Baht Baht Baht Baht Bank overdrafts 100,000,000 100,000,000 100,000,000 100,000,000 Promissory note 20,000,000 20,000,000 - - Trust receipts 455,000,000 455,000,000 455,000,000 455,000,000 Bank loan facilities : Padaeng Industry Public Co., Ltd. 3,198,362,330 3,185,592,155 3,198,362,330 3,185,592,155 Padaeng Poongsan Metals Co., Ltd. 470,000,000 470,000,000 - - 4,243,362,330 4,230,592,155 3,753,362,330 3,740,592,155 Loan facility as at March 31, 2000 includes USD 50,475,000 converted at Baht 37.9628 (As at December 31, 1999 USD 50,475,000 converted at Baht 37.7098). /11 - 11 - 10.2 The following has been drawn under the above facilities at the balance sheet date. CONSOLIDATED THE COMPANY ONLY March 31, December 31, March 31, December 31, 2000 1999 2000 1999 Baht Baht Baht Baht Bank overdrafts 16,278,760 16,582,454 - 290,438 Promissory note 40,000,000 20,000,000 20,000,000 - Trust receipt 371,414,797 215,074,720 371,414,797 215,074,720 Bank loan facilities : Padaeng Industry Public Co., Ltd. 2,256,471,122 2,531,553,627 2,256,471,122 2,531,553,627 2,684,164,679 2,783,210,801 2,647,885,919 2,746,918,785 11. RISK MANAGEMENT POLICY FOR ASSETS AND LIABILITIES IN FOREIGN CURRENCY 11.1 Significant Assets and Liabilities in Foreign Currencies Assets and liabilities of the Company and subsidiaries in foreign currencies are as follows: As at March 31, 2000: Term of CONSOLIDATED THE COMPANY ONLY Receipt/ Payment AMOUNT AMOUNT Days USD Baht USD Baht Cash at banks - 324,338 12,243,485 318,883 12,037,557 Accounts receivable-foreign 15 859,285 32,437,241 859,285 32,437,241 Trust receipts 90 - 120 9,783,651 371,414,797 9,783,651 371,414,797 Accounts payable 30 - 60 1,208,199 45,866,604 1,208,199 45,866,604 Accrued interest expenses 90 1,022,762 38,826,914 168,940 6,413,426 Long-term loans 180 35,615,000 1,352,045,122 35,615,000 1,352,045,122 Short-term loans from related companies 2,859,097 108,539,320 - - As at December 31, 1999: Term of CONSOLIDATED THE COMPANY ONLY Receipt/ Payment AMOUNT AMOUNT Days USD Baht USD Baht Cash at banks - 28,376 1,059,239 22,921 855,605 Accounts receivable-foreign 15 2,103,055 78,503,883 2,103,055 78,503,883 Trust receipts 90 - 120 5,703,417 215,074,720 5,703,417 215,074,720 Accounts payable 30 - 60 3,710,647 139,927,750 3,710,647 139,927,750 Accrued interest expenses 90 985,237 37,153,126 186,567 7,035,422 Long-term loans 180 40,115,000 1,512,728,627 40,115,000 1,512,728,627 Short-term loans from related companies 2,859,097 107,815,968 - - /12 - 12 - Foreign currency amounts are translated at the exchange rate as at March 31, 2000 and 31 December 1999 respectively. 11.2 Risk Management The Companys 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 entered into forward exchange contracts to cover loan commitments in foreign currencies.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. 11.3 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 financial 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. 11.4 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 Companys maximum exposure to credit risk. /13 - 13 - 11.5 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. 12. COMMITMENTS AND CONTINGENCIES 12.1 As at March 31, 2000 and December 31, 1999 a subsidiary which operates in real estate business has commitments under a Joint Cooperation Agreement for the Padaeng Industry Park project as follows: - Baht 567,525 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. 12.2 As at March 31, 2000 and December 31, 1999 the Company and subsidiary have contingent liabilities for letters of guarantee issued by banks of approximately Baht 85.58 million and Baht 84.61 million respectively. 12.3 As at March 31, 2000 and December 31, 1999 the Company has unused letters of credit amounting to approximately Baht 68.32 million and Baht 234.79 million respectively. 12.4 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 submitted an appeal to cancel such income tax assessment, waive and reduce such penalties and surcharge. In November 1999, the Company received the notice from the Board of Tax Appeal to reduce such penalties by Baht 6.43 million. The Company has the remainder of income tax, penalties and surcharge totalling Baht 25.29 million. If the Company calculates the surcharge until December 31, 1999, the Company has to pay the income tax, penalties and surcharge totalling Baht 32.17 million. In December 1999, the Company has submitted an appeal to the Central Taxation Court regarding such decision of the Board of Tax Appeal. As at March 31, 2000 the result of such appeal has not yet been finalized. The Company has not made any provision for this contingent liability in the interim financial statements. /14 - 14 - 12.5 Capital commitments: Commitments for the acquisition of plant and equipment contracted for at the reporting date but not recognised as liabilities or payables: CONSOLIDATED THE COMPANY ONLY March 31, December 31, March 31, December 31, 2000 1999 2000 1999 Baht Baht Baht Baht Not later than 1 year 19,931,298 7,980,650 19,931,298 7,980,650 Later than 1 years - - - - 19,931,298 7,980,650 19,931,298 7,980,650 12.6 Purchase commitments: Commitments for the purchase of raw materials contracted for at the reporting date but not recognised as liabilities or payables : CONSOLIDATED THE COMPANY ONLY March 31, December 31, March 31, December 31, 2000 1999 2000 1999 Baht Baht Baht Baht Not later than 1 year 91,195,700 2,543,729 91,195,700 2,543,729 Later than 1 years - - - - 91,195,700 2,543,729 91,195,700 2,543,729 13. 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. 14. 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: /15 - 15 - Main transactions between related companies consist of the following: CONSOLIDATED THE COMPANY ONLY March 31, December 31, March 31, December 31, 2000 1999 2000 1999 Baht Baht Baht Baht Trade accounts receivable (See*1) - - 48,736,288 48,216,841 Current loans to subsidiaries and associated companies 911,311 693,346 1,837,469 1,620,430 Non-current loans and advances to a subsidiary (See *5) - - 1,300,243,431 1,291,243,431 Investments - - 371,337,052 372,035,797 Trade accounts payable (see*4) - - 86,064,150 86,077,196 Accrued interest (see*2) - - 986 17,324 Current loans from associated companies 108,539,320 107,815,968 - - Non-current loans from a subsidiary (See * 2) - - 9,000,000 9,879,959 Sales (see *3) - - 2,606,528 300,208 Interest (see*2) - - 98,597 3,097,896 * 1. As at March 31, 2000 and December 31, 1999 the Company has a trade accounts receivable from a related company that has difficulties in repayments amounting to Baht 46.81 million (see Note 5). * 2. As at March 31, 2000 and December 31, 1999 loans from a subsidiary company that are at call and 3 months term promissory notes. (Interest rate 4% per annum for 2000 and interest rate 4-8.50 % per annum for 1999 and no collateral) * 3. Sales to the subsidiary company are based on a negotiated price. The Company has no available market price for comparison. * 4. Sales commission paid to a subsidiary at 1.5% of sale amount in Baht. The Company didnot renew the commission agreement with such subsidiary as from 1998. The Company has no available information of commission paid in the market. * 5 On September 1, 1998 the Company entered into the amendment loan agreement with the subsidiary to convert the USD14,614,412 loan into Baht 616,241,546 loan by using the reference rate quoted by the Bank of Thailand as at August 31, 1998 which was USD 1 = Baht 42.1667. The agreement specified that interest would cease accruing from August 31, 1998 onwards. /16 - 16 - As at March 31, 2000 and December 31, 1999 such loans and advances to subsidiary have the outstanding balances of approximately Baht 1,300,243,431 (principal Baht 1,095,281,806 and interest and cancellation fees Baht 204,961,625 ) and Baht 1,291,243,431 (principal Baht 1,086,281,806 and interest and cancellation fees Baht 204,961,625) respectively. CONSOLIDATED THE COMPANY ONLY March 31, December 31, March 31, December 31, 2000 1999 2000 1999 Baht Baht Baht Baht Loans and advances - - 1,300,243,431 1,291,243,431 Less Accumulated loss exceeding investment in a subsidiary - - (1,300,243,431) (1,283,243,431) Loans and advances net - - - 8,000,000 The Company has recognized the full-undistributed loss of a subsidiary that incurred a capital deficiency, by reducing the investment in, receivables from and loans to the subsidiary. 15. JOINT CO - OPERATION AGREEMENT In 1995, a subsidiary company operating in real estate sold land in the Industrial Park of Padaeng Industry Group to two companies at a loss. The terms of that sale were not in accordance with the Joint Cooperation Agreement established with the Industrial Estate Authority of Thailand to develop that land. The Industrial Estate Authority of Thailand has the right to request 30% of the profit from the sale of the land as compensation, however as the sale was at a loss the subsidiary company believes no amounts will be due. 16. PROVISION FOR GUARANTEE OF A SUBSIDIARY In 1999, Padaeng Poongsan Metals Co., Ltd. has repaid part of the principals and interest to a bank. This repayment decreased the provision for guarantee of a subsidiary of Padaeng Industry Public Co., Ltd. The Company has recognized the amount as adjustment to the provision for guarantee of a subsidiary which is shown under other income. As at March 31, 2000 and December 31, 1999 the balances of provision for guarantee of a subsidiary are as follows: CONSOLIDATED THE COMPANY ONLY March 31, December 31, March 31, December 31, 2000 1999 2000 1999 Baht Baht Baht Baht Provision for guarantee of Padaeng Poongsan Metals Co.,Ltd - - 154,357,587 174,357,587 /17 - 17 - 17. OPERATIONS OF A SUBSIDIARY COMPANY On February 19, 1999, the Board meeting of Padaeng Poongsan Metals Co., Ltd. passed the resolution to approve the discontinuation of its business and to write down c ertain assets to be realizable value in the financial statements for the year ended December 31, 1998.The valuation of subsidiarys assets was determined by an independent appraisal. The valuation included appraisal of the buildings, land improvements, machinery and equipment of the subsidiary at Lamchabang Industrial Estate. The valuation excluded land and building at Moo-Ban Panya at Chonburi Province, furniture and fitting, office equipment, inventories of consumables and spares and other stocks of scrap and work in progress. In the opinion of the valuer, the most reasonable basis for determining the fair market value of the subsidiary was to assess the estimated gross amount that the property would realize if sold on a negotiated individual basis in an as-is, where-is condition and location, either as a complete unit or on piece-meal basis. The following property, plant and equipment for sale of Padaeng Poongsan Metals Co., Ltd. as at March 31, 2000 and December 31, 1999 have been classified under assets for sale in the consolidated balance sheet : As at As at March 31, 2000 December 31, 1999 Book Value Book Value Land improvement, buildings plant, machinery and equipment 111,000,004 111,000,004 Other land and buildings 12,500,000 12,500,000 Total Baht 123,500,004 123,500,004 For the quarters ended March 31, 2000 and 1999, operations of such subsidiary are as follows: March 31, March 31, 2000 1999 Revenues Sales 9,298,400 25,161,057 Other income 1,963,146 121,211 Total revenues 11,261,546 25,282,268 Expenses Cost of sales 623,867 18,051,864 Selling and administrative expenses 8,650,752 17,633,214 Total expenses 9,274,619 35,685,078 Net income (loss) Baht 1,986,927 (10,402,810) /18 - 18 - 18. BUSINESS SEGMENT INFORMATION The business segment information for the quarter ended March 31, 2000 Domestic sales Export sales Consolidated Net sales 943,405,375 263,376,047 1,206,781,422 Cost of sales 708,616,026 228,367,457 936,983,483 Net earnings Baht 234,789,349 35,008,590 269,797,939 The business segment information for the quarter ended March 31, 1999 Domestic sales Export sales Consolidated Net sales 716,566,705 323,913,509 1,040,480,214 Cost of sales 567,671,003 292,407,878 860,078,881 Net earnings Baht 148,895,702 31,505,631 180,401,333 19. YEAR 2000 PROBLEM (Not reviewed - Not Covered by the Review Report of the Independent Certified Public Accountants) The Company and its subsidiaries had modified their computer systems to address the Year 2000 problems and evaluated their impact. To date, the Company and its subsidiaries have not experienced any material impact on their operations.