VINYTHAI PUBLIC COMPANY LIMITED REPORT AND FINANCIAL STATEMENTS 31st DECEMBER, 1997 AND 1996 To The Board of Directors and Shareholders of Vinythai Public Company Limited I have examined the balance sheet of Vinythai Public Company Limited as at 31st December, 1997, the related statements of earnings, retained earnings, changes in shareholders+ equity and cash flows for the year then ended. My examination was made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as I considered necessary in the circumstances. During 1997, Thailand experienced severe economic problems and financial crisis, which are expected to prevail for the foreseeable future. The crisis has caused a significant effect to many business sectors by varying degrees. However, the financial statements under report have been prepared under the going-concern basis, which presumes that the realisation of assets and settlement of liabilities and obligations will occur in the ordinary course of business of the Company. In my opinion, the aforementioned financial statements present fairly the financial position of Vinythai Public Company Limited as at 31st December, 1997, the results of its operations, changes in shareholders+ equity and cash flows for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. / 2 - 2 - The 1996 financial statements, as presented herein for comparative purpose were examined by another auditor of our firm who expressed an unqualified opinion on those financial statements under his report dated 6th February, 1997. Narong Puntawong Certified Public Accountant (Thailand) No. 3315 BANGKOK : 6th February, 1998. VINYTHAI PUBLIC COMPANY LIMITED BALANCE SHEETS As at 31st December Note 1997 1996 BAHT BAHT ASSETS CURRENT ASSETS Cash in hand and at banks 2 608,418,994 29,970,934 Short-term investment - promissory note 3 - 70,000,000 Accounts receivable - trade, net 993,504,692 560,516,890 Accounts receivable - related parties 4 285,520,012 206,154,425 Amounts due from related parties 4 139,653 5,219,659 Inventories 5 660,309,402 624,136,596 Other current assets Prepayment 30,721,220 37,911,201 Others 32,527,818 26,281,455 63,249,038 64,192,656 TOTAL CURRENT ASSETS 2,611,141,791 1,560,191,160 INVESTMENTS Promissory note 6 20,419,652 - Related parties 7 608,065,140 608,065,140 628,484,792 608,065,140 PROPERTY, PLANT AND EQUIPMENT - net 8 10,035,883,877 10,350,770,107 OTHER ASSETS Pre-operating expenses - net 9 736,854,007 765,329,209 Deferred share flotation expenses - net 58,647,063 62,096,890 Others 25,185,913 28,444,880 820,686,983 855,870,979 TOTAL ASSETS 14,096,197,443 13,374,897,386 The accompanying notes are an integral part of the financial statements. VINYTHAI PUBLIC COMPANY LIMITED BALANCE SHEETS (Continued) As at 31st December Note 1997 1996 BAHT BAHT LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdrafts and bank loans - 4,667,980 Accounts payable - trade 121,471,493 101,093,875 Accounts payable - related parties 4 223,290,162 140,155,002 Current portion of long-term loans 10 1,205,854,754 607,305,268 Amounts due to related parties 4 173,263,288 69,681,387 Other current liabilities Accrued interest expenses 355,164,727 197,373,308 Accrued expenses 52,940,962 169,689,119 Others 43,897,035 95,901,056 452,002,724 462,963,483 TOTAL CURRENT LIABILITIES 2,175,882,421 1,385,866,995 LONG-TERM LOANS - net of current portion 10 11,033,551,538 6,564,929,866 LONG-TERM LOANS FROM RELATED PARTIES 11 810,473,850 - OTHER LIABILITIES Accrued interest expenses - related parties 4 38,876,781 - Others 20,848,710 16,155,470 59,725,491 16,155,470 TOTAL LIABILITIES 14,079,633,300 7,966,952,331 SHAREHOLDERS' EQUITY Share capital 12 6,022,971,990 6,022,971,990 Share premium 1,125,000,000 1,125,000,000 Deficit (7,131,407,847) (1,740,026,935) TOTAL SHAREHOLDERS' EQUITY 16,564,143 5,407,945,055 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 14,096,197,443 13,374,897,386 0 0 The accompanying notes are an integral part of the financial statements. VINYTHAI PUBLIC COMPANY LIMITED STATEMENTS OF EARNINGS For the year ended 31st December Note 1997 1996 BAHT BAHT REVENUES Sales 4,796,710,022 3,578,392,593 Interest income 9,597,142 28,843,057 Other income 2,277,679 1,745,490 TOTAL REVENUES 4,808,584,843 3,608,981,140 EXPENSES Cost of sales 3,108,478,402 2,873,570,600 Selling and administrative expenses 591,115,072 448,691,017 Provision for diminution in value of inventories (reversal) 13 - (76,000,000) Interest expenses and bank loan fees 947,186,573 553,605,990 Exchange(gain) loss 14 (60,973,176) 114,878,992 Directors' remuneration 15 3,808,000 3,860,000 TOTAL EXPENSES 4,589,614,871 3,918,606,599 EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM 218,969,972 (309,625,459) EXTRAORDINARY ITEM :- Exchange loss from the adoption of managed float system 14 (5,610,350,884) - NET LOSS FOR THE YEAR (5,391,380,912) (309,625,459) EARNINGS PER SHARE Earnings (loss) before extraordinary item 0.36 (0.61) Extraordinary item (9.31) - Net loss (8.95) (0.61) Weighted average number of shares (shares) 602,297,199 507,875,432 The accompanying notes are an integral part of the financial statements. VINYTHAI PUBLIC COMPANY LIMITED STATEMENTS OF RETAINED EARNINGS For the year ended 31st December 1997 1996 BAHT BAHT DEFICIT BALANCE - beginning of year (1,740,026,935) (1,430,401,476) NET LOSS FOR THE YEAR (5,391,380,912) (309,625,459) BALANCE - end of year (7,131,407,847) (1,740,026,935) The accompanying notes are an integral part of the financial statements. VINYTHAI PUBLIC COMPANY LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the year ended 31st December 1997 1996 BAHT BAHT ORDINARY SHARE Balance - beginning of year 6,022,971,990 3,012,250,000 Increase during the year - 3,010,721,990 Decrease during the year - - Balance - end of year 6,022,971,990 6,022,971,990 SHARE PREMIUM Balance - beginning of year 1,125,000,000 1,125,000,000 Increase during the year - - Decrease during the year - - Balance - end of year 1,125,000,000 1,125,000,000 DEFICIT Balance - beginning of year (1,740,026,935) (1,430,401,476) Increase during the year (5,391,380,912) (309,625,459) Decrease during the year - - Balance - end of year (7,131,407,847) (1,740,026,935) TOTAL SHAREHOLDERS' EQUITY 16,564,143 5,407,945,055 The accompanying notes are an integral part of the financial statements. VINYTHAI PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS For the year ended 31st December 1997 1996 BAHT BAHT Cash flows from (used in) operating activities Net loss (5,391,380,912) (309,625,459) Adjustments to reconcile net loss to net cash provided by (paid from) operating activities :- Depreciation 363,620,355 261,693,406 Amortisation of pre-operating expenses 31,925,029 27,222,228 Unrealized (gain) loss on exchange rate (67,708,694) 109,050,853 Unrealized loss from the adoption of managed float system 5,502,366,195 - Increase in allowance for doubtful accounts 10,100,000 - Profit from sales of fixed assets (1,134,799) - Provision for diminution in value of inventories - reversal - (76,000,000) 447,787,174 12,341,028 Decrease (increase) in operating assets :- Accounts receivable - trade (443,087,802) (29,142,293) Accounts receivable - related parties (79,365,587) (54,127,986) Amounts due from related companies 5,080,006 (4,044,478) Inventories (36,172,806) 117,859,684 Other current assets 943,618 148,234,602 Increase (decrease) in operating liabilities :- Accounts payable - trade 20,377,618 (570,801,764) Accounts payable - related parties 83,135,160 139,477,528 Amounts due to related companies 103,581,901 (48,005,765) Other current liabilities (10,960,759) (47,572,364) Net cash flows from (used in) operating activities 91,318,523 (335,781,808) The accompanying notes are an integral part of the financial statements. VINYTHAI PUBLIC COMPANY LIMITED STATEMENTS OF CASH FLOWS (Continued) For the year ended 31st December Note 1997 1996 BAHT BAHT Cash flow from (used in) investing activities Increase in deposits with maturity of more than 3 months and guaranteed deposits (528,369,362) (35,693,003) Sales of investment in associated company - 61,738,560 Paid for investment in other company - (74,218,700) Acquisition of fixed asset - net (48,738,036) (695,577,066) Proceeds from sales of fixed assets 1,138,709 - (Increase) decrease in other assets 3,258,967 (155,558,611) Increase in other liabilities 43,570,021 4,452,265 Net cash flows used in investing activities (529,139,701) (894,856,555) Cash flows from financing activities Increase (decrease) in bank overdrafts (4,667,980) 4,667,980 Cash received from (paid for) loans from related companies 648,839,160 (1,055,324,250) Cash received from (paid for) long-term loans - net (205,851,652) (727,889,755) Cash received from increase in share capital - 3,010,721,990 Net cash flows from financing activities 438,319,528 1,232,175,965 Net increase in cash and cash equivalents 498,350 1,537,602 Cash and cash equivalents at beginning of year 2,169,183 631,581 Cash and cash equivalents at end of year 16 2,667,533 2,169,183 The accompanying notes are an integral part of the financial statements. VINYTHAI PUBLIC COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.1 Sales Sales are the invoiced value, excluding value added tax, of goods delivered after deducting discount and allowance. 1.2 Inventories Inventories are valued at the lower of cost (weighted average method) or net realisable value. 1.3 Investments Investment in associated company is stated on an equity method. Investment in other company is stated at cost. Provision for loss from investment will be set up if the decline in value is of a permanent nature. 1.4 Depreciation Depreciation of fixed assets is calculated by reference to their costs on a straight-line method over the estimated useful lives as follows :- Building and improvement - 5, 30, 50 years Leasehold improvement - 50 years Machinery and equipment - 30 years Furniture, fixtures and equipment - 5, 10, 30 years Vehicles - 5, 10 years No depreciation is provided for land, machinery under installation. 1.5 Amortisation Pre-operating expenses for project Phase I and Phase II are amortised over the period of 30 years commencing as from 1st August, 1992 and 1st July, 1996 respectively. Deferred flotation expenses are amortised over the period of 20 years commencing as from 1st January, 1995. 1.6 Foreign currencies Exchange rates adopted :- Foreign currency transactions during the year - at the rates ruling on the transaction dates. Assets and liabilities in foreign currency outstanding on the balance sheet date - at the rates ruling on the balance sheet date with the exception of those specific items covered by forward exchange contracts, at the contracted rates. Exchange gains and losses are included in determining earnings. 1.7 Earnings per share Earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average number of ordinary shares in issue during the year. NOTE 2 - CASH IN HAND AND AT BANKS According to the conditions as stipulated in the long-term loan agreement, as of 31st December 1997, the Company has pledged its saving deposits of approximately Baht 606 million (1996 : Baht 28 million) with banks as security against bank loans. Balances as of 31st December, 1997 included foreign currency deposit of approximately US$ 3.9 million or equivalent to Baht 184 million. NOTE 3 - SHORT-TERM INVESTMENT - PROMISSORY NOTE According to the conditions as stipulated in the long-term loan agreement, the Company has pledged these promissory notes as security against bank loans. NOTE 4 - RELATED PARTY TRANSACTIONS During the year, the Company had significant business transactions with its associated and related companies (related by way of holding interest, common shareholders and/or common directors). Therefore, the financial statements reflect the effects of these transactions on the basis determined by the companies concerned and as stipulated in the agreements. The transactions are in the ordinary course of business and the significant transactions are as follows :- For the year ended 31st December 1997 1996 Million Baht Million Baht Transactions with associated company : Purchase of raw materials 154 101 Transactions with related companies : Sales of finished products 879 708 Purchase of raw materials and finished products 1,505 683 Technical assistance expenses - 71 Royalty expenses 100 73 Interest expenses 39 60 Freight expenses 42 36 Commission expenses 14 8 In 1997, the amounts of all transactions have been included in determining earnings, whereas in 1996, part of the amounts was capitalized as cost of project under construction. The outstanding balances are separately shown in the balance sheets. NOTE 5 - INVENTORIES 1997 1996 BAHT BAHT Finished goods 173,724,485 207,562,918 Spare parts 270,289,283 246,844,460 Raw materials 193,686,268 147,819,945 Goods in transit 5,948,412 2,776,478 Work in process 6,561,208 4,765,538 Packing materials 10,099,746 14,367,257 660,309,402 624,136,596 NOTE 6 - INVESTMENT IN PROMISSORY NOTE This represents a promissory note of a finance company which can be withdrawn in 2002 and subject to market interest rate (as at 31st December, 1997 the rate was 13.20 percent per annum). According to the conditions as stipulated in the long-term loan agreement, the Company has pledged this promissory notes as security against bank loans. NOTE 7 - INVESTMENTS IN RELATED PARTIES Percentage of the Company's interest As at 31st December 1997 1996 1997 1996 Percent Percent Baht Baht Investment in associated company Pimai Salt Company Limited 20.4 20.4 203,221,440 203,221,440 Investment in related company Thai Olefins Company Limited 5.29 5.29 404,843,700 404,843,700 608,065,140 608,065,140 According to the latest financial statements, as provided by the management of Pimai Salt Company Limited (supplier of raw material - salt), the accumulated share of profit from investment in this company amounted to approximately Baht 2.2 million. Since the share of profit is insignificant, the Company, therefore, concludes that the investment under the equity method equals to the acquisition cost. According to the latest financial statements, as provided by the management of Thai Olefins Company Limited (supplier of raw material - ethylene), the networth of this company attributable to the Company+s interest was higher than the acquisition cost of approximately Baht 74.5 million (1996 : lower than the acquisition cost Baht 89.6 million). NOTE 8 - PROPERTY, PLANT AND EQUIPMENT 1997 1996 BAHT BAHT Land 2,909,414 2,909,414 Building and improvement 1,106,696,414 1,097,415,497 Leasehold improvement 622,024,907 621,964,068 Machinery and equipment 9,096,510,089 9,046,389,432 Furniture, fixtures and equipment 333,387,270 328,633,917 Vehicles 13,050,861 18,473,661 Machinery under installation 14,748,805 30,891,757 Total 11,189,327,760 11,146,677,746 Less : Accumulated depreciation (1,153,443,883) (795,907,639) Net book value 10,035,883,877 10,350,770,107 Depreciation for the year has been charged to the following :- 1997 1996 BAHT BAHT Cost of sales and inventories 347,142,255 247,826,584 Selling and administrative expenses 16,478,100 13,866,822 Total 363,620,355 261,693,406 According to the conditions as stipulated in the long-term loan agreements, the Company has mortgaged its land, office building, factory buildings, machinery and equipment with banks as security against the credit facilities. NOTE 9 - PRE-OPERATING EXPENSES 1997 1996 BAHT BAHT Pre-operating expenses - Phase I 572,087,995 572,087,995 - Phase II 282,168,081 282,168,081 Less : Accumulated amortisation (117,402,069) (88,926,867) Pre-operating expenses - net 736,854,007 765,329,209 Amortisation for the year 28,475,202 23,772,401 NOTE 10 - LONG-TERM LOANS These represent loans from local and overseas banks that provided financing facilities of US$ 289 million and Baht 685 million. These loans are repayable in the years 1996 to 2006. As of 31st December, 1997, there were outstanding long-term loans of US$ 244.5 million and Baht 610 million (1996 : US$ 268 million and Baht 290 million). The loans denominated in US$ currency are subject to both fixed interest rates and floating interest rates ranging from 6 - 10 percent per annum. The Company has entered into an interest rate swap agreement with overseas financial institutions for part of the loans denominated in US$ which are subject to floating interest rates. Under the agreement, the Company has fixed the floating interest rates at the rate of 7.4 percent per annum. This agreement matures in the year 1999. Thai Baht loans are subject to interest at the rates of MOR plus 0.25 percent per annum. The Company had already fulfilled all conditions for Phase II financial completion and the lenders declared the Phase II completion effective as from 31st December, 1997. In addition, the guarantee obligation by related companies on part of the loans had been released by the lenders on 12th February, 1998. Under the loan agreement, the Company has to undertake certain conditions as stipulated in the agreement. After the Phase II completion date, the Company has to maintain a Current Ratio of at least 1.2:1. Part of the loans has been guaranteed by local banks. In addition, the loans have been secured by the mortgage/pledge of the Company+s fixed assets, bank saving accounts and promissory notes. NOTE 11 - LONG-TERM LOANS FROM RELATED PARTIES These represent subordinated loans denominated in US$ and Thai Baht currencies from related companies. As of 31st December, 1997, there were outstanding long-term loans of US$ 13.7 million and Baht 157.8 million (1996 : None). These loans were subject to interest at the rates of LIBOR plus 1 percent per annum for the loans denominated in US$ and at the rates of MLR plus 0.25 percent per annum for Thai Baht loans. NOTE 12 - SHARE CAPITAL 1997 1996 Registered Number of shares (shares) 602,450,000 602,450,000 Par value per share (Baht) 10 10 Amount (Baht) 6,024,500,000 6,024,500,000 Issued and fully paid Number of shares (shares) 602,297,199 602,297,199 Par value per share (Baht) 10 10 Amount (Baht) 6,022,971,990 6,022,971,990 NOTE 13 - PROVISION FOR DIMINUTION IN VALUE OF INVENTORIES (REVERSAL) In 1996, the Company reversed the provision for diminution in value of inventory since market price of such inventory was higher than its cost. NOTE 14 - EXCHANGE (GAINS) LOSSES FROM TRANSLATION OF FOREIGN CURRENCIES As at 31st December, 1997, the Company had outstanding foreign currency loans of US$ 258.3 million of which US$ 25.4 million is due for repayment in 1998 and the remaining balances of US$ 232.9 million are due in the year 1999 to 2006. As at 31st December, 1997, the Company has outstanding forward contract and swap contract for the amount of US$ 15 million to cover the loan repayment and interest payment in first quarter of 1998. Following the change of the country+s foreign exchange system to the so- called managed float system as announced by the Government on 2nd July, 1997, the Company+s financial statement for the third quarter ended 30th September, 1997 presented the gains/losses from floatation of Baht as deferred losses. However, on 5th February, 1998, the Stock Exchange of Thailand issued a letter requiring all listed companies to recognise total exchange gains/losses in the earnings statement pursuant to the Accounting Standard Pronouncement No. 30. Therefore, the Company followed the Stock Exchange of Thailand+s requirement and affected the change in the financial statements ended 31st December, 1997 by presenting the impact of exchange gains/losses arising from the translation of its foreign currency transactions into two classifications, regular item and extraordinary items. The translation gains and losses on transactions outstanding as of 2nd July, 1997 are presented as an extraordinary item in the earnings statement. The translation gains and losses on transaction booked after the introduction of the managed float system are presented as ordinary items in the earnings statement. The details are as follows :- 1997 1996 Baht Million Baht Million Ordinary items :- Realised loss 6.7 5.8 Unrealised (gain) loss (67.7) 109.1 Total exchange (gain) loss (61.0) 114.9 1997 1996 Baht Million Baht Million Extraordinary items :- Realised loss 108.0 - Unrealised loss 5,502.3 - Total exchange loss 5,610.3 - As of 31st December, 1997 the bank selling rate for US$ 1 was equal to Baht 47.556. NOTE 15 - DIRECTORS+ REMUNERATION Directors+ remuneration represents the benefits paid to the Company directors in accordance with Section 90 of the Public Limited Companies Act, exclusive of salaries and related benefits payable to the managing director who is one of the executive directors. NOTE 16 - STATEMENTS OF CASH FLOWS For the purposes of the statements of cash flows, cash and cash equivalents include cash in hand and at banks and investment in promissory notes with an original maturity of 3 months or less and without commitment. Cash and cash equivalents as reflected in the statements of cash flows consist of the following :- 1997 1996 BAHT BAHT Cash in hand and at banks 608,418,994 29,970,934 Investment in promissory notes 20,419,652 70,000,000 628,838,646 99,970,934 Less : Investment in promissory notes more than 3 months (20,419,652) - Deposits with commitments (605,751,461) (97,801,751) Cash and cash equivalents 2,667,533 2,169,183 Supplemental cash flows information :- Cash paid during the year for Interest paid 734,361,528 747,865,409 Corporate income tax - - NOTE 17 - FINANCIAL INFORMATION BY SEGMENT The Company+s operations involve industry segment mostly in manufacturing and distribution of PVC and related by-products for both domestic and export market. In 1997, the export sales represent approximately 16.6 percent (1996 : 11.0 percent) of the total sales. As a result, the Company+s operations involve a single industry segment and are carried out from the single geographic area in Thailand. All of the revenues, operating profits (loss) and assets as reflected in these financial statements pertain to the aforementioned industry segment and geographic area. NOTE 18 - PROMOTIONAL PRIVILEGES The Company was granted the following tax privileges under the Investment Promotion Act B.E. 2520 approved by the Board of Investment on 15th June, 1988. Subject to certain imposed conditions, the privileges include the following :- 18.1 Exemption of import duty on machinery and equipment as approved by the Board. 18.2 Exemption of corporate income tax on net profit for a period of seven years commencing as from 1st August, 1992 (the date of earning operating income). 18.3 Exemption of income tax on goodwill, copyright and other rights paid from the operating profit according to the contract as approved by the Board for a period of five years commencing as from the date of earning operating income. 18.4 Exemption of income tax on dividends paid from the profit from the operation throughout the promoted period. 18.5 Reduction of corporate income tax on net profit at the rate of fifty percent of normal rate for a period of five years after expiry period of corporate income tax exemption. 18.6 Permission to double costs of transportation, electricity and water supply for corporate income tax purpose for a period of ten years commencing as from the date of earning operating income. 18.7 Permission to deduct cost of installation or construction of facilities at the rate of twenty percent in addition to normal depreciation charges. 18.8 Exemption of import duty on raw and essential materials imported for use specifically in producing for export for a period of one year commencing as from the date of first import. 18.9 An allowance of five percent of the increment in export income over the preceding year is deductible from taxable income for a period of ten years commencing as from the date of earning operating income. NOTE 19 - INCOME TAX ON EXCHANGE GAINS/LOSSES ARISING FROM FLOATING OF THAI BAHT For financial reporting purposes, the Company credited/charged in total the exchange gains/losses arising from the floating of Thai Baht to the 1997 earnings statement. However, for income tax reporting purposes, such exchange gains/losses have been deferred and amortised in proportion to the amount of debts due in accordance with Recital 2 of the Revenue Department+s Notification No. 72/2540. NOTE 20 - PROVISION FOR LONG-TERM EMPLOYMENT BENEFIT The Company has provided a long-term employment fund scheme for its employees who have been in the plan for five years or more of continuous service as from 1st January, 1994. Under the scheme, an employee is entitled to receive upon retirement or resignation, a sum computed in accordance with his length of service. The outstanding balances of provision for long-term employment benefit as at 31st December, 1997 was approximately Baht 20.8 million (1996 : Baht 16.2 million). NOTE 21 - LEASE AND RENTAL COMMITMENTS As at 31st December, 1997, the Company had outstanding lease and rental commitments as follows:- a) Lease commitments in respect of land for its plant for a period of 30 years as from 15th June, 1989 to 14th June, 2019 amounted to approximately Baht 162.5 million. Rental fees are Baht 6.9 million per annum as from 15th June, 1989 to 14th June, 1998 and Baht 7.59 million per annum as from 15th June, 1998 to 14th June, 2019. b) Commitments in respect of motor vehicle operating leases amounted to approximately Baht 14 million which are repayable within the year 2001. c) Other lease and rental commitments payable in the future are as follows :- 1997 1996 Million Baht Million Baht Payable within 1 year 81.7 69.0 Payable between 2 - 5 years 177.2 183.0 258.9 252.0 NOTE 22 - OTHER COMMITMENTS As at 31st December, 1997, the Company had outstanding commitments as follows :- a) The Company has entered into a license and on-going knowhow agreements with its overseas related company. The fees are payable by the Company on the basis and at the rate as stipulated in the agreements. b) The Company has entered into an agreement to purchase raw materials from a related local company. The Company agrees to purchase raw materials at the quantity and price as stipulated in the agreement. The price is referenced to the US market price. c) The Company has entered into an agreement with its associated company to purchase raw materials produced by this associated company at the quantity and at the price as stipulated in the joint venture agreement. NOTE 23 - BANK GUARANTEES AND AVAL As at 31st December, 1997, there were outstanding bank guarantees and aval as follows :- a) Bank guarantees of Baht 250 million (1996 : Baht 227 million) issued by banks on behalf of the Company in the normal course of business of the Company. b) Bank aval of US$ 1.134 million (1996 : US$ 1.134 million) was issued by a bank on behalf of the Company as a shareholders+ cash deficiency support obligation to a related company. c) Bank aval for export credit of approximately US$ 115.2 million (1996 : US$ 129.6 million) was issued by local banks on behalf of the Company according to the conditions as stipulated in the long-term loan agreement. NOTE 24 - PRESENTATION The presentation of the financial statements has been made in compliance with the Ministerial Regulation No. 7 (1996) as empowered under the Public Limited Companies Act B.E. 2535. Certain amounts of the 1996 financial statements have been reclassified to conform to the current year classification, with no effect on previously reported net loss and shareholders' equity. NOTE 25 - APPROVAL OF FINANCIAL STATEMENTS These financial statements have been approved by the Company+s directors. ÿÿÿÿ