The accompanying notes are an integral part of these statements. THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 1998 1997 Baht Baht Cash Flows from Operating Activities : Net Profit (Loss) 59,337,543 (3,784,505,551) Adjustment to reconcile net profit(loss) to net cash provided by operating activities : Depreciation 737,546,891 695,181,957 Doubtful debts 12,149,231 53,624,099 Amortization 116,559,164 76,387,161 Unrealized losses(gains) from foreign exchange fluctuations (863,435,692) 15,487,652 Unrealized losses from foreign exchange fluctuations - Managed float - 4,500,262,093 Income tax credit - (1,595,042,408) Deferred Income tax 33,686,140 - Losses from fixed assets disposal 2,636,123 5,313,474 Deferred revenue (6,888,588) (26,806,060) Pension fund 1,369,374 5,054,735 Earnings from associated companies (5,737,855) (4,499,752) Trade accounts and notes receivable,( increase ) decrease 867,040,277 (183,152,573) Inventories,( increase ) decrease 1,745,642,991 (335,918,308) Other current assets,( increase ) decrease 83,528,565 (106,371,801) Trade accounts payable, increase ( decrease ) (5,526,152,877) 3,884,993,219 Other current liabilities, increase 448,474,555 11,866,103 Net Cash Provided by (Used in) Operating Activities (2,294,244,158) 3,211,874,040 Cash Flows from Investing Activities : Short-term investments, ( increase ) decrease (58,879,900) 5,557,798,412 Long-term investments,( increase ) - (31,000,000) Purchase of Property, plant and equipment, ( increase ) (1,625,622,457) (2,015,232,658) Other assets,( increase ) decrease (84,352,916) 67,488,020 Accounts payable-Ministry of Finance paid Net Cash Provided by (Used in) Investing Activities (1,768,855,273) 3,579,053,774 The accompanying notes are an integral part of these statements. Cash Flows from Financing Activities : Sale of stock from increasing registered capital Bank overdrafts and loans from financial institution, increase (decrease) 1,657,872,826 (3,508,453,371) Long-term loan, increase (decrease) 996,905,754 (530,934,195) Cash dividends - (652,551,175) Net Cash Provided by (Used in) Financing Activities 2,654,778,580 (4,691,938,741) Increase ( Decrease ) in Cash and Cash Equivalents (1,408,320,851) 2,098,989,072 Cash and Cash Equivalents as of 1 January 2,098,989,073 0 Cash and Cash Equivalents as of 31 December 690,668,222 2,098,989,073 Supplemental Cash Flow Information : Cash paid during the year for : Interest expenses 856,302,462 1,104,988,836 Income tax (34,785,120) 242,837,189 The accompanying notes are an integral part of these statements. THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,1998 AND 1997 1. Summary of Significant Accounting Policies 1.1 The accounting transactions of the Company have been recorded on the accrual basis. 1.2 Allowance for Doubtful Accounts The allowance for doubtful accounts is set-up based on debts deemed uncollectable from debtors as judged from the current status of each account receivable. 1.3 Inventories Finished petroleum products are stated at the lower of cost or net realizable value, whichever is lower. The unit cost is determined by the weighted average of monthly production costs and the volume of each oil product and ex-refinery selling prices. Product inventories are priced on a first-in, first-out method. Crude oil is stated at the lower of cost or net realizable value, whichever is lower. The unit cost is determined by the weighted average cost and the volume of monthly purchased crude oil. Crude inventories are priced on a first-in, first-out method. 1.4 Materials and Supplies Materials and supplies are stated at cost determined by the moving average method. 1.5 Turn-Around Expenses Refinery turn-around expenses are amortized over the period of 18 months, which is the standard of Design Basis. 1.6 Long-Term Investment to Related Parties 1.6.1 The investment equal to or over 20 % of the paid-up share capital is recorded on the equity method. 1.6.2 The investment less than 20 % of the paid-up share capital is recorded on the cost method. 1.7 Property, Plant and Equipment Property, plant, equipment and depreciation are carried at cost. Interest expenses which are related to fixed assets,are booked to the cost of assets. Depreciation is computed by the straight-line method at rates varying from 5% to 20% per annum based upon the estimated useful life of the assets. The company revises the value of its fixed assets should serious fluctuation in the economy occur which has direct effect on the assets.The surplus value from the revaluation is recorded under account Surplus on fixed assets revaluation in Shareholders Equity, which is not available for dividend distribution. Depreciation on the increased value of the assets is deducted from the Surplus on fixed assets revaluation. 1.8 Leasehold for Construction of Service Station Leasehold for construction of service station is carried at cost. Interest expense in acquiring leasehold is considered a cost of the leasehold and is amortized equally each year over the period of the lease ,commencing from the completion of the service station construction. 1.9 Deferred Income Tax The company records the difference in the corporate income tax numbers, calculated on the basis of the companys financial statement and that of the Revenue Code, as Deferred Income Tax in the Balance Sheet. Amortization of this account s made as the income or expense booked is realized or used for tax credit when permitted under the Revenue Code. 1.10 Deferred Charges The prepaid land lease for service stations are amortized over the term of the land lease contract. Deferred charges related to the exchange of buildings between the company and Defence Energy Department, of the Ministry of Defence is amortized over a contracted term of 20 years. Other deferred charges are amortized within five years. 1.11 Foreign Currencies 1.11.1 Foreign currency transactions are converted into Baht at the exchange rate on the date the transactions incurred The outstanding balance as of the ending period is translated into Baht using the exchange rate as announced by the Bank of Thailand. Differences from foreign exchange translations are booked the total amount as income or expense except for foreign exchange losses prior to year 1996, which are booked as deferred expense and amortized over the period of the loan . 1.11.2 Gains or losses resulting from the repayment during the year are recorded as income or expense. 1.11.3 In cases where forward exchange contracts are purchased to minimize the risk exchange rate as per the contract . The Premium associated with this is a mortized over the period of the contract. 1.12 Deferred Revenue Deferred revenue, the advance lease income of equipments and others, are amortized over the term of the contract. 1.13 Pension Fund Reserve Pension Fund Reserve is established on the basis of the pension fund amounts payable to employees as of the end of each accounting year. For all employees who have completed five years service with the Company, a five percent of the pension amount is reserved. And for all employees due to retire over the period of the next five years , a 100 percent of the pension amount is reserved. 1.14 Registered Provident Fund The Company established a contributory provident fund covering substantially all employees.Members are required o make monthly contribution to the fund at either 5% or 10% of the members salaries depending on their choice and the Company is required to make monthly contribution at the same rate. 1.15 Borrowing Cost 1.15.1 Interest expenses incurred from loan specifically for the construction of fixed assets are booked as construction cost until the project is completed and the asset is ready for its intended use. 1.15.2 Interest expenses on loan for general purposes, but partly used for the construction and leasehold acquisition of service stations, are capitalized during work in progress. Upon completion of the project , such interests are booked as expense. 1.16 Public Offering Expenses Public offering expenses which include registered capital fee, underwriting fee and all other expenses incurred in onnection with the public offering, are treated as an adjustment against the premium on share capital. 1.17 Earnings Per Share Earnings per share is calculated from the net profit (loss) divided by the weighted average of issued and paid-up share capital. 1.18 Expenditures for the Development and Modification of Computer Systems Expenditures for the development and modification of computer system, which significantly increase its capacity and efficiency are booked as assets. Expenditures for solving the computer problems for the year 2000 are booked in total as expense in the accounting year the expenses occurred. 2. Trade Accounts and Notes Receivable - Net ( Accounting Policy 1.2 ) Million Baht 1998 1997 Trade accounts and notes receivable 1761.38 2628.46 Less Allowance for doubtful accounts -65.73 -53.62 Trade accounts and notes receivable - net 1695.65 2574.84 As of December 31,1998, the Company has trade account receivables that have problems in repaying d ebts. The following is an age analysis of the outstanding amount of such debts. Million Baht over 3 - 6 months 5.31 over 6 - 12 months 13.5 over 12 months 69.22 Total 88.03 The Company has set up an allowance for doubtful accounts of Baht 65.73 Million. 3. Investments and Loans to Related Parties ( Accounting Policy 1.6 ) As of December 31 ,1998 , the investments and loan to related parties of the Company in amount of Baht 427.20 million consists of investments in related parties of Baht 203.57 million ( on cost method of Baht 163.00 million and on equity equity method of Baht 40.57 million ) and Tariff Prepayment of Baht 223.63 million. The details of which are as follows :- (More)