FINANCIAL STATEMENTS QUARTER 2

SUPPLEMENTAY INFORMATION 1) Cash and cash equivalents consist of Cash in hand and at banks 159,831 68,783 159,831 68,783 Add Deposits with financial institutions 101 11,774 101 11,774 Less Bank overdrafts (4,961) (1,027) (4,961) (1,027) Cash at banks pledged as collateral (1,000) (1,000) (1,000) (1,000) Cash and cash equivalents 153,971 78,530 153,971 78,530 2) Cash payment during the period Interest expense 5 452 5 1,382 Income tax 26,026 13,232 32,616 13,236 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 NOTES TO INTERIM FINANCIAL STATEMENTS JUNE 30, 1999 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 vaule. 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 equipment. 1.6 Deferred charges Deferred charger represent development expenditures for new products in the amount of Baht 242 million and are amortized over a period of 5 years from the date revenues from sales of those produce 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, and 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 significant transactions with related parties. The interim 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 for the three- month and six-month periods ended June 30, 1999 and 1998 as follows : In Thousand Baht For the three-month For the six-month period ended June 30, period ended June 30, 1999 1998 1999 1998 Purchase made by the company to 1,723 1,089 4,312 2,617 related parties Rental and service expenses paid to 916 852 1,786 1,745 related parties At June 30, 1999 and December 31, 1998 the outstanding balances with related parties are as follows : In Thousand Baht As at June 30, As at December Investment in share of Thantawan Marketing Co.,ltd. 150 150 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 514 713 Accrued rental expenses 2 6 3. TRADE ACCOUNTS AND NOTES RECEIVABLE Trade accounts and notes receivable consisted of : In Thousand Baht As at June 30, As at December 1999 31, 1998 Domestic accounts receivable 5,167 8,965 Foreign accounts receivable 63,179 73,071 Post-dated cheques 4,955 1,357 73,301 83,393 Less Allowance for doubtful accounts (3,799) (3,717) Trade accounts and notes receivable-net 69,502 79,676 As at June 30, 1999 and December 31, 1998, the company has overdued accounts receivable 11 accounts which are aging as follows : In Thousand Baht As at June 30, As at December 31, 1999 1998 Over 3 months to 6 months 2,370 1,379 Over 6 months to 12 months 684 1,704 Over 12 months 2,873 2,980 Total 5,927 6,063 4. INVENTORIES Inventories consisted of : In Thousand Baht As at June 30, As at December 1999 31, 1998 Finished goods 19,805 15,963 Work in process 19,715 14,461 Raw materials 26,651 22,483 Supplies 10,876 6,609 Goods in transit 5,924 - Total 82,971 59,516 Less Allowance for devalue of inventories (2,963) (5,800) Inventories, net 80,008 53,716 5. INVESTMENTS Investments consisted of : As at June 30, As at December Type of Business 1999 31, 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 8,091 Total Investments 8,241 8,241 At June 30, 1999 and December 31, 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 controlled by the Bank of Thailand and ordered to write down capital which the Company has adjusted the related loss for diminution in value of Baht 96,444.25. At June 30, 1999 and December 31, 1998, investment in note receivable - financial institution in the amount of Baht 8,090,592.64 represent note receivable issued by the financial institution which has closed its business as its rehabilitation plan was not approved by the Financial Sector Restructuring Authority on December 8, 1997. In 1998 the Company exchanged the note to be the negotiable certificate of deposit (NCD) issued by Krung Thai Bank according to "Project of Krung Thai Bank in Accepting Exchange of Notes issued by the 42 Finance Companies". The maturity date is on December 12, 2000. Interest is receivable annually at the floating rate as announced by Krung Thai Bank. As at June 30, 1999 and December 31, 1998, the said NCD is pledged as collateral for loans granted from EXIM bank. 6. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of : In Thousand Baht Balance per Additions Deduction Balance per Method of Estimated Book book as at book as at depreciation useful life value Dec 31'98 June 30'99 (Years) June 30'99 Land and improvements 16,198 - - 16,198 Straight-line 5-20 12,820 Buildings and improvements 46,715 500 - 47,215 Straight-line 5-20 21,940 Machinery and equipment 177,231 3,868 - 181,099 Straight-line 5-10 75,615 Tools and equipment 10,762 912 - 11,674 Straight-line 5 3,243 Office furniture, fixtures and equipment 6,032 99 - 6,131 Straight-line 5 887 Vehicles 14,265 3 - 14,268 Straight-line 5 3,791 Construction in progress 3,456 5,403 - 8,859 8,859 Total 274,659 10,785 - 285,444 127,155 Less Accumulated depreciation (148,519) (9,770) - (158,289) Property, plant and equipment-net 126,140 127,155 At June 30, 1999 and December 31, 1998, the company had a portion of buildings and land improvements at cost of Baht 8,474,659.75 (book value of Baht 7,484,377.88) and Baht 8,474,659.75 (book value of Baht 7,694,504.34), respectively, which are located on a related company's land without a lease agreement. 7. ADVANCE PAYMENTS FOR ASSETS ACQUISITION The company was attempting to purchase the land and building from the related company. At June 30, 1999 and December 31, 1998 advance payments for assets acquisition represent advance payments according to an agreement to purchase the land and building with the related company on December 29, 1997 at a price of Baht 41 million. The company paid 50% of the price in the amount of Baht 20.5 million on date of signing of the agreement by issuing note receivable in the amount of Baht 20,232,717.81 issued by a financial institution which has closed its business as its rehabilitation plan was not approved by the financial sector restructuring authority on December 8, 1997. On January 22, 1998 and June 30, 1998, the extraordinary meetings of shareholders did not approve to purchase the said land and building. Therefore the company has notified for cancellation of the to buy and to sell agreement and refund the advance payments of Baht 20.5 million as its letter dated February 12, 1998. 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. 8. DEPOSIT FOR MACHINE ACQUISITION The Company has entered into a machine acquisition agreement with a local company totalling Baht 61.75 million (exclusive VAT) on March 5, 1999. As at June 30, 1999. The company has paid 30% of the price in the amount of Baht 18.53 million, (exclusive VAT), was shown under "Other Assets" in the balance sheets. Under the term of the agreement, the seller shall deliver some machine which is not less than 30% of total value of machine within June 16, 1999. Consequently, the Company approved to delay the delivery for 2 months and the seller shall deliver within August 16, 1999. The seller shall deliver the outstanding machine within September 14, 1999. The Company must pay 50% of the price in the amount of Baht 30.9 million when delivery completed and 20% of the price in the amount of Baht 12.4 million within 30 days after the date of installation and completed test-run of the machine. While the seller cannot deliver the machine, it should pay back the deposit to the company within June 17, 1999. 9. SEGMENT INFORMATION Thantawan Industry Public Company Limited manufactures plastic products which divided into three main products : straw products, HD.PE bag products and LD.PE bag products. Products purchased for sales are groups as others. The results of its operations for the three-month and six-month periods ended June 30, 1999 and 1998 are summarized as follows : For the three-month periods ended June 30, 1999 and 1998 In Thousand Baht HD. PE bag LD.PE bag 1999 1998 Straw products products products Others Total Total Sales-export : 1999 35,227 30,920 80,638 4,260 151,045 : 1998 57,471 62,695 112,037 3,812 236,015 Sales-local : 1999 5,642 1,253 538 83 7,516 : 1998 4,224 692 359 13 5,288 Total : 1999 40,869 32,173 81,176 4,343 158,561 : 1998 61,695 63,387 112,396 3,825 241,303 In Thousand Baht HD. PE bag LD.PE bag 1999 1998 Straw products products products Others Total Total Operating profit : 1999 8,832 1,798 15,814 860 27,304 : 1998 20,080 9,354 29,945 735 60,114 Other income 152 18,577 General corporate expense (12,470) (20,854) Interest expense (64) (391) Income tax (3,633) (17,149) Net income 11,289 40,297 For the six-month periods ended June 30, 1999 and 1998 In Thousand Baht HD. PE bag LD.PE bag 1999 1998 Straw products products products Others Total Total Sales-export : 1999 61,612 76,160 154,081 5,681 297,534 : 1998 103,448 128,239 211,499 6,354 449,540 Sales-local : 1999 14,344 2,222 1,248 171 17,985 : 1998 8,727 2,914 812 153 12,606 Total : 1999 75,956 78,382 155,329 5,852 315,519 : 1998 112,175 131,153 212,311 6,507 462,146 Operating profit : 1999 17,412 8,128 35,892 1,170 62,602 : 1998 38,504 23,404 64,485 1,552 127,945 Other income 4,103 1,491 General corporate expense (30,114) (25,699) Interest expense (69) (1,002) Income tax (10,527) (30,748) Net income 25,995 71,987 As at June 30, 1999 and 1998, property, plant and equipment, net of accumulated deprecation are summarized as follows In Thousand Baht Straw products HD PE bag LD.PE bag 1999 1998 products Products Total Total Assets used by products : 1999 16,046 42,946 54,793 113,785 : 1998 19,056 42,663 57,617 119,336 General assets used 13,370 12,997 Total property, plant and equipment' net 127,155 132,333 (more)