ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL STATEMENTS AND AUDITOR'S REPORT SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES DECEMBER 31, 1999 AND 1998 As required by Thai law and regulatory requirements, the Company's financial statements and auditor's report thereon have been prepared in the Thai language. They have been translated into English for the convenience of the reader. Auditor's Report To the Shareholders of Sino-Thai Engineering and Construction Public Company Limited: I have audited the consolidated balance sheets of Sino-Thai Engineering and Construction Public Company Limited and subsidiaries as at December 31, 1999 and 1998, and the related consolidated statements of income, changes in deficit in shareholders' equity, deficit and cash flows for each of the years then ended, and the separate financial statements of Sino-Thai Engineering and Construction Public Company Limited for each of the years then ended. The Company's management are responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to report on these financial statements based on my audit. 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 statement presentation. I believe that my audits provide a reasonable basis for my report. As shown in the financial statements for 1999 and 1998, the Company and subsidiaries have incurred net profit (loss) on operations in the amount of Baht (1,080.61) million and Baht 374.17 million, respectively. As at December 31, 1999 and 1998, total current liabilities exceeded total current assets in the amount of Baht 3,261.23 million and Baht 2,889.09 million in the consolidated financial statements and Baht 3,252.96 million and Baht 2,672.69 million in the separate financial statements, respectively. Total liabilities exceeded total assets amount of Baht 1,639.49 million and Baht 324.50 million in the consolidated financial statements and Baht 1,703.57 million and Baht 479.56 million in the separate financial statements, respectively, and deficit in shareholders'equity in the amount of Baht 1,703.65 million and Baht 386.12 million and Baht 1,703.57 million and Baht 479.56 million, respectively in the consolidated financial statements and the separate financial statements. In addition, the Company and a subsidiary in 1999 and two subsidiaries in 1998 have failed to repay loans and interest and have not performed financial ratio condition with domestic commercial banks and foreign banks. The default entitles the banks to accelerate the maturity of all amount outstanding immediately due and payable. If accelerated, the Company and the above subsidiaries would not be able to repay such debt. However, the Company and subsidiaries have been still in the process of debt restructuring that has not been resolved. Also, two subsidiaries in 1999 and a subsidiary in 1998, have difficulties relating to operating as going concerns, which is significant matter. In addition, the operations of the Company and subsidiaries may continue to be influenced by the economic conditions in Thailand and the Asia Pacific Region in general. These factors raise substantial doubt about the Company and subsidiaries' ability to continue as a going concern. The financial statements are prepared in accordance with generally accepted accounting principles and do not include any adjustment relating to the recoverability of the recorded assets and the amounts and classification of liabilities that might be necessary should the Company and subsidiaries be unable to continue as going concern, as described in Notes 1.2, 1.4, 13 and 19. Because of the uncertainty of the Company and subsidiaries' ability to continue as a going concern as described in the third paragraph, which enter materially into the determination of the financial position, and the results of their operations and cash flows of the Company and subsidiaries, I do not express an opinion on the consolidated financial statements and the separate financial statements for the years ended December 31, 1999 and 1998 of Sino-Thai Engineering and Construction Public Company Limited and subsidiaries. . I draw attention to Note 2 to the financial statements concerning the significant transactions of the Company and subsidiaries with related parties and Note 13 to the financial statements, in 1999, regarding to debt restructuring contract with a domestic commercial bank. Under the above contract, the bank has agreed to release conditions on principal and interest payment as the specified rates. Differences between interest expense based on bank's right and debt restructuring contract, the subsidiary has agreed to repay that depends on the subsidiary's performance and the bank's approval. As an uncertainty regarding to ability on payment of the subsidiary that depends on its performance, the subsidiary has not recorded accrued interest expense of differences between interest expense based on bank's right and debt restructuring contract as from the fourth quarter of the year 1999 through December 31, 1999. The subsidiary has disputed in mining development contract and quarry for mill and has been sued for above compension in the approximately amount of Baht 174.07 million and the Company has counterclaimed in the same case in the amount of Baht 142.89 million. The case is still in process on consideration of the arbitrator of judge. However, the ultimate effect on this case cannot presently be decided and the subsidiary has not provided against the contingent liability. Also, Note 4 to the financial statements, during 1999, the subsidiary changed its accounting policy with respect to the treatment of unamortized mining development cost previously recognized as other assets to be recognized as expenses. Therefore, the comparative financial statements for 1998 of the subsidiary have been restated to conform to the changed accounting policy. The consolidated financial statements and the separate financial statements included equity in loss of associated companies and joint ventures for the years ended December 31, 1999 and 1998 in the amount of Baht 35.31 million and Baht 106.77 million, respectively, equal to 3.27% and 28.54% of net income (loss) based on the financial information prepared by the management which had not been audited by the auditors. Nirand Lilamethwat Certified Public Accountant Registration Number 2316 KPMG Audit (Thailand) Limited Bangkok, February 28, 2000 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT DECEMBER 31, 1999 AND 1998 (Amounts : Baht) Consolidated Balance Sheets Company's Separate Balance Sheets ASSETS 1999 1998 1999 1998 (Restated) (Restated) CURRENT ASSETS Cash in hand and at banks (Notes 3 and 5) 1,194,872,031.33 878,822,655.94 1,171,218,735.67 855,637,819.99 Short-term investments (Notes 3 and 6) Notes receivable - financial institution - 2,014,909.24 - - Investment in listed securities 91,047,405.30 82,792,335.05 91,042,845.30 82,787,775.05 Total Short-Term Investments 91,047,405.30 84,807,244.29 91,042,845.30 82,787,775.05 Accounts receivable - Related parties - net (Notes 2 and 3) 70,339,403.40 67,420,200.54 61,610,816.04 76,108,451.68 - Others - net ( Notes 3 and 7) 1,195,120,112.38 1,205,268,193.61 1,156,997,274.65 1,080,614,979.59 Total Accounts Receivable - net 1,265,459,515.78 1,272,688,394.15 1,218,608,090.69 1,156,723,431.27 Short-term loans to related parties (Note 2.3) 29,558,638.11 33,363,792.69 29,558,638.11 198,534,192.69 Retention receivables - net (Notes 3 and 8) 101,044,655.54 300,493,956.76 101,044,655.54 296,418,682.36 Inventories - net (Notes 3 and 9) 56,268,290.98 221,230,222.18 - - Other current assets - net (Note 10) Advances to suppliers 32,113,775.15 42,813,872.37 32,113,775.15 42,813,872.37 Withholding tax 203,504,808.48 414,810,690.54 199,018,050.92 411,881,005.43 Others 28,943,522.51 46,968,865.98 23,720,449.98 34,822,974.65 Total Other Current Assets 264,562,106.14 504,593,428.89 254,852,276.05 489,517,852.45 Total Current Assets 3,002,812,643.18 3,295,999,694.90 2,866,325,241.36 3,079,619,753.81 INVESTMENTS AND LOANS (Notes 2.4 and 3) Joint ventures 14,879,180.13 7,837,461.49 14,879,180.13 7,837,461.49 Related parties 245,543,201.57 325,352,262.80 312,758,423.13 430,840,341.32 Other parties 286,179,469.89 310,183,933.89 273,907,469.89 275,983,933.89 Total Investments and Loans 546,601,851.59 643,373,658.18 601,545,073.15 714,661,736.70 GOODWILL (Note 3) - 72,766,885.98 - - PROPERTY, PLANT AND EQUIPMENT - NET (Notes 3 and 11) 1,408,752,800.31 1,809,243,534.29 1,038,184,108.80 1,449,292,745.93 OTHER ASSETS - NET (Note 12) Loans and advances to directors and employees 12,374,313.81 14,422,872.35 12,030,363.20 10,192,138.81 Condominiums 69,470,241.70 93,624,699.81 69,470,241.70 93,624,699.81 Deposit 12,191,282.76 6,053,209.18 12,191,282.76 6,053,209.18 Deposit for bid security (Note 18) 27,884,000.00 - 27,884,000.00 - Others 14,594,030.87 44,662,458.23 12,159,317.45 39,357,308.58 Total Other Assets 136,513,869.14 158,763,239.57 133,735,205.11 149,227,356.38 Total Assets 5,094,681,164.22 5,980,147,012.92 4,639,789,628.42 5,392,801,592.82 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT DECEMBER 31, 1999 AND 1998 (Amounts : Baht) Consolidated Balance Sheets Company's Separate Balance Sheets LIABILITIES AND DEFICIT IN SHAREHOLDERS' EQUITY 1999 1998 1999 1998 (Restated) (Restated) CURRENT LIABILITIES Bank overdrafts and loans from financial institution 915,911,175.73 956,126,178.37 820,599,714.49 812,805,744.11 Accounts payable - Related parties (Note 2.2) 2,864,136.79 4,161,936.26 3,006,793.47 5,318,731.51 - Others 956,633,640.60 1,141,761,462.00 920,910,532.16 1,043,810,772.01 Total Accounts Payable 959,497,777.39 1,145,923,398.26 923,917,325.63 1,049,129,503.52 Current portion of hire purchase creditors (Note 15) 23,078,760.00 23,232,578.52 23,078,760.00 23,232,578.52 Long-term loans in default (Note 13) 3,205,333,000.00 3,282,650,000.00 3,205,333,000.00 3,135,650,000.00 Short-term loans from directors 2,322,178.53 - - - Advance receipt on contracts 417,356,727.53 317,162,098.48 417,356,727.53 315,245,591.89 Other current liabilities Accrued expenses 640,595,054.31 248,102,876.75 638,406,743.79 225,283,713.65 Deferred value added tax 51,378,600.13 69,586,451.91 51,378,600.13 66,290,927.55 Provision for contingent cost 9,174,379.00 71,289,018.81 9,174,379.00 64,370,930.47 Others 39,393,782.60 71,014,525.86 30,041,221.15 60,296,130.88 Total Other Current Liabilities 740,541,816.04 459,992,873.33 729,000,944.07 416,241,702.55 Total Current Liabilities 6,264,041,435.22 6,185,087,126.96 6,119,286,471.72 5,752,305,120.59 LONG-TERM LOANS (Note 13) 185,986,492.45 - - - OTHER LIABILITIES Provision for loss on collection from subsidiary 177,187,732.60 - - - Loss on investment in subsidiaries and joint ventures exceeding carrying amount (Note 2.4) 38,870,465.99 74,574,412.09 203,810,576.46 74,574,412.09 Hire purchase creditors (Note 15) 18,814,143.92 41,892,889.40 18,814,143.92 41,892,889.40 Others 49,269,900.94 3,094,229.60 1,453,343.00 3,592,979.60 Total Other Liabilities 284,142,243.45 119,561,531.09 224,078,063.38 120,060,281.09 Total Liabilities 6,734,170,171.12 6,304,648,658.05 6,343,364,535.10 5,872,365,401.68 MINORITY INTERESTS 64,163,899.78 61,616,112.69 - - See notes to financial statements (Amounts : Baht) Consolidated Balance Sheets Company's Separate Balance Sheets LIABILITIES AND DEFICIT IN SHAREHOLDERS' EQUITY 1999 1998 1999 1998 (Restated) (Restated) DEFICIT IN SHAREHOLDERS' EQUITY Share capital, Baht 10 par value Authorized shares capital - Preference shares 7,000,000 shares 70,000,000.00 70,000,000.00 70,000,000.00 70,000,000.00 - Ordinary shares 68,000,000 shares 680,000,000.00 680,000,000.00 680,000,000.00 680,000,000.00 Issued and fully paid - Preference shares 7,000,000 shares 70,000,000.00 70,000,000.00 70,000,000.00 70,000,000.00 - Ordinary shares 23,000,000 shares 230,000,000.00 230,000,000.00 230,000,000.00 230,000,000.00 Paid-in capital Premium on share capital 486,000,000.00 486,000,000.00 486,000,000.00 486,000,000.00 Revaluation surplus ( Note 17) 571,100,082.62 929,173,784.53 571,100,082.62 834,565,471.57 Appropriated retained earnings - legal reserve 56,163,648.79 56,163,648.79 48,565,466.52 48,565,466.52 Deficit (2,962,042,404.79) (1,901,701,079.92) (2,954,444,222.52) (1,894,102,897.65) Unrealized loss on non-current marketable securities (Note 3) (154,874,233.30) (255,754,111.22) (154,796,233.30) (254,591,849.30) Total Deficit in Shareholders' Equity (1,703,652,906.68) (386,117,757.82) (1,703,574,906.68) (479,563,808.86) Total Liabilities Net of Deficit in Shareholders' Equity 5,094,681,164.22 5,980,147,012.92 4,639,789,628.42 5,392,801,592.82 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (Amounts : Baht) Consolidated Statements of Income Company's Seperate Statements of Income 1999 1998 1999 1998 (Restated) (Restated) REVENUES (Notes 2.5, 3 and 20) Revenues from construction and sales 3,535,690,960.37 5,063,753,612.07 3,349,577,534.19 4,595,765,884.17 Other income Foreign exchange gains (losses) (81,577,263.64) 1,024,930,182.00 (76,566,011.98) 954,865,249.66 Excess of book value over cost of investment written off (Note 14) - 53,495,381.37 - 53,495,381.37 Interest income 57,049,588.89 49,876,478.67 51,539,017.04 135,155,291.63 Others 75,078,210.53 129,592,499.08 51,834,107.61 32,593,295.95 Total Other Income 50,550,535.78 1,257,894,541.12 26,807,112.67 1,176,109,218.61 Total Revenues 3,586,241,496.15 6,321,648,153.19 3,376,384,646.86 5,771,875,102.78 EXPENSES (Notes 2.3, 3 and 20) Costs of construction and cost of sale 3,228,877,585.24 4,722,692,357.41 3,036,049,410.35 4,345,441,181.42 Selling and administrative expenses 572,520,762.13 423,176,352.25 495,643,800.38 355,780,625.18 Loss on diminution in value of inventories (Note 9) 104,158,829.63 - - - Doubtful debts 286,308,172.11 344,015,037.18 205,246,220.79 323,248,923.78 Equity in loss of subsidiaries and associated companies and joint ventures 35,310,643.22 106,770,878.99 289,575,722.33 5,317,049.83 Directors' remuneration 961,000.00 599,500.00 802,000.00 480,000.00 Interest expense 486,338,561.94 415,099,304.92 429,677,911.00 375,948,195.60 Total Expenses 4,714,475,554.27 6,012,353,430.75 4,456,995,064.85 5,406,215,975.81 Income (loss) before minority interests and extraordinary items (1,128,234,058.12) 309,294,722.44 (1,080,610,417.99) 365,659,126.97 Minority interests in net loss 47,623,640.13 8,117,721.20 - - Income (loss) before extraordinary items (1,080,610,417.99) 317,412,443.64 (1,080,610,417.99) 365,659,126.97 Extraordinary items : Gain on debts restructuring (Note 16) - 56,753,056.53 - 8,506,373.20 Net income (loss) (1,080,610,417.99) 374,165,500.17 (1,080,610,417.99) 374,165,500.17 Basic earnings (loss) per share (Note 3) Income (loss) before extraordinary items (46.98) 13.80 (46.98) 15.90 Extraordinary items - 2.47 - 0.37 Net income (loss) (46.98) 16.27 (46.98) 16.27 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN DEFICIT IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Consolidated Statements of Changes Company's Separate Statements of Changes (Amounts : Baht) in Deficit in Shareholders' equity in Deficit in Shareholders' equity 1999 1998 1999 1998 (Restated) (Restated) Share capital Preference shares Beginning balance 70,000,000.00 70,000,000.00 70,000,000.00 70,000,000.00 Increase during year - - - - Decrease during year - - - - Ending balance 70,000,000.00 70,000,000.00 70,000,000.00 70,000,000.00 Ordinary shares Beginning balance 230,000,000.00 230,000,000.00 230,000,000.00 230,000,000.00 Increase during year - - - - Decrease during year - - - - Ending balance 230,000,000.00 230,000,000.00 230,000,000.00 230,000,000.00 Paid-in capital Premium on ordinary share Beginning balance 486,000,000.00 486,000,000.00 486,000,000.00 486,000,000.00 Increase during year - - - - Decrease during year - - - - Ending balance 486,000,000.00 486,000,000.00 486,000,000.00 486,000,000.00 Revaluation surplus (Note 17) Beginning balance 929,173,784.53 929,173,784.53 834,565,471.57 834,565,471.57 Increase during year 32,776,860.59 - 127,385,173.55 - Decrease during year (390,850,562.50) - (390,850,562.50) - Ending balance 571,100,082.62 929,173,784.53 571,100,082.62 834,565,471.57 Appropriated retained earnings - legal reserve Beginning balance 56,163,648.79 56,163,648.79 48,565,466.52 48,565,466.52 Increase during year - - - - Decrease during year - - - - Ending balance 56,163,648.79 56,163,648.79 48,565,466.52 48,565,466.52 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN DEFICIT IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Consolidated Statements of Changes Company's Separate Statements of Changes (Amounts : Baht) in Deficit in Shareholders' equity in Deficit in Shareholders' equity 1999 1998 1999 1998 (Restated) (Restated) Deficit Beginning balance as previously reported (1,890,898,995.30) (2,264,928,114.52) (1,883,300,813.03) (2,257,329,932.25) Cumulative effect of change in accounting policy of a subsidiary (Note 4) (10,863,395.28) (10,938,465.57) (10,863,395.28) (10,938,465.57) Adjustment of retained earnings of subsidiary at beginning of year not included consolidated financial statements 20,330,403.78 - 20,330,403.78 - Beginning balance as restated (1,881,431,986.80) (2,275,866,580.09) (1,873,833,804.53) (2,268,268,397.82) Increase during year - net income(loss) (1,080,610,417.99) 374,165,500.17 (1,080,610,417.99) 374,165,500.17 Decrease during year - - - - Ending balance (2,962,042,404.79) (1,901,701,079.92) (2,954,444,222.52) (1,894,102,897.65) Unrealized loss on non-current marketable securities (Note 3) Beginning balance (255,754,111.22) (257,797,954.92) (254,591,849.30) (256,635,693.00) (more)