annual report 2011 thinking - listed...

BA

NGKO

K A

VIA

TION

FUEL S

ERVIC

ES P

LC.

Thinking

Positive ANNUAL REPORT 2011

BANGKOK AVIATION FUEL SERVICES PLC.

CONTENTS 1 KEY FINANCIAL HIGHLIGHTS 2 MESSAGE FROM MANAGING DIRECTOR 4 GENERAL INFORMATION 6 ORGANIZATION CHART 8 BOARD OF DIRECTORS 16 MANAGEMENT TEAM 20 HONORABLE AWARDS 21 NATURE OF BUSINESS 23 RESULTS OF OPERATIONS IN 2011 25 SUMMARY OF BUSINESS CHANGING 26 AVIATION REFUELLING OVERVIEW AND COMPETITION 27 INNOVATING AND DEVELOPING FOR THE FUTURE 29 RISK FACTORS 33 SHAREHOLDER AND MANAGEMENT STRUCTURE 40 GOOD CORPORATE GOVERANCEี 56 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE OPERATING RESULTS IN 2011 60 REPORT OF THE BOARD OF DIRECTOR RESPONSIBILITIES FOR 2011 FONANCIAL STATEMENTS 61 FINANCIAL STATEMENT REPORT103 REPORT OF THE AUDIT COMMITTEE FOR THE YEAR 2011 106 SUMMARY OF THE OPINION CONCERNING ADEQUACY AND APPROPRIATENESS OF THE INTERNAL CONTROL SYSTEM FOR THE YEAR 2011112 RELATED PARTY TRANSACTIONS

1

KEY FINANCIAL HIGHLIGHTS

2011 2010 2009

(Unit : Million Baht)

Key Financial Status and Performance

Services Income 2,338.02 2,172.24 1,996.84

Rental Income 22.17 19.19 16.69

Total Revenue 2,409.33 2,219.86 2,034.98

Cost of Services 950.76 930.44 895.50

Administrative Expenses 413.56 415.53 350.48

Total Expenses 1,364.32 1,345.98 1,245.97

Gross Profi t 1,409.43 1,260.98 1,118.03

Finance Costs 118.64 86.20 107.02

Net Profi t (Loss) 527.56 523.17 463.05

EPS (Baht) 1.03 1.03 0.91

Cash and Short Term Investment 879.95 936.34 768.80

Total Assets 7,355.22 6,882.28 6,843.56

Total Liabilities 3,534.96 3,122.55 3,570.95

Shareholders’ Equity 3,820.26 3,759.73 3,272.61

Key Financial Ratios

Gross Profi t Margin 59.72% 57.54% 55.53%

Net Profi t Margin 21.90% 23.57% 22.75%

Return to Assets 7.41% 7.62% 6.66%

Return to Equity 13.92% 14.88% 14.79%

Debt to Equity (Times) 0.93 0.83 1.09

Book Value per Share (Baht) 7.49 7.37 6.42

Number of Shares 510 510 510

Dividend per Shares (Baht) 0.65 0.54 0.43

Earning per Shares (Baht) 1.03 1.03 0.91

ANNUAL REPORT 2011

MessagefrOm

maNagiNg DirECTOr

In the previous year, natural disasters have occurred throughout the world, for instance, Japan got hit by Tsunami in March and severe inundation caused damage to majority areas in Thailand including Don Mueang Airport and our operation have to closed down since October 31, 2011. As well as the economic fl uctuation from all over the world is led to the economic downturn which affected various business sectors especially tourism industry.With the collaboration of the Board of Directors, the management team and all employees in rehabilitation our facilities at Don Mueang headquarter, we are able to restore our normal operation on December 22, 2011.

BAFS strongly emphasizes the on-time performance with high international safety standard and new innovations to fulfi ll our customer’s satisfaction. We are capable to maintain as the leading service provider towards the aviation refuelling business with the total market share not less than 85 percent. In addition, the company continuously strives to focus on cost effi ciency and also the environmental aspect is one of our core principles. Currently, BAFS has support Thai Airways International initiative “Travel Green” program by reforming one of the refueller trucks to be able to provide biojet fuel to the aircraft in order to participate in the campaign of “THAI fi rst fl ight with biofuel” : TG 8421 on December 21, 2011 and “The fi rst passenger biofuel fl ight in Asia” : TG 104 Bangkok - Changmai on December 22, 2011

On behalf of the management team and all employees, I would like to reaffi rm our commitment to continue improving and developing the company’s business to be a leader in the aviation refueling services in ASEAN.

I would like to express my sincere gratefulness to all our shareholders,customers, business alliances and fi nancial institutions for their support. Throughout the dedication of the Board of Directors, management team, and the employees that contributed a number of efforts to achieve the company’s success. I hope that BAFS will maintain the development of sustainable organization. Meanwhile, the company will be a part of the corporate social responsibility that will be benefi cial to the society and the overall economy of the country. Lastly, achieving trust worthiness from related parties is the heart of principles forever more.

(M.R. Supadis Diskul) Managing Director

FROM

MANAGING DIRECTOR

MESSAGE FROM MANAGING DIRECTOR

3

ANNUAL REPORT 2011


4

Bangkok Aviation Fuel Services Public Company Limited

Head Offi ce 171/2 Kamphaeng Phet 6 Rd., Don Mueang, Don Mueang, Bangkok 10210Telephone : 02 834 8900 Fax : 02 834 8999 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 Capital 509.997 million shares, 1 Baht per share, total 509.997 million Baht

ReferencesShare Registrar Thailand Securities Depository Company Limited62 Rachadapisek Road, Klongteoy, Bangkok 10110Telephone : 02 229 2800 Fax : 02 654 5427

Auditor Dharmniti Auditing Co., Ltd.267/1 Pracharaj Sai 1 Road, Bangsue, Bangkok 10800Telephone : 02 587 8080 Fax : 02 586 0301

B a n g k o k A v i a t i o n F u e l S e r v i c e s

GENERAL INFORMATION

BAFS’s Shareholdings in Subsidiary and Affiliated Companies

Name Thai Aviation Refuelling Co., Ltd. 99 Moo 10, Srisa Jorakhanoi, Bang Saothong, Samut Prakran 10540 Tel 02 134 4021-6 Fax 02 134 4020Type of Business Operating aviation fuel service using the Hydrant technology at Suvarnabhumi AirportType of share Ordinary Paid-up Capital 530 Mil. Baht Shareholding Percentage 90.00

Name JP-One Asset Co., Ltd. 171/2 Kamphaeng Phet 6 Rd., Don Mueang, Don Mueang, Bangkok 10210 Tel 02 834 8984-6 Fax 02 834 8975Type of Business Transporting aviation fuel through pipeline system, from Makkasan to Suvarnabhumi Airport Type of share Ordinary Paid-up Capital 600 Mil. Baht Shareholding Percentage 92.50

Name Intoplane Services Co., Ltd. 171/2 Kamphaeng Phet 6 Rd., Don Mueang, Don Mueang, Bangkok 10210 Tel 02 834 8982-3 Fax 02 834 8999Type of Business Conducting Into-plane fuelling service which is hired only for labor. Currently, it provides service at Samui and Sukothai Airports Type of share Ordinary Paid-up Capital 0.12 Mil. Baht Shareholding Percentage 83.33

Name Fuel Pipeline Transportation Limited 424 Kamphaeng Phet 6 Rd., Don Mueang, Don Mueang, Bangkok 10210 Tel 02 574 6180-3 Fax 02 574 6101Type of Business Storing and transporting aviation fuel through pipeline system Type of share Ordinary and PreferredPaid-up Capital 1,592 Mil. Baht Shareholding Percentage 49.01

Name BAFS International Limited Room 1202, Golden Star Building, 20 Lockhart Road, Hong Kong Tel 852 2524 6441 Fax 852 2810 4009Type of Business Amending debt structure of related company Type of share OrdinaryPaid-up Capital HKD 10,000 Shareholding Percentage 100.00

Remarks : Intoplane Services Co., Ltd. has PTT Plc, the person who may have conflict of interests, holds IPS’s shares of 16.67%.

This shareholding structure is the structure prior to the listing of BAFS in the Stock Exchange of Thailand.

5

ANNUAL REPORT 2011


6

ORGANIZATION CHART

6

AUDIT COMMITTEE NOMINATION COMMITTEE

CONSULTANT TO MD

FUELLING OPERATIONS COMMITTEE

INTERNAL AUDITOR DIVISION

LEGAL & SECURITIESDIVISION

INTERNAL AUDIT CORPORATE AFFAIRS

LEGAL

INVESTOR RELATIONS

PUBLIC RELATIONS

CORPORATE COMMUNICATION

FINANCE & ACCOUNTING DEPARTMENT

HUMAN RESOURCES & ADMINISTRATION DEPARTMENT

BUSINESS DEVELOPMENT & MARKETING DEPARTMENT

CORPORATE FINANCIAL PERSONNEL BUSINESS DEVELOPMENT & MARKETING

ACCOUNTING ADMINISTRATIONINFORMATION TECHNOLOGY

STOCK CONTROL PURCHASINGIT SYSTEM ENGINEERING

HUMAN RESOURCES DEVELOPMENT


ANNUAL REPORT 2011

7

77

BOARD OF DIRECTORS

MANAGING DIRECTOR

SAFETY, OCCUPATIONAL HEALTH AND ENVIRONMENT

QUALITY, SAFETY, HEALTH AND ENVIRONMENT REPRESENTATIVE (OH&SMR)

REMUNERATION COMMITTEE

EXECUTIVE ASSISTANT TO MANAGING DIRECTOR

RISK MANAGEMENT & STRATEGIC PLAN DIVISION

QUALITY, SAFETY, HEALTH AND ENVIRONMENT DIVISION

RISK MANAGEMENT COMMITTEE

SAFETY

TECHNICAL DEPARTMENT

ELECTRICAL ENGINEER DEPOT OPERATION AVIATION REFUELING DONMUEANG AIRPORT

MECHANICAL ENGINEER C/R & MAINTENANCE AVIATION INFORMATION SERVICE

REGIONAL AIRPORT-USM

REGIONAL AIRPORT-THSQUALITY CONTROL

MAINTENANCE

DEPOT DEPARTMENT

AVIATION REFUELING DEPARTMENT

DONMUEANG & REGIONAL AIRPORT DEPARTMENT

ANNUAL REPORT 2011


8

BOARD OF DIRECTORS

Mr. Palakorn Suwanrath Chairman and Independent Director Age 63 Years

(%) Share Holding • No

Education/Training• Master of Arts in International Affairs (M.A.I.A) Southeast Asia Studies, Ohio University, USA• Bachelor of Arts in Political Science, Chulalongkorn University• Certificate, National Defence College, Class 37• Director Accreditation Program (DAP), Director Certification Program (DCP), The Role of Chairman from Thai Institute of Directors (IOD)

Other Current Position • Privy Councillor

Past Experience

• Chairman, Metropolitan Electricity Authority• Chairman, Provincial Electricity Authority • Director, Electricity Generating Authority of Thailand• Director, Expressway and Rapid Transit Authority of Thailand• Director, Government Savings Bank• Director, SCB Securities Co., Ltd.

B A F S ’ SB O A R D O F D I R E C T O R S

ANNUAL REPORT 2011

9

Flight Lieutenant Montree Jumrieng Director Age 54 Years (%) Share Holding

• No

Education/Training• Bachelor of Science, Mechanical Engineering, Royal Thai Air Force Academy

Other Current Position • Executive Vice President, Technical Department, Thai Airways International Pcl.• Director, Don Mueang International Airport Hotel Co., Ltd.

Past Experience • Executive Vice President, Human Resources Development & Management, Thai Airways International Pcl. • Vice President, Human Resources Management Department, Thai Airways International Pcl. • Director, Chief Pilot Department, Thai Airways International Pcl.

M.R. Supadis Diskul Director and Managing Director Age 62 Years

(%) Share Holding • 0.62 (In name of himself and spouse 3,150,000 shares)

Education/Training• Master of Community and Regional Planning, North Dakota State University, USA• Bachelor of Science, Medical Technology, Mahidol University• Certifi cate, National Defence College, The National Defence Course for the Joint State-Private Sectors, Class 15 • Director Accreditation Program (DAP), Director Certifi cation 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)

Other Current Position • Director, Thai Aviation Refuelling Co., Ltd.• Director, JP-One Asset Co., Ltd.• Chairman, Intoplane Services Co., Ltd.• Chairman, Fuel Pipeline Transportation Ltd.• Director, BAFS International Limited

Past Experience • Executive Vice President, Corporate Development and Support Department, Thai Airways International Pcl. • Managing Director, Thai Aviation Refuelling Co., Ltd.• Managing Director, JP-One Asset Co., Ltd.• Managing Director, Fuel Pipeline Transportation Ltd.


10

Sqn.Ldr.Alongot Pullsuk Director Age 58 Years (%) Share Holding

• No

Education/Training• Bsc. Civil Engineering, Virginia Military Institute, USA

Other Current Position • Vice President, Aviation Resources Development Department, Thai Airways International Pcl.

Past Experience • Vice President, Flight Operations Support Department, Thai Airways International Pcl.• Mission Commander, Flight Operations Department, Thai Airways International Pcl.• Director, Flight Test and development Department, Thai Airways International Pcl.• Deputy Director, Flight Test and development Department, Thai Airways International Pcl.

Mr. Chokchai Panyayong Director Age 57 Years (%) Share Holding

• No

Education/Training• Master of Engineering, Civil Engineering, University of Detriot, USA• Bachelor of Engineering, Civil Engineering, University of Detriot, USA• Bachelor of Science, Architecture, Mapua Institute of Technology, PhilippinesOther Current Position • Executive Vice President, Strategy and Business Development Department, Thai Airways International Pcl.

Past Experience • Vice President, Business Development and Special Project Department, Thai Airways International Pcl. • Vice President, Suvarnabhumi Project, Thai Airways International Pcl. • Vice President, Asset Management Department, Thai Airways International Pcl.

BOARD OF DIRECTORS

ANNUAL REPORT 2011

11

Mr. Ath Hemvijitraphan Director Age 53 Years (%) Share Holding

• No

Education/Training• Master of Management, Sasin Graduate Institute of Business Administration of Chulalongkorn University • Bachelor of Business Administration, Assumption University • Director Accreditation Program (DAP) from Thai Institute of Directors (IOD)

Other Current Position • Secondary Transport Manager : Thailand, Hong Kong and Philippines, The Shell Company of Thailand Limited

Past Experience • General Manager-Distribution: Mekong Cluster, The Shell Company of Thailand Limited • General Manager-Supply: Mekong Cluster, The Shell Company of Thailand Limited

Mr. Nuttachat Charuchinda Director Age 57 Years


Education/Training• MBA, Thammasat University • B.Eng (Civil Engineering), Chiangmai University • Diploma, The Joint State-Private Sector Course, National Defence College, Class 20 • Director Certifi cation Program (DCP) from Thai Institute of Directors (IOD)

Other Current Position • Chief Operation Offi cer, Downstream Petroleum Business Group, PTT Plc.• Director, Bangchak Petroluem Plc. • Director, PTT Global Chemical Plc.

Past Experience • Senior Executive Vice President, Corporate Strategy, PTT Plc. • Executive Vice President, International Trading Business Unit, PTT Plc.• Executive Vice President, Natural Gas Vehicle, PTT Plc.• Executive Vice President, Supply and Logistics, PTT Plc.• Executive Vice President, Terminal Operation, PTT Plc.• Executive Vice President, International Business Development and Marketing, PTT Plc.


12

Mr. Navee Lertphanichkul Director Age 63 Years (%) Share Holding

• 0.26 (In name of spouse 1,309,800 shares)

Education/Training• Bachelor Degree, Electrical Engineering, Chulalongkorn University • Cost/Schedule Engineer, Exxon Research and Engineering, New Jersey• International Management Program, IMD, Switzerland• Marketing Strategy, Michigan University• Director Accreditation Program (DAP), Director Certifi cation Program (DCP), Finance for Non-Finance Director from Thai Institute of Directors (IOD)

Other Current Position • -

Past Experience • Senior Advisor, Purad (Thailand) Co., Ltd.• Director, ESSO (Thailand) Plc.• Supply and Distribution Manager, ESSO (Thailand) Plc. • Director, Thai Petroluem Pipeline Company Limited

Mr. Chakraphan Krachaiwong Director Age 40 Years (%) Share Holding

• No

Education/Training• MBA, Seattle University, USA • Bachelor of Business Administration, Chulalongkorn University• Director Accreditation Program (DAP) from Thai Institute of Directors (IOD)

Other Current Position • Area Transportations & Operations Manager, Chevron (Thailand) Ltd.• Director, Star Holding Co., Ltd.

Past Experience • Property & Facility Optimization Manager, Chevron (Thailand) Ltd.• Retail District Manager, Chevron (Thailand) Ltd.• Operational Excellence Manager, Chevron (Thailand) Ltd.• Networking Planning Manager, Chevron (Thailand) Ltd.

BOARD OF DIRECTORS

ANNUAL REPORT 2011

13

Mr. Vinai Chamlongrasdr Director Age 72 Years (%) Share Holding

• 0.08 (In name of spouse 420,000 shares)

Education/Training• Bachelor Degree, Chemical Engineering, Science Faculty, Chulalongkorn University• Director Accreditation Program (DAP), Director Certifi cation Program (DCP), Finance for Non-Finance Director from Thai Institute of Directors (IOD)

Other Current Position • Director, Thai Aviation Refuelling Co., Ltd.

Past Experience • Advisor, Air Total (Thailand) Co., Ltd.• Managing Director, Air Total (Thailand) Co., Ltd.

Mr. Aswin Kongsiri Independent Director, Nominating Committee Chairman, and Risk Management Committee Chairman Age 66 Years


Education/Training• Bachelor Degree, Philosophy, Politics and Economics, Oxford University, England• Certifi cate, National Defence College, The National Defence Course for the Joint State-Private Sectors, Class 6 • Director Certifi cation Program (DCP), The Role of Chairman from Thai Institute of Directors (IOD)

Other Current Position • Chairman, Thoresen Thai Agencies Plc. • Chairman, Ch.Karnchang Plc. • Vice Chairman, Electricity Generating Plc. • Governor, The Stock Exchange of Thailand• External Committee Member, Monetary Policy Committee, Bank of Thailand

Past Experience • Director and Executive Director, Krung Thai Bank Plc. • Chairman of Executive Committee, Electricity Generating Plc. • Director and Executive Director, Siam Commercial Bank Plc. • President, The Industrial Finance Corporation of Thailand


14

Mr. Visut Montriwat Independent Director, Audit Committee Director, and Remuneration Committee Chairman Age 65 Years


Education/Training• MBA, Northern Illinois University, USA• Bachelor of Commerce, Chulalongkorn University• Certifi cate, National Defence College, Class 38• Director Certifi cation Program (DCP), Audit Committee Program (ACP), Role of the Compensation Committee, Financial Statements for Directors (FSD), 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)

Other Current Position • Director, Thai Aviaition Refuelling Co., Ltd.• Independent Director and Audit Committee Director, Srivichai Vejvivat Plc. • Director, Thai Paiboon Insurance Co., Ltd.

Past Experience

• Audit Committee Chairman and Independent Director, Krung Thai Bank Plc. • Deputy Permanent Secretary, Ministry of Finance • Inspector-General, Ministry of Finance • Comptroller-General, Ministry of Finance• Director-General, The Treasury Department, Ministry of Finance

Mr. Pachara Yutidhammadamrong Independent Director and Audit Committee Chairman Age 64 Years


Education/Training• Honorary Degree of Doctor of Laws, Ramkhamhaeng University • Class 399 National Defence Course for the Joint State-Private Sectors, National Defence College • Barrister at Law, Institute of Legal Education of The Thai Bar • LL.B., Thammasat University • Certifi cate from Naval College • Director Accreditation Program (DAP), Audit Committee Program (ACP) from Thai Institute of Directors (IOD) • Public Director Certifi cation Program from Public Director Institute

Other Current Position • Director, Offi ce of the Council of State • Sub-committee, Sukhumvit Asset Management Co., Ltd. • Director, Thai Aviation Refuelling Co., Ltd.

Past Experience • Audit Committee Chairman and Independent Director, Krung Thai Bank Plc. • Attorney General, Offi ce of the Attorney General • Deputy Attorney General, Offi ce of the Attorney General • National Legislative Assemble Member• Director, Thai Airways International Plc. • Director, IRPC Plc. • Director, Provincial Electricity Authority

BOARD OF DIRECTORS

ANNUAL REPORT 2011

15

Mr. Sumon Surathin Independent Director and Audit Committee Director Age 70 Years


Education/Training• Master Degree in Economics, Florida Institute of Technology, USA • Bachelor Degree in Economics, Asia University, Japan • Director Accreditation Program (DAP), Financial Statement for Directors (FSD) from Thai Institute of Directors (IOD)

Other Current Position • Chairman, JP-One Asset Co., Ltd.

Past Experience • Chairman, Krung Thai Asset Management Plc. • Vice Chairman, Krung Thai Asset Management Plc. • Acting Management Director, Krung Thai Asset Management Plc. • Chairman of Audit Committee, Krung Thai Asset Management Plc. • Assistant Director, The Bereau of the Budget, The Prime Minister Offi ce


16

M.R. Supadis DiskulDirector and Managing Director Age 62 Years (%) Share Holding

• 0.62 (In name of himself and spouse 3,150,000 shares)

Education/Training• Master of Community and Regional Planning, North Dakota State University, USA • Bachelor of Science, Medical Technology, Mahidol University• Certificate, National Defence College, The National Defence Course for the Joint State-Private Sectors, Class 15• Director Accreditation Program (DAP), Director 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)

Other Current Position • Director, Thai Aviation Refuelling Co., Ltd.• Director, JP-One Asset Co., Ltd.• Chairman, Intoplane Services Co., Ltd.• Chairman, Fuel Pipeline Transportation Ltd.• Director, BAFS International Limited

Past Experience• Executive Vice President, Corporate Development and Support Department, Thai Airways International Pcl. • Managing Director, Thai Aviation Refuelling Co., Ltd.• Managing Director, JP-One Asset Co., Ltd.• Managing Director, Fuel Pipeline Transportation Ltd.

B A F S ’ SM A N A G E M E N T T E A M

MANAGEMENT TEAM

ANNUAL REPORT 2011

17

Mr. Jarern PavarojkitConsultant to Managing Director Age 59 Years


Education/Training• Bachelor Degree, Mechanical Engineering, Kasetsart University• Director Certifi cation Program (DCP) from Thai Institute of Directors (IOD) • Economics in Public Administration for High-Level Administrators - King Prajadhipok’s Institute

Other Current Position • Director and Managing Director, Thai Aviaition Refuelling Co., Ltd.

Past Experience• Deputy Managing Director - Operations, Bangkok Aviation Fuel Services Plc.• Director and Managing Director, Intoplane Services Co., Ltd.• Director, JP-One Asset Co., Ltd.

(%) Share Holding • 0.01 (In name of himself 3,000 shares)Education/Training• D.Eng., Kasetsart and Case Western Reserve University, USA • Ph.D., American University, USA• MSc., University of London, UK.• B.Eng., Chulalongkorn University • Certifi cate, National Defence College, The National Defence Course for the Joint State-Private Sectors, Class 22• Certifi cate in Executive Development Program, University of California, Los Angeles, USA • Director Certifi cation Program (DCP), Finance for Non-Finance Director, Successful Formulation and Execution of Strategy (SFE) from Thai Institute of Directors (IOD)Other Current Position • Director and Managing Director, JP-One Asset Co., Ltd.• Director, Fuel Pipeline Transportation Ltd. Past Experience• Deputy Managing Director - Administration, Bangkok Aviation Fuel Services Plc. • Director, Intoplane Services Co., Ltd.• Chief Executive Offi cer, Castrol Chemicals Limited

Dr. Pakdee Manahirunvet Consultant to Managing Director

Age 48 Years

Mr. Amnuay PahuvanichSenior Technical ManagerAge 52 Years


Education/Training• Bachelor Degree, Electrical Engineering, Kasetsart University • Director Certifi cation Program (DCP), Financial Statement for Directors (FSD), Successful Formulation and Execution of Strategy (SFE) from Thai Institute of Directors (IOD)• Economics in Public Administration for High-Level Administrators - King Prajadhipok’s Institute

Other Current Position • Director, Thai Aviation Refuelling Co., Ltd.• Director, Intoplane Services Co., Ltd.

Past Experience• Technical Manager, Bangkok Aviation Fuel Services Plc.


18

Mr. Ditsapong PrithaveepongSenior Depot ManagerAge 54 Years


Education/Training• MBA, Commerce and Accountancy Faculty, Chulalongkorn University• Bachelor of Engineering, Chulalongkorn University• Director Certifi cation Program (DCP), Successful Formulation and Execution of Strategy (SFE) from Thai Institute of Directors (IOD)

Other Current Position • Director, JP-One Asset Co., Ltd.• Director, Intoplane Services Co., Ltd.• Director, Fuel Pipeline Transportation Ltd.

Past Experience• Airfi eld Manager, Bangkok Aviation Fuel Services Plc.

(%) Share Holding • 0.01 (In name of himself 10,000 shares)

Education/Training• MBA, Personnel Management, NIDA• Bachelor of Economics, Chulalongkorn University• Director Certifi cation Program (DCP), Role of the Compensation Committee, Successful Formulation and Execution of Strategy (SFE) from Thai Institute of Directors (IOD) • Economics in Public Administration for High-Level Administrators - King Prajadhipok’s Institute

Other Current Position • Director and Managing Director, Intoplane Services Co., Ltd.• Director, JP-One Asset Co., Ltd.• Director, Fuel Pipeline Transportation Ltd.• Director, BAFS International Limited

Past Experience• Finance & Accounting Manager, Bangkok Aviation Fuel Services Plc.

Mr. Chathaya Bandhaya Senior Finance & Accounting Manager

Age 56 Years

Mr. Tawin SaiwaewSenior Aviation Refuelling Manager Age 55 Years


Education/Training• Master of Management, Mahidol University• Bachelor of Arts, General Management, Dhonburi Rajabhat University• Director Certifi cation Program (DCP), Financial Statement for Directors (FSD), Successful Formulation and Execution of Strategy (SFE) from Thai Institute of Directors (IOD)

Other Current Position • Director, Thai Aviation Refuelling Co., Ltd.

Past Experience• Depot Manager, Bangkok Aviation Fuel Services Plc.

MANAGEMENT TEAM

ANNUAL REPORT 2011

19

Miss Raweewan MantasatianHuman Resources and Administration ManagerAge 53 Years (%) Share Holding

• 0.01 (In name of herself 30,000 shares)

Education/Training• Master of Public Administration, Human Resources Management, NIDA• Bachelor of Public Administration, Ramkhamhaeng University


Past Experience• Deputy Human Resources & Administration Manager, Bangkok Aviation Fuel Services Plc.


Education/Training• MBA, Sripratum University• Bachelor of Science, Chulalongkorn University

Other Current Position • Director, Intoplane Services Co., Ltd.

Past Experience• Deputy Airfi eld Manager, Bangkok Aviation Fuel Services Plc.

Mr. Pichai PathravutigulDon Mueang and Regional Airport Manager

Age 57 Years

Mr. Charoen Charusalaipong Business Development and Marketing ManagerAge 49 Years


Education/Training• MBA, Sripratum University• Bachelor of Science, Mahidol University


Past Experience• Executive Assistant of Quality Management, Bangkok Aviation Fuel Services Plc.


20

Mrs. Mayuree NalinwongExecutive of Internal Audit(to be appointed as executive on February 1, 2012)

Age 48 Years (%) Share Holding • 0.01 (In name of herself 30,000 shares)

Education/Training• MBA, Ramkhamhaeng University• Bachelor of Accounting,Thammasat University• Monitoring the Quality of Financial Reporting from Thai Institute of Directors (IOD)


Past Experience• Executive Assistant of Internal Audit, Bangkok Aviation Fuel Services Plc.

HONORABLE AWARDS

BAFS won Enterprise of Safety Awards at Three Locations.

Minister of Labour Protection and Welfare granted the Year 2011’s National Award of the Outstanding for Enterprise of Safety Operation, Occupational Health and Working Environment to Bangkok Aviation Fuel Services Plc. at Bitec Bangna on 9th July 2011. In this year, BAFS won these awards for three locations in following places: Don Mueang Depot, Into-Plane Service Substation and Suvarnnabhumi Depot.

BAFS received a Carbon Footprint for Organizations from TGO and MTEC

BAFS received a certificate of carbon footprint for organization held by Thailand Greenhouse Gas Management Organization (Public Organization) and National Metal and Materials Technology Center, Thailand on 22nd July 2011.

BAFS received Winning Award in the Campaign of Eliminating Material from FOD

BAFS received Winning Award in the campaign of eliminating material that is harmful to aircrafts (Foreign Object Damage : FOD) at Suvarnabhumi Airport on 28 December 2011.

BA

FS’S

AW

AR

DS

MANAGEMENT TEAM

ANNUAL REPORT 2011

21

NATURE OF BUSINESS

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 affi liated 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 Affi liated 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 serviceincluding 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.

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 Plc., Chevron (Thailand) Ltd., PTT Plc., ESSO (Thailand) Plc., The Shell Company of Thailand Ltd., Airports of Thailand Plc., and Air Total (Thailand) Co., Ltd.


22

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 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 at Samui and Sukothai Airports.

Moreover, BAFS International Limited has been established with the business objective in amending debt structure of related company.

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)

1. Services Income BAFS 1,592.86 66.1 1,480.37 66.7 1,343.81 66.0

TARCO 90% 620.79 25.8 582.30 26.2 555.79 27.3

JP-One 92.5% 124.37 5.2 109.56 4.9 97.25 4.8

2. Rental Income BAFS 22.17 0.9 19.19 0.9 16.69 0.8

3. Others Income * 49.14 2.0 28.44 1.3 21.44 1.1

Total 2,409.33 100.00 2,219.86 100.0 2,034.98 100.0

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

as interest received, and guarantee fee income

Type of RevenueYear 2011

Amount Amount AmountPercentPercent Percent

Year 2010 Year 2009% ofinvestmentby BAFS

Operateby

ANNUAL REPORT 2011

23

1. Depot Operations At Suvarnabhumi Airport

In 2011, the Company provided aviation fuel intermediate storage services with 4 main storage tanks, with a combined capacity of 60 million liters1, equivalent to 3.5 days of operating stock.

The total volume of Jet A-1 received from oil companies was 4,482.8 million liters, with JP-One Assets Co., Ltd. (JP-One) and Thai Petroleum Pipeline Co., Ltd. (Thappline) providing 1,218.3 million liters and 3,264.5 million liters respectively ; a ratio of 27 : 73

Summary of Suvarnabhumi Airport 2011 2010 Increase (decrease) Depot Operations (Million liters) (Million liters) %

Total volume of Jet A-1 received 4,482.8 4,205.5 6.6 Daily average volume of Jet A-1 received 12.3 11.5 7.0 Daily average volume of Jet A-1 received from JP-One 3.3 2.9 13.8 Daily average volume of Jet A-1 received from Thappline 8.9 8.6 3.5

Note 1) 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 3 of the 7 tanks.

At Don Mueang Airport

In 2011, the Company provided aviation fuel intermediate storage services with 3 main storage tanks, with a combined capacity of 21 million liters, and a daily average volume received of 307,757 liters. The total volume of Jet A-1 received was 112.3 million liters (a daily average of 0.31 million liters).

Summary of Don Mueang Airport 2011 2010 Increase (decrease) Depot Operations (Million liters) (Million liters) %

Total volume of Jet A-1 received 112.3 104.1 7.9 Daily average volume of Jet A-1 received 0.31 0.29 6.9

2. Into-plane Operations 2.1 Refuelling Operations

At Suvarnabhumi Airport

JET A-1 Total volume of Jet A-1 uplifted during 2011 was 3,838.1 million liters, or 320 million liters per month, supplying 140,492 total annual fl ights (average of 11,708 fl ights per month).

RESULTS OF OPERATIONS IN 2011


24


JET A-1 Total volume of Jet A-1 uplifted during 2011 was 115 million liters, or 9.6 million liters per month, supplying 18,536 total annual fl ights (average of 1,545 fl ights per month).

AVGAS

Total volume of Avgas uplifted during the same period was 173,808 liters or 14,484 liters per month, supplying 2,195 total annual fl ights (average of 183 fl ights per month).

2.2 Defuelling Operations


The Company supplied Jet A-1 defuelling services to 124 fl ights (10 fl ights per month), with a total combined volume of 2.3 million liters or 0.2 million liters per month.


The Company supplied Jet A-1 defuelling services to 86 fl ights (7 fl ights per month), with a total combined volume of 1.1 million liters or 0.1 million liters per month.

2.3 Number of Flights Serviced

The Company provided aviation refuelling services to 159,028 fl ights at Suvarnabhumi Airport and Don Mueang Airport, during 2011, a increase of 16,056 fl ights or 11.2% from 2010. Total volume of fuel uplifted at both airports in 2011 was 3,953.1 million liters, a increase of 123 million liters or 3.2% from 2010.

Flights 2011 2010


Domestic Flights

Number of fl ights 44,136 38,618 14.3 Volume of fuel uplifted (million liters) 378.7 333.2 13.7

International Flights

Number of fl ights 96,356 89,118 8.1 Volume of fuel uplifted (million liters) 3,459.4 3,393.7 1.9


Domestic Flights

Number of fl ights 17,551 14,445 21.5 Volume of fuel uplifted (million liters) 108.5 98.1 10.6

International Flights

Number of fl ights 985 791 24.5 Volume of fuel uplifted (million liters) 6.5 5.1 27.5 Totals

Total Number of fl ights 159,028 142,972 11.2 Total Volume of fuel uplifted (million liters) 3,953.1 3,830.1 3.2

RESULTS OF OPERATIONS IN 2011

Increase (decrease), %

ANNUAL REPORT 2011

25

In 2011, business at both Don Mueang Airport and Suvarnabhumi Airport had no major changes. Refeulling services at Don Mueang Airport have also not changed. The Company is still providing refuelling services with 8 refuellers. Other than providing refuelling services and storage of jet fuel at Don Mueang Airport, the Company is providing diesel storage by using two of the fuel tanks that was formerly used to storage jet fuel. The Company reformed the jet fuel storage tanks to storage diesel and then transports the product via pipeline before heading to Bang Pa-in. The total capacity of both tanks is at 19 million liters and has started to storage diesel since September 2010. However, if the fuel consumption at Don Mueang Airport increases, we will be able to reform the storage tank to store jet fuel once again.

For business operations at Suvarnabhumi Airport, operations have not changed from the previous year. The Company still provides aviation fuel storage for Jet A-1 with the total capacity of 60 million liters and is one of the two intoplane agents that are the refuelling service providers at the airport. Currently in total, the Company has 40 aviation hydrant dispenser trucks and 3 refueller tank trucks, capable of providing aviation refuelling services to airline customers 24 hours.

SUMMARY OF BUSINESS CHANGING


26

In 2011, despite the negative factors of the tsunami disaster in Japan in March and major floods in many areas of the country late last year, gave a negative impact on tourism and the aviation business. However, the passenger figures at Suvarnabhumi Airport were more than 46 million people and at Don Mueang Airport were at 3.4 million people. On October 25, 2011 Don Mueang Airport had to stop daily operations due to the heavy floods and all operations were migrated to Suvarnabhumi Airport. The growth of both airports grew 12 percent compared to the previous year (source: Airports of Thailand Plc.). As a result of the increase of passenger figures at Suvarnabhumi Airport, the total consumption of jet fuel was at 4,607 million liters, averaged at 12.6 million liters per day, and grew 6.7 percent compared to the previous year. Due to the consequences that operations at Don Mueang Airport had to migrate to Suvarnabhumi Airport, this increased the Company’s Intoplane Service market share to be 86 percent.

For 2012, the Company forecasts that the fuel consumption in the first quarter will be affected adversely from the fourth quarter of 2011. But the situation will improve and will be back to normal within the second quarter of 2012. Apart from the negative factors from flooding and the negative factors of the economic crisis in the European Unions, the global economy is recovering gradually slow and might have an impact toward the tourism industry in Thailand. Currently, Thailand is becoming very popular in emerging markets like India, Russia, and the ASEAN countries. So the growths of low cost carriers in the ASEAN countries are gradually growing and are planning to start operations in 2012. The Company expects the overall fuel consumption in 2012 will tend to grow continuously and forecast the growth rate of 3.8 percent. The Company forecasts that the fuel consumption at Don Mueang Airport to be 132 million liters per year, averaged at 0.4 million liters per day and at Suvarnabhumi Airport to be 4,648 million liters per year, averaged at 12.7 million liters per day. The total fuel consumption for both airports is forecasted to be 4,780 million liters, averaged at 13.1 million liters per day, increased from the previous year 173 million liters. This forecast of the fuel consumption growth is based on that the low cost carriers at Don Mueang Airport has not changed to operate at Suvarnabhumi Airport and no other negative factors that might affect the tourism industry.

The Company aims to maintain the 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 via 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.

AVIATION REFUELLING OVERVIEW AND COMPETITION

ANNUAL REPORT 2011

27

The Company is committed to its vision and mission. To innovate and develop for the future, the Company has plans as follows.

1. Additional Diesel Generator Set Project

The Company will install an additional diesel generator set to ensure that the Company’s main hydrant pump system, which now totals 11 pumps after 2 additional main hydrant pumps were installed and operational in 2011, has a reliable source of power. Suvarnabhumi Airport can rest assured that, as a World Class provider of aviation refuelling services, we will always be able to supply aviation fuel to meet the airport’s growing demands.

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

Our 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, we plan on replacing 2 of these older vehicle chassis with newer units that are more effi cient and more environmentally friendly.

3. Don Mueang Depot and Into-plane Facility Rehabilitation Project

On 31 October 2011, fl ood water reached the Don Mueang Area and subsequently inundated the Company’s Don Mueang Depot, and Into-plane

INNOVATING AND DEVELOPING FOR THE FUTURE


28

Services Facility located on the airport’s airside area causing major damage to both property, and refuelling systems. With most of the salvage and clean-up works have already been completed in 2011, the Company will be rehabilitating damaged buildings, communications and power infrastructure, and all aviation refuelling systems to enable aviation refueling services to resume at Don Mueang Airport by 4th quarter of 2012.

4. Aviation Refuelling Management System Study (ARMS)

The Company will be studying various Aviation Refuelling Management Systems (ARMS) to replace our current On-truck Computer System which has been in use for almost a decade. The new system will enable us to better handle the increased complexity from more flights, but reduced turnaround time, the larger service areas due to continuous airport expansion e.g. Midfield Concourse 1 & 2, and more required manpower, to more effectively manage our aviation refuelling resources on the apron. The study is to be completed by 3rd

quarter of 2012.

5. Automatic Differential Pressure Calculation System Study

In an effort to obtain the best performance from our filtration equipment, the Company will study the feasibility of installing an Automatic Differential Pressure Calculation System on our filter water separators to provide a corrected differential pressure reading at various fuel flow rates. Should the corrected differential pressure be greater than the set point, or the rate of corrected differential pressure increase be exceedingly high, or the corrected pressure differential suddenly drop, the system will immediately shutdown the main hydrant pump. This is to prevent any water, or other foreign objects such as dust, or rust from entering the hydrant pipeline network.

6. Investment Project in Fuel Pipeline Transportation Limited

In 2011, the Company considered to increase the investment in Fuel Pipeline Transportation Limited (FPT) from the previous shareholding of 16.67% as the Company had the view that FPT has the potential in its operation in fuel pipeline transportation and can create long term value to the Company. However, FPT currently has a lot of debt as a result of Thai Baht floating in 1997, causing concern in its financial position. The Company considered that to mitigate risk from business interruption in fuel pipeline transportation, which is the business that relates to the Company and important to the aviation refuelling service of the Company in Don Mueng and Suvarnabhumi Airports, more investment in FPT would be a preventive solution, by purchasing FPT’s debt and preferred shares from the financial institutions. Later, the Company, as a creditor, petitioned to the Central Bankruptcy Court to request for the rehabilitation of FPT and in February 2012, the Central Bankruptcy Court has approved for the rehabilitation of FPT.

The Company has expected that the rehabilitation of FPT will be finished at the end of 2012, and FPT will be revived to be the firm with strong financial position that can generate cash flow continually, which shall be the most beneficial to the Company Group.

INNOVATING AND DEVELOPING FOR THE FUTURE

ANNUAL REPORT 2011

29

1. Business Risk

1.1 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 fl ight services provided which is directly related to Thai tourism industry growth rate. Additional factors which can negatively impact the Company’s revenue are political protestation and the sabotage at Thailand’s favorite tourism place. Moreover, the increasing of natural disasters i.e. fl ight cancellation due to the ashes from volcano eruption, the tourist cancellation due to fl ood in Thailand between October to November 2011. These severe incidents are uncontrollable factors which have directly affected to aviation business and also Company’s revenue.

Bangkok Aviation Fuel Services Plc. has continuously and systematically managed its relevant risks, which enables the Company to mitigate risk to the acceptable level in 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 :

RISK FACTORS


30

However, the Company’s financial operating result is carefully monitored every month because the management team has set it as main priority, as well as set up the trigger points 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.

1.2 Risks from Subsidiaries’ Performance Being Partly Subject to BAFS’s Performance

As the Company has focused on the consistent growth of completed aviation fuel service business, the investment in related aviation business through subsidiaries is appeared. Since partly of the Company’s revenue come from subsidiaries’ dividend yield, therefore subsidiaries’ performance has inevitably subjected to the Company’s performance. However, the subsidiaries are facing the risks arising from business operation including being the concession for Suvarnabhumi Airport Development Phase 2 in operation of the hydrant pipeline network and the construction over the pipeline network.

However, for operating result control and operating advice, some of the Company’s management is in the subsidiaries’ board of directors. Furthermore, the subsidiaries’ operating result is regularly report to the Company’s board of directors as well as the risk management system will be used as a tool to control all the possible risk factors to an acceptable level.

2. Risk from Operations

2.1 Risk Relating to Inadequate Refueling 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. Furthermore, the second phase airport development plan may drive the Company to face the risk of delay services due to the break down or incapability of refuel service equipment during peak hours.

However, refuel services equipment has been checked on regularly basis as well as generator will be set up at BKK Depot before the end of 2012 in order to increase the service performance during peak hour or emergency situation i.e. the electricity system break down.

Furthermore, the Company’s Fuelling Operations Committee, which composes of the representatives from the Company’s managements 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.

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

RISK FACTORS

31

ANNUAL REPORT 2011

could affect 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 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 5,744.1 million.

2. Aviation Third Party Legal Liability Insurance Policy, valued of USD 750 millions, and Terrorism and Disaster Insurance, valued of Baht 5,878.5 million.

3. Accidental Damage (property) Insurance Policy coverage for the Company’s property, valued of Baht 134.4 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 1-2 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. The Company received the certificate of carbon footprint emission volume as references to find the way of reduction in responsible of The Green Committee. Moreover, the project “Thai Travel Green” in collaboration with Thai Airways International Plc., is released as the first Asian Airline that uses Aviation Biofuel. The Company provided Aviation Biofuel service to Thai Airways TG 8421 on 21 December 2011.

3. Financial Risk

Risks related to Financial Obligations on Long-Term Loans In 2011, the Company has loans for the expansion of aviation refueling service business with financial institution as follows.

3.1 The Company has negotiated with the banks for 3 existing 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 :


32

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, 2011, the Company has outstanding loan of 1,172.4 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.

2) Loan contract with Kasikorn Bank Plc., for buying shares of Thai Aviation Refuelling Co., Ltd. amounts Baht 800 million, which is extend from 10-years to 14.5-year loan, paying back loan started in 2007. The outstanding loan at December 31, 2011 is Baht 311.1 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) Loan contract with Thanachart Bank Plc., for buying shares of JP-One Assets Co., Ltd. amounts 220 million Baht, which is extend from 7-year to 10-year loan, paying back loan will start in 2011. The outstanding loan at December 31, 2011 is 195 million Baht. 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

3.2 The Company obtains an Additional 8-years loan from Bangkok Bank Plc., amounts 700 million Baht, for relating business investment. The first loan amounts 650 million Baht were withdraw on November, 2011. The Company has to pay interest rate at MLR -1.75% for the first 2 years and at MLR-1.5% on the years of 3-5, after the years of 6 at MLR-1.25% with the same financial condition of current loan. Paying back loan started in December, 2012.

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, base on Company’s loan restructuring, the Company is confident that the financial and investment plan for company’s growing in the long run will be as planed and able to follow all the loan’s conditions at lower risk.

RISK FACTORS

ANNUAL REPORT 2011

33

1. Shareholding Structure

Top ten shareholders as of Aug 26, 2011 (latest shareholding’s book closing date) :

2. Management Structure The Board of Directors The Board of Directors of the Company is as follows :

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. Ath Hemvijitraphan, Mr. Chokchai Panyayong, Flight Lieutenant Montree Jumrieng, Mr. Nuttachat Charuchinda, Mr. Chakraphan Krachaiwong, Sqn.Ldr.Alongot Pullsuk, two out of nine directors sign and affi x the Company’s seal.

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. Alongot Pullsuk Director 6. Mr. Ath Hemvijitraphan Director 7. Mr. Chakraphan Krachaiwong Director 8. Mr. Navee Lertphanichkul Director 9. Mr. Vinai Chamlongrasdr Director 10. Mr. Nuttachat Charuchinda Director 11. Mr. Aswin Kongsiri Independent director 12. Mr. Pachara Yutidhammadamrong Independent director 13. Mr. Visut Montriwat Independent director 14. Mr. Sumon Surathin Independent director Mr. Tarnthong Chandrangsu Company’s secretary

Names Number of shares Shareholding %

1. Thai Airways International Plc. 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. Goldman Sachs & Co 9,990,880 1.96


34

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 : • 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


35

ANNUAL REPORT 2011

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 Team As per details in the topic of “Management Team”

3. Nomination of Directors and Managements

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.

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 he 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 ;


36

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 ; 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 Managements 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 Managements 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 28,500 Baht/month, director receives 19,000 Baht/month • Meeting Allowance : Chairman receives 24,000 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.


37

ANNUAL REPORT 2011

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 14

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 2011 Baht 14,003,025.65

Year 2010 Baht 13,576,058.76

The remuneration in detail is as follows :

Audit Committee

Remuneration

Bonus year 2010 paid in 2011

Unit : Baht

Director RemunerationNames

Other Committees Remuneration

Total Remuneration in Subsidiary Companies

PositionRemuneration in Subsidiary Companies


Audit Committee

RemunerationPosition

1. Mr. Palakorn Suwanrath Chairman 432,950.00 - - 842,200.00 1,275,150.00 -

2. M.R. Supadis Diskul Director 308,000.00 - 72,000.00 561,500.00 941,500.00 648,450.00

3. Flight Lieutenant Montree Jumrieng Director 308,000.00 - - 487,600.00 795,600.00 -

4. Mr. Chokchai Panyayong Director 308,000.00 - - 487,600.00 795,600.00 -

5. Sqn.Ldr.Alongot Pullsuk Director 137,483.80 - - - 137,483.80 -

6. Mr. Ath Hemvijitraphan * Director 308,000.00 - - 561,500.00 869,500.00 -

7. Mr. Chakraphan Krachaiwong * Director 274,071.42 - - 561,500.00 835,571.42 -

8. Mr. Navee Lertpanichkul Director 308,000.00 - 19,500.00 561,500.00 889,000.00 -

9. Mr. Vinai Chamlongrasdr Director 308,000.00 - 42,000.00 561,500.00 911,500.00 472,550.00

10. Mr. Nuttachat Charuchinda Director 308,000.00 - - 358,400.00 666,400.00 -

11. Mr. Aswin Kongsiri Director 308,000.00 - 60,000.00 561,500.00 929,500.00 -


38

12. Mr. Pachara Yutidhammadamrong Director 308,000.00 359,000.00 - 561,500.00 1,228,500.00 472,550.00

13. Mr. Visut Montriwat Director 308,000.00 308,000.00 22,500.00 561,500.00 1,200,000.00 472,550.00

14. Mr. Sumon Surathin Director 292,000.00 308,000.00 18,000.00 561,500.00 1,179,500.00 215,700.00

Mr. Tevin Vongvanich Ex-Director - - - 70,800.00 70,800.00 -

Flying Offi cer Norahuch Ployyai Ex-Director - - - 513,800.00 513,800.00 -

Mr. Serirat Prasutanond Ex-Director 56,387.10 - - 561,500.00 617,887.10 -

Sqn.Lsr.Asdavut Watanangura Ex-Director 121,133.33 - - 24,600.00 145,733.33 -

Total 4,394,025.65 975,000.00 234,000.00 8,400,000.00 14,003,025.65 2,281,800.00

Remarks : * 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.








Total








4,394,025.65 975,000.00 234,000.00 8,400,000.00 14,003,025.65 2,281,800.00








4,394,025.65 975,000.00 234,000.00 8,400,000.00 14,003,025.65 2,281,800.00








4,394,025.65 975,000.00 234,000.00 8,400,000.00 14,003,025.65 2,281,800.00

Remuneration for the Management

Number of Management 10

Types of remuneration Salary, Bonus, Welfare * Total Management’s remuneration Year 2011 Baht 52,372,633.49 Year 2010 Baht 59,820,570.08

* including Retirement Benefi t Program ; Prior to the establishment of the provident fund, each employee is entitled to benefi ts 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 benefi t program which the employee will receive after retiring. If they choose to join the provident fund program, the Company will guarantee that provident fund benefi ts will not be less than that of the retirement benefi t.

4.2 Other Remunerations Another form of remuneration that the Company provides for the managements 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 specifi ed in the Company’s rules.

Provident Fund Contribution for the Management

Number of Management 10

Provident Fund Contribution Year 2011 Baht 4,706,446.32 Year 2010 Baht 4,389,980.88

SHAREHOLDER AND MANAGEMENT STRUCTUREUnit : Baht

Director Remuneration

Names PositionOther

Committees Remuneration

TotalRemuneration in Subsidiary Companies


Audit Committee

Remuneration

39

ANNUAL REPORT 2011

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 Profi t after Tax, Legal Reserve and Other Reserves, of not less than 10%, calculating from the net profi t of Company’s fi nancial 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 :

Dividend Paid Dividend per share % of (Mil.Baht) (Baht) Net Profi t *

Year 2011 331.50 0.65 79 Year 2010 275.40 0.54 63 Year 2009 219.30 0.43 59

Remarks : * Calculated from the Company Financial Statement.

The Company paid interim dividend to the shareholders at the rate of Baht 0.25 per share on September 6, 2011 and on February 22, 2012, the Board of the Directors’ Meeting assented to pay the dividend for last six month of the year 2011 to the shareholders at the rate of Baht 0.40, totaling Baht 0.65 per share for the year 2011, or 79% of net profi t. This rate follows the Company’s dividend policy and will propose to the Annual General Meeting for the year 2012.

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 Profi t 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 Profi t after Tax, Retained Loss and Legal Reserve.

IPS, the Company’s Subsidiary, and FPT, the Company’s Affi liate, still have no dividend policy.


40

The Board of Directors of 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, Corporate Governance Policy, and Code of Conduct, and believes that this will lead the Company to achieve its goal, attain sustainable growth, as well as boost the confidence of shareholders and stakeholders.

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 BusinessLaws, 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, managements 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, managements and employees.

Furthermore, the Company has provided Code of Conduct for the Board of Directors, the managements and the employees of the Company and its subsidiaries 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 continually on an annual basis.

The Company has complied with the Principles of Good Corporate Governance of the Stock Exchange of Thailand as follows.

Section 1 : Shareholders’ Rights 1. Shareholders’ Rights Protection1.1 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 bylaws, 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.

GOOD CORPORATE GOVERNANCE

41

ANNUAL REPORT 2011

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 2011, the meeting was held on April 22, 2011, where relevant directors especially Chairman of the Board of Directors, Chairman of various committees, Managing Director, managements, external auditor, and legal advisor attended the meeting to respond to questions. 2.2 The Company has provided Legal Advisor of HNP Counsellors Limited responsible for checking registration documents and counting of votes in the shareholders’ meeting.

3. Delivering the Meeting Invitation Letter

3.1 The Company assigned Thailand Securities Depository Co., Ltd., the Company’s share registrar to send the meeting invitation letter to shareholders 14 days in advance and posted such information, which is the same information as sent to shareholders, in www.bafsthai.com, 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, specifying clearly whether each agenda is for acknowledgement or consideration, 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.

3.4 Important agendas for consideration in the annual shareholders’ meeting are

• Appointing Directors : The Company opens chance to shareholders to appoint director by person while providing information on nominating criteria and method, director background, educational background, working experience, number of companies served as director, 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, together with the reason, and book register date for right of receiving dividend, which is screened by the Remuneration Committee.


42

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 offi cers 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 uses a barcode system detailing each shareholder in the registration form. This is to facilitate the registration for time saving and accuracy.

4.5 The Company gives shareholders who show up late a chance to vote on agenda items still under deliberation.

5. Conduct of the Shareholders’ Meeting

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

6. After the Shareholders’ Meeting

6.1 The Company notifi ed the meeting resolution on dividend payment via the Stock Exchange of Thailand’ s information dissemination system and coordinated with Thailand Securities Depository Co., Ltd. to ensure that all shareholders shall receive the dividend. In addition, the Company set the book closing date to determine the shareholders’ right to the dividend not less than 5 working days after the shareholders’ meeting, which aligned with the recommendation of the SET.6.2 The minutes of meeting are correct, complete and can be verifi ed by shareholders. The minutes covers the name and position of directors who attend in the meeting, voting method, shareholders’ opinions, the director’s clarifi cation 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.

From the above efforts, the Company has received “Excellent” scoring in

AGM Assessment Project for four consecutive years.


43

ANNUAL REPORT 2011

Section 2 : 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 specifi ed by the law, which specifi es that one or several shareholders, holding minimum share in the amount of 5 percent can propose meeting agenda. However, no shareholder proposed additional meeting agenda or director nominee.

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 and instruction 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 confi dential 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, managements and employees to trade the Company’s shares 7 days prior to the disclosure date of quarterly fi nancial results. As for the trading of Company’s shares by the Board of Directors and the managements, the Company has notifi ed the Board of Directors and the managements to report changes in any shareholding status to the SEC, as specifi ed in Section 59 of Securities and Exchange Act B.E. 2535. The shareholding agenda of the Board of Directors and the managements 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.

3.2 The Company’s directors and managements 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 managements 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 managements who may have onfl icts 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.

In 2011, the Company did not get any complaints for not respecting shareholders’ rights or any accusation regarding misuse of inside information.


44

Section 3 : 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. Furthermore, the Company encourages shareholders to express their opinions, give recommendation, propose meeting agenda and director nominee in the shareholders’ meeting,

1.2 Customers :

• The Company is attentive and responsible to customers, complies with all agreements made with customers, treats every customer equally and fairly, commits to satisfaction and confidence to customers in order to get quality service. • The Company provides aviation refuelling service, conforming to international standard, on time, with highest safety, which receives the certification ISO 9001 and OHSAS 18001. • The Company has customer satisfaction survey system, which is one of Key Performance Indicators (KPIs) of the Company. • The Company has customer relationship activities such as bowling tournament, football tournament, meeting customers in various festivals.

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 addition, 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, 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 :

• Have Social Responsibility and Work Force Policy to enhance the employee’s rights to be respected and protected in accordance with labor laws. • Have regulation regarding compensation and employee benefits. • Provide reasonable compensation and fringe benefit e.g. salary, bonus, retirement fund, life insurance, accident insurance and health insurance. • Provide orientation to new employees ; educate them about code of conduct, core value, safety, quality system, fundamental knowledge, as well as giving them on the job training.


45

ANNUAL REPORT 2011

• Have policy to promote employee development in systematic way, by adopting 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. • Provide education support programs e.g. scholarships for employees • Have activities to promote good relationships among employees such as arranging sport day, New Year party, happy hours activity, encouraging employee to participate in various clubs of the Company. • Give assistance to employees in the flood crisis such as providing alternated workplace, allowing employees in some duties to work at home, arranging van to pick up employees, providing accommodation, providing grant and interest free loan.1.7 Social and Community : • The Company amended Anti-Bribery and Corruption Policy to be more explicit, established the Policy of not violate human rights and not violate any intellectual property or copyright. Such policies are specified in the Company’s Code of Conduct. • The Company realizes the importance of Corporate Social Responsibility (CSR), by establishing CSR Policy, and conducts activities that support CSR and community development which is disclosed in the Company’s website. • The CSR activities were such as Mangrove Forest Field Trips, Royal Kathin, Annual Kathin Offering Ceremonies and Buddhist Monk Scholarship Project, participating in the landscape improvement of Dhamrong Dhamma Meditation Center, donating to victims of natural disaster via the Thai Red Cross Society, Soldier Moral Improvement Program, donating used calendar to Foundation for the Blind in Thailand, providing assistance to nearby community in the flood crisis e.g. floating toilets, bus service, drinking water machine, encouraging the employee to mold EM Ball for waste water treatment, distributing EM Ball to community, for etc. • The community development activities were such as Teachers Volunteering Project, Fire Drill Training, arranging health check up for community, granting scholarship, educational and sport facilities to nearby schools, granting scholarship by joining with Woman Thai Muslim Orphan Help Foundation of Thailand, supporting in National Children Day activities for nearby communities and schools, supporting for office equipment of traffic section of Don Mueng police station, for etc. 2. Safety, Occupational Health and Environment The Company has emphasized in Safety, Occupational Health and Environment in workplace, by established Safety, Occupational Health and Environmental Policy and set up Safety, Occupational Health and Environment Committee. The Company conducted in Safety, Occupational Health and Environment as follows. • Develop Safety, Occupational Health and Environment System to comply with laws, international standards and other regulations • Control, improve, prevent, and correct dangers from operation that may affect employees and assets of the Company • Adjust the performance on Safety, Occupational Health and Environment of the Company continually • Promote and support the participation of the employees in performing their duties concerning Safety, Occupational Health and Environment • Develop the employee to have knowledge and awareness in Safety, Occupational Health and Environment both in workplace and outside workplace • Provide resources to support the performance under Safety, Occupational Health and Environment System for continual improvement. • Provide safety workplace environment for the employee’s life, health, and property, as well as educate and train them about environment regularly. The Company organized various activities e.g. arranging health check up on annual basis, Big Cleaning Day activities, various training courses such as courses on Occupational Health and Environment in workplace, fire drill training, as well as providing Personal Preventive Equipment for Into-plane staffs.


46

3. Responsibility towards Resources and Environment

The Company has promoted the employee to use resources efficiently, with maximum benefit, while concerning of environmental impact. The Company has assessed impact and set measures to prevent and mitigate the impact that may occur systematically. The Company established Energy Conservation Policy, and set up Green Committee with the responsibility to manage the energy using to align with Energy Conservation Policy as follows.

• Ensure compliance with laws regarding energy using and energy conservation • Improve the efficiency of energy using in the building and in the storage and transport procedure of aviation fuel • Strictly and continually manage energy using and energy conservation • Promote the use of renewable energy to reduce energy using of the Company • Promote awareness and educate about energy conservation • Communicate about the objective, plan, and performance of energy conservation annually to enhance the employee understanding and following • Develop and educate the employee to have knowledge about Environment continually • Summarize and report the performance of energy using and energy conservation to the management consistently at least 1 time a year

The Company organized various activities e.g. Aviation Bio Fuel refuelling service, trip for employee to implant awareness of environment caring at Wangdum Mountain Camp (Renewable Energy Learning Center) in Kanchanaburi, the feasibility study on using Electrical Vehicle Hydrant Dispenser at Suvarnabhumi Airport.

4. Observation of Human Rights

It is the responsibility of every director, management, and employee of the Company and its subsidiaries to fully observe the human rights that specified in Code of Conduct such as

• Commit to democracy and encourage employees to use their constitutional right to vote. • Treat employees on the basis of the dignity of human beings and respect the rights of individuals. • Support and respect for human rights, by regularly monitor the Company of not being involved in the violation of human rights e.g. not supporting forced labor, child labor • Promote the monitoring of compliance with human rights within the Company and encourage compliance with international human rights standards.

There has never been any report or complaint on the violation of human rights of the Company.

5. Intellectual Property or Copyright

It is the responsibility of every director, management, and employee of the Company and its subsidiaries to follow Code of Conduct regarding intellectual property or copyright i.e.

• Protect intellectual property of the Company and avoid infringing the intellectual property of others • Comply with laws, regulations and obligations regarding intellectual property rights of others, including patents, copyrights, trade secrets and other proprietary information • not infringe or misuse intellectual property rights of others • In the case of a copyright work or other intellectual property occurs from the performance of employees, such copyright or intellectual property rights shall belong to the Company.

There has never been any report or complaint on the violation of Intellectual Property or Copyright of the Company.


47

ANNUAL REPORT 2011

6. Anti-Bribery and Corruption

It is the responsibility of every director, management, and employee of the Company and its subsidiaries to follow Code of Conduct regarding anti-bribery and corruption i.e.

• Not offer compensation, pay, demand, accept, or receive bribes from others in any form, either directly or indirectly, in order to have mutual benefi ts or for the benefi t of the Company • Not engage in illegitimate transactions that involve with government offi cials, other persons or entities, either directly or indirectly • Not donate, or make any facilitation payment, or provide any fi nancial support to other persons or entities as a way to pay bribes • Not provide fi nancial support or other benefi ts, either directly or indirectly, to political parties, political groups, or any person related to politics, in order to gain the benefi t for the Company, self-interest and partisan. There has never been any report or complaint on the violation of anti-bribery and corruption of the Company.

7. Channel to Direct Corporate Issues

The Company provides channel for stakeholders to send recommendation, opinion, question, or complaint to the Company via the Company Secretary, e-mail: [email protected], tel 02 834 8911, or Investors Relations Section, e-mail: [email protected], tel. 02 834 8914. The mailing address is Bangkok Aviation Fuel Services Plc. 171/2 Kamphaeng Phet 6 Rd., Sub-Distict Don Mueang, Khet Don Mueang, Bangkok 10210

In case that there is any important issue or the matter that may negatively affect the Company, the Company Secretary shall propose it to the Board of Directors.

8. Whistleblower System

The Board of Directors has set various channels for whistle blowing in any suspected violation in code of conduct and has investigation procedure after acknowledging such matter. It is the responsibility of every director, management and employee to acknowledge and strictly adhere to the Company’s Code of Conduct.

Section 4 : Information Disclosures and Transparency 1. Information Disclosure

The Company has disclosed signifi cant information in Annual Report and via the Company’s website, www.bafsthai.com, both in Thai and English. The information includes vision, mission, various policies, structure of the business group, nature of business and competition, fi nancial and operation information, risk factors, shareholding structure, organization chart, the Board of Directors, the Managements, type of director, background and shareholding of the directors and managements, director training record, the remuneration policy, type and remuneration for directors and managements of the Company and its subsidiaries, performance of the Board

In 2011, the Company received honorable awards i.e.

• National Award of the Outstanding for Enterprise of Safety Operations, Occupational Health and Working Environment in 3 areas i.e. Don Mueang Depot, Suvarnbhumi Depot, and Suvarnbhumi Intoplane, • Winning Awards in the campaign of eliminating material that is harmful to aircrafts (Foreign Object Damage : FOD) at Suvarnabhumi Airport • Certifi cate as “A Pilot Organization in Carbon Footprint for Organization Project” from Thailand Greenhouse Gas Management Organization (TGO) and National Metal and Materials Technology Center (MTEC).


48

The Company has no record of being ordered by the SEC to amend the fi nancial statements, and has disclosed its quaterly and yearly fi nancial statements to shareholders and investors within the timeframe.

of Directors and various committees in previous year e.g. number of meeting, number of attendance of each director, information about Investor Relations, the invitation letter and minutes of shareholders’ meeting, press release, for etc., where the information is consistently updated.

2. Financial Reports Preparation

To perform responsibilities in providing the fi nancial 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’ confi dence to the fi nancial reports, the Board of Directors has appointed the Audit Committee to assume key duties and responsibilities of reviewing the Company’s fi nancial 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.

In 2011, the auditors from Dharmniti Auditing Co., Ltd., the Company’s external auditors had knowledge, competence, independency, and was approved by the Offi ce of the SEC. The Company’s fi nancial statements were approved with unqualifi ed opinion and accurate in accordance with the generally accepted accounting principles, and assented by the Audit Committee/the Board of Directors before disclosing to shareholders.

The Company constantly discloses Management Discussion and Analysis (MD&A) on a quarterly basis to explain analytically about the fi nancial position, earning result, factors that affected fi nancial position and earning result, as well as the major change of the Company. Moreover, the Company distributed important information via BAFS Newsletter semiannually.

3. Information Disclosure Channel

3.1 The Company realizes the importance of disclosing both fi nancial and non-fi nancial information correctly, completely, in a timely manner, transparency via various channels as follows :

• The SET information dissemination system and the SEC web site • The Company’s web site, www.bafsthai.com, that provides both Thai and English information • Providing information to analysts and investors in the Opportunity Day at the SET • Providing information to analysts and investors who visited the Company • Analyst Meeting • Sending documents to shareholders by post.

3.2 The Company discloses the information in accordance with the Regulations of the SEC and the SET, under the responsibility of Corporate Affairs Section.

3.3 Investors Relations Section, e-mail: [email protected], tel. 02 834 8914, has been established to represent the Company in communication with investors, shareholders, stock analysts and other related organizations. In the year 2011, the main activities were participation in the activities of the SET and other parties to meet investors 5 times, arrangement of institutional and retail investors to meet the managements and visit the Company 5 times, Analyst Meeting 6 times, providing information for the Company’s Credit Rating Review and to the investors that ask questions to the Company.


49

ANNUAL REPORT 2011

Section 5 : 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 managements.

5.1 Composition of the Board of Directors

5.1.1 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 14 directors as follows :

• Executive Director 1 person

• Non-Executive Director 13 persons,

comprises of 8 outside directors and 5 independent directors, more than 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, as per details in the topic of “Shareholder and Management Structure - Nomination of Directors”.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 managements. 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 managements.

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.

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 as follows :


50

1. Mr. Pachara Yutidhammadamrong (Independent Director) Chairman of Audit Committee 2. Mr. Visut Montriwat (Independent Director) Director of Audit Committe 3. Mr. Sumon Surathin (Independent Director) Director of Audit Committee Mrs. Mayuree Nalinwong (Executive of Internal Audit) Secretary of Audit 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 managements and concerned persons, and performing any other functions assigned by the Board of Directors.”

In addition, the Audit Committee gives opinion in performing its duties as specified in the Audit Committee Charter such as opinion in reviewing the financial statements, risk management, and internal control.

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 as follows :

1. Mr. Visut Montriwat (Independent Director) Chairman of Remuneration Committee 2. Mr. Sumon Surathin (Independent Director) Director of Remuneration Committee 3. M.R. Supadis Diskul (Managing Director) Director of Remuneration Committee Mr. Chattaya Bhandhaya Secretary of Remuneration Committee (Senior Finance and Account Manager)

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,


51

ANNUAL REPORT 2011

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 as follows :

1. Mr. Aswin Kongsiri (Independent Director) Chairman of Nominating Committe 2. Mr. Navee Lertphanichkul (Non-Executive Director) Director of Nominating Committee 3. M.R. Supadis Diskul (Managing Director) Director of Nominating Committee Mr. Tarnthong Chandransu Secretary of Nominating Committee (Executive Assistant of Legal and Securities)

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.

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 as follows :

1. Mr. Aswin Kongsiri (Independent Director) Chairman of Risk Management Committee 2. Mr. Vinai Chamlongrasdr (Non-Executive Director) Director of Risk Management Committee 3. M.R. Supadis Diskul (Managing Director) Director of Risk Management Committee 4. Mr. Ditsapong Prithaveepong Director and Secretary of Risk Management (Senior Depot Manager) Committee

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.”

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 managements to have controlling measures.

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 2011, 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 managements’ 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.


52

5.3.3 The Company clearly segregates the structures, roles, duties and responsibilities of the Board of directors and the managements. Power of attorney is issued to specify the scope and level of authority for the managements 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 initiated, participated in preparation, and approved Corporate Governance Policy and Code of Conduct to the directors, managements 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 the following topics ;

• Ethics for business conduct • Practices towards various stakeholders i.e. shareholders, employees, customers, trade partners, creditors, competitors, social and environment • Ethics for the directors • Ethics for the employees in various aspects such as conflict of interests, confidential information, provision, inside information, anti-bribery and corruption, intellectual property and the use of information technology • Monitoring procedures and Disciplinary actions.

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 consistently educated the managements and employees via internal journal since the year 2003

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 2011 are disclosed by complying with Regulations of the SEC as per details in the topic of “Related Party 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 2011”.

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.


53

ANNUAL REPORT 2011

Name

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.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. In 2011, each director attended the meeting regularly, i.e. 89% of total meeting. Meeting Attendance of directors Meeting Attendance in 2011 (Meeting Attendance/Total Meeting) Board of Audit Remuneration Nominating Risk Directors Committee Committee Committee Management Committee (5 times) (5 times) (3 times) (3 times) (6 times)

1. Mr. Palakorn Suwanrath 5/5 2. M.R. Supadis Diskul 5/5 3/3 3/3 6/6 3. Flight Lieutenant Montree Jumrieng 5/5 4. Mr. Chokchai Panyayong 5/5 5. Sqn.Ldr.Alongot Pullsuk 1/ 3/3 6. Mr. Ath Hemvijitraphan 5/5 7. Mr. Chakraphan Krachaiwong 5/5 8. Mr. Navee Lertphanichkul 5/5 3/3 9. Mr. Vinai Chamlongrasdr 2/ 5/5 1/1 6/610. Mr. Nuttachat Charuchinda 5/5 11. Mr. Aswin Kongsiri 5/5 2/2 6/612. Mr. Pachara Yutidhammadamrong 5/5 5/5 13. Mr. Visut Montriwat 5/5 5/5 3/3 14. Mr. Sumon Surathin 4/5 5/5 3/3 * Sqn.Ldr.Asdavut Watanangura 3/ 1/2 * Mr. Serirat Prasutanond 4/ 0/1

Remarks :1/ Assume director since Aug 10, 2011. Therefore, the number of Board of Directors’ Meeting is 3 time. 2/ To be ad-hoc nominating director in place of Mr. Aswin Kongsiri to seek for the directors in replacement of those retired by rotation in AGM 2011 where Mr. Aswin Kongsiri was in that list. 3/ Resigned from director since Jun 17, 2011. Therefore, the number of Board of Directors’ Meeting is 2 times.

4/ Resigned from director since Mar 31, 2011. Therefore, the number of Board of Directors’ Meeting is 1 times.


54

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.

5.4.3 In the Board of Directors’ meetings, the Chairman allocates sufficient time for the managements 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 the managements 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 Self Assessment of the Board Even though the Board of Directors and each committee have completely performed their responsibility, they realized in continually improving the effectiveness of its performance. Therefore, they have conducted the performance assessment. The Board of Directors and the Audit Committee have arranged individual assessment and entire committee assessment while the Remuneration Committee, the Nominating Committee and the Risk Management Committee has arranged entire committee. The performance assessment of the Board of Directors and each committee has the same rating criteria, and is consistent with the example of self assessment of the board, provided by the SET. Furthermore, the assessment has been reviewed regularly to ensure its appropriateness.

The assessment result was proposed in the meetings of the Board of Directors and each committee for discussion and sought for the performance improvement. The assessment result for the year 2011 revealed that the Board of Directors and each committee has the performance in “Very Good-to-Excellent” 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 for the efficiency of the meeting in 2011 reveals “Good-to-Best” level.

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.


55

ANNUAL REPORT 2011

Remuneration for the Managements : 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 managements as per details in the topic of “Shareholder and Management Structure - Remuneration for the Board of Directors and Managements.”

5.7 Development for the Directors and Managements

5.7.1 The Company supports and facilitates training and educating the Boards of Directors, the managements and all employees thus continually improving the performance.

5.7.2 The Board of Directors has established “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 managements, 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. More than 75% of the total directors attended the director courses. In 2011, there were 2 directors attended the course arranged by IOD i.e. Mr Chakraphan Krachaiwong attending DAP Course, and Mr. Visut Montriwat attending Financial Statements for Director Course.

5.7.5 The Company has Succession Plan for important positions, by specifying in the Company’s strategic

plan to be the benefi t for the management’s work succession and development, and to work in place

of Managing Director and the managements when they can not perform their duties

From the commitment to Good Corporate Governance, the Company has received Excellent Corporate Governance Scoring from Thai Institute of Directors (IOD)

for 3 consecutive years.


56

MANAGEMENT DISCUSSION AND ANALYSIS FOR THE OPERATING RESULTS IN 2011

1. Report and Analysis of the Operating Results

In 2011, volume of BAFS and subsidiaries increased by 6.7% (y-o-y) to 4,607 million litres compared with that of 2010 which was 4,317 million litres while the growth of total fl ights services of group increased 13.5% (y-o-y) to170,963 fl ights from 150,639 fl ights. For this reason, total revenues of BAFS and subsidiaries increased by Baht 189.5 million or 8.5% (y-o-y) to Baht 2,409.3 million from Baht 2,219.9 million. However, on December 21, 2011, a royal decree was issued which enacted the law for reducing the corporate income tax rates for the 3 years from 30% to 23% for year 2012 and 20% for year 2013 and 2014. Later, the Federation of Accounting Professions issued the guideline regarding the reduction in corporate income rate in which the substantially enacted tax rate for using for measurement of the deferred tax assets and deferred tax liabilities. Therefore, The Company and its subsidiaries had reduced their deferred tax assets of Baht 89.7 million that affected the increment of net profi t of 2011 which increased by Baht 4.4 million to Baht 527.6 million or 0.8% (y-o-y) from Baht 523.2 millionwhich earning per share of this year was equal toBaht 1.03.

Moreover in 2011, the Board of Directors was approved to increase the investment in Fuel Pipeline Transportation Limited (FPT) from the previous shareholding of 16.7% as the Board of Directors considered that FPT has the potential in its operation in fuel pipeline transportation and can create long term value to the Company. Although FPT currently has a lot of debts as a result of Thai Baht fl oating in 1997, the Board of Directors considered that to mitigate risk from business interruption in fuel pipeline transportation, which is the business relates to the Company and important to the aviation refueling service of the Company in Suvarnabhumiand Don Mueng Airports. On November 2, 2011, the Company Group purchased the debt of FPT from the group of fi nancial institutions in the amount of Baht 1,717 million at the price of Baht 738 million or at the average discount of 57% of outstanding debt mentioned above.

In addition, the Company purchased 5,147,314 preferred shares of FPT or 32.3% of total shares at the price of 0.10 Baht/share. Therefore, at present the Company Group has increased its shareholding of FPT from 16.67% to 49%. However, these investments are considered general investments because the Company does not have signifi cant infl uence over FPT.

57

ANNUAL REPORT 2011

According to the un-audited accounts of FPT as of December 31, 2011, that FPT has a capital deficit of Baht 522 million which the Company was already set aside provisions against impairment loss of this investment in full amount.

1.1 Revenue For 2011, total revenues of BAFS and its subsidiaries wereamounted to Baht 2,409.3 million which details are following,

1.1.1 Services Income Services income of BAFS and its subsidiaries were amounted to Baht 2,338.0 million which increasedby Baht 165.8 million or 7.6% (y-o-y) from last year.

1.1.2 Other Income

1.1.2.1 Rental Income The rental income in 2011 was Baht 22.2 million which increased by Baht 3.0 million or 15.5% (y-o-y) from last year.

1.1.2.2 Other Income Other income was Baht 49.1 million which increased by Baht 20.7 million or 72.8% (y-o-y) from last year.

1.2 Expenses

1.2.1 Cost of Services In 2011, Cost of services was Baht 950.8 million, increased by Baht 20.3 million from Baht 930.4 million or 2.2% (y-o-y). Major items thatincreased cost of services wasthe costs of flood prevention during the months of October to November 2011 at the amount of Baht 18.1 million.

1.2.2 Administrative Expenses Administrative expenses in 2011, was Baht 413.6 million, decreased by Baht 2.0 million or 0.5% (y-o-y) as a result of in 2010 the Company was recorded impairment loss from assets not used of Baht 19.9 million. Besides in this year, management benefit expenses was Baht 74.6 million, decreased by Baht 7.0 million or 8.5% (y-o-y) from the year earlier.

Moreover,the depreciations and amortizations expense were Baht 305.3 million, decreased by Baht 51.8 million and the employee’s expense was Baht 417.5 million, increased by Baht 7.5 million when compared with 2010.

1.2.3 Finance Costs Finance Costs in 2011 was Baht 118.6 million which increased by Baht 32.4 million or 37.6 % (y-o-y). Mainly causes of the increment was came from the effect of the adoption of TAS 19 Employee Benefits since January 1, 2011 which was increased by Baht 21.8 million (detail were in the notes to financial statement no.16) and the remaining cause was the interests cost which was increased by Baht 10.6 million. Therefore the finance costs can be divided in 3 groups which is belonging to BAFS at amount of Baht 98.7 million, TARCO’s atamount of Baht 17.8 million and JP-One’sat amount of Baht 2.2 million respectively.


58

1.3 Operating Results For 2011, Net profit of BAFS and its subsidiaries amounted to Baht 527.6 million which was increased by Baht 4.4 million or 0.8% (y-o-y) which was equivalent an earning per share of Baht 1.03 when compared with Net Profit of last year at amount of Baht 523.3 million.

The Board of Directors’ Meeting No.1/2012 held on February 22, 2012 resolved to pay dividend for 2011’s performance at the rate of Baht 0.65 per share which accounted to be the total amount of Baht 331.5 million or accounted for payout ratio of 79.3% of net profit before reserve of the company only. Interim dividend was paid at the rate of Baht 0.25 per share and the rest of dividend would be paid at Baht 0.40 per share. The Company fixed the share registration book closing date for the right to receive dividend on May 10, 2012 and fixed the dividend payment date to be May 23, 2012.

2. Report and Analysis of Financial Status

2.1 Assets As at December 31, 2011 the Companygroup have had total assets in the amount of Baht 7,355.2 million, increased by Baht 472.9 million or 6.9% from December 31, 2010. The important details were as follows :

2.1.1 Cash, cash equivalent and short term investments of the Company group were Baht 879.9 million which the net cash flow from operations was Baht 934.4 million, the net cash outflow from investment was Baht 849.7 million which mainly item was the investment in FPT as details were mentioned earlier and the net cash flow used in financing was Baht 204.9 million.

2.1.2 Property, leasehold improvement and equipment at December 31, 2011 was Baht 4,487.0 million decreased by Baht 205.1 million or 4.4% from December 31, 2010.

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 thisconcession was Baht 633.3 million.

2.2 Liabilities

As at December 31, 2011, the Companygroup have had total liabilities of Baht 3,535.0 million, increased by Baht 412.4 million or 13.2% compared from December 31, 2010 and resulted in debt to equity ratio to 0.93 : 1 time from 0.83 : 1 time. The causes of total liabilities increased were 1) increased in long term loan by Baht 259.4 million due to in Q4/2011 the Company was loaned Baht 650 million form BBL for FPT’s investment project and 2) increased in Employee benefit obligations by Baht 238.0 million. The liabilities comprised of major items which are follows :

2.2.1 Account payable was Baht 76.4 million which compounded of account payable - related company’s group of Baht 41.5 million and others account payable of Baht 34.9 million.

2.2.2 Portion of long term loan which to be paid in one year at the mount of Baht 447.7 million, decreased by Baht 32.2 million which were comprised of long term of BAFS at the mount of Baht 262.0 million, TARCO’s at the mount of Baht 161.7 million and JP-One’s at the mount of Baht 24.0 million. Besides, the financial lease which to be paid in one year was Baht 5.0 million which was belonging to BAFS at Baht 2.8 million and TARCO’s at Baht 2.3 million respectively.

MANAGEMENT DISCUSSION AND ANALYSIS FOR THE OPERATING RESULTS IN 2011

59

ANNUAL REPORT 2011

2.2.3 Others current liabilities was Baht 172.4 million which comprised of major items such as accrued corporate income tax of Baht 83.7 million and others of current liabilities of Baht 88.7 million.

2.2.4 Long term loan from bank was Baht 2,280.8 million, increased by Baht 259.4 million or 12.8% when compared with those of December 31, 2010 which comprised of :

• The first portion of Baht 266.7 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%.

• The second portion of Baht 979.8 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%.

• The third portion of Baht 176.3 million was long term loan from TBANK 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 of Baht 643.8 million was long term loan from BBL due at Dec. 31, 2019 which was quarterly, principal repayment : Baht 25.0 million/period, at rate of MLR - 1.75% for the first 2 years, MLR - 1.50% in the year of 3 - 5 and MLR - 1.25% in the year of 6 - 8 and

• The remaining portion was TARCO’s loan of Baht 214.3 million from BBL which comprised of THB baht loan of 155.5 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 THB baht loan of 58.8 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%.

2.3. Shareholders’ Equity

As at December 31, 2011, shareholders’equity of the Companywas Baht 3,820.3 million, increased from December 31, 2010 by Baht 60.5 million or 1.6%.

3. Major factors that may affected operating performance or financial status

The Company has had contingent liabilities from providing a bank guarantee to TARCO for outstanding amount of long term loanat Baht 376.1 million. (which was included the portion to be paid in one year)

Moreover, the Company has contingent liabilitiesfrom providing a bank guarantee to JP-One for a proportion of 50.0% of outstanding amount of long term loan at Baht 12.0 million.(which was included the portion to be paid in one year)


60

The Board of Directors is aware of the duties and responsibilities in ensuring that the Company’s fi nancial 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 fi nancial reports. This is for the benefi t of the shareholders and general investors who are entitled to acknowledge the fi nancial and operation information that is complete, accurate, on time and reasonable.

To provide stakeholders with the confi dence that the Company’s fi nancial statements is prepared in accordance with the above objectives, the Board of Directors has appointed the Audit Committee, which consists of qualifi ed 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 fi nancial 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 effi ciency, 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 fi nancial statements ended 31 December 2011 and 2010, and the operation information, change in shareholders’ equity, and cash fl ow 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 confl ict of interest transactions, and having good internal control.

REPORT OF THE BOARD OF DIRECTOR RESPONSIBILITIES FOR 2011 FINANCIAL STATEMENTS

(Mr. Palakorn Suwanrath) Chairman

(M.R. Supadis Diskul) Managing Director

ANNUAL REPORT 2011

61

To The Shareholders and Board of Directors of Bangkok Aviation Fuel Services Public Company Limited

I have audited the consolidated statements of financial position of Bangkok Aviation Fuel Services Public Company Limited and subsidiaries as at December 31, 2011 and 2010, the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years then ended and the statements of financial position of Bangkok Aviation Fuel Services Public Company Limited as at December 31, 2011 and 2010, the related statements of comprehensive 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, 2011 and 2010, 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, 2011 and 2010, 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.

Without qualifying my opinion, as mentioned in Note 3.22 to financial statements for the year ended December 31, 2011, the Company and its subsidiary have adopted the new and revised financial reporting standards issued by the Federation of Accounting Professions. These standards are required to be applied to the financial statements for the accounting period beginning on or after 1 January 2011 onwards. As described in Note 4, the financial statements of the Company and its subsidiary for the year ended December 31, 2010 have been restated as a result of the adoption of new and revised financial reporting standards mentioned above. I have audited the adjustment transactions that are used to adjust with the financial statements of 2010. In my opinion, these adjustments by the Company and its subsidiary are appropriate and correct.

(Mr. Pichai Dachanapirom) Certified Public Accountant Registration No. 2421Dharmniti Auditing Company LimitedBangkok, ThailandFebruary 22, 2012

AUDITOR OF REPORT


62

STATEMENTS OF FINANCIAL POSITIONBANGKOK AVIATION FUEL SERVICES PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESAS AT DECEMBER 31, 2011 AND 2010

CURRENT ASSETS

Cash and cash equivalents

Short-term investments

Trade accounts receivable - net

Related companies

Others

Amounts due from and advance to related companies

Inventory of spare parts

Other current assets

Prepaid insurance

Input tax refundable

Others

TOTAL CURRENT ASSETS

NON-CURRENT ASSETS

Restricted fi xed deposits with fi nance institutions

Investments in subsidiaries

Other investments in related company - net

Loan to and long-term receivable from

related companies - net

Long-term loan to employees

Investment property

Property, leasehold improvement and equipment - net

Right of use of land leased by a subsidiary - net

Consession of a subsidiary - net

Computer softwares - net

Deferred tax assets

Other non-current assets

Others

TOTAL NON-CURRENT ASSETS

TOTAL ASSETS

6

7.1

8

5

5

7.2

9

10

5

5

11

12

2.3

2.4

13

18

Notes to fi nancial statements form an integral part of these statements.

843,154,030

93,185,184

217,288,457

1,904,953

1,013,129

14,813,690

24,943,905

14,266,639

11,260,565

1,221,830,552

5,616,518

-

-

-

-

47,953,340

4,692,047,809

38,763,318

658,942,840

12,875,328

197,401,577

6,847,533

5,660,448,263

6,882,278,815

432,434,023

151,000,000

202,508,125

1,974,449

3,034,916

13,603,389

18,453,648

7,316,048

11,375,169

841,699,767

-

1,836,039,998

-

766,747,162

14,992,992

47,953,340

2,462,876,383

-

-

6,369,287

180,750,617

13,311,345

5,329,041,124

6,170,740,891

595,431,694

91,000,000

204,456,731

1,904,953

3,645,226

10,875,121

16,910,159

11,444,628

4,972,267

940,640,779

-

1,836,000,000

-

-

-

47,953,340

2,579,228,008

-

-

10,676,104

195,108,556

6,606,033

4,675,572,041

5,616,212,820

722,993,048

156,955,200

220,341,049

1,974,449

424,353

19,450,040

27,312,693

8,953,061

14,027,253

1,172,431,146

4,509,852

-

-

738,208,895

15,220,192

47,953,340

4,486,988,115

36,301,834

633,342,612

8,096,436

182,987,425

29,180,162

6,182,788,863

7,355,220,009

In Baht

Notes2011 20112010

(Restated)2010

(Restated)

Consolidated Financial Statement Separate Financial StatementASSETS

ANNUAL REPORT 2011

63

CURRENT LIABILITIES

Trade accounts payable

Related companies

Others

Current portion of liabilities under

fi nance lease agreements

Current portion of long-term loans from banks

Current portion of employee benefi t obligations

Other current liabilities

Corporate income tax payable

Accounts payable - other

Others

TOTAL CURRENT LIABILITIES

NON-CURRENT LIABILITIES

Liabilities under fi nance lease agreements - net

Long-term loans from banks - net

Employee benefi t obligations - net

Other non-current liabilities

TOTAL NON-CURRENT LIABILITIES

TOTAL LIABILITIES

5

14

15

16

14

15

16


125,901,776

17,926,735

5,412,387

479,905,702

13,393,861

83,079,617

23,582,758

72,455,058

821,657,894

8,136,947

2,021,386,652

261,349,506

10,017,633

2,300,890,738

3,122,548,632

81,521,301

32,193,562

2,825,977

262,044,460

39,220,087

26,641,470

20,327,342

55,635,693

520,409,892

3,656,798

2,066,466,634

487,827,829

683,353

2,558,634,614

3,079,044,506

166,795,003

13,811,452

2,388,146

294,187,302

13,393,861

26,747,621

13,711,975

57,708,770

588,744,130

1,588,128

1,621,368,252

254,281,525

739,992

1,877,977,897

2,466,722,027

41,452,742

34,910,496

4,979,917

447,748,940

39,220,087

83,684,794

22,833,184

65,886,710

740,716,870

8,913,745

2,280,766,634

499,339,829

5,223,124

2,794,243,332

3,534,960,202

In Baht

Notes2011 20112010

(Restated)2010

(Restated)

Consolidated Financial Statement Separate Financial StatementLIABILITIES AND SHAREHOLDERS’ EQUITY

BANGKOK AVIATION FUEL SERVICES PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESAS AT DECEMBER 31, 2011 AND 2010

STATEMENTS OF FINANCIAL POSITION (CONT.)


64

SHAREHOLDERS’ EQUITY

Share capital - Par value Baht 1 each

Authorized share capital

ordinary share 509,998,044 shares

Issued and fully paid

ordinary share 509,997,325 shares

Share premium

Retained earnings

Appropriated - legal reserve

Appropriated - other reserve

Unappropriated

TOTAL SHAREHOLDER’S EQUITY OF PARENT COMPANY

NON - CONTROLLING INTERESTS

TOTAL SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

20


509,998,044

509,997,325

434,975,000

50,999,804

882,599,762

1,720,714,301

3,599,286,192

160,443,991

3,759,730,183

6,882,278,815

509,998,044

509,997,325

434,975,000

50,999,804

969,723,101

1,126,001,155

3,091,696,385

-

3,091,696,385

6,170,740,891

509,998,044

509,997,325

434,975,000

50,999,804

882,599,762

1,270,918,902

3,149,490,793

-

3,149,490,793

5,616,212,820

509,998,044

509,997,325

434,975,000

50,999,804

969,723,101

1,679,675,745

3,645,370,975

174,888,832

3,820,259,807

7,355,220,009

BANGKOK AVIATION FUEL SERVICES PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESAS AT DECEMBER 31, 2011 AND 2010

In Baht

Notes2011 20112010

(Restated)2010

(Restated)

Consolidated Financial Statement Separate Financial StatementLIABILITIES AND SHAREHOLDERS’ EQUITY (CONT.)

STATEMENTS OF FINANCIAL POSITION (CONT.)

ANNUAL REPORT 2011

65

REVENUES

Service income

Other income

Rental income

Dividend receive from subsidiaries

Others

TOTAL REVENUES

EXPENSES

Cost of services

Administrative expenses

Management benefi t expenses

Amortization of concession of subsidiaries

Loss on impairment of assets

Finance costs

TOTAL EXPENSES

PROFIT (LOSS) BEFORE TAX EXPENSES

TAX EXPENSES

PROFIT FOR THE YEAR

OTHER COMPREHENSIVE INCOME

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

PROFIT (LOSS) ATTRIBUTABLE TO

Equity holders of the parent

Non-controlling interests

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO

Equity holders of the parent

Non-controlling interests

BASIC EARNINGS PER SHARE

Net profi t (Baht per share)

Weighted average number of ordinary shares (shares)

9

17

17

5, 17

18


2,172,236,264

19,187,947

-

28,439,293

2,219,863,504

930,443,456

285,993,799

81,538,372

28,061,713

19,938,000

86,199,157

1,432,174,497

787,689,007

235,521,327

552,167,680

-

552,167,680

523,169,309

28,998,371

523,169,309

28,998,371

1.03

509,997,325

1,592,863,360

36,793,517

181,569,188

64,333,375

1,875,559,440

791,055,320

266,963,122

71,588,106

-

-

98,658,738

1,228,265,286

647,294,154

229,450,126

417,844,028

-

417,844,028

417,844,208

-

417,844,208

-

0.82

509,997,325

1,480,372,795

34,794,752

148,751,608

57,607,067

1,721,526,222

777,064,918

234,426,236

77,874,610

-

19,938,000

63,992,390

1,173,296,154

548,230,068

111,211,905

437,018,163

-

437,018,163

437,018,163

-

437,018,163

-

0.86

509,997,325

2,338,017,992

22,166,676

-

49,142,219

2,409,326,887

950,756,844

310,924,210

74,573,306

28,061,712

-

118,642,113

1,482,958,185

926,368,702

364,169,048

562,199,654

-

562,199,654

527,564,873

34,634,781

527,564,873

34,634,781

1.03

509,997,325

In Baht

Notes2011 20112010

(Restated)2010

(Restated)

Consolidated Financial Statement Separate Financial StatementLIABILITIES AND SHAREHOLDERS’ EQUITY

BANGKOK AVIATION FUEL SERVICES PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESFOR THE YEARS ENDED DECEMBER 30, 2011 AND 2010

STATEMENTS OF COMPREHENSIVE INCOME

66


Notes

Balan

ce a

s at

Janua

ry 1, 2

010

- as p

revio

usly

repo

rted

50

9,99

7,32

5 43

4,97

5,00

0 50

,999

,804

80

7,90

8,47

7 1,32

1,32

8,90

7

3,12

5,20

9,51

3 14

7,40

2,3,58

3,27

2,61

1,87

1Ad

justmen

t

The

cumu

lative

effect

of cha

nge

in ac

counting

policy on

inco

me ta

x 4

-

-

-

-

195,70

4,89

8 19

5,70

4,89

8 20

9,65

5 19

5,91

4,55

3Ba

lance a

s at

January 1, 2

010

- as re

stated

509

,997

,325

43

4,97

5,00

0

50,99

9,80

4

807

,908

,477

1,51

7,03

3,80

5 3,32

0,91

4,41

1 14

7,61

2,01

3 3,46

8,52

6,42

4Divid

end

paym

ent

19

-

-

-

-

(152

,998

,477

) (152

,998

,477

) -

(152

,998

,477

) Othe

r reserve

19

-

-

-

74

,691

,285

(74,69

1,28

5)

-

- -

Divid

end

paym

ent b

y subsidiarie

s 9

-

-

-

-

-

-

(8,995

,452

) (8,995

,452

) Total com

preh

ensiv

e inc

ome

for the

yea

r (resta

ted)

-

- -

-

523,16

9,30

9

523,16

9,30

9

- 52

3,16

9,30

9 Interim d

ivide

nd p

ayme

nt 19

-

-

-

(91,79

9,05

1)

(91,79

9,05

1)

- (91,79

9,05

1)

Interim d

ivide

nd p

ayme

nt by

sub

sidiarie

s 9

-

-

-

-

-

-

(7,170

,941

) (7,170

,941

)Pro

fi t of

non-co

ntrolling

interests

-

-

-

-

-

-

28,998

,371

28

,998

,371

Ba

lance a

s at

Decemb

er 3

1, 2

010

5

09,997

,325

4

34,975

,000

5

0,99

9,80

4

882,59

9,76

2 1

,720

,714

,301

3

,599

,286

,192

1

60,443

,991

3,75

9,73

0,18

3 Ad

justmen

t

The

cumu

lative

effect

of cha

nge

in ac

counting

policy

on e

mploy

ee b

enefi ts

4 -

-

-

- (

243,30

5,44

5)

(243

,305

,445

) (909

,290

) (244

,214

,735

)

The

effect o

n inc

ome

taxes fr

om cha

nging

in p

olicy

o

n em

ployee

ben

efi ts

4 -

-

-

-

72,922

,259

7

2,92

2,25

9

267,16

2

73,189

,421

Balan

ce a

s at

January 1, 2

011

- after

adjusted

509,99

7,32

5

434

,975

,000

50

,999

,804

8

82,599

,162

1,55

0,33

1,11

5

3,42

8,90

3,00

6

159,80

1,86

3

3,58

8,70

4,86

9Divid

end

paym

ent

19

-

-

-

-

(183

,598

,173

) (183

,598

,173

) -

(183,5

98,17

3)

other re

serve

19

-

- -

8

7,12

3,33

9

(87,12

3,33

9)

-

-

-

Divid

end

paym

ent b

y subsidiarie

s 9

-

-

-

-

-

- (10,16

0,75

8)

(10,16

0,75

8)

Total com

preh

ensiv

e inc

ome

for the

yea

r

-

-

-

-

527,56

4,87

3

527

,564

,873

-

527,56

4,87

3Interim d

ivide

nd p

ayme

nt 19

-

-

-

- (

127,49

8,73

1)

(127

,498

,731

) -

(127

,498

,731

)Interim d

ivide

nd p

ayme

nt by

sub

sidiarie

s 9

-

-

-

-

-

-

(9,387

,054

) (9,387

,054

)Pro

fi t of non

-con

trollin

g interests

-

-

-

-

-

-

34,634

,781

34

,634

,781

Balan

ce a

s at

Decemb

er 3

1, 2

011

5

09,997

,325

43

4,97

5,00

0

50,999

,804

96

9,72

3,10

1 1

,679

,675

,745

3

,645

,370

,975

1

74,888

,832

3,82

0,25

9,80

7

Note

s to

fi nan

cial s

tatem

ents

form

an integ

ral p

art o

f the

se statem

ents.

Consoli

dated

Finan

cial S

tatem

ent (

Resta

ted)

In Ba

ht

Issue

d an

dpa

id-up

share ca

pital

Share

prem

iumLega

l reserve

Unap

prop

riated

Total

Total

Shareh

older’s

equit

y of th

e pa

rent

comp

any

Retaine

d ea

rnings

Approp

riated Othe

r reserve

Non

-contr

olling

inter

ests

STATEM

ENTS O

F CHANGES IN

SHAREHOLD

ERS’ EQUIT

Y

BANGKO

K AV

IATIO

N FUE

L SE

RVICES

PUB

LIC C

OMPA

NY

LIMITE

D AN

D ITS

SUB

SIDIARIE

SFO

R TH

E YE

ARS

ENDE

D DE

CEMBE

R 30

, 201

1 AN

D 20

10

67

ANNUAL REPORT 2011

Note

s to

fi nan

cial s

tatem

ents

form

an integ

ral p

art o

f the

se statem

ents.

Balan

ce a

s at

Janua

ry 1, 2

010

- as p

revio

usly

repo

rted

50

9,99

7,32

5

434,97

5,00

0

50,999

,804

80

7,90

8,47

7

959,68

2,46

3

2,76

3,56

3,06

9Ad

justmen

t

The

cumu

lative

effect

of cha

nge

in ac

counting

policy on

inco

me ta

x

4

-

-

-

-

193,70

7,08

9

193

,707

,089

Ba

lance a

s at

January 1, 2

010

- as re

stated

509,99

7,32

5

434

,975

,000

5

0,99

9,80

4

807

,908

,477

1,15

3,38

9,55

2

2,95

7,27

0,15

8 Divid

end

paym

ent

19

-

-

-

- (

152,99

8,47

7)

(152

,998

,477

)Othe

r reserve

19

-

-

-

74,69

1,28

5

(74,69

1,28

5)

-

Total com

preh

ensiv

e inc

ome

for the

yea

r (resta

ted)

-

-

-

-

437,01

8,16

3

437

,018

,163

Interim d

ivide

nd p

ayme

nt

19

-

-

-

-

(91,79

9,05

1)

(91,79

9,05

1)Ba

lance a

s at

Decem

ber 3

1, 2

010

5

09,997

,325

4

34,975

,000

5

0,99

9,80

4

882

,599

,762

1,27

0,91

8,90

2

3,14

9,49

0,79

3 Ad

justmen

t

The

cumu

lative

effect

of cha

nge

in ac

counting

policy on

em

ployee

bene

fi ts

4

-

-

-

- (

235,05

9,33

2)

(235

,059

,332

)

The

effect o

n inc

ome

tax fr

om cha

nging

in p

olicy o

n em

ployee

bene

fi ts

4

-

-

-

-

70,51

7,80

0

70,51

7,80

0 Ba

lance a

s at

January 1, 2

011

- as re

stated

509,99

7,32

5

434,97

5,00

0

50,99

9,80

4

882

,599

,762

1,10

6,37

7,37

0

2,98

4,94

9,26

1 Divid

end

paym

ent

19

-

-

-

- (

183,59

8,17

3)

(183

,598

,173

)Othe

r reserv

19

-

-

-

87,12

3,33

9

(87,12

3,33

9)

-

Total com

preh

ensiv

e inc

ome

for the

yea

r (resta

ted)

-

-

-

-

417,84

4,02

8

417

,844

,028

Interim d

ivide

nd p

ayme

nt

19

-

-

-

- (

127,49

8,73

1)

(127

,498

,731

)

Balan

ce a

s at

Decemb

er 3

1, 2

011

50

9,99

7,32

5

434,97

5,00

0

50,99

9,80

4

969

,723

,101

1,12

6,00

1,15

5

3,09

1,69

6,38

5

Sepa

rate

Finan

cial S

tatem

ent (

Resta

ted)

In Ba

ht

Issue

d an

dpa

id-up

share ca

pital

Share

prem

iumLega

l reserve

Unap

prop

riated

Total

Retained

earning

s

Approp

riated Othe

r reserve

STATEM

ENTS O

F CHANGES IN

SHAREHOLD

ERS’ EQUIT

Y (CONT.)

BANGKO

K AV

IATIO

N FUE

L SE

RVICES

PUB

LIC C

OMPA

NY

LIMITE

D AN

D ITS

SUB

SIDIARIE

SFO

R TH

E YE

ARS

ENDE

D DE

CEMBE

R 30

, 201

1 AN

D 20

10Notes


68

Cash fl ows from operating activities Profi t for the year Adjustments to reconcile net profi t to net cash provided by (used in) Operating activities Depreciation and amortization Amortization of right to use of concession and right of use of land leased by subsidiary Reversal of allowance for doubtful accounts Employee benefi t expenses Loss (gain) on diposal and written-off fi xed assets Unrealized (gain) loss on exchange rate Loss on impairment of assets Dividend received from subsidiaries Interest income Amortization of deferred interest under fi nance lease agreements Interest expenses Tax expenses Net profi t from operations before changes in operating asset and liabilities Operating assets decrease (increase) Trade accounts receivable Amounts due from and advances to related companies Inventory of spare parts Other current assets Long-term loan to employees Other non-current assets Operating liabilities increase (decrease) Trade accounts payable Other current liabilities Employee benefi t obligations Other non-current liabilities Cash generated from operations Payment for income tax Net cash from (used in) operating activities


552,167,680

357,079,615

28,061,713 (17,659,400) 34,162,217

(661,410) 381,836

19,938,000 -

(12,760,037)

992,559 85,206,598

235,521,327

1,282,430,698

(16,059,884)(686,938)

(2,026,636)(13,512,653)

- (38,271)

81,712,137 25,097,809 (13,052,888) 4,859,633

1,348,723,007 (209,719,493)

1,139,003,514

417,844,028

210,358,142

- (12,575,633) 42,362,000 1,280,276 311,127

- (181,569,188)(26,749,792)

285,451

76,983,287 229,450,126

757,979,824

1,568,419 609,874

(2,728,268)(624,984)

(18,741,240)(6,760,288)

(66,931,590) 5,171,331

(18,048,802)(56,639)

651,437,637 (144,680,538) 506,757,099

437,018,163

263,308,325

- (17,659,400) 32,778,002

(501,395) 321,937

19,938,000 (148,751,608)(11,192,042)

609,376

63,383,014 111,211,905

750,464,277

(17,428,759) 280,825

(1,392,280)(6,018,676)

- (1,271)

88,135,367 10,454,614 (13,052,888)

437,117 811,878,326 (92,457,127)

719,421,199

562,199,654

305,307,275

28,061,712 (12,575,633) 44,181,000 1,574,969 197,763

- -

(30,547,266)

738,725 96,057,389

364,169,048

1,359,364,636

(3,432,779) 588,340

(4,636,350) 3,478,178

(19,025,240)(22,387,605)

(67,465,273)(6,684,306)

(24,579,185)(4,794,512)

1,210,425,904 (276,051,663) 934,374,241


In Baht

2011 20112010(Restated)

2010(Restated)

Consolidated Financial Statement Separate Financial Statement

STATEMENTS OF CASH FLOWS

ANNUAL REPORT 2011

69

Cash fl ows from (used in) investing activities

Increase in short-term investments

Received for in loan to and long-term receivable from

related companies

Payment of loan to and long-term receivable

from related companies

(Increase) decrease in restricted fi xed deposits with

fi nance institutions

Received interest

Dividend received from subsidiaries

Cash paid for property, leasehold improvement

and equipment

Cash paid for computer softwares

Cash received from disposal of property,

leasehold improvement and equipment

Net cash from (used in) investing activities

Cash fl ows from (used in) fi nancing activities

Payment of liabilities under fi nance lease agreements

Received for long-term loans from banks

Payment of long-term loans from banks

Payment of interest expenses

Dividend payment

Dividend payment from subsidiary to non-controlling

interests

Net cash from (used in) fi nancing activities

Net increase (decrease) in cash and cash equivalents

Unrealized gain (loss) on exchange rate, deposit

in foreign currency

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year


(668,565)

17,659,400

-

(27,691)

12,727,773

-

(50,036,559)

(2,187,713)

2,169,147

(20,364,208)

(1,434,109)

-

(601,168,262)

(88,121,988)

(244,797,528)

(16,166,393)

(951,688,280)

166,951,026

(61,246)

166,889,780

676,264,250

843,154,030

(60,000,000)

12,575,633

(760,000,000)

-

19,554,731

181,569,188

(84,932,320)

(683,300)

26,231

(691,889,837)

(1,825,790)

650,000,000

(237,044,460)

(77,897,779)

(311,096,904)

-

22,135,067

(162,997,671)

-

(162,997,671)

595,431,694

432,434,023

-

17,659,400

-

-

11,053,140

148,751,608

(36,854,452)

(1,597,498)

515,000

139,527,198

(5,210,899)

-

(361,587,302)

(65,909,468)

(244,797,528)

-

(677,505,197)

181,443,200

-

181,443,200

413,988,494

595,431,694

(63,715,936)

12,575,633

(738,208,895)

1,106,666

29,857,697

-

(90,550,736)

(721,200)

-

(849,656,771)

(4,086,510)

650,000,000

(422,746,940)

(97,429,730)

(311,096,904)

(19,547,812)

(204,907,896)

(120,190,426)

29,444

(120,160,982)

843,154,030

722,993,048

In Baht

2011 20112010(Restated)

2010(Restated)



STATEMENTS OF CASH FLOWS (CONT.)


70

Supplemental disclosures of cash fl ows information 1. The Company purchased vehicles by fi nancial lease agreements2. Reversal of liabilities under fi nancial lease agreements

3. Investment in subsidiary that have not been paid in cash


8,604,717 4,301,561

-

5,681,302 1,349,011

39,998

712,194

4,301,561

-

6,677,414 2,246,576

-


In Baht

2011 20112010(Restated)

2010(Restated)


STATEMENTS OF CASH FLOWS (CONT.)

ANNUAL REPORT 2011

71


NOTES TO FINANCIAL STATEMENTS

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. PRINCIPLES OF PREPARATION AND PRESENTATIONS OF FINANCIAL STATEMENTS 2.1 Basis for the preparation of the financial statements 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. 2004. 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. 2001. 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 :- Subsidiaries’s Subsidiaries’s total assets as total revenues as Percentage owned by a percentage to the a percentage to the the Company consolidated total consolidated total As at As at Incorporated Nature of As at As at For the year ended December December in country Business December December December 31, 31, 2011 31, 2011 31, 2010 31, 2010 2011 2010

Intoplane Services Company Limited 83.33 83.33 Thailand Intoplane services 0.06 0.05 - -

Thai Aviation Refuelling Company Limited 90.00 90.00 Thailand Hydrant network 23.72 26.60 25.71 26.01 services

JP-One Assets Company Limited 92.50 92.50 Thailand Aviation Fuel Pipeline 9.15 10.33 5.93 5.05 Transportation Bafs International Limited 100.00 - Hongkong The objective is to revise 0.08 - - - and restructure the debt of the related company

2.3 The Company has invested in ordinary shares of JP-One Assets Company Limited. The excess of cost over book value of subsidiary at the acquisition date has been presented as asset under “Right of use of land leased by a subsidiary” in consolidated financial statements 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. 2.4 The Company has invested in ordinary shares of Thai Aviation Refuelling Company Limited. The resultant difference at the acquisition date has been presented as “Concession of a subsidiary” in the consolidated financial statements 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 According to the Board of Director’ Meeting No. 2/2011 held on May 11, 2011, it had resolution to approved in principle to establish a holding company in Hong Kong. The objective is to revise and restructure the debt of the related company, the new subsidiary Bafs International Limited was set up on October 11, 2011 with registered and fully paid up capital of HK$ 10,000.


72

2.6 Material inter-company balances and transactions are eliminated from the consolidated financial statements. The book value of investments in subsidiaries in the Separate financial statements and the shareholders’ equity of the subsidiaries are eliminated from the consolidated financial statements.

3. SIGNIFICANT ACCOUNTING POLICIES

Significant 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) Dividend income Dividend incomes are recognized when the right to receive the dividends is established. d) 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 Short-term investments Short-term investments include fixed deposit and government bond with an original maturity of 3 months and free from restriction. 3.4 Trade accounts receivable Trade accounts receivable are initially recognized by the invoice amount and subsequently measured at the remaining amount less an allowance for doubtful accounts (if any). The allowance for doubtful accounts is the difference between the carrying amount of trade accounts receivable and the amount expected to be collectible. Bad debts are immediately recognized in the income statement as part of administrative expenses. 3.5 Allowance for doubtful accounts The Company provides allowance for doubtful accounts equal to the estimated collection losses that may be incurred in the collection of all receivables. The estimated losses are based on a review of the current status of each receivable by considering the ability to repay debt and the amount expected to be paid from the debtor. 3.6 Inventory of spare parts Spare parts are stated at cost, by first-in, first-out method and are expended whenever consumed according to the practices as specified in the revised accounting standards. 3.7 Investment property Investment property is stated at cost less allowance on impairment (if any). Since January 1, 2011, the Company has applied TAS 40 (revised 2009) Investment Property by reclassifying the account caption from “Asset not used in operation” to “Investment property”. 3.8 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 and allowance on impairment (if any). Assets under finance lease are stated at fair value, on begin agreement date less accumulated depreciation Cost is initially recognized upon acquisition of assets along with other direct costs attributing to acquiring such assets in the condition ready to serve the objectives, including the costs of asset demolition, removal and restoration of the asset location, which are the obligations of the Company (if any). 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 year, lease period Office furniture, equipment and computer 3 - 10 year Main depot facilities 5 - 28 year Hydrant equipment 10 - 30 year Intoplane substation 5 - 20 year Vehicle fleet and motor vehicle 3 - 20 year Motor vehicle under finance lease agreements lease period


73

ANNUAL REPORT 2011

The Company estimates the remaining value of the asset with value that business is expected to receive in the present from that current assets, if having the age and condition that is expected to receive in the present, when ending of useful life. The Company has reviewed the residual value and useful life of the assets every year. The depreciation for each asset component is calculated on the separate components when each component has significant cost compared to the total cost of that asset. Depreciation is included in determining income. No depreciation is provided on land, land improvement, construction in progress and equipment under installation. Property, leasehold improvement and equipment are written off at disposal. Gains or losses arising from sale or write-off of assets are recognized in the statement of comprehensive income.

3.9 Computers softwares Computers softwares are stated at cost less amortization and allowance on impairment (if any) . Amortization of intangible assets is calculated by the straight-line method over the estimated useful lives of 3 - 5 years.

3.10 Leasehold rights Leasehold rights are stated at cost less amortization and allowance on impairment (if any). Amortization of leasehold is calculated by the straight-line method over the lease period of 3 years and 17 years.

3.11 Impairment of assets The Company and its subsidiaries review the impairment of assets whenever events indicate that the carrying value of an asset exceeds its recoverable amount. The recoverable amount of an asset is the higher of its value in use and its faire value less costs to sell. The Company and its subsidiaries recognize an impairment loss in the statements of comprehensive income whenever the carrying value of an asset exceeds its recoverable amount. The Company and its 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. The reversal shall not exceed the carrying value that would have been determined (net of accumulated depreciation or amortization) if had no impairment loss been recognized.

3.12 Investments in subsidiaries and related company Investments in subsidiaries Subsidiaries are entities over which the Company has the power to control their financial and operating policies generally accompanying a shareholding of more than one-half of the voting rights. The financial statements of the subsidiaries are consolidated from the date the Company exercises control over the subsidiaries until the date that control power ceases. Investments in subsidiaries are stated at cost net from allowance on impairment (if any) in the separate financial statements. Other investment in related company Other investment in related company which is investments in non-marketable equity securities, is stated at cost. An allowance for impairment loss will be made when the net recoverable amount is lower than the cost of the investments.

3.13 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.

3.14 Foreign currencies Foreign currency transactions incurred during the periods are translated into Baht at the rates ruling on the transaction dates. Assets and liabilities denominated in foreign currency outstanding on the statement of financial position dates are translated into Baht at the rates ruling on the statement of financial position dates. Exchange gains and losses are included in determining earnings.

3.15 Obligations for employee’s benefits Short-term Benefits The Company has been recognized salaries, wages, bonuses, social security contributions, and provident funds as an expense when transaction incurred.


74

Benefits for employees after resignation (Contributions and benefits project) and other long-term employee’s benefits. a) 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 monthly 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. The fund’s assets are held separately from the Company and the Company’s contributions are recognized as expenses when incurred. 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.

b) Under Labor Protection Laws of Thailand and employee’s employment policy, every employee, who has age of employment exceed 120 days, has the right to receive workers compensation as rule of labor protection laws when the employees have the retirement.

c) The Company has other welfares, which has long-term benefit for the employees who work for the company reached a number of years specified by the Company.

The obligation under the defined benefit plan is calculated based on the actuarial principles by an independent actuary by using projected unit credit method. 3.16 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 costs are included in determining earnings according to the remaining balance of the liabilities.

3.17 Income tax/deferred tax assets Tax expenses is the aggregate amount include in the determination of profit or loss for the year in respect of current income tax and deferred tax. a) Current income tax Current income tax is the amount of income taxes payable in respect of the taxable profit for a year. Taxable profit is different from net profit shown in statements of comprehensive income because taxable income does not include items that can be recognized as income or tax expense in other years and not include items that cannot be considered as income or tax expense as well. Current tax liabilities calculating by using tax rate as at the date in statement of financial position. b) Deferred tax assets Deferred tax assets is recognition temporary differences between the carrying amount of an asset or liability in the statement of financial position and its tax base. The Company has recognized deferred tax liabilities for temporary differences every item and recognized deferred tax assets for temporary differences, as it is probable that taxable profit will be sufficient to bring the temporary differences to utilize. 3.18 Financial instruments The Company and its subsidiaries have no policy to speculate in or engage in the trading of any financial derivative instruments.


75

ANNUAL REPORT 2011

The Company and its subsidiaries record 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 statement of financial position include cash and cash equivalents short-term investmens, 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.

3.19 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.

3.20 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.

3.21 Related parties Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the Company, including holding companies, subsidiaries and fellow subsidiaries are related parties of the Company. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the enterprise, key management personnel, including directors and officers of the Company and close members of the family of these individuals and companies associated with these individuals also constitute related parties. In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.

3.22 Adoption of new accounting standards

3.22.1 New accounting standards and financial reporting standards effective for using in this year. During the years 2010 and 2011, the Federation of Accounting Professions (FAP) has issued Notifications to mandate the use of the revised 2009, new issued of accounting standards, financial reporting standards and the interpretations of which they are effective for using in the periods beginning on or after January 1, 2011, as follows.

Framework for the Preparation and Presentation of Financial Statements (revised 2009) TAS 1 (revised 2009) Presentation of Financial Statements¹ TAS 2 (revised 2009) Inventories TAS 7 (revised 2009) Statement of Cash Flows TAS 8 (revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors TAS 10 (revised 2009) Events after the Reporting Period TAS 11 (revised 2009) Construction Contracts TAS 16 (revised 2009) Property, Plant and Equipment TAS 17 (revised 2009) Leases TAS 18 (revised 2009) Revenue TAS 19 Employee Benefits TAS 23 (revised 2009) Borrowing Costs TAS 24 (revised 2009) Related Party Disclosures TAS 26 Accounting and Reporting by Retirement Benefit Plans TAS 27 (revised 2009) Consolidated and Separate Financial Statements TAS 28 (revised 2009) Investments in Associates TAS 29 Financial Reporting in Hyperinflationary Economies TAS 31 (revised 2009) Interests in Joint Ventures TAS 33 (revised 2009) Earnings per Share TAS 34 (revised 2009) Interim Financial Reporting TAS 36 (revised 2009) Impairment of Assets TAS 37 (revised 2009) Provisions, Contingent Liabilities and Contingent Assets TAS 38 (revised 2009) Intangible Assets


76

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 TSIC 31 Revenue - Barter Transactions Involving Advertising Services

The management of the Company has assessed the effect of these accounting standards and financial reporting standards and believes that they will not have any significant impact on the financial statements for this year. However, TAS 1 (revised 2009) Presentation of Financial Statements, TAS 12 Income Taxes, TAS 16 (revised 2009) Property, Plant and Equipment, TAS 19 Employee Benefits and TAS 40 (revised 2009) Investment Property of which the Company has adopted of using in this year, have the effects of changes in the Company’s accounting policies as disclosed in Note 3.23. These changes of accountings policies mostly affect to the presentation of financial statements in new format as disclosed in Note 4.

3.22.2 Issue of new interpretation of accounting standards during the year During the year 2011, the Federation of Accounting Professions (FAP) has issued Notifications to mandate the use of the new interpretations of accounting standards of which are effective for the fiscal year beginning on or after January 1, 2013, as follows. TSIC 10 Government Assistance - No Specific Relation to Operating Activities TSIC 21 Income Taxes - Recovery of Revalued Non - Depreciable Assets TSIC 25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders

The management of the Company has assessed the effect of these new interpretations of accounting standards and believes that they will not have any significant impact on the financial statements for the year in which they are initially applied.

3.23 Changes in Accounting Policy Since January 1, 2011, the Company shall comply with revised financial reporting standards as mentioned in note to financial statement item 3.22. The Company has changed its accounting policy as follows : TAS 1 (revised 2009) Presentation of Financial Statements TAS 12 Income Taxes TAS 16 (revised 2009) Property, Plant and Equipment TAS 19 Employee Benefits TAS 40 (revised 2009) Investment Property

4. IMPACT OF CHANGE IN ACCOUNTING POLICY DUE TO THE IMPLEMENTATION OF NEW FINANCIAL REPORTING STANDARDS Since January 1, 2011, the Company and its subsidiaries have complied with revised financial reporting standards, which affect the financial statements as follows :

4.1 Change in Accounting Policy relating to Income Tax Under the terms of the revised accounting standards for income tax, it requires compliance the financial statements for accounting period beginning on or after January 1, 2013 onwards. However, for the year ended December 31, 2011, the Company and its subsidiaries have changed accounting policy relating to income tax TAS. 12 “Income Taxes” before the standard date become effective. As such, the Company and its subsidiaries have to adjust retrospectively financial statement for the previous year which taking to compare as if the Company and its subsidiaries have always recorded deferred tax according to new accounting policy.

4.2 Changes in Estimates During the year ended December 31, 2011, the Company has started using TAS. 16 (Revised 2009) “Property, plant and equipment”. The Company has changed the estimated useful life of assets and estimated remaining value of the asset in order to reflect the currently conditions of actual use and economic benefits expected to receive in the future to be more appropriate. These changes shall be recognised prospectively according to the changes in the practices as specified in the revised accounting standards. The Company has applied prospectively the effect for the assets that have


77

ANNUAL REPORT 2011

book value as at January 1, 2011. Therefore, it is affecting the financial statement for year ended December 31, 2011, which depreciation reduced total amount of Baht 41.65 million and total comprehensive income after tax increased Baht 29.16 million and basic earnings per share increased total amount Baht 0.06 per share.

4.3 Change in Accounting Policy relating to Employee Benefits For the year ended December 31, 2011, the Company and its subsidiaries have changed accounting policy relating to employee benefits in order to comply with the TAS.19 “Employee Benefits”. As such, the Company and its subsidiaries have obligations for compensation that have to be paid to employees once resignation and other long-term benefits in accordance with their regulations and labor law by choosing to adjust the impact with the retained earnings of the beginning period as at January 1, 2011. Therefore, information in the statements of comprehensive income for the year ended December 31, 2010 and the statement of financial position as at December 31, 2010, presented for comparation purpose, is the information prepared in accordance with new accounting policy.

‹ 4.4 The cumulative effect of the change of accounting policy leads to the adjustment of the financial statements as follows ;

(Unit : Baht) Statement of financial position Consolidated Separate Financial Statement Financial Statement

Retained earnings as at January 1, 2010 - as previously reported 1,321,328,907 959,682,463Deferred tax assets increased 195,914,553 193,707,089Non-controlling interests increased (209,655) -Retained earnings as at January 1, 2010 part of the shareholders of the parent company - as restated 1,517,033,805 1,153,389,552

Retained earnings as at January 1, 2011 - as previously reported 1,523,539,165 1,075,810,346Deferred tax assets increased 197,401,577 195,108,556Non-controlling interests increased (226,441) -Retained earnings as at January 1, 2011 - as restate of retrospective financial statement on income taxes 1,720,714,301 1,270,918,902Employee benefit obligations increased (244,214,735) (235,059,332)Deferred tax assets increased by adjusting employee benefit obligations 73,189,421 70,517,800Non-controlling interests decreased 642,128 -Retained earnings as at January 1, 2011 part of the shareholders of the parent company - as restated 1,550,331,115 1,106,377,370

(Unit : Baht)

Consolidated Financial Statement Separate Financial Statement Statements of comprehensive income For the year ended December 31, For the year ended December 31, 2011 2010 2011 2010

Depreciation decreased 41,651,405 - 41,651,405 -Employee benefit expenses (increased) Cost of services (increased) (13,352,966) - (12,392,622) - Administrative expenses (increased) (5,452,235) - (5,049,579) - Management benefit expenses (increased) (3,529,799) - (3,529,799) - Finance costs (increased) (21,846,000) - (21,390,000) -Tax expenses decreased (increased) (87,603,572) 1,487,024 (84,875,738) 1,401,467Profit for the year increased (decreased) (90,133,167) 1,487,024 (85,586,333) 1,401,467Profit attributable to non-controlling interests increased (435,167) 16,787 - -Profit attributable to Equity holders of the parent increased (decreased) (89,698,000) 1,470,237 (85,586,333) 1,401,467Basic earnings per share increased (decreased) (Baht per share) (0.18) 0.003 (0.17) 0.003


78

5. RELATED PARTY TRANSACTIONS

5.1 Transaction related to subsidiaries and related companies During the year, the Company had significant trading transaction with its subsidiaries (eliminated from the interim 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.

Significant transactions between the Company and its related parties are summarized below :-

(Unit : Million Baht)

Consolidated Financial Statement Separate Financial Statement Pricing policy For the years ended December 31, For the years ended December 31, 2011 2010 2011 2010

Transactions with subsidiaries : Cost of service - - 7.1 6.5 (1) Rental charges for office building - - 1.9 1.3 (2) Rental charge for receiving pipeline system - - 12.2 13.8 (3) Guarantee fee income - - 4.9 6.8 (4) Other income - - 21.5 19.8 (5)Transactions with related companies : Service income 1,578.1 1,453.3 1,578.1 1,453.3 (5) Rental charges for receiving pipeline system 3.7 2.9 3.7 2.9 (6) Rental charges for receiving diesel pipeline system 5.2 2.0 5.2 2.0 (7) Rental charges for office building and land 5.9 6.8 5.9 6.8 (8), (9) Rental charges for land & building 7.6 7.6 7.6 7.6 (11) Interest income 3.2 3.9 3.2 3.9 (10)


79

ANNUAL REPORT 2011

The outstanding balance of the above transactions have been separately presented in the statement of financial position under the caption as follows :- (Unit : Baht) Consolidated Financial Statement Separate Financial Statement

As at As at As at As at December December December December 31, 2011 31, 2010 31, 2011 31, 2010

Trade accounts receivable - related companies Thai Airways International Shareholder and Public Company Limited a representative director 36,363,673 37,150,780 36,363,673 37,150,780 Chevron (Thailand) Company Limited Shareholder and a representative director 40,269,317 45,921,518 40,269,317 45,921,518 Esso (Thailand) Public Company Limited Shareholder 32,195,963 26,374,864 32,195,963 26,374,864 PTT Public Company Limited Shareholder and a representative director 56,605,702 57,795,666 56,061,125 57,795,666 The Shell Company of Thailand Limited Shareholder and a representative director 31,632,517 31,176,478 31,632,517 31,176,478 Singapore Petroleum (Thailand) Limited Shareholder 2,055,182 2,292,384 2,055,182 2,292,384 Petronas Retail (Thailand) Company Limited Shareholder 3,930,348 3,745,041 3,930,348 3,745,041 Bangchak Petroleum Public Company Limited Co-Shareholder 12,206,645 11,192,702 - - Fuel Pipeline Transportation Limited Common shareholders and a representative director 5,081,702 1,639,024 - - Total 220,341,049 217,288,457 202,508,125 204,456,731

(Unit : Baht) Consolidated Financial Statement Separate Financial Statement

As at As at As at As at December December December December 31, 2011 31, 2010 31, 2011 31, 2010

Amounts due from and advance to related companies Subsidiaries Thai Aviation Refuelling Company Limited - - 1,114,773 1,586,842 JP-One Assets Company Limited - - 1,495,790 1,045,255 Related companies Fuel Pipeline Transportation Limited Common shareholders and a representative director 301,740 892,123 301,740 892,123 Thai Petroleum Pipeline Company Limited Co-Shareholder 122,613 121,006 122,613 121,006 Total 424,353 1,013,129 3,034,916 3,645,226Loan to and long-term receivable from related companies

Fuel Pipeline Transportation Limited Common shareholders and a representative director 1,108,319,729 382,686,467 370,110,834 382,686,467 Bafs International Limited Subsidiary - - 766,747,162 - Total 1,108,319,729 382,686,467 1,136,857,996 382,686,467 Less : Allowance for doubtful accounts (370,110,834) (382,686,467) (370,110,834) (382,686,467) Total 738,208,895 - 766,747,162 -Trade accounts payable - related companies Subsidiaries Thai Aviation Refuelling Company Limited - - 58,986,450 57,804,993 JP - One Assets Company Limited - - - 866,786

Relationship

Relationship


80


For the years ended For the years ended December 31, December 31, 2011 2010 2011 2010

Related companies

Airports of Thailand Public Company Limited Shareholder 35,767,251 120,609,475 22,420,907 107,549,358 The Shell Company of Thailand Limited Shareholder and a representative director 29,781 29,649 20,330 20,330 Thai Airways International Shareholder and Public Company Limited a representative director - 4,532 - 4,532

Chevron (Thailand) Company Limited Shareholder and a representative director 20,330 20,330 20,330 20,330 PTT Public Company Limited Shareholder and a representative director 73,284 333,363 73,284 333,363 Fuel Pipeline Transportation Limited Common shareholders and a representative director 5,562,096 4,904,427 - 195,311

Total 41,452,742 125,901,776 81,521,301 166,795,003

5.2 Loan to and long-term receivable from related companies

Movement of loan to and long-term receivable from related companies during the year ended December 31, 2011, is as follows :-

Consolidated Financial Statement (Unit : Baht)

Balance as at่ Movement during the year Balance as at January 1, 2011 Increase Decrease December 31, 2011

Fuel Pipeline Transportation Limited 382,686,467 738,208,895 (12,575,633) 1,108,319,729

Bafs International Limited - - - -

Total 382,686,467 738,208,895 (12,575,633) 1,108,319,729

Less : Allowance for doubtful accounts (382,686,467) - 12,575,633 (370,110,834)

Total - 738,208,895

Separate Financial Statement (Unit : Baht)

Balance as at่ Movement during the year Balance as at January 1, 2011 Increase Decrease December 31, 2011

Fuel Pipeline Transportation Limited 382,686,467 - (12,575,633) 370,110,834

Bafs International Limited - 766,747,162 - 766,747,162

Total 382,686,467 766,747,162 (12,575,633) 1,136,857,996

Less : Allowance for doubtful accounts (382,686,467) - 12,575,633 (370,110,834)

Total - 766,747,162


Relationship

81

ANNUAL REPORT 2011

1) Loan to and long-term receivable from related company credit line amount of Baht 415 million (As at December 31, 2011 : Baht 370 million).

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, FPT 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”.

2) Transaction of loan to and long-term receivable from related company during the year 2011. According to the resolution of the Board of Directors meeting No.2/2011 held on May 11, 2011. approving in principle to increase the investment in Fuel Pipeline Transportation Limited (FPT) from the previous shareholding of 16.67%, by consenting the Company or its subsidiary (the Company Group) to purchase the debt of FPT with the amount not more than Baht 850 million and preferred shares at the price not more than 0.10 Baht/share from the group of financial institutions. The Board of Directors considered the FPT has the potential in its operation in fuel pipeline transportation and can create long term value to the Company. Although FPT currently has a lot of debt as a result of Thai Baht floating in 1997, the Board of Directors considered that to mitigate risk from business interruption in fuel pipeline transportation, which is the business the relates to the Company and important to the aviation refueling service of the Company in Don Mueng and Suvarnabhumi Airports, the Board of Directors has approved the Company Group to increase the investment in FPT, by assigning the Risk Management Committee to consider in details and Managing Director to be the authorized person to conduct within the principle and details that set by the Board of Directors and the Risk Management Committee, as follows :-

Details of debt and share purchase On November 2, 2011, the Company Group purchased the debt of FPT from the group of financial institutions in the amount of Baht 1,717 million at the price of Baht 738 million or at the average discount of 57% of outstanding debt. In addition, on November 2, 2011, the Company Group purchased 5,147,314 preferred shares of FPT or 32.33% of total shares at the price of 0.10 Baht/share. Therefore, at present the Company Group has increased its shareholding of FPT from 16.67% to 49%

Details of FPT debt restructuring

On November 4, 2011, the Company, as a creditor, petitioned to the Central Bankruptcy Court to request for the rehabilitation of FPT. On February 10, 2012, the Central Bankruptcy Court has approved for the rehabilitation of FPT and has appointed Treasure Specialty Co., Ltd as the planner.

Expected Benefits

1. Mitigate risk from business interruption in fuel pipeline transportation, which is the business that relates to the Company and is critical to the energy security of the country. 2. Create long term value to the Company. The Company has expected that the rehabilitation of FPT will be finished at the end of 2012, and FPT will be revived to be the firm with strong financial position that can generate cash flow continually, which shall be the most beneficial to the Company.

5.3 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 year ended December 31, 2011 and 2010 in amount of Baht 6 million.


82

5.4 Long-term loan to employees

The Company provides Staff emergency loans as welfare benefit to the flood impact employees in special case. The employees entitled to withdraw money from this program as shown below. (Unit : Baht) Consolidated Financial Statement Separate Financial Statement

For the year ended December 31, For the year ended December 31, 2011 2010 2011 2010

Long-term loan to employees 19,025,240 - 18,741,240 -

Less current portion (3,805,048) - (3,748,248) -

Net 15,220,192 - 14,992,992 -

5.5 Management benefit expenses Management benefit expenses as follows :-


For the year ended December 31, For the year ended December 31,

2011 2010 2011 2010

Short-term employee benefits 71,043,507 75,085,429 68,058,307 72,701,229

Post-employment benefits 3,511,261 6,452,943 3,511,261 5,173,381

Other long-term benefits 18,538 - 18,538 -

74,573,306 81,538,372 71,588,106 77,874,610

6. CASH AND CASH EQUIVALENTS

Cash and cash equivalents as at December 31, 2011 and 2010 are comprised of the followings :-


2011 2010 2011 2010

Cash on hand 115,511 132,031 82,515 99,328

Deposit with banks and finance institutions 224,230,034 168,543,845 47,507,050 60,532,013

Bond and promissory note 498,647,503 674,478,154 384,844,458 534,800,353

Total cash and cash equivalents 722,993,048 843,154,030 432,434,023 595,431,694

As at December 31, 2011 and 2010, a subsidiary’s cash at banks with a financial institutions amount of Baht 194 million and Baht 165 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.

7. SHORT-TERM INVESTMENTS / RESTRICTED FIXED DEPOSITS WITH FINANCE INSTITUTIONS

7.1 As of December 31, 2011 and 2010, 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.

7.2 As of December 31, 2011 and 2010 a subsidiary has deposits and bonds of Baht 4.5 million and Baht 5.6 million, respectively, with finance institutions. The deposits and bonds have been placed as collaterals for issuance of letters of guarantee for the company’s subsidiary and related company.


83

ANNUAL REPORT 2011

8. TRADE ACCOUNTS RECEIVABLE

As at December 31, 2011 and 2010, the outstanding balances of trade accounts receivable are not yet due.

9. INVESTMENTS IN SUBSIDIARIES

These represent investments in ordinary shares of the following companies :-

(Unit : Baht)

Million Baht Percentage owned by Book value of the subsidiaries

Paid-up capital The Company Cost method base on equty method Dividend

Company 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Subsidiaries

Intoplane Services Co., Ltd. 0.12 0.12 83.33 83.33 100,000 100,000 3,523,635 2,880,395 - -

Thai Aviation Refuelling Co., Ltd. 530 530 90 90 1,235,000,000 1,235,000,000 1,139,663,126 1,027,041,337 160,701,199 136,708,114

JP-One Assets Co., Ltd. 600 600 92.50 92.50 600,900,000 600,900,000 586,515,490 561,488,902 20,867,989 12,043,494

Bafs International Limited 0.04 - 100.00 - 39,998 - (6,958,906) - - -

Total 1,836,039,998 1,836,000,000 1,722,743,345 1,591,410,634 181,569,188 148,751,608

On March 22, 2010, the annual general meeting of a 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 at the rate of Baht 12.17 per share amounting to Baht 64.50 million in August 2009. 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 interim 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 28, 2011 the annual general meeting of the such subsidiary approved a resolution to declare a cash dividend payment from its 2010 operations at the rate of Baht 31.92 per share for an amount of Baht 169.18 million of which the interim dividend payment had been paid at the rate at Baht 13.53 per share amounting at Baht 71.71 million in August 2010. The dividend balance at last six-month period of 2010 operation at Baht 18.39 per share amounting to Baht 97.47 million. The payment was made on April 5, 2011.

On July 25, 2011, the Board of Director Meeting No. 2/2011 of the such subsidiary approved to declare a cash interim dividend payment from its half year 2011 operations at the rate of Baht 15.30 per share for an amount to Baht 81.09 million. The payment was made on August 11, 2011.

On March 26, 2010, the annual general meeting of the other 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. The payment was made on March 31, 2010.

On March 30, 2011, the annual general meeting of the such subsidiary approved a resolution to declare a cash dividend payment from its 2010 operations at the rate of Baht 0.92 per share for an amount of Baht 5.52 million. The payment was made on March 31, 2011.

On August 8, 2011, the Board of Director Meeting No. 2/2011 of the such subsidiary approved to declare a cash interim dividend payment from its half year 2011 operations at the rate of Baht 2.84 per share for an amount of Baht 17.04 million payment on August 9, 2011.

10. OTHER INVESTMENTS IN RELATED COMPANY

These represent investments in shares of the following company :-


84

Million Baht Percentage owned by Baht Paid-up capital the Company Cost Company Nature of Business 2011 2010 2011 2010 2011 2010

Related company

Fuel Pipeline Transportation Limited Aviation fuel pipeline transportation Ordinary shares 796 796 8.36 8.36 133,000,000 133,000,000

Preferred shares 796 796 40.66 8.33 132,521,700 132,521,700

Total 49.02 16.69 265,521,700 265,521,700

Less : Allowance for impairment loss of investment (265,521,700) (265,521,700)

Total investment in related company - net - -

In 2011, the proportion of investments had changed as the preferred stock was transferred to the Company from the transaction mentioned in Note 5.2 (2). However, these investments are considered general investments because the Company does not have significant influence over that company.

According to the un-audited accounts of Fuel Pipeline Transportation Limited as of December 31, 2011, that company has a capital deficit of Baht 522 million (As at December 31, 2010, audited financial statement : Baht 449 million). However, the Company has already set aside provision against impairment loss of investment in full amount.

11. INVESTMENT PROPERTY (Unit : Baht)

Consolidated Separate Financial Statement Financial Statement

Land - cost Balance as at January 1, 2010 47,953,340 47,953,340 Decrease - - Increase - - Balance as at December 31, 2010 47,953,340 47,953,340 Decrease - - Increase - - Balance as at December 31, 2011 47,953,340 47,953,340

Investment property comprises land that is located in Chiang Mai province with an area of approximately 8 Rais. The fair value estimated by an independent appraiser according to the fair value method on March 2010 was Baht 49.50 million.

Since October 2011 onwards, the Company has revenues from leasing such land to another company for a period of 3 years at the annual rental fee of Baht 300,000.


85

ANNUAL REPORT 2011

Cost

Janua

ry 1, 2

011

160,80

5,90

2 11

,742

,273

19

1,19

7,05

5 4,10

2,78

2,46

2 1,73

1,99

9,60

4 49

9,69

5,92

8 73

8,27

9,54

4 21

,180

,807

13

,561

,930

7,47

1,24

5,50

5

Purch

ase

-

61,050

5,88

9,83

2 49

5,52

9 -

- 42

5,16

8 6,67

7,41

4 83

,679

,157

97

,228

,150

Transfer

in

- 1,96

0,62

1 3,52

0,08

8 6,30

5,51

5 -

280,15

9 1,30

0,00

0 -

- 13

,366

,383

Transfer

out

-

- -

- -

- -

- (13,36

6,38

3)

(13,36

6,38

3)

Disposal

-

- (17,51

9,85

6)

(103

,959

,839

) -

(9,383

,479

) (533

,329

) (9,618

,900

) -

(141

,015

,403

)

Decemb

er 3

1, 2

011

160,80

5,90

2 13

,763

,944

18

3,08

7,11

9 4,00

5,62

3,66

7 1,73

1,99

9,60

4 49

0,59

2,60

8 73

9,47

1,38

3 18

,239

,321

83

,874

,704

7,42

7,45

8,25

2

Accumu

lated

dep

recia

tion

Janua

ry 1, 2

011

- 11

,729

,158

14

6,93

2,64

1 1,53

0,04

4,59

4 26

2,87

8,58

1 17

9,25

8,24

2 64

0,18

9,26

4 8,16

5,21

6 -

2,77

9,19

7,69

6

Transfer

out

-

- -

- -

- -

- -

-

Disposal

-

- (17,16

9,83

6)

(103

,017

,493

) -

(9,383

,464

) (533

,328

) (7,372

,324

) -

(137

,476

,445

)

Depreciation for the

yea

r -

58,515

22

,003

,866

16

5,86

6,14

8 57

,477

,285

27

,525

,802

21

,653

,136

4,16

4,13

4 -

298,74

8,88

6

Decemb

er 3

1, 2

011

- 11

,787

,673

15

1,76

6,67

1 1,59

2,89

3,24

9 32

0,35

5,86

6 19

7,40

0,58

0 66

1,30

9,07

2 4,95

7,02

6 -

2,94

0,47

0,13

7

Net

book valu

e

Decemb

er 3

1, 2

011

160,80

5,90

2 1,97

6,27

1 31

,320

,448

2,41

2,73

0,41

8 1,41

1,64

3,73

8 29

3,19

2,02

8 78

,162

,311

13

,282

,295

83

,874

,704

4,48

6,98

8,11

5

12. P

ROPE

RTY, LE

ASEH

OLD

IMPR

OVE

MEN

T AN

D EQ

UIPM

ENT - N

ET

Consoli

dated

Fina

ncial S

tatem

ent

(Unit :

Baht)

Land

and

land

improvem

ent

Leaseh

oldimprovem

ent

Offi c

e furniture

/eq

uipme

nt/co

mpute

r

Main

depo

tfacilitie

s

Hydran

teq

uipme

ntIntop

lane

substation

Vehic

le fl e

etMoto

r vehic

le unde

r fi nan

cial lea

seag

reem

ent

Build

ing a

ndeq

uipme

nt unde

rco

nstruction

/ins

tallation

Total

86


Cost

Janua

ry 1, 2

010

208,75

9,24

2 11

,742

,273

18

2,22

2,24

9 4,08

1,51

4,42

7 1,73

1,99

9,60

4 49

8,56

7,64

3 72

6,00

5,31

8 44

,182

,094

39

,883

,423

7,52

4,87

6,27

3

Purch

ase

-

- 4,10

9,39

9 20

0,16

5 -

- 64

0,57

3 8,60

4,71

7 36

,481

,705

50

,036

,559

Transfer

in

- -

5,18

3,18

4 21

,067

,870

-

1,12

8,28

5 16

,205

,298

-

- 43

,584

,637

Transfer

out

(47,95

3,34

0)

- -

- -

- -

(719

,439

) (62,80

3,19

8)

(111

,475

,977

)

Disposal

-

- (317

,777

) -

- -

(4,571

,645

) (30,88

6,56

5)

- (35,77

5,98

7)

Decemb

er 3

1, 2

010

160,80

5,90

2 11

,742

,273

19

1,19

7,05

5 4,10

2,78

2,46

2 1,73

1,99

9,60

4 49

9,69

5,92

8 73

8,27

9,54

4 21

,180

,807

13

,561

,930

7,47

1,24

5,50

5

Accumu

lated

dep

recia

tion

Janua

ry 1, 2

010

- 11

,698

,600

12

2,66

0,33

0 1,35

1,53

9,64

5 20

5,36

8,70

6 14

9,72

3,29

2 59

3,18

7,96

8 24

,927

,749

-

2,45

9,10

6,29

0

Transfer

out

-

- -

- -

- -

- -

-

Disposal

-

- (251

,749

) -

- -

(4,017

,417

) (25,78

4,53

7)

- (30,05

3,70

3)


yea

r -

30,558

24

,524

,060

17

8,50

4,94

9 57

,509

,875

29

,534

,950

51

,018

,713

9,02

2,00

4 -

350,14

5,10

9

Decemb

er 3

1, 2

010

- 11

,729

,158

14

6,93

2,64

1 1,53

0,04

4,59

4 26

2,87

8,58

1 17

9,25

8,24

2 64

0,18

9,26

4 8,16

5,21

6 -

2,77

9,19

7,69

6

Net

book valu

e

Decemb

er 3

1, 2

010

160,80

5,90

2 13

,115

44

,264

,414

2,57

2,73

7,86

8 1,46

9,12

1,02

3 32

0,43

7,68

6 98

,090

,280

13

,015

,591

13

,561

,930

4,69

2,04

7,80

9

Depreciation charge

in th

e sta

temen

ts of com

preh

ensiv

e inc

ome

For the

yea

r end

ed D

ecem

ber 3

1, 2

011

29

8,74

8,88

6

For the

yea

r end

ed D

ecem

ber 3

1, 2

010

35

0,14

5,10

9

Consoli

dated

Fina

ncial S

tatem

ent

(Unit :

Baht)

Land

and

land

improvem

ent

Leaseh

oldimprovem

ent

Offi c

e furniture

/eq

uipme

nt/co

mpute

r

Main

depo

tfacilitie

s

Hydran

teq

uipme

ntIntop

lane

substation

Vehic

le fl e

etMoto

r vehic

le unde

r fi nan

cial lea

seag

reem

ent

Build

ing a

ndeq

uipme

nt unde

rco

nstruction

/ins

tallation

Total

87

ANNUAL REPORT 2011

Cost

Janua

ry 1, 2

011

160,80

5,90

2 11

,742

,273

17

5,40

7,13

0 3,40

1,68

1,51

8 24

,798

,857

47

7,16

0,92

8 71

7,64

2,53

1 6,91

2,58

3 8,56

5,29

7 4,98

4,71

7,01

9

Purch

ase

-

- 4,17

6,82

8 93

,699

-

- 42

5,16

8 5,68

1,30

2 80

,236

,625

90

,613

,622

Transfer

in

- -

2,75

3,42

5 6,30

5,51

5 -

280,15

9 1,30

0,00

0 -

- 10

,639

,099

Transfer

out

-

- -

- -

- -

- (10,63

9,09

9)

(10,63

9,09

9)

Disposal

-

- (17,40

7,76

6)

(103

,959

,839

) -

(9,383

,479

) (533

,329

) (3,826

,526

) -

(135

,110

,939

)

Decemb

er 3

1, 2

010

160,80

5,90

2 11

,742

,273

16

4,92

9,61

7 3,30

4,12

0,89

3 24

,798

,857

46

8,05

7,60

8 71

8,83

4,37

0 8,76

7,35

9 78

,162

,823

4,94

0,21

9,70

2

Accumu

lated

dep

recia

tion

Janua

ry 1, 2

010

- 11

,729

,158

14

0,22

7,59

6 1,42

1,68

5,40

3 20

,288

,699

17

6,72

0,58

2 63

1,85

4,18

6 2,98

3,38

7 -

2,40

5,48

9,01

1

Transfer

out

-

- -

- -

- -

- -

-

Disposal

-

- (17,04

3,62

1)

(103

,017

,493

) -

(9,383

,464

) (533

,328

) (2,477

,515

) -

(132

,455

,421

)


yea

r -

12,422

18

,202

,132

13

9,76

8,24

2 57

0,59

3 26

,399

,053

17

,525

,733

1,83

1,55

4 -

204,30

9,72

9

Decemb

er 3

1, 2

011

- 11

,741

,580

14

1,38

6,10

7 1,45

8,43

6,15

2 20

,859

,292

19

3,73

6,17

1 64

8,84

6,59

1 2,33

7,42

6 -

2,47

7,34

3,31

9

Net

book valu

e

Decemb

er 3

1, 2

011

160,80

5,90

2 69

3 23

,543

,510

1,84

5,68

4,74

1 3,93

9,56

5 27

4,32

1,43

7 69

,987

,779

6,42

9,93

3 78

,162

,823

2,46

2,87

6,38

3

Sepa

rate

Finan

cial S

tatem

ent

(Unit :

Baht)

Land

and

land

improvem

ent

Leaseh

oldimprovem

ent

Offi c

e furniture

/eq

uipme

nt/co

mpute

r

Main

depo

tfacilitie

s

Hydran

teq

uipme

ntIntop

lane

substation

Vehic

le fl e

etMoto

r vehic

le unde

r fi nan

cial lea

seag

reem

ent

Build

ing a

ndeq

uipme

nt unde

rco

nstruction

/ins

tallation

Total


88

Cost

Janua

ry 1, 2

010

208,75

9,24

2 11

,742

,273

17

1,47

8,09

5 3,38

0,31

7,87

7 24

,798

,857

47

6,03

2,64

3 71

3,36

7,87

4 28

,711

,533

25

,642

,110

5,04

0,85

0,50

4

Purch

ase

-

- 2,65

3,35

1 14

,500

-

- 11

,600

71

2,19

4 33

,462

,807

36

,854

,452

Transfer

in

- -

1,33

4,38

4 21

,349

,141

-

1,12

8,28

5 6,78

9,81

0 -

- 30

,601

,620

Transfer

out

(47,95

3,34

0)

- -

- -

- -

- (50,53

9,62

0)

(98,49

2,96

0)

Disposal

-

- (58,70

0)

- -

- (2,526

,753

) (22,51

1,14

4)

- (25,09

6,59

7)

Decemb

er 3

1, 2

010

160,80

5,90

2 11

,742

,273

17

5,40

7,13

0 3,40

1,68

1,51

8 24

,798

,857

47

7,16

0,92

8 71

7,64

2,53

1 6,91

2,58

3 8,56

5,29

7 4,98

4,71

7,01

9

Accumu

lated

dep

recia

tion

Janua

ry 1, 2

010

- 11

,698

,600

11

9,08

0,80

5 1,26

9,23

4,08

4 19

,685

,515

14

8,31

2,38

2 58

6,04

7,90

1 15

,408

,438

-

2,16

9,46

7,72

5

Transfer

out

-

- -

- -

- -

- -

-

Disposal

-

- (45,15

5)

- -

- (2,526

,692

) (18,20

9,58

4)

- (20,78

1,43

1)

Depreciationfo

r the

yea

r -

30,558

21

,191

,946

15

2,45

1,31

9 60

3,18

4 28

,408

,200

48

,332

,977

5,78

4,53

3 -

256,80

2,71

7

Decemb

er 3

1, 2

010

- 11

,729

,158

14

0,22

7,59

6 1,42

1,68

5,40

3 20

,288

,699

17

6,72

0,58

2 63

1,85

4,18

6 2,98

3,38

7 -

2,40

5,48

9,01

1

Net

book valu

e

Decemb

er 3

1, 2

010

160,80

5,90

2 13

,115

35

,179

,534

1,97

9,99

6,11

5 4,51

0,15

8 30

0,44

0,34

6 85

,788

,345

3,92

9,19

6 8,56

5,29

7 2,57

9,22

8,00

8

Depreciation charge

in th

e sta

temen

ts of com

preh

ensiv

e inc

ome

For the

yea

r end

ed D

ecem

ber 3

1, 2

011

20

4,30

9,72

9

For the

yea

r end

ed D

ecem

ber 3

1, 2

010

25

6,80

2,71

7

Sepa

rate

Finan

cial S

tatem

ent

(Unit :

Baht)

Land

and

land

improvem

ent

Leaseh

oldimprovem

ent

Offi c

e furniture

/eq

uipme

nt/co

mpute

r

Main

depo

tfacilitie

s

Hydran

teq

uipme

ntIntop

lane

substation

Vehic

le fl e

etMoto

r vehic

le unde

r fi nan

cial lea

seag

reem

ent

Build

ing a

ndeq

uipme

nt unde

rco

nstruction

/ins

tallation

Total

89

ANNUAL REPORT 2011

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, 2011 the right transferring as to the above 2 agreements are in its process.

As at December 31, 2011 and 2010 the initial cost of the fixed assets that have been fully depreciated but still in use are as follows :

(Unit : Baht) Consolidated Financial Statement Separate Financial Statement 2011 2010 2011 2010

Leasehold improvement 11,618,052 11,589,252 11,618,052 11,589,252

Office furniture / equipment / computer 108,812,925 102,912,097 106,881,345 102,058,155

Main depot facilities 693,162,417 769,255,880 692,912,047 769,255,880

Hydrant equipment 16,697,043 16,697,044 16,697,043 16,697,044

Intoplane substation 45,895,488 55,058,967 45,895,488 55,058,967

Vehicle fleet 501,914,873 474,901,361 501,914,873 474,901,361

Total 1,378,100,798 1,430,414,601 1,375,918,848 1,429,560,659

13. COMPUTER SOFTWARES - NET Computer softwares, net consisted of :- (Unit : Baht) Consolidated Separate Financial Statement Financial Statement

At cost As at January 1, 2010 46,560,137 44,170,924 Increase 2,187,713 1,597,498 Decrease - - As at December 31, 2010 48,747,850 45,768,422 Increase 721,200 683,300 Decrease - - As at December 31, 2011 49,469,050 46,451,722Less : Accumulated amortization As at January 1, 2010 (29,996,312) (29,645,006) Increase (5,876,210) (5,447,312) Decrease - - As at December 31, 2010 (35,872,522) (35,092,318) Increase (5,500,092) (4,990,117) Decrease - - As at December 31, 2011 (41,372,614) (40,082,435)Net book value as at December 31, 2010 12,875,328 10,676,104Net book value as at December 31, 2011 8,096,436 6,369,287


90

(Unit : Baht) Consolidated Financial Statement Separate Financial Statement For the year ended December 31, For the year ended December 31, 2011 2010 2011 2010

Amortization 5,500,092 5,876,210 4,990,117 5,447,312

14. LIABILITIES UNDER FINANCE LEASE AGREEMENTS

As at December 31, 2011 and 2010, the Company and its subsidiaries have liabilities under finance lease agreement, leasing of vehicles. The payment details are follows :-

Consolidated Financial Statement (Baht)

As at December 31, 2011 As at December 31, 2010 Principal Interest Payments Principal Interest Payments

Within one year 4,979,917 613,119 5,593,036 5,412,387 590,047 6,002,434

After one year but within five years 8,913,745 583,887 9,497,632 8,136,947 632,023 8,768,970

Total 13,893,662 1,197,006 15,090,668 13,549,334 1,222,070 14,771,404

Separate Financial Statement (Baht)

As at December 31, 2011 As at December 31, 2010 Principal Interest Payments Principal Interest Payments

Within one year 2,825,977 266,465 3,092,442 2,388,146 164,697 2,552,843 After one year but within five years 3,656,798 205,285 3,862,083 1,588,128 60,539 1,648,667

Total 6,482,775 471,750 6,954,525 3,976,274 225,236 4,201,510

As at December 31, 2011 and 2010, the Company and its subsidiaries have 34 and 33 outstanding finance lease agreements, respectively with 5 local leasing companies. The lease term will end in 2016, 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 finance lease agreements for the portion due within one year were shown under “current liabilities” in the statement of financial position.


91

ANNUAL REPORT 2011

15. LONG-TERM LOANS FROM BANKS

Credit line no. Credit facility Consolidated Financial Statement Separate Financial Statement Interest Rate /

2011 2010 2011 2010 Condition term payment loan and interest

(Million (Million (Million (Million (Million (Million USD) Baht) USD) Baht) Baht) Baht)

The Company 1 Baht 800 million - 311 - 355 311 355 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.

On February 25, 2011, the Company was approved by the bank to extend the due date of principal payment for 4.5 years. From February 28, 2014 to August 31, 2018 The principal will be paid in 16 every 6 - month period installments, and each installment in Baht 22.22 million. The last installment is the rest. These payments will be effective from February 2011.

2 Part 1 - Baht 1,700 million - 997 - 1,139 997 1,139 3-month fixed deposit rate plus a certain percentage. Part 2 - Baht 300 million - 175 - 201 175 201 The interest is payable monthly. Repayment of 1,172 1,340 1,172 1,340 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 32 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 32 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 million - 195 - 220 195 220 MLR of the bank less a fixed percentage. The interest is payable monthly. The loan is repayable in 20 every 3 month period installments of Baht 6.25 million, the last installment is the rest. These payments will be effective from February 2011 onward.

On March 24, 2011, the Company was approved by the bank to extend the due date of principal payment for 3 years, from November 28, 2015 to November 28, 2018. The principal will be paid in 32 every 3 month period installments, and each installment in Baht 6.25 million. The last installment is the rest. These payments will be effective from February 2011.

4 Baht 700 million - 650 - - 650 - MLR of the bank less a fixed percentage. The interest is payable monthly. The loan is repayable in 28 quaterly installments of Baht 25 million, the last installment is the rest. These payments will be effective from December 2012 onward


92

Credit line no. Credit facility Consolidated Financial Statement Separate Financial Statement Interest Rate /

2011 2010 2011 2010 Condition term payment loan and interest

(Million (Million (Million (Million (Million (Million USD) Baht) USD) Baht) Baht) Baht)

The Subsidiaries 5 Baht 700 million - 234 - 311 - - The higher of 3-month fixed deposit 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. 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.

6 USD 8 million 1.6 54 3.2 109 - - LIBOR plus a certain percentage. The interest is payable monthly. The loan is repayable in 20 quarterly installments of USD 0.4 million from March 2008 to December 2012.

7 Baht 170 million - 89 - 118 - - MLR minus a percentage specified in 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 a year, 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.

8 Baht 120 million - 24 - 48 - - MLR minus a percentage specified in the agreement. The interest is payable monthly. 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 2,729 2,501 2,328 1,915

Less Current portion (448) (480) (262) (294)

Long-term loans from banks - net 2,281 2,021 2,066 1,621


93

ANNUAL REPORT 2011

Additions :

The Company

The Credit line no. 1, in order to hedge the interest rate risk associated with the above loan the Company had entered into an interest rate hedging agreement in a full amount with a bank, terminating on February 28, 2014, to swap the above interest rate for a fixed interest rate and has been postponed the period until August 31, 2018 in accordance with the principle agreement. At the maturity date of every six month, the Company will pay the interest at a fixed rate per annum to the bank and the bank will pay the interest to the Company at the 6-month Thai Baht Interest Rate Fixing (6-Month THBFIX) plus a fixed percentage per annum in accordance with the new conditions stipulated in the agreement, which is effective on August 31, 2011 onwards. 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. 5, 6 and 7, 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.

Later, on August 31, 2010, a 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 decreased per said in the credit line no 5 and 7 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. 8, 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 etc.

16. EMPLOYEE BENEFIT OBLIGATIONS

The Company and its subsidiaries shall comply with TAS no.19 on employee benefits, which is effective from January 1, 2011. Impacts on the financial statements are disclosed in the notes to financial statements no. 4.

16.1 Employee benefit obligations according to Labor Protection Laws and benefit scheme of the Company and its subsidiaries.

As at December 31, 2011, reconciliation of present value of the obligations for employee benefits shown as follows :

(Unit : Baht) Consolidated Separate Financial Statement Financial Statement

Present value of obligations, beginning of the year 518,958,101 502,734,718Current service cost 22,335,000 20,972,000Interest cost 21,846,000 21,390,000Benefits paid (24,579,185) (18,048,802)Present value of obligations, ending of the year 538,559,916 527,047,916Less Current portion (39,220,087) (39,220,087) Net 499,339,829 487,827,829

Statements of financial position


94

Expenses recognized in the statements of comprehensive income for the year ended December 31, 2011 has the descriptions as follows : (Unit : Baht) Consolidated Separate Financial Statement Financial Statement

Current service cost Cost of services 13,352,966 12,392,622 Administrative expenses 5,452,235 5,049,579 Management benefit expenses 3,529,799 3,529,799 Total 22,335,000 20,972,000Interest cost 21,846,000 21,390,000Expenses recognized in the statements of comprehensive income 44,181,000 42,362,000

16.2 Principal actuarial assumptions Financial assumptions for the Company and its subsidiaries Consolidated Financial Statement/ Separate Financial Statement

Discount rate Salary increase rate

Employee benefit obligations after resignation 4.00% - 4.20% 7% - 8%Employee benefit obligations under labor protection laws 4.25% 7% - 8%Employee benefit obligations - mark of years of service 3.90% 7% - 8%

Demographic assumptions of the Company and its subsidiaries

Assumptions about the death : with reference to mortality rate based on table of mortality B.E. 2540 (TM097) announced by Insurance Commission Act. and adjust down 25%, the used table of mortality (TM097) consisting of data collected from a survey of life insurance companies in Thailand, which can be confident that the numbers will reflect the actual death rate of the population in Thailand.

Assumptions about employee turnover rate Percent rate per year

Consolidated Separate Financial Statement Financial Statement 2011 2011

Employee turnover rate 1.15% - 21.67% 1.15% - 2.97%

The above employee turnover rate shows attrition rate of employees who voluntarily, which does not include death, disability to work that is a reason to leave and early retirement. Therefore, the calculation of benefits paid to employees will be based on the mentioned assumptions.

16.3 Provident Fund

The Company and subsidiaries’s contribution for the years ended December 31, 2011 and 2010, amounted to Baht 27 million and Baht 24 million, respectively.

The Company’s contributions for the years ended December 31, 2011 and 2010, amounted to Baht 25 million and Baht 23 million, respectively.


Statements of comprehensive income

95

ANNUAL REPORT 2011

17. EXPENSES BY NATURE Significant expenses by nature are as follow : (Unit : Baht) Consolidated Financial Statement Separate Financial Statement

For the years ended December 31, For the years ended December 31,

2011 2010 2011 2010

Employees benefit expenses 417,542,405 410,040,864 384,028,326 382,145,300Directors’ remuneration 17,494,226 16,048,259 14,509,026 13,664,059Depreciation and amortization expenses 305,307,275 357,079,615 210,358,142 263,308,325Airport concession fees 242,840,161 235,363,431 230,424,420 223,717,488Rental expenses 29,021,713 26,783,588 25,681,948 24,425,908Consulting services expenses 21,757,942 3,334,795 20,942,132 2,633,965Loss of damage from flooding 42,136,927 - 40,666,927 -

Flood Impact

The Company had flood impacts in October and November 2011, which composed of flood preventive cost in both Don muaeng and Suvarnabhumi Airport site, property damaged at Don muaeng office and the remedial cost to employees in total amounting of 42.14 million baht the company only of 40.67 million baht) the Company had completed Don mueang Airport operation recovery as the some time of reclaim insurance to subsidize cost of damage. On January 20, 2012 the Company got partial compensation of 60 million baht.

18. DEFERRED TAX ASSETS AND INCOME TAXES

The movement of deferred tax assets as at December 31, 2011 and 2010 are as follows : (Unit : Baht) Consolidated Financial Statement

Balance as at Increase Use/decrease Balance as at December 31, 2010 from tax rate December 31, 2011

Receipt of the returned principal 114,805,940 - (40,783,773) 74,022,167 from restructuring receivableEmployee benefit obligations 82,423,010 86,402,020 (60,014,244) 108,810,786Loss carry forward on tax base 156,759 - (156,759) -Depreciation 15,868 - (3,660) 12,208 Others - 142,264 - 142,264 Total deferred tax assets 197,401,577 86,544,284 (100,958,436) 182,987,425

(Unit : Baht) Consolidated Financial Statement


Receipt of the returned principal from 119,322,007 - (4,516,067) 114,805,940 restructuring receivableEmployee benefit obligations 76,090,212 10,248,658 (3,915,860) 82,423,010Loss carry forward on tax base 486,337 - (329,578) 156,759Depreciation 15,997 - (129) 15,868 Total deferred tax assets 195,914,553 10,248,658 (8,761,634) 197,401,577


96

(Unit : Baht) Separate Financial Statement


Receipt of the returned principal from restructuring receivable 114,805,940 - (40,783,773) 74,022,167Employee benefit obligations 80,302,616 83,226,400 (56,942,830) 106,586,186Others - 142,264 - 142,264 Total deferred tax assets 195,108,556 83,368,664 (97,726,603) 180,750,617

(Unit : Baht) Separate Financial Statement


Receipt of the returned principal from restructuring receivable 119,322,007 - (4,516,067) 114,805,940Employee benefit obligations 74,385,082 9,833,394 (3,915,860) 80,302,616 Total deferred tax assets 193,707,089 9,833,394 (8,431,927) 195,108,556

Tax expenses for the Company and its subsidiaries for the years ended December 31, 2011 and 2010 consisted of :

(Unit : Baht)


For the years ended December 31, For the years ended December 31,

2011 2010 2011 2010

Current income tax 276,565,475 237,008,351 144,574,387 112,613,372Deferred tax expense relating to temporary differences (2,047,999) (1,487,024) (3,663,533) (1,401,467)Effect of change in applicable tax rate on deferred tax 89,651,572 - 88,539,272 -Tax expenses 364,169,048 235,521,327 229,450,126 111,211,905

For the years ended December 31, 2011 and 2010, reconciliation of amounts between tax expenses and the multiple of accounting profit and used tax rate are as follows :


97

ANNUAL REPORT 2011


For the years ended For the years ended December 31, December 31, 2011 2010 2011 2010

Accounting profit before tax expenses 926,368,702 787,689,007 647,294,154 548,230,068

Tax rate 30% 28.33% 30% 25%

Current income tax 277,921,960 223,153,087 194,231,545 137,325,650

Tax effect of expenses that are not

deductible for tax purposes 3,983,965 14,801,838 3,003,742 12,857,944

Tax effect of income that are

deductible for tax purposes (6,938,917) (2,433,598) (55,875,126) (38,971,689)

Effect of change in applicable tax rate on deferred tax 89,651,572 - 88,539,272 -

Currant tax adjustments arising from income tax

in the prior periods (449,532) - (449,307) -

Tax expense shown in the statement

of comprehensive income 364,169,048 235,521,327 229,450,126 111,211,905

Corporate income tax for the Company is calculated on net income for the years 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. Since 2011 at the rate of 30 percent of net income before tax.

Corporate income tax for a subsidiary is calculated on net income for the year 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.

Corporate income tax for another subsidiary is calculated on net income for the year 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, 2011 and 2010, 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.

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 %

Change in corporate income tax rate

On December 21, 2011, a royal decree was enacted the law to reduce corporate income tax rates for the 3 years from 30% to 23% for the year of 2012 and 20% for year 2013 and 2014. Later, on January 13, 2012, the Federation of Accounting Professions issued the guideline regarding the reduction in corporate income tax rate in which the substantially enacted tax rate for using in measurement of the deferred tax assets and deferred tax liabilities should be 23% for the year of 2012 and 20% for the year of 2013 onwards. Therefore, The Company and its subsidiaries had reduced their deferred tax assets as at December 31, 2011 from 30% to 23% for the year of 2012 and 20% for the year of 2013 onwards. The effect of the reduction in corporate income tax rate on deferred tax assets in amount of Baht 89.65 million (Separate financial statement : Baht 88.54 million) had been included in 2011 total comprehensive income.


98

19. DIVIDEND PAID

On August 10, 2011 the board of directors of the Company has approved a payment of interim dividend from 2011 results at Baht 0.25 per share amounting to Baht 127.50 million. The dividend was paid in September 6, 2011.

On April 22, 2011, the board of directors of the Company has approved the follwing transaction ; 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 per share amounting to Baht 91.80 million. The rest of dividend paid by cash at Baht 0.36 per share amounting to Baht 183.60 million on May 13, 2011.

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.

20. LEGAL RESERVE

According to the Public Limited Companies Act B.E. 1992, 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.

21. 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 statements of financial position as at December 31, 2011 and 2010, the Company and subsidiaries’s debt-to-equity ratio was 0.93 : 1 and 0.83 : 1, respectively.

According to the separate statements of financial position as at December 31, 2011 and 2010, the Company’s debt-to-equity ratio was 1 : 1 and 0.78 : 1, respectively.

22. BANK GUARANTEES

As at December 31, 2011, there were outstanding bank guarantees of the Company and its subsidiaries amounting to approximately Baht 54 million (As at December 31, 2010 : Baht 55 million), with the Company only has outstanding guarantees amounting to approximately Baht 43 million (As at December 31, 2010 : Baht 43 million), The guarantees were in respect of certain performance bonds as required in the ordinary course of business of the Company and its subsidiaries.

23. COMMITMENT AND CONTINGENT LIABILITIES

23.1 Commitment

23.1.1 As at December 31, 2011, the Company and its subsidiaries have the commitments from long-term contracts which have the minimum amount to pay in the future as follows ;

Minimum amount to be paid in the future (Million Baht)

Period Company Not over Over 1 year Over Total 1 year not over 5 years 5 years

Bangkok Aviation Fuel Services Public Company Limited 35.21 62.62 63.86 161.69Thai Aviation Refuelling Company Limited 4.35 5.14 - 9.49JP-One Assets Company Limited 14.44 62.24 266.76 343.44 Total 54.00 130.00 330.62 514.62


99

ANNUAL REPORT 2011

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 contract has been renewed for another three years period starting from September 28, 2010 to September 27, 2013.

c) Rental agreement for space at Don Mueang Airport for a period of three years from September 19, 2007, to September 27, 2010. The Contract has been renewed for another three years period starting from September 28, 2010 to September 27, 2013.

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.

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. The contract has been renewed for another three years period starting from January 1, 2012 to December 31, 2014, whereby the Company has to pay rental and comply with various conditions indicated in the agreement.

3. A subsidiary has entered into the land lease for the aviation fuel pipeline transport agreement with The State Railway of Thailand for the period of 24 years, 2 months and 9 days ending on August 9, 2034 , the subsidiary has to pay rental and comply with various conditions indicated in the agreement.

4. A subsidiary has entered the 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, the subsidiary has to pay rental and comply with various conditions indicated in the agreement.

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.


100

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 125 million (As at December 31, 2010 : Baht 33 million) with the commitments of the Company amounting to approximately Baht 125 million (As at December 31, 2010 : Baht 29 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.

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, 2010 : 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 Lawsuit

In 2008, the Company was sued as a defendant in a lawsuit arising from the case that 51 plaintiffs had suffered from the smell of gasoline vapors from the fuel tank of the transmission pipeline company. This claim details approximately Baht 300,000 per person, which is a total of Baht 15.3 million (excluding interest). Later, some plaintiffs withdrew the lawsuit. Thus, the claim from the remaining plaintiffs of 47 persons would add up to Baht 14.1 million (excluding interest).

On February 3, 2012, the plaintiffs did not fully pay the court fee within the specified time so it was considered an abandon. The court ordered to strike the case out of the case-list.

24. FINANCIAL INSTRUMENTS

Accounting policies Details of significant accounting policies and methods adopted, including criteria for recognition of revenues and expenses relating to financial assets and financial liabilities are disclosed in note 3.

Financial risk management and for financial instruments 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 cash and cash equivalents, short-term investments 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 as described in note 15 to the financial statements.


101

ANNUAL REPORT 2011

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 a subsidiary has foreign currency deposit accounts which are used to pay its foreign currency denominated liabilities.

As at December 31, 2011, the subsidiary has entered into a foreign currency hedging agreement on the total balance of long-term loan that will be due quarterly until December 31, 2012, for USD 1,600,000 (As at December 31, 2010 : USD 3,200,000).

As at December 31, 2011, the Company and a subsidiary had foreign currency denominated deposit account and trade debtors which were unhedged amounting to USD 837,983 (As at December 31, 2010 : USD 839,299) but there were no foreign currency denominated liabilities so that they were unhedged (As at December 31, 2010 : GBP 10,000).

Credit risk The Company and subsidiaries are 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 and subsidiaries do not anticipate material losses from its debt collection.

Liquidity risk The Company and subsidiaries manage their liquidity risk by maintaining adequate level of cash and cash equivalents include management of investments and payment of long-tern loans to the appropriation of their operations.

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 SEGMENT

The 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 PRIVILEAGES

A 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. BVENTS AFTER THE REPORTING PERIOD

On February 22, 2012, 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 41.8 million. 2) To allot the retained earnings to be reserved for general reserve amounting to Baht 41.8 million. 3) To declare dividends from the Company’s 2011 result at Baht 0.65 per share amounting to Baht 331.50 million of which the Company has paid the interim dividend in September 2011 at Baht 0.25 per share amounting to Baht 127.50 million. The rest of dividend will be paid by cash at Baht 0.40 per share amounting to Baht 204 million on May 23, 2012.

28. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved by the Company’s authorized of directors on February 22, 2012.


102

AUDITOR’S FEE

1. Audit’s Fee

• Last year the Company and its subsidiaries paid audit fee to Dharmniti Auditing Co., Ltd., in the amount of Baht 1,297,919 (including out of pocket expenses for the financial year, ended December 31, 2011) as follows :

1. Bangkok Aviation Fuel Services Plc. Baht 813,814 2. Thai Aviation Refuelling Co., Ltd. Baht 263,292 3. JP-One Asset Co., Ltd. Baht 152,495 4. Intoplane Services Co., Ltd. Baht 68,318 Total Baht 1,297,919

• Last year the Company paid audit fee in auditing the employees’ provident fund to Dharmniti Auditing Co., Ltd. in the amount of Baht 60,000.

2. Non-audit fee

• Last year Thai Aviation Refuelling Co., Ltd. paid legal fee to Dharmniti Law office Co., Ltd., the company

that relates to Dharmniti Auditing Co., Ltd. in the amount of Baht 90,000

• For the Company and other subsidiaries, there was no non-audit fee paid to Dharmniti Auditing Co., Ltd. and its related persons or entities last year.

ANNUAL REPORT 2011

103

REPORT OF THE AUDIT COMMITTEE FOR THE YEAR 2011 (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 2011 and 2 Audit Committee meetings in 2012 until the reporting date, totally 7 Audit Committee meetings. Each Audit Committee Director attended every meeting with management executives, internal auditors, compliance officer, and external auditors in relating issues, which could be summarized as follows :

1. Reviewed the interim and annual financial statements of 2011, 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, independency, and audit problems, as well as acknowledging the audit plan of the external auditors for the year 2011. 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 2011 along with the assessment of the internal control and risk management system, benchmarking with the international standard of COSO-ERM (The Committee of Sponsoring Organizations of the Treadway Commission-Enterprise Risk Management) of the internal auditor and found no weakness or 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, 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.


104

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, as well as approved internal audit plan for the year 2011 that linked to corporate risk and reviewed it semi-annually to ensure its appropriateness and consistency with the risk incurred. In addition, the Audit Committee reviewed the audit report 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 goals 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 Performance Indicators (KPIs), Key Risk Indicators (KRIs) in corporate and functional levels, 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 flood, global warming, 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 2011. 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, financial reporting, internal audit, law and regulation compliance, internal control, and risk management. 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 2012 and proposed to the Board of Directors to ask for the approval of the Annual Shareholder’s Meeting for the year 2012. The Audit Committee considered appointing the external auditors by evaluating their skill, knowledge, competence, audit team, quality of audit work in 2011, independency in compliance with the Practice of the Office of the SEC and the appropriateness of audit fee. The Audit Committee proposed appointing Mr. Pichai Dachanapirom,

REPORT OF THE AUDIT COMMITTEE FOR THE YEAR 2011 (TRANSLATION)

105

ANNUAL REPORT 2011

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 Auditing Co., Ltd. to serve as the Company’s external auditors for the year 2012, with the audit fee of Baht 850,000. The Audit committee has opinions regarding the appointment of external auditots as follows :

• In the past financial year, the external auditors performed their duties with knowledge, professional competence satisfied work quality as well as to have continuation in audit work.

• The proposed audit fee of Baht 850,000, increasing 6.25% from that of 2011 which was Baht 800,000, is appropriate as there has been the new subsidiary established aboard to purchase debt of related company. Therefore, the audit time has to be increased. In addition, the proposed audit fee is at the similar rate as other listed companies that are in the same level.

• There is in compliance with Regulation of the Office of the SEC with regards to the changing of the financial statements signatory external auditor every 5 years, while the Company has used the service of Dharmniti Auditing Co., Ltd. since 2009.

• The external auditors has independency, with no relation to the Company and its 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, and also had selection criteria to propose the independent persons to serve as the external auditors and considered their audit fee. Furthermore, the result of corporate Governance Rating in the year 2011 of Thai Institute of Directors (IOD) revealed that the Company received Excellent Corporate Governance Scoring as same as last year.

February 13, 2012 On behalf of the Audit Committee

Mr. Pachara Yutidhammadamrong Chairman of the Audit Committee


106

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 at least 80%. The Company has educated Good Corporate Governance and Risk Management for every employee on a regular basis, and contained these courses in the orientation program for new employees. The Company has regulation prohibiting its management and employees to act with confl ict of interests with the Company which specifying in Code of Conduct and Employees’ Regulation Manual.

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 22, 2012, 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 2011 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.-

SUMMARY OF THE OPINION CONCERNING ADEQUACY AND

APPROPRIATENESS OF THE INTERNAL CONTROL SYSTEM

FOR THE YEAR 2011

107

ANNUAL REPORT 2011

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 has reorganized to enhance the management potential and to boost its operation efficiently, as well as amended job descriptions and specifications to be in line with the changing organization chart. The Company set up selection procures to replace the management that will be retired. In addition, the Company modified Code of Conduct and Code of Conduct on-line test to be more clarified and standardized. Furthermore, the Company has a project to implant its Core Value and organizational culture continually.

The Company amended its policies and regulations to be more clarified and appropriate such as JV Core Principle Policy, Safety, Occupational Heath and Environmental Policy, Regulation of Nominating Committee, Regulation of Remuneration Committee, Performance Evaluation Criteria for Employee, Employees’ Regulation Manual, Successor Plan Manual, Manual for Strategic Plan and Risk Management. Also, the Company prepared a risk management plan in case of flooding in the Company area in order to enhance the performance efficiency.

The Company recognized the importance of human resources, by developing and training its employees to gain knowledge, skill, and competence to be suitable for them and their jobs such as arranging Individual Development Plan, English Language Development Plan, and Successor Training Plan to prepare the readiness for leadership positions in the future.

In addition, from Corporate Governance Report Survey of Thai Listed Companies in 2011 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 2011 in 3 areas i.e. Don Mueang Depot, Suvarnbhumi Depot, and Suvarnbhumi Intoplane, as well as Winning Awards in the campaign of eliminating material that is harmful to aircrafts (Foreign Object Damage: FOD) at Suvarnabhumi Airport in 2011. Moreover, the Company received certificate as “A Pilot Organization in Carbon Footprint for Organization Project” from Thailand Greenhouse Gas Management Organization (TGO) and National Metal and Materials Technology Center (MTEC).

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. Furthermore, the Company had budget system to reflect and control its operation efficiently.


108

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 considering internal and external risks of the Company i.e. financial risk, risk from operation, politic, economy, and natural disaster.

The Company revised risk, 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.

Furthermore, the Company analyzed risk factors that may affect its operations such as the economic recession in the United States of America and Europe, the crisis in the Middle East and North Africa, the adjustment of minimum wage to be Baht 300 and minimum salary for Bachelor Degree holder to be Baht 15,000.

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 revised the likelihood and impact of each risk continually 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 acceptablelevel. 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 affect its business and set the risk reducing measures, for example:

• The flood at Don Mueng Airport, which caused the airport to close its operation and damaged the Company’s Into-Plane substation, leading to the business interruption of the Company. To recover the Company’s situation back to normal, Don Mueng Recovering Committee and Rehabilitation Working Team has been set up, with the plan to protect the crisis immediately and reduce losses to be at the minimum level, to recover the situation in the quickest and safest way and to rehabilitate major structures of the Company permanently. The engineering consultant is hired to survey and design the permanent



FOR THE YEAR 2011

109

ANNUAL REPORT 2011

flood prevention system. In addition, the Company had policy to help and relief the losses for employees such as providing grant, emergency loan or reimbursing interest in case of loan from financial institutions, providing temporary accommodation along with equipments needed to sustain life for employees and their families in crisis.

• To mitigate the risk in climate change and Green & Clean Airport compliance, various measures have been set up such as establishing Green Committee, with duties, responsibilities, action plan and environmental educational plan to manage energy using of the Company to be more efficient and effective.

• The risk of earthquake in Thailand or neighboring countries that may affect the Company’s building structure, aviation fuel depot, and pipeline transportation. The Company had risk reducing measures by dividing into 3 parts i.e. before earthquake, occurring earthquake, and after earthquake.

• Thai Baht appreciation. The Company has risk reducing measures such as entering into foreign exchange forward contract for its revenue continually.

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.

The Company has issued manual of authorities in each level, operation manuals, and job descriptions, which clearly specified and are in written manner. 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), The Company has revised its policies and regulations constantly to be in line with changing situations and risks for ensuring that it can achieve its objectives, while having the measures to assure that its operations shall be comply 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 reviewed 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


110

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 effi cient and effective communication channel which can communicate throughout the Company and its subsidiaries, has Electronic Document Management and Employee Self Service Systems. 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 prepared Sustainable Report describing internal and external activities that took into account of various stakeholders (Corporate Social Responsibility : CSR).

8. Monitoring

In 2011, the Company had 5 Board of Directors’ meetings to consider and monitor the performance of management to ensure achieving the specifi ed goal. If the performance differed from the specifi ed 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 specifi ed 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 specifi ed Risk Tolerance. Furthermore, to enhance work effi ciency, the Board of Directors requires the sub-committees to evaluate their performance as well.



FOR THE YEAR 2011

111

ANNUAL REPORT 2011

In 2011, 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 system, 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 its charter and is responsible in examining the internal control system, risk management system, connected transactions, the compliance with related rules and regulations of the Company and its subsidiaries, and also making recommendations in various aspects, preparing the evaluation checklist of the Internal Control System, within COSO-ERM framework to ensure that the operation of the Company and its subsidiaries would reach the specified objectives, efficiently and effectively. Moreover, Internal Audit Division has produced the audit manual to be the guideline in conducting into the same direction.

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, 2011. 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.


112

RELATED PARTY TRANSACTIONS

Relationship Type of Transaction Name

1. Transactions between BAFS and 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 Plc. (THAI) Don Mueang Airport and Suvarnabhumi Airport 2. - Flight Lieutenant Montree Jumrieng, - Mr. Chokchai Panyayong , - SQN.LDR.Asdavut Watanangura (ended Jun 16, 2011), - Sqn.Ldr.Alongot Pullsuk (since Aug 10, 2011), BAFS’s directors are the executives of THAI 2. Collection of service fee for aviation fuel transport through Hydrant System at Suvarnabhumi Airport

3. Customs Service Fee

2. Chevron (Thailand) Ltd. 1. Aviation fuel storage, fuel and defuel service atl Mr. Chakraphan Krachaiwong Don Mueang Airport and Suvarnabhumi Airport (since Feb 23, 2011), BAFS’s director is the executive of Chevron (Thailand) Ltd. 2. Collection of service fee for aviation fuel transport through Hydrant System at Suvarnabhumi Airport


3. The Shell 1. Aviation fuel storage, fuel and defuel service atl Mr. Ath Hemvijitraphan, BAFS’s Company of Thailand Ltd. Don Mueang Airport and Suvarnabhumi Airport director is the executive of The Shell Company of Thailand Ltd. 2. Collection of service fee for aviation fuel transport 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 Don Mueang Airport and Suvarnabhumi Airport shareholder of BAFS and major shareholder of PTT Plc. 2. Mr. Nuttachat Charuchinda, BAFS’s director is the executive of PTT Plc.

2. Collection of service fee for aviation fuel transport through Hydrant System at Suvarnabhumi Airport

3. Aviation fuel and defuel service at Samui and Sukothai Airports

4. Gas to refuel the vehicles

113

ANNUAL REPORT 2011

288.13 Mil.Baht

101.40 Mil.Baht

-

326.29 Mil.Baht

131.21 Mil.Baht

-

256.95 Mil.Baht

100.06 Mil.Baht

-

414.80 Mil.Baht

168.41 Mil.Baht

18.56 Mil.Baht

3.42 Mil.Baht

24.13 Mil.Baht

9.85 Mil.Baht

-

26.84 Mil.Baht

10.87 Mil.Baht

-

20.83 Mil.Baht

8.79 Mil.Baht

-

35.84 Mil.Baht

14.69 Mil.Baht

1.96 Mil.Baht

0.07 Mil.Baht

Continue

Continue

Continue

Continue

Continue

Continue

Continue

Continue

Continue

Continue

Continue

Continue

Continue

Unit PriceAmount

( Exclude VAT)Outstanding Balance as of Dec 31, 2011

Continuation of Transaction

As specified in the agreed contract, with generalbusiness conditions

As specified in the agreed contract between BAFS, users, and Thai Aviation Refuelling Service Co., Ltd. and with general business conditions

As specified in the agreed contract to full-service users, which is support normal business transactions, with general business conditions

As specified in the agreed contract, with general business conditions


As specified in the agreed contract to full-service users, which is support normal business transactions, with general business conditions



As specified in the agreed contract to full - service users, with is support normal business transactions, with general business conditions




General business conditions, Actual use


114

5. Bangchak Petroluem Plc. 1. Aviation fuel storage, fuel and defuel service at Ministry of Finance is indirect major Don Mueang Airport and Suvarnabhumi Airport shareholder of BAFS and major shareholder of Bangchak 2. Collection of service fee for aviation fuel transport through Hydrant System at Suvarnabhumi Airport

6. Airports of Thailand Plc. 1. Lease for Fuel Pipeline, Building and Area 1. Ministry of Finance is indirect major (AOT) Don Mueang Airport shareholder of BAFS and major shareholder 1. Fuel Pipeline Lease of AOT (The lease payment was waived during Apr 1, 2009 - Dec 31, 2011) 2. Mr. Serirat Prasutanond (ended Mar 30, 2011), 2. Lease for office building and area inside parking apron BAFS’s director is the executive of AOT 3. Lease area outside parking apron

Suvarnabhumi Airport 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

Chiang Mai Airport‹ Lease area outside parking apron 2. Utility and other charges

7. Ministry of Finance Lease for office building and land at Don Mueang Airport Indirect major shareholder of BAFS

8. Thai Petroluem Pipeline 1. Lease of Land, Building, Utility Service Ministry of Finance is indirect major Co., Ltd. (THAPP) shareholder of BAFS and THAPP Don Mueang Depot 1. Lease of Land and Building 2. Utility service

Suvarnabhumi Depot 1. Lease of Land and Building 2. Utility service

2. Water for fire suppression system, water and electricity

9. Dhipaya Insurance Plc. 1. All Risks Insurance, Aviation Third Party Ministry of Finance is indirect major Legal Liability Insurance and Terrorism shareholder of BAFS and Dhipaya Insurance

2. Car Insurance and Car Casualty Coverage

10. Fuel Pipeline 1. Lease/Service for aviation fuel receiving pipeline system Ministry of Finance is indirect major Transportation Ltd. shareholder of BAFS and FPT (FPT) 2. Lease for land and office building - Lease for land

- Lease for office building

3. Lease for diesel receiving pipeline system

4. Assistance in debt restructuring - Long term loan and receivable - Interest income



115

ANNUAL REPORT 2011

As specified in the agreed contract, with general business conditionsAs specified in the agreed contract between BAFS, users, and Thai Aviation Refuelling Service Co., Ltd. and with general business conditions

-

115 Baht/sqm/month85 Baht/sqm/month.

0.06 Baht/liter 63.60 Baht/sqm/month450 Baht/sqm/month150 Baht/sqm/month

7 Baht/sqm/monthGeneral business conditions, Actual use

-

As specified in the agreed contract,with general business conditions


As specified in the agreed contract, with general business conditions, Actual Use



21.5 % of FPT’s revenue from JET A-1 transporting (before discount and tax)

Rental charges paid to Department of Treasury plus 5%320 Baht/sqm/month.

As agreed rate

1% per annum

-

-

-

9.33 Mil.Baht0.01 Mil.Baht

230.42 Mil.Baht5.92 Mil.Baht0.72 Mil.Baht3.27 Mil.Baht

0.004 Mil.Baht 4.38 Mil.Baht

6.43 Mil.Baht



0.27 Mil.Baht

9.88 Mil.Baht

0.82Mil.Baht

3.66 Mil.Baht

1.20 Mil.Baht

4.67 Mil.Baht

5.22 Mil.Baht

- 3.16 Mil.Baht

-

-

-

- -

20.58 Mil.Baht - - -

- 0.28 Mil.Baht

-

--

--

0.11 Mil.Baht

-

0.32 Mil.Baht

-

-

-

0.28 Mil.Baht

370.11 Mil.Baht -

Continue

Continue

Continue

Continue Continue

Continue Continue Continue Continue

Continue Continue

Continue

Continue Continue

Continue Continue

Continue

Continue

Continue

Continue

Continue

Continue

Continue

Continue Continue

8,144 sqm

1,458 sqm

Volume Unit PriceAmount




116

2. Transactions between Thai Aviation Refuelling Co., Ltd. (Subsidiary) and persons who may have conflict of interests

1. Airports of Thailand Plc. 1. Permission for Operation of the 1. Ministry of Finance is indirect major (AOT) Hydrant Pipeline Network shareholder of BAFS and major shareholder of AOT

2. - Mr. Nirandra Theeranartsin (ended Feb 23, 2011) - Flying Officer Anirut Thanomkulbutra (ended Nov 1, 2011) - Miss Sasisupa Sukontasab (since Mar 28, 2011), - Mr, Somchai Sawasdeepon (since Dec 16, 2011), TARCO’s directors are the controlling persons of AOT

2. Lease for land at Suvarnabhumi Airport for laying equipments and hydrant pipeline

3. Lease for room inside passenger building at Suvarnabhumi Airport for office building

4. Lease for area inside parking apron at Suvarnabhumi Airport for parking the service vehicles and storing ground support equipments

5. Lease for area behind domestic cargo at Suvarnabhumi Airport to construct for parking the service vehicles and other facilitators

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. Nuttachat Charuchinda, BAFS’s director is the executive of PTT Plc.

3. The Shell Company Gas to refuel the vehicles Mr. Ath Hemvijitraphan, BAFS’s director of Thailand Ltd. is the executive of The Shell Company of Thailand Ltd.

4. Dhipaya Insurance Plc. All Risks Insurance, Aviation Third Ministry of Finance is indirect major Party Legal Liability Insurance and shareholder of BAFS and Dhipaya Terrorism Insurance



117

ANNUAL REPORT 2011

Continue

Continue

Continue

Continue

Continue

Continue

Continue

Continue

Continue

2% per annum of TARCO’s revenue before deduct

any expenses

60 Baht/sqm/month

450 Baht/sqm/month + service fee

150 Baht/sqm /month

60 Baht/sqm/month (Jan-Jul 2011)150 Baht/sqm/month (Aug- Dec 2011)

General business condition, Actual use




12.42 Mil.Baht

0.10 Mil.Baht

0.94 Mil.Baht

0.08 Mil.Baht

2.11 Mil.Baht

0.49 Mil.Baht

0.46 Mil.Baht

0.16 Mil.Baht

2.30 Mil.Baht

-

121.20 sqm 136.58 sqm

39 sqm

1,600 sqm

.

-

-

12.42 Mil.Baht

-

-

-

-

0.03 Mil.Baht

0.05 Mil.Baht

-

-





118


1. Fuel Pipeline 1. Connection of common facility with Ministry of Finance is indirect major Transportation Ltd. Makkasan - Suvarnabhumi pipeline system shareholder of BAFS and FPT (FPT)

2. Employment for operation, repair and maintenance of Makkasan - Suvarnabhumi pipeline system

3. Throughput fee from Bangchak Refinery and fuel depot at Chong Nonsi to Makkasan control station

4. Employment for management and control the pipeline repair on Makkasan - Suvarnabhumi route in the area of Nasa Vegas

5. Employment for management and control the pipeline repair on Makkasan - Suvarnabhumi route in the area of Sai Tong Village

2. PTT Plc. Service charge for pipeline system 1. Ministry of Finance is indirect to Suvarnabhumi Depot major shareholder of BAFS and major shareholder of PTT Plc.‹ 2. Mr. Nuttachat Charuchinda, BAFS’s director is the executive of PTT Plc.

3. Chevron (Thailand) Ltd. Service charge for pipeline system Mr. Chakraphan Krachaiwong to Suvarnabhumi Depot (since Feb 23, 2011), BAFS’s director is the executive of Chevron (Thailand) Ltd.)

4. The Shell Company Service charge for pipeline system Mr. Ath Hemvijitraphan, of Thailand Ltd. to Suvarnabhumi Depot BAFS’s director is the executive of The Shell Company of Thailand Ltd.

5. The Bangchak Service charge for pipeline system Ministry of Finance is indirect Petroleum Plc. to Suvarnabhumi Depot major shareholder of BAFS and The Bangchak Petroleum Plc.

6. Airports of Thailand Plc. Land lease outside airport ground within 1. Ministry of Finance is indirect (AOT) Suvarnabhumi Airport to lay aviation fuel pipeline major shareholder of BAFS and major shareholder of AOT 2. Mr. Serirat Prasutanond (ended Mar 31, 2011), BAFS’s director is the executive of AOT

3. Transactions between JP-One Asset Co., Ltd. (Subsidiary) and persons who may have conflict of interests


119

ANNUAL REPORT 2011

0.65 Mil.Baht

6.40 Mil.Baht

79.29 Mil.Baht

1 Mil.Baht

0.5 Mil.Baht

1.70 Mil.Baht

36.08 Mil.Baht

48.46 Mil.Baht

121.14 Mil.Baht

1.79 Mil.Baht

0.51% of revenue but not less than 15,000 Baht /month

5% of revenue but not less than 100,000 Baht/month

6.50 Satang/liter

As agreed conditions




60 Baht/sqm/month

1,219.86 Mil.liter

9.99 Mil.liter

212.21 Mil.liter

285.08 Mil.liter

712.57 Mil.liter

2,209.88 sqm

0.06 Mil.Baht

0.63 Mil.Baht

7.74 Mil.Baht

-

-

0.51 Mil.Baht

3.73 Mil.Baht

4.61 Mil.Baht

11.40 Mil.Baht

-

Continue

Continue

Continue

-

-

Continue

Continue

Continue

Continue

Continue





120

OPINION ON RELATED PARTY TRANSACTIONS FOR THE YEAR 2011

The Company’s Board of Directors has appointed the independent Audit Committee to consider the related party transactions of the Company in compliance with the Regulations of the Stock Exchange of Thailand and Offi ce of the Securities Exchange Commission (SEC)

In 2011, the Company engaged in transactions with persons who may have confl ict of interests in various normal business conditions. The disclosure of pricing policy of such transactions appeared in the notes of the Company’s consolidated fi nancial statement as of December 31, 2011.

Furthermore, in the Board of Directors’ meeting held on February 22, 2012 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 benefi cial to the business of Company, in accordance to the Regulations of the SEC as follows.

1. The transactions between the Company and the persons who may have confl ict of interests

1.1 Thai Airways International Plc.

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 specifi ed, 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-specifi ed contracts.

121

ANNUAL REPORT 2011

The Audit Committee has the opinion that such transactions are related party 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 related party 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.

1.4 PTT Plc.


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 related party 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 related party transaction, but is beneficial to the Company’s operation.

1.5 Bangchak Petroluem Plc.


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 Bangchak Petroluem Plc. as same as to Thai Airways International Plc., Chevron (Thailand) Ltd., The Shell Company of Thailand Ltd., and PTT Plc. (PTT)

The Audit Committee has the opinion that such transactions are related party transactions, but are beneficial to the Company’s operation.

1.6 Airports of Thailand Plc. (AOT)

Rationale and Necessity • Don Mueang Airport

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.


122

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.

The Audit Committee has the opinion that such transactions are related party 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 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 2011 .

• Suvarnabhumi Airport

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.

The Audit Committee has the opinion that such transaction is related party 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.

The Audit Committee has the opinion that such transactions are related party transactions, 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.

• Chiang Mai Airport

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 has terminated the lease since March 1, 2011. The Audit Committee has the opinion that such transaction is related party 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


ANNUAL REPORT 2011

123

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 related party transactions, but are necessary and the most beneficial to the Company’s operation since they are parts of normal aviation refuelling operation in airports.

1.7 Ministry of Finance


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 related party 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.

1.8 Thai Petroleum Pipeline Co., Ltd. (THAPP)


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. The Audit Committee has the opinion that such transactions are related party transactions, 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.

1.9 Dhipaya Insurance Plc.


The Company made All Risks 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 related party 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.

1.10 Fuel Pipeline Transportation Ltd. (FPT)


The Company has 49.01% of the total shareholding in FPT which stores and transports aviation fuel through underground pipelines system.


124

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 related party 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 related party 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.

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 related party 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 persons who may have conflict of interests



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.

TARCO has entered into the lease agreement for land at Suvarnabhumi Airport to stack equipments and Hydrant for maintenance, the lease agreement for room inside passenger building for being office for service staffs, as well as the lease agreement for area inside parking apron for parking the service vehicles and storing ground support equipments. Those rental fees are as similar as the rate that AOT made with external parties.


ANNUAL REPORT 2011

125

TARCO has entered into the lease agreement for area behind domestic cargo to construct for parking the service vehicles and other facilitators. Such agreement is terminated on July 31, 2011 and TARCO requested for renewal of the lease. For the renewal, AOT has increased the rental fee, however TARCO asked AOT to reconsidered the fee and it is not finalized yet.

The Audit Committee has the opinion that such transactions are related party transactions, 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 related party 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.



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 related party transactions, but are beneficial to TARCO’s operation.

2.4 Dhipaya Insurance Plc.


TARCO made All Risks 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 related party 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 persons who may have conflict of interests

3.1 Fuel Pipeline Transportation Ltd. (FPT)


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, which specialized in maintaining and managing fuel pipeline, to operate, repair and maintenance the above pipeline system.


126

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.

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.

JP-One employed FPT to manage and control the pipeline repair on Makkasan-Suvarnabhumi route in the area of Nasa Vegas and Sai Tong Village. The fee was based on the cost of employee and equipments used.

The Audit Committee has the opinion that such transactions are related party transactions, 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.


3.5 The Bangchak Petroleum Plc.


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

The Audit Committee has the opinion that such transactions are related party transactions, but are the most beneficial to JP-One since they are part of normal business operation.



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 related party 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.


ANNUAL REPORT 2011

127

MEASURE OR PROCEDURES REGARDING RELATED PARTY TRANSACTIONS

The procedures in conducting related party transactions between the Company and the person who may have confl ict of interests and the disclosure of related party transactions of the Company comply with the Regulation of the Securities and Exchange Commission and the Stock Exchange of Thailand. 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 entering the related party transactions, the Company concerns that such transactions would be the most benefi cial to the Company’s business, fair, reasonable, in market price and have normal business condition. In addition, according to the Company’s rules, in case that particular director has interests in certain issues, he shall not be allowed to vote in approving such related party transaction agenda.

Moreover, to capacitate the Company to operate in accordance with Section 89/12 (1) of Securities and Exchange Act (No. 4) B.E. 2551, the Board of Directors approved in principal in transactions that have general trading conditions between the Company or subsidiaries and director, management, or related person.


128

POLICY OR TREND REGARDING FUTURE RELATED PARTY TRANSACTIONS

The Company has the policy regarding related party transactions to be in compliance with the regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand. In entering the related party transactions, the Company would specify the agreement and conditions to enhance the fair price and conditions that do not cause the misappropriation of benefit. And due to the nature of the Company’s business that provides the full range aviation service, combined with the Company’s shareholding structure that comprises of Thai Airways Plc., AOT Plc. and oil companies, there will be future related party transactions continually. However, such related party transactions would be the transactions that are reasonable, necessary and benefit to the Company and are the normal business of providing aviation refuelling service at Don Mueang and Suvarnabhumi Airports. The Company would disclose the detail of related party transactions in Notes to Financial Statements that audited by the External Auditor of the Company.

In addition, the Company has made All Risks Insurance, Aviation Third Party Legal Liability Insurance and Terrorism Insurance with Dhipaya Insurance Plc., which is beneficial to the Company as it covers risk and reduces damage that may result from the Company’s aviation refuelling operation.


ThinkingThinking

PositivePositive

BAFSBANGKOK AVIATION FUEL SERVICES PLC.

HEAD OFFICE

171/2 KAMPHAENG PHET 6 RD.,

DON MUEANG, BANGKOK 10210

TELEPHONE 0-2834-8900 FAX. 0-2834-8999

SUVARNABHUMI BRANCH

99 SRIWAREENOI ROAD, SRISAJORRAKHENOI,

AMPER BANGSHOTONG, SMUTPRAKARN 10540

TELELPHONE 0-2326-3800 FAX. 0-2326-3888

BAFSBAFSBAFSBAFS

annual report 2011 thinking - listed...

Documents