NANCIAL STATEMENT 1997

See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (Amounts in Baht) CONSOLIDATED THE COMPANY ONLY 1997 1996 1997 1996 Retained earnings (Deficit) Appropriated - legal reserve Beginning balance 56,142,648.79 31,055,408.91 48,565,466.52 30,108,226.64 Increase during year 21,000.00 25,087,239.88 - 18,457,239.88 Decrease during year - - - - Ending balance 56,163,648.79 56,142,648.79 48,565,466.52 48,565,466.52 Unappropriated Beginning balance 498,818,884.43 886,782,975.95 506,396,066.70 894,360,158.22 Increase during year - - - - Decrease during year (2,763,746,998.95) (387,964,091.52) (2,763,725,998.95) (387,964,091.52) Ending balance (2,264,928,114.52) 498,818,884.43 (2,257,329,932.25) 506,396,066.70 Loss on non-current marketable securities (Note 4) Beginning balance - - - - Increase during year - - - - Decrease during year (257,797,954.92) - (256,635,693.00) - Ending balance (257,797,954.92) - (256,635,693.00) - Total Shareholders' Equity (751,388,636.12) 2,270,135,317.75 (844,834,687.16) 2,175,527,004.79 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF RETAINED EARNINGS (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (Amounts in Baht) CONSOLIDATED THE COMPANY ONLY 1997 1996 1997 1996 Unappropriated retained earnings Balance at the beginning of year 370,984,193.26 821,647,791.87 282,115,501.94 744,251,048.50 Effects of change in accounting method for recording investments in subsidiaries reflected in the retained earnings at beginning of year (Note 6) - - - (12,205,420.39) Adjustment of retained earnings of subsidiary at beginning of year included in consolidated financial statements - (15,340,115.26) - - Amortization of good will in subsidiaries and associated companies and share of earnings from companies reflected in the retained earnings at beginning of year (Note 6) 127,834,691.17 80,475,299.34 224,280,564.76 162,314,530.11 Less Appropriated net income at prior period - (18,457,239.88) - (18,457,239.88) Legal reserve (21,000.00) - - - Dividend - (210,000,000.00) - (210,000,000.00) Net loss (2,763,725,998.95) (159,506,851.64) (2,763,725,998.95) (159,506,851.64) Total Unappropriated Retained Earnings (Deficit) (2,264,928,114.52) 498,818,884.43 (2,257,329,932.25) 506,396,066.70 Appropriated retained earnings Legal reserve 56,163,648.79 56,142,648.79 48,565,466.52 48,565,466.52 Total Retained Earnings (Deficit) (2,208,764,465.73) 554,961,533.22 (2,208,764,465.73) 554,961,533.22 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,1997 AND 1996 (Amounts in Baht) CONSOLIDATED THE COMPANY ONLY 1997 1996 1997 1996 CASH FLOWS PROVIDED BY OPERATING ACTIVITIES Net loss (2,763,725,998.95) (159,506,851.64) (2,763,725,998.95) (159,506,851.64) Adjustments to reconcile net loss to net cash provided (used) by operating activities Doubtful accounts 11,261,939.63 789,795.31 8,632,350.06 - Depreciation and deferred charges written off 108,112,159.04 139,082,765.88 88,587,436.35 113,604,655.02 Gain (loss) on sales of fixed assets 3,564,971.20 (3,539,071.98) 3,521,535.44 (280,663.93) Loss on disposal of fixed assets 2,487,016.43 667,770.22 2,487,016.43 667,770.22 Companies' share of profit from its investment in subsidiaries and associated companies 124,350,976.54 (47,415,895.32) 345,631,777.75 (74,171,455.04) Unrealized loss on exchange 1,910,489,552.77 17,944,795.47 1,912,371,052.82 19,039,789.50 Changes in operating assets and liabilities (Increase) decrease in operating assets Accounts receivable (328,659,290.33) (317,732,957.42) (340,545,064.14) (344,171,071.22) Due from related companies (19,926,141.09) 8,006,420.49 5,385,957.45 9,055,809.80 Retentions receivable 171,263,213.51 (105,593,478.94) 171,863,297.28 (105,727,186.61) Inventories 1,183,400.85 (133,207,410.74) - - Construction contract in progress 112,383,121.00 424,822,103.00 112,383,121.00 424,822,103.00 Withholding corporate tax (140,733,095.52) - (140,733,095.52) - Other current assets (761,755.31) (147,438,888.51) 13,163,925.39 (129,781,020.44) Increase (decrease) in operating liabilities Accounts payable 435,140,535.84 326,601,016.06 372,666,797.45 321,984,815.78 Liabilities under trust receipts 28,494,857.86 8,195,527.95 28,494,857.86 8,195,527.95 Due to related companies (22,466,196.96) 30,822,255.19 (7,347,035.70) 26,787,695.77 Advance received on contracts 298,493,096.62 (28,734,842.86) 224,343,633.65 (45,676,983.25) Dividend received (11,165,806.00) (41,769,853.50) (11,165,806.00) (41,769,853.50) Income tax payable - 4,648,147.62 - - Other current liabilities 25,826,844.03 89,937,732.51 70,612,874.40 43,819,561.37 Goodwill - (102,899,201.63) - - Net cash provided by operating activities (54,386,598.84) (36,320,122.84) 96,628,633.02 66,892,642.78 See notes to financial statements (Amounts in Baht) CONSOLIDATED THE COMPANY ONLY 1997 1996 1997 1996 CASH FLOWS PROVIDED BY INVESTING ACTIVITIES (Increase) decrease in short-term investment 555,120,742.75 (312,630,286.78) 555,031,642.75 (261,415,523.88) (Increase) in investment and loans (827,110,574.67) - (209,061,251.85) (175,666,348.75) Cash payment on purchase of fixed assets (227,848,361.63) (334,668,515.62) (163,234,226.76) (162,227,129.43) Cash from sale of fixed assets 9,527,240.65 27,710,131.80 11,150,691.67 22,600,090.40 Decrease in condominiums 33,016,244.54 8,562,201.38 33,016,244.54 8,562,201.38 Decrease in advance payments on condominium 5,117,106.62 5,157,132.00 5,117,106.62 5,157,132.00 Dividend received 11,165,806.00 41,769,853.50 11,165,806.00 41,769,853.50 (Increase) decrease in other assets 29,151,424.97 (57,807,043.31) 2,100,151.80 5,839,503.73 Net Cash used in Investing Activities (411,860,370.77) (621,906,527.03) 245,286,164.77 (515,380,221.05) CASH FLOW PROVIDED BY FINANCING ACTIVITIES (Increase) decrease in notes receivable - finance companies 1,135,938,247.97 (651,919,011.04) 1,042,000,000.00 (516,360,000.00) (Increase) decrease in loans and advances to directors and employees (774,762.96) (12,998,696.80) 3,868,015.90 (9,831,017.78) Increase (decrease) in short-term loans (739,889,761.02) 1,153,826,000.00 (885,600,000.00) 1,058,186,000.00 Decrease in convertible bonds - (2,046,139,706.84) - (2,046,139,706.84) Increase in long-term loans 136,426,935.00 2,162,895,000.00 29,176,935.00 2,162,895,000.00 Increase in due from related companies - (5,093,625.00) (600,000,000.00) (80,093,625.00) Increase in other liabilities 38,091,723.45 1,396,983.40 38,836,572.85 652,134.00 Increase (decrease) in minority interests (64,959,893.89) 81,036,283.52 - - Dividend payment - (210,000,000.00) - (210,000,000.00) Increase (decrease) in current portion of long-term loans (45,250,000.00) 55,000,000.00 - - Net Cash Provided by Financing Activities 459,582,488.55 528,003,227.24 (371,718,476.25) 359,308,784.38 NET DECREASE IN CASH AND CASH EQUIVALENTS (6,664,481.06) (130,223,422.63) (29,803,678.46) (89,178,793.89) CASH AND CASH EQUIVALENTS AS AT BEGINNING OF YEAR (Notes 4 and 7) (155,155,751.95) (24,932,329.32) (89,468,969.65) (290,175.76) CASH AND CASH EQUIVALENTS AS AT END OF YEAR (Notes 4 and 7) (161,820,233.01) (155,155,751.95) (119,272,648.11) (89,468,969.65) SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash paid during the year Interest expense 376,387,002.88 208,857,071.16 343,997,082.76 148,977,459.78 Income tax 140,816,547.35 145,135,176.66 140,733,095.52 142,236,221.18 See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE 1 - GOING CONCERN In 1997, certain Asia Pacific countries, including Thailand, are experiencing 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 for the year ended December 31, 1997 have been presented on a going concern basis which assume that the Company will continue in operation. The validity of the assumption is dependent upon the Companys ability to meet its financial requirements and success of future operations. If the Company were unable to continue in operation, adjustments would have to be made to reduce the value of assets to their recoverable amounts, to provide for any additional liabilities that might arise and to consider the classification of these assets and liabilities. NOTE 2 - BASIS OF CONSOLIDATION 2.1 Basis 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 and the regulations of the Stock Exchange of Thailand. The financial statements are presented in compliance with Commerce Ministerial Regulation No. 7 (B.E.2539) issued by the Ministry of Commerce under the Public Limited Company Act B.E. 2535. 2.2 Principles for Preparation of Consolidated Financial Statements The consolidated financial statements for the years ended December 31, 1997 and 1996 consist of the financial statements of Sino-Thai Engineering and Construction Public Company Limited and the financial statements of subsidiaries and subsidiaries of subsidia ries as follows : Percentage of shares holding Type of business 1997 1996 Subsidiaries held by the Company Sino-Thai Construction Services Company Limited 99.99 99.99 Equipment trading and rental, sandblasting and slipforming Sino-Thai Resources Development Public Company Limited 51.16 51.00 Tin dredging Subsidiaries of subsidiaries held indirectly (held by Sino-Thai Resources Development Public Company Limited) Percentage of shares holding Type of business 1997 1996 Siam Dimension Stone Company Limited 35.81 35.70 Processing of Marble The financial statements for the years ended December 31, 1997 and 1996 of Siam Dimension Stone Company Limited in which Sino-Thai Resources Development Public Company Limited (Formerly : Sino-Thai Resource Development Public Company Limited) holds 70% shares are included in consolidation as the parent 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. 2.3 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's Board of Directors resolved to cease the tin mining operation since August 19, 1993 due to the continuous world tin market recession and tin ore price being lower than the production cost. The subsidiary has not set up provision for decline in value of assets relating to mining operation having the book value of approximately Baht 63.7 million as at December 31, 1996. The subsidiary entered into lease agreement for 2 limestone mining rights No. 27951/14713 and 27952/14724 at Tambon Lamphayaklang, Amphur Mouklek, Saraburi Province with Siam Dimension Stone Company Limited in order to operate the planned construction stone mining project. The subsidiary will be responsible for all of mining expenses when mining operation starts. The subsidiary had entered into an agreement with Thai Mineral Industry Consultants Company Limited to do the feasibility study of the construction stone mining project by which the geological study was already done. The 2 mining rights were classified as the class 1A basin according to the resolution passed by the Cabinet on February 21, 1995 which prohibits the stone mining operation. However, Siam Dimension Stone Company Limited can operate limestone mining until the expiration of the mining rights due to such company was granted mining rights before the Cabinet passed the resolution. Siam Dimension Stone Company Limited asked the Department of Mineral Resources for the permission to mine other construction stones according to the present mining rights for which permission was granted by the letter dated November 26, 1996 and also asked for the separation of the mining rights area from the class 1A basin area which is still under the consideration. NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICY Income Recognition Income from construction of parent company are recognized on the basis of the percentage-of-completion method as estimated by the Companys 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 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 parent 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 and at banks net of bank overdrafts. (More)