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 June 30, 2000, and the related consolidated and Company's statements of income for the quarters and six-month periods ended June 30, 2000 and 1999, and the consolidated and Company's statements of changes in shareholders' equity, retained earnings and cash flows for the six-month periods ended June 30, 2000 and 1999. These financial statements are the responsibility of the Company's management as to their correctness and completeness of the presentation. Our responsibility is to report on these financial statements based on our reviews. 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 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 subsidiary's assets as at June 30, 2000, which amounted to Baht 123.5 million or 2.45 % of the total consolidated assets as at June 30, 2000. As described in Notes 7.2 and 9 to the interim financial statements, the consolidated interim financial statements for the six-month period ended June 30, 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 which declined the Company's appeal on May 29, 2000 and the Company has submitted an appeal to the Supreme 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. 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 Company's ability to continue as a going concern, uncertainty related to recoverability of assets for sale, deferred exploration expenditure and special project license fee, the Company's investment in a subsidiary, compensation paid to a company and contingent liability due to the income tax assessment. The consolidated and the Company's balance 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. - 3 - As described in Note 3 to the interim financial statements for the quarter and six-month period ended June 30, 2000, the Company and subsidiaries have complied with new Accounting Standards. The significant change is in respect of the presentation of the interim financial reports. In addition, the Company adopted IAS 37, Provision, Contingent Liabilities and Contingent Assets in respect of environmental restoration costs. Nachalee Boonyakarnkul Certified Public Accountant (Thailand) BANGKOK Registration No. 3126 July 28, 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 JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2000 1999 2000 1999 Note Baht Baht Baht Baht ASSETS CURRENT ASSETS Cash in hand and at banks 266,224,256 398,269,162 200,667,316 335,184,787 Deposits at banks used as collateral 4.1 200,000 11,554,589 - - Trade accounts and notes receivable net 5 202,228,372 250,412,696 196,975,487 246,226,037 Short-term loans and advances to related companies 14 1,249,030 693,346 2,189,990 1,620,430 Inventories - net 1,178,149,760 712,418,284 1,173,488,188 704,975,002 Withholding tax 18,487,350 18,606,514 664,208 649,334 Account receivable - Revenue Department 41,972,494 55,621,072 41,509,872 55,234,785 Other receivables 2,003,844 1,946,138 1,970,994 1,850,084 Prepayment for financial advisory fee - 9,345,826 - 9,345,826 Other current assets 11,814,406 6,844,333 11,300,643 5,138,363 Total Current Assets 1,722,329,512 1,465,711,960 1,628,766,698 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 - - 369,284,180 372,035,797 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 14,451,626 383,735,806 394,487,423 PROPERTY, PLANT AND EQUIPMENT NET 2,895,763,565 3,003,419,924 2,895,900,778 3,002,961,743 OTHER ASSETS Assets for sale 17 123,500,004 123,500,004 - - Other 9 248,108,129 249,366,330 81,898,593 83,055,635 TOTAL ASSETS 5,034,206,972 4,886,503,980 4,990,301,875 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 JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2000 1999 2000 1999 Note Baht Baht Baht Baht LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdrafts and loans from financial institutions 236,483,329 251,657,174 200,273,331 215,365,158 Trade accounts and notes payable 555,050,085 187,563,936 641,080,059 273,641,132 Current portion of long-term loans 10 1,602,751,549 1,757,400,278 1,466,501,549 1,582,400,278 Short-term loans and advances from related companies 14 112,293,600 107,815,968 - - Other current liabilities Accrued interest 46,626,833 42,550,805 10,926,816 12,450,425 Accrued electricity expenses 124,227,464 119,107,092 124,227,464 119,107,092 Provision for guarantee expenses of a subsidiary 16 - - 135,607,587 174,357,587 Other 55,304,608 93,335,407 53,914,923 90,385,787 Total Current Liabilities 2,732,737,468 2,559,430,660 2,632,531,729 2,467,707,459 LOANS FROM RELATED COMPANIES 14 - - 8,000,000 9,879,959 LONG TERM LOANS 10 836,735,629 949,153,349 836,735,629 949,153,349 PROVISION FOR RESTORATION 3,19 64,132,897 71,647,141 64,132,897 71,647,141 OTHER LIABILITIES 1,468,642 2,937,283 1,468,642 2,937,283 TOTAL LIABILITIES 3,635,074,636 3,583,168,433 3,542,868,897 3,501,325,191 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 JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2000 1999 2000 1999 Note Baht Baht Baht Baht LIABILITIES AND SHAREHOLDERS' EQUITY (CONTINUED) 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) 3,19 (3,046,293,688) (3,141,137,539) (2,994,888,692) (3,102,917,412) TOTAL COMPANY SHAREHOLDERS' EQUITY 1,396,027,982 1,301,184,131 1,447,432,978 1,339,404,258 MINORITY INTEREST 3,104,354 2,151,416 - - TOTAL SHAREHOLDERS' EQUITY 1,399,132,336 1,303,335,547 1,447,432,978 1,339,404,258 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 5,034,206,972 4,886,503,980 4,990,301,875 4,840,729,449 See notes to the interim financial statements PADAENG INDUSTRY PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE QUARTERS ENDED JUNE 30, "UNAUDITED" CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Note Baht Baht Baht Baht REVENUES Sales 18 1,172,084,343 1,034,750,534 1,169,172,409 1,032,729,609 Other income Interest income 845,381 1,724,432 635,632 1,004,306 Gain on exchange rate - 34,737,733 - 34,396,200 Equity in undistributed net income of subsidiary companies - - - 2,124,451 Other 67,413 526,371 52,293 535,941 Total Revenues 1,172,997,137 1,071,739,070 1,169,860,334 1,070,790,507 EXPENSES Cost of sales 18 929,089,501 819,272,158 928,231,151 818,233,397 Selling and administrative expenses 80,240,700 67,860,749 76,311,617 65,609,887 Loss on exchange rate 52,079,818 - 52,079,818 - Residue pond written off - 10,510,423 - 10,510,423 Depreciation of residue pond 5,630,591 7,007,131 5,630,591 7,007,131 Restoration expenses 3,19 1,743,202 1,922,525 1,743,202 1,922,525 Interest expenses 64,042,877 75,443,298 64,132,411 77,733,233 Directors' remuneration 1,177,000 652,796 1,177,000 652,796 Equity in undistributed net loss of subsidiary companies - - 2,052,871 - Other expenses 1,167,235 1,068,242 1,167,235 1,068,242 Total Expenses 1,135,170,924 983,737,322 1,132,525,896 982,737,634 Net income before minority interest and the result of operations of a subsidiary which ceased its operations 37,826,213 88,001,748 37,334,438 88,052,873 Minority interest in net (income) loss of a subsidiary company (506,712) 51,123 - - Net income before the result of operations of a subsidiary which ceased its operations 37,319,501 88,052,871 37,334,438 88,052,873 Net loss of a subsidiary which ceased its operations 17 (12,156,479) (11,428,112) - - NET INCOME 25,163,022 76,624,759 37,334,438 88,052,873 BASIC EARNINGS FOR THE QUARTER PER SHARES BAHT 0.17 0.51 0.25 0.58 WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING SHARES 150,899,993 150,899,993 150,899,993 150,899,993 See notes to the interim financial statements PADAENG INDUSTRY PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE SIX-MONTH PERIODS ENDED JUNE 30, "UNAUDITED" CONSOLIDATED THE COMPANY ONLY 2000 1999 2000 1999 Note Baht Baht Baht Baht REVENUES Sales 18 2,378,865,765 2,075,230,748 2,372,959,373 2,071,599,255 Other income Interest income 2,328,083 4,833,354 1,675,149 2,726,369 Gain on exchange rate - 6,065,805 - 5,724,271 Amount to be adjusted for provision for guarantee of a subsidiary, previously estimated 16 - 1,151,000 - 22,315,677 Equity in undistributed net income of subsidiary companies - - - 6,489,297 Other 221,114 659,611 221,114 669,121 Total Revenues 2,381,414,962 2,087,940,518 2,374,855,636 2,109,523,990 EXPENSES Cost of sales 18 1,866,072,985 1,679,351,039 1,864,391,953 1,677,285,036 Selling and administrative expenses 165,232,679 132,582,091 155,352,257 136,177,228 Loss on exchange rate 61,272,082 - 61,272,082 - Mutual separation plan expenses 1 32,873,212 - 32,873,212 - Residue pond written off - 10,510,423 - 10,510,423 Depreciation of residue pond 11,261,182 7,007,131 11,261,182 7,007,131 Restoration expenses 3,19 3,486,404 3,845,050 3,486,404 3,845,050 Interest expenses 131,080,153 158,972,680 131,268,285 164,140,510 Directors' remuneration 1,846,590 836,796 1,846,590 836,796 Equity in undistributed net loss of subsidiary companies - - 2,751,617 - Other expenses 2,323,334 2,148,416 2,323,334 2,148,416 Total Expenses 2,275,448,621 1,995,253,626 2,266,826,916 2,001,950,590 Net income before minority interest and the result of operations of a subsidiary which ceased its operations 105,966,341 92,686,892 108,028,720 107,573,400 Minority interest in net (income) loss of a subsidiary company (952,938) 511,830 - - Net income before the result of operations of a subsidiary which ceased its operations 105,013,403 93,198,722 108,028,720 107,573,400 Net loss of a subsidiary which ceased its operations 17 (10,169,552) (21,830,922) - - NET INCOME 94,843,851 71,367,800 108,028,720 107,573,400 BASIC EARNINGS FOR THE SIX-MONTH PERIOD PER SHARE BAHT 0.63 0.47 0.72 0.71 WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING SHARES 150,899,993 150,899,993 150,899,993 150,899,993 See notes to the interim financial statements PADAENG INDUSTRY PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, "UNAUDITED" CONSOLIDATED THE COMPANY ONLY 2000 2000 2000 2000 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 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) before adjustment (3,069,490,398) (3,222,202,601) (3,031,270,271) (3,210,798,168) Adjustment for restoration expense (71,647,141) (63,957,042) (71,647,141) (63,957,042) Brought forward (deficit) after adjustment (3,141,137,539) (3,286,159,643) (3,102,917,412) (3,274,755,210) Increase (decrease) in the period 94,843,851 71,367,800 108,028,720 107,573,400 Carried forward (deficit) (3,046,293,688) (3,214,791,843) (2,994,888,692) (3,167,181,810) UNREALISED LOSS ON NON-CURRENT MARKETABLE SECURITIES Brought forward - (85,501,228) - (85,501,228) Increase (decrease) in the period - 59,096,437 - 59,096,437 Carried forward - (26,404,791) - (26,404,791) TOTAL COMPANY SHAREHOLDERS' EQUITY 1,396,027,982 1,201,125,036 1,447,432,978 1,248,735,069 MINORITY INTEREST Brought forward (deficit) 2,151,416 2,284,494 - - Increase (decrease) in the period 952,938 (511,830) - - Carried forward (deficit) 3,104,354 1,772,664 - - TOTAL SHAREHOLDERS' EQUITY 1,399,132,336 1,202,897,700 1,447,432,978 1,248,735,069 (more)