HAAD THIP PUBLIC COMPANY LIMITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 AND REPORT OF CERTIFIED PUBLIC ACCOUNTANT EXPRESSED IN Thai Baht REPORT OF CERTIFIED PUBLIC ACCOUNTANT To The Shareholders of Haad Thip Public Company Limited I have audited the balance sheets of Haad Thip Public Company Limited as at December 31,2000 and 1999, and the related statements of income, changes in shareholders' equity, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management as to their correctness and completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Haad Thip Public Company Limited as at December 31,2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. As discussed in Note 6 to the financial statements, the Company changed the method recording of land from the cost method to the appraisal method in the second quarter of year 2000. VICHIEN THAMTRAKUL C.P.A. (THAILAND) Registration No. 3183 Bangkok February 14, 2001 BALANCE SHEETS DECEMBER 31, 2000 AND 1999 A S S E T S In Baht Note 2000 1999 CURRENT ASSETS Cash on hand and in banks 23,345,181 16,133,584 Investment in marketable securities 20,165,553 - Accounts and notes receivable trade 3 92,343,036 71,183,082 Less allowance for doubtful accounts ( 2,650,036) ( 2,679,926) Accounts and notes receivable trade - net 89,693,000 68,503,156 Inventories net 4 67,624,904 60,209,686 Other current assets Claim and other receivables net 8,006,964 25,087,816 Prepaid expenses 5,807,297 5,849,458 Others 3,434,860 670,803 Total other current assets 17,249,121 31,608,077 Total Current Assets 218,077,759 176,454,503 ADVANCES AND LOANS TO DIRECTORS AND EMPLOYEES 2,139,776 1,902,277 LONG-TERM INVESTMENTS Investment in shares - net 5 2,259,913 2,839,913 Investment in held - to - maturity debt instruments 5,210,233 - Total Long-term Investments - net 7,470,146 2,839,913 PROPERTY, PLANT AND EQUIPMENT - net of accumulated depreciation 6 737,489,536 548,611,440 OTHER ASSETS Land not used in operations at appraisal value in 2000 and at cost; net of allowance for impairment loss of Baht 0.5 million in 1999 6 73,820,750 60,231,812 Assets under development for future project 9,668,748 9,587,548 Refundable deposits and others 1,366,343 2,599,429 Total Other Assets 84,855,841 72,418,789 TOTAL ASSETS 1,050,033,058 802,226,922 The accompanying notes are an integral part of these financial statements. BALANCE SHEETS DECEMBER 31, 2000 AND 1999 LIABILITIES AND SHAREHOLDERS' EQUITY In Baht Note 2000 1999 CURRENT LIABILITIES Bank overdraft and loans from financial institutions 15,483,939 64,871,720 Accounts payable - trade 7 102,555,200 93,440,179 Current portion of long-term loans 13,569,607 1,495,000 Other current liabilities 8 Accounts payable others 17,477,253 10,713,775 Dividend payable 809,198 16,601,500 Income tax payable 9 18,872,853 20,148,151 Others 22,022,699 11,227,978 Total other current liabilities 59,182,003 58,691,404 Total Current Liabilities 190,790,749 218,498,303 DEPOSITS RECEIVED FROM CUSTOMERS AND OTHERS 135,390,068 143,197,645 LONG-TERM LOANS - Net of Current Portion 8 23,210,599 5,779,582 Total Liabilities 349,391,416 367,475,530 SHAREHOLDERS' EQUITY Share capital common shares 250,000,000 250,000,000 Authorized - 25,000,000 shares; Baht 10 par value Issued and fully paid up - 16,601,500 shares 166,015,000 166,015,000 Premium on share capital 154,727,500 154,727,500 Retained earnings Appropriated Legal reserve 9 20,410,306 16,457,404 General reserve 19,000,000 19,000,000 Unappropriated 112,152,882 78,551,488 Revaluation surplus on land 6 228,335,954 - Total Shareholders' Equity 700,641,642 434,751,392 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,050,033,058 802,226,922 The accompanying notes are an integral part of these financial statements. STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 In Baht Note 2000 1999 REVENUES Net sales 1,422,843,217 1,215,784,608 Other income Reversal of unclaimed customers' deposits 12,730,718 17,850,555 Others 8,685,578 5,552,799 Total other income 21,416,296 23,403,354 Total Revenues 1,444,259,513 1,239,187,962 COSTS AND EXPENSES Cost of goods sold 978,583,959 834,396,667 Selling and administrative expenses 6 345,769,886 345,195,777 Interest expense 3,373,666 4,225,718 Directors' remuneration 267,500 200,000 Total Costs and Expenses 1,327,995,011 1,184,018,162 INCOME BEFORE INCOME TAX 116,264,502 55,169,800 INCOME TAX ( 37,206,456) ( 20,154,121) NET INCOME 79,058,046 35,015,679 Earnings per Share 4.76 2.11 The accompanying notes are an integral part of these financial statements. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 In Baht Note 2000 1999 SHARE CAPITAL Common shares Balance, beginning of year 166,015,000 166,015,000 Increase during the year - - Balance, end of year 166,015,000 166,015,000 PREMIUM ON SHARE CAPITAL Balance, beginning of year 154,727,500 154,727,500 Increase during the year - - Balance, end of year 154,727,500 154,727,500 RETAINED EARNINGS Appropriated Legal reserve Balance, beginning of year 16,457,404 14,706,620 Increase during the year 9 3,952,902 1,750,784 Balance, end of year 20,410,306 16,457,404 General reserve Balance, beginning of year 19,000,000 16,000,000 Increase during the year 9 - 3,000,000 Balance, end of year 19,000,000 19,000,000 Unappropriated Balance, beginning of year 78,551,488 81,489,593 Increase during the year 79,058,046 35,015,679 Decrease during the year ( 45,456,652) ( 37,953,784) Balance, end of year 112,152,882 78,551,488 REVALUATION SURPLUS ON LAND Balance, beginning of year - - Increase during the year 228,335,954 - Balance, end of year 228,335,954 - TOTAL SHAREHOLDERS' EQUITY 700,641,642 434,751,392 The accompanying notes are an integral part of these financial statements. STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 In Baht Note 2000 1999 UNAPPROPRIATED RETAINED EARNINGS: Beginning of year 78,551,488 81,489,593 Less appropriation of net income of previous year: General reserve 9 - ( 3,000,000) Dividends 9 ( 16,601,500) ( 16,601,500) Interim dividends 9 ( 24,902,250) ( 16,601,500) Net income for the year 79,058,046 35,015,679 Appropriation for legal reserve for the year 9 ( 3,952,902) ( 1,750,784) Total Unappropriated Retained Earnings 112,152,882 78,551,488 APPROPRIATED RETAINED EARNINGS: Legal reserve 20,410,306 16,457,404 General reserve 19,000,000 19,000,000 Total Appropriated Retained Earnings 39,410,306 35,457,404 TOTAL RETAINED EARNINGS 151,563,188 114,008,892 The accompanying notes are an integral part of these financial statements. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 In Baht 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income 79,058,046 35,015,679 Reconciliation of net income to net cash provided by (used in) operating activities: Bad debts expense and provision for doubtful accounts 187,625 1,860,067 Provision (reversal of provision) for obsolete inventories 90,427 ( 244,612) Provision (reversal of provision) for decline in value of investments ( 560,000) 400,000 Provision (reversal of provision) for impairment loss on land not used in operations ( 500,000) 500,000 Depreciation and amortization 50,633,674 57,133,602 Promotion materials amortized and book value of containers written off 29,872,887 30,817,950 Loss on sales of investment in shares 1,128,607 - Loss on revaluation of land 4,418,406 - Gain on sales of fixed assets ( 1,664,823) ( 654,524) Unrealized gain on change in value of investment ( 165,553) - Reversal of unclaimed customers' deposits (12,730,718) (17,850,555) Net cash provided by operating activities before changes in operational assets and liabilities 149,768,578 106,977,607 Decrease (increase) in operational assets Accounts and notes receivable trade (21,159,954) 209,007 Inventories ( 7,505,645) ( 8,653,352) Claim and other receivables 16,863,337 ( 79,392) Prepaid expenses 42,161 630,305 Other current assets ( 2,764,057) ( 349,837) Refundable deposits and others 681,852 472,809 Increase (decrease) in operational liabilities Accounts payable - trade 9,115,021 (18,693,134) Accounts payable others 6,763,478 ( 3,397,042) Accrued bonus - (14,274,646) Income tax payable ( 1,275,298) ( 7,889,677) Other current liabilities 10,794,721 ( 3,831,592) Customers' deposits and others 4,923,141 ( 6,346,065) Net Cash Provided by Operating Activities 166,247,335 44,774,991 CASH FLOWS FROM INVESTING ACTIVITIES: Increase in property, plant and equipment (58,341,265) (32,757,536) Proceeds from sales of fixed assets 2,001,274 507,000 Proceeds from sales of investment 11,393 - Increase in assets under development for future project ( 81,200) - Increase in short - term investment in marketable securities (20,000,000) - Increase in long - term investment ( 5,210,232) - Net Cash Used in Investing Activities (81,620,030) (32,250,536) CASH FLOWS FROM FINANCING ACTIVITIES: Increase in advances and loans to directors and employees ( 237,499) ( 131,455) Decrease in loans from banks (45,000,000) ( 5,000,000) Increase (decrease) in long - term loan 29,505,624 ( 722,755) Payment of dividends (57,296,052) (16,601,500) Net Cash Used in Financing Activities (73,027,927) (22,455,710) STATEMENTS OF CASH FLOWS (Continued) FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 In Baht 2000 1999 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,599,378 ( 9,931,255) Cash and Cash Equivalents, Beginning of Year ( 3,738,136) 6,193,119 CASH AND CASH EQUIVALENTS, END OF YEAR 7,861,242 ( 3,738,136) ADDITIONAL INFORMATION FOR CASH FLOWS: 1.Cash and Cash Equivalents consisted of: Cash on hand and in banks 23,345,181 16,133,584 Bank overdraft (15,483,939) (19,871,720) Net 7,861,242 ( 3,738,136) 2.Cash Paid During the Year for: Interest expense 3,584,075 5,777,811 Income tax 38,475,914 28,043,798 The accompanying notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 1. GENERAL Haad Thip Public Company Limited was established as a public company and is listed on the Stock Exchange of Thailand. The Company is engaged in the manufacturing and distribution of soft drinks. At the end of the years 2000 and 1999, the Company has 1,716 and 1,682 employees, and the employee cost for the years 2000 and 1999 amounted to Baht 195 million and Baht 189 million, respectively. The registered office of the Company is located at 87/1, Kanchanavanich Road, Thambol Banphru, Amphur Hadyai, Songkhla, Thailand. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Statement Preparation The statutory financial statements are prepared in Thai Baht and in Thai language in conformity with generally accepted accounting principles in Thailand. The accounting standards applied by the Company may not conform with generally accepted accounting principles in other countries. The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries or jurisdictions other than Thailand. Accordingly, these financial statements are not designed for those who are not informed about Thai accounting principles and practices. For the convenience of the reader, an English translation of financial statements has been prepared from the statutory Thai language statutory financial statements which are issued for domestic reporting purposes. Cash and Cash Equivalents Cash and cash equivalents includes cash on hand and cash in banks. Cash in banks includes savings deposits in short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturity of three months or less and that are subject to an insignificant risk of change in value. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are stated at faced value net of allowance for doubtful accounts, if any. The Company provides allowance for doubtful accounts equal to the estimated losses that may be incurred in the collection of receivables. The estimated losses are based on a review of the current status of the existing receivables. Inventories Valuation Inventories are valued at cost (first-in, first-out method) or net realizable value, whichever is lower. Investments Investment in marketable securities, held as trading securities, are valued at fair value. Realized gain or loss on changes in value of trading securities are recorded in statements of income. Long-term investments in shares are valued at cost, net of allowance for impairment of investments. Long-term investments in held - to - maturity debt instruments are valued at amortized cost. The premium or discount is amortized to interest income by the effective interest rate method over the remaining life of the debt instrument. NOTES TO FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2000 AND 1999 Property, Plant and Equipment Land at appraised value determined by an independent appraiser. Other items-at cost net of accumulated depreciation and allowance for impairment loss, if any. During the second quarter of 2000, the Company recorded its land at appraisal value determined by an independent appraiser (see Note 6). The revaluation increment on land is shown under "Shareholders' Equity" in the balance sheet. The losses on land devaluation are recorded as expenses in the statement of income. The Company has a policy to appraise the land whenever the fair value of the appraised land materially changes from the carrying value. Depreciation and Amortization The Company depreciates its property, plant and equipment acquired prior to 1990 and containers by the declining balance method. Assets acquired since 1990 are depreciated by the straight-line method over the estimated useful lives of the assets. The difference of depreciation between the straight-line method and declining balance method is not material. The useful lives of the assets are determined as follows: No. of Years Land improvements 10 Buildings 20 Leasehold improvements 4 Machinery and equipment 5 and 20 Furniture and office equipment 5 and 10 Vehicles 5 Containers 5 Promotion materials are amortized by the straight-line method over a period of five (5) years upon use in the operations. Deferred charges pertaining to advertising and sale promotion expenses are amortized by the straight-line method over the term of agreements. The unamortized balances as at December 31, 2000 and 1999 are not material. Impairment of Assets Property, plant and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the recoverable amount (the higher of an asset's selling price or value in use) of assets is below the carrying amount. The review is made for individual assets or for the cash-generating unit. In case that the carrying value of an asset exceeds its recoverable amount, the Company recognizes the impairment losses in the statement of income. The reversal of impairment losses recognized in prior years is recorded as other income when there is an indication that the (more)