3.  MONITOR BUSINESS

4.3.1 Product description

  Computer Monitors are classified into three 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.

3.  LCD Multimedia/LCD-TV: this product was developed from the LCD
    Monitor to support the multimedia functions therefore this products
    can receive the various source of input signal such as TV, VDO, DVD
    directly.

  The Capetronic major products include:

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

-   Flat Panel Display, ranging in size from 13 to 29 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.

4.3.2 Privilege / Limitation of the business

In 1995, the Company received promotion certificates from the Board of
Investment for CRT Monitor, PCB and PC Display the principal terms of
which are as follows:

1. Promotion Certificate No. 1061/2538 (provided on January 19, 1995)

1.  Under Section 25, the promoted person shall be permitted to bring
    foreign 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, foreign 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 seven years 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 nine years from the date of first import.
    (the expiry date is May 8, 2004)

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, on condition that the current year exported income shall
    not be less than the average prior three years exported income
    (except first two years).

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 (provided on January 26, 1995)

1.  Under Section 25, the promoted person shall be permitted to bring
    foreign 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, foreign 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 29, the promoted person shall be exempted from half of
    import duties on machinery which are not in the list as specified in
    the Ministry of Finance Announcement No. 13/2533 except the
    machinery with import duties less than 10% will not be exempted.

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 eleven years from the
    date of 9^(th) May 1993 to 8^(th) May 2004.

6.  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 eleven years from the date of 9^(th) May
    1993 to 8^(th) May 2004.

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, on condition that the current year exported income shall
    not be less than the average prior three years exported income
    (except first two years).

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

  The Company was permitted to stop production of the products as
  promoted per the certificate no. 1061/2538 and 1071/2538 for a period
  of two year from October 1, 2001 to September 30, 2003.

  The Company received one promotion certificate from the Board of
  Investment for LCD Monitor, LCD Multimedia Display, LCD-TV, PCBA
  Product on the January 5, 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, 2004)

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 four years from the
    first imported date. (the expiry date is January 19, 2004)

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 four years from the first imported date.
    (the expiry date is January 19, 2004)

9.  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 (only income from direct export and indirect export in case
    of export through agent without further production) on condition
    that the current year exported income shall not be less than the
    average prior three years exported income (except first two years).

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

    2.  Other Privilege / Right

- None -

3.  Limitation of the business

  - None -

4.  Marketing Strategies, Industry and Competition

  Industry Situation :

  In light of the overall economic depression on a global basis,
  consumers demand for electrical products has obviously changed in 2002
  to be much more conservative.

  As such, the demands of monitor display (business field of CITL), has
  become much slower than prior years ; in particular the negative
  impact from the major market domination by the United States has been
  flat since the Sep-11 event.

  Most of the suppliers therefore use low price as part of the leverages
  to motivate consumers to purchase, which results in a bad cycle for
  price reduction and of course it causes a bottom line by loss or
  micro-profitable for most of the companies in the industry. This
  applies across all electrical products including DVD player, CD
  player, Digital Camera, CRT monitor Display, LCD monitor Display, PDP
  (Plasma)

  Market Strategy :

  As a focal point of profit for CITL, product strategy has been
  changed/ diversified from monitor display (CRT/ TFT LCD base) to
  LCD-TV (LCD Multi-Media) since 2002. The intention is to use years’ of
  design experience in monitor displays to further incorporate with TV
  technology, audio technology (Nakamichi) from corporate and
  exclusive/premium industry design (ID) and advanced features (Memory
  Card Reader) etc so as to distinguish CITL products from the other
  competitors in selling through to the market place.

  Such a product plan has been executed by putting significant efforts
  and time for development in year 2002, which include 15”, 17”, 22”,
  29” and 40” etc. It is also a major reason for the low turn over in
  the 2002.

  The new products of LCD-TV (LCD Multi-Media) can be multi-played/
  viewed along with PC (Personal Computer), DVD and TV etc. By its
  (LCD-TV) advantage of lighter weight, less space taken, slim design,
  less power consumption, better picture presentation, excellent audio
  performance and longer operating life hours (compare with Plasma) etc,
  we believe this type of new product will provide with better edge of
  competition and more importantly bring with better margin due to its
  higher add-on value.

  Market Demand/Forecast Status of LCD-TV :

  Year 2002 1,830K units

  Year 2003 3,630K units

  Year 2004 7,500K units

  Year 2005 12,100K units

  Year 2006 16,200K units

  Note :

  The listed forecast/demand information was provided in December 2002
  by a marketing company “Display Search” in the USA.

  As per the marketing information, the LCD-TV’s will have good and
  stable growth rate on a year-to-year basis. The trends is to replace
  traditional CRT TV and compete with Plasma TV (PDP) in the range of
  big screen size. The company’s product strategy has been moving in
  this right direction of main-stream field for future perspectives.

  Sales and Business Strategy :

  There are two major aspects that CITL will focus on in year 2003 and
  beyond. One is to concentrate on business development of OEM type
  (attach with customer’s logo) and the other one is to operate brands’
  distribution of Sansui, Akai and Nakamichi.

  For home electrical type product of LCD-TV, it is very important to
  have an identified/ recognized brand to the consumers. Very few people
  will buy a no-brand or a brand which is not classified in such a
  particular field. By way of selling through the group’s branded
  distribution, this enable CITL to have a good start in penetrating to
  the market place.

  Opportunity and Obstacle in the Industry :

  Effective and early development of LCD-TV along with reasonable
  operating costs will be important key elements towards the future
  success, which CITL will continue to keep up with and contribute its
  efforts. However, the trend of price erosion and competition will not
  be avoidable due to more and more suppliers joining in demands from
  the market are dependant on the economical environment, which CITL
  management team must pay significant attention to.

5.  Procurement

Production Process for LCD-TV

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 such as resistor, capacitor, transistor
are inserted onto the 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 onto the prepared PCB.

3.  MI (Manual Insertion)

  There are larger size components such as transformer, heat sink, which
  are unable to be inserted or placed by the above process. They require
  manual insertion by qualified operators.

3.  Wave Soldering

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

4.  Soldering touch up

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

5.  PCB’s function 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.

6.  Chassis Assembly

  To assembly the Printed Circuit Board with LCD panel and the plastic
  case. The company’s plastic injection operation which produces most of
  the plastic cases for the LCD TV produced by the Company enhances
  vertical production integration and scheduling flexibility.

  The product assembly process has 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.

7.  TV Channel and Picture Quality Checking

  Our latest LCD-TV design with full digital function, all factory
  default setting has been download to IC memory. The alignment process
  doss not require anymore. In this process perform only TV Channel and
  Picture Quality checking to ensure its quality both picture and sound
  perform which product specification.

8.  Aging Test

  The electrical circuit functions are tested at temperatures raging 35+
  5 C. Not only to assure the quality of all components but also to warm
  up the LCD panel for the alignment process which takes place after the
  aging test.

9.  Adjustment of White Balance and Luminance

  This process will ensure the white balance and luminance of the
  products has been set within the product specification.

10. Power Saving Testing

  This stage supports environmental issues in terms of energy saving.
  All LCD-TV must reach an international standard. In this phase, all
  the Company’s products are checked to ensure compliance with such
  standards.

11. Safety Testing

  The Company recognizes the importance of the end users satisfaction.
  Therefore, the company emphasizes the safety of its products ensuring
  especially that their electric and fire resistance is in conformanty
  with universal standards such as TUV, cUL, Nemko, CE etc.

12. Final Quality Inspection

  In this stage, all finish units undertake a final quality inspection
  by Quality Control Department to ensure those units meet the product
  specification.

13. Packaging

  The product is well packed with good packaging to ensure its safe
  transportation.

14. Quality Assurance Inspection

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

15. Warehouse

  To pack the computer monitor into a carton box.

Production Capacity and Output

a)  Computer Monitors/LCD-TV

[TABLE]

Remark : 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

2001 - Factory Bangpakong produced 15, 17, 19, 21 inch CRT monitors and
15, 17,18 inch LCD monitors

2002 – Factory Bangpakong produced 15, 17 inch LCD monitor/ LCD TV

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

2001 - The Company stopped production of Shadow mask computer monitors

  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.

  In 2001, production capacity was significantly reduced as compared to
  2000 due to management’s strategy to stop non-profitable Shadow mask
  computer monitors and concentrate on more profitable Trinitron models.
  The production capacity mainly represented Trinitron computer
  monitors’ capacity and part of LCD monitors’capacity.

  In 2002, the company invested in developing the LCD monitor and LCD-TV
  models to replace the trinitron product which was cancelled by the
  major customer.

b)  PCBA

[TABLE]

In the past, the Company produced PCBA to sales for Kaohsiung factory in
Taiwan. However, the production quantity to sales were reduced in 1999
and there was no further production from early 2000 as a result of the
transfer of production of computer monitors from Taiwan to Thailand.

 Raw materials and suppliers

+----------------------------------------+-----------------------------+
| Components                             | Estimated % of total        |
|                                        | material cost               |
+----------------------------------------+-----------------------------+
| CRTs                                   | 67 to 76%                   |
|                                        |                             |
| Semiconductors                         | 8 to 13%                    |
|                                        |                             |
| Other components                       | 11 to 25%                   |
+----------------------------------------+-----------------------------+

  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. LCD panel         | Sanyo                      | Japan            |
|                      |                            |                  |
|                      | AV                         | Taiwan           |
|                      |                            |                  |
|                      | Samsung                    | Korea            |
+----------------------+----------------------------+------------------+
| II. Semiconductor    | Genesis                    | USA              |
| components           |                            |                  |
|                      | Micronas                   | USA              |
| Integrated Circuits  |                            |                  |
| (IC)                 | Philips                    | Thailand, Taiwan |
|                      |                            |                  |
| Transistors          | Analog Device              | USA              |
|                      |                            |                  |
| Diodes               | Silicon Image              | USA              |
|                      |                            |                  |
|                      | National Semiconductor     | Singapore        |
|                      |                            |                  |
|                      | Philips                    | Thailand/Taiwan  |
|                      |                            |                  |
|                      | Hitachi                    | Japan            |
|                      |                            |                  |
|                      | Toshiba                    | Japan            |
|                      |                            |                  |
|                      | Samsung                    | Korea            |
|                      |                            |                  |
|                      | Sanyo                      | Japan            |
|                      |                            |                  |
|                      | General Instrument         | Taiwan           |
|                      |                            |                  |
|                      | Panjit                     | Taiwan           |
|                      |                            |                  |
|                      | Hitachi                    | Japan            |
|                      |                            |                  |
|                      | Rohm                       | 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/Panel 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
  2000 to 2002.

  -------------------------- --------- ------ ------ --------- ------ --------- ------
                             2000             2001                    2002      

                             Million   %             Million   %      Million   %
                             Baht                    Baht             Baht      

  Total foreign material     9,912     88            3,437     88     56        82
  purchased by Bangpakong                                                       
  plant                                                                         

  Total foreign material     -         -             -         -      -         -
  purchased by Kaohsiung                                                        
  plant                                                                         

  Total foreign material     9,912     88            3,437     88     56        82
  purchased                                                                     

  Total local material       1,378     12            486       12     12        18
  purchased by Bangpakong                                                       
  plant                                                                         

  Total material purchased   11,290    100           3,923     100    68        100
  -------------------------- --------- ------ ------ --------- ------ --------- ------

  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.

  The Company was awarded the ISO 14001 standard from AJA EQS. In order
  to maintain these 14001 standards, the Company is 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 sold to 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.