1. Vanachai Group Public Company Limited 3-year Amortizing Baht Debenture
June 2002

2. Content
Investment Highlights
Company Background
Industry Overview
Financial Profile
Summary of the Issue

3. Investment Highlights

4. Investment Highlights
Proven Leader and Proven Winner: VNG is Thailand’s industry leader for MDF and Particle Board with the following contribution:
MDF PB
Capacity Share % %
Market Share % 35%
Variety of Products: VNG offers both MDF and PB while almost of the competitors concentrates only one. For example, major competitors in MDF do not produce PB. Meanwhile, another which produces both MDF and PB has so far been under a business rehabilitation plan.
High Product Quality: VNG’s products meet the international standards: JIS, DIN, ASTM, and BSI. Plus, the company has certified ISO 9002.
High Quality of Services: The company focuses on “On time - In full” delivery to minimize customers’ inventory and providing after sales services.
Cost Competitive Advantage: Due to being considered as a major player and 100% utilization rate in term of production capacity, the company currently enjoy the benefit from economy of scale.
BOI Privileges: VNG’s particle board plant in Surattani and glue plant in Rayong currently enjoy Board of Investment privileges.

5. Investment Highlights
Low level of D/E ratio: From December 1999 to March 2002, the company prepaid the outstanding loans of 2200 MB, therefore, VNG’s D/E ratio is equal to 1.59 as of 1Q02.
Quality of clients: With strictly credit term policy and targeting at strong credit customers, the company has been able to maintain low level of NPL.
Plenty of Raw Material with Competitive Cost: Major raw material is branch, or even small part, of rubber tree apparently considered as the huge source in Thailand. Logs from old rubber trees can be purchased at roughly the cost of transportation and labor.
Strong Earning and Cash Flow : The company generated 1,297MB and 1,308MBcash flow from operation and 911MB and 828MB net profit while had the outstanding debt of 4,774 MB and 3,476 MB left, therefore cash flow per outstanding debt was impressively 27% and improved to 38% in year 2000 and 2001 respectively.
No foreign exchange risk : All debt burden was converted to Thai Baht, therefore, the company is facing no foreign exchange risk.
Healthy Term of Debentures : Terms of debentures are tailored to ensure healthy interest coverage and debt service coverage. Assigning expected annual cash flow of 1,300 MB, DSCR in 2002 would be 4.5x
Over collateral : To comfort bond holders, VNG provides collateral to loan ratio at 125%

6. Company Overview

7. History of VNG
1989 Established under “MDF Planner” as a producer and distributor of medium-density fibreboard (MDF) and Moulded Doorskins with paid-up capital of 220MB.
1994 Increased registered capital to 1,000MB (670MB paid-up) and changed the name to “Vanachai Group Public Company Limited”
1995 Listed on Stock Exchange of Thailand.
Vanachai Panel Industries Co., Ltd., VNG’s subsidiary, has started its operation to produce particle board since the fourth quarter of 1998.
- The group of companies has been operating the particle board at full capacity since VNG has successfully expanded the export market to Korea, Middle-East, Vietnam and Philippine.
1999 VNG and its subsidiaries have entered into debt restructuring plan with 6 creditors to reschedule the principal payment to 14 years.
VNG has registered in the change of paid-up capital from 670MB to 980MB. This was done by selling 31 million shares of increased ordinary share capital at the price of Baht 10 each to 6 financial institutions creditor.
- VNG has accomplished expanded to South Korea, China, Hong Kong, and Malaysia. The group of companies has been starting to operate at full capacity of 240,000 cubic meters/year for MDF board and 480,000 cubic meters/year for particle board.
- Due to the company’s strong improvement in operation, VNG has prepaid 1,087MB of its loans.
VNG has prepaid 1,091MB of its loans.

8. Public Company Limited
VNG and Subsidiaries
Durospan Company Limited
Established: 1983 Business: Manufacturer of plain and Melamine
laminated particle board
Registered Capital: 100 MB Factory location: Chachoengsao
Particle Planner Company Limited
Established: 1990 Business: Manufacturer of particle board
Registered Capital: 250 MB Factory location: Chonburi
Vanachai Group
Public Company Limited
Established: 1989
Business: Manufacturer of MDF and Doorskin
Registered Capital: 980 MB
Factory location: Chonburi
Vanachai Chemical Industries Company Limited
Established: 1994 Business: Manufacturer of glue (Formaldehyde based)
Registered Capital: 150 MB Factory location: Rayong
Vanachai Panel Industries Company Limited
Established: 1995 Business: Manufacturer of particle board
Registered Capital: 600 MB Factory location: Suratthani
Woodtek International Company Limited
Established: 1989 Business: Marketing and exporting all products
within the group
Registered Capital: 2 MB

9. Organization Structure
(Head Office)
Organization Structure
(Factory)
Managing Director
Deputy Managing Director
Deputy Managing Director-Factory
Manufacturing
Department
Administration
Department
Financial
Division
General
Administration
Division
Accounting
Division
Planning &
Developing
Department
Board of Directors
Mr. Sompon Sahavat Chairman
Mr. Sompop Sahavat Director
Mr. Vasan Jareonnawarat Director
Mr. Wanthana Jareonnawarat Director
Mr. Suthep Chaipattanawanich Director
Mrs Siriporn Chaipattanawanich Director
Ms. Yupaporn Boongate Director
Mr. Nirun Suntipiromkul Director
Mr. Seubtakul Soonthonthum* Director
Mrs Patra Sahavat Director
Mr. Nipon Wisityuthasat Director
Mrs Nopparat Rungpitarangsee Director
Mr. Phatt Sahavat Director
Mr. Wutthichai Suraratchai Director
Project
Division
Manufacturing
Division (1)
Manufacturing
Division (2)
Accounting
Division
Human
Resource Division
Import
Division
Machine
Maintenance
Electric
Maintenance
Administration
Division
Export
Division
Manufacturing
Support Division
Note : * Outside Director and Audit Committee

10. The Vanachai Group of Company (as of 17/08/2000)
Major Shareholders
VNG (as of 04/04/2002)
The Vanachai Group of Company (as of 17/08/2000)
Name
No. Of Shares Held %
The Vanachai Group of Company Limited
40,900,928
41.74
Mr. Sompop Sahavat
5,500,000
5.61
Bangkok Bank Public Company Limited
4,691,252
4.79
Ms. Nathanan Acosta
3,396,874
3.47
Mr. Patt Sahavat
2,969,000
3.03
Ms. Nisara Kerdnaimongkol
2,843,000
2.90
Mr. Suchat Fukiet
2,809,100
2.87
Industrial Finance Corporaiton of Thailand
2,807,518
2.86
Ms. Phatra Sahavat
2,750,000
2.81
Mr. Wanthana Jareonnawarat
Ms. Yupaporn Boonket
Mr. Vasan Jareonnawarat
Ms. Somjairuk Sahavat
Ms. Somprasong Sahavat
Ms. Siriporn Chaipatthanavanich

11. Revenue Breakdown
Vanachai and Subsidiaries manufacturing Wood-base Panel industries which are used as substitutes for natural wood boards in various industries such as construction, furniture, interior decoration, electrical appliances manufacturing and all modified wood industries. Particle and MDF Board have primarily been VNG’s major products.
* Y2001 Data

12. ISO9002:1994 from The TuV CERT certify that Particle Planner Co., Ltd.
Key Success Factors
Quality of Products
ISO 9002 certification
Use of hi-technology production facilities
Product R&D focus
Quality inspection along the production process from raw materials to finished products
Following international quality standards: JIS (Japan), DIN (Germany), ASTM (USA), and BSI (England)
Competitive Production Costs
Optimized utilization of the production capacity
Minimizing defects from production
Use of “In-House” developed glue considered as significant raw material
Customer Satisfaction
“On Time - In Full” delivery
Providing after-sale service
Make use of customers’ feedback to enhance product development
Providing product know-how
Problem solving to customer
ISO9002:1994 from The TuV CERT certify that Particle Planner Co., Ltd.
ISO9002: 1994 from The TuV CERT certify that Vanachai Group Public Co., Ltd.
EN ISO9002:1994 from BVQI (Bureau Veritas Quality International) certify that Doctor Wood Co., Ltd.
ISO9002 from SGS Yarsley International Certification Services certify that Vanachai Panel Industry Co., Ltd.

13. Operation Highlights
Production Development: VNG is committed to produce excellence, which can be achieved only with continued personnel and productivity development programs and state-of-the-art machinery and equipment. At each step of production process, products are tested under the stringent laboratory conditions to ensure product quality and excellence.
Service Excellence: VNG also strongly emphasize the quality of service, strive for on-time delivery and after-sale service.
Product Development: It is forecast that Asian producers will step into the leadership position of the leadership position of natural wood substitute product. VNG is therefore concentrating on developing new products to replace natural wood and to improve on current products in order to maintain our leadership position.
Human Resources Development: The company’s technicians often receive overseas training so that they are exposed to the latest production processes and are abreast with the industry’s latest development.
Environment Friendly: VNG can save production up to 720,000 cubic meters of natural wood from forests. The most efficient production process means that at each step of the manufacturing nothing is wasted and the environment quality is not compromised.

14. Customer Base & Distribution Channel
Domestic
Customer base:
(1) major manufacturing exporters in the industries consuming VNG’s products as raw materials (supplier positioning) and
(2) construction material wholesalers.
Maintaining well long-term relationship with these customers.
Positioning as an allied supplier.
Emphasis on good credit customers.
Oversea
Customer base - manufacturers in various industries focusing on quality of raw material.
Distribution through oversea market via import agents in each country.
Country: South Korea, Taiwan, China, Malaysia.
Revenue (1Q02) by Domestic : Export = 47 : 53
(Million Baht)

15. Industry Overview

16. Industry Outlook
With cheaper price compared to wood and the new modern trend of home decoration, MDF and Particle board seems more popularly used.
Environmental concerns would increase the consumption of MDF and Particle board as substitute for real wood materials.
Government support in real estate sector: With recently strong support from the government in real estate sector, domestic demand for wood based panel apparently will be awaiting down the road.
Expectable demand growth in oversea market: Regarding the VNG’s existing oversea market, the demand have been strong and continuously growing with the following available evidence:
Expected growth rate of furniture industry in South Korea = 10%
Expected growth rate of new modern furniture in China = 15% through the next decade
Limited turnaround of local competitors due to their exposure to:
Deteriorating machines
Tough debt restructure
Less competition from neighbour competitors since:
Indonesia has still been uncertain about government stability
Malaysia is focusing more on palm than on rubber tree

17. Nature of The Domestic Industry
Capacity Contribution
MDF
6 majors players
Particle
10 majors players

18. Financial Profile

19. Ability to Release The Debt Burden
According to relaxation of debt repayment arranged on December 29, 1999, debt amount of 6,969 MB (principal and accrued interest) was initially scheduled to repay. Nonetheless, VNG has so far proved its business performance have repaid 51% of the burden (as of March 28, 2002) in 3 years.
Completion of the new plant in the mid of 1998
7,000.00
6,000.00
Repayment schedule according to the relaxation contract
The amount that VNG have actually repaid

20. Financial Performance
- Due to the economic crisis, the business got directly hit by the floating foreign exchange rate.
- With such an effect together with shrinkage of domestic demand, VNG have decided to expand into foreign market in order to maintain sales and hedge the FOREX risk
- VNG have proved successful in export channel and been able to survive through the crisis
- With rarely haircut from its creditors according to the debt restructuring plan in 1999, VNG along with its wise strategy have done a good job to release the debt burden
Clear signal that VNG is a “Winner” as a USD project enjoying floated Baht environment

21. Financial Performance
With marketing and operations strategy, profit figures have shown improvement. MB

22. Debt Service & Interest Bearing Loan to Cash Flow
Since the debt restructuring agreement in 1999 and proven operation performance, VNG has enjoyed the strong operation cash flow.
Voluntary Prepayment MB
200
400
600
800
1000
1200
1400
1600
1800
2000
1998
1999
2001
Voluntary prepayment
Scheduled repayment
Interest
C/F from Operation before
Interest & Tax
* according to the repayment schedule in the restructuring plan

23. Financial Performance
Following the debt restructuring plan, the company has paid attention in clearing the leverage burden successfully.Thus, cash flow per outstanding liabilities has been continuously improved, so has D/E. MB % X
Negative Equity
Assets of VNG, PP, VP, and VC were re-appraised by The Valuation & Consultants Co.,Ltd. at 6,001 MB compared to their book value of 4,174 MB (as of 1Q02)

24. Key Ratio * * * * * *
* Annualized
With asset revaluation, D/E ratio would be:

25. Use of Proceeds VNG057A Issue Size: 1,700 MB Tenor: 3 years
Coupon Rate: to be determined
11 YEARS LOAN
Tenor: years
(Dec 29, 1999-Dec 31, 2013)
Interest Rate: MLR
Lenders: BBL, TFB, KTB, IFCT, DTDB, TMB
Original Loan: 5, MB
Outstanding: ,400 MB
(March 31, 2002)
Current Status: prepay ahead of schedule 2 years
Debt Repayment
7 YEARS LOAN
Loan Amount: 1,700 MB
Tenor: years
Interest Rate: years at 6.00%
3-7 years at MLR-0.50%
Lenders: BBL, TFB, KTB, IFCT, TMB

26. Collateral Summary Factory of Vanachai Group Public Company Limited
Freehold Asset Owned by Vanachai Group Plc.
Located in Chonburi
Land area 134 Rai
Full Capacity of 240,000 for MDF
Appraisal value (by The Valuation & Consultants Co.,Ltd.) is 2,176 MB as of March 2002.
Collateral to loan value at 125%.
Factory of Particle Planner Company Limited
Land area 42 Rai
Full Capacity of 135,000 for Particle Board
Appraisal value 873 MB as of March 2002.

27. Summary of the Issue

28. Issue Summary Issue Size Type of Debenture/Loan Tenor Grace Period
Interest Rate
Repayment Schedule
Frequency of Payment
Issue Date
Offering Collateral
Debenture
1,700 MB
THB Secured Debenture
3 years
2 quarters
To be determined
Quarterly amortizing from 3rd interest payment
Quarterly
July 17, 2002 (Tentatively)
Public offering
Land, plant & equipment
Long-term Loan
1,700 MB long term loan
642 MB working capital facilities
THB Secured Loan
7 year
2 quarters
6.00% for year 1-2
MLR % afterwards
Quarterly amortizing from 3rd
interest payment
Quarterly
July 17, 2002 (Tentatively)
Existing lenders
Land, plant & equipment