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Strategies & Market Trends : Low Price/Cash Ratio Value Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (220)	8/8/1999 12:47:00 AM
From: Q.	Read Replies (1) \| Respond to of 1931

Bob, thanks for the info on TMAX. The related-party transactions by the controlling shareholder and chairman are so large that they would normally disqualify the stock from my consideration as a long. I didn't remember this conflict, until you pointed out the link to the SI post that described it, so maybe I never noticed it. Usually I check the proxies for stuff like that, but apparently I did failed to do it this time. It is not uncommon for stocks this small to have conflicts of interest like this. Nevertheless, this example looks more severe than most: from the proxy: agent pursuant to an Agency Agreement dated April 1, 1997, as amended (the "Agency Agreement") between Tai Nam and Toymax Inc. Since the Company's founding, Tai Nam and its affiliate, Concentric, have served as the Company's purchasing agent. Tai Nam and Concentric are owned by David Chu, the Chairman and a principal stockholder of the Company. As the Company's purchasing agent, Tai Nam arranges for the manufacturing of the Company's products based on purchase orders placed with Tai Nam by the Company. In addition, Tai Nam handles all shipping documents, letters of credit, bills and payment, serves as liaison with other vendors and performs quality control functions. Pursuant to the Agency Agreement, Tai Nam receives an agency fee equal to seven percent (7%) of the gross invoiced value of products purchased by Toymax Inc. (based on the factory purchase price of the merchandise). i> It looks like investing in TMAX requires some measure of trust of the controlling shareholder that I'm not sure that I have. My position in TMAX is quite small. I should try to evaluate whether the conflict, as a risk factor, outweighs the apparent attraction of the stock