FINANCIAL STATEMENTS Q 3 (AS OF 30 JUNE 1998)

PHATRA LEASING PUBLIC COMPANY LIMITED INTERIM FINANCIAL STATEMENTS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JUNE 30, 1998 (With Comparative Figures for The Three-Month and Nine-Month Periods Ended June 30, 1997) AND AUDITORS REPORT EXPRESSED IN Thai Baht The Board of Directors Phatra Leasing Public Company Limited We have made a review of the balance sheet of Phatra Leasing Pub lic Company Limited as at June 30, 1998, and the related statemen ts of income, changes in shareholders equity and retained earning s for the three-month and nine-month periods then ended, in accor dance with standards established by the Institute of Certified Ac countants and Auditors of Thailand. The financial statements for the three-month and nine-month periods ended June 30, 1997, whic h are presented for comparative purposes, were reviewed by other auditors whose report was dated August 5, 1997 and stated the con clusion that such auditors were not aware of any material modific ations that should be made to the said interim financial statemen ts for them to be in conformity with generally accepted accountin g principles. A review of interim financial statements consists principally of obtaining an understanding of the system for the preparation of interim financial statements, applying analytical review procedur es to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an examination in accordance with generally accepte d auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modificati ons that should be made to the interim financial statements for t he three-month and nine-month periods ended June 30, 1998, for th em to be in conformity with generally accepted accounting princip les. The financial statements of Phatra Leasing Public Company Limite d for the year ended September 30, 1997 were audited by other aud itors, who expressed an unqualified opinion thereon under the rep ort dated November 14, 1997. PRASIT MUSIKABHANTU C.P.A. (THAILAND) Registration No. 2675 July 24, 1998 UNAUDITED REVIEWED PHATRA LEASING PUBLIC COMPANY LIMITED BALANCE SHEET JUNE 30, 1998 (With Comparative Figures As At June 30, 1997) A S S E T S In Thousand Baht 1998 1997 CURRENT ASSETS (Note 3) Cash on hand and in banks 49,260 52,631 Short-term investment in promissory notes 60,390 - Leasing receivables under operating lease contracts - net (Note 4) 74,285 72,268 Receivables under finance lease contracts - net (Note 4) 381,394 837,110 Prepaid expenses 23,301 28,132 Other current assets 32,341 35,998 Total Current Assets 620,971 1,026,139 INVESTMENTS IN SHARES - At Cost (Note 3) Associated company 245 245 Other company 5,000 5,000 Total Investments in Shares 5,245 5,245 PROPERTY AND EQUIPMENT - Net 1,557,968 1,930,962 PROPERTY FORECLOSED Land 20,861 17,341 Others - net 20,374 3,586 Total Property Foreclosed 41,235 20,927 OTHER ASSETS Deferred income tax - net 172,554 167,953 Other receivable - net 31,370 47,840 Withholding tax deducted at source and others 32,463 10,170 Total Other Assets 236,387 225,963 TOTAL ASSETS 2,461,806 3,209,236 See accompanying Notes to Interim Financial Statements. (With Mr. Prasit Musikabhantus report dated July 24, 1998) UNAUDITED REVIEWED PHATRA LEASING PUBLIC COMPANY LIMITED BALANCE SHEET JUNE 30, 1998 (With Comparative Figures As At June 30, 1997) LIABILITIES AND SHAREHOLDERS EQUITY In Thousand Baht 1998 1997 CURRENT LIABILITIES (Note 3) Bank overdrafts and loans from financial institutions 400,426 280,593 Accounts payable - trade 17,960 14,406 Current portion of long-term loans 820,900 - Loan from and payables to related companies 301,540 544,853 Rental income received in advance 9,392 13,377 Accrued interest expense 38,304 52,585 Income tax payable - 18,982 Accrued expenses and other current liabilities 10,759 20,782 Total Current Liabilities 1,599,281 945,578 LONG-TERM LOANS Related company (Note 3) 60,000 100,000 Other companies - 1,280,625 ADVANCES RECEIVED FROM LESSEES FOR EXERCISING PURCHASE OPTION (Note 3) 80,824 129,326 Total Liabilities 1,740,105 2,455,529 SHAREHOLDERS EQUITY Share capital - common share; Baht 10 par value Authorized, issued and fully paid-up 30,000,000 shares 300,000 300,000 Premium on share capital 156,000 156,000 Retained earnings Appropriated for reserve fund 9,216 7,696 Unappropriated 256,485 290,011 Total Shareholders Equity 721,701 753,707 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 2,461,806 3,209,236 See accompanying Notes to Interim Financial Statements. (With Mr. Prasit Musikabhantus report dated July 24, 1998) UNAUDITED REVIEWED PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF INCOME FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JUNE 30, 1998 (With Comparative Figures For The Three-Month And Nine -Month Per iods Ended June 30, 1997) In Thousand Baht Three months ended Nine months ended June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 REVENUES (Note 3) Rental income from operating lease contracts 207,256 222,381 649,394 635,609 Income from finance lease contracts 12,719 22,525 46,275 82,097 Other income 10,915 9,178 46,030 25,198 Total Revenues 230,890 254,084 741,699 742,904 COSTS AND EXPENSES (Note 3) Direct rental costs 148,700 151,888 467,068 421,385 General and administrative expenses 21,197 21,022 101,199 69,492 Interest expense 51,285 63,821 168,832 179,165 Directors remuneration 72 238 360 714 Total Costs and Expenses 221,254 236,969 737,459 670,756 INCOME BEFORE INCOME TAX AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 9,636 17,115 4,240 72,148 INCOME TAX - 5,383 - 25,111 INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 9,636 11,732 4,240 47,037 CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 1) - - (19,616) - NET INCOME (LOSS) 9,636 11,732 (15,376) 47,037 UNAUDITED REVIEWED -2- In Thousand Baht Three months ended Nine months ended June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 Earnings (Loss) per Share (Baht) Income before cumulative effect of accounting change 0.32 0.39 0.14 1.57 Cumulative effect of accounting change - - (0.65) - Net income (loss) 0.32 0.39 (0.51) 1.57 Pro Forma Amounts Net income 9,636 8,799 4,240 40,398 Earnings per share (Baht) 0.32 0.30 0.14 1.35 See accompanying Notes to Interim Financial Statements. (With Mr. Prasit Musikabhantus report dated July 24, 1998) UNAUDITED REVIEWED PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JUNE 30, 1998 (With Comparative Figures For The Three-Month And Nine-Month Peri ods Ended June 30, 1997) In Thousand Baht Three months ended Nine months ended June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 Common Share Capital Balance, beginning of period 300,000 300,000 300,000 300,000 Addition - - - - Balance, end of period 300,000 300,000 300,000 300,000 Premium on Share Capital Balance, beginning of period 156,000 156,000 156,000 156,000 Addition - - - - Balance, end of period 156,000 156,000 156,000 156,000 Retained Earnings Appropriated Reserve Fund Balance, beginning of period 9,216 7,696 9,216 7,696 Addition - - - - Balance, end of period 9,216 7,696 9,216 7,696 Unappropriated Retained Earnings Balance, beginning of period 246,849 278,279 271,861 272,974 Addition (deduction) - net income (loss) 9,636 11,732 (15,376) 47,037 Deduction - dividends (Baht 1 per share) - - - (30,000) Balance, end of period 256,485 290,011 256,485 290,011 TOTAL SHAREHOLDERS EQUITY 721,701 753,707 721,701 753,707 See accompanying Notes to Interim Financial Statements. (With Mr. Prasit Musikabhantus report dated July 24, 1998) UNAUDITED REVIEWED PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF RETAINED EARNINGS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JUNE 30, 1998 (With Comparative Figures For The Three-Month And Nine -Month Per iods Ended June 30, 1997) In Thousand Baht Three months ended Nine months ended June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 UNAPPROPRIATED RETAINED EARNINGS Brought forward from prior period 246,849 278,279 271,861 272,974 Net income (loss) for the period 9,636 11,732 (15,376) 47,037 Cash dividends (Baht 1 per share) - - - (30,000) Total Unappropriated Retained Earnings, End of period 256,485 290,011 256,485 290,011 APPROPRIATED RETAINED EARNINGS Reserve fund 9,216 7,696 9,216 7,696 TOTAL RETAINED EARNINGS 265,701 297,707 265,701 297,707 See accompanying Notes to Interim Financial Statements. (With Mr. Prasit Musikabhantus report dated July 24, 1998) PHATRA LEASING PUBLIC COMPANY LIMITED NOTES TO INTERIM FINANCIAL STATEMENTS JUNE 30, 1998 AND 1997 1. ACCOUNTING CHANGE Starting from October 1, 1997, the Company changed the method o f 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 recog nized as income on the accrual basis over the term of leases. Un der the changed method, such income is recognized on the accrual basis only for six months on the grounds of conservatism of reven ue recognition. As a result of the change, revenues for the nine -month period ended June 30, 1998 reduced by approximately Baht 16.0 million. The cumulative effect of this change up to Septemb er 30, 1997 was separately presented in the statement of income. 2. EARNINGS (LOSS) PER SHARE Earnings (loss) per share is determined by dividing the income (loss) by the number of shares outstanding at the end of the per iods. 3. TRANSACTIONS WITH RELATED COMPANIES The Company has certain transactions with its related companies . These companies are related through common shareholdings and/o r management. The effects of these transactions are reflected in the accompanying interim financial statements. Investment in shares of an associated company which is held for long-term purpose is valued at cost. The Company has not adjust ed the investment in shares of the associated company to the equi ty method since the effect is not material. Significant account balances with the related companies, arisin g from transactions in the normal course of business, as of June 30, 1998 and 1997 and for the three-month and nine-month periods then ended were as follows: In Thousand Baht Three months ended Nine months ended June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 Cash at banks 27,818 52,514 27,818 52,514 Promissory notes 60,390 - 60,390 - Leasing receivables under operating lease contracts 1,227 1,112 1,227 1,112 Receivables under finance lease contracts - net 9,138 26,046 9,138 26,046 -2- In Thousand Baht Three months ended Nine months ended June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 Prepaid expenses and other current assets 21,267 25,342 21,267 25,342 Bank overdrafts and loans from financial institutions 300,426 230,592 300,426 230,592 Short-term loans from and payables to related companies 301,540 544,853 301,540 544,853 Long-term loan from related company 60,000 100,000 60,000 100,000 Accrued expenses and other current liabilities 502 406 502 406 Advances received from lessees for exercising purchase option 1,926 3,312 1,926 3,312 Rental income from operating lease contracts 39,893 32,210 109,661 93,050 Income from finance lease contracts 459 745 1,276 2,863 General and administrative expenses 132 158 447 515 Interest expense 20,764 21,816 60,104 59,887 4. LEASING RECEIVABLES UNDER OPERATING LEASE CONTRACTS AND RECEIVABLES UNDER FINANCE LEASE CONTRACTS The 106 leasing receivables under operating lease contracts and the 86 receivables under finance lease contracts had been long o utstanding as at June 30, 1998, categorized by aging schedules as follows: In Thousand Baht Operating lease Finance lease Total Over 3 months to 6 months 33,425 59,998 93,423 Over 6 months to 12 months 11,868 87,624 99,492 Over 12 months 6,269 38,536 44,805 Total 51,562 186,158 237,720 The Company provided allowance for doubtful accounts of leasing receivables under operating lease contracts and receivables und er finance lease contracts amounted to approximately Baht 15.4 mi llion and Baht 27.7 million, respectively. - 3 - 5. CONTINGENT LIABILITIES As at June 30, 1998, the Company was contingently liable for le tters of guarantee issued by a local bank amounting to approximat ely Baht 0.3 million. 6. RECLASSIFICATION OF ACCOUNTS Certain accounts in the 1997 interim financial statements were reclassified to conform with the 1998 interim financial statement s presentation. 7. COMPUTER REMEDY PLAN FOR THE YEAR 2000 (UNREVIEWED) As at June 30, 1998, the Company had installed the computer sys tem in connection with the storage and data processing in order t o deal with the effect of Year 2000 issues for the most part exce pt for certain functions relating to the transmatching and data b ack up file which are being upgraded. The cost of the said upgra de amounted to approximately Baht 0.2 million, which will be reco rded in the period it incurs. The Company still faces risks that other companies with whom the Company does business may be unsuc cessful in their computer remedy projects within the time limit. However, the Company expects that the impact, if any, will not b e significant to the Companys operations.