CONSOLIDATED FINANCIAL STATEMENTS Q3/2000 - STECON

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 September 30, 2000, and the related consolidated statements of income for each of the three-month and nine-month periods ended September 30, 2000 and 1999, changes in deficit in shareholders' equity, deficit and cash flows for each of the nine-month periods ended September 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 inquiries 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 nine-month periods ended September 30, 2000 and 1999, the Company and subsidiaries incurred net loss from operations in the amount of Baht 1,495.90 million and Baht 665.97 million, respectively. As at September 30, 2000 and December 31, 1999, the Company's total current liabilities exceeded total current assets by Baht 4,372.07 million and Baht 3,264.23 million, respectively in the consolidated financial statements and Baht 4,392.12 million and Baht 3,252.96 million, respectively in the separate financial statements. It's total liabilities exceeded total assets by Baht 3,048.10 million and Baht 1,639.49 million, respectively in the consolidated financial statements and Baht 3,112.32 million and Baht 1,703.57 million, respectively in the separate financial statements. The Company and a subsidiary also have failed to repay loans and interest. Later on the creditors and the Company submitted their petition for reorganization plan of the Company to the Central Bankruptcy Court. On January 17, 2000, the Court ruled that the Company must be reorganized by appointed planner and on August 23, 2000, the creditors meeting resolved to approve the reorganization plan. Later on September 4, 2000, the Central Bankruptcy Court authorized the reorganization plan in compliance with Bankruptcy Act, which determined Stecon Administrator Company Limited as the plan administrator. Therefore, at the report date, the Company is in the process of compliance with the reorganization plan in order to rehabilitate its financial position and operations as approval from the creditors meeting. 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. 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, 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 interest expense of differences between interest expense based on bank's right and debt restructuring contract as from the fourth quarter of year 1999 through September 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 nine-month period ended September 30, 1999 of the subsidiary have been restated to conform to the changed accounting policy. For the three-month and nine-month periods ended September 30, 2000, equity in profit (loss) from three associated companies and two joint ventures in the amount of Baht 36.99 million and Bath 40.56 million, reflected 6.67% and 2.71%, respectively, of net loss in the consolidated financial statements, and equity in profit (loss) from three associated companies and two joint ventures in the amount of Baht 36.99 million and Bath 40.56 million, reflected 6.67% and 2.71%, 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. Equity in profit (loss) from a joint venture of Baht 5.77 million and Baht 4.73 million also reflected 1.04% and 0.32%, respectively of net loss in the separate financial statements for the three-month and nine-month periods ended September 30, 2000 based on the financial statements to be reviewed by another 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, November 3, 2000 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (Amounts : Thousands 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) 139,416 368,994 132,381 345,229 Short-term investments (Note 1.5) 980,703 918,837 977,439 917,033 Accounts receivable - Related parties - net (Notes 1.5 and 2.1) 10,080 70,340 15,344 61,611 - Others - net ( Notes 1.5 and 2.3) 1,027,617 1,195,120 1,008,316 1,156,997 Total Accounts Receivable - net 1,037,697 1,265,460 1,023,660 1,218,608 Short-term loans and advance to related parties (Note 2.1) 6,671 27,017 6,671 29,559 Retention receivables - net (Note 1.5) 116,347 101,045 116,347 101,045 Inventories - net (Note 1.5) 23,976 56,268 - - Construction contract in progress 5,590 - - - Other current assets - net Advances to contractors 226,396 32,114 226,396 32,114 Withholding tax recoverable 105,094 203,505 104,025 199,018 Others 58,357 29,751 56,695 23,720 Total Other Current Assets 389,847 265,370 387,116 254,852 Total Current Assets 2,700,247 3,002,991 2,643,614 2,866,326 INVESTMENTS (Note 2.1) - Joint ventures 14,867 14,879 16,599 14,879 - Related parties 255,995 245,543 323,265 312,758 - Others 38,129 282,029 38,029 269,758 Total Investments 308,991 542,451 377,893 597,395 LOANS - others (Note 2.1) 4,150 4,150 4,150 4,150 PROPERTY, PLANT AND EQUIPMENT - NET (Note 1.5) 1,415,210 1,408,753 1,059,220 1,038,184 OTHER ASSETS - NET Loans and advances to directors and employees 31,897 12,375 31,894 12,031 Condominiums 63,666 69,470 63,666 69,470 Deposit 7,120 40,075 7,120 40,075 Others 6,178 14,594 4,145 12,159 Total Other Assets 108,861 136,514 106,825 133,735 Total Assets 4,537,459 5,094,859 4,191,702 4,639,790 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (Amounts : Thousands 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 1,009,434 915,911 1,007,919 820,600 Accounts payable - Related parties (Note 2.1) 120 3,934 244 3,007 - Others 875,869 956,634 853,419 920,910 Total Accounts payable 875,989 960,568 853,663 923,917 Current portion of hire purchase creditors 22,050 23,079 22,050 23,079 Creditor on currency swap contracts 155,971 - 155,971 - Long-term loans in default (Note 2.4) 3,338,452 3,205,333 3,338,452 3,205,333 Short-term loans from directors 1,939 2,322 - - Advance receipt on contracts 338,349 417,570 336,463 417,356 Other current liabilities Accrued expenses 1,102,681 640,595 1,101,871 638,407 Deferred value added tax 38,208 51,379 38,197 51,379 Provision for contingent cost 157,997 9,174 157,997 9,174 Others 31,244 41,286 23,150 30,041 Total Other Current Liabilities 1,330,130 742,434 1,321,215 729,001 Total Current Liabilities 7,072,314 6,267,217 7,035,733 6,119,286 LONG-TERM LOANS (Note 2.4) 185,986 185,986 - - OTHER LIABILITIES Provision for loss on uncollectible collection from subsidiary 246,225 177,188 - - Loss on investment in subsidiaries and joint ventures exceeding carrying amount (Note 2.1) 27,981 35,873 263,229 203,810 Hire purchase creditors 4,238 18,814 4,238 18,814 Accrued interest expense 48,006 48,006 - - Others 809 1,264 819 1,454 Total Other Liabilities 327,259 281,145 268,286 224,078 Total Liabilities 7,585,559 6,734,348 7,304,019 6,343,364 (Amounts : Thousands 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 (Note 2.5) - Preference shares 7,000,000 shares 70,000 70,000 70,000 70,000 - Ordinary shares 68,000,000 shares in 1999 and 78,000,000 shares in 2000 780,000 680,000 780,000 680,000 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 2.6) 570,307 571,100 570,307 571,100 Appropriated retained earnings to legal reserve 56,164 56,164 48,565 48,566 Deficit (4,457,938) (2,962,042) (4,450,339) (2,954,444) Unrealized loss on non-current marketable securities (Note 1.5) (66,850) (154,875) (66,850) (154,796) (3,112,317) (1,703,653) (3,112,317) (1,703,574) Minority interests 64,217 64,164 - - Total Deficit in Shareholders' Equity (3,048,100) (1,639,489) (3,112,317) (1,703,574) Total Liabilities net of Deficit in Shareholders' Equity 4,537,459 5,094,859 4,191,702 4,639,790 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 ( UNAUDITED ) (Amounts : Thousands 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 852,074 751,615 817,437 708,389 Equity in profit (loss) of subsidiaries, associated companies and joint ventures 39,989 (22,042) 33,582 (57,281) Other income Unrealized gain in marketable securities 16,428 16,078 16,428 16,078 Interest income 11,072 12,934 10,992 14,240 Others 5,647 18,495 2,991 9,146 Total Other Income 33,147 47,507 30,411 39,464 Total Revenues 925,210 777,080 881,430 690,572 EXPENSES (Notes 1.5 and 2.1) Costs of construction and cost of sales 1,114,950 643,245 1,085,471 598,133 Selling and administrative expenses 69,146 88,894 67,603 79,425 (Gain) loss on exchange rate 485 389,460 (64) 368,226 Loss on impairment of investments 34,820 - 28,468 - Doubtful debts 120,997 (12,671) 120,654 (11,196) Directors' remuneration 24 284 - 210 Interest expense 138,682 165,561 134,148 153,999 Total Expenses 1,479,104 1,274,773 1,436,280 1,188,797 Net loss before tax and minority interests (553,894) (497,693) (554,850) (498,225) Income tax (741) - - - Net loss before minority interests (554,635) (497,693) (554,850) (498,225) Minority interests in net income (215) (532) - - Net loss (554,850) (498,225) (554,850) (498,225) Basic loss per share (Baht) (Note 1.5) (24.12) (21.66) (24.12) (21.66) SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 ( UNAUDITED ) (Amounts : Thousands 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 2,336,227 2,635,384 2,238,156 2,476,975 Equity in profit (loss) of subsidiaries, associated companies and joint ventures 43,635 (6,068) (23,994) (83,560) Other income Unrealized gain in marketable securities 49,369 106,711 49,369 106,711 Allowance for decline in valuation of inventories written back 49,374 - - - Interest income 33,715 34,825 33,622 43,334 Others 34,991 33,043 27,269 17,615 Total Other Income 167,449 174,579 110,260 167,660 Total Revenues 2,547,311 2,803,895 2,324,422 2,561,075 EXPENSES (Notes 1.5 and 2.1) Costs of construction and cost of sales 2,679,647 2,306,770 2,510,748 2,152,012 Selling and administrative expenses 234,395 230,780 217,424 199,234 Loss on exchange rate 142,506 404,768 146,577 383,263 Loss on impairment of investments 141,124 - 129,402 - Loss on sales of investments 55,637 168,445 55,637 168,445 Loss on currency swap contracts in prior year 155,971 - 155,971 - Doubtful debts 162,511 (22,573) 148,789 (31,612) Directors' remuneration 115 577 - 480 Interest expense 469,748 385,767 455,769 355,227 Total Expenses 4,041,654 3,474,534 3,820,317 3,227,049 Net loss before tax and minority interests (1,494,343) (670,639) (1,495,895) (665,974) Income tax (741) - - - Net loss before minority interests (1,495,084) (670,639) (1,495,895) (665,974) (more)