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Equity in Joint Ventures by subsidiary Joint venture of CH. Karnchang Public Co., Ltd and CH. Karnchang Tokyu Construction Co., Ltd. CH. Karnchang - Tokyu Construction Ltd. in joint with CH. Karnchang Public Co., Ltd. made agreement with the Police Department for the design and construction the police department office building, together with car park building and other related constructions as contract dated September 30, 1996, which the joint venture will finish its work within December 24, 1999. However, there is approval to extend construction period to August 7, 2000 as the notice dated May 26, 1999. Joint venture of CH. Karnchang Tokyu Construction Co., Ltd. and Tokyu Construction Co., Ltd. CH. Karnachang - Tokyu Construction Co., Ltd. in joint with Tokyu Construction Co., Ltd. made agreement with Joint Venture CH. Karnchang Public Co., Ltd. Bilfinger and Berger Bauaktiengesellschaft, Tokyu Construction Co., Ltd. and CH. Karnchang - Tokyu Construction Co., Ltd. to construct Bang Pa In Pak Kret Expressway sector 15 & 16 as contract dated August 14, 1997. As at June 30, 1999 the joint venture had an additional construction and had received revenue over the contract value. The new contract had not yet been made due to estimated that it will be completed and submitted within October 1999. The result of subsidiaries' operation were presented in this consolidated financial statements since acquisition date. The significant related transaction, investment of parent company and shareholders' equity of subsidiaries were eliminated from this consolidated financial statements. Excess in net book value as acquisition date over cost of investment in limited partnership of subsidiary is adjusted to retained earnings at the beginning of year. NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition for Construction Company recognized revenue from construction on percentage of completion. Revenue from additional work and the constructions that have working period not over 1 year are recognized on work done and billed to customer. Subsidiary company and joint ventures which subsidiary have joint control recognized revenue on work done and billed to customer due to contract period is short and contract price is not significant. Joint ventures and partnership limited recognized revenue on percentage of completion. Revenues from moving infrastructure, additional work and other contract works are recognized on work done and billed to customer. The joint ventures which the company has 25% of profit sharing have contract price in foreign currency, recognized revenue on percentage of completion included gains and losses from exchange rate between exchange rate identified in construction contract and exchange rate on billing date. Revenue and Expenses Recognition Revenue and expenses are recognized on an accrual basis. Cash and Cash Equivalents Cash and cash equivalents comprised cash on hand, unpledged cash at banks and short term deposits. Allowance for Doubtful Accounts Allowance for doubtful accounts is provided based on the review of the current status of each account. Construction Contract in Progress The cost of construction contract in progress comprises of the cost of materials and labor, subcontractor charges, the services and overheads plus attributable net profit or loss less amount billed to customers. Excess in construction contract in progress value over amount billed to customers is shown under current assets. For the excess amount billed to customers over construction contract in progress value is showed in deferred construction revenue under current liabilities. Supplies for Construction and Construction in Progress Supplies for construction are valued at cost using first-in-first-out method. Construction in progress comprises of the cost of materials and labor, subcontractor charges, the services and overheads. Construction in progress and supplies in process are valued at cost. Materials and inventories of a subsidiary company are valued at cost using weighted average method to be in line with information processing and shown separately cost of each product. Investment Investment in subsidiaries and joint ventures which the company has significant influence are stated according to the equity method. Investment in marketable securities are stated at fair value in 1999 and at the lower of cost or net realizable value in 1998. Other investments are stated at cost. Investment in marketable securities are stated at fair value in accordance with generally accepted accounting principles applied for financial statements of fiscal year 1999. Excess in Book value over Cost of Investment Excess in book value over cost of investment is the difference of book value compare with amount paid for acquisition cost of investment which is written off to retained earnings at beginning of years. Property, Plant and Equipment Property plant and equipment are stated at cost. Depreciation are computed by the straight-line method over the estimated useful lives as follows: Building 20 years Equipment 5 years Leasehold improvement according to remaining project life For the equipment's acquired by a partnership before 1993, depreciation was computed by straight line method from the book value at January 1, 1993, the useful life of 5 years. Investment on land was recorded in appraised price which was estimated by independent appraisal. Company Establishment Expenses Company establishment expenses are amortized within five years from date of operating. Pre-operating Expense Pre-operating expense is amortized according to the project - period from the date of commencement of the operations. Deferred Charges Almost deferred charges are related to expense of providing finance, successful biding project, leasehold improvement will be amortized according to the related contracts and loan periods. Foreign Currency Transactions Foreign currency transactions during the periods are translated to Baht at the exchange rate at the transaction dates. Foreign currency balances at the balance sheet date are translated at the exchange rates ruling on that date. Foreign currency balances which are secured by the agreement are translated using exchange rate of the agreement. Exchange gains and losses are included in determining income. The difference between exchange rate from foreign exchange forward contracts are amortized as expense or income included in statement of income according to each foreign exchange forward contract periods. Forward contracts to prevent losses from foreign currency commitment at the balance sheet date are translated to Baht at exchange rate ruling on that date. Earnings (Deficits) per Share Earnings (Deficits) per share are calculated by dividing the net profit (loss) for the periods by the number of shares outstanding at the end of periods. NOTES 5 - SHORT-TERM INVESTMENTS As at June 30, cash at bank - fixed deposit of the parent company in the amount of Baht 20,000 and of one joint venture in amount of Baht 31.50 million are used as collateral for bank guarantee of using electricity and forward contract in 1999. Cash at bank of joint ventures in amount of Baht 104 million are used as collateral for letter of credit and bank guarantee from banks in 1998. As at June 30, 1999, in the consolidated financial statement, the short term investments of the joint venture which the company has 59.99% of profit sharing in unit trust of fund is in the approximate amount of Baht 12 million and of the joint venture which the company has 25% of profit sharing in unit trust of preferred stock fund - subordinated debentures of a commercial bank is in the approximate amount of Baht 6.25 million and in unit trust of fund is in the approximate amount of Baht 5 million NOTES 6 - ACCOUNTS RECEIVABLE As at June 30, 1999, the company had account receivable which were classified by account receivable aging as follows: Amounts : Thousand Baht Construction contract receivables Consolidated CH.Karnchang Public Co.,Ltd Related Companies Other Related Companies Other & Joint Ventures Receivables Total &Joint Ventures Receivables Total Less than 3 months 546,321 343,641 889,962 260,903 101,466 362,369 More than 3 to 6 months 94,220 2,724 96,944 235,491 - 235,491 More than 6 to 12 months 177,773 8,100 185,873 125,984 8,100 134,084 More than 12 months 268,096 - 268,096 409,070 - 409,070 1,086,410 354,465 1,440,875 1,031,448 109,566 1,141,014 Less Allowance for doubtful accounts (5,090) - (5,090) - - - 1,081,320 354,465 1,435,785 1,031,448 109,566 1,141,014 Retention accounts as per contracts 7,908 206,442 214,350 10,040 20,452 30,492 Total 1,089,228 560,907 1,650,135 1,041,488 130,018 1,171,506 For the accounts receivable aging over 1 year, the company does not record allowance for doubtful accounts. The management has explained that the related joint venture has been affected by the economic recession and overall Thailand's liquidity problem in 1997 which being recovered since 1998. The joint venture started to repay its debt in 1999 and the company plans to discuss with the joint venture regarding to its finance restructure in order that the joint venture can make full repayment within the forth quarter of 1999. As at June 30, 1999, the joint venture which the company has 59.99% of profit sharing had an account receivable from additional construction work in the approximate amount of Baht 101.8 million. Currently, it is in the process of negotiation on repayment with the account receivable. The joint venture set up allowance for doubtful account in amount of Baht 5.10 million. The effect of the allowance for doubtful account that should be set up increasingly can not be estimated. NOTE 7 - CONSTRUCTION IN PROGRESS As at June 30, 1999, the joint venture which the company has 35% of profit sharing has adjusted construction in progress from additional work in the approximate amount of Baht 225.4 million which value of work of the additional contract from employer is in the process of negotiation which resolution can not yet be concluded by transferring to the cost of construction and adjusted estimated budget cost to address increasing of the said cost. NOTE 8 - ADVANCE TO SUBCONTRACTOR As at June 30, 1999 a joint venture which the company has 50% of profit sharing has outstanding balance of advance payment to an affiliate company in amount of USD 1.61 million. The joint venture expected to submit the whole construction work in 1999. The outstanding significant advance payment amount to the affiliated company resulted from the delay in shipping supplies. The joint venture will reduce this outstanding balance by compensation with balance in payable and reimbursement from the affiliated company in the future. NOTE 9 - OTHER CURRENT ASSETS As at June 30, 1999, other current assets included receivable from Revenue Department to the joint venture which the company has 50% of profit sharing in the amount of Baht 20.1 million from Value Added Tax. The joint venture will refund its Value Added Tax in cash when its project finished. As at June 30, 1999, other current assets included the other receivables of the joint venture which the company has 35% of profit sharing was incurred by an advance payment to a subcontractor in order to solve the problem of reiterate work. The Expressway and Rapid Transit Authority of Thailand will take responsibility of compensation cost by payment through variation order of joint venture. Since the approval of reimbursement for variation order is in process and the said subcontractor has partly completed its construction, the joint venture had to pay advance to the said subcontractor which was included in the consolidated financial statements in the approximate amount of Baht 15.4 million. NOTE 10 - NOTES RECEIVABLE - FINANCE COMPANIES In 1998, promissory notes from finance companies in the amount of Baht 147.8 million were promissory notes from finance companies which Bank of Thailand has suspended operations and it can not redeem 5 years before due date under the conditions prescribed by the Ministry of Finance. In the second quarter of 1999, the joint venture which the company has 50% of profit sharing transferred its right to claim in promissory note in the approximate amount of Baht 42.1 million to related company according to the letter dated May 27, 1999 for principal and interest repayment. NOTE 11 - INVESTMENTS IN SUBSIDIARIES, RELATED, OTHER COMPANIES AND JOINT VENTURES As at June 30, investments in subsidiary companies and joint ventures comprise of: Percentage Holding by Parent Company Dividend Business or Percentage of profit Cost method Equity method or profit sharing payment Classification Relationship (Amounts : Thousand Baht) sharing in Joint Ventures 1999 1999 1998 1999 1998 Subsidiaries Production, distribution, Selling & buying - Construction Material Supply Co.,Ltd. 99.99 15,000 20,848 - - construction supplies Co- director - CH. Karnchang Realstate Co., Ltd. and Limited Partnerships 99 158,400 295,680 288,262 - - Investment and construction Co- director - Bangkok Metro Co., Ltd. 79.94 799 - 796 - - Public Utility Consession Co- director - CH. Karnchang-Tokyu Construction Co., Ltd. and Joint Ventures 55 55,000 188,792 193,071 16,500 - Construction Co- director Equity in Joint Ventures - Joint Venture CH. Karnchang Public Co., Ltd., Tokyu Construction Co., Ltd. in joint venture with CH. Karncahng - Tokyu Construction Co., Ltd. Highway Project 60 - 2,007 46,191 - 9,000 Construction Co-director Expressway Project 40 - 329 35,943 - 14,000 - Joint Venture CH. Karnchang Public Co., Ltd., Bilfinger + Berger Bauaktiengesellschaft, Tokyu Construction Co., Ltd.,and CH. Karnchang - Tokyu Construction Co., Ltd. - Second Stage Expressway Project Sector B Route Phayathai - Bangkhlo 53.20 - 73,696 152,204 - 122,400 Construction Co-director Percentage Holding by Parent Company Dividend Business or Percentage of profit Cost method Equity method or profit sharing payment Classification Relationship (Amounts : Thousand Baht) sharing in Joint Ventures 1999 1999 1998 1999 1998 - Second Stage Expressway Project Sector C+ Route Chaeng Watthana - Bang Phun & Bang Sai 59.99 - 564,220 495,878 47,984 - - Second Stage Expressway Project Sector D Route Asoke Srinakarin 59.99 - 70,874 32,044 - - - Second Stage Expressway Project Sector C1A Route Ngam Wong wan - Chaeng Wattana 59.99 - 37,679 10,256 - - - Joint Venture TWCK (Thames Water International (Thailand) Ltd. and CH. Karnchang Public Co., Ltd.) 50 - 45,836 125,042 40,000 17,000 Construction Co-director - Joint Venture BCKT Bilfinger + Berger Bauaktiengesellschaft, CH. Karnchang Public Co., Ltd., Kumagi Gumi Co.,Ltd.,and Tokyu Construction Co., Ltd. 25 - 54,419 - - - Construction Co-director Total Investment in subsidiaries and joint ventures 229,199 1,354,380 1,379,687 104,484 162,400 As at June 30, investment in related and other companies comprise of: Percentage Holding Consolidated CH. Karnchange Public Co.,Ltd. Dividend Business by Parent Company Cost method Amount Amount classification Relationship (Amounts : Thousand Baht) 1999 1999 1998 1999 1998 1999 1998 Investment in Related Companies - Pathumthani Water Company Ltd. 15.00 165,298 165,298 149,450 165,298 149,450 - - Public Utility Concession Investment - Bangkok Expressway Public Co., Ltd. 13.81 2,133,070 2,578,021 2,424,755 2,346,406 2,284,316 - - Public Utility Concession Investment Investment in Other Companies - Nava Finance and Securities Public Co., Ltd. - 27,291 27,291 27,291 27,291 27,291 - - Financial Institution None - Bangkok Tokyu Department Store Co.,Ltd - 2,280 2,280 - - - - - Department Store None - Kruasakul Co., Ltd. 10.14 43,750 43,750 43,750 43,750 43,750 - - Real Estate Development None - Tokyu Merchandise Development Co., Ltd. - - - 15,000 - - - - Department Store None - Tokyu Department Store (Thailand) Co., Ltd. - - - 2,100 - 600 - - Department Store None - The Bangkok Club Co., Ltd. 0.57 3,000 3,000 3,000 3,000 3,000 - - Entertainment None - Chanthaburi Country Club Co., Ltd. 0.25 2,000 2,000 2,000 2,000 2,000 - - Real Estate Development None - Investment in Related Joint Ventures. 10,502 10,502 10,502 8,845 8,845 - - - Total Investments 2,387,191 2,832,142 2,677,848 2,596,590 2,519,252 - - Less Allowance for devaluation of investments (27,291) (27,291) (442,976) (27,291) (426,476) - - - Total Investment - Net 2,359,900 2,804,851 2,234,872 2,569,299 2,092,776 - - - (more)