NSOLIDATED FINANCIAL STATEMENTS Q2/2542

(Amounts in thousand Baht) CONSOLIDATED THE COMPANY 1999 1998 1999 1998 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (Increase) decrease in temporary investments 7,001 (2,554) 7,001 (2,528) Increase in notes receivable - finance institutes (830) - - - (Increase) decrease in short-term loans to related parties (70,052) - 31,567 - Decrease in investments (16,663) 60,442 (42,314) 26,091 Decrease in loans to related parties 12,895 331,825 34,212 137,816 Cash payment on purchase of fixed assets (41,997) (28,932) (40,816) (16,643) Decrease in property, plant and equipment 24,527 - - - Cash from sale of fixed assets 7,637 3,340 5,947 1,234 (Increase) Decrease in condominiums 8,922 (15,263) 8,922 (15,263) Decrease in advance payments on condominium - 27,195 - 27,195 Net Cash Provided by (Used in) Investing Activities (68,560) 376,053 4,519 157,902 CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES Increase (decrease) in bank overdrafts and loans from financial institutes 23,797 (82,854) 2,805 92,585 Increase short-term loans from directors 6,322 - - - Increase in long-term loans - 30,000 - - Net Cash Provided by (Used in) Financing Activities 30,119 (52,854) 2,805 92,585 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (512,733) 292,342 (515,411) 267,019 CASH AND CASH EQUIVALENTS AS AT BEGINNING OF PERIOD (Notes 4 and 6) 794,792 43,409 771,608 42,400 CASH AND CASH EQUIVALENTS AS AT END OF PERIOD (Notes 4 and 6) 282,059 335,751 256,197 309,419 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash paid during the period Interest expense 10,734 230,682 5,397 208,641 Income tax 39,721 70,820 38,747 70,811 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 AND 1998 (UNAUDITED) NOTE 1 - ECONOMIC ENVIRONMENT AND BASIS OF PRESENTATION Since July 1997, certain Asia Pacific countries, including Thailand, have experienced economic difficulties relating to currency devaluation and slowdown in growth. Accordingly, the Thai government sought assistance from the International Monetary Fund to alleviate the economic crisis and improve the economy over time. The financial statements of Sino-Thai Engineering and Construction Public Company Limited ("the Company") and subsidiaries for the three-month periods and six-month periods ended June 30, 1999 and 1998 and the separate financial statements for the same periods have been presented on a going concern basis and in conformity with generally accepted accounting principles practiced in Thailand applied on a consistent basis and reflect the management 's current assessment of the possible impact of this economic situation on the financial position of the Company and its subsidiaries. The operations of the Company and subsidiaries since July 1997 have been affected and may continue to be influenced for the foreseeable future by the economic conditions in Thailand and the Asia Pacific Region in general. The ultimate effect that these uncertainties will have on stated values or classifications of assets and liabilities at the balance sheet date cannot presently be determined. The consolidated financial statements of the Company and subsidiaries for the three-month periods and six-month periods ended June 30, 1999 and 1998 and the separate financial statements for each of the periods then ended, therefore, may not necessarily include all adjustments that might ultimately result from these economic conditions due to such adjustments being both uncertain and unquantifiable. The significant effect of currency devaluation, as mentioned above, has caused the Company's financial ratios to be not in accordance with conditions of a loan contract. Accordingly, the lender had a right to call in debts immediately as at August 20, 1998, and on September 4, 1998, the lender announced the call of such debt. The Company has appointed a financial consultant to produce a financial restructuring plan. Whilst the management and the financial consultant are producing a financial restructuring plan, there is no guarantee for a success. Such planning may include the extension to repay loan principle for several years and to pay interest at a lower rate. NOTE 2 - BASIS OF CONSOLIDATION 2.1 Principles for Preparation of consolidated Financial statements The consolidated financial statements of Sino-Thai Engineering and Construction Public Company Limited and subsidiaries are prepared in accordance with generally accepted accounting principles practiced in Thailand, the regulations of the Office of the Securities and Exchange Commission and the Stock Exchange of Thailand. The consolidated financial statements for the three-month period and six-month period ended June 30, 1999 consist of the financial statements of Sino-Thai Engineering and Construction Public Company Limited and the financial statements of subsidiaries, and the consolidated financial statements for the three-month period and six-month period ended June 30,1998consist of the financial statements of Sino-Thai Engineering and Construction Public Company Limited and the financial statements of subsidiaries and subsidiaries of subsidiaries as follows: Percentage of Consolidated Consolidated Percentage of shares holding total assets total revenue 1999 1998 1999 1998 1999 1998 Subsidiaries held by the Company Sino-Thai Construction Services Company Limited 99.99 99.99 5.47 8.42 3.67 3.81 Sino-Thai Resources Development Public Company Limited 51.16 51.16 6.15 5.31 3.09 0.85 Subsidiaries of subsidiaries held indirectly (held by Sino-Thai Resources Development Public Company Limited) Siam Dimension Stone Company Limited - 35.81 As at June 30,1999, the consolidated financial statements of Sino-Thai Engineering and Construction Public Company Limited do not include the financial statements of Siam Dimension Stone Company Limited, since the resolution of the Executive Board of Directors' Meeting held on March 30, 1999 authorized the sale of 51 percent of Siam Dimension Stone's shares reducing Sino-Thai Resources Development Public Company Limited is investment in Siam Dimension Stone from 70 percent to 19 percent. The financial statements for the three-month period and six-month period ended June 30, 1998 of Siam Dimension Stone Company Limited in which Sino-Thai Resources Development Public Company Limited holds 70% shares are included in consolidation as the company can exercise influence over such company's operating and financial policies. All significant intercompany transactions and accounts are eliminated in preparing the consolidated financial statements. 2.2 The Excess of Book Value Over Cost of Investment and the Excess of Cost Over Book Value of Investment The excess of book value over cost of investment at acquisition was fully amortized on that date and reflected in the consolidated retained earnings. The excess of cost over book value of investment at acquisition is amortized by the straight-line method over a period of 10 years. NOTE 3 - THE SUBSIDIARY'S OPERATION The subsidiary has been informed by a letter from the Stock Exchange of Thailand reference No. Bor Jor/Mor 1921/2540 dated December 17, 1997, of its suspension from trading because of the decline in value of its assets and because it has ceased its main operations. The Company is presently working on its rehabilitation plan. On April 8, 1998, the Company made a contract with one financial institute to be a financial consultant and work on the rehabilitation plan due to its suspension from trading. NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICY Income Recognition Income from construction of the company are recognized on the basis of the percentage-of-completion method as estimated by the Company's engineers. Differences between income recognized on the basis of the percentage-of- completion method and billing income are recorded as accounts receivable. Subsidiary's income from sales are recognized when the goods are delivered. Service income are recognized on the basis of the percentage-of-completion method and invoices collected. Rental income are recognized when invoices are collected. Other income are recognized on the accrual basis. Expenses Recognition Costs of construction of the company are recognized on the basis of the percentage of work completed to the total estimated costs or the actual costs. Differences between actual costs and the related costs recognized on the basis of the percentage of work completed are recorded as construction contracts in progress. Subsidiary's service costs are recognized on the basis of actual cost. Expenses are recognized on the accrual basis. Cash and Cash equivalents Cash and cash equivalents represent cash in hand , at banks and notes receivable financial institutes which are less than 3 months repayment net of cash at bank pledged as collaterals. Allowance for Doubtful Accounts The Company provides allowance for doubtful accounts on the basis of those amounts which may prove to be uncollectible. Inventories Inventories of subsidiaries are stated at cost using first-in, first-out method, net of provision for damaged goods. Investments Investment in securities for the period ended June 30, 1999 are classified and stated in conformity with Accounting Standards No.40 "Accounting for Investments in Debt and Equity Instruments" as follows: Temporary investments in marketable equity securities held for trading are stated at fair value. Unrealized gains or losses arising on the revaluation of trading securities are reflected in the statement of income. Temporary investments in non-marketable equity securities, which is general investment are stated at cost. Long-term investments in marketable equity securities available for sale are stated at fair value. Unrealized gains or losses arising on the revaluation of available for sale securities are shown as a component of shareholders' equity and reflected in the statement of income upon disposal. Long-term investments in non-marketable equity securities, which is general investment are stated at cost. The moving average method is used to determine the cost temporary investments and long-term investments at the time of sales. Investment in securities for the period ended June 30, 1998 are stated as follows: Investments in listed securities are valued at the lower of aggregate cost or aggregate market value. The declining in value of non-current marketable securities is shown under shareholders' equity. Investments in subsidiaries and associated companies are stated at the equity method. Investments in other securities which the Company holds less than 20 percent is stated at cost net of allowance for revaluation of investment. Investments in joint ventures in which percentage of Company's portion of profit and loss exceeds 20 percent are stated at equity method to proportionate method for all joint venture that the Company had a joint control. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is computed by the straight-line method, based on the estimated useful lives of assets 5-20 years. Deferred Charges Deferred charges of company represent the underwriting fee which is amortized over a period of 5 years and 10 years respectively. Foreign Currency Accounts Foreign currency transactions during the period are translated into Baht at the rates prevailing at the dates of transactions. Liabilities in foreign currencies outstanding at the balance sheet date are translated into Baht at the rates prevailing at that date and at forward exchange rates in case there are forward exchange contracts. Basic Earnings (Loss) per Share Basic earnings (loss) per share is computed by dividing net income (loss) by the number of shares outstanding at the end of the period. NOTE 5 - RELATED PARTIES TRANSACTIONS The Company has significant transactions with its related parties. The financial statements reflect the effects of these transactions on the normal business operations. At June 30, the outstanding balances with its related parties are as follows: 5.1 Due from related parties are summarized as follows: CONSOLIDATED THE COMPANY 1999 1998 1999 1998 Baht'000 Baht'000 Baht'000 Baht'000 Joint ventures Philipp Holzmann (Thai) /U.T.M. Engineering / Sino-Thai Joint Venture 60,694 75,402 60,694 75,402 Zueblin -W&F- Stecon joint venture 2,638 6,292 1,858 6,292 The Joint Venture of Tomen Enterprise (Bangkok) Company Limited/Sino-Thai Engineering and Construction Public Company Limited/ Totems Company Limited 16,301 - 16,301 - Total 79,633 81,694 78,853 81,694 CONSOLIDATED THE COMPANY 1999 1998 1999 1998 Baht'000 Baht'000 Baht'000 Baht'0000 Subsidiaries Sino-Thai Construction Services Company Limited - - 12,193 6,256 Sino-Thai Resources Development Public Company Limited - - - 20 Total - - 12,193 6,276 Associated companies STP & I Public Company Limited - 12,243 - 38 ACS Asia Limited 12 12 12 12 ACS Asia (1996) Company Limited - 1,622 - 1,622 MMR Asia Company Limited - 14,171 - 14,171 Thai Maintenance Contracting Company Limited 377 13,107 377 13,107 Total 389 41,155 389 28,950 Other related parties 21,793 26,163 18,987 18,907 Total 101,815 149,012 110,422 135,827 Less Allowance for doubtful accounts (19,479) (16,402) (18,978) (16,402) Total 82,336 132,610 91,444 119,425 5.2 Due from related parties are analyzed by aging as follows: CONSOLIDATED THE COMPANY 1999 1998 1999 1998 Baht'000 Baht'000 Baht'000 Baht'000 Current 32,184 124,743 44,292 125,638 Overdue 1 month to 4 months 10,710 1,312 10,634 3,082 Over 4 months to 12 months 36,562 22,571 36,059 6,770 Over 12 months 22,359 386 19,437 337 Total 101,815 149,012 110,422 135,827 5.3 Due to related parties are summarized as follows: CONSOLIDATED THE COMPANY 1999 1998 1999 1998 Baht'000 Baht'000 Baht'000 Baht'000 Subsidiaries Sino-Thai Construction Services Company Limited - - 354 17,861 Sino-Thai Resources Development Public Company Limited - - 156 84 Total - - 510 17,945 Associated companies STP & I Public Company Limited - 41 - 41 HTR Corporation Limited 664 282 664 282 ACS Asia Limited 76 76 76 76 MMR Asia Company Limited - 409 - 409 Total 740 808 740 808 Other related parties 2,633 14,637 2,606 3,790 Total 3,373 15,445 3,856 22,543 (More)