SET Announcements

( Translation) 1600 / 056 / 2542 June 29, 1999 The Stock Exchange of Thailand 62, Ratchadapisek Road, Klongtoey Bangkok 10110 Attention : President of the Stock Exchange of Thailand Subject : The Bangchaks Board of Directors confirmed the Companys good performance and that the accounting system is in accordance with the auditing standard. Mr.Chirayu Isarangkun na Ayuthaya the Companys director and the chairman of the Companys audit committee, together with Mr. Somchai Richupan, the Chairman of the Board of Directors announced, in the press conference at the Companys refinery on June 28, 1999, the result of the Board of Directors investigation on the allegations against the company as reported in several newspapers. Based on the investigation, the Board of Directors concluded that the Companys financial position is strong. In addition, the Companys operating performance is relatively good when compared with those of its counterparts in the industry. The Board is also convinced that the Companys accounting system is in full compliance with the internationally accepted standard. It is also thoroughly audited and certified by the Office of the Auditor General ( OAG ) . In addition, all related party transactions are normal business practice, without any unusual transaction or siphoning of interests among the company, its affiliates and its shareholders. The Companys donation to the public is the usual practice among all business firms. The amount of such donation expense is relatively low. As for the foreign currency loan of USD 150 milliion, the proceed of which had all the time been in the USD accounts, with the proper approval from the Bank of Thailand ( BOT ). The purpose of the loan was for the overseas payment of the crude oil purchase. There was no evidence whatsoever that the proceed was converted into the Baht fund and deposited for the arbitrage purpose. Such investigation was conducted by the Companys audit committee which was appointed in compliance with the SETs regulation. The Companys Board of Directors agreed and approved the results of such investigation as per the following details : 1. Past Operating Performance and the 1998 Financial Statements. Having investigated the Companys operating results and its 1998 financial statements, the audit committee concluded that the 1998 financial statements present fairly, in all material respects, the financial position, the results of operations and the cash flows in accordance with generally accepted accounting principles. The Companys past operating performances are also good, with strong financial position and relatively high level of liquidity. The Company was founded in 1985 with Baht 2,354 million cash and assets from the government as the start up capital. As of 1998, the government has received the financial returns totaling Baht 15,248 million. These comprise cash , in terms of dividend payments to the government of Baht 4,116 million, the paid corporate income tax of Baht 3,091 million and the governments stake in the Companys shareholders equity of Baht 8,041 million. The Company has accumulated net profit before 1997 extraordinary foreign exchange loss of Baht 7,808 million and after 1997 extraordinary foreign exchange loss of Baht 2,615 million. Compared with its four other counterparts who also have refinery operations, BCP is much less affected by the foreign exchange fluctuation impact. Its financial position is relatively strong. Despite the financial & economic crisis in the country in 1998, the Company still scored the net protit of Baht 59 million, with reasonably strong financial position and high level of liquidity. Its debt to equity ratio in 1998 was 1.7 to 1. This is comfortably acceptable and is definitely much better than those of its couterparts. The 1998 financial statements were audited and certified by the auditor officials from the OAG, the Companys auditor during the past 14 years. The OAG has been auditing the Companys financial statements in accordance with generally accepted accounting principles and has the opinion that the Companys financial statements present fairly, in all material respects, the financial position and the results of operations in accordance with generally accepted accounting principles. 2. The companys accounting and auditing systems. The audit committee concluded that the companys accounting , internal control and auditing systems are in full compliance with the high and internationally accepted standard. These are all thoroughly audited by the auditors from the OAG. The Company has been in full compliance with the SET required accounting standard, the 35 article regulations of The Institute of Certified Accountants and Auditors of Thailand and the interenational accounting standards of the International Accounting Standards Committee and the American Institute of Certified Public Accountants or Financial Accounting Standards Board. In addition, the companys accounting structures and the procedures for financial statements preparations are in the same standard and similar to other large corporations, including the foreign petroleum companies in Thailand. In order to perform the audit operation for the company, the OAG, the auditor for all governmental agencies and state owned enterprises, has dispatched 6 officials to work full time in the Company. The auditing operation is also broader in scope and more thorough than those of the the private companies. 3. Investments and other transactions to related parties. The audit committee concluded that the reports of the realised earnings and transactions from all associated and related companies has been in full compliance with the SETs requirements and standards. In addition, these transactions are normal business practice, without any unusual transaction or siphoning of interests among the Company, its associated companies and its shareholders. The Company invested in 4 associated companies ( with shareholding of more than 20 % but less than 50 %. ) These are companies with small paid up share capital or investments and were set up to support the Companys business. In 1998, all of these associated companies generated net profits from operations. 4. Social & Public Donation Expenses. The audit committte concluded that , in 1998, the Company has donation and public service expenses of Baht 1,243,229. This represents only 0.004 % of the Companys revenue. The expense is therefore relatively small and in normal practice, similar to other business firms and thus is entirely justified. 5. Foreing Currency Loan The audit committee concluded that the Companys utilisation of the loan proceed is justified and conducted with the acceptable, prudent procedures. The USD 150 million loan borrowed in June 1998 was the normal refinance of the short tem loan, which is a normal practice in all businesses. The proceed of the loan was for the overseas payment ( in USD ) for crude oil directly purchased from the overseas suppliers. Such loan costed the Company in terms of interest and other expenses of USD 11 million. The loan proceed had all the time been in the USD accounts ie Sumitomo Bank A/C no. 121-110049-0 & Bank of America A/C no. 30586-030, with the proper approvals from BOT. The entire USD 150 miillion proceed was then used as payment for for the crude oil purchase through the above mentioned bank accounts. None of the proceed was ever converted to Baht for interest arbitrage purpose. In June 1999, the Company refinanced such loan with the new USD 130 million loan. Another USD 20 million was properly repaid with the Companys own operating revenue. Yours sincerely, Rabil Pornpatkul Senior Manager, Corporate Planning Office Corporate Planning Office Tel: 301-2842