OPERATIONAL GUIDELINES ON SETTING UP AUDIT COMMITTEE OF THIP

TP-MT 019/99 (FC043/99) March 31, 1999 Subject: Operational Guidelines on Setting Up Audit Committee of THIP Attention: Director and Manager, Securities Exchange of Thailand Reference: SET letter no. Bor Jor (Circular) 4/2542 dated January 29, 1999 Pertaining to SET has announced a policy promoting listed companies in equipping with good governance system which required listed companies to set up their own Audit Committee within December 31, 1999. In order to be able in setting up the Audit Committee within the mentioned deadline, Thantawan Industry Public Co., Ltd. therefore forwards its operational plan and/or progrees in readiness preparation to the SET for acknowledgement as following details: 1. Plan on Setting Up Internal Audit Unit or Arranging for Internal Audit by Outsourcing Entity. Thantawan Industry Public Co., Ltd. had already set up an Internal Audit Unit in July 1998 for purpose of installing appropriate and efficient internal control and audit systems functioning in auditing these activities: finance, accounting, working according to regulations, and general management. The Internal Audit Unit shall report its audit findings to the Audit Committee or the Companys Vice Chairman. The operation of the Internal Audit Unit is an independent unit without supervising unit above it.The goals of internal audit activities are followings: 1. Developing operational steps in all areas for working transparency and good governance. 2. Verifying all data, information, and reports in operation to assure the management of transactions occurred in order to analyze and manage information correctly. 3. Ensuring that all activities undertaken have been following required regulations and authorization correctly. 4. Enabling full utilization of reports and documentations in monitoring and controlling operational activities appropriately. 5. Ensuring that the companys operations conform with laws, accepted accounting principles, and the announcements issued by the Internal Revenue Department. The major goals of internal audit are formulated as follows: 1. Increasing efficiency and effectiveness in internal control. 2. Increasing quality of operational process. 3. Achieving objectives formulated by the companys policies. 4. Increasing values to the organization. 5. Building up confidence to the organization. - 2 - Summary on Progressive Activities Undertaken by the Internal Audit Unit Since Beginning upto February 1999 1. Attended a seminar on Audit Committee and Techniques in Writing Up Audit Manual held by P&D training institute. 2. Attended a seminar on Internal Audit Unit and Increasing Organization Efficiency organized by SET and Association of Public Listed Companies. 3. Attended a seminar on Techniques of Internal Control Operation: Principles and Guidelines organized by Faculty of Commerce and Accountancy, Chulalongkorn University. 4. Attended a seminar on Accountants and Internal Control Functioning organized by Association of Accountants and CPA of Thailand. 5. Issued the companys directives on preparation of working manuals of each working unit and timetables for internal audit in 1999. 6. Prepared a manual on Internal Audit Procedures comprising: No. 1 Policies and plans on internal audit No. 2 Personnel qualifications functioning on internal audit No. 3 Process of audit and reporting No. 4 Purchasing and hiring audit procedures No. 5 Production and quality control audit procedures No. 6 Warehousing management audit procedures No. 7 Accounting and finance audit procedures No. 8 Contract documents and legal matters audit procedures No. 9 General affairs and personnel management audit procedures No. 10 Marketing and sales management audit procedures No. 11 Data processing and MIS audit procedures No. 12 Planning and budgeting audit procedures No. 13 Audit timetables No. 14 Forms used in evaluation, reporting, and worksheets 7. Isuued internal memorandum notifying objectives, authority, and responsibilities of the Internal Audit Unit. 8. The Internal Audit team had undertaken auditing in January 1999 on purchasing and hiring transactions and activities. 9. The Internal Audit team had prepared audit reports and submitted to the Director of Internal Audit Unit in 1999. 10.The Internal Audit team had undertaken auditing in February 1999 on production and quality control transactions and activities. 2. Guidelines on Selection and Appointment of Independent Professionals as Members of the Audit Committee Qualifications of Audit Committee Members The members of Audit Committee shall compose of Non-Executive Directors having independence and not involving with day to day management of the company who are appointed by the meeting resolution of Board of Directors. The members of Audit Committee must have all these qualifications: 1. Being independence whether directly or indirectly on finance and management of public listed companies, subsidiaries, affiliates, and not being major shareholders of public listed companies. - 3 - 2. Not having relationship whether directly or indirectly on finance and management of public listed companies, subsidiaries, affiliates, and as major shareholders of public listed companies (within the last one year period). 3. Not being close relatives and associates of Executive Directors. 4. Not being nominees appointed as agents overseeing benefits received on behalf of Directors or any major shareholders of public listed companies. Numbers and Composition of the Audit Committee Currently the Board of Directors had proposed an agenda on election of new Directors replacing those Directors completed their stipulated terms and appointment of additional Directors towards the general meeting of shareholders, session no. 1/2542 which shall be held on Friday, April 23, 1999 for consideration and approval. The election and appointment of Directors team to be undertaken above shall compose a portion of the total with 3 Independent Professional Directors specialized in accounting, mechanical engineering, and lawyer.The Audit Committee members term has been set for 2 years to insure continuity in operation. 3. Basic Guidelines on Functions, Responsibilities or Charter of the Audit Committee The Audit Committee is an independent organization which shall support and operate on behalf of the Board of Directors in verifying financial data and information proposing to shareholders and others concerned. In addition, the Audit Committee shall verify internal control system that the management and the Board of Directors had set them up including process of internal audit and communication with the companys auditor. The Board of Directors hence had given mandate to the Audit Committee having authority, roles, and operational functions as followings: 3.1 The Audit Committee must hold meetings at least 4 times a year or more as deems necessary. The Audit Committee may invite the management team or concerned parties to its meeting for providing additional information. 3.2 The Audit Committee has authority in checking and investigation on parties and matters concerned within scope of its functions and authority. It also has authority on hiring specialized professionals to help in auditing and investigation as it deems necessary. 3.3 Verifying and adjusting the Audit Committee regularly once a year for update and suitability to environments of the company. 3.4 Preparing operational reports of the Audit Committee to be forwarded to the Board of Directors. 3.5 Preparing reports showing responsibilities and operations of the Audit Committee to be reported as a part of the companys annual report. 3.6 Verifying all data and information of financial statements, conformity with laws and regulations of the companys policies and internal working procedures by working with parties concerned both inside and outside organization for the purpose of correctness and completeness according to the requirements of supervising units before forwarding to the supervising units. - 4 - 3.7 Verifying and considering with accounting auditor, management team, and Director of Internal Audit Unit on developing internal audit including computer system, deficiencies found during the year, scope of auditing, regulations, budgets, manpower and operational standards of the Internal Audit Unit and developing systems in complying with operational standards required by Association of Internal Audit of Thailand. 3.8 Consulting with accounting auditor, management team, and Director of Internal Audit Unit on significant risk levels and risk mitigation methods. 3.9 Proposing name list of auditors to the Board of Directors together with the annual auditing fees for appointment in the general shareholders meeting and the Audit Committee shall be evaluator of the accounting auditors including verifying and fixing hiring fees for services and consultancy fees in which the accounting auditors or offices are service providers. 3.10 Giving approval to appointment, dismissing, transferring, or termination of hiring the Director of Internal Audit and System Development Unit. Please be informed accordingly. Very truly yours, Mr. Pichai Tangvitetjit Mr. Phietoon Trivijitkasem Director Director