Business Overview

4. INFORMATION ON THE 0&0 GROUP 4. INFORMATION ON THE 0&0 GROUP 4.1 History 0&0 was incorporated in Malaysia as a public limited company on 12 March 2004 under the Act. It was established to become the investment holding company of Omega, OSTB and OPPB in conjunction with the listing of the Company on the Second Board of Bursa Securities. The principal activities of 0&0 are investment holding and provision of management services. The 0&0 Group, via its wholly-{)wned subsidiary, Omega, is principally engaged in the provision of a full range of contract manufacturing services for the manufa(,iure of semiconductor components which are supplied mainly to MNCs engaged in the manufacture of semiconductor products. The manufacture and assembly of semiconductor components are primarily undertaken by Omega under an OEM contrad manufacturing arrangement and ‘captive line’ arrangement, which could involve the full consignment of manufaduring equipment. The history of the 0&0 Group began with the formation of Omega in 1993 and the commencement of Omega’s operations in sub-contracting the assembly work of Metal-Can products for STMicroelectronics Sdn Bhd. The operations were carried out at a rented factory with a built-up area of 9,741 sq. it. located at Lot 8, Batu Be-rendam Free Trade Zone, Phase Ill, Melaka, with the support of approximately sixty (60) employees. Within the year, Omega expanded its production area and rented two (2) additional factories with a total built-up area of 21,269 sq. ft. at Lots 4 and 7, Batu Berendam Free Trade Zone, Phase III, Melaka. Over the years, Omega managed to secure more contracts and extended its contract manufacturing services to include more product packages such as Opto Metal­Can, Fibre Optic Metal-Can and LEO Lamps. In order to accommodate the increase in capacity, Omega rented factories with a total built-up area of 91,841 sq. ft at Lots 3 and 6, Batu Berendam Free Trade Zone, Phase III, Melaka in 1999. The Group had subsequently acquired all these factory lots. In 1997, Omega was awarded the IS09OO2 quality system accreditation by SGS National Accreditation of Certification Body for its production and assembly services. This is a testimony to its commitment to provide quality services to its customers. Over the years, as Omega continued to expand its services to meet the eVQlving needs of its customers, it secured more contracts. most of which were on OEM manufacturing and ‘captive line’ contract basis. Under such arrangements, the Group’s customers consign their production equipment to the Group for the purpose of manufacturing the scheduled orders. The nature of such arrangements substantially reduces the likelihood of the MNC customers terminating the business relationship with the 0&0 Gwup as such a move would entail high relocation costs and trigger possible disruptions to their supply chain. Today, the Board of 0&0 believes that Omega has established itself as a quality contract manufacturer for semiconductor devices specialising in Hermetic Sealed Metal-Cans for lasers, sensors, transistors and diodes. Resin Filled Encapsulation Packages for LEDs and Thermoset Epoxy Moulded Packages for transistors and diodes. These products are found in a wide range of electronic products such as mobile phones, audio-visual equipment, traffic lights, computers, telecommunication equipment, automobiles, medical equipment, industrial machinery and outdoor advertising digital billboards. Currently, the Group has a distinctive clientele base which includes quality conscious MNCs such as Fairchild Semiconductor (Optoelectronics) Sdn Bhd. Agilent Technologies (Malaysia) Sdn Bhd, STMicroelectronics Pte Ud, Matsushita Precision Capacitor (M) Sdn Bhd and Central Semiconductor Corp., USA. As part of its continuous effort to diversify its customer base and capture more market opportunities, the Group had in 1997 ventured into and exported its products to foreign markets, namely, USA, Germany and England. The 0&0 Group currently exports 100% of its products through MNCs located at various free trade or industrial zones in Malaysia or at licensed manufacturing warehouses and direct shipments to USA, Germany and Singapore. 4. INFORMAnON ON THE 0&0 GROUP (Conl’d) In 2001, Omega was accredited with Q59000 quality system accreditation by BVQI-UKAS Quality Management Body for the complete assembly and testing process for all products manufactured by Omega. In 2002, Omega offered ‘full turnkey’ services for all products manufactured for its MNC customers. Omega also expanded its services to include provision of value-added services for forming, taping and packing precision capacitors for Matsushita Precision Capacitor (M) Sdn Bhd. In the same year, Omega embarked on R&D activities with the formation ofa R&D department. In 2003, in order to augment its internal development efforts and tap into global markets, Omega collaborated with sglux Solgel Technologies GmbH, a Gennan company, on the design of a packaging process for all types of Metal·Can UV Sensors. These products are usually used in medical equipment, water purification equipment, weather monitoring systems, combustion control equipment, arc welding helmets, sports watches, sun bed dosimetry equipment and others. In February 2004, the Group achieved another milestone by diversifying into assembly of new OEM packages for the wireless semiconductor business segment. To meet the anticipated increase in orders for its OEM packages and to enable the Group to assemble and test OEM packages for niche markets in the future, the Group has placed orders for new production machinery, which are anticipated to be commissioned by the end of2004. The Group currently operates from two (2) factories with an aggregate built-up area of approximately 280,729 sq. ft. located in the vicinity ofthe Batu Berendam Free Trade Zone, Phase Ill, Melaka and has a total workforce of 1,235 as at 15 October 2004. The Group’s corporate structure is depicted as follows: D&O  l  J. 100% Omega  I  [  100% .. OSTB + 51% OPPB  ) )
4. INFORMATION ON THE 0&0 GROUP (Conl’d)
4.2 Share Capital The authorised share capital of 0&0 is RMIOO,ooo,OOO comprising 1,000,000,000 0&0 Shares, of which RM62,740,400 comprising 627,404,000 0&0 Shares has been issued and fully paid-up as at 15 October 2004. The changes in the issued and paid-up share capital of 0&0 since its incorporation arc as follows: Date of No. ofordinary Par Total issued and paid-allotment shares allotted value Consideration up share capital RM RM 12.03.2004 200 1.00 Subscriber shares 200 10.09.2004 2,000 0.10 Sub-division of shares 200 13.09.2004 627,402,000 0.10 Shares issued pursuant to 62,740,400 the Acquisitions The principal activities of the Company’s subsidiaries are as follows: DatelPlace of Effective Issued and paid-Subsidiaries incorporation equity interest up capital Principal activities % RM Omega 25.11.1993 100 4,561,677 Provision of ‘full turnkey’ contract Malaysia manufacturing of semiconductor components which are supplied mainly to multinational companies engaged in the manufacture of semiconductor products OSTB 26.08.2002 100 2 Currently dormant. It is intended that Malaysia OSTB shall commence operations in the design, manufacture and supply of photonics semiconductor products OPPB 16.03.2004 51 100 Currently dormant. It is intended that M.alaysia OPPB shall commence operations in the provision of engineering design, research and development of photonics products’ assembly, packaging and testing process as well as marketing and sales of photonics products and manufacturIng services
4.3 Listing Scheme As an integral part of the listing of and quotation for the entire issued and paid-up capital of the Company on the Second Board of Bursa Securities, the Company undertook a restructuring scheme, which was approved by the following: (i) Mm, vide its letter dated 21 June 2004;
(ii) SC, vide its letters dated 24 August 2004-and 30 September 2004; and

(iii) FIC (through the sq, vide the SC’s letter dated 24 August 2004. 4. iNFORMATION ON THE D&O GROUP (Cont’d) Approval-in-principle has been obtained from Bursa Securilies on 10 August 2004 for the admission of D&O to the Official List of the Second Board of Bursa Securities and for the listing of and quotation for the entire enlarged issued and paid-up ordinary shares of D&O on the Second Board of Bursa Securities. The restructuring scheme entails the following: (I) Sub-Division ofShares
On 10 September 2004, D&O undertook a sub-division in the par value of iis ordinary shares from RMJ.OO each to RMO.IO each. Consequently, the issued and paid-up ordinary shares of 0&0 was sub-divided from RM200 comprising 200 ordinary shares of RM1.00 each into RM200 comprising 2,000 ordinary shares of RMO.IO each.
(ii) Acquisilions

On 27 April 2004, the Company undertook the following acquisitions, subject to the approval of the relevant authorities: (a) 4,561,677 ordinary shares of RMl.OO each representing the entire issued and paid-up share capital of Omega for a purchase consideration of RM62,740,217 whieh was fully satisfied by the issuance of 627.402,000 new D&O Shares at an issue price of approximately RMO.I0 per Share; and
(b) 2 ordinary shares of RM1.00 each representing the entire issued and paid-up share capital of OSTB for a cash consideration of RM2.00.

The purchase consideration for the entire equity interest of Omega was arrived at based on the adjusted audited NTA of Omega as at31 December 2003, after taking into consideration the new issue of shares subsequent to financial year ended 31 December 2003. The Acquisitions were completed on 13 September 2004. Upon completion of the Acquisitions, the issued and paid-up share capital of D&O increased from RM200 to RM62,740,400 comprising 627,404.000 Shares. On 9 September 20Ct4, Omega declared an inlerim dividend iR respecl of the financial year ending 31 December 2004. Tile distribution of dividend was approved by the SC vide its leiter dated 30 September 2004, On 22 October 2004, the tax exempt interim dividend amounting to RM2,280,838.50 was paid 10 the sharetlolders of OUlega who were members of the company prior to the completion of acquisition of Omega by 0&0. (iii) Public Issue In conjunction with the listing of D&O on the Second Board of Bursa Securities, the Company will be implementing a public issue of 102.596,000 new Shares at the Issue Price. The Public Issue of a total of 102,596.000 new Shares representing approximately 14.1% of the enlarged share capital of D&O are to be issued 10 the following parties: 36,500,000 new Shares representing 5.0% of the enlarged share capital will be reserved for application by Malaysian citizens, companies, co-operatives, societies and institutions to be allocated via balloting, of which at least 30% is to be set aside for Buntiputcra individuals. companies, societies, co-operatives and institutions; 4. INFORMATION ON THE D&O GROUP (Co.,’d) 5,000,000 new Shares representing approximately 0.7% of the enlarged share capital will be reserved for eligible Directors and employees of the 0&0 Group; and 61,096,000 new Shares representing approximately 8.4% of the enlarged share capital will be placed out to investors to be identified. Upon completion of the Public Issue, the issued and paid-up share capital of D&O will be increased to RM73,OOO,000 comprising 730,000,000 Shares. All the new ordinary shares to be issued pursuant to the Public Issue shall, upon allotment and issue, rank pari passu in all respects with the existing issued and paid-up ordinary shares of D&O including voting rights and dividends and/or distribution that may be declared subsequent to the completion of the Publie Issue. (iv) Listing and quotation Pursuant to the Public Issue, D&O will seek admission to the Official List of Bursa Securities and the listing of and quotation for the entire enlarged issued and paid-up share capital of D&O of RM73,OOO,OOO comprising 730,000,000 Shares on the Second Board of Bursa Securities. Iv) ESOS The Company has established an ESOS of up to 15% of the issued and paid-up capital of the Company at anyone time for the benefit of the Directors and eligible employees of the D&O Group. The granting of options under the ESOS to Non-Executive Directors serves to recognise the contribution of the Non-Executive Directors, who are involved in the formulation of the Group’s strategy through, amongst others, their participation in board deliberations and independent views in the decision making process, as well as ensuring that the D&O Group maintains good corporate practices at all times. The ESOS shall be for a duration of ten (10) years during which options shall be offered to Directors and eligible employees of the Group in accordance with the ESOS By-Laws adopted by the shareholders of the Company. The ESOS By-Laws are set out in Section 11 of this Prospectus.
4.4 Business Overview 4.4.1 Principal Activities The core business activity of the D&O Group includes provision of assembly, testing and packaging services for the manufacturing of semiconductor components. Semiconductors are chips that conduct and block electricity and are used in a variety of electronic products. Semiconductors are often classified as either discrete components, such as individual diodes and transistors, or Ie. In an Ie, thousands of functions are combined on a single chip to form a more complex circuit. The chip is then encapsulated in Thermoset Epoxy, Metal-Can or Resin or other forms of packaging for connection to a circuit board. Over the years, continued improvements in the semiconductor process and design technologies have enabled the production of complex and highly integrated semiconductors which provide higher performance and increased functionality at optimum costs and smaller sizes. These advances have driven the usc of semiconductors in many electronic equipment and appliances, water treatment systems, automotive electronics, weather monitoring systems, avionics systems, medical equipment and military hardware electronics systems. 4. INFORMATION ON THE D&O GROUP (Cont’d) 4.4.2 Products and Services Products A summary of the major products offered by the D&O Group is set out below: Usage/End Products Application-“P~rod”,::U=C=t-,T:,Y”pe’-cc-c-cc-_—‘P=rod=,uets Application a) Transistor Metal-Can Transistor. power o Avionics systems transistor, voltage o Automotive, electronic and military regulator and IC hardware o Industrial equipment
o Power generating and medical equipments

b) Opto Metal-Can Infrared emitter and o Home appliances infrared detector
o Data transmission and telecommunication equipment c) Photonics Metal-Can Emitter and detector, o Wireless communication hardware media using light
VCSEL 1:1 Weather stati()n monitor wavelength or radio Infra Red o Sport watches frequency or UV o Welding helmets
pressure Radio Frequecy o Sun bed dosimeter
o Purification of air, water and waste water system
o Automotive engine management system
o Medical equipment
o Industrial equipment

d) Small Outline Voltage regulator, o Cellular phones Transistor/Diode/ diode transistor and
o Computer Radio Frequency radio frequency
o Audio-visual equipment Mixer mixer o Traffic signals
o Advertising billboard
o Car lights and industrial equipment

e) Discrete Transistor Transistor and o Cellular phones voltage regulator
o Computer
o Audio-visual equipment
o Traffic signals
o Advertising billboard
o Car lights and industrial equipment

 

4. INFORMATION ON THE D&O GROUP (Conl’d) Product Type Products Application Usage/End Products Application f) LED Lamps Outdoordisplay o Audio·…isual equipment lighting. equipment
o Household electronic equipment L indicalor lighting o Traffic signalsand infrared lighl o AUlomobileCQCkpit and back lighting emiUer A brief description of the abovementioned products is as follows: (a) Transistor Metal·Can A transistor, being a fundamental component of almost aU modern electronic equipment is a solid-state circuit component, usually with three (3) leads in which a voltage or current controls the flow of another current. This product was first manufactured by Omega in 1994. Transistor Metal-Can provides amplification and switching functions. The chips are hermetically encapsulated with a “metal cap” and “header”. (b) Opto Metal-Can This product was first manufactured by Omega in 1997. It is a semiconductor device with an infrared chip used 10 convert light to electrical signals. The chip and gold wire are hermetically encapsulated with a metal cap embedded with a clear glass lens. (c) Photonics Metal-CIID This product was produced in collaboration with a Oerman based UV pholOdiode patented chip designer and manufaclurer. Omega developed the unique assembly process which is hermetically encapsulated with a metal-cap embedded in a UV glass window. The chip is designcd to sense UV radiation. This package assembly was developed in September 2003. (d) Small Outline TransistorlDiscrete Transistor This product was developed at the eod of 2002. The production capacity installalion and product qualification by the customer was completed in July 2003. The devices are mainly transistor, diodes, radio frequency or Ie. The device chip and gold wire are cncapsulated with thcrmoscl moulding compound. (e) LED Lamps LEOs arc electronic components that produce light when a small current flows through it. This product was first manufactured by Omega in 1998. LEOs are used extensively as electronic indicators. They are available in different sizes and shapes and emil a variety of colours. The LED chip and gold wire are encapsulated with epoxy resin. 4. INFORMATION ON THE D&O GROUP (Conl’d) Services The services which are provided by the D&O Group can be summarised as follows: (a) Assembly Generally, the assembly services provided by the D&O Group are undertaken by Omega under contract manufacturing arrangements either on a consignment basis or turnkey basis. Contract manufacturing may be undertaken under ‘open line’ arrangement or ‘captive line’ arrangement. Under the ‘captive line’ arrangement, the production equipment will be consigned by customers to Omega and the capacity of a production line is dedicated to a specific customer as opposed to an ‘open line’ arrangement, whereby Omega owns the production equipment. Sub-eontractors manufacture products for their customers who prefer to outsource their manufacturing work and can be categorised into either ‘labour only’ service providers or turnkey contractors. Contract manufacturers as ‘labour only’ service providers obtain all materials from the customer while turnkey contractors supply substantially all the raw materials required to manufacture the customer’s products. The latter is referred to as ‘Original Equipment Manufacturing’. Over the years of operation, the D&O Group has developed core competencies in customising turnkey assembly, testing and packaging services for semiconductor components. As added value to the customers, the Group also provides advice on materials sourcing and design improvement in order to help its customers to optimise production costs. The Group’s business constitutes an important part of the value chain in the semiconductor manufacturing process. The trend towards outsourcing the semiconductor devices is increasing amongst the MNCs primarily because it is often more cost-effective than in-house manufacturing. Contract manufacturers are able to lower costs through economies of scale and specialisation. The D&O Group is poised 10 capitalise on the outsourcing trend and has constantly focused in positioning itself as a “One-Stop” service provider by providing complete product packaging services and solutions. The Group’s manufacturing activities, categorised by product types are summarised as follows: (I) HermeticaUy Sealed Metal-Cans A metal-can package is a unique semiconductor component specifically designed for application in electronic circuitry to function as a voltage or power regulator, switching device, amplifier device, UV sensor device, infra-red emitting device and/or light emitting device. The metal-can package, also known as heat-sink header, is designed to withstand high heat generating devices and is efficient in heat dissipation by virtue of being encapsulated in a metal casing. Any semiconductor devices that require extremely high voltage, current inputs and robust package must be assembled using a metal-can package. The metal-ean devices are typically applied as power supply units of all electronic equipment and appliances, water treatment systems, automotive electronics, weather monitoring systems, avionics systems, medical equipment and military hardware electronic systems.
4. INFORMATION ON THE D&Q GROUP (Cont’d) (U) Resin Filled Encapsulation Packages A resin filled package is a semiconductor component designed to house a LED or an infrared chip. The use of resin for encapsulation is 10 allow light of various colour spectrums or infrared light that is invisible 10 naked eyc 10 emit through the resin filled package. The resin of the package can be in differem colours or water-cleac. The lights emitted are in different wavelengths for specific end applications, such as electronic and electrical equipment. electronic adver1jsing billboards, automolivc interior and exterior lighting, traffic signal lights, audio-visual equipmcn! and security control systems. (iii) Thermoset Epoxy Moulded Packages Today, thc majority of the discrete devices. Ie devices, memory devices and microprocessor devices are encapsulated using the thermoset epoxy-moulding compound, which can withstand a low 10 medium voltage or current supply. The typical devices under this discrete category are diodes transistors, power transistors and radio frequency mixers. These devices are mainly used in mobile phones. personal computers, laptop computers, automotive electronics and audio-visual cquipment. (b) Value added services M MNCs are increasingly outsourcing their manufacturing processcs including the sub· assembly of semiconductor components, the D&O Group has capitalised on tllis trcnd by strengthening ils position as a turnkey provider of assembly, 1csting and packaging for semiconductor devices by providing a ‘One-Slap’ solUlion, manufacturing and packaging of semiconductor produclS to these MNCs. 1be D&O Group also offers to its cuslomcrs value­added auxiliary services Ihatleveragc on its eng.ineering and technical capabililics, including: (a) Providing recommendations on the packaging products’ design, choice of materials used in the components and parts so as to improve products’ functionality and optimise manufacturing costs; and
(b) Providing complete turnkey project and management services. which inelude:

Managing the project by sourcing for and/or qualifying suppliers of other engineering components as required for the customers’ products; Asscmbling cngineering products with Omega’s own products to form a complete device; and Providing engineering solutions, building and testing prototypes and developing relevant manufacturing capabilities and methodologies. 4. INFORMATION ON THE D&O GROUP (Cont’d) 4.4.3 Technology The Group utilises high technology machines for the various processes involved in the assembly and testing of semiconductor devices, such as die attach, wire at1ach, encapsulation syscem, laser mark, aulo trim and form system. The Group’s as.scmbly processes are done in a conlrollcd environment to ensure minimum contamination and quality to meet the stringent standards of the aulomocive, military, telecommunication and other electronic or computerised applications in which these components are used. The tcchnology adopterl at various stages of the manufacturing process is set out in the diagram in Section 4.4.5 ofthis Prospectus. Ths includes, amongst others, the following: • using a high·speed precision auto-sawing machine to separate individual chip in the wafer at the wafer sawing stage;
• using automated die attach machines to pick and place separated chips into lcadframes;
• using automated precision machines known as “wire bonders” to connect inputJOUlpul lead terminals on the chips to the leads of the leadframes by ultra fine gold or aluminium wire;
• using automated handler and test systems to conduct 1(1()% electrical testing on assembled units; and
• using automated vision system to conduct visual inspection to spot cosmetic defects.

In 2(X)2, the Group recruited a team of engineers to embark on R&D activities in particular on the design of small outline transistor packages, packaging processes and tooling in order to expand its product portfolio and diversify its revenue from its OEM product range. 4.4.4 I’ltteots and T …..demarks Currently, the D&O Group docs not hold any intellectual property rights which arc registered as patents and trademarks by the relevant authorities. At this point in time, 0&0 does not intend to apply for any intclloctual property rights in respect of the tcchnology it possesses and proccssesJsystems which it has developed. This is because most of the products manufactured by Omega, such as transistor Metal-am, OpIO Metal-Can and discrete transistor are customised in nature and those products can only be userl for a specific purpose by a specific customer. In view of the non-generic nature of these produl-“1S, the Directors of D&O are of the opinion thai lhe 0&0 Group’s proprietary product designs need not be patented at this point in lime. Nevertheless. where necessary, the Group intends to protect future developments in process, technology or systems if it is in the best inle~ of the Group and where lhe developed process, technology or systems will allow the Group to mainlain its competitive cdgeovcr its compelilors. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK
4. INFORMATION ON THE D&O GROUP (Cont’d)
4.4.5 Production Process The process overview of Omega’s ‘full turnkey’ or contract manufacturing assembly is illustrated diagrammatically as follows: ~–••I W_’_”_’_’_hi_P_pe_d ‘_'”_rn_cu_’_’o_rn_’_” _ + Step 1 WAFER SAWING: o Sawing of wafers into individual chip Technology used; Automatic Dicing Saw ASSEMBLY: 0 Die Attach: Attaching die to Lead FramelHeadcrs Technology used: Eulelie &rub; Eutetic Preform; Soft Solder and Epoxy 0 Wire Attach: Connecting wire to the die and leads Technology used: Al Wedge Bond; Au Ball Bond 0 Casting/Seal: Encapsulating die in protective casing/cap Technology used: Resin CaMing; Polaris Sealer; Pyramid Sealer +
TESfING. PACKAGING & QUALITY ASSURANCE: 0 Testing the produl.1S for electrical funl.1ionality Technology used: Sort, measure and select right electrical performance characteristic ofproducts Step 2 Step 3 CUSTOMISED PACKING:  Step 4  0  Tape in Reel; Tape in Amno Pack; Loose Packing and Pack in Tube Technology used: Hot or cold pressure sealing and taping system •FINAL QUTGOING QUALITY ASSURANCE:  Step 5  0  Quality assurance inspection Technology used: Imaging/visioning 5)’stem
—t–_h~
Shipment to Customers ~I 4. INFORMATION ON THE D&O GROUP (Cont’d) Omega’s manufacturing process can be divided into five (5) broad areas as follows: (a)  Wafer sawing;  (b)  A=mbly;  (c)  Testing and taping;  (d)  Final visual inspection; and  (e)  Outgoing quality assurancc.
(a) Wafer sawing Wafers consist of an lU’Tay of semiconductor chips that have been fabricated by wafer fabrication foundcies. All wafers are electrically tested in order to identify defective chips, which are marked in “black” and separated from non-defedive chips. A high-speed precision auto-sawing machine is used to separate the individual chips in the wafer. Separated chips arc then tl\oroughly washed. dried and inspected for sawing defects. (b) Assembly Sawn wafers are transferred to the die attach operation unit. At this stage, separated chips are pieked and placed onto lcadframes using automated die attach machines. An attached chip is then “glued” to a leadframe by silver epoxy or metal alloy on the reverse side of the chip. Leadframes with attached chips will then undergo the wire-attached process. Allhe wire-altacbed stage, input/output lead terminals on the chips are connected to the leads of the Jeadframes by ultra fine gold or aJuminium wire using automated precision machines known as “wire-bonders”. Leadframcs Ihal have undergone the wire-ahached process are subsequently encapsulaled wilh thermoset moulding compound or resin-based epoxy or metal cap welded with high current welding machioos. In the next stage of the process, leadframes will be “baked” or “oven cured” in which encapsulated Jcadframes will be placed in ovens for several hours depending on lhe semiconductor components to ensure the hardening of the encapsulated media. Subsequenlly lhe encapsulated lead frames will undergo lead-trimming, SOldering, forming and singulalion processes. The singulaled units are then fomled inlo requisite formalions sueh as “gull-wing leads”, “scaggered leads”. “crimped-leads” and “slraighl-Ieads”. (c) Testing.and taping Assembled units are subject to 100% electrical testing via aulomated handler and test syscems. Tested units arc inserted into tape and reel carriers. Depending on the cUSComers’ request, tested units are also inserted into tubes or loose units wilh anti-sialic or conductive plastic bags. Selected packages may undergo “bum-in” prior to testing whereby it is elcctrically stressed, usually at high temperaturc and voltage, for a period of time long enougll to confirm the robustness of the assembled package. 4. INFORMATION ON THE D&O GROUP (Cont’d) (d) Final visual inspection Tested units that have been inserted into the various forms of carrier undergo 100% final visual inspection to spot any “cosmetic” defects. Among the common cosmetic defects include bent leads and illegible markings. This inspection process could be conducted via automation, which involves vision systems or manually, where operalors use microscopes. Visual inspection is necessary to ensure compliance with stringent quality requirements. Vision equipment is a combjnation of electronic hardware, software, lighting and optics to analyse and inspect objects. Successful vision systcms enable manufacturers to achieve 100% inspection. in order to achieve zero defect production. In addilion, functioning as a quality control tool. inspection systems provide manufacturers a window on tlteir manufacturing processes by producing real-time statistical process control feedback to allow manufacturers to take timely corrective action. (e) Outgoing quaUty assurance All finished lots are subject to a stringent quality assurance checking process based on a specified sampling plan. Quality inspectors perform productllol acceptance before serruconductor components are packed and shipped to customers. 4.4.6 Principal Mar~ts. Mark£tiDg aDd Distribution Scmiconductor products manufactured by (be D&O Group arc used extensively in various applications such as advertising billboards, home: appliances, electrical aod electronic equipment, computers, telecommunication products, automotive eltttronics, medical equipment, industrial equipment and water treatment plant. The 0&0 Group’s products arc mainly sold to MNCs located at various free trade or industrial zones in Malaysia or at licensed manufacturing warehouses. The Group’s sales are deemed to be export sales as these MNCs ultimately export the final products worldwide. Thc D&O Group had also in the past tapped overseas markets in USA, Germany and England. For thc financial year ended 31 December 2003, aHthe Group’s products were exported. Over the years, the 0&0 Group has managed 10 establish an extensive customer base which it continues to service. The 0&0 Group has managed 10 gain lhe confidence of its customers lhrough the Group’s established record in terms of product reliabilily and cycle time_ Principally, Ihe D&O Group markets its products and services via a direct marketing approach and through refcrrals from existing customers. Due to the nature of the Gr-oup’s services wl:tich involve technical specification aod process, a dedicated marketing team has been formed to support the Group’s marketing activities and to work closely with customers for both pre·sales and post-sales activities. The marketing team adopts a proactive marketing strategy whercby the sales executives will initiate direct communication with prospective customers followed by presentations or mini roadshows to provide the prospective customers with a beller understanding of the Group’s capabilities and its range of products and services. As part of its follow-up measures, the Company will make regular visits to customers and go through audit and qualification procedures by prospective customers before the business relationship can be established. The marketing team is also responsible for post-sales customer services which cover project management, including making Ihe necessary logislic arrangements and overseeing quality matters to ensure scheduled and timely delivery to CUSlomers. Other marketing strntegies adopted by the 0&0 Group include participating in semiconductor trade shows and research through lntemct websitcs. 4. INFORMATION ON THE D&O GROUP (Conl’d) AJthough the Group is anticipating revenue growth to be primarily from its major customers, the Group will continue to exploit opportunities arising from the growing trend of outsourcing by MNCs and at the same time. seek new customers. increase ils range of assembly services and penetrate new industry segments. The Group’s endeavours in this regard involve the following marketing strategies: (a) Enhance l(ulliurukfy’ solutions 10 capture outsourcing opportunities The 0&0 Group has developed core competencies in customising turnkey assembly and testing of packages. The Board of 0&0 believes that the ability of the Group to provide turnkey assembly and test of memory, mixed-signal and radio frequency semiconductors has provided it with an edge over its competitors. In line with its goal to be a preferred sub-contraetor and assembler of semiconductor products, the Group intends to strengthen its position in this industry by providing a complete product paCkaging service and solution, wh.ich include the design of leadframcs, packages and processes. To achieve tbis. the Group intends to intensify collaboration with MNCs. especially through whom the Group will be able to enhance its tecbnical skills and know-how. Through close collaboration with such MNCs, the Company will be able to develop new products, create iMovative processes and product improvements with the objective of cost saving for the customers. (b) Tapping into existing customer base Mo~ MNCs Iypically qualjfy a few assembly and lesl service providers for their outsourcing needs. The Group believes thai opportunilies exist for the Group to generate higher revenue from its existing customers, particularly cu~omers who have recently qualified the services of the Group. Having established a good working relationship with its existing customers and having earned the recognition of being ablc to deliver qualily services in a timely manner, the Group is eager to cement these business partnerships with their customers and further glOw ils business by exploring assembly services which the Group can provide to these customers for their other product lines. The Directors of D&O believe that the proven track record of the Group will position it favourably to capture further market opportunities. The Group also plans to expand its OEM business as part of its market penetration strategy to diversify its customer and product base. In this connection. the Group will leverage on the r.xpertise of its R&D engineers to pursue product development strategies that the Group has idenlified. Under an OEM arrangement, the Group’s R&D engineers would design the product leadframe configuration whilst the stamping tool for the manufacturing of the leadframe is. in most circumstances, produced by a third party under a closed-end product arrangement. Equipment and tooling manufacturers are provided wilh specific details to cnsure strict adherence to the Group’s product specification and manufacturing process. Products manufactured by the Group under OEM arrangements comply with the international standards of JEDEC Solid State Technology Association. which is the semiconductor engineering standardisation body of the Elcclronic Industries Alliance (a trade association that represents all areas of the electronics industry). Since the fourth quarter of 2002, the Group had begun embarking OD direct marketing efforts to promote its OEM mnnufaeturing capacity. To date. the Group has successfully clinched several OEM manufacturing, deals. 4. INFORMATION ON THE D&O GROUP (Cont’d) (c) Establish distribution and Sogistics network Currently, the Group’s production process ends with the slLipment and delivery of the assembled components to the MNC CUSlomer. The Group’s customers will in tum deliver the components to their customers. The Group intends 10 move further downstream by establishing a distribution and logistics network to deliver the assembled components directly to end customers. By venturing into the provis ion of distribution and logistics services for its customers, the Group would in effect be servicing its customers’ end markets. Such a venture holds promise for the Group as it would be an additional value-added service to its customers thereby reinforcing the bond and inter·dependency between the Group and its customers.
4.4.7 Sources and Availability or Raw Materiab The principal raw materials used by the Group for its business activities are leadframes. headers. silver preform, metal caps. solder bars, mould compound, resin. hardeller. silver epoxy. aluminium wire and gold wire. These materials are sourced by {he Group from a group of approved vendors who have passed the accreditation process administered by {be MNC customers. For the financial year ended 31 December 2003, the purchases of raw materials amounted to RM29.3 million, of which approximately 68.7% were sourced from overseas vendors, such as Taiwan. USA, Germany, Japan. France. Korea, Czech Republic, Italy and Singapore. The Group manages its inventory of raw materials on a “just-in·tirne” basis and generally maintains sufflCienl raw materials for two (2) month’s production based on blanket orders and rolling forecast rCC<lived from customus.
4.4.8 QuaUty Control The 0&0 Group adopts a stringent intemal qualily management assurance policy to ensure that products and services provided by the Group are of high quality and meet the specifications and requirements of its customers. The Directors of 0&0 consider the consistent high standard of services and quality products as an essential attribute in retaining existing customers and attracting new ones as well as maintaining its status as one of the leading locally owned semiconductor contract manufacturers in Malaysia. The D&O Group is thus committed 10 providing quality products and services. The 0&0 Group conducts control checks at various stages of the assembly process to facilitate corrective aclions in order 10 eradicate any cause of deviation. allheir sources. A1; part of its assembly process. inspection is done via automation, which involves the usc of vision systems or manually carried oul by the operators with microscopes. Visual inspection is necessary to ensure compliance with stringent quality requirements. Vision equipment is a combinalion of electronic hardware. software. lighting and optics to analyse and inspect objects. Successful vision syslems enable manufacturers to achieve 100% inspection, in order to achieve zero defect production. In addition. functioning as a quality control tool, inspection systems provide manufacturers a window on their manufacturing processes by producing real-time statistical process control feedback to allow manufacturers to take timely corrective action. 4. LN.”ORMATION ON THE D&O GROUP (Conl’d)
4.4.9 R&D Recognising the rapid development of technological change in the semiconductors industry, the Group is committed 10 continuous development in R&D so as 10 ensure that its assembly, testing and packaging services meet the evolving needs of the customers. The Group’s R&D activities are usually initiated based on the plans of existing customers of Ihe Group as well as the inquiries from existing and prospective customers. Continuous R&D activities are also undertaken to enhance manufacturing processes with the objective of attaining production or operational efficiency targets at the lowest possible cost. The D&O Group had in 2((}2 set up a R&D team. The Group a150 places significant emphasis on identifying the latest packaging trends in collaboration with its customers. The Group’s R&D initiatives focus on the consolidation of its inherent strcngths and diversification into designing new product packaging and new tooling for OEM products, such as Metal-Can UV sensors, MEMS devices, VCSELand Side Firing Laser. Amongst others, the focus and strategies of the Group’s R&D team are as follows: (;) Coolin””..process ;mprovemeol Process simplification through customisation, materials substitution without compromising the quality and reliability for (ower cost of production and yield improvement programs are continuous activities undertaken by the Group’s R&D in collaboration with its customers. Regular in-depth failure analysis is conducted to identify areas where automation could be implemented to reduce defects and increase productivity. Re-engincering and re-designing of processing tools are actively implemented to reduce material cost. The 0&0 Group intends to leverage on its experience in current R&D activities such as frame and tool design to progress into research which is at the forefront of any cutting edge technologies. The Group plans to develop core competencies in back.-end semiconductor vision inspection, marking and handling systems. This suggests a widening of the R&D focus to enhance integration of its operations. (U) Quality assurance programs The D&O Group is committed 10 maintaining high levels of quality and reliability assurance with rcspcc1 to services that it provides to its customers. The Group aspires to exceed (”’1lstomers’ expectation through excellence, creativity and continuous improvement. The Directors of D&O believe that an effective system and process implementation is essential to ensure higll quality products and services. A team of experienced personnel comprising engineers and technicians monitor the Group’s assembly and test process indices to cnsure that they meet indu.stry and customers’ specific qualily standards. The Group’s in-house laboratory is equipped with (he necessary equipment and resources for the R&D learn to undcrtake experiments in engineering, product, machinery and tool designs. 1l1c D&O Group is committed to providing the highest quaLily of work and meeting stringent standards set by its customers in order 10 maintain an edgc over its competitors. •. INFORMATION ON THE D&O GROUP (Conl’d) In 1997. Omega was awarded IS09OO2 certification by SGS-Yarsley International Certification Services. Subsequently, in 2001, Omega was awarded 059000 by Bureau Veritas Quality International (Holding) SA London -UKAS Quality Management. Both certifications are testimonies of the quality standard of the Group’s products and services. The MNCs often look to an ISO certification as a litmus test for a service provider’s quality and control standards. As part of the Group’s process improvement efforts, the Group has embarked on IsorrsI6949:2002certificationandplanstoattain IS0141X)(}certificationby2007. (ill) Macbinesltools design a.d mod;nc.Uoos Machines form an integral part of Omega’s manufacturing operations. The R&D learn is constantly developing new tooling processes by re-designing and re·engirtCering production tools to reduce defects, improve yields and output and reduce cost. Modifications to machine handJing and vision systems have helped in improving direct labour productivity and output yields. (iv) Implementation of new technologies As the semiconduclor industry is characterised by rapid technological change. the Group’s R&D team is constantly keeping abreast with new technologies in mach..ine capabilities and design innovations. The Group believes that il has to continuously redevelop and upgrade its technical know-how by incorporating new developments in product design and process innovation. The Group’s R&D team has the responsibility of identifying new developments in these areas and to procure machinery and tooling which provide the necessary technology at acceptable costs and returns to the Group. (\I) Collaboration with MNCs Over the years, the Group has forged strong working relationships with MNCs. Regular technical feedback sessions arc held to discuss collaborations in terms of process improvement, yield enhancement, cost reduction and produCl designs. For example, through close coHaboraHon with the Group’s customers, the R&D division successfully rc-engineered encapsulation process and tooling design 10 reduce material cost and to extend the usage life of tools. The Group believes that these collaborative sessions are necessary for the Group 10 remain at the forefronl of the latest technological changes as required by the MNCs. The Group has incurred R&D expenses of RM599,OOO and RM937,400, representing approximately 1.5% and 1.4% of the Group’s revenue for the financial years ended 31 December 2002 and 3’1 December 20m, respectively. The 0&0 Group expects to incur approximately RM3.0 million in R&D expenditure including investment in machinery and equipment for the financial year ending 31 December 2004. The D&O Group envisages tbat the invcstmenl in R&D will fuel the Group’s continuous R&D as oullined above and assist the 0&0 Group in becoming one of tile preferred turnkey assemblers and manufacturers for MNCs.
4.4.10 lntCrruptiOD5 in Operations The D&O Group did not experience any disruption in business which may have had a significant effect on its operations during the twelve (12)-month period prior to the date of this Prospectus. 4. INFORMATION ON THE D&O GROUP (Cont’d)
4.4.11 Information on Employees As at 15 October 2004, the Group had a total of 1,235 employees (including 2 Executive Directors). AJI indirect employees are Malaysian while direct employees constitute a mi){ of nationals from Indonesia. India and Malaysia. The total number of employees of the 0&0 Group and their respective length of service as al 15 October 2004 are as follows: <—Length ofservice —-> 5 to 10 2 to 5 Less Thall Categories of staff Years Yean 2 Yean Total Management Executives 9 10 5 24 Engineers 3 10 8 21 Technical staff 19 41 43 103 Supervisors 11 14 25 50 Administrative Staff 14 28 40 82 Direct Labour 36 232 687 955 92 335 808 1,235 The management of the D&O Group maintains a close and cordial relationship with its employees. Together with its employees. the Group creates a healthy and comfortable working environment. The Group regularly organises recreational events such as family days, sports days and annual dilUlers for the employees and their spouses. In addition, the Group places strong emphasis on employees’ safety and health. The employees of the D&O Group are not members of any labour unions. There have never been any industrial disputes in the past between the employees and management. The Group provides a series of continuous training and development programs for its employees, which includes in-house workshops to update all employees on new developments in the Group. The employees receive technical and production training from the Group’s in-house experts. The main objective of its [raining and development program is 10 cnsure that the staff are trained in new operational processes of new products and 10 furl her improve overall productivity and efficiency. In addition, the Group also engages external training centres and associations to conduct seminars and workshops to identify, evaluatc and manage risks. to enhance management quality and to increase the competency level of its employees. The types of external programs that the staff have panieipated in are management courses, engineering courses, information technology training and sales/marketing courses.
4.4.12 Key AchievementsIMilestonesJAwards The fact thai the D&O Group is a long established supplier to many of the quality conscious MNCs is a testimony of the Group’s track record in consistently producing high standard products and services which meet the MNCs’ requirements. As a testament 10 its outstanding perfonnance, Omega was one of the winners of the Enterprise SO Award Programme, Malaysia in 1999. Omega was accredited with IS09002 quality system accreditation by SGS-Yarsley International Certification Services in 1997 and was further awarded with QS9000 in 2001 by Bureau Vcritas Quality International (Holding) S.A. London -UKAS Quality Management for its produ{..1ion process. 4. INFORMATION ON THE D&O GROUP (Cont’d) 4.4.13 Principal Plaee of Business and Location of Plants Currently, the D&O Group owns and operates from two (2) factories located in Batu Berendam Free Trade Zone, Melaka as follows: Registered Size of Plant/Built-up Owner Location of Plants Area (sq. ft) Omega funU Lot 6, Batu Brendam Free Trade Zone 189,686 Phase III, Batu Berendam 75350 Mc1aka
Omega Plant 2 Lot 3,4,7 & 8, Batu Brendam Free 91,043 Trade Zone, Phase III, Batu Berendam 75350 Melaka
As part of the Group’s expansion plan, Omega had in 2002 commenced extension work on the factories at Lots 3, 4 and 8 of Plant 2 and this was completed in phases between then and 2003. The new extension is equipped with full class 10K clean room facilities and thus enables the Group to undertake other new value-added processes whieh include glass or metal seal military and aeronautics products and moulded package products. To further enhance the Group’s production capacity. the Group has increased production floor space at the existing factory building at Lot 7, Ratu Berendam Free Trade Zone, Melaka with the construction of an extension factory building. The factory extension is expected to be fully commissioned by November 2004 and will be used for the increase in capacity for the Group’s OEM products. In addition, the Group has also constructed a four (4)-storey factory building adjacent to thc existing factory building at Lot 6, Batu Berendam Free Trade Zone, Melaka increasing its built-up area by 69,539 sq. ft. which will cater for the capacity expansion of LED products. It is expected that the new factory building will be commissioned by the end of 2004. Currently, the Group operates on a flexible multiple shift models. The estimated annual production capacity of the Group and its utilisation rate are as follows: Annual production Annual production Products capacity· output· Capacity utilised (Vol”) (Uni”) (%) Discrete products 211 million 182 million 86 Opto products 1,070 million 894 million 84 Note: • Based on the existing installedproduction cnpQdty (which may fluctuate from time to time) 4. INFORMATION ON THE D&O GROUP (Conl’d) 4.4.14 Competitive advantages The Directors of D&O believe that the D&O Group possesses the following strengths that differentiate it from its competitors: (a) Competitive prieing
The Group competes in a segment previously dominated by MNCs whose pricmg are substantially higher than that offered by the Group. The D&O Group is able to offer its products at lower prices due to minimal wastage and economies of scale. The Group also emphasises on cost reduction via continuous process improvement, materials substitutes and training of its employees.
(b) Innovative customised products

Apart from the generic orders by MNCs, the Group also offers value-added innovative customised products arising from its commitment to continuous R&D to meet specific customer requirements. For instance, the Group’s R&D has successfully designed an interconnect process between the chip input/output terminal to the cathode post of a metal-can header using conductive epoxy as opposed to the conventional gold·wire bonding process for a new UV sensor device. To remain competitive, the Group’s R&D team regularly holds discussion with its customers to obtain feedback for new products designs, foster better understanding of customer requirements and constant updates of technical evolution in the market. (c) Good customer relationships The Group enjoys close working relationships with its customers through good understanding of customers’ requirements. Personal attention is given by the D&O Group to ensure that customers’ requirements and needs are met and fulfilled. The Group constantly strives to improve its services by increasing the speed and efficiency in production, enhancing the product quality and ensuring on-time delivery to customers. These close working relationships have enabled the Group to establish long term relationships with all of its major customers. Over the years, more than 90% of the Group’s businesses were repeat orders from existing customers. Potential customers are convinced of the Group’s capabilities as it possesses an established customer list. The reputable client base is a strong selling point for the D&O Group and provides the Group with additional competitive advantage. (d) Skilled and dedicated workforce The Group’s core management team has extensive experience in the semiconductor industry as most of them are ex-employees of MNCs. A people-oriented culture that eSlXluses employee empowerment among the staff has cultivated a dedicated workforce. Being union­free, the Group has enjoyed a long history of unhampered operations. As at 15 October 2004, more than 90% of the D&O Group’s employees arc skilled work-ers. 4. INFORMATION ON THE D&O GROUP (Cont’d) (e) Experienccd management team The D&O Group has an experienced and well-trained management [cam to oversee the direction and growth of the Group. The core management team have served the Group between 3 to 10 years and have extensive experience in the semiconductor and manufacturing industry. They are responsible for achieving the Group’s mission and business objectives, implementing the Group’s strategies and executing critical milestones by conlinually identifying new opportunities which are vital for the long term growth of the Group. Their length of service is a testament to their dedication and loyalty to the Group, as well as thc Group’s ability to retain its key management The Group bas also ~ablished proper management system controls and key performance indicators to allow management to benchmark themseLves and continually improve on quality. delivery and profitability of the Group’s businesses. (f) R&D and strategic alliances It is a pre-requisite for an established contract manufacllJrer to have in place a R&D team that constantly explores new technology and innovative product dcvelopment. To remain competitive. the D&O Group sct up its R&D team in 2002 with continuous efforts on new product design. produclion process simplification as well as equipment/tooling design and modification, to achieve produdion efficiency and to lower the cost of production. The Group’s R&D team monitors closely its euslomers’ product deVelopment and always initiates an early involvemellt in its cus(omers’ product development stage. This allows the Group to build on customers’ ideas and concepts during their fonnutation. to provide advice and suggestions to customers, to translate such ideas into tangible and feasible products with the necessary lechnical drawings and specifications. By doing so, the Group is bcttcr­positioned to win any future business opportunities with them. To remain at the forefront of technology and product development, the Group also continually seeks opportunities to establish stratcgic alliances or collaborations with semiconductor technology partncrs. The Directors of D&O believe these strategic alliances and collaboration will enable the Group to have access to leading edge system technologies and 10 become a leading service provider. As at 15 October 2004, the D&O Group has signed NOli Disclosure Agreements with four (4) foreign companies 10 joinlly design and develop Ihe packaging and assembly process for new products. This would ensure further revenue growth and reduce the Group’s revenue dependency on its existing ‘captive-line’ contract with its MNCcustomers. (g) Quality Products llDd Services The Group is committed to providing quality products and services to its customers al competitive prices. To this end, the 0&0 Group has implemented comprehensive controls in the quality of its manufacturing processes to ensure the Group produces quality and reliable products, and maintain the consislency of such quality. The Group believes that the consistent quality of its products and scrvices is a decisive factor for [he long lerm business prospect with its MNC customers. Qualily perfonnance also incorporates factors such as on-lime delivery, fast response and tum-around time of rescheduled orders or urgenl orders in addition to good quality and reliability of the manufactured components. 4. INFORMATION ON THE D&O GROUP (Conl’d) 4.4.15 Barriers to entry (a) High capital lovestment cos. 1be start-up investment for a sub-contractor and assembler of semiconductors would involve a capital cost ranging from several million Ringgit 10 over a billion Ringgit. Due to this high investment cost in machinery and infrastructure. many local players are hindered from entering the semiconductor industry. Contract manuf.tclurers must have sufficienl long-term capital to sustain them tllrough the period taken (0 install production machinery, set*up process, persontteltraining and customer’s qualification process. (b) Technology edge The semiconductor industry is characterised by rapid technological changes. The success of industry players will depend on their ability 10 identify, develop and adopt new products or new production processes in a timely and cost effective manner. New entrants are therefore faced with the need to constantly upgrade or improve their technical know-how to remain competitive and be at the forefront of any cutting edge technologies in order to be competitive and profitable. (c) Skilled human resource Due to the vast expansion in the semiconductor industry in recent years, the industry has been facing a shortage in supply of skilled manpower in areas such as quality control, technical advisory and R&D. Recognising these problems. the Government has offered liberal employment incentives for Multimedia Super Corridor -Status companies, including unrestricted employment of local and foreign skilled workers. In addilion, increased investment in technology education such as Ihe selling up of the Multimedia University have been implemented, but these are longer-term solutions in nature. The success of new entrants in the semiconductor industry will largely depend on their abilily to attract experienced workers. (d) Stringent quality control Contract manufacturers are usually required to undergo a lengthy and rigid accreditation process conducted by prosp~tive customers to assess the capabilities of the sub-ronlraetorsl assemblers. Furthermore, a substantial amount of lime and resources will have to be spent in order to provide training to the staff of sub-contractors. Therefore, MNCs arc more likely to remain loyal to their present contract manufacturers with a proven track reoord, thus resulting in limited opportunities for new entrants into the semiconductor industry. THE REST OF TillS PAGE IS INTENTIONALLY LEFr BLANK 4. INFORMATION ON THE D&O GROUP (Conl’d) 4.5 Subsidiaries 4.5.1 Information on Omega (a) History and Business
Omega was incorporated in Malaysia on 25 November 1993 under the Act as a private limited company. The company commenced operations in 1994 and is principally engaged in the business of providing ‘full turnkey’ contract manufacturing services for the manufacture of semiconductor components which are supplied mainly to MNCs.
(b) Share Capital

As al 15 October 2004, the authorised and iSSl,led and paid-up share capital of Omega are as follows: RM Authorised share capital Ordinary shares of RMl.00 each 5,000,000 Issued and paid-up Ordinary shares of RM1.00 each 4,561,677 (c) Changes in Share Capital The changes in the issued and paid-up share capital of Omega since its incorporation up to 15 October 2004 arc as follows: Date of No. of shares Cumulative issued and aUotment aUoUd Consideration paid-up share capital RM 25.11.1993 2 Subscriber shares 2 31.12.1994 999,998 ea,h 1,000,000 15.11.1995 500,000 ea,h 1,500,000 06.11.2000 526,500 ea,h 2,026,500 29.05.2001 223,500 ea,h 2,250,000 15.01.2002 278,100 Cash 2,528,100 20.12.2002 400,000 Cash 2,928,100 26.12.2003 *63,492 Cash 2,991,592 31.12.2003 *1,170,000 ea,h 4,161,592 19.01.2004 *80,085 ea,h 4,241,677 31.03.2004 *320,000 ea,h 4,561,677 Note: • Th.eje jhatej were issued at an issue price of RM20 per share, out of which RM2 per share was called upon issuanre atshares. As at 15 October 2004, these shares have been fully called and paid-up. 4. INFORMATION ON THE 0&0 GROUP (Conl’d) (d) Profit and Dividend Record The 3udiled profit and dividend record of Omega for the past five (5) financial years ended 31 December 1999 to 31 December 2003 and the seven (7)·month period ended 31 July 2004 are summarised as follows: 7·montb <_•••••-Yean; ended 31 December _ •••••> cnded 1999 2000 2001 2002 2003 31.07.2004 RMtOOO RMtOOO RMtOOO RMtOOO RMtOOO RM’OOO Revenue 10,570 18,893 27,326 40.328 69,192 56.862 EBITDA 1,817 2,272 6,252 9,221 13,024 13,487 Interest expense (279) (278) (494) (619) (773) (554) Interest income 67 56 65 185 206 Depreciation (397) (528) (901) (1,257) (2,582) (2,604) Amortisation (122) (537) (657) (538) (125) (2) PBT 1,086 985 4,259 6,992 9,750 10,327 Taxation (969) (636) (500) (808) PAT 1.086 985 3,290 6,356 9.250 9,519
Weighted average number 1,500 1,581 2,161 2,531 2,929 3,503 of shares in issue (‘000) Gross EPS (RMl 0.72 0.62 1.97 2.76 3.33 *2.95 Net EPS(RMi 0.72 0.62 1.52 2.51 3.16 “‘2.72 Nel dividend ralc (%) 16.7 263.0 175.4
Not~s: I. Ther~ wt:re flO exceptional or atraordirwry items, shore C’f projilsllosses from associated company and joint l’ellIUUS aM minority interest during tile [inancial years/period uruier rel’jew 2. Gross EPS Iras bull “,leulated based on PDT um! the weigllted uverage number of ordifIDry 5lr.ares in js.su~
3. N~t EPS has been calculated bDsed 011 PAT atul the weighted al’€:rage number of ordillary shares in issue The gross EPS and net EPS weu computed by dividing dIe PST afld PAT respectively lor tile seven (7)-month period ended 31 July ZOO4 by tM weiglrted al’Uage ruunbu of ordituJry shares in issue during the period. The 8ross EPS and Mt EPS computed were rwI CUlIIuulised

(e) Substantial Sharebolder
(I) Subsidiary and associated company
(g) Outstanding option or convertible securities

Omega is a wholly-owned subsidiary ofD&O. Omega docs not have any subsidiary or associated company as al 15 October 2004. As at 15 October 2004, Omega has not issued any options or convertible securities. •• INFORMATION ON THE D&O GROUP (Cont’d) 4.5.2 Information on OS’fB (a) History and Business OSTB was incorporated in Malaysia on 26 August 2002 under the Act as a private limited company. OSTB is currently a dormant company and its intended principal activities are designing, manufacturing and supplying of photonics semiconductor products. (b) Share Capital As al 15 October 2004, the authorised and issued and paid-up share capital of OSTB are as follows: RM Autborised Ordinary shares of RMl.OO each 100.000 Issued and paid-up Ordinary shares of RMl.00 each 2 (e) Cbanges in Share Capital There is 00 change in the issued aOO paid-up share capital of OSTB since its incorporation. (d) Profit and Dividend Record The lludited profit and dividend record of OSTB for the financial period from 26 August 2002 to 31 December 2003 and the seven (7)-month period ended 31 July 2004 are summarised as follows: Financial period from ‘-montb 26 Aug 2002 to period eoded 31 Dec 2003 31 Ju12004 RM RM Revenue Loss before tax (6.000) (2,000) Taxation Loss after tax (6,000) (2,000)
No. of ordinary shares in issue 2 2 Gross loss per share (RM) (3,000) (1,000) Net loss per share (RM) (3,OOO) (1,000) Net dividend rate (%)
(e) Substantial Shareholder OSTB is a wholly-owned subsidiary of 0&0. (0 Subsidiary and associated company As at 15 October 2004. OS1’8 has a 51% subsidiary. namely OPPB. 4. INFORMATION ON THE D&O GROUP (Conl’d) (g) Outstanding option or convertible securities As at 15 October 2004, OSTB has not issued any options or convertible securities. 4.5.3 Information on OPPB (a) History and Business OPPB was incorporated in Malaysia on 16 March 2004 under the Act as a private limited company. OPPB is currently a dormant company and its intended principal activities are provision of engineering design, R&D of photonics products’ assembly, packaging, testing, marketing and sale of photonics products and manufacturing services. (b) Share Capital As at 15 Octobcr 2004, the authorised and issued and paid-up share capital of OPPB are as follows: RM Autborised Ordinary shares of RM1.00 each 100,000 Issued and paid-up Ordinary shares of RM1.00 each 100 (c) Changes in Share Capital There is no change in the issued and paid-up share capital ofOPPB since its incorporation. (d) Pro6t and Dividend Record The audited profit and dividend record of OPPB for the financial period from 16 March 2004 to 31 July 2004 are summarised as follows: Financial period from 16 Marcb 2004 to 31 July 2004 RM Revenue
Loss before tax (5,000) Taxation Loss after tax (5,000) No. of ordinary shares in issue 100 Gross loss per share (RM) (50) Net loss per share (RM) (50) Net dividend rate (%)
4. INFORMATION ON THE D&O GROUP (Cont’d) (e) Substantial Sharebolden OPPB is a 51 % subsidiary of OSTB, which in tum is a wholly-owned subsidiary of D&O.
(I) Subsidiary and associated company OPPB does n01 have any subsidiary or associated company as at 15 October 2004.
(g) Outstanding option or convertible securities As al 15 October 2004. OPPB has not issued any options or convertible securities.

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4. INFORMATION ON THE D&O GROUP (Cont’d) 4.6 lDdllStry Overview 4.6.1 The Global FMaomy World output. projcdcd to grow by 4.6% in 2004. is close to matclting tbe strong global growtb of 4.7% at the beginning of the new millennium. the highesl in the lasllwo decades. The global economy recovered from the adverse effects of the 11 September incident, which drove the world into recession in 2001. and the subsequent fallout from Severe Acute Respiratory Syndrome rSARS”) epidemic, as well as the war in Iraq to attain broad-based growth. This recovery was supported by the accommodative monetary and fiscal policies pursued by major economies which revived confidence to fuel global growth. The continued strengthening of the global cronomy is mainly driven by sustained consumption and export gro-.vth in the USA and Japanese economies. FJsewhere. the vibrant economics in the Asia­Pacific region, in particular China and to a lesser extect India, further supportt:d the strengthening of global growth. Amidst this optimistic development, world inflation continued to remain benign despilc concerns over rising oil prices. The gradual pick-Up in world trade contributed in a big way towards global growth. World trade, which practically came 10 a staoostiJI io 2OOl, slowly gained strength in subsequenl years, supported by strong impon demand from developing Asia, the transilion cconomies and the USA. to record a growth of 4.5% for 2003. World trade is projected to strengthen even further in 2004 at 6.8% as global growth becomes more broad-based. The growtn momentum in the global economy in 2005 is expected to decelerate slightly as major economies tighten monetary policy to contain inflationary pressures. Concerns over the possibility of higher oil prices and the slowing down of China’s economy are other factors than can dampen growth. Against the backdrop, the growth in the USA is expected to moderate from 4% to 3.5%, other emerging markets and developing economies at 5.9%, while Japan is expected to grow by 2.4%. In contrast, recovery in euro area is anticipated to strengthen further to post a real GOP growth of 2.3% with a gradual pick-up in domestic demand aided by favorable financing conditions. Overall. global growth is projccted at 4.4% in 2005. (Source: Economic Report 2004/2005) 4.6.2 The Malaysiao Ewoomy Malaysia’s growth momentum continues into 2004 after recording a strong growth in 2003. Unlike 2003. when the global economy was affected by the war in Iraq and SARS. the external environment in 2004 has improved markedly with an upswing in 1he global electronics demand as well as favorable commodity prices. This enabled the Malaysian economy 10 expand steadily from 7.6% in the first quarter of 2004 to 8% in the second quarter of 2004. Growth was broad based, driven by strong domestic demand and a buoyant external sector, with Ihe manufacturing and service sectors.a…. the key contributors to growth. The manufacluring sector registered a solid growth of 12.3% during the firsl halfof2004.while theservice sedor expanded sirongly by 6.8% in the same period. Given the strong ccooomi.c performance during the firsl half of the year. aUied to a generally encouraging external environment. and despite higher global oil prices. rising interest rates and tighler fISCal policy stance, the economy is expeclcd to record the ttigtleSl GOP since 2001 of 7% for 2004 (2003: 5.2%). 4. INFORMATION ON THE 0&0 GROUP (ConN) Entrenched domestic economic activities. coupled with a fairly fuvomble external environment, arc expected to drive growth into 2005. Strong output growth is expected to emanate from all sectors, led by manufacturing and services with an increasingly higher contribution from private sector expenditure. Malaysia is set to achieve another year of healthy g.cowth at 6% in 2005. (Source: Economic Report 2004/2005) 4.6.3 The Semiconductor Iodustry Malaysia is currently among the world’s leading sites for semiconductor assembly, lcsling and packaging, with some renowned MNCs based in the country. The main activilies are the assembly and lesting of scmicortduclor devices, which include microprocessors, memory chips. power ICs, linear rCs, opto devices and other logic and discrete devices. Many MNCs companies irtitiaUy came to Malaysia in the early 1970s because of the country’s inexpensivc labour that was good at working on small electronic devices. Since then, the industry has grown by leaps and bounds, progressing from labour-intensive operations to statc-of·the-art robotics manufacturing siles that produce the latest generation of ICs. The semiconductor sector today has a major part in Malaysia’s electronics industry, accounting for RM78.5 billion (USS20.7billion) or 42.8% of the country’s total electronics exports in 2003. The semiconductor industry in Malaysia is now moving towards backward integration into silicon ingot growing, cutting and polishing of silicon wafers, chip design and wafer fabrication. local semiconductor companies believe that business wiJI continue 10 grow for the rest of the years despite uncertainties in lhe global economy due to rising interest rales and crude oil prices. As a result. a number of them are expected 10 inCrease production 10 cater for the rise in worldwide demand for computer chips. (Source: Malaysia Industrial DevelopmentAuthority) As the leading manufacturing sector in Malaysia, electrical, electronics and machinery as a group registered the highest growth in tandem with the cyclical upturn of global electronics demand, Tbe uptrend in global demand for semiconductors pushed the output of electrical and electronics sharply by 24.4% during the first six (6) months of 2004 (January -June 2003~ 4.3%). In addition, greater outsourcing activities as well as software development helped to enhance the sector’s grow1h. Within the group, outptlt of scmiconduclolS, accounting for more lhan one-third of the l~al output of lhe manufacturing sector, increased sharply by 33.4% (January -June 2003: 7.8%). This was reflected by the higher sales of semiconductors, which recorded a 14.1% increase during the same period. These strong increases were in line with the expansion of broadband infrastructure fadtitics in the information and communication technology sector to support increasing demand for global supply nelwork and back-office facilities. Given the importance of the semiconductor industry in terms of its contribution to GDP growth and exports. efforts arc ongoing to further develop the industry. especially in advanced Ie design and packaging. (Source: Economic Report 2004/2005) 4.6.4 Demand and supply The semiconduclor industry bas been cyclical in nature. Typically, cycles are two strong years of gro\Vth, one year of slow growth, and one year of flat or declining growth. TIte semiconductor industry enters 2004 in tne midst of an up cycle, after experiencing the worst downturn ever seen in 2001 and flat sales in 2002. The improvement began in the secopd half of 2003, with sequential growth at moderate rates, driven by technological advances, the increasing pervasiveness of electronics in society, and the increasing capability of the semiconductors that powered them. 4. INFORMATION ON THE D&O GROUP (Cont’d) The demand and supply for the Group’s prodUdS and services is expected to be driven by the following key factors: • (n the latc 19908, the scmicorlduetor consumption in Asia gained strength as a resuh of lhe regional supply chain shift which was caused by both tile growth of outsourcing and Ille rapid growth of electronic equipment consumption in Asia, led by China.
• In the 19805, Asia was primarily a place for low-cost semiconductor assembly and low-end consumer electronic product sales. Today, the region is not only the leader in electlOnic equipment production-from low-end to advanced products, but also a significant consumer of sophisticated eleC1ronics.
• The consumer market has been growing briskly over the past years in view of the virtual revolution in global consumer markels as consumers adopt new technology and pursue greater mobility and productivity. Advances powered by scmiconduC10rs give businesses and consumers new flexibility, freedom, and opportunities. Activities lhat OJ1CC confined. people 10 the home or office can now be performed at any time or any plac-e.

4.6.5 Industry Players and Competition The semiconductor industry in general consists of many players and is competitive. The D&O Group is operating in an environment that is constantly and rapidly evolving and requires players to be capable of supplying increasingly complex semiconductor components. In Malaysia, there are several Malaysian-owned semiconductor contract manufacturers and each of these contract manufacturers calers 10 a different segment of market on a wide technical spectrum and tends to have a different product mix from the others. The Directors bclic\le that the competition from these contrnct manufacturers is minimal especially under the “caplive line” arrangement. However, the Group’s OEM products do face direct competition from some of t!lese Malaysian-owned semiconduc1or contract manufacturers. However, the Group’s risk of losing its customers is mitigated to a certain extent by the nature of thc business contracts the Group has with its customers, which are based on “captive contract” terms. Under the “captive contract” arrangement, these customers consign all their production equipment to the Group for the purpose of producing scheduled orders. The nature of such an arrangement substantially reduces the likelihood that these customers will terminate the existing business contracts as such a move will involve high relocation costs and disapproval by MNC’s end customers to switch manufacturer without strong justifications and benefits 10 the customer in terms of cost, quality, reliability and delivery performance_ Re-qualification of any new manufacturer requires a very costly and tedious process, and long quality and reliability tests through lhe entire cod user chain. In addition. the nature oftlle industry is such that it involves high vendor swilching costs and requires a long gestation period of acccptanee. This is because customers normally require a lengthy timc 10 carry out operational and quality audit of the turnkey manufacturers’ production capabilities and facilities. and the ensuing evaluation of the quality of products manufactured. Consequently, it is usual that customers would foster long-term business relationships with their turnkcy manufacturers. Hence, the D&O Group believes that by fostering a long-Ierm business relationShip with its customers, the risk of losing its customers is miligated to a certain extent. 4. INFORMATION ON TIlE D&O GROUP (Cont’d) 4.6.7 4.1 Government Legislation, Policies aDd Incentives Save [or the normal law applicable to the conduct of business in Malaysia, there is currently no specific regulatory requirement wruch is applicable 10 semicoDductor manufacturing. Nonetheless, the. Malaysian Government, through Malaysia Industrial Development Authority, is highly dedicated towards policies providing incentives for manufaclUring-related sector. The D&O Group is eligible for the following incentive: Being a manufacturing company which has operated for more than twelve (12) months, the 0&0 Group is eligible 10 claim reinvc~ment allowance for the qualifying capilal expenditures incurred for projects of expansion, modemisalion, upgrading facilities, diversification as well as automation. Up to 60% of its qualifying capilal expendilure caD be used 10 offsel against 70% of Ihe statulory income for the year of assessment. Prospects aDd Outlook of tbe Industry Over the years, MNCs have increased the outsourcing of product manufacturing to local manufacturers as 1hese MNCs view integrated manufacturing services as advantageous to reduce the linkages in their supply chains. The trend towards outsourcing is increasing primarily because it is more cost-effective than in-house manufacturing. Both value added sub-eontractors or full-turnkey contract manufacturers are able to lower cost through specialisation and economies of scale. This arrangement also allows MNCs to reduce costs as they are able 10 do away with the need to purchase packaging equipment. Introdudion of new products, obsolescence of mature in-house manufacturing operations and reduction of operational costs and lime in dealing with a single manufaclurcr rather than coordinating produclion with multiple suppliers conlributes directly to the grow-ing oUlsoUrcing business in this region. In Ibis regard, the 0&0 Group is well positioned to benefit from this trend as it has constantly focused its efforts on strengthening itself as a ‘One-Stop’ provider in manufacturing and components packaging solutions. Ml\ior Cuslomers A list ofthc Group’s top 10 customers for the financial year ended 31 December 2003 is as follows: Name of customer Agilent Technologies (Malaysia) Sdn Bhd STMicroelectronics Sdn Bhdl STMicroc1ectronics Pte Ud Matsushita Precision Capacitor (M) Sdn Bhd Fairchild Semiconductor (Op4oeleetconics) Sdn Bhd Central Semiconductor Corporation Rutronik Elektronische Bauelemente GmbH, Germany EBV Electronik GmbH & Co KG. Germany Robert Bosch GmbH sglux Sol-Gel Technologies GmbH CaDital Electronics Inc. Sales  Contribution to  Length of  COUDtry  contribution  total sales  relationship  (RM’OOOl  1%\  IVearl  Malaysia  43,053  62.2  5  Malaysial  19,486  28.2  10  Singapore  Malaysia  3,938  5.7  2  Malaysia  1,206  1.7  7  USA  629  0.9  7  Germany  309  0.4  2  Germany  295  0.4  2  Germany Germany USA  59 27 13  • • •  2 1 2
• Less than 0.01% •• INFORMATION ON THE D&O GROUP (Conl’d) ••8 M~or Suppliers A list of the Group’s top 10 suppliers for the financial year ended 31 December 2003 is as follows:
Total  % of total  cost of  cost of  Lengtb of  Products/Services  Name  Country  purcbases  purcbases  relationship  purchased  IRM’OOO\  (%)  (Year)  Sintermctalglass SrI  Italy  4,864  8.8  1  Metal can cap and  header  I-Cbiun Precision Industry  Taiwan  4,488  8.1  2  LED leadframc  Co.Ud  Panasonic Communications  MaJaysia  3,906  7.1  2  LED Icadframe  (Malaysia) Sdn Bhd  CPT Semioooouctor  Malaysia  3,883  7.0  Metal can headers  Packaging Sdn Bhd  Pacific Polytech, Inc.  USA  3,691  6.6  2  Diffusant, epoxy, resin,  hardener and dye  Hotec Industry Co., lJd  Taiwan  1,106  2.0  2  Mold cup  Jade Precision Engineering  Singapore  956  1.7  2  LED leadframe  Singapore Pte Ltd  Dexter Asia Pacific Ltd  Hong  638  1.2  2  Diffusant, hysol. resin.  Kong  hardener and dye  Enomoto Co. Ud  Japan  586  1.1  2  LED leadframe  Microdvne Plastic Inc.  USA  728  1.3  2  Mold CUD
••9 Future Plans and Outlook The D&O Group will conlinuc 10 concentrate and expand on its core compclcocics in lhe provision of ‘fuU lurnkey’ conllact manufacturing services for the semiconduclor industly as wcll as 10 expand into the OEM markel segment With continuous emphasis on enhancing its ‘full lurnkey’ capabilities, ploduct and design dcvelopment. and with ready access to Ihe capital market after its listing, the Group sets out its slratcgies and future plans as follows: Short term The Group’s immediate goal within three (3) years from its listing is to consolidate its position in Malaysia by est8blishing itself as a premier full turnkey contract manufacturer and asscmblcr of stmiconductor products. The dcvelopmcnt path towards this short term goal would involve the fallowing: (a) Providing more capacity space The Group will not only look forward lowards providing more capacity space 10 absorb excess production volume from MNCs bUI also expanding ordclS of new produci lange from ils exisHng customers. Currently, the Group has already executed the capacity expansion plan for two (2) of its new OEM packages in older to meet its MNC customer’s requirement for its wireless semiconductor business unils. The pUlchase ordel from the said MNC is large and is anticipaled 10 increase towalds the end of 2004. In Older to meet the customer’s ramp-up plan, the D&O Group has placed ordelS for new pro<iuction machinery. Constructi.on wOlk to increase floor space has becn completed and the new factory building i.s expected to be fully commissioned by the cnd of 2004. 4. INFORMATION ON THE D&O GROUP (Co”,’d) (b) Upgrading ofexisting tecbnology platform Rapid technology advancement in the semiconductor industry requires the Group to continuously evaluate and improve its capabilities and/or to invest in new equipment, in order to offer increasingly sophisticated services to its customers. The Group has been able to ell:tend the useful lives of its equipment by reconfiguring them to assemble/test a wider range of products and to optimise the utilisation of its equipment. The Group also plans to upgrade its existing technology platfonn to enable the Group to assemble and test OEM metal cans paekages for niche markets Ihrough more collaboration with exi~ing or new customers for new semiconduclOr products introduced for new application requirements. Collaboration would mainJy be focussed on assembly and packaging processes. The Group recognises that it is imperative to invest in an efficient resource planning infrastructure which will integrate with the management informatioo system of its business operation. Thus. the Group is looking forward to set up an information technology infrastructure which will enable the customers to have real time access to the necessary information for their commercial consideration. (c) Intensity marketing efforts and widen customer concentration In lhe lurnkey contract manufacturing industry, customers Iypically qualify a few assembly and lest service providers 10 meet Iheir outsourcing needs and develop a long term business relaHoRShip with the service providers in view of the lengthy process needed 10 carry out qualily audit of the contract manufacturer’s capabilities and the higll vendor switching costs involved. The Group believes that there cxi~s opportunities for it to generate more revenue from its existing customers and thus aims 10 position itself as the preferred sourcing avenue for its customers. At the forcfront of its marketing strategy to diversify its customer base, the Group will also intensify cfforts of marketing networks amongst existing and potential customers in the USA, Europe and Japan to support the Group’s OEM plans. Long term In the long-term, the 0&0 Group is looking 10 diversify ils products and 10 explore new export markets. Some of the planned actions are as follows: (a) To expand its OEM product portfolios. in particular, tile Discrete Surface Mount products, which the Group expects to introduce four (4) new packages in 2005 and 2006;
(b) To develop high technology packaging designJsolution for wireless semiconductor and UV sensor devices, the R&D for which commenced in 2003; and
(c) To develop packaging process technology of VCSEL for Photonics Technology applications. the R&D for which commenced in 2004.

The Directors of 0&0 believe Ihal 1he prospect for growth in the existing business of tbe Group remains bright. especially with the increasing trend towards oUlsourcing and the Group’s diversification into the OEM contract manufacturing. In view of Ihe Group’s track record and based on its competitive strengths, the Directors of D&O believe that the Group is well positioned to establish itself as a premier full turnkey contract manufacturer and assembler of semiconductor products.

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