CONSOLIDATED FINANCIAL STATEMENTS Q2/2000

Auditor's Review Report To the Shareholders of Sino-Thai Engineering and Construction Public Company Limited: I have reviewed the consolidated balance sheet of Sino-Thai Engineering and Construction Public Company Limited and subsidiaries as at June 30, 2000, and the related consolidated statements of income for each of the three-month and six-month periods ended June 30, 2000 and 1999, changes in deficit in shareholders' equity, deficit and cash flows for each of the six- month periods ended June 30, 2000 and 1999, and the separate financial statements of Sino-Thai Engineering and Construction Public Company Limited for the same periods. The Company's management are responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to issue a report on these financial statements based on my review. I conducted my review in accordance with standard on auditing applicable to review engagements. This standard requires that I plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquires of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit in accordance with generally accepted auditing standards. I have not performed an audit and, accordingly, I do not express an audit opinion. As shown in the financial statements for the six-month periods ended June 30, 2000 and 1999, the Company and subsidiaries incurred net loss from operations in the amount of Baht 941.05 million and Baht 167.75 million, respectively. As at June 30, 2000 and December 31, 1999, the Company's total current liabilities exceeded total current assets by Baht 3,842.99 million and Baht 3,264.23 million, respectively in the consolidated financial statements and Baht 3,822.13 million and Baht 3,252.96 million, respectively in the separate financial statements. It's total liabilities exceeded total assets by Baht 2,488.19 million and Baht 1,639.49 million, respectively in the consolidated financial statements and Baht 2,522.45 million and Baht 1,703.57 million, respectively in the separate financial statements. The Company and a subsidiary have failed to repay loans and interest. Later on the creditors and the Company submitted their petition for rehabilitation plan of the Company to the Central Bankruptcy Court and on January 17, 2000 , the Court ruled that the Company must be rehabilitated by appointed planner. Therefore, the Company must follow the rehabilitation process as specified in the Bankruptcy Law. The subsidiary is operating along with the project to solve the status and operating in order to reach the plan. Also, the subsidiary has difficulties in 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, and 2.4 to the financial statements. According to generally accepted accounting principles, the Company and subsidiaries are required to estimate the recoverable amount of its land when circumstances or events indicate their value may be impaired. If the estimated recoverable amount is less than the carrying value of the assets, an impairment loss should be recognized in the statement of income. The Company revalued its land resulting in surplus on revaluation of Baht 1,019.57 million on the base of valuation of an independent appraiser. The Company and subsidiaries did not estimate the recoverable amount of their land in accordance with generally accepted accounting principles. Therefore, we were unable to review the carrying value of these assets for the six-month period ended June 30, 1999. As described in Note 2.5 to the financial statements, the Company has estimated the revaluation of land. Because of the pervasive effect on the consolidated and separate financial statements regarding the uncertainties of the Company and subsidiaries to continue as a going concern as described in the third paragraph and the recoverable amount of its land in 1999 as described in the fourth paragraph, therefore, I am unable to provide any assurance that the accompanying financial statements are presented fairly, in all material respects, in conformity with generally accepted accounting principles. I have audited the consolidated financial statements of SinoThai Engineering and construction Public Company Limited and subsidiaries as at December 31, 1999 and the separate financial statements of the Company for the year then ended in accordance with generally accepted auditing standard and my report dated February 28, 2000 disclaimed an opinion on those statements. The accompanying balance sheet of the Company and subsidiaries and the separate balance sheet of the Company as at the same date, which have been presented for comparatives, are parts of the financial statements on which I have audited and reported. I have not conducted any audits on the financial information of the Company and its subsidiaries subsequent to the date of my report. I draw attention to Note 2.1 to the financial statements concerning the significant transactions of the Company and subsidiaries with related parties and Note 2.4 to the financial statements, regarding to debt restructuring contract between a subsidiary and a domestic commercial bank. According to 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.Therefore,the subsidiary has not recorded accrued interert expense of differences between interest expense based on bank's right and debt restructuring contract as from the fourth quarter of year 1999 through June 30 , 2000 as an uncertainty regarding to ability on payment of the subsidiary that depends on its performance. As described in note 2.6 to the financial statements, a subsidiary has disputed in mining development contract and quarry for crushing plant and has been sued for above compensation in the approximately amount of Baht 170.72 million and the subsidiary 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. The dispute cannot presently be finalized and the subsidiary has not provided a provision for these contingent liabilities. Also, Note 1.6 to the financial statements, during 1999, the subsidiary changed its accounting policy with respect to the treatment of deferred charged on mining development cost previously recognized as other assets to be recognized as expenses. Therefore, the comparative financial statement for the three-month period and six-month period ended June 30, 1999 of the subsidiary have been restated to conform to the changed accounting policy. For the three-month period and six-month period ended June 30, 2000, equity in profit (loss) from three associated companies and two joint ventures in the amount of Baht (3.71) million and Bath 3.57 million , reflected 0.60% and 0.38%, respectively, of net loss in the consolidated financial statements and equity in profit (loss) from three associated companies and three joint ventures in the amount of Baht (3.27) million and Bath 2.53 million, reflected 0.53% and 0.26%, respectively, of net loss in the separate financial statements based on the financial information prepared by the management which had not been reviewed by the auditor. The consolidated financial statements as at December 31, 1999 , which have been presented for comparative , have been restated by including a joint venture's financial statements as significant power to control. Nirand Lilamethwat Certified Public Accountant Registration Number 2316 KPMG Audit (Thailand) Limited Bangkok, August 8, 2000 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT JUNE 30, 2000 AND DECEMBER 31, 1999 (Amounts in thousand Baht) Consolidated Balance Sheets Company's Separate Balance Sheets 2000 1999 2000 1999 (Unaudited) (Audited) (Unaudited) (Audited) ASSETS (Restated) CURRENT ASSETS Cash in hand and at banks (Notes 1.5 and 2.2) 1,056,636 1,196,784 1,043,221 1,171,219 Short-term investments (Note 1.5) 125,387 91,047 123,731 91,043 Accounts receivable - Related parties - net (Notes 1.5 and 2.1) 52,837 70,340 58,334 61,611 - Others - net ( Notes 1.5 and 2.3) 1,020,650 1,195,120 988,655 1,156,997 Total Accounts receivable - net 1,073,487 1,265,460 1,046,989 1,218,608 Short-term loans and advance to related parties (Note 2.1) 11,671 27,017 11,671 29,559 Retention receivables - net (Note 1.5) 105,897 101,045 105,897 101,045 Inventories - net (Note 1.5) 27,294 56,268 - - Other current assets - net Advances to contractors 237,085 32,114 237,085 32,114 Withholding tax recoverable 93,785 203,505 92,702 199,018 Others 50,891 29,751 44,804 23,720 Total Other Current Assets 381,761 265,370 374,591 254,852 Total Current Assets 2,782,133 3,002,991 2,706,100 2,866,326 INVESTMENTS AND LOANS Investments (Note 2.1) Joint ventures 14,861 14,879 14,861 14,879 Related parties 256,348 245,543 323,661 312,758 Others 42,879 282,029 42,779 269,758 Total Investments 314,088 542,451 381,301 597,395 Loans - others (Note 2.1) 4,150 4,150 4,150 4,150 Total Investments and Loans 318,238 546,601 385,451 601,545 PROPERTY, PLANT AND EQUIPMENT - NET (Note 1.5) 1,416,330 1,408,753 1,058,127 1,038,184 OTHER ASSETS - NET Loans and advances to directors and employees 23,881 12,375 23,860 12,031 Condominiums 67,323 69,470 67,323 69,470 Deposit 6,789 40,075 6,789 40,075 Others 6,857 14,594 4,884 12,159 Total Other Assets 104,850 136,514 102,856 133,735 Total Assets 4,621,551 5,094,859 4,252,534 4,639,790 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT JUNE 30, 2000 AND DECEMBER 31, 1999 (Amounts in thousand Baht) Consolidated Balance Sheets Company's Separate Balance Sheets 2000 1999 2000 1999 (Unaudited) (Audited) (Unaudited) (Audited) LIABILITIES AND DEFICIT IN SHAREHOLDERS' EQUITY (Restated) CURRENT LIABILITIES Bank overdrafts and loans from financial institution 945,541 915,911 890,348 820,600 Accounts payable - Related parties (Note 2.1) 2,353 3,934 76 3,007 - Others 763,301 956,634 739,258 920,910 Total Accounts payable 765,654 960,568 739,334 923,917 Current portion of hire purchase creditors 23,268 23,079 23,268 23,079 Creditor on currency swap contracts 155,972 - 155,972 - Long-term loans in default (Note 2.4) 3,338,452 3,205,333 3,338,451 3,205,333 Short-term loans from directors 1,939 2,322 - - Advance receipt on contracts 343,097 417,570 341,140 417,356 Other current liabilities Accrued expenses 958,731 640,595 957,923 638,407 Deferred value added tax 38,305 51,379 38,060 51,379 Provision for contingent cost 16,878 9,174 16,879 9,174 Others 37,284 41,286 26,852 30,041 Total Other Current Liabilities 1,051,198 742,434 1,039,714 729,001 Total Current Liabilities 6,625,121 6,267,217 6,528,227 6,119,286 LONG-TERM LOANS (Note 2.4) 185,986 185,986 - - OTHER LIABILITIES Provision for loss on uncollectible collection from subsidiary 203,946 177,188 - - Loss on investment in subsidiaries and joint ventures exceeding carrying amount (Note 2.1) 36,850 35,873 266,733 203,810 Hire purchase creditors 9,290 18,814 9,290 18,814 Accrued interest expense 48,006 48,006 - - Others 545 1,264 734 1,454 Total Other Liabilities 298,637 281,145 276,757 224,078 Total Liabilities 7,109,744 6,734,348 6,804,984 6,343,364 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT JUNE 30, 2000 AND DECEMBER 31, 1999 (Amounts in thousand Baht) Consolidated Balance Sheets Company's Separate Balance Sheets 2000 1999 2000 1999 (Unaudited) (Audited) (Unaudited) (Audited) (Restated) DEFICIT IN SHAREHOLDERS' EQUITY Share capital, Baht 10 par value Authorized shares capital - Preference shares 7,000,000 shares 70,000 70,000 70,000 70,000 - Ordinary shares 68,000,000 shares 680,000 680,000 680,000 680,000 Issued and fully paid - Preference shares 7,000,000 shares 70,000 70,000 70,000 70,000 - Ordinary shares 23,000,000 shares 230,000 230,000 230,000 230,000 Paid-in capital Premium on share capital 486,000 486,000 486,000 486,000 Revaluation surplus (Notes 1.5 and 2.5) 570,574 571,100 570,574 571,100 Appropriated retained earnings - legal reserve 56,164 56,164 48,566 48,566 Deficit (3,903,087) (2,962,042) (3,895,489) (2,954,444) Unrealized loss on non-current marketable securities (Note 1.5) (62,101) (154,875) (62,101) (154,796) (2,552,450) (1,703,653) (2,552,450) (1,703,574) Minority interests 64,257 64,164 - - Total Deficit in Shareholders' Equity (2,488,193) (1,639,489) (2,552,450) (1,703,574) Total Liabilities net of Deficit in Shareholders' Equity 4,621,551 5,094,859 4,252,534 4,639,790 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 ( UNAUDITED ) (Amounts in thousand Baht Except Consolidated Company's Seperate Basic Earnings (Loss) per Share) Statements of Income Statements of Income 2000 1999 2000 1999 (Restated) (Restated) REVENUES (Notes 1.5 and 2.1) Revenues from construction and sales 789,136 931,400 759,451 895,434 Equity in profit (loss) of subsidiaries and associated companies and joint ventures (3,634) 13,272 (27,292) 9,356 Other income Unrealized gain in marketable securities 17,955 88,581 17,955 88,581 Allowance for decline in valuation of goods written back 49,374 - - - Interest income 11,332 11,745 14,741 12,659 Others 12,158 8,422 7,493 3,130 Total Other Income 90,819 108,748 40,189 104,370 Total Revenues 876,321 1,053,420 772,348 1,009,160 EXPENSES (Notes 1.5 and 2.1) Costs of construction and cost of sales 852,508 786,587 773,028 747,365 Selling and administrative expenses 86,357 73,085 85,177 61,322 (Gain) loss on exchange rate 123,035 (72,261) 122,673 (67,458) Loss on impairment of investments (7,819) - (12,081) - Loss on sales of investments 55,637 165,635 55,637 165,635 Loss on currency swap contracts in prior year 155,972 - 155,972 - Doubtful debts 22,334 (30,507) 9,161 (23,263) Directors' remuneration 46 149 - 150 Interest expense 207,539 98,060 202,272 90,986 Total Expenses 1,495,609 1,020,748 1,391,839 974,737 Net income (loss) before minority interests (619,288) 32,672 (619,491) 34,423 Minority interests in net (income) loss (203) 1,751 - - Net income (loss) (619,491) 34,423 (619,491) 34,423 Basic earnings (loss) per share (Baht) (Note 1.5) (26.93) 1.14 (26.93) 1.14 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 ( UNAUDITED ) (Amounts in thousand Baht Except Consolidated Company's Seperate Basic Loss per Share) Statements of Income Statements of Income 2000 1999 2000 1999 (Restated) (Restated) REVENUES (Notes 1.5 and 2.1) Revenues from construction and sales 1,484,154 1,883,769 1,420,719 1,768,587 Equity in profit (loss) of subsidiaries and associated companies and joint ventures 3,645 15,974 (57,576) (26,279) Other income Unrealized gain in marketable securities 32,940 90,633 32,940 90,633 Allowance for decline in valuation of goods written back 49,374 - - - Interest income 22,643 21,891 22,630 29,093 Others 29,345 14,586 24,279 8,507 Total Other Income 134,302 127,110 79,849 128,233 (more)