- 10 - 9. OTHER SECURITIES COMPANY'S NAMES TYPE OF PAID-UP OWNERSHIP INVESTMENT INVESTMENT BUSINESS CAPITAL (%) COST METHOD EQUITY METHOD DIVIDEND Baht 1999 1998 1999 1998 1999 1998 Baht Baht Baht Baht Baht Baht Asia Investment (1995) Co., Ltd. Explore and US$ 200,000 20.00 - 1,018,200 - 1,018,200 - - Produce Zinc Asean Potash Holding Co., Ltd. Produce and 395,967,000 2.52 10,010,000 10,010,000 10,010,000 10,010,000 - - distribute Potash mineral mineral Millennium Gold Corporation Explore and CAN $ 9,917,857 7.56 4,441,626 4,441,626 4,441,626 4,441,626 - - Co., Ltd. Gold mineral Canal National Fertilizer Public Co., Ltd. Produce and 4,744,561,390 2.65 - 125,737,100 - 125,737,100 - - distribute fertilizer Less Unrealized loss on non-current marketable security - (89,273,341) - (89,273,341) - - - 36,463,759 - 36,463,759 - - Total other securities 14,451,626 51,933,585 14,451,626 51,933,585 - - /11 - 11 - 10. OTHER ASSETS Other assets as at June 30, consist of the following: CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Start-up cost (net) 12,184,731 19,800,309 12,184,731 19,800,309 Excess of development stage expenses over revenues (net) 9,796,057 41,487,577 9,796,057 20,205,906 Assets and data from other companies (net) 205,700 617,101 205,700 617,101 Deposits and installment payments for condominium units 74,932,723 61,998,500 - - Less Allowance for doubtful accounts (74,932,723) (61,998,500) - - 22,186,488 61,904,987 22,186,488 40,623,316 Deposits 6,863,217 6,666,650 3,980,881 3,181,783 Financial advisory fees - 12,338,607 - 12,338,607 Special prospect license fee 16,986,510 27,798,891 - - Exploration expenditures 145,538,979 232,778,055 - - Others 27,355,859 53,014,378 26,011,184 52,603,881 196,744,565 332,596,581 29,992,065 68,124,271 218,931,053 394,501,568 52,178,553 108,747,587 Deposits and installment payments for condominium units of Baht 74.93 million and Baht 62 million as at June 30, 1999 and 1998 respectively, as shown above, is of a subsidiary company. Construction of such condominium units was suspended due to the country's unstable economy and decline in the real estate property market, a full allowance for doubtful account has been provided against such amount. On July 23, 1999, Padaeng Industry Public Co., Ltd. entered into a Memorandum of Understanding with a foreign company who indicated its wish to enter into a joint-venture to undertake exploration and mining of Puthep Copper Project and to acquire equity in the project which will be established through shares acquisition in Puthep Co., Ltd., a wholly owned subsidiary of Padaeng Industry Public Co., Ltd. The consolidated interim financial statements as at June 30, 1999 include deferred exploration expenditures and special prospect license fee, amounting to Baht 162 million. The recoverable value is still uncertain because the exploration results and continued funding of a joint venture project are not known at this time. On February 17, 1998, the Company entered into a Memorandum of Understanding with a local company who had concession rights for certain property. The Company has to pay compensation as described in such Memorandum of Understanding to the local company for concession withdrawal in target area. On June 3, 1999, the Company entered into an Amendment to Memorandum of Understanding with such company to terminate the old compensation payment and to pay compensation of Baht 40.9 million which is repayable in three installments. /12 - 12 - As at June 30, 1999 the Company paid compensation of Baht 13.6 million as described in the Amendment to Memorandum of Understanding and such company already withdrew from the concession. The Company is currently submitting its concession application in the target area to the Department of Mineral Resources for approval. 11. LONG-TERM LOANS Long-term loans as at June 30, consist of the following: CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Long-term loans - The Company 2,640,540,085 1,393,843,650 2,640,540,085 1,393,843,650 - A subsidiary 213,750,000 291,250,000 - - 2,854,290,085 1,685,093,650 2,640,540,085 1,393,843,650 Less Current portion of long-term loans (632,077,031) (1,685,093,650) (418,327,031) (1,393,843,650) 2,222,213,054 - 2,222,213,054 - On February 24, 1999 Western Metals Limited rescinded its subscription in accordance with the Override and Supplementary Agreement which it was to have acquired another 75.1 million shares for Baht 1,051 million, it caused the Company to be unable to comply with Tranche A principal repayment as per such agreement. On June 25, 1999, the Company entered into the Override Amendment Agreement with its lenders to amend the Tranche A principal repayment. Under the Override Amendment Agreement, the Company will have to sell the remainder of the increased capital of 75.1 million shares to repay the Tranche A principal by September 15, 2000. Certain conditions in this agreement are amended as follows: 1. Maintaining the debt to equity ratio, on a consolidated basis, at all times prior to the Equity Injection, at not exceeding 3.25 : 1 and at all times after the Equity Injection, at not exceeding 2 :1. 2. Maintaining the interest coverage ratio on a consolidated basis, at the end of each Financial Quarter at not less than 1.75:1 prior to an Equity Injection and at not less than 3:1 after the Equity Injection. 3. The Company shall pay a fee amounting to USD 1 million. If the Company does not have an equity injection of at least USD 12.5 million by September 15, 2000. /13 - 13 - As at June 30, 1999, the loan under the Override Amendment Agreement has been classified to long-term loan. In addition, the Company entered into a Termination Agreement with Western Metals Limited dated June 25, 1999 to terminate the sales of the increased capital to Western Metals Limited, also other trading commitments. The Company is currently in process of offering the shares for the capital increase to new investors. 12. DISCLOSURE OF FINANCIAL INSTRUMENTS According to a letter received from The Stock Exchange of Thailand dated October 21, 1998, the Company is required to use the International Accounting Standard (IAS) No. 32- Presentations and Disclosure of Financial Instruments as a guideline for disclosure of the Company's financial instruments both on- balance sheet and off-balance sheet. 12.1 Significant Assets and Liabilities in Foreign Currencies Assets and liabilities of the Company and subsidiaries in foreign currencies. As at June 30, 1999 : Term of CONSOLIDATED THE COMPANY ONLY receipt/ payment AMOUNT AMOUNT days USD Baht USD Baht Cash at banks - 1,980,580 72,820,785 1,975,190 72,622,595 Accounts receivable-foreign 15 1,748,770 64,297,726 1,748,770 64,297,726 Trust receipt 90-150 9,559,475 353,709,186 9,559,475 353,709,186 Accounts payable 30-60 919,531 34,023,465 919,531 34,023,465 Accrued interest expense 90 952,399 35,239,649 247,943 9,174,132 Advance from export sales - 12,720 468,096 12,720 468,096 Long-term loans - 42,316,000 1,565,730,084 42,316,000 1,565,730,084 Short-term loans and advances from related companies - 2,859,097 105,789,154 - - As at June 30, 1998: Term of CONSOLIDATED THE COMPANY ONLY receipt/ payment AMOUNT AMOUNT days USD Baht USD Baht Cash at banks - 2,793,478 117,850,981 2,788,244 117,630,159 Accounts receivable-foreign 30 2,171,379 91,605,932 2,171,379 91,605,932 Loans to a subsidiary company 180 14,614,412 622,423,442 14,614,412 622,423,442 Accrued interest income - 16,473 694,968 16,473 694,968 Accounts Payable 30-60 2,324,690 99,007,837 2,324,690 99,007,837 Loans from banks 120-360 50,198,944 2,129,955,275 50,198,944 2,129,955,275 Accrued interest expense 180 827,167 35,228,803 335,614 14,293,699 Long-term loans 180 7,359,097 313,421,734 4,500,000 191,653,650 Loans from related companies - 14,614,412 622,423,442 - - Foreign currency amounts are translated at the exchange rate as at June 30, 1999, and represent the Baht equivalent of commitments to purchase US dollar. /14 - 14 - 12.2 Risk Management The Company's policy on risk management of loan liabilities in foreign currencies is to use financial instruments purchased in the financial markets for hedging purposes. The Company has both local and foreign sales in USD currency, which result in revenues and accounts receivable in USD currency. In addition, the Company has accounts payable, loans and interest expense in the same currency. Thus, the Company believes it is able to manage currency exchange risk by matching cash receipt with the debts and interest in foreign currencies. The following summarizes the contractual amounts of the forward exchange contracts as at June 30, 1999. CONSOLIDATED THE COMPANY ONLY Contract Amount Fair Value Contract Amount Fair Value Baht Baht Baht Baht USD Equivalent Equivalent USD Equivalent Equivalent Purchase forward contracts 6,592,468 282,816,876 282,553,178 6,592,468 282,816,876 282,553,178 12.3 Fair values of financial assets and liabilities The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of the economic entity approximates their carrying value. The net fair value of other monetary financial assets and liabilities is based upon market values. Equity investments traded on organized markets have been valued by reference to market prices prevailing at balance date. For non-traded equity investments, the net fair value is an assessment by the directors based on the underlying net assets, future maintainable earnings and special circumstances pertaining to a particular investment. 12.4 Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the Company. The Company has the credit risk management policy to obtain collateral from the customers before commencing the trade. The collateral may include bank guarantee or cash guarantee. In the case of recognized financial assets, the carrying amount of the assets recorded in the consolidated balance sheet, net of a portion of allowance for doubtful debts, represents the Company maximum exposure to credit risk. /15 - 15 - 12.5 Interest rate risk Interest rate risk in the balance sheet arises from the potential for a change in interest rates to have an adverse effect on the net interest earnings of the Company in the current reporting period and in future years. 13. COMMITMENTS AND CONTINGENCIES 13.1 As at June 30, 1999 and 1998, a subsidiary which operates in real estate business has commitments under a Joint Cooperation Agreement for the Padaeng Industry Park project as follows: - Baht 567,252 per annum payable for service and operation support and a 5% increase every 5 years commencing from September 7, 1992, and the annual compensation on wharf usage as specified in the agreement. 13.2 As at June 30, 1999 and 1998, the Company and a subsidiary have contingent liabilities for letters of guarantee issued by banks of approximately Baht 111.37 million and Baht 121.98 million respectively. 13.3 As at June 30, 1999 and 1998, the Company have unused letters of credit amounting to approximately Baht 40 million and Baht 276.70 million respectively. 13.4 In December 1995, the Company received the notice of income tax assessment from the Revenue Department in respect of income tax, penalties and surcharge totalling Baht 31.72 million. In February 1996, the Company has submitted an appeal to cancel such income tax assessment, waive and reduce such penalties and surcharge. As at June 30, 1999, result of such appeal has not yet been finalized. 13.5 Capital commitments: Commitments for the acquisition of plant and equipment contracted for at the reporting date but not recognized as liabilities on June 30, 1999 are as follows: CONSOLIDATED THE COMPANY ONLY Baht Baht Not later than 1 year 4,170,775 4,170,775 For the interim financial statements as at June 30, 1998, the Company could not conveniently obtain the information for comparison. /16 - 16 - 13.6 Purchase commitments: Commitments for the purchase of raw materials contracted for at the reporting date but not recognized as liabilities on June 30, 1999 are as follows: CONSOLIDATED THE COMPANY ONLY Baht Baht Not later than 1 year 31,702,662 31,702,662 Later than 1 year but no later than 2 years 38,501,122 38,501,122 70,203,784 70,203,784 For the interim financial statements as at June 30, 1998, the Company could not conveniently obtain the information for comparison. 14. COMMITMENTS WITH A GOVERNMENT AGENCY The Company has commitments under a contract with a Government Agency in respect of zinc mining and construction of zinc refinery plant, including certain conditions for sales of zinc metal and zinc remelt and payments of special benefits and special bonus. 15. TRANSACTIONS BETWEEN RELATED COMPANIES Transactions between related companies which have to be disclosed in accordance with the regulation of The Stock Exchange of Thailand regarding the basis, conditions and procedure for preparation and submission of financial statements and reports on financial position and result of operations of the listed companies are as follows: Major transactions and balances with related companies as at June 30, consist of the following: CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Trade accounts receivable (See*1) - - 47,381,243 57,943,117 Current loans to subsidiaries 13,836 13,138 959,995 592,777 and associated companies - 64,403 - 64,403 13,836 77,541 959,995 657,180 /17 - 17 - CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Current loans and advances from related companies 105,890,865 142,804,889 - - Non current loans and advances to a subsidiary (See *5) - - 8,000,000 471,821,403 Non current loans from a subsidiary (See * 2) - - 166,600,000 153,000,000 Investments 1,491,469 6,471,557 532,558,328 606,376,673 Trade accounts payable (see*4) - - 85,920,928 85,891,998 Accrued interest (See *2) - - 2,053,260 3,585,164 FOR THE QUARTERS ENDED JUNE 30, CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Sales (See *3) - - 576,948 4,077,499 Commission paid (See *4) - - - 16,604,109 Interest received (See *5) - - - 23,608,365 Interest paid (See *2) - - 2,449,934 4,345,378 FOR THE SIX-MONTH PERIODS ENDED JUNE 30, CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Sales (See *3) - - 877,156 7,866,866 Commission paid (See *4) - - - 40,950,897 Interest received (See *5) - - - 48,570,945 Interest paid (See *2) - - 5,547,830 8,495,022 (more)