REVIEW REPORT OF THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS PADAENG INDUSTRY PUBLIC COMPANY LIMITED We have reviewed the consolidated balance sheet of Padaeng Industry Public Company Limited and its subsidiaries and the balance sheet of Padaeng Industry Public Company Limited as at March 31, 2000, and the related consolidated and the Companys statements of income, changes in shareholders equity, retained earnings and cash flows for the quarter then ended. These financial statements are the responsibility of the Companys management as to their correctness and completeness of the presentation. Our responsibility is to report on these financial statements based on our reviews. The consolidated and the Companys interim financial statements for the quarter ended March 31, 1999 were reviewed by another auditor of the same firm, whose report thereon dated May 7, 1999 stated that he was not aware of material modifications that should be made to the consolidated and the Companys interim financial statements in order for them to be in conformity with generally accepted accounting principles and there are emphasis of a matter paragraphs describing the uncertainty regarding the Companys ability to continue as a going concern, uncertainty related to recoverability of the amount of a subsidiarys assets, uncertainty related to recoverability of deferred exploration expenditures and special project license fee of a subsidiary and the Companys investment in a subsidiary in the Companys interim financial statements has not included any adjustments which may arise from the resolution of such matter. We conducted our reviews in accordance with the Standard on Auditing applicable to review engagements. This Standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit in accordance with generally accepted auditing standards, and accordingly, we do not express an opinion. Based on our reviews, nothing has come to our attention that causes us to believe that the financial statements are not presented fairly, in all material respects, in accordance with generally accepted accounting principles. - 2 - As described in Notes 1 and 10 to the interim financial statements, on June 25, 1999, the Company entered into the Override Amendment Agreement with its lenders to amend the Tranche A principal repayment. Under the Override Amendment Agreement, the Company will have to sell the remainder of the increased capital of 75.1 million shares to repay the Tranche A principal by September 15, 2000. There is uncertainty regarding the ability of the Company to continue as a going concern if the Company is unable to sell the remainder of the increased capital of 75.1 million shares by September 15, 2000 and the lenders are to demand immediate repayment. If the Company is unable to continue as a going concern, it may be required to realize its assets and extinguish its liabilities other than the normal course of business and at amounts different from those stated in the financial statements. As described in Note 17 to the interim financial statements, on February 19, 1999, the board meeting of a subsidiary company passed the resolution to approve the discontinuation of its business. Certain of its assets were written down to realizable value in 1998. However, there is uncertainty related to the recoverability of the amount of the subsidiarys assets as at March 31, 2000, which amounted to Baht 123.5 million or 2.59 % of the total consolidated assets as at March 31, 2000. As described in Notes 7.2 and 9 to the interim financial statements, the consolidated interim financial statements for the quarter ended March 31, 2000 include deferred exploration expenditures and special project license fee of a subsidiary amounting to Baht 162 million. The recoverable value of this amount is still uncertain because the results of a joint venture project is not known at this time. The Company s investment in such subsidiary by the equity method amounting to Baht 162 million has not included any adjustments which may arise from the resolution of such matter. As described in Note 9 to the interim financial statements, the Company has uncertainty related to the recoverability of the compensation which was paid to a company amounting to Baht 40.9 million because the Company submitted its concession application for approval, and the outcome of which is not known at this time. As described in Note 12.4 to the interim financial statements, the Company received the notice of decision of the Board of Tax Appeal to pay the income tax, penalties and surcharge. The Company has submitted an appeal to the Central Taxation Court, the result of such appeal is not known at this time. The Company has not made any provision for this contingent liability in the 2000 interim financial statements. - 3 - We have previously audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Padaeng Industry Public Company Limited and its subsidiaries and the financial statements of Padaeng Industry Public Company Limited for the year ended December 31, 1999, and expressed an unqualified opinion in our report dated February 10, 2000, with the emphasis of a matter paragraphs describing the uncertainty regarding the Companys ability to continue as a going concern, uncertainty related to recoverability of assets for sale, deferred exploration expenditure and special project license fee, the Companys investment in a subsidiary, compensation paid to a company and contingent liability due to the income tax assessment. The consolidated and the Companys balanc e sheets as at December 31, 1999, presented herein for comparison, have been derived from such financial statements which we have audited and reported on. We have not performed any other audit procedures subsequent to such report date. As described in Note 3 to the interim financial statements for the quarter ended March 31, 2000, the Company and subsidiaries have complied with new Accounting Standards. The significant change is in respect to the presentation of the interim financial reports. Nachalee Boonyakarnkul Certified Public Accountant (Thailand) BANGKOK Registration No. 3126 May 4, 2000 DELOITTE TOUCHE TOHMATSU JAIYOS PADAENG INDUSTRY PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS CONSOLIDATED THE COMPANY ONLY UNAUDITED AUDITED UNAUDITED AUDITED AS AT AS AT AS AT AS AT MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, 2000 1999 2000 1999 Note Baht Baht Baht Baht ASSETS CURRENT ASSETS Cash in hand and at banks 346,038,398 398,269,162 276,766,340 335,184,787 Deposits at banks used as collateral 4.1 200,000 11,554,589 - - Trade accounts and notes receivable net 5 212,582,299 250,412,696 205,709,994 246,226,037 Short-term loans and advances to related companies 14 911,311 693,346 1,837,469 1,620,430 Inventories 743,772,334 712,418,284 736,870,646 704,975,002 Other current assets Withholding tax 18,461,368 18,606,514 649,837 649,334 Account receivable - Revenue Department 48,717,861 55,621,072 48,308,275 55,234,785 Other receivables 3,157,649 1,946,138 2,924,867 1,850,084 Prepayment for financial advisory fee 11,531,380 9,345,826 11,531,380 9,345,826 Other 13,765,660 6,844,333 12,775,175 5,138,363 Total Current Assets 1,399,138,260 1,465,711,960 1,297,373,983 1,360,224,648 LONG-TERM DEPOSIT AT FINANCIAL INSTITUTION 6 30,054,136 30,054,136 - - INVESTMENTS AND LOANS Investments in related companies 7.1 - - 371,337,052 372,035,797 Other securities 8 14,451,626 14,451,626 14,451,626 14,451,626 Loans and advances 14 - - - 8,000,000 Total Investments and Loans 14,451,626 14,451,626 385,788,678 394,487,423 PROPERTY, PLANT AND EQUIPMENT NET 2,944,240,488 3,003,419,924 2,944,086,189 3,002,961,743 OTHER ASSETS ASSETS FOR SALE 17 123,500,004 123,500,004 - - OTHER 9 245,370,710 249,366,330 79,104,552 83,055,635 TOTAL ASSETS 4,756,755,224 4,886,503,980 4,706,353,402 4,840,729,449 See notes to the interim financial statements PADAENG INDUSTRY PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS (CONTINUED) CONSOLIDATED THE COMPANY ONLY UNAUDITED AUDITED UNAUDITED AUDITED AS AT AS AT AS AT AS AT MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, 2000 1999 2000 1999 Note Baht Baht Baht Baht LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES Bank overdrafts and loans from financial institutions 427,693,557 251,657,174 391,414,797 215,365,158 Trade accounts and notes payable 116,765,749 187,563,936 202,829,899 273,641,132 Current portion of long-term loans 10 1,791,360,013 1,757,400,278 1,636,360,013 1,582,400,278 Short-term loans from related companies 14 108,539,320 107,815,968 - - Other current liabilities Accrued interest 43,543,915 42,550,805 11,131,413 12,450,425 Accrued electricity expenses 115,297,628 119,107,092 115,297,628 119,107,092 Provision for guarantee expenses of a subsidiary 16 - - 154,357,587 174,357,587 Other 84,388,025 93,335,407 80,159,110 90,385,787 Total Current Liabilities 2,687,588,207 2,559,430,660 2,591,550,447 2,467,707,459 LOANS FROM RELATED COMPANIES 14 - - 9,000,000 9,879,959 LONG TERM LOANS 10 620,111,109 949,153,349 620,111,109 949,153,349 OTHER LIABILITIES 2,202,963 2,937,283 2,202,963 2,937,283 TOTAL LIABILITIES 3,309,902,279 3,511,521,292 3,222,864,519 3,429,678,050 SHAREHOLDERS EQUITY SHARE CAPITAL Authorized share capital 226,000,000 ordinary shares of Baht 10.00 each 2,260,000,000 2,260,000,000 2,260,000,000 2,260,000,000 Issued and paid-up share capital 150,899,993 ordinary shares of Baht 10.00 each, fully paid 1,508,999,930 1,508,999,930 1,508,999,930 1,508,999,930 PREMIUM ON SHARE CAPITAL 866,121,740 866,121,740 866,121,740 866,121,740 RETAINED EARNINGS (DEFICIT) Appropriated Legal reserve 98,200,000 98,200,000 98,200,000 98,200,000 Reserve for business expansion 1,969,000,000 1,969,000,000 1,969,000,000 1,969,000,000 Unappropriated (deficit) (2,998,066,367) (3,069,490,398) (2,958,832,787) (3,031,270,271) TOTAL COMPANY SHAREHOLDERS EQUITY 1,444,255,303 1,372,831,272 1,483,488,883 1,411,051,399 MINORITY INTEREST 2,597,642 2,151,416 - - TOTAL SHAREHOLDERS EQUITY 1,446,852,945 1,374,982,688 1,483,488,883 1,411,051,399 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 4,756,755,224 4,886,503,980 4,706,353,402 4,840,729,449 See notes to the interim financial statements PADAENG INDUSTRY PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE QUARTER ENDED MARCH 31, UNAUDITED CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Notes Baht Baht Baht Baht REVENUES Sales 1,206,781,422 1,040,480,214 1,203,786,964 1,038,869,646 Other income Interest income 1,482,702 3,108,922 1,039,517 1,722,063 Loss on provision guarantee reversal - 1,151,000 - 22,315,677 Equity in undistributed net income of subsidiary and associated companies - - - 4,364,846 Other 153,701 133,240 168,821 133,180 Total Revenues 1,208,417,825 1,044,873,376 1,204,995,302 1,067,405,412 EXPENSES Cost of sales 936,983,483 860,078,881 936,160,802 859,051,639 Selling and administrative expenses 84,991,979 64,721,342 79,040,641 70,567,341 Loss on exchange rate 9,192,264 28,671,929 9,192,264 28,671,929 Mutual separation plan expenses 1 32,873,212 - 32,873,212 - Depreciation of residue pond 5,630,591 - 5,630,591 - Interest expenses 67,037,277 83,529,382 67,135,874 86,407,277 Directors remuneration 669,590 184,000 669,590 184,000 Equity in undistributed net loss of subsidiaries and associated company - - 698,745 - Other expenses 1,156,099 1,080,174 1,156,099 1,080,174 Total Expenses 1,138,534,495 1,038,265,708 1,132,557,818 1,045,962,360 Net income before minority interest and the result of operations of a subsidiary which ceased its operations 69,883,330 6,607,668 72,437,484 21,443,052 Minority interest in net (income) loss of a subsidiary company (446,226) 460,708 - - Net income before the result of operations of a subsidiary which ceased its operations 69,437,104 7,068,376 72,437,484 21,443,052 Net income (loss) of a subsidiary which 17 ceased its operations 1,986,927 (10,402,810) - - NET INCOME (LOSS) 71,424,031 (3,334,434) 72,437,484 21,443,052 BASIC EARNINGS (LOSS) FOR THE QUARTER PER SHARE BAHT 0.47 (0.02) 0.48 0.14 WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING SHARES 150,899,993 145,371,488 150,899,993 145,371,488 See notes to the interim financial statements PADAENG INDUSTRY PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF RETAINED EARNINGS FOR THE QUARTER ENDED MARCH 31, UNAUDITED CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Baht Baht Baht Baht UNAPPROPRIATED RETAINED EARNINGS (DEFICIT) Brought forward (deficit) (3,069,490,398) (3,222,202,601) (3,031,270,271) (3,210,798,168) Net income (loss) for the quarter 71,424,031 (3,334,434) 72,437,484 21,443,052 Total unappropriated retained earnings (deficit) (2,998,066,367) (3,225,537,035) (2,958,832,787) (3,189,355,116) APPROPRIATED RETAINED EARNINGS Legal reserve 98,200,000 98,200,000 98,200,000 98,200,000 Reserve for business expansion 1,969,000,000 1,969,000,000 1,969,000,000 1,969,000,000 Total appropriated retained earnings 2,067,200,000 2,067,200,000 2,067,200,000 2,067,200,000 TOTAL RETAINED EARNINGS (DEFICIT) (930,866,367) (1,158,337,035) (891,632,787) (1,122,155,116) See notes to the interim financial statements PADAENG INDUSTRY PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE QUARTER ENDED MARCH 31, UNAUDITED CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Baht Baht Baht Baht SHARE CAPITAL Ordinary shares Brought forward 1,508,999,930 1,508,999,930 1,508,999,930 1,508,999,930 Carried forward 1,508,999,930 1,508,999,930 1,508,999,930 1,508,999,930 PREMIUM ON SHARE CAPITAL Brought forward 866,121,740 866,121,740 866,121,740 866,121,740 Carried forward 866,121,740 866,121,740 866,121,740 866,121,740 RETAINED EARNINGS (DEFICIT) Appropriated Legal reserve Brought forward 98,200,000 98,200,000 98,200,000 98,200,000 Carried forward 98,200,000 98,200,000 98,200,000 98,200,000 Reserve for business expansion Brought forward 1,969,000,000 1,969,000,000 1,969,000,000 1,969,000,000 Carried forward 1,969,000,000 1,969,000,000 1,969,000,000 1,969,000,000 Unappropriated Brought forward (deficit) (3,069,490,398) (3,222,202,601) (3,031,270,271) (3,210,798,168) (Increase) decrease in the period 71,424,031 (3,334,434) 72,437,484 21,443,052 Carried forward (deficit) (2,998,066,367) (3,225,537,035) (2,958,832,787) (3,189,355,116) UNREALIZED LOSS ON NON-CURRENT MARKETABLE SECURITIES Brought forward - (85,501,228) - (85,501,228) (Increase) decrease in the period - (7,544,226) - (7,544,226) Carried forward - (93,045,454) - (93,045,454) TOTAL COMPANY SHAREHOLDERS EQUITY 1,444,255,303 1,123,739,181 1,483,488,883 1,159,921,100 MINORITY INTEREST Brought forward (deficit) 2,151,416 2,284,495 - - Increase (decrease) in the period 446,226 (460,708) - - Carried forward 2,597,642 1,823,787 - - TOTAL SHAREHOLDERS EQUITY 1,446,852,945 1,125,562,968 1,483,488,883 1,159,921,100 See notes to the interim financial statements PADAENG INDUSTRY PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE QUARTER ENDED MARCH 31, UNAUDITED CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Baht Baht Baht Baht CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) 71,424,031 (3,334,434) 72,437,484 21,443,052 (more)