Page 1

Head Office 191/54, 191/57, 18th floor, CTI Tower, Rachadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel. (662) 261-5033-40, 661-9381-88 Fax. (662) 261-5042, 661-9396-9 e-mail : ir@calcomp.co.th http://www.calcomp.co.th

Factory 1, 2, 3 (Samutsakorn)

Annual Report 2005 R Cal- Comp Electronics (Thailand) Public Company Limited

Cal-Comp Electronics (Thailand) Public Company Limited

Annual Report 2005

60 Moo 8, Sethakij Road, Klong Maduea, Kratoom Ban, Samutsakorn 74110, Thailand Tel. (6634) 472-000, 849-000 Fax. (6634) 471-654, 471-998, 472-009

Factory 4, 5, 6 (Petchaburi) 138 Moo 4, Phetchakasem Road, Sapang, Koaw Yoi, Petchaburi 76140, Thailand Tel. (6632) 447-756-67 Fax. (6632) 477-619-20

Cal-Comp Electronics and Communication Co., Ltd. 3Fl., No. 205, Sec. 3, Beisin Rd., Sindian City, Taipei County 231, Taiwan R.O.C. Tel. 886-2-2764-5312 Fax. 886-2-2748-5208

Cal-Comp Electronics (Suzhou) Co., Ltd. No. 18, Jiangxing Rd., Wujiang Economic Development Zone, Jiangsu, China Tel. 86-512-6340-7000 Fax. 86-512-6340-7995

Cal-Comp Electronics (Thailand) Public Company Limited CCET


D D D D D D D D D D D D D D D D D D

Financial Highlights

1

Message from Chairman & President

2

Board of Directors

9

General Information

10

Nature of Business Operation

12

Risk Factors

21

Shareholding Structure and Management

24

Organization Chart

29

Related Party Transactions

33

Audit Committee Report

37

Controlling System & Internal Audit

38

Directors' Reporting

39

Relation with Investors

39

Social and Environment Responsibilities

40

Remuneration for Auditor

40

Report of Independent Auditor

41

Financial Statements

42

Management Explanation

72

Exit Emergency Way Co.,Ltd. 0-2986-2525-28

CONTENTS


Financial Highlights Balance Sheet Summary Cash in hand and at banks Accounts receivable Inventory Total current assets Investment Land, building and equipment (net) Total assets Loan from banks Accounts payable Total current liabilities Convertible Bonds Total liabilities Registered capital Paid-up capital Retained earnings Total shareholders’ equity Number of shares Outstanding Dec Weighted average number of share

2005

2004

2003

1,305,831,457 11,003,977,154 6,331,168,253 20,127,769,196 77,617,357 5,610,703,238 25,987,482,931 2,202,358,254 8,943,848,614 12,903,129,926 15,665,295,435 5,678,438,956 3,629,729,045 4,931,487,990 10,322,187,496 3,629,729,045 3,574,475,272

253,465,437 11,787,146,514 7,527,751,465 20,965,730,288 170,417,206 4,927,450,793 26,229,654,001 4,471,984,209 9,017,509,882 14,801,255,249 17,937,455,249 4,230,000,000 3,235,318,350 4,246,020,892 8,292,198,752 323,531,835 307,389,141

528,591,120 5,191,526,472 4,695,484,285 11,664,114,080 213,652,382 3,829,224,176 15,897,224,682 3,072,953,989 3,798,382,187 7,581,065,993 1,409,215,351 8,990,281,344 3,780,000,000 3,050,310,720 3,366,596,232 6,906,943,338 305,031,072 303,074,659

2005

2004

2003

58,536,007,573 58,692,975,488 55,160,147,009 1,189,739,621 56,672,479,148 1,762,231,743

56,466,836,001 56,498,780,570 53,348,063,457 1,125,847,316 54,506,064,627 1,801,816,541

29,086,570,253 29,330,849,792 26,953,139,154 814,426,794 27,771,357,630 1,484,772,316

Key Financial Ratios

2005

2004

2003

Liquidity Ratios Current ratio Quick ratio Collection period (days) Inventory turnover (days) Payment period (days) Cash cycle (days)

1.56 1.07 70.08 45.22 58.61 56.70

1.42 0.91 54.12 41.24 43.24 52.12

1.54 0.92 60.38 56.67 43.98 73.07

5.77% 3.73% 3.00% 18.93%

5.52% 3.53% 3.19% 23.71%

7.33% 4.53% 5.06% 22.48%

6.75% 45.06% 1.50

8.55% 41.15% 1.65

10.02% 45.35% 1.28

1.52 8.30

2.16 11.33

1.30 19.58

2.84 0.49 0.30

25.63 5.86 3.00

22.64 4.90 3.00

-0.92% -12.67% 3.66% 3.88% 3.40% 5.68% -2.20%

65.00% 99.52% 94.13% 92.63% 97.93% 38.24% 21.35%

15.60% 20.66% -10.13% -9.76% -10.32% 10.12% -7.02%

Profit & Loss Statement Summary Sales Total revenue Cost of sales Selling and administrative expenses Total expense Net profit

Profitability Ratios Gross profit margin Operating profit margin Net profit margin Return on equity

Efficiency Ratios Return on total assets Return on fixed assets Total assets turnover (times)

Leverage Ratios Total liabilities/Total equity Interest coverage (EBIT/Interest expenses)

Information on Shares (Par Value was changed from Bt. 10 to Bt.1 as of April 12, 2005) Book value per share Earnings per share Dividend per share

Growth Rate Total assets Total liabilities Sales Total revenue Cost of sales Selling and administrative expenses Net profit

Annual Report 2005 R Cal- Comp Electronics (Thailand) Public Company Limited

01


Message from Chairman & President

Mr. Hsu, Sheng-Hsiung Chairman

It is always my great pleasure to say a few words, at the end of the year, to our shareholders as well as those who have been working together with Cal-Comp in the course of business growth, including our suppliers, customers, business partners and, above all, our diligent employees and management team. In the year of 2005, Cal-Comp has made some progress in comparison with the sales revenue of 2004, although the sales growth was not as shining as that of the previous year. In spite of oil price spiral which has unavoidably caused an impact to some extent on our business growth, we still managed to reach a record high sales revenue since 1989, USD 1.44 billion or THB 58.54 billions, a slight growth of 3.66% in terms of Thai Baht. Look to the future prospect of 2006, we are quite optimistic and very much confident in reaching another peak of business growth. It is based on the fact that Cal-Comp has built up its core competence in facing the challenges of ever-increasing competition and gradually broadened its customer base. Let me say thanks to you all again, and sincerely hope that we will collaborate in creating via constant innovations a better tomorrow for us all.

02

Annual Report 2005 R Cal- Comp Electronics (Thailand) Public Company Limited


Mr. Chiang, Hsiao-Chin President

In the year of 2005, Cal-Comp has completed the third plant at Suzhou, China in addition to the ones that are already in full operation, including two in the same manufacturing campus of Suzhou and six others in Thailand. With these manufacturing bases along the coast of Pacific rim, we are now well-equipped with production capacity, manufacturing capabilities and logistic advantages to serve our customers from all over the world. As an EMS company, our effort of keeping continuous growth is undoubtedly focused on the build-up of core competence in winning more businesses. From this point of view, Cal-Comp is, in essence, ready for further growth in the coming years. We have made some progress in sales revenue of 2005, USD 1.44 billion or THB 58.54 billions, a slight growth of 3.66% compared with that of 2004. With the back-up of sufficient capacity in production, strengthened capabilities in manufacturing as well as R&D, and the soundness of business operation system, we are quite confident in showing a better performance in 2006. I would like to take this opportunity to express my sincere thanks to those who have generously extended their helping hands to Cal-Comp in pursuit of business growth, including all shareholders, our suppliers, valuable customers, business partners and, above all, our hard working employees and management team. Without the help and collaboration, we could not have achieved any sales growth in 2005, though relatively minor, under a severe circumstance of oil price hike. Let us be optimistic, we will win if we all work closely together and walk hand in hand toward the same goal of ours--- in search of the excellence.

Annual Report 2005 R Cal- Comp Electronics (Thailand) Public Company Limited

03


ISO 9002 ISO 14001

IEC 17025 QS 9000


Board of Directors Mr. Hsu, Sheng-Hsiung Education Working Experience

no. of ordinary shares 3,610,000 no. of TDR -NoneBachelor of Chinese, National Taiwan Normal University 1992-present The Chairman of the Board of Kinpo Electronics Inc. 1994-present The Chairman of the Board of Compal Electronics Inc. 1989-present The Chairman of the Board of Cal-Comp Electronics (Thailand) Plc.

Mr. Chiang, Hsiao-Chin Education Working Experience

no. of ordinary shares 10,010,000 no. of TDR -None-

Bachelor of Industrial Engineering, Taipei College 1999-present Executive Vice President of Kinpo Group 1989-present The President of Cal-Comp Electronics (Thailand) Plc.

Mr. Kuo, Hsien-Min Education Working Experience

no. of ordinary shares 4,560,000 no. of TDR -NoneBachelor of Electrical Engineering, National Taiwan University 1995-present The Director of the Board of Kinpo Group 1989-present The Director of the Board of Cal-Comp Electronics (Thailand) Plc.

Mr. Hsu, Sheng-Chieh Education Working Experience

Working Experience

Mr. Alan Kam Education Working Experience

no. of ordinary shares no. of TDR

5,780,000 -None-

Master of BA, National Cheng Chi University Bachelor of Business Administration, National Taiwan University 1994-present The Director of the Board of Kinpo Electronics Inc. 1989-present The Director of the Board of Cal-Comp Electronics (Thailand) Plc.

Mr. Chou, Kung-Hsiung Education Working Experience

5,560,000 -None-

Bachelor of Architecture, Tamkang University 1994-present The Director of the Board of Kinpo Electronics Inc. 1989-present The Director of the Board of Cal-Comp Electronics (Thailand) Plc.

Mr. Ko, Charng-Chyi Education

no. of ordinary shares no. of TDR

no. of ordinary shares no. of TDR

1,400,000 -None-

Bachelor of Engineering, Feng Chia University 2000-2002 Assistant Managing Director of Cal-Comp Electronics (Thailand) Plc. 2002-present The Director of the Board of Cal-Comp Electronics (Thailand) Plc. no. of ordinary shares -Noneno. of TDR -NoneMaster of Business Administration University of Denver, Colorado 2006-present Consultant of Manulife Insurance (Thailand) Plc. 2005-present The Independent Director of Siam 2 You Plc. 2000-present The Independent Director of Cal-Comp Electronics (Thailand) Plc.

Mr. William Hang Man Chao Education Working Experience

no. of ordinary shares 8,471,000 no. of TDR -NoneMBA, Major in Finance and Marketing University of Chicago 1998-present The Independent of Seamico Securities Plc. 1998-present Managing Director of Wing Wah Advisory (Thailand) Limited 2000-present The Independent Director of Cal-Comp Electronics (Thailand) Plc.

Mr. Vichai Jittawait Education Working Experience

no. of ordinary shares 300,000 no. of TDR -NoneMaster of M.S.C.E. (Structural) from West Virginia University 2005-Present The Independent Director of Cal-Comp Electronics (Thailand) Plc. 1990-Present Chief Executive Officer of Builder Consultants Co., Ltd. Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

09


General Information General information of the company Cal-Comp Electronics (Thailand) Public Company Limited (the “Company”) was established in 1989 and to manufacture electronic products in the form of OEM (Original Equipment Manufacturer). At present, the Company’s groups of products consist of 4Cs which include (1) Computer Peripheral sectors such as Ink Jet Color Printer, Multi-Function Printer, Dot Matrix Printer and Printed circuit board assembly for hard disk, etc., (2) Telecommunications Equipment sectors such as Cordless Telephones, Mobile Phone (CDMA, TDMA, GSM), Integrated Satellite Receivers and Transmitters, Blue tooth, GPS Personal Local, etc., and (3) Consumer Office Equipment sectors such as Facsimile Machines, Finger Print, etc. (4) Home Entertainment such as the Personal Media Player, Personal Media Center. The head office is located at 191/54 and 191/57 CTI Tower, 18th Floor, Ratchadapisek Road, Klongtoey, Bangkok 10110, Telephone 02-261-5033-40, Fax 02-661-9396-7, corporate registration no. bor mor jor. 656, Homepage http\\:www.calcomp.co.th. As of December 31, 2005, the Company had registered capital of Baht 5,678,438,956 and paid-up capital of Baht 3,629,729,045.

Companies in which Cal-Comp Electronics PLC. holds 10 % or more of the shares outstanding Logistar International Holding Co., Ltd.

100%

In May 2001, the Company established a new subsidiary company abroad with an initial capital of USD 50,000 in order to enhance the Company’s business potential in the future. Logistar was established to be a holding company for the CCET’s investment oversea, as also act as a selling agent for CCET’s products. The registered address is situated at Beaufort House, P.O. Box 438, Road Town, Tortola, British Virgin Islands.

Cal-Comp Electronics (Suzhou) Co., Ltd.

100%

In May 2002, Cal-Comp Electronics (Suzhou) Co., Ltd. was established with an initial capital of USD 12,495,000 to manufacture telecommunication equipments and accessories in the form of OEM (Original Equipment Manufacturer) in order to expand the capacity. The registered address is no.18, Jiangxing Road, Wujiang Economic Development Zone, Jiangsu, The People’s Republic of China.

Cal-Comp Optical Electronics (Suzhou) Co., Ltd.

100%

In October 2003, Cal-Comp Optical Electronics (Suzhou) Co., Ltd. was established with an initial capital of USD 25 million to manufacture the computer peripheral equipments in the form of OEM (Original Equipment Manufacturer) in order to expand the capacity. The registered address is no.18, Jiangxing Road, Wujiang Economic Development Zone, Jiangsu, The People’s Republic of China.

Cal-Comp Electronics and Communications Co., Ltd.

100%

Cal-Comp Electronics and Communications Co., Ltd. was established in December 2004, with the paid up capital of NTD 69,920,780, to service providing and electronic goods trading. The registered address is 3F., No.205, Sec.3, Beisin Road, Sindian City, Taipei County 231, Taiwan , R.O.C.

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Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Wise Sigma International Holding Co., Ltd.

45%

Wise Sigma International Holding Co.,Ltd. was established in November 2001, with initial capital USD 50,000 which was increased to USD 5,000,000 in October 2002. The Company’s had invested 45% in Wise Sigma International Holding Co., Ltd. through Logistar International Holding Co., Ltd. It was established to be a holing company. The registered address is situated at Beaufort House, P.O. Box 438, Road Town, Tortola, British Virgin Islands.

Telian Corporation (Korea)

23.87%

Telian Corporation (Korea) Incorporated in Korea with the paid-up capital Won 2,871,080,000 which was increased to Won 3,346,080,000, therefore, the percentage of holding share decrease from 27.82% to 23.87%. (60% of initial registered capitals of Telian shares are held by parties who have no related interest in Kinpo group and Cal-Comp group) This Company is engaged in research and distribution of cordless phones and mobile phones by sending the prototype to Cal-Comp to manufacture and export. The office address is 4th Fl., Namjeun Bldg., 53-3 Haan-Dong, Kwangmyung-Si, Kyunggi-Do, 423-060, Korea.

Inx Japan International, Inc.

19.98%

Inx Japan International, Inc. was established in the year 2003, with paid up capital of JPY 50,000,001 to sell, purchase, lease and manage copyrights and design rights, and also act as a computer and peripheral trading company. The investment will allow Cal-Comp Electronics (Thailand) Plc. to use its brand name in the Company’s product. The registered address is 2 Fl., Akasaka Long Beach Bldg., Akasaka 3-21-20, Minato-ku, Tokyo, Japan.

Zakang, Inc. (Old name is Wide Telecom Inc. (Korea))

2.01%

Wide Telecom have changed the firm name to Zakang, Inc. since November 18, 2005 incorporated to engage in develop and manufacture of telephones and instruments for wire & wireless communication network with paid-up capital Won 1,360,633,500, which was increased to Won 7,845,295,000 therefore, the percentage of holding share decrease from 11.58% to 2.01%. Cal-Comp will receive the prototype from Zakang, Inc. for production and export. The office address is C-402, Pundang Techno Park, 151, Yatap-Dong, Pundang-Ku, Sungnam-Si, Kyunggi-Do, Korea.

Other reference parties Shares Registrar : Thailand Securities Depository Co., Ltd. 4th, 7th floor, The Stock Exchange of Thailand Building Rachadapisek Road, Klongtoey, Bangkok 10110 Tel: (662) 229-2800; Fax : (662) 359-1259

Taiwan Depository Recipt (TDR) Registrar : Far Eastern International Bank 5 F, No. 1, Hsiang Yang Rd., Taipei, Taiwan, R.O.C. Tel : 886-2-2312-3636; Fax : 886-2-2388-8278 Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

11


Nature of Business Operation Cal-Comp Electronics (Thailand) Public Company Limited (“the company”) was found with the initial capital of 125 million baht on 4 December 1989 in order embark on electronics manufacturing services (EMS) business. At present, the company has a registered capital of 5,678,438,956 baht and a paid up capital of 3,629,729,045 baht and its major shareholders are Kinpo group and Compal group. Kinpo group produces and sells cable modem, electronic calculator, electronic organizer, fax, GPS while Compal group produces and sells notebook computer, monitor and PDA. Kinpo and Compal are listed company in Taiwan Stock Exchange (TSE) and holding stake in the company for 49.52% and 7.75% respectively. The company is in Original Equipment Manufacturing (OEM) business, producing electronics products for major brands worldwide for example, Hewlett Packard, Panasonic, Olivetti, Western Digital, Motorola, Advance Digital Broadcast and Nikon. The company’s OEM products can be categorized into 4 groups as follows: - Computing products such as ink-jet printers, multi-function printers, dot-matrix printers, PC board for hard disk. - Telecommunication products such as wireless phone, mobile phone for CDMA TDMA GSM, Integrated Receivers Decoder, Bluetooth headsets, GPS, USB Phone. - Office equipment products such as fax machines, fingerprint scanners. - Home entertainment products such as the Personnel Media Player, Personnel Media Center and LCD TV. As of 31 December 2005, the company has 9 factories, 6 located in Thailand, employing 6,162 employees and 3 located in China, employing 3,975 employees. The factories are in 3 main locations, each having 3 factories within the same area as follows : - The first location in Thailand has 3 factories in the same area at Ampor Kratumban, Samuthprakarn - The second location in Thailand has 3 factories in the same area at Ampor Khaoyoi, Petchaburi - The location in China has 3 factories in the same area at Suzhou, Jiangsu. The third factory in China was completely constructed in September 2005 and began production in October 2005. The Company has become well known and recognized both locally and internationally for its high-standard quality of products. It was among certain famous companies in Thailand, which was preliminarily granted a certificate of standard entitled ISO 9002, ISO 14001, QS-9000 and IEC17025. The Company has been granted certificates of promotion by The Board of Investment in the category 5.6 in the areas of production of electronic products and 5.7 in the areas of production of component parts and accessories of electronic products. Plants are located at 2 provinces of Thailand and 1 province of China i.e. 3 plants in Kratoomban District, Samutsakorn, 3 plants in Khaoyoi District, Petchaburi.

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Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Remarks: Kinpo Electronics Group securities holding amount shows 49.52% came from the securities holding amount of Kinpo Electronics, Inc. plus Kingbolt International (Singapore) Pte, Ltd. of 42.85% and 6.67% respectively. Compal Electronics Group securities holding amount shows 7.75% came from the securities holding amount of Compal Electronics, Inc. plus Just International (Singapore) Pte, Ltd. of 7.00% and of 0.75% respectively.

Investment policy and rights and beneďŹ ts derived from investment in any subsidiary company, associated company and other companies. In an attempt to make investments in any subsidiary company, associated company and other companies, the Company will particularly take into account the possibility of generating proceeds and beneďŹ ts to be obtained by the Company. As at present the Company expand its base into the telecommunications and computer industries, it continues to make investments in such subsidiary companies, associated companies and other companies in such industries in Korea, Taiwan and China which are well-recognized for their expertise in the research and development of telecommunications and computer products. As a result, the sales volume of the Company has increased and the clients base expanded, such developing of client base will generate more sales and business opportunity to the Company, and it has further received a great amount of proďŹ t in proportion to shareholding and dividend payment from such investments.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

13


Shareholding structure of Cal-Comp Group as of 31st December 2005 Cal-Comp Electronics (Thailand) Plc.

100%

Cal-Comp Electronics (Suzhou) Co., Ltd.

100%

Cal-Comp Optical Electronics (Suzhou) Co., Ltd.

45%

Logistar International Holding Co., Ltd.

100%

7%

Wise Sigma International Holding Co., Ltd.

BC2L Ltd.

Cal-Comp Electronics and Communications Co., Ltd.

100%

23.87%

Telian Corporation (Korea)

19.98%

Inx Japan International, Inc.

2.01%

Zakang, Inc.

Afreey, Inc. (Taiwan)

6.9%

1.9%

Power Digital Communication Co., Ltd.

Income Structure 2003 Divisions

2004

2005

Million Baht

%

Million Baht

%

Million Baht

%

1,449.58

4.94

1,910.90

3.38

1,765.06

3.00

Telecommunication Accessories

12,433.80

42.39

19,642.98

34.77

19,960.83

34.01

Computer Accessories

15,203.19

51.84

34,464.69

61.00

36,065.77

61.45

-

-

448.26

0.79

744.35

1.27

29,086.57

99.17

56,466.83

99.94

58,536.01

99.73

244.28

0.83

31.95

0.06

156.97

0.27

29,330.85 100.00

56,498.78

100.00

Office Equipment

Home Entertainment Total sale revenue Other revenue Total revenue Note:

All types of products are manufactured by Cal-Comp Electronics (Thailand) Plc., and Cal-Comp Electronics (Suzhou) Co., Ltd. and Cal-Comp Optical Electronics (Suzhou) Co., Ltd.

14

58,692.98 100.00

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Material changes in 2005 - Privately placed newly issued shares of 31,650,000 shares (par 10 baht per share) to institutional investors in order to use as working capital. Thus, the company paid up capital increased from 3,235,318,350 baht to 3,551,818,350 baht. - Changed par value of the share from 10 baht per share to 1 baht per share. - In general shareholder meeting 1/2005, it was resolved that the company increased its capital by 1,448,438,956 shares (par 1 baht per share) of which not more than 600,000,000 share offered to public and not more than 848,438,956 shares to support the issue of new warrants. - In general shareholder meeting 1/2005, it was resolved the warrants be issued not more than 848,438,956 units to existing shareholders and to public for not more than 120,000,000 units to public who buys newly issued shares by ratio of 5 shares per 1 unit of warrants. The warrants not more than 728,438,956 units will be allocated to the existing shareholders in ratio of 5 existing shares for 1 unit of warrant. - Increase registered capital from 4,230,000,000 baht to 5,678,438,956 baht to support the issuance of warrants and issuance of new offered shares to public. - Logistar International Holding Company Limited in which is a 100% subsidiary of the company invested in the un-connected company in Singapore namely BC2L Ltd. for 500,000 US dollar or equivalent of 20,500,000 baht in order to help develop bluetooth technology and increase the company’s revenues in telecommunication products. - The company succeed in issuing Taiwan Depository Receipts (TDR) in Taiwan. In 2005, there where 80 shareholders participating with total shares of 174,580,000 shares. Then, TDR was trading with offering price of 4.10 NT dollar and began trading since 16 November 2005, thus making total TDR shares in Taiwan the amount of 474,580,000 units. - In 2005, there were bond converted into equity for 6,250,000 US dollar or equivalent to 38,643,710 shares and redecmed amount of 1,000,000 US doller. - From 2002 to 2005, there were bond converted into equity totally 13,001,000 US dollar or equivalent to 159,729,045 shares and the bond has been redeemed totally 34,999,000 US doller and the ECB had already expired in December 6, 2005.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

15


Market Competition The consumer segment in the second-largest business segment in terms of the revenue generation for the EMS/ODM industry and is expected to be one of the fastest-growing segment over the next several years. Opportunities in this segment will be some of the best in the industry for those EMS/ODM providers that choose to develop a dominant and defensible position in the market. This IDC study examines the expansion of worldwide electronics manufacturing service (EMS) providers and Original Design Manufacturers (ODM) into the consumer electronics business segment. This research also examines the growth trends in the segment and highlights the major providers that complete and dominate in this segment. Some of key ďŹ ndings of this study include: - Half of the revenue in this consumer segment for the EMS/ODM industry is made up of mobile phone production, and the top EMS/ODM providers in this segment dominate by virtue of their large mobile phone businesses. - The dynamics in the consumer segment are driven by the migration from more traditional products to newer-generation products with higher gross margins and lower outsourcing penetration rates: monitors to digital TVs, PCs to PDA-type products, and mobile phones to smart handheld devices. - A growing trend among ODM providers in the consumer segment is to produce and sell ownbranded products in addition to providing standard ODM products to their OEM customers. This trend will continue to cause conicts in this market as ODMs look for ways to grow their business.

Situation Overview In 2004, the consumer business segment was one of the largest revenue generators for the EMS/ ODM industry at $28.6 billion, second only to the computing segment at $53.9 billion. The consumer segment accounted for 19.2% of the EMS/ODM industry revenue of $149.2 billion in 2004. The growth in the consumer segment has also been robust and is one of the fastest-growing business segments for the EMS/ODM industry given its considerable size. This segment is expected to grow 16.2% in 2005 and at 16% CAGR through 2009.

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Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Worldwide EMS and ODM Revenue for the Consumer Segment, 2004-2009 ($B) 2004

2005

2006

2007

2008

2009

2004-2009 CAGR (%)

EMS

22.6

Growth (%) ODM Growth (%) Total Growth (%)

25.9

30.0

34.2

38.7

43.8

14.0

14.6

15.8

13.8

13.3

13.2

6.0

7.3

8.9

11.0

13.5

16.2

23.7

22.3

21.9

23.6

22.7

20.0

28.63

3.2

38.9

45.2

52.2

60.0

12.0

16.2

17.2

16.1

15.6

14.9

19.2

19.5

20.1

20.7

21.4

22.1

14.1

20.1

16.0

Share of industry total (%)

Note : EMS / ODM industry revenue total was &149.2 billion in 2004 Source : IDC, 2005 Although consumer electronics products make up almost 20% of the revenue of the EMS/ ODM industry as a whole, some provider are much more heavily invested in the segment than others. Some EMS providers have a sizeable portion of their revenue in consumer electronics by virtue of their strong mobile phone business. But many ODMs are also developing a growing dependence on consumer electronics, not through expansion in mobile phone, but as a result of migrating their core competencies in the monitor and PC segments (mobile PCs Motherboard, desktop PCs). Many ODMs that have traditionally been large monitor and display manufacturers have migrated to fast-growing LCD TV market where they are able to leverage their existing vertical integration strengths, particularly in LCD panel manufacturing. Other ODMs have migrated from traditional desktop and mobile PCs to the myriad converged devices that are beginning to integrate Pc functionality such as PDAs and Pocket PCs.

Future Outlook Consumer electronics manufacturing outsourcing is following the same life-cycle trajectory as other EMS/ODM product groups such as desktop PCs, mobile PCs, and monitors in the PC segment. As more EMS/ODM resources and capacity are dedicated to the industry, and as the segment matures, the competition for EMS service will increase. Pricing will continue to decline and margins for the EMS/ODM industry will get squeezed throughout the transformation process. While some products in the consumer segment are relatively new and showing promising growth, such as digital TVs, gaming devices, and digital media player, other consumer products are seeing signs of slowing as the market mature and growth slows.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

17


Procurement of Products for Sale The manufacturing plants are located in Thailand and The People’s Republic of China i.e. 3 plants situated at No. 60 Moo.8, Settakij Road, Kratoomban District, Samutsakorn, 3 plants situated at No. 138 Moo.4, Petchkasem Road, Khaoyoi District, Petchaburi with total area of 193,600 square metres and the manufacturing plant in China situated at No.18,Jiangxing East Road, Wujiang Economic Development Zone, Jiangsu, the People’s Republic of China with total area of 298,667 square metres. Currently, the Company’s manufacturing consumes one shift/day (8 hours). An average actual production quantity on a daily basis is up to 75% of the full productivity. During 2003-2005, details of the actual production quantity are set forth below. ( Unit in Thousand set) Products

2003

Office Equipment

1,894

930

842

Telecommunication Accessories

9,376

10,664

15,052

11,441

36,912

35,680

-

314

682

Computer Accessories Home Entertainment

2004

2005

Types and sources of essential raw materials Raw material can be divided 2 types as the following: 1.

Raw material use inside products. Raw material use inside products as the following. Type

Details

Source

LCD Panel

TFT LCD Panel, Module

Taiwan, Korea, China

Radio Components

RF Modulator, Tuner,

Korea, Taiwan, China

Chip IC, IC and IC encoders

Electric circuits which vary in

Resonator, Antenna, Filter Singapore, Japan, Korea, U.S.A.

terms of usage and size according to types of electronic appliances Capacitors

Equipment used in storing

Singapore, Korea, Taiwan, Japan

electric charge Pens

Printer inks

Singapore

Plastic Resins

Plastic granules

Singapore, Korea, Malaysia,

Printed Circuit Boards (PCB)

Electronic circuit boards used in

U.S.A., Germany China, Taiwan

all kinds of electronic appliances Printer Heads

Printer heads used in printers

Singapore, Japan

and printing calculators Miscellaneous parts

18

Screws, Nuts, Washers, Rollers

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

China, Taiwan, Thailand


2.

Raw material use outside products. Raw material use outside products as the following.

Type

Details

Source

Adapters and Cables

Electric cables and adapters

Thailand, China, Malaysia

Case

Plastic, Plastic component parts

Thailand, China

Packaging raw materials

Paper cartons, polyfoam,

Thailand

plastic bags, tapes, glue, tags

Number of suppliers In comparison between the quantity of local and foreign raw materials, it appears that they do not vary from year to year because it is the Company’s policy to equally maintain the amicable relationships with its counterparts, customers and suppliers. The Company does not depend on any supplier for more than 30% of the purchase value of raw materials during the past three consecutive years.

Details of purchasing of local and foreign raw materials during 2003 - 2005 Year 2003 Thailand Plant China Plant Baht

%

Million Local Raw 3,007.28 materials Foreign raw 23,428.66 materials Total 26,435.94

Baht

Year 2004 Thailand Plant China Plant

%

Baht

Million 11.38

65.89

88.62

2,026.49

100.00

%

Million 3.15

1,935.71

Baht

%

Million 4.79

1,279.78

96.85 38,436.77

95.21 12,114.48

2,092.38 100.00 40,372.48

100.00 13,394.26

Year 2005 Thailand Plant China Plant Baht

%

Million 9.55

5,479.92

90.45 27,563.84

Baht

%

Million 16.58

1,999.26

13.32

83.42 13,006.36

86.68

100.00 33,043.76 100.00 15,005.62 100.00

Notes : The total purchasing amount of raw materials in 2005 included the amount of the ending materials.

Suppliers Raw materials purchased by the Company from suppliers are divided into three groups as follows. Direct purchase Through parent company Through subsidiary companies The purchasing of essential raw materials such as ICs, chips are mainly subject to the specification of the customers. Within this ambit, the parent company and subsidiary companies are deemed as the Company’s customers. Random check in respect of each kind of raw materials is proportionally and regularly made, also the qualifications of each supplier, by following the vendor quality assurance method prior to commencing any deal. The Company will purchase raw materials from any supplier, which meets the Company’s requirements such as those obtaining an ISO 9002 certificate.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

19


Moreover, the Company has asked the following suppliers to relocate their plants within the area of the Company so as to facilitate the quality control, save storage room for raw materials and reduce deliver time. The six suppliers have no connections with the Company or its executive officers. Company (Located in plant area)

Raw materials

Ever Jet Co., Ltd.

Plastic component parts

Jet Industries (Thailand) Co., Ltd.

Plastic component parts

Yong Deng Industry (Thailand) Co., Ltd.

Steel component parts, pressing steel

Lanjo Enterprise (Thailand) Co., Ltd.

Rollers

Hypertek Plastic Industry Co., Ltd.

Plastic

Chung Cheng Plastic (Thailand) Co., Ltd.

Plastic

Details of purchasing channels of raw materials during 2003 - 2005 Year 2003 Thailand Plant Baht

%

Million Direct purchase

Year 2004

China Plant Baht

%

Million

Thailand Plant Baht

%

Million

Year 2005

China Plant Baht

%

Million

Thailand Plant Baht

%

Million

China Plant Baht

%

Million

26,276.25

99.40

1,758.33

84.03

40,314.20

99.86

13,182.00

98.41

32,913.24

99.60

13,608.37

90.69

Through parent company

18.48

0.07

334.05

15.97

51.24

0.13

212.26

1.59

12.20

0.04

112.72

0.75

Through subsidiaries and Joint Venture

141.21

0.53

-

-

7.04

0.02

-

118.32

20.36

1,284.53

8.56

26,435.94

100.00

2,092.38

40,372.48

100.00

13,394.26

33,043.76

100.00

15,005.62

100.00

Total

100.00

-

100.00

Notes : The total purchasing amount of raw materials in 2005 included the amount of the ending materials.

Purchasing Policy The Company’s purchasing policy is based upon the comparison of prices of raw materials quoted by each supplier, and punctual delivery of the supplier to each shipment and taking into account the maximum benefits to be obtained by the company. In the purchasing process, the sales department and the production department will cooperate in planning the purchase of raw materials so as to ascertain the demands for each period and maintain the inventory at an appropriate level from time to time.

20

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Risk Factors 1.1

Risks from currency exchange volatility The company has a major source of revenue as foreign currency that composes of US dollar

for 96% of the total revenue. Meanwhile, the company has an expenses of raw material bought from foreign countries in the unit of US dollar for about 80% of the total revenue. The company has had the foreign currency risk hedging strategies in place in order to reduce foreign currency risks. As the company has both revenue and expense in US dollar, this is capable to naturally hedging the foreign currency exposure overall while the company still keeps US dollar as a major currency to perform sales and expenses transactions. Even though, the revenue and expense both are in US dollar, making a reduction of foreign currency risk. The company still emphasizes the foreign currency risk management by creating a department to monitor and manage such risk. The company is always analyzing and considering an appropriate derivatives instrument to use such as currency forwards and currency options that fit the foreign currency risk profile. In a meantime, the company has no policy in speculating on the direction of any foreign currency.

1.2

Risks from scarcity of specialized personnel The company has revenue from producing electronics for customers’ owned brands or so called

Original Equipment Manufacturing (OEM). The product can be categorized into 4 groups – computing, telecommunications, office equipments, and home entertainment. Thus, the company relies upon knowledgeable engineers who has specialized skills. As skilled specialists in the country is limited in number and tend to hop the jobs, the company accepted the inflow from foreign skilled specialists from India, the Philippines, Burma in order to make a strong engineering team who also can communicate well in English with customers worldwide. Moreover, the company expanded its business in China as foreign production base, making the company easier to recruit Chinese engineers into Thailand operation if needed be as Chinese engineers on average have a lower compensation rates compared to the ones from Taiwan, Korea. The company also exchange knowledge, skills between Chinese engineers and Thai engineers in order to increase productivity. At present, the company has foreign skilled specialists of 45 persons while having 250 Thai engineers and technicians.

1.3

Risks from changes in product life cycle and production technology As the electronics industry has evolved to improve its technology constantly and the company

focuses on producing for customers with medium to high technology, the company needs to adjust itself according to product technology changes and production technology. However, technology development has not much impacted production line technology as production line technology has not evolved more quickly than the product technology changes and the company has a production line’s flexibility to support production of various product types both old and new. The R&D department also helps improve production line technology in order to support changing new product manufacturing while improving production capability and lowering production costs.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

21


The company believes that changing technology spurs demand for new electronics products to replace old ones, thus initiating various form of competition and shortening product life cycle thereby benefiting EMS industry for higher production volume.

1.4

Risks from competition in the market In the Electronics Manufacturing Services industry, the competition is intense because of

numerous players able to compete on worldwide basis, not too high production technology needed, and flexibility of manufacturers to adjust and compete for the same customer base wishing to lower production cost. Therefore, the maintain profitability is a challenge for each player in the industry. The company is constantly attempting to lower production cost for OEM while maintaining reputation and standard of services to be world class. The company initiatives are (a) to cooperate with customers to design technology such as applying data and information kept from production line experiences to develop, design and customize better products and (b) to share logistics information with customers in order to better package and distribute the products, enhancing cost structures and tightening customer relationship with the company.

1.5

Risks from obsolete inventories Changing nature of electronics technology is commanded by consumers’ constantly changing

needs. Thus, electronics product is better produced to suit consumers’ changing demands. The changes in product technology poses the EMS players to obsolete inventories which are not yet sold to the customers or consumers. Because majority of the company’s products are produced for customers’ owned brands, the company has a policy to make to order and classifies the products into 2 types as follows : (1) the products produced for customers that are designed and researched by customers who provided the product models to the company’s production line - (Original Equipment Manufacturing :OEM). (2) the products produced for customers that are researched and designed by the company (Original Design Manufacturing: ODM). According to make to order policy, the company major revenue derives from OEM and the risk of obsolete inventories from OEM has not impacted the company as the company is guaranteed ability to sell the product from the customers’ orders. However, ODM production poses a risk of obsolete inventories but to a lesser degree of impact since the revenue from ODM is minimal. The raw materials and obsolete inventories will be re-valued by the auditors. If the raw materials are standard components for various types of products, such materials will not be devalued into obsolete ones. The finished goods that could not be sold will be re-valued every year and to use a conservative accounting policy, the company will write off the finished goods that cannot be sold after 1 year. The company has a strict risk control policy for obsolete inventories by controlling product delivery timetable and raw material timeframe to reduce such risks.

22

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


1.6

Risks from dependency upon major customers The company intends to diversify away the risk of dependency by developing new products and

increasing customer bases. Therefore, the company has entered into producing Bluetooth headset, PC board for hard disk, multi-function printers, set-top box, USB phone that would significantly grow in the future and help the company’s sales. By continuously developing new products, the company has reduced dependency upon major customers.

1.7

Risks from dependency upon and competition with the parent companies Because the company is an OEM producer according to customers’ orders and owned technology,

the company does not necessary depend upon the technology know-how from Kinpo group, the parent company. The company has established the R & D arms in order to improve product model and quality, to lower cost of production line that help the company accumulate knowledge and develop its own skills set in the production processes. At the same time, the company also invested in technology research and development in Korea and Taiwan to sharpen skill set in telecommunication and computing technologies. Regarding the competition between the company and the parent companies, there is no direct competition between them as Kinpo group, Compal group and the company each has its own different kinds of products. Kinpo group’s production focuses on digital camera and digital organizers and Compal group’s production focuses on computing products and notebooks while the company’s production focuses on printers, Bluetooth and PCB board.

1.8

Risks from influence of parent companies toward management policy At the present, the board of director of the company has 5 directors, elected by Kinpo group in

order to cooperate with Kinpo group, as a major shareholder, that will beneficial to the company from its management expertise and good relationships with suppliers and customers. However, this may cause Kinpo group to have influence on the company’s important management policy. In practice, for the company’s operation, the company and Kinpo group business operations are clearly separated and that includes separated expenses. At present, Kinpo decreased a holding stake in the company from 55.58% to 49.52% because there were bond conversion into equity and private placement for newly issued equity. Thus, Kinpo group could not control a majority voting at the shareholder meeting that requires at least 75% of the majority vote such as nomination of directors or other issues that require majority vote except some issue that the law or the memorandum of association of the company specifies. As such, a minority shareholder is able to accumulate votes and check and balance the voting power of the major shareholder.

1.9

Risks from sufficiency of working capital Working capital is important for the business expansion. In December 2004 and January 2005,

the company issued 45.00 million shares (at par 10 baht per share) to support working capital sufficiency. However, the company has also secured more working capital by getting syndication loan for short and medium term. As of 31 December 2005, the company has a credit line of 325.63 million US dollar (included 80 million US dollar syndication loan already) that is equivalent to credit line of 13,025.20 million baht, which the company believes sufficient for future business growth.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

23


Shareholding Structure and Management List of top 10 shareholders

1.

Group of shareholders

Nature of business

Kinpo Electronics, Inc

Manufacture and

No. of shares as December 31, 2005

%

1,555,163,770

42.85

474,580,000

13.07

distribution of electronic products 2.

Far Eastern International Bank

Manufacture and distribution of computer equipment and accessories

3.

Compal Electronics, Inc

-

254,240,000

7.00

4.

Kingbolt International (Singapore)

-

241,930,000

6.67

5.

Chase Nominees Limited 42

-

230,642,000

6.35

6.

HSBC (Singapore) Nominee Pte., Ltd.

-

140,915,900

3.88

7.

Thai NVDR Company Limited

-

116,562,000

3.21

8.

Goldman Sachs International

-

42,640,300

1.17

9.

Government of Singapore Investment

-

35,119,100

0.97

-

33,200,000

0.91

-

3,124,993,070

86.08

Corporation C 10. American International Assurance Company Limited - AIA5E Total

Notes: 1) Kinpo Group includes Kinpo Electronics, Inc. and Kingbolt International (Singapore) Pte. Ltd., which hold totally 1,797,093,770 shares or 49.52%. 2) Compal Group is including Compal Electronics, Inc. and Just International (Singapore) Pte. Ltd., which hold totally 281,390,000 shares or 7.75% 2.1) Just International (Singapore) Pte. Ltd., holds 27,150,000 shares or 0.75%

24

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Management Structure Executive Committee The Company has two executive committees, that is, the Board of Directors and the Audit Committee, particulars of which are shown below.

Board of Directors As of 31st December 2005, the Company’s Board of Directors consists of the following members. Name

Position

Meeting Attendance

Mr. Hsu, Sheng-Hsiung

Chairman

7/7

Mr. Chiang, Hsiao-Chin*

President

7/7

Mr. Kuo, Hsien-Min

Director

6/7

Mr. Ko, Charng-Chyi

Director

7/7

Mr. Hsu, Sheng-Chieh

Director

5/7

Mr. Chou, Kung-Hsiung*

Director

1/7

Mr. Alan Kam

Independent Director and Audit Committee

5/7

Mr. William Hang Man Chao

Independent Director and Audit Committee

5/7

Mr.Vichai Jittawait**

Independent Director and Audit Committee

4/7

Mr. Chatchaval Jiaravanon

Independent Director and Audit Committee

1/7

Remark: 1. Board of Directors Total 9 persons 1

Chairman

1

President

4

Directors

3

Independent Directors

* (2 Directors are management) ** Mr. Vichai Jittawait is the independent director and audit committee member of the Company on March 23,2005 replaced Mr. Chatchaval Jiaravanon who resigned from the company 2. The Chairman and President is not the same person for the determination of corporate governance policy and Management. The Company has divided authorities between Chairman of the Board of Directors and Executive Director for the suitability of the administration and management functions.

Scope of powers and authorities 1. Per formance of duties of the board of director The Board of Directors has applied its best knowledge, capability and experience to carefully perform its duties in the Company’s interests in accordance with the law, the Company’s Objectives, the Articles of Association and resolutions made at shareholders’ meeting with a strong commitment to a practice of honesty, straight-forwardness and carefulness towards a maximum extent of effort to maintain both the Company and shareholders’ benefits.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

25


2. Duties on the Accountability to shareholders The Board of Directors shall consistently have accountability to shareholders, protect the interests of shareholders, and clearly and fully disclose information to the investors.

3. Review and approval of financial report and changes in accounting policy The Board of Directors is responsible for approving the financial report that have been audited and/or reviewed by the auditor and the audit committee and any changes in accounting policy.

4. Review and approval of policies, budget and business plan The Board of Directors is responsible for reviewing and approving any appropriate policy, budget and direction of the Company’s business operation and plan as proposed by the management.

5. Supervision of management The Board of Directors is responsible for supervising the effective performance of the Company’s policy by managing and informing the management in preparing any material reports on the Company’s business operation and other related party transactions in accordance with the rules and regulations of The Office of Securities and Exchange Commission and The Stock Exchange of Thailand. In case of necessity, the Board of Directors will request third parties to give professional or technical advice on any matters, which may materially affect the Company’s business.

6. Internal control and audit The Board of Directors has set up and maintains effective internal control system designed to provide management with reasonable assurance that transactions are recorded properly, the assets are safeguarded and that material frauds and malpractices are precluded. The Board of Directors also appointed the Audit Committee and the internal auditors to examine the adequacy and the suitability of the internal control systems of the Company.

7. Independent performance of duties of non-management directors The independent directors have in their own discretion to make decision on any strategy, administration, appointment of directors and any other matter which may materially affect the benefits of the Company, including the sufficient and appropriate access to information technology concerning financial and business matters in the interest of the Company’s operation.

8. Ethics and etiquette The Board of Directors prepared a compliance manual in relation to the ethics and etiquette of the management and staff as guidelines for good and proper practice within the organization.

26

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Scope of power and duties of the President According to the Approval Authority List dated 1st November 1995, the President shall have the powers and duties as follows: 1. To make a decision on important matters; determine the Company’s mission, objectives, strategies and policies; oversee the overall operations, productivity, customer relation and overseas marketing; and assume responsibility to the Board of Directors. 2. To approve the Company’s annual budgets. 3. To approve credit lines and terms of payment to the customers, conclusion of product supply agreements and changes in dealing conditions, conclusion of insurance contracts, and management of obsolete inventories. 4. To have the authority to approve a purchase of fixed assets and settlement of payment in an amount up to Baht 20 million. 5. To have the authority to approve investment in a new project in an amount up to Baht 20 million. 6. To determine and approve principles for personnel management and annual salary increase. 7. To approve the appointment of advisors on areas crucial for the operations. 8. To perform any activity relevant to the general administration, excluding connected transactions and acquisition & disposal of properties under the regulations of the Stock Exchange of Thailand.

Management The management of the Company consists of the following 10 executive officers. 1. Mr. Chiang, Hsiao-Chin

President

2. Mr. Lai, Chi-Tien

Vice President Administration

3. Mr. Liu, Kuo-Tung

Vice President Sale & Marketing

4. Mr. Yu, Hsing-Chin

Vice President Business Unit

5. Mr. Chou, Kung-Hsiung

Vice Managing Director

6. Mr. Yeh, Tien-Kung

Financial Controller

7. Mr. Wang, Ho-Shun

Business Division Director

8. Mr. Yu, Shih-Tung

Business Division Director

9. Mr. Pan, Hung-Shen

Business Division Director

10. Mr. Fang, Chih-Cheng

Finance and Sales Director

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

27


Appointment of directors No nominating committee is established to select any appropriate persons to be directors of the Company. The Company has laid down the guidelines on appointment of the Company’s directors as follows. 1. The Board of Directors is responsible for selecting any appropriate persons, taking into account the experience, vision, abilities and characters, and submitting a list of nominees to the shareholders’ meeting. 2. At each annual general meeting of shareholders, it is prescribed by the Articles of Association that at least one-third of the directors or if their number is not a multiple of three (3), the number nearest to one-third (1/3) must retire. In the event that any retired director is re-elected, a resolution of the shareholders’ meeting will be required. At the time of nominating any candidate for the Board of Directors, the Company will prepare a list of details and information about such candidate for the shareholders’ consideration. According to the Articles of Association, the shareholders’ meeting will appoint the Board of Directors in accordance with the following rules and procedures. (1) Each shareholder has a vote for each share he/she holds. (2) Each shareholder will exercise the right to elect one or more persons to be members of the Board of Directors, however, that a vote will not be divided. Each shareholder has the right of one vote for each share held, each shareholder must also exercise in full the total number of votes he possesses. (3) A person who has the most votes will be elected to the Board of Directors in respective order up to the number of directors to be elected at that time. In case of two or more candidates having an equality of votes, exceeding the number of directors required for election at that time, the Chairman will have a casting vote.

Board of Directors’ Meeting The Board of Directors’ meeting would be held quarterly to consider and approve the business performance, operations and financial statement of the Company, implement and direct the Company’s policies, monitor and supervise its operations to maximize economic value and shareholders’ wealth, approve any matters which are beyond the authorization limit of the Executive Board.

However the

Company might hold an extra meeting for approval the extra agenda, the Company will send the notice of Board of Directors’ meeting including agenda and documents at least 7 days prior to the meeting date. For year 2005, the Board of Directors’ meeting was held 7 times. There were at least 1/3 of directors presented constituting the quorum as required by articles of association of the Company.

28

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Organization Chart

Mr. Hsu, Sheng-Hsiung Chairman

Mr. Chiang, Hsiao-Chin President

Mr. Lai, Chi-Tien

Mr. Liu, Kuo-Tung

Mr. Yu, Hsing-Chin

Mr. Chou, Kung-Hsiung

VP Administration

VP Sales & Marketing

VP Business Unit

Vice Managing Director

Mr. Yeh, TienKung Financial Controller

Mr. Wang, HoShun Business Division Director

Mr. Yu, ShihTung Business Division Director

Mr. Pan, HungShen Business Division Director

Mr. Fang, ChihCheng Fiinance and Sales Director

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

29


Directors and Executive Officer Remuneration 1. Director Remuneration The following is a list of remuneration for 6 directors in 2005. Year 2005

Type of Remuneration

No. of Director

Amount of Remuneration (Baht)

Bonus

6

15,800,000

Board Allowance

6

1,530,000

Others

-

Total

6

17,330,000

The following is a list of remuneration for 4* Audit Committee and Independent directors in 2005. Year 2005

Type of Remuneration

*Remark:

No. of Director

Amount of Remuneration (Baht)

Bonus

3

3,600,000

Board Allowance

4*

Others

-

Total

4*

495,000 4,095,000

Number of the Audit Committee and Independent directors is 4 persons including Mr.Chatchaval Jiaravanon who resigned from the company on March 23, 2005.

2. Executive Officer Remuneration Type of Remuneration

Year 2005 No. of Executive Officer

Bonus

10

26,937,017

Board Allowance

10

11,233,753

Others

10

324,851

Total

10

38,495,621

Other remuneration (if any) - None -

30

Amount of Remuneration (Baht)

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Policy on Corporate Governance The Board of Directors realized the importance of Corporate Governance, which will promote transparency and managerial efficiency and therefore strengthen the confidence of all shareholders, investors and other related parties. The followings are the main policy to support Corporate Governance:. Issued policy for the Rights and Equitable Treatment Shareholders and various groups of stakeholders. Managed through absolute responsibility and oversee for conflict of interests by the Board of Directors. Verified financial statement and connected transaction with related parties through Controlling system and Internal Audit. Operated business with transparency and disclosure. Managed business operation under risk management. Performed under Code of Ethics by Directors and employees.

Corporate Governance The Board of Directors have implemented Best Practice Guidelines for Directors of Listed Companies set forth by the Stock Exchange of Thailand such as roles, duties and responsibilities of company directors, appointment of directors, fixing remuneration for directors, board meeting and shareholders’ meeting, and reporting financial information. In addition, we have set up Audit Committee as resources for the board of directors and management of the Company for necessary assistance.

Shareholders: Rights and Equitable Treatment Shareholders’ Meetings The Company encourages equal treatments and opportunities for all shareholders to express their opinions and raise question at the meeting, according to the agenda and the issues presented to the meetings. And the Company also has facilitated all shareholders to access to company information, as well as attend shareholders’ meetings with easy procedures and without expenses charged. In year 2005 the company held 1 Annual Shareholder’s meeting on March 23, 2005. All shareholders are invited to the annual shareholder’s meeting. The company were delivered an invitation letter as well as the agenda of each meeting to the shareholders not less than 14 days prior to the meeting date for their consideration. Shareholders have voting rights equal to the number of shares owned and must exercise all eligible votes to safeguard their investment in voting for the resolution, an opinion for a significant decision making, for example, regulation amendment, capital increase. All shareholders have right to receive correct, up-to-date, fully disclosed information. The meeting minutes were completely and accurately taken within the appropriate times in order to enable the shareholders to monitor afterward. Shareholders wishing to appoint a proxy representation may appoint any person or may elect to appoint the Independent Director and Chairman of the Audit committee as recommended by SEC. The Company has a policy for the Rights and Equitable Treatment Shareholders and Various groups of Stakeholders by controlling of the exploitation of inside information by executive officers in securities trading since the Company’s securities are listed on The Stock Exchange. The Company’s policy on such matter is described as follows. Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

31


1. An executive officer will prepare and submit to the Company a securities holding report showing the number of securities held by him/her, his/her spouses and minor children in the prescribed form immediately following the delivery of such report to The Office of Securities and Exchange Commission and The Stock Exchange of Thailand as follows. Initial securities holding report (form 59-1) will be submitted within 30 days after the closing date of public offering or after the date of appointment of such executive officer. Amendment to securities holding report (form 59-2) will be submitted within 3 days from the date of each purchase, sale, transfer and acceptance of securities. 2. The Company has submitted to each and every executive officer a circular letter notifying that any executive officer who is informed of any inside information will prohibit to do any trading transaction of the Company’s securities 30 days prior to the Company’s publication of its operating result (quarterly financial statement and annual financial statement) or any other significant information which may materially affect the securities value. The Company will inflict the maximum punishment on any executive officer who exploits the inside information or performs any act in such a way that may disgrace or damage the Company.

Leadership and Vision The Board of Director has participated with the management by taking into account and making an approval of vision, mission, strategies, oversight of business plan, oversea a level of control and risk management of operation. This includes supervising the management to perform the business efficiently in accordance with the action plan’s target and budget, which shall help add the highest economic value to the business and shareholders.

Various groups of stakeholders The Board of Directors recognized the rights of various groups of stakeholders, including shareholders, minority shareholders, employees, customers, supplier, the public and communities. The Board of Directors also supported a collaborative approach between the company and its stakeholders for their mutual benefit. The various groups of company’s stakeholders are treated with high priority as follows. Employees are treated equally and fairly. Benefits are paid appropriately. Products and service bought from supplier are in accordance with normal business condition and agreements. Produce high quality products to serve the customer’s need and their information is treated as confidential. Competition is moral. No illegal practices are used to destroy competitors. Community, environment, and society are responsibly treated.

Business Ethics The Company adopted Code of Best Practice for the Board of Directors of listed companies issued by The Stock Exchange of Thailand as company’s Code of Ethics for directors to comply. The Company will review the Code of Ethics in compliance with ethics of the management and staff as guidelines for good and proper practice within the organization. The Company also has the regulations of employees in order to set the standard of the work, quality and also the employees. Related training courses and observation have also been arranged so as to assure effectiveness as desire.

Conflict of interests The Audit Committee was appointed to consider every transactions and conflict of interest in according to the relevant rules and regulations of The Stock Exchange of Thailand. The price and conditions should be similar to Arm’s Length Basis and has disclosed details, transaction value, reason /necessity in Connected Transaction Report.

32

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Related Party Transactions During the years, the Company had significant business transactions with its overseas related companies (related by way of having certain shareholders and/or directors in common). The relationship between the Company and the related parties are summarised below:

Name of related parties

Relationship with the Company

Kinpo Electronics, Inc.

Parent company

Logistar International Holding Co., Ltd.

Subsidiary company

Cal-Comp Electronics (Suzhou) Co., Ltd.

Subsidiary company

Cal-Comp Optical Electronics (Suzhou) Co., Ltd.

Subsidiary company

Cal-Comp Electronics & Communications Co., Ltd.

Subsidiary company

Wise Sigma International Holding Co., Ltd.

Associated company (held by a subsidiary company)

Telian Corporation

Associated company and common directors

inx Japan International Inc.

Shareholding by the Company

Wide Telecom, Inc.

Shareholding by the Company

Afreey Inc.

Shareholding by the Company

Kinpo Electronics, Inc. (China) Co., Ltd.

Subsidiary of the parent company

Kinpo International Limited

Subsidiary of the parent company

Leading Team Technology Ltd.

Common shareholders

Acbel Polytech Inc.

Common shareholders

Such significant transactions are summarised below: (Unit: Thousand Baht)

Transactions with subsidiaries

Consolidated 2005

The Company Only

2004

2005

Pricing policy

2004

(Eliminated from consolidated financial statements) Sales

-

-

22,497,919

19,127,259

Near market price

Service income

-

-

-

603,312

Sales of fixed assets

-

-

-

10,065

Purchases of raw materials

-

-

135,053

279,244

Near market price

4,665,956

4,699,741

2,453,921

2,051,536

Near market price

277,243

607,250

277,243

607,250

Near market price

- Others

1,580,244

2,875,828

115,570

24,429

Near market price

Purchases of raw materials

4,753,758

5,789,986

108,707

189,190

Near market price

1,189

1,993

-

-

2% per annum

-

1,864

-

1,864

2% per annum

USD 1,349,000 per month Cost

Transactions with related parties Sales - Kinpo Electronics, Inc. - Kinpo International Limited

Interest income Interest expense

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

33


Opinions of Independent Directors in connection with the Related Party Transactions After due consideration, the independent directors found no doubtful signs in the Company’s internal audit report showing the product trading transactions between the Company and Kinpo Group during the year 2005. It appeared that any and all trading agreements and transactions have been made in line with the relevant agreements entered into by both parties. The independent directors expressed their opinion that the shareholding structures among the company, its subsidiary company, associated companies and related companies do not constitute conflicts of interests among the Company, directors and executives and that no shareholding structure or management of companies in the group are nominees. The independent directors and the Company have committed themselves to ensure that any potential related party transactions would be subject to the relevant agreements and disclose to each other the type and value of any related party transaction in connection with the joint related parties under the relevant notifications and regulations of The Office of Securities and Exchange Commission.

34

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Supply/Manufacturing Agreement Parties concerned

: Cal-Comp Electronics (Thailand) Public Company Limited and Kinpo Electronics, Inc. (a company incorporated under the laws of Taiwan).

Execution date

: 1st April ,2004

Material subject

: The term of the agreement apply to each purchase by Kinpo to CalComp of the good and services as specifies in the Purchase Order and 1. Cal-Comp shall notify Kinpo in advance and in writing of any proposed change in method of producing or testing, subcontractors for producing, processing and testing, site of manufacture and labeling. 2. All products shall meet the specifications and shall be subjected to quality control inspection by Cal-Comp in accordance with Cal-Comp’s quality control standards. Cal-Comp shall permit Kinpo to review periodically Cal-Comp’s production and quality control procedures and records and to visit Cal-Comp’s facilities.

Expiry date

: The Agreement shall continue in full force and effect for one year. The agreement shall be renews and effective for another one year if there is no objection before the end of the above effective period.

Joint Venture Agreement Parties concerned

: Cal-Comp Electronics (Thailand) Public Company Limited and Telian Corporation (a company incorporated under the laws of Korea).

Execution date

: 2nd April, 1998

Material subject

: The Company shall be entitled to the following benefits. 1. Know-how: the Company is authorized to apply know-how, patents, technology and formulae in connection with the production or sale of cordless telephones and other telecommunications equipment owned, designed and developed by Telian Corporation during the validity of the Joint Venture Agreement at the fair market price. 2. Production: the Company is entitled to the first right refusal in connection with any new product designed and developed by Telian. Parties concerned will determine the remuneration and other relevant contractual conditions from time to time.

Expiry date

: This Agreement shall be terminated upon occurrence of any of the following events. 1. Both parties agree to terminate the Agreement. 2. Either party claims for compensation from any defaulting party, but the latter fails to pay the compensation within the period of 30 days.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

35


License Agreement Parties concerned

:

Cal-Comp Electronics (Thailand) Public Company Limited and Zakang, Inc. (a company incorporated under the laws of Korea).

Execution date

:

25th September, 2000 Material subject

:

1. The Company is granted exclusive right to use patents and knowhow for production and distribution of products (pagers) owned by Zakang, Inc. throughout the validity of the Agreement. 2. Zakang, Inc. agrees to provide technical assistance for production of pagers. 3. The Company is entitled to sell Zakang, Inc. technology pagers in any country, except Korea. 4. The Company agrees not to enter into contract with any current and potential customer of Zakang, Inc. Both parties also agree to disclose their lists of customers to each other from time to time. Expiry date

:

This Agreement shall be terminated upon occurrence of any of the following events. 1. Either party breaches any provision thereof, and fails to remedy within the period of 60 days. 2. Either party participates in the bankruptcy proceedings. 3. Either party becomes an injured party due to any Act of God for an uninterrupted period of more than 6 months from the date of notice given by the other party.

Use-Right of Land Agreement Parties Concerned

:

Cal-Comp Electronics(Thailand) Public Company Limited and Wujiang State-Owned Land Administration Bureau

Execution Date

:

4th June 2002

Material Subject

:

The company is granted 50 years usage-right of state-owned

land

of Wujiang City for constructing plant. The constructed area and designing for each building must be subjected to the layout of the city, and constructed as per ratified designing program. Expiry Date

:

3rd June 2052 The contract may be terminated, if Cal-Comp delays the payment until 60 days.

36

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Audit Committee Report As usual, the Audit Committee has been supporting the board and management in maintaining and improving its corporate governance policy and supervising its internal audit plan throughout the year. There was a total of 7 Board meetings and 4 Audit Committee meetings in addition to various sub-committee meetings held at its Bangkok head office and at the factories in Petchaburi, Mahachai and Suzhou, China. Audit Committee took an active role in interacting with the internal audit team. Internal audit results also reflect that the company maintains high standards in the area of material error, safety standards, quality control, cash management and quality assurance. Audit Committee member periodically communicate with factory managers in Mahachai and Petchaburi. The company continued to improve its awareness in good corporate governance by updating its management team on appropriate corporate governance issues and training staff at all levels. Investor Relations Department has continued to liaise with investors and analysts throughout the year including the participation of Opportunity Day at the Stock Exchange of Thailand. The Audit Committee members would like to thank management, Investor Relation and Internal Audit departments for their support in 2005. And we look forward to serving all stakeholders in 2006.

Alan Kam Chairman of the Audit Committee and Independent Director

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

37


Scope of powers and authorities of the Audit Committee 1. To ensure that the Company prepares any quarterly and annual financial report which contains accurate and sufficient information and cooperate with any third party auditor and executive officer in charge of preparing such reports. 2. To ensure that the Company has the appropriateness and effectiveness of the internal control system and internal audit functions by coordinating with the external auditors and internal auditors. 3. To consider and advise the appointment of the external auditors including the determine an amount of remuneration for such auditor by considering the creditability, the adequacy of its resources, the firm’s audit engagements, and the experience of its supervisory, and the experience of its supervisory and professional staff. 4. To ensure that the conduct of business of the company is in compliance with the securities and exchange law, regulations of The Stock Exchange or any other applicable law. 5. To make decision on disclosing any accurate and complete information of the Company in the case of any related party transaction or conflicting transaction. 6. To take care of any other matters assigned by the Board of Directors and approved by the audit committee such as reviewing the accounting policy, the financial reporting system and the information disclosure in conformance with accounting standards, all important reports which must be disclosed to the public according to the law. 7. To prepare an audit report and publish it in the annual report of the Company. 8. To perform any other act as assigned by the Board of Directors with the approval of the Audit Committee.

Controlling system & Internal Audit The Company realized important of the internal audit, internal audit department was established as compliance unit to review and verify financial statement and connected transaction with related party. Moreover Internal audits are independence unity and directly report to the audit committee.

38

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Directors’ Reporting

The Board of directors are responsible for the accuracy and completeness of the Company and its subsidiary’s financial statements. Accounting principles used and financial statements are in compliance with accounting standards and disclosed. In order to ensure the efficient internal control and audit system, the audit committee will regularly review the financial statement and internal control system. The audit committee report had already disclosed in annual report. Audit committee had clarified on internal audit with good management that can be confident for the financial statement and its subsidiary as of 31 December 2005.

Mr. Hsu Sheng-Hsiung

Mr. Chiang Hsiao-Chin

Chairman

Managing Director

Relation with investors Investor relations Department has been established for individual investors or stockholders benefits and interests as the Company sees the significant of their investments and values, by communicate with investors and allowing them to procure appropriate devices for presenting information or for helping them in dealing with communication. The analyst meetings are held at least forth a year to meeting with investors and analysts to provide on the updated company financial results and businesses All interested investors can obtain information on the Company at website: www.calcomp. co.th. Contact Department : Investor Relations Department Responsible person : Ms. Naririn Tantisajjatham E-Mail Address : peggy@calcomp.co.th or IR@calcomp.co.th Telephone no. : 0-2261-5033-40 Ext : 5605, 5686 Fax no. : 02-661-9396-7

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

39


Social and Environment Responsibilities The Company always realizes that the successful factors in conducting business are not only perseverance of good operation results but also the responsibility to society and environment. Therefore, the Company determined to continue further contribution, though our activity is only a small social contribution, but we did it with the great intention to all in society. Regarding the environment, the Company received ISO 14001 certiďŹ cation from AFAQ & Bestcert (Thailand) Co., Ltd., France which result from the successful in implementing the ISO14001 standard for Environmental Management Systems (EMS) at both Mahachai and Petchaburi plants.

Remuneration for Auditor 1.

Audit fee

For year 2005 the company has pay the audit fee to Ernst & Young Office Limited by Ms. Rungnapa Lertsuwankul, Certified Public Accountant No.3516 amount of BHT 2,200,000 Baht. The Audit fee for the period of year 2005 had been approved by the shareholder meeting, the remuneration of not exceeding Baht 2,300,000 per annum. 2.

Other fee -None-

40

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Report of Independent Auditor To the Board of Directors and Shareholders of Cal-Comp Electronics (Thailand) Public Company Limited I have audited the accompanying consolidated balance sheets of Cal-Comp Electronics (Thailand) Public Company Limited and its subsidiaries as at 31 December 2005 and 2004, and the related consolidated statements of earnings, changes in shareholders’ equity and cash flows for the years then ended; and the separate financial statements of Cal-Comp Electronics (Thailand) Public Company Limited for the same years. These financial statements are the responsibility of the Company’s management as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits. I did not audit the financial statements of Logistar International Holding Co., Ltd. and Cal-Comp Electronics (Suzhou) Co., Ltd. and Cal-Comp Optical Electronics (Suzhou) Co., Ltd. and Cal-Comp Electronics & Communications Co., Ltd., four overseas subsidiary companies, which are included in the consolidated financial statements for the years ended 31 December 2005 and 2004. These subsidiaries’ financial statements show total assets as at 31 December 2005 and 2004 of Baht 14,552 million and Baht 14,788 million, respectively, revenues for the years then ended totalling Baht 43,087 million and Baht 34,598 million, respectively and net earnings for the years then ended of Baht 186 million and Baht 132 million, respectively. In addition, the financial statements of the Company only include its investments in its subsidiaries presented under the equity method, amounting to Baht 2,395 million and Baht 2,060 million, as at 31 December 2005 and 2004, respectively, and its share of the profits of its subsidiaries for the years then ended, amounting to Baht 186 million and Baht 132 million, respectively. The financial statements of the subsidiary companies were audited by other auditors, whose reports have been furnished to me, and my opinion, in so far as it relates to the figures for the various transactions with those subsidiary companies included in the consolidated financial statements and the financial statements of Company only, is based on those auditors’ reports. 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, together with the report of other auditors discussed in the first paragraph, provide a reasonable basis for my opinion. In my opinion, based on my audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Cal-Comp Electronics (Thailand) Public Company Limited and its subsidiary companies and of Cal-Comp Electronics (Thailand) Public Company Limited as at 31 December 2005 and 2004, and the results of their operations and cash flows for the years then ended in accordance with generally accepted accounting principles. I draw attention to Note 6 to the financial statements. The Company has substantial product sales and raw material purchase transactions with its subsidiaries and related companies, and these are presented in the financial statements at the prices which it mutually agreed with those subsidiaries and related companies.

Rungnapa Lertsuwankul Certified Public Accountant (Thailand) No. 3516 Ernst & Young Office Limited Bangkok: 6 February 2006

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

41


Balance Sheets Cal-Comp Electronics (Thailand) Public Company Limited and Its Subsidiary Companies As At 31 December 2005 And 2004 (Unit: Baht)

CONSOLIDATED Note ASSETS Current assets Cash and cash equivalents Short-term investments Term deposits at financial institutions Trade accounts receivable Trade accounts receivable under agreements assigning rights of claim Less: Allowance for doubtful accounts Trade accounts receivable, net Trade accounts receivable - related parties Less: Allowance for doubtful accounts Trade accounts receivable - related parties, net Short-term loans to related party Amount due from related parties, net Inventories, net Goods in transit Advances payment for raw materials Other receivables Other current assets Total current assets Non-current assets Investments accounted for under the equity method Other long-term investments, net Property, plant and equipment, net Intangible assets Deferred assets, net Land occupancy rights, net Other non-current assets Molds and spare parts Others Total non-current assets TOTAL ASSETS

2005

2004

1,305,831,457 287,550,200 10,163,851,754 5 4

4,6 6 6 7 8 9 10

253,465,437

2,663,162 74,954,195 5,610,703,238

14

7,549,889 62,938,149

2004

256,509,769

61,889,555

(40,558,863) 3,922,622,443 6,298,305,333 (27,447,114) 6,270,858,219 96,753,655 4,019,433,363 133,956,191 149,600,767 73,388,208 110,053,739 15,033,176,354

(52,096,931) 1,802,113,936 7,740,067,109 (9,336) 7,740,057,773 153,547,636 5,809,989,932 54,369,802 221,689,440 261,836,127 75,004,653 16,180,498,854

119,674,479 2,397,667,670 2,121,710,624 50,742,727 27,011,607 24,762,615 4,927,450,793 2,482,301,140 2,307,647,311 8,752,096 59,846,782

-

-

66,232,408 91,136,862 66,232,408 91,136,862 34,672,694 6,319,974 928,927 1,274,815 5,859,713,735 5,263,923,713 4,974,141,752 4,546,532,227 25,987,482,931 26,229,654,001 20,007,318,106 20,727,031,081

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

42

2005

9,522,453,439 3,963,181,306 1,854,210,867

151,144,845 (40,964,527) (52,096,931) 10,122,887,227 9,621,501,353 914,890,753 2,165,654,497 (33,800,826) (9,336) 881,089,927 2,165,645,161 71,869,804 67,271,407 67,367,127 145,053,811 6,331,168,253 7,527,751,465 150,968,557 54,369,802 249,131,010 295,585,804 73,388,208 261,836,127 586,517,426 573,249,921 20,127,769,196 20,965,730,288

11 12 13

THE COMPANY ONLY

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Cal-Comp Electronics (Thailand) Public Company Limited and Its Subsidiary Companies As At 31 December 2005 And 2004 (Unit: Baht)

CONSOLIDATED Note

2005

2004

THE COMPANY ONLY 2005

2004

LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Short-term loans from financial institutions 15 2,202,358,254 4,471,984,209 4,290,827 1,576,280,224 Trade accounts payable - Related parties 6 340,303,467 845,523,256 28,489,704 196,555,031 - Others 8,603,545,147 8,171,986,626 5,993,757,120 6,865,203,197 Total trade accounts payable 8,943,848,614 9,017,509,882 6,022,246,824 7,061,758,228 Convertible debentures due within 1 year 18 284,123,512 284,123,512 Current portion of long-term loans 19 941,133,714 941,133,714 Advance from and amount due to related parties 6 1,887,806 16,555,003 41,783,163 18,457,248 Corporate income tax payable 9,840,577 9,089,564 2,894,868 2,875,280 Accrued interest expense 2,639 13,132,641 2,639 13,132,641 Accrued expenses 360,756,032 317,127,312 134,578,309 144,261,428 Other payable 16 160,714,268 442,601,128 88,075,774 114,848,335 Other current liabilities 17 282,588,022 229,131,998 97,290,206 82,895,433 Total current liabilities 12,903,129,926 14,801,255,249 7,332,296,324 9,298,632,329 Non-current liabilities Long-term loans 19 2,762,165,509 3,136,200,000 2,352,834,286 3,136,200,000 Total non-current liabilities 2,762,165,509 3,136,200,000 2,352,834,286 3,136,200,000 Total liabilities 15,665,295,435 17,937,455,249 9,685,130,610 12,434,832,329 Shareholders’ equity Share capital 20 Authorised share capital 5,678,438,956 ordinary shares of Baht 1 each (2004: 423,000,000 ordinary shares of Baht 10 each) 5,678,438,956 4,230,000,000 5,678,438,956 4,230,000,000 Issued and paid up share capital 3,629,729,045 ordinary shares of Baht 1 each (2004: 323,531,835 ordinary shares of Baht 10 each) 3,629,729,045 3,235,318,350 3,629,729,045 3,235,318,350 Additional paid-in capital Premium on common stocks 20 1,895,654,635 1,108,433,144 1,895,654,635 1,108,433,144 Other deficits (147,880,327) (162,192,236) (147,880,327) (162,192,236) Convertible debentures - equity component 18 453,224 453,224 Currency translation differences 13,196,153 (135,834,622) 13,196,153 (135,834,622) Retained earnings Appropriated - legal reserve 21 511,111,587 423,000,000 511,111,587 423,000,000 Unappropriated 4,420,376,403 3,823,020,892 4,420,376,403 3,823,020,892 Total shareholders’ equity 10,322,187,496 8,292,198,752 10,322,187,496 8,292,198,752 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 25,987,482,931 26,229,654,001 20,007,318,106 20,727,031,081 The accompanying notes are an integral part of the financial statements.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

43


Statements Of Earnings Cal-Comp Electronics (Thailand) Public Company Limited and Its Subsidiary Companies For The Years Ended 31 December 2005 And 2004 (Unit: Baht)

CONSOLIDATED Note

2005

THE COMPANY ONLY

2004

2005

2004

REVENUES Sales

6

58,536,007,573 56,466,836,001 38,024,931,811 41,088,875,638

Share of profit from investments accounted for under equity method

-

-

126,926,227

135,986,257

24

82,539,205

-

113,831,962

-

- Service income

6

-

-

-

603,311,610

- Others

6

74,428,710

31,944,569

43,498,700

18,959,066

Gain on exchange Other income

Total revenues

58,692,975,488 56,498,780,570 38,309,188,700 41,847,132,571

Expenses Cost of sales and service

6

Selling and administrative expenses

55,160,147,009 53,348,063,457 36,028,562,702 39,615,541,464 1,189,739,621

1,125,847,316

196,591,572

231,560,882

165,110,828

-

163,139,727

-

134,281,690

17,982,466

-

-

Allowance for devaluation in value of inventories Share of loss from investments accounted for under equity method Loss on exchange

24

-

7,778,888

-

70,010,962

Directors’ remuneration

25

23,200,000

6,392,500

23,200,000

6,392,500

Total expenses

56,672,479,148 54,506,064,627 36,411,494,001 39,923,505,808

Earnings before interest expense and income tax

2,020,496,340

1,992,715,943 1,897,694,699 1,923,626,763

Interest expense

(243,371,273)

(175,907,529)

(131,159,050)

(108,917,712)

(14,893,324)

(14,991,873)

(4,303,906)

(12,892,510)

Corporate income tax

26

Net earnings for the year

1,762,231,743

1,801,816,541 1,762,231,743 1,801,816,541

Basic earnings per share Net earnings

0.49

0.59

0.49

0.59

3,574

3,074

3,574

3,074

0.49

0.53

0.49

0.53

3,603

3,463

3,603

3,463

Weighted average number of ordinary shares (million shares) Diluted earnings per share Net earnings

27

Weighted average number of ordinary shares (million shares)

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

44

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

45

(13,181,700) (162,192,236) 14,311,909 14,311,909 (147,880,327)

133,069,129 134,569,455 258,981,992 1,108,433,144 169,865,197 169,865,197 617,356,294 1,895,654,635

(13,181,700)

1,500,326

(149,010,536)

(453,224) -

(390,710) -

(62,514)

-

(1,766,009) 453,224

(265,683) -

(1,500,326)

-

2,219,233

Convertible debentures Other deficits equity component

149,030,775 13,196,153

149,030,775

-

-

(57,807,614) (135,834,622)

(57,807,614)

-

-

(78,027,008)

Currency translation differences

-

-

-

1,801,816,541 (45,000,000) (922,364,881) 3,823,020,892

-

-

-

2,988,569,232

Unappropriated

247,385,182 149,030,775

(62,514)

14,311,909

113,321,762 1,801,816,541 392,481,992 (922,364,881) 8,292,198,752

184,311,076 (57,807,614)

-

(13,181,700)

6,906,943,338

Total

(Unit: Baht)

410,665,352 - 1,762,231,743 1,762,231,743 88,111,587 (88,111,587) 933,856,294 - (1,076,764,645) (1,076,764,645) 511,111,587 4,420,376,403 10,322,187,496

-

-

-

45,000,000 423,000,000

-

-

-

378,000,000

Appropriated

Retained earnings

CONSOLIDATED AND THE COMPANY ONLY

714,881,697

Premium on common stocks

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

Balance - beginning of year 2004 3,050,310,720 Unrealised loss on change in the value of investment Periodic redemption of the debenture holders Increase due to convert convertible debentures to shares 51,507,630 Currency translation adjustment Unrealised transactions in earnings statements 51,507,630 Net earnings for the year 2004 Transferred to legal reserve Ordinary shares issued with premium 133,500,000 Dividends paid (Note 23) Balance - end of year 2004 3,235,318,350 Unrealised loss on change in the value of investment Periodic redemption of the debenture holders Increase due to convert convertible debentures to shares 77,910,695 Currency translation adjustment Unrealised transactions in earnings statements 77,910,695 Net earnings for the year 2005 Transferred to legal reserve Ordinary shares issued with premium 316,500,000 Dividends paid (Note 23) Balance - end of year 2005 3,629,729,045

Issued and paid up share capital

For The Years Ended 31 December 2005 And 2004

Cal-Comp Electronics (Thailand) Public Company Limited and Its Subsidiary Companies

Statements Of Changes In Shareholders’ Equity


Statements Of Cash Flows Cal-Comp Electronics (Thailand) Public Company Limited and Its Subsidiary Companies For The Years Ended 31 December 2005 And 2004 (Unit: Baht)

CONSOLIDATED 2005

2004

THE COMPANY ONLY 2005

2004

Cash flows from operating activities Net earnings for the year

1,762,231,743

1,801,816,541 1,762,231,743 1,801,816,541

Adjustments to reconcile net earnings to net cash provided by (paid from) operating activities: Depreciation and amortisation

611,972,953

508,090,060

412,834,144

408,907,787

52,532,427

6,846,040

45,773,051

6,846,040

Loss (gain) on disposal of equipment

(710,680)

20,598,994

(1,568,076)

20,568,962

Gain on disposal of mold and tooling

(7,742,816)

(290,299)

(7,742,816)

(290,299)

Allowance for doubtful accounts

Share of loss (profit) from investments accounted 134,281,690

17,982,466

(126,926,227)

(135,986,257)

Allowance for diminution in value of investments

for under equity method

87,044,378

12,000,000

12,062,872

12,000,000

Allowance for devaluation in value of inventories

164,843,122

1,457,573

163,139,728

-

Amortisation of discounts on convertible debentures Unrealised loss on exchange

94,613

919,085

94,613

919,085

234,478,762

89,439,246

236,302,281

87,062,082

Earnings from operating activities before change in operating assets and liabilities

3,039,026,192

2,458,859,706 2,496,201,313 2,201,843,941

Operating assets (increase) decrease Trade accounts receivable

(493,520,165) (5,158,975,645) (2,112,237,134)

781,960,965

Trade accunts receivable under agreements assigning rights of claim Trade accounts receivable - related parties Amount due from related parties

-

(151,144,845)

-

-

1,245,462,566 (1,672,729,442) 1,436,460,598 (5,211,655,009) 48,289,833

(110,405,479)

27,397,130

98,812,104

Inventories

956,758,584 (2,833,724,753) 1,627,416,841 (1,982,469,648)

Goods in transit

(96,759,096)

(41,540,976)

(79,746,729)

(41,540,976)

46,320,907

(152,181,273)

71,954,786

(78,284,909)

Advances payment for raw materials Other receivables

190,201,044

114,521,597

190,201,044

35,245,297

Other current assets

(65,803,410)

(207,035,997)

(85,695,830)

146,506,460

Operating liabilities increase (decrease) Trade accounts payable Trade accounts payable - related parties Advance from and amount due to related parties Corporate income tax payable Accrued interest expense Accrued expenses Other payable Other current liabilities Net cash from (used in) operating activities

419,700,381

4,632,923,971

(505,281,351)

787,044,202

(168,126,888)

185,796,805

(14,667,197)

7,269,896

23,325,915

(2,195,284)

751,013

9,089,564

19,588

2,875,280

(11,785,988)

(15,313,784)

(11,785,988)

(16,750,715)

42,284,706

23,011,286

(11,027,133)

(121,391,730)

(282,299,634)

254,000,704

(27,185,336)

74,345,587

51,398,147

42,922,100

12,336,896

(87,689,979)

4,570,076,532 (2,013,409,168) 2,506,204,856

(197,225,441)

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

46

(883,304,217) 3,817,366,370

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Cal-Comp Electronics (Thailand) Public Company Limited and Its Subsidiary Companies For The Years Ended 31 December 2005 And 2004 (Unit: Baht)

CONSOLIDATED 2005

THE COMPANY ONLY

2004

2005

2004

Cash flows from investing activities Increase in investments accounted for under equity method Increase in other investment Decrease in short-term loans to related parties

-

-

- (1,051,985,319)

(21,962,475)

-

-

-

-

69,775,016

-

-

127,162,048

(60,433,173)

-

(88,186,427)

Decrease (increase) in property, plant and equipment (1,247,500,229) (1,665,536,637)

(545,008,099)

74,754,217

Decrease (increase) in currency translation differences Decrease (increase) in molds and spare parts

(58,543,502)

12,721,443

(28,318,745)

(63,760,025)

Proceeds from sales of equipment

30,030,107

46,327,020

5,908,039

46,327,020

Proceeds from sales of molds and spareparts

14,149,027

982,269

14,149,027

982,269

Decrease (increase) in other intangible assets

-

(2,923,140)

-

11,983,192

(28,352,720)

4,955,075

345,888

10,000,234

Decrease (increase) in other non-current assets Net cash used in investing activities

(1,185,017,744) (1,594,132,127)

(552,923,890) (1,059,884,839)

Cash flows from financing activities Increase (decrease) in short-term loans from financial institutions

(2,269,634,461)

Increase in capital

933,856,294

Decrease in convertible debentures Increase in long-term loans Dividends paid Net cash from (used in) financing activities

1,398,386,009 (1,571,997,902)

(494,780,607)

400,500,000

933,856,294

400,500,000

(43,754,499)

(944,400,000)

(43,754,499)

(944,400,000)

411,154,743

3,241,440,000

- 3,241,440,000

(1,076,764,645)

(922,364,881) (1,076,764,645)

(2,045,142,568)

3,173,561,128 (1,758,660,752) 1,280,394,512

Net increase (decrease) in cash and cash equivalents

(922,364,881)

1,339,916,220

(433,980,167)

194,620,214

23,284,232

253,465,437

687,445,604

61,889,555

38,605,323

1,593,381,657

253,465,437

256,509,769

61,889,555

256,180,314

177,524,985

144,289,052

118,007,285

13,536,834

5,952,888

3,533,856

5,949,209

Unrealised loss on change in the value of investment

14,311,909

13,181,699

14,311,909

13,181,699

Purchase of plant and equipment that has yet been paid

31,109,358

161,438,117

-

-

Increase in capital due to convert convertible debentures

77,910,695

51,507,630

77,910,695

51,507,630

169,865,197

134,569,455

169,865,197

134,569,455

Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (Note 32) Supplemental cash flows information: Cash paid during the year for: Interest expense Corporate income tax Non-cash items consist of: -

Increase in premium on common stocks due to convert convertible debentures

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

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

47


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CAL-COMP ELECTRONICS (THAILAND) PUBLIC COMPANY LIMITED AND ITS SUBSIDIARY COMPANIES FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004

1.

GENERAL INFORMATION On 4 December 1989, Cal-Comp Electronics (Thailand) Public Company Limited was incorporated as a limited

company under Thai laws. On 11 August 2000, the Company registered the change of its status to a public limited company under the Public Limited Companies Act.

Its major shareholder is Kinpo Electronics, Inc., a company

incorporated in Taiwan. The Company operates its business in Thailand and its principal activity is the manufacture of electronic products in three sectors, such as computer and computer peripheral, telecommunication equipment and automation equipment. Its registered office is 191/54, 191/57 18th Floor, CTI Tower, Rachadapisek Road, Kwang Klongtoey, Khet Klongtoey, Bangkok 10110. The Company has 2 branches in Thailand located at Samutsakorn and Petchaburi province. On 24 September 2004, the Company’s Board of Directors approved the dissolution of the Taiwan branch and the establishment of a new subsidiary located in Taiwan, in order to enhance management efficiency and maximise benefits to the Company and its shareholders. This company has a registered capital of approximately NTD 100 million or Baht 122 million and all shares held by the Company. The Company implemented the approved steps in December 2004. The financial statements of the Company for the year 2004 only included the financial statements of Taipei branch for the period as from 1 January 2004 to 30 November 2004, which has been audited by other auditors. On 8 August 2005, the Company’s Board of Directors meeting approved not more than 173,316,500 ordinary shares to the scheme to convert ordinary shares of the Company to Taiwan Depositary Receipts (“TDR”) in Taiwan. On 11 October 2005, the Company announced that the relevant Taiwanese authorities had approved the TDR offering under the above scheme. A total of 80 shareholders hold 174,580,000 shares that are to be converted to TDR by the way of a public offering in Taiwan, the offering price set at NTD 4.10 or approximately Baht 5.04 per share. The TDR was allowed to be traded on Taiwan Stock Exchange Corporation since 16 November 2005. In addition, the Company’s Board of Directors meeting approved a policy and procedures for the conversion of ordinary shares of the Company to Taiwan Depositary Receipts (“TDR”) to the shareholders in 2006 and their sale, including the qualifications of shareholders eligible to convert the shares, sales conditions, the price and the number of TDRs for each conversion, fees and taxes. These financial statements were authorised for issue by the Authorised Directors on 6 February 2006.

2.

BASIS OF CONSOLIDATION The consolidated financial statements include the financial statements for the years ended 31 December 2005

and 2004 of Cal-Comp Electronics (Thailand) Public Company Limited (hereinafter called “the Company”) and its subsidiary companies, Logistar International Holding Co., Ltd., Cal-Comp Electronics (Suzhou) Co., Ltd., Cal-Comp Optical Electronics (Suzhou) Co., Ltd. and Cal-Comp Electronics & Communications Co., Ltd. which were incorporated and operated their businesses in overseas (hereinafter call “the subsidiaries”). The financial statements of the subsidiaries were prepared by the management of the subsidiaries and audited by their auditors overseas. During the last quarter of 2004, the Company incorporated a subsidiary company, Cal-Comp Electronics & Communications Co., Ltd. in Taiwan with an authorised capital of NTD 100 million. The Company held 100% stake.

48

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


The Company has subsidiary companies as follows: Revenue Subsidiaries’ name

Logistar International Holding

Investment

Country of

Nature of

proportion

incorporation

business

2005

2004

%

%

100

100

Co., Ltd. Cal-Comp Electronics (Suzhou)

100

100

Co., Ltd.

for the years ended Total assets 2005

2004

31 December 2005

2004

Million Baht Million Baht Million Baht Million Baht

British Virgin

Company’s

8,356

9,050

41,596

30,785

Islands

distributor

The People’s

Manufacture

2,920

3,454

1,415

3,798

Manufacture

2,714

1,677

9

2

562

607

67

13

Republic of China

Cal-Comp Optical Electronics

100

100

(Suzhou) Co., Ltd. Cal-Comp Electronics &

The People’s Republic of China

100

100

Taiwan

Communications Co., Ltd.

Purchasing material and research and development

All intercompany balances and significant intercompany transactions have been eliminated from the consolidated financial statements. The financial statements of the branch office and subsidiaries incorporated overseas are translated into Thai Baht at the closing exchange rate for assets and liabilities, and at the average exchange rate for revenues and expenses. The resultant difference is shown under the caption of “Currency translation differences” in shareholders’ equity.

3.

SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with accounting standards enunciated under the

Accounting Profession Act B.E. 2547. Significant accounting policies adopted by the Company and its subsidiary companies are summarised below: -

3.1

Revenue and expense recognition Sales of goods are recognised when products are delivered and title passes to customers. Service revenue is

recognised by reference to the stage of completion. Expenses are recognised on an accrual basis.

3.2

Inventories Inventories are valued at the lower of cost (average method) or net realisable value. Allowance for devaluation in value of inventories is made for damaged, obsolete, deteriorated inventories

and management’s past experience.

3.3

Trade accounts receivable and other receivables Trade accounts receivable and other receivables are recognised and carried at original invoice amount less

an allowance (if any) for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

49


3.4

Investments

a) Investments in marketable equity securities, which are held as available-for-sale securities, are determined at fair value. Gains or losses arising from changes in value have been separately shown in shareholders’ equity under the caption of “Other deficits”. b) Investments in non-marketable equity securities, which the Company hold as, other investments, are valued at cost. Loss on impairment (if any) of investments in available-for-sale securities and other investments is included in determining earnings. c) Investments in subsidiary and associated companies are valued under the equity method.

3.5

Property, plant and equipment and depreciation

Land is stated at cost. Plant and equipment are stated at cost less accumulated depreciation. Depreciation of buildings, building improvements and equipment are calculated by reference to their costs on a straight-line basis over the estimated useful lives as follows: Buildings and building improvements Machinery and factory equipment Office furniture and equipment Motor vehicles Miscellaneous equipment and research and development equipment

- 11 - 50 - 5 - 10 - 5 - 11 - 5 - 10 1-7

years years years years years

No depreciation is provided for land, land improvement, construction in progress, equipment under installation and fixed assets in transit.

3.6

Intangible assets Deferred assets are stated at cost and amortised on a straight-line basis over 3 years. Land occupancy rights are stated at cost and amortised on contract period of 50 years.

3.7

Deferred expenses

Deferred expenses are calculated by reference to their costs and amortised on a straight-line basis at the following rates: Convertible debentures issued expenses Molds and spare parts

3.8

3 - 1, 2, 5

years years

Impairment of assets

The Company reviews the impairment of assets whenever events indicate that the carrying value of an asset exceeds its realisable value. Realisable value is the higher of an asset’s net selling price and its value in use. The value in use is arrived at based on the management estimates. The Company recognises an impairment loss in the earnings statements whenever the carrying value of an assets exceeds its realisable value. The Company will reverse the impairment loss when there are indications that the value of the asset is no longer impaired or the amount of impairment has decreased.

3.9

Foreign currencies

Foreign currency transactions incurred during the year are translated into Baht at the rates ruling on the transaction dates. Monetary assets and liabilities denominated in foreign currency outstanding at the balance sheet date are translated into Baht at the rates ruling on the balance sheet date. Exchange gains and losses are included in determining earnings.

50

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


3.10 Cash and cash equivalents Cash and cash equivalents are cash and deposits at banks, excluded deposits at banks with an original maturity over 3 months and cash secured as collateral.

3.11 Foreign exchange contracts Foreign exchange contracts are accounted for as hedge against exposure to the foreign currency risk related to the Company and its subsidiaries’s purchases and sales to overseas. Premium paid for forward exchange contracts are recognised as liabilities or assets and are amortised over the period of contracts and included in determining earnings.

3.12 Interest rate swap The notional amounts of interest rate swap agreements of the Company and its subsidiaries are not recognised in the financial statements since the agreements do not require the settlement of such notional amounts. The amounts receivable or payable under the agreements resulting from the difference in the interest rates are recognised as interest income or interest expense at the balance sheet dates and at settlement dates.

3.13 Foreign currency option The notional amounts of the foreign currency option contracts of the Company and its subsidiaries are not recognised as either assets or liabilities on the contract dates. However, amounts received on options written are recognised as liabilities, and amounts paid on options bought are recognised as assets. Such amounts are amortised using the straight-line method over the terms of contracts and charged to current income. Gains or losses on the exercise of the options are charged to current income.

3.14 Provident fund The Company and its employees jointly established a provident fund as approved by the Ministry of Finance in accordance with the Provident Fund Act B.E. 2530. The fund is contributed by both employees at the rate of 2 percent of salary and the Company at the rate of 2 percent of salary.

3.15 Earnings per share Basic earnings per share is calculated by dividing net earnings for the year by the weighted average number of ordinary shares held by outsider and outstanding during the year, after adjusting the number of ordinary shares in proportion to the change in the number of shares as a result of the change in par value as discussed in Note 20. The previous year’s reported earnings per share is also restated. Diluted earnings per share is calculated by dividing net earnings for the year by the total sum of the weighted average number of ordinary shares held by outsiders and outstanding during the year plus the weighted average number of ordinary shares to issue for conversion of all dilutive potential ordinary shares into ordinary shares.

3.16 Use of accounting estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates for certain accounting transactions, affecting amounts reported in the financial statements and notes related thereto. Subsequent actual results may differ from these estimates.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

51


4.

TRADE ACCOUNTS RECEIVABLE/TRADE ACCOUNTS RECEIVABLE - RELATED PARTIES The outstanding balances of trade accounts receivable is aged as follows: (Unit: Thousand Baht)

CONSOLIDATED

THE COMPANY ONLY

2005

2004

2005

2004

8,869,593

7,305,324

3,560,004

1,159,860

Less than 1 month

816,273

1,387,958

242,956

546,432

1 - 2 months

146,937

636,628

73,274

27,641

2 - 3 months

119,526

91,318

40,536

1,556

3 - 6 months

137,996

130,485

4,986

1,881

6 - 12 months

31,203

42,519

44

37,782

Over 12 months

42,324

79,366

41,381

79,059

10,163,852

9,673,598

3,963,181

1,854,211

(40,965)

(52,097)

(40,559)

(52,097)

10,122,887

9,621,501

3,922,622

1,802,114

Not yet due Overdue

Total Less: Allowance for doubtful accounts Net

The outstanding balances of trade accounts receivable - related parties is aged as follows: (Unit: Thousand Baht)

CONSOLIDATED 2005

THE COMPANY ONLY

2004

2005

2004

486,673

1,516,992

2,966,249

5,489,004

Less than 1 month

44,115

428,782

1,370,703

1,196,444

1 - 2 months

22,514

151,254

970,120

703,119

2 - 3 months

236,200

8,789

735,926

311,434

3 - 6 months

20,748

53,760

185,076

39,956

6 - 12 months

78,888

6,077

24,260

110

Over 12 months

25,753

-

45,971

-

Total

914,891

2,165,654

6,298,305

7,740,067

Less: Allowance for doubtful accounts

(33,801)

(9)

(27,447)

(9)

Net

881,090

2,165,645

6,270,858

7,740,058

Not yet due Overdue

The Company and its subsidiary companies’ management believe that allowance for doubtful accounts set aside is adequate in the present situation.

52

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


5.

TRADE ACCOUNTS RECEIVABLE UNDER AGREEMENTS ASSIGNING RIGHTS OF CLAIM As at 31 December 2004, a subsidiary company had assigned its rights of claim over trade receivables amounting

to Baht 504 million to a bank, whereby the trade receivables had agreed in writing to make their payment against all invoices issued by the subsidiary company directly to this bank. The subsidiary company, as the assignor had surrendered control over these debts, and the bank, as the assignee, had sole rights of claim over the trade receivables. The subsidiary company had recorded the transactions as sales to the bank. The subsidiary company had received payment of Baht 353 million from the bank and recorded the amount as a deduction from the trade accounts receivable balance. The remaining Baht 151 million, for which no payment had yet been received from the bank, had been presented as “Trade accounts receivable under agreements assigning rights of claim� in the balance sheet. During the first quarter of this year, the subsidiary company has received payment from the trade accounts receivable.

6.

RELATED PARTY TRANSACTIONS During the years, the Company had significant business transactions with its overseas related companies (related

by way of having certain shareholders and/or directors in common). The relationship between the Company and the related parties are summarised below:

Name of related parties

Relationship with the Company

Kinpo Electronics, Inc.

Parent company

Logistar International Holding Co., Ltd.

Subsidiary company

Cal-Comp Electronics (Suzhou) Co., Ltd.

Subsidiary company

Cal-Comp Optical Electronics (Suzhou) Co., Ltd.

Subsidiary company

Cal-Comp Electronics & Communications Co., Ltd.

Subsidiary company

Wise Sigma International Holding Co., Ltd.

Associated company (held by a subsidiary company)

Telian Corporation

Associated company and common directors

inx Japan International Inc.

Shareholding by the Company

Wide Telecom, Inc.

Shareholding by the Company

Afreey Inc.

Shareholding by the Company

Kinpo Electronics, Inc. (China) Co., Ltd.

Subsidiary of the parent company

Kinpo International Limited

Subsidiary of the parent company

Leading Team Technology Ltd.

Common shareholders

Acbel Polytech Inc.

Common shareholders

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

53


Such significant transactions are summarised below: (Unit: Thousand Baht)

CONSOLIDATED Transactions with subsidiaries

2005

THE COMPANY ONLY

2004

2005

PRICING POLICY

2004

(Eliminated from consolidated financial statements) Sales - 22,497,919 19,127,259 Near market price Service income 603,312 USD 1,349,000 per month Sales of fixed assets 10,065 Cost Purchases of raw materials 135,053 279,244 Near market price Transactions with related parties Sales - Kinpo Electronics, Inc. 4,665,956 4,699,741 2,453,921 2,051,536 Near market price - Kinpo International Limited 277,243 607,250 277,243 607,250 Near market price - Others 1,580,244 2,875,828 115,570 24,429 Near market price Purchases of raw materials 4,753,758 5,789,986 108,707 189,190 Near market price Interest income 1,189 1,993 - 2% per annum Interest expense 1,864 1,864 2% per annum The outstanding balances of the above transactions have been presented in the balance sheets as follows: (Unit: Thousand Baht)

CONSOLIDATED 2005 Trade accounts receivable - related parties Subsidiary companies (eliminated from consolidated financial statements) - Logistar International Holding Co., Ltd. - Cal-Comp Electronics (Suzhou) Co., Ltd. - Cal-Comp Optical Electronics (Suzhou) Co., Ltd. - Cal-Comp Electronics & Communications Co., Ltd. Related companies - Kinpo Electronics, Inc. - Telian Corporation - Wide Telecom, Inc. - Leading Team Technology Ltd. - Kinpo International Limited - Wise Sigma International Holding Co., Ltd. - Acbel Polytech Inc. - Others Total Less: Allowance for doubtful accounts

54

THE COMPANY ONLY

2004

2005

2004

-

-

6,106,232 36,936 15,968 7,436 6,166,572

7,014,442 102,940 9,507 123,858 7,250,747

245,209 423,200 184,365 10,082 50,923 594 518 914,891 (33,801) 881,090 881,090

475,912 550,238 96,861 380,968 260,170 401,505 2,165,654 (9) 2,165,645 2,165,645

82,727 38,924 10,082 131,733 (27,447) 104,286 6,270,858

227,293 371 1,486 260,170 489,320 (9) 489,311 7,740,058

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


(Unit: Thousand Baht)

CONSOLIDATED 2005 Short-term loans to related party Related company - Wise Sigma International Holding Co., Ltd. Amount due from related parties Subsidiary companies (eliminated from consolidated financial statements) - Logistar International Holding Co., Ltd. - Cal-Comp Electronics (Suzhou) Co., Ltd. - Cal-Comp Optical Electronics (Suzhou) Co., Ltd. - Cal-Comp Electronics & Communications Co., Ltd.

THE COMPANY ONLY

2004

2005

2004

71,870

67,271

-

-

-

-

9,115 1,110 2,751 16,411 29,387

2,345 10,163 2,318 14,826

29,342 562 66,952 96,856 (29,489) 67,367 67,367

56,169 535 84,841 3,509 145,054 145,054 145,054

29,342 562 66,952 96,856 (29,489) 67,367 96,754

52,945 535 84,841 401 138,722 138,722 153,548

-

-

-

23,994

- Cal-Comp Electronics (Suzhou) Co., Ltd.

-

-

8,047

41,643

- Cal-Comp Electronics & Communications Co., Ltd.

-

-

73

205

-

-

8,120

65,842

295,326

1,625

819

1,625

- Wide Telecom, Inc.

1,917

2,412

-

-

- Telian Corporation

36,804

17,810

13,352

766

- Wise Sigma International Holding Co., Ltd.

-

126,515

-

126,515

- Leading Team Technology Ltd.

-

272,518

-

-

- Kinpo Electronics, Inc. (China) Co., Ltd.

-

422,836

-

-

428

1,807

428

1,807

5,771

-

5,771

-

57

-

-

-

340,303

845,523

20,370

130,713

340,303

845,523

28,490

196,555

Related companies - Kinpo Electronics, Inc. - Telian Corporation - Wide Telecom, Inc. - Others Total Less: Allowance for doubtful accounts

Trade accounts payable - related parties Subsidiary companies (eliminated from consolidated financial statements) - Logistar International Holding Co., Ltd.

Related companies - Kinpo Electronics, Inc.

- Kinpo International Limited - Acbel Polytech Inc. - Others

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

55


(Unit: Thousand Baht)

CONSOLIDATED 2005 Advance from and amount due to related parties Subsidiary companies (eliminated from consolidated financial statements) - Logistar International Holding Co., Ltd. - Cal-Comp Electronics (Suzhou) Co., Ltd. - Cal-Comp Optical Electronics (Suzhou) Co., Ltd. - Cal-Comp Electronics & Communications Co., Ltd. Related company - Kinpo Electronics, Inc.

THE COMPANY ONLY

2004

2005

2004

-

-

17,750 1,716 4,580 15,849 39,895

2,279 1,902 226 4,407

1,888 1,888 1,888

16,555 16,555 16,555

1,888 1,888 41,783

14,050 14,050 18,457

The movements of short-term loans to related party during the year are as follows: (Unit: Thousand Baht)

CONSOLIDATED 31 December

Additional

Interest

31 December

2004

loans

Repayment

receivable

Translation

2005

67,271

-

-

1,210

3,389

71,870

Short-term loans to related party Wise Sigma International Holding Co., Ltd.

Short-term loans to Wise Sigma International Holding Co., Ltd. were denominated in US dollar currency and interest was charged at the rate of 2 percent per annum. Net foreign currency assets and liabilities has been included in Note 34.3.

7.

INVENTORIES (Unit: Baht)

CONSOLIDATED 2005

2004

THE COMPANY ONLY 2005

2004

Finished goods

437,826,588

739,677,824

279,997,498

550,381,524

Work in process

19,116,857

18,556,834

15,060,257

15,290,490

Raw materials Raw materials outside contract Total

6,124,251,978 6,838,082,397 3,971,241,811 5,311,425,935 128,329,736

144,948,194

128,329,736

144,948,194

6,709,525,159 7,741,265,249 4,394,629,302 6,022,046,143

Less: Allowance for devaluation in value of inventories (378,356,906) (213,513,784) (375,195,939) (212,056,211) Inventories, net

56

6,331,168,253 7,527,751,465 4,019,433,363 5,809,989,932

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


The Company and its subsidiary companies’ management believe that allowance for devaluation in value of inventories set aside is adequate in the present situation.

8.

ADVANCES PAYMENT FOR RAW MATERIALS Included in the balances as at 31 December 2005 and 2004 mainly consist of: a)

Short-term loans of Baht 95 million (2004: Baht 95 million) provided to local suppliers for use as working capital in agreed production of raw materials, on which interest is charged at the rate of 7 percent per annum (2004: 7 percent per annum).

b) Advance payment of Baht 37 million (2004: Baht 113 million) for the purchase of raw materials and others. c)

Advance payment of Baht 18 million to overseas suppliers (2004: Baht 14 million) for the purchase of molds and raw materials. The remaining balances is to be paid upon the completion of molds (please refer to Note 33.4).

9.

OTHER RECEIVABLES The balances as at 31 December 2005 and 2004, amounting to Baht 73 million and Baht 262 million, respectively,

represent suspense accounts receivable set up for additional expenses that can be passed on to customers or suppliers, and for cost of raw materials purchased from suppliers and later subject to engineering or component changes. In the latter case the costs are recorded to the suspense account while awaiting the return of the raw materials from the suppliers.

10.

OTHER CURRENT ASSETS The balances as at 31 December 2005 and 2004 consist of: (Unit: Thousand Baht)

CONSOLIDATED 2005

THE COMPANY ONLY

2004

2005

2004

Receivable - molds Other receivables Forward contracts receivables, net Others

31,516 105,994 46,462 402,545

34,769 94,346 444,135

31,516 46,462 32,076

34,769 40,236

Total

586,517

573,250

110,054

75,005

11.

INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD (Unit: Thousand Baht)

CONSOLIDATED Company’s name

Nature of

Country of

business

incorpora-

Paid up capital

tion

Investments in associated companies Telian Corporation Mobile phone

Korea

2005

2004

KW 3,346 KW 2,871 million million

Wise Sigma International Holding company British Holding Co., Ltd. Virgin Islands Total investments accounted for under equity method

Investments proportion 2005

2004

%

%

23.87 45

Investments Cost method

Equity method

2005

2004

27.8

57,825

57,825

2,663

61,887

45

87,994

87,994

-

57,787

145,819 145,819

2005

2004

2,663 119,674

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

57


(Unit: Thousand Baht)

THE COMPANY ONLY Company’s name

Nature of

Country of

business

incorporation

Paid up capital 2005

2004

Investments proportion

Investments Cost method 2005

Equity method

2005

2004

2004

2005

2004

%

%

100

100

2,280

2,280

112,409

326,473

100

100

528,610

528,610

715,247

534,899

100

100

100

100

92,510

92,510

112,541

99,861

23.87

27.8

57,825

57,825

2,663

61,887

Investments in subsidiary companies Logistar International Holding Co., Ltd. Cal-Comp Electronics

Company’s

British

distributor

Virgin Islands

Manufacturing

The People’s

USD 10

USD 10

Republic of China

million

million

The People’s

USD 25

USD 25

Republic of China

million

million

Purchasing material Taiwan

NTD 70

NTD 70

and research

million

million

Korea

KW 3,346

KW 2,871

million

million

(Suzhou) Co., Ltd. Cal-Comp Optical Electronics

Manufacturing

(Suzhou) Co., Ltd. Cal-Comp Electronics & Communications Co., Ltd.

USD 50,000 USD 50,000

1,023,834 1,023,834

1,454,808 1,098,591

and development Investments in associated company Telian Corporation

Mobile phone

Total investments accounted for under equity method

1,705,059 1,705,059

2,397,668 2,121,711

In December 2004, the Company set up a new subsidiary company in Taiwan, Cal-Comp Electronics & Communications Co., Ltd., by dissolving the Taiwan branch and transferring all business, assets and liabilities of the branch to the new subsidiary. The subsidiary is wholly owned by the Company and is engaged in the acquisition of raw materials, and the research and development of new products for the group.

12.

OTHER LONG-TERM INVESTMENTS (Unit: Thousand Baht)

CONSOLIDATED Company’s name

Nature of

Country of

business

incorporation

Investments proportion 2005

Investments in other companies Wide Telecom, Inc. CDMA Less: Unrealised loss on change in the value of investment Afreey Inc. Power Digital Communication Co., Ltd. inx Japan International Inc. BC2L Ltd.

Korea

Producing of CD ROM Taiwan Trading of communication apparatus Taiwan Japan Singapore

2.06

6.90 1.90 19.98 7.00

Less: Allowance for diminution in the value of investments Total other long-term investments

58

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

2004

11.60

Investments Cost method 2005

2004

%

%

171,247

171,247

(147,881) (162,192) 23,366 9,055 6.90 76,752 76,752 1.90 19.98 -

27,403 3,645 20,540 128,340

25,980 3,645 106,377

(76,752) 51,588 74,954

(64,689) 41,688 50,743

Fair value 2005

2004

23,366

9,055


(Unit: Thousand Baht)

THE COMPANY ONLY Company’s name

Nature of

Country of

business

incorporation

Investments proportion 2005

Investments in other companies Wide Telecom, Inc. CDMA Less: Unrealised loss on change in the value of investment Afreey Inc. inx Japan International Inc. Less: Allowance for diminution in the value of investments

Korea

Producing of CD ROM

Investments

2.06

Taiwan Japan

6.90 19.98

Cost method

2004

11.60

2005

2004

%

%

171,247

171,247

Fair value 2005

2004

23,366

9,055

(147,881) (162,192) 23,366 9,055 6.90 76,752 76,752 19.98 3,645 3,645

Total other long-term investments

(76,752) 3,645

(64,689) 15,708

27,011

24,763

On 30 June 2005, a meeting of the Board of Directors of the Company approved investment by Logistar International Holding Co., Ltd., a subsidiary company, in a 7 percent interest in a Singapore company, BC2L Ltd. for USD 500,000 or Baht 20.5 million. The subsidiary company invested this investment in the third quarter of this year. This investment will help the Company both in terms of the development of Bluetooth technology and increased sales.

13.

PROPERTY, PLANT AND EQUIPMENT (Unit: Baht)

CONSOLIDATED Construction in progress, equipment Buildings

Machinery

and buildings

and factory

Office furniture

Motor

and fixed

improvements improvements

equipment

and equipment

vehicles

assets in transit

550,085,894

27,408,508

184,422,276 7,061,348,439

3,747,840

872,605,807 1,420,611,762

Land and land

under installation Total

Cost 31 December 2004

340,893,977 2,467,343,353 3,491,194,431

Acquisitions

-

135,300,120

252,534,316

156,423,679

Disposals

-

(25,548,543) (224,323,406)

(40,130,062)

Transfer in (out)

-

520,000

456,768,606

57,792,423

5,512,386

71,497,754

79,211,689

18,351,457

707,711

346,406,363 2,649,112,684 4,055,385,636

742,523,391

29,442,891

Translation adjustment 31 December 2005

(2,421,168) (209,234,365) (501,657,544) - (546,724,528) 16,280,567

(31,643,499) 191,561,564

317,349,757 8,140,220,722

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

59


(Unit: Baht)

CONSOLIDATED Construction in progress, equipment Buildings

Machinery

and buildings

and factory

Office furniture

Motor

and fixed

improvements improvements

equipment

and equipment

vehicles

assets in transit

Land and land

under installation Total

Accumulated depreciation 31 December 2004

-

135,683,063

8,235,165

- 2,133,897,646

Depreciation for the year

-

435,203,238 1,554,776,180 87,689,265

351,635,517

82,680,969

3,121,733

-

Disposals

-

(8,371,095) (111,975,175)

Translation adjustment

-

31 December 2005

-

525,127,484

(19,157,801)

(1,573,108)

6,780,672

2,844,052

73,232

516,392,985 1,801,217,194

202,050,283

9,857,022

- 2,529,517,484

31 December 2004

340,893,977 2,032,140,115 1,936,418,251

414,402,831

19,173,343

184,422,276 4,927,450,793

31 December 2005

346,406,363 2,132,719,699 2,254,168,442

540,473,108

19,585,869

317,349,757 5,610,703,238

1,871,577

- (141,077,179) -

11,569,533

Net book value

Depreciation charged in the earnings statements 2004

435,685,732

2005

525,127,484

A part of depreciation of 2005 amounting to Baht 518 million (2004: Baht 427 million) for the consolidated has been charged to cost of sales and the remaining part of Baht 7 million (2004: Baht 9 million) has been charged to selling and administrative expenses. (Unit: Baht)

THE COMPANY ONLY Construction in progress, equipment Buildings

Machinery

and buildings

and factory

Office furniture

Motor

and fixed

improvements improvements

equipment

and equipment

vehicles

assets in transit

Land and land

Cost 31 December 2004 108,210,251 1,386,354,504 Acquisitions Disposals Transfer in (out) 520,000 31 December 2005 108,210,251 1,386,874,504 Accumulated depreciation 31 December 2004 - 412,876,307 Depreciation for the year 61,917,686 Disposals 31 December 2005 - 474,793,993 Net book value 31 December 2004 108,210,251 973,478,197 31 December 2005 108,210,251 912,080,511 Depreciation charged in the earnings statements 2004 2005

60

under installation Total

2,482,453,838 (108,107,853) 456,768,606 2,831,114,591

320,807,247 766,050 (1,778,845) 57,792,423 377,586,875

1,499,915,408 260,846,279 (102,206,808) 1,658,554,879

101,477,298 31,550,027 (342,380) 132,684,945

6,871,005 1,894,707 (454,999) 8,310,713

- 2,021,140,018 - 356,208,699 - (103,004,187) - 2,274,344,530

982,538,430 1,172,559,712

219,329,949 244,901,930

10,801,154 8,906,446

13,289,330 2,307,647,311 35,642,290 2,482,301,140

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

17,672,159 13,289,330 4,328,787,329 - 569,077,488 569,843,538 (455,000) - (110,341,698) - (546,724,528) (31,643,499) 17,217,159 35,642,290 4,756,645,670

333,255,683 356,208,699


A part of depreciation of 2005 amounting to Baht 350 million (2004: Baht 327 million) for the Company only has been charged to cost of sales and the remaining part of Baht 6 million (2004: Baht 6 million) has been charged to selling and administrative expenses. As at 31 December 2005, certain machinery and factory equipment and office equipment items have been fully depreciated but are still in use. The original cost, before deducting accumulated depreciation, of those assets amounts to Baht 394 million (2004: Baht 392 million).

14.

LAND OCCUPANCY RIGHTS The balance as at 31 December 2005 and 2004 represents the land occupancy rights of a subsidiary in the

People’s Republic of China. These rights are for 50 years. (Unit: Thousand Baht)

CONSOLIDATED 2005

2004

Cost

68,555

68,555

Translation adjustment

(2,230)

(6,756)

Accumulated amortisation

(3,387)

(1,952)

Net

62,938

59,847

1,435

1,952

Amortisation for the year (as included in statements of earnings)

15.

SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONS Short-term loans from financial institutions of the Company and its subsidiaries consist of loans from both local

banks and overseas financial institutions in both local currency and foreign currency. The loans are mainly repayable within 3 months, and carry interest rates of 1.65 - 5.9 percent per annum. The Company has considered the foreign currency risk pertaining to the above loans. These loans which are not hedged with derivative financial instruments are included in Note 34.3.

16.

OTHER PAYABLE The outstanding balance as at 31 December 2005 and 2004 represents accounts payable suspense for goods

sales which there are subject to changes in price, specifications and other components.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

61


17.

OTHER CURRENT LIABILITIES The balance as at 31 December 2005 and 2004 consist of: (Unit: Thousand Baht)

CONSOLIDATED 2005

THE COMPANY ONLY

2004

2005

2004

Advances received from customers - for purchase of molds

48,408

67,014

48,408

64,677

1,784

1,998

1,784

1,998

4,991

5,217

4,991

5,217

40,922

-

-

-

Others

186,483

154,903

42,107

11,003

Total

282,588

229,132

97,290

82,895

- for preparation of production line Money received from customers pending for clear Forward contracts payables, net

18.

CONVERTIBLE DEBENTURES On 6 December 2002, the Company issued 48,000, 3-year, convertible debentures of USD 1,000 each, a total

of USD 48 million, redeemable on 6 December 2005. One debenture is convertible to 1,211.944 ordinary shares and adjusted the exercising right of one debenture is convertible to 1,246.5714 ordinary shares due to public offering at lower than market price in accordance with minute of Board of directors on 26 January 2005. However, a change in the par value of ordinary shares from Baht 10 each to Baht 1 each as described in Note 20. Therefore, the Company adjusted the exercising right of one debenture is convertible to 12,465.7143 ordinary shares and the adjustment effective since 12 April 2005. During the current year, debenture holders exercised their rights to convert 6,250 debentures into shares. The Company registered the increase in its paid-up capital to support such conversion, as described in Note 20 and debenture holders redeemed before maturity dated 1,000 convertible debentures. There was no convertible debenture outstanding as at 31 December 2005.

19.

LONG-TERM LOANS (Unit: Thousand Baht)

CONSOLIDATED

THE COMPANY ONLY

2005

2004

2005

2004

Loans from financial institutions

3,703,300

3,136,200

3,293,968

3,136,200

Less: Current portion of long-term loans

(941,134)

-

(941,134)

-

Long-term loans, net of current portion

2,762,166

3,136,200

2,352,834

3,136,200

62

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


On 18 June 2004, the Company entered into a 5-year syndicated loan agreement with financial institutions for a facility of USD 80 million. The loan carries interest at LIBOR plus margin per annum and is to be repaid in semi-annually installments, the first of which will be due in June 2006. The above loan agreement contains certain restrictive covenants relating to the maintenance of a particular current ratio and EBITDA for the term of the agreement, among others. If the Company is unable to comply with the restrictive covenants, repayment of all or part of the loans and related accrued interest would be due at call. During the third quarter of this year, two subsidiary companies entered into a 3-year loan agreements with financial institution for a facility of USD 10 million. The loan carries interest at LIBOR plus margin per annum and is to be paid in semi-annually installment, the first of which will be due in January 2007.

20.

SHARE CAPITAL/PREMIUM ON COMMON STOCKS On 26 January 2005, the meeting of the Company’s Board of Directors approved a resolution to offer 31,650,000

new ordinary shares to investors by private placement at a price of Baht 30 per share. The Company sold all of such shares in late January 2005. The premium on the shares is presented, net of the underwriting expenses, under the caption “Premium on common stocks” in the balance sheet. The Company registered the related increase in its paid-up capital with the Ministry of Commerce on 3 February 2005. On 23 March 2005, the Annual General Meeting of the Company’s shareholders passed the following resolutions relating to changes in the Company’s share capital: 1) Approved a change in the par value of the ordinary shares from Baht 10 each to Baht 1 each. As a result, the Company’s registered share capital of Baht 4,230 million consists of 4,230 million shares of Baht 1 each. The Company registered the change in the par value of the ordinary shares with the Ministry of Commerce on 7 April 2005. 2) Approved an increase in the Company’s registered share capital from Baht 4,230,000,000 to Baht 5,678,438,956 through the issuance of 1,448,438,956 new ordinary shares with a par value of Baht 1 each, or equivalent to Baht 1,448,438,956, by allocation as follows: 2.1)

Allocated not over 600,000,000 shares via a public offering.

2.2)

Allocated not over 848,438,956 shares to be reserve for the exercise of the warrants described in Note 22.

The Company registered the increase in its registered share capital with the Ministry of Commerce on 7 April 2005. As described in Note 18, during the current year the Company registered the increase of its paid-up capital by a total of 77,910,695 ordinary shares in order to support the exercise of the convertible debentures. Both liability and equity components of such convertible debentures were transferred to share capital, and the difference between the transfer value and the par value of the ordinary shares has been recorded as premium on common stocks.

21.

LEGAL RESERVE Pursuant to section 116 of the Public Limited Companies Act B.E. 2535, 5 percent of the net earnings has been

set aside as part of the statutory reserve in order to increase the amount of the reserve to the level of 10 percent of the registered share capital. The statutory reserve could not use for dividend payment.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

63


22.

WARRANTS On 23 March 2005, the Annual General Meeting of the Company’s shareholders approved the issuance of

848,438,956 warrants in a ratio of 5 ordinary shares to 1 warrant and the allotment of up to 728,438,956 warrants to the former shareholders and up to 120,000,000 warrants to the investors who exercised their options to buy new shares of the Company, without charge. The warrants are exercisable not more than 5 years from the issue date, in a ratio of 1 warrant to 1 ordinary share, at a price not less than the average closing price in the 15 days before the date the details of the warrants are stipulated. The warrants can be exercised on the last working day of each March, June, September and December, with the first exercise date being in 2006. As at 31 December 2005, the Company is in the process of submission the related documents for the approval from the Office of the Securities and Exchange Commission.

23.

DIVIDEND Dividends declared in 2005 and 2004 consist of the following: Approved by

Final dividends on 2003 earnings Interim dividends on 2004 earnings

Total dividends

Dividend per share

Million Baht

Baht

Annual General Meeting of the shareholders on 2 April 2004

earnings Interim dividends on 2005 earnings

13 August 2004

464.8

1.5 (at par value of Baht 10)

922.3 Annual General Meeting of the shareholders on 23 March 2005

532.8

1.5 (at par value of Baht 10)

544.0

0.15 (at par value of Baht 1)

Board of Directors’ meeting on 8 August 2005

Total for 2005

24.

1.5 (at par value of Baht 10)

Board of Directors’ meeting on

Total for 2004 Final dividends on 2004

457.5

1,076.8

EXCHANGE GAINS (LOSS) (Unit: Thousand Baht)

FOR THE YEARS ENDED 31 DECEMBER CONSOLIDATED 2005 Realised exchange gains Unrealised exchange loss Exchange gains (loss) - net

64

2004

THE COMPANY ONLY 2005

2004

317,018

81,660

350,134

17,051

(234,479)

(89,439)

(236,302)

(87,062)

82,539

(7,779)

113,832

(70,011)

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


25.

DIRECTOR’S REMUNERATION Directors’ remuneration represents the benefits paid to the Company’s directors in accordance with section 90

of the Public Limited Companies Act, exclusive of salaries and related benefits payable to Executive Directors.

26.

CORPORATE INCOME TAX Corporate income tax has been calculated at the rate of 25 percent on the non-BOI promoted earnings after

adding back provisions and certain expenses which are disallowable for tax computation purposes.

27.

RECONCILIATION OF DILUTED EARNINGS PER SHARE For the years ended 31 December Weighted average Net earnings

number of ordinary shares

2005

2004

Million Baht

Million Baht

2005

2004

Earnings per share

2005

2004

Baht

Baht

0.49

0.59

0.49

0.53

Million Share Million share

Basic earnings per share Net earnings for the year of ordinary shareholders

1,762

1,802

3,574

3,074

1

26

29

389

1,763

1,828

3,603

3,463

Effect of dilute potential ordinary shares Convertible debentures Diluted earnings per share Net earnings for the year of ordinary shareholders assuming the conversion of diluted potential ordinary shares

28.

NUMBER OF EMPLOYEES AND RELATED COSTS CONSOLIDATED 2005

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

29.

THE COMPANY ONLY

2004

2005

2004

10,987

9,915

6,909

6,782

1,479,694

1,339,137

628,480

1,083,512

PROVIDENT FUND The Company and its employees jointly established a provident fund as approved by the Ministry of Finance in

accordance with the Provident Fund Act B.E. 2530. The fund is contributed by both employees at the rate of 2 percent of salary and the Company at the rate of 2 percent of salary and managed by TISCO Securities Company Limited. The fund will be paid to the employees upon termination in accordance with the rules of the fund. Total contributions of the Company for the current year amounted to Baht 0.9 million (2004: Baht 0.7 million).

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

65


30.

BOARD OF INVESTMENT PRIVILEGES The Company was granted the following tax privileges by the Board of Investment for certain specified categories

of products, under the Investment Promotion Act B.E. 2520: -

Exemption from corporate income tax on net profit for periods of 3 to 8 years commencing as from the date of first earning operating income.

-

Dividends paid from the promoted operations which are exempt from corporate income tax are in turn exempted from inclusion in the determination of corporate income tax.

-

Exemption from import duty on the raw and essential materials imported for use specifically in producing for export.

-

Exemption from import duty on items imported for re-export.

-

Exemption from import duty on machinery as approved by the Board.

-

An allowance of five percent of the increment in export income over that of the preceding year is deductible from taxable income for a period of ten years commencing as from the date of earning operating income.

-

A fifty percent reduction of the normal rate of corporate income tax on net profit, of for a period of 5 years after the expiry of the corporate income tax exemption period.

To be entitled to these rights and privileges, the Company must comply with conditions specified in the promotional certificates. The Company’s operating revenues for the years ended 31 December 2005 and 2004 are below divided according to whether the revenues are from promoted and non-promoted activities: (Unit: Million Baht)

Promoted

Non-promoted

Total

2005

2004

2005

2004

2005

2004

2,934

6,989

24

8

2,958

6,997

34,318

31,675

749

2,417

35,067

34,092

37,252

38,664

773

2,425

38,025

41,089

Revenues Sales Local Overseas Total

31.

FINANCIAL INFORMATION BY SEGMENT The Company’s operations involve the single industry segment of manufacturing and distributing electronic

equipment. Information for the years ended 31 December 2005 and 2004 is below presented by geographic segment: -

66

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


(Unit: Million Baht)

For the years ended 31 December 2005 and 2004 Local sales

Overseas sales

Total

Elimination

Grand total

2005

2004

2005

2004

2005

2004

2005

2004

2005

2004

2,958

6,997

49,058

43,337

52,016

50,334

-

-

52,016

50,334

-

-

43,549

34,611

43,549

34,611 (37,029) (28,478)

6,520

6,133

2,958

6,997

92,607

77,948

95,565

84,945 (37,029) (28,478)

58,536

56,467

3,376

3,119

157

32

(1,756)

(1,334)

(15)

(15)

1,762

1,802

Sales - external - related parties Earnings from operations Other income Expenses and interest expense Corporate income tax Net earnings

The Company used the gross profit margin + 2% major basis to set transfer prices between the geographic segment. (Unit: Million Baht)

As at 31 December 2005 and 2004 Local

Overseas

Total

Elimination

Grand total

2005

2004

2005

2004

2005

2004

2005

2004

2005

2004

10,193

9,542

9,133

10,923

19,326

20,465

(8,322)

(8,678)

11,004

11,787

4,019

5,810

2,306

1,717

6,325

7,527

6

1

6,331

7,528

net

2,482

2,308

3,138

2,631

5,620

4,939

(9)

(11)

5,611

4,928

- Others

3,298

3,186

2,141

1,905

5,439

5,091

(2,398)

(3,104)

3,041

1,987

19,992

20,846

16,718

17,176

36,710

38,022 (10,723) (11,792)

25,987

26,230

Assets - Trade accounts receivable, net - Inventories, net - Property, plant and equipment,

Total assets

32.

STATEMENTS OF CASH FLOWS For the purpose of the statements of cash flows, cash and cash equivalents include cash on hand and at financial

institutions with an original maturity of 3 months or less and without restriction. Cash and cash equivalents as reflected in the statements of cash flows consist of the followings: -

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

67


(Unit: Thousand Baht)

CONSOLIDATED 2005 Cash

THE COMPANY ONLY

2004

2005

2004

898

604

229

239

Deposits at financial institutions

1,304,934

252,861

256,281

61,651

Cash and cash equivalents

1,305,832

253,465

256,510

61,890

287,550

-

-

-

1,593,382

253,465

256,510

61,890

Current investments - Term deposits with financial institutions Cash and cash equivalents in statements of cash flows

33.

COMMITMENTS AND CONTINGENT LIABILITIES 33.1 Financial derivatives a) Forward foreign exchange contracts Buying / Selling forward foreign exchange contracts

Forward exchange Amount

rate

USD 20 million against Baht

38.63

USD 45 million against RMB

7.8240 - 8.0035

JPY 123 million against RMB

0.07

USD 20 million against Baht

38.68

USD 45 million against RMB

7.8462 - 8.0508

Buying forward foreign exchange contract

USD 20 million against Baht

39.095

Selling forward foreign exchange contract

USD 5 million against Baht

39.4875

USD 28 million against Baht

39.2 - 40.055

USD 65 million against RMB

7.8165 - 8.2425

JPY 501 million against RMB

12.318 - 12.515

USD 3 million against Baht

39.4785

USD 65 million against RMB

8.0599 - 8.2499

As at 31 December 2005 The Company Buying forward foreign exchange contracts Subsidiary companies Buying forward foreign exchange contracts Selling forward foreign exchange contracts As at 31 December 2004 The Company

Subsidiary companies Buying forward foreign exchange contracts

Selling forward foreign exchange contracts

These foreign exchange contracts generally have maturities of less than 1 year and the counterparties to the transactions are financial institutions.

68

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


b) Option contracts As at 31 December 2005 and 2004, the Company had outstanding option contracts as

follows: -

Amount

Contractual exchange rate

(Million USD)

(Per 1 USD)

2005

2004

2005

2004

Baht

Baht

Buy “call option” contracts

-

41

-

39.5

Buy “put option” contracts

-

20

-

40.4

Sell “call option” contracts

104

192

39.5 - 40.0

39.5 - 40.4

Sell “put option” contracts

-

41

-

38.5

As at 31 December 2005, a subsidiary of the Company has outstanding option contracts under which it will pay USD 505 million and Baht 7,280 million (2004: USD 848 million and Baht 7,184 million) and receive USD 181 million and Baht 17,370 million and JPY 8,437 million (2004: USD 184 million and Baht 28,295 million and RMB 414 million) on maturity dates between 23 January 2006 to 30 October 2006 (2004: 6 January 2005 to 15 November 2005). As at 31 December 2005, the exchange rate announced by the BOT is as following: Average buying rate

Average selling rate

Currency

(Baht per 1 USD)

(Baht per 1 USD)

USD

40.9826

41.1746

c) Interest Rate Swap Transaction Agreements The Company has entered into Interest Rate Swap Transaction Agreements with a local bank for principal totaling USD 40 million. The contracts are for a period of 5 years, maturing in June 2009 with the condition stipulated in the agreements. At each of the maturity dates, which occur every 3 months, the Company is required to pay interest to the bank based on the rate stipulated in the agreements and the bank is required to pay interest to the Company at 3-month LIBOR of the lasted maturity date. The agreements contain other conditions. A subsidiary of the Company has entered into an Interest Rate Swap Transaction Agreement with an oversea bank for principal totaling USD 10 million. The contract is for a period of 1 year, maturing in April 2005. At the maturity date, the subsidiary is required to pay interest to the bank at 12 month LIBOR and the bank is required to pay interest to the subsidiary at a fixed rate of 3.22 percent per annum.

33.2 Guarantees As at 31 December 2005, there were outstanding bank guarantees of approximately Baht 292 million (2004: Baht 96.2 million) issued by banks on behalf of the Company in respect of certain performance bonds as required in the normal course of the Company’s business. Its parent company has issued a letter of awareness to a bank for credit facilities.

33.3 Sale of collection rights over trade accounts receivable Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

69


As discussed in Note 5, as at 31 December 2004 the subsidiary company had contingent liabilities to bank amounting to Baht 353 million as a result of its sale of collection rights over trade accounts receivable are unable to repay their debt to the bank. However during the first quarter of this year, the subsidiary company has received payment from the trade accounts receivable.

33.4 Agreements for hire of production of molds As at 31 December 2005, the Company had outstanding commitments of Baht 17.0 million with overseas suppliers in respect of agreements for hire of production of molds (2004: Baht 15.9 million).

33.5 Commitments As at 31 December 2005, the Company had outstanding commitment of NTD 30 million in respect of uncalled portion of investments in its subsidiary (2004: NTD 30 million). As at 31 December 2005, its two subsidiaries had outstanding commitments of approximately RMB 10 million in respect of agreements to construct a plant in the People’s Republic of China (2004: RMB 4 million). In August 2004, a subsidiary company entered into a franchise agreement with a company, whereby the subsidiary has to pay a franchise fee and issue a letter of credit as a guarantee. As at 31 December 2005, the issued and unused letter of credit amounted to USD 150,000.

34.

FINANCIAL INSTRUMENTS 34.1 Financial risk management and policies

The Company and its subsidiaries are exposed to risks from changes in market interest rates and in currency exchange rates and from nonperformance of contractual obligations by counter parties. The Company and its subsidiaries use derivative instruments, as and when it, considers appropriate, to manage such risks.

34.2 Credit Risk It is the Company and its subsidiaries’ policy to enter into financial instruments with creditworthy counterparties. Therefore the Company and its subsidiaries do not expect any material loss to arise from the counterparties’ failure to perform their obligations under the financial statements. The Company’s and its subsidiaries’ revenues are generated in the technology industry, which is characterised by short product life cycles and rapid advances in manufacturing technologies. The maximum exposure to credit risk is the carrying amount of the financial assets less provision for losses as stated in the balance sheets. With respect to off-balance sheet derivative financial instruments, it is the Company’s and its subsidiaries’ policy to enter into financial instruments with creditworthy counterparties. Therefore, the Company and its subsidiaries do not expect any material losses to arise from the counterparties’ failure to perform their obligations under the financial instruments.

34.3 Foreign currency risk The Company and its subsidiaries’ exposure to foreign currency risk relates primarily to their receivable, payable, loans and convertible debentures which are denominated in foreign currencies. As at 31 December 2005 and 2004, the Company’s net foreign currency assets and liabilities that were not hedged by derivative financial instruments were as follows.

70

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Million JPY

Million USD

Million NTD

Million EURO

2005

2004

2005

2004

2005

2004

2005

2004

2

14

194

243

23

23

2

5

(93) (91)

(216) (202)

(112) (57) 25

(157) (80) 6

(7) 16

(2) 21

(1) 1

(1) 4

Foreign currency assets - Due within one year Foreign currency liabilities - Due within one year - Due over one year Net foreign currency assets (liabilities)

34.4 Interest rate risk and liquidity The interest rate risk is the risk that future movements in market interest rates will affect the results of operations of the Company and its subsidiaries and their cash flows. The Company’s and its subsidiaries’ exposure to interest rate risk related primarily to their deposits at banks, short-term investments, loans to related party and loans from financial institutions. The majority of these financial assets and liabilities carry interest rates which vary in line with market rates. The cash flow requirements related to the Company and its subsidiaries’ forward contracts and interest rate swap are limited to the net differences between the contracted forward rate and the spot rates prevailing at their settlement dates, and the net differences between the floating rate and fixed rate at the maturity date, respectively. Cash and cash equivalents as at 31 December 2005 and 2004 are as follows: (Unit: Million Baht)

ConsolIdated 2005

The Company only

2004

2005

Interest rate

2004

Cash on hand

0.9

0.6

0.2

0.2

Cash at banks

1,305.1

252.9

256.2

61.7

1,306.0

253.5

256.4

61.9

Market rate

34.5 Fair value Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction. Fair values are obtained from quoted market prices, discounted cash flow models or net asset value as appropriate. The following methods and assumptions are used to estimate the fair value of each class of financial instruments. Cash on hand and at banks, current investments, accounts receivable - the carrying values approximate their fair values due to the relatively short-term maturity of these financial instruments. The determination of fair value of investments and the presentation of such items are described in Notes 11 and 12. Accounts payable - the carrying amounts of these financial liabilities approximates their fair values due to the relatively short-term maturity of these financial instruments. Loans - the carrying amounts approximate its fair values due to its carrying a floating interest rate, which is considered to be market rate.

35.

PRESENTATION

The presentation of these financial statements have been made in compliance with the Notification of the Department of Business Development dated 14 September 2001, issued under the Accounting Act. B.E. 2543. Certain amounts in the financial statements for the year ended 31 December 2004 have been reclassified to conform to the current year classifications, with no effect on previously reported net earnings or shareholders’ equity.

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited

71


Management Explanation 1. Sales revenues For the year 2005, The Company’s sale revenues were Bt.58,536.01 million which increased 3.66% from last year. The Company also had gain on exchange and other revenues Bt. 82.54 million and Bt. 74.43 million respectively. Therefore, the total revenue was Bt. 58,692.98 million.

2. Cost of goods sold For the year 2005, the Company’s cost of goods sold was Bt.55,160.15 million or 94.23% of sale revenues which slightly decreased from 94.48% in year 2004, the gross margin increased from 5.52% to 5.77% compare to the same period last year. The reason for the increase of the gross profit margin for year 2005 compare to last year is because of the change in product mix and the Company is more concentrate on producing profitable products.

3. Selling and Administrative Expenses For the year 2005, the Company’s SG&A expenses were Bt.1,189.74 million or 2.03% of the total sale revenue was slightly increased from 1.99% of sales revenue, compare to the same period last year.

4. Interest Expense For the year 2005, the Company had interest expense of Bt. 243.37 million, increased from Bt.175.91 million from year 2004. Due to the raising of the interest rate cause the interest expense was increase compare to the same period last year.

5. Net Profit For the year 2005, the Company’s net profit was Bt.1,762.23 million, which decreased 2.20%, compared to last year. Therefore, the Company’s net profit margin was decreased from 3.19% in year 2004 to 3.00% in year 2005 The net profit and the margin for year 2005 decreased because of the Company uses conservative accounting standard to book the allowance for devaluation in value of inventories with mainly caused by the change of the product mix sach as the cut off of the low margin product, i.e. LCD Monitor and DVD Player and share of loss from investments accounted for under equity method.

72

Annual Report 2005 R Cal-Comp Electronics (Thailand) Public Company Limited


Head Office 191/54, 191/57, 18th floor, CTI Tower, Rachadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel. (662) 261-5033-40, 661-9381-88 Fax. (662) 261-5042, 661-9396-9 e-mail : ir@calcomp.co.th http://www.calcomp.co.th

Factory 1, 2, 3 (Samutsakorn)

Annual Report 2005 R Cal- Comp Electronics (Thailand) Public Company Limited

Cal-Comp Electronics (Thailand) Public Company Limited

Annual Report 2005

60 Moo 8, Sethakij Road, Klong Maduea, Kratoom Ban, Samutsakorn 74110, Thailand Tel. (6634) 472-000, 849-000 Fax. (6634) 471-654, 471-998, 472-009

Factory 4, 5, 6 (Petchaburi) 138 Moo 4, Phetchakasem Road, Sapang, Koaw Yoi, Petchaburi 76140, Thailand Tel. (6632) 447-756-67 Fax. (6632) 477-619-20

Cal-Comp Electronics and Communication Co., Ltd. 3Fl., No. 205, Sec. 3, Beisin Rd., Sindian City, Taipei County 231, Taiwan R.O.C. Tel. 886-2-2764-5312 Fax. 886-2-2748-5208

Cal-Comp Electronics (Suzhou) Co., Ltd. No. 18, Jiangxing Rd., Wujiang Economic Development Zone, Jiangsu, China Tel. 86-512-6340-7000 Fax. 86-512-6340-7995

Cal-Comp Electronics (Thailand) Public Company Limited CCET

Ccet 05  

CCET_2005 CAL-COMP ELECTRONICS (THAILAND) PCL Annual Report 2005

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