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(Translation) Auditor's Report To the Shareholders of Thanulux Public Company Limited and Subsidiaries I have audited the consolidated balance sheet as of December 31, 2000 and 1999, and the related consolidated statements of income, retained earnings, changes in shareholders' equity and cash flows for the years then ended of Thanulux Public Company Limited and Subsidiaries, including the financial statements of Thanulux Public Company Limited. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with International Standards on Auditing. 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 audit provides a reasonable basis for my opinion. In my opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of Thanulux Public Company Limited, Thanulux Public Company Limited and Subsidiaries as of December 31, 2000 and 1999 and the results of operations, changes in shareholders' equity and cash flows for the years then ended in accordance with generally accepted accounting principles. (Mr. Natee Sangudomlert) Certified Public Accountant auditors No. 300 Bangkok February 18, 2001 Thanulux Public Company Limited and Subsidiaries Notes to The Consolidated Financial Statements December 31, 2000 and 1999 ---------------------------------------------------------------------------------------------------------- 1. Principles of Consolidated Financial Statements The company's financial statements include those of Thanulux Public Company Limited's ended December 31, 2000 and 1999. 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 company's 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 by all such companies. 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 after less depreciation. Depreciation is calculated by the straight-line method at the following rate Building and construction 5% per annum Other assets 20% per annum As for the subsidiaries' asset - depreciation is calculated by the straight-lime method at the following rate Building and construction 5% per annum Other assets obtained before October 1, 1996 20% per annum Other assets obtained since October 1, 1996 10% per annum 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 are long term investment which classified as follows - Marketable securities are the securities for trading which show fair value. The company acknowledges the altered value to be the seperated item of shareholders' equity and will record in the financial statements, when the company sells the securities. - The investment of unlisted securities are general securities which show the cost value. - The cost of disposed investments are average cost. - Investments in subsidiaries and associated companies are booked under the equity 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 year are translated into Baht at the average exchange rate on the last day of the accounting year. 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 company's experience. 3.8 Allowance for loss from impairment of assets, consider the identification which persuade to believe to be impairment of assets by the difference of the refolded estimated value which is lower than the book value of the assets. 3.9 The 26th ordinary meeting of shareholders dated 24 April 2000 had the resolution of approving the directors' remuneration. The remuneration, will not include their compensation or welfare given to the director as a staff or employee of the company, will be provided by board not on the basis of company's profit. 4. Fixed Deposit at Bank In 2000 and 1999, the company had fixed deposit at 2 commercial banks which amounted to Baht 157.57 million and Baht 165.0 million. The interest rate was 3.5 3.75% per year and 4.25 - 4.75% per year respectively. 5. Trade Accounts and Notes Receivable consist of (Unit : Baht 1,000) Consolidated The company only 2000 1999 2000 1999 Accounts receivable 305,143 241,785 311,642 242,158 Less allowance for doubtful accounts 171 5,538 171 5,538 Total 304,972 236,247 311,471 236,602 In 2000 and 1999, the company had both domestic and foreign debtors amounting to 66 and 61debtors respectively. They were classified to the age of the debt. (Unit : Baht 1,000) Consolidated The company only 2000 1999 2000 1999 Within credit term 275,122 212,997 282,014 213,370 Over due 1 - 3 months 25,992 20,142 25,970 20,142 Over due 3 - 6 months 3,947 1,538 3,575 1,538 Over due 6 12 months 105 2,686 105 2,686 Over due more than 12 months (22) 4,422 (22) 4,422 Total 305,114 241,785 311,642 242,158 As December 31, 2000 and 1999, the company had made Baht 0.17 million and Baht 5.54 million respectively of allowance for doubtful accounts. 6. Short-term Loans Consolidated Related parties Amount Amount Policy for setting the (This year) (Last year) cost of borrowing Loan receivable Related companies Ramasorn Thaveekarn Co., Ltd. 63,000,000.00 87,000,000.00 Cost of borrowing interest rate plus 1-2% Total 63,000,000.00 87,000,000.00 The company only Related parties Amount Amount Policy for setting the (This year) (Last year) cost of borrowing Loan receivable Subsidiaries Thanulux Kabinburi Co., Ltd. 41,800,000.00 58,500,000.00 Cost of borrowing interest rate plus 1-2% Related companies Ramasorn Thaveekarn Co., Ltd. 63,000,000.00 87,000,000.00 " Total 104,800,000.00 145,500,000.00 The company had loaned a sum of Baht 104.8 million and Baht 145.5 million to 2 companies at the interest rate per year of 8.375 9.25% and 10.0% respectively, without guarantee. 7. Inventories consist of (Unit : Baht 1,000) Consolidated The company only 2000 1999 2000 1999 Raw materials 111,114 89,819 105,289 83,906 Work in process 100,981 67,768 98,131 62,109 Finished products 58,981 34,321 59,217 34,307 Goods in transit 2,239 466 - 466 Total 273,315 192,374 264,876 180,788 8. Investments in Securities Consolidated As of December 31, 2000, we had, securities in 9 listed companies which had total fair value as Baht 126,060,675.25 (total cost = Baht 69,940,874.24) - for selling, securities in 51 non-listed companies which had total cost as Baht 177,986,368.12 general investment (this amount had included allowance for loss from decreasing registered capital Baht 1,950,000.00 and allowance for loss from impairment of investment = Baht 32,060,782.81). The securities in non-listed companies had lost Baht 14,329,932.46 from impairment of investment in this period. There were 3 companies which the capital were not fully paid for the amount of Baht 775,000.00. As of December 31, 1999, we had, securities in 9 listed companies which had total fair value as Baht 59,736,826.00 (total cost = Baht 40,021,660.77) - for selling, securities in 43 non-listed companies which had total cost as Baht 146,948,292.91 general investment (this amount had included allowance for loss from decreasing registered capital Baht 1,950,000.00). The securities in non-listed companies had lost Baht 17,743,161.85 from impairment of investment in this period. There were 3 companies which the capital were not fully paid for the amount of Baht 1,100,000.00. Investments-Related parties Consolidated 2000 (Unit : 1,000) Company Name Type of Relationship Paid-up % of Investment Dividend Market Business Share capital Investment price Cost Equity As of Dec. 31 method method - Securities for trading Related companies People's Garment Public Co., Ltd. Garment Co-Director 72,000 13.78 9,920 - 1,985 25,799 I.C.C. International Public Co., Ltd. Cosmetics and Co-Director 290,634 2.32 43,133 - 1,957 71,335 Apparel Thai Wacoal Public Co., Ltd. Ladies's Lingerie Co-Director 120,000 0.93 8,461 - 611 13,986 Far East Advertising Public Co. Ltd. Advertising Co-Shareholder 25,000 0.35 505 - 198 776 Textile Prestige Public Co., Ltd. Embroidery Lace Co-Shareholder 108,000 0.35 285 - 95 2,320 Saha Pathana Inter-Holding Public Investment Co-Director 494,034 0.33 6,836 - 163 9,535 Co., Ltd. O.C.C. Public Co., Ltd. Consumer Products Co-Shareholder 60,000 0.13 41 - 12 230 Sahapathanapibul Public Co., Ltd. Consumer Products Co-Shareholder 275,875 0.07 495 - 30 1,150 Total 69,676 - 5,051 125,131 Add Unrealized gain for Marketable securities 55,455 - - - Total securities for trading 125,131 - 5,051 125,131 - General investments P.T. Mesapro International Garment and Co-Director US$ 800 19.00 3,817 - - - Leatherware Thai Hamilton Co. Ltd. Garment Co-Director 20,000 19.00 12,236 - 760 - Thai Monster Co., Ltd. Garment Co-Director 20,000 19.00 5,549 - 380 - Total Way Image Co., Ltd. Leatherware Co-Director 20,000 19.00 7,132 - 950 - Thai Nakamura Label Co., Ltd. Label Co-Shareholder 20,000 19.00 3,800 - - - SSDC (Tigertex) Co., Ltd. Dyeing Co-Director 270,000 18.96 58,394 - - - Woven Fabric Puning Xie Zhong Garment Co. Ltd. Garment Co-Director US$ 2,400 18.50 6,582 - - - International Commercial Apparel Co-Director HK$ 1,000 18.00 1,302 - - - Coordination (Hong Kong) Ltd. International Leather Fashion Leatherware Co-Director 50,000 18.00 8,810 - - - Corp., Ltd. Champ Ace Co., Ltd. Garment Co-Director 40,000 15.00 6,000 - 4,500 - S.T. G.C. Co., Ltd. Reserch and Co-Director 2,500 13.00 325 - - - Development Thai Poron Co., Ltd. Garment Co-Director 20,000 13.00 2,917 - - - Grand Star Industry Co., Ltd. Cloth Co-Shareholder 20,000 12.50 4,992 - 450 - Thai Takaya Co., Ltd. Jeans Co-Director 30,000 11.00 3,300 - 1,155 - Thai Gunze Co., Ltd. Garment Co-Shareholder 180,000 8.00 17,280 - 2,160 - Ascot International Co., Ltd. Knitwear Co-Shareholder 21,000 7.62 1,600 - - - Belle Maison (Thailand) Co., Ltd. Direct Sale Co-Shareholder 40,000 7.00 2,800 - - - Thai Le Jour Co., Ltd. Garment Co-Shareholder 20,000 5.00 1,000 - - - Saha Info Technology Co., Ltd. Information Co-Shareholder 5,000 5.00 * 250 - - - Technology Sunrise Garment Co., Ltd. Garment Co-Shareholder 10,000 5.00 916 - 350 - K. Commercial and Construction Construction Co-Director 50,000 5.00 6,694 - - - Co., Ltd. Thai Shikibo Co., Ltd. Cotton Yarn Co-Shareholder 237,500 4.81 11,425 - - - Thai Staflex Co., Ltd. Powernet Co-Shareholder 60,000 4.00 2,400 - 360 - Treasure Hill Co., Ltd. Golf Cours Co-Shareholder 200,000 4.00 6,300 - - - Value Added Textile Co., Ltd. Embroidery Co-Shareholder 50,000 3.00 67 - - - Wien Co., Ltd. Direct Sales Co-Director 10,000 2.40 1,067 - - - Thai Janome Co., Ltd. Sewing Machine Co-Shareholder 88,000 2.00 1,760 - 370 - Sahapat Properties Co., Ltd. Land Development Co-Shareholder 20,000 1.00 200 - - - Thai Itokin Co., Ltd. Garment Co-Director 100,000 1.00 1,411 - - - Racha Uchino Co., Ltd. Cotton Towels Co-Director 81,000 0.49 163 - - - Pattaya Manufacturing Co., Ltd. Garment Co-Director 30,000 0.33 741 - - - Total general investments 181,230 - 11,435 - Less allowance loss from impairment of investments 20,565 - - - Total general investments 160,665 - 11,435 - Total investments 285,796 - 16,486 125,131 Consolidated 1999 (Unit : 1,000) Company Name Type of Relationship Paid-up % of Investment Dividend Market Business Share capital Investment price Cost Equity As of Dec. 31 method method - Securities for trading Related companies People's Garment Public Co., Ltd. Garment Co-Director 72,000 13.78 9,920 - 1,191 18,853 I.C.C. International Public Co., Ltd. Cosmetics and Co-Director 290,634 0.99 13,214 - 1,003 20,196 Apparel Thai Wacoal Public Co., Ltd. Ladies's Lingerie Co-Director 120,000 0.93 8,461 - - 9,324 Far East Advertising Public Co. Ltd. Advertising Co-Shareholder 25,000 0.35 505 - 78 819 Textile Prestige Public Co., Ltd. Embroidery Lace Co-Shareholder 108,000 0.35 285 - 57 856 Saha Pathana Inter-Holding Public Investment Co-Director 494,034 0.33 6,836 - 40 8,150 Co., Ltd. O.C.C. Public Co., Ltd. Consumer Products Co-Shareholder 60,000 0.13 41 - - 104 Sahapathanapibul Public Co., Ltd. Consumer Products Co-Shareholder 275,875 0.07 495 - 40 865 Total 39,757 - 2,409 59,167 Add Unrealized gain for Marketable securities 19,410 - - - Total securities for trading 59,167 - 2,409 59,167 - General investments P.T. Mesapro International Garment and Co-Director US$ 800 19.00 3,817 - - - Leatherware Thai Hamilton Co. Ltd. Garment Co-Director 20,000 19.00 12,236 - 760 - Thai Monster Co., Ltd. Garment Co-Director 20,000 19.00 5,549 - 570 - Total Way Image Co., Ltd. Leatherware Co-Director 20,000 19.00 7,132 - 950 - Thai Nakamura Label Co., Ltd. Label Co-Shareholder 20,000 19.00 3,800 - - - Puning Xie Zhong Garment Co. Ltd. Garment Co-Director US$ 2,400 18.00 6,311 - - - International Commercial Apparel Co-Director HK$ 1,000 18.00 1,302 - - - Coordination (Hong Kong) Ltd. International Leather Fashion Leatherware Co-Director 50,000 18.00 8,810 - - - Corp., Ltd. Champ Ace Co., Ltd. Garment Co-Director 40,000 15.00 6,000 - 2,400 - SSDC (Tigertex) Co., Ltd. Dyeing Co-Director 270,000 14.28 42,809 - - - Woven Fabric S.T. G.C. Co., Ltd. Reserch and Co-Director 2,500 13.00 325 - - - Development Thai Takaya Co., Ltd. Jeans Co-Director 30,000 11.00 3,300 - 495 - Thai Poron Co., Ltd. Garment Co-Director 20,000 10.00 2,000 - - - Ascot International Co., Ltd. Knitwear Co-Shareholder 21,000 7.62 1,600 - - - Grand Star Industry Co., Ltd. Cloth Co-Shareholder 20,000 7.50 1,500 - 375 - Belle Maison (Thailand) Co., Ltd. Direct Sale Co-Shareholder 30,000 7.00 *2,100 - - - Thai Le Jour Co., Ltd. Garment Co-Shareholder 20,000 5.00 1,000 - - - Saha Info Technology Co., Ltd. Information Co-Shareholder 5,000 5.00 * 250 - - - Technology Thai Shikibo Co., Ltd. Cotton Yarn Co-Shareholder 237,500 4.81 11,425 - - - Thai Staflex Co., Ltd. Powernet Co-Shareholder 60,000 4.00 2,400 - 60 - Thai Gunze Co., Ltd. Garment Co-Shareholder 180,000 4.00 7,200 - 810 - Treasure Hill Co., Ltd. Golf Cours Co-Shareholder 200,000 4.00 6,300 - - - Value Added Textile Co., Ltd. Embroidery Co-Shareholder 50,000 3.00 67 - - - Sunrise Garment Co., Ltd. Garment Co-Shareholder 10,000 3.50 385 - - - Thai Janome Co., Ltd. Sewing Machine Co-Shareholder 88,000 2.00 1,760 - 405 - Sahapat Properties Co., Ltd. Land Development Co-Shareholder 20,000 1.00 200 - - - Thai Itokin Co., Ltd. Garment Co-Director 100,000 1.00 1,411 - - - Racha Uchino Co., Ltd. Cotton Towels Co-Director 81,000 0.49 163 - - - Total general investments 141,152 - 6,285 - Less allowance loss from impairment of investments 15,435 - - - Total general investments 125,717 - 6,285 - Total investments 184,884 - 9,234 59,167 Investments-Others - Securities for trading comprise : Public Limited Companies 2000 1999 % of Investment % of Investment Investment Investment 1. Thai Toray Textile Mill 0.50 265,320.00 0.50 265,320.00 Add Unrealized gain for marketable securities 664,680.00 304,680.00 Total securities for trading 930,000.00 570,000.00 - General investments comprise : Limited Companies 2000 1999 % of Investment % of Investment Investment Investment 1. Pak Numpo Wattana 14.00 1,037,442.00 - - 2. Thai Pleats 12.50 1,000,000.00 12.50 1,000,000.00 3. Intanin Chiangmai 12.50 3,406,362.50 - - 4. Koraj Wattana 12.50 1,527,575.00 - - 5. Sun & San 12.50 1,498,637.50 - - 6. Intersouth 12.50 4,285,612.50 - - (more)