10. Connected Transactions

10.1 Necessary and Reason of Transaction

The connected transactions were financial assistance for the Company’s
working capital because of low liquidity. Terms and conditions of
transaction benefit the Company. For example, the Company pays interest
charges directly to a bank at the rate charged by the bank and if the
Company pays directly to the lender, the Company will pay interest at
the same rate as render borrowing rate without charge. Thus, the lender
requested the Company to provide a secondary land mortgage registration.

Above said transactions were approved by the Company’s Board of
Director, and reported to the Stock Exchange of Thailand (SET) following
SET’s regulations of connected transaction disclosure.

10.2 Policy of Connected Transaction Approval

The Company minimizes or avoids further financial assistance from
connected and/or related parties. The transactions below provide the
Company with credit facilities in case of unplanned working capital
shortages to meet immediate financial commitments. Upon entering such
transactions, controls are in effect pursuant to the Board of Director’s
resolution (meeting No. 2/2009, February 26, 2009) stating as follow:

1. On receiving or granting finance assistance transactions between
related parties, do as follows concerning amounts and procedures for
each transaction (Note:(1):

1.1 Between THB 1 M and THB 20 M; notify the SET immediately and obtain
approval from the BOD.

1.2 THB 20 M (approximately USD 0.57 M) or more; notify the SET
immediately, and obtain approval from the BOD and shareholders.

2. On purchasing goods or services, or entering into any kind of
contracts or agreements, such as purchase, service, joint venture, or
agent contract etc. do as follows concerning amounts and procedures
(Note: (2):

2.1 Between THB 1 M. and THB 20 M (approximately USD 28,000 to USD 0.57
M.); notify the SET immediately. Also, BOD approval may be needed in
certain cases, such as in transactions where the terms are not normal
commercial terms (except in the lease of immovable assets where the
lease period is not over 3 years), or in an asset/ service transaction.

2.2 THB 20 M (approximately USD 0.57 M) or more; notify the SET
immediately and obtain approval from BOD. Also, shareholders’ approval
may be needed in certain transactions such as in cases where the terms
are not normal commercial terms, or in an asset/ service transaction.

(1) The amount is referred to in the financial statement and/or SET or
SEC’s announcement and can be changed as appropriate.

(2) There is no need to inform or send the reports as mentioned above to
the secretary if the transaction is an ordinary and normal business
transaction with normal commercial term e.g. purchase of raw materials,
purchase of supplies used in processing, purchase-selling inventories.
However, if the transaction is done between the related parties, normal
commercial terms have to be applied, otherwise the procedure- as in 2.1
or 2.2 above, must be applied regardless of the value involved.

In the latter case, any involved parties must abstain from voting on the
transaction(s); and said transaction(s) must be scrutinized by the Audit
Committee and reported to the SET pursuant to SET regulations relating
to the disclosure of related parties transactions.

10.3 Connected Parties

+--------------+-------------------------+-----------------------------+
|   Tungkum    | Sintana                 | Authon                      |
|   Limited    |  Holdings Limited (SHL) | g Enterprises Limited (AEL) |
|   (TKL)      |                         |                             |
+==============+=========================+=============================+
|              |   SHL advanced to TKL   |   AEL provides services to  |
|  Transaction |   short-term for woking |   TKL as follow:            |
|   Type       |   capital of gold       |                             |
|              |   mining operations     | (1) To support TKL’s        |
|              |                         |     geological and back-up  |
|              |                         |     for exploration         |
|              |                         |                             |
|              |                         | (2) To advise on the plant  |
|              |                         |     processing facilities   |
|              |                         |     and expansion plans,    |
|              |                         |     hedging the companies’  |
|              |                         |     production and foreign  |
|              |                         |     currency                |
|              |                         |                             |
|              |                         | (3) To introduce sources of |
|              |                         |     overseas and local      |
|              |                         |     project financing and   |
|              |                         |     funding.                |
|              |                         |                             |
|              |                         | (4) To help sourcing on     |
|              |                         |     suppliers i.e. for      |
|              |                         |     purchase of chemical    |
|              |                         |     products, and           |
|              |                         |     construction companies  |
|              |                         |     for the site            |
|              |                         |     preparation work.       |
|              |                         |                             |
|              |                         | (5) To help expediting      |
|              |                         |     approval of TKL’s       |
|              |                         |     applications for mining |
|              |                         |     leases at each stage.   |
|              |                         |                             |
|              |                         | (6) To introduce new        |
|              |                         |     investors to TKL for    |
|              |                         |     equity participation.   |
|              |                         |                             |
|              |                         |   TKL pays monthly consult  |
|              |                         |   service fee to AEL        |
+--------------+-------------------------+-----------------------------+
|              |   The outstanding       |   Services fee for year     |
|  Transaction |   balance of short term |   2009 as follow:           |
|   Value &    |   loan as at December   |                             |
|   Criteria   |   31, 2009 amount Baht  | (1) Management fee Baht     |
|   on Net     |   82.04 million         |     4.68 million (monthly   |
|   Tangible   |                         |     Baht 390,000)           |
|   Assets     |                         |                             |
|              |                         | (2) Car Rental Baht 1.20    |
|              |                         |     million (monthly Baht   |
|              |                         |     100,000)                |
|              |                         |                             |
|              |                         | (3) House Allowance Baht    |
|              |                         |     0.696 million (monthly  |
|              |                         |     Baht 58,000)            |
|              |                         |                             |
|              |                         |   Total Baht 6.576 million  |
|              |                         |   (monthly Baht 548,000)    |
|              |                         |                             |
|              |                         |   This value represents     |
|              |                         |   less than 3% of the       |
|              |                         |   latest audited (30 June   |
|              |                         |   2008) net tangible assets |
|              |                         |   of THL as per the Stock   |
|              |                         |   Exchange of Thailand      |
|              |                         |   (SET)’s regulation (ref:  |
|              |                         |   Bor Jor: 52-2-01, clause  |
|              |                         |   9 (1) and (2), page 122). |
|              |                         |   The Transaction Value     |
|              |                         |   divided by THL’s Net      |
|              |                         |   Tangible Assets derives a |
|              |                         |   percentage of 0.66%.      |
|              |                         |                             |
|              |                         |   AEL started service to    |
|              |                         |   TKL since August 1, 2008. |
+--------------+-------------------------+-----------------------------+
|   Reason for |   The financial         |   Before that, SHL provided |
|              |   assistance rendered   |   service to TKL            |
|  Transaction |   was used primarily to |                             |
|              |   support the high      |   Then, THL and TKL agreed  |
|              |   strength aggregate    |   to have AEL replace SHL   |
|              |   gold mine operations  |   position in order to      |
|              |   and as TKL’s working  |   reduce the conflict of    |
|              |   capital.              |   interest                  |
|              |                         |                             |
|              |                         |   The term and condition of |
|              |                         |   the service fees was      |
|              |                         |   reasonable based on       |
|              |                         |   appropriateness and       |
|              |                         |   fairness.                 |
+--------------+-------------------------+-----------------------------+
| Terms and    |   1) The facility was   |                             |
| Conditions   |   made exclusively for  |                             |
| of           |   TKL for working       |                             |
| Transaction  |   capital.              |                             |
|              |                         |                             |
|              |   2) SHL advanced to    |                             |
|              |   TKL without interest  |                             |
|              |   and any fee charge.   |                             |
|              |                         |                             |
|              |   3) No collateral.     |                             |
+--------------+-------------------------+-----------------------------+
|   Scope of   |   TKL is subsidiary of  |   Mr. R. Ng Wai Choi is a   |
|   Connected  |   THL SHL is major      |   Managing Director and     |
|   Persons/   |   THL’s shareholder.    |   shareholder of THL but    |
|   R          |                         |   does neither hold shares  |
| elationships |   Mr. Ronald Ng was     |   nor being a director in   |
|              |   THL’s shareholder and |   AEL. However, he has      |
|              |   directors of both THL |   controlled the TKL’s      |
|              |   and SHL at the time   |   management (THL hold      |
|              |   of the transaction.   |   shares 98.86% in TKL) and |
|              |                         |   TKL pay AEL for the       |
|              |   Per THL policy, these |   consultancy fee, and AEL  |
|              |   persons abstained     |   pay the consultancy fees  |
|              |   from voting in        |   to him. Thus he is a      |
|              |   connection with this  |   related person who        |
|              |   transaction.          |   benefits from this        |
|              |                         |   transaction.              |
+--------------+-------------------------+-----------------------------+
|              |   This transaction was  |   This transaction was      |
|  Transaction |   reported in THL’s     |   reported in THL’s annual  |
|              |   annual and quaterly   |   and quaterly financial    |
| Transparency |   financial statements  |   statements and submitted  |
|   and        |   and submitted         |   quarterly to the SET.     |
|   approval   |   quarterly to the SET. |   This transaction was      |
|   process    |   This transaction was  |   reviewed by an external   |
|              |   reviewed by an        |   auditor, legal counsel,   |
|              |   external auditor,     |   THL’s Audit Committee,    |
|              |   legal counsel, THL’s  |   and Board of Directors    |
|              |   Audit Committee, and  |   who deemed the said       |
|              |   Board of Directors    |   transaction to be fair,   |
|              |   who deemed the said   |   reasonable, and in        |
|              |   transaction to be     |   compliance with generally |
|              |   fair, reasonable, and |   acceptable accounting     |
|              |   in compliance with    |   procedures.               |
|              |   generally acceptable  |                             |
|              |   accounting            |                             |
|              |   procedures.           |                             |
+--------------+-------------------------+-----------------------------+

10.4 CONNECTED TRANSACTIONS WITHIN THE GROUP

10.4.1 Regular Commercial or Business-Supporting Items

During the year, the following significant transactions were engaged in
the normal course of business:

10.4.2 Property Leases

  -------------- -------------- ------------- ------------- ---------------
  Subsidiaries   Tungkum        Cholsin       Sky Cliff     Sea Minerals
                 Limited        Limited       Limited       Limited

  Rental Income  1,200,000.00   660,000.00    0.00          60,000.00
  (Baht)                                                    
  -------------- -------------- ------------- ------------- ---------------

The rates for such space leases were compatible with market rates.

10.4.3 Financial Assistance to Subsidiaries

The transactions within the Group relate mainly to inter-company loans
from Tongkah Harbour Public Company Limited to the subsidiaries. The
terms of agreement between the parent entity and the subsidiaries are
mainly as follows:

Transaction type : Long term loan

Reason for loan : To provide long term capital for the subsidiary’s
projects.

Terms : Interest charged on the average banking interest cost.

Disclosure : Reported to the SET and shareholders, quarterly and

  annually as incurred.

Approval Process : Reviewed by auditors, legal counsel, Tongkah Harbour
Public Company Limited’s Audit Committee and Board of Directors who
deemed said transaction to be fair, reasonable, and in compliance with
generally acceptable accounting procedures.

+-----------+-------------+--------------+-------------+--------------+
|   Company | Tungkum Li  | Cholsin L    |   Sky Cliff | Se           |
|   Name    | mited (TKL) | imited (CSL) |   Limited   | a Minerals L |
|           |             |              |   (SCL)     | imited (SML) |
+-----------+-------------+--------------+-------------+--------------+
|           |   Baht      |   Baht       |   Baht      |   Baht       |
|  Balances |   156       |   7          |   129       |   (22        |
|           | ,192,792.78 | 5,250,520.63 | ,506,565.07 | ,685,037.70) |
|   31 Dec  |             |              |             |              |
|   2009    |   Baht      |   Baht       |   Baht      |   Baht       |
|           |   1         |   4          |   27        |   (1         |
|           | ,279,699.36 | 5,313,695.47 | ,073,792.08 | ,523,737.14) |
| Principal |             |              |             |              |
|   due     |             |              |             |              |
|   from    |             |              |             |              |
|   (due    |             |              |             |              |
|   to)     |             |              |             |              |
|           |             |              |             |              |
|   Acc.    |             |              |             |              |
|           |             |              |             |              |
|  Interest |             |              |             |              |
|           |             |              |             |              |
|   R       |             |              |             |              |
| eceivable |             |              |             |              |
|           |             |              |             |              |
| (payable) |             |              |             |              |
+-----------+-------------+--------------+-------------+--------------+
|           |   0.00      |   Baht       |   0.00      |   0.00       |
| Provision |             |   10         |             |              |
|           |             | 8,982,006.47 |             |              |
+-----------+-------------+--------------+-------------+--------------+
|   Scope   |   Share     |   Share      |   Share     |   Share      |
|   of      |   holders   |   holders    |   holders   |   holders    |
|           |   98.86%    |   72.10%     |   75.00%    |   99.99%     |
| Connected |             |              |             |              |
|           |   Joint     |   Joint      |   Joint     |   Joint      |
|  Persons/ |   directors |   directors  |   directors |   directors  |
|   Relat   |   and       |   and        |   and       |   and        |
| ion-ships |   s         |              |   s         |              |
|           | hareholders | shareholders | hareholders | shareholders |
+-----------+-------------+--------------+-------------+--------------+

10.5 Future of Connected Transactions

The Company operates business based on Company benefit. Connected
transactions with related companies or parties (financial assistance)
will occur in significant circumstance. In future, the Company has no
intent to do connected transactions, except where the Company encounters
severe circumstances. However, the Company follows the policy of
connected transaction approval as stated in clause 2.11.2 In addition,
the Company will report connected transactions to SET.