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Client: Orion Hanel Picture Tubes Co Ltd Audit date:

Professional standards require us to have or obtain knowledge of the business sufficient to enable us to identify and
understand the events, transactions and practices that, in our judgment, may have a significant effect on the
financial statements or on the examination or audit report. Generally, it is neither difficult nor time-consuming to
obtain or update this understanding for a smaller client, due to its non-complex operations and our familiarity with
the company and its personnel.

Brief Description of the Client’s Business

Provide a brief description of the client’s business, including its principal activities, main products and services,
the industry in which it operates, and the principal market forces and environmental factors affecting the entity.
This brief description, along with our prior knowledge of the client’s business, may be sufficient to identify
any business or financial statement risks for some smaller business engagements. However, we also should
consider each of the sections below under “Market Forces and Environmental Factors,” as well as
“Stakeholder Influences,” and provide any additional relevant information that is necessary to understand
the business and industry, properly assess risk, and develop an appropriate audit strategy. We document the
effects of the business environment on the client’s business and financial statement risks on page 4 of this
template.

Orion Hanel is a company operating in the sector of produce cathode ray tubes. The main product of company are
cathode ray tubes and elecrtric guns. Almost of company's products is to export (in 2002, cathde ray tubles more
than 72%, electric guns: 100%)
Now, products of the company is not enough to provide to demand of market. Company has a project expanding
ability production.
The foreign party is Orion Electric Co Ltd - ownership 70%
The Vietnamese party is Ha noi electronics corporation - ownership 30%

Market Forces and Environmental Factors

It is not necessary to provide comments for an item that is not applicable to the client. For example, a single-
location restaurant client serving a small geographic area and having a stable and loyal customer base may not be
affected by broad trends in the restaurant industry or by any particular social or political factors. Similarly, if the
client has sustainable profits and cash flow, there may be no concerns about financing needs or credit availability.

General Economic Trends/Regional and Local Economic Conditions

Vietnamese economic is developing, so that business activity of the company have advantages.

Date:

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Significant Trends in the Industry/Key Competitors and Competitive Issues

In Vietnam, Orion Hanel Picture Tube Co Ltd is a company only which licensed to produced and sell cathode ray
tubes and electrics guns. In domestic market, the Company rarely have to face the competition but in oversea
market, the Company often face the competion. The Company has been trying to maitain traditional customer.

Key Suppliers/Vendor Relationships

The Company purchased of raw material by a stable and constant supplier.

Main suppliers:
Orion Electric CO.,TD (OEC) - in Korea
Hankuk Electrict Glass CO.,TD - in Korea
LG Micron CO.,LTD - in Korea
SUMIMOTO - in Japan
Sumsung Asia PTE - in Singapore
Teikoku (Raintree) - in China

Key Customers/Sales and Distribution Methods

With products selling in domestic market, when a customers have demands and the company meets the
requirement of customer, the Company will confirm to customer and prepare buying order.
With products selling in oversea market, the Company have an intermediate department seeking customers and
selling products.
Main Customers:
LG Vietnam (12% sale)
TCL Vietnam (5% sale)
SAVINA Vietnam (6% sale)
Deawoo Electronics Corperation - Korea (12% sale)
EL ARABY Co. for TV. Electricial and Electronic Appliances - Banha (11% sale)
FUNA - Japan (8% Sale)
Vestel Ekecktronik Sanayi Ve Ticaret A.S (VESTEL) - Turkey (5% sale)
LG Electronic Co., Ltd - Korea (10% sale).

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Sources of Financing/Credit Availability

Sources of Financing of Company:

- Revenue (good sale)
- Short - term loans from Vietnamese banks (ei:Industrial commece Bank; total credit limit is USD 8,000,000;
Bank of investment and development total credit limit is USD 3,200,000).
- Long - trem loans from foreign bank. This loan is secured by OEC
- Long - term loans from Vietnamese banks (ei:Industrial commece Bank; total credit limit is USD 7,312,500;
Bank of investment and development total credit limit is USD 8,000,000)

Legal and Regulatory Requirements Affecting the Business

Legal and Regulatory Requirements does not affect much to business activity of company..

Social and Political Factors Affecting the Business

Up to now, Business activity of Company not be affected much by social and political policy. But in year 2003,
Viet nam is going to attend AFTA, import tax will decrease, and products sell in domestic market may is more
difficulty. However Business activity of Company not be affected much, because all most products of company is
exported.

Stakeholder Influences
Identify significant stakeholders and indicate how the expectations of these stakeholders influence management’s
actions. In particular, consider potential business and financial statement risks that may arise from management’s
responses to stakeholder expectations or needs that are unrealistic, conflicting, or not aligned with the client.

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According to cor-operative contract, General Director of the company is Vietnamese people since April of year
2002. But according to Vietnamese legal, decision about appointing general director has to have an agreement of
Chairman of Hanoi People Commitee. At the time we conduct the audit financial statements, the company does
not receive the decision about this problem. Now, for and on behalf of the Company now is Ms Phan Thu Luong.
In year 2002, the company calculated import duties payable according to the rate of Vietnamese regulation, not
base on the actual attained localisation ration implemented.

Effects of the Business Environment on Business and Financial Statement Risks

Document below any matters relating to the above market forces, other environmental factors, and stakeholder
influences that have a significant effect on the client’s business and/or financial statement risks. If changes in the
client’s business environment from the prior year require a change in our audit strategy, document the effects in
the Audit Strategies Memorandum (under “Significant Changes in the Client’s Business, Market Forces, or Key
Stakeholders”) and consider them in making our combined risk assessments and in developing our audit
procedures.

Now, factory is useing full capacity, the market for seeing television with curved surface continous increasing in
Vietnam, because Vietnammese people's needs. However, in the next few year, the demand of market will move
from television with curved surface to television with plane surface, next time shareholders want to expand factory,
they will assemble second line to produce cathode ray tubes with flat surface.

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SB-03 (12-00) Understand the Business