IMPSA S.A. — Interim / Quarterly Report 2003

Dec 15, 2003

Impsa Asia Limited

(Incorporated in Hong Kong)

Consolidated Financial Statements

For the period ended 30th September 2003

Chan & Wat

Certified Public Accountants

Hong Kong

Impsa Asia Limited

Report of the directors

The directors have pleasure in presenting to shareholders their report together with the reviewed financial statements of the company for the period ended 30th September 2003.

Principal activities

The company is engaged in the production and marketing of port and hydropower equipment. 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 loss of the group for the period ended 30th September 2003 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 period.

Fixed assets

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

Directors

The directors who held office during the period were:

Francisco Ruben Valenti

Juan Carlos Fernandez

Yeung Sum Ming, Lydia

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.

By order of the board

Chairman

Hong Kong,

AUDITORS’ REPORT

(incorporated in Hong Kong with limited liability)

REVIEW REPORT TO THE SHAREHOLDERS OF IMPSA ASIA LIMITED

We have reviewed the accompanying consolidated balance sheet of Impsa Asia Limited at 30th September 2003, and the related consolidated profit and loss account and cash flows for the period then ended. The preparation of the financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these financial statements based on our review.

We conducted our review in accordance with the International Standards on Auditing applicable to review engagements. A review of financial information consists principally of applying review procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements take as a whole. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying financial statements do not give a true and fair view in accordance with approved Accounting Standards.

Chan & Wat

Hong Kong, Certified Public Accountants

IAL.903

Impsa Asia Limited

Consolidated balance sheet

As at 30th September 2003

( Expressed in United States dollars )

		Note		30/9/2003		31/12/2002
Current assets
	Inventories	1i & 6	$	26,022,665.10	$	33,175,903.49
	Trade debtors and bill receivables			11,274,174.71		12,442,181.61
	Other debtors, deposits and prepayment			3,037,936.18		2,187,701.09
	Amount due from a fellow subsidiary			35,354,013.54		31,704,280.11
	Amount due from an associated company			322,796.87		974,732.23
	Cash and bank balances			28,098,380.59		26,753,924.08
Total current assets			$	104,109,966.99	$	107,238,722.61
Non current assets
	Fixed assets	2	$	1,134,081.65	$	919,844.19
	Interest in an associated company	3		932,172.53		952,706.11
	Investment			110.81		25,252.53
	Intangible assets	4		--		--
Total non current assets			$	2,066,364.99	$	1,897,802.83
Total assets			$	106,176,331.98	$	109,136,525.44
Current liabilities
	Trade creditors and bills payable		$	38,210,820.54	$	31,573,037.70
	Other creditors and accruals			6,091,531.77		912,541.00
	Bank loans and overdraft			24,983,393.97		29,550,056.78
	Deferred taxation			7,812.11		7,812.11
	Amount due to holding company			6,930,350.25		9,289,470.83
Total current liabilities			$	76,223,908.64	$	71,332,918.42
Shareholders’ equity
	Share capital	7	$	16,134,369.00	$	16,134,369.00
	Minority interest			1,854.64		--
	Exchange equalisation reserve	1h		(4,561,720.11)		(4,641,139.19)
	Profit and loss account			18,377,919.81		26,310,377.21
Total shareholders’ equity			$	29,952,423.34	$	37,803,607.02
Total liabilities and shareholders’ equity			$	106,176,331.98	$	109,136,525.44

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 30th September 2003

( Expressed in United States dollars )

		Note		30/9/2003		31/12/2002
Current assets
	Inventories	1i & 6	$	25,125,568.98	$	18,971,157.00
	Trade debtors and bills receivables			9,403,305.66		8,069,203.19
	Other debtors, deposits and prepayments			278,436.75		433,059.33
	Amount due from a fellow subsidiary			33,891,300.62		27,384,860.11
	Amount due from an associated company			1,469.55		716,909.55
	Cash at bank			26,533,213.86		25,900,661.55
Total current assets			$	95,233,295.42	$	81,475,850.73
Non current assets
	Fixed assets	2	$	38,426.15	$	41,114.08
	Interests in subsidiary companies	5		(2,918,123.17)		15,397,386.09
	Investment			110.81		25,252.53
	Intangible assets	4		--		--
Total non current assets			$	(2,879,586.21)	$	15,463,752.70
Total assets			$	92,353,709.21	$	96,939,603.43
Current liabilities
	Trade creditors and bills payable		$	30,384,541.38	$	26,370,311.19
	Other creditors and accruals			31,648.34		86,208.37
	Bank loans and overdraft			15,969,330.16		16,065,576.04
	Amount due to the holding company			11,189,808.04		11,648,066.46
Total current liabilities			$	57,575,327.92	$	54,170,162.06
Shareholders’ equity
	Share capital	7	$	16,134,369.00	$	16,134,369.00
	Profit and loss account			18,644,012.29		26,635,072.37
Total shareholders’ equity			$	34,778,381.29	$	42,769,441.37
Total liabilities and shareholders’ equity			$	92,353,709.21	$	96,939,603.43

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 period ended 30th September 2003

( Expressed in United States dollars )

	Note		1/1/2003 to 30/9/2003		1/1/2002 to 31/12/2002
Turnover	8	$	38,593,748.18	$	117,203,489.79
Cost of sales			(47,442,194.85)		(111,845,433.48)
Group gross (loss) / profit		$	(8,848,446.67)	$	5,358,056.31
Other revenue			2,235,155.85		829,470.05
Administrative and marketing expenses			(1,240,932.10)		(2,224,574.45)
Group (loss) / profit from operating activities		$	(7,854,222.92)	$	3,962,951.91
Finance cost			(38,964.69)		(55,528.16)
Group operating (loss) / profit		$	(7,893,187.61)	$	3,907,423.75
Share of results of associated company			(20,533.58)		(1,655,035.19)
Group (loss) / profit from ordinary activities
before taxation		$	(7,913,721.19)	$	2,252,388.56
Taxation	9		(18,835.25)		(202,559.00)
Group (loss) /profit from ordinary activities
after taxation	10	$	(7,932,556.44)	$	2,049,829.56
Minority interest			99.04		--
Group (loss) / profit attributable to shareholders		$	(7,932,457.40)	$	2,049,829.56
Retained profits brought forward	11	$	26,310,377.21		30,939,985.65
Prior year adjustment	11		--		(6,679,438.00)
		$	26,310,377.21	$	24,260,547.65
Retained profits carried forward		$	18,377,919.81	$	26,310,377.21

No separate statement of changes in equity has been prepared as the net (loss) / profit for the period would be the only component of this statement.

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

Impsa Asia Limited

Consolidated cash flow statement

For the period ended 30th September 2003

( Expressed in United States dollars )

				1/1/2003 to 30/9/2003		1/1/2002 to 31/12/2002
Net cash inflow / (outflow) from operating activities			$	6,926,918.61	$	(22,548,290.65)
Returns on investments and servicing of finance
	Bank interest received		$	194,744.84	$	415,071.99
	Contribution from minority shareholder			1,953.68		--
	Bank interest paid			(893,788.65)		(1,090,526.91)
Net cash outflow from returns on investments and
	servicing of finance		$	(697,090.13)	$	(675,454.92)
Taxation
	Tax paid		$	(48,600.94)	$	--
Investing activities
	Payments to acquire fixed assets		$	(322,721.40)	$	(22,978.56)
	Receipts from disposal of fixed assets			52,613.18		37,812.00
Net cash (outflow) / inflow from investing activities			$	(270,108.22)	$	14,833.44
Net cash inflow / (outflow) before financing			$	5911,119.32	$	(23,208,912.13)
Financing
	Bank loans		$	(3,822,716.05)	$	(5,860,470.94)
			$	(3,822,716.05)	$	(5,860,470.94)
Increase / (decrease) in cash and cash equivalents			$	2,088,403.27	$	(29,069,383.07)
Cash and cash equivalents at 1st January 2003				25,222,939.18		54,292,322.25
Cash and cash equivalents at 30th September 2003			$	27,311,342.45	$	25,222,939.18
Analysis of the balances of cash and cash equivalents
	Cash and banks		$	28,098,380.59	$	26,753,924.08
	Bank overdraft			(787,038.14)		(1,530,984.90)
			$	27,311,342.45	$	25,222,939.18

Impsa Asia limited

Consolidated cash flow statement (continued)

For the period ended 30th September 2003

( Expressed in United States dollars )

Reconciliation of operating (loss) / profit to net inflow / (outflow) from operating activities

			1/1/2003 to 30/9/2003		1/1/2002 to 31/12/2002
	(Loss) / profit before taxation	$	(7,893,187.61)	$	3,907,423.75
	Prior year adjustment		--		(6,679,438.00)
	Exchange equalization reserve		79,419.08		(33,634.15)
	Gain on disposal of fixed assets		(3,908.64)		1,684.83
	Bank interest received		(194,744.84)		(415,071.99)
	Bank interest paid		893,788.65		1,090,526.91
	Depreciation on fixed assets		59,779.40		301,610.70
	Amortization on organization expenses		--		22,558.28
	Decrease in inventories		7,153,238.39		6,719,257.24
	Decrease in trade debtors and bills receivables		1,168,006.90		5,339,306.49
	Increase in amount due from a fellow
	subsidiary		(3,649,733.43)		(22,035,622.94)
	Decrease / (increase) in amount due from an associated company		651,935.36		(314,463.80)
	Decrease in investment		25,141.72		--
	Increase in other debtors, deposits and prepayment		(820,469.40)		(261,935.98)
	Increase in trade creditors and bills payable		6,637,782.84		12,688,906.04
	Increase / (decrease) in other creditors and accruals		5,178,990.77		(1,307,471.37)
	Decrease in amount due to holding company		(2,359,120.58)		(21,571,926.66)
Net cash inflow / (outflow) from operating activities		$	6,926,918.61	$	(22,548,290.65)

Impsa Asia Limited

Notes to financial statements

(Expressed in United States dollars)

1. Significant accounting policies
2. Statement of compliance

These accounts have been prepared in accordance with all applicable Statements of Standard Accounting Practice (“SSAP”) and Interpretations issued by the Hong Kong Society of Accountants, accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. A summary of the significant accounting policies adopted by the company is set out below.

(b) 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 30th September 2003. All significant intercompany transactions and balances are eliminated on consolidation.

(c) Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognized for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.

An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation / amortisation), had no impairment loss been recognized for the asset in prior years.

A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

(d) 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.

Interest in subsidiary companies are carried at cost less any impairment losses.

Impsa Asia Limited

Notes to financial statements

(Expressed in United States dollars)

(1) Significant accounting policies (continued)

(e) 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 interest in associated companies are stated in the consolidated balance sheet at the group’s share of net assets under the equity method of accounting less any impairment losses.

(f) 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

Machineries 10% or actual consumption by 20 times

Furniture, fixtures and office equipment 20%

Motor vehicles 20%

Leasehold improvement 20%

(g) 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.

(h) 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 year 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.

Impsa Asia Limited

Notes to financial statements

(Expressed in United States dollars)

(1) Significant accounting policies (continued)

(i) 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.

(j) Recognition of income

Incomes are recognized on accrual basis.

(k) 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.

(l) 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.

Impsa Asia Limited

Notes to financial statements

( Expressed in United States dollars)

1. Fixed assets

2. The group

		Freehold Land		Motor vehicles				Furniture, fixtures and office equipment				Leasehold improvement						Machineries			Total
At cost
	at 1/1/2003	$	523,000.00	$	88,198.56		$		442,213.27		$		52,000.00				$		476,024.74			$	1,581,436.57
	Additions		--		50,800.00				17,741.85				--						254,179.55				322,721.40
	Disposal		--		(14,661.42)				(2,631.57)				--						(62,887.20)				(80,180.19)
	at 30/9/2003	$	523,000.00	$	124,337.14		$		457,323.55		$		52,000.00				$		667,317.09			$	1,823,977.78
Aggregate depreciation
	A 1/1/2003	$	--	$	58,781.30		$		345,383.52		$		29,280.00				$		228,147.56			$	661,592.38
	Charge for the period		--		13,281.59				17,964.12				7,800.00						20,733.69				59,779.40
	Written back on disposal		--		(13,195.28)				(1,184.21)				--						(17,096.16)				(31,475.65)
	At 30/9/2003	$	--	$	58,867.61		$		362,163.43		$		37,080.00				$		231,785.09			$	689,896.13
Net book value
	at 30/9/2003	$	523,000.00	$	65,469.53		$		95,160.12		$		14,920.00				$		435,532.00			$	1,134,081.65
	at 31/12/2002	$	523,000.00	$	29,417.26		$		96,829.75		$		22,720.00				$		247,877.18			$	919,844.19

The title deed of the freehold land owned by a 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 USD50,800 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

		Tools & Machinery		Office Equipment		Motor vehicle		Total
Cost
at 1/1/2003	$	--	$	311,417.76	$	24,733.36	$	336,151.12
Additions		62,887.20		--		--		62,887.20
Disposal		(62,887.20)		--		(14,661.42)		(77,548.62)
at 30/9/2003	$	--	$	311,417.76	$	10,071.94	$	321,489.70
Aggregate depreciation
at 1/1/2003	$	--	$	274,335.08	$	20,701.96	$	295,037.04
Charge for the period		17,096.16		--		1,221.79		18,317.95
Written back		(17,096.16)		--		(13,195.28)		(30,291.44)
at 30/9/2003	$	--	$	274,335.08	$	8,728.47	$	283,063.55
	-------------------		------------------		------------------		----------------
Net book value
at 30/9/2003	$	--	$	37,082.68	$	1,343.47	$	38,426.15
at 31/12/2002	$	--	$	37,082.68	$	4,031.40	$	41,114.08

(3) Interest in an associated company

		30/9/2003		31/12/2002
Unquoted shares, at cost	$	800,160.00	$	800,160.00
Share of post-acquisition reserve		132,012.53		152,546.11
	$	932,172.53	$	952,706.11

Particulars of the associated are as follows : -

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

Place of incorporation : Malaysia

Indirect percentage of share-holdings : 40%

Principal activities : Manufacturing and marketing of hydro generation equipments, cranes and heavy duty pressure vessels

Impsa Asia Limited

Notes to financial statements

( Expressed in United States dollars )

1. Intangible assets

		30/9/2003		31/12/2002
- The group and the company
Organization expenses	$	2,707,049.08	$	2,707,049.08
Deduct : Aggregate amortization		2,707,049.08		2,707,049.08
As at 30th September 2003	$	--	$	--

(5) Interests in subsidiary companies

		30/9/2003		31/12/2002
- The company
Unquoted shares - at cost	$	16,175,701.44	$	16,175,701.44
Amount due from subsidiary companies		23,013.69		11,908,283.08
Amount due to subsidiary companies		(19,116,838.30		(12,686,598.43)
	$	(2,918,123.17)	$	15,397,386.09

Particulars of the subsidiary companies are as follows:

Percentage of Countries of Principal

Names of subsidiaries ordinary shares held incorporation activities

Directly Indirectly

Impsa Port Systems Limited 100% -- Hong Kong Production and marketing

of port machinery

and equipment

Impsa Port Systems Sdn. Bhd. -- 100% Malaysia Production and

marketing of port

machinery and

equipment

e-SeaPorts.com Sdn. Bhd. 100% -- Malaysia Providing total

port information

technology solutions

IPS Port Systems Ltda. -- 100% Brazil Production and marketing

of port machinery

and equipment

IPS Global Services Sdn. Bhd. -- 100% Malaysia Providing engineering and

technical know-how

consultancy and services

and trade in supplies related

to various industries

Impsa Port Sistems Argentina S.A. -- 54.17% Argentina Mainly services with

port activities

Impsa Asia Limited

Notes to financial statements

( Expressed in United States dollars )

(6) Inventories

		30/9/2003		31/12/2002
- The group
Work-in-progress	$	32,702,103.10	$	39,855,341.49
Deduct : Provision for foreseeable losses		(6,679,438.00)		(6,679,438.00)
	$	26,022,665.10	$	33,175,903.49
- The company
Work-in-progress	$	31,805,006.98	$	18,971,157.00
Deduct : Provision for foreseeable losses		(6,679,438.00)		--
	$	25,125,568.98	$	18,971,157.00

(7) Share capital

		30/9/2003		31/12/2002
- The group and the company
Authorized, issued and fully paid :
125,848,080 shares of US$0.1282 each	$	16,134,369.00	$	16,134,369.00

(8) Turnover

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

(9) Taxation

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 rates prevailing in the respective jurisdictions.

Impsa Asia Limited

Notes to financial statements

( Expressed in United States dollars )

(10) Group (loss) / profit from ordinary activities after taxation

The loss of the company from ordinary activities for the year dealt with in the consolidated profit and loss account amounted to USD1,311,622.08 (year ended 31/12/2002 – profit USD3,405,510.98).

(11) Retained profits brought forward

		30/9/2003		31/12/2002
Balance brought forward	$	26,310,377.21	$	30,939,985.65
Prior year adjustment		--		(6,679,438.00)
Amount restated	$	26,310,377.21	$	24,260,547.65

Prior year adjustment represented the provision for foreseeable losses on a long term contract which existed in previous year and had significant effect on the financial statements of prior year. The financial statements of 2001 have been restated to correct this error.

(12) 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 period from 1st January 2003 to 30th September 2003

(For management purposes only)

( Expressed in United States dollars )

				1/1/2003 to 30/9/2003		1/1/2002 to 31/12/2002
	Sales		$	38,593,748.18	$	117,203,489.79
	Deduct : Cost of sales			47,442,194.85		111,845,433.48
	Gross (loss) / profit		$	(8,848,446.67)	$	5,358,056.31
	Add : Bank interest received			194,744.84		415,071.99
	Sundry income			2,036,502.37		414,398.06
	Gain on disposal of fixed assets			3,908.64		--
			$	(6,613,290.82)	$	6,187,526.36
	Deduct :
	Expenses
	Administrative		$	1,109,681.16	$	1,902,719.38
	Financial			50,653.77		57,307.57
	Marketing			119,561.86		320,075.66
			$	1,279,896.79	$	2,280,102.61	6.83
Group operating (loss) / profit for the period			$	(7,893,187.61)	$	3,907,423.75
Share of results of associated company				(20,533.58)		(1,655,035.19)
Group (loss) / profit from ordinary activities before taxation			$	(7,913,721.19)	$	2,252,388.56
Taxation				(18,835.25)		(202,559.00)
Group (loss) / profit from ordinary activities after taxation			$	(7,932,556.44)	$	2,049,829.56