<PAGE>
[LOGO OF DSG]
DISPOSABLE SOFT GOODS
SECOND QUARTER REPORT 2000
<PAGE>
REVIEW OF OPERATIONS
SECOND QUARTER 2000
AND SIX MONTHS ENDED JUNE 30, 2000
To our Shareholders:
We are pleased to announce our second quarter and first half 2000 results.
Second Quarter ended June 30, 2000 compared to
Second Quarter ended June 30, 1999
The Company's net sales for the second quarter ended June 30, 2000 increased by
5.2% to $51.3 million compared with $48.7 million for the same period in 1999.
Net income and earnings per share were $0.7 million and $0.10 respectively,
represented a 121.5% and 100% increase, respectively over the same quarter in
1999.
The Company's sales in the Asian region reported a strong volume growth of 56.1%
in the second quarter of 2000 compared with the same period in 1999. The Company
successfully captured the growth of the markets in the Asian region by
introduction of several economy brands and price reduction on several branded
products. The Company's sales in Australia also improved by 7.7% in volume terms
in the second quarter of 2000 compared with the corresponding period in 1999.
Gross profit as a percentage of net sales was 32.1% in the second quarter of
2000 compared with 32.4% for the same period in 1999. The lower gross margin was
primarily due to the global upward price movement on fluff wood pulp and the
introduction of economy brands and price reduction in the Asian region. The
Company's selling, general and administrative expense as a percentage of net
sales reduced by 1.0% to 29.2% in the second quarter of 2000. Interest expense
for the Company in the second quarter of 2000 declined to $362,000, compared
with $577,000 for the same period in 1999 as a result of reduction of bank
borrowings. This was largely offset by an increase in exchange loss from $82,000
in the second quarter of 1999 to $256,000 in the second quarter of 2000 which
was a result of unfavorable currency fluctuation of Australian Dollars and Pound
Sterling against US Dollars.
<PAGE>
Six Months concluding June 30, 2000 compared to
Six Months concluding June 30, 1999
The Company's net sales for the six-month period ended June 30, 2000 increased
by 4.7% to $107.1 million compared with $102.3 million for the first half year
1999. Gross profit as a percentage of net sales increased to 32.7% in the six-
month period ended June 30, 2000, from 32.3% in the same period in 1999.
Selling, general and administrative expense was $30.7 million for the period
ended June 30, 2000 compared with $29.9 million for the same corresponding
period in 1999. The Company's operating income improved to $4.4 million during
the first half of 1999 compared with $3.7 million during the same period in
1999.
Mr. Brandon Wang, Chairman of the Company, stated "I am very pleased with the
strong sales growth in the Asian region, as the Company has been strategically
allocating our resources with the anticipation of the recovering of Asian
markets. We have also recorded an encouraging growth in the Australian market
resulting from the product feature enhancement and quality improvement. On the
global basis, the continued effort to improve our operating efficiency has
helped to offset some of the raw material cost increase."
DSG International Limited and its predecessors have been in the business of
manufacturing and distributing disposable diapers since 1973. With manufacturing
plants in Georgia and Wisconsin, the Company also maintains manufacturing
operations in Hong Kong, Australia, Great Britain, Switzerland, China, Thailand,
Indonesia and Malaysia. Additionally, the Company distributes its products
throughout Asia, Australia, North America and Europe. The Company produces
private label disposable diapers, adult incontinence products and training pants
at certain of its operations. Its best selling brands include "Fitti(R)", "Pet
Pet(R)", "Cosies(R)", "Cosfits(R)", "Baby Love(R)", "Babyjoy(R)", "Lullaby(R)",
"Cares(R)", "Cuddles(R)", "Super Fannies(R)", "Dispo 123(TM)", "Handy(TM)",
"Vlesi(R)", "Certainty(R)" and "Merit(R)".
September 5, 2000
<PAGE>
STATEMENTS OF OPERATIONS AND
BALANCE SHEET DATA
The Statements of Operations for the three-month and six-month periods ending
June 30, 2000 and 1999, and the Balance Sheet information as of June 30, 2000,
are derived from unaudited financial statements which, in the opinion of the
management, include all necessary adjustments, consisting only of normally
recurring adjustments, for a fair presentation of the results of operations for
these time frames. The results for these periods, however, are not necessarily
indicative of the results for the full year.
STATEMENTS OF OPERATIONS
(in thousands, except earnings per share)
<TABLE>
<CAPTION>
Three montsh ended Six months ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Sales $51,270 $48,732 $107,138 $102,323
======== ======= ======== ========
Gross profit 16,451 15,784 35,086 33,057
Gain on sale of property, plant and equipment 10 -- 33 509
Selling, general & administrative expense (14,986) (14,735) (30,739) (29,878)
-------- ------- -------- --------
Operating income 1,475 1,049 4,380 3,688
Interest expense (362) (577) (758) (1,185)
Exchange loss (256) (82) (315) (152)
Other income 160 155 180 280
-------- ------- -------- --------
Income before income taxes 1,017 545 3,487 2,631
Provision for income taxes (338) (144) (1,027) (655)
Minority interest 21 (85) (157) (104)
-------- ------- -------- --------
Net income $700 $316 $2,303 $1,872
======== ======= ======== ========
Earnings per share $0.10 $0.05 $0.34 $0.28
======== ======= ======== ========
Weighted average number of shares outstanding 6,675 6,675 6,675 6,675
======== ======= ======== ========
</TABLE>
<PAGE>
STATEMENTS OF COMPREHENSIVE
INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income $700 $316 $2,303 $1,872
Other comprehensive income (expense), before tax
Foreign currency translation adjustments (676) 1,541 (1,896) 780
------ ------- ------- -------
Comprehensive income $24 $1,857 $407 $2,652
====== ======= ======= =======
</TABLE>
BALANCE SHEET DATA
(Dollars in thousands, unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
<S> <C> <C>
Working capital $30,600 $36,000
Total assets 112,590 121,847
Long-term debt 10,511 11,894
Shareholders' equity 62,739 70,302
</TABLE>
At June 30, 2000 the Company had cash totaling $4.3 million.
<PAGE>
DSG INTERNATIONAL LTD.
17th Floor Watson Centre
Kung Yip Street
Kwai Chung
Hong Kong
Tel: (852) 2484 4820
Fax: (852) 2480 4491
