(ADD2) F/S Q3/98

NOTE 3 - THE SUBSIDIARY'S OPERATION The subsidiary's Board of Directors resolved to cease the tin mining operation since August 19, 1993 due to the continuous world tin market recession and tin ore price was lower than the production cost. The subsidiary has not set up provision for decline in value of assets relating to mining operation at the book value of approximately Baht 63.7 million as at September 30, 1997. The subsidiary entered into lease agreement for 2 limestone mining rights No. 27951/14713 and 27952/14724 at Tambon Lamphayaklang, Amphur Mouklek, Saraburi Province with Siam Dimension Stone Company Limited in order to operate the planned construction stone mining project. The subsidiary will be responsible for all of mining expenses when mining operation starts. The subsidiary had entered into an agreement with Thai Mineral Industry Consultants Company Limited to do the feasibility study of the construction stone mining project by which the geological study was already done. The 2 mining rights were classified as the class 1A basin according to the resolution passed by the Cabinet on February 21, 1995 which prohibits the stone mining operation. However, Siam Dimension Stone Company Limited can operate limestone mining until the expiration of the mining rights due to such company was granted mining rights before the Cabinet passed the resolution. Siam Dimension Stone Company Limited asked the Department of Mineral Resources for the permission to mine other construction stones according to the present mining rights for which permission was granted by the letter dated November 26, 1996 and also asked for the separation of the mining rights area from the class 1A basin area which is still under the consideration. The Company has been informed by a letter from the Stock Exchange of Thailand reference No. Bor Jor/Mor 1921/2540 dated December 17, 1997, of its suspension from trading because of the decline in value of its assets and because it has ceased its main operations. The Company is presently working on its rehabilitation plan. On April 8, 1998, the Company made a contract with one financial institute to be a financial consultant and work on the rehabilitation plan due to its suspension from trading. 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 and at banks net of bank overdrafts. 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 per cent 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 period 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 periods. NOTE 5 - RELATED PARTIES TRANSACTIONS The Company has significant transactions with its related companies. The financial statements reflect the effects of these transactions on the normal business operations. At September 30, the outstanding balances with its related companies are as follow: 5.1 Investment and loan to subsidiaries, associated companies and other related companies are summarized as follows : The Company as at September 30, 1998 Issued Percentage of Cost Equity Company's name Type of Business Country Relation shares capital shares holding method method Dividend Baht'000 Baht'000 Baht'000 Baht'000 Subsidiaries Sino-Thai Construction services Rental, Trading Thailand Shareholders and 30,000 99.99 29,999 64,220 - Company Limited in construction Co-management equipment and heavy machinery Sino-Thai Resources Mining Thailand Shareholders and 130,000 51.16 201,441 60,934 - Development Public Co-management Company Limited Total Investments in subsidiaries 231,440 125,154 - Associated companies HTR Corporation Limited Real estate Thailand Shareholders 500,000 47.6 329,990 276,363 - development DKK Sino-Thai Engineering Telecommunications Thailand Shareholders 8,000 35 2,800 29,080 2,800 Company Limited and transaction ACS Asia Limited Light steels Thailand Shareholders 10,000 50 5,000 8,986 - fabrication ACS Asia (1996) Company Manufacturing cable Thailand Shareholders 15,000 50 7,500 15,966 - Limited support system Thai Maintenance Contracting Maintenance service Thailand Shareholders 12,315 30 2,340 5,049 - Company Limited for industrial plants MMR Asia Company Limited Electrical and Thailand Shareholders 30,000 30 8,999 - - instrumentation contractor 356,629 335,444 2,800 Less Allowance for decline in investment (8,986) - Total Investments in Associated Companies 326,458 2,800 The Company as at September 30, 1998 Issued Percentage of Cost Equity Company's name Type of Business Country Relation shares capital shares holding method method Dividend Baht'000 Baht'000 Baht'000 Baht'000 Other related companies STP&I Public Company Limited Steel fabrication, Thailand Shareholders 250,000 10 75,750 - - steel construction, industrial boilers and pressure vessels manufacturing Abico Land Company Limited Thailand Shareholders 200,000 15 30,000 - - Nithipat Leasing Company Thailand Shareholders 800,000 11.25 97,168 - - Limited National Insurance Company Thailand Shareholders 300,000 10 - - - Limited National Life Insurance Thailand Shareholders 500,000 10 - - - Company Limited Nakornthai Stripmill Public Thailand Shareholders 8,600,000 1.85 254,000 - - Company Limited Peroxy Thai Company Limited Thailand Shareholders 793,000 2.73 21,650 - - Others Thailand Shareholders 42,264 - - 520,832 Less Allowance for decline in investment (276,019) Total Investments in Other related companies 244,813 Total Investments 696,425 The Company as at September 30, 1997 Issued Percentage of Cost Equity Company's name Type of Business Country Relation shares capital shares holding method method Dividend Baht'000 Baht'000 Baht'000 Baht'000 Subsidiaries Sino-Thai Construction Services Rental, Trading Thailand Shareholders and 30,000 99.99 29,999 50,906 - Company Limited in Construction Co-management equipment and heavy machinery Sino-Thai Resources Mining Thailand Shareholders and 130,000 51.16 201,441 156,114 - Development Public Co-management Company Limited Total Investments in subsidiaries 231,440 207,020 - The Company as at September 30, 1997 Issued Percentage of Cost Equity Company's name Type of Business Country Relation shares capital shares holding method method Dividend Baht'000 Baht'000 Baht'000 Baht'000 Associated companies HTR Corporation Limited Real estate Thailand Shareholders 500,000 47.60 329,990 309,731 - development CBI/ST Company Limited Manufacturing and Thailand Shareholders 100,000 35 9,082 11,766 14,006 erection of spherical & cylindrical tank STP&I Public Company Steel fabrication, Thailand Shareholders 250,000 24 59,999 196,605 - Limited steel construction, industrial boilers and pressure vessels manufacturing DKK Sino-Thai Engineering Telecommunications Thailand Shareholders 8,000 35 2,800 25,537 2,800 Company Limited and transaction ACS Asia Limited Light steels Thailand Shareholders 10,000 50 5,000 8,228 - fabrication ACS Asia (1996) Company Manufacturing cable Thailand Shareholders 15,000 50 7,500 7,500 - Limited support system MMR Asia Company Limited Electrical and Thailand Shareholders 30,000 30 8,999 8,999 - instrumentation contractor Thai Maintenance Contracting Maintenance service Thailand Shareholders 12,315 30 2,340 2,340 - Company Limited for industrial plants Total Investments in Associated Companies 425,710 570,706 16,806 Other related companies Abico Land Company Limited Thailand Shareholders 200,000 15 30,000 - - Nithipat Leasing Company Thailand Shareholders 800,000 11.25 97,168 - - Limited National Insurance Company Thailand Shareholders 300,000 10 30,000 - - Limited National Life Insurance Thailand Shareholders 500,000 10 50,000 - - Company Limited Nakornthai Stripmill Public Thailand Shareholders 5,600,000 3.01 270,000 - - Company Limited Peroxy Thai Company Limited Thailand Shareholders 793,000 2.73 21,650 - - Others Thailand Shareholders 82,264 - - 581,082 Less Allowance for decline in Investment (31,067) Total Investments in Other related companies 550,015 Total Investments 1,327,741 Loans to Amount in thousand Baht Policy for charging 1998 1997 interest on loans Subsidiaries Sino-Thai Construction Services Company Limited 205,402 65,000 7.2774-24% Associated companies MMR Asia Company Limited 14,864 10,000 17% Thai Maintenance Contracting Company Limited 13,000 - 18% ACS Asia (1996) Company Limited 5,094 5,094 14.75% Total 32,958 15,094 Joint Venture Philipp Holzmann (Thai) /U.T.M. Engineering / Sino-Thai Joint Venture 89,454 - 15% Other related companies Others 4,240 4,240 13-18% Less Allowance for doubtful account (90) - 4,150 4,150 Total Loans 331,964 84,334 (More)