) Related Party Transaction

- 14. Mr. Sombat He is a director of the Transaction with Pathum Thani Kitjalaksana Company. Water which is the Company's - He is a director of CH. subsidiary Karnchang which is the - Consulting fees for 60,000 - - This represents the consulting fees for contact and - Pathum Thani Water has no Company's major operations of Pathum coordination with banks and planning for the restructuring personnel with know-how in business shareholder, holding 35.3 Thani Water of Pathum Thani Water for the year 2007, whereby Pathum restructuring. In addition, Mr. percent of shares in the Thani Water terminated such consultation service on 24 Sombat Kitjalaksana has knowledge, Company. July 2007. experience and know-how in terms of - He is a shareholder of the business restructuring. Company, holding shares representing 0 percent (2.0 million shares). - He was a director of Pathum Thani Water prior to 1 October 2006. Person/Juristic 2007 2008 Nine- Person who may Transaction Month Period Relationship Nature of Transaction Necessity/Justification Pricing Policy have conflict of Value Transaction interest (Baht) Value (Baht) - He is a director of the 15. Mr. Prasert Transaction with Pathum Thani Marittanaporn Company. Water which is the Company's - He is a director of CH. subsidiary Karnchang which is the - Consulting fees for 60,000 - - This represents the consulting fees for contact and - Pathum Thani Water has no Company's major operations of Pathum coordination with banks and planning for the restructuring personnel with know-how in business shareholder, holding 35.3 Thani Water of Pathum Thani Water for the year 2007, whereby Pathum restructuring. In addition, Mr. Prasert percent of shares in the Thani Water terminated such consultation service on 24 Marittanaporn has knowledge, Company. July 2007. experience and know-how in terms of - He is a shareholder of the business restructuring. Company, holding shares representing 0 percent (2.0 million shares). - He was a director of Pathum Thani Water prior to 1 October 2006. 14. Summary of Financial Statements during the Past 3 years and the Current Year Until the Third Quarter of 2008 Balance sheets Description Separate financial Consolidated financial statements statements 31 Dec 05 31 Dec 06 31 Dec 07 31 Dec 08 Baht % Baht % Baht % Baht % Thousand Thousand Thousand Thousand CURRENT ASSETS Cash and deposits at financial institutions 387,595 3.74 356,130 3.33 674,895 3.61 1,079,737 5.85 Current investments 285,000 2.75 695,000 51.6 847,258 4.54 594,982 3.23 Trade accounts receivable 126,433 1.22 217,596 2.04 92,704 1.57 330,490 1.79 Raw materials and supplies - - 6,685 0.06 14,117 0.08 17,246 0.09 Advance payment for construction - related parties - - - - 42,592 0.23 13,354 0.07 Other receivable -related parties 10,285 0.10 - - 16 0.00 535 0.00 Other current assets Interest receivable 4,542 0.04 10,223 0.10 8,172 0.04 2,834 0.02 Prepaid insurance premium 1,663 0.02 - - - - - - Prepaid expenses 2,709 0.03 18,004 17.0 33,768 0.18 23,123 0.13 Prepaid interest expenses - - - - 1,672 0.01 - - Others 2,216 0.02 3,023 0.03 42,553 0.23 31,930 0.17 TOTAL CURRENT ASSETS 820,443 7.92 1,306,661 12.23 1,957,747 10.48 2,094,231 11.35 NON-CURRENT ASSETS Restricted bank deposits - - - - 184,483 0.99 256,005 1.39 Property, plant and equipment - net 9,536,450 92.04 9,355,964 87.59 9,196,857 49.23 8,992,348 48.73 Assets for production of tap water -net - - - - 4,258,205 22.79 4,168,549 22.59 Right to produce and distribute tap water-net - - - - 3,079,619 16.49 2,933,276 15.90 Withholding income tax 4,035 0.04 4,272 0.04 3,634 0.02 2,560 0.01 Other non-current assets 36 0.00 15,048 0.14 604 0.00 5,339 0.03 TOTAL NON-CURRENT ASSETS 9,540,521 92.08 9,375,284 87.77 16,723,402 89.52 16,358,077 88.65 TOTAL ASSETS 10,360,964 100.00 10,681,945 100.00 18,681,149 100.00 18,452,308 100.00 CURRENT LIABILITIES Overdrafts and short-term loans from financial institutions - - - - 3,004,836 16.08 14,899 0.08 Trade accounts payables Related parties 85,610 0.83 260 0.00 - - - - Unrelated parties 10,506 0.10 31,503 0.29 58,897 0.32 44,791 0.24 Payables to related parties - - - - 137,340 0.74 18 0.00 Retention payable Related parties 6,600 0.06 - - 1,251 0.01 1,193 0.01 Unrelated parties 2,080 0.02 2,150 0.02 3,177 0.02 3,819 0.02 Long-term loans from financial institutions due in one year 140,000 1.35 700,000 6.55 1,411,800 7.56 1,547,631 8.39 Other current liabilities Accrued expenses 31,943 0.31 18,428 0.17 47,440 0.25 37,614 0.20 Unbilled output tax 8,944 0.09 9,940 0.09 20,339 0.11 21,818 0.12 Accrued value added tax 6,387 0.06 8,145 0.08 10,606 0.05 16,492 0.09 Others 1,077 0.01 1,659 0.02 9,378 0.05 2,708 0.01 TOTAL CURRENT LIABILITIES 293,147 2.83 772,085 7.22 4,705,064 25.19 1,690,983 9.16 NON-CURRENT LIABILITIES Long-term loans from financial institutions - net of portions due in one year 6,720,000 64.86 6,020,000 56.36 9,261,312 49.58 8,218,122 44.54 TOTAL NON-CURRENT LIABILITIES 6,720,000 64.86 6,020,000 56.36 9,261,312 49.58 8,218,122 44.54 TOTAL LIABILITIES 7,013,147 67.69 6,792,085 63.58 13,966,376 74.76 9,909,105 53.70 SHAREHOLDERS' EQUITY Issued and fully paid-up shares 3,000,000 28.96 3,250,000 30.43 3,290,000 17.61 3,990,000 21.62 Premium on shares - - 475,000 4.45 483,000 2.59 2,637,770 14.30 Retained earnings Appropriated for statutory reserve 17,882 0.16 51,602 0.48 399,000 2.14 399,000 2.16 Unappropriated 329,935 3.18 713,621 6.68 1,123,775 6.02 2,092,619 11.34 Difference on reorganisation of business of the Group - - (600,363) (5.62) (600,363) (3.21) (600,363) (3.25) Minority interest - equity attributable to minority shareholders of subsidiaries - - - - 19,361 0.10 24,177 0.13 TOTAL SHAREHOLDERS' EQUITY 3,347,817 32.31 3,889,860 36.42 4,714,773 25.24 8,543,203 46.30 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 10,360,964 100.00 10,681,945 100.00 18,681,149 100.00 18,452,308 100.00 Income statement Separate financial Consolidate Financial Statement statement 2005 2006 2007 9 month of 2008 Baht % Baht % Baht % Baht % Thousand Thousand Thousand Thousand REVENUES Revenue from sales of tap water 1,356,031 99.69 1,697,802 98.58 2,567,034 97.88 2,620,362 98.16 Service income - - - - 23,037 0.88 25,907 0.97 Interest income 4,217 0.31 24,385 1.42 32,895 1.25 21,289 0.80 Other income - - - - 266 0.01 1,993 0.07 TOTAL REVENUES 1,360,248 100.00 1,722,187 100.00 2,623,232 100.00 2,669,551 100.00 EXPENSES Cost of sales of tap water 628,130 46.18 496,142 28.80 780,802 29.76 867,266 32.49 Selling and administrative expenses 52,186 3.83 105,062 6.10 158,048 6.02 133,592 5.00 Amortization of the right to produce and distribute tap water - - - - 89,490 3.41 146,343 5.48 TOTAL EXPENSES 680,316 50.01 601,204 34.91 1,028,340 39.20 1,147,201 42.97 Earnings before interest and tax 679,932 49.99 1,120,983 65.09 1,594,892 60.80 1,522,350 57.03 Interest expense (344,895) 25.36 (437,016) 25.38 (637,644) 24.31 (542,129) 20.31 Corporate income tax - - (2,071) 0.12 (14,037) 0.54 (4,560) 0.17 Earnings after corporate income tax 335,037 24.63 681,896 39.59 943,211 35.96 975,661 36.55 Net profit attributable to existing shareholders - - (7,490) 0.43 - - - - Net profit of minority interest in subsidiaries - - - - (23,160) 0.88 (6,817) 0.26 Net income for the period 335,037 24.63 674,406 39.16 920,051 35.07 968,844 36.29 Primary earnings per share (Baht) 0.11 0.21 0.28 0.27 Weighted average number of ordinary shares (shares) 3,000,000,000 3,211,482,384 3,253,015,421 3,627,226,277 Cash Flow Statements Separate Description financial Consolidated financial statements statements 9 months 2005 2006 2007 of 2008 Cash Flow from Operating Activities Net Profit 335,037 674,406 920,051 968,844 Adjustment to reconcile net income to net cash derived from (used in) operating activities Depreciation and amortization 223,767 255,555 401,269 428,361 Amortization of cost of the right to produce and distribute tap water - - 89,490 146,343 Loss from written off of equipment 4 772 8 (343) Unrealised profit (loss) from foreign exchange - (184) - - Net profit of minority interest in subsidiaries - - 23,160 6,817 Operating profit before change in operating assets and liabilities (Increase) decrease in operating assets 558,808 930,549 1,433,978 1,550,022 Trade accounts receivable (45,055) (91,163) 40,609 (37,770) Accrued revenues 196,347 - - - Other receivable - related parties (4,092) 34,090 (16) (519) Raw materials and supplies - (3,669) 1,914 (3,129) Other current assets 1,923 (18,805) (23,220) 28,262 Other non-current assets (4,047) (215) 2,620 (3,661) Increase (decrease) in operating liabilities Trade accounts payable - related parties 31,526 (96,824) (260) - Trade accounts payable - unrelated parties 10,506 5,067 8,520 (14,106) Accounts payable - related parties - - (495,047) (137,322) Other current liabilities 15,049 (18,782) 14,726 (9,131) Net cash from operating activities 760,965 740,248 983,824 1,372,646 Cash flow from (used in) Investment Activities Current investments (285,000) (410,000) (101,759) 252,276 Restricted bank deposits - - 19,485 (71,522) Advance payment for construction fees - related parties - - (42,592) 29,239 Net cash payments for acquisition of investment in subsidiaries - (660,539) (3,498,488) - Net cash payments for acquisition of investment in subsidiaries from minority shareholders - - (360,894) - property, plant and equipment (6,541) (9,363) (101,426) (46,425) Assets for tap water production that must be transferred at end of concession - - (276,843) (87,778) Proceeds from disposal equipment 258 1,535 - 350 Deposits for land purchase - (15,000) - - Retention payable 99 (6,345) 1,642 583 Net cash from (used in) investment activities (291,184) (1,099,712) (4,360,875) 76,723 Cash flow derived from (used in) financing activities Bank overdrafts and short-term loans from financial institutions - - 2,983,891 (2,989,937) Cash receipts from issuance of additional new shares - 725,000 48,000 2,854,770 Long-term loans from financial institutions (140,000) (140,000) 826,424 (907,359) Dividend payment (105,000) (257,000) (162,500) (2,001) Net cash derived from (used in) financing activities (245,000) 328,000 3,695,815 (1,044,527) Cash and cash equivalents - net 224,781 (31,464) 318,764 404,842 Cash and cash equivalents at the beginning of period 162,814 387,594 356,130 674,895 Cash and cash equivalents at the end of period 387,595 356,130 674,895 1,079,737 Supplemental cash flows information Interest expenses 344,650 435,402 633,773 555,625 Interest expenses recorded as part of assets for production of tap water - - 15,995 30,368 Withholding tax 290 7,450 15,292 19,501 Financial Radio Audited Reviewed 31 Dec 05 31 Dec 06 31 Dec 07 30 Sep 08 Liquidity ratios; Current ratio (times) 2.80 1.69 0.42 1.24 Quick ratio (times) 2.73 1.64 0.39 1.19 Cash Flow current ratio (times) 2.88 1.39 0.36 0.42 Trade accounts receivable turnover (times) 13.05 9.87 10.15 8.34 Raw materials and supplies turnover(times) - 148.43 75.07 54.51 Trade Account payable turnover (times) 8.36 7.76 17.22 21.30 Average collection period (days) 27.97 36.98 35.96 32.85 Raw materials and supplies turnover period (days) - 2.46 4.86 5.03 Average debt servicing period (days) 43.64 47.04 21.19 12.86 Cash turnover (days) (15.67) (7.60) 19.63 25.61 Profitability ratios; Gross profit margin (%) 53.68 70.78 69.85 67.23 Operating Profit (%) 49.99 65.09 60.80 57.03 Cash to profitability Ratio (%) 111.92 66.04 61.69 91.60 Net Profit Margin (%) 24.63 39.16 35.07 36.29 Return on equity (%) 10.36 18.64 21.39 15.13 Efficiency ratios; Return on assets (%) 3.26 6.41 6.27 7.06 Return on Fixed assets (%) 5.79 9.84 11.58 14.05 Assets turnover (times) 0.13 0.16 0.18 0.19 Financial ratios; Debt to equity ratio 2.09 1.75 2.96 1.16 Interest serviceability (times) 3.21 2.70 2.51 3.36 Debt service ratio (times) 1.42 0.49 0.18 1.20 Dividend Payout Ratio (%) 31.34 38.11 17.66 N/A Management Discussion and Analysis Overview of Operations in the Past In 2006, the Company invested in 100 percent of ordinary shares in WaterFlow Co., Ltd. ("WaterFlow") and amended the Operation & Maintenance Agreement (O&M) with WaterFlow in April 2006, by reducing service fee from Baht 3.56 per cubic meter which included the costs of labor, electricity, chemical substances and supplies for tap water production to Baht 0.25 per cubic meter, covering the costs of labor and supplies for tap water production only, whereby the Company would be responsible for the costs of electricity and chemical substances in the production. In this regard, the Company prepared the consolidated financial statements of the Company and WaterFlow from 1 March 2006 onwards. In June and December 2007, the Company invested in ordinary shares in Pathum Thani Water Co., Ltd. ("Pathum Thani Water") with the shareholding ratio of 98.0 percent, totaling Baht 3,998.4 million, by borrowing loans from financial institutions in full. After the restructuring, from 1 July 2007, the Company had a duty to prepare the consolidated financial statements that included the operation results of Pathum Thani Water and BJT Water Co., Ltd. ("BJT"), a subsidiary of Pathum Thani Water. Based on the Company's business restructuring, the operation results of the Company and its subsidiaries improved consistently. Only during 2005, the Company's gross profit margin and net profit margin were low because of a one-time expense for termination of a Technical Service Agreement with Thames Water International Service Ltd. and a Local Co-ordination Agreement with CH. Karnchang Public Company Limited, in a total of Baht 126 million. Analysis of Operation Results A. Revenue from Sales of Tap Water In 2007, the Company and its subsidiaries had revenue from sales of tap water totaling Baht 2,567.03 million, representing an increase by Baht 869.23 million or 51.20 percent as compared to that of 2006. The increased revenue from sales of tap water was from the increasing in the Company's total sales volume of tap water and the increasing in the tap water charge rates to Baht 21.48 per cubic meter. Moreover, the revenue of 2007 also includes the revenue from of Pathum Thani Water from July 2007 to December 2007. During nine-month period of 2008, the Company and its subsidiaries had revenue from sales of tap water in total of Baht 2,620.36 million, representing an increase by Baht 854.15 million or 48.36 percent as compared to that of the same period in previous year, which can be explained as follows: 1) During nine-month period of 2007, the Company included sales revenue of Pathum Thani Water in the consolidated financial statements for three months from July 2007 to September 2007, amounting to Baht 295.13 million. 2) The tap water sale volume of the Company increased by 12.81 million cubic meters or 18.96 percent as compared to that of the nine-month period in the previous year. 3) The tap water sales volume of Pathum Thani Water in the third quarter 2008 increased by 1.0 million cubic meters or 3.19 percent (more)