<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1998
REGISTRATION NO. 333-53925
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM F-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PEAK INTERNATIONAL LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NOT APPLICABLE
(TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)
BERMUDA 3089 NOT APPLICABLE
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
UNITS 3, 4, 5 AND 7, 37TH FLOOR
WHARF CABLE TOWER
9 HOI SHING ROAD
TSUEN WAN
N.T., HONG KONG
(852) 2402-5100
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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PEAK INTERNATIONAL, INC.
2111 KRAMER LANE
AUSTIN, TEXAS 78758
U.S.A.
(512) 339-4684
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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COPIES TO:
MICHAEL V. GISSER, ESQ. JOHN E. LANGE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & PAUL, WEISS, RIFKIND, WHARTON &
FLOM LLP GARRISON
30/F, TOWER II, LIPPO CENTRE THE HONG KONG CLUB BUILDING, 13TH
89 QUEENSWAY FLOOR
CENTRAL, HONG KONG 3A CHATER ROAD
CENTRAL, HONG KONG
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. [_]
-----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS June 12, 1998
1,793,038 SHARES
[LOGO OF PEAK INTERNATIONAL LIMITED APPEARS HERE]
PEAK INTERNATIONAL LIMITED
(incorporated in Bermuda with limited liability)
COMMON STOCK
This Prospectus relates to up to 1,793,038 shares of common stock, par value
$0.01 per share ("Common Stock"), of Peak International Limited (the
"Company") (each a "Share") which are beneficially owned by Mr. T. L. Li
through his ownership of all the outstanding shares of Luckygold 18A Limited
("Luckygold" or the "Selling Shareholder"), a company incorporated in the
British Virgin Islands ("BVI") and may be sold by Donaldson, Lufkin & Jenrette
Securities Corporation and certain third parties, in connection with, among
other things, ordinary trading or market-making activities by Donaldson,
Lufkin & Jenrette Securities Corporation in Shares or Trust Enhanced Dividend
Securities ("TrENDS") of Peak TrENDS Trust, a newly organized finite-term
Delaware business trust (the "Trust"). Donaldson, Lufkin & Jenrette Securities
Corporation will obtain Shares from Luckygold pursuant to a Securities Loan
Agreement (the "Securities Loan Agreement") between Donaldson, Lufkin &
Jenrette Securities Corporation and Luckygold. Under the Securities Loan
Agreement, subject to certain restrictions, Donaldson, Lufkin & Jenrette
Securities Corporation may from time to time borrow, return and reborrow
Shares from Luckygold. The number of Shares that may be borrowed under the
Securities Loan Agreement at any time may not exceed 1,793,038 shares.
The Securities Loan Agreement was entered into in connection with the public
offering of TrENDS by the Trust and is intended to, among other things,
facilitate ordinary trading and market-making activity in the TrENDS by
Donaldson, Lufkin & Jenrette Securities Corporation. The availability of
Shares under the Securities Loan Agreement does not assure market-making
activity in the Shares or the TrENDS by Donaldson, Lufkin & Jenrette
Securities Corporation. Any market-making activity engaged in by Donaldson,
Lufkin & Jenrette Securities Corporation, if commenced, may be discontinued at
any time.
Donaldson, Lufkin & Jenrette Securities Corporation may from time to time
offer Shares directly to one or more purchasers at negotiated prices, at
market prices prevailing at the time of sale or at prices related to such
market prices. In addition, in the course of ordinary trading or market-making
activities, Donaldson, Lufkin & Jenrette Securities Corporation may lend to
third parties Shares borrowed from Luckygold. Such third parties may offer for
sale such Shares under this Prospectus directly to one or more purchasers at
negotiated prices, at market prices prevailing at the time of sale or at
prices related to such market prices. See "Plan of Distribution."
The TrENDS are offered (the "Offering") by a separate prospectus of the
Trust (the "Trust Prospectus"). This Prospectus of the Company relates only to
the Shares covered hereby and does not relate to the TrENDS. THE COMPANY TAKES
NO RESPONSIBILITY FOR ANY INFORMATION INCLUDED IN OR OMITTED FROM THE TRUST
PROSPECTUS. THE TRUST PROSPECTUS DOES NOT CONSTITUTE A PART OF THIS
PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN. Because the TrENDS are
a separate security issued by the Trust, for which the Company has no
responsibility, an investment in the TrENDS may have materially different
characteristics and risks from a direct investment in the Shares. This
Prospectus does not reflect any changes in the TrENDS or the offering thereof
after the date of this Prospectus.
Effective October 31, 1997, the Shares began to trade on the Nasdaq National
Market ("Nasdaq") under the symbol "PEAKF". Prior to October 31, 1997, the
Shares traded on Nasdaq under the symbol "PITLF". The reported last sale price
of the Shares on June 11, 1998 was $12 1/4 per Share. See "Price Range of
Shares."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form F-1 (including all amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Shares covered hereby.
This prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules and regulations of
the Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
The Company is subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), applicable to a foreign private issuer, and in accordance therewith
files reports and other information with the Commission. The Registration
Statement (with exhibits), as well as such reports and other information, when
so filed, can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549; and at the regional offices of the Commission at
Seven World Trade Center, 13th Floor, New York, New York 10048, and at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. In addition, such material can also be obtained from the Commission's
Web site at http://www.sec.gov. Such reports and other information may also be
inspected at the offices of Nasdaq, 1735 K Street, N.W., Washington, D.C.
20006. As a foreign private issuer, the Company is exempt from certain
provisions of the Exchange Act requiring the furnishing and content of proxy
statements and requiring reporting of insider purchases and sales.
ENFORCEMENT OF CIVIL LIABILITIES
The Company is an exempted company (that is, it is exempted from the
provisions of Bermuda law which stipulate that at least 60% of the equity must
be beneficially owned by Bermudians) organized under the laws of Bermuda, and
all or a substantial portion of its assets are located outside the United
States. In addition, most of the members of the Board of Directors and the
officers of the Company and certain of the experts named herein are resident
outside the United States (principally in the Hong Kong Special Administrative
Region ("Hong Kong") and elsewhere in the People's Republic of China (the
"PRC" or "China")), and all or a substantial portion of the assets of such
persons are or may be located outside the United States. As a result, it may
not be possible for investors to effect service of process within the United
States upon such persons, or to enforce against them, the Company or the
Selling Shareholder judgments obtained in United States courts predicated upon
the civil liability provisions of the federal securities laws. The Company and
the Selling Shareholder have been advised by their Bermuda and BVI counsel,
Conyers Dill & Pearman, and their Hong Kong counsel, Richards Butler, that in
the opinion of such counsel there is doubt as to the enforceability in
Bermuda, BVI and Hong Kong, respectively, in original actions or in actions
for enforcement of judgments of United States courts, of civil liabilities
predicated solely upon the United States federal securities laws.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
appearing elsewhere herein. Unless otherwise indicated, the information
contained herein assumes no exercise of the Underwriters' over-allotment option
and no exercise of options issued pursuant to the Company's share option plan.
See "Management--Share Option Plan." All references to the "Company" herein are
references to Peak International Limited, a company incorporated under Bermuda
law on January 3, 1997, and, unless the context otherwise requires, its
subsidiaries and predecessors. All references to "Peak (HK)" herein are to Peak
Plastic & Metal Products (International) Limited, a company incorporated in
Hong Kong and a wholly-owned subsidiary of the Company and, unless the context
otherwise requires, its subsidiaries and predecessors. References in this
Prospectus to the historical business and operations of the Company assume that
the corporate reorganization in 1997 (the "Restructuring") by which, among
other things, Peak (HK) became a wholly-owned subsidiary of the Company and the
Company acquired its other subsidiaries, had already occurred as of the times
to which the references relate. Any discrepancies in the tables included in
this Prospectus between the amounts indicated and the totals thereof are due to
rounding. All references to "US Dollars," "US$" or "$" herein are to United
States Dollars, references to "HK Dollars" or "HK$" are to Hong Kong Dollars
and references to "Fiscal 1994," "Fiscal 1995," "Fiscal 1996," "Fiscal 1997,"
"Fiscal 1998," "Fiscal 1999" and "Fiscal 2000" are to the years ended March 31,
1994, 1995, 1996, 1997, 1998, 1999 and 2000, respectively.
THE COMPANY
The Company is a leading supplier of precision engineered packaging products
for the storage, transportation and automated handling of semiconductor devices
and other electronic components. The Company's products are designed to
interface with automated handling equipment used in the production and testing
of semiconductor and electronic products. The Company's customers include
semiconductor companies such as Texas Instruments, SGS-Thomson, Philips and
Motorola, as well as subcontract assembly and test companies such as ASAT and
ASE. The Company's products are designed to ensure that semiconductor devices
and electronic components, which are often delicate and may have significant
value, are protected from mechanical and electrical damage during storage,
transportation and automated handling.
The Company produces principally matrix trays, shipping tubes, reels and
carrier tape. The Company also produces leadframe boxes and interleaves used in
the storage and transportation of leadframes. In addition, the Company collects
and sells recycled matrix trays and reels using the trade name "SemiCycle." The
Company believes that its recycling programs, whereby the Company collects and
recycles both products manufactured by itself and products manufactured by
others, enable it to expand its customer base by providing it with
opportunities to supply both newly-manufactured and recycled products to
customers.
In recent years, the Company has experienced a significant increase in demand
for its products as a result of unit volume growth and other developments in
the global semiconductor industry. First, the increasing complexity of
semiconductor devices and use of automated production equipment have shifted
the use of packaging products by semiconductor companies away from traditional
products, such as tubes, in favor of products such as matrix trays and carrier
tape which require precision engineering. Second, with the advent of Surface
Mount Technology ("SMT"), increasing lead-count and finer lead-to-lead spacing,
semiconductor devices have become more susceptible to mechanical damage during
shipment. As a result, the use of precision engineered packaging products such
as matrix trays has increased. Third, the Company believes that the recent
trend in the global semiconductor industry towards increased out-sourcing of
various steps of the integrated circuit ("IC") production process, such as
assembly and testing, will also benefit the Company as semiconductor companies
increasingly look for suppliers of packaging products with the ability to
supply large quantities of a wide range of products on short notice to
different subcontractor assembly and test companies at various locations.
3
<PAGE>
During the last three years, the Company's consolidated net sales have
increased from $54.9 million in Fiscal 1996 to $57.6 million in Fiscal 1997 and
to $73.7 million in Fiscal 1998, and its consolidated net income has increased
from $11.5 million in Fiscal 1996 to $13.5 million in Fiscal 1997 and $20.6
million in Fiscal 1998. The Company believes that its growth has largely been
attributable to the successful implementation of its business strategy.
The Company's objective is to increase its market presence in serving the
growing semiconductor and electronics industries by providing top quality
service, precision engineered packaging solutions and recycling alternatives to
manufacturers of semiconductor devices and electronic components through its
integrated manufacturing capability and its recycling programs, with collection
points in Asia, North America and Europe. The key elements of the Company's
business strategy are:
Leverage Industry Expertise of Senior Management. Members of the
Company's senior management team have extensive experience in the
semiconductor industry which provides them with a first hand understanding
of customer and market requirements. The Company believes that the industry
experience and close customer relationships of its senior management enable
the Company to identify and evaluate potential markets for future product
development.
Maintain Close Customer Relationships. The Company maintains close
relationships with its customers through an extensive network of
strategically located sales, customer service and product distribution
sites and by working closely with its customers in developing precision
engineered packaging solutions for the storage, transportation and
automated handling of their products. In addition, the Company's recycling
programs provide it with opportunities to monitor changes in particular
customer requirements.
Shorten Delivery Time. The Company intends to attract and retain
customers on the basis of its ability to deliver large quantities of
products on short notice to meet customer demand. By initiating its
recycling programs, stocking certain key products in a network of Just-in-
Time ("JIT") warehouses, maintained either by the Company's local sales
representatives or the Company, and increasing its tooling capacity and raw
material compounding capabilities, the Company has been able to achieve
shorter production cycles and improve its responsiveness to customer
requirements for flexibility in delivery.
Offer a Broad Range of Products. In recent years, the Company has
expanded its product offerings from tubes to include matrix trays, recycled
matrix trays and tape-and-reel products. The Company's ability to offer a
broad range of products allows the Company to compete effectively with
other suppliers of packaging products to the semiconductor and electronics
industries, a number of which are single-product suppliers.
Increase Volume Supply Capabilities. The Company has been expanding its
production and tooling capacities and its recycling programs so as to
increase its high volume supply capabilities. Since 1992, the Company has
expanded the production capacity of its facilities in Shenzhen, China in
order to meet growing demand. The Company is planning further expansion
through the construction of an additional plant to be located approximately
three miles from the existing production facilities, which will double the
Company's production capacity.
Emphasize Quality Assurance and Process Control. The Company performs
quality assurance and statistical process control procedures at each major
stage of production for its products. These include the inspection of
incoming raw materials, statistical process control at the injection
molding (for trays and reels) and extrusion (for tubes) stages of
production and the inspection and testing of finished products. The
Company's production facilities in Shenzhen, China have been certified as
meeting the ISO 9002 quality standards since October 1994.
4
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
Common Stock of the Selling Shareholder covered
hereby......................................... 1,793,038 Shares
<C> <S>
Common Stock outstanding after the Offering..... 13,461,538 Shares
Use of proceeds................................. The Company will not receive any of
the proceeds from the sale of the
TrENDS or as a result of the
distribution of the TrENDS in
connection therewith. The Company
will not receive any of the proceeds
from any sale by Donaldson, Lufkin
Jenrette Securities Corporation or
other third party of Shares borrowed
from Luckygold under the Securities
Loan Agreement. See "Use of
Proceeds."
Nasdaq National Market symbol................... PEAKF(1)
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA(2)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------------------------------------
1994 1995 1996 1997 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $27,787 $35,115 $54,944 $57,594 $73,705
Gross profit............ 11,327 7,522 21,013 24,918 32,657
Income from operations.. 7,759 3,104 12,334 15,990 20,976
Net income.............. 7,457 2,741 11,490 13,517 20,594
Dividends paid.......... 1,941 -- 9,719 1,294 --
Earnings per Share
Basic:................ $ 0.71 $ 0.26 $ 1.10 $ 1.29 $ 1.61
======= ======= ======= ======= =======
Diluted:.............. $ 0.71 $ 0.26 $ 1.10 $ 1.29 $ 1.59
======= ======= ======= ======= =======
<CAPTION>
Shares outstanding(3)... 10,461,538 10,461,538 10,461,538 10,461,538 12,804,004
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31,
1998
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................... $ 19,214
Total assets................................................... 89,540
Short-term debt(4)............................................. 89
Long-term debt................................................. --
Shareholders' equity........................................... 77,582
</TABLE>
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(1) Prior to October 31, 1997, the Shares traded on Nasdaq under the symbol
"PITLF".
(2) The consolidated financial data have been presented as if the Company,
which was incorporated on January 3, 1997, had been in existence for all
periods presented and 100% of Peak (HK) and other subsidiaries of the
Company had been transferred to the Company and that they had been
consolidated for Fiscal 1994 and subsequent years.
(3) Shares outstanding for each period presented (except for Fiscal 1998) is
based on 10,461,538 Shares outstanding prior to the Company's initial
public offering in June 1997, after giving effect to the Restructuring. See
Note 1 to Notes to Consolidated Financial Statements. Shares outstanding
during Fiscal 1998 is based on the weighted average number of Shares and
common stock equivalents outstanding during such period.
(4) Short-term debt represents bank borrowings (except as of March 31, 1997 and
1998, for which short-term debt consists only of bank borrowings).
5
<PAGE>
RISK FACTORS
In evaluating the Company's business, prospective investors should consider
carefully the following factors in addition to the other information presented
herein. The Company is a holding company and its major operating asset is its
ownership interest in Peak (HK). The Company's only source of cash flow is its
share of the dividends, if any, paid by Peak (HK) and other subsidiaries of
the Company.
Except for the historical information contained herein, this Prospectus
contains forward looking statements, which are subject to significant risks
and uncertainties. Forward looking statements are included in the "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" sections and elsewhere in this
Prospectus. Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results,
performance, or achievements of the Company, or industry results, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. The principal risks
and uncertainties that may cause actual results to vary materially from the
forward looking statements contained herein include those described in the
risk factors set forth below as well as a wide variety of other factors, many
of which are outside the Company's control, including: general economic and
business conditions, particularly in the Asia Pacific Region (as defined
below); industry capacity and trends; competition and competitive pricing
pressures; expansion; the loss of major customers; changes in demand for the
Company's products; cost and availability of raw materials; changes in
business strategy or development plans; changes in the laws of the PRC, Hong
Kong or other jurisdictions; quality of management; and availability, terms
and deployment of capital.
VARIABILITY OF OPERATING RESULTS
The Company's operating results are affected by a wide variety of factors
that could materially affect revenues and profitability or lead to significant
variability of quarterly or annual operating results. These factors include,
among others, the price of raw materials; factors relating to conditions in
the semiconductor and electronics industries such as lower demand for
products, increased price competition, downturns and deterioration of business
conditions; technological changes and changes in production processes in the
semiconductor and electronics industries which could require changes in
packaging products; capital requirements and the availability of funding; the
Company's expansion plan and possible disruptions caused by the installation
of new equipment or the construction of new facilities; the lack of long-term
purchase or supply agreements with customers; the loss of key personnel or the
shortage of available skilled employees; international political or economic
events or developments, including those relating to Hong Kong and the PRC; and
currency fluctuations. Unfavorable changes in the above or other factors could
materially and adversely affect the Company's results of operations or
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DEPENDENCE ON SEMICONDUCTOR AND ELECTRONICS INDUSTRIES
The Company's revenues depend on increased demand for its products from
manufacturers of semiconductor and electronic components. The global
semiconductor industry in recent periods has experienced pricing pressure for
semiconductor products, as supply has been increasing. Any deterioration of
business conditions in the semiconductor industry, including lower demand for
semiconductor products, decreased unit volume of semiconductor products
shipped or other factors resulting in decreased demand for packaging products,
or increased price competition in the semiconductor industry could result in
increased price pressure on suppliers to the semiconductor industry, and could
have a material adverse effect on the Company's results of operations and
financial condition. The semiconductor industry is characterized by rapid
technological change leading to more complex products, evolving industry
standards, intense competition and fluctuations in demand. From time to time,
demand for electronic systems, which generally include both semiconductors and
electronic components, has suffered significant downturns which in some cases
have been prolonged. These downturns have been characterized by diminished
product demand, product overcapacity and accelerated erosion of average
selling prices. No assurance can be given that any future downturn in the
semiconductor or electronics industries will not be severe or that the
Company's results of operations or financial condition will not be materially
and adversely affected by such downturns or other developments.
6
<PAGE>
MANAGEMENT OF EXPANSION
The Company has expanded its production capacity significantly in recent
years and expects to continue to expand capacity in future periods. See
"Business--Production Facilities." To manage its growth, the Company must
continue to implement and improve its operational, financial and quality
assurance and process control systems and to expand, train and manage its
employee base. Further, the Company will be required to continue to manage
multiple relationships with various customers and other third parties. While
the Company believes it has effectively managed its expansion in recent years,
there can be no assurance that the Company will be able in the future to
manage its expansion effectively. The implementation by the Company of its
expansion program is expected to place additional demands on the Company's
managerial, financial, logistical and other resources, which could adversely
affect its existing operations. In particular, the failure of the Company to
implement its expansion plan in a timely manner could adversely affect its
ability to maintain, expand and diversify its customer base. See "Business--
Production Facilities." In addition, there can be no assurance that the
implementation by the Company of its expansion plan will not adversely affect
its existing operations.
DEPENDENCE ON SIGNIFICANT CUSTOMERS
In the aggregate, the top ten customers accounted for 51.7%, 51.2% and 53.5%
of the Company's net sales in Fiscal 1996, Fiscal 1997 and Fiscal 1998,
respectively. A significant portion of the Company's net sales has
historically been and is expected to continue to be made to companies
controlled by Mr. T.L. Li, a principal beneficial shareholder of the Company
through his ownership of all of the outstanding shares of Luckygold. Such
companies include ASAT Limited ("ASAT"), a subcontract assembly and test
company, QPL Limited ("QPL"), a leadframe manufacturer and other companies
controlled by the QPL International Holdings Limited ("QPL Holdings") group
(the "QPL Holdings Group"), which together accounted for approximately 20.9%,
16.1% and 16.3% of the Company's net sales in Fiscal 1996, Fiscal 1997 and
Fiscal 1998, respectively. See "Principal Shareholders and Selling
Shareholder," "Management" and "Certain Transactions."
The ability of the Company to maintain close, mutually beneficial
relationships with its leading customers is important to the ongoing growth
and profitability of its business. Although the Company's sales to specific
customers have varied from year to year, the Company's results of operations
have been dependent on a number of significant customers and the conditions of
their respective industries. As a result of the amount of time required to
develop working relationships with new customers, the Company's results of
operations have been dependent on its existing customers and the conditions of
their respective industries. All of the Company's customers operate in the
global semiconductor and electronics industries which historically have been
highly cyclical. As a result of the concentration of the Company's customer
base, the loss or cancellation of business from, or significant changes in
scheduled deliveries or decreases in the prices of products or services
provided to, any of these customers could materially and adversely affect the
Company's results of operations and financial condition. The Company's sales
are made pursuant to purchase orders, and therefore, the Company generally has
no agreements with or commitments from its customers for the purchase of
products. Although customers typically provide the Company with forecasts of
their requirements, such forecasts are not binding. No assurance can be given
that the Company's customers will maintain or increase their sales volumes or
orders for the Company's products or that the Company will be able to maintain
or add to its existing customer base.
COMPETITION
The markets for the Company's products and services are highly competitive.
The Company's products compete with similar products manufactured by other
companies, some of which have substantially greater financial resources than
the Company. See "Business--Competition." The Company's competitors
continually evaluate plans to increase their manufacturing capacity, improve
their production processes or invest in new facilities. In addition, the
Company's competitors may have plans to establish recycling programs and
operations similar to those of the Company's and other companies may have
plans to enter the packaging products business. Any such increased capacity
could result in excess capacity and more intense competition and could have a
material adverse effect on the Company's results of operations and financial
condition. The Company's results
7
<PAGE>
of operations have benefitted in recent years from the operations of its
recycling programs. There can be no assurance that the Company's results in
the future will benefit to the same extent from the operations of its
recycling programs. While the Company is not currently aware that any of its
major competitors operate comparable recycling programs, there is no assurance
that the Company's competitors will not commence operations of such recycling
programs or that any such recycling programs, if commenced, will not compete
successfully with the Company's programs or that the Company's financial
condition and results of operations would not be materially and adversely
affected as a result.
While the Company has sought patent protection in instances in which it
believes that a patent will provide sufficiently broad coverage and protection
for certain of its new product features, the Company has chosen not to attempt
to obtain patents for its processes and production techniques. Instead, the
Company intends to rely on certain unpatented proprietary processes and
production techniques to maintain and develop its competitive position. There
can be no assurance that others will not independently develop similar
processes or production techniques or obtain access to the Company's
unpatented proprietary processes or production techniques.
FLUCTUATIONS IN THE PRICES OF RAW MATERIALS
Although the Company believes that supplies of raw materials used in the
Company's production processes currently are adequate, increases in the prices
of various critical materials could occur in the future due to interruption of
supply or increased industry demand. Any such increases would result in higher
costs, which would have a material adverse effect on the Company's results of
operations and financial condition. See "Business--Raw Materials." In recent
periods, volatility in the price of PVC resin has had a material adverse
effect on the Company's results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
CURRENCY EXCHANGE RATE FLUCTUATIONS
The Company's sales are denominated primarily in US Dollars, while its costs
of goods sold are generally incurred in US Dollars, Hong Kong Dollars and
Renminbi, and its operating expenses are generally denominated in Renminbi,
Hong Kong Dollars, US Dollars and Malaysian Ringgit. In addition, a
substantial portion of the Company's capital expenditures, primarily for the
purchase of equipment, has been and is expected to continue to be denominated
in US Dollars, Japanese Yen and Malaysian Ringgit. Consequently, a portion of
the Company's costs and operating margins may be affected by fluctuations in
exchange rates, primarily between the US Dollar and other currencies. The
Company's results of operations and financial condition could be adversely
affected by fluctuations in currency exchange rates or the imposition of new
or additional currency controls in the jurisdictions in which it operates. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Primarily in response to recent developments in the Southeast
Asian currency markets, the Company from time to time engages in derivative
trading activities, such as entering into forward contracts, to hedge its
currency exchange exposure. See Note 12 to the Notes to the Consolidated
Financial Statements. In addition, many of the Company's competitors are
located in countries whose currencies have devalued significantly against the
US Dollar beginning in the second half of 1997. As a result of such
devaluation, these competitors' products have become less expensive in US
dollar terms. This reduction could result in the Company's customers
purchasing products from these competitors rather than from the Company, which
could have a significant adverse effect on the Company's net sales and results
of operation. See "--Deterioration of Economic Conditions in the Asia Pacific
Region" and "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Currency Exchange Rate Fluctuations."
DETERIORATION OF ECONOMIC CONDITIONS IN THE ASIA PACIFIC REGION
A significant amount of the Company's sales are made in Hong Kong,
Singapore, the Philippines and other countries in East and Southeast Asia (the
"Asia Pacific Region"). Accordingly, the Company's financial condition and
results of operations and market price of the Shares may be affected by
changes in governmental policies, inflation, increasing interest rates, social
instability and other political, economic, diplomatic or social
8
<PAGE>
developments in or affecting the Asia Pacific Region, which are not within the
control of the Company. In recent months, many countries in the Asia Pacific
Region have experienced considerable currency volatility and depreciation,
high interest rates, stock market volatility and declining asset values which
have contributed to net foreign capital outflows, an increase in the number of
insolvencies and a decline in business and consumer spending.
Recent economic developments in the Asia Pacific Region could have a
material adverse effect on the Asia Pacific Region's business and consumer
demand for products that use semiconductor and electronics devices. Such
demand generally rises as the overall level of economic activity increases and
falls as such activity decreases. In addition, the recent currency
devaluations in the Asia Pacific Region could result in accelerated price
erosion of semiconductor and electronic products as products manufactured in
countries whose currencies have devalued significantly against the US dollar
become less expensive in US dollar terms. Any adverse effect on the global
semiconductor and electronics industries as a result of slower demand for
products in the Asia Pacific Region or accelerated product price erosion
arising from currency devaluations in the Asia Pacific Region could have a
material adverse effect on the Company's financial condition or results of
operations, especially if current business and economic conditions in the Asia
Pacific Region continue or deteriorate further.
CONCENTRATION OF OPERATIONS IN THE PRC
As of March 31, 1998, substantially all of the Company's fixed assets and
inventories were located in Shenzhen, China. The Company's main production
facilities are located in Shenzhen, China and are operated by an unaffiliated
PRC company under a processing agreement, pursuant to which such company
provides all of the personnel for the operation of the Company's facilities
and renders assistance in dealing with matters relating to the import of raw
materials and the export of the Company's products. The Company's additional
production facilities will be operated under similar arrangements. The
Company's existing production facilities in Shenzhen, China are, and the
Company's additional facilities in Shenzhen, China will be, located on land
leased from the PRC government by a wholly-owned subsidiary of the Company
under land use certificates and agreements with terms of fifty years. The
Company's assets and facilities located in the PRC and the PRC company's
operation of such facilities are subject to the laws and regulations of the
PRC and the Company's results of operations in the PRC are subject to the
economic and political situation in the PRC.
The operations of the Company's production facilities in Shenzhen, China may
be adversely affected by changes in the laws and regulations of the PRC (or
the interpretation thereof), such as those relating to taxation, import and
export tariffs, environmental regulations, land use rights, property and other
matters. The Company currently exports all the products manufactured at its
production facilities in Shenzhen, China. Accordingly, the Company is not
subject to certain PRC taxes and is exempt from customs duties on imported raw
materials and exported products. There is no assurance, however, that the
Company will not become subject to PRC taxes or will not be required to pay
customs duties in the future. In the event that the Company is required to pay
PRC taxes or customs duties, the Company's results of operations could be
materially and adversely affected. The Company believes that its operations in
Shenzhen, China are in compliance with applicable PRC legal and regulatory
requirements. However, there can be no assurance that the central or local
governments of the PRC will not impose new, stricter regulations or
interpretations of existing regulations which would require additional
expenditures.
The economy of the PRC differs from the economies of many countries in such
respects as structure, government involvement, level of development, growth
rate, capital reinvestment, allocation of resources, self- sufficiency, rate
of inflation and balance of payments position, among others. In the past, the
economy of the PRC has been primarily a planned economy subject to State
plans. Since 1978, the PRC government has been reforming the PRC's economic
and political systems. Such reforms have resulted in significant economic
growth and social change. There can be no assurance, however, that the PRC
government's policies for economic reforms will be consistent or effective.
The Company's results of operations and financial position may be adversely
affected by changes in the PRC's political, economic or social conditions.
9
<PAGE>
CONSIDERATIONS RELATING TO HONG KONG
The Company maintains its principal executive offices, a sales office and
JIT warehouse in Hong Kong and its general invoicing and accounting functions
are centralized at its offices in Hong Kong. On July 1, 1997, sovereignty over
Hong Kong reverted from the United Kingdom to the PRC, and Hong Kong has
become a Special Administrative Region ("SAR") of the PRC. The Joint
Declaration signed by the PRC government and the government of the United
Kingdom on December 19, 1984 (the "Joint Declaration") provides that the basic
policies of the PRC regarding Hong Kong will be stipulated in the basic law of
Hong Kong which was enacted by the National People's Congress of the PRC on
April 4, 1990 (the "Basic Law"). Although the Basic Law provides that Hong
Kong will have a high degree of legislative, judicial and economic autonomy,
there can be no assurance that the general economic position of Hong Kong, and
the Company's results of operations and financial condition, will not be
adversely affected as a consequence of the exercise of PRC sovereignty over
Hong Kong.
Under the Hong Kong tax authority's Departmental Interpretation and Practice
Notes, a company based in Hong Kong but with substantially all of its
manufacturing operations located in the PRC conducted pursuant to a processing
agreement entered into with a PRC company can enjoy profit apportionment
through which only 50% of its manufacturing profit is subject to Hong Kong
profits tax. Substantially all of the Company's manufacturing operations are
located in Shenzhen, China. See "Business--Employees." Effective April 1,
1998, the profits tax rate in Hong Kong is 16.0%, a change from the former
profits tax rate, which was 16.5%. Under profits apportionment, only 50% of
the profits of the Company is subject to Hong Kong profits tax and as a
result, the Company enjoys a lower effective tax rate than would otherwise be
the case. Such tax concession has been granted based on an annual application
by the Company and there can be no assurance that the Hong Kong tax authority
will continue to grant such tax concession to the Company and other Hong Kong
companies with manufacturing operations in China, or that the Company will not
lose such concession in the future as a result of changes in Hong Kong tax law
or the interpretation of such law. In the event that such tax concessions are
unavailable to the Company, the Company's results of operations could be
materially and adversely affected.
RELATIONSHIP WITH PRINCIPAL SHAREHOLDER AND POTENTIAL CONFLICTS OF INTERESTS
Upon completion of the Offering, Mr. T.L. Li, through his ownership of all
of the outstanding shares of Luckygold, will continue to beneficially own
approximately 58.6% of the outstanding Shares. Until and to the extent
Luckygold delivers Shares to the Trust pursuant to the forward purchase
contract (the "Contract") in connection with the offering of TrENDS, Luckygold
will continue to own and Mr. T.L. Li will continue to control the Shares
subject to the Contract and retain the voting rights with respect to such
Shares. Following the mandatory exchange of TrENDS, assuming no other
disposition of Shares by Luckygold or change in the Company's capitalization
and even assuming a cash settlement alternative is not exercised, Mr. T.L. Li
may continue to be in a position to substantially influence actions that
require shareholders' approval, including the timing and payment of dividends
and certain other actions to be taken by the Company, and the election of the
Board of Directors of the Company. In addition, certain members of the
Company's Board of Directors serve as directors of companies in the QPL
Holdings Group. See "Management" and "Certain Transactions."
A significant portion of the Company's net sales historically has been and
is expected to continue to be made to companies controlled by Mr. T.L. Li, a
principal beneficial shareholder of the Company through his ownership of all
of the outstanding shares of Luckygold, including ASAT, QPL and other
companies in the QPL Holdings Group, which together accounted for
approximately 20.9%, 16.1% and 16.3% of the Company's net sales in Fiscal
1996, Fiscal 1997 and Fiscal 1998, respectively. Accordingly, any adverse
development in the operations, competitive position or customer base of ASAT,
QPL or other companies in the QPL Holdings Group or the Company's relationship
with the companies in the QPL Holdings Group could have a material adverse
effect on the results of operations and financial condition of the Company.
See "Business--Customers" and "Certain Transactions." EEMS Italia S.p.A.
("EEMS"), a memory IC assembly and test company, has acted as the Company's
sales agent in Europe since 1995. After the Offering, Mr. T.L. Li will
continue to be the
10
<PAGE>
controlling shareholder and Chairman of QPL Holdings (the parent holding
company of the QPL Holdings Group) and of EEMS. In addition, Mr. T.L. Li may
take actions as the controlling shareholder of the companies in the QPL
Holdings Group and as the controlling shareholder of EEMS that are not in the
best interests of the Company or its shareholders.
After the Offering, QPL, ASAT and EEMS will continue to be customers of the
Company and may engage in transactions from time to time with the Company that
are material to the Company. See "Certain Transactions."
POTENTIAL DIFFICULTIES IN PROTECTING SHAREHOLDER RIGHTS
The Company's corporate affairs are governed by its Memorandum of
Association and Bye-laws and by the laws governing corporations incorporated
in Bermuda. The rights of shareholders of the Company and the responsibilities
of members of the Company's Board of Directors under Bermuda law are different
from those applicable to a corporation incorporated in the United States and,
therefore, the shareholders of the Company may have more difficulty in
protecting their interests in connection with actions by the management,
members of the Company's Board of Directors or controlling shareholders of the
Company than they would as shareholders of a corporation incorporated in the
United States. See "Description of the Shares."
PRICE VOLATILITY
The market price of the Shares has been highly volatile and may continue to
be subject to wide fluctuations in response to quarterly variations in
operating results, changes in financial estimates by securities analysts, or
other events or factors. In addition, the equity markets in the United States
have experienced significant price and volume fluctuations that have
particularly affected the market prices of equity securities of many high
technology companies and that often have been unrelated to the operating
performance of such companies. These broad market fluctuations may adversely
affect the market price of the Shares.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Shares in the public market following the
Offering (including 700,000 Shares issuable upon the exercise of outstanding
options under the Company's share option plan) could adversely affect the
market price of the Shares. See "Management--Share Option Plan." Upon
completion of the Offering, the Company will continue to have approximately
13,461,538 Shares outstanding, assuming no exercise of options pursuant to the
Company's share option plan. Of these outstanding Shares, approximately 12.7
million Shares, including the Shares covered hereby, if and to the extent
transferred to nonaffiliates of the Company in the Exchange, will be freely
tradeable within the United States without restriction or further registration
under the Securities Act by persons other than "affiliates" of the Company as
that term is defined in Rule 144 under the Securities Act. See "Shares
Eligible for Future Sale."
The Company, Mr. T.L. Li, who through his ownership of all of the
outstanding shares of Luckygold will control approximately 58.6% of the
outstanding Shares following the Offering (including the shares covered
hereby), and the executive officers and directors of the Company have agreed
they will not offer, sell, contract to sell, grant any option to purchase, or
otherwise dispose of any Shares or any securities convertible into or
exercisable or exchangeable for such Shares or in any other manner transfer
all or a portion of the economic consequences associated with the ownership of
any such Shares, except to the Underwriters of the TrENDS, for a period of 90
days from the date of the prospectus with respect to the offering of the
TrENDS, subject to certain exceptions for pledges and, in the case of the
Company, the grant and exercise of employee stock options and certain other
exceptions, without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation. However, Donaldson, Lufkin & Jenrette Securities
Corporation may, in its sole discretion and at any time without notice,
release all or any portion of the securities subject to lock-up agreements.
Following the expiration of such lock-up periods, such Shares will be eligible
for resale, subject to the registration requirements under the Securities Act.
See "Shares Eligible for Future Sale."
11
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the TrENDS
or as a result of the distribution of the Shares in connection therewith. The
Company will not receive any of the proceeds from any sale by Donaldson,
Lufkin & Jenrette Securities Corporation or other third party of Shares
borrowed from Luckygold under the Securities Loan Agreement. None of such
proceeds described above will be available for use by the Company or otherwise
for the Company's benefit.
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of the Company as of March 31, 1998.
<TABLE>
<CAPTION>
AS OF MARCH
31, 1998
(IN THOUSANDS)
<S> <C>
Short-term debt (l).............................................. $ 89
=======
Long-term debt................................................... $ --
Shareholders' equity
Common stock................................................... 135
Additional paid-in-capital..................................... 34,034
Retained earnings.............................................. 44,117
Other reserves................................................. (704)
-------
Total shareholders' equity................................... 77,582
-------
Total capitalization............................................. $77,582
=======
</TABLE>
- ---------------------
(1) Short-term debt represents bank borrowings.
12
<PAGE>
PRICE RANGE OF SHARES
Effective October 31, 1997, the Shares began to trade on Nasdaq under the
symbol "PEAKF". Prior to October 31, 1997, the Shares traded on Nasdaq under
the symbol "PITLF". Public trading of the Shares commenced on June 20, 1997.
Prior to that time, there was no public market for the Shares. The following
table sets forth the high and low sale prices for the Shares as reported by
Nasdaq for the periods indicated:
<TABLE>
<CAPTION>
PRICE RANGE
OF COMMON
STOCK
----------------
HIGH LOW
<S> <C> <C>
Year Ending March 31, 1998:
1st Quarter (from June 20, 1997)......................... $12 3/4 $11 7/8
2nd Quarter.............................................. 26 1/8 10 7/8
3rd Quarter.............................................. 31 1/2 15 1/8
4th Quarter.............................................. 25 7/8 18 1/2
Year Ending March 31, 1999:
1st Quarter (through June 11, 1998)...................... $25 5/16 $12 1/4
</TABLE>
On June 11, 1998 the reported last sale price of the Shares on Nasdaq was
$12 1/4 per Share. As of June 11, 1998, there were 7 holders of record of the
Shares.
DIVIDEND POLICY
The Company intends to retain its earnings to finance the development and
expansion of its business operations and does not intend to pay dividends for
the foreseeable future.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated income statement data for the years ended March
31, 1996, 1997 and 1998 and the selected consolidated balance sheet data as of
March 31, 1997 and 1998 set forth below are derived from the Company's audited
financial statements included elsewhere herein and should be read in
conjunction with, and are qualified in their entirety by reference to, such
financial statements, including the notes thereto. The selected consolidated
income statement data for the years ended March 31, 1994 and 1995 and the
selected consolidated balance sheet data as of March 31, 1994, 1995 and 1996
set forth below are derived from the Company's audited financial statements
not included herein. The consolidated financial statements have been prepared
and presented in accordance with U.S. GAAP.
The consolidated financial data set forth below have been presented as if
the Company, which was incorporated January 3, 1997, had been in existence for
all periods presented and 100% of Peak (HK) and other subsidiaries of the
Company had been transferred to the Company and that they had been
consolidated for Fiscal 1994 and subsequent years. The consolidated financial
data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and related notes thereto, included
elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------------------------
1994 1995 1996 1997 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................. $27,787 $35,115 $54,944 $57,594 $ 73,705
Cost of goods sold........ (16,460) (27,593) (33,931) (32,676) (41,048)
------- ------- ------- ------- --------
Gross profit.............. 11,327 7,522 21,013 24,918 32,657
Operating expenses:
General and
administrative and
research and
development............ (2,632) (2,616) (5,385) (4,730) (6,194)
Selling and marketing... (936) (1,802) (3,294) (4,198) (5,487)
------- ------- ------- ------- --------
Income from operations.... 7,759 3,104 12,334 15,990 20,976
Other income.............. 276 234 1,133 83 926
Net interest (expense)
income................... (80) (405) (750) (1,320) 517
------- ------- ------- ------- --------
Income before income
taxes.................... 7,955 2,933 12,717 14,753 22,419
Provision for income
taxes.................... (498) (192) (1,227) (1,236) (1,825)
------- ------- ------- ------- --------
Net income................ $ 7,457 $ 2,741 $11,490 $13,517 $ 20,594
======= ======= ======= ======= ========
Dividends paid............ $ 1,941 $ -- $ 9,719 $ 1,294 $ --
Earnings per Share:
Basic................... $ 0.71 $ 0.26 $ 1.10 $ 1.29 $ 1.61
======= ======= ======= ======= ========
Diluted................. $ 0.71 $ 0.26 $ 1.10 $ 1.29 $ 1.59
======= ======= ======= ======= ========
(basic)(1)............... 10,461,538 10,461,538 10,461,538 10,461,538 12,804,004
<CAPTION>
AS OF MARCH 31,
----------------------------------------------------------
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (IN THOUSANDS)
Cash and cash
equivalents............ $ 1,180 $ 1,828 $ 924 $ 1,814 $ 19,214
Total assets............ 24,288 35,210 38,423 53,795 89,540
Short-term debt(2)...... 11,868 13,879 19,156 21,170 89
Long-term debt.......... 1 -- -- -- --
Shareholders' equity.... 9,255 11,701 13,960 26,272 77,582
</TABLE>
- ---------------------
(1) Shares outstanding for each period presented (except for Fiscal 1998) is
based on 10,461,538 Shares outstanding prior to the Company's initial
public offering in June 1997, after giving effect to the Restructuring.
Shares outstanding during Fiscal 1998 is based on the weighted average
number of Shares and common stock equivalents outstanding during such
period.
(2) Short-term debt consists of bank borrowings, amount due to shareholder and
current portion of long-term debt (except as of March 31, 1997 and 1998,
for which short-term debt consists only of bank borrowings).
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following information is based on, and should be read in conjunction
with, the consolidated financial statements of the Company and the related
notes thereto included elsewhere herein.
GENERAL
The Company produces matrix trays, shipping tubes, reels and carrier tape
for the storage, transportation and automatic handling of semiconductor
devices and other electronic components. The Company also produces leadframe
boxes and interleaves used in the storage and transportation of leadframes. In
addition, the Company sells recycled matrix trays and reels under the trade
name "SemiCycle." In Fiscal 1998, all of the Company's sales were made to
customers located in Asia, North America and Europe. See "Business--Sales and
Marketing."
In recent years, the Company has experienced a significant increase in
demand for its products as a result of growth in the global semiconductor and
electronics industries. Unit volume of semiconductor and electronic components
shipped is an important determinant of demand for the Company's products.
There has been an industry trend to integrate more semiconductors and
electronic components onto a single chip, which could in the future have an
adverse effect on the Company's results of operations or financial condition.
The Company's consolidated net sales increased by 28.0% to $73.7 million in
Fiscal 1998, compared to $57.6 million in Fiscal 1997, and its consolidated
net income increased by 52.4% to $20.6 million in Fiscal 1998, compared to
$13.5 million in Fiscal 1997. During the last three years, the Company's
consolidated net sales have increased from $54.9 million in Fiscal 1996 to
$57.6 million in Fiscal 1997 and to $73.7 million in Fiscal 1998, and its
consolidated net income has increased from $11.5 million in Fiscal 1996 to
$13.5 million in Fiscal 1997 and to $20.6 million in Fiscal 1998. The Company
believes that its growth has largely been attributable to the implementation
of its business strategy. In Fiscal 1998, the Company's gross margin increased
to 44.3%, compared to 43.3% in Fiscal 1997, and the Company's operating margin
increased to 28.5%, compared to 27.8% in Fiscal 1997.
The Company has expanded its production capacity significantly in recent
years and expects to continue to expand capacity in future periods with the
construction of an additional facility in Shenzhen, China, which is expected
to be operational by Fiscal 2000. Depreciation expense increased 40.4% from
$3.6 million in Fiscal 1997 to $5.0 million in Fiscal 1998. The Company
expects that depreciation expense will increase correspondingly with the
increase in value of property, plant and equipment. As of the date of this
Prospectus, the Company has expended approximately $3.7 million of $33.0
million budgeted over the next two years for the construction of the new
facility in Shenzhen, China. See "--Liquidity and Capital Resources."
15
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain income
statement items for the Company as a percentage of net sales.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------
1996 1997 1998
<S> <C> <C> <C>
Net sales........................................... 100.0% 100.0% 100.0%
Cost of goods sold.................................. (61.8) (56.7) (55.7)
------- ------- -------
Gross profit........................................ 38.2 43.3 44.3
Operating expenses:
General and administrative and research and
development...................................... (9.8) (8.2) (8.4)
Selling and marketing............................. (6.0) (7.3) (7.4)
------- ------- -------
Income from operations.............................. 22.4 27.8 28.5
------- ------- -------
Income before income taxes.......................... 23.1 25.6 30.4
Provision for income taxes.......................... (2.2) (2.1) (2.5)
------- ------- -------
Net income.......................................... 20.9% 23.5% 27.9%
======= ======= =======
</TABLE>
FISCAL 1998 COMPARED TO FISCAL 1997
Net Sales. Net sales increased by 28.0% to $73.7 million in Fiscal 1998 from
$57.6 million in Fiscal 1997, primarily as a result of an increase in the
volume of the Company's tray products, tube products, reels, carrier tape and
other products sold. The increase in the Company's net sales was also
partially attributable to slightly higher average realized sales prices of the
Company's products.
Gross Profit. Gross profit increased by 31.1% to $32.7 million in Fiscal
1998 from $24.9 million in Fiscal 1997. Cost of goods sold increased by 25.6%
to $41.0 million in Fiscal 1998 from $32.7 million in Fiscal 1997. The
Company's gross margin improved to 44.3% in Fiscal 1998 from 43.3% in Fiscal
1997, primarily as a result of lower raw material costs and the increased
proportion of the Company's product mix represented by tape and reel products,
which tend to generate higher gross margins than trays or tubes.
Income from Operations. Operating income increased by 31.2% to $21.0 million
in Fiscal 1998 from $16.0 million in Fiscal 1997. The Company's operating
margin improved to 28.5% in Fiscal 1998 from 27.8% in Fiscal 1997, primarily
as a result of improvements in the Company's gross margin, partially offset by
an increase in operating expenses.
General and Administrative and Research and Development Expenses. General
and administrative and research and development expenses increased by 31.0% to
$6.2 million in Fiscal 1998 from $4.7 million in Fiscal 1997 primarily due to
an increase in research and development expenses incurred in connection with
the continuing development of the Company's tape and reel product line.
General and administrative and research and development expenses increased as
a percentage of total sales to 8.4% in Fiscal 1998 from 8.2% in Fiscal 1997,
primarily due to an increase in sales.
Selling and Marketing Expenses. Selling and marketing expenses increased by
30.7% to $5.5 million in Fiscal 1998 from $4.2 million in Fiscal 1997,
primarily as a result of additional staff hired in connection with the
expanded sales and marketing of the Company's existing products as well as new
products such as tape and reel products.
16
<PAGE>
Net Income. Net income increased by 52.4% to $20.6 million in Fiscal 1998
from $13.5 million in Fiscal 1997. Net income as a percentage of sales
improved to 27.9% in Fiscal 1998 from 23.5% in Fiscal 1997. This increase
reflected the foregoing factors, as well as a decrease in interest expense for
short-term bank borrowings and an increase in other income (including interest
on deposits) due to increased funds available from the Company's initial
public offering in June 1997.
FISCAL 1997 COMPARED TO FISCAL 1996
Net Sales. Net sales increased by 4.8% to $57.6 million in Fiscal 1997 from
$54.9 million in Fiscal 1996. Net sales of trays increased by $1.2 million
over the period reflecting the effects of a 16.3% increase in sales volume,
substantially offset by a 11.1% decrease in average realized sales price. The
increase in the aggregate sales volume of the Company's tray products
reflected principally an increase in sales volume of recycled, low temperature
and non-bakeable trays, partially offset by decreases in the sales volume of
high temperature trays. Average realized sales price for the Company's tray
products decreased in the period reflecting principally a decrease in the
average realized sales price for recycled trays and high temperature trays,
partially offset by increases in the average realized sales price for the
Company's other tray products. The average realized price for recycled trays
decreased primarily as a result of a change in the product mix of the
Company's recycled trays reflecting increased sales of lower-priced low
temperature trays, principally in Taiwan and Japan. Net sales of tubes
decreased 18.5% to $8.6 million in Fiscal 1997 from $10.5 million in Fiscal
1996, while net sales of reels increased by 52.7% to $2.1 million in Fiscal
1997 from $1.4 million in Fiscal 1996, reflecting an increase in the
proportion of the Company's product mix represented by newer products such as
reels.
Gross Profit. Gross profit increased 18.6% to $24.9 million in Fiscal 1997
from $21.0 million in Fiscal 1996. Cost of goods sold decreased 3.7% to $32.7
million in Fiscal 1997 from $33.9 million in Fiscal 1996. Such decrease
resulted primarily from lower raw material costs due principally to lower
volumes of raw materials purchased by the Company as a result of an increase
in the use of recycled materials in manufacturing using the Company's
proprietary processes and production techniques. In addition, raw material
costs were lower in Fiscal 1997 compared to Fiscal 1996 as a result of the
lower average price of PVC resin. The Company's gross margin improved to 43.3%
in Fiscal 1997 from 38.2% in Fiscal 1996 primarily as a result of lower raw
material costs and the increased proportion of the Company's product mix
represented by reels, which tend to generate higher gross margin than tubes
(which represented a lower proportion of the Company's product mix in Fiscal
1997 compared to Fiscal 1996).
Income from Operations. Income from operations increased by 29.6% to $16.0
million in Fiscal 1997 from $12.3 million in Fiscal 1996. The Company's
operating margin improved to 27.8% in Fiscal 1997 from 22.4% in Fiscal 1996
primarily as a result of improvements in the Company's gross margin, partially
offset by an increase in selling and marketing expenses.
General and Administrative and Research and Development Expenses. General
and administrative and research and development expenses decreased 12.2% to
$4.7 million in Fiscal 1997 from $5.4 million in Fiscal 1996 primarily as a
result of reduced collection and administrative expenses relating to the
Company's recycling operations in the United States as the Company began
purchasing recycled trays collected by the SemiCycle Foundation instead of
collecting such trays itself. See "Certain Transactions."
Selling and Marketing Expenses. Selling and marketing expenses increased
27.4% to $4.2 million in Fiscal 1997 from $3.3 million in Fiscal 1996
primarily as a result of additional staff hired in connection with the
sales and marketing of new products such as tape and reel products.
Net Income. Net income increased 17.6% to $13.5 million in Fiscal 1997 from
$11.5 million in Fiscal 1996. This increase reflected the foregoing factors,
as well as a decrease in the Company's effective tax rate to 8.4% in Fiscal
1997 compared to 9.6% in Fiscal 1996, partially offset by an increase in
interest expense to $1.4 million in Fiscal 1997 from $0.8 million in Fiscal
1996. The decrease in the effective tax rate was due primarily
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to the effects of a lower proportion of the Company's profits in Fiscal 1997
accounted for by its operations located in the United States, which have
higher applicable tax rates. The increase in interest expense was due to the
increase in bank borrowings incurred for working capital purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically met a significant portion of its cash requirements
from cash flow from operations and, prior to its initial public offering in
June 1997, shareholder loans, generally at no interest, from Mr. T.L. Li, as
well as short-term bank loans guaranteed by Mr. T.L. Li. The Company's primary
uses of cash have been to fund capital expenditures related to the expansion
of its facilities and operations, dividend payments and working capital
requirements. The Company intends to continue to retain its earnings to
finance the development and expansion of its business operations and does not
intend to pay dividends for the foreseeable future. The Company's net cash
provided by operating activities was $15.5 million in Fiscal 1998, compared to
$9.5 million in Fiscal 1997 and $6.8 million in Fiscal 1996.
The Company incurred capital expenditures of $14.5 million for the
acquisition of new equipment in the Company's current facility and $1.2
million for the construction of an additional facility in Shenzhen, China
during Fiscal 1998. The Company incurred capital expenditures of $7.2 million
in Fiscal 1997 and $4.6 million in Fiscal 1996, primarily for the acquisition
of new equipment in the Company's current facility. See Note 14 of Notes to
Consolidated Financial Statements. As of March 31, 1998, the Company had
commitments for capital expenditures of $0.3 million. In connection with the
Company's construction of an additional facility in Shenzhen, China and the
acquisition of equipment for such new facility, the Company has budgeted
aggregate capital expenditures of approximately $33.0 million for Fiscal 1999
and Fiscal 2000. The new facility is expected to be operational by Fiscal
2000. As of the date of this Prospectus, the Company has expended
approximately $3.7 million of such budgeted amount. The actual amounts of
capital expenditures may vary substantially from those budgeted or estimated
for a variety of reasons, including changes in market conditions,
unavailability or changes in scheduled delivery of specific equipment, changes
in interest rates and other factors. In addition, the Company plans to
continue to expand capacity in future periods from cash on hand, including the
proceeds of its June 1997 initial public offering, cash flow from operations
and new bank borrowings as required.
As of March 31, 1998, the Company had total outstanding indebtedness of
$0.09 million, representing unsecured bank borrowings. These bank borrowings
are at floating interest rates which, as of March 31, 1998, had a weighted
average rate of 9.2%. Mr. T.L. Li no longer guarantees any of the Company's
bank loans or overdrafts. Neither the Company's ability to obtain bank
financing nor its cost of funds has been materially affected. As of March 31,
1998, the Company had available certain unused short-term lines of credit. See
Note 6 of Notes to Consolidated Financial Statements.
From time to time, the Company may evaluate possible investments or
acquisitions and may, if a suitable opportunity arises, make such an
investment or acquisition. The Company currently has no commitments to make
any material investments or acquisitions.
PVC RESIN PRICE
PVC resin, the principal raw material used in the manufacture of tubes,
together with additives used in the manufacture of tubes accounted for 22.2%,
24.2% and 17.4% of the Company's total raw material costs in Fiscal 1996,
Fiscal 1997 and Fiscal 1998, respectively. While the Company believes that,
principally as a result of increased production capacity by suppliers, a
severe shortage in the supply of PVC resin is unlikely to occur in the
foreseeable future, there can be no assurance that such shortage will not
occur. Any price increases would result in higher costs, which could have a
material adverse effect on the Company's results of operations and financial
condition. The Company currently maintains approximately two to three months
stock of PVC resin and other raw materials used in its production processes,
and increases such stock when it believes prices are
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favorable. The Company does not, and does not intend to, enter into futures
contracts or use any financial instruments to hedge its exposure to
fluctuations in the price of PVC resin or other raw materials used in its
production processes.
CURRENCY EXCHANGE RATE FLUCTUATIONS
The Company's sales are denominated primarily in US Dollars while its costs
of goods sold are generally incurred in US Dollars, Hong Kong Dollars and
Renminbi, and its operating expenses are generally denominated in Renminbi,
Hong Kong Dollars, US Dollars and Malaysian Ringgit. In addition, a
substantial portion of the Company's capital expenditures, primarily for the
purchase of equipment, has been and is expected to continue to be denominated
in US Dollars, Japanese Yen and Malaysian Ringgit. Consequently, a portion of
the Company's costs and operating margins may be affected by fluctuations in
exchange rates, primarily between the US Dollar and other currencies. The
Company's results of operations and financial condition could be adversely
affected by fluctuations in currency exchange rates or the imposition of new
or additional currency controls in the jurisdictions in which it operates.
Primarily in response to recent developments in the Southeast Asian currency
markets, the Company from time to time engages in derivatives trading
activities, such as entering into forward contracts, to hedge its currency
exchange exposure. See Note 12 to the Notes to the Consolidated Financial
Statements. In addition, many of the Company's competitors are located in
countries whose currencies have devalued significantly against the US Dollar
beginning in the second half of 1997. As a result of such devaluation, these
competitors' products have become less expensive in US dollar terms. This
reduction could result in the Company's customers purchasing products from
these competitors rather than from the Company, which could have a significant
adverse effect on the Company's net sales and results of operation.
HONG KONG PROFITS TAX
Under the Hong Kong tax authority's Departmental Interpretation and Practice
Notes, a company based in Hong Kong but with substantially all of its
manufacturing operations located in the PRC conducted pursuant to a processing
agreement entered into with a PRC company can enjoy profit apportionment
through which only 50% of its manufacturing profit is subject to Hong Kong
profits tax. Substantially all of the Company's manufacturing operations are
located in Shenzhen, China and conducted pursuant to a processing agreement
entered into with a PRC company. See "Business--Employees." Effective April 1,
1998, the profits tax rate in Hong Kong is 16.0%, a change from the former
profits tax rate, which was 16.5%. Under profits apportionment, only 50% of
the profits of the Company is subject to Hong Kong profits tax and, as a
result, the Company enjoys a lower effective tax rate than would otherwise be
the case. Such tax concession has been granted based on an annual application
by the Company and there can be no assurance that the Hong Kong tax authority
will continue to grant such tax concession to the Company and other Hong Kong
companies with manufacturing operations in China, or that the Company will not
lose such concession in the future as a result of changes in Hong Kong tax law
or the interpretation of such law. In the event that such tax concessions are
unavailable to the Company, the Company's results of operations could be
materially and adversely affected.
IMPACT OF THE YEAR 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The year
2000 problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to
"00." The issue is whether the computer system will properly recognize date-
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
The Company has assessed its systems and believes them to be year 2000
compliant. In addition, the Company has received assurance from its major
software vendors that the products used by the Company are year 2000
compliant. The failure of the systems of other companies on whose services the
Company depends or with whom the Company's system interface, including the
Company's significant customers, to be year 2000 compliant could have a
material adverse effect on the Company, its results of operations and
financial condition.
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BUSINESS
GENERAL
The Company is a leading supplier of precision engineered packaging products
for the storage, transportation and automated handling of semiconductor
devices and other electronic components. The Company's products are designed
to interface with automated handling equipment used in the production and
testing of semiconductor and electronic products. The Company's customers
include semiconductor companies such as Texas Instruments, SGS-Thomson,
Philips and Motorola, as well as subcontract assembly and test companies such
as ASAT and ASE. The Company's products are designed to ensure that
semiconductor devices and electronic components, which are often delicate and
may have significant value, are protected from mechanical and electrical
damage during storage, transportation and automated handling.
The Company produces principally matrix trays, shipping tubes, reels and
carrier tape. The Company also produces leadframe boxes and interleaves used
in the storage and transportation of leadframes. In addition, the Company
collects and sells recycled matrix trays and reels using the name "SemiCycle."
The Company believes that its recycling programs, whereby the Company collects
and recycles both products manufactured by itself and products manufactured by
others, enable it to expand its customer base by providing it with
opportunities to supply both newly-manufactured and recycled products to
customers.
The Company's principal production facilities, located in Shenzhen, China,
are equipped with injection molding machines, extruders, carrier tape
machines, mixing machines, ultra sonic welding machines and other machinery
and equipment. The Company maintains in-house tooling facilities capable of
producing the molds used for production, dies and tooling for sale and spare
parts for machines used in its production processes. The Company also has in-
house compounding capabilities for the mixing, blending and pelletizing of raw
materials used in its production processes. In addition, the Company maintains
computer aided design ("CAD") stations which are linked electronically to the
Company's sales offices to enable the sharing of design information. Finalized
designs are transmitted electronically to the Company's in-house tooling
facilities for the production of molds, dies and tooling.
The Company maintains recycling programs through which used trays and reels,
both those manufactured by the Company and those manufactured by others, are
collected from end users, such as SMT companies and other types of assemblers
of circuit boards and manufacturers of computers and other end products, at
approximately 550 locations in Asia, North America and Europe by the Company,
its agents and independent contractors. The trays and reels collected are then
transported principally to the Company's production facilities in Shenzhen,
China, where they undergo processing, including inspection, cleaning and anti-
static coating, if appropriate. They are placed into inventory in the
Company's warehousing facilities pending sale to customers. Recycled trays and
reels that do not meet the Company's quality requirements are ground and
reused in the manufacturing processes for new products. Currently,
approximately 2.5 million units, largely trays, are collected each month for
recycling by the Company.
The Company maintains five sales offices, located in Hong Kong; Singapore;
Penang, Malaysia; Milpitas, California; and Austin, Texas whereby direct sales
are made to customers. The Company also sells its products through eight sales
agents located in Japan (four); Seoul, South Korea; Taipei, Taiwan; Rieti,
Italy; and Shanghai, China. The Company maintains, either directly or through
its local sales representatives, a network of JIT warehouses located near the
production facilities of its customers.
The Company's principal executive offices are located in Units 3, 4, 5 and
7, 37th Floor, Wharf Cable Tower, 9 Hoi Shing Road, Tsuen Wan, N.T., Hong Kong
and its telephone number is (852) 2402-5100.
STRATEGY
The Company's objective is to increase its market presence in serving the
growing semiconductor and electronics industries by providing top quality
service, precision engineered packaging solutions and recycling
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alternatives to manufacturers of semiconductor devices and electronic
components through its integrated manufacturing capability and its recycling
programs, with collection points in Asia, North America and Europe. The key
elements of the Company's business strategy are as follows:
Leverage Industry Expertise of Senior Management. Members of the Company's
senior management team have extensive experience in the semiconductor industry
which provides them with a first hand understanding of customer and market
requirements. The Company believes that the industry experience and close
customer relationships of its senior management enable the Company to identify
and evaluate potential markets for future product development. The Company
intends to maintain and further develop relationships with appropriate senior
executive officers of its customers.
Maintain Close Customer Relationships. The Company's strategy is to maintain
close relationships with its customers through an extensive network of
strategically located sales, customer service and product distribution sites
and by working closely with its customers in developing precision engineered
packaging solutions for the storage, transportation and automated handling of
their products. The Company believes that its ability to distribute its
products to customers located in Asia, North America and Europe allows the
Company to compete effectively with other suppliers of packaging products to
the semiconductor and electronics industries, a number of which distribute
only within certain geographic regions. Customer reliance on quick delivery
drives the Company's product strategy with respect to both new and recycled
products. The Company believes that its recycling programs, whereby the
Company collects and recycles both products manufactured by itself and
products manufactured by others, enable it to expand its customer base by
providing it with opportunities to supply both newly-manufactured and recycled
products to customers. In addition, the Company's recycling programs provide
it with opportunities to monitor changes in particular customer requirements.
Shorten Delivery Time. The Company's strategy is to attract and retain
customers on the basis of its ability to deliver large quantities of products
on short notice to meet customer demand. The Company believes that short
delivery time is of particular importance to its customers in the
semiconductor and electronics industries where requirements for packaging
products are sometimes difficult to forecast accurately. The Company believes
that stocking certain key products in its network of JIT warehouses,
maintained either by the Company's local sales representatives or the Company,
reduces the amount of time required for the delivery of its products to its
customers, thereby improving its responsiveness to customer requirements for
flexibility in delivery and generally facilitating the improvement of
inventory management by its customers. In addition, the Company believes that
its inhouse tooling facilities and raw material compounding capabilities
obviate the necessity of working with sub-contractors and enable the Company
to achieve shorter production cycles.
Offer a Broad Range of Products. The Company's strategy is to increase the
range of its products, both new and recycled, in order to meet customer
requirements. The Company's current product offerings, which include matrix
trays, tubes, tape-and-reel and other carrier products, allow it to service a
broad range of customers which often have needs across multiple product
categories. In recent years, the Company has expanded its product offerings
from tubes to include matrix trays, recycled matrix trays and tape-and-reel
products. The Company also is currently engaged in the study and development
of new product lines, with an emphasis on packaging products designed to carry
high-value components related to the semiconductor and electronics industries.
The Company's production facilities have been formally approved or "qualified"
by a number of its customers across its product categories. The Company
believes that its customers value the range of its product offerings and that
its ability to offer a broad range of products allows the Company to compete
effectively with other suppliers of packaging products to the semiconductor
and electronics industries, a number of which are single-product suppliers.
The Company's in-house design and tooling capabilities reduce the cycle time
needed for the development of new products and product features by the Company
and facilitate the development of "custom" products by the Company, which
typically requires different prototype stages during product development. The
Company's in-house design and tooling capabilities have also facilitated the
Company's development of new product features such as the "enhanced pocket
strength," "anti-reflective wall" and "high strength ring pedestal" features
for the Company's carrier tape products, for which the Company has patent
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applications pending. In addition, the Company's in-house raw material
compounding capabilities enable the Company to better control the quality of
its products to meet customer specifications with respect to characteristics
such as color, transparency and hardness. The Company believes that its
recycling programs, with a monthly collection of approximately 2.5 million
units, enable it to supply a broad range of recycled trays and reels to its
customers.
Increase Volume Supply Capabilities. The Company's strategy is to expand its
production and tooling capacities and its recycling programs so as to increase
its high volume supply capabilities. Since 1992, the Company has expanded the
production capacity of its facilities in Shenzhen, China in order to meet
growing demand for its products. The Company has commenced the construction of
an additional plant to be located approximately three miles from the existing
production facilities, which would double the Company's production capacity.
In addition to increasing production volume, the Company believes that such
expansion will enable the Company to maintain equipment utilization rates
which give it the flexibility to meet high volume requirements from customers
with short lead time. In addition, the Company believes that its inventory of
recycled products enables it to supply recycled tray and reel products in
large quantities on short notice.
Emphasize Quality Assurance and Process Control. The Company's strategy is
to attract and retain customers, and price its products, principally on the
basis of the quality of its products and services. The Company maintains a
quality assurance and process control department which, as of March 31, 1998,
consisted of approximately 40 engineers and 230 on-line process controllers.
Quality assurance and process control procedures are performed at each major
stage of production. These include the inspection of incoming raw materials,
statistical process control at the injection molding (for trays and reels) and
extrusion (for tubes) stages of production and the inspection and testing of
finished products. The Company's production facilities in Shenzhen, China
obtained ISO 9002 certification in October 1994 and are subject to follow-up
surveillance audits conducted semi-annually thereafter in accordance with
normal ISO procedures. In addition, customers generally require the Company to
undergo a one- to two-month "qualification" process before purchasing in
volume from the Company. Such qualification processes often include on-site
certification of the Company's production facilities by members of the
customer's engineering and quality control staff. The Company's production
facilities in Shenzhen, China have been qualified by such customers as Intel,
Texas Instruments, Motorola, NEC, Toshiba and others. The Company believes
that in addition to its quality assurance and process control department, its
in-house design and tooling facilities and raw material compounding
capabilities have enabled it to better control the quality of its products.
HISTORY
The Company commenced operations in 1975, principally as a manufacturer of
IC shipping tubes, with production facilities located in Tsuen Wan, Hong Kong.
In 1987, the Company relocated its production facilities to Shenzhen, China.
In 1992, the Company was acquired by Mr. T.L. Li, a semiconductor industry
entrepreneur and investor. See "Management." In the same year, the Company's
in-house tooling capability was substantially augmented. In 1992, the Company
commenced the production and sale of matrix trays. At the same time, the
Company commenced the establishment of a distribution network of JIT
warehousing facilities located near areas of semiconductor manufacturing
activity. Additionally, the Company commenced the operation of its recycling
programs through subsidiaries doing business under the trade name "SemiCycle."
In 1994, the Company commenced the sale of the reels used in tape-and-reel IC
carriers and in 1996, the Company commenced the sale of the tape used in such
carriers. Since 1992, the Company has expanded the production capacity of its
facilities in Shenzhen, China in order to meet growing demand.
MARKETS SERVED BY THE COMPANY
The Company's products are used for the storage and transportation of
semiconductor devices and other electronic components such as connectors,
resistors and capacitors. The Company's products are designed to interface
with automated handling equipment used in the production and testing of
semiconductor and electronics products.
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SEMICONDUCTORS
Semiconductors are the basic building blocks used to create a variety of
electronic products and systems. Continual improvements in semiconductor
process and design technologies have enabled the production of complex, highly
integrated circuits which provide faster execution, increased functionality
and greater reliability. As a result, semiconductor demand has experienced
growth in markets for such products as computers, communications, consumer
electronic devices, automotive products and industrial automation and control
systems.
Semiconductors are often classified as either discrete devices (such as
individual diodes or transistors) or IC's. In ICs, thousands of functions are
combined on a single "chip" of silicon to form a more complex circuit, which
is then encapsulated in plastic, ceramic or other materials (forming a
"module") for connection to a circuit board.
In pin-through-hole ("PTH") technology, modules are attached by pins, also
called I/O (for input/output) "leads," inserted through or soldered to plated
holes in the printed circuit board. PTH is one of the earliest technologies in
the assembly of printed circuit boards. PTH semiconductor devices, such as
PDIP (Plastic Dual In-Line Package) modules, are typically sorted and
transported in IC shipping tubes such as those produced by the Company.
In the technologically more advanced SMT, the leads on ICs and other
electronic components are soldered to the surface of the printed circuit board
rather than inserted into holes. SMT can accommodate a substantially higher
number of leads than PTH, thereby permitting the board to interconnect a
greater number of integrated circuits. This, in turn, allows tighter component
spacing which permits a reduction in the dimensions of the printed circuit
board. Because of their high lead counts, most very large scale integrated
circuits are configured for surface mounting. Additionally, SMT allows
components to be placed on both sides of the board thereby permitting even
greater density. The substantially higher number of leads and finer lead-to-
lead spacing or "pitch" in SMT products requires packaging solutions which are
more exacting than for PTH products. In addition, certain SMT products are
sensitive to moisture absorption and typically undergo a baking process before
surface mounting, and consequently require robust packaging solutions which
are resistant to high temperature. SMT semiconductor devices, such as QFP
(Quad Flat Package), TQFP (Thin Quad Flat Package), TSOP (Thin Small Outline
Package) and BGA (Ball Grid Array) modules, are typically stored and
transported in matrix trays or tape-and-reel carriers such as those produced
by the Company.
In recent years, the Company has experienced a significant increase in
demand for its products as a result of unit volume growth and other
developments in the global semiconductor industry. First, the increasing
complexity of semiconductor devices and use of automated production equipment
has shifted the use of packaging products by semiconductor companies away from
traditional products, such as tubes, in favor of products such as trays and
carrier tapes which require higher precision engineering. Second, with the
advent of SMT and increasing lead-count and finer lead-to-lead spacing,
semiconductor devices have become more susceptible to mechanical damage during
shipment. As a result, the use of higher precision engineered packaging
products such as matrix trays has increased. Third, the Company believes that
the recent trend in the global semiconductor industry towards increased out-
sourcing of various steps of the IC production process, such as assembly and
testing, will also benefit the Company as semiconductor companies increasingly
look for suppliers of packaging products with the ability to supply large
quantities of a wide range of products on short notice to different
subcontractor assembly and test companies at various locations.
In recent years, the total available market ("TAM") for semiconductor
devices has grown significantly and industry sources estimate that such growth
is likely to continue. The growth in the market for the Company's products,
however, is related to the growth in unit volume, namely the number of
semiconductor devices produced, which may differ from the growth in the TAM
for semiconductor devices, as a result of variation over time in the average
selling price per semiconductor device. See "Risk Factors--Dependence on
Semiconductor and Electronics Industries."
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ELECTRONIC COMPONENTS
Electronic connectors are electro-mechanical devices that allow an
electronic signal to pass from one device to another. They are used to connect
wires, cables, printed circuit boards, flat cable and other electronic
components to each other and to related equipment. Connectors are found in
virtually every electronic product including computers, printers, disk drives,
modems, VCRs, radios, medical instruments, airplanes, appliances, cellular
telephones, pagers and automobiles. Original equipment manufacturers in the
electronics industry generally use connectors to complete the design and
manufacture of their products.
Resistors are basic components used in all forms of electronic circuitry to
adjust and regulate levels of voltage and current. They vary widely in
precision and cost, and are manufactured in numerous materials and forms.
Resistive components may be either fixed or variable, depending on whether the
resistance is adjustable (variable) or not (fixed). Resistors can also be used
as measuring devices, such as resistive sensors. Resistive sensors or strain
gages are used in experimental stress analysis systems as well as in
transducers for electronic measurement of loads (scales), acceleration and
fluid pressure.
Capacitors perform energy storage, frequency control, timing and filtering
functions in most types of electronic equipment. The more important
applications for capacitors are electronic filtering for linear and switching
power supplies, decoupling and bypassing of electronic signals for ICs and
circuit boards, and frequency control, timing and conditioning of electronic
signals for a broad range of applications.
In recent years, the TAMs for electronic components such as electronic
connectors, resistors and capacitors have grown significantly and industry
sources estimate that such growth is likely to continue. The growth in the
market for the Company's products, however, is related to the growth in unit
volume, namely the number of electronic components produced, which may differ
from the growth in the TAMs for electronic components, as a result of
variation over time in the average selling price per electronic component. In
addition, the Company's products serve only portions of the TAMs for various
electronic components, principally those for SMT components such as SMT
ceramic chip capacitors and SMT chip resistors. See "Risk Factors--Dependence
on Semiconductor and Electronics Industries."
PRODUCTS AND PRODUCTION PROCESSES
The Company produces matrix trays, tubes and tape-and-reel products such as
reels and carrier tape. The Company also sells recycled matrix trays and
reels. In addition, the Company produces leadframe boxes and leadframe
interleaves used in the storage and transportation of leadframes.
The Company's products are typically categorized by their dimensions and
configurations, the type and size of semiconductor devices they carry, and
their physical characteristics, in particular their resistance to deformation
(called "warpage") at various temperatures. The Company's products are also
categorized by their electrostatic properties as "conductive," "dissipative"
or "anti-static." Conductive and dissipative products are manufactured by
adding carbon fibre or carbon powder to the plastic compound. Anti-static
characteristics are achieved by applying a coating to the surface of the
product to prevent the accumulation of surface electrostatic charges.
TRAY PRODUCTS
The Company's tray products may be used for the storage and transportation
of SMT semiconductor devices such as QFP, TQFP, PQFP (Plastic Quad Flat
Package), TSOP, PGA (Pin Grid Array) and BGA modules. The outer dimensions of
matrix trays are generally fixed by industry standards prescribed by
electronics industry associations such as JEDEC in the United States and EIAJ
in Japan. The Company sells high temperature trays (which may be baked to a
temperature of 150(degrees)C and above), low temperature trays (which may be
baked to a temperature of up to 150(degrees)C), non-bakeable trays and lots
consisting solely of recycled trays.
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At the beginning of the tray production process, samples of incoming raw
materials, largely polyarysulphon, polysulphon, polypropylene and others, are
inspected and tested for key material properties. Raw materials are mixed and
blended with other materials in accordance with the Company's proprietary
processes and production techniques and formed by injection molding machines
into trays. The formed trays are then cleaned of surface contaminants. Trays
that require anti-static coating are subsequently dipped in anti-static
solution and then dried. Trays made from heat resistant materials undergo a
baking process. Thereafter, samples of new trays from each manufactured lot
are inspected for visible defects and warpage and tested for electrostatic
discharge characteristics, and have their dimensions checked, prior to
shipment.
TUBE PRODUCTS
The Company's tube products may be used for the storage and transportation
of SMT semiconductor devices such as PLCC (Plastic Leaded Chip Carrier) and
SOIC (Small Outline Integrated Circuit) modules and PTH semiconductor devices
such as PDIP modules, as well as other products used in the electronics
industry, such as connectors and sockets.
At the beginning of the tube production process, samples of incoming raw
materials largely PVC resin and various additives, are inspected for
conformity to specifications. Raw materials are mixed and blended and made
into pellets, based on compounding formulae which vary depending on the
characteristics, such as color, transparency and hardness, required for the
product. The pellets are extruded into tubes, which undergo further processing
such as hole punching, silk screen marking and anti-static coating, before
samples of the new tubes are inspected for visible defects and tested for
electrostatic discharge prior to shipment.
TAPE-AND-REEL PRODUCTS
The Company's tape-and-reel products may be used for the storage and
transportation of SMT semiconductor devices such as TQFP, BGA, PLCC, SOJ
(Small Outline Plastic "J" Bend), SOIC and other modules, as well as other
products used in the electronics industry, such as connectors and sockets.
Tape-and-reel carriers comprise three parts: reel, carrier tape and cover
tape. The semiconductor devices and other products to be carried are placed in
pockets formed in the carrier tape, which is sealed with cover tape and wound
around reels for storage and transportation. The Company commenced sales of
carrier tape in October 1996 and expects carrier tape, and reels in general,
to represent an increasing proportion of the Company's product mix.
The production process for reels is similar to that for trays except that
the raw material used in the production of reels is principally polystrene and
that an additional process of ultrasonic welding is required following the
injection molding process to weld two parts of the reel together. In the
production of carrier tape, polystyrene, polyester or polycarbonate tape is
purchased from suppliers in large rolls and slit to desired widths in-house.
The carrier tape is formed by a combination of thermal, air pressure and hole
punching processes, and thereafter the new carrier tape is inspected for
visible defects prior to shipment. The Company purchases and then resells
cover tape to its customers.
OTHER PRODUCTS
In addition to standard products in its three principal product lines, the
Company also produces an array of "custom" products which include customer-
specific designs of trays, tubes, reels, carrier tape and an assortment of
other carriers. The Company also produces leadframe boxes and leadframe
interleaves which are sold to leadframe suppliers for use in the storage and
shipping of their products. Leadframes are sheets of metal, etched or stamped
with various patterns of I/O leads which allow for interconnections between
silicon chips and printed circuit boards. Leadframes are generally stored and
transported in stacks, with individual leadframes separated by plastic or
paper interleaves and the stack housed in plastic boxes.
NEW PRODUCT DEVELOPMENT
The Company is currently engaged in the study and development of new product
lines, with an emphasis on packaging products designed for the carriage of
high-value components related to the semiconductor and
25
<PAGE>
electronics industries. The Company undertakes on-going research and
development efforts which emphasize the development of products and features
that require precision engineering in order to better serve its customer base.
The Company expanded its product lines from tubes to include matrix trays in
1992, reels in 1994 and carrier tape in 1996. The Company has developed new
product features for its carrier tape products, such as the "enhanced pocket
strength," "anti-reflective wall" and "high strength ring pedestal" features,
for which the Company has patent applications pending in the United States.
The "enhanced pocket strength" feature improves the vertical crush resistance
of the pockets in the carrier tape by corrugating the vertical sidewalls of
the pockets. The "high strength ring pedestal" feature improves the lateral
crush resistance of the pockets in the carrier tape by means of a trapezoidal
shaped pedestal and an annular ring at the bottom of the pocket. The "anti-
reflective wall" feature enables the Company's customers to utilize more
effectively their automated optical inspection equipment to inspect the
semiconductor or electronic components placed in the carrier tape manufactured
by the Company. By placing a chamfered corner in the carrier tape pocket, the
feature reduces the amount of reflection which could interfere with the
workings of the automated optical inspection equipment.
RECYCLING PROGRAMS
The Company conducts its collection operations through subsidiaries and
independent contractors doing business using the trade name "SemiCycle." The
Company recycles trays and reels collected from end users at approximately 550
locations in Asia, North America and Europe by the Company, and its
independent contractors. In the United States, the Company purchases used
trays and reels collected by The SemiCycle Foundation, a Texas non-profit
corporation. See "Certain Transactions." Tube products, made largely of PVC,
and carrier tape products, made largely of polystyrene, polyester and
polycarbonate, are generally not recycled. Currently, approximately 2.5
million units, largely trays, are collected each month for recycling by the
Company. The Company also purchases products for recycling from independent
dealers.
The Company maintains recycling programs through which used trays and reels,
both those manufactured by the Company and those manufactured by others, are
collected from end users. Typical end users include SMT and other types of
assemblers of circuit boards and manufacturers of computers and other end
products. The trays and reels collected are then transported principally to
the Company's production facilities in Shenzhen, China where they undergo
processing, including sorting, inspection, cleaning and anti-static coating,
if appropriate. They are placed into inventory in the Company's warehousing
facilities pending sale to customers. Recycled trays and reels that do not
meet industry quality requirements or the Company's requirements are ground
and reused in the manufacturing processes for new products using the Company's
proprietary processes and production techniques.
In some jurisdictions in which the Company's packaging products are sold or
used, laws and regulations have been adopted or proposed with a view to
promote, among other things, the recycling of packaging materials. In
addition, the International Standard Organization (the "ISO") has incorporated
environmental considerations in formulating its new ISO 14000 quality
standards. The Company's recycling programs provide its customers with
opportunities to select the packaging products that best meet their
requirements in terms of cost and environmental preferences. The Company's
recycling programs help its customers comply with environmental regulations
and meet ISO standards in the area of environmental protection, principally in
two ways. First, the Company provides a recycling alternative to the
traditional disposal methods of landfill and incineration. Second, the
Company's offerings of recycled products assist its customers in complying
with or meeting "recycle-content" and "green product" regulations, standards
or goals.
CUSTOMERS
The Company had an average of approximately 175 customers in each of the
twelve months in Fiscal 1998, including semiconductor companies as well as
subcontract assembly and test companies. The Company also sells its products
to manufacturers of connectors, sockets, passive components such as chip
resistors and capacitors and other types of electronic components. In Fiscal
1998, the Company's top customers were ASAT, Texas
26
<PAGE>
Instruments, Philips, QPL, ASE, Symbios, Motorola, S3, LSI and Hewlett
Packard. ASAT, Texas Instruments, Philips and QPL were the only customers
which individually accounted for more than 5% of the Company's net sales in
Fiscal 1998. In the aggregate, the top ten customers accounted for 51.7%,
51.2% and 53.5% of the Company's net sales in Fiscal 1996, Fiscal 1997 and
Fiscal 1998, respectively. The Company has received awards from customers such
as Texas Instruments, Motorola, Hewlett-Packard, GEC Plessey and Lucent
Technologies in recognition of the quality of its products and services.
A significant portion of the Company's net sales have historically been and
are expected to continue to be derived from ASAT, QPL and other companies in
the QPL Holdings Group. ASAT, QPL and other companies in the QPL Holdings
Group together accounted for approximately 20.9%, 16.1% and 16.3% of the
Company's net sales in Fiscal 1996, Fiscal 1997 and Fiscal 1998, respectively.
EEMS has acted as the Company's sales agent in Europe since 1995. See "Risk
Factors--Relationship with Principal Shareholder and Potential Conflicts of
Interest."
PRICING
The Company provides price quotations which contemplate the delivery of
products within two weeks of the receipt of purchase orders. Higher prices are
charged for shorter delivery time and any additional services required, such
as local warehousing, special packaging provisions or special markings on the
product. As a general policy, the Company prices its recycled products at a
discount with respect to the price of corresponding new products.
SALES AND MARKETING
The Company maintains five sales offices, located in Hong Kong; Singapore;
Penang, Malaysia; Milpitas, California; and Austin, Texas, whereby direct
sales are made to customers. In addition, the Company sells its products
through eight sales agents located in Japan (four); Seoul, South Korea;
Taipei, Taiwan; Rieti, Italy; and Shanghai, China.
The Company's sales are generally made pursuant to purchase orders received
from its customers. Therefore, the Company generally has no long-term
agreements with or commitments from its customers for the purchase of
products. While customers typically provide the Company with one- to two-month
forecasts of their requirements, such forecasts are not binding.
The following table sets forth the geographic distribution, by percentage,
of the Company's net sales for the periods indicated. See Note 14 of Notes to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------
1996 1997 1998
<S> <C> <C> <C>
North Asia........................................ 49.4% 47.5% 53.8%
North America..................................... 20.1 19.9 22.1
South Asia........................................ 23.4 29.4 21.3
Europe............................................ 7.1 3.2 2.8
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
</TABLE>
North Asia represents China and Hong Kong, Philippines, Taiwan, Japan and
Korea while South Asia represents Singapore, Malaysia and Thailand.
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<PAGE>
DISTRIBUTION
The Company maintains, either directly or through its sales representatives,
a network of JIT warehouses located near the production facilities of its
customers. The following table sets forth the locations of JIT warehouses
maintained by the Company's local sales representatives or by the Company.
<TABLE>
<CAPTION>
ASIA NORTH AMERICA EUROPE
<S> <C> <C>
Japan (seven) Milpitas, California Rieti, Italy
Malaysia (five) Austin, Texas Dublin, Ireland
Shenzhen, China
Shanghai, China
Hong Kong
Keelung, Taiwan
Kaohsiung, Taiwan
Bangkok, Thailand
Manila, Philippines
Singapore
Seoul, South Korea
</TABLE>
The Company also offers drop shipment services for its products, which
provide for the shipment of the Company's packaging products directly to end-
users designated by the Company's customers. Since drop shipment eliminates
the additional step of inspection by the customer prior to shipment to the end
user, quality of service is an important consideration for the customers.
Customers generally place purchase orders with the Company's sales office or
sales agent near their location. The orders are then forwarded together with
the requested shipping date to the Company's production facilities in
Shenzhen, China via the Company's internal electronic mail system, with a copy
to the Company's Hong Kong office for invoicing and accounting purposes.
Employees at the Company's production facilities in Shenzhen, China generally
respond to the local sales office upon receipt of the order with a committed
shipping date. Full container sea freight, which includes most shipments to
JIT warehouses maintained by the Company's local sales representatives or by
the Company, is generally shipped from the Yantian port located near Shenzhen,
China, while loose cargoes and air freight are generally transported to a
warehouse in Hong Kong by trucks for onward shipment.
The Company's office in Hong Kong is responsible for invoicing local sales
offices and sales agents who in turn are responsible for the invoicing of
customers and for the collection of payment.
RAW MATERIALS
The raw materials used in the Company's production of trays and reels are
polyarysulphone, polysulphone, polypropylene, high impact polystyrene and
others. The principal raw material used in its production of tubes is PVC
resin. The Company purchases rolls of polystyrene, polyester and polycarbonate
tape for formation into carrier tape and purchases rolls of cover tape for
resale to its customers.
The raw materials used in the Company's production of trays and reels are
generally available from various sources worldwide at similar prices. The
Company purchases such materials principally from two suppliers located in the
United States and Malaysia. The Company compounds raw materials with other
materials in accordance with its proprietary processes and production
techniques and formed by injection molding machines into trays. PVC resin is
generally available from various sources worldwide at similar prices. The
Company purchases PVC resin and certain additives used in the production of
tubes principally from three suppliers located in Singapore, Japan and
Germany. PVC resin is mixed and blended with various additives and made into
pellets, based on compounding formulae which vary depending on the
characteristics, such as color, transparency and hardness, required for the
product. The Company purchases the polystyrene tape and polycarbonate tape
used in its carrier tape production process, as well as cover tape, from two
suppliers located in Japan and the United States.
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<PAGE>
The Company generally purchases the various raw materials used in its
production processes pursuant to purchase orders issued to suppliers one and a
half months before the materials are delivered to the Company. The Company
tries to maintain in Shenzhen, China inventories of raw materials for
approximately two to three months of estimated production requirements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." From time to time, the Company makes strategic purchases of raw
materials when it believes the prices are favorable. Recycled trays collected
by the Company or by its agents and sold to the Company are initially
accounted for as part of the Company's inventories of raw materials. Following
sorting and processing, recycled trays are subsequently accounted for as part
of the Company's inventories of finished products.
QUALITY ASSURANCE AND PROCESS CONTROL
The Company maintains a quality assurance and process control department.
Quality assurance and statistical process control procedures are performed at
each major stage of production and include the inspection of raw materials,
statistical process control at the injection molding (for trays and reels) and
extrusion (for tubes) stages of production and the inspection and testing of
finished products. The Company also conducts "qualification" procedures for
its raw material suppliers. The Company believes that, in addition to its
quality assurance and process control department, its in-house design and
tooling facilities and compounding capabilities have enabled it to control the
quality of its products and that such integrated quality assurance system
enables the Company to ensure end-product integrity and maximize customer
value.
The Company's production facilities in Shenzhen, China were certified as
meeting the ISO 9002 quality standards by the ISO in October 1994, and are
subject to follow-up surveillance audits conducted semi-annually thereafter in
accordance with normal ISO procedures. The ISO is an organization formed by
delegates from member countries to establish international quality assurance
standards for products and manufacturing processes. The certification process
involves subjecting the Company's production processes and the quality
management systems to review and surveillance for periods as long as nine
months. The ISO 9002 certification is required by certain European countries
in connection with sales of industrial products in such countries. In
addition, such certification provides independent verification to the
Company's customers as to the quality control in the Company's manufacturing
processes and many of the Company's customers require ISO certification as a
prerequisite for purchasing from the Company.
The Company's production facilities are generally required to undergo a one-
to two-month "qualification" process conducted by prospective customers before
purchasing in volume from the Company. Such qualification processes often
include on-site certification of the Company's production facilities by
members of the customer's engineering and quality control staff. The Company's
production facilities in Shenzhen, China have been qualified by customers such
as Intel, Texas Instruments, Motorola and Toshiba.
COMPETITION
The markets for the Company's products and services are highly competitive.
The Company's products compete with similar products manufactured by other
companies, some of which have substantially greater financial resources than
the Company. See "Risk Factors--Competition."
The Company competes in the markets for tray products, tube products and
tape-and-reel products. The Company classifies its competitors as large
diversified manufacturers, large single-product manufacturers and small local
job-shop style manufacturers. Large diversified manufacturers are typically
divisions of large multinational companies which compete with the Company in
markets for more than one product. Large single-product manufacturers
typically have international operations similar to those of the Company. Small
local job-shop style manufacturers typically operate only within certain
geographic regions, such as Taiwan and Singapore. The Company is not aware
that any of its major competitors offers the range of products and services
offered by the Company. The Company believes that it competes with large
diversified manufacturers through its focus on serving the semiconductor and
electronics industries, with large single-product manufacturers through its
broad
29
<PAGE>
range of product offerings and with smaller local job-shop style manufacturers
through its international organization which enables the Company to meet the
requirements of multinational customers with several production facilities at
various locations.
The Company believes that the principal competitive factors in the markets
for the Company's products and services are responsiveness and flexibility
(including short delivery cycles and the ability to supply large quantities on
short notice), price, product quality and range of products and services
available.
PRODUCTION FACILITIES
The Company's main production facilities are located in Shenzhen, China in a
plant with a total floor space of approximately 305,000 square feet. The plant
is equipped with injection molding machines, extruders, carrier tape machines,
mixing machines, ultra-sonic welding machines and other machinery and
equipment.
In addition to its production facilities in Shenzhen, China, the Company
also maintains production facilities located in Penang, Malaysia, with a total
floor space of approximately 3,500 square feet, which process tubes extruded
at the Company's Shenzhen facilities.
The Company is planning further expansion of its production capacity in
Shenzhen, China and has commenced the construction of an additional plant to
be located approximately three miles from the existing production facilities.
The new plant is expected to be operational by Fiscal 2000 and has a planned
floor space of approximately 800,000 square feet. See "Risk Factors--
Management of Expansion."
The Company maintains a tooling shop on the premises of its production
facilities in Shenzhen, China which is capable of producing the molds used in
the Company's production, dies and tooling for sale, and spare parts for
equipment used in its production process. The in-house tooling machinery and
equipment (including computer numeric control ("CNC") electronic discharge
machines ("EDMs"), CNC wire cut machines, milling machines and miscellaneous
lathes, planers, surface grinders and drill presses) account for approximately
half of the Company's capital investment in its facilities in Shenzhen, China.
As of March 31, 1998, the tooling shop, with a total floor space of
approximately 80,000 square feet, employed 157 tool makers.
The Company's existing facilities in Shenzhen, China are, and the Company's
additional facilities in Shenzhen, China will be, operated pursuant to
processing agreements with unaffiliated PRC companies. Such facilities are, or
will be, located on land which is leased from the PRC government by Warden
Development Ltd. ("Warden"), a wholly-owned subsidiary of the Company, under
land use certificates and agreements with terms of fifty years. The buildings
comprising the facilities are owned by Warden. The land and the buildings are
in turn leased by Peak (HK) from Warden under a two-year lease commencing
April 1995 which in April 1997 was automatically renewed for another two years
on the same terms. The machinery and equipment in the facilities are owned by
Peak (HK). Under current PRC law, all land belongs to the government, and
individuals and enterprises may only lease land from the government.
As of March 31, 1998, substantially all of the Company's fixed assets and
inventories were located in the PRC. The operations of the Company's
production facilities in Shenzhen, China may be adversely affected by changes
in the laws and regulations of the PRC (or the interpretation thereof), such
as those relating to taxation, import and export tariffs, environmental
regulations, land use rights, property and other matters. The Company's
results of operations and financial condition may be adversely affected by
changes in the PRC's political, economic and social conditions. See "Risk
Factors--Concentration of Operations in the PRC."
ENVIRONMENTAL MATTERS
The Company is subject to various laws, rules and regulations in the PRC
regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment. The Company believes that it is
in substantial compliance with applicable laws, rules and regulations relating
to the protection of the environment.
30
<PAGE>
EMPLOYEES
As of March 31, 1998, the Company had 156 employees at its offices located
in Asia, North America and Europe. The Company's employees are not covered by
any collective bargaining agreements. The Company has not experienced any
strikes or work stoppages by its employees and believes that its relationship
with its employees is good.
Since June 1996, the Company has established defined contribution benefit
plans for its employees in Hong Kong, and has made contributions to such plans
based on 5.0% of the monthly base salaries of participating employees. The
assets of such plans are held under provident funds managed by independent
trustees. In addition, the Company makes contributions to employee retirement
schemes as required by local authorities in certain jurisdictions, such as
Singapore, in which the Company has operations. See Note 11 of Notes to
Consolidated Financial Statements.
The Company's existing production facilities in Shenzhen, China are operated
by an unaffiliated PRC company pursuant to a processing agreement initially
entered into in May 1987 and subsequently amended and renewed in May 1994 and
December 1996. The processing agreement was entered into by the Company and
the PRC company which was formed by the Shenzhen Municipal Longgang District
Foreign Economic Service Company, a company controlled by the local government
of the Longgang District of Shenzhen. The current term of the processing
agreement expires on May 28, 2016. Under the processing agreement, the PRC
company provides all of the personnel for the operation of the Company's
existing facilities in Shenzhen, China and renders assistance in dealing with
all matters relating to the import and export of raw materials and the
Company's products. Such personnel are not employees of the Company. The
Company agrees to pay each worker no less than a fixed sum each month, which
is revised every two years, in addition to an annual fee to the PRC company
(which has been waived for the current term of the agreement) based on the
quantity of products manufactured each year. In October 1995, the Company
entered into a similar processing agreement with another unaffiliated PRC
company, which has a term of fifty years, for the operation of the Company's
additional production facilities being constructed in Shenzhen, China. As of
March 31, 1998, the personnel at the Company's production facilities in
Shenzhen, China numbered approximately 1,850, including personnel in
production and quality assurance and process control, warehousing and
inventory control, tooling and molding, engineering and product development,
and purchasing, financing and other support functions.
LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings which the Company
believes would, individually or in the aggregate, have a material adverse
effect on its results of operations or financial condition.
INSURANCE
The Company maintains insurance policies covering risks of losses due to
fire, flood and other natural disasters. The Company's insurance policies
cover certain of its buildings, machinery and equipment, raw materials and
inventory. The Company also maintains business interruption insurance.
Significant damage to any of the Company's production facilities, whether as a
result of fire or other causes, would have a material adverse effect on the
Company's results of operations and financial condition. The Company is not
insured against the loss of its key personnel.
31
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Members of the Board of Directors of the Company are elected by the
shareholders of the Company. At each annual general meeting one-third of the
Directors for the time being shall retire from office by rotation provided
that the Chairman of the Board shall not, while holding such office, be
subject to retirement by rotation. A retiring Director shall be eligible for
re-election. The Board of Directors of the Company appoints the executive
officers of the Company.
The following table sets forth information with respect to the directors and
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Mr. T.L. Li............... 45 Chairman of the Board and Chief Executive Officer
Mr. Robin Nicholson....... 42 Director
Mr. Francis Leung......... 43 Director
Mr. Hon Ying Ng........... 44 Director
Mr. Kong Chi Wong......... 40 Director
Mr. Richard M. Brook...... 38 President and Chief Operating Officer; Director
Mr. Jerry Mo.............. 39 Chief Financial Officer and Controller; Director
Mr. Mao Shi Khoo.......... 36 Vice President
Mr. Steve R. Dezso........ 33 Vice President
</TABLE>
Mr. T.L. Li has served as Chairman and Chief Executive Officer of the
Company since 1990 and, through his ownership of all of the outstanding shares
of Luckygold, holds the majority of the Company's outstanding Shares. Mr. Li
holds a Bachelor of Science degree in chemical engineering from the University
of Wisconsin--Madison and has over 20 years of experience in the semiconductor
industry. Mr. Li is the controlling shareholder of, and since 1981 has served
as the Chairman of the Board of Directors of, QPL Holdings, a company whose
shares are listed on The Stock Exchange of Hong Kong Limited ("The Hong Kong
Stock Exchange"). Mr. Li also owns 100% of EEMS, a memory IC assembly and test
business based in Italy. See "Certain Transactions." Mr. Li is the brother-in-
law of Mr. Jerry Mo.
Mr. Robin Nicholson is a senior partner of Richards Butler, a law firm
practicing in Hong Kong and London. He is qualified as a solicitor in Hong
Kong and England and has over 15 years of securities law experience. He is
also director of a number of companies listed on The Hong Kong Stock Exchange
including QPL Holdings and Evergo China Holdings Limited. Mr. Nicholson has
been a director of the Company since January 1997.
Mr. Francis Leung is a Director of BNP Prime Peregrine Securities Limited.
He has over 17 years of experience in corporate finance. He is also a director
of a number of companies listed on The Hong Kong Stock Exchange, including
Beijing Enterprises Holdings Limited, Guangzhou Investment Company Limited,
Shanghai Industrial Holdings Limited and Shum Yip Investment Limited. He has
been a director of the Company since January 1997.
Mr. Hon Ying Ng is a partner of Ng and Fang, a Hong Kong law firm. Mr. Ng
holds a Bachelor of Arts degree from the University of Hong Kong. He was
admitted to practice in Hong Kong in 1981. He commenced his own practice in
1983 and has been a partner of Ng and Fang since 1985. Mr. Ng has been a
director of the Company since January 1997.
Mr. Kong Chi Wong is a fellow member of the Association of Chartered
Certified Accountants and an associated member of the Hong Kong Society of
Accountants. He is a director of a number of companies listed on The Hong Kong
Stock Exchange, including China Resources Beijing Land Limited, Yip's Hang
Cheung
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<PAGE>
(Holdings) Limited, Le Saunda Holdings Limited, World Houseware (Holdings)
Limited and Kee Shing (Holdings) Limited. Mr. Wong holds a Bachelor of Science
degree in economics from the London School of Economics and Political Science.
Mr. Wong has been a director of the Company since January 1997.
Mr. Richard M. Brook has served as President and Chief Operating Officer of
the Company since 1995. He holds a Bachelor of Science degree in mechanical
engineering from the University of Saskatchewan and a Master of Science degree
in Engineering Management from Southern Methodist University. Before joining
the Company in 1991, Mr. Brook had over nine years of experience in the
semiconductor industry as an engineering manager at Texas Instruments. He
holds two patents on semiconductor packaging and wafer processing, and helped
develop palladium plated lead frames which allow for the elimination of solder
from the semiconductor assembly and test process.
Mr. Jerry Mo has served as the Chief Financial Officer and Controller of the
Company since 1996. He holds a Bachelor of Science degree in accounting and
data processing from Leeds University in the United Kingdom. He is a fellow
member of the Institute of Chartered Accountants in England & Wales and an
associated member of the Institute of Chartered Accountants in Australia and
the Hong Kong Society of Accountants. Mr. Mo joined the Company in November
1996. Prior to joining the Company, Mr. Mo worked as the Financial Controller
for the Group Administration Division of Pacific Dunlop Ltd., a major
industrial conglomerate in Australia, from 1992 to 1996. Mr. Mo is the
brother-in-law of Mr. T.L. Li.
Mr. Mao Shi Khoo has served as Vice President responsible for the
manufacturing operations of the Company since 1995. He holds a Bachelor of
Science degree in mechanical engineering from the University of Wisconsin. Mr.
Khoo joined the Company in 1987. Prior to joining the Company, he worked for
Advanced Micro Devices and Thomson-CSF from 1982 to 1987 in various audit and
supervisory capacities.
Mr. Steve R. Dezso has served as Vice President responsible for the United
States operations of the Company since 1994. He holds a Bachelor of Science
degree in electrical engineering from the University of Texas. Mr. Dezso
joined the Company in 1992. Prior to joining the Company, Mr. Dezso worked as
an electronics design engineer for E-Systems, as a design consultant and as a
marketing manager for NVE.
BOARD COMMITTEES
The Board of Directors formed a Compensation Committee and an Audit
Committee in February 1997. The Compensation Committee makes recommendations
to the Board of Directors relating to salaries and other compensation for the
Company's directors, officers and employees and administers the Share Option
Plan. The members of the Compensation Committee are Messrs. Nicholson, Leung,
Ng and Wong.
The Audit Committee reviews the results and scope of the annual audit and
other services provided by the Company's independent auditors, reviews and
evaluates the Company's internal audit and control functions, and monitors
transactions between the Company and its directors, officers, employees and
other related parties. The members of the Audit Committee are Messrs. Ng and
Wong.
COMPENSATION
The aggregate compensation paid or accrued in Fiscal 1998 and Fiscal 1997 to
individuals serving as directors and executive officers of the Company,
including bonuses and pension, retirement or similar benefits, was
approximately $0.9 million and $1.0 million, respectively. Such compensation
does not include dividends paid to Mr. T.L. Li in Fiscal 1997.
In Fiscal 1998, none of the Company's directors and none of its executive
officers received pension benefits as part of his compensation. The Company's
contributions to such pension plans in Fiscal 1998 and Fiscal 1997 amounted to
$13,913 and $5,407, respectively.
33
<PAGE>
SHARE OPTION PLAN
The Company's executive share option plan (the "Share Option Plan") was
adopted by the Board of Directors on March 18, 1997 and approved by the then
sole shareholder on March 18, 1997.
An aggregate of 700,000 Shares has been reserved for issuance under the
Share Option Plan. Under the Share Option Plan, directors, officers, employees
of, and advisors and consultants to, the Company or its affiliates may, at the
discretion of the Compensation Committee of the Board of Directors which is
responsible for administering the plan (the "Committee"), be granted options
to purchase Shares at an exercise price determined by the Committee. The
Committee has the discretion to determine which eligible individuals are to
receive option grants, the number of shares subject to each such grant and
vesting restrictions and other terms and conditions applicable to the exercise
of any option. No participant in the Share Option Plan, however, may receive
grants under the Share Option Plan in any calendar year which relate to more
than 150,000 Shares. Under the Share Option Plan, the Committee may grant
incentive stock options ("Incentive Stock Options"), non-qualified stock
options, or both types of options. In the case of Incentive Stock Options, the
terms and conditions of grants of such options comply with rules prescribed by
Section 422 of the United States Internal Revenue Code of 1986, as amended,
and the regulations implementing such statute. Options granted under the Share
Option Plan which are not Incentive Stock Options are non-qualified stock
options. The Committee has the discretion to establish the exercise price per
Share at the time each option is granted, which will not be less than the par
value of a Share, except that in the case of an Incentive Stock Option, the
exercise price will not be less than the fair market value of the underlying
Shares on the date such option is granted. As of March 31, 1998, options
relating to an aggregate of 537,375 Shares (150,314 of which Shares relate to
options held by directors and officers of the Company) and 67,560 Shares
(14,084 of which Shares relate to options held by directors and officers of
the Company) have been granted under the Share Option Plan at an exercise
price equal to $12.00 per Share and $19.375 per Share, respectively. Such
options, if not exercised, will expire on March 17, 2007.
The Board of Directors may amend or modify the Share Option Plan at any
time. The Share Option Plan will terminate on March 17, 2007 unless sooner
terminated by the Board of Directors.
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<PAGE>
PRINCIPAL SHAREHOLDERS AND SELLING SHAREHOLDER
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the ownership
of Shares as of March 31, 1998 by (i) each person who is known by the Company
to own more than 10.0% of its Shares and (ii) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES OWNED AS
OF MARCH 31, 1998
-----------------
IDENTITY OF PERSON OR GROUP NUMBER PERCENT
<S> <C> <C>
Luckygold(1)................................................ 7,888,038 58.6%
All directors and executive officers as a group (9
persons)(2)................................................ 7,888,038 58.6%
</TABLE>
- ----------
(1)Mr. T.L. Li is the sole shareholder of Luckygold.
(2)Includes shares held by Mr. T. L. Li through Luckygold.
SELLING SHAREHOLDER
Pursuant to the Contract, a specified number of Shares will be required to
be delivered to the Trust by Luckygold upon exchange of the TrENDS, subject to
the exercise of a cash settlement alternative and certain other events more
fully described in the Trust Prospectus. The following table sets forth
certain information for Luckygold with respect to (i) its ownership of the
Shares as of March 31, 1998 and (ii) the maximum number of Shares that may be
delivered to the Trust by Luckygold pursuant to the Contract. Luckygold's
beneficial ownership of the Shares will not change as a result of the Offering
until and to the extent Luckygold delivers Shares to the Trust pursuant to the
Contract.
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF
SHARES DELIVERABLE
TO THE TRUST
SHARES OWNED AS OF PURSUANT TO THE
MARCH 31, 1998 CONTRACT
-------------------- -----------------------
NAME OF SELLING SHAREHOLDER NUMBER PERCENTAGE NUMBER PERCENTAGE
<S> <C> <C> <C> <C>
Luckygold(1)....................... 7,888,038 58.6% 5,300,000(2) 39.4%
</TABLE>
- ----------
(1) Mr. T.L. Li is the sole shareholder of Luckygold.
(2) The maximum number of Shares deliverable pursuant to the Contract does not
include up to an additional 795,000 Shares which may be distributed by the
Trust to the holders of TrENDS issued upon the exercise of the over-
allotment option granted to the Underwriters of the TrENDS.
As of the date of this Prospectus, 58.6% of the Shares are owned
beneficially by Mr. T.L. Li through his ownership of all of the outstanding
shares of Luckygold. Mr. T.L. Li is the Chairman and Chief Executive Officer
of the Company. Luckygold has granted to the Underwriters of the TrENDS an
option, exercisable within 30 days of the date of the Trust Prospectus, to
purchase up to 795,000 additional TrENDS solely to cover over-allotments, if
any. Mr. T.L. Li is also the controlling shareholder of, and since 1981 has
served as the Chairman of the Board of Directors of, QPL Holdings. A
significant portion of the Company's product sales has historically been and
is expected to continue to be derived from transactions with companies in the
QPL Holdings Group. See "Management--Directors and Executive Officers" and
"Certain Transactions."
This Prospectus covers 1,793,038 Shares owned by Luckygold that may be
borrowed from time to time pursuant to the Securities Loan Agreement. Since
Luckygold is only lending such Shares to Donaldson, Lufkin & Jenrette
Securities Corporation, Donaldson, Lufkin & Jenrette Securities Corporation is
obligated to return such borrowed Shares to Luckygold. See "Plan of
Distribution".
35
<PAGE>
CERTAIN TRANSACTIONS
Mr. T.L. Li through his beneficial ownership of all of the outstanding
shares of Luckygold, is the majority shareholder of the Company. Mr. T.L. Li
owns approximately 40.0% of the outstanding shares of QPL Holdings, a company
incorporated under Bermuda law and listed on The Hong Kong Stock Exchange. QPL
Holdings is a holding company of a group of semiconductor companies which
includes QPL, ASAT, Newport Wafer-Fab Limited, Worltek International Limited
and Talent Focus Industries Limited and provides a wide range of outsourcing
services, including leadframe manufacturing, IC assembly and testing and
silicon wafer fabrication. In the leadframe manufacturing area, QPL Holdings
manufactures both etched leadframes through QPL as well as stamped leadframes
through Talent Focus Industries Limited, both based in Hong Kong. In the IC
assembly and test area, QPL Holdings acquired ASAT in Hong Kong in 1989 and
ASAT S.A. in France in 1993, and founded ASAT (U.K.) Ltd. in the United
Kingdom in 1993. In addition, Worltek International Limited, a United States
subsidiary of QPL Holdings, acts as sales agent for both QPL and ASAT, and
provides IC testing services. In the wafer foundry area, QPL Holdings acquired
Newport Wafer-Fab Limited in the United Kingdom through a two-step acquisition
in 1992 and 1995. Mr. T.L. Li also owns 100% of the outstanding shares of
EEMS, a memory IC assembly and test business based in Italy which acts as the
Company's sales agent in Europe. See "Management."
A significant portion of the Company's product sales has historically been
and is expected to continue to be made to companies controlled by Mr. T.L. Li,
which include QPL, ASAT and other subsidiaries of QPL Holdings. Product sales
of the Company to the subsidiaries of QPL Holdings totaled approximately $11.5
million, $9.3 million and $12.0 million in Fiscal 1996, Fiscal 1997 and Fiscal
1998, respectively, which represented approximately 20.9%, 16.1% and 16.3% of
the Company's net sales in the respective periods. QPL and ASAT are customers
of the Company and may engage in transactions from time to time with the
Company that are material to the Company.
In January 1995 and February 1995, the Company purchased certain fixed
assets from ASAT at a total net book value of $0.6 million, which it resold to
EEMS at the same net book value in February 1995. In November 1995, the
Company purchased certain fixed assets from ASAT at a net book value of $0.3
million, which it resold to EEMS at the same net book value in November 1995.
In the United States, the Company purchases used trays and reels collected
by The SemiCycle Foundation, a Texas non-profit corporation which is a
publicly supported organization exempt from federal income tax, as part of its
recycling program. The Company leases office space and provides certain
administrative and accounting services to The SemiCycle Foundation and has in
the past advanced loans to such foundation to help meet its cash requirements.
See Note 13 of Notes to Consolidated Financial Statements. Mr. Richard M.
Brook, President and Chief Operating Officer of the Company, and Mr. Steve R.
Dezso, Vice President of the Company responsible for United States operations,
served as directors of The SemiCycle Foundation when it was organized in
October 1995. Mr. Brook resigned as a director of The SemiCycle Foundation in
December 1996.
Before the Company's initial public offering in June 1997, Mr. T.L. Li
advanced short-term shareholder loans to the Company upon request to help meet
its cash requirements, both in his personal capacity and through companies
owned by him, such as Six Sigma Finance Limited, a Hong Kong company. As of
March 31, 1996, 1997 and 1998, the amount of such loans outstanding was $10.5
million, nil and nil respectively. Mr. T.L. Li no longer makes shareholder
loans to the Company. In addition, before the Company's initial public
offering in June 1997, Mr. T.L. Li guaranteed bank loans and overdrafts for
the benefit of the Company. As of March 31, 1996, 1997 and 1998, the aggregate
amount of such bank loans and overdrafts was $8.7 million, $21.2 million and
$0.1 million, respectively. Mr. T.L. Li no longer guarantees such bank loans
or overdrafts. Neither the Company's ability to obtain bank financing nor its
cost of funds has been materially affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Notes 6 of
Notes to Consolidated Financial Statements.
The Company reviews related party transactions on an ongoing basis and
utilizes the Audit Committee of its Board of Directors for the review of
potential conflicts of interest where appropriate. The Company's policy is to
conduct transactions with its affiliates, including the companies in the QPL
Holdings Group and The SemiCycle Foundation, on an arms-length basis.
36
<PAGE>
DESCRIPTION OF THE SHARES
The authorized share capital of the Company consists of 100,000,000 Shares.
As of the date of this Prospectus, there are 13,461,538 Shares outstanding,
and such number will remain unchanged upon completion of the Offering
(assuming no exercise of options issued pursuant to the Company's Share Option
Plan). Set forth below is a description of the Shares, including summaries of
material relevant provisions of the Company's Memorandum of Association, Bye-
laws and the Companies Act 1981 of Bermuda. These summaries do not purport to
be complete and are qualified in their entirety by reference to the full
Memorandum of Association and Bye-laws which have been filed (or incorporated
by reference) as exhibits to the Registration Statement of which this
Prospectus forms a part.
GENERAL
As of the date of this Prospectus, all the issued Shares are fully paid and
non-assessable. Authorized but unissued Shares may be issued at any time and
at the discretion of the Board of Directors without the approval of the
shareholders of the Company with such rights, preferences and limitations as
the Board may determine. Certificates representing Shares are issued in
registered form. Shareholders of the Company who are non-residents of Bermuda
for exchange control purposes may freely hold and vote their Shares. The
shareholders are not entitled to any preemptive, sinking fund or redemption
rights.
VOTING RIGHTS
Subject to any special rights or restrictions as to voting for the time
being attached to any Shares by or in accordance with the Bye-laws, at any
general meeting on a show of hands, every shareholder who is present in person
by proxy shall have one vote and on a poll every shareholder present in person
or by proxy shall have one vote for every fully paid Share of which he is the
holder. Most matters to be approved by holders of Shares require approval by a
simple majority vote of the Shares represented at the shareholders meeting. A
resolution passed by a majority of not less than three-fourths of votes cast
by the holders of the Shares as, being entitled so to do, vote in person or by
proxy at a general meeting is required to approve a merger or amalgamation
with another company. Shareholders do not have cumulative voting rights.
Shareholders have the power to elect directors, appoint auditors and make
changes in the amount of authorized share capital of the Company. Any change
in the rights relating to the Shares requires the adoption of a resolution by
the holders of a majority of the Shares at a duly held meeting of the
shareholders of the Company or, if by written consent, by the holders of at
least 75% of the Shares. Voting at any meeting of shareholders is by show of
hands unless a poll is demanded. A poll may be demanded by the chairman of the
meeting, by at least three shareholders who are present in person or by proxy
for the time being entitled to vote at the meeting, or by shareholders who are
present in person or by proxy and who hold an aggregate amount of Shares (a)
which represent at least 10% of the voting right of Shares entitled to vote at
the meeting or (b) as to which the total paid up sum on such Shares is equal
to at least 10% of the total paid up sum on all Shares entitled to vote at the
meeting.
A quorum required for a meeting of shareholders consists of at least two
shareholders present in person or by proxy representing not less than one-
third in nominal value of the total issued Shares. Shareholders' meetings are
convened upon advance notice of at least 14 days.
DIVIDENDS
The shareholders are entitled to receive on a pro rata basis such dividends
when, as and if declared by the Board of Directors of the Company or
shareholders in a general meeting. Dividends may be paid only in accordance
with the Companies Act 1981 of Bermuda which provides that dividends and other
distributions to shareholders may not be paid if there are reasonable grounds
for believing that (a) the Company is, or would after the dividend payment be,
unable to pay its liabilities as they become due or (b) the realizable value
of the Company's assets after such payment would be less than the aggregate of
its liabilities and its issued share capital and share premium accounts.
Rights to dividends and distributions that have not been claimed within six
years after the date on which they were declared revert to the Company.
37
<PAGE>
WINDING UP
If the Company is wound up, the liquidator may, with the sanction of a
resolution of shareholders, divide among the shareholders in specie or in kind
the whole or any part of the assets of the Company and may, with the like
sanction, vest the whole or any part of the assets in trustees upon such
trusts for the benefit of the shareholders as the liquidator thinks fit,
provided that a shareholder shall not be compelled to accept any Shares or
other securities which would subject such shareholder to liability.
POTENTIAL DIFFICULTIES IN PROTECTING SHAREHOLDER RIGHTS
The Company's corporate affairs are governed by its Memorandum of
Association and Bye-laws and by the laws governing corporations incorporated
in Bermuda. The rights of shareholders of the Company and the responsibilities
of members of the Company's Board of Directors under Bermuda law are different
from those applicable to a corporation incorporated in the United States and,
therefore, the shareholders of the Company may have more difficulty in
protecting their interests in connection with actions by the management,
members of the Company's Board of Directors or controlling shareholders of the
Company than they would as shareholders of a corporation incorporated in the
United States.
MISCELLANEOUS
Certificates for Shares registered in the names of two or more persons may
be delivered to any one of them named in the share register, and if two or
more such persons tender a vote, the votes of the person whose name first
appears in the share register will be accepted to the exclusion of any other.
All notices to joint shareholders and, save as otherwise directed by the joint
holders of Shares, all checks or warrants for dividend payments, will be sent
to the joint holder whose name stands first in the registrar of members. Under
Bermuda law and the Company's Memorandum of Association and Bye-laws,
shareholders do not have preemptive rights.
The Transfer Agent and Registrar for the Shares is ChaseMellon Shareholder
Services, L.L.C.
LISTING
Effective October 31, 1997, the Shares began to trade on the Nasdaq National
Market under the symbol "PEAKF". Prior to October 31, 1997, the Shares traded
on Nasdaq under the symbol "PITLF".
38
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial numbers of Shares in the public market (including
700,000 Shares issuable upon the exercise of outstanding options under the
Share Option Plan) could adversely affect market prices prevailing from time
to time. Upon completion of the offering of the TrENDS, the Company will
continue to have approximately 13.5 million Shares outstanding, assuming no
exercise of options issued pursuant to the Share Option Plan. Of these
outstanding Shares, approximately 12.7 million Shares (approximately 13.5
million Shares if the over-allotment option granted to the Underwriters of the
TrENDS is exercised in full), including the Shares covered hereby will be
freely tradeable within the United States without restriction or further
registration under the Securities Act by persons other than "affiliates" of
the Company as that term is defined in Rule 144 under the Securities Act
("Affiliates"). The remaining Shares are "restricted securities" as that term
is defined in Rule 144 under the Securities Act ("Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rule 144 or 701
promulgated under the Securities Act, which rules are summarized below. As a
result of contractual restrictions described below and provisions of Rules 144
and 701, additional Shares will be available for sale in the public market by
the Selling Shareholder and certain officers and directors of the Company upon
expiration of the lock-up agreements 90 days after the date of the prospectus
with respect to the offering of the TrENDS. Upon the termination of the
Securities Loan Agreement, the approximately 1.8 million borrowed Shares
returned to Luckygold will be Restricted Shares.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least one year (including the holding period of any prior owner except an
Affiliate) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of: (i) one percent of the number of
Shares then outstanding (which will equal 134,615 Shares immediately after the
Offering), or (ii) the average weekly trading volume of the Shares on the
Nasdaq National Market during the four calendar weeks preceding the filing of
notice on Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to
the availability of current public information about the Company. Under Rule
144(k), a person who is not deemed to have been an Affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned
the Shares proposed to be sold for at least two years (including the holding
period of any prior owner except an Affiliate), is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
In addition, any employee, officer or director of or consultant to the
Company who purchased Shares pursuant to a written compensatory plan or
contract may be entitled to rely on the resale provisions of Rule 701. Rule
701 permits an Affiliate to sell Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-Affiliates may sell such shares in reliance on Rule 144
without having to comply with the public information, volume limitation or
notice provisions of Rule 144. In both cases, a holder of Rule 701 shares is
required to wait until 90 days after the date hereof before selling such
shares.
The Company has registered all Shares issued or issuable pursuant to the
Share Option Plan on Form S-8 under the Securities Act. See "Management--Share
Option Plan." Accordingly, these Shares will, subject to Rule 144 volume
limitations applicable to an Affiliate, be available for sale in the open
market, except to the extent that such Shares are subject to vesting
restrictions with the Company or the contractual restrictions described above.
As of March 31, 1998, options relating to an aggregate of 537,375 Shares and
67,560 Shares have been granted under the Company's Share Option Plan at an
exercise price equal to $12.00 per Share and $19.375 per Share, respectively.
39
<PAGE>
TAXATION
The following is a summary of certain Bermuda and United States federal
income tax considerations for purchasers of Shares pursuant to the Offering.
This summary does not discuss all aspects of taxation which may be important
to particular investors in light of their individual investment circumstances,
such as Shares held by investors subject to special tax rules (e.g., financial
institutions, insurance companies, broker-dealers and tax-exempt
organizations) or to persons who will hold the Shares as a position in a
"straddle" or as part of a "hedging" transaction or that have a functional
currency other than the United States dollar, all of whom may be subject to
tax rules that differ significantly from those summarized below. This
discussion is not exhaustive of all possible tax considerations and potential
investors are urged to consult their tax advisors regarding the overall tax
consequences of the purchase, ownership and disposition of the Shares.
BERMUDA TAXATION
In the opinion of Conyers Dill & Pearman, Bermuda counsel of the Company,
the following discussion correctly describes certain tax consequences of the
ownership of Shares under Bermuda law.
The Company is incorporated in Bermuda. Under current Bermuda law, the
Company is not subject to tax on income or capital gains, and no Bermuda
withholding tax will be imposed upon payments of dividends by the Company to
its shareholders. Furthermore, the Company has received from the Minister of
Finance of Bermuda under the Exempted Undertakings Tax Protection Act of 1966
an assurance that, in the event that Bermuda enacts any legislation imposing
any tax computed on profits or income or on any capital asset, gain or
appreciation, or any tax in the nature of an estate duty or inheritance tax,
the imposition of such tax shall not be applicable to the Company or any of
its operations, nor to the shares, debentures or other obligations of the
Company until March 28, 2016. This assurance does not, however, prevent the
imposition of any Bermuda tax payable in relation to any land in Bermuda
leased to the Company or to persons ordinarily resident in Bermuda.
As an exempted company, the Company is liable to pay to the Bermuda
government an annual registration fee not exceeding Bermuda dollars 26,500 per
annum calculated on a sliding scale basis by reference to its authorized share
capital plus any share premium.
UNITED STATES FEDERAL INCOME TAXATION
The following is a summary of certain United States federal income tax
considerations for purchasers of Shares pursuant to the Offering and is for
general information purposes only. This summary is based upon existing United
States federal income tax law, which is subject to change, possibly
retroactively. This summary does not discuss any state or local tax
considerations. In addition, except to the extent described below, this
summary does not discuss the tax consequences to investors who are not "U.S.
Holders" (as defined below). This summary assumes that investors will hold
their Shares as "capital assets" (generally, property held for investment)
under the Internal Revenue Code of 1986, as amended (the "Code"). Prospective
investors are urged to consult their tax advisors regarding the United States
federal, state, local, and foreign income and other tax considerations of the
purchase, ownership and disposition of the Shares.
For purposes of this summary, a "U.S. Holder" is a beneficial owner of
Shares that is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized under the laws of the United States or any state or
political subdivision thereof, (iii) an estate whose income is includible in
gross income for United States federal income tax purposes without regard to
the source of its income or (iv) a trust whose administration is subject to
the primary supervision of a United States court and which has one or more
United States persons who have the authority to control all substantial
decisions of the trust.
40
<PAGE>
U.S. HOLDERS
Dividends
Any cash distributions paid by the Company out of earnings and profits, as
determined under United States federal income tax principles, will be subject
to United States federal income tax as ordinary dividend income and will be
includible in the gross income of a U.S. Holder when such distributions are
received in an amount equal to the gross amount (i.e., before any withholding
taxes) of the dividend. Cash distributions in excess of the earnings and
profits of the Company will be treated as a return of capital to the extent of
the U.S. Holder's adjusted tax basis in its Shares, which will not be subject
to tax, and thereafter as gain from the sale or exchange of a capital asset.
Dividends paid in Bermuda dollars will be includible in income in a United
States dollar amount based on the United States dollar-Bermuda dollar exchange
rate prevailing at the time of receipt of such dividends regardless of whether
payment is in fact converted into United States dollars at that time. Such
dividend income will constitute foreign source income for United States
federal income tax credit purposes and will not be eligible for the dividends
received deduction allowed to corporations.
Sale or Other Taxable Disposition
A U.S. Holder will recognize capital gain or loss upon the sale, exchange or
other taxable disposition (collectively, a "disposition") of Shares in an
amount equal to the difference between the amount realized upon such
disposition and the U.S. Holder's adjusted tax basis in such Shares. Net
capital gain (i.e., generally, capital gain in excess of capital loss)
recognized by an individual holder upon the disposition of Shares that have
been held for more than 18 months will generally be subject to tax at a rate
not to exceed 20%. Net capital gain recognized by a holder upon the
disposition of Shares that have been held for more than 12 months but for not
more than 18 months will be subject to tax at a rate not to exceed 28%, and
net capital gain recognized from the disposition of Shares that have been held
for 12 months or less will be subject to tax at ordinary income tax rates. In
addition, capital gain recognized by a corporate holder will be subject to tax
at the ordinary income tax rates applicable to corporations.
Capital gain recognized upon the disposition of Shares will generally be
treated as United States source income for United States federal income tax
purposes. Under current law, it is unclear whether any capital loss recognized
upon the disposition of Shares would be treated as foreign or United States
source loss for United States federal income tax purposes.
FOREIGN PERSONAL HOLDING COMPANY RULES
The Company would be a foreign personal holding company ("FPHC") for any
taxable year in which, at any time during the year, more than 50% of the
voting power or value of the Company's stock is owned, directly or pursuant to
rules of attribution, by or for five or fewer individuals who are citizens or
residents of the United States ("U.S. Group").
Upon completion of the Offering, Mr. T.L. Li will be treated as owning 58.6%
of the outstanding Shares for purposes of the FPHC rules. If Mr. Li or his
spouse were to become a U.S. citizen or resident, Shares owned by Mr. Li would
be taken into account in determining the existence of a U.S. Group. Moreover,
if a member of Mr. Li's family, or any individual partner of any partnership
of which if Mr. Li is a partner, were to own one or more Shares and were or
were to become a U.S. citizen or resident, Shares considered owned by Mr. Li
would be considered owned by such family member or partner in determining the
existence of a U.S. Group. Although the Company believes that no U.S. Group
presently exists, there can be no assurance that a U.S. Group will not exist
in the future. The Company does not intend to assess whether a U.S. Group
exists in any taxable year.
If the Company were a FPHC, each U.S. Holder who, or that, owned Shares on
the last day of the Company's taxable year, or, if earlier, the last day of
its taxable year on which a U.S. Group existed with respect to the Company,
would be required to include in gross income, as a dividend, such U.S.
Holder's pro rata share of the Company's undistributed taxable income, subject
to certain adjustments. In addition, an individual U.S.
41
<PAGE>
Holder who acquires Shares from a decedent would be denied the step-up of tax
basis of such Shares to fair market value on the decedent's date of death
which would otherwise be available and instead would have a tax basis equal to
the lower of fair market value or the decedent's tax basis.
NON-U.S. HOLDERS
Dividends received or any gains recognized on the disposition of Shares by
an investor which is not a U.S. Holder will not be subject to U.S. federal
income taxation unless such dividends or gains are treated as effectively
connected with the conduct by such holder of a trade or business in the United
States or, in the case of gains derived by an individual, such individual is
present in the United States for 183 days or more and certain other
requirements are satisfied.
42
<PAGE>
CERTAIN FOREIGN ISSUER CONSIDERATIONS
The Company has been designated as non-resident of Bermuda for exchange
control purposes by the Bermuda Monetary Authority, whose permission for the
free transferability of the Shares has been obtained subject to the Shares
being listed on the Nasdaq National Market.
IT MUST BE DISTINCTLY UNDERSTOOD THAT, IN GRANTING SUCH PERMISSION, THE
BERMUDA MONETARY AUTHORITY WILL ACCEPT NO RESPONSIBILITY FOR THE FINANCIAL
SOUNDNESS OF ANY SCHEMES OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE
OR OPINIONS EXPRESSED HEREIN.
The transfer of Shares between persons regarded as resident outside Bermuda
for exchange control purposes and the issue of Shares within the current
authorized share capital of the Company after the completion of the Offering
to or by such persons may be effected without specific consent under the
Exchange Control Act 1972 and regulations thereunder subject to such Shares
being listed on the Nasdaq National Market. Issues and transfers of Shares
involving any person regarded as resident in Bermuda for exchange control
purposes require specific prior approval under the Exchange Control Act 1972.
There are no limitations on the rights of holders of the Shares who are non-
resident in Bermuda for exchange control purposes to hold or vote their
Shares. Because the Company has been designated as a non-resident for Bermuda
exchange control purposes, there are no restrictions on its ability to
transfer funds in and out of Bermuda or to pay dividends to United States
residents who are holders of the Shares, other than in respect of local
Bermuda currency. The Company does not anticipate that it will transact
business or make payments of dividends or other distributions in the local
Bermuda currency.
In accordance with Bermuda law, share certificates are only issued in the
names of corporations, partnerships or individuals. In the case of an
applicant acting in a special capacity (for example, as trustee), certificates
may, at the request of the applicant, record the capacity in which the
applicant is acting. Notwithstanding the recording of any such special
capacity, the Company is not bound to investigate or incur any responsibility
in respect to the proper administration of any such trust.
Upon completion of the Offering, Luckygold will continue to be the
registered shareholder of the Shares covered hereby and will retain all
shareholders' rights with respect to such Shares. The Company will not
recognize the Trust as the beneficial owner of the Shares covered hereby and
will not take notice of any other trust applicable to any other of its Shares
whether or not it has notice of such trust.
As an exempted company, the Company is exempted from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians,
but as an exempted company the Company may not participate in certain business
transactions including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years), (2) the taking of mortgages on land in
Bermuda to secure an amount in excess of 50,000 Bermuda dollars without the
consent of the Minister of Finance of Bermuda, (3) the acquisition of any
bonds or debentures secured on any land in Bermuda except bonds or debentures
issued by the Bermuda government or a public authority or (4) the carrying on
of business of any kind in Bermuda, except in furtherance of the business of
the Company carried on outside Bermuda or under a license granted by the
Minister of Finance of Bermuda.
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<PAGE>
PLAN OF DISTRIBUTION
Donaldson, Lufkin & Jenrette Securities Corporation may from time to time
offer Shares borrowed from Luckygold under the Securities Loan Agreement
directly to one or more purchasers at negotiated prices, at market prices
prevailing at the time of sale or at prices related to such market prices. The
Securities Loan Agreement provides that, subject to certain restrictions and
with the agreement of Luckygold, Donaldson, Lufkin & Jenrette Securities
Corporation may from time to time borrow, return and reborrow Shares from
Luckygold; provided, that the number of Shares borrowed under the Securities
Loan Agreement at any time may not exceed 1,793,038 Shares. In addition, in
the course of ordinary trading or market-making activities, Donaldson, Lufkin
& Jenrette Securities Corporation may lend to third parties Shares borrowed
from Luckygold. Such third parties may offer for sale such Shares under this
Prospectus directly to one or more purchasers at negotiated prices, at market
prices prevailing at the time of sale or at prices related to such market
prices.
The obligations of Donaldson, Lufkin & Jenrette Securities Corporation under
the Securities Loan Agreement shall be secured by cash, U.S. government
securities, irrevocable letters of credit or other collateral, as may be the
case, in an amount not less than 102% of the market value of the borrowed
Shares. If the market value of the borrowed Shares falls or rises over time,
Donaldson, Lufkin & Jenrette Securities Corporation may be required to provide
additional collateral or may be entitled to the return of collateral. The
recalculation of the market value of the borrowed Shares will be done on a
daily basis. Any fees payable by Donaldson, Lufkin & Jenrette Securities
Corporation under the Securities Loan Agreement will be paid directly to
Luckygold. Donaldson, Lufkin & Jenrette Securities Corporation intends to
borrow Shares under the Securities Loan Agreement to facilitate its ordinary
trading and market-making activity with respect to the Shares and the TrENDS.
The availability of Shares under the Securities Loan Agreement does not assure
market-making activity in the Shares or the TrENDS by Donaldson, Lufkin &
Jenrette Securities Corporation. Donaldson, Lufkin & Jenrette Securities
Corporation may use this Prospectus in connection with the sale of Shares
borrowed under the Securities Loan Agreement. Donaldson, Lufkin & Jenrette
Securities Corporation is not under any obligation to engage in market-making
activity with respect to the Shares or the TrENDS, and any such market-making
activities engaged in by Donaldson, Lufkin & Jenrette Securities Corporation,
if commenced, may be discontinued at any time.
The Company has agreed to indemnify Donaldson, Lufkin & Jenrette Securities
Corporation against certain civil liabilities, including liabilities under the
Securities Act, and to contribute to payments Donaldson, Lufkin & Jenrette
Securities Corporation may be required to make in respect thereof.
44
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed upon
for the Company, Luckygold and Mr. T.L. Li by Skadden, Arps, Slate, Meagher &
Flom LLP, Hong Kong and New York, New York, Conyers Dill and Pearman, BVI and
Bermuda, and Richards Butler. In rendering such opinions, Skadden, Arps,
Slate, Meagher & Flom LLP may rely with respect to certain matters of Bermuda
law on the opinion of Conyers Dill and Pearman and, with respect to certain
matters of Hong Kong law, on the opinion of Richards Butler. Mr. Robin
Nicholson, a partner of Richards Butler, is also a director of the Company.
EXPERTS
The consolidated financial statements as of March 31, 1997 and 1998 and for
each of the two years ended March 31, 1998 included in this Prospectus have
been audited by Deloitte Touche Tohmatsu, independent auditors, as stated in
their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements as of March 31, 1996 and for the year
then ended included in this Prospectus have been audited by BDO Binder,
independent auditors, as stated in their report appearing herein, and are
included herein in reliance upon such report given upon the authority of said
firm as experts in accounting and auditing.
45
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report on the Consolidated Financial Statements for
the years
ended March 31, 1997 and 1998 .......................................... F-2
Independent Auditors' Report on the Consolidated Financial Statements for
the year
ended March 31, 1996.................................................... F-3
Consolidated Balance Sheets as of March 31, 1997 and 1998................ F-4
Consolidated Statements of Income for the years ended March 31, 1996,
1997 and 1998........................................................... F-5
Consolidated Statements of Shareholders' Equity for the years ended March
31, 1996,
1997 and 1998 .......................................................... F-6
Consolidated Statements of Cash Flows for the years ended March 31, 1996,
1997 and 1998........................................................... F-7
Notes to Consolidated Financial Statements............................... F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Peak International Limited
We have audited the accompanying consolidated balance sheets of Peak
International Limited and subsidiaries as of March 31, 1997 and 1998 and the
related consolidated statements of income, shareholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we 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. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Peak International Limited
and subsidiaries as of March 31, 1997 and 1998 and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
Deloitte Touche Tohmatsu
Hong Kong
May 7, 1998
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Peak International Limited
We have audited the accompanying consolidated statements of income,
shareholders' equity and cash flows of Peak International Limited and
subsidiaries for the year ended March 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards applicable in the United States of America. Those standards require
that we 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. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in
all material respects, the consolidated results of operations and consolidated
cash flows of Peak International Limited and subsidiaries for the year ended
March 31, 1996 in conformity with accounting principles generally accepted in
the United States of America.
BDO Binder Hong Kong March 19, 1997
F-3
<PAGE>
PEAK INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
---------------
NOTE 1997 1998
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 1,814 $19,214
Investment in certificate of deposit................... 100 100
Short-term marketable securities....................... 3 1,129 --
Accounts receivable--trade............................. 10,251 10,141
Inventories............................................ 4 22,053 27,941
Other receivables, deposits and prepayments............ 1,348 1,521
Amounts due from related companies..................... 13 1,356 4,275
------- -------
Total current assets............................... 38,051 63,192
Property, plant and equipment, net....................... 5 15,744 26,348
------- -------
Total assets....................................... $53,795 $89,540
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings: 6
--overdrafts and invoice financing................... $ 9,208 $ 89
--bills payable...................................... 5,489 --
--other short-term loans............................. 6,473 --
------- -------
21,170 89
Accounts payable:
--trade.............................................. 1,767 3,763
--property, plant and equipment...................... 70 557
Accrued liabilities and deposits....................... 1,356 2,578
Income taxes payable................................... 2,477 3,800
Amounts due to related companies....................... 13 309 353
------- -------
Total current liabilities.......................... 27,149 11,140
Deferred income taxes.................................... 10 374 818
Commitments and contingencies 12
Shareholders' equity:
Common stock, $0.01 par value; 100,000,000 shares
authorized, 10,461,538 shares issued and outstanding
as of March 31, 1997, and 13,461,538 shares issued and
outstanding as of March 31, 1998...................... 105 135
Additional paid-in capital............................. 2,564 34,034
Retained earnings...................................... 23,523 44,117
Cumulative translation adjustment...................... 21 (704)
Unrealized holding gain on marketable securities....... 3 59 --
------- -------
Total shareholders' equity......................... 26,272 77,582
------- -------
Total liabilities and shareholders' equity......... $53,795 $89,540
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PEAK INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------
NOTE 1996 1997 1998
<S> <C> <C> <C> <C>
Net sales:
--third parties....................... $43,467 $47,910 $60,934
--related companies................... 13 11,477 9,684 12,771
------- ------- -------
54,944 57,594 73,705
Cost of goods sold...................... (33,931) (32,676) (41,048)
------- ------- -------
Gross profit............................ 21,013 24,918 32,657
Operating expenses:
General and administrative and
research and development............. (5,385) (4,730) (6,194)
Selling and marketing................. (3,294) (4,198) (5,487)
------- ------- -------
Income from operations.................. 12,334 15,990 20,976
Other income, net....................... 7 1,133 83 926
Interest income......................... 8 15 105 907
Interest expense........................ 9 (765) (1,425) (390)
------- ------- -------
Income before income taxes.............. 10 12,717 14,753 22,419
Provision for income taxes.............. 10 (1,227) (1,236) (1,825)
------- ------- -------
Net income.............................. $11,490 $13,517 $20,594
======= ======= =======
Earnings per share
Basic................................. $ 1.10 $ 1.29 $ 1.61
======= ======= =======
Diluted............................... $ 1.10 $ 1.29 $ 1.59
======= ======= =======
<CAPTION>
Weighted average number of
shares outstanding (basic)............. 10,461,538 10,461,538 12,804,004
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PEAK INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED
CUMULATIVE HOLDING
COMMON STOCK ADDITIONAL TRANSLATION GAINS/(LOSSES)
----------------- PAID-IN RETAINED ADJUSTMENT ON MARKETABLE
SHARES AMOUNT CAPITAL EARNINGS ACCOUNT SECURITIES TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of March 31,
1995................... 10,461,538 $105 $ 2,564 $ 9,529 $ (9) $(488) $11,701
Net income for the
year................... -- -- -- 11,490 -- -- 11,490
Dividend of $0.93 per
share.................. -- -- -- (9,719) -- -- (9,719)
Holding losses realized
during the year upon
disposal............... -- -- -- -- -- 488 488
---------- ---- ------- ------- ----- ----- -------
Balance as of March 31,
1996................... 10,461,538 105 2,564 11,300 (9) -- 13,960
Net income for the
year................... -- -- -- 13,517 -- -- 13,517
Dividend of $0.12 per
share.................. -- -- -- (1,294) -- -- (1,294)
Foreign currency
translation............ -- -- -- -- 30 -- 30
Increase in unrealized
holding gain for
the year............... -- -- -- -- -- 59 59
---------- ---- ------- ------- ----- ----- -------
Balance as of March 31,
1997................... 10,461,538 105 2,564 23,523 21 59 26,272
Net income for the
year................... -- -- -- 20,594 -- -- 20,594
New issue of shares..... 3,000,000 30 31,470 -- -- -- 31,500
Foreign currency
translation............ -- -- -- -- (725) -- (725)
Holding gain realized
during the year upon
disposal .............. -- -- -- -- -- (59) (59)
---------- ---- ------- ------- ----- ----- -------
Balance as of March 31,
1998................... 13,461,538 $135 $34,034 $44,117 $(704) $ -- $77,582
========== ==== ======= ======= ===== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PEAK INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------
1996 1997 1998
<S> <C> <C> <C>
Operating activities:
Net income....................................... $ 11,490 $ 13,517 $20,594
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 2,963 3,570 5,012
Deferred income taxes.......................... 11 (67) 444
Gain on sale of long-term marketable
securities.................................... (949) -- --
Loss on disposal/write-off of plant and
equipment..................................... 891 3 7
Gain on sale of short-term marketable
securities.................................... -- (90) (345)
Changes in operating assets and liabilities:
Accounts receivable--trade...................... (1,708) (1,720) (356)
Inventories..................................... (3,364) (7,444) (5,888)
Other receivables, deposits and prepayments .... 880 (266) (173)
Bills payable................................... (1,560) 306 (5,489)
Accounts payable--trade......................... (491) 567 1,996
Accrued liabilities and deposits................ 27 (554) 1,222
Amounts due from/to related companies........... (2,461) (12) (2,875)
Income taxes payable............................ 1,063 1,666 1,323
-------- -------- -------
Net cash provided by operating activities...... 6,792 9,476 15,472
-------- -------- -------
Investing activities:
Purchase of marketable securities................ (328) (1,592) --
Proceeds on sale of plant and equipment.......... 72 -- --
Acquisition of property, plant and equipment..... (7,156) (8,050) (15,244)
Decrease in deposits for acquisition of property,
plant and equipment............................. 99 -- --
Proceeds from sale of short-term marketable
securities...................................... -- 612 1,415
Purchase of investment in certificate of
deposit......................................... (100) -- --
Purchase of investment held to maturity.......... -- -- (11,003)
Maturity of investment held to maturity.......... -- -- 11,003
-------- -------- -------
Net cash used in investing activities.......... (7,413) (9,030) (13,829)
-------- -------- -------
Financing activities:
Proceeds from/(repayment of) short-term bank
loans........................................... -- 6,473 (6,473)
Increase/(decrease) in bank overdrafts and
invoice financing, net.......................... 1,492 5,726 (9,119)
Dividends paid................................... (7,120) (1,294) --
Advances from shareholder........................ 13,564 1,570 --
Proceeds from issue of common stock.............. -- -- 31,500
Repayment of amount due to shareholder........... (8,219) (12,061) --
-------- -------- -------
Net cash (used in)/provided by financing
activities.................................... (283) 414 15,908
-------- -------- -------
Net (decrease)/increase in cash and cash
equivalents...................................... (904) 860 17,551
Cash and cash equivalents at beginning of year.... 1,828 924 1,814
Effects of exchange rate changes on cash.......... -- 30 (151)
-------- -------- -------
Cash and cash equivalents at end of year.......... $ 924 $ 1,814 $19,214
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(1) ORGANIZATION AND BASIS OF PRESENTATION
Peak International Limited (the "Company") was incorporated as an exempted
company with limited liability in Bermuda under the Companies Act 1981 of
Bermuda (as amended) on January 3, 1997.
Pursuant to a group restructuring (the "Restructuring"), the interest in
Peak Plastic & Metal Products (International) Limited ("Peak (HK)") and other
companies in the packaging products business held by Mr. T.L. Li, the
shareholder of the Company (the "Shareholder"), were restructured whereby the
Company became the holding company of Peak (HK) and the Company's other
subsidiaries. Prior to the Restructuring, the Shareholder owned, in the
aggregate, all 200,000 of the outstanding ordinary shares of Peak (HK). Prior
to the Restructuring, the Shareholder also directly owned all of the
outstanding shares of Luckygold 18A Limited ("Luckygold") and, through
Luckygold, indirectly held all of the outstanding shares of each of Success
Gold 8 Limited ("Success Gold") and Peakgold 3 Limited ("Peakgold") and each
of their respective subsidiaries. Luckygold, Success Gold and Peakgold are
incorporated in the British Virgin Islands.
On January 14, 1997, 1,200,000 shares of the Company were allotted nil paid
to Luckygold. On February 28, 1997, Luckygold transferred to the Company all
the outstanding shares of Peakgold and Success Gold in consideration for (i)
crediting as fully paid the existing 1,200,000 shares allotted to Luckygold
and (ii) the issue of 8,800,000 additional shares to Luckygold. As part of the
Restructuring, on March 18, 1997, the Company issued 461,538 shares to
Luckygold, credited as fully paid, by way of capitalization of the sum of
$4,615 standing to the credit of the additional paid-in capital account of the
Company.
On February 13, 1997, Peakgold subscribed for at par and was allotted two
ordinary shares of Peak (HK). Following the acquisition of those two shares,
the 200,000 ordinary shares of Peak (HK) owned by the Shareholder prior to the
Restructuring were, on February 17, 1997, converted into non-voting deferred
shares. The deferred shares have effectively no rights to dividends and
limited rights to return of capital upon any dissolution or liquidation of
Peak (HK). In addition, Peakgold was granted an option to purchase all of the
deferred shares within the five-year period following the grant of the option
for a total consideration of one Hong Kong dollar. As a result, the voting and
economic rights relating to the common stock of Peak (HK) became effectively
wholly-owned by Peakgold and, accordingly, the value of the Shareholder's 100%
interest in Luckygold increased by the value of Peak (HK).
The Restructuring has been accounted for as a reorganization of entities
under common control similar to a pooling of interests. The financial
statements present the results of the Company and its subsidiaries as if the
companies had been combined for all periods presented.
In June 1997, the Company issued 3,000,000 shares of common stock in an
initial public offering and received net proceeds of approximately $31,500.
The subsidiaries of the Company are principally engaged in the manufacture
and sale of precision engineered packaging products, such as matrix trays,
shipping tubes, reels and carrier tape, leadframe boxes and interleaves used
in the storage and transportation of semiconductor devices and other
electronic components. The Company's principal production facilities are
located in the People's Republic of China (the "PRC") and the Company
maintains sales offices in Hong Kong, the United States of America, Singapore
and Malaysia.
The consolidated financial statements of the Company and its subsidiaries
have been prepared in accordance with generally accepted accounting principles
in the United States of America ("U.S. GAAP") which differ from those used in
the statutory accounts of most of its subsidiaries. There are no material
differences between the U.S. GAAP amounts and the amounts used in the
statutory accounts of the subsidiaries.
F-8
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(1) ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
(B) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first-out method. Cost of work-in-progress and finished goods
includes costs of direct materials, direct labor and an appropriate proportion
of production overheads. The production overheads are absorbed in work-in-
progress and finished goods based on units of production.
(C) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation.
Depreciation and amortization is provided using the straight-line method so
as to allocate the cost of depreciable assets in use to operations based upon
the following estimated useful lives:
<TABLE>
<CAPTION>
CATEGORY OF ASSETS ESTIMATED USEFUL LIVES
<S> <C>
Land use rights............................. Over the unexpired lease term
Buildings................................... Over the unexpired lease term
Other property, plant and equipment......... 5 years
</TABLE>
Costs incurred in constructing the new factory, including progress payments,
interest costs and other costs relating to the construction are capitalized.
These costs will be transferred to property, plant and equipment on completion
and depreciated from that time. As of March 31, 1997 and 1998, capitalized
interest included in factory under construction amounted to $11 and $34,
respectively.
(D) INVESTMENT IN MARKETABLE SECURITIES
Management determines the appropriate classification of investment
securities at the time they are acquired and reevaluates the appropriateness
of such classifications at the balance sheet date. At each balance sheet date,
the investment in marketable equity securities has been classified as
"Available for Sale Securities". This type of security is stated at fair
market value and unrealized holding gains and losses, net of deferred tax, are
reported as a separate component of shareholders' equity.
Dividends on marketable equity securities, if any, are recognized as income
when declared. Realized gains and losses will be included in income and will
be based upon the actual cost of the security.
F-9
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) FOREIGN CURRENCY TRANSLATION
The Company uses the United States dollar as its reporting currency.
Monetary assets and liabilities denominated in currencies other than United
States dollars are translated into United States dollars at the rates of
exchange ruling at the balance sheet date. Transactions in currencies other
than United States dollars during the year are converted into United States
dollars at the rates of exchange ruling at the transaction dates. Exchange
differences are recognized in the statements of income.
On consolidation, balance sheets of subsidiaries denominated in currencies
other than United States dollars are translated into United States dollars at
the rates of exchange ruling at the balance sheet date. Statements of income
of subsidiaries denominated in currencies other than United States dollars are
translated into United States dollars at average exchange rates. Exchange
differences are recorded to a cumulative translation adjustment account within
shareholders' equity.
The Company enters into foreign exchange contracts to reduce its exposure to
changes in exchange rates. Material market value gains and losses are
recognized in the statement of income.
(F) INCOME TAXES
Income taxes are calculated under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Deferred income
taxes include the effects of temporary differences between financial and
taxable amounts of assets and liabilities.
(G) RECOGNITION OF REVENUE
Revenue arising from sale of goods is recognized at the time when the goods
are shipped and title to the goods passes to customers.
(H) EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of shares
outstanding during the year. For the year ended March 31, 1998, diluted
earnings per share is computed using a weighted average number of shares
outstanding of 12,972,060, which includes 168,056 additional shares, being the
dilutive effect of stock options computed using the treasury stock method.
(I) CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity of
ninety days or less at the time of acquisition to be cash equivalents.
(J) CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and trade accounts receivable.
The Company places its temporary cash investments with various financial
institutions and, by policy, limits the amount of credit exposure to any one
financial institution. The Company believes that no significant credit risk
exists as these investments are made with high-credit, quality financial
institutions.
The Company's business activities and accounts receivable are with customers
in the semiconductor industries, the majority of which are located throughout
Asia and the United States of America. The Company performs ongoing credit
evaluations of its customers. The Company believes that no significant credit
risk exists as credit losses, when realized, have been within the range of
management's expectations. During the years, the Company has not experienced
any significant bad debts and did not maintain any allowances for doubtful
accounts.
F-10
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(K) FINANCIAL INSTRUMENTS
The carrying value of financial instruments, which consist of cash and cash
equivalents, investments in certificates of deposit and marketable securities,
accounts receivable, other receivables, amounts due from related companies,
short-term bank borrowings, accounts payable and bills payable, approximates
to fair value due to the short-term nature of these instruments.
(L) NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board (FASB) issued two new
disclosure standards. Results of operations and financial position will be
unaffected by implementation of these new standards.
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS No. 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which supersedes SFAS No. 14, Financial Reporting for Segments of
a Business Enterprise, establishes standards for the way that public
enterprises report information about operating segments in interim financial
statements issued to the public. It also establishes standards for disclosures
regarding products and services, geographic areas and major customers. SFAS
No. 131 defines operating segments as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance.
Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. Due to the recent issuance of these
standards, management has been unable to fully evaluate the impact, if any,
they may have on future financial statement disclosures.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits, which amends the disclosure
requirements for pensions and other postretirement benefits. Adoption of the
standard will not significantly change the Company's financial statement
disclosures.
(3) SHORT-TERM MARKETABLE SECURITIES
<TABLE>
<CAPTION>
MARCH 31,
------------
1997 1998
<S> <C> <C>
Equity securities listed in the United States:
Cost......................................................... $1,070 $ --
Unrealized holding gain...................................... 59 --
------ -----
Market value................................................. $1,129 $ --
====== =====
</TABLE>
F-11
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(4) INVENTORIES
The components of inventories, net of the related reductions to the lower of
cost or market, were as follows:
<TABLE>
<CAPTION>
MARCH 31,
----------------
1997 1998
<S> <C> <C>
Raw materials.............................................. $15,374 $20,489
Finished products.......................................... 6,808 7,645
------- -------
22,182 28,134
Less: Inventory reserve.................................... (129) (193)
------- -------
$22,053 $27,941
======= =======
</TABLE>
The inventory reserve represents provision for slow moving inventory
determined after periodic review by management.
Movements in inventory reserve are as follows:
<TABLE>
<S> <C>
Balance as of March 31, 1996.......................................... $ 582
Provision for slow moving inventory written back to income............ (453)
-----
Balance as of March 31, 1997.......................................... 129
Provision for slow moving inventory charged to income................. 64
-----
Balance as of March 31, 1998.......................................... $ 193
=====
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1998
<S> <C> <C>
Land use rights and building............................ $ 2,424 $ 4,909
Factory under construction.............................. 1,426 2,649
Plant, machinery, moulds and equipment.................. 12,923 20,068
Leasehold improvements, furniture, fixtures and motor
vehicles............................................... 9,476 14,177
-------- -------
26,249 41,803
Less: Accumulated depreciation and amortization......... (10,505) (15,455)
-------- -------
$ 15,744 $26,348
======== =======
</TABLE>
A subsidiary of the Company operating in Shenzhen in the PRC acquired
factory buildings on certain state-owned land in the PRC. Pursuant to land use
rights' agreements entered into between the subsidiary and the local land
bureau on March 27, 1995 and January 31, 1996, the subsidiary was legally
assigned the land use rights for a period of 50 years after payment of an
additional land premium.
F-12
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(6) BANK BORROWINGS
These represent borrowings in the form of bills payable, invoice financing,
bank overdrafts and other short-term loans with certain commercial banks.
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1998
<S> <C> <C>
Total unsecured credit facilities available............. $54,450 $ 50,518
======= ========
Total utilized unsecured facilities..................... $21,170 $ 89
======= ========
Weighted average interest rate on borrowings at end of
year................................................... 8.27% 9.17%
======= ========
</TABLE>
All the above credit facilities were guaranteed at no cost by Mr. T.L. Li
throughout the relevant years. Following the Company's initial public offering
in June 1997, these guarantees were released by the banks. Interest rates in
respect of such facilities are generally based on the banks' prime lending
rates and the credit lines are normally subject to annual review.
(7) OTHER INCOME, NET
Other income/(expense) consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------
1996 1997 1998
<S> <C> <C> <C>
Market value of long-term marketable securities
distributed as dividend....................... $ 2,599 $ -- $ --
Proceeds on sale of short-term marketable secu-
rities........................................ -- 612 1,415
Cost of marketable securities.................. (1,650) (522) (1,070)
-------- ------ -------
Realized gain on marketable securities......... 949 90 345
Dividend income................................ 164 -- --
Foreign currency exchange gain/(loss), net..... 20 (7) 581
-------- ------ -------
$ 1,133 $ 83 $ 926
======== ====== =======
(8) INTEREST INCOME
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------
1996 1997 1998
<S> <C> <C> <C>
Interest income from:
--third parties.............................. $ 15 $ 74 $ 901
--an affiliated party (note 13).............. -- 31 6
-------- ------ -------
$ 15 $ 105 $ 907
======== ====== =======
</TABLE>
F-13
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(9) INTEREST EXPENSE
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------
1996 1997 1998
<S> <C> <C> <C>
Interest expense to:
--third parties................................... $ 738 $ 1,425 $ 390
--a related company (note 13)..................... 27 -- --
------- ------- -------
$ 765 $ 1,425 $ 390
======= ======= =======
(10) PROVISION FOR INCOME TAXES
Income is subject to taxation in the various countries in which the Company
and its subsidiaries operate. The components of income before income taxes are
as follows:
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------
1996 1997 1998
<S> <C> <C> <C>
Hong Kong.......................................... $12,184 $14,678 $21,787
Other countries.................................... 533 75 632
------- ------- -------
$12,717 $14,753 $22,419
======= ======= =======
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------
1996 1997 1998
<S> <C> <C> <C>
Income tax:
Current:
Hong Kong........................................ $ 1,114 $ 1,223 $ 1,299
United States.................................... 98 22 52
Malaysia......................................... 4 27 (4)
Singapore........................................ -- 31 34
Deferred income tax:
Hong Kong........................................ 11 (28) 450
Malaysia......................................... -- (26) --
Singapore........................................ -- (13) (6)
------- ------- -------
$1,227 $1,236 $ 1,825
======= ======= =======
</TABLE>
The components of the net deferred income tax liabilities as of March 31,
1997 and 1998 are as follows:
<TABLE>
<CAPTION>
MARCH 31,
----------
1997 1998
<S> <C> <C>
Deferred income tax liabilities:
Depreciation................................................... $447 $900
Other temporary difference..................................... (73) (82)
---- ----
$374 $818
==== ====
</TABLE>
F-14
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(10) PROVISION FOR INCOME TAXES (CONTINUED)
The effective tax rate of the Company varied from the Hong Kong profits tax
rate for the following reasons:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------
1996 1997 1998
<S> <C> <C> <C>
Hong Kong profits tax rate...................... 16.5% 16.5% 16.5%
Hong Kong profits tax relief for the PRC opera-
tions.......................................... (8.3) (8.3) (8.3)
Taxation elsewhere.............................. 1.4 0.3 0.4
Other items..................................... -- (0.1) (0.5)
------- ------- -------
Effective tax rate.............................. 9.6% 8.4% 8.1%
======= ======= =======
</TABLE>
Under the Hong Kong tax authority's Departmental Interpretation and Practice
Notes, a company based in Hong Kong, but with substantially all of its
manufacturing operations located in the PRC conducted pursuant to a processing
agreement entered into with a PRC company, can enjoy profit apportionment
through which only 50% of its manufacturing profit is subject to Hong Kong
profits tax. Substantially all of the Company's manufacturing operations are
located in Shenzhen, the PRC and conducted pursuant to a processing agreement
entered into with a PRC company. Effective April 1, 1998 the profits tax rate
in Hong Kong is 16.0%, a change from the former profits tax rate, which was
16.5%. Under profits apportionment, only 50% of the profits of the Company is
subject to Hong Kong profits tax. Such tax concession is granted based on
annual application by the Company and there can be no assurance that the Hong
Kong tax authority will continue to grant such tax concession to the Company
and other Hong Kong companies with manufacturing operations in the PRC, or
that the Company will not lose such concession in the future as a result of
changes in Hong Kong tax law or the interpretation of such law.
(11) EMPLOYEE BENEFIT PLAN
Since June 1, 1996, the Company has established defined contribution benefit
plans for its Hong Kong employees. The assets of the plans are held under
provident funds managed by independent trustees. The employees can elect not
to make contributions to the plans or they can elect to contribute a fixed
percentage from 1% to 5% (in 1% increments) of individual employee's monthly
basic salary. The employer's contributions are based on 5% of individual
employee's monthly basic salary. The employees are entitled to the whole of
the employer's contributions and accrued interest thereon after 10 years of
complete service or at a reduced scale of 90% to 30%, after completion of 9 to
3 years of service, respectively.
In addition, certain subsidiaries of the Company are required to contribute
amounts based on respective employee's salary to the retirement schemes as
stipulated by relevant local authorities. The employees are entitled to the
employer's contributions subject to the regulations of the relevant local
authorities.
The aggregate employers' contributions which have been made are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
MARCH 31,
--------------
1996 1997 1998
<S> <C> <C> <C>
Employers' contributions..................................... $28 $143 $199
=== ==== ====
</TABLE>
F-15
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(12) COMMITMENTS AND CONTINGENCIES
(a) Capital expenditure
As of March 31, 1998, the Company and its subsidiaries had contracted
for capital expenditure on property, plant and equipment of $263.
(b) Operating leases
The Company and its subsidiaries lease certain land and buildings
under operating leases, most of which do not contain renewal options
and escalation clauses, which expire through December 2007. Total
rental expenses associated with operating leases for the years ended
March 31, 1996, 1997 and 1998, amounted to $595, $1,048 and $1,295,
respectively.
The aggregate annual minimum operating lease commitments under all
noncancelable leases as of March 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
<S> <C>
1999................................................................ $1,415
2000................................................................ 863
2001................................................................ 429
2002................................................................ 258
2003................................................................ 258
Thereafter.......................................................... 749
------
$3,972
======
</TABLE>
As of March 31, 1998 the Company has entered into foreign exchange contracts
totaling approximately $17,614 (1997: nil) primarily to purchase Hong Kong
dollars and Renminbi. The Company is exposed to credit risk in the event of
non-performance by the counterparties to the contracts. However, the Company
does not anticipate non-performance because the counterparties are major
financial institutions.
F-16
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(13) RELATED AND AFFILIATED PARTY TRANSACTIONS
The Company had the following significant transactions with certain related
and affiliated parties during the relevant years:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------
1996 1997 1998
<S> <C> <C> <C>
Sales to related companies:
Certain subsidiaries of QPL
International Holdings Limited ("QPL").............. $11,477 $9,315 $12,046
EEMS Italia S.P.A. ("EEMS").......................... -- 369 725
------- ------ -------
$11,477 $9,684 $12,771
======= ====== =======
Acquisition of plant and equipment from a subsidiary of
QPL................................................... 290 -- --
Disposal of plant and equipment to EEMS................ 290 -- --
Commission expense to EEMS............................. -- 212 100
Interest expense to Six Sigma Finance Limited ("SS Fi-
nance")............................................... 27 -- --
Management fee from SemiCycle Foundation............... 74 252 101
Purchases from SemiCycle Foundation.................... 438 1,735 3,000
Rental income from SemiCycle Foundation................ -- 91 98
Interest income from SemiCycle Foundation.............. -- 31 6
Management fee from EEMS, Inc.......................... -- 144 147
</TABLE>
The amounts due from/to related companies as of March 31, 1997 and 1998 were
as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------
1997 1998
<S> <C> <C>
Amounts due from:
Certain subsidiaries of QPL.................................... $ 991 $4,068
EEMS, Inc...................................................... 13 --
EEMS........................................................... 91 207
SemiCycle Foundation........................................... 261 --
------ ------
$1,356 $4,275
====== ======
Amounts due to:
EEMS........................................................... $ -- $ 36
SemiCycle Foundation........................................... 309 317
------ ------
$ 309 $ 353
====== ======
</TABLE>
The above advances are unsecured, interest free and are repayable on demand
except, as of March 31, 1997, the amount due from SemiCycle Foundation
included unsecured notes totaling $220 all of which bear interest at 8% per
annum. As of March 31, 1998, the notes have been repaid.
Mr. T.L. Li, who is a director of and majority shareholder of the Company,
is a director of and has substantial equity interests in QPL, EEMS and SS
Finance. Messrs. Steve Dezso, a corporate officer of a subsidiary of the
Company, and Richard M. Brook, a director of the Company, were until October
27, 1997 corporate officers of EEMS, Inc. Mr. Steve Dezso is a director of
SemiCycle Foundation and Mr. Richard M. Brook was until December 21, 1996 a
director of SemiCycle Foundation. In December 1997, the board of directors of
SemiCycle Foundation was expanded from three to eight directors, and
consequently, the Company's transactions with SemiCycle Foundation will no
longer be regarded as related and affiliated party transactions beginning
April 1, 1998 under accounting standards generally accepted in the United
States of America.
F-17
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(14) SEGMENT INFORMATION
The Company and its subsidiaries operate in one business segment, which is
to manufacture and sell plastic tubes, trays and other related products.
An analysis of net sales, operating profit and identifiable assets by
geographic location is as follows:
<TABLE>
<CAPTION>
OTHER SOUTHEAST
HONG KONG UNITED ASIAN
& PRC STATES COUNTRIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31,
1996
Net sales to third
parties................ $ 30,877 $ 10,911 $ 1,679 $ -- $ 43,467
Net sales to related
companies.............. 11,477 -- -- -- 11,477
Transfer between
geographic areas....... 10,196 1,937 -- (12,133) --
-------- -------- ------- --------- --------
Total net sales....... $ 52,550 $ 12,848 $ 1,679 $ (12,133) $ 54,944
-------- -------- ------- --------- --------
Depreciation and
amortization........... $ 2,865 $ 47 $ 51 $ -- $ 2,963
-------- -------- ------- --------- --------
Operating
profit/(loss).......... $ 11,801 $ 857 $ 29 $ (353) $ 12,334
-------- -------- ------- --------- --------
Capital expenditure..... $ 4,084 $ 149 $ 359 $ -- $ 4,592
-------- -------- ------- --------- --------
Identifiable assets..... $ 33,964 $ 2,076 $ 1,272 $ (353) $ 36,959
Corporate assets........ 1,464
--------
Total assets.......... $ 38,423
--------
YEAR ENDED MARCH 31,
1997
Net sales to third
parties................ $ 22,098 $ 10,488 $15,324 $ -- $ 47,910
Net sales to related
companies.............. 9,684 -- -- -- 9,684
Transfer between
geographic areas....... 21,095 496 2,806 (24,397) --
-------- -------- ------- --------- --------
Total net sales....... $ 52,877 $ 10,984 $18,130 $ (24,397) $ 57,594
-------- -------- ------- --------- --------
Depreciation and
amortization........... $ 3,383 $ 42 $ 145 $ -- $ 3,570
-------- -------- ------- --------- --------
Operating
profit/(loss).......... $ 16,100 $ 138 $ 197 $ (445) $ 15,990
-------- -------- ------- --------- --------
Capital expenditure..... $ 6,718 $ 144 $ 334 $ -- $ 7,196
-------- -------- ------- --------- --------
Identifiable assets..... $ 43,427 $ 3,056 $ 4,847 $ (798) $ 50,532
Corporate assets........ 3,263
--------
Total assets.......... $ 53,795
--------
YEAR ENDED MARCH 31,
1998
Net sales to third
parties................ $ 30,129 $ 14,457 $16,348 $ -- $ 60,934
Net sales to related
companies.............. 12,771 -- -- -- 12,771
Transfer between
geographic areas....... 26,683 -- 2,286 (28,969) --
-------- -------- ------- --------- --------
Total net sales....... $ 69,583 $ 14,457 $18,634 $ (28,969) $ 73,705
-------- -------- ------- --------- --------
Depreciation and
amortization........... $ 4,824 $ 53 $ 135 $ -- $ 5,012
-------- -------- ------- --------- --------
Operating
profit/(loss).......... $ 20,344 $ 271 $ 457 $ (96) $ 20,976
-------- -------- ------- --------- --------
Capital expenditure..... $ 15,582 $ 83 $ 66 $ -- $ 15,731
-------- -------- ------- --------- --------
Identifiable assets..... $ 63,918 $ 2,279 $ 4,923 $ (894) $ 70,226
Corporate assets........ 19,314
--------
Total assets.......... $ 89,540
--------
</TABLE>
F-18
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(14) SEGMENT INFORMATION (CONTINUED)
Intercompany sales between geographic areas are recorded at cost plus a
mark-up. Such transfers are eliminated on consolidation.
Identifiable assets are those assets used in the Company's operations in
each geographic area. Corporate assets represent cash and cash equivalents,
investment in certificate of deposit, notes receivable from SemiCycle
Foundation (note 13) and marketable securities.
An analysis of sales by geographic destinations for the relevant years is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------
1996 1997 1998
<S> <C> <C> <C>
North Asia........................................ 49.4% 47.5% 53.8%
North America..................................... 20.1 19.9 22.1
South Asia........................................ 23.4 29.4 21.3
Europe............................................ 7.1 3.2 2.8
------ -------- ------
100.0% 100.0% 100.0%
====== ======== ======
North Asia represents China and Hong Kong, Philippines, Taiwan, Japan and
Korea while South Asia represents Singapore, Malaysia and Thailand.
(15) MAJOR CUSTOMERS
One customer, representing QPL International Holdings Limited group of
companies, accounted for 20.9%, 16.1% and 16.3% of the Company's net sales
during the fiscal years ended March 31, 1996, 1997, and 1998, respectively.
Another customer accounted for 12.5% of the Company's net sales during the
fiscal year ended March 31, 1998.
(16) SUPPLEMENTAL CASH FLOW INFORMATION
(a) Cash inflow/(outflow) for interest and income taxes:
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------
1996 1997 1998
<S> <C> <C> <C>
Cash paid for interest............................ $ (765) $ (1,425) $(390)
Cash paid for income taxes........................ (153) (138) (58)
Cash refunded on income taxes..................... -- 501 --
====== ======== ======
</TABLE>
(b) Major non-cash transaction
During the year ended March 31, 1996, the Company distributed marketable
securities with a market value of $2,599 as an interim dividend.
F-19
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(17) STOCK OPTION PLAN
An executive share option plan (the "Share Option Plan") was adopted by the
Board of Directors and approved by the sole shareholder on March 18, 1997. An
aggregate of 700,000 shares has been reserved for issuance under the plan.
Under the Share Option Plan, directors, officers, employees of, and advisors
and consultants to, the Company or its affiliates may, at the discretion of a
committee of the Board of Directors administering the plan, be granted options
to purchase shares at an exercise price per share of no less than the par
value of a share. As of March 31, 1998, options relating to an aggregate of
537,375 shares and 67,560 shares have been granted under the Share Option Plan
at $12.00 per share in March 1997 and at $19.375 per share in March 1998,
respectively. One-third of the options granted in March 1997 vest annually
commencing in April 1998. All the options granted in March 1998 vest in April
1998. The weighted average grant-date fair value of the options is estimated
to be $4.20 per share using the Black-Scholes option pricing model with the
following assumptions: (a) weighted average risk-free interest rate--6.0%; (b)
expected life--3 years; (c) weighted average expected volatility--0.34;
expected dividend yield--0. The weighted average remaining life of outstanding
options as of March 31, 1998 is 8 years. The Company has accounted for the
stock options using the intrinsic value method. Had the Company adopted the
fair value based method of accounting for stock options, net income, basic and
fully diluted earnings per share for the year ended March 31, 1998 would have
been $19,346, $1.51 and $1.49, respectively.
F-20
<PAGE>
================================================================================
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING BEING
MADE HEREBY NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDER, THE UNDERWRITERS OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY, ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIR-
CUMSTANCES CREATE AN IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.................................................... 2
Enforcement of Civil Liabilities......................................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 12
Capitalization........................................................... 12
Price Range of Shares.................................................... 13
Dividend Policy.......................................................... 13
Selected Consolidated Financial Data..................................... 14
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 15
Business................................................................. 20
Management............................................................... 32
Principal Shareholders and Selling Shareholder........................... 35
Certain Transactions..................................................... 37
Description of the Shares................................................ 37
Shares Eligible for Future Sale.......................................... 39
Taxation................................................................. 40
Certain Foreign Issuer Considerations.................................... 43
Plan of Distribution..................................................... 44
Legal Matters............................................................ 45
Experts.................................................................. 45
Index to Consolidated Financial Statements............................... F-1
</TABLE>
================================================================================
================================================================================
1,793,038 SHARES
[LOGO OF PEAK INTERNATIONAL LIMITED APPEARS HERE]
PEAK INTERNATIONAL LIMITED
COMMON STOCK
----------------
PROSPECTUS
----------------
JUNE 12, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses, other than the
underwriting discounts and commissions, all of which are payable by the
Selling Shareholder of the Offering:
<TABLE>
<S> <C>
Securities and Exchange Commission.................................... $ 9,357
NASD Filing Fee....................................................... 3,672
Blue Sky Fees and Expenses............................................ 0
Printing Costs........................................................ 10,000
Legal Fees and Expenses............................................... 100,000
Accounting Fees and Expenses.......................................... 10,000
Miscellaneous......................................................... 10,000
--------
Total Expenses...................................................... $143,029
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 98 of the Companies Act 1981 of Bermuda (the "Act") provides
generally that a Bermuda company may indemnify its directors, officers and
auditors against any liability which by virtue of Bermuda law otherwise would
be imposed on them, except in cases where such liability arises from fraud or
dishonesty of which such officer, director, or auditor may be guilty in
relation to the Company. Section 98 further provides that a Bermuda company
may indemnify its directors, officers, and auditors against any liability
incurred by them in defending any proceedings, whether civil or criminal, in
which judgment is awarded in their favor or in which they are acquitted or
when granted relief by the Supreme Court of Bermuda in certain proceedings
arising under Section 281 of the Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The only securities of the Registrant that were issued or sold by the
Registrant within the past three years and not registered with the Commission
under the Securities Act were those issued on the dates and for the
consideration described below. Such securities were offered and issued outside
the United States to individuals or entities who were not citizens or
residents of the United States in reliance upon Regulation S promulgated under
the Securities Act. Accordingly, the issuance and sale of such securities were
not subject to the registration requirements of the Securities Act.
<TABLE>
<CAPTION>
PURCHASERS DATE OF ISSUANCE NUMBER OF SHARES CONSIDERATION
---------- ----------------- ---------------- -------------
<C> <C> <C> <S>
Luckygold..... January 14, 1997 1,200,000 The Shares were issued as
part consideration for the
outstanding shares of
Peakgold and Success Gold.
Luckygold..... February 28, 1997 8,800,000 The Shares were issued as
part consideration for the
outstanding shares of
Peakgold and Success Gold.
Luckygold..... March 18, 1997 461,538 The Shares were issued in a
bonus issue of Shares to
the sole shareholder of the
Company by way of
capitalization of $4,615
standing to the credit of
the additional paid-in
capital account of the
Company.
</TABLE>
II-1
<PAGE>
ITEM 16. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
+3.1 --Memorandum of Association and Bye-Laws (as currently in effect) of
the Registrant
+4.1 --Specimen of Share Certificate for the Shares of the Registrant
*5.1 --Opinion of Conyers Dill & Pearman, Bermuda counsel to the
Registrant, as to the validity of the Shares
*8.1 --U.S. Tax Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
*8.2 --Bermuda Tax Opinion of Conyers Dill & Pearman
+10.1 --Processing Agreement dated May 28, 1987 and renewed and amended on
May 24, 1994 and December 12, 1996
+10.2 --Processing Agreement dated October 8, 1995
+10.3 --Land Use Certificate relating to the Company's existing production
facilities
+10.4 --Land Use Certificate relating to the Company's planned additional
production facilities
+10.5 --Land Use Right Granting Contract relating to the Company's existing
production facilities
+10.6 --Land Use Right Granting Contract relating to the Company's planned
additional production facilities
+10.7 --Lease between Warden and Peak (HK) relating to the Company's
existing production facilities
+10.8 --Form of Share Option Plan
+10.9 --Deed of Undertaking by T.L. Li dated May 29, 1997 relating to non-
competition and referral
+10.10 --Option Agreement dated February 17, 1997 relating to the non-voting
deferred shares of Peak (HK)
+10.11 --Restructuring Agreement dated February 28, 1997 for the acquisition
of the entire issued share capital of Peakgold and Success Gold
+21.1 --Subsidiaries of the Registrant
*23.1 --Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 8.1)
*23.2 --Consent of Conyers Dill & Pearman (included in Exhibit 5.1 and
Exhibit 8.2)
23.3 --Consent of BDO Binder
23.4 --Consent of Deloitte Touche Tohmatsu
*23.5 --Consent of Richards Butler
*24.1 --Power of Attorney
*99.1 --Form of Securities Loan Agreement between Luckygold 18A Limited and
Donaldson, Lufkin & Jenrette Securities Corporation
</TABLE>
- ---------------------
* Previously Filed.
+ Incorporated by reference from the Registration Statement on Form F-1 of
Peak International Limited, Registration No. 333-6652, declared effective by
the Commission on June 20, 1997.
(b) Consolidated Financial Statement Schedules
All supplemental schedules are omitted because of the absence of conditions
under which they are required or because the information is shown in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
II-2
<PAGE>
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To file a post-effective amendment to the registration statement to
include any financial statements required by Rule 3-19 of this chapter at
the start of any delayed offering or throughout a continuous offering.
Financial statements and information otherwise required by Section 10(a)(3)
of the Act need not be furnished, provided, that the registrant includes in
the prospectus, by means of a post-effective amendment, financial
statements required pursuant to this paragraph (a)(4) and other information
necessary to ensure that all other information in the prospectus is at
least as current as the date of those financial statements.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM F-1 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT THERETO TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN HONG KONG, ON JUNE 12, 1998.
Peak International Limited
By: /s/ Jerry Mo
--------------------------------
Name: Jerry Mo
Title: Principal Financial Officer
and Principal Accounting
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED ON JUNE 12, 1998
BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
SIGNATURE TITLE
--------- -----
/s/ T. L. Li* (Principal Executive
- ------------------------------------- Officer)
T. L. LI
/s/ Jerry Mo (Principal Financial
- ------------------------------------- Officer and
JERRY MO Principal
Accounting Officer)
/s/ Richard M. Brook* Director
- -------------------------------------
RICHARD M. BROOK
/s/ Robin Nicholson* Director
- -------------------------------------
ROBIN NICHOLSON
/s/ Francis Leung* Director
- -------------------------------------
FRANCIS LEUNG
Director
- -------------------------------------
HON YING NG
/s/ Kong Chi Wong* Director
- -------------------------------------
KONG CHI WONG
*By: /s/ Jerry Mo
------------------------------
Name: Jerry Mo
Attorney-in-fact
II-4
<PAGE>
SIGNATURE OF AUTHORIZED REPRESENTATIVE OF THE REGISTRANT
Pursuant to the Securities Act of 1933, the undersigned, the duly authorized
representative in the United States of Peak International Limited, has signed
this Registration Statement or amendment thereto in Austin, Texas, on June 12,
1998.
Peak International, Inc.
By /s/ Richard M. Brook*
---------------------------------
RICHARD M. BROOK
PRESIDENT
II-5
<PAGE>
As filed with the Securities and Exchange Commission on June 12, 1998
Registration No. 333-53925
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------
EXHIBITS TO FORM F-1
------------
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
PEAK INTERNATIONAL LIMITED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
+3.1 --Memorandum of Association and Bye-Laws (as currently in effect) of
the Registrant
+4.1 --Specimen of Share Certificate for the Shares of the Registrant
*5.1 --Opinion of Conyers Dill & Pearman, Bermuda counsel to the
Registrant, as to the validity of the Shares
*8.1 --U.S. Tax Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
*8.2 --Bermuda Tax Opinion of Conyers Dill & Pearman
+10.1 --Processing Agreement dated May 28, 1987 and renewed and amended on
May 24, 1994 and December 12, 1996
+10.2 --Processing Agreement dated October 8, 1995
+10.3 --Land Use Certificate relating to the Company's existing production
facilities
+10.4 --Land Use Certificate relating to the Company's planned additional
production facilities
+10.5 --Land Use Right Granting Contract relating to the Company's existing
production facilities
+10.6 --Land Use Right Granting Contract relating to the Company's planned
additional production facilities
+10.7 --Lease between Warden and Peak (HK) relating to the Company's
existing production facilities
+10.8 --Form of Share Option Plan
+10.9 --Deed of Undertaking by T.L. Li dated May 29, 1997 relating to non-
competition and referral
+10.10 --Option Agreement dated February 17, 1997 relating to the non-voting
deferred shares of Peak (HK)
+10.11 --Restructuring Agreement dated February 28, 1997 for the acquisition
of the entire issued share capital of Peakgold and Success Gold
+21.1 --Subsidiaries of the Registrant
*23.1 --Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 8.1)
*23.2 --Consent of Conyers Dill & Pearman (included in Exhibit 5.1 and
Exhibit 8.2)
23.3 --Consent of BDO Binder
23.4 --Consent of Deloitte Touche Tohmatsu
*23.5 --Consent of Richards Butler
*24.1 --Power of Attorney
*99.1 --Form of Securities Loan Agreement between Luckygold 18A Limited and
Donaldson, Lufkin & Jenrette Securities Corporation
</TABLE>
- ---------------------
* Previously Filed.
+ Incorporated by reference from the Registration Statement on Form F-1 of
Peak International Limited, Registration No. 333-6652, declared effective by
the Commission on June 20, 1997.
<PAGE>
EXHIBIT 23.3
Date: June 12, 1998
Board of Directors
Peak International Limited
Re: Consent of Independent Auditors
We hereby consent to the use in the Prospectus constituting a part of Post-
Effective Amendment No. 1 to the Registration Statement on Form F-1
(Registration No. 333-53925) of our report dated 19 March 1997 relating to the
consolidated financial statements of Peak International Limited for the year
ended March 31, 1996, which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Binder
Hong Kong
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Registration Statement Post-Effective Amendment No.
1 to Form F-1 (Registration No. 333-53925) of Peak International Limited of our
report dated May 7, 1998, appearing in the Prospectus, which forms part of this
Registration Statement. We also consent to the reference to us under the heading
"Experts" in this Prospectus.
/s/ Deloitte Touche Tohmatsu
Hong Kong
June 12, 1998
