FINANCIAL STATEMENTS ENDED MARCH31, 1999(2)

DUSIT THANI PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO THE CONSOLIDATED AND EQUITY METHOD INTERIM FINANCIAL STATEMENTS FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998 1. ECONOMIC TURMOIL IN ASIA-PACIFIC REGION Many Asia-Pacific countries, including Thailand, are experiencing severe economic difficulties relating to currency devaluations, volatile stock markets, and slowdown in growth. The countrys unstable economy has to a certain extent affected, and may continue to affect, the operations of the Company, recoverability of the Companys assets and the ability of the Company to maintain or pay its debts as they mature. 2. BASIS FOR PREPARATION OF THE CONSOLIDATED AND EQUITY METHOD INTERIM FINANCIAL STATEMENTS 2.1 The consolidated and equity method interim financial statements for the quarter ended March 31, 1999 and 1998 are unaudited. However, in the opinion of the Company, all adjustments necessary for a fair presentation, have been reflected therein. The consolidated and equity method interim financial statements have been prepared in accordance with the Notification of SET dated February 3, 1998 regarding the basis, conditions and procedures for preparation and submission of financial statements and reports for the financial position and result of operations of the listed companies (No.1) B.E. 2541 (1998). International Accounting Standard (IAS) No.34 Interim financial statements has not been adopted by the Company. The consolidated and equity method interim financial statements for the quarter ended March 31, 1998 have been reclassified to conform to the classifications used in the consolidated and equity method interim financial statements for the quarter ended March 31, 1999. Certain financial information which is normally included in financial statements prepared in accordance with generally accepted accounting principles, but which is not required for interim reporting purposes, has been omitted. The consolidated and equity method interim financial statements should be read in conjunction with the consolidated and equity method financial statements and notes thereto included in the audited financial statements for the year ended December 31, 1998. .../2 - 2 - 2.2 The consolidated interim financial statements include the account balances of the subsidiary companies as follows: % of shareholding March 31, 1999 March 31, 1998 Dusit Resort Cha-am Company Limited 97.09 90.36 Royal Princess Public Company Limited 79.65 79.65 Korat Thani Corporation Limited by Royal Princess Public Company Limited 68.00 68.00 Supsinthanee Company Limited by Royal Princess Public Company Limited 60.00 60.00 Philippine Hoteliers, Inc.* 85.76 85.76 Dusit Thani Delaware, Inc*. 100.00 100.00 Dusit Thani International Company Limited* 99.99 99.99 * Not subject to a review For the quarter ended March 31, 1999, the consolidated interim financial statements include the account balances of an additional subsidiary, namely, Dusit Thani International Company Limited. Accordingly, the consolidated interim financial statements for the quarter ended March 31, 1998, have been adjusted retroactively to include the account balances of such subsidiary. 2.3 The consolidated interim financial statements for the quarter ended March 31, 1999 and 1998 included the financial statements of 3 subsidiary companies whose financial statements have not been reviewed. Total assets and revenues of those subsidiaries can be stated as a percentage of consolidated total assets and total revenues as follows: % of % of Consolidated % of Consolidated Shareholding Total Assets Total revenues March 31, March 31, 1999 1998 1999 1998 Philippine Hoteliers, Inc. 85.76 24.65 19.80 22.90 21.31 Dusit Thani Delaware, Inc. 100.00 3.05 0.70 1.15 0.01 Dusit Thani International Company Limited 99.99 0.12 0.12 0.01 0.20 27.82 20.62 24.06 21.52 In addition, the consolidated and equity method interim financial statements for the quarter ended March 31, 1999 and 1998 included equity in undistributed net income (loss) of the following subsidiary and associated companies which have not been reviewed and can be stated as a percentage of net income (loss) as follows: .../3 - 3 - % of % of net income (loss) Shareholding Consolidated Equity Method March 31, March 31, 1999 1998 1999 1998 Subsidiary Companies Philippine Hoteliers, Inc. 85.76 - - 5.72 10.12 Dusit Thani Delaware, Inc. 100.00 - - 6.52 0.01 Dusit Thani International Company Limited 99.99 - - (0.53) 0.50 Best Western (Thailand) Company Limited 99.93 - - - - - - 11.71 10.63 Associated Companies Dusit Sindhorn Limited 49.99 - (17.35) - (16.81) DPMN Industries Company Limited (directly and indirectly) 25.00 - (0.95) - (0.92) Worldclass Rent a Car Company Limited 20.00 - 0.09 - 0.08 - (18.21) - (17.65) Total - (18.21) 11.71 (7.02) 2.4 Balance sheet and statement of income of foreign subsidiaries are translated into Baht at the exchange rates prevailing at the balance sheet date and the average exchange rates, respectively. The exchange differences on the translation is shown as a deduction of the shareholders equity. 3. A CHANGE IN ACCOUNTING POLICY For the quarter ended March 31, 1999, the Company adopted the new Thai Accounting Standard No.36 Impairment of Assets, and No.40 Accounting for Investment in Debt Security and Equity Security. The impact of the changed were immaterial. 4. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION 4.1 Cash and cash equivalent As at March 31, 1999 and 1998, short-term investments in the consolidated interim financial statements include fixed deposits of Baht 3,447 thousand and Baht 2,838 thousand, respectively, which are used as collateral for bank guarantees and employees loans from bank. .../4 - 4 - As at March 31, 1999 and 1998, short-term investments in the equity method interim financial statements include fixed deposit of Baht 2,606 thousand and Baht 2,192 thousand, respectively, which are used as collateral for bank guarantees and employees loans from bank. In the statement of cash flows, cash and short-term investments used as collateral are not included in cash and cash equivalents but are presented as part of the other current assets. 4.2 Cash paid for interest and income tax are as follows: Baht :000 CONSOLIDATED EQUITY METHOD March 31, March 31, 1999 1998 1999 1998 Interest 11,752 80,690 6,604 38,661 Income tax 231 4,211 - - 4.3 For the quarter ended March 31, 1999 and 1998, non cash transactions are as follows : 4.3.1 The recording of unrealized loss on translation of the subsidiarys financial statements into Baht which was presented as a deduction in the shareholders equity in the consolidated and equity method interim financial statements. 4.3.2 The transfer of long-term loan of the subsidiary to long- term liabilities converted to current liabilities according to contracts in the consolidated interim financial statements. 5. TRADE ACCOUNTS RECEIVABLE Trade accounts receivable which are past due, are classified by aging as follows: CONSOLIDATED EQUITY METHOD MARCH 31, MARCH 31, 1999 1999 Number of accounts receivable past due 265 66 Baht :000 Amount past due Less than 3 months 40,593 36,255 3-4 months 4,651 2,339 Over 4 months 18,497 10,354 Total 63,741 48,948 Allowance for doubtful accounts (25,460) (16,223) .../5 - 5 - 6. INVESTMENTS AND LOANS Investments and loans consist of the following : 6.1 Related parties Baht :000 CONSOLIDATED EUUITY METHOD March 31, March 31, 1999 1998 1999 1998 Related parties Other securities (Note 10) 26 7,265 1,248,588 1,283,188 6.2 As at March 31, 1999, other investments consist of the following : Baht :000 CONSOLIDATED EQUITY METHOD Available for sale Equity securities 5,314 5,314 (Market Value : Baht 7,954 thousand) General investments Equity securities 239,186 4,000 244,500 9,314 The aforementioned investments are classified according to the Thai Accounting Standard No. 40 Accounting for Investment in Debt Security and Equity Security. 7. LONG-TERM LIABILITIES CONVERTED TO CURRENT LIABILITIES ACC ORDING TO CONTRACTS As at March 31, 1999, one subsidiary, namely, Korat Thani Corporation Limited, had not complied with the covenant in the loan agreement, accordingly, the loan in the amount of Baht 240,000 thousand was presented as long-term liabilities converted to current liabilities according to contracts. However, the subsidiary is currently negotiating with the lender for a debt restructuring. Such loan is collateralized by the mortgage of land and hotel building of the subsidiary and partly guaranteed by Royal Princess Public Company Limited. As at March 31, 1998, one subsidiary, namely, Supsinthanee Company Limited, had not complied with the covenant of maintaining liabilities to capital ratio as specified in the loan agreement, accordingly, the loan in the amount of Baht 146,553 thousand was presented as long-term liabilities converted to current liabilities according to contracts. However, the subsidiary has obtained a waiver from the lender in 1998. .../6 (More)