Bangkok Aviation Fuel Services : Anuual Report 2010

02

M.R. Supadis DiskulManaging Director

02

03

In the past year 2010, Thai economy continues to face many challenges

from the domestic political uncertainties, Iceland volcano eruption and global

financial crisis resulted the severe dropping of the Company’s revenue in the

second quarter.

However, on the second half of the year 2010, the recovery of air transport

and tourism industry as well as the Company’s strategy of discontinuation

promotion discount for storage fee at Suvarnabhumi Airport has helped to

propel an increase of the Company income by 17% compare to last year.

With strong earning and cash flow as well as moderate capex, which led to

continued improvement in its financial leverage measured against cash flow,

Fitch Ratings (Thailand) Limited has upgraded Bangkok Aviation Fuel Services

Public Company Limited’s National Long-term rating from “A-(tha)” to “A+(tha)”

and National Short-term rating from “F2(tha)” to “F1(tha)”. Simultaneously,

the agency has revised the Outlook on long term rating from “Positive” to

“Stable”.

However, BAFS is confident that the development of sustainable organization

not only involves the return on investment and suitable growth for shareholders

but the Company needs to operate in connection to the sustainable business

development and social and environment. Therefore, BAFS together with

our subsidiary and related companies have encourages experience-based

education by sponsoring field trips for local student in the surrounding area

of Suvarnabhumi Depot in taking part in mangrove planting. Moreover, BAFS

has been elected as a pilot organization for “Carbon Footprint for Organization”

established by Thailand Greenhouse Gas Management Organization (TGO) and

National Metal and Materials Technology Center (MTEC) of National Science

and Technology Development Agency (NSTDA). As the result in our dedication

to forging balance between business and society on a continual and earnest

basis and always adhere to good corporate governance principles, BAFS has

been awarded as Excellent Corporate Governance Scoring from Thai Institute

of Directors and The National Award of Outstanding for Enterprise of Safety

Operations, Occupational Health and Working Environment for the tenth year.

I would like to express my gratitude to all our shareholders, customers,

business partner and other related parties as well as the board, management

and employees for all their trust and steadfast support.

Message From Managing Director

(M.R. Supadis Diskul)Managing Director

04

Social Responsibility Policy

BAFS is fully committed to delivering high quality aviation

refuelling services that meet international standard of practices.

Alongside its core business, the company has been actively

engaging in social activities to promote social progress and

development along with environmental and economical

sustainability. We strive for being a socially-responsible firm to our

stakeholders by conducting our business in fair and responsible

manners. Our corporate social responsibility program covers the

following aspects ;

05

06

1. SOCIAL AND COMMUNITY DEVELOPMENT

BAFS business is based upon the philosophy of supporting local

communities through education. We believe that by providing supports on

education and implanting ethical thoughts, it will strengthen the nation’s

prospect; thus, BAFS regards this as its responsibility to be fulfilled.

2. CULTURAL AND RELIGIOUS PROMOTION

Undoubtedly, religions play an influential role in nation’s identity, culture,

and people’s morality. Religions encourage people to embrace ethical

thoughts and peace of which BAFS has been successively supporting those

activities.

3. ENVIRONMENTAL SUSTAINABILITY

Our business conducts and operational procedures are strictly adhered to

the international environmental standard to prevent potential adverse impacts

on to the environment and society. BAFS strongly believe that environmental

aspects must be considered in a sustainable business model. The company

has a policy to promote environmental awareness to employees, communities

and stakeholders which is highly beneficial to the environment and society.

4. HUMAN RESOURCE DEVELOPMENT

The key to BAFS success lies upon its human resource. Human resource

possesses a unique characteristic which is the capability to learn and develop.

BAFS is highly dedicated to human resource from staff selection process

with high qualifications, experiences, and working attitude to meet with our

corporate culture. Continuous training and development programs have been

delivered to enhance human resource capability and efficiency. Our company

introduced performance-based financial rewards scheme which is based

upon individual’s responsibility and the nature of assigned tasks. BAFS’s

human resource strategy aims to promote organizational working spirit and

encourage our member of staff to be fully committed to their responsibilities.

Apart from our commitment on financial returns to our shareholders, it

is imperative that our business conducts are also to be beneficial and

constructive to the society and has therefore been participating in various

social activities.


The Activity and the Policy of Corporate

Social Responsibility

07

The following are the activities;

Social and Community Development Projects

Soldier Moral Improvement Program (Mor-Ouam-Bam-Rung-Kwan-Ta-Harn)

Recent insurgencies in the three southernmost provinces resulted

in adverse impacts to Thai economy and its image. A number of soldiers

assigning to these areas have been injured or disabled which consequently

suffer from moral and psychological issues. BAFS in the association with

the Royal Thai Army Medical Department and Phramonkutklao Hospital have

been supporting the “Mor-Ouam-Bam-Rung-Kwan-Ta-Harn” which is a

program that provides moral support to injured soldiers in Phramonkutklao

Hospital. BAFS joined the program every two months. The program’s

objective is to help injured soldier to be fully integrated back to the society

and being proud of their services to the nation. BAFS strongly hopes that

such program will demonstrate our appreciation to the sacrifices made by

these soldiers and at the same time, promoting solidarity and compatriot

among the participants.

Fire Drill Training

Safety is the prime concern in BAFS business as an aviation refueling

service provider. Our company is strictly abided by the safety regulation and

practices in compliance with international standard. Firefighting is an area

where BAFS has paid a special attention by providing mandatory firefighting

training to every employee. Nonetheless, we have also identified local

communities as important allies in safety promotion by providing introductory-

level firefighting courses to the local communities near fuel storages.

National Children Day Activities

BAFS has long been supporting the National Children Day’s activities in

the local communities such as Prem Prachakorn, Romsaingam Communities

and Wat Hua Ku School, etc.

Scholarship Programs

BAFS provides scholarships through the Thai Muslim Women Foundation

of Thailand for the welfare of Orphans for the under privileged children without

the discriminations against racial backgrounds and religious beliefs.

Donation Program/Project on Education and Sport Equipments

BAFS has donated educational and sporting equipments along with

scholarship to various schools around the country; namely, Wat Ku School,

Pak Klong Mon School, Wat Sriwaree Noi School, Samut Prakarn, Wat

Wiharn Deang Community School, Saraburi, Ban Pu Nam Ron, School,

Karnchanaburi, etc.


Activities on the Corporate Social

Responsibility

08


Teachers Volunteering Project

BAFS has been arranging voluntary teaching project by sending volunteers

from BAFS to teach basic electricity background for High School students in

Wat Hua Kua School.

Government Officer Supporting Project

BAFS has supported the Honorable Government Officer by granting the

reward through the Civil Service Association of Thailand every year in the

hope that the Honorable with characters of faithful and dedicated will be

model for all government officers.

Relieving the painful of disaster victim Project

BAFS concerned about natural disaster which occurs on the whole

world. To relieve victim’s pain, BAFS has donated through the Thai Red Cross

Society in most severe cases such as Earthquake in Haiti, Heavily Flood in

Thailand.

Religion Supporting Project

Royal Kathin, Annual Kathin Offering Ceremonies and Buddhist Monk

Scholarship Project

BAFS has been actively involving in religious promotion which is an

important part of Thai Culture. Our company has since supported the

construction of Dhamma School at Wat Monkonthep, Chachengsao and Wat

Thep Prasit, Samut Songkram. We also grant scholarship for Buddhist Monks

and Novices along with supporting Kantthet Mahachat Sermon Ceremony

and the publication of the Tripitaka, the Buddist Sciptures.

Environmental Conservation Project

Mangrove Forest Field Trips

BAFS encourages experience-based education by sponsoring field trips

for local students in the “Pa Nong Rak Pa Chai Lane Project” or Mangrove

Forest Field Trips. During the field trip, students, teachers from Wat Hua

Koo school, Wat Srivareenoi School and Pak Klong Mol School andtogether

with BAFS volunteers were taking part in mangrove trees planting and being

taught to analyze, experience and to be conscious on the importance of

environmental conservation.

Effective Microorganisms for Environmental Treatment Project

BAFS has supported by Electricity Generating Authority of Thailand

(EGAT) to educate, train, and result follow-up with the students in many

school namely, Wat Wiharn Deang School , Wat Hua Ku school on the use of

Effective Microorganisms (EM) for environmental treatment.

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Activities In 2010

Aviation Safety Week 2010 BAFS attended the aviation safety week at the main

terminal building at Suvarnabhumi Airport between 2

August 2010 until 6 August 2010.

Senior Executives on Justice Administration batch 14 visits BAFSM.R. Supadis Diskul welcomed “The senior executives

on justice administration batch 14” that visited BAFS

aviation fuel depot at Suvarnabhumi Airport on 7

September 2010.

BAFS celebrates Chinse New Year to airlines customers.On the occasion of the Chinese Lunar New Year, Business Development and

Marketing Department greets customer airlines with oranges for good luck and

good fortune throughout the whole year.

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Honorable Awards

BAFS won the national flag decoration in Don Mueang District The Don Mueang’s District Director granted the award

of national flag decoration for private sector to Bangkok

Aviation Fuel Services Plc on 17 September 2011. The

Contest was held by the Don Mueang District Office in

order to promote national flag decoration

BAFS won enterprise of safety awards at two locations.Minister of Labour Protection and Welfare granted the

Year 2010’s National Award of the Outstanding for

Enterprise of Safety Operation, Occupational Health

and Working Environment to Bangkok Aviation Fuel

Services Plc., at Bangkok International Trade & Exhibition

Centre (BITEC) on 10 July 2010. In this year, BAFS, Don

Mueang Depot wons these awards for ten consecutive

years while Intoplane Substation office wons for two

consecutive years.

on enterprise of safety awards

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General Information

BANGKOK AVIATION FUEL SERVICES PUBLIC COMPANY LIMITED

Head Office171/2 Kamphaeng Phet 6 Rd., Don Mueang,

Don Mueang, Bangkok 10210

Telephone : 02 834 8900 Fax : 02 834 8999

Web Site : www.bafsthai.com

Type of Business Storage and Aircraft Refuelling Services

Registration Number 0107538000487

Registered Capital 509.998 million shares, 1 Baht per share,

total 509.998 million Baht

Paid-up Capital509.997 million shares, 1 Baht per share,

total 509.997 million Baht

ReferencesShare Registrar Thailand Securities Depository Company Limited

62 Rachadapisek Road, Klongteoy, Bangkok 10110

Telephone : 02 229 2800 Fax : 02 654 5427

Auditor Dharmniti Auditing Co., Ltd.

267/1 Pracharaj Sai 1 Road, Bangsue, Bangkok

10800

Telephone : 02 587 8080 Fax : 02 586 0301

13

BAFS’s Shareholdings in Subsidiary and Related Companies

General Information

Name

Type of Type of Paid-up Capital Shareholding

Business Share (Mil. Baht) Percentage

Thai Aviation Refuelling Co., Ltd. Operating aviation fuel service Ordinary 530 90.00

99 Moo 10, Srisa Jorakhanoi, using the Hydrant technology

Bang Saothong, at Suvarnabhumi Airport

Samut Prakarn 10540

Tel : 02 134 4021-6

Fax : 02 134 4020

JP-One Asset Co., Ltd. Transporting aviation fuel Ordinary 600 92.50

171/2 Kamphaeng Phet 6 Rd., through pipeline system,

Don Mueang, Don Mueang, from Makkasan to

Bangkok 10210 Suvarnabhumi Airport

Tel : 02 834 8984-6

Fax : 02 834 8975

Intoplane Services Co., Ltd Conducting Into-plane fuelling Ordinary 0.12 83.33

171/2 Kamphaeng Phet 6 Rd., service which is hired only

Don Mueang, Don Mueang, for labor. Currently, it provides

Bangkok 10210 service at Samui and

Tel : 02 834 8982-3 Sukothai Airports

Fax : 02 834 8999

Fuel Pipeline Transportation Storing and transporting Ordinary and 1,592 16.67

Limited aviation fuel through Preferred

424 Kamphaeng Phet 6 Rd., pipeline system

Don Mueang, Don Mueang,

Bangkok 10210

Tel : 02 574 6180-3

Fax : 02 574 6101

14

Organization Chart

BOARD OF DIRECTORS

Managing Director

Deputy Managing Director –

Administration

Executive Assistant to

Managing Director

Executive Assistant of

Legal & Securities

Media Development &

Community Affair

Public Relations

Corporate Affairs

Investor Relations

Legal

Safety

Executive Assistant of

Internal Audit

Internal Audit

Business Development &

Marketing Department

Human Resources &

Administration Department

Finance & Accounting

Department

Business Development & MarketingPersonnelCorporate Financial

Information TechnologyAdministrationAccounting

IT System EngineeringPurchasingStock Control

Human Resources Development

Nomination CommitteeAudit Committee

14

15

is commanding line

is reporting line

Fuelling Operations Committee

Deputy Managing Director –

Operations

Occupational Health And Safety

Management Representative (OH&SMR)

Safety, Occupational Health

and Environment

Executive Assistant of Quality

Management System

Risk Management & Strategic Plan

Technical Department Depot DepartmentAviation Refueling

Department

Donmueang & Regional

Airport Department

Electrical Engineer Depot Operation Aviation Refueling Donmueang Airport

Mechanical Engineer C/R & Maintenance Aviation Information Service Regional Airport -USM

Quality Control Regional Airport -THS

Maintenance

Risk Management CommitteeRemuneration Committee

15

16

(%) Share Holding

Education/Training

The Role of Chairman from Thai Institute of Directors (IOD)

Other Current Position

Past Experience

Mr. Palakorn Suwanrath Chairman and Independent Director

Age 62 years

Board of Directors

17

(%) Share Holding

shares)

Education/Training

North Dakota State University, USA

Mahidol University

Defence Course for the Joint State-Private Sectors,

Class 15

Certification Program (DCP), Finance for Non-

Finance Director, The Role of Chairman, Role of the

Compensation Committee, Successful Formulation

and Execution of Strategy (SFE) from Thai Institute of

Directors (IOD)


Thai Aviation Refuelling Co., Ltd.

JP-One Asset Co., Ltd.

Past Experience

and Support Department, Thai Airways International Pcl.

M.R. Supadis DiskulDirector and Managing Director

Age 61 years

(%) Share Holding

Education/Training

Royal Thai Air Force Academy


Thai Airways International Pcl.

Co., Ltd.

Past Experience

Development & Management, Thai Airways

International Pcl.

Department, Thai Airways International Pcl.

International Pcl.

Flight Lieutenant Montree Jumrieng Director

Age 53 years

Board of Directors

18

Board of Directors

(%) Share Holding

Education/Training

Bundeswehr Muenchen Federal Republic of

Germany



Past Experience



SQN. LDR. Asdavut WatananguraDirector

Age 51 years

(%) Share Holding

Education/Training

University of Detroit, USA

University of Detroit, USA

Mapua Institute of Technology, Philippines


Development Department, Thai Airways

International Pcl.

Past Experience

Project Department, Thai Airways International Pcl.



Mr. Chokchai PanyayongDirector

Age 56 years

19

(%) Share Holding

Education/Training

National Institute of Development Administration

Management), Mahidol University

Chulalongkorn University

Systems for Executive Course, Class 9 from

The King Prajadhipok’s Institute Academic

Class 3 from The King Prajadhipok’s Institute Academic

Program (DCP) from Thai Institute of Directors (IOD)

Singapore (CAAS)


Ministry of Finance

Past Experience

of Suvarnabhumi Airport, Airports of Thailand Plc.

of Regional Airports, Airports of Thailand Plc.

Airports of Thailand Plc.

Mr. Serirat PrasutanondDirector

Age 59 years

Board of Directors

(%) Share Holding

Education/Training

Business Administration of Chulalongkorn University

University

Institute of Directors (IOD)


and Philippines, The Shell Company of Thailand

Limited

Past Experience

The Shell Company of Thailand Limited

The Shell Company of Thailand Limited

Mr.Ath HemvijitraphanDirector

Age 52 years

20

Board of Directors

(%) Share Holding

Education/Training



Chevron (Thailand) Ltd.

Past Experience

Chevron (Thailand) Ltd.

Mr. Chakraphan Krachaiwong Director

Age 39 years

(%) Share Holding

Education/Training

National Defence College, Class 20


PTT Plc.

Past Experience

International Trading Business Unit, PTT Plc.

Development and Marketing, PTT Plc.

Mr. Nuttachat Charuchinda Director

Age 56 years

21

(%) Share Holding

Education/Training


Engineering, New Jersey

Certification Program (DCP), Finance for Non-Finance

Director from Thai Institute of Directors (IOD)


-

Past Experience

Mr. Navee LertphanichkulDirector

Age 62 years

Board of Directors

(%) Share Holding

Education/Training

Faculty, Chulalongkorn University

Certification Program (DCP), Finance for Non-Finance

Director from Thai Institute of Directors (IOD)


Past Experience

Mr. Vinai ChamlongrasdrDirector

Age 71 years

22

Board of Directors

(%) Share Holding

Education/Training

Ramkhamhaeng University

State-Private Sectors, National Defence College

of The Thai Bar

Committee Program (ACP) from Thai Institute of

Directors (IOD)

Public Director Institute


Past Experience

Director, Krung Thai Bank Plc.

General

Mr. Pachara Yuthidhammadamrong Independent Director and Audit Committee Chairman

Age 63 years

(%) Share Holding

Education/Training

Economics, Oxford University, England

Defence Course for the Joint State-Private Sectors,

Class 6

Chairman from Thai Institute of Directors (IOD)


Past Experience

Generating Plc.

Bank Plc.

Thailand

Mr. Aswin KongsiriIndependent Director, Nominating Committee

Chairman, and Risk Management Committee Chairman

Age 65 years

23

(%) Share Holding

Education/Training

Committee Program (ACP), Role of the

Compensation Committee, Monitoring the System

of Internal Control and Risk Management (MIR),

Corporate Fraud, Monitoring the Quality of Financial

Reporting (MFR) from Thai Institute of Directors (IOD)


Director, Krung Thai Bank Plc.

Past Experience

Ministry of Finance

Mr. Visut Montriwat Independent Director, Audit Committee Director, and

Remuneration Committee Chairman

Age 64 years

Board of Directors

(%) Share Holding

Education/Training

Florida Institute of Technology, USA

Japan

Statement for Directors (FSD) from Thai Institute of

Directors (IOD)


Past Experience

Krung Thai Asset Management Plc.

Krung Thai Asset Management Plc.

The Prime Minister Office

Mr. Sumon Surathin Independent Director and Audit Committee Director

Age 69 years

24

M.R. Supadis DiskulManaging Director

Age 61 years

(%) Share Holding

Education/Training

University, USA

the Joint State-Private Sectors, Class 15

(DCP), Finance for Non-Finance Director, The Role of Chairman, Role of

the Compensation Committee, Successful Formulation and Execution

of Strategy (SFE) from Thai Institute of Directors (IOD)


Past Experience


Management Team

25

Management Team

Mr. Jarern PavarojkitDeputy Managing Director -

Operations

Age 58 years

(%) Share Holding

Education/Training

Engineering, Krasetsart

University

(DCP) from Thai Institute of

Directors (IOD)

Administration for High-

Level Administrators - King

Prajadhipok’s Institute


Intoplane Services Co., Ltd.

Co., Ltd.

Past Experience

Bangkok Aviation Fuel Services Plc.

(%) Share Holding

0.01 (In name of himself 3,000

shares)

Education/Training

Western Reserve University, USA

College, The National Defence

Course for the Joint State-Private

Sectors, Class 22

Development Program, University

of California, Los Angeles, USA

Finance for Non-Finance Director,

Successful Formulation and

Execution of Strategy (SFE) from

Thai Institute of Directors (IOD)


Transportation Ltd.

Past Experience

Castrol Chemicals Limited

(%) Share Holding

Education/Training

Electrical Engineering,

Krasetsart University

Financial Statement for Directors

(FSD), Successful Formulation

and Execution of Strategy (SFE)

from Thai Institute of Directors

(IOD)

Administration for High-

Level Administrators - King

Prajadhipok’s Institute


Refuelling Co., Ltd.

Co., Ltd.

Past Experience


Dr. Pugdee ManavesDeputy Managing Director –

Administration

Age 47 years

Mr. Amnuay PahuvanichSenior Technical Manager

Age 51 years

26

Mr. Ditsapong PrithaveepongSenior Depot Manager

Age 53 years

(%) Share Holding

Education/Training

Accountancy Faculty,



(DCP), Financial Statement

for Director (FSD), Successful

Formulation and Execution of

Strategy (SFE) from Thai Institute

of Director (IOD)


Past Experience


Ltd.

(%) Share Holding

Education/Training

NIDA


(DCP), Successful Formulation

and Execution of Strategy (SFE)

from Thai Institute of Director

(IOD)


Transportation Ltd.

Past Experience

Bangkok Aviation Fuel Services

Plc.

(%) Share Holding

Education/Training

Mahidol University

Management, Dhonburi

Rajabhat University

Financial Statement for Directors

(FSD) from Thai Institute of

Directors (IOD)


Co., Ltd.

Past Experience

Aviation Fuel Services Plc.

Mr. Chathaya BandhayaSenior Finance & Accounting

Manager

Age 55 years

Mr. Tawin SaiwaewSenior Aviation Refuelling Manager

Age 54 years

Management Team

27

(%) Share Holding

shares)

Education/Training

Human Resources Management,

NIDA

Ramkhamhaeng University


-

Past Experience

& Administration Manager,


(%) Share Holding

Education/Training



-

Past Experience


(%) Share Holding

Education/Training

Mahidol University


-

Past Experience

Management, Bangkok Aviation

Fuel Services Plc.

Ms. Raweewan MantasatianHuman Resources and

Administration Manager

Age 52 years

Mr. Pichai PathravutigulDon Mueang and Regional Airport

Manager

Age 56 years

Mr. Charoen CharusalaipongBusiness Development and

Marketing Manager

Age 48 years

Management Team

28

Nature of Business

Bangkok Aviation Fuel Services Public Company Limited (BAFS) provides aviation fuel

services including aviation fuel depot and aircraft refuelling service at Suvarnabhumi Airport and

Don Mueang Airport. Currently, the Company consists of major shareholders namely Thai Airways

International Pcl., Chevron (Thailand) Ltd., PTT Plc., ESSO (Thailand) Plc., The Shell Company of

Thailand Ltd., Airports of Thailand Plc., and Air Total (Thailand) Co., Ltd.

Besides the service at Suvarnabhumi Airport and Don Mueang Airport, the Company services

two regional airports in Sukhothai Airport, Sukhothai Province, and Samui Airport, Suratthani

Province.

Furthermore, the Company conducts its business through subsidiary and related companies

i.e. Thai Aviation Refuelling Company Limited (TARCO), JP-One Asset Co., Ltd. (JP-One), Intoplane

Services Company Limited (IPS), and Fuel Pipeline Transportation Limited (FPT) as per details in the

topic of “General Information - BAFS’s Shareholdings in Subsidiary and Related Companies”.

Operation Policy of the Group

The Company has a clear operation policy within the group. For aviation fuel service

business, the Company is a sole operator at Don Mueang Airport and regional airports, providing

a comprehensive aviation fuel service including hydrant pipeline system, depot and into-plane

service. For Suvarnabhumi Airport, the Company provides aviation depot and into-plane service,

while Thai Aviation Refuelling Company Limited (TARCO) provides only hydrant pipeline system.

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Remark: * Other income comprises of income form other service, Gain (Loss) form Foreign Exchange, other investing

income such as interest received, and guarantee fee income.

Nature of Business

For pipeline transportation business, Fuel Pipeline Transportation Limited (FPT) provides

service in this business, while JP-One Asset Co., Ltd. (JP-One) provides pipeline transportation

service only from Makkasan to Suvarnabhumi Airport.

As for Intoplane Services Company Limited (IPS), it conducts into-plane fuelling service, by

engaged from the Company. Currently, it provides service only at Samui and Sukothai Airports.

In the future, the operation policy within the group may change according to the changing in

economics, political, and competition factors. However, any change would be for the best interest

of the whole group of the Company.

Revenue Structure

The Company has three sources of revenue as follows:

1. Services Income from providing aviation fuel services including fuel depot, transporting

aviation fuel through pipeline and aviation refuelling services

2. Rental Income

3. Other Income

(Unit : Million Baht)

Type of Revenue Operate % of Investment Year 2010 Year 2009 Year 2008 by by BAFS Amount Percent Amount Percent Amount Percent

1. Services Income BAFS 1,480.37 66.7 1,343.81 66.0 1,404.33 66.0

TARCO 90% 582.30 26.2 555.79 27.3 571.58 26.9

JP-One 92.5% 109.56 4.9 97.25 4.8 82.99 3.9

2. Rental Income BAFS 19.19 0.9 16.69 0.8 19.28 0.9

TARCO 90% - -

JP-One 92.5% - -

3. Others income* 28.44 1.3 21.44 1.1 48.83 2.3

Total 2,219.86 100.0 2,034.98 100.0 2,127.01 100.0

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Results of Operations in 2010

1. Depot Operations Suvarnabhumi Airport

In 2010, the Company provided aviation fuel intermediate storage services with 3 main storage

tanks, with a combined capacity of 45 million liters1), equivalent to 3 days of operating stock.

The total volume of Jet A-1 received from the oil companies was 4,205.5 million liters, with

JP-One Assets Co., Ltd. (JP-One) and Thai Petroleum Pipeline Co., Ltd. (Thappline) providing

1,053.9 million liters and 3,151.6 million liters respectively; a ratio of 25 : 75.

Total volume of Jet A-1 received 4,205.5 4,000.3 5.1

Daily average volume of Jet A-1 received 11.5 11.0 4.5

Daily average volume of Jet A-1 received from JP-One 2.9 2.4 20.8

Daily average volume of Jet A-1 received from Thappline 8.6 8.6 0

Note1) Total number of storage tanks at Suvarnabhumi Airport Depot is 7 tanks with a total capacity of 90 million liters.

JP-One, a Company’s subsidiary, has rented 4 of the 7 tanks.

Summary of Suvarnabhumi Airport 2010 2009 IncreaseDepot Operations Million liters Million liters (decrease) %

31


Don Mueang Airport

In 2010, the Company provided aviation fuel intermediate storage services with 2 main

storage tanks, with a combined capacity of 14 million liters, and a daily average volume received

of 285,132 liters. The total volume of Jet A-1 received was 104.1 million liters (a daily average

of 0.29 million liters).

Summary of Don Mueang Airport 2010 2009 IncreaseDepot Operations Million liters Million liters (decrease) %

Total volume of Jet A-1 received 104.1 85.2 22.2

Daily average volume of Jet A-1 received 0.29 0.23 26.1

2.3 Number of Flights Serviced

The Company provided aviation refuelling services to 142,972 flights at Suvarnabhumi

Airport and Don Mueang Airport, during 2010, a increase of 8,219 flights or 6.1% from 2009.

Total volume of fuel uplifted at both airports in 2010 was 3,830.1 million liters, a increase of 123

million liters or 3.3% from 2009.

Suvarnabhumi Airport

JET A-1 Total volume of Jet A-1 uplifted during 2010 was 3,726.9 million liters, or 311 million liters per

month, supplying 127,736 total annual flights (average of 10,645 flights per month).

Suvarnabhumi Airportิ The Company supplied Jet A-1 defuelling services to 105 flights (9 flights per

month), with a total combined volume of 1.7 million liters or 0.1 million liters per

month.

Don Mueang Airport The Company supplied Jet A-1 defuelling services to 152 flights (13 flights per

month), with a total combined volume of 2.7 million liters or 0.2 million liters per

month.

Don Mueang Airport

JET A-1 Total volume of Jet A-1 uplifted during 2010 was 103.2 million liters, or 8.6 million liters per

month, supplying 15,236 total annual flights (average of 1,270 flights per month).

AVGAS Total volume of Avgas uplifted during the same period was 191,050 liters or 15,921 liters per

month, supplying 2,564 total annual flights (average of 214 flights per month).

Airport Operation

2. Into-plane Operations 2.1 Refuelling Operations

2.2 Defuelling Operations

32


Flights 2010 2009 Increase (decrease)%


Domestic Flights

Number of flights 38,618 37,961 1.7

Volume of fuel uplifted (million liters) 333.2 334.1 (0.3)

International Flights


Volume of fuel uplifted (million liters) 3,393.7 3,278.1 3.5

Don Mueang Airport

Domestic Flights


Volume of fuel uplifted (million liters) 98.1 89.4 9.7

International Flights

Number of flights 791 751 5.3

Volume of fuel uplifted (million liters) 5.1 5.6 (8.9)

Totals

Total number of flights 142,972 134,753 6.1

Total volume of fuel uplifted (million liters) 3,830.1 3,707.2 3.3

33

Summary of Business Changing

In 2010, the Company was negatively affected by political factors, resulting in the

performance of the Company, the second and third quarters were lower than expected; however,

in the last quarter of 2010 fuel consumption was back to normal. Compared to last year, total fuel

consumption grew 4.9 percent.

In addition, to maximize the utilization of asset, the Company improved one of the unused

aviation fuel storage tanks at Don Mueang Airport to store diesel; the project was completed in

September 2010.

Operations at Suvarnabhumi Airport

In 2010, the Company transferred 2 aviation hydrant dispenser trucks from Don Mueang

Airport to Suvarnabhumi Airport; this is to allocate appropriate resources to service at each

airport. Currently, in total the Company has 40 aviation hydrant dispenser trucks and 3 refueller

tank trucks at Suvarnabhumi Airport.

Regarding the operational changes in 2010, other than transferring the aviation hydrant

dispenser trucks to Suvarnabhumi Airport, the Company is currently improving 2 out of 8 aviation

hydrant dispenser trucks from using EURO 2 diesel engines to be EURO 3 diesel engines.

Furthermore, in order to support the expansion of Suvarnabhumi Airport, the Company plans to

increase hydrant pumps form 9 to 11 hydrant pumps, which is expected to be complete within

December 2011.

Outlining the amount of flights in 2010, the Company provided aviation refuelling services

at Suvarnabhumi Airport, at a total of 127,736 flights, divided into 38,618 domestic flights and

89,118 international flights, or an average of 371 flights per day, increased 4.5 percent from last

year. The number of flights that the Company provided service was accounted for 94 percent of

the total number of flights landing at Suvarnabhumi Airport.

Operations at Don Mueang Airport

Certainly, the major scheduled flights airline at Don Mueang Airport is Nok Air and

One Two Go, with some other charter flights. During 2010, Don Mueang Airport accommodated

15,236 flights, estimated at 42 flights per day, increased 21.7 percent from last year, with fuel

consumption of 103 million liters or 283,000 liters per day, increased 10 percent from last year.

With 8 refuellers at Don Mueang Airport and the flights accommodated at this airport, the Company

is more than capable to provide the service.

Besides the aviation refuelling and storage service at Don Mueang Airport, with maximum

reserved capacity at 20 million liters, the Company has another additional service to reserve

diesel since September 2010. To provide this service, the Company has modified the unused

aviation fuel storage tank to receive and store diesel via pipeline before transporting diesel to

Bang Pa In depot. However, in the future, if the flights and the demand of aviation fuel increases at

Don Mueang Airport, the Company can restore the tank back to reserve aviation fuel as usual.

34

Aviation Refuelling Overview

and Competition

Thailand’s aviation refuelling business in 2010 was somewhat similar as in 2009. From

March to May 2010, the government declared a state of emergency under the executive degree

for administration in emergency situations in many provinces throughout the country. But the

airline industry benefited from the global recovery factors, and passenger figures at Suvarnabhumi

Airport in total was 10.3 million, increased 6.8 percent compared to last year. In 2010, the total

number of flights that the Company provided aircraft refuelling at Suvarnabhumi Airport was

135,403 flights, divided into 38,618 domestic flights, and 96,785 international flights, or an

average of 371 flights per day, increased 5.1 percent from last year. Fuel consumption at

Suvarnabhumi Airport in 2010 was 4,213 million liters, or an average of 11.5 million liters per

day. The Company has an 88.5 percent market share for the into-plane service at Suvarnabhumi

Airport. For Don Mueang Airport, the fuel consumption was 103 million liters, servicing 15,236

flights. The overall fuel consumption for both Suvarnabhumi Airport and Don Mueang Airport

was 4,317 million liters, increased 4.9 percent compared to last year.

For 2011, the Company forecasts that fuel consumption for both airports will be able

to grow and expects the fuel consumption to be 4,392 million liters, representing a 2 percent

growth. The Company predicts by the hypothesis that the major airlines at Don Mueang Airport

will remain the same and no other negative factors that will affect the tourism industry seriously,

causing unexpected growth of fuel consumption.

The Company aims to maintain market share at Suvarnabhumi Airport for not less than

85 percent. Focusing on satisfying and fulfilling the demand of the customer, which are the oil

companies. The Company will maintain service quality under the motto “Service with our hearts”

and emphasizes highest priority in safety, with modern technology. This will create highest

satisfaction to indirect customers, which are the airlines. The Company also focuses on cost

conscious and fortifies good relationship with customers.

35

Innovating and Developing

for the Future

The Company will continue to fulfill its Vision and Mission by developing the capabilities of

the aviation refuelling system to ensure a reliable supply of aviation fuel is available to support the

growth of Suvarnabhumi airport. The Company is also studying various business opportunities as

alternative means to increase its revenue. The following is a summary of these activities.

1. Main Hydrant Pump Project

The Company has already started the installation of an additional main hydrant pump, which

is to be completed in 2011. However, due to higher than expected passenger and air traffic growth,

and despite the negative impact of the political and economic situation, this extra pumping capacity will

be fully utilized by the time the system comes online, leaving no pumps on stand-by.

In light of this, and to ensure that the Company maintains its world-class standards of

operational excellence, it will be installing an additional main hydrant pump in early 2011, and

will be completed during the same period as the abovementioned pump. The addition of pump will

increase our maximum pumping capacity to 4,540 cubic meters per hour, while having one main

hydrant pump always on stand-by, which greatly reduces system down-time, and enhances the overall

availability of the pumping facility.

2. Hydrant Dispenser Vehicle Chassis Replacement Project (2 vehicles)

The Company’s hydrant dispenser vehicles have been fully utilized for providing aviation

refuelling services at Suvarnabhumi Airport since 2006. Some of the older vehicles require an amount

of vehicle chassis maintenance that is increasingly disproportionate to the amount of fuel they uplift,

which results in increased costs in providing service for the Company. Each year, the Company

plans on replacing 2 of these older vehicle chassis with newer units that are more efficient and more

environmentally friendly.

3. Additional 15 million liter Main Storage Tank Construction Project

At the current rate of air traffic growth, it is forecasted that the aviation fuel requirements at

Suvarnabhumi Airport will reach 14.5 million liters per day by 2012. To ensure that the Company is able to

provide the airport with a reliable supply of aviation fuel, the 5 year strategic plan calls for the construction

of an additional 15 million liter main storage tank in 2012, with completion due in 2013. The increase in

buffer stock capacity will also enhance the Company’s ability to handle fluctuation in fuel demand.

36

Risk Factors

Bangkok Aviation Fuel Services Plc. has continuously and systematically managed its

relevant risks, which enables the Company to mitigate risk to the acceptable level of the preceding

year. The risk points and controlled plan have been annually adjusted to align with the corporate

strategic target, concerning the sustainable growth of the Company and increasing value to

shareholders in the long run. The risk factors of the Company which may occur and could affect

shareholders and stakeholders are as follows:

1. Business Risk Risk associated with the Growth Rate of Thai Tourism Industry

The Company’s major revenue is from aircraft refuelling services at Don Mueang, Samui,

Sukhothai, and especially at Suvarnabhumi Airport; therefore, an increase of income depends

largely on the number of flight services provided which is directly related to Thai tourism industry

growth rate. Additional factors which can negatively impact the Company’s revenue are political

turmoil and natural disasters. The closures of Suvarnabhumi and Don Mueang Airports due to

political demonstrations and unrest in 2008 and the cancellation of flights from Europe to Thailand

due to the eruption of a volcano in Iceland in 2010 are examples of these severe incidents which

are uncontrollable factors.

However, the Company’s financial operating result is carefully monitored every month

because the management team has set it as a main priority, as well as has set up the trigger

point for some financial factors such as EBITDA and cash flow to be early warning points. In

the case that revenues are going to falls below the budget, the controlling expenses plan will

be conducted on every department to cover the decrease in revenue and able to pay dividends

to the shareholder. Furthermore, Business Development and Marketing Department is currently

conducting studies on investment in other related businesses that can create future additional

revenue.

2. Risk from Operations2.1 Risk Relating to Inadequate Refuelling Service Devices to Cope with the

Growth of Flight at Suvarnabhumi Airport

The Company is facing the risk of inadequate refuelling services devices due to Airports of

Thailand Plc. (AOT)’s marketing activity and the project of enlargement at Suvarnabhumi Airport

to push up the volume of flights coming to Thailand.

In order to increase the Company’s capability on providing service at the peak hours, 2

additional hydrant pumps will be installed, which can provide 4,540 cubic meters per hour on

pumping the aircraft fuel to the system. This project will finish in 2011.

Furthermore, the Company’s Fuelling Operations Committee, which composes of the

representatives from the Company’s management and oil companies, has regularly meeting for

improvement services purpose. Moreover, there is the inspection from Joint Inspection Group (JIG)

once a year to make sure that the Company’s operating systems meets the international standard.

37

2.2 Risk Relating to Conflagration or Terrorism

As the Company’s business is related to aviation fuel, the fuel storage tanks situated in vicinity

of Don Mueang and Suvarnabhumi Airports may be a risk of conflagration or other hazards such

as terrorism. This could effect a variety of unwanted events such as personal health and safety

issues, properties damage, environmental degradation, as well as the Company’s operations.

The Company has highly concerned about the importance of safety, by strictly complies with

the Occupational Health and Safety Assessment Series: OHSAS 18001:2001. Every employee

is well-aware of their individual responsibilities and strictly conforms to the health, safety, and

environment policies. Furthermore, noise barrier is set up on Utrapimook Tollway in front of the

Company’s depot at Don Mueang area as well as the tank protection nets are going to be installed

over the oil tanks in order to avoid the risk of sabotage.

Moreover, the Company has conducted the risk transfer by possessing the insurance policies

with Bangkok Insurance Plc. and Dhipaya Insurance Plc. The policies cover the followings.

1. All-risks insurance policy which covers business interruption. The policy valued

Baht 5,311.2 million.

2. Aviation Third Party Legal Liability Insurance Policy, valued of USD 750 millions, and

Terrorism and Disaster Insurance, valued of Baht 5,440 millions.

3. Accidental Damage (property) Insurance Policy coverage for the Company’s property,

valued of Baht 128.8 million.

2.3 Risk from the drive in global warming mitigation policy

The negative repercussions of global warming have indeed become more accelerated and

amplified, which have clearly seen from the unpredictable changes in meteorological conditions

such as snow storm in Europe, deluge in Europe and Asia. Thus, all countries over the world

are seriously taking these matters into account including Airports of Thailand Plc. (AOT), which

released the “Green and Clean Airport” policy. In couple of years, the operators in Suvarnabhumi

Airport will have to mitigate the carbon dioxide emission according to the above policy.

As the Company concerns about global warming, “Carbon Footprint for Organization” project

has been manipulated. This project is set up by National Metal and Material Technology Center

(MTEC) and Thailand Greenhouse Gas Management Organization (TGO) in order to calculate the

amount of carbon dioxide that the Company releases per year bases on the Company’s activities

and operation. This project is 7- month long from December 2010 to June 2011, and then the

Company will receive the certificate of carbon footprint emission volume as references to find the

way of reduction.

Risk Factors

38

Risk Factors

3. Financial RiskRisks related to Financial Obligations on Long-Term Loans

The Company has three loans for the expansion of aviation refuelling service business. In 2011

the Company has negotiated with the banks for the loan restructuring according to the conservative

financial plan and investment plan of the Company, which is already approved, by extending the

loan pay back period for 3-4 years, or ended in 2018. The loans are as follows:

3.1 Loan for the investment of main depot and into-plane services systems projects. The

Company obtained 10-year with Baht 2,000 million loan from Bangkok Bank Plc., which is extend

to be 14-year loan, paying back loan started in 2008. As at December 31, 2010, the Company has

outstanding loan of 1,340 million Baht. From 2011, the Company has to pay interest throughout

the loan installments, at 3-month current account interest rate + 1.5%. Other financial covenants

(considering from consolidated financial statement) included Debt-to-Equity ratio of not exceeding

1.50:1, Debt Service Coverage Ratio (DSCR) of not lower than 1.10:1, and cumulative DSCR of not

lower than 1.25:1. At present, the Company is able to maintain all financial ratios to comply with all

financial covenants mentioned above.

3.2 10-year loan contract for buying shares of Thai Aviation Refuelling Co., Ltd. amounts

Baht 800 million, which is extend to be 14.5-year loan, paying back loan started in 2007. The

outstanding loan at December 31, 2010 is Baht 355.6 million. From 2011, the Company has to

pay interest rate at THBFIX 6 MTH +1.15% per annum, which has been hedged at 5.8% fixed rate.

Other financial covenants (considering from separate financial statement) included Debt-to-Equity

ratio of not exceeding 2.25:1, and Debt Service Coverage Ratio (DSCR) of not lower than 1.20:1.

The Company is able to maintain all financial ratios to comply with all financial covenants mentioned

above.

3.3 7-year loan contract for buying shares of JP-One Assets Co., Ltd. amounts 220 million

Baht, which is extend to be 10-year loan, paying back loan will start in 2011. The Company has to

pay interest rate at MLR – 2.5% for 3 years (February 2011 – January 2014) and at MLR-2.0% after

that. Other financial covenants include Debt-to-Equity ratio of not exceeding 2.0:1, in which the

Company can still comply with the financial covenant mentioned above

Even though, the Company faces the risk of failing to comply with the above financial

covenants, the overall operation result shows that the Company has been able to follow all financial

covenant and the creditors are confident as the Company’s operations are better than the contract

conditions.

Moreover, from the aforementioned negotiation of loan restructuring, the Company is confident

that it can follow all the loan’s conditions at lower risk as well as all the Company’s operations will be

as planed.

39

1. Shareholding StructureTop ten shareholders as of Aug 26, 2010 (latest shareholding’s book closing date):

2. Management StructureThe Board of Directors (as of Feb 23, 2011):

Shareholder and

Management Structure

Names Position

1. Mr. Palakorn Suwanrath Chairman and Independent Director

2. M.R. Supadis Diskul Managing Director

3. Flight Lieutenant Montree Jumrieng Director

4. Mr. Chokchai Panyayong Director

5. SQN.LDR. Asdavut Watanangura Director

6. Mr. Serirat Prasutanond Director

7. Mr. Ath Hemvijitraphan Director

8. Mr. Chakraphan Krachaiwong Director

9. Mr. Navee Lertphanichkul Director

10. Mr. Vinai Chamlongrasdr Director

11. Mr. Nuttachat Charuchinda Director

12. Mr. Aswin Kongsiri Independent Director

13. Mr. Pachara Yutidhammadamrong Independent Director

14. Mr. Visut Montriwat Independent Director

15. Mr. Sumon Surathin Independent Director

Mr. Tarnthong Chandrangsu Company’s Secretary

Names Number of shares Shareholding %

1. Thai Airways International Pcl. 115,186,150 22.59

2. PTT Plc. 36,000,000 7.06

3. Chevron (Thailand) Limited 36,000,000 7.06

4. Esso (Thailand) Plc. 36,000,000 7.06

5. The Shell Company of Thailand Ltd. 36,000,000 7.06

6. Airports of Thailand Plc. 25,200,000 4.94

7. Air Total (Thailand) Co., Ltd. 18,000,000 3.53

8. Singapore Petroluem (Thailand) Company Limited 10,200,000 2.00

9. Petronas Retail (Thailand) Co., Ltd. 10,200,000 2.00

10. BP Oil (Thailand) Limited 10,200,000 2.00

40

Shareholder and Management Structure

Directors Authorized to Sign on Behalf of the Company The directors whose signatures are recognized as binding on the Company are

M.R. Supadis Diskul, Mr. Vinai Chamlongrasdr, Mr. Navee Lertphanichkul, Mr.Serirat Prasutanond,

Mr. Chakraphan Krachaiwong, Mr.Ath Hemvijitraphan, Mr.Chokchai Panyayong, Flight Lieutenant

Montree Jumrieng, Mr. Nuttachat Charuchinda, SQN.LDR.Asdavut Watanangura, two out of ten

directors sign and affix the Company’s seal.

Composition and Appointment of the Board of Directors The composition, appointment, removal and termination of the Directors have been

prescribed in the Company’s rules, which can be summarized as follows:

- The Board of Directors shall consist of al least 11 persons but not exceeding 15 persons

elected and removed at the Shareholders’ Meeting. At least half of the directors shall

reside in Thailand and shall have the qualifications as specified by laws.

- The directors shall be elected by the Shareholders’ meeting under the specified rules

and regulations.

- At every Annual General Meeting, one-third of the directors who have longest directorship

term shall retire from the positions. Anyway, those directors may be reappointed to be

the directors.

- The Shareholders’ meeting may resolve to remove the Board of Directors prior to their

retirement, with a three-quarter vote of the shareholders, who present in the meeting

and have voting rights, and with an aggregate number of up to half of all shares held by

such shareholders.

The Retirement of the Board of Directors The Board of Directors specified the retirement age of the director as follows.

- The person whom appointed as the director shall not exceed 72 years old at the date

that the Nominating Committee propose the name to the Board of Directors.

- The director shall be retired at the age of 75 years old.

- Managing Director shall be retired at the end of the last day of the month that the age

of 65 years old.

The Board of Directors’ Scope of Authorities The Board of Directors shall perform their duties in accordance with Laws, the Company’s

objectives and rules, as well as shareholders’ resolutions with honesty while preserving the

Company’s interest.

The Board of Directors may appoint other persons to act on behalf of the Company under

the supervision of the Board of Directors, or Managing Director, or assign them the authorities

in accordance with the proper specified scope and within the certain time period. The Board

of Directors may terminate, remove, change or revise such scope of authority as deemed

appropriate.

Managing Director’s Scope of Authority The Board of Directors has authorized Managing Director to engage in various activities on

behalf of the Company as specified in the Company’s Power of Attorney document, which can be

summarized as follows:

41


- Manage or operate normal business within the limit of Baht 10 million except for investment

in treasury bill, government bond and for the operating expense as determined by the

Company shall be followed the condition set by the Company.

- Engage any legal transaction, agreement or obligation on behalf of the Company after

the Board of Directors have approved.

- Recruit, pay salary or wages, dismiss or deal with other matters relating to any staffs or

employees, as deemed appropriate.

- Appoint lawyers and legal counselors.

- Act of behalf of, or in the name of the Company in any activities involving government

agencies, state enterprises, or other legal entities.

- Appoint and transfer of a sub-recipient of power of attorney, or a representative.

However, such authority does not include the authority, which Managing Director can approve

the transaction that Managing Director or connected persons have done with the Company or its

subsidiaries.

Committees The Board of Directors has set up various committees to help the Board in studying

various issues in details and screen workload to improve work efficiency of the Board. The

committees consist of Audit Committee, Remuneration Committee, Nominating Committee and

Risk Management Committee whose compositions and responsibilities have been prescribed in

details in the topic of “Good Corporate Governance”.

The Management TeamAs per details in the topic of “Management Team”

3. Nomination of Directors and Management 3.1 Nomination of Directors Selection of the Directors and Managing Directors has to be carried out via Nominating

Committee to consider and nominate name lists to the Board of Directors and/or the shareholders

for their approval.

For selecting directors in place of directors who expires form their terms, which has to be

carried out via the Shareholders’ Meeting, shall base on majority votes under the specified rules

and regulations as follows:

1. Each shareholder shall have has one vote for each share of which he/she is the holder.

2. Each shareholder shall exercise all votes he/she has as per no.1 to elect one person or

many persons as director(s) as such he/she shall not allot his/her votes to any person in

any number.

3. The person who receives the most votes according to ranking will be elected as a director

according to the position available at that time. The Chairman of the Board will cast the

deciding vote in the case where a voting ties between two persons competing for one

available position at that time.

As such, shareholder shall not spilt votes in electing directors (Cumulative Voting), according

to Section 70 of Public Limited Companies Act.

42


The Company has specified the qualification of the directors, and also the qualification of

independent director more strictly than Regulations of the Securities and Exchange Commission

(SEC) regarding shareholding qualification to enhance the Company’s independent directors to

have real independency, by specifying that “Independent Director” must have the qualifications as

follows:

1. holding shares not exceeding 0.5 per cent of the total number of voting rights of the

company, its parent company, subsidiary, affiliate, major shareholder or controlling

person of the company, including the shares held by related persons of the independent

director;

2. neither being nor having been an executive director, employee, staff, or advisor who

receives salary, or a controlling person of the company, its parent company, subsidiary,

affiliate, same-level subsidiary, major shareholder or controlling person of the company

unless the foregoing status has ended not less than two years. This qualification is not

include the case that the independent director has been the government officer or advisor

of government agency that is major shareholder or controlling person of the company;

3. not being a person related by blood or registration under laws, such as father, mother,

spouse, sibling, and child, including spouse of the children, of executives, major

shareholders, controlling persons, or persons to be nominated as executive or controlling

persons of the company or its subsidiary;

4. not having a business relationship with the company, its parent company, subsidiary,

affiliate, major shareholder or controlling person of the company, in the manner which

may interfere with his independent judgement, and neither being nor having been a major

shareholder or controlling person of any person having business relationship with the

company, its parent company, subsidiary, affiliate or juristic person who may have conflicts

of interest unless the foregoing relationship has ended not less than two years;

5. neither being nor having been an auditor of the company, its parent company, subsidiary,

affiliate, major shareholder or controlling person of the company, and not being a major

shareholder, controlling person or partner of an audit firm which employs auditors of the

company, its parent company, subsidiary, affiliate major shareholder or controlling person

of the company unless the foregoing relationship has ended not less than two years;

6. neither being nor having been any professional advisor including legal advisor or financial

advisor who receives an annual service fee exceeding two million Baht from the company,

its parent company, subsidiary, affiliate, major shareholder or controlling person of the

company, and neither being nor having been a major shareholder, controlling person or

partner of the professional advisor, in case that professional advisor is juristic person,

unless the foregoing relationship has ended not less than two years;

7. not being a director who has been appointed as a representative of the company’s director,

major shareholder or shareholders who are related to the company’s major shareholder;

8. neither doing business that similar to or competitive with business of the company or its

subsidiary, nor being a major partner, or executive director, employee, officer, advisor who

regularly receives salary, or holding shares not exceeding 1 per cent of the total number

of voting rights of other company that doing business that similar to or competitive with

business of the company or its subsidiary;

9. not being a director assigned by the board of directors to take part in the business

decision of the company, its parent company, subsidiary, affiliate, same-level subsidiary,

major shareholder or controlling person of the company;

43

10. not being a director of other listed companies, which are the parent company, subsidiary

or same-level subsidiary;

11. not having any characteristics which make him incapable of expressing independent

opinions with regard to the company’s business affairs.

3.2 Selection of Management Managing Director has been provided with the authority to make recruitment decision of

qualified, competent and experienced personnel in accordance with Staff Policies and Procedures

Manual, Re: Terms and Conditions of Service Employment. If the selection is from outside persons,

the candidates have to be interviewed by the interview committee.

4. Remuneration for the Directors and Management 4.1 Monetary Remuneration 4.1.1 The remuneration of the Board of Directors shall be screened by the Remuneration

Committee to the Board of Directors, and approved by the Shareholders’ Meeting as follows:

- Monthly remuneration: Chairman receives 22,000 Baht/month, director receives

19,000 Baht/month

- Meeting Allowance: Chairman receives 19,000 Baht/time, director receives 16,000

Baht/time

- Remuneration for Performance (Bonus) : shall be aligned with the policy and condition

that screened by the Remuneration committee and propose to the Shareholders’

Meeting annually.

4.1.2 The remuneration of the Audit Committee shall be screened by the Remuneration

Committee, and approved by the Board of Directors as follows:

- Monthly remuneration: Chairman receives 22,000 Baht/month, director receives 19,000

Baht/month

- Meeting Allowance: Chairman receives 19,000 Baht/time, director receives 16,000

Baht/time

4.1.3 The remuneration of the Risk Management Committee, the Remuneration Committee,

and the Nominating Committee shall be screened by the Remuneration Committee, and approved

by the Board of Directors as follows:

- Meeting Allowance: Chairman receives 7,500 Baht/time, director receives 6,000 Baht/

time

Remuneration for the Board of Directors

Number of Directors 15 persons

Total Directors’ remuneration in the positions of Board of Directors,

Audit Committee and other committees i.e. Risk Management Committee,

Remuneration Committee, and Nominating Committee

Year 2010 13,576,058.76 Baht

Year 2009 13,483,364.64 Baht


44


Remark: * The Company didn’t directly pay the remuneration to that director, but paid to the shareholder of the Company

of which that director has been the executive.

The remuneration in detail is as follows: Unit: Baht

Names Position Director Audit Other Bonus year Total Remuneration

Remuneration Committee Committees 2009 paid in Subsidiary

Remuneration Remuneration in 2010 Companies

1. Mr. Palakorn Suwanrath Chairman 359,000.00 - - 785,000.00 1,144,000.00 -

2. M.R. Supadis Diskul Director 308,000.00 - 66,000.00 523,500.00 897,500.00 604,900.00

3. Flight Lieutenant Montree Jumrieng Director 261,464.29 - - - 261,464.29 -

4. Mr. Chokchai Panyayong Director 277,464.29 - - 277,464.29 -

5. SQN.LDR. Asdavut Watanangura Director 9,806.45 - - 9,806.45 -

6. Mr. Serirat Prasutanond Director 260,000.00 - - 523,500.00 783,500.00 260,100.00

7. The Shell Company of Thailand Ltd. * 308,000.00 - - 477,600.00 785,600.00 -

(Mr. Ath Hemvijitraphan, Shell’s

Executive is the Company’s director)

8. Chevron (Thailand) Limited * 308,000.00 - - 523,500.00 831,500.00 -

(Mr. Tanachai Vienravee, Chevron’s

Executive has been the Company’s

director, ended Dec 31,2010)

9. Mr. Navee Lertpanichkul Director 292,000.00 - 24,000.00 523,500.00 839,500.00 -

10. Mr. Vinai Chamlongrasdr Director 308,000.00 - 24,000.00 523,500.00 855,500.00 459,000.00

11. Mr. Nuttachat Charuchinda Director 192,645.16 - - - 192,645.16 -

12. Mr. Aswin Kongsiri Director 308,000.00 - 60,000.00 523,500.00 891,500.00 -

13. Mr. Pachara Yutidhammadamrong Director 308,000.00 359,000.00 - 382,900.00 1,049,900.00 270,500.00

14. Mr. Visut Montriwat Director 308,000.00 308,000.00 22,500.00 523,500.00 1,162,000.00 459,000.00

15. Mr. Sumon Surathin Director 308,000.00 308,000.00 18,000.00 523,500.00 1,157,500.00 -

Mr. Chanchai Singtoroj Ex-director - - - 140,500.00 140,500.00 -

Mr. Nattachak Pattamasingh Ex-director - - - 140,500.00 140,500.00 -

Na Ayutthaya

Flight Lieutenant Udom Krisnampok Ex-director - - - 140,500.00 140,500.00 -

Mr. Tummasak Chutiwong Ex-director - - - 440,300.00 440,300.00 -

ACM Narongsak Sangapong Ex-Vice - - - 538,900.00 538,900.00 310,250

Chairman

Mr. Tevin Vongvanich Ex-director 29,178.57 - - 382,900.00 412,078.57 -

Flying Officer Norahuch Ployyai Ex-director 241,000.00 - - 382,900.00 623,900.00 -

45

* including Retirement Benefit Program; Prior to the establishment of the provident

fund, each employee is entitled to benefits based on the employee’s salary level and the number

of years employed by the Company.

For employees and management who have been worked with the Company prior to

the establishment of the provident fund, they may choose to join the provident fund program,

or remain with the retirement benefit program which the employee will receive after retiring. If

they choose to join the provident fund program, the Company will guarantee that provident fund

benefits will not be less than that of the retirement benefit.

4.2 Other Remunerations

Another form of remuneration that the Company provides for the management is as

same as that of the employees, which is monthly contribution to the provident fund; Employees

who start working with the Company after the Company provides provident fund can choose to

join the program. The contribution rate will be a progressive percentage rate of the employees’

salary as specified in the Company’s rules.


Remuneration for the Management

Number of Management 10 persons

Types of remuneration Salary, Bonus, Welfare *

Total Management’s remuneration

Year 2010 59,820,570.08 Baht

Year 2009 52,716,538.55 Baht

Provident Fund Contribution for the Management

Number of Management 10 persons

Provident Fund Contribution

Year 2010 4,389,980.88 Baht

Year 2009 3,624,644.01 Baht

46


5. Corporate Governance, Internal Information Controlling and Internal Audit

As per details in “Good Corporate Governance”

6. Dividend Policy of the Company, its Subsidiary and Related Companies

The Company has dividend policy at the ratio of not less than 50% of Net Profit after

Tax, Legal Reserve and Other Reserves, of not less than 10%, calculating from the net profit

of Company’s financial statement only, such ratio of dividend declaration is subject to the

Company’s liquidity and business expansion plan. In the past, the Company has paid dividend

by aligning with such policy continually as follows:

Remark: * Calculated from the Company Financial Statement.

The Company paid interim dividend to the shareholders at the rate of Baht 0.18 per

share on September 7, 2010 and on February 23, 2011, the Board of the Directors’ Meeting

assented to pay the dividend for last six month of the year 2010 to the shareholders at the rate

of Baht 0.36, totaling Baht 0.54 per share for the year 2010, or 63% of net profit. This rate

follows the Company’s dividend policy and will propose to the Annual General Meeting for the

year 2011.

The dividend policy of the Company’s Subsidiaries and Related Company is as follows:

TARCO, the Company’s Subsidiary, has dividend policy at the ratio of not less than

60% of Net Profit after Tax, Legal Reserve and Other Reserves, except in the year that TARCO

has investment project, it shall pay at the ratio of not less than 30%.

JP-One Asset, the Company’s Subsidiary, has dividend policy at the ratio of 100% of

Net Profit after Tax, Retained Loss and Legal Reserve.

IPS, the Company’s Subsidiary, and FPT, the Company’s Related Company, still have

no dividend policy.

Dividend Paid Dividend per share % of

(Mil.Baht) (Baht) Net Profit *

Year 2010 275.40 0.54 63

Year 2009 219.30 0.43 59

Year 2008 204.00 0.40 57

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Good Corporate Governance

Bangkok Aviation Fuel Service Plc. recognizes the importance of good corporate

governance, by adhering to the Principles of Good Corporate Governance for listed companies

of the Stock Exchange of Thailand as guideline for corporate governance and enhancing the

Company to operate with efficiency, and with code of conduct. In addition, the Company places

great importance on Corporate Social Responsibility, by taking care of society, environmental

conservation, and giving back to the communities. The Company realizes that its business is

mutually coexistence with community and environment, which leads to its sustainability in the

long run.

The Corporate Governance Policy of the Company was approved by the Board of Directors

since 2002, and was been later improved to align with the Principles of Good Corporate

Governance for listed companies of the Stock Exchange of Thailand and Guideline in Preparing

Corporate Governance Policy of Thai Institute of Directors, as well as to be more suitable with

the current environment. The Corporate Governance Policy can be summarized as follows:

Bangkok Aviation Fuel Services Plc. recognizes the importance of good corporate

governance including the paramount role that it plays in the sustainable growth and the

effective operation of the Company. The Company is therefore committed to do business in

compliance with Securities and Exchange Law, Rules and Regulations of the Stock Exchange

of Thailand and the Securities and Exchange Commission, Related Business Laws, Articles of

Association of the Company, Code of Best Practice for Directors of Listed Companies and the

Principles of Good Corporate Governance of the Stock Exchange of Thailand. The Company

takes responsibility for its stakeholders, the environment and contributes to society. As such,

the Company specifies the governance policy for the Board of Directors, management and

employees to follow by adhering to the following 5 principles:

1. Accountability

2. Transparency

3. Equitable Treatment

4. Long-Term Value-Added Creation to Shareholders

5. Promotion of Best Practices

And also adhere to Code of Conduct to ensure that the Company can operate with

transparency. The Company has announced Corporate Governance Policy to the Board of

Directors, management and employees.

Furthermore, the Company has provided Code of Conduct for the Board of Directors,

the management and the employees to use as a guideline in performing their duties with

transparency and conforming to good corporate governance. Also, Code of Conduct Working

Group has been set up to ensure the compliance of Code of Conduct and to establish the

testing system as well as to improve Code of Conduct and testing system to be updated on a

regular basis.

48

The Company has complied with the Principles of Good Corporate Governance of the

Stock Exchange of Thailand as follows:

Shareholders’ Rights

1. Shareholders’ Rights Protection 1.1 The Company attaches importance to protection of shareholders’ rights and

promotion of exercising the basic legal rights i.e. the rights to share profit /receive dividend,

to obtain relevant and adequate information of the Company, to participate and vote in the

shareholders’ meeting to elect and remove members of the board, appoint the external auditor,

and make decisions on any transactions that affect the Company such as amendment to the

Company’s articles of association and the Company’s by laws, for etc.

1.2 The Company recognizes the importance of shareholders’ rights by facilitating

shareholders more than the prescribed laws i.e. provide current important information via the

Company’s website, provide Management Discussion and Analysis (MD&A) on a quarterly basis

and Newsletter semiannually for etc.

1.3 The shareholding structure of the Company comprises of numerous minority

shareholders to balance with the majority shareholders, not contributing to any person or group

to control vote or control of the Company, while enhancing the good corporate governance to

shareholders. Currently, the Company has free float more than 40 percent.

2. The Shareholders’ Meeting 2.1 The Company held the Shareholders’ Meeting once a year within 4 months after

the end of the accounting period. In 2010, the meeting was held on April 19, 2010, where

relevant directors especially Chairman of the Board of Directors, Chairman of various committees,

Managing Director, management, external auditor, and legal advisor attended the meeting to

respond to questions.

2.2 The Company has provided legal advisor responsible for checking registration

documents and counting of votes in the shareholders’ meeting.

3. Delivering the Meeting Invitation Letter 3.1 The Company has sent the meeting invitation letter to shareholders 14 days in

advance and posted such information, which is the same information as sent to shareholders, in

the Company’s web site 30 days before the meeting date to facilitate shareholders to have time in

considering such information in advance. The Company has also advertised in daily newspaper 3

days consecutively and 3 days in advance about the shareholders’ meeting.

3.2 The meeting invitation letter has sufficient and complete information, regarding date,

time, place, agendas, enclosures of each agenda, purpose and reason, the directors’ opinion,

articles of association relating to the meeting, map of meeting place, documents or evidences

required to be presented on the meeting date, and meeting attendance procedure. The Company

has also provided meeting invitation letter in English to facilitate foreign shareholders.

3.3 The Company recognizes the importance of shareholders’ rights, enhances rights

using and does not infringe or curtail rights. In the shareholders’ meeting, various important

issues, covering the issues as prescribed by Laws, the Regulations of the SET and the articles of

association of the Company have been proposed for the approval of shareholders.


49

3.4 Important agendas in the shareholders’ meeting are

- Appointing Directors: The Company opens chance to shareholders to appoint

director by person while providing information on nominating criteria and method, details

of director background, working experience, number of companies served, types of

director that is proposed to be appointed, service years and meeting attendance in

case of proposing previous director, which is screened by the Nominating Committee.

- Director Remuneration: The Company provides details of proposed remuneration

payment that align with the director remuneration policy and condition, which is

screened by the Remuneration Committee.

- Appointing External Auditors: The Company provides details of external auditor’s

name and company, experience and competence, independency, audit fee, service

years for the Company (in case of proposing existing external auditors), reason in

changing external auditors (in case of proposing new external auditors), consideration

method of appropriateness of audit fee, which is screened by the Audit Committee.

- Allocating Profit and Dividend Payment: The Company provides details of profit

allocation and reserve fund, dividend amount that align with the Company’ s dividend

policy, and book register date for right of receiving dividend, which is screened by the

Remuneration Committee.

4. Facilitating Shareholders 4.1 The Company allows shareholders to send questions related to the agenda to the

Board of Directors in advance via Investor Relations Section.

4.2 In the shareholders’ meeting, the Company facilitates all shareholders in a fair

manner by arranging officers to taking care of them.

4.3 The Company allows registration of shareholders at least 1 hour before the meeting,

does not curtail rights of shareholders who came late, and facilitates shareholders to use their

meeting rights.

4.4 The Company use a barcode system detailing each shareholder in the registration

form. This is to facilitate the registration for time saving and accuracy.

5. Conduct of the Shareholders’ Meeting

5.1 Before the meeting, Chairman shall introduce the directors, Chairman of various

committees, management, external auditor, and legal advisor, as well as informs the rules in the

meeting and the voting procedures. The Company also asks shareholders volunteers together

with legal advisor to witness ballot count for transparency.

5.2 The Company provides enough time for the meeting, encourages equal opportunities

for shareholders to express their opinions and raise any questions in the meeting, where Chairman,

directors, and management address and answer all questions clearly and precisely.

5.3 The Company conducts the shareholders’ meeting in sequence of agendas as

informed in the meeting invitation letter. There would be no additional material information given in

the shareholders’ meeting instantly and no additional agenda in the shareholders’ meeting.

5.4 The Company provides voting cards for every agenda to make it transparency if

there is any argument in the future and in director appointing agenda, the Company opens chance

to shareholders to appoint director by person.


50

6. After the Shareholders’ Meeting The minutes of meeting are correct, complete and can be verified by shareholders. The

minutes covers the name and position of directors who attend or absent in the meeting, voting

method, shareholders’ opinions, the director’s clarification and clear resolution, classifying into

agree, disagree or abstain votes. The minutes is sent to the SET within 14 days after each meeting

as well as posted, together with the web cast recording the meeting proceeding, in the Company’s

website.

Equitable Treatment To Shareholders The Company recognizes the importance of rights and equitable treatment of shareholders

through the following actions.

1. Proposing Additional Meeting Agenda and Nominating Director The Company provides channel for shareholders to propose in advance additional

meeting agenda and director nominee, by having clear rules, which is disclosed via the SET and

the Company’s website. One or several shareholders, holding minimum share in the amount of

0.05 percent can propose meeting agenda and director nominee for 3 months, during October 15

– January 15 of each year. This proportion facilitates the shareholders more than that specified by

the law, which specifies that one or several shareholders, holding minimum share in the amount

of 5 percent can propose meeting agenda.

2. Appointing Proxies In case that the shareholders cannot attend the meeting, the Company provides the proxy

document, so that the shareholders can make the proxy vote to other persons, independent

director or Managing Director. The Company provides the proxy in the format that the shareholders

can specify the voting direction (Form B.), and also clearly indicates the evidence for proxy.

3. Preventive Measures for Misuse of Inside Information 3.1 The Company protects internal information and has procedures to prevent the use

of inside information for abusive self-dealing such as insider trading or related party transactions.

The Company has prescribed about confidential information in Staff Policies and Procedures

Manual and in Code of Conduct and has penalties for employees who violate such rules. Moreover,

the Company violates the directors, management and employees to trade the Company’s shares

7 days prior to the disclosure date of quarterly financial results.

As for the trading of Company’s shares by the Board of Directors and the management,

the Company has notified the Board of Directors and the management to report changes in any

shareholding status to the SEC, as specified in Section 59 of Securities and Exchange Act B.E.

2535. The shareholding agenda of the Board of Directors and the management is also included

in each Board of Directors’ Meeting.

In addition, for the trading of Company’s shares by the employees who are close to the

Company’s information, the Company has set the procedures that they shall report changes

in shareholding within 3 working days and their shareholding agenda shall be report to the

management meeting monthly.

Last year, there was no misuse of inside information.


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3.2 The Company’s directors and management shall disclose the interests of themselves

and their related parties to the Company. Such disclosure complies with the business of the

Company, related law and regulations. Also, the directors and management have to report the

changing in their interests every time when it occurs. The Company Secretary is responsible in

gathering such information.

3.3 The Board of Directors has established procedure to prohibit the directors or

management who may have conflicts of interests to involve in the consideration process. Before

the Board of Directors’ meeting begins, Chairman shall inform that in case of the particular director

who has interests in certain issues, he shall inform to the meeting and not be allowed to vote in

approving such agenda.

Roles Of Stakeholders1. Treatment of Stakeholders The Company has written procedures in its Corporate Governance Policy and Code of

Conduct to treat with each group of stakeholder i.e. shareholders, customers, trade partners,

creditors, competitors, employees, social and environment, which are disclosed in the Company’s

website. The Company has done through the following actions.

1.1 Shareholders: The Company is constantly responsible to shareholders, adheres to

loyalty and fairness, aims to achieve business growth, as well as to create appropriate return to

shareholders, discloses information to shareholders equitably, constantly and completely.

1.2 Customers:

made with customers, treats every customer equally and fairly, commits to satisfaction

and confidence to customers in order to get quality service.

on time, with highest safety, which receives the certification ISO 9001 and OHSAS

18001.

Indicators (KPIs) of the Company.

activities in 2010 are such as meeting with customers in each festival, designating

service signature, for etc.

1.3 Trade partners: The Company complies with all agreements made with trade

partners, treats every trading partner equally and fairly, bases on the fair return for both parties,

not asks for, receives, and gives benefit that dishonest to trade partners. In 2010, the Company

sets JV Core Principle Policy as a tool to prevent the disclosure of sensitive information.

1.4 Creditors: The Company complies with all agreements made with creditors,

provides complete financial information, not asks for, receives, and gives benefit that dishonest to

creditors.

1.5 Competitors: The Company conducts within the framework of good competition,


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does not acquire the confidential information of competitors in dishonest or inappropriate way,

and not ruin the reputation of competitors by accusation without truth information.

1.6 Employees: All employee are important part of business, therefore the Company

realizes the importance of developing the employees, provides reasonable compensation and

fringe benefits to the employee as well as supports the employees’ participation as follows:

life insurance, accident insurance and health insurance.

value, safety, quality system, fundamental knowledge, as well as giving them on the job

training.

Competency Model as the standard in personnel training plans, such as Competency

and Potential Assessment, Training Roadmap, Individual Development Plan, Career

Development Plan, Succession Plan, for etc.

activities in 2010 are such as happy hours activity, dissemination of the Compnay’s

information through social networks: facebook, for etc.

used for personal gain.

educate and train them about environment regularly.

1.7 Social and Environment:

providing Social Responsibility Policy, and conducts activities that support CSR

and community development such as Soldier Moral Improvement Program (Mor-

Ouam-Bam-Rung-Kwan-Ta-Harn), Fire Drill Training, National Children Day Activities,

Scholarship Programs, Teachers Volunteering Project, Royal Kathin, Annual Kathin

Offering Ceremonies and Buddhist Monk Scholarship Project, Mangrove Forest Field

Trips, Environmental Project with Effective Microorganisms, for etc, which is disclosed

in the Company’s website.

and Social Responsibility and Work Force Policy.

Company has set up Global Warming Mitigation Committee, establishing plan,

objectives, and campaign on renewable energy, for etc. Moreover, the Company was

chosen from Thailand Greenhouse Gas Management Organization (TGO) and National

Metal and Materials Technology Center (MTEC) as a pilot organization in “Organizational

Carbon Footprint” Project.


53


more explicit as the Board of Directors realizes that it is serious issue for economy and

social. In addition, the Company is in the process of establishing the Policy of not violate

human rights and not violate any intellectual property or copyright.

2. Stakeholders’ Participation 2.1 The Company provides stakeholders with opportunities to participate in various

activities such as encouraging shareholders to express their opinions, give recommendation,

propose meeting agenda and director nominee in the shareholders’ meeting, inviting customers and

trade partners to participate in the Company’s activities e.g. Jet Fuel Talk activity, 9 oil companies

bowling tradition for etc. Furthermore, the Company has supported the management, employees of

the Company and subsidiaries, teachers, instructors, students, and general public to participate in

CSR activities such as “Love our King” Project to sign blessing to His Majesty the King while staying

at Siriraj Hospital, which is held every monthly, Soldier Moral Improvement Program (Mor-Ouam-

Bam-Rung-Kwan-Ta-Harn), which is held every 2 months, for etc.

2.2 The Company provides channel for stakeholders to send recommendation, opinion

or question to the Company via Investor Relations Section, and also discloses the sufficient

information to enhance the efficiency of stakeholders’ participation.

3. Filing of Complaints 3.1 The Company provides channel for filing complaints and reporting about the violation

in code of conduct of the directors, management and employees, and has investigation process

after acknowledging such matters.

3.2 Stakeholders can contact or complain via Investor Relations Section, which is under

the responsibility of the Company Secretary and Managing Director Department. The question

and recommendation shall be passed to the related department and in case that there is any

important issue; the Company Secretary shall propose it to the Board of Directors.

Information Disclosures And Transparency The Company realizes the importance of disclosing both financial and non-financial

information correctly, completely, in a timely manner, transparency via accessible, equal, and reliable

channel as follows:

1.1 The Company discloses the information in accordance with the Regulations of the

SEC and the SET, under the responsibility of Corporate Affairs Section. In the year 2010, the

Company has no history of late submission of financial statements or has been ordered to amend

the financial statements.

1.2 The material information consists of financial and non-financial information. The

financial information, particularly the financial statements, was reviewed/audited by the external

auditor, was unconditionally accepted, and shown that the Statements of financial position,

operation, change in shareholders’ equity, and cash flow were accurate, in line with the generally

accepted accounting principles, and was assented by the Audit Committee/the Board of Directors

before disclosing to shareholders.

54

The non-financial information that the Company constantly discloses is Management

Discussion and Analysis (MD&A) on a quarterly basis and Newsletter semiannually.

1.3 To perform responsibilities in providing the financial reports that they are accurate,

complete and transparency enough to protect the Company’s assets against fraud, or

abnormalities, and in line with the generally accepted accounting standards and using appropriate

and consistent accounting policy, and with reasonable and circumspect considering to enhance

the stakeholders’ confidence to the financial reports, the Board of Directors has appointed the

Audit Committee to assume key duties and responsibilities of reviewing the Company’s financial

statements and operation reports to ensure its correctness and completeness. In addition,

the Board of Directors provides Report of the Board of Directors’ Responsibilities for Financial

Statements, signed by Chairman and Managing Director that covers important topics of Code of

Best Practices for Directors of Listed Companies as prescribed by the SET together with Report

of Auditor in annual report.

1.4 Investors Relations Section (Tel. 02 834 8914, e-mail: [email protected]) has

been established to represent the Company in communication with investors, shareholders, stock

analysts and other related organizations. In the year 2010, the main activities were as follows:

1.5 The Company provides channel to access to the Company’s information via

www.bafsthai.com in Thai and English. The information includes vision, mission, nature of

business of the Company and subsidiaries, shareholding structure, organization chart, the Board

of Directors, the Management, Investor Relations, various policies e.g. Corporate Governance

Policy, Risk Management Policy, Social Responsibility Policy and the implementation, Code of

Conduct, financial information, Annual Report (Form 56-2), Annual Registration Statement (Form

56-1), notification to the SET, the invitation letter and minutes of shareholders’ meeting, risk

management for etc., where the information is consistently updated.

1.6 The Company has disclosed information in Annual Report such as financial and

operation information, nature of business and competition, risk factors, various policies e.g.

Corporate Governance Policy, Social Responsibility Policy and the implementation, Code of

Conduct, background and shareholding of the directors and management, type of director,

duties of the Board of Directors and various committees in previous year e.g. number of meeting,

number of attendance of each director, training record, and also disclosed the remuneration policy,

type and detail for directors and top management as well as the remuneration received from the

Company and its subsidiaries for etc.


2010 Activities Times

Analyst Meeting 6

Credit Rating Review 1

E-mail / Phone Call 1-2 times/day

Participate activities of the SET and other parties to meet investors 2

Arrange institutional and retail investors to meet the management and visit the Company 4

55

Responsibilities Of The Board Of Directors The Board of Directors plays an important role in corporate governance for the best interest

of the Company, and is accountable to shareholders and independent of the management.

5.1 Composition of the Board of Directors5.1.1 The Board of Directors considers the appropriateness of board structure, and sets

the structure to consist of at least 11 directors, but not more than 15 directors. At present, the

Board of Directors consists of 15 directors as follows:

- Executive Director 1 person

- Non-Executive Director 14 persons,

comprises of 9 outside directors 9 persons and 5 independent directors, one third of the total

directors.

5.1.2 The Board of Directors has specified the qualification of director for example

shall not be more than 75 years old, has various knowledge and capabilities that is beneficial

to the Company’s business for etc., and has specified the qualification of independent director

more strictly than Regulations of the SEC regarding shareholding to enhance the Company’s

independent directors to have real independency.

5.1.3 Chairman of the Board of Directors is independent director, not the same person

as Managing Director, and has no relationship with the management. As such it is better enhance

the balance of power within the Board of Directors.

5.1.4 The Company has clearly separated and defined in written the power and authorities

among the Board of Directors and the management.

5.1.5 The directorship term of the Board of Directors has been definitely prescribed in

articles of association of the Company that one third of the directors who has longest term, has

to terminate its directorship.

5.1.6 Referring to the Principles of Good Corporate Governance which suggests that

each director should serve not more than 5 boards of listed firms; however, Mr.Aswin Kongsiri,

the Company’s director, serves more than 5 boards of listed firms. Nevertheless, from his past

performance, he has attended the Board of Directors’ meetings and other committees every

time, and also used his knowledge, competent, and dedicated time to perform the responsibility

competently.

5.1.7 The Company has Executive Assistant of Legal and Securities to serve as Company

Secretary to advise about law and regulations that the directors shall know, take care of the

directors’ activities, and coordinate in informing related persons to comply with the Board of

Directors’ resolutions.

5.1.8 The Company has established the system to monitor the operation of its subsidiaries,

the direction for its subsidiaries, the direction to the person that the Company assigned to be the

director or management and the reporting to the Board of Directors to ensure that the Company

could monitor the operation of its subsidiaries efficiently.


56

5.2 Committees The Board of Directors has set up various committees to help the Board in studying various

issues in details and screen workload to improve work efficiency of the Board. In addition, the

Chairman of each committee is independent. And to ensure that the performance of every

committee has real independency, the Chairman of the Board of Directors is not the chairman

and member in such various committees. The Company has specified compositions and

responsibilities of various committees have been clearly prescribed as follows:

5.2.1 Audit Committee

The Audit Committee consists of 3 independent directors, who qualified according to the

Regulations of the SEC, with a directorship term of 3 years. In 2010, the Committee held 5

meetings, with the attendance of each director as follows:

with Mrs. Mayuree Nalinwong, Executive Assistant of Internal Audit serves as the secretary of the

Committee.

Mr. Visut Montriwat and Mr. Sumon Surathin are Audit Committee directors who have

knowledge and experience in reviewing the Company’s financial statements, as per details in the

topic of “the Board of Directors”.

The Audit Committee has always reported the resolutions to the Board of Directors and had

fulfilled the responsibility of the Audit Committee Charter as follows:

“Reviewing the correction and sufficiency of the financial reporting, reviewing the correction,

completeness and reliability of the operational information reporting, reviewing the internal audit and

control system to ensure its suitability and effectiveness, considering the independency of Internal

Audit, appointment, transfer, and dismissal of chief of Internal Audit, reviewing compliance with the

Securities and Exchange Acts, Regulations of the SET, relevant laws, and given commitments with

outside parties, reviewing the adequacy for the safeguarding of assets, reviewing risk management

and internal control systems independently, considering and recommending the appointment and

the remuneration of the external auditor, attending a non-management meeting with an external

auditor at least once a year, reviewing the Connected Transactions to ensure that the compliance

with the laws and Regulations of the SET, revising the Charter of the Audit Committee at least once

a year, performing the Audit Committee’s assessment and self-assessment annually, considering

approving the audit plan, budget and man-power of Internal Audit that approved from Managing

Director, preparing and disclosing the Audit Committee’s report in the Company’s annual report,

having the power to employ independent professional advisors, inviting the management and

concerned persons, and performing any other functions assigned by the Board of Directors.”


Meeting Attendance/

Total Meeting (times)

1. Mr. Pachara Yutidhammadamrong Chairman 5/5

2. Mr. Visut Montriwat Director 5/5

3. Mr. Sumon Surathin Director 5/5

57


In addition, the Audit Committee gives opinion in performing its duties as specified in the Audit

Committee Charter for example opinion in reviewing the financial statements, risk management,

and internal control, for etc. The Audit Committee has self assessment and the overall assessment

to evaluate the effectiveness of its performance annually, which is an important mechanism in

good corporate governance. The Audit Committee has considered the assessment result together

and seeks for the improvement. The assessment result in the year 2010 reveals that the Audit

Committee performs its duties completely as specified in the Audit Committee Charter and has

Good-to-Very Good” effectiveness in performing the roles of the Audit Committee.

5.2.2 Remuneration Committee

The Remuneration Committee consists of at least 3 but not more than 4 directors, with a

directorship term of 2 years, where the chairman is independent director and Managing Director

is the director ex officio. In 2010, the Committee held 3 meetings, with the attendance of each

director as follows:

with Mr. Chattaya Bhandhaya, Senior Finance and Account Manager serves as the secretary of

the Committee.

The Remuneration Committee has fulfilled the responsibility that was approved by the Board

of Directors as follows:

“Considering remuneration for the Board of Directors, the Audit Committee, the Nominating

Committee, the Fuelling Operation Committee, Managing Director, Committees and Other

Sub-Committees for further proposal to the Board of Directors and/or the shareholders for

consideration”

In addition, the Remuneration Committee considers the interim and annual dividend payment

for shareholders, proposing to the Board of Directors or the shareholder’s meeting. Furthermore,

the Remuneration Committee gives opinion in performing its duties as specified in the prescribed

responsibility for example opinion in directors’ remuneration and dividend paid to shareholders,

for etc. The Remuneration Committee has the overall assessment to evaluate the effectiveness of

its performance annually, The assessment result in the year 2010 reveals that the Remuneration

Committee performs its duties in Very Good-to-Excellent Level.

5.2.3 Nominating Committee

The Nominating Committee consists of at least 3 directors, with a directorship term of 2

years, where the chairman is independent director. In 2010, the Committee held 4 meetings, with

the attendance of each director as follows:

Meeting Attendance/


1. Mr. Visut Montriwat Chairman 3/3

2. Mr. Sumon Surathin Director 3/3

3. M.R. Supadis Diskul Director 3/3

58

with Dr. Pugdee Manaves, Deputy Managing Director in Administration serves as the

secretary of the Committee.

The Nominating Committee has fulfilled the responsibility that was approved by the Board

of Directors as follows:

“Reviewing the appropriateness in respect of number and composition of the Board of

Directors, preparing the specifications and conditions for Managing Director’s contract, and also

nominating when there is a vacancy in the position of director and Managing Director for further

proposal to the Board of Directors and/or the shareholders for consideration”

In addition, the Nominating Committee gives opinion in performing its duties as specified

in the prescribed responsibility for example opinion in nominating directors. The Nominating

Committee has the overall assessment to evaluate the effectiveness of its performance annually,

The assessment result in the year 2010 reveals that the Nominating Committee performs its

duties in Very Good-to-Excellent Level.

5.2.4 Risk Management Committee

The Risk Management Committee consists of 4 directors, with a directorship term of 3

years, where the chairman is independent director. In 2010, the Committee held 4 meetings, with

the attendance of each director as follows:

The Risk Management Committee has constantly reported the resolutions to the Board

of Directors and had fulfilled the responsibility of the Risk Management Committee Charter as

follows:

“Supporting the Board of Directors in setting Risk Management Policy and acceptable risk

level, establishing risk management profile to align with the Risk Management Policy, following the

compliance, reviewing the effectiveness of risk management profile, presenting the Company’s

overall risks, measures and results to the Board of Directors as well as considering and reviewing

Risk Management Report and performing to ensure that the Company’s risk management is

adequate and appropriate, can be managed in acceptable level and is performed continually.”


Meeting Attendance/


1. Mr. Aswin Kongsiri Chairman 4/4

2. Mr. Navee Lertphanichkul Director 4/4


Meeting Attendance/


1. Mr. Aswin Kongsiri Chairman 4/4

2. Mr. Vinai Chamlongrasdr Director 4/4


4. Mr. Ditsapong Prithaveepong Director and Secretary 4/4

59


In addition, in every meeting the Risk Management Committee has considered Key Risk

Indicators e.g. EBITDA, cash flow, expenditure control, market share etc., in order to ensure the

performance of the Company shall meet its objective. In case that the performance is likely to

be lower than targeted, the Risk management Committee shall direct the management to have

controlling measures such as cost reduction, asset management to push the performance in the

specified target, thus the dividend can be paid to the shareholders in line with the dividend policy.

The Risk Management Committee has the overall assessment to evaluate the effectiveness of its

performance annually. The assessment result in the year 2010 reveals that the Risk Management

Committee performs its duties in Very Good-to-Excellent Level.

5.3 Roles, Duties and Responsibilities of the Board of Directors 5.3.1 The Board of Directors is responsible for overseeing the Company’s operations to

comply with laws, objectives and articles of association of the Company, as well as shareholders’

resolutions, with honesty while preserving the Company’s interests. In 2010, the Company has no

history of any incompliance matter.

5.3.2 The Board of Directors considers and approves the important matter regarding the

Company’s operation e.g. vision, mission, strategies, financial goal, budget, Committee Charter

for etc., supervises the management’ performance to comply with the specified policy and plans,

efficiently and effectively, and also provides systems to monitor, improve and evaluate operation

results comparing with the work plans and approved budget. This is to achieve maximum values

to the Company.

5.3.3 The Company clearly segregates the structures, roles, duties and responsibilities of

the Board of directors and the management. Power of attorney is issued to specify the scope and

level of authority for the management engaging in certain business transactions on behalf of the

Company. Moreover, the Company regularly communicates the roles, duties and responsibilities

to such related persons.

5.3.4 The Company has provided Corporate Governance Policy and Code of Conduct

to the directors, management and employees to use as a guideline in performing their duties to

accomplish the mission of the Company, which is communicated throughout the Company.

5.3.5 Code of Conduct covers ethics for business conduct, practices towards various

stakeholders such as shareholders, employees, customers, trade partners, creditors, competitors,

social and environment, ethics for the Directors and for the employees such as conflict of interests,

confidential information, provision, inside information for etc., monitoring procedures and penalties.

The Company has encourage the compliance of Code of Conduct, and also has the system to

monitor i.e. conducting on line self assessment annually.

5.3.6 The Company has continually arranged training course about good corporate

governance and Code of Conduct annually, and has also educated the management and

employees via monthly internal journal since the year 2003.

60


5.3.7 The Company has clear procedures to oversee transactions that may have

conflict of interests and set up the regulation regarding connected transactions that in line with

the Regulations of the SEC. In case that the transaction must be approved by the Board of

Directors and/or the shareholder’s meeting, it shall be screened by the Audit Committee. The

Audit Committee would give opinion in entering such transaction. If the Board of Directors has

different opinion with the Audit Committee, the Company shall also disclose the different opinion.

In addition, in case that particular director has interests in certain issues, he shall not be allowed

to vote in such agenda.

5.3.8 The information, necessities and rationale about transactions that may have conflict

of interests in the year 2010 are disclosed by complying with Regulations of the SEC as per details

in the topic of “Connected Transactions”.

5.3.9 The Company has internal control system and system to monitor the operation of

its subsidiaries, appropriately and effectively. In addition, the Company has internal control system

and risk management regarding risk management framework, based on the International Standard

of COSO-ERM (The Committee of Sponsoring Organizations of the Treadway Commission-

Enterprise Risk Management), which relates to the operations and management procedures as

per details in the topic of “Summary of the Opinion concerning Adequacy and Appropriateness of

the Internal Control System for the Year 2010”.

5.3.10 The Board of Directors has specified the risk management policy by emphasizing

the usage of risk management throughout the Company, to enhance the Company to achieve

the strategic objectives. Risk Management and Strategic Plan Section has responsibility to

monitor the risk management process and evaluate the achievement of strategic annually, set up

early warning indicators to prompt the Company in finding measures to amend and improve its

performance before the crisis arises, as well as report to Risk Management Committee, which has

been reviewed by Audit Committee and reported to the Board of Directors quarterly.

5.3.11 To evaluate the efficiency of the Company’s internal control system, the Company has

Internal Audit division as a separate unit, which is responsible to audit, evaluate, recommend and

support the effectiveness improvement in risk management, control and corporate governance in

accordance with International Standard for the Professional Process of Internal Auditing, reports

the audit results to the Audit Committee and administration matter to Managing Director. The

Board of Directors and the Audit Committee has reviewed the Assessment Form of Adequacy of

Internal Control System annually.

5.3.12 For the assessment of risk management effectiveness, Internal Audit Division

has reviewed the indicators or risk factors that may affect the objective and risk management

process, to ensure that the risk indication and assessment are correct and appropriate, the risk

management is in a systematic manner, the risk reporting to related persons is complete and in

timely manner, and also continually monitored the risk review every quarter.

61


5.4 The Board of Directors’ Meetings 5.4.1 The Company has set the Board of Directors’ meeting schedule in advance and

informs each director for acknowledgement so that the director can allocate the time and attend

the meetings. The Board of Directors shall held at least 5 regular meetings in a year, which is

suitable with the responsibility of the directors and the Company’s business nature, and may held

a special meeting if necessary. The Chairman of the Board of Directors and Managing Director

shall consider the agenda together and each director can independently propose matter for

agenda.

5.4.2 The Company has clear agendas for the meeting and send meeting invitation letter

together with meeting document to the directors at least 7 days prior to the meeting date. As such

the directors would have time to study the document before attending the meeting. In 2010, the

Board of Directors held 5 regular meetings. The attendance of each director is as follows:

Remarks:1/ Assume director since Dec 16, 2010. Therefore, the number of total meeting is 1 time.

2/ Assume director since May 13, 2010. Therefore, the number of total meeting is 4 times.

3/ Resigned from director since February 16, 2010. Therefore, there is no number of meetings.

4/ Resigned from director since Dec 1, 2010. Therefore, the number of total meeting is 4 times.

Names Meeting Attendance/ Total Meeting (# of times)

1. Mr. Palakorn Suwanrath 5/5

2. M.R. Supadis Diskul 5/5

3. Flight Lieutenant Montree Jumrieng 4/5

4. Mr. Chokchai Panyayong 5/5

5. SQN.LDR.Asdavut Watanangura1/ 0/1

6. Mr. Serirat Prasutanond 2/5

7. Mr. Ath Hemvijitraphan 5/5

8. Mr. Tanachai Vienravee 5/5

9. Mr. Navee Lertphanichkul 4/5

10. Mr. Vinai Chamlongrasdr 5/5

11. Mr. Nuttachat Charuchinda 2/ 3/4

12. Mr. Aswin Kongsiri 5/5

13. Mr.Pachara Yutidhammadamrong 5/5

14. Mr.Visut Montriwat 5/5

15. Mr.Sumon Surathin 5/5

* Mr. Tevin Vongvanich 3/ 0/0

* Flying Officer Norahuch Ployyai 4/ 2/4

62

5.4.3 In the Board of Directors’ meetings, the Chairman allocates sufficient time for the

management to present adequate issues and for the directors to broadly discuss important matters

with care. The Chairman promotes the directors to have prudent consideration. In addition, the

Board of Directors supports Managing Director to invite top management to attend the meeting

to provide explanation and additional information as they involves in the proposed agenda directly.

The directors can also request for additional information from the Company Secretary.

5.4.4 The Company Secretary has prepared the minutes of meeting, correctly and

completely, which covers details such as name of directors who attended or absent in the meeting,

important content, discussion issues, opinions of each director and resolutions. The minutes can

be verified by shareholders according to the prescribed law. The minutes are kept safely and

carefully.

5.5 The Board of Directors’ Self Assessment

Even though the Board of Directors has completely performed its responsibility, it realizes

in continually improving the effectiveness of its performance. Therefore, it has approved Form of

the director’s Self Assessment and the Board of Directors’ Assessment. The directors would have

done such assessments annually. The Board of Directors has considered the assessment result

together and seeks for the improvement. The overall assessment result in the year 2010 reveals

that the Board of Directors performed duties in Good-to-Best level.

Furthermore, the Board of Directors has assessed the efficiency of the meeting every time

and the result would be reported in the next meeting. The overall assessment result reveals

“Good-to-Best”.

5.6 Remuneration

Remuneration for the Board of Directors: the Remuneration Committee has responsibility

to consider remuneration for the Board of Directors. The remuneration is clearly defined in a

transparent manner and is approved by the shareholders. The remuneration is comparable to

the industry and is appealing enough to attract and retain quality directors. The directors who are

assigned additional responsibilities are paid appropriately more.

Remuneration for Managing Director: the remuneration of Managing Directors is screened

by Remuneration Committee and approved by the Board of Directors, in accordance with the

employment contract and uses Key Performance Indicators (KPIs) that covers the performances

of the Company as well as the Company’s strategies, comprising of aspects in finance, customers

and stakeholders, internal process, learning and development.


63

Remuneration for the Management: the remuneration is determined in accordance with the

principles and policy set by the Board of Directors, which corresponds to the performances of the

Company as well as that of each management by using Key Performance Indicators (KPIs)

The Company also discloses the remuneration of the Board of Directors and the management

as per details in the topic of “Shareholder and Management Structure - Remuneration for the

Board of Directors and Management.”

5.7 Development for the Directors and Management

5.7.1 The Company supports and facilitates training and educating the Boards of

Directors, the management and all employees thus continually improving the performance.

5.7.2 The Board of Directors has establish “CG Policy” manual to distribute to the

directors, which the policy has been frequently updated. This is to acknowledge the directors

about the important practices of each committee as well as important policies and information

of the Company, and also to enhance the directors to perform the role of corporate governance

more effectively.

5.7.3 The Company arranges orientation for new director, whereby Managing Director,

relevant management, company secretary shall present the information regarding shareholding

structure, organization chart, nature of business, performance of the Company, subsidiaries, the

Board of Directors’ meeting and other relevant information.

5.7.4 The Company supports the directors to attend the director courses arranged

by Thai Institute of Directors (IOD) e.g. DCP, DAP, The Role of Chairman Program, Role of

the Compensation Committee, Audit Committee Program, Finance for Non-Finance Director,

Successful Formulation and Execution of Strategy, Monitoring the System of Internal Control and

Risk Management and Monitoring the Internal Audit Function etc. The Company also enhances

knowledge of the management and related persons in Corporate Governance of the Company

e.g. Company Secretary and Internal Audit for etc.

5.7.5 The Company has Succession Plan for important positions, by specifying in

the Company’s strategic plan to be the benefit for the management’s work succession and

development, and to work in place of Managing Director and the management when they can not

perform their duties.

From the commitment to Good Corporate Governance, in the year 2010, the Company

received Excellent Corporate Governance Scoring from Thai Institute of Directors (IOD) as same

as last year. Moreover, the Company received honorable awards such as National Award of the

Outstanding for Enterprise of Safety Operations, Occupational Health and Working Environment

in 2010 in 2 areas i.e. Don Mueang Depot and Suvarnbhumi Intoplane.


64

Management Discussion and Analysis

for the Operating Results in 2010

1. Report and Analysis of the Operating Results In 2010, volume of fuel serviced was increased by 4.9% (y-o-y) to 4,317 million liters

from last year at 4,117 million litres where as the number of flights services was increased by 6.6%

(y-o-y) to 150,639 from 141,336. Besides, volume increased, the major factors influent Company’s

services income and net profit was Storage fee discounting period are expired since Mar. 31,

2010 and this project was succeed on plan. However, average market share of refuelling business

would slightly dropped to 88% but still higher than our target market share at 85%. Company’s

operation can summarized are as follows:

1.1 Revenue

For 2010, total revenues of BAFS and its subsidiaries amounted to Baht 2,219.9 million

which increased of Baht 184.9 million or 9.1%. The Company revenue was comprised of

1.1.1 Services Income

Services income of BAFS and its subsidiaries amounted to Baht 2,172.3 million, an

increase of Baht 175.4 million or 8.8% when compared with that of last year.

1.1.2 Other Income

1.1.2.1 Rental Income

The rental income was Baht 19.2 million, increasing by Baht 2.5 million or 15.0%

compared to that of the last year. And in this year, BAFS received new rental income item from the

receiving diesel pipeline system at the amount of Baht 2.0 million.

1.1.2.2 Other Income

Other income was Baht 28.4 million, increasing by Baht 7.0 million or 32.6% compared

to that of the last year. Major items were (1) loan repayment from Fuel Pipeline Transportation

Limited (FPT) which is the related company by Baht 17.7 million (2) interest income from short

term investment in T-Bill of Baht 12.7 million and (3) guarantee fee of BAFS subsidiaries’s liabilities

of Baht 6.8 million.

In 2010, BAFS and its subsidiaries have unrealized FX loss by Baht 0.4 million when

compared to unrealized FX loss of last year of Baht 0.6 million as result of Thai Baht appreciated

against US$ from 34.34 Bt./US$ in 2009 to 31.70 Bt./US$.

1.2 Expenses

1.2.1 Cost of Services

In 2010, Cost of services was Baht 930.4 million, increased by Baht 34.9 million or

3.9% compared to that of the last year which major items are (1) Airport concession fees of Baht

235.4 million, increased by Baht 7.4 million or 3.3% which conform with increased in volume (2)

maintenance expense at amount of Baht 64.5 million which increased by Baht 10.6 million (3)

insurance premium at amount of Baht 32.3 million which increased by Baht 5.6 million etc.

65



1.2.2 Administrative Expenses

Administrative expenses for 2010, was Baht 367.5 million, increasing by Baht 45.1

million or 14.0% when compared to that of the last year which mainly items are (1) management

benefit expenses of Baht 81.5 million which increased by Baht 8.2 million or 11.2% (2) damageable

expense in JP-One Assets Company Limited’s pipeline that was not yet compensated from

Insurance and relevant parties of Baht 18.2 million which we anticipated that will receive in 2011

and (3) Public Relations and Corporate social responsibility expense of Baht 8.1 million which

increased by Baht 2.9 million etc.

In 2010, Company have depreciation and amortization of Baht 357.1 million, decreased

by Baht 7.9 million or 2.2%, employees benefit expenses of Baht 410.0 million which increased

by Baht 39.6 million or 10.7% and the impairment loss from assets not used in operation of Baht

19.9 million which are land, design fee and underground pipeline for the main depot facilities

project at Chiangmai Airport.

1.2.3 Finance Costs

Finance Costs for 2010 was Baht 86.2 million which decreasing by Baht 20.8 million

or 19.5% when compared to that of the last year as decreasing in the principal of long term loan

which decreased by loan payment schedule. Mainly comprised of interest payment for long term

loan and interest payment for financial lease of BAFS at amounted of Baht 64.0 million. Besides

that of these items was TARCO’s and JP-One’s Finance Costs at Baht 22.2 million.

1.3 Operating Results

For 2010, Net profit of BAFS and its subsidiaries amounted to Baht 521.7 million, an

increased of Baht 58.7 million or 12.7% which is equivalent an earning per share of Baht 1.02

when compared with last year, as result of various factors as discussed above.

The Board of Directors’ Meeting No.1/2011 held on February 23, 2011 resolved to

pay dividend for 2010’s performance at the rate of Baht 0.54 per share which accounted to be

the total amount of Baht 275.4 million or accounted for payout ratio of 63.2% of net profit before

reserve of the company only. Interim dividend was paid at the rate of Baht 0.18 per share and the

rest of dividend would be paid at Baht 0.36 per share. The Company fixed the share registration

book closing date for the right to receive dividend on May 4, 2011 and fixed the dividend payment

date to be May 16, 2011.

2. Report and Analysis of Financial Status 2.1 Assets

As at December 31, 2010 the Company’s group had total assets in the amount of

Baht 6,684.9 million, decreased by Baht 158.7 million or 2.3% from December 31, 2009. The

important details are as follows:

66



2.1.1 Cash, Cash equivalent and short term investment of the Company’s group is Baht

936.3 million. The details of important sources and uses of cash and short term investment

are as follows:

- The Company’s group had cash flow from operations of Baht 1,139.0 million from

consolidated net profit before minority interest and adjusted with items such as depreciation

and amortization of Baht 357.1 million, amortization of right to use of land and concession

of subsidiary at Baht 28.1 million, impairment loss from asset at Baht 19.9 million and

unrealized loss from FX at Baht 0.4 million.

- Net Cash flow used in investment was Baht 20.4 million which was purchased in other

asset and equipment at amount of Baht 50.0 million, receiving loan from Fuel Pipeline

Transportation Limited (FPT) which is the related company by Baht 17.7 million and interest

received of Baht 12.7 million.

- Net Cash flow used in financing was Baht 951.7 million which was long term loan principal

payment and financial lease at the amount of Baht 602.6 million, interest payment was of

Baht 88.1 million and dividend payment for 2H/2009 and 1H/2010 of the company at the

amount of Baht 244.8 million respectively.

2.1.2 Property, leasehold improvement and equipment at December 31, 2010 was Baht

4,692.0 million decreased by Baht 373.7 million or 7.4% from December 31, 2009.

2.1.3 Concession of subsidiary was incurred from the acquisition of TARCO’s shares at the

price higher than its book value up to present this concession was Baht 658.9 million.

2.2 Liabilities

As at December 31, 2010, the Company’s group had total liabilities of Baht 3,122.5

million, decreased by Baht 448.4 million or 12.6% compared from December 31, 2009 and

resulted in debt to equity ratio improved to 0.88 : 1 time from 1.09 : 1 time. Liabilities comprised

of major items as follows:

2.2.1 Account payable of Baht 143.8 million which comprised of account payable –

relatedcompany’s group of Baht 125.9 million and others account payable of Baht 17.9 million.

2.2.2 Portion of long term loan which to be paid of Baht 479.9 million which are

comprised of long term loan which to be paid for BAFS of Baht 294.2 million, TARCO’s long term

loan which to be paid of Baht 161.7 million and JP-One’s long term loan which to be paid of Baht

24.0 million. Besides that the financial lease which to be paid in one year was Baht 5.4 million

which was belonging to BAFS Baht 2.4 million, TARCO’s Baht 2.0 million and JP-One’s Baht 1.0

million.

2.2.3 Other current liabilities of Baht 179.1 million which comprised of major items

such as accrued corporate income tax of Baht 83.1 million and others of current liabilities of Baht

96.0 million.

67



2.2.4 Long term loan from bank of Baht 2,021.4 million decreased by Baht 426.1

million or 17.4% when compared December 31, 2009 which BAFS and subsidiaries were

extended in loan agreement that details are

- The first portion of Baht 254.0 million was long term loan from KBANK due at Aug.

31, 2018 which was semi-annual, principal repayment : Baht 22.2 million/period,

the rest principal will be paid in the last, at rate of THBFIX 6-month + 1.15% and

Company entered into an interest rate swap agreement to swap the above interest

rate to a fixed rate at 5.8% and effective from February 2011 onward.

- The second portion of Baht 1,172.4 million was long term loan from BBL due at

Dec. 31, 2018 which was quarterly, principal repayment: Baht 41.9 million/period,

the rest principal will be paid in the last, at rate of 3-month fixed deposit rate +1.5%

and effective from March 2011 onward.

- The third portion of Baht 195.0 million was long term loan from NBANK due at Nov.

31, 2018 which was quarterly, principal repayment : Baht 6.25 million/period and

the rest principal will be paid in the last. In addition, interest rate of this loan was

reduced from MLR-2.0% to MLR-2.5% for the first 3 years and then back away to

MLR-2.0% in the 4th year.

- The forth portion was TARCO’s loan of Baht 376.0 million from BBL which comprised

of (1) USD loan that TARCO already swap to Thai Baht at Baht 54.4 million, due at

Dec. 31, 2012 which was quarterly, principal repayment : Baht 13.6 million/period

and the rest principal will be paid in the last, at fixed rate 6.56% (2) THB baht loan of

233.3 million, due at Dec. 31, 2014 which was quarterly, principal repayment : Baht

19.45 million/period and the rest principal will be paid in the last, at rate of 3-month

fixed deposit rate +1.75% and (3) THB baht loan of 88.3 million, due at Dec. 31,

2014 which was quarterly, principal repayment : Baht 7.37 million/period and the

rest principal will be paid in the last, at rate of MLR-2.25%.

- The remaining portion was JP-One loan at amount of Baht 24.0 million from BBL,

due at Dec. 31, 2012 which was monthly principal repayment: Baht 2.0 million/

period at rate of MLR-1.0%.

2.3 Shareholders’ Equity

As at December 31, 2010, shareholders’ equity of the Company’s group was Baht

3,562.3 million, increasing from December 31, 2009 by Baht 289.7 million or 8.9%.

3. Major factors that may affect operating performance or financial status The Company’s group has contingent liability from providing a bank guarantee to

TARCO for outstanding amount from total long term loan of Baht 537.7 million (including portion

to be paid in one year).

Moreover, the Company has contingent liability from providing a bank guarantee to JP-

One for a proportion of 50.0% of outstanding amount from total long term loan since established

which up to present the amount is Baht 24.0 million (including portion to be paid in one year).

68

The Board of Directors is aware of the duties and responsibilities in ensuring that

the Company’s financial reports are accurate, complete and transparent enough to protect

the Company’s assets against fraud, and abnormalities, in line with the generally accepted

accounting principles, as well as using appropriate and consistent accounting policy. In addition,

the Board of Directors considers the reasonability and prudence in preparing the Company’s

financial reports. This is for the benefit of the shareholders and general investors who are entitled

to acknowledge the financial and operation information that is complete, accurate, on time and

reasonable.

To provide stakeholders with the confidence that the Company’s financial statements

is prepared in accordance with the above objectives, the Board of Directors has appointed

the Audit Committee, which consists of qualified independent directors as prescribed by

the Securities and Exchange Commission and performs duties as prescribed by the Stock

Exchange of Thailand, to assume key duties and responsibilities of reviewing the Company’s

financial statements and operation reports to ensure its correctness and adequacy, the internal

control and audit system, and the risk management to ensure its suitability and efficiency, the

compliance with the law on Securities and Exchange Commission, the regulations of the Stock

Exchange of Thailand, laws related to the Company’s business, and commitments, as well

as the compliance with the connected transaction regulation, considering and proposing the

appointment and the remuneration of the Company’s external auditors.

The Board of Directors agreed with the opinions of the Audit Committee that the

consolidated and separate financial statements ended 31 December 2010 and 2009, and the

operation information, change in shareholders’ equity, and cash flow in the same period of

the Company and Subsidiaries are accurate, in line with the generally accepted accounting

principles, disclosing correct and complete connected or conflict of interest transactions, and

having good internal control.

Mr. Palakorn Suwanrath M.R. Supadis Diskul

Chairman Managing Director

Report of the Board of Director Responsibilities for 2010 Financial

Statements

69

Auditor Of Report

To The Shareholders and Board of Directors of

Bangkok Aviation Fuel Services Public Company Limited

I have audited the consolidated balance sheets of Bangkok Aviation Fuel Services Public

Company Limited and subsidiaries as at December 31, 2010 and 2009, the related consolidated

statements of income, changes in shareholders’ equity and cash flows for the years then ended

and the balance sheet of Bangkok Aviation Fuel Services Public Company Limited as at December

31, 2010 and 2009, the related statements of income, changes in shareholders’ equity and cash

flows for the years then ended. These financial statements are the responsibility of the Company’s

management as to their correctness and 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 consolidated financial position of Bangkok Aviation Fuel Services Public Company

Limited and subsidiaries as at December 31, 2010 and 2009, the consolidated results of their

operations, the consolidated changes in their shareholders’ equity and their consolidated cash

flows for the years then ended and the financial position of Bangkok Aviation Fuel Services Public

Company Limited as at December 31, 2010 and 2009, the results of its operations, the changes

in its shareholders’ equity and its cash flows for the years then ended in conformity with generally

accepted accounting principles.

Mr. Pichai DachanapiromCertified Public Accountant

Registration No. 2421

Dharmniti Auditing Company Limited

Bangkok, Thailand

February 23, 2011

70

Balance SheetsAs At December 31, 2010 and 2009

Consolidated Separate

Financial Statement Financial Statement

ASSETS Notes 2010 2009 2010 2009

CURRENT ASSETS Cash and cash equivalents 5 843,154,030 676,264,250 595,431,694 413,988,494

Short-term investments 6.1 93,185,184 92,539,705 91,000,000 91,000,000

Trade accounts receivable - net 7

Related companies 4 217,288,457 199,122,424 204,456,731 184,921,823

Others 1,904,953 4,329,436 1,904,953 4,329,436

Amounts due from and advance

to related companies 4 1,013,129 329,795 3,645,226 3,929,655

Inventory of spare parts 14,813,690 12,787,054 10,875,121 9,482,841

Other current assets

Prepaid insurance 24,943,905 21,471,021 16,910,159 14,879,839

Input tax refundable 14,266,639 7,016,838 11,444,628 5,756,368

Others 11,260,565 7,139,782 4,972,267 5,529,949

TOTAL CURRENT ASSETS 1,221,830,552 1,021,000,305 940,640,779 733,818,405

NON-CURRENT ASSETS

Restricted fixed deposits with finance institutions 6.2 5,616,518 5,588,827 - -

Investments in subsidiary companies 8 - - 1,836,000,000 1,836,000,000

Other investments in related company - net 9 - - - -

Loan to and long-term receivable from

related company - net 4 - - - -

Property, leasehold improvement

and equipment - net 10 4,692,047,809 5,065,769,983 2,579,228,008 2,871,382,779

Right of use of land leased by a subsidiary - net 2.3 38,763,318 41,224,803 - -

Consession of a subsidiary - net 2.4 658,942,840 684,543,068 - -

Computer softwares - net 11 12,875,328 16,563,825 10,676,104 14,525,918

Assets not used in operation - net 12 47,953,340 - 47,953,340 -

Other non-current assets

Others 6,847,533 8,870,878 6,606,033 8,666,378

TOTAL NON-CURRENT ASSETS 5,463,046,686 5,822,561,384 4,480,463,485 4,730,575,075

TOTAL ASSETS 6,684,877,238 6,843,561,689 5,421,104,264 5,464,393,480

In Baht

Notes to financial statements form an integral part of these statements.

71



LIABILITIES AND SHAREHOLDERS’ EQUITY Notes 2010 2009 2010 2009

CURRENT LIABILITIES

Trade accounts payable

Related Companies 4 125,901,776 41,105,665 166,795,003 78,750,873

Others 17,926,735 21,008,422 13,811,452 13,720,215

Current portion of liabilities under finance

lease agreement 13 5,412,387 12,560,470 2,388,146 9,817,590

Current portion of long-term loans from banks 14 479,905,702 655,035,462 294,187,302 361,587,302

Other current liabilities

Corporate income tax payable 83,079,617 55,408,514 26,747,621 6,591,376

Accounts payable - other 23,582,758 7,227,134 13,711,975 5,134,552

Others 72,455,058 65,635,705 57,708,770 57,748,658

TOTAL CURRENT LIABILITIES 808,264,033 857,981,372 575,350,269 533,350,566

NON-CURRENT LIABILITIES

Liabilities under finance lease agreements-

net off current portion 13 8,136,947 6,724,534 1,588,128 3,671,144

Long-term loans from banks - net 14 2,021,386,652 2,447,451,874 1,621,368,252 1,915,555,554

Reserve for employee’s benefit 15 274,743,367 253,634,038 267,675,386 247,950,272

Other non-current liabilities 10,017,633 5,158,000 739,992 302,875

TOTAL NON-CURRENT LIABILITIES 2,314,284,599 2,712,968,446 1,891,371,758 2,167,479,845

TOTAL LIABILITIES 3,122,548,632 3,570,949,818 2,466,722,027 2,700,830,411


In Baht


72





LIABILITIES AND SHAREHOLDERS’

EQUITY (CONT.) Notes 2010 2009 2010 2009

SHAREHOLDERS’ EQUITY

Share capital - Par value Baht 1 each

Authorized share capital ordinary

share 509,998,044 shares 509,998,044 509,998,044 509,998,044 509,998,044

Issued and fully paid ordinary

share 509,997,325 shares 509,997,325 509,997,325 509,997,325 509,997,325

Share premium 434,975,000 434,975,000 434,975,000 434,975,000

Retained earnings

Appropriated - legal reserve 19 50,999,804 50,999,804 50,999,804 50,999,804

Appropriated - other reserve 882,599,762 807,908,477 882,599,762 807,908,477

Unappropriated 1,523,539,165 1,321,328,907 1,075,810,346 959,682,463

TOTAL EQUITY ATTRIBUTABLE TO COMPANY’S

SHAREHOLDERS 3,402,111,056 3,125,209,513 2,954,382,237 2,763,563,069

MINORITY INTEREST - EQUITY ATTRIBUTABLE TO

MINORITY SHAREHOLDERS OF SUBSIDIARIES 160,217,550 147,402,358 - -

TOTAL SHAREHOLDERS’ EQUITY 3,562,328,606 3,272,611,871 2,954,382,237 2,763,563,069

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 6,684,877,238 6,843,561,689 5,421,104,264 5,464,393,480

In Baht

73




Notes 2010 2009 2010 2009

REVENUES

Service income 2,172,236,264 1,996,842,988 1,480,372,795 1,343,811,274

Other income

Rental income 19,187,947 16,689,694 34,794,752 32,885,958

Dividend receive from subsidiaries 8 - - 148,751,608 133,723,659

Other 28,439,293 21,443,659 57,607,067 53,964,700

TOTAL REVENUES 2,219,863,504 2,034,976,341 1,721,526,222 1,564,385,591

EXPENSES

Cost of services 16 930,443,456 895,498,984 777,064,918 745,955,511

Administrative expenses 16 285,993,799 249,067,372 234,426,236 219,737,409

Management benefit expenses 16,21 81,538,372 73,346,466 77,874,610 70,324,547

Amortization of concession of subsidiaries 28,061,713 28,061,713 - -

Loss on impairment of assets 12 19,938,000 - 19,938,000 -

TOTAL EXPENSES 1,345,975,340 1,245,974,535 1,109,303,764 1,036,017,467

PROFIT (LOSS) BEFORE FINANCE COST

AND INCOME TAX EXPENSES 873,888,164 789,001,806 612,222,458 528,368,124

FINANCE COSTS 86,199,157 107,015,475 63,992,390 76,374,742

PROFIT (LOSS) BEFORE INCOME 787,689,007 681,986,331 548,230,068 451,993,382

TAX EXPENSES

CORPORATE INCOME TAX EXPENSES 17 237,008,351 191,630,444 112,613,372 78,536,955

NET PROFIT 550,680,656 490,355,887 435,616,696 373,456,427

PROFIT (LOSS) ATTRIBUTABLE TO

Equity holders of the parent 521,699,071 463,045,916 435,616,696 373,456,427

Minority interest 28,981,585 27,309,971 - -

BASIC EARNINGS PER SHARE

Net profit (Baht per share) 1.02 0.91 0.85 0.73

Weighted average number of

ordinary shares (Shares) 509,997,325 509,997,325 509,997,325 509,997,325

Statements of IncomeFor The Years Ended December 31, 2010 and 2009

In Baht

74

Statements of Changes In Shareholders’ Equity For The Years Ended December 31, 2010 and 2009

In B

aht

Co

nso

lidat

ed F

inan

cial

Sta

tem

ent

Sha

reho

lder

’s e

qui

ty o

f th

e p

aren

t co

mp

any

Is

sued

and

R

etai

ned

earn

ings

pa

id-u

p S

hare

A

ppro

pria

ted

U

napp

ropr

iate

d

Min

ority

Not

es

shar

e ca

pita

l pr

emiu

m

Lega

l res

erve

O

ther

rese

rve

To

tal

inte

rest

To

tal

Bala

nce a

s at Ja

nuary

1, 2009

509,9

97,3

25

434,9

75,0

00

76,3

92,5

02

773,2

94,1

82

1,0

61,3

02,6

22

2,8

55,9

61,6

31

134,9

15,7

27

2,9

90,8

77,3

58

Div

idend p

aym

ent

18

-

-

-

-

(127,4

98,7

07)

(127,4

98,7

07)

-

(127,4

98,7

07)

Oth

er re

serv

e

18

-

-

-

71,2

37,2

99

(71,2

37,2

99)

-

-

-

Div

idend p

aym

ent by

subsi

dia

ry

8

-

-

-

-

-

-

(14,8

23,3

40)

(14,8

23,3

40)

Reve

rsal o

f legal r

ese

rve a

nd o

ther

re

serv

e in

subsi

dia

ry a

ccount

-

-

(25,3

92,6

98)

(36,6

23,0

04)

62,0

15,7

02

-

-

-

Net pro

fit fo

r th

e y

ear

-

-

-

-

463,0

45,9

16

463,0

45,9

16

-

463,0

45,9

16

Inte

rim d

ivid

end p

aym

ent

18

-

-

-

-

(66,2

99,3

27)

(66,2

99,3

27)

-

(66,2

99,3

27)

Net pro

fit o

f min

orit

y in

tere

st

-

-

-

-

-

-

27,3

09,9

71

27,3

09,9

71

Bala

nce a

s at D

ecem

ber 31, 2009

509,9

97,3

25

434,9

75,0

00

50,9

99,8

04

807,9

08,4

77

1,3

21,3

28,9

07

3,1

25,2

09,5

13

147,4

02,3

58

3,2

72,6

11,8

71

Div

idend p

aym

ent

18

-

-

-

-

(152,9

98,4

77)

(152,9

98,4

77)

-

(152,9

98,4

77)

Oth

er re

serv

e

18

-

-

-

74,6

91,2

85

(74,6

91,2

85)

-

-

-

Div

idend p

aym

ent by

subsi

dia

ry

-

-

-

-

-

-

(8,9

95,4

52)

(8,9

95,4

52)

Net pro

fit fo

r th

e y

ear

-

-

-

-

521,6

99,0

71

521,6

99,0

71

-

521,6

99,0

71

Inte

rim d

ivid

end

18

-

-

-

-

(91,7

99,0

51)

(91,7

99,0

51)

-

(91,7

99,0

51)

Div

idend p

aym

ent by

subsi

dia

ry

8

-

-

-

-

-

-

(7,1

70,9

41)

(7,1

70,9

41)

Net pro

fit o

f min

orit

y in

tere

st

-

-

-

-

-

-

28,9

81,5

85

28,9

81,5

85

Bal

ance

as

at D

ecem

ber 3

1, 2

010

5

09,9

97,3

25

434

,975

,000

5

0,99

9,80

4

882,

599,

762

1,52

3,53

9,16

5 3,

402,

111,

056

160,

217,

550

3,56

2,32

8,60

6

Note

s t

o fi

nancia

l sta

tem

ents

form

an in

tegra

l part

of th

ese s

tate

ments

.

75

Statements of Changes In Shareholders’ EquityFor The Years Ended December 31, 2010 and 2009

In B

aht

Sep

arat

e Fi

nanc

ial S

tate

men

t

Is

sued

and

R

etai

ned

earn

ings

paid

-up

Sha

re

App

ropr

iate

d

Una

ppro

pria

ted

Not

es

shar

e ca

pita

l pr

emiu

m

Lega

l res

erve

O

ther

rese

rve

To

tal

Bala

nce a

s at J

anuary

1, 2009

509,9

97,3

25

434,9

75,0

00

50,9

99,8

04

736,6

71,1

78

851,2

61,3

69

2,5

83,9

04,6

76

Div

idend p

aym

ent

18

-

-

-

-

(127,4

98,7

07)

(127,4

98,7

07)

Oth

er re

serv

e

18

-

-

-

71,2

37,2

99

(71,2

37,2

99)

-

Net pro

fit fo

r th

e y

ear

-

-

-

-

373,4

56,4

27

373,4

56,4

27

Inte

rim d

ivid

end p

aym

ent

18

-

-

-

-

(66,2

99,3

27)

(66,2

99,3

27)

Bala

nce a

s at D

ecem

ber 31, 2009

509,9

97,3

25

434,9

75,0

00

50,9

99,8

04

807,9

08,4

77

959,6

82,4

63

2,7

63,5

63,0

69

Div

idend p

aym

ent

18

-

-

-

-

(152,9

98,4

77)

(152,9

98,4

77)

Oth

er re

serv

e

18

-

-

-

74,6

91,2

85

(74,6

91,2

85)

-

Net pro

fit fo

r th

e y

ear

-

-

-

-

435,6

16,6

96

435,6

16,6

96

Inte

rim d

ivid

end p

aym

ent

18

-

-

-

-

(91,7

99,0

51)

(91,7

99,0

51)

Bal

ance

as

at D

ecem

ber 3

1, 2

010

50

9,99

7,32

5

434

,975

,000

5

0,99

9,80

4

882

,599

,762

1

,075

,810

,346

2

,954

,382

,237

Note

s t

o fi

nancia

l sta

tem

ents

form

an in

tegra

l part

of th

ese s

tate

ments

.

76

Statements of Cash FlowsFor The Years Ended December 31, 2010 and 2009



2010 2009 2010 2009

CASH FLOWS FROM OPERATING ACTIVITIES

Net profit 550,680,656 490,355,887 435,616,696 373,456,427

Adjustments to reconcile net profit to net cash

provided by (used in) Operating activities

Depreciation and amortization 357,079,615 364,993,300 263,308,325 273,225,116

Amortization of right to use of land

and concession of subsidiary 28,061,713 28,061,713 - -

Reversal of allowance for doubtful accounts (17,659,400) (17,659,400) (17,659,400) (17,659,400)

Increase in reserve for employees’ benefit 21,109,329 9,242,878 19,725,114 8,040,319

Loss (gain) on diposal and

written-off fixed assets (661,410) 911,409 (501,395) 895,925

Unrealized (gain) loss 381,836 550,397 321,937 414,857

Loss on impairment of assets 19,938,000 - 19,938,000 -

Dividend received from subsidiaries - - (148,751,608) (133,723,659)

Interest income (12,760,037) (10,987,957) (11,192,042) (9,080,603)

Amortization of deferred interest under

finance lease agreements 992,559 1,684,206 609,376 1,117,132

Interest expenses 85,206,598 105,331,269 63,383,014 75,257,610

Corporate income tax expenses 237,008,351 191,630,444 112,613,372 78,536,955

Net profit from operations before changes in

operating asset and liabilities 1,269,377,810 1,164,114,146 737,411,389 650,480,679

Operating assets decrease (increase)

Trade accounts receivable (16,059,884) (51,002,812) (17,428,759) (43,852,399)

Amounts due from and advances to related

companies (686,938) 57,928 280,825 306,247

Inventory of spare parts (2,026,636) 1,131,093 (1,392,280) 864,843

Other current assets (13,512,653) (814,155) (6,018,676) (291,403)

Other non-current assets (38,271) (104,185) (1,271) (8,184)

Operating liabilities increase (decrease)

Trade accounts payable 81,712,137 12,383,666 88,135,367 20,718,827

Other current liabilities 25,097,809 (7,257,970) 10,454,614 (9,581,315)

Other non-current liabilities 4,859,633 (443,500) 437,117 (438,871)

Cash generated from operations 1,348,723,007 1,118,064,211 811,878,326 618,198,424

Receipt of refunded income tax - 2,080,715 - 2,080,715

Payment for income tax (209,719,493) (171,395,049) (92,457,127) (71,945,579)

Net cash from (used in) operating activities 1,139,003,514 948,749,877 719,421,199 548,333,560

In Baht

77

Statements of Cash FlowsFor The Years Ended December 31, 2010 and 2009



2010 2009 2010 2009

CASH FLOWS FROM (USED IN)

INVESTING ACTIVITIES

Increase in short-term investments (668,565) (1,500,000) - -

Increase in restricted fixed

deposits with finance institutions (27,691) (126,569) - -

Decrease in loan to and

long-term receivable from related company 17,659,400 17,659,400 17,659,400 17,659,400

Dividend received from subsidiary - - 148,751,608 133,723,659

Received interest 12,727,773 11,702,921 11,053,140 9,979,510

Cash paid for property, leasehold improvement

and equipment (50,036,559) (23,726,944) (36,854,452) (10,009,412)

Cash paid for computer softwares (2,187,713) (2,601,718) (1,597,498) (2,216,592)

Construction paid in advance - - - -

Cash received from disposal of property,

leasehold improvement and equipment 2,169,147 584,145 515,000 584,145

Net cash from (used in) investing activities (20,364,208) 1,991,235 139,527,198 149,720,710

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES

Payment of liabilities under finance lease

agreements (1,434,109) (10,611,939) (5,210,899) (7,613,043)

Payment for long-term loans from banks (601,168,262) (519,995,942) (361,587,302) (301,587,302)

Dividend payment from subsidiary to minority

interest (16,166,393) (14,823,340) - -

Dividend payment (244,797,528) (193,798,034) (244,797,528) (193,798,034)

Payment for interest expenses (88,121,988) (109,014,167) (65,909,468) (78,377,543)

Net cash from (used in) financing activities (951,688,280) (848,243,422) (677,505,197) (581,375,922)

Net increase (decrease) in cash and cash

equivalents 166,951,026 102,497,690 181,443,200 116,678,348

Unrealized gain (loss) on exchange rate,

deposit in foreign currency (61,246) (29,929) - -

Net increase (decrease) in cash and cash

equivalents 166,889,780 102,467,761 181,443,200 116,678,348

Cash and cash equivalents at beginning of year 676,264,250 573,796,489 413,988,494 297,310,146

Cash and cash equivalents at end of year 843,154,030 676,264,250 595,431,694 413,988,494

In Baht

78

Notes To The Financial StatementsFor The Years Ended December 31, 2010 and 2009

1. GENERAL INFORMATION Bangkok Aviation Fuel Services Public Company Limited was incorporated as a limited company under Thai laws on

30 December 1983, later on the company was registered itself as the public company under the Public Company Law on

28 September 1995 with the registered address at 171/2 Kampaengphet 6 Road, Donmuang, Bangkok. The Company operates

in Thailand and its principal activity is aviation fuel service.

2. BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS 2.1 The financial statements have been prepared in accordance with the accounting standards prescribed by Thai

Accounts Act enunciated under the Accounting Profession Act B.E.2547. The presentation of the financial

statements has been made in compliance with the Notification of the Department of Business Development, the

Ministry of Commerce, re : the financial statements presentation for public limited company, 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 The consolidated financial statements include the financial statements of Bangkok Aviation Fuel Services Public

Company Limited and a group of subsidiaries that the Company has a direct control as the following:-

Percentage Subsidiaries’s total Subsidiaries’s total owned by assets as a revenues as a the Company percentage to the percentage to the Incorporated Nature of consolidated total consolidated total

As at As at in country Business As at As at For the years ended December December December December December 31 31, 2010 31, 2009 31, 2010 31, 2009 2010 2009

Intoplane Services 83.33 83.33 Thailand Intoplane services 0.05 0.04 - -

Company Limited

Thai Aviation Refuelling 90.00 90.00 Thailand Hydrant network 26.60 27.04 26.01 26.97

Company Limited services

JP-One Assets 92.50 92.50 Thailand Aviation Fuel 10.33 10.25 5.05 4.82

Company Limited Pipeline

Transportation

2.3 The Company has invested in JP-One Assets Company Limited. The investments in the subsidiary, as recorded in

the Company’s book of accounts were eliminated against the shareholders’ equity of the subsidiary. The excess

of cost over book value at the acquisition date has been presented as asset under “Right of use of land leased by

a subsidiary” in consolidated balance sheet and is to be amortized by the straight-line method for 17 years and

10 months, stipulated by the remaining of the rental period that the subsidiary has been granted approval by

Airports of Thailand Public Company Limited to rented the land outside of the fence of the Suvarnabhumi Airport

for the aviation fuel hydrant network from the refinery plant to the Company’s storage. The amortization of the

“Right of use of land leased by a subsidiary” commenced from December 8, 2008 until the expiration of the rental

agreement.


79

2.4 The Company has invested in Thai Aviation Refuelling Company Limited. The investments in the subsidiary, as

recorded in the Company’s book of accounts were eliminated against the shareholders’ equity of the subsidiary. The

resultant difference at the acquisition date has been presented as “Concession of a subsidiary” in the consolidated

balance sheets and amortized on a straight-line basis over a period of thirty years since the date of September 28,

2006 until the expiration of the rental agreement. The amortization period has been stipulated based on the period

that the subsidiary has been granted the concession to operate an aviation refuelling.

2.5 Material inter-company balances and transactions are eliminated from the consolidated financial statements. The

book value of investments in subsidiaries in the Company’s financial statements and the shareholders’ equity of the

subsidiaries are eliminated from the consolidated financial statements.

3. SIGNIFICANT ACCOUNTING POLICIESSignificant accounting policies adopted by the Company and its subsidiaries are summarized below.

3.1 Income recognition and expenses

a) Services incomes

Services incomes are recognised when services are rendered. Services incomes present the invoiced

value, excluding value added tax.

b) Rental and interest incomes

Rental and interest incomes are recognised as incomes on an accrual basis.

c) Expenses

Expenses are recorded on an accrual basis.

3.2 Cash and cash equivalents

Cash and cash equivalents include cash on hand, at banks, deposit with finance institutions and short-term

investment with an original maturity of 3 months and free from restriction.

3.3 Trade accounts receivable and allowance for doubtful accounts

Trade accounts receivable are stated at the net realizable value. Allowance for doubtful accounts is provided

for the estimated collection losses that may incur in collection of receivables. The allowance is based on collection

experience and current status of receivables outstanding at the balance sheet date.

3.4 Inventory of spare parts

Spare parts are stated at cost and are expended whenever consumed.

3.5 Property, leasehold improvement and equipment and depreciation

Land and land improvement are stated at cost. Leasehold improvement and equipment are stated at cost

less accumulated depreciation. Assets under finance lease are stated at fair value, on begin agreement date less

accumulated depreciation.

Depreciation of leasehold improvement and equipment are calculated by reference to costs or fair value on

begin agreement date as the case may be, on a straight-line method over their estimated useful lives as follows:-

Leasehold improvement 10 years, lease period

Office furniture, equipment and computer 3 - 5 years

Main depot facilities 5 - 28 years

Hydrant equipment 5 - 30 years

Intoplane substation 5 - 20 years

Vehicle fleet and motor vehicle 5 years

Motor vehicle under finance lease agreements lease period

No depreciation is provided for land, land improvement, building under construction and equipment under installation.


80

3.6 Computers softwares

Computers softwares are stated at cost less amortization. Amortization of intangible assets is calculated by

the straight-line method over the estimated useful lives of 3 - 5 years.

3.7 Leasehold rights

Leasehold rights are stated at cost less amortization. Amortization of leasehold is calculated by the straight-

line method over the lease period of 3 years and 17 years.

3.8 Impairment of assets

The Company and the subsidiaries review the impairment of assets whenever events indicate that the carrying

value of an asset exceeds its realizable value. Realizable value is determined the value of an asset’s net selling price

and its value in use whichever is higher.

The Company and the subsidiaries recognize an impairment loss in the statements of income whenever

the carrying value of an asset exceeds its realizable value. The Company and the subsidiaries will reverse the

impairment loss when there are indications that the value of the asset is no longer impaired or the amount of

impairment has decreased.

3.9 Investments in subsidiary and related companies

Investments in subsidiary (in the Separate financial statements) are stated under cost method.

The Company estimate impairment of investment in subsidiaries by consideration its net book value and other

related factor.

Other investment in related company is stated at cost. An allowance for impairment loss will be made when

the net realizable value is lower than the cost of the investments.

3.10 Borrowing cost

The interest cost and commitment fee of borrowings for construction of project is capitalized as part of the

cost of project which is ended when the project is transferred to be fixed-assets in the register.

3.11 Foreign currencies

Foreign currency transactions incurred during the years are translated into Baht at the rates ruling on the

transaction dates. Assets and liabilities denominated in foreign currency outstanding on the balance sheet dates

are translated into Baht at the rates ruling on the balance sheet dates.

Exchange gains and losses are included in determining earnings.

3.12 Reserve for employees’ benefit/provident fund

The Company has a benefit scheme for its employees whereby an employee is entitled to receive, upon

retirement or resignation, a sum computed in accordance with his length of service, and is also entitled to receive

part of such amount in advance, in accordance with conditions stipulated by the Company. In 1997, the Company

and its employees jointly established a provident fund as approved by the Ministry of Finance in accordance with

the Provident Fund Act (B.E. 2530), to replace the old benefit scheme. Most employees chose to joint the provident

fund and the Company transferred a total of the reserve for employee benefits set aside under the old scheme to

the provident fund. The provident fund is contributed to by both employees and Company and the fund will be paid

to employees upon termination of employment in accordance with the rules of the fund.


81

However the Company has to set reserve for its obligations in respect of employees who had joined the old

employee benefit scheme and transferred to the provident fund, equal to the excess of the amount that would have

been payable upon termination if the employee had stayed with the old employee benefit scheme over the amount

payable upon termination under the provident fund, in respect of the Company’s contributions and their related

benefits, together with obligations to employees who are still members of the previous scheme.

The employees of the Company started working after provident fund foundation will obtain benefit only from

provident fund scheme.

A subsidiary provided retirement benefit scheme for its employees retirement or resignation as the parent

company until provident fund establishment. The employees started working after January 2007 will obtain benefit

from provident fund scheme afterwards.

The employees in another two subsidiaries will obtain benefit from provident fund scheme which the company

and its employees joined to establish together.

3.13 Finance leases

The Company and its subsidiaries regarded leases that transfer substantially all the risks and rewards of

ownership as finance leases whereby the fair value of the leased properties are recorded as assets and commitment

of the future rental (deducted interest portion) as liabilities.

Interest expenses or finance charge are included in determining earnings according to the remaining balance

of the liabilities.

3.14 Financial instruments

The Company and its subsidiaries have no policy to speculate in or engage in the trading of any financial

derivative instruments.

The Company records the derivative instruments for interest rate swaps on an accrual basis.

A subsidiary records the derivative instruments for USD/THB cross currency swaps on an accrual basis.

Financial instruments carried in the balance sheets include cash and bank balances, trade accounts receivable,

trade accounts payable, loan to related company and loans. The particular recognition methods adopted are

disclosed in the individual policy statements associated with each item.

3.15 Basic earnings per share

Basic earnings per share are determined by dividing net earnings for the year by the weighted average

number of ordinary shares in issue during the year.

3.16 Use of accounting estimates

Preparation of financial statements in conformity with generally accepted accounting principles in certain

circumstances requires management to make estimates and assumptions that affect amounts reported in the

accompanying financial statements and notes thereto. Actual results could differ from these estimates.


82

3.17 Adoption of new accounting standards

3.17.1 Adoption of new accounting standards during the year 2009

a) The Federation of Accounting Professions (FAP) has issued Notification No. 12/2552 dated May 15, 2009,

regarding the renumbering of Thai Accounting Standards to be the same as International Accounting

Standards.

b) The Federation of Accounting Professions (FAP) has issued Notification No. 86/2551 and 16/2552, mandating

the use of new accounting standards, financial reporting standards and accounting treatment guidance as

follows:

1. Framework for the Preparation and Presentation of Financial Statements (revised 2007)

2. TAS 20 Accounting for Government Grants and Disclosure of Government Assistance

(effective on January 1, 2012)

3. TAS 24 Related Party Disclosures (revised 2007) (effective on January 1, 2011)

4. TAS 36 Impairment of Assets (revised 2007)

5. TAS 40 Investment Property (effective on January 1, 2011)

6. TFRS 5 Non-current Assets Held for Sale and Discontinued Operations (revised 2007)

7. Accounting Treatment Guidance for Leasehold Right

8. Accounting Treatment Guidance for Business Combination under Common Control

These accounting standards, financial reporting standards and accounting treatment guidance are effective

for the fiscal year beginning on or after January 1, 2009, except for TAS 24 and TAS 40, they are effective for the

fiscal year beginning on or after January 1, 2011, and TAS 20 is effective for the fiscal year beginning on or after

January 1, 2012.

3.17.2 Adoption of new accounting standards during the year 2010

During the year 2010, the Federation of Accounting Professions (FAP) has issued Notifications to mandate

the use of the revised 2009, new issued of accounting standards and financial reporting standards and the

interpretation, totalling 32 standards, as follows.

Framework for the Preparation and Presentation of Financial Statements (revised 2009)

TAS 1 (revised 2009) Presentation of Financial Statements

TAS 2 (revised 2009) Inventories

TAS 7 (revised 2009) Statement of Cash Flows

TAS 8 (revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors

TAS 10 (revised 2009) Events after the Reporting Period

TAS 11 (revised 2009) Construction Contracts

TAS 12 Income Taxes

TAS 16 (revised 2009) Property, Plant and Equipment

TAS 17 (revised 2009) Leases

TAS 18 (revised 2009) Revenue

TAS 19 Employee Benefits

TAS 20 (revised 2009) Accounting for Government Grants and Disclosure of Government Assistance

TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates

TAS 23 (revised 2009) Borrowing Costs

TAS 24 (revised 2009) Related Party Disclosures

TAS 26 Accounting and Reporting by Retirement Benefit Plans

TAS 27 (revised 2009) Consolidated and Separate Financial Statements

TAS 28 (revised 2009) Investments in Associates

TAS 29 Financial Reporting in Hyperinflationary Economies

TAS 31 (revised 2009) Interests in Joint Ventures

TAS 33 (revised 2009) Earnings per Share


83

TAS 34 (revised 2009) Interim Financial Reporting

TAS 36 (revised 2009) Impairment of Assets

TAS 37 (revised 2009) Provisions, Contingent Liabilities and Contingent Assets

TAS 38 (revised 2009) Intangible Assets

TAS 40 (revised 2009) Investment Property

TFRS 2 Share-based Payment

TFRS 3 (revised 2009) Business Combinations

TFRS 5 (revised 2009) Non-current Assets Held for sale and Discontinued Operations

TFRS 6 Exploration for and Evaluation of Mineral Resources

TFRIC 15 Agreements for the Construction of Real Estate

These accounting standards and financial reporting standards are effective for the fiscal year beginning on or after

January 1, 2011, except for TAS 12, TAS 20 and TAS 21, they are effective for the fiscal year beginning on or after

January 1, 2013.

The management of the Company is in the process of reviewing the impact of such accounting standards to

the financial statements for the year in which they are initially applied, for TAS 12 Income Taxes, TAS 16 (revised

2009) Property, Plant and Equipment and TAS 19 Employee Benefits and other accounting standards and financial

reporting standards will not have any significant impact on the financial statements for the year in which they are

initially applied.

4. RELATED PARTY TRANSACTIONS4.1 Transaction related to subsidiaries and related companies

During the years, the Company had significant trading transaction with its subsidiaries (eliminated from the

consolidated financial statements) and related companies (related by shareholder and/or way of common shareholders

and/or common directors) in connection with service income, loan, rental and other income. The Company has the

following policy on pricing for its related transactions :-

1. Cost of service from the subsidiaries based on the serviced and expenses occurred.

2. Rental charge for an office building to subsidiaries is based on the every year increase in the average rate of CPI

by the minimum rate of 5 percent but not exceeding 7 percent from the prior year rental.

3. Rental charge for receiving pipeline system to subsidiaries is based on the contract price between the parties.

4. Guarantee fee income is charged at the rate of 1 percent per annum of the outstanding balance of the guarantee

obligation.

5. Service income is based on the contract price between the parties.

6. Rental charge for receiving pipeline system to a related company is charged the rate of 21.5 percent of the

lessors’ annual income received from the transportation of the fuel, JET A-1, via the pipeline system (before

discounts and relevant tax).

7. Rental charge for receiving diesel pipeline system to a related company is based on the contract price between

the parties.

8. Rental charge for an office building to a related company is based on the every-3-year increase in the average

rate of CPI but not exceeding 5 percent of the latest rent charge.

9. Rental charges for land is based on rental expense paid to Treasury Department and plus a rate of 5 percent of

annual rental.

10. Interest on loan to related company is charged at the rate of 1 percent per annum according to the Amendment

Agreement (No. 2 and 3) relating to the Debt Restructuring Agreement of its related company.

11. Rental charge for land and building include utilities to a related company is based on the every year increase in

the average rate of CPI but not exceeding 7 percent of the latest rent charge.


84

Significant transactions between the Company and its related parties are summarized below :-

(Unit : Million Baht)

Consolidated Separate Pricing Financial Statement Financial Statement policy

For the years ended For the years ended December 31 December 31 2010 2009 2010 2009

TRANSACTIONS WITH SUBSIDIARY COMPANIES :

Cost of service - - 6.5 5.4 (1)

Rental charges for office building - - 1.3 1.1 (2)

Rental charge for receiving pipeline system - - 13.8 15.0 (3)

Guarantee fee income - - 6.8 9.2 (4)

Other income - - 19.8 17.7 (5)

TRANSACTIONS WITH RELATED COMPANIES :

Service income 1,453.3 1,320.3 1,453.3 1,320.3 (5)

Rental charges for receiving pipeline system 2.9 1.8 2.9 1.8 (6)

Rental charges for receiving diesel

pipeline system 2.0 - 2.0 - (7)

Rental charges for office building and land 6.8 6.4 6.8 6.4 (8),(9)

Rental charges for land & building 7.6 8.6 7.6 8.6 (11)

Interest income 3.9 4.1 3.9 4.1 (10)


85

The outstanding balance of the above transactions have been separately presented in the balance sheets under the caption as

follows :-

(Unit : Baht)



As at As at December 31 December 31 Relationship 2010 2009 2010 2009

TRADE ACCOUNTS RECEIVABLE -

RELATED COMPANIES

Thai Airways International Public Shareholder and 37,150,780 37,101,583 37,150,780 37,101,583

Company Limited a representative director

Chevron (Thailand) Company Limited Shareholder and 45,921,518 40,654,269 45,921,518 40,654,269

a representative director

Esso (Thailand) Public Company Limited Shareholder 26,374,864 27,529,042 26,374,864 27,529,042

PTT Public Company Limited Shareholder and 57,795,666 47,782,094 57,795,666 46,874,421


The Shell Company of Thailand Limited Shareholder and 31,176,478 29,097,012 31,176,478 28,742,627


Air Total (Thailand) Limited Shareholder - 1,206,236 - 1,206,236

Singapore Petroleum (Thailand) Limited Shareholder 2,292,384 1,678,867 2,292,384 1,678,867

Petronas Retail (Thailand) Company Limited Shareholder 3,745,041 1,134,778 3,745,041 1,134,778

Bangchak Petroleum Public Company Limited Co-Shareholder 11,192,702 12,268,447 - -

Fuel Pipeline Transportation Limited Common shareholders and 1,639,024 670,096 - -


Total 217,288,457 199,122,424 204,456,731 184,921,823

AMOUNTS DUE FROM AND ADVANCE

TO RELATED COMPANIES

SUBSIDIARIES

Thai Aviation Refuelling Company Limited - - 1,586,842 2,438,320

JP-One Asset Company Limited - - 1,045,255 1,161,540

RELATED COMPANIES

Fuel Pipeline Transportation Limited Common shareholders and

a representative director 892,123 214,333 892,123 214,333

Thai Petroleum Pipeline Company Limited Co-Shareholder 121,006 115,462 121,006 115,462

Total 1,013,129 329,795 3,645,226 3,929,655

LOAN TO AND LONG-TERM RECEIVABLE

FROM RELATED COMPANY

Fuel Pipeline Transportation Limited Common shareholders and

a representative director 382,686,467 400,345,867 382,686,467 400,345,867

LESS : Allowance for doubtful accounts (382,686,467) (400,345,867) (382,686,467) (400,345,867)

Total - - - -


86

(Unit : Baht)

Consolidated Separate Financial Statement Financial Statement

As at As at December 31 December 31 Relationship 2010 2009 2010 2009

TRADE ACCOUNTS PAYABLE -

RELATED COMPANY

SUBSIDIARIES

Thai Aviation Refuelling Company Limited - - 57,804,993 55,473,427

JP - One Asset Company Limited - - 866,786 -

RELATED COMPANIES

Airports of Thailand Public Company Limited Shareholder and 120,609,475 34,883,545 107,549,358 22,952,793


The Shell Company of Thailand Limited Shareholder and 29,649 20,330 20,330 20,330


Thai Airways International Public

Company Limited Shareholder and 4,532 5,800 4,532 5,800


Chevron (Thailand) Company Limited Shareholder and 20,330 20,330 20,330 20,330


PTT Public Company Limited Shareholder and 333,363 278,193 333,363 278,193


Fuel Pipeline Transportation Limited Common shareholders and 4,904,427 5,897,467 195,311


Total 125,901,776 41,105,665 166,795,003 78,750,873

Movement of loan to and long-term receivable from related company during the year ended December 31, 2010, is as follows:-

(Unit : Baht)

Balance as at Movement during the period Balance as at

Jan 1, 2010 Increase Decrease Dec 31, 2010

LOAN TO AND LONG-TERM RECEIVABLE FROM

RELATED COMPANY

Fuel Pipeline Transportation Limited 400,345,867 - 17,659,400 382,686,467

LESS : Allowance for doubtful accounts (400,345,867) - (17,659,400) (382,686,467)

Total - - - -


87

In addition, the Company had transactions by entering into agreements with the local bank to guarantee the credit facilities

provided to Thai Aviation Refuelling Company Limited and JP-ONE Assets Co., Ltd (subsidiaries) as discussed in note 23.1.5 to

the financial statements.

On April 29, 1999, the Company entered into the agreement to guarantee the debt payment with a group of creditors of Fuel

Pipeline Transportation Limited (FPT), under its debt restructuring agreement. The outstanding balance of guarantee obligation, as

of December 31, 2001, was approximately Baht 415 million, and the Company had already recorded provision in full amount of

the guarantee expenses for such obligation.

On March 28, 2002, the above company entered into the Amendment Agreement (No. 2) relating to the Debt Restructuring

Agreement with the group of creditors, and on the same day the Company entered into the Assignment Agreement (relating to

Tranche 2 Debts under the Debt Restructuring Agreement) of Fuel Pipeline Transportation Limited with that company’s creditors

to purchase the rights of claim over debt amounting to Baht 415 million from that company’s group of creditors. In this regard,

the Company agreed to accept all rights and debt under the agreement, including commitments of the group of creditors with

respect to the agreement but excluding interest accrued up to the date of the purchase. As to the above activities, cause the

commitment on guarantee agreement revoked.

On December 29, 2009, FPT entered into the Amendment Agreement (No.3) relating to the Debt Restructuring Agreement

with the group of creditors again, for running a business straight forward. The creditors approved to waive the accrued interest

and reschedule the loan payment as the terms and conditions of the Amendment Agreement (No.3). This restructuring has no

effect to debt between BAFS and FPT.

The BAFS has recorded FPT as a debtor amounting of Baht 415 million under the category of “Loan to and long term

receivable from the related company”. The Company has also transferred the reserve of guarantee expenses totaling of Baht

415 million to “Allowance for doubtful debt for loan to and long term receivable from related company”.

Under the agreement to purchase the right of claim amounting of Baht 415 million, the Company had recorded this

transaction as “Liability under agreement to purchase the right of claim” in the balance sheets. The terms of payment as

follows;

1. Payment of 50% of the debt, or in amount of Baht 207.5 million is made on the date of signing agreement.

2. The remaining debt is to be paid in 12 quarterly installments of approximately Baht 17.3 million each.

The Company repaid all of the particular debt on March 31, 2005.

4.2 Transaction related to government entities that may conflict interest

The Company has entered into a contract with The Ministry of Finance which is the Company’s indirect major shareholder

(The Ministry of Finance is the major shareholder of Thai Airways International Public Company Limited and Airport of Thailand

Public Company Limited, including Thai Airways International Public Company Limited is the major shareholder of the Company)

for leasing of land and building of Treasury Department at Don Muang Airport, rental incurred for the years ended December 31,

2010 and 2009 in amount of Baht 6 million and Baht 7 million, respectively.


88

5. CASH AND CASH EQUIVALENTS Cash and cash equivalents as at December 31, 2010 and 2009 are comprised of the followings:-

(Unit : Baht)



2010 2009 2010 2009

Cash on hand 132,031 159,940 99,328 112,398

Deposit with banks and finance institutions 168,543,845 165,664,475 60,532,013 43,245,734

Bond and promissory note 674,478,154 510,439,835 534,800,353 370,630,362

Total cash and cash equivalents 843,154,030 676,264,250 595,431,694 413,988,494

As at December 31, 2010 and 2009, a subsidiary’s cash at banks with a financial institutions amount of Baht 165 million and

Baht 185 million, respectively are under the financial facility agreement. Under the term of agreement, the subsidiary has to transfer

the right on the said cash to the financial institution but it is not effective unless the subsidiary fail to comply with the agreement.

6. SHORT-TERM INVESTMENTS / RESTRICTED FIXED DEPOSITS WITH FINANCE INSTITUTIONS6.1 As of December 31, 2010 and 2009, the Company has fixed deposit of Baht 90 million with a bank to use for support

of “The employee housing loan project” which the Company’s employees who participate with the project will be

privilege on the interest rate at below the market rate. However, the Company is able to withdraw the deposit to use

in its normal business operations, then the interest rate of the employees’ loans will be adjusted to the market rate.

6.2 As of December 31, 2010 and 2009 a subsidiary has deposits of Baht 5.6 million and Baht 5.5 million, respectively

with finance institutions. The deposits have been placed as collaterals for issuance of letters of guarantee for the

company’s subsidiary and related company.

7. TRADE ACCOUNTS RECEIVABLEAs at December 31, 2010 and 2009, the outstanding balances of trade accounts receivable are not yet due.

8. INVESTMENTS IN SUBSIDIARIESThese represent investments in ordinary shares of the following companies :-

Company Million Baht Percentage Unit : Baht

Paid-up capital owned by Cost method Book value of the subsidiaries Dividend

The Company base on equity method

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

SUBSIDIARY COMPANIES

Intoplane Services Co., Ltd. 0.12 0.12 83.33 83.33 100,000 100,000 2,880,395 2,346,512 - -

Thai Aviation Refuelling Co., Ltd. 530 530 90 90 1,235,000,000 1,235,000,000 1,027,041,337 907,821,296 136,708,114 132,558,161

JP-One Assets Co., Ltd. 600 600 92.50 92.50 600,900,000 600,900,000 561,488,902 568,126,561 12,043,494 1,165,498

Total 1,836,000,000 1,836,000,000 1,591,410,634 1,478,294,369 148,751,608 133,723,659


89

On March 23, 2009, the annual general meeting of a subsidiary approved a resolution to declare a cash dividend payment

from its 2008 operations at the rate of Baht 29.94 per share for an amount of Baht 158.68 million of which the interim dividend

payment had been paid at the rate of Baht 14.32 per share amounting to Baht 75.90 million in August 2008. The subsidiary

would pay the remaining of Baht 15.62 per share amounting to Baht 82.79 million. The payment was made on April 10, 2009.

On July 23, 2009, the board of directors of the such subsidiary approved an interim dividend payment from its first six-month

period of 2009 operation at Baht 12.17 per share amounting to Baht 64.50 million. The dividend was paid on August 10, 2009.

On March 22, 2010, the annual general meeting of the such subsidiary approved a resolution to declare a cash dividend

payment from its 2009 operations at the rate of Baht 27.30 per share for an amount of Baht 144.69 million of which the interim

dividend payment had been paid as mentioned above. The dividend balance at last six-month period of 2009 operation at Baht

15.13 per share amounting to Baht 80.19 million. The payment was made on April 9, 2010.

On July 19, 2010, the Board of Director Meeting No. 2/2010 of the such subsidiary approved to declare a cash dividend

payment from its half year 2010 operations at the rate of Baht 13.53 per share for an amount to Baht 71.71 million. The payment

was made on August 11, 2010.

On March 30, 2009, the annual general meeting of another subsidiary approved a resolution to declare a cash dividend

payment from its 2008 operations at the rate of Baht 0.21 per share for an amount of Baht 1.26 million payment in April 3, 2009.

On March 26, 2010, the annual general meeting of the such subsidiary approved a resolution to declare a cash dividend payment

from its 2009 operations at the rate of Baht 2.17 per share for an amount of Baht 13.02 million payment in March 31, 2010.

9. OTHER INVESTMENTS IN RELATED COMPANY

These represent investments in shares of the following company:-

Unit : Baht

Company Nature of Million Baht Percentage owned by

Business Paid-up capital the Company Cost

2010 2009 2010 2009 2010 2009

RELATED COMPANY

Fuel Pipeline

Transportation Limited Services

Ordinary shares 796 796 16.71 16.71 133,000,000 133,000,000

Preference shares 796 796 16.65 16.65 132,521,700 132,521,700

Total 265,521,700 265,521,700

LESS : Allowance for impairment

loss of investment (265,521,700) (265,521,700)

Total investment in related company - net - -

According to the un-audited accounts of Fuel Pipeline Transportation Limited as of December 31, 2010, that company has a

capital deficit of Baht 449 million (As at December 31, 2009, audited financial statement : Baht 408 million). However, the Company

has already set aside provision against impairment loss of investment in full amount.


90

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92

According to the rental agreement, the legal right of equipment and building constructed on the leased land shall be

taken over by the lesser upon the completion of construction. However the Company remain the right to use the assets, which

is continuing renew the agreement, and believe that the Company will able to continuing renew the agreement.

Under the land rental agreement between the Airport of Thailand Public Company Limited and a subsidiary, the Subsidiary

shall transfer the ownership of all buildings and construction to the Ministry of Finance when 3 years since the date of completion

of the construction (September 30, 2008).

Under the Into-plane Service Agreement and the Permission for Performance Agreement of the aviation fuel hydrant

network at Suvarnabhumi Airport, between the Airport of Thailand Public Company Limited and the Company, and a subsidiary

respectively, the Company shall transfer the ownership of all buildings and construction to the Ministry of Finance upon the

completion of the construction, and the Subsidiary shall transfer the Hydrant system to the Airport of Thailand Public Company

Limited within 60 days before operating the service. As of December 31, 2010 the right transferring as to the above 2 agreements

are in its process.

As December 31, 2010 and 2009 the initial cost of the fixed assets that have been fully depreciated but still in use are as

follows :

(Unit : Baht)



2010 2009 2010 2009

Leasehold improvement 11,589,252 11,165,653 11,589,252 11,165,653

Office furniture / equipment / computer 102,912,097 91,245,098 102,058,155 90,766,060

Main depot facilities 769,255,880 747,796,971 769,255,880 747,796,971

Hydrant equipment 16,697,044 16,697,044 16,697,044 16,697,044

Intoplane substation 55,058,967 54,219,762 55,058,967 54,219,762

Vehicle fleet 474,901,361 477,228,722 474,901,361 477,228,722

Total 1,430,414,601 1,398,353,250 1,429,560,659 1,397,874,212

11. COMPUTER SOFTWARES - NET Computer softwares, net consisted of:-

(Unit : Baht)

Consolidated Financial Statement

Balance per Increase Decrease Balance per

book as at book as at

Jan 1, 2010 Dec 31, 2010

At cost 46,560,137 2,187,713 - 48,747,850

Less Accumulated amortization (29,996,312) (5,876,210) - (35,872,522)

Computer softwares, net 16,563,825 12,875,328


93

(Unit : Baht)

Separate Financial Statement

Balance per Increase Decrease Balance per

book as at book as at

Jan 1, 2010 Dec 31, 2010

At cost 44,170,924 1,597,498 - 45,768,422

Less Accumulated amortization (29,645,006) (5,447,312) - (35,092,318)

Computer softwares, net 14,525,918 10,676,104

(Unit : Baht)



For the year ended December 31, For the year ended December 31,

2010 2009 2010 2009

Amortization 5,876,210 6,621,166 5,447,312 6,385,302

12. ASSETS NOT USED IN OPERATION- NET Consisted of:-

(Unit : Baht)

Consolidated Financial Statement/

Separate Financial Statement

2010 2009

At cost

Land 47,953,340 -

Design and construction 19,938,000 -

Total 67,891,340 -

Less Allowance for impairment of assets (19,938,000) -

Net 47,953,340 -

Assets not used in operation are land, design fee and underground pipeline for the main depot facilities project at

Chiangmai Airport. This portion had been transferred from property, leasehold improvement and equipment.


94

13. LIABILITIES UNDER FINANCIAL LEASE AGREEMENT As at December 31, 2010 and 2009, the Company and its subsidiaries have liabilities under financial lease agreement,

leasing of vehicles. The payment details are follows :-

Consolidated Financial Statement (Baht)

As at December 31, 2010 As at December 31, 2009

Principal Interest Payments Principal Interest Payments

Within one year 5,412,387 590,047 6,002,434 12,560,470 909,239 13,469,709

After one year but within five years 8,136,947 632,023 8,768,970 6,724,534 169,738 6,894,272

Total 13,549,334 1,222,070 14,771,404 19,285,004 1,078,977 20,363,981

Separate Financial Statement (Baht)

As at December 31, 2010 As at December 31, 2009

Principal Interest Payments Principal Interest Payments

Within one year 2,388,146 164,697 2,552,843 9,817,590 594,824 10,412,414

After one year but within five years 1,588,128 60,539 1,648,667 3,671,144 127,224 3,798,368

Total 3,976,274 225,236 4,201,510 13,488,734 722,048 14,210,782

As at December 31, 2010 and 2009, the Company and its subsidiaries have 33 outstanding financial lease agreements

and 41 outstanding financial lease agreements, respectively with 5 local leasing companies. The lease term will end in 2014,

each agreement is repayable on equal monthly installments as specified in the lease agreement.

Under the term of lease agreement referred to above, the Company and its subsidiaries shall have the right to purchase

the assets upon the expiry of the lease agreement and shall have to comply with certain conditions and restrictions as specified

in the lease agreement.

Liabilities under financial lease agreement for the portion due within one year were shown under “current liabilities” in the

balance sheet.

14. LONG-TERM LOANS FROM BANKS


Credit line Credit Financial Statement Financial Statement Interest Rate /

no. facility 2010 2009 2010 2009 Condition term payment

(Million (Million (Million (Million (Million (Million loan and interest

USD) Baht) USD) Baht) USD) Baht)

The Company

1 Baht 800 million - 355 - 457 355 457 6-month THBFIX plus a certain

percentage per annum.

Repays the principal and interest

every 6-month period. The loan

is repayable in 15, equal,

installments of Baht 50.79 million

from February 2007 to February

2014.


95

Consolidated Financial Statement Separate Interest Rate /

Financial Statement Condition term payment

Credit line Credit 2010 2009 2010 2009 loan and interest

no. facility (Million (Million (Million (Million (Million (Million


2 Part 1 - Baht

1,700 million - 1,139 - 1,360 1,139 1,360 3-month fixed deposit rate plus a

certain percentage.

Part 2 - Baht - 201 - 240 201 240 The interest is payable monthly.

300 million 1,340 1,600 1,340 1,600 Repayment of loan principal at the

amount specified in the agreement is

to be made by 28 quarterly

installments from March 2008

to December 2014.

On December 28, 2010, the

Company was approved by the

bank to extend the due date of

principal payment for 4 years, from

December 31, 2014 to

December 31, 2018. Part 1,

Baht 1,700 million will be paid

in 31 quarterly installments, and

each installment in Baht 35.60

million. The last installments is

the rest and Part 2, Baht 300 million

will be paid in 31 quarterly

installments, and each installment in

Baht 6.30 million. The last

installments is the rest too.

These payments will be effective

from March 2011.

3 Baht 220 - 220 - 220 220 220 MLR of the bank less a fixed

million percentage. The interest is

payable monthly. The loan is

repayable in 20 quaterly

installments of Baht 6.25 million from

February 2011 onward.

The

Subsidiaries

4 Baht 700 - 311 - 420 - - The higher of 3-month fixed deposit

million rate for individuals or corporations,

plus a certain percentage. The

interest is payable monthly. The loan

is repayable in 20 quaterly

installments of Baht 35 million from

March 2008 to December 2012.



96


Financial Statement Condition term payment

Credit line Credit 2010 2009 2010 2009 loan and interest

no. facility (Million (Million (Million (Million (Million (Million


On August 31, 2010, the subsidiary

was approved by the bank to extend

the due date of principal payment for

2 years, from December 31, 2012 to

December 31, 2014. The principal

will be paid in 18 quarterly

installments, and each installment is

Baht 19.45 million. The last

installment is the rest. These

payments will be effective from

September 2010.

5 USD 8 3.2 109 4.8 163 - - LIBOR plus a certain percentage.

million The interest is payable monthly. The

loan is repayable in 20 quarterly

installments of USD 0.4 million from

March 2008 to December 2012.

6 Baht 170 - 118 - 170 - - MLR minus a percentage specified in

million the agreement. The interest is

payable monthly. The loan is

repayable in 16 quarterly installments

of Baht 18.75 million from March

2010 onward.

On August 31, 2010, the subsidiary

was approved by the bank to adjust

the interest rate decrease and

extend the due date of principal

payment for years, from December

31, 2013 to December 31, 2014.

The principal will be paid in 18

quarterly installments, and each

installment is Baht 7.37 million. The

last installment is the rest. These

payments will be effective from

September 2010.

7 Baht 120 - 48 - 72 - - MLR minus a percentage specified in

million the agreement. The loan is to be

repaid in 60 monthly installments of

Baht 2 million each, from January

2008 to December 2012.

Total long-term loans 2,501 3,102 1,915 2,277

LESS Current portion (480) (655) (294) (362)

Long-term loans from banks - net 2,021 2,447 1,621 1,915


97

Additions : The Company The Credit line no. 1, in order to hedge the interest rate risk associated with the above loan the Company entered into

an interest rate swap agreement with a bank, terminating on February 28, 2014, to swap the above interest rate for a fixed

interest rate. At each quarterly maturity date the Company pays interest at a fixed rate per annum to the bank and the bank pays

interest to the Company at the 6-month Thai Baht Interest Rate Fixing (6-Month THBFIX) plus a certain percentage per annum,

in accordance with the conditions stipulated in the agreement.

Under the above agreement, the Company is required to comply with certain stipulated loan conditions relating to matters

such as prohibit of creation of commitment to the Company’s assets or transfer of right except for certain conditions, the

maintenance of a debt to equity ratio and payback ability ratio etc.

The Subsidiaries The Credit line no. 5, in order to hedge the interest rate and foreign currency exchange risk the subsidiary entered into the

agreement of USD/THB Cross Currency Rate Swap transaction with the such bank, which will be terminated due on December 31,

2012 as the following condition;

On each monthly maturity date the subsidiary will pay the fixed interest rate to the bank and the bank pays USD-LIBOR

plus spread.

And, each party will exchange amount of USD and THB due from the quarterly principal installments and monthly interest

as stated in the agreement.

The Credit line no. 4, 5 and 6, these loans are guaranteed by the Company and secured by the rights over deposits, and

the transfer of the rights under the Permission for Performance Agreement of the aviation fuel hydrant network.

On August 31, 2010, the subsidiary has received a written approval by the bank for a waiver of conditions in the financial

facility agreement about extending the due date of principal and adjusting the interest rate per said in the credit line no 4 and 6

above. The subsidiary can use deposit accounts with any financial institutions. The subsidiary must conditionally transfer of the

rights of the such financial instruments or such deposit accounts to the bank for guarantee.

The Credit line no. 7, the Company is a guarantor of the loan, whereby it is responsible for 50 percent of principal, interest

and any other expenses incurred by the bank in making collection of suing for recovery.

Under the above agreement, the subsidiaries are required to comply with certain stipulated loan conditions, relating to

matters such as the maintenance of a debt to equity ratio, dividend payment and compensation for losses suffered by the credit

provider.

15. RESERVE FOR EMPLOYEE’S BENEFIT / PROVIDENT FUND Reserve for employee’s benefit, net consisted of :-

(Unit : Baht)



2010 2009 2010 2009

Beginning balance 253,634,038 244,391,160 247,950,272 239,909,953

INCREASE reserve during period 34,162,217 19,121,766 32,778,002 17,919,207

DECREASE paid during period (13,052,888) (9,878,888) (13,052,888) (9,878,888)

Ending balance 274,743,367 253,634,038 267,675,386 247,950,272

The Company and subsidiaries’s contribution for the years ended December 31, 2010 and 2009, amounted to

Baht 24 million and Baht 22 million, respectively.

The Company’s contributions for the years ended December 31, 2010 and 2009, amounted to Baht 23 million and

Baht 21 million, respectively.


98

16. EXPENSES BY NATURE Significant expenses by nature are as follow :

(Unit : Baht)



For the years ended For the years ended

December 31, December 31,

2010 2009 2010 2009

Employees benefit expenses 410,040,864 370,427,250 382,145,300 346,631,063

Directors’ remuneration 16,048,259 15,857,105 13,664,059 13,983,365

Depreciation and amortization expenses 357,079,615 364,993,300 263,308,325 273,225,116

Airport concession fees 235,363,431 227,920,370 223,717,488 216,804,630

Rental expenses 28,085,358 30,326,713 24,425,908 27,447,088

17. CORPORATE INCOME TAX 17.1 Corporate income tax for the Company is calculated on net income for the nine-month periods after adding back

certain expenses and deducting exempted income in compliance with the Revenue Code at the rate of 25 percent for profit

under Baht 300 million and at the rate of 30 percent for over Baht 300 million, for the period from 2008 to 2010.

For the years ended December 31, 2010 and 2009, the Company’s significant adding back expenses which disallowable

for tax calculation are reserve for employee’s benefit expenses amounted to Baht 20 million and Baht 8 million, respectively, and

loss on impairment of assets amounted to Baht 20 million (year 2010) and deducting certain exempted income are dividend

income amounted to Baht 149 million and Baht 134 million, respectively, and reversal debt amounted equal to Baht 18 million

in both years.

17.2 Corporate income tax for a subsidiary is calculated on net income for the period after adding back certain expenses

and deducting exempted income in compliance with the Revenue Code at the rate of 30 percent of net profit before income tax.

17.3 Corporate income tax for another subsidiary is calculated on net income for the period after adding back certain

expenses and deducting exempted income in compliance with the Revenue Code at the rate of 30 percent of net profit before

income tax. For the years ended December 31, 2010 and 2009, the such subsidiary does not have income tax expenses due to

investment promotional privileges for a period of 8 years from 2006 to 2014 and deficit carried forward from the previous years.

17.4 Corporate income tax for another subsidiary is calculated on net income for the period after adding back certain

expenses and deducting exempted in compliance with the Revenue Code at the rates as follow :

Profit before income tax expenses (Baht) Rate

1 - 150,000 Exempted

150,001 - 1,000,000 15 %

1,000,001 - 3,000,000 25 %

Over 3,000,000 30 %


99

18. DIVIDEND PAID On August 11, 2010, the board of directors of the Company approved a payment of Interim dividend from 2010 results at

Baht 0.18 per share amounting to Baht 91.80 million. The dividend was paid in September 2010.

On April 19, 2010, the annual general meeting of the Company has approved the following transactions;

1) To allot the retained earnings to be reserved for investment expansion amounting to Baht 37.35 million.

2) To allot the retained earnings to be reserved for general reserve amounting to Baht 37.35 million.

3) To declare dividends from the Company’s 2009 result at Baht 0.43 per share amounting to Baht 219.30 million of

which the Company has paid the interim dividend in September 2009 at Baht 0.13 per share amounting to Baht 66.30

million. The rest of dividend paid by cash at Baht 0.30 per share amounting to Baht 153.00 million on May 14, 2010.

On August 13, 2009, the board of directors of the Company approved a payment of interim dividend from 2009 results at

Baht 0.13 per share amounting to Baht 66.30 million. The dividend was paid in September 2009.

On April 8, 2009, the annual general meeting of the Company has approved the following transactions;

1) To allot the retained earnings to be reserve for investment expansion amounting to Baht 35.62 million.

2) To allot the retained earnings to be reserve for general reserve amounting to Baht 35.62 million.

3) To declare dividends from the Company’s 2008 result at Baht 0.40 per share amounting to Baht 204 million of which

the Company has paid the interim dividend in September 2008 at Baht 0.15 per share amounting to Baht 76.50

million. The dividend paid by cash at Baht 0.25 per share amounting to Baht 127.50 million on May 4, 2009.

19. LEGAL RESERVE According to 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 profit after deducting accumulated deficit brought forward (if any) until the reserve reaches 10 percent

of the registered share capital. The statutory reserve cannot be used for dividend payment.

20. CAPITAL MANAGEMENT The primary objective of the Company’s capital management is to ensure that it has an appropriate financial structure and

preserves the ability to continue its business as a going concern.

According to the consolidated balance sheet as at December 31, 2010 and 2009, the Company and subsidiaries’s debt-

to-equity ratio was 0.88 : 1 and 1.09 : 1, respectively.

According to the separate balance sheet as at December 31, 2010 and 2009, the Company’s debt-to-equity ratio was

0.83 : 1 and 0.98 : 1, respectively.

21. MANAGEMENT BENEFIT EXPENSES The management benefit expenses represents the benefits paid to the Company’s management such as salaries and

related benefit including the benefit paid by other means. The Company’s management is the persons who are defined under

the Securities and Exchange Act.

22. BANK GUARANTEES As at December 31, 2010, there were outstanding bank guarantees of the Company and its subsidiaries amounting to

approximately Baht 55 million (As at December 31, 2009 : Baht 56 million), with the Company only has outstanding guarantees

amounting to approximately Baht 43 million (As at December 31, 2009 : Baht 45 million), The guarantees were in respect of

certain performance bonds as required in the ordinary course of business of the Company and its subsidiaries.


100

23. COMMITMENT AND CONTINGENT LIABILITIES23.1 Commitment

23.1.1 As at December 31, 2010, the Company and its subsidiaries have the commitments from long-term

contracts which have the minimum amount to pay in the future as follows;

Company Minimum amount to be paid in the future (Million Baht)

Period

Not over Over 1 year Over 5 years Total

1 year Not over

5 years

Bangkok Aviation Fuel Services Public Company Limited 35.34 64.93 70.52 170.79

Thai Aviation Refuelling Company Limited 2.22 1.13 - 3.35

JP-One Assets Company Limited 14.44 62.24 282.39 359.07

Total 52.00 128.30 352.91 533.21

The Company has the principal contracts as follows ;

1. The Company has entered into the following rental agreements with Airports of Thailand Public Company Limited (AOT) :-

a) Three-year pipeline system rental agreement used for the refueling operation to the Don Mueang Airport, dated

September 19, 1986, renewable every three years until the end of the life of the fuel pipeline system.

Since March 29, 2009, almost flight services at Don Mueang Airport have been moved to Suvanabhumi

Airport. So that the Company had requested AOT to waive the pipeline system rental fee. Later AOT approved

to waive the pipeline system rental fee effective from April 1, 2009 to December 31, 2009. Later the Company

requested AOT to extend the waiving of the pipeline system rental fee and AOT approved to waive the pipeline

system rental fee from January 1, 2010 until the Company start to use the pipeline system.

b) Land and building in apron rental agreement at Don Mueang Airport for a period of three years from September

28, 2007 to September 27, 2010. The renewed contract for three years period during September 28, 2010 to

September 27, 2013 is under processed.

c) Rental agreement for space at Don Mueang Airport for a period of three years from September 19, 2007, to

September 27, 2010. The renewed contract for three years period during September 28, 2010 to September 27,

2013 is under processed.

d) Land rental agreement at Suvanabhumi Airport for a period of twenty years from September 28, 2006 to

September 27, 2026.

e) Land in apron rental agreement for parking the refueling truck, at Suvanabhumi Airport for a period of three years

since from the date of utilization of the land since October 1, 2006 and November 1, 2006 to September 30,

2009 respectively. The contract has been renewed for another three - year period starting from October 1, 2009

to September 30, 2012.

f) Rental agreement for space in passenger building at the edge of the aircraft building, concourse C and concourse

F, to use for the Company office at Suvanabhumi Airport for a period of three years from September 28, 2006 to

September 27, 2009. The contract has been renewed for another three - year period starting from September

28, 2009 to September 27, 2012.

The Company has to pay annual rental fees to Airports of Thailand Public Company Limited as indicated in the

agreements, and the aforesaid rental agreements additionally stipulates the transfer of the ownership of construction on leased land

to the landlord and various conditions which the lessee must comply with.


101

2. The Company has entered a land lease agreement with the Treasury Department for a period of three years, as from

January 1, 2009 to December 31, 2011, whereby the Company will have to pay rental and comply with various

conditions indicated in the agreement.

3. A subsidiary has entered into the land sublease agreement with The Fuel Pipeline Transportation Limited and the

memorandum for FPT maintenance services the aviation fuel pipeline transportation system for a period of 30 years

from August 10, 2004 to August 9, 2034. However, the such agreement and memorandum have right to cancel if the

such subsidiary enter into land lease agreement directly with The State Railway of Thailand.

On June 1, 2010, the such subsidiary has entered into land lease agreement directly with The State Railway of

Thailand for remaining period of 24 years, 2 months and 9 days ending on August 9, 2034, and the such agreement

and memorandum with FPT cancelled already.

4. A subsidiary has entered online and management the aviation fuel pipeline transportation system service agreements

with The Fuel Pipeline Transportation Limited for a period of 30 years from October 1, 2006 to September 30, 2036.

23.1.2 The Company has entered into an agreement with Airports of Thailand Public Company Limited (AOT) whereby

it has been granted a permission to provide into-plane services at Suvanabhumi Airport for a period of 20 years

from the date the airport officially opens for service (On September 28, 2006). The Company is to compensate

AOT at the rate stipulated in the agreement, and has to comply with certain obligations. These obligations

include entering into an agreement to rent land, erect buildings and certain structures on the land and transfer

ownership of such construction to the Ministry of Finance immediately upon completion, without charge. They

also include the installation of equipment and systems to be used in implementing the project and, at its own

expense, maintaining such equipment and systems in good and workable condition throughout the term of the

agreement.

23.1.3 A subsidiary has been granted approval by Airports of Thailand Public Company Limited to operate the aviation

fuel hydrant network services at Suvarnabhumi Airport, for a period of 30 years from the date of first operation of

that company (on September 28, 2006). The subsidiary is obliged to comply with certain conditions including the

obligation to transfer the ownership of the hydrant refueling network including related supplies and spare parts

for free of charge, and to pay a concession fee to Airport of Thailand Public Company Limited at a rate stipulated

in the agreement of the subsidiary’s income before deducting expenses from the year of first operation.

On April 3, 2008, Airport of Thailand Public Company Limited (AOT) informed the subsidiary about the change

of the calculation method of concession fee on the operation of the aviation fuel hydrant network services at

Suvarnabhumi Airport to be collected from the subsidiary and required the subsidiary to pay additional fee for the

year 2006 and 2007 for an amount of Baht 42.96 million. The subsidiary submitted a disputed letter to Airports

of Thailand Public Company Limited for its consideration to charge the subsidiary according to the agreement.

However, the subsidiary has not received advice for the additional fee.

23.1.4 The Company and its subsidiaries have entered into agreements with local companies under which they have

commitments relation to the cost of equipment, supplementary engineering and design and service charges

amounting to approximately Baht 33 million (As at December 31, 2009 : Baht 22 million) with the commitments

of the Company amounting to approximately Baht 29 million (As at December 31, 2009 : Baht 14 million).

23.1.5 The Company has entered into an agreement with a local bank to guarantee credit facilities of subsidiaries to

Baht 990 million and USD 8 million, the subsidiaries have already drawn down. The Company is obligated to

comply with the terms stipulated in the agreement.


102

A subsidiary has entered into an agreement with a local bank to guarantee credit facilities of a related company

amounting to Baht 2 million (As at December 31, 2009 : Baht 2 million).

Generally, the Company and its subsidiary’s guarantees are binding for as long as the underlying obligations

have not yet been discharged by the subsidiary.

23.2 Litigation

On 8 May 2008, the Company and a subsidiary had been filed a lawsuit as co-defendants on a case

which a group of 51 plaintiffs complained that they have been suffering from the evaporation of the JET A-1

from the Company’s storage tanks. Each plaintiff demanded a compensation in the amount of 300,000 Baht

totaling approximately 15.3 Million Baht for the damages (excluding interest). The court had settlement of issues

and considered to place mediation between the plaintiffs and the defendants but could not reach an agreement.

Consequently, the court made appointment for investigation of witnesses of the Company and the subsidiary

between November 2009 and February 2010.

- On 30 June 2008, there were 3 plaintiffs having withdrawn their cases filed against the Company;

- On 24 November 2009, all plaintiffs had withdrawn their cases filed against the subsidiary;

- On 4 December 2009, there was one more plaintiff having withdrawn his case filed against the Company;

- On 21 January 2010, the court had made an appointment for the mediation again, the plaintiff requested for

period of time to seek for additional information, accordingly, the court had postponed the appointment date

among all case’s parties to be on 1 April 2010;

- On 3 May and 14 June 2010, the plaintiffs and defendants had 2 more meetings but could not reach a mutual

settlement. The Court therefore made another appointment on 30th July 2010 to schedule the hearing, where

the court has set the dates for hearing of the plaintiff’s witnesses on 24-27 and 31 May and 1-3 and 7-8 June

2011 and the hearing of the defendant’s witnesses on 21-24 June and 28 June - 1 July 2011;

On 24 November 2009, there were additional 4 plaintiffs jointly filing a lawsuit against the Company upon

the same ground. Each plaintiff claimed the damages in the amount of 300,000 Baht totaling 1,200,000Baht.

However, the 4 plaintiffs who had filed the lawsuit as the new lawsuit had withdrawn the lawsuit later, and the court

had ordered to dispose the lawsuit from the case list on 5 February 2010.

24. FINANCIAL INSTRUMENTS Financial risk management and policies

The Company and its subsidiaries are exposed to risks from changes in market interest rates and currency exchange

rates and from nonperformance of contractual obligations by counterparties. The Company and its subsidiaries use

certain derivative instruments to manage such risks and do not hold or issue derivative instruments for speculative or

trading purposes.

Interest rate risk

The interest rate risk is the risk that future movements in market interest rates will affect the results of the Company’s

and its subsidiaries’ operations and their cash flow. The Company and its subsidiaries’ exposure to interest rate risk

related primarily to their deposits with and loans from banks and financial institutions. Such financial assets and liabilities

carry interest at rates which vary with reference to the market rates. However, the Company and a subsidiary had entered

into the interest rate swap agreement and USD/THB Cross Currency Swap agreement as described in note 14 to the

financial statements.

Foreign currency risk

The Company and its subsidiaries’ exposure to foreign currency risk relates primarily to their trade debtors, payables and loan

which are dominated in foreign currencies. However, the Company’s trade debtors are to be settled in Baht in the near future and

the subsidiary has foreign currency deposit accounts which it utilizes to pay its foreign currency-denominated liabilities.


103

As at December 31, 2010 the subsidiary has entered into a loan foreign currency hedging agreement that will be due

quarterly to December 31, 2012, as the conditions set in the agreement for USD 3,200,000 (As at December 31, 2009 :

USD 4,800,000).

As at December 31, 2010 the Company and a subsidiary had foreign currency-denominated assets which were

un-hedged amounting to USD 839,299 (As at December 31, 2009 : USD 1,040,165) and liabilities were un-hedged

amounting to GBP 10,000.

Credit risk

The Company is exposed to credit risk primarily with respect to trade accounts since the majority of services are

provided to a limited number of customers. However, due to those customers’ creditworthiness, the Company does not

anticipate material losses from its debt collection.

Fair value

Since the majority of financial assets are short-term, and that loans carrying interest at rates close to current market rates, the

management believes that fair values of these financial assets and liabilities do not materially differ from their carrying values.

25. FINANCIAL INFORMATION BY SEGMENTThe Company’s and its subsidiaries’ operations involve a single industry segment in refueling service at the airport and

are carried on in the single geographic area in Thailand. As a result, all of the revenues, operating profits and assets as

reflected in these financial statements pertain to the aforementioned industry segment and geographic area.

26. PROMOTIONAL PRIVILEAGESA subsidiary was granted various tax privileges by the Board of Investment January 4, 2005, for the transportation

of petroleum products by pipeline system. Subject to certain imposed conditions, the privileges include equipment as

approved by the Board and exemption from corporate income tax on profits from the promoted activity for a period of 8

years commencing from the date income is first earned from the promoted activity, capped at 100 percent of the amount

invested by the subsidiary, excluding land costs and revolving funds. The value of the corporate income tax exemption

according to the promotional privileged certificate thus amounts to not more than Baht 435,670,000.00 The subsidiary has

adjusted the investment amount which excludes cost of land and working capital as at the date on which the operation of the

promoted project commences, to not over Baht 704,498,240.24 as approved by the Board of Investment on May 8, 2008.

27. EVENTS AFTER THE BALANCE SHEET DATE27.1 On January 21, 2011, the Company got a written approval from the bank for long term loan no. 1 Baht 800 million

under condition of 4-year principal repayment extension from February 28, 2014 to August 31, 2018 and shift the

interest rate since February 28, 2011 onwards. (Details as per notes to financial statements no.14)

27.2 On February 17, 2011, the Company got a written approval from another bank for long term loan no.3 Baht 220

million under condition of 3-year principal repayment extension from November 2015 to November 2018 and

decrease the interest rate since February 2011 onwards (Detail as per Notes to financial statements no.14)

27.3 On February 23, 2011, the board of directors of the Company has approved the follwing transactions;

1) To allot the retained earnings to be reserved for investment expansion amounting to Baht 43.56 million.

2) To allot the retained earnings to be reserved for general reserve amounting to Baht 43.56 million.

3) To declare dividends from the Company’s 2010 result at Baht 0.54 per share amounting to Baht 275.40 million

of which the Company has paid the interim dividend in September 2010 at Baht 0.18 amounting to Baht 91.80

million. The rest of dividend will be paid by cash at Baht 0.36 Per share amounting to Baht 183.60 million on

May 16, 2011.

28. APPROVAL OF FINANCIAL STATEMENTS These financial statements were approved by the Company’s authorized of directors on February 23, 2011.

104

1. Audit Fee

in the amount of Baht 1,220,726 (including out of pocket expenses for the financial year,

ended December 31, 2010) as follows:

1. Bangkok Aviation Fuel Services Plc. Baht 764,559

2. Thai Aviation Refuelling Co., Ltd. Baht 248,062

3. JP-One Asset Co., Ltd. Baht 142,635

4. Intoplane Services Co., Ltd Baht 65,470

Total Baht 1,220,726

Dharmniti Auditing Co., Ltd in the amount of Baht 60,000.

2. Non-audit fee

Auditor’s Fee

105

Report of the Audit Committeefor the Year 2010 (Translation)

To: The shareholders of Bangkok Aviation Fuel Services Public Company Limited

The Company’s Audit Committee comprises of 3 independent directors i.e.

Mr.Pachara Yutidhammadamrong as Audit Committee Chairman, Mr. Visut Montriwat and

Mr. Sumon Surathin as Audit Committee Directors, with Mrs.Mayuree Nalinwong served as the

secretary of the Audit Committee. Every Audit Committee Directors are qualified according to

the Audit Committee Charter and in line with the Regulations of the Office of the Securities and

Exchange Commission (SEC).

The Audit Committee fulfilled the responsibility according to the scope, duties and

responsibilities assigned by the Board of Directors that complied with the Regulation of the

Stock Exchange of Thailand. There were 5 Audit Committee meetings in the year 2010 and 2

Audit Committee meetings in 2011 until the reporting date, totally 7 Audit Committee meetings.

Each Audit Committee Director attended every meeting with management executives, internal

auditors, lawyer, compliance officer, and external auditors in relating issues, which could be

summarized as follows:

1. Reviewed the interim and annual financial statements of 2010, which reviewed

and audited by external auditors and by questioning and listening to the management and

the external auditor’s clarifications, concerning the correctness and completeness of the

financial statements, material accounting change, accounting policy change, risks, information

disclosure, and audit problems, as well as acknowledging the audit plan of the external

auditors for the year 2010, and the preparation in conducting the financial statements based on

International Financial Reporting Standards (IFRS). The Audit Committee attended 3 meetings

with the external auditors with no management attended. The Audit Committee agreed with

the external auditors that the financial statements were correct adhering to the generally

accepted accounting principles, having disclosed information adequately and in timely manner.

In additions, the Audit Committee had given opinions and made recommendations to the Board

of directors quarterly.

2. Reviewed the operation information and the internal control system, to evaluate

the sufficiency, appropriateness and effectiveness of the internal control system, by evaluating

the adequacy of internal control system complying with the Practice of the Office of the SEC

and considering the internal audit report for the year 2010 according to the approved internal

audit plan that covered important workflows of the Company and found no weakness or

106

Report of the Audit Committee

for the Year 2010 (Translation)

significant deficiency, Furthermore, the Audit Committee listened to the external auditors about

the internal control system and had opinion in line with the external auditors that the Company

had no deficiency in accounting internal control system that may significantly affected the

financial statements, had a good internal control system, had the asset safeguarding and the

system to monitor the operation of the Company and its subsidiaries that was appropriate and

effective to prevent corruption, and had the internal control and risk management system under

the Risk Management Framework, benchmarking with the international standard of COSO-

ERM (The Committee of Sponsoring Organizations of the Treadway Commission-Enterprise

Risk Management), which related to the operation and management procedure about internal

environment, objective setting, event identification, risk assessment, risk response, control

activities, information and communication, and monitoring system.

3. Reviewed the internal audit, by considered the mission, scope of work, duties

and responsibilities, manpower, training plan, budget and independency of the Internal Audit

Division. The Audit Committee also annually reviewed and approved the amendment of the

Internal Audit Charter to be appropriate and up to date, as well as approved internal audit plan

for the year 2010 that linked to corporate risk and evaluated the performance of the Head of

Internal Audit Division by using Key Performance Indicators (KPIs). The Audit Committee had

opinion that the Company had the internal control that was appropriate, effective, in line with

the strategic objectives and risks of the Company, independent, and also had developed the

audit quality in personnel training and audit work.

4. Reviewed compliance with the Securities and Exchange Acts, Regulations

of the Stock Exchange of Thailand (SET), and any other relevant laws, including the

compliance with the Company’s requirement and obligations to external parties. The

Audit Committee did not find any significant incompliance to the law, Regulations and the

Company’s obligations to external parties.

5. Reviewed the risk management process, to be link with the strategic plan and internal

control system to manage the overall risks of the Company, by reviewed the risk management

process to be in line with Risk Management Policy, and Strategic Plan and Risk Management

Manual. The Audit Committee got reports from the Risk Management Committee quarterly. The

Audit Committee had the opinion that the Company had risk management system that was

appropriate, sufficient, and effective, had appropriate crisis management plan that fit with the

situation, reviewed the corporate objectives, risk factors, Key Risk Indicators in corporate and

107

functional levels, Risk Appetite and Risk Tolerance that aligned with 2009-2012 strategic plan,

which annually adjusted to be appropriate and fit with the business environment. In addition,

the Company had measures in managing risk arising from politic, climate change, and foreign

currency exchange fluctuation. Also, the Audit Committee gave opinions and recommendations

to the Board of Directors quarterly.

6. Considered the connected transactions or transactions that may have conflict

of interests. The Company set its rule and had Compliance Section to monitor the compliance

of law and Regulation of the Office of the SEC and the Company’s rule. The Audit Committee

had opinion that every transactions were reasonable and the most beneficial to the business of

the Company and were disclosed correctly and completely.

7. Reviewed the Audit Committee Charter to be appropriate and in line with the

Regulations of the Office of the SEC and the SET, and proposed to the Board of Directors

annually.

8. Considered the overall assessment and self-assessment of the Audit

Committee for the year 2010. The evaluation result revealed that the Audit Committee’s

performance completely fulfilled according to its Charter. The evaluation items were such as the

Audit Committee’s composition, duties and responsibilities, meeting, working with the external

auditors, and training.

9. Conducted the Report of the Audit Committee’s Activities and proposed to the

Chairman of the Board of Directors for every Audit Committee meetings.

10. Considered Appointing the External Auditors and their audit fee for the Year

2011 and proposed to the Board of Directors to ask for the approval of the Annual Shareholder’s

Meeting for the year 2011. The Audit Committee considered appointing the external auditors

by evaluating their skill, knowledge, competence, audit team, quality of audit work in 2010, fee,

and independency in compliance with the Practice of the Office of the SEC. Also, the Audit

Committee required them to submit independency certification letter. The Audit Committee

proposed appointing Mr.Pichai Dachanapirom, Certified Public Accountant Registration number

2421, or Mr. Pojana Asawasartichai, Certified Public Accountant Registration number 4891, or

Ms.Chantra Wongsriudomporn, Certified Public Accountant Registration number 4996, or Ms.

Wannisa Ngambuathong , Certified Public Accountant Registration number 6838 of Dharmniti



108

Auditing Co., Ltd. to serve as the Company’s external auditors for the year 2011, with the

audit fee of Baht 800,000. The Audit committee has the opinions regarding the appointment of

external auditors as follows:

professional competence satisfied work quality as well as to have continuation in audit

work.

Baht 750,000, is appropriate as there are new accounting and financial reporting standards

and most of them will be effective in 2011. Therefore, the audit time has to be increased. In

addition, the fee in 2010 was at the same rate as that of 2009.

of the financial statements signatory external auditor every 5 years, while the Company has

used the service of Dharmniti Auditing Co., Ltd. since 2009.

subsidiaries.

In summary, the Audit Committee had fulfilled the responsibility of the Audit Committee

Charter that was approved by the Board of Directors, by using their knowledge, competence,

and having independency, as well as giving opinions and recommendations to the management

and the Board of Directors continually. Furthermore, the Audit Committee had opinion that the

Company disclosed financial and operation information correctly, completely, had appropriate

and effective internal control, internal audit, and risk management, complied with laws,

regulations and obligations, conducted the connected transactions correctly, developed the

operation systems to be more qualified and fit with the changing business environment on a

continuing basis, and also had selection criteria to propose the independent persons to serve

as the external auditors and considered their audit fee.

February 11, 2011

On behalf of the Audit Committee

Mr.Pachara Yutidhammadamrong

Chairman of the Audit Committee



109

Summary of the Opinion Concerning Adequacy and Appropriateness of the Internal Control System for the Year 2010

The Company’s Board of Directors has appointed the independent Audit Committee

to review the Company’s internal control system to ensure the system’s appropriateness and

effectiveness in protecting the assets of the Company and its subsidiaries.

On February 23, 2011, the Company’s Board of Directors and Audit Committee had

a meeting and agreed with the opinions of the Audit Committee as indicated by the evaluation

checklist of the internal control system for the year 2010 that the Company’s internal control

system and monitoring system for the Company’s subsidiary companies were appropriate and

effective. In addition, the Company had the internal control and risk management system under

the Risk Management Framework, benchmarking with the international standard of COSO-

ERM (The Committee of Sponsoring Organizations of the Treadway Commission-Enterprise

Risk Management), which related to the operation and management procedure as follows.-

1. Internal Environment The Company had arranged organization chart, by emphasizing on functional

segregation, and given importance on Good Corporate Governance, by having policies and

manual in important matters i.e. Corporate Governance Policy, Risk Management Policy, Social

Responsibility Policy, JV Core Principle Policy, Quality Policy, Safety, Occupational Heath and

Environmental Policy, Code of Conduct for etc. The Company has set up Code of Conduct Working

Group. The Company’s Code of Conduct is the discipline that the directors and employees

must adhere to, and to ensure such compliance, the Company requires every management and

employees to conduct on-line test, which they have to pass 80% within the specified testing

time. The Company has educated Good Corporate Governance and Risk Management for

new employees, and also has training courses for its employees about Corporate Governance

and Risk Management annually. The Company has regulation prohibiting its management

and employees to act with conflict of interests with the Company which specifying in Code of

Conduct and Employees’ regulation Manual. The Company set up its core values in line with

the Company’s vision, mission, core competencies and objectives to ensure that the employees

realized in it and conduct their good behavior to alloy into the organizational culture behavior,

enhancing work efficiency. The Company has also used Following Best Practice, one of its core

values, as the criteria in annual performance evaluation of its management and employees.

The Company modified Code of Conduct on-line test annually to be more clarified and

extend more coverage of its Code of Conduct. Furthermore, the Risk Appetite of the Company

was modified to be in line with the changing internal and external environments.

The Company amended the regulation in related transactions and had audit mechanism

to be in line with the good internal control system. And to improve work efficiency, the followings

had been adjusted; Regulation in sending employees to work in its subsidiaries, Regulation

in bringing asset out of the Company, Regulation in using the Company’s car, Regulation on

Service Awards, Strategic Planning and Risk Management Manual, Employee Performance

Evaluation Criteria for etc.

110

Summary of the Opinion Concerning Adequacy and

Appropriateness of the Internal Control System

for the Year 2010

The Company recognized the importance of developing and training its employees

to gain knowledge, skill, and competence to be suitable for them and their jobs. To prepare

the work roadmap for its employees, the Company has Training Roadmap Manual, Individual

Development Plan, English Language Development Plan, English Language E-Learning, as well

as Successor Development Plan to reduce weakness and improve strength of successors in

the right direction and systematically.

In addition, from Corporate Governance Report Survey of Thai Listed Companies in

2010 conducted by Thai Institute of Directors (IOD), the Company received Excellent Corporate

Governance Scoring as same as last year. The Company also received honorable awards

such as National Award of the Outstanding for Enterprise of Safety Operations, Occupational

Health and Working Environment in 2010 in 2 areas i.e. Don Mueang Depot and Suvarnbhumi

Intoplane. Moreover, the Company was chosen from Thailand Greenhouse Gas Management

Organization (TGO) and National Metal and Materials Technology Center (MTEC) as a pilot

organization in “Carbon Footprint for Organization” Project.

2. Objective Setting The Company set up the Company’s strategic plan, with clear and measurable

goals, established Key Performance Indicators (KPIs), and the Company Objectives to be in

line with Strategic Goals and risk appetite, using the “Balanced Scorecard” concept which

covered various business aspects such as finance, customer, internal process, learning and

development. The Company also set up Key Risk Indicators (KRIs) on corporate and functional

levels, Risk Tolerance, ISO 9001 Objectives, and OHSAS 18001:2007 Objectives.

The Company revised Key Performance Indicators (KPIs) and KPIs Objectives to

be in line with its Strategic Goals, and amended the accident control objectives, causing by

employees and the Company, for each areas. In addition, the Company had the monitoring and

reporting system of strategic plan to the Board of Directors every 6 months, had the budget

system as the operation indicator and control, as well as used Activity Based Costing (ABC) and

Activity Based Management (ABM) to assist in analyzing, administering and managing it costs

to be more efficient.

3. Event Identification The Company used the updated corporate and functional levels objectives and

procedures to identify the events or risk factors that may occur, suitably and continually, by

doing workshop with the management and related employees and considering internal and

external risks of the Company i.e. financial risk, risk from operation, politic, and economy.

Furthermore, the Company revised risk factors, risk control plan, Key Risk Indicators

(KRIs), risk tolerance, and trigger point (that was early warning system) to align with the Strategic

Goals to promptly tackle problems at an early stage. The Company also has contingency

plans in normal situations and crisis management, has monitoring and reporting system of risk

management work plan to the management, Risk Management Committee, Audit Committee

and the Board of Directors for their acknowledgement continually.

111



for the Year 2010

4. Risk Assessment The Company has established and revised risk assessment through qualitative

and quantitative risk indicators/risk factors, by dividing into corporate and functional risks.

Furthermore, the Company assesses the likelihood and impact of each risk and prioritized the

risk importance by classifying into high, medium and low risk.

In addition, the Company has assessed its residual risk, which is the current risk before

having additional risk control plan, and decreased the target risk to make the risk control plan

be appropriate with the Company’s acceptable level.

5. Risk Response The Company has systematic risk management process, by designating the responsible

person in risk management and completion date, to reduce the chance in occurring risk and

impact to be in an acceptable level. The Company also has continual risk management together

with internal control measure to fit the changing risk continually and prioritize to manage the

high risk. The Company has used the following risk management strategies i.e. Treat (to set

measures to reduce risk), Take (to take risk that may occur), Transfer (to transfer risk to third

parties) and Terminate (Not to do activity that may cause risk).

Moreover, the Company has monitored the incidents that may affect its business and

set the risk reducing measures, for example:

Co., Ltd. (Thappline) and the oil depot of the army’s Quartermasters Department in

Nonthaburi province, as well as bombs at other areas. The Company had measures

to reduce its own risk such as increasing security guards, installing more CCTV,

installing noise barrier at toll way in front of Don Mueang Depot, and following

security measures of the Centre for the Resolution of Emergency Situations, for

etc.

The Company had risk reducing measures such as establishing Global Warming

Working Group as well as setting up plan, objectives, and measures in using of

renewable energy campaign, for etc.

into foreign exchange forward contract continually, for etc.

6. Control Activities The Company’s Board of Directors has appointed sub-committees to oversee specific

areas of management as assigned. Such committees have fully performed their duties within

the scope, authority and responsibilities as assigned by the Board of Directors.

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for the Year 2010

The Company has issued manual of authorities in each level, operation manuals, and

job descriptions, which clearly specified and are in written manner. The manuals are updated

regularly to ensure efficiency. The duties and responsibilities segregation about approved

authority, accounting records and information, and asset safeguarding are clearly segregated.

The Company has regulation on connected transaction, in line with the Regulations of the Office

of the SEC, has prepared its personnel and information management system to support for

the adoption of International Financial Reporting Standard (IFRS) in 2011, by hiring consulting

expertise, setting working group, implementing of the plan, and training the employees. The

Company has follow up measure to ensure the compliance with its regulation and related law, by

Legal and Securities Division, Internal Audit Division and Quality Management System Division

for etc.

In addition, the Company has revised the Regulations in monitoring, supervising and

setting direction for the Company’s subsidiaries and direction for persons who are nominated

as director or management, and assigned them to report the performance of such companies

to the management monthly and to the Board of Directors every 6 months.

7. Information and Communication The Company has prepared and issued the meeting agendas with adequate information

to the Board of Directors within the time as prescribed by law. The Company has arranged the

assessment of the Board of Directors’ meeting efficiency for every meeting. The minutes of

the Board of Directors has detail that the shareholders can review the appropriate activities of

the Board of Directors. The Company has filed accounting records under various categories in

compliance with applicable laws, and has the back up system. There were meetings between

the Audit Committee, external auditor, and management regarding the external auditor report,

performance of the Company and its subsidiaries, risk and risk managing measures, accounting

policy, internal control and connected transactions disclosure, for etc.

The Company has efficient and effective communication channel which can communicate

throughout the Company and its subsidiaries. The important information would pass from the

management to employees and from employees to the management, such as the Company’s

policies and regulations, manual of authorities, corporate governance, risk management and

employee’s information. For external communication channel, the Company has an investor

relations section to disseminate information to investors and external parties.

Furthermore, The Company has internal and external activities, relating to Customer

Relationship Management (CRM) such as Happy hours activity, information dissemination

through Social Network: Facebook. The Company has improved the information reporting

format via web-site for airline customers. The Company has also set up Service Signature, in

line with the marketing strategy plan.

113



for the Year 2010

8. Monitoring In 2010, the Company had 5 Board of Directors’ meetings to consider and monitor the

performance of management to ensure achieving the specified goal. If the performance differed

from the specified goal, the Board of Directors would assign the management to rectify and

report the progress to the Board of Directors. Also, the Company had monthly management

meeting to consider and monitor the performance to achieve the specified goal, and reported

to the Board of Directors. The Company has implemented Key Performance Indicators (KPIs),

and reported the implementation of the strategy to the Board of Directors every 6 months to

ensure that the goal and objectives of the Company are reached. The Company has quarterly

progress report of risk controlling plan and Key Risk Indicators status report, together with the

report when Key Risk Indicators affect Trigger Point and not in the specified Risk Tolerance.

Furthermore, to enhance work efficiency, the Board of Directors requires the sub-committees

to evaluate their performance as well.

In 2010, the Company had 5 Audit Committees’ meetings. The Audit Committee fulfilled

the responsibility according to the Audit Committee Charter i.e. review the financial statements

reporting, operation information, internal control and internal audit, compliance with the law

and commitment, risk management process, asset safeguarding, appoint external auditors,

consider connected transactions, review Audit Committee Charter, conduct overall assessment

and self assessment, evaluate the performance of Head of Internal Audit Division, consider the

independency of Internal Audit Division, approve budget and man power of Internal Audit Division,

and approve internal audit plan, by using risk-based approach to ensure that the Company has

suitable internal control for risk management. Internal Audit Division, which is independent,

has functional reported to the Audit Committee, while administrative reported to Managing

Director. Internal Audit Division has examined internal control system, risk management system,

connected transactions, the compliance with related rules and regulations of the Company

and its subsidiaries, and also made recommendations in various aspects to ensure that the

operation of the Company and its subsidiaries would reach the specified objectives.

The Company’s external auditor is Mr.Pichai Dachanapirom of Dharmniti Auditing Co.,

Ltd. who is approved by the Office of the SEC and is the external auditor for the consolidated

financial statements of the Company and its subsidiaries and the separate financial statements

of the Company for the year ended December 31, 2010. The external auditor studied and

evaluated the efficiency of the requisite internal control system in accounting for the benefit

of setting scope, testing method and audit period, and found no significant weakness in the

internal control system in accounting that may have material effect on financial statements.

However, the external auditor did not audit every accounting item, but used only testing method

for the audit objective, not for giving opinion on the efficiency of the internal control system of

the Company.

114

Connected Transactions

Name Type of Transaction Relationship

1. Transactions between BAFS and connected persons who may have conflict of interests

1. Thai Airways 1. Aviation fuel storage, fuel and defuel service at 1. THAI is major shareholder of BAFS

International Pcl. (THAI) Don Mueang Airport and Suvarnabhumi Airport 2. - Flying Officer Norahuch Ployyai

(ended Nov 30, 2010)

- Flight Lieutenant Montree Jumrieng

(since Feb 18, 2010)

- Mr. Chokchai Panyayong

(since Feb 18, 2010)

- SQN.LDR.Asdavut Watanangura

(since Dec 16, 2010)

BAFS’s directors are the executives of THAI

2. Collection of service fee for aviation fuel transport

through agreed contract Hydrant System at


3. Customs Service Fee

2. Chevron (Thailand) Ltd. 1. Aviation fuel storage, fuel and defuel service at Mr.Tanachai Vienravee, BAFS’s director is the executive

Don Mueang Airport and Suvarnabhumi Airport of Chevron (Thailand) Ltd.


through Hydrant System at Suvarnabhumi Airport


3. The Shell Company 1. Aviation fuel storage, fuel and defuel service at Mr.Ath Hemvijitraphan, BAFS’s director is the executive

of Thailand Ltd. Don Mueang Airport and Suvarnabhumi Airport of The Shell Company of Thailand Ltd


through Hydrant System at Suvarnabhumi Airport


4. PTT Plc. 1. Aviation fuel storage, fuel and defuel service at 1. Ministry of Finance is indirect major shareholder

Don Mueang Airport and Suvarnabhumi Airport of BAFS and major shareholder of PTT Plc.

2. Collection of service fee for aviation fuel transport 2. - Mr.Tevin Vongvanich (ended Feb 15, 2010)

through Hydrant System at Suvarnabhumi Airport - Mr. Nuttachat Charuchinda (since May 13, 2010),

BAFS’s directors are the executive of PTT Plc.

3. Aviation fuel and defuel service at Samui and

Sukothai Airports

4. Gas to refuel the vehicles

115


Unit Price Amount Outstanding Continuation of

( Exclude VAT ) Balance as of Transaction

Dec 31, 2010

As specified in the agreed contract, with general 268. 88 Mil.Baht 25.49 Mil.Baht Continue

business conditions

As specified in the agreed contract between BAFS, 95.61 Mil.Baht 8.82 Mil.Baht Continue

users, and Thai Aviation Refuelling Service Co., Ltd. and

with general business conditions

As specified in the agreed contract to full-service - - Continue

users, which is support normal business transactions,


As specified in the agreed contract, with general 332.12 Mil.Baht 30.69 Mil.Baht Continue

business conditions





users, which is support normal business transactions, with

general business conditions


business conditions





users, which is support normal business transactions, with

general business conditions


business conditions





business conditions

General business conditions, Actual use 3.70 Mil.Baht 0.31 Mil.Baht Continue

116



5. Airports of Thailand 1. Lease for Fuel Pipeline, Building and Area 1. Ministry of Finance is indirect major shareholder

Plc. (AOT) of BAFS and major shareholder of AOT

2. Mr.Serirat Prasutanond, BAFS’s director is the

1. Fuel Pipeline Lease executive of AOT

(The lease payment was waived

during Apr 1, 2009 – Dec 31, 2010)

2. Lease for office building and area inside

parking apron

3. Lease area outside parking apron

1. Concession fee for Into-plane Service

2. Lease area outside parking apron

3. Lease area inside passenger building

4. Lease area for parking dispensers and

refuellers inside apron

Lease area outside parking apron

2. Utility and other charges

6. Ministry of Finance Lease for office building and land at Don Mueang Airport Indirect major shareholder of BAFS

7. Thai Petroluem 1. Lease of Land, Building, Utility Service Ministry of Finance is indirect major shareholder of

Pipeline Co., Ltd.(THAPP) BAFS and THAPP

1. Lease of Land and Building

2. Utility service

1. Lease of Land and Building

2. Utility service

2. Water for fire suppression system, water and electricity

8. Dhipaya Insurance Plc. 1. Property Insurance, Aviation Third Party Legal Ministry of Finance is indirect major shareholder of

Liability Insurance and Terrorism Insurance BAFS and Dhipaya

2. Car Insurance and Car Casualty Coverage

117


Unit Price Amount Outstanding Continuation of


Dec 31, 2010

- - - Continue

115 Baht/sqm /month 8.71 Mil.Baht 2.12 Mil.Baht Continue


0.06 Baht/liter 223.72 Mil.Baht 93.06 Mil.Baht Continue




7 Baht/sqm /month 0.02 Mil.Baht - Continue

General business conditions, Actual use 4.08 Mil.Baht 0.27 Mil.Baht Continue

- 6.43 Mil.Baht - Continue

As specified in the agreed contract, with general business 0.45 Mil.Baht - Continue

conditions 0.66 Mil.Baht - Continue


conditions 2.52 Mil.Baht - Continue

As specified in the agreed contract, with general business 0.30 Mil.Baht 0.11 Mil.Baht Continue

conditions, Actual Use


conditions

As specified in the agreed contract, with general business 1.16 Mil.Baht 0.25Mil.Baht Continue

conditions

118



9. Thai Aviation Refuelling 1. Guarantee Fee 1. BAFS is major shareholder of TARCO

Co., Ltd. (TARCO)

2. Connection of facilities with Hydrant system 2. M.R. Supadis Diskul, BAFS’s executive is

the executive of TARCO

3. Lease for office building

- Lease for canteen area at Suvarnabhumi Depot

- Utility charges

4. Management service

5. Provision of stock account system and collection service

6. Audit on Hydrant System Operation

7. Quality Assurance and Technical Training

8. Hydrant Sampling Drain and Pit Cleaning

9. Safety and occupational heath consulting service

10. Legal consulting service

11. Computer system service

12. Consult service for application program

13. Training service in Quality Management

14. Training service in Writing course and English course

for business communication

15. Granting of Karaoke set

10. Intoplane Services 1. Aviation refuelling service employment 1. BAFS is major shareholder of IPS

Co., Ltd. (IPS)

2. Management service 2. Mr. Jarern Pavarojkit, BAFS’s executive

is the executive of IPS

3. Telephone system service

119


Volume Unit Price Amount Outstanding Continuation of


Dec 31, 2010

870 Mil.Baht 1% of amount used each quarter by 6.48 Mil.Baht 1.42 Mil.Baht Continue

$ US 8 Mil. TARCO

- 582. 30 Mil.Baht 54. 02 Mil.Baht Continue

82.22 sqm . 496.74 Baht/sqm/month (not include 0. 55 Mil.Baht - Continue

property and land tax)

- 33,115.95 Baht /month 0.40 Mil.Baht - Continue

- As agreed fee + 12.5% 4.15 Mil.Baht - Continue

- 478,146.60 Baht /month 1.91 Mil.Baht - Continue

(May 1, 2009 – Apr 30, 2010)

492,491 Baht /month 3.94 Mil.Baht - Continue

(May 1, 2010 –Apr 30, 2011)

- As agreed rate 0.06 Mil.Baht 0.02 Mil.Baht -

- As agreed rate 0.83 Mil.Baht 0.10 Mil.Baht Continue

- As agreed rate 0.02 Mil.Baht - -

- As agreed rate 0.006 Mil.Baht - Continue


- 8,000 Baht /month 0.008 Mil.Baht 0.008 Mil.Baht Continue

- 52,500 Baht /month 0.63 Mil.Baht - Continue


- As agreed rate 0.05 Mil.Baht 0.02 Mil.Baht -

- - 0.03 Mil.Baht - -

- At cost + 12.5% 6.49 Mil.Baht - Continue


Actual Use As agreed rate 0.004 Mil.Baht - Continue

120



11. JP-One Asset Co., 1. Guarantee Fee 1. BAFS is major shareholder of JP-One

Ltd (JP-One)

2. Lease for receiving pipeline system at Suvarnabhumi Airport 2. M.R. Supadis Diskul, BAFS’s executive is

the executive of JP-One

3. Lease for Jet-A1 Depot at Suvarnabhumi Depot Area

4. Purchase of pipeline and pipeline joint

5. Lease for office building

1. Lease of Office Building

2. Utility service

1. Lease of Office Building

2. Utility service

3. Telephone system service

6. Management service

7. Safety and occupational heath consulting service

8. Quality management consulting service

9. Information technology network service

10. Legal consulting service

11. Marketing consulting service

12. Risk management service

13. Training service in Quality Management

14. Training service in Writing course for business

communication

12. Fuel Pipeline 1. Lease/Service for aviation fuel receiving pipeline system Ministry of Finance is indirect major shareholder

Transportation Ltd. (FPT) of BAFS and FPT

2. Lease for land and office building

- Lease for land

- Lease for office building

3. Lease for diesel receiving pipeline system

4. Commissioning for aviation fuel receiving pipeline system

5. Commissioning for diesel receiving pipeline system

6. Assistance in debt restructuring

- Long term loan and receivable

- Interest income

121




Dec 31, 2010

Long - Term Loan 1% of amount used each quarter by 0.30 Mil.Baht 0.07 Mil.Baht Continue

120 Mil. Baht JP-One

JET A-1 volume 0.01 Baht/liter/month 10.60 Mil.Baht 0.77 Mil.Baht Continue

transporting through

pipeline system


- - 0.81 Mil.Baht 0.81 Mil.Baht -

100 sqm 295.35 Baht/ sqm/month 0.39 Mil.Baht - Continue

(not include property and land tax )

Actual Use As agreed rate 0.03 Mil.Baht 0.01 Mil.Baht Continue

54 sqm 450 Baht/sqm/month (not include 0.36 Mil.Baht - Continue

property and land tax )


Actual Use As agreed rate 0.01 Mil.Baht 0.01 Mil.Baht Continue






- As agreed rate 0.31 Mil.Baht 0. 1 Mil.Baht Continue




- 21.5 % of FPT’s revenue from 2.91 Mil.Baht 0.32 Mil.Baht Continue

JET A-1 transporting (before discount

and tax)

8,144 sqm Rental charges paid to Department of 1.20 Mil.Baht - Continue

Treasury plus 5%

1,458 sqm 320 Baht/sqm/month 5.60 Mil.Baht - Continue

- As agreed rate 2 .04 Mil.Baht 0.51 Mil.Baht Continue

0.003 Mil.Baht 0.003 Mil.Baht -

0.18 Mil.Baht 0.18 Mil.Baht -

1% per annum - 382 .69 Mil.Baht Continue

3.93 Mil.Baht - Continue

122


2. Transactions between Thai Aviation Refuelling Co., Ltd. (Subsidiary) and connected persons who may have conflict of interests


1. Airports of Thailand 1. Permission for Operation of the Hydrant Pipeline Network 1. Ministry of Finance is indirect major shareholder

Plc. (AOT) of BAFS and major shareholder of AOT

2. Lease for land at Suvarnabhumi Airport for laying 2. - Mr.Nirandra Theeranartsin

equipments and hydrant pipeline - Mr.Chayakorn Aksharamat (ended Oct 31, 2010)

- Flying Officer Anirut Thanomkulbutra

(since Nov 29, 2010),

TARCO’s directors are the controlling

persons of AOT

3. Lease for room inside passenger building at

Suvarnabhumi Airport for office building

4. Lease for area behind domestic cargo at Suvarnabhumi

Airport to construct for parking the service vehicles and

other facilitators

5. Lease for area inside parking apron at Suvarnabhumi

Airport for parking the service vehicles and storing

ground support equipments

6. Utility and other charges of AOT

2. PTT Plc. Gas to refuel the vehicles 1. Ministry of Finance is indirect major shareholder

of BAFS and major shareholder of PTT Plc.

2. - Mr.Tevin Vongvanich (ended Feb 15, 2010)

- Mr. Nuttachat Charuchinda

(since May 13, 2010), BAFS’s directors

are the executive of PTT Plc.

3. The Shell Company Gas to refuel the vehicles Mr.Ath Hemvijitraphan, BAFS’s director is the

of Thailand Ltd. executive of The Shell Company of Thailand Ltd.

4. Dhipaya Insurance Plc. Property Insurance, Aviation Third Party Legal Ministry of Finance is indirect major shareholder

Liability Insurance and Terrorism Insurance of BAFS and Dhipaya

123




Dec 31, 2010

- 2% per annum of TARCO’s revenue 11.65 Mil.Baht 11.65 Mil.Baht Continue

before deduct any expenses

121.20 sqm 60 Baht/sqm/month 0.09 Mil.Baht - Continue

136.58 sqm 450 Baht/sqm/month 0.09 Mil.Baht - Continue

1,600 sqm 60 Baht/sqm/month 1.24 Mil.Baht - Continue

39 sqm 150 Baht /sqm/month 0.06 Mil.Baht - Continue

General business condition, Actual use 0.55 Mil.Baht 0.04 Mil.Baht Continue

- General business condition, Actual use 0.48 Mil.Baht 0.01 Mil.Baht Continue

- General business condition, Actual use 0.13 Mil.Baht 0.01 Mil.Baht Continue

- As specified in the agreed contract, 2.32 Mil.Baht - Continue


124


3. Transactions between JP-One Asset Co., Ltd. (Subsidiary) and connected persons who may have conflict of interests


1. Fuel Pipeline 1. Land sublease for laying pipeline and constructing control Ministry of Finance is indirect major

Transportation Ltd. (FPT) station (ended May 31, 10) shareholder of BAFS and FPT

2. Guarantee for compliance of land lasing agreement for

laying pipeline and constructing control station

(ended May 31, 10)

3. Pipeline route monitoring (ended May 31, 10)

4. Connection of common facility with Makkasan

-Suvarnabhumi pipeline system

5. Employment for operation, repair and maintenance of

Makkasan-Suvarnabhumi pipeline system

6. Throughput fee from Bangchak Refinery and

fuel depot at Chong Nonsi to Makkasan control station

2. PTT Plc. Service charge for pipeline system to Suvarnabhumi Depot 1. Ministry of Finance is indirect major

shareholder of BAFS and major shareholder

of PTT Plc.

2. - Mr.Tevin Vongvanich (ended Feb 15, 2010)

- Mr. Nuttachat Charuchinda

(since May 13, 2010),

BAFS’s directors are the executive of PTT Plc.

3. Chevron (Thailand) Ltd. Service charge for pipeline system to Suvarnabhumi Depot Mr.Tanachai Vienravee, BAFS’s director is the

executive of Chevron (Thailand) Ltd.

4. The Shell Company Service charge for pipeline system to Suvarnabhumi Depot Mr.Ath Hemvijitraphan, BAFS’s director is the

of Thailand Ltd. executive of The Shell Company of Thailand Ltd.

5. The Bangchak Service charge for pipeline system to Suvarnabhumi Depot Ministry of Finance is indirect major

Petroleum Plc. shareholder of BAFS and The Bangchak

Petroleum Plc.

6. Airports of Thailand Land lease outside airport ground within Suvarnabhumi Airport 1. Ministry of Finance is indirect major

Plc. (AOT) to lay aviation fuel pipeline shareholder of BAFS and major

shareholder of AOT

2. Mr.Serirat Prasutanond, BAFS’s

director is the executive of AOT

125




Dec 31, 2010

10,672 sqm 232 Baht/ sqm/year 1.03 Mil.Baht - -

- 2 Mil.Baht - -

23,680 m 755,200 Baht/month 3.78 Mil.Baht - -

0.51% of revenue but not less than 0.57 Mil.Baht 0.04 Mil.Baht Continue

15,000 Baht /month

5% of revenue but not less than 5.56 Mil.Baht 0.41 Mil.Baht Continue

100,000 Baht/month

1,059.56 Mil.liters 6.50 Satang/liter 68.87 Mil.Baht 5.02 Mil.Baht Continue

36.43 Mil.liters As agreed conditions 6.19 Mil.Baht - Continue

210.31 Mil.liters As agreed conditions 35.75 Mil.Baht 0.29 Mil.Baht Continue



2,209.88 sqm 60 Baht/sqm/month 1.47 Mil.Baht - Continue

126

The Company’s Board of Directors has appointed the independent Audit Committee to

consider the connected transactions of the Company in compliance with the Regulations of the

Stock Exchange of Thailand and Office of the Securities Exchange Commission (SEC)

In 2010, the Company engaged in transactions with connected persons in various normal

business conditions. The disclosure of pricing policy of such transactions appeared in the notes of

the Company’s consolidated financial statement as of December 31, 2010.

Furthermore, in the Board of Directors’ meeting held on February 23, 2011 attended by

the Audit Committee, the Board of Directors agreed with the opinions of the Audit Committee

that these transactions are reasonable and the most beneficial to the business of Company, in

accordance to the Regulations of the SEC as follows.

1. The transactions between the Company and the connected persons who may have conflict of interests1.1 Thai Airways International Pcl.1.2 Chevron (Thailand) Ltd. 1.3 The Shell Company of Thailand Ltd.

Rationale and Necessity The Company provides the aviation fuel storage, transport and refuelling services at Don

Mueang and Suvarnabhumi Airports. The Company and the users have established an agreement

to clearly set the terms and service rate which equals to the rate charged on external parties

except for new oil companies that are not the Company’s shareholders to be charged as the

terms specified, in accordance with the policies approved by the Board of Directors.

However, for the fuel transportation through the Hydrant Pipeline System at Suvarnabhumi

Airport, the Company, the users, and Thai Aviation Refuelling Co., Ltd. who receives the concession

in operating the Hydrant System, have jointly agreed upon the terms and service fees in aviation

fuel transportation at the same rate as the external parties.

The Company represents Thai Aviation Refuelling Co., Ltd. in charging the representative

service fee to the users with the pre-specified contracts.

The Audit Committee has the opinion that such transactions are connected transactions,

but are necessary and the most beneficial to the Company’s operation since they are part of

normal business operation of the aviation refuelling service at Don Mueang and Suvarnabhumi

Airports.

Moreover, the Company provides free custom clearance service for the users who has

a full-service contract. The Audit Committee has the opinion that such transaction is connected

transaction, but is offered to facilitate users, which is the supporting normal business transaction

with general business conditions. This service should benefit the Company’s operation in both

Don Mueang and Suvarnabhumi Airports.

Opinion on Connected Transactions

for the Year 2010

127


for the Year 2010

1.4 PTT Plc.Rationale and Necessity

The Company provides the aviation fuel storage, transport and refuelling services, as

well as collection of service fee for aviation transport through Hydrant System to PTT Plc. (PTT)

as same as to Thai Airways International Plc., Chevron (Thailand) Ltd. and The Shell Company of

Thailand Ltd.

Moreover, the Company provides the aviation refuelling service at Samui and Sukhothai

Airports, whereby PTT supply fuel through aviation refuelling system. PTT has agreed on the

aviation fuel service charge to the Company in accordance with the pre-specified terms and

the service rate. The Audit Committee has the opinion that such transactions are connected

transactions, but are beneficial to the Company’s operation.

The Company bought fuel from PTT gas station to refuel the Company’s vehicles. PTT

charges the Company according to the market price with general business conditions. The Audit

Committee has the opinion that such transaction is connected transaction, but is beneficial to the

Company’s operation.

1.5 Airports of Thailand Plc. (AOT)Rationale and Necessity

The Company has entered into the Fuel Pipeline Lease Agreement with AOT since it is

part of the normal business operations of aviation refuelling service in transporting aviation fuel

through Hydrant System at Don Mueang Airport. The Company has to compensate AOT at the rate

stipulated in the agreement which 16% of fuel pipeline investment and the rate would be adjusted

annually according to the Consumer Price Index.

The Company has the lease contract for offices and the areas inside and outside parking

apron at Don Mueang Airport for operating the aviation refuelling service on the same rental rate as the

external parties.


but are necessary and the most beneficial to the Company’s operation since they are part of

normal business operation of the aviation refuelling service at Don Mueang Airport.

Since 2009, Thai Government has policy to operate Suvarnabhumi Airport as a single

airport for international and domestic flights with certain flight schedule, while operate Don

Mueang Airport for chartered flights, private flights, and maintenance aircrafts. Therefore, the

Company has requested for the exemption of fuel pipeline charge. Subsequently, AOT exempted

the charge for the year 2010 .

The Company has entered the Into-Plane Service contract with AOT at Suvarnabhumi

Airport to provide the aviation refuelling service. AOT has granted the concession to the Company

in into-plane and defuel service at Suvarnabhumi Airport for 20 years, starting from the date of

formal opening of the airport on September 28, 2006. The Company is to compensate AOT at the

rate stipulated in the agreement which equals to the rate for external parties and has to comply

with certain obligations.

128


for the Year 2010

The Audit Committee has the opinion that such transaction is connected transaction, but

is necessary and the most beneficial to the Company’s operation since they are parts of normal

aviation refuelling operation at Suvarnabhumi Airport.

The Company has also entered into the lease agreement outside the parking apron at

Suvarnabhumi Airport to construct the office buildings and the amenities for aviation refuelling

service for 20 years, starting from the date of formal opening of the airport at the same rate as

charged on external parties.

In addition, the Company has entered into the lease agreements inside the passenger

building and necessary area for parking dispensers and refuellers inside apron at Suvarnabhumi

Airport for the Into-Plane operation, on the same rental rate as the external parties.


but are necessary and the most beneficial to the Company’s operation since it is a part of normal

aviation refuelling operation at Suvarnabhumi Airport.

In the early 2010, AOT concerned of the effect of political conflict situation in the country,

as such AOT had measures to alleviate such effect to the airlines and operators at Don Mueang

and Suvarnabhumi Airports, by decreasing the rental charge and/or building service charge by

10% for 9 months, since April – December 2010. Therefore, the Company received the discount

for the rental charge of office building and area inside and outside parking apron.

The Company rents the land outside the parking apron at Chiang Mai Airport from AOT

between the Company’s aviation fuel depot and the roads inside Chiang Mai Airport. This is to

support the original expansion plan of service to Chiang Mai Airport. The lease rate equals to the

rate for external parties. However, this plan has no potential to arise; the Company will further

cancel the agreement with AOT. The Audit Committee has the opinion that such transaction is

connected transaction, but is beneficial to the Company’s operation according to the original

plan.

Moreover, the Company uses infrastructure and facilities of AOT in various airports.

These are services AOT provides to facilitate the Company’s operation to refuel aircraft in the

airport. The Company must pay service fees and comply to AOT’s conditions, which are the

same standard as if made with other external parties. The Audit Committee has the opinion that

such transactions are connected transactions, but are necessary and the most beneficial to the

Company’s operation since they are parts of normal aviation refuelling operation in airports.

1.6 Ministry of FinanceRationale and Necessity

The Company has entered the lease agreement with the Ministry of Finance in renting

the building and land relating to the Company’s building and fuel depot. The agreement also

circumvents the lease for Fuel Pipeline Transportation Ltd. and JP-One Asset Co., Ltd. The rented

buildings and land are used for aviation refuelling and related services of the Company and its

subsidiaries. The Company agreed to pay the rent and comply with the terms specified in the

agreement. The Audit Committee has the opinion that such transaction is connected transaction,

but is necessary and the most beneficial to the Company’s operation since it is a part of normal

business operation of the aviation refuelling service at Don Mueang Airport.

129

1.7 Thai Petroleum Pipeline Co., Ltd.(THAPP)Rationale and Necessity

The Company entered contract with Thai Petroleum Pipeline Co., Ltd. (THAPP) as lessor

of land and building at fuel depot in Don Mueang and Suvarnabhumi airports, as well as a provider

of utility service. According to contract, THAPP must pay rent and comply with conditions in the

contract. The service fees will be adjusted according to consumer price index. The utilities service

here does not include water for fire suppression system, water and electricity, which is charged

according to actual usage.


but enable THAPP to construct facilities and the aviation fuel pipeline receiving system. These

transactions are necessary and the most beneficial to the Company’s operation since it is a part

of normal business operation of the aviation refuelling service at the airport.

1.8 Dhipaya Insurance Plc.Rationale and Necessity

The Company made Property Insurance, Aviation Third Party Legal Liability Insurance,

and Terrorism Insurance, as well as Car Insurance and Car Casualty Coverage with Dhipaya

Insurance Plc. (Dhipaya Insurance). The Company must pay insurance premium and comply with

the conditions Dhipaya Insurance stated in insurance policies. The insurance premium is charged

at the market rate. The Audit Committee has the opinion that such transactions are connected

transactions, but are necessary and the most beneficial to the Company’s operation as they

cover risk and reduce damage that may result from the Company’s aviation refuelling operation in

airports.

1.9 Thai Aviation Refuelling Co., Ltd.(TARCO)Rationale and Necessity

The Company has 90% of the total shareholding in TARCO which provides underground

pipeline service to distribute aviation fuel (Hydrant System) at Suvarnabhumi Airport. To compensate

for the rights to operate the aviation fuel distribution service via Hydrant System at Suvarnabhumi

Airport, it was specified in TARCO’s shareholder agreement that shareholders shall transfer 10%

of the shares to New Bangkok International Airport Co., Ltd. (NBIA) at no cost. After that Airports

of Thailand Plc. (AOT) received business, rights, debts, liabilities, obligations and asset of NBIA.

Currently, AOT shall have full ownership to those shares.

The Company has entered into the agreemant with Bangkok Bank Plc. to guarantee

credit facilities of TARCO, a subsidiary, amounting to Baht 870 million and US$ 8 million. The

Company will be liable to fulfill the loan payment obligations if TARCO fails to fulfill the terms of

the loan contracts. The Company charges the guarantee fee of 1% of the outstanding balance

of credit. The Audit Committee has the opinion that such transaction is connected transaction,

but is necessary to TARCO’s operation so that it is able to connect to the aviation fuel depot and

provide the aviation refuelling service at Suvarnabhumi Airport, leading to the most beneficial to

the Company.


for the Year 2010

130

The Company has entered into the agreement with TARCO to permit the Company to

access in Hydrant System. The connection between the Company’s equipments and Hydrant

System is for transporting fuel for aviation refuelling service at Suvarnabhumi Airport. The Audit

Committee has the opinion that such transaction is connected transaction, but is necessary to the

Company’s aviation refuelling service at Suvarnabhumi Airport.

The Company also leased out the office building and provided utility service according to

the lease contract. The rental and service charge is at market price.

The Company has signed a memorandum with TARCO in appointing the Company’ staffs

to participate in TARCO’s management with the service charge based on the rate approved by

Company’s management and adjusted with the processing fee of 12.5% which is the same rate as

charged on other companies.

The Company has enter into the agreement with TARCO to provide the stock account

system and collection service to accommodate TARCO to report fuel through Hydrant System to

AOT and collect hydrant service fee from oil companies. The service fee is based on the scope of

works and adjusted with the consumer price index.

The Company has enter into the agreements / memorandums with TARCO regarding the

services of audit on Hydrant System operation, quality assurance and technical training, Hydrant

Sampling Drain and Pit Cleaning, safety and occupational heath consulting, legal consulting,

computer system, consult for application program, as well as training in quality management,

writing course and English course for business communication. The service fees are based on the

conditions and scope of works.


but are beneficial to the Company’s operation.

Moreover, the Company was granted a karaoke set from TARCO. The Audit Committee

has the opinion that such transaction is connected transaction, but is transparent as TARCO give

it to thank you the Company as TARCO’ customer.

1.10 Intoplane Service Co., Ltd. (IPS)Rationale and Necessity

Prior to listing in the Stock Exchange of Thailand, the Company has 83.3% stake in IPS,

which provides aviation refuelling service by subcontracted for labor aspect only, while PTT holds

only 16.7% of the total shares.

The Company employs IPS to provide the aviation refuelling service at Samui and

Sukhothai Airports, according to the aviation refuelling service employment agreement. The

service fee is based on the incurred cost adjusted by processing fee of 12.5%.

The Audit Committee has the opinion that such transaction is connected transaction, but

is the most beneficial to the Company’s operation.

The Company has signed a memorandum with IPS to appoint the Company’s staffs to

participate in the management of IPS based on the rate approved by the Company’s management

and adjusting for the processing fee of 12.5% which is the same rate as charged on other

companies.


for the Year 2010

131

In addition, the Company provides telephone service to IPS at the rate equals to the rate

for external parties and according to the actual usage.



1.11 JP-One Asset Co., Ltd. (JP-One)Rationale and Necessity

The Company has 92.5% of the total shareholding in JP-One which transports aviation

fuel through underground pipelines system, from Makkasan to Suvarnabhumi Airport.

The Company has entered into an agreement with Bangkok Bank Plc. to guarantee JP-

One, a subsidiary, long-term credit facilities with the amount of Baht 120 million. The guarantee

fee is charged at 1% of the outstanding facilities per year.

The Company leased out receiving pipeline system composed of receiving pipeline

system, receiving fuel tank and facilities at Suvarnabhumi Airport. The Company has entered into

a lease agreement with clear terms and rental charge based on investment and minimum fuel

through pipeline.

The Audit Committee has the opinion that such transaction is connected transaction,

but is necessary to JP-One’s operation since it is a part of normal business operation to lay

underground aviation fuel pipeline to transport fuel from oil companies to the Company’s aviation

fuel system at Suvarnabhumi Airport which is the most beneficial to the Company.

The Company purchased pipeline and pipeline joint to use for diesel storage system. The

Company had memorandum in entering this transaction, with the purchase price was at market

price. The Audit Committee has the opinion that such transaction is connected transaction, but

is beneficial to the Company’s operation that supported the Company to construct and use the

diesel storage system before the projected plan.

The Company also leased out the office building and provided utility service according to

the office lease contract. The rent and service fee is at market price and the utility service fee is

according to the actual usage.

The Company has signed the Memorandum of Understanding with JP-One in charging

for appointing the Company’s staffs to participate in the management of JP-One. The service fee

is based on the rate approved by the Company’s management and adjusted with the processing

fee of 12.5% which is the same rate as charged on other companies.

The Company has enter into the agreements / memorandums with JP-One regarding the

services of safety and occupational heath consulting, quality management consulting, information

technology network, legal consulting, marketing consulting, risk management consulting, as well

as training in quality management, and writing course for business communication. The service

fees are based on the conditions and scope of works.




for the Year 2010

132

1.12 Fuel Pipeline Transportation Ltd. (FPT)Rationale and Necessity

The Company has 16.7% of the total shareholding in FPT which stores and transports

aviation fuel through underground pipelines system.

The Company had agreement with FPT to lease out / service aviation fuel pipeline receiving

system, as well as leased out land and office building. The charge for the pipeline receiving system

is 21.5% of FPT’s revenue from aviation fuel transporting. (before discount and tax). For the rent

on land and offices, it is based on the market price. The Audit Committee has the opinion that

such transactions are connected transactions, but it is to facilitate construction of amenities and

the use of pipeline receiving system from oil companies and dispenses fuel to pipeline receiving

system before reaching the aviation refuelling service of the Company through the underground

pipeline at Don Mueang Airport. This is the most beneficial to the Company’s operation.

The Company had agreement with FPT to lease out diesel pipeline receiving system,

with agreed rental rate. The Audit Committee has the opinion that such transaction is connected

transaction, but is the most beneficial to the Company’s operation as FPT is the sole pipeline

transportation operator, which can transport diesel via pipeline to the Company. Moreover, FPT

has oil companies as customer base that used fuel transportation service of FPT. Therefore, the

Company can save operation cost and use existing customers of FPT to create certain revenue

together, while maximize the utilization of asset.

The Company hired FPT for commissioning of aviation fuel and diesel receiving pipeline

system. The Audit Committee has the opinion that such transactions are connected transactions, but

are the most beneficial to the Company’s operation to ensure that the receiving pipeline system can

operate without any problem.

Furthermore, the Company has assisted FPT in debt restructuring. The Company has set

aside allowance for doubtful debt for loan and long-term receivable from related company in full

to comply with the 2nd amendment to debt restructuring agreement and claim selling agreement

(the 2nd group debt under debt restructuring agreement).

In 2009, there was the 3rd amendment to debt restructuring, which the financial institutions

waived accrued interest for FPT. However, the Company signed in the 3rd debt restructuring

agreement only as one of the creditors. The Audit Committee has the opinion that such transaction

is connected transaction, but is beneficial to the Company’s operation as the Company will benefit

from receiving back more principle.

2. The transactions between Thai Aviation Refuelling Co., Ltd. (a subsidiary) and the connected persons who may have conflict of interests2.1 Airports of Thailand Plc. (AOT)Rationale and Necessity

TARCO was authorized by AOT to operate the aviation fuel transport system via

underground pipeline (Hydrant System) at Suvaranbhumi Airport for 30 years as of September 28,

2006, the first day the Company commenced operations at the airport. According to the terms

of Permission for Operation of the Hydrant Pipeline Network Contract at Suvarnabhumi Airport,

TARCO pays 2% of the total income before deducting expenses per year in exchange for the

operations rights.


for the Year 2010

133

Furthermore, TARCO signed the contract on renting land and room inside passenger

building at Suvarnabhumi Airport. The land is for stacking equipments and Hydrant for maintenance

and the room inside passenger building is for the office for service staffs. The rental fee is as similar

rate as the rate that AOT made with external parties.

TARCO has entered into the lease agreement for area behind domestic cargo to construct

for parking the service vehicles and other facilitators. TARCO has also entered into the lease

agreement for area inside parking apron at Suvarnabhumi Airport for parking the service vehicles

and storing ground support equipments. The rental fee is as similar rate as the rate that AOT

made with external parties.


but are necessary and the most beneficial to TARCO’s operation since it is part of normal business

operations for transporting aviation fuel via Hydrant System.

Moreover, TARCO uses infrastructure and facilities of AOT in Suvarnabhumi Airport area.

These are services AOT provides to facilitate TARCO’s operation to transport aviation fuel in the

airport. TARCO must pay service fees and comply to AOT’s conditions, which are the same

standard as if AOT made with external parties. The Audit Committee has the opinion that such

transactions are connected transactions, but are necessary and the most beneficial to TARCO’s

operation since they are parts of normal aviation transporting in Suvarnbhumi Airport.

2.2 PTT Plc.2.3 The Shell Company of Thailand Ltd.Rationale and Necessity

TARCO bought fuel from PTT Plc. (PTT) and The Shell Company of Thailand Ltd. (Shell) gas

stations to refuel TARCO’s vehicles. PTT and Shell charged TARCO according to the market price

with general business conditions. The Audit Committee has the opinion that such transactions are

connected transactions, but are beneficial to TARCO’s operation.

2.4 Dhipaya Insurance Plc.Rationale and Necessity

TARCO made Property Insurance, Aviation Third Party Legal Liability Insurance, and

Terrorism Insurance with Dhipaya Insurance Plc. (Dhipaya Insurance). The insurance premium

is charged at the market rate. The Audit Committee has the opinion that such transactions are

connected transactions, but are necessary and beneficial to TARCO’s operation as they cover risk

and reduce damage that may result from TARCO’s operation.

3. The transactions between JP-One Asset Co, Ltd. (a subsidiary) and the connected persons who may have conflict of interests3.1 Fuel Pipeline Transportation Ltd. (FPT)Rationale and Necessity

JP-One has entered into a 30-years land sublease agreement with FPT for laying pipeline

and constructing control station for Makkasan-Suvarnabhumi route. JP-One requested National

Finance Bank Plc. to issue Baht 2 million guarantee as collateral for FPT’s debts obligation with the

State Railway of Thailand. The bank guarantee is to ensure FPT’s compliance with the land lease


for the Year 2010

134

contract obligations. In additions, JP-One employed FPT to monitor pipeline route, by having a

memorandum, which the employment rate was based on the cost of personnel and monitoring

equipment for 24 hours a day. However, since June 1, 2010, JP-One was transferred the rights

from FPT for leasing land for Makkasan-Suvarnabhumi route, therefore JP-One canceled the

aforementioned land sublease agreement, bank guarantee and memorandum.

JP-One, the operator of aviation fuel pipeline project, Makkasan-Suvarnabhumi route

to the Company’s aviation depot at Suvarnabhumi Airport, connected aviation fuel pipeline with

common facility of FPT and employed FPT to operate, repair and maintenance the above pipeline

system.

JP-One would pay FPT throughput fee from Bangchak Refinery and fuel depot at Chong

Nonsi to Makkasan control station, which will be reimbursed such fee from users at the same

rate.

The agreements between JP-One and FPT had established for the above transactions, by

specifying the rate for facility connection, maintenance and repair of FPT’s facility at the connection

point to ensure its effective operation. For the operation and management employment of FPT,

the management fee was based on the cost of on time fuel transportation, with qualified standard

in areas of marketing, security and reporting, etc.


but are necessary and the most beneficial to JP-One’s operation since they are part of normal

business operation to receive and disburse fuel to the Company’s depot at Suvarnabhumi

Airports.

3.2 PTT Plc.3.3 Chevron (Thailand) Ltd.3.4 The Shell Company of Thailand Ltd.3.5 The Bangchak Petroleum Plc.Rationale and Necessity

JP-One has entered into the agreements / memorandums on aviation fuel pipeline system

from Bangchak Refinery to Chong Nonsi fuel depot through pipeline system of FPT and JP-One

to fuel depot at Suvarnabhumi Airport. The service rate was at the same rate as charged to the

external parties. However, the throughput fee through FPT’s pipeline would reimburse to FPT


but are the most beneficial to JP-One since they are part of normal business operation.

3.6 Airports of Thailand Plc. (AOT)Rationale and Necessity

JP-One signed land lease contract with AOT outside the airport ground but within

the operating area of Suvarnabhumi Airport to lay aviation fuel pipeline from fuel refinery to the

Company’s fuel depot. The rental fee is as similar rate as the rate that AOT made with external

parties.

The Audit Committee has the opinion that such transaction is connected transaction,

but is necessary and the most beneficial to JP-One as its core business require underground

aviation fuel pipeline from users and feed those fuel into the Company’s fuel depot system at

Suvarnabhumi Airport.


for the Year 2010

Documents

Bangkok Aviation Fuel Services : Anuual Report 2010