FINANCIAL STATEMENT FOR PERIOD ENDED JUNE 30,1999

DUSIT THANI PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE QUARTERS AND SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 Unaudited /Reviewed 1. ECONOMIC TURMOIL IN ASIA-PACIFIC REGION Many Asia-Pacific countries, including Thailand, have experienced 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 INTERIM FINANCIAL STATEMENTS 2.1 The accompanying consolidated and the Companys interim financial statements for the quarters and six-month periods ended June 30, 1999 and 1998 are prepared by the management of the Company and are unaudited. However, in the opinion of the Company, all adjustments necessary for a fair presentation, have been reflected therein. The interim financial statements have been prepared in accordance with the Regulation of the Stock Exchange of Thailand (SET) dated May 18, 1999 regarding the preparation and submission of financial statements and reports for the financial position and result of operations of the listed companies (No.1) B.E.2542. International Accounting Standard (IAS) No.34 Interim financial statements has not been adopted by the Company. The consolidated and the Companys interim financial statements for the quarter and six-month period ended June 30, 1998 have been reclassified to conform to the classifications used in the consolidated and the Companys interim financial statements for the quarter and six-month period ended June 30, 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. In addition, the consolidated and the Companys interim financial statements should be read in conjunction with the consolidated and the Companys financial statements and notes thereto included in the audited financial statements for the year ended December 31, 1998. 2.2 The consolidated interim financial statements include the account balances of the subsidiary companies as follows: % of shareholding June 30, 1999 June 30, 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 /2 - 2 - For the quarter and six-month period ended June 30, 1999, the consolidated interim financial statements included the account balances of an additional subsidiary, Dusit Thani International Company Limited. Accordingly, the consolidated interim financial statements for the quarter and six-month period ended June 30, 1998, have been adjusted retroactively to include the account balances of such subsidiary. 2.3 The consolidated interim financial statements for the quarters and six-month periods ended June 30, 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 Consolidated Total Revenues % of % of Consolidated For the quarter For the six-month Shareholding Total Assets ended June 30, Period ended June 30, June 30, 1999 1998 1999 1998 1999 1998 Philippine Hoteliers, Inc. 85.76 - 25.59 - 20.13 - 21.54 Dusit Thani Delaware, Inc. 100.00 0.06 0.06 - 13.19 0.50 5.06 Dusit Thani International Company Limited 99.99 0.13 0.13 - 0.02 0.01 0.14 0.19 25.78 - 33.34 0.51 26.74 In addition, the consolidated and the Companys interim financial statements for the quarters and six-month periods ended June 30, 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 as follows: % of net income (loss) % of net income (loss) % of Consolidated The Company Only Consolidated The Company Only Shareholding For the quarter ended June 30, For the six-month period ended June 30, 1999 1998 1999 1998 1999 1998 1999 1998 Subsidiary Companies Philippine Hoteliers, Inc. 85.76 - - - (54.78) - - - 1.48 Dusit Thani Delaware, Inc. 100.00 - - 3.71 124.08 - - 5.74 16.53 Dusit Thani International Company Limited 99.99 - - (1.36) 0.15 - - (0.76) 0.45 - - 2.35 69.45 - - 4.98 18.46 Associated Companies Dusit Sindhorn Limited 49.99 - - - - - (15.78) - (14.58) DPMN Industries Company Limited (directly and indirectly) 44.91 - (10.15) - (3.53) - (1.65) - (0.92) Worldclass Rent a Car Company Limited 20.00 - - - - - 0.08 - 0.07 - (10.15) - (3.53) - (17.35) - (15.43) Total - (10.15) 2.35 65.92 - (17.35) 4.98 3.03 /3 - 3 - 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 and six-month period ended June 30, 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 changes were immaterial. 4. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION 4.1 Cash and cash equivalent Consolidated financial statements As at June 30, 1999 and 1998, cash and cash equivalent include fixed deposits and deposits with financial institutions whose maturaities are less than 3 months amounting to Baht 340,280 thousand and Baht 749,180 thousand, respectively, which are included in short-term investments. As at June 30, 1999 and 1998, fixed deposits of Baht 3,469 thousand and Baht 2,943 thousand, respectively, which are used as collateral for bank guarantees and employees loans from bank which are presented as past of other current assets in the statement of cash flows. The Companys financial statements As at June 30, 1999 and 1998, cash and cash equivalent include fixed deposits and deposits with financial institutions whose maturities are less than 3 months amounting to Baht 296,300 thousand and Baht 728,400 thousand, respectively, which are included in short-term investments. As at June 30, 1999 and 1998, fixed deposits of Baht 2,606 thousand and Baht 2,191 thousand, respectively, which are used as collateral for bank guarantees and employees loans from bank which are presented as part of other current assets in the statements of cash flows. 4.2 Cash paid for interest and income tax are as follows: Baht :000 FOR THE QUARTER FOR THE SIX-MONTH PERIOD ENDED JUNE 30, ENDED JUNE 30, CONSOLIDATED THE COMPANY ONLY CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 1999 1998 1999 1998 Interest 3,741 38,011 78 7,125 15,493 111,820 6,682 45,786 Income tax 7,994 31,816 - - 8,225 36,027 - - /4 - 4 - 4.3 For the quarters and six-month periods ended June 30, 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 the Companys 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. 4.3.3 The recording of investments available for sale at fair value and recognizing unrealized gains on such investments in the consolidated and the Companys interim financial statements which were included in shareholders equity. 5. TRADE ACCOUNTS RECEIVABLE Trade accounts receivable which are past due, are classified by aging as follows: CONSOLIDATED THE COMPANY ONLY June 30, June 30, 1999 1998 1999 1998 Number of accounts receivable - past due 236 439 108 170 Baht :000 Amount past due Less than 3 months 25,067 33,784 21,295 18,106 3-4 months 6,964 3,653 4,888 2,262 Over 4 months 22,032 37,795 15,459 14,282 Total 54,063 75,232 41,642 34,650 Allowance for doubtful accounts (25,229) (28,871) (16,246) (11,851) 6. INVESTMENTS AND LOANS Investments and loans consist of the following : 6.1 Related parties Baht :000 CONSOLIDATED THE COMPANY ONLY June 30, June 30, 1999 1998 1999 1998 Related parties Investments in subsidiary and associated companies (Note 11) 217,742 219,657 1,251,825 1,312,462 Loans - 1,150 143 - 217,742 220,807 1,251,968 1,312,462 /5 - 5 - 6.2 As at June 30, 1999, other investments consist of the following : Baht :000 CONSOLIDATED THE COMPANY ONLY Available for sale Equity securities 50,360 10,430 General investments Equity securities 14,970 - 65,330 10,430 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 ACCORDING TO CONTRACTS As at June 30, 1999, one subsidiary, 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. 8. LONG-TERM LIABILITES As at June 30, 1998, one subsidiary, Supsinthanee Company Limited had not complied with the covenant of maintaining debts to equity ratio as specified in the loan agreement. However, the subsidiary had obtained a waiver from the lender regarding this matter. Such waiver is only for the effects resulting from currency volatility. As at June 30, 1999, the outstanding balance of the aforementioned loan had been converted to promissory notes and included in loans from financial institution. 9. GAIN ON SALE OF INVESTMENT For the quarter and six-month period ended June 30, 1998, the subsidiary had a gain on the sale of investment in Melrose Texas Investment Partnership, L.P. in the amount of Baht 92,406 thousand. For the six-month period ended June 30, 1998, the Company had a gain in the amount of Baht 375,771 thousand from the sale of investment in Dusit Sindhorn Company Limited to Siam Sindhorn Company Limited, which had a carrying value based on the equity method of Baht 734,229 thousand and selling price of Baht 1,110,000 thousand. Dusit Sindhorn Company Limited is an associated company whose share capital was 49.99% owned by the Company. /6 - 6 - 10. DERIVATIVE FINANCIAL INSTRUMENTS As at June 30, 1999, the Company entered into a forward exchange contract with a bank to buy US$ 1,500,000 at the rate of Baht 39.4612 for US$ 1, for the remaining period of 15 days as a hedge of liabilities in foreign currencies. The spot rate as at June 30, 1999 was Baht 37.0009 for US$ 1. As at June 30, 1998, the Company and subsidiary companies entered into various exchange contracts with banks to buy US$ 33,000,000 at the average rates of Baht 41.1293 for US$ 1, for the period ranging from 91 days to 251 days as a hedge of liabilities in foreign currencies. The spot rate as at June 30, 1998 was Baht 42.5897 for US$ 1. 11. TRANSACTIONS BETWEEN RELATED COMPANIES Transactions between related companies 11.1 Investment in subsidiary, associated, and related companies The Companys financial statements June 30, 1999 Baht :000 Companys Type of Relationship Issued and % of Cost Equity name business paid-up Shareholding Subsidiary companies 1. Dusit Resort Cha-am Hotel and Co., Ltd. Condominium Subsidiary BAHT 225,000 97.09 403,109 0 2. Royal Princess Hotel and Public Co., Ltd. Management Subsidiary BAHT 600,000 79.65 780,047 475,840 3. Philippine Hoteliers, Inc. Hotel Subsidiary PESO 40,000 85.76 688,949 648,846 4. Dusit Thani Delaware, Inc. Holding Subsidiary US$ 800 100.00 21,726 123,547 5. Dusit Thani International Co., Ltd. Holding Subsidiary BAHT 4,000 99.99 4,000 3,566 6. Best Western (Thailand) Room reservation Co., Ltd. agent Subsidiary BAHT 25 99.30 25 26 7. Landmark Hotel Co., Ltd. Hotel Subsidiary BAHT 10,000 99.88 9,988 0 Associated company 1. Worldclass Rent a Car Co., Ltd. Car rental Associated BAHT 100,000 20.00 20,000 0 Related companies 1. Acme Printing Co., Ltd. Printing house Mutual management BAHT 40,000 - - - 2. Crown Property Bureau Land leasing Major shareholder BAHT - - - - 1,927,844 1,251,825 /7 - 7 - The Companys financial statements June 30, 1998 Baht :000 Companys Type of Relationship Issued and % of Cost Equity name business paid-up Shareholding Subsidiary companies 1. Dusit Resort Cha-am Hotel and Co., Ltd. Condominium Subsidiary BAHT 225,000 90.36 380,398 0 2. Royal Princess Hotel and Public Co., Ltd. Management Subsidiary BAHT 600,000 79.65 780,047 560,508 3. Philippine Hoteliers, Inc. Hotel Subsidiary PESO 40,000 85.76 687,984 616,699 4. Dusit Thani Delaware, Inc. Holding Subsidiary US$ 800 100.00 21,726 127,331 5. Dusit Thani International Co., Ltd. Holding Subsidiary BAHT 4,000 99.99 4,000 6,387 6. Best Western (Thailand) Room reservation Co., Ltd. agent Subsidiary BAHT 25 99.30 25 26 7. Format Advertising Co., Ltd. Advertisement Subsidiary BAHT 500 59.70 299 1,106 8. Landmark Hotel Co., Ltd. Hotel Subsidiary BAHT 10,000 99.88 9,988 0 Associated companies 1. DPMN Industries Co., Ltd. Laundry Associated BAHT 60,000 25.00 15,000 405 2. Worldclass Rent a Car Co., Ltd. Car rental Associated BAHT 100,000 20.00 20,000 0 Related companies 1. Acme Printing Co., Ltd. Printing house Mutual management BAHT 40,000 - - - 2. Crown Property Bureau Land leasing Major shareholder BAHT - - - - 1,919,467 1,312,462 (more)