FINANCIAL STATEMENT Q2 YEAR 1998

FINANCIAL STATEMENTS AND ACCOUNTANTS REVIEW REPORT THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED SECOND QUARTER ENDED JUNE 30, 1998 AND 1997 Accountants Review Report To the Shareholders of Thantawan Industry Public Company Limited: We have made a review of the balance sheets of Thantawan Industries Public Company Limited as at June 30, 1998 and 1997, and the related statements of income, changes in shareholders equity and retained earnings for the three-month and six-month periods then ended and cash flow for the three-month and six-month periods ended June 30, 1998, in accordance with standards established by The Institute of Certified Accountants and Auditors of Thailand. A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical review procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an examination in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We draw attention to Note 1 to the financial statements. The operations of the Company have been affected and will continue to be affected for the foreseeable future by the economic conditions in Thailand and the Asia Pacific Region in general. The ultimate effect that these uncertainties will have on the financial statements for the six-month periods ended June 30 , 1998 cannot presently be determined. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. Nirand Lilamethwat Certified Public Accountant Peat Marwick Suthee Limited Bangkok, August 7, 1998 THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED BALANCE SHEETS (UNAUDITED) (Amounts in Thousand Baht) June 30 ASSETS 1998 1997 CURRENT ASSETS Cash in hand and at banks 68,783 9,040 Short-term investments Notes receivable - finance companies (Note 5) - 27,500 Deposits with financial institutions 12,774 6,000 Trade accounts and notes receivable (Notes 4 and 6) 142,019 72,553 Less Allowance for doubtful accounts (4,321) (6,420) Trade accounts and notes receivable - net 137,698 66,133 Inventories - net (Note 4 ) 78,258 96,374 Other current assets Refundable value added tax 13,537 10,279 Subsidy for export tax 4,723 5,015 Others 5,747 5,238 Total Current Assets 321,520 225,579 INVESTMENTS (Notes 4 and 7) 8,241 247 PROPERTY, PLANT AND EQUIPMENT - Net (Note 4) 132,333 145,309 OTHER ASSETS Advance payments for assets acquisition (Note 2) 20,500 - Deferred charges - net (Note 4) 3,333 4,550 Deposits 189 30 Total Assets 486,116 375,715 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED BALANCE SHEETS (UNAUDITED) (Amounts in Thousand Baht) June 30 LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997 CURRENT LIABILITIES Bank overdraft and loans from financial institutions 11,349 57,192 Trade accounts payable (Note 2) 96,348 74,877 Other current liabilities Accrued expenses (Note 2) 47,693 10,027 Advances received from customers 5,697 3,317 Others 1,128 583 Total Current Liabilities 162,215 145,996 SHAREHOLDERS' EQUITY Share capital Authorized share capital 10,000,000 shares, Baht 10 par value 100,000 100,000 Issued and fully paid 8,000,000 shares 80,000 80,000 Paid-in capital Premium on share capital 136,800 136,800 Retained earnings Appropriated Legal reserve 7,655 6,024 Unappropriated 99,446 6,895 Total Shareholders' Equity 323,901 229,719 Total Liabilities and Shareholders' Equity 486,116 375,715 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended Six Months Ended (Amounts in Thousand Baht June 30 June 30 Except Earnings per Share) 1998 1997 1998 1997 REVENUES Sales (Note 4) 241,303 114,420 462,146 232,643 Other income Income from subsidy for export tax 1,808 2,153 4,834 2,487 Sales of scrap 4,341 2,440 8,067 4,892 Others 2,367 1,525 3,895 2,204 Total Revenues 249,819 120,538 478,942 242,226 EXPENSES Cost of sales (Note 2) 161,178 96,832 300,254 193,458 Selling and administrative expenses (Note 2) 30,804 23,442 74,951 47,171 Interest expense 391 727 1,002 1,124 Total Expenses 192,373 121,001 376,207 241,753 Income (loss) before income tax 57,446 (463) 102,735 473 Income tax expenses 17,149 (743) 30,748 39 Net income 40,297 280 71,987 434 Earnings per share (Baht) (Note 4) 5.04 0.03 9.00 0.05 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) Three Months Ended Six Months Ended (Amounts in Thousand Baht) June 30 June 30 1998 1997 1998 1997 Share capital Ordinary shares Beginning balance 80,000 80,000 80,000 80,000 Additions - - - - Ending balance 80,000 80,000 80,000 80,000 Paid-in capital Premium on share capital Beginning balance 136,800 136,800 136,800 136,800 Additions - - - - Ending balance 136,800 136,800 136,800 136,800 Retained earnings Appropriated Legal reserve Beginning balance 6,024 5,651 6,024 5,651 Additions 1,631 373 1,631 373 Ending balance 7,655 6,024 7,655 6,024 Unappropriated Beginning balance 70,780 14,988 39,090 14,834 Additions 40,297 280 71,987 434 Deductions (11,631) (8,373) (11,631) (8,373) Ending balance 99,446 6,895 99,446 6,895 Unrealized loss on securities for investment Beginning balance (76) - - - Additions 96 - - - Deductions (20) - - - Ending balance - - - - Total Shareholders' Equity 323,901 229,719 323,901 229,719 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF RETAINED EARNINGS (UNAUDITED) Three Months Ended Six Months Ended (Amounts in Thousand Baht) June 30 June 30 1998 1997 1998 1997 Unappropriated retained earnings Beginning balance 70,780 14,988 39,090 14,834 Less Appropriations of earnings for prior period Legal reserve (1,631) (373) (1,631) (373) Dividend (10,000) (8,000) (10,000) (8,000) Net income for the period 40,297 280 71,987 434 Total Unappropriated Retained Earnings 99,446 6,895 99,446 6,895 Appropriated retained earnings Legal reserve 7,655 6,024 7,655 6,024 Total Retained Earnings 107,101 12,919 107,101 12,919 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOW FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1998 (UNAUDITED) For the Period (Amounts in Thousand Baht) Three Months Six Months CASH FLOWS FROM OPERATING ACTIVITIES Net income 40,297 71,987 Add (Less) Adjustments to reconcile net income to net cash provided by operating activities Allowance for doubtful accounts 1,106 1,252 Allowance for devalue of inventories (1,748) (2,217) Depreciation and amortization 5,522 11,011 Deferred charges written off 439 874 Net income from operations before changes of operating assets and liabilities 45,616 82,907 (INCREASE) DECREASE IN OPERATING ASSETS Accounts receivable (34,754) (16,725) Inventories 26,568 6,182 Other current assets 22 (4,555) Other assets - (5) INCREASE (DECREASE) IN OPERATING LIABILITIES Accounts payable 4,842 (9,317) Accrued expenses 3,326 998 Accrued company income tax 3,917 17,512 Other current liabilities 1,370 3,118 Net Cash Provided by Operating Activities 50,907 80,115 CASH FLOWS FROM INVESTING ACTIVITIES Decrease in investment 96 96 Carrying value of tools and equipment disposed (3) 5 Purchase of property, plant and equipment (2,853) (6,213) Net Cash used in Investing Activities (2,760) (6,112) See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOW FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1998 (UNAUDITED) For the Period (Amounts in Thousand Baht) Three Months Six Months CASH FLOWS FROM FINANCING ACTIVITIES Decrease in loans from financial institutions (6,520) (24,483) Dividend payment (10,000) (10,000) Net Cash used in Financing Activities (16,520) (34,483) NET INCREASE IN CASH AND CASH EQUIVALENTS 31,627 39,520 CASH AND CASH EQUIVALENT AT BEGINNING OF PERIOD 47,903 40,010 CASH AT BANK PLEDGED AS COLLATERAL AT BEGINNING OF PERIOD 1,000 1,000 CASH AT BANK PLEDGED AS COLLATERAL AT END OF PERIOD (Note 3) (1,000) (1,000) CASH AND CASH EQUIVALENT AT END OF PERIOD 79,530 79,530 SUPPLEMENTARY INFORMATION Cash payment during the period Interest expense 452 1,382 Income tax 13,232 13,236 See notes to financial statements THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 AND 1997 (UNAUDITED) NOTE 1 - ECONOMIC ENVIRONMENT AND BASIS OF PRESENTATION As from the second half of 1997 up to present, certain Asia Pacific countries, including Thailand, are experiencing economic difficulties relating to currency devaluation and slowdown in growth. Accordingly, the Thai government sought assistance from the International Monetary Fund to alleviate the economic crisis and improve the economy over time. The financial statements for the period ended June 30, 1998 reflect the assessment of the possible impact of this economic situation on the financial position of the Company. In addition, the ultimate effect on the entitys financial position of these uncertainties cannot presently be determined. The financial statements are prepared in compliance with Commerce Ministerial Regulation No. 7 (B.E. 2539) dated October 25, 1996. NOTE 2 - TRANSACTIONS WITH RELATED PARTIES The Company has significant transactions with related parties. The financial statements reflect the effect of these transactions on the basis determined by the companies concerned. Significant transactions occurred between the Company and related parties during 1998 and 1997 as follows: (Amounts in Thousand Baht) 1998 1997 Advance payments for assets acquisition paid to related party 20,500 - Purchase made by the Company to related party 2,617 2,032 Rental and service expenses paid to related parties 1,745 1,721 At June 30, 1998 the outstanding balances with related parties are as follows: (Amounts in Thousand Baht) 1998 1997 Account payable - related party 318 351 Accrued rental expenses - related parties 1,657 279 NOTE 3 - BASIS FOR PREPARATION OF THE CASH FLOWS STATEMENT Cash and Cash Equivalents Cash and cash equivalents shown in the cash flows statement as at June 30, 1998 consisted of the following: (Amounts in Thousand Baht) Cash in hand and at banks 68,783 Add Deposits with financial institutions 12,774 Less Bank overdraft (1,027) Cash at bank pledged as collateral (1,000) Cash and Cash Equivalents 79,530 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 receivables. Inventories Inventories are stated at the lower of cost or net realizable value determined on the average method. Investments 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 shareholders 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. 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 equipment. Deferred Charges Deferred charges represent development expenditures for new products in the amount of Baht 2.42 million and are amortized over a period of 5 years from the date revenues from sales of those products are first earned. In addition, deferred charges include expenditures incurred in obtaining a Stock Exchange of Thailand listing in the amount of Baht 6.42 million which will be amortized over a period of 5 years from the listing date. Revenues Recognition Revenues from sales of goods are recognized at the date of delivery to customers. 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. 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. NOTE 5 - Investment in Notes Receivable - Finance Companies At June 30, 1997 notes recievabble - finance companies in the amount of Baht 27.5 million represent promissory notes of two finance companies which cease the operations to the announcement of the Ministry of Finance dated August 5, 1997. NOTE 6 - OVERDUED ACCOUNTS RECEIVABLE At June 30, 1998, the Company has overdued accounts receivable as follows: (Amounts in Thousand Baht) Over 3 months to 6 months 4,889 Over 6 months to 12 months 1,000 Over 12 months 5,808 Total 11,697 The Company has provided an allowance for doubtful accounts in the amount of Baht 4.3 million. NOTE 7 - INVESTMENT At June 30, 1998, the Company had investments in equity security issued by the financial institutions that have been controlled, writtten down and recapitalized in the amount of Baht 96,512.50 which the company has provided an allowance for diminution in value of Baht 96,444.25. NOTE 8 - SEGMENT INFORMATION Thantawan Industry Public Company Limited manufactures plastic products which devided into three main products: straw products, HD.PE bag product and LD.PE bag product. Product purchased for sales are groups as others. The results of its operations for the six-month period ended June 30, 1998 are summarized as follows: (Amounts in Thousand Baht) HD.PE bag LD.PE bag Straw Products Products Products Others Total Sales - export 103,448 128,239 211,499 6,354 449,540 Sales - local 8,727 2,914 812 153 12,606 Total 112,175 131,153 212,311 6,507 462,146 Operating profit 38,504 23,404 64,485 1,552 127,945 Other income 2,580 General corporate expense (26,788) Interest expense (1,002) Income tax (30,748) Net income 71,987 As at June 30, 1998 property, plant, and equipment net of accumulated depreciation and amortization are summarized as follows: (Amounts in Thousand Baht) HD. PE bag LD. PE bag Straw Products Products Products Total Assets used by products 19,056 42,663 57,617 119,336 General assets used 12,997 Total property, plant and equipment - net 132,333