FINANCIAL STATEMENT 1997

CONSOLIDATED FINANCIAL STATEMENTS AND AUDITORS' REPORT SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES DECEMBER 31, 1997 AND 1996 Auditors' Report To the Shareholders of Sino-Thai Engineering and Construction Public Company Limited: We have examined the consolidated balance sheets of Sino-Thai Engineering and Construction Public Company Limited and subsidiaries as at December 31, 1997 and 1996, and the related consolidated statements of income, changes in shareholders equity, retained earnings (deficit) and cash flows for each of the years then ended, and the separate financial statements of Sino-Thai Engineering and Construction Public Company Limited for the same periods. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The financial statements of Sino-Thai Construction Services Company Limited and Sino-Thai Resources Development Public Company Limited (Formerly : Sino-Thai Resource Development Public Company Limited) and Siam Dimension Stone Company Limited which are included in the consolidated financial statements for the years ended December 31, 1997 and 1996, of which the assets amounting to 14.14% and 13.20% of total assets respectively and revenues amounting to 10.78 and 10.86 of total revenues respectively had not been audited or reviewed by the auditor in accordance with standards established by The Institute of Certified Accountants and Auditors of Thailand. As described in Note 6 to the consolidated financial statements, the Company changed its accounting method for recording investments in associated companies from the cost method to the equity method in 1994. The Company's share of profit (loss) from its investments in associated companies for the years ended December 31, 1997 and 1996 amounting to approximately Baht (89.25) million and Baht 47.42 million respectively are based on the financial information obtained from the management of the associated companies, and in the separate financial statements in 1996 and 1994 the Company changed its accounting method for recording investments insubsidiaries and associated companies from the cost method to the equity method. The Companys share of profit (loss) from its investments in subsidiaries and associated companies for the years ended December 31, 1997and 1996 amounting to approximately Baht (345.63) million and Baht 74.17 million respectively are based on the financial information obtained from the management of the subsidiaries and associated companies. For the year ended December 31, 1997 in the separate financial statements the Company has a net loss from operations amounting to Baht 2,763.73 million. At December 31, 1997 , the Company's current liabilities exceeded current assets by Baht 97.31 million and total liabilities exceeded total assets by Baht 791.34 million. The operations of the Company have been affected and will continue to be affected for the foreseeable future by the economic conditions in Thailand and the Asia Pacific Region in general. The ultimate effect that these uncertainties will have on stated values or reclassification of assets and liabilities at the balance sheet date cannot presently be determined and accordingly no provisions have been made as described in Note 1 to the financial statements. As described in Note 8 to the financial statements, as at December 31, 1997 the Company had overdue accounts receivable amounting to approximately Baht 513.27 million. The Company has not set up a provision for such accounts receivable because the debtors are undertaking negotiations with foreign financial institutions. In our opinion, subject to the effects of any adjustment on the financial statements for 1997 and the results of the uncertainty of the Company to continue as a going concern as described in the fourth paragraph and except for the effects on the financial statements for 1997 as described in the fifth paragraph and subject to the effects of any adjustment on the financial statement for 1997 and 1996 described in the second and third paragraphs, the consolidated financial statements referred to above present fairly the consolidated financial position of Sino-Thai Engineering and Construction Public Company Limited and subsidiaries at December 31, 1997 and 1996, and the consolidated results of their operations, changes in shareholders' equity, retained earning (deficit) and their cash flows for each of the years then ended, and the separate financial statements for the same periods, in conformity with generally accepted accounting principles applied on a consistent basis. Nirand Lilamethwat Certified Public Accountant Peat Marwick Suthee Limited Bangkok, February 20, 1998 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT DECEMBER 31, 1997 AND 1996 (Amounts in Baht) CONSOLIDATED THE COMPANY ONLY ASSETS 1997 1996 1997 1996 CURRENT ASSETS Cash in hand and at banks (Notes 4 and 7) 43,409,119.04 56,341,419.21 42,400,691.97 51,863,453.05 Short-term investment Notes receivable - financial institutes 41,620,763.07 1,177,559,011.04 - 1,042,000,000.00 Investment in listed securities (Note 4) 105,053,376.13 660,174,118.88 104,975,076.13 660,006,718.88 Accounts receivable - net (Notes 4 and 8) 2,237,346,946.45 1,890,179,331.14 2,123,947,695.79 1,784,004,463.37 Due from related companies - net (Note 5) 59,961,386.19 59,893,491.32 50,889,865.97 56,275,823.42 Retentions receivable - net (Notes 4 and 9) 195,845,490.89 367,108,704.40 192,054,295.56 363,917,592.84 Inventories (Notes 4 and 10) 310,199,138.19 311,382,539.04 - - Construction contracts in progress (Note 4) - 112,383,121.00 - 112,383,121.00 Other current assets (Note 11) Withholding corporate tax 140,733,095.52 - 140,733,095.52 - Others 97,005,951.47 96,244,196.16 61,837,544.56 75,001,469.95 Total Current Assets 3,231,175,266.95 4,731,265,932.19 2,716,838,265.50 4,145,452,642.51 INVESTMENTS AND LOANS (Notes 4 and 5) Related companies 547,338,680.63 501,975,949.02 631,025,820.41 929,217,438.19 Other companies 1,001,819,840.53 560,631,793.16 967,619,840.53 474,255,533.53 EXCESS OF COST OVER BOOK VALUE OF INVESTMENT (Note 2) 83,406,336.66 94,045,787.34 - - PROPERTY, PLANT AND EQUIPMENT - NET (Notes 4 and 12) 1,917,884,560.86 1,784,212,982.69 1,512,806,493.34 1,415,725,679.37 OTHER ASSETS Loans and advances to directors and employees 24,302,691.41 23,527,928.45 15,716,305.33 19,584,321.23 Condominiums 113,286,331.09 150,630,667.00 113,286,331.09 150,630,667.00 Advance payments on condominiums 53,944,655.45 59,061,762.07 53,944,655.45 59,061,762.07 Withholding corporate tax 142,984,981.08 142,984,981.08 142,984,981.08 142,984,981.08 Others (Note 4) 75,320,919.49 117,373,022.39 40,763,177.39 51,306,946.28 Total Assets 7,191,464,264.15 8,165,710,805.39 6,194,985,870.12 7,388,219,971.26 _____________________ _____________________ Director Director SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT DECEMBER 31, 1997 AND 1996 (Amounts in Baht) CONSOLIDATED THE COMPANY ONLY 1997 1996 1997 1996 LIABILITIES AND SHAREHOLDERS'EQUITY CURRENT LIABILITIES Bank overdrafts and loans from financial institutes (Notes 4 and 7) 1,295,109,272.50 1,924,353,488.61 900,203,021.55 1,648,548,740.15 Accounts payable 1,318,438,913.73 884,945,520.59 1,174,705,944.76 799,790,016.65 Due to related companies (Note 5) 25,419,824.68 47,886,021.64 39,001,220.96 46,348,256.66 Current portion of long-term loans (Note 14) 9,750,000.00 55,000,000.00 - - Advance received on contracts 557,993,996.15 259,500,899.53 448,053,771.04 223,710,137.39 Other current liabilities Accrued interests 73,810,339.67 38,638,856.39 73,810,339.67 38,638,856.39 Deferred value added tax 101,568,759.43 62,289,249.16 101,568,759.43 62,289,249.16 Others 88,935,580.77 137,559,730.29 76,807,185.45 80,645,304.60 Total Current Liabilities 3,471,026,686.93 3,410,173,766.21 2,814,150,242.86 2,899,970,561.00 PROVISION FOR VALUATION OF INVESTMENT (Note 13) 31,931,326.25 - - - LONG-TERM LOANS (Note 14) 4,149,510,000.00 2,181,100,000.00 4,042,260,000.00 2,181,100,000.00 OTHER LIABILITIES Hire purchase creditors 87,744,588.60 67,910,178.10 87,744,588.60 67,910,178.10 Others 42,170,344.45 4,078,621.00 42,170,344.45 3,333,771.60 Total Liabilities 7,782,382,946.23 5,663,262,565.31 6,986,325,175.91 5,152,314,510.70 EXCESS OF BOOK VALUE OVER COST OF INVESTMENT (Note 6) 53,495,381.37 60,378,455.77 53,495,381.37 60,378,455.77 MINORITY INTERESTS 106,974,572.67 171,934,466.56 - - See notes to financial statements (Amounts in Baht) CONSOLIDATED THE COMPANY ONLY 1997 1996 1997 1996 SHAREHOLDERS' EQUITY Share capital, Baht 10 par value Authorized shares capital Preference shares 7,000,000 shares 70,000,000.00 70,000,000.00 70,000,000.00 70,000,000.00 Ordinary shares 68,000,000 shares 680,000,000.00 680,000,000.00 680,000,000.00 680,000,000.00 Issued and fully paid Preference shares 7,000,000 shares 70,000,000.00 70,000,000.00 70,000,000.00 70,000,000.00 Ordinary shares 23,000,000 shares 230,000,000.00 230,000,000.00 230,000,000.00 230,000,000.00 Paid-in capital Premium on share capital 486,000,000.00 486,000,000.00 486,000,000.00 486,000,000.00 Surplus on revaluation - Parent company (Note 12) 834,565,471.57 834,565,471.57 834,565,471.57 834,565,471.57 - Subsidiary (Note 12) 94,608,312.96 94,608,312.96 - - Retained earnings (Deficit) Appropriated - legal reserve 56,163,648.79 56,142,648.79 48,565,466.52 48,565,466.52 Unappropriated (2,264,928,114.52) 498,818,884.43 (2,257,329,932.25) 506,396,066.70 Loss on non-current marketable securities (Note 4) (257,797,954.92) - (256,635,693.00) - Total Shareholders' Equity (751,388,636.12) 2,270,135,317.75 (844,834,687.16) 2,175,527,004.79 Total Liabilities and Shareholders' Equity 7,191,464,264.15 8,165,710,805.39 6,194,985,870.12 7,388,219,971.26 _____________________ _____________________ Director Director See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (Amounts in Baht) CONSOLIDATED THE COMPANY ONLY 1997 1996 1997 1996 REVENUES (Notes 4 and 5.4) Revenues from construction and sales 6,093,920,428.15 6,378,281,235.70 5,474,879,437.84 5,738,425,507.70 Other income Interest income 19,794,014.82 147,861,998.66 22,121,188.84 119,474,324.94 Others 66,495,516.40 119,232,743.30 40,471,593.34 73,666,955.32 Total Revenues 6,180,209,959.37 6,645,375,977.66 5,537,472,220.02 5,931,566,787.96 EXPENSES (Note 4) Costs of construction and cost of sales 5,478,104,668.80 5,807,383,746.90 4,942,969,114.33 5,269,151,303.52 Selling and administrative expenses 624,177,425.70 514,574,222.03 349,404,093.48 422,929,699.14 Company's share of (profit) loss from its investments in subsidiaries and associated companies (Note 6) 89,254,669.90 (47,415,895.32) 345,631,777.75 (74,171,455.04) (Gain) loss on current marketable securities 364,235,480.51 (24,611,479.70) 364,235,480.51 (24,611,479.70) Directors' remuneration 2,630,000.00 650,000.00 2,440,000.00 440,000.00 Interest expense 411,983,523.38 248,088,392.64 379,168,566.04 185,684,690.68 Interest expense - convertible bonds (Note 16) - 311,650,881.00 - 311,650,881.00 Total Expenses 6,970,385,768.29 6,810,319,867.55 6,383,849,032.11 6,091,073,639.60 Net loss before minority interests and income tax (790,175,808.92) (164,943,889.89) (846,376,812.09) (159,506,851.64) Minority interests in subsidiaries' net loss 64,662,665.14 22,331,155.86 - - Net loss before income tax and loss currency exchange under managed float system (725,513,143.78) (142,612,734.03) (846,376,812.09) (159,506,851.64) Income tax - (16,894,117.61) - - Net loss before loss on currency exchange under managed float system (725,513,143.78) (159,506,851.64) (846,376,812.09) (159,506,851.64) Loss on currency exchange under managed float system (Notes 4 and 17) (2,094,604,600.59) - (1,917,349,186.86) - Extraordinary items Gain of debts restructuring (Note 15) 56,391,745.42 - - - Net loss (2,763,725,998.95) (159,506,851.64) (2,763,725,998.95) (159,506,851.64) Earnings (loss) per share (Note 4) Net loss before loss on currency exchange under managed float system (24.18) (5.32) (28.21) (5.32) Loss on currency exchange under managed float system (69.82) - (63.91) - Extraordinary items: Gain of debt restructuring 1.88 - - - Net loss (92.12) (5.32) (92.12) (5.32) See notes to financial statements SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (Amounts in Baht) CONSOLIDATED THE COMPANY ONLY 1997 1996 1997 1996 Share capital Preference shares Beginning balance 70,000,000.00 70,000,000.00 70,000,000.00 70,000,000.00 Increase during year - - - - Decrease during year - - - - Ending balance 70,000,000.00 70,000,000.00 70,000,000.00 70,000,000.00 Ordinary shares Beginning balance 230,000,000.00 230,000,000.00 230,000,000.00 230,000,000.00 Increase during year - - - - Decrease during year - - - - Ending balance 230,000,000.00 230,000,000.00 230,000,000.00 230,000,000.00 Paid-in capital Premium on ordinary share Beginning balance 486,000,000.00 486,000,000.00 486,000,000.00 486,000,000.00 Increase during year - - - - Decrease during year - - - - Ending balance 486,000,000.00 486,000,000.00 486,000,000.00 486,000,000.00 Surplus on revaluation (Note 12) Beginning balance 929,173,784.53 - 834,565,471.57 - Increase during year - 929,173,784.53 - 834,565,471.57 Decrease during year - - - - Ending balance 929,173,784.53 929,173,784.53 834,565,471.57 834,565,471.57 (More)