Auditor's Review Report
To the Shareholders of Thai Petrochemical Industry Public Company Limited:
I have reviewed the consolidated balance sheet of Thai Petrochemical Industry
Public Company Limited and subsidiaries as at March 31, 2001, and the related consolidated
statements of income, changes in (deficit in) shareholders' equity, deficit and cash flows for each
of the three-month periods ended March 31, 2001 and 2000, and the separate financial statements
of Thai Petrochemical Industry Public Company Limited for the same periods. The Company's
management are responsible for the correctness and completeness of information presented in
these financial statements. However, as mentioned in Note 1.1 to the financial statements, the
Planner (Effective Planners Limited) has stated that as they have only undertaken the role of the
management of the Company since April 20, 2000, and have not yet completed their own analysis
of the financial statements for the three-month period ended March 31, 2000. They are unable to
verify the correctness and completeness of the financial statements for the three-month period
ended March 31, 2000, and that, had they completed their analysis, other matters might have come
to light which would need to be reflected in the financial statements for the three-month period
ended March 31, 2000. Consequently, the Planner has stated that they are unable to accept
responsibilities for the aforementioned financial statements for the three-month period ended
March 31, 2000. However, the Planner or the Plan Administrator has already analyzed such
financial statements and adjusted the assets items on the financial statements of the Company and
subsidiaries for the year ended December 31, 2000. My responsibility is to issue a report on these
financial statements based on my reviews.
Except as described in the fourth and fifth paragraphs, I conducted my reviews in
accordance with the standard on auditing applicable to review engagements. This standard
requires that I 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. I have not
performed an audit and, accordingly, I do not express an audit opinion.
As shown in the financial statements, the Company and subsidiaries have
incurred a net loss from operations for the three-month period ended March 31, 2001 and 2000 of
Baht 6,080.01 million and Baht 1,194.82 million, respectively in the consolidated financial
statements and Baht 6,088.61 million and Baht 1,434.89 million, respectively in the separate
financial statements. As at March 31, 2001 and 2000, the Company and subsidiaries also have a
deficit of Baht 102,216.44 million and Baht 59,682.69 million, respectively in the consolidated
financial statements and Baht 112,360.14 million and Baht 61,360.04 million, respectively in the
separate financial statements, total current liabilities exceeded total current assets by Baht
141,648.61 million and Baht 112,017.79 million, respectively in the consolidated financial
statements and Baht 121,265.17 million and 96,192.59 million, respectively in the separate
financial statements and as at March 31, 2001, total liabilities exceeded total assets by Baht
29,843.44 million and Baht 30,557.24 million in the consolidated and separate financial
statements, respectively. As at March 31, 2001, investments in twenty-two subsidiaries of Baht
665.76 million in the separate financial statements and as at March 31, 2000, investments in
nineteen subsidiaries and an associated company of Baht 11,502 million in the consolidated
financial statements and of Baht 18,165 million in the separate financial statements (such
investments included investment in TPI Polene Public Company Limited), have experienced
liquidity problems and the Company and these subsidiaries have failed to repay their debts under
the terms of the relevant loan agreements. On March 15, 2000, the Central Bankruptcy Court
ruled that the Company must be rehabilitated, and on April 20, 2000, ordered the appointment of
Effective Planners Limited as Planner for the Company. Subsequently, Effective Planners
Limited was also appointed Planner of seven subsidiaries of the Company and despatched copies
of rehabilitation plans including each proposed various amendments to the rehabilitation plans for
the Company and the seven subsidiaries to creditors and the official receiver. The creditors
meeting resolved to accept the rehabilitation plans of Thai Petrochemical Industry Public
Company Limited and the six subsidiaries and on December 15, 2000, the Central Bankruptcy
Court approved the rehabilitation plans of Thai Petrochemical Industry Public Company Limited
and such six subsidiaries under Section 90/58 of the Bankruptcy Act, B.E. 2483, which
determined Effective Planners Limited located at Level 21/1 Sathorn City Tower, 175 South
Sathorn Road, Thungmahamek, Sathorn, Bangkok, 10120, as the Plan Administrator. Once the
Plan Administrator learns of the Court's order, the right and duties of the Planner shall
immediately pass to the Plan Administrator under Section 90/59 of the Bankruptcy Act, B.E.
2483. On January 15, 2001, Thai Petrochemical Industry Public Company Limited ("Debtor")
appealed against the Central Bankruptcy Court's ruling dated December 15, 2000, to request that
the Supreme Court would order to revoke the resolution of creditors meeting on November 27,
2000 regarding the rehabilitation plan and the endorsement, and/or reject and/or revoke the Plan
Administrator appointment, or order the Central Bankruptcy Court to investigate the evidences
including appointing the Debtor's management as a temporary management; in addition, to order
the Central Bankruptcy Court to declare void the resolution of creditors meeting on November 27,
2000 regarding the rehabilitation plan and the amendment, and to reject the rehabilitation plan and
amendments under Section 90/58 and/or revoke the appointment of the Plan Administrator. Until
the date of this report, the ruling has not been finalized. On December 6, 2000, a subsidiary,
Rayong Tank Terminal Co., Ltd., was ordered to terminate from the rehabilitation by the Central
Bankruptcy Court because the creditors meeting resolved to reject the rehabilitation plan and
amendments. Later on January 16, 2001, the Central Bankruptcy Court ruled that the above
subsidiary must be rehabilitated and appointed Churchill Pryce Planner Limited as a Planner for
the subsidiary. Until the date of this report, the subsidiary's Planner is preparing the
rehabilitation plan. These circumstances raise substantial doubt about the uncertainty of success
in the completion of the rehabilitation plan of the Company and its subsidiaries. Therefore, they
cause material doubt regarding the ability of Thai Petrochemical Industry Public Company
Limited and subsidiaries to continue as going concerns. The consolidated and separate financial
statements for the three-month period ended March 31, 2001 and 2000 have been prepared on a
going concern basis and assume that the Company and subsidiaries will continue in operational
existence and do not include any adjustments relating to the recoverability and classification of
the recorded assets and the amounts and classification of liabilities that might be necessary should
the Company and subsidiaries be unable to continue as going concerns as described in Notes 1.5,
2.7 and 2.8 to the financial statements. However, as at March 31, 2001, the Plan Administrator of
the Company and six subsidiaries have been still in the process of the implementation in
accordance with the rehabilitation plans accepted by the creditors and approved by the Central
Bankruptcy Court. See Note 2.19 to the financial statements regarding the Company's authorized
and paid up share capital.
Because I was engaged as auditor of Thai Petrochemical Industry Public
Company Limited and subsidiaries on March 24, 2000, I was not present to observe the physical
inventory taken at December 31, 1999 in the amount of Baht 10,840.23 million and Baht 9,686.18
million in the consolidated and separate financial statements, respectively. Therefore, I had to
rely on the balances brought forward of inventories and other accounts in the consolidated
financial statements of Thai Petrochemical Industry Public Company Limited and subsidiaries and
the separate financial statements of Thai Petrochemical Industry Public Company Limited, which
were audited by another auditor and restated by the Company's and subsidiaries' management as
described in Note 1.7 to the financial statements, for my review of the consolidated and separate
financial statements for the three-month period ended March 31, 2000.
Since the appointment of the Company's and subsidiaries' Planner by the
Central Bankruptcy Court as discussed in the third paragraph, creditors have filed their respective
claims for payment from the Company and six subsidiaries with the official receiver. Some
claims and supporting evidence are still being examined by the official receiver (see Note 1.5 to
the financial statements). Certain of the debts claimed have not been recorded in the consolidated
and separate financial statements for the three-month period ended March 31, 2001. In addition,
the Company and subsidiaries are in the process of checking the documents and legal
information supporting the balance of debts with each creditor but the differences referred to
above have not yet been resolved. I am, therefore, unable to obtain sufficient appropriate
evidence to review whether there are any debts which have not been included in the accounting
records and the additional amount, if any, which should be included in the accounting records and
the consolidated and separate financial statements.
As at March 31, 2000, the Company and subsidiaries had overdue accounts and
notes receivable in the amount of Baht 2,063.24 million and Baht 1,817.77 million in the
consolidated and separate financial statements, respectively. Allowance for doubtful accounts
have been provided for in the amount of Baht 165.33 million and 53.27 million in the
consolidated and separate financial statements, respectively. Short-term loans and advances to
related parties in the amount of Baht 10,381 million and Baht 15,086 million in the consolidated
and separate financial statements, respectively, which were deemed uncollectible, have not been
provided allowance for doubtful accounts. The Company's notes receivable on land in the
amount of Baht 1,739.43 million, which is a related party, has been also experiencing liquidity
problems resulting to uncertainty of collection. The Company has provided an allowance for
doubtful accounts in the amount of Baht 1,550 million in both the consolidated and separate
financial statements. Therefore, there is an uncertainty regarding the recoverability of such
receivables and those related parties' ability to continue as a going concern. However, the Plan
Administrator has already adjusted such items on the financial statements for the year ended
December 31, 2000.
As described in Notes 1.3, 1.4 and 2.4 to the financial statements, the
consolidated financial statements of Thai Petrochemical Industry Public Company Limited and
subsidiaries and the separate financial statements for the three-month period ended March 31,
2001, the Company has recorded investment in security in an associated company by using equity
method until December 31, 2000, less a provision for decline in value of investment amount to
Baht 1,754.20 million in the consolidated financial statements and Baht 1,743.05 million in the
separate financial statements. For the three-month period ended March 31, 2001, the Company
has not accounted for by equity method for investment in associated company. According to
generally accepted accounting principles, the Company is required to record such investments by
using equity method. The Plan Administrator has not yet received formally any updated financial
information from the aforementioned associated company's management, and was therefore
unable to equity account for this investment. However, the Plan Administrator has made a
provision for decline in value of investment in such associated company in the amount of Baht
6,545.18 million.
As described in Notes 1.6 and 2.5 to the financial statements, in 1997, the
Company and certain subsidiaries and associated companies revalued their land, buildings and
machinery in accordance with an independent appraiser and recognized a revaluation surplus in
the balance sheet. The outstanding balance of revaluation surplus as at March 31, 2000 amounts
to Baht 63,786.02 million in the consolidated and separate financial statements. In accordance
with generally accepted accounting principles, the Company is required to estimate the
recoverable amount of its assets, when circumstances or events indicated their value may be
impaired. If the estimated recoverable amount is less than the carrying amount of the assets, an
impairment loss should be recognized in the statement of income. Therefore, there is an
uncertainty if such assets are not less than their carrying amounts as an updated appraisal as at
March 31, 2000 was not available. Later in December 31, 2000, the Plan Administrator of the
Company and the six subsidiaries commissioned an updated revaluation of land, buildings and
machinery by independent appraisers in accordance with the appraisal report dated February 27,
2001. As at March 31, 2001, the carrying amount of land, buildings and machinery of Baht
1,898.53 million and Baht 54.50 million in the consolidated and separate financial statements,
respectively, their revaluation is not yet complete and consequently, not all items of land,
buildings and machinery have yet been revalued in accordance with generally accepted
accounting principles as the Plan Administrator of the Company and the six subsidiaries is
performing the revaluation of all fixed assets and plans to complete within the following period
(land, buildings and machinery of two subsidiaries, their carrying amount of Baht 1,836.81
million in the consolidated financial statements have not yet updated the revaluation because such
subsidiaries have not been managed by the Plan Administrator).
As described in Notes 2.1 and 2.5 to the financial statements, a subsidiary did not
record accrued interest expense relating to obligation on constructions and machinery as at March
31, 2001 approximately amounted to Baht 252.87 million because interest rates have not been
finalized and the debt restructuring agreement have been approved by such subsidiary. Such
subsidiary has selected to capitalize interest expense as part of the cost of building and machinery.
Until March 31, 2001, the interest expense was capitalized in the amount of Baht 53.62 million
which has not been verified the calculating cost of borrowing in accordance with the accounting
standard as the Planner of such subsidiary, Churchill Pryce Planner limited, has been in the
process of verification of related documents and information.
The Company and its subsidiaries had rental deposits for office buildings as at
March 31, 2000 in the amount of Baht 947.46 million and Baht 847.81 million in the consolidated
and separate financial statements, respectively under long-term lease agreements with a related
company. Each agreement contains the lease term for 3 years to 90 years, which have not been
registered with the Land Department. Therefore, there is an uncertainty regarding the
recoverability of rental deposits if either party terminate the lease agreement before due date as
described in Note 2.15 to the financial statements. However, in December 2000, the Plan
Administrator, on behalf of the Company and subsidiaries, has hired an independent appraiser to
appraise the aforementioned leasehold office building and made a provision for impairment of
such rental deposits in the amount of Baht 821.63 million.
Because of the pervasive effect on the consolidated and separate financial
statements regarding the uncertainties of ability to continue as going concerns and the successful
completion of the rehabilitation of the Company and subsidiaries as discussed in the third
paragraph, the fact that the Planner stated that they are unable to accept any responsibilities of the
financial statements for the three-month period ended March 31, 2000 as the aforementioned
matter, the effect on the consolidated and separate financial statements for the three-month period
ended March 31, 2000 concerning the uncertainties of recoverable amounts for overdue accounts
and notes receivable, short-term loans and advances to related parties, investments in an
associated company, notes receivable on land, deposits for office buildings and property, plant
and equipment as discussed in the sixth, eighth and tenth paragraphs, and the effect on the
consolidated and separate financial statements for the three-month period ended March 31, 2001
because of not being compliance with generally accepted accounting principles regarding
investment in an associated company which is not accounted for by the equity method, all of land,
building and machinery which are not revalued, accrued interest relating to obligations on
constructions and machinery which is not recorded, capitalized interest expense as part of the cost
of building and machinery as discussed in the seventh, eighth and ninth paragraphs and the
limitation in scope of my review concerning other matters as discussed in the fourth and fifth
paragraphs, therefore, I am unable to provide any assurance that the accompanying consolidated
and separate financial statements are presented fairly, in all material respects, in conformity with
generally accepted accounting principles.
I have audited the consolidated financial statements of Thai Petrochemical
Industry Public Company Limited and subsidiaries as at December 31, 2000 and the separate
financial statements of the Company for the year then ended in accordance with generally
accepted auditing standard and my report dated February 28, 2001 disclaimed an opinion on those
statements because of the pervasive effect of uncertainties regarding the ability of Company and
subsidiaries to continue as going concerns and the successful completion of the rehabilitation, and
the effect on the consolidated and separate financial statements concerning the use of financial
information for recording investment in an associated company by equity method, all of land,
building and machinery not being revalued, accrued interest relating to obligations on
constructions and machinery which was not recorded, and the effect of offset transactions and the
limitation in scope of my audit. In addition, I have provided further information in the emphasis
of the matters paragraphs in the audit report relative to the influence of the economic conditions in
Thailand and the Asia Pacific Region in general which affects the Company's and subsidiaries'
business operations, the change in accounting policy regarding revaluation surplus of the
Company and subsidiaries, uncertainties of recoverability of rental deposits if either party
terminates the lease agreement before due date, transactions with related parties, the Planner and
the Plan Administrator and gains from offset transactions on debentures and debt instruments
between the Company and two subsidiaries. The accompanying consolidated balance sheet of the
Company and subsidiaries as at December 31, 2000 and the separate balance sheet of the
Company as at the same date, which have been presented for comparatives, are parts of the
financial statements on which I have audited and reported. I have not conducted any audits on the
financial information of the Company and its subsidiaries subsequent to the date of audit report.
I draw attention to Notes to the financial statements as follows:
As described in Note 1.2 to the financial statements the operations of Thai
Petrochemical Industry Public Company Limited and subsidiaries, may continue to be influenced
by the economic conditions in Thailand and the Asia Pacific Region in general.
As described in Note 1.7 to the financial statements, in the period of 2000, the
Company and subsidiaries changed their accounting policy with respect to revaluation surplus
included in equity, which previously was transferred to the income statement and is now
transferred directly to retained earnings when the surplus is realized. In order to conform to the
amendment of accounting standard, the comparative prior year financial statements have been
restated.
As described in Note 1.7 to the financial statements, in the period of 2000, a
subsidiary changed its account recording of accrued interest expense relating to obligation on
constructions and machinery and previously charged as expense in the statement of income based
on default rate. As from the beginning of 2000, the subsidiary has not recognized accrued interest
expense based on default rate because the above interest rate has not been finalized and the debt
restructuring agreement has been approved by such subsidiary.
As described in Note 2.1 to the financial statements, the Company and
subsidiaries have significant transactions with related parties, the Planner and the Plan
Administrator. The effects of these transactions were reflected in the financial statements on the
basis determined by the Company and subsidiaries with those related parties, the Planner and the
Plan Administrator.
As described in Note 2.14 to the financial statements, the Company adjusted
gains from the Company's and subsidiaries' debenture repurchase to the beginning balance of
deficit amounting to Baht 1,437.28 million in the consolidated financial statements and
recognized gains from repurchase of debenture as extraordinary items in the consolidated
statements of income for the three-month period ended March 31, 2000 amounting to Baht 240.07
million.
Nirand Lilamethwat
Certified Public Accountant
Registration Number 2316
KPMG Audit (Thailand) Limited
Bangkok, May 9, 2001
FINANCIAL STATEMENTS AND AUDITOR'S REVIEW REPORT
THAI PETROCHEMICAL INDUSTRY PUBLIC COMPANY LIMITED
AND SUBSIDIARIES
FIRST QUARTER ENDED MARCH 31, 2001
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