NOTE 5 - TRANSACTIONS WITH RELATED PARTIES The Company has significant transactions with related parties and dealt with ordinary course of business. Significant transactions arising in the course of ordinary business between the Company and related parties during 1998 and 1997 were as follows: (Amounts in Thousands of Baht) Consolidated Company 1998 1997 1998 1997 Sales of goods by the Company to related parties - - 6,388 - Purchases of goods by the Company from related parties - - 1,739,910 2,077,809 Dividend income received from related parties 6,745 1,230 67,449 237,927 Interest income received from related parties 7,837 753 81,796 22,158 Other income received from related parties - - 32,965 - Interest expense paid to related parties 609 60 1,026 1,471 At September 30, 1998 and 1997 the outstanding balances with related parties were as follows: (Amounts in Thousands of Baht) Consolidated Company 1998 1997 1998 1997 Accounts receivable - related parties - - 3,875 - Lease receivable from a related party - current portion - - 36,000 36,000 - non-current portion - - 40,500 76,500 Accounts payable - related parties - - 323,663 349,748 (Amounts in Thousands of Baht) Consolidated Company 1998 1997 1998 1997 Short- term loans and advances to related parties are summarized as follows: Subsidiaries Companies Rubia Industries Ltd. - - 80,230 21,574 Thai Sancella Co., Ltd. - - 4,559 6,435 Thai-Scandic Steel Co., Ltd. - - 211,423 190,472 Siam Snack Co., Ltd. - - 73,107 5,318 Polipharm Co., Ltd. - - 31,937 43,672 Agri-Systems (Thailand) Co., Ltd. - - 21,504 26,739 Cosma Ltd. - - 349 230 Cellox Paper Co., Ltd. - - 4,367 43,262 Berli Prospack Co., Ltd. - - 58,318 20,094 Tropicwood Co., Ltd. - - 29,358 27,905 Thai Glass Industries PCL. - - 307,618 26,685 Vina Glass Industries Limited - 185,359 - - Thai Klinipro Co., Ltd. - - 20,255 - (Amounts in Thousands of Baht) Consolidated Company 1998 1997 1998 1997 Associated Companies O-I Pacific (Machinery and Distribution) Ltd. 836 - - - Bell International Surveyors & Adjusters Ltd. 1,618 - 1,618 - Pacific Leisure (Thailand) Ltd. Group 258 400 258 400 Beston Food (Shanghai) Co., Ltd. 6,953 - 6,953 - BJT Water Co., Ltd. 3,864 4,169 3,864 4,169 Other Companies Prospack Co., Ltd. 134 - - - Prathum Thani Water Co., Ltd. 105,485 - 105,485 - Total 119,148 189,928 961,203 416,955 Short-term loans and advances from related parties are summarized as follows: Subsidiaries Company Montana Co., Ltd. - - 4,531 3,363 Associated Companies Bell Internationa Surveyors & Adjusters Ltd - 8,515 - 8,515 Other Company Reime Jarlso AS 11,763 2,021 - - Total 11,763 10,536 4,531 11,878 Interest rates on loan and advance to (from) related parties carry at the ordinary business. The lease receivables from a related party represent amounts outstanding under a five year finance lease for machinery and equipment entered into with Cellox Paper Co., Ltd. in November 1995. The lease carries interest at 12% per annum. NOTE 6 - ACCOUNTS RECEIVABLE Accounts receivable as at September 30, 1998 classified by age can be summarized as follows: (Amounts in Thousands of Baht) Consolidated Company Less than 6 months 2,697,169 1,536,322 Over 6 months to 12 months 85,486 74,343 Over 12 months 159,707 130,983 Total 2,942,362 1,741,648 At September 30, 1998 the Company provided an allowance for doubtful accounts in the amount of Baht 168.50 million for the consolidated financial statements and Baht 144.59 million for the Company's financial statements. NOTE 7 - INVESTMENTS IN RELATED PARTIES AND OTHER COMPANIES Investments in related parties and other companies as at September 30, consisted of the following: (Amounts in Thousands of Baht) Group- Consolidated Company Type of Business Shareholding 1998 1997 1998 1997 Subsidiary Companies Berli Jucker (Myanmar) Ltd. Import & export 100.00% - - - - Montana Co., Ltd. Sales of cosmetics 100.00% - - 3,959 3,049 and machinery Polipharm Co., Ltd. Manufacture of 100.00% - - 69,332 67,640 pharmaceuticals Siam Snack Co., Ltd Manufacture of 100.00% - - 202,938 199,511 snack foods Cosma Ltd. Sales of cosmetics 100.00% - - 198 195 (a subsidiary holds 98.00%) Thai-Scandic Steel Co., Ltd. Manufacture of 100.00% of - - 130,000 130,000 galvanized steel preference shares structures Rubia Industries Ltd. Manufacture of 99.70% - - 110,797 165,910 soap, cosmetics & confectionery Tropicwood Co., Ltd. Dormant 98.30% - - 3,492 9,583 Thai Glass Industries PCL. Manufacture of 97.74% in 1998 - - 2,931,642 1,919,719 (Market value Baht 3,716.49 glass containers and 65.28% in million at September 30, 1998 1997 and Baht 2,673.06 million at September 30, 1997) Thai Flourspar & Minerals Co., Manufacture of 95.00% - - 20,375 22,179 Ltd. calcium carbonate Cellox Paper Co., Ltd. Manufacture of 75.08% in 1998 - - 640,832 511,589 paper products And 66.16% in 1997 Thai Klinipro Co., Ltd. Manufacture of 51.00% - - 43,149 45,449 surgical gowns Berli Prospack Co., Ltd. Manufacture of 50.00% - - 85,144 66,367 plastic containers (Amounts in Thousands of Baht) Group- Consolidated Company Type of Business Shareholding 1998 1997 1998 1997 Associated Companies BJC Marine Resources Dormant 50.00% 16,130 16,991 16,130 16,991 Development Co., Ltd. Thai-Swiss Metal Works Co., Ltd. Dormant 50.00% - - - - ADAT Sales (Thailand) Ltd. Travel 48.32%(a 2,499 5,547 - - subsidiary holds 49.00%) Thai-Pacific Foods Ltd. Dormant 47.33% - - - - Bell International Surveyors Surveying 41.00% in 1997 - 7,703 - 7,703 & Adjusters Ltd. BJT Water Co., Ltd. Consultancy and 35.00% 17,436 20,910 17,436 20,910 management service for water and waste water systems Beston Food (Shanghai) Co., Ltd. Manufacture of 34.00% 36,535 37,336 36,535 37,336 snack foods Siemens Limited Electrical 25.50% 80,000 26,967 80,000 26,967 engineering, telecommunications and mass transportation Pacific Leisure (Thailand) Ltd. Travel 23.67%(a 2,325 2,617 - - subsidiary holds 24.00%) O-I Pacific (Machinery and Sale of machinery 29.32% in 1998 2,484 546 - - Distribution) Ltd. for glass container and 19.58% in 1997 factories (a subsidiary holds 30.00%) Total Investments in Related Parties 157,409 118,617 4,391,959 3,251,098 Other Companies Siam Industrial Products Ltd. Import 20.00%(a subsidiary 50 50 - - (25.00% paid up) holds 20.00%) J.N.P.A. Co., Ltd. Property holding 17.24% 53,779 53,779 53,779 53,779 Pathum Thani Water Co., Ltd. Clean water supply 15.00% 145,500 108,000 145,500 108,000 Siam Cement Myanmar Trading Ltd Cement distributor 15.00% 837 837 837 837 Ethoxylates Manufacturing Pte. Ltd. Manufacture of 5.00% - 1,896 - 1,896 chemical products Thaiviet Invexim Co., Ltd. Import & export 1.00% 100 100 100 100 Total Investments in Other Companies 200,266 164,662 200,216 164,612 At September 30, 1998 and 1997 the Company had an excess loss over book value of investments in Agri-Systems (Thailand) Co., Ltd. and Berli Jucker (Myanmar) Ltd. totalling Baht 33.29 million and Baht 26.50 million, respectively, which is presented as other liabilities in the Company's financial statements. The recording of investments in subsidiary and associated companies by using the equity basis in the financial statements for the nine-month periods ended September 30, 1998 and 1997 is based on financial information obtained from reviewed financial statements and from management, which had not been audited or reviewed by the auditors in accordance with standards established by The Institute of Certified Accountants and Auditors of Thailand. NOTE 8 - SHARE CAPITAL A special resolution was passed by the extraordinary general meeting of shareholders held on June 5, 1998 authorizing an increase in the authorized share capital of the Company by Baht 1,010,625,000 by issuing 101,062,500 new ordinary shares with a par value of Baht 10 each, thus increasing the authorized share capital from Baht 577,500,000 to Baht 1,588,125,000. The new ordinary shares were offered on a rights basis to all existing shareholders at a price per share of Baht 40 in the proportion of 7 new ordinary shares for every 4 existing shares held. On June 26, 1998, all rights had been fully subscribed and the Company received Baht 4,028.4 million in subscription monies (net of expenses). The Company registered the increase in share capital on July 7, 1998. NOTE 9 - SHARE OF PROFITS LESS LOSSES OF SUBSIDIARY AND ASSOCIATED COMPANIES Share of profits less losses of subsidiary and associated companies included provision loss on suspense of subsidiary business segment in the amount of Baht 92.58 million in 1998. This has been classified as an extraordinary items in the consolidated accounts in conformity with the generally accepted accounting principles on which these accounts are prepared. NOTE 10 - OTHER FINANCING INCOME In the normal course of business the Company undertakes financial transactions to minimise the cost of its foreign exchange hedging activities. For the nine-month period ended September 30, 1998 these activities produced a net receipt which, under generally accepted accounting standards, has been accounted for as "other financing income". The receipts were, in substance, a reduction in the cost of hedging US dollar denominated indebtedness. NOTE 11 - EXTRAORDINARY ITEMS Thai Glass Industries Public Company Limited has suspended its Vietnam Glass Project as demand for new glass bottles is substantially below original projection due to a combination of lower than forecast beverage consumption and a higher than anticipated re-usage rate of second hand bottles. The Company decided to make provision for loss, amount to Baht 200 million, in connection with the project, as approved by the Board of Directors Meeting held on August 13, 1998. NOTE 12 - CONTINGENCIES The Company was contingently liable as guarantor of credit facilities for subsidiary and associated companies at September 30, 1998 to the extent of Baht 429.06 million and Baht 33.88 million, respectively. At September 30, 1998, a subsidiary company was contingently liable as guarantor of credit facilities provided to Vina Glass Industries Limited amounting to Baht 449.65 million (DEM 19 million). NOTE 13 - COMMITMENTS At September 30, 1998 subsidiary companies had commitments for capital expenditures in the approximate amount of Baht 202 million. NOTE 14 - SEGMENT INFORMATION For financial accounting purposes the Group divides its core business into two areas: Packaging & Consumer products and Technical products & Engineering, non-core operations are classified as Others. The results of operations for the nine- month period ended September 30, 1998 are summarized below: Baht (Million) Packaging Technical & Consumer products products & Engineering Others Total Sales 5,037.6 2,837.8 27.9 7,903.3 Operating profit before interest excluding proportion attributable to minority interests 517.9 172.0 7.8 697.7 Minority interests proportion in operating profit before tax 141.0 Operating profit before interest 838.7 General corporate expenses (158.6) Other financing income 158.8 Net interest(expense)income (165.1) Loss on foreign exchange (155.7) Provision against diminution in value of assets (17.0) Net income before tax 501.1 Income tax (106.8) Net income before minority interests and extraordinary items 394.3 Minority interests (83.6) Net income after minority interests 310.7 Extraordinary items (92.6) Net income 218.1 As at September 30, 1998 property, plant and equipment, net of accumulated depreciation and amortization, were allocated as follows: Baht (Million) Packaging Technical & Consumer products products & Engineering Others Total Property plant and equipment: 5,878.5 513.7 60.8 6,453.0 General assets used 810.8 Total Property Plant and Equipment - Net 7,263.8 NOTE 15 - YEAR 2000 COMPUTER COMPLIANCE (UNREVIEWED) The Company commenced its plan to improve the computerized system in respect of resolving the Year 2000 compliance problem. The plan is expected to be completed within December 1998. The expected costs of remedying the problem is approximately Baht 13.5 million and these costs will be recognized in the period in which they occur. Although the Company expected to have remedied the time year 2000 occurs, the operations of the Company would still remain at risk from other entities with which the Company undertakes business if they are unable to remedy their own problems in time. It may impact on the Company's operations and the management cannot expect that the exposure on its operations. NOTE 16 - RECLASSIFICATION OF ACCOUNTS Certain accounts in the financial statements for the period ended September 30, 1997 are reclassified to conform with the presentation of the accounts in the financial statements for the period ended September 30, 1998.