ANNUAL FINANCIAL STATEMENTS

2000/72/4300 REPORT OF THE AUDITOR To The Shareholders and Board of Directors of Thantawan Industry Public Company Limited I have audited the balance sheet of Thantawan Industry Public Company Limited as at December 31, 1999 and the related statements of income, changes in shareholders' equity, retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company's management as to their correctness and completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits. The financial statements for the year ended December 31, 1998 of such company which is presented for comparative purposes, were audited by other auditors, whose report dated February 19, 1999, expressed an unqualified opinion on the statements and without qualifying their opinion, they draw attention that at December 31, 1998 the Company had buildings and improvements at cost of Baht 8,474,659.75 (book value of Baht 7,694,504.34) which are located on a related company's land without a lease agreement. In 1998, the related company charged the Company Baht 24.1 million for rental fees for the preceding five years from 1994 to 1998. The Company has not recorded this liability in the financial statements because there is no agreement or other supporting evidence. In addition, they draw attention that the Company was attempting to purchase the land and building from the related company. Advance payments for asset acquisitions at December 31, 1998 represent advance payments according to an agreement to purchase the land and building from the related company in the amount of Baht 20.5 million. The Company has given notice of cancellation of the agreement and requested a refund of the advance payment since the Extraordinary Meetings of Shareholders did not approve the purchase plan. At present, the advance payment has not been refunded and the Company is in the process of negotiation with the related company. However there is no evidence to specify the timing for reaching an agreement or receiving a refund of the advance payment. The 1998 financial statements do not include any adjustments that might result from the outcome of this uncertainty. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Thantawan Industry Public Company Limited as at December 31, 1999, and its results of its operations, its changes in shareholders' equity and its cash flows for the year then ended in conformity with generally accepted accounting principles. In the second quarter of 1999, the company had changed the method of valuation of investment in marketable equity/debt securities from the lower of aggregate cost or market to the fair value, in order to conform with the application of new accounting standard. Without qualifying my opinion, I draw attention to Note 7 to the financial statements, the Company is seeking approval from shareholders of the Company for transactions with a related company on the payment of compensation to the use of land, the entering into lease agreements covering land with building and 4 land plots, The keeping of advance payment on the purchase of land with building as stipulated in the agreement dated December 29, 1997, and the purchase of land with building and 4 land plots at the amount at Baht 85 million. The Company set date of the extraordinary meeting of shareholders on February 28, 2000, in order to comply with the announcement of the Stock Exchange of Thailand Concerning Criteria, Method, and Disclosure of Cross Related Transaction of Listed Companies. (Mr. Pichai Dachanapirom) Certified Public Accountant Registration No. 2421 Dharmniti Auditing Company Limited Bangkok, Thailand February 11, 2000 THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED BALANCE SHEETS AS AT DECEMBER 31, 1999 AND 1998 ASSETS Baht 1999 1998 CURRENT ASSETS Cash in hand and at banks 114,337,825 71,616,787 Short-term investments Deposits with financial institutions (Note 12) 9,347,888 87,437,115 Trade accounts and notes receivable, net (Notes 1.3 and 3) 99,386,726 79,676,343 Inventories-net (Notes 1.4 and 4) 85,571,364 53,715,709 Other current assets Refundable value added tax 8,992,437 12,731,609 Tax card 1,535,123 4,321,711 Subsidy for export tax 4,027,291 2,430,623 Others 1,690,467 1,463,127 Total current assets 324,889,121 313,393,024 INVESTMENTS, Net (Notes 1.2, 5 and 12) 150,000 8,240,661 PROPERTY, PLANT AND EQUIPMENT, Net (Notes 1.5, 6 and 12) 126,854,662 126,140,151 OTHER ASSETS Advance payments for assets acquisition (Notes 2 and 7) 20,500,000 20,500,000 Deposit for machine acquisition (Note 8) 18,525,000 - Deferred charges, net (Note 1.6) 4,124,366 4,402,194 Others 292,804 189,427 Total other assets 43,442,170 25,091,621 TOTAL ASSETS 495,335,953 472,865,457 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdrafts (Notes 9 and 12) 2,204,442 691,734 Trade accounts payable - Related parties (Note 2) 537,226 712,976 - Others 93,103,818 54,865,608 Accrued expenses (Note 2) 24,497,197 25,143,956 Other current liabilities Accrued income tax 10,962,832 42,832,560 Others 4,317,222 2,654,562 Total current liabilities 135,622,737 126,901,396 SHAREHOLDERS' EQUITY Share capital Authorized share capital 10,000,000 shares Baht 10 par value 100,000,000 100,000,000 Issued and fully paid-up share capital 8,000,000 shares, Baht 10 par value 80,000,000 80,000,000 Paid-in capital Premium on share capital 136,800,000 136,800,000 Retained earnings Appropriated - legal reserve (Note 11) 10,000,000 7,655,732 Unappropriated 132,913,216 121,508,329 Total shareholders' equity 359,713,216 345,964,061 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 495,335,953 472,865,457 Notes to financial statements form an integral part of these statements. (See auditor's report dated February 11, 2000) THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Baht 1999 1998 REVENUES Sales 665,420,301 825,585,193 Other income Subsidy for export tax income 5,821,700 5,273,917 Sales of scrap 8,256,467 15,138,060 Interest income 5,105,997 8,667,348 Gain on exchange rate 611,384 - Reverse of allowance for devalue of inventories 3,166,630 - Reverse of allowance for doubtful accounts 1,005,455 - Others 1,975,402 1,675,218 Total revenues 691,363,336 856,339,736 EXPENSES Cost of sales (Note 2 ) 498,898,047 551,550,126 Selling and administrative expenses (Note 2) 153,381,811 154,107,759 Interest expense 305,938 1,106,540 Loss on exchange rate - 8,370,898 Provision for devalue of inventories - 3,582,254 Provision for doubtful accounts - 648,638 Directors' remuneration - - Total expenses 652,585,796 719,366,215 INCOME BEFORE INCOME TAX 38,777,540 136,973,521 INCOME TAX (11,028,385) (42,924,124) NET INCOME 27,749,155 94,049,397 EARNINGS PER SHARE (Note 1.9) Net income 3.47 11.76 Notes to financial statements form an integral part of these statements. (See auditor's report dated February 11, 2000) THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Baht 1999 1998 Ordinary share capital Beginning balance 80,000,000 80,000,000 Additions - - Ending balance 80,000,000 80,000,000 Premium on share capital Beginning balance 136,800,000 136,800,000 Additions - - Ending balance 136,800,000 136,800,000 Retained earnings Appropriated Legal reserve Beginning balance 7,655,732 6,024,212 Additions 2,344,268 1,631,520 Ending balance 10,000,000 7,655,732 Unappropriated Beginning balance 121,508,329 39,090,452 Additions - net income 27,749,155 94,049,397 Deduction - Legal reserve (2,344,268) (1,631,520) - Dividend (14,000,000) (10,000,000) Ending balance 132,913,216 121,508,329 Total Shareholders' Equity 359,713,216 345,964,061 Notes to financial statements form an integral part of these statements. (See auditor's report dated February 11, 2000) THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Baht 1999 1998 Unappropriated retained earnings Beginning balance 121,508,329 39,090,452 Less Appropriations of earnings for prior year Legal reserve (2,344,268) (1,631,520) Dividend (14,000,000) (10,000,000) Net income for the year 27,749,155 94,049,397 Total unappropriated retained earnings 132,913,216 121,508,329 Appropriated retained earnings Legal reserve 10,000,000 7,655,732 Total Retained Earnings 142,913,216 129,164,061 Notes to financial statements form an integral part of these statements. (See auditor's report dated February 11, 2000) THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Baht 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES Net income 27,749,155 94,049,397 Add (less) Adjustments to reconcile net income to net cash provided by operating activities Loss on disposal of equipment 5,154 3,378 Allowance for doubtful accounts (reversal) (1,005,455) 648,638 Unrealized loss on exchange rate 639,960 - Allowance for devalue of inventories (reversal) (3,166,630) 3,582,254 Allowance for diminution in value of investment - 96,444 Depreciation 19,369,775 19,344,131 Deferred charges written off 4,617,461 5,869,791 Net income from operations before changes of operating assets and liabilities 48,209,420 123,594,033 (Increase) decrease in operating assets Accounts receivable (20,975,975) 41,900,245 Inventories (28,689,025) 24,925,037 Other current assets 4,701,753 (1,496,144) Other assets (4,443,010) (4,800) Increase (decrease) in operating liabilities Trade accounts payable - Related companies (175,750) 281,559 - Others 39,869,297 (50,367,544) Accrued expenses (646,759) 9,177,397 Income tax payable (31,869,728) 29,616,450 Other current liabilities 1,662,660 (1,052,117) Net cash provided by operating activities 7,642,883 176,574,116 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of equipment 8,738 455 Advance payment for machine acquisition (18,525,000) - Purchases of fixed assets (20,098,179) (14,417,256) Net cash used in investing activities (38,614,441) (14,416,801) CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) increase in loans from financial institutions - (34,804,692) Dividend payment (14,000,000) (10,000,000) Net cash Used in financing activities (14,000,000) (44,804,692) Net increase (decrease) in cash and cash equivalents (44,971,558) 117,352,623 Cash and cash equivalents at beginning of period 157,362,168 40,009,545 Cash at bank pledged as collateral at beginning of period (Note 12) 1,000,000 1,000,000 Cash at bank pledged as collateral at end of period (Note 12) (1,153,450) (1,000,000) Cash and cash equivalents at end of period 112,237,160 157,362,168 SUPPLEMENTARY INFORMATION 1) Cash and cash equivalents consist of Cash in hand and at banks 114,337,825 71,616,787 Add Deposits with financial institutions 1,257,227 87,437,115 Less Bank overdrafts (2,204,442) (691,734) Cash at banks pledged as collateral (1,153,450) (1,000,000) Cash and cash equivalents 112,237,160 157,362,168 2) Cash payment during the period Interest expense 305,938 1,568,237 Income tax 31,869,633 13,307,674 3) In 1999, Company had reclassified investment in negotiable certificate of deposit of Baht 8.09 million from long-term investment to be short-term investment since it will due within one year. Notes to financial statements form an integral part of these statements. (See auditor's report dated February 11, 2000) THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS DECEMBR 31, 1999 AND 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.1 Revenues recognition Revenues from sales of goods are recognized at the date of delivery to customers. 1.2 Investments Since the second quarter of 1999, the Company's investment is stated as follows: - Short-term investment in equity/debt securities classified as trading securities is stated at the fair value. - Long-term investment in equity securities, non-marketable securities being held to be general investment is stated at cost. - Investment in long-term note receivable from finance company is stated at cost. - The cost of short-term and long-term investment which are sold during the period, are determined by weighted average. Before the second quarter of 1999, investments in listed securities are stated at the lower of aggregate cost or market. Allowance for reduction in market price due to temporary market fluctuations, if any, is treated as deduction from the shareholder's equity. Losses from permanent decline in value of investment are reflected in the statement of income. Investments in other securities and long-term note receivable-financial institution are stated at cost. 1.3 Trade accounts and notes receivable Trade accounts and notes receivable are shown net of allowance for doubtful accounts which is an estimate of those amounts which may prove to be uncollectible based on historical collection experience and a review of the current status of existing receivable. 1.4 Inventories Inventories are stated at the lower of average cost or net realizable value. 1.5 Property plant and equipment Property plant and equipment are stated at cost net of accumulated depreciation. Depreciation and amortization are computed by the straight-line method at the rates of 5% for buildings and 10-20% for equipments. 1.6 Deferred charges Mould is amortized to expense over a period of 2 years. 1.7 Accounts in foreign currencies Accounts in foreign currencies occurred during the period are translated into Baht at the rates of exchange prevailing on the date of the transactions. Assets and liabilities in foreign currencies at the end of the period are translated into Baht at the rates of exchange prevailing at that date. Gain or loss on translation is included in the statement of income. 1.8 Cash and cash equivalents Cash and cash equivalents consist of cash on hand and at bank and short-term investment in promissory notes which are not due over 3 months deducted by bank overdrafts and cash at bank pledged as collateral. 1.9 Earnings per share Earnings per share is computed by dividing net income for the period by the number of shares outstanding at the end of the period. 2. TRANSACTIONS WITH RELATED PARTIES The Company has transactions with related parties. The financial statements reflect the effect of these transactions on the basis determined by the companies concerned under their policy over sale/purchase of goods which are stated that they will be compared with market price or fair value. Significant transactions occurred between the company and related parties for the years ended December 31, 1999 and 1998 as follows : In Thousand Baht 1999 1998 Purchase made by the company to related parties 7,300 6,051 Rental, land compensation fee and service expenses paid to related parties 9,972 3,463 At December 31, 1999 and 1998 the outstanding balances with related parties are as follows : In Thousand Baht 1999 1998 Advance payments for assets acquisition paid to related party - Sunflower Enterprise Co.,Ltd. 20,500 20,500 Accounts payable - related parties Flower International Company Limited 537 713 Accrued rental and service fee expenses Sunflower Enterprise Co.,Ltd. 4 7 Sun Tower Co.,Ltd. 7 9 3. TRADE ACCOUNTS AND NOTES RECEIVABLE Trade accounts and notes receivable consisted of : In Thousand Baht 1999 1998 Domestic accounts receivable 10,480 8,965 Foreign accounts receivable 88,669 73,071 Domestic post-dated cheques 576 1,357 Foreign post-dated cheques 2,373 - 102,098 83,393 Less Allowance for doubtful accounts (2,711) (3,717) Trade accounts and notes receivable-net 99,387 79,676 As at December 31, 1999 and 1998, the company has overdued accounts receivable of 12 and 11 accounts, respectively which are aging as follows : In Thousand Baht 1999 1998 Over 3 months to 6 months 465 1,379 Over 6 months to 12 months - 1,704 Over 12 months 2,732 2,980 Total 3,197 6,063 4. INVENTORIES Inventories consisted of : In Thousand Baht 1999 1998 Finished goods 19,900 15,963 Work in process 19,212 14,461 Raw materials 35,543 22,483 Supplies 13,549 6,609 Total 88,204 59,516 Less Allowance for devalue of inventories (2,633) (5,800) Inventories, net 85,571 53,716 5. INVESTMENTS Investments consisted of : In Thousand Baht Type of Business 1999 1998 Thantawan Marketing Co.,Ltd. Holding company 150 150 First Bangkok City Bank Public Company Limited Banking - - Total General investment in equity securities 150 150 Negotiable certificate of deposit - 8,091 Total Investments 150 8,241 At December 31, 1999 and 1998, the Company had investments in equity security at cost of Baht 96,512.50 issued by the ailing financial institutions that have been supervisory (more)