ANNUAL FINANCIAL STATEMENTS

FINANCIAL STATEMENTS AND AUDITORS' REPORT SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES DECEMBER 31, 1998 AND 1997 Auditors' Report To the Shareholders of Sino-Thai Engineering and Construction Public Company Limited: We have audited the consolidated balance sheet of Sino-Thai Engineering and Construction Public Company Limited and subsidiaries as at December 31, 1998, and the related consolidated statements of income, changes in shareholders' equity deficit, retained earnings (deficit) and cash flows for the year then ended and the separate financial statements of Sino-Thai Engineering and Construction Public Company Limited for the year then ended. The Company's management are responsible for the correctness and completeness of information presented in these financial statements. Our responsibility is to report on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we 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. We believe that our audit provides a reasonable basis for our report. For the year ended December 31, 1998, the Company's current liabilities exceeded current assets amounting to approximately Baht 2,918.02 million and total liabilities exceeded total assets amounting to approximately Baht 468.76 million. The Company has default the loan contract due to the unability to maintain the financial ratio. Accordingly ,the lender may has a right to call in debts immediately. At present, the Company is negotiating the restructure of its loans. The operations of the Company 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. These factors will probably cause a doubt that the Company will have a problem to continue as a going concern. The financial statements are prepared in accordance with generally accepted accounting principles and on a going concern basis, therefore, it does not include any adjustment relating to recoverability and classification of recorded assets amount or the amounts and classification of liabilities that may be necessary should the Company be unable to continue in existence. The financial statement of Sino-Thai Resources Development Public Company Limited and Siam Dimension Stone Company Limited which are included in the consolidated financial statements for the year ended December 31, 1998, were audited by ourselves in our report dated February 18, 1999, we do not express about the entity's ability to continue as a going concern. Because of the results of the uncertainty of the Company to continue as a going concern as described in the third and fourth paragraphs, which might have a significant effect on the financial position, results of operations and cash flows, we do not express an opinion on the financial statements of Sino-Thai Engineering and Construction Public Company Limited and subsidiaries and the separate financial statements of Sino-Thai Engineering and Construction Public Company Limited for the year ended December 31,1998. The financial statements of Sino-Thai Engineering and Construction Public Company Linited and subsidiaries and the separate financial statements of Sino-Thai Engineering and Construction Public Company Limited for the year ended December 31, 1997, shown for comparative purposes, were audited by ourselves. In our audit report dated February 20, 1998 we express a qualified opinion on those financial statements except for the effects on the financial statement the Company has not set up a provision for such accounts receivable amounting to approximately Baht 513.27 million and subject to the effects of any adjustment on the financial statement had we been able to audit, the financial statements of the subsidiary and associated companies, as might have been required had the outcome of the uncertainty about the Company's ability to continue as a going concern. Presently, Those uncertainties are still existing. Nirand Lilamethwat Certified Public Accountant Registration Number 2316 KPMG Audit (Thailand) Limited Bangkok, February 22, 1999 The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Thailand. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in Thailand. SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT DECEMBER 31, 1998 AND 1997 (Amounts in Baht) CONSOLIDATED THE COMPANY ASSETS 1998 1997 1998 1997 CURRENT ASSETS Cash in hand and at banks (Notes 4 and 6) 878,822,655.94 43,409,119.04 855,637,819.99 42,400,691.97 Short-term investment Notes receivable - financial institutes 2,014,909.24 41,620,763.07 - - Investment in listed securities (Note 4) 120,467,345.94 105,053,376.13 120,462,785.94 104,975,076.13 Total Short-Term Investment 122,482,255.18 146,674,139.20 120,462,785.94 104,975,076.13 Accounts receivable - net (Notes 4 and 7) 1,205,268,193.61 2,231,412,185.27 1,080,614,979.59 2,118,012,934.61 Due from related parties - net (Notes 4 and 5) 67,420,200.54 65,896,147.37 76,108,451.68 56,824,627.15 Short-term loans to related parties (Note 5.4) 33,363,792.69 - 198,534,192.69 - Retentions receivable - net (Notes 4 and 8) 300,493,956.76 195,845,490.89 296,418,682.36 192,054,295.56 Inventories - net (Notes 4 and 9) 221,230,222.18 310,199,138.19 - - Other current assets - net (Notes 4 and 10) Advances to suppliers 42,813,872.37 32,807,033.69 42,813,872.37 32,807,033.69 Withholding corporate tax 129,053,933.10 - 128,870,481.49 - Others 47,252,604.77 64,198,917.78 34,822,974.65 29,030,510.87 Total Other Current Assets 219,120,410.24 97,005,951.47 206,507,328.51 61,837,544.56 Total Current Assets 3,048,201,687.14 3,090,442,171.43 2,834,284,240.76 2,576,105,169.98 INVESTMENTS AND LOANS (Notes 4 and 5) Joint ventures 7,837,461.49 670,000,000.00 7,837,461.49 670,000,000.00 Related parties 325,352,262.80 512,988,653.78 441,642,425.94 631,025,820.41 Other parties 272,508,923.00 366,169,867.38 238,308,923.00 297,619,840.53 Total Investments and Loans 605,698,647.29 1,549,158,521.16 687,788,810.43 1,598,645,660.94 EXCESS OF COST OVER BOOK VALUE OF INVESTMENT (Note 2) 72,766,885.98 83,406,336.66 - - PROPERTY, PLANT AND EQUIPMENT - NET (Notes 4 and 11) 1,809,243,534.29 1,917,884,560.86 1,449,292,745.93 1,512,806,493.34 OTHER ASSETS - NET (Notes 4 and 12) Loans and advances to directors and employees 14,422,872.35 24,302,691.41 10,192,138.81 15,716,305.33 Condominiums 93,624,699.81 113,286,331.09 93,624,699.81 113,286,331.09 Advance payments on condominiums - 53,944,655.45 - 53,944,655.45 Withholding corporate tax 285,756,757.44 283,718,076.60 283,010,523.94 283,718,076.60 Others 71,545,610.78 75,320,919.49 45,410,517.76 40,763,177.39 Total Other Assets 465,349,940.38 550,572,674.04 432,237,880.32 507,428,545.86 Total Assets 6,001,260,695.08 7,191,464,264.15 5,403,603,677.44 6,194,985,870.12 _________________________________ _________________________________ Director Director See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT DECEMBER 31, 1998 AND 1997 (Amounts in Baht) CONSOLIDATED THE COMPANY LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIT 1998 1997 1998 1997 CURRENT LIABILITIES Bank overdrafts and loans from financial institutes (Note 4) 956,126,178.37 1,295,109,272.50 812,805,744.11 900,203,021.55 Accounts payable 1,141,761,462.00 1,304,030,818.04 1,043,810,772.01 1,160,465,489.07 Due to related parties (Note 5) 4,161,936.26 39,827,920.37 5,318,731.51 53,241,676.65 Current portion of long-term loans (Note 14) - 9,750,000.00 - - Current portion of hire purchase creditors 23,232,578.52 22,619,120.68 23,232,578.52 22,619,120.68 Long-term loans in default (Note 14) 3,282,650,000.00 - 3,135,650,000.00 - Advance received on contracts 317,162,098.48 557,993,996.15 315,245,591.89 448,053,771.04 Other current liabilities Accrued interest payable 248,102,876.75 73,810,339.67 225,283,713.65 73,810,339.67 Deferred value added tax 69,586,451.91 101,568,759.43 66,290,927.55 101,568,759.43 Provision for contingent cost 71,289,018.81 30,742,202.00 64,370,930.47 30,742,202.00 Others 71,014,525.86 58,193,378.77 60,296,130.88 46,064,983.45 Total Other Current Liabilities 459,992,873.33 264,314,679.87 416,241,702.55 252,186,284.55 Total Current Liabilities 6,185,087,126.96 3,493,645,807.61 5,752,305,120.59 2,836,769,363.54 PROVISION FOR VALUATION OF INVESTMENT (Note 13) - 31,931,326.25 - - LONG-TERM LOANS (Note 14) - 4,149,510,000.00 - 4,042,260,000.00 OTHER LIABILITIES Allowance for decline in investment 74,574,412.09 38,886,726.85 74,574,412.09 38,886,726.85 Hire purchase creditors 41,892,889.40 65,125,467.92 41,892,889.40 65,125,467.92 Others 3,094,229.60 3,283,617.60 3,592,979.60 3,283,617.60 Total Other Liabilities 119,561,531.09 107,295,812.37 120,060,281.09 107,295,812.37 Total Liabilities 6,304,648,658.05 7,782,382,946.23 5,872,365,401.68 6,986,325,175.91 EXCESS OF BOOK VALUE OVER COST OF INVESTMENT (Note 2) - 53,495,381.37 - 53,495,381.37 MINORITY INTERESTS 71,927,710.23 106,974,572.67 - - SHAREHOLDERS' EQUITY DEFICIT 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 Surplus on revaluation 929,173,784.53 929,173,784.53 834,565,471.57 834,565,471.57 Retained earnings (Deficit) Appropriated - legal reserve 56,163,648.79 56,163,648.79 48,565,466.52 48,565,466.52 Unappropriated (1,890,898,995.30) (2,264,928,114.52) (1,883,300,813.03) (2,257,329,932.25) Loss on non-current marketable securities (Note 4) (255,754,111.22) (257,797,954.92) (254,591,849.30) (256,635,693.00) Total Shareholders' Equity Deficit (375,315,673.20) (751,388,636.12) (468,761,724.24) (844,834,687.16) Total Liabilities and Shareholders' Equity Deficit 6,001,260,695.08 7,191,464,264.15 5,403,603,677.44 6,194,985,870.12 _________________________________ _________________________________ Director Director See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Amounts in Baht) CONSOLIDATED THE COMPANY 1998 1997 1998 1997 REVENUES (Notes 4 and 5.6) Revenues from construction and sales 5,063,753,612.07 6,093,920,428.15 4,595,765,884.17 5,474,879,437.84 Other income Gain on exchange rate 1,024,930,182.00 - 954,865,249.66 - Excess of book value over cost of investment written off (Note 15) 53,495,381.37 6,883,074.40 53,495,381.37 6,883,074.40 Others 179,468,977.75 79,406,456.82 167,748,587.58 55,709,707.78 Total Revenues 6,321,648,153.19 6,180,209,959.37 5,771,875,102.78 5,537,472,220.02 EXPENSES (Notes 4 and 5) Costs of construction and cost of sales 4,716,328,551.94 5,478,104,668.80 4,345,441,181.42 4,942,969,114.33 Selling and administrative expenses 332,270,532.64 611,188,435.39 261,244,430.81 340,644,275.34 Doubtful accounts 344,015,037.18 12,988,990.31 323,248,923.78 8,759,818.14 Company 's share of loss from its investments in subsidiaries and associated companies and joint ventures 106,770,878.99 89,254,669.90 5,453,430.78 345,631,777.75 Loss on current marketable securities 97,536,194.37 364,235,480.51 94,536,194.37 364,235,480.51 Directors' remuneration 599,500.00 2,630,000.00 480,000.00 2,440,000.00 Interest expense 415,099,304.92 411,983,523.38 375,948,195.60 379,168,566.04 Total Expenses 6,012,620,000.04 6,970,385,768.29 5,406,352,356.76 6,383,849,032.11 Net income (loss) before minority interests and income tax 309,028,153.15 (790,175,808.92) 365,522,746.02 (846,376,812.09) Minority interests in subsidiaries' net loss 8,247,909.54 64,662,665.14 - - Net income (loss) before income tax and loss on currency exchange under managed float system 317,276,062.69 (725,513,143.78) 365,522,746.02 (846,376,812.09) Income tax - - - - Net income (loss) before loss on currency exchange under managed float system 317,276,062.69 (725,513,143.78) 365,522,746.02 (846,376,812.09) Loss on currency exchange under managed float system (Notes 4 and 16) - (2,094,604,600.59) - (1,917,349,186.86) Extraordinary items : Gain of debts restructuring (Note 17) 56,753,056.53 56,391,745.42 8,506,373.20 - Net income (loss) 374,029,119.22 (2,763,725,998.95) 374,029,119.22 (2,763,725,998.95) Earnings (Loss) per share (Baht) (Note 4) Net income (loss) before loss on currency exchange under managed float system 10.58 (24.18) 12.18 (28.21) Loss on currency exchange under managed float system - (69.82) - (63.91) Extraordinary items : Gain of debts restructuring 1.89 1.88 0.29 - Net income (loss) 12.47 (92.12) 12.47 (92.12) See notes to financial statements (More)