1999 1998 1999 1998 Unappropriated retained earnings Beginning balance 2,036,926 2,021,021 2,098,450 2,081,710 Less appropriations of earnings: Legal reserve (101,583) (834) (101,063) - Dividend for 1998 and 1997 (79,406) (57,750) (79,406) (57,750) Cost of investment in excess of net assets of subsidiary and associated companies eliminated against retained earnings (14,946) (283,409) (14,946) (283,409) Net income for the period 522,940 218,120 522,940 218,120 Less Dividend for 1999 and 1998 (79,407) (47,644) (79,407) (47,644) Unappropriated retained earnings at end of period 2,284,524 1,849,504 2,346,568 1,911,027 Appropriated retained earnings Legal reserve 218,456 116,872 158,813 57,750 Reserve for business expansion 87,401 87,401 85,000 85,000 Appropriated retained earnings at end of period 305,857 204,273 243,813 142,750 Retained earnings at end of period 2,590,381 2,053,777 2,590,381 2,053,777 See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 OPERATING ACTIVITIES Profit before tax 231,449 197,294 159,954 168,120 Add : Interest expense 61,527 72,315 37,783 46,616 Currency swap cost 32,955 50,119 32,955 47,651 Less : Dividend income (963) - (963) - Share of profits less losses in subsidiary and associated companies (2,240) (116) (135,346) (37,200) Interest income (18,958) (68,684) (32,408) (99,950) Profit before investment/finance income and expense 303,770 250,928 61,975 125,237 Allowance for doubtful accounts (24,329) 2,589 (8,536) 2,896 Depreciation and amortization 166,297 185,541 30,041 29,320 Deferred charges written off 1,766 3,755 - - Book value of property, plant and equipment written off 902 1,339 627 1,125 Loss (gain) on disposal of property, plant and equipment 244 (2,799) (800) (2,304) (Gain) loss on disposal of investments (1,059) 607 (1,059) 607 Provision for staff retirement benefits 8,065 41,433 1,673 24,288 Loss (gain) on conversion of foreign currency borrowings 1,526 (35,931) 355 (96,519) (INCREASE) DECREASE IN WORKING CAPITAL Accounts receivable 79,139 146,017 212,722 125,966 Inventories (82,086) 127,974 127,139 123,867 Other current assets (63,488) 55,631 (56,099) 3,249 Loans to other companies - 450 - - Other assets (832) 1,798 - - Accounts and notes payable 164,713 (219,949) (7,706) (141,298) Accounts payable - related parties - - (154,316) (107,965) Accrued expenses 55,867 73,847 (4,237) (12,220) Other current liabilities 19,386 (36,121) 12,434 21,178 Loans from directors and employees (755) (259) (760) 371 Long-term lease deferred income (1,402) (1,402) (1,402) (1,402) Staff retirement benefit (4,856) - (4,632) - Other liabilities 39,512 18,804 39,510 18,804 Net cash inflow from operating activities 662,380 614,252 246,929 115,200 INCOME TAX PAID (53,883) (4,384) (30,927) (5,729) See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 INVESTING ACTIVITIES Loans and advances from (to) related parties 23,294 (25,220) 23,107 (16,778) Purchase of investments in related parties (net of cash and cash equivalents acquired) (10,925) (1,320,079) (10,925) (1,325,079) Purchase of property, plant and equipment (222,974) (288,147) (26,511) (34,581) Deferred charges paid - (1,728) - - Disposal of investments in other companies 36,059 - 36,059 - Disposal of investments in related parties (net of cah and cash equivalents disposed) - 4,920 - 4,920 Disposal of property, plant and equipment 3,613 3,163 12,590 2,673 Interest received 9,729 70,120 24,418 101,380 Dividend received 15,662 4,900 15,662 4,900 Net cash (outflow) inflow from investing activities (145,542) (1,552,071) 74,400 (1,262,565) FINANCING ACTIVITIES Net (decrease) increase in borrowings (91,452) 21,680 (73,780) - Gain (loss) on currency hedging contracts received (paid) 1,192 (53,954) 522 (1,389) Currency swap cost paid 180 (2,468) - - Interest paid (61,138) (66,334) (37,623) (42,791) Proceeds from increase in share capital - (14,076) - (14,076) Issue of shares to minority interests - 5,000 - - Dividend paid (79,407) (47,644) (79,407) (47,644) Net cash outflow from financing activities (230,625) (157,796) (190,288) (105,900) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 232,330 (1,099,999) 100,114 (1,258,994) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,729,929 2,340,226 979,769 2,400,132 EXCHANGE TRANSLATION - (6,111) - - CASH AND CASH EQUIVALENTS AT END OF PERIOD (Note 3) 1,962,259 1,234,116 1,079,883 1,141,138 See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 OPERATING ACTIVITIES Profit before tax 744,614 501,042 545,798 238,303 Add : Interest expense 194,977 267,125 118,808 183,934 Currency swap cost 98,891 138,468 97,791 127,699 Less : Dividend income (1,926) - (1,926) - Share of profits less losses in subsidiary and associated companies (9,291) (58,671) (373,656) (149,019) Interest income (67,693) (101,986) (109,854) (166,874) Profit before investment/finance income and expense 959,572 745,978 276,961 234,043 Allowance for doubtful accounts (8,023) 3,875 (9,010) 11,161 Depreciation and amortization 500,555 550,721 88,908 86,205 Provision against diminution in value of assets - 17,000 - - Deferred charges written off 5,346 6,260 - - Book value of property, plant and equipment written off 1,164 1,967 641 1,125 Gain on disposal of property, plant and equipment (6,335) (6,069) (5,148) (2,688) Loss on disposal of investments 2,533 607 2,533 607 Provision for staff retirement benefits 33,762 52,377 15,673 29,288 Loss (gain) on conversion of foreign currency borrowings 3,204 (141,806) 365 (96,945) (INCREASE) DECREASE IN WORKING CAPITAL Accounts receivable (134,824) 54,008 294,768 203,975 Inventories (152,305) 121,518 102,711 189,213 Other current assets (67,157) (9,858) (61,553) (12,933) Loans to other companies - 1,350 - - Other assets (618) 1,950 159 (9) Accounts and notes payable 262,234 (209,421) 85,399 (215,108) Accounts payable - related parties - - 29,882 (91,478) Accrued expenses 198,230 154,402 36,351 2,384 Other current liabilities (44,578) (67,636) (22,294) 6,629 Loans from directors and employees (2,048) (259) (1,997) 384 Long-term lease deferred income (4,207) (4,207) (4,207) (4,207) Staff reitrement benefits (66,246) (29,195) (48,084) (21,425) Other liabilities 25,589 16,620 25,802 16,620 Net cash inflow from operating activities 1,505,848 1,260,182 807,860 336,841 INCOME TAX PAID (210,581) (75,896) (61,232) (24,562) See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 INVESTING ACTIVITIES Loans and advances from (to) related parties 10,888 (161,577) 20,473 (444,724) Purchase of short-term investments (20) - (20) - Purchase of investments in related parties (net of cash and cash equivalents acquired) (14,974) (1,667,732) (588,675) (1,365,001) Purchase of investments in other companies (54,800) (22,500) (54,800) (22,500) Purchase of property, plant and equipment (411,777) (726,668) (63,605) (57,567) Deferred charges paid (10,354) (7,099) - - Disposal of investments in related parties (net of cash and cash equivalents disposed) 19,552 4,920 13,998 4,920 Disposal of investments in other companies 36,059 1,896 36,059 1,896 Disposal of property, plant and equipment 15,080 7,251 18,398 3,179 Interest received 52,793 94,576 95,408 159,545 Dividend received 16,625 6,745 83,865 67,449 Net cash outflow from investing activities (340,928) (2,470,188) (438,899) (1,652,803) FINANCING ACTIVITIES Net decrease in borrowings (142,449) (1,626,667) (73,780) (1,712,016) Gain on currency hedging contracts received 2,293 339,750 1,420 322,040 Currency swap cost paid (66,189) (82,734) (64,836) (71,022) Interest paid (206,444) (256,240) (118,853) (182,944) Deferred financing charges paid (282) (2,669) (282) (2,669) Proceeds from increase in share capital - 4,028,424 - 4,028,424 Issue of shares to minority interests - 15,000 - - Dividend paid (158,813) (105,394) (158,813) (105,394) Dividend paid to minority interests (11,760) (23,787) - - Net cash (outflow) inflow from financing activities (583,644) 2,285,683 (415,144) 2,276,419 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 370,695 999,781 (107,415) 935,895 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,591,564 240,446 1,187,298 205,243 EXCHANGE TRANSLATION - (6,111) - - CASH AND CASH EQUIVALENTS AT END OF PERIOD (Note 3) 1,962,259 1,234,116 1,079,883 1,141,138 See notes to financial statements BERLI JUCKER PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) NOTE 1 - ECONOMIC ENVIRONMENT AND BASIS OF PRESENTATION Certain Asia Pacific countries, including Thailand, have experienced economic difficulties since 1997. The accompanying consolidated financial statements and the separate financial statements reflect the assessment, as at September 30, 1999 and 1998, of the possible impact of this economic situation on the financial position of Berli Jucker Public Company Limited ("The Company") and its subsidiaries. In addition, the ultimate effect on the group's financial position of these uncertainties cannot presently be determined. The accompanying consolidated and the Company only financial statements have been prepared in accordance with generally accepted accounting principles practiced in Thailand and in compliance with the Commerce Ministerial Regulation No. 7 (B.E. 2539) dated October 25, 1996 issued under The Public Company Act B.E. 2535. NOTE 2 - BASIS OF CONSOLIDATION The Group comprises Berli Jucker Public Company Limited and its subsidiaries. Principles of Consolidation The accompanying consolidated financial statements for the nine-month periods ended September 30, 1999 and 1998 include the accounts of the Company, and its five wholly owned and fourteen majority-owned subsidiaries. Significant intercompany transactions and accounts are eliminated from the consolidated financial statements. Companies in which the Group has shareholdings of between 20% and 50% are classified as associated companies. The equity method of accounting is adopted for associated companies so as to reflect the Group's share of its profits less losses and net assets in these companies in the financial statements. Investments of less than 20% in other companies are accounted for on the cost method under which dividends declared during the year are included in the consolidated statements of income. Profits or losses on sale of investments are determined by the specific identification method. The assets of acquired subsidiaries and associates are accounted for at their fair value on the date of acquisition. The difference between these fair values and the original cost of the assets is dealt with under property, plant and equipment for subsidiaries and as part of the equity investment in associates for associated companies. The excess of acquisition costs over the fair value of the net assets of subsidiary and associated companies at their date of acquisition is eliminated against retained earnings. NOTE 3 - BASIS FOR PREPARATION OF THE STATEMENTS OF CASH FLOWS Cash and Cash Equivalents Cash and cash equivalents shown in the statements of cash flows as at September 30, consisted of the following: (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 Cash on hand and at banks 1,707,455 1,276,373 795,321 1,160,390 Deposits with financial institutions 300,000 - 300,000 - Bank overdrafts (45,196) (42,257) (15,438) (19,252) Cash and Cash Equivalents 1,962,259 1,234,116 1,079,883 1,141,138 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounts Receivable Accounts receivable are shown net of allowance for doubtful accounts which is an estimate of those amounts which may prove to be uncollectible based on historical collection experience and a review of the current status of the receivables outstanding at the balance sheet date. Lease Receivable from a Related Party The lease receivable from a related party is carried in the balance sheets at the total of the minimum lease payments due under this lease less unearned interest attributable to future periods. Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined on the first-in, first-out basis or average cost basis. Investments in Related Parties and Other Companies In accordance with the regulations of the Stock Exchange of Thailand, investments in subsidiary and associated companies are accounted for on the equity basis so as to incorporate the Company's share of its profits less losses and net assets in these companies in the financial statements. The excess of acquisition costs over the fair value of the net assets of subsidiary and associated companies at their date of acquisition is eliminated against retained earnings. Investments of less than 20% in other companies are accounted for on the cost method under which dividends declared during the year are included in the statements of income. Profits or losses on sales of investments are determined by the specific identification method. Property, Plant and Equipment Property, plant and equipment are stated at cost net of accumulated depreciation and amortization. Depreciation and amortization are computed by the straight-line method at the rates of 3-5% for buildings and construction and 10-20% for land improvements and equipment. Leaseholdings are amortized at the rate of 10% or over the related lease terms, whichever is shorter. Deferred Income Tax The Company accounts for deferred income tax by including the income tax effects of all revenues and expenses recorded in the calculation of net income for the year, regardless of when they are recognized for tax purposes. The tax effects of timing differences are reported as deferred income tax in the balance sheets. Long-term Lease Deferred Income Long-term lease premiums received in advance are booked as deferred income and are dealt with under other liabilities in the balance sheets. Income is recognized on a straight-line basis over the duration of the lease. Income recognizable within one year is dealt with as part of other current liabilities. Retirement Benefits The Company and its affiliated companies operate various defined contribution and defined benefit retirement plans for employees. Provisions for the obligations of the Company and its affiliated companies under defined benefit plans are established by reference to expected final employee benefits, length of employee service and staff turnover rates. Revenue Recognition Revenue from sale of goods is recognized at the date of delivery to customers, while revenue from work on contracts is recognized in proportion to work completed and billed. Unbilled costs of work on contracts in process are included in inventories. Revenue from long-term installment sales is recognized in the period of sale while interest on installment contracts is recognized as revenue on the basis of installments due during the year. Unearned interest on installment contracts is deducted from accounts receivable in the financial statements. Foreign Currency Accounts Foreign currency transactions during the period are translated into Baht at the rates of exchange prevailing on the relevant transaction dates. Assets and liabilities denominated in foreign currencies at the end of the period are translated into Baht at the rates of exchange prevailing at the balance sheet date or at the relevant forward contract rates. Gain or loss on translation is included in the statements of income. Foreign currency financial statements are translated for the purpose of consolidation using the following rates: a. Assets and liabilities are translated at the rates of exchange prevailing on the balance sheet date. b. Revenues and expenses are translated at average rate. c. Items in the statements of retained earnings and shareholders' equity are translated at the rates prevailing on the dates of the transactions. Translation adjustments in respect of foreign currency financial statements are reported as a separate component of equity. Flotation of the Baht All foreign exchange gains and losses associated with the flotation of the Baht are dealt with in the statements of income. Net exchange gains and losses are disclosed on the face of the statements of income as they are deemed exceptional. Basic Earnings Per Share Basic earnings per share are computed by dividing net income for the period by the weighted average number of shares outstanding during the period. NOTE 5 - TRANSACTIONS WITH RELATED PARTIES Significant transactions arising in the course of ordinary business between the Company and related parties during 1999 and 1998 were as follows: (Amounts in Thousands of Baht) Consolidated Company 1999 1998 1999 1998 Transactions with subsidiary companies (Eliminated in consolidated financial statements) Sales of goods - - 173,981 6,388 Purchases of goods - - 1,530,995 1,739,910 Dividend income - - 100,571 60,704 Interest income - - 67,240 73,959 Other income - - - 32,965 (more)