FINANCIAL STATEMENTS QUARTER 1 (AS OF DECEMBERB 31,1998)

PHATRA LEASING PUBLIC COMPANY LIMITED INTERIM FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 1998 AND 1997 AND REPORT OF CERTIFIED PUBLIC ACCOUNTANT EXPRESSED IN Thai Baht REPORT OF CERTIFIED PUBLIC ACCOUNTANT To the Board of Directors of Phatra Leasing Public Company Limited I have made a review of the balance sheets of Phatra Leasing Public Company Limited as at December 31, 1998 and 1997, the related statements of income, changes in shareholders equity and retained earnings for the three-month periods then ended, in accordance with standards established by the Institute of Certified Accountants and Auditors of Thailand. 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 procedures 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 accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, I do not express such an opinion. Based on my review, I am not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with generally accepted accounting principles. PRASIT MUSIKABHANTU C.P.A. (THAILAND) Registration No. 2675 Bangkok February 2, 1999 UNAUDITED REVIEWED PHATRA LEASING PUBLIC COMPANY LIMITED BALANCE SHEETS DECEMBER 31, 1998 AND 1997 A S S E T S In Thousand Baht 1998 1997 CURRENT ASSETS (Note 3) Cash on hand and in banks 72,252 19,669 Short-term investment in promissory notes 41,366 10,000 Leasing receivables under operating lease contracts - net (Note 4) 27,217 36,087 Receivables under finance lease contracts - net (Note 4) 199,329 521,975 Other current assets Prepaid expenses 26,837 28,535 Receivable from Revenue Department 3,933 5,442 Advance payment for customers 4,521 8,602 Others 3,660 10,898 Total Current Assets 379,115 641,208 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 1,290,808 1,751,435 PROPERTY FORECLOSED Land 40,431 17,341 Others - net 19,456 31,780 Total Property Foreclosed 59,887 49,121 OTHER ASSETS Deferred income tax - net 198,631 169,808 Other receivable - net 6,028 49,826 Others 13,448 6,558 Total Other Assets 218,107 226,192 TOTAL ASSETS 1,953,162 2,673,201 See accompanying Notes to Interim Financial Statements. UNAUDITED REVIEWED PHATRA LEASING PUBLIC COMPANY LIMITED BALANCE SHEETS DECEMBER 31, 1998 and 1997 LIABILITIES AND SHAREHOLDERS EQUITY In Thousand Baht 1998 1997 CURRENT LIABILITIES (Note 3) Bank overdrafts and loans from financial institutions 160,191 509,939 Accounts payable - trade 5,953 42,180 Current portion of long-term loans 451,531 820,900 Short-term loans from and payables to related companies 363,829 355,004 Other current liabilities Rental income received in advance 8,276 12,150 Accrued interest expense 8,276 41,634 Income tax payable 6,811 - Others 8,097 9,616 Total Current Liabilities 1,012,964 1,791,423 LONG-TERM LOANS FROM RELATED COMPANIES - Net (Note 3) 291,841 100,000 ADVANCE RECEIVED FROM LESSEES FOR EXERCISING PURCHASE OPTION (Note 3) 73,738 114,351 Total Liabilities 1,378,543 2,005,774 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 9,216 Unappropriated 109,403 202,211 Total Shareholders Equity 574,619 667,427 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 1,953,162 2,673,201 See accompanying Notes to Interim Financial Statements. UNAUDITED REVIEWED PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF INCOME FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 1998 AND 1997 In Thousand Baht 1998 1997 REVENUES (Note 3) Rental income from operating lease contracts 193,188 209,100 (Note 1) Income from finance lease contracts (Note 1) 7,224 16,844 Other income Gain on sales of assets 370 4,333 Others 4,710 4,248 Total Revenues 205,492 234,525 COSTS AND EXPENSES (Note 3) Direct rental costs 133,882 156,159 General and administrative expenses 15,136 48,384 Interest expense 45,771 61,561 Directors remuneration 66 72 Total Costs and Expenses 194,855 266,176 INCOME (LOSS) BEFORE INCOME TAX AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 10,637 (31,651) INCOME TAX (3,206) - INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 7,431 (31,651) CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 1) - (38,000) NET INCOME (LOSS) 7,431 (69,651) Earnings (Loss) per Share (Baht) Income (loss) before cumulative effect of accounting change 0.25 (1.05) Cumulative effect of accounting change - (1.27) Net income (loss) 0.25 (2.32) See accompanying Notes to Interim Financial Statements. UNAUDITED REVIEWED PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 1998 AND 1997 In Thousand Baht 1998 1997 Common Share Capital Balance, beginning of period 300,000 300,000 Addition - - Balance, end of period 300,000 300,000 Premium on Share Capital Balance, beginning of period 156,000 156,000 Addition - - Balance, end of period 156,000 156,000 Retained Earnings Appropriated Reserve Fund Balance, beginning of period 9,216 9,216 Addition - - Balance, end of period 9,216 9,216 Unappropriated Retained Earnings Balance, beginning of period 101,972 271,862 Addition (deduction) - net income (loss) 7,431 (69,651) Balance, end of period 109,403 202,211 TOTAL SHAREHOLDERS EQUITY 574,619 667,427 See accompanying Notes to Interim Financial Statements. UNAUDITED REVIEWED PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF RETAINED EARNINGS FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 1998 AND 1997 In Thousand Baht 1998 1997 UNAPPROPRIATED RETAINED EARNINGS: Brought forward from previous period 101,972 271,862 Net income (loss) for the period 7,431 (69,651) Total Unappropriated Retained Earnings 109,403 202,211 APPROPRIATED RETAINED EARNINGS Reserve fund 9,216 9,216 TOTAL RETAINED EARNINGS 118,619 211,427 See accompanying Notes to Interim Financial Statements. PHATRA LEASING PUBLIC COMPANY LIMITED NOTES TO INTERIM FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 1. ACCOUNTING CHANGE 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. As a result of this change, revenues for the three- month period ended December 31, 1998 reduced by approximately Baht 2.9 million (Baht 0.1 per share). The cumulative effect of this change up to September 30, 1998 amounted to approximately Baht 38.0 million. The financial statements for the three-month period ended December 31, 1997, which are presented herewith for comparative purposes, have been reflected the latest change in the fourth quarter of 1998. 2. 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. 3. 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. Investment in shares of an associated company which is held for long-term purpose is 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. - 2 - Significant account balances with the related companies, arising from transactions in the normal course of business, as of December 31, 1998 and 1997 and for the three-month periods then ended were as follows: In Thousand Baht 1998 1997 Cash in banks 71,547 19,532 Short - term investment in promissory notes 41,366 10,000 Leasing receivables under operating lease contracts 907 1,376 Receivables under finance lease contracts - net 6,004 14,104 Prepaid expenses 24,286 19,640 Other current assets 259 1,416 Investment in associated company 245 245 Bank overdrafts and loans from financial institutions 156,546 509,675 Current portion of long-term loans 451,531 - Short-term loans from and payables to related companies 363,829 355,004 Rental income received in advance 150 378 Accrued interest expense 8,276 394 Other current liabilities 732 174 Long-term loans from related companies 291,841 100,000 Advances received from lessees for exercising purchase option 1,926 1,469 Rental income from operating lease contracts 47,941 32,631 Income from finance lease contracts 224 388 General and administrative expenses 199 699 Interest expense 45,812 29,482 - 3 - 4. LEASING RECEIVABLES UNDER OPERATING LEASE CONTRACTS AND RECEIVABLES UNDER FINANCE LEASE CONTRACTS The 100 leasing receivables under operating lease contracts and the 74 receivables under finance lease contracts which may be uncollectible as at December 31, 1998, categorized by aging schedules, are as follows: In Thousand Baht Operating lease Finance lease Total Over 3 months to 6 months 5,798 13,361 19,159 Over 6 months to 12 months 17,524 43,385 60,909 Over 12 months 12,132 38,018 50,150 Total 35,454 94,764 130,218 The Company provided allowance for doubtful accounts of leasing receivables under operating lease contracts and receivables under finance lease contracts amounted to approximately Baht 36.1 million and Baht 84.3 million, respectively. 5. CONTINGENT LIABILITY As at December 31, 1998, the Company was contingently liable for letter of guarantee issued by a local bank amounting to approximately 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 statements presentation. 7. THE COMPUTER REMEDIATION PLAN FOR THE YEAR 2000 As at December 31, 1998, the Company had installed the computer system in connection with the storage and data processing in order to deal with the effect of Year 2000 issues for the most part except for certain functions relating to the transmatching and data back up file which are being upgraded. The estimated cost of the said upgrade amounted to approximately Baht 2.0 million, which will be recorded in the period incurred. It is expected that the computer remediation plan is completed on time. The Company still faces risks that other companies with whom the Company does business may be unsuccessful in their computer remedy projects within the time limit. However, the Company expects that the impact, if any, will not be significant to the Companys operations.