CLIENT

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Reference:Sample- Special Report

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Receiving Date:-

Issuing Date:-

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BASIC INFORMATION

Company: XXX (THAILAND) CO. LTD.

Address:203 MOO 5, BANGPA-IN INDUSTRIAL ESTATE,

T. KLONGIG, A. BANGPA-IN,

AYUDHYA13160, THAILAND

Telephone:(6635) 723-456, 789-101

Fax :(6635) 254-957, 297-584

E-mail:

SUMMARY

Started Year:1991

Legal Form:Private Limited Company

Status:Active

Registered Capital:THB 300,000,000

Paid-Up Capital:THB 225,000,000

Total Revenues:THB 6,659,977,963

EBIT:THB 976,511,792

Net Profit (Loss):THB 947,369,465

Chief Executive:Mr. Howard Schmidt

Senior Vice President (International)

Nature of Business:Manufacturer of Personal Computer Components

ISIC Code:3210

Employees:8,500

HISTORY/BACKGROUND

The subject was established on January 23, 1991 as a private limited company under the name XXX (THAILAND) CO. LTD.

A core production facility of XXX Corporation in California, U.S.A., a manufacturer of recording heads and head stack assemblies for disk drivers and magnetoresistive head for quarter-inch-cartridge tape drives. Besides the subject, XXX CO. LTD also operates in Philippines and Japan.

In 1991, received promotional privilege from the Board of Investment.

In May 1991, started producing personal computer components.

In March 1993, changed the operating status to a company operating in an export processing zone.

Award

ISO 9002 and 14001 certification for quality and environmental management systems

Excellent Safety Factory Award from the Ministry of Labor and Social Welfare – 1998

Prime Minster’s Award in the category of Outstanding Plant in Industrial Estates and Industrial Export Zone - 1997

PERSONNEL

Board of Directors

Mr. Choukiat Kijpatthana

Mr. Benjamin Alan Scott

Mr. Alberto Benedetti

Mrs. Kanokwan Munthorn

Mr. Simon O’Connell

Mr. Terrence Munier

Authorized Signatures

Any of the above directors can sign on behalf of the subject with seal affixed.

Management

Mr. Howard Schmidt (American, age 49): Senior Vice President – International

Education: B.Sc. (Computer Science), University of Sacramento, California State

Experience: Former Executive Director, Software & Service Business Unit, ABC

Group

Former Director, XXX Co. Ltd.

Mr. Choukiat Kijpatthana (Thai, age 52): Vice President and General Manager

Education: B.Sc. (Electrical Eng.), ChulalongkornUniversity

Experience: Former Executive Director, Systems Integration Strategic Business Unit,

ABC Group

Former Field Engineer Manager, XYZ (Thailand) Co. Ltd.

Mr. Surachai Rungrueng (Thai, age 40): Accounting Manager

Mrs. Kanokwan Munthorn (Thai, age 35): Financial Manager

Mr. Theerayudh Somprathana (Thai): Quality Assurance Manager

Mr. Sutham Sae-Lee (Thai): Senior Director - Human Resource

BUSINESS OPERATIONS

Business Activities

The subject operates as a manufacturer and exporter of Personal Computer Components. The core three products include Sliders, Head Gimbal Assemblies (HGAs) and Head Stack Assemblies (HSAs). Currently, HGAs are the main product of the subject.

The subject under the parent policy has a US$ 180 million expansion project in the pipeline to boost production capacity by 70% within three years. To be implemented in phases from 2000 to 2002, the project essentially involves the automation and modernization of equipment and plant in half of subject’s factory.

Brand Names

“XXX”

“YYY”

Production Capacity

Sliders: 40 million units

HGA: 30 million units

HSA: 5 million units

Purchasing/Import

95% of raw materials including wafer, flexure, PVC shoes, etc. are imported from the U.S.A., Hong Kong, Singapore and the Philippines, while the rest is purchased from local suppliers.

Major Suppliers

XXX Precision Co. Ltd. : Thailand

XXX Supply Co. Ltd. : Thailand

XXX Technical Services Co. Ltd. : Thailand

XXX Technology (Thailand) Ltd. : Thailand

Sales/Export

100% of its products are exported to the U.S.A. and Singapore.

Major Customers

ABC Technology : Singapore

ABC Electronic Corporation: Singapore

ABCD Electronic Corporation: U.S.A.

Credit

Purchasing Term

Local:Cash, 30-60-90 days

Import:L/C and Open Account

Sales Term

Local:-

Export:L/C, D/A, D/P, T/T and Open Account

Banking

Bangkok Bank Public Co. Ltd.: Sapanmai and Chaoprom Branches

Thai Farmers Bank Public Co. Ltd.: Bangpa-in Branch

Manpower

Office staff : 500

Factory workers: 8,000

Total : 8,500

Location

Registered address : Same as the heading address

Office and factory : Owns in an industrial area at the heading address.

Areas : 7 acres comprising of 2 buildings – 353,000 sq. ft.

Acquired an adjacent 97,000 sq. ft. facility.

Leased a 20,000 sq.ft. warehouse for storage.

RELATED PARTIES INFORMATION

Parent Company

XXX Corporation

Address : 55300 Osgood Rd., Fremont, CA94538, USA.

Tel : (510) 768-5326, Fax : (501) 856-9658

LITIGATION

(The litigation action is based on INRA’s database for bankruptcy and receivership cases only obtained from Legal Execution Department encompassing the last five years.)

Subject Check

No litigation action

Directors Check

No litigation action

recent operating development

Sales of HGAs dropped by 10%-15% during the first quarter of 2002 due to the slump in global computer market. Subject confirmed to maintain its core production base in Thailand due to the low labor cost and has no plan to switch its investment to China like other manufacturers. It also transferred R&D from the US to Thailand.

In 2002, subject has invested THB 200 million to kick off a new product “OPTICAL” with the annual production capacity of 2,000,000 pcs. Subject will in charge of the production while it will set up a new firm - ABCD to responsible for designing and export market. The production will be started in 3rd quarter of 2002. The new plant is located in the same compound as subject’s plant.

COMMENT & credit opinion

Thailand’s exports this year could shrink 2.6% in value if the economies of the US and Japan, major buyers of electronic products, remain dormant in the second half. Exports of computers and their parts as well as other electronic goods, could reduce overall export value to US$ 68 billion or THB3.09 trillion.

Thailand has become one of the world & largest production bases for HDD and related components. Thailand has clusters of firms producing large volumes of HDD, HSA, HGA, and spindle motor. Thailand is a production base of AAA, BBB, and CCC, which are the world's largest, third largest, and sixth largest HDD producers. These three companies' aggregate market shares are as much as 45% of world's market. However, we view that demand in the HDD and related components in this year will drop this year in line with the industrial trend.

Subject is the production base of XXX Corp. in the U.S.A. Subject is the major player in Slider Fabrication and HGA market with long experience in this business for 10 years. Based on the latest financial result for FY 2001, subject’s performance remained stable both in terms of sales and margin. Nevertheless, the lower obsolete assets expense and lower interest payment helped to boost subject’s net profit by 174% in FY 2001. Furthermore, subject could maintain its strong financial position. With strong support from its parent company, we view that subject could cope with this tough situation in electronic industry and maintain its strong financial condition. Therefore, we recommend credit proceeding for subject.

FINANCIAL INFORMATION

The capital was initially registered at THB 100,000.

Increases : THB 100,000,000 on August 8, 1991

THB 200,000,000 on September 23, 1991

THB 300,000,000 on April 14, 2002

The latest increase was divided into 3,000,000 shares of THB 100 each, with the paid-up capital of THB 225,000,000.

Shareholders Structure (as of June 14, 2002)

Nationality / No. of Shareholders / Shareholding / % of Total Shares
Thai(s) / - / - / -
Foreigner(s) / 8 / 3,000,000 / 100.00
Total / 8 / 3,000,000 / 100.00

List of Shareholders

Name / Nationality / Shareholding / Percentage
XXX Corporation / American / 2,999,993 / 100.00
Mr. Alberto Benedetti / American / 1 / -
Mr. Benjamin Alan Scott / American / 1 / -
Mr. Simon O’Connell / American / 1 / -
Mr. Sean Petit / American / 1 / -
Ms. Florence Penn / American / 1 / -
Ms. Caroline Hewitt / American / 1 / -
Mr. Andre Shield / American / 1 / -

Auditor

Mr. Thanongsak Eaksomboon No. 3315

ABC Office Ltd.

BALANCE SHEET (BAHT) / 30/09/2002 / 30/09/2001 / 30/09/2000
ASSETS
Cash & Bank / 166,359,629 / 171,157,249 / 113,343,233
Cost of Services / 78,056,340 / 277,465,513 / -
Accounts & Notes Receivable
Accounts Receivable / 32,776,608 / - / -
Affiliated Companies / 1,866,654,065 / 1,248,823,616 / 844,412,511
Inventories / 20,386,283 / 13,575,602 / -
Deposits & Prepaid Expenses / 34,465,977 / 27,374,976 / 9,741,112
Refundable Purchasing Tax / 16,953,987 / 45,465,976 / 26,833,129
Other Current Assets / 19,788,528 / 20,255,785 / 8,565,641
Total Current Assets / 2,235,441,417 / 1,804,118,717 / 1,002,895,626
Fixed Assets / 3,534,780,826 / 4,141,052,334 / 4,826,691,189
Advances / 30,366,148 / 14,731,787 / 16,057,139
Total Assets / 5,800,588,391 / 5,959,902,838 / 5,845,643,954
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts Payable / 644,075,306 / 675,178,464 / 929,887,529
Loans from Affiliated Companies / 1,641,810,373 / 2,923,862,277 / 2,679,091,517
Other Payables / 22,163,595 / 13,422,717 / 11,684,135
Current Portion of Long-term Loans due in 1 year / 82,267,800 / 175,441,491 / 319,671,463
Accrued Expenses / 433,151,971 / 450,752,258 / 366,675,672
Total Current Liabilities / 2,823,469,045 / 4,238,657,207 / 4,307,010,316
Long-term Debt / 308,504,250 / - / 162,744,879
Total Liabilities / 3,131,973,295 / 4,238,657,207 / 4,469,755,195
Shareholders' Equity
Share Capital / 200,000,000 / 200,000,000 / 200,000,000
Capital Paid / 200,000,000 / 200,000,000 / 200,000,000
Retained Earning (Deficit) - Unappropriated / 2,468,615,096 / 1,521,245,631 / 1,175,888,759
Total Shareholders' Equity / 2,668,615,096 / 1,721,245,631 / 1,375,888,759
Total Liabilities & Shareholders' Equity / 5,800,588,391 / 5,959,902,838 / 5,845,643,954
PROFIT & LOSS ACCOUNT / 30/09/2002 / 30/09/2001 / 30/09/2000
Revenues
Service Revenue / 6,495,565,449 / 6,797,262,790 / 6,159,228,252
Other Incomes
Gain (Loss) from Exchange Rate / 152,411,947 / - / -
Interest Income / 9,150,428 / 18,625,735 / 12,665,392
Others / 2,850,139 / 3,159,942 / -
Total Revenues / 6,659,977,963 / 6,819,048,467 / 6,171,893,644
Expenses
Cost of Services / 5,340,211,179 / 5,589,774,512 / 5,340,703,820
Selling & Administration / 68,204,597 / 75,777,747 / 75,177,768
Loss (Gain) on Foreign Exchange / - / 140,770,253 / 233,350,619
Obsolete Assets Expense / 275,050,395 / 627,962,170 / -
Total Expenses / 5,683,466,171 / 6,434,284,682 / 5,649,232,207
Earning (Deficit) before Interest & Income Tax (EBIT) / 976,511,792 / 384,763,785 / 522,661,437
Interest Paid / 27,117,199 / 34,999,246 / 40,900,341
Profit (Loss) before Income Tax & Ex. Items / 949,394,593 / 349,764,539 / 481,761,096
Income Tax / 2,025,128 / 4,407,667 / 2,911,364
Loss (Gain) on Foreign Exchange / - / - / 905,620,059
Net Profit (Loss) / 947,369,465 / 345,356,872 / (426,770,327)
Retained Earning (Deficit), Beginning of year / 1,521,245,631 / 1,175,888,759 / 1,602,659,086
Retained Earning (Deficit), End of year / 2,468,615,096 / 1,521,245,631 / 1,175,888,759

KEY FINANCIAL RATIOS

2002 / 2001 / 2000
LIQUIDITY RATIO
Current Ratio / (Times) / 0.79 / 0.43 / 0.23
Quick Ratio / (Times) / 0.77 / 0.42 / 0.23
ACTIVITY RATIO
Receivable Turnover / (Times) / 3.42 / 5.44 / 7.29
Collection Period / (Days) / 107 / 67 / 50
Account Payable Turnover / (Times) / 8.30 / 8.30 / 5.74
Payment Period / (Days) / 44 / 44 / 64
Inventory Turnover / (Times) / 261.95 / 411.75 / -
Inventory Turnover Period / (Days) / 1 / 1 / -
Total Assets Turnover / (Times) / 1.12 / 1.14 / 1.05
PROFITABILIY RATIO
Cost of Goods Sold / (%) / 82.21 / 82.24 / 86.71
Selling & Administration / (%) / 1.05 / 1.11 / 1.22
Interest / (%) / 0.42 / 0.51 / 0.66
Gross Profit Margin / (%) / 17.79 / 17.76 / 13.29
Net Profit Margin before ex. Item / (%) / 14.62 / 5.15 / 7.82
Net Profit Margin / (%) / 14.58 / 5.08 / (6.93)
Return on Equity / (%) / 35.50 / 20.06 / (31.02)
Return on Asset / (%) / 16.33 / 5.79 / (7.30)
Earning per Share / (Baht) / 473.68 / 172.68 / (213.39)
LEVERAGE
Debt to Asset (or Debt Ratio) / (%) / 53.99 / 71.12 / 76.46
Debt to Equity / (Times) / 1.17 / 2.46 / 3.25
Time Interest Earned / (Times) / 36.01 / 10.99 / 12.78
GROWTH RATE
Sales / (%) / (4.44) / 10.36 / -
Cost of Sales / (%) / (4.46) / 4.66 / -
Selling & Administration / (%) / (9.99) / 0.80 / -
Net Profit (Loss) / (%) / 174.32 / 180.92 / -
Total Asset / (%) / (2.67) / 1.95 / -

Financial Analysis

Profitability and Annual Growth

Subject’s net services grew by 10.36% in FY2001 and declined by 4.44% in FY2002 from THB 6.16 billion in FY2000, THB 6.80 billion in FY2001 and THB 6.50 billion in FY2002. When compared all costs with sales, cost of sales was 86.71% in FY2000, 82.24% in FY2001 and 82.21% in FY2002 while selling and administration was 1.22% in FY2000, 1.11% in FY2001 and 1.05% in FY2002. Interest portion was 0.66% in FY2000, 0.51% in FY2001 and 0.42% in FY2002.

Gross Profit Margin was 13.29% in FY2000, 17.76% in FY2001 and 17.79% in FY2002. Net Profit Marginbefore extra. Item was 7.82% in FY2000, 5.15% in FY2001 and 14.62% in FY2002. The subject was suffered from loss on foreign exchange of THB 905.62 million in 2000, which made impact on subject’s income structure. After the subject had to pay income tax and extra item into account, Net Profit Margin was (6.93%) in FY2000, 5.08% in FY2000 and 14.58% in FY2002 or Growth Rate, net profit grew by 180.92% in FY2001 and 174.32% in FY2002. As a result, E.P.S. was THB 213.39 in FY2000, THB 172.68 in FY2001 and THB 473.68 in FY2002.

Liquidity Ratio

The subject’s current assets were about THB 1.00 billion in FY2001, THB 1.80 billion in FY2001 and THB 2.24 billion in FY2002. The major item was accounts and notes receivable. On the other hand, current liabilities were THB 4.31 billion in FY2000, THB 4.24 billion in FY2001 and THB 2.82 billion in FY2002, the major item was loans from affiliated companies.

Looking at liquidity ratio, Current Ratio, which is used to measure short-term debt paying ability was 0.23 times in FY2000, 0.43 times in FY2001 and 0.79 times in FY2002. Quick Ratio, which measured short-term liquidity was 0.23 times in FY2000, 0.42 times in FY2001 and 0.77 times in FY2002. As evident, both ratios were lower than one times, which indicated that the subject might be facing liquidity shortage.

Activity Ratio

Activity ratios are used to evaluate the efficiency with which the firm manages and utilises its assets, it indicated the speed with which assets are being converted or turned over into sales. This ratio involves a relationship between sales and assets.

The Collection Period was 50 days in FY2000 and 67 days in FY2001 and 107 days in FY2002 while Payment Period was 64 days in FY2000, 44 days in FY2001 and FY2002. Inventory Turnover Period was nothing in FY2000, 1 days in FY2001 and FY2002. Therefore, the subject should negotiate with its customer to pay back quickly for it cash flow.

Leverage

Debt to Asset, this measured the percentage of funds provided by creditors. This was due to the composition in its total liabilities and total assets, it was 76.46% in FY2000, 71.12% in FY2001 and 53.99% in FY2002, meant that its creditors have supplied more than half the firm’s total financing.

Debt to Equity, this ratio expressed the direct proportion between debt and owners’ equity, it was 3.25 times in FY2000, 2.46 times in FY2001 and 1.17 times in FY2002. This capital structure clearly implied that the subject was supported by more debt than equity.

Time Interest Earned is used to test the firm’s debt-servicing capacity. This was composition between its profit before interest and taxes and its interest charges. It was 12.78 times in FY2000, 10.99 times in FY2001 and 36.01 times in FY2002.

Overall financial status is considered fair, the subject improved its leverage which indicated sufficient capability to service debt and interest payment.

XXX (THAILAND) CO. LTD 1 / 14