IMPSA S.A. — Annual Report 1999

May 9, 2002

Impsa Asia Limited

Report of the directors

The directors have pleasure in presenting to shareholders their annual report together with the audited financial statements of the company for the period ended 31st December 1999.

Principal activities

The company is engaged in the production and marketing of heavy capital goods. The principal activities of the subsidiary company and associated company are as shown in note 5 and note 3 respectively to the financial statements.

Financial statements

The profit of the group for the year ended 31st December 1999 and the state of the group’s and the company’s affairs at that date are shown in the attached financial statements. The directors do not recommend the payment of any dividend for the year.

Fixed assets

The movements in fixed assets are shown in note 2 to the financial statements.

Directors

The directors who held office during the year were:

Francisco Ruben Valenti

Juan Carlos Fernandez

Luis Emilio Navas

Cheong Kah Wang (As alternate director to Francisco Ruben Valenti)

Yeung Sum Ming, Lydia (As alternate director to Luis Emilio Navas)

In accordance with the company’s articles of association, all directors shall continue to remain in their office.

Directors’ interest

The company has not entered into any contract, commitment or agreement with any other company in which any of the directors or members of the company’s management has interest, either directly or indirectly; nor has the company made any arrangement to enable any of the directors or members of the company’s management to obtain benefits by means of the acquisition of shares in, or debentures of, the company or any other body corporate.

Auditors

The financial statements have been audited by Messrs Chan &Wat Certified Public Accountants, who now retire and being eligible offer themselves for re-appointment.

By order of the board

Chairman

Hong Kong,

AUDITORS’ REPORT

TO THE SHAREHOLDERS OF IMPSA ASIA LIMITED

(incorporated in Hong Kong with limited liability)

We have audited the financial statement on pages 3 to 16 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

Respective responsibilities of directors and auditors

The Companies Ordinance requires the directors to prepare financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you.

Basis of opinion

We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, the financial statements give a true and fair view, in all material respects, of the state of the company’s and the group’s affairs as at 31st December 1999 and of the group’s profit and cash flows for the year then ended and have been properly prepared in accordance with the Companies Ordinance.

Chan & Wat

Certified Public Accountants

Hong Kong,

IMPS1299.SAM

Impsa Asia Limited

Consolidated balance sheet

As at 31st December 1999

( Expressed in United States dollars )

		Note		31/12/1999		31/12/1998
Current assets
	Inventories	1g & 7	$	16,382,081.14	$	18,563,392.39
	Trade receivables	6		19,517,621.74		17,951,115.16
	Bills receivable			382,429.20		1,423,360.00
	Other receivables			12,084,246.68		11,543,256.84
	Cash and banks			1,360,056.82		1,902,559.89
Total current assets			$	49,726,435.58	$	51,383,684.28
Non current assets
	Fixed assets	2	$	2,442,646.93	$	2,833,266.27
	Interest in an associated company	3		2,802,956.19		1,236,132.06
	Investment			25,252.53		25,252.53
	Intangible assets	4		563,968.09		834,672.97
Total non current assets			$	5,834,823.74	$	4,929,323.83
Total assets			$	55,561,259.32	$	56,313,008.11
Current liabilities
	Accounts payable and bills payable		$	6,763,478.16	$	7,922,935.81
	Other creditors and accruals			97,003.47		359,429.32
	Bank loans and overdraft			13,027,707.31		14,113,040.35
	Provision for taxation			--		194,736.65
	Deferred taxation			7,812.11		7,812.11
	Amount due to holding company			4,935,065.20		6,299,504.53
Total current liabilities			$	24,831,066.25	$	28,897,458.77
Shareholders’ equity
	Share capital	8	$	16,134,369.00	$	16,134,369.00
	Exchange equalisation reserve	1f		(4,628,555.17)		(4,618,220.23)
	Profit and loss account			19,224,379.24		15,899,400.57
Total shareholders’ equity			$	30,730,193.07	$	27,415,549.34
Total liabilities and shareholders’ equity			$	55,561,259.32	$	56,313,008.11

Approved by the board of directors on

Director Director

The accompanying notes form an integral part of the financial statements.

Impsa Asia Limited

Balance sheet

As at 31st December 1999

( Expressed in United States dollars )

		Note		31/12/1999		31/12/1998
Current assets
	Inventories	1g & 7	$	3,066,026.36	$	6,652,248.29
	Trade receivables	6		12,344,834.00		12,949,906.45
	Bills receivable			382,429.20		1,423,360.00
	Other receivables			5,675,004.99		5,727,860.58
	Cash and banks			413,207.94		412,609.09
Total current assets			$	21,881,502.49	$	27,165,984.41
Non current assets
	Interest in a subsidiary company	5	$	16,563,722.70	$	20,339,556.62
	Amount due form holding company			946,175.18		--
	Investment			25,252.53		25,252.53
	Fixed assets	2		1,898,787.22		2,225,404.02
	Intangible assets	4		563,968.09		834,672.97
Total non current assets			$	19,997,905.72	$	23,424,886.14
Total assets			$	41,879,408.21	$	50,590,870.55
Current liabilities
	Accounts payable and bills payable		$	1,402,121.74	$	3,945,348.87
	Other creditors and accruals			68,203.52		286,823.27
	Bank loans and overdraft			9,115,519.62		12,522,413.10
	Amount due to holding company			--		3,941,436.56
Total current liabilities			$	10,585,844.88	$	20,696,021.80
Shareholders’ equity
	Share capital	8	$	16,134,369.00	$	16,134,369.00
	Profit and loss account			15,159,194.33		13,760,479.75
Total shareholders’ equity			$	31,293,563.33	$	29,894,848.75
Total liabilities and shareholders’ equity			$	41,879,408.21	$	50,590,870.55

Approved by the board of directors on

Director Director

The accompanying notes form an integral part of the financial statements.

Impsa Asia Limited

Consolidated profit and loss account

For the year ended 31st December 1999

( Expressed in United States dollars )

			1/1/1999		1/1/1998
			to		to
	Note		31/12/1999		31/12/1998
Turnover	9	$	36,888,577.07	$	35,001,109.50
Group profit for the year before taxation	10	$	1,758,154.54	$	2,704,715.91
Share of results of associated companies			1,566,824.13		287,561.27
		$	3,324,978.67	$	2,992,277.18
Taxation	11		--		(316,031.05)
Group profit for the year after taxation	12	$	3,324,978.67	$	3,308,308.23
Retained profits brought forward			15,899,400.57		12,591,092.34
Retained profits carried forward		$	19,224,379.24	$	15,899,400.57

The accompanying notes form an integral part of the financial statements.

Impsa Asia Limited

Consolidated cash flow statement

For the year ended 31 st December 1999

( Expressed in United States dollars )

				1/1/1999		1/1/1998
				to		to
				31/12/1999		31/12/1998
Net cash inflow / (outflow) from operating activities			$	1,041,579.93	$	(18,658,690.87)
Returns on investments and servicing of finance
	Bank interest received		$	29,068.31	$	42,418.25
	Bank interest paid			(236,507.54)		(200,294.38)
Net cash outflow from returns on investments and
	servicing of finance		$	(207,439.23)	$	(157,876.13)
Taxation
	Tax paid		$	(212,696.78)	$	(354,495.33)
Investing activities
	Payments to acquire fixed assets		$	(78,613.95)	$	(76,564.23)
	Payments to acquire investment			--		(25,252.53)
Net cash outflow from investing activities			$	(78,613.95)	$	(101,816.76)
Net cash inflow / (outflow) before financing			$	542,829.97	$	(19,272,879.09)
Financing
	Bank loans		$	(1,371,960.04)	$	11,281,627.25
	Issue of ordinary share capital			--		10,000,000.00
				(1,371,960.04)		21,281,627.25
(Decrease) / Increase in cash and cash equivalents			$	(829,130.07)	$	2,008,748.16
Cash and cash equivalents at 1st January 1999				1,871,146.79		137,601.37
Cash and cash equivalents at 31st December 1999			$	1,042,016.72		1,871,146.79
Analysis of the balances of cash and cash equivalents
	Cash and banks			1,360,056.82	$	1,902,559.89
	Bank overdraft			(318,040.10)		(31,413.10)
			$	1,042,016.72	$	1,871,146.79

Impsa Asia limited

Consolidated cash flow statement (continued)

For the period ended 31st September 1999

( Expressed in United States dollars )

Reconciliation of operating profit to net cash inflow from operating activities

				1/1/1999		1/1/1998
				to		to
				31/12/1999		31/12/1998
	Profit before taxation		$	1,758,154.54	$	2,704,715.91
	Exchange equalisation reserve			(10,334.94)		307,432.60
	Deferred taxation			--		181.34
	Bank interest received			(29,068.31)		(42,418.25)
	Bank interest paid			236,507.54		200,294.38
	Exchange loss			--		16,639.14
	Depreciation on fixed assets			469,233.29		458,519.79
	Amortization on organization expenses			270,704.88		270,704.88
	(Decrease) / increase in inventories			2,181,311.25		(6,640,490.63)
	Increase in trade receivables			(1,566,506.58)		(5,221,383.13)
	Decrease in bills receivable			1,040,930.80		--
	Increase in other receivables			(523,029.71)		(3,683,879.71)
	(Decrease) / increase in accounts payables and bills payable			(1,159,457.65)		4,043,655.55
	(Decrease) / increase in other creditors and accruals			(262,425.85)		206,506.18
	Decrease in amount due to holding company			(1,364,439.33)		(11,279,168.92)
Net cash inflow /(outflow) from operating activities			$	1,041,579.93	$	(18,658,690.87)

Impsa Asia Limited

Notes to financial statements

(Expressed in United States dollars)

1. Significant accounting policies

(a) Basis of consolidation

The consolidated financial statements of the group incorporate the audited financial statements of the company and all its subsidiary companies for the period ended 31st December 1999.

(b) Subsidiary companies

A company is a subsidiary company if more than 50% of the issued voting capital is held for long term or if the composition of the board of directors is being controlled.

Investment in subsidiary companies is carried at cost less provision for permanent diminution in value.

(c) Associated company

Associated company is a company in which the company has a long-term equity interest of 20% to 50% and in which the company participates in management policy decisions.

The group’s investments in associated companies are stated at the group’s share of net assets.

(d) Amortization and depreciation

No amortization is provided on freehold land.

Depreciation is calculated to write off the cost of fixed assets over their estimated useful lives on a straight-line basis at the following rates per annum:

Category Rate

Machinery 10%

Furniture, fixtures and office equipment 20%

Motor vehicles 20%

(e) Amortization

Amortization on intangible assets is calculated to write off the organisation expenses on a straight line basis at the rate of 10% per annum.

Impsa Asia Limited

Notes to financial statements

(Expressed in United States dollars)

(1) Significant accounting policies (continued)

(f) Foreign currencies

Monetary assets and liabilities denominated in foreign currencies are translated into United States dollars at the approximate rates of exchange ruling at the balance sheet date. Transactions during the period have been converted at the rates of exchange ruling at the transaction dates. All exchange differences are dealt with in the profit and loss account.

On consolidation, the financial statements of overseas subsidiary companies denominated in foreign currencies except fixed assets, long term investment and share capital are translated at the rates of exchange ruling at the balance sheet date. All exchange differences arising on consolidation are dealt with in the exchange equalisation reserve.

(g) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost of inventories comprise all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Work in progress comprises direct material and labour costs and an appropriate proportion of overhead expenses less provisions for foreseeable losses. Net realisable value is the selling price in the ordinary course of business less the costs of production and the estimated costs necessary to make the sale.

(h) Recognition of income

Income are recognized on accrual basis.

(i) Deferred taxation

Deferred taxation is provided at current rates on accelerated depreciation allowances and other short term timing differences to the extent that it is probable that a liability or asset will crystallize.

(j) Lease

Lease that transfers substantially all the risks and rewards of ownership of an asset to the company is accounted for as finance lease. Under the finance lease, the asset and the related long term obligation, excluding interest are recorded to reflect the purchase and its financing.

Lease other than a finance lease is accounted for as operating lease. Rental payments under operating lease are directly charged to the profit and loss account.

(k) Provision for doubtful debts

Provision is made against amounts due by customers as and when they are considered doubtful by the directors. In additions, amounts have been set aside as provision for doubtful debts. The provision is deducted from the trade receivables.

Impsa Asia Limited

Notes to financial statements

( Expressed in United States dollars )

1. Fixed assets

The group

		Freehold land				Motor vehicles					Furniture, fixtures and office equipment					Machinery							Total
At cost
	at 1/1/1999		$		523,000.00			$		107,429.45			$		582,126.92			$		3,560,000.00				$		4,772,556.37
	Additions				--					--					78,613.95					--						78,613.95
	at 31/12/1999		$		523,000.00			$		107,429.45			$		660,740.87			$		3,560,000.00				$		4,851,170.32
Aggregate depreciation
	at 1/1/1999		$		--			$		73,979.28			$		470,977.49			$		1,394,333.33				$		1,939,290.10
	Charge for the year				--					12,829.29					100,403.99					356,000.01						469,233.29
	at 31/12/1999		$		--			$		86,808.57			$		571,381.48			$		1,750,333.34				$		2,408,523.39
Net book value
	at 31/12/1999		$		523,000.00			$		20,620.88			$		89,359.39			$		1,809,666.66				$		2,442,646.93
	at 31/12/1998		$		523,000.00			$		33,450.17			$		111,149.43			$		2,165,666.67				$		2,833,266.27

The title deed of the freehold land owned by the subsidiary in Malaysia is in the name of the vendor as the subsidiary has not complied with the terms and conditions stipulated by the Foreign Investment Committee in Malaysia.

The motor vehicle at the cost of USD24,460 is registered in the name of a director who holds in trust for the company.

Impsa Asia Limited

Notes to financial statements

( Expressed in United States dollars )

1. Fixed assets (continued)

The company

		Furniture, fixtures and office equipment		Machinery		Motor vehicles		Total
At cost
	at 1/1/1999	$	208,554.52	$	3,560,000.00	$	39,733.36	$	3,808,287.88
	Additions		60,396.16		--		--		60,396.16
	at 31/12/1999	$	268,950.68	$	3,560,000.00	$	39,733.36	$	3,868,684.04
Aggregate depreciation
	at 1/1/1999	$	177,384.69	$	1,394,333.33	$	11,165.84	$	1,582,883.86
	Charge for the year		23,066.31		356,000.01		7,946.64		387,012.96
	at 31/12/1999	$	200,451.00	$	1,750,333.34	$	19,112.48	$	1,969,896.82
Net book value
	at 31/12/1999	$	68,499.68	$	1,809,666.66	$	20,620.88	$	1,898,787.22
	at 31/12/1998	$	31,169.83	$	2,165,666.67	$	28,567.52	$	2,225,404.02

(3) Interest in an associated company

		31/12/1999		31/12/1998
Unquoted shares, at cost	$	800,160.00	$	800,160.00
Share of post-acquisition reserve		2,002,796.19		435,972.06
	$	2,802,956.19	$	1,236,132.06

Particulars of the associated are as follows : -

Name of company : Impsa (Malaysia) Sdn. Bhd.

Place of incorporation : Malaysia

Indirect percentage of shares holding : 40%

Principal activities : Installation of cranes and undertaking maintenance works

Impsa Asia Limited

Notes to financial statements

( Expressed in United States dollars )

1. Intangible assets

The group and the company		31/12/1999		31/12/1998
Organization expenses	$	2,707,049.08	$	2,707,049.08
Deduct : Aggregate amortization		2,143,080.99		1,872,376.11
As at 31st December 1999	$	563,968.09	$	834,672.97

1. Interest in a subsidiary company

The company

		31/12/1999		31/12/1998
Unquoted shares - at cost	$	16,174,418.60	$	16,174,418.60
Amount due from a subsidiary company		389,304.10		4,165,138.02
	$	16,563,722.70	$	20,339,556.62

Particulars of the subsidiary company are as follows:

Direct percentage Country of Principal

Name of subsidiary of shares holding incorporation activities

Production and

Impsa Asia Sdn. Bhd 100% Malaysia marketing of capital goods

1. Trade receivables

The group
		31/12/1999		31/12/1998
Trade receivables	$	19,810,261.48	$	18,243,754.90
Deduct : Provision for doubtful debts		292,639.74		292,639.74
	$	19,517,621.74	$	17,951,115.16
The company
		31/12/1999		31/12/1998
Trade receivables	$	12,344,834.00	$	12,949,906.45

Impsa Asia Limited

Notes to financial statements

( Expressed in United States dollars )

1. Inventories

The group		31/12/1999		31/12/1998
Work-in-progress	$	16,382,081.14	$	18,563,392.39
The company
Work-in-progress	$	3,066,026.36	$	6,652,248.29

1. Share capital

The group and the company

		31/12/1999		31/12/1998
Authorized, issued and fully paid :
125,848,080 shares of US$0.1282 each	$	16,134,369.00	$	16,134,369.00

1. Turnover

Turnover represents the net invoiced value after deducting discounts and returns for the period.

1. Group profit for the year before taxation

Group profit before taxation is arrived at after charging		1/1/1999 to 31/12/1999		1/1/1998 to 31/12/1998
Audit fee	$	42,771.52	$	37,856.79
Bank interest		236,507.54		200,294.38
Depreciation		469,233.29		458,519.79
Directors’ emoluments		34,728.42		17,178.95
Exchange loss		14,457.18		--
Rental payments under operating leases		285,639.75		435,235.89
and after crediting :
Bank interest received	$	29,068.31	$	42,418.25
Gain on exchange		--		408,106.24

Impsa Asia Limited

Notes to financial statements

( Expressed in United States dollars )

1. Taxation

		1/1/1999 to 31/12/1999		1/1/1998 to 31/12/1998
The charges comprises:
Hong Kong profits tax	$	--	$	--
Overseas taxation		--		(316,031.05)
	$	--	$	(316,031.05)

No provision for Hong Kong profits tax has been provided as there is no assessable profit derived from Hong Kong.

Overseas taxation is calculated at the rate prevailing in the respective jurisdictions.

(12) Group profit for the year after taxation

The profit for the year of the company dealt with in the consolidated profit and loss account amounted to USD1,398,714.58(year ended 31/12/1998– profit USD2,702,230.44).

(13) Lease commitments

At the balance sheet date, the company had the following commitment payable within one year under non-cancellable operating leases in respect of rented premises : -

		31/12/1999		31/12/1998
Operating leases which expire
- within one year	$	17,784.00	$	99,493.85
- in the second to fifth year inclusive		61,875.00		48,125.00
	$	79,659.00	$	147,618.85

Impsa Asia Limited

Notes to financial statements

( Expressed in United States dollars )

(14) Commitments

As at the balance sheet date, the company had the following irrevocable letters of credit outstanding :

31/12/1999 31/12/1998

USD 2,521,677.00 USD 11,487,006.50

TWD -- TWD 196,678.20

(15) Ultimate holding company

In the opinion of the directors, the ultimate holding company of the company is Industrias Metalurgicas

Pescarmona S.A.I.C.Y.F., a company incorporated in Argentina.

Impsa Asia Limited

Detailed consolidated profit and loss account

For the year ended 31st December 1999

(For management purposes only)

( Expressed in United States dollars )

				1/1/1999		1/1/1998
				to		to
				31/12/1999		31/12/1998
	Sales		$	36,888,577.07	$	35,001,109.50
	Deduct : Cost of sales			32,556,220.84		29,590,998.95
	Gross profit		$	4,332,356.23	$	5,410,110.55
	Add : Bank interest received			29,068.31		42,418.25
	Gain on exchange			--		408,106.24
	Sundry income			56,559.87		136,713.74
			$	4,417,984.41	$	5,997,348.78
	Deduct :
	Expenses
	Marketing		$	236,966.23	$	646,402.77
	Administrative			2,184,495.03		2,431,631.49
	Financial			238,368.61		214,598.61
				2,659,829.87		3,292,632.87
Net profit for the year			$	1,758,154.54	$	2,704,715.91