VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (REVISED) AUDITOR'S REPORT To The Shareholders of Vibhavadi Medical Center Public Company Limited I have audited the consolidated balance sheets of Vibhavadi Medical Center Public Company Limited and its subsidiary as at December 31, 2000 and 1999, and the consolidated related statements of income, changes in shareholders' equity, retained earnings (deficits) and cash flows for the years then ended, and the separate financial statements of Vibhavadi Medical Center Public Company Limited for the same periods. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. Except mentioned in the next paragraph, I conducted my audit 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 statement presentation. I believe that my audit provides a reasonable basis for my opinion. According to Note 6 to the financial statements, the associated company's financial statements for the year ended December 31, 2000 prepared by its management are not audited by its auditor. The Company's portion in net loss of associated company accounted for 158% of total net income and investments in associated company accounted for 4.28% of total assets. -2- In my opinion, except for the effect on adjustment which might be necessary to the 2000 financial statements if the associated company's financial statements as described in the third paragraph are audited by the auditor, the aforementioned financial statements present fairly, in all material respects, the financial position of Vibhavadi Medical Center Public Company Limited and its subsidiary and the Company only as at December 31, 2000 and 1999, and the results of their operations, changes in shareholders' equity and their cash flows for the years then ended in accordance with generally accepted accounting principles. As described in Note 3 to the financial statements, the Company has changed in accounting policy of recording investments in the associated company to be in accordance with the new accounting standards. (Mr. Chaiyakorn Aunpitipongsa) Certified Public Accountant Registration No. 3196 February 16, 2001 VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY BALANCE SHEETS AS AT DECEMBER 31, ASSETS BAHT CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 (Revised) (Revised) Current Assets Cash on hand and at banks 14,760,091 20,330,534 10,712,320 19,250,642 Short-term investments 257,526 3,362,613 257,526 3,362,613 Trade accounts receivable (Note 20.1) 38,791,814 38,153,182 34,999,502 34,138,983 Less Allowance for doubtful accounts (Notes 4.2 and 20.1) (9,150,138) (11,157,612) (7,434,629) (9,341,935) Trade accounts receivable-net 29,641,676 26,995,570 27,564,873 24,797,048 Inventories (Notes 4.3 and 5) 16,720,252 18,086,403 16,720,252 18,070,892 Other current assets Rental receivable - - 5,400,000 5,100,000 Interest receivable (Note 20.2) 14,503,344 13,606,138 14,503,344 13,606,138 Others 2,454,297 2,184,403 2,426,308 2,365,997 Total other current assets 16,957,641 15,790,541 22,329,652 21,072,135 Total Current Assets 78,337,186 84,565,661 77,584,623 86,553,330 Investments in Subsidiary, Associated and Related Parties (Notes 4.4 and 6) 118,141,044 124,951,120 120,375,593 125,666,528 Loans to Associated and Related Parties (Notes 7 and 20.2) 76,150,000 76,150,000 76,150,000 76,150,000 Property, Plant and Equipments-net (Notes 4.5 and 8) 826,573,284 857,288,408 821,869,543 852,139,155 Investments in Land (Notes 4.6 and 9) 150,770,240 - 150,770,240 - Other Assets Deposit on land (Note 9) - 102,297,480 - 102,297,480 Others (Note 10) 4,354,149 6,948,910 3,730,179 6,305,092 TOTAL ASSETS 1,254,325,903 1,252,201,579 1,250,480,178 1,249,111,585 Notes to the financial statements form an integral part of these statements. VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY BALANCE SHEETS AS AT DECEMBER 31, LIABILITIES AND SHAREHOLDERS' EQUITY BAHT CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 (Revised) (Revised) Current Liabilities Bank overdrafts and loans from financial institutions (Note 11) 6,100,594 69,678,924 6,100,594 69,678,924 Trade accounts payable 26,465,913 25,528,453 26,465,913 25,528,453 Current portion of Financial lease payable (Note 12) 607,515 642,495 607,515 642,495 Assets payable (Note 13) 1,471,250 1,605,000 1,471,250 1,605,000 Long-term loans (Note 14) 57,486,582 22,473,734 57,486,582 22,473,734 Total current portion due within one year 59,565,347 24,721,229 59,565,347 24,721,229 Other current liabilities Accrued interest 253,969 2,074,906 253,969 2,074,906 Accrued doctors' fee 7,177,202 8,158,281 7,177,203 8,158,281 Share subscription payable 12,500,000 12,500,000 12,500,000 12,500,000 Accrued income tax 2,423,057 297 2,256,331 - Others 6,099,701 6,124,305 5,095,506 5,340,510 Total other current liabilities 28,453,929 28,857,789 27,283,009 28,073,697 Total Current Liabilities 120,585,783 148,786,395 119,414,863 148,002,303 Financial Lease Payable-net (Note 12) 459,247 1,066,763 459,247 1,066,763 Assets Payable-net (Note 13) - 1,471,250 - 1,471,250 Long-Term Loans-net (Note 14) 357,822,014 334,597,837 357,822,014 334,597,837 Other Liabilities 2,784,805 2,415,902 110,000 110,000 Total Liabilities 481,651,849 488,338,147 477,806,124 485,248,153 Notes to the financial statements form an integral part of these statements. VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY BALANCE SHEETS AS AT DECEMBER 31, LIABILITIES AND SHAREHOLDERS' EQUITY (CONTINUED) BAHT CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 (Revised) (Revised) Shareholders' Equity Share capital Authorized share capital 40,000,000 ordinary shares of Baht 10 par value 400,000,000 400,000,000 400,000,000 400,000,000 Issued and paid-up share capital 35,964,603 ordinary shares at Baht 10 each 359,646,030 359,646,030 359,646,030 359,646,030 Premium on share capital 434,233,100 434,233,100 434,233,100 434,233,100 Unrealized loss on available-for-sale securities-associated company (11,059,278) (13,818,877) (11,059,278) (13,818,877) Retained earnings (deficits) Appropriated Legal reserve (Note 16) 6,365,319 6,365,319 6,365,319 6,365,319 Unappropriated (16,511,117) (22,562,140) (16,511,117) (22,562,140) Total Shareholders' Equity 772,674,054 763,863,432 772,674,054 763,863,432 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,254,325,903 1,252,201,579 1,250,480,178 1,249,111,585 Notes to the financial statements form an integral part of these statements. VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, BAHT CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 (Revised) (Revised) REVENUES Income from medical treatment 434,460,351 423,917,663 434,460,351 423,917,663 Income from rental and service 19,100,244 16,038,589 7,200,000 7,500,000 Company's portion in net income of subsidiary company - - 1,519,141 3,362 Interest income (Note 18) 7,632,908 9,652,854 7,619,352 9,625,018 Other income 6,767,300 6,312,664 6,454,723 5,998,763 Total Revenues 467,960,803 455,921,770 457,253,567 447,044,806 EXPENSES Cost of medical treatment 322,635,590 309,102,832 322,635,590 309,102,832 Selling and administrative expenses 84,272,384 80,893,068 74,198,555 72,247,633 Company's portion in net loss of associated company 9,594,674 15,796,689 9,594,674 15,796,689 Interest expenses 37,599,206 44,994,295 37,599,206 44,994,295 Directors' remuneration (Note 15) 700,000 700,000 700,000 700,000 Total Expenses 454,801,854 451,486,884 444,728,025 442,841,449 INCOME BEFORE INCOME TAX 13,158,949 4,434,886 12,525,542 4,203,357 INCOME TAX EXPENSE 7,107,926 2,217,406 6,474,519 1,985,877 NET INCOME 6,051,023 2,217,480 6,051,023 2,217,480 BASIC EARNINGS PER SHARE (Note 4.8) Net income 0.17 0.06 0.17 0.06 (The number of ordinary share 35,964,603 shares) Notes to the financial statements form an integral part of these statements. VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, BAHT CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 (Revised) (Revised) Share capital Common stock 359,646,030 359,646,030 359,646,030 359,646,030 Paid-in capital Premium on share capital 434,233,100 434,233,100 434,233,100 434,233,100 Unrealized loss on available-for -sale securities-associated company Beginning balance (13,818,877) (23,415,629) (13,818,877) (23,415,629) Decrease during the year 2,759,599 9,596,752 2,759,599 9,596,752 Ending balance (11,059,278) (13,818,877) (11,059,278) (13,818,877) Retained earnings (deficits) Appropriated Legal reserve 6,365,319 6,365,319 6,365,319 6,365,319 Unappropriated Beginning balance before adjustment (7,598,817) (25,612,986) (7,598,817) (25,612,986) Cumulative effect on change in accounting policy of investment in associated company (Note 3) (14,963,323) 833,366 (14,963,323) 833,366 Beginning balance after adjustment (22,562,140) (24,779,620) (22,562,140) (24,779,620) Increase during the year 6,051,023 2,217,480 6,051,023 2,217,480 Ending balance (16,511,117) (22,562,140) (16,511,117) (22,562,140) TOTAL SHAREHOLDERS' EQUITY 772,674,054 763,863,432 772,674,054 763,863,432 Notes to the financial statements form an integral part of these statements. VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY STATEMENTS OF RETAINED EARNINGS (DEFICITS) FOR THE YEARS ENDED DECEMBER 31, BAHT CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 (Revised) (Revised) UNAPPROPRIATED RETAINED EARNINGS (DEFICITS) Beginning balance before adjustment (7,598,817) (25,612,986) (7,598,817) (25,612,986) Cumulative effect on change in accounting policy of investment in associated company (Note 3) (14,963,323) 833,366 (14,963,323) 833,366 Beginning balance after adjustment (22,562,140) (24,779,620) (22,562,140) (24,779,620) Net income for the year 6,051,023 2,217,480 6,051,023 2,217,480 TOTAL UNAPPROPRIATED RETAINED EARNINGS (DEFICITS) (16,511,117) (22,562,140) (16,511,117) (22,562,140) APPROPRIATED RETAINED EARNINGS Legal reserve 6,365,319 6,365,319 6,365,319 6,365,319 TOTAL APPROPRIATED RETAINED EARNINGS 6,365,319 6,365,319 6,365,319 6,365,319 TOTAL RETAINED EARNINGS (DEFICITS) (10,145,798) (16,196,821) (10,145,798) (16,196,821) Notes to the financial statements form an integral part of these statements. VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, BAHT CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 (Revised) (Revised) CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME 6,051,023 2,217,480 6,051,023 2,217,480 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED FROM (USED IN) OPERATION : Depreciation 37,438,893 36,906,365 36,447,271 36,005,090 Loss on disposal and unused fixed assets 16,858 1,548,739 16,858 1,548,739 Company's portion in net income of subsidiary company - - (1,519,141) (3,362) Company's portion in net loss of associated company 9,594,674 15,796,689 9,594,674 15,796,689 Bad debt and allowance for doubtful accounts (1,176,359) 3,257,373 (1,076,191) 2,763,593 Loss on impaired assets - 2,394,186 - 2,394,186 INCOME FROM OPERATING ACTIVITIES BEFORE CHANGE IN OPERATING ASSETS AND LIABILITIES ITEMS 51,925,089 62,120,832 49,514,494 60,722,415 ( INCREASE ) DECREASE IN OPERATING ASSETS ITEMS Trade accounts receivable (1,469,746) 22,474 (1,691,633) 737,607 Inventories 1,366,150 (1,568,782) 1,350,641 (1,577,331) Other current assets (1,167,099) (5,347,327) (1,257,518) (4,823,743) Other assets 2,594,760 (509,007) 2,574,912 (398,915) INCREASE (DECREASE) IN OPERATING LIABILITIES ITEMS Trade accounts payable 937,461 1,819,054 937,461 1,819,054 Other current liabilities (403,859) (10,423,818) (790,689) (10,703,789) Other liabilities 368,901 232,766 - (465,001) NET CASH PROVIDED FROM OPERATING ACTIVITIES 54,151,657 46,346,192 50,637,668 45,310,297 Notes to the financial statements form an integral part of these statements. VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, BAHT CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 (Revised) (Revised) CASH FLOWS FROM INVESTING ACTIVITIES Decrease in short-term investments 3,105,087 911,331 3,105,087 911,331 Increase in loans to related parties (25,000) - (25,000) - Decrease in loans to associated and related parties - 1,550,000 - 1,550,000 Purchase of property, plant and equipments (6,783,427) (6,804,794) (6,237,317) (6,322,068) Increase in investment in land (48,472,760) - (48,472,760) - Proceeds from equipment disposal 42,800 108,185 42,800 108,185 NET CASH USED IN INVESTING ACTIVITIES (52,133,300) (4,235,278) (51,587,190) (3,752,552) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in bank overdrafts and loans from financial institutions 18,412,124 (12,625,667) 18,412,124 (12,625,667) Repayment for financial lease payable (642,495) (98,845) (642,495) (98,845) Repayment for assets payable (1,605,000) (401,250) (1,605,000) (401,250) Repayment for long-term loans (23,753,429) (22,228,471) (23,753,429) (22,228,471) NET CASH USED IN FINANCING ACTIVITIES (7,588,800) (35,354,233) (7,588,800) (35,354,233) NET INCREASE (DECREASE) IN CASH ON HAND AND AT BANKS (5,570,443) 6,756,681 (8,538,322) 6,203,512 CASH ON HAND AND AT BANKS AS AT JANUARY 1, 20,330,534 13,573,853 19,250,642 13,047,130 CASH ON HAND AND AT BANKS AS AT DECEMBER 31, 14,760,091 20,330,534 10,712,320 19,250,642 Notes to the financial statements form an integral part of these statements. VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, BAHT CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 (Revised) (Revised) ADDITIONAL DISCLOSURE ITEMS TO CASH FLOWS STATEMENTS CASH PAID DURING THE YEAR FOR : Interest expenses 39,420,143 50,454,406 39,420,143 50,454,406 Income tax expenses 4,685,166 2,664,106 4,218,188 2,432,874 NON-CASH FLOWS ITEMS : Increase in equipments from financial lease agreement - 1,808,103 - 1,808,103 Increase in equipments from installment payment - 3,477,500 - 3,477,500 Increase in investment in land from deposit on land 102,297,480 - 102,297,480 - Convert short-term loans to long-term loans 81,990,454 - 81,990,454 - Notes to the financial statements form an integral part of these statements. VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 1. GENERAL INFORMATION Parent Company Subsidiary Company 1.1 Legal status A juristic person established A juristic person established under Thai law and listed in the under Thai law. Stock Exchange of Thailand. 1.2 Company location 51/3 Moo 3, Ngam Wong Wan 51/3 Moo 3, Ngam Wong Road, Khet Chatuchak, Bangkok Wan Road, Khet Chatuchak 10900, Thailand. Bangkok 10900, Thailand. 1.3 Type of business Hospital. Office building and apartment for rent. 1.4 Number of employees as at December 31, 2000 Full time 590 persons and Full time 6 persons and Part time 171 persons Part time 10 persons as at December 31, 1999 Full time 582 persons and Full time 10 persons Part time 183 persons 2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS 2.1 The consolidated financial statements included the financial statements of Vibhavadi Medical Center Public Company Limited and subsidiary as follows: % HOLDING Vibhavadi Mansion Company Limited 100 2.2 Vibhavadi Medical Center Public Company Limited invested in its subsidiary since the registration date at par value. 2.3 Inter-company balances and transactions have been eliminated in the consolidation. -2- 3. THE CHANGE IN ACCOUNTING POLICY In 2000, the Company has changed its accounting policy in recording investment from formerly recording investment in related parties by cost method in accordance with the former accounting standards to recording investment in associated company from cost method to equity method to be consistent with the Accounting Standard No. 45, subject of Accounting for Investment in Associated Company. In changing in such accounting policy, the Company has to adjust retroactively to previous financial statements comparatively shown as if the Company has recorded by equity method according to the new accounting policy all through. Therefore, the 1999 comparative information was duly prepared following the new accounting policy which resulted the Company's portion in net losses of the associated company in 2000 and 1999 by Baht 9,594,674 and Baht 15,796,689, respectively. The cumulative effect from change in accounting policy resulted in decreasing the 1999 beginning deficits by Baht 833,366. 4. SIGNIFICANT ACCOUNTING POLICIES 4.1 Income and expenses recognition Revenues from medical treatment, rental and service revenues, and expenses are recognized on an accrual basis. 4.2 Allowance for doubtful accounts The Company provided allowance for doubtful accounts which are expected to be uncollectible. 4.3 Inventories Inventories are stated at cost or net realizable value, whichever is the lower by physical checking and determined by the First-in, First-out method. -3- 4.4 Investments in subsidiary, associated and related parties Investments in subsidiary and associated are stated by equity method. Investments in related parties are stated by cost method. 4.5 Property, plant and equipments Property, plant and equipments are stated at cost. Depreciation for plant and equipments acquired before 1996 is calculated by the declining method as follows : Per annum Building 3.30% Medical instruments and office appliances 6.67% Vehicles 6.67% Depreciaton for plant and equipments acquired since 1996 onwards, is calculated by the straight-line method as follows : Per annum Building and building equipments 3.30% Medical instruments 6.67% Furniture 10.00% Office appliances and equipments of rooms for rent 20.00% Vehicles 10.00% Equipments and health center appliances 20.00% The unused medical instruments and office appliances are stated at book value on the effect date net after the provision for the impairment of those assets. 4.6 Investment in land Investment in land is stated by cost method. -4- 4.7 Foreign currency transactions Foreign currency transactions are recorded in Baht at the rate ruling on the date of transactions. Outstanding foreign currency assets and liabilities at the balance sheets date are converted to Baht at the exchange rates of commercial bank in effect at that date. Gains or losses on translation are credited or charged to operation during the year. 4.8 Basic earnings per share Basic earnings per share are calculated by dividing the net income by the number of issued and paid-up share capital at the end of the year. 5. INVENTORIES consist of : (BAHT) CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Medicines and medical supplies 14,346,280 15,906,543 14,346,280 15,906,543 Office supplies 1,086,437 853,899 1,086,437 853,899 House supplies 737,991 550,335 737,991 550,335 Stationery and other supplies 549,544 775,626 549,544 760,115 Total 16,720,252 18,086,403 16,720,252 18,070,892 -5- 6. INVESTMENTS IN SUBSIDIARY, ASSOCIATED AND RELATED PARTIES consist of: (BAHT) % Cost Equity Method Holding Method (for subsidiary and associated only) 2000 1999 2000 1999 2000 1999 Subsidiary Company 1. Vibhavadi Mansion Co., Ltd. 100.00 100.00 250,000 250,000 2,234,549 715,408 Total Investments in Subsidiary Company 250,000 250,000 2,234,549 715,408 Associated Company 1. Phattanakarn Vechakit Co., Ltd. 16.50 16.50 89,250,000 89,250,000 53,632,724 60,467,800 Total Investment in Associated Company 89,250,000 89,250,000 53,632,724 60,467,800 Related Parties 1. Chao Phya Hospital Co., Ltd. 5.44 5.44 46,408,320 46,408,320 46,408,320 46,408,320 2. Supalerk U-Thong Hospital Co., Ltd. 6.00 6.00 3,000,000 3,000,000 3,000,000 3,000,000 3. Vibhavadi Consultant Co., Ltd. 10.00 10.00 100,000 75,000 100,000 75,000 4. Karnchanaburi Health Center Co., Ltd. 15.00 15.00 15,000,000 15,000,000 15,000,000 15,000,000 Total Investments in Related Parties 64,508,320 64,483,320 64,508,320 64,483,320 Total Investments in Associated and Related Parties 153,758,320 153,733,320 118,141,044 124,951,120 Grand Total Investments in Subsidiary, Associated and Related Parties 154,008,320 153,983,320 120,375,593 125,666,528 -6- (BAHT) Type of Relationship Paid-up share capital Dividend business 2000 1999 2000 1999 Subsidiary Company 1. Vibhavadi Mansion Co., Ltd. Apartment Common shareholders for rent / directors 250,000 250,000 - - Associated Company 1. Phattanakarn Vechakit Co., Ltd. Hospital Common shareholders 600,000,000 600,000,000 - - / directors Related Parties 1. Chao Phya Hospital Co., Ltd. Hospital Common shareholders / directors 440,000,000 440,000,000 - - 2. Supalerk U-Thong Hospital Co., Ltd Hospital Common shareholders / directors 50,000,000 50,000,000 - - 3. Vibhavadi Consultant Co., Ltd. Consultant Common shareholders / directors 1,000,000 750,000 - - 4. Karnchanaburi Health Center Fitness Common shareholders Co., Ltd. Center / directors 100,000,000 100,000,000 - - Total - - The Company invested in Phattanakarn Vechakit Co., Ltd. at 16.50% of share capital but the Company has materially influence to it by having common directors and significant accounting transactions. Therefore, it is treated as associated company. The financial statements of Phattanakarn Vechakit Co., Ltd., associated company are based on the information prepared by its management. They are under the examination by its auditor and not yet finished. Due to the associated company is non-listing in the Stock Exchange of Thailand, therefore the financial statements are not prepared for auditing according to the Company's schedule. On September 29, 2000, Vibhavadi Consultant Co., Ltd. called for additional share subscription payable Baht 250,000 from the Company which was fully settled on October 26, 2000. -7- 7. LOANS TO ASSOCIATED AND RELATED PARTIES consist of : (BAHT) 2000 1999 Condition Associated Company 1. Phattanakarn Vechakit Co., Ltd. - Loan Contract 40,750,000 40,750,000 1. In 1999, interest rate at MLR of TMB +1.5% per annum. In 2000, interest rate at MLR of TMB + 1% per annum. 2. Grace period for principal repayment is 1 year. 3. Repayment period for total loan is 5 years. 4. By mortgaging medical instruments as collateral according to the contract. - Promissory Notes 30,000,000 30,000,000 1. Promissory note at call 2. Interest rate at borrowing rate + 1% per annum 3. Interest payable at the end of every month. 4. By mortgaging medical instruments as collateral according to the contract. Related Parties 1. M.D.S. Enterprise Co., Ltd. 500,000 500,000 1. Promissory note at call 2. Interest rate at 4.00% per annum. 3. Interest payable at the end of every month 4. No collateral -8- (BAHT) 2000 1999 Condition Related Parties 2. Supalerk U-Thong Hospital 4,900,000 4,900,000 1. Loan under loan agreement Co., Ltd. 2. In 1999, interest rate at MLR of TMB +1.5% per annum. In 2000, interest rate at MLR of TMB + 1% per annum. 3. Repayment within one year, commencing from the borrowing date. 4. Interest payable within the 5th of every month. 5. Having assets of related parties' director as collateral. Total Loans to Associated and Related Parties 76,150,000 76,150,000 Some loan contracts to associated company and related parties are due for settlement the principal but the Company has not received any repayment. -9- 8. PROPERTY, PLANT AND EQUIPMENTS consist of : (BAHT) THE COMPANY ONLY 1999 INCREASE SALE TRANSFER 2000 Land 68,134,533 - - - 68,134,533 Building and equipments 728,441,689 - - - 728,441,689 Office appliances and furniture 65,766,406 3,328,565 96,300 463,528 69,462,199 Medical instruments 186,262,654 1,978,900 - - 188,241,554 Vehicles 9,320,275 5,350 - - 9,325,625 Equipments and health center appliances 1,091,631 14,570 - - 1,106,201 Assets under installation - 909,932 - (463,528) 446,404 Total 1,059,017,188 6,237,317 96,300 - 1,065,158,205 Less Accumulated depreciation (204,483,847) (36,447,271) (36,642) - (240,894,476) 854,533,341 824,263,729 Less Provision for impairment of assets - Medical instruments (1,050,354) - - - (1,050,354) - Office appliances and furniture (1,343,832) - - - (1,343,832) Property, Plant and Equipments-net 852,139,155 821,869,543 Depreciation for the year 36,005,090 36,447,271 -10- (BAHT) CONSOLIDATED 1999 INCREASE SALE TRANSFER 2000 Land 68,134,533 - - - 68,134,533 Building and equipments 728,441,689 - - - 728,441,689 Decoration for leased building 6,140,704 - - - 6,140,704 Equipments of rooms for rent 724,684 288,585 - - 1,013,269 Office appliances and furniture 66,617,359 3,586,090 96,300 463,528 70,570,677 Medical instruments 186,262,654 1,978,900 - - 188,241,554 Vehicles 9,320,275 5,350 - - 9,325,625 Equipments and health center appliances 1,091,631 14,570 - - 1,106,201 Assets under installation - 909,932 - (463,528) 446,404 Total 1,066,733,529 6,783,427 96,300 - 1,073,420,656 Less Accumulated depreciation (207,050,935) (37,438,893) (36,642) - (244,453,186) 859,682,594 828,967,470 Less Provision for the impairment of assets - Medical instruments (1,050,354) - - - (1,050,354) - Office appliances and furniture (1,343,832) - - - (1,343,832) Property, Plant and Equipments-net 857,288,408 826,573,284 Depreciation for the year 36,906,365 37,438,893 The Company has mortgaged its land and building with one commercial bank as collateral for loans obtained from bank. -11- 9. DEPOSIT ON LAND AND INVESTMENT IN LAND On August 9, 1994, the Company signed an agreement to purchase and to sell the land with Phattanakarn Vechakit Co., Ltd. at total cost of Baht 204,595,000. A deposit of Baht 102,297,480 has been made on the date of signing the agreement with the commitment that such deposit is partial payment of land. The remaining portion of Baht 102,297,520 shall be settled when the ownership title is transferred to the Company. Phattanakarn Vechakit Company Limited has hired Chesterton (Thai) Co., Ltd. to appraise the land, which the new appraised value of land in December 1997 is Baht 144 million due to the downturn of economy especially the real estate sector. On December 29, 1999, the Company made a memorandum of understanding annexed to the agreement to purchase and to sell the land with Phattanakarn Vechakit Co., Ltd. with additional agreement that if the right on deposit is going to change for whatever reason, that change must be made not less than Baht 102,297,480 and at fair value. If the additional price of land will be paid, it should not exceed the fair value of land (market price) less deposit upon the transferring right of land. On March 30, 2000, the Company purchased the land from Phattankarn Vechakit Co., Ltd. at the price of Baht 150 million and the Company paid additional amount for the remaining of Baht 47,702,520. The registration on transferring right of land was made on March 31, 2000. -12- 10. OTHER ASSETS consist of : (BAHT) CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Guarantee for electricity consumption 2,528,700 2,528,700 2,528,700 2,528,700 Bail 702,779 682,718 702,779 682,718 Prepaid income tax 426,774 3,054,323 - 2,594,974 Other assets 695,896 683,169 498,700 498,700 Total 4,354,149 6,948,910 3,730,179 6,305,092 11. BANK OVERDRAFTS AND LOANS FROM FINANCIAL INSTITUTIONS consist of : (BAHT) CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Bank overdrafts 6,100,594 2,688,470 6,100,594 2,688,470 Loans from financial institutions - 66,990,454 - 66,990,454 Total 6,100,594 69,678,924 6,100,594 69,678,924 In 2000 and 1999, the Company mortgaged its land and buildings as collateral for bank overdrafts. In 1999, loans from financial institutions are guaranteed by related parties. -13- 12. FINANCIAL LEASE PAYABLE consist of : (BAHT) CONSOLIDATED THE COMPANYONLY 2000 1999 2000 1999 Financial Lease Payable 1,230,869 1,974,955 1,230,869 1,974,955 Less Deferred interest (164,107) (265,697) (164,107) (265,697) Current portion of financing Lease (607,515) (642,495) (607,515) (642,495) Financial Lease Payable-net 459,247 1,066,763 459,247 1,066,763 In September 1999, The Company bought assets under financial lease agreement with certain leasing company amount of Baht 2 million. The payable amount has to be made by 36 months at Baht 57,237 per month of which such agreement cannot be cancelled. The portion of financial lease payable due within one year was shown under current liabilities. 13. ASSETS PAYABLE consist of : (BAHT) CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Assets Payable 1,471,250 3,076,250 1,471,250 3,076,250 Less Current portion of assets payable (1,471,250) (1,605,000) (1,471,250) (1,605,000) Assets Payable-net - 1,471,250 - 1,471,250 In September 1999, The Company bought assets by hire purchase amount of Baht 3,477,500 with 26 installments repayable at Baht 133,750 per month. The portion of assets payable due within one year has been shown under current liabilities. -14- 14. LONG-TERM LOANS consist of : (BAHT) CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Long-term loans Loans in Baht currency 340,599,857 357,071,571 340,599,857 357,071,571 Loans converted from short-term loans 74,708,739 - 74,708,739 - Total 415,308,596 357,071,571 415,308,596 357,071,571 Less Portion due within one year (57,486,582) (22,473,734) (57,486,582) (22,473,734) Long-term loans-net 357,822,014 334,597,837 357,822,014 334,597,837 In June 2000, the Company has made an agreement with the bank to change the repayment condition of short-term loans of Baht 82 million to the term of repayment principal within 6 years. The portion of long-term loans due within one year has been shown under current liabilities. -15- The repayment condition for the principal and interest of each contract is as follows: (BAHT) PRINCIPAL PRINCIPAL BALANCE REPAYMENT CONDITION (LOAN AGREEMENT DATE) 2000 1999 36,000,000 26,765,692 31,084,216 1. Repayment for principal with interest at the end of every (December 23, 1998) month at Baht 700,000, interest rate at MLR per annum. 2. First installment started in January 1999 and ending in December 2005. 52,000,000 35,321,493 41,680,509 1. Repayment for principal with interest at the end of every (December 23, 1998) month at Baht 1,000,000, interest rate at MLR per annum. 2. First installment started in January 1999 and ending in December 2005. 30,000,000 17,392,672 23,186,846 1. Repayment for principal with interest at the end of every (January 5, 1999) month at Baht 800,000, interest rate at MLR per annum. 2. First installment started in January 1999 and ending in January 2004. 36,730,000 36,730,000 36,730,000 1. Repayment for interest at the end of every month interest (January 5, 1999) rate at MLR per annum. 2. First installment of principal with interest will start in January 2001 at Baht 800,000 per month and ending in December 2007. 36,150,000 36,150,000 36,150,000 1. Repayment for interest at the end of every month, interest (January 11, 1999) rate at MLR per annum. 2. First installment of principal with interest will start in January 2001 at Baht 800,000 per month and ending in December 2007. 37,500,000 37,500,000 37,500,000 1. Repayment for interest at the end of every month, interest (April 27, 1999) rate at MLR per annum. 2. First installment of principal with interest will start in April 2001 at Baht 800,000 per month and ending in December 2007. 150,740,000 150,740,000 150,740,000 1. Repayment for interest at the end of every month, interest (December 2, 1999) rate at MLR per annum. 2. First installment of principal and interest will start in January 2002 at 3,100,000 per month and ending in December 2006. 3. Subsequent installment of principal with interest will be continuing in January 2007 at Baht 5,500,000 per month and ending in December 2007. -16- PRINCIPAL PRINCIPAL BALANCE REPAYMENT CONDITION (LOAN AGREEMENT DATE) 2000 1999 25,000,000 22,923,739 - 1. Repayment of interest at the end of every month, interest (June 29, 2000) rate at MLR per annum. 2. First installment of principal with interest started in June 2000 at Baht 520,000 per month and ending in June 2005. 56,990,454 51,785,000 - 1. Repayment of interest at the end of every month, interest (June 30, 2000) rate at MOR per annum. 2. First installment of principal with interest started in July 2000 at Baht 865,000 per month and ending in January 1, 2006. Total 415,308,596 357,071,571 The Company mortgaged its land with the structure as the collateral for these long-term loans. -17- 15. DIVIDENDS PAYMENT AND DIRECTORS' REMUNERATION On April 28, 2000, the Ordinary General Shareholders' Meeting of 2000 was held and approved not to pay dividends to the shareholders and approved to pay directors' remuneration for 1999 totalling Baht 700,000. On April 23, 1999, the Ordinary General Shareholders' Meeting of 1999 was held and approved not to pay dividends to the shareholders and approved to pay directors' remuneration for 1998 totalling Baht 700,000. 16. LEGAL RESERVE The Company has to set up legal reserve at least 5% of net annual income until meet 10% of authorized share capital, in compliance with the Public Company Act, B.E.2535 (1992). Such legal reserve is not allowed to pay for dividend. 17. CONTINGENT LIABILITIES AND COMMITMENT The Company and its subsidiary have commitments and contingent liabilities as at December 31, 2000 and 1999 as follows : -18- (BAHT) CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 17.1 Commitment from the letters of guarantee issued by commercial bank 36,000 36,000 36,000 36,000 17.2 Commitment from the letters of guarantee issued by commercial bank for subsidiary company 2,528,700 2,528,700 2,528,700 2,528,700 17.3 Commitment from the letters of guarantee for loans amount of SGD 2.8 million for associated company 70,531,720 63,715,960 70,531,720 63,715,960 17.4 Commitment from the letters of guarantee for loans amount of USD 270,000 for associated company 11,728,692 10,181,646 11,728,692 10,181,646 18. TRANSACTIONS WITH RELATED PARTIES The Company has certain transactions with its related parties which are related through the shareholdings or having common shareholders or directors. The effects of these transactions were reflected in the accompanying financial statements on the bases mutually determined by the parties concerned. The significant transactions with related parties for 2000 and 1999 are as follows : (BAHT) TRANSACTIONS IN BALANCE SHEETS 2000 1999 Loans to associated and related parties (see Note 7) 76,150,000 76,150,000 Purchase of land from associated company(see Note 9) 150,000,000 - Deposit on land to purchase paid to related party (see Note 9) - 102,297,480 Interest receivable on loans to associated and related parties (see Note 20.2) 14,484,827 13,580,250 -19- (BAHT) TRANSACTIONS IN STATEMENTS OF INCOME 2000 1999 Consultancy fees for various working systems and maintenance fees for medical instruments to related parties 901,893 687,050 Interest income from loans to associated and related parties 7,524,280 9,349,872 In 2000, the Company purchased land from the associated company valued Baht 150 million which the price is lower than cost about Baht 3.5 million. In 2000 and 1999, the Company paid consultancy fees and maintenance fees for medical instruments to Vibhavadi Consultant Co., Ltd., its related party at the general trading price. The Company has other related transactions with subsidiary company which are eliminated in the consolidation as follows : The Company has lent some part of Vibhavadi building 2 to its subsidiary for others renting as an office and residential apartment with the term of 3 years since August 1, 1995 to July 31, 1998. In case that the lease agreement is expired and no renewal agreement is made for whatever reason, it is assumed that the agreement is renewable according to the old condition for further 3 years with the compensation of Baht 100,000 per month per floor which are fully utilized. In 1999, the Company changed the rent agreement by fixing monthly rental to be Baht 1,200,000, commencing from October to December 1999, and in 2000, the monthly rental is Baht 600,000, commencing from January 2000, onward. The Company has to pay for electricity and water supply of Vibhavadi building 2 for the actual consumption of the Company to the subsidiary company at cost without intra profit. -20- 19. FINANCIAL INFORMATION BY SEGMENT The Company and its subsidiary are engaged in the business of medical treatment and building for rent in one geographical area, Thailand. Due to the business segment of building for rent has immaterial amount. Therefore, these financial statements do not present the financial information by segment. 20. QUALITY OF ASSETS as at December 31, 2000 and 1999 are as follows : 20.1 Trade accounts receivable Trade accounts receivable which have financial difficulties in settlement debts in consolidation and financial statements of the Company are classified by outstanding balances of aging as follows : (BAHT) CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Over 3 to 6 months 3,328,299 3,835,468 3,227,143 3,436,599 Over 6 to 12 months 3,058,890 1,208,405 2,832,330 690,273 Over 12 months 9,150,138 11,157,612 7,434,629 9,341,935 Total 15,537,327 16,201,485 13,494,102 13,468,807 Allowance for doubtful accounts 9,150,138 11,157,612 7,434,629 9,341,935 20.2 Loans to associated and related parties and interest receivable as at December 31, 2000 and 1999 are as follows : Loans to associated and related parties, see also Note 7. Interest receivable incurred from loans to associated company and related parties consist of : -21- 2000 (BAHT) Interest receivable Under 3 over 3 to over 6 to over 12 Total Months 6 months 12 months months 1. Phattanakarn Vechakit Co., Ltd. 1,771,202 1,816,928 3,652,196 7,147,317 14,387,643 2. Supalerk U-Thong Hospital Co., Ltd. 40,840 - - - 40,840 3. M.D.S. Enterprise Co., Ltd. 5,041 5,041 9,972 36,290 56,344 Total 1,817,083 1,821,969 3,662,168 7,183,607 14,484,827 1999 (BAHT) Interest receivable Under 3 over 3 to over 6 to Over 12 Total Months 6 months 12 months Months 1. Phattanakarn Vechakit Co., Ltd. 1,928,038 2,091,931 4,599,758 4,876,475 13,496,202 2. Supalerk U-Thong Hospital Co., Ltd. 47,758 - - - 47,758 3. M.D.S. Enterprise Co., Ltd. 19,828 6,736 9,726 - 36,290 Total 1,995,624 2,098,667 4,609,484 4,876,475 13,580,250 The Company did not provide any allowance for doubtful accounts for such loans and interest receivable because they are associated and related parties and full settlement is expected to be made. 21. LEGAL CASE As at December 31, 2000 and 1999, the Company has legal case of claiming about land trespassing, driving out with the disputant and the latter has filed the law-suit under the same case. Currently, such case remains pending in the court. -22- 22. DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS Following Accounting Standard No. 48 about presentation of transactions and disclosure of financial instruments, the Company and its subsidiary have information about financial instruments both in and off balance sheets, as follows: 22.1 Accounting policies - Accounting policies are disclosed in Note 4 to financial statements. 22.2 Risk from breach of contracts - Due to the counter party does not follow the requirement in the contracts which caused damage to the Company and its subsidiary. - Concentrations of the credit risk with respect to trade accounts receivable are limited due to the large number of customers and their dispersion across different groups of enterprises. - For the financial assets shown in the balance sheets, the book value of such assets is net from allowance for doubtful accounts which are assumed to be the highest value of risk incurred from breach of contracts. 22.3 Risk relating to interest rate Risk from the change in interest rate may cause damage to the Company and its subsidiary for the current period and the following periods. 22.4 Fair value of financial instruments The Company and its subsidiary use the procedure and assumption in estimation the fair value of financial instruments, as follows: - Cash on hand and at banks, short-term investments, trade accounts receivable and loans to related parties shown at book values are equal to estimated fair value. - Bank overdrafts and loans from financial situations shown at book values are equal to estimated fair value. Portion of long-term loans shown at book value is equal to estimated fair value.