1 THE ORIENTAL HOTEL (THAILAND) PUBLIC COMPANY LIMITED AND ITS SUBSIDIARY COMPANIES REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 AND 2002
2 Report of Independent Auditor To The Board of Directors and Shareholders of The Oriental Hotel (Thailand) Public Company Limited I have audited the accompanying consolidated balance sheets of The Oriental Hotel (Thailand) Public Company Limited and its subsidiaries as at 31 December 2003 and 2002, and the related consolidated statements of earnings, changes in shareholders' equity and cash flows for the years then ended, and the separate financial statements of The Oriental Hotel (Thailand) Public Company Limited for the same years. These financial statements are the responsibility of the Company s management as to their correctness and completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits 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 statements presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the aforementioned financial statements referred to above present fairly, in all material respects, the financial position of The Oriental Hotel (Thailand) Public Company Limited and its subsidiaries and of The Oriental Hotel (Thailand) Public Company Limited as at 31 December 2003 and 2002 and the results of their operations and cash flows for the years then ended in accordance with generally accepted accounting principles. Songdej Praditsmanont Chartered Accountant, Certified Public Accountant (Thailand) No. 2349
3 Ernst & Young Office Limited Bangkok : 23 January
4 - 1 -
5 THE ORIENTAL HOTEL (THAILAND) PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS AS AT 31 DECEMBER 2003 AND 2002 CONSOLIDATED THE COMPANY ONLY Note ASSETS CURRENT ASSETS Cash and cash equivalents ,693, ,845, ,114, ,472,480 Current investments 1,516,539-1,516,539 - Accounts receivable - trade, net 4 86,247, ,917,284 85,165, ,048,422 Loans and advances due from related party, net 5, , ,391 Inventories 12,468,435 19,718,127 8,653,241 14,642,673 Other current assets 22,512,332 25,493,520 22,130,646 24,060,897 TOTAL CURRENT ASSETS 342,438, ,974, ,901, ,383,863 NON-CURRENT ASSETS Investments accounted for under equity method Investments in subsidiary companies ,945, ,794,498 Investments in associated companies 7 58,706,775 60,358,468 58,351,154 60,187,534 Total investments 58,706,775 60,358, ,296, ,982,032 Property, plant and equipment, net 8 1,836,860,886 1,753,358,812 1,716,086,861 1,619,193,048 Other non-current assets Deferred tax benefits 9 19,241,087 14,391,955 19,241,087 14,391,955 Others 2,598,798 4,006,955 2,414,416 3,929,665 Total other non-current assets 21,839,885 18,398,910 21,655,503 18,321,620 TOTAL NON-CURRENT ASSETS 1,917,407,546 1,832,116,190 1,927,038,750 1,848,496,700 TOTAL ASSETS 2,259,846,272 2,229,090,509 2,249,939,874 2,208,880,563 The accompanying notes are an integral part of the financial statements.
6 THE ORIENTAL HOTEL (THAILAND) PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS (Continued) AS AT 31 DECEMBER 2003 AND 2002 CONSOLIDATED THE COMPANY ONLY Note LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term loan from bank ,000, ,000,000 - Accounts payable 74,672,741 77,285,138 68,599,558 70,262,874 Current portion of long-term loan 11 34,800,000 34,800,000 34,800,000 34,800,000 Amounts due to related parties 5, 12 30,022,975 32,346,421 43,772,306 46,377,056 Other current liabilities Accrued expenses 62,501,588 75,205,741 55,604,319 64,880,115 Corporate income tax payable 13 40,609,827 47,165,942 34,530,528 30,932,523 Proposed dividends ,000, ,000, ,000, ,000,000 Retention payable 8,064,672 1,111,708 8,064,672 1,111,708 Others 64,745,799 58,347,270 60,139,821 57,687,998 TOTAL CURRENT LIABILITIES 543,417, ,262, ,511, ,052,274 NON-CURRENT LIABILITIES Long term loan - net of current portion ,000, ,800, ,000, ,800,000 Other liabilities Provision for retirement benefit 17 58,988,430 47,131,130 58,988,430 47,131,130 Others 15,608,569 15,540,262 15,608,569 15,540,262 TOTAL NON-CURRENT LIABILITIES 677,596, ,471, ,596, ,471,392 TOTAL LIABILITIES 1,221,014,601 1,170,733,612 1,211,108,203 1,150,523,666 The accompanying notes are an integral part of the financial statements.
7 THE ORIENTAL HOTEL (THAILAND) PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS (Continued) AS AT 31 DECEMBER 2003 AND 2002 CONSOLIDATED THE COMPANY ONLY Note SHAREHOLDERS' EQUITY Share capital Registered, issued and fully paid up 16,000,000 ordinary shares of Baht 10 each 160,000, ,000, ,000, ,000,000 Retained earnings Appropriated - statutory reserve 18 16,010,000 16,010,000 16,000,000 16,000,000 Unappropriated 862,821, ,346, ,831, ,356,897 TOTAL SHAREHOLDERS' EQUITY 1,038,831,671 1,058,356,897 1,038,831,671 1,058,356,897 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,259,846,272 2,229,090,509 2,249,939,874 2,208,880,563 The accompanying notes are an integral part of the financial statements. DIRECTORS
8 THE ORIENTAL HOTEL (THAILAND) PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF EARNINGS FOR THE YEAR ENDED 31 DECEMBER 2003 AND 2002 CONSOLIDATED THE COMPANY ONLY Note REVENUES Revenue from hotel operations 1,645,740,131 1,901,192,295 1,454,108,430 1,671,239,419 Other income Interest income 1,003,902 1,305,470 1,625,679 1,915,029 Others 2,067,142 2,502, Share of profit from investments accounted for under equity method 8,748,306 5,589,739 58,183,862 78,135,802 TOTAL REVENUES 1,657,559,481 1,910,589,962 1,513,917,971 1,751,290,250 EXPENSES Cost of sales and services 659,880, ,851, ,824, ,067,154 Selling and administrative expenses 454,658, ,057, ,066, ,533,954 Depreciation 8 196,738, ,652, ,839, ,101,160 Directors' remuneration 14 1,470,000 1,050,000 1,470,000 1,050,000 Loss on sales and write-off of fixed assets 19,439,230 3,830,405 15,268,253 2,869,643 TOTAL EXPENSES 1,332,187,175 1,424,441,627 1,210,469,673 1,296,621,911 EARNINGS BEFORE INTEREST EXPENSES AND INCOME TAX 325,372, ,148, ,448, ,668,339 INTEREST EXPENSES (50,441,534) (51,272,448) (50,441,534) (51,272,448) CORPORATE INCOME TAX 13 (70,455,998) (114,769,156) (48,531,990) (83,289,160) NET EARNINGS FOR THE YEAR 204,474, ,106, ,474, ,106,731 BASIC EARNINGS PER SHARE Net earnings The accompanying notes are an integral part of the financial statements.
9 THE ORIENTAL HOTEL (THAILAND) PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003 AND 2002 CONSOLIDATED Issued and Retained earnings fully paid up Appropriated - Note share capital statutory reserve Unappropriated Total Balance - beginning of year ,000,000 16,010, ,240, ,250,166 Net earnings for the year ,106, ,106,731 Dividends paid (96,000,000) (96,000,000) Proposed dividends (144,000,000) (144,000,000) Balance - end of year ,000,000 16,010, ,346,897 1,058,356,897 Net earnings for the year ,474, ,474,774 Dividends paid (96,000,000) (96,000,000) Proposed dividends (128,000,000) (128,000,000) Balance - end of year ,000,000 16,010, ,821,671 1,038,831,671 THE COMPANY ONLY Issued and Retained earnings fully paid up Appropriated - Note share capital statutory reserve Unappropriated Total Balance - beginning of year ,000,000 16,000, ,250, ,250,166 Net earnings for the year ,106, ,106,731 Dividends paid (96,000,000) (96,000,000) Proposed dividends (144,000,000) (144,000,000) Balance - end of year ,000,000 16,000, ,356,897 1,058,356,897 Net earnings for the year ,474, ,474,774 Dividends paid (96,000,000) (96,000,000) Proposed dividends (128,000,000) (128,000,000) Balance - end of year ,000,000 16,000, ,831,671 1,038,831,671 The accompanying notes are an integral part of the financial statements.
10 THE ORIENTAL HOTEL (THAILAND) PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 AND 2002 CONSOLIDATED THE COMPANY ONLY Note Cash flows from operating activities Net earnings for the year 204,474, ,106, ,474, ,106,731 Adjustments to reconcile net earnings to net cash provided by (paid for) operating activities:- Share of profit from investments accounted for under equity method (8,748,306) (5,589,739) (58,183,862) (78,135,802) Depreciation 196,738, ,652, ,839, ,101,160 Loss on sales of fixed assets 19,439,229 3,830,405 15,268,253 2,869,643 Decrease in allowance for doubtful accounts (135,822) (329,358) (85,822) (329,358) 411,768, ,670, ,313, ,612,374 Decrease in corporate income tax payable (6,556,115) 6,691,999 3,598,005 5,125,065 Net change in other operating assets and liabilities 15 31,232,364 (62,664,244) 29,341,178 (63,326,078) Net cash from operating activities 436,444, ,698, ,252, ,411,361 Cash flows from investing activities Decrease (increase) in current investments (1,516,539) 7,242,465 (1,516,539) - Increase in loans and advances due from related party - - (692,135) (1,138,674) Dividends received from subsidiary and associated companies 10,400,000 10,400,000 80,400,000 75,400,000 Acquisition of property, plant and equipment, net (303,918,801) (114,636,416) (297,070,001) (83,579,223) Cash received from disposal of equipment 4,238,767 2,173,855 4,068,195 1,401,107 Net cash used in investing activities (290,796,573) (94,820,096) (214,810,480) (7,916,790) Cash flows from financing activities Cash received from loans, net 65,200,000 62,600,000 65,200,000 62,600,000 Dividend paid (240,000,000) (272,000,000) (240,000,000) (272,000,000) Net cash used in financing activities (174,800,000) (209,400,000) (174,800,000) (209,400,000) Net increase (decrease) in cash and cash equivalents (29,151,719) 161,478,151 (14,358,214) 160,094,571 Cash and cash equivalents at beginning of the year 248,845,388 87,367, ,472,480 59,377,909 Cash and cash equivalents at end of the year ,693, ,845, ,114, ,472,480 Supplemental disclosures of cash flows information :- Cash paid during the year for Corporate income tax 82,499, ,987,081 50,415,417 78,947,517 Interest expenses 46,412,301 52,142,964 46,412,301 52,142,964 The accompanying notes are an integral part of the financial statements.
11 THE ORIENTAL HOTEL (THAILAND) PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL INFORMATION The Oriental Hotel (Thailand) Public Company Limited was incorporated as a limited company under Thai laws and registered the change of the status of the Company to a public limited company under the Public Limited Company Act on 15 September The Company operates its business in Thailand and its principal activity is hotel operation with the registered address at 48 Oriental Avenue, New Road, Bangrak, Bangkok. 2. BASIS OF CONSOLIDATION 2.1 These consolidated financial statements include the financial statements of The Oriental Hotel (Thailand) Public Company Limited and the following subsidiaries :- Country of incorporatio Equity interest Nature of business n Baan Rim Naam Chao Phraya Thailand 100 Restaurant and spa Company Limited Bagan Hotel Holding (Thailand) Thailand 100 Investment in a Myanmar Company Limited hotel project 2.2 Intercompany balances and significant transactions between the Company and its subsidiaries are eliminated from the consolidated financial statements. 3. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with accounting standards pronounced by the Institute of Certified Accountants and Auditors of Thailand which are effective under the Accounting Act B.E However, the accounting policies for deferred taxation (see Note 3.6) are based on the relevant International Accounting Standard since no corresponding Thai accounting standard has been pronounced
12 Significant accounting policies adopted by the Company and its subsidiaries are summarized below :- 3.1 Revenue Revenue from hotel and restaurant operations represents the invoiced value of goods supplied and services rendered after deducting discounts, value added tax and service charge. 3.2 Trade accounts receivable and allowance for doubtful accounts Trade accounts receivable are stated at their net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may incurred in the collection of receivables. The allowance is based on collection experience and the current status of receivables outstanding at the balance sheet date. 3.3 Property, plant and equipment and depreciation No depreciation is provided on land and construction in progress, which are recorded at cost. Plant and equipment are stated at cost less accumulated depreciation. Depreciation on the costs of buildings, plant, machinery, motor vehicles, furniture and fixtures is provided on a straight-line basis at the following rates per annum :- Buildings 2.5 percent Building improvements 5 percent Leasehold improvements and renovations 20 percent Plant and machinery 10 or 20 percent Furniture and fixtures 10 or 20 percent Motor vehicles 20 percent Operating equipment consisting of china, glassware, silver, linen and uniforms is recorded as hotel operating equipment and expensed upon issuance. The initial complement of operating equipment and the cost of operating equipment when an existing outlet changes its theme or style is charged to deferred expenses and written off over 36 months. In cases where an item of operating equipment becomes obsolete due to a concept change, the value of the remaining operating equipment items being replaced is immediately written off. 3.4 Investment in subsidiary and associated companies Investments in subsidiary and associated companies are stated under the equity method. 3.5 Inventories - 2 -
13 Inventories are valued at the lower of weighted average cost and net realisable value. 3.6 Deferred taxation Deferred taxation is accounted for under the liability method in respect of temporary differences between profit as computed for taxation purpose and profit as stated in the statements of earnings to the extent that a liability or asset is expected to be payable or receivable in the foreseeable future. Corporate income tax payable under the Revenue Code is calculated after adding back disallowable expenses and after deducting share of profits from subsidiary and associated companies since this is not part of assessable income and any resulting dividends are exempted from corporate income tax. 3.7 Foreign currencies Transactions in foreign currencies incurred during the year are translated into Baht at the rates ruling at the transaction dates. Assets and liabilities in foreign currency outstanding on the balance sheet date are translated into Baht at the rates ruling at the balance sheet date. Exchange gains and losses are included in determining earnings. 3.8 Use of accounting estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates for certain accounting transactions, affecting amounts reported in the financial statements and notes related thereto. Subsequent actual results may differ from these estimates
14 3.9 Financial instruments Financial instruments presented in the balance sheets consist of cash and cash at bank, accounts receivable, accounts payable and loans. The accounting policy is separately disclosed in the related notes. The Company and its subsidiaries have no policy to speculate in or engage in the trading of any derivative financial instruments Earnings per share Earnings per share as presented in the earnings statements is the basic earnings per share which is determined by dividing the net earnings for the year by the number of ordinary shares outstanding at the balance sheet date. No disclosure of diluted earnings per share for the year is required as the Company has no potential ordinary shares. 4. ACCOUNTS RECEIVABLE - TRADE As at 31 December 2003 and 2002, the aging analysis of trade receivables are as follows :- Consolidated The Company Only Less than 30 days 69,745,412 86,974,186 68,653,514 86,045, days 10,105,188 14,396,619 10,105,188 14,396, days 5,941,652 1,461,635 5,941,652 1,461, days 466, , , ,223 Over 120 days - 11,800-11,800 Total 86,259, ,064,463 85,167, ,136,056 Less : Allowance for doubtful accounts (11,357) (147,179) (1,812) (87,634) Net accounts receivable trade 86,247, ,917,284 85,165, ,048,
15 5. RELATED PARTY TRANSACTIONS During the years, the Company had business transactions with its subsidiaries and related companies (related by way of common shareholders and/or directors). Such transactions, which have been concluded on the terms and basis as determined by the Company and those companies and were in the normal course of business, are summarised below :- (Unit : Million Baht) Transactions with subsidiaries : Advance payments Service income received by parent company on behalf of subsidiary Interest income Transactions with related companies : Service income Management and license fees expenses Construction and service payments Service income received by the Company on behalf of related company Advance payments The outstanding balances of the above transactions have been separately shown as Loans and advances due from related party and Amounts due to related parties in the balance sheets
16 6. LOANS AND ADVANCES DUE FROM RELATED PARTY As at 31 December 2003 and 2002, the balances of loans and advances due from related party are as follows :- Consolidated The Company Only Interest policy Subsidiary company Bagan Hotel Holding (Thailand) ,955,22 0 Company Limited Less: Allowance for doubtful - - (33,634,18 accounts 6) Net loans and advances due from 33,263,08 5 (33,103,69 4) Fixed interest rate per annum to related party , ,391 During the year movement to loans and advances due from related company are as follows :- The Company Only Balance as at During the year Balance as at 1 January 2003 Increase Decrease 31 December 2003 Subsidiary company Bagan Hotel Holding (Thailand) Company Limited 33,263, ,135-33,955, INVESTMENTS ACCOUNTED FOR UNDER EQUITY METHOD CONSOLIDATED FINANCIAL STATEMENTS Investments in associated companies are accounted for under the equity method Shares in Siam Flight Services Limited at cost - 26% (2002 : 26%) 9,520,000 9,520,
17 Add : Cumulative profits retained in Siam Flight Services Limited 48,831,154 50,667,534 58,351,154 60,187,
18 Shares in Bagan Hotel Holding Company (BVI) Limited at cost - 50% (2002 : 50%) 40,780,000 40,780,000 Less : Cumulative losses in Bagan Hotel Holding Company (BVI) Limited (40,424,379) (40,609,066) 355, ,934 Total for the Group 58,706,775 60,358,468 Bagan Hotel Holding (Thailand) Co., Ltd. a subsidiary of the Company had invested in a Myanmar hotel project through Bagan Hotel Holding Company (BVI) Limited. On 13 August 2003, the project was terminated by the Ministry of Hotels and Tourism, Union of Myanmar. Full provision had already been made against the investment in THE COMPANY S FINANCIAL STATEMENTS Investments in subsidiaries Baan Rim Naam Chao Phraya Company Limited at cost - 100% (2002 : 100%) 100, ,000 Add : Cumulative profits retained in Baan Rim Naam Chao Phraya Company Limited 130,845, ,694, ,945, ,794,498 Bagan Hotel Holding (Thailand) Company Limited at cost - 100% (2002 : 100%) 4,000,000 4,000,000 Less : Cumulative losses retained in Bagan Hotel Holding (Thailand) Company Limited (4,000,000) (4,000,000) - - Total investments in subsidiary companies 130,945, ,794,
19 Investment in an associated company Siam Flight Services Limited at cost - 26% (2002 : 26%) 9,520,000 9,520,000 Add : Cumulative profits retained in Siam Flight Services Limited 48,831,154 50,667,534 Total investment in an associated company 58,351,154 60,187, PROPERTY, PLANT AND EQUIPMENT Consolidated Building Leaseho Hotel and ld building improve Plant Furnitur Motor operatin Constru ments and e and g ction Land improve and machine fixtures vehicles equipme in Total ments renovatio ry nt process ns Cost 31 December ,562, 1,276,8 299, , ,803 5,785,4 6,765,1 14,624, 2,526, ,090,828,068, ,552 Purchases and - 3,145,2 343,920 29,171, 80,455, - 5,935,0 231,38 694,015 transfer in 16, ,247,558 Disposals and - (139,85 (16,746 (7,286, (47,361 (1,092, (7,655, (243,01 (463,00 transfer out 3,657),159) 998),261) 800) 278) 0,185) 6,338) 31 December ,562, 1,140,1 627, , ,897 4,692,6 5,044,9 3,002,6 2,757, ,649,332,254, ,772 Accumulated depreciation 31 December ,170, ,523,046 99,903, ,907,945 5,304, ,809,740 Depreciation for - 59,327, 33,989, 30,502, 72,685, 233, ,738 the year ,730 Transfer in/out - (66,956, 66,956,
20 179) 179 Disposals - - (13,392 (6,778, (27,968 (1,092, - - (49,231,,117) 434),234) 799) 584) 31 December , , , ,625 4,444, ,316,285,493,917,403 88,886 Net book value 31 December ,562, 1,068,6 65,356, 127, , ,284 6,765,1 14,624, 1,753, , ,430, , December ,562, 939, , , , ,863 5,044,9 3,002,6 1,836,8 635,364,839,337, ,886 Depreciation charge (included in earnings statement) for the year ,652, ,738,
21 The Company Only Building Leaseho Hotel and ld building improve Plant Furnitur Motor operatin Constru ments and e and g ction Land improve and machine fixtures vehicles equipme in Total ments renovatio ry nt process ns Cost 31 December ,562,6 1,136,99 265,729, 217,348, 637,352, 5,785,45 6,765,17 1,209,71 2,299,753, , Purchases and - 3,145,21 203,701, 26,162,0 63,998,1-5,935,02 231,388, 534,329,717 transfer in Disposals and - - (9,750,8 (7,243,4 (45,436, (1,092,8 (7,655,2 (229,604 (300,783,081) transfer out 72) 98) 195) 00) 78),438) 31 December ,562,6 1,140,14 459,679, 236,266, 655,914, 4,692,65 5,044,92 2,993,52 2,533,299, , Accumulated depreciation 31 December ,677, 226,142, 94,374,2 209,062, 5,304, ,560, Depreciation for - 54,864,8 27,431,7 29,456,8 68,852,8 233, ,839,740 the year Disposals - - (9,486,4 (6,753,4 (26,854, (1,092,7 - - (44,186,917) 15) 21) 282) 99) 31 December ,542, 244,087, 117,077, 251,060, 4,444, ,213, Net book value 31 December ,562,6 991,322, 39,587,2 122,974, 428,290, 481,284 6,765,17 1,209,71 1,619,193, December ,562,6 939,602, 215,592, 119,189, 404,854, 247,863 5,044,92 2,993,52 1,716,086, Depreciation charge (included in earning statement) for the year
22 ,101, ,839, 740 The Company had mortgaged its land and building to secure long-term loan facilities from a branch of an overseas company. As at 31 December 2003 and 2002, certain plant and equipment items have been fully depreciated but are still in use. The original cost before deducting accumulated depreciation, of those assets amounted to Baht million and Baht million (The Company only Baht million and Baht million), respectively. 9. DEFERRED TAX BENEFITS Balance brought forward 14,391,955 13,277,459 Add : Current year temporary difference 7,685,931 7,009,213 Less : Utilised during the year (2,836,799) (5,894,717) Net movement of deferred tax benefits during the year 4,849,132 1,114,496 Balance carried forward 19,241,087 14,391,
23 10. SHORT-TERM LOANS FROM BANKS As at 31 December 2003, the Company had obtained short-term loans of Baht 100 million from a branch of a foreign bank carrying interest at a fixed rate and is due for repayment within May LONG-TERM LOAN The Company has a facility of Baht 1.5 billion of which Baht million was outstanding as at 31 December 2003 (2002 : Baht million), from the branch of an overseas company and carries interest at a fixed rate. This loan is repayable on a quarterly installments of Baht 8.7 million from 28 February 2002 to 28 February 2007, with the payment schedule for the remaining outstanding balance to be determined at a later date. This long-term loan is secured by the Company s land and building, as mentioned in Note AMOUNTS DUE TO RELATED PARTIES As at 31 December 2003 and 2002, the balance of amounts due to related parties are as follows :- Consolidated The Company Only Amounts due to related parties Subsidiary company Baan Rim Naam Chao Phaya Company Limited ,749,331 14,030,635 Related companies Mandarin Oriental Management B.V. 21,051,709 21,020,899 21,051,709 21,020,899 Mandarin Oriental Services B.V. 8,019,699 8,007,961 8,019,699 8,007,961 Mandarin Oriental (Thailand) Limited 531, , , ,979 Mandarin Oriental Hotel Group 419,746 2,788, ,746 2,788,582 Total amounts due to related parties 30,022,975 32,346,421 43,772,306 46,377,
24 13. CORPORATE INCOME TAX Consolidated The Company Only Income tax payable at year end 40,609,827 47,165,942 34,530,528 30,932,523 Income tax paid during the year 34,695,303 68,717,710 18,850,594 53,471,133 Total income tax liabilities 75,305, ,883,652 53,381,122 84,403,656 Net deferred tax benefits (4,849,132) (1,114,496) (4,849,132) (1,114,496) Corporate income tax charge against earnings 70,455, ,769,156 48,531,990 83,289, DIRECTORS REMUNERATION Directors remuneration represents the benefits paid to the Company s directors in accordance with Section 90 of the Public Limited Companies Act, exclusive of salaries and related benefits payable to executive directors. 15. CASH FLOW STATEMENTS For the purpose of cash flow statements, cash and cash equivalents include cash on hand and at banks and deposits with financial institutions with an original maturity of three months or less and free from commitment. Cash and cash equivalents as reflected in the cash flow statements for the year ended 31 December 2003 and 2002 consist of the following :- Consolidated The Company Only Cash on hand and at banks 139,727, ,713, ,148, ,340,697 Fixed deposits with maturity of three months or less 79,966,042 52,131,783 79,966,042 52,131,783 Cash and cash equivalents 219,693, ,845, ,114, ,472,
25 The net change in other operating assets and liabilities as reflected in the cash flow statements consists of the following :- Consolidated The Company Only Decrease (increase) in operating assets :- Accounts receivable - trade 16,805,355 (12,297,438) 16,968,846 (12,211,884) Inventories 7,249,692 3,595,380 5,989,432 3,611,416 Other current assets 2,981,188 (10,335,437) 1,930,251 (9,433,262) Other assets (3,440,975) (1,012,336) (3,333,883) (1,011,335) Increase (decrease) in operating liabilities :- Accounts payable (2,612,397) (3,323,138) (1,663,316) (3,508,507) Amounts due to related parties (2,323,446) 4,223,636 (2,604,750) 4,017,418 Accrued expenses (12,704,153) (12,589,855) (9,275,796) (13,205,595) Other current liabilities and other 25,277,100 (30,925,056) 21,330,394 (31,584,329) liabilities Net change in other operating assets and liabilities 31,232,364 (62,664,244) 29,341,178 (63,326,078) 16. DIVIDEND During the year 2003 and 2002, the Extraordinary Meeting of Shareholders and Board of Directors Meeting of the Company approved the payment of a final dividend and the payment of an interim dividend to the Company s shareholders, as follows : Interim Final Interim Final dividend dividend dividend dividend Dividend per share Total dividend 96,000, ,000,000 96,000, ,000,
26 17. PROVISION FOR RETIREMENT BENEFIT PLAN The Company has provided a retirement benefit plan for its employees who have completed ten years or more of continuous service with the Company and who reach the specified retirement age. Under the plan, an employee is entitled to receive, upon retirement or early retirement, a sum computed by reference to length of service, age and average remuneration on retirement. As at 31 December 2003, the amount provided in the accounts of the Company amounted to Baht 59 million (2002 : Baht 47.1 million). 18. STATUTORY RESERVE Under the Public Company Limited Act B.E. 2535, the Company is required to set aside as a statutory reserve of at least 5 percent of its net profit, after deducting accumulated deficit brought forward (if any) until the reserve reaches 10 percent of its registered share capital. The statutory reserve can not be used for dividend payment. 19. PROVIDENT FUND The Company, its subsidiaries and their permanent employees have jointly registered a provident fund scheme under Provident Fund Act B.E Such fund is monthly contributed by both the employees and the Company and its subsidiaries at the rate of 5 percent of the employees basic salaries. The fund is managed by Siam Commercial Bank Public Company Limited. During the year, the Company and its subsidiaries contributed Baht 9.8 million (2002 : Baht 9.4 million) to the fund and the Company alone Baht 9.4 million (2002 : Baht 8.9 million). 20. NUMBER OF EMPLOYEES AND RELATED COSTS Consolidated The Company Only Number of employees at end of the year (persons) Employee costs for the year (Thousand Baht) 231, , , ,
27 21. FINANCIAL INFORMATION BY SEGMENT The Group s operations involve a single industry segment - hotel operations and are carried on entirely in Thailand. As a result, all of the revenues, operating profits and assets as reflected in these financial statements pertain to this industry segment and geographic area. 22. BANK GUARANTEES As at 31 December 2003, there were outstanding bank guarantees of Baht 8 million and Baht 7 million (2002 : Baht 8 million and Baht 7 million) issued by banks on behalf of the Group and the Company, respectively, in respect of certain performance bonds as required in the normal course of business. 23. COMMITMENTS As at 31 December 2003, the Company and its subsidiaries have outstanding commitments : The Company has entered into management and licence agreements with its affiliated companies. The agreements are effective from the year 1988 for a ten year period with options to extend for two further periods of ten years each. The Group is committed to pay fees based on these long-term management agreements on normal commercial terms The following leasing commitments are payable by the Company and its subsidiaries :- (Unit : Million Baht) Year The Group The Company Only The Group and the Company had outstanding capital expenditure and construction commitments of Baht 22.3 million and Baht 22.3 million, respectively (2002 : Baht 17.7 million and Baht 15.1 million, respectively)
28 24. FINANCIAL INSTRUMENTS Financial risk management and policies The Company and its subsidiaries are exposed to risks from changes in market interest rates and in currency exchange rates, and from nonperformance of contractual obligations by counterparties. The Company and its subsidiaries use derivative instruments, as and when it is considered appropriate, to manage such risks. They do not hold or issue derivative instruments for speculative or trading purposes. Interest rate risk The interest rate risk is the risk that future movements in market interest rates will affect the results of the Company and its subsidiaries operations and cash flows. The Company and its subsidiaries exposure to interest rate risk relates primarily to their deposits with financial institutions and loans. Since the majority of these financial assets and liabilities are short-term, therefore the Company and its subsidiaries do not use derivative financial instruments to hedge such risk. The details of longterm loans are set out in Note 11 and 12. Foreign currency risk The Company and its subsidiaries exposure to foreign currency risk relates primarily to their certain receivables and payables which are denominated in foreign currencies. In addition to those transactional exposures, a subsidiary is also exposed to the effect of foreign exchange movements on its investment in foreign associated company, which currently is not hedged by any derivative financial instrument. However, the Company and its subsidiaries believe that foreign currency risk will have no material effect to their operational results and they therefore do not use derivative financial instruments to hedge this risk. Below is the summary of the Company and its subsidiaries foreign currency-denominated assets/liabilities as at 31 December 2003 which were unhedged. The majority of these liabilities are repayable within one year
29 (Unit : Million) Average exchange rate as at Consolidated The Company Only 31 December 2003 Foreign currency Assets Liabilities Assets Liabilities (Baht per foreign currency unit) United States dollar Euro Credit risk The Company and its subsidiaries are exposed to credit risk primarily with respect to trade accounts receivable in that sales are principally made to travel agents, credit card companies and companies with secure financial position. The Company and its subsidiaries have never experienced significant difficulties in debt collection and the management, believes that the maximum exposure to credit risk is the carrying amount of the financial assets less allowance for losses as stated in the balance sheets. Fair value Since the majority of the financial assets are short-term and that the loans carry interest at rates close to current market rates, the management believes that the fair value of the Company and its subsidiaries financial assets and liabilities does not materially differ from their carrying value. 25. PRESENTATION The presentation of the financial statements has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 14 September 2001, as empowered under the Accounting Act B.E APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS These consolidated financial statements have been approved by the directors of the Company