HEMRAJ : Annual Report 2002

Annual Report-Eng_rev.1_Mar 31, 2003.doc

2. Message from the Board of Directors

Hemaraj Land And Development Public Company Limited accomplished improved results in all operating areas of the business in 2002. Total Revenue for 2002 was Baht 1,811 million versus Baht 1,258 million in 2001. Net Profit for the corresponding period was Baht 639 million versus a loss of Baht (493) million the prior year. The profit included currency, debt restructuring, investment and other areas as outlined further in the report. The Thailand industrial property market in 2002 was flat while Hemaraj leases and sales increased to 351 rai and 19 new customers. Hemaraj achieved double digit increases in the four areas of its business, industrial estates, industrial estate utilities, lease and sale of SME factories and other utilities and services. Sales from industrial estates now at only 60 % of total operating revenue provide risk diversity and predictability of growing returns. On the capital side, Hemaraj had raised Baht 284 million in new equity in January of 2002 through a rights issue. All debt at the end of 2002 have been either restructured or paid and are active with the exception of the unsecured euro convertible bond, which we are trying to settle further. Total liabilities have decreased year over year from Baht 4,952 million in 2001 to Baht 3,615 million in 2002. Total Shareholders Equity has correspondingly increased from Baht 1,177 million to Baht 2,127 million in 2002, although there is an open issue on the classification of sinking fund assets. Net Debt to Equity decreased to 1.68 to 1 times in 2002 from 4.07 to 1 times in 2001, still a level higher than our target. The continued Hemaraj strategy to be the marker leader in Thailand as a developer of complementary property, utility, and service customer solutions will broaden the revenue base for the company. These will provide a more predictable revenue stream in a volatile industry and perhaps global investment climate as well as to provide growth opportunities for the company. Hemaraj values the support of its stakeholders, namely our shareholders, management, employees, customers, creditors, and business partners. Our obligation is to provide relevant information and consistent company performance to these stakeholders and to manage the company in line with the practices of good corporate governance. We would like to express our appreciation on behalf of the Management and Board of Directors for entrusting us with this responsibility.

Respectfully submitted,

David R. Nardone Sawasdi Horrungruang President & Chief Executive Officer Chairman of the Board of Directors 28 March 2003 28 March 2003


3. The Company’s Business Profile

Hemaraj Land And Development Public Company Limited is a leading Thailand developer of property, utilities, infrastructure and services. The Company has assets of Baht 5.742 billion. Hemaraj was established in 1988 and listed on the Stock Exchange of Thailand (SET) in 1992. The Hemaraj strategy is to be the market leader in Thailand as a developer of complementary property platform customer solutions. By providing the customer with an integrated solution such as industrial estates, utilities and services, this creates for the Company predictable higher margin growing revenue opportunities. For Shareholders, this forms the basis for predictable growing and superior returns. 1. Industrial Estate Development Hemaraj’s three industrial estates are Chonburi Industrial Estate (Bowin), Eastern Industrial Estate (Map Ta Phut), and

Eastern Seaboard Industrial Estate (Rayong). At the end of 2002, the combined land area of the industrial estates was 14,215 rai (5,686 acres) with 191 industrial customers, and over US$ 7.5 billion of customer investments. The Hemaraj target market aims at higher end infrastructure intensive industrial customer, based around process or industrial clusters such as Automotive, Petrochemical, Steel and Power.

Hemaraj provides the industrial estate land infrastructure and utility development as well as managing the provision of public and private utilities, design, management, and environmental approvals. The capital-intensive industrial sectors allow Hemaraj to provide a higher level of shared infrastructure much like a municipality with utilities and services. This delivers to the customer the lowest long-term cost of ownership. This also protects the margins for the development in a competitive market environment.

The Chonburi Industrial Estate (CIE) has a customer base of steel mills and power generation with some auto parts, electronics, building materials and general industries. There is an export processing zone which has mixed success to date and a number of SME factories for sale or lease. In 2002, we decreased our primarily undeveloped land bank at CIE with a debt for property swap. The Eastern Industrial Estate (EIE) is located adjacent to the Map Ta Phut Petrochemical Complex and designed for heavy industry including steel, petrochemical and chemical industries. The infrastructure is designed for a high volume of raw and potable water, wastewater and power capability with optional utility services such as power, steam, de-mineralized water and pipe rack distribution. The Phase II development of EIE will be available for sale from early 2003. Although the sales at EIE have been minimal and disappointing since 1997, there is considerable activity anticipated going forward with increased chemical prospects for Thailand and the expansion of utilities for current customers. The Eastern Seaboard Industrial Estate (Rayong), or ESIE is a 60:40 joint venture with Siam Food Products. The Eastern Seaboard Industrial Estate developed only since 1995 is a world-class integrated industrial environment renowned as the “Detroit of the East” with 79 automotive supply-line companies and 9 of the world’s top 10 automotive suppliers. The Eastern Seaboard Industrial Estate prospects remain strong with one third of Thailand’s volume automotive vehicle production at ESIE with Ford, Mazda, GM, Opel, and Isuzu domestic and export platforms. Through 2002, ESIE had sales (some lease) of 3,156 rai and 126 customers in total. In 2002, ESIE launched Phase IV A, B, and C with new customers in each area, namely Phase IV A for expansion of SME factories, Phase IV B for Toyota Tsusho Techno Park and Phase IV C for a major Maxxis tire production facility. The Phase V development at ESIE is available from mid 2003 with land additions continuing.

2. Industrial Estate Utilities

Utility revenue in industrial estates are mainly through the sale of raw water, treated potable water, gray recycled water, waste water treatment, and general maintenance fees. The utility revenue is a recurring and growing income stream. In

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addition, the majority of the utility asset base has been amortized in the cost of the industrial land. With unique exposure to the petrochemical, power, steel, automotive and major utility users, Hemaraj forecasts the utility revenues to increase in excess of 20% per annum over the next 5 years.

With the restructured IEAT contracts for Eastern and Chonburi industrial estates in the 4th quarter of 2001, Hemaraj as the developer owns and manages 100% of the utility provision, revenue, and infrastructure services. The Eastern Seaboard Industrial Estate had used this concept since its inception. The three industrial estates have been awarded the “Best Environmental Management” in 1998, 2000, and 2001. This award was by the Office of Environmental Planning and Policy (OEPP) under the Ministry of Science and Technology. All three Hemaraj industrial estates have achieved the ISO 14001 certification by BVQI enhancing the environment for its customers and surrounding community alike. At ESIE, Hemaraj has developed an environmental friendly reed bed vegetation waste water system that has been audited by the Asian Institute of Technology for its efficiency. This system is being studied by various Thai government agencies for potential use.

3. SME Factories for Lease and Sale Several trends will continue to increase the attractiveness of the Hemaraj SME factories for sale or lease. International manufacturers in general prefer to set up factories within industrial estates, as they are dependent on a high level of infrastructure and industrial services. Secondly, industries have competitive advantages to cluster, even more so in Thailand due to under developed transportation networks, due to emerging support services, integrated supply line management, and the interdependence of anchor manufacturers in the automotive and petrochemical industries particularly. Third, financing costs in Thailand have been reducing as the access to capital is not artificial given a floating Baht. The company preference to lease can provide a flexible entry to the market with reduced capital costs. Manufactures with simple process buildings want to concentrate on their strategic capital areas, non core investments can be outsourced leading to lower total investment costs and thus a higher return on capital investment. As of December 31, 2002, 58 SME factories have been built with a total area of 90,462 square meters. Of these, 15 units or 29,330 square meters were sold and 28 units of 41,332 square meters are leased.

4. Other Utilities and Industrial Services

Utility and Industrial Services include power generation through Hemaraj 5% direct shareholding in Bowin Power (a 713 mw. IPP project) directly and indirectly through a 2002 year end 16.99% shareholding in Glow, both with Tractebel, a Suez Group company, 40% shareholding with Elyo-H Facilities Management Limited, a joint venture with Teo Hong Silom and Tractebel, wholly owned pipe rack distribution by subsidiary Eastern Pipeline Services, and wholly owned construction management design and engineering services under H-Construction Management and Engineering (HCME). These areas provide synergy where Hemaraj has access to the industrial customer market.

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Economic & Competitive Condition The Thai economy in 2002 showed stronger than expected GDP growth of 4.8% comparing to 1.9% in 2001. The main driving forces in 2002 included higher private consumption, increases in private investment and the government’s spurred domestic demand. Low inflation with a rate at 0.7% and low interest rates afforded consumers increased purchasing power. In 2002, the low level of interest rates and higher consumption of vehicles and residences boosted the Private Consumption Index to 4.4%. Manufacturing production growth was up significantly by 8.2% comparing to 1.3% in 2001, which led to rising capacity utilization at 59.7%, a 6% increase year over year. For the year 2002, the Private Investment Index grew by 11.9%. Export volumes for Thailand were increased to USD$ 66.89 billion, a 5.8% increase. Imports increased by 4.6% to USD$ 63.43 billion US resulting in a higher trade balance surplus. The revenue collection exceeded the target by 5.6% resulting in lower deficit at 2.2% of GDP, compared to a 3.6% budget deficit. The Residential sectors for housing and condominiums in 2002 showed the highest growth since the economic crisis in 1997 while the Industrial market sector remained stagnant with only a 1.2% growth. One factor was increased investment flow to China but a significant factor further were the state of world economies. Sales of industrial land were 1,848 rai in 2002 with higher transactions but less large land plots. Rayong, Chonburi and Ayutthaya were prime locations for industrial estate demand in 2002. The Board of Investment (BOI) approved projects decreased by 12% to 721 projects for January to September of 2002. Thailand remains a growing regional production hub in the ASEAN automotive industry, particularly for one-ton pickups, with a capacity approaching one million vehicles per year. The industry has grown from being one based on import substitution to becoming an export-oriented industry with 175,000 exported vehicles in 2002. The 2003 growth in Thailand should continue to be favorable, particularly for automotive and petrochemical investment. The Thailand and regional economies could reflect a slowdown due to geopolitical risks and deteriorations in world economies, influenced by higher oil prices and instability.

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4. Management Analysis

1. Operating Performance The 2002 consolidated financial results show a significant improvement with Net Income of Baht 639 million compared to a Net Loss of Baht 493 million for the year 2001. The causes of such change are highlighted as follows:

Industrial land sales for 2002, being from the sale of 351 rai and 19 new customers, were Baht 633 million. This represents an increase in sales of 18% compared to Baht 569 million in sales from 261 rai and 22 new customers in 2001. Service Income from Utilities increased to Baht 284 million in 2002, reflecting an increase of 19% compared to Baht 240 million in 2001. Income from the Sales and Lease of Mini Factories increased to Baht 116 million in 2002, reflecting an increase of 25% compared to Baht 93 million in 2001. Total Operating Revenue was Baht 1,060 million compared to Baht 891 million in 2001, representing a 19% increase. As important, Hemaraj has diversified its revenue stream to have less dependence on the sale of industrial land. Total Revenue in 2002 was Baht 1,811 million versus Baht 1,258 million in 2001, a 44% increase overall. Earning per share was Baht 1.84 compared to Net Loss per share of Baht 6.97 per share in 2001.

In 2002, the company realized gains on foreign exchange of Baht 60 million and from an affiliated company of Baht 274 million. Other non-operating gains of Baht 453 million net included Gains on Sales of Securities, Loan Restructuring and changes in Reserves and Revaluations.

2. Financial Status

The consolidated Balance Sheet in 2002 is summarized as follows. Total Assets in 2002 were Baht 5,742 million, a 6% decrease from Baht 6,129 million in 2001. Total Current Assets in 2002 were Baht 3,218 million compared to Baht 2,927 million in 2001 including Land held for Real Estate development of Baht 2,356 million, reduced from Baht 2,401 million in 2001. Other Assets were Baht 2,524 million in 2002, reduced from Baht 3,202 million in 2001. This includes Land held for commercial purposes not under development of Baht 1,085 million in 2002 reduced from Baht 1,757 million in 2001. The reduction mainly resulted from transferring land in Chonburi to settle a bank loan. Total Liabilities in 2002 were Baht 3,615 million, a 27% decrease from Baht 4,952 million in 2001. The significant reductions were mainly from various liability restructuring payments and settlements as described in the notes. The convertible bond is not restructured; however, there was a meeting with bondholders in September 2002 and have been ongoing communications with bondholders in order to accomplish this. In January of 2002, Hemaraj raised Baht 283 million with the subscription of a 1/4 rights issue. The outstanding warrants were adjusted. The 2002 Net Debt to Equity ratio as a result of the new capital and reduced debt has improved to 1.67 times from 4.07 times in 2001. Total Shareholders Equity in 2002 was Baht 2,127 million versus Baht 1,177 million in 2001, or an 81% increase.

3. Risk Factors & Others

The company faces risks from foreign exchange rates. As of December 31, 2002, Hemaraj Land And Development Public Company Limited has USD nominated liabilities of USD 47.24 million. The changes of foreign exchange between Baht and USD will directly impact the local currency book value of these debts. In general, the company policy is to match currencies where possible. The company has no open derivative positions and does not use derivative instruments. The company faces investment risks associated with the external political and economic environment. The company is dependent on the attraction of the investment levels in Thailand as opposed to other countries competing for foreign direct investment, particularly China. In addition, the company operates in a highly competitive marketplace with established competitors, some with resources greater than the company. The company is dependant on knowledge base employees and key management personnel, the access to capital, and the consistency of government policies for investment promotion.


5. Management Structure for Internal Control

5.1 Board of Directors 1. Mr. Sawasdi Horrungruang Chairman of the Board of Director 2. Mr. Thongchai Srisomburananonta* Director 3. Mr. Thavorn Anankusri Director 4. Mr. Prateep Trilohaka** Director 5. Mr. David Richard Nardone Director 6. Mr. Sudhipan Charumani Independent Director 7. Mr. Peter John Edmondson Independent Director 8. Mrs. Punnee Worawuthichongsathit Independent Director 9. Mr. Vivat Jiratikarnsakul Director 10. Ms. Pattama Horrungruang*** Director - The Board of Directors has the authority to formulate the strategy of the company to meet the objectives of the

return of its shareholders of the company in accordance with the laws, objects and Articles of Association, and the principles of good governance including the resolutions of the shareholders’ meeting. * Mr. Thongchai Srisomburananonta had been the company’s director until September 2002. ** Mr. Prateep Trilohaka had been the company’s director until March 2002. *** Ms. Pattama Horrungruang has joined the company since 1st January 2003.

5.2 Executive Committee

1. Mr. Sawasdi Horrungruang Chairman of the Board of Director 2. Mr. Thongchai Srisomburananonta* Vice Chairman of the Board 3. Mr. Thavorn Anankusri Vice Chairman of the Board 4. Mr. Prateep Trilohaka** Vice Chairman of the Board 5. Mr. David Richard Nardone Executive Director 6. Mr. Vivat Jiratikarnsakul Executive Director 7. Ms. Pattama Horrungruang*** Executive Director - The Executive Directors shall have the duty as assigned by the Board of Directors in formulating and reviewing

specific strategic or policy issues in lieu of committees or more frequent meeting for the business activities of the company. * Mr. Thongchai Srisomburananonta had been a member of the Executive Committee until September

2002. ** Mr. Prateep Trilohaka had been a member of the Executive Committee until March 2002. *** Ms. Pattama Horrungruang has joined the Executive Committee since 1st January 2003.

5.3 Audit Committee

1. Mr. Sudhipan Charumani Chairman of the Audit Committee 2. Mr. Peter John Edmondson Member 3. Mrs. Punnee Worawuthichongsathit Member

- The Audit Committee of the company has the scope of duties and responsibilities as outlined below, and shall

report to the company’s Board of Directors as follows:

1. To review that the Company has correct and sufficient financial reports; 2. To review that the Company has appropriate and efficient internal control and internal audit systems; 3. To review that the Company complies with laws relating to securities and securities markets, as well as

with SET’s rules and regulations and any other law relating to the Company’s business; 4. To consider, select and propose the appointment of the Company’s statutory auditor and to propose his

professional fees; 5. To consider the Company’s correct and adequate disclosure of information with regards to third party

transactions or any other transactions with a conflict-of-interest tendency; 6. To include in the Company’s annual report the result of the audit committee’s review work, inclusive of an

al statements, information disclosure therein and the internal control system. This statement shall be signed by the audit committee chairman;

7. To report the audit committee’s work to the Company’s Board of Directors at least on quarterly basis; 8. To take part in giving opinion on the appointment, removal, work performance and remuneration of the

internal auditor; and 9. To perform any other work as may be assigned by the Company’s Board of Directors with the consent of

the audit committee.


5.4 Investment & Risk Management Committee The Company has not appointed a specific Investment and Risk Management Committee. The paramount

responsibility of the Board of Directors is to formulate, examine, and assess the company strategy and investment decisions related to the appropriateness, return to shareholders, prudent levels of risk, and other criteria. The Board of Directors uses a number of safeguards in this risk scope with the Audit Committee, the outsourced internal auditor, the external auditor in terms of compliance with GAAP, and the use of professional legal advisors to safeguard the legal and regulatory compliance in Thailand that the Company is subject to. The Company fully utilizes, outside professional management and financial advisers in the assessment of alternative strategies and courses of action including financial, the diversity wisdom and experience level of the Board of Directors, and the professional management experience and qualifications of the Company management.

5.5 Remuneration Committee

The Company has not appointed a Remuneration Committee to date. Remuneration is the responsibility of and approved by the Shareholders, the Board of Directors and the Company management as specified. The compensation for the Company management and employees is the responsibility of the President and CEO using internal Company, board directive and market guidelines. The compensation directive is to fairly compensate management and employees based on their performance, their contributions to the Company, and the company performance and to retain key employees as a strategic asset of the Company. The Board of Directors approves employment letters or agreements for any key executive management. The compensation to company Directors, Board Advisers, and Executive Committee are considered in the Board of Directors and are to approved by the Shareholders of the Company, or in some cases the Shareholders of the joint venture or subsidiary companies. The objective in assessing the compensation level of Directors is to be generally in line with the market and to compensate based on contribution and the performance of the Company.

5.6 Good Corporate Governance Committee The Company fully embraces the principles of Good Corporate Governance and this is the responsibility of the

Board of Directors specifically to ensure its full adherence within the organization. The underlying principles of good corporate governance relies on the principles of equitable treatment and fairness of all stakeholders, the full and meaningful disclosure, and the transparency of the Company its operations and information. The stakeholders beyond all sizes of shareholders include management and employees, customers, suppliers, external organizations and businesses, joint venture partners and the business community, regulatory bodies, creditors, and the communities where we operate in.

5.7 Company Management & Structure

1. Mr. David Richard Nardone President & Chief Executive Officer 2. Mr. Vivat Jiratikarnsakul Executive Vice President 3. Ms. Pattama Horrungruang* Senior Vice President & Chief Financial Officer 4. Mr. Khamhoung Ratsamany Director – Industrial Estate Operations 5. Mr. Tanin Subboonrueng Director – Development 6. Mr. Sirisak Kijraksa** Director – Accounting 7. Ms. Somjai Wachiraha** Director – Finance 8. Mr. Paopitaya Smutrakalin** Assistant Director – Planning and Investor Relations 9. Ms. Jinnapat Tongviseskul** Assistant Director – Marketing 10. Mr. Apichat Trongsukson** Manager – Information System & Services - The Management shall have the responsibilities as appropriately assigned by the President & CEO in order to

manage the business of the company and to implement the strategies and policies as specified by the Board of Directors of the company. * Ms. Pattama Horrungruang has joined the company since 1st January 2003. ** Mr. Sirisak Kijraksa, Ms. Somjai Wachiraha, Mr. Paopitaya Smutrakalin, Ms. Jinnapat Tongviseskul and

Mr. Apichat Trongsukson have been promoted, effective 1st January 2003.

5.8 Selection of Company’s Director and Management

The recommendation of new Directors to serve on the Board shall be deliberated by the Board of Directors. A Director nominee may be proposed by, any Director, shareholder, or others for consideration. The Board of Directors proposes the candidates to the Shareholders meeting for approval. The executive management appointment and selection is the responsibility of the President & CEO. The President is the Chief Executive Officer appointed by the Board of Directors. The objective in selecting Directors is to be able to attract knowledgeable


experienced members to the Board of the Company and the committees including independent Directors and the Audit Committee, who can assist the company in strategic initiatives to strengthen the company, maximize the return to all shareholders in a controlled way, in compliance with good corporate governance practices. The objective further is to provide a balance between the management of the Company represented on the Board with the Independent Directors and significant Director shareholder representatives. The Directors of the Company are provided with Directors liability insurance. The position of Chairman of the Board is separate from the President and CEO in order to safeguard the interests of the Shareholders and the management of the Company.

5.9 Remuneration for Director and Management

Monetary Remuneration during the fiscal year (January-December) 2002: In 2002, the total remuneration for 9 directors was Baht 12,730,285.17. In 2002, the total remuneration for 10 Executive Committee and management was Baht 68,243,085.05.

5.10 Good Corporate Governance

The Board of Directors are responsible for the Good Corporate Governance of the Company, and in their role to direct monitor and supervise the strategy policy and control of the Company provide this direction to the Management of the Company to be adhered to. Good Corporate Governance is developed in conformity with the 15 guidelines of the SET’s Code of Best Practices. 5.10.1 Good Corporate Governance Policy

The Company policy is to fully embrace the principles of Good Corporate Governance and this is the responsibility of the Board of Directors specifically to ensure its full adherence within the organization and by practice within the management and organization of the Company. The underlying principles of good corporate governance relies on the principles of equitable treatment and fairness of all stakeholders, the full and meaningful disclosure, and the transparency of the Company its operations and information.

5.10.2 Rights and Equitable Treatment to Shareholders All shareholders are invited to the annual shareholder’s meeting. The company would send out an invitation letter and agenda of each meeting to the shareholders prior to the meeting for their consideration. Shareholders have voting rights equal to the number of shares owned and must exercise all eligible votes to safeguard their investment in voting for a resolution, an opinion for a significant decision making, for example, regulations amendment, capital increase. All shareholders have right to receive correct, up-to-date, fully disclosed information. Shareholders wishing to appoint a proxy representation may appoint any person or may elect to appoint the Independent Director and Chairman of the Audit Committee as recommended by the SEC.

5.10.3 Rights of Various Groups of Stakeholders The company realizes and respects the rights of various groups of stakeholders, including shareholders, minority shareholders, employees, customers, creditors, vendors, the public and communities through various procedures such as the Shareholders’ Meeting, providing information on employee’s rights concerning welfare benefits, receiving all inquiries from customers and nearby communities, environmental education and community programs in the areas where we operate, contracts with customers and ongoing dialogue, and contracts entered with vendors and suppliers.

5.10.4 Shareholders’ Meeting A Shareholders’ Meeting is to be held at least once a year which the company has attempted to ensure full participation of shareholders and dissemination of information to shareholders by sending invitation letter to each shareholder, advertising the meeting in the local media, and including the agenda prior to the meeting for consideration for shareholders to vote for resolution. The company’s Board of Directors provides information and answers to questions from the participants. The shareholders could also inquire and contact the Company through the company’s Investor Relations management, by attending investment briefings, and through the company’s website.

5.10.5 Leadership & Vision The company’s Board of Directors, selected to have a broad experience level, formulates the company’s vision, strategy, preparation of its business plan, and approves its operation and implementation plans. The Board of Directors also supervises the company’s business as to effectively conform to its business plan, a prudent level of risk and control, and to maximize the benefit of the Company and its stakeholders.

5.10.6 Conflict of Interest • Conflict of Interest


The company’s Board of Directors and Management have been informed for legal and ethical conflict of interest and related transactions guidelines. The company has disclosed, in accordance with the regulations of Stock Exchange of Thailand, such information, detail and reason/necessity, if any in the company’s Annual Report and the 56-1 Form. The Company further uses the Audit Committee, internal auditors, external auditors, and external lawyers to review compliance.

• Insider Trading Controls The Company informed all Board members and executive management about the Notification of SET concerning Rules, Procedures, and Disclosure of securities holdings.

5.10.7 Business Ethics The Company policy from the Board of Directors, communicated to both management and employees in the employee handbook is to conduct business with sound ethics toward the company, all stakeholders, the public, and the community.

5.10.8 Balance of Power for non-management Directors The company’s Board of Directors consists of 9 directors which are:

• Directors 6 persons • Independent Directors - Audit Committee 3 persons

Therefore, the company has 3 directors who are independent and are not involved in the daily operations of the company.

5.10.9 Aggregation or Segregation of Positions The company’s Chairman of the Board of Directors is not the same person as the President & CEO and the structure of the Board of Directors consists of Independent Directors comprising 1/3 of the Board. This creates a balance between the interests and representation of the shareholders and the management as well as independent persons whom could review the company’s business plans, controls, and create a balanced view.

5.10.10 Remuneration for Director and Management The remuneration of the company’s Directors and Management has been considered and approved as

outlined. This is in order to be competitive in the market in attracting highly qualified individuals, to reflect the contributions and performance of the individuals in meeting the company objectives, and consistent with the performance of the Company.

5.10.11 Board of Directors’ Meeting

During 2002, from January to December, the company held 10 Board of Directors’ Meetings and 13 Executive Committee Meetings. There were calls for regular meetings and/or for emergency meetings when need of the directors/committee’s consideration, opinion and decision by sending out prior notice, invitation and agenda to all directors and committee.

5.10.12 Committee The authority and responsibility of the Board and its committees are clearly defined. The report of the committees’ quarterly meeting as well as any items for further consideration are reviewed by the Board of Directors and Management of the company as appropriate for further action.

5.10.13 Controlling System & Internal Audit The Board of Directors Audit Committee controls the work of the external auditor, the outsourced internal audit function, the review of management information, reporting, risk controls, and systems, and the performance of the management specific to these areas. They meet and report quarterly to the Board of Directors. Ultimately, the management of the company with relevat professionals is tasked with providing a level of control to manage the performanc of the company in a controlled way.

5.10.14 Report from the Board of Directors on the company’s Financial Statements The Board of Directors is responsible for thoroughly consideration and carefully estimation in order to produce the company’s financial statements which are to be in line with the generally accepted accounting standard. The company has utilized and appropriate accounting policy and exercised regularly. In addition, the Board of Directors has had a resolution to appoint the Audit Committee and the Internal Auditors whom are not the company employees to observe the company’s internal control system and to verify that the company would have accurate and adequate financial statements.

5.10.15 Relations with Investors


The Company actively seeks to provide relevant information to all investors to fairly reflect shareholder value. In addition to the SET information and releases, the company website, www.hemaraj.com and [email protected] allow, even the smallest investor, to search for information concerning the company, its activities, and financial information. The Company has also designated one management executive for Investor Relations. The President meets often with interested investors and the Company hosts analyst meetings and industrial estate information tours.


6. Shareholding & Organization Structure

Organization Structure of Hemaraj Land And Development Public Company Limited as of January 2003

Top Ten of Hemaraj Land And Development’s Shareholders as at 27 December 2002

Name No. of Shares% of total Issued

Shares

1 Thailand Securities Depository Co., Ltd. for Depositor (Thai) 128,974,734 36.36%

2 Miss Phenpunnee Horrungurang 40,282,371 11.36%

3 Mr. Sumeth Horrungruang 31,444,757 8.86%

4 Miss Kanokthip Nuamcharoen 17,000,000 4.79%

5 Mrs. Vasana Horkaew 16,800,000 4.74%

6 Miss Charuwan Chaisupawan 14,500,000 4.09%

7 Mr. Kiat Yingkiattaweesuk 13,014,514 3.67%

8 Thailand Securities Depository Co., Ltd. for Depositor (Foreigner) 12,963,044 3.65%

9 Sun Tech Group Public Company Limited

Board of Directors

Executive Committee

President & CEO

IE Operations Finance Account

Senior Vice President

Hemaraj OrganizationThe Company's organization structure as of January 2003

Shareholders

Audit Committee

Internal Audit

Corporate Marketing DevelopmentPlanning & InvestorRelations

Information System &Services

Business Development

Executive Vice President

Customer Development Legal


7. General Information

Name Address Nature of Business Paid Capital % of(Mil.Baht) Investment 2002 % 2001 % 2000 %

Hemaraj Land And Development 18th Floor, UM Tower, Industrial Estate Developer 3,547 453.02 25% 287.53 30% 138.11 20%Public Company Limited 9 Ramkhamhaeng Rd., Suanluang,Registration No. 141 Bangkok 10250Share Capital 1,300,000,000 shares Tel.(662) 719-9555Issued 354,742,385 shares Fax (662) 719-9546-7

www.hemaraj.com

E-mail: [email protected]

Hemaraj International Limited (1) Scotia Centre, 4th Floor 100P.O.Box 2804, George Town, ($1 = 25.29 Baht)

Grand Cayman, Cayman Islands

H-International (BVI) Company Limited (2) Romasco Place, Wickhams Cay 1, 100 4% 0% 4%P. O. Box 3140, Road Town, TortolaBritish Virgin Islands.

Eastern Industrial Estate Co., Ltd. 18th Floor, UM Tower, Industrial Estate Developer 400 11% 22% 29%9 Ramkhamhaeng Road, Suanluang,

Eastern Pipeline Service Co., Ltd. (3) 18th Floor, UM Tower, 60 1% 2% 2%9 Ramkhamhaeng Road, Suanluang,

Eastern Seaboard Industrial Estate 18th Floor, UM Tower, Industrial Estate Developer 358 60 43% 78% 64%(Rayong) Co., Ltd. 9 Ramkhamhaeng Road, Suanluang,

H-Construction Management 18th Floor, UM Tower, Supervision Service 0% 0%and Engineering Co., Ltd. 9 Ramkhamhaeng Road, Suanluang,

Glow Company Limited (5) 195 Empire Tower, 38th - Park Wing, 15%

(Formerly known as H-Power Company Limited) South Sathorn Road, Yannawa, Sathorn

Industrial Power Company Limited (4) 195 Empire Tower, 38th - Park Wing, Co-Generation Power Plant 800South Sathorn Road, Yannawa, Sathorn

Operation Power Services Company Limited (4) 195 Empire Tower, 38th - Park Wing, Operation&Maintenance 1South Sathorn Road, Yannawa, Sathorn

Bowin Power Company Limited (4) 195 Empire Tower, 38th - Park Wing, Independent Power

South Sathorn Road, Yannawa, Sathorn

Industrial Water Supply Company Limited (4) 195 Empire Tower, 38th - Park Wing, Demineralised Water Plant 21South Sathorn Road, Yannawa, Sathorn

Elyo-H Facilities Management Limited 107/1 Moo 4, Eastern Seaboard Facilities Management Services 26 0% 0%Industrial Estate (Rayong),Pluakdeang, Rayong

Eastern Fluid Transport Company Limited 618 Nimom Makkasan Road Management and Maintenance 10 15

Makkasan, Ratchthewi

Total Revenue : Hemaraj Land And Development PLC. and Subsidiaries 1,810.62 100% 954.51 100% 679.99 100%

Remark

1) Incorporated in the Cayman Islands2) Incorporated in the Territory of the British Virgin Islands3) Subsidiary of Eastern Industrial Estate4) Indirectly held through Glow Co., Ltd.5) Partially sold shares in 2002

General Information

Subsidiary Companies

Associated Companies

Revenue (Mil. Baht)

Revenue Structure


8. Board of Directors, Executive Committee, Audit Committee and Management

Period PositionOrganization / Company / Type of

1 Mr. Sawasdi Horrungruang 62 Honorary Doctorate Degree Chairman of The Associate Thai Industrial Association

Chairman of the Board of Directors Bachelor Degree of Business Administration,

Humanity Faculty, Burapha UniversityT H K Real Estate

2 Mr. Thongchai Srisomburananonta 50 - Since 1989 - -

Vice Chairman of The Board

3 Mr. Prateep Trilohaka Passed Bachelor Degree Faculty of Economics - -

Vice Chairman of The Board Away Thammasat University

4 Mr. Thavorn Anankusri 61 - -

Vice Chairman of The Board

5 Mr. David Richard Nardone 47 MBA - -

President & CEO Northeastern University, Boston, USA

6 Mr. Sudphipan Charumani 59 Charter Accountant Institutes - -

Independent Directorand Chairman of Audit (Britian and Wales)

7 Mr. Peter John Edmondson 52 Bachelor of Science in Chemistry (Honor) - -

Independent Director and Audit Committee University of Sheffield, England

8 Mrs. Punnee Worawuthichongsathit 51 Bachelor of Accounting (Honor) - -

Independent Director and Audit Committee Chulalongkorn University

9 Mr. Vivat Jiratikarnsakul 47 Bachelor of Sanitary, Faculty of Engineering Since 1989 - -

Executive Vice President Chulalongkorn University

10 Ms. Pattama Horrungruang 40 MBA Since 2003

Senior Vice President Thammasat University

11 Mr. Khamhoung Ratsamany 36 MBA Since 1995 -

Director - Industrial Estate Operations Bangkok University -

12 Mr. Tanin Subboonrueng 39 MBA, Business Administration Since 1996 - -

Director - Development Assumption University

13 Mr. Sirisak Kijruksa 42 Bachelor of Accounting Since 1990 - -

Director - Accounting Bangkok University

14 Ms. Somjai Wachiraha 42 Bachelor of Business Administration - -

Director of Finance General Affairs, Ramkhamhaeng University

15 Mr. Paopitaya Smutrakalin 32 - -

Assistant Director - Planning & Investor Relations Drexel University, Philadelphia, USA

16 Ms. Jinnapat Tongviseskul 32 MBA, Economic & Administration - -

Assistant Director - Marketing Chulalongkorn University

17 Mr. Apichat Trongsukson 38 MBA - -

Manager - Information System & Services-

-

-

-

-

-

-

-

-

-

-

Management (%), as

Experiences Related with the Company Age Graduation


9. Checklist to the SEC 56-2 Form

Page

1. General Information 1.1 Financial Highlights 1

1.2 Board of Directors, Executive Committee, Audit Committee and Management

1.3 General Information – The Company & its Subsidiaries

1.4 Shareholding & Organization Structure 1.5 Project Summary

1.6 Other References 2. Message from the Board of Directors 3. The Company’s Business Profile

3.1 Nature of Business

3.2 Core and Related Business 3.3 Revenue Structure by Business Line

4. Economic and Competitive Condition

5. Management Analysis 5.1 Operating Performance

5.2 Financial Status

5.3 Risk Factors & Others 6. Management Structure for Internal Control

6.1 Board of Directors and Executive Committee

6.2 Audit Committee

6.3 Company Management and Structure 7. Selection of Company’s Director and Management

8. Remuneration for Director and Management

9. Stocks held by Directors / Management 10. Good Corporate Governance

11. Report of Certified Public Accountant

12. Financial Statement and Note to Financial Statement


10. Project Summary

Project Summary

As of 31 December, 2002

Industrial Estate Cumulative (Rai) Sold Industrial Area Total Area (Rai) % of Completion

Chonburi Industrial Estate (Bowin)Phase I, II (A,B) 1,565** 80% 1,950 2,428 100

Phase II (C) , (D) 503 93% 542 1,099 100

Phase III 200* 330

Total Chonburi 2,068 2,692 3,857

Eastern Industrial Estate (Map Ta Phut)

Eastern Seaboard Industrial Estate (Rayong)

Phase I 1,536 100% 1,536 2,075 98

Phase II (A) 926** 90% 1,032 1,442 98

Phase II (B) 494** 60% 823 1,156 97

Phase IV (A) 3** 3% 90 90 90

Phase IV (B) 37 70% 53 191 99

Phase IV (C) 168 59% 286 376 86

Expansion: 1,255* 2,320***

Total Eastern Seaboard 3,164 5,075 7,650

Total (Rai)

6,563 9,568 14,215

* estimate** includes land lease*** Land in hand plus fixed option to purchase from Siam Food Products Plc.Note: 1 Rai = 1,600 Sq. meters or approx. 0.4 acres.

%

HEMARAJ LAND AND DEVELOPMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

AND

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS’ REPORT

EXPRESSED IN

THAI BAHT

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS’ REPORT

To the Shareholders of Hemaraj Land and Development Public Company Limited

We have audited the consolidated balance sheet of Hemaraj Land and Development Public Company Limited and its subsidiaries as of December 31, 2002, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the year then ended. We have also audited the Company’s financial statements for the same periods of Hemaraj Land and Development Public Company Limited. 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 statement based on our review. The consolidated financial statements and financial statements of Hemaraj Land and Development Public Company Limited for the year then ended December 31, 2001 for comparison were audited by the other auditor with an unqualified opinion reported on February 15, 2002.

We conducted our audits in accordance with the generally accepted auditing standard. These standards require

that we plan and perform the audits to obtain moderate assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The Company and its two subsidiaries had recorded the Sinking fund, which had transferred the right to the Industrial Estate Authority of Thailand in other non-current assets (Sinking Fund) in the amount of Baht 149.4 million and Baht 239.8 million respectively as of December 31, 2002, as described in the Note 13 to the financial statements, which in our opinion it should be recorded as cost of real estate developments, in effect the retaining earnings should be decreased in the amount of Baht 335.9 million, cost of land sales should be increased Baht 6.1 million, asset for rent should be increased Baht 2.9 million and cost of real estate developments should be increased Baht 44.3 million.

In our opinion, except for the item and the effects as mentioned in the third paragraph, the financial statements referred to above present fairly, in all material respects, the consolidated financial positions as at December 31, 2002, of Hemaraj Land and Development Public Company Limited and subsidiaries, and the consolidated results of their operations, changes in shareholders’ equity and their cash flows for the years then ended, and the separate financial positions as at December 31, 2002 and separate results of operations, changes in shareholders’ equity and cash flows of Hemaraj Land and Development Public Company Limited for the same periods, in conformity with generally accepted accounting principles.

Without qualified opinion on the financial statements, we draw attention to the uncertainties as described in the

note 14 to the financial statements. Due to the liquidity constraints, the Company has failed to redeem the convertible bonds for which the bondholders sought redemption on September 9, 1998, and have not paid all interest payables on bond which were due since September 9, 1998. According to the bond prospectus, all the bonds are due to be redeemed on September 9, 2003. The management have informed that according to the resolution of the company’s boards meeting on July 15, 2002, the Company had called the convertible bondholders meeting in August 14, 2002 to request the bondholders to approve the redemption of all outstanding bonds at 50 percent of the par value on September 9, 2002, waive and discharge all outstanding claims under the bonds including all accrued interest and any other monetary debt. As at September 2, 2002, the Company had called the convertible bondholders meeting to approve the said offer, which 71 percent of the total votes supported the proposal. However, 75 percent of the total votes was needed to be treated as the resolution. Currently, the Company is in the process of negotiating to get the approval from the bondholders.

(KESREE NARONGDEJ) Certified Public Account Registration No. 76

A.M.T. & ASSOCIATES Bangkok, Thailand February 25, 2003

As of 31st As of 31st As of 31st As of 31stNOTE December, 2002 December, 2001 December, 2002 December, 2001

CURRENT ASSETSCash and cash equivalents 5 124,082 110,095 21,096 9,421 Deposit for investment 6 371,728 243,545 - - Current investments

Time deposits 5,7 and 27 34,192 45,862 527 546 Marketable securities 7 and 27 55,496 281 55,496 282

Trade account receivablesRelated parties, net 3,196 3,748 - 135 Other parties, net 8 254,473 94,661 3,363 2,601

Short - term loans to related parties 4 93 93 50,625 49,893 Cost of real estate developments, net 9,27 and 28 2,355,725 2,401,101 335,268 563,389 Other current assets 19,487 27,843 4,856 10,344

Total Current Assets 3,218,472 2,927,229 471,231 636,611

NON - CURRENT ASSETS

Investments for using the equity method 4 5,816 4,011 2,048,524 2,256,144 Other long - term investments

Related parties, net 4 374,458 49,632 372,959 48,132 Other parties 1,000 1,000 - -

Long - term loans to related parties, net 4,27,and 29 62,038 401,438 595,918 681,716 Property, plant and equipment, net 10 175,270 186,262 20,660 21,277 Other non - current assets

Leasehold land and land held for commercial purposes, net 11,27 and 28 1,085,282 1,756,631 1,085,283 1,483,204

Assets for rent, net 12 and 27 400,599 411,690 - 96,109 Sinking fund 13 and 28 389,234 360,335 149,434 147,485 Others 29,995 30,933 11,881 8,331

Total Non - current Assets 2,523,692 3,201,932 4,284,659 4,742,398

TOTAL ASSETS 5,742,164 6,129,161 4,755,890 5,379,009

The accompanying notes to financial statementsare an integral part of these statements.

…………………………………………………… DIRECTOR …………………………………………………… DIRECTOR

HEMARAJ LAND AND DEVELOPMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES BALANCE SHEETS

THOUSAND BAHTCONSOLIDATED THE COMPANY ONLY

ASSETS


CURRENT LIABILITIESBank overdrafts 27 119 40,015 77 39,819 Loans under debt restructuring

negotiation plan 24 - 535,370 - 535,370 Convertible bonds 14,20 and 27 1,202,308 1,272,091 1,202,308 1,272,091 Trade account payables 78,377 91,268 7,925 5,035 Current portion of long - term loans

Related person 4 and 16 118,083 102,765 - - Others 17 and 27 217,103 71,547 137,215 54,851

Current portion of guaranteed bonds 18 and 27 32,263 213,306 - - Short - term loans from related parties 4 52,000 - 26,726 32,134 Other current liabilities

Income received in advance 158,742 134,748 1,628 1,628 Accrued interest expenses 14,16,17 and 18 220,659 450,670 220,659 433,673 Accounts payable - the Industrial

Estate Authority of Thailand 13 and 28 41,067 60,424 24,818 37,163 Accrued directors’ remuneration 22 10,464 38,302 10,464 23,902 Others 56,004 118,534 37,471 30,359

Total Current Liabilities 2,187,189 3,129,040 1,669,291 2,466,025

NON - CURRENT LIABILITIESLong - term loans from related parties 4 and 15 - 1,518 1,026,808 1,465,074 Long - term loans from related persons 4,16 and 27 126,167 182,235 - - Other long - term loans 17 and 27 216,272 497,942 102,036 237,575 Guaranteed bonds 18,27 and 29 618,165 547,743 - - Provisions 19 365,085 522,297 365,085 522,297 Other non - current liabilities

Retentions payable 29,931 21,395 1,152 1,401 Deferred leasehold right income 15,122 23,477 - - Others 57,255 25,967 21,195 21,195

Total Non - Current Liabilities 1,427,997 1,822,574 1,516,276 2,247,542

Total Liabilities 3,615,186 4,951,614 3,185,567 4,713,567

…/2



LIABILITIES AND SHAREHOLDERS' EQUITY


SHAREHOLDERS’ EQUITY Share capital - Baht 10 par value 20 and 21

Authorized share capital Common stocks 1,300,000,000 shares, for the year 2002 and 327,000,000 shares, for the year 2001 13,000,000 3,270,000 13,000,000 3,270,000

Issued and paid-up share capital Common stocks 354,742,385 shares, for the year 2002 and70,790,777 shares, for theyear 2001 3,547,424 707,908 3,547,424 707,908

Warrants 20 and 21 14,127 14,151 14,127 14,151 Surplus (Deficit) paid-in capital

Premium on common stocks 997,245 997,245 997,245 997,245 Discount on common stocks 20 and 21 (2,553,964) - (2,553,964) -

Unrealized gain (loss) from changes in carrying amount ofavailable-for-sale securities 3,152 - 3,152 -

Currency translation differences 74,238 96,769 74,238 96,769 Retained earnings (deficit)

Appropriated - legal reserve 210,491 210,491 95,340 95,340 Deficit (722,390) (1,361,122) (607,239) (1,245,971)

Total Equity of Parent Company’s Shareholders 1,570,323 665,442 1,570,323 665,442

Minority interest 556,655 512,105 - - Total Shareholders’ Equity 2,126,978 1,177,547 1,570,323 665,442

TOTAL LIABILITIES ANDSHAREHOLDERS' EQUITY 5,742,164 6,129,161 4,755,890 5,379,009


…………………………………………………… DIRECTOR …………………………………………………… DIRECTOR



Issued and Premium on Discount on Unrealized Currency paid-up Warrants common common gain (loss) from translation Minority

share capital stocks stocks changes in differences Appropriated (Deficit) interest Totalcarrying amount of available-for-sale

NOTE securities Legal reserve

Beginning balance as of January 1,2002 707,908 14,151 997,245 - - 96,769 210,491 (1,361,122) 512,105 1,177,547

Unrealized gain (loss) from changes in carrying amount ofavailable-for-sale securities - - - - 3,152 - - - - 3,152

Currency translation differences - - - - - (22,531) - - - (22,531) Net gain (loss) not recognized

in the income statement - - - - 3,152 (22,531) - - - (19,379) Net profit (loss) - - - - - - - 638,732 - 638,732 Minority interest - - - - - - - - 44,550 44,550 Dividend - - - - - - - - - - Common stocks 20 and 21 2,831,631 - - (2,548,468) - - - - - 283,163 Warrants 20 and 21 7,885 (24) - (5,496) - - - - - 2,365 Ending balance as of

December 31,2002 3,547,424 14,127 997,245 (2,553,964) 3,152 74,239 210,491 (722,390) 556,655 2,126,979

Beginning balance as of January 1,2001 707,908 14,151 997,245 - (21) 71,509 210,491 (867,893) 466,970 1,600,360

Unrealized gain (loss) from changes in carrying amount ofavailable-for-sale securities - - - - 21 - - - - 21

Currency translation differences - - - - - 25,260 - - - 25,260 Net gain (loss) not recognized

in the income statement - - - - 21 25,260 - - - 25,281 Net profit (loss) - - - - - - - (493,229) - (493,229) Minority interest - - - - - - - - 60,887 60,887 Dividend - - - - - - - - (15,752) (15,752) Ending balance as of

December 31,2001 707,908 14,151 997,245 - - 96,769 210,491 (1,361,122) 512,105 1,177,547


HEMARAJ LAND AND DEVELOPMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

CONSOLIDATEDFOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

THOUSAND BAHTRetained earnings (deficit)

Issued and Premium on Discount on Unrealized Currencypaid-up common common gain (loss) from translation

share capital Warrants stocks stocks changes in differences Appropriated (Deficit) Totalcarrying amount of

available-for-sale

NOTE securities Legal reserve

Beginning balance as of January 1,2002 707,908 14,151 997,245 - - 96,769 95,340 (1,245,971) 665,442

Unrealized gain (loss) from changes in carrying amount ofavailable-for-sale securities - - - - 3,152 - - - 3,152

Currency translation differences - - - - - (22,531) - - (22,531) Net gain (loss) not recognized

in the income statement - - - - 3,152 (22,531) - - (19,379) Net profit (loss) - - - - - - - 638,732 638,732 Common stocks 20 and 21 2,831,631 - - (2,548,468) - - - - 283,163 Warrants 20 and 21 7,885 (24) - (5,496) - - - - 2,365 Ending balance as of

December 31,2002 3,547,424 14,127 997,245 (2,553,964) 3,152 74,238 95,340 (607,239) 1,570,323

Beginning balance as of January 1,2001 707,908 14,151 997,245 - - 71,509 95,340 (752,742) 1,133,411

Unrealized gain (loss) from changes in carrying amount ofavailable-for-sale securities - - - - - - - - -

Currency translation differences - - - - - 25,260 - - 25,260 Net gain (loss) not recognized

in the income statement - - - - - 25,260 - - 25,260 Net profit (loss) - - - - - - - (493,229) (493,229) Ending balance as of

December 31,2001 707,908 14,151 997,245 - - 96,769 95,340 (1,245,971) 665,442


HEMARAJ LAND AND DEVELOPMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

THE COMPANY ONLYFOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

THOUSAND BAHTRetained earnings (deficit)

NOTE 2002 2001 2002 2001REVENUES

Sales of land 4 and 31 632,590 534,376 - 202 Sale of pre-fabricated factory 4 and 31 35,530 35,000 - - Service income 4 and 31 401,404 368,438 66,717 50,058 Other income

Profits from sales of investments 4 160,064 - 160,064 - Reversal of reserve on possible loss from la 24 157,212 - 157,212 - Interest income 4 13,944 61,009 39,081 97,055 Commission and management income 4 - - 34,053 44,247 Gain on convertible bond redemption 22,644 - 22,644 - Gain on the yield rate of guaranteed bonds 37,218 - - - Gain on exchange rate 59,725 - 27,118 - Gain on revision of the Joint Operating Agreements - 222,484 - 174,340 Others 16,588 37,060 8,141 8,927

Share of profits from investments for using the equity method - subsidiary companies 4 - - 41,055 -

Share of profits from investments for using the equity method - associated companies 4 273,692 - 273,692 -

Total Revenues 1,810,611 1,258,367 829,777 374,829

EXPENSESCost of land sales 434,047 420,489 46,070 63,224 Cost of pre-fabricated factory sales 17,655 - - - Cost of services 10,12 and 22 281,602 248,284 47,140 35,751 Selling and administrative expenses 10,22,28 and 33 205,837 161,839 109,584 71,012 Other expenses

Directors’ remuneration 22 50,083 86,360 26,121 31,601 Loss on exchange rate - 46,979 - 22,937 Loss on possible loss from lawsuit - 158,398 - 158,398 Reserve for possible loss of title

of land and office building - 25,181 - 25,181 Others - 10,166 - 725

Loss on assets evaluation 23Loss on projects evaluation 160,697 - 160,697 - Loss on impairment of assets evaluation 58,957 - 58,957 -

Share of losses from investments for usingthe equity method - subsidiary companies 4 - - - 9,812

Share of losses from investments for usingthe equity method - associated companies 4 - 303,873 - 303,873

Total Expenses 1,208,878 1,461,569 448,569 722,514

PROFIT (LOSS) BEFORE INTEREST AND INCOME TAX EXPENSES 601,733 (203,202) 381,208 (347,685)

INTEREST EXPENSES 4,14,16,17 and 18 153,584 220,901 109,151 145,544 INCOME TAX EXPENSES 31 1,110 8,239 - -

PROFIT (LOSS) AFTER TAX 447,039 (432,342) 272,057 (493,229) NET PROFIT (LOSS) OF MINORITY INTEREST (74,909) (60,887) - -

PROFIT (LOSS) FROM ORDINARY ACTIVITIES 372,130 (493,229) 272,057 (493,229) EXTRAORDINARY ITEM 24

- GAIN FROM DEBT RELEASE AGREEMENT 195,057 - 162,977 - - GAIN FROM COMPROMISING DEBT 151,884 - 151,884 - - GAIN FROM DEBT SETTLEMENT BY

TRANSFERRING ASSETS 51,814 - 51,814 - - LOSS ON PURCHASE OF DEBT AND RIGHT (132,153) - - -

NET PROFIT (LOSS) 638,732 (493,229) 638,732 (493,229)

HEMARAJ LAND AND DEVELOPMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESSTATEMENTS OF INCOME



NOTE 2002 2001 2002 2001BASIC EARNINGS (LOSS) PER SHARE (BAHT)

Profit (loss) from ordinary activities 1.07 (2.12) 0.78 (2.12)Extraordinary item 0.77 - 1.06 -Net profit (loss) 25 1.84 (2.12) 1.84 (2.12)

DILUTIVE EARNINGS (LOSS) PER SHARE (BAHT)Profit (loss) from ordinary activities 0.69 0.50Extraordinary item 0.51 0.70Net profit (loss) 25 1.20 1.20


HEMARAJ LAND AND DEVELOPMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESSTATEMENTS OF INCOME



2002 2001 2002 2001CASH FLOW FROM OPERATING ACTIVITIES

Net profit (loss) 638,732 (493,229) 638,732 (493,229) Adjustments to reconcile net loss to net cash provided by (used in)

Allowance for doubtful accounts 6,223 5,316 1,693 2,926 Loss on projects evaluation (160,697) - (160,697) - Loss on impairment of assets evaluation (58,957) - (58,957) - Share of (profits) losses from investments for using

the equity method - subsidiaries companies - - (41,055) 9,812 Share of (profits) losses from investments for using

the equity method - associated companies (273,692) 303,873 (273,692) 303,873 (Gain) loss on Marketable Securities (2,089) - (2,089) - (Gain) loss exchange rate (18,421) (8,885) 10,098 (554) (Gain) loss from sales of equipment (1,331) (1,721) (635) (1,120) (Gain) loss from sales of investments (160,064) - (160,064) - Depreciation and amortisation 45,120 39,743 10,968 12,200 (Gain) loss on convertible bond redemption (22,533) - (22,533) - (Gain) loss from debt release agreement (195,057) - (195,057) - Gain from compromising debt (151,884) - (151,884) - Gain from debt settlement by transferring assets (51,814) - (51,814) - Impairment loss on construction in process - 10,166 - 724 Increase (decrease) in reserve for possible loss

of title of land and office building - 25,181 - 25,181 Amortisation of goodwill - 1,061 - 1,061 Increase (decrease) in provision for convertible bond redempti (37,216) 26,385 (37,216) 26,385 Gain on revision of the Joint Operating Agreements - (222,484) - (174,340) Increase (decrease) in provision for guaranteed bond redempt 10,544 58,242 - - (Gain) loss from the yield rate of guaranteed bonds (37,219) - - - Increase (decrease) in provision for

possible loss from pledge of securities (157,212) 158,398 (157,212) 158,398 Realization of deferred leasehold right income 1,436 (9,905) - - Net profit of minority interests 74,909 60,887 - - (Increase) decrease in accounts receivable - related parties 871 (620) 976 (45) (Increase) decrease in accounts receivable - other parties (176,146) 1,743 (3,296) (715) (Increase) decrease in cost of real estate developments 188,153 (27,323) 201,467 62,973 (Increase) decrease in other current assets 8,356 109 5,488 4,448 (Increase) decrease in other non - current assets (4,564) 36,119 (3,550) (3,017) Increase (decrease) in trade account payables (12,891) 37,734 2,890 (3,493) Increase (decrease) in income received in advance 23,994 (44,556) - (202) Increase (decrease) in accrued interest expense (4,836) 97,968 (3,752) 100,965 Increase (decrease) in accounts payable - the Industrial

Estate Authority of Thailand (19,357) (42,545) (12,345) (18,736) Increase (decrease) in accrued directors’ remuneration (27,838) 14,530 (13,437) 8,757 Increase (decrease) in other current liabilities (62,529) 53,356 7,112 (8,650) Increase (decrease) in retentions payable 8,536 6,118 (249) 279 Increase in deferred leasehold right income - 8,360 - - Increase (decrease) in other non - current liabilities 31,288 (16,298) - -

Net Cash Provided by (Use in) Operating Activities (598,187) 570,952 (438,030) 507,110

…/2

HEMARAJ LAND AND DEVELOPMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIESSTATEMENTS OF CASH FLOWS



NOTE 2002 2001 2002 2001CASH FLOWS FROM INVESTING ACTIVITIES

(Increase) decrease in current investments in securities (49,974) (19) (49,974) (19) (Increase) decrease in cash deposited for investment (128,183) (243,545) - - (Increase) decrease in short - term loans to related parties - (92) (732) (16,132) (Increase) decrease in investments for using the equity method (3,616) (5,280) (152,454) (5,530) (Increase) decrease in long - term loans to related parties (156,250) - - - Dividend received from subsidiary companies - - 220,538 23,628 (Increase) decrease in long - term loans to related parties 357,821 410,459 67,376 393,131 Cash received from sales of equipment 94,934 2,881 93,652 1,134 Cash received from sale of the investments in securities 266,990 - 266,990 - (Increase) decrease in building and equipment (11,666) (14,272) (6,994) (1,543) (Increase) decrease in leasehold land and land held for

commercial purposes 643,253 (427) 644,229 - (Increase) decrease in assets for rent - (177) (265) - (Increase) decrease in advance to the

Provincial Electricity Authority 5,501 - - - (Increase) decrease in sinking fund (28,899) (13,528) (1,949) -

Net Cash Provided by (Used in) Investing Activities 989,912 136,000 1,080,416 394,669

CASH FLOWS FROM FINANCIAL ACTIVITIESIncrease (decrease) in bank overdrafts (39,896) 2,276 (39,741) 2,094 Cash paid for convertible bond redemption (15,640) - (15,640) - Increase (decrease) in long - term loans from related parties (1,518) - (429,943) - Increase (decrease) in short - term loans from related parties 52,000 (11,012) (5,407) 32,134 Decrease in long - term loans from related parties - - - (371,376) Increase (decrease) in long - term loans from related person (40,750) 222,000 - - Increase (decrease) in other long - term loans (492,298) (40,000) (425,526) (40,000) Decrease in long - term liabilities - (378,450) - (28,787) Cash paid for guaranteed bond redemption (69,971) (21,861) - - Proceeds from increasing share capital 283,163 - 283,163 - Proceeds from exercise of warrants 2,366 - 2,366 - Dividend paid to minority interests (30,358) (15,752) - -

Net Cash Provided by (Used in) Financial Activities (352,902) (242,799) (630,730) (405,935)

Adjustments from financial statement translations (36,506) 40,530 - -

Increase (decrease) in cash and cash equivalents, Net 2,316 11,454 11,656 2,615 Cash and cash equivalents, beginning of year 5 110,095 88,735 9,421 1,914 Cash at banks pledged as collateral, beginning of year 5 45,862 55,769 546 5,438 Cash at banks pledged as collateral, end of year 5 And 27 (28,186) (46,898) (527) (546)

Cash and cash equivalents, end of year 5 130,087 109,060 21,096 9,421

…/3




2002 2001 2002 2001OPERATING ACTIVITIES, INVESTING ACTIVITIES AND FINANCIAL ACTIVITIES NOT AFFECTING CASH

Increase in unrealised gain (loss) from changes in carrying amount of available-for-sale securities 3,151 - 3,151 -

Increase in surplus from available-for-sale securities by above (3,151) - (3,151) -

Increase (decrease) in cost of real estate development by transfer to assets for rent (104,974) - - -

Increase (decrease) in assets for rent by above 104,974 - - -

Increase (decrease) in leasehold land and land held for commercial purposes by transfer to cost of real estate development (274,403) - - -

Increase (decrease) in cost of real estate development by above 274,403 - - -

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Cash paid during the year for :Interest expenses 127,001 87,398 15,192 44,283 Income tax expenses 6,789 8,496 3,624 2,968


CONSOLIDATED THE COMPANY ONLY



THOUSAND BAHT

1

HEMARAJ LAND AND DEVELOPMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS


1. ECONOMIC ENVIRONMENT AND BASIS OF FINANCIAL STATEMENT PRESENTATION

1.1 Economic Environment

The operations of Hemaraj Land and Development Public Company Limited (“the Company”) and its subsidiaries

(“Hemaraj Group”) may continue to be influenced for the foreseeable future by the economic conditions in Thailand and the Asia Pacific Region in general. The financial statements of the Company and its subsidiaries reflect the management’s current assessment of the impact of current economic conditions on the financial positions of the Company and its subsidiaries. However, actual results could differ from the management estimates.

1.2 Basis for preparation and presentation of financial statements

The financial statements of the Company and its subsidiaries have been presented in accordance with the Ministerial

Regulation No.7 (B.E. 2539), under the Public Company Limited Act, B.E. 2535 and in conformity with generally accepted accounting principles practiced in Thailand. They have been prepared in the Thai language as required by Thai law and regulatory requirements and have been translated into English for the convenience of the reader.

1.3 Basis for preparation and presentation of consolidated financial statements

The consolidated accounts incorporate the accounts of the Company and its majority own directly or indirectly (over 50%) subsidiaries as follows:

HOLDING OF INTEREST (%) As of 31st As of 31st TYPE OF BUSINESS December, 2002 December, 2001 Eastern Industrial Estate Company Limited Industrial Estate 99.99 99.99 Eastern Seaboard Industrial Estate (Rayong) Company Limited Industrial Estate 60.00 60.00 Eastern Pipeline Services Company Limited Pipe Rack Rental 99.99 99.99 H-International (BVI) Company Limited Holding Company 100.00 100.00 Hemaraj International Limited* Holding Company 99.99 99.99 H - Construction Management and Engineering and Construction Engineering Company Limited Supervision Service 99.99 99.99

* An overseas subsidiary, the information being used to prepare the financial statements were provided by the

management and have not been audited. However, the total assets and net income as show in these financial statements were not material to the consolidated financial statements as a whole.

Significant intercompany transactions are eliminated from the consolidated financial statements.

All subsidiaries were incorporated in Thailand except H- International (BVI) Company Limited and Hemaraj

International Limited which were incorporated in British Virgin Islands and Cayman Islands, respectively.

In addition, the consolidated and the Company’s financial statements for years ended December 31, include portions of gain (loss) from associated companies, based on information from the financial statements, which were provided by the management and were not audited or were audited by other auditors, as follows:

2

Economic environment and basis of financial statement presentation (continued)

2002

(Amounts:Million Baht)

Elyo-H Facilities Management Limited ** (1.81)

2001


Glow Company Limited (formerly: H-Power Company Limited)* (301.45)

Elyo-H Facilities Management Limited ** (2.42)

* Based on information from the financial statements, which were audited by other auditors. ** Based on information from the financial statements, which were provided by the management and were not

audited.

2. GENERAL INFORMATION

On August 15, 1988, the Company was incorporated under the Civil and Commercial Code of Thailand and was subsequently listed on the Stock Exchange of Thailand and transformed as a Public Company Limited on July 10, 1992 and July 12, 1993, respectively.

The Company, which is the parent company of Hemaraj Group, operates its business as an industrial estate developer with 3 industrial estate development projects located in the Eastern Seaboard of Thailand. The projects are operating under the joint operation agreements with the Industrial Estate Authority of Thailand, in the names of the Company and its 2 subsidiaries as follows:

Company Name Industrial Estate Site Location

Hemaraj Land and Development Plc. Chonburi Industrial Estate (Bor Win) Sriracha district, Chonburi province

Eastern Industrial Estate Co., Ltd. Eastern Industrial Estate (Map Ta Phut) Muang district, Rayong province

Eastern Seaboard Industrial Estate Eastern Seaboard Industrial Pluak Daeng district, Rayong province (Rayong) Co., Ltd. Estate (Rayong)

Hemaraj Group’s headquarters is located at 18th Floor, UM Tower, 9 Ramkhamhaeng Road, Suan Luang, Bangkok 10250.

As at December 31, 2002 and 2001, Hemaraj Group employs 141 and 145 staff, respectively.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Measurement Bases Used in Preparing the Financial Statements

Other than those disclosed in other topics and other notes to the financial statements, the financial statements are prepared on the historical cost basis.

Estimation

Preparation of financial statements in conformity with generally accepted accounting principles requires the management to make the estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and also the disclosures of contingent assets and liabilities at balance sheet date. However, actual results may differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents represent cash on hand and at banks net of cash at banks pledged as collateral.

3

Summary of significant accounting policies (continued)

Current Investments

Available-for-sale securities consist of investments in marketable securities, which are stated at fair value net of accumulated impairment loss on investments.

Account Receivables

Account receivables consist of land sale contract receivables which represent the amount of contract prices net of installments received and deferred income, and service receivables which are shown net of allowance for doubtful accounts for billings overdue by more than 90 days.

Cost of Real Estate Developments

Cost of real estate developments consists of land costs, development costs and capitalised interest on loans for development project including advances for construction costs. These costs are transferred to cost of sales when revenue from sales is recognised.

Cost of real estate developments is stated at the lower of aggregate cost or net realisable value.

Loss on projects evaluation is included in the statement of income.

Capitalisation of Borrowing Costs

The Company and its subsidiaries have accounting policy to record interest expenses and fees on long-term loans and loan from directors and related person for development projects are capitalised to cost of real estate developments. The capitalisation will be suspended or ceased when the development projects are interrupted or completed.

Investments and Loans

Investments

- Investments in subsidiary and associated companies are recorded by using the equity method.

- General investments represent investments in related and other companies which are stated at cost net of accumulated impairment loss on investments.

Impairment loss on investments is included in the statement of income.

Loans

The Company and its subsidiaries have recorded allowance for doubtful accounts by using an estimate of those amounts which may prove to be uncollectible, based on a review of the current status and the repayment ability of receivables.

Leasehold Land and Land Held for Commercial Purposes

Leasehold land and land held for commercial purposes consist of land leasehold, land costs, development costs and capitalised interest on loans of undeveloped projects and projects which were suspended from development.

Leasehold land and land held for commercial purposes are stated at the lower of aggregate cost or net realisable value.

Loss on projects revaluation is included in the statement of income.

Assets for Rent

Assets for rent are stated at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the assets of 15 years for pipe rack and 20 years for building.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the assets of 5 years for equipment and 20 years for building.

4


Deferred Interest on Hire Purchase Agreements

Deferred interest on hire purchase agreement is amortised over the period of hire purchase agreements.

Income Received in Advance

Income received in advance represents the amounts received from land sale and purchase contracts over the amount of revenues, which are recognised using the percentage of completion method, and service income received in advance.

Deferred Leasehold Right Income

Deferred leasehold right income represents right of use fee received on rental of land, building and pipe rack, and is recognised as revenue over the period of rental contract.

Revenue and Expense Recognition

Other than those disclosed in other topics, revenue and expense recognition are as follows:

- Revenue and Cost of Land Sales

Revenue from land sales is recognised upon signing of contract and receiving of deposits by the percentage of completion method, using the ratio of actual development costs incurred to total estimated development cost excluding land cost. Cost of sales is total estimated development costs proportionately recognised by the percentage of revenue recognition, using the ratio of accumulated revenue recognition to total estimated project revenues.

Total estimated revenues and development costs of each project shall be revised when they reflect total revenues and costs that expected to be incurred.

During 2002, the Company and its subsidiaries have revised estimated revenues and development cost for each project in order to reflect the amount that expected to be incurred, which has generally effected to the revenue and cost recognition.

- Revenue and Cost of pre-fabricated Factory Sales (Eastern Seaboard Industrial Estate (Rayong) Company Limited)

Revenue and cost of pre-fabricated factory sales are recognised upon signing of sale contract.

- Service Income and Cost of Services

Service income and cost of services are recognised on the accrual basis. Service income represents income received from providing public utilities, tap water, raw water, wastewater processing, garbage collection services, construction services and rental services in respect of land, shop house, warehouse, factory and pipe rack to the Industrial Estate. Cost of services represents cost incurred from providing of such services.

The recognition of income from public utilities service is ceased when the customers cease their business operations and are in trouble to make payments.

- Gain from Debt Release Agreements. (Hemaraj Land and Development Public Company Limited and Eastern Pipeline Services Company Limited)

The Company has recorded portions of long-term loans under the Conditional Debt Release Agreements and related interest payable, which would be forgiven, as revenue in the statement of income in full upon the completion of debt repayments.

- Gain from Compromising Debt. (Hemaraj Land and Development Public Company Limited)

The Company has recorded the difference between the aggregate amount of loan and related interest payable, which would be compromised under the Restructuring Agreements as revenue in the statement of income in full on the signing date of the Restructuring Agreement.

- Gain from Debt Settlement by Transferring Assets. (Hemaraj Land and Development Public Company Limited)

The Company has recorded the difference between the aggregate amount of loan and related interest payable, which would be released and the fair value of transferred assets as revenue in the statement of income in full on the signing date of the Restructuring Agreement.

5


- Loss from Purchase Debt and Right. (Eastern Industrial Estate Company Limited)

The Company has recorded the difference between the expected receivable and the price of purchase debt and right in full at the closing date and will record as revenue once the repayment is collected.

- Other incomes and expenses.

Other incomes and expenses are recognized on the accrual basis.

Accounts in Foreign Currency

A. The financial statements of an overseas subsidiary company are translated into Baht for consolidation purposes using rates of exchange as follows:

- Assets and liabilities are translated at the average selling and purchasing price exchange rate ruling at the end of the year.

- Revenues and expenses are translated at the average selling and purchasing price exchange rate ruling at the end of the month.

- Share capital is translated at the exchange rate ruling on the transaction date.

Adjustments from translation of foreign financial statements are included under shareholders’ equity.

B. Convertible bonds and related transactions are translated into Baht using rates of exchange as follows:

- Convertible bonds are translated into Baht at the forward rate of exchange stated in the Bond prospectus.

- The provision for convertible bond redemption is converted into Baht at the rate of exchange stated in the bond prospectous.

- Accrued interest expense on convertible bonds is translated into Baht at the rate of exchange at the end of the year.

Adjustments from translation are included in the statement of income.

C. Other foreign currency transactions occuring during the year are converted into Baht at the rates prevailing on the dates of the transactions. Assets and liabilities at the end of the year are converted into Baht at the rates of exchange on that date.

Gain and loss on translation is included in the statement of income.

Corporate Income Tax

Corporate income tax for each year is recognised on the accrual basis, which is base on the taxable profit (loss) for the year.

Earning (Loss) per Share

Basic earning (loss) per share is computed by dividing net income (loss) attributable to ordinary shareholders for the year by the weighted average number of ordinary shares outstanding during the year.

Diluted earning (loss) per share is computed by dividing net income (loss) attributable to ordinary shareholders for the year, as adjusted for the effect of dilutive ordinary shares, by the weighted average number of ordinary shares outstanding during the year plus the number of dilutive ordinary shares.

6

4. RELATED PARTIES

The Company has certain transactions with its related parties. Intercompany terms are determined at the maximum rate of 5% of contract price for commission on sales, maximum of 5% of service income received for management fees and 7% - 12.50% for interest on loans relating to business operation and expansion, of which the recognition of interest income is ceased when overdue more than 180 days.

Enterprises that directly or indirectly through one or more intermediaries, control, or are under common control with, the Company by through shareholding and/or directors as follows:

PERCENTAGE OF HOLDING

As of 31st As of 31st COMPANY NAME TYPE OF BUSINESS RELATIONSHIP December, 2002 December, 2001

Subsidiary Companies Eastern Industrial Estate Company Limited Industrial Estate Common shareholders and management Eastern Seaboard Industrial Estate

(Rayong) Company Limited Industrial Estate ,, 60.00 60.00 Eastern Pipeline Services Company Limited* Pipe Rack Rental ,, 99.99 99.99 H-International (BVI) Company Limited Holding Company ,, 100.00 100.00 Hemaraj International Limited Holding Company ,, 99.99 99.99 H-Construction Management and Design and Construction

Engineering Company Limited Supervision Service ,, 99.99 99.99

Associated Company Elyo - H Facilities Management Limited Facilities Management Service Common shareholders 39.99 39.99

and management

Related Companies Glow Company Limited Holding Company Common shareholders 16.99 24.99 and directors Industrial Power Company Limited** Electricity and Steam 16.99 24.99 Power Generation ,, Operation Power Service Company Limited** Energy Consulting ,, 16.99 24.99 Industrial Water Supply Company Limited** Industrial Water Supply ,, 16.99 24.99 Bowin Power Company Limited** Independent Power Producer ,, 21.14 24.99 Sriracha Harbor Public Company Limited Port Service ,, Millenium Steel Public Company Limited Steel Manufacturer and Distributor ,, 0.03 0.76 Nakornthai Strip Mill Public Company Limited Steel Manufacturer and Distributor ,, 1.39 1.39 Sun Tech Group Public Company Limited Agriculture and Scrap Steel Business ,, - - Metal Star Company Limited Cut-to-length Steel Common directors - - Stretching Steel and Sales Benz BMB Company Limited Automotive Sales and Service ,, - - Standard Inter Trade Company Limited Automotive Sales and Service ,, - - Tractebel S.A. Energy Joint investor - - Eastern Fluid Transport Company Limited Pipe Rack Maintenance ,, 15.00 15.00 Siam Food Products Public Company Limited Processing agriculture produce ,, - - Teo Hong Silom Company Limited Facilities Management Service ,, - - Elyo South East Asia PTE LTD Facilities Management Service ,, - - Related Person - Directors and shareholders - -

* 74.99% directly held by the Company and 25% indirectly held by Eastern Industrial Estate Company Limited ** Indirect holding by Glow Company Limited (formerly: H-Power Company Limited)

7

Transactions with related parties (continued)

As at December 31, balances with related parties, which are shown in the balance sheets, are as follows:

(Amounts:Thousand Baht) Intercompany

Consolidated The Company Terms

2002 2001 2002 2001

Assets

Advance to related party:

- Associated Company

Elyo-H Facilities Management Limited

93

93 93 93 -

- Subsidiary company

Eastern Seaboard Industrial Estate

(Rayong) Company Limited Maximum 5% of

Accrued commission and contract price and 5% of

Management income - - 50,532 49,800 service income received

93 93 50,625 49,893

Long - term loans to related parties:

- Subsidiary companies

Eastern Industrial Estate Company Limited

Loans and accrued interest income - - 416,730 280,278 MLR(TFB)+1%


(Rayong) Company Limited

Loans and accrued interest income - - 78,000 - MLR(TFB)+1%

Eastern Pipeline Services Company Limited

Loans and accrued interest income - - 38,628 - MLR(TFB)+1%

H-Construction and Engineering

Company Limited

Loans and accrued interest income - - 522 - -

- Related Companies

Tractebel S.A.

Loans and accrued interest income 62,029 401,429 62,029 401,429 LIBOR + 2%

Sriracha Harbor Public Company Limited

Loans and accrued interest income, net 9 9 9 9 1% - MLR

Total 62,038 401,438 595,918 681,716

8


(Amounts: Thousand Baht) Intercompany

Consolidated The Company Terms

2002 2001 2002 2001

Liabilities

Short - term loans from related parties :



(Rayong) Company Limited

Advance received - - 26,726 32,134 -

- Related company

Siam Food Public Company Limited

Loans and accrued interest expense 52,000 - - - 8%

Total 52,000 - 26,726 32,134

Long - term loans from related parties :


H-International (BVI) Company Limited

Loans from repurchase of convertible bonds - - 453,783 1,010,139 -

Other loans - - 573,025 453,417 -

- Related company

Other loan - 1,518 - 1,518 -

Total - 1,518 1,026,808 1,465,074

Loans from related person 244,250 285,000 - - MLR+1%

The significant transactions with related parties for the years ended December 31, 2002 and 2001 are as follows:

MILLION BAHT

CONSOLIDATED THE COMPANY ONLY INTERCOMPANY

2002 2001 2002 2001 COST POLICY

Land sale - 0.20 - 0.20 Service income 37.04 30.59 3.78 0.31 - Interest income 10.57 56.91 38.55 97.00 MLR (TFB) + 1% and LIBOR + 2% Commission and Maximum 5% of

Management contract price and Income - - 34.05 44.25 5% of service income received

Other income - - - 2.96 - Cost of service 9.13 4.75 8.61 1.34 - Interest expenses 3.82 17.99 - - MLR (TFB) + 1%

9


As at December 31, 2002 the Company’s investment for using the equity method are as follows:

Paid-up Holding of Investments

Company Type of Business Relationship Capital Interest Cost Net Change in Equity Equity

(Million Baht) (%) (Million Baht) (Million Baht) (Million Baht)


Eastern Industrial Estate Company Limited Industrial Estate Co. shareholders

And management 400.00 99.99 400.00 (27.58) 372.42


(Rayong) Company Limited Industrial Estate ,, 358.00 60.00 214.80 614.21 829.01

Eastern Pipeline Services Company Limited* Pipe Rack Rental ,, 15.00 99.99 11.25 2.15 13.40

H-International (BVI) Company Limited Holding Company ,, 0.08 100.00 0.08 826.80 826.88

Hemaraj International Limited Holding Company ,, 0.03 99.99 0.03 0.01 0.04

H-Construction Management and Engineering Design and Construction

Company Limited Supervision Services ,, 0.25 99.99 0.25 0.70 0.95

Associated Company

Elyo-H Facilities Management Limited Facilities Management Services ,, 26.29 39.99 10.50 (4.68) 5.82

Total 636.91 1,411.61 2,048.52

* 74.99% directly held by the Company and 25% indirectly held by Eastern Industrial Estate Company Limited

Additional information

- H-International (BVI) Company Limited was registered in the British Virgin Islands (US. currency used for business operation). - Hemaraj International Limited was registered in the Cayman Islands (US. currency used for business operation). - During the year 2002, the Company received dividend from Eastern Seaboard Industrial Estate (Rayong) Company Limited amounting to Baht 45.54 million and from H-International (BVI) Company Limited

amounting to Baht 175 million.

10


As at December 31, 2001, the Company’s investment for using the equity method are as follows:

Paid-up Holding of Investments

Company Type of Business Relationship Capital Interest Cost Net Change in Equity Equity

(Million Baht) (%) (Million Baht) (Million Baht) (Million Baht)


Eastern Industrial Estate Company Limited Industrial Estate Co. shareholders

And management 400.00 99.99 400.00 105.04 505.04


(Rayong) Company Limited Industrial Estate ,, 358.00 60.00 214.80 549.07 763.87

Eastern Pipeline Services Company Limited* Pipe Rack Rental ,, 60.00 99.99 - (24.88) (24.88)

H-International (BVI) Company Limited Holding Company ,, 0.08 100.00 0.08 1,007.97 1,008.05

Hemaraj International Limited Holding Company ,, 0.03 99.99 0.03 0.01 0.04

H-Construction Management and Engineering Design and Construction

Company Limited Supervision Services ,, 0.25 99.99 0.25 (0.24) 0.01

Associated Company

Elyo-H Facilities Management Limited Facilities Management Services ,, 17.20 39.99 6.88 (2.87) 4.01

Total 622.04 1,634.10 2,256.14

* 74.99% directly held by the Company and 25% indirectly held by Eastern Industrial Estate Company Limited

Additional information

- H-International (BVI) Company Limited was registered in the British Virgin Islands (US. currency used for business operation). - Hemaraj International Limited was registered in the Cayman Islands (US. currency used for business operation). - During the year 2001, no dividend was received from subsidiary, associated and related companies except for a dividend from Eastern Seaboard Industrial Estate (Rayong) Company Limited amounting to

Baht 23.63 million.

11


Other long-term investments - related parties, net

THOUSAND BAHT CONSOLIDATED THE COMPANY ONLY 2002 2001 2002 2001 Investments in related parties

Glow Company Limited (formerly: H-Power Company Limited)

-

26,937

-

26,937

Investments in related parties

Sriracha Harbor Public Company Limited 75,300 75,300 75,300 75,300 Eastern Fluid Transport Company Limited 1,500 1,500 - - Bowin Power Company Limited 125,000 - 125,000 - Glow Company Limited (formerly:

H-Power Company Limited)

226,763

-

226,763

- Total 428,563 76,800 427,063 75,300

Less Impairment loss on investments (54,105) (54,105) (54,105) (54,105)

Investments in related parties, net 374,458 22,695 372,958 21,195

Other long-term investments - related parties, net 374,458 49,632 372,958 48,132

Hemaraj Land and Development Public Company Limited

a) According to the resolution passed by the Board of Directors’ Meeting No. 1/2000 dated February 8, 2000, the Company entered into a share transfer agreement with Tractebel S.A. (“Tractebel”), an overseas business cooperation company and transferred its 33.25 million shares in Glow Company Limited (“Glow”), an associated company, to Tractebel. All remuneration from such transactions were funded to Glow for Bowin Power Plant Project development in full under the condition of conversion into share capital of such company in the future.

In the year 2001, the Company entered into a debt restructuring agreement with Tractebel as resolved by the 3/2001 Board of Directors’ Meeting held on November 30, 2001. Subsequently, in the third quarter of 2002, the Board of Directors had passed the resolution at the meeting No. 7/2545 dated August 14, 2002 to amend the Restructuring Agreement that a part of the sale to Tractebel for the loan to Glow Company should be used to pay for paid up capital of Bowin Power, and the balance of unpaid up portion of the shares capital of Glow Company, and reserve for payment of the increase in Bowin Power share capital in the future. However, the Company have the right to proceed in selling of all of Glow Company shares. For the year 2002, the Company sold part of the Glow share capital. As a result, the Company shares remaining in Glow is 16.99%.

b) During the period 2002, the Company purchased 449,993 ordinary shares of Eastern Pipeline Service Company Limited

from Eastern Industrial Estate Company Limited at book value of the said subsidiary as at December 31, 2002. As a result, the Company is holding 74.99% directly and 25% indirectly through Eastern Industrial Estate Company Limited.

Later in November 2002, the said subsidiary has decreased its authorized ordinary shares from 600,000 shares to 150,000 shares. However, it did not affect the Company’s holding structure in Eastern Pipeline Services Company Limited directly and indirectly.

5. CASH AND CASH EQUIVALENTS, NET

For the purpose of preparation of the statements of cash flows in accordance with the relevant Thai Accounting Standard, as of December 31, 2002 and 2001, cash and cash equivalents, net consisted of:

THOUSAND BAHT CONSOLIDATED THE COMPANY ONLY 2002 2001 2002 2001 Cash on hand and at banks 124,082 110,095 21,096 9,421 Current investments - time deposits 34,192 45,862 527 546 Less Cash at banks pledged as collateral and deposits

with maturity dates longer than 3 months (28,186) (46,898) (527) (546) Cash and cash equivalents, Net 130,088 109,059 21,096 9,421

12

6. DEPOSITS FOR INVESTMENT


Deposits for investment as at December 31, 2002 represent deposits with an overseas investment adviser in the amount of USD 8.6 million under the Non-Discretionary Investment Advisory Agreement dated September 18, 2001, which aim at investment in assets and investments overseas.

According to the agreement condition, the investment adviser shall provide investment advisory service and act as representative of the Company to enter into transactions associated with assets as assigned by the Company. The Company has commitment to pay the investment advisory fee on a yearly basis.

7. CURRENT INVESTMENTS

As at December 31, 2002 and 2001, current investments consisted of:

THOUSAND BAHT CONSOLIDATED THE COMPANY ONLY 2002 2001 2002 2001 Time deposits 34,192 45,862 527 546 Current investments classified as Available-for-sale securities - Equity securities - Nakornthai Strip Mill Plc. 82,900 82,900 82,900 82,900

- Millenium Steel Plc. 2,524 3,054 2,524 3,054 - Other companies and unit trusts 49,820 281 49,820 282

135,244 86,235 135,244 86,236 Less Allowance for revaluation of investments - - - -

Accumulated impairment loss on investments (79,748) (85,954) (79,748) (85,954) Current investments classified as

Available-for-sale securities - Equity securities - net 55,496 281 55,496 282

Total Current Investments 89,688 46,143 56,023 828

The Company exchanged ordinary shares and warrants of NTS Steel Group Public Company Limited for ordinary shares

and warrants of Millenium Steel Public Company Limited at the ratio of 1:1 according to NTS Steel Group Public Company Limited’s restructuring plan.

8. TRADE ACCOUNTS RECEIVABLE - OTHER PARTIES, NET

As of December 31, 2002 and 2001, trade accounts receivable - other parties consisted of:

THOUSAND BAHT CONSOLIDATED THE COMPANY ONLY 2002 2001 2002 2001 Land sale contracts receivable Land sale contracts 381,515 588,558 1,987 3,487 Less Installments received (109,899) (506,758) (652) (2,152) Installments receivable 271,616 81,800 1,335 1,335 Less Deferred income (39,776) (17,283) - - Land Sale Contracts Receivable, net 231,840 64,517 1,335 1,335 Service receivables Accrued service income 39,757 42,783 32,119 6,693 Less Allowance for doubtful accounts (17,124) (12,639) (30,091) (5,427) Service Receivables, net 22,633 30,144 2,028 1,266

Trade accounts receivable - other parties, Net 254,473 94,661 3,363 2,601

13

Trade accounts receivable - other parties, net (continued)

As of December 31, 2002 and 2001, the land sale contracts receivable and accrued service income classified by aging are as follows:

THOUSAND BAHT CONSOLIDATED THE COMPANY ONLY 2002 2001 2002 2001 Land sale contracts receivable

Undue installments 231,840 65,565 1,335 101 Less than 3 months - 300 - 300 Over 3 months to 12 months - 848 - 847 Over 12 months - - - - Installments paid on date of transfer

of title deed - 15,087 - 87 Less Deferred income - (17,283) - -

Total land sale contracts receivable 231,840 64,517 1,335 1,335

Accrued service income

Less than 3 months 23,883 30,999 3,278 2,114 Over 3 months to 6 months 1,182 1,658 266 266 Over 6 months to 12 months 2,591 1,446 1,601 422 Over 12 months 12,101 8,680 4,843 3,891

39,757 42,783 9,988 6,693 Less Allowance for doubtful accounts (17,124) (12,639) (7,960) (5,427)

Accrued service income, Net 22,633 30,144 2,028 1,266

9. COST OF REAL ESTATE DEVELOPMENTS, NET

As at December 31, 2002 and 2001, cost of real estate developments consisted of:

THOUSAND BAHT CONSOLIDATED THE COMPANY ONLY 2002 2001 2002 2001 Land cost - under development 3,076,675 2,743,483 845,411 850,138 Development project costs 4,865,863 4,583,426 927,723 1,011,028 Interest capitalised 1,776,321 1,795,804 634,971 654,412 Additional utility cost 7,340 7,054 7,185 7,054 Advance for construction costs 4,305 7,419 - -

9,730,504 9,137,186 2,415,290 2,522,632 Less Accumulated costs transferred to

cost of land sales

(6,848,611)

(6,252,139)

(1,897,704)

(1,714,174) Accumulated costs transferred to be

assets for rent

(343,850)

(346,349)

-

(107,472) Accumulated costs transferred to

repay debt (143,838) (137,597) (143,838) (137,597) 2,394,205 2,401,101 373,748 563,389 Less Loss on projects revaluation (38,480) - (38,480) -

Cost of Real Estate Developments, net 2,355,725 2,401,101 335,268 563,389

14

Cost of real estate developments (continued)



Eastern Seaboard Industrial Estate (Rayong) Company Limited

Valuation Stated in the Financial Statements

Cost of real estate developments is stated at the lower of aggregate cost or net realisable value. During the year 2002, the Company and the 2 subsidiaries had obtained appraisal by an appraisal firm and had recognised loss on projects evaluation in the statements of income.

Obligation of Assets as at December 31, 2002

The majority of land in the projects of the Company and the 2 subsidiaries has been mortgaged as collateral for loans from local financial institutions and the other part has been mortgaged as collateral for the issue of the US$ 15.1 million Guaranteed Bonds of an overseas subsidiary company.

Capitalisation of Borrowing Costs

Consolidated For the years ended December 31, 2002 and 2001, interest expenses are capitalised to the cost of real estate developments in the approximate amounts of Baht 31.41 million and Baht 41.06 million, respectively.

The Company The Company has ceased interest capitalisation since January 1, 1999.

Debt Settlement by Transferring Assets (Hemaraj Land and Development Public Company Limited)

During 2001, the Company transferred the land in its industrial estate with the cost of Baht 137.60 million to the Industrial Estate Authority of Thailand to repay debts of the Company and a subsidiary company and as a fund in accordance with the amendment to the joint operation agreements dated October 31, 2001 as disclosed in Note 13 and Note 28 to the financial statements.

During 2002, the Company transferred the land in its industrial estate with the cost of Baht 143.84 million to an asset management company, which received rights claim of the asset from a commercial bank to settle the debt under the Restructuring Agreement as disclosed in Note 24 to the financial statements.

15

10. PROPERTY, PLANT AND EQUIPMENT

As at December 31, 2002 and 2001, property, plant and equipment consisted of:

Changes in Cost Changes in Accumulated Depreciation Net Book Value

Beginning Addition Sale Transfer Ending Beginning Depreciation Sale Transfer Ending Beginning Ending

Consolidated

Land 17.28 - - - 17.28 - - - - - 17.28 17.28

Building and structure 203.43 0.77 - - 204.20 42.25 7.87 - - 50.12 161.18 154.06

Building improvements 3.79 0.58 (0.14) - 4.23 1.48 0.72 - - 2.20 2.31 2.03

Office equipment and furniture and fixture 68.51 3.36 (0.93) - 70.94 46.85 7.09 (0.21) - 53.73 21.66 17.22

Vehicles 34.40 6.95 (6.18) - 35.17 16.84 5.67 (5.98) - 16.53 17.56 18.64

Construction in progress 10.62 - - - 10.62 - - - - - 10.62 10.63

Raw water pipe 3.66 - - - 3.66 0.88 0.24 - - 1.12 2.78 2.54

Total 341.69 11.66 (7.25) - 346.10 108.30 21.59 (6.19) - 123.70 233.39 222.40

Less Reserve for impairment loss of assets (10.17) (10.17)

Less Reserve for possible loss of title

of land and office building (36.96) (36.96)

Property, Plant and Equipment, net 341.69 11.66 (7.25) - 346.10 108.30 21.59 (6.19) - 123.70 186.26 175.27

The Company

Land 2.93 - - - 2.93 - - - - - 2.93 2.93

Building and structure 45.35 - - - 45.35 11.32 - - 11.32 34.03 34.02

Building improvements 1.56 - (0.14) - 1.42 1.42 - - - 1.42 0.14

Office equipment and furniture and fixture 37.22 2.21 (0.93) - 38.50 29.62 2.72 (0.21) - 32.13 7.60 6.37

Vehicles 17.70 5.05 (1.55) - 21.20 7.09 3.85 (1.36) - 9.58 10.61 11.62

Construction in progress 0.86 - - - 0.86 - - - - - 0.86 0.86

Raw water pipe 3.66 - - - 3.66 0.88 0.24 - - 1.12 2.78 2.54

Total 109.28 7.26 (2.62) - 113.92 50.33 6.81 (1.57) - 55.57 58.95 58.34

Less Reserve for impairment loss of assets (0.72) (0.72)

Less Reserve for possible loss of title

of land and office building (36.96) (36.96)

Property, Plant and Equipment, net 109.28 7.26 (2.62) - 113.92 50.33 6.81 (1.57) - 55.57 21.27 20.66

16

Property, plant and equipment (continued)

Consolidated

For the year ended December 31, 2002, depreciation of building and equipment are included in selling and administrative expenses and cost of services in the amounts of Baht 12.86 million and Baht 9.23 million, respectively.

The Company

For the year ended December 31, 2002, depreciation of building and equipment are included in selling and administrative expenses and cost of services in the amounts of Baht 6.45 million and Baht 0.37 million, respectively.


As at December 31, 2002, the Company has provided reserve for loss of the possessory right over the land and office building in the amount of Baht 36.96 million as the management of the Company view that the Company may not receive transfer of such possessory right.

11. LEASEHOLD LAND AND LAND HELD FOR COMMERCIAL PURPOSES

As at December 31, 2002 and 2001, leasehold land and land held for commercial purposes consisted of:

THOUSAND BAHT CONSOLIDATED THE COMPANY ONLY 2002 2001 2002 2001 Land bank 10,201 10,201 10,201 10,201 Land cost of projects suspended from development 1,135,711 1,406,047 1,135,711 1,134,937 Suspended development project costs 266,909 268,526 266,909 266,499 Interest capitalized 556,119 556,409 556,119 556,119 Leasehold land 77,077 77,077 77,077 77,077

2,046,017 2,318,260 2,046,017 2,044,833 Less Accumulated costs transferred to

repay debt (645,413) - (645,413) - Loss on projects evaluation (315,322) (561,629) (315,322) (561,629)

Leasehold Land and Land Held for Commercial Purposes, net 1,085,282 1,756,631 1,085,282 1,483,204




Valuation Stated in the Financial Statements

Leasehold land and land held for commercial purposes is stated at the lower of aggregate cost or net realisable value for which during the year 2002, the Company and the subsidiary had obtained appraisal by an appraisal firm and had recognised loss from projects evaluation in the statements of income.

Obligation of Assets as at December 31, 2002

The majority of land in the projects of the Company and the subsidiary has been mortgaged as collateral for loans from local financial institutions and the other part has been mortgaged as collateral for the issue of the US$ 19.2 million Guaranteed Bonds of an overseas subsidiary company.

Assets Transfer for Debt Repayment (Hemaraj Land and Development Public Company Limited)

During 2002, the Company transferred the land in its industrial estate with the cost of Baht 645.41 million to an asset management company, which received rights claim of the assets from a commercial bank to settle the debt under the Restructuring Agreement as disclosed in Note 24 to the financial statements.

17

12. ASSETS FOR RENT

As at December 31, 2002 and 2001, assets for rent consisted of:


Changes in Cost Changes in Accumulated Depreciation Net Book Value

Beginning Addition Sale/Written off Transfer Ending Beginning Depreciation Sale/Written off Transfer Ending Beginning Ending

Consolidated

Land 65.05* 14.81 (25.20)*** - 54.66* - - - - - 65.05 54.66

Building 280.59* 90.16 (82.27)*** - 288.48* 22.07 16.33 (15.51) - 22.89 258.52 265.59

Pipe rack 116.52 - - - . 116.52 28.40 7.77 - - 36.17 88.12 80.35

Total 462.16 104.97 (107.47) - . 459.66 50.47 24.10 (15.51) - 59.06 411.69 400.60

The Company

Land 25.20** - (25.20)*** - - - - - - - 25.20 -

Building 82.27** - (82.27)*** - . - . 11.36 4.15 (15.51) - - . 70.91 - .

Total 107.47 - (107.47) - . - . 11.36 4.15 (15.51) - - 96.11 - .

Consolidated

- As at December 31, 2002 and 2001, portions of land and building for rent, which have been transferred from the cost of real estate developments, were in the accumulated amounts of Baht 343.13* million and Baht 345.64* million, respectively.

- Depreciation of building and pipe rack for the year ended December 31, 2002 is included in cost of services.

- Debt Settlement by Transferring Assets ***

The Company

- As at December 31, 2002, portion of land and building for rent, which has been transferred from the cost of real estate developments, was in the accumulated amount of Baht 107.47** million.

- Depreciation of building for the year ended December 31, 2002 is included in cost of services.

18

13. SINKING FUND

As disclosed in the Note 28 to the financial statements, the Company and its subsidiaries had entered into the joint operating agreements with the Industrial Estate Authority of Thailand (“IEAT”). The Company and its subsidiaries are committed to be a provider and to set up a fund (“Sinking Fund”) for the maintenance and reconstruction of utilities systems and facilities for the customers in the industrial estate. The Company and its subsidiaries had made the payment by cash and by transferred of partial piece of land for the Sinking Fund and in addition, the company and its subsidiaries had transferred the withdrawal rights over the Sinking fund to the IEAT per the terms and conditions of such agreements. As a service provider for utilities system and facilities in the industrial estate under the current joint agreement with IEAT, the Company believed and proposed that the Sinking Fund should also be an asset of the joint operating partner in order to be consistent with the infrastructure assets. Thai Industrial Estate Association, of which the Company and its subsidiaries are members, are under negotiation with IEAT to amend the agreement in order to make clear and comply with the Company’s proposal. On January 21, 2003, the Board of IEAT had a resolution to accept in the concept and during the procedure to amend the announcement appropriately.

As at December 31, 2002 and 2001, Sinking Fund consisted of :

THOUSAND BAHT

2002 2001

Hemaraj Land and Development Public Company Limited 149,434 147,485 Eastern Industrial Estate Company Limited 77,200 76,189 Eastern Seaboard Industrial Estate (Rayong) Company Limited 162,600 136,661

Total 389,234 360,335

14. CONVERTIBLE BONDS AND DEFAULTS ON DEBT REPAYMENTS

On September 9, 1993, Hemaraj Land and Development Public Company Limited were issued the US$ 60 million convertible bonds, which bear interest at the rate of 3.5 percent per annum, net of withholding tax, payable annually commencing on September 9, 1994, and will be redeemed on September 9, 2003.

On September 10, 1993, a resolution was passed by the Board of Directors Meeting No.11/1993 to approve the Company to manage funds from convertible bonds in the amount of Baht 1,512.18 million for developing land for commercial purposes and to record the interest from convertible bonds as a part of land development cost.

Conversion and Option for Redemption

As from December 9, 1993 up to August 9, 2003, each convertible bond may be converted into 135 fully paid ordinary shares of the Company. Such conversion rate may be changed as a result of the issue of warrants and the offering of ordinary shares as disclosed in Note 25 to the financial statements, respectively. At present, the Company is waiting for the confirmation from the trustee for the new conversion rate.

The convertible bonds may be redeemed, in whole or in part, by the Company as from September 9, 1996 at varying percentages of the principal amount from 109.28 percent to 116.50 percent of principal amount. At the option of the bondholders, the Company must redeem such convertible bonds on September 9, 1998 at 116.50 percent of principal amount.

Repurchase of Convertible Bonds

During 1998 and 1997, an overseas subsidiary repurchased part of the Hemaraj Land and Development Public Company Limited’s convertible bonds. According to the Bond prospectus, the repurchased convertible bonds shall be cancelled forthwith. As at December 31, 2001 and 2000, repurchased convertible bonds were in the approximate amounts of US$ 30.34 million, which were shown as loan from repurchase of convertible bonds.

During the second and the third quarter of 2002, the Company had made an offer to retire 211 units and 553 units of the bonds respectively from the bondholders.

19

Convertible bonds and defaults on debt repayments (continued)

Remaining Convertible Bonds and Provision for Convertible Bond Redemption

As at December 31, 2002 and 2001, the remaining convertible bonds were in the amount of US$ 23.25 million (Baht 585.99 million) and in the amount of US$ 24.02 million (Baht 605.25 million), respectively. The Company has based the provision for redemption of the remaining convertible bonds. As at December 31, 2002 and 2001, the Company had reserved provision for convertible bond redemption in the approximate amounts of Baht 616.31 million and Baht 666.84 million, respectively, and included these amounts within convertible bonds.

Defaults on Debt Repayments for Convertible Bonds

The Company failed to redeem the convertible bonds which the bondholders sought redemption in accordance with their rights on September 9, 1998, and failed to meet payments of interest on convertible bonds which were due on September 9, 1998, 1999, 2000, 2001 and 2002. As of December 31, 2002, accrued interest on convertible bonds totaled US$ 5.09 million (Baht 220.36 million). In addition, on April 28, 2000, a resolution was passed by the Annual General Meeting of Shareholders giving approval for the Company to change some conditions of convertible bonds for the convenience of debt restructuring, based on the results of negotiation for debt restructuring.

The Board of Directors’ meeting on July 15, 2002 resolved the Company to call a convertible bondholders’ meeting to approve the redemption of all outstanding bonds at 50 percent of the par value on September 9, 2003, waive and discharge all outstanding claims under the bonds including all accrued interest and any other monetary debt. As at September 2, 2002, the Company had called the convertible bondholders’ meeting to approve the said offer, which 71 percent of the total votes supported the proposal. However, 75 percent of the total votes was needed to be treated as the resolution. Currently, the Company is in the process of negotiating to get the approval from the bondholders.

15. LONG-TERM LOANS TO RELATED PARTIES

As of December 31,2002, Hemaraj Land and Development Public Company Limited has made loan agreement with an overseas subsidiary company, H-International Company Limited, in the amount of Baht 1,026.89 million, which do not have the maturity date and interest rate.

20

16. LOANS FROM RELATED PERSONS

Eastern Seaboard Industrial Estate (Rayong) Company Limited As at December 31, loans from related persons consisted of:

Credit Line Credit Conditions Interest Payment Balances (Million Baht) Period Term Total Principal Repayment Period Rate (Million Baht) Installments (%) 2002 2001

a. Loan from director in term 80.00 November 2000 to Quarterly 4 MLR+1% of 58.67 80.00 of promissory note with April 2004 Thai Farmers grace period of 1 year 10.00 August 2002 to Monthly 12 Monthly Bank Plc. 10.00

July 2007 b. Loan from 3 shareholders in terms of

promissory note with grace period of 1 year - Under the agreement dated 165.00 November 2000 to Quarterly 4 Monthly MLR+1% of 132.41 165.00

October 31, 2000 August 2005 Thai Farmers Bank Plc.

- Under the agreement dated 20.00 May 2001 to Quarterly 4 Monthly MLR+1% of 16.00 20.00

October 31, 2000 and July 24, 2002 10.00 July 2005 Monthly 12 Thai Farmers 10.00 - Bank Plc.

- Under the agreement May 2001 to Quarterly 4 Monthly MLR+1% of 17.17 20.00

Dated May 2, 2001 20.00 July 2005 Thai Farmers Bank Plc. Total 305.00 244.25 285.00

Less Current portion of long-term loan (118.08) (102.77) Loans from Director and Related Person, net

Total of the first 3 periods, which approximates 25% of principal of each promissory note for Baht 80 million loan and the remaining will, after grace period, be repaid in the last period. and 48 months equal installments be repaid for Baht 10 million loan.

Total of the first 3 periods, which approximates 25% of principal of each promissory note will, after grace period, be repaid equally for each period and the remaining will be repaid in the last period.

Total of the first 3 periods, which approximates 25% of principal of each promissory note for Baht 20 million loan and the remaining will, after grace period, be repaid equally in the last period for 48 months for Baht 10 million loan. Total of the first 3 periods, which approximates 25% of principal of each promissory note will, after grace period, be repaid in the last period. and 48 months equal installments be repaid for Baht 10 million loan.

126.17 182.23

The Company obtained loans from its director and related person for financing the construction of micro pre-fabricated factories and mini pre-fabricated factories for sale and rent. Part of land and factories has been mortgaged as collateral for such loans.

21

17. LONG-TERM LIABILITIES

As at December 31, long-term liabilities consisted of: (Amounts:Million Baht)

Current Repayment Condition Balances Credit Line Credit Principal Repayment Interest Payment Consolidated The Company (Million Baht) Period Installment Term Total Term Rate 2002 2001 2002 2001 Amount Installments (%) (Million Baht)


Loans from 2 local banks and 3 local finance institutions

1) Loan with credit line of Baht 1,200 million, to be repaid within 3 years as from September 28, 1994. Payment, when no mortgage, is at the rate of 60% of transferred land price. Payment is made, when no mortgage, The interest rate is MLR+1% per annum. at the rate of 65% of the transferred On September 30, 1998, the company had the 1st negotiation on debt September 28, 2000 land price and at the minimum annual restructuring and the 2nd negotiation on September 28, 2000. to rate as specified in the agreement,

Payment for the loan had been made on December 26, 2002. 107.55 December 30, 2005 commencing in 2001 Monthly MLR - 107.55 - 107.55

2) Loan with credit line of Baht 297 million and grace period of 18 months, which changed from promissory note from the 1st debt restructuring on September 30, 1998, to be repaid within Payment is made, when no mortgage, 14 quarters from June 2000 to September 2003. at the rate of 65% of the transferred The interest rate is MLR per annum, payable monthly. September 28, 2000 land price and at the minimum annual

The 2nd debt restructuring was negotiated on September 28, 2000.

to rate as specified in the agreement,

Payment for the loan had been made on December 26, 2002. 297.00 December 30, 2005 commencing in 2001 Monthly MLR - 297.00 - 297.00

3) Loan in the amount of Baht 150 million, to be repaid within 12 quarters, in 3 years from 1996. The interest rate is MLR+1% per annum. According to the results of debt restructuring on 5.36 December 14, 1998 and November 29, 2001, respectively. September 30, 2001 Commencing

On October 10, 2002, the latest debt restructuring is reached To In September under current repayment conditions. 75.00 December 30, 2005 2002 Quarterly 14 Monthly MLR 58.92 75.00 58.92 75.00

4) Loan with credit line of Baht 100 million and grace period of 36 months, which was changed from promissory note, is to be repaid within December, 2003 commencing on December 14, 2001 September 30, 2001 7.14

On November 29, 2002 until October 10 2002, the latest debt To Commencing in restructuring is reached under current repayment conditions. 100.00 December 30, 2005 September 2002 Quarterly 14 Monthly MLR 78.58 100.00 78.58 100.00

22

Long-term liabilities (continued) (Amounts:Million Baht) Current Repayment Condition Balances Credit Line Credit Principal Repayment Interest Payment Consolidated The Company (Million Baht) Period Installment Term Total Term Rate 2002 2001 2002 2001 Amount Installments (%) (Million Baht)

5) Loan in the amount of Baht 110 million, to be repaid within 20 months as from February 13, 1996. The interest rate is MLR+0.5% per annum.

Debt restructuring had been negotiated on June 24, 1998 and March 31, 1999, respectively. Subsequently, debt claim right of lender had been transferred to a mutual fund, which the company had entered into a Debt September 30, 2002 7.27 Compromising Agreement, dated September 5, 2002 under To Commencing in current repayment conditions. 130.82 March 30, 2004 September 2002 Monthly 18 - - 101.75 130.82 101.75 130.82

6) Loan under the Conditional Debt Release Agreement dated July 31, 2000, the original principal of Baht 172 million is to be repaid totaling Baht 86.93 million, of which Baht 12.62 million was repaid at beginning of the agreement. The remaining Baht 74.31 million is to be repaid as described in current July 31, 2000 repayment conditions. The first installment due on July 31, 2000. To Minimum

The remaining had been repaid on June 28, 2002. 172.00 December 31, 2002 2.87 Monthly 30 Monthly 11.75 - 117.42 - 117.42

Total 882.37 239.25 827.79 239.25 827.79

Eastern Industrial Estate Company Limited Loan from a local bank with credit line of Baht 93 million and grace period of 18 months, which was changed from promissory note from debt restructuring on September 30, 1998, to be repaid within 6 quarters from June, 2000 to September, 2001. The interest rate is MLR per annum, payable monthly. Payment is made, when no mortgage, Subsequently, on August 30, 2000 and February 6, 2002 the debt at the rate of 70% of the transferred restructuring negotiations are reached. February 6, 2002 land price and at the minimum annual Amendment on Debt Restructuring Agreement had been made To rate as specified in the agreement, on March 4, 2002 under current repayment conditions. 93.00 December 30, 2004 commencing in 2002. Monthly MLR 84.00 93.00 - -

Total 93.00 84.00 93.00 - -


Loans from 2 local commercial banks consisted of:

1) Loan with credit line of Baht 550 million, repayable within March, 2000 Repayable as titles are transferred at 50% March, 2000, subsequently, extended to March 2001. To of land contract price and the outstanding Latest, the repayment term is extended to be within March 2003. 550.00 March, 2003 amount repayable within March, 2003. Monthly MLR 19.14 160.20 - -

23

Long-term liabilities (continued) (Amounts:Million Baht)

Current Repayment Condition Balances Credit Line Credit Principal Repayment Interest Payment Consolidated The Company (Million Baht) Period Installment Term Total Term Rate 2002 2001 2002 2001 Amount Installments (%) (Million Baht)

2) Loan in the amount of Baht 270 million, repayable Minimum Baht 3.75 million per month, within 7 years from the first withdrawal. March 2002 Commencing from the last working day MLR -0.5%, To of the month 13 and 30% of the only 1st year. 270.00 March 2009 repayment amount. Monthly MLR 31.75 - - -

3) Loan in the amount of Baht 100 million, repayable within Minimum 30% of the repayment amount. 4 years from the first withdrawal. May 2002 When no mortgage, not less than MLR -0.5%,

To Baht 0.60 million per rai by deducting only 1st year. 100.00 May 2006 from the amount that already repaid. Monthly MLR 59.24 - - -

Total 920.00 110.13 160.20 - -

Eastern Pipeline Services Company Limited Loan from a finance company with credit line of Baht 50 million, to be repaid over 72 months from April 30, 1998 to March 31, 2004. The interest rate is MLR+1% per annum, payable monthly. The loan had been put up for sale by FRA. Subsequently, according to the Conditional Debt Release Agreement, which the Company entered into it with a Mutual Fund on July 31, 2000, the original principal is to be repaid totaling Baht 20.57 million, of which Baht 2.90 million was paid at beginning of the agreement. The remaining Baht 17.67 million is to be repaid as described in current repayment July 31, 2000 condition. The first installment due on July 31, 2000. to Minimum The remaining had been repaid on April 3, 2002. 50.00 December 31, 2002 0.68 Monthly 30 Monthly 11.75 - 23.86 - -

Total 50.00 - 23.86 - -

Total Long-Term Liabilities 1,575.37 433.38 1,104.85 239.25 827.79

Less Portions under debt restructuring negotiation plan - (535.37) - (535.37)

Less Current portions of long-term liabilities shown under current liabilities (217.11) (71.54) (137.22) (54.85)

Long-Term Liabilities, net 216.27 497.94 102.03 237.57

24

Long-term liabilities (continued)

The above liabilities are variously collateralised.


Portions of long-term loans under the Conditional Debt Release Agreement and related interest payable totaling Baht 162.98 million, which would be forgiven, are to be recognised as revenue in the statement of income upon the completion of debt repayment. In the second quarter, the debt repayment is completed.


Portions of long-term loan under the Conditional Debt Release Agreement and related interest payable totaling Baht 32.08 million, which would be forgiven, are to be recognised as revenue in the statement of income upon the completion of debt repayment. In the second quarter, the debt repayment is completed.

18. GUARANTEED BONDS


On September 25, 1998, a resolution was passed by the Board of Directors Meeting No. 5/1998 to approve the company to issue, in two tranches, US$ 19.2 million Guaranteed Bonds to a foreign commercial bank which had acquired part of the convertible bonds issued by Hemaraj Land and Development Public Company Limited. The principal amounts are US$ 11.5 million for the first tranche and US$ 7.7 million for the second tranche, to be repaid within 2005 in 8 semi-annual installments, with the first installment due on March 31, 2002. The interest rates (net of withholding tax) are 1% per annum and 5% per annum, respectively, payable quarterly as from December 31, 1998.

Provision for Guaranteed Bond Redemption

Provision for Guaranteed Bond redemption is calculated over the period of the Guaranteed Bonds and included in Guaranteed Bonds.

Collateral

- Hemaraj Land and Development Public Company Limited has co-operated with 2 related companies to guarantee the issue of Guaranteed Bonds. These companies have obligations to comply with terms and conditions of the issue of Guaranteed Bonds.

- Investments in ordinary shares and certain land of a related company have been used as collateral for the issue of

Guaranteed Bonds.

Other Conditions of Guaranteed Bonds

- The Guaranteed Bonds are not capable of being quoted, listed or ordinarily dealt in any stock exchange, over-the-counter or other organised securities market and may not be transferred to any person other than to a related company of the registered holder.

- The Guaranteed Bonds may be redeemed early in whole or in part and the company is mandated to redeem part of the bonds when the mortgaged land is sold. The redemption price is being calculated to give a yield of 7% - 9% per annum from the issuing date to redemption date.

On March 29, 2002, a resolution was passed by the Board of Directors’ Meeting to authorise the Company to enter into

the Supplemental Agreement Relating to Trust Deed to amend and waive certain of the terms and conditions of the Bonds, effective from April 1, 2002, are summarised as follows :

1) Prepayment

The Company will make the principal prepayment of the Tranche B bond for US$1,526,000 within April 1, 2003.

25

Guaranteed bonds (continued)

2) Interest

Tranche A : From July 1, 2002 onwards, interest rate of the first tranche will be increased from 1% per annum to 3% per annum, payable quarterly.

Tranche B : No change is made.

At any time the consolidated financial statements of Hemaraj and its subsidiaries show the Net Operating Profit in excess of Baht 80,000,000 for the three consecutive quarters, both tranches’ interest rate shall bear 1% increase from the current rate. However, if the interest rate is increased by 1% and, at any time afterwards, the consolidated financial statements of Hemaraj and its subsidiaries show the Net Operating Loss in excess of Baht 80,000,000 for the three consecutive quarters, both tranches’ interest rate shall be reduced by 1%.

3) Redemption

Tranche A: The principal is to be redeemed semi-annually from September 30, 2003 to March 31, 2007 in 8 equal installments, US$ 1,205,000 each.

Tranche B: The principal is to be redeemed semi-annually from September 30, 2003 to March 31, 2007 in the 8 installments, US$ 952,000 each for the first 5 installments, US$ 370,000 each for the next 2 installments and US$ 369,000 for the last installment.

4) Collateral

150,000 ordinary shares of Eastern Pipeline Services Company shall be additionally pledged as collateral.

5) Other Condition

The redemption price will be changed as a result of changing in the Bond’s yield from 7% per annum to 4% per annum retroactively from the issuance date to the redemption date for Tranche A and from 9% per annum to 7% per annum effective from January 1, 2002 to the redemption date for Tranche B.

19. PROVISIONS

As at December 31, 2002 and 2001, Loss Provision consisted of:

THOUSAND BAHT

2002 2001 19.1 Maximum loss reserve that may arise from a lawsuit

relating to the obligation under guarantee a subsidiary company, being under consideration of the primary court

128.40

128.40

19.2 Reserve for possible loss from pledge of securities on pledged agreements, against loans to a related company

236.69

212.06

19.3 Reserve for possible loss from pledge of securities on pledged agreements, against loans to a related company (withdrawn from the filing)

-

181.84

Total 365.09 522.30

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20. SHARE CAPITAL

20.1 The Extraordinary General Meeting of Shareholders No. 1/2001 of the Company held on December 28, 2001 approved the Company to proceed its authorized share capital summarised as follows :

- Decrease authorized share capital, from authorized share capital of Baht 3,270,000,000 to authorized share

capital of Baht 2,252,967,250, consisting of 225,296,725 ordinary shares of Baht 10 par value, by way of revoking 101,703,275 unissued ordinary shares (including ordinary shares allocated to accommodate the exercise of the right of convertible bonds of 51,234,425 shares, with the remaining 13,000,000 ordinary shares to accommodate the exercise of right of convertible bonds) of Baht 10 par value, amounting to Baht 1,017,032,750. The Company registered the decrease of its authorized share capital with the Ministry of Commerce on January 2, 2002.

- Increase authorized share capital by Baht 7,747,032,750 from authorized share capital of Baht 2,252,967,250 to

authorized share capital of Baht 10,000,000,000, divided into 1,000,000,000 ordinary shares of Baht 10 par value, by issuing authorized 774,703,275 ordinary shares of Baht 10 par value. The Company registered the increase of its authorized share capital with the Ministry of Commerce on January 3, 2002.

- Allocation of the increased ordinary shares is as follows :

- 283,163,108 shares for offering to the existing shareholders at the rate of 1 existing share to 4 new shares

of Baht 1 each, which was completed during the period 2002 with cash received of Baht 283.16 million; - 159,782,075 shares for offering via private placement in accordance with the Notification of the Securities

and Exchange Commission No. Kor Jor. 12/2543 regarding request for permission and permission to offer newly issued shares at the offering price of not lower than Baht 3 per share.

- 331,758,092 shares to accommodate the exercise of the right of warrant holders to purchase ordinary shares in addition to the existing allocation. The ordinary shares allocated to accommodate the exercise of the right of warrant holders to purchase ordinary shares total 473,264,040 shares.

20.2 The Annual General Meeting of Shareholders of the Company on April 30, 2002 approved the Company to proceed its authorized share capital summarised as follows :

- Decrease authorised share capital, from authorised share capital of Baht 10,000,000,000 to authorised

share capital of Baht 8,402,179,250, consisting of 840,217,925 ordinary shares of Baht 10 par value, by way of revoking 159,782,075 unissued ordinary shares of Baht 10 par value, amounting to Baht 1,597,820,750. The Company registered the decrease of its authorized share capital with the Ministry of Commerce on May 8, 2002.

- Increase authorized share capital by Baht 4,597,820,750, from authorized share capital of Baht 8,402,179,250 to

authorized share capital of Baht 13,000,000,000, divided into 1,300,000,000 ordinary shares of Baht 10 par value, by issuing authorized 459,782,075 ordinary shares of Baht 10 par value. The Company registered the increase of its authorized share capital with the Ministry of Commerce on May 10, 2002.

- Allocation of the increased ordinary shares is as follows :

- 402,782,075 shares for offering via private placement in accordance with the Notification of the Securities

and Exchange Commission No. Kor Jor. 12/2543 regarding request for permission and permission to offer newly issued shares at the offering price of not lower than Baht 3 per share.

- 57,000,000 shares to accommodate the exercise of the right of warrant holders to purchase ordinary shares

in addition to the existing allocation. The ordinary shares allocated to accommodate the exercise of the right of warrant holders to purchase ordinary shares total 530,264,040 shares.

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21. WARRANTS

According to the resolutions of the Annual General Meeting of Shareholders dated April 30, 1999, the Company issued 141,531,150 warrants to the existing shareholders and specific investors, at the unit price of Baht 0.1. Total cash received from offer of warrants was in the approximate amount of Baht 14.15 million. The Company registered its warrants with the Stock Exchange of Thailand (“SET”) as listed securities and the warrants were approved by the SET to be listed securities from December 15, 1999 onwards.

The Extraordinary General Meeting of Shareholders No. 1/2001 of the Company held on December 28, 2001 approved the extension of exercised period to 10 years from the issuing date, which will end within September 30, 2009 and for the adjustment of exercised price to Baht 3 per share.

Subsequently, the Board of Directors’ Meeting No. 1/2002 held on February 20, 2002 approved the adjustment to the numbers of the existing warrants with the additional ratio of 2.33333 units per each 1 existing warrant, in accordance with announcement of the Office of the Securities and Exchange Commission regarding guidelines on the adjustment to the exercise price/exercise ratio of warrants. The warrants after the adjustment are 471,686,471 units with the exercise ratio of 1 ordinary share per each warrant and exercise price of Baht 3 per share.

22. DIRECTORS’ REMUNERATION AND PERSONNEL EXPENSES

For the years ended December 31, directors’ remuneration included in the consolidated and the Company’s financial statements consisted of:


2002 2001 Hemaraj Land and Development Public Company Limited 26.12 31.60 Eastern Seaboard Industrial Estate (Rayong) Company Limited 6.45 4.35 H-International (BVI) Company Limited 17.51 50.41 Total 50.08 86.36

For the years ended December 31, personnel expenses included in selling and administrative expenses and cost of services in the statements of income are as follows:


2002 2001 Consolidated statements of income 91.88 63.43 The Company’s statements of income 53.00 26.27

23. LOSS ON EVALUATION

23.1 Loss on projects evaluation

The Company has recorded the difference between the book value and the fair value of cost of development as loss on projects evaluation 160.97 million baht.

23.2 Loss on impairment of assets evaluation

In the second quarter of 2002, the Company and its subsidiaries had the cost of real estate developments, appraised by an independent appraiser. The Company and its subsidiaries had the policy to adjust only those value are decreased. Loss which are recorded amounting to Baht 58.96 million.

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24. EXTRAORDINARY ITEM

24.1 Gain from debt release agreement

In the second quarter of 2002, the Company and its subsidiaries repaid their entire debts to a mutual fund in accordance with conditions agreed upon the debt settlements agreement. The released amount are summarized as follows :

THOUSAND BAHT CONSOLIDATED THE COMPANY ONLY 2002 2001 2002 2001 Debt under debt release agreement 302,555 - 249,902 - Less Repayment (107,498) - (86,925) -

Gain from debt release agreement 195,057 - 162,977 -

24.2 Gain from compromising debt

In the third quarter of 2002, the Company had settled a debt with Financial Institutions Development Fund with a gain of Baht 151.88 million. The balance under the debt settlement agreement amounting to Baht 130.82 million is to be paid in 18 months installment at Baht 7.27 million each, and a related company shares had been pledged as collateral. The first installment was on September 30, 2002.

24.3 Gain from debt settlement by transferring assets

In the fourth quarter of 2002, the Company had entered into the restructuring agreement with an asset

management company, which have been transferred debt equity in a loan from a commercial bank. Such loan consists of long-term amounting to Baht 404.55 million, bank overdraft amounting to Baht 29.90 million and interest payable amounting to Baht 71.33 million, which the Company agreed to make loan repayment by transferred right in land and prefabricated factories to the said asset management company. However, the Company can payback all or part of it within 5 years from transferred right of asset date. As a result, the Company has gain from debt settlement by transferring assets in the amount of Baht 51.81 million.

24.4 Loss from purchased debt and right

In the fourth quarter of 2002, Eastern Industrial Estate Company Limited, a subsidiary, has entered into the

Transferred Debt Agreement with 2 mutual funds to release the Company from the debt obligations and cease the court litigation. The subsidiary paid Baht 132.53 million and obtained the rights claim over the Company and related person including the collateral.

As a result, the mutual funds withdrew the case and released Hemaraj Land and Development Public Company Limited, a guarantor, from the lawsuit. Therefore the Company has reversed the loss provision for the legal disputes for the amount of Baht 181.84 million. The loss provision from such legal dispute was recorded by the subsidiary in full amount and shall be recorded as a gain if the Company receives the payment from the future claims.

.

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25. EARNINGS (LOSS) PER SHARE COMPUTATION

Earnings (loss) per share computation in the consolidated and the Company’s financial statements for the years ended December 31, 2002 and 2001 consisted of:

2002 2001 Thousand Baht Number Baht Thousand Baht Number Baht Net profit(loss) for the Year of Share Earnings (loss) per share Net profit(loss) for the Year of Share Earnings (loss) per share (Share) (Share) Basic earnings (loss) per share

Net profit (loss) attributable to ordinary shareholders 638,732 347,986,275 1.84 (B) (493,229) 232,944,009 (A) (2.12)

The effect of potential ordinary shares

1. Convertible bonds 1.1 Adding back the expenses that will be

saved on the conversion of convertible bonds (net of income tax 25%)

1.2 Deducting the revenues that will not be recognized upon the conversion of convertible bonds (net of income tax 25%) (10,385) 54,950

1.3 Increase in ordinary shares under conversion of convertible bonds (C) 3,225,442 3,254,032

2. Warrants Number of shares that would have been issued

for no consideration as the average fair value of ordinary shares exceeds the exercise price 175,972,310 -

Earnings (loss) per share after adjustment by

The effect of potential ordinary shares Net profit (loss) attributable to ordinary shareholders

in case of convertible bonds being converted and all warrants being exercised 628,347 527,184,027 1.20 (438,279) 236,198,042 (1.86)

(A) The weighted average number of ordinary shares outstanding during the period as restated by the adjustment factor from the right issue during the year 2002. (B) Including the effects of right issue during the year 2002. (C) Such conversion rate may be changed as a result of the issue of warrants and the offering of ordinary shares as disclosed in Note 20 to the financial statements. Currently, the Company is waiting for the confirmation from the trustee for the new conversion rate.

Diluted loss per share are not shown in the statements of income for the year ended December 31, 2001 because the effect of dilutive ordinary shares would be lower than the basic earning loss.

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26. BUSINESS SEGMENT INFORMATION

As of December 31, 2002 and 2001, business segment information in the consolidated balance sheets classified by domestic and overseas business are as follows:

MILLION BAHT 2002 2001

Domestic Overseas Domestic Overseas Industrial Estate Others Holding Company Total Industrial Estate Others Holding Company Total Cost of real estate developments, net 2,355.73 - - 2,355.73 2,401.10 - - 2,401.10 Leasehold land and land held for

Commercial purposes, net 1,085.28 - - 1,085.28 1,756.63 - - 1,756.63 Assets for rent, net 320.25 80.35 - 400.60 323.57 88.12 - 411.69 Property, plant and equipment, net 174.57 0.70 - 175.27 186.26 - - 186.26 Other assets 1,269.88 4.82 450.58 1,725.28 1,048.76 1,373.48

Total Assets 5,205.71 85.87 450.58 5,742.16 5,716.32 92.49 320.35 6,129.16

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The consolidated statements of income, for the years ended December 31, 2002 and 2001, operations in classified by domestic and overseas business are as follows :

MILLION BAHT 2002 2001

Domestic Overseas Total Domestic Overseas Total Holding Holding

Industrial Estate Others Company Industrial Estate Others Company Sales of land 632.59 - - 632.59 534.37 - - 534.37 Sales of pre-fabricated factory 35.53 - - 35.53 35.00 - - 35.00 Service income 382.44 18.96 - 401.40 350.28 18.16 - 368.44

Total Sales and Services income 1,050.56 18.96 - 1,069.52 919.65 18.16 - 937.81

Profit (loss) from operations 109.26 (12.45) 33.58 130.39 111.82 (3.69) (0.93) 107.20 Other income 30.00 0.31 0.22 30.53 319.23 0.98 0.34 320.55 Gain on exchange rate 27.12 - 32.61 59.72 (22.94) - (24.04) (46.98) Gain on sale of investment 160.06 - - 160.06 - - - - Gain from repurchase bonds 22.64 - - 22.64 - - - - Gain from the yield rate of Guaranteed bonds - - 37.22 37.22 - - - - Share of profits from investments for using

the equity method - associated companies 273.69 - - 273.69 - - - - Other expenses - directors’ remuneration (32.57) - (17.51) (50.08) (35.95) - (50.41) (86.36)

- loss on evaluation (219.65) - - (219.65) (10.17) - - (10.17) Share of losses from investments for using

the equity method - associated companies - - - - (303.87) - - (303.87) Reserve for other possible loss 157.21 - - 157.21 (183.58) - - (183.58) Interest expenses (118.34) (0.51) (34.74) (153.58) (161.31) (1.35) (58.24) (220.90) Income tax expenses - (1.11) - (1.11) (8.23) - - (8.23)

Profit (loss) after tax 409.42 (13.76) 51.38 447.04 (295.00) (4.06) (133.28) (432.34)

Profit (loss) of minority interest (74.91) (60.89)

Profit (loss) from ordinary activities 372.13 (493.23) Extraordinary item 266.60 -

Net profit (loss) 638.73 (493.23)

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27. PLEDGED ASSETS

As of December 31, 2002, pledged assets are as follows :


1) Time deposits of approximately Baht 0.52 million have been pledged to local banks against letters of guarantee issued to the Communication Authority of Thailand, the Provincial Electricity Authority, the Industrial Estate Authority of Thailand and other companies.

2) Investments in 10 million ordinary shares of Nakornthai Strip Mill Public Company Limited, a related company, have

been used as collateral for loans from a financial institution.

3) Investments in 9,999,994 ordinary shares of Eastern Industrial Estate Company Limited, a subsidiary company, have been used as collateral for the issue of Guaranteed Bonds of an overseas subsidiary company.

4) Investments in 8 million ordinary shares of Sriracha Harbor Public Company Limited, which is a related company, have been used as collateral for loans obtained by a related company from financial institutions.

5) The majority of land and attachments have been mortgaged as collateral for loans from local financial institutions.

6) Investments in 112,493 ordinary shares of Eastern Pipeline Services Company Limited, which is a subsidiary

company, have been used as collateral for the issue of Guaranteed Bonds of an overseas related company.


1) Time deposit of approximately Baht 14.36 million has been pledged to local banks against security given for

performance under sale contracts and utility construction. 2) All of the company’s land for development and the majority of its land held for commercial purposes have been

mortgaged as collateral for long-term loans from a local commercial bank and the issue of Guaranteed Bonds of an overseas related company.

3) Investments in 37,500 ordinary shares of Eastern Pipeline Services Company Limited, which a subsidiary

company, have been used as collateral for the issue of Guaranteed Bonds of an overseas related company.


1) Time deposit of approximately Baht 13.23 million has been pledged to local banks against security given for performance under sale contracts and utility services.

2) The majority of the company’s land has been mortgaged as collateral for overdrafts and loans from 2 commercial

banks. 3) Land, mini and micro pre-fabricated factories of the company have been mortgaged as collateral for loans from

related persons.

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28. COMMITMENTS UNDER AGREEMENTS

As of December 31, 2002, commitments under agreements are as follows: Hemaraj Land and Development Public Company Limited

The Company has participated in the establishment project of Chonburi Industrial Estate (Bor Win) in Phase 1 and Phase 2 with the Industrial Estate Authority of Thailand ("IEAT") according to the joint operation agreements dated July 5 and December 29, 1989, respectively. Later on October 31, 2001, the Company entered into the amendment to such joint operation agreements with IEAT. The major conditions are summarised as follows:

1) The Company shall provide utilities systems and facilities to the entrepreneurs in the industrial estate with payment of expenses on its participation in the procedures to the IEAT.

2) The Company shall not transfer assets, component part and equipment as well as utilities systems and facilities to

the IEAT.

3) The Company shall provide a fund for the maintenance and construction of utilities systems and facilities in the industrial estate ("Sinking Fund").


1) The Company shall provide utilities systems and facilities to the entrepreneurs in the industrial estates with payment of expenses on its participation in the procedures to the IEAT.

2) The Company shall not transfer assets, component part and equipment as well as utilities systems and facilities to

the IEAT.

3) The Company shall provide a fund for the maintenance and construction of utilities systems and facilities in the industrial estate ("Sinking Fund").


1) The company has obligations, under a joint-investment agreement with Hemaraj Land and Development Public Company Limited and another company as of follows:

- The Company has to pay commission on sale of land and management fee to Hemaraj Land and Development

Public Company Limited based on revenues from sales of land, public utility service providing and lease of factory.

- The Company has commitment to purchase land from a company with the first installment 50% of land prices, with

no interest for balance due in 4 - 6 months. All land prices between 2002 - 2005 are at Baht 296.75 million.

2) The company has commitment under construction contracts with 2 contractors to construct micro and mini pre-

fabricated factory, amounting to Baht 24 million.

3) The company has commitment under construction contracts with 2 contractors to construct a utilities system, amounting to Baht 33.20 million.

4) The company has commitment under service agreement with a related company in obtaining the maintenance of

utility system service from such company, amounting to Baht 2.97 million.

34

29. COMMITMENTS AND CONTINGENT LIABILITIES

As of December 31, 2002, commitments and contingent liabilities consisted of :


1) The Company has co-operated with 2 subsidiaries to guarantee the issue of the US$ 19.20 million Guaranteed Bonds of an overseas subsidiary company.

2) The Company has obligations, under condition of the letters of guarantee issued by the banks for its performance

under the joint operation agreements with the Industrial Estate Authority of Thailand, the construction of utilities under land sale contract, and its performance under the raw water purchase agreement and others, as well as the letters of guarantee issued by the banks for the performance of its associated company under the power plant construction agreement with the Electricity Generating Authority of Thailand, in the total amount of Baht 71.20 million.


1) The company has entered into land sale and purchase contracts. Under the terms of the contracts, the company is

contingently liable to repay deposits and installments in the event that buyers are unable to obtain satisfactory approval from the Board of Investment and/or the IEAT to set up operations and, consequently, obliged to cancel contracts.

2) The company has co-operated with 2 related companies to guarantee the issue of the US$ 19.20 million Guaranteed

Bonds of an overseas related company.

3) The company has obligations regarding guarantee of the hire purchase agreements of its 2 related companies in the total credit line of Baht 18.39 million.

4) The company has obligations, under condition of the letters of guarantee issued by the banks for its performance

under the joint operation agreement with the IEAT, the construction of utility and power substation in its industrial estate, and others in the total amount of Baht 70.25 million.


1) The company has entered into land sale and purchase contracts. Under the terms of the contracts, the company is contingently liable to repay deposits and installments in the event that buyers are unable to obtain satisfactory approval from the Board of Investment and/or the IEAT to set up operations and, consequently, obliged to cancel contracts.

2) The company has obligation, under condition of the letters of guarantee issued by banks to guarantee its

performance under the joint operation agreement with the IEAT, the construction of utility, transmission lines, power station and sale of land in its industrial estate, and others in the total amount of Baht 257.48 million.


The company has co-operated with 2 related companies to guarantee the issue of the US$ 19.20 million Guaranteed Bonds of an overseas related company.

35

30. SUBSEQUENT EVENTS

On January 8, 2003, Glow Company Limited, related company, in which the Company holds 16.99% intends to increase its registered capital to all existing shareholders in proportion to the shares held by them. In this regard, the Board of Directors’ Meeting had approved the waiver of the rights entitlement to subscribe for right shares in the said company. The Company’ s shareholding proportion in Glow will be diluted from 16.99% to 4.51% of the registered capital after such capital increase.

31. PROMOTIONAL PRIVILEGES

The Company and its 2 subsidiary companies have been granted promotional certificates under the Investment

Promotion Act, B.E. 2520 as follows:


A. Industrial Estate Business

A.1 On December 29, 1988, obtaining the first promotional certificate for the development area of 1,500 Rais.

A.2 On February 15, 1990, obtaining the second promotional certificate for the development area of 2,000 Rais.

B. Industrial Factory Development Business

B.1 On June 21, 2000, obtaining the third promotional certificate for the development of industrial factories for sale and rent, 11 units for micro factory.

Major Privileges

A.1 Exemption from corporate income tax on net income derived from the promoted business for a period of 7 years as from the date when revenues are first earned.

A.2 Reduction of 50% of the normal rate of corporate income tax on net income derived from the promoted business for 5 years from the expiry date under condition A.

B.1 Exemption from corporate income tax on net income derived from the promoted business for a period of 7 years as from the date when revenues are first earned.

The promotion period under condition A.1 and A.2 expired and the Company is currently in the promotion period under condition B.1 .



1. On May 8, 1989, obtaining the first promotional certificate for the development area of 626 Rais; 2. On September 23, 1992, obtaining the second promotional certificate for the development area of 1,850 Rais;

and 3. On May 25, 2000, obtaining the third promotional certificate for the development area of 565 Rais.

Major Privileges

1. Exemption from corporate income tax on net income derived from the promoted business from the date when revenues are first earned 5 years for the first promotional certificate, currently expired.

2. Exemption from corporate income tax on net income derived from the promoted business from the date when revenues are first earned for 8 years was expired. The company is currently in the promotion period under the 50% reduction of the corporate income tax rate on net income derived from the promoted business for 5 years from the expiry date of the exemption.

3. Exemption from corporate income tax on net income derived from the promoted business from the date when revenues are first earned 8 years for the first promotional certificate.

36

Promotional privileges (continued)



- On June 21, 1995, obtaining the promotional certificate for the development area of 2,063 Rais, which subsequently, extended to be 3,595 Rais on August 9, 1995.

- On October 27, 1997, obtaining the promotional certificate for the development area of 2,466 Rais, which subsequently, extended to be 2,791 Rais on August 26, 2002.

B. Industrial Factory Development Business

- On January 19, 2000, obtaining the promotional certificate for the development of industrial factories for sale and rent, 17 units for micro factory and 5 units for mini factory.

- On June 21, 2000, obtaining the promotional certificate for the development of industrial factories for sale and rent, 6 units for micro factory and 7 units for mini factory.

- On November 29, 2000, obtaining the promotional certificate for the development of industrial factories for sale and rent, 1 unit for micro factory and 11 units for mini factory.

- On January 16, 2002, obtaining the promotional certificate for the development of industrial factories for sale and rent, 50 units for micro factory and 1 unit for mini factory.

- On March 27, 2002, obtaining the promotional certificate for the development of industrial factories for sale and rent, 22 units for mini factory.

Major Privileges

A. Exemption from corporate income tax on net income derived from the promoted business for a period of 8 years as from the date when revenues are first earned.

B. Reduction of 50% of the normal rate of corporate income tax on net income derived from the promoted business for 5 years from the expiry date of 8 years after the date when revenues of each business are first earned.

C. Double deduction of transportation expenses, electricity expenses and water supply expenses is allowed for 10 years from the date when the revenues are first earned.

For the years ended December 31, domestic revenues are classified into the promoted and the non-promoted businesses as follows:


The promoted The non-promoted Total 2002 2001 2002 2001 2002 2001

Consolidated Revenue from sales of land 595.15 534.17 - 0.20 595.15 534.37 Revenue from sales of pre-fabricated factory 35.53 35.00 - - 35.53 35.00 Service income 278.14 234.59 123.26 133.85 401.40 368.44 Total 908.82 803.76 123.26 134.05 1,032.08 937.81 The Company Revenue from sales of land - - - 0.20 - 0.20 Service income 1.84 13.24 64.87 36.82 66.71 50.06 Total 1.84 13.24 64.87 37.02 66.71 50.26

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32. FINANCIAL INSTRUMENTS

Risk Management Policy

Exposure to interest rate and currency risk arises in the normal course of the Hemaraj Group’s business. These are subject to the risk of market rates changing subsequent to transaction date.

The Hemaraj Group’s policy on interest rate risk and currency risk hedging is as follows:

- Maintaining proportions of domestic and foreign borrowings denominated in USD currency;

- Borrowing loans at fixed and floating interest rates; - Mobilizing fund from directors and shareholders; and

- Pledging assets as collateral against loans.

The Hemaraj Group has no policy to speculate on or engage in the trading of any off-balance-sheet derivative financial statements.

Fair Value of Financial Instruments

Except as disclosed in Note 3 to the financial statements, fair value of significant financial instruments consists of:

- Fair value of cash and cash equivalents, deposits for investment, accounts receivable, bank overdrafts and loans from financial institutions, accounts payable and accrued expenses approximates the carrying amount because of short maturity of these instruments.

- Fair value of short-term investments in available-for-sale securities is equal to the carrying amount. - Fair value of short-term loans and advances to related parties, loans to related parties, short-term loans and advances

from related parties, due to and loans from related parties could not be determined since the repayment period is not determined.

- Fair value of convertible bonds, loans under debt restructuring negotiation plan and related interest payable could not be determined since the conditions of payments have not yet been determined.

- Fair value of the restructured domestic loans could not be determined due to uncertainty of payment under the conditions of debt restructuring agreements.

- Fair value of Guaranteed Bonds, which is computed by giving the discount rates to each installment, is equal to the carrying amount.

33. PROVIDENT FUND

Hemaraj Land and Development Public Company Limited Eastern Industrial Estate Company Limited

Eastern Seaboard Industrial Estate (Rayong) Company Limited Eastern Pipeline Services Company Limited

H - Construction Management and Engineering Company Limited

The Company and the 4 subsidiaries jointly established the provident fund under the Provident Fund Act B.E. 2530, named “Hemaraj Provident Fund”, to provide membership for their employees. According to regulations of the fund, members are required to make contributions at the rate of 4% of their monthly salaries while the Company and the subsidiaries will also make contributions at the rate of 4% - 8% of such salaries, depending on the length of work. Members are entitled to the companies’ contributions plus net benefit thereon, depending on their working period.

The provident fund is managed by a commercial bank as the fund manager, and therefore does not appear in the balance sheet.

34. RECLASSIFICATION OF ACCOUNTS

Certain accounts in the financial statements for the year ended December 31, 2001 have been reclassified to

conform with the presentation in the financial statements for the year ended December 31, 2002.

Documents

HEMRAJ : Annual Report 2002