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THREE THINGS ABOUT PRANDA The Strengths of PRANDA Jewelry Jewelry.. 2003 marked the 30th anniversary of Pranda Jewelry Public Company Limited as a leading gemstone jewelry manufacturer. This 30th anniversary celebration ,held on September 8, 2003 reflected the long-term business achievement and expertise in the production of gemstone jewelry which has been accumulated over the past three decades. The company’s achievement is evidenced by it’s capacity to expand the business and win recognition in international markets, currently operating through 12 subsidiary companies in the domestic market and across the world. The Company plays a critical part as a real driving force, supporting the government’s ambitious plan to develop Bangkok as the Fashion City, in order to upgrade Thailand’s gemstone jewelry and accessories penetration of the international market. There are three main strengths of Pranda Jewelry which have resulted in the company becoming the leading manufacturer of gemstone jewelry over the past 30 years. Firstly, Pranda Expertise Expertise. The Company is currently a leading manufacturer of the gemstone jewelry industry with expertise ranging from it’s unique and innovative design and development center, to production handled by highly skilled craftsmen, all supported by extensive exclusive distributors and the Pranda Group’s own sales network worldwide. Secondly, Pranda Scale Scale. With high competency in jewelry manufacturing producing in excess of 4,000,000 items per year with more than 3,500 highly skilled crafts persons at five manufacturing facilities located throughout South East Asia. Two of them in Thailand, one in Indonesia, one in Vietnam, and another recently opened in China , enabling the company to cater to a wide range of target customers and regional markets throughout the world. Thirdly, Pranda Corporate Culture. Culture The company runs the business under good corporate culture principals, creating team spirit and commitment from staff at all levels to cater to the different demands of clients with maximum care, and to ensure fair and equal treatment to all related parties ,especially for the Company’s stakeholders. Summary - These three strengths of Pranda Jewelry Public Company Limited and the Pranda Group as a whole have created a confidence throughout the group, that the new decade of the company in business would be also another decade of continuous growth. The Pranda Group is committed to playing a part as a driving force, fully supporting the government’s “Bangkok Fashion City” project in order to create the greatest benefit to Thailand and all Thai people.

3


MESSAGE FROM CHAIRMAN Thailand’s economy has experienced a satisfactory growth in 2003 to the extent that the country had obviously succeeded in steering clear of the economic slump. Several positive factors also transpired in the industry such as the robust expansion of exports, restored confidence of general consumers and investors, and expanded investment in the macroeconomic level. Still, there were some negative factors to the country’s economy which posed a risk to all businesses, prompting the operators to immediately fine-tune themselves to the incident. That was the outbreak of Severe Acute Respiratory Syndrome or Sars. Despite the Sars devastation, Thailand’s genuine jewelry exports expanded by 12% in 2003 to US$1,105 million compared with the figures of 2002. This year, the industry outlook is likely to become brighter, as the government has earmarked a relatively huge financial package to support the country’s first-ever Bangkok Fashion City with an aim to increase potential of the unique design, production and competitiveness of Thai gems and jewelry in the world market. In 2004, the Company is still committed to pursuing the existing growth strategy both in terms of revenues and profits with the main focus on expansion into Asian market under Prima Gold and Esse Brand.In the meantime, the Company plans to enlarge the European market for silver accessories and North America for gold products. The Company is also committed to developing inhouse production to become more Original Brand Manufacturing (OBM) from a current Original Design Manufacturing (ODM) which complies with “Product Leadership,” the organization’s business goal. In addition the Company states clearly a policy of social contribution and environmental care to bring the surrounding environments to sustainable growth together with us. I would like to thank all stakeholders, clients, as well as business partners who continue providing good support to the Company’s business development. Again, I would like to thank employees at all levels who collectively and whole-heartedly cooperate in the company’s operations, the government sector and other related agencies which share a part both directly and indirectly to contribute their supports to the Company. Last but not least, the Company’s Board of Directors is committed to operating business to generate maximum returns and share profits to all groups of related parties with transparency and fairness in accordance with the code of the best practice under the good corporate governance, and we look forward to receiving continued support from all of you in the future.

In 2004, the Company is still committed to pursuing the existing growth strategy both in terms of revenues and profits with the main focus on expansion into Asian market under Prima Gold and Esse Brand. In the meantime, the Company plans to enlarge the European market for silver accessories and North America for gold products.

Prida Tiasuwan, Chairman

5


MESSAGE FROM THE PRESIDENT Performance of Pranda Jewelry Public Company Limited in 2003 was very positive benefiting from the government’s import tariff waiver for raw materials used in the gems and jewelry industry, implementation of Bangkok Fashion City project, and the planned free trade area (FTA) agreements with several trade partners such as Japan, India, Peru, Australia and the United States. However, the outbreak of Sars (severe acute respiratory syndrome) had generated some negative impact to the Company, as the deadly virus caused many businessmen to cancel their business trips to Thailand. However, because of the Company’s extensive existing overseas representative offices now operating in our major export markets and with business strategy adjustments to conform to the market changing conditions, Pranda Jewelry Public Company Limited has well weathered these problems and achieved our business targets, becoming the country’s the largest genuine gem and jewelry exporter last year. On the manufacturing front, the Company had increased last year , the production capacity of the three plants located at Bangna-Trad, Nakhon Ratchasima and Vietnam fully and efficiently utilizing existing resources with no new capital injection. In addition, the Company had raised production capacity of the factory in Guangzhou in China. As a result, the Company’s total production capacity increased by 10% in combination last year in line with expanding exports. On human resources which are always taken as the critical part of the Company, Pranda Jewelry Public Company Limited has well prepared human resource development plans with extensive training courses throughout the departments to increase the experience and boost the efficiency of our workers. Information technology was also upgraded to cater to a wide range of increased demands of the customers. The Company has also implemented an efficient management strategy within the organization as well as the promotion of brands awareness resulting in increased profitability. To meet this end, the Company has injected 50 million baht to expand the distribution bases of Prima Gold International Co., Ltd. which resulted in not only an increase of its sales but also greater awareness of the Company’s brands including Prima Gold, Prima Diamond, Esse, and Prima Art in both the domestic and overseas market. The Company’s commitment to develop high quality products through our product design ,planning center and the provision of services to meet different requirements of the clients through our extensive distribution network both

The Company has also implemented an efficient management strategy within the organization as well as the promotion of brands awareness resulting in increased profitability.

in the domestic and international market played a vital part to bring about appreciation of the Company’s products and services both to existing and new customers. For the achievement in 2003, I would like to thank the board of directors, the company’s employees at all levels and the management who all dedicate themselves with great responsibility. and I look forward to maintaining their continuous supports in the future.

Prapee Sorakraikitikul President

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THE BOARD OF DIRECTORS

Mr .Prida T iasuwan Mr.Prida Tiasuwan Chairman

Sub.Lieut. Prayoon T alerngsri Talerngsri Chairman (Executive Committee)

Lieut. Olarn Krairiksh Independent Director/Chairman of Audit Committee

Lieut. Anan Panananda R.N. Independent Director/Audit Committee

Mrs. Prapee Sorakraikitikul President

8


THE BOARD OF DIRECTORS

Mrs. Sunanta T iasuwan Tiasuwan Corporate Finance Chairman

Mrs. Pranee Khunprasert Senior Vice President

Mr iasuwan Mr.. Pramote T Tiasuwan Senior Vice President

Mrs. Panidda T iasuwan Tiasuwan Vice President

Mr Mr.. Eugene S. Davis Director

Mr orasit Pokachaiyapat Mr.. V Vorasit Independent Director/Audit Committee

9


EXECUTIVE DIRECTORS

Sub.Lieut. Prayoon T alerngsri Talerngsri Executive Chairman

Mrs. Prapee Sorakraikitikul Vice Executive Chairman

Mrs. Sunanta T iasuwan Tiasuwan Vice Executive Chairman

Mr iasuwan Mr.. Pramote T Tiasuwan Vice Executive Chairman

Mrs. Pranee Khunprasert Vice Executive Chairman

10


EXECUTIVE DIRECTORS

Miss Pittaya T iasuwan Tiasuwan Executive Director

Mrs. Panidda T iasuwan Tiasuwan Executive Director

Mr Mr.. Decha Nuntanajaroenkul Executive Director

Mr ongkaew Mr.. Banjong W Wongkaew Executive Director

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GENERAL INFORMATION COMPANY INFORMATION Pranda Jewelry Public Company Limited Registration Business Headquarters address

: : :

Public company 445 Manufacturing and export of jewelry 333 Soi Rungsang, Bangna-Trad Road, Bangna Sub-district, Bangna District, Bangkok 10260

Telephone Fax Website Registered capital of ordinary share Paid-up shares

: : : : :

(66) 2361-3311, 2393-8428, 2393-8779 (66) 2361-3088, 2398-2143, 2399-4874 www.pranda.co.th 400,000,000 Baht 238,851,900 Baht

Par value

:

1 baht per share

JURISTIC PERSONS OF WHICH THE COMPANY’S SHAREHOLDING EXCEEDED 10 % Domestic Subsidiaries Crystaline Co., Ltd. Type of Business Address

: :

Registered capital of ordinary share Paid-up shares % of Shareholding

: : :

Primagold International Co., Ltd. Type of Business

:

Address

:

Registered capital of ordinary share Paid-up shares % of Shareholding

: : :

Manufacturing and export of costume jewelry 331 Soi Rungsang, Bangna-Trad Rd., Bangna Sub-district, Bangna District, Bangkok 10260 Tel. (66) 2746-9580-5 Fax : (66) 2399-4878 www.crystaline.com 50,000,000 Baht 50,000,000 Baht 92

Distribution of pure gold 99.99 %, diamond and gems jewelry under brands of Prima Gold, Prima Diamond, ESSE 1093/64 12th Flr., Central City Bangna Building, Bangna-Trad Rd., Bangna Sub-district, Bangna District, Bangkok 10260 Tel. (66) 2745-6111 Fax : (66) 2745-6117 www.primagold.co.th 100,000,000 Baht 100,000,000 Baht 100

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GENERAL INFORMATION Pranda Lodging Co., Ltd. Type of Business

:

Address

:

Registered capital of ordinary share Paid-up shares % of Shareholding

: : :

Property rental / Properties 333 Soi Rungsang, Bangna-Trad Rd., Bangna Sub-district, Bangna District, Bangkok 10260 Tel. (66) 2361-3311 Fax : (66) 2361-3088 50,000,000 Baht 50,000,000 Baht 83

Overseas Subsidiaries Pranda North America, Inc. Type of Business

:

Address

:

Paid-up shares % of Shareholding

: :

Crystaline North America, Inc. Type of Business

:

Address

:

Paid-up shares % of Shareholding

: :

Distribution of gold Jewelry in the US and Canada 1 Wholesale Way, Cranston, RI 02920, U.S.A. Tel. 1(401) 490-5100-10 Fax : 1(401) 490-5106 E-mail : Dchand@prandana.com 2,000 USD 100

Distribution of costume jewelry and silver Jewelry in the US and Canada 1 Wholesale Way, Cranston, RI 02920, U.S.A. Tel. 1(401) 946-2104 Fax : 1(401) 946-2109 E-mail : Silver@cna-corp.com 25,000 USD (held by Pranda North America, Inc,) 100

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GENERAL INFORMATION H.Gringoire s.a.r .l. s.a.r.l. Type of Business

:

Address

:

Paid-up shares % of Shareholding

: :

Pranda UK Limited Type of Business

:

Address

:

Paid-up shares % of Shareholding

: :

Distribution of gold jewelry under H.Gringoire brand in France and Europe 79 Rue De Turbigo F-75003, Paris, France Tel. 33 (1) 5301-9530 Fax : 33 (1) 5301-9540 E-mail : h.gringoire@libertysurf.fr 1.893 Million EUR 100

Distribution of gold, Silver and costume jewelry under Cristalina brand in UK and Europe P.O. Box 270, Walton On Thames, Surrey KT 12 3 YS Tel. 44 (1) 932-220-645 Fax : 44 (1) 932-221-438 E-mail : everyone@pranda.co.uk 0.5 Million GBP 100

Pranda Vietnam Company Limited Manufacturing and export of costume jewelry and distributor of Type of Business : silverware under ESSE brand in Vietnam Address : 16 Road 2A, Bien Hoa Industrial Zone II, Dong Nai, Vietnam Tel. 84 (61) 836 627, 836 739 Fax : 84 (61) 836 738 E-mail : pranda_vn@hcm.vnn.vn Paid-up shares : 1.5 Million USD % of Shareholding : 100

Pranda Singapore Pte Limited Type of Business : Address :

Paid-up shares % of Shareholding

: :

Venture in Malaysia and Indonesia Asiaciti Management Pte. Limited 3 Raffles Place, # 09-01 Bharat Building Singapore 048617 Tel. (65) 533-2611 Fax : (65) 532-5092 3 Million SGD 100

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GENERAL INFORMATION Guangzhou Pangda Zhubao Shoushi Y ouxian Gongsi Youxian Type of Business : Manufacturing of Jewelry for locally distributed to People’s Address

:

Paid-up shares % of Shareholding

: :

Republic of China No. 381 Yushan Road West, 2/F., Shiqiao, Panyu, Guangzhou, Guangdong, CHINA Tel. (86) 020 8480 3359, 139 0243 9101 Fax : (86) 139 0243 9101 0.25 Million USD 100

Domestic Associated Company LG-Pranda Co., Ltd. Type of Business

:

Address

:

Registered capital of ordinary share Paid-up shares % of Shareholding

: : :

Import and Distribution of Silver and Pure Gold Granules and Bars 159 Sukhumvit Road 21 (Asoke) Khongtoey Sub-district, Wattana District, Bangkok 10110 Tel. (66) 2204-1441-3 Fax : (66) 2204-1444 30,000,000 Baht 9,000,000 Baht 40

Overseas Associated Company P.T .T.. Pranda SCL Indonesia Type of Business

:

Address

:

Paid-up shares % of Shareholding

: :

Manufacturing of Jewelry for export and domestic distribution JL.I Gusit Ngurah Rai No.1, Jakarta 13420, INDONESIA Tel. 62 21 819 9280-2 Fax : 62 21 819 9223 E-mail : Pranscl@cbn.net.id 4,000 Million IDR 50

16


GENERAL INFORMATION REFERENCE PERSONS Official Registrar

:

Thailand Securities Depository Company Limited 62 The Stock Exchange of Thailand Building, 4, 7th Floor, Rachadapisek Road, Klongtoey, Bangkok 10110, THAILAND. Tel. (66) 2229-2800 Fax : (66) 2359-1259

Auditor

:

1. Mr.Ruth Chaowanagawi CPA No. 3247 and/or 2. Mr. Narong Pantawong, CPA No. 3315 and/or 3. Ms.Siraporn Ouaanunkun CPA No. 3844 Ernst & Young Office Limited 33rd Floor, Lake Rajada Office Complex 193/136-137 New Rajadapisek Road (Near Queen Sirikit’s National Convention Centre) Klongtoey, Bangkok 10110, THAILAND Tel : (66) 2264-0777, 2661-9190 Fax : (66) 2264-0789-90, (66) 2661-9192

Law Consultants

:

White & Case (Thailand) Limited 5th Floor, Gaysorn Place (Gaysorn Plaza) 999 Ploenchit Road, Lumpini Pathumwan, Bangkok 10330, THAILAND Tel : (66) 2656-1721 Fax : (66) 2656-1733

17


NATURE OF BUSINESS Pranda Jewelry Public Company Limited (Pranda) was founded in 1973 by Pranda Design Group and later renamed to Pranda Jewelry Limited on April 27, 1984. The Company had listed its ordinary shares in the Stock Exchange of Thailand on July 6, 1990 and later converted into Public Company Limited on June 3, 1994. The Company has current registered capital worth of 400 million baht with 236.85 million baht paid up. P r a n d a Jewelry Public Company Limited’s headquarter is located at 333 Moo.11, Soi Rungsaeng, Bangna-Trad, Bangna, Bangkok. The Company operates under the promotional privileges of the Board of Investment for export-orientated golden and silver-based jewelry. Since the inception, Pranda Jewelry Company Limited has now been in business for over 30 years and operated 12 companies both in the country and foreign markets, producing a wide range of products from golden jewelry to silver-based ornaments. Extensive portfolio of the Company’s products including rings, earrings, brooch, locket, necklaces, and bracelets have driven Pranda Jewelry Public Company Limited as the jewelry specialist to the extent that the Company has achieved in expansion into the overseas market. Major market destinations include the United States, European Union, Australia, Asia Pacific and the Middle East. On the domestic front, the Company is currently the manufacturer of 99.99% gold jewelry under Prima Gold brand, diamond jewelry under Prima Diamond brand, and silver jewelry under Esse brand which are distributed through Primagold International, the Company’s wholly-owned subsidiary. In addition, the Company has generated additional revenues from contracted manufacturing for other companies, state units, and a wide range of institutions, which want to produce their own souvenirs or commemoratives. The Company’s current core business is the production and distribution of jewelry, covering nine subsidiaries and two joint venture firms with five manufacturing plants in four countries including Thailand, Indonesia, Vietnam. At the latest development, to increase the distribution channels and expand the Company’s markets, the Company has established the wholly owned Guangzhou Pangda Zhubao Shoushi Youxian Gongsi to operate production of jewelry under a wide range of brands for distribution in the domestic market in China.

19


NATURE OF BUSINESS PRINCIPAL BUSINESS STRUCTURE OF PRANDA JEWELRY PUBLIC COMPANY LIMITED

Production Base

CRYSTALINE Co.,Ltd. (THAILAND) Producer and exporter of costume jewelry

PRANDA SINGAPORE P.T. PRANDA Pte. Limited SCL. 50% (SINGAPORE) (INDONESIA) Joint venture firm Manufacturing of in Jewelry for export Malaysia and domestic and Indonesia. distribution

92%

100%

100%

Joint V enture Venture

LG- PRANDA Co.,Ltd (THAILAND) Importer and distributor of pure silver and pure gold in nuggets and bars.

PRANDA VIETNAM Co., Ltd. (VIETNAM) producer and distributor of sliver jewelry for exports and distribution under Esse brand in Vietnam

GUANGZHOU PANGDA ZHUBAO SHOUSHI YOUXIAN GONGSI (CHINA) Jewelry producer for distributor In China

100%

Domestic Distribution Base

40%

PRANDA JEWELRY PUBLIC COMPANY LIMITED (THAILAND) Jewelry producer 100% and exporter

PRIMAGOLD INTERNATIONAL Co., Ltd. (THAILAND) Distributor of pure gold , diamond and jewelry under Prima Gold, Prima Diamond and Esse brand.

Overseas Distribution Base 100% PRANDA NORTH AMERICA, INC. (USA), Distributor of gold accessories in the USA and Canada

100%

H. GRINGOIRE S.A.R.L. (FRANCE), distributor of gold jewelry under H. Gringoire in France and Europe

20

100%

100%

CRYSTALINE NORTH AMERICA, INC. (USA), distributor of costume jewelry and silver jewelry in the US and Canada

PRANDA U.K. LTD. (ENGLAND ), distributor of gold and silver jewelry under Cristalina brand in England


NATURE OF BUSINESS SIGNIFICANT CHANGE AND DEVELOPMENT IN THE PAST YEAR The Company established last year Guangzhou Pangda Zhubao Shoushi Youshi Youxian Gongsi, a new wholly-owned subsidiary, to operate the production of jewelry under a wide range of brands for distribution in China through cooperation with Home Shopping Shanghai Limited (TVSN), China’s largest retail network, which operates sales channels through a wide range of media including television, Internet, catalogue and department stores and retail outlets in China. The new subsidiary would enable the Company’s products to get more access to over 120 million household target customers in 30 major economic cities of China. The Company has also injected 50 million baht in new capital into Primagold International Co, the subsidiary, for use as working capital to expand the Group’s distribution base and develop “Prima Art” brand artwork.

INDUSTRY OUTLOOK. The jewelry industry itself has experienced a continuous robust growth especially in the segment of colored gemstone and silver accessories, because of a greater line of products available to meet different demands of the global market, and a gradual recovery of the world economy and government initiatives such as Bangkok Fashion City project, and import tariff waiver for imported raw materials. The government’s ambitious plans to implement international free trade either on bilateral or multilateral basis and the trade liberalization; in the meantime, has prompted the market competition particularly in the pricing to be more intensified. H o w e v e r, Pranda Jewelry Public Company Limited has strictly adhered to policy and commitments to developing its own brands and upgrading itself to achieve Original Brand Manufacturing (OBM) practice to sustain long-term competitiveness in the world market and comply with the greatest satisfaction of customers through the Company’s extensive networks and subsidiaries throughout Europe, the Untied States, and Asia.

21


REVENUE STRUCTURE The revenue structure of Pranda Jewelry Public Company Limited and Subsidiaries broken down to domestic sales and exports (after deduction of intercompany transaction items) 2003

2002

million baht Revenue from Exports Revenue from Domestic Sales

Total

2,229 386 2,615

%

2001 %

million baht

85.24 14.76 100.00

2,082 425 2,507

%

million baht

83.05 16.95 100.00

1,942 303 2,245

86.50 13.50 100.00

Revenue Structure of Pranda Jewelry Public Company Limited and Subsidiaries according to consolidated financial statements Company

2003

% of holdings

Pranda Jewelry Plc.

2002

2001

Type of Revenue

Producer and exporter of costume jewelry, gold

Million baht

%

Million baht

%

Million baht

%

958

36.15

896

35.39

912

39.45

271

10.23

264

10.43

204

8.82

-

-

-

-

2

0.09

127

4.79

126

4.98

110

4.76

696

26.26

745

29.42

545

23.57

205

7.74

218

8.61

232

10.03

352

13.28

255

10.07

237

10.25

6

0.23

3

0.12

3

0.13

2,615

98.68

2,507

99.01

2,245

97.10

and silver accessories

Subsidiaries-Domestic Primagold International

100

Co., Ltd. Pranda Intergems Co.,

Distributor of Prima Gold, Prima Diamond and Eighteen K.

100

Local gem distributor

92

Producer and exporter of costume jewelry

100

Distributor of gold accessories in the US and

Ltd. Crystaline Co., Ltd.

Subsidiaries-Overseas Pranda North America, Inc.

Canada Crystaline North

100

America, Inc. H.Gringoire

Distributor of costume jewelry and silver jewelry in the US and Canada

100

Distributor of gold jewelry under H. Gringoire brand in France and Europe

Pranda U.K. Limited

100

Distributor of gold & silver and costume jewelry under Cristalina brand in UK and Europe

Pranda Vietnam Co.,Ltd.

100

Producer and exporter of costume jewelry and distributor of silverware under Esse brand in Vietnam

Returns on investments from joint venture Pranda Lodging Co., Ltd.

83

Property rental/properties

4

0.15

4

0.16

5

0.22

Pranda Singapore Pte

100

Venture in Malaysia and Indonesia

-

-

-

-

-

-

7

0.26

(10)

(0.39)

15

0.65

Limited Returns on investments from joint venture Other revenues

24

0.91

31

1.22

47

2.03

Total revenues

2,650

100.00

2,532

100.00

2,312

100.00

23


2003 HIGHLIGHTS

Unit : Million Baht Total Assets Total Liabilities Shareholders’ Equity Total Revenues Total Sales Cost of Sales Gross Margin Operating Expenses Profit from Operation Interest Expenses Net Profit for the year

2003

2002

2001

2,992

2,824

2,855

1,196

1,281

1,651

1,796

1,543

1,204

2,650

2,543

2,335

2,615

2,507

2,245

1,633

1,549

1,351

982

958

894

606

578

577

376

380

317

58

87

116

312

370

365

Unit : Baht

2003

2002

2001

Basic book value per share

8.23

7.71

6.75

Basic earnings per share

1.43

1.85

2.05

2003

2002

2001

Sales growth

%

4.33

11.66

0.07

Gross Margin

%

37.55

38.19

39.82

EBITDA / Sales

%

16.31

17.08

16.23

EBIT / Sales

%

14.36

15.13

14.12

Net Profit / Sales

%

11.93

14.78

16.25

Current Ratio

X

5.23

5.26

6.26

Quick Ratio

X

2.55

2.61

3.58

Inventory Turnover

X

1.60

1.70

1.71

ROCE

%

13.55

14.25

11.73

Return on Shareholders’ Equity (ROE)

%

17.43

24.10

30.28

Time Interest Earned

X

6.49

4.36

2.74

Debt to Equity Ratio

X

0.67

0.83

1.37

Debt to Asset Ratio

X

0.40

0.45

0.58

25


2003 HIGHLIGHTS

26


2003 HIGHLIGHTS

27


SHAREHOLDER AND MANAGEMENT STRUCTURE SHAREHOLDING STRUCTURE The first 10 major shareholders with number of shares and percentage of shareholding as at the latest closing book dated December 30, 2003 (No.) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

as at December 30, 2003 (No. of Shares) (% of Total Shares) 24,662,700 10.33 16,262,320 6.81 13,000,000 5.44 12,068,280 5.05 11,533,700 4.83 10,732,780 4.49 9,503,280 3.98 8,932,780 3.74 8,310,500 3.48 8,091,280 3.39

(Name) Thai NVDR Co., Ltd. Mr.Prida Tiasuwan Pranda Holding Co., Ltd. Mrs.Pranee Khunprasert GOLDMAN SACHS & CO Mrs. Panidda Tiasuwan Ms. Pittaya Tiasuwan Mrs. Prapee Sorakraikitikul Mrs. Sunanta Tiasuwan Mr. Pramote Tiasuwan

Shareholders Distribution by Nationality As of December 30, 2003 Compared to December 27, 2002 Shareholding Distribution by Nationality

Private Individuals

Juristic Persons No. of

No. of

Shareholders

Shares

2003 2002

%

2003

2002

2003 2002

No. of

No. of

Shareholders

Shares

2003 2002

2003

2002

% 2003 2002

Thais

38

30

50,392,200

22,317,700

21.10

11.14

2,245

1,484

158,275,700

141,142,400

66.27

70.43

Foreigners

17

8

28,824,500

35,580,900

12.07

17.76

37

37

1,359,500

1,352,000

0.57

0.67

To t a l

55

38

79,216,700 57,898,600 33.17 28.89

1 71.11 2,282 1,521 159,635,200 142,494,400 66.83 71.1

2003

Thai Shareholders Foreign Shareholders Total

2002

No. of Shareholders

No. of Total Shares

%

No. of Shareholders

No. of Total Shares

%

2,283 54 2,337

208,667,900 30,184,000 238,851,900

87.36 12.64 100

1,514 45 1,559

163,460,100 36,932,900 200,393,000

81.57 18.43 100

29


SHAREHOLDER AND MANAGEMENT STRUCTURE

2003 No. of share holders 1. State, state enterprises and state units 2. Directors, managers executives

No. of shares

2002 % of paid up capital

No. of share holders

No. of shares

% of paid up capital

8 29

3,465,390 90,407,500

1.45 37.85

7 29

3,464,890 92,385,900

1.73 46.10

2 2,283 15

37,662,700 107,315,970 340

15.77 44.93 0.00

2 1,506 15

37,679,900 66,861,980 330

18.80 33.37 0.00

2,237

238,851,900

100

1,559

200,393,000

100

including related and connected persons 3. Shareholders of > 5 % 4. Retail investors 5. Shareholders of less than one transaction unit To t a l

Numbers of shares of the Management, which experienced changes. Name

1. Lieut. Anan Panananda R.N. 2. Mr.Pramote Tiasuwan 3. Mrs.Pranee Khunprasert

Shares

Change (Shares)

29 Dec. 2003

27 Dec. 2002

300,000 8,025,280 12,068,280

168,000 9,025,280 11,068,280

30

132,000 (1,000,000) 1,000,000


SHAREHOLDER AND MANAGEMENT STRUCTURE MANAGEMENT Organization Chart

Board of Directors (11) 1. Audit Committee (3) Corporate Finance Corporate Finance Chairman 2.Investment Committee (7) Executive Committee (9)

Executive Chairman

President

Senior Vice President

Senior Vice President

Production Management

Stones Management

Marketing

Vice President

Vice President

and Sales Vice President

Mini Factory Vice President

Design and Development Center Senior Vice President

Accounting and Finance

Manager

31

(act.)


SHAREHOLDER AND MANAGEMENT STRUCTURE Board of Directors 1. Mr. Prida Tiasuwan 2. Sub.Lieut. Prayoon Talerngsri 3. Mrs. Prapee Sorakraikitikul 4. Mrs. Sunanta Tiasuwan 5. Mrs. Pranee Khunprasert 6. Mr. Pramote Tiasuwan 7. Mrs. Panidda Tiasuwan 8. Lieut. Olarn Krairiksh 9. Lieut. Anan Panananda R.N. 10. Mr. Vorasit Pokachaiyapat 11. Mr. Eugene S. Davis

Chairman Chairman (Management Committee) President Corporate Finance Chairman Senior Vice President Senior Vice President Vice President Independent Director / Chairman of Audit Committee Independent Director / Audit Committee Independent Director / Audit Committee Board Director

Executive Committee 1. Sub.Lieut. Prayoon 2. Mrs. Prapee 3. Mrs. Sunanta 4. Mr. Pramote 5. Mrs. Pranee 6. Ms. Pittaya 7. Mrs. Panidda 8. Mr. Decha 9. Mr. Banjong

Talerngsri Sorakraikitikul Tiasuwan Tiasuwan Khunprasert Tiasuwan Tiasuwan Nuntanajaroenkul Wongkaew

Executive Chairman Vice Executive Chairman Vice Executive Chairman Vice Executive Chairman Vice Executive Chairman Executive Director Executive Director Executive Director Executive Director

Krairiksh Panananda R.N. Pokachaiyapat

Chairman of Audit Committee Member Member

Audit Committee 1. Lieut. Olarn 2. Lieut. Anan 3. Mr. Vorasit

Investment Committee 1. Mr. Prida 2. Sub.Lieut. Prayoon 3. Mrs. Prapee 4. Mrs. Sunanta 5. Mrs. Pranee 6. Mr. Pramote 7. Mr. Decha

Tiasuwan Talerngsri Sorakraikitikul Tiasuwan Khunprasert Tiasuwan Nuntanajaroenkul

Chairman Vice Chairman Member Member Member Member Member

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SHAREHOLDER AND MANAGEMENT STRUCTURE Management 1. Mrs. Prapee 2. Mrs. Pranee 3. Mr. Pramote 4. Mrs. Panidda 5. Ms. Pittaya 6. Mr. Decha 7. Mr. Banjong 8. Ms. Tanaporn

Sorakraikitikul Khunprasert Tiasuwan Tiasuwan Tiasuwan Nuntanajaroenkul Wongkaew Tana-Anunchok

President Senior Vice President Senior Vice President Vice President – Production Management Vice President – Stones Management Vice President – Marketing Vice President – Mini Factory Accounting and Finance Manager

Scope of Functions and responsibilities of Board of Directors The Board of Directors will consider and clearly determine scope of duties and responsibilities of the directors, the sub-committee and management as well as regularly communicate such roles, duties and responsibilities to the directors, sub-committees, management and employees. The details are as follows : 1. The Board of Directors is to oversee and ensure that the Company’s operation is compliant with the laws, relevant regulations concerning the business and the Company itself, and resolutions of the shareholders’ meeting with honesty, sincerity and caution for the greatest benefits of the Company. 2. The Board of Directors is to take responsibilities for determining and directing the Company’s strategic policies and operations, monitoring and supervising to ensure that the operations work efficiently and effectively in conformity with the strategic plans. 3. The Board of Directors is held to take accountability to all shareholders, managing the operations for the shareholders’ interests including proper information disclosure to the investors in a correct, complete and transparent manner. 4. The Board of Directors is authorized to nominate the executive directors, delegate them responsibilities, and determine scope of their approval authorization and report to the Board of Directors to ensure the Company’s operation is managed in accordance with the Company’s strategic plans and goal. To this end, the executive directors will choose among one another as a chairman, at least one vice chairman and a managing director. 5. Under the above authorities in 1 or 4, the Board of Directors is authorized to consider and approve all matters concerning the Company’s management and operations.

Scope of duties and responsibilities of the Executive Committee. The executive committee are to take responsibilities as follows: 1. To monitor and supervise the Company’s operations in compliance with policies of the Company’s Board of Directors, relevant laws, conditions, and rules governing the business and the Company’s regulations. 2. To determine the Company’s corporate directions, business development and expansion in conformity with the Board of Directors’ plans and policies. 3. To appoint necessary and appropriate numbers of persons as the Company’s executives to handle routine operations, and determine scope of their authorities and responsibilities, as well as authorize persons to handle duties on the Board of Directors’ behalf as appropriate.

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SHAREHOLDER AND MANAGEMENT STRUCTURE 4. manner that they are not against the laws and regulations governing the business. 5. To consider salary structure and other benefits. 6. To review the Company’s operation and its creditability presented in the annual financial statements, and complete duties as assigned by the Board of Directors. 7. To review the accuracy, completeness, adequacy and creditability of the Company’s financial statements. 8. To review and oversee the appropriateness of the Company’s internal control systems. 9. To handle other responsibilities as assigned by the Board of Directors.

Scope of functions and responsibilities of Executive Chairman The Executive Chairman is to take duties and responsibilities as follows: 1. To carry out the policies of the Executive Committee in compliance with the laws, conditions, rules and the Company’s internal regulations. 2. To oversee and supervise the Company’s operations to ensure their conformity with the policies of the Executive Committee. 3. To consider and propose a change and improvement of related regulations as appropriate to the Executive Committee for further approval. 4. To handle other assignments of the Executive Committee. However, above-mentioned authorities and responsibilities do not cover the authorizations for the above Management to approve transactions which they or related persons may have vested interests or cause conflicts of interests with the Company and subsidiaries. Connected transactions and acquisitions or distributions of significant assets of the listed companies under the rules, and regulations of the Stock Exchange of Thailand which the Company is committed to abide by are also not covered under such Management’s duties. In addition, the authorities and responsibilities single other issues, which are required to go through the approval of the shareholders’ meeting.

Scope of functions and responsibilities of the Audit Committee. 1. To review the Company’s financial statements to ensure that they are accurate, complete, adequate and credible. 2. To ensure the appropriateness and efficiency of the Company’s internal control functions. 3. To consider, select and propose the appointments of the Company’s external auditor. 4. To oversee and supervise the Company’s compliance with relevant regulations and laws. 5. To prevent any possible conflict of interests 6. To act upon other assignments of the Board of Directors. 7. To prepare the code of conducts of the Audit Committee and present in the Company’s annual reports.

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SHAREHOLDER AND MANAGEMENT STRUCTURE Scope of functions and responsibilities of the Investment Committee. 1. To monitor and supervise the subsidiaries and associated companies’ operation in compliance with Company’s policy. 2. To review the accuracy, completeness, adequacy and creditability of the subsidiaries and associated companies’ financial statements.

Nomination of the Board of Directors and Executives Directors of the Company are not mandatory to be the Company’s shareholders. The Company’s Board of Directors is composed of members of not fewer than five but not over than 20 persons at least a half of the board members is required to become Thai residents, and they have to possess qualifications as stated in the laws. The selection of persons to serve as Directors is considered by the Meeting of Shareholders , in accordance with the principles and methods of casting votes, as follows :1. One shareholder possesses one voting right for each share held. 2. Each shareholder is required to exercise his voting rights in full according to the number of shares held 3. He may nominate one or several persons as Directors, but may not share his voting rights with others. Persons with the highest number of votes in descending order will be nominated as Directors, according to the number of Directors the Meeting of Shareholders is required to appoint. In the event that a person nominated as a Director has the same number of votes as the next nominee, but both nominees exceed the number of Directors which the Meeting of Shareholders is required to appoint, the Chairman will cast the deciding vote. At the annual ordinary meeting of shareholders, one/third of the Board of Directors is required to remove. If such requirement could not be met, at least one/third of directors should be removed at the first year of their tenure, and draws will be held at the second year and the following years for the next directors to be removed. The last director would be finally removed according to the terms. However, the removed directors could resume their tenure accordingly. In addition to the term’s expiry, the directors would be removed from their tenure in the event of 1. Death, 2. Resignation, 3. Lack of qualifications and disqualification under the public company laws, 4. Dismissal by the resolutions of the shareholders’ meeting with not fewer than 3/4 votes of shareholders which own voting rights and combined shareholdings of not less than a half of total shares held by attending shareholders and those who possess voting rights, 5. By the court’s sanction.

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SHAREHOLDER AND MANAGEMENT STRUCTURE Any directors who want to resign are required to submit their resignations to the Company. Their resignations will take immediate effect once the letter was received.

Remuneration of Directors and Management of the Company Remuneration to Executives Remuneration in the form of cash for 2003 Item Company’s Directors Executive Directors and Management

Type of Remuneration / No. of Executive Salary and Bonus Directors’ Attendance Fees No. of Executive 1 2 3 9 9

Total (million baht) 4.82 17.45

Remark : There are six persons of company’s directors who are in executive directors position. Other remuneration At present, the Company’s management is entitled only to salary and bonus as remuneration, with no any other benefits and revenues.

Inside Information Controls The Company has determined the principle of best practice and responsibilities of the executives especially towards shareholders as follows: 1. The executives are required to exercise their duties and responsibilities with honesty, and manage the Company with sincerity, transparency and for the best benefits of the Company and shareholders. 2. The executives must not abuse their power and responsibilities for the sake of personal interests or related persons. 3. The executives who are aware of inside information are prohibited from revealing inside information to the people outside or persons who are not involved without the consent of the Company, and causing the ways that may result in the conflict of interests to the Company.

Internal Control and Audit Systems The Company has realized the importance of the efficiency of the internal control both in the management and operations level. The efficient internal control is regarded as a crucial mechanism to establish confidence to the management on matters as follows: 1. To help offset the Company’s business risk 2. To help prevent any damage or leakage or misuse of the Company’s assets 3. To help strengthen the accuracy and creditability of the Company’s financial statements

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SHAREHOLDER AND MANAGEMENT STRUCTURE 4. To help ensure the compliance with the laws and relevant regulations of the Company’s personnel. 5. To help ensure the efficiency of the Company’s business management, and efficient and effective deployment of the Company’s human resources. 6. To help protect the investment of the Company’s shareholders. The Company has set up the internal audit department to ensure that the Company’s important operations and financial activities are undertaken in line with the policy and produce the greatest efficiency. The Internal Audit department has overseen the compliance with the laws and regulations, which may affect the Company. With the best efforts to make the internal audit department independent and fully capable of handling its audit duties and counterbalance, the Board of Directors has required the department to report its auditing results directly to the Company’s Audit Committee. The Audit Committee will then assess its performance.

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GOOD CORPORATE GOVERNANCE BEST PRACTICE IN CORPORATE GOVERNANCE In the best attempt to establish transparency and effectiveness of the Company’s administration which would eventually affect confidence of the Company’s shareholders, investors, and related parties, Pranda Jewelry Public Company Limited has strictly adhered to 15 principles of the best practice of the good corporate governance as stated by the Stock Exchange of Thailand.

Policy on Good Corporate Governance The Board of Directors of the Company has realized the importance of the best practice of good corporate governance in order to increase transparency, competitiveness and greater confidence of stakeholders, investors, and all related parties. The Company has therefore determined policies to promote the best practice of good corporate governance covering the following issues: 1. To determine policies and directions of the Company and establish the best practice of good corporate governance for the Company’s management to pursue efficiently and effectively 2. To perform business on the principles of efficiency, cost-effectiveness, effectiveness, and transparency; adhere to accountability for all beneficiaries; generate appropriate returns to investors; and sustain the Company’s business growth and prosperity 3. To perform business with care, reliability, accountability and transparency for the greatest benefits of the Company 4. To report the Company’s financial and general information to related parties, shareholders, and general investors with accuracy and transparency 5. To prepare financial statement to disclose the Company’s financial stability and annual operating performance 6. To ensure the compliance with rules and regulations of the Stock Exchange of Thailand 7. To develop creditability and effectiveness of internal control and audit system 8. To appraise and provide comments on adequacy and appropriateness of the Company’s internal control and good governance 9. To organize the meeting between the Board of Directors and the audit committee 10. To prevent from exploiting authority and assignment for their personal gains 11. To avoid disclosing confidential information of the Company and take the Company’s confidential information for personal gains or interests of related parties without due approval 12. To operate no activities which affect the conflict of interests of the Company without the Company’s consent.

Shareholders: Shareholders’ Rights The Company has given the greatest convenience to the shareholders’ meeting and treating equally all shareholders. Shareholders could exercise their voting rights at will and are allowed to raise any questions to the meeting in accordance with agenda and other issues proposed. All shareholders are also entitled to have rights and equitability to receive accurate, up-to-date, complete information, as well as reexamine it. Documents dispatched by the Company to the shareholders include invitation letter, minutes of the meeting, annual report and three forms of proxy prepared according to the announcement of the Commerce Ministry for the shareholders’ selection.

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GOOD CORPORATE GOVERNANCE The invitation letter includes comment of the Board of Directors in each agenda. For agenda on the appointment of the Board of Directors, for instance, preliminary information of the proposed directors including their age, education background, expertise and experience would be made avai-lable. The agenda on the audit committee appointment would also state clearly name, office and remuneration of the proposed audit committee. In addition, the Company has designed extra alternatives to the shareholders by allowing independent directors to hold proxy on the Shareholders’ behalf in case of their abstention in order to protect their rights. All information of the meeting would be recorded accurately, completely and systematically for later reexamination by the shareholders.

Rights of Related Parties The Company has always paid attention to the rights of all related parties, be they in organization such as employees, the Company’s administration and subsidiaries or external persons including shareholders, trade partners, creditors, clients, competitors and surrounding communities and environment. The Company has promoted “the Code of Conduct and Accountabilities of Management and Employees of the Company’’ to streamline the Company’s operations and ensure fair treatment to all parties. Throughout the operations of the Company, Pranda Jewelry Public Company Limited has treated equally and fairly all levels of employees with proper remuneration offered. Transactions and services with the trade partners are conducted in accordance with the contracts under which the Company is committed to fulfilling the contracts to trade partners and lenders with great care and accountability. The Company also takes information of clients strictly confidential, thereby setting up supervisory units and staff to handle complaints of customers and surrounding communities.

Shareholders’ Meeting The Company has dispatched invitation letters enclosed with the meeting’s agenda to shareholders about seven days ahead of the meeting. At the meeting, appropriate time would be allocated by the chairman to allow all shareholders to speak their comments and raise inquiries to the meeting in accordance with agenda and proposed topics by the chairman. The meeting would allow equally the shareholders to have rights to examine the Company’s operation, inquire and express their comments and suggestions to the Board of Directors. All members of audit committee would also be made available in the meeting to answer all questions and inquiries raised as well as provide additional information to the meeting. About one hour would generally be set aside for shareholders’ registration prior to the meeting.

Leadership and Vision The Board of Directors has clearly and independently involved in determining the Company’s commitment, mission strategy, business goal, policy and business plan as well as annual budget. For the maximum gains for the Company and entire shareholders, the Board of Directors has adopted Total Quality Management and ISO 2000 as well as Monitory and Supervision process for the management to pursue effectively and efficiently with an aim to procreate fortune to the Company and generate maximum returns to the shareholders under the proper risk and constant monitoring system. “Pranda keeps Quality’’ is always the commitment the Company has adopted since its inception. The Company is committed to

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GOOD CORPORATE GOVERNANCE 1. Manufacturing superb quality and high-valued jewelry 2. Swift and punctual delivery 3. Increasing productivity, and production efficiency 4. Taking care of customers with swift and punctual services 5. Ensuring maximum safety to customers and employees as well as environments The Company has set a new strategic plan and vision with commitment to upgrade the entire organization as the high quality and excellent enterprise for customers, shareholders, employees, distributors, communities and societies as a whole. Pranda Jewelry Public Company Limited is committed to generating profitability and sustainable growth to the Company; as well as developing organizational culture which would reflect the Company’s leadership and mission in order to achieve the Company’s business goal. The Board of Directors comprises those who are knowledgeable, competent and professionally capable of business supervision and monitoring as well as dedicated to establish and entrench the Company’s foundations in keeping with present and future competition. The Board is set to drive the sustainable growth into the Company, which eventually results in more values to shareholders and the entire society. The Board takes responsibility to clearly delegate and designate role, task and responsibility of the board members, management, sub-committees and employees, be it in financial operation or internal communications. All of the Company’s board members have also passed through Direct Certification Program (DCP) which was held by the Thai Institute of Directors Association (IOD), as follows:1. Mrs.Prapee Sorakraikitikul 2. Mrs.Sunanta Tiasuwan 3. Mr.Vorasit Pokachaiyapat

Conflict of interests The Company has strictly pursued policy and responsibilities to all beneficiaries. The Board of Directors is well aware of items and connected transactions which may cause the conflict of interests, and have undertaken great care of appropriateness of those items. In the best attempt to curb any conflict of interests, Audit Committee has carefully managed to prevent transactions, which may cause the conflict of interests. The Company has stated clearly regulations for related items or those concerning asset acquisition or distribution as directed by the Stock Exchange of Thailand and has also abided by all regulations of the Stock Exchange of Thailand. Pranda Jewelry Public Company Limited’s investment strategy focuses mainly on consistent production and distribution to prevent the conflict of interests. Therefore, the Company has adopted policy to take a full control in all investment projects both in and out of the country ranging from manufacturing to distribution levels. The Company’s investment in the joint ventures primarily aims at raising the Company’s competitiveness and strengthening the group’s operations through raw material supply and supplementary businesses for the Company’s core. Inside Information Controls.. The Company’s executives are required to report changes of their securities holding to the Securities and Exchange Commission and Stock Exchange of Thailand according to the Article 59 of the Securities and Stock Exchange of Thailand Act for the sake of transparency and to prevent any abuse of inside information for personal gains. The Company’s Board of Directors has a mandate to prohibit the Board of Directors, administration, employees, temporary staff and their family members from disclosing important inside information of the Company and a group of companies to people outside or persons who are not involved, nor having securities trading particularly one month ahead of the disclosure of the financial statements to the general public for their personal interests and anybody’s gains.

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GOOD CORPORATE GOVERNANCE Business Ethics The Company has promoted the code of conduct for the management and employees as announced on December 22, 2000. The Company has informed all directors and employees to strictly abide by the code of conduct in order to steer the Company into the principles of effectiveness and efficiency, cost-effectiveness, transparency and accountabilities to all beneficiaries; and produce appropriate returns to investors as well as develop long-term prosperity to the Company. Regular monitoring process has also been developed to achieve the principles.

Counter-Balance of Non-Management Directors The Board of Directors comprises 11 members as follows: Directors who hold management position in the Company 6 Non-management directors 3 Independent directors 3 The Company has three independent directors accounting for 27.27% of total directors. Independent directors have no direct involvement in routine management and are not major shareholders of the Company.

Position’s Combination or Separation Chairman of director will not be the same person with the Company’s president in order to separate their responsibilities. The chairman is regarded as the Company’s leader who will take a major part to determine the Company’s policy in cooperation with the management. Chairman and president should represent major shareholders of the Company. However, as independent directors account for one-third of the directors, the Company’s counter-balance and cross-checking remain existent.

Remuneration of Directors and Management Remuneration of directors and management is considered a proper rate compared with the industry’s offerings. The Board of directors and management are also entitled to other fringe benefits based on their additional assignments and responsibilities. The Board’s remuneration would be on approval of the shareholders, while remuneration for senior management would be subject to principles and policy of the board of directors’ consideration.

The Board of Directors’ Meeting The Board of Directors would hold a quarterly meeting in a year and call an extra meeting if needed. Agenda of the meeting and report on the quarterly operating performance, which goes through, the Board of Director’s monitoring and review would be prepared in advance. Invitation Letter enclosed with the meeting’s agenda and other documents would be prepared about seven days ahead of the meeting so that the Board of Directors have sufficient time to study information. Generally, the meeting would take about 2-3 hours. Minutes of the meeting would be fully recorded, and well saved for later examination and reference. In 2003, the Board of Directors had held 13 ordinary meetings, and two extraordinary meetings. Here are the records of the attendance of each director.

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GOOD CORPORATE GOVERNANCE Name 1. Mr.Prida Tiasuwan 2. Sub. Lieut. Prayoon Talerngsri 3. Mrs. Prapee Sorakraikitikul 4. Mrs. Sunanta Tiasuwan 5. Mrs. Pranee Khunprasert 6. Mr. Pramote Tiasuwan 7. Mrs. Panidda Tiasuwan 8. Mr. Eugene S. Davis 9. Mr. Vorasit Pokachaiyapat 10. Lieut.Olarn Krairiksh 11. Lieut. Anan Panananda R.N.

Attendance/Meeting Ordinary Meeting

Extraordinary Meeting

Total Attendance

12/13 13/13 13/13 13/13 12/13 13/13 13/13 5/13 6/13 13/13 13/13

2/2 2/2 2/2 2/2 2/2 2/2 2/2 2/2 2/2 2/2 2/2

14/15 15/15 15/15 15/15 14/15 15/15 15/15 7/15 8/15 15/15 15/15

Sub-Committees The Company has set up sub-committees to help supervise and monitor the Company’s operations, comprising the audit committee and investment committee. 1. Audit Committee The Board of Directors has appointed the Audit committee on January 29, 1999. The Audit Committee comprises three directors, all of them are independent as follows: Chairman of Audit Committee 1. Lieut.Olarn Krairiksh Member 2. Lieut. Anan Panananda R.N. Member 3. Mr. Vorasit Pokachaiyapat The Audit Committee has held meetings regularly for four times in 2003 and reported directly to the Company’s Board of Directors. Scope of the Committee’s Duties and responsibilities 1. To review the Company’s financial statement to ensure its accuracy, adequacy and creditability. 2. To maximize efficient and effective internal control system of the Company 3. To consider, select and propose the appointment of the Company’s auditors 4. To oversee the compliance with related rules and regulations 5. To prevent the conflict of interests 6. To exercise duties as assigned by the Board of Directors 7. To prepare report on the supervision and monitoring of the audit committee which is made available in the Company’s annual report.

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GOOD CORPORATE GOVERNANCE 2. Investment Committee The Investment Committee has taken responsibility to oversee and supervise the Company’s overseas operations. The committee comprises seven directors who are competent in different fields from production, manufacturing to finance, representing the Company’s senior management as follows: 1. 2. 3. 4. 5. 6. 7.

Mr.Prida Tiasuwan Sub.Lieut. Prayoon Talerngsri Mrs. Prapee Sorakraikitikul Mrs. Sunanta Tiasuwan Mrs. Pranee Khunprasert Mr. Pramote Tiasuwan Mr. Decha Nuntanajaroenkul

Chairman Vice Chairman Member Member Member Member Member

The investment committee has held four meetings, informing the presidents of subsidiaries the report on the Company’s operating performance and providing them suggestions to improve the Company’s operations in order to ensure that they perform in accordance with policies designated by the Board of Directors. Corporate Finance Office would function as secretary to monitor and review the Company’s operating performance. The executives would pay a frequent visit to overseas subsidiaries for at least two times a year to supervise and monitor their operations.

Internal Control and Audit System The Company has realized the importance of effective internal control both in the management and operations level. Responsibilities of each management and employee are clearly stated and written to ensure optimal utilization of the Company’s assets. Separate divisions of the Company have carefully studied investment budget and the feasibility of each investment project in order to bring about counter-balance and cross checking. The Company has also stressed up the maintenance of the internal audit to ensure that important operations and financial activities of the Company are undertaken in line with the policy; and produce optimal efficiency. The Internal Audit Department would be given a free hand to handle their jobs. The Company has assigned the Internal Audit Department to report its internal audit result directly to the Audit Committee. The Board of Directors; in addition, has paid a full attention to effective risk management under which the Board has empowered the Corporate Finance Office to take responsibilities in designating scope and policy on risk management as well as organizing meetings with the executive committees to set and appraise the risk of operations for every six months. The Board of directors would work collaboratively with the executive committees to work out safeguard and risk management measures as well as develop the early warning system and monitoring system to ensure its compliance with related laws and regulations.

The Board of Directors’ Report The Board of Directors is held responsible for the consolidated financial report of the Company and its subsidiaries as well as financial information appeared in the annual report. Financial report was prepared according to the accounting standard recognized in Thailand, using proper and widely adopted accounting policy and disclosing sufficient financial information. Financial information is made available on the notes to the Company’s financial report. The Board of Directors has promoted the maintenance of the effective internal controls system to ensure an accuracy, completeness and adequacy of the accounting information so that the Company could

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GOOD CORPORATE GOVERNANCE effectively manage existing assets and realize its weakness to prevent any possible irregularities. In this case, the Board of Directors has set up the audit committee which comprises the non-management directors to oversee the adequacy of the financial statements and internal control system. Comments of the audit committee would appear in the audit committee’s report as shown in the Company’s 2003 annual report. The Board of Directors commented the Company’s internal control system was satisfactory and saw it efficient enough to create confidence and trust towards financial statement of the Company and subsidiaries as of December 31, 2003. Responsibilities of the Board of Directors Towards Financial Statement To report financial and general information to shareholders and general investors with accuracy, com 1. pleteness and transparency To allow the Company’s auditors to perform their duties freely and independently without intervention 2. To prepare financial statement to disclose the Company’s financial status and performance in the past 3. year with true and fair presentation To ensure the accuracy, completeness and adequacy of accounting information to protect the Company’s 4. interests and assets from any irregularities and dishonest practices and find the Company’s weakness To secure the compliance with the generally recognized accounting standard strictly using appropriate 5. accounting policies.

Relationship with Investors The Board of Directors has always realized the importance of the disclosure of accurate, complete and transparent information on finance, general and important information which might affect the prices of the Company’s securities. The Company has disseminated information to investors and related parties through a wide range of channels as well as the media of the Stock Exchange of Thailand and the Company’s own website. The Company has also set up investor relations department to provide information services and inform the Company’s activities to investors, shareholders, analysts, and the public. Interested investors could contact the Company at IR@pranda.co.th. Moreover, the Company has linked the Company’s internal information with the Stock Exchange of Thailand’s website: www.set.or.th and the Company’s website: www. Pranda.co.th, which is available in the investor relations section. In the past year, the Company has welcome a great deal of visitors from the government agencies and educational institutes as well as representatives from the fund management firms, financial analysts, and interested investors who paid a visit to the Company. Pranda Jewelry Public Company Limited has also participated in Opportunity Day held by the Stock Exchange of Thailand as the forum for executives of local companies to express their vision and explain operating performance of their individual companies. The Company had also attended the Investors Fair as well in the previous year and held other promotional activities by inviting financial analysts and investors to attend the Analyst Meeting held once a year at the Company’s premise with an aim to explain the Company’s operations and exchange opinion between the Company’s management and financial analysts as well as now held supplementary investor relations’ activities by issuing ‘’ Investor Relations Newsletter’’ both in Thai and English to disseminate the Company’s operating performance to the financial analysts and interested people through electronic mailing system. Additionally, The Company plans to issue a quarterly issue to explain the Company’s performance and future business directions as well as answer all questions which are in the people’s interests. Questions are mostly collected from inquiries raised by financial analysts. However, all questions are welcome at IR@Pranda.co.th. Questions and answers would be then prepared at the said corporate website.

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FINANCIAL ANALYSIS AND OPERATION RESULTS Operating results Proceeds from new share allocations to increase registered capital in 2001 and the exercise of Pranda warrants by the warrant holders to buy ordinary shares during 2002 and 2003 had enabled the company to achieve in debt restructuring and better investment and business management. As a result, the company had reported a 4.3% rise of sale turnovers in 2003 compared with a year earlier, with gross margin increasing 24 million baht, interest expenses decreasing 29 million baht. The company posted operating profit before foreign exchange, extraordinary items and others totalling 318 million baht or a 12.15% of sales turnovers. Because exchange rate fluctuation and termination of Debt Restructuring Agreement, the company’s net income decreased by 58 million baht compared with a year before which gained from debt restructuring agreement in addition to operating activities. The company’s corporate philosophy has been firmly on the ground of maximize shareholders’ wealth which was reflected by dividend payment 2 years consecutively. For the sake of mutual benefit for other stakeholders, the company was committed to enforcing sales growth through marketing strategy, controlling selling and administrative expenses, enhancing efficiency on Pranda Group’s asset utilization and aligning optimal capital structure for business expansion. Debt to Equity improved from 0.83 times to 0.67 times, resulting in an increase of the company’s debt repayment capacity to 6.49 times from 0.67 times. Because of the company’s increased capacity in liquidity management both in the domestic and international operations, the company’s operating cash flow surged to 314 million baht in 2003 compared with just 95 million baht in 2002.

Financial Status As of December 2003, the company and subsidiary firms had total assets worth 2,992 million baht,a 168 million baht rise from 2002, with cash in hand increasing 87 million baht mainly due to higher cash inflow from improved operating performance and the exercise of Pranda warrants than cash expenses for investment in machinery and equipment, and short-term and long-term debt repayments. Productive Assets The company and subsidiary firms had total assets turnover that slightly declined to 0.87 times from 0.89 times and fixed assets turnover improved from 2.47 times to 2.61 times. The company and subsidiary companies generated cash flow from operating activity totalling 314 million baht, up 219 million baht from 2002 due to sales growth, reduced interest expenses progressive collection, and expanding trade credit term. The Pranda had invested in machinery and equipment worth around 27 million baht to replace the old ones. Despite the company paid off long-term debt installment of 131 million baht, short-term loans of 16 million baht, dividend worth a total of 172 million baht, the company still had cash on hand increasing 87 million baht including cash at the beginning of the period totaling 373 million baht. As a result, the company and subsidiary firms’ cash at the end of 2003 totalled 460 million baht or 15.39% of total assets. Liquidity Ratio Current ratio slight declined from 5.26 times to 5.23 times while Quick ratio declined from 2.61 times to 2.55 times because the company had extended the trade debt repayment period to 24 days from 18 days previously.

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FINANCIAL ANALYSIS AND OPERATION RESULTS Risk from Short-term debt Pranda and subsidiary firms had short-term loan amounting of 380 million baht, while having total current assets at 1,991 million baht. This can be concluded that Pranda has sufficient liquidity for short-term debt payment and having interest coverage improved from 4.36 times to 6.49 times.

Capital Expenditure Previous spending on capital expenditure The company made investment on new machinery and equipment worth 27 million baht to replace the old ones. Current Capital Expenditure Plan The company is still on the process of establishing the new production facility in China. The new factory which is scheduled to start operations in the first quarter of 2004 will have 60 workers at the start, and adding up to full capacity of 400 workers at the ninth year of its operation.Initial production run will be 120,000 pieces per annum, which full capacity at 700,000 pieces within 9 years. Capital expenditure spending for this project was approved at 60 million baht.

Sources of Fund Capital Structure Resulting from having operational profit consecutively with successive debt restructuring, the company’s debt to equity ratio improved to 0.67 times from 0.83 times, with debt ratio reducing from 0.45 times to 0.40 times comparing with 2002. In conclusion, Pranda has strong balance sheet, which will support business expansion in the future. Shareholders’ Equity The company has raised its capital and issued warrants in 2002, and in 2003, the company had allocated a total of 38,458,900 new shares for the warrant conversions to ordinary shares. As of December 31, 2003, the company has registered ordinary shares at 238,851,900 shares.As of the end of December 2003, the company Pranda booked retained earnings at 826 million baht, up 141 million baht or 20.50% comparing to 2002 and book value per share increasing from 7.71 baht to 8.23 baht. At the end of 2003, the company’s shares were traded at 7.40 baht apiece. Liabilities Pranda and subsidiary firms had total current liabilities at 380 million baht or 31.81% of total liabilities. Noncurrent liabilities were 815 million consisting of long-term bank loan at 812 million baht or 62.90% of total liabilities. This bank term-loan scheduled under condition of debt repayment by quarterly installment till the term serves on January 2011.

Future T rend Trend The company has operated quality growth strategy by manufacturing its own product brands through Product Development Center and effective distributions through subsidiary firms and trade partners. The company is committed to upgrading its production from existing Original Brand Manufacturing (OBM) to Original Design Manufacturing (ODM) through cooperation with clients who have already their own brands in each region to jointly develop the product designs.

48


FINANCIAL ANALYSIS AND OPERATION RESULTS The company is also committed to providing seamless services to customers through distribution offices. It could therefore well understand the market in each region, hence providing the company a clear prospect in marketing planning with the main focus on expanding of the company’s own product brands in Asia, while developing silver accessories in Europe, and gold accessories for the North America. The company strongly believes to steer the company to grow at least 12% in US-dollar denominated sales turnovers, with strong profitability in 2004.

49


RISK FACTORS RISK FACTORS WHICH AFFECTED THE INDUSTRY With trade liberalization, Thailand’s current jewelry market has experienced intensified competition not only on the design and quality front but also pricing. Moreover, continuous expansion of the jewelry market exacerbated the skilled labor’s shortage under which a number of skilled craftsmen failed to meet significantly growing demand in the market including foreign exchange fluctuation mainly derived from periodic wars and terrorist attacks as well as the dollar depreciated by the US government in order to increase its trade competitiveness in the world market. In addition, the country’s economic recovery and substantial improvement of financial and fiscal conditions, which resulted in the Thai baht appreciation against the US dollar, had also impact to the performance of Thailand’s overall jewelry industry. The Company has realized such challenges, and therefore not only expanding its production bases to cover Asian region, but also developing new product patterns through the Company’s product development center, developing its own brands and distribution channels and initiating training courses to develop its own skilled labor in keeping with growing market. In order to diversify risk, the Company has also expanded distribution channels to cover over 40 countries as well as developed the domestic market through local distributors.

RISK FACTORS WHICH AFFECTED THE COMPANY’S OPERATIONS 1. Risk Factors on Sales and Production Rapidly changing environments have prompted the Company’s existing customers to reduce significantly their inventories and required more developed products as well as product items in a wider price range and quality. To cope with this change, the Company has adopted the state-of-the-art technology in design and reduces production process as well as diversified production bases throughout Asia in order to sustain price and product competitiveness. 2. Human Resource Risk The continuous growth both in the local and overseas market has resulted with inadequacy of experienced workforce in the marketing, finance, and production. Having realized such a risk, the Company has operated training courses not only to the senior management but also employees, and students on the bilateral basis to harness growing demand and offer them appropriate remuneration in order to retain competent personnel. 3. Financial Risk 3.1 Now that the Company also got involved in exports to overseas market and imports of certain raw materials (about 33% of the entire raw materials used in production), the Company might face either foreign exchange gain or loss. The Company has realized the exposure arising from volatility of the foreign exchange and hedged with forward contracts and natural hedging. 3.2 Credit Risk arising from overdue payment of direct customers and related companies. The Company has set policy to be strictly careful of extending credit lines to new clients. All transactions as well as client information were completely recorded and could be immediately monitored once the purchase orders were made. In addition, The Company has also had strict policy on debt collections and debt controls as well as close contacts with debtors and provisions set aside for doubtful debts of suspected accounts. As a result, substantial impact from the debt defaults was unlikely.

51


RISK FACTORS 4. Risk Factors on Business Planning and Information T echnology Technology The Company’s business network, which covers the production bases and distribution channels throughout strategic regions of the world, has prompted the Company to realize information technology adoption in order to increase operation efficiency. However, the Company also realized that information technology system itself might cause the Company certain technical restrictions, which might result with inability to fully utilize important information. In a bid to curb such a risk, the Company has developed backup information system either on the daily, weekly or monthly basis. Backup information could be retrieved and made available immediately once the system failure. In addition, the Company has prepared back-up power supply and voltage regulation to support the information system to protect electronic appliances in good conditions. Moreover, the Company has planned to develop the entire network to become computer online system to cope with future business expansion.

52


RELATED PARTY TRANSACTIONS THE PAST RELATED PARTY TRANSACTIONS The company and the major shareholders had no other business involved or competed against it. During 2003 and 2002 the company had related transactions with the affiliates, subsidiaries and related companies with joint management and directors, which are the normal trade practices (please see the financial remark No. 5). NECESSITY AND RATIONALIZATION The related transactions occurred among the company, its affiliates and subsidiaries are business items are normal practice, and the board of directors or the board of executives had approved them in compliance with the appropriate procedures according to the regulations of the Company in all respects. MEASURES OR STEPS FOR APPROVAL OF THE INTERTWINED ITEMS The related transactions that occurred and could take place in the future the board of directors or the board of executives must approve according to the appropriate procedures according to the regulations of the company. The directors who had vested interest in approving the said items were refrained from voting on such issues. POLICIES AND TRENDS ON MAKING THE FUTURE INTERTWINED ITEMS The future related transactions of the company shall be implemented in the normal business practice as usual without a special treatment. No transfers of interests among the company, the affiliates and persons of vested interest. Nevertheless, the company shall ask the inspection committee or the auditor of the company or an independent specialist to audit and show appropriateness of the prices and rationalization of making the items too. It shall disclose type and value of the said items with reasons of making the items to the annual general meeting of the shareholders. Moreover, the board of directors had to comply with the laws on securities and the Stock Exchange of Thailand (SET) and regulations, notices, orders or requirements of the SET. Including compliance with the requirements on data disclosure of information on making the related transactions and acquiring or disposal of the important assets of the company or its affiliates. It complied with the standards of accounting prescribed by the Accounting and Auditor Association of Thailand (AAAT). Nevertheless, if there was a related transactions between the company or its affiliates or people who may have conflict of interest or had vested interest or future conflict of interest, the company would have the inspection committee to comment on the necessity and appropriateness of such items. In case the inspection committee had no expertise in considering the related transactions that may happen, the company would ask an independent specialist or the auditor of the company to give opinions on the intertwined items for supplementing the decision of the committee or the shareholders as the case maybe. Nonetheless, the company would reveal the related transactions in the remarks supplementing the financial statement that had been audited by the company's auditor.

54


SOCIAL ACTIVITIES Pranda Jewelry Public Company Limited has not only played a part in business to promote reputation for Thailand’s jewelry industry into worldwide recognition of high quality products, but also realized social accountabilities throughout 30 years. The Company was therefore set to participate in arising social activities either in education, community promotion, public welfare, or environmental care to better the surrounding environments to grow in parallel with the Company’s business prosperity. The Company’s social activities included:-

EDUCATIONAL PROMOTION

To provide supplementary education and experiences to university students. Pranda Jewelry Public Company Limited has always paid attention to promote students’ education in order to broaden their perspective in keeping with the state-of-the-art technology. The Company has also realized the importance of a sense of participation in social development as well as educational opportunities of Thai youths who deserve development to become the country’s future valuable human resources in order to steer up the country into further prosperity. The Company fully hoped that Thai people come up with higher quality of life and better education. Throughout the operations for more than three decades, Pranda Jewelry Public Company Limited has offered opportunities for Thai students to increase their out-of-the-class education and visit and experience the sophisticated production technology of the Company.

To provide vocational education in bilateral system. The Company has teamed up with Kanchanapisek Technical College, and College of Fine Arts, Bangkok to manage bilateral vocational education system and the Non-Formal Education Department to offer occupational education for underprivileged children to further their studies on the bilateral education system on gems and costume jewelry at the higher and advanced vocational certificate levels.

56


SOCIAL ACTIVITIES

To promote activities held on the National Children Day through cooperation with several neighboring organizations to organize the National Children Day fair, and donate stationery, presents and snacks to Phongploynusorn and Sri-iam Schools. The activities have been conducted for over the three consecutive years.

To provide educational opportunities to schools in remote areas through donation of educational instruments, sports gears as well as other necessities to Banpai School and Ban Kormor 80 School in Prachin Buri.

Social Promotion Pranda Jewelry Public Company Limited has taken responsibilities and realized the importance of being a good member of the society. The Company has therefore provided constant supports to surrounding societies and are committed to developing good environments to communities we stay in order to promote and continue long-nourished culture in the society for the better life of Thai society. Throughout the operations, the Company has supported community activities as follows:-

The Company has taken part in the “Clean, Safe, Pollution-Free and Lively’’ Office Scheme held by the Public Health Office of the Bangkok Metropolitan Administration and won award. The Company in conjunction with Bangna Police Station joined the friendly football match with an aim to underline relationship within the community The Company has participated in activities to support the charity walk and run event held by Siriraj Hospital under the theme “Hundred Hearts for Her Majesty’’. Pranda Jewelry Public Company Limited has taken part in activities held by the Sukhumvit 105 committee to sponsor the opening of multi-purpose sports fields under the heath and anti-drug campaign.

57


SOCIAL ACTIVITIES Public Activities

The Company has promoted the family institute by co-sponsoring the ‘’Glittering Gems’’ event and providing free golden marriage certificates with platinum heart-form locket to 10 couples who registered their marriage on the Valentine’s Day, the Day of Love, held by Thai Gems and Jewelry Traders Association, in conjunction with Jewel Fest Club, and Bangrak District of Bangkok Metropolitan Administration and the Tourism Authority of Thailand.

Donated necessities, consumer products, computer, electrical appliances and other apparatus to Wat Suankaew Foundation of Prakrupisal Dhammapatee (Phra Payom Kalayano) as part to support and develop society.

Joined Matichon Public Company limited in the Matichon 25 th Year’s event to mobilize fund to buy books to 250 libraries of needy schools nationwide.

Cooperated with the National Blood Service Center of the Thai Red Cross to donate blood every three months.

58


REPORT OF THE AUDIT COMMITTEE Chairman of the Board of Directors The Audit Committee comprises member as follows:1. Lieut.Olarn Krairiksh 2. Lieut. Anan Panananda R.N. 3. Mr. Vorasit Pokachaiyapat The appointed Audit Committee has taken responsibility mainly to prevent any vested interests and ensure the transparency in financial and accounting management and the company’s compliance with the rules and regulations of the Stock Exchange of Thailand. The Audit Committee held four meetings in 2003 at which the company’s inside auditors also attended, as the Board of Directors saw it necessary for the inside auditors to thoroughly understand the inside auditing duties to upgrade the quality of their duties. However, the inside auditing is relatively new for mid-sized company, the inside auditors themselves are required to deeply realize that the jewelry firm which grew into the mid-sized company was always originally derived from the family-run business. Therefore, the code of good corporate governance as directed by the Stock Exchange of Thailand deserves development on the step-by-step basis to ensure the business’s quality and steady growth. The supervision is thus to rely on the external auditors, and Audit Committee found that the auditing of the external auditors was handled without barriers or limitations in information disclosure. As a result, the company’s operations are proven transparent both in the financial and accounting front and the compliance with the Stock Exchange of Thailand. The Audit Committee also found the company’s financial liquidity management was carefully operated. However, as the jewelry accessory market always experienced intensified competition, with majority of the production made on order from foreign importers, and most businesses are operated by not more than 15 years, the company which makes its presence for over 30 years clearly reflects its high competitiveness. However, the company should also pay heed to these following factors which might affect its operations. 1. To assess the performance of subsidiary firm on how well it could adjust its business to changing environments both in the short term and in the long run or which business deserves development or change. 2. To analyze how long relationship with company’s major clients would last and whether the purchase orders would drop in the future. 3. To closely monitor the price of raw materials whether its change would generate significant impact on the company’s profitability. 4. The company has full competence in the production cost controls. However, it was still required to pay attention to operations of the competitors whether their businesses would affect the company in order to design preparatory plans as appropriate. The company was found that it well protected the interests of all small shareholders.

Lieut.Olarn Krairiksh Chairman of the Audit Committee

60


AUDITOR’S REPORT AND FINANCIAL STATEMENTS Report of Independent Auditor To The Board of Directors and Shareholders of Pranda Jewelry Public Company Limited I have audited the accompanying consolidated balance sheets of Pranda Jewelry Public Company Limited and its subsidiaries as at 31 December 2003, the related consolidated statements of earnings, changes in shareholders’ equity and cash flows for the year then ended, and the separate financial statements of Pranda Jewelry Public Company Limited for the same periods. These financial statements are the responsibility of the Company’s management as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audit. The consolidated financial statements of Pranda Jewelry Public Company Limited and its subsidiaries and the separate financial statements of Pranda Jewelry Public Company Limited as at 31 December 2002 and for the year then ended, were audited by another auditor in my office, who expressed unqualified audit opinion on those statements, based on his audit and another auditors’ reports, under the report dated 21 February 2003. I did not audit the financial statements, included in the consolidated financial statements for the year ended 31 December 2003, of a local subsidiary company, Pranda Lodging Co., Ltd., and 4 overseas subsidiary companies, Pranda Vietnam Co., Ltd., Pranda U.K. Ltd., H. GRINGOIRE s.a.r.l. and Pranda North America, Inc., which incorporated the financial statements of another subsidiary, Crystaline North America, Inc. Those financial statements were included in the consolidated financial statements with total assets as at 31 December 2003 of Baht 734 million (2002 : Baht 749 million), total revenues and net loss for the year then ended of Baht 1,272 million and Baht 9 million, respectively (2002 : total revenues and net earnings of Baht 1,231 million and Baht 16 million, respectively). In addition, the Company’s financial statements include its investment in those subsidiaries stated under the equity method, amounting to Baht 197 million as at 31 December 2003 (2002 : Baht 210 million) and its share of loss for the year then ended, amounting to Baht 9 million (2002 : share of profit Baht 16 million). The subsidiary companies’ financial statements were audited by other auditors, as discussed in note 2.2 to the financial statements. Their reports have already been furnished to me. My opinion on the consolidated financial statements for the year 2003, insofar as they relate to the amounts included for those subsidiaries, is based solely on the reports of the other auditors 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 audit together with the reports of the other auditors mentioned above provides a reasonable basis for my opinion. In my opinion, based on my audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Pranda Jewelry Public Company Limited and its subsidiary companies and of Pranda Jewelry Public Company Limited as at 31 December 2003 and the results of their operations and cash flows for the year then ended in accordance with generally accepted accounting principles.

Siraporn Ouaanunkun Certified Public Accountant (Thailand) No. 3844 Ernst & Young Office Limited Bangkok : 17 February 2004

62


AUDITOR’S REPORT AND FINANCIAL STATEMENTS PRANDA JEWELR Y PUBLIC COMP ANY LIMITED AND ITS SUBSIDIAR Y COMP ANIES JEWELRY COMPANY SUBSIDIARY COMPANIES BALANCE SHEETS AS A T 31 DECEMBER 2003 AND 2002 AT (Unit:Baht)

Consolidated NOTE

2003

The Company Only 2002



2003

2002



ASSETS CURRENT ASSETS Cash and cash equivalents

460,469,166

372,990,200

389,530,733

275,421,078

549,529

3,224,643

547,232

2,744,643

671,771,860

685,777,266

338,793,479

294,507,070

6,194,704

6,028,059

581,956,304

569,413,445

(202,329,854)

(204,964,214)

(200,572,014)

(202,184,363)

475,636,710

486,841,111

720,177,769

661,736,152

Current investments - fixed deposit with maturity of more than 3 months Trade accounts and notes receivable Accounts and notes receivable Accounts receivable - related parties

5

Less : Allowance for doubtful accounts Trade accounts and notes receivable, net

4

Amounts due from related parties

5

318,432

558,701

19,029,737

33,414,308

Inventories, net

6

1,019,651,865

912,377,158

525,147,030

521,763,367

5,511,767

11,745,098

290,997

6,065,205

Other current assets Value added tax refundable Others TO T AL CURRENT ASSETS TAL NON-CURRENT

27,859,566

22,808,286

11,507,607

9,452,750

1,989,997,035

1,810,545,197

1,666,231,105

1,510,597,503

9,782,800

8,618,940

9,302,800

8,618,940

219,364,510

175,964,689

ASSETS

7

Deposit with financial institution - pledge Investments accounted for under equity method Investments in subsidiary companies

8

Investments in associated companies

8

34,550,475

29,985,310

Other long-term investments

9

14,881,033

14,779,158

Advances for investment

5

-

Loans and amounts due from related parties, net

5

-

Property, plant and equipment, net

10

560,346,280

Land held for development, net

11

354,329,189

Other non-current assets T OT AL OTAL

NON-CURRENT

T OT AL OTAL

ASSETS

ASSETS

-

-

-

-

14,508,803

14,444,278

-

24,969,191

33,584,786

-

85,115,912

102,711,835

587,251,159

438,627,546

449,277,826

354,329,189

354,329,189

354,329,189

28,192,713

18,983,082

12,114,126

5,653,688

1,002,082,490

1,013,946,838

1,158,332,077

1,144,585,231

2,992,079,525

2,824,492,035

2,824,563,182

2,655,182,734

The accompanying notes are an integral part of the financial statements.

63


AUDITOR’S REPORT AND FINANCIAL STATEMENTS PRANDA JEWELR Y PUBLIC COMP ANY LIMITED AND ITS SUBSIDIAR Y COMP ANIES JEWELRY COMPANY SUBSIDIARY COMPANIES BALANCE SHEETS (Continued) AS A T 31 DECEMBER 2003 AND 2002 AT (Unit:Baht)

Consolidated Note

2003

The Company Only

2002 (Restated)

2003

2002 (Restated)

LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT

LIABILITIES

Bank overdrafts and short-term loans from financial institutions

36,072,542

52,492,670

-

128,796,828

89,936,075

69,294,945

31,772,880

1,328,647

847,304

369,123

392,308

12

-

Trade accounts and notes payable Accounts and notes payable Accounts payable - related parties

5

Total trade accounts and notes payable Current portion of long-term loans Short-term loan and amounts due to related parties

130,125,475

90,783,379

69,664,068

32,165,188

13

122,937,345

129,331,397

120,840,000

120,840,000

5

2,000,000

9,280,970

9,254,625

-

Other current liabilities Corporate income tax payable Accrued interest expenses

1,513,114

1,974,762

285,519 3,763,226

4,027,002

-

3,763,226

4,027,002

Accrued expenses

53,832,636

47,481,510

16,216,272

16,060,343

Others

30,181,602

18,083,294

2,657,220

3,047,548

TO T AL CURRENT LIABILITIES TAL NON-CURRENT

380,425,940

344,174,014

222,707,275

185,394,706

811,980,000

936,424,210

811,980,000

932,820,000

3,484,912

613,017

-

-

LIABILITIES

Long-term loans - net of current portion

13

Other non-current liabilities TO T AL NON-CURRENT LIABILITIES TAL TO T AL LIABILITIES TAL

815,464,912

937,037,227

811,980,000

932,820,000

1,195,890,852

1,281,211,241

1,034,687,275

1,118,214,706

The accompanying notes are an integral part of the financial statements.

64


AUDITOR’S REPORT AND FINANCIAL STATEMENTS PRANDA JEWELR Y PUBLIC COMP ANY LIMITED AND ITS SUBSIDIAR Y COMP ANIES JEWELRY COMPANY SUBSIDIARY COMPANIES BALANCE SHEETS (Continued) AS A T 31 DECEMBER 2003 AND 2002 AT (Unit:Baht)

Consolidated Note

2003

The Company Only

2002

2003

(Restated)

2002 (Restated)

SHAREHOLDERS’ EQUITY Share capital

16

Authorized share capital 400 million ordinary shares of Baht 1 each

400,000,000

400,000,000

400,000,000

400,000,000

238,851,900

200,393,000

238,851,900

200,393,000

476,880,180

407,654,160

476,880,180

407,654,160

10

202,996,742

202,996,742

202,996,742

202,996,742

16

16,504,740

8,400,000

16,504,740

8,400,000

29,060,293

32,373,187

29,060,293

32,373,187

40,000,000

37,183,870

40,000,000

37,183,870

785,582,052

647,967,069

785,582,052

647,967,069

1,789,875,907

1,536,968,028

1,789,875,907

1,536,968,028

shareholders of subsidiary

6,312,766

6,312,766

TOTAL SHAREHOLDERS’ EQUITY

1,796,188,673

1,543,280,794

1,789,875,907

1,536,968,028

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

2,992,079,525

2,824,492,035

2,824,563,182

2,655,182,734

Issued and paid-up share capital 238,851,900 ordinary shares of Baht 1 each (2002 : 200,393,000 ordinary shares of Baht 1 each) Additional paid-in capital Premium on share capital Revaluation surplus on land Share subscription received in advance Translation adjustment Retained earnings Appropriated - legal reserve

18

Unappropriated EQUITY ATTRIBUTABLE TO COMPANY’S SHAREHOLDERS MINORITY INTEREST - equity attributable to minority

-

The accompanying notes are an integral part of the financial statements.

...................................................................... DIRECTORS ......................................................................

65

-


AUDITOR’S REPORT AND FINANCIAL STATEMENTS PRANDA JEWELR Y PUBLIC COMP ANY LIMITED AND ITS SUBSIDIAR Y COMP ANIES JEWELRY COMPANY SUBSIDIARY COMPANIES EARNINGS ST ATEMENTS STA FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002 (Unit:Baht) Consolidated Note

2003

2002

The Company Only 2003

(Restated)

2002 (Restated)

REVENUES Sales

2,615,278,441

2,506,840,507

2,053,211,449

1,950,670,638

9,232,209

8,861,013

14,821,956

15,274,158

18,624,632

26,867,835

40,074,067

48,602,687

Other income Interest income Others Share of profit from investments accounted for under equity method

6,582,384

TOTAL REVENUES

-

12,365,208

-

2,649,717,666

2,542,569,355

2,108,107,472

2,026,912,691

1,633,279,143

1,549,400,852

1,478,444,519

1,382,256,905

601,638,864

573,003,245

231,242,928

250,129,565

36,404,857

6,921,693

34,838,898

6,281,986

4,816,800

5,082,800

4,816,800

5,082,800

-

10,139,979

3,287,285

2,276,139,664

2,144,548,569

1,752,630,430

1,643,751,256

373,578,002

398,020,786

355,477,042

383,161,435

(57,850,845)

(86,913,223)

(42,829,631)

(74,337,517)

(3,666,844)

(2,323,645)

(587,098)

(40,000)

312,060,313

308,783,918

312,060,313

308,783,918

EXPENSES Cost of sales Selling and administrative expenses Loss on exchange Directors’ remuneration

19

Share of loss from investments accounted for under equity method TOTAL EXPENSES

-

EARNINGS BEFORE INTEREST EXPENSES AND CORPORATE INCOME TAX INTEREST EXPENSES CORPORATE INCOME TAX

20

EARNINGS FROM ORDINARY ACTIVITIES EXTRAORDINARY ITEM - net Gain on debts restructuring NET EARNINGS FOR THE YEAR

EARNINGS PER SHARE

-

14

61,637,623

61,637,623

-

312,060,313

370,421,541

312,060,313

370,421,541

1.43

1.54

1.43

1.54

21

BASIC EARNINGS PER SHARE Earnings from ordinary activities Extraordinary item - net

-

Net earnings

Weighted average number of ordinary shares (shares)

0.31

0.31

-

1.43

1.85

1.43

1.85

218,354,345

200,187,325

218,354,345

200,187,325

0.98

1.20

0.98

1.20

DILUTED EARNINGS PER SHARE Earnings from ordinary activities Extraordinary item - net

-

Net earnings

Weighted average number of ordinary shares (shares)

0.24

0.24

-

0.98

1.44

0.98

1.44

318,971,297

256,474,342

318,971,297

256,474,342

The accompanying notes are an integral part of the financial statements.

66


67

The accompanying notes are an integral part of the financial statements.

Balance - as at 31 December 2003

Net earnings for the year

Legal reserve

Dividend paid

Translation adjustment

Share subscription received in advance

Increased in share capital

Balance - as at 31 December 2002, as restated

Prior year adjustments

Balance - as at 31 December 2002, as previously reported

Balance - as at 31 December 2002 (Restated)

Net earnings for the year (Restated)

Legal reserve

Dividend paid

Translation adjustment (Restated)

Share subscription received in advance

Increased in share capital

Balance - as at 31 December 2001

 

 



 

Note

                 

         

share capital

share capital

       

Premium on

Issued and paid-up

         

       

surplus on land

Revaluation

         

       

received in advance

Share subscription

(Unit:Baht)

         

       

adjustment

Translation

CONSOLIDATED

FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002

ST ATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITY STA

Unappropriated

         

         

               

Appropriated

Retained earnings

PRANDA JEWELR Y PUBLIC COMP ANY LIMITED AND ITS SUBSIDIAR Y COMP ANIES JEWELRY COMPANY SUBSIDIARY COMPANIES

         

       

Minority interest

         

       

Total

AUDITOR’S REPORT AND FINANCIAL STATEMENTS


68

The accompanying notes are an integral part of the financial statements.

Balance - as at 31 December 2003

Net earnings for the year

Legal reserve

Dividend paid

Translation adjustment

Share subscription received in advance

Increased in share capital

Balance - as at 31 December 2002, as restated

Prior year adjustments

Balance - as at 31 December 2002, as previously reported

Balance - as at 31 December 2002 (Restated)

Net earnings for the year (Restated)

Legal reserve

Dividend paid

Translation adjustment (Restated)

Share subscription received in advance

Increased in share capital

Balance - as at 31 December 2001

 

 



 

                  

         

         

surplus on land

Revaluation

       

share capital

Premium on

       

share capital

Issued and paid-up

(Unit : Baht)

         

       

received in advance

Share subscription

THE COMPANY ONLY

         

       

adjustment

Translation

FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002

ATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Continued) ST STA

         

       

         

       

Unappropriated

Retained earnings Appropriated

PRANDA JEWELR Y PUBLIC COMP ANY LIMITED AND ITS SUBSIDIAR Y COMP ANIES JEWELRY COMPANY SUBSIDIARY COMPANIES

         

       

Total

AUDITOR’S REPORT AND FINANCIAL STATEMENTS


AUDITOR’S REPORT AND FINANCIAL STATEMENTS PRANDA JEWELR Y PUBLIC COMP ANY LIMITED AND ITS SUBSIDIAR Y COMP ANIES JEWELRY COMPANY SUBSIDIARY COMPANIES ST ATEMENTS OF CASH FLOWS STA FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002 (Unit:Baht)

Consolidated



The Company Only



(Restated)





(Restated)

Cash flows from (used in) operating activities : Net earnings for the year

312,060,313

370,421,541

312,060,313

370,421,541

50,913,505

48,775,088

28,473,705

25,813,968

98,198

111,838

98,198

97,781

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities Depreciation/amortization Written-off fixed assets

-

Amortized deferred discount from debt restructuring

(64,525)

Amortized discounted value of government bond

(3,712,073) -

(64,525)

(2,634,360)

18,314,628

(188,994)

3,172,241

Share of loss (profit) from investments accounted for under equity method (6,582,384)

10,139,979

Provision for doubtful accounts (reversal) Provision for diminution in value of stocks (reversal)

-

Loss (gain) from written-off investment

(3,712,073)

-

5,337,231

(1,612,349)

14,083,009 4,000,000

3,287,285

(12,365,208) (2,608,531)

-

Gain on disposal of machinery and equipment

(359,188)

(820,587)

(123,095)

(820,587)

Unrealized loss (gain) on exchange

9,150,994

2,851

18,232,961

(8,616,802)

362,393,559

451,742,737

360,352,493

386,293,098

Trade accounts and notes receivable

6,021,639

(177,863,133)

(52,270,176)

(22,651,130)

Trade accounts receivable - related parties

(617,432)

11,471,428

(19,813,587)

(102,517,597)

240,269

799,959

14,384,571

(22,202,719)

(105,933,472)

(126,738,868)

(3,383,663)

(76,716,701)

1,182,051

(1,643,494)

3,719,351

(4,714,660)

(9,209,631)

(8,672,655)

(6,460,438)

(5,378,659)

38,860,753

29,258,449

37,522,065

11,927,321

481,343

847,304

(23,185)

224,826

26,345

385,219 4,027,002

Decrease (increase) in operating assets :-

Amounts due from related parties Inventories Other current assets Other non-current assets Increase (decrease) in operating liabilities :Trade accounts and notes payable Trade accounts payable - related parties

-

Amounts due to related parties

-

Accrued interest expenses

(263,776)

3,593,408

(263,776)

Accrued expenses

6,351,126

(4,955,960)

155,929

809,656

Corporate income tax payable

(461,648)

761,693

285,519

(1,213,069)

12,098,308

(18,522,056)

(390,328)

(1,165,367)

2,871,895

(3,887,274)

Other current liabilities Other non-current liabilities Net cash before extraordinary item

314,014,984 -

Gain on debts restructuring Net cash provided by operating activities

314,014,984

The accompanying notes are an integral part of the financial statements.

69

156,191,538 (61,637,623) 94,553,915

333,841,120 333,841,120

167,107,220 (61,637,623) 105,469,597


AUDITOR’S REPORT AND FINANCIAL STATEMENTS PRANDA JEWELR Y PUBLIC COMP ANY LIMITED AND ITS SUBSIDIAR Y COMP ANIES JEWELRY COMPANY SUBSIDIARY COMPANIES ST ATEMENTS OF CASH FLOWS (Continued) STA FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002 (Unit:Baht) Consolidated





The Company Only



(Restated)

Cash flows from (used in) investing activities :

 (Restated)

Decrease (increase) in cash at banks which is pledged or has maturity period of more than 3 months Payment in other long-term investment Proceeds from loans and amount due from related parties Decrease in advances for investment Payment for investment in subsidiary company Acquisition of machinery and equipment Proceeds from disposal of machinery and equipment Proceeds from other long-term investment Net cash used in investing activities

        

        

        

        

Cash flows from (used in) financing activities : Increase (decrease) in bank overdrafts and short-term loans from financial institutions Proceeds from (repayment of) loans from related parties Repayment of long-term loans Proceeds from increase in share capital Share subscription received in advance Dividend paid Net cash used in financing activities Translation

adjustment

Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

                                           

Supplemental cash flows information :Cash paid (refund) during the year Interest paid Corporate income tax

 

 

 

 

Non cash transactions :The conversion of advances for investment in an overseas

subsidiary company to become the capital of that subsidiary company

The accompanying notes are an integral part of the financial statements.

70




AUDITOR’S REPORT AND FINANCIAL STATEMENTS PRANDA JEWELR Y PUBLIC COMP ANY LIMITED AND ITS SUBSIDIAR Y COMP ANIES JEWELRY COMPANY SUBSIDIARY COMPANIES NOTES T O CONSOLIDA TED FINANCIAL ST ATEMENTS TO CONSOLIDATED STA FOR THE YEAR ENDED 31 DECEMBER 2003

1 . GENERAL INFORMA TION INFORMATION Pranda Jewelry Public Company Limited (hereinafter called “the Company”) is a Public Company Limited under Thai Laws and listed on the Stock Exchange of Thailand. Its registered address is 333 Soi Rungsang, Bangna-trad Road, Bangna Subdistrict, Bangna District, Bangkok 10260. The Company operates its business inThailand and is principally engaged in the manufacture and distribution of jewelry.

2 . BASIS OF CONSOLIDA TION CONSOLIDATION 2.1

The consolidated financial statements include the financial statements for the years ended 31 December 2003 and 2002 of the Company and the following subsidiary companies (hereinafter called “the subsidiary companies”):-

Percentage of

Total assets

Total income

included in the consolidated

included in the consolidated

balance sheets

earnings statements

shareholdingby the Company and subsidiary companies

The subsidiary companies

Country of incorporation

Nature of business

2003

2002

Primagold International Co., Ltd.

100

100

Thailand

Distribution of jewelry

Crystaline Co., Ltd.

92

92

Thailand

Manufacture and distribution of

Pranda Lodging Co., Ltd.

83

83

Thailand

Dormitory rental

Pranda North America, Inc.

100

100

U.S.A.

Distribution of jewelry

2003

2002

2003

2002

155

272

264

73

71

127

129

38

39

5

5

177

258

697

747

220

213

210

221

261

197

852

255

42

38

7

-

38

42

8

3

(Restated) 226

jewelry

Crystaline North America, Inc. (held by Pranda North America, Inc.)

100

100

U.S.A.

Distribution of jewelry

H. GRINGOIRE s.a.r.l.

100

100

France

Distribution of jewelry

Pranda UK Ltd.

100

100

United Kingdom

Distribution of jewelry

Pranda Singapore Pte. Limited

100

100

Singapore

Holding company

100

100

Malaysia

Distribution of jewelry

Pranda Acceptance Sdn. Bhd. (held by Pranda Singapore Pte. Limited)

 

(ceased its operations in 2000) Pranda Vietnam Co., Ltd.

100

100

Vietnam

Manufacture and distribution of jewelry

71


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 2.2

The financial statements of a local subsidiary company, Pranda Lodging Co., Ltd. and 4 overseas subsidiary companies, Pranda Vietnam Co., Ltd., Pranda UK Ltd., H. GRINGOIRE s.a.r.l and Pranda North America, Inc., which incorporate the financial statements of its subsidiary, Crystaline North America, Inc., were included in the consolidated financial statements with total assets as at 31 December 2003 of Baht 734 million (31 December 2002 : Baht 749 million), total revenues and net loss for the year then ended of Baht 1,272 million and Baht 9 million, respectively (2002 : total revenues and net earnings of Baht 1,231 million and Baht 16 million, respectively). Those subsidiary companies’ financial statements were audited by their auditors who expressed an unqualified audit opinion on those financial statements, except for the financial statements of Pranda UK Ltd., on which the audit opinion is qualified on the prior year adjustment and the financial statements of H.GRINGOIRE s.a.r.l, on which the audit opinion is qualified on its financial position.

2.3

The consolidated financial statements of an overseas subsidiary company, Pranda Singapore Pte. Limited and its subsidiary, Pranda Acceptance Sdn. Bhd., which were included in the consolidated financial statements, were prepared by the management of the subsidiary company and not audited by its auditor because of time restrictions. As at 31 December 2003, this subsidiary company has assets included in the consolidated financial statements of Baht 42 million (2002 : Baht 38 million), revenues for the year ended 31 December 2003 of Baht 7 million (2002 : no revenue) and net earnings for the year then ended of Baht 7 million (2002 : net loss of Baht 11 million). These amounts are immaterial to the consolidated financial statements.

In addition, the financial statements of an overseas subsidiary company, Pranda Acceptance Sdn. Bhd., included in the consolidated financial statements of Pranda Singapore Pte. Limited, are for the period ended 31 March 2000 since this company ceased its operations during the first quarter of 2000. Assets of this subsidiary company amounting to approximately 0.3 million Singapore dollars (or equivalent to Baht 8 million) were included in the consolidated financial statements.

2.4

The assets, liabilities and results of operations of the subsidiaries are included in the consolidated financial statements from the date of acquisition to the date of disposition.

2.5

Balances and significant transactions between the Company and its subsidiary companies, cost of investments in subsidiary companies, the share capital of the subsidiary companies, and profits included in ending balance of inventories have been eliminated from the consolidated financial statements.

2.6

The financial statements of the subsidiary companies incorporated overseas are translated to Thai Baht at the closing exchange rate as to assets and liabilities, and at the average exchange rate as to revenues and expenses.

The resultant difference is shown under the caption of “Translation adjustment” in the

shareholders’ equity.

3 . SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with accounting standards pronounced by the Institute of Certified Accountants and Auditors of Thailand which are effective under the Accounting Act B.E. 2543.

Significant accounting policies adopted by the Company and its subsidiaries are summarized below :-

72


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 3.1

Revenue

recognition

Sales are the invoiced value of goods supplied, excluding value added tax, after deducting discounts and allowances.

Rental and service income is recognized when service is rendered. Rental and service income presents the invoiced value, excluding value added tax.

3.2

Trade accounts receivable and allowance for doubtful accounts Trade accounts receivable are stated at their net realisable value. Allowance for doubtful accounts isprovided for the estimated losses that may be incurred in collection of receivables. The allowance is based on analysis of debtor aging, the financial position of the debtors, and the likelihood of settlement of debt, on a specific account basis.

3.3

Inventories Raw materials are valued at the lower of cost (moving average method) and net realisable value. Work in process and finished goods are valued at the lower of cost and net realisable value, with cost being determined on a standard cost basis which approximates actual cost (FIFO method).

3.4

Basis of recording provision for diminution in value of stocks The Company records provision for diminution in the value of stocks based on an appraisal of the value of stocks and expected future sales trends, and taking into consideration the type of product and the age of the goods.

3.5

P r o p e r t yy,, p l a n t a n d e q u i p m e n t / D e p r e c i a t i o n a n d a m o r t i s a t i o n Land is initially recorded at cost and subsequently revalued by an independent appraiser to its fair value. Revaluations are to be made with sufficient regularity to ensure that the carrying amount does not The differences arising from revaluation are dealt in the financial statements as follows :

-

When the carrying amount of land is increased as a result of the revaluation, such increase is credited directly to equity under the heading of “Revaluation surplus on land”. However, a revaluation increase will be recognized as income to the extent that it reverses a revaluation decrease of land previously recognized as an expense.

-

When carrying amount of land is decreased as a result of a revaluation, such decrease is recognized as an expense. However, a revaluation decrease will be charged directly against the related “Revaluation surplus on land” to the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of land.

Plant and equipment is stated at cost less accumulated depreciation. Depreciation of plant and equipment is generally calculated by reference to its cost on a straight-line basis (although for certain assets of some subsidiary companies, a declining balance method is used) over the following estimated useful lives :-

73


AUDITOR’S REPORT AND FINANCIAL STATEMENTS Land improvements

20 years

Buildings

14, 20 years

Leasehold improvements

period of lease

(5 - 39 years)

Machinery

5 - 10 years

Furniture, fixtures and equipment

3 - 10 years

Motor vehicles

3 - 6 years

No depreciation is provided for land and construction in progress.

The Company and some subsidiary companies amortise leasehold rights on a straight-line basis over the period of the lease.

The Company and its subsidiary companies recognise impairment loss if events or changes in circumstances indicate the carrying value of assets may not be recoverable.

3.6

Investments Investments in subsidiary companies (in the separate financial statements of the Company) and investments in associated companies are recorded under the equity method.

Investments in debt securities, expected to be held to maturity, are determined at depreciated cost.

Long-term investments are held as other investments and valued at cost. A provision for impairment loss will be made when the fair value of an investment is lower than its cost.

3.7

Foreign

currencies

Foreign currency transactions incurred during the year are translated into Baht at the rates of exchange ruling on the transaction dates. Assets and liabilities denominated in foreign currency outstanding at the balance sheet date are translated into Baht at the rates of exchange ruling on the balance sheet date.

Exchange gains and losses are included in determining earnings.

3.8

Basic earnings per share The basic earnings per share is determined by dividing net earnings for the year by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share is calculated by dividing net earnings for the year by the total sum of the weighted average number of ordinary shares in issue during the year and the weighted average number of ordinary shares issuable to convert all dilutive potential ordinary shares (warrants) into ordinary shares.

3.9

Cash and cash equivalents Cash and cash equivalents include cash, cash at banks and financial institutions with an original maturity of 3 months or less and not subject to restrictions.

74


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 3.10

Financial

instruments

The Company has no policy to speculate in or engage in the trading of any financial derivative instruments.

Financial instruments carried in the balance sheet include cash and bank balances, trade accounts receivable, and trade accounts payable. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.

3 . 11

Use of accounting estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates for certain accounting transactions such as accrued expenses,, affecting amounts reported in the financial statements and notes related thereto. Subsequent actual

results may

differ from these estimates.

3.12

Gain from debt restructuring The Company adopts the Accounting Standard No. 34 “an accounting for troubled debt restructuring” when the debt restructuring involves a waiver of debts, a portion of the waived debts that exceeds the aggregate amount of repayment to be incurred over the term of the new agreement is recognised as an extraordinary gain in the earnings statements.

4 . TRADE ACCOUNTS AND NOTES RECEIV ABLE RECEIVABLE The outstanding balances of trade accounts and notes receivable as at 31 December 2003 and 2002 are aged as follows :-

(Unit : Thousand Baht) Consolidated Trade accounts receivable

Trade accounts receivable

- related parties

- other companies

2003

2002

Total

2003

2002

2003

2002

69

17

202,895

190,031

202,964

190,048

1,466

3,725

183,882

142,614

185,348

146,339

3 - 6 months

1,096

703

47,470

27,425

48,566

28,128

6 - 12 months

3,131

1,563

31,015

51,374

34,146

52,937

433

20

206,510

176,391

206,943

176,411

Not yet due Past due Up to 3 months

Over 12 months Add : Trade accounts receivable of one overseas subsidiary company - no information Total Less : Allowance for doubtful accounts Total

-

-

-

97,942

-

97,942

6,195

6,028

671,772

685,777

677,967

691,805

-

-

(202,330)

(204,964)

(202,330)

(204,964)

6,195

6,028

469,442

480,813

475,637

486,841

75


AUDITOR’S REPORT AND FINANCIAL STATEMENTS (Unit : Thousand Baht) The Company Only Trade accounts receivable - related parties Not yet due

Trade accounts receivable Total

- other companies

 

 

 

 

 

 

      

      

      

      

      

      

Past due Up to 3 months 3 - 6 months 6 - 12 months Over 12 months Total Less : Allowance for doubtful accounts Total

The Company’s management believes that allowance for doubtful accounts set aside is adequate in the present situation.

An overseas subsidiary company has pledged some of its trade accounts receivable to secure loans granted to it by a bank.

During 2003, sales by two overseas subsidiary companies, Pranda North America, Inc. and Crystaline North America, Inc. to two significant customers totaled USD 14 million or approximately Baht 581 million, equivalent to 84 percent of its net sales (2002 : three significant customers totaled USD 15 million or approximately Baht 644 million, equivalent to 87 percent of its net sales).

5 . RELA TED P AR TY TRANSACTIONS RELATED PAR ARTY During the year, the Company had significant business transactions with its subsidiary, associated and related companies (related by way of common shareholders and/or common directors). Such transactions, which have been concluded on terms negotiated between the relevant parties, but without written agreements, are summarised below : (Unit : Million Baht) Consolidated

The Company Only

Pricing policy

2003

2002

2003

2002

Sales





Purchases of goods and raw materials





Transactions with subsidiary companies (eliminated from the consolidated financial statements) Normal business price closed as charged to other customers Standard cost or with reference to market price Loan interest income Service income Management income Service fees

   

   

   

   

 

 

 

 

 

 

 

 

Interest rate at 7.5% p.a. Cost plus margin At 2% of net sales Agreed between the parties

Transactions with associated companies Purchases of raw materials Service income

With reference to market price Cost plus margin

Transactions with related companies Sales

Normal business price closed as charged to other customers

Service income Service fee

76

Cost plus margin Agreed between the parties


AUDITOR’S REPORT AND FINANCIAL STATEMENTS The outstanding balances with those companies have been separately shown in the balance sheets. Details are as follows :-

(Unit : Million Baht) Consolidated



The Company Only







Accounts receivable - related parties Subsidiary

companies

Primagold International Co., Ltd. Crystaline Co., Ltd. Pranda UK Ltd. H. GRINGOIRE s.a.r.l. Crystaline North America, Inc. Pranda North America, Inc. Pranda Acceptance Sdn. Bhd. Others

Associated

        

        

        

        





 

 

 

 

    

    

    

    









 

 

 

 

company

P.T. Pranda SCL Indonesia Related company PT. Gold Martindo Total accounts receivable - related parties

Amounts due from related parties Subsidiary

companies

Primagold International Co., Ltd. Crystaline North America, Inc. Pranda North America, Inc. Others

Associated

company

P.T. Pranda SCL Indonesia Related companies Others Total amount due from related parties

77


AUDITOR’S REPORT AND FINANCIAL STATEMENTS (Unit : Million Baht) The average balances Consolidated





The Company Only





for the year ended

Interest

31 December

Policies

 

Percentage per annum

Loans and amounts due from related parties Subsidiary

companies

Loans granted Crystaline Co., Ltd. Primagold International Co., Ltd. Pranda Singapore Pte. Limted Amount due from Crystaline Co., Ltd. Primagold International Co., Ltd. Total loans and amounts due from related parties Advances for investment Pranda Vietnam Co., Ltd. Total advances for investment

  

  

  

  

  

  

  

  

 

 

 

 

  

     Interest-free loan

These loans are unsecured and repayable on demand. (Unit : Million Baht) Consolidated





  

The Company Only





  

  

  

 

 

 

 

   

   

   

   

 

 

 

 

Accounts payable – related parties Subsidiary

companies

Pranda North America, Inc. Others Related companies Others Total accounts payable - related parties

Short-term loan and amounts due to related parties Subsidiary

companies

Amounts due to Primagold International Co., Ltd. Pranda UK Ltd. Pranda North America, Inc.

Short-term loan from related individual Total short-term loan and amounts due to related parties

78


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 6. INVENTORIES (Unit : Baht) Consolidated



The Company Only







     

     

(Restated) Raw materials Work in process Finished goods Total Less : Provision for diminution in value of stocks Inventories, net

     

     

The Company’s management believes that provision for diminution in value of stocks set aside is adequate in the present situation.

7 . DEPOSIT WITH FINANCIAL INSTITUTION - PLEDGE These balances are the Company and its subsidiaries’ deposit with banks, pledged to secure the guarantee issued by local banks and an overseas bank for electricity usage and for the lawsuit brought against an overseas customer.

8 . INVESTMENTS ACCOUNTED FOR UNDER EQUITY METHOD Investments in subsidiary and associated companies are recorded under the equity method. They are summarized below :-

Paid up capital





   

   

  

  

Currency

Percentage of shareholding by the Company and subsidiary companies

(Unit : Baht) The Company Only

















   

   

   

   

  

  

Investments in subsidiary companies

(Restated)

Pranda North America, Inc.

Thousand USD

Crystaline North America, Inc. (held by Pranda North America, Inc.) H. GRINGOIRE s.a.r.l. Pranda UK Ltd. Pranda Vietnam Co., Ltd. Pranda Singapore Pte. Limited

Million EUR Million GBP Million USD Million SGD

Pranda Acceptance Sdn. Bhd. (held by Pranda Singapore Pte. Limited) Primagold International Co., Ltd. Crystaline Co., Ltd. Pranda Lodging Co., Ltd.

Million Baht Million Baht Million Baht

Total investments - at cost Less : Cumulative share of loss from investments Translation adjustment Total investments in subsidiary companies

79

               


AUDITOR’S REPORT AND FINANCIAL STATEMENTS On 26 December 2003, a meeting of the Company’s Board of Directors resolved to purchase Baht 50 million of the new ordinary shares of a local subsidiary, Primagold International Co., Ltd., (5 million ordinary shares of Baht 10 each). As a result, there is no change in the Company’s percentage shareholding in the subsidiary company, which registered the resulting increase in its share capital with the Ministry of Commerce on 6 January 2004.

(Unit : Baht)

Percentage of shareholding by the Company and subsidiary companies



Consolidated





The Company Only







Investments in associated companies

 

LG - Pranda Co., Ltd. P.T. Pranda SCL Indonesia

       

Total investments - at cost Less : Cumulative share of loss from investments Translation adjustment Total investments in associated companies

                 

The share of profit (loss) from investment in an associated company incorporated overseas as included in the consolidated statements of earnings has been calculated from the financial statements prepared by that Company’s management but not audited by its auditor. However, the management believes that there would be no material difference if those financial statements had been to be audited by its auditor.

During 2003 and 2002, the Company received no dividend income from its investments in subsidiary and associated companies.

9 . OTHER LONG-TERM INVESTMENTS The other long-term investments are summarized below :-

(Unit : Baht) Consolidated

The Company Only





  

  





Held-to-maturity Government bonds Other long-term investments Total other long-term investments

80

  

  


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 10.

PROPER TY PROPERTY TY,, PLANT AND EQUIPMENT (Unit : Baht) CONSOLIDATED Furniture, Land improvement

Land

Building

Leasehold

Leasehold

improvement

rights

fixtures and

Motor

Construction

equipment

vehicles

in progress

Machinery

Total

Cost/Revaluation : At 31 December 2002 Purchases Transferred in/(out) Disposals Translation adjustment At 31 December 2003

     

     

           

     

                       

    

    

    

    

    

              

 

 

 

 

 

 

     

Accumulated depreciation : At 31 December 2002 Depreciation for the year Depreciation - disposals Translation adjustment At 31 December 2003

    

    

 

 

Net book value : At 31 December 2003 At 31 December 2002

 

 

Depreciation charged included in the earnings statements for the year

 

2003 2002

(Unit : Baht) THE COMPANY ONLY Furniture, Land Land

improvement

fixtures and

Motor

Construction

Machinery

equipment

vehicles

in progress

Leasehold Building

rights

Total

Cost/revaluation : At 31 December 2002 Purchases Transferred in/(out) Disposals At 31 December 2003

    

    

    

    

    

    

    

    

    

   

   

   

   

   

   

   

   

   

 

 

 

 

 

 

 

 

 

Accumulated depreciation : At 31 December 2002 Depreciation for the year Depreciation - disposals At 31 December 2003 Net book value At 31 December 2003 At 31 December 2002

Depreciation charged included in the earnings statements for the year

 

2003 2002

81


AUDITOR’S REPORT AND FINANCIAL STATEMENTS Most of the land, buildings thereon and leasehold rights have been mortgaged with financial institutions to secure the credit facilities of the Company and subsidiary companies.

In December 2001, the Company hired an independent appraiser to appraise the fair value of land, which showed the fair market value of the land to be approximately Baht 203 million higher than its book value. The Company recorded the land at the reappraised value and credited the surplus of Baht 203 million directly to equity, under the heading of “Revaluation Surplus on land” in the balance sheet. Had the land been presented at cost in the financial statements, its book value as of 31 December 2003 would have been Baht 51,711,917.

11 .

LAND HELD FOR DEVELOPMENT

The Company’s land held for development is land for future projects and has been mortgaged to secure the credit facilities of the Company. This balance is stated at cost, covering the cost of land, land improvements and other related capitalized expenses and interest less provision for impairment loss if the carrying value is less than the recoverable amount.

As at 31 December 2003 and 2002, the balances of land held for development consist of the following :-

(Unit : Thousand Baht)

      

Land Capitalised interest Land improvement

Less : Provision for impairment loss Total

      

In December 2001, the Company hired an independent appraiser to conduct an appraisal of the fair value of the land held for development, the results of which showed that its fair value was approximately Baht 313 million lower than its net book value. The Company has recognised the difference in the accounts.

12.

BANK OVERDRAFTS AND SHOR T-TERM LOANS FROM FINANCIAL INSTITUTIONS SHORT As at 31 December 2003, the credit facilities of bank overdrafts of the Company are secured by the mortgage of the

Company’s land and buildings, land held for development and by the guarantees of its directors.

The bank overdrafts of a local subsidiary company are secured by the guarantees of the Company and its directors. The bank overdrafts and short-term loans of an overseas subsidiary company are secured by some of its accounts receivable and assets.

82


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 13.

LONG-TERM LOANS The outstanding balances of long-term loans as at 31 December 2003 and 2002 are as follows :-

(Unit : Baht) Consolidated



The Company Only







The Company 13.1 Baht loan, to refinance restructured debt

   

- Interest at MLR less 1% per annum - Repayable quarterly as from October 2002 to January 2011 The local subsidiary company 13.2 Baht loan - Interest at MLR per annum - Repayable monthly as from 1994 to 2004







The overseas subsidiary company 13.3 GBP loan - Interest at LIBOR plus 2.5% per annum - Repayable monthly as from April 2002 to April 2004 Total Less : Current portion of long-term loans Long-term loans-net of current portion

           

The long-term loan of the Company was granted by a local commercial bank for the purpose of refinancing its outstanding balance of restructured debt under the debt restructuring agreement (dated 18 September 2000). The loan agreement stipulates various conditions with which the Company must comply. This long-term loan is secured by the mortgage of land and the building thereon, and land held for development, and by the guarantee of the Company’s directors. The long-term loan of the local subsidiary company is secured by the pledge of leasehold rights and by the guarantees of the Company’s and its subsidiary’s directors. The long-term loan of the overseas subsidiary company is secured by that subsidiary’s assets.

14.

GAIN ON DEBT RESTRUCTURING In September 2002, the Company repaid all of the outstanding balance of its restructured loan before the due date stipulated in

the debt restructuring agreement, resulting in a gain on debt restructuring of approximately Baht 62 million. Part of this gain was from forgiveness of the portion of the outstanding loan balance in excess of the bank overdraft facilities and part of the accrued interest, amounting to Baht 20 million, while the other Baht 42 million was from recognition of the difference between the loan balances per the Company’s accounts and under the debt restructuring agreement, which had previously been recorded as “Deferred discount from debt restructuring”. No corporate income tax was payable on such gain as the Company has received income tax privileges. The gain on debt restructuring has been shown as an extraordinary item in the 2002 earnings statements.

83


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 15.

W ARRANTS ARRANTS-During the second quarter of 2002, the Company received approval from the Office of the Securities and Exchange Commission

to offer 200 million warrants to purchase ordinary shares to the Company’s shareholders in proportion to their shareholding, in a ratio of 1 warrant per 1 existing ordinary share. No value is to be charged for the warrants upon issue. The warrants have an exercise price of Baht 2.80 per share and are exercisable at the ratio of 1 warrant per 1 ordinary share. However, 15,000 warrants were not offered to some shareholders thus the Company has 199,985,000 outstanding warrants. The warrants’ life is 5 years and is exercisable every month with the first exercise date on the last business day of May 2002 until 2 May 2007.

The Stock Exchange of Thailand has set the warrants to be traded on the Stock Exchange of Thailand commencing from 20 May 2002.

During the year, 41,353,450 warrants have been exercised. As at 31 December 2003, the Company has 155,238,550 outstanding warrants not yet exercised.

16.

SHARE CAPIT AL / SHARE SUBSCRIPTION RECEIVED IN ADV ANCE CAPITAL ADVANCE During the year 2003, 44,353,450 warrants have been exercised to be new ordinary shares. The Company registered the

capital increase of 38,458,900 shares with the Ministry of Commerce during the year, raising the Company’s issued and paid-up share capital increased to Baht 238,851,900 (238,851,900 ordinary shares of Baht 1 each). For the remaining 5,894,550 shares resulting from the exercise of the warrants, the Company registered the resulting capital increase with the Ministry of Commerce on 7 January 2004. As at balance sheet date, the proceeds of Baht 16.5 million (5,894,550 shares at an exercise price of Baht 2.80 per share) from the exercise of these rights was presented under the heading of “Share subscription received in advance” in the shareholders’ equity.

17.

DIVIDEND During 2003, the Company declared the following dividends in respect of the net earnings of 2002 for payment to

shareholders :-

17.1

Dividend of Baht 0.50 per share for the 210,727,700 ordinary shares, a total of approximately Baht 105 million, declared at the Annual General Meeting of the Company’s shareholders No. 1/2003 on 22 April 2003.

17.2

Dividend of Baht 0.30 per share for the 220,958,500 ordinary shares, a total of approximately Baht 66 million, declared at Board of director’s Meeting No.7/2003 on 13 August 2003.

During 2002, the Company paid dividend of Baht 2.50 per share for the 20 million ordinary shares to its shareholders in accordance with the resolutions of the Annual General Meeting of the Company’s shareholders no. 1/2002 on 18 April 2002.

18.

LEGAL RESERVE Under the Public Company Limited Act B.E. 2535, the Company is required to set aside a legal reserve at least 5 percent of its

net profit of the year, after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of its registered share capital. The statutory reserve could not use for dividend payment.

84


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 19.

DIRECT ORS’ REMUNERA TION DIRECTORS’ REMUNERATION Directors’ remuneration represents the benefits paid to the Company’s directors in accordance with Section 90 of the Public

Limited Companies Act, exclusive of salaries and related benefits payable to the executive directors.

20.

CORPORA TE INCOME T AX CORPORATE TAX The corporate income tax for the year represents the corporate income tax of the Company and its subsidiary companies. The

Company’s corporate income tax is calculated on the net earnings from operations without BOI promotional privileges after deducting income which is exempted from income tax, adding back expenses which are disallowable for tax computation purposes and taxable loss brought forward from the previous year. The subsidiary companies’ corporate income tax is calculated on the net earnings before tax, adding back certain expenses which are disallowable for tax computation purposes.

21.

RECONCILIA TION OF DILUTED EARNINGS PER SHARE RECONCILIATION

For the years ended 31 December Weighted average number Net earnings





of ordinary shares



Earnings per share

 

(Restated) Thousand Basic earnings per share Net earnings

Baht

 (Restated)

Thousand

Thousand

Thousand

Baht

Shares

Shares





















Baht

Baht









Effect of dilutive potential

ordinary shares Warrants Diluted earnings per share Net earnings of ordinary shareholders assuming the conversion of dilutive potential ordinary shares

85


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 22.

PRIOR YEAR ADJUSTMENTS In the second quarter of the current year, an overseas subsidiary company, Pranda UK Ltd., had completed changing its

accounting system and also reviewed its assets and liabilities valuation, that subsidiary company had made adjustments to decrease the balance of current assets as at 31 December 2002 of GBP 99,979 (or approximately Baht 7 million) and increase the balance of current liabilities as at 31 December 2002 of GBP 31,949 (or approximately Baht 2 million) to the balance of retained earnings brought forward to the beginning of the year 2003 and a retrospective adjustment to the financial statements for the year ended 31 December 2002. As a result, the net earnings of the year ended 31 December 2002 decreased by Baht 9 million. The adjustments have been presented under the heading “Prior year adjustments” in the respective statement of changes in shareholders’ equity.

In addition, under the reviews of its assets valuation as referred above that subsidiary company also performed stocktaking on 31 May 2003. As a result, the discrepancy amounting to GBP 65,000 (or approximately Baht 5 million) had adjusted to increase cost of sales in the statement of earnings for the year 2003.

23.

PROMOTIONAL PRIVILEGES 23.1 The Company was granted various tax privileges under the Investment Promotion Act B.E. 2520 by the Board of Investment under the certificate no. 1010/2544 for its factory located in the Suranaree Industrial Estate Zone in Nakorn Rachasima province. Subject to certain imposed conditions, the privileges include exemption from corporate income tax on profits for a period of eight years commencing as from the date of first earnings operating income (beginning on 1 January 2003), exemption from income tax on dividends paid from the profits of the operations on which corporate income tax is exempted throughout the corporate income tax exemption period and an allowance permitting five percent on the increment in export income over that of the preceding year to be deductible from taxable income for a period of ten years commencing as from the date of first earnings operating income.

23.2 A subsidiary company (Crystaline Co., Ltd.) was granted promotional privileges under the Investment Promotion Act B.E. 2520 by the Board of Investment on 24 June 2002. Subject to certain imposed conditions, the privileges include exemption from import duty on imported raw materials and supplies for use in export manufacturing from 2002 until 2004.

The Company’s revenues for 2003 below are divided between those from promoted and non-promoted activities :-

(Unit : Baht) Promoted Activities

Non-Promoted Activities

Total

REVENUES Domestic sales Export sales

  

86

  

  


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 24.

EMPLOYEES AND RELA TED COSTS RELATED Consolidated

  

Number of employees at end of year (persons) Employee costs for the year (Thousand Baht)

25.

The Company Only

  

  

  

FINANCIAL INFORMA TION BY SEGMENT INFORMATION The Company’s and the subsidiary companies’ operations involve major industry segments, the manufacture and distribution

of jewelry which is carried on in both Thailand and overseas, while a subsidiary company carries a business of dormitory rental in Thailand. The financial information of the Company and its subsidiary companies by industry and geographical segment, as of and for the years ended 31 December 2003 and 2002 are as follows :-

(Unit : Million Baht) The consolidated financial statements for the years ended 31 December The manufacturing and distribution of Jewelry Domestic

Overseas





Sales – net



Gross profit

Dormitory Rental Domestic

Eliminate

Total







































     

     

     

     

     

     

     

     

     

     

 

 

 

 

 

 

 

 

 

 

  

  

  

  

  

  

  

  

(Restated)





(Restated)

 

Share of profit (loss) from investments accounted for under equity method Loss on exchange Other income Selling and administrative expenses Interest expenses Corporate income tax Extraordinary item - gains on debts restructuring Net earnings for the year

Property, plant and equipment - net Other assets Total assets

87

     


AUDITOR’S REPORT AND FINANCIAL STATEMENTS 26.

COMMITMENTS AND CONTINGENT LIABILITIES 26.1

Commitments As at 31 December 2003, the Company and its subsidiaries have outstanding lease and service commitments under which total approximately Baht 20.7 million is payable. These commitments comprise commitments of the Company amounting to Baht 10.1 million, commitments of a local subsidiary amounting to Baht 3.8 million and commitments of two overseas subsidiaries amounting to GBP 32,587 and USD 114,251 or equivalent to approximately Baht 6.8 million.

26.2

Bank guarantees As at 31 December 2003, there were outstanding guarantees totaling of approximately Baht 13.7 million issued by banks on behalf of the Company and its subsidiaries in respect of performance bonds as required in the normal course of their businesses. Baht 1.9 million of these bank guarantees were issued on behalf of the Company, Baht 0.5 million issued on behalf of local subsidiaries and GBP 160,000 or equivalent to approximately Baht 11.3 million issued on behalf of an overseas subsidiary company.

26.3

Guarantees As at 31 December 2003, the Company has issued guarantees to secure bank overdrafts facilities from banks of a local subsidiary company, totaling Baht 20 million.

26.4

Agreement to reserve leasehold rights As at 31 December 2003, a local subsidiary company has commitments in relation to the payment of fees for leasehold rights in a shopping mall under an agreement to reserve the leasehold rights amounting to approximately Baht 12.6 million.

27.

SUBSEQUENT EVENT On 5 January 2004, a meeting of the Company’s Board of Directors passed a resolution approving the establishment of a new

company in the People’s Republic of China, to be named Guangzhou Pangda Zhubao Shoushi Youxian Gongsi, with a registered share capital of USD 250,000, or approximately Baht 10 million. The Company will hold 100 percent of the shares of this company.

28. FINANCIAL INSTRUMENTS Financial risk management and policies The Company and its subsidiary companies are exposed to risks from interest rates, currency exchange rates and nonperformance of contractual obligations by counterparties. The Company and its subsidiary companies use derivative instruments, as and when they consider appropriate, to manage such risks. They have no policy to hold or issue derivative instruments for speculative or trading purposes.

88


AUDITOR’S REPORT AND FINANCIAL STATEMENTS Interest rate risk The interest rate risk is the risk that future movements in market interest rates will affect the results of the Company and its subsidiary companies’ operations and their cash flows. The Company and its subsidiary companies’ exposure to interest rate risk relates primarily to their deposits with banks, loans to related parties, bank overdrafts and long-term loans. The Company and its subsidiary companies do not use derivative financial instruments such as interest swap to hedge such risk since they believe that the exposure to such risk is minimal (the details of loans are set out in Notes 12 and 13).

Foreign currency risk The Company and its subsidiary companies’ exposure to foreign currency risk relates primarily to their deposits with banks, receivables, payables, loans and amounts due from related parties, advances for investment and amount due to related parties which are denominated in foreign currencies. In addition to those transactional exposures, the Company is also exposed to the effect of foreign exchange movements on its investments in foreign subsidiary and associated companies.

As at 31 December 2003 the Company and its local subsidiary companies have foreign currency assets/liabilities as follows :-

Unit of currency Million USD Million GBP Million EURO

Assets

Liabilities

  

  

The Company has entered into various forward exchange contracts, to sell USD currency of approximately USD 5.5 million at pre-determined sold exchange rates ranging from Baht 39.09 to 39.69 per USD 1 to prevent the foreign currency risk derived from cash payment made by customers.

Subsequent to the balance sheet date up to 17 February 2004, the Company has entered into various forward exchange contracts to sell USD currency of approximately USD 5.7 million at pre-determined sold exchange rates ranging from Baht 38.95 to 39.36 per USD 1.

Credit risk The Company and its subsidiary companies are exposed to credit risk primarily with respect to trade accounts and notes receivable and loans to related parties. However, as the Company and its subsidiary companies have a prudent credit policy and a diversified customer base, the management of the Company and its subsidiary companies do not anticipate losses from debt collection in excess of the allowance for doubtful accounts already set up in the accounts. In general, the Company operates in the matter of concerns as the normal course of business.

89


AUDITOR’S REPORT AND FINANCIAL STATEMENTS Fair value Since most of long-term investments of the Company and its subsidiary companies are recorded under the equity method, long-term loans carry interest at rates which vary with the current market rates, and the majority of the other financial assets and liabilities are short-term, the management of the Company and its subsidiary companies believes that the fair value of the Company and its subsidiary companies’ financial assets and liabilities do not materially differ from their carrying value.

29.

PRESENT ATION PRESENTA The presentation of the financial statements has been made in compliance with the stipulations of the Notification of the

Department of Business Development dated 14 September 2001, under the Accounting Act B.E. 2543.

30.

APPROV AL OF FINANCIAL ST ATEMENTS APPROVAL STA These financial statements have been approved by the directors of the Company.

90


PRANDA : Annual Report 2003  

Annual Report 2003

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