Auditor's Review Report To the Shareholders of Sino-Thai Engineering and Construction Public Company Limited: I have reviewed the consolidated balance sheet of Sino-Thai Engineering and Construction Public Company Limited and subsidiaries as at September 30, 2000, and the related consolidated statements of income for each of the three-month and nine-month periods ended September 30, 2000 and 1999, changes in deficit in shareholders' equity, deficit and cash flows for each of the nine-month periods ended September 30, 2000 and 1999, and the separate financial statements of Sino-Thai Engineering and Construction Public Company Limited for the same periods. The Company's management are responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to issue a report on these financial statements based on my review. I conducted my review in accordance with standard on auditing applicable to review engagements. This standard requires that I plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit in accordance with generally accepted auditing standards. I have not performed an audit and, accordingly, I do not express an audit opinion. As shown in the financial statements for the nine-month periods ended September 30, 2000 and 1999, the Company and subsidiaries incurred net loss from operations in the amount of Baht 1,495.90 million and Baht 665.97 million, respectively. As at September 30, 2000 and December 31, 1999, the Company's total current liabilities exceeded total current assets by Baht 4,372.07 million and Baht 3,264.23 million, respectively in the consolidated financial statements and Baht 4,392.12 million and Baht 3,252.96 million, respectively in the separate financial statements. It's total liabilities exceeded total assets by Baht 3,048.10 million and Baht 1,639.49 million, respectively in the consolidated financial statements and Baht 3,112.32 million and Baht 1,703.57 million, respectively in the separate financial statements. The Company and a subsidiary also have failed to repay loans and interest. Later on the creditors and the Company submitted their petition for reorganization plan of the Company to the Central Bankruptcy Court. On January 17, 2000, the Court ruled that the Company must be reorganized by appointed planner and on August 23, 2000, the creditors meeting resolved to approve the reorganization plan. Later on September 4, 2000, the Central Bankruptcy Court authorized the reorganization plan in compliance with Bankruptcy Act, which determined Stecon Administrator Company Limited as the plan administrator. Therefore, at the report date, the Company is in the process of compliance with the reorganization plan in order to rehabilitate its financial position and operations as approval from the creditors meeting. The subsidiary is operating along with the project to solve the status and operating in order to reach the plan. Also, the subsidiary has difficulties in operating as going concerns, which is significant matter. In addition, the operations of the Company and subsidiaries may continue to be influenced by the economic conditions in Thailand and the Asia Pacific Region in general. These factors raise substantial doubt about the Company and subsidiaries' ability to continue as a going concern. The financial statements are prepared in accordance with generally accepted accounting principles and do not include any adjustment relating to the recoverability of the recorded assets and the amounts and classification of liabilities that might be necessary should the Company and subsidiaries be unable to continue as going concern as described in Notes 1.2, 1.4, and 2.4 to the financial statements. Because of the pervasive effect on the consolidated and separate financial statements regarding the uncertainties of the Company and subsidiaries to continue as a going concern as described in the third paragraph, therefore, I am unable to provide any assurance that the accompanying financial statements are presented fairly, in all material respects, in conformity with generally accepted accounting principles. I have audited the consolidated financial statements of SinoThai Engineering and construction Public Company Limited and subsidiaries as at December 31, 1999 and the separate financial statements of the Company for the year then ended in accordance with generally accepted auditing standard and my report dated February 28, 2000 disclaimed an opinion on those statements. The accompanying balance sheet of the Company and subsidiaries and the separate balance sheet of the Company as at the same date, which have been presented for comparatives, are parts of the financial statements on which I have audited and reported. I have not conducted any audits on the financial information of the Company and its subsidiaries subsequent to the date of my report. I draw attention to Note 2.1 to the financial statements concerning the significant transactions of the Company and subsidiaries with related parties and Note 2.4 to the financial statements, regarding to debt restructuring contract between a subsidiary and a domestic commercial bank. According to the above contract, the bank has agreed to release conditions on principal and interest payment as the specified rates. Differences between interest expense based on bank's right and debt restructuring contract, the subsidiary has agreed to repay that depends on the subsidiary's performance and the bank's approval. Therefore, the subsidiary has not recorded accrued interest expense of differences between interest expense based on bank's right and debt restructuring contract as from the fourth quarter of year 1999 through September 30, 2000 as an uncertainty regarding to ability on payment of the subsidiary that depends on its performance. As described in Note 2.6 to the financial statements, a subsidiary has disputed in mining development contract and quarry for crushing plant and has been sued for above compensation in the approximately amount of Baht 170.72 million and the subsidiary has counterclaimed in the same case in the amount of Baht 142.89 million. The case is still in process on consideration of the arbitrator of judge. The dispute cannot presently be finalized and the subsidiary has not provided a provision for these contingent liabilities. Also, Note 1.6 to the financial statements, during 1999, the subsidiary changed its accounting policy with respect to the treatment of deferred charged on mining development cost previously recognized as other assets to be recognized as expenses. Therefore, the comparative financial statement for the three-month period and nine-month period ended September 30, 1999 of the subsidiary have been restated to conform to the changed accounting policy. For the three-month and nine-month periods ended September 30, 2000, equity in profit (loss) from three associated companies and two joint ventures in the amount of Baht 36.99 million and Bath 40.56 million, reflected 6.67% and 2.71%, respectively, of net loss in the consolidated financial statements, and equity in profit (loss) from three associated companies and two joint ventures in the amount of Baht 36.99 million and Bath 40.56 million, reflected 6.67% and 2.71%, respectively, of net loss in the separate financial statements based on the financial information prepared by the management which had not been reviewed by the auditor. Equity in profit (loss) from a joint venture of Baht 5.77 million and Baht 4.73 million also reflected 1.04% and 0.32%, respectively of net loss in the separate financial statements for the three-month and nine-month periods ended September 30, 2000 based on the financial statements to be reviewed by another auditor. The consolidated financial statements as at December 31, 1999, which have been presented for comparative, have been restated by including a joint venture's financial statements as significant power to control. Nirand Lilamethwat Certified Public Accountant Registration Number 2316 KPMG Audit (Thailand) Limited Bangkok, November 3, 2000 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (Amounts : Thousands Baht) Consolidated Balance Sheets Company's Separate Balance Sheets 2000 1999 2000 1999 (Unaudited) (Audited) (Unaudited) (Audited) ASSETS (Restated) CURRENT ASSETS Cash in hand and at banks (Notes 1.5 and 2.2) 139,416 368,994 132,381 345,229 Short-term investments (Note 1.5) 980,703 918,837 977,439 917,033 Accounts receivable - Related parties - net (Notes 1.5 and 2.1) 10,080 70,340 15,344 61,611 - Others - net ( Notes 1.5 and 2.3) 1,027,617 1,195,120 1,008,316 1,156,997 Total Accounts Receivable - net 1,037,697 1,265,460 1,023,660 1,218,608 Short-term loans and advance to related parties (Note 2.1) 6,671 27,017 6,671 29,559 Retention receivables - net (Note 1.5) 116,347 101,045 116,347 101,045 Inventories - net (Note 1.5) 23,976 56,268 - - Construction contract in progress 5,590 - - - Other current assets - net Advances to contractors 226,396 32,114 226,396 32,114 Withholding tax recoverable 105,094 203,505 104,025 199,018 Others 58,357 29,751 56,695 23,720 Total Other Current Assets 389,847 265,370 387,116 254,852 Total Current Assets 2,700,247 3,002,991 2,643,614 2,866,326 INVESTMENTS (Note 2.1) - Joint ventures 14,867 14,879 16,599 14,879 - Related parties 255,995 245,543 323,265 312,758 - Others 38,129 282,029 38,029 269,758 Total Investments 308,991 542,451 377,893 597,395 LOANS - others (Note 2.1) 4,150 4,150 4,150 4,150 PROPERTY, PLANT AND EQUIPMENT - NET (Note 1.5) 1,415,210 1,408,753 1,059,220 1,038,184 OTHER ASSETS - NET Loans and advances to directors and employees 31,897 12,375 31,894 12,031 Condominiums 63,666 69,470 63,666 69,470 Deposit 7,120 40,075 7,120 40,075 Others 6,178 14,594 4,145 12,159 Total Other Assets 108,861 136,514 106,825 133,735 Total Assets 4,537,459 5,094,859 4,191,702 4,639,790 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEETS AS AT SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (Amounts : Thousands Baht) Consolidated Balance Sheets Company's Separate Balance Sheets 2000 1999 2000 1999 (Unaudited) (Audited) (Unaudited) (Audited) LIABILITIES AND DEFICIT IN SHAREHOLDERS' EQUITY (Restated) CURRENT LIABILITIES Bank overdrafts and loans from financial institution 1,009,434 915,911 1,007,919 820,600 Accounts payable - Related parties (Note 2.1) 120 3,934 244 3,007 - Others 875,869 956,634 853,419 920,910 Total Accounts payable 875,989 960,568 853,663 923,917 Current portion of hire purchase creditors 22,050 23,079 22,050 23,079 Creditor on currency swap contracts 155,971 - 155,971 - Long-term loans in default (Note 2.4) 3,338,452 3,205,333 3,338,452 3,205,333 Short-term loans from directors 1,939 2,322 - - Advance receipt on contracts 338,349 417,570 336,463 417,356 Other current liabilities Accrued expenses 1,102,681 640,595 1,101,871 638,407 Deferred value added tax 38,208 51,379 38,197 51,379 Provision for contingent cost 157,997 9,174 157,997 9,174 Others 31,244 41,286 23,150 30,041 Total Other Current Liabilities 1,330,130 742,434 1,321,215 729,001 Total Current Liabilities 7,072,314 6,267,217 7,035,733 6,119,286 LONG-TERM LOANS (Note 2.4) 185,986 185,986 - - OTHER LIABILITIES Provision for loss on uncollectible collection from subsidiary 246,225 177,188 - - Loss on investment in subsidiaries and joint ventures exceeding carrying amount (Note 2.1) 27,981 35,873 263,229 203,810 Hire purchase creditors 4,238 18,814 4,238 18,814 Accrued interest expense 48,006 48,006 - - Others 809 1,264 819 1,454 Total Other Liabilities 327,259 281,145 268,286 224,078 Total Liabilities 7,585,559 6,734,348 7,304,019 6,343,364 (Amounts : Thousands Baht) Consolidated Balance Sheets Company's Separate Balance Sheets 2000 1999 2000 1999 (Unaudited) (Audited) (Unaudited) (Audited) (Restated) DEFICIT IN SHAREHOLDERS' EQUITY Share capital, Baht 10 par value Authorized shares capital (Note 2.5) - Preference shares 7,000,000 shares 70,000 70,000 70,000 70,000 - Ordinary shares 68,000,000 shares in 1999 and 78,000,000 shares in 2000 780,000 680,000 780,000 680,000 Issued and fully paid - Preference shares 7,000,000 shares 70,000 70,000 70,000 70,000 - Ordinary shares 23,000,000 shares 230,000 230,000 230,000 230,000 Paid-in capital Premium on share capital 486,000 486,000 486,000 486,000 Revaluation surplus (Notes 1.5 and 2.6) 570,307 571,100 570,307 571,100 Appropriated retained earnings to legal reserve 56,164 56,164 48,565 48,566 Deficit (4,457,938) (2,962,042) (4,450,339) (2,954,444) Unrealized loss on non-current marketable securities (Note 1.5) (66,850) (154,875) (66,850) (154,796) (3,112,317) (1,703,653) (3,112,317) (1,703,574) Minority interests 64,217 64,164 - - Total Deficit in Shareholders' Equity (3,048,100) (1,639,489) (3,112,317) (1,703,574) Total Liabilities net of Deficit in Shareholders' Equity 4,537,459 5,094,859 4,191,702 4,639,790 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 ( UNAUDITED ) (Amounts : Thousands Baht Except Consolidated Company's Seperate Basic Loss per Share) Statements of Income Statements of Income 2000 1999 2000 1999 ( Restated ) ( Restated ) REVENUES (Notes 1.5 and 2.1) Revenues from construction and sales 852,074 751,615 817,437 708,389 Equity in profit (loss) of subsidiaries, associated companies and joint ventures 39,989 (22,042) 33,582 (57,281) Other income Unrealized gain in marketable securities 16,428 16,078 16,428 16,078 Interest income 11,072 12,934 10,992 14,240 Others 5,647 18,495 2,991 9,146 Total Other Income 33,147 47,507 30,411 39,464 Total Revenues 925,210 777,080 881,430 690,572 EXPENSES (Notes 1.5 and 2.1) Costs of construction and cost of sales 1,114,950 643,245 1,085,471 598,133 Selling and administrative expenses 69,146 88,894 67,603 79,425 (Gain) loss on exchange rate 485 389,460 (64) 368,226 Loss on impairment of investments 34,820 - 28,468 - Doubtful debts 120,997 (12,671) 120,654 (11,196) Directors' remuneration 24 284 - 210 Interest expense 138,682 165,561 134,148 153,999 Total Expenses 1,479,104 1,274,773 1,436,280 1,188,797 Net loss before tax and minority interests (553,894) (497,693) (554,850) (498,225) Income tax (741) - - - Net loss before minority interests (554,635) (497,693) (554,850) (498,225) Minority interests in net income (215) (532) - - Net loss (554,850) (498,225) (554,850) (498,225) Basic loss per share (Baht) (Note 1.5) (24.12) (21.66) (24.12) (21.66) SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF INCOME FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 ( UNAUDITED ) (Amounts : Thousands Baht Except Consolidated Company's Seperate Basic Loss per Share) Statements of Income Statements of Income 2000 1999 2000 1999 ( Restated ) ( Restated ) REVENUES (Notes 1.5 and 2.1) Revenues from construction and sales 2,336,227 2,635,384 2,238,156 2,476,975 Equity in profit (loss) of subsidiaries, associated companies and joint ventures 43,635 (6,068) (23,994) (83,560) Other income Unrealized gain in marketable securities 49,369 106,711 49,369 106,711 Allowance for decline in valuation of inventories written back 49,374 - - - Interest income 33,715 34,825 33,622 43,334 Others 34,991 33,043 27,269 17,615 Total Other Income 167,449 174,579 110,260 167,660 Total Revenues 2,547,311 2,803,895 2,324,422 2,561,075 EXPENSES (Notes 1.5 and 2.1) Costs of construction and cost of sales 2,679,647 2,306,770 2,510,748 2,152,012 Selling and administrative expenses 234,395 230,780 217,424 199,234 Loss on exchange rate 142,506 404,768 146,577 383,263 Loss on impairment of investments 141,124 - 129,402 - Loss on sales of investments 55,637 168,445 55,637 168,445 Loss on currency swap contracts in prior year 155,971 - 155,971 - Doubtful debts 162,511 (22,573) 148,789 (31,612) Directors' remuneration 115 577 - 480 Interest expense 469,748 385,767 455,769 355,227 Total Expenses 4,041,654 3,474,534 3,820,317 3,227,049 Net loss before tax and minority interests (1,494,343) (670,639) (1,495,895) (665,974) Income tax (741) - - - Net loss before minority interests (1,495,084) (670,639) (1,495,895) (665,974) Minority interests in net (income) loss (811) 4,665 - - - Net loss (1,495,895) (665,974) (1,495,895) (665,974) Basic loss per share (Baht) (Note 1.5) (65.04) (28.96) (65.04) (28.96) SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN DEFICIT IN SHAREHOLDERS' EQUITY FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 ( UNAUDITED ) (Amounts : Thousands Baht) Consolidated Statements of Changes Company's Separate Statements of in Deficit in Shareholders' equity Changes in Deficit in Shareholders' equity 2000 1999 2000 1999 ( Restated ) ( Restated ) Share capital Preference shares Beginning balance 70,000 70,000 70,000 70,000 Increase during period - - - - Decrease during period - - - - Ending balance 70,000 70,000 70,000 70,000 Ordinary shares Beginning balance 230,000 230,000 230,000 230,000 Increase during period - - - - Decrease during period - - - - Ending balance 230,000 230,000 230,000 230,000 Paid-in capital Premium on ordinary share Beginning balance 486,000 486,000 486,000 486,000 Increase during period - - - - Decrease during period - - - - Ending balance 486,000 486,000 486,000 486,000 Revaluation surplus (Note 2.6) Beginning balance 571,100 929,174 571,100 834,565 Increase during period - - - - Decrease during period (793) (409,611) (793) (390,850) Ending balance 570,307 519,563 570,307 443,715 Appropriated retained earnings to legal reserve Beginning balance 56,164 56,164 48,565 48,565 Increase during period - - - - Decrease during period - - - - Ending balance 56,164 56,164 48,565 48,565 (Amounts : Thousands Baht) Consolidated Statements of Changes Company's Separate Statements of in Deficit in Shareholders' equity Changes in Deficit in Shareholders' equity 2000 1999 2000 1999 ( Restated ) ( Restated ) Deficit Beginning balance as previously reported (2,962,043) (1,870,569) (2,954,444) (1,862,971) Cumulated effect of change in accounting policy of a subsidiary (Note 1.6) - (10,802) - (10,802) Beginning balance as restated (2,962,043) (1,881,371) (2,954,444) (1,873,773) Increase during period - net loss (1,495,895) (665,974) (1,495,895) (665,974) Decrease during period - - - - Ending balance (4,457,938) (2,547,345) (4,450,339) (2,539,747) Unrealized loss on non-current marketable securities (Note 1.5) Beginning balance (154,875) (255,754) (154,796) (254,592) Increase during period - 102,708 - 101,546 Decrease during period 88,025 - 87,946 - Ending balance (66,850) (153,046) (66,850) (153,046) (3,112,317) (1,338,664) (3,112,317) (1,414,513) Minority interests Beginning balance 64,164 61,616 - - Increase during period 53 6,639 - - Decrease during period - - - - Ending balance 64,217 68,255 - - Total Deficit in Shareholders' Equity (3,048,100) (1,270,409) (3,112,317) (1,414,513) SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF DEFICIT FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 ( UNAUDITED ) (Amounts : Thousands Baht) Consolidated Statements of Deficit Company's Separate Statements of Deficit 2000 1999 2000 1999 ( Restated ) ( Restated ) Deficit Beginning balance as previously reported (2,962,043) (1,870,569) (2,954,444) (1,862,971) Cumulated effect of change in accounting policy of a subsidiary (Note 1.6) - (10,802) - (10,802) Beginning balance as restated (2,962,043) (1,881,371) (2,954,444) (1,873,773) Net loss (1,495,895) (665,974) (1,495,895) (665,974) Total Deficit (4,457,938) (2,547,345) (4,450,339) (2,539,747) Appropriated retained earnings Legal reserve 56,164 56,164 48,565 48,565 Total Deficit (4,401,774) (2,491,181) (4,401,774) (2,491,182) SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 ( UNAUDITED ) (Amounts : Thousands Baht) Consolidated Statements Company's Separate Statements of Cash Flows of Cash Flows 2000 1999 2000 1999 ( Restated ) ( Restated ) CASH FLOWS FROM OPERATING ACTIVITIES Net loss (1,495,895) (665,974) (1,495,895) (665,974) Adjustments to reconcile net loss to net cash provided by (used in) operating activities Doubtful debts 162,511 (22,573) 148,789 (31,612) Depreciation 62,391 68,718 56,516 55,825 Deferred charges written off 327 13,328 - 20,980 Loss on sales of short-term investment - 95,047 - 95,047 (Gain) loss on sales of equipment and condominiums (369) (2,761) (3,429) 1,002 Equity in (profit) loss of subsidiaries and associated companies and joint ventures (43,635) 6,068 23,994 83,560 Loss on impairment of assets 4,262 (1,125) - (1,125) Unrealized gain in marketable securities (49,366) (106,711) (49,369) (106,711) Provision against value of inventories (44,985) (2,990) - - Loss on impairment of investments 132,473 1,162 129,402 - Loss on currency swap contracts in prior year 155,971 - 155,971 - Unrealized losses on exchange rate 145,920 390,885 145,648 377,968 Loss on sales of long-term investments 54,966 73,398 55,637 73,398 Minority interest 53 14,742 - - Changes in operating assets and liabilities (Increase) Decrease in operating assets Accounts receivable 227,862 245,569 182,898 157,652 Retentions receivable (15,302) 170,311 (15,302) 170,319 Inventories 77,277 58,022 - - Construction contract in progress (5,590) - - - Other current assets (139,949) (41,641) (132,304) (46,712) Other assets 41,044 (108,189) 40,970 (109,320) (Amounts : Thousands Baht) Consolidated Statements Company's Separate Statements of Cash Flows of Cash Flows 2000 1999 2000 1999 ( Restated ) ( Restated ) Increase (Decrease) in operating liabilities Accounts payable (84,847) (205,907) (70,254) (167,228) Advance receipt on contracts (79,221) 27,721 (80,894) 27,765 Other current liabilities 587,698 267,579 592,214 256,762 Other liabilities 55,976 (9,743) (16,239) (9,743) Net Cash Provided by (Used in) Operating Activities (250,428) 264,936 (331,647) 181,853 CASH FLOWS FROM INVESTING ACTIVITIES Increase in short-term investments (1,154) (5,710) - (24) (Increase) decrease in short-term loans to related parties - (111,528) (113,810) 2,333 (Increase) decrease in loans to related parties (131,321) 32,494 - 35,966 Increase in investments (9,978) (107,069) (9,978) (135,379) Proceeds from sales of investments 175,620 86,439 165,870 86,439 Receipt of dividends 1,400 - 1,400 - Purchase of equipment (82,530) (33,935) (83,180) (56,412) Proceeds from sales of equipment 14,360 12,888 9,896 8,145 Proceeds from sales of condominiums 4,965 8,832 4,965 8,832 Increase in loans and advances to directors and employees (19,523) (3,106) (19,863) (1,896) Net Cash Used in Investing Activities (48,161) (120,695) (44,700) (51,996) (Amounts : Thousands Baht) Consolidated Statements Company's Separate Statements of Cash Flows of Cash Flows 2000 1999 2000 1999 (Restated) (Restated) CASH FLOWS FROM FINANCING ACTIVITIES Increase in bank overdrafts and loans from financial institutions 80,993 27,851 174,789 11,113 Increase (decrease) in short-term loans from directors (384) 6,322 - - Net Cash Provided by Financing Activities 80,609 34,173 174,789 11,113 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (217,980) 178,414 (201,558) 140,970 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD (Notes 1.5 and 2.2) 340,674 794,792 317,132 771,608 CASH AT BANK PLEDGED AS COLLATERALS AT BEGINNING OF PERIOD (Notes 1.5 and 2.2) 854,310 84,030 854,087 84,030 CASH AT BANK PLEDGED AS COLLATERALS AT ENDING OF PERIOD (Notes 1.5 and 2.2) (822,122) (839,666) (821,899) (836,553) CASH AND CASH EQUIVALENTS AT END OF PERIOD (Notes 1.5 and 2.2) 154,882 217,570 147,762 160,055 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash paid during the period Interest expense 5,823 24,131 3,355 8,533 Income tax 34,150 55,720 33,807 54,136 SINO-THAI ENGINEERING AND CONSTRUCTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) NOTE 1 GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.1 General Information Sino-Thai Engineering and Construction Public Company Limited has operated major business in general construction. The major shareholder of the Company as at September 30, 2000 is the Charnvirakul family, who held 52.27% of total fully paid shares capital. The Company is major shareholder of SinoThai Construction Services Company Limited and SinoThai Resources Development Public Company Limited. As at September 30, 2000 and December 31, 1999, the Company and subsidiaries have staffs for 586 persons and for 666 persons, respectively and staff costs for the nine-month periods ended September 30, 2000 and 1999 are in the amount of Baht 126.79 million and Baht 144.00 million, respectively in the consolidated financial statements. As at September 30, 2000 and December 31, 1999, the Company has staffs for 569 persons and 581 persons, respectively and staff costs for the nine-month periods ended September 30, 2000 and 1999 are in the amount of Baht 120.89 million and Baht 133.12 million, respectively in the separate financial statements. 1.2 Economic Environment The operations of Sino-Thai Engineering and Construction Public Company Limited ("the Company") and subsidiaries may continue to be influenced by the economic conditions in Thailand and the Asia Pacific Region in general. The consolidated financial statements and the separate financial statements of the Company reflect the management's current assessment of the impact of current economic conditions on the financial position of the Company. However, actual results could differ from the management estimates. 1.3 Basis of Consolidaion The consolidated financial statements and the separate financial statements 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 in Thailand. As required by Thai law and regulatory requirements, the Company's financial statements have been prepared in the Thai language. They have been translated into English for the convenience of the reader. The accompanying consolidated financial statements for the three-month and nine-month period ended September 30, 2000 and 1999 and for the year ended December 31, 1999 consist of the financial statements of Sino-Thai Engineering and Construction Public Company Limited, collectively "the Company", and the financial statements of subsidiaries, Sino-Thai Construction Services Company Limited, Sino-Thai Resources Development Public Company Limited and Sino-Thai Joint Venture which the Company has the significant role to control and/or percentage of shareholding is considered to possess the ability to exercise significant influence over subsidiary in the financial and operating policy decisions, collectively "subsidiaries". The financial informations of subsidiaries have been reviewed by us except for the financial statements of Sino-Thai Joint Venture which have been reviewed by another auditor. The Company's separate financial statements for the three-month and nine-month period ended September 30, 2000 includes equity in profit (loss) of the above subsidiaries, associated companies and three joint ventures as the Company has significant influence and/or has powers to participate in the financial and operating policy decisions. The financial informations of the above associated companies and two joint ventures prepared by the Company's management and have not been reviewed by auditor and have been reviewed by another auditor for one joint venture. All significant intercompany transactions and balances have been eliminated in preparing the consolidated financial statements. The financial information of the Company and subsidiaries includes in the consolidated financial statements are summarized as follows: Percentage of holding As at September 30, As at December 31, 2000 1999 1999 Direct Subsidiaries Sino-Thai Construction Services Company Limited 99.99 99.99 99.99 Sino-Thai Resources Development Public Company Limited 51.16 51.16 51.16 Sino-Thai Joint Venture 100.00 - 100.00 The consolidated financial statement for the three-month and nine-month periods ended September 30, 2000 and for the year ended December 31, 1999 includes the financial statements of subsidiaries which have been reviewed by another auditor. Its total assets, total revenues and net loss reflected in percentage of total consolidated assets, total consolidated revenues and net loss in the consolidated financial statement are as follows: Assets Total revenues Net income (loss) September 30, December 31, September 30, September 30, 2000 1999 2000 2000 Subsidiary Sino Thai Joint Venture 3.02 1.25 3.44 0.12 The Company's separate financial statements for the three-month and nine-month periods ended September 30, 2000 and 1999 include equity in profit (loss) of associated companies and joint ventures, which have been prepared by the management and have not been reviewed by auditor that reflected to net income (loss) as follows : 2000 1999 % % Associated companies HTR Corporation Limited 0.28 2.65 DKK Sino-Thai Engineering Company Limited 2.83 0.43 Thai Maintenance Contracting Company Limited 0.27 0.12 Joint Ventures Philipp Holzmann (Thai)/U.T.M. Engineering/ Sino-Thai Joint Venture - 3.07 Zueblin W&F Stecon Joint Venture 0.11 1.63 The Joint Venture of Tomen Enterprise (Bangkok) Limited/Sino-Thai Engineering and Construction Public Company Limited/Totems Company Limited 0.01 0.01 1.4 Going Concern For the nine-month periods ended September 30, 2000 and 1999, the Company and subsidiaries have incurred net loss from operations in the amount of Baht 1,495.90 million and Baht 665.97 million, respectively, and as at September 30, 2000 and December 31,1999, their total current liabilities exceeded total current assets amount of Baht 4,372.07 million and Baht 3,264.23 million, respectively in the consolidated financial statements and Baht 4,392.12 million and Baht 3,252.96 million, respectively in the separate financial statements. The Company and subsidiaries also have total liabilities exceeded total assets in the amount of Baht 3,048.10 million and Baht 1,639.49 million, respectively in the consolidated financial statements and Baht 3,112.32 million and Baht 1,703.57 million, respectively in the separate financial statements as at September 30, 2000 and December 31, 1999. The financial statements have been prepared on going concern basis, which assumes that the Company will continue in existence. The validity of this assumption is dependent upon the Company's ability to meet its financial requirements, and the success of future operations. If the Company were unable to continue in existence, adjustments would have to be made to reduce the value of assets to their recoverable amounts, to provide for any additional liabilities that might arise and to consider the classification of those assets and liabilities. The Company and a subsidiary in the period of 2000 and 1999 have failed to repay loans and interest and have not performed financial ratio condition under loan agreement that entitles the banks to accelerate the maturity of all amount outstanding immediately due and payable. On August 20, 1998 and September 4, 1998, the lenders informed to the Company to repay the whole amount before due date in according to the loan agreement. The Company has appointed a financial consultant to prepare a financial restructuring plan and perform under the plan. A subsidiary is in the process of compliance with the restructuring plan in order to rehabiliate its financial position and operations and has difficulties in operating as a going concern, which is significant matter, also has been informed by a letter from the Stock Exchange of Thailand reference No. Bor Jor/Mor 1921/2540 dated December 17, 1997, regarding to withdraw from listed company because of a significant decrease in operating assets since it has ceased its operations on tin ore mining. Another subsidiary has incurred a net loss from operations for many years, total current liabilities exceeded total current assets and has difficulties in operating as a going concern. The extraordinary of shareholders meeting of the subsidiary also resolved to close temporarily. On December 17, 1999, creditors and the Company submitted their petition for reorganization plan for the company to the Central Bankruptcy Court and on January 17, 2000 the Court ruled that the Company must be reorganized by appointing, Mr. Anutin Charnvirakul and Mr. Chavarat Charnvirakul as the planner by requesting of creditors and the Company. On August 23, 2000, the creditors meeting resolved to approve the reorganization plan and on September 4, 2000 the Central Bankruptcy Court authorized the reorganization plan under Section 90/58 of the Bankruptcy Act, B.E. 2483, which determined STECON Administrator Company Limited located at 29th-30th Floor, Sino-Thai Tower, 32/59-60 Asoke Soi, North Klongtoey, Wattana, Bangkok 10110 as the Plan Administrator. Any of the planner's rights or privileges, powers and duties will be transferred to the Plan Administrator since from date of order of the Court. See Note 2.4 to the financial statements. Therefore, at the report date, the Company is in the process of compliance with the reorganization plan in order to rehabilitate its financial position and operations as approval from the creditors meeting. The Company's organization plan to be approved by the creditors meeting and the Central Bankruptcy Court is summarized as follows: Types of creditors Million Baht 1. Financial creditors 4,656.31 2. Working capital creditors 55.00 3. Foreign currency swap creditors 201.17 4. Sub-contractor creditors 31.89 5. Trade creditors 81.89 6. Creditors whose cliams are disputed by the Company 41.04 7. Condominium creditors and facility agents creditors under the Syndicated loan 4.20 8. Bond issuer creditors and beneficiary creditors 1.73 Total 5,073.23 The aforementioned class 1 and class 3 creditors forgive a part of debts after the Company will follow under items 1 to 5 of business reorganization steps. 1. The increase of registered share capital Within 60 days from the date of plan approval, the Company will increase its registered share capital and issue 55 million ordinary shares. These shares will be divided into (i) Group 1 Shares consisting of 5 million newly issued shares with the par value of Baht 10 per share, offered for sale to the majority shareholder at the price of Baht 20 per share, and (ii) Group 2 Shares consisting of 50 million newly issued shares with the par value of Baht 10 per share, offered for sale to class 1 and class 3 creditors at the price of Baht 70 per share. 2. The purchase of newly issued shares by the majority shareholder Within 60 days from the date of plan approval, the majority shareholder will purchase Group 1 Shares of 5 million ordinary shares at the price of Baht 20 per share. 3. The debt-equity conversion of the financial creditors Within 60 days from the date of plan approval, class 1 and class 3 creditors will corvert the Baht 3,500 million pricipal into Group 2 Shares of 50 million ordinary shares at the price of Baht 70 per share under proportionate to the outstanding principal due to each creditor. 4. The transfer of non-core assets to the Asset Management Company ("AMC") Within 60 days from the date of plan approval, the Company will transfer its non-core assets (Non-core assets are not main assets to operations) to AMC to repay outstanding principal of Baht 5.52 million to class 1 creditor under proportionate to that due to each creditor. 5. Cash repayment Within 60 days from the date of plan approval, the Company will repay outstanding principal of Baht 100 million to class 1 and class 3 creditors in cash under proportionate to that due to each creditor. 6. Extension of repayment The Company will repay its Baht 600 million outstanding principal to class 1 and class 3 creditors in installments over six years in accordance with the guideline set forth in the plan. The class 2, 4, 5, 6, 7 and 8 creditors will be repaid in accordance with the guideline set forth in the plan. 1.5 Summary of Significant Accounting Policy Revenue Recognition Revenue from construction of the parent company is recognized on the basis of the percentage-of-completion method as estimated by the Company's engineers. Differences between income recognized on the basis of the percentage-of-completion method and billing income are recorded as accounts receivable. Subsidiary's revenue from sales is recognized when significant risk on ownership or rewards is transferred to the buyer. Service income is recognized on the basis of the percentage-of-completion method and invoices are collected. Rental income on equipments is recognized when invoices are collected. Other income is recognized on the accrual basis. Expenses Recognition Costs of construction of the Company are recognized on the basis of the percentage of work completed to the total estimated costs or the actual costs. Differences between the estimated costs and the actual cost are recognized on the basis of the percentage of work completed which are recorded as construction contracts in progress. Subsidiary's service costs are recognized on the basis of actual cost. Expenses are recognized on the accrual basis. Cash and Cash equivalents Cash and cash equivalents represent cash in hand and at banks, fixed deposits and notes receivable financial institutions with an original maturity of three months or less, net of bank deposits pledged as collateral. Allowance for Doubtful Accounts The Company provides allowance for doubtful accounts on the basis of those amounts, which may proved to be uncollectible. Inventories Inventories of its subsidiaries are stated at cost, using first-in, first-out method, net of provision for declining in value of inventories. Investments Short-term investments in marketable equity securities, which held for trading, are stated at fair value. Unrealized gains or losses arising on the revaluation of trading securities are recognized in the statement of income. Short-term investments in non-marketable equity securities, which are general investment, are stated at cost. Long-term investments in marketable equity securities available for sale are stated at fair value. Unrealized gains or losses arising on the revaluation of available for sale securities are shown as a separate from shareholders' equity and recognized in the statement of income upon sale or when the securities are impaired in the value. Long-term investments in non-marketable equity securities, which are general investment, are stated at cost. Investments in joint ventures in which percentage of Company's portion of profit exceeds 20 percent are stated at equity method according to proportionate method for all joint venture that the Company has a power to control. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is computed by the straight-line method, based on the estimated useful lives of assets 5-20 years. Property, Plant and Equipment of subsidiaries are stated at cost. Depreciation is computed by the straight- line method on costs less approximate salvage value, based on the estimated useful life of assets (Except dredges of which depreciation is computed by the ratio of actual production of tin concentrate to the estimated tin ore reserves and bucket bands, tumblers and bucket idlers which are based on actual production hours over their estimated useful lives) as follows: Buildings 5% Buildings, jetty and dry dock 5% Leasehold buildings improvements 5% Vehicles 10 - 20% Motor launches and tugs 10% Machinery and construction equipment 10 - 20% Mining equipment 5 - 20% Office furniture equipment and others 20% Revaluation The Company and subsidiaries recorded the asset's carrying amount, which were increased as a result of this appraisal, by crediting equity directly under the heading of revaluation surplus. Where the asset's carrying amount, has been decreased as a result of a revaluation, the expense is charged in the statement of income. A revaluation decrease is however charged directly against any related revaluation surplus to the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of that same property, plant and equipment. The fixed assets revaluation in respect of land and dredges is based on Fair Value as determined by an independent appraiser. Unamortized Mining Rights Mining rights for 2 right are amortized by the straight-line method over the lives of mining rights 25 years as from February 1979 and August 1979. Accounts in Foreign Currencies Transactions in foreign currencies are translated into Baht at the rates of exchange prevailing on the dates of transactions. Liabilities in foreign currencies outstanding at the balance sheet date are translated into Baht at the rate of exchange prevailing on that date, and at forward exchange rates where the Company has entered into forward exchange contracts. Gain or loss on translation is included in statements of income. Basic loss per Share Basic loss per share is computed by dividing net loss for the period by the number of ordinary shares outstanding at the end of the period. 1.6 Change in Accounting Policy for Deffered Charge on Mining Right During 1999, a subsidiary changed its accounting policy with respect to the treatment of unamortized mining development cost previously recognized as assets to be recognized as expenses in order to conform with the TAS interpretation No. 4 issued by the Institute of Certified Accountants and Auditors of Thailand. This Change in accounting policy has been accounted for retrospectively. Therefore, the comparative statements for 1999 have been restated to conform to the changed accounting policy. The effect of the change has decreased in net loss and basic losses per share for the nine-month period ended September 30, 1999 by Baht 409,141.62 and Baht 0.01 per share, which had not been occurred previously. The cumulative effect of change in accounting policy resulted to opening deficit of the year 1999 have been increased by Baht 10,802,084.62. In the period 2000, the Company restated its financial statements of the year 1999 from recording a group of related companies as Sino-Thai Construction Service Company Limited and Sino-Thai Resources Development Public Company Limited to be Sino-Thai Construction Service Company Limited, Sino-Thai Resources Development Public Company Limited and the Sino-Thai Joint Venture. In restating the financial statements, the Company had to restate the preceding consolidated financial statements for the purpose of comparability. The result of the change caused the total assets increased by Baht 177,957.33 and total liabilities also increased in the same amount. NOTE 2 SUPPLEMENTAL INFORMATION 2.1 Transactions with Related parties The Company has significant transactions with its persons and related parties, which concerned certain director and shareholder of the Company, their sharing and directorships in the related parties. The basis of transactions occurring between the Company and its related parties is similar to the basis of transactions undertaken with non-related parties and included in financial statements. The outstanding balances occurred between the Company and related parties as at September 30, 2000 and December 31, 1999 are as follows: The significant accounting transactions concerned related parties for the nine-month periods ended September 30, are as follows: (Amounts : Thousands Baht) Company's Separate Financial Statements 2000 1999 Revenues from construction 83,087 - Revenues from services, rent and others - 567 Interest income - 17,353 Purchase of equipment 28 628 Concrete service and others - 689 Accounts receivable-related parties as at September 30, 2000 and December 31, 1999 are summarized as follows: (Amounts : Thousands Baht) Consolidated Balance Sheets Company's Separate Balance Sheets 2000 1999 2000 1999 Joint ventures Philipp Holzmann (Thai) /U.T.M. Engineering / Sino-Thai Joint Venture 18,494 39,358 18,493 39,358 Zueblin W&F Stecon Joint Venture 780 4,930 - 4,149 The Joint Venture of Tomen Enterprise (Bangkok) Limited/Sino-Thai Engineering and Construction Public Company Limited/ Totems Company Limited 6,790 16,032 6,790 16,032 Sino-Thai Joint Venture - 1,500 5,344 1,500 SS Joint Venture - 70 - 70 Total 26,064 61,890 30,627 61,109 Subsidiaries Sino-Thai Construction Services Company Limited - - 29,183 18,486 Sino-Thai Resources Development Public Company Limited - - 2 1 Total - - 29,185 18,487 Associated companies STP & I Public Company Limited 24 9,655 7 - ACS Asia Limited 12 16 12 16 Thai Maintenance Contracting Company Limited 133 266 133 266 Total 169 9,937 152 282 Others 21,836 21,815 18,966 18,987 Total 48,069 93,642 78,930 98,865 Less Allowance for doubtful accounts (37,989) (23,302) (63,586) (37,254) Total accounts receivable-related Parties - net 10,080 70,340 15,344 61,611 Accounts receivable-related parties are overdue as follows: (Amounts : Thousands Baht) Consolidated Balance Sheets Company's Separate Balance Sheets 2000 1999 2000 1999 Overdue 1 month to 4 months 16,711 28,918 16,811 19,408 More than 4 months to 12 months 4,489 247 6,323 - More than 12 months 26,774 57,684 23,171 54,328 Total 47,974 86,849 46,305 73,736 The above overdue accounts receivable, the Company and subsidiaries are following up on the collection of these debts. The Company's management has provided adequately for allowance for doubtful accounts in accordance with accounting policy. Accounts payable-related parties as at September 30, 2000 and December 31, 1999 are summarized as follows: (Amounts : Thousands Baht) Consolidated Balance Sheets Company's Separate Balance Sheets 2000 1999 2000 1999 Subsidiaries Sino-Thai Construction Services Company Limited - - - 150 Sino-Thai Resources Development Public Company Limited - - 168 - Total - - 168 150 Associated companies HTR Corporation Limited - 175 - 175 ACS Asia Limited 76 76 76 76 Total 76 251 76 251 Other related parties 44 3,683 - 2,606 Total 120 3,934 244 3,007 Short-term loans to related parties as at September 30, 2000 and December 31, 1999 are summarized as follows: As at September 30 , 2000 2000 Consolidated Company's Separate Policy of interest rate on loans charging Balance Sheet Balance Sheet Consolidated Company's separate (Thousands Baht) (Thousands Baht )Balance Sheet Balance Sheet Joint Ventures Philipp Holzmann (Thai)/ U.T.M. Engineering/ Sino-Thai Joint Venture Beginning balance 15,346 15,346 15% 15% Increase in loan during period - - Decrease in loan during period (15,346) (15,346) Ending balance - - The Joint Venture of Tomen Enterprise (Bangkok) Limited/ Sino-Thai Engineering and Construction Public Company Limited/ Totems Company Limited Beginning balance 6,671 6,671 11% 11% Increase in loan during period - - Decrease in loan during period - - Ending balance 6,671 6,671 Sino-Thai Joint Venture Beginning balance 2,542 2,542 - 9.25% Increase in loan during period - - Decrease in loan during period (2,542) (2,542) Ending balance - - Total 6,671 6,671 Subsidiary Sino-Thai Construction Services Company Limited Beginning balance - 158,911 - 7.3941-9% Increase in loan during period - 97,203 Decrease in loan during period - (39,072) Less Allowance for doubtful accounts - (217,042) Ending balance - - 2000 Consolidated Company's Separate Policy of interest rate on loans charging Balance Sheet Balance Sheet Consolidated Company's separate (Thousands Baht) (Thousands Baht) Balance Sheet Balance Sheet Associated companies MMR Asia Company Limited Beginning balance 17,050 11,612 15-17% 17% Increase in loan during period - - Decrease in loan during period - - Less Allowance for doubtful accounts (17,050) (11,612) Ending balance - - Thai Maintenance Contracting Company Limited Beginning balance 5,000 5,000 10% 10% Increase in loan during period - - Decrease in loan during period (5,000) (5,000) Ending balance - - Other related party Is Geo System Company Limited Beginning balance - - Increase in loan during period 78,567 78,567 Less Allowance for doubtful accounts (78,567) (78,567) Ending balance carried forward - - Total short-term loans to related parties net 6,671 6,671 As at December 31, 1999 1999 Consolidated Company's Separate Policy of interest rate on loans charging Balance Sheet Balance Sheet Consolidated Company's separate (Thousands Baht) (Thousands Baht) Balance Sheet Balance Sheet Joint Ventures Philipp Holzmann (Thai)/ U.T.M. Engineering/ Sino-Thai Joint Venture Beginning balance - - 15% 15% Increase in loan during period 15,346 15,346 Decrease in loan during period - - Ending balance 15,346 15,346 The Joint Venture of Tomen Enterprise (Bangkok) Limited/Sino-Thai Engineering and Construction Public Company Limited/ Totems Company Limited Beginning balance 7,837 7,837 11% 11% Increase in loan during period - - Decrease in loan during period (1,166) (1,166) Ending balance 6,671 6,671 1999 Consolidated Company's Separate Policy of interest rate on loans charging Balance Sheet Balance Sheet Consolidated Company's separate (Thousands Baht) (Thousands Baht) Balance Sheet Balance Sheet Sino-Thai Joint Venture Beginning balance - - - 9.25% Increase in loan during period - 2,542 Decrease in loan during period - - Ending balance - 2,542 Total 22,017 24,559 Subsidiary Sino-Thai Construction Services Company Limited Beginning balance - 194,506 - 7.3941-9% Increase in loan during period - - Decrease in loan during period - (35,595) Less Allowance for doubtful accounts - (158,911) Ending balance - - Associated company MMR Asia Company Limited Beginning balance 20,364 14,864 15-17% 17% Increase in loan during period - - Decrease in loan during period (3,252) (3,252) Less Allowance for doubtful accounts (17,112) (11,612) Ending balance - - Thai Maintenance Contracting Company Limited Beginning balance 13,000 13,000 10% 10% Increase in loan during period - - Decrease in loan during period (8,000) (8,000) Ending balance 5,000 5,000 Total 5,000 5,000 Other Related Parties Beginning balance 77,297 - Increase in loan during period - - Decrease in loan during period - - Less Allowance for doubtful accounts (77,297) - Ending balance - - Total short-term loans to related parties - net 27,017 29,559 Investments as at September 30, 2000 and December 31, 1999 consisted of:- (Amounts : Thousands Baht) 2000 Fully Paid Company's separate Shares Capital Portion of Consolidated balance sheets Balance Sheets Type of Business (Thousand Baht) Interest Cost Method Equity Method Cost Method Equity Method Joint Ventures Philipp Holzmann (Thai)/ U.T.M. Engineering/ Sino-Thai Joint Venture - 100% - 14,861 - 14,861 Zueblin-W&F-Stecon Joint Venture - 33% - - - - The Joint Venture of Tomen Enterprise (Bangkok) Limited/Sino-Thai Engineering and Construction Public Company Limited/ Totems Company Limited - 33% - 6 - 6 Sino-Thai Joint Venture - 100% - - - 1,732 Total investment in joint ventures - 14,867 - 16,599 Related Parties Subsidiaries Sino-Thai Construction Rental, dealer Services Company in construction Limited equipment and heavy machinery 30,000 99.99% - - 29,999 - Sino-Thai Resources Development Public Company Limited Mining 130,000 51.16% - - 201,442 67,270 Total - - 231,441 67,270 (Amounts : Thousands Baht) 2000 Fully Paid Company's separate Shares Capital Portion of Consolidated balance sheets Balance Sheets Type of Business (Thousands Baht) Interest Cost Method Equity Method Cost Method Equity Method Associated Companies HTR Corporation Limited Real estate 500,000 47.6% 329,990 167,918 329,990 167,918 DKK Sino-Thai Engineering Telecommunications Company Limited and transmission lines 8,000 35% 2,800 78,184 2,800 78,184 ACS Asia Company Limited Light steels fabrication 10,000 50% 5,000 8,986 5,000 8,986 Thai Maintenance Maintenance Contracting Company service for large Limited industrial plants 12,315 25.14% 2,340 9,893 2,340 9,893 340,130 264,981 340,130 264,981 Less Provision for declining in value of investment (8,986) (8,986) Total 255,995 255,995 Total investments in related parties - net 255,995 323,265 Others Available for sale securities STP & I Public Steel fabrication, Company Limited Steel construction, Industrial boilers and pressure vessels Manufacturing 250,000 10% 75,750 - 75,750 - Nakornthai Stripmill Public Company Limited 8,600,000 1.85% 110,000 - 110,000 - Thanayong Public Company Limited 3,064,557 0.02% 10,033 - 10,033 - 195,783 - 195,783 - Less Provision for declining in value of available for sale securities (186,783) (186,783) Total 9,000 9,000 (Amounts : Thousands Baht) 2000 Fully Paid Company's separate Shares Capital Portion of Consolidated balance sheets Balance Sheets Type of Business (Thousands Baht) Interest Cost Method Equity Method Cost Method Equity Method General Securities Abico Land Company Limited 200,000 15% 30,000 - 30,000 - Peroxy Thai Company Limited 793,000 2.73% 21,650 - 21,650 - Others 87,832 - 87,732 - 139,482 - 139,382 - Less Provision for declining in value of general securities (110,353) - (110,353) - 29,129 - 29,029 - Total investments in others - net 38,129 - 38,029 - (Amounts : Thousands Baht) 1999 Fully Paid Company's separate Shares Capital Portion of Consolidated balance sheets Balance Sheets Type of Business (Thousands Baht) Interest Cost Method Equity Method Cost Method quity Method Joint Ventures Philipp Holzmann (Thai)/ U.T.M. Engineering/ Sino-Thai Joint Venture - 100% - 14,861 - 14,861 Zueblin-W&F-Stecon Joint Venture - 33% - - - - The Joint Venture of Tomen Enterprise (Bangkok) Limited/Sino-Thai Engineering and Construction Public Company Limited/ Totems Company Limited - 33% - 18 - 18 Sino-Thai Joint Venture - - - - - - Total investment in joint ventures - 14,879 - 14,879 (Amounts : Thousands Baht) 1999 Fully Paid Company's separate Shares Capital Portion of Consolidated balance sheets Balance Sheets Company's Name Type of Business (Thousands Baht) Interest Cost Method Equity Method Cost Method Equity Method Related Parties Subsidiaries Sino-Thai Construction Rental, dealer Services Company in construction Limited equipment and heavy machinery 30,000 99.99% - - 29,999 - Sino-Thai Resources Development Public Company Limited Mining 130,000 51.16% - - 201,442 67,215 Total - - 231,441 67,215 Associated Companies HTR Corporation Limited Real estate 500,000 47.6% 329,990 202,555 329,990 202,555 DKK Sino-Thai Engineering Telecommunications Company Limited and transmission lines 8,000 35% 2,800 37,152 2,800 37,152 ACS Asia Company Limited Light steels fabrication 10,000 50% 5,000 8,986 5,000 8,986 Thai Maintenance Maintenance Contracting service for large Company Limited industrial plants 12,315 25.14% 2,340 5,836 2,340 5,836 340,130 254,529 340,130 254,529 Less Provision for declining in value of investment (8,986) (8,986) Total 245,543 245,543 Others Available for sale securities STP & I Public Steel fabrication, Company Limited steel construction, industrial boilers and pressure vessels manufacturing 250,000 10% 75,750 - 75,750 - Nakornthai Stripmill Public Company Limited 8,600,000 1.85% 110,000 - 110,000 - Thanayong Public Company Limited 3,064,557 0.02% 10,033 - 10,033 - 195,783 195,783 Less Provision for declining in value ofavailable for sale securities (154,796) (154,796) Total 40,987 40,987 (Amounts : Thousands Baht) 1999 Fully Paid Company's separate Shares Capital Portion of Consolidated balance sheets Balance Sheets Type of Business (Thousands Baht) Interest Cost Method Equity Method Cost Method Equity Method General Securities Abico Land Company Limited 200,000 15% 30,000 - 30,000 - Nithipat Leasing Company Limited 15% 129,568 - - - 800,000 11.25% - - 97,168 - Peroxy Thai Company Limited 793,000 2.73% 21,650 - 21,650 - The Preferred Shares Mutual fund - Subordinated Debentures of Thai Farmer Band Public Company Limited Fund 40,000,000 0.25% 100,000 - 100,000 - Government Bond - - 23,888 - 23,888 - Others 92,531 - 87,732 - 397,637 - 360,438 - Less Provision for declining in value of general securities (156,595) - (131,667) - Total 241,042 - 228,771 - Total investments in other related parties - net 282,029 - 269,758 - Loans other as at September 30, 2000 and December 31, 1999 are as follows: 2000 Consolidated Company's Separate Policy of interest rate on loans charging Balance Sheet Balance Sheet Consolidated Company's Separate (Thousands Baht) (Thousands Baht) Balance sheet Balance sheet Others Related Parties 13-18% 13-18% Beginning balance 4,240 4,240 Increase in loan during period - - Decrease in loan during period - - Less Allowance for doubtful accounts (90) (90) Ending balance 4,150 4,150 1999 Consolidated Company's Separate Policy of interest rate on loans charging Balance Sheet Balance Sheet Consolidated Company's Separate (Thousands Baht) (Thousands Baht) Balance sheet Balance sheet Other Related Parties 13-18% 13-18% Beginning balance 4,240 4,240 Increase in loan during period - - Decrease in loan during period - - Less Allowance for doubtful accounts (90) (90) Ending balance 4,150 4,150 As at September 30, 2000 and December 31, 1999, the Company recognized loss on investments in subsidiaries and joint ventures exceeding carrying amount by equity method in the amount of Baht 27.98 million and Baht 35.87 million, respectively, in the consolidated financial statements, and Baht 263.23 million and Baht 203.81 million, respectively, in the separate financial statements which were shown as other liabilities. 2.2 Cash and Cash Equipment Cash and cash equivalents as at September 30, 2000 and 1999 are summarized as follows: (Amounts : Thousands Baht) Consolidated Company's Separate Statements of Cash Flows Statements of Cash Flows 2000 1999 2000 1999 Cash in hand and at banks 139,416 301,842 132,381 241,993 Add Short-term investment-fixed deposit- three months 837,587 755,394 837,279 754,615 Less Cash at bank pledged as collaterals (26,070) (133,705) (25,847) (130,592) Short-term investment pledged as collaterals (796,051) (705,961) (796,051) (705,961) Cash and cash equivalents - net 154,882 217,570 147,762 160,055 2.3 Accounts Receivable Accounts receivable - others as at September 30, 2000 and December 31, 1999 are as follows: (Amount in Thousand Baht) Consolidated Balance Sheets Company's Separate Balance Sheets 2000 1999 2000 1999 Overdue 1 month to 4 months 181,713 321,921 179,315 308,425 More than 4 months to 12 months 17,865 57,877 5,115 54,575 More than 12 months 354,910 359,891 325,653 327,807 Total 554,488 739,689 510,083 690,807 Allowance for doubtful accounts have been provided for 335,625 334,201 303,222 317,503 The above overdue accounts receivable, the Company and subsidiaries are following up on the collection of these debts. The Company and subsidiaries' management have provided adequately for allowance for doubtful accounts in accordance with accounting policy. 2.4 Long-term Loans The Company obtained the US$ 80,000,000 syndicate loan from 19 foreign banks and financial institutions and the US$ 5,000,000 loan from a foreign bank, which bear interest at the rate of the SIBOR. The principals are repayable within 3 years from the drawdown date and interest payable semi-annually. The lenders may request the Company to repay the loans within 2 years from the drawdown date. Loan covenants include maintenance of important financial ratios to the level as set out in the agreement. As at September 30, 2000 and December 31, 1999, the Company has not performed in accordance with loan agreements concerning loan and interest payment in the amount of US$ 93.5 million and financial ratio. The default entitles the lenders to accelerate the maturity of all amount outstanding immediately due and payable. Therefore, the loans are shown under current liabilities in total amount. See Note 1.4 to the financial statement. In 1997, the subsidiary has entered into a loan agreement with a domestic commercial bank for Baht 117 million, repayable quaterly in twenty-four installments within 7 years. The first repayment was repaid at the end of the one year and 3 months from loan agreement's date. The monthly interest is payable as from the first month of drawdown. In 1998, the subsidiary has entered into a loan agreement with the same bank for Baht 30 million, repayable quarterly in twenty-four installments within June 30, 2004. The first repayment was repaid on September 1998. The monthly interest is payable as from the first month of drawdown. During 1998, the subsidiary has not repaid on loan payments as a whole and has not performed under loan agreements. This default entitles the bank to accelerate the maturity of all amounts outstanding immediately due. Later on November 4, 1999, the subsidiary has entered into the debt restructuring contract with a domestic commercial bank. The outstanding debts as at December 31, 1998 were restructured by transferring bank overdrafts, short-term loans and long-term loans in the amounts of Baht 10.53 million, Baht 28.46 million and Baht 147 million, respectively, into the contract principal in the amounting to Baht 185.99 million and accrued interest expense of Baht 23.39 million. The bank is entitled to charge interest for the principal at the interest of MLR. (8.5% per annum as at the contract date). The following under the contract are summarized: The bank has agreed to extend the terms and conditions of principal quarterly repayment for 21 quarterly installments. The first installment will start from December 31, 2003 as below: Year Payment (Million Baht) 2003 145.86 2004 (quarterly payable Baht 1,547,400) 6.19 2005 (quarterly payable Baht 1,992,600) 7.97 2006 (quarterly payable Baht 2,145,000) 8.58 2007 (quarterly payable Baht 2,655,000) 10.62 2008 (quarterly payable Baht 1,691,623) 6.77 Total 185.99 The bank has agreed to extend the terms and conditions for monthly interest payments, which will start from the month of contract signed as follows: For the Period Interest rate Or equivalent monthly interest % per annum Thousands Baht January 1, 1999 to December 31, 2000 0.5420 84 January 1, 2001 to December 31, 2001 1.3550 210 January 1, 2002 to December 31, 2002 2.7099 420 January 1, 2003 to 2008 MLR The difference between the interest expense which are calculated based on the interest rate of MLR per annum and debt restructuring contract, the subsidiary has agreed to repay which depend on the subsidiary's performances and the bank's approval. The subsidiary has to repay to bank when cash in available after the repayment of the normally debt repayment. Therefore, as from the fourth quarter of the year 1999 through December 31,2003 as an uncertainty regarding to ability on repayment of the subsidiary that depends on its performance, the subsidiary has not recorded accrued interest expense of differences between interest expense based on bank's right and debt restructuring contract. If the subsidiary considered to record accrued interest expense as at September 30, 2000 and as at December 31,1999, the accrued interest expenses would be recognized to increase by Baht 12.73 million and Baht 2.47 million, respectively, based on bank's right. The subsidiary has agreed to repay accrued interest expense within 2003 for Baht 11.16 million and the remaining within December 31, 2013. 2.5 Share Capital According to the resolution of creditors meeting held on August 23, 2000 and the Central Bankruptcy Court authorized the reorganization plan on September 4, 2000, therefore, on September 20, 2000, the Company has registered to decrease the authorized share capital from Baht 750 million to be Baht 300 million consisted of 23 million ordinary shares, Baht 10 par value, and 7 million preference shares, Baht 10 par value. Later on September 22, 2000, the Company has registered to increase the authorized share capital from Baht 300 million by Baht 550 million to Baht 850 million consisted of 78 million ordinary shares, Baht 10 par value and 7 million preference shares, Baht 10 par value. 2.6 Revaluation Surplus In 1996, the Company revalued its land resulting in revaluation surplus of Baht 834.57 million was approved by the Executive Board of Directors' meeting No.12/2539 held on March 28, 1996. The Company recorded the revaluation of land as revaluation surplus shown under shareholders' equity. In March 1999, the Company revalued the majority of land of Baht 509 million based on market value on the basis of valuation of the appraisal company dated March 4, 1999 that resulted to decrease carrying amount of land by approximately amount of Baht 390.85 million. The above land revaluation was approved by the Executive Board of Directors' meeting No.8/2542 held on February 22,1999, and No. 31/2542 held on September 27, 1999 and the Company recorded the revaluation surplus as shown under shareholders' equity. In 1996, a subsidiary revalued its land resulting in revaluation surplus of Baht 185 million which was approved by the Executive Board of Directors No. 4/2539 held on June 28, 1996, and recognized the revaluation under the heading of revaluation surplus in shareholders' equity in the amount of Baht 94.61 million on proportion of holding by the Company. On June, 1999, this subsidiary revalued the land in the amount of Baht 148.72 million as based on market value on the basis of valuation of the appraisal company dated September 14, 18 and 21, 1999 that resulted to decrease carrying amount of land by approximately amount of Baht 36.79 million which was approved by the Meeting of the Executive Board of Directors No. 6/2542 held on July 12, 1999. The subsidiary recorded the devaluation on land shown under shareholders' equity. As at December 31, 1999, the subsidiary has revalued its two dredges resulting in revaluation surplus of approximately Baht 96.06 million as approved by the Executive Board of Directors No. 11/2542 held on December 30, 1999 and appraised by an independent appraiser on December 30, 1999, based on comparison with the useful value of the dredges. The subsidiary recognized the revaluation on land as revaluation surplus on assets shown under shareholders' equity. 2.7 Contigencies and Commitments The Company and subsidiaries have commitments and contingent liabilities as at September 30, 2000 are as follows: Million Baht Guarantor of credit facilities for affiliated companies 54.84 Guarantor of credit facilities for related parties 223.13 Guarantor of credit facilities for other company 86.07 Letter of guarantee issued by financial institution 1,362.87 Letter of credit 46.62 The Company and subsidiaries' claims under litigation 12.79 As at September 30, 2000, deposit in the amount of Baht 7.12 million is pledged for damage of construction. As at September 30, 2000, the subsidiary was sued for compension in disputed in mining development contract and quarry for crushing mill in the approximately amount of Baht 170.72 million and the subsidiary has counterclaimed in the same case in the amount of Baht 142.89 million. This case is still in the process on consideration of the arbitrator of judge and is not decided. 2.8 Segment Information The Company and subsidiaries operate in business of construction, sale of goods and services in Thailand. Segment information classified by type of business in the consolidated financial statements for the nine months ended September 30, 2000 and 1999 are summarized as follows: (Amounts : Million Baht) 2000 Construction Sale Service Total Revenues 2,242.53 90.47 3.23 2,336.23 Cost of construction and sale (2,512.54) (163.08) (4.03) (2,679.65) Gross loss (270.01) (72.61) (0.80) (343.42) 1999 Revenues 2,476.41 150.54 8.43 2,635.38 Cost of sale (2,152.01) (142.75) (12.01) (2,306.77) Gross profit (loss) 324.40 7.79 (3.58) 328.61 2.9 Reclassification Certain items in the financial statements for the three-month and nine - month period ended September 30, 1999 and December 31, 1999 have been reclassified to conform with the presentation in the financial statements for the three-month and nine - month period ended September 30, 2000.