) FINANCIAL STATEMENTS QUARTER 2

PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF RETAINED EARNINGS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED MARCH 31, 1999 AND 1998 In Thousand Baht Three months ended Six months ended March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998 UNAPPROPRIATED RETAINED EARNINGS Brought forward from prior period 109,403 202,211 101,972 271,862 Net income (loss) for the period 9,850 1,192 17,281 ( 68,459) Total Unappropriated Retained Earnings, End of period 119,253 203,403 119,253 203,403 APPROPRIATED RETAINED EARNINGS Reserve fund 9,216 9,216 9,216 9,216 TOTAL RETAINED EARNINGS 128,469 212,619 128,469 212,619 See accompanying Notes to Interim Financial Statements. "UNAUDITED" "REVIEWED" PHATRA LEASING PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED MARCH 31, 1999 AND 1998 In Thousand Baht Three months ended Six months ended March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) 9,850 1,192 17,281 ( 68,459) Reconciliations of net income (loss) to net cash provided by (used in) operating activities: Cumulative effect of accounting change - - - 38,000 Depreciation and amortization 110,496 152,774 233,452 300,162 Provision for doubtful accounts - 1,154 - 41,484 Unrealized gain on exchange rate - ( 139) - ( 282) Reversal of provision for loss on decline in value of assets held for lease ( 254) - ( 2,749) - Gain on sales of assets ( 2,766) ( 16,447) ( 3,136) ( 20,780) Decrease in leasing receivables under operating lease contracts 2,724 2,111 7,140 4,321 Decrease in receivables under finance lease contracts 35,142 93,857 84,691 199,473 Decrease (increase) in prepaid expenses and other current assets ( 4,127) 2,339 ( 779) 4,081 Decrease (increase) in property foreclosed 346 2,702 ( 4,576) ( 2,947) Decrease (increase) in deferred income tax 4,465 ( 923) 7,671 ( 923) Decrease in other assets 7,334 8,966 3,798 820 Increase (decrease) in accounts payable-trade 23,052 ( 18,851) 22,600 16,868 Decrease in income tax payable ( 6,811) - ( 6,811) - Decrease in other current liabilities ( 9,451) ( 26,341) ( 10,814) ( 10,673) Decrease in advances received from lessees for exercising purchase option ( 596) ( 10,054) ( 5,955) ( 20,352) Net Cash Provided by Operating Activities 169,404 192,340 341,813 480,793 "UNAUDITED" "REVIEWED" - 2 - In Thousand Baht Three months ended Six months ended March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 84,722) ( 81,632) (139,314) (190,360) Proceeds from sales of assets 58,447 64,973 122,225 95,502 Net Cash Used in Investing Activities ( 26,275) ( 16,659) ( 17,089) ( 94,858) CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in loans from financial institutions (151,319) (130,000) (238,966) (360,000) Increase (decrease) in short-term loans from and payables to related companies 29,161 ( 17,425) 78,989 ( 45,466) Decrease in long-term loans from related companies (117,465) - (226,384) - Net Cash Used in Financing Activities (239,623) (147,425) (386,361) (405,466) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 96,494) 28,256 ( 61,637) ( 19,531) Cash and Cash Equivalents at Beginning of Period 108,747 28,377 73,890 76,164 CASH AND CASH EQUIVALENTS AT END OF PERIOD 12,253 56,633 12,253 56,633 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash and cash equivalents consist of: Cash on hand and in banks 13,175 27,018 13,175 27,018 Short-term investment in promissory notes - 35,063 - 35,063 Bank overdrafts ( 922) ( 5,448) ( 922) ( 5,448) 12,253 56,633 2,253 56,633 Cash paid during the period for: Interest expense 48,234 81,122 86,188 122,581 Income tax 6,820 2,584 7,350 4,555 See accompanying Notes to Interim Financial Statements. PHATRA LEASING PUBLIC COMPANY LIMITED NOTES TO INTERIM FINANCIAL STATEMENTS MARCH 31, 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 were 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 installments period based on the sum-of-the-digits method as the installments fall due irrespective of actual collections. Starting from the fourth quarter of 1998, the Company has recognized 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. As a result of this change, revenues for the three-month and six-month periods ended March 31, 1999 reduced by approximately Baht 1.9 million (Baht 0.06 per share) and Baht 4.8 million (Baht 0.16 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 six-month periods ended March 31, 1998, which are presented herewith for comparative purposes, have been reflected the latest change 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 does not adjust 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 currencies forward position which are recorded at forward exchange rates. Losses from the translation of transactions in foreign currencies 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 March 31, 1999 and 1998 and for the three-month and six-month periods then ended were as follows: - 4 - In Thousand Baht 1999 1998 Balance Sheets Cash in banks 12,469 26,898 Short - term investment in promissory notes - 35,063 Leasing receivables under operating lease contracts 736 1,579 Receivables under finance lease contracts - net 2,239 11,625 Prepaid expenses 22,030 22,691 Other current assets 677 646 Investment in associated company 245 245 Bank overdrafts and loans from financial institutions 4,887 304,058 Current portion of long-term loans 482,192 - Short-term loans from and payables to related companies 368,144 341,052 Rental income received in advance 123 170 Other current liabilities 474 462 Long-term loans from related companies 174,376 100,000 Advances received from lessees for exercising purchase option 1,232 1,926 (More)