NUAL FINANCIAL STATEMENTS

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICY Income Recognition Income from construction of parent company are 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 income from sales are recognized when the goods are delivered. Service income are recognized on the basis of the percentage-of-completion method and invoices collected. Rental income are recognized when invoices are collected. Other income are recognized on the accrual basis. Expenses Recognition Costs of construction of parent company are recognized on the basis of the percentage of work completed to the total estimated costs or the actual costs. Differences between actual costs and the related costs recognized on the basis of the percentage of work completed 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 , at banks and notes receivable financial institutes which are less than 3 months repayment net of cash at bank pledged as collaterals. Allowance for Doubtful Accounts The Company provides allowance for doubtful accounts on the basis of those amounts which may prove to be uncollectible. Inventories Inventories are stated at cost using first-in, first-out method, net of provision for damaged goods. Investments Investments in listed securities are valued at the lower of aggregate cost or aggregate market value. The declining in value of non-current marketable securities is shown under shareholders' equity. Investments in subsidiaries and associated companies are stated at the equity method. Investments in other securities which the Company holds less than 20 percent is stated at cost net of allowance for decline in value of investment. Investments in joint ventures in which percentage of Company's portion of profit and loss exceeds 20 percent are stated at equity method to proportionate method for all joint venture that the Company had a joint 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. Deferred Charges Deferred charges of parent company represent the underwriting fee which is amortized over a period of 5 years and 10 years respectively. Foreign Currency Accounts Foreign currency transactions during the year are translated into Baht at the rates prevailing at the dates of transactions. Liabilities in foreign currencies outstanding at the balance sheet date are translated into Baht at the rates prevailing at that date and at forward exchange rates in case there are forward exchange contracts. The Effects of the Change in Currency Exchange System to a Managed Float System The Company has recognized the entire gain or loss on the change in currency exchange system under Managed Float System and has shown the gain or loss under item "Gain (Loss) on currency exchange under Managed Float System" in the statement of income. Earnings (Loss) per Share Earnings (loss) per share is computed by dividing net income (loss) by the number of shares outstanding at the end of the year. NOTE 5 - RELATED PARTIES TRANSACTIONS The Company has significant transactions with its related parties. The financial statements reflect the effects of these transactions on the normal business operations. At December 31, the outstanding balances with its related parties are as follow: 5.1 Due from related parties are summarized as follows: CONSOLIDATED THE COMPANY 1998 1997 1998 1997 Baht Baht Baht Baht Joint ventures Philipp Holzmann (Thai) /U.T.M. Engineering / Sino-Thai Joint Venture 63,745,671.61 5,719,989.78 63,745,671.61 5,719,989.78 Zueblin - W&F - Stecon joint venture 2,692,891.92 5,605,516.91 2,147,060.92 5,605,516.91 The Joint Venture of Tomen Enterprise (Bangkok) Company Limited/Sino-Thai Engineering and Construction Public Company Limited/ Totems Company Limited 275,573.16 - 275,573.16 - Total 66,714,136.69 11,325,506.69 66,168,305.69 11,325,506.69 Subsidiaries Sino-Thai Construction Services Company Limited - - 8,994,931.14 2,772,733.94 Sino-Thai Resources Development Public Company Limited - - 2,640.00 167,640.00 Total - - 8,997,571.14 2,940,373.94 Associated companies STP&I Public Company Limited - 34,374,134.94 - 22,415,583.38 CBI/ST Company Limited - 311,019.27 - 311,019.27 ACS Asia Limited 12,378.48 12,378.48 12,378.48 12,378.48 ACS Asia (1996) Company Limited 1,987,791.56 1,248,928.47 1,987,791.56 1,248,928.47 MMR Asia Company Limited 8,078,170.20 3,775,558.51 6,993,043.82 3,775,558.51 Thai Maintenance Contracting Company Limited 782,164.00 10,084,155.92 782,164.00 10,084,155.92 DKK Sino-Thai Engineering Company Limited - 3,476,461.91 - 3,476,461.91 Total 10,860,504.24 53,282,637.50 9,775,377.86 41,324,085.94 Other related parties 18,953,697.01 17,689,984.18 18,953,697.01 17,636,641.58 96,528,337.94 82,298,128.37 103,894,951.70 73,226,608.15 Less Allowance for doubtful accounts (29,108,137.40) (16,401,981.00) (27,786,500.02) (16,401,981.00) Total 67,420,200.54 65,896,147.37 76,108,451.68 56,824,627.15 5.2 Due from related parties are analyzed by aging as follow : CONSOLIDATED THE COMPANY 1998 1997 1998 1997 Baht Bath Baht Baht Current 15,155,472.74 17,027,822.59 21,522,303.13 17,472,075.67 Overdue 1 month to 4 months 32,783,980.45 35,899,979.48 34,829,647.78 36,731,616.89 Over 4 months to 12 months 26,107,522.17 11,922,350.24 25,311,079.66 1,574,939.53 Over 12 months 22,481,362.58 17,447,976.06 22,231,921.13 17,447,976.06 Total 96,528,337.94 82,298,128.37 103,894,951.70 73,226,608.15 5.3 Due to related parties are summarized as follows: CONSOLIDATED THE COMPANY 1998 1997 1998 1997 Baht Bath Baht Baht Joint ventures Philipp Holzmann(Thai)/U.T.M.Engineering/ Sino-Thai Joint Venture - 8,735,487.66 - 8,735,487.66 Subsidiaries Sino-Thai Construction Services Company Limited - - 1,072,660.34 16,917,872.28 Sino-Thai Resources Development Public Company Limited - - 84,134.91 - Total - - 1,156,795.25 16,917,872.28 Associated companies STP & I Public Company Limited - 3,544,782.19 - 40,666.19 HTR Corporation Limited 232,929.09 1,008,548.91 232,929.09 1,008,548.91 ACS Asia Limited 75,878.32 75,878.32 75,878.32 75,878.32 ACS Asia (1996) Limited 109,339.98 - 109,339.98 - MMR Asia Company Limited 408,751.19 408,751.19 408,751.19 408,751.19 Thai Maintenance Contracting Company Limited 728,653.20 23,448,087.62 728,653.20 23,448,087.62 Total 1,555,551.78 28,486,048.23 1,555,551.78 24,981,932.23 Other related parties 2,606,384.48 2,606,384.48 2,606,384.48 2,606,384.48 Total 4,161,936.26 39,827,920.37 5,318,731.51 53,241,676.65 5.4 Short-term loans to related parties are summarized as follows : CONSOLIDATED THE COMPANY Policy for charging interest on loans 1998 1997 1998 1997 CONSOLIDATED THE COMPANY Baht Baht Baht Baht Subsidiaries Sino-Thai Construction Service Company Limited - - 170,670,400.00 - - 7.1275-24% Associated Companies MMR Asia Company Limited 20,363,792.69 - 14,863,792.69 - 15-17% 17% Thai Maintenance Contracting Company Limited 13,000,000.00 - 13,000,000.00 - 18% 18% Total 33,363,792.69 - 27,863,792.69 - Total Loans 33,363,792.69 - 198,534,192.69 - 5.5 Investments and loans 5.5.1 Investments in related parties THE COMPANY Company's name Type of Business Country Relation Issued shares capital Percentage of Cost method Equity method Dividend 1998 1997 share holding 1998 1997 1998 1997 1998 1997 Baht Baht 1998 1997 Baht Baht Baht Baht Baht Baht Joint ventures Philipp Holzmann (Thai)/ Thailand Joint venture - - 100 - - - - - - - U.T.M. Engineering/ Sino-Thai Joint Venture Zueblin-W&F-Stecon Thailand Joint venture - - 33 - - - - - - - Joint Venture The Joint Venture of Thailand Joint venture - - 33 - - - - - - - Tomen Enterprise (Bangkok) Company Limited/Sino-Thai Engineering and Construction Public Company Limited /Totems Company Limited Total Investment in Joint Ventures - - - - - - THE COMPANY Company's name Type of Business Country Relation Issued shares capital Percentage of Cost method Equity method Dividend 1998 1997 share holding 1998 1997 1998 1997 1998 1997 Baht Baht 1998 1997 Baht Baht Baht Baht Baht Baht Subsidiaries Sino-Thai Construction Rental, Trading in Thailand Shareholders and 30,000,000.00 30,000,000.00 99.99 99.99 29,999,300.00 29,999,300.00 39,436,036.44 - - - Services Company Limited construction Co-management equipment and heavy machinery Sino-Thai Resources Development Mining Thailand Shareholders and 130,000,000.00 130,000,000.00 51.16 51.16 201,441,563.75 201,441,563.75 53,018,857.68 86,037,166.59 - - Public Company Limited Co-management Total Investments in Subsidiaries 231,440,863.75 231,440,863.75 92,454,894.12 86,037,166.59 - - Associated Companies HTR Corporation Limited Real estate Thailand Shareholders 500,000,000.00 500,000,000.00 47.6 47.6 329,990,005.00 329,990,005.00 266,705,743.83 295,042,917.33 - - Development CBI/ST Company Limited Manufacturing Thailand Shareholders - 100,000,000.00 - 35 - 9,082,075.00 - - - 24,511,060.00 and Erection of spherical & cylin drical tank STP & I Public Company Steel fabrication, Thailand Shareholders - 250,000,000.00 - 24 - 59,999,100.00 - 155,473,300.83 - 11,999,820.00 Limited steel construction, Industrial boilers and pressure vessels manufacturing DKK Sino-Thai Telecommunications Thailand Shareholders 8,000,000.00 8,000,000.00 35 35 2,799,600.00 2,799,600.00 30,172,257.05 26,294,822.96 2,799,600.00 2,799,600.00 Engineering and transmission Company Limited lines ACS Asia Limited Light steels Thailand Shareholders 10,000,000.00 10,000,000.00 50 50 5,000,000.00 5,000,000.00 8,985,576.90 8,097,655.58 - - (More)