NSOLIDATED FINANCIAL STATEMENTS Q3/2000 - STECON

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 (more)