bh : annual report 2006

Bumrungrad Hospital Public Company Limited33 Sukhumvit 3, Bangkok 10110, Thailand Tel: +66 (0) 2667 1000 Fax: +66 (0) 2667 2525E-mail: [email protected] www.bumrungrad.com

Bumrungrad Hospital Public Company Limited

Annual Report 2006

1

Bumrungrad Hospital Public Company LimitedAnnual Report 2006

Table of Contents

Message from the Chairman 2

Message from the Group CEO 3

Our People 4

Financial Information

Financial Highlights 19

Management Discussion and Analysis 20

Report of the Audit Committee 23

Report of the Accountability of the Board of Directors

to the Company’s Financial Reports 24

Financial Statements 25

Other Importation Information

General Information 63

Company Profile 64

Risk Factors 69

Shareholding Structure & Management 70

Corporate Governance 84

Related Parties Transactions 90

2


Defining what makes Bumrungrad a market leader in

healthcare really boils down to one word: people.

Everyday we touch, change and improve the lives of

thousands of people in so many different ways. After

26 years in the healthcare business, this is the one

constant.

As Bumrungrad’s business network expands, we will

continue to focus on people – our patients, our doctors,

nurses and support staff. Any visitor to Bumrungrad

can feel the difference that a ‘patient-centric’ healthcare

model delivers. It shows on the smiles of our staff, the

extra time our doctors spend with patients, and the

emphasis we put on customer service.

We believe that by putting people first, we attract the

best doctors, earn the loyalty of our patients, and build

a healthcare brand recognized for world class quality

and service. These simple guiding principles drive our

business and financial success.

It is clear that major changes are taking place in

healthcare delivery systems worldwide, and these

global challenges are creating opportunities for a new

consumer-driven healthcare model. As always,

Bumrungrad is prepared to meet those challenges

through innovation and by utilizing its greatest asset –

people.

Message from the Chairman

Mr. Chai Sophonpanich

Chairman

3


Message from the Group CEO

A retrospective look at Bumrungrad validates strong

performance in key areas of our business – record

earnings and revenues, growth in patient volume,

re-accreditation by the Joint Commission International,

dominance in medical tourism, and worldwide brand

recognition as a leading healthcare destination by

Newsweek International.

Initiatives to expand our business domestically and

internationally are well underway, and include a

campaign to attract and retain Thai nationals – the

foundation of our business; the commissioning of our

new Health Screening Center in early 2007;

agreements with US insurers and corporations to

develop new global health plans; and continued

development of our international network.

Bumrungrad is well positioned to capitalize on the

growing demand for medical services in Asia, while

attracting more patients from Europe and North

America looking for high quality, lower cost care. By

investing in our brand, our network and our people

today, we are ensuring our competitiveness tomorrow.

Mr. Curtis J. Schroeder

Group Chief Executive Officer

2006 was a year of solid continuity for Bumrungrad

International. In a year that brought both changes and

challenges, Bumrungrad continued to expand its

facilities and network, execute its business plan and

meet the expectations of its customers and

shareholders. This continuity is what makes

Bumrungrad a trusted business partner and healthcare

provider for millions of patients around the world.

4


A seasoned healthcare veteran, Dennis oversees

Bumrungrad’s international expansion and

development. Network expansion is a critical part of

Bumrungrad’s growth and brand development

strategy, as the company seeks to meet the rising

demand of healthcare services from the Middle East

to the Far East.

Dennis BrownCEO, Bumrungrad International Limited

Our Guiding Principals

5


With over 30 years in healthcare administration

spanning four continents, Mack represents the skill and

experience of Bumrungrad senior management. He

manages Thailand’s premier hospital and its 3,100

employees by focusing on patient satisfaction, staff

development and continuous improvement.

Mack BannerCEO, Bumrungrad International, Bangkok

6


Simon and Carrie Ann ClarkExpatriate Family

Meet the Clarks: Simon, Carrie Ann and their three children – Jade, Alex and Caitlin – all born at Bumrungrad.

The Clarks are just one of the thousands of expatriate families that choose Bumrungrad, and part of the

430,000 international patients that select Bumrungrad as their healthcare provider.

Our Patients

7


Lidy and Paul GundersenMedical Tourists

Uninsured and unable to afford surgical treatment in

the USA, Lidy and her husband Paul traveled halfway

around the world from their home in Arkansas to

Bumrungrad for medical treatment. Lidy and Paul

represent a growing trend of medical tourists seeking

afforable medical care overseas, and one of the 65,000

Americans Bumrungrad treated in 2006.

Paramee Thongcharoen andSuchari ThongcharoenThai Nationals

Paramee and her mom, are the root and foundation of

Bumrungrad’s one million plus patient base. Our

patients entrust us with more than their healthcare;

they entrust us with the lives of their mothers and

fathers, husbands and wives, and sons and daughters.

Treating them like family seems only natural.

8


Mr. 24/7. The 1-2-Call. Dr. Sukitti has many nicknames because he is seemingly everywhere, all the time. Bumrungrad

is home to over 800 medical specialists, like Dr. Sukitti, whose dedication to patient care is what makes them so

special. Delivering integrated healthcare one-patient-at-a-time has made Bumrungrad a recognized center of

excellence and a regional referral center for specialty care.

Dr. Sukitti PanpunnungCardiologist and Emergency Medicine

Our Doctors

9


Educated in Egypt and fluent in Arabic, Dr. Borihan

helps coordinate the care of the more than 90,000

Arabic patients that travel to Bumrungrad annually for

medical treatment. Bumrungrad doctors treat patients

from over 190 countries around the globe, making

Bumrungrad the world’s leading destination for

overseas care.

Dr. Borihan SuwandeeGP and Arabic Medical Coordinator

10


Gaysorn PhancharoensinnNurse Manager

A nurse with an MBA, Gaysorn manages Bumrungrad’s bustling Health Screening Center catering to over 50,000

patients annually. Bumrungrad’s new center is part of our campus expansion program, which includes a new

25,000 sq. m. outpatient clinic that will re-define the healthcare experience for our patients.

Our Staff

11


Phatcharin In-On, NurseRattanah Hoisang, Radiology Technician

Wilasinee Natenopparat, Customer Service Representative

These women are stars. Through our Star of Bumrungrad program, patients recognize Bumrungrad staff that

demonstrate exceptional care and service standards. Staff development and recognition programs are core to

Bumrungrad’s position as a service leader in the healthcare industry.

12


Our Corporate Citizens

Prawnapa ChantapoomNurse Aide

Prawnapa is just one of the hundreds of young women

that Bumrungrad supports through its participation in

the UNICEF Youth Career Development Program,

which provides scholarships, training and career

opportunities in the healthcare and hospitality

industries for young women from the provinces of

Thailand.

13


Over the past three years, Bumrungrad has helped over

150 children with life threatening congenital heart

defects by providing them with free surgical treatment.

Our commitment to helping disadvantaged children

and their families is reflected in skill and dedication of

physicans, like Dr. Oradee, who give these children new

hearts and new hope.

Dr. Oradee ChandavasuNeonatologist

14


You’ve

met

15


our

People

16


And now for

17


the numbers

18


19


Financial Highlights

2006 2005 2004

Financial Performance (Bt ‘000)

Total Current Assets 1,629,054 1,103,842 1,503,740

Total Assets 6,622,894 5,727,518 5,021,086

Total Current Liabilities 1,571,898 1,580,758 1,181,395

Total Liabilities 2,994,347 3,031,729 2,960,888

Total Shareholders’ Equity 3,628,547 2,695,789 2,060,198

Total Revenues 7,895,518 6,806,775 5,809,298

Net Earnings for the Year 1,095,702 1,052,739 934,547

Basic Earnings Per Share 1.51 1.45 1.36

Earnings per Share - Fully Diluted 1.26 1.21 1.08

Book Value per Share 4.51 3.59 3.00

Book Value per Share - Fully Diluted 3.79 3.01 2.39

Dividend per Share 0.75 0.75 0.70

Financial Ratios

Gross Profit Margin (%) 37.6 37.6 35.6

EBITDA Margin (%) 24.5 24.5 23.4

Pre-tax Profit Margin (%) 19.4 18.7 18.3

Net Profit Margin (%) 13.9 15.5 16.1

Growth on Sales from Hospital Operations (%) 15.1 16.9 26.6

Growth on Net Profit (%) 4.1 12.6 40.2

Return on Equity (%) 34.7 44.3 56.3

Return on Assets (% 17.7 19.6 19.7

Liabilities to Equity (x) 0.91 1.16 1.44

Debt to Equity (x) 0.48 0.66 1.02

Net Debt to Equity (x) 0.24 0.37 0.37

Interest Coverage Ratio (x) 17.54 15.57 11.36

Current Ratio (x) 1.04 0.70 1.27

Average Collection Period (days) 22.01 17.55 16.36

Average Inventory Period (days) 11.92 11.04 9.73

Average Payable Period (days) 39.06 38.98 39.88

20


(Unit: Baht Million)

2006 2005 Growth

Total Revenues 7,896 6,807 16%

Gross Profit 2,875 2,501 15%

Gross Profit Margin 37.6% 37.6%

EBITDA 1,928 1,657 16%

EBITDA Margin 24.5% 24.5%

Net Profit 1,096 1,053 5%

Net Profit Margin 13.9% 15.5%

EPS - Basic 1.51 1.45 4%

EPS - Fully Diluted 1.26 1.21 4%

Management Discussion and Analysis

1. Revenues and Margins

For the year 2006, the Company reported total revenues of Baht 7,896 million, an increase by 16% from Baht 6,807

million for year 2005. The increase is the result of 12% increase in inpatient revenues and 20% increase in outpatient

revenues.

The cost of hospital operations for the year ended 2006 was at Baht 4,775 million, or an increase of 15% from year-end

2005, in line with the increase in the hospital operations. The gross margin therefore remained stable at 37.6% for

both 2005 and 2006. Administrative expenses increased by 18% to accommodate the growth in hospital operations,

resulting in a stable EBIDTA margin at 24.5% for both 2005 and 2006.

2. Corporate Income Tax and Net Profit

For 2006, the Company reported corporate income tax of Baht 432 million (effective tax rate of 28.3%), an increase of

98% from Baht 218 million (effective tax rate of 17.1%) for 2005, as the Company pays full tax rate in 2006. As a result,

the net profit margin decreased from 15.5% for year 2005 to 13.9% for year 2006. However, the Company’s net profit

still saw a 5% increase from Baht 1,053 million in 2005 to Baht 1,096 million in 2006.

Year-end 2006 basic EPS was at Baht 1.51 per share, or an increase of 4% from Baht 1.45 per share for year-end 2005.

Similarly, fully diluted EPS increased by 4% from Baht 1.21 per share for 2005 to Baht 1.26 per share for year-end 2006.

3. Balance Sheet

Total assets increased to Baht 6,623 million as at 31 December 2006 from Baht 5,728 million as at 31 December 2005,

primarily because of increase in cash from Baht 544 million in 2005 to Baht 854 million in 2006, mainly from the

Company’s subsidiary, Bumrungrad International Company Limited (BIL)’s capital increase of Baht 453 million,

increase in accounts receivables from Baht 339 million in 2005 to Baht 525 million in 2006, in line with the growth of

revenues from hospital operations and increasing average collectible days because of increasing foreign accounts,

coupled with the increase in property, plant and equipment from Baht 3,270 million in 2005 to Baht 3,752 million in

21



2006 2005 Growth

Total Assets 6,623 5,728 16%

Total Liabilities 2,994 3,032 -1%

Total Shareholders’ Equity

(excluding equity attributable

to minority shareholders of

subsidiaries) 3,284 2,615 35%

Average Collection Period (days) 22.0 17.6

Average Inventory Period (days) 11.9 11.0

Average Payables Period (days) 39.1 39.0

Net Debt to Equity 0.24x 0.37x

Interest Coverage Ratio 17.5x 15.6x

Average Return on Assets 17.7% 19.6%

Average Return on Equity 34.7% 44.3%

2006 from the construction of new outpatient and parking building, netted off with decrease in pledge of fixed

deposits at financial institutions from Baht 230 million in 2005 to Baht 10 million in 2006, as the condition on

maintaining an escrow account for the term loan has been released.

The Company’s average collection period increased to 22 days as at 31 December 2006 from 18 days as at

31 December 2005, as the Company’s composition of insurance and corporate contracts are gradually changing

towards an increasing of foreign accounts. Naturally, these accounts take longer to process and collect the bills. The

Company’s average inventory period remains stable at 12 days for both 2005 and 2006.

Total liability was at Baht 2,994 million as at 31 December 2006, stable compared to Baht 3,032 million as at

31 December 2005. The Company’s long-term debt (including current portion) remained stable at Baht 1,751 million

as at 31 December 2006 compared to Baht 1,779 million as at 31 December 2005, as during 2006, the Company made

a scheduled repayment of Baht 329 million and made a draw-down of Baht 300 million in 4Q06. Net debt to equity

declined to 0.24x as at 31 December 2006 compared to 0.37x as at 31 December 2005, as a result in an increase in cash

and increase in equity. The Company’s interest coverage ratio improved to 17.5x for the year 2006 from 15.6x in 2005

as EBITDA improves.

Shareholder’s equity attributable to Company’s shareholders (excluding equity attributable to minority shareholders

of subsidiaries) increased to Baht 3,284 million as at 31 December 2006 from Baht 2,615 million as at 31 December

2005, primarily a result of unrealized gain from BIL’s capital increase to strategic partners in excess of par value (Baht

153.52 per share vs. par value of Baht 100 per share) of Baht 156 million, coupled with 2006 net profit of Baht 1,096

million netted off with dividend payment of Baht 548 million. In July 2006, the Company waived its rights to subscribe

to BIL’s 5,764,701 new shares to allow strategic partners to buy such shares. As a result, its shareholding in BIL was

diluted to 51% from 100%. Consequently, the equity attributable to minority shareholders of subsidiaries significantly

increased from Baht 81 million as at 31 December 2005 to Baht 344 million as at 31 December 2006. Average return

on assets for 2006 was at 18% while average return on equity remained high at 35% for 2006.

22


4. Liquidity

The Company’s cash flow from operating activities for 2006 was at Baht 1,137 million, lower than 2005 of Baht 1,513

million, primarily because of the increase in accounts receivable, decrease in corporate income tax payable resulting

from income tax payment, decrease in accrued expense as miscellaneous expenses have been paid down and

decrease in accounts payable – others as the Company paid for its construction of the new outpatient center. Net cash

used in investment activities decreased to Baht 678 million in 2006 from Baht 859 million in 2005, primarily because in

2005, the Company spent Baht 323 million in investment in Asian Hospital Inc. to expand its hospital business into the

Philippines. Net cash used in financing activities significantly decreased to Baht 141 million in 2006 from Baht 857

million in 2005, as in 2006, BIL received cash from shares issued in the amount of Baht 453 million, together with the

Company’s increase in long term loan of Baht 300 million. As a result, cash and cash equivalents at the end of the

period increased to Baht 854 million as at 31 December 2006 from Baht 544 million as at 31 December 2005.

Liquidity ratio stood at 1.04x as at 31 December 2006, an increase from 0.70x as at 31 December 2005, as a result of

stronger cash position. Consequently, quick ratio was at 0.99x as at 31 December 2006, an increase from 0.65x as at

31 December 2005.


2006 2005

Cash Flow from Operating Activities 1,137 1,513

Cash Flow from Investing Activities -678 -859

Cash Flow from Financing Activities -141 -857

Net Increase (Decrease) in cash

and cash equivalents 318 -203

Cash and Cash Equivalents

at end of year 854 544

Liquidity Ratio 1.04x 0.70x

Quick Ratio 0.99x 0.65x

23


Report of the Audit Committee

To the Shareholders of Bumrungrad Hospital Public Company Limited

The Audit Committee was established by a board resolution. The Committee comprises of three independent

directors of the Company, namely, Miss Sophavadee Uttamobol, Chairperson, Mr. Boonpakorn Chokwathana and

Mr. Soradis Vinyaratn as Audit Committee Members. The duties and responsibilities of the committee are mainly to

review the financial reports to ensure sufficient compliance with accounting standards and credibility; to review the

company’s internal control system for adequacy and effectiveness; to ensure that the company complies with the

regulations and other relevant laws, and to review any possible conflict of interest between the company and persons

or any related parties transaction.

The Audit Committee had 5 meetings in year 2006 to perform the duties assigned. The major topics are:

1. Reviewed the Company and subsidiaries’ financial statements prior to submission to the Board of Directors.

After due considerations with the external auditors and the management, it is the opinion of the committee

that the financial statements are presented with sufficient and accurate disclosure of material information.

2. Considered and recommended an appointment of external auditor and the yearly audit fee to the Board of

Directors and Shareholders.

3. Reviewed an internal auditing policy, which is part of the company’s administrative policy, and agreed to a

written procedure for internal audit as working criteria in accordance with international standard.

4. Considered the disclosure of information concerning connected transaction and disposition assets.

5. Reviewed and acknowledge the reports from internal auditors in relation to various policies, regulation,

procedures, and rules as prescribed by the laws as well as the adequate effectiveness of risk assessment for

various divisions of the Company. The committee is of the opinion that the internal control systems are

adequate and appropriate to prevent risks in the Companyís operation.

The Audit Committee has performed its assigned duties with care and at its fullest ability for the benefit of the

company’s stakeholders.

Miss Sophavadee Uttamobol

Chairperson of Audit Committee

6 March 2007

24


Report of the Accountability of the Board ofDirectors to the Company’s Financial Reports

The board of directors is responsible for the consolidated financial statements of the Company and its subsidiaries

and information as appears in the annual report. The financial statements have been prepared in accordance with the

generally accepted accounting principles, using appropriate and consistent accounting policies. The financial

statements have been prepared with caution and have been evaluated for appropriateness of the overall

presentation of the financial statement. There was sufficient information disclosure in the notes to the financial

statements.

The board of directors has set up an efficient and effective internal control system to ensure that all accounting

transactions have been recorded correctly and comprehensively, and that there has been a record-keeping system of

assets to protect the Company from any material fraud or damage.

The board of directors has the opinion that the overall internal control system of the Company was at a satisfactory

level, which resulted in confidence in the reliability of the financial statements of the Company and its subsidiaries as

at 31 December 2006.

Mr. Chai Sophonpanich Mrs. Linda Lisahapanya

Chairperson Managing Director

25


Report of Independent Auditor

To The Board of Directors and Shareholders of


I have audited the consolidated balance sheets of Bumrungrad Hospital Public Company Limited and its subsidiaries

as at 31 December 2006 and 2005, the related consolidated income statements, statements of changes in

shareholders’ equity and cash flows for the years then ended, and the separate financial statements of Bumrungrad

Hospital Public Company Limited for the same periods. These financial statements are the responsibility of the

Company’s management as to their correctness and the completeness of the presentation. My responsibility is to

express an opinion on these financial statements based on my audits.

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

and perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the

financial statements. An audit also includes assessing the accounting principles used and significant estimates made

by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a

reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position

of Bumrungrad Hospital Public Company Limited and its subsidiaries and of Bumrungrad Hospital Public Company

Limited as at 31 December 2006 and 2005, and the results of their operations and cash flows for the years then ended,

in accordance with generally accepted accounting principles.

Sumalee Reewarabandith

Certified Public Accountant (Thailand) No. 3970

Ernst & Young Office Limited

Bangkok: 27 February 2007

26


BUMRUNGRAD HOSPITAL PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESBALANCE SHEETSas at 31 December 2006 and 2005

(Unit: Baht)

CONSOLIDATED THE COMPANY ONLY

Note 2006 2005 2006 2005

ASSETS

Current assets

Cash and cash equivalents 853,860,177 543,506,119 353,636,646 382,385,685

Current investments - fixed deposit at

financial institution 10,000,000 - 10,000,000 -

Trade accounts receivable - net 6, 7 525,196,532 339,475,021 468,695,611 314,651,484

Amounts due from related parties 7 6,520,043 1,383,764 17,242,430 5,863,072

Advances to employees and directors 11,300,539 10,014,019 9,563,658 9,523,442

Short-term loans and interest receivable

– a related party 7 - - - 20,097,671

Inventories 8 166,413,300 149,895,896 161,111,044 147,181,909

Prepaid expenses 44,390,574 49,969,718 37,078,848 26,073,426

Other current assets 11,372,648 9,597,054 2,209,237 1,245,248

Total current assets 1,629,053,813 1,103,841,591 1,059,537,474 907,021,937

Non-current assets

Pledged fixed deposits at financial

institutions 9 9,605,495 229,883,845 1,251,095 221,250,972

Investments accounted for under

equity method 10 464,948,666 481,415,370 1,678,669,626 1,492,256,552

Other long-term investments - net 11 2,047,213 2,047,213 2,047,213 2,047,213

Advance for future subscription - net 16,370,994 - - -

Long-term loans and interest receivable

– a related party 7 - - 18,121,384 22,603,851

Property, plant and equipment - net 12 3,751,950,703 3,269,654,875 2,680,514,143 2,153,355,063

Intangible assets - net 13 732,093,327 624,219,061 786,428,585 692,026,413

Other non-current assets 16,823,645 16,456,303 19,823,645 19,456,303

Total non-current assets 4,993,840,043 4,623,676,667 5,186,855,691 4,602,996,367

TOTAL ASSETS 6,622,893,856 5,727,518,258 6,246,393,165 5,510,018,304

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

27


BUMRUNGRAD HOSPITAL PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESBALANCE SHEETS (Continued)

as at 31 December 2006 and 2005

(Unit: Baht)


Note 2006 2005 2006 2005

LIABILITIES AND

SHAREHOLDERS’ EQUITY

Current liabilities

Trade accounts payable 551,815,024 484,362,198 547,325,609 482,523,293

Amount due to a related party 7 1,800,000 - 1,800,000 -

Current portion of long-term loan 14 328,521,802 328,521,802 - -

Short-term loans and interest payable

– a related party 7 - - 1,465,263,415 1,709,236,428

Accrued physician’s fee 255,561,894 213,240,714 253,511,894 213,049,372

Interest payable 768,021 585,039 - -

Interest payable – convertible bonds treated

as equity securities 6,232,877 6,232,877 6,232,877 6,232,877

Corporate income tax payable 196,122,348 205,622,400 196,122,348 204,543,949

Accrued expenses 137,849,661 203,357,059 126,178,348 171,015,278

Accounts payable – others 7 27,802,694 71,126,079 27,576,890 67,173,381

Unearned income 7 25,391,445 34,131,272 - -

Other current liabilities 40,031,930 33,578,559 38,130,678 32,445,898

Total current liabilities 1,571,897,696 1,580,757,999 2,662,142,059 2,886,220,476

Non-current liabilities

Long-term loan 14 1,422,449,491 1,450,971,293 300,000,000 -

Provision for loss in excess of cost of

investment in subsidiary 10 - - - 8,561,836

Total non-current liabilities 1,422,449,491 1,450,971,293 300,000,000 8,561,836

TOTAL LIABILITIES 2,994,347,187 3,031,729,292 2,962,142,059 2,894,782,312


28


BUMRUNGRAD HOSPITAL PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESBALANCE SHEETS (Continued)as at 31 December 2006 and 2005

(Unit: Baht)


Note 2006 2005 2006 2005

Shareholders’ equity

Share capital 16

Registered

920,475,835 ordinary shares of Baht 1 each

(2005: 920,341,835 ordinary shares

of Baht 1 each) 920,475,835 920,341,835 920,475,835 920,341,835

2,226,850 preference shares of Baht 1 each

(2005: 2,360,850 preference shares

of Baht 1 each) 2,226,850 2,360,850 2,226,850 2,360,850

Issued and paid-up

727,825,372 ordinary shares of Baht 1 each

(2005: 727,691,372 ordinary shares

of Baht 1 each) 727,825,372 727,691,372 727,825,372 727,691,372

2,226,850 preference shares of Baht 1 each

(2005: 2,360,850 preference shares

of Baht 1 each 2,226,850 2,360,850 2,226,850 2,360,850

Premium on ordinary shares 285,568,300 285,568,300 285,568,300 285,568,300

Unrealised gain resulting from the sale

of subsidiary’s shares to the public in excess

of par value 156,134,945 - 156,134,945 -

Translation adjustment 13,045,673 30,828,437 13,045,673 30,828,437

Convertible bonds treated

as equity securities 15 550,000,000 550,000,000 550,000,000 550,000,000

Excess of investment over book value

of a susidiary 10 (192,661,558) (192,661,558) (192,661,558) (192,661,558)

Retained earnings

Appropriated - statutory reserve 17 92,275,000 92,275,000 92,275,000 92,275,000

Unappropriated 1,649,836,524 1,119,173,591 1,649,836,524 1,119,173,591

Total equity attributable to company’s

shareholders 3,284,251,106 2,615,235,992 3,284,251,106 2,615,235,992

Minority interest – equity attributable to minority

shareholders of subsidiaries 344,295,563 80,552,974 - -

Total shareholders’ equity 3,628,546,669 2,695,788,966 3,284,251,106 2,615,235,992

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY 6,622,893,856 5,727,518,258 6,246,393,165 5,510,018,304


29


BUMRUNGRAD HOSPITAL PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESINCOME STATEMENTS

For the years ended 31 December 2006 and 2005

(Unit: Baht)


Note 2006 2005 2006 2005

Revenues

Revenues from hospital operations 7 7,650,579,386 6,646,518,382 7,585,397,295 6,595,730,218

Revenues from hospital management 7 57,093,812 6,876,693 - -

Rental income 7 118,423,241 89,087,699 145,367,048 114,204,008

Interest income 7 18,480,051 8,414,581 11,328,721 8,402,714

Gain on exchange rate 15,218,810 25,216,037 21,446,128 24,467,416

Other income 7 27,958,782 27,501,701 63,067,371 36,903,233

Share of income from investments accounted for

under equity method 7,763,568 3,160,025 74,352,816 29,804,599

Total revenues 7,895,517,650 6,806,775,118 7,900,959,379 6,809,512,188

Expenses

Cost of hospital operations 4,775,141,818 4,145,590,150 4,752,401,403 4,127,593,520

Depreciation and amortisation 12, 13 342,093,936 291,816,213 300,424,972 251,605,807

Administrative expenses 7 1,148,589,490 986,095,496 1,195,092,972 1,006,276,837

Allowance for loss on impairment of

assets (reversal) 10,426,768 11,430,248 (6,788,266) 11,430,248

Share of loss from investments accounted for

under equity method - - 17,520,733 37,995,459

Total expenses 6,276,252,012 5,434,932,107 6,258,651,814 5,434,901,871

Income before interest expense and income tax 1,619,265,638 1,371,843,011 1,642,307,565 1,374,610,317

Interest expense 7 (109,946,409) (106,867,549) (120,396,441) (101,549,396)

Corporate income tax 18 (432,140,026) (217,907,995) (426,209,024) (220,321,642)

Income after corporate income tax 1,077,179,203 1,047,067,467 1,095,702,100 1,052,739,279

Net loss attributable to minority interest 18,522,897 5,671,812 - -

Net income for the year 1,095,702,100 1,052,739,279 1,095,702,100 1,052,739,279

Basic earnings per share 20

Net income 1.51 1.45 1.51 1.45

Weighted average number of

ordinary shares (shares) 727,798,572 727,630,430 727,798,572 727,630,430

Diluted earnings per share 20

Net income 1.26 1.21 1.26 1.21

Weighted average number of

ordinary shares (shares) 867,414,859 867,414,859 867,414,859 867,414,859


30


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31


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cial

sta

tem

ents

.

32


BUMRUNGRAD HOSPITAL PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESSTATEMENTS OF CASH FLOWSFor the year ended 31 December 2006 and 2005

(Unit: Baht)


2006 2005 2006 2005

Cash flows from operating activities

Net income 1,095,702,100 1,052,739,279 1,095,702,100 1,052,739,279

Adjustments to reconcile net income to net each

provided by (paid from) operating activities: -

Depreciation and amortisation 342,093,936 291,816,213 300,424,972 251,605,807

Allowance for loss on impairment

of assets (reversal) 10,426,768 11,430,248 (6,788,266) 11,430,248

Bad debts and allowance for

doubtful accounts 54,482,057 14,264,748 52,550,495 12,776,194

Share of loss (income) from investments

accounted for under equity method (7,763,568) (3,160,025) (56,832,083) 8,190,860

Net loss attributable to minority interest (18,522,897) (5,671,812) - -

Loss on disposal of equipment 6,098,983 2,694,621 6,098,983 3,073,072

Income from operating activities before

change in operating assets and liabilities 1,482,517,379 1,364,113,272 1,391,156,201 1,339,815,460

Decrease (increase) in operating assets

Trade accounts receivable (240,203,567) (118,781,734) (206,594,622) (93,541,690)

Amounts due from related parties (5,136,279) - (11,379,358) -

Inventories (16,517,404) (45,444,839) (13,929,135) (45,154,175)

Other current assets 3,803,550 (24,080,958) (11,969,411) 2,825,506

Increase (decrease) in operating liabilities

Trade accounts payable (11,127,448) 8,523,531 (13,777,958) 7,957,506

Amount due to a related party 1,800,000 - 1,800,000 -

Accrued physicians’ fee 42,321,180 46,239,046 40,462,522 46,672,327

Interest payable 182,982 585,039 - -

Corporate income tax payable (9,500,052) 144,729,028 (8,421,601) 204,543,949

Accrued expenses (65,507,398) 67,203,470 (44,836,930) 36,946,606

Accounts payable – others (43,323,385) 23,263,630 (39,596,491) 27,108,553

Unearned income (8,739,827) 34,131,272 - -

Other current liabilities 6,453,371 12,262,058 5,684,780 12,451,452

Net cash from operating activities 1,137,023,102 1,512,742,815 1,088,597,997 1,539,625,494


33


BUMRUNGRAD HOSPITAL PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESSTATEMENTS OF CASH FLOWS (Continued)

For the years ended 31 December 2006 and 2005

(Unit: Baht)


2006 2005 2006 2005

Cash flows from investing activities

Decrease (increase) in deposits at financial

institutions with maturity of more

than 3 months and those pledged 210,278,350 399,943,927 209,999,877 (92)

Increase in advances to employees and

directors (1,286,520) (4,480,728) (40,216) (4,086,563)

Decrease (increase) in short-term loans

and interest receivable-related parties - (953,736) 20,097,671 4,132,918

Decrease in long-term loans and interest

receivable-related parties - - 4,482,467 2,418,518

Sales (purchase) of investments in a

subsidiary and associated companies 209,354 (385,002,855) 209,354 (599,000,000)

Increase in long term advance for

future subscription (33,586,028) - - -

Increase in plant and equipment (680,434,863) (653,109,053) (670,157,128) (665,176,119)

Increase in other non-current assets (172,926,881) (215,474,922) (172,926,881) (116,787,922)

Net cash used in investing activities (677,746,588) (859,077,367) (608,334,856) (1,378,499,260)

Cash flows from financing activities

Capital increase of minority shareholders

of a subsidiary 452,644,323 - - -

Increase (decrease) in short-term loans

and interest payable-a related party - - (243,973,013) 233,488,839

Increase in long-term loan 300,000,000 - 300,000,000 -

Long-term loan repayment (328,521,802) (328,521,802) - -

Dividend paid (547,539,167) (511,029,555) (547,539,167) (511,029,555)

Interest paid for convertible bonds

treated as equity securities (17,500,000) (17,500,000) (17,500,000) (17,500,000)

Net cash used in financing activities (140,916,646) (857,051,357) (509,012,180) (295,040,716)

Net increase (decrease) in cash and

cash equivalents 318,359,868 (203,385,909) (28,749,039) (133,914,482)

Translation adjustment (8,005,810) 24,010,087 - -

Cash and cash equivalents at beginning

of year 543,506,119 722,881,941 382,385,685 516,300,167

Cash and cash equivalents at end of year 853,860,177 543,506,119 353,636,646 382,385,685

Supplemental cash flows information

Cash paid during the year for: -

Interest expense 109,763,427 106,270,888 110,369,454 106,930,038

Corporate income tax 441,640,078 73,178,967 435,396,812 15,777,693


34


BUMRUNGRAD HOSPITAL PUBLIC COMPANY LIMITEDAND ITS SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the years ended 31 December 2006 and 2005

1. GENERAL INFORMATION

Bumrungrad Hospital Public Company Limited (“the Company”) is registered as a public limited company under Thai

laws. The Company operates its business in Thailand and is principally engaged in hospital business, investment in

other companies and rental of properties service. Its registered address is 33 Soi 3 (Nana Nua) Sukhumvit Road,

Klongtoey Nua Sub District, Wattana District, Bangkok.

The meeting of the Company’s Board of Directors No. 2/2548 dated 28 February 2005 has approved an investment of

49% of shares in a new company to be incorporated in Dubai, United Arab Emirates for operating hospital business,

with investment value amounting to Baht 388 million. A subsidiary (Bumrungrad International Ltd.) entered into a

Memorandum of Understanding and Shareholders Agreement relating to the Establishment with the counterparty

on 16 March 2005 and 31 January 2006, respectively. The initial investment of Baht 25.8 million was made on

7 September 2006.

On 14 February 2006, a subsidiary (Bumrungrad International Holdings (Hong Kong) Ltd.) entered into Call Option

Agreement with the counterparties for investment in the People’s Republic of China. The subsidiary paid USD 1

million for call option as deposit and recorded in advance for future subscription account in the consolidated

financial statements.

The meeting of the Company’s Board of Directors No. 3/2549 dated 30 March 2006 has resolved to approve the

following resolutions: -

a) Approve the increase in registered capital of Bumrungrad International Ltd. (“BIL”), a wholly-owned subsidiary

of the Company, from 6,000,000 shares to 19,764,701 shares by issuing new 13,764,701 ordinary shares at a par

value of Baht 100 per share.

The subscription for the capital increase will be made in 2 stages. In the first capital increase, 5,764,701 new

shares will be issued at Baht 153.52 per share to strategic investors, raising fund of Baht 884,996,897.52. The

Company’s shareholding in BIL will reduce to 51% after the first capital increase.

In the second capital increase, all shareholders of BIL will subscribe to 8,000,000 new shares on a pro-rata basis

at Baht 100 per share to raise an additional Baht 800 million. After the second capital increase, the Company’s

shareholding will remain at 51%.

b) Approve a waiver of right to subscribe to a maximum of 5,764,701 new shares of BIL to allow subscription by

Bangkok Bank Public Company Limited (“BBL”), Istithmar PJSC (“Istithmar”) and V-Sciences Investment Pte Ltd

(“V-Sciences”).

35


Revenues as aAssets as a percentage to thepercentage consolidated

Country to the consolidated total revenuesNature of Percentage of of total assets as at for the year ended

Company’s name business shareholding incorporation 31 December 31 December

2006 2005 2006 2005 2006 2005

Percent percent Percent Percent Percent Percent

Subsidiaries held by the Company

Bumrungrad Medical Center Ltd. (BMC) Building lease 100.00 100.00 Thailand 17 20 - -

Bumrungrad International Ltd. (BIL) Holding company 51.00 100.00 Thailand 8 3 1 -

Vitallife Corporation Ltd. Health care center 100.00 100.00 Thailand 1 1 1 1

This transaction is subject to the following conditions: -

- The Company, BBL, Istithmar and V-Sciences shall obtain all necessary regulatory approvals/permissions for the

transaction; and

- The execution of the definitive agreements in relation to the transaction by the Company, BBL, Istithmar and V-

Sciences.

Provided that, the actual amount of new BIL shares to be waived by the Company shall depend on the amount of

shares approved for each investors under condition a) above. Particularly for BBL, the waiver is subject to approval of

the Company’s shareholders’ meeting with affirmative votes of not less than three-fourths of all votes of the

shareholders or proxy present at the meeting and having the right to vote, excluding the shareholders having interest

therein. In case any investor is not allowed to subscribe to the shares, the Company may reduce the amount of shares

to be waived as the Board of Directors may deem appropriate.

On 15 May 2006, the extraordinary meeting of the Company’s shareholders No. 1/2549 passed a resolution approving

the waiver of the right to subscribe new shares of BIL to allow subscription by BBL, which is the connected transaction.

On 2 June 2006, the Company, BIL, BBL, Istithmar and V-Sciences have executed contracts for investment in BIL. On 28

July 2006, BIL registered the first increase of share capital.

2. BASIS OF FINANCIAL STATEMENTS PREPARATION

The financial statements have been prepared in accordance with accounting standards enunciated under the

Accounting Profession Act B.E. 2547. The presentation of financial statements has been made in compliance with the

stipulations of the Notification of the Department of Business Development dated 14 September 2001, issued under

the Accounting Act B.E. 2543.

The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the

accounting policies.

3. BASIS OF CONSOLIDATION

3.1 The consolidated financial statements included the financial statements of Bumrungrad Hospital Public

Company Limited, its subsidiaries and joint venture (applying the proportionate consolidated method)

jointly controlled by the Company or its subsidiary as follows: -

36


Percentage of indirect

shareholding Country of

Company’s name Nature of business 2006 2005 incorporation

Percent Percent

Subsidiaries held by a subsidiary (BIL)

Bumrungrad International Philippines Inc. Hospital Management 100.00 100.00 Philippines

Neptune Stroika Holdings, Inc. Holding company 40.00 40.00 Philippines

Bumrungrad International Holdings (Hong Kong) Limited Holding company 100.00 100.00 Hong Kong

Bumrungrad International Management (Hong Kong) Limited Hospital Management 100.00 100.00 Hong Kong

Joint venture held by a subsidiary (BIL)

Bumrungrad Hospital Dubai LLC Hospital business 49.00 - United

(not yet commenced operation) Arab Emirates

3.2 The financial statements of the subsidiaries incorporated overseas are translated into Thai Baht at the

average closing exchange rate for assets and liabilities, and at the monthly average exchange rate applying

during the year for revenues and expenses. The resultant differences have been shown under the caption

of “Translation adjustment” in shareholders‘ equity.

3.3 Material balances and transactions between the Company and its subsidiaries have been eliminated from

the consolidated financial statements.

3.4 Investments in the subsidiaries as recorded in the Company’s books of account are eliminated against the

equity of the subsidiaries. The resultant differences are amortised over a period of 5 and 10 years commencing

as from the date of acquisition of the investment.

3.5 In September 2006, a subsidiary (Bumrungrad International Ltd.) invested in Bumrungrad Hospital Dubai

LLC (BHD), a newly established company incorporated in United Arab Emirates, in which it holds 49% of

equity.

3.6 In February 2005, a subsidiary (Bumrungrad International Ltd.) invested in Bumrungrad International

Philippines Inc. (BIPI), incorporated in Philippines, in which it holds 100% of equity.

3.7 In February 2005, a subsidiary (Bumrungrad International Ltd.) invested in Neptune Stroika Holdings, Inc.

(Neptune), incorporated in Philippines, in which it holds 40% of equity. Although the subsidiary holds only

a 40% shareholding in Neptune, this companyís financial statements have nevertheless been consolidated

since the subsidiary has controlled over its management.

3.8 In December 2005, a subsidiary (Bumrungrad International Ltd.) invested in Bumrungrad International

Holdings (Hong Kong) Limited (BIH (HK)) and Bumrungrad International Management (Hong Kong) Limited

(BIM (HK)), incorporated in Hong Kong, in which it holds 100% of equity.

4. ADOPTION OF NEW ACCOUNTING STANDARDS

In October 2006, the Federation of Accounting Professions issued Notification No. 26/2006 regarding Accounting

Standard No. 44 “Consolidated Financial Statements and Accounting for Investments in Subsidiaries” (Amendment

No. 1) under which investments in subsidiaries, jointly controlled entities and associates are to be presented in the

separate financial statements under the cost method rather than the equity method. Entities which are not ready to

adopt the cost method in 2006 can continue to use the equity method through the end of 2006 and adopt the cost

method as from 1 January 2007.

37


In this regard, the Company has elected to adopt the change in 2007. Adoption of the change in 2007 will necessitate

the restatement of the Company’s 2006 separate financial statements to be presented for comparative purposes

along with the financial statements for 2007. The effect to net income and net worth in the Company’s separate

financial statements for 2006 is in the process of consideration.

5. SIGNIFICANT ACCOUNTING POLICIES

5.1 Revenue and expense recognition

a) Revenues from hospital operations, mainly consisting of medical fees, hospital room sales, and

medicine sales, are recognised as income when services have been rendered or medicine delivered.

b) Consulting and management fee income are recognised when service have been rendered taking

into account the stated of completion.

c) Rental income and related service income are recognised on an accrual basis in accordance with a

period as stipulated in an agreement.

d) Interest income and expenses are recognised on an accrual basis.

5.2 Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, cash at bank, and all highly liquid investments with

an original maturity of three months or less and not subject to withdrawal restrictions.

5.3 Trade accounts receivable

Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is provided

for the estimated losses that may be incurred in collection of receivables. The allowance is generally based

on collection experiences and analysis of debtor aging.

5.4 Inventories

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

5.5 Investments

Investments in subsidiaries (in the separate financial statements of the Company), jointly controlled entity

and associates are valued at the equity method.

Long-term investments in non-marketable equity securities, which are held as other investments, are valued

at cost net of allowance for loss on diminution in value (if any).

5.6 Property, plant and equipment/Depreciation

Land is stated at cost. Buildings and equipment are stated at cost less accumulated depreciation and

allowance for loss on impairment of assets (if any). Depreciation of buildings and equipment is calculated,

by reference to their costs, on a straight-line basis over the following estimated useful lives: -

Leasehold right - lease period (30 years)

Land improvement - 3 years and 30 years

Buildings and construction - 8 - 30 years

Facility systems - 5 - 20 years

Medical accessory equipment - 5 - 15 years

Hospital equipment - 3 - 15 years

Equipment and furniture - 5 - 15 years

Motor vehicles - 5 - 10 years

Depreciation is included in determining income.

No depreciation is provided on land and construction in progress and under installation.

38


5.7 Intangible assets and amortisation

Intangible assets are stated at cost less accumulated amortisation. Amortisation is calculated by reference

to cost on a straight-line basis over the expected future period, for which the assets are expected to

generate economic benefit, as follows: -

Computer software - 5 years and 10 years

Goodwill on purchase of business - 10 years

Other intangible asset - 10 years

The amortisations is included in determining income.

5.8 Related party transactions

Related parties comprise enterprises and individuals that control, or are controlled by, the Company,

whether directly or indirectly, or which are under common control with the Company.

They also include associated companies and individuals which directly or indirectly own a voting interest in

the Company that gives them significant influence over the Company, key management personnel,

directors and officers with authority in the planning and direction of the Companyís operations.

5.9 Foreign currencies

Foreign currency transactions are translated into Baht at the exchange rates ruling on the transaction

dates. Monetary assets and liabilities denominated in foreign currencies outstanding at the balance sheet

date are translated into Baht at the exchange rates ruling on the balance sheet date.

Gains and losses on exchange are included in determining income.

5.10 Impairment of assets

The Company and its subsidiaries assess at each reporting date whether there is an indication that an asset

of the Company and subsidiary may be impaired. If any such indication exists, the Company and its

subsidiaries make an estimate of the assetís recoverable amount. Where the carrying amount of the asset

exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable

amount. Impairment losses are recognised in the income statement. An asset’s recoverable amount is the

higher of fair value less costs to sell and value in use.

5.11 Employee benefits

Salaries, wages, bonuses and contributions to the social security fund and provident fund are recognised as

expenses when incurred.

5.12 Provisions

Provisions are recognised when the Company and its subsidiaries have a present obligation as a result of a

past event, it is probable that an outflow of resources embodying economic benefits will be required to

settle the obligation, and a reliable estimate can be made of the amount of the obligation.

39


(Unit: Baht)


Age of receivables 2006 2005 2006 2005

Not yet due 269,103,295 209,272,336 232,975,428 186,997,648

Past due

1 - 30 days 98,189,592 67,190,268 97,876,579 65,560,381

31 - 60 days 50,190,426 24,610,224 49,951,413 24,016,496

61 - 90 days 34,091,683 15,250,749 33,766,064 14,244,873

91 - 180 days 40,457,551 22,180,489 37,451,898 22,038,206

181 - 365 days 21,432,824 15,347,076 20,331,900 14,690,543

More than 365 days 39,555,519 28,688,726 20,746,572 28,679,631

Total 553,020,890 382,539,868 493,099,854 356,227,778

Less: Allowance for doubtful accounts (27,824,358) (43,064,847) (24,404,243) (41,576,294)

Trade accounts receivable - net 525,196,532 339,475,021 468,695,611 314,651,484

5.13 Income tax

Income tax of the Company and its subsidiaries in Thailand is provided for in the accounts based on the

taxable profits determined in accordance with tax legislation.

Overseas subsidiaries calculate corporate income tax in accordance with tax rates regulated in tax laws of

those countries.

5.14 Use of accounting estimates

Preparation of financial statements in conformity with generally accepted accounting principles requires

management to make estimates and assumptions in certain circumstances, affecting amounts reported in

these financial statements and related notes. Actual results could differ from these estimates.

6. TRADE ACCOUNTS RECEIVABLE

The outstanding balances of trade accounts receivable as at 31 December 2006 and 2005 are aged, based on due

date, as follows: -

40


7. RELATED PARTY TRANSACTIONS

During the years, the Company and its subsidiaries had significant business transactions with their related parties,

which have been concluded on the commercial terms and bases agreed upon in the ordinary course of businesses

between the Company and those companies. Below is a summary of those transactions.

(Unit: Million Baht)

CONSOLIDATED THE COMPANY ONLY Transfer pricing policy

2006 2005 2006 2005

Transactions with subsidiary companies

(eliminated from the consolidated

financial statements)

Rental income - - 26.9 25.1 As per contracts 7.1)

Interest income 4.6 1.9 2.1 2.4 10% p.a., MLR less 0.5% p.a. to

MLR plus 0.25% p.a. (2005:

10% p.a., MLR less 0.5% p.a.)

Medical service income - - 17.0 10.6 Cost plus margin

Consulting fee income 11.9 - 36.9 9.9 As per contract 7.10), Actual

charge

Rental expense - - 84.0 84.0 As per contract 7.2)

Interest expense - - 116.0 101.5 MLR less 0.45% p.a. to MLR

p.a. (2005: MLR less 0.45% p.a.)

Purchase of equipment - - - 8.5 Book value plus margin

Sales of equipment - - - 0.7 Book value

Transactions with associated companies

System implementation income 5.4 6.8 - - As per contract 7.6)

Software license fee income 7.7 5.7 - - As per contract 7.7)

Management fee income 40.6 23.1 - - As per contract 7.8)

Transactions with joint venture

(eliminated from the consolidated financial statements)

Consulting fee income 2.8 - - - Cost

Transactions with related companies

Medical service income 85.4 57.3 85.4 57.3 Cost plus margin

Rental income 1.3 1.3 1.3 1.3 As per contract 7.3)

Software maintenance expense 74.9 - 74.9 - As per contract 7.9)

Other income 0.9 1.0 0.9 1.0 Cost

Rental expense 31.5 20.1 31.5 20.1 As per contract 7.4)

Donation expense 7.2 11.6 7.2 11.6 -

Consulting fee expense 9.3 0.8 4.0 0.8 As per contracts

Purchase of computer software 139.1 164.2 139.1 64.2 As per contracts 7.5)

Sales of equipment - 7.7 - - As 7.5)

System implementation expense 3.5 4.1 - - As per contract 7.6)

Insurance expense 18.5 15.7 18.5 15.6 As per insurance policies

41


7.1 A subsidiary (Bumrungrad Medical Center Ltd.) has leased a plot of land for its hospital operations. The

lease agreements cover a period of 30 years, commencing from the year 1996. The rental fees are Baht 22

million per annum.

Another subsidiary (Vitallife Corporation Ltd.) has leased building spaces from the Company for use in its

operations. The lease agreement covers a period of 11 years, commencing from the year 2001, and rental

fees are Baht 3 million per annum. On 1 July 2004, the Company and the subsidiary made an addendum to

lease agreement. The subsidiary has to pay rental fee equal to 5% of gross revenue inclusive of value added

tax, but not less than Baht 238,200 per month.

7.2 The Company has leased hospital building from Bumrungrad Medical Center Ltd. for use in its hospital

business. The lease agreement covers a period of 3 years, commencing from August 2004, and the rental

fees are Baht 84 million per annum.

7.3 Global Care Solutions (Thailand) Co., Ltd. has leased building spaces from the Company for use in its

operations. The lease agreement covers a period of 3 years, commencing from the year 2001, and shall be

extended for a further period of 3 years. The rental fees are Baht 1 million per annum, not including rental

fees for room at B.H. Residence.

7.4 The Company has entered into an agreement to lease land and a building (B.H. Tower) from Bangkok Bank

Plc. for a period of 3 years, commencing from August 2000. The rental fee is calculated at the rate of 75% of

net income (total revenues minus total expenses) from the sub-lease, with a minimum rental of Baht 8

million per annum. On 11 November 2005, the bank approved renewal of agreement, commencing on 29

August 2005 to 28 August 2006. The rate of rental and other conditions shall be in accordance with the

initial agreement. At the present, the Company is in the process of agreement renewal.

Rental payable as at 31 December 2006, amounting to Baht 8.0 million (2005: Baht 3.3 million), was shown

in the balance sheet under the caption of “Accounts payable - others”.

7.5 In December 2006, the Company entered into a license agreement with Global Care Solutions (Thailand)

Co., Ltd. to purchase additional computer software, totaling USD 3.25 million (exclusive of value added tax).

The Company paid for such software in December 2006.

In January 2005, the Company entered into a license agreement with Global Care Solutions (Thailand) Co., Ltd.

to purchase additional computer software, totaling USD 1.5 million (exclusive of value added tax). The

Company paid for such software in the first quarter of 2005.

A subsidiary (Bumrungrad International Ltd.) has entered into a license agreement with Global Care

Solutions (Thailand) Co., Ltd. in January 2005 to purchase computer software for use in its international

hospital management service business. The subsidiary paid a minimum license fee of USD 2.5 million in the

second quarter of 2005.

In January 2005, a subsidiary (Bumrungrad Medical Center Ltd.) sold its equipment to Global Care Solutions

(Thailand) Co., Ltd., amounting to Baht 7.7 million (book value plus margin) and fully received the proceeds.

7.6) A subsidiary (Bumrungrad International Ltd.) has entered into the provision of services under system

implementation agreement with Global Care Solutions (Thailand) Co., Ltd. in April 2005 to provide

computer system implementation services to Asian Hospital, Inc. (AHI) for the use in its overseas hospital

42


business. The subsidiary is obliged to pay such fee totaling USD 200,000. During the year 2005 and 2006,

the subsidiary recorded for such fee amounting to USD 103,000 and USD 94,000, respectively.

The subsidiary has also entered into computer system implementation agreement with AHI, totaling USD

350,000. The subsidiary called for such fee during the year 2006 and 2005 amounting to USD 175,000 and

USD 140,000, respectively.

7.7 In February 2005, a subsidiary (Bumrungrad International Ltd.) and Asian Hospital, Inc. (AHI) have entered

into a software site license agreement. AHI paid all license fee of 52,676,342 pesos in 2005. The license fee

will be recognised as income in accordance with the period as stipulated in the agreement. Unrecognised

license fee as at 31 December 2006, amounting to Baht 24.9 million (2005: Baht 32.6 million), was shown in

“Unearned income” in consolidated financial statements.

7.8 In February 2005, a subsidiary (Bumrungrad International Philippines Inc.) (BIPI) and Asian Hospital, Inc.

(AHI) have entered into a management service agreement under which AHI has to pay the subsidiary a

percentage of its total revenue and profit before interest expense, income, tax, and depreciation and

amortisation expenses. The management fee shall be paid in form of cash up to a certain amount, the

excess of which will be paid in form of AHI’s shares, up to maximum 10% of total issued and outstanding

capital stock of AHI (fully diluted basis). The agreement covers a period of 5 years, expiring in the year 2010,

and shall be renewed. Management fee receivable as at 31 December 2006, amounting to Baht 52.8 million

(2005: Baht 22.8 million) was recorded in “Trade accounts receivable” in consolidated financial statements.

7.9 On 4 January 2006, the Company has entered into a Maintenance Services for Software Hospital 2000/DOT

NET with Global Care Solutions (Thailand) Co., Ltd. The Company is obliged to pay such fee totaling USD

1,750,000 (exclusive of value added tax). The agreement expired on 31 December 2006.

7.10 On 2 June 2006, the Company has entered into a Consulting Support Agreement with a subsidiary

(Bumrungrad International Ltd.). The subsidiary is obliged to pay such fee totaling Baht 55 million per

annum starting from August 2006. The agreement will expire as per the agreementís conditions. In

addition, the Company charged Baht 14 million for consulting services provided from January to July 2006.

43




2006 2005 2006 2005

Amounts due from related parties

Former subsidiary

The Bumrungrad Hospital Rayong Co., Ltd. - - - 39,431,842

Less: Allowance for doubtful accounts - - - (39,431,842)

- - - -

Subsidiaries

Bumrungrad Medical Center Ltd. - - - 4,921,080

Bumrungrad International Ltd. - - 15,932,419 5,878

Vitallife Corporation Ltd. - - 1,041,658 647,323

Associated companies

Asian Hospital, Inc. 514,127 1,094,973 - -

L.S. Cleaning Co., Ltd. - 105 - 105

Joint venture

Bumrungrad Hospital Dubai LLC 5,737,563 - - -

Related companies

Global Care Solutions (Thailand) Co., Ltd. 67,268 138,547 67,268 138,547

The Bumrungrad Hospital Foundation 201,085 150,139 201,085 150,139

Total 6,520,043 1,383,764 17,242,430 5,863,072

Short-term loans and interest receivable - a related party

Subsidiary

Vitallife Corporation Ltd. - - - 20,097,671

Long-term loans and interest receivable - a related party

Subsidiary

Vitallife Corporation Ltd. - - 18,121,384 22,603,851

Amounts due to a related party

Related company

The Bumrungrad Hospital Foundation 1,800,000 - 1,800,000 -

Short-term loans and interest payable - a related party

Subsidiary

Bumrungrad Medical Center Ltd. - - 1,465,263,415 1,709,236,428

The balances of the accounts as at 31 December 2006 and 2005 between the Company and those related

companies are as follows: -

44


(Unit: Baht)

During the year

Balance as at Balance as at

31 December 31 December2005 Increase Decrease 2006

Short-term loans and interest receivable - a related party

Subsidiary

Vitallife Corporation Ltd.

Principal 20,000,000 - 20,000,000 -

Interest receivable 97,671 549,151 646,822 -

20,097,671 549,151 20,646,822 -

Long-term loans and interest receivable - a related party

Subsidiary

Vitallife Corporation Ltd.

Principal 22,494,000 - 4,494,000 18,000,000

Interest receivable 109,851 1,512,891 1,501,358 121,384

22,603,851 1,512,891 5,995,358 18,121,384

Short-term loans and interest payable - a related party

Subsidiary

Bumrungrad Medical Center Ltd.

Principal 1,709,236,428 40,000,000 294,000,000 1,455,236,428

Interest payable - 116,040,757 106,013,770 10,026,987

1,709,236,428 156,040,757 400,013,770 1,465,263,415

Directors and management’s remuneration

In 2006 the Company and its subsidiaries paid salaries, bonuses, meeting allowances and gratuities to their

directors and management totaling Baht 126.3 million (The Company only: Baht 118.2 million) (2005: Baht 93.8

million, The Company only: Baht 93.8 million).

The short-term and long-term loans to Vitallife Corporation Ltd. carry interest at the rates of MLR less 0.5% per

annum, MLR per annum, and MLR plus 0.25% per annum (2005: MLR less 0.5% per annum).

Bumrungrad International Ltd. granted short-term loan of USD 1 million to Bumrungrad International Holdings

(Hong Kong) Limited. The loan carries interest at the rate of MLR less 0.45% per annum.

Bumrungrad International Ltd. granted long-term loan to Neptune Stroika Holdings, Inc. of 30 million pesos,

carrying interest at the rate of 10% per annum, for a period of 7 years (within the year 2012). The loan has been

secured by a pledge of shares in Neptune Stroika Holdings, Inc., which are held by Mr. Augusto G. Gan.

The short-term loans from Bumrungrad Medical Center Ltd. carry interest at the rates of MLR less 0.45% per

annum, and MLR per annum (2005: MLR less 0.45% per annum).

During 2006, movements of loans to and loans from related parties were as follows.

45


8. INVENTORIES

(Unit: Baht)


2006 2005 2006 2005

Medicine 103,969,481 90,825,694 98,667,225 88,111,707

Medical supplies 28,613,789 25,784,871 28,613,789 25,784,871

Other supplies 33,830,030 33,285,331 33,830,030 33,285,331

Total inventories 166,413,300 149,895,896 161,111,044 147,181,909

9. PLEDGED FIXED DEPOSITS AT FINANCIAL INSTITUTIONS

As at 31 December 2006, deposits at financial institutions of Baht 9.6 million (2005: Baht 9.9 million) have been

pledged with banks to secure bank guarantees issued by banks on behalf of the Company and a subsidiary

(Bumrungrad Medical Center Ltd.).

As at 31 December 2005, fixed deposit of Baht 220 million had been pledged to secure long-term loan of that

subsidiary and the pledge of fixed deposits had been cancelled in 2006 as described in Note 14.

10. INVESTMENTS ACCOUNTED FOR UNDER EQUITY METHOD/PROVISION FOR LOSS INEXCESS OF COST OF INVESTMENT IN SUBSIDIARY

These represent investments in ordinary shares in the following subsidiary and associated companies.

CONSOLIDATED(Unit: Baht)

Percentage of InvestmentPaid-up capital shareholding Cost method Equity method Dividend

Companies 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005% %

Associate held by the CompanyL.S. Cleaning Co., Ltd. - 1,250,000 - 25.00 - 312,500 - 209,354 - -

Associate held by subsidiariesAsian Hospital, Inc. 1,422,424,944 1,409,179,552 35.10 35.19 385,759,564 385,759,564 464,948,666 481,206,016 - -

Peso Peso

Joint venture held by a subsidiaryBumrungrad Hospital Dubai LLC 5,000,000 - 49.00 - 25,051,549 - - - - -

AED

Total investments 410,811,113 386,072,064 464,948,666 481,415,370

THE COMPANY ONLY(Unit: Baht)

Percentage of InvestmentPaid-up capital shareholding Cost method Equity method Dividend

Companies 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005% %

SubsidiariesBumrungrad Medical Center Ltd. 958,953,608 958,953,608 100.00 100.00 1,691,902,972 1,691,902,972 1,146,352,548 1,092,852,182 - -Bumrungrad International Ltd. 744,117,525 600,000,000 51.00 100.00 599,999,400 599,999,400 712,688,023 591,856,574 - -Vitallife Corporation Ltd. 31,500,000 31,500,000 100.00 100.00 25,610,000 25,610,000 12,290,613 (8,561,836) - -Total investments in subsidiaries 2,317,512,372 2,317,512,372 1,871,331,184 1,676,146,920

Associate held by the CompanyL.S. Cleaning Co., Ltd. - 1,250,000 - 25.00 - 312,500 - 209,354 - -

Total investment in associated company - 312,500 - 209,354Total investments 2,317,512,372 2,317,824,872 1,871,331,184 1,676,356,274

46


(Unit: Baht)

THE COMPANY ONLY

2006 2005

Net investments

Investments accounted for under equity method 1,678,669,626 1,492,256,552

Excess of investment over book value of a subsidiary 192,661,558 192,661,558

Provision for loss in excess of cost of investment

in subsidiary - (8,561,836)

Total 1,871,331,184 1,676,356,274

On 28 July 2006, Bumrungrad International Ltd. registered the first increase of registered share capital by issuing

5,764,701 ordinary shares with a par value of Baht 100 each. Therefore, the registered share capital of the subsidiary is

increased from Baht 600,000,000 to Baht 1,176,470,100. The new shares were issued at Baht 153.52 per share, with

initial paid up in cash of Baht 78.52 per share. On 15 May 2006, the extraordinary meeting of the Company’s

shareholders No. 1/2549 passed a resolution approving the waiver of the right to subscribe new shares of BIL to allow

subscription by BBL, Istithmar and V-Sciences. As a result, the Company’s shareholding in BIL reduced to 51%.

On 24 February 2005, a subsidiary (Bumrungrad International Ltd.) invested Baht 131,949,605.69 (Peso 185 million) in

Neptune Stroika Holdings, Inc. (Neptune) to acquire 66,667 preferred shares at a par value of Peso 1,000 each (40%

ownership) and also invested Baht 59,155,653.07 in Bumrungrad International Philippines Inc. (BIPI) to acquire

7,000,000 shares at a par value of Peso 1 each (a 100% holding) and further inject Capital in the form of loans to BIPI

amounted to Baht 179,386,827.26 (Peso 253,856,573.29).

On 31 January 2006, BIPI registered the increase of registered share capital by issuing new 19,000,000 ordinary shares

at a par value of Peso 1 each. Therefore, the registered share capital of the subsidiary is increased from Peso 7,000,000

to Peso 26,000,000. Bumrungrad International Ltd. purchased all increased shares therefore the subsidiary’s

shareholding in BIPI is still at 100%. Baht 179,386,827.26 loans to BIPI were used for such share subscription.

Neptune and BIPI acquired investments in the ordinary shares of Asian Hospital, Inc. (AHI) for Peso 215 million

(190,265,487 shares) and Peso 283 million (423,238,004 shares), respectively, representing respective shareholdings

of 13.41% and 29.83%. AHI is incorporated in Philippines and operates the hospital business.

On 7 September 2006, a subsidiary (Bumrungrad International Ltd.) invested AED 2,450,000 or equivalent to Baht

25,774,000 in Bumrungrad Hospital Dubai LLC (BHD) to acquire 2,450 ordinary shares at a par value of AED 1,000 each

(49% ownership). BHD is a newly established company incorporated in United Arab Emirates. Its principal activity is

hospital business. At the present, BHD is in a progress of construction of 250-bed-hospital and shall commence an

operation in 2008.

L.S. Cleaning Co., Ltd. registered its dissolution with the Ministry of Commerce on 8 December 2005 and registered the

liquidation on 22 May 2006.

The share of the profit/loss of L.S. Cleaning Co., Ltd. for the year 2005 had been calculated from the management

accounts of that company.

The share of the profit/loss of AHI for the year 2006 and 2005 has been calculated from the audited financial

statements of that company.

47


11. OTHER LONG-TERM INVESTMENTS

(Unit: Baht)

PERCENTAGE OF

COMPANIES SHAREHOLDING CONSOLIDATED THE COMPANY ONLY

2006 2005 2006 2005 2006 2005

% %

Chantaburi Country Club Co., Ltd. 0.5 0.5 4,500,000 4,500,000 4,500,000 4,500,000

Global Care Solutions S.A. 14.0 14.0 347,213 347,213 347,213 347,213

Total 4,847,213 4,847,213 4,847,213 4,847,213

Less: Allowance for impairment loss (2,800,000) (2,800,000) (2,800,000) (2,800,000)

Other long-term investments - net 2,047,213 2,047,213 2,047,213 2,047,213

48


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reci

atio

n fo

r th

e ye

ar-

1,10

3,02

072

,266

,111

7,25

0,36

112

7,53

4,06

548

,077

,988

16,5

21,2

454,

655,

873

-27

7,40

8,66

3

Dep

reci

atio

n o

n d

isp

osa

ls -

--

-(4

,044

,308

)(1

,337

,004

)(1

88,3

97)

(3,4

56,0

38)

-(9

,025

,747

)

31 D

ecem

ber

200

6 -

12,6

72,8

5262

9,51

2,66

056

,067

,006

724,

818,

121

381,

574,

542

183,

498,

562

32,1

45,6

94-

2,02

0,28

9,43

7

Allo

wan

ce f

or

imp

airm

ent

loss

31 D

ecem

ber

200

5 -

--

-20

,430

,248

--

--

20,

430,

248

Dec

reas

e d

uri

ng

th

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ar -

--

-(6

,788

,266

)-

--

-(6

,788

,266

)

31 D

ecem

ber

200

6-

--

-13

,641

,982

--

--

13,6

41,9

82

Net

bo

ok

valu

e

31 D

ecem

ber

200

529

0,86

1,48

223

,311

,077

1,40

1,01

6,27

775

,232

,799

572,

986,

030

191,

402,

522

130,

873,

745

19,4

94,2

2856

4,47

6,71

53,

269,

654,

875

31 D

ecem

ber

200

629

0,86

1,48

222

,208

,057

1,37

8,05

6,01

878

,645

,071

814

,693

,153

199,

351,

523

128,

034,

315

13,2

13,0

6682

6,88

8,01

83,

751,

950,

703

Dep

reci

atio

n in

clu

ded

in t

he

inco

me

stat

emen

t fo

r th

e ye

ar

2005

233,

373,

296

2006

277,

408,

663

49


(Un

it: B

aht)

THE

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ht

Med

ical

Equ

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and

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alan

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Lan

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rnit

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sin

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Tota

l

Co

st

31 D

ecem

ber

200

529

0,86

1,48

215

,563

,340

353,

036,

037

99,2

38,5

9275

3,76

4,18

329

9,88

0,51

017

8,35

4,66

628

,004

,330

564,

476,

714

2,58

3,17

9,85

4

Purc

has

e-

-43

,545

,988

10,6

62,6

3331

4,67

8,90

957

,136

,932

13,8

14,0

542,

680,

000

315,

321,

696

757,

840,

212

Dis

po

sals

--

--

(12,

910,

295)

(2,7

29,1

12)

(826

,740

)(7

,761

,327

)-

(24,

227,

474)

Tran

sfer

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9,86

4-

56,6

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495,

469

-(6

2,89

5,33

3) -

31 D

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200

629

0,86

1,48

215

,563

,340

402,

341,

889

109,

901,

225

1,11

2,17

2,79

735

4,28

8,33

019

1,83

7,44

922

,923

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816,

903,

077

3,31

6,79

2,59

2

Acc

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dep

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atio

n

31 D

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ber

200

5 -

6,85

3,24

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17,1

14,3

9013

4,02

1,93

211

1,18

1,67

772

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,757

8,51

0,11

1-

409,

394,

543

Dep

reci

atio

n fo

r th

e ye

ar-

459,

101

17,5

03,1

667,

111,

646

129,

668,

413

46,9

04,1

9215

,965

,214

4,65

5,87

3-

222,

267,

605

Dep

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atio

n o

n d

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ls-

--

-(4

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31 D

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6 -

7,31

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177

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,602

24,2

26,0

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9,64

6,10

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6,74

8,86

587

,812

,574

9,70

9,94

6-

622,

636,

467

Allo

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31 D

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200

5 -

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--

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48

Dec

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31 D

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200

6-

--

-13

,641

,982

--

--

13,6

41,9

82

Net

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31 D

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200

529

0,86

1,48

28,

710,

100

293,

358,

601

82,1

24,2

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9,31

2,00

318

8,69

8,83

310

6,31

8,90

919

,494

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564

,476

,714

2,15

3,35

5,06

3

31 D

ecem

ber

200

629

0,86

1,48

28,

250,

999

325,

161,

287

85,6

75,1

8983

8,88

4,71

219

7,53

9,46

510

4,02

4,87

513

,213

,057

816,

903,

077

2,68

0,51

4,14

3

Dep

reci

atio

n in

clu

ded

in t

he

inco

me

stat

emen

t fo

r th

e ye

ar

2005

177,

768,

329

2006

222

,267

,605

50


The Company has mortgaged all of the land with a book value of Baht 290.9 million (Baht 719 million appraisal fair

value as of 14 February 2006) with a commercial bank, acting as bondholders’ trustee, as collateral for the convertible

bonds treated as equity securities as described in Note 15.

The Company and Bumrungrad Medical Center Ltd. have mortgaged their buildings and pledged medical

instruments and hospital equipment, with a total net book value as at 31 December 2006 of Baht 1,236 million (2005:

Baht 1,285 million) (the Company only: Baht 170 million 2005: Baht 165 million), as collaterals for long-term loan credit

facilities granted by a local commercial bank as described in Note 14.

As at 31 December 2006, certain equipment items have been fully depreciated but are still in use. The original cost of

those assets amounted to Baht 105 million (2005: Baht 112 million) (the Company only: Baht 97 million 2005: Baht 110

million).

13. INTANGIBLE ASSETS

(Unit: Baht)


Other Goodwill on

Computer intangible Computer purchase of

software asset Total software business Total

Cost

31 December 2005 683,625,752 1,687,000 685,312,752 583,625,752 192,927,561 776,553,313

Additions 172,559,539 - 172,559,539 172,559,539 - 172,559,539

31 December 2006 856,185,291 1,687,000 857,872,291 756,185,291 192,927,561 949,112,852

Accumulated amortisation

31 December 2005 61,065,496 28,195 61,093,691 57,195,496 27,331,404 84,526,900

Amortisation during the year 64,024,611 660,662 64,685,273 58,864,611 19,292,756 78,157,367

31 December 2006 125,090,107 688,857 125,778,964 116,060,107 46,624,160 162,684,267

Net book value

31 December 2005 622,560,256 1,658,805 624,219,061 526,430,256 165,596,157 692,026,413

31 December 2006 731,095,184 998,143 732,093,327 640,125,184 146,303,401 786,428,585

Amortisation included in the income

statement for the year

2005 58,414,722 28,195 58,442,917 54,544,722 19,292,756 73,837,478

2006 64,024,611 660,662 64,685,273 58,864,611 19,292,756 78,157,367

51


14. LONG-TERM LOAN

(Unit: Baht)


2006 2005 2006 2005

Bumrungrad Medical Center Ltd.

Loan from a local commercial bank 1,750,971,293 1,779,493,095 300,000,000 -

Less: Current portion (328,521,802) (328,521,802) - -

Long-term portion 1,422,449,491 1,450,971,293 300,000,000 -

Movements in long-term loan account during the year are summarised below.

(Unit: Baht)


Balance as at 1 January 2006 1,779,493,095 -

Add : Additional loan 300,000,000 300,000,000

Less: Repayment (328,521,802) -

Balance as at 31 December 2006 1,750,971,293 300,000,000

On 16 September 2002, the subsidiary entered into a loan agreement in the Baht currency with a local commercial

bank to obtain a Baht 2,400,000,000 credit facility. Such loan carries interest at 5.5% per annum for the first two years

and then at MLR less 0.5% per annum. Interest is payable on a monthly basis and principal is repayable in 24 quarterly

installments, commencing 30 December 2004. To guarantee this loan, the subsidiary has mortgaged its building and

pledged medical instruments, hospital equipment and fixed deposits as described in Notes 12 and 9. In July 2004, the

Company has entered into the Amendment Agreement and the Amended and Restated Facility Agreement with that

bank in order to assume joint responsibility for these liabilities.

On 25 May 2006, the Company and the subsidiary entered into Second Amendment Dated 25 May 2006 to Baht

2,400,000,000 Facility Agreement Dated 12 September 2002 (As Amended and Restated) with the bank creditor to

change the interest rate of Baht 2,250,000,000 credit facility from MLR less 0.5% per annum to average MLR less 1.25%

per annum and cancel the pledged of fixed deposits.

In addition, the Company and the subsidiary obtain additional Baht 1,370,000,000 credit facilities, divided into

4 tranches as follows: -

a) Tranche B2 of Baht 650,000,000 carries interest at average MLR less 1.25% per annum. Principal is repayable in

32 quarterly installments, commencing 31 March 2008.

b) Tranche C of Baht 400,000,000 carries interest at average MLR less 1.25% per annum. Principal is repayable in

32 quarterly installments, commencing 31 March 2008.

c) Tranche D of Baht 300,000,000 for 8-year working capital carries interest at average MLR less 1.25% per annum.

d) Tranche E of Baht 20,000,000 for 8-year working capital carries interest at MOR per annum.

Original mortgaged building and pledged medical instruments and hospital equipment are still used as collaterals

for above loan credit facilities except for Tranche C; B.H. Residence building will be mortgaged when the Company

buys it back from Bangkok Bank Plc.

52


The loan agreement contains normal covenants pertaining to matters such as the maintenance of certain financial

ratios, and restriction on financial indebtedness and the payment of dividends, among others.

As at 31 December 2006, outstanding long-term credit facilities of the Company and its subsidiaries which have yet to

be drawn down total Baht 750 million.

15. CONVERTIBLE BONDS

Convertible bonds as at 31 December 2006 and 2005 are as follows: -

a) Partly secured convertible bonds in an amount of Baht 300 million, with a maturity of 12 years, and a coupon

rate of 2.5% for years 1 - 4, 5% for years 5 - 8, and 10% for years 9-12, payable semi-annually. The current

conversion price is Baht 4.55 per one ordinary share. The bondholders have the option to convert the bonds

into ordinary shares throughout the life of the bonds. The bonds are secured by the mortgage of the

Company’s land.

b) Partly secured convertible bonds in an amount of Baht 250 million (after conversion by the bondholder of Baht

750 million in the year 2003); with a maturity of 12 years, and a coupon rate of 1% per annum, payable

semi-annually. The current conversion price is Baht 3.50 per one ordinary share. The bondholders have the

option to convert the bonds into ordinary shares throughout the life of the bonds. The bonds are secured by

the mortgage of the Companyís land.

On 24 November 2000, an extraordinary meeting of the Company’s shareholders passed approval of the amendment

to the terms and conditions governing the rights and obligations of the issuer and the bondholders, which gives the

Company the option to either redeem the convertible bonds or to convert the bonds into ordinary shares on the

maturity date.

According to the Thai Accounting Standard No. 48 “Financial Instruments: Disclosure and Presentation”, because the

Company has the option to either redeem the convertible bonds or to convert them into ordinary shares on the

maturity date, and delivery of equity securities will not be changed by fair value of such equity securities (since the

Company determined a certain conversion price), so the convertible bonds are not covered by the definition of

financial liabilities and are to be treated as equity securities. In addition, the Company’s management expresses their

intention to convert these bonds into ordinary shares on the maturity date. Therefore, the whole amounts of the

convertible bonds are presented as part of shareholders’ equity and future interest on the bonds will be recorded as

a deduction from shareholders’ equity.

The Company has reserved 178,571,433 ordinary shares to accommodate the above convertible bonds.

Interest expense for the year 2006 of the convertible bonds amounted to Baht 17.5 million (2005: Baht 17.5 million),

being recorded as a reduction to “retained earnings”.

16. SHARE CAPITAL

Preference shareholders have the same right as the ordinary shareholders except that they are entitled to receive an

annual dividend at 15% of preference shares capital prior to the dividend paid to the ordinary shareholders.

Preference shares can be converted into ordinary shares.

53


In the first quarter of 2006, 134,000 preference shares (2005: 332,000 shares) were converted into ordinary shares at

ratio of one preference share to one ordinary share. The Company registered this conversion with the Ministry of

Commerce on 14 March 2006.

17. STATUTORY RESERVE

Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside to a

statutory reserve at least 5% of its net income after deducting accumulated deficit brought forward (if any), until the

reserve reaches 10% of the registered capital. The statutory reserve is not available for dividend distribution.

During the years 2006 and 2005, the statutory reserve reaches 10% of the Company’s registered capital.

18. CORPORATE INCOME TAX

The Company’s corporate income tax for the years 2006 and 2005 has been calculated at the rate of 25% of net

income not exceed Baht 300 million and 30% for the rest. The tax rate applied are in compliance with the provision of

Royal Decree 387 (B.E. 2544) dated 28 August 2001, issued under the Revenue Code, regarding the reduction of

income tax rates.

Corporate income tax for the years 2006 and 2005 of a subsidiary (Bumrungrad Medical Center Ltd.) has been

calculated at the rate of 30% of net taxable income.

19. NUMBER OF EMPLOYEES AND RELATED COSTS


2006 2005 2006 2005

Number of employees at end of year (persons) 3,130 2,841 3,089 2,809

Employee costs for the year (Thousand Baht) 1,090,770 928,897 1,061,837 916,257

20. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net income for the year by the weighted average number of

ordinary shares in issue during the year.

Diluted earnings per share is calculated by dividing the net income for the year by the sum of the weighted average

number of ordinary shares in issue during the year and the weighted average number of ordinary shares which would

need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation assumes that

the conversion took place either at the beginning of the year or on the date the potential ordinary shares were issued.

54


Reconciliation between basic earnings per share and diluted earnings per share is presented below.

For the years ended 31 December

Weighted average

Net income number of ordinary shares Earnings per share

2006 2005 2006 2005 2006 2005

Baht Baht Shares Shares Baht Baht

Basic earnings per share

Net income 1,095,702,100 1,052,739,279 727,798,572 727,630,430 1.51 1.45

Effect of dilutive potential

ordinary shares

Preference shares - - 2,253,650 2,421,792

Convertible bonds - - 137,362,637 137,362,637

Diluted earnings per share

Net income of ordinary shareholders

assuming the conversion of

dilutive potential ordinary shares 1,095,702,100 1,052,739,279 867,414,859 867,414,859 1.26 1.21

21. SEGMENT INFORMATION

The Company’s and its subsidiaries’ business operations involve 2 principal segments: (1) hospital and health care

center and (2) hospital management business. These operations are mainly carried on in Thailand. Below is the

consolidated financial information for the years ended 31 December 2006 and 2005 of the Company and its

subsidiaries by segment.


Hospital and Hospital Elimination of inter-

health care center management business segment revenues Consolidation

2006 2005 2006 2005 2006 2005 2006 2005

Revenues 7,668 6,657 57 7 (17) (11) 7,708 6,653

Segment income 2,875 2,501 57 7 - - 2,932 2,508

Unallocated income and expenses:

Other income 180 150

Depreciation and amortisation (342) (292)

Administrative expenses (1,159) (997)

Share of income of associated

companies and joint venture 8 3

Interest expense (110) (107)

Corporate income tax (432) (218)

Minority interest 19 6

Net income 1,096 1,053

55



Hospital and Hospital Elimination of inter-

health care center management business segment revenues Consolidation

2006 2005 2006 2005 2006 2005 2006 2005

Assets

Property, plant and

equipment - net 3,784 3,304 - 1 (32) (35) 3,752 3,270

Intangible assets 786 692 114 121 (168) (189) 732 624

Other assets 4,303 4,452 1,018 624 (3,182) (3,242) 2,139 1,834

Total assets 8,873 8,448 1,132 746 (3,382) (3,466) 6,623 5,728

Transfer prices between business segments are set out as described in Note 7.

22. PROVIDENT FUND

The Company, its subsidiaries and its employees have jointly established a provident fund in accordance with the

Provident Fund Act B.E. 2530. Employees contributed to the fund monthly at the rate of 5% of their basic salaries and

the Company or subsidiaries contributed 5% - 7% of basic salary. The fund, which is managed by Finansa Asset

Management Limited, will be paid to employees upon termination in accordance with the fund rules. During the year

2006, the Company and subsidiaries contributed Baht 24.7 million (2005: Baht 21.9 million) to the fund.

23. DIVIDENDS PAID(Unit: Baht)

Total Dividend

Dividends Approved by dividends per share

Final dividends for 2005 Annual General Meeting of the shareholders

on 26 April 2006 328,523,500 0.45

Interim dividends for 2006 Board of Directors’ meeting on 16 August 2006 219,015,667 0.30

Total for 2006 547,539,167 0.75

Final dividends for 2004 Annual General Meeting of the shareholders

on 27 April 2005 292,013,889 0.40

Interim dividends for 2005 Board of Directors’ meeting on 17 August 2005 219,015,666 0.30

Total for 2005 511,029,555 0.70

24. COMMITMENTS AND CONTINGENT LIABILITIES

24.1 Capital commitment

As at 31 December 2006, the Company has capital commitments to pay a total of Baht 98.4 million

(2005: Baht 79.5 million) in relation to the construction of a new building and Baht 120.2 million (2005:

Baht 150.1 million) in respect of purchase of medical instrument and hospital equipment.

56


24.2 Long-term service commitments

As at 31 December 2006, the Company and its subsidiaries have the following outstanding long-term

service commitments: -


Details of commitments Paid in Amount

The Company

1) To pay fee to a bank which is bondholders’ representative 2007 0.3

2008 - 2012 1.2

2) Land rental for construction of nursing dormitory 2007 30.9

(shall be extended for a further period of 20 years) 2008 - 2035 60.8

3) Lease of medical instrument 2007 20.0

2008 - 2009 39.9

4) Lease of land and building for operating service apartment 2007 24.8

(shall be extended for a further period of 2 years) 2008 6.4

5) Lease of building for nursing dormitory and related services 2007 9.1

(shall be renewed automatically) 2008 4.0

6) Maintenance service fee for medical instrument 2007 33.6

2008 11.2

7) Rental and maintenance service fee for cars 2007 8.8

2008 - 2011 26.1

Subsidiaries

Bumrungrad International Inc.

1) To pay consulting fee (Unit: USD) 2007 30,000

2008 - 2012 82,500

24.3 Bank guarantees

As at 31 December 2006, there were outstanding bank guarantees of Baht 3.4 million (2005: Baht 1.9

million) issued by a bank on behalf of the Company, and of Baht 8.4 million (2005: Baht 8.4 million)

issued on behalf of a subsidiary. All were required in the normal course of business.

24.4 Contingent liabilities

On 4 October 2005, Asian Hospital, Inc. (AHI), an associated company, received a preliminary deficiency

tax findings for the year ended 31 December 2002 from the Revenue Department of Philippines. AHI’s

management strongly believes that the finding was made without grounds and vigorously challenged

it. AHI has therefore not set aside allowance for the assessment in its accounts.

25. FINANCIAL INSTRUMENTS

25.1 Financial risk management

The Company’s and subsidiaries’ financial instruments, as defined under Thai Accounting Standard No.

48 “Financial Instruments: Disclosure and Presentations”, principally comprise cash and cash equivalents,

trade accounts receivable, loans, investments, and short-term and long-term loans. The financial risks

associated with these financial instruments and how they are managed is described below.

57


Credit risk

The Company and subsidiaries are exposed to credit risk primarily with respect to trade accounts

receivable, loans, and other receivables. The Company and subsidiaries manage the risk by adopting

appropriate credit control policies and procedures and therefore do not expect to incur material

financial losses. In addition, the Company and subsidiaries do not have high concentration of credit risk

since they have a large customer base. The maximum exposure to credit risk is limited to the carrying

amounts of receivables, loans and other receivables as stated in the balance sheet.

Interest rate risk

The Company’s and its subsidiaries’ exposures to interest rate risk relate primarily to their cash at banks,

bank overdrafts, and long-term borrowings. However, since most of the Company’s and its subsidiaries’

financial assets and liabilities bear floating interest rates or fixed interest rates which are close to the

current market rate, the interest rate risk is expected to be minimal.

Significant financial assets and liabilities as at 31 December 2006 classified by type of interest rates are

summarised in the table below, with those financial assets and liabilities that carry fixed interest rates

further classified based on the maturity date, or the repricing date if this occurs before the maturity

date.

CONSOLIDATED

Fixed interest rates Floating Non-

Within Over interest interest

1 year 1-5 years 5 years rate bearing Total Interest rate

(Million Baht) (% p.a.)

Financial assets

Cash and cash equivalents 419 - - 402 33 854 0.25 - 4.62

Current investments - fixed deposits

at financial institutions 10 - - - - 10 5.125

Trade accounts receivable - net - - - - 525 525 -

Amounts due from related parties - - - - 7 7 -


institutions 10 - - - - 10 3.25 - 3.50

Other long-term investments - net - - - - 2 2 -

439 - - 402 567 1,408

Financial liabilities

Trade accounts payable - - - - 552 552 -

Amount due to a related party - - - - 2 2 -

Long-term loan - - - 1,751 - 1,751 MLR less 1.25

- - - 1,751 554 2,305

58


THE COMPANY ONLY

Fixed interest rates Floating Non-

Within Over interest interest

1 year 1-5 years 5 years rate bearing Total Interest rate

(Million Baht) (% p.a.)

Financial assets

Cash and cash equivalents - - - 333 21 354 0.25 - 0.50

Current investments - fixed deposits

at financial institutions 10 - - - - 10 5.125

Trade accounts receivable - net - - - - 469 469 -

Amounts due from related parties - - - - 17 17 -


institutions 1 - - - - 1 3.25 - 3.50

Other long-term investments - net - - - - 2 2 -

Long-term loans and interest

receivable - a related party - - - 18 - 18 MLR plus 0.25

11 - - 351 509 871

Financial liabilities

Trade accounts payable - - - - 547 547 -

Amount due to a related party - - - - 2 2 -

Short-term loans and interest

payable - a related part - - - 1,455 10 1,465 MLR

Long-term loan - - - 300 - 300 MLR less 1.25

- - - 1,755 559 2,314

Foreign currency risk

The Company’s and its subsidiaries’ exposures to foreign currency risk arise mainly from servicing

transactions and payments for service fee that are denominated in foreign currencies.

The balances of financial assets and liabilities denominated in foreign currencies as at 31 December

2006 are summarised below.

Financial Financial Average exchange rate

Foreign currency assets liabilities as at 31 December 2006

(Million) (Million) (Baht per 1 foreign currency unit)

US dollar - 0.2 36.2308

59


25.2 Fair values of financial instruments

Since the majority of the Company’s and its subsidiaries’ financial instruments are short-term in nature

and loans and borrowings bear floating interest rates, their fair value is not expected to be materially

different from the amounts presented in the balance sheets.

A fair value is the amount for which an asset can be exchanged or a liability settled between

knowledgeable, willing parties in an arm’s length transaction. The fair value is determined by

reference to the market price of the financial instrument or by using an appropriate valuation technique,

depending on the nature of the instrument.

26. SUBSEQUENT EVENTS

26.1 On 29 January 2007, the Company’s Board of Directors approved a waiver of future rights to subscribe

to a maximum of 3,714,283 new shares at Baht 153.52 per share, totaling Baht 570,216,726.16, of

Bumrungrad International Ltd. (“BIL”) and to allocate such rights to Asia Financial Holdings Limited

(“AFH”), or its wholly-owned subsidiary. As a result, BH’s shareholding in BIL will reduce to 31.5% of the

diluted share capital.

26.2 On 27 February 2007, the Company’s Board of Directors approved the proposal to the annual general

meeting of the Company’s shareholders for consideration of the payment of Baht 0.45 per share from

the Company’s income for the year ended 31 December 2006. This constitutes a total dividend of Baht

329 million. In addition, the meeting also resolved that the interim dividend of Baht 0.30 per share,

totaling Baht 219 million, which had been distributed on 15 September 2006 be reported to the annual

general meeting of the Company’s shareholders. The total dividend payment for the year 2006 is Baht

0.75 per share, totaling Baht 548 million.

27. RECLASSIFICATION

Certain amounts in the financial statements for the year ended 31 December 2005 have been reclassified to conform

to the current year’s classification, with no effect on previously reported net income or shareholders’ equity.

28. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were authorised for issue by the Company’s Board of Directors on 27 February 2007.

Other Important Information

62


63


Company Type of Business Issued Shareholdingand paid up (%)

ordinary shares

Other Important Information

1. General Information

1.1 Company Information

Name : Bumrungrad Hospital Public Company Limited (“the Company”)

Type of Business : Private hospital

Head Office Address : 33 Sukhumvit Soi 3 (Nana Nua) Sukhumvit Road

Klong Toey Nua, Wattana, Bangkok 10110

Registration No. : Public Company Limited 173

Home page : http://www.bumrungrad.com

E-mail address : [email protected]

Telephone : 0 2667 1000

Fax : 0 2667 2525

Registered Capital : Bt 922,702,685

Divided into

Ordinary shares of 920,475,835 shares, par value at Bt 1 per share

Preferred shares of 2,226,850 shares, par value at Bt 1 per share

Issued and Paid up Capital: Bt 730,052,222 Divided into

Ordinary shares of 727,825,372 shares, par value at Bt 1 per share

Preferred shares of 2,226,850 shares, par value at Bt 1 per share

1.2 Entities in which the Company has more than 10% shareholding

Bumrungrad Medical Center Limited Property Lease 119,869,201 100%

33/3 Sukhumvit 3 (Nana Nua) Sukhumvit Road, Klong Toey Nua, shares

Wattana, Bangkok 10110

Phone 0 2667 1000, Fax 0 2667 2525

Vitallife Corporation Limited Wellness Center 315,000 100%

210 Sukhumvit Soi 1 Sukhumvit Road, Klong Toey Nua, shares


Phone 0 2667 2340, Fax 0 2667 2341

Bumrungrad International Limited International 11,767,701 51%

33 Sukhumvit Soi 3 (Nana Nua) Sukhumvit Road, Klong Toey Nua, Investment shares


Phone 0 2667 1000, Fax 0 2667 2525

Global Care Solutions S.A. Healthcare software 31,426 14%

9 Rue Schiller, L-2519 Luxembourg development shares

Phone 41 (76) 565 1533, Fax 41 (44) 496 6319

64


1.3 Reference Persons

1. Auditor Ernst & Young Office Limited

33rd Floor, Lake Rajada Office Complex, 193/136-137 New Rajadapisek Road, Bangkok 10110

Phone 0 2264 0777, Fax 0 2264 0789-90

2. Legal Consultant Thai Consultant Limited

63 Soi 8 (Soi Preeda), Sukhumvit Road, Bangkok 10110

Phone 0 2255 2552, Fax 0 2653 1133

3. Share Registrar Thailand Securities Depository Co., Ltd.

62 The Stock Exchange of Thailand Building, 4th and 6th-7th Floor, Rachadapisek Road,

Bangkok 10110

Phone 0 2229 2800, Fax 0 2359 1259

4. Convertible Bonds Bumrungrad Hospital Public Company Limited

Registrar 33 Sukhumvit Soi 3 (Nana Nua) Sukhumvit Road, Klong Toey Nua, Wattana, Bangkok 10110

Phone 0 2667 2025, Fax 0 2667 2031

5. Bondholders’ Thai Military Bank Public Company Limited

Representative 3000 Paholyothin Road, Jatujak, Bangkok 10900

Phone 0 2299 1111, 0 2617 9111, Fax 02 299 1784

2. Financial Highlights

2.1 Financial Summary (Page 19)

2.2 Financial Ratios (Page 19)

3. Company Profile

3.1 Executive Summary

Bumrungrad Hospital Public Company Limited (“the Company”) operates a private hospital business in

Bangkok with capacity of 554 beds and 3,500 outpatients per day. The Company is one of the leading

healthcare providers in Thailand and in the Southeast Asian region, providing complete healthcare services for

both outpatients and inpatients.

The Company has always emphasized the importance of quality healthcare and experienced physicians and

staff. The Company is the first hospital in Asia to receive the US standard accreditation from Joint Commission

International Accreditation (JCIA).

The Company is expanding and upgrading its Bangkok facilities over the next 5 years to accommodate the

increasing demand for private healthcare. The expansion will ultimately increase the Company’s ability to

service patients to 650 beds and 6,000 outpatients per day, almost doubling its current capacity. In addition,

the Company is looking to expand its operations overseas through its 51% subsidiary, Bumrungrad

International Limited (BIL). Currently, BIL has two investments, one in Asian Hospital Inc. in the Philippines,

which is currently in operation, and the other investment in Bumrungrad Hospital Dubai LLC, which is currently

under construction. BIL is aggressively looking for other healthcare opportunities in the region.

65


Notes:* As at 31 December 2006** L.S. Cleaning Co., Ltd., the Company’s previous 25% subsidiary, registered the liquidation with the Ministry of Commerce on

22 May 2006.

Details of subsidiaries, affiliates and related companies are as follows:

1. Bumrungrad Medical Center Limited (“BMC”) is the owner of the existing hospital building, which is leased

to the Company.

2. Vitallife Corporation Limited (“Vitallife”) is a pioneer in wellness and anti-aging which provides preventive

care services targeted at health-conscious individuals. The Vitallife program brings together experienced

medical professionals and world-class technologies to provide customers with a customized exercise

programs, nutrition plans, and food and vitamin supplements for healthy living.

3. Bumrungrad International Limited (“BIL”) is the Company’s international investment arm. BIL’s policy is to

enter into management contracts only when BIL has an equity stake with management control, or there is

an evident pathway towards an equity stake. BIL currently has 2 investments: a 43% stake in Asian Hospital,

Inc. in the Philippines and 49% investment in Bumrungrad Hospital Dubai LLC in the United Arab Emirates.

4. Global Care Solutions S.A. (“GCS”) is a healthcare software development company headquartered in

Luxemburg.

The Company has three subsidiaries, including 100% shareholding in Bumrungrad Medical Center Limited,

100% in Vitallife Corporation Limited and 51% in Bumrungrad International Limited and a 14% investment in

Global Care Solutions S.A. The corporate structure of the Company is as follows:


- Operates private hospital in Bangkok

Bumrungrad MedicalCenter Limited

Vitallife CorporationLimited

BumrungradInternational Limited

Global Care SolutionsS.A.

100% 100% 51% 14%

- Owner of main hospitalbuilding and lesser of thebuilding to the Company

- Comprehensive wellnesscenter specializing inpreventive care

- International investmentand businessdevelopment

- Healthcare softwaredevelopment company

66


3.3 Business Characteristics and Competition

Bumrungrad Hospital Public Company Limited (“the Company”)

Bumrungrad Hospital Public Company Limited is the operator of Bumrungrad Hospital in Bangkok, which is the

main revenue contributor. The Company’s revenue from hospital operations is 95.9% of total revenues.

The hospital, which is supported by the advanced Hospital 2000 Medical Information System, has services which

can be detailed as follows:

1. Outpatient service has 34 outpatient clinics with 135 examination rooms, and capacity to service 3,500

patients per day.

2. Inpatient service has 554 beds. As at 31 December 2006, the hospital has 449 beds in operation.

3. Emergency facilities and operating theaters: The Company has emergency center open 24 hours, equipped

with specialized physicians. In addition, the Company has 19 operating theaters fully equipped with

modern medical equipment.

Healthcare Bumrungrad Hospital Pcl. 7,572 95.9 6,586 96.8 2,482 42.7

Healthcare Bumrungrad Medical Center Ltd. 100.00 - - - - 3,167 54.5

Healthcare Vitallife Corporation Ltd. 100.00 78 1.0 61 0.8 37 0.7

Total Healthcare 7,650 96.9 6,647 97.6 5,686 97.9

Hospital Management Bumrungrad International Ltd. 51.00 57 0.7 7 0.1 - -

Total Hospital Management 57 0.7 7 0.1 - -

Rental Bumrungrad Hospital Pcl. 118 1.5 89 1.3 41 0.7

Rental Bumrungrad Medical Center Ltd. 100.00 - - - - 12 0.2

Total Rental 118 1.5 89 1.3 53 0.9

Others Bumrungrad Hospital Pcl. 57 0.7 58 0.9 36 0.6

Others Bumrungrad Medical Center Ltd. 100.00 1 - - - 34 0.6

Others Bumrungrad International Ltd. 100.00 12 0.2 6 0.1 - -

Total Others 70 0.9 64 1.0 70 1.2

Total 7,895 100.0 6,807 100.0 5,809 100.0

3.2 Revenue StructureUnit: Bt Million

Product line / Business Group Operate by % Shareholding 2006 2005 2004

by Company Revenue % Revenue % Revenue %

67


Inpatient51%

Outpatient49%

Data as at 31 December 2006

In 2006, the Company has treated a total of over one million patients. The client base of the hospital can be

segmented in 2 ways as follows:

1. Inpatient and outpatient (% of total revenue)

2. Domestic and international patients

The Company has a strong and successful track record in increasing its presence in the international market. In

2006, Bumrungrad Hospital in Thailand treated over 430,000 international patients from over 190 countries. The

top three highest revenue contributors by country are the United Arab Emirates, the United States and Oman.

The following graph shows the historical revenue contribution of international patients over the past five years.

The Company has a master plan to expand and upgrade its Bangkok facility over the next 5 years. The plan

includes the opening of the new Bumrungrad International Clinic building, expanding its inpatient capacity to

BH Tower building and renovating and upgrading the existing hospital building as it is entering its 10th year of

operation.

The new Bumrungrad International Clinic is a 22-storey outpatient facility, with the first 10 floors being used as

parking spaces and the top 12 floors as outpatient clinics. The Company plans to gradually occupy the building

floor by floor as the additional space is needed, and expects to take 5-7 years before the building is fully

occupied. In February 2007, the parking space was open for patient use, while the health screening center was

the first unit to occupy the 11th floor of the new Bumrungrad International Clinic in March 2007.

% o

f rev

enu

e

68


The Company also has a long-term plan to expand its inpatient capacity to grow in line with the expansion of its

outpatient capacity. The Company plans to reacquire the BH Tower Building from Bangkok Bank Pcl. and to

gradually convert the building into inpatient beds. The building was given to Bangkok Bank Pcl. as part of the

Company’s debt restructuring plan after the economic crisis in 1997 and it is currently being leased from

Bangkok Bank Pcl. to be used as the serviced apartments for patients’ families and relatives.

The third part of the expansion plan is the renovation and upgrade of the existing hospital building as it is

entering its 10th year of operations. This includes rolling renovation of existing patient beds as well as expansion

of the outpatient clinics that remain in this existing building while others move to the new Bumrungrad

International Clinic Building.

After the 5-7 years of expansion, the Company’s capacity will ultimately increase to 650 beds and 6,000

outpatients per day, almost doubling its current capacity, and making Bumrungrad one of the largest outpatient

clinics in the world.

Bumrungrad International Limited (BIL)

Bumrungrad International Limited is the Company’s 51% subsidiary which operates as a holding company, with

the objective to invest in overseas healthcare related businesses through joint ventures with local partners and

to provide consulting and management services for those businesses. Currently, BIL has investments through its

subsidiaries in two hospitals in the Philippines and in United Arab Emirates.

BIL made a 43.25% investment in Asian Hospital Inc. (AHI) in 2005. AHI commenced its operations in 2002 and is

one of the first large-scale private hospitals in Manila. It is a 258-bed hospital located in the south of Metro Manila

and is well known for its modern medical equipment and experienced physicians, particularly in cardiology.

Similar to the Bangkok facility, AHI also targets the middle class population.

In 2006, BIL entered into a 49% joint venture with Istithmar PJSC, an investment arm of the United Arab Emirates

government, to operate a 250-bed private hospital under the name Bumrungrad Hospital Dubai. Currently, the

hospital is under construction and is expected to be operational in 2009.

In addition to the two existing investments, BIL is aggressively pursuing other investment opportunities in the

region. In July 2006, BIL went through a capital increase process and invited Istithmar, Temasek and Bangkok

Bank Pcl. as strategic partners. In addition to the capital availability, the strategic partners are also sources of new

investment opportunities and network in their respective regions of presence. As a result of the capital increase,

the Company’s shareholding in BIL was diluted from 100% to 51%.

Industry and Competition

As at 2003, there were 346 private hospitals in Thailand, of which 100 are in Bangkok. The demand for healthcare

continues to grow with the growth of GDP and the rise of life expectancy. However, supply of private healthcare

facilities in Thailand remains in excess of domestic demand and as a result competition for Thai patients remains

intense. Many private hospitals have undergone upgrades to keep pace with Bumrungrad including quality of

service and building renovations and expansion. In any case, the private healthcare industry in Thailand is a

fragmented market and only a few hospitals are operating close to its full capacity.

69


The bigger market that is growing faster than domestic demand is medical tourism. The global medical tourism

industry is expected to see continued strong growth as more and more people are traveling abroad for

healthcare services. Thailand’s regional competitors are hospitals in countries such as Singapore, Malaysia and

India. Private hospitals in Thailand have a competitive advantage compared to many of the countries, as Thailand

has a unique combination of high quality healthcare, accessibility and affordability, coupled with Thailand being

a popular tourist destination with a good supporting infrastructure. Within Thailand itself, there are only a few

private hospitals that have the technology and sophistication to address the needs of international patients.

The Company’s strategy is to maintain quality superiority through a differentiated product that includes

Bumrungrad as Asia’s first internationally accredited hospital. Also, pricing is targeted within the top tier of Thai

hospitals while remaining price competitive in the region.

For regional competition, in addition to maintaining the quality and the pricing strategy, the Company also seeks

to continue as the dominant player by operating hospitals in key markets through investments in hospitals

abroad, which at present includes the Philippines and the Middle East. In addition, the Company operates twenty

overseas representative offices in its major markets and has an international patient center to accommodate the

needs of international patients. The Company is also a tertiary referral center for both domestic and international

hospitals.

4. Risk Factors

1. Slow down of the tourism industry

In the past, Thailand’s tourism industry has been affected by many issues, including public health epidemics,

international terrorism, the unrest in southern Thailand, and most recently, the political situation and the

Bangkok New Year’s bombings. Although medical tourism is not as easily affected as the regular tourism industry

as there is an established relationship between patients and the hospital and physicians, these events could

cause a postponement or a reduction in number of patients traveling to Thailand and could in turn affect

revenues from international patients.

In order to minimize the possible risk, the Company maintains a balanced portfolio of international and Thai

patients so that the Company does not rely excessively on revenue from international patients.

2. Intensified competition in the premium healthcare sector

With the current environment where purchasing power may be slowing down because of the political and

economic uncertainties, while the supply of private hospital remains high, competition in the private healthcare

sector continues to intensify. The risk of the Company losing its clients to other competitors therefore increases.

In order to maintain its leading position in Thailand and Asia and to mitigate the risk, the Company has invested

in up-to-date technology and has continuously improved its quality of care. The Company was the first hospital

in Asia to receive US standard accreditation from Joint Commission International Accreditation (JCIA), and was

the first private hospital in Thailand to receive Thai Hospital Accreditation (HA). In addition, the Company has a

strong client base of referral patients both from within Thailand and internationally. This signifies the reputation

of the Company as the leader both within Thailand and in the region.

70


3. Shortage of professional staff

The hospital business requires personnel with specific technical expertise and knowledge, including nurses,

pharmacists and various technicians. A shortage of these professionals is possible due to the increasing demand.

In addition, because the Company sees the importance of its international client base, multi-lingual professionals

are also required.

In order to minimize the risk, the Company offers competitive compensation and benefits for its staff. The

Company also provides education and training, recreation and staff welfare activities to all staff members, on par

with other competitors. Through a decentralized management structure, the Company also offers excellent

career paths to various categories of staff members.

4. International investments

Bumrungrad International Limited (“BIL”) has made investments in hospitals in the Philippines and the United

Arab Emirates. Such investments carry the inherent risk of investment and expose the Company to country and

currency risk outside Thailand.

To mitigate this risk, BIL’s experienced international management team conducts extensive feasibility studies

and carries out detailed due diligence using firms with local knowledge before recommending Company’s

investment. Risk is also reduced by engaging local equity partners in most overseas investments.

5. Legal disputes

Hospital business is subject to litigation risk attended to the provision of healthcare services by hospital staff and

physicians.

Therefore, in order to minimize the risk, the Company has implemented a healthcare risk management system to

ensure that the risk of mistakes by the Company’s personnel is minimized and corrected. In addition, the

Company has various insurance policies in place against possible legal lawsuits.

5. Shareholding Structure and Management

5.1 Major Shareholders

List of Company’s 10 major shareholders as at 19 February 2007 is as follows:

1. Bangkok Insurance Pcl. 96,286,402 13.19

2. HSBC (Singapore) Nominees Pte Ltd 77,206,000 10.58

3. Sinsuptawee Asset Management Co., Ltd. 63,258,514 8.66

4. Istithmar PJSC 43,370,743 5.94

5. Thai NVDR Co., Ltd. 40,735,894 5.58

6. UOB Kay Hian Private Limited 30,920,390 4.24

7. Wattanasophonpanich Co., Ltd. 25,121,875 3.44

8. Littledown Nominees Limited 9 24,615,100 3.37

9. Citibank Nominees Singapore Pte Ltd - Aranda Investments Pte Ltd 21,685,372 2.97

10. TLS Alpha Pte Ltd 21,685,371 2.97

Total 444,885,661 60.94

Shareholder Number of Shareholding**shares* (%)

* Number of shares includes both preferred shares and common shares

** The calculation of holding percentage includes both preferred shares and ordinary shares

71


The Company has shareholders in the top ten major shareholders list who are foreign financial institutions or

custodians acting as trust companies or nominee accounts. The Company has no knowledge of the ultimate

shareholders of these companies as these shareholders have never nominated their representatives to serve on

the Board of Directors or take part in the management of the Company.

The shareholders with significant influence on the policies or management of the Company

Bangkok Bank Pcl, the major shareholder of the Company with 9.75* percent shareholding, has 2 representatives

on the Board of Directors, which are Mr. Chatri Sophonpanich and Mrs. Kulathida Sivayathorn. The other group of

major shareholders, Istithmar and Temasek, with a total shareholding of 11.88%, has one rotating board seat

between the two. Currently, Sultan Ahmed Bin Sulayem from Istithmar is the representative on the Company’s

Board of Directors.

* The data as of at 19 February 2007; the shareholding includes that of Sinsuptawee Asset Management Co., Ltd.

and Bangkok Bank Pcl.

** The data as of at 19 February 2007; the shareholding includes that of Istithmar PJSC, Aranda Investments Pte Ltd

and TLS Alpha Pte Ltd.

5.2 Management

(1) Management

Management Structure

The Company has 4 sets of committees; i.e. the Company’s Board of Directors, the Audit Committee, Governing

Board and Investment Committee. Details of each committee are as follows:

Board of Directors

The Company’s Board of Directors as at 31 December 2006 consists of the following:

1. Mr. Chai Sophonpanich Chairperson

2. Mr. Chanvit Tanphiphat, MD Vice Chairperson

3. Mrs. Linda Lisahapanya Director, Managing Director

4. Mr. Curtis John Schroeder Director, Group Chief Executive Officer

5. Mr. Dhanit Dheandhanoo, MD Director, Chairperson of the Medical Director

6. Mr. Chatri Sophonpanich Director

7. Mr. Anant Tejavej, MD Director

8. Mr. John Yangpichitt, MD Director

9. Ms. Khun Sawanya Dej-Udom, MD Director

10. Mrs. Kulathida Sivayathorn Director

11. Mr. Chong Toh Director

12. Sultan Ahmed Bin Sulayem Director

13. Ms. Sophavadee Uttamobol Director, Chairperson of Audit Committee

14. Mr. Soradis Vinyaratn Director, Member of Audit Committee

15. Mr. Boonpakorn Chokwathana Director, Member of Audit Committee

Ms. Suthinee Tevidhaya is the secretary of the Board of Directors.

Legal Binding of the Company

Any two authorized directors, except Mr. Chatri Sophonpanich, Mrs. Kulathida Sivayathorn and Mr. Chong Toh,

sign and affix the Company’s seal.

72


Duties and Responsibilities of Board of Directors:

1. To perform duties in accordance with the laws, the Company’s objectives and regulations, and resolutions

of the shareholders’ meetings in good faith and with care for the best interest of the Company

2. To establish the Company’s vision, direction and strategies

3. To endorse major strategies and policies, including objectives, business plans, financial targets, operation

plans and capital expenditure budgets, as proposed by the management; and to monitor and ensure the

implementation and follow up on the outcome

4. To ensure proper systems for corporate accounting, financial reporting and financial auditing; to ensure

that the Company has an effective internal control and internal audit system

5. To approve quarter and annual financial reports; to ensure that they are correct, accurate, credible, in

compliance with Generally Accepted Accounting Standards and report to shareholders in the annual report

6. To supervise and approve, as the case may be, and to ensure transparency in the transactions which are

connected transactions and may cause conflict of interest

7. To have the authority to enter into any transaction on behalf of the Company, which requires two signatures

of any authorized directors and affixing of the Company’s seal

Audit Committee

The Company’s Audit Committee as at 31 December 2006 comprises the following:

1. Ms. Sophavadee Uttamobol Chairperson of the Audit Committee

2. Mr. Soradis Vinyaratn Member of the Audit Committee

3. Mr. Boonpakorn Chokwathana Member of the Audit Committee

Mrs. Tawichar Tansathit is the secretary of the Audit Committee.

Duties and Responsibilities of the Audit Committee

The Company’s Audit Committee has the scope of duties and responsibilities to report to the Board of the

Directors as follows:

1. To review the financial report of the Company to be in accordance with the accounting standards, and

ensure that the financial reporting is sufficient and reliable, before being presented to the Board of Directors

2. To consider and recommend the appointment of external auditors and audit fees

3. To ensure that the Company has adequate and effective internal control system

4. To ensure the Company’s compliance with regulations and other relevant laws

5. To ensure that there is no conflict of interest arising from connected parties

6. To prepare the report of the Audit Committee to be disclosed in the Company’s annual report; the report

must be signed by the Chairperson of the Audit Committee

7. To be responsible for any other matters assigned by the Board of Directors.

Other responsibilities:

1. To consider the budget and human resources of the internal audit office

2. To coordinate with the Company’s internal auditors regarding the internal control system, audit plans and

audit programs, and to evaluate the results of the internal auditing of various operations of the Company,

according to the generally accepted methods and standards

3. To appoint, dismiss, transfer or terminate the employment of director (chief ) of internal audit.

73


Governing Board

The Company’s Governing Board for the Bumrungrad Hospital in Bangkok as at 31 December 2006 comprises

the following:

1. Mr. Chanvit Tanphiphat, MD Chairman

2. Mr. Mack Banner Secretary

3. Mr. Chong Toh Member

4. Mr. Karoon Mekanontchai, MD Member

5. Mr. Mondej Sookpranee, MD Member

6. Ms. Oradee Chandavasu, MD Member

7. Mr. Rujapong Sukhabote, MD Member

8. Mr. Sira Sooparb, MD Member

9. Ms. Sophavadee Uttamobol Member

10. Mr. Vatana Supromajakr, MD Member

11. Mr. Visuit Vivekaphirat, MD Member

12. Mr. Watcharaphong Saechere, MD Member

13. Mr. Apichati Sivayathorn, MD Ex officio

14. Ms. Janice Chan Mun Yee Ex officio

15. Mrs. Khor Lee Chan Ex officio

16. Mr. Sinn Anuras, MD Ex officio

Duties and Responsibilities of the Governing Board

The Governing Board has the objective to recommend and implement the Company’s Hospital Policy, promote

patient safety and performance improvement, provide quality patient care and provide for organizational

management and planning of the Hospital. The Governing Board has the scope of duties and responsibilities to

report to the Board of the Directors as follows:

1. To organize physicians and other practitioners granted clinical privileges at the Hospital into a medical staff

under Professional Staff Bylaws, Rules and Regulations approved by the Governing Board

2. To appoint and reappoint Medical Staff members and assign clinical privileges in accordance with

Professional Staff Bylaws, Rules and Regulations

3. To establish and amend, together with the Medical Staff, and approve Professional Staff Bylaws, Rules and

Regulations which set forth its organization and governance

4. To assign to the Medical Staff reasonable authority to ensure appropriate professional care to Hospital

patients, including to direct that all reasonable and necessary steps be taken by the Medical Staff and

Hospital administration for meeting JCIA and HA accreditation standards and complying with applicable

laws and regulations.

74


Investment Committee

The Company’s Investment Committee as at 31 December 2006 comprises the following:

1. Mr. Chai Sophonpanich Chairperson

2. Mrs. Linda Lisahapanya Member

3. Mr. Chong Toh Member

4. Ms. Sophavadee Uttamobol Member

5. Mr. Curtis John Schroeder Member

6. Mr. Dennis Brown Observer

7. Mr. Carl Stanifer Observer

Duties and Responsibilities of the Investment Committee

To consider investment opportunities, appropriateness and feasibility studies, including the structure of

the Company’s investment projects both within the country and in the region.

Management

The Company’s Management as at 31 December 2006 consists of the following:

1. Mrs. Linda Lisahapanya Managing Director

2. Mr. Dhanit Dheandhanoo, MD Chairperson of the Medical Director

3. Mr. Curtis John Schroeder Group Chief Executive Officer

4. Mr. Sinn Anuras, MD Group Medical Director

5. Mr. Karoon Mekanontchai, MD Medical Director

6. Mrs. Chamaree Chuapetcharasopon, MD Senior Associate Medical Director

7. Mr. Carl Stanifer Group Chief Financial Officer and Director of

International Development

8. Mr. Dennis Brown Group Chief Operating Officer and Chief Executive

Officer, Bumrungrad International Limited

9. Mr. James Matthew Banner Chief Executive Officer

10. Mrs. Khor Lee Chan Chief Financial Officer

11. Ms. Janice Chan Mun Yee Chief Operating Officer

75


Details of Management and Controlling Parties

Directors

Mr. Chai Sophonpanich

Age: 65 years

Position in the Company:

Chairperson

Education:

- Bachelor of Science, University of Colorado, USA

- Advanced Management Program, The Wharton

School, University of Pennsylvania, USA

- The Joint State - Private Sectors Course, Class 6,

The National Defense College of Thailand

- Director Certification Program Class 16/2002,

Thai Institute of Directors

- Chairman 2000, Class 10/2004, Thai Institute of

Directors

Shareholding:

1.09%

Family Relationship between Management:

- Husband of Mrs. Linda Lisahapanya’s siste

- Brother of Mr. Chatri Sophonpanich

Work Experience:

1976 - Present President and Managing Director,

Bangkok Insurance Pcl.

1978 - Present Chairman, Bangkok Insurance Pcl.

1986 - Present Chairman, Charoong Thai Wire &

Cable Pcl.

1988 - Present Chairman, Furukawa Metal

(Thailand) Pcl.

1989 - Present Director, Amata Corporation Pcl.

1968 - Present Director, Bangkok Life Assurance Ltd.

1968 - Present Vice Chairman, Thai Reinsurance Pcl.

Mr. Chanvit Tanphiphat, MD

Age: 63 years


Vice Chairperson

Education:

- MB ChB (Bachelor of Medicine and Bachelor of

Surgery), Leeds University, England

- FRCS (Fellowship of the Royal College of Surgeons),

England

Shareholding:

0.07%


- None

Work Experience:

- Professor, Faculty of Medical Science, Surgery

Department, Chulalongkorn University

Mrs. Linda Lisahapanya

Age: 55 years


Director

Managing Director

Education:

- Master of Finance, University of Illinois, USA



Shareholding:

0.18%


- Sister of Mr. Chai Sophonpanich’s wife

Work Experience:

- Managing Director, Bumrungrad Hospital Pcl.

* Shareholding as at 19 February 2007, including spouse and minors

76


Mr. Curtis John Schroeder

Age: 51 years


Director


Education:

- Master’s degree in Health Services Administration,

University of Southern California, USA



Shareholding:

0.01%


- None

Work Experience:

1997 - Present Group Chief Executive Officer,

Bumrungrad Hospital Pcl.

1987 - 1993 Director, USC University Hospital,

Los Angeles, California

Mr. Dhanit Dheandhanoo, MD

Age: 71 years


Director

Chairperson of the Medical Director

Education:

- Doctor of Medicine, Mahidol University

- Board Certification: Neurosurgery, England

Shareholding:

0.02%


- None

Work Experience:

- Clinical Professor Emeritus, Director, Neurology

Surgery Department, Ramathibodi University

Mr. Chatri Sophonpanich

Age: 73 years


Director

Education:

- Honorary Doctorate in Business Administration,

Thammasart University

- Honorary Doctorate of Philosophy in Business

Administration, De La Salle University,

the Philippines

- Certificate of Banking from Institute of Bankers,

London, England

Shareholding:

0.50%


- Brother of Mr. Chai Sophonpanich

Work Experience:

1999 - present Chairman, Bangkok Bank Pcl.

1999 - present Chairman, Bangkok Entertainment

Co., Ltd.

Present Chairman, Dusit Thani Pcl.

1963 - Present Director, Bangkok Bank Pcl.

Mr. Anant Tejavej, MD

Age: 73 years


Director

Education:

- MB ChB (Bachelor of Medicine and Bachelor of

Surgery), Edinburgh University, Scotland

- DCH, England

- FRCP (Fellow of the Royal College of Physicians),

Edinburgh, Scotland

- Director Accreditation Program Class 47/2005,


Shareholding:

0.14%


- None

Work Experience:

Emeritus Professor, Pediatrics,

Medical Science Faculty, Mahidol University


77


Mr. John Yangpichitt, MD

Age: 71 years


Director

Education:

- MRCOG (Member of Royal College of Obstetricians

and Gynecologists), Queens University, England

- FRCOG (Fellow of Royal College of Obstetricians and

Gynecologists), Queens University, England

Shareholding:

-


- None

Work Experience:

Independent physician, Ruamrudee Clinic

Ms. Khun Swanya Dej-Udom, MD

Age: 61 years


Director

Education:


- Board Certification:

- Internal Medicine

- Cardiology



Shareholding:

0.04%


- None

Work Experience:

1980 - Present Cardiologist, Bumrungrad Hospital Pcl.

1992 - Present Cardiologist, Paat Pattana Medical

Center

Present Academic Director,

The Heart Foundation of Thailand

Under Royal Patronage

Mrs. Kulathida Sivayathorn

Age: 54 years


Director

Education:

- Bachelor of Science in Chemistry, Stetson University, USA

- Chief Financial Officer Certification Program,

Federation of Accounting Professions, Class 6/2006

- Advanced Management Program, Harvard Business

School, 1997

- Director Certification Program Class 3/2000, Thai

Institute of Directors

Shareholding:

-


- None

Work Experience:

1976 - Present Current Position: Executive

Vice President, Bangkok Bank Pcl.

Mr. Chong Toh

Age: 39 years


Director

Education:

- Master of Science in Management, Massachusetts

institute of Technology, USA

- Bachelor of Arts in Philosophy, Politics and

Economics, Oxford University, England

Shareholding:

-


- None

Work Experience:

2005 - Present Executive Vice President,

International Banking Group,

Bangkok Bank Plc.

2005 - Present Executive Chairman, Bualuang

Securities Plc.

2001 - Present Director, Bualuang Securities Plc.

2000 - Present Director, Asia Cement Plc.

2001 - 2005 President, Bualuang Securities Plc.

1999 - 2005 President, Bualuang Finance Co., Ltd.

2000 - 2001 Director, Bualuang Finance Co., Ltd.


78


Sultan Ahmad Bin Sulayem

Age: 52 years


Director

Education:

- Master’s degree in Economics, Temple University,

Philadelphia, USA

Shareholding:

-


- None

Work Experience:

- Executive Chairman, Dubai Ports

- Executive Chairman, Customs and Free Zone

Corporation

- Chairman, Nakheel LLC

- Chairman, Tejari.com

- Chairman, Dubai Metals and Commodities Center

Ms. Sophavadee Uttamobol

Age: 47 years


Director

Chairperson of Audit Committee

Education:

- Master of Business Administration, Chulalongkorn

University

- Director Accreditation Program Class 5/2003, Thai


- Audit Committees Program Class 2/2004, Thai


- The Role of the Chairman Program Class 14/2006,


Shareholding:

-


- None

Work Experience:

1991 - present Legal Consultant, Dhamrongtham

Law Office

2001 - present Director, S&P Syndicate Pcl.

Mr. Soradis Vinyaratn

Age: 67 years


Director

Member of Audit Committee

Education:

- Bank Management, City of London College of

Banking, London, England

- Director Accreditation Program Class CP on 5 May

2005, Thai Institute of Directors

Shareholding:

0.02%


- None

Work Experience:

1982 - present Vice Chairperson, Landmark Hotel

Group

1957 - 1990 Executive Vice President, Bangkok

Bank Pcl.

Mr. Boonpakorn Chokwathana

Age: 72 years


Director

Member of Audit Committee

Education:

- Bachelor’s Degree of Economics, University of

Nottingham, England





Shareholding:

0.04%


- None

Work Experience:

- Chairperson, New City (Bangkok) Pcl.

- Chairperson, Dr. Tiem Chokwathana Foundation

- Vice Chairperson, Saha Pathanapibul Pcl.

- Vice Chairperson, Saha Pathana Inter-Holding Pcl,

- Director, IT City Pcl.


79


Management

Mrs. Linda Lisahapanya

Age: 55 years


Director

Managing Director

Education:

- Master of Finance, University of Illinois, USA



Shareholding:

0.18%


- Sister of Mr. Chai Sophonpanich’s wife

Work Experience:

Managing Director, Bumrungrad Hospital Pcl.

Mr. Dhanit Dheandhanoo, MD

Age: 71 years


Director

Chairperson of the Medical Director

Education:


- Board Certification: Neurosurgery, England

Shareholding:

0.02%


- None

Work Experience:

Clinical Professor Emeritus, Director,

Neurology Surgery Department,

Ramathibodi University

Mr. Curtis John Schroeder

Age: 51 years


Director


Education:

- Master’s degree in Health Services Administration,

University of Southern California, USA



Shareholding:

0.01%


- None

Work Experience:

1997 - Present Group Chief Executive Officer,

Bumrungrad Hospital Pcl.

1987 - 1993 Director, USC University Hospital,

Los Angeles, California

Mr. Sinn Anuras, MD

Age: 66 years


Group Medical Director

Education:

- MD Chulalongkorn University

- Board Certifications:

- American Board of Internal Medicine

- American Board of Gastroenterology

Shareholding:

-


- None

Work Experience:

1987-1994 Vice Chairperson for Medical Affair

University Medical Center Lubbook,

Texas


80


Mr. Karoon Mekanontchai, MD

Age: 57 years


Medical Director

Education:

- MD, Mahidol University

- Board Certification: Orthopedic Surgery

Shareholding:

-


- None

Work Experience:

1989 Orthopedics Consultant, Bumrungrad

Hospital Pcl.

1983-1998 Orthopedics and Rehabilitation

Medical School Mahidol University

1978-1993 Full time physician, Saraburi Province

Hospital

Mrs. Chamaree Chuapetcharasopon , MD

Age: 52 years


Senior Associate Medical Director

Education:

- MD, Mahidol University, Ramathibodi Hospital

- Board Certification: General Radiology, Thailand

- Fellowships:

- Vascular and Interventional Radiology, USA

- Body Imaging, USA

Shareholding:

-


- None

Work Experience:

1998-present Executive Committee, Royal College

of Radiologists of Thailand

1994-present Consultant Radiologist, National

Cancer Institute

1990-1995 Instructor, Department of Radiology,

Ramathibodi Hospital, Mahidol

University

Mr. Carl Stanifer

Age: 58 years


Group Chief Financial Officer and Director of

International Development

Education:

- Graduate studies in Health Planning and

Administration at the University of Cincinnati, USA

- Bachelor’s Degree in Accounting and Finance,

Cumberland College, USA

Shareholding:

0.02%


- None

Work Experience:

- Chairperson and President of VISTA Healthcare,

Singapore

- Senior Vice President, Operations of International

Healthcare Division, Tenet Healthcare Corporation

- Experience in Saudi Arabia, Australia and Malaysia

Mr. Dennis Brown

Age: 53 years


Group Chief Operating Officer

Chief Executive Officer, Bumrungrad International

Limited

Education:

- Executive Program, Graduate School of Business,

Stanford University, USA

- Company Director’s Diploma, University of

New England, Australia

- Master of Business Administration in Health and

Hospital Administration, University of Florida, USA

Shareholding:

-


- None

Work Experience:

2003-2004 Chief Executive Officer, BFT

Investments, LLC.

1980-1984, Senior Vice President,

1985-2003 Operations Northern Region,

Tenet Healthcare Corporation

Chief Executive Officer,

Australian Medical

Enterprises, Australia

Chief Executive Officer,

Mount Elizabeth Hospital, Ltd.


81


Mr. James Matthew Banner

Age: 59 years


Chief Executive Officer

Education:

- Master of Hospital Administration,

Medical College of Virginia, USA

Shareholding:

-


- None

Work Experience:

- BUPA Health Care Asia (previously VISTA)

- Director and CEO of Subang Jaya Medical Center,

Kuala Lumpur

Mrs. Khor Lee Chan

Age: 52 years


Chief Financial Officer

Education:

- Bachelor’s degree, Victoria University of Wellington,

New Zealand

Shareholding:

0.00%


- None

Work Experience:

1987-1994 Chief Financial Officer, Mount

Elizabeth Hospital Ltd.

1984-1986 Chief Accountant, Scotts Holding (S)

Pte. Ltd

1982-1983 Internal Manager, Diethelm

Singapore Pte. Ltd.

Ms. Janice Chan Mun Yee

Age: 45 years


Chief Operating Officer

Education:

- Master Degree, George Washington University

Shareholding:

-


- None

Work Experience:

2003-2005 Director of Operations, Bumrungrad

Medical Center

2000-2003 Division Director, Hospital

Administrative, Bumrungrad Medical

Center


82


Subsidiaries BMC VITALLIFE BIL

Directors

1. Mr. Chai Sophonpanich X X

2. Mr. Chanvit Tanphiphat, MD /

3. Mrs. Linda Lisahapanya // /

4. Mrs. Kulathida Sivayathorn /

5. Mr. Dhanit Dheandhanoo, MD //

6. Mr. Chong Toh / /

7. Mr. Boonpakorn Chokwathana /

8. Mr. Curtis John Schroeder // / X

9. Mr. Sinn Anuras, MD // /

10. Mrs. Khor Lee Chan /

11. Mrs. Anongnuth Chiangpradit, MD //

12. Mr. Carl Stanifer /

Details of Directorship in Subsidiaries and Related Companies

Notes

1. / = Director X = Chairperson // = Management

2. GCS does not appear in this table as no director, chairperson or management of the Company holds a directorship

position in GCS.

(2) Election of Directors and Management

The Company does not have a nominating committee for the selection of directors and management. The

election of any members of the Board of Directors must be approved by the shareholders’ meeting, in

accordance with the following rules and principles:

1. Each shareholder has one vote for one share.

2. The election of directors may be either by voting for each individual director, or by voting for a group of

directors, whichever way the shareholders’ meeting deems appropriate. For each resolution, each

shareholder must exercise all of his/her votes for one individual director or for one group of directors. Votes

by each shareholder may not be split between any directors or any groups of directors.

3. The election passes with the majority of the votes. If the number of votes is equal, the chairperson of the

meeting has the final vote.

The process for selection of independent directors is the same as the selection of directors and management.

The fundamental qualifications of independent directors are as follows:

1. Is an external director with no management or employment position in the Company, subsidiaries, affiliates

or related companies

2. Is not a management of the Company, subsidiaries, affiliates or related companies

3. Does not have direct or indirect benefits or interests, either financially or managerially, in the Company,

subsidiaries, affiliates or related companies

4. Is independent from the major shareholders, management and related parties

83


5. Is able to protect the interest of every shareholder fairly

6. Is able to prevent transactions with conflict of interest between the Company and related parties

7. Holds shares accounting for not more than 5 percent of paid-up capital of the Company, subsidiaries,

affiliates or related companies (Including shares held by related parties).

(3) Remuneration of Directors, Audit Committee and Management

Directors’ Remunerations and Audit Committee’s Remuneration

Directors’ remunerations and Audit Committee’s remunerations for the year ended 31 December 2006 for

15 directors are as follows:

* Sultan Ahmed Bin Sulayem was appointed the Company’s director by the Extraordinary General Meeting of Shareholders

No. 1/2006 held on 15 May 2006

Directors’ remuneration represents the benefits paid to the Company’s directors, exclusive of salaries and related

benefits payable to the management. The above remunerations have been approved by the shareholders.

Director’s Remuneration Audit Committee’s Remuneration

TotalRemuneration

Name

Number ofMeetings

Attending/Invitation

AnnualRemuneration

MeetingRemuneration

Total

Number ofMeetings

Attending/Invitation

MeetingRemuneration

1 Mr. Chai Sophonpanich 6/6 280,000 240,000 520,000 520,000

2 Mr. Chanvit Tanphiphat, MD 6/6 240,000 180,000 420,000 420,000

3 Mrs. Linda Lisahapanya 6/6 200,000 150,000 350,000 350,000

4 Mr. Curtis Schroeder 6/6 200,000 150,000 350,000 350,000

5 Mr. Dhanit Dheandhanoo, MD 5/6 200,000 125,000 325,000 325,000

6 Mr. Chatri Sophonpanich 1/6 200,000 25,000 225,000 225,000

7 Mr. Anant Tejavej, MD 5/6 200,000 125,000 325,000 325,000

8 Mr. John Yangpichitt, MD 6/6 200,000 150,000 350,000 350,000

9 Ms. Khun Sawanya Dej-Udom, MD 6/6 200,000 150,000 350,000 350,000

10 Mrs. Kulathida Sivayathorn 5/6 200,000 125,000 325,000 325,000

11 Mr. Chong Toh 5/6 200,000 125,000 325,000 325,000

12 Sultan Ahmed Bin Sulayem* 0/6 120,000 0 120,000 120,000

13 Ms. Sophavadee Uttamobol 6/6 200,000 150,000 350,000 5/5 200,000 550,000

14 Mr. Soradis Vinyaratn 6/6 200,000 150,000 350,000 5/5 125,000 475,000

15 Mr. Boonpakorn Chokwathana 6/6 200,000 150,000 350,000 5/5 125,000 475,000

3,040,000 1,995,000 5,035,000 280,000 5,485,000

84


Remunerations of Management

In 2006, the total remuneration of the 11 executives of the Company and its subsidiaries amounted to Bt 121.8

million. The remuneration represents the salaries and benefits paid to the management.

(4) Corporate Governance

The Company realizes the importance of good corporate governance, and is committed to follow the Principles

of Good Governance Guidelines provided by the Stock Exchange of Thailand as follows:

1. Corporate governance policy

The Board of Directors sees the importance of good corporate governance, and has the intention to follow

such policies for the long-term benefits of shareholders, under the regulations and laws and business

ethics.

The Company is currently in the process of drafting its Corporate Governance Manual and Code of Ethics.

The draft is expected to be completed and to be proposed to the Board for approval and implemented in

2007.

2. Shareholders’ rights

The Company acknowledges the importance of all shareholders’ rights, including equitable treatment of

major and minority shareholders. The Company also emphasizes on providing correct, timely, equal and

transparent information sufficient for all shareholders and investors to make their investment decision.

For every shareholder meeting, the Company sends invitation letters to shareholders in advance to inform

of the meeting agenda and Board of Directors’ opinion on each agenda, with supporting documents and

information sufficient to facilitate shareholders in making their decisions. If the shareholders cannot attend,

the shareholders have the right to authorize a person or an independent director as their proxy to attend

the meeting on their behalf.

During the shareholders’ meeting, the Chairman of the Meeting gives all shareholders the right to

comment, ask questions or give opinions and suggestions on all agendas. The Chairman and management

see the importance of every question and give precise and clear answers. The Company also has minutes of

the shareholders meeting which are correct and complete available for shareholders to verify.

3. Stakeholders’ rights

The Company recognizes the importance of the rights of each stakeholder, and intends to interact with

each party fairly. The important stakeholders are as follows:

Customers / Patients The Company provides patient care in an ethical manner, and at the best

quality possible. The hospital’s Ethics Committee protects patients’ rights. In

addition, the Company has a department to monitor and improve the quality of

the care provided to all patients, taking into consideration patients’ needs and

suggestions.

Suppliers / Contractors The Company abides by the contracts with all suppliers and contractors and

ensures timely payment to all suppliers and contractors.

85


Employees The Company believes that its employees are valuable resources and therefore

gives all employees the equal opportunity in their employment. The Company

has the policy to provide employees with appropriate compensation and to

develop human resources through continuous education and regular training

programs.

Competitors The Company competes with competitors fairly and in accordance with the

rules and regulations. The Company focuses on competition in the area of

quality and efficiency of the service for the best benefit of customers and patients.

Creditors The Company strictly abides by loan agreements, loan covenants and ensures

timely payments.

Community The Company has social responsibilities, including environmental responsibilities,

and has set up an environmental policy to communicate to employees its views

on environment preservation and encourages employees to help protect

global environment. The Company is committed to controlling environmental

impact to neighboring communities and efficiently utilizing natural resources.

In addition, the Company has various activities to support the community

through its Bumrungrad Hospital Foundation, including the UNICEF Youth

Career Development program to develop nurse aids and the “80 Hearts Project”

for heart disease children.

4. Shareholders’ meetings

The Company understands the rights of every shareholders, including major and minority shareholders.

The Board of Directors therefore sees the importance of shareholders’ meetings and emphasizes on giving

equal and transparent information sufficient for shareholders to make their decision on each of the

agenda. In the 2006 annual general shareholders’ meeting, 12 directors attended the meeting to provide

information and details to shareholders.

In every shareholders’ meeting, in addition to the Board of Directors, which includes the Chairperson of

Audit Committee, management of the Company also attended the meeting to answer questions that

shareholders may have. The Chairperson of the meeting encouraged and gave all shareholders equal

opportunity to ask questions, express their views, and make suggestions without limitation on the time of

the meeting. The Company has recorded the important issues raised in the minutes of the meeting.

5. Leadership and vision

The Board of Directors comprises of qualified directors with extensive experience in various fields. Every

director participates in the setting of the Company’s vision, mission, strategies, goals, business plans and

budgets. The Board of Directors also ensures that the plans are carried out efficiently and effectively, to

ensure the maximization of the Company’s value and stability to shareholders. The Board of Directors

meets quarterly to review the management’s report on the Company’s operations.

Moreover, the Board of Directors has set roles and responsibilities for various committees, including

internal control system and internal audit, as well as has communicated such roles and responsibilities to all

levels of management and employees.

86


6. Conflict of interest

To prevent any conflicts of interest, the Board of Directors pays special attention to the consideration of

transactions which conflicts of interest may arise, and to related parties transaction, as well as strictly

follows the Stock Exchange of Thailand rules and regulations, with pricing and other conditions on an arms-

length basis. Details of the transactions, including amount, contracting party, and reasons for entering into

the transactions are disclosed in financial statements, annual report, and the 56-1 filing.

7. Business ethics

The Company’s mission statement is “We provide world class healthcare with care and compassion”. In

addition, the Company has guiding principles, which are communicated to all employees as follows:

1. We treat our patients as we would our family members.

2. We embrace cultural diversity.

3. We are trusted, honest and ethical in all our dealings.

4. We work as a team.

5. We continually improve the quality of everything we do.

6. We strive for a happy working environment with respect and mutual trust.

7. We encourage professional development and innovation through a constant process of learning.

8. We provide efficient healthcare to bring value to our external and internal customers.

9. We are a good corporate citizen.

All employees are expected to observe and follow these guiding principles.

8. Balance of power in the Board of Directors

The Company has 3 directors who are management:

1. Mrs. Linda Lisahapanya

2. Mr. Dhanit Dheandhanoo, MD

3. Mr. Curtis John Schroeder

There are 9 directors who are not management:

1. Mr. Chai Sophonpanich

2. Mr. Chanvit Tanphiphat, MD

3. Mrs. Kulathida Sivayathorn

4. Mr. John Yangpichitt, MD

5. Ms. Khun Swanya Dej-Udom, MD

6. Mr. Anant Tejavej, MD

7. Mr. Chong Toh

8. Mr. Chatri Sophonpanich

9. Sultan Ahmed Bin Sulayem

The Company has 3 directors who are independent directors and members of the Audit Committee:

1. Ms. Sophavadee Uttamobol

2. Mr. Soradis Vinyaratn

3. Mr. Boonpakorn Chokwathana

The 3 independent directors account for 20% of total Board of Directors. The Company plans to increase

the number of independent directors to not less than 1/3 of all directors in the future.

87


9. Aggregation and segregation of positions

Chairperson of the Board of Directors is not the same person as the Managing Director, in order to

segregate the duties of policy setting and control from the day-to-day management.

10. Directors and management remuneration

The Company does not yet have a compensation committee. The directors’ remunerations are in the form

of annual remunerations and meeting fees, which have already been approved by the shareholders.

Management’s remunerations are in the form of salaries and bonus, and are based upon both the

Company’s performance and individual performance.

The details of remunerations for directors and management are in Section Remuneration of Directors,

Audit Committee and Management.

11. Board of Directors’ meetings

The Board of Directors has a regular meeting every quarter, and has extraordinary meetings as necessary.

The Secretary to the Board prepares and sends invitation letters to directors at least 7 days in advance,

together with all the agendas of the meeting and other necessary documents, so that the directors will

have sufficient time to study the information. Normally, each meeting takes approximately 2 hours. In 2006,

there were 6 meetings, with details of the attendance of each director in the table in Section Remuneration

of Directors, Audit Committee and Management.

The Company has documented minutes for every board meeting, which are approved at the next board

meeting. The Company keeps the minutes available for directors and relevant persons’ verification.

12. Committees

The Board of Directors has set up committees to assist with specific tasks, including the following:

Audit Committee, consisting of 3 independent directors appointed by the Board of Directors. In 2006,

Audit Committee held 5 meetings and reported their meeting results to the Board of Directors. The Audit

Committee members and their responsibilities are detailed in Management Structure Section.

Governing Board, appointed by the Board of Directors, consisting of 3 directors, 3 management and 7

physicians. In 2006, Governing Board held 6 meetings. The Governing Board members and their

responsibilities are detailed in Management Structure Section.

Investment Committee, appointed by the Board of Directors, consisting 1 independent director, 2 non-

executive directors and 2 executive directors. In 2006, the Investment Committee held 2 meetings. The

Investment Committee members and their responsibilities are detailed in Management Structure Section.

The Company does not yet have a compensation committee.

13. Internal control and internal audit systems

The Company has given importance to internal control and internal audit systems, by establishing an

internal audit unit, with the primary objective to support and develop effective internal control of the

organization, in order to minimize operational risks, and to ensure quality of the work process and

88


operations. Emphasis is on effectiveness and efficiency, and appropriateness of expenses and costs,

including operations in accordance to the policy and/or requirements of the management.

To ensure the independence of the internal audit unit and the balance of power, the internal audit unit

reports directly to the Audit Committee.

14. Directors’ report

Report of the Accountability of the Board of Directors to the Company’s Financial Reports

The Board of Directors is responsible for the consolidated financial statements of the Company and its

subsidiaries and information as appears in the annual report. The financial statements have been prepared

in accordance with generally accepted accounting principles, using appropriate and consistent accounting

policies. The financial statements have been prepared with caution and have been evaluated for

appropriateness of the overall presentation of the financial statement. There was sufficient information

disclosure in the notes to the financial statements.

The Board of Directors has set up an efficient and effective internal control system to ensure that all

accounting transactions have been recorded correctly and comprehensively, and that there has been a

record-keeping system of assets to protect the Company from any material fraud or damage.

The Board of Directors has the opinion that the overall internal control system of the Company was at a

satisfactory level, which resulted in confidence in the reliability of the financial statements of the Company

and its subsidiaries as at 31 December 2006.

15. Relations with investors

The Board of Directors sees the importance of the disclosure which is correct, complete, reliable, timely,

transparent and dispersed, including the disclosure of financial information and general information which

are important to investors’ decision making process. The Company also ensures that the disclosures are in

accordance with the Securities and Exchange Commission, Thailand and Stock Exchange of Thailand’s rules

and regulations.

The Company has various ways of communicating with investors and shareholders, including participating

in roadshows and investor conferences, organizing quarterly analyst meetings, arranging investor

meetings and company visits, and providing an investor relations section website with updated

information available both in Thai and English.

The Company has assigned personnel to be responsible for investor relations activities to facilitate

interested investors and shareholders in this regard. Interested investors or shareholders can inquire

regarding the Company’s information at the following:

Investor Relations

Telephone: 0 -2667- 2010

Email address: [email protected]

Website: www.bumrungrad.com

89


(5) Internal Control of Information

The Company has the policy regarding management using internal information for personal benefits as

follows:

1. According to Company’s rules and regulations, directors are required to inform the Company

immediately in the event that they may have any interests in any transactions being entered into by the

Company, or that there is an increase or decrease in their holding of shares or bonds of the Company or

subsidiaries.

2. Directors and management must prepare and disclose securities holding report to the Securities

Exchange Commission within the required time.

Penalties for violation include the following:

1. Verbal warning for corrective action

2. Report to shareholders’ meeting for consideration

3. Compensation for any damages

4. Disclosure to Securities and Exchange Commission and The Stock Exchange of Thailand

(6) Internal Control

See Report of Audit Committee (Page23)

(7) Dividend Policy

1. The Company’s dividend policy is as follows:

1.1 When the Company has net profit which can be distributed to shareholders, the preferred

shareholders will receive dividends before the ordinary shareholders. In any year that dividends

distributed to the preferred shareholders reaches 15% of the capital represented by the preferred

shares, the balance of the profit shall be distributed to the ordinary shareholders at any amount as

determined by the shareholders meeting.

In any year that the Company is able to distribute dividends of more than 15% of its capital, the

shareholders of both types shall receive the dividends equally.

1.2 For the payment of dividends, the Board of Directors is to follow the resolution of the shareholders’

meeting.

1.3 For every dividend payment, the Company shall reserve at least 5% of the profit as appropriated

statutory reserve, until the reserve accounts for 10% of the Company’s capital.

1.4 Accrued dividends are not entitled to any interest payment.

2. Subsidiaries’ dividend policy is as follows:

2.1 When the company has profit which can be distributed to shareholders, the company is eligible to

pay dividends to its shareholders at any amount in accordance with the resolution of shareholders’

meeting.

2.2 Accrued dividends are not entitled to any interest payment.

For the year 2006, the Company paid an interim dividend to preferred and ordinary shareholders

from the net profit of 1 January 2006

90


until 30 June 2006 of Bt 0.30 per share, totaling to Bt 219 million. In addition, on 27 February 2007,

the Board of Directors has approved dividend payment to preferred and ordinary shareholders of

Bt 0.45 per share, amounting to Bt 329 million. Such amount is subject to shareholders’ approval in

shareholders’ meeting to be held in April 2007. Therefore, the total dividend payment for the

operation of the year 2006 is expected to be Bt 0.75 per share, which is 50.0% dividend pay-out

ratio. For the year 2005, the Company paid dividend of Bt 0.75 per share, which is 52.0% of the

Company’s 2005 net profit.

6. Related Parties Transactions

1. Characteristics of Related Parties Transactions

The Company has transactions with its subsidiaries, affiliates and related companies as detailed in

note to financial statement no. 7.

For the period ending 31 December 2005 and 31 December 2006, the Company and subsidiaries

entered into a number of transactions with related parties that may have conflict of interest with

the Company and its subsidiaries. These connected transactions include normal course of business

transactions and other transactions, and can be summarized as follows:

91


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e

tran

sact

ion

is r

easo

nab

le.

Exp

ense

s

-In

sura

nce

fees

wh

ich

th

e

Co

mp

any

and

sub

sid

iari

es p

aid

to

BK

I

15.7

18.5

BK

I is

th

e in

sura

nce

pro

vid

er w

hic

h t

he

Co

mp

any

and

su

bsi

dia

ries

hav

e al

way

s

use

d. I

n a

dd

itio

n, t

he

insu

ran

ce p

rem

ium

that

th

e C

om

pan

y an

d s

ub

sid

iari

es p

aid

to B

KI w

as a

t th

e ra

te w

hic

h B

KI o

ffer

s to

its

cust

om

ers

in g

ener

al.

The

Au

dit

Co

mm

itte

e h

as

the

op

inio

n t

hat

th

e

tran

sact

ion

is r

easo

nab

le.

Ban

gko

k B

ank

Pcl.

(BB

L)C

om

mo

n d

irec

tor

Reve

nu

es

-Re

ven

ues

fro

m h

osp

ital

serv

ices

rec

eive

d fr

om

BB

L

Exp

ense

s

-Ba

nk

cred

it c

ard

s

com

mis

sio

n fe

es p

aid

to B

BL

22.8

20.9

It is

th

e C

om

pan

y’s

no

rmal

co

urs

e o

f

bu

sin

ess,

char

gin

g a

t n

orm

al p

rice

an

d

ben

efit

s as

cu

sto

mer

s in

gen

eral

.

The

Au

dit

Co

mm

itte

e h

as

the

op

inio

n t

hat

th

e

tran

sact

ion

is r

easo

nab

le.

36.5

44.3

BB

L is

th

e cr

edit

car

d s

ervi

ce p

rovi

der

wh

ich

th

e C

om

pan

y h

as a

lway

s u

sed

. Th

e

Co

mp

any

inve

sted

in v

ario

us

infr

astr

uct

ure

s to

max

imiz

e th

e b

enef

its

fro

m e

ffic

ien

t u

se o

f cre

dit

car

d p

aym

ent

syst

em. T

he

fees

pai

d t

o B

BL

are

at t

he

mar

ket

rate

.

The

Au

dit

Co

mm

itte

e h

as

the

op

inio

n t

hat

th

e

tran

sact

ion

is r

easo

nab

le.

92


Rela

ted

Co

mp

any

Rela

tio

nsh

ipD

escr

ipti

on

Am

ou

nt

(Bah

t M

illio

n)

Pri

cin

g P

olic

y R

easo

n fo

r th

e Tr

ansa

ctio

nFo

r th

e ye

aren

ded

31

Dec

200

5

For

the

year

end

ed 3

1

Dec

200

6

Ban

gko

k B

ank

Pcl.

(BB

L)

(Co

nt’d

)

-Re

nta

l of l

and

an

d

bu

ildin

g p

aid

to

BB

L

20.1

31.5

The

Co

mp

any

ren

ted

a b

uild

ing

fro

m B

BL

to s

up

po

rt it

s h

osp

ital

bu

sin

ess

and

to

use

for

par

kin

g a

nd

ser

vice

d a

par

tmen

ts fo

r

pat

ien

ts’ f

amili

es. T

he

ren

tal f

ees

are

reas

on

able

.

The

Tran

sact

ion

has

bee

app

rove

d b

y sh

areh

old

ers.

-In

tere

st o

n c

on

vert

ible

bo

nd

s p

aid

to

BB

L

17.5

17.5

The

Co

mp

any

pai

d in

tere

st o

n B

aht

550

mill

ion

pri

nci

pal

of c

onv

erti

ble

bo

nd

s.

Inte

rest

rat

es a

re in

acc

ord

ance

wit

h d

ebt

rest

ruct

uri

ng

ag

reem

ent.

The

Tran

sact

ion

has

bee

n

app

rove

d b

y th

e

shar

eho

lder

s.

Bu

mru

ng

rad

Inte

rnat

ion

al L

imit

ed

(BIL

)

Sub

sid

iary

wh

ich

th

e

Co

mp

any

ho

lds

51%

wit

h

com

mo

n d

irec

tor

Reve

nu

es

-C

on

sult

ing

fees

on

ho

spit

al m

anag

emen

t

rece

ived

fro

m B

IL

9.9

36.9

The

Co

mp

any

char

ges

th

e fe

es in

rel

atio

n

wit

h t

he

actu

al c

ost

of t

he

reso

urc

es

use

d.

The

Au

dit

Co

mm

itte

e h

as

the

op

inio

n t

hat

th

e

tran

sact

ion

is r

easo

nab

le.

93


Other transactions

On 15 May 2006, the Company’s shareholders approved waiver of the Company’s right to subscribe to BIL’s new

shares in order to allow Bangkok Bank Pcl to subscribe to new shares. Such waiver is a related transaction, with

the details as follows:

Related Company: Bangkok Bank Pcl. (BBL)

Relationship: BBL, including its subsidiary, Sinnsuptawee Asset Management

Company Limited, are major shareholders of the Company holding

136,158,279 shares or 18.65% of paid-up capital of the Company as of 20

January 2006. As a potential investor in Bumrungrad International

Limited (BIL), a 99.99% owned subsidiary of the Company, BBL is

considered a Connected Person.

Description: - Waiver of rights by the Company to subscribe to 1,176,469 shares in

BIL in order to allow BBL to subscribe to the shares.

- BIL offers new 1,176,469 shares to BBL.

Amount (Baht Million): The value of the Transaction is approximately Baht 180.6 million

Pricing Policy The subscription price of the new shares of BIL of Baht 153.52 was

calculated based on the accumulated cost of investment by BH in BIL

plus an agreed upon rate of return. This is in substantial premium to

BIL’s book value per share of Baht 120.18 as of 31 December 2005, which

is in line with IFA report.

Reasons for the transaction: The Transaction was approved by the shareholders’ meeting on 15 May

2006

2. The Necessity and Rationale of the Related Parties Transactions

The Company has entered into related parties transactions to support the normal business of the

Company. The rental of building from Bangkok Bank Pcl (as detailed in notes to financial statements

no. 7) has helped the Company to maintain and expand its international patient base. The corporate

contracts and insurance contracts have helped expand the Company’s client base.

3. Approval Process for Entering into Related Parties Transactions

For contracts which were entered into as part of normal courses of business, the transactions are

approved through the normal process in accordance with the Company’s policy. In addition, the

Audit Committee has considered the appropriateness and reasonableness of these transactions. For

other transactions which are significant in size as per the definition of the Stock Exchange of

Thailand, Board of Directors’ and/or shareholders’ approvals are obtained in accordance with rules

and regulations, where management and/or directors with vested interests are not allowed to vote.

94


4. Policy on Related Parties Transactions in the Future

The Company will continue to have related parties’ transactions, as these transactions are beneficial

to the Company as explained earlier. The Company will strictly abide by the Company’s policy, as well

as the rules and regulations of the Stock Exchange of Thailand. In addition, the Company will

emphasize the transparency of the related parties transactions, and will protect the highest benefit

of the Company.

7. Management Discussion and Analysis Page 20 - 22

8. Financial Statements

8.1 Financial Statements Page 25- 59

8.2 Audit Fees

(a) Audit Fees

For the year 2006, the Company and subsidiaries have paid the audit fee in the amount of

Bt 2,140,000. The 2006 audit fee has been approved by the shareholders’ meeting.

(b) Non-Audit Fees

For the year 2006, the Company has paid non-audit fee of Bt 85,000 as special audit fee for BH

Tower.

95


96


bh : annual report 2006

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