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Technology Stocks : Deswell Industries (DSWL) -- Ignore unavailable to you. Want to Upgrade?

To: j rector who wrote (854)	7/31/1998 11:40:00 AM
From: Ron Bower	Read Replies (1) \| Respond to of 1418

j, I have to admit that I've gotten confused on the currency. 1. The Annual Report (YE97) says, "The company's subsidiaries conduct substantially all of their business in Hong Kong dollars, whose exchange rate has been fixed to the US dollar at approximately HK$7.80 to US$1.00 since 1983." Also, "Aggregate foreign currency transaction losses included in income were $31, $26, and $91 in '95, '96, and '97 respectively." This is insignificant to $16-$20M, but it would be with the peg. 2. In my first phone conversation with Mr. Lau, I asked about the impact of a devaluation of the $HK or the yuan and he said it would have virtually no effect except to lower costs. The interpretation was that they kept cash in $US. 3. It was a topic under discussion when Mike talked to him and I believe he came to the same conclusions. 4. In my second conversation Mr. Lau stated that he felt the $HK and the Renminbi should be devalued and thought the ties to the $US to be wrong. Why would he say this if the company had not protected itself from a devaluation = $US? I think the question is no longer relevant. It is now generally accepted that the peg to the $US will be maintained. If I talk with Mr. Lau again, I will try to get a definite answer on the cash currency. My confusion has come from my most recent read of the report. jmt - I doubt if IR can give you a firm answer, but it would be worth a try. FWIW, Ron

To: j rector who wrote (854)	8/1/1998 12:23:00 PM
From: Ron Bower	Read Replies (2) \| Respond to of 1418

j, I may have figured it out. The sales to Mita, Nam Tai, Vtech, etc. are in $HK. Sales to InterTel and likely Behringer are in $US. Most expenses are in $HK or $HK converted to yuan or other currency. Revenues in $US are deposited as $US, $HK as $HK. They use from the $HK funds for most expenses, from the $US for some raw material and dividends. The result would be a build up of $US funds that would not convert unless needed. May be wrong, but this would explain the difference between the report and what Mr. Lau has said. I think we can still assume the majority of the cash is deposited in $US. FWIW, Ron