thai Tap Water Supply Public Company Limited received payment for the additional shares in December 2007 and registered the increase in its paid-up share capital with the Ministry of Commerce on 18 December 2007. As a result, the shareholding of the Company in such company has decreased from 46.15 percent to 45.59 percent.

126

Annual Report 2008

During 12 to 13 May 2008, Thai Tap Water Supply Public Company Limited made a public offering of the 700 million additional shares at a price of Baht 4.2 per share, or a total of Baht 2,940 million, and on 20 May 2008 received payment of this share capital increment. Thai Tap Water Supply Public Company Limited registered the increase in its paid-up capital with the Ministry of Commerce on 20 May 2008.

On 22 May 2008, the Stock Exchange of Thailand (çSETé) approved the listing of the ordinary shares of Thai Tap Water Supply Public Company Limited. This company launched an IPO of 1,000 million ordinary shares, consisting of 700 million new ordinary shares and 300 million existing ordinary shares, at a price of Baht 4.2 per share. The Company sold 143 million ordinary shares of Thai Tap Water Supply Public Company Limited, comprising all shares classified as current investments and some of the shares classified as investment in associated company, to the public at the public offering price (Baht 4.2 per share), or for a total of Baht 600.9 million, in order to ensure that Thai Tap Water Supply Public Company Limited would be qualified in accordance with SET rules. As a result the Companyûs equity interest fell from 45.59 percent to 35.31 percent. Therefore, the Company recognised gain from the sale of investment in associated company amounting to Baht 278.7 million in the consolidated income statements for the second quarter of the year 2008 (Separate financial statements: 291.0 million). Following the listing of the shares of Thai Tap Water Supply Public Company Limited, a 1-year silent period was imposed on the 1,099.4 million shares held by the Company, as from the initial trading date of the shares on the SET. They will be released from such commitment in November 2008 and May 2009. As at 31 December 2008, 329.4 million ordinary shares of Thai Tap Water Supply Public Company Limited have been released from the commitment.

On 17 December 2008, Extraordinary General Meeting of the shareholders of Thai Tap Water Supply Public Company Limited resolved to approve the payment of dividend of Baht 0.15 per share from the earnings of the promoted operations for the year 2007, or a total of Baht 598.5 million, to shareholders listed in the share register as at 20 November 2008. Thai Tap Water Supply Public Company Limited paid such dividend in December 2008. The Company recorded dividend received of Baht 209.4 million as other income in the separate income statement for the year 2008.

The Company has pledged part of the share certificates for its investment in Thai Tap Water Supply Public Company Limited with a group of banks to guarantee a loan facility granted to that company by the group of banks and as a security for loans from banks of the Company.

SouthEast Asia Energy Limited On 26 May 2006, the Company entered into an Equity Contribution Agreement with SouthEast Asia Energy Limited and Nam Ngum 2 Power Company Limited (co-borrower), other shareholders and lenders of SouthEast Asia Energy Limited. Under the agreement, the Company agreed to provide equity contributions to SouthEast Asia Energy Limited in the proportion stipulated in the agreement (62.5 percent), or in total not more than Baht 2,469 million, in the following 3 cases: 1) Equity contribution of not more than Baht 781 million for tax liabilities which may arise if such company fails to be granted tax exemption under the double taxation treaty between Thailand and the Lao Peopleûs Democratic Republic.

2) Equity contribution of not more than Baht 1,219 million for income tax liabilities which may arise if such company fails to obtain the BOI Promotion Certificate from the Board of Investment.

3) Equity contribution of not more than Baht 469 million for any revenue shortfall in the event that the construction of the Nam Ngum 3 Hydropower plant negatively impacts on the energy production of the above company, causing such company to be unable to comply with its obligations under the Financing Documents.

In addition, the Company agrees to provide additional equity contributions of not more than USD 12.5 million to SouthEast Asia Energy Limited in the event of any budget cost overruns in the Nam Ngum 2 Hydroelectric Power Project, and additional equity contributions of not more than Baht 313 million if the co-borrower of that company defaults on loan payment or is unable to comply with its obligations under the Financing Documents.

On 11 April 2007, SouthEast Asia Energy Limited entered into the Memorandum of Understanding with the Lao Peopleûs Democratic Republic for exclusive rights to carry out the feasibility study and the development of the Nam Bak 1-2 Hydroelectric Power Project within 18 months after the signing date.

CH. Karnchang Public Company Limited

127

During the first and the second quarters of 2007, SouthEast Asia Energy Limited called up an additional 16 percent and an additional 13.5 percent, respectively, of the value of the 102.6 million ordinary shares held by the Company which were not fully paid (par value of Baht 10 each), or totals of Baht 164.16 million and Baht 138.5 million, respectively. The Company made payment of the share prices in the first and the second quarter of 2007.

On 8 June 2007, an Extraordinary General Meeting of the shareholders of SouthEast Asia Energy Limited approved the increase of its registered share capital from Baht 4,000 million to Baht 8,809 million through the issuance of 480.9 million new ordinary shares with a par value of Baht 10 each to its existing shareholders and called up 25 percent of the value of the new ordinary shares, or a total of Baht 1,202.3 million. SouthEast Asia Energy Limited called for share payment within 2 July 2007. The Company exercised its rights to subscribe to 137,056,500 new shares of SouthEast Asia Energy Limited in order to maintain the Companyûs shareholding of 28.5 percent of its registered share capital and paid the Baht 342.6 million for these additional shares on 2 July 2007. SouthEast Asia Energy Limited registered the increase in its registered share capital with the Ministry of Commerce on 2 July 2007.

On 19 September 2007, an Extraordinary General Meeting of the shareholders of SouthEast Asia Energy Limited Companyûs approved a Baht 2,202.25 million reduction in such companyûs registered share capital, from Baht 8,809 million to Baht 6,606.75 million (660.675 million ordinary shares of Baht 10 each). Such reduction was made in order to remove the 25 percent of shares held by the Electricite du Laos, or 220.225 million shares of Baht 10 each, and to transfer them to Nam Ngum 2 Power Company Limited (the subsidiary of SouthEast Asia Energy Limited) as share capital in accordance with SouthEast Asia Energy Limitedûs obligations under the Concession Agreement and under the long-term loan agreements, whereby it is to transfer all of its rights and obligations under the Project Documents to the subsidiary. Upon completion of the capital reduction and the transfer of rights and obligations, SouthEast Asia Energy Limited and Electricite du Laos will own 75 percent and 25 percent of the shares of the subsidiary, respectively. SouthEast Asia Energy Limited registered the reduction of its registered share capital to Baht 6,606.75 million with the Ministry of Commerce on 2 January 2008.

As a result the Companyûs shareholding in such company was increased from 28.5 percent to 38.0 percent during the first quarter of the year 2008.

On 9 January 2008, the branch of SouthEast Asia Energy Limited entered into a novation agreement to transfer all rights and obligations under the Project Documents of the Nam Ngum 2 Hydroelectric Power Project to Nam Ngum 2 Power Company Limited, as approved by the meeting of the Board of Directors of SouthEast Asia Energy Limited. In this regard, SouthEast Asia Energy Limited transferred its major assets and liabilities to Nam Ngum 2 Power Company Limited in payment of the additional share capital of the subsidiary. The result of the novation agreement is that the rights and obligations under the Nam Ngum 2 Hydroelectric Power Project and rights to carry out the feasibility study and develop the Nam Bak 1-2 Hydroelectric Power Project have been transferred to the subsidiary.

On 9 October 2008, Nam Ngum 2 Power Company Limited entered into the Addendum to Memorandum of Understanding with the Government of the Lao Peopleûs Democratic Republic for the extension of the exclusive rights to carry out the feasibility study and the development of the Nam Bak 1-2 Hydroelectric Power Project for the further period of 1 year after the expiration date, as approved by the resolution of meeting of the companyûs Executive Board.

During the year 2008, SouthEast Asia Energy Limited called up further for a total of 45.5 percent and 6.4 percent of the value of the 102.6 million ordinary shares and the 137.1 million ordinary shares held by the Company which were not fully paid (par value of Baht 10 each), or totals of Baht 554.5 million. The Company made payment of the share prices in such amount.

On 29 December 2008, SouthEast Asia Energy Limited called up an additional 2.7 percent of the value of the 137.1 million ordinary shares held by the Company which were not fully paid (par value of Baht 10 each), or totals of Baht 37.0 million. The Company made payment of the share prices in January 2009.

The Company has pledged share certificates for its investment in SouthEast Asia Energy Limited with a group of banks to guarantee a loan facility granted to that company by the group of banks.

128

Annual Report 2008

16. Other long-term investments (Unit: Baht) Consolidated financial statements

Separate financial statements

Shareholding percentage Percent

2008

2007

Shareholding percentage Percent

2008

2007

16.56

2,572,789,703

2,490,016,962

15.32

2,432,350,664

2,349,577,923

(391,387,488) 2,040,963,176

334,867,752 2,684,445,675

Investments in available for sale related company Bangkok Expressway Public Company Limited Add: Unrealised gain (loss) on changes in value of investments Other Investments - other companies Nava Finance and Securities Public Company Limited Bangkok Tokyu Department Store Company Limited Kruasakul Company Limited The Bangkok Club Company Limited Chanthaburi Country Club Company Limited Other related parties

(366,591,806) 420,790,731 2,206,197,897 2,910,807,693

Investments

-

27,291,095

27,291,095

-

27,291,095

27,291,095

19.00 10.14 0.57 0.25

2,280,000 43,750,000 3,000,000 2,000,000 136,044 78,457,139

2,280,000 43,750,000 3,000,000 2,000,000 136,044 78,457,139

10.14 0.57 0.25

43,750,000 3,000,000 2,000,000 136,044 76,177,139

43,750,000 3,000,000 2,000,000 136,044 76,177,139

(71,041,095) 7,416,044

(71,041,095) 7,416,044

(71,041,095) 5,136,044

(71,041,095) 5,136,044

20,000,000

-

20,000,000

-

10,000,000 30,000,000 2,243,613,941

2,918,223,737

10,000,000 30,000,000 2,076,099,220

2,689,581,719

Less: Provision for loss on diminution in value of investments Investments in held-to-maturity debt securities Debentures of Bank of Ayudhya Public Company Limited Debentures of Thai Airways International Public Company Limited Other long-term investments, net

Investments

The Company has pledged part of the share certificates for its investment in Bangkok Expressway Public Company Limited with banks to secure its long-term loans from banks.

CH. Karnchang Public Company Limited

129

130

Annual Report 2008

Condominium building Building and construction Leasehold improvement

Machinery and equipment

Furniture, fixtures and office equipment

Consolidated financial statements

Cost 31 December 2007 285,847,719 631,756,243 198,294,170 324,565,103 2,949,301,795 203,385,829 Additions 27,946,831 3,037,999 1,053,000 256,558,964 22,732,233 Disposals/write off (112,237,566) (37,441,178) Reclassification/transfer in (out) 22,887,711 127,496 31 December 2008 313,794,550 631,756,243 201,332,169 325,618,103 3,116,510,904 188,804,380 Accumulated depreciation 31 December 2007 8,212,603 2,469,456 132,893,328 320,158,270 1,704,475,468 145,023,675 Depreciation for the year 2,876,926 14,776,256 9,213,362 1,051,376 371,190,752 23,192,708 Depreciation on disposals/write off (74,686,211) (35,087,488) Reclassification/transfer in (out) 1,252,142 79,627 31 December 2008 11,089,529 17,245,712 142,106,690 321,209,646 2,002,232,151 133,208,522 Allowance for impairment loss 31 December 2007 85,147,523 31 December 2008 85,147,523 Net book value 31 December 2007 192,487,593 629,286,787 65,400,842 4,406,833 1,244,826,327 58,362,154 31 December 2008 217,557,498 614,510,531 59,225,479 4,408,457 1,114,278,753 55,595,858 Depreciation for the year 2007 (Baht 353 million included in cost of construction services, sales of construction materials and services, and the balance in administrative expenses) 2008 (Baht 411 million included in cost of construction services, sales of construction materials and services, and the balance in administrative expenses)

Land and land improvement

17. Property, plant and equipment

15,038,093 (7,705,420) 7,332,673 7,332,673

185,701,698 58,253,025 (7,340,885) (1,737,572) 234,876,266 197,227,108 143,743,170

Construction in progress

382,928,806 6,579,063 (8,313,627) (2,574,806) 378,619,436

Motor vehicles

413,162,213 480,554,405

2,391,997,644 2,216,652,419

85,147,523 85,147,523

2,498,934,498 480,554,405 (117,114,584) (405,803) 2,861,968,516

4,976,079,665 332,946,183 (157,992,371) 12,734,981 5,163,768,458

Total

(Unit: Baht)

CH. Karnchang Public Company Limited

131

Condominium building Building and construction Leasehold improvement

Furniture, fixtures and office equipment

Cost 31 December 2007 179,329,818 631,756,243 76,222,295 9,984,396 1,605,448,142 112,175,285 Additions 27,946,831 3,037,999 1,053,000 82,210,930 16,242,462 Disposals/write off (89,547,006) (36,511,966) Reclassification/transfer in (out) 1,686,000 83,000 31 December 2008 207,276,649 631,756,243 79,260,294 11,037,396 1,599,798,066 91,988,781 Accumulated depreciation 31 December 2007 6,036,281 2,469,456 54,931,537 5,577,584 1,006,878,490 84,599,276 Depreciation for the year 2,557,588 14,776,256 3,892,685 1,051,377 176,218,200 13,061,597 Depreciation on disposals/write off (58,104,797) (34,432,566) Reclassification/transfer in (out) 896,635 35,133 31 December 2008 8,593,869 17,245,712 58,824,222 6,628,961 1,125,888,528 63,263,440 Provision for loss on impairment 31 December 2007 73,859,768 31 December 2008 73,859,768 Net book value 31 December 2007 99,433,769 629,286,787 21,290,758 4,406,812 598,569,652 27,576,009 31 December 2008 124,823,012 614,510,531 20,436,072 4,408,435 473,909,538 28,725,341 Depreciation for the years 2007 (Baht 192 million included in cost of construction services, sales of construction materials and services, and the balance in administrative expenses) 2008 (Baht 212 million included in cost of construction services, sales of construction materials and services, and the balance in administrative expenses)

Land and land improvement

Machinery and equipment

Separate financial statements

7,332,673 7,332,673 7,332,673

301,487,053 6,259,063 (6,222,738) (1,769,000) 299,754,378 140,093,305 46,322,940 (5,286,371) (931,768) 180,198,106 161,393,748 119,556,272

Motor vehicles

Construction in progress

224,889,051 257,880,643

1,541,957,535 1,393,701,874

73,859,768 73,859,768

1,300,585,929 257,880,643 (97,823,734) 1,460,642,838

2,916,403,232 144,082,958 (132,281,710) 2,928,204,480

Total

(Unit: Baht)

As at 31 December 2008, the Company had machinery, vehicles and equipment under hire purchase agreements with net book values amounting to Baht 271 million.

As at 31 December 2008, certain plant and equipment items have been fully depreciated but are still in use. The original cost of those assets amounted to approximately Baht 1,252 million (2007: Baht 1,166 million) (Separate financial statements: Baht 842 million, 2007: Baht 777 million).

A subsidiary has mortgaged part of its plots of land, building and construction thereon and machinery with a total net book value as at 31 December 2008 of Baht 120 million as collateral for bank overdraft and short-term loan granted by a bank.

18. Investments in land (Unit: Baht) Consolidated financial statements Separate financial statements

Cost Less: Provision for decline in value of investments in land Investments in land, net

2008 341,737,495

2007 341,737,495

2008 182,346,124

2007 182,346,124

(59,848,637) 281,888,858

(59,848,637) 281,888,858

(41,834,202) 140,511,922

(41,834,202) 140,511,922

The Company and its subsidiaries appraised the value of investments in land and adjusted them to fair value, which is equivalent to the price appraised by the Land Department.

19. Intangible assets Details of intangible assets which are computer software are as follows: (Unit: Baht) Consolidated and separate financial statements

2008 42,525,488 (922,411) 41,603,077 677,893

Cost Accumulated amortisation Net book value Amortisation expenses included in the income statements for the year

2007 1,711,500 (244,518) 1,466,982 244,518

20. Bank overdrafts and short-term loans from financial institutions Bank overdrafts and short-term loans from financial institutions as at 31 December 2008 and 2007 are comprised of: (Unit: Baht) Consolidated financial statements Separate financial statements

Bank overdrafts Short-term loans from banks

Bills of exchange Total

132

Interest rate (% p.a.)

7.0 to 15.5, and MOR 7.5, MLR - 1, MLR - 0.5, MLR + 1 and MOR 3.8 to 4.3

2008

2007

2008

2007

70,243,427 2,604,030,000

65,826,615 2,048,850,774

3,057,585 1,039,530,000

12,804,559 488,560,000

2,674,273,427

550,000,000 2,664,677,389

1,042,587,585

550,000,000 1,051,364,559

Annual Report 2008

Short-term loans from a bank of Joint Venture BBCD, with an outstanding balance as at 31 December 2007 of approximately Baht 239 million (in proportion to the Company没s interest in the joint venture), were originally repayable within June 2007. However, on 13 August 2008, the Company entered into a debt conversion agreement with the bank (as discussed in Note 14) whereby the Company is responsible for all indebtedness of the Joint Venture BBCD under existing agreements, which comprises loan principal of Baht 667.6 million and accrued interest of approximately Baht 138.4 million. Loan payments and accrued interest payments of Baht 126.9 million are scheduled to be made in 15 semi-annual installments, with the first of these due in December 2008 and the last installment due in December 2015. The loan is subject to interest at the Minimum Loan Rate (MLR) per annum. However, during the period of loan payment, the Company requested to pay interest at the Minimum Loan Rate minus a stipulated margin (MLR - margin) per annum on a monthly basis and suspend the difference. If the Company complies with the term of payment of loan principal, accrued interest and monthly interest, the bank will waive the remaining accrued interest of Baht 11.5 million and all suspended interest.

However, if the Joint Venture BBCD or the Company receives compensation for damages or other payment of claims from the Expressway and Rapid Transit Authority of Thailand, the Company will additionally repay debt to the bank not less than the percentage of the compensation stipulated by the bank.

Therefore, the Company has recorded such loan as long-term loan in the balance sheet since 30 September 2008, as presented in item 6 in Note 22.

CH. Karnchang (Lao) Company Limited In May 2006 CH. Karnchang (Lao) Company Limited entered into credit facilities agreements totaling Baht 6,096.3 million with a local commercial bank to obtain the following 6 types of credit facilities for the Nam Ngum 2 Hydroelectric Power Project: 1) Promissory note facility of Baht 1,000 million for use as working capital in the construction of the project, carrying interest at the Minimum Overdraft Rate (MOR) per annum.

2) Bank guarantee facility of Baht 3,576.3 million to provide guarantees for the project under the construction contract.

3) Bank guarantee facility of Baht 400 million to provide guarantees for purchases of construction material and utilities.

4) Letter of credit, trust receipt, and domestic letter of credit facilities totaling Baht 600 million for ordering machinery and equipment.

5) Bank overdraft facility of Baht 20 million for use as working capital.

6) Forward contract facility of Baht 500 million to hedge exchange risk.

The collateral for these credit facilities comprises the transfer of the rights to make collection on construction payments for the Nam Ngum 2 Hydroelectric Power Project, the transfer of bank guarantees provided by subcontractors, the transfer of the rights over savings deposits of the subsidiary, and the provision of a guarantee by the Company, as discussed in Note 35.4 The outstanding balance of bills of exchange represented bills of exchange issued to commercial banks and open-ended funds, which carried interest at rates between 3.8 and 4.3 percent per annum, and matured within 1 year.

Parts of the bank overdrafts and short-term loans from financial institutions of the Company are secured by the transfer of rights over collection of revenues from construction projects and guaranteed by the Company没s directors.

Bank overdrafts and short-term loans from financial institutions of subsidiaries are secured by certain bank deposits of the Company, the transfer of the rights over saving deposits of a subsidiary, the transfer of rights over receipt of payment under construction contracts of subsidiaries, the transfer of bank guarantees provided by subcontractors, the mortgage of part of land, building and construction thereon and machinery of a subsidiary and are guaranteed by the Company and subsidiaries没 shareholders.

The bank overdrafts of two limited partnerships, which were invested in by a subsidiary, are secured by the mortgage of the securities of a related company and are guaranteed by the partners of these partnerships and the Company没s directors.

CH. Karnchang Public Company Limited

133

21. Hire purchase creditors (Unit: Baht) Consolidated financial statements Separate financial statements

Liabilities under hire purchase Less: Deferred interest expenses Less: Portion due within one year Liabilities under hire purchase, net of current portion

2008 225,853,210 (16,198,237) (123,737,027) 85,917,946

2007 331,671,473 (31,268,669) (184,848,226) 115,554,578

2008 201,176,970 (14,484,802) (112,664,965) 74,027,203

2007 317,347,705 (30,076,058) (179,683,044) 107,588,603

The Company and its subsidiaries has entered into hire purchase agreements with leasing companies for rental of equipment and motor vehicles for use in their operation, whereby they are committed to pay rental on a monthly basis. The terms of the agreements are generally between 3 and 5 years.

As at 31 December 2008, Future minimum lease payments required under the hire purchase agreements were as follows: (Unit: Million Baht) Consolidated financial statements

Future minimum lease payments Deferred interest expenses Present value of future minimum lease payments

Less than 1 year 135.0 (11.3) 123.7

1-5 years 90.8 (4.9) 85.9

Total 225.8 (16.2) 209.6 (Unit: Million Baht)

Separate financial statements

Future minimum lease payments Deferred interest expenses Present value of future minimum lease payments

134

Less than 1 year 122.8 (10.1) 112.7

1-5 years 78.4 (4.4) 74.0

Total 201.2 (14.5) 186.7

Annual Report 2008

22. Long-term loans The outstanding balances as at 31 December 2008 and 2007 comprise of long-term loans of the Company and its jointly controlled entity (in proportion to the Company没s interest in the joint venture) as follows: (Unit: Baht) Consolidated financial statements Separate financial statements

Loans Repayment schedule The Company 1 Quarterly installments as from 31 March 2006 to 30 December 2008 2 Quarterly installments as from 18 August 2006 to 18 May 2011 3 Quarterly installments as from 31 October 2009 to 31 July 2013 4 Quarterly installments as from 30 June 2009 to 30 September 2013 5 Semi-annual installments as from 30 June 2008 to 30 December 2015 6 Semi-annual installments as from 25 December 2008 to 30 December 2015 7 Semi-annual installments as from 30 September 2008 to 30 March 2014 Joint Venture BBCD 8 Paid in full in June 2007. The scheduled repayment term for the loan has been extended to 30 June 2008.

9 Quarterly installments as from March 2007 to December 2011. However, the joint venture has to repay all outstanding debt as soon as the result of the litigation involving the Expressway and Rapid Transit Authority of Thailand is finalised.

Total Less: Current portion Long-term loans, net

2008

2007

2008

2007

-

100,000,000

-

100,000,000

250,000,000

350,000,000

250,000,000

350,000,000

750,000,000

-

750,000,000

-

1,000,000,000

-

1,000,000,000

-

658,000,000

-

658,000,000

-

648,370,000

-

648,370,000

-

514,105,212

-

514,105,212

-

-

240,800,000

-

-

-

214,936,824

-

-

3,820,475,212 (378,700,000) 3,441,775,212

905,736,824 (655,736,824) 250,000,000

3,820,475,212 (378,700,000) 3,441,775,212

450,000,000 (200,000,000) 250,000,000

The long-term loans of the Company carry interest rates between the Minimum Loan Rate minus stipulated margins (MLR - margin) per annum and Minimum Loan Rate (MLR) per annum.

Long-term loans of Joint Venture BBCD presented in item 8 in the above table , with an outstanding balance as at 31 December 2007 of approximately Baht 240.8 million (in proportion to the Company没s interest in the joint venture), were loans from a local commercial bank which were originally payable within June 2007. However, on 31 March 2008, the Company entered into the agreement to restructure the debts with the bank (as discussed in Note 14). In this regard, the Company will pay indebtedness (presented in item 5 in the above table) on behalf of the Joint Venture BBCD, which comprises loan principal of Baht 688 million and accrued interest of Baht 219.8 million. Loan payments and accrued interest payments of Baht 165.9 million are scheduled to be made in 16 semi-annual installments, with the first of these due in June 2008 and the last installment due in December 2015. The loan is subject to interest at the Minimum Loan Rate (MLR) per annum and the interest will be paid on a monthly basis. In addition, if the Company complies with the repayment conditions and other conditions, the bank will waive the difference in accrued interest of Baht 53.9 million. However, if the Joint Venture BBCD receives compensation for additional costs from the Expressway and Rapid Transit Authority of Thailand and the Company receives such compensation from the joint venture, the Company will repay all remaining principal and outstanding interest to the bank.

CH. Karnchang Public Company Limited

135

Long-term loans of Joint Venture BBCD presented in item 9 in the above table, with an outstanding balance as at 31 December 2007 of approximately Baht 214.9 million (in proportion to the Company没s interest in the joint venture), were loans from another local commercial bank which were originally payable within June 2007. However, on 29 September 2008, the Company entered into the agreement to restructure the debts with the bank (as discussed in Note 14). In this regard, the Company agreed to convert indebtedness of the Joint Venture BBCD (presented in item 7 in the above tabel) to the bank of Baht 584.1 million to a loan to the Company. Loan payments are scheduled to be made in 12 semi-annual installments, with the first of these due in September 2008 and the last installment due in March 2014. The loan is subject to interest at the Minimum Loan Rate minus a stipulated margin (MLR - margin) per annum and the interest will be paid on a quarterly basis. However, if Joint Venture BBCD receives compensation for additional costs from the Expressway and Rapid Transit Authority of Thailand, all indebtedness in the agreement are due immediately and the Company will repay all remaining indebtedness to the bank within the period stipulated by the bank.

Long-term loans of the Company and its jointly controlled entity were secured by the pledge of parts of share certificates of investments in associated and related companies, the transfer of part of the rights over receipt of payment under construction contracts, the transfer of parts of the rights to receive deposits in bank accounts, the mortgage of land and construction thereon of other company (as discussed in Note 12) and the guarantee of the Company没s directors, the venturers in certain joint ventures, certain related companies and other companies.

The loan agreements contain covenants that, among other things, require the Company to maintain certain debt to equity and debt to collateral value ratios.

As at 31 December 2008, the long-term credit facilities of the Company and its subsidiaries which have not yet been drawn down amounted to Baht 180 million.

23. Debentures (Unit: Baht) Consolidated and Separate financial statements

Debentures

Life

Date of issue

Maturity date

1 2 3

5 years 5 years 4 years, 7 months and 12 days 3 years 3 years 3 years 3 years 3 years

18 October 2004 18 October 2004 July 2005

18 October 2009 18 October 2009 26 February 2010

Interest rate (% p.a.)

5.45 MLR - 0.75 5.2

October 2005 October 2005 September 2006 July 2007 April 2008

13 October 2008 28 October 2008 20 September 2009 26 July 2010 30 April 2011

6.25 6.5 6.5 5.25 5.0

4 5 6 7 8

Total Less: Current portion of debentures Debentures, net of current portion

2008

2007

120,000,000 880,000,000 1,100,000,000

120,000,000 880,000,000 1,100,000,000

2,000,000,000 1,996,349,772 1,995,347,945 8,091,697,717 (3,000,000,000) 5,091,697,717

610,000,000 1,090,000,000 2,000,000,000 1,994,016,438 7,794,016,438 (1,700,000,000) 6,094,016,438

All debentures of the Company are unsecured, registered, senior debentures with trustees and with a par value of Baht 1,000 each.

The interest is payable every 6 months throughout the life of the debentures.

On 2 September 2004, a meeting of the Company没s Board of Directors approved the issue of 3,000,000 debentures or a total of Baht 3,000 million. The Company classified the debentures into 3 types and scheduled their issue for 18 October 2004. The outstanding debentures are presented in items 1 and 2 in the above table.

On 10 June 2005, a meeting of the Company没s Executive Board approved the issue of 1,300,000 debentures or a total of Baht 1,300 million (Debentures No. 1/2005). The Company classified the debentures into 2 types and scheduled the issue in July 2005. The outstanding debentures are presented in item 3 in the above table.

On 13 and 28 October 2008, the Company redeemed Baht 1,700 million of the Debentures No. 2/2005 and No. 3/2005, as presented in items 4 and 5 in the above table.

136

Annual Report 2008

On 14 September 2006, a meeting of the Companyûs Executive Board approved the issue of 2,000,000 debentures or a total of Baht 2,000 million (Debenture No. 1/2006). These were scheduled to be issue in September 2006, as presented in item 6 in the above table.

On 30 April 2007, the Annual General Meeting of the Companyûs shareholders passed a resolution approving the issue and offer, in whole or in part, of up to Baht 3,000 million of debentures, to raise funds to be used for repayment of loans, as working capital and for the expansion of the Companyûs business. The issue is to be by means of a public offering and/or private placement and/or offering to institutional investors, as stipulated in the relevant Notifications of the Securities and Exchange Commission. These will be senior, registered debentures and may be secured or unsecured and with or without a debenture holdersû representative. The offering of the debentures may be made on one or several occasions. Combined with the debentures approved in prior periods, totaling Baht 9,000 million, the Company now has a debenture credit line of Baht 12,000 million. The Company can issue new debentures when existing debentures mature, but the outstanding balance of all debentures is not at any time to exceed the line of Baht 12,000 million.

The Executive Board and/or the Chief Executive Officer are granted authority to subsequently determine all other details of the issue, including type, collateral, amount, maturity, face value, offer price, interest rate, redemption rights, offering method, issuance and offer period, as the circumstances may allow and to the schedule deemed appropriate.

On 23 July 2007, a meeting of the Companyûs Executive Board approved the issue of 2,000,000 debentures or a total of Baht 2,000 million (Debentures No. 1/2007). The Company scheduled the issue on 26 July 2007. The balance of the debentures presented net of deferred debenture issuing costs, as presented in item 7 in the above table.

On 22 April 2008, a meeting of the Companyûs Executive Board approved the issue of 2,000,000 debentures, with a par value of Baht 1,000 each, or a total of Baht 2,000 million (Debentures No. 1/2008). The Company scheduled the issue on 30 April 2008. The balance of the debentures presented net of deferred debenture issuing costs, as presented in item 8 in the above table.

On 6 February 2009, the Company offered and issued unsecured, registered, senior debentures with trustees, with a par value of Baht 1,000 each. The details of such debentures are as follows: 1) Debentures No. 1/2009 Tranche 1 comprises 1,616,200 units with terms of 3 years, bearing interest at a rate of 5.3 percent for the first two years and then at 5.9 percent per annum until maturity 2) Debentures No. 1/2009 Tranche 2 comprises 883,800 units with terms of 5 years, bearing interest at a rate of 5.5 percent for the first two years and then at 6.3 percent per annum until maturity The conditions of the debentures include covenants that, among other things, require the Company to maintain a certain debt to equity ratio.

24. Warrants/Share capital During March 2007, 194,899,149 CK-W1 warrants were exercised to 194,899,149 ordinary shares at a price of Baht 4.50 per share, a total of Baht 877.0 million. Following such exercise, there are 388,480 outstanding warrants. On 10 April 2007, the Company registered the increase in its paid up share capital to Baht 1,446,012,169 comprising 1,446,012,169 ordinary shares with a par value of Baht 1 each, with the Ministry of Commerce.

The final exercise date of the CK-W1 warrants was 30 March 2007, and as a result the 388,480 unexercised CK-W1 warrants still outstanding lost their status as securities listed on the Stock Exchange of Thailand, effective from 31 March 2007, and can no longer be exercised.

25. Share premium/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 after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for dividend distribution.

On 30 April 2007, the Annual General Meeting of the Companyûs shareholders passed a resolution approving the transfer of Baht 129,845,770 of the statutory reserve and the transfer of share premium of Baht 688,000,000 to offset the Companyûs deficit. The Company implemented these transfers during the second quarter of 2007 and as a result, share premium stands at Baht 3,972.9 million as at 31 December 2007.

CH. Karnchang Public Company Limited

137

26. Accounts receivable - claims for additional costs In 2000, Joint Venture BBCD had claimed for payment of additional construction costs from the Expressway and Rapid Transit Authority of Thailand (the employer). The employerûs consulting engineer considered the joint ventureûs claims and issued a letter confirming its acceptance of the additional costs. Subsequently, the Arbitral Tribunal issued its award, ruling that the employer was to pay the joint venture for such additional costs and accrued interest. Later the employer sent a letter to the joint venture informing that, after consideration, the employer had decided to comply with the arbitral award. Consequently, the joint venture had recorded such amounts as asset and income in the financial statements of 2001. The Groupûs proportionate interest in such amounts is approximately Baht 2,500 million.

As a result of the delay in the payment, the joint venture filed a lawsuit against the employer with a Civil Court to ordering compliance with the arbitral award. On 30 December 2003, the court ruled in favor of the joint venture, ordering compliance with the arbitral award requiring the Expressway and Rapid Transit Authority of Thailand (the employer) to pay the joint venture in accordance with the arbitral award. Subsequently, in January 2004, the employer appealed the ruling to the Supreme Court of Thailand.

On 15 February 2007, the Supreme Court handed down a judgment reversing that of the Civil Court enforcing the arbitral award requiring the employer to make payments to the Joint Venture BBCD. The joint venture therefore recorded allowance for doubtful accounts for the full amount of the accounts receivable recorded in respect of the claim for additional costs as a expense in the income statement of 2006, with the Groupûs proportionate interest in such allowance being approximately Baht 2,500 million.

Subsequently, after the management of the Company carefully reviewed the details of the Supreme Courtûs judgment, on 11 February 2008 a lawsuit was filed against the employer with the Civil Court, to recover costs paid by the Joint Venture BBCD from the employer, on the grounds of undue enrichment. Such costs and accrued interest calculated up to the date of filing of the lawsuit amounted to approximately Baht 3,400 million (per the Groupûs proportionate interest). Currently, the case is in the process of consideration of the Civil Court.

27. Gain (loss) on exchange The Company, its subsidiaries and its jointly controlled entities recorded the following gain (loss) on exchange for the years ended 31 December 2008 and 2007.

(Unit: Baht) Consolidated financial statements Separate financial statements

2008 Gain (loss) on exchange - Realised - Unrealised Total

(15,824,540) 94,777,976 78,953,436

2007 (17,503,311) (112,510,546) (130,013,857)

2008

2007

(4,580,722) 1,857,585 (2,723,137)

(15,451,892) 7,510,309 (7,941,583)

28. Expenses by nature Significant expenses by nature are as follow: (Unit: Baht) Consolidated financial statements Separate financial statements

Salary and wages and other employee benefits Depreciation Construction materials and consumables used and subcontractors costs Repair and maintenance expenses

138

2008 1,323,606,900 480,562,948

2007 1,150,807,891 413,341,043

2008 516,682,087 257,880,386

2007 595,994,614 224,889,052

5,945,022,666 335,933,754

7,213,262,433 264,370,988

4,565,159,526 270,320,032

5,892,912,915 184,198,580

Annual Report 2008

29. Corporate income tax The Company has no corporate income tax liabilities for the years 2008 and 2007 since the Company has tax losses for such years.

30. Earnings per share Basic earnings per share is calculated by dividing the net income for the year by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share is calculated by dividing net income for the year by the weighted average number of ordinary shares in issue during the year plus the weighted average number of ordinary shares which would need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation assumes that the conversion took place either at the beginning of the year or on the date the potential ordinary shares were issued.

The following table sets forth the computation of basic and diluted earnings per share: Consolidated financial statements

For the years ended 31 December Weighted average Net income number of ordinary shares 2008 2007 2008 2007 (Thousand Baht) (Thousand Baht) (Thousand shares) (Thousand shares) Basic earnings per share Net income attributable to equity holders of the parent Effect of dilutive potential ordinary shares CK-W1 Warrants Diluted earnings per share Net income of ordinary shareholders assuming the conversion of warrants to ordinary shares

544,738

14,537

1,446,012

1,400,098

-

84,262

14,537

1,484,360

Earnings per share 2008 2007 (Baht) (Baht)

0.38

0.01

0.01

Separate financial statements

For the years ended 31 December Weighted average Net income number of ordinary shares 2008 2007 2008 2007 (Thousand Baht) (Thousand Baht) (Thousand shares) (Thousand shares) Basic earnings per share Net income attributable to equity holders of the parent Effect of dilutive potential ordinary shares CK-W1 Warrants Diluted earnings per share Net income of ordinary shareholders assuming the conversion of warrants to ordinary shares

CH. Karnchang Public Company Limited

98,706

659,488

1,446,012

1,400,098

-

84,262

659,488

1,484,360

Earnings per share 2008 2007 (Baht) (Baht)

0.07

0.47

0.44

139

31. Contracts in progress As at 31 December 2008, the aggregate amount of construction cost incurred and recognised profits or losses to date for contracts in progress of the Company, its subsidiaries and its jointly controlled entities was approximately Baht 40,297 million (Separate financial statements: Baht 24,572 million), gross amounts due from customers for contracts in progress were approximately Baht 3,141 million (Separate financial statements: Baht 2,906 million), and gross amounts due to customers for contracts in progress were approximately Baht 727 million (separate financial statements: Baht 9 million).

32. Segment information The Company, its subsidiaries and its jointly controlled entities没 operations involve principally a single industry segment, construction service, and are carried on in two geographic areas in Thailand and in the Lao People没s Democratic Republic, as operated by a subsidiary.

The financial information of the Company, its subsidiaries and its jointly controlled entities by geographical segment, for the years ended 31 December 2008 and 2007 are as follows:

Revenue from external customers Inter-segment revenues Total revenues Segment operating profit (loss) Unallocated income and expenses: Other income Share of loss from investments in associated companies Finance cost Corporate income tax Net income

Trade accounts receivable, net Construction contracts in progress Advance payment to subcontractors, net Property, plant and equipment, net Unallocated assets Total assets

Thailand 2008 2007 8,116 8,240 277 370 8,393 8,610 (256) (536)

Thailand 2008 2007 2,458 1,708 3,067 2,898 661 334 1,576 1,717 14,069 15,033

The Lao People没s Democratic Republic 2008 2007 5,163 5,350 5,163 5,350 578 470

The Lao People没s Democratic Republic 2008 2007 308 399 701 714 641 674 2,693 1,236

Elimination of inter-segment revenues 2008 2007 (277) (370) (277) (370)

Elimination of inter-segment revenues 2008 2007 (5) (15) (296) (222)

(Unit: Million Baht) Consolidated financial statements 2008 2007 13,279 13,590 13,279 13,590 322 (66) 1,154

1,328

(26) (824) (53) (28) 545

(238) (940) (50) (19) 15

(Unit: Million Baht) Consolidated financial statements 2008 2007 2,761 2,092 3,067 2,898 1,362 1,048 2,217 2,391 16,466 16,047 25,873 24,476

Transfer prices between business segments are as set out in Note 6.

140

Annual Report 2008

33. Provident fund The Company, some subsidiaries and their employees have jointly established provident funds in accordance with the Provident Fund Act B.E. 2530. The Company, the subsidiaries and their employees contribute to the funds monthly at the rate of 5 percent of basic salary. The funds, which are managed by TMB Asset Management Company Limited and TISCO Asset Management Company Limited (Separate financial statements: TMB Asset Management Company Limited) will be paid to employees upon termination in accordance with the fund rules. During the years 2008 and 2007, the Company and the subsidiaries contributed Baht 19.1 million and Baht 17.5 million, respectively (Separate financial statements: Baht 11.9 million and Baht 12.8 million, respectively) to the funds.

34. Dividends On 3 September 2007, a meeting of the Company没s Board of Directors passed resolutions approving the payment of an interim dividend for 2007 of Baht 0.05 per share to the Company没s shareholders from the earnings of the 6-month period ended 30 June 2007, a total of Baht 72.3 million. The dividend was paid in October 2007.

On 30 April 2008, the Annual General Meeting of the Company没s shareholders passed resolutions approving the payment of a dividend of Baht 0.15 per share for the operations of July to December 2007, a total of Baht 216.9 million. The dividend was paid on 30 May 2008. Together with the payment of an interim dividend of Baht 0.05 per share for the operations of January to June 2007, total dividends for the year 2007 amount to Baht 0.20 per share, or a total of Baht 289.2 million.

35. Commitments and contingent liabilities 35.1 Capital commitments As at 31 December 2008, the Company had capital commitment of approximately Baht 25.7 million, relating to the acquisition of fixed assets and intangible assets.

35.2 Operating lease commitments A subsidiary has entered into a lease agreement in respect of the lease of office building space. The term of the agreement is 5 years.

As at 31 December 2008, future minimum lease payments required under the operating leases contract were as follows: (Unit: US dollar) Payable within: Consolidated financial statements 1 year 24,000 2 to 5 years 24,000 35.3 Service commitments and other commitments As at 31 December 2008, the Company, its subsidiaries and its jointly controlled entities had the following service commitments and other commitments: a) The Company, its subsidiaries and its jointly controlled entities have commitments totaling Baht 7,996.0 million (Separate financial statements: Baht 1,951.6 million) in respect of project construction costs and services, which the Company, its subsidiaries and its jointly controlled entities had already entered into agreements. b) The Company has commitment in respect of uncalled portion of investments in a subsidiary and an associated company of approximately Baht 955.3 million (2007: Baht 1,509.8 million). c) The Company has commitments of Baht 1,417 million in respect of the Subordinated Loan Agreement to provide funding to Bangkok Metro Public Company Limited, as stipulated in the agreement (as discussed in Note 6). d) The Company has commitments of up to Baht 2,782 million and USD 12.5 million in respect of its undertaking to provide equity contributions to SouthEast Asia Energy Limited as stipulated in the agreement (as discussed in Note 15). e) The Company (as contractor for the expansion of a treated water production project for Pathum Thani Water Company Limited) has commitments in respect of its undertaking to provide financial support to Pathum Thani Water Company Limited as stipulated in the Sponsor Support Agreement. f) The Company has commitments as stipulated in the Payment Agreement (as discussed in Note 14).

CH. Karnchang Public Company Limited

141

35.4 Related party guarantees As at 31 December 2008, the Company has provided guarantees totaling Baht 6,262.3 million for bank credit facilities on behalf of two subsidiaries.

35.5 Bank guarantees As at 31 December 2008 and 2007, there were outstanding bank guarantees of approximately Baht 7,962.3 million and Baht 6,807.9 million, respectively (Separate financial statements: Baht 6,129.6 million and Baht 5,171.9 million, respectively) issued by banks on behalf of the Company, its subsidiaries and its jointly controlled entities (in proportionate of the Company没s interest in joint ventures) in respect of certain performance bonds as required in the normal course of business of the Company, its subsidiaries and its jointly controlled entities. The details of bank guarantees are as follows: (Unit: Million Baht) Consolidated financial statements Separate financial statements

Guarantee of construction contracts bidding and debt repayment Guarantee of advance payment bond and retention Other guarantees

2008 4,940.6

2007 4,352.1

2008 3,824.9

2007 3,258.6

2,019.0 1,002.7 7,962.3

2,226.2 229.6 6,807.9

1,430.1 874.6 6,129.6

1,740.6 172.7 5,171.9

35.6 Contingent liability The Company In October 2008, the Company was sued for damages of Baht 75.5 million, plus interest at the rate of 7.5 percent per annum calculated from the day following the date of filing of the case. Currently, the case is under consideration by the Civil Court. However, since the management of the Company believes that the Company has no liability in respect of such claim it has not set aside provision for loss in the accounts.

Joint Venture BBCD In 2007, the Central Tax Court issued a judgement ordering the Joint Venture BBCD to pay additional customs duties on construction equipment imports amounting to approximately Baht 109 million (in proportion to the Company没s interest in the joint venture).

The joint venture filed an appeal against the judgement with the Supreme Court and the case is currently before the Supreme Court.

However, since the management of the Joint Venture BBCD believes that the joint venture has no liability in respect of such additional customs duties it has not set aside provision for loss for the customs duty assessment in the accounts.

142

Annual Report 2008

36. Financial instruments 36.1 Financial risk management The Companyûs, its subsidiariesû and its jointly controlled entitiesû financial instruments, as defined under Thai Accounting Standard No. 48 çFinancial Instruments: Disclosure and Presentationsé, principally comprise the following: Financial assets - Cash and cash equivalents - Trade accounts receivable - Accounts receivable and loans to related parties - Advance payment to subcontractors - Loans to subcontractors and interest receivable - Long-term loans to other companies and interest receivable - Restricted bank deposits - Long-term loans to jointly controlled entities and interest receivable - Long-term loans to associated companies and interest receivable

Financial liabilities - Bank overdrafts and short-term loans from financial institutions - Trade accounts payable - Hire purchase creditors - Accounts payable and loans from related parties - Advances received from employers and deferred construction revenue - Retention for construction - Long-term loans - Debentures

The financial risks associated with these financial instruments and how they are managed is described below. a) Credit risk The Company, its subsidiaries and its jointly controlled entities are exposed to credit risk primarily with respect to construction receivables and loans. However, since the majority of the Companyûs, its subsidiariesû and jointly controlled entitiesû construction contracts are made with government agencies and other creditworthy customers, they do not anticipate material losses from their debt collection outside those for which provision has already been set aside. b)

Interest rate risk The Companyûs, its subsidiariesû and its jointly controlled entitiesû exposure to interest rate risk relates primarily to its cash at banks, lendings, bank overdrafts and short-term loans, hire purchase creditors, long-term borrowings and debentures. However, since most of these financial assets and liabilities bear floating interest rates or fixed interest rates which are close to the market rate, the interest rate risk is expected to be minimal.

Significant financial assets and liabilities as at 31 December 2008 classified by type of interest rates 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.

CH. Karnchang Public Company Limited

143

(Unit: Million Baht) Consolidated financial statements Fixed interest rates Within 1 year Financial assets ash and cash equivalents Trade accounts receivable, net Accounts receivable and loans to related parties, net Advance payment to subcontractors, net Loans to subcontractors and interest receivable Long-term loans to other companies and interest receivable Restricted bank deposits Long-term loans to jointly controlled entities and interest receivable Long-term loans to associated companies and interest receivable

Financial liabilities Bank overdrafts and short-term loans from financial institutions

Trade accounts payable Hire purchase creditors Accounts payable and loans from related parties Advances received from employers and deferred construction revenue Retention for construction Long-term loans Debentures

144

1-5 years

Over 5 years

Floating interest rate

Non-interest bearing

Total

Effective interest rate (% p.a.)

22 45

-

-

2,470 334

65 2,382

2,557 2,761

0.5 to 2.1 8.5 and MLR + 1

-

-

-

-

142

142

-

-

-

-

-

1,362

1,362

-

107

161

-

-

-

268

9.5

25 307

924 15

508 -

-

-

1,457 322

MLR + 1.5 1.4 to 3.0

-

2

-

234

-

236

8 to 10, MLR + 1, and MLR + 2

-

-

-

1,987

-

1,987

MLR + 0.5 and MLR + 1

506

1,102

508

5,025

3,951

11,092

65

-

-

2,609

-

2,674

124

86

-

-

2,074 -

2,074 210

-

-

-

2

-

2

-

-

-

3,820

1,439 343 -

1,439 343 3,820

3,000 3,189

5,092 5,178

-

6,431

3,865

8,092 18,654

7.5 to 15.5, MLR - 0.5 to MLR + 1 and MOR 2.95 to 4.90 MLR + 1 MLR - margin to MLR 5.0 to 6.5

Annual Report 2008

(Unit: Million Baht) Separate financial statements Fixed interest rates Within 1 year Financial assets Cash and cash equivalents Trade accounts receivable, net Accounts receivable and loans to related parties, net

Advance payment to subcontractors, net Restricted bank deposits Long-term loans to jointly controlled entities and interest receivable

Long-term loans to associated companies and interest receivable

Financial liabilities Bank overdrafts and short-term loans from financial institutions

Trade accounts payable Hire purchase creditors Advances received from employers and deferred construction revenue Retention for construction Long-term loans Debentures

1-5 years

Over 5 years

Floating interest rate

Non-interest bearing

Total

Effective interest rate (% p.a.)

18 -

-

-

52 334

34 1,788

104 2,122

0.5 to 2.1 MLR + 1

76

-

-

236

420

732

6.25 to 8.25, MLR + 0.25, and MLR + 0.5

231

-

-

-

552 -

552 231

1.4 to 1.875

-

115

-

1,186

-

1,301

8 to 10, MLR + 1 and MLR + 2

-

-

-

1,987

-

1,987

MLR + 0.5 and MLR +1

325

115

-

3,795

2,794

7,029

65

-

-

978

-

1,043

113

74

-

-

1,261 -

1,261 187

-

-

-

3,820

323 134 -

323 134 3,820

3,000 3,178

5,092 5,166

-

4,798

1,718

8,092 14,860

CH. Karnchang Public Company Limited

7.5, MLR - 0.5, MLR, MLR - 1, and MOR 2.95 to 4.65 MLR - margin to MLR 5.0 to 6.5

145

c)

Foreign currency risk The Companyûs, its subsidiariesû and its jointly controlled entitiesû exposure to foreign currency risk arises mainly from construction contracts, purchasing transactions, advances received from employers and borrowings that are denominated in foreign currencies. A subsidiary seeks to reduce this risk by entering into forward exchange contracts when it considers appropriate. Generally, the forward contracts mature within one year.

The balances of financial assets and liabilities denominated in foreign currencies as at 31 December 2008 are summarised below.

Consolidated financial statements

Foreign currency

US Dollar Euro Japanese yen Vietnamese Dong

Separate financial statements

Financial assets (Million)

Financial liabilities (Million)

Financial assets (Million)

Financial liabilities (Million)

37.1 0.1 10,653.5

7.5 0.1 2,599.4

0.2 10,653.5

2,599.4

Average exchange rate as at 31 December 2008 (Bath per 1 foreign currency unit) 34.9438 49.2662 0.3864 0.0021

Foreign exchange contracts of a subsidiary outstanding at 31 December 2008 are summarised below.

Foreign currency US dollar

Bought amount (Million) 60

Contractual exchange rate (Baht per 1 foreign currency unit) 33.485 - 33.778

36.2 Fair values of financial instruments Since the majority of the Companyûs, its subsidiariesû and its jointly controlled entitiesû financial instruments are short-term in nature, and the significant financial assets and liabilities comprise loans to, loans from and debentures which bear interests at rates close to market rates, the fair values of these financial assets and liabilities are not expected to differ materially 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 armûs 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.

37. Capital management The primary objective of the Companyûs 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 Group has to maintain a debt-to-equity ratio as stipulated in long-term loan agreements and condition of debentures.

38. Subsequent event On 27 February 2009, a meeting of the Companyûs Board of Directors passed resolutions approving the appropriation of 5 percent of the 2008 net income, or Baht 4.9 million, to the statutory reserve and the payment of a dividend for 2007 of Baht 0.10 per share, or a total of Baht 144.6 million. This resolution will be proposed for approval by the Annual General Meeting of the Companyûs shareholders for the year 2009.

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Annual Report 2008

39. Reclassification Certain amounts in the financial statements for the year ended 31 December 2007 have been reclassified to conform to the current year没s classification but with no effect to previously reported net income or shareholders没 equity. The reclassifications are as follow: (Unit: Baht) Consolidated financial statements

Accounts receivable and loans to related parties Loans to subcontractors and interest receivable Current portion of long-term loans to other companies and interest receivable Interest receivable Long-term Loans to associated companies and interest receivable Long-term Loan to other companies and interest receivable, net of current portion Property, plant and equipment Intangible assets

Separate financial statements

As reclassified 285,121,892 267,149,152

As previously reported 329,218,824 221,903,456

As reclassified 692,520,036 -

As previously reported 736,616,968 -

715,219,604 563,035

631,771,738 212,704,462

-

-

1,188,944,233

1,144,847,301

1,188,944,233

1,144,847,301

715,219,604 2,391,997,644 1,466,982

631,771,739 2,393,464,626 -

1,541,957,535 1,466,982

1,543,424,517 -

40. Approval of financial statements These financial statements were authorised for issue by the Company没s Board of Directors on 27 February 2009.

CH. Karnchang Public Company Limited

147

L S AO

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CH. KARNCHANG PUBLIC COMPANY LIMITED

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CH. Karnchang Public Company Limited

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CH. Karnchang is committed to sustainable growth and corporate social responsibility.

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CH. Karnchang Public Company Limited 587 Viriyathavorn Bldg., Sutthisarn Rd., Dindaeng, Bangkok 10400, Thailand Tel. : 66(0) 2277 0460 Fax : 66(0) 2275 7029 www.ch-karnchang.co.th