NNUAL FINANCIAL STATEMENTS

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 December 31, 1999 and 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. 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 December 31, 1999 and 1998, the said NCD is pledged as collateral for loans granted from a bank and as at December 31, 1999, the Company presented the said NCD including in "Deposits with financial institutions" under "Short-term investments" in the balance sheets. 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 at Dec. 31'98 Dec. 31'99 (Years) Dec. 31'99 At Cost Land and improvements 16,198 - - 16,198 Straight-line 5-20 12,779 Buildings and improvements 46,715 1,247 - 47,962 Straight-line 5-20 21,331 Machinery and equipment 177,231 6,382 (43) 183,570 Straight-line 5-10 71,856 Tools and equipment 10,762 1,757 (20) 12,499 Straight-line 5 3,356 Office furniture, fixtures and equipment 6,032 285 - 6,317 Straight-line 5 854 Vehicles 14,265 1,155 - 15,420 Straight-line 5 3,951 Construction in progress and Machinery under installation 3,456 9,272 - 12,728 12,728 Total 274,659 20,098 (63) 294,694 126,855 Less Accumulated depreciation (148,519) (19,369) 49 (167,839) Property, plant and equipment, net 126,140 126,855 7. LAND AND ADVANCE PAYMENTS FOR ASSETS ACQUISITION WITH A RELATED COMPANY On December 29, 1997, the Company had entered into a to buy and to sell the land with building agreement with a related company at a price of Baht 41 million. The Company paid 50% of the price in amount of Baht 20.5 million on date of signing of the agreement. Subsequently, at the extraordinary shareholders' meetings held. on January 22, 1998 and June 30, 1998, the shareholders did not approve to purchase the said land with building. Therefore the Company has notified for cancellation of the to buy and to sell agreement and refund the advance payment of Baht 20.5 million as its letter dated February 12, 1998. At present the advance payment could not been refunded. Addition, since 1994 the Company has utilized the 4 land plots of the said related company without lease agreement which the Company has a portion of building and land improvement located on certain land plots. Subsequently in 1998, the related company charged the Company for retroactive rental fees of Baht 24.1 million. The Company was negotiating with the related company. On November 25, 1999, the Board of Directors passed the resolution for entering into the memorandum with the said related company which are summarized as follows: (1) The Company commits to pay the compensation fee totalling fo Baht 6.5 million for land plots utilized since 1994 on November 29, 1999. (The Company recorded the compensation fee as expenses in the statements of income for the year ended December 31, 1999.) (2) The Company commits to enter into lease agreements covering land with building and 4 land plots at the rate of Baht 120 per square meter per month (totalling Baht 444,000 per month) and at the rate of Baht 50 per square wah per month (totalling Baht 252,100 per month), respectively. The period of the lease agreements is January 1, 2000 to December 31, 2000. (The Company has entered into lease agreements with the related company on January 4, 2000.) (3) The related company commits that it will not sell or lease the land with building and a land plot to others, except for to the Company for a period of 3 years from the date of agreement and also to stand the selling price of these assets at Baht 41.0 million for such period. In exchange, the related company will keep the above advance payment for asset acquisition of Baht 20.5 million during the period. On February 1, 2000, the Board of Directors passed the resolution of approval on purchasing of land with building and 4 land plots (as discussed in (2) above) from the said related company at the amount of Baht 85.0 million. The payment schedule had been assigned power to Managing Director as negotiation on condition of payment schedule with the related company. This resolution shall be presented further to the extraordinary meeting of shareholders. The Company is seeking approval from shareholders of the Company for transactions with a related company on the payment of compensation to the use of land, the entering into lease agreements covering land with building and 4 land plots, the keeping of advance payment on the purchase of land with building as stipulated in the agreement dated December 29, 1997, and the purchase of land with building and 4 land plots at the amount at Baht 85 million. The Company set date of the extraordinary meeting of shareholders on February 28, 2000, in order to comply with the announcement of the Stock Exchange of Thailand Concerning Criteria, Method, and Disclosure of Cross Related Transaction of Listed Companies. 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 September 30, 1999, the company has paid 30% of the price in the amount of Baht 18.53 million (exclusive VAT), which 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 totalling 2 times by the seller will deliver within September 16, 1999 and December 20, 1999, respectively, because the seller informed that it is abnormal after assembly of machine. Therefore the seller can not deliver in the present. 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. Afterwards, on December 16, 1999, the Company and seller agreed to cancell the machine acquisition agreement because the seller cannot assemble the specified and qualified machine and the seller agreed to pay back the deposit of Baht 18.53 million and penalty fee of Baht 0.35 million on February 4, 2000. On January 7, 2000, the Company has entered into new machine acquisition agreement for new group of machine as specified in the agreement with the above company totalling Baht 19.18 million (exclusive VAT). The Company agreed to pay deposits of 18.53 million (exclusive VAT) on the date of agreement and the outstanding amount of Baht 0.65 million (exclusive VAT) will be paid within 30 days after the date of installation and completed test-run of the machine. The seller agreed to deliver at least 1 of 3 of total machine value within March 31, 2000 and June 30, 2000. The remain machine is delivered within September 29, 2000. In this case, the Company paid deposit for new agreement by the old deposit which the seller shall pay back since the cancellation of the former agreement. 9. CREDIT FACILTIES WITH FINANCIAL INSTITUTIONS As at December 31, 1999, the Company has overdfraft lines of Baht 41.50 million and other credit facilities e.g. packing credit, letter of credit and trust receipt totalling Baht 588.50 million. The almost overdraft lines are without collateral. 10. 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 grouped as others. The results of its operations for the years ended December 31, 1999 and 1998 are summarized as follows : In Thousand Baht HD. PE bag LD.PE bag 1999 1998 Straw products products products Others Total Total Sales - export : 1999 111,967 180,259 323,491 11,937 627,654 : 1998 168,915 226,846 390,709 11,855 798,325 Sales - local : 1999 28,389 6,166 2,896 316 37,767 : 1998 20,491 4,559 1,889 321 27,260 Total : 1999 140,356 186,425 326,387 12,253 665,421 : 1998 189,406 231,405 392,598 12,176 825,585 Operating profit : 1999 31,348 7,700 65,599 2,471 107,118 : 1998 56,980 32,434 116,894 2,665 208,973 Other income 5,992 8,667 General corporate expense (74,027) (79,560) Interest expense (306) (1,107) Income tax (11,028) (42,924) Net income 27,749 94,049 As at December 31, 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 15,271 40,856 56,368 112,495 : 1998 17,363 44,434 49,868 111,665 General assets used 14,360 14,475 Total property, plant and equipment, net 126,855 126,140 11. APPROPRIATIONS OF EARNINGS On April 23, 1999, the Ordinary General Meeting of Shareholders approved the proposed dividend payable from the net income of the year 1998 of Baht 1.75 per share on 8 million shares totaling Baht 14 million and the appropriation legal reserve for the year 1998 in the amount of Baht 2,344,267.61. On April 23, 1998, the Ordinary General Meeting of Shareholders approved the proposed dividend payable from the net income of the year 1997 of Baht 1.25 per share on 8 million shares totaling Baht 10 million and the appropriation of 5% net income for the year 1997 to legal reserve in the amount of Baht 1,631,520.32. 12. ASSETS PLEDGED AS COLLATERAL Fixed deposit in the amount of Baht 1.15 million and part of land and constructions were pledged as collateral for liabilities and commitments with commercial bank. The Company has requested to withdraw the land and constructions since December 1, 1999. NCD of financial institution in the amount of Baht 8.1 million was pledged as collateral for loan with a bank. 13. RECLASSIFICATION OF ACCOUNTS Certain accounts in the 1998 financial statements were reclassified to conform with the 1999 financial statements presentation. 14. OTHERS a) Address and legal status The company has registered to be a limited public company under the Limited Public Company Act with the Ministry of Commerce on December 1, 1994 and its head office is located at 143-144, Moo 8, Soi Kangwal 2, Phetkasem Road, Omyai, Sampran, Nakornpratom ,Thailand. b) Nature the Company's operations The company's operations are produce and export plastic products. c) Name of parent company The parent company of the Company is Sunflower Company Limited. d) Number of employees As at December 31, 1999, the number of employees of the company is approximately 1,327 persons. e) Supplemental disclosures of expense information Supplemental disclosures of expense information for the years ended December 31, 1999 and 1998 are as follows: In Thousand Baht 1999 1998 Depreciation 19,369 19,344 Amortization 4,618 5,870 Employee benefit costs 150,786 136,088