FINANCIAL STATEMENTS QUARTER 2

99/617/4306 AUDITOR'S REPORT To The Shareholders and Board of Directors Thantawan Industry Public Company Limited I have made a review of the balance sheet of Thantawan Industry Public Company Limited as at June 30, 1999 and the related statements of income, changes in shareholders' equity, retained earnings and cash flows for the three-month and six-month periods then ended, in accordance with standards established by the lnstitute of Certified Accountants and Auditors of Thailand. A review of interim financial statements consists principally of obtaining an understanding of the system for the preparation of interim financial statements, 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, I do not express such an opinion. Based on my review, I am not aware of any material modifications that should be made to the accompanying interim financial statements for them to be 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. I draw attention to Notes to the interim financial statements as follows : (a) The Company had a portion of building and land improvement which are located on a related company's land without a lease agreement. In 1998 the related company charged the Company for rental fees of Baht 24.1 million for the preceding five years since 1994 to 1998. The Company is in the process of negotiation with the related company and the amount of liabilities about rent for the said land is not yet finalized in this moment. The Company did not record this liability about rent for the said land upto the present. (see Notes 6 and 13). (b) The Company had advance payments for land and building acquisition to related company (company is same as (a)). The Shareholders did not approve subsequently to purchase the said land and building. Therefore, the Company has notified for cancellation of to buy and to sell agreement and asked for refund the advance payments. At the present, the advance payment has not been refunded and the Company is in process of negotiation with the rerated company in this moment. (see Note 7). The accompanying balance sheet as at December 31, 1998 of such company which is presented for comparative purposes, was audited by other auditors whose report dated February 19, 1999, expressed an unqualified opinion on the statements. They draw attention to the matters that I have mentioned in the fifth paragraph (a) and (b) and the operations of the Company since 1997 have been affected and may continue to be influenced for the foreseeable future by the adverse economic conditions in Thailand and the Asia Pacific Region in general. The ultimate effect that these uncertainties will have on the financial statements cannot presently be determined. The accompanying related statements of income, changes in shareholders' equity, retained earnings and cash flows for the three-month and six-month period ended June 30, 1998 of Thantawan Industry Public Company Limited which are presented for comparative purposes, were reviewed by other auditors, whose report dated August 7, 1998, stated that they were not aware of any material modifications that should be made to those interim financial statements for them to be in conformity with generally accepted accounting principles. (Mr. Pichai Dachanapirom) Certified Public Accountant Registration No. 2421 Dharmniti Auditing Company Limited Bangkok, Thailand August 6, 1999 "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED BALANCE SHEETS ASSETS In Thousand Baht As at June 30, As at December 1999 31, 1998 CURRENT ASSETS Cash in hand and at banks 159,831 71,617 Short-term investments Deposits with financial institutions (Note 11) 1,255 87,437 Investment in trading securities-Unit trust (Note 1.2) 10,270 - Trade accounts and notes receivable-net (Notes 1.3 and 3) 69,502 79,676 Inventories-net (Notes 1.4 and 4) 80,008 53,716 Other current assets Refundable value added tax 12,618 12,732 Tax card 2,328 4,322 Subsidy for export tax 2,788 2,431 Others 3,054 1,462 Total current assets 341,654 313,393 INVESTMENTS - Net (Notes 1.2, 2, 5 and 11) 8,241 8,241 PROPERTY, PLANT AND EQUIPMENT-Net (Notes 1.5, 6 and 11) 127,155 126,140 OTHER ASSETS Advance payments for assets acquisition (Notes 2 and 7) 20,500 20,500 Deposit for machine acquisition (Note 8) 18,525 - Deferred charges-net (Note 1.6) 4,524 4,402 Others 189 189 Total other assets 43,738 25,091 TOTAL ASSETS 520,788 472,865 Notes to interim financial statements form an integral part of these statements. (See auditor's report dated August 6, 1999) LIABILITIES AND SHAREHOLDERS' EQUITY In Thousand Baht As at June 30, As at December 31, 1999 1998 CURRENT LIABILITIES Bank overdraft and loans from financial institutions (Note 11) 49,961 692 Trade accounts payable - Related parties (Note 2) 514 713 - Others 75,873 54,866 Accrued expenses (Note 2) 21,069 25,144 Other current liabilities Accrued income tax 10,491 42,832 Others 4,921 2,654 Total current liabilities 162,829 126,901 SHAREHOLDERS' EQUITY Share capital Authorized share capital 10,000,000 shares Baht 10 par value 100,000 100,000 Issued and fully paid-up share capital 8,000,000 shares, Baht 10 par value 80,000 80,000 Paid-in capital Premium on share capital 136,800 136,800 Retained earnings Appropriated-legal reserve (Note 10) 10,000 7,656 Unappropriated 131,159 121,508 Total shareholders' equity 357,959 345,964 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 520,788 472,865 Notes to interim financial statements form an integral part of these statements. (See auditor's report dated August 6, 1999) "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF INCOME FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 In Thousand Baht For the three-month For the six-month period ended June 30, period ended June 30, 1999 1998 1999 1998 REVENUES Sales 158,561 241,303 315,519 462,146 Other income Subsidy for export tax income 943 1,808 2,997 4,834 Sales of scrap 1,608 4,341 3,922 8,067 Interest income 1,009 782 3,297 2,580 Gain (loss) on exchange rate (1,126) 8,581 537 (1,089) Others 468 3,065 753 3,044 Total revenues 161,463 259,880 327,025 479,582 EXPENSES Cost of sales (Note 2 ) 114,236 161,178 223,255 300,254 Selling and administrative expenses (Note 2) 32,239 40,865 67,179 75,591 Interest expense 65 391 69 1,002 Directors' remuneration - - - - Total expenses 146,540 202,434 290,503 376,847 INCOME BEFORE INCOME TAX 14,923 57,446 36,522 102,735 INCOME TAX (3,634) (17,149) (10,527) (30,748) NET INCOME 11,289 40,297 25,995 71,987 EARNINGS PER SHARE (Note 1.9) Net income (Baht) 1.41 5.04 3.25 9.00 Notes to interim financial statements form an integral part of these statements. (See auditor's report dated August 6, 1999) "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 In Thousand Baht For the three-month For the six-month period ended June 30, period ended June 30, 1999 1998 1999 1998 Ordinary share capital Beginning balance 80,000 80,000 80,000 80,000 Additions - - - - Ending balance 80,000 80,000 80,000 80,000 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 7,656 6,024 7,656 6,024 Additions 2,344 1,632 2,344 1,632 Ending balance 10,000 7,656 10,000 7,656 Unappropriated Beginning balance 136,214 70,780 121,508 39,090 Additions - net income 11,289 40,297 25,995 71,987 Deduction - Legal reserve (2,344) (1,632) (2,344) (1,632) - Dividend (14,000) (10,000) (14,000) (10,000) Ending balance 131,159 99,445 131,159 99,445 Unrealized loss on securities for investment Beginning balance - (76) - - Additions (deduction) - 76 - - Ending balance - - - - Total Shareholders' Equity 357,959 323,901 357,959 323,901 Notes to interim financial statements form an integral part of these statements. (See auditor's report dated August 6, 1999) "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF RETAINED EARNINGS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 In Thousand Baht For the three-month For the six-month period ended June 30, period ended June 30, 1999 1998 1999 1998 Unappropriated retained earnings Beginning balance 136,214 70,780 121,508 39,090 Less Appropriations of earnings for prior period Legal reserve (2,344) (1,632) (2,344) (1,632) Dividend (14,000) (10,000) (14,000) (10,000) Net income for the period 11,289 40,297 25,995 71,987 Total unappropriated retained earnings 131,159 99,445 131,159 99,445 Appropriated retained earnings Legal reserve 10,000 7,656 10,000 7,656 Total Retained Earnings 141,159 107,101 141,159 107,101 Notes to interim financial statements form an integral part of these statements. (See auditor's report dated August 6, 1999) "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 In Thousand Baht For the three-month For the six-month period ended June 30, period ended June 30, 1999 1998 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES Net income 11,289 40,297 25,995 71,987 Add (less) Adjustments to reconcile net income to net cash provided by operating activities Unrealized (gain) on investment in unit trust (270) - (270) - Allowance for doubtful accounts 184 1,106 338 1,252 Unrealized loss on exchange rate 94 - 59 - Allowance for devalue of inventories (reversal) (2,837) (1,748) (2,837) (2,217) Depreciation and amortization 4,900 5,522 9,770 11,011 Deferred charges written off 1,121 439 2,193 874 Net income from operations before changes of operating assets and liabilities 14,481 45,616 35,248 82,907 (Increase) decrease in operating assets Accounts receivable 9,444 (34,754) 9,535 (16,725) Investment in trading securities - unit trust (10,000) - (10,000) - Inventories (11,967) 26,568 (23,455) 6,182 Other current assets 7,719 22 159 (4,555) Other assets (1,098) - (2,315) (5) Increase (decrease) in operating liabilities Trade accounts payable - Related companies (621) (216) (199) (395) - Others 3,737 5,058 21,249 (8,922) Accrued expenses 1,314 3,326 (4,075) 998 Income tax payable (25,751) 3,917 (32,341) 17,512 Other current liabilities 2,865 1,370 2,267 3,118 Net cash provided by operating activities (9,877) 50,907 (3,927) 80,115 CASH FLOWS FROM INVESTING ACTIVITIES Increase in fixed deposit - 12 months (154) - (154) - Decrease in investment - 96 - 96 Proceeds from disposal of equipment - (3) - 5 Advance payment for machine acquisition 1,853 - (18,525) - Purchases of property plant and equipment (4,992) (2,853) (10,785) (6,213) Net cash used in investing activities (3,293) (2,760) (29,464) (6,112) CASH FLOWS FROM FINANCING ACTIVITIES Increase in note payable 45,000 - 45,000 - (Decrease) increase in loans from financial institutions - (6,520) - (24,483) Dividend payment (14,000) (10,000) (14,000) (10,000) Net cash Used in financing activities 31,000 (16,520) 31,000 (34,483) Net increase (decrease) in cash and cash equivalents 17,830 31,627 (2,391) 39,520 Cash and cash equivalents at beginning of period 136,141 46,903 156,362 39,010 Cash at bank pledged as collateral at beginning of period (Note 11) 1,000 1,000 1,000 1,000 Cash at bank pledged as collateral at end of period (Note 11) (1,000) (1,000) (1,000) (1,000) Cash and cash equivalents at end of period 153,971 78,530 153,971 78,530 (more)