1. GENERAL INFORMATION Vibhavadi Medical Center Public Company Limited was a public company limited and was listed on the Stock Exchange of Thailand in 1992.The Company engages in its core business of hospital business. The registered office of the Company is located at 51/3 Moo3, Ngam Wong Wan Road, Khet Chatuchak, Bangkok. 2. BASIS FOR CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS PREPARATION The consolidated and the Company financial statements have been prepared in accordance with Thai Generally Accepted Accounting Principles under the Accounting Act, B.E.2543 being those Thai Accounting Standards issued under the Accounting Profession Act, B.E. 2547 and the financial reporting requirements of the Securities and Exchange Commission under the Securities and Exchange Act, B.E. 2535. The consolidated financial statements include the accounts of Vibhavadi Medical Center Public Company Limited and subsidiaries, Vibhavadi Mansion Co.,Ltd. and Benjasub property Co.,Ltd. with the percentage of holding of 100%. On September 2, 2006, the Extraordinary meeting of the shareholders of Vibhavadi Mansion Co.,Ltd, subsidiary, passed a resolution to approve the termination of its business in order to adjust for the reasonable of the group structure, to decrease expenses and to reduce the management of the operations. The subsidiary sold its assets to the Company at net book value and the subsidiary registered its business termination with the Ministry of Commerce on October 24, 2006. On November 30, 2006. The Company invested in common shares of Benjasup Propert Co.,Ltd to obtain the right to purchase land and building thereon (Wongtawee Tower) from the Legal Execution Department. The significant transactions between the Company and its subsidiaries have been eliminated in the consolidated financial statements. Financial information which audited by other auditors : Unit : Million Baht Consolidated 2006 2005 Total assets of subsidiaries 64.5 - Investments in associated companies recorded by the equity method 406.6 - Equity share in net profit of associated companies 19.6 11.6 Unit : Million Baht The Company Only 2006 2005 Investments in subsidiary recorded by the equity method (0.3) - Investments in associated companies recorded by the equity method 406.6 287.6 Equity share in net loss of subsidiary (0.4) - Equity share in net profit of associated companies 19.6 11.6 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies of the Company and subsidiary are summarized as follows: 3.1 Cash and Cash Equivalents Cash and cash equivalents include cash on hand and deposits at financial institutions. The Company and subsidiary maintain cash on hand for general use. Deposits at financial institutions, including short - term saving deposits, are highly liquid investments that are readily convertible to known amounts with original maturities of three months or less and that are subject to an insignificant risk of change in value. 3.2 Trade Accounts Receivable Trade accounts receivable are carried at original invoice amount less allowance for doubtful accounts. 3.3 Allowance For Doubtful Accounts The Company and subsidiary provide allowance for doubtful accounts equal to the estimated losses that may be incurred in the collection of receivables. The estimated losses are based on the collection experiences and the review of the current status of the existing receivables. Bad debts are written off during the year in which they are identified. 3.4 Inventories Inventories are valued at the lower of cost (First-in, First-out) or net realisable value. 3.5 Investments The Company values its investments in subsidiary and associated companies at equity method and values investments in shares of related companies which are held for long-term purposes in general investments at cost, net of allowance for impairment of investments (if any). The Company and subsidiary evaluate impairment of their investments when there is a factor indicating that such investments might be impaired, by comparing their carrying values with their net book values (based on their latest audited financial statements). Impairment loss is reflected in the statements of income. When disposing of an investment, the difference between its net disposal proceeds and its carrying value is charged or credited to operations. 3.6 Property, Plant and Equipment Property, plant and equipment are initially recorded at cost. All assets, except for land, are stated at historical cost less accumulated depreciation. Depreciation for property and equipment acquired before 1996 is calculated by using the declining method, details are as follows: Percentage per annum Buildings 3.30 Medical instruments and office equipment 6.67 Vehicles 6.67 Depreciation for property and equipment acquired since 1996 onwards is calculated by using straight-line method, under estimated useful life as follows: No. of Years Buildings, building equipment and system 10-30 Medical instruments 7-15 Furniture, fixture and office equipment 5 Vehicles 10 Appliances and furniture health center 5-10 When assets are sold or retired, the Company and subsidiaries will eliminated their costs and accumulated depreciation from the accounts and any gain or loss resulting from their disposal is included in the statements of income. Assets-in-progress and under installation are stated at cost. These assets are not depreciated until such time as the relevant assets are completed and ready for their intended operational use. 3.7 Impairment of Assets The Company and subsidiary reviewed the impairment of assets whenever events or changes in circumstances indicate that the recoverable amount of assets is below the carrying amount (the higher of an assets selling price or value in use). The review is made for individual assets or the cash generating unit. In case that the carrying value of an asset exceeds its recoverable amount, the Company and subsidiary recognise the impairment losses in the statements of income. The reversal of impairment losses recognised in prior years is recorded as other income when there is an indication that the impairment losses recognised for the assets no longer exist or are decreased. 3.8 Intangible asset Intangible asset is software computer stated at cost less accumulated amortization. Amortization of intangible assets is calculated by straight-line method over the useful lives of assets 3 years. 3.9 Accounting for leases - where a company is the lessee Leases transferring all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated to the principal and to the finance charges so as to achieve a constant rate on the finance balance outstanding. The outstanding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of income over the lease period. The property, plant or equipment acquired under finance leases is depreciated over the useful life of the asset. Leases not transferring a significant portion of the risks and rewards of ownership to the lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of income on a straight-line basis over the period of the lease. 3.10 Foreign Currency Transactions Foreign currency transactions throughout the years are recorded to Thai Baht at the rates prevailing at the transactions dates. Gain or loss is credited or charged to current operations. 3.11 Provisions Provisions are recognized when the Company and subsidiary have a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Company and subsidiary expect a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. 3.12 Revenue Recognition Revenue from hospital operations mainly consisted of medical fees, hospital room sales and medicine sales. The Company and subsidiaries recognised its as income when services have been rendered or medicine delivered. The Company and subsidiary recognised service income when services have been rendered. The Company recognised rental income on an accrual basis. Interest income is recognised on a time proportion basis that reflects the effective yield on the asset. 3.13 Borrowing cost Borrowing cost is recognized as expense as occurred. 3.14 Income Tax The Company and subsidiary recorded income tax based on the actual amount currently payable according to the Revenue Code. 3.15 Basic Earnings per Share Basic earnings per share is determined by dividing the net income by the weighted average number of shares outstanding during the year. 3.16 Diluted Earnings per Share Diluted earnings per share is calculated by dividing net income for the year after adjusting the effects of all transactions relating to dilutive potential common shares by the weighted average number of common shares to be issued for conversion of all dilutive potential common shares into common shares. 3.17 Financial Instruments Financial assets carried on the balance sheet include cash and cash equivalents, short-term investments, trade accounts receivable, revenue department receivable and short-term loan to subsidiary. Financial liabilities carried on the balance sheet include trade accounts payable, loan, finance lease. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. 4. TRANSACTIONS WITH RELATED PERSONS AND PARTIES The Company and subsidiary have certain transactions with their related persons and/or related companies. A portion of assets, liabilities, revenues and expenses arose from transactions with said related persons and/or related companies. These related companies and related persons are related through common shareholding and/or directorships. The effects of these transactions are reflected in the accompanying financial statements on the bases mutually considered by the companies concerned, and other entities, normal course of business. 4.1 Relationships and Pricing Policies The relationship and pricing policies among the Company, subsidiary, associated companies, and other related companies, are as follows: Relationships Subsidiaries: Benjasub property Co., Ltd. Shareholding and Directorship. Vibhavadi Mansion Co., Ltd. (business termination on October 24, 2006) Shareholding and Directorship. Associated companies: Vibharam Hospital Co., Ltd. Shareholding and Directorship. All Experts Co., Ltd. Shareholding and Directorship. Related companies: Chao Phaya Hospital Public Co., Ltd. Inter – Shareholding and Directorship. Supalerk U- Thong Hospital Co., Ltd. Shareholding and Directorship. Innovation Technology Co., Ltd. Shareholding and Directorship. Kranchanaburi Health Center Co., Ltd. Shareholding and Directorship. Seriruk Hospital Co., Ltd. Shareholding and Directorship. Thairim And Associates Co., Ltd. Share held by close relative of directors. 4.1 Relationships and Pricing Policies (CON’T) Pricing Policies for the Company, Subsidiary, Associates and Related Persons and Companies. Pricing Policy Income from medical treatment At normal business prices, as same as other entities. Loans to At market interest rates or approximates. Rental and service income At contract prices which are agreed upon. Purchase At normal business prices, as same as other entities. Service expenses At normal business prices, as same as other entities. Loans from At market interest rates or approximates. Guarantee No fee charged. Fixed assets acquisition Net book value. 4.2 Balances of transactions with subsidiary, associates and related persons and companies Balances among the Company, subsidiary, associates, persons and related companies as at December 31, 2006 and 2005 are as follows : In Baht Consolidated The Company Only 2006 2005 2006 2005 Trade account receivable - Associated company All Experts Co., Ltd. 64,426 251,891 64,426 251,891 Interest receivable - Subsidiary Benjasub property Co., Ltd. - - 153,038 - - Related company Supalerk U-Thong Hospital Co., Ltd. 1,099,056 1,099,056 1,099,056 1,099,056 Less : Allowance for doubtful accounts (1,099,056) (1,099,056) (1,099,056) (1,099,056) Net - - - - Receivable from disposal of building - Related company Innovation Technology Co., Ltd. 3,610,000 - 3,610,000 - Other current assets - Subsidiary Vibhavadi Mansion Co., Ltd. - - - 195,789 - Associated companies Vibharam Hospital Co., Ltd. 14,579 - 14,579 - All Experts Co., Ltd. 158,996 175,788 158,996 175,788 - Related company Chao Phaya Hospital Public Co., Ltd. 12,757 34,991 12,757 34,991 Total 186,332 210,779 186,332 406,568 4.2 Balances of transactions with subsidiary, associates and related persons and companies (CON’T) In Baht Consolidated The Company Only 2006 2005 2006 2005 Short - term loans to Interest rate 6.25% per annum - Subsidiary Benjasub property Co., Ltd. - - 64,625,284 - Less : Provision for liabilities of subsidiary (Note 9) - - (292,946) - Net - - 64,332,338 - Long - term loans to (No interest charged) - Related company Supalerk U-Thong Hospital Co., Ltd. 4,900,000 4,900,000 4,900,000 4,900,000 Disposal of building - Related company Innovation Technology Co., Ltd. 3,610,000 - 3,610,000 - Short - term loans from (Note 14) Interest rate (%) per annum 5.25 4.5 5.25 4.5 - Related persons 30,500,000 32,000,000 30,500,000 32,000,000 - Related company Thairim And Associates Co., Ltd. 14,000,000 - 14,000,000 - Total 44,500,000 32,000,000 44,500,000 32,000,000 Other current liabilities Prepaid revenue - Associated company All Experts Co., Ltd. 400,000 400,000 400,000 400,000 Accrued expenses - Subsidiary Vibhavadi Mansion Co., Ltd. - - - 1,645,712 Accrued interest expenses - Related persons 71,949 67,192 71,949 67,192 - Related company Thairim And Associates Co., Ltd. 40,685 - 40,685 - Total 112,634 67,192 112,634 67,192 Payable from acquisition of investment - Associated company Vibharam Hospital Co., Ltd. 93,286,424 - 93,286,424 - 4.3 Revenue and expense transactions with subsidiary, associates and related persons and companies Revenue and expense transactions with subsidiary, associates and related persons and companies for the years ended December 31, 2006 and 2005 are as follows: In Baht Consolidated The Company Only 2006 2005 2006 2005 Rental and service income - Subsidiary Vibhavadi Mansion Co., Ltd. - - 9,800,000 14,400,00 - Associated company All Experts Co., Ltd. 1,200,000 1,200,000 1,200,000 1,200,000 Total 1,200,000 1,200,000 11,000,000 15,600,000 Other income - Subsidiary Vibhavadi Mansion Co., Ltd. - - 193,671 - - Associated companies Vibharam Hospital Co., Ltd. 87,477 - 87,477 - All Experts Co., Ltd. 442,683 388,491 442,683 388,491 - Related company Chao Phaya Hospital Public Co., Ltd. 76,542 69,981 76,542 69,981 Total 606,702 458,472 800,373 458,472 Dividend income - Related companies Chao Phaya Hospital Public Co., Ltd. 1,941,886 647,295 1,941,886 647,295 Kranchanaburi Health Center Co., Ltd. 15,000 - 15,000 - Innovation Technology Co., Ltd. 25,000 - 25,000 - Total 1,981,886 647,295 1,981,886 647,295 Interest income - Subsidiary Benjasub property Co., Ltd. - - 153,038 - Selling and administrative expenses - Subsidiary Vibhavadi Mansion Co., Ltd. - - 17,196,375 18,719,956 Interest expenses - Related persons 1,428,442 1,524,205 1,428,442 1,524,205 - Related company Thairim And Associates Co., Ltd. 382,603 - 382,603 - Total 1,811,045 1,524,205 1,811,045 1,524,205 4.4 Long – term Lease Contracts On July 1, 2004, the Company rent some space on the 17 th floor of Vibhavadi building 2 to All Expert Co.,Ltd. (Associated Company) to provide health and beauty care service. The rental charge of Baht 60,000 per month and service charge Baht 40,000 per month. The rental term is 3 years commencing from July 1, 2004 to June 30, 2007. The rate will be increased by 50% at the third years of the rental period. 5. CASH AND CASH EQUIVALENTS In Baht Consolidated The Company Only 2006 2005 2006 2005 Cash on hand 3,536,401 3,508,212 3,536,401 3,479,264 Deposits at financial institutions - Current account 40,660 41,462 40,660 32,000 Deposits at financial institutions - Savings account 28,223,991 16,279,095 28,223,991 8,622,764 Deposits at financial institutions - Fixed account 6,404 24,167 6,404 24,167 Total 31,807,456 19,852,936 31,807,456 12,158,195 The weighted average effective interest rates of deposits at financial institutions were 0.25% - 1.0% per annum (2005: 0.25% - 1.0% per annum.) 6. CURRENT INVESTMENTS As at December 31, 2005, current investments are deposits at financial institutions - fixed deposits which bear interest at the rates of 1.5% - 1.75% per annum. 7. TRADE ACCOUNTS RECEIVABLE - NET The aging of outstanding balances as at December 31, 2006 and 2005 are as follows: In Baht Consolidated The Company Only 2006 2005 2006 2005 Trade accounts receivable - Related companies Not yet due receivable 64,426 151,659 64,426 151,659 Over due within 1 month to 3 months - 100,232 - 100,232 Total 64,426 251,891 64,426 251,891 Trade accounts receivable - Others Not yet due receivable 28,435,009 26,372,450 28,435,009 26,372,450 Over due within 1 month to 3 months 4,483,537 3,907,780 4,483,537 3,196,360 Over due within 4 months to 6 months 338,070 274,241 338,070 241,020 Over due within 7 months to 12 months 107,510 43,134 107,510 16,590 Over due over 12 months 1,604,300 1,633,560 1,604,300 323,359 Total 34,968,426 32,231,165 34,968,426 30,149,779 Less: Allowance for doubtful accounts (1,604,300) (1,633,560) (1,604,300) (323,359) Trade accounts receivable - Others - net 33,364,126 30,597,605 33,364,126 29,826,420 8. INVENTORIES In Baht Consolidated The Company Only 2006 2005 2006 2005 Medicines and medical supplies 16,385,287 16,959,452 16,385,287 16,959,452 Office supplies 1,312,826 1,844,860 1,312,826 1,844,860 Stationeries and other supplies 615,061 557,594 615,061 557,594 Total 18,313,174 19,361,906 18,313,174 19,361,906 9. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATED COMPANIES - AT EQUITY METHOD CONSOLIDATED AS AT DECEMBER 31, 2006 Nature of Business Paid up Capital (In Baht) Proportion of Share Holding (%) In Baht Investment At Cost At Equity Devidend Associated Companies Vibharam Hospital Co., Ltd Hospital 832,500,000 40.75 358,727,130 400,172,011 - All Experts Co., Ltd. Pharmacy 45,000,000 19.75 8,887,500 6,434,052 - Total investments in associated companies 367,614,630 406,606,063 - CONSOLIDATED AS AT DECEMBER 31, 2005 Nature of Business Paid up Capital (In Baht) Proportion of Share Holding (%) In Baht Investment At Cost At Equity Devidend Associated Companies Vibharam Hospital Co., Ltd Hospital 624,500,000 40.74 265,440,706 287,557,738 - All Experts Co., Ltd. Pharmacy 45,000,000 19.75 8,887,500 6,148,281 - Total investments in associated companies 274,328,206 293,706,019 - 9. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATED COMPANIES - AT EQUITY METHOD (CON’T) THE COMPANY ONLY AS AT DECEMBER 31, 2006 Nature of Business Paid up Capital (In Baht) Proportion of Share Holding (%) In Baht Investment At Cost At Equity Devidend Subsidiary Benjasub property Co., Ltd. Mansion 100,000 99.94 84,000 (292,946) - Associated Companies Vibharam Hospital Co., Ltd Hospital 832,500,000 40.75 358,727,130 400,172,011 - All Experts Co., Ltd. Pharmacy 45,000,000 19.75 8,887,500 6,434,052 - Total investments in subsidiary and associated companies 367,698,630 406,313,117 - Transfer of provision for liabilities to deduct from short-term loans (note 4.2) - 292,946 - Total investments in subsidiary and associated companies – net of provision for liabilities 367,698,630 406,606,063 - THE COMPANY ONLY AS AT DECEMBER 31, 2005 Nature of Business Paid up Capital (In Baht) Proportion of Share Holding (%) In Baht Investment At Cost At Equity Devidend Subsidiary Vibhavadi Mansion Co., Ltd Mansion 250,000 100.00 250,000 10,921,783 - Associated Companies Vibharam Hospital Co., Ltd Hospital 624,500,000 40.74 265,440,706 287,557,738 - All Experts Co., Ltd. Pharmacy 45,000,000 19.75 8,887,500 6,148,281 - Total investments in subsidiary and associated companies 274,578,206 304,627,802 - 9. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATED COMPANIES - AT EQUITY METHOD (CON’T) During the years ended December 31, 2006 and 2005, the Company invested in common shares of subsidiary and associated company as follows: In Baht Investment/ Paid-up Share Capital 2006 Benjasub property Co., Ltd. 84,000 Vibharam Hospital Co., Ltd 93,286,424 Total 93,370,424 2005 Vibharam Hospital Co., Ltd 2,954,637 All Experts Co., Ltd 987,500 Total 3,942,137 On June 1, 2005, the Company entered into agreement to sell investment in All Experts Co., Ltd of 0.5 million shares at paid up of Baht 4 per share totaling Baht 2,100,000 to the existing shareholder as a related person by reflecting gain on sale of investment amounting to Baht 560,970 included in income from operations for the year ended December 31, 2005. 10. INVESTMENTS IN RELATED COMPANIES - AT COST METHOD CONSOLIDATED AND THE COMPANY ONLY AS AT DECEMBER 31, 2006 Nature of Business Paid up Capital (In Baht) Proportion of Share Holding (%) Amount (In Baht) Related companies Chao Phaya Hospital Public Co., Ltd. Hospital 471,214,710 6.87 52,993,509 Supalerk U-thong Hospital Co., Ltd. Hospital 50,000,000 6.00 3,000,000 Innovation Technology Co.,Ltd. Consulting 1,000,000 10.00 100,000 Kranchanaburi Health Center Co.,Ltd. Fitness Center 50,000,000 5.00 2,500,000 Seriruk Hospital Co.,Ltd. Hospital 152,700,000 10.00 15,270,000 Total investments 73,863,509 Less Allowance for impairment of investments - Supalerk U-thong Hospital Co., Ltd. (3,000,000) - Kranchanaburi Health Center Co.,Ltd. (2,500,000) Total Allowance for impairment of investments (5,500,000) Investments – net 68,363,509 10. INVESTMENTS IN RELATED COMPANIES - AT COST METHOD(CON’T) CONSOLIDATED AND THE COMPANY ONLY AS AT DECEMBER 31, 2005 Nature of Business Paid up Capital (In Baht) Proportion of Share Holding (%) Amount (In Baht) Related companies Chao Phaya Hospital Public Co., Ltd. Hospital 471,214,710 6.87 52,993,509 Supalerk U-thong Hospital Co., Ltd. Hospital 50,000,000 6.00 3,000,000 Innovation Technology Co.,Ltd. Consulting 1,000,000 10.00 100,000 Kranchanaburi Health Center Co.,Ltd. Fitness Center 50,000,000 5.00 2,500,000 Seriruk Hospital Co.,Ltd. Hospital 86,250,000 10.00 8,625,000 Total investments 67,218,509 Less Allowance for impairment of investments - Supalerk U-thong Hospital Co., Ltd. (3,000,000) - Kranchanaburi Health Center Co.,Ltd. (2,500,000) Total Allowance for impairment of investments (5,500,000) Investments – net 61,718,509 The investment in Chao Phaya Hospital Public Co., Ltd amounted to Baht 45.87 million (2005: Baht 45.87 million) in consolidated and the Company financial statements is pledged as collateral for bank overdrafts and short term loans and long term loans in Notes 14 and 16 respectively. During the years ended December 31, 2006 and 2005, the Company invested in common shares of Seriruk Hospital Co.,Ltd. amounted Baht 6,645,000 and Baht 7,125,000 respectively. 11. PROPERTY, PLANT AND EQUIPMENT - NET CONSOLIDATED In Baht Land Buildings, building equipment and system Medical Instruments& office appliances Furniture fixture & equipment Vehicle Appliances health center Assets in progress and under installation Total At December 31, 2005 Cost 218,904,773 857,119,956 245,044,909 102,992,462 13,105,709 2,624,797 23,413,660 1,463,206,266 Less Accumulated Depreciation - (260,143,176) (116,262,409) (57,306,826) (5,422,664) (1,571,939) - (440,707,014) Net book amount 218,904,773 596,976,780 128,782,500 45,685,636 7,683,045 1,052,858 23,413,660 1,022,499,252 For the year ended December 31, 2006 Opening net book amount 218,904,773 596,976,780 128,782,500 45,685,636 7,683,045 1,052,858 23,413,660 1,022,499,252 Add Acquisition - 2,479,432 21,676,598 7,064,110 1,742,931 - 107,627,396 140,590,467 Transfer in (out) - 17,036,992 69,644,266 2,940,146 - - (89,621,404) - Less Disposals - (3,604,931) (431,181) (209,646) - - - (4,245,758) Amortization - (11,286,897) (3,515,108) - - - - (14,802,005) Depreciation - (30,992,346) (19,471,767) (10,392,484) (1,191,853) (298,485) - (62,346,935) Closing net book amount 218,904,773 570,609,030 196,685,308 45,087,762 8,234,123 754,373 41,419,652 1,081,695,021 At December 31, 2006 Cost 218,904,773 853,353,497 323,100,731 112,181,939 14,848,640 2,624,797 41,419,652 1,566,434,029 Less Accumulated Depreciation - (282,744,467) (126,415,423) (67,094,177) (6,614,517) (1,870,424) - (484,739,008) Net book amount 218,904,773 570,609,030 196,685,308 45,087,762 8,234,123 754,373 41,419,652 1,081,695,021 Certain land and building with net book value amounted of Baht 789.5 million and Baht 812.1 million were mortgaged as collateral of credit facilities from financial institutions as discussed in Notes 14 and 16 to the financial statements. As at December 31, 2006 and 2005, the Company had gross carrying amounts that are fully depreciated. These are still in active use amounting to approximately Baht 11.52 million and Baht 12.63 million, respectively. THE COMPANY ONLY In Baht Land Building , building equipment and system Medical Instruments & office appliances Furniture fixture & equipment Vehicle Appliances health center Assets in progress and under installation Total At December 31, 2005 Cost 218,904,773 853,119,956 245,044,909 92,692,922 13,105,709 2,624,797 23,413,660 1,448,906,726 Less Accumulated Depreciation - (259,946,464) (116,262,409) (48,695,162) (5,422,664) (1,571,939) - (431,898,638) Net book amount 218,904,773 593,173,492 128,782,500 43,997,760 7,683,045 1,052,858 23,413,660 1,017,008,088 For the year ended December 31, 2006 Opening net book amount 218,904,773 593,173,492 128,782,500 43,997,760 7,683,045 1,052,858 23,413,660 1,017,008,088 Transfer in assets’ subsidiary at business termination date. Add Cost - 4,000,000 - 10,697,450 - - - 14,697,450 Less Accumulated Depreciation - (346,301) - (9,358,564) - - - (9,704,865) Net book amount - 3,653,699 - 1,338,886 - - - 4,992,585 Add Acquisition 2,479,432 21,676,598 6,666,200 1,742,931 - 107,627,396 140,192,557 Transfer in (out) - 17,036,992 69,644,266 2,940,146 - - (89,621,404) - Less Disposals - (3,604,931) (431,181) (209,646) - - - (4,245,758) Amortization - (11,286,897) (3,515,108) - - - - (14,802,005) Depreciation - (30,842,757) (19,471,767) (9,645,584) (1,191,853) (298,485) - (61,450,446) Closing net book amount 218,904,773 570,609,030 196,685,308 45,087,762 8,234,123 754,373 41,419,652 1,081,695,021 At December 31, 2006 Cost 218,904,773 853,353,497 323,100,731 112,181,939 14,848,640 2,624,797 41,419,652 1,566,434,029 Less Accumulated Depreciation - (282,744,467) (126,415,423) (67,094,177) (6,614,517) (1,870,424) - (484,739,008) Net book amount 218,904,773 570,609,030 196,685,308 45,087,762 8,234,123 754,373 41,419,652 1,081,695,021 Certain land and building with net book value amounted of Baht 789.5 million and Baht 812.1 million were mortgaged as collateral of credit facilities from financial institutions as discussed in Notes 14 and 16 to the financial statements. As at December 31, 2006 and 2005, the Company had gross carrying amounts that are fully depreciated. These are still in active use amounting to approximately Baht 11.52 million and Baht 12.63 million, respectively. 12. ASSETS NOT USED IN OPERATIONS - NET CONSOLIDATED In Baht Land Building Total For the year ended December 31, 2006 Opening net book amount - - - Add Fixed asset acquired by business acquisition-net 16,096,000 42,054,000 58,150,000 Add Acquisition 139,274,880 5,861,334 145,136,214 Less Depreciation - (52,458) (52,458) Closing net book amount 155,370,880 47,862,876 203,233,756 At December 31, 2006 Cost 155,370,880 47,915,334 203,286,214 Less Accumulated Depreciation - (52,458) (52,458) Net book amount 155,370,880 47,862,876 203,233,756 THE COMPANY ONLY In December 2006, the Company has purchased unused land amounting of Baht 139.3 million to prepare for the hospital expansion. Unused Land and building’s subsidiary amounting of Baht 63.9 Million to prepare for lease. Unused land and building with net book value amounting of Baht 203.2 million were mortgaged as collateral of long-term loan as discussed in Notes 16 to the financial statements. 13. INTANGIBLE ASSET – NET CONSOLIDATED AND THE COMPANY ONLY In Baht As at December 31, 2005 Increase As at December 31, 2006 Software computer 8,432,285 28,890 8,461,175 Less Accumulated amortization (3,504,406) (2,812,591) (6,316,997) Software computer – Net 4,927,879 (2,783,701) 2,144,178 14. OVERDRAFTS AND SHORT – TERM LOANS FROM FINANCIAL INSTITUTIONS In Baht Consolidated The Company Only 2006 2005 2006 2005 Bank Overdrafts 9,540,171 6,595,887 9,540,171 6,595,887 Short – Term loans 142,000,000 100,000,000 142,000,000 100,000,000 Total 151,540,171 106,595,887 151,540,171 106,595,887 At at December 31, 2006 and 2005, the Company has overdrafts and short - term loans facilities amounted to Baht 160 million (2005 : amounted to Baht 135 million) which are securied over the Company’s land and structures thereon in Note 11 and the Company’s common share of Chao Phaya Hospital Public Co., Ltd. in Note 10. The facilities bear interest at the rates ranging from 6.05 – 6.75% per annum (2005: 5.0 - 6.5% per annum.) 15. SHORT - TERM LOANS FROM RELATED PARTIES In Baht Consolidated The Company Only 2006 2005 2006 2005 Related persons Interest Rate (%) p.a. 5.25 4.5 5.25 4.5 Balance, beginning of year 32,000,000 28,000,000 32,000,000 28,000,00 Add : Increase during the year 5,500,000 7,000,000 5,500,000 7,000,000 Less : Decrease during the year (7,000,000) (3,000,000) (7,000,000) (3,000,000) Balance, end of year 30,500,000 32,000,000 30,500,000 32,000,000 Related company Interest Rate (%) p.a. 5.25 - 5.25 - Balance, beginning of year - - - - Add : Increase during the year 14,000,000 - 14,000,000 - Less : Decrease during the year - - - - Balance, end of year 14,000,000 - 14,000,000 - Total 44,500,000 32,000,000 44,500,000 32,000,000 On December 31, 2006 and 2005, the Company has short term loans from directors, shareholders, staffs and other persons in a form of promissory notes, interest payable on quarterly basis, The maturity date for settlement is on June 18, 2007 under the condition that lenders are able to call for their loans before maturity and the Company can repay its loans before maturity. 16. LONG -TERM LOANS – NET In Baht Consolidated The Company Only 2006 2005 2006 2005 Long - term loans 222,863,272 29,938,272 222,863,272 29,938,272 Less Current portion (11,400,000) (22,175,000) (11,400,000) (22,175,000) Long – term loans – net 211,463,272 7,763,272 211,463,272 7,763,272 The Company had long term loans from several local financial institutions consist of: The first line the Company paid the last installment in June 2006 (2005: balance of Baht 19.2 million which bear interest at the rate of 4.5% per annum). The second line balance of Baht 4.3 million (2005: Baht 7.3 million) the last installment is within February 2010, interest payable on monthly basis which bear interest at the rate of 2.5% per annum. The third line balance of Baht 49.9 million (2005: Baht 3.5 million) the last installment is within January 2012, interest payable on monthly basis which bear interest at the rate of 6.50% per annum (2005: 5.25% per annum). The fourth line balance of Baht 62.0 million the last installment is within December 2016, interest payable on monthly basis which bear interest at the rate of 6.25% per annum The fifth line balance of Baht 106.7 million the last installment is within December 2008, interest payable on monthly basis of which interest is waived. The aforementioned loans were collateralized by land and structures there on as discussed in Note 11 and Assets - net not used in operations in Note 12 to the financial statements and guaranteed by pledging the Company’s share of Chao Phaya Hospital Public Co., Ltd. amounted to 2.8 million shares as discussed in Note 10 to the financial statements. The movements of loans from financial institutions can be analyzed as follows: In Baht 2006 2005 Balance, beginning of year 29,938,272 60,601,272 Addition loan during the year 215,100,000 3,500,000 Repayment of loan during the year (22,175,000) (34,163,000) Balance, end of year 222,863,272 29,938,272 17. SHARE CAPITAL PREMIUM ON SHARE CAPITAL AND SHARE WARRANTS On November 1, 2002, 119,882,010 share warrants of the Company were approved to be traded in the Stock Exchange of Thailand and can be exercised of each quarter. The first exercise date and the last exercise date will be on December 31, 2002 and June 30, 2009, respectively Units Warrants 119,882,010 Warrants exercised As at December 31, 2003 (772,580) As at March 31, 2004 (1,178,860) As at June 30, 2004 (6,000,000) As at September 30, 2004 (62,050) As at December 31, 2004 (5,041,060) As at March 31,2005 (1,644,850) As at June 30, 2005 (50,000) As at September 30, 2005 (2,686,500) As at December 31, 2005 (5,000,000) As at March 31, 2006 (3,001,332) As at June 30, 2006 (5,003,660) As at September 30, 2006 (2,076,400) (32,517,292) Warrants had not been exercised 87,364,718 The Company recorded cash receipt from warrant exercise of Baht 6.0 million as at December 31, 2005 in the account “Cash receipt from share subscriptions” under shareholders’ equity. The Company registered the increase in paid-up share capital from such exercise with the Ministry of Commerce on January 12, 2006. The increase share capital was approved to be traded in Stock Exchange of Thailand on January 20, 2006, were issued above par value of common share, which resulted premium on share capital amounted to Baht 1.0 million. The Company recorded cash receipt from warrant exercise of Baht 3.6 million as at March 31, 2006. The Company registered the increase in paid-up share capital from such exercise with the Ministry of Commerce on April 24, 2006. The increase share capital was approved to be traded in Stock Exchange of Thailand on April 28, 2006, were issued above par value of common share, which resulted premium on share capital amounted to Baht 0.6 million. The Company recorded cash receipt from warrant exercise of Baht 6.0 million as at June 30, 2006. The Company registered the increase in paid-up share capital from such exercise with the Ministry of Commerce on July 12, 2006. The increase share capital was approved to be traded in Stock Exchange of Thailand on July 19, 2006, were issued above par value of common share, which resulted premium on share capital amounted to Baht 1.0 million. The Company recorded cash receipt from warrant exercise of Baht 2.5 million as at September 30, 2006. The Company registered the increase in paid-up share capital from such exercise with the Ministry of Commerce on October 11, 2006. The increase share capital was approved to be traded in Stock Exchange of Thailand on October 18, 2006, were issued above par value of common share, which resulted premium on share capital amounted to Baht 0.4 million. 18. LEGAL RESERVE Under the provisions of the Limited Public Company Act B.E 2535, the Company is required to appropriate at least 5 % of its annual net income after deduction of the deficit brought forward (if any) as legal reserve until the reserve equal to 10 % of authorized share capital. The reserve is not available for dividend distribution. As at December 31, 2006 and 2005 the Company appropriated the legal reserve amounted to Baht 4.4 million and Baht 2.9 million, respectively. 19. DIVIDENDS PAID At the board of director’s meeting date October 31, 2006, the board of director approved the interim payment of dividends at Baht 0.05 per share for 602.8 million shares totaling Baht 30.1 million out of the operations from January 1, 2006 to June 30, 2006. The Company paid such dividends on November 30, 2006. At the Shareholders’ Meeting for the year 2006 held on April 28, 2006. The shareholders approved dividends payment at Baht 0.08 per share, amounted to Baht 47.66 million out of net income for the year ended December 31, 2005. The Company paid such dividends on May 26, 2006. At the Shareholders’ Meeting for the year 2005 held on April 28, 2005. The shareholders approved dividends payment at Baht 0.05 per share, amounted to Baht 29.25 million out of net income for the year ended December 31, 2004. The Company paid such dividends on May 27, 2005. 20. EARNINGS PER SHARE For the year ended December 31, Net income (In Baht) Weighted average number of ordinary shares (Shares) Earnings per share (In Baht) 2006 2005 2006 2005 2006 2005 Basic earnings per share Net Income 88,118,622 56,182,698 597,503,735 584,904,955 0.147 0.096 Effect of dilutive potential Ordinary share Warrants 54,602,949 48,995,966 Diluted earnings per share Income of ordinary shareholders assuming the conversion of dilutive potential ordinary shares 88,118,622 56,182,698 652,106,684 633,900,921 0.135 0.089 21. EMPLOYEE AND RELATED COST Consolidated The Company Only 2006 2005 2006 2005 Staff costs (In Baht) 167,131,716 149,830,156 165,529,417 147,736,152 Number of employee as at December 31, (person) 814 792 814 779 22. SEGMENT FINANCIAL INFORMATION The Company and its subsidiaries 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. 23. EMPLOYEE’S PROVIDENT FUND The Company established a contributory registered provident fund in accordance with the provident fund Act, B.E.2530. The provident fund plan was registered on July 1,2006 Under the plan, the employees contribute monthly the amounts equivalent 2.5% of their basic salaries. The Company contributes at the rates of 2.5% of the employees basic salaries. The Company appointed a fund manager to manage the fund in accordance with the terms and conditions prescribed in the Ministerial Regulation No.2 B.E. 2532 issued under the Provident fund Act. B.E. 2530. The Company’s contributions charged to expenses for the years ended December 31, 2006 amounted to Baht 1.2 million 24. FINANCIAL INSTRUMENTS As at December 31, 2006, the Company and subsidiaries have no policy to perform speculate or trade the financial instrument transaction (derivatives). 24.1 Liquidity Risk Liquidity risk, or funding risk, is the risk that the Company and subsidiaries will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value. 24.2 Interest rate risk The Company and subsidiaries were exposed to interest risk because it held deposit to and loan from financial institutions. However, the Company and subsidiaries believed that the future fluctuation on market interest rate would not provided significant effect to their operations and cash flows, therefore; no financial derivative was adopted to manage such risks. 24.3 Credit risk The Company and subsidiaries are exposed to credit risk primarily with respect to trade accounts receivable. However, due to the Company and subsidiaries’ prudent credit policy and their diversified customer base, the Company and subsidiaries do not anticipate material losses from its debt collection. 24.4 Fair value of financial instruments Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm's length transaction. Fair values are obtained from quoted market prices or discounted cash flow models. The Company and subsidiaries used the following methods and assumptions in estimating the fair values of financial instruments. Because these financial instruments are in short-term maturity. Cash and cash equivalents and Trade accounts receivable; the carrying values approximate their fair values. Trade accounts payable; the fair value based on the carrying value in the balance sheets. Loans to and loans from ; the carrying values approximate their fair values. 25. CAPITAL COMMITMENTS As at 31 December 2006, the Company has capital commitments in respect of the construction of plant and purchase of equipment amounted to Baht 8.3 million. 26. CONTINGENT LIABILITIES As at December 31, 2006, the Company was contingently liable for bank guarantees issued in favor of government agency amounted to Baht 3.4 million 27. RECLASSIFICATION OF ACCOUNTS Certain accounts in 2005 financial statements have been reclassified to conform with the 2006 financial statement presentation with no effect on previously reported net earnings or shareholders’ equity. 28. APPROVAL OF FINANCIAL STATEMENTS These financial statements have been approved by the board of directors of the company. ?? ?? ?? ?? VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005 Page 13 VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2006 AND 2005 Page 25 VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2006 AND 2005 Page 27 VIBHAVADI MEDICAL CENTER PUBLIC COMPANY LIMITED AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2006 AND 2005 Page 34