3. MONITOR BUSINESS

1.  Product description

Computer Monitors are classified in two types

  1. CRT Monitor : computer monitors which use glass tube to reflect the
  picture.

2.  LCD Monitor or Flat Panel Display : computer monitors which use a
    Flat Panel made from Liquid Crystal Display to reflect the picture.
    While the screen size for these monitors are comparable to those in
    the CRT based units, this type of monitor has a smaller “footprint”,
    and uses less energy than a CRT based monitor and does not have the
    electrical field created by the CRT.

  The Cape Group major products include;

-   Digital Display Color Monitors, ranging in size from 15 to 21 inch.

-   Flat Panel Display, ranging in size from 13 to 18 inch.

-   Printed Circuit Boards Assemblies (PCBA) for monitors, for use
    within the Group. However, the Company stopped producing the Printed
    Circuit Boards in the third quarter of 1999 as per management
    decision to transfer computer monitor production from Taiwan to
    Thailand.

    1.  Privilege / Limitation of the business

The Company received two promotion certificates from the Board of
Investment for CRT Monitor, PCB and PC Display on 6^(th) June 1995 the
principal terms of which are as follows ;

1. Promotion Certificate No. 1061/2538

1.  Under Section 25, the promoted person shall be permitted to bring
    alien experts and technical staff together with their spouses and
    dependents into the Kingdom, at the numbers and for the period of
    time as deemed appropriate by the Board. (the expiry date was
    December 31, 2002)

2.  Under Section 26, alien experts and technical staff who are granted
    permission to come into the Kingdom under Section 25, shall be given
    work permits only for the work positions approved by the Board
    throughout the entire length of their stay in the Kingdom. (the
    expiry date was December 31, 2002)

3.  Under Section 27, the promoted person shall be permitted to own land
    at the amount as the Board considered appropriate.

4.  Under Section 28, the promoted person shall be exempted from import
    duties on machinery (as the Board considers appropriate) which had
    not been imported to the country or already imported but permitted
    to be as Bank Guarantees or has been permitted to be exempt from the
    import duties from Custom Department already. (the expiry date was
    December 31, 2001).

5.  Under Section 36(1), the promoted person shall be exempted from
    import duties on raw and essential materials imported for use in
    producing products for export for a period of one year from the date
    of first import. (the expiry date was May 8, 2002)

6.  Under Section 36(2), the promoted person shall be exempted from
    import duties on items which the promoted person imports for
    re-export for a period of one year from the date of first import.
    (the expiry date is May 8, 2002)

7.  Under Section 36(4), the promoted person shall be permitted to
    deduct from the assessable income for payment of juristic person
    income tax an amount equal to 5% of the increased income over the
    previous year derived from the export of products, for a period of
    10 years commencing from the date income is first derived from such
    activity.

8.  Under Section 37, the promoted person shall be permitted to remit
    foreign exchange out of the Kingdom. (the expiry date is June 5,
    2005)

  2. Promotion Certificate No. 1071/2538

1.  Under Section 25, the promoted person shall be permitted to bring
    alien experts and technical staff together with their spouses and
    dependents into the Kingdom, at the numbers and for the period of
    time as deemed appropriate by the Board. (the expiry date was
    December 31, 2002)

2.  Under Section 26, alien experts and technical staff who are granted
    permission to come into the Kingdom under Section 25, shall be given
    work permits only for the work positions approved by the Board
    throughout the entire length of their stay in the Kingdom. (the
    expiry date was December 31, 2002)

3.  Under Section 27, the promoted person shall be permitted to own land
    at the amount as the Board considered appropriate.

4.  Under Section 36(1), the promoted person shall be exempted from
    import duties on raw and essential materials imported for use in
    producing products for export for a period of five years from the
    date of 9^(th) May 1993 to 8^(th) May 1998. (the expiry date is May
    8, 2002)

5.  Under Section 36(2), the promoted person shall be exempted from
    import duties on items which the promoted person import for
    re-export for a period of five years from the date of 9^(th) May
    1993 to 8^(th) May 1998. (the expiry date was May 8, 2002)

6.  Under Section 37, the promoted person shall be permitted to remit
    foreign exchange out of the Kingdom.

  The Company received one promotion certificate from the Board of
  Investment for LCD Monitor Product on the 5^(th) January 2000 the
  principal terms of which are as follows ;

  3. Promotion Certificate No. 1040/2543

1.  Under Section 25, the promoted person shall be permitted to bring
    alien experts and technical staff together with their spouses and
    dependents into the Kingdom, at the numbers and for the period of
    time as deemed appropriate by the Board.

2.  Under Section 26, alien experts and technical staff who are granted
    permission to come into the Kingdom under Section 25, shall be given
    work permits only for the work positions approved by the Board
    throughout the entire length of their stay in the Kingdom.

3.  Under Section 27, the promoted person shall be permitted to own land
    at the amount as the Board considered appropriate.

4.  Under Section 28, the promoted person shall be exempted from import
    duties on Machinery which the Board considered appropriate (the
    expiry date is January 19, 2002)

5.  Under Section 31, the promoted person shall be exempted from
    Corporate Income Tax for net profit arising from such promoted
    products for a period of five years from the date the promoted
    person has the income from such promoted products.

6.  Under Section 34, the promoted person shall be allowed to not
    involve the dividend arising from such promoted products which is
    exempted from Corporate Income Tax according to section 31 for
    calculating the Corporate Income Tax as long as the promoted person
    is exempted from such Corporate Income Tax.

7.  Under Section 36(1), the promoted person shall be exempted from
    import duties on raw and essential materials imported for use in
    producing products for export for a period of five years from the
    first imported date. (the expiry date is January 19, 2001)

8.  Under Section 36(2), the promoted person shall be exempted from
    import duties on items which the promoted person import for
    re-export for a period of five years from the first imported date.
    (the expiry date is January 19, 2001)

9.  Under Section 37, the promoted person shall be permitted to remit
    foreign exchange out of the Kingdom.

    1.  Other Privilege / Right

- None -

2.  Limitation of the business

  - None -

1.  Marketing Strategies, Industry and Competition

    1.  Marketing Strategies

  The Company and its associated companies are OEM-Original Equipment
  Manufacturers producing computer monitors under their customers’ brand
  names using the Company’s designed and developed products or the
  customer’s. Customers are then able to choose the required design and
  technology of the product. The Company then manufactures the products
  in accordance with the design agreed upon with the customer.

  The marketing strategies which the Company uses to attract the
  potential customers are as follows:-

1.  No Brand Name

  As the Company is an OEM producer and does not produce and/or sell
  monitor products under its own brand name, the company has positioned
  itself in the market so it has no conflicts of interest with its
  customers or potential customers, an advantage over some of its
  competitors.

2.  Production Capacity and Technology

  The Company and its associated companies have adequate production
  capacity for large volume orders of computer monitors of every size
  and type as a result of the size of its facility and its up-to-date
  manufacturing technology. With the Company’s and its associated
  companies’ own Research and Development departments and the Company’s
  strong long term relationships with many of its customers, which are
  among the world’s leading information technology companies, the
  Company has built worthwhile strategic partnerships with their
  customers through co-operation in product development and design.

  This co-ordination enables the company to enhance the transfer of new
  technologies from customers and obtain information on consumer trends
  and expectations resulting in continuous product development.

3.  Product Quality

  The Company’s and its associated company’s objective is to manufacture
  products of the highest quality at competitive prices. They inspect
  the products using modern equipment at every stage in the production
  process to see that the products meet the Company’s exacting quality
  standard. The results of this testing ensure that the Company’s
  quality control policy has been fully implemented and is rigorously
  followed. In this regard, the Company has adopted “Zero Defect” and
  “Six Sigma” targets using statistical process control (SPC) enabling
  the Company to gain more confidence in the quality of the output from
  manufacturing process and thus built loyalty from its customers.

  The Company’s products have received quality and safety certificates
  from UL, FCC and DHHS in USA, CSA in Canada, CE and TUV/GS in Europe
  and numerous other bodies.

4.  Competitive Pricing

  In addition to concentrating on ensuring quality during the
  manufacturing process, the Company and its associated companies must
  ensure their products can be manufactured and sold at competitive
  prices. The Group has a large manufacturing base and controls the cost
  of its products at every stage from the purchasing of raw materials to
  the delivery of finished goods, the Company also has the capability to
  purchase components both locally and overseas to ensure the required
  raw materials are purchased at the most advantageous prices. The Group
  is constantly look to qualified new suppliers which can provide high
  quality components at better than current prices. The purchasing
  department, in addition, is constantly pushing vendors to reduce their
  prices to maintain or enhance the Company’s competitive position.

  The Company’s prices are based on cost plus a mark-up. However, the
  price determination also depends on prices charged by competitors for
  comparable products. The Company, thus, reviews its products’ prices
  regularly while bearing in mind changes in product specifications. In
  addition, the sales team meets with Cape Group’ s marketing executives
  before making any announcements of price revisions.

5.  After sales services

  The Company not only provides its own after sales service but also has
  agreements with Capetronic (UK) Limited located in the U.K., Nakamichi
  Corporation located in Japan, Capetronic USA Manufacturing Inc. and
  N.A.K.S Technology Corporation located in the USA to provide after
  sales services for worldwide customers.

1.  Sales and Distribution

  The Company manufactures computer monitors and sells them through its
  associated companies (Capetronic Computer USA (Hong Kong) Ltd.,
  Capetronic Computer International Ltd., Capetronic Computer Sales
  Ltd.) which have expertise in marketing computer monitors in Asia,
  Europe and USA. These companies are located in Hong Kong and act as
  the marketing arms of the Company, seeking orders for the Company and
  its associated company.

  Customer’s product purchase process:

-   Customer will contact the sales department of Capetronic Group
    located in Hongkong.

-   Customer meets Capetronic engineers to discuss product design and
    specifications.

-   Sales department quotes the product’s initial price to the customer.

-   Customer visits the factories in the Thailand or Taiwan or both
    depending on customer’s product requirements to review the factory’s
    production process, production efficiency and production control
    system.

    These Capetronic sales companies are responsible for collections
    from customers on behalf of the Company which not only saves costs
    but also reduces the Company’s administrative work load. However,
    the Company must deliver the finished goods to customers.

  As an OEM manufacturer, the Company manufactures the products under
  the customers’ brand names. Having sold the products, the Company
  provides after sales services to and any product support required by
  the customers through its subsidiaries, Capetronic UK Limited,
  N.A.K.S. Technology Corporation, Capetronic USA Manufacturing Inc. and
  Nakamichi Japan Corporation which have networks of sales and
  service/repair centers in Europe, North America and Far East
  respectively.

1.  Customer characteristics

  Most customers will only deal with manufacturing companies that can
  provide production in volumes sufficient to meet their world-wide
  demands and their rigorous quality standards. If there is a basis for
  customer loyalty in this industry, it is the ability to provide the
  highest quality products at competitive prices.

  To cement customer loyalty, the Company has a rigorous quality control
  and improvement policy which includes the implementation of “zero
  defect” and “six sigma” quality control programs that are supported by
  statistical process control (SPC). The company also has a policy of
  co-operating with its customers in product design and development, as
  well as maintaining high quality and reasonable prices to meet
  customers’ requirements.

  At present, substantial Japanese Corporation is the Company’s major
  customer. For the year 2000, the Company sold to this Japanese
  corporation approximately Baht 8,571 million (71.7 % of total sales).
  The Company has long relationship with the customer as from the start
  up of business. Although the customer has other suppliers for computer
  monitors due to widen distribution and reduce reliance on single
  supplier, the management expect that sales for this customer for the
  year 2001 will stay close to year 2000 as the Company has continual
  cooperation with its customer in products design and development.

  However, the Company is also focusing on the new products with
  consideration of our engineering strength in video and audio, along
  with the new employment of software in order to work out future new
  product line to minimize risk from reliance on single product.

  The Customers distribution are as below:

(Unit : Million Baht)

  ----------- ----------- -------- ----------- -------- ----------- --------
  No.         1998                 1999                 2000        

              Amount      %        Amount      %        Amount      %

  1.          8,784.47    67.92    6,864.56    60.65    8,571.42    71.67

  2.          1,453.71    11.24    1,897.49    16.76    1,895.36    15.85

  3.          1,238.37    9.57     1,518.45    13.41    720.76      6.03

  4-10        1,456.95    11.27    1,038.67    9.18     771.24      6.45

  Total       12,933.50   100.00   11,319.17   100.00   11,958.78   100.00
  ----------- ----------- -------- ----------- -------- ----------- --------

2.  The Industry and Competition

-   Supply vs. Demand of the Industry (Million Units)

  ------------ ------------------- ------------------- -------------------
                                                       Unit : Million
                                                       units

  Year                             Demand              Supply

  1998         CRT Monitor         86.5                108.1

               LCD Monitor         1.3                 1.7

  1999         CRT Monitor         99.3                119.2

               LCD Monitor         4.1                 4.9

  2000         CRT Monitor         110.2               126.7

               LCD Monitor         6.0                 9.0
  ------------ ------------------- ------------------- -------------------

-   Growth and Future Trends Projection (Million Units)

  Unit : Million units

  ---------------- ------------------ ------------------ ------------------
  Year             CRT                LCD                Total

  2001             116.3              12.3               128.6

  2002             121.2              20.3               141.5

  2003             125.9              28.2               154.1

  2004             129.3              38.0               167.3
  ---------------- ------------------ ------------------ ------------------

-   Future Trends Projection by Geography (Percentage)

  ---------- ------------ ------------ ------------ ------------ ------------
  Year       USA          Europe       Japan        Asia         Others

  2000       39.6%        23.3%        6.5%         16.5%        14.1%

  2001       39.0%        22.0%        5.8%         17.1%        16.1%

  2002       38.3%        21.5%        4.8%         18.2%        17.2%

  2003       37.8%        21.0%        3.0%         20.3%        17.9%
  ---------- ------------ ------------ ------------ ------------ ------------

-   Future Trends Projection by Product Size (Percentage)

  ---------- ---------- ---------- ---------- ---------- ---------- ----------
  Year       14”        15”        17”        19”        21”        LCD

  2000       7.2%       32.1%      45.7%      7.9%       2.0%       5.1%

  2001       4.0%       23.8%      51.6%      9.8%       3.6%       7.2%

  2002       2.8%       18.6%      55.1%      11.4%      3.7%       8.4%

  2003       2.4%       14.2%      57.0%      12.9%      3.9%       9.6%
  ---------- ---------- ---------- ---------- ---------- ---------- ----------

-   Market Share

  Capetronic had 1.5% of the worldwide market share of CRT/LCD monitor
  display in the year of 2000. Year 2001 market share expects to stay
  close to Year 2000 subject to new customers/business development.

-   Industry Competition and Capetronic Group Position

  53.6% of all worldwide monitor shipments in 2000 were produced by
  Taiwanese manufacturers (on-shore and off-shore manufacturing
  facilities combined). The remaining 46.4% was produced by Korean,
  Japanese, US and European manufacturers.

  As per the latest market analysis, tough competitions of the
  commercial terms among the monitor suppliers will not stop but
  continue onto year 2001 or even go up to the first half of year 2002.

  Capetronic remain in the position to continue to economically produce
  the monitors by running the confirmed drawing again her strength so as
  to walk through this critical period of time. Low-cost generation
  monitors will continue to be introduced.

-   Competition in Thailand

  Market report indicates that monitor suppliers in Thailand have
  suffered great losses. Either the manufacturer slows down or move
  off-shore. By removal of the non-profitable models as well as reducing
  expenses, Capetronic is in a reasonable position to compete in
  Thailand in respect of production of computer monitors.

-   Opportunity and Obstacle in the Industry

  Supply is more than demand, and competition seems inevitable in the
  display industry in the foreseeable future.

  The Company’s focus on various operation costs reduction as well as
  new low cost chassis design (not only for current customers but new
  developed customers) will ensure that the Company remains competitive
  and will continue to grow.

1.  Procurement

Production Process

Production Process

1.  Preparation

  All raw materials and equipment are prepared for the production
  process.

2.  PCB Assembly

  There are 3 steps to assemble PCB (Printed Circuit Board) as following
  :

2.1 AI (Auto Insertion)

  In this process, lead components like resistor, capacitor, transistor
  are inserted in PCB by automatic insertion machines.

2.  SMT (Surface Mount Technology)

  SMT Assembly is a process to place and attach SMD (Surface Mount
  Device) type like IC (Integrated Circuit), Diode, Chip Resistor, Chip
  Capacitor directly into prepared PCB.

3.  MI (Manual Insertion)

  There are larger component size such as transformer, heat sink, which
  are unable to insert or place by above process. They are required
  manual inserted by qualified operators.

3.  Wave Soldering

  All PCBs from above process are soldered by wave soldering machines.

4.  Soldering touch up

  The PCB which passed through the wave soldering machine will be
  inspected well trained operators who will touch up any flaws in the
  soldering quality.

5.  Assembling the PCB Module

  The main board and neck boards are assembled together.

6.  PCB’s functions test

To improve yield rates and the quality of final products, the Company
uses enhanced testing and test equipment to detect possible errors at an
early stage of production. ICT-machines (In Circuit Test) serve the
function of detecting missing or wrong components after AI in the
sub-assembly process. The Company’s main objectives are to assert
continuous efforts in improving testing procedures to ensure there is a
testing function at every production process and to enhance process
quality.

7.  Assembling PCB with CRT and casing

  To assemble the Printed Circuit Board with the CRT and the plastic
  case. The Company’s plastic injection operation which produces most of
  the plastic cases for the monitors produced by the Company enhances
  vertical production integration and scheduling flexibility.

  The product assembly process is largely manual with the various
  assembly stations connected by conveyor belts thus increasing
  efficiency and reducing manual handling. At various stages of the
  assembly process, the sub-assembled parts are checked for quality
  defects before a final quality check is done on the finished product.

  Monitor assembly lines are allocated by CRT size. However, the
  similarity of the products allows low cost and time effective set up
  changes so that the lines can be used very flexibly if required.

8.  Testing the picture’s alignment

Alignment checks are fundamental steps in the production of a computer
monitor. To support a complete range of computer monitor production, the
Company has implemented a technology and process to align the CRT with
the deflection yoke in order to provide better quality and save costs.

9.  Burn-in

  The electrical circuit functions are tested at temperatures ranging
  35+5 Celsius not only to assure the quality of all components but also
  to warm up the CRT for the alignment process which takes place after
  the burn-in.

10. Adjustment of electrical circuits, picture balance, color and
    contrast

  This process standardizes the loading of the electrical circuits and
  the adjustment of electrical circuits as well as the picture’s
  balance, its color, contrast and convergence.

11. Alignment of position, sharpness, size and picture

  The Company employs the CAS system (Camera Alignment System) which
  automatically checks and sets the accuracy of picture performance
  alignment.

12. Power saving testing

  This stage supports environmental issues in terms of energy saving.
  All computer monitors must reach an international standard such as the
  US Environmental Protection Agency’s “Energy Star” level. In this
  phase, all the Company’s monitors are checked to ensure compliance
  with such standards.

13. Safety testing

  The Company recognises the importance of the ended user’s safety.
  Therefore, the Company emphasizes the safety of its products ensuring
  especially that their Electric and Fire resistance are in conformance
  with universal standards such as TUV/R.

14. Final Quality Inspection

  In this stage, all finish units are performed final quality inspection
  by Quality Control department to ensure those units meet product’s
  specification.

15. Packaging

  To pack the computer monitor into a carton box.

16. Quality Assurance Inspection

  Before moving finished goods to warehouse, Quality Assurance
  department will do sampling some units for inspection to ensure those
  finished goods meet Company quality standard.

17. Warehouse

All finished goods are kept in the appropriate finished goods warehouse
until shipping to customers.

Production Capacity and Output

a)  Computer Monitors

[TABLE]

Remark : 1998 - Factory Bangpakong produced 14, 15, 17 inch CRT monitors

1999 - Factory Bangpakong produced 15, 17, 19, 21 inch CRT monitors

2000 - Factory Bangpakong produced 15, 17, 19, 21 inch CRT monitors and
15, 17, 18 inch LCD monitors

1998 - Factory Kaohsiung produced 15, 17, 19, 21 inch CRT monitors and
13, 15 inch LCD monitors

1999 - Factory Kaohsiung produced 15, 17, 19, 20, 21 inch CRT monitors
and 13, 15, 17, 18 inch LCD monitors

2000 - Factory Kaohsiung transfer the production of computer monitors
and LCD monitors to Bangpakong

  The computer monitor production was transferred from Kaohsiung factory
  to Thailand at the end of 1999. Consequently, The Company had to
  modify the production line to support LCD computer monitor production.
  As a result, average production capacity for 2000 was reduced from
  that in 1999.

b)  PCBA

[TABLE]

 Raw materials and suppliers

+----------------------------------------+-----------------------------+
| Components                             | Estimated % of total        |
|                                        | material cost               |
+----------------------------------------+-----------------------------+
| CRTs                                   | 50 to 55%                   |
|                                        |                             |
| Semiconductors                         | 20 to 25%                   |
|                                        |                             |
| Other components, i.e., transformers,  | 25 to 30%                   |
|                                        |                             |
| casings, cables, switches and          |                             |
| connectors                             |                             |
+----------------------------------------+-----------------------------+

  In order to source appropriate components for each product and each
  factory, the Company and its associated company have separate and
  independent purchasing teams. Each team will issue Purchase Orders
  directly to its suppliers. The Company’s Research and Development
  Department (R&D) and VQE Department carefully analyze, verify and
  approve the quality and price of the raw materials from suppliers
  before the Company places orders with them. In general, the Company
  and its associated company purchase raw materials from the following
  major suppliers:

+--------------------------+--------------------------+----------------+
| Major material           | Major manufacturers      | Country        |
| components               |                          |                |
+--------------------------+--------------------------+----------------+
| I. CRTs                  | Sony Corporation         | Japan          |
|                          |                          |                |
|                          | Chungwa Picture Tubes.   | Taiwan         |
|                          | Ltd.                     |                |
|                          |                          | Japan          |
|                          | Hitachi                  |                |
|                          |                          | Korea          |
|                          | Samsung                  |                |
|                          |                          | Korea          |
|                          | LG Electronic Co. Ltd.   |                |
+--------------------------+--------------------------+----------------+
| II. Semiconductor        | Motorola                 | U.S.A          |
| components               |                          |                |
|                          | SGS                      | Europe         |
| Integrated Circuits (IC) |                          |                |
|                          | Phillips                 | Thailand,      |
| Transistors              |                          | Taiwan         |
|                          | Samsung                  |                |
| Diodes                   |                          | Korea          |
|                          | Mitsubishi               |                |
|                          |                          | Japan          |
|                          | National Semiconductor   |                |
|                          |                          | Singapore      |
|                          | Phillips                 |                |
|                          |                          | Thailand,      |
|                          | Hitachi                  | Taiwan         |
|                          |                          |                |
|                          | Toshiba                  | Japan          |
|                          |                          |                |
|                          | Samsung                  | Japan          |
|                          |                          |                |
|                          | Mitsubishi               | Korea          |
|                          |                          |                |
|                          | Sanyo                    | Japan          |
|                          |                          |                |
|                          | General Instrument       | Japan          |
|                          |                          |                |
|                          | Panjit                   | Taiwan         |
|                          |                          |                |
|                          | Sanken                   | Taiwan         |
|                          |                          |                |
|                          | Hitachi                  | Japan          |
|                          |                          |                |
|                          | Rohm                     | Japan          |
|                          |                          |                |
|                          |                          | Japan          |
+--------------------------+--------------------------+----------------+

  In some cases, customers require that certain components be purchased
  from specific manufacturers in order to control the product quality.
  In other cases, the Company may propose a list of vendors for the
  customer’s approval.

  Although the Company and its associated company have a hierarchy of
  preferred suppliers, changing suppliers is relatively easy as there is
  no dependency on any single supplier. The Company has a preference for
  local suppliers which are documented in the Supplier Quality
  Engineering (“SQE”) program. Nonetheless, the ultimate purchase
  decision is always based on the lowest price with the best quality as
  well as the vendor’s delivery reliability.

  To guarantee the quality of supplied materials, all suppliers’
  products are subjected to rigorous testing. The Company understands
  that it is essential to gain the trust of its customers and thus
  frequently involves them in the process of choosing component and raw
  material suppliers. Therefore, samples are not only tested by the
  Company itself but frequently also by its customers.

  The Company has set up specific short term targets to improve
  inventory turnover, production to delivery time, material supply rate
  while reducing material cost and import expenses.

Raw Materials Problems and Substituted Parts

  One of the problems the Company has faced in the past is an
  insufficient supply of critical components, CRTs and semiconductors.
  To ensure there is an assured supply of these and other key
  components, the Company relies on its long standing relationships with
  many of the suppliers of these parts as well as its advanced inventory
  purchasing and production planning systems. In addition, where
  shortages appear likely or do arise, the Company can place orders with
  secondary suppliers of comparable components. R&D has already
  qualified them as approved vendors i.e. the quality and price of their
  components are acceptable but which are not used on a regular basis.

Changes in Technologies' Effect on Use of Materials

  The Company's Research & Development watch for changes in technologies
  in the Company's products with an impact on the components the Company
  uses in its product. Their responsibility in this area is to ensure
  the Company is always purchasing the most appropriate parts and that
  it is not left with obsolete inventory as a result of technological
  changes.

  Ratio of local material purchased to foreign material purchased in
  1998, 1999 and 2000

  -------------------------- ----------- -------- ------ ----------- -------- ----------- --------
                             1998                 1999                        2000        

                             Million     %               Million     %        Million     %
                             Baht                        Baht                 Baht        

  Total foreign material     11,721.87   54.97           9,053.33    58.38    9,911.74    87.79
  purchased by Bangpakong                                                                 
  plant                                                                                   

  Total foreign material     8,463.71    39.69           4,745.47    30.60    -           -
  purchased by Kaohsiung                                                                  
  plant                                                                                   

  Total foreign material     20,185.58   94.66           13,798.80   88.98    9,911.74    87.79
  purchased                                                                               

  Total local material       1,139.83    5.34            1,709.01    11.02    1,377.92    12.21
  purchased by Bangpakong                                                                 
  plant                                                                                   

  Total material purchased   21,325.41   100.00          15,507.81   100.00   11,289.66   100.00
  -------------------------- ----------- -------- ------ ----------- -------- ----------- --------

  Environmental issues

The Company is well aware that waste and scrap from the production
process may be hazardous to the environment. Hence, the Company
carefully follows standards in its factory and on its property
established by the Ministry of Public Health and Labor and Social
Welfare Department as follows:

(1) Setting up and monitoring an appropriate air pollution management
    system.

(2) Establishing and monitoring ventilation systems through the use of
    air filters.

(3) Monitor water quality in water areas and on soil surfaces to ensure
    it is within the levels set out in the law.

(4) Monitor air quality to ensure it is in accordance with current laws.

(5) Setting up monitoring systems within the factory for air emission,
    discharged water, noise, temperature and lighting in accordance with
    standards set by the Ministry of Labor, Ministry of Industry,
    Ministry of Science and Ministry of Public Health.

  In 1999, the Company was awarded the ISO 14001 standard from AJA EQS.
  Its associated company, CKC, was awarded the ISO 14001 standard by
  SGS. In order to maintain these 14000 standards the Company and CKC
  are required to follow waste management practices with higher
  standards than those mandated by various laws in Thailand. To reach
  the ISO 14001 standard, the Company has performed the follows:

  1. Procedure

  The Company has set up a waste management system to manage waste from
  the Company’s production processes or other activities and to classify
  its waste as follow:

A)  Hazardous Waste

-   Solid hazardous waste such as doss, component legs, paint sludge,
    batteries, lead contamination filters, cloth or supplies for
    cleaning chemical, fuel cans, fuel tanks, light bulbs, paint tins.

-   Liquid hazardous waste such as flux waste, solder, thinner, waste
    oil, Hydraulic oil, waste oil etc.

-   Medical / Chemical waste from clinics including hypodermic syringes,
    bandages, cotton pads.

B)  Non - Hazardous Waste

-   Solid Non - Hazardous Waste

(1) Recyclable solid non-hazardous waste such as wooden pallets, carton
    boxes, plastic bags and Styrofoam etc.

(2) Solid non-hazardous waste of no value such as garbage, broken
    pallets, general waste etc.

-   Liquid Non-Hazardous

(1) Canteen waste

(2) Toilet and washroom waste

(3) Waste water from waste pipes or from the cooling tower

2.  Waste is to be Classified as follows:

1)  Dry waste

2)  Wet waste

3)  Metal and glass waste

4)  Hazardous waste

3.  The Company has the following waste management processing stages

    1.  Recyclable valuable waste such as doss, oil containers, pallets,
        paper etc. must be separated and collected by approved
        sub-contractors for reuse or recycling.

    2.  No value waste such as scrap, junk etc. is to be separated and
        collected by approved sub-contractor for destruction.

    3.  Hazardous waste of no value such as flux, thinner, wasted oil,
        hydraulic oil etc. must be separated and collected by approved
        sub-contractors for destruction.

4.  Waste storage facilities are to be separated by waste types and must
    have a roof over them to protect the waste from wind or rain which
    can lead to absorption in the soil.

5.  All data about the Company’s waste treatment must be maintained for
    at least 2 years.

6.  The Company has developed its own measurements and guidelines to
    assess and select waste disposal sub-contractors to ensure that they
    efficiently, adequately and appropriately operate and manage all
    environmental issues in their operations.

  Based on test carried out by various government authorities, the
  Company has been and is in compliance with all environmental
  regulations.