SET Releases

(Translation) Auditors Report To the Shareholders of Thanulux Public Company Limited and Subsidiaries We have reviewed the consolidated balance sheet of Thanulux Public Company Limited as of June 30, 1998 and the consolidated income statement, consolidated retained earnings statement, consolidated changes in shareholders equity and consolidated cash flow statement for the first quarter then ended of Thanulux Public Company Limited and subsidiaries, including the financial statements of Thanulux Public Company Limited. Our review was made in accordance with the standards of the Certified Public Accountants and Auditors Association of Thailand. The review of financial statements for this period is mainly for the purpose of basic understanding of the preparation of financial statements and its system, based on the analytical method of financial analysis and an interview with the companys finance and accounting personnel. This review has more limited scope than generally accepted auditing standards. Therefore, we are unable to express any opinion on the reviewed financial statements. From our review, we have not found any significant transactions requiring any accounting qualifications in these financial statements. (Mr. Natee Sangudomlert) Certified Public Accountant Auditors No. 300 Bangkok August 11, 1998 Thanulux Public Company Limited and Subsidiaries Notes to Consolidated Financial Statements for the first quarter ended June 30, 1998 ----------------------------------------------------------------- 1. Principles of Consolidated Financial Statements The Companys financial statements include those of Thanulux Public Company Limiteds ended June 30, 1998. Related transactions have been eliminated from the consolidated financial statements. One subsidiary is Thanulux Kabinburi Company Limited of which the Company holds 99.99% of the paid-up capital. Minority shareholders equity in subsidiaries consists of the percentage of their ownership and corresponding operating income. 2. Basis of Consolidated Financial Statements Part of the Companys assets, liabilities, income and expenses includes those of subsidiaries and associated companies. Therefore, these financial statements show the results of the mentioned balances in accordance with policy of setting the usual business price. 3. Significant Accounting Policies 3.1 Recognition of revenues The company recognizes sales revenues when the products are delivered to the customers. 3.2 Fixed assets Fixed assets are stated at cost less depreciation. Depreciation is calculated by the straight-line method at the highest rate allowed by law (except for land which shows no depreciation) As for the subsidiaries assets obtained since October 1, 1996, depreciation is calculated at 10% per year. 3.3 Inventories Finished goods and raw materials are estimated at the lower average cost or net realized value. Work in process is stated at cost. 3.4 Other supplies Other supplies are stated at cost. 3.5 Investments in common shares of subsidiaries and other companies Investment in common shares of subsidiaries and other companies are stated as follows: - Marketable securities are stated at the lower of aggregate cost or market value. The market values are the latest closing prices on the Stock Exchange of Thailand for the period. - Unlisted securities are stated at cost. Investments in subsidiaries and associated companies are booked under the equity method. Gains and losses on sales of securities use the average method. 3.6 Accounts in foreign currencies Transactions in foreign currencies are translated into Baht at the exchange rate on the dates of the transactions. Assets and liabilities denominated in foreign currencies at the end of the period are translated in to Baht at the average exchange rate on the last day of the accounting period. Exchange gains or losses arising from transactions are included in the income statements. 3.7 Provision for possible loan losses The provision for possible loan losses is based on the analysis of outstanding loans according to the Companys experience. 3.8 Deferred charges Subsidiaries deferred charges which are in respect of computer programs and capital increase fees are amortised for a five-year period. 3.9 Goodwill from investments in associated companies Goodwill from investments in associated companies is amortised for a ten-year period. 4. Investments 4.1 The company has invested in 48 companies which are, related companies and non-related companies, listed securities and unlisted securities. The cost of the 6 listed securities are Baht 20.37 million, the market price is Baht 9.56 million. The company has made the allowance for the decreasing securities price as the amonut of Baht 10.81 million. The cost of the 42 unlisted securities are Baht 184.92 million. Three unlisted companies will be dissolved as the following. Investment in unlisted securities Amount (Baht) Date of dissolution 1. Thai Hishiya Co., Ltd. 629,790.00 31 July 1998 2. Thai Mitsuboshi Co., Ltd. 2,999,900.00 In 1999 3. Kunming Shenjian Fashion 11,445,250.00 16 August 1998 Dress Co., Ltd. 4.2 Investments in Subsidiaries and Associated Companies The following are the companies that Thanulux holds 20% or more of their capital. Ownership percentage 1. Thanulux Kabinburi Company Limited 99.99 2. Kunming Shenjian Fashion Dress Company Limited** 90.00 3. Puning Xie Zhong Garment Company Limited 33.33 4. Hamilton Company Limited 25.00 5. Totalway Image Company Limited 21.00 6. Thai Monster Company Limited 21.00 7. International Commercial Coordination (HK) Limited 20.00 ** The Company does not operate nor prepare financial statements; therefore, it is not included under the equity method. 5. Earnings Appropriation The Companys earnings appropriation shall be recorded upon approval from the shareholders meeting. 6. Provident Fund The company has set up a provident fund under the Provident Fund Act B.E. 2530 (1987) on February 1, 1993. Contributions are made by the Company and the employees as stipulated. The Company has appointed a Provident Fund Manager to manage the said fund according to the ministerial regulations. However, the Company has requested the temporary suspension of the provident fund from October 1, 1997 until December 31, 1999. 7. Earnings per Share Earnings per share is calculated by dividing net income by the number of shares outstanding. 8. Commitments and Contingencies As at June 30, 1998, the Company has the following commitments. - The Company has entered into 14 trademark contracts with respective owners concerning the manufacturing and distribution of garments and leather products under their trademarks. Both parties have mutual obligations to fulfil under these contracts. The trademark fees are 0.3-8.0%. - The Company has a total of Baht 61.35 million on available but unutilized L/C lines for ordering imported raw materials. - There are contingent obligations under two bank guarantees issued to guarantee customs duties at Baht 8.16 million and the use of electricity at Baht 4.39 million. - The Company has signed a 15-year land lease to build a warehouse for raw materials in Chong Nonthri, Yannawa, Bangkok, starting on March 30, 1992 until November 29, 2007. The company paid Baht 300,000.00 for the transfer of leasehold rights plus monthly lease fees. - The Company has entered into a purchase agreement for one piece of land of 5 rai 2 ngarn 93.2 wah2 at Pa Sak district, Amphor Muang, Lum Poon Province valued at Baht 4,586,400.00. The Company has already paid a deposit of Baht 3,057,600.00. And the Company has entered into another purchase agreement for 5 rai 3 ngarn 71.2 wah2 land at Baht 5,690,880.00. The down payment is made in 24 installments totalling at Baht 3,793,920.00 and the rest will be paid on the date of the land transfer. In addition, the Company has entered into another two purchases of 11 rai 91.413 wah2 totalling Baht 12,351,385.75. Payment of Baht 1,351,385.75 was made on the date of the purchase agreement and the rest was paid by 11 cheques of Baht 1.0 million each. 9. Related Party Transactions 9.1 Related transactions of the Company and its subsidiaries are as follows. Consolidated Company Financial Financial Statement Statement June 30, 1998 June 30, 1998 (one thousand baht) (one thousand baht) Accounts receivable and post-date check 38,338 46,230 Loans 157,853 229,370 Accounts payable and expenses 19,647 30,014 Accrued income 11,679 12,005 Sales income 72,620 87,398 Other income 19,446 24,273 Purchase of goods and raw materials 16,081 37,247 Other expenses 9,441 9,169 9.2 The Company has been authorized by the 24th shareholders ordinary general meeting on April 27, 1998 to: 9.2.1 Provide loans to related companies to the amount of Baht 500 million. As at the quarter end, total loans to two related companies amount to Baht 157.85 million. 9.2.2 Provide guarantees to banks and other financial institutions for related companies liabilities at the amount less than half of the Companys total assets. As at the quarter end, the Company has a total of Baht 183.92 million contingent liabilities from various guarantees to 15 related companies. 10. Segment Information Consolidated Company Financial Financial Statement Statement June 30, 1998 June 30, 1998 (one thousand baht) (one thousand baht) Domestic sales 234,842 248,573 Export sales 265,166 250,043 Total 500,008 498,616 11. Promotional Privileges The Company was granted privileges from the BOI according to the Investment Promotion Act B.E. 2520 (1977) for business type 3.6 the manufacturing of ready-to-wear garments and 3.10 the manufacturing of leather or synthetic leather products. The privileges were granted by the Board of Investment on June 14, 1996, February 14, 1995 and November 10, 1994 respectively, according to Clauses 25, 26, 28, 30, 31, paragraphs one, two and three, Clauses 34, 35(2)(3)(4), 36(1)(2)(4) paragraphs one and two, and Clauses 37 under which taxes are exempt for a period of 8 years. Apart from the mentioned privileges, the Company has to comply with various conditions as prescribed in the promotional certificates. 12. Presentation The presentation of the financial statements ended June 30, 1997 has been reclassified in compliance with the Ministerial Regulation No. 7 (B.E. 1996) as empowered under the Public Limited Companies Act B.E. 2535 dated October 25, 1996 for comparative purposes with the financial statements of the second quarter ended June 30, 1998. 13. Statements of Cash Flows The Company has started the preparation of the cash flow statement for the second quarter ended June 30, 1998. Therefore, the cash flow statement for the second quarter ended June 30, 1997 was not available for comparative purposes. 14. Business transaction with the related company 14.1 The company has 65 domestic and export customers which are seperated according to the age of accounts receivable. Consolidated Company Financial Financial Statement Statement June 30, 1998 June 30, 1998 (one thousand baht) (one thousand baht) Over due 3 - 6 months 9,508 9,508 6 - 12 months 12,017 12,017 More than 12 months 5,165 5,165 Within credit term 152,043 158,345 Post dated cheque 28 28 Total 178,761 185,063 The company has made Baht 5.11 million of allowance for doubtful account. 14.2 The company granted loan to 3 related companies for amount of Baht 157.85 million on the clean basis. One of these companies require more capital for running business. The company granted Baht 30.95 million loan to the mentioned company without mading the allowance for doubtful account. It is because of the principle of loan will be paid in the third quarter. 14.3 The company has invested in security for Baht 6.3 million in a related company which has problems which the company has made the allowance for doubtful account.