...... Name and address R.S. Promotion Public Company Limited Registration No. : 40854600001 Address : 419/1 Chetchotisak Building Ladphrao 15, Ladyao, Jatujark, Bangkok 10900 Tel. : 0-2511-0555 Fax. : 0-2511-2324 E-mail : [email protected] Website : www.rs-promotion.com Type of business Fully integrated entertainment business Registered capital Authorized share capital 140,000,000 and 5,600,000 ordinary shares in 2003 and 2002 respectively, Baht 5 and 100 par value respectively Total Baht 700,000,000 Issued and paid-up capital 140,000,000 and 5,600,000 ordinary shares in 2003 and 2002 respectively Total Baht 700,000,000 Other reference persons Share registrar : Thailand Securities Depository Co.,Ltd. Address : 62 The Stock Exchange of Thailand Building, 4, 6-7th Floor, Rachadapisek Road, Klongtoey, Bangkok 10110 Tel. : 0-2359-1200-1 Fax. : 0-2359-1259 Auditor KPMG Phoomchai Audit Limited By 1. Mr. Supot Singhasaneh Auditor License No. 2826 or 2. Ms. Somboon Supasiripinyo Auditor License No. 3731 Address : 21st & 22nd Fl., Empire Tower 195 South Sathorn Rd, Yannawa, Sathorn, Bangkok 10120 Tel. : 0-2677-2000 Fax. : 0-2677-2222 Special legal counselor MINTER ELLISON (THAILAND) LTD Address : No.900 Tonson Tower Building, 17th Floor, Zone A, Ploenchit Road, Lumpini, Pathumwan, Bangkok Tel. : 0-2689-3333 Fax. : 0-2689-3300 ...... Rose Sound, R.S.Group's first music business, was established by Khun Kriangkrai Chotchetsak in 1976. A new company was registered in 1992 as R.S. Promotion (1992) Co., which was later to become R.S.Promotion (Public Company) Limited. Since May 2003, the company has been listed on the Stock Exchange of Thailand. From the outset, Kriangkrai Chotchetsak instituted a method of working based on integrity. In its early years, R.S. Group was simply a music company with a production team and a tape cassette factory that also acted as producer for other music companies. In marketing, though, R.S. had few rivals thanks to its long experience in the music business and its good relationship with distributors. This helped the Group to distribute its music products to consumers throughout Thailand. Originally, only Thai traditional and country songs were the main stock of Thailand's music business. RS was the first company to introduce modern pop music to the industry, and its bands at the time included Kereeboon, Rainbow, Ruam Dao Artists and Noppakao. They boosted not only the revenue but also the reputation of RS. Pop fans knew them well; they helped to build the market for pop music and led the way for new artists to follow them.
With the vision and leadership of the brothers Kriengkrai and Surachai Chetchotisak, RS saw new opportunities for expansion. The company extended its interests into the entertainment industry with TV programmes and drama series, radio advertising and management, and film productions that returned a notable increase in its revenue.
004 R.S. Promotion Public Company Limited ...... 1976 Mr Kriangkrai Chetchotisak entered the music business by forming Rose Sound Company. 1992 Chetchotisak Family registered a new company, R.S.Promotion 1992 Co., Ltd and announced the company's new positioning as an integrated entertainment company rather than a music company. It entered other branches of the entertainment industry, namely radio and television, and established the R.S. Star Club, the first music business fan club in Thailand. 1995 The company moved decisively into the movie business with "Lok Tang Bai Hai Nai Kon Diew" (Romantic Blue), a great success in terms of the profits it attracted and the critical awards it received. 1997 "Shock Game", the talk-of-the-town game show, was the company's initial entry in the television business. 1999 The company formed Sky-High Network as its offical entry into the radio business. At that time, it had two radio stations, 88.5 Z POP We Like, targeted on the Z generation; and 98 Cool FM, an easy listening station. 2002 Significant business re-structuring and re-organizing culminated in RS being elevated to a Public Limited Company. 2003 The company was listed on the Stock Exchange of Thailand in the Entertainment and Recreation category.
2003
Listed on the Stock Exchange 1999 of Thailand
Establishes "Sky High Network" 1997 to enter radio business 1995 Enters television business with "Shock Game" Enters movie business with 1992 " Lok Tang Bai Hai Nai Kon Diew" (Romantic Blue)
R.S. Promotion 1992 Co.,Ltd forms R.S Star Club 1976
Rose Sound established
005 R.S. Promotion Public Company Limited ...... "Quality enterprise creates quality entertainment for quality society" is the business philosophy of RS . It reflects the company resolve to combine art with entertainment and bring happiness to everyone; and its determination to make the organization an expert in the integrated entertainment industry, with emphasis on supporting activities that will benefit society. Since it was first formed, the company has always adhered to this philosophy, and it has led to continuous and stable business expansion. When it switched its policy to the international system with the decision to be listed its on the Stock Exchange, RS continued to formulate plans focussing on producing quality entertainment creating the highest income and profit, and adding value to the business.
...... Today, RS business consist of three main segments: 1. Music; 2. Media, incorporating television, radio and publishing; and 3. Motion Pictures and production house Other continuing business activites support RS Group's business, such as studio and film-making equipment hire, concert and marketing organizing services, and design and commercial production for the media.
006 R.S. Promotion Public Company Limited Co., Ltd Support [3 Million Bath] [10 Million Bath] [2.80 Million Bath] Bangkok Organizer R.S. Studio Co., Ltd Screen Head Co., Ltd. P.O.V. Co., Ltd [5 Million Bath] Avant Co., Ltd. [3 Million Bath] [3 Million Bath] [5 Million Bath] [5 Million Bath] [10 Million Bath] [10 Million Bath] [10 Million Bath] Nagasia Co., Ltd. & Production Filmsurf Co., Ltd. [10 Million Bath] Tai-Saduak Co., Ltd Motion Picture Red Drama Co., Ltd. RS Film & Distribution [point of view] Co., Ltd Aladdin House Co., Ltd. R.S. Television Co., Ltd. Publishling Poema Co., Ltd. [10 Million Bath] Radio Media Co., Ltd. R.S. PROMOTION PUBLIC COMPANY LIMITED [100 Million Bath] Sky-High Network Co., Ltd. Co., Ltd. Television [47 Million Bath] [37 Million Bath] Magic Advertainment Shadow Entertainment Music Thai Copyright [1 Million Bath] [1 Million Bath] [1 Million Bath] [1 Million Bath] R Siam Co., Ltd. [82 Million Bath] [10 Million Bath] Collection Co., Ltd. K. Master Co., Ltd. Rock Skin Co., Ltd. Ruk Saing Co., Ltd. Red Sailor Co., Ltd. * Temporarily suspended.
007 R.S. Promotion Public Company Limited
ion urce to its pecially eholders, success previous he music field. This lso return dicated to ders. . The music . The music ve advantages. Chief Executive Officer Mr Surachai Chetchotisak Pan-Rock-Nah-Yon brought in 50 million proved a hit at the box office and which all did well. Notable among them were the 15 drama series, a main so which all did well. Notable among them were the R.S. Promotion Public Company Limited medium, and in February we launched a new women’s magazine, FRONT. We are medium, and in February we launched a new women’s to present new programmes on FM 93 MHz in mid-2003. After evaluation, we decided to present new programmes on FM 93 MHz in the businesses that we have skilled for which help boost our capability. We will a to improve the efficiency of its marketing and public relations, such as forming t 008 managed by TCC has been acknowledged by the industry as the most efficient in its managed by TCC has been acknowledged by the year 2003 earned a total revenue of 1,961.27 million baht, an increase of 61% over the revenue of 1,961.27 million baht, an increase year 2003 earned a total almost double that of the last year -- derived from the growth in all major businesses last year -- derived from the growth in all major almost double that of the Chairman integrated entertainment provider serving the needs of consumers, and at the same time adding value integrated entertainment provider serving the needs of consumers, and at the same time adding Entertainment segment, the MobiClub brand was launched and successfully built customer recognition, es Entertainment segment, the MobiClub brand was Mr Kriengkrai Chetchotisak In 2003, RS Promotion Public Limited Company passed an important milestone in its progress by improving the work process its progress by improving important milestone in Company passed an Promotion Public Limited In 2003, RS In 2003, RS launched seven movies, one of which,
RS aims to be an business. To achieve its goals the company must give special consideration to all those parties with whom it is concerned: shar business. To achieve its goals the company must give special consideration to all those parties employees, clients and business partners. RS has identified effective actions production team into an independent music company, combining media segments, and restructuring its movie business operations. production team into an independent music company, combining media segments, and restructuring At RS, we firmly believe that our sustainable profit derives from the quality of our products and from our competiti shall continue to see our strength, Our commitment is to build on the skills that are the foundation of our business so that we and reputation grow. Thus we are committed to operating benefits for our sharehol benefit to the society as well as focus on the Good Corporate Governance in order to create long-term baht. The copyright collection business company manages the copyright of 30,000 songs for RS, as well as for a number of songwriters. company manages the copyright of 30,000 songs In the Mobile in the first six months after its launch in June 2003. in the first six months after its launch in June 2003. Dear Shareholders, pleased to say that it has received a good response from both readers and advertising buyers. pleased to say that it has received a good response year. Net profits reached 107.81 million baht, representing a year-on-year increase of 81%. 107.81 million baht, representing a year-on-year year. Net profits reached in net profit -- This increase in every one of its business segments. In the past, we had sometimes encountered difficulties in the way we worked and in decis we worked and in difficulties in the way sometimes encountered In the past, we had of its business segments. in every one de claim to be an integrated entertainment provider efficient preparation and teamwork, RS can rightly making. Now, through its consumers’ satisfaction. for the fiscal RS performance of revenue, which were aired in 2003. In radio, we received the concession it expired at the end of 2003, as it did not yield an acceptable level of profit. against renewing the FM 98 MHz contract when print Our latest business venture is in the segment released 78 new albums and 181 compilation albums, demonstrating how effectively the Music Library, the company’s major how effectively the Music Library, the albums and 181 compilation albums, demonstrating segment released 78 new ...... asset, is being used. The television segment created programmes Chairman Mr. Kriengkai Chetchotisak ...... R.S. Promotion Public Company Limited Chief Executive Officer 009 Mr. Surachai Chetchotisak 4 1. Mr. Kriengkai Chetchotisak Chairman 4. Mr. Vorapoj Nimvijit Operation Director 5 6 2. Miss Malee Chetchotisak Deputy Managing Director 5. Ms. Pattama Kositangkul Business development Director 1 2 3 3. Miss Pornpan Rungruengbangchan Assistant Managing Director 6. Miss Sutthinun Srichaisak Public Relations Director
010 R.S. Promotion Public Company Limited 1. Mr. Surachai Chetchotisak Chief Executive Officer
7 2. Mr. Suwat Chetchotisak Deputy Managing Director 5. Miss Buntanik Boonsin Advertising Business Director 4 5 6 3. Mr. Sataporn Panichraksapong Music Business Director 6. Miss Assanee Sritrakoon Finance & Accounting Director 1 3 4. Mrs. Napaporn Treepayak Central Administration Director 7. Mr. Chairat Lkitcharoenpong Home Entertainment Business Director 2
011 R.S. Promotion Public Company Limited 2003 2002 Detail Amount share in revenue Amount share in revenue (Million Baht) (%) (Million Baht) (%) Product Sales 838.75 43% 232.02 19% Copyright 166.29 8% 455.93 37% Production House 214.56 11% 143.92 12% Motion Pictures 134.03 7% 20.85 2% Concert And Event 129.10 7% 114.89 9% Advertising 399.20 20% 169.14 14% Others 79.34 4% 80.97 7% Tatal 1,961.27 1,217.72
Product Sales Copyright Production House Motion Pictures Concert And Event Advertising Others
012 R.S. Promotion Public Company Limited Auditor s report Auditor s report Detail Consolidated Consolidated 2002 2003
Cash and cash equivalent 320,939,618 206,032,962 Accounts and notes receivable-net 282,228,850 471,113,774 Inventories 326,427,110 739,204,629 Property, plant and equipment-net 228,511,078 437,850,188 Total assets 1,353,780,283 2,226,383,941 Short-term loans from financial institutions 230,000,000 78,500,000 Accounts payable 192,571,993 287,770,936 Long-term loan 55,000,000 - Total Liabilities 689,944,457 707,217,540 Registered capital 560,000,000 700,000,000 Paid-up capital 560,000,000 700,000,000 Retained earnings 103,835,826 211,650,162 Total shareholders' Equity 663,835,826 1,519,166,401 Total Revenue 1,217,729,748 1,961,266,375 Cost of sales and productions 867,694,460 1,329,183,417 Selling and administrative expense 190,360,882 458,297,863 Interest Expense 4,371,972 7,402,835 Tax Expense 95,829,982 58,207,924 Net profit 59,472,453 107,814,336 Weigted average number of shares at par 5 Bt 48,230,140 129,896,790 Earnings per share 1.23 0.83 Book value per share 13.76 11.70
013 R.S. Promotion Public Company Limited ......
In 2003, the company seized the opportunity to restructure its music business by dividing the production team into independent music companies. They would be responsible for producing as well as for public relations and marketing, as they saw fit. This led to a greater variety of music and increased flexibility in the distribution planning, with more specifically identified target groups. The changes were not complete until the end of the year, so more time will be needed before the results fully materialize; as there will be more kinds of music and more albums.
In 2003, RS sold some eight million units including top ten favourite albums from I-Nam, D2B, Hyper, Parn Tanaporn Wagprayoon, B-Mix, Baby Bull, Bovi, Pink, Nai Kunchid and Tid Laem and Neo X.
014 R.S. Promotion Public Company Limited ...... It was a competitive year for the media business, whether TV, radio or publishing, as there was more spending on commercials because of the improved economy. Always assertive, RS became the leading entrepreneur in all media, and we expanded by increasing the broadcasting time on Channel 9 and iTV, adopting another radio station, which is the 93MHz of the Navy radio station and launching the women's magazine, FRONT. Our TV output in 2003 consisted of music video programmes, drama series, variety shows and children's programmes. On the radio, our three stations targetted all age groups from pre-teens to teenagers and working people. In the publishing business, as well as introducing FRONT, the company launched nine pocket books, which were popular with readers.
In 2003, RS produced seven movies. After they were screened in and around Bangkok, the company sold the copyright to provincial distributors, and the movies also went to VCD and DVD for sale. Selling copyright to foreign customers is another distribution channel that the company believes has the potential to create a handsome income in 2004. This year, RS looks forward to producing more good movies that are oriented to the demand of the market, and expects to put another seven movies on the screen. Other RS productions were TV commercials and drama series. These included the Buddhanubhap and Ka-Wao Ti Bang Pleng drama series for Channel 3, and Jone Plon Jai for Channel 7.
015 R.S. Promotion Public Company Limited Recognized by the local and foreign entertainment industries foreign entertainment by the local and Recognized Promotion (Public) Co., Ltd is an integrated for its leadership, R.S. whose policy is to develop society as well as entertainment company standards in the way it runs its business. The maintaining the highest to society at the forefront of its company puts its responsibility it has received attest to its vision and activities, and many awards world philosophy in the business R.S. Promotion Public Company Limited 016
In order to carry on this socially-oriented policy, RS In order to carry on this socially-oriented of Provincial Promotion has joined with the Department Ruam Pa-lang Administration, Ministry of Interior, to form the join forces Chao Thai Ruam Jai Jud Rabiab Sangkom (Thais is aimed at to organize society) Project. This campaign power of the creating harmony among the Thais, showing the to strengthen nation, and responding to Government initiatives by the economic growth. Its success has been demonstrated opinion and recognition it has received from public government agencies alike. RS views as There are many other activities that It supports its benefitting society and to which it contributes. encouraging artists as good role models for young people, activities them to spend their leisure time in useful, creative and avoid the like sport and music to ensure good health scourge of drug abuse. Many of the company's artists have received honours for this, and been selected as presenters for social campaigns...... its leadership in Thailand's Each year's successes increase RS Promotion's determination to maintain the international stage in the near integrated entertainment industry. RS is firm in its commitment to step onto future, and thus to further contribute to the development of Thai society. Presenters against Osteoporosis The Osteoporosis Foundation Ning Kulsatri Siripongpreeda, Donut Manusnant Panlertwongskul, Cha-cha Arita Ramnarong Presenters of Tri-Rally on the Occasion Office of Transport and Traffic Policy Dance Army of King Rama V's150th Anniversary and Planning Representatives on the Occasion of Laymen's Working Team on the Occasion of Num Sornram Theppitak, Supreme Patriarch's 90th Birthday 90th Birthday the Supreme Patriarch's Tik Kanyarat Chirarachakij Presenters Promoting National Flag Sticker Thai Is Free Club Tao Somchai Kemklad, Kade Tiyada Pannabua Posting to Welcome APEC Summit Presenters of HRH Princess Maha Chitralada Shop Ning Kulsatri Siripongpreeda, Orn Luckana Chakri Sirindhorn's Paintings Huangmaneerungroj, Nathan Oman, Louis Scott Presenters Promoting Thai Costume Bangkok Metropolitan Administration Ning Kulsatri Siripongpreeda, Touch Na Takuatung on Lay Kratong Day 2nd World Anti Drug Artist The Foundation for Crime and Drug Num Sornram Theppitak Prevention of Thailand Presenters Promoting Garbage Sorting, Ministry of Natural Resources and Mo Mae Napassorn Buranasiri, Clean Alert Project the Environment Donut Manusnant Panlertwongskul, Anan Anwa Presenters Promoting Thai Products Chitralada Shop Nat Avitra Sirasart, Sandra Mavrow as New Year's Gifts
Presenters Promoting Tree Planting Ministry of Natural Resources and James Ruangsak Loychoosak, Aeh Sasikarn on Thai Environment Day the Environment Apichartvorasilp Commemorative Medals for Supporting Chulalongkorn University Foen Nantaka Worawanichanant, Touch Na King Rama V Honour Celebration Takuatung, Arm Siriroj Siricharoen Supporter of "Ruam Pa-lang Chao Thai Ministry of the Interior Surachai Chettachotisak Ruam Jai Jud Rabiab Sangkom" Supporter of "Royal Thai Army's Sports Royal Thai Army RS Promotion (Public) Co., Ltd. and Music Camp"" Nab Kun Cheep" Award, Merit Contributor to Foundation of the King's Royal Attendant Surachai Chettachotisak, Royal Thai Army Bodyguard, 1st Infantry Division, Komwit Chettachotisak, Chairat Likitcharoenpong Royal Thai Army The Gold Medal (Sixth Class) of Directorate of Civil Affairs, Royal Thai Army RS Promotion (Public) Co., Ltd the Direkgunakorn as Merit Contributor to the Nation Best Drama Series in Supporting Buddhism Office of National Buddhism RS Promotion (Public) Co., Ltd and Moral, Buddhanubhap Best Grateful Children National Council for Social Welfare of Thailand Khun Kriangkrai Chettachotisak Best Drama Series and Best Movie, Catholic Social Communications of Thailand RS Promotion (Public) Co., Ltd Buddhanubhap and Sex Phone Trader of the Year for Large Enterprise Commercial World Magazine Kriangkrai Chettachotisak
017 R.S. Promotion Public Company Limited Presenters of Teachers' Day Khurusapha, Ministry of Education Dunk Pankorn Boonyachinda, Mo Mae Napassorn Buranasiri, Donut Manusnant Panlertwongskul Commemorative Pins, "Nam Phra Tai Chuay Friends in Need (of "Pa") Volunteers Foundation, Ning Kulsatri Siripongpreeda, Duay JaiKhon Thai MaiTing Kan" The Thai Red Cross Society Tukta Ubonwan Boonraud, Bazoo 20th Best Mass Communications for Youth Office of the National Youth Promotion and D2B Co-ordination Commission,Ministry of Social Development and Human Security Anti Sexual Diseases and Aids Presenters Ministry of Public Health Lift Supoj Chancharoen, Oil Tana Suttikomol Organ Donation Presenters Organ Donation Center, Tao Somchai Kemklad, Kade Tiyada Pannabua The Thai Red Cross Society Special Surasawadi Award, Khurusapha Ning Kulsatri Siripongpreeda Best Anti Drug Artist 5th Golden Phra Pikanase Music Association of Thailand Ford Sobchai Kraiyoorasane, Parn Tanaporn Wagprayoon, D2B, Bazoo "Nab Kun Cheep" Award, Merit Contributor Foundation of King's Royal Attendant Num Sornram Theppitak, D2B to Royal Thai Army Bodyguard,1st Infantry Division,Royal Thai Army Golden Pin, Best Anti Drug Artist Office of the Narcotics Control Board Ning Kulsatri Siripongpreeda Presenters of Jasmine Distribution National Social Welfare Council of Thailand Tik Kanyarat Chirarachakij, on Mother's Day Lift Supoj Chancharoen, Oil Tana Suttikomol
Presenters of Five Dharma Practices against Office of National Buddhism Ning Kulsatri Siripongpreeda, Social Perils on the Occasion of James Ruangsak Loychoosak, Louis Scott Asalha Bucha Day Commemorative Medals for Supporting Office of National Buddhism Ning Kulsatri Siripongpreeda, Asalha Bucha Day James RuangsakLoychoosak, Louis Scott Presenters against Alcohol during Buddhist Lent Ministry of Public Health Tik Kanyarat Chirarachakij, Donut ManusnantPanlertwongskul Presenters of Traffic Discipline Office of Transport and Traffic Policy Vitamin A, Lift Supoj Chancharoen, Promoting Songs and Planning Oil Tana Suttikomol Presenters Promoting Global Warming WWF Thailand Programme Office Nancy Nantaporn Sawangchaeng, Orn Luckana Huangmaneerungroj, Jiwa, Strikerz Star with Dharma, Buddhanubhap Office of National Buddhism Num Sornram Theppitak Presenters of Loving Mum Project Loving Mum Association and Ning Kulsatri Siripongpreeda, Aeh Sasikarn The Thai Red Cross Society Apichartvorasilp, Lift Supoj Chancharoen Best National Grateful Children National Social Welfare Council of Thailand Tukta Ubonwan Boonraud, Dan Woradech Taniwong Best National Youth Office of Welfare Promotion, Protection D2B and Empowerment of Vulnerable Groups Best Youth, "Siam Diamonds" in Culture Center, Rajabhat Institute Chandrakasem Tukta Ubonwan Boonraud Gratitude Category
018 R.S. Promotion Public Company Limited 1. Capital structure
1.1 Company's Assets The company has the paid-up registered capital of 700 million baht including 140,000,000 ordinary shares at five baht par value. The company has adjusted the par value from 100 baht each to five baht each, according to the resolution of the extraordinary meeting 1/2003 on 13 January 2003
1.2 Shareholders The 10 major shareholders as at 31 December 2003 are as follows Shareholder No. of Shares % 1. Thailand Securities Depository Company Limited for depositors 35,746,797 25.53 2. Mr Kriangkrai Chetchotisak 23,184,000 16.56 3. Mr Surachai Chetchotisak 21,638,400 15.46 4. Mr Suwat Chetchotisak 21,638,400 15.46 5. Miss Malee Chetchotisak 7,728,000 5.52 6. ING Securities (Singapore) Pte Ltd. 6,048,000 4.32 7. Mr Annop Limprasert 5,628,000 4.02 8. Mr Chalaew Chimma 4,536,000 3.24 9. Mrs Chantaporn Angkasurak 4,452,000 3.18 10. Mr Anun Limprasert 3,360,000 2.40
R.S. Promotion Public Company Limited has not closed the registered book of shareholders as it was listed on the Stock Exchange of Thailand on 22 May 2003. Latest information is according to the report of Thailand Securities Depository Company Limited as at 31 December 2003. The shareholders without share warrants are listed under the name of Thailand Securities Depository Company Limited for depositors if they are Thai shareholders. Foreign shareholders will be listed under the name of Thailand Securities Depository Company Limited.
1.3 Dividend payment policy The company and its subsidiaries will pay a dividend not less than 50 per cent of net profit after tax and legal reserve. The company committee may consider and decide not to follow this policy, or adjust it in order to maximize the benefit to the shareholders.
2. Management
2.1 Management structure (Corporate Structure chart updated 31 December 2003) See details on page 7 Remark: The management structure noted above came into effect on 1 March 2003.
019 R.S. Promtion Public Company Limited Management structure of the company consists of 3 set of committees including: Board of Directors, Audit Committee and Executive Board. Details are as follows:
2.1.1 As at 31 December 2003, the Board of Directors consists of 11 qualified persons:
1. Mr Kriangkrai Chetchotisak Chairman 2. Mr Surachai Chetchotisak Vice Chairman 3. Miss Malee Chetchotisak Director 4. Mr Suwat Chetchotisak Director 5. Mrs Nareerat Limprasert Director 6. Miss Marisa Chetchotisak Director 7. Mrs Naphaporn Treepayauk Director and Secretary 8. Miss Assanee Sritrakoon Director 9. Gen.Thani Saeneewong Na Ayudhya Independent Director and Audit Committee Chairman 10. Pol.Gen Somchai Wanichsaeree Independent Director and Audit Committee 11. Mr Kriangkrai Sretkraikul Independent Director and Audit Committee
Authorized signatory directors Directors authorized to sign for the company are Mr Kriangkrai Chetchotisak, Mr Surachai Chetchotisak, Miss Malee Chetchotisak, Mr Suwat Chetchotisak, Mrs Nareerat Limprasert, Miss Marisa Chetchotsak, Mrs Naphaporn Treepayak, and Miss Assanee Sritrakul. Two of above directors can jointly sign and affix the company seal.
Roles of Board of Directors The Board of Directors is in charged with overseeing the company's operations to be in compliance with the country's laws and regulations as well as the policies and resolutions of shareholders' meetings. The Board of Directors can appoint the committee or assign any other persons to take any or several actions under the control of the Board of Directors except for the actions stated below. Those actions can be performed after receiving the approval from the shareholders' meeting. In cases where the committeeor any person has a conflict of interest with the company or its subsidiaries, the committee involved in that conflict may not vote on that case. (A) Any case that the laws mention must be in compliance with the resolution of the shareholders' meeting. (B) Performing cases where the committee gains the interest or where the laws and regulations the Stock Exchange of Thailand are mentioned must be approved by the shareholders' meeting. The following cases must be approved by the Board of Directors' meeting and the shareholders' meeting with a voting score of three-fourths of the number of shareholders attending the meeting and voting: (A) Trading or transferring the company's businesses or an important part of the business. (B) Acquiring or receiving transferred business from other companies or private entities. (C) Making, rectifying or terminating the renting contracts for the entire business of the company or an important section of it. Appointing any person to run the company's business or form a merger with any person for the purpose of profit and loss sharing. (D) Amending the Articles of Association or Memorandum of Association. (E) Increasing or reducing capital, issuing debentures, forming mergers or closing the company. (F) Any actions mentioned in the Securities Act or announcements by the Stock Exchange of Thailand requiring the approval of the shareholders' meeting, such as the acquisition or disposal of assets of the listed company or any related items.
020 R.S. Promtion Public Company Limited 2.1.2 Audit Committee
As at 31 December 2003, the three members of the Audit Committee are: 1. Gen.Thani Saeneewong Na Ayudhya Audit Committee Chairman 2. Pol.Gen Somchai Wanichsaenee Audit Committee 3. Mr Kriangkrai Sretkraikul Audit Committee
Responsibilities of Audit Committee
Audit Committee's responsibilities are as follows: (A) To attend the Board of Directors' meeting in order to formulate policy, to make decisions on business operations and control those operations. (B) To consider, select and propose the appointment of the auditors and propose the annual audit. (C) To consider the policy and operation guidelines of the Central Audit Department to ensure that they are effective and proper. (D) To consider and review plans for the annual audit of the Central Audit Department. (E) To work with external and internal auditors to ensure that the company has an effective internal control and internal audit systems. (F) To consider quarterly audit reports and comments of the internal and external auditors. To follow up the results based on those comments. (G) To review the quarterly financial statement of the company and its subsidiaries, to ensure its correctness and reliability, and to disclose appropriate information in line with good corporate governance. (H) To oversee and ensure that the company's operation complies with the regulations and conditions of the Stock Exchange of Thailand, and other related laws. (I) To review the dealings of the company and its subsidiaries with any person who may have a conflict of interest and ensure that all dealings are proper and without interest transfer. The long-term benefits of the shareholders will be borne in mind. (G) To join the auditors in considering any problems or restrictions caused by the financial budget audit. (K) To report on the activities of the Audit Committee and disclose their findings in the company's annual report. The report will be signed by the Audit Committee Chairman. (L) The Audit Committee can invite the executive directors, executives and other related persons to share the information or attend the meeting. (M) To be responsible for other duties assigned by the Board of Directors.
2.1.3 Executive Committee As at 31 December 2003, the seven members of Executive Committee are: 1. Mr Kriangkrai Chetchotisak Advisor to the Executive Committee 2. Mr Surachai Chetchotisak Chief Executive Officer 3. Miss Malee Chetchotisak Executive Director 4. Mr Suwat Chetchotisak Executive Director 5. Mrs Nareerat Limprasert Executive Director 6. Mrs Naphaporn Treepayak Executive Director 7. Miss Assanee Sritrakoon Executive Director
Responsibilities of the Executive Committee The Executive Committee's responsibilities are as follows:
021 R.S. Promtion Public Company Limited (A) To approve loans or apply for credit from financial institutions as well as acting as surety or making payments for general activities of the company. The credit limit of each item must be less than 100 million baht or equivalent. (B) To appoint and remove the company employees who are ranked below Managing Director. (C) To initiate, suggest and formulate policy for the business direction and business strategy of the company and present it to the Board of Directors. (D) To form corporate and management structures and Executive Committee. To oversee all aspects of the recruiting, training, employment and removal of company employees. (E) To formulate business plans and management powers. To approve the annual budget for business operations and expenses. To run the company following the business plan and strategy as well as the policy and business direction presented to the Board of Directors. (F) To be responsible for other duties assigned by the Board of Directors in each period.
Approval for carrying out the activities mentioned above would not be granted in cases where the Administrative Committee, or parties authorized by the Administrative Committee, are authorized to approve activities that may conflict with the company's interests under the regulations and announcements of the Stock Exchange of Thailand. Exceptions would be made for those activities carried out under policies and regulations approved by the Company's Committee, whereby the Committee has the authority to amend or change the responsibilities of the Administrative Committee whenever necessary.
2.1.4 Management Team As at 31 December 2003, the 12 members of Management Board: 1. Mr Surachai Chetchotisak Managing Director 2. Miss Malee Chetchotisak Deputy Managing Director 3. Mr Suwat Chetchotisak Deputy Managing Director 4. Miss Pornpan Rungruengbangchan Assistant Managing Director 5. Mrs Naphaporn Treepayak Central Administration Director 6. Miss Assanee Sritrakoon Accounting and Finance Director 7. Mr Chairat Likitcharoenpong Home Entertainment Business Director 8. Mr Sathaporn Phanitraksapong Music Business Director 9. Mr Vorapoj Nimwijit Operation Director 10. Miss Pattama Kositangkul Business Development Director 11. Miss Buntanik Bunsin Advertising Business Director 12. Miss Sutthinun Srichaisak Public Relations Director (Details of all directors and executives are shown in Appendix 1 in page 25-26)
Remark 1. "Executive" in this section refers to directors, the managing director and the top four executives ranked below the president or any persons of an equivalent position to the top four executives.
Roles and Responsibilities of the Managing Director The Managing Director is concerned with the company in general and has the authority to carry out any activity that is necessary. However, the Managing Director has no authority to deal with important assets received or sold out of the company; or matters concerning persons who may be in conflict with, or have conflict of interest with the activities of the company or affiliated companies. In such instances, the Internal Audit Committee and/or the Administrative Committee, depending on the case, will consider the matter.
022 R.S. Promtion Public Company Limited 2.2 Nomination of Directors and Executives Nomination of the company's directors is not conducted by the Nomination Committee. The committee nomination will be conducted by the Board of Directors which selects the members based on section 68 of the Public Company Limited Act 1992 and the related announcements of the Securities and Exchange Commission. In addition, the Board will consider the experience, knowledge and ability of any nominee before making proposals to the shareholders' meeting for appointments.
To elect the Board of Directors, the shareholders' meeting appoints the director based on majority scores with the following regulations and guidelines: (A) The voting score of each shareholder is equal: one share equals one score (B) Shareholders can vote for each directorial appointment. (C) Persons who receive the highest scores will be appointed to the committee. In the case of any persons receiving equal scores, the nomination president will make the final decision.
2.3 Executive Remuneration
2.3.1 Cash Remuneration (A) Directors
List Year 2003 No. Amount of money (baht) Detail of Remuneration Directors 11 290,000 Meeting allowance Audit Committees 3 90,000 Meeting allowance
(B) Executive Directors and Company Management Team
List Year 2003 No. Amount of money (baht) Detail of Remuneration Executive Directors 7 - - Management team 14 31.89 Salary/bonus/ other allowance
2.3.2 Other remunerations -None-
2.4 Administration of the Business The committee clearly understands its roles and responsibilities towards the company and its shareholders, and has performed to the best of its ability in accordance with the registration of the company with the Stock Exchange of Thailand, as indicated in document #3.
023 R.S. Promtion Public Company Limited 2.5 Monitoring Internal Use of Information The company has explained to the administrators their their responsibilities in reporting the number of shares in the company owned by them, their spouses and their children who are considered as minors, and any changes made to the holdings, to the Stock Exchange of Thailand, in accordance with Article 59, where the penalty is indicated in Article 275 of the Securities and Exchange Act B.E. 2535 (1992)
In addition, the company has laid out rules and regulations on the use of the company's internal information as follows: (1) The administrative committee, staff members and the employees of the company are obliged to treat the internal information of the company with confidentiality. (2) The administrative committee, staff members and the employees of the company should not directly or indirectly disclose confidential or internal information of the company for the personal benefit of any individual. (3) The administrative committee, the staff members and the employees of the company should not buy, sell, transfer or receive the company's assets by using the confidential or internal information that may cause direct or indirect damage to the company.
The above mentioned regulations include the spouses and children who are considered minors of the administrative committee, the staff members and employees of the company. Any violation of the company's regulations would be considered as a serious breach of those regulations which could lead to a penalty ranging from a verbal warning to being asked to leave the company.
2.6 Personnel The number of staff in the company and its affiliated companies as of December 2003 is 1,578 persons. The total rewards of company staff as of the year 2003 amounted to 352.20 million baht, paid in the form of salaries, overtime and welfare payments, bonus and provident fund. Since its establishment, the company has had no labour disputes that adversely affected its image.
Staff Development Policy The company has a clear policy on developing the staff by promoting their knowledge and working skills. It provides on-the-job training through practical work and advice from experienced persons. In addition, the company encourages the staff to participate in training and seminars in accordance with their field of work.
3. Internal Audit The first meeting of the committee was held on 28th January 2003 with three members of the audit committee taking part. The committee evaluated the requirements of the internal control system by requesting information from the administrators. They filled in evaluation forms on the internal control system of the company themselves.The company's internal control system is evaluated in five sectors: the organization and surrounding environment; risk management; the administrators' work control; public relations and information systems; and the follow-up system. According to the committee, the company has a satisfactory system of administering the work of the major shareholders, the administrative committee, and the persons concerned (see point 3 from 3.3 to 3.7 of the evaluation form). With regard to the other sectors of the company, the committee found that the internal control system was sufficient. In 2003, the company emphasised the importance of building and developing an internal control system, with the internal audit unit responsible for examining important financial transactions and reporting on their auditing. This was carried out independently and directly by the internal audit committee.
024 R.S. Promtion Public Company Limited R.S. Promotion Public Company Limited Description of management team and other persons overeeing the company As at 31 December 2003 Experience in past five years No Name Age Education % of share owned Family relationship between (Yrs) executives Period Job Title Employment Records
1 Mr Kriangkrai Chetchotisak 49 Master's degree in Business Administration (Honorary) 16.56 Sibling of 2003 2003-present Advisory to the Executive Committee R.S. Promotion Public Company Limited Ramkhamhaeng University Executives No. 2-6 1992-present Chairman 2 Mr Surachai Chetchotisak 41 Bachelor's degree in Political Sciences in Political Science 15.60 Sibling of Executives 2003-present Vice Chairman R.S. Promotion Public Company Limited Ramkhamhaeng University No. 1-2 and No. 4-6 1992-present CEO and Managing Director 3 Mr Suwat Chetchotisak 38 Bachelor's degree in Political Sciences in Mass Communications 15.46 Sibling of Executives 2003-present Director and Executive Director R.S. Promotion Public Company Limited Bangkok University No. 1-3 and No. 5-6 October 2003-present Deputy Managing Director 1997-October 2003 Sales Management Director 1997-present Managing Director Magic Advertianment Co., Ltd
025 1992-1997 Marketing Manager R.S. Promotion Public Company Limited 4 Miss Malee Chetchotisak 43 Bachelor's degree in Political Sciences in Political Science 5.52 Sibling of Executives 2003-present Director and Executive Director R.S. Promotion Public Company Limited
R.S. PromotionPublic CompanyLimited Ramkhamhaeng University No.1-4 and 6 July 2003-present Deputy Managing Director 2001-July 2003 Central Audit Director 1997-2001 Accounting and Finance Director 1992-1997 Accounting and Finance Manager 5 Miss Marisa Chetchotisak 33 Master's degree in International Management International Management 4.30 Sibling of Executives 2003-present Director R.S. Promotion Public Company Limited Monterey Institute of International (Include share No.1-5 2002-present Managing Director K. Master Co., Ltd. Studies, California, USA owned by spouse) 1998-2002 Managing Director Star Merchandise Co., Ltd. Bachelor's degree in Political Sciences in Business Administration 1997-1998 Assistant to Managing Director R.S Retail And Restaurant Co., Ltd. Assumption University 6 Mrs Nareerat Limprasert 37 Bachelor's degree in Arts Rajaphat Institute 6.46 Kinship with 2003-present Director and Executive Director R.S. Promotion Public Company Limited Suansunandha (Include share Executives ranked 1-5 2002-November 2003 Managing Director Thai Copyright Collection Co., Ltd Other Mini MBA owned by spouse) 1997-2002 Music Sales Management Director R.S. Promotion Public Company Limited Thammasat University 1992-1997 Accountant 7 Mrs Naphaporn Treepayauk 37 Bachelor's degree in Arts Rajaphat Institute 0.08 - 2003-present Director and Executive Director R.S. Promotion Public Company Limited Suansunandha 1997-present Central Administration Director 1993-1997 Assistant to Managing Director 8 Miss Assanee Sritrakoon 34 Master's degree in International Management Business Administration 0.03 - 2003-present Director and Executive Director R.S. Promotion Public Company Limited Barry University, Florida, USA 2001-present Accouting and Finance Director Bachelor's degree in Arts in Business Administration 1997-2001 Manager KPMG Audit (Thailand) Co.Ltd. Assumption University R.S. Promotion Public Company Limited Description of management team and other persons overeeing the company As at 31 December 2003 Experience in past five years No Name Age Education % of share owned Family relationship between (Yrs) executives Period Job Title Employment Records 9 Gen. Thani Saeneewong Na Ayudhya 66 Master's degree The National Defence College of Thailand (34) 0.03 2003-present Independent Director and Audit Committee R.S. Promotion Public Company Limited Bachelor's degree Chulachomklao Royal Military Academy (5) 1997 Extra Royal-de-Camp 1997 Special Staff Officer Royal-de-Camp Division, Chulachomklao Toyal Military Academy 1991-1997 Special Staff Officer First Airforce Artillery Battellion Royal King's Guard 1979-1985 Senator The Senate 1977-1979 Member of the National Legislature National Legislature 10 Pol.Gen Somchai Wanichsaenee 61 Master's degreein Political Sciences Political Science - 2003-present Independent Director and Audit Committee R.S. Promotion Public Company Limited Chulalongkorn University 1997-2000 Deputy Commissioner-General Royal Thai Police Bachelor's degree in Political Science 1996-1997 Assistant Commissioner Royal Thai Police Police Cadet Academy (16)
026 11 Mr Kriangkrai Sretkraikul 63 Bachelor's degree in Economics 0.01 2003-present Independent Director and Audit Committee R.S. Promotion Public Company Limited Thammasat University 1971-2000 Deputy Director General (Suppression Bureau) Customs Department, Finance Ministry Other Senior Executive Certificate R.S. PromotionPublic CompanyLimited 12 Miss Pornpan Rungruengbangchan 34 Master's degree in Business Administration Sasin Graduate Institute 0.002 2003-present Assistant Managing Director R.S. Promotion Public Company Limited of Business Administration of Chulalongkorn University 2001-March 2003 Assistant Managing Director Golden Land Property Development Public Company Limited Bachelor's degree in Statistics 1999-July 2001 Assistant Director SG Asia Asset Securities Co., Ltd. Chulalongkorn University 13 Mr Chairat Likitcharoenpong 39 Bachelor's degree in Arts in Industrial Education 0.04 June 2003-present Home Entertainment Business Director R.S. Promotion Public Company Limited Rajabhat Institute Pranakorn 2003-June 2003 Music Business Director 2002-2003 Operation Director 2001-2002 Assistant to Managing Director 1997-2001 TV Programme Production Manager 14 Mr Sathaporn Panichraksapong 36 Bachelor's degree in Arts in Journalism and Mass Communications 0.11 June 2003-present Music Business Director R.S. Promotion Public Company Limited Thammasat University 1997-June 2003 Marketing and Promotion Director 1992-1997 Public Relations and Advertising Manager 15 Mr Vorapoj Nimwijit 39 High Vocational Education Electrics Bangkok Techical Campus 0.02 2003-present Operation Director R.S. Promotion Public Company Limited 2001-2003 Business Development Manager 1997-2001 Country Manager of Thailand Warner Chaple Music (Thailand) Co., Ltd 1996-1997 General Manager Bakery Music Co., Ltd 16 Miss Pattama Kositangkul 35 Bachelor's degree in Arts in Business Administration March 2003-present Business Development Director R.S. Promotion Public Company Limited Ramkamhaeng University 2002-2003 Business Development Manager Promotional Partners Woldwide [Thailand] Co.,Ltd. Other Management Skill Certificate 2000-2002 Marketing Manager California Fitness Centers Co.,Ltd. Chulalongkorn University 1996-2000 Assistant to Marketing Director Kantana Co., Ltd. 17 Miss Buntanik Boonsin 36 Master's degree in Mass Communications 0.03 October 2003-present Advertising Business Director R.S. Promotion Public Company Limited Bangkok Univeristy 1999-2003 Managing Director Shadow Entertainment Co., Ltd. Bachelor's degree in Economics and Business Administrationin Economics and Business Administration (Second honour) Kasetsart University 18 Miss Sutthinun Srichaisak 39 Master's degree in Journalism and Mass Communications 0.01 October 2003-present Public Relations Director R.S. Promotion Public Company Limited Thammasat University 2002-September 2003 Public Relations Manager R.S. Promotion Public Company Limited
4. Business descriptions RS Group's major entertainment business incorporates music, media including television, radio, magazine publishing, films, TV drama series and programme production.
4.1 Music There are five factors driving the success to RS Group's businesses:
1) RS Group employs a fully integrated business model managing all types of related business. As a company associated with a number of artists, RS Group has produced a variety of music with continuous releases onto the market. The company's music products are screened by its Music Committee to ensure the quality and market's popularity. 2) The Committee is composed of four separate units: pre-production, music production, music promotion, and distribution. It is RS Group's policy to generate products in an appropriate quantity and of good quality. It places its priority on released products driving investment. 3) RS Group utilises its television, radio and Internet media to facilitate public relations programmes. 4) Efficient distribution transfers products to end customers speedily; effective inventory control management can adjust appropriate levels of stock. 5) Efficient music copyright management creates added revenue for the business.
Music business acquires most of its revenue from the following five sources: 1) Sale of products, new or compilation albums in the form of cassettes, CDs, VCDs and DVDs; 2) Advertising and promotion campaigns invested with products' owners; 3) Tickets and sponsors from concert events; 4) Commission from its artists as presenters; 5) Copyright collection from ringtone downloading and karaoke copyright collection.
4.1.1 Products and Services Descriptions RS Music Company produces Thai modern and country songs as well as international songs for foreign companies.
4.1.1.1 Music Production Factors Pre-Production Unit The Pre-Production Unit under the management of RS Group is an experienced team whose responsibility covers recruitment, selection and development focussing on potential artists. By introducing new artists, the company has extended opportunities to produce more outcomes in music, drama series, advertising and films.
Music Production Unit RS Music Production Unit has 12 teams, each with a producer, creative, song writer, tune writer and composer skilled and experienced in their field. They combine to produce quality music in a variety of styles. The Music Production Unit is responsible for making complete master tapes in the studio and sending them to the RS subsidiary K. Master Factory. Then they are transformed into cassette tapes, CDs, VCDs and DVDs and passed on to end customers through wholesale and retail outlets.
027 R.S. Promtion Public Company Limited Music Promotion Music Promotion is responsible for marketing campaigns, distribution systems, sales and feedback follow-up, and marketing plan adjustment. Its marketing strategies influence sales volumes, product life cycle and artists' popularity. The Music Promotion team works closely with Music Production unit to ensure that the music is produced as planned.
Artists/Singers RS Group currently has 200 artists and singers under its management including solo singers and groups who all have different styles. RS artists and singers include:
Solo Group Male Dunk-Pankorn, James-Ruengsak, Joni Anwar, D2B, I-nam, Hyper, Pluem, Sandstone, B-Mix, Polsant, Ford-Sopchai, Anan Anwar, Tannatorn, 3Plus1, Strikerz, Mono, Motif, A Cappela 7, Joe-Thanarat, Keng-Jakapong, Nutt, Nathan, Out, Pa-tong-ko, Baby Bull, Dance Army, Mathew Dean, Bovy, Touch Na Takuatung Neo-X, Bogie-Dodge, Kanchit-Tidleam
Female Parn-Thanaporn, Fourth-Naruemol, Mam- Pink, The Sis, Girly Berry, 001, Zigzag Patcharida, Sandra, Momae, Nancy, Ae-Sasikarn
Top Thai country singers associated with R.S. include Santi Duangsawang, Ekachai Sriwichai, Paijit Aksornnarong, Dan Sriwichai, Jeab Benjaporn, Sonthi Sommart, Namoil Thamlanka and Man Motorcycle The Top five selling albums for 2003 were
Album Sales as % of total sales 1 I-Nam 8.02 2 D2B 5.09 3 Hyper 4.63 4 Parn-Thanaporn 3.64 5 B-Mix 1.41
4.1.1.2 Compilation Albums This is another income-generating channel with copyright collection. Most customers buy newly released albums and have favorite songs; others prefer to collect compilation albums. Compilation albums therefore have their own market, and are poised for growth.
4.1.1.3 Concerts and Events Concerts free or paid for will be organised after the release of an album to stimulate sales and create a close relationship between artists and audience. Artists and singers presented in special events form another revenue-producing channel. The company cooperates with sponsors in music marketing campaigns to promote its products among target groups using the company's artists as presenters. These events may be concerts, game shows or tours.
028 R.S. Promtion Public Company Limited 4.1.1.4 Copyright Collection Business Thai Copyright Collection Co., Ltd. (TCC) manages copyright for owners. In 2003, TCC was dedicated to developing license and copyright collection systems. It is acknowledged as the prototype of efficient copyright collection and manages the copyright of more than 30,000 songs for R.S. Promotion Plc., as well as music companies and songwriters. From 1 January 2004, TCC extended its copyright collection network to companies by distributing the copyright to modifier mini-disk (MD) karaoke VCDs of almost 30,000 songs.
TCC earns revenue from copyright collection, and means to extend collection to companies that distribute copyright works to radio stations and paid TV channels.
4.1.1.5 Other Copyright Revenue The company can earn other copyright revenue from ringtone and downloading artists' photos in forms such as Picture Messages and Wallpaper through the company's website www.mobiclub.net and its partners. The company plans to develop and extended technology-based service channels such as MobiOke (karaoke on mobile phone), MobiPixer (wallpaper decoration) and other services. This will utilise intellectual property and add value to it for the company's benefit.
4.1.1.6 International Songs The company is also a music distributor and organiser for international music companies including Unlimited Group Co., Ltd., a large Japanese-based music company promoting artists like Glay, Lucifer and famous Japanese singers. RS Group earns only a small portion of the revenue but it offers a good opportunity to enter the international market.
4.1.2 Marketing and Competitive Environment
4.1.2.1 Marketing Strategy 1) Quality Production Strategy RS Group's priority is quality, in both artists and music. The company's pre-production unit selects and develops artists with the right quality and plans ongoing improvement in its 12 sub-units. Each team gathers personnel with expertise who have worked in the music industry for between 10 and 20 years. This skilled workforce has an in-depth knowledge of the flow of the Thai music market and can produce different types of music based on their expertise, attracting audiences from all age groups and backgrounds.
2) Thorough Distribution RS distributes its products effectively and thoroughly through wholesalers and retailers. The company uses an effective production policy to provide products in accordance with estimated sales figures. This improves the company's inventory control management and keeps a low level of outdated products in stock.
029 R.S. Promtion Public Company Limited B) Client Description and Distribution Channel
1) Music Products as cassette tapes, CDs, VCDs and DVDs The company's music clients can be categorised in three major groups: listeners, wholesalers and retailers, and sponsors
1. Listeners can also be divided into three groups :
.Pre-teen students under 15; .Teens and students from 16-22; .Adult working people over 22 .
2. Wholesalers and Retailers
K. Master, an RS subsidiary, currently applies sales and distribution systems as follows:
Factory
Dealer Modern Trade
Retailers in GMC / LION / Cherry Bangkok (Modern Shop) D-Network / CD Warehouse
Retailers in Super Store LOTUS / CARREFOUR / BIG C provincial area
(G&C Store) 7-11 / JIFFY / SELECT STAR MART
3. Sponsors .Agencies .Direct Customers
Some 70 per cent of advertising sales are generated through advertising agencies, with the remaining 30 percent coming from promotional campaigns in cooperation with product/brand owners. Most sponsors are well known such as Pepsi, Orange, Sony, Panasonic, Hanami, GSM, GSM 1800, DTAC, 12 Plus and Lip Ice Color.
2) Music and Artists' Picture Copyright Music and Artists' Picture Copyrights clients are in two groups: the first group is consisted of 20 duplicate licensees including website operators and ringtone operators; and the second group is distribution members such as karaoke booth and jukebox operators with approximately 90,068 machines.
030 R.S. Promtion Public Company Limited 4.1.2.2 Competitive Environment 1. Thai Music Market Value and Growth Trends In 2003, the company forecast that the domestic music market would grow to 3,400 million baht, an eight per cent decrease from the 3,700 million baht of the previous year. However, the company believes that in 2004 the music market will grow by at least 10 per cent as each music company increases the number of its music products launched onto the market. The outcome of the anti- piracy campaign in which all parties cooperated has motivated consumers to buy more copyright products as well as pirated products, though it encounters distribution channel problems whenever the authorities show reluctance to arrest illegal traders. These factors encourage growth for the domestic music industry and impact positively on the music business generally. 2. Music Business Operators The Thai music market has two major operators including RS, a large music company and other independent music companies 3. Competitive Trends The domestic music industry remains more competitive in products and marketing promotional campaigns than in price. Each company tends to differentiate its music.
4.1.3 Product or Service Placement
4.1.3.1 Production The company continually employs pre-production methods through its experienced team to improve its quality. Raw material for CDs, VCDs, and DVDs production such as reels and cassettes can be obtained from domestic suppliers. This has never been a problem. The RS subsidiary, K. Master Co., Ltd. is a factory that manages distribution systems (see 3.1.2.1) and plans to service other music companies. The new factory is at 9/9 Moo 1, Ban Chang Subdistrict, Muang District, Patumthani on 5.4 rai of land. The facility usage area is 5,012 square metres. State-of-the-art production machinery is shown in the Production Capacity for 2002 and 2003 table. In November 2003, the company imported a new machine at a cost of 55 million baht for CD and DVD production with a production capacity of 1.8 million DVDs per year.
Production capacity (Unit) Production Hour / Day 2002 2003
Full Capacity 24 hours 22,500,000 31,860,000 Tape 5,000,000 15,000,000 Increase (%) 0.00 CD / VCD 7,500,000 16,860,0002) Increase (%) 124.80 Actual Production Tape 8 hours 5,000,000 5,239,762 Utilization Rate (%) 33.33 34.93 CD / VCD1) 20 hours 3,500,000 13,617,462 Utilization Rate (%) 46.67 80.76
031 R.S. Promtion Public Company Limited In 2003, the company disbursed 2.8 million to outsource CD and VCD production while terminated production for a month to move its factory from Ladprao to Patunthani, and another two weeks to install new machinery in November 2003.
Inventory Control Management The company applies a strict production order system to ensure effective inventory management,. Production order volume is allowed for fixed period to meet market demand. Effective production and marketing policies have improved the inventory system.
4.1.3.2 Environmental Effects -None-
5.1 Media RS Group believes that its ownership of media companies boosts its music business, improves its flexibility and provides public relations and advertising channels for the benefit of its organisation. This accords with its business objectives as a fully integrated entertainment provider. Utilising its resources including artists, production unit and capital, R.S. Group penetrated the media market, beginning with television, radio and publishing respectively. Media Business of R.S. Promotion (Public) Co., Ltd. can be categorised as follows: 1. Television 2. Radio 3. Publishing Media business also covers selling advertising media such as album covers, films, concerts, contests and sport events.
Television 5.1.1 Product or Service Descriptions The company operates advertising airtime sales in RS television programmes broadcast on Channels 3, 5, 7, 9 and ITV. The company's programmes consist of:
NON MV which includes four drama series, variety shows and children's programmes
Twenty-one music programmes
5.1.1.1 Drama series, Variety Shows and Children's Programmes All programmes are produced by RS subsidiaries. The company is involved in Time-Sharing with Channel 3 and 9 as follows:
Program type Channel Airing Day Airing Time Program Name Drama 3 Sat-Sun 10:45-11:30 Na-kak-khon-nok Drama 3 Sat 14:00-15:00 Ran-Maha-Sanook Variety 9 Wed 21:00-22:00 T-Zaa Kids 3 Sun 07:00-07:40 Zoo
Weekend morning drama series are focussed on teenagers and students. For example, the Ran-Ma-Ha-Sa-Nook (Amusing Shop) sitcom serves audiences of all genders and ages. It has received a good response from advertising agencies.
032 R.S. Promotion Public Company Limited T-ZAA, a live variety programme is presented on prime time and is directed to the teenage group. The company has also produced a children's programme, Zoo Puen-Rak-Sad-Lok-Maha-Sanook (Zoo--Amusing Good Friends) for two years.
5.1.1.2 Music Programmes The company produces music programmes to promote its artists' and singers' albums. Music videos and concert events are also presented. These 21 programmes are broadcast every day on different channels.
Airing Airing-time day Channel 5 Channel 7 Channel 9 ITV Produced by
Monday 11.50 - 12.50 Pleng Talu Jaw R.S. Television 12.35 - 13.30 Ban Terng Mue Tieng R Saim 13.00 - 13.30 DAY LIVE R.S. Television 00.15 - 01.15 Yoohoo Night Nagasia 00.30 - 01.30 HOT HEAD Filmsurf
Tuesday 12.30 - 13.00 MUSIC IN TREND Aladdin House 13.00 - 13.30 DAY LIVE R.S. Television 15.00 - 16.00 Puen Dern Tang R.S. Television 23.10 - 00.04 Music Mart P.O.V.
Wednesday 13.00 - 13.30 DAY LIVE R.S. Television 16.30 - 17.00 Pooyai ban Dumde R Siam 00.15 - 01.15 POP ON THE ROAD P.O.V. 01.10 - 01.35 Looktung sananmuang R Siam
Thursday 12.50 - 13.20 Kluen Look Mai Nagasia 13.00 - 13.30 DAY LIVE R.S. Television 23.45 - 00.45 MIX CLUB Filmsurf
Friday 12.30 - 13.30 TV Relax Aladdin House 13.00 - 13.30 DAY LIVE R.S. Television 23.20 - 00.00 Na na na show R.S. Television 00.30 - 01.30 Wai Man Pan Karaoke Filmsurf
Saturday 11.30 - 12.30 SEE SAW SCENE Filmsurf 15.00 - 16.00 Saturday Show Aladdin House
Sunday 11.00 - 12.00 MUSICA R.S. Television 12.00 - 13.00 T-UNITED P.O.V.
Holiday 13.00 - 14.00 Menu Wan yud R.S. Television
033 R.S. Promotion Public Company Limited 5.1.2 Marketing and Competitive Environment
5.1.2.1 Marketing Marketing Strategy 1) Positioning Strategy The TV business team is responsible for research and determining target groups before designing programmes or selecting plays. This method facilitates production, improves viewing ratings, gains higher advertising income and makes good sales.
2) Quality-oriented Strategy The team takes account of trends and audience behaviour as well as programmes produced by the competition before designing and producing its own quality-based programmes. The company has produced a variety of programmes created by its seven companies. Each team has extensive experience and is skilled in making all types of programmes and series. They receive a good response and are high in the charts.
3) Advertising Airtime Sales Strategy Advertising airtime sales for series and game shows are managed by Shadow Entertainment Co., Ltd. and Magic Advertisement Co., Ltd. through Loose Spot and Tie-in advertising. The package pricing is utilised for music programmes.
4) Good Relationship Strategy The company's major partners for television business are the TV stations and advertising agencies. RS Group gives priority to both groups because the stations rent airtime and are also clients for its productions. Maintaining good relationships and providing quality-based production ensures better business opportunities for the company. Advertising clients are also one of the company's main sponsors and play an important role in the company's growth.
Client Description and Distribution Channels 1) Advertising Clients
Agencies
Direct Customers RS Group makes advertising airtime sales through agencies and direct customers in the proportion of 90% and 10% of total television media sales.
2) Target Audiences Target audiences can be categorised according to the kind of programmes they watch and the airtimes. For example: Drama series Teenagers, students, families, all genders and all ages Variety shows Teenagers Children's programmes Primary school students
5.1.2.2 Competitive Environment Television media's advertising market value and growth
034 R.S. Promotion Public Company Limited According to research by AC Neilsen (Thailand) Co., Ltd., advertising market value through television media in 2003 increased by 11.70% from 37, 339 million baht in 2002 to 42,288 million baht. Its popularity has never declined and it has the highest rate of advertising investment compared to other media: 59.17% of the 71,465 million baht total advertising market value.
Advertising Market Value January - December 2003 = 71,456 Million Baht Advertising Market Value Comparison
TV 51% Octher 36% 80,000 71,456 70,000 61,211 60,000 53,053 50,000 42,288 40,000 37,339 32,879 30,000
TV 20,000 Octher Publishing 5% 10,000 Publishing Radio 8% Radio Total Advertising Television Media
2001
2002
2003
Television Companies TV companies are highly competitive and have their own artists. The only differences between them are audience numbers and popularity. Well known production companies include RS Group, GMM, PolyPlus, BEC Tero, Kantana, JSL, Work Point, and Born. Each is dedicated to its own quality-based productions. Competition in television business is based on the quality of the programmes. Programmes that are aired at the same time or share the same target audience require clients to consider carefully which one they should allocate their advertising budget to.
Competitive Trends Clients give priority to programmes with high viewing figures and an audience in the target group for their products. These two factors are the forces that drive producers to focus on the quality of their programmes and their ability to satisfy the target audience's taste, and thus improve their programme's viewing ratings.
5.1.3 Production or Service Placement
5.1.3.1 Production To produce television programmes and drama series, RS Group utilises its existing resources including actors/actresses and programme presenters as well as production teams from its seven subsidiaries. The company also rents tools and equipment including studios, sound studios, cameras and production equipment from its affiliate, R.S. Studio Co., Ltd.
5.1.3.2 Environmental Effects -None-
035 R.S. Promotion Public Company Limited Radio Media
5.2.1 Product or Service Description In 2003, Sky High Network Co., Ltd., produced radio programmes for three stations: FM 88.5 MHz, FM 93.0 MHz and FM 98.0 MHz. The concession to produce programmes for FM 93.0 MHz started on 1 July, 2003. All three stations generated revenue from advertising airtime sales. They are directed to different target audience as shown in the table below:
F.M. 88.5 MHz. / 88.5 Z Pop F.M. 93.0 MHz. / 93 DNA F.M. F.M. 98.0 MHz. / 98 Cool F.M. Radio Station
Concessioners Navy Radio Station Navy Radio Station First Battalion Royal King's Guard Radio Station On Air Date and Time 24 hours 24 hours 24 hours Signal Coverage Bangkok and vicinity Bangkok and vicinity Bangkok and vicinity Programme Concept Za Puan (Naughty) Excited Station Music Lovers' Station Target Audience Students aged 10-18 years old Students aged 18- 25 years old Students and Employed people aged 18-35 years old
The policy of all the three frequencies is to let their radio stations pursue a fully commercial operation. The stations are free to play any song from any music company in the market, thus improving the stations' popularity with business management. Today, the stations have clearly-defined audience bases and are gradually gaining higher ratings. This has prompted the clients of advertising companies and product owners to put their trust in the programmes and popularity of the stations, thus raising the stations' income from their advertising budgets.
The Radio Station Styles Radio Station: F.M. 88.5 MHz (Z Pop, Zaa Puan) Navy Radio Station Z Pop is a friendly, cheerful station favoured by the audience group of secondary-school teenagers for its "zaa" (naughty), unique, continuously streamlined presentation. With a "zaa puan" (daring and mischievous) concept it is hosted by new-generation guys and girls with a high sense of individualism, taste and modernity, the organizers are well able to reach the teenage students. F.M. 88.5 MHz. "Z Pop, We Like" Mon-Fri DJ Sat-Sun DJ 08:00-11:00 Totsaporn Taengluang 08:00-11:00 Papasawan Yotnane Nakorn Kaewkanipakorn Didi Anwar 11:00-14:00 Porawan Wanitcha 11:00-14:00 Napasorn Buranasiri 14:00-16:00 Veeravon Pikilpol 14:00-16:00 Varote Sahatsanan 16:00-19:00 Kanda Srithamupatam 16:00-19:00 Anuwat Amnatruangkrai Tanate Luangorachartkul Pajaree Na Nakorn
036 R.S. Promotion Public Company Limited F.M. 88.5 MHz. "Z Pop, We Like"
Mon-Fri DJ Sat-Sun DJ 20:30-24:00 Anuwat Amnatruangkrai 20:30-24:00 Natavut Kanjanapairin Tanate Luangorachartkul 24:00-03:00 Piyakiat Boonruang 24:00-03:00 Veeravon Pikilpol 03:00-05:30 Totsavut Ratanakunchorn 03:00-05:30 Totsavut Ratanakunchorn
The activities presented focus on uniqueness and are oriented towards teenagers who are at a fun and adventurous age. The show emphasises friendliness, allowing the teenagers to express themselves, give opinions and join in special activities. The leading activities in 2003 were 'Z on the Beach # Aqua Mission' (an Eco-tourism activity at the Surin Isles, Trang), 'Z teen Idol Carnival' (where young stars were transformed into teen idols at Siam Square), 'School Greet Weed Boom' (cheerleading competition for the trophy of HRH Princess Maha Chakri Sirindhorn) and 'Z Pop Culture in Japan' (out-of-classroom experience in Japan). All the activities were extremely well received by the target audience. Z Pop clearly lays out the structure of the programme, targetted to secondary-school listeners most of whom are fans of RS shows and artists. This is the strong point of the programme: the audience can listen to the latest songs in original versions and this expands the audience base. The station has become a hub where Thai and international songs from all music companies are played, focussing on new and favourite songs. It has become 'the' pop music station, chosen from 35 stations in the Greater Bangkok, in the poll by Tapscan (December 2003). The station also won second place in the pre-teen (10 to 18 years old) category.
Radio Station: F.M. 93.0 MHz (93 DNA) Navy Radio Station This new-species radio station began operations on July 1, 2003 to appeal to new generation listeners, college and university students aged from 18-25, with 24-hour exciting, modern programmes
F.M. 93.0 MHz. 93 DNA Mon-Fri DJ Sat-Sun DJ 04:00-07:00 Atiruj Porakitsuwan 04:00-07:00 Atiruj Porakitsuwan 08:00-11:00 Chatchai Charoenchutsana 08:00-11:00 Tommy and Club 11:00-14:00 Katreeya Nipamanee 11:00-14:00 Duanpen Sriharat 14:00-17:00 Renar Chotikajinda 14:00-17:00 Chatchai Charoenchutsana 17:00-19:00 Pipat Vitayapanyanon 17:00-19:00 Sopat Nasawat 20:30-23:00 Sai Charoenpura 20:30-23:00 Sat- Wongthanong and team Sun-Manote Puttan 23:00-02:00 Chavalit Srimankongtham 23:00-02:00 Patric Chainam 02:00-04:00 Sweep 02:00-04:00 Sweep
93 DNA is another new-species radio station offering modern, exciting programmes of all kinds to satisfy the taste and lifestyle of new generation people, with songs and special activities. With its unique "Exotic Species F.M." concept, the station has been welcomed by audiences at a rapid rate and at a satisfying level. The leading activity was its 'X'cite Broadcast in New Zealand', a programme for young people promoting Thai culture in New Zealand.
Radio Station: F.M. 98.0 MHz (Cool F.M.) First Battalion Royal King's Guard Radio Station Cool F.M. is for an audience that enjoys easy-listening Thai songs from past and present and from every music company.
037 R.S. Promotion Public Company Limited The programme's concept is 'a music frequency for music listeners', and it lets the audience listen to song after song as much as they can from a commercial radio station. Cool F.M. has won its spurs among teenagers and working listeners. Hosted by light-hearted professionals who themselves prefer easy-listening music, the clean programme structure reflects the audience's fashionable lifestyle.
F.M. 98.0 MHz. Cool F.M. Mon-Fri DJ Sat-Sun DJ 08:00-11:00 Thanate Saengchotikul 08:00-11:00 Prasert Tantigakaveera 11:00-15:00 Rangrong Wannarot 13:00-15:00 Sukteeporn Roma 15:00-18:00 Warongporn Vichaidit 15:00-18:00 Kanokporn Wongwisetpaiboon 20:00-22:00 Burin Hematat 20:00-23:00 Pornchai Chanwisetlak 22:00-24:00 Boonyita Ngamtapasil 20:30-02:00 Urairat Wittanond 24:00-02:00 Sribang-orn Teenamkam 02:00-05:00 Nonthanee Kongniyom 02:00-05:00 Kriengkrai Tiyanan
Besides the accepted programme structure, the 'Cool Experience' is a forum where listeners can exchange ideas with other working people. There are several kinds of activity for this thought-trading forum, such as concerts, local and overseas trips, seminars and creative activities to improve the living conditions of working people. Examples are 'X'coolsive Moment' (exclusive concerts by hot artists for Cool F.M.'s fans), 'Wonder Cool Rally # Music Racing' (the first music rally from Bangkok to Cha-am), 'Cool Journey #1 Smart Life Club' (high-class visit to Club Med, Phuket), 'Cool Journey #2 Simply Your Life' (simple living at Muang Pai, Chiang Rai) and 'Cool 3rd Anniversary in Kenya' (third anniversary celebration in Kenya). These were marketing-promotion activities that won the audience's attention and keen support from sponsors. For these reasons, Cool F.M. has proved to be a popular radio station according to the December 2003 Tapscan popularity poll for 34 radio frequencies. It won third place in the Cool Easy Listening category for working people aged 25-45.
5.2.2 Marketing and Competitiveness 5.2.2.1 Marketing A. Marketing and Competition Strategies
1) Pricing strategies The company has used pricing strategies to create an advertising customer base by selling packages, expanding the loose- spot time and organizing "activities in programmes" and event marketing. These have added to the value of sales promotions and investment, especially with 93 DNA 93 F.M., where the company offered a 'buy one, get one free' package to allow clients to test the station's advertising strength. The package was enthusiastically welcomed by the sponsors, and the income from it was well up to expectations. Examples were the 'Red Bull Extra Ordinary DJ Talent', 'Travogen Cool on Trip at Kaeng Hin Plern, Nakorn Nayok', and the 'Man from Mars, Women from Venus' concert at Science Center for Education held by Heineken.
The pricing strategies together with sales promotion activities brought in advertising budgets from advertising agencies and product owners for packages throughout the year. There were more advertising budgets while new advertising agencies had more trust in the company's ability and investment value. As a result, the company was gradually able expand its customer base and earn more income.
038 R.S. Promotion Public Company Limited 2) Sales Promotion Strategies In the tough competitiveness of the radio business in 2003, the sale of advertising airtime was not enough for customers' needs. Thus, the company added value to the products by organizing sales promotion activities between the programme and the audience, such as games during the programme. There were special activities between the product owners and Government offices, such as the visits to tourist attractions in Bangkok held with the Tourism Authority of Thailand, youth cultural exchange programmes, concerts and contests. The company focussed on the quality of the activities, combining academic interest with entertainment for those taking part. The company also responded effectively to the marketing policies of the clients. It formed a special project team to create and run the special sales promotion activities exclusively for the customers thus December 2003 creating further income. In addition, the company used the potential of its Advertising and PR Departments to publicize the activities of its radio stations. The clients' activities were widely accepted in the form of PR news and advertisements on TV programmes, in magazines, and on outdoor and mobile media.
3) Advertising Planning Service With its long experience in the radio business, the company has a thorough understanding of all aspects of the business. Its staff can advise clients how to plan the best quality media management. They can also help them choose the most appropriate airtime or advertising package to suit their purpose and reach the audience. Since the Government announcement that advertisements for alcoholic beverages may not be broadcast before 10 pm, the company has adjusted the style of its public relations and advertising. It has turned to promoting the product image through scoops in several programmes, and now conducts special activities to meet the needs of the customers and the limitations on each product type. Based on the policies of its business partners, the company and the programme sponsors have planned advertising strategies that will keep sponsors' interest and return the greatest benefit to them as they use the company's media service.
B. Customer description and target group
1) Target group
Advertising agencies
Direct customers
2) Target audience 88.5 MHz. Z pop : Students, male and female teenagers aged between 10 and 18. 93.0 MHz.DNA F.M. : Student and male and female working adults aged between 18 and 25 years. 98.0 MHz. Cool F.M. : Students male and female working adults aged 25-45 years.
C. Distribution Channels Some 70% of radio airtime will be distributed to the advertising agency while 30% of total airtime will go directly to the product owner.
039 R.S. Promotion Public Company Limited 5.2.2.2 Competitive Environment A. Value of Radio Advertising Market and Growth Potential According to the data from AC Neilsen (Thailand) Ltd., total radio advertising expenditure in 2003 was 6,662 millionbaht , a rise of 7.97 per cent over the 6,170 million baht in the previous year. Radio advertising costs accounted for nine per cent of total advertising expenditures, which amounted to 71,456 million bath. Advertising Market Value January - December 2003 = 71,456 Million Baht Advertising Market Value Comparison
TV 51% Octher 36% 80,000 71,456 70,000 61,211 60,000 53,053 50,000 42,288 40,000 37,339 32,879 30,000
TV 20,000 Octher Publishing 5% 10,000 Publishing Radio 8% Radio Total Advertising Television Media
2001
2002 B. Radio Station Operators 2003 Twelve radio stations broadcasting mainly Thai songs with similar target listeners are presented on the table below. Currently, the company is the third largest radio station operator with a market share of 2.2 per cent and a growth of 69 per cent over 2003. The company is satisfied with this growth rate as it has been running three radio stations for four years.
Radio Station Teenage College Student Working Group Adult 25-45 years 10-18 years 15-25 years 18-35 years F.M. 88.0 Radio Noproblem Competitor F.M. 88.5 Z Pop Sky-High Network F.M. 89.0 Vergin Soft Competitor F.M. 91.5 Hot Wave Competitor F.M. 93.0 03 DNA Sky-High Network F.M. 93.5 Radio Vote Sattlelite Competitor Competitor F.M. 94.0 Bangkok Radio Competitor Competitor F.M. 95.5 Vergin Hitz Competitor F.M. 98.0 Cool F.M. Sky-High Network Sky-High Network F.M. 103.5 Modern Love Competitor F.M. 104.5 Fat Radio Competitor F.M. 106.5 Green Wave Competitor Competitor
C. Competition Trends There is strong competition in the radio business because of limits on advertising expenditure. Clients prefer to buy advertising airtime on radio stations with good ratings. Consideration is given to pricing strategies that will allow the client to buy more airtime or choose a variety of advertising styles. This will depend on the sales strategy of each company; those who can show that they are providing the best value-added service will stay ahead of the competition.
040 R.S. Promotion Public Company Limited 5.2.3 Product and service placement A. DJs and production staff The company employs 21 DJs and a production staff of 22. DJs are the key factor contributing to the reputation of the radio station as they are responsible people who have a good understanding of the music, and the ability to communicate with the listeners. With training, they can improve their knowledge of technology in order to be able to handle state-of-the-art equipment and software. They host their programmes in a style that meets the taste of the target listener, and may also work externally as programme hosts for sales promotion activities.
B. Studios In the past, the company rented studio space for its programmes from the radio station operator. In 2003, the company built its own broadcast studios, the first totally digital studios in Thailand, at R.S. Group's head office at Chetchotsak 2 Building. Opened in July 2003, the studios are equipped with Radioman software from Finland, which is also used for the universal standard radio programmes of the BBC in the UK and NHK in Japan. The company believes that this will increase the quality of its broadcasting and its productions, and will significantly increase the number of listeners.
The digital studios include:
Four broadcast studios: Programme hosts use the state-of-the-art software and hardware to select the songs and tailor the broadcast to their specific programme style. This equipment helps the host make the programme and its content more interesting. It is of the same standard as global radio stations such the BBC and NHK.
Two digital production studios: These help the company to produce standard quality programmes with catchy effects and gimmicks that add to their interest.
The library: Music is collected and classified here according to the requirements of each programme.
The transfer room: This is where song data, jingles and spots are loaded to the main server. DJs can use these data for each programme.
Traffic control room: Broadcasting system and sound quality with digital system are transferred here to each radio station.
Master control room: The DJs' work, advertising spots and the billing system are controlled from here. The control room also checks and reports feedback from the advertising spots in clients' programmes in real time. This ensures the clients' confident in the advertising.
5.2.3.2 Environment Effects -None-
Publishing
Having established its new publishing business in 2003, R.S. Group launched Front Magazine in February. It also launched Poema Books, its pocket book publishing company, and introduced eight pocket books in the same year. The company, previously published RS Star Club Magazine to promote its artists' performance, and made it a communication channel for staging activities for the customers. This magazine received an overwhelming response from customers as it communicates news and information of the company to them directly. By doing so it helped the company to gain specific target groups.
041 R.S. Promotion Public Company Limited The production team of Front Magazine consists of professional in the Thai publishing business with experience in leading magazines and an understanding of how to produce quality magazines. Also, celebrities are invited to design the content and columns of the magazine.
5.3.1 Product and Service Description Front is a leading monthly women's magazine featuring the lifestyle of trendy women in a variety of sections including fashion, beauty care, society and personal relationships. Poema Books mainly publishes translated pocket books from best-selling contemporary books in the Europe and the U.S. Last year, it focussed on books for female readers, which was the popular trend at the time.
5.3.2 Marketing and competitive Environment
5.3.2.1 Marketing
Marketing Strategy and Competitive Environment 1) Specific Selling Points for Magazines The core strategy is to advance the concept of Front Magazine as the leading women's magazine with outstanding layout and content. This is done by integrating the style and presentation of foreign magazines with issues of concern to women in Thailand. The content is delivered in informal language, making the reader feel that she is communicating with friends. 2) Public Relations and Sales Promotion In order to sell advertising space in the magazine, the company has focussed on public relations material on radio and television. This enables Front Magazine to receive positive reactions from readers within a short time as it has total sales of 80,000 copies per issue.
Target Groups and Distribution 1) Buyers and Consumers The target group is ladies aged between 20 and 45 in the high-end class who read a lot of women's magazines and has high purchasing power. There are two ways to purchase the magazine: - Apply for membership: the expected membership number is 5,000 in the first year of the launch. - Buy from bookstalls: the company distributes the magazine through the distributor. 2) Distributors Front magazine is distributed nationwide through the leading distribution agencies, allowing the customers to easily buy the magazine at bookstalls. The distribution ratio between Bangkok and Greater Bangkok and the Provinces is 70:30. 3) Advertising customers
Agencies
Direct customers The advertising distribution ratio between agencies and direct customers is 60:40.
5.3.2.2 Competitive Environment Thai Advertising Market Value and Growth Trends
042 R.S. Promotion Public Company Limited The total print advertising expenditure in 2003 amounted to 4,550 million baht or 6% of total advertising expenditure. Advertising expenditure growth was around 25 per cent, compared with total magazine advertising expenditures of 3,640 million baht in 2002. Popular products advertised in the magazine are cosmetics, clothing, mobile phones, cars and restaurants -- products for trendy people.
The publishing business trends to grow continually and the number of new magazine increase every year. Each magazine has its own selling point and target readership. Existing publishers have to increase their magazines' quality and maintain the customer base by presenting content and adjusting the style according to market trends. This will include activities for the readers such as a lucky draw or special premiums or offers. Front magazine has conducted activities such as workshops and roadshows at office building to promote itself and attract readers. These activities receive a positive response from readers.
Advertising Market Value January - December 2003 = 71,456 Million Baht Advertising Market Value Comparison
TV 51% Octher 36% 80,000 71,456 70,000 61,211 60,000 53,053 50,000 42,288 40,000 37,339 32,879 30,000
TV 20,000 Octher Publishing 5% 10,000 Publishing Radio 8% Radio Total Advertising Television Media
2001 2002
2003 Operators and Market Share Many existing magazine operators include large companies that publish several books at their own printing house or with independent printers.
Competitive Environment Each magazine has its specific target group, whether it be women's fashions magazine or men's magazines. Magazines are also categorized by their target market, such as high-end, middle-end and low-end market. Front Magazine of R.S. Group is high-end women's fashion magazine. There are 12 magazines in this category and have similar readers. Competition is considered moderate to high, as many publishers want to invest in this business in the future. However, with the capabilities of R.S. Group, strong television media backing and continuing additional activities, the company expects to broaden the customer base of Front Magazine rapidly.
5.3.3 Product and service placement
5.3.3.1 Product placement for distribution To publish a monthly fashion magazine, teams are appointed to take responsibility for two main processes: content selection and printing. For the content selection, Poema Ltd assigns competent staff members with experience in leading magazines to select the
043 R.S. Promotion Public Company Limited content and create issues, as well as choosing well-known writers and experts from many fields to be the columnists. Every issue is printed by a contract printing house, and the contract price includes paper cost and printing fee.
5.3.3.2 Environment Effects -None-
6.1 Films, Drama Series and TV Programmes The keys to the success of R.S. Group's film and TV business are these: 1) The number of its production staff producing good quality work that responds to the needs of the market; and its experienced sales team. 2) A strong capital base that supports smooth and continuous production. 3) The integrated nature of the group's media business, with television and radio helping the company to effectively market films and television drama. 4) Good relation with other branches of the industry, such as television companies, cinema owners and film distributors.
The film business derives its main income from five sources: 1) Provincial movie distributors. 2) Copyright fees for cable TV and free TV. 3) Profit sharing, with some 50 per cent of the income from feature films in Bangkok and greater Bangkok. 4) Distribution in the form of VDOs, VCDs and DVDs. 5) Copyright fee in the overseas market.
6.1.1 Products and Services
6.1.1.1 Production R.S. Group's film business is evaluated as another perfect business model. It includes eight production teams from eight companies that can produce many films with different themes each year. Experienced sales teams who distribute films both domestically and in the overseas market help the film segment to make a significant contribution to the Group's income.
There are five outstanding characteristics of the film business: 1. The cost of production and promotion of each film differs according to the size and type of production. On average, the expenditure on each film ranges from 20 to 30 million baht. 2. Production costs account for 60-70% of total cost. Production will be completed within three or four months. 3. Pre-sales -- selling the rights to provincial distributors and cable or free TV. Any feature film, which is pre-sold at a good price, has a chance recovering the cost before being released in the cinema. Profit evaluation will be conducted after selling films through regular cinema channels. 4. The proportion of profit sharing from ticket prices in Bangkok and Greater Bangkok, which stands at 50 per cent. 5. Popular feature films producing high income when released in VCD and DVD form. With the goal of being market leader, R.S. Group plans to produce films continuously. Ability in all aspects of the business from budget to actors and capable production staff who know the market are the key factors that have made the Group's films popular from the beginning.
044 R.S. Promotion Public Company Limited A. Film Production The average production period of each film is eight to 10 months. The first three or four months are for preparation: selecting, writing and developing the screenplay. When the screenplay is agreed, casting begins, together with equipment planning and shooting preparation. Filming should be completed in three or four months. After filming, the editing and post-production processes will take around two months. Later, the company will launch public relations activities and advertising to promote the film two months before it opens.
B. Previous Film Experience The company has released a total of 21films to date:
No. Story 21 The park 20 Zaa Club 19 Talking Dick 18 Sex Phone a.k.a. The Girl Next Door 17 Omen 16 Old Mad Rock 15 Taloompuk 14 Bangkok Haunted 13 Where is Tong? 12 Killer Tattoo 11 Cloning 10 Friendship Breakdown 9 A Miracle of Oam + Somwang 8 Dreamer 7 Buddy 6 Long June 5 Jenny 4 Extreme Game 3 Darkside Romance 2 Romantic Blue 1 Long Ta Lab Prab
045 R.S. Promotion Public Company Limited 6.1.1.2 Sales and Distribution
R.S. Film and Distribution Ltd.*, a subsidiary of R.S. Group mainly distributes R.S. Group films but is also the distributor for other film companies including large production houses and independent companies. Currently, there are four distribution channels: cinemas, provincial film distributors, home entertainment (VDO, VCD, DVD, cable TV, free TV) and the overseas market. The last is a new channel which has grown significantly through the international film festivals held three times a year. These include AFM in the US in February, Cannes in May and MIFED in Italy in November. With experience in distributing films in a global market, the company is confident that Thai films will receive a positive response from this market, depending on the type and quality of the films and the perception of the purchasers. *R.S. Film and Distribution Ltd., is temporarily closed and responsibility for distribution has been transferred to the Film Business and Home Entertainment Department of R.S. Promotion (Public) Co., Ltd.
6.1.1.3 Production House R.S. Group has been assigned by three television channels, Channel 3, Channel 7 and ITV, to produce drama series broadcast on prime time including pre-news and post-news drama series. The company's income is based on the production contract for each drama series. In 2003, the company produced and broadcast the following 15 drama series:
Channel Name Airing Time Produced By
3 18-80 Puan-si-mai-me-sua May-Aug Magic Advertainment Sainam lookpuchai Aug-Nov Magic Advertainment Nueng Ruethai Jan-May Magic Advertainment Buddhanuparp July-Aug Red Drama Nee-Kan-saen-rak Dec02-Mar03 Shadow Entertainment Hak-leam pra-karn Jun-Aug Shadow Entertainment Olwon-kon-rai-som Mar-Jun Shadow Entertainment Na-kak-khon-nok Nov03-Feb04 RS Promotion Wai-rai-Freshy Jul02-Jan03 Magic Advertainment Ia-ya-a-teu Sep Red Drama Botan Nov-Dec Red Drama Ka-waw-tee-bang-pleng Nov03-Jan04 Filmsurf
7 Jone-pluon-jai Jul Red Drama
ITV Daw-mang-korn Oct-Dec Nagasia Rak-fan-wan-rue-do-naw Dec Filmsurf
In addition to drama series, R.S. Group has been producing commercial films since late 2002. Clients for commercials broadcast in 2003 include Coke, Mistine, Kito, Tanachart and Kom Chad Luek newspaper.
046 R.S. Promotion Public Company Limited 6.1.1.4 New Products In June 2003, the company introduced Tele Movie or VCD movie, new product line in the home entertainment category.
Tele Movie films are produced for home entertainment only; they will not be released in the cinema. Their production costs are significantly lower than those of feature films. The average cost of a Tele Movie is two to three million baht, while that of a feature film would be between 20 and 50 million baht. This cost factor has attracted many companies to enter the business.
In 2003, R.S. Group released the following 21 Tele Movies:
Month Story Produced by
June 2003 MISS QUEEN THAILAND RS TELE REST ROOM P.O.V. SNEAK AVANT MY WONDERFUL LIFE NAGASIA July 2003 X Generation Cop NAGASIA Kill Me Why FILMSURE Aug 2003 Dead Line RS TELE Scenery of Love FILMSURF PIZZA P.O.V. September 2003 Haunted Night Aladdin House Soul Under Bed Aladdin House Body - Snatcher Aladdin House October 2003 Sexy Number NAGASIA LAST REMEMBER NAGASIA Haunted House FILMSURF November 2003 The Band 's Battle FILMSURF The Vanished Aladdin House Crimson Blood SHADOW December 2003 What's Upon A Time Filmsurf Indiana Joai : Elephant Cemetery P.O.V. China Girl Aladdin House
Although the Tele Movie market experienced strong competition in 2003, with the advantages of its production team, its experienced sales team and wide-ranging distribution network, the company can deliver a high quality product that will be welcomed by consumers. At present, R.S. Group is the market leader of Tele Movies in term of both quantity and quality.
6.1.2 Marketing and Competitive Environment 6.1.2.1 Marketing A. Marketing Strategy
047 R.S. Promotion Public Company Limited 1) Quality Work in Response to Market Needs R.S. Group takes pride in its productions, whether of films, Tele Movies, drama series or TV programmes, and it pays careful attention to every aspect of the process. First, the production team will study and evaluate the market condition and the taste of the audience. After choosing suitable themes, they painstakingly begin the screenwriting, casting, shooting, editing and sound mixing to produce work of the highest quality work that will live up to the expectations of the audience. 2) Continuity With more than 25 years' business experience, R.S. Group understands that continuity is the best means of gaining trust and confidence from its business partners, the TV channels cinema owners, film distributors, home entertainment companies and, of course, the audience. In addition to the continuity of its business, R.S. Group is continuously expanding its investment in related areas such as increasing its production staff, investing in modern filmmaking equipment and continuous marketing. 3) Development with State-of-Art-Technology The company is the first movie producer to use the latest digital system for filmmaking in Thailand. This helps the company not only to improve the quality of its work, but also to save on production and film costs as compared with more conservative production methods.
B. Customers and Target Groups 1) Film Customers Core customers are cinemas, provincial film distributors, free TV and cable TV. 2) Production Customers TV Channels 3, 5, 7, 9 and ITV 3) Tele Movie Customers The company's subsidiary, K Master Ltd. is in charge of distribution, so most Tele Movie customers are wholesale distributors and retailers.
C. Distribution Channels 1) Film Distribution See detail referred to in 3.3.1.2 2) Drama Series The company works continually for the television channels as it can produce quality work within the deadlines set by the operators. 3) Tele Movies These are distributed through the company's subsidiary K Master Ltd., to wholesale distributors and retailers.
6.1.2.2 Competitive Environment A. Thai Movie Market Value and Growth Trends In 2003, the market value of the film industry was 3,600 million baht, an increase of 22% over the 2,950 million baht shown in 2002. In 2003, Thai films were valued at 1,000 million baht, or one third of the total market value of 53 released movies.
048 R.S. Promotion Public Company Limited R.S. released seven movies in 2003 and plans to release seven movies in 2004. Film Market Value Table (Million Baht) 2002 2003 Growth Thai Movies 650 1,000 54% Hollywood Movies 2,100 2,400 14% Other Foreign movies 200 200 - 2,950 3,600 22% Source: R.S. Group and Film Distribution Companies
Graph Movie Maket Value
4,000 3,500 3,400 2,950 29% 3,000 20% 34% 2,000 80% 71%
Unit : Million Baht 60% 1,000
2001 2002 2003 Thai Movies 1,000 650 1,000 Foreign movies 1,950 2,580 2,500
B. Film Companies There are six large film companies who release movies continuously: R.S. Group, Mongkol Film, Five Stars, Film Bangkok, Thai-Entertainment and GMM Picture.
C. Competitive Environment The company estimates that all film companies will be creating new work in 2004 focussing on quality as well as expanding distribution channels to the overseas market.
6.1.3 Product and Service Placement
6.3.3.1 Product Placement R.S. Group is able to runs its business effectively with its film business model. Films made by the teams of R.S. Group's subsidiaries use equipment supported by R.S. Studio Ltd., which ensure the smooth running of the Group's production process. The company has an independent policy for casting. The subsidiaries may select non-R.S. Group actors based on the suitability of the actor's character and the script of each film. In addition to working with well-known film directors, R.S. Group introduces new directors selected from staff members who are creative and can present alternative films. This makes R.S. Group films more interesting and capable of attracting audiences. Continuity of film production attracts new personnel including screenwriters, directors, actors and production staff to join the company.
049 R.S. Promotion Public Company Limited 6.3.3.2 Environmental Effects -None-
7. Research and Development The company truly understands the importance of the marketing research and has worked closely with the marketing and sales promotion department to conduct regular surveys. Marketing and consumer behaviour surveys help the company to perceive the movement of the target consumers' tastes and requirements. This information is essential for planning and deciding the marketing strategy for all products including music, drama series, films and publications; they all need preparation to respond to changes in the social climate. The company uses marketing surveys to estimate the consumer acceptance of each product. This is not just in order to follow the existing market requirements, but also to introduce new products to meet new market trends. In addition to regular internal assessments, specific studies such as ratings surveys of drama series and programmes, and surveys of advertising expenditures in all media are conducted by professionals such as AC Nielsen (Thailand), the leading research and marketing survey firm. By giving attention to the surveys' results, the company can improve the quality of its work and plan effective strategies to make it more competitive.
8. Risk Factors R.S. Group has evaluated the risks that might affect its companies and subsidiaries.
8.1 Economic and Regulatory Risks
The Economic Environment With its 25 years experience, the company believes that there is a low level of risk from economic changes to its music business, as entertainment goods remain continuously popular with consumers. Music brings pleasure and relaxation at a low cost to the consumer, and the same may be said of the film business.
Amendments to Radio Broadcasting and Television Regulations Radio, the company's second priority business, may feel the effects of the free media business policy as laid down by the Constitution of the Thai Kingdom 1997 section 40. The Constitution has approved the National Radio and Television Broadcasting Committee (NRTC) as the government-based independent agency responsible for allocating broadcasting frequencies and overseeing the fairness of policies related to radio and television broadcasting. Changes in the management agency may lead to risks for existing media operators in the areas of increasing rigidity of regulations, and in the revision of radio concessions. It is true that there will be opportunities for new media companies to enter the industry after the free media business policy becomes effective; however, the potential for growth in business will be a competitive advantage for all media operators. The company has evaluated the risks and is confident that it has the potential, preparedness, experience and financial support to enhance its capability and competitive advantages. In addition, it has the full complement of requirements to enter the bidding for radio broadcasting concessions and continue its radio business.
8.2 Industrial Risks
Piracy
050 R.S. Promotion Public Company Limited The increased production of pirated cassettes and CDs is a serious obstacle to the growth of the music industry, as music providers cannot collect their full entitlement to the legal revenues for copyright and sale. All concerned parties, music companies, entertainment providers, artists and Government, will be well advised to devote more attention to this problem, and cooperate to motivate consumers to buy copyright products rather than pirated goods. Manufacturers have reduced the cost of their entertainment products to narrow the price gap between copyright and pirated goods. At the same time, Government has adopted stronger measures against infringement of the law, resulting in a decrease in the numbers of pirated products. The Government also allows karaoke copyright collection, a move which supports business expansion and companies' health.
Changes in Consumer Behaviour With its interests in television, films, radio and publishing, the company accepts that it will encounter changes in the habits and behaviour of consumers. These changes might include the influence of Western music styles, and the popularity of entertainers, singers, actors/actresses, programme presenters and DJs as well as in drama styles. Trends in films and film-going habits may cause instability that is hard to control. However, with its executives' skills in market evaluation and forecasting and its research into target group behaviour, the company has confidence in its readiness to adapt to innovations and new developments in music, drama series, television programmes and films, and its ability to meet the target groups' expectations.
8.3 Business Risks
Expiry of Radio Concession Contracts The company has one-year lease contracts with two radio stations: 88.5 MHz and 93.0 MHz. It decided against renewing the FM 98.0 MHz contract when it expired on 31 December 2003, as the running costs were too high to guarantee a profit. The company believes that the risk posed by renewing contracts with the two existing stations is low. The audience base is of a suitable size, the company's output is popular, and it enjoys a good relationships with the stations' owners.
Dependence on Company Executives The success of RS Group is due to the visionary leadership of the Chetchotisak Family led by Mr Kriangkrai and Mr Surachai, but in recent years the Group has adopted a policy of greater decentralisation. It has divided its core business into segments each managed by its own Managing Director and executive teams. This allows for independent decision making and makes for flexibility. Thus, the level of dependence on the Chetchotisak Family has been reduced. As the major shareholders and founders of RS Business, the Chetchotisak Family is committed to extending the company's activities into other sectors of the entertainment industry in order to continue its growth and add values to its business. The family will continue to maintain its position as the major shareholders.
Movement of Human Resources Throughout its 25 years of operation, the company and its management have given a high priority to human resources, and the risk from this direction is low. The company and senior executives realise that the workforce in the entertainment business is an essential component in its sustainable growth and progress. The management reviews its artists' yields and growth regularly to satisfy all parties. This has helped to improve relationships and create the supportive and easy-going culture which people in entertainment desire. The positive relationship between artists and production teams in each segment of the company means that they are happy to work together, dedicated to their responsibility and committed to giving best performance for the company.
051 R.S. Promotion Public Company Limited The company believes that its ability to handle risk management efficiently has been demonstrated by the absence of significant risks in all segments of its business.
8.4 Management Risk from as major shareholder hold more than 50% As of 31 December 2003, Chetchotisak Group held 53% of the company's shares. The Chetchotisak Group is eligible to take control of resolutions by Shareholders' Meetings concerned with committee appointments. If shareholders' majority is needed to exempt any case from the company's regulations, three out of four votes will be required. Other shareholders may not consolidate votes to examine or delay matters proposed by the major shareholder.
The company's management structure consists of the Board of Directors, the Executive Committee and the Audit Committee. It can be seen that the company has appointed highly skilled persons to suitable positions and settled questions of the authority of each committee with transparency.
In matters related to the Committee, major shareholder and business controllers, or such issues as conflicts of interest, those involved will be ineligible to vote. This is to assure shareholders that the company's management is transparent in its dealings.
10. Management's Discussion and Analysis
With its restructuring on 11 September 2003, the RS Group acquired 99.99 percent of the shares of its 22 subsidiaries. Thus, the company's consolidated financial statement for 2002 cannot be compared to that of 2003.The consolidated financial statement for 2002 shows RS Group's performance only after restructuring in September, and so does not reflect performance for the entire year. To simplify comparative analysis, the company prepared management account assuming the completed restructuring from 1 January 2002 in order to compare its financial statement with the 2003 financial statement.
Management's explanation and analysis in this section was based on RS Group's performance in the management account financial statement for 2002, and the audited statement for 2003. For a clear understanding of the Group's overall performance from the chart, RS Group's business is divided into three segments: Music, Media and Motion Picture and production house in conformity with the type of its core business. (See the chart of RS Group's Shareholding Structure, page 7)
10.1 2002 and 2003 performance Revenue In 2002 and 2003, the company earned revenue from each business segment as follows:
Type of Revenue 2003 Revenue 2002 Revenue Increase (Million baht) (Million baht) (Million baht) Music 1,061.74 1,035.64 26.10 Media 319.38 273.06 46.32 Film Production and Production Services 446.74 169.73 277.01 Others 63.41 11.63 51.78 Overall operating income 1,891.27 1,490.06 401.21 Other income 70.00 42.35 27.65 Overall income 1,961.27 1,532.41 428.86
052 R.S. Promtion Public Company Limited Type of Revenue 2003 Proportion 2002 Proportion (percentage) (percentage) Music 54 67 Media 16 18 Film Production and Production Services 23 11 Others 3 1 Overall operating income 96 97 Other income 4 3 Overall income 100 100
Music The company's revenue derives from products sold after deducting costs of returned goods and discounts during the year. The company has prepared reserves for year-end in case of returned goods. In 2003, the company earned 1,061.74 million baht from its music business, an increase of 26.10 million baht year-on-year. Its major revenue came from sales of cassettes, CDs and CVDs, which accounted for 65 percent of overall music business revenue. The company sold 2.68 million cassettes, 1.58 million CDs and 3.31 million CVDs. The proportion of sales revenue was 23 percent for cassettes, 24 percent for CDs and 53 percent for VCDs. In 2003, the company released 259 albums of which 78 were new albums and 181 compilations. Revenue from music also came from concert and marketing activities, advertising airtime, production services and copyright. Respectively, these accounted for 12 per cent, 9 per cent, 1 per cent and 13 per cent of overall revenue from music business.
Media In 2003, the company earned 319.38 million baht from its activities in the media, with the focus on income from advertising airtime sales. Its income from television was 211.36million baht; from radio, 98.20million baht; and from publishing 9.82 million baht. In 2003, the company earned 302.33 million baht from advertising airtime sales, while 6.08 million baht came from production services, 10.50 million baht from publishing and drama series CDs sales and 0.47 million baht from other sources. The advertising income was generated from its seven drama series and three television programmes. The average income of its advertising airtime sales per series was 21.75 million baht, and from television programmes 16.21 million baht.
Motion Picture and Production Services In 2003, the company generated an income of 446.74 million baht from film production and production services, an increase of 277.01 million baht on the previous year. Its main sources of income were drama series and advertising production services, films and film CD sales and copyright collection. In 2003, the company generated 85.65 million baht from drama series and production services, 61.32 million baht from advertising production services, 188.55 million baht from film copyright collection and product sales, and 111.22 million baht from drama series, talk shows, film CDs and others. The company also earned revenue from six films released this year and one film continuing from the previous year.
Expenses Sales and management expenses in 2003 can be categorised as follows: employee expenses and commission 52%; rent and public utilities, 12%; advertising and public relations, 10%; depreciation, 4%; others, 22%. However, these percentages exclude 46.81 million baht loss of reserves for product devaluation, and 13.02 million baht reserves for returned goods. These figures represent 1.23 million baht, a 6.15 million baht increase on the previous year.
053 R.S. Promtion Public Company Limited
In 2003, the company showed primary profits before depreciation, interest and tax, shareholders' returns and permanent assets' returns of 30%, 12%, 10% and 50% respectively. Costs and expenses of each business units can be described as follows:
Music Major costs of music business were production expenses, rent for radio and television airtime, programme production expenses, concert and event expenses, advertising and public relations expenses and employee expenses. Other expenses included promotion and artist management, commissions for artists and music owners, production and distribution costs, television airtime, artists and songs development, and the cost of music programmes for public relations purposes.
Media Major costs of television media business were series and programme production, television airtime, commissions, and public relations. Major costs of radio media business were radio airtime, production costs and public relations.
Motion Picture and Production Services Major costs of movie production business and production services were series and programme production, field production, film support and employees' expenses.
Net Profit In 2003, the company generated a net profit of 108 million baht, a decrease of 86 million baht on the previous year. The lower profits were due to the loss from motion picture, the loss from provision on obsolete inventories and sales return, copyright devaluations for comedy programmes and the increase in amortization of intangible assets. The year before the company recognised other income from the record of negative goodwill of its subsidiaries at 23 million baht. This resulted from a negative goodwill evaluation that was higher than two of its subsidiaries' non-current assets.
10.2 Financial Status
Assets In 2003, the company held 2,226 million baht in assets. These consisted of 1,625 million baht in current assets accounting for 73% of total assets and 601 million baht in non-current assets. The company's major assets consisted of 739 million baht of inventories, 206 million baht in cash and bank savings as working capital, and 471 million baht in net account receivable. Of these, 98% are current and less than 6 months overdue receivable. There is 438 million baht in net property plant and equipment, and 168 million baht in net intangible assets such as master music copyright, drama series and films.
Liabilities As of 31 December 2003, the company owed 78.50 million baht in short-term loans. The number of overall loans was reduced from the previous year by 206.50 million baht as the company paid back its short-term and long-term creditors by fund raised from the initial public offering in 2003.
Liquidity The company had 2.30 times liquidity ratio and approximately 103 days of cash cycle.
Sources of capital
In 2003, the company gained 748 million baht in cash by raising fund(net of all expenses for registering with the Stock Exchange) through the initial public offering. The company used the proceed to pay back short-term and long-term loans while retaining some for working capital and for investment in film production and building broadcast studios.
054 R.S. Promtion Public Company Limited Audit Committee Report
To Shareholders, R.S. Promotion Public Company Limited
The Audit Committee was appointed by a resolution of the Shareholders' Meeting of R.S. Promotion (Public) Limited on 13 January 2003. In 2003, the Audit Committee performed its duties in accordance with the Audit Committee Charter approved by the Board of Directors, including reviewing quarterly financial statements and the Financial Statement for 2003 to ensure their accuracy and adequate disclosure. The Audit Committee held meetings with internal and external auditors in order to discuss and exchange views on risk assessment, audit results and the adequacy of the internal control system. The Audit Committee was also responsible for recommending the decrement and prevention of risk, considering and approving charters and internal audit plans, overseeing the company's operations to ensure transparency and compliance with the related laws and regulations.
The Audit Committee has proposed to the Board of Directors that it should seek approval from the Shareholders' Meeting to appoint KPMG Phoomchai Business Advisory Limited as the company's auditor for 2004.
( Chairman of the Audit Committee
055 R.S. Promotion Public Company Limited AUDITOR'S REPORT OF CERTIFIED PUBLIC ACCOUNTANT
To The Shareholders of R.S. Promotion Public Company Limited (Formerly: R.S. Promotion 1992 Company Limited)
I have audited the consolidated balance sheets of R.S. Promotion Public Company Limited and subsidiaries as at December 31, 2003 and 2002, and the related consolidated statements of income, changes in shareholders equity and cash flows for the years then ended and the separate financial statements of R.S. Promotion Public Company Limited for the same period. The Company's managements are responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of R.S. Promotion Public Company Limited and subsidiaries as at December 31, 2003 and 2002, and the consolidated results of their operations, and cash flows for the years then ended and the separate financial positions as at December 31, 2003 and 2002, and results of the operations and cash flows of R.S. Promotion Public Company Limited, for the years then ended, in conformity with generally accepted accounting principles.
Somboon Supasiripinyo Certified Public Accountant Registration Number 3731
KPMG Phoomchai Audit Ltd. Bangkok February 3, 2004
056 R.S. Promtion Public Company Limited R.S. PROMOTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) BALANCE SHEETS AS AT 31 DECEMBER 2003 AND 2002
ASSETS Baht Consolidated The Company Only Notes 2003 2002 2003 2002
CURRENT ASSETS Cash on hand and at banks 206,032,962 320,939,618 46,862,518 13,174,868 Accounts and notes receivable - related parties 3, 5 - - 700,674,515 232,952,695 Accounts and notes receivable - others - net 4, 5 471,113,774 282,181,128 78,751,613 52,782,896 Loans to related parties 3 - - 66,750,000 177,340,139 Inventories 3, 4, 6 739,204,629 326,427,110 284,694,105 124,155,142 Undue input vat 67,227,721 30,342,253 12,095,744 6,814,613 Accrued income 3 26,005,222 12,264,870 24,907,911 6,165,250 Prepaid expenses 29,759,603 16,795,714 22,033,829 9,689,283 Advance payments 13,749,075 16,511,342 516,226 2,407,384 Other current assets 72,378,885 26,227,108 58,549,696 8,484,985 Total Current Assets 1,625,471,871 1,031,689,143 1,295,836,157 633,967,255
NON CURRENT ASSETS Investments in subsidiaries - net 4, 7 - - 454,317,403 322,275,836 Property plant and equipment - net 4, 8 437,850,188 228,511,078 55,553,118 39,146,826 Intangible assets - net 4, 9 168,420,792 88,718,822 104,100,150 25,979,392 Goodwill 4 (32,435,084) (34,169,962) - - Withholding tax 20,934,939 23,861,100 4,192,851 5,492,272 Other non current assets 6,141,235 15,170,102 105,239 165,476 Total Non Current Assets 600,912,070 322,091,140 618,268,761 393,059,802
TOTAL ASSETS 2,226,383,941 1,353,780,283 1,914,104,918 1,027,027,057
057 R.S. Promotion Public Company Limited R.S. PROMOTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) BALANCE SHEETS AS AT 31 DECEMBER 2003 AND 2002
LIABILITIES AND SHAREHOLDERS' EQUITY Baht Consolidated The Company Only Notes 2003 2002 2003 2002
CURRENT LIABILITIES Short-term loans from financial institutions 10 78,500,000 230,000,000 30,000,000 150,000,000 Accounts and notes payable - related parties 3 - - 146,254,527 75,522,438 Accounts and notes payable - others 287,770,936 192,571,993 110,596,050 58,228,725 Other payable 69,356,336 26,556,933 11,449,118 10,839,498 Current portion of long-term loan from financial institution 11 - 11,538,926 - - Unearned revenues 3 92,038,625 22,420,645 17,431,808 9,601,208 Undue output vat 68,250,423 32,569,159 51,098,055 18,732,204 Accrued corporate income tax 14,149,863 64,317,143 - 24,425,006 Accrued expenses 58,781,481 34,710,515 23,016,160 15,267,356 Other current liabilities 37,548,990 31,502,752 4,598,425 340,439 Total Current Liabilities 706,396,654 646,188,066 394,444,143 362,956,874
NON CURRENT LIABILITIES Long-term loan from financial institution - net from current portion 11 - 43,461,074 - - Other non current liabilities 820,886 295,317 494,374 234,357 Total Non Current Liabilities 820,886 43,756,391 494,374 234,357 Total Liabilities 707,217,540 689,944,457 394,938,517 363,191,231
SHAREHOLDERS' EQUITY Share capital 14 Authorized share capital 140,000,000 and 5,600,000 ordinary shares in 2003 and 2002 respectively, Baht 5 and Baht 100 par value, respectively 700,000,000 560,000,000 700,000,000 560,000,000 Issued share capital 140,000,000 and 5,600,000 ordinary shares in 2003 and 2002 respectively, fully paid 700,000,000 560,000,000 700,000,000 560,000,000 Premium on share capital 607,516,239 - 607,516,239 - Retained earnings Appropriated - legal reserve 5,400,000 - 5,400,000 - Unappropriated 206,250,162 103,835,826 206,250,162 103,835,826 Total Shareholders' Equity of parent company 1,519,166,401 663,835,826 1,519,166,401 663,835,826 Total Shareholders' Equity 1,519,166,401 663,835,826 1,519,166,401 663,835,826
058 R.S. Promotion Public Company Limited R.S. PROMOTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002
Baht Consolidated The Company Only Notes 2003 2002 2003 2002
REVENUES 3,4 Revenues from sales - net 838,746,463 232,015,121 6,819,754 2,113,341 Revenue from copyrights 166,290,512 455,932,932 775,791,176 710,682,570 Revenue from production 214,556,912 143,921,335 29,505,326 60,227,723 Revenue from films production 134,031,094 20,852,207 124,925,620 - Revenue from production concerts and marketing activities 129,102,734 114,891,623 132,327,734 114,891,623 Advertising income 399,197,621 169,137,797 107,659,436 91,298,036 Service income 9,344,566 38,049,056 14,382,532 51,800,000 Revenue from copyrights violation 52,915,051 7,454,559 51,072,060 2,757,559 Other income 15,346,544 12,370,692 8,240,239 14,072,203 Goodwill from subsidiaries 1,734,878 23,104,426 - - Share of profit from subsidiary companies - net - - 66,137,688 - Total Revenues 1,961,266,375 1,217,729,748 1,316,861,565 1,047,843,055 COST AND EXPENSES 3,4 Cost of sales and production 1,329,183,417 867,694,460 1,067,196,474 812,915,004 Selling and administrative expenses 458,297,863 190,360,881 133,489,679 111,259,839 Share of loss from subsidiary companies - net - - - 12,826,937 Directors remuneration 360,000 - 360,000 - Total Cost and Expenses 1,787,841,280 1,058,055,341 1,201,046,153 937,001,780 PROFIT BEFORE INTEREST EXPENSES AND INCOME TAX 173,425,095 159,674,407 115,815,412 110,841,275 Interest expenses 3 7,402,835 4,371,972 3,438,398 2,997,220 Income tax 58,207,924 95,829,982 4,562,678 48,371,602 Net profit for the year 107,814,336 59,472,453 107,814,336 59,472,453 Basic earnings per share 4 0.83 25.00 0.83 25.00
059 R.S. Promotion Public Company Limited R.S. PROMOTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002
Baht Consolidated Retained Earnings Issued and Paid-up Premium on Appropriated - Share Capital Share Capital Legal Reserve Unappropriated Total Beginning balance of the year 2002 100,000,000 - - 44,363,373 144,363,373 Increase share capital 460,000,000 - - - 460,000,000 Net profit for the year - - - 59,472,453 59,472,453 Ending balance of the year 2002 560,000,000 - - 103,835,826 663,835,826 Increase share capital 140,000,000 607,516,239 - - 747,516,239 Net profit for the year - - - 107,814,336 107,814,336 Legal reserve - - 5,400,000 (5,400,000) - Ending balance of the year 2003 700,000,000 607,516,239 5,400,000 206,250,162 1,519,166,401
Baht The Company Retained Earnings Issued and Paid-up Premium on Appropriated - Share Capital Share Capital Legal Reserve Unappropriated Total Beginning balance of the year 2002 100,000,000 - - 44,363,373 144,363,373 Increase share capital 460,000,000 - - - 460,000,000 Net profit for the year - - - 59,472,453 59,472,453 Ending balance of the year 2002 560,000,000 - - 103,835,826 663,835,826 Increase share capital 140,000,000 607,516,239 - - 747,516,239 Net profit for the year - - - 107,814,336 107,814,336 Legal reserve - - 5,400,000 (5,400,000) - Ending balance of the year 2003 700,000,000 607,516,239 5,400,000 206,250,162 1,519,166,401
060 R.S. Promotion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
2. Copyright of drama Copyright of drama is recognized at cost, comprising various related direct expenses of production less accumulated amortization. Amortization is charged to the Statement of Income as follows: 80% of the copyright value when the drama is on air until the end of the first time show ; the remaining 20% over a period of 5 years from the end of first time show.
3. Copyright of films Copyright of films is recognized at cost, comprising various related direct expenses of production and filming, less accumulated amortization. Amortization is charged to the Statement of Income as follows: Year 1: 60% of the copyright value based on the estimated income ratio; Year 2 to Year 10: the remaining 40% of the copyright value using the straight-line method.
4. Other copyrights Other copyrights are recognized at cost, comprising various related direct expenses of acquisition, less accumulated amortization. Amortization is charged to the Statement of Income using the straight-line method over the whole period of the contract.
Investments The Company records cost of investment securities in the subsidiaries by the equity method.
The Company records cost of investment in subsidiaries by the equity method in order to recognize the status and return from investment in the said companies. The Company does not consider net profit (loss) from investment in subsidiaries for the year ended December 31, 2003 and 2002 in calculating the income tax for each year.
Amortized positive goodwill and negative goodwill The above stated goodwill is the result of the fair value of assets and liabilities of the subsidiary companies, which are lower or higher than cost - respectively. The positive goodwill and negative goodwill are amortized by the straight-line method for a period of 20 years.The negative goodwill being part of profit of monetary assets is immediately recognized as revenue.
In Million Baht Consolidated Positive goodwill Negative goodwill Total
2003 2002 2003 2002 2003 2002 Beginning balance 32.36 - (66.53) - (34.17) - Occurred during the year - 32.86 - (90.14) - (57.28) Amortized during the year (1.64) (0.50) 3.37 23.61 1.73 23.11 Ending balance 30.72 32.36 (63.16) (66.53) (32.44) (34.17)
071 R.S. Promtion Public Company Limited R.S. PROMOTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002
Baht Consolidated The Company Only Notes 2003 2002 2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES : Net profit 107,814,336 59,472,453 107,814,336 59,472,453 Adjustments to reconcile net profit to net cash provided by (used in) operating activities: Depreciation and amortization 86,048,855 21,672,653 14,631,628 7,353,220 Allowance for devaluation intangible assets 4,800,000 - - - Allowance for doubtful debts and written off withholding tax 2,871,186 27,331,330 1,308,845 24,734,451 Share of loss (profit) from subsidiaries - - (66,137,688) 12,826,937 Goodwill from subsidiaries (1,734,878) (23,104,426) - - Loss from provision for obsolete inventories 46,810,803 45,579,959 - 637,365 Allowance for sales return 13,017,048 6,868,754 - - Loss (Gain) on sale of equipment 154,165 (143,229) (113,651) (140,117) Loss on write off equipment 688,907 65,921 121,428 40,337 Profit from operating activities before changes in operating assets and liabilities 260,470,422 137,743,415 57,624,898 104,924,646 DECREASE (INCREASE) IN OPERATING ASSETS: Accounts and notes receivable (188,868,246) (59,928,472) (493,690,538) (135,971,289) Inventories (459,588,322) (185,247,689) (160,538,963) (92,748,165) Other current assets (106,979,219) 39,707,441 (84,541,890) (15,230,829) Intantigible assets (111,175,127) (64,650,710) (82,392,351) (26,348,053) Other non - current assets 9,019,442 (34,272,076) (9,425) 33,811 INCREASE (DECREASE) IN OPERATING LIABILITIES : Accounts payable and notes payable 133,575,996 60,615,827 161,476,468 38,789,137 Other current liabilities 36,810,775 31,310,027 (9,989,199) 77,653,034 Other non - current liabilities 525,569 128,733 260,017 234,357 Net Cash used in Operating Activities (426,208,710) (74,593,504) (611,800,983) (48,663,351)
061 R.S. Promotion Public Company Limited R.S. PROMOTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002
Baht Consolidated The Company Only Notes 2003 2002 2003 2002
CASH FLOWS FROM INVESTING ACTIVITIES : Decrease (Increase) in loans to related parties - (196,046,664) 110,650,376 (177,340,139) Increase investments in subsidiaries - (335,102,772) (118,000,000) (335,102,773) Purchase of equipment (231,381,638) (81,360,419) (27,262,151) (43,694,717) Cash received from sales of equipment 1,667,453 1,956,601 488,049 399,595 Dividend from subsidiaries - - 52,096,120 - Net Cash Provided by (Used in) Investing Activities (229,714,185) (610,553,254) 17,972,394 (555,738,034) CASH FLOWS FROM FINANCING ACTIVITIES : Loan from financial institutions (206,500,000) 230,000,000 (120,000,000) 150,000,000 Cash received from other long-term loan - 55,000,000 - - Proceeds from issue of share capital 747,516,239 559,000,000 747,516,239 460,000,000 Net Cash Provided by Financing Activities 541,016,239 844,000,000 627,516,239 610,000,000 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (114,906,656) 158,853,242 33,687,650 5,598,615 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 4 320,939,618 162,086,376 13,174,868 7,576,253 CASH AND CASH EQUIVALENTS AT THE ENDING OF THE YEAR 4 206,032,962 320,939,618 46,862,518 13,174,868
SUPPLEMENTARY CASH FLOWS INFORMATION : Cash paid during the year Interest expenses 12,166,192 8,354,881 3,438,398 2,997,220 Income taxes 145,939,403 46,169,357 51,374,364 23,946,597
062 R.S. Promotion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
1. GENERAL INFORMATION, ECONOMIC ENVIRONMENT AND BASIS OF FINANCIAL STATEMENTS PRESENTATION
General Information R.S. Promotion Public Company Limited, formerly - R.S. Promotion 1992 Company Limited, was registered as a Limited Company in Thailand on 17 April 1992 and was registered as a public company on 15 January 2003. The operations of R.S. Promotion Public Company Limited and its subsidiaries (Group of companies) are integrated entertainment businesses including music, television, radio and publishing media and production houses.
The numbers of the parent company employees as at December 31, 2003 and 2002 were 487 and 331, respectively. The total expenditure for employees for the years ended December 31, 2003 and 2002 amounted to Baht 132.40 million and Baht 90.37 million, respectively.
The Company is located at 419/1 Soi Ladphrao 15, Ladphrao Road, Lad Yao, Jatujak, Bangkok.
Economic Environments and Basis of Financial Statements Presentation The financial statements of R.S. Promotion Public Company Limited and its subsidiaries have been prepared in accordance with the Department of Commercial Registration's announcement dated 14 September 2001, under the Accounting Act B.E. 2543 and the generally accepted accounting principles practiced in Thailand.
As required by Thai law and regulatory requirements, the Company's financial statements have been prepared in the Thai language. They have been translated into English for the convenience of the reader.
2. CONSOLIDATED FINANCIAL STATEMENTS PRESENTATION
The Company has invested in subsidiary companies since September 12, 2002 through the increases in the share capital and the changes in the shareholders structure, amounting to Baht 335.10 million. As a result, the prepared consolidated income statement for the year ended 31 December 2002 presents the subsidiaries' operating result from the period between 12 September to 31 December 2002.
Subsidiaries Nature of Business
1. K. Master Co., Ltd. Distributor of Tapes, CD, VCD and DVD 2. Ruk Seing Co., Ltd. Music promotion house 3. Red Sailor Co., Ltd. Music promotion house 4. Rock Skin Co., Ltd. Music promotion house 5. R Siam Co., Ltd. Master tape production and music promotion house 6. RS Film and Distribution Co., Ltd. Films distributor 7. Avant Co., Ltd. Production house - films and drama series 8. Filmsurf Co., Ltd. Production house - films, drama series and TV programs 9. Sky - High Network Co., Ltd. Radio production
063 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
Subsidiaries Nature of Business
10. Shadow Entertainment Co., Ltd. TV broadcast and production house 11. Magic Advertainment Co., Ltd. TV broadcast 12. Red Drama Co., Ltd. Production house - drama series 13. R.S. Television Co., Ltd. Production house - films and TV programs 14. P.O.V. (Point of View) Co., Ltd. Production house - films and TV programs 15. Aladdin House Co., Ltd. Production house - films, drama series and TV programs 16. R.S. Studio Co., Ltd. Post production service studio 17. Bangkok Organizer Co., Ltd. Concerts and events organizer 18. Screen Head Co., Ltd Printing designer 19. Nagasia Co., Ltd. Production house - films, drama series and TV programs 20. Thai Copyright Collection Co., Ltd. Music copyright collection 21. Poema Co., Ltd. Publishing business 22. Tai-Saduak Co., Ltd. Production house - commercial films
The significant accounting transactions between the Company and the subsidiary companies were eliminated from the consolidated financial statements.
3. RELATED PARTY TRANSACTIONS
The Company has significant transactions with its related parties through the common shareholding and/or some of the directors. The financial statements reflect the effects of these transactions on the basis determined between the parent company and the related parties, with concern over normal business terms.
3.1 The Company's financial statement only has significant balances between the Company and its related parties for the year ended December 31, 2003 and 2002 as follows: In Million Baht 2003 2002 Accounts Receivable Shadow Entertainment Co., Ltd - 0.02 Magic Advertainment Co., Ltd. 0.51 0.01 Sky - High Network Co., Ltd. 0.08 8.93 Aladdin House Co., Ltd. 0.01 0.03 R.S. Television Co., Ltd. 0.38 0.09 P.O.V. (Point of View) Co., Ltd. 0.01 0.07 RS Film and Distribution Co., Ltd. 0.27 2.08
064 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002 In Million Baht 2003 2002 Accounts Receivable K. Master Co., Ltd. 680.35 219.94 Red Sailor Co., Ltd. 2.98 0.30 Rock Skin Co., Ltd. - 0.03 R Siam Co., Ltd. 10.49 0.05 Ruk Seing Co., Ltd. - 0.02 Thai Copyright Collection Co., Ltd 4.47 1.10 R.S. Studio Co., Ltd. - 0.16 Bangkok Organizer Co., Ltd. 0.95 0.09 Screen Head Co., Ltd 0.02 0.02 Chetchoatisak Co., Ltd. - 0.01 Avant Co., Ltd. 0.02 - Poema Co., Ltd. 0.04 - Red Drama Co., Ltd. 0.09 - Total 700.67 232.95 Accrued Interest Income Red Drama Co., Ltd. 0.04 0.12 P.O.V. (Point of View) Co., Ltd. - 0.01 Avant Co., Ltd. 0.03 0.09 Filmsurf Co., Ltd. 0.03 0.13 K. Master Co., Ltd. - 0.36 Red Sailor Co., Ltd. 0.04 0.06 Rock Skin Co., Ltd. - 0.01 R Siam Co., Ltd. - 0.02 Ruk Seing Co., Ltd. 0.02 0.04 Thai Copyright Collection Co., Ltd. - 0.04 R.S. Studio Co., Ltd. - 0.02 Total 0.16 0.90
Loans to Red Drama Co., Ltd. 13.00 23.00 P.O.V. (Point of View) Co., Ltd. - 1.50 Avant Co., Ltd 11.00 17.10 Filmsurf Co., Ltd 20.00 26.65 K. Master Co., Ltd. - 71.00 Red Sailor Co., Ltd. 12.55 12.55 Rock Skin Co., Ltd. - 2.25 R Siam Co., Ltd. - 3.20
065 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002 In Million Baht 2003 2002
Accrued Interest Income Ruk Seing Co., Ltd. 5.70 7.65 Thai Copyright Collection Co., Ltd. - 8.68 R.S. Studio Co., Ltd - 3.50 Screen Head Co., Ltd. - 0.26 Tai - Saduak Co., Ltd. 1.50 - Poema Co., Ltd. 3.00 - Total 66.75 177.34
Beginning of the year 2002 - Loans 177.34 Increase during the year 29.50 Paid during the year 140.09 Ending Balance 66.75
Cost of work in process Magic Advertainment Co., Ltd. 0.12 - Aladdin House Co., Ltd. 25.06 8.54 R.S. Television co., Ltd. 12.99 16.82 P.O.V. (Point of View) Co., Ltd. 26.02 19.32 Avant Co., Ltd. 50.90 46.03 RS Film and Distribution Co., Ltd. 30.66 25.64 Filmsurf Co., Ltd. 10.88 - Red Sailor Co., Ltd. 0.93 - Rock Skin Co., Ltd. 0.54 - Ruk Seing Co., Ltd. 3.83 - R.S. Studio Co., Ltd. 0.27 - Bangkok Organizer Co., Ltd. 0.90 - Nagasia Co., Ltd. 33.20 2.29 Screen Head Co., Ltd. 1.32 - Red Drama Co., Ltd. 0.40 - Tai-Saduak Co., Ltd. 2.02 - Total 200.04 118.64
066 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002 In Million Baht 2003 2002 Accounts payable Magic Advertainment Co., Ltd. 0.95 0.75 Sky - High Network Co., Ltd. 3.36 0.83 Aladdin House Co., Ltd. 23.23 6.22 R.S. Television Co., Ltd. 20.39 12.84 P.O.V. (Point of View) Co., Ltd. 17.53 11.03 Avant Co., Ltd. 15.89 12.89 RS Film and Distribution Co., Ltd. 2.88 0.07 Filmsurf Co., Ltd. 12.41 4.71 K. Master Co., Ltd. 2.93 6.06 Red Sailor Co., Ltd. - 3.34 Rock Skin Co., Ltd. 3.05 0.41 R Siam Co., Ltd. 1.16 1.00 Ruk Seing Co., Ltd. 7.12 2.68 Thai Copyright Collection Co., Ltd. 0.01 0.05 R.S. Studio Co., Ltd. 4.85 2.46 Bangkok Organizer Co., Ltd. 11.57 5.63 Nagasia Co., Ltd 12.32 1.46 Screen Head Co., Ltd. 4.60 3.09 Shadow Entertainment Co., Ltd 1.63 - Red Drama Co., Ltd. 0.21 - Poema Co., Ltd. 0.16 - Total 146.25 75.52 Unearned revenues Sky - High Network Co., Ltd. 1.19 -
3.2 The Company's financial statements only has significant transactions between the Company and subsidiaries for the year ended December 31, 2003 and 2002 as follows: In Million Baht 2003 2002 Revenue from sales - net 0.20 0.27 Revenue from copyrights 703.86 267.80 Revenue from production 8.78 - Revenue from concert and marketing activities 3.23 - Advertising income 4.35 3.27 Service income 14.13 14.53 Interest income 3.17 4.44 Other income 1.75 0.99 Cost of sales 421.69 82.21 Selling and administrative expenses 13.13 2.25
067 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
The parent company has a plan for business restructuring, under which the personnel and business of seven subsidiary companies will be transferred into the parent company's working lines or business units. This will be effected as follows:
Company Name Effective Date Shadow Entertainment Co., Ltd. October 1, 2003 Magic Advertainment Co., Ltd October 1, 2003 Red Sailor Co., Ltd. December 1, 2003 Rock Skin Co., Ltd. December 1, 2003 Ruk Seing Co., Ltd December 1, 2003 Screen Head Co., Ltd January 1, 2004 RS Film and Distribution Co., Ltd. January 1, 2004
The Transfer of the Remaining Items in the Books between those of the Subsidiaries & Companies
Besides transferring their personnel and business, the above-stated 7 companies will sell their fixed assets of Baht 0.04 million according to their book values and work in process of Baht 6.06 million to the Company at book value. Thus, the income of Promoter groups, receive from the Company which, according to the original conditions, is calculated from the total sales volume of musical products, will be terminated on December 31, 2003.
Basis of measurements on intercompany revenues and expenses
3.2.1 Sales are determined per unit on cost basis. 3.2.2 Revenue from copyrights is determined either by per unit historical cost or by a proportion of copyrights usage to revenue collection During the year 2003, there has been a change in basis of billing the cost of copyright of musical work with K. Master Co., Ltd, from using the number of covers delivered to total net sales. 3.2.3 Revenue from production is determined from original cost plus operating margin based on normal business operation. Revenue sharing from production of promotional work is based on the sales volume. 3.2.4 Revenue from concert and marketing activities is calculated from cost plus operating margin based on normal business operation. 3.2.5 Revenue from advertising is determined per unit by referring to the market price. 3.2.6 Services income is determined by referring to the market price. 3.2.7 Radio stations lease income is determined on cost basis. 3.2.8 Interest income derived from subsidiaries is based on the cost of fund or at market rate of approximately 2 - 8 % per annum.
3.3 In the consolidated financial statements, the transactions between the Company and its subsidiaries and its related parties and persons for the year ended December 31, 2003 and 2002 are summarized as follows:
In Million Baht 2003 2002 Basis of Pricing 3.3.1 Selling and administrative expenses 37.72 29.44 Unit price comparable to the market price survey of rental and service fees in the neighborhood area. 3.3.2 Purchase of goods - 3.49 Acquisition cost
068 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002 In Million Baht 2003 2002 Basis of Pricing 3.3.3 Payment on purchase of assets 0.74 21.94 As per lower of book value or market rate 3.3.4 Interest expenses - 1.95 Interest rate referable to market rate
3.4 In July, 2002, K. Master Co., Ltd entered into an agreement for the purchase of machinery, amounting to Baht 24 million from a related party, by installments for which full payment was made.
3.5 In December 2002, the Company entered into an agreement permitting the uses of copyright to a subsidiary for a period of 3 years as from August 2002, the remuneration of which is based on costs amounting to Baht 12 million.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF MEASUREMENT
The Measurement Basis Used in Preparing the Financial Statements Other than those disclosed in other outlines in the summary of significant accounting policies and other notes to the financial statements, the financial statements have been prepared using the historical cost basis.
Revenue and Expenses Recognition Revenues and expenses are recognized on an accrual basis.
a. Revenue from sales Revenue from sales is recognized at invoice value after deduction of goods returned and discounts. Revenue from sales of printed matter is recognized according to billing issued showing goods delivered and after deduction of goods returned and discounts. b. Revenue from Copyright Revenue from copyright is recognized at invoice value upon issue of the invoice. Revenue from sale of film copyrights is recognized based on the agreement date and / or the rights attaching to the said film. c. Revenue from production Revenue from production of a drama, a TV programme, an advertising film and various other productions is recognized upon delivery of completed work or recognized based on the proportion of completed service, whichever is the case. d. Revenue from films production Income from box - office sharing is recognised when the motion pictures have been exhibited. Revenue from motion picture films is recognized upon delivery of the films. e. Revenue from organizing concerts and marketing activities Revenue from organizing concerts and marketing activities is recognized based on the proportion of work completed. f. Revenue from sales of advertising Revenue from sales of advertising being the revenue from the sale of advertising media, i.e. the media of TV, radio, printed matter, and others, is recognized at invoice value less discounts when service has been provided. g. Revenue from services Revenue from services is recognized when the service has been provided.
069 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
Director's Remuneration Director's remuneration represents the benefit paid to the Company's directors according to section 90 of the Public Company Limited Act. B.E. 2535, which excludes the salaries and other related benefits payable to executive directors. Inventories Inventories are stated at cost or at net realizable value, whichever is lower.
Property, Plant and Equipment Land is stated at cost.
Buildings and equipment are stated at cost less accumulated depreciation.
Depreciation is computed by the straight-line method over the estimated useful lives of assets of 5-20 years
Income tax Income tax for each year is recognized on an accrual basis, which is based on the taxable net profit for the year, in accordance with the Revenue Code.
Accounting Estimation Preparation of financial statements in conformity with generally accepted accounting principles in Thailand requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent assets and liabilities - actual results may differ from those estimates.
Cash and Cash Equivalents Cash and cash equivalents are cash in hand, cash at banks and cash in transit, which are not pledged.
Allowance for Doubtful Accounts Allowance for doubtful accounts is an estimate of those amounts which are expected to be uncollectable.
Intangible Assets Intangible assets are recognized at cost amortized based on the nature of each category of copyright acquired and net of allowance for intangible assets as follows:
1. Copyright of musical master tapes Cost of copyright of musical master tapes is recognized at cost comprising various related direct expenses of production less accumulated amortization. Amortization is charged to the Statement of Income and calculated using the straight-line method over a period of ten years from the date of completion of work.
070 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
2. Copyright of drama Copyright of drama is recognized at cost, comprising various related direct expenses of production less accumulated amortization. Amortization is charged to the Statement of Income as follows: 80% of the copyright value when the drama is on air until the end of the first time show ; the remaining 20% over a period of 5 years from the end of first time show.
3. Copyright of films Copyright of films is recognized at cost, comprising various related direct expenses of production and filming, less accumulated amortization. Amortization is charged to the Statement of Income as follows: Year 1: 60% of the copyright value based on the estimated income ratio; Year 2 to Year 10: the remaining 40% of the copyright value using the straight-line method.
4. Other copyrights Other copyrights are recognized at cost, comprising various related direct expenses of acquisition, less accumulated amortization. Amortization is charged to the Statement of Income using the straight-line method over the whole period of the contract.
Investments The Company records cost of investment securities in the subsidiaries by the equity method.
The Company records cost of investment in subsidiaries by the equity method in order to recognize the status and return from investment in the said companies. The Company does not consider net profit (loss) from investment in subsidiaries for the year ended December 31, 2003 and 2002 in calculating the income tax for each year.
Amortized positive goodwill and negative goodwill The above stated goodwill is the result of the fair value of assets and liabilities of the subsidiary companies, which are lower or higher than cost - respectively. The positive goodwill and negative goodwill are amortized by the straight-line method for a period of 20 years.The negative goodwill being part of profit of monetary assets is immediately recognized as revenue.
In Million Baht Consolidated Positive goodwill Negative goodwill Total
2003 2002 2003 2002 2003 2002 Beginning balance 32.36 - (66.53) - (34.17) - Occurred during the year - 32.86 - (90.14) - (57.28) Amortized during the year (1.64) (0.50) 3.37 23.61 1.73 23.11 Ending balance 30.72 32.36 (63.16) (66.53) (32.44) (34.17)
071 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
Basic Earnings per Share Basic earnings per share are computed by dividing the net profit by the number of shares using the weighted average number 129,413,699 shares and 2,411,507 shares for years 2003 and 2002, respectively.
5. ACCOUNTS AND NOTES RECEIVABLE - NET As at December 31, 2003 and 2002 accounts and notes receivable are classified by aging as follows:
In Thousand Baht Consolidated The Company Only 2003 2002 2003 2002 Accounts and notes receivable - related parties Current - - 190,410 134,672 Overdue : Less than 3 months - - 262,408 97,856 3-6 months - - 182,812 425 6-12 months - - 65,042 - Over 12 months - - 2 - Accounts and notes receivable related parties - - 700,674 232,953
In Thousand Baht Consolidated The Company Only 2003 2002 2003 2002 Accounts and notes receivable - others Current 314,194 228,337 67,843 32,805 Overdue : Less than 3 months 106,793 31,072 10,353 - 3-6 months 43,223 21,564 128 17,548 6-12 months 4,385 2,855 - 2,429 Over 12 months 4,846 808 428 - Total 473,441 284,636 78,752 52,782 Less Allowance for doubtful accounts (2,327) (2,455) - - Accounts and notes receivable others - Net 471,114 282,181 78,752 52,782
072 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
6. INVENTORIES In Thousand Baht Consolidated The Company Only 2003 2002 2003 2002 Finished goods (Tape , CD , VCD , DVD) 492,634 214,008 1,754 1,065 Work in process 333,932 152,079 283,577 120,723 Raw materials 2,668 2,915 - - Others 2,361 3,005 - 3,005 Total 831,595 372,007 285,331 124,793 Less Allowance for obsolete inventories (92,390) (45,580) (637) (637) Inventories - Net 739,205 326,427 284,694 124,156
7. INVESTMENTS / RESERVE FOR LOSS FROM INVESTMENT BY EQUITY METHOD As at December 31, 2003 and 2002 investments under equity method in the Company's financial statements consisted of investment in ordinary shares as follows: In Thousand Baht Equity Method Paid up capital Cost Method (Reserve for loss) 2003 2002 2003 2002 2003 2002 Subsidiaries K. Master Co., Ltd. 200,000 82,000 199,999 81,999 143,865 45,729 Ruk Seing Co., Ltd. 1,000 1,000 10 10 (123) (2,327) Red Sailor Co., Ltd. 1,000 1,000 10 10 (21,342) (6,122) Rock Skin Co., Ltd. 1,000 1,000 999 999 7,534 (2,164) R Siam Co., Ltd. 1,000 1,000 999 999 8,710 (983) RS Film and Distribution Co., Ltd. 5,000 5,000 4,999 4,999 3,064 6,261 Avant Co., Ltd. 10,000 10,000 9,999 9,999 11,111 9,178 Filmsurf Co., Ltd. 10,000 10,000 9,999 9,999 14,714 13,193 Sky-High Network Co., Ltd. 100,000 100,000 80,200 80,200 72,528 71,450 Shadow Entertainment Co., Ltd. 37,000 37,000 36,996 36,996 36,153 43,293 Magic Advertainment Co., Ltd. 47,000 47,000 46,999 46,999 40,869 46,517 Red Drama Co., Ltd. 10,000 10,000 100 100 13,015 6,994 R.S. Television Co., Ltd. 3,000 3,000 3,000 3,000 32,579 21,643 P.O.V. (Point of view) Co., Ltd. 3,000 3,000 3,000 3,000 9,990 4,676 Aladdin House Co., Ltd. 5,000 5,000 4,999 4,999 10,190 8,907 R.S. Studio Co., Ltd. 10,000 10,000 9,999 9,999 21,025 12,716 Bangkok Organizer Co., Ltd. 3,000 3,000 3,000 3,000 19,027 10,257
073 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
In Thousand Baht Equity Method Paid up capital Cost Method (Reserve for loss) 2003 2002 2003 2002 2003 2002
Screen Head Co., Ltd. 2,800 2,800 2,798 2,798 4,765 3,887 Nagasia Co., Ltd. 10,000 10,000 9,999 9,999 10,485 8,936 Thai Copyright Collection Co., Ltd. 10,000 10,000 9,999 9,999 18,856 8,058 Poema Co., Ltd. 10,000 10,000 10,000 10,000 (10,049) 8,492 Tai - Saduak Co., Ltd. 5,000 5,000 5,000 5,000 7,351 3,685 484,800 366,800 453,103 335,103 454,317 322,276
8. PROPERTY, PLANT AND EQUIPMENT - NET
In Thousand Baht Consolidated Furniture Construction Buildings Machines Fixture in progress Land and and and and and land building operation office equipment improvementimprovement equipment equipment Vehicles under Total installation Cost : At the beginning of the year 32,705 9,518 124,070 50,881 10,056 32,219 259,449 Purchase / transfer in - 80,661 173,189 46,889 2,105 45,707 348,551 Disposal / transfer out - (523) (497) (1,995) (1,550) (76,561) (81,126) At the end of the year 32,705 89,656 296,762 95,775 10,611 1,365 526,874 Accumulated depreciation : At the beginning of the year - 711 19,680 8,822 1,725 - 30,938 Disposal / transfer out - (80) (216) (524) (470) - (1,290) Depreciation - 4,933 38,597 13,724 2,122 - 59,376 At the end of the year - 5,564 58,061 22,022 3,377 - 89,024 Net book value : At the beginning of the year 32,705 8,807 104,390 42,059 8,331 32,219 228,511 At the end of the year 32,705 84,092 238,701 73,753 7,234 1,365 437,850
074 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
In Thousand Baht The Company Only Furniture Construction Buildings Machines Fixture in progress Land and and and and and land building operation office equipment improvementimprovement equipment equipment Vehicles under Total installation Cost : At the beginning of the year - - 13,924 24,834 3,401 2,599 44,758 Purchase / transfer in - - 2,600 25,588 1,672 - 29,860 Disposal / transfer out - - (6) (342) (360) (2,598) (3,306) At the end of the year - - 16,518 50,080 4,713 1 71,312 Accumulated depreciation : At the beginning of the year - - 2,520 2,548 543 - 5,611 Disposal / transfer out - - (2) (103) (107) - (212) Depreciation - - 3,172 6,391 797 - 10,360 At the end of the year - - 5,690 8,836 1,233 - 15,759 Net book value : At the beginning of the year - - 11,404 22,286 2,858 2,599 39,147 At the end of the year - - 10,828 41,244 3,480 1 55,553 Office building rental from related business.
9. INTANGIBLE ASSETS - NETÔ
In Million Baht Consolidated The Company Only 2003 2002 2003 2002 Beginning Balance: Intangible assets - net 88.72 32.36 25.98 1.46 Add Increased during the year 111.17 64.65 82.39 26.35 Total 199.89 97.01 108.37 27.81 Less Amortized during the year 26.67 8.29 4.27 1.83 Less Allowance for intangible assets 4.80 - - - Ending Balance: Intangible assets - net 168.42 88.72 104.10 25.98
075 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
10. SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONS
As at December 31, 2003 and 2002 the Company and a subsidiary obtained loans from a financial institution with commitments as follows.
In Million Baht Consolidated 2003 2002 Guarantee/Commitments Parent Company 30.00 150.00 - 2 directors signed as guarantors Subsidiary 48.50 80.00 - 2 directors signed as guarantors 78.50 230.00 The Company As at December 31, 2003, the Company had short-term loan from a local bank, to the amount of Baht 30,000,000, according to the agreement dated December 19, 2003. The loan bears interest at 2.75% per annum. The said loan is due for repayment at the maturity date and repayment of interest per month/per due.
Subsidiary As at December 31, 2003, the subsidiary had a short-term loan from a local bank, to the amount of Baht 48,500,000, according to the agreement dated December 1, 2003. The loan bears interest at 2.75% per annum. The said loan is due for repayment at the maturity date and repayment of interest per month/per due.
11. LONG-TERM LOAN
Long-term loan as at December 31, 2003 and 2002 consisted of : In Million Baht Consolidated 2003 2002 Long-term loan - 55.00 Less Long-term loan due for repayment in 1 year - (11.54) Long-term loan - net - 43.46
Subsidiary As at December 31, 2002, the subsidiary had a loan from a local bank, to the amount of Baht 55,000,000, according to the agreement dated 24 December 2002. The loan bears interest at the minimum lending rate (MLR) less one percent per annum. The said loan is due for repayment of principal and interest at Baht 1,200,000 per month and due for repayment by 60 months with the first repayment in January 2003. In 2003 the subsidiary changed to promissory notes.
The said loan plus interest has been collateralized by R.S. Promotion Co., Ltd and the Company's directors
076 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
12. DIVIDEND
K. Master Co., Ltd. According to the Board of Director's Meeting held on August 19, 2002, a resolution was passed to pay the interim dividend to the shareholders at the rate of Baht 400 per share, totaling Baht 40,000,000.
Shadow Entertainment Co., Ltd. According to the Board of Director's Meeting held on 14 November 2003, a resolution was passed to pay dividend to all shareholders whose names were listed in the shareholder book as at November 14, 2003 at the rate of Baht 90 per share, totaling Baht 33,300,000. According to the Board of Directors' Meeting held on 19 August 2002, a resolution was passed to pay the interim dividend to all shareholders whose names were listed in the shareholders book as at 19 August 2002 at the rate of Baht 1,500 per share, totalling Baht 30,000,000.
Magic Advertainment Co., Ltd. According to the Board of Directors' Meeting held on 14 November 2003, a resolution was passed to pay dividend to all shareholder whose names were list in the shareholder book as at November 14, 2003 at the rate of Baht 40 per share, totaling Baht 18,800,000. According to the Board of Directors' Meeting held on August 19, 2002, a resolution was passed to pay the interim dividend to all shareholders whose names were listed in the shareholders book as at 19 August 2002 at the rate of Baht 150 per share, totalling Baht 30,000,000.
13. LEGAL RESERVE Under the provisions of the Limited Public Company Act. B.E. 2535, the Company is required to appropriate at least 5% of its annual net income as reserve fund until the reserve reaches 10% of the authorized capital. This reserve is not available for dividend distribution.
14. SHARE CAPITAL The Company In 2003 At the Extraordinary Shareholders' Meeting held on 13 January 2003, it was resolved to increase the authorized share capital to Baht 560 Million and split all authorized share capital to 112 million shares at Baht 100 to Baht 5 per share. On 15 January 2003 the Company registered with the Commercial Department and became a public company limited and increased its share capital by Baht 140 Million resulting in the increase of registered capital and number of registered shares to Baht 700 million and 140 million shares at 5 Baht par value accordingly. On 19 May 2003 the Company registered the increased paid up share capital from Baht 560 million to Baht 700 million at the Ministry of Commerce.
In 2002 At the Extraordinary Shareholders' Meetings held on 22 July 2002 and 28 August 2002, it was resolved to increase the authorized share capital from Baht 100,000,000 to Baht 560,000,000 by issuing 4,600,000 new ordinary shares at Baht 100 par value. The Company registered the increased paid up share capital at the Ministry of Commerce on 11 September 2002.
077 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
Subsidiaries In 2003 At the Extraordinary Shareholders' Meeting of K. Master Co., Ltd. held on 14 May 2003, it was resolved to increase the share capital from Baht 82,000,000 to Baht 200,000,000 by issuing 1.18 million ordinary shares at Baht 100 par value. The subsidiary registered the increased paid up share capital on 30 May 2003.
In 2002 At the Extraordinary Shareholders' Meetings of Shadow Entertainment Co., Ltd. held on 22 July 2002 and 19 August 2002, was resolved to increase the authorized share capital from Baht 10,000,000 to Baht 37,000,000 by issuing 54,000 ordinary shares at Baht 500 par value. The subsidiary registered the increased paid up share capital on 6 September 2002, at the Ministry of Commerce.
At the Extraordinary Shareholders' Meetings of Shadow Entertainment Co., Ltd. held on 19 September 2002 and 4 October 2002, it was resolved to decrease the value of the share capital from Baht 500 par value to Baht 100 par value. The subsidiary registered the said reduction of share capital on 4 October 2002, at the Ministry of Commerce.
At the Extraordinary Shareholders' Meetings of Magic Advertainment Co., Ltd. held on 22 July 2002 and 19 August 2002, it was resolved to increase the share capital from Baht 20,000,000 to Baht 47,000,000 by issuing 270,000 ordinary shares at Baht 100 par value. The subsidiary registered the increased paid up share capital on 6 September 2002, at the Ministry of Commerce.
At the Extraordinary Shareholders' Meetings of Aladdin House Co., Ltd. held on 29 November 2002 and 18 December 2002, it was resolved to increase the share capital from Baht 1,000,000 to Baht 5,000,000 by issuing 40,000 ordinary shares at Baht 100 par value. The subsidiary registered the increased paid up share capital on 25 December 2002, at the Ministry of Commerce.
At the Extraordinary Shareholders' Meetings of K. Master Co., Ltd held on 22 March 2002 and 8April 2002, it was resolved to increase the share capital from Baht 2,000,000 to Baht 10,000,000 by issuing 80,000 ordinary shares at Baht 100 par value. The subsidiary registered the increased paid up share capital on 11April 2002, at the Ministry of Commerce.
At the Extraordinary Shareholders' Meetings of K. Master Co., Ltd. held on 22 July 2002 and 19 August 2002, it was resolved to increase the share capital from Baht 10,000,000 to Baht 82,000,000 by issuing 720,000 ordinary shares at Baht 100 par value The subsidiary registered the increased paid up share capital on 6 September 2002, at the Ministry of Commerce.
At the Extraordinary Shareholders' Meetings of Sky - High Network Co., Ltd held on 29 November 2002 and 18 December 2002, it was resolved to increase the share capital from Baht 20,000,000 to Baht 100,000,000 by issuing 800,000 ordinary shares at Baht 100 par value. The subsidiary registered the increased paid up share capital on 25 December 2002, at the Ministry of Commerce.
At the Extraordinary Shareholders' Meetings of Tai - Saduak Co., Ltd held on 10 October 2002 and 25 October 2002, it was resolved to increase the share capital from Baht 1,000,000 to Baht 5,000,000 by issuing 40,000 ordinary shares at Baht 100 par value. The subsidiary registered the increased paid up share capital on 31 October 2002, at the Ministry of Commerce.
. 078 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
At the Extraordinary Shareholders' Meetings of Screen Head Co., Ltd. held on 19 September 2002 and 4 October 2002, it was resolved to decrease the value of share capital from Baht 500 par value to Baht 100 par value. The subsidiary registered the decreased share capital on 4 October 2002, at the Ministry of Commerce
At the Extraordinary Shareholders' Meetings of Screen Head Co., Ltd. held on 6 November 2001 and 22 November 2001, it was resolved to decrease the share capital from Baht 5,000,000 to Baht 2,800,000 by reducing from 10,000 to 5,600 ordinary shares at Baht 500 value. The subsidiary registered the decreased share capital on 19 March 2002, at the Ministry of Commerce.
15. SEGMENTATION The Company is a fully integrated entertainment business whose operations are interdependent. Therefore the management considers that the Company operates with only one segment. Considering the Company's service location and market, the Company and subsidiaries are operating in a sole domestic geographical area.
16. DISCLOSURE OF FINANCIAL INSTRUMENT INFORMATION The Company and its subsidiaries do not have the policy of buying and selling derivative financial instruments or for trading or speculative purposes.
16.1 Credit risk The Company and subsidiaries have credit risk on trade accounts receivable. However, the Company and subsidiaries have the policy of doing business with traders who are reliable and with good financial status to reduce the risk of financial loss. The Company and subsidiary make allowance for doubtful accounts - to cover the residual risk of financial loss.
16.2 Risk from exchange rate The Company hedges against exchange rate risk in order to mitigate the said risk which may arise from foreign accounts payable, with contract value of about EURO 246,000 as at December 31, 2002 and value of about EURO 875,083 and USD 169,166 as at December 31, 2003.
16.3 Risk from interest rate The Company and subsidiary borrow at floating interest rates which approximate financial market rates.
16.4 Fair value of financial instruments The Company uses the following measures and assumptions in estimating fair value of financial instrument. Cash and cash at bank, short- term investment - the book value is close to fair value due to those financial instruments being due in short periods of time. Trade accounts receivable, other accounts receivable and other assets - the book value is close to fair value due to those financial instruments being due in short periods of time. Investment in subsidiaries - the fair value of investments in subsidiaries is not readily determinable as these investments do not have a quoted market price. Accordingly, these investment are held at their net asset value. Trade accounts payable, other accounts payable and accrued liabilities - the book value is close to fair value due to those financial instruments being due in short periods of time. Long -term loans - the book value is close to fair value because these financial instruments have floating interest rates which approximate financial market rates.
079 R.S. Promtion Public Company Limited R.S. PROMTION PUBLIC COMPANY LIMITED AND SUBSIDIARIES (FORMERLY : R.S. PROMOTION 1992 COMPANY LIMITED) Notes to Financial Statements December 31, 2003 and 2002
17. COMMITMENT AND CONTINGENT LIABILITIES
The Company 1. As at December 31, 2003, the Company had commitments for 12 letters of guarantee issued by the bank which have been used as collateral for airtime rental and government agency in the amount of Baht 2.85 million, and 2.27 million, respectively. 2. As at December 31, 2003, the Company had commitments for 11 letters of service & advertising broad rental period 1 - 2 years in the amount of Baht 16.64 million. 3. As at December 31, 2003, the Company had commitments for a service & rental agreement with a related company in the amount of Baht 53.81 million. 4. As at December 31, 2002, the Company had commitments for 3 letters of guarantee issued by the bank which have been used as collateral for airtime rental in the amount of Baht 1.84 million for the total amount of Baht 13.73 million.
Subsidiaries 1. Commitment for a bank guarantee As at December 31, 2003, a subsidiary had a commitment for a bank guarantee which relates to normal business of EURO 875,083 and USD 169,166.66 As at December 31, 2002 a subsidiary had a commitment for a bank guarantee which relates to normal business of EURO 246,000. 2. As at December 31, 2003, subsidiaries had commitments for 5 letters of guarantee issued by the bank which have been used as collateral for electricity in the amount of Baht 0.80 million. 3. As at December 31, 2003, a subsidiary had a commitment for a letter of guarantee issued by the bank which has been used as collateral for telecommunication of Thailand in the amount of Baht 0.01 million. 4. As at December 31, 2003, subsidiaries had a commitment for a service & office rental agreement with a related company in the amount of Baht 27.01 million. 5. In August 2002, a subsidiary had a commitment to sell discounted bills to the bank to the line of Baht 100 million.
18. RECLASSIFICATION OF ACCOUNTS The Company has reclassified certain accounts of the 2002 financial statements to conform with the 2003 financial statement presentation.
19. SUBSEQUENT EVENTS
The Company On 1 January 2004, two subsidiaries transferred their business to the Company (See note 3).
080 R.S. Promtion Public Company Limited