) FINANCIAL STATEMENTS QUARTER 3 (AS OF JUNE 30,1999)

- 3 - In Thousand Baht Three months ended Nine months ended June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash and cash equivalents consist of: Cash on hand and in banks 47,667 49,260 47,667 49,260 Short-term investment in promissory notes - 60,390 - 60,390 Bank overdrafts ( 985) ( 1,777) ( 985) ( 1,777) 46,682 107,873 46,682 107,873 Cash paid during the period for: Interest expense 27,154 28,134 99,836 150,715 Income tax 156 22,608 7,506 27,164 See accompanying Notes to Interim Financial Statements. PHATRA LEASING PUBLIC COMPANY LIMITED NOTES TO INTERIM FINANCIAL STATEMENTS JUNE 30, 1999 AND 1998 "UNAUDITED", "REVIEWED" 1. SIGNIFICANT ACCOUNTING POLICIES Income Recognition The Company recognizes the income from long-term leases in conformity with the Accounting Standard No. 29 "Accounting for Long-Term Leases", which is applied to individual contracts since the dates on which the contracts are entered into. Rental income from operating lease contracts is recognized based on the term of the lease. Income from finance lease contracts is recognized over the installment periods based on the sum-of-the-digits method as the installments fall due irrespective of actual collections. The Company recognizes the rental income from operating lease contracts and income from finance lease contracts on the accrual basis only for three months for lessees who had not paid rentals for more than three months. During the first to third quarters of the fiscal year ended September 30, 1998, the Company changed the method of the recognition of rental income from operating lease contracts and income from finance lease contracts for lessees who had not paid rentals for more than six months, which was previously recognized as income on the accrual basis over the term of leases, to be recognized on the accrual basis only for six months effective from October 1, 1997 on the grounds of conservatism of revenue recognition. However, in the fourth quarter of 1998, management had reviewed the policy on the income recognition and decided to change the method on the recognition of rental income from operating lease contracts and income from finance lease contracts to be recognized on the accrual basis only for three months. The change was made retroactively to October 1,1997. As a result of this change, revenues for the three-month and nine-month periods ended June 30, 1999 reduced by approximately Baht 1.4 million (Baht 0.05 per share) and Baht 6.2 million (Baht 0.21 per share), respectively. The cumulative effect of this change up to September 30, 1997 amounted to approximately Baht 38.0 million. The financial statements for the three-month and nine-month periods ended June 30, 1998, which are presented herewith for comparative purposes, have been reflected the latest change made in the fourth quarter of 1998. - 2 - Allowance for Doubtful Accounts The Company provides allowance for doubtful accounts equal to the estimated losses that may be incurred in the collection of all receivables. The estimated losses are based on historical collection experience and a review of the current status of existing receivables. Investments Investments in shares of the associated and other companies which are held for long-term purpose are valued at cost. The Company has not adjusted the investment in shares of the associated company to the equity method since the effect is not material. Gains or losses will be taken up when the investments are disposed of. Depreciation The Company depreciates its property and equipment, except assets held for operating lease and those held for future lease, by the straight-line method over the estimated useful lives of the assets as follows: No. of Years Office condominium 7 and 40 Furniture, fixtures and office equipment 5 Transportation equipment 5 The Company will depreciate assets held for future lease upon starting of the lease. The Company depreciates assets held for operating lease by the straight- line method on the original cost less estimated residual value over the term of the lease. Allowance for Decline in Value of Assets Held for Operating Lease The Company provides allowance for decline in value of assets held for operating lease for those lessees who had not paid rental for more than three months equal to the estimated recoverable amount of assets based on the average market value less estimated discount determined by management. - 3 - Foreign Currency Transactions Transactions in foreign currencies throughout the periods are recorded in Baht at rates prevailing at the date of transactions. Outstanding liabilities denominated in foreign currencies at the balance sheet dates are converted into Baht at the prevailing bank rates as of those dates excluding transactions in foreign currency forward position which are recorded at forward exchange rates. Losses from the translation of transactions in foreign currency forward position are deferred and amortized by the straight-line method over the term of the forward exchange contracts while gains or losses arising from the translation of transactions in foreign currencies without forward position are credited or charged to current operations. Deferred Income Tax The Company has adopted the practice of recognizing the income tax effects of transactions in the period in which they enter into the determination of net income, regardless of when they are recognized as income or expenses for tax purposes. Accordingly, the income taxes applicable to income which is not currently taxable and expenses which are not currently tax deductible are set up as a deferred income tax in the balance sheets. This will be allocated to future periods when the expenses provided for are actually incurred and considered deductible for income tax purposes, or the income is recognized for tax purposes. Earnings (Loss) per Share Earnings (loss) per share is determined by dividing the income (loss) by the weighted average number of shares outstanding during the periods. 2. TRANSACTIONS WITH RELATED COMPANIES The Company has certain transactions with its related companies. These companies are related through common shareholdings and/or management. The effects of these transactions are reflected in the accompanying interim financial statements. Significant account balances with the related companies, arising from transactions in the normal course of business, as of June 30, 1999 and 1998 and for the three-month and nine-month periods then ended were as follows: - 4 - In Thousand Baht 1999 1998 Balance Sheets Cash in banks 46,962 27,819 Short - term investment in promissory notes - 60,390 Leasing receivables under operating lease contracts - 1,227 Receivables under finance lease contracts - net 1,572 9,115 Prepaid expenses 19,978 20,592 Other current assets 141 675 Investment in associated company 245 245 Bank overdrafts and loans from financial institutions 559 400,212 Current portion of long-term loans 514,994 - Short-term loans from and payables to related companies 364,743 301,947 Rental income received in advance 282 706 Other current liabilities 204 502 Long-term loans from related companies 87,085 60,000 Advance received from lessees for exercising purchase option 1,231 1,925 In Thousand Baht Three months ended Nine months ended June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998 Statements of Income Rental income from operating lease contracts 48,639 39,893 144,553 109,661 Income from finance lease contracts 203 459 604 1,275 General and administrative expenses 49 132 298 994 Interest expense 25,420 24,053 103,498 83,027 3. LEASING RECEIVABLES UNDER OPERATING LEASE CONTRACTS The 102 leasing receivables under operating lease contracts which may be uncollectible as at June 30, 1999, categorized by aging schedules, are as follows: In Thousand Baht Over 3 months to 6 months 5,218 Over 6 months to 12 months 14,705 Over 12 months 15,506 Total 35,429 - 5 - The Company provided allowance for doubtful accounts covering leasing receivables under operating lease contracts equal to the estimated losses that may be incurred in the collection of receivables amounted to approximately Baht 36.1 million. 4. RECEIVABLES UNDER FINANCE LEASE CONTRACTS - Net In Thousand Baht 1999 1998 Receivables under finance lease contracts (including portion due within one year from June 30, 1999 amounting to approximately Baht 73 million) 235,487 436,451 Less unearned interest income (including portion due within one year from June 30, 1999 amounting to approximately Baht 8 million) ( 14,404) ( 36,140) Net 221,083 400,311 The 67 receivables under finance lease contracts which may be uncollectible as at June 30, 1999, categorized by aging schedules, are as follows: In Thousand Baht Over 3 months to 6 months 8,101 Over 6 months to 12 months 35,163 Over 12 months 44,519 Total 87,783 The Company provided allowance for doubtful accounts covering receivables under finance lease contracts equal to the estimated losses that may be incurred in the collection of receivables amounted to approximately Baht 84.3 million. 5. INVESTMENT IN ASSOCIATED COMPANY - At Cost In Thousand Baht Percentage of Company's Name Business Relation Holding (%) Investment Dividend Associated Company Sarathi Co., Ltd. Car driving service Shareholder 49 245 - - 6 - 6. PROPERTY AND EQUIPMENT - At Cost In Thousand Baht 1999 1998 Assets held for lease under operating lease contracts (mainly transportation equipment) (Note 12) 2,002,832 2,509,975 Office condominium (including land) 113,212 113,212 Furniture, fixtures and office equipment 18,005 16,951 Transportation equipment 20,439 14,067 Assets held for future lease 7,666 790 Advance payment for condominium - 6,000 Total 2,162,154 2,660,995 Less : accumulated depreciation (1,003,587) (1,103,027) allowance for decline in value of assets held for lease ( 10,763) - Property and Equipment - Net 1,147,804 1,557,968 Depreciation charges for the three-month and nine-month periods ended June 30, 1999 amounted to approximately Baht 100.6 million and Baht 325.2 million, respectively, and for the three-month and nine-month periods ended June 30, 1998 amounted to approximately Baht 132.3 million and Baht 408.3 million, respectively. 7. PROPERTY FORECLOSED In Thousand Baht 1999 1998 Land 40,431 20,861 Transportation equipment 28,336 33,772 Condominium 5,227 5,227 Total 73,994 59,860 Less accumulated depreciation 17,230 18,625 Net 56,764 41,235 Depreciation charges for the three-month and nine-month periods ended June 30, 1999 amounted to approximately Baht 1.4 million and Baht 4.4 million, respectively, and for the three-month and nine-month periods ended June 30, 1998 amounted to approximately Baht 1.5 million and Baht 7.2 million, respectively. (more)