ANNUAL FINANCIAL STATEMENTS 1999 BY PL

PHATRA LEASING PUBLIC COMPANY LIMITED FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998 AND REPORT OF CERTIFIED PUBLIC ACCOUNTANT EXPRESSED IN Thai Baht REPORT OF CERTIFIED PUBLIC ACCOUNTANT Translation of a report originally issued in Thailand To the Shareholders of Phatra Leasing Public Company Limited I have audited the balance sheets of Phatra Leasing Public Company Limited as of September 30, 1999 and 1998, and the related statements of income, changes in shareholders' equity, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management as to their correctness and completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Phatra Leasing Public Company Limited as of September 30, 1999 and 1998, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. - 2 - The operations of the Company have been affected, and may continue to be affected for the foreseeable future, by the adverse economic conditions in Thailand and in the Asia Pacific region, including the volatile foreign exchange rates, slowdown in economic growth and the general deterioration of the economies of countries in the Asia Pacific region. Further, it is not possible to determine the future effect that a continuation of the economic crisis may have on the Company's liquidity and earnings. As of September 30, 1999, deferred income tax account included future tax benefit arising from loss carryforward amounting to Baht 8 million. Management strongly believes that the future tax benefit arising from loss carryforward can be utilized in the succeeding fiscal years. However, there are uncertainties that the above economic conditions may affect future operations and the adequacy of taxable income available against which such deferred income tax can be utilized. The accompanying financial statements do not include any adjustment that might result from these uncertainties. PRASIT MUSIKABHANTU C.P.A. (THAILAND) Registration No. 2675 Bangkok November 16, 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. PHATRA LEASING PUBLIC COMPANY LIMITED BALANCE SHEETS SEPTEMBER 30, 1999 AND 1998 A S S E T S In Baht 1999 1998 CURRENT ASSETS Cash on hand and in banks (Note 2) 41,844,353 33,853,673 Short-term investment in promissory notes (Note 2) - 40,532,862 Leasing receivables under operating lease contracts (Notes 2 and 3) 59,761,592 67,116,225 Less Allowance for doubtful accounts ( 36,085,963) ( 36,085,963) Leasing receivables under operating lease contracts - net 23,675,629 31,030,262 Receivables under finance lease contracts - net of unearned interest income 199,663,917 335,474,319 (Notes 2 and 4) Less Allowance for doubtful accounts ( 84,262,867) ( 83,660,867) Receivables under finance lease contracts - net 115,401,050 251,813,452 Other current assets Prepaid expenses (Note 2) 25,995,126 30,131,425 Others (Note 2) 12,738,856 12,167,933 Total Current Assets 219,655,014 399,529,607 INVESTMENTS IN SHARES Associated company (Notes 2 and 5) 245,000 245,000 Other company - net of allowance for decline in value of investment of Baht 3,000,000 in 1999 2,000,000 5,000,000 Total Investments in Shares 2,245,000 5,245,000 PROPERTY AND EQUIPMENT - Net (Note 6) 1,170,458,304 1,416,984,422 PROPERTY FORECLOSED - Net (Note 7) 49,372,073 54,853,064 OTHER ASSETS Deferred income tax - net 191,145,521 201,837,181 Other receivables - net of allowance for doubtful accounts of Baht 57,931,393 in 1999 and 1998 5,281,440 2,430,691 Others - net 15,096,055 14,388,082 Total Other Assets 211,523,016 218,655,954 TOTAL ASSETS 1,653,253,407 2,095,268,047 See accompanying Notes to Financial Statements. (With Mr. Prasit Musikabhantu's report dated November 16, 1999) PHATRA LEASING PUBLIC COMPANY LIMITED BALANCE SHEETS SEPTEMBER 30, 1999 AND 1998 LIABILITIES AND SHAREHOLDERS' EQUITY In Baht 1999 1998 CURRENT LIABILITIES Bank overdraft and loans from financial institution (Notes 2 and 8) 62,948,198 243,462,283 Accounts payable - trade 22,284,683 6,405,298 Current portion of long - term loans (Notes 2 and 10) 342,080,218 502,687,398 Short - term loans from and payables to related companies (Notes 2 and 9) 293,650,371 262,845,501 Other current liabilities Rental income received in advance (Note 2) 4,259,187 9,904,766 Value added tax payable 1,372,843 7,914,087 Accrued interest expense (Note 2) 2,446,077 458,031 Income tax payable (Note 14) - 6,810,904 Others (Note 2) 4,236,886 7,734,968 Total Current Liabilities 733,278,463 1,048,223,236 LONG-TERM LOANS FROM RELATED COMPANIES - Net (Notes 2 and 10) 236,536,512 400,760,000 ADVANCES RECEIVED FROM LESSEES FOR EXERCISING PURCHASE OPTION (Notes 2 and 12) 68,052,840 79,096,792 Total Liabilities 1,037,867,815 1,528,080,028 SHAREHOLDERS' EQUITY Share capital - common share; Baht 10 par value Authorized, issued and fully paid-up- 30,000,000 shares 300,000,000 300,000,000 Premium on share capital 156,000,000 156,000,000 Retained earnings Appropriated for reserve fund (Note 13) 11,716,172 9,216,172 Unappropriated 147,669,420 101,971,847 Total Shareholders' Equity 615,385,592 567,188,019 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,653,253,407 2,095,268,047 See accompanying Notes to Financial Statements. (With Mr. Prasit Musikabhantu's report dated November 16, 1999) PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF INCOME FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998 In Baht 1999 1998 REVENUES Rental income from operating lease contracts (Notes 1 and 2) 696,022,397 848,908,332 Income from finance lease contracts (Notes 1 and 2) 20,751,518 58,898,226 Other income Gain on sales of assets for lease and property foreclosed 16,470,426 29,306,790 Penalty income from delay payment 8,985,343 21,044,651 Others 7,655,719 12,866,049 Total Revenues 749,885,403 971,024,048 COSTS AND EXPENSES Direct rental costs 487,753,703 615,480,062 General and administrative expenses (Note 2) 77,261,205 262,173,229 Interest expense (Note 2) 125,793,067 224,828,555 Directors' remuneration 354,000 432,000 Total Costs and Expenses 691,161,975 1,102,913,846 Income (Loss) Before Income Tax, Tax Benefit Arising From Loss Carryforward And Cumulative Effect of Accounting Change 58,723,428 ( 131,889,798) Income Tax 18,525,855 - Income (Loss) Before Tax Benefit Arising From Loss Carryforward and Cumulative Effect of Accounting Change 40,197,573 ( 131,889,798) - 2 - In Baht 1999 1998 Tax Benefit Arising From Loss Carryforward 8,000,000 - Income (Loss) Before Cumulative Effect of Accounting Change 48,197,573 ( 131,889,798) Cumulative Effect of Accounting Change (Note 1) - ( 37,999,567) NET INCOME (LOSS) 48,197,573 ( 169,889,365) Earnings (Loss) per Share Income (Loss) Before Cumulative Effect Of Accounting Change 1.61 ( 4.40 ) Cumulative Effect of Accounting Change - ( 1.26 ) Net Income (Loss) 1.61 ( 5.66 ) Pro Forma Amounts Net Loss - ( 131,889,798) Loss per Share - ( 4.40 ) See accompanying Notes to Financial Statements. (With Mr. Prasit Musikabhantu's report dated November 16, 1999) PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998 In Baht 1999 1998 Common Share Capital Balance, beginning of year 300,000,000 300,000,000 Addition - - Balance, end of year 300,000,000 300,000,000 Premium on Share Capital Balance, beginning of year 156,000,000 156,000,000 Addition - - Balance, end of year 156,000,000 156,000,000 Retained Earnings Appropriated Reserve Fund (Note 13) Balance, beginning of year 9,216,172 9,216,172 Addition 2,500,000 - Balance, end of year 11,716,172 9,216,172 Unappropriated Balance, beginning of year 101,971,847 271,861,212 Addition (deduction) - net income (loss) 48,197,573 (169,889,365) Deduction - reserve fund ( 2,500,000) - Balance, end of year 147,669,420 101,971,847 TOTAL SHAREHOLDERS' EQUITY 615,385,592 567,188,019 See accompanying Notes to Financial Statements. (With Mr. Prasit Musikabhantu's report dated November 16, 1999) PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998 In Baht 1999 1998 UNAPPROPRIATED RETAINED EARNINGS: Brought Forward 101,971,847 271,861,212 Net income (loss) for the year 48,197,573 (169,889,365) Appropriated for reserve fund (Note 13) ( 2,500,000) - Total Unappropriated Retained Earnings 147,669,420 101,971,847 APPROPRIATED RETAINED EARNINGS: Reserve Fund (Note 13) 11,716,172 9,216,172 TOTAL RETAINED EARNINGS 159,385,592 111,188,019 See accompanying Notes to Financial Statements. (With Mr.Prasit Musikabhantu's report dated November 16, 1999) PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998 In Baht 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) 48,197,573 ( 169,889,365) Reconciliations of net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 445,736,320 579,573,464 Provision for doubtful accounts - 167,286,319 Provision for decline in value of investment 3,000,000 - Provision for decline in value of property foreclosed 3,800,000 - Provision (reversal of provision) for loss on decline in value of assets held for lease ( 3,890,901) 14,554,756 Gain on sales of assets for lease and property foreclosed ( 16,470,426) ( 29,306,790) Decrease in leasing receivables under operating lease contracts 7,354,632 16,586,193 Decrease in receivables under finance lease contracts 93,739,786 244,477,148 Decrease in prepaid expenses and other current assets 3,565,376 12,919,169 Increase in property foreclosed ( 4,353,712) ( 51,351,695) Decrease (increase) in deferred income tax 10,691,660 ( 45,917,870) Increase in other assets ( 10,563,476) ( 11,974,575) Increase (decrease) in accounts payable - trade 15,879,385 ( 56,516) Increase (decrease) in income tax payable ( 6,810,904) 6,810,904 Decrease in other current liabilities ( 13,696,859) ( 21,729,173) Decrease in advances received from lessees for exercising purchase option ( 11,043,952) ( 45,551,793) Net Cash Provided by Operating Activities 565,134,502 666,430,176 CASH FLOWS FROM INVESTING ACTVITIES: Purchases of property and equipment ( 372,625,030) ( 367,070,197) Proceeds from sales of fixed assets 249,488,228 331,700,511 Net Cash Used in Investing Activities ( 123,136,802) ( 35,369,686) - 2 - In Baht 1999 1998 CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in loans from financial institutions ( 507,797,196) ( 513,134,073) Increase (decrease) in short-term loans from and payables to related companies 30,804,870 ( 120,199,171) Net Cash Used in Financing Activities ( 476,992,326) ( 633,333,244) NET DECREASE IN CASH AND CASH EQUIVALENTS ( 34,994,626) ( 2,272,754) Cash and Cash Equivalents at Beginning of Year 73,890,781 76,163,535 CASH AND CASH EQUIVALENTS AT END OF YEAR 38,896,155 73,890,781 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash and cash equivalents consist of: Cash on hand and in banks 41,844,353 33,853,673 Short-term investment in promissory notes - 40,532,862 Bank overdrafts ( 2,948,198) ( 495,754) 38,896,155 73,890,781 Cash paid during the year for: Interest expense 126,556,944 241,786,892 Income tax 7,617,409 28,560,987 See accompanying Notes to Financial Statements. (With Mr. Prasit Musikabhantu's report dated November 16, 1999) PHATRA LEASING PUBLIC COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 AND 1998 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. 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 year ended September 30, 1998 reduced by approximately Baht 33.3 million (Baht 1.11 per share). The cumulative effect of this change up to September 30, 1997 amounting to approximately Baht 38.0 million was presented separately in the statement of income. 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. - 2 - Investments Investments in shares of the associated and other companies which are held for long-term purpose are valued at cost. Allowance for decline in value of investments will be provided in the accounts when the decline in value is permanent. The Company has not adjusted the investment in shares of associated company to the equity method since the effect is not material. 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 loss from recoverable amount of assets based on the average market value less estimated discount determined by management. Allowance for Decline in Value of Property Foreclosed The Company provides allowance for decline in value of property foreclosed equal to the estimated loss from recoverable amount of assets based on the average market value determined by management. Foreign Currency Transactions Transactions in foreign currencies throughout the years 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. Gains or losses arising from the translation of transactions in foreign currencies are credited or charged to current operations. - 3 - 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 including the future tax benefit arising from loss carryforwards 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, or the tax benefit arising from loss carryforwards is utilized. Deferred income tax on recognition of tax benefit arising from loss carryforwards is taken up only in the case that the Company can assure beyond a reasonable doubt that the future operating results will generate sufficient taxable income available against which the deferred income tax arising from loss carryforwards can be utilized in the succeeding fiscal years. In this connection, it is the Company's practice to determine at every accounting period whether the carrying amount of such deferred income tax, which is recorded in the balance sheet will be fully utilized. Consequently in 1999, the Company recorded a tax benefit arising from loss carryforward which management believes to be utilized in the succeeding fiscal years amounting to Baht 8 million as part of deferred income tax account at September 30, 1999. 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 years. (30 million shares) 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 financial statements. - 4 - Significant account balances with the related companies, arising from transactions in the normal course of business, as of September 30, 1999 and 1998 and for the years then ended were as follows: In Baht 1999 1998 Cash in bank 41,139,965 33,150,809 Short-term investment in promissory notes - 40,532,862 Leasing receivables under operating lease contracts 33,259 1,111,911 Receivables under finance lease contracts- net 836,936 7,709,810 Prepaid expenses 24,196,644 26,582,254 Other current assets 592,295 1,028,804 Investment in associated company 245,000 245,000 Bank overdraft and loans from financial institution 62,943,842 243,445,531 Current portion of long-term loans 342,080,218 502,687,398 Short-term loans from and payables to related companies 293,650,371 262,845,501 Rental income received in advance 125,017 172,692 Accrued interest expense 2,446,077 458,031 Other current liabilities 104,286 6,641,264 Long-term loans from related companies 236,536,512 400,760,000 Advances received from lessees for exercising purchase option 1,231,501 1,925,523 Rental income from operating lease contracts 193,483,756 153,054,596 Income from finance lease contracts 753,323 1,454,026 General and administrative expenses 353,200 699,155 Interest expense 125,793,067 120,910,350 - 5 - 3. LEASING RECEIVABLES UNDER OPERATING LEASE CONTRACTS The 97 leasing receivables under operating lease contracts which may be uncollectible as at September 30, 1999, categorized by aging schedules, were as follows: In Thousand Baht Over 3 months to 6 months 4,555 Over 6 months to 12 months 15,247 Over 12 months 16,388 Total 36,190 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 Baht (more)