9.  INTERNAL CONTROL/CORPORATE GOVERNANCE

    1.  Internal Control

The internal audit function is carried out by Group Internal Auditors
from The Grande Holdings Limited. It was successfully set up at the end
of 2000. Thereon, internal audit was commenced to examine and evaluate
the internal control system of the companies under the Group since early
of 2001.

During 2002, the internal auditors conducted the audit according to a
plan approved by the audit committee with the purpose to evaluate the
overall adequacy and effectiveness of the Company’s internal control
system. The systems audited by the internal auditors included the
following:

1.  Revenue Cycle

2.  Fixed Asset Cycle

3.  Purchasing Cycle

From the audit, no significant issues were found. However, the internal
auditors provided some recommendations to the management for further
improvement in certain control areas.

The internal auditors reported the results of the audit to the audit
committee for consideration in the meeting between the audit committee
and internal auditors held during the year.

During 2003, the audit committee considered the internal audit report
for 2003 having reviewed the Company’s remaining oversea operations,
under Capetronic Computer USA (HK) Limited (“CCUL”). The audit committee
further reviewed supporting information detailing the closure costs of
the CCUL overseas operations amounting US 851,355.

1.  Corporate Governance

  The company committee had set the policy to ensure that the company
  undertakes business based on the good corporate governance principles,
  legally and ethically. Practically, the committee will clearly
  segregate the authority of The board of management and the authority
  of The board of Audit committee. However, the company committee still
  fully takes responsibility on the company’s operation.

  The company complied with the 15 good corporate governance principles
  as follows:-

1.  Policy on Corporate Governance

The company has not announced the official policy on corporate
governance.

2.  Shareholders: Right and Equitable Treatment and 4. The Shareholders’
    Meetings

The company had set up guidelines ensuring that all of shareholders have the right to receive the company’s information and voting rights in shareholders’ meetings. The company’s guidelines in 2002 are as follows:-

The company had set up an ordinary meeting held in the year 2003. The meeting was set up at the annual ordinary shareholders’ meeting No. 2003 on April 25, 2003 at 2:00PM at the Meridien President Hotel. 

-   The company is committed to all shareholders in providing adequate
    information.

The meeting location–The company intends to conduct shareholders’ meeting at Prominent Hotel which are located in central Bangkok

As one of the issues to be tabled in the annual ordinary meeting No. 1/2003 is in relation to the approving of a connected party transaction, the Company had made the necessary announcement as to the names of the interested parties who had to abstain from voting in that meeting in accordance to the requirement by the SET. The Company also provided a report prepared by an independent financial consultant to advise the minority shareholders

The registration for the meeting begin about 1 hour before the meeting time.

Due to the Chairman of the board of directors is a foreigner who could not communicate in Thai language, the Company provided a translator for him throughout the meeting.

The Company also set up the voting process on each issues as stated in the invitation letter, which also explained the correct counting procedure before the meeting began.

The meeting also approved the appointment of the external auditors and the audit fees.

3.  Various Group of Stakeholders

  The Company also takes into consideration the interest of all the
  various group of stakeholders regardless of being an insider who may
  be the employees and the management or outsider such as the customers,
  the suppliers, general public. The Company had performed in 2003 and
  the prior year as follows: -

Employees

-   The Company treats all employees equally and fairly and also
    provides the appropriate remuneration.

-   The Company had set up an employees welfare committee as a
    representative of all the employees in looking to the welfare of its
    employees.

-   The Company had set up a safety committee as a representative of all
    the employees in looking to safety and work environment matters.

Customers

-   The Company always takes responsibility in producing a high quality
    and standard products and also maintains the client confidentially.

Rivals

-   The Company complies with competition rules and maintains
    benchmarking in the competition practice.

Public

-   The Company is responsible to the public environment and social
    community by complying to practices stipulated by the Environment
    Standard Systems regulated by the Ministry of Industry and also
    checks on the waste water release from the company’s factory
    regularly.

-   The Company also manages and maintains the environment and working
    standards to obtain the ISO 14000 certificate.

5.  Leadership and Vision

  The Company ‘s Board of directors maintains the best practices for the
  ultimate benefit of the Company and the Shareholders. The Company’s
  Board of director and the management had set certain guidelines as
  follows: -

-   An annual budget is prepared for every year.

-   Monthly executive committee meetings are held to discuss on the
    Company’s performance and monitoring the performance of the actual
    results against the budget. Strategies are formulated if necessary
    whenever necessary whenever there is any significant adverse
    deviation in the actual performance.

-   Regular internal audits are conducted by the Group Internal Audit
    department of the ultimate parent Company.

-   The Company has set up clear level of authorization for its
    management level in executing their tasks.

6.  Conflict of Interests

  In 2002 and 2003, this practice is adopted as follows :-

-   The company disclosed the related transactions between the company
    and its associated & related companies in company annual report and
    annual company information (form 56-1) in accordance to the Stock
    Exchange of Thailand’s regulations.

-   The company disclosed the details of the salient terms for
    contractual agreement between the company and its associated &
    related companies in annual company information (form 56-1)

-   The terms of the contractual arrangement between the Company and its
    associated and related parties are contracted at arms length basis
    similar to contracts made between the Company and its outsiders.

7.  Business Ethics

  The company’s business operation always took concern of proper
  business ethics.

8.  Balance of Power for Non-Executive Directors

  The company maintains the role of the non-executive directors in
  exercising their duties objectively and independently by implementing
  the following measures :-

-   All the independent directors that the Company has appointed do not
    manage the operation of the Company or any of its subsidiaries, they
    are independent from the management and significant shareholders,
    and have no business or other relations with the company, which
    could influence the independence of their expression of views.

-   The company determined the proportion of independent non-executive
    directors and executive directors to be not less than 1/3 of the
    number of company directors and the number of independent directors
    consist of at least 3 people.

-   The company disclosed the authorities and responsibilities of all
    directors, audit committees in the company’s annual report for
    shareholders’ information.

-   The company disclosed the composition of appointment of the board of
    directors in company’s annual reports for shareholders’ information.

9.  Aggregation of Segregation of Positions

  The company has set up a clear separation of power and authorities so
  that no one would be granted the unlimited power.

  The company had the following practices in year 2002 and 2003 as
  follows:-

-   The company had segregated the position of Chairman and the position
    of the Managing Director so that no one would be granted unlimited
    power.

-   The company had set up limits of authority for approving of capital
    expenditure.

10. Remuneration for Directors and the Management

  The level of remuneration should be appealing enough to attract and
  retain essential directors for the success of the business. Directors’
  remuneration tends to rise because of the responsibilities and risks
  associated with their duties:-

  In year 2002 and 2003 the company had implemented the following:-

-   The Company has become a member of a personnel management
    association which allows the Company to have access on the level of
    remuneration paid for different employment category.

-   Remuneration in salary, bonus and long-term incentives for each
    employee is performance based.

-   The company disclosed the directors’ remuneration in the company’s
    annual report for shareholders for consideration.

11. Board of Directors’ Meeting

  In the Board of director meeting, the Company tries to arrange
  effective meetings as follows: -

-   The Company’s chairman, who has the authority in controlling the
    meeting, always support and encourage issues to be discussed and
    deliberated.

-   The Company’s chairman will integrate all the suggestions and
    summarize the best one from the attendance

-   The Company’s chairman will appoint the company’s secretary to
    manage the Board of director activities, take memorandum of the
    meetings, keep the meeting documents and if necessary requesting to
    seek for further advise from other advisers on legal and other
    related rules.

-   The Committee can propose any additional issues during the meeting
    and is open to suggestions and ideas.

-   The company will invite the top management to attend the meeting and
    the committee can inquire and give any suggestion to them directly.

12. Board Committees

  During 2002 and 2003, to encourage committees of the board to increase
  the Board of Committee effectiveness, the Board of Directors had setup
  the following committees: -

-   Executive committee

The scope of this committee is to oversee the compliance of the
principles of the Company’s corporate governance and to identify any
issues for discussion and deliberation.

-   Remuneration Committee

This committee will review the directors’ remuneration for consideration
as well as the top management of the Company, given out in the form of
meeting allowances, yearly bonus, staff welfare, other benefits both
monetary and non monetary. In addition, this committee also looks into
the directors’ remuneration guideline for the following year.

-   Nomination Committee

This committee will review the appointment of new members of the board.

13. Control System and Internal Audit

  The Company places a lot of emphasis on internal control system at
  both the management and operation level. There are clear written job
  descriptions for each position, written procedures on operating fixed
  assets and segregation of duties among the staff to avoid duplication
  of work. In addition, there are also internal controls on cash system
  by setting up the financial report system submitted to the related
  authorized person

The Company’s internal auditor position is carried out the Group
Internal Audit department of the ultimate parent company. The internal
audit reports have not reported any major non-conformance in current
practices. There are proper effective internal control measures to
prevent the incidence of fraud amongst management and staff.

14. Directors’ Reporting

  The Board of Director is responsible for the Consolidated and the
  subsidiary Financial Statement and the Non financial information as
  reported in the annual report and the yearly information report form.
  The financial statements had been prepared in accordance with Thai
  General Accepted Accounting Standard by the Company. Significant
  accounting policies includes consistency, prudence and accruals. All
  material information are further elaborated in the notes to the
  accounts.

15. Relations with Investors.

  The Company has disclosed significant Financial Information and Non
  Financial Information accurately, timely and transparently in
  accordance with the rules of the Stock Exchange of Thailand.