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Auditors' Report To the Shareholders of CH. Karnchang Public Co., Ltd. I have audited the consolidated balance sheets of CH. Karnchang Public Company Limited, subsidiaries and joint ventures as at December 31, 1999 and 1998, and the related consolidated statements of income, changes in shareholders' equity and retained earnings, and consolidated statements of cash flows for the years then ended and the financial statements of CH. Karnchang Public Co.,Ltd. for the same years then ended. The company's management are responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to express an opinion on these financial statements based on my audit. Except as discussed in the fourth and fifth paragraphs, 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 statements presentation. I believe that my audit provides a reasonable basis for my opinion. In 1998, the parent company did not recorded the allowance for doubtful account for accounts receivable from the related joint venture, which are overdue over 1 year in the approximated amount of Baht 324.94 million, therefore I express the qualified opinion to the financial statements in 1998 according to the report dated February 15, 1999. However, the parent company had adjusted the allowance for doubtful debt of the said transaction in the financial statements of 1999. As discussed in Note 16 to the financial statements. The joint venture which the company has 35% of profit sharing, whose project will be completed in 2000, had recorded the allowance for impairment of fixed assets which are expected to be sold at price lower than net book value in the approximated amount, by the proportion of profit sharing, of Baht 49 million. The joint venture can not estimated allowance for impairment of fixed assets for the remaining amount as at December 31, 1999 in the financial statements in the approximated amount of Baht 375.9 million. As discussed in Note 16 to the financial statements, I was unable to apply any audit procedure to obtain the sufficient evidences for the cost of land of a subsidiary which the company had invested in 1999, land was recorded at cost in the approximated amount of Baht 92.3 million and the appraisal value from Land Department is in the approximated amount of Baht 53.6 million. In addition, at present this subsidiary produces and sells most of the products to the joint venture whose project is going to finish as mentioned in the fourth paragraph and the subsidiary can not estimate the allowance for impairment of other fixed assets in the consolidated statement as at December 31, 1999 in the approximated amount of Baht 172.12 million. In my opinion, except for the effects on the 1999 financial statements of such adjustments, if any, as might have been determined to be necessary had I been able to apply adequate procedures to the matter discussed in the fourth and fifth paragraph and except for the effects on the financial statements of 1998 of the matter discussed in the third paragraph, the consolidated financial statements present fairly, in all material respects, the financial position of CH. Karnchang Public Co.,Ltd., subsidiaries and joint ventures as at December 31, 1999 and 1998, and the results of their operations and cash flows for the years then ended and of CH. Karnchang Public Co.,Ltd., in conformity with generally accepted accounting principles . As discusses in Note 5 to the financial statements. Ch. Karnchang Public Company Limited, subsidiaries and joint ventures had changed their accounting policy for deferred charges in 1999. I draw attention to Note 1 to the financial statements. The operations of CH. Karnchang Public Company Limited, subsidiaries and joint ventures may continue to be influenced by the economic conditions in Thailand and the Asia Pacific Region in general. Supot Singhasaneh Certified Public Accountant Registrative number 2826 KPMG Audit (Thailand) Limited Bangkok, February 18, 2000 CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES BALANCE SHEETS AS AT DECEMBER 31, 1999 AND 1998 Amounts : Baht Consolidated CH. Karnchang Public Co., Ltd. ASSETS 1999 1998 1999 1998 RESTATED RESTATED CURRENT ASSETS Cash on hand and at banks (Note 6) 4,055,912,090 5,059,682,837 1,421,787,831 1,942,289,674 Short - term investments (Note 7) 202,420,442 212,281,559 601,711 574,211 Investment in marketable securities (Note 4) 977,125 7,958,624 977,125 7,958,625 Accounts receivable - net (Note 8) 945,051,382 2,296,581,355 658,134,638 1,312,413,505 Accounts receivable and loan to subsidiary, related companies and joint ventures 572,391,979 602,776,253 692,393,729 812,872,737 Construction contract in progress - net (Note 9) 2,367,462,505 3,767,313,466 - 347,697,662 Inventories,supplies for construction and construction in progress - net (Notes 4 and 10) 68,012,247 404,731,246 21,162,069 20,422,485 Advance payment to subcontractors - net (Note 11) 88,569,722 188,227,375 24,856,451 47,045,174 Advance payment 77,645,060 15,212,696 - - Accrued interest income 38,122,194 - 52,525,789 18,482,068 Accrued income 14,263,923 2,361,658 14,263,923 30,785,674 Refundable input tax - net (Note 12) 125,313,864 189,691,373 - - Unbilled input tax 73,462,043 92,932,828 13,069,962 11,817,895 Other current assets (Note 13) 39,712,304 154,496,397 12,488,276 12,772,388 Total Current Assets 8,669,316,880 12,994,247,667 2,912,261,504 4,565,132,098 Notes receivable-finance companies (Note 14) - 42,117,187 - - Investments in subsidiary companies and joint ventures (Notes 4 and 15) - - 1,126,290,100 1,290,988,189 Investments in associated related and other companies (Notes 4 and 15) 2,163,530,776 2,245,623,440 1,984,614,688 2,101,248,400 Property, plant and equipment-net (Notes 4 and 16) 1,483,364,505 2,095,713,596 439,356,814 528,141,477 Investment on land (Note 17) 155,779,735 202,731,721 132,765,798 174,600,000 Advance payment for project (Note 18) 128,265,484 69,350,012 - - Withhoding tax (Note 19) 281,521,358 288,520,052 161,919,435 161,919,435 Other assets 16,672,291 371,371,185 6,483,160 7,082,717 Total Assets 12,898,451,029 18,309,674,860 6,763,691,499 8,829,112,316 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES BALANCE SHEETS AS AT DECEMBER 31, 1999 AND 1998 Amounts : Baht Consolidated CH. Karnchang Public Co., Ltd. LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998 1999 1998 RESTATED RESTATED CURRENT LIABILITIES Bank overdrafts and loans from banks (Note 20) 3,079,640,207 3,104,715,162 882,382,327 1,014,490,811 Notes payable - finance institute 200,000,000 100,000,000 200,000,000 100,000,000 Accounts and notes payable 781,404,895 1,721,967,086 480,883,096 853,572,479 Current portion of long-term liabilities (Notes 21 and 22) 3,630,064,225 3,902,697,982 - 898,362,500 Accounts payable and loans from related companies and joint ventures 1,063,319,500 1,352,668,406 30,417,640 42,079,072 Advance received from contractor and deferred construction revenue (Note 9) 1,414,383,503 1,466,374,702 497,713,138 183,625,834 Retentions for construction 195,374,094 239,779,492 93,343,614 81,714,405 Allowance loss from constrution (Note 9) 134,127,269 - - - Accrued interest expense 42,696,335 99,718,536 13,223,981 60,023,448 Accrued income tax 30,761,194 8,338,908 - - Accrued expense 25,002,107 - 28,125,315 8,338,908 Unbilled out put tax 117,473,581 195,665,071 93,143,602 127,399,624 Other current liabilities 90,055,093 106,978,961 14,213,843 30,076,713 Total Current Liabilities 10,804,302,003 12,298,904,306 2,333,446,556 3,399,683,794 Long - term loans from related companies 165,541,273 - - - Liabilities under discounted notes receivable (Note 21) - 1,082,749,500 - - Long-term loans (Note 22) 262,118,058 542,395,758 240,000,000 200,000,000 Allowance loss for doubful account from related companies (Note 8) 272,302,862 - - - Other liabilities (Note 15) - - 3,056,839,745 998,792,098 Total Liabilities 11,504,264,196 13,924,049,564 5,630,286,301 4,598,475,892 MINORITY INTEREST IN SUBSIDIARY COMPANIES 240,840,257 154,988,872 - - SHAREHOLDERS' EQUITY Share capital Authorized 105,000,000 ordinary shares, Baht 10 par value 1,050,000,000 1,050,000,000 1,050,000,000 1,050,000,000 Issued and fully paid 105,000,000 ordinary shares, Baht 10 par value 1,050,000,000 1,050,000,000 1,050,000,000 1,050,000,000 Premium on share 2,436,000,000 2,436,000,000 2,436,000,000 2,436,000,000 Retained earnings Appropriated to legal reserve 88,442,063 88,442,063 82,942,063 82,942,063 Unappropriated (2,238,447,317) 656,194,361 (2,232,947,317) 661,694,361 Unrealized loss on change in investment value (Note 15) (182,648,170) - (202,589,548) - Total Shareholders' Equity 1,153,346,576 4,230,636,424 1,133,405,198 4,230,636,424 Total Liabilities and Shareholders' Equity 12,898,451,029 18,309,674,860 6,763,691,499 8,829,112,316 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Consolidated CH. Karnchang Public Co., Ltd. Amounts : Baht 1999 1998 1999 1998 RESTATED RESTATED REVENUES Construction activities income (Note 23) 7,915,837,725 13,223,501,604 2,318,368,474 3,275,811,717 Sale of construction material 490,575,896 392,919,743 539,991,456 597,891,593 Management income 73,286,827 84,804,216 101,485,519 147,853,701 Rental income 46,417,753 81,043,964 79,363,297 120,993,767 Transportation income 38,554,936 55,422,815 41,108,204 59,146,317 Interest income 141,811,411 344,571,568 77,773,402 112,182,183 Gain from sale of investment (Note 15) - 169,070,874 - 152,570,874 Gain on exchange rate (Note 24 ) - 286,472,245 6,677,217 - Share of net profit (loss) by equity method (77,743,732) (38,007,094) (2,156,761,405) 119,660,207 Good will written off (Notes 4 and 15) 11,535,685 - - - Other incomes 45,848,312 61,654,950 52,930,915 46,860,223 Total Revenues 8,686,124,813 14,661,454,885 1,060,937,079 4,632,970,582 EXPENSES Cost of construction activities and sale constrution material 8,500,971,857 12,159,146,452 2,361,679,844 3,526,988,039 Administrative expenses 485,947,992 681,867,388 249,946,109 285,351,012 Interest expenses 831,822,728 1,150,681,875 224,418,528 423,428,362 Directors' remuneration 7,300,000 7,822,250 7,300,000 7,822,250 Allowance for doubtful accounts (Notes 2,4 and 8) 855,766,773 8,836,571 729,180,098 7,588,765 Allowance for loss form constrution contracts (Note 9) 160,889,826 - - - Other expenses Loss from impairment of investment (Note 15) 65,007,431 27,291,095 63,291,431 27,291,095 Loss from impairment of property , plant and equipment-net (Note 16) 213,336,221 27,716,002 73,859,768 12,777,069 Loss from impairment of investment in land (Note 17) 46,112,953 - 41,834,203 - Other expenses 187,715,037 128,662,297 125,327,340 127,399,274 Total Expenses 11,354,870,818 14,192,023,930 3,876,837,321 4,418,645,866 Profit (loss) before income tax (2,668,746,005) 469,430,955 (2,815,900,242) 214,324,716 Income tax 228,607,733 235,388,705 78,741,436 3,083,137 Net profit (loss) from operation (2,897,353,738) 234,042,250 (2,894,641,678) 211,241,579 Plus (less) Minority interest in net (profit) loss 2,712,060 (22,800,671) - - Net profit (loss) (2,894,641,678) 211,241,579 (2,894,641,678) 211,241,579 Net profit (loss) per share (Baht) (Note 4 ) (27.57) 2.01 (27.57) 2.01 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Consolidated CH. Karnchang Public Co., Ltd. Amounts : Baht 1999 1998 1999 1998 RESTATED RESTATED ORDINARY SHARE CAPITAL Beginning balance 1,050,000,000 1,050,000,000 1,050,000,000 1,050,000,000 Increase during year - - - - Decrease during year - - - - Ending balance 1,050,000,000 1,050,000,000 1,050,000,000 1,050,000,000 PREMIUM ON SHARE CAPITAL Beginning balance 2,436,000,000 2,436,000,000 2,436,000,000 2,436,000,000 Increase during year - - - - Decrease during year - - - - Ending balance 2,436,000,000 2,436,000,000 2,436,000,000 2,436,000,000 APPROPRIATED RETAINED EARNINGS Beginning balance 88,442,063 78,046,679 82,942,063 72,546,679 Increase during year - 10,395,384 - 10,395,384 Decrease during year - - - - Ending balance 88,442,063 88,442,063 82,942,063 82,942,063 UNAPPROPRIATED RETAINED EARNINGS (DEFICIT) Beginning balance 818,018,761 620,506,455 823,518,761 626,006,455 Accumulative effect resulting from change in accounting policy of deferred expenses (Note 5 ) (63,396,504) (104,737,486) (63,396,504) (104,737,486) Accumulative effect resulting from change in accounting for investment (Note 5 ) (98,427,896) (60,420,803) (98,427,896) (60,420,803) Beginning balance as restated 656,194,361 455,348,166 661,694,361 460,848,166 Increase during the year - Net profit (loss) (2,894,641,678) 211,241,579 (2,894,641,678) 211,241,579 Decrease during the year - Transfer to legal reserve (Note 25 ) - (10,395,384) - (10,395,384) - Payment of dividend (Note 25 ) - - - - Ending balance (2,238,447,317) 656,194,361 (2,232,947,317) 661,694,361 UNREALIZED LOSS ON CHANGE INVESTMENT VALUE Beginning balance - - - - Increase during year (Note 15 ) (182,648,170) - (202,589,548) - Decrease during year - - - - Ending balance (182,648,170) - (202,589,548) - Total Shareholders' Equity 1,153,346,576 4,230,636,424 1,133,405,198 4,230,636,424 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF RETAINED EARNING (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Consolidated CH. Karnchang Public Co., Ltd. Amounts : Baht 1999 1998 1999 1998 RESTATED RESTATED Unappropriated retained earnings Retained earnings at beginning of the year 818,018,761 620,506,455 823,518,761 626,006,455 Less Accumulative effect resulting from change in accounting policy of deferred expenses (Note 5 ) (63,396,504) (104,737,486) (63,396,504) (104,737,486) Accumulative effect resulting from change in accounting for of investment (Note 5 ) (98,427,896) (60,420,803) (98,427,896) (60,420,803) Less Appropriated net profit of prior year Dividend (Note 25 ) - - - - Beginning balance as restated 656,194,361 455,348,166 661,694,361 460,848,166 Increase during the year - Net profit (loss) (2,894,641,678) 211,241,579 (2,894,641,678) 211,241,579 Less legal reserve (Note 25 ) - (10,395,384) - (10,395,384) Unappropriated retained earnings (deficit) at end of the year (2,238,447,317) 656,194,361 (2,232,947,317) 661,694,361 Appropriated retained earnings 88,442,063 78,046,679 82,942,063 72,546,679 legal reserve (Note 25 ) - 10,395,384 - 10,395,384 Total appropriated retained earnings 88,442,063 88,442,063 82,942,063 82,942,063 Total retained earnings (deficit) (2,150,005,254) 744,636,424 (2,150,005,254) 744,636,424 See notes to financial statements CH. KARNCHANG PUBLIC COMPANY LIMITED, SUBSIDIARIES AND JOINT VENTURES STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (more)