Total investment in related companies 340,840,972 582,090,972 372,035,797 526,069,032 - - /11 - 11 - 10.2 For the year ended December 31, 1998, the Company has written off investment in Padaeng Industry (Laos) Co., Ltd. because the management believe that there is a decline, other than temporary, in the value of such investment. 10.3 On January 8, 1999, Padaeng Siam Industry Co, Ltd. an associated company was registered to wind up and was liquidated on July 1, 1999. As at December 31, 1999, the Companys financial statements do not include equity in the undistributed profit (loss) of Padaeng Siam Industry Co., Ltd. For the year ended December 31, 1998, the equity in the undistributed net income (loss) of Padaeng Siam Industry Co., Ltd. included in the consolidated financial statements has been based on unaudit financial statements. 10.4 At December 31, 1999 the Companys investment in Puthep Company Limited was Baht 162 million (1998 : Baht 162 million). The financial statements for 1999 and 1998 do not include any allowance for diminution of the project (see Note 13). 10.5 On August 31, 1999 an extraordinary meeting of Padaeng Properties Co., Ltd., a subsidiary, resolved to register a decrease in captial from Baht 320 million to Baht 80 million. This resolution was registered with the Registrar of Partnerships and Companies on September 8, 1999. On December 16, 1999, Padaeng Properties Co., Ltd. distributed capital of Baht 162.15 million after offsetting accumulated losses of Baht 77.87 million against the total decrease in share capital of Baht 240 million. /12 10.4 - 12 - 11. OTHER SECURITIES COMPANYS NAMES TYPE OF PAID-UP OWNERSHIP INVESTMENT INVESTMENT BUSINESS CAPITAL (%) COST METHOD EQUITY METHOD DIVIDENDED 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 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 Plc. Produce and 4,744,561,390 2.65 - 125,737,100 - 125,737,100 - - distribute fertilizer Less Unrealized loss on marketable security non-current - (85,501,228) - (85,501,228) - - - 40,235,872 - 40,235,872 - - Total other securities 14,451,626 55,705,698 14,451,626 55,705,698 - - 11.1 For the year ended December 31, 1999 the Company sold the security which is the investment in ordinary shares of National Fertilizer Plc. of 12,573,710 shares, amounting to Baht 55.85 million. The Company incurred realized loss on disposal of this investment amounting to Baht 69.89 million. 11.2 On April 21, 1999 the Company sold the security which is the investment in ordinary shares of Asia Investment (1995) Co., Ltd. of 400 shares, amounting to Baht 400,538. The Company incurred realized loss on disposal of this investment amounting to Baht 617,662. /1 - 13 - 12. PROPERTY, PLANT AND EQUIPMENT - NET Property, plant and equipment - net consist of the following: CONSOLIDATED Balance as at Additions Disposals Balance as at December 31, 1998 December 31, 1999 Land 261,024,099 - 10,100,000 250,924,099 Land improvement 170,146,237 390,000 4,578,989 165,957,248 Sub-total 431,170,336 390,000 14,678,989 416,881,347 Buildings 1,640,434,665 7,249,776 172,627,674 1,475,056,767 Building improvement 4,081,870 - 4,081,870 - Sub-total 1,644,516,535 7,249,776 176,709,544 1,475,056,767 Machinery 3,860,074,996 76,752,036 373,473,775 3,563,353,257 Heavy equipment 131,343,792 8,475,000 16,859,851 122,958,941 Sub total 3,991,418,788 85,227,036 390,333,626 3,686,312,198 Equipment, furniture and fixture 312,558,141 25,525,042 30,795,960 307,287,223 Vehicles 34,927,182 3,790,253 3,913,185 34,804,250 Mine improvement and development 2,415,573 - - 2,415,573 Other structure 295,052,720 - 71,355,824 223,696,896 Building and equipment under construction 59,560,444 56,779,860 94,118,849 22,221,455 Total property, plant and equipment 6,771,619,719 178,961,967 781,905,977 6,168,675,709 Accumulated depreciation: - Land improvement 110,525,510 10,080,657 1,578,989 119,027,178 - Buildings 612,427,651 68,787,454 100,198,270 581,016,835 - Building improvement 4,081,870 - 4,081,870 - Sub-total 616,509,521 68,787,454 104,280,140 581,016,835 - Machinery 2,032,003,823 217,406,853 334,524,974 1,914,885,702 - Heavy equipment 122,811,821 3,313,300 16,854,300 109,270,821 Sub-total 2,154,815,644 220,720,153 351,379,274 2,024,156,523 - Equipment furniture and fixture 266,214,618 20,442,278 30,287,565 256,369,331 - Vehicles 25,941,730 3,520,451 3,908,638 25,553,543 - Mine improvement and development 2,264,600 150,973 - 2,415,573 - Other structure 128,998,915 62,845,915 35,128,028 156,716,802 Total accumulated depreciation 3,305,270,538 386,547,881 526,562,634 3,165,255,785 Property, Plant and Equipment - net 3,466,349,181 3,003,419,924 Depreciation for the year 413,706,774 386,547,881 /14 - 14 - THE COMPANY ONLY Balance as at Additions Disposals Balance as at December 31, 1998 December 31, 1999 Land 254,434,036 - - 254,434,036 Land improvement 165,567,247 390,000 - 165,957,247 Sub-total 420,001,283 390,000 - 420,391,283 Building 1,467,925,991 7,249,776 119,000 1,475,056,767 Machinery 3,484,182,776 76,752,036 339,075 3,560,595,737 Heavy Equipment 116,132,512 8,475,000 1,648,571 122,958,941 Sub-total 3,600,315,288 85,227,036 1,987,646 3,683,554,678 Equipment, furniture and fixture 285,621,257 25,414,851 5,005,942 306,030,166 Vehicles 29,795,440 3,516,937 338,150 32,974,227 Mine improvement and development 2,415,573 - - 2,415,573 Other structure 295,052,720 - 71,355,824 223,696,896 Building and Equipment under construction 59,560,444 56,779,860 94,118,849 22,221,455 Total property, plant and equipment 6,160,687,996 178,578,460 172,925,411 6,166,341,045 Accumulated depreciation: - Land improvement 108,946,521 10,080,657 - 119,027,178 - Buildings 512,318,977 68,787,454 89,596 581,016,835 - Machinery 1,697,558,503 217,406,853 79,654 1,914,885,702 - Heavy equipment 107,600,541 3,313,300 1,643,020 109,270,821 Sub-total 1,805,159,044 220,720,153 1,722,674 2,024,156,523 - Equipment furniture and fixtures 239,781,265 20,223,471 4,501,605 255,503,132 - Vehicles 21,700,893 3,176,971 334,605 24,543,259 - Mine improvement and development 2,264,600 150,973 - 2,415,573 - Other structure 128,998,915 62,845,915 35,128,028 156,716,802 Total accumulated depreciation 2,819,170,215 385,985,594 41,776,508 3,163,379,302 Property, Plant and Equipment - net 3,341,517,781 3,002,961,743 Depreciation for the year 330,881,970 385,985,595 The Company mortgaged its land, plant, structures and machinery at Rayong and Tak as collateral for long-term loan (see Note 16.1). The value of certain items of property, plant and equipment of subsidiaries and associated companies in the 1998 consolidated accounts above include loss from diminution (see Note 24). /15 - 15 - 13. OTHER ASSETS Other assets consist of the following: CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Deposits and installment payments for condominium units 74,932,723 74,932,723 - - Less Allowance for doubtful accounts of deposits and installment payment for condominium units (74,932,723) (74,932,723) - - - - - - Deposits 6,513,439 6,807,160 3,631,103 3,592,233 Special prospect license fee 16,986,510 16,986,510 - - Exploration expenditures 145,538,980 145,113,530 - - Compensation for concession application withdrawal of a company 40,900,000 - 40,900,000 - Other 39,427,401 37,534,338 38,524,532 37,001,299 249,366,330 206,441,538 83,055,635 40,593,532 A provision of Baht 75 million has been provided in respect of deposit and installment payments for condominium units whose construction was suspended due to unfavorable economic conditions. In 1999, the Company paid Baht 40.9 million as compensation to another company for the access rights to land adjacent to the Mae Sod mining lease. As at December 31, 1999 the Company had submitted its concession application to the Department of Mineral Resources for approval, however at the date of this report, the outcome was not known. 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 financial statements for the years ended December 31, 1999 and 1998 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. /16 - 16 - The following deferred expenditure was written off during the year: CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Capitalised exploration expenditure 701,269 93,572,375 701,269 31,302,794 Other deferred costs - 11,995,058 - 11,995,058 Capitalised financing expenditure of former arrangements - 12,870,152 - 12,870,152 Total 701,269 118,437,585 701,269 56,168,004 14. BANK OVERDRAFTS AND SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONS CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Bank overdrafts 16,582,454 27,993,460 290,438 - Promissory notes 20,000,000 30,098,212 - - Trust receipts 215,074,720 218,223,401 215,074,720 218,223,401 251,657,174 276,315,073 215,365,158 218,223,401 Short-term borrowings are unsecured. 15. TRADE ACCOUNTS CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Trade accounts payable 187,563,936 61,444,585 273,641,132 146,334,385 187,563,936 61,444,585 273,641,132 146,334,385 16. LONG-TERM LOANS CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Long-term loans - The Company 2,531,553,627 2,773,027,131 2,531,553,627 2,773,027,131 - A subsidiary 175,000,000 252,500,000 - - 2,706,553,627 3,025,527,131 2,531,553,627 2,773,027,131 Less Current portion of long-term loans (1,757,400,278) (1,527,899,675) (1,582,400,278) (1,275,399,675) 949,153,349 1,497,627,456 949,153,349 1,497,627,456 /17 - 17 - 16.1 On June 25, 1999, the Company entered into the Override Amendment Agreement with its lenders to amend the Tranche A principal repayment following the decision of February 24, 1999 by Western Metals Ltd to rescind the acquisition of the remaining 75.1 million shares for Baht 1,051 million. 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. 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. On July 19, 1999, the Company entered into an agreement to appoint a financial institution as financial adviser in relation to seeking potential investors. Under such agreement, the Company shall pay the financial institution fees specified in the agreement. 16.2 Financing Arrangements Available CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Bank overdrafts 100,000,000 115,000,000 100,000,000 100,000,000 Promissory notes 20,000,000 120,000,000 - 100,000,000 Trust receipts 455,000,000 455,000,000 455,000,000 455,000,000 Bank loan facilities : Padaeng Industry Public Co., Ltd. 3,185,592,155 3,144,212,750 3,185,592,155 3,144,212,750 Padaeng Poongsan Metals Co., Ltd. 470,000,000 470,000,000 - - 4,230,592,155 4,304,212,750 3,740,592,155 3,799,212,750 1999 loan facility includes USD 50,475,000 converted at Baht 37.7098 (1998 USD 50,475,000 converted at Baht 36.89). /18 - 18 - The following has been drawn under the above facilities at the balance sheet date. CONSOLIDATED THE COMPANY ONLY 1999 1998 1999 1998 Baht Baht Baht Baht Bank overdrafts 16,582,454 27,993,460 290,438 - Promissory note 20,000,000 30,098,212 - - Trust receipt 215,074,720 218,223,401 215,074,720 218,223,401 Bank loan facilities Padaeng Industry Public Co., Ltd. 1,513,747,452 2,773,027,131 1,513,747,452 2,773,027,131 Padaeng Poongsan Metals Co., Ltd. - 252,500,000 - - 1,765,404,626 3,301,842,204 1,729,112,610 2,991,250,532 16.3 A subsidiary companys long-term loans Padaeng Poongsan Metals Co., Ltd. has two syndicated credit facilities, the first amounting to Baht 320 million with local banks and financial institutions and the second facility of Baht 150 million with local banks. As at December 31, 1999 amounts outstanding on the first facility amounted to Baht 100 million (1998 : Baht 140 million). The Company has guaranteed the loan. Repayments are made in equal tranches of Baht 20 million and repayment will be completed in 2002. As at December 31, 1999 amounts outstanding on the second facility were Baht 75 million (1998 : 112.5 Baht). Repayment of this facility will be in 2001. The significant conditions for the two loan agreements include: - Borrowers properties must not be mortgaged or pledged with other creditors. - The Companys debt to equity ratio must be as follows: - total availment of Baht 320 million, the Companys debt to equity ratio must not exceed 4:1 - total availment of Baht 150 million, the Companys debt to equity ratio must not exceed 2:1 - Promptly notifies the lender of any negotiations with any of its creditors for the restructuring or rescheduling or any of its indebtedness. - If the borrower will reduce its share capital outstanding or make any significant sales or transfer of assets, the borrower must receive the permission in writing from the lenders. /19 - 19 - As at December 31, 1999 and 1998 Padaeng Poongsan Metals Co., Ltd. had not complied with the conditions of the loans agreements as follows: - At December 31, 1999 Baht 11.6 million (1998 : Baht 11.6 million) was used as collateral for the issuance of letters of guarantee (Note 4.1). - As at December 31, 1999 and 1998 land and buildings were mortgaged as collateral against an extension of payments for the current portion of long-tem loans with lenders of the second facility of Baht 150 million. This contravened conditions of the first loan facility of Baht 320 million prohibiting the borrower from pledging property with other creditors. - As at December 31, 1999 Padaeng Poongsan Metals Co., Ltds debt to equity ratio was 1.09:1 (1998 1.13:1) The penalty for non-compliance with the terms of the loans is additional interest changes or in the event that default cannot be resolved, termination by the lenders. As a result of non compliance, the long-tem loans of Padaeng Poongsan Metals Co., Ltd. have been reclassified as Current Liabilities. 17. 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 Companys financial instruments both on- balance sheet and off-balance sheet. 17.1 Significant Assets and Liabilities in Foreign Currencies Assets and liabilities of the Company and subsidiaries in foreign currencies are as follows: 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 and advances from related companies 2,859,097 107,815,968 - - /20 - 20 - As at December 31, 1998 : Term of CONSOLIDATED THE COMPANY ONLY receipt/ payment AMOUNT AMOUNT days USD Baht USD Baht Cash at banks - 623,762 22,826,487 618,439 22,631,664 Accounts receivable-foreign 30 1,838,217 67,269,191 1,838,217 67,269,191 Accounts payable 30-60 6,464,753 238,446,560 6,464,753 238,496,560 Accrued interest expenses 180 850,520 31,375,689 250,714 9,248,825 Long-term loans 180 47,376,096 1,747,704,210 44,517,000 1,642,232,130 Accrued Income 54,761 2,003,968 54,761 2,003,968 Foreign currency amounts are translated at the exchange rate as at December 31, 1999 and 1998 respectively. 17.2 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. As at December 31, 1998, the deferred hedging cost arising under these contracts amounted to Baht 7.5 million. The following summarises the contractual amounts of the forward exchange contracts as at December 31, 1998. CONSOLIDATED THE COMPANY ONLY (more)