SET Announcements

NOTE 17 - INCOME AND COST OF CONSTRUCTION ACTIVITIES In consolidated financial statements of 1999, the construction income of a joint venture which the company has 25% of profit sharing have included gain from exchange rate arising from increasing of the exchange rate which was identified in the contracts of foreign currency income portion in approximate amount of Baht 59.77 million. The project value of the said joint venture consists of Baht and Yen currency portions, the value of project will vary in accordance with foreign exchange rate. If using the exchange rate identified in construction contract in translation, the project value was lower than the revised budget cost. When using the exchange rate as at March 31, 1999 in translation, the project value is still higher than estimated budget cost. In 1998, the parent company had made the adjustment to reduce the construction income in approximate amount of Baht 93 million, according to the cost overrun arising from increase in costs of construction materials, wages, subcontractors together with construction plan of project delayed because of the reserve structure in the construction area. The project which the company has already estimated and realized the loss in 1997 because the estimation of total contract cost exceeded the total contract revenue, also incurred additional cost in the amount of Baht 90 million. NOTE 18 - ESTIMATION OF COST OF CONSTRUCTION ACTIVITIES The joint venture which the company has 35% of profit sharing expected that its cost of construction will be increased from the previous estimation. The negotiation of cost overrun reimbursement between the joint venture and employer is in the process. The joint venture believe that it can claim this reimbursement. The said negotiation can not be determined at this moment. Therefore, the joint venture has not adjust its estimated cost of construction and reduce its revenue. NOTE 19 - GAIN (LOSS) FROM CURRENCY EXCHANGE The company recorded gain (loss) from currency exchange for the 3 month periods ended March 31, as follows: Consolidated CH. Karnchang Public Co., Ltd. (Amounts : Thousand Baht) 1999 1998 1999 1998 Gain (Loss) from currency exchange - Realized (42,512) 92,950 - (6,602) - Unrealized 87,731 383,781 - 3,282 Total 45,219 476,731 - (3,320) As at March 31, the company, subsidiaries and joint ventures had net liabilities in foreign currencies equivalent to USD currency as follows: 1999 1998 CH. Karnchang Public Co., Ltd. 35,273 47,991 CH. Karnchang Public Co., Ltd. Subsidiary Companies and Joint Ventures 85,621 95,348 In 1999 and 1998, the company secure the risk of exchange rate for long term loans in the amount of USD 35.23 million and USD 47.8 million, respectively. In 1999 and 1998, the company, subsidiaries and joint ventures had a contract to secure the risk from exchange rate in the amount of USD 39.05 million and USD 50.7 million, respectively. NOTE 20 - PROFIT SHARING In the first quarter of 1998, two joint ventures had completed its projects and paid the first and second profit sharing to the participants in the amount of Baht 20 million and Baht 40 million, respectively, as the letters dated February 2, 1998 and January 10, 1998, respectively. NOTE 21 - COMMITMENTS AND CONTINGENT LIABILITIES As at March 31, commitments and contingent liabilities are as follows: - The parent company had commitments from guarantee loans, letter of credit, letters of guarantee issued by banks and discounted notes to joint venture which the company is one of the participants, in the approximate amount of Baht 3,862 million and Baht 6,244 million in 1999 and 1998, respectively. - In 1999 the joint ventures have unused letters of credit with banks in the approximate amount of Baht 931.65 million. The commitments from letter of guarantee issued by banks are as follows: (Amounts : Thousand Baht) Consolidated CH. Karnchang Public Co., Ltd. 1999 1998 1999 1998 Guarantee of construction contract, bid, and payment 7,631,002 6,867,454 1,893,623 1,373,073 Advance Payment Bond and Retention 4,256,612 4,827,137 214,853 213,521 Guarantee of loss revenue due to damage caused by transportation, retention bond, rental equipment, electricity and letter of credit 942,165 958,398 665,108 588,223 One of the joint venture transferred its right to received work value from employer to secured its bank guarantee. Foreign exchange In 1999 a joint venture which the company has 35% of profit sharing has commitment with banks from forward contracts in amount of USD 10.37 million and has made forward contracts for speculation purpose in amount of USD 21 million with a commercial bank which may raise gain or loss from exchange rate in the future. The contracts will be due on October 1999 and November 1999. In 1999 the joint venture which the company has 25% of profit sharing has made 17 foreign exchange forward contracts in totalling amount of Yen 1,850 million with a commercial bank and pledged by fixed deposit in amount of Baht 31.5 million. This contract may raise gain or loss from exchange rate in the future. These contracts will be due in 1999 and 2000. In 1998 consolidated financial statements, joint venture had made foreign exchange forward contracts for contingent liabilities in foreign currency as follows: Foreign Currency Amounts : Thousand USD 3,228 FRANC 2,585 YEN 13,340 Other contracts In 1999 subsidiary company has the outstanding balance of sale construction supplies contract in the approximate amount of Baht 3.4 million and from other rental contracts. A joint venture which the company has 35% of profit sharing has made 2 land rental agreements for 3 year and 4 year periods. The rental rate is Baht 13,500 per month per rai and Baht 618,000 per year , respectively. In 1999 a joint venture which the company has 25% of profit sharing has the outstanding balance of purchase contract with subsidiary company in the approximate amount of Baht 4.19 million and has commitment from vehicle rental agreement in the approximate amount of Baht 36.68 million and commitment from land rental agreement for constructing a factory producing construction supplies and for located a temporary office in the approximate amount of Baht 26.99 miillion. Other matters In 1999 a joint venture which the company has 59.99% of profit sharing was claimed to compensate on its staff lay off in the approximate amount of Baht 4.67 million. The case is in the consideration of court. In 1999 a joint venture which the company has 35% of profit sharing has a claim against the employer. This claim is under consideration of employer's approval of work done which the joint venture has cost incurred in the approximate amount of Baht 70 million. NOTE 22 - RECLASSIFICATION Certain transactions for 1998 financial statements have been reclassified to conform with the 1999's financial statements presentation. Certain transactions for 1999 financial statements have been reclassified in accordance with generally accepted accounting principles applied for financial statements of fiscal year 1999. NOTE 23 - DISCLOSURE OF SEGMENT INFORMATION The parent company, subsidiaries and joint ventures operate their constructions only in Bangkok and region. Therefore, segment information is not available. NOTE 24 - SUBSEQUENT EVENTS The parent company 1999 Ordinary shareholders' meeting held on April 30, 1999, the solution was passed approving appropriated legal reserve by 5% of net profit. The joint venture which the company has 59.99% of profit sharing paid the first profit sharing from completed project to the participants according to the notice dated April 20, 1999 in amount of Baht 80 million. NOTE 25 - IMPROVEMENT COMPUTERIZED SYSTEM FOR YEAR 2000 (Y2K) (UNAUDITED AND NOT FORMING PART OF AUDITORS' REPORT) The company started computer improvement to solve problem of Y2K. As at March 31, 1999 the improvement has been finished. The company recorded these expenses in the incurred period. As at March 31, 1999 the company recorded these expenses in totalling amount of Baht 1.67 million. The company still having risk in dealing with others who may be unable to solve the computerized system in time. The ultimate effect can not presently be determined but not expected to be material. Major subsidiary and joint venture, in overall have considered specific critical system which impact their ongoing operation and have considered that there is no impact of year 2000 to their operations. The same as parent company, they still having risk in dealing with others who maybe unable to solve the computerized system in time. The ultimate effect can not presently be determined but not expected to be material.