FINANCIAL STATEMENTS QUARTER 3

99/670/4300 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 September 30, 1999 and the related statements of income, changes in shareholders' equity, retained earnings and cash flows for the three-month and nine-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 nine-month periods ended September 30, 1998 of Thantawan Industry Public Company Limited which are presented for comparative purposes, were reviewed by other auditors, whose report dated November 5, 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 November 2, 1999 "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED BALANCE SHEETS ASSETS In Thousand Baht As at September 30, As at December 31, 1999 1998 CURRENT ASSETS Cash in hand and at banks 127,748 71,617 Short-term investments Deposits with financial institutions (Note 11) 11,256 87,437 Trade accounts and notes receivable-net (Notes 1.3 and 3) 79,710 79,676 Inventories-net (Notes 1.4 and 4) 69,976 53,716 Other current assets Refundable value added tax 6,743 12,732 Tax card 224 4,322 Subsidy for export tax 4,255 2,431 Others 1,806 1,462 Total current assets 301,718 313,393 INVESTMENTS - Net (Notes 1.2, 2, 5 and 11) 8,241 8,241 PROPERTY, PLANT AND EQUIPMENT-Net (Notes 1.5, 6 and 11) 127,796 126,140 OTHER ASSETS Advance payments for assets acquisition (Notes 2 and 7) 20,500 20,500 Deposit for machine acquisition (Note 8) 18,597 - Deferred charges-net (Note 1.6) 4,247 4,402 Others 197 189 Total other assets 43,541 25,091 TOTAL ASSETS 481,296 472,865 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft and loans from financial institutions (Note 11) 1,965 692 Trade accounts payable - Related parties (Note 2) 490 713 - Others 68,152 54,866 Accrued expenses (Note 2) 21,927 25,144 Other current liabilities Accrued income tax 15,818 42,832 Others 3,385 2,654 Total current liabilities 111,737 126,901 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 142,759 121,508 Total shareholders' equity 369,559 345,964 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 481,296 472,865 Notes to interim financial statements form an integral part of these statements. (See auditor's report dated November 2, 1999) "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF INCOME FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 In Thousand Baht For the three-month period For the nine-month period ended September 30, ended September 30, 1999 1998 1999 1998 REVENUES Sales 169,397 205,857 484,916 668,003 Other income Subsidy for export tax income 1,741 417 4,738 5,251 Sales of scrap 1,813 4,317 5,734 12,384 Interest income 969 2,608 4,266 5,188 Gain (loss) on exchange rate 6,317 - 6,854 - Others 875 379 1,630 1,694 Total revenues 181,112 213,578 508,138 692,520 EXPENSES Cost of sales (Note 2 ) 124,861 126,299 348,116 426,553 Selling and administrative expenses (Note 2) 39,085 41,278 106,265 116,229 Interest expense 237 104 306 1,106 Directors' remuneration - - - - Total expenses 164,183 167,681 454,687 543,888 INCOME BEFORE INCOME TAX 16,929 45,897 53,451 148,632 INCOME TAX (5,329) (14,477) (15,856) (45,225) NET INCOME 11,600 31,420 37,595 103,407 EARNINGS PER SHARE (Note 1.9) Net income (Baht) 1.45 3.93 4.70 12.93 Notes to interim financial statements form an integral part of these statements. (See auditor's report dated November 2, 1999) "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 In Thousand Baht For the three-month period For the nine-month period ended September 30, ended September 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 10,000 7,656 7,656 6,024 Additions - - 2,344 1,632 Ending balance 10,000 7,656 10,000 7,656 Unappropriated Beginning balance 131,159 99,445 121,508 39,090 Additions - net income 11,600 31,420 37,595 103,407 Deduction - Legal reserve - - (2,344) (1,632) - Dividend - - (14,000) (10,000) Ending balance 142,759 130,865 142,759 130,865 Total Shareholders' Equity 369,559 355,321 369,559 355,321 Notes to interim financial statements form an integral part of these statements. (See auditor's report dated November 2, 1999) "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF RETAINED EARNINGS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 In Thousand Baht For the three-month period For the nine-month period ended September 30, ended September 30, 1999 1998 1999 1998 Unappropriated retained earnings Beginning balance 131,159 99,445 121,508 39,090 Less Appropriations of earnings for prior period Legal reserve - - (2,344) (1,632) Dividend - - (14,000) (10,000) Net income for the period 11,600 31,420 37,595 103,407 Total unappropriated retained earnings 142,759 130,865 142,759 130,865 Appropriated retained earnings Legal reserve 10,000 7,656 10,000 7,656 Total Retained Earnings 152,759 138,521 152,759 138,521 Notes to interim financial statements form an integral part of these statements. (See auditor's report dated November 2, 1999) "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 In Thousand Baht For the three-month period For the nine-month period ended September 30, ended September 30, 1999 1998 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES Net income 11,600 31,420 37,595 103,407 Add (less) Adjustments to reconcile net income to net cash provided by operating activities Loss on disposal of equipment 5 - 5 - Allowance for doubtful accounts 235 1,166 235 2,418 Unrealized loss on exchange rate (563) - (562) - Allowance for devalue of inventories (reversal) 2,931 827 1,628 (1,390) Depreciation 4,850 5,537 14,620 16,548 Deferred charges written off 1,199 1,833 3,391 2,707 Net income from operations before changes of operating assets and liabilities 20,257 40,783 56,912 123,690 (Increase) decrease in operating assets Accounts receivable (7,670) 43,592 2,503 26,867 Investment in trading securities - unit trust 10,270 - - - Inventories 7,101 1,768 (17,888) 7,950 Other current assets 7,760 (4,025) 7,919 (8,580) Other assets (930) - (3,244) (5) Increase (decrease) in operating liabilities Trade accounts payable - Related companies (24) 299 (223) 186 - Others (9,931) (22,025) 11,076 (31,229) Accrued expenses 858 (209) (3,217) 789 Income tax payable 5,327 14,449 (27,014) 31,961 Other current liabilities (1,536) (364) 731 2,754 Net cash provided by operating activities 31,482 74,268 27,555 154,383 CASH FLOWS FROM INVESTING ACTIVITIES Increase in fixed deposit - 12 months - - (153) - Decrease in investment - - - 96 Proceeds from disposal of equipment 9 - 9 4 Advance payment for machine acquisition (72) - (18,597) - Purchases of property plant and equipment (5,505) (2,536) (16,290) (8,748) Net cash used in investing activities (5,568) (2,536) (35,031) (8,648) CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) increase in note payable (45,000) - - - (Decrease) increase in loans from financial institutions - (10,322) - (34,805) Dividend payment - - (14,000) (10,000) Net cash Used in financing activities (45,000) (10,322) (14,000) (44,805) Net increase (decrease) in cash and cash equivalents (19,086) 61,410 (21,476) 100,930 Cash and cash equivalents at beginning of period 154,972 79,530 157,362 40,010 Cash at bank pledged as collateral at beginning of period (Note 11) 1,153 1,000 1,153 1,000 Cash at bank pledged as collateral at end of period (Note 11) (1,153) (1,000) (1,153) (1,000) Cash and cash equivalents at end of period 135,886 140,940 135,886 140,940 SUPPLEMENTAY INFORMATION 1) Cash and cash equivalents consist of Cash in hand and at banks 127,748 72,041 127,748 72,041 Add Deposits with financial institutions 11,256 72,285 11,256 72,285 Less Bank overdrafts (1,965) (2,386) (1,965) (2,386) Cash at banks pledged as collateral (1,153) (1,000) (1,153) (1,000) Cash and cash equivalents 135,886 140,940 135,886 140,940 2) Cash payment during the period Interest expense 237 186 306 1,568 Income tax - 28 42,833 13,264 Notes to interim financial statements form an integral part of these statements. (See auditor's report dated November 2, 1999) "UNAUDITED" "REVIEWED" THANTAWAN INDUSTRY PUBLIC COMPANY LIMITED NOTES TO INTERIM FINANCIAL STATEMENTS SEPTEMBER 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 2.42 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 nine-month periods ended September 30, 1999 and 1998 as follows : In Thousand Baht For the three-month period For the nine-month period ended September 30, ended September 30, 1999 1998 1999 1998 Purchase made by the company to 1,334 1,604 5,646 4,221 related parties Rental and service expenses paid to 829 863 2,615 2,608 related parties At September 30, 1999 and December 31, 1998 the outstanding balances with related parties are as follows : In Thousand Baht As at Sepetmber As at December 30, 1999 31, 1998 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 490 713 Accrued rental expenses 6 6 3. TRADE ACCOUNTS AND NOTES RECEIVABLE Trade accounts and notes receivable consisted of : In Thousand Baht As at September As at December (more)